Amp Not Alone As It Posts 'awful Bottom Line' And Waits For Recovery To Kick In

The Age

Friday August 29, 2008

Stuart Kelly

AMP, Australia's biggest provider of pension plans, said first-half profit declined 22 per cent as investors shunned managed funds and markets slumped.

Net income fell to $366 million in the six months to June 30, from $470 million a year earlier, AMP announced.

Underlying profit, which excludes writedowns and provisions from declining investments, slid 2 per cent to $437 million.

Chief executive officer Craig Dunn, 45, said earnings might improve in next year as markets recover.

AMP is also the nation's largest life insurer and joins Suncorp-Metway and Insurance Australia Group in posting declining earnings as tumbling global markets cut investment returns.

"As awful as the bottom line is, there's not much in this result that will spark another round of selling," said Matthew Kidman, who recently bought AMP shares as part of the $350 million he helps manage at Wilson Asset Management in Sydney.

AMP shares were the worst performing of the six-member S&P/ASX 200 Insurance Index this year before yesterday's 6.4 per cent gain. That was the biggest one-day gain in more than three months, helping pare the shares' slide to 31 per cent in 2008.

Assets under management dropped 9 per cent to $117 billion in the half, while net flows into the company's managed funds declined 69 per cent to $760 million.

About 57 per cent of managed funds met or exceeded their performance measures in the half, falling short of the company's target of 75 per cent.

AMP wrote down $49 million in investments for the half as the Australian S&P/ASX 200 Index dropped 18 per cent. The MSCI World Index of 1736 companies fell 12 per cent for the same period. The company also set aside $41 million of potential losses against its fixed-income annuity investments.

Costs rose 5 per cent to $442 million, pushing AMP's cost- to-income ratio 1.4 percentage points higher to 39.9 per cent.

"Most of the insurers have extensive wealth management businesses, so when you get a market slump like this one, then it's this side of the business that everyone looks at," said Steven Marsh of Trust Co The Reserve Bank of Australia said last week it may soon cut interest rates for the first time in seven years.

Oil has dropped 27 per cent from its all-time high in July and AMP's Mr Dunn said the company was "reasonably optimistic" that the economy and 2009 would start to look brighter if the oil price kept coming down and the Reserve Bank eased interest rates as the market anticipated.

Suncorp-Metway, Australia's third-largest general insurer, this week said credit-market woes would continue to crimp its earnings after second-half profit fell 68 per cent. Insurance Australia, Axa Asia Pacific Holdings and QBE Insurance Group also posted declining earnings this month.

Perpetual, an Australian fund manager, last week said full-year profit had fallen 29 per cent.

AMP will pay a 22 cent dividend, and an additional 2 cents a share from the $585 million sale of its Cobalt-Gordian reinsurance businesses in December. AAP

AMP

HALF-YEAR RESULT

Underlying profit: $437m DOWN 22%

Net income: $366 m DOWN 22%

Dividend: 22

+ 2 a share from the sale of its Cobalt-Gordian reinsurance businesses

© 2008 The Age

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