Amp Limited · ASX:AMP
Amp — Merger or Acquisition (October 2003)
34 slides from Amp's merger presentation, Oct 16, 2003
Slide 1: ASX Announcement: AMP's Proposal to Demerge
ASX Announcement 16 October 2003 Manager Company Announcement Office Australian Stock Exchange Level 4, 20 Bridge Street Sydney NSW 2000 Announcement No: 124/03 Manager Market Information Services Section New Zealand Stock Exchange Level 9, ASB Tower, 2 Hunter Street Wellington New Zealand Part 1: A
Slide 2: AMP's Proposal to Demerge - Explanatory Memorandum
This presentation is not for distribution or release in the United States AMP’s Proposal to Demerge - Explanatory Memorandum
Slide 3: Important information
important information The information in this presentation is an overview and does not contain ail information necessary for an investment decision. In making an investment decision, investors must rely on their own examination of AMP, including the merits and risks involved and the effects of the p
Slide 4: Contents
Contents « Overview of Explanatory Memorandum ad Proposal to demerge s Benefits a Recommendations a Transaction mechanics . Demerger costs s Demerger timetable a Overview . Pro forma forecasts a AMP Financial Services a AMP Capital Investors . Outlook
Slide 5: EM overview - proposal to demerge
EM overview —- proposal to demerge « AMP intends to separate into two regional listed companies: > AMP Limited — which will own AMP’s Australian and New Zealand businesses and a 15% interest in HHG. Listed on the ASX and NZSX > HHG PLC — which will own AMP’s UK businesses, including Henderson Global
Slide 6: EM overview - demerged companies
EM overview - demerged companies ¢« AMP Limited in Australasia will be a leading wealth management company with > 2.3 million customers > the largest superannuation provider and financial planning network in the market > — one of the largest investment managers in Australasia, with A$70b’ in total f
Slide 7: EM overview - benefits of demerger
EM overview — benefits of demerger The demerger will: help unlock the underlying value of AMP and HHG, which is more likely to be reflected in the share prices of the two demerged companies’ than in the share price of AMP under the current structure create two separate, regional businesses, with a p
Slide 8: EM overview - demerger recommendations
EM overview —- demerger recommendations ¢« The AMP Board of Directors unanimously recommend that AMP shareholders vote in favour of the proposal to demerge *« The Independent Expert’s Report by Rothschild concludes that the demerger is in the best interests of AMP shareholders on the basis that no o
Slide 9: EM overview - transaction mechanics
EM overview —- transaction mechanics e AMP’s demerger will be implemented through > acapital adjustment > ascheme of arrangement The capital adjustment is a restructure of AMP’s share capital, involving the cancellation and splitting of some AMP shares, which will ensure shareholders have the same n
Slide 10: EM overview - transaction mechanics
EM overview — transaction mechanics ¢ Shareholder approvals required for the demerger are: > amajority of at least 50% of the votes cast to pass the Capital Adjustment Resolution > amajority in number of shareholders voting and at least 75% of the votes cast for the Demerger Resolution (this will ap
Slide 11: EM overview - demerger costs
EM overview —- demerger costs ¢ Total cost of the demerger is estimated at A$214m (before tax), including: > A$99m for financial advisory, legal, accounting and other advisory and experts’ fees and costs, including costs of LSE listing > A$46m for establishing HHG and AMP as independent entities > A
Slide 12: EM overview - capital structures of AMP and HHG
EM overview - capital structures of AMP and HHG « 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 improve
Slide 13: Demerger timetable
Demerger timetable Date Event 16 October 2003 EM lodged on ASX platform 21 October 2003 EM begins printing 28 October 2003 First EM todgment with Australia Post 28 October 2003 Record date for AMP Rights Offer 7 November 2003 Opening date for AMP Rights Offer 9 November 2003 Last EM lodgment with Au
Slide 14: Demerger timetable
Demerger timetable Date 16 ~ 17 December 2003 17 December 2003 18 December 2003 18 December 2003 19 December 2003 23 December 2003 23 December 2003 23 December 2003 January 2004 January 2004 2 January 2004 5 January 2004 8 January 2004 Event AMP Rights Offer bookbuild Bookbuild price and AMP Rights
Slide 15: AMP - post demerger
AMP - post demerger
Slide 16: AMP - overview
AMP - overview ¢ AMP will be a leading, regionally focused wealth management company with about 4,100 employees, 2.3 million customers and two core business units: > AMP Financial Services, the leading provider of wealth management products and services in Australia and New Zealand » the largest sup
Slide 17: AMP - Board and management
AMP - Board and management Non-Executive Directors . Peter Willcox Chairman Richard Grellman Pat Handley Meredith Hellicar Peter Mason Nora Scheinkestel Executive Director yo Se Moni _ Managing Director & Other Senior Management SSS inancial Services Christine M Loughlin. L ‘General Manager, Office
Slide 18: AMP - key strengths
AMP - key strengths * Strong market positions ~ in both wealth management and investment management in Australia and New Zealand * Highly recognised brand — with leading brand awareness in life insurance and superannuation markets in Australia and New Zealand * Extensive customer base — over 2.3 mil
Slide 19: AMP - strategy
AMP - strategy AMP Group » Regain investor and wider market support as a listed company Build trust in AMP’s brand Improve productivity and deliver unit cost reductions Maximise integration synergies Develop a high performance culture AMP Financial S = Maintain its leading position and achieve = Mai
Slide 20: AMP - AGAAP pro forma balance sheet
AMP - AGAAP pro forma balance sheet 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 4,623 3,330 735 4,065 AMP Life Statutory Funds 1,464 2,971 - 2,
Slide 21: AMP 2003 pro forma forecasts - key assumptions
AMP 2003 pro forma forecasts - key assumptions * Market volatility has been taken into account by using a range of ASX 200 and 10- year bond yield assumptions! ¢« No material changes in AMP’s competitive environment * improvements in new business volumes in AFS 2H03 on 1HO3, although still down on 2
Slide 22: AMP 2003 pro forma forecasts
AMP 2003 pro forma forecasts Pro-forma historical Pro-forma forecast $m (All amounts are after. tax) ae oeonths ended 6 months ended 12 months ending ecember 2002 30 June 2003 31 December 2003 : Low High AMP Financial Services 329 172 347 383 AMP Capital Investors 95 34 63 65 Total BU operating marg
Slide 23: AMP investment return sensitivities
AMP investment return sensitivities Forecast range Lower Higher Sensitivity Low High Sensitivity As at 31 December 2003 ASX 200 2600 2800 3400 3600 Australian 10 year bond yield 4.5% 5.0% 6.0% 6.5% $m $m $m $m Operating profit after Income tax’ BU operating margins 397 410 448 461 Investment income
Slide 24: AMP - other significant sensitivities
AMP - other significant sensitivities Impact on forecast operating margin’ Assumption Ag$m AMP Financial Services t/- 5% sales volumes +/-7 +/- 1% persistency levels +/-7 t/- 5% Australian contemporary superannuation +/- 12 fees charged to customers for assets under management AMP Capital investors
Slide 25: AMP Financial Services
AMP Financial Services « Evolve the distribution model by tailoring the offer for planners to meet customer needs and improve the quality of advice « Develop and deliver market competitive products and platforms by lowering the unit cost of production « Improve technology and products to ensure plan
Slide 26: AMP Financial Services - market position
AMP Financial Services - market position Total market) AMP market . AMP. market size position share ($m) (rank) (%) Funds under management Superannuation! 430,731 4 47 Retirement income2 45,838 3 12 Unit trusts (excluding cash management trusts)* 82,642 9 4 Total retail managed funds‘ 297,380 3 11 M
Slide 27: Summary of Consulting Actuary's report on AMP Financial Services' embedded values
Summary of Consulting Actuary’s report on AMP Financial Services’ embedded values and value of six months’ sales As at 30 June 2003 AMP calculated Tillinghast’s Tillinghast’s traditional Ev’ traditional EV market- consistent EV? Embedded 5,596 5 625 6,084 AMP Financial Services (ASm) F Value of six
Slide 28: Reconciliation of CA's market-consistent embedded value to traditional
Reconciliation of CA’s market-consistent embedded value to CA’s traditional embedded value for AMP Financial Services As at 30 June 2003 Embedded value vee oe Asm A$m Traditional value 5,625 76 Removal of traditional cost of prudential capital 352 49 Removal of traditional allowance for operating pr
Slide 29: AMP Financial Services - sensitivity of market-consistent embedded value
AMP Financial Services - sensitivity of market-consistent embedded value (excluding explicit agency costs) Embedded Value of six value months’ sales Base value 6,084 4118 20% fall in equity values* 5,590 nia 20% fall in property values! §,913 nia 20% adverse movement in yield curve? 5,957 442 Discon
Slide 30: AMP Capital Investors - overview
AMP Capital Investors - overview Pun unter management $bn Equities Fixed income Property* Private capital Total Australia 24.8 22.1? 12.6 2.3 61.8 New Zealand 3.3 3.9 1.3 0.4 8.6 Total 28.1 26.0 13.9 2.4 70.4 ? Includes $4.2 billion (as at 30 June 2003) relating to four listed property trusts which
Slide 31: AMP Capital Investors - market position
AMP Capital Investors - market position Total market AMP market AMP market size ($m)* position (rank) share (%) Total investment management market 735,396 2 8.3 Retail investment market 248,278 3 12.1 Wholesale investment market 502,965 3 6.2 Select asset classes Australian equities 193,065 2 8.3 Au
Slide 32: AMP - outlook beyond 2003
AMP - outlook beyond 2003 ¢« The AMP Board expects profit after income tax to increase in 2004, subject to investment market conditions « This will be driven by higher operating margins in AFS and lower corporate office costs, offset in part by lower earnings in AMP Capital Investors due to the loss
Slide 33: Caution regarding forward-looking information
Caution regarding forward-looking information « Certain statements contained in this presentation may constitute “forward-looking statements” or statements about “future matters" for the purposes of section 728(2) of the Corporations Act 2001 (Cth) and/or “forward- looking statements" within the mea
Slide 34: Caution regarding financial information
Caution regarding financial information The prospective financial information contained in this presentation necessarily is based upon a number of estimates and assumptions that, while presented with numerical specificity and considered reasonable by AMP, are inherently subject to significant busine