AMP LIMITED — Annual Report 2010

Feb 16, 2011

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ASX Announcement
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17 February 2011

Manager Manager Company Announcements Office Market Information Services Section Australian Securities Exchange New Zealand Stock Exchange Level 4, 20 Bridge Street Level 2, NZX Centre, 11 Cable Street Sydney NSW 2000 Wellington New Zealand

Announcement No: 05/11

AMP Limited (ASX/NZX: AMP)

(Also for cross release to AMP Group Finance Services Limited (ASX: AQNHA; NZX: AQN010))

Part 1: AMP delivers fully ear A$760 million underlying profit AMP reports Q4 2010 cashflows and AUM

• Part 2: Investor Presentation

Part 3: Investor Report Part 4: Appendix 4E

AMP Limited (AMP) ASX Announcement

AMP Limited Level 24, 33 Alfred Street Sydney NSW 2000 Australia ABN 49 079 354 519

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AMP results presentation FULL YEAR RESULTS 2010

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2010 full year results
Craig Dunn
Chief Executive Officer
Paul Leaming
Chief Financial Officer
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17 February 2011
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Executive summary

• Operating result reflects robust performance in CWM and solid results elsewhere offset by negative claims experience in CWP

• Disciplined operating cost control enabled continued investment in growth initiatives

• Growth investments have positioned company well ahead of regulatory change, driving:

• more productive planner force, with strong growth in AMPFP planner numbers

• simpler, transparently priced products with encouraging new business flows

• growing investment management footprint in Asia

• Capital position further strengthened ahead of changing APRA standards

• Proposed AXA merger progressing to plan

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2
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1

Outline

• Group overview

• Business line review

• Financial overview

• Outlook and strategy

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3
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Key performance measures and dividend

• Underlying profit A$760m, down 2% on FY 09 (A$772m)

• Growth measures:

• Net cashflows in AMP Financial Services A$789m, down from A$1.7b; AMP Capital Investors external net cashflows A$2.6b, up from -A$1.1b in FY 09

• Value of risk new business* up A$6m to $108m

• 63% of AMPCI’s AUM met or exceeded benchmark over 12 months to 31 December 2010

• Underlying return on equity 26.2% (FY 09 31.6%), reflects prudent approach to capital management

• Final dividend of 15cps, 60% franked, represents payout of 83% of 2H 10 underlying profit; full year dividend 30cps (FY 09 30cps)

• Combined value of new business (VNB) measure for Australian Contemporary Wealth Protection and New Zealand risk insurance.

4

2

5 Overview – FY 10 profit summary +5% 739 775 Net profit attributable to shareholders of AMP Limited 1. M&A transaction costs in FY 10 principally relate to the proposed merger with AXA Asia Pacific Holdings Limited. See p40 of FY 10 Investor Report. 2. Principally comprise release of prior year tax provisions offset by one-off and non-recurring costs. 3. Represents the abnormal writedown of seed pool assets, in FY 09 primarily Singapore industrial property and an Australian retirement village business. 4. Relate to accounting gains / losses that do not reflect underlying profitability of the group and should reverse over time. See p41 of FY 10 Investor Report. - (14) (7) Market adjustment – risk products4 - 20 22 Market adjustment – annuity fair value4 - 1 Loan hedge revaluations4 - (1) 22 Accounting mismatches4 - 20 (2) Other items2 - (30) - Seedpool valuation adjustments3 - (13) (5) Market adjustment – investment income Steady 16 16 AMP Limited tax loss recognition -0.3% 739 737 Profit after income tax before timing differences -2% 772 760 Underlying profit +1% (71) (72) Interest expense on corporate debt +3% 126 130 Underlying investment income -2% 701 686 Total operating earnings +8% (37) (40) Groupoffice costs -2% 738 726 BU operating earnings -4% 91 87 AMP Capital Investors +7% 54 58 AFS New Zealand -7% 151 140 AFS Mature -16% 164 138 AFS Contemporary Wealth Protection +9% 303 AFS Contemporary Wealth Management % change FY 09 FY 10 A$m (5) 278 - (10) (16) M&A transaction costs1

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Overview – assets under management
140
128 129
120 122
117
115
112 113
112
105 106
100
80
60
FY 06 FY 07 FY 08 FY 09 FY 10
Average AUM Closing AUM
6
A$b
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Overview – tight cost control while investing for
growth
CAGR 2% since FY 06
900 871 879 884
837
812 63 73 79
800 808 806 59 805
58
778
754
700
75bps 79bps 78bps
72bps
68bps
600
500 39.6% 39.7% 41.3% 41.7% 43.3%
400
FY 06 FY 07 FY 08 FY 09 FY 10
Operating costs Project costs Cost to income ratio Controllable costs to AUM
7
A$m
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Business line review
8
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9

AMP Financial Services – FY 10 highlights

• Delivered A$639m in operating earnings in FY 10 (A$647m in FY 09) while significantly repositioning the business

• Strong performance in CWM and improvements in NZ offset by negative claims experience in CWP

• 34.7% cost to income ratio reflects ongoing cost discipline, while continuing to invest in growth initiatives

• Ambitious change program delivering simpler, more transparent products, and transformed planner force with fee-for-advice capability well ahead of regulatory change

AFS overview – FY 10 cashflows

• Cashflows reflected a subdued market, with market share marginally up

• Total net cashflows of A$789m, down from A$1,661m in FY 09, reflected

• increases in outflows, because of higher customer account balances

• reduced salary sacrifice contributions, following changes to the contribution caps

• These factors were only partially offset by

• increased inflows from rollovers, reflecting higher AUM balances

• higher member contributions

• success of AMP Flexible Super

• CWM net cashflows A$1,391m (A$2,189m in FY 09)

• Persistency increased to 90.4% in FY 10 (90.1% in FY 09)

• AMP Flexible Super total AUM A$1.4b – split between superannuation and pensions; 21,000 customers; product working as designed for customers and shareholders

10

5

AFS overview – update on Flexible Super

AMP Flexible Super superannuation account – AUM (A$541m)

• Product designed to extend reach into younger customer base and attract SG contributions; balances will increase over time:

• 33%  Total customers 17,000

• 41%  One-third of Core customers aged 30 or younger  Average customer balance $33,000 (higher than retail industry average)

• Average customer balance of Choice customers almost three times Core

• Majority of flows from new superannuation

• 26% customers  70% of customers by number in Core or Select  Only A$90m in AUM sourced from closed retail super product; well within AMP's assumptions for

• % AUM Core Select Choice determining margin guidance  Employer plans represent A$18m of AUM, with 3,700 customers 11

AFS overview – update on Flexible Super

AMP Flexible Super retirement account – AUM (A$837m)

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2%
 Designed to offer a more
sophisticated solution for retirement
customers with more complex
14%
needs:
 Total customers 4,000
 Average customer balance $212,000
 Majority of pension flows a result of money
transferred internally following closure of
Flexible Lifetime – Allocated Pension
84%  Strong flows to Choice option support
margin guidance
% AUM Core Select Choice
12
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6

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AFS overview – strong track record of
managing margins
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250
Investment-related revenue to AUM
200 199 201
195
Choice of Fund 187 186 186 182 183 190 184 180 177
150 introduced
APRA licensing Lehman AMP Flexible
100 changes collapses Super
introduced launched
50 52 51 52 52 53 55 51 52 54 51 50
Operating earnings to AUM 45
0
1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10
bps
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• Five year change in investment-related revenue to AUM consistent with AMP’s past guidance

• AMP’s investment related revenue to AUM guidance remains unchanged at around 3% pa decrease across the cycle (in normal markets), subject to potential MySuper changes

• Operating earnings to AUM reflects cost discipline and business model flexibility

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13
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AFS overview – changes in investment-related revenue

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190
180 - 4 2
- 3
No impact on - 1
CWM operating - 1
184 earnings
170
177
160
14
Reduction in planner fees attributable to lower new business volumes relative to AUM.
bps
2H 09 investment- related revenue to AUM Lower initial planner fees on contributions Changes in investment / product mix Higher fee rebates Lower SuperLeader par profits Member account fees 2H 10 investment- related revenue to AUM
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AFS overview – disciplined cost control
600
543 553 560 545
529
50 54
500 50 503 506 50 63
493
479 482
400
77bps 75bps 76bps 72bps
69bps
300
200 35.6% 34.2% 35.4% 34.0% 34.7%
100
FY 06 FY 07 FY 08 FY 09 FY 10
Operating costs Project costs Cost to income ratio Controllable costs to AUM
15
A$m
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AFS Australian contemporary wealth management

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CWM
FY 10 FY 09 Change
Operating earnings A$303m A$278m +9%
Controllable costs A$344m A$340m +1%
Cost to income ratio 42.9% 44.9% -2 percentage points
Net cashflows A$1,391m A$2,189m -A$798m
Operating earnings to AUM [1,2] 50bps 53bps -3bps
Persistency 90.3% 90.0% +0.3 percentage points
Average AUM (including A$51.9b A$45.7b +14%
capital) [1]
Return on equity 40.9% 42.9% -2 percentage points
1. Based on monthly average AUM including capital. 16
2. Costs in this ratio exclude AMP Bank costs.
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AFS Australian contemporary wealth protection

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CWP
FY 10 FY 09 Change
Profit margins A$152m A$144m +6%
Experience profits (A$14m) A$20m -A$34m
Operating earnings A$138m A$164m -16%
Profit margins / API [1] 19.4% 19.8% -0.4 percentage points
Operating earnings / API [1] 17.6% 22.5% -4.9 percentage points
Controllable costs A$93m A$75m +24%
Individual risk API A$662m A$607m +9%
Individual risk lapse rate 11.4% 11.1% +0.3 percentage points
RoEV pre transfers @ 3% 13.6% 12.4% +1.2 percentage points
discount margin
VNB @ 3% discount margin A$101m A$100m 1%
Return on equity 23.2% 30.1% -6.9 percentage points
1. Based on average annual premium in-force. 17
.
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AFS Australian mature

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Mature
FY 10 FY 09 Change
Operating earnings A$140m A$151m -7%
Controllable costs A$58m A$60m -3%
Controllable costs/AUM [1] 32bps 32bps Steady
Net cashflows (A$1,265m) (A$1,201m) -5%
Persistency 89.3% 89.5% -0.2 percentage points
AUM (pre-capital) A$17.3b A$18.1b -4%
RoEV pre transfers @ 3% 13.6% 17.1% -3.5 percentage points
discount margin
VNB @ 3% discount margin A$14m A$21m -33%
Average capital A$433m A$390m +11%
Return on equity 36.7% 43.4% -6.7 percentage points
1. Based on monthly average AUM including capital. 18
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AFS New Zealand

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New Zealand
FY 10 FY 09 Change
Profit margins A$58m A$65m -11%
Experience profits / losses A$0m (A$11m) +A$11m
Operating earnings A$58m A$54m +7%
Controllable costs A$50m A$54m -7%
Cost to income ratio 34.2% 37.9% -3.7 percentage points
Individual risk API [3] A$115m A$117m -2%
Lapse rates 9.9% 11.6% -1.7 percentage points
Net cashflows A$201m A$235m -15%
AUM (pre capital) A$4.7b A$4.7b Steady
RoEV pre transfers @ 3% 4.3% (10.1%) +14.4 percentage points
discount margin [1, 3]
VNB @ 3% discount margin [3] A$8m A$16m -A$8m
Return on equity 22.2% 20.0% +2 percentage points
1. In NZ dollar terms, RoEV increased by 10.8% on FY 09.
2. In NZ dollar terms, individual risk API increased by 4% on FY 09.
3. New Zealand EV and VNB in FY 10 were impacted by a change in methodology to recognise recurring contributions on wealth management products as a movement in EV rather than VNB. On a like-for-like basis, 2010 RoEV would have been -0.6% (compared to +4.3%) and VNB would have been 19
A$10m (compared to A$8m).
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AMP Capital Investors – FY 10 highlights

• Resilient performance through subdued market conditions delivered operating earnings of A$87m, down 4% on FY 09 (A$91m)

• Total management fees up to A$353m from A$341m

• Increase in controllable costs reflecting continued investment in growth initiatives

• 63% of AUM meeting or exceeding benchmark in 12 months to 31 December 2010

• A$2.6b in external net cashflows (-A$1.1b in FY 09), including A$1.7b from Japan and improved flows from domestic institutions into property and infrastructure

• Controllable costs of A$281m, up 10% from A$255m, reflecting continued investment in new market-leading operating platform and Asian expansion; other costs held tight

• Investment program delivering new mandates, including good flows from Asia

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20
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10

AMPCI overview – FY 10 key financial results

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AMPCI
FY 10 FY 09 Change
Operating earnings A$87m A$91m -4%
Management fees – AUM based A$300m A$284m +6%
Management fees – non-AUM A$53m A$57m -7%
based
Total performance & transaction A$45m A$38m +18%
fees
Controllable costs A$281m A$255m +10%
Cost to income ratio 69.0% 65.2% +3.8 percentage points
External net cashflows A$2.6b (A$1.1b) +A$3.7b
Return on equity 45.8% 60.8% -15 percentage points
21
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AMPCI – controllable costs and cost to income
ratio reflect ongoing growth investments
65.2% 69.0%
56.0% 53.1% 56.3% Medium-term cost
to income ratio
target (55-60%)
325
300
275 281
268
250 257 255
225
223
200
175
150
FY 06 FY 07 FY 08 FY 09 FY 10
Controllable costs Cost to income ratio
22
Controllable costs A$m
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11

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AMPCI – drivers of cashflows
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100
1.7 0.1 0.0 2.7
0.8
95 (0.5)(0.3) (0.3)(0.2) 0.0 98.0
95.1 (1.9)
90
85
80
75
External Internal
70
AMPCI cash inflows are reported net of fees and taxes. 23
AMPCI – performance against benchmarks
62% of AUM met or exceeded benchmark over five years
48% over three years
63% over one year AMPCI managed Multi-manager and Multi-Asset Group
100 98 100
92 91
87 86
Target
75% 74
63 61 61
54 56
49
43 42
37 39
29
9
4 6
0 0
% Asia-Pacific Asia-Pacific Infrastructure Australasian International International International Diversified
equities fixed interest and direct direct property listed property equities fixed interest
investments
One-year rolling to Dec 10 Three-year rolling to Dec 10 Five-year rolling to Dec 10
% Indicates assets under management meeting or exceeding benchmarks over rolling one, three- and five-year periods to Dec 10. 24
Excludes Future Directions Funds.
A$b
AUM at 31/12/09AUM at 31/12/09 Australian market Australian market flowsflows Asian distribution Asian distribution channelschannels NZ market flowsNZ market flows Aus Mkt flows (otherRest of the worldexternal) Australian Australian contemporarycontemporary AMP GroupAMP Group Australian run-offAustralian run-off businessbusiness NZ market flowsNZ market flows Investment returns andInvestment returns and otherother AUM at 31/12/10AUM at 31/12/10
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Financial overview
Paul Leaming
Chief Financial Officer
25
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Financial overview – key points on P&L

	A$m	FY 10	FY 09	% change
	Underlying profit	760	772	-2%
	Market adjustment – investment income	(5)	(13)	-
	M&A transaction costs	(16)	(10)	-
	Other items	(2)	20	-
	Seed pool valuation adjustments	-	(30)	-
	Profit after income tax before timing differences	737	739	-0.3%
	Market adjustment – annuity fair value	22	20	-
	Market adjustment – risk products	(7)	(14)	-
	Loan hedge revaluations	1	(5)	-
	Accounting mismatches	22	(1)	-
	Net profit attributable to shareholders of AMP	775	739	+5%

• M&A transaction costs mostly relate to AXA but also include a number of smaller projects completed during the year

• Subject to successful completion, integration costs will be reported separately from 1 January 2011

• NPAT growth driven by tightening of credit spreads (annuities) and favourable accounting mismatches

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13

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Financial overview – balance sheet strength
2010 2009
Maturities
A$m A$m
Tier 1
Shareholder equity 3,046 2,706 Surplus above MRR increased
by A$240m to A$1,482m at the
Tier 2 Group level
Subordinated bonds 10+ years 83 83
AMP Notes 2 - 5 years 296 296
Subordinated loan to AMP Bank 2 - 5 years (100) (100)
279 279
FY10 FY09
Senior debt Gearing 10% 13%
Commercial paper 0 - 1 year 59 132 Interest cover 11.6 times 11.9 times
Euro MTN 1 - 2 years 398 628 (underlying)
Domestic MTN 0 - 1 year 350 350
Group cash A$468m A$622m
Loan to AMP Bank 0 - 1 year (200) (200)
607 910 Undrawn bank A$500m A$700m
TOTAL RESOURCES 3,932 3,895 facilities
27
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Financial overview – strengthened capital
position over five years
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3,000
2.4 Coverage
2.2 (times)
2.1 2.1
2,500 1.8
2,000
1,482
1,242
1,500
668 895 898
1,000
500 1,023 1,089
886 823 829
-
FY 06 FY 07 FY 08 FY 09 FY 10
MRR Surplus
FY 06 adjusted for 40 cents per share capital return paid in 1H 07. 28
A$m
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14

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Financial overview – capital movements
Movements in MRR (A$m)
Markets 92
Asset mix (59)
Par smoothing (35)
Risk new business 90
Other (22)
Net increase in MRR 66
2,200
775
2,000
1,800
1,600
1,400 (387) (18) (64) (66)
1,200
1,000 1,548 1,482
800 1,242
600
400
29
A$m
Reg. capital above MRR at FY 09 Reg. capital above MRR at FY09 Net profit attributable to shareholders of AMP Limited Net profit attributable to shareholders of AMP Limited Dividends (net of DRP) Dividends (net of DRP) Intangibles/DBF deficit Intangibles/DBF deficit Other movement in regulatory capital resources Other movement in regulatory capital resources Reg. capital above MRR before movement in MRR Reg. capital above MRR before movement in MRR Movement in MRR Movement in MRR Reg. capital above MRR at FY 10 Reg. capital above MRR at FY 10
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Financial overview – regulatory capital outlook

• Strengthened capital position ahead of outcomes of regulatory capital reviews

• Reviews underway include

• APRA developing supervision framework for conglomerate groups (to include conglomerate capital standards) and reviewing capital standards for life and general insurers

• ASIC reviewing financial requirements imposed on responsible entities of registered managed investment schemes under the AFSL regime

• Reserve Bank of New Zealand reviewing solvency standards for NZ insurance companies

• Basel Committee on Banking Supervision reviewing global banking supervision (Basel III); APRA will then revise Australian banking standards

• Reviews at various stages of development and consultation

• Too early to determine impact of changes on AMP’s regulatory capital position

• AMP prudently holding more capital until position becomes clearer

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30
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15

Financial overview – capital and dividends

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Policy FY 10
Dividend payout ratio 75% to 85% of Final 15 cps dividend
underlying profit represents 83% of 2H 10
underlying profit
Franking Maximum Dividend 60%
possible franked
DRP Preference for DRP offered at a
DRP at par, with discount of 1.5% and
shares bought effected by issuing
on market new shares, as part
of prudent capital
approach
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• Following the proposed merger between AMP and AXA APH’s Australian and New Zealand operations, the franking capacity of the merged company is expected to be less than AMP’s current FY 10 franking level of 60% in the near term, given AXA APH’s current franking position

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Outlook & strategy
32
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16

Outlook

• In short term, the global recovery looking increasingly robust, particularly in the US, although volatility from GFC aftershocks still likely

• Australian growth will be distorted by the floods and Cyclone Yasi in the short term, but the medium term outlook remains bright

• AMP well positioned for regulatory changes in industry and prudential requirements

• Integration planning underway for proposed merger with AXA

• Over medium term, dynamics underpinning wealth management in Australia and investment management in Asia remain highly attractive

• Proposed move to 12% SG in Australia over next decade will underpin strong market growth

• AMP’s growth investments, including selective M&A, are positioning the business to succeed in changing wealth management world

33

Short-term outlook – cost outcomes

• Tight management of costs across the business will continue

• AFS costs expected to grow by 4-5% in FY 11 as investment in growth initiatives continues

• AMPCI cost ratio expected to remain above medium-term target in 2011 as a result of continued investment in Asian expansion and final tranche of investment in new operating platform; FY 11 cost to income ratio should be in line with FY 10

• Integration cost budget of A$285m (post tax) for AXA merger, with expected net annual synergies of A$120m (post tax)

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17

Growth strategy: reshaping the business for success

• Ongoing investment program across five growth platforms has enabled fast, flexible responses to changing regulatory and consumer environment

• Growing planner capacity and broadening distribution

• Expanding to Asia through AMP Capital Investors

• Growing customers in high-value segments

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

• Investing in key growth enablers

• Investment has enabled AMP to renovate core business, expand into new markets and geographies and reshape the business portfolio through targeted M&A

• While emphasis has been on renovating core, now gaining traction in new markets / geographies and targeted M&A

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35
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Organic growth strategy gaining traction

• Goal Action Outcome

• Professional, • Removed in-built commissions and moved to • AMPFP largest planner group by adviser numbers; growing productive fee-for-advice on new super, investment and pension products from 1 July 2010 • AFS planners more productive than industry averagefaster than industry[1][2] planner force • Increased investment in Horizons Planner • Horizons graduates helping to drive AMPFP planner force growing faster Academy growth; 297 graduates to date, including 81 in 2010 than the market • Invested in COIN planner software and • COIN delivering up to 60% efficiency gains paraplanning services • Paraplanning volumes up 68% on FY 09

• • Roll-out of scoped advice pilot • Scoped advice packages now used by 200 planners • First financial planning centre opened • Success of pilot means more financial planning centres to open in 2011

• Quality products • AMP Flexible Super launched in May; catering • AMP Flexible Super AUM A$1.4b at 31 Dec; average 150 that respond to the for broad range of customers; choice of investment options and product features; pricing • Flexible Super awarded 5-star Canstar Cannex rating and new accounts opened each day needs of fast- to match the Heron Partnership 5-star rating growing customer • Improving HNW position with: • SuperRatings named Flexible Lifetime – Super Easy (now segments  Personalised Portfolio aimed at SMSF marketAMP Private Wealth Management, employed• Personalised Portfolio AUM A$263m at 31 DecFlexible Super Core) 2010 Best New Product planner channel for HNW clients • Individual risk API increased by 9% and sales through IFAs

• • Revamped risk offering - with product and increased by 30% service improvements including claims and underwriting concierge services

• More of AMPCI’s • A growing number of investment professionals in • 8% of AUM now sourced from Asia net cashflows a number of geographic centres, including Hong • A$1.7b raised from international clients Kong, Singapore and Japan • A$7b in AUM managed for Japanese clients

• sourced • Improved distribution capability in Japan (Gemini • Secured first UK, Japanese & French pension fund investors internationally acquisition) in infrastructure • Marketing two closed end infrastructure funds • Launched Global Listed Infrastructure Fund with Brookfield globally • Launched Infrastructure Debt Fund, with client commitments

• • Brookfield JV in listed infrastructure / property of €118m at first close, including a large Asian investor • Strengthened capabilities in international centres

• 1. Money Management, August 2010. 36 2. Comparator 2010 Annual Quantitative Report – investment and insurance sales per advisor.

18

AXA merger to accelerate growth strategy

• AMP’s proposed merger with AXA will accelerate delivery of our strategy, capture synergies and position the merged business for stronger growth

• The merger will create:

• the leading independent wealth management company in Australia and New Zealand

• significant scale in Australian and New Zealand markets, strengthening the company’s competitive position and balancing a market-leading position in personal and corporate superannuation with a strong position in retail risk insurance

• a broader and deeper distribution footprint, providing multi-brand advice options and improving distribution through IFAs

• a stronger domestic base to support AMPCI growth into Asia

• The combined company will be a competitive new force for consumers and a wealth management company differentiated through its commitment to the value of financial advice and the role of financial advisers

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37
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Approach to AXA / AMP integration planning

• Objectives of the integration include

• building on strengths of both organisations to create stronger merged business

• ensuring stability of core businesses

• retaining key talent

• delivering planned synergies and benefits

• minimising customer and planner disruption and attrition

• building long-term, accelerated growth profile of combined business

• managing risk effectively

• Process includes

• integration planning being done alongside core business to minimise disruption

• initial integration workstreams formed, with increasing input from AXA as we progress to completion

• Current indicative timeline

• Approvals being sought from  8 March – scheme would regulators and Government become legally binding

• 2 March – AXA shareholders  22 March – end of VWAP vote on scheme of period arrangement  30 March – AMP would merge

• 7 March – second court date with AXA APH 38

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Summary

• Growth investments are delivering a more flexible, responsive business, well ahead of regulatory change curve, with:

• a reinvigorated product set

• repositioned advice business and transformed, growing planner force

• broader and deeper distribution footprint

• strengthened domestic and international investment capabilities

• Potential AXA merger will accelerate growth strategy and strengthen competitive position of combined company

• AMP is strongly positioned in very attractive, high growth markets and well placed to benefit from market recovery

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39
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Appendices
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40
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Further information
Topic Chart
 Volatility in 10-year bond yield and ASX 200 42
 Margin guidance 43
 AMP Bank
 Business and funding model 44
 Business profile 45
 Regulatory update 46
41
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Volatility in 10-year bond yield and ASX 200

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7 7500
6.5 10-year bond yield LHS 7000
6500
6
6000
5.5
5500
5
5000
4.5
4500
4 ASX 200 Index RHS
4000
3.5 3500
3 3000
1-Jan-07 1-Jan-08 1-Jan-09 1-Jan-10
42
Percent Index
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Margin guidance

• Investment-related revenue to AUM will decrease by around 3% pa across the cycle (i.e. initially 5 to 6 bps) in normal markets

• This allows for changes in business mix, increases in revenue from member fees and fee rebates as customer balances increase

• Guidance doesn’t take potential MySuper changes into account – however AMP remains confident margin compression can be managed

• CWM has around A$9b of default superannuation business in accounts receiving SG contributions on which planners earn commissions – representing 17% of total CWM business

• Removal of commissions does not impact CWM net revenue margins

• MySuper-type pricing likely to involve a range below 1%

• Design changes and supply chain management can reduce product costs

• Govt intends to look at transitioning arrangements, grandfathering provisions

• MySuper and proposed shift to 12% SGC offer potential for revenue growth

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1. Includes 1% pa assumption of switching from existing AMP products to AMP Flexible Super. 5% rate of switching would only increase guidance by 43
0.3% pa.
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AMP Bank – business and funding model

• Direct Australian bank offering residential mortgages and deposits

• Direct and third-party distribution, including AMPFP and mortgage brokers

• Operating earnings of A$42m in FY 10 (FY 09 A$35m)

• Capital adequacy ratio of 11.33% at December 2010; tier one $264m (FY 09 $248m)

• A$10.1b mortgage book (56% mortgage insured*); 1% market share of residential lending

• Less than 3% of mortgages are classified as low doc and are 100% mortgage-insured*

• Weighted average LVR for the total mortgage portfolio is 57%

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

• 90+ day arrears at 0.43% FY 10 (FY 09 0.30%)

• Historical bad debt experience totals A$5.2m over past 5 years

• Doubtful debt provision of A$1.0m and specific provision of A$1.6m at December 2010

• A$7.5b in on balance sheet funding at December 2010

• 39% retail deposits, 25% superannuation deposits and 36% wholesale deposits

• A$3.3b in off-balance sheet funding at December 2010

• Net interest margin 1.38% (FY 09 1.40%)

• Cost to income ratio 41.1% (FY 09 47.5%)

• NTA $300m at 31 December 2010 (FY 09 $258m)

44 * Mortgage insurance provided by external supplier.

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AMP Bank – business profile
Deposit mix (excluding wholesale) Credit quality
2009 2010 1.00% 90+ days past due
0.90%
Cash Management 41% 8% 5% 0.80%
Business Saver 7% 15% 0.70%
Investment Accounts 2% 40% 0.60%
Transaction Accounts 9% 1% 0.50%
9% 0.40%
Savings Accounts 0.30%
Term Deposits 13% 0.20%
Super Deposits 12% 0.10%
20% 19% 0.00%Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11
Deposit growth relative to market Mortgage growth relative to market
10.00% 2.00%
8.00%
1.50%
6.00%
4.00% 1.00%
2.00% 0.50%
0.00%
0.00%
-2.00%
-4.00% -0.50%
Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10
AMP Bank Total Market AMP Bank Total Market
45
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AMP changing well ahead of curve

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Proposed reform AMP action/impact
Future of Financial Advice (FoFA) reforms
• Draft legislation expected mid-2011; reforms to AMP participating in consultation process
commence July 2012. Proposals include:
o Prospective ban on super, pension and Removed built-in commissions on super, pension and
investment product commissions investment new business from 1 July 2010
o Adviser charging regime
o Fiduciary duty for financial planners to act in Broadly support establishment of fiduciary duty for
best interests of clients financial planners
Stronger Super
• Stronger Super (Government response to Cooper Significant consultation with Treasury already undertaken
Review) released Dec 2010; direction of regulatory
change becoming clearer
• MySuper can be offered from 1 July 2013 with Already launched AMP Flexible Super – a simple,
transition arrangements for existing default products flexible, all-in-one super and retirement solution expected
o Simple, low cost default super product largely to meet Government’s MySuper product attributes
o Product requirements to be set in legislation;
enforced by APRA
o MySuper funds to be only eligible default funds
in modern awards
o Productivity Commission review of award Potential for closed segment of super market to be
default funds to be completed by 1 July 2013 opened to competition
• SuperStream: to modernise and streamline AMP’s efficiency already recognised as industry-leading;
superannuation administration; most measures in changes likely to lead to further efficiency opportunities
place by 1 July 2015 for AMP
46
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