Slide 1: Annual results 2007
For personal use only Annual results 2007 Craig Dunn Chief Executive Officer 14 February 2008
Slide 2: Executive summary
For personal use only Executive summary Robust financial performance in 2007, while investing for future growth AMP remains strategically well positioned in high growth markets Resilient business model with financial strength to withstand current market volatility Continuing to invest for gr
Slide 3: Key performance measures
Key performance measures Underlying return on equity up from 30.3% to 37.9% 1 For personal use only Total operating earnings up 12% to A$770m 2 Cost ratio down to 38.6% from 39.4% Embedded value up 17% , before transfers, and 3 3 value of new business up 13% to A$393 million 68% of AUM at
Slide 4: Outline
Outline Group overview For personal use only Business line review Current market conditions Capital management Strategy Outlook Summary 4
Slide 5: Overview – 2007 full year profit summary
Overview – 2007 full year profit summary A$m FY 07 FY 06 % change For personal use only AFS Contemporary Wealth Management 306 244 +25% AFS Contemporary Wealth Protection 119 121 -2% AFS Mature 190 190 Steady AFS New Zealand 48 52 -8% AMP Capital Investors 150 115 +30% BU operating earnings 813 722
Slide 6: Overview – assets under management
For personal use only Overview – assets under management 129 122 120 18.9 19.4 104 2.0 100 2.5 90 18.9 3.4 80 76 19.3 18.8 5.7 60 6.3 108.1 100.1 40 81.7 65.0 50.9 20 A$b 0 FY 03 FY 04 FY 05 FY 06 FY 07 Open businesses Group Closed businesses 6
Slide 7: Overview – group cost performance
For personal use only Overview – group cost performance 894 900 851 832 821 818 800 107bps 99bps 700 84bps 44.8% 45.1% 39.4% 600 38.6% 41.0% 76bps 500 70bps 400 300 200 100 A$m 0 FY 03 FY 04 FY 05 FY 06 FY 07 Controllable costs Cost to income ratio Controllable costs to AUM 7
Slide 8: Overview – business unit operating earnings and underlying investment income
Overview – business unit operating earnings and underlying investment income For personal use only 891 789 78 67 681 190 74 190 540 539 58 51 171 172 210 623 532 210 193 436 190 184 158 272 316 A$m FY 03 FY 04 FY 05 FY 06 FY 07 BU operating earnings - open BU operating BU operating Underlying busine
Slide 9: Overview – dividends and capital returns
For personal use only Overview – dividends and capital returns 86 80 72 40 40 40 24* 27 21 18 16 14 9 22 19 13 14 7 Cents per share 2003 2004 2005 2006 2007 15% franked - interim 75% franked 75% franked 85% franked 85% franked 85% franked - final Interim dividend Final dividend Capital return *Final
Slide 10: Overview – underlying return on equity
For personal use only Overview – underlying return on equity 40 37.9% 35 30.3% 30 25.0% 25 21.2% 20 18.1% 15 10 5 % 0 FY 03 FY 04 FY 05 FY 06* FY 07 Underlying return on equity * FY 06 underlying return on equity restated for Cobalt/Gordian fair value provision release. 10
Slide 11: Business line review
For personal use only Business line review 11
Slide 12: AMP Financial Services – 2007 highlights
AMP Financial Services – 2007 highlights Strength of business franchise underpinned robust financial For personal use only performance ¾ Operating earnings up 25% in Contemporary Wealth Management ¾ Retail net cashflows up 47%, following regulatory changes ¾ Continued cost leadership with cost to
Slide 13: AFS Australian contemporary wealth management
AFS Australian contemporary wealth management For personal use only Contemporary Change wealth management FY 07 FY 06 Operating earnings A$306m A$244m +25% Controllable costs1 A$361m A$359m +1% Cost to income ratio 43.3% 48.0% -4.7 percentage points Retail net cashflows A$3,263m A$2,218m +47% Corpor
Slide 14: AFS Australian contemporary wealth protection
AFS Australian contemporary wealth protection Contemporary For personal use only wealth protection Change FY 07 FY 06 Profit margins A$115m A$107m +7% Experience profits A$4m A$14m -71% Operating earnings A$119m A$121m -2% Operating earnings / API1 20.7% 22.6% -1.9 percentage points Controllable cos
Slide 15: AFS Australian mature
For personal use only AFS Australian mature Mature Change FY 07 FY 06 Operating earnings A$190m A$190m Steady Controllable costs A$64m A$60m +7% Controllable costs/AUM1 34bps 32bps +2 basis points Net cashflows (A$1,433m) (A$1,136m) -26% Persistency 87.0% 88.1% -1.1 percentage points AUM (pre capita
Slide 16: AFS New Zealand
For personal use only AFS New Zealand New Zealand Change FY 07 FY 06 Profit margins A$47m A$47m Steady Experience profits A$1m A$5m -80% Operating earnings A$48m A$52m -8% Controllable costs A$64m A$59m +8% Cost to income ratio 44.3% 41.0% +3.3 percentage points Individual risk annual premium A$104m
Slide 17: AFS overview – industry trends in cashflows
For personal use only AFS overview – industry trends in cashflows 2007: Regulatory changes drove large super inflows pre 1 July, then strong flows into other products, including pensions, post 1 July ¾ Surge in super inflows biased to voluntary contributions from high net worth investors, though h
Slide 18: AFS overview – 2007 cashflows
AFS overview – 2007 cashflows Total retail net cashflows up 47% to A$3.3b For personal use only ¾ Retail superannuation and annuities/pensions net cashflows up 51% to A$2.4b ¾ Majority of superannuation outflows from customers aged 55 and over ¾ Two-thirds of retail and corporate superannuation ou
Slide 19: AFS – cost performance
For personal use only AFS – cost performance 600 572 557 562 541 543 114bps 500 101bps 89bps 400 43.2% 77bps 40.6% 70bps 38.8% 35.6% 34.5% 300 200 100 A$m 0 FY 03* FY 04* FY 05* FY 06 FY 07 Controllable costs Cost to income ratio Controllable costs to average AUM * Some minor restatements to reflect
Slide 20: AMP Capital Investors – 2007 highlights
AMP Capital Investors – 2007 highlights Strong financial result, with operating earnings up 30% For personal use only Good investment performance across diverse investment capabilities ¾ 87% of Australian equities AUM met or exceeded benchmark; 85% of Australian and NZ property; 85% of infrastru
Slide 21: AMPCI – overview
For personal use only AMPCI – overview AMPCI Change FY 07 FY 06 Operating earnings A$150m A$115m +30% Internal management fees A$183m A$158m +16% External management fees A$192m A$147m +31% Total performance & A$94m A$80m +18% transaction fees Controllable costs A$257m A$223m +15% Cost to income rat
Slide 22: AMPCI – volumes and profit margins
For personal use only AMPCI – volumes and profit margins 120 13.6bps 11.7bps 100 10.8bps 9.7bps 9.0bps 80 69.0 62.1 60 56.0 51.0 44.8 40 20 41.7 35.7 28.8 21.7 23.6 A$b 0 FY 03 FY 04 FY 05 FY 06 FY 07 Average external AUM Average internal AUM Operating earnings after tax to average AUM - basis point
Slide 23: AMPCI – drivers of operating earnings
For personal use only AMPCI – drivers of operating earnings 14 200 45 180 160 (34) 25 (15) 140 150 120 115 100 80 60 40 20 A$m 0 FY 06 Higher Higher Higher Higher Higher tax FY 07 operating internal external performance controllable expense operating earnings management management and costs earnings
Slide 24: AMPCI – performance against benchmarks
For personal use only AMPCI – performance against benchmarks Weighted AUM % at or above benchmark 98% 99% 93% 85% 85% 83% Target 76% 78% 75% 71% 68% 66% 64% Listed assets Infrastructure Private equity Property Future Directions Total funds AUM at 31 A$70.1b A$3.7b A$1.3b A$17.9b A$18.1b A$111.1b Dec
Slide 25: AMPCI – performance fee breakdown
For personal use only AMPCI – performance fee breakdown Performance fees by Performance fees by asset class benchmark v absolute return Property Equities Absolute return 22% 24% 27% Private equity Fixed interest 15% 11% Infrastructure 28% Benchmark 73% Note: Based on 2007 performance fees 25
Slide 26: AMPCI – cost performance
For personal use only AMPCI – cost performance 300 62.3% 61.7% 257 57.8% 250 56% 223 53.1% 198 200 184 177 150 26.6bps 24.7bps 100 23.3bps 22.8bps 23.3bps 50 A$m 0 FY 03* FY 04* FY 05* FY 06 FY 07 Controllable costs Cost to income ratio Controllable costs to average AUM * Some minor restatements to
Slide 27: Cobalt/Gordian – update
For personal use only Cobalt/Gordian – update Sale for A$585m to Enstar Group announced on 11 December 2007 Based on book value at 30 June 2007, AMP has booked A$83m profit on the sale Surplus capital to be used to lift each of the next four dividend payments by 2c a share, beginning with FY 0
Slide 28: Current market conditions
For personal use only Current market conditions 28
Slide 29: AMP is well positioned
AMP is well positioned Equity market falls will impact AUM-based fee revenue and could subdue For personal use only cashflows, but AMP better placed than most to withstand these pressures Current market AMP position issues Downward pressure on cashflows cushioned by: AMP bias to superannuation flo
Slide 30: AMP is well positioned
For personal use only AMP is well positioned Current market issues AMP position Prudently managed, diversified book of business means no shareholder or customer funds are disproportionately exposed to any one asset, asset class or counter-party Normal business exposures to counter-parties being prud
Slide 31: AMP earnings sensitivities
For personal use only AMP earnings sensitivities Investment A$m Operating earnings Total income Total Group CWM CWP Mature NZ AMPCI Total AFS Office Economic variables 10% Ï in Australian equities 10 - 3 - 13 6 19 26 45 10% Ð in Australian equities (10) - (3) - (13) (6) (19) (21) (40) Business varia
Slide 32: Capital management
For personal use only Capital management 32
Slide 33: Capital management
Capital management AMP’s capital strength result of transformation to low capital For personal use only intensive wealth management group and disciplined, efficient capital management strategy As part of strategy, AMP maintaining dividend payout ratio policy of 85% of underlying profit, with tar
Slide 34: Strategy
For personal use only Strategy 34
Slide 35: Strategic context
Strategic context Market trends Implications for AMP For personal use only 10%+ growth in retirement savings market Mandated superannuation Significant growth in pensions system and ageing demographics Unmet demand for advice Growing demand for higher yielding assets Increasing cost to ser
Slide 36: Strategic emphasis on driving long-term growth
For personal use only Strategic emphasis on driving long-term growth AMP’s investment aimed at driving stronger value growth Investment biased to capturing opportunities and responding to challenges in our core markets Targeting profitable segments where we can exert advantage Cost and capit
Slide 37: Distribution 1. Growing our planner capacity and broadening distribution
Distribution 1. Growing our planner capacity and broadening distribution For personal use only Growing planner numbers (short term) Target new planners through Horizons Academy, Planner Pathways and field management Improve value proposition for planners, with better aligned terms and tailored s
Slide 38: Distribution 2. Expanding to Asia through AMP Capital Investors
Distribution 2. Expanding to Asia through AMP Capital Investors For personal use only Products & services Expand Asian distribution channels and alliances (short term) Build on existing distribution relationships in Japan, Taiwan and Korea Build on infrastructure partnership with China Life Insu
Slide 39: Growing customers in high value segments
Distribution 3. Growing customers in high value segments Extend relationships with customers, particularly employer sponsored For personal use only Products & super members services Roll-out improved customer product/service offerings based on customer segmentation/value initiatives Continuing
Slide 40: Outlook
For personal use only Outlook 40
Slide 41: Outlook – overview and assumptions over five year cycle
Outlook – overview and assumptions over five year cycle For personal use only Top quartile TSR performance Requires doubling the value of an investment in AMP every 5 years Operating earnings Dividend payout ratio Ongoing capital growth of 10-12% CAGR policy of 85% of underlying initiatives where su
Slide 42: Outlook – short term
Outlook – short term Market volatility means more challenging outlook for 2008 For personal use only Focus on continued investment to grow through cycle, while prudently managing through current market conditions ¾ AFS costs expected to grow by around 5% in ’08 ¾ Group costs expected to return t
Slide 43: Summary
For personal use only Summary 43
Slide 44: Summary
For personal use only Summary Achieved robust financial performance in 2007, while investing for future growth Remain strategically well positioned for the medium term Financial strength and resilient business model to withstand current market volatility Significant opportunities to grow – s
Slide 45: Appendices
For personal use only Appendices 45
Slide 46: Further information about…
For personal use only Further information about… Topic Chart Growth in shareholder value 47 AMP’s earnings by business line 48 AMP Financial Services ¾ Cashflows by channel and product line 49-50 ¾ Super contribution pattern 51 ¾ Financial planner recruitment 52 AMP Capital Investors investm
Slide 47: Growth in shareholder value
For personal use only Growth in shareholder value Value of an investment* in AMP has grown 91% from June 2005 to December 2007 (84% in TSR terms based on actual share price) 25 23.2 2.7 22.1 0.7 20 17.9 0.8 16.2 15 13.5 11.6 10 5 A$b 0 Opening Opening Opening Opening Dividends Capital Valuation Clos
Slide 48: AMP's earnings by business line
For personal use only AMP’s earnings by business line AFS Contemporary Wealth Management operating earnings - A$m AMP Capital Investors operating earnings – A$m 150 AFS Mature operating earnings – A$m 306 210 190 190 244 115 172 171 92 187 73 68 124 79 FY 03* FY 04* FY 05 FY 06 FY 07 FY 03 FY 04 FY
Slide 49: For personal use only
For personal use only 0 500 1,000 1,500 2,000 2,500 3,000 3,500 300 800 1,300 1,800 2,300 (200) Q4 02 Q4 02 Q1 03 Q1 03 (A$m) Q2 03 Q2 03 Q3 03 Q3 03 Q4 03 Q4 03 Q1 04 Q1 04 Q2 04 Q2 04 Q3 04 Q3 04 Q4 04 Q4 04 Q1 05 Q1 05 Q2 05 Q2 05 Excludes cashflows from CCC, 3PD, GID and other Hillross Q3 05 Q3
Slide 50: AFS net cashflows by wealth management product line
AFS net cashflows by wealth management product line on rolling 12 month basis For personal use only (A$m) 1 2 Corporate Super 2,500 AMP-manufactured retail products Corporate Super including SignatureSuper mandate wins 3,500 Corporate Super excluding SignatureSuper mandate wins 2,000 3,000 1,500 2,5
Slide 51: AFS super contribution pattern in 2007
AFS super contribution pattern in 2007 consistent with market positioning For personal use only 1,800 1,600 1,400 1,200 1,000 800 600 400 200 A$m 0 $0 - $1000 $1000 - $100k $100k - $250k $250k - $450k $450k - $1M $1m+ Super contribution amount – FLS, Corporate Super* 2006 2007 *Corporate Super exclu
Slide 52: Financial planner recruitment
For personal use only Financial planner recruitment Series of programs put in place during 2007 to source, attract and recruit planners to AMP (see Investor Report p21) Aim to attract and develop new planners, planners currently working for other groups and those starting as paraplanners AMP H
Slide 53: AMPCI performance in diversified funds
For personal use only AMPCI performance in diversified funds AMP Capital Balanced Growth Fund AMP Capital Conservative Fund Return Ranking Return Ranking Year 1 9.86% 2 Year 1 6.42% 1 Year 3 14.22% 1 Year 3 8.81% 1 Year 5 14.01% 1 Year 5 8.92% 1 Source: Mercer Pooled Fund Survey of institutional fun
Slide 54: AMP debt overview
For personal use only AMP debt overview Total AMP Group debt of A$1,169m and S&P gearing of 10% at end 2007 Group debt repayment due in 2008 totals A$382m, split between A$70m CP maturing to March 2008 and A$312m of Euro medium term notes maturing in November 2008 Group debt interest expense e
Slide 55: Group on balance sheet debt funding schedule
For personal use only Group on balance sheet debt funding schedule Repayment (years) 31 Dec 2007 31 Dec 2006 0-1 190 (330) 1-2 267 312 2-5 628 497 5-10 - 398 10+ 84 84 2007 2006 0-1 1-2 2-5 5-10 10+ 0-1 1-2 2-5 5-10 10+ Group debt 382 267 628 - 84 - 312 497 398 84 AMP Bank loan (192) - - - - (330) -
Slide 56: AMP Bank – business and funding model
For personal use only AMP Bank – business and funding model Branchless Australian bank offering residential mortgages, deposits and credit cards ¾ Direct and third-party distribution, including AMP Financial Planning and mortgage brokers Operating earnings of around A$10m (1% of AMP’s 2007 opera
Slide 57: Growing AUM coupled with increasing capital efficiency
Growing AUM coupled with increasing capital efficiency For personal use only 10 140 129 9 122 7.8 120 8 104 7 100 90 6 76 5.0 80 5 4.4 4 3.7 60 3.4 3 40 2 20 1 A$b 0 A$b 0 FY 03* FY 04 FY 05 FY 06 FY 07 FY 03 FY 04 FY 05 FY 06 FY 07 Total capital resources AUM *FY 03 total capital resources not rest
Slide 58: Legacy book – impact of markets
For personal use only Legacy book – impact of markets Amount of AMP’s AUM comprised of non-cash based capital guaranteed products has reduced significantly ¾ At 31 December 2007, customer AUM A$18b Australia and A$1.6b New Zealand (excluding capital and tax reserves) Assets are managed by AMP Ca
Slide 59: Comparison of gross returns with gross crediting rate
Comparison of gross returns with gross crediting rate For personal use only Equities versus bonds versus crediting rate 50% 40% 30% Return 20% 10% 0% (10%) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 All Ords All maturities Gross crediting rate Accumulation I
Slide 60: Shareholder funds portfolio – how invested
Shareholder funds portfolio – how invested Overview of portfolio For personal use only ¾ 23% fixed interest ¾ 22% cash ¾ 55% growth assets (including property) Key changes in 2007 ¾ Major reduction in cash holding due to capital return payment in first half 2007 Market risks managed by referen