Slide 1: Interim results 2004
Interim results 2004 Andrew Mohl
Slide 2: Outline
Outline w @ we a Summary Group overview Business Unit review Outlook Wrap up
Slide 3: Summary
Summary # 1H 04 focus on operational excellence to deliver shareholder value: Running AMP better than it’s ever been run before » Four key areas: Reducing unit costs Growing cashflows Outperforming on investments Lowering balance sheet gearing » Good progress in first half: Controllable costs down 1
Slide 4: Overview — 1H financial results highlights
Overview — 1H 04 financial results highlights we % % we we % Underlying contribution up 21% to A$311m driven by higher business unit margins Net profit before other items up 72% to A$412m driven by sharp improvement in investment income Value of New Business up 25% on 1H 03 to A$125m and Embedded Va
Slide 5: Overview — 1H profit and loss
Overview — 1H 04 profit and loss AMP Financial Services! 225 174 AMP Capital Investors 35 34 Cobalt/Gordian 19 27 Total BU operating margins 279 235 Discontinued businesses 1.2 (1) 9 Group office costs (17) (10) Total operating margins 261 234 Underlying investment income 124 94 interest expense on
Slide 6: Overview — underlying contribution
Overview — underlying contribution 4 (8) (29) Am T T T T v T T T T 1HO3 AFS AMPCI Cobalt? Discontinued Group Underlying Interest Lower 41HO4 underlying margins margins Gordian businesses office investment expense on interest underlying contribution margins margins costs income debt expense contribut
Slide 7: Overview — earnings and dividend
Overview — earnings and dividend Average shares on issue 1,849m 1,233m Earnings per share A$0.20 A$0.30 (actual) Earni h arnings per share AS0.17 $0.21 (underlying) Dividend per share A$0.13 A$0.07 Franking 75% 15%
Slide 8: Overview - cashflows
Overview - cashflows » 21% increase in AFS cash inflows over 1H 03 driven by post demerger planner and customer confidence, higher markets and improved investor sentiment = 8% reduction in AFS cash outflows, reflecting improved persistency « A$1.1b turnaround in net cashflows in AFS to A$540m = Net
Slide 9: Overview — value of new business
Overview — value of new business @ 3% discount margin 140 4 A$124m A$125m 120 ¥ 100 + 804 60 4 40 4 20 + Agm 04
Slide 10: Overview — group costs and cost ratio
Overview — group costs and cost ratio 1,800: 1,600: 1,400 4,200 4,000 800 600 400: 200 AgSm 0 1,543 AT% 400 42% 396 1HOOT 1HO1t 1HO2t E=*i Controllable costs 41H03 * —* Cost io income ratio t+ AMP group including previously owned HHG entities * Demerged AMP. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
Slide 11: Overview — debt and gearing
Overview — debt and gearing 6,000 60% 5,000 50% 4,000 40% 3,000 30% 2,000 + | 20% 1,000 + 10% A$m 0 0% 31/12/2000 31/12/2001 =" Group debt (excl operational debt) 31/12/2002 31/12/2003 30/06/2004 —e Gearing defined as debt/ (debt + equity) 11
Slide 12: Overview - shareholder capital invested
Overview - shareholder capital invested Notional allocation at 30 June 2004 31 December 2003 AMP Financial Services 3,632 3,652 AMP Capital Investors 256 246 Cobalt/Gordian’ 592 590 Group office? (includes HHG 880 3,354 holding) Total AMP shareholder capital 5,360 7,842 _fesources nn a External Grou
Slide 13: Overview — capital management
Overview — capital management Actions: % th % Higher underlying dividend payout policy of 75% with franking of 75% sustainable in medium term Future dividend growth linked to EPS growth Limiting participation in DRP to the first 10,000 shares held by each shareholder — this will reduce likely reinve
Slide 14: Overview — capital management
Overview — capital management Potential excess capital: ® ® % Group Office capital currently AS880m v required holdings of A$500m Current excess largely reflects HHG stake, valued at A$324m at 30 June 2004 — AMP intends to retain its stake until it sees appropriate value for its shareholders AMP Lif
Slide 15: Business Unit review
Business Unit review
Slide 16: AMP Financial Services
AMP Financial Services % 4 G we Operating margins up 29% on 1H 03 to A$225m, driven by strong cashflows, improved persistency and claims experience, and reduced cost base Return on Invested Capital (RoIC) up to 16.1% from 13.8% Return on Business Unit Equity (RoBUE) up to 19.9% from 15.7% Controllab
Slide 17: AMP Financial Services — operating margins
AMP Financial Services — operating margins Asm T T T T T T T T T t T 4HO3 Market Persistency Mortality/ New Contemporary Mature Service NZ Reduction Other 4HO4 operating movements morbidity business expense run-off co. fees - non-life in bank operating margins volumes reduction mature margins margin
Slide 18: AMP Financial Services — fee reductions for key products
AMP Financial Services — fee reductions for key products # Reducing fees on key Australian superannuation (FLS and CustomSuper) and pension (FLAP) products » Average 10% fee reduction on FLS, 6% on CustomSuper and 5% on FLAP from 1 November = About 90% of existing customers will benefit - more than
Slide 19: AMP Financial Services — strategic rationale for fee reductions
AMP Financial Services — strategic rationale for fee reductions * Using scale and low-cost manufacturing platform to improve competitive position in response to changing market dynamics * Consistent with product manufacturing strategy of delivering market competitive products at the lowest unit cost
Slide 20: AMP Financial Services — shareholder impact of fee reductions
AMP Financial Services — shareholder impact of fee reductions # 2004 impact on value partly mitigated by other premium increases » A$14m gross impact on Value of New Business partly offset by higher premiums for disability income products (A$1m) and higher margins on annuities (A$6m) = A$109m gross
Slide 21: AMP Financial Services — Australian contemporary business
AMP Financial Services — Australian contemporary business 1H 04 1H 03 AUM A$32.0b A$27.0b +19% Total profit margins A$114m A$71m +61% Controllable costs A$210m A$220m -5% Cost to income ratio 48.7% 60.9% -12.2 percentage pts Net cashflow A$1,199m A$522m +130% VNBe 3% discount margin A$96m A$74m +30%
Slide 22: AMP Financial Services — Australian mature business
AMP Financial Services — Australian mature business a 41H 04 1H 03 AUM A$19.0b _ A$ 19.6b b-3% Total profit margins A$85m A$87m -2% Controllable costs A$35m A$38m -8% Cost to income ratio 17.0% 15.5% +1.5 percentage pts Net cashflow (A$646m) __ (A$991m) i 435% VNBe 3% discount margin A$19m A$17m | +
Slide 23: AMP Financial Services — New Zealand business
AMP Financial Services — New Zealand business 1H 04 1H 03 AUM A$4.2b A$3.8b +11% Total profit margins A$17m A$21m -19% Controllable costs A$27m A$26m +4% Cost to income ratio 46% 39% +7 percentage pts Net cashflow (A$13m) (A$70m) +81% VNBe@ 3% discount A$10m A$9m +11% Persistency 88.9% 87.1% +1.8 pe
Slide 24: AMP Financial Services — value of new business
AMP Financial Services — value of new business Traditional VNB@ 3% discount margin 6 {4) Cost Volume Other Bond Pricing tHO4 savings & mix of yields changes" VNB business 4. ($14m) gross impact of new pricing partly offset by additional product margins of A$7m Market consistent VNB With agency costs
Slide 25: AMP Financial Services — embedded value
AMP Financial Services — embedded value Traditional EV@ 3% discount margin 70 (91) 6,239 {492) Market consistent EV After transfers, with A$5,917m agency costs of 0% After transfers, with A$5,621m agency costs of 5% ‘ Asm T r t r r r t r FY03 Expected 1HO4 Investment Other Pricing | 1H04 Net 4H04 re
Slide 26: AMP Financial Services — channels and products
AMP Financial Services — channels and products * Cash inflows rose A$764m or 21% in 1H 04 on a year ago # By channel: « AMP Financial Planning — up A$459m or 22% « Hillross/Arrive - up A$294m or 59% « Corporate Super Direct Sales force — up A$53m or 29% » 3 Party Distributors — up A$13m or 4% « By p
Slide 27: AMP Financial Services — costs and cost ratios
AMP Financial Services — costs and cost ratios* 5005 100 =f 450% r 90 414 400+ 3504 304 300% 2507 200% 1505 100% 5Ow AgSm 0 4HOO 4HO1 1HO2 4H03 1HO04 [= Controllable costs —@—- Cost to income ratio *Excluding AMP Banking 27
Slide 28: AMP Life — financial strength
AMP Life — financial strength % % we AMP Life shareholder capital A$1.7b above minimum regulatory capital at June 2004 (A$250m higher than December 2003) AMP Life shareholder capital A$484m above top of target surplus range at 30 June 2004 (139% of target surplus compared to 110% in December 2003 an
Slide 29: AMP Capital Investors
AMP Capital Investors * Operating margins up A$1m to A$35m, despite loss of LPT margins (A$8m) due to higher AUM, improved cashflows and growth in performance and transaction fees # Improved investment performance across all asset classes, with 81% of Australian assets under management outperforming
Slide 30: AMP Capital Investors — operating margins
AMP Capital Investors — operating margins (6) ASm T T T T T 4HO3 Higher Higher Higher AUM- Higher Loss of LPT Staff Other costs 1HO04 operating transaction investment based mgmt otherfees netmargin incentives operating margins fees performance fees {e.g. bond {low 1HO3 margins fees fending) base) 30
Slide 31: AMP Capital Investors — assets under management
AMP Capital Investors — assets under management Assets under management at | 31 December 2003 A$67.2b External listed assets net cashflows 1,452m External private capital net 39m cashflows | External property net cashflows 131m Internal net cashflows | (1,586m) Market movements 5,496m Assets under m
Slide 32: AMP Capital Investors — Australian investment performance
AMP Capital Investors — Australian investment performance A$48.8b A$2.7b A$8.5b A$4.1b A$64.1b AUM AUM AUM AUM AUM 9 100 + sor 84% t Listed assets Private capital Property Future Directions Total Funds 32
Slide 33: AMP Capital Investors — value added to Life No Fund
AMP Capital Investors — value added to Life No 1 Fund (389) Fund size: A$27.4b A$24.4b A$23.8b A$21.4b A$21.9b A$21.8b 33
Slide 34: Cobalt/Gordian
Cobalt/Gordian * Operating margins of A$19m, down from A$27m in 1H 03 » Risk margins released to profit as claims managed down = Tightly managed with a focus on maximising profit and increasing surplus capital 34
Slide 35: Cobalt/Gordian — operating margins
Cobalt/Gordian — operating margins AgSm 35
Slide 36: Cobalt/Gordian — gross reserves
Cobalt/Gordian — gross reserves 3,500 + 2,969 3,000 + 2,500 4 2,37 2,000 + 1,500 4 1,000 - 500 + Ag$m 0 _ nt nn i | 1999 2000 2001 2002 2003 1H04 Gross discounted claims including risk margins. Prior years adjusted to 30 June 04 exchange rates. 36
Slide 37: Outlook
Slide 38: Outlook in 2004
Outlook in 2004 # Results tracking well = Expecting strong growth in Embedded Value and Value of New Business in AFS. VNB in 2H 04 will benefit both from seasonally higher sales and resetting of maintenance costs for FY 04 based on expected lower unit costs in 2005 # Operating margins in AMP Capital
Slide 39: International Financial Reporting Standards (IFRS)
International Financial Reporting Standards (IFRS) « P&L impact of IFRS on Business Unit operating margins not expected to be material * AMP Ltd after tax profit may be more volatile under IFRS # Under IFRS, equity will be adjusted for loss of part of Deferred Acquisition Costs (DAC) and Excess of M
Slide 40: Outlook in 2005
Outlook in 2005 » AFS operating margins and underlying contribution will be impacted by loss of transitional tax relief (around A$20m from 1 July) and effect of fee reductions for key superannuation and pension products (around A$15m) * AFS expects to more than offset these negative impacts with gro
Slide 41: Wrap up
Slide 42: Wrap up
Wrap up » Focus remains on running AMP better than it’s ever been run before — encouraging initial results # Post demerger, AMP is a more focused and agile company with a passion to succeed * Significant opportunities for growth in wealth management in Australia and New Zealand « Attractive retireme