Slide 1: ASX Announcement - AMP announces outcomes of review
[=AMP| Level 24, 33 Alfred Street, Sydney, NSW 2000 GPO Box 4134, Sydney, NSW 2001 ASX ANNOUNCEMENT DATE: 4 December, 2002 ADDRESSEE: Name : Companies Announcements Office Company: Australian Stock Exchange Limited Fax No: 1 300 300 021 COPY: Name : Market Information Services Section Company: New Z
Slide 2: Driving reform: Strategic review outcomes
Slide 3: Strategic overview
Strategic overview
Slide 4: Current positioning
Current positioning AMP's core business is wealth management — “helping customers build and protect their wealth so they can enjoy the life they want” The wealth management industry is facing tough times as continuing poor equity markets reshape the industry and position of wealth management compani
Slide 5: Core capabilities and businesses
Core capabilities and businesses AMP’s core capabilities are: * advice based distribution * guperannuation/pension fund management * asset management AMP’s key businesses and markets are: e Australian Financial Services » Australia & New Zealand UK Life Services » United Kingdom UK Contemporary Fina
Slide 6: Strategic challenges
Strategic challenges Reshaping the business portfolio to drive growth in EPS and shareholder value Extracting optimal shareholder value from mature UK life books Positioning the UK contemporary business to compete profitably in selected markets Enhancing our leading position in Australia Developing
Slide 7: CEO's reform agenda
CEO’s reform agenda Five areas of initial focus: « Addressing low return channel and product lines Focusing short term growth ambitions on core businesses Increasing transparency and quality of disclosure Tackling sacred cows and embedded behaviours Role modelling strong leadership
Slide 8: Reform decisions to date
Reform decisions to date installing new Senior Management Team Successfully raising A$1.1bn through RPS Reducing Asian and European development teams Closing AMP New Ventures Closing Global IT Reviewing carrying value of all assets Restructuring Pearl fund to meet MRC requirements to FISE 3000 Restr
Slide 9: Reform aspirations for culture
Reform aspirations for culture “Getting real’ Candour - open and honest communications Tough decisions Decisive, speedy action External focus Strong bottom line focus Disciplined execution against strategy High performance standards Recognition of performance
Slide 10: Business unit and functional review
Slide 11: UK financial services strategic focus
UK financial services strategic focus Recognise it is a tough and uncertain market Ring fence the mature business by splitting UK into mature and contemporary Sharpen focus on areas of competitive strength — advice- based distribution, pension fund management, asset management Lower risk capital inv
Slide 12: UK financial services indicative metrics
UK financial services indicative metrics VNB (2%dm) * 2002LE refers to combined UK Life and Contemporary Financial Services business ™ Discount margin
Slide 13: UK Life Services - ring fencing the mature business
UK Life Services - ring fencing the mature business * Tightly managing book of mature/closed products, being run off over time « Maximising value of in-force book by » developing customer management systems centred on customer value - persistency, up-sell, cross-sell, transfers, closures, product pr
Slide 14: UK Life Services — building new sales channels
UK Life Services — building new sales channels Advice-based distribution remains key but current models not economic Closing” Building + Direct Sales Force of about 700, * New advice-based financial planning group of 50-100 highly selling primarily Pearl products to gualified, self-employed planners
Slide 15: UK Life Services indicative metrics
UK Life Services indicative metrics Capital RolC Controllable costs Cost to income ratio EV (2%dm) VNB (2%dm)
Slide 16: UK Contemporary Financial Services - strategic focus
UK Contemporary Financial Services - strategic focus * Focused player in selected markets » Manufacture pensions and retirement solutions » Advice based distribution "Retail: Towry Law/ new model financial planning group » Wholesale: Employee Benefit Consultants (EBCs), Independent Financial Advisor
Slide 17: UK Contemporary Financial Services — current assessment
UK Contemporary Financial Services — current assessment Employee Benefit Consultants (EBCs) Strong growth in new business — growing market Effective end-to-end business model Encouraging panel acceptance Independent Financial Advisors (IFAs) —* ‘Pensions specialist Replicating EBC end-to-end busines
Slide 18: UK Contemporary Financial Services indicative metrics
UK Contemporary Financial Services indicative metrics Capital
Slide 19: Tracking UK cost savings
Tracking UK cost savings (Pre-tax £m) 200 . 180 - 160 4 140 4 120 4 Original target 100 4 80 4 60 5 40 4 20 4 ) led eceeesebesteessecevevasersesccasensenssssbasacseasascesneas Revised target Cost Withdrawal Shareholder savings of with- benefit profits products oO Original estimate net of management
Slide 20: Total UK financial services cost savings
Total UK financial services cost savings (Pre-tax £m) 500 9 450 400 350 300 2001 total costs 2002 total costs 2003 total costs Total savings vs Includes Towry Law. target on pro rata basis 2001 2 Business as usual C1 _ Project costs
Slide 21: UK financial services split of operating margins
UK financial services split of operating margins (After tax £m) 140 45 120 4 100 4 80 4 2001 Actual 2002 LE 2003 Plan [1 Planned margins [1] Other [A Service Company
Slide 22: UK Service Company profit movement
UK Service Company profit movement (After tax £m) With-profits withdrawal Volume mix, Cost savings other
Slide 23: UK financial services embedded value
UK financial services embedded value Change in embedded value from 1H02 At 2% discount margin End Jun 2002 Expected Market Capital ServCo Projected Dec Return Movement Actions. 2002
Slide 24: Illustrative impact on Pearl of 100pt or 2.5% fall in FTSE
lllustrative impact on Pearl of 100pt or 2.5% fall in FTSE Pearl 90:10 fund (£120m) v_ Pearl Embedded Value (£24m) £rn impact on 1H02 Regulatory Embedded assets capllal Value Shareholder Capital (10%) 236 2 2 > y Policyholder capital (90%) 4,912 48 S Market fall impacts Assets backing 90:10 fund ass
Slide 25: Update on UK capital position
Update on UK capital position * All AMP's UK entities meet minimum regulatory capital (MRC) requirements at current FTSE levels Since June 2002, AMP’s initiatives have delivered regulatory capital benefit of more than £1.5b for Pearl, including £500m in capital support from Group — more than offsett
Slide 26: Australian Financial Services strategic focus
Australian Financial Services strategic focus Business tracking well in a tough market Reaffirmed strategic direction Positioning the business to withstand a tough environment » Expenses: sustainable cost efficiencies » Revenue: focused product businesses » Distribution: embedding value proposition
Slide 27: AFS indicative metrics
AFS indicative metrics Capital VNB (3% dm) A$250m >A$300m
Slide 28: Henderson Global Investors strategic focus
Henderson Global Investors strategic focus Refocused strategic direction Pursuing growth opportunities in the UK Targeting additional cost saves and investing in growth areas and capability gaps eg US equities Doing the basics better — investment performance, client services, distribution
Slide 29: Henderson indicative metrics
Henderson indicative metrics Capital
Slide 30: Other assets reviewed
Other assets reviewed Japan financial services Realise value Cobalt/Gordian Realise value
Slide 31: Corporate office reviewed
Corporate office reviewed Key activities: ®. Strategic leadership Portfolio management Resource allocation Corporate governance Stakeholder management Facilitation/leveraging
Slide 32: Group
Slide 33: Summary of strategic review outcomes
Summary of strategic review outcomes AMP UK Financial Services » Separation into two clear businesses - mature & contemporary » Closure of DSF and Household Advisor channels”; creation of new advice channels » Expected cost saves from 2001 levels increased from £100m by end 2003 to £160m in full yea
Slide 34: New Group reporting
New Group reporting Australian Financial Services UK Life Services UK Contemporary Financial Services Henderson Global Investors AMP Banking (Australia) Total BU Operating Margins Discontinuing businesses Corporate Office Expenses Total Operating Margins Underlying investment income on BU capital Un
Slide 35: Key modelling assumptions
Key modelling assumptions Australian equity mkts Bond yields - UK (10yr)
Slide 36: 2002 anticipated asset writedowns and restructuring costs
2002 anticipated asset writedowns and restructuring costs Estimated writedowns £m A$m NPI 221 612 Towry Law 40 110 AMPLEIII 23 64 Pearl 23 64 Sub total Virgin Japan AMP Finance Gordian (discontinued business) Total AMP writedowns in 2002 A$1,200 Estimated Group restructuring costs (after tax) 320
Slide 37: AMP total capital invested
AMP total capital invested AFS (Incl India) $3,807 $3,800 UK Life Services UK Contemporary HGI $1,982 $1,800 Discontinued $902 $800 Corporate (including Bank, Japan and Virgin) $2,057 $1,700 $6,063 | $6,600 Sub total $14,811 $14,700 Investment in AMP (UK) ple preference shares -$1,176 -$700 Total sh
Slide 38: Short term goals
Short term goals Do the basics really well Pursue operational excellence Reduce portfolio risks Focus on core businesses Realise value from and exit non-core businesses Invest only in those businesses delivering required financial returns and/or return surplus capital to shareholders Ongoing evoluti
Slide 39: Longer term goals
Longer term goals Grow AMP's leading position in the Australian wealth management market Reduce AMP's capital commitment in the UK by releasing capital from UK Life Services while simultaneously taking other action to increase its RolC Develop a wealth management business in the UK, focused on inves