Slide 1: Demerger update
Demerger update
Slide 2: Agenda
Agenda Overview Demerger capital plan Consulting Actuary’s Report (Tillinghast) Update on approaches for UK businesses Demerger timetable
Slide 3: Overview — Demerger entities
Overview — Demerger entities ¢ AMP now has ‘in principle’ regulatory approval from APRA and FSA to demerge into two separate listed companies > EM to be released in late October, with demerger on track to be effected in December (if approved) ¢ AMP in Australasia will be a leading wealth management
Slide 4: Overview - Capital structures of demerger entities
Overview - Capital structures of demerger entities ° AMP will > have total shareholder capital resources of A$6,027m > have total external debt of A$2,627m >» undertake a A$1.2b Rights Offer to existing shareholders of shares in the post-demerger AMP to redeem the RPS > aim to maintain and/or improv
Slide 5: Overview - Consulting Actuary's Draft Report on demerger entities
Overview - Consulting Actuary’s Draft Report on demerger entities ¢ Consulting Actuary Tillinghast has confirmed market-consistent embedded values (MCEV) for AMP and HHG which demonstrate strong underlying value > A$6,084m for AMP Financial Services and A$118m for AFS’s value of six months’ sales, e
Slide 6: Demerger capital plan
Demerger capital plan
Slide 7: Demerger capital plan — key elements
Demerger capital plan — key elements 1. Restructuring external corporate debt and repaying all loans between demerged entities 2. Recapitalising HHG as a standalone company 3. Enabling HHG to achieve majority ownership of Henderson (through AMP Invest) 4. Redeeming RPS with proceeds of the AMP Right
Slide 8: Key elements of capital plan
Key elements of capital plan > AMP will assume £1,041m (A$2,562m) of corporate external debt held or issued by its UK businesses and extinguish all material intercompany guarantees > About A$600m of corporate debt will be restructured in 2003, using proceeds of May capital raising, subject to achiev
Slide 9: Key elements of capital plan
Key elements of capital plan > £157m (A$386m) injected, as disclosed in 1H03 Investor Report, in part to recapitalise UK Service Company > £34m (A$84m) additional capital injected to facilitate demerger > £116m (A$285m) additional injection which is returned to AMP — £26m to enable the purchase of H
Slide 10: Key elements of capital plan
Key elements of capital plan Reconciliation Total £m Non-cash' : capital Previously flagged Transfer of UK corporate debt to AMP? 966 1,041 Repayment of AMP Life loan to AMP Invest 90 90 Recapitalisation as flagged in AMP’s Half Year 457 Investor Report* Additional capital Transfer of Henderson offs
Slide 11: Key elements of capital plan
Key elements of capital plan > HHG also requires £100m (A$246m) in additional capital to achieve demerger objectives (buyout majority of AMP Invest) - £50m at demerger; up to £50m at 30 June 2004 > HHG intends to achieve this through an equity raising of at least £100m to be held by 30 June, 2004 —
Slide 12: Key elements of capital plan
Key elements of capital plan Povo =e The = : = = he a o cat bung LAAT buy, cpemressive, pra micoriis g PPG fo accuire majors > HHGwill acquire a controlling interest (between 50-60%) in AMP Invest! (the parent company of Henderson Global Investors) through — directing the majority of its capital inj
Slide 13: Key elements of capital plan
Key elements of capital plan ri HHG Shareholders , Convertible Loan 4° Notes HHG ple ac” I | AMP (UK) Services Limited AMP --- Peart London Life we (UK Service operations} invest pic 4 > Assurance ple Limited NPI Limited p00 oo a na ao Henderson Global Investors (Hotdings) ple (UK tnvest. operations
Slide 14: Key elements of capital plan
Key elements of capital plan > Demerger triggers regulatory event under terms of Reset Preferred Securities (RPS) — notall RPS amount will be considered Tier 1 capital after demerger > Demerger also means RPS will lose ratings and tax efficiencies >» Regulatory event gives AMP right to exchange RPS
Slide 15: Key elements of capital plan
Key elements of capital plan ea £ 4, Terms of AMP Rights Offer > AMP intends raising about A$1.2b through an underwritten, non- renounceable rights offer to facilitate cash redemption of the RPS Eligible AMP shareholders will be invited to subscribe a fixed dollar amount per existing AMP share for n
Slide 16: Key elements of capital plan
Key elements of capital plan — — if “ re 9 = & & — > Eligible shareholder has right to subscribe a fixed A$0.77 per existing AMP share held for new AMP shares, eg holding 1000 shares gives right to buy A$770 worth of new AMP shares (unless AMP reduces size of rights offer) >» Subscription price paid
Slide 17: Reconciliation of capital plan
Reconciliation of capital plan Capital raising and allocation May / June 2063 raising AS1.720 Purchase of UK preference shares from AMP Life A$400m Repayment of £90m AMP Life loan’ A$250m Restructuring corporate external debt A$600m UK recapitalisation (£157m and £34m cash) A$470m Redemption of RPS
Slide 18: Reconciliation of demerger capital plan with May announcement
Reconciliation of demerger capital plan with 1 May announcement * Equity from capital raising and asset sales used to retire debt > Level of external debt reduced > All corporate debt between demerged entities repaid * ‘New’ Henderson appropriately capitalised, with minimal external corporate debt *
Slide 19: Reconciliation of demerger capital plan with May announcement
Reconciliation of demerger capital plan with 1 May announcement « Changes to 1 May assumptions: > NPI Limited closed rather than sold >» Other asset sales yet to be realised > Decision to strengthen HHG through direct majority ownership of Henderson > Higher demerger and business restructuring costs
Slide 20: AGAAP pro forma balance sheets - HHG
AGAAP pro forma balance sheets - HHG Pro forma statement of shareholder capital invested Notional allocation As as 30 June 2003 1 $ million Net assets Intangibles Total capital Life Services 4,956 - 4,956 Pearl 3,683 - 3,683 London Life 671 - 671 Life Services Other 602 - 603 Henderson 406 817 1,223
Slide 21: AGAAP pro forma balance sheets - AMP
AGAAP pro forma balance sheets - AMP Pro forma statement of shareholder capital invested Notional allocation As at 30 June 2003 Minimum regulatory $ million requirements Net assets Intangibles Total capital Australian Financial Services 1,623 3,330 735 4,065 AMP Life Statutory Funds 1,464 2,971 - 2,
Slide 22: Consulting Actuary's Report (Tillinghast)
Consulting Actuary’s Report (Tillinghast) Tillinghast is preparing a Consulting Actuary’s Report for inclusion in AMP’s demerger Explanatory Memorandum. The values shown in this presentation have been extracted from a draft of this report and their interpretation requires additional information and
Slide 23: Consulting Actuary's Report — Market-consistent embedded valuations
Consulting Actuary’s Report — Market-consistent embedded valuations * Market-consistent valuation techniques are widely accepted in financial markets and are used in the pricing of a range of financial instruments. They value cashflows consistently with the valuation of similar instruments in financ
Slide 24: Summary of CA's report on AMP's embedded values and value of six months' sales
Summary of CA’s report on AMP’s embedded values and value of six months’ sales As at 30 June 2003 AMP calculated _Tillinghast’s _illinghast's . ; - market- traditional EV traditional EV consistent EV2 Embedded 5,596 5,625 6,084 Value Value of six 76 76 118 months’ sales Embedded 1,341/925° 8458 900°
Slide 25: Reconciliation of CA's market-consistent embedded value to traditional EV for AMP Financial Services
Reconciliation of CA’s market-consistent embedded value to CA’s traditional embedded value for AMP Financial Services As at 30 June 2003 Embedded value Value of six months sales A$m Ag$m Traditional vafue* 5,625 76 Removal of traditional cost of prudential capital? 352 19 Removal of traditional allo
Slide 26: Reconciliation of CA's market-consistent embedded value to traditional EV for UK Life Services
Reconciliation of CA’s market-consistent embedded value to CA’s traditional embedded value for UK Life Services As at 30 June 2003 Unit linked London — Service & other Pearl & NPLL Life Ltd companies —m Em £m Traditional embedded value* 491 436 218 845 Removal of traditional cost of prudential capit
Slide 27: Implications of CA's review of embedded values
Implications of CA’s review of embedded values @ AMP Financial Services EV and value of six months’ sales on MCEV basis are significantly higher than traditional EV basis at 5% risk discount margin Pearl and NPLL traditional EVs are based on a risk discount margin of 5%. This is high by market norms
Slide 28: Implications of CA's review of embedded values - AMP's view
Implications of CA’s review of embedded values - AMP’s view ¢ AMP illustrative use of 3% discount margin for AMP Financial Services (lower end of the range) validated ¢ UK Life Services MCEV broadly similar to traditional EV (even after allowing for a moderate level of agency costs) ¢ AMP illustrati
Slide 29: CA's realistic balance sheets for UK life companies
CA’s realistic balance sheets for UK life companies As at 30 June 2003 £m Pearl National Provident Life’ | London Life Admissible assets 14,874 7,915 2,865 Adjustment for non-profit business (3,471) 405 (4,122) Available assets 41,403 8,020 1,743 Realistic liabilities (11,047) (7,819) (1,714) Assets
Slide 30: CA's realistic balance sheets for UK life companies - AMP's views
CA’s realistic balance sheets for UK life companies - AMP’s views ¢ Pearl, National Provident Life and London Life expected to meet proposed new ‘realistic’ capital adequacy guidelines * Assets available to cover risk capital margin (RCM) projected at over £600m (A$1470m) with free capital above RCM
Slide 31: CA's review of UK life companies' capital releases — AMP's view
CA’s review of UK life companies’ capital releases — AMP’s view * Release of capital depends on building and maintaining an excess of capital beyond FSA requirements * Shareholder capital is likely to be released over the long term, subject to performance, as the business runs off: however it is unl
Slide 32: Update on approaches for UK businesses
Update on approaches for UK businesses
Slide 33: Approaches for UK businesses
Approaches for UK businesses @ Conditional proposals have been received for UK businesses These conditional proposals were not attractive relative to the demerger proposal because >» they fail to offer shareholders the intrinsic value of the businesses >» they involve a continuing exposure through w
Slide 34: Demerger timetable
Demerger timetable Date Event October 2003 Late October 2003 Late October 2003 Late November 2003 Early December 2003 Early December 2003 Mid December 2003 Mid December 2003 Mid-late December 2003 January 2004 - - ra we ve Pa Pa ra ee - we ASIC and Federal Court approvals of EM EM released Record da
Slide 35: Conclusion
Conclusion « “Moving parts” have been resolved to satisfaction of Boards and regulators « Proposal is broadly in line with 1 May announcement despite many complexities encountered since proposal first outlined * Interests of key stakeholders have been well served ¢« Balance sheets and valuations of
Slide 36: Appendix
Appendix
Slide 37: CA's traditional embedded value for AMP Financial Services
CA’s traditional embedded value for AMP Financial Services Components of traditional embedded value’ (EV) and value of six months’ sales as at 30 June 2003 Adjusted net assets 2 3,361 Value of in-force business 2,615 Cost of prudential capital (352) Traditional embedded value 5,625 “Traditional valu
Slide 38: Reconciliation of CA's traditional EV to 1H03 Investor Report for AMP Financial Services
Reconciliation of CA’s traditional EV to 1H03 Investor Report for AMP Financial Services As at 30 June 2003 Value of six Embedded value months’ sales A$m A$m Value in AMP Investor Report' 5,596 76 Differences in assumptions 29 10 Differences in projection models & methodology 14 (10) Difference in v
Slide 39: CA's market-consistent embedded value for AMP Financial Services
CA’s market-consistent embedded value for AMP Financial Services Components of market-consistent embedded value (MCEV) and value of six months’ sales as at 30 June 2003 (excluding explicit agency costs)! Adjusted net assets? 3,361 Market-consistent value of in-force business 2,891 Cost of capital (1
Slide 40: CA's market-consistent embedded value for AMP Financial Services, with illustrative agency costs
CA’s market-consistent embedded value and value of six months’ sales for AMP Financial Services, with illustrative agency costs As at 30 June 2003 lllustrative level of agency costs! 0% 2.5% 5% Market-consistent embedded value . ve 6,084 6,084 6,084 (excluding explicit agency costs) Agency costs 0 (
Slide 41: CA's traditional embedded value for UK Life Services
CA’s traditional embedded value for UK Life Services Components of traditional embedded value’ as at 30 June 2003 Unit linked, Pearl & London Service & other NPLL Life Ltd companies £m £m £m Adjusted net assets 291 21 181 493 Value of in-force business 448 126 54 628 Cost of capital (248) (11) (17)
Slide 42: Reconciliation of CA's traditional embedded value to 1H03 Investor Report for UK Life Services
Reconciliation of CA’s traditional embedded value to 1H03 Investor Report for UK Life Services Reconciliation of traditional embedded value to AMP Investor Report as at 30 June 2003 Embedded value in AMP Investor Report! 1,341 Differences in assumptions 59 Differences in expense methodology? (129) O
Slide 43: CA's market-consistent embedded value for UK Life Services
CA’s market-consistent embedded value for UK Life Services Components of market-consistent embedded value (MCEV) as at 30 June 2003 (excluding explicit agency costs) Unit linked, London Service and Life Ltqd other companies £m £m Adjusted net assets 291 21 181 493 Market-consistent value . : 311 161
Slide 44: CA's market-consistent embedded value for UK Life Services, with illustrative agency costs
CA’s market-consistent embedded value for UK Life Services, with illustrative agency costs As at 30 June 2003 Illustrative level of Agency costs! Em 0% 2.5% 5% Market-consistent embedded value? (excluding explicit agency costs) 900 900 900 Agency costs? 0 (23) (45) Market-consistent embedded value 9