Francesco De Ferrari
Francesco De Ferrari
The group released its financial results for the year to December 31 on Thursday.
Overall profit for the year was A$28 million ($29.15m), a dramatic drop from the A$848m a year earlier.
That was due to money spent on “advice remediation”, in which it had to repay customers it had charged unjustified fees, and subdued performance in its wealth protection division.
AMP spent A$496m on compensating customers, as well as spending A$32m on legal advice and consultants to prepare for the Australian Royal Commission of Inquiry into misconduct in the sector, which found it had misled regulators.
“2018 has been a challenging year for AMP. Our core businesses have delivered resilient results, with continued growth in AMP Capital and AMP Bank offsetting the headwinds faced in Australian wealth management,” said chief executive Francesco De Ferrari.
“The Royal Commission has been a confronting but valuable experience for the financial services industry and has served as a catalyst for change at AMP. We have undertaken board and leadership renewal, accelerated client remediation and sharpened our focus on delivering better value to customers including reducing fees on our MySuper products.
“The sale of our wealth protection and mature businesses to Resolution Life is also a key milestone for the company, exiting the historic business on which AMP was founded. This is a significant shift but a necessary one given the volatility and capital intensity of these businesses.”
Operating earnings for the New Zealand wealth management business were A$53m, supported by income from financial advice.
Its KiwiSaver had A$4.9 billion in assets under management and net cashflows of A$135m. AMP said its KiwiSaver was a focus for growth – it will be hoping that this is enough to attract investors when it gets a now-deferred IPO of its wealth business.
The amount of total assets under management in New Zealand slipped 3% to NZ$11.5b, although AMP said that was largely due to market movements - unlike in Australia, where investors have been shifting their money out of AMP funds in the wake of the Royal Commission revelations of the company's misconduct. Its Australian wealth management division had a 7.2% profit drop to A$363m.
This year will see the sale of AMP’s life insurance and mature business in Australia and New Zealand to Resolution Life. Its New Zealand life insurance arm reported a 45% operating earnings drop for the year, mostly due to A$180m of capitalised losses and A$50m of experience losses.
In Australia, the wealth protection business reported an earnings loss of A$176m.
The sold businesses recorded an earnings loss of A$3m in the year, compared to postiive earnings A$331m the year before.
There was an increase in income protection and total permanent disability claims.
AMP said, as a specialist in-force manager, Resolution Life was a better owner of its assets and had the capital structure to manage them effectively.
“The sale of these businesses fundamentally resets AMP, reducing the capital intensity of our portfolio and creating a new, more streamlined and agile group.
“2019 will be a transitional year as we prioritise the complex legal separation from the businesses sold to Resolution Life, and deliver on our commitments to remediate advice customers and strengthen our risk management, governance and controls. Delivery on these priorities is a precondition to set a strong foundation for future growth."
Under the sale terms, Resolution Life takes on the risk and profit impacts as of July 1 last year.
AMP is still responsible for the operation and capital management of the businesses until the sale completes. Any required adjustments from this period will be made on settlement of the transaction.
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