Amp Limited · ASX:AMP
Amp — Non-Deal Roadshow (April 2008)
80 slides from Amp's roadshow presentation, Apr 3, 2008
Slide 1: ASX Announcement: Investor Roadshow Materials
ASX Announcement For personal use only 3 April 2008 Manager Manager Company Announcements Office Market Information Services Section Australian Stock Exchange New Zealand Stock Exchange Level 4, 20 Bridge Street Level 2, NZX Centre, 11 Cable Street Sydney NSW 2000 Wellington New Zealand Announcement
Slide 2: AMP – investor discussion pack
For personal use only AMP – investor discussion pack Craig Dunn, Chief Executive Officer Paul Leaming, Chief Financial Officer Howard Marks, Director, Investor Relations April 2008
Slide 3: Executive summary
Executive summary Robust financial performance in 2007, while investing for For personal use only 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 4: Index
Index AMP business model………………………………………..………………….……….. ..4 For personal use only Market dynamics………………………………………………………….………….……12 Strategy……………………………………..………………………………………..…….17 Group performance………………………………………………………….……………22 Business line performance overview……………………………………………………27 Business line perfo
Slide 5: AMP business model
For personal use only AMP business model 4
Slide 6: AMP business model built on key competitive advantages
AMP business model built on key competitive advantages For personal use only Products & Cost Asset Brand Distribution Packaging platforms efficiency management Large Large, Pre-eminent footprints in scaleable Cost to Broadly Rapidly brand in planner and contemporary income ratio based AUM growing AU
Slide 7: Model generates margins across the industry value chain
Model generates margins across the industry value chain For personal use only Products & Distribution – Products & Platforms Asset Dealer groups / planners platforms management Pricing - typical industry range for balanced 75 – 115 bps 40 – 95 bps 20 – 40 bps growth fund AMP retail platform with AMP
Slide 8: AMP's aligned planner model has scale and is highly productive
AMP’s aligned planner model has scale and is highly productive For personal use only 1,600 PIS 1,400 AMP Financial Planning Number of planners 1,200 1,000 Count 800 CBA FP 600 Millennium 3 Westpac MLC/Garvan NAB FP ABN AMRO Financial Wisdom 400 Genesys ANZ Suncorp Bridges Hillross 200 Godfrey Retire
Slide 9: AMP's strong position in employer channel
AMP’s strong position in employer channel AMP fastest growing employer super provider For personal use only Employer sponsored products by assets under management 6,000 Net cashflow growth ($b) Dec 2003 to Dec 2007 AMP (total) 5,000 AMP SignatureSuper 4,000 Mercer 3,000 CFS FC NAB (total) 2,000 BT (
Slide 10: Business unit operating earnings now more than five times underlying investment income
Business unit operating earnings now more than five times underlying investment income For personal use only 891 789 78 67 681 190 74 190 540 539 58 51 171 172 210 623 532 210 193 436 190 184 158 272 316 A$m FY 03 FY 04 FY 05 FY 06 FY 07 BU operating earnings - open BU operating BU operating Underly
Slide 11: AUM growth coupled with increasing capital efficiency
AUM growth 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 resta
Slide 12: AUM growth coupled with cost discipline
For personal use only AUM growth coupled with cost discipline 140 1000 129 122 894 900 832 851 120 821 818 104 800 100 90 700 76 600 80 44.8% 45.1% 41.0% 500 39.4% 38.6% 60 400 40 300 200 20 100 A$b 0 A$m 0 FY 03 FY 04 FY 05 FY 06 FY 07 FY 03 FY 04 FY 05 FY 06 FY 07 AUM Controllable costs Cost to in
Slide 13: Market dynamics
For personal use only Market dynamics 12
Slide 14: 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 15: Legislative changes highly supportive of superannuation
Legislative changes highly supportive of superannuation For personal use only Superannuation flagship product in Australian financial services sector Successive governments over two decades have shaped superannuation as the preferred vehicle for retirement savings ¾ Clear bi-partisan support for
Slide 16: Robust growth outlook for key market sectors
For personal use only Robust growth outlook for key market sectors Retirement savings projections to 2016 800 Post retirement - CAGR: 18.2% 700 Retail - CAGR: 9.4% 600 SMSF - CAGR: 9.5% Industry funds - CAGR: 12.3% 500 $billion 400 300 200 100 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 P
Slide 17: Australian private pension market forecast to more than double
Australian private pension market forecast to more than double For personal use only 2006 2015 Total US$1,858 billion Total US$4,114 billion China China 13% 4.4% Singapore Australia Hong Kong 4.5% 47.0% 3% South Korea India 6.4% 2.9% Other countries India Australia 43.1% 5.0% 3.1% US$801.0b Singapor
Slide 18: Strategy
For personal use only Strategy 17
Slide 19: 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 20: 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 21: 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 22: 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 23: Group performance
For personal use only Group performance 22
Slide 24: Key performance measures
Key performance measures Underlying return on equity up from 30.3% to 37.9% For personal use only 1 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$393 million 68% of AUM at
Slide 25: Group assets under management
For personal use only Group assets under management 129 122 120 18.9 19.4 104 2.0 100 2.5 90 18.9 3.4 80 76 19.3 18.8 5.7 60 6.3 108.1 100.1 40 81.7 65.0 50.9 20 A$b 0 FY 03 FY 04 FY 05 FY 06 FY 07 Open businesses Group Closed businesses 24
Slide 26: Group cost performance
For personal use only 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$m 0 FY 03 FY 04 FY 05 FY 06 FY 07 Controllable costs Cost to income ratio Controllable costs to AUM 25
Slide 27: Underlying return on equity
For personal use only Underlying return on equity 40 37.9% 35 30.3% 30 25.0% 25 21.2% 20 18.1% 15 10 5 % 0 FY 03 FY 04 FY 05 FY 06* FY 07 Underlying return on equity * FY 06 underlying return on equity restated for Cobalt/Gordian fair value provision release. 26
Slide 28: Business line performance
For personal use only Business line performance 27
Slide 29: AMP's earnings by business line
For personal use only AMP’s earnings by business line AFS Contemporary Wealth Management operating earnings - A$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 30: AMP Financial Services (AFS)
For personal use only AMP Financial Services (AFS) 29
Slide 31: AFS 2007 highlights
For personal use only AFS 2007 highlights Strength of business franchise underpinned robust financial 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 income ratio of 34.5%
Slide 32: 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 33: AFS Australian contemporary wealth protection
For personal use only AFS Australian contemporary wealth protection Contemporary 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 34: 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 35: Impact of markets on AMP legacy book
For personal use only Impact of markets on AMP legacy book 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 A
Slide 36: 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 37: 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$104m
Slide 38: AFS cost performance
For personal use only AFS cost performance 600 572 557 562 541 543 114bps 500 101bps 89bps 400 43.2% 77bps 40.6% 70bps 38.8% 35.6% 34.5% 300 200 100 A$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 a
Slide 39: AFS financial planner distribution
For personal use only AFS financial planner distribution 38
Slide 40: Power of aligned planner model
For personal use only Power of aligned planner model Model of self-employed planners operating under AFS license creates alignment of interests – for consumers, planners and AMP ¾ For consumers, large institutional backing for planners in local communities provides necessary security and peace of
Slide 41: Two distinct planner groups create powerful presence in market
Two distinct planner groups create powerful presence in market For personal use only AMP Financial Planning (AMPFP) Hillross (including Arrive and Magnify) 1,296 self-employed planners; 710 practices 297 self-employed planners; 107 practices 468 Certified Financial Planners 167 Certified Fin
Slide 42: Growing planner numbers
Growing planner numbers Enhanced focus on business-as-usual initiatives For personal use only ¾ Increased specialised resources to recruit new planners ¾ Improved marketing and recruitment material ¾ Improved support for practices transitioning from other licensees Introduction of planner pathwa
Slide 43: Improving planner productivity
Improving planner productivity Investing to improve technology For personal use only ¾ Rationalised online client applications to single front end (MyBusiness Portal) ¾ Increase in planner technology investment to enhance planner and licensee productivity, while improving risk management processes
Slide 44: Improving planner productivity
Improving planner productivity Improving planners’ business acumen For personal use only ¾ Dedicated programs delivered to planners to improve their business strategy and processes, eg client management and marketing ¾ Specific in-field management support dedicated to enhanced business performance
Slide 45: AFS cashflows
For personal use only AFS cashflows 44
Slide 46: Industry trends in cashflows
For personal use only 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 higher inflows a
Slide 47: AFS 2007 cashflows
AFS 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$2.4b ¾ Majority of superannuation outflows from customers aged 55 and over ¾ Two-thirds of retail and corporate superannuation outflows reta
Slide 48: AFS super contribution pattern in 2007 consistent with market positioning
AFS super contribution pattern in 2007 consistent with market positioning For personal use only 1,800 1,600 1,400 1,200 1,000 800 600 400 200 A$m 0 $0 - $1000 $1000 - $100k $100k - $250k $250k - $450k $450k - $1M $1m+ Super contribution amount – FLS, Corporate Super* 2006 2007 *Corporate Super exclu
Slide 49: AFS retail superannuation outflows by age group
AFS retail superannuation outflows by age group For personal use only 50 45 40 35 30 25 20 15 10 5 % 0 Under 20 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 79+ -5 48
Slide 50: AFS retirement income net cashflow growth
For personal use only AFS retirement income net cashflow growth 1800 1600 1400 1200 1000 800 600 400 200 A$m 0 -200 1H04 2H04 1H05 2H05 1H06 2H06 1H07 2H07 49
Slide 51: AFS net cashflows
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$m) Q2 03 Q2 03 Q3 03 Q3 03 Q4 03 Q4 03 Q1 04 Q1 04 Q2 04 Q2 04 Q3 04 Q3 04 Q4 04 Q4 04 Q1 05 Q1 05 Q2 05 Q2 05 Excludes cashflows from CCC, 3PD, GID and other Hillross Q3 05 Q3
Slide 52: AFS net cashflows by wealth management product line
AFS net cashflows by wealth management product line on rolling 12 month basis For personal use only (A$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 53: AFS value metrics
For personal use only AFS value metrics 52
Slide 54: AFS embedded value (EV) up 17%
For personal use only A$m 4500 5000 5500 6000 6500 7000 7500 8000 8500 FY 9000 06 EV R 6518 es ta te m 6518 FY en *Before transfers t 797 06 EV re st Ex ate d 7315 pe ct ed FY re 7315 07 tu rn n 645 In ew ve st bu m si 7960 en ne ta ss 393 nd bo U nd 8353 ni yi tc el os ds 151 tr ed uc 8504 Pe tio c
Slide 55: AFS value of new business (VNB) up 13%
For personal use only A$m 220 240 260 280 300 320 340 360 380 400 420 FY 06 VN 364 B R es ta te FY m en 06 t (16) VN B re st at 348 Vo ed lu m e In Fu an ve d m 64 st ture ix m en ec t on Ex ass om pe u ic ns mp / (12) e ti as ons su m pt io 21 Pe cl ai r si ns Pr m st ic s e in as nc g su y a an m
Slide 56: Impact of persistency and claims assumption changes on value metrics
Impact of persistency and claims assumption changes on value metrics For personal use only 400 300 200 100 A$m 0 -100 -200 -300 2004 2005 2006 2007 Embedded value Value of new business 55
Slide 57: Impact of persistency assumption changes on EV during 2007
Impact of persistency assumption changes on EV during 2007 Retail superannuation outflows For personal use only ($259m) Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 56
Slide 58: AMP Capital Investors (AMPCI)
For personal use only AMP Capital Investors (AMPCI) 57
Slide 59: AMPCI 2007 highlights
AMPCI 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 infrastructure; 98% of priv
Slide 60: 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$223m +15% Cost to income ratio
Slide 61: AMPCI volumes and profit margins
For personal use only AMPCI volumes and profit margins 120 13.6bps 11.7bps 100 10.8bps 9.7bps 9.0bps 80 69.0 62.1 60 56.0 51.0 44.8 40 20 41.7 35.7 28.8 21.7 23.6 A$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 points
Slide 62: 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 f
Slide 63: 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$111.1b Dec 0
Slide 64: AMPCI performance fee breakdown
For personal use only AMPCI performance fee breakdown Performance fees by Performance fees by asset class benchmark v absolute return Property Equities Absolute return 22% 24% 27% Private equity Fixed interest 15% 11% Infrastructure 28% Benchmark 73% Note: Based on 2007 performance fees 63
Slide 65: AMPCI cost performance
AMPCI cost performance 300 For personal use only 62.3% 61.7% 257 57.8% 250 56% 223 53.1% 198 200 184 177 150 26.6bps 24.7bps 100 23.3bps 22.8bps 23.3bps 50 A$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 re
Slide 66: Current market conditions
For personal use only Current market conditions 65
Slide 67: 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 68: 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 69: AMP earnings sensitivities
AMP earnings sensitivities Investment For personal use only A$m Operating earnings Total income Total Group CWM CWP Mature NZ AMPCI Total AFS Office Economic variables 10% Ï in Australian equities 10 - 3 - 13 6 19 26 45 10% Ð in Australian equities (10) - (3) - (13) (6) (19) (21) (40) Business varia
Slide 70: Composition of shareholder funds portfolio
For personal use only Composition of shareholder funds portfolio Overview of portfolio ¾ 23% fixed interest ¾ 22% cash ¾ 55% growth assets (including property) Key changes in 2007 ¾ Major reduction in cash holding due to capital return payment in first half 2007 Market risks managed by referen
Slide 71: Capital management, dividends and debt
For personal use only Capital management, dividends and debt 70
Slide 72: Capital management
For personal use only Capital management AMP’s capital strength result of transformation to low capital intensive wealth management group and disciplined, efficient capital management strategy As part of strategy, AMP maintaining dividend payout ratio policy of 85% of underlying profit, with tar
Slide 73: AMP Financial Services profit and capital releases
AMP Financial Services profit and capital For personal use only releases AFS AFS underlying Investment Additional Cash transfer A$m operating investment income market transfers(3,4) from AFS (5) earnings(1) income(1,2) adjustment(1,2) 2000 322 258 243 176 999 2001 311 234 (94) (271) 180 2002 272 221
Slide 74: Dividends and capital returns
For personal use only 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 dividend i
Slide 75: Underlying EPS trend before and after impact of capital returns
Underlying EPS trend before and after impact of $2.25b of capital returns* (*AMP conducted a $750m return of capital in June 2005, $750m in June 2006 and $750m in June 2007) For personal use only 70 58.5 60 56.4 54.4 52.3 51.2 49.5 48.2 50 46.6 Cents per share 43.9 43.9 43 43.9 40 34.8 34.8 30 20 10
Slide 76: 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 77: 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 78: Outlook
For personal use only Outlook 77
Slide 79: Evergreen goal to double value of investment in AMP every five years
Evergreen goal to double value of investment in AMP every five years 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 initiat
Slide 80: Short term outlook
Short term outlook 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 to