AMP New Zealand managing director Jack Regan says this illustrates the company’s strategy of diversifying its earnings across the three main parts of the business; life insurance, wealth management and general insurance.
The company, last week, reported operating earnings of $129.2 million for the 12-months to December 31, an increase of 7.5% on the previous year.
“This is a strong result that reflects improved performance in wealth management driven by increased margins from higher assets under management, increased general insurance profit share and lower controllable costs, Regan says.
AMP, like other life companies, is facing headwinds in the life insurance space. “Our new business growth is poor. Sluggish,” Regan says. But “so is the market.”
“There has been very little movement outside of premium increases,” he says. “The reality is the insurance basket is expensive.”
Overall annual premium income fell by $4 million to $337 million during the financial year. AMP says the reduction reflects subdued new business sales and the closure of a loss-making group risk policy.
Looking forward Regan says there are good opportunities for the business to grow in the group risk market in coming years. He says group risk is a good way to improve employee value propositions and AMP is seeing more activity in this area.
He says group risk only makes up about 7% of the market in New Zealand, but it sits at around 40% in the Australian market, mainly because it is tied into superannuation.
Lapse rates improved 1.8 percentage points to 11.9% as a result of a strong focus, and investment in lapse management.
AMP has now gone three years with no premium increases and it isn’t planning any this year.
“We can’t commit (to that), but we have no plans to increase premiums,” Regan said.
AMP took the position when changes we made to life insurance tax to set a goal of not putting prices up. It has achieved this but competitors have been changing premiums.
“Repricing is something which causes disruption amongst distributors,” he says. AMP’s position has been to be consistent.
AMP, like all life companies, had to look an item for transitional tax relief. Regan says if this was put aside the overall financial result for the year was good.
“Despite the loss of transitional tax relief, which came into effect for all life insurance companies on July 1, 2015, AMP continued to diversify its earnings and is well positioned for continued growth.”
Experience profits improved from $2.9 million to $14.1 million. This reflected overall improved management of claims, with an increased focus on helping customers return to work and a better lapse experience. Lapses improved by 1.8 percentage points from the prior year to 11.9 per cent as a result of a strong emphasis on lapse management.
Net cashflows increased by 62.7% to $477.4 million and assets under management increased 4% to $14.8 billion.
One of the things that AMP has been successfully doing for a number of years is reducing its cost to income ratio. This year it improved by 2.8 percentage points to 29.8% compared to the previous year due to higher operating earnings and lower controllable costs.
Controllable costs have fallen by $5 million to $89.6 million.
Regan says the company is operating at the benchmark level for a financial services firm, however he expects the ratio to continue to come down as revenues increase.
Some interesting numbers
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