AMP LIMITED — Annual Report 2008

Feb 18, 2009

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2008 full year results

Craig Dunn

Chief Executive Officer

Paul Leaming Chief Financial Officer

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Executive summary

• Sound result in tough market underscores resilience of AMP’s business

• Underlying profit of A$810m, with good profit growth in nonAUM businesses

• Controllable cost growth kept to 1%

• Contemporary wealth management net cashflows over A$2b

• Capital resources exceed minimum regulatory requirements (MRR) by A$898m

• Group gearing low at 14% on an S&P basis, with high underlying interest cover at 10.9 times

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Outline

• Group overview

• Business line review

• Financial overview

• Outlook and strategy

• Summary

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Key performance measures

• Underlying return on equity increased 1.0 percentage points to 38.9%

• Total operating earnings of A$737m, down 4%

• Cost ratio up to 41.3% from 39.7% in FY 07

• Growth measures:

• Net cashflows in AMP Financial Services of A$1.4b, down from A$2.9b in FY 07; AMP Capital Investors external net cashflows A$(804m) down from A$1.7b

• Value of risk new business[1] up 41% to A$114m

• 63% of AUM met or exceeded benchmark over five years

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Overview – 2008 full year profit summary

A$m	FY 08	FY 07	% change
AFS Contemporary Wealth Management	266	306	-13%
AFS Contemporary Wealth Protection	154	119	+29%
AFS Mature	161	190	-15%
AFS New Zealand	56	48	+17%
AMP Capital Investors	136	150	-9%
BU operating earnings	773	813	-5%
Group office costs	(36)	(43)	-16%
Total operating earnings	737	770	-4%
Underlying investment income	140	158	-11%
Interest expense on Group debt	(82)	(59)	+39%
AMP Limited tax loss recognition	15	13	+15%
Underlying profit	810	882	-8%
Market adjustment – investment income	(260)	13	-
Discontinued business – Cobalt/Gordian	-	171	-
Other items	73	7	-
Seed pool valuation adjustments	(42)	-	-
Profit after income tax before timing differences	581	1,073	-46%
Market adjustment – annuity fair value	(117)	(13)	-
Loan hedge revaluations Accounting mismatches	(41) 157	(4) (71)	- -

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Overview – assets under management

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140
129
121
120 18.5
18.9
104 1.8 105
2.3
100
90 16.2
18.3
1.5
3.1
80 18.9
3.4
60
108.8
100.2
87.1
40 82.3
67.3
20
A$b 0
FY 04 FY 05 FY 06 FY 07 FY 08
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Overview – group cost performance

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900 871 879
812
800 782 780
94bps
81bps
700 45.8%
75bps
72bps
68bps
41.7%
600 39.6%
41.3%
39.7%
500
400
FY 04 FY 05 FY 06 FY 07 FY 08
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Capital management

• Approach to capital management based on priority to preserve capital in volatile market and maintain balance sheet strength

• Proactive management of both capital and funding requirements have enhanced AMP’s financial strength, despite ongoing volatility

• Raised A$559m in equity in Nov/Dec through over-subscribed institutional and retail raisings

• Raised A$350m in senior debt in May, as part of ongoing program of refinancing corporate debt maturities well ahead of time

• Range of other capital management initiatives to limit market impacts on capital requirements

• Final declared dividend of 16cps takes total FY 08 dividend to 38cps – representing a payout ratio of 89% of underlying profit

�

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Business line review

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AMP Financial Services – FY 08 highlights

• Diversified business delivered solid results in difficult environment, with operating earnings of A$637m, down 4% on FY 07, despite 19% fall in AUM

• Contemporary Wealth Management’s operating earnings down 13% to A$266m reflecting impact of market turbulence

• Contemporary Wealth Protection’s earnings up 29% as a result of strong new business growth and better claims experience

• Operating earnings for the New Zealand business up 17% driven by risk growth, improved claims experience, cost control and success in KiwiSaver

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AFS overview – FY 08 cashflows

• Resilient business model and strong mandated super position drove relative outperformance in cashflows, despite fall in member contributions

• Total net cashflows of A$1.4b compared with A$2.9b in FY 07

• Retail superannuation and pensions/annuities net cashflows of A$1.3b compared to A$2.4b in FY 07

• Corporate super net cashflows (ex-mandate wins) up 57% to A$554m, largely driven by solid employer contributions

• NZ net cashflows increased to A$126m from A$73m in FY 07

1

• Positive net cashflows helped drive market share growth of 0.5%

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AFS overview – FY 08 cashflows

• Planner channels reflected investor reticence but still had positive cashflows

• AMP Financial Planning net cashflows of A$863m compared to A$2b in FY 07

• Hillross net cashflows of A$56m compared to A$664m in FY 07

• Persistency¹ strengthened across the board

• Overall persistency up to 90.3% from 88.6%

• Retail super persistency up to 91.9% from 89.3%

• Corporate super persistency up to 94.0% from 92.0%

• Allocated annuities and pensions persistency up to 86.8% from 83.0%

• Outflows slowed

• Outflows overall down 18% to A$13b from $16b

• Outflows from Mature book down 22% on FY 07

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AFS – cost performance

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600
560
553
546
533 535
500
100bps
87bps
42.8%
400 76bps
75bps
69bps
300 38.5%
35.2% 35.4%
200
34.2%
100
0
FY 04 FY 05 FY 06 FY 07 FY 08
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AFS Australian contemporary wealth management

			Contemporary wealth management		Change
			FY 08 FY 07
	Operating earnings		A$266m A$306m		- 13%
	Controllable costs1		A$352m1 A$354m		+ 1%
	Cost to income ratio1		42.7%1 46.5%		+ 3.8 percentage points
	Net cashflows		A$2,077m A$4,086m		- 49%
	Operating earnings to AUM2		48bps 54bps		- 6 basis points
	Persistency		88.5% 90.3%		+ 1.8 percentage points
	AUM (pre capital)		A$43.4b A$56.5b		- 23%
	Return on equity		46.5% 54.1%		- 7.6 percentage points

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AFS Australian contemporary wealth protection

			Contemporary	Contemporary	Contemporary	Contemporary
			wealth	protection				Change
			FY 08			FY 07
	Profit margins		A$135m			A$115m		+ 17%
	Experience profits		A$19m			A$4m		+ A$15m
	Operating earnings		A$154m			A$119m		+ 29%
	Operating earnings / API1		23.9%			20.7%		+ 3.2 percentage points
	Controllable costs		A$78m			A$73m		+ 7%
	Individual risk API		A$547m			A$469m		+ 17%
	Individual risk lapse rate		10.8%			10.6%		+ 0.2 percentage points
	RoEV pre transfers @ 3% discount margin		22.9%			8.2%		+ 14.7 percentage points
	VNB @ 3% discount margin²		A$90m			A$65m		+ 39%
	Return on equity		31.5%			28.9%		+ 2.6 percentage points

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AFS Australian mature

			Mature	Mature	Mature		Change
			FY 08		FY 07
	Operating earnings		A$161m		A$190m		- 15%
	Controllable costs		A$64m		A$64m		Steady
	Controllable costs/AUM1		37bps		34bps		+ 3 basis points
	Net cashflows		(A$1,036m)		(A$1,433m)		+ 28%
	Persistency		89.7%		87.0%		+ 2.7 percentage points
	AUM (pre-capital)		A$16.1b		A$18.4b		- 13%
	RoEV pre transfers @ 3% discount margin		(19.6%)		18.9%		- 38.5 percentage points
	VNB @ 3% discount margin²		A$21m		A$32m		- 34%
	Return on equity		158.2%		193.3%		- 35.1 percentage points

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AFS New Zealand

			New Zealand	New Zealand	New Zealand	Change
			FY 08		FY 07
	Profit margins		A$50m		A$47m	+ 6%
	Experience profits		A$6m		A$1m	+ A$5m
	Operating earnings		A$56m		A$48m	+ 17%
	Controllable costs		A$64m		A$64m	steady
	Cost to income ratio		41.4%		44.3%	- 2.9 percentage points
	Individual risk API¹		A$112m		A$104m	+ 8%
	Lapse rates		8.2%		7.1%	+ 1.1 percentage points
	Net cashflows		A$126m		A$73m	+ A$53m
	AUM (pre capital)		A$4.5b		A$4.7b	- 4%
	RoEV pre transfers @ 3% discount margin²		16.5%		11.7%	+ 4.8 percentage points
	VNB @ 3% discount margin3,4 Return on equity		A$26m 27.2%		A$20m 27.6%	+ 30% - 0.4 percentage points

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AMP Capital Investors – FY 08 highlights

• Solid performance with operating earnings down 9% on FY 07 to A$136m

• Total management fees increased 3% to A$387m from A$375m, reflecting a change in product mix and growth in non-AUM sourced income

• Performance and transaction fees of A$86m, down from A$94m

• AUM fell 17% to A$92b from A$111b in FY 07, driven by falling investment markets

• Tight cost control and lower staff remuneration held costs to 4% increase over FY 07

• 63% of AUM met or exceeded benchmark over five years to 31 December 2008, impacted by extraordinary markets in 2008, when 17% of AUM met or exceeded benchmark

�

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AMPCI overview – FY 08 key financial results

			AMPCI	AMPCI	AMPCI			Change
			FY 08			FY 07
	Operating earnings		A$136m			A$150m	- 9%
	Internal management fees		A$176m			A$170m	+ 4%
	External management fees		A$211m			A$205m	+ 3%
	Total performance & transaction fees 1		A$86m			A$94m	- 9%
	Controllable costs		A$268m			A$257m	+ 4%
	Cost to income ratio		56.3%			53.1%	+ 3.2	percentage points
	External net cashflows		(A$804m)			A$1.71b
	Return on equity		59.9%			64.2%	- 4.3	percentage points

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AMPCI – drivers of cashflows

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120
1.4
0.1
110 111.1 (0.2) (0.5) (0.1) (0.4)
(1.6)
100
(18.0) 91.8
90
80
External Internal
A$b 70
AUM at Australian Asian NZ market Australian AMP Australian NZ market Investment AUM at 31
31 Dec 07 market distribution flows run-off flows returns and Dec 08
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AMPCI – volumes and profit margins

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120 13.6 13.4
11.7 41.5
100
10.8
39.2
35.7
9.7
80
28.8
23.6
60
51.0 56.0 62.1 69.0 62.4
40
20
0
FY 04 FY 05 FY 06 FY 07 FY 08
$Ab
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AMPCI fund quartile performance

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Australian Australian Australian Balanced
Direct Property Equities Fixed Interest Growth
Return Ranking Return Ranking Return Ranking Return Ranking
5 years 12.57 Q1 9.21 Q2 6.83 Q1 5.9 Q1
3 years 12.82 Q2 -1.35 Q2 6.72 Q1 - 1.05 Q1
1 year 0.92 Q2 -34.77 Q2 13.92 Q2 - 24.23 Q3
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AMPCI – performance against benchmarks

63% of AUM met or exceeded benchmark over five years 40% over three years and 17% over 12 months to 31 December 08

Multi-manager

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AMPCI managed Multi-manager
98%
97%
94%
88%
Target 73%
69%
75%
61%
53% 53%
51%
43%
32%
29%
27%
22%
21%
15%
6%
4%
3%
0% 0% 0% [2%]
Australasian Australasian Infrastructure Property Diversified International International Diversified
equities fixed interest and private equities fixed interest
equity
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AMPCI – performance fee breakdown

Performance fees by asset class

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Property
Equities
25% 27%
Private equity
Infrastructure
16%
32%
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Performance fees by benchmark v absolute return

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Absolute
33%
Relative
67%
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AMPCI – cost performance

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300
268
257
250 61.7%
57.8%
223 56.3%
53.1%
56.0%
198
200 184
150
26.4bps
24.7bps
23.3bps 22.8bps 23.3bps
100
50
A$m 0
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Financial overview

Paul Leaming Chief Financial Officer

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Financial overview – key points on P&L

					�Interest expense on Group
	A$m	FY 08	FY 07	%	debt – includes cost of
				change	holding additional senior
					debt for 6 months
	Total operating earnings	737	770	-4%
	Interest expense on Group debt Underlying investment income	(82) 140	(59) 158	+39% -11%	�Investment income market adjustment – mostly consistent with current
	AMP Limited tax loss recognition	15	13	+15%	sensitivities
	Market adjustment – investment income Underlying profit	(260) 810	13 882	-8% -	�Other items – provision releases, project costs
	Discontinued business – Cobalt/Gordian	-	171	-	written off
	Other items Seed pool valuation adjustments	73 (42)	7 -	- -	�Seed pool – abnormal revaluation losses on
	Profit after income tax before timing differences	581	1,073	-46%	Singapore property and retirement village assets
	Market adjustment – annuity fair value	(117)	(13)	-	Timing differences:
	Loan hedge revaluations	(41)	(4)	-	�Annuities:
	Accounting mismatches	157	(71)	-	- widening credit spreads, no
					defaults
Net profit attributable to shareholders of AMP		580	985	-41%	- change in liability valuation

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Financial overview – capital movements 2H 08

A$m

Capital resources		AMP Life Statutory Funds	AMP Group
As at 30 June 2008		1,162	1,473
2H 08 statutory profits		212	214
Mismatch items		-	(69)
Dividend (net of DRP)		-	(365)
Capital raising		-	559
Movements in intangibles		-	104
Subordinated debt amortisation		-	(53)
Defined benefit fund deficit		-	(88)
Transfer of AMP head office building	1	211	-
Year end profit transfer		(70)	-
Other		12	(48)
As at 31 December 2008		1,527	1,727

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Financial overview – capital movements 2H 08 A$m

Minimum regulatory capital requirements	AMP Life Statutory Funds	AMP Group
As at 30 June 2008	521	808
AMP Life impact of investment markets 1	328	328
Tactical equities and bonds protection	(206)	(206)
Asset mix changes	(116)	(116)
AMP Life net risk business capital requirements	74	74
AMP Life reduction in investment linked AUM	(22)	(22)
Net movements in non-Life businesses	-	(37)
As at 31 December 2008	579	829
Excess above regulatory requirements 2
As at 30 June 2008	641	665

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Financial overview – capital sensitivity

• These sensitivities are a point in time view of the impact of movements in equity markets, bond yields and property values on the 31 December 2008 capital position

• AMP’s dynamic capital management framework includes market-related trigger points at which management will take action to reduce the impact of market movements on its capital position

• These sensitivities do not make any allowance for these management actions

31 December 2008 capital sensitivities – regulatory capital resources above MRR	AMP Life Statutory Funds	AMP Group	1
Actual 31 December 2008 (ASX 200 @ 3,722, Australian bond yields @ 4%)	948	898
Equity sensitivity - ASX 200 @ 4,000 @ 3,500 @ 3,000 @ 2,500 Australian bond yield sensitivity - @ 5.0%	90 (80) (260) (440) (140)	110 (100) (310) (520) (130)
- @ 4.5%	(60)	(50)
- @ 3.5%	(70)	(80)
- @ 3.0% Property sensitivity - 10% increase in unlisted property values - 10% reduction in unlisted property values	(250) 100 (130)	(260) 100 (130)

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Financial overview – capital management strategy

• AMP remains strongly capitalised, with A$898m in surplus capital above MRR, reflecting disciplined and dynamic capital management approach

• Capital management strategy aims to deliver:

• strong balance sheet in a challenging market, with focus on capital preservation

• business flexibility for growth

• optimised capital mix, subject to market conditions

• Capacity to raise up to A$660m additional Tier 2 capital

� Intend to replace maturing A$267m in subordinated debt with

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Financial overview – dividend

• Final dividend of 16cps, franked to 85%, takes FY 08 dividend to 38cps¹ – a payout ratio of 89% of underlying profit.

• Dividend decision driven by:

• current cash earnings

• expected future underlying profits (1-2 years)

• preservation of capital and balance sheet strength

• Prudent decision consistent with overall capital strategy of maintaining strong balance sheet in a challenging market, particularly given material worsening of market since 1H 08

• Target payout ratio likely to be in range of 75%-85% of underlying profits going forward

• DRP (uncapped, issued not bought) will be offered at a 2.5% discount

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Financial overview – franking

• Sufficient franking credits to frank final dividend to 85%

• Tax payable in 2H 08 significantly down on prior periods due to impact of markets

• Supply of franking credits reduced as a result of interim dividend being greater than earnings

• 85% franking ratio remains appropriate target provided investment markets stabilise

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Financial overview – shareholder debt profile

Repayment (years)	31	Dec 2008	31 Dec 2007
		A$m	A$m
0-1		443	190
1-2		230	267
2-5		748	629
5-10		-	-
10+		83	83

• Group gearing remains low at 14% on an S&P basis, while underlying interest cover is high at 10.9 times

• Program of refinancing or repaying corporate debt maturities well ahead of time continues

• A$443m of 0-1 year debt comprises:

• A$267m subordinated debt callable in August 09

• A$76m of commercial paper with maturities ranging up to 3 months

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Financial overview – summary

• Proactive management of capital resources has strengthened AMP’s capital position despite continuing market turbulence

• Significant flexibility remains for management to take action to preserve capital against further market downturn

• Future dividend payout likely to be in the range of 75% to 85% of underlying profit, targeting 85% franking

• Strong bias remains toward having more capital rather than less in the current environment

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Outlook & strategy

Craig Dunn Chief Executive Officer

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Market outlook – short term

• Continued market volatility through 2009

• Full consequences of credit crunch still working way through economy

• Subdued investor sentiment

• Flight to safety and quality

• ‘Deleveraging’ of households

• Returns favouring liquid investors

• Rapidly changing competitive environment

• New opportunities for strong, well-capitalised industry participants

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Short-term priorities

• Prudently managing costs, liquidity and capital to protect our financial position in the short term

• Ongoing focus on risk management, as risks heightened in volatile and uncertain environment

• Acting on opportunities to sustain and improve revenues in current market, by

• Growing revenues in non AUM-based businesses

  • eg banking and risk insurance

• Improving investment performance

• Focusing strongly on customer retention

• Continuing investment to increase scale and productivity of our distribution footprint

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Outlook – costs

• Total controllable costs moderated in 2H 08 (down 3% on 2H 07), reflecting actions to reduce cost base, including lower staff numbers

• AFS costs expected to be around 3% lower in FY 09 on FY 08, as continued investment in growth initiatives is offset by cost efficiencies

• AMPCI costs will be managed closely, contingent on market opportunities and conditions, and variables such as staff remuneration and increased technology spend

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Market outlook – medium to long term

• Robust growth outlook for wealth management sectors in Australia, New Zealand and selected :

• Asian markets, underpinned by

• Ageing demographics

• Bi-partisan party support for mandatory superannuation regime in Australia – super now tax free after age 60

• KiwiSaver and PIE initiatives in New Zealand

• Economic, social and political development in selected Asian markets, opening up new sources of funds and assets

• Long-term outlook for key geographic markets

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Outlook – growth goal

• Over-arching goal to deliver top quartile TSR performance to shareholders

• Aim to be in top 25% of the top 50 listed Australian industrials in terms of total shareholder returns over every five-year cycle

• Strong alignment between shareholder goal and long term incentive (LTI) for executives

• Requires prudent and pragmatic management of costs, capital and liquidity in current market, while maintaining investment in critical growth initiatives for medium to long term (and as markets recover)

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Strategic response

Continuing to invest today in improving distribution and enhancing products and services to drive strong value growth over the longer term by:

1. Growing planner capacity and broadening distribution

2. Expanding to Asia through AMP Capital Investors

3. Growing customers in high-value segments

4. Reshaping AMP Capital Investors into a high value-add investment manager

5. Building our capacity for profitable growth

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1. Growing planner capacity and broadening distribution

Goal: Strengthen core planner franchise, while building new channels to reach more customers in high-value segments by:

increasing planner numbers and improving their productivity in the short term

• Planner numbers up by 63 planners or 3% to 2,095; 27 new AMPFP planner practices and 7 new Hillross practices added to AFS network

• Continued strong interest in planner academy, with over 3,600 total applications to date

• New planner software to improve productivity now rolled out to 212 practices

• Paraplanning services extended to 175 practices

• Increased take-up of low-touch program, with almost 130,000 clients now being serviced

developing broader, complementary distribution channels in both AFS and AMPCI over the medium term

• AMPCI capabilities now represented on 38 of the top 50 Australian retail platforms, with the Core Property, the Small Companies, Responsible Investment Leaders and Sustainable funds recently added to leading external platforms

• 32% increase in insurance new business distributed through third party and mortgage broker market

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2. Expanding to Asia through AMP Capital Investors

Goal: Establish AMPCI as strong competitor in select investment capabilities in targeted Asian funds management markets by:

expanding Asian distribution channels and alliances to market existing Australian and global products in the short term

• AMPCI products now distributed in Japan, Singapore, Malaysia, Korea

• Strengthened distribution team, appointing Head of Institutional Business in Japan

• Won mandates from Japan’s T&D Asset Management for European and Asia Pacific infrastructure funds

establishing investment capabilities in Asia to manage Asian assets over the medium term

• Appointed a Head of Asia Pacific Equities; Head of Private Debt Asia; Co-head of Infrastructure Asia

• Won 2nd China Qualified Foreign Institutional Investor (QFII) mandate of US$100m - the only Australian investment manager to have received two QFII mandates

• Established investment advisory office in Beijing and signed Memorandum of Understanding with China Life Asset Management Company, China’s largest asset

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3. Growing customers in high-value segments

Goal:

Attract new customers and develop stronger relationships with existing customers in high-value segments with new offers based on customer needs by:

• developing and rolling out improved product and service offerings, and extending relationships with customers over the medium term � In 2008 AFS rolled out:

  • The insurance offering Loan Cover, along with several risk enhancements

  • AMP Super Cash – a deposit product with AMP Banking that provides low risk investment returns in a superannuation environment – to Corporate Superannuation customers

  • AMP Banking’s First Home Saver Account

  • Term deposits on super and pension investment menus

  • The AMP Growth Bond

• Customer Value pilots reached more than 8,000 customers in two tests in ’08; ramping up to reach over 36,000 customers in ’09 with targeted offers

• AMPCI focusing on customers in high-value markets in Asia and Europe; new mandates from:

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4. Reshaping AMP Capital Investors into a high value-add investment manager

Goal: Drive margin growth in higher value business and market segments, by delivering superior value to clients by:

refreshing investment platforms and research capabilities in short term

• Continued investment in technology platforms to underpin growth initiatives in Asia and new investment capabilities

expanding investment capabilities in higher value segments which are more specialised and attract higher margins

• Continued to attract higher management fees externally than internally

• Launched Asian Giants Infrastructure Fund, raising A$145m and intends its initial investment to be a minority stake in an Indian infrastructure company

• Continued shopping centre investment program; portfolio 41 centres strong

• Made two new infrastructure acquisitions in Europe totalling £300m

• Continuing to build strong external recognition of investment capabilities

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5. Building our capacity for profitable growth

Goal: Provide a strong platform to support business growth by:

continuing to invest in people, technology and brand

• Purpose-built programs (eg Sustainable Leadership Program in AFS and Investment Leadership Initiative in AMPCI) to attract, develop and retain key talent

• Continuing to simplify and rationalise existing technology platforms, while building new systems and processes to support business growth, eg

• Separately Managed Account platform, AMP Super Cash, Loan Cover, documentation simplification program and new planner software in AFS

• Continued investment in technology platforms to underpin growth initiatives in Asia and new investment capabilities

• New advertising campaign showing AMP as more contemporary, smart and high performing

• Investing in business process management technologies to drive cost-efficient growth

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Summary

• Sound FY 08 results in testing environment demonstrates fundamental resilience of AMP’s business model, planner base and brand

• Managing business tightly through short term volatility while investing to set business up for stronger growth over the medium to longer term

• Capital preservation and balance sheet strength a key priority, to enable business to withstand market volatility and provide strong base for future growth

• Remain confident of long term prospects for wealth management sectors in Australia, NZ and selected Asian markets

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Appendices

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Further information about…

Further information about…	Further information about…
Topic		Chart
�	AMP’s earnings by business line	51
�	AFS cashflows by channel and product line	52, 53
�	AMP Banking
	� Business and funding model	54
	� Business profile	55
�	Non-listed asset valuations	56 - 58
�	AMP fixed interest portfolio – shareholder exposure	59
�	Legacy book – impact of markets	60
�	Comparison of gross returns with gross crediting rate	61
�	Shareholder funds portfolio	62
�	5 year dividend chart	63

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AMP’s earnings by business line

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FY 04 FY 05 FY 06 FY 07 FY 08 FY 04 FY 05 FY 06 FY 07 FY 08 FY 04 FY 05 FY 06 FY 07 FY 08
AFS Contemporary Wealth Protection AFS New Zealand operating earnings
operating earnings
154
56
52
121 119 50 48
107
40
82
A$m
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AFS net cashflows by major channel on rolling 12 month basis

(A$m)

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Corporate Super direct
3,500 Corporate Super – exc. mandate wins
Corporate Super
3,000
2,500
2,000
1,500
1,000
500
0
Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
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Hillross
2,300
Hillross
1,800
1,300
800
300
-200
Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
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2,500 AMP Financial Planning
2,000
1,500
1,000
500
0
-500
Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
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2,300 New Zealand
New Zealand
1,800
1,300
800
300
-200
Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
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AFS net cashflows by wealth management product line on rolling 12 month basis

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(A$m)
Corporate Super 1 AMP-manufactured retail products 2
3,500 Corporate Super – exc. mandate wins 3,000
Corporate Super
2,500
3,000
2,000
2,500
1,500
2,000 1,000
1,500 500
0
1,000
-500
500 -1,000
0 -1,500
-2,000
External platforms 2,500 Mature
2,000
1,500
1,500
1,000 1,000
500 500
0
0
-500
-500
-1,000
-1,000
-1,500
-1,500 -2,000
-2,000 -2,500
Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
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AMP Banking – business and funding model

• Branchless Australian bank offering residential mortgages, deposits and white-labeled credit cards

• Direct and third-party distribution, including AMP Financial Planning and mortgage brokers

• Operating earnings of A$21m ($A10m at FY 07)

• Capital adequacy ratio of 12.2% at 31 Dec 2008

• A$9.6b mortgage book (66% mortgage insured); 1% market share of residential lending

• Less than 4% of residential mortgages are classified as low doc and are 100% mortgage insured

• The weighted average LVR for the total mortgage portfolio is 56%

• Loans with LVR >80% at origination are mortgage insured

• 90+ day arrears at 0.57% (0.31% at FY 07)

• Historical bad debt experience totals $1.7m over the past 5 years

• Doubtful debt provision of $0.9m and specific provision of $1.3m at Dec 08

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AMP Banking – business profile

Credit quality

Deposit mix

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1.20% 90+ days past due
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08
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2007 2008
14% 9%
Cash Management 21% 10%
Business Saver
3%
Investment Accounts 13%
46% 4%
Transaction Accounts
Savings Accounts 7%
22%
Term Deposits 0% 16%
Super Deposits
23% 12%
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Deposit growth relative to market

Strong mortgage growth relative to market

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AMP Bank Limited Total Market
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AMP Bank Limited Total Market
7.00% 3.50%
6.00%
5.00% 3.00%
4.00% 2.50%
3.00%
2.00%
2.00%
1.00% 1.50%
0.00% 1.00%
-1.00%
0.50%
-2.00%
-3.00% 0.00%
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Non-listed asset valuations

	Asset type	Portfolio	Valuation approach in current	Valuation approach in current	Outcome
		size		market
				�Valuation cycle twice a year for major	�High quality core property
				properties	portfolio
	Property	A$18.1b AMP Life		�Independent external valuers use a range of market data to arrive at fair value, including comparable sales analysis, discounted cash flow analysis and capitalisation of income approach	�Overall the gross values of the Australian assets have fallen by about3.5% due to an increased weighted average capitalisation rate from 6.1% to 6.6%, offset by an 8.2% increase in income
		A$8b		�High proportion of properties valued in 6	�A similar trend was experienced
				months to 31 December 2008, with 98% of	for the NZ portfolio
				AMP Life properties valued in last 6
				months, and majority valued in Q4 ‘08
			�	Independent valuations undertaken every	�Valuations generally stable or
				six months	marginally stronger, with fall in
	Infrastructure	A$4.1b	�	Valuations primarily based on discounted cash flow models, with a consideration of any relevant market transactions	discount rate offsetting the impact of reduced revenue and increased debt costs
		AMP Life A$1b	�	3 factors influencing infrastructure valuations currently: • fall in risk free rate	�Valuations supported by recent market transactions, eg sale of AMPCI’s managed stake in
				• economic outlook • increase in cost of debt refinancing assumptions	Brisbane airport in December ’08, sale of Mackay airport and partial sell down of the Australian Pacific Airport Corporation to the Future Fund

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Unlisted property portfolio mix

Total portfolio A$18.1b

AMP Life portfolio A$8b

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Other
Other
18%
7%
Office/Commercial Office/Commercial
34%
35%
Industrial Retail
Retail Industrial
7%
52%
7%
40%
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Non-listed asset valuations

	Asset	type	Portfolio	Valuation approach in current	Outcome
			size	market
				�Valuations prepared every six months	�Approx 37% fall in value of
	Private	equity	A$1.2b	�Most common valuation method is multiple of sustainable earnings, with an illiquidity discount	private equity portfolio as at 31 December 2008, reflecting average 30% drop in comparable
				�Investments less than one year old generally	listed company earnings
				valued at cost	multiples, combined with
			AMP Life A$0.7b	�AMPCI-managed private equity investments valued internally, subject to peer review and	pressure on earnings forecasts for most companies
				ratified by Private Equity Valuation Committee
				�Externally managed investments valued on net
				asset valuation and ratified by Private Equity
				Valuation Committee
				�Change in valuation approach from face value	�While some debt investments
				(or amortised cost) plus accrued interest (as a	were impaired, such as
	Debt		A$2.8b	proxy for fair value) to asset by asset review,	Diversified CMBS (valuations
				using available market data or underlying asset	down 15%), this was partially
				valuations	offset by holdings of guaranteed
					debt with contracted minimum
			AMP Life	�Structured High Yield Fund continues to	returns, which continue to be
			A$0.7m	calculate unit prices on the basis of cost plus accrued interest as set out in the product disclosure statement	held at face value

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Immaterial shareholder exposure to these assets

	AMP fixed interest portfolio ($m)	AMP fixed interest portfolio ($m)		AMP shareholder	fund	SF1 Annuities	SF1 Annuities	SF1 Other 20%1
	Fixed interest portfolio			535526	2,5992,478			2,0471,966
		US Alt A		31		-	-	- 4		All underlying issues in
										monoline portfolio are
		US subprime		54		-	-	11		Australian or New Zealand credits. More than 90% are
										investment grade.
		Monoline wrapped		159		133	152	4141		Incorporating the rating of the monoline insurer 19% are AA
										rated or above, 9% A rated and
		SIV CDO Sub-total		95 1920 5139		- 15 148	- 14 166	1111 5452 107109		the remainder are BBB. CDOs backed by predominantly Australian corporate loans originated by major Australian banks. Over 90% rated AAA.

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Legacy book – impact of markets

• Amount of AMP’s AUM comprised of non-cash based capital guaranteed products has reduced significantly

• At 31 December 2008, customer AUM A$15b Australia and A$1.6b New Zealand (excluding capital and tax reserves)

• Assets are managed by AMP Capital Investors and held in Statutory Fund No 1

• Benchmark asset allocation is prudent

• 40% fixed interest

• 17% cash

• 43% growth assets (including property)

• Sensitivity to movements in investment markets described on pages 43 and 44 of FY 08 Investor Report

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Comparison of gross returns with gross crediting rate

Equities versus bonds versus crediting rate

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Shareholder funds portfolio – how invested

	Dec 2008	Dec 2007
Cash	57%	35%
Fixed Interest	21%	23%
Equities1	11%	29%
Property	11%	13%

Key changes in FY 08

• Previously, the investment risk in the shareholder funds was managed by reference to the probability of loss over a one-year time horizon at a 99% confidence level (Value at Risk).

• This loss tolerance was set at 3% of shareholder funds (with a tolerance range of + or - 0.5%) under a fat-tailed distribution.

• During 2008, AMP reviewed its financial risk settings across the group. In view of

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Financial overview – dividends and capital returns

A$5.7b in dividends and capital returns distributed to AMP shareholders over past five years

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46
40 2 40
2
32
22
27
21 16
18
14 40 40 40
22 22
19
13 14
Cents
2004 2005 2006 2007 2008
per
share
15% franked - interim 75% franked 75% franked 85% franked 85% franked
85% franked - final
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