AMP LIMITED — Annual Report 2013

Feb 19, 2014

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20 February 2014

Manager ASX Market Announcements Australian Securities Exchange Level 4, 20 Bridge Street Sydney NSW 2000

Client and Market Services Team NZX Limited Level 1, NZX Centre, 11 Cable Street PO Box 2959 Wellington, New Zealand

Announcement No: 05/2014

AMP Limited (ASX/NZX: AMP)

(also for release to AMP Group Finance Services Limited (ASX: AQNHA / NZX: AQN010 / SGX)

Full Year Financial Results

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Part 1:

Appendix 4E

Part 2: AMP Limited reports A$672 million net profit for FY 13 Part 3: Investor Presentation Part 4: Investor Report

Public Affairs T 02 9257 6127 E media@amp.com.au W AMP.com.au/media AMP_AU

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

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20 February 2014

Public Affairs Tel: 02 9257 6127 Email: media@amp.com.au Website: AMP.com.au/media AMP_AU

AMP Limited reports A$672 million net profit for FY 13

AMP Limited has reported a net profit of A$672 million for the year to 31 December 2013, compared with A$689 million for FY 12.

Underlying profit for FY 13 was A$849 million compared with A$950 million for FY 12[1] .

Underlying profit benefited from strong growth in Wealth Management, AMP Bank, Mature and New Zealand, offset by the challenging life insurance environment and a decline in investment income on shareholder funds.

The board has declared a final 2013 dividend of 11.5 cents per share, the same as the 2013 interim dividend. This represents a full year payout ratio of 80 per cent of underlying profit and is within AMP’s target payout range of 70 to 80 per cent of underlying profit. The dividend will be 70 per cent franked with the unfranked amount being declared as conduit foreign income.

Shareholders will be invited to participate in AMP’s dividend reinvestment plan (DRP) however no discount will be applied to the DRP allocation price and the shares will be acquired on-market.

The board reviews its approach to the DRP every six months as part of its review of AMP’s capital position.

AMP remains strongly capitalised with capital resources of A$2.1 billion above minimum regulatory requirements at 31 December 2013, up from A$1.7 billion at 30 June 2013, reflecting retained profits and A$325 million raised through the AMP Notes 2 retail subordinated debt issue. Subject to APRA approval, it is intended that the 2009 issued AMP Notes of A$266 million be redeemed for cash in May 2014.

1 Prior period comparisons restated in accordance with changes in accounting standards.

AMP Limited 33 Alfred Street Sydney NSW Australia ABN 84 079 300 379 AFSL 233671

AMP Limited reports A$672 million net profit for FY 13 / 2

AMP Chief Executive Craig Meller said that while AMP has delivered strong underlying earnings growth across the majority of its business units, the result has clearly been impacted by the ongoing challenges facing the life insurance sector.

Excluding Wealth Protection, AMP achieved an average 15 per cent earnings growth across the company compared with FY 12. This reflects particularly strong sales momentum in Wealth Management, improved net interest margin in AMP Bank, improved investment returns in the closed Mature business and strong cost management across the group.

Performance against key measures

• Underlying profit: A$849 million for FY 13, down 11 per cent compared with FY 12.

• Cost to income ratio: 49.4 per cent for FY 13, up from 47.3 per cent for FY 12[2] reflecting improved cost control offset by lower income, particularly in the Wealth Protection business. Controllable costs fell 2.6 per cent on FY 12.

• Growth measures:

• AMP Financial Services (AFS) net cash flows were A$1.3 billion, up from A$308 million for FY 12[3] reflecting strong flows from the Australian Wealth Management business.

• AMP Capital external net cash outflows were A$1,039 million compared with net cash outflows of A$1,784 million in FY 12. This improvement was largely driven in 2H 13 by strong inflows into infrastructure assets and a slow-down in Japanese net outflows.

• AFS value of risk new business was A$116 million, compared with A$203 million for FY 12, reflecting the challenging life insurance environment.

• Underlying return on equity: 10.7 per cent, down from 12.7 per cent FY 12[4] reflecting higher capital held to meet new prudential requirements, lower Wealth Protection profits and lower investment income earned on shareholder capital as a result of lower short-term interest rates.

Wealth Management, AMP’s largest business unit, delivered an increase in operating earnings of 16 per cent, reflecting stronger net cashflows and improved investment markets leading to 14 per cent growth in average assets under management (AUM). Margins in the wealth management business declined 4 basis points to 121 basis points which is within AMP’s market guidance.

The life insurance sector remains challenging with insurance claims and policy lapses remaining at higher levels than the long term average.

AMP has undertaken a comprehensive review across all aspects of its life insurance business and researched global best practice, and as a result launched a series of initiatives that are expected to improve claims and lapse experience over the medium term.

“We’re already seeing the benefit of working more closely with our customers to help them get back to work after illness or injury, improving the financial outcome for both our customers and

2 Prior period comparisons restated in accordance with changes in accounting standards and a reclassification of costs. See pages 15, 19 & 39 of the FY 13 Investor Report for more details.

3 Prior period comparatives changed following changes in reporting for SMSF. See pages 20-23 of FY 13 Investor Report for details. 4 Prior period comparisons restated in accordance with changes in accounting standards. For more information see page 39 of FY 13 Investor Report.

AMP Limited reports A$672 million net profit for FY 13 / 3

AMP. We’re also investing in new systems and data analytics that will improve claims management performance over the medium and long term.

“As market leader, AMP has the scale, capacity and executional capability to continue to deliver quality life insurance products that provide Australians with much needed security in a market that is changing. And, we play an important role in helping people understand the fundamental difference life insurance can make in the lives of Australians,” Mr Meller said.

The benefits of a stronger AMP with the advantages of scale and operational capacity are becoming evident as the company capitalises on improving investment markets and a rebound in the level of discretionary superannuation contributions.

Key highlights

• AMP Bank delivered record profit of A$83 million – up 34 per cent on FY 12 reflecting ongoing growth in home loan customers and lower funding costs.

• Strong AFS net cashflows of A$1.3 billion – net AFS cashflows up from A$308 million FY 12. Cashflows into the Australian wealth management business unit almost tripled to $2.2 billion from A$821 million FY 12.

• –

• North platform cashflows almost doubled to A$4.1 billion now with A$10 billion AUM, a fivefold increase since AMP acquired North in 2011 as part of the AXA merger. North’s success demonstrates this wrap platform’s appeal and quality, including fast online technology and access to a broad range of quality investments.

• AMP SMSF administration established as market leader – following both organic growth and a number of strategic acquisitions aimed at delivering scale and efficiency, AMP is now focused on broadening distribution reach, developing advice capabilities and developing quality investment products tailored for the SMSF market.

• 86 per cent and 67 per cent of AMP Capital funds met or exceeded client performance –

• targets over one and three years respectively representing improved investment performance.

• –

• New Zealand operating profit up 19 per cent buoyed by strong cost management, improved life insurance experience and a stronger New Zealand dollar.

Growth strategy

“With the AXA integration now complete, and most of the significant regulatory changes largely implemented, AMP’s strategy remains to focus on the attractive A$2.2 trillion Australian wealth management market; transform the core of the Australian business to a more customer-centric model; reduce costs to maintain market-leading efficiency and to continue to invest selectively internationally, with a focus on high growth Asian markets.

“We made considerable progress against our growth strategy in 2013. The pathway to a more customer-centric organisation is clear and work is underway on improving multi-channel access, diversifying advice models and better using data to drive customer offers,” Mr Meller said.

As announced in August 2013, AMP expects to deliver A$200 million pre-tax recurring, run-rate cost savings by the end of 2016. AMP expects to invest A$320 million (pre-tax) over the next three years to deliver these efficiencies.

AMP Limited reports A$672 million net profit for FY 13 / 4

Our commitment to investing in selective growth opportunities in Asia is providing returns through the successful launch of a A$2.2 billion mutual fund by our joint venture with China Life and the further development of our relationship with MUTB in Japan,” Mr Meller said.

AMP established its joint venture with China Life during the year and is now well-positioned to participate in China’s rapidly growing mutual fund investment market. AMP Capital further deepened and broadened its relationship with MUTB and now offers two institutional funds and three retail funds through MUTB’s extensive distribution network with AUM of more than A$570 million.

Important note:

Forward-looking statements in this release are based on AMP’s current views and assumptions and involve known and unknown risks and uncertainties, many of which are beyond AMP’s control and could cause actual results to differ materially from those expressed or implied. They are not guarantees or representations of future performance, and should not be relied upon as such.

Attached below are AMP Limited’s FY 13 financial summary, and for the quarter ending 31 December 2013 AMP Financial Services’ cashflows and AMP Financial Services and AMP Capital AUM.

For more information:

Shareholders are invited to join a live webcast of the investment analyst briefing at 12.30pm today by visiting www.amp.com.au/shareholdercentre/webcasts.

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A replay of the presentation will also be available shortly after the briefing has concluded.

Media enquiries Investor enquiries Jane Anderson Howard Marks +61 2 9257 9870 +61 2 9257 7109 +61 402 967 791 +61 402 438 019 Amanda Wallace Stephen Daly +61 2 9257 6168 +61 2 9257 5207 +61 422 379 964 +61 416 289 535

AMP Limited reports A$672 million net profit for FY 13 / 5

Financial summary

A$m	FY 13	FY 12
Profit and loss
	330	285
Australian wealth management
	83	62
AMP Bank
Australian wealth protection	64 190
Australian mature	178 167
New Zealand	97 73
AMP Financial Services	752 777
AMP Capital	99 99
BU operating earnings	851 876
Group Office costs	(62) (66)
	789	810
Total operating earnings
	135	226
Underlying investment income
	(75)	(86)
Interest expense on corporate debt
	849	950
Underlying profit
	(2)	21
Other items
	(57)	(128)
AXA integration costs
	(39)	-
Business efficiency program costs
	(91)	(99)
Amortisation of AXA acquired intangible assets
Profit before market adjustments and accounting	660	744
mismatches
	2	(12)
Market adjustment – investment income
	27	(9)
Market adjustment – annuity fair value
	(5)	(4)
Market adjustment – risk products
	(12)	(30)
Accountingmismatches
Profit attributable to shareholders of AMP Limited	672	689

AMP Limited reports A$672 million net profit for FY 13 / 6

Q4 13 Cashflows

	Cash inflows	Cash inflows	Cash outflows	Cash outflows	Net cashflows	Net cashflows
Cashflows by product(A$m)	Q4 13	Q4 12	Q4 13	Q4 12	Q4 13	Q4 12
Australian wealth management
AMP Flexible Super1	1,617	1,327	1,073	768	544	559
North2	2,222	1,386	981	478	1,241	908
Summit,Generations and iAccess(includingAssure)3	506	510	942	894	(436)	(384)
Flexible Lifetime Super(superannuation andpension)4	556	529	1,045	1,190	(489)	(661)
Other retail investment andplatforms5	101	81	154	164	(53)	(83)
Total retail on AMPplatforms	5,002	3,833	4,195	3,494	807	339
SignatureSuper and AMP Flexible Super - Employer	653	614	501	302	152	312
Other corporate superannuation6	390	424	506	486	(116)	(62)
Total corporate superannuation	1,043	1,038	1,007	788	36	250
Total retail and corporate super on AMP Platforms	6,045	4,871	5,202	4,282	843	589
Externalplatforms7	519	600	785	908	(266)	(308)
Total Australian wealth management	6,564	5,471	5,987	5,190	577	281
Australian wealthprotection
Individual risk	348	343	147	153	201	190
Grouprisk	85	79	82	56	3	23
Total Australian wealthprotection	433	422	229	209	204	213
Australian mature	158	151	543	598	(385)	(447)
Total Australia	7,155	6,044	6,759	5,997	396	47
New Zealand
KiwiSaver	126	88	68	53	58	35
Other8	175	190	221	247	(46)	(57)
Total New Zealand	301	278	289	300	12	(22)
Total AFS cashflows	7,456	6,322	7,048	6,297	408	25
	Net Cashflows9		AUM		Adviser Numbers
Channel Analysis(A$m)	Q4 13	Q4 12	Q4 13	Q4 12	Q4 13	Q4 12
AMP Financial Planning	358	140	49,015	43,091	1,706	1,616
Horizons	(4)	(3)	824	689	142	120
Hillross	99	14	11,856	9,606	367	337
Charter Financial Planning& Futuro Financial Services	155	89	15,528	13,113	934	865
Jigsaw advisers	(13)	(15)	1,021	1,014	171	234
ipacgroupadvisers and Tynan Mackenzie	(86)	(36)	8,507	7,427	176	168
Genesysgroupadvisers	29	(45)	3,533	3,330	219	239
Direct(includingcorporate superannuation)	39	129	10,317	8,645	-	-
Centrallymanaged clients and other	35	(83)	9,268	9,480	30	40
3rdpartydistributors	(216)	(143)	13,169	12,293	-	-
SMSF Advice10	-	-	-	-	57	17
Total Australia	396	47	123,038	108,688	3,802	3,636
New Zealand	12	(22)	12,201	10,305	604	640
Total AFS	408	25	135,239	118,993	4,406	4,276

	Net Cashflows9	Net Cashflows9		AUM		Adviser Numbers
Channel Analysis(A$m)	Q4 13		Q4 12	Q4 13	Q4 12	Q4 13	Q4 12
AMP Financial Planning	358		140	49,015	43,091	1,706	1,616
Horizons	(4)		(3)	824	689	142	120
Hillross	99		14	11,856	9,606	367	337
Charter Financial Planning& Futuro Financial Services	155		89	15,528	13,113	934	865
Jigsaw advisers	(13)		(15)	1,021	1,014	171	234
ipacgroupadvisers and Tynan Mackenzie	(86)		(36)	8,507	7,427	176	168
Genesysgroupadvisers	29		(45)	3,533	3,330	219	239
Direct(includingcorporate superannuation)	39		129	10,317	8,645	-	-
Centrallymanaged clients and other	35		(83)	9,268	9,480	30	40
3rdpartydistributors	(216)		(143)	13,169	12,293	-	-
SMSF Advice10	-		-	-	-	57	17
Total Australia	396		47	123,038	108,688	3,802	3,636
New Zealand	12		(22)	12,201	10,305	604	640
Total AFS	408		25	135,239	118,993	4,406	4,276

1 AMP Flexible Super is a flexible all in one superannuation and retirement account for individual retail business.

2 North is a market leading fully functioning wrap platform which includes guaranteed and non-guaranteed options.

3 Summit and Generations are owned and developed platforms. iAccess and Assure are ipac badges on Summit.

4 Flexible Lifetime Super (superannuation and pension) was closed to new business from 1 July 2010. A small component of corporate superannuation schemes is included.

5 Other retail investment and platforms include Flexible Lifetime - Investments, AMP Personalised Portfolio and Synergy.

6 Other corporate superannuation comprises CustomSuper, SuperLeader and Business Super .

7 External platforms comprise Asgard, Macquarie and BT Wrap platforms.

8 Other New Zealand cashflows include New Zealand wealth protection, mature and non-KiwiSaver wealth management.

9 Q4 12 net cashflows have been restated to reflect changes in customer channels.

10 Reported AFS net cashflows and AUM exclude AMP SMSF.

AMP Limited reports A$672 million net profit for FY 13 / 7

Q4 13 AUM[1]

	Q3 13	Q3 13	Q4 13 Net cashflows	Q4 13 Net cashflows	Q4 13 Net cashflows	Total	Other	Other	Q4 13
						net
AUM (A$m)	AUM	Superannuation	Pension	Investment	Other		movements2		AUM
						cashflows
Australian wealth management
AMP Flexible Super	9,122	241	303	-	-	544	341	10,007
North	8,177	421	550	270	-	1,241	209	9,627
Summit,Generations and iAccess(includingAssure)	14,514	(180)	(152)	(104)	-	(436)	433	14,511
Flexible Lifetime(superannuation andpension)	24,661	(280)	(209)	-	-	(489)	937	25,109
Other retail investment andplatforms	3,287	(29)	(26)	2	-	(53)	73	3,307
Total retail on AMPplatforms	59,761	173	466	168	-	807	1,993	62,561
SignatureSuper and AMP Flexible Super - Employer	10,807	145	7	-		152	443	11,402
Other corporate superannuation	12,759	(116)	-	-		(116)	359	13,002
Total corporate superannuation	23,566	29	7	-	-	36	802	24,404
Total retail and corporate super on AMPplatforms	83,327	202	473	168	-	843	2,795	86,965
Externalplatforms	13,336	(100)	(163)	(3)	-	(266)	456	13,526
Total Australian wealth management	96,663	102	310	165	-	577	3,251	100,491
Australian wealthprotection					204	204	(204)
Australian mature	22,576	(166)	(58)	(38)	(123)	(385)	356	22,547
Total Australia	119,239	(64)	252	127	81	396	3,403	123,038
New Zealand
KiwiSaver	2,444	58	-	-	-	58	131	2,633
Other	9,119	(6)	(1)	(42)	3	(46)	495	9,568
Total New Zealand	11,563	52	(1)	(42)	3	12	626	12,201
Australian wealth management - AMP SMSF3 Assets under administration 12,736 3,780								16516
								,
Total AUM	143,538	(12)	251	85	84	408	7,809	151,755
Australian wealth management - AMP Bank by product
Deposits(Supercash,Super TDs & Platform TDs)	4,841						(391)	4,450
Deposits(retail)	4,046						245	4,291
Loans	12,886						436	13,322

1 Reported AUM excludes shareholder capital.

2 Other movements include fees, investment returns, taxes, as well as foreign currency movements on New Zealand AUM. For Australian Wealth Protection this includes the reversal of net cashflows which are not included in AUM.

3 AMP SMSF includes Multiport, Cavendish, SuperIQ, YourSMSF and Ascend administration platforms. SuperIQ is 49% owned by AMP, however 100% of assets under administration are included.

Q4 13 AUM and API summary

AUM (A$m)	Q3 13	Q4 13
	AUM	AUM
Australian wealth management - AUM by product
Superannuation	59,002	61,265
Pension	26,043	27,249
Investment	11,618	11,977
Total	96,663	100,491
Australian wealth management - AUM by asset class
Cash and fixed interest	31%	30%
Australian equities	35%	35%
International equities	23%	24%
Property	6%	6%
Other	5%	5%
Total	100%	100%
AUM summary (A$b)
Australian wealth management
ClosingAUM	96.7	100.5
Average AUM	94.8	98.8
Asset Management
AMP Capital
ClosingAUM	135.9	140.2
Average AUM	134.1	138.0
Risk insurance Annual Premium Income - API(A$m)
Australia
Individual lumpsum	1,030	1,029
Individual incomeprotection	416	419
Grouprisk	371	366
New Zealand
Individual lumpsum	222	229
Individual incomeprotection	47	48
Grouprisk	35	36
Total	2,121	2,127