Pre-tax change push to sell life policies helps AMP

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AMP New Zealand has reported a 39% increase in operating earning for the six months to June 30, but warns this level of increase isn’t likely to be replicated again soon.

Thursday, August 19th 2010, 1:44PM 1 Comment

The company lifted its earnings from $29 million to $41 million on the back of strong new business sales, continued cost cutting and a one-off tax benefit from lower corporate tax rates.

AMP NZ managing director Jack Regan says one-off items helped achieve the 39% increase. On a more normalised basis the result is probably around 27-28% better than the previous period.

A key factor in the result was the push to sell level premium life insurance before tax changes came into effect on July 1. AMP, like its competitors, had actively encouraged advisers and brokers to sell more insurance in the first half of the year.

Regan said there had been "a flurry of business" leading up to July 1, "but things are a bit quiet now".

A likely outcome from this is that the second half insurance sales will be lower than normal, when traditionally it is a better period than the first six months of the year.

AMP has increased its persistency rate by 0.9% to 89.9%. Regan says the industry average is around 87.2% and he expects AMP, with its business model and products, can get its rate to be between 4 and four and a half percentage points better than the average.

He says AMP has ended relationship with a number of brokers (IFAs) in the market and focused on the AMP aligned distribution channels. This, he says, has helped improve persistency rates.

AMP does deal with "select brokers on more rationale terms," he says and on hybrid or level commission remuneration structures.

Regan says the level of churn in the market has come back a bit, "but not as much as I'd like."

"There's an enormous amount of aggressive selling going on."

AMP expects to reprice its life products at the start of next year. Currently the market is "grappling with how to handle this," Regan says.

As reported earlier Sovereign has made a second set of changes and companies like ING Life are yet to make pricing decisions.

Regan says changes are in the 5 to 8% range and he expects AMP to be at the bottom end of that range.

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