AMP profits down, but result solid

AMP's New Zealand financial services division noted an increase in income protection claims in the first six months of 2018 and a growing number of policy lapses, which weighed on earnings in the period.

Wednesday, August 8th 2018, 12:07PM

The business reported a 13% decline in operating earnings to $60.4 million in the six months ended June 30, citing skinnier profit margins from its wealth protection and mature life insurance products, and an increased number of claims on income protection products and a number of policy lapses in the period.

AMP's Australian parent company gave no update on the future of its New Zealand operations, however it noted that it "is well progressed with a portfolio review of its manage for value businesses, Australian wealth protection, New Zealand and Australian mature."

"All alternatives are being considered as part of the review. As a result, AMP is in discussions with a number of interested parties and will update the market as appropriate."

AMP Financial Services managing director Blair Vernon described the result as being "solid".

He says the claims numbers and experience profits tend to move around a bit, but these reported today were in line with the company's assumptions.

Lapse rates for the full year came in at 10.8%

"That's a good number compared to prior periods," he said.

The company reported that annual premium income was up . Vernon says a key driver behind this number was successes in the group insurance market. He said it is a market that AMP is doing work on and "there is a real gap in the New Zealand market."

"This was mainly driven by a reduction in experience profits reflecting an increase in the number of claims AMP New Zealand paid to support its customers who were unable to work due to an illness or injury," it said in a statement. "AMP customers received $103 million in claims payments to provide them with dignity and to protect their families in their time of need."

The calls on income protection come at a time when New Zealand is experiencing low unemployment at 4.5 percent, a strong participation rate, and a sticky under-utilisation rate. That has also coincided with a number of white-collar employers restructuring their businesses to adapt to changing work environment where technology improvements have paved the way for greater automation in jobs previously done by people.

New health and safety regulations have become a major focus for employers in recent years, and Worksafe New Zealand has become more active, undertaking 1,378 assessments in June compared to 1,198 in the same month a year earlier and recording 262 non-fatal injuries or illnesses that same month compared to 225 a year earlier.

Its New Zealand unit cut costs by 5% to A$36 million in the half, which it said included a business reorganisation and process simplification.

Assets under management swelled 7% to $17.5 billion, of which $5.2 billion was from KiwiSaver funds. AMP holds 11% of the KiwiSaver market with 228,000 members. Its biggest KiwiSaver fund, with $1.39 billion under management, is its default fund, which has generated an annual return of 4.8% in the 10 years ended June 30, making it the worst performer among the 10 conservative KiwiSaver funds that have operated for at least a decade and compiled by Morningstar.

- Additional reporting BusinessDesk

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