Slide 1: ASX Announcement: Presentation on AMP Financial Services
ASX Announcement 26 November 2003 Manager Manager Company Announcements Office Market Information Services Section Australian Stock Exchange New Zealand Stock Exchange Level 4, 20 Bridge Street Level 9, ASB Tower, 2 Hunter Street Sydney NSW 2000 Wellington New Zealand Announcement No: 146/03 Present
Slide 2: AMP Financial Services: Primed for growth
AMP Financial Services “Primed for growth”
Slide 3: The performance of AMP Financial Services is driven by
The performance of AMP Financial Services is driven by * Sustainable competitive advantage, driven by: ~ Unmatched strength in distribution ~ Scale and focus in product manufacturing ~ Strategic focus and business model * Capacity to maintain attractive margins ® — Significant operational and capita
Slide 4: Agenda
Agenda Sustainable competitive advantage Advice-Based Distribution strategy Steven Helmich Jiractor, Advice-Based Distribution Product Manufacturing strategy Craig Melle Director, Product Manufacturing Capacity to maintain attractive margins Craig Dunn Operational and capital leverage Craig
Slide 5: AMP business model
AMP business model Distribution - Investment Products & Dealer Distribution - Management Platforms Planners Groups AMP Capital AFS - Product | AFS - Advice AMP and aligned Manufacturing | Based Distribution Focused wealth management company Capabilities stretch across the value chain Strong bias to
Slide 6: AMP has strength across the value chain
AMP has strength across the value chain Investment Products & Distribution - Management Platforms Dealer groups Net investment Net platform Share of Share of Dealer mgt margins margins platform investmgt cut margins margins Transaction type AMP platform, with ACI : ee investment AMP platform F ee wi
Slide 7: AMP's margin power lies with its distribution
AMP’s margin power lies with its distribution Assets under Management or Advice ($m) for FLS and PortfolioCare Investment Products & Distribution - Management Platforms Dealer groups Net investment Net platform Share of Shareof Dealer mgt margins margins platform investmgt cut margins margins AMP pl
Slide 8: The big winners in retail wealth management
The big winners in retail wealth management Winners will have strong, closely aligned distribution: * Pricing power is greatest for scale players who operate across the value chain, but have real strength in distribution * Dealer groups with scale can claim margin share from both platform providers
Slide 9: AMP Financial Services business model
AMP Financial Services business model Distribution - Distribution - Investment Products & Management Platforms Dealer Groups Planners AMP Owned or Partnered: AFS - Product AFS - Advice AMP and aligned Manufacturing Based Distribution planners Savings & || || AMP Financial Retirement | Planning Corpo
Slide 10: Simple, focused, disciplined strategy
Simple, focused, disciplined strategy
Slide 11: AMP Financial Services: basis for competition
AMP Financial Services — basis for competition Advice-Based Distribution Product Manufacturing Primary basis of competition Comparative advantage Strategic priorities
Slide 12: Agenda
Agenda _~ [o>] L {4} Sewer +5 tribution s IS Based D Advice- 44
Slide 13: Advice-Based Distribution strategy
Advice-Based Distribution strategy Purpose To be the partner of choice for financial planners and lead the market space for quality advice Comparative advantages Planner network + Institutionalised (self (reach & scale) employed) model
Slide 14: Leverage distribution scale
Leverage distribution scale Arrive Hillross Launched August 2003 Planner Nos (June 2003) / Customer High Net Chartered focus Worth Accountant Clients | wee | New planners /) ‘Growth from | || Productivity | ceographic PwC link | succession growth | Efficiency 43
Slide 15: Leverage distribution scale: number of Australian planners
Leverage distribution scale 1,702 ; — Number of Australian Planners October 2003 * Leveraging scale to enhance 1,309 share of margin 1,121 1,112 1,074 1,369 * Leveraging scale to deliver cost efficiency _ Common back office ~ Supply chain management ~ Bolt-on dealer groups 655 AMP ING/ANZ Source: Mo
Slide 16: Consistent, quality advice
Consistent, quality advice Number of Certified Financial Planners (CFPs) 554 | 477 243 140 nid d o <x a z 2 5 Proportion of CFPs: 33% 35% 11% 22% 8% Source: Money Management October 2003 n/d=not disclosed ING/ANZ * Quality of advice — industry issue: ~ Consistent reliable advice appropriate for indi
Slide 17: Best in class support
Best in class support Stage 1 - New Planner Planner « One of few with capability to recruit Lif | greenfield planners in SEP model recycie « 100-130 new planners recruited each year* « Orphan customers, immediate client base for planner ° $50k pa investment in planners first 4 years resulting in a 4
Slide 18: Productivity
|: fomer Telationship | Productivity Significant opportunity to grow advice share through enhancing productivity in AMPFP channel Driving planner productivity through: Quality advice offering across all segments Segmented service offering Customer Call Centre (CCC) as low cost servicing option Techn
Slide 19: Productivity
Productivity Industry leading planner technology and coaching supports planner productivity and delivery of consistent, quality advice Client Information: Online access to over 2 million AMP & non AMP client holdings, including Super, Investments, Life/General Insurance & Banking Financial Planning:
Slide 20: Alignment of reward and recognition
Alignment of Model characteristics: E 12.5% 10% 75% 5% 3.5% « « The AMPFP Value proposition: reward and recognition * Self-employed model is key to resilience of model e Planners meeting ‘model characteristics’ pay a lower dealer cut (and similar impact on BOLR) aligning interests of self employed p
Slide 21: Customer relationship
Levelage scale Alignment of reward | andrecognition e e e e e e Customer relationship Community based Broad geographical reach Generations of planners and customers have relationship with AMP Self employed model and customer intimacy are key drivers of the strength to the model Institutional ownersh
Slide 22: Advice-Based Distribution summary
Advice-Based Distribution summary AMP has strong, closely aligned distribution with * Leading share of advice market, and with unmatched presence * Channels strongly positioned across all market segments * Model difficult to emulate * Growth options (organic, productivity and selected acquisition) .
Slide 23: Agenda
Agenda trategy ings Product Manufactur OT ULTN i fi THE at fuct Ma rou ctor, F Dir 22
Slide 24: Product Manufacturing strategy
Product Manufacturing strategy Purpose To deliver market competitive products at the lowest unit cost Comparative advantages Scale + Focus Strategic priorities
Slide 25: Simple & evolving products
Simple & evolving products Ue a Savings & Retirement Corporate Super Risk Insurance Banking Flagship | (product |. [Key focus Flexible Lifetime Range Growth Cost efficiency Persistency Allocated Pensions FLI (Unit trusts) Custom Super Signature Super Growth Cost efficiency Transfer from Individual d
Slide 26: Simple & evolving products
Simple & evolving products Selective manufacturing philosophy — AFS only manufactures product where it makes economic sense Savings & Corporate Super Risk Banking Core product offerings | Retirement Personal Super Allocated Pensions Investments SME Corporate Corporate Insurance Term/Trauma Temporary
Slide 27: Best in class wholesale distribution
Best in class wholesale distribution & Wholesale distribution capability is important for the success of manufacturing Focus on internal channels delivers superior value: ~ Easy to focus on profitable activity ~ Superior access -- Superior retention Py Exploit third party distribution where opportun
Slide 28: Focus on persistency
Focus on persistency Strong bias to AMP managed / aligned distribution maximises persistency, significantly improving returns to shareholders Annual Premium Life Office Products Risk VNBas Sensitivity of Decrease in Risk Lapse Discontinuance Rates ™ % of 1HO3 Rates on Value of New Business (Year end
Slide 29: Scale benefits
Scale benefits Focus on persistency Corporate Super Death benefit Home Loan / Super 28
Slide 30: Scale benefits
Scale benefits Total Market Market Size Position Market Share $m (rank) % Funds Under Management: Superannuation including rollovers (a) 130,731 1 17% Retirement Income (a) 45,838 3 12% Unit trusts (excluding Cash Management Trusts) (a) 82,642 9 4% Total Retail Managed Funds (a) 297,380 3 11% Master
Slide 31: Cost efficiency & quality programs
Cost efficiency & quality programs AMP Financial Services Controllable Costs (excluding Bank) Efficiency and unit cost initiatives: . Business model, SLAs ° Elimination of non-value add ° Customer service automation ° Property rationalisation ° ght through pro sing <$520m'” ° stem decommissioning °
Slide 32: Cost efficiency & quality programs
Cost efficiency & quality programs ELIMINATE “Remove activities that do not add value” INNOVATE “Find better ways to do what has to be done” PERFORM “Deliver operational excellence in execution” Strategic Tactical Cultural planners/customers want Investment Solutions to e- wrap Review services provi
Slide 33: Cost efficiency & quality programs
| Best _ 4 - [wholesale dstibuton | | . Cost quality | oncsane Administration Transactions meeting 100 + Quality Standard (%) Rigorous capi Focused on delivering quality improvements AND cost efficiency 84 | $2002 2003 Jan Mar May Jul Sep Nov 1005 Advisor & Personal Assistant ratings Variability of
Slide 34: Rigorous capital focus
Rigorous capital focus Changes over past 18 months ® Reduced equity backing for most capital guaranteed products * Switched from fixed interest to cash for RSA * Fixed interest ~ lengthened bond duration") ® International shares - now 70% indexed) * Private capital - reduced major asset holdings * B
Slide 35: Product Manufacturing summary
Product Manufacturing summary AMP has strong focused manufacturing business with * Significant share in core product areas * Strategy focused to deliver to AMP distribution * Business model leveraged to growth ... designed to deliver sustainable competitive advantage and ongoing growth 34
Slide 36: Agenda
Agenda Dunn g cl fa wie INS ttractive margi ina ta ity to main Capac 35
Slide 37: Continuing opportunities are considerable
Continuing opportunities are considerable Top line growth: & e & e Planner productivity (esp. in AMP Financial Planning) Planner growth in aligned channels (Hillross, Arrive and Magnify) Planner quality — advice and practice management AMP product share of planner sales — through improving quality o
Slide 38: Capacity to maintain attractive margins
Capacity to maintain attractive margins Products & Distribution - Distribution - Platforms Dealer Planners Groups Net marain drivers: Gross margin drivers: 4 Unit costs 4 Planner productivity i Customer intimacy J Persistency WA Share of platform 4 Quality of advice margin (buying Buying power power
Slide 39: Run down of mature book not impacting growth
Run down of mature book not impacting growth Growth in contemporary book and strong cost management have more than offset mature book run-off Mature Book v Operating Margins Operating Margins Operating Marai $368m a CAGR 97-02 oe perating Margins . 9, “ Contemporary Book AUM $342m 1 . ff 29% pa % Ma
Slide 40: Agenda
Agenda ital leverage ional and cap Operat 39
Slide 41: History of profit & capital releases from AFS
History of profit & capital releases from AFS Underlying AFS §AFS Shareholder Underlying Transfer Operating Profit") Capital Reduction (2) from AFS@) $m $m $m 2000 600 161 761 2001 602 (381) 221 2002 550 702 1,252 TOTAL 1,752 482 2,234 Note: (1) Underlying Operating Profit (page 83 of Explanatory Me
Slide 42: AMP's operational leverage has never been better
AMP’s operational leverage has never been better AMP Financial Services Controllable Costs (excluding Bank) $730m 2000 2001 2002 2003 Costs —@—Cost to Income Ratio Note: (1) 2003 Cost guidance from Explanatory Memorandum, page 101 (2) 2003 Cost to Income Ratio as at 30 June 2003 41
Slide 43: Industry cycle has bottomed and is recovering
Industry cycle has bottomed and is recovering Net Flows $m All Ordinaries Share Index and Net Cash flows into the 9,000 + Wealth Management Industry 8,000 + All 7,000 Tr Net Ords %. Flows - ‘Ny 6,000 + \ \ 5,000 - | 7 4,000 + , i inn 3,000 + WAT \| 2,000 + i : rn 1,000 + 1 | 1} - i | { | i i i | { |
Slide 44: AMP's cash flows have been resilient in a difficult climate
AMP’s cash flows have been resilient in a difficult climate Quarterly Net Cash Flows ($m) of Five Largest Participants by AUM (Preliminary Results) 214 164 102 26 -256 481 O March @ Jun-03 @ Sep-03 735 -694 Commonwealth National Australia AMP ING Australia Westpac Bank of Australia Bank Source: Plan
Slide 45: Value of New Business and Profit Margins
Value of New Business and Profit Margins Value of New Business ($m VNB) and Profit Margin (VNB / New Business) 2.7% 2.5% mms 118 Tillinghast 1998 1999 2000 2001 2002 1HO03 Value of New Business omg \VNB/New Business — Tillinghast Market Consistent Note: 3% Discount Margin. Tillinghast Market Consist
Slide 46: Embedded Value and Value of New Business
Embedded Value and Value of New Business FY02() 1H03 FY03() $m $m $m Embedded Value 5,995 6,050°) 6,480) 3% discount margin Value of New Business 3% discount margin 234 100 230 Note: (1) Restated for revised expense reallocation (2) Estimate for FY03 based on October 2003 YTD experience and investme
Slide 47: Operating Margins
Operating Margins Operating Margins $m 383 122 1999 2000 2001 2002 2003 LE Note: 2000-2003 data excludes discontinued Bank businesses, Australian Administration Services and AMP Consulting 46
Slide 48: AMP Financial Services: a powerhouse business
AMP Financial Services — a powerhouse business Achievements in 2003 & e ® e ® Held distribution franchise together Largely maintained market share Significantly lowered unit costs Improved capital strength Restructured business lines Outlook in 2004 & e & With improving markets, we expect strong new