AMP LIMITED — Interim / Quarterly Report 2007

Aug 22, 2007

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AMP Investor Report Half year 2007

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07
1H
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Information for shareholders

10	September 2007	Ex-dividend date for interim 2007 dividend (Australia)
14	September 2007	Record date for interim 2007 dividend
17	September 2007	Ex-dividend date for interim 2007 dividend (New Zealand only)
20	– 28 September 2007	Pricing period for DRP
12	October 2007	2007 interim dividend payment date

Contact Details

Investor Relations enquiries

Jill Craig	Director, Investor Relations
Telephone	61 2 9257 7053
Facsimile	61 2 9257 7445
Email	jill_craig@amp.com.au
Karyn Munsie	Director, Media and Community Relations
Telephone	61 2 9257 9870
Facsimile	61 2 9257 5497
Email	karyn_munsie@amp.com.au

Executive management team	Executive management team
Andrew Mohl	ManagingDirector and Chief Executive Officer
Paul Leaming	Chief Financial Officer
CraigDunn	ManagingDirector, AMP Financial Services
Stephen Dunne	ManagingDirector, AMP Capital Investors
Lee Barnett	Chief Information Officer
David Cohen	General Counsel
Peter Hodgett	General Manager, Human Resources & Strategy
Matthew Percival	General Manager, Public Affairs

Online reports

This investor report is available online at amp.com.au along with the AMP annual report and other investor relations information

AMP Limited ABN 49 079 354 519

AMP Investor Report 1H 07 Contents 1

Contents

AMP	1H 07 highlights	2
	Key performance measures	3
	Financial summary	4
	Strategic overview	6
	Sensitivities – profit and capital	8
	Five year summary	9
AMP Financial Services (AFS)	Australian contemporary wealth management	10
	Australian contemporary wealth protection	12
	Australian mature	14
	New Zealand	16
	AMP Financial Services financial summary	18
	Cashflows and assets under management (AUM)	19
	Market share	22
	Embedded value (EV) and value of new business (VNB)	23
	EV and VNB methodology	26
	EV and VNB sensitivities	28
	EV assumptions	29
AMP Capital Investors (AMPCI)	Financial summary	30
Cobalt/Gordian	Financial summary	38
Capital structure	Capital management	39
	Debt overview	42
Additional information	Group Office	43
Glossary of terms and independent reviewAccounting treatment and definitions		44
	Life insurance accounting	47
	Definitions of business units (BUs) and exchange rates	48
	1H 07 financial results	49
	AMP Limited – major ASX announcement index for 1H 07	50
	Independent review statement	51

Important note

This Investor Report provides financial information reflecting 100% shareholder attributable after income tax results from an operational perspective. The principles of life insurance accounting are used in reporting the results of AFS. Information is provided on an operational basis (rather than statutory basis) to reflect a management view of the businesses and existing structures. Content is prepared using external market data and internal management information useful for investors. This Investor Report is not audited. In preparing the Investor Report management has had its external auditors, Ernst & Young, prepare a review report in relation to specific matters pertaining to the information presented herein for management’s purposes. This report has been included in the document for the information of readers, however has been prepared solely for management and may not be relied upon by any party other than the management of AMP Limited.

All results have been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), except for comparatives prior to 2004, which are on an AGAAP basis.

Forward looking statements in this Investor Report are based on management’s current views and assumptions and involve known and unknown risks and uncertainties, many of which are beyond AMP’s control and that could cause actual results, performance or events to differ materially from those expressed. These forward looking statements are not guarantees or representations of future performance.

This Investor Report is not an offer document and therefore has not been the subject of a full due diligence process typically used for an offer document. While AMP has sought to ensure that information in this Investor Report is accurate by undertaking a review process, it makes no representation or warranty as to the accuracy or completeness of any information or statement in this Investor Report. In particular, information and statements in this Investor Report do not constitute investment advice or a recommendation on any matter.

AMP also provides prescribed statutory reporting under the Corporations Act 2001. Those accounts will be available from AMP’s website www.amp.com.au and reflect policyholder and shareholder interests.

2 AMP AMP Investor Report 1H 07

1H 07 highlights

Strategic priorities

AMP is focused on running the business better than ever before, capturing scale benefits from volume and market growth, sustaining its lowest unit cost position in the industry and pursuing strong growth in its core businesses

Results against five key performance measures

Underlying RoE increased to 38.7% in 1H 07, up 12.1 percentage points on 1H 06

Operating earnings grew by 35% to A$460m. Earnings in AMP’s open businesses increased 21%, including contemporary wealth management (up 25%), contemporary wealth protection (flat), New Zealand (up 4%) and AMPCI (up 42%). In the closed businesses, AFS mature grew 3% and Cobalt/Gordian earnings more than quintupled with very favourable claims experience in the period

Value metrics (3% discount margin)

AFS value of new business (VNB) rose by 30% on 1H 06 to A$215m

AFS embedded value (EV) rose by 12.4% in the half year, before transfers

Cost to income ratio fell by 3.6 percentage points to 36.5%. Controllable costs increased by 7% to A$439m; excluding AMPCI, costs increased by 2%

Investment performance – 76% of AUM met or exceeded their benchmarks over the year to June 2007

Profit overview

Underlying profit (which smoothes out the effect of investment market volatility) increased 27% to A$534m notwithstanding lower investment income due to capital management initiatives

Profit attributable to shareholders of AMP Limited before accounting mismatches was A$561m, up 32% from 1H 06

Cashflows and AUM

AFS net cashflows were A$2.4b in 1H 07. Net cashflows, excluding large corporate superannuation mandate transfers, grew 75%

Persistency was down 1.7 percentage points to 83.0% in 1H 07

AFS AUM grew 8% to A$82.3b and AMPCI AUM grew by 6% to A$111.6b in the half year

Capital management and dividend

Interest cover (underlying) increased from 15.2 times in FY 06 to 18.4 times

Gearing on an S&P basis fell from 12% at end 2006 to 8% in June 2007

Capital of A$750m (A$0.40 a share) was returned to shareholders on 19 June 2007

Dividend of 22 cps (85% franked) was declared for 1H 07, an increase of 3 cps over 1H 06

AMP AMP Investor Report 1H 07

3

Key performance measures

Return on equity (RoE – underlying)

Operating earnings

Controllable costs (A$m) and cost to income ratio (%)

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%
40
35
30
25
20
15
10
1H 04 1H 05 1H 06 1H 07
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A$m

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500
440
380
320
260
200
1H 04 1H 05 1H 06 1H 07
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% A$m
45 450
43 425
41 400
39 375
37 350
35 325
1H 04 1H 05 1H 06 1H 07
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• Underlying RoE rose to 38.7% in 1H 07

• Operating earnings were up 35% (A$118m) in 1H 07

• Cost to income ratio improved from 40.1% in 1H 06 to 36.5% in 1H 07

• Controllable costs increased by 7% in 1H 07

Value of new business (VNB)

Return on embedded value

(RoEV) – before transfers

Percentage of funds meeting or exceeding benchmark

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A$m
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250
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200
150
100
50
0
1H 04 1H 05 1H 06 1H 07
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• AFS value of new business was up 30% to A$215m in 1H 07

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%
15
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% Jun-07 Dec-06
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100 99%
95% 96%
93%
86%
83%
80 78%
10 74% [76%] 76% Target
71% 75%
64%
60
5
40
0 20
1H 04 1H 05 1H 06 1H 07 Listed assets Infrastructure Private equity Property Future Directions funds Total
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• 76% of AUM met or exceeded their benchmarks in the year to June 2007

• AFS RoEV was 12.4% in 1H 07

4 AMP AMP Investor Report 1H 07

Financial summary

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Proft and loss
Australian contemporary wealth management	145	116	128	244	25.0
Australian contemporary wealth protection	59	59	62	121	-
Australian mature	95	92	98	190	3.3
New Zealand	24	23	29	52	4.3
AMP Financial Services	323	290	317	607	11.4
AMP Capital Investors	78	55	60	115	41.8
Cobalt/Gordian	78	15	52	67	420.0
BU operating earnings	479	360	429	789	33.1
Group Offce costs	(19)	(18)	(19)	(37)	5.6
Total operating earnings	460	342	410	752	34.5
Underlying investment income	90	99	85	184	(9.1)
Interest expense on Group debt	(26)	(31)	(32)	(63)	(16.1)
Cobalt/Gordian fair value provision release1	10	10	10	20	-
Underlying proft	534	420	473	893	27.1
Investment income market adjustment	29	1	76	77	n/a
Proft after income tax before other items	563	421	549	970	33.7
Employee defned beneft schemes	3	2	3	5	n/a
Fair value adjustments	(4)	3	(1)	2	n/a
Other items	(1)	(2)	1	(1)	n/a
Proft attributable to shareholders of AMP
Limited before accounting mismatches2	561	424	552	976	32.3

1 The Cobalt/Gordian fair value provision was written down by A$10m to A$182m reflecting the continued run down in claim liabilities. Pending continued satisfactory run-off of the book, the provision is likely to amortise by A$20m per annum for the next four years.

2 Before accounting mismatches of A$91m (FY 06 A$61m), details of which are contained in the AMP Limited Financial Report for the half year ended 30 June 2007.

Movement in underlying profit 1H 06 to 1H 07

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600
9 5
63
(1) 534
500
23 33% up on
0 3 1 comparable 1H 06
420
400 (18) 402 29
300
200
100
1H 06 underlying Loss of investment income from capital profit return in 1H 06Comparable 1H 06 to 1H 07 underlying profitContemporary wealth managementContemporary wealth protection Mature New Zealand AMPCI Cobalt/Gordian Underlying investment incomeGroup Office costsInterest expense on Group debt1H 07 underlying profit
A$m
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AMP AMP Investor Report 1H 07

5

Financial summary cont’d

		1H 07	1H 06	FY 06
Earnings
EPS – underlying (cps)		28.5	22.4	47.7
EPS – actual (cps)		30.0	22.6	52.1
RoE – underlying		38.7%	26.6%	31.0%
RoE – actual		40.8%	26.7%	33.7%
Underlyinginvestment income as apercentage of underlying profit		17%	24%	21%
Dividend per share (cps)		22	19	40
Dividend payout ratio – underlying		77%	85%	84%
Ordinary shares on issue (m)1		1,874.9	1,874.9	1,874.9
Weighted average number of shares on issue (m)1	– basic	1,874.9	1,873.3	1,873.3
	– fully diluted	1,882.2	1,876.8	1,884.2
Market capitalisation – endperiod (A$m)		18,974	17,118	18,936
Capital management
Group debt (excluding operational debt) (A$m)		1,061	1,291	961
Book gearing – debt/(debt + equity)		33%	34%	26%
S&P gearing		8%	29%	12%
Interest cover – underlying (times)		18.4	14.6	15.2
Interest cover – actual (times)		20.2	15.4	16.4
EV and VNB
EV after transfers – AFS (3% dm) (A$m)2,3		7,722	6,909	7,277
Return on EV – AFS (3% dm)3		12.4%	11.2%	26.6%
VNB – AFS (3% dm) (A$m)3		215	165	367
Cashflows and AUM
AFS cash inflows (A$m)		8,811	7,730	13,744
AFS cash outflows (A$m)		(6,398)	(4,887)	(10,226)
AFS net cashflows (A$m)		2,413	2,843	3,518
AFS persistency		83.0%	84.7%	84.3%
AFS AUM – externally managed (A$b)		18	14	16
AFS AUM – AMPCI managed (A$b)		64	57	60
AMPCI net cashflows – internal (A$m)		(1,037)	(421)	(1,194)
AMPCI net cashflows – external (A$m)		1,261	1,144	2,416
AMPCI AUM (A$b)		112	96	106
Investment performance
Percentage of funds meetingor exceedingbenchmark4		76%	84%	78%
Controllable costs and cost ratios
Operating costs (A$m)		410	386	793
Project costs (A$m)		29	26	58
Total controllable costs (A$m)		439	412	851
Cost to income ratio		36.5%	40.1%	39.4%
Controllable costs to AUM		0.70%	0.77%	0.76%
Staff numbers
AFS5		2,042	2,343	2,350
AMPCI5,6		798	753	770
Cobalt/Gordian		85	100	91
GroupOffice5		915	380	437
Total		3,840	3,576	3,648

1 Number of shares has not been adjusted to remove treasury shares.

2 1H 07 after transfers of A$456m (FY 06 A$1,152m).

4 Performance figures are on a 12 month rolling basis for total AUM (1H 06 based on Australian AUM).

3 Comparatives restated for methodology and modelling changes, including 5 In 1H 07, 408 FTEs transferred from AFS and 31 transferred from AMPCI to recurring contributions methodology. Group Office, representing the centralising of IT support.

• 6 1H 07 includes 224 shopping centre FTEs; however, the costs of these FTEs are recharged to shopping centres.

AMP AMP Investor Report 1H 07

6

Strategic overview

Overview

The drivers of AMP’s business model - brand, scaleable platform, distribution, cost efficiency, asset management and investment packaging capability - power a simple focused strategy to run the business better than ever before.

These drivers, combined with an increasingly constructive culture, a focused technology enhancement program, a strong and improving risk management framework and tight capital management have enabled AMP to capitalise on its strong competitive position in a high growth sector to deliver improving results for its shareholders.

AMP believes it can continue to deliver top quartile returns for its shareholders well into the future, as laid out in the medium term goal.

Performance

AMP’s short term performance goals are focused on growing return on equity, operating earnings and value, continued tight cost management and above benchmark investment performance. Short term incentive plans for all employees are aligned with these performance goals (KPIs).

Performance against these KPIs has been strong:

• underlying RoE up to 38.7%

• operating earnings up 34.5%

• EV up 12.4% in the half year and VNB up 30.3% on 1H 06

• cost ratio down to new low of 36.5%

• 76% of AUM at or exceeding benchmark.

AMP’s capital position and balance sheet remain strong. Underlying interest cover is now 18.4 times and S&P gearing is at 8%.

AFS

AFS is comprised of contemporary businesses - wealth management, wealth protection, and New Zealand and a closed mature business.

The AFS business strategy is to be the leading provider of financial advice, delivering competitive products at the lowest unit cost. Compared to 1H 06, in 1H 07 the business delivered:

• an 11.4% increase in operating earnings

• a 1.8 percentage point reduction in the cost to income ratio to 34.3%

• a 10.3 percentage point increase in RoBUE to 49.8%

• net cashflows of A$2,413m.

Contemporary wealth management profits grew by 25% over 1H 06, and now comprise 45% of total AFS operating earnings. Mature profits now account for less than 30% of AFS operating earnings.

For more information on the AFS result, see pages 10 to 29.

AMPCI

AMPCI is a broadly based funds management business, providing in-house and packaged products, through Australian, New Zealand and Asian distribution channels. Compared to 1H 06, in 1H 07 the business:

• grew operating earnings 41.8% to A$78m

• reduced its cost to income ratio 3.8 percentage points to 51.4%

• 77% of Australian AUM and 62% of NZ AUM met or exceeded benchmarks

• increased RoBUE by 11.6 percentage points to 71.6%.

AMPCI’s external business continues to grow strongly, contributing 51% of the business’ management fee income. Net cashflows in the period were largely sourced from Asia and the Australian retail market, underlining a broadening in distribution capability.

For more information on AMPCI, see pages 30 to 37.

Cobalt/Gordian

Cobalt/Gordian is focused on achieving a profitable run-off of AMP’s remaining books of general insurance business while maximising returns to shareholders. Cobalt/Gordian produced abnormally large operating earnings in 1H 07 driven by the successful resolution of a series of claims.

Earnings of A$78m compared with earnings of A$15m in 1H 06. Capital has continued to be released from the business. Since 1999, gross claim liabilities have been reduced from A$2.6b to A$0.6b.

For more detail on the Cobalt/Gordian result, see page 38.

Capital management

The AMP capital management strategy has focused on reducing capital intensity – through growing the low capital intensity contemporary wealth management and asset management businesses; achieving sustained out performance in managing the assets of the mature business while simultaneously derisking that business through a range of initiatives; developing sophisticated monitoring systems and sensitivity modelling to improve risk/return trade-offs; generating superior returns on capital employed; and returning excess capital to shareholders.

The success of this strategy has manifested itself in a high and rising RoE, three capital returns (2005, 2006 and 2007) returning a total of A$2.25b and a higher dividend payout ratio.

AMP’s surplus capital position has reduced significantly but remains above its target range post the 2007 return of capital due to strong operating earnings, sharemarkets and investment out performance in 1H 07.

Future capital initiatives are likely to be less frequent and/or significantly smaller in scale. Initiatives will continue to be framed against the objective to maintain the Group’s ”A” range credit rating.

The capital strategy is now focusing on optimising AMP’s capital mix.

The target franking and dividend payout ratios are 85% of underlying profit. The 1H 07 dividend of 22 cps is up from 19 cps in 1H 06. The 22 cps dividend represents a 77% payout ratio, lower than the 85% policy guideline due to the Board's recognition of the abnormally large earnings contribution from Cobalt/Gordian.

AMP AMP Investor Report 1H 07

7

Strategic overview cont’d

Evergreen goal to double the value of an investment in AMP every 5 years

Background

AMP’s original medium term goal to double the value of an investment in AMP between mid 2005 and mid 2010 was upgraded at the 1H 06 result to be achieved by 2009.

On current performance the goal will be achieved in advance of that upgraded assumption. For this reason AMP has moved to an evergreen medium goal – to double the value of an investment in AMP every 5 years.

The goal implies average growth across the cycle of around 15% pa, including dividends and capital returns paid out to shareholders and increases in enterprise value[1] .

Performance to date against current cycle of the medium term goal

The group’s value as defined in the medium term goal has grown 85% in the period from June 2005 to June 2007 from A$11.6b to A$21.4b. This compares to 81% TSR based on the actual share price.

Growth over the past 6 months was 19.5%, from A$17.9b to A$21.4b. Growth in the half came from combined dividends paid of A$394m, a capital return of A$750m and a total A$2.4b uplift in valuation from the major stockbroking analysts.

The median valuation at 30 June 2007 included A$15.7b for AFS, A$3.2b for AMPCI, A$0.7b for Cobalt/Gordian and nil for Group Office. Group debt of A$961m is subtracted to arrive at the Group’s median valuation of A$18.6b (A$9.94 a share).

Underlying assumptions

The medium term goal was released to provide the market with an understanding of management’s desired future performance targets.

The strategic plan for AMP is based on a goal to run the business such that, across the cycle, the value of an investment in the company doubles every five years.

The AMP strategic plan contains the following assumptions around markets, volumes, costs and margins:

• equity markets growth of around 6% pa net of dividends

• realising scale benefits from volume and market growth of 10% pa in the retirement savings and 18% in the post retirement sectors[2]

• group-wide costs growth around cost of living type increases per annum

• actively managing revenue margin contraction of circa 2-3% pa in the AFS contemporary wealth management business driven by changes to business mix, increases in average AUM balances and infrequent, strategic repricing initiatives.

Expectations of key performance metrics

AMP intends to deliver at or above system growth with expectations for key metric trends as follows:

• return on equity – strong trend improvement

• value metrics – overall growth of 15% pa

• operating earnings – double digit growth pa

• cost ratio – continuing trend reduction

• investment performance – 75% of AUM > benchmark.

Summary

AMP today is a low capital intensity, high return, high growth wealth management group. The group intends to continue to leverage scale benefits as it grows volumes, drive ongoing unit cost reductions and manage expected reductions in revenue margins to achieve well above average growth in shareholder value over the cycle.

Movement in value of an investment in AMP, June 2005 to June 2007

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25
2.4 23.2
20 21.4
10 0.7
0.4
17.9
15
600
11.6
10
400
2005
0
Opening value – Jun 05 0 Opening value – Dec 06 Dividends Capital return – 1H 07 Valuation uplift Closing value – Jun 07 2009 goal
A$b
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• 1 Enterprise value is measured by calculating the median of the major stockbroking analyst valuations of AMP in each year, beginning June 2005. At June 2005, the median valuation was A$11.6b.

• 2 Trowbridge Deloitte July 2007 report, commissioned by AMP.

8 AMP AMP Investor Report 1H 07

Sensitivities – profit and capital

FY 07 profit sensitivities (A$m)	Operating earnings	Investment income	Total
Economic variables - AMP Financial Services and AMP Capital Investors combined
5% increase in Australian equities	10	16	26
5% increase in international equities	5	16	21
5% decrease in Australian equities	(10)	(15)	(25)
5% decrease in international equities	(5)	(15)	(20)
1% (100 bps) decrease in 10 year Australian bond yields	(5)	13	8
Business variables
AMP Financial Services
5% increase in AUM	24
5% increase in sales volumes	6
1% increase in persistency	1
AMP Capital Investors
5% increase in average external AUM	5
5% increase in average internal AUM	6
AMP Limited
5% reduction in controllable costs	31
	Changes in excess over shareholder
30 June 2007 capital sensitivities (A$m)	minimum regulatory requirements (MRR)
Economic variables
AMP Financial Services
10% increase/(decrease) in equities	0
15% increase/(decrease) in equities	0
1% (100 bps) increase/(decrease) in 10 year Australian bond yields	0

Purpose of section

The table above illustrates the potential sensitivity of AMP’s FY 07 profit and end of period capital position, to a series of hypothetical economic and operational performance variables.

Important considerations when using these sensitivities

These sensitivities are only indicative for a variety of reasons covered on page 45 of the definitions section of this document. There are a number of assumptions made which are also outlined in the definitions section.

Profit sensitivities

The analysis is point to point assuming the movement occurs evenly over the year (eg where did the market finish versus where it started).

Capital sensitivities

The analysis is a point in time looking at the capital impact of a movement at the end of the period.

• The regulatory capital sensitivities relate to A$22b of assets backing guaranteed products sitting within the life book, the majority of which are contained within the AFS mature business

• AMP actively manages both the asset mix and the associated capital. Market movements and trends are carefully monitored and adjustments made accordingly. It requires a large sustained movement, as opposed to a brief correction, to materially impair the excess over shareholder MRR.

The impact of investment experience on life margins varies depending on the product, because

• for participating business, profit margins are dependent on the level of future bonuses supported by both the value of available assets and the assumed future investment earnings (largely driven by prevailing bond yields). As the effect of movements in investment markets is absorbed by bonuses over a number of years, only a fraction of the impact is recognised in the current reporting period and is shared between policyholders and shareholders

• for risk and annuity business, movements in asset values impact to the extent that assets and liabilities are mismatched. These impacts are included in investment income market adjustment and have no effect on operating earnings

• for investment linked business, fee income is mainly based on the levels of AUM, which in turn is directly impacted by investment markets.

Shareholder resources capital sensitivities at June 2007

The excess over shareholder MRR was not sensitive to modest movements in the levels of equity markets (up to 15% movement in either direction) and bond yields (a 1% movement in either direction) at June 2007 due to a combination of:

• the strength of assets backing liabilities

• shareholder capital resources being invested conservatively

• the company considers the actual performance of market versus its actuarial expectations prior to finalising decisions around bonuses to policyholders. Bonuses are typically determined at the end of the financial year.

AMP AMP Investor Report 1H 07

9

Five year summary

		1H 07	1H 06	1H 05	1H 04	1H 03
Total operating earnings (A$m)		460	342	297	245	234
Underlying investment income as a percentage of	underlying profit	17%	24%	26%	39%	36%
Underlying profit (A$m)		534	420	392	309	258
Profit attributable to shareholders of AMP Limited before accounting mismatches (A$m)		561	424	397	370	371
EPS – underlying (cps)		28.5	22.4	21.1	16.7	20.9
– actual (cps)		30.0	22.6	21.3	21.6	30.1
RoE – underlying		38.7%	26.6%	22.9%	21.0%
– actual		40.8%	26.7%	22.5%	26.2%
Dividend per share (cps)		22	19	14	13	7
Dividend payout ratio – underlying		77%	85%	67%	77%	41%
Ordinary shares on issue (m)		1,874.9	1,874.9	1,865.2	1,854.9	1,419.6
Weighted average number of shares on issue (m)	– basic	1,874.9	1,873.3	1,862.0	1,848.7	1,233.3
	– fully diluted	1,882.2	1,876.8	1,868.7	1,853.6	1,235.7
Share price for the period (A$)	– low1	9.48	7.36	6.06	4.29	4.77
	– high1	10.56	9.44	7.45	6.36	11.64
Return on embedded value – AFS (3% dm)2		12.4%	11.2%	11.1%	9.3%	5.8%
Value of new business – AFS (3% dm) (A$m)2		215	165	134	125	100
Financial position
AMP shareholder equity (A$m)		2,173	2,507	2,851	3,077	7,025
Group debt (excluding operational debt) (A$m)		1,061	1,291	1,291	1,553	4,487
Book gearing – debt/(debt + equity)		33%	34%	31%	34%	39%
Interest cover – underlying (times)		18.4	14.6	10.6	5.9	3.5
Interest cover – actual (times)		20.2	15.4	12.6	6.9	3.0
Assets under management (AUM)
Assets under management – internally managed (AMPCI) (A$b)		112	96	84	73	70
Assets under management – externally managed (A$b)		18	14	12	10	8
Total assets under management (A$b)		130	110	96	83	78
Investment performance – AMPCI
Percentage of funds meeting or exceeding benchmark – Australian AUM3		77%	84%	83%	81%
Percentage of funds meeting or exceeding benchmark – total AUM3		76%
Persistency – AFS		83.0%	84.7%	85.2%	84.3%	82.5%
Cost to income ratio – AMP		36.5%	40.1%	41.9%	43.9%	46.5%
Controllable costs to AUM		0.70%	0.77%	0.84%	1.01%	1.01%
Controllable costs – AMP (A$m)		439	412	392	399	397
Staff numbers
AFS4,5		2,042	2,343	2,355	2,792	3,339
AMPCI5,6		798	753	746	663	820
Cobalt/Gordian		85	100	110	119	160
GroupOffice5		915	380	355	109	189
Demerged AMP staff numbers		3,840	3,576	3,566	3,683	4,508
Businesses previously owned by AMP7		-	-	-	-	4,262
Total staff numbers		3,840	3,576	3,566	3,683	8,770

NOTE: 1H 03 has not been restated for AIFRS.

• 1 In each of June 05, 06 and 07, A$0.40 per share was returned to shareholders. The high share price for 1H 03 relates to AMP pre-demerger.

• 2 1H 06 restated for methodology and modelling changes, including recurring contributions methodology.

3 Performance figures are on a 12 month rolling basis.

• 4 Excludes non-salaried planners.

• 5 In 1H 07, 408 FTEs transferred from AFS and 31 FTEs transferred from AMPCI to Group Office, representing the centralising of IT support.

• 6 Includes 224 (1H 07) shopping centre FTEs; however, the costs of these FTEs are recharged to shopping centres.

• 7 AMP International, AMP General Insurance and HHG FTEs.

10 AMP Financial Services AMP Investor Report 1H 07

Australian contemporary wealth management

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Profit and loss1
Revenue
AUM related	493	420	443	863	17.4
Other2	87	80	87	167	8.8
Total revenue	580	500	530	1,030	16.0
Controllable costs	178	175	184	359	1.7
Variable costs3	197	159	170	329	23.9
Tax expense	60	50	48	98	20.0
Operating earnings	145	116	128	244	25.0
Underlyinginvestment income4	15	14	14	28	7.1
Underlying operating profit after income tax	160	130	142	272	23.1
RoBUE5	49.0%	37.6%	39.2%	38.2%	n/a
End period tangible capital resources (A$m) – after transfers6	532
VNB (3% dm) (A$m)7	144	110	123	233	30.9
EV - after transfers (3% dm) (A$m)7	3,765	3,274	3,538	3,538	n/a
Return on EV (3% dm)7	13.8%	10.4%	17.9%	29.5%	n/a
Net cashflows (A$m)	2,964	3,309	1,144	4,453	(10.4)
AUM (pre-capital) (A$b)	55.4	44.7	49.8	49.8	23.9
Average AUM (including capital) (A$b)	53.0	43.1	47.4	45.2	23.0
Persistency	80.9%	83.1%	82.8%	82.1%	n/a
Persistency (excluding major internal flows)	88.3%	89.4%	89.7%	89.0%	n/a
Cost to income ratio8	43.8%	48.5%	47.4%	48.0%	n/a
AUM related revenue to AUM9	1.86%	1.95%	1.87%	1.91%	n/a
Variable costs to AUM9,10	0.66%	0.65%	0.63%	0.64%	n/a
Controllable costs to AUM9,10	0.58%	0.70%	0.67%	0.69%	n/a
Operatingearnings to AUM9,11	0.53%	0.52%	0.52%	0.52%	n/a

• 1 Contemporary wealth management business comprises: retail superannuation, corporate superannuation, retail investment, allocated pensions/annuities, fixed term annuities, external platforms (see page 19), AMP Banking and Financial Planning, Advice & Services.

• 2 Other revenue includes AMP Banking revenue (net interest income and fees) and product and platform fees received by Financial Planning, Advice & Services from mature and wealth protection.

• 3 Variable costs include costs that vary directly with the level of related business (planner fees and commissions, investment management fees, banking securitisation costs and commissions).

• 4 Refer to page 41 for details on wealth management underlying investment income.

• 5 RoBUE is based on monthly average capital numbers excluding intangibles.

• 6 Capital reallocated on 30 June 2007. See page 40 for details. Contemporary wealth management capital includes A$166m of AMP Banking capital.

• 7 Comparatives restated for methodology and modelling changes, including recurring contributions methodology.

• 8 Refer to page 44 for cost to income definition.

• 9 Based on monthly average AUM including capital.

• 10 Costs in this ratio exclude AMP Banking costs.

• 11 Operating earnings exclude AMP Banking. Comparatives have been restated to exclude AMP Banking operating earnings.

Movement in operating earnings 2H 06 to 1H 07

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AMP Financial Services AMP Investor Report 1H 07 11

Australian contemporary wealth management cont’d

Wealth management

The contemporary wealth management business is focused on optimising the opportunities arising from strong market growth in financial planning, superannuation and pensions, driving growth in AUM and revenues, while maintaining tight cost control.

The key priorities are:

• Distribution

• advice channel – improve planner productivity and the quality of the advice experience; grow planner numbers over the medium term

• direct channel – capitalise on the downstream opportunities arising from corporate superannuation business inflows and other customer contact.

• Customers

• increase customer advocacy.

Variable costs

Variable costs grew 23.9% on 1H 06 to A$197m.

The variable cost line includes costs that vary directly with business volumes such as planner fees and commissions, investment management fees and banking securitisation costs and commissions.

Planner fees and commissions, a key component of the variable cost base, grew faster than AUM towards the end of the half due to a significant portion of the cashflows coming in at the end of June. This effectively created a timing difference as the cost of taking on the flows occurs prior to the increase in average AUM (this had an inverse impact on gross revenues).

Payments to planners increased significantly during the half due to large retail inflows. Conversely, the licensee advice margin (or the proportion of payments to planners retained by AMP) as a proportion of AUM declined as more planners reached AUM levels at which discounts to licensee advice margin apply. The licensee advice margin is treated as a negative variable cost.

• Products

• manufacture contemporary products ensuring the cost of production is the lowest in the market.

Net revenue margins

Net revenue margins (AUM related revenue less variable cost to AUM ratio) declined 4 bps to 1.20% during the half from 1.24% in 2H 06.

• Efficiency

• drive lower unit costs and achieve ongoing capital efficiencies.

Operating earnings

Operating earnings increased by A$29m (25%) to A$145m in 1H 07. Operating earnings to AUM improved marginally to 53 bps with unit costs declining at a significantly faster rate than revenue margins.

Gross revenue margins

There are 3 major factors that impact AUM related revenue margins in any given period – product mix effects, rising average AUM balances and repricing initiatives. There were no repricing initiatives during the first half. As of 1 July 2007, AFS instituted price reductions for retail customers with balances above A$1m and A$1.5m. The financial impact of these pricing changes is insignificant.

To reward loyalty, when a customer’s aggregate balance reaches various levels (eg A$0.1m, A$0.5m, A$1m, A$1.5m), it triggers a fee rebate for their entire balance. As more customers increase their total business with AMP it impacts margins. At A$0.1m the rebate is 0.40% pa of the total account balance, at A$0.5m 0.60%, at A$1m 0.75% and at A$1.5m 0.85%. The changes for rebates for A$1m and A$1.5m apply from 1 July 2007.

Gross revenue margins (AUM related revenue to AUM) declined 1 bp during the half from 1.87% in 2H 06 to 1.86% in 1H 07. Margin reduction from rising average AUM balances was offset by higher planner fees arising from higher levels of cash inflows and the correction in 2H 06 of a small overstatement in 1H 06.

Average AUM rose 23% in 1H 07. The average retail superannuation balance per member was 16% higher than for 1H 06.

Guidance for gross revenue trends remains in place – that being a 2 to 3% pa decline per annum across the cycle.

Other revenue

Other revenue includes AMP Banking revenue (net interest income and fees) and product and platform fees paid to Financial Planning, Advice & Services from mature and contemporary wealth protection.

Growth in other revenue over 1H 06 is primarily driven by AMP Banking (up 8.5%), and contemporary wealth protection product and platform fees to Financial Planning, Advice & Services (up 12%).

AMP Banking operating earnings contributed A$4.1m to contemporary wealth management operating earnings in 1H 07 compared to A$2.9m in 1H 06.

Controllable costs

The cost to income ratio improved by 4.7 percentage points to 43.8% in 1H 07 while controllable costs to AUM fell 12 bps from 0.70% in 1H 06 to 0.58% in 1H 07.

Total controllable costs increased by A$3m to A$178m. Absolute cost reductions in some parts of the contemporary wealth management business have been used to fund a number of distribution initiatives, including those focused on improving planner productivity.

Cashflows and persistency

Cashflows and persistency commentary is on pages 19 to 21.

Embedded value and value of new business

AMP has now included recurring contributions in its value metrics and only reports on a traditional basis.

EV grew 13.8% at the 3% discount margin during the half before 1H 07 transfers.

VNB at the 3% discount margin was A$144m, an increase of 31% compared to 1H 06.

The EV and VNB methodologies are explained on page 26 and in a separate section on page 27 there is specific discussion of the contribution to value made by the change to recurring contributions.

12 AMP Financial Services AMP Investor Report 1H 07

Australian contemporary wealth protection

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Profit and loss1
Profit margins	57	49	58	107	16.3
Experience profits	2	10	4	14	(80.0)
Operating earnings	59	59	62	121	-
Underlying investment income	21	17	18	35	23.5
Underlying operating profit after income tax	80	76	80	156	5.3
RoBUE2	29.3%	28.2%	30.0%	29.1%	n/a
End period tangible capital resources (A$m) – after transfers3	524
VNB (3% dm) (A$m)4	40	24	40	64	66.7
EV - after transfers (3% dm) (A$m)4	1,600	1,461	1,536	1,536	n/a
Return on EV (3% dm)4	9.5%	13.6%	12.7%	27.3%	n/a
Individual risk annual premium income (A$m)	433	403	429	429	7.4
Group risk annual premium income (A$m)	134	129	127	127	3.9
AUM (pre-capital) (A$b)5	1.7	1.7	1.7	1.7	-
Individual risk lapse rate	10.0%	9.6%	10.2%	9.9%	n/a
Operating earnings/annual premium income6	20.9%	22.6%	22.6%	22.6%	n/a
Controllable costs (A$m)	33	31	34	65	6.5
Cost to income ratio7	22.5%	22.2%	22.8%	22.5%	n/a
Controllable costs/annual premium income6	11.8%	12.1%	12.2%	12.1%	n/a

1 Contemporary wealth protection includes individual risk, group risk and lifetime annuities.

2 RoBUE is based on monthly average capital numbers excluding intangibles.

5 Relates to lifetime annuities.

6 Based on average annual premium income.

7 Refer to page 44 for cost to income ratio definition.

3 Capital reallocated on 30 June 2007. See page 40 for details.

4 Comparatives restated for methodology and modelling changes.

Movement in operating earnings 1H 06 to 1H 07

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AMP Financial Services AMP Investor Report 1H 07 13

Australian contemporary wealth protection cont’d

Wealth protection

Individual risk protection is a core component of AMP’s contemporary advice proposition with 41% of in-force business and 75% of sales written within a superannuation contract. Group risk is a key component of the corporate superannuation offer.

Key priorities for the contemporary wealth protection business are:

• grow market share of our in-force book whilst only writing profitable business

• increase the proportion of business sold through superannuation

• ensure the AMP product and service proposition remain market leading

• improve the ease and profitability of writing AMP risk for planners

• improve operational leverage

• strong claims management processes built on a philosophy of paying all genuine claims.

Operating earnings

Operating earnings were in line with 1H 06:

• reduced pricing of term products resulted in a reduction of A$2m

• experience profits reduced by A$3m.

Offset by:

• change to the MoS profit carrier detailed below of A$4m

• A$1m from growth of the book.

Income protection claims experience worsened during the half compared to 1H 06 driven by higher claims, in particular for larger policies.

Annual premium income (API)

Individual risk API grew A$4m over 2H 06. Three factors influenced API growth. New business volumes grew 18% to A$18m (largely from growth in transfers from corporate superannuation), lapses grew 11% to A$25m (see detail in section below) and age related/CPI increases totalled A$11m.

AMP API typically grows much faster during the second half of the year as CPI and age price increases for business within superannuation occur on 1 July each year. These increases represent approximately A$15m of API.

Change to MoS profit carrier

During the period the MoS profit carrier for individual risk was changed from claims to premiums which is more consistent with general industry practice. The impact on the prior period result of the change in methodology was not material (increase of A$4m), therefore no restatement of the prior period has been made.

Lapse rates

AMP has lapse rates amongst the lowest in the industry. Individual lapse rates improved slightly compared to the end of 2006.

Transfers from corporate superannuation plans, as members change employment, have become a bigger influence on contemporary wealth protection lapse rates, in particular transfers from Custom Super. Apart from lowering API, lapses of corporate super transfers do not impact profit more broadly as they carry no acquisition cost.

Return on capital

RoBUE increased slightly to 29.3% from 28.2% in 1H 06.

Embedded value and value of new business

EV increased 9.5% (at the 3% discount margin) in the half before transfers.

The increase was driven by product and pricing changes including A$32m from income protection premium increases and A$14m arising from an increase in the minimum CPI rise for term assurance.

VNB increased 67% to A$40m in 1H 07 compared to A$24m in 1H 06. The majority of the increase was driven by increases in transfers from corporate superannuation (A$15m).

Pricing and product features

AMP seeks to price risk products at market median. Product features are revisited to keep pace with the market but are only enhanced where it is economic to provide increased cover.

As stated above, term product prices were reduced in January 2007 and a price increase in income protection was introduced on 1 July 2007 taking effect from the next policy anniversary.

Business improvement programs

Writing risk insurance across the industry has traditionally involved significant paperwork and follow up, driving a relatively high cost to serve for financial planners and a poor customer experience.

As part of broader productivity initiatives, AMP is acting to overcome these barriers using automated underwriting, online lodgment, automatic acceptance for small business plans, product enhancements and improved medical limits.

The focus of our business improvement programs is to make it easier and more profitable for planners to write business with AMP without reducing AMP’s business quality controls, particularly underwriting criteria.

The full program of improvements is being progressively rolled out through 2007, with completion toward the end of the year.

Under the old methodology profit margins were set as a % of expected claims, whereas now they are set as a % of premiums.

14 AMP Financial Services AMP Investor Report 1H 07

Australian mature

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Profit and loss
Profit margins	93	87	91	178	6.9
Experience profits	2	5	7	12	(60.0)
Operating earnings	95	92	98	190	3.3
Underlying investment income	5	8	6	14	(37.5)
Underlying operating profit after income tax	100	100	104	204	-
RoBUE1	201.1%	82.5%	155.1%	112.3%	n/a
End period tangible capital resources (A$m) – after transfers2	74
VNB (3% dm) (A$m)3	20	20	12	32	-
EV - after transfers (3% dm) (A$m)3	1,708	1,654	1,605	1,605	n/a
Return on EV (3% dm)3	14.0%	15.8%	8.8%	24.7%	n/a
Net cashflows (A$m)	(614)	(564)	(572)	(1,136)	(8.9)
AUM (pre-capital) (A$b)	18.9	18.2	18.7	18.7	3.8
Operating earnings to AUM4	1.00%	0.99%	1.06%	1.02%	n/a
Persistency	87.6%	87.7%	88.8%	88.1%	n/a
Controllable costs (A$m)	33	30	30	60	10.0
Cost to income ratio	19.0%	17.4%	16.9%	17.1%	n/a
Controllable costs to AUM4	0.35%	0.32%	0.32%	0.32%	n/a

1 RoBUE is based on monthly average capital numbers excluding intangibles.

2 Capital reallocated on 30 June 2007. See page 40 for details.

3 Comparatives restated for methodology and modelling changes.

4 Based on monthly average AUM including capital.

Movement in operating earnings 1H 06 to 1H 07

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AMP Financial Services AMP Investor Report 1H 07 15

Australian mature cont’d

Business overview

AMP’s mature business is the largest closed life business in Australia with AUM of A$18.9b at 1H 07. Management remains focused on maintaining capital efficiency and improving business persistency while continually striving for greater cost efficiency.

Mature AUM increased 3.8% from 1H 06 reflecting strong investment markets and high rates of persistency. Higher AUM contributed in part to the A$614m net cash outflow in 1H 07.

Operating earnings

Operating earnings increased by A$3m (3.3%) from A$92m in 1H 06 to A$95m in 1H 07.

The movement in operating earnings was attributable to:

• good investment markets and higher bond rates, leading to an increase in profits attributable to shareholders from higher bonuses allocated to policyholders (A$13m)

• persistency improvements (A$3m).

Offset by:

• business run-off (A$6m)

• other (A$7m).

Embedded value and value of new business

RoEV was 14.0% in 1H 07, driven by stronger investment markets, improved persistency assumptions and experience gains.

VNB was stable at A$20m in 1H 07 (at the 3% discount margin), driven primarily by higher volumes offset by higher expenses due to the AFS expense reallocation discussed above.

Product characteristics

The mature product range includes over 40 closed products such as Whole of Life, Endowment, investment linked and investment account products, plus two open products, Retirement Savings Account (RSA) and Eligible Rollover Fund (ERF).

The legacy business services around 0.6m customers and has AUM of A$14.9b while the ERF/RSA products, which are usually the default options for exiting members of other superannuation funds, has approximately 1.5m customers and AUM of A$4.0b.

The mature AUM as at 30 June was A$18.9b. Investment linked products currently have an equity backing ratio (EBR) of 75%, RSA/ERF have an EBR of 12% and the remaining assets have an EBR of 50%. Since 2005 this split has changed little.

The mature AUM supports capital guaranteed products (78%) and market linked products (22%).

Controllable costs

Controllable costs increased by A$3m to A$33m in 1H 07. During the half the AFS business revisited its cost allocation methodology. While traditionally some fixed costs have been allocated on an AUM basis, this has disadvantaged those businesses with rapidly growing AUM. These costs are now allocated proportionally to marginal profit contribution. This reallocation impacted negatively on the total controllable costs line for mature business.

Principally as a result of this cost reallocation, the cost to income ratio for the mature business increased to 19.0% in 1H 07 from 17.4% in 1H 06. Costs as a percentage of AUM rose to 0.35% from 0.32% in 1H 06.

Cashflows

Net cash outflows for the mature business were impacted by higher AUM levels and higher terminal bonus rates in 1H 07 with resulting increased average withdrawal size. Outflows were also impacted by the superannuation changes announced in 2006 which saw some customers opt for early withdrawal from the mature book to transfer to superannuation.

Net outflows increased to A$614m in 1H 07 from A$564m in 1H 06. Gross outflows increased by A$54m (5.2%) from A$1,044m in 1H 06 to A$1,098m in 1H 07 while gross inflows increased by A$4m (0.8%) to A$484m in 1H 07 from A$480m in 1H 06.

Run-off profile

The mature business is in slow decline but is expected to remain profitable for many years to come. It is expected to run-off between 3% to 5% per annum.

Active management of the business (including improvement in retention, rationalisation of product, out performance from active investment management and other efficiency gains) as well as investment market performance may, however, lead to variations in this rate of run-off.

The run-off for AUM mirrors that for the policy liabilities, although there is potential for operating margins to be impacted differently for individual products.

The run-off of the mature book AUM is anticipated to have an average duration of between 15 and 20 years. The profile of the run-off for existing customers in the ERF and RSA products is similar to AMP’s contemporary superannuation products. The key source of new customers for these products is determined by policy decisions of trustees of superannuation schemes. The increasing use of mastertrusts rather than stand-alone corporate schemes means that membership from non-AMP sources is declining.

Return on capital

RoBUE increased to 201.1% in 1H 07 from 82.5% in 1H 06 as a result of significant releases of shareholder capital over the past few years, coupled with strong investment markets.

16 AMP Financial Services AMP Investor Report 1H 07

New Zealand

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Profit and loss
Profit margins	26	22	25	47	18.2
Experience profits (losses)	(2)	1	4	5	n/a
Operating earnings	24	23	29	52	4.3
Underlying investment income	3	3	2	5	-
Underlying operating profit after income tax	27	26	31	57	3.8
RoBUE1	29.8%	23.0%	37.0%	30.0%	n/a
End period tangible capital resources (A$m) – after transfers2	204
VNB (3% dm) (A$m)3,4	11	11	27	38	-
EV - after transfers (3% dm) (A$m)4	649	521	598	598	n/a
Return on EV (3% dm)4,5	7.4%	(3.6%)	20.7%	14.6%	n/a
Net cashflows (A$m)	(31)	10	2	12	n/a
AUM (pre-capital) (A$b)	4.9	4.2	4.6	4.6	16.7
Individual risk annual premium income (API) (A$m)6	101	79	93	93	27.8
Operating earnings/annual premium income7	50.1%	56.6%	67.1%	61.2%	n/a
Lapse rates	7.1%	6.9%	7.0%	6.9%	n/a
Controllable costs (A$m)	29	31	28	59	(6.5)
Cost to income ratio	42.5%	44.4%	37.7%	41.0%	n/a
Controllable costs/annual premium income7	61.9%	76.2%	65.9%	69.8%	n/a

• 1 RoBUE is based on monthly average capital numbers excluding intangibles.

2 Capital reallocated on 30 June 2007. See page 40 for details.

• 3 In NZ dollar terms, VNB has decreased by 12% on 1H 06.

• 4 Comparatives restated for methodology and modelling changes.

5 In NZ dollar terms, return on EV is 5.4%.

• 6 In NZ dollar terms, individual risk annual premium income has increased by 15% over 1H 06.

7 Based on monthly average annual premium income.

Movement in operating earnings 1H 06 to 1H 07

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AMP Financial Services AMP Investor Report 1H 07 17

New Zealand cont’d

Business overview

Currently, operating earnings in the New Zealand business flow primarily from the risk insurance and mature books. This is likely to change over the medium term following legislative changes in New Zealand which are likely to elicit stronger growth in superannuation and managed funds markets.

The key priorities in the NZ business are:

• manufacturing market leading products in risk insurance and workplace savings

• maintaining a strong presence in the savings and investment markets through AMP manufactured and in-sourced products

• building the quality, productivity and number of AMP advisors

• achieving cost and capital efficiencies

• implementing KiwiSaver and the coming Portfolio Investment Entity (PIE) tax changes that will provide the foundation for significant future growth in savings and investment AUM.

Net cashflows decreased by A$41m from a net inflow in 1H 06 of A$10m to a net outflow of A$31m in 1H 07.

The net outflow was due mainly to planned retail fund closures in 1H 07 (as a part of a product rationalisation program), a slow down in new workplace savings mandates due to the introduction of KiwiSaver in 2H 07 and locked in superannuation funds maturing and customers withdrawing their funds.

Cash inflows should improve with no further fund closures planned for 2007, favourable PIE tax changes being implemented in the managed funds market and with KiwiSaver inflows expected following successful tenders with major NZ employers and encouraging preferred provider results.

During the half, 70 new advisors were recruited (including 36 new mortgage advisors added as a result of the Roost acquisition). Roost Mortgage Brokers is one of New Zealand's largest mortgage and investment property finance arrangers. New Zealand announced the acquisition of Roost in April 2007.

Annual premium income (API)

Operating earnings

Operating earnings increased 4% from A$23m in 1H 06 to A$24m in 1H 07. Profit margins growth over 1H 06 was 18%.

The result was driven by:

• growth in the risk life insurance book (A$3m), underpinned by an API increase of 15% (in NZ dollar terms) from 1H 06

• appreciation of the NZ dollar (A$1m)

• lower operational costs.

Offset by:

• lower experience profits (A$3m) mainly due to higher claims than expected.

NZ exchange rate

AMP has a policy that profit and loss items are translated into Australian dollars at the year to date average exchange rate and balance sheet items are translated at a closing rate. The New Zealand dollar (NZ$) appreciated against the Australian dollar in 1H 07. This impacted operating earnings, value metrics, cashflows and AUM for the New Zealand business.

The NZ$ appreciated 3% in 1H 07 against the Australian dollar in average terms and by 11% in closing terms on 1H 06. See page 48.

Controllable costs

The cost to income ratio fell 1.9 percentage points over 1H 06. The decrease in controllable costs of A$2m was attributable to ongoing cost management initiatives in 1H 07.

Annual premium income increased by 15% in NZ dollar terms over 1H 06, reflecting strong retention (7.1% lapse rate) and general growth in the risk book.

Lapse rates

Market leading lapse rates were maintained during the half.

Return on capital

RoBUE was higher in 1H 07 at 29.8%, compared to 23.0% in 1H 06. This reflected lower levels of capital held in the business and higher underlying profit after tax.

Capital allocation

Capital within the AFS business was reallocated at the end of 1H 07. See separate section on page 40. End period tangible capital resources for the New Zealand business were A$204m at 30 June 2007. The increase in capital will modestly impact RoBUE for this business at the full year.

Embedded value and value of new business

Embedded value increased by 7.4% in the half year before transfers at the 3% discount margin, or by 5.4% in NZ dollar terms. This was largely due to expected return and new business.

Value of new business fell 12% in NZ dollar terms from 1H 06 to 1H 07 (at the 3% discount margin), mainly driven by the effect of an increase in the NZ 10 year bond rate.

Cashflows

Savings and investment funds under management grew by 3% in 1H 07 (up 6% from 1H 06).

18 AMP Financial Services AMP Investor Report 1H 07

AMP Financial Services financial summary

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Profit and loss
Profit margins	320	272	305	577	17.6
Experience profits1	3	18	12	30	(83.3)
Operating earnings	323	290	317	607	11.4
Underlying investment income	44	42	40	82	4.8
Underlying operating profit after income tax	367	332	357	689	10.5
Controllable costs and cost ratios
Operating costs	251	244	249	493	2.9
Project costs	23	23	27	50	-
Total controllable costs	274	267	276	543	2.6
Cost to income ratio	34.3%	36.1%	35.1%	35.6%	n/a
Controllable costs to AUM	0.69%	0.78%	0.76%	0.77%	n/a
Return on capital
RoBUE2	49.8%	39.5%	45.7%	42.5%	n/a
End period tangible capital resources (A$m) – after transfers	1,334
EV and VNB
EV – after transfers (3% dm) (A$m)3	7,722	6,909	7,277	7,277	n/a
Return on EV (3% dm)3	12.4%	11.2%	14.8%	26.6%	n/a
VNB (3% dm) (A$m)3	215	165	202	367	30.3
AUM, persistency and risk annual premium income (API)
AUM (pre-capital) (A$b)	80.9	68.8	74.8	74.8	17.3
Persistency	83.0%	84.7%	84.5%	84.3%	n/a
Australian individual risk API (A$m)	433	403	429	429	7.4
New Zealand risk API (NZ$m)	110	96	104	104	14.6

1 Includes contemporary wealth management experience.

2 RoBUE is based on average monthly capital numbers excluding intangibles.

• 3 Comparatives restated for methodology and modelling changes, including recurring contributions methodology.

Movement in operating earnings 1H 06 to 1H 07

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AMP Financial Services AMP Investor Report 1H 07 19

Cashflows and assets under management (AUM)

		Cash inflows			Cash outflows		Net	cashflows
	1H 07	1H 06	1H/1H	1H 07	1H 06	1H/1H	1H 07	1H 06	1H/1H
Cashflows by product	A$m	A$m	%	A$m	A$m	%	A$m	A$m	%
Australian contemporary wealth management
Retail superannuation1	3,203	2,139	49.7	1,954	1,464	33.5	1,249	675	85.0
Allocated pensions/annuities	787	531	48.2	403	271	48.7	384	260	47.7
Total retail superannuation and pensions/annuities	3,990	2,670	49.4	2,357	1,735	35.9	1,633	935	74.7
Retail investment	207	196	5.6	260	166	56.6	(53)	30	n/a
Fixed term annuities	81	75	8.0	117	131	(10.7)	(36)	(56)	35.7
External platforms2	1,348	837	61.1	792	452	75.2	556	385	44.4
Total retail	5,626	3,778	48.9	3,526	2,484	41.9	2,100	1,294	62.3
Corporate superannuation	1,693	1,194	41.8	1,241	880	41.0	452	314	43.9
Corporate superannuation mandate wins3	412	1,701	(75.8)	–	–	n/a	412	1,701	(75.8)
Total Australian contemporary wealth
management	7,731	6,673	15.9	4,767	3,364	41.7	2,964	3,309	(10.4)
Australian contemporary wealth protection
Group risk	73	62	17.7	39	41	(4.9)	34	21	61.9
Individual risk	214	196	9.2	87	63	38.1	127	133	(4.5)
Lifetime annuities	5	7	(28.6)	72	73	(1.4)	(67)	(66)	(1.5)
Total Australian contemporary wealth protection	292	265	10.2	198	177	11.9	94	88	6.8
Total Australian contemporary	8,023	6,938	15.6	4,965	3,541	40.2	3,058	3,397	(10.0)
Australian mature	484	480	0.8	1,098	1,044	5.2	(614)	(564)	(8.9)
Total Australia	8,507	7,418	14.7	6,063	4,585	32.2	2,444	2,833	(13.7)
New Zealand	304	312	(2.6)	335	302	10.9	(31)	10	n/a
Total AFS cashflows	8,811	7,730	14.0	6,398	4,887	30.9	2,413	2,843	(15.1)
AMP Bank – mortgages	1,262	1,008	25.2	636	608	4.6	626	400	56.5
AMP Bank – deposits							(224)	77	n/a
Cashflows by distribution channel
AMP Financial Planning	4,939	3,524	40.2	3,487	2,651	31.5	1,452	873	66.3
Hillross (including Arrive and Magnify)	1,415	967	46.3	929	613	51.5	486	354	37.3
Corporate Superannuation – direct sales force	1,296	2,195	(41.0)	553	330	67.6	743	1,865	(60.2)
Centrally managed clients and other	427	426	0.2	581	574	1.2	(154)	(148)	(4.1)
3rd party distributors	430	306	40.5	513	417	23.0	(83)	(111)	25.2
Total Australia	8,507	7,418	14.7	6,063	4,585	32.2	2,444	2,833	(13.7)
New Zealand	304	312	(2.6)	335	302	10.9	(31)	10	n/a
Total AFS cashflows	8,811	7,730	14.0	6,398	4,887	30.9	2,413	2,843	(15.1)

1 Retail superannuation comprises the product Flexible Lifetime - Super (FLS), a component of which is small corporate superannuation schemes.

2 Externally manufactured products that earn platform fees (superannuation, pensions and investments).

3 Cashflows from the transfer of accumulated member benefits as a result of SignatureSuper mandate wins.

Cashflows

Total AFS AUM grew by A$12.1b to A$80.9b (pre-capital), or up 17.6% on 30 June 2006. AUM in contemporary wealth management grew 23.9% to A$55.4b. See page 21.

AFS net cashflows of A$2,413m were down 15% on 1H 06, reflecting lower cash inflows from SignatureSuper mandate wins offset by higher net cashflows from contemporary retail products. Contemporary wealth management net cashflows were A$2,964m, or A$2,552m excluding SignatureSuper new mandate wins, up from A$1,608m or up by 59% on 1H 06.

Net cashflows in retail superannuation (up 85%), allocated pensions/annuities (up 48%) and external platforms (up 44%), all benefited from the new Australian superannuation regime, as did net cashflows in AMP Financial Planning (up 66%) and Hillross (up 37%).

Internal flows

AMP reports cashflows on a product basis. This means that both cash inflows and cash outflows are affected by internal flows between products, as well as cash flowing into and out of AMP. Overall net cashflows are not affected by internal flows between products, although they are on an individual product level.

20 AMP Financial Services AMP Investor Report 1H 07

Cashflows and assets under management (AUM) cont’d

Internal product flows are particularly significant for retail superannuation to allocated pensions/annuities, especially given changes flowing from the new superannuation regime and because of the aging of the Australian population. Given these trends, success in retail superannuation and pensions is better measured by the combined net flows for these products, which were up 75% to A$1,633m in 1H 07. Around half of FLS outflows in 1H 07, for example, were retained in other AMP products, in particular allocated pensions/annuities.

Internal product flows are also significant for corporate superannuation to retail superannuation, as well as to other corporate superannuation products. Most Australians will begin their involvement with superannuation through an employer sponsored relationship. In some instances, employer sponsored funds require that employees transfer their money out of the fund on change of employment. This can provide an important source of cash inflow into retail superannuation or other corporate superannuation products. Around two thirds of corporate superannuation outflows in 1H 07 flowed back into other AMP products, which demonstrates the potential downstream benefits flowing from winning corporate superannuation mandates.

Persistency excluding internal flows

Stripping out major internal product flows from the persistency calculations, persistency for retail superannuation was 91.0% versus 90.5% in 1H 06 (on the same basis) and for allocated pensions/ annuities was 86.6% versus 87.2%. Persistency for corporate superannuation was 93.0% in 1H 07 versus 93.8% in 1H 06.

Persistency for contemporary wealth management was 88.3% excluding the impact of internal flows in 1H 07, versus 89.4% in 1H 06.

Pricing for allocated pensions/annuities and retail superannuation products is aligned. However, average balances for allocated pensions/annuities products tend to be higher than average superannuation balances and therefore AUM fees in absolute terms are lower due to tiered reductions in fees (refer to page 11 for further commentary on fee rebates).

Corporate superannuation

AMP has built a strong position in the employer sponsored channel and has established market leadership.

Corporate superannuation provides significant exposure to a key superannuation channel, one through which most people begin their exposure to superannuation. Much of this business flows from super guarantee levy contributions and is characterised by sticky contracts with good revenue growth driven by member growth, wage inflation growth, growth in non superannuation guarantee member contributions/consolidations plus retained investment earnings.

The large flows in this business, which incorporate asset transfers associated with mandate wins, assist to drive lower unit costs in other parts of the AFS business through common use of systems and supply chains, as well as providing other downstream product opportunities.

Corporate superannuation net cashflows decreased 57% in 1H 07 compared to 1H 06, however, there were disproportionately strong inflows in the comparison period owing to new account wins leading up to the closing of the APRA licensing window.

If asset transfers arising from mandate wins in SignatureSuper are excluded from both periods, net cashflows increased 44% to A$452m. SignatureSuper AUM is now A$5.2b (up from A$0.5b at 30 June 2005), and overall AUM in corporate superannuation grew to A$15.1b (pre capital), up 23% on 30 June 2006.

Retail superannuation and allocated pensions/annuities

Total retail superannuation and allocated pensions/annuities net cashflows grew 75% to A$1.6b in 1H 07.

Retail superannuation cash inflows increased 50% to A$3.2b while cash outflows rose 34%. However, around half of these outflows were retained in other AMP products. More than 90% of allocated pensions/annuities inflows came directly from AMP’s retail superannuation product.

Allocated pensions/annuities inflows increased 48% to A$787m, with net cashflows up 47.7% to A$384m. Net cashflows for retirement products have increased significantly over the past 3 years from net outflows of A$15m in 1H 04.

In the Australian superannuation system, people 60 and over can only benefit from a tax free environment if they transfer money from superannuation into an allocated pension/annuity. To enable customers to consolidate various superannuation accounts prior to converting the same into a pension, a specific product was developed within the FLS range. Customers can utilise a Super Consolidation Account (SCA) for a 6 month period. The SCA account in FLS contributed A$574m of inflows to retirement products versus A$241m in 1H 06.

The strong growth in allocated pensions/annuities has been driven by an increased focus on the at-retirement market, including further training and support for planners. AMP is now better able to retain superannuation customers at the point of retirement, leading to improved retention rates, as well as attracting new money from other funds when consolidating into an SCA.

Mature

Net cash outflows for the Mature business were impacted by higher AUM levels in 1H 07 and thereby an increased average withdrawal size. The changes to superannuation announced in 2006 and the subsequent opportunity to top up prior to 30 June 2007 saw some customers opt for early withdrawal from the mature book to transfer to superannuation.

New Zealand

Net cashflows decreased substantially during the half mainly due to planned retail fund closures, a slow down in new workplace savings mandates due to the introduction of KiwiSaver in 2H 07 and locked in superannuation funds maturing with customers subsequently withdrawing their funds.

Cashflows are expected to improve in the second half with no further fund closures in planned for 2007, favourable PIE tax changes being implemented in the managed funds market and with KiwiSaver inflows expected following successful tenders with major NZ employers and encouraging preferred provider results.

The new Australian superannuation regime

The changes to superannuation announced in 2006 have provided for a transition period during which customers, in particular those close to retirement age, can top up their super. As a one off opportunity in the period to 30 June 2007 customers could deposit up to an additional A$1m into superannuation.

AMP Financial Services AMP Investor Report 1H 07 21

Cashflows and assets under management (AUM) cont’d

Around 380 customers (including external platform plus retail and corporate superannuation) made contributions of A$1m or over during the period (A$480m total). Contributions, while strong across the board, were particularly strong in the A$50k to A$250k category. Further information is in the 1H 07 results presentation.

From 1 July, Australians have the opportunity to deposit an additional A$150k per annum or A$450k every 3 years in non-concessional contributions into superannuation. Australians can contribute up to A$50k per annum in concessional contributions, or up to A$100k until 2012 for Australians aged 50 years and over.

AMP believes that the changes to superannuation have added between 1 and 1.5% per annum to sector AUM growth trends over the next 10 years as superannuation will clearly be the savings vehicle of choice due to its favourable tax treatment.

AMP Financial Planning and Hillross (including Arrive and Magnify)

Net cashflows through AMP Financial Planning (AMPFP) increased 66% or A$579m in 1H 07 on 1H 06, driven by strong growth in retail superannuation and allocated pensions/annuities. Higher pension inflows through this channel reflect the results of a major campaign to upskill planners in the provision of pensions related advice.

Net cashflows through Hillross (including Arrive and Magnify) increased 37.3%. A one-off A$50m consolidation of the Arrive business into Hillross, increased cash inflows into this business by 26% in 1H 06. Stripping this out for comparison purposes, net cashflows grew 60% period on period.

Financial planners

Driving improvements in planner productivity is a significant growth opportunity for AMP. Good progress is being made in this area and a series of projects is in train as outlined in a presentation by the AFS Managing Director in June 2007 (available on the AMP website).

AFS is focused on using its scale to deliver and drive efficiencies that ensure its planners have the lowest cost to serve in the industry.

AMPFP has a significantly lower licensee cost to revenue ratio compared to similar dealer groups and likewise a lower licensee costs per adviser ratio.

The AMPFP and Hillross financial planning businesses together comprise the largest number of planners in the Australian market. AMP also has the highest number of Certified Financial Planners (CFPs).

Overall planner numbers (AMPFP, Hillross, AMPNZ) were up slightly in 1H 07 from 1,876 to 1,883. AMPFP and Hillross numbers declined slightly while numbers in New Zealand increased partly due to the acquisition of a planner practice.

A series of programs are in place to source, attract and recruit planners to AMP, including new planners, those starting as paraplanners and planners currently working for other planner groups. AMP expects these programs to have a positive impact on planner numbers over the medium term.

AUM by product	FY 06		FY 06	FY 06	Net		1H 07	1H 07	1H 07	1H 07
	AUM	share cap4		total	cashflows	Other5	AUM	share cap6	total	change
	A$b		A$b	A$b	A$b	A$b	A$b	A$b	A$b	%
Australian contemporary wealth	management
Retail superannuation1	20.9		0.2	21.1	1.2	1.1	23.2	0.2	23.4	10.9
Allocated annuities/pensions	5.0		-	5.0	0.4	0.2	5.6	-	5.6	12.0
Retail investment	2.9		-	2.9	(0.1)	0.2	3.0	-	3.0	3.4
Fixed term annuities	1.0		-	1.0	-	-	1.0	-	1.0	-
Externalplatforms2	6.6		0.1	6.7	0.6	0.3	7.5	0.1	7.6	13.4
Total retail	36.4		0.3	36.7	2.1	1.8	40.3	0.3	40.6	10.6
Corporate superannuation	13.4		0.2	13.6	0.9	0.8	15.1	0.2	15.3	12.5
Total Australian contemporary
wealth management	49.8		0.5	50.3	3.0	2.6	55.4	0.5	55.9	11.1
Australian contemporary wealth	protection
Group risk3	-		-	-	-	0.1	-	0.1	0.1	n/a
Individual risk3	-		0.4	0.4	0.1	(0.1)	-	0.4	0.4	-
Lifetime annuities	1.7		0.1	1.8	(0.1)	0.1	1.7	0.1	1.8	-
Total Australian contemporary
wealthprotection	1.7		0.5	2.2	-	0.1	1.7	0.6	2.3	4.5
Total Australian contemporary	51.5		1.0	52.5	3.0	2.7	57.1	1.1	58.2	10.9
Australian mature	18.7		0.2	18.9	(0.6)	0.7	18.9	0.1	19.0	0.5
Total Australia	70.2		1.2	71.4	2.4	3.4	76.0	1.2	77.2	8.1
New Zealand	4.6		0.2	4.8	-	0.3	4.9	0.2	5.1	6.3
Total AFS	74.8		1.4	76.2	2.4	3.7	80.9	1.4	82.3	8.0
AMP Bank – mortgages	7.2			7.2	0.6		7.8		7.8	8.3
AMP Bank – deposits	1.8			1.8	(0.2)		1.6		1.6	(11.1)

1 Retail superannuation comprises the product Flexible Lifetime – Super (FLS), a component of which is small corporate superannuation schemes.

2 Externally manufactured products that earn platform fees.

3 Individual and group risk are included in inflows and outflows but not in the AUM balances.

4 Share capital at 1 January 2007 contains A$480m of capital transfers declared at 31 December 2006.

5 Other includes product transfers, fees, investment returns, taxes, share capital movements and foreign currency movements on New Zealand AUM.

6 Share capital at 30 June 2007 includes A$200m of capital transfers declared at 30 June 2007.

22 AMP Financial Services AMP Investor Report 1H 07

Market share

		March 2007			March 20064
Market share – Australia	Total	Market	Market	Total	Market	Market
	market size	position	share	market size	position	share
	A$b	(rank)3	%	A$b	(rank)3	%
Net cashflows1
Superannuation including rollovers	17.8	1	20.4	11.7	1	20.4
Retirement income	4.6	3	11.3	3.3	4	7.5
Retirement income (excluding guaranteed annuities)	5.3	2	14.0	4.1	4	12.3
Unit trusts (excluding cash management trusts)	11.5	11	2.8	7.3	7	5.1
Total retail managed funds (excluding cash management trusts)	33.5	1	13.2	22.0	3	13.4
Assets under management1
Superannuation including rollovers	250.3	1	17.6	217.1	1	17.2
Retirement income	79.6	2	12.0	68.1	2	12.2
Retirement income (excluding guaranteed annuities)	67.6	4	10.2	55.6	4	9.9
Unit trusts (excluding cash management trusts)	169.3	10	3.6	137.9	10	3.8
Total retail managed funds (excludingcash management trusts)	507.5	3	11.9	431.1	3	11.9
Total in-force annual premiums2
Individual risk	4.0	3	10.9	3.6	3	11.2

1 Source: Plan for Life 31 March 2007 – QDS Retail & Wholesale.

2 Source: Plan for Life 31 March 2007 – Detailed Risk Statistics (in force premiums individual risk excludes single premiums).

3 The net cashflows market position (rank) is calculated on a rolling 12 month basis.

4 March 2006 comparatives have been restated by Plan for Life.

AMP maintained its number one and two market share of AUM

rankings for superannuation and retirement income respectively at March 2007.

AMP captured 20.4% of the superannuation industry net cashflows for the 12 months to March 2007.

AMP’s leadership position in superannuation, both in terms of AUM and annual net cashflows, continues to reflect strong inflows including a number of SignatureSuper product wins over the 12 months to March 2007.

Retirement income net cashflows remain below AUM market share of 12.0% as a significant portion of the retirement income AUM is made up of life annuity (guaranteed income plan) business. AMP has continued to grow its market share in retirement incomes (excluding guaranteed annuities). Refer to page 20 for further commentary.

AMP individual risk share of in-force annual premiums decreased slightly to 10.9% but maintained its number 3 ranking over the 12 months to March 2007.

Market share data are not available for the June 2007 quarter.

AMP also improved in retirement income net cashflows, with a market share of 11.3% for the 12 months to March 2007.

		March 2007			March 20064
Market share – New Zealand	Total	Market	Market	Total	Market	Market
	market size	position	share	market size	position	share
	NZ$b	(rank)	%	NZ$b	(rank)	%
Assets under management
Retail superannuation1	6.8	2	18.6	6.5	2	20.0
Unit trusts1	8.2	7	3.5	7.9	6	3.6
Insurance bonds1	1.1	3	21.2	1.2	3	24.5
Total retail funds1	21.4	4	8.7	20.5	3	9.5
Corporate superannuation2	3.6	1	30.0	3.3	1	27.8
Conventional3	0.1	1	43.7	0.2	1	43.3
Term insurance3	0.6	2	13.3	0.5	2	12.8

1 Measured by AUM: Source: Fund Source Research Limited March 2007.

2 Measured by AUM: Source: Eriksen's Master Trust Survey March 2007.

3 Measured by in-force premium: Source: ISI Statistics March 2007.

4 March 2006 comparatives have been restated by Fund Source Research Limited.

New Zealand maintained its number one ranking for corporate superannuation, increasing market share to 30%. Corporate superannuation AUM increased by 17.5% to NZ$1,085m, with New Zealand capturing 54% of corporate superannuation new business.

Market share of retail funds fell by 0.8% to 8.7%.

New Zealand retained its number one and number two market share rankings for conventional and term insurance respectively, driven by market leading persistency rates and strong insurance sales growth.

AMP Financial Services AMP Investor Report 1H 07 23

Embedded value (EV) and value of new business (VNB)

AFS embedded value (A$m)	3% dm 4% dm 5% dm
Embedded value as at 1 January 2007 Restatement1 Expected return Value added Net transfers out	6,518 6,166 5,854 759 682 619 327 339 349 574 527 486 (456) (456) (456)
Embedded value as at 30 June 2007	7,722 7,258 6,852
1H 07 return on embedded value	12.4% 12.6% 12.9%
Embedded value comprises Adjusted net assets2 Value of in-force business3	290 290 290 7,432 6,968 6,562
AFS embedded value (A$m) at the 3% dm	Wealth management Wealth protection Mature New Zealand Total
Embedded value as at 1 January 2007 Restatement1 Expected return Value added Net transfers out	2,754 1,538 1,584 642 6,518 784 (2) 21 (44) 759 156 71 75 25 327 331 75 149 19 574 (260) (82) (121) 7 (456)
Embedded value as at 30 June 2007	3,765 1,600 1,708 649 7,722
1H 07 return on embedded value	13.8% 9.5% 14.0% 7.4% 12.4%
AFS embedded value (A$m) at the 4% dm	Wealth management Wealth protection Mature New Zealand Total
Embedded value as at 1 January 2007 Restatement1 Expected return Value added Net transfers out	2,619 1,441 1,500 606 6,166 709 – 14 (41) 682 162 73 78 26 339 302 68 140 17 527 (260) (82) (121) 7 (456)
Embedded value as at 30 June 2007	3,532 1,500 1,611 615 7,258
1H 07 return on embedded value	13.9% 9.8% 14.4% 7.6% 12.6%
AFS embedded value (A$m) at the 5% dm	Wealth management Wealth protection Mature New Zealand Total
Embedded value as at 1 January 2007 Restatement1 Expected return Value added Net transfers out	2,498 1,355 1,426 575 5,854 648 2 8 (39) 619 166 75 81 27 349 278 62 131 15 486 (260) (82) (121) 7 (456)
Embedded value as at 30 June 2007	3,330 1,412 1,525 585 6,852
1H 07 return on embedded value	14.1% 10.1% 14.8% 7.8% 12.9%
AFS value of new business (A$m)	3% dm 4% dm 5% dm
	1H 07 1H 061 1H 07 1H 061 1H 07 1H 061
Value of new business by business line Wealth management Wealth protection Mature New Zealand	144 110 131 99 121 91 40 24 35 21 31 18 20 20 18 18 16 16 11 11 11 10 10 9
Total	215 165 195 148 178 134
% change	30.3% 31.8% 32.8%

• 1 The restatements are due to methodology and modelling changes and include the move to recurring contributions. Both EV and VNB have been restated.

2 Adjusted net assets are as defined on page 26.

3 Value of in-force business includes shareholder net assets of A$878m at face value which are valued at a discount to expected time of release.

24 AMP Financial Services AMP Investor Report 1H 07

Embedded value (EV) and value of new business (VNB) cont’d

Embedded value increase was driven by new business, investment returns and pricing and product changes

Embedded value at 31 December 2006 was restated for methodology and modelling changes. The EV was increased by A$759m (at the 3% discount margin). The major component of this restatement was the change to allow for expected future recurring contributions on corporate superannuation, Flexible Lifetime Superannuation (FLS) and Retirement Savings Account (RSA) contracts.

The NZ EV was restated down by A$44m (at the 3% discount margin) to align the NZ EV methodology to be consistent with Australian calculations.

Embedded value increased by 12.4% at the 3% discount margin before 1H 07 transfers and after the restatement of the FY 06 result.

The value added factors in 1H 07 were:

• new business adding A$215m

• higher than expected investment returns and changes in bond yields, adding A$176m

• improved persistency and claims assumptions adding A$4m

• unit cost reductions adding A$17m

• pricing and product changes adding A$115m (including pricing changes on income protection business and an increase in the proportion of members and value of business transferring from corporate superannuation to FLS)

• other adding A$47m, mainly exchange rate movements in the New Zealand dollar and other current year experience profits.

Net transfers include capital of A$362m transferred out, and A$94m of franking credits at 70% of face value.

Change in embedded value FY 06 to 1H 07

(at the 3% dm above bond rate)

==> picture [411 x 249] intentionally omitted <==

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9,000
8,500
115 47
176 17 4 8,178
8,000 215
327
(456) 7,722
7,500
759
7,277
7,000
6,500 6,518
6,000
5,500
5,000
4,500
FY 06 EV Restatement FY 06 EV restatedExpected return1H 07 new businessInvestment and bond yieldsUnit cost reductionsPersistency and claims assumptionsPricing and product changes Other (before transfers)1H 07 EV Net transfers out(after tranfers)1H 07 EV
A$m
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AMP Financial Services AMP Investor Report 1H 07 25

Embedded value (EV) and value of new business (VNB) cont’d

Value of new business increase was driven by increased volumes and improved claims and persistency assumptions

The value of new business increased by 30.3% from A$165m in 1H 06 (restated) to A$215m in 1H 07 (both at 3% dm) mainly due to:

• future economic and investment assumptions reducing VNB by A$8m, mainly driven by the bond yield increase of around 0.5% pa

• improved expense assumptions adding A$2m

• improved persistency and claims assumptions adding A$9m

• higher volumes (including the 30 June opportunity from the 2006 Federal Budget) and the impact of changes in the mix of business adding A$42m

• pricing and product changes adding A$4m

• appreciation in the New Zealand dollar increasing VNB by A$1m.

Change in value of new business 1H 06 to 1H 07

(at the 3% dm above bond rate)

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240
4 1
42 9 215
2
200
(8)
1
160 164 165
120
80
1H 06 VNB Restatement 1H 06 VNBrestatedVolume and mixinvestment assumptionsFuture economic/ Expense assumptionsPersistency and claims assumptionsPricing and product changesNZ exchange rate 1H 07 VNB
A$m
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26 AMP Financial Services AMP Investor Report 1H 07

EV and VNB methodology

EV and VNB valuations are the outcomes of actuarial modelling based on a complex set of assumptions; they are not management projections of the value of the company. Value measurement metrics are highly sensitive to the model’s underlying assumptions. Valuations for AMP are modelled on cashflows (cash in, cash out, AUM at period end). Profit margins are assumed to be stable over time. The AMP methodologies are consistent with Australian and European actuarial standards.

The table below outlines the key underlying assumptions for the EV and VNB calculations for the main product groupings for the AMP Financial Services business.

A significant change from previous disclosures is that AMP’s EV and VNB methodologies now include allowance for expected recurring contributions on all corporate superannuation (CS), Flexible Lifetime Superannuation (FLS) and Retirement Savings Account (RSA) contracts where future contributions can be reasonably anticipated.

	Embedded value (EV)	Value of new business (VNB)
Definitions	The EV is a measure of the economic value of the shareholder capital in the business and the profits expected to emerge from the business currently in force. The EV is made up of two items: – value of inforce business (VIF) – the discounted value of future profits and movements/releases of regulatory capital, and – adjusted net assets – shareholder assets in excess of the regulatory capital requirements, at face value. For this purpose regulatory capital is allocated at a product-group level with a minimum of zero. This will give a different regulatory capital to the MRR disclosed on page 39, which is calculated at an entity level.	The VNB is a measure of the economic value of the profits expected to emerge from new business net of the cost of supporting capital. VNB is the increase in EV over the period due to new business.
Method of calculating VIF	Future profit margins and capital requirements are projected on best estimate assumptions (see page 29 for more details on assumptions). VIF is calculated by discounting these to a present value using a range of risk discount rates, expressed as margins above the 10 year bond yield.	Calculated at point of sale using the same method as for VIF. The value at the point of sale is rolled up at the risk discount rate to the valuation date.
Main product groupings	Key elements of cashflows included in future projections1
	Embedded value (EV)	Value of new business (VNB)
Regular premium retail risk insurance, conventional, investment account and investment linked contracts	Future premiums, claims, investment returns, taxes and expenses adjusted for best estimates of lapses/surrenders. Future expenses are projected using unit costs related to number of policies, annual premiums or assets under management, depending on the underlying driver of the expenses. Unit costs that are related to policies are assumed to increase at 3% pa.	Only new contracts commencing during the period for consistency with EV approach.
Single premium retail investment account, investment linked and eligible rollover contracts, eWrap and Portfoliocare contracts	As above but with no future premiums.	Single premiums paid during the period are included - no future premiums assumed for consistency with EV approach.

AMP Financial Services AMP Investor Report 1H 07

27

EV and VNB methodology cont'd

Main product groupings	Key elements of cashflows included in future projections1	Key elements of cashflows included in future projections1
	Embedded value (EV)	Value of new business (VNB)
Corporate superannuation, retail flexible lifetime superannuation, and retirement savings account contracts	As above but with full allowance for expected future recurring contributions based on contractual policy terms and conditions and observed policyholder payment methods2.	All single premium and transfer values paid during the period (for both new and old policies) are included along with expected future recurring contributions for new contracts commencing in the period2.
Group risk contracts	As above but assuming future premiums for existing members only - ie assumes withdrawing members are not replaced.	Only new group contracts commencing during the period are included in VNB (new members replacing withdrawing members only impact EV).

• 1 Only contracts which are in force at the valuation date are included in EV and VNB calculations.

• 2 For corporate superannuation contracts, where member administration is at a group level, EV assumes that departing members from a continuing scheme are replaced with new scheme members. However, no allowance is made for the potential transfers of accumulated benefits with the new member from their previous superannuation scheme.

FLS and RSA contracts are administered as separate accounts for each member. EV assumes there will be no replacement when existing members withdraw, and new members are included as new contracts in VNB. For FLS, employer sourced contributions (including salary sacrifice) are considered as recurring contributions, but member direct contributions are considered as recurring contributions only if it is sourced from a periodic direct debit or a periodic reminder notice payment facility.

New business includes all new policies or schemes, all single premiums received and, in the case of retail business, any increases in regular contributions. Note that the corporate superannuation single premiums include asset transfers for new members of existing schemes, consistent with the exclusion of these transfers within the EV.

It is estimated there were recurring contributions of A$1.7b in 1H 07 based on contributions coming to AMP through:

• employer salary systems of A$1.5b (largely Superannuation Guarantee Levy contributions)

• direct member contributions in FLS and RSA of A$0.2b (largely tax paid contributions).

Total AFS cash inflows in 1H 07 were A$8.8b as summarised below:

Contributions received in 1H 07 (A$b)

Contributions received in 1H 07 (A$b)
Transfer values and single premiums – for CS, FLS and RSA	3.9
Recurring contributions – for CS, FLS and RSA	1.7
Total CS, FLS and RSA	5.6
Other AFS cash inflows	3.2
Total AFS cash inflows	8.8

The A$3.9b in the table above includes transfer values for corporate superannuation. While the EV and VNB makes allowance for new members into corporate superannuation schemes to replace those who exit, no allowance is made for any transfers of money with those members. The following table provides an indication of the sensitivity of the EV and VNB to an assumed level of transfers. It has been assumed that new members of corporate superannuation schemes transfer benefits to the fund when joining equal to 10% of the amount withdrawn by exiting members.

1H 07 change in EV and VNB (A$m)		3%dm	4%dm	5%dm
New members with 10% transfer of accumulated benefits –	EV	75	65	56
New members with 10% transfer of accumulated benefits –	VNB1	(1)	(1)	(1)

1 The VNB decreases as a result of an amount of the single premiums included in new business being reclassified as transfers that are then included in the EV.

28 AMP Financial Services AMP Investor Report 1H 07

EV and VNB sensitivities

1H 07 change in embedded value (A$m)

1H 07 change in embedded value (A$m)
	Wealth	Wealth
	management	protection	Mature	New Zealand	Total
5% reduction in controllable costs	68	6	15	7	96
10% reduction in discontinuance rates	202	91	55	34	382
1% (100 bps) decrease in long term bond yields	119	62	10	15	206
1% (100 bps) increase in long term bond yields	(111)	(55)	(16)	(14)	(196)
5% increase in equity index in Australian equities	59	-	29	-	88
5% increase in equity index in international equities	26	-	9	8	43
1% reduction in investment fees	(71)	-	(4)	(1)	(76)

1H 07 change in value of new business (A$m)

1H 07 change in value of new business (A$m)
	Wealth	Wealth
	management	protection	Mature	New Zealand	Total
5% reduction in controllable costs	5	1	-	-	6
10% reduction in discontinuance rates	12	5	2	2	21
1% (100 bps) decrease in long term bond yields	4	3	-	2	9
1% (100 bps) increase in long term bond yields	(4)	(3)	-	(2)	(9)
5% increase in sales (all costs variable)	8	2	1	1	12
5% increase in sales (controllable costs fixed)	11	2	1	1	15
1% reduction in investment fees	(4)	-	-	-	(4)

Key assumptions

The tables illustrate the sensitivity of the EV and VNB to various economic and business variables.

The sensitivities are only indicative because:

• they are not always linear or symmetrical, due to the asymmetric nature of risks facing insurance companies, including the scope for policyholders to exercise options against the company or to benefit from guarantees

• they assume that the movement in a particular variable is independent of all others. For the change in discontinuance rates, unit costs are assumed unchanged. For the 5% increase in sales (all costs variable) unit costs are assumed unchanged. For the 5% increase in sales (controllable costs fixed) unit costs are assumed to reduce because of the increase in business volumes

• they show the average movement for the risk discount margin range

The 1% increase in long term government bond yields is assumed to be accompanied by a 0.5% increase in Consumer Price Index (CPI) and other associated changes in economic assumptions, bonus rates, risk discount rates and bond values. For equities, the assumed future earning rate is assumed to increase by 0.5% (ie the equity risk premium is reduced by 0.5%).

The 5% reduction in costs is based on AFS controllable costs only, ie it excludes commission and investment management fees.

The 10% reduction in discontinuance rates is based on a uniform reduction in lapses in all future years (eg a 15% lapse rate changes to 13.5%).

The 5% increase in equity index for Australian equities assumes all Australian shares increase in value by 5%.

Investment fees are defined as all initial and ongoing fees on investment products with explicit fees. The investment fee sensitivity assumes no corresponding reduction in funds management costs or commission.

• they are based on the 1H 07 position, ie not “forward looking”, and make no allowance for events subsequent to 30 June 2007.

AMP Financial Services AMP Investor Report 1H 07 29

EV assumptions

Economic assumptions

Risk discount rates are based on the yield on long term government bonds plus a discount margin.

Economic assumptions Risk discount rates are based on bonds plus a discount margin.	the yield on long	term government
Annualised 10 year bond yields	30 June 2007	31 December 2006
Australia	6.4%	6.0%
New Zealand	6.8%	6.0%

Assumed investment returns gross of income tax (% pa) are set at risk premiums over long term government bond rates:

Risk premiums	30 June 2007	31 December 2006
Local equities1	4.0%	4.0%
International equities	2.5%	2.5%
Property	2.0%	2.0%
Corporate bonds	0.5%	0.5%
Other fixed interest	0.0%	0.0%
Cash (where significant)	(0.5%)	(0.5%)

1 Includes allowance of approximately 1% for franking credits on equity income.

For the purpose of setting investment assumptions, the broad asset mixes assumed for participating business are:

AMP Life (Australia)	30 June 2007	31 December 2006
Equities	31%	31%
Property	12%	12%
Fixed interest	41%	41%
Cash	16%	16%

Operating assumptions

Changes to assumptions since 31 December 2006 include changes to discontinuance rates for risk business that has transferred from corporate superannuation business.

Future mortality and morbidity rates are based on an analysis of recent AFS experience, general industry experience and, in some cases, population experience.

Future discontinuance rates are derived from an analysis of recent AFS experience.

Maintenance unit costs are derived from 2007 budgets. Allowance is made for future inflation but potential unit cost improvements arising after 2007 are ignored. Future rates of bonus for participating business were set at levels that were supportable by the assets backing the respective product sub-funds as at 30 June 2007.

Acquisition costs for VNB are the actual costs incurred in 1H 07.

Franking credits are valued at 70% of face value.

Further details

Assumptions are consistent with the best estimate assumptions used in calculating policy liabilities for AMP Life. A fuller description of these assumptions and their 31 December 2006 values can be found in the notes to the 2006 AMP Ltd Financial Report. As all business is projected for the embedded value, the description of the assumptions in the notes applies even where that business is not valued by projection methods.

Annual inflation rates assumed are:

Inflation rate	30 June 2007	31 December 2006
Australia – CPI	3.4%	3.2%
Australia – Expenses	3.0%	3.0%
New Zealand – CPI	3.0%	2.6%
New Zealand – Expenses	3.0%	2.6%

These inflation rates are used for indexation of premiums and benefits, where appropriate, and for expense inflation. Recurring contributions are assumed to grow in line with future growth in average weekly earnings (4.5%).

30 AMP Capital Investors AMP Investor Report 1H 07

AMP Capital Investors

Operating earnings and key performance metrics

AMPCI is seeking to develop into a high value adding manager, creating both exotic beta and high alpha products, and enhancing revenue margins. Growth in the business is increasingly being driven by its external assets under management which in turn are being distributed through a broader range of domestic and international channels. Expansion into Asia is an integral part of this strategy. The net effect is expected to be a more diversified and more profitable business, subject to delivery of ongoing strong investment performance.

The success of this strategy is evident in the 1H 07 results. Operating earnings after tax grew 42% to A$78m in 1H 07 from A$55m in 1H 06. Fee income grew by 28%. The cost to income ratio improved 3.8 percentage points to 51.4%, with total operating costs rising at a significantly slower rate than fee income.

RoBUE increased to 71.6%, driven by growth in operating earnings.

Investment performance for the 12 months to June 2007 was strong, with 76% of AUM meeting or exceeding their respective benchmarks compared with 78% for FY 06. The AMP Capital Balanced Growth and Conservative Funds were ranked number 1 over 3 months, 1 year, 2 years, 3 years and 5 years in the Mercer Investment Consulting Pooled Fund Survey.

Fee income

Fee income increased to A$232m in 1H 07, up 28% (A$51m) compared to 1H 06.

Management fees increased 25% to A$184m driven by higher AUM and improved revenue margins. There was proportionately stronger growth in the higher margin external business which grew 39%.

Fees are growing at a far greater rate than AUM (up 16%).

Total management fees to average AUM grew 2.7 basis points to 33.8 bps with external management fees to average external AUM growing 3.1 basis points to 45.4 bps. External management fees have grown 7.5 bps over the past 2 years with external AUM as a percentage of average overall AUM growing from 33% to 38%.

Performance and transaction fees increased 41% or A$14m over 1H 06. This increase was largely driven by the generation of fees in property, infrastructure and fixed income, in line with the strategic objective to access new opportunities in these business areas. Performance fees were boosted by an unusually high DUET net performance fee after tax of A$10m, as a result of the DUET share price strongly out performing the general market.

Costs

Controllable costs were A$124m in 1H 07, up A$20m (19%) from 1H 06. The cost to income ratio dropped 3.8 percentage points from 55.2% to 51.4%.

Employee related costs were A$71m, an increase of A$13m (22%) on restated costs of A$58m in 1H 06. This increase was due to business expansion, strengthening AMPCI’s investment capability and tighter labour conditions.

Investment operations and other costs increased to A$47m in 1H 07, up A$4m (9%) on restated 1H 06 costs. Higher trading volumes and funding of efficiency programs, including improving IT systems, increased costs during the year.

Controllable costs include A$6m of project related expenditure, an increase of A$3m on 1H 06, project expenditure including the creation of the Singapore office. It is currently anticipated that project spend for FY 07 will be approximately double that of FY 06.

Seed pool

A seed pool was established to assist business growth through the acquisition of assets to seed new funds or opportunities. Group Office lends AMPCI the funds with commercial interest rates paid by the business on the facility. AMPCI in turn seeks to generate future revenues from the subsequent on-sale of these assets to clients through new or existing funds.

A disciplined process has been put in place around risk/profit analysis and approvals on investments.

The net seed pool has been disclosed separately. The fund currently has A$120m invested with net income of A$2m in 1H 07. Net income relates to the movement in seed asset valuations and net profit or loss on sales offset by funding costs.

AUM and cashflows

AUM increased to A$111.6b in 1H 07, up A$15.1b or 16% on 1H 06, reflecting strengthening investment markets and strong external cashflows.

External AUM increased by 22% to A$42.1b in 1H 07. Internal AUM increased 12% to A$69.4b in 1H 07.

External net cash inflows were A$1.3b in 1H 07, compared with net cash inflows of A$1.1b in 1H 06. Of this, A$0.2b was raised in Australia and New Zealand, with institutional net outflows of A$0.5b offset by retail net inflows of A$0.7b, and A$1.1b was raised in Asia (including Japan, Taiwan, Singapore and Malaysia). By asset class, the strongest sector was fixed interest, with net cash inflows of A$1.3b.

Internal net cash outflows were A$1.0b in 1H 07 compared with net cash outflows of A$0.4b in 1H 06. The 1H 07 net cash outflows were primarily from AMP businesses in run-off (A$1.4b), AMP Group (A$0.7b), NZ internal market flows (A$0.2b), and were partly offset by improving net cash inflows of A$1.3b from AMP Australia's contemporary products.

Refer to tables on page 33 for more detail.

AMP Capital Investors AMP Investor Report 1H 07

31

AMP Capital Investors cont'd

Movement in operating earnings 1H 06 to 1H 07

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----- Start of picture text -----

100
9
18
80
(14) 2 78
8
60
55
40
20
0
1H 06 operating earnings Higher internal management fees Higher external management fees Higher performance and transaction feesHigher controllable costs Net seed pool income 1H 07 operating earnings
A$m
----- End of picture text -----

Average AUM and operating earnings before net seed pool income basis points (bps)

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----- Start of picture text -----

120 16.0
41.0
100 14.0
33.6 13.9
80 26.9 12.0
24.3 21.6 11.6
60 10.0 (bps)
10.3
9.9 9.7
40 8.0
68.1
60.9
54.4
45.7 48.8
20 6.0
0 4.0
1H 03 1H 04 1H 05 1H 06 1H 07
Average Internal AUM
Average External AUM
Operating earnings after tax to average AUM (bps)
A$b
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32 AMP Capital Investors AMP Investor Report 1H 07

AMP Capital Investors cont’d

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Profit and loss
Management fees - internal	91	80	78	158	13.8
Management fees - external	93	67	80	147	38.8
Total management fees	184	147	158	305	25.2
Performance fees	39	27	36	63	44.4
Transaction fees	9	7	10	17	28.6
Total performance and transaction fees	48	34	46	80	41.2
Fee income	232	181	204	385	28.2
Controllable costs	(124)	(104)	(119)	(223)	19.2
Tax expense	(32)	(22)	(25)	(47)	45.5
Operating earnings before net seed pool income	76	55	60	115	38.2
Net seed pool income	2	-	-	-	n/a
Operating earnings	78	55	60	115	41.8
Underlying investment income	6	6	4	10	-
Underlying operating profit after income tax	84	61	64	125	37.7
Controllable costs
Employee related1	71	58	63	121	22.4
Investment operations and other1	47	43	51	94	9.3
Total operating costs	118	101	114	215	16.8
Project costs	6	3	5	8	100.0
Total controllable costs	124	104	119	223	19.2
Cost to income ratio	51.4%	55.2%	57.1%	56.0%	n/a
Controllable costs to average AUM (bps)2	22.9	22.1	23.7	22.8	n/a
External management fees to average external AUM (bps)2	45.4	42.3	39.9	41.2	n/a
Total management fees to average AUM (bps)2	33.8	31.1	31.3	31.2	n/a
Performance and transaction fees to average AUM (bps)2	8.8	7.2	9.2	8.1	n/a
RoBUE3	71.6%	60.0%	63.2%	60.9%	n/a

1 Controllable costs have been restated to reflect centralisation of support costs in 1H 07.

2 Based on average monthly AUM.

3 RoBUE is based on monthly average capital numbers excluding intangibles.

AMP Investor Report 1H 07 AMP Capital Investors 33

AMP Capital Investors cont’d

		Cash inflows			Cash outflows			Net cashflows
	1H 07	1H 06	1H/1H	1H 07	1H 06	1H/1H	1H 07	1H 06	1H/1H
Cashflows by asset class	A$m	A$m	%	A$m	A$m	%	A$m	A$m	%
External
Australian equities	802	1,018	(21.2)	1,412	469	201.1	(610)	549	n/a
International equities	1,119	1,237	(9.5)	710	819	(13.3)	409	418	(2.2)
Fixed interest	2,165	1,289	68.0	893	1,243	(28.2)	1,272	46	2,665.2
Infrastructure	96	77	24.7	14	18	(22.2)	82	59	39.0
Private equity	1	(2)	n/a	57	5	1,040.0	(56)	(7)	(700.0)
Property	207	304	(31.9)	43	225	(80.9)	164	79	107.6
Total external	4,390	3,923	11.9	3,129	2,779	12.6	1,261	1,144	10.2
Internal
Australian equities	673	1,486	(54.7)	1,823	1,764	3.3	(1,150)	(278)	(313.7)
International equities	1,027	1,425	(27.9)	814	947	(14.0)	213	478	(55.4)
Fixed interest	2,992	3,281	(8.8)	3,008	3,645	(17.5)	(16)	(364)	95.6
Infrastructure	9	2	350.0	43	(2)	n/a	(34)	4	n/a
Private equity	10	20	(50.0)	15	42	(64.3)	(5)	(22)	77.3
Property	134	64	109.4	179	303	(40.9)	(45)	(239)	81.2
Total internal	4,845	6,278	(22.8)	5,882	6,699	(12.2)	(1,037)	(421)	(146.3)
Total	9,235	10,201	(9.5)	9,011	9,478	(4.9)	224	723	(69.0)

	FY 06	Net cashflows	Investment returns1	1H 07	1H 06	1H/1H
AUM by asset class	A$m	A$m	A$m	A$m	A$m	%
External
Australian equities	8,047	(610)	577	8,014	7,003	14.4
International equities	10,762	409	126	11,297	10,256	10.2
Fixed interest	7,390	1,272	(333)	8,329	5,998	38.9
Infrastructure	1,989	82	122	2,193	1,691	29.7
Private equity	444	(56)	32	420	442	(5.0)
Property	10,892	164	840	11,896	9,129	30.3
Total external	39,524	1,261	1,364	42,149	34,519	22.1
Internal
Australian equities	21,915	(1,150)	2,408	23,173	21,301	8.8
International equities	13,595	213	609	14,417	11,544	24.9
Fixed interest	23,844	(16)	540	24,368	22,217	9.7
Infrastructure	413	(34)	890	1,269	445	185.2
Private equity	1,661	(5)	(556)	1,100	1,917	(42.6)
Property	4,691	(45)	432	5,078	4,468	13.7
Total internal	66,119	(1,037)	4,323	69,405	61,892	12.1
Australian equities	29,962	(1,760)	2,985	31,187	28,304	10.2
International equities	24,357	622	735	25,714	21,800	18.0
Fixed interest	31,234	1,256	207	32,697	28,215	15.9
Infrastructure	2,402	48	1,012	3,462	2,136	62.1
Private equity	2,105	(61)	(524)	1,520	2,359	(35.6)
Property	15,583	119	1,272	16,974	13,597	24.8
Total	105,643	224	5,687	111,554	96,411	15.7

1 Investment returns include foreign currency movements on New Zealand AUM.

1H 07 AUM by asset class

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----- Start of picture text -----

Property
15% (1H 06 14%)
Infrastructure
Australian equities
3% (1H 06 2%)
28% (1H 06 29%)
Private equity
1% (1H 06 3%)
----- End of picture text -----

Fixed interest 30% (1H 06 29%) International equities 23% (1H 06 23%)

34 AMP Capital Investors AMP Investor Report 1H 07

AMP Capital Investors cont’d

Movement in AUM by channel FY 06 to 1H 07

115
																		5.7
																					111.6
110
											1.3
							1.1
				0.7										(0.7)
105.6 105		(0.5)													(1.4)	(0.2)
A$b
100
95
				External										Internal
90
AUM at 1/1/07 Asian distribution channels Australian institutional market flows Australian retail market flows Australian contemporary												AMP Group Australian run-off businesses NZ internal market flows Investment returns							AUM at 30/06/07
															31 March 2007								31 March 2006
														Total	Market			Market				Total	Market	Market
													market size2			share			share		market size2		share	share
Australian market position			by AUM1											A$b	(rank)				%			A$b	(rank)	%
Total investment management market														1,433.9		2			6.6		1,230.4		2	6.9
Retail investment market														400.2		2			13.3		339.5		2	13.8
Wholesale investment market														1,059.7		7			3.8		915.1		6	4.1
Select asset classes
Australian equities														380.9		2			7.3		343.5		2	7.4
Australian fixed income														186.3		1			9.7		176.9		2	10.1
International equities														277.3		6			5.6		269.7		7	5.4
International fixed income														78.3		10			3.6			62.2	9	4.0
Property														133.4		1			11.4			85.8	1	15.2

1 Source: Rainmaker Roundup, March 2007 and March 2006.

2 The sum of the wholesale and retail investment market does not reconcile to the total investment management market due to an overlap in the classification of the funds.

		31 March 2007			31 March 2006
	Total	Market	Market	Total	Market	Market
	market size	share	share	market size	share	share
New Zealand market position by AUM1	A$b	(rank)	%	A$b	(rank)	%
Total investment management market	56.6	1	17.0	52.1	1	17.3
Select asset classes2
Balanced products	1.4	1	30.9	1.3	1	35.1
Property	0.6	3	13.7	0.3	3	17.4
New Zealand fixed interest	1.5	2	17.2	1.8	2	16.9
Cash	1.7	2	9.6	1.6	2	8.9

1 Source: Reserve Bank of New Zealand.

2 Source: AON Investment Survey.

AMP Investor Report 1H 07 AMP Capital Investors 35

AMP Capital Investors cont’d

Investment performance

Investment performance was strong for the 12 months to 30 June 2007, with 76% of AUM meeting or exceeding their benchmarks. 77% of Australian AUM and 62% of New Zealand AUM met or exceeded their benchmarks. This compared to 77% in Australia and 87% in New Zealand for the 12 months to 31 December 2006. The target for the business is 75% of AUM meeting or exceeding target.

This strong performance was reflected in the performance of our flagship Australian diversified funds . The Conservative and Balanced Growth Funds both ranked first over all time periods (3 months, 1 year, 2 years, 3 years and 5 years) in their respective Mercer competitor surveys for periods ending 30 June 2007. AMPCI was also awarded Morningstar’s 2006 ”Multi-sector Fund Manager of the Year” award.

Performance was mixed across the various domestic shares investment styles, with 53% of AUM meeting or exceeding their benchmarks. The highlight was the Small Companies Fund, which returned 54.2% for the year and out performed by 9.7%. Total domestic shares AUM was A$20.6b as at 30 June 2007.

For domestic bonds 81% of AUM met or exceeded their benchmarks for the 12 months to 30 June 2007. Most investment styles out performed, with the highlights the performance of our Structured High Yield and Enhanced Yield funds, which out performed by 4.6% and 3.7% respectively. Domestic bonds AUM was A$24.9b as at 30 June 2007.

For international funds (multi-manager) 80% of international shares AUM and 53% of international bonds AUM met or exceeded their benchmarks. The highlights were the International Share and International Bond funds which out performed by 1.9% and 1.2% respectively. International funds AUM was A$24.1b as at 30 June 2007.

For property , 96% of AUM met or exceeded their benchmarks for the 12 months to 30 June 2007. Our flagship Australian Core Property Portfolio returned 19.3% and out performed by 10.5%. Property AUM was A$17.0b as at 30 June 2007.

For infrastructure , 86% of AUM met or exceeded their benchmarks for the 12 months to 30 June 2007. The Infrastructure Equity Fund returned 18.4% and out performed by 8.1%. Infrastructure AUM was A$3.8b as at 30 June 2007.

For Future Directions Funds performance was mixed with 64% of AUM meeting or exceeding their benchmarks for the 12 months to 30 June 2007. Across the different fund classes, the international share, international bond and all diversified funds out performed, while the Australian share and property funds under performed. Future Directions AUM was A$16.8b as at 30 June 2007 of which 18% was managed directly by AMPCI.

In New Zealand , performance was mixed across the various asset classes. Highlights included Direct Property (100% of AUM met or exceeded benchmark), Diversified (98%), New Zealand equities (98%) and New Zealand fixed interest (96%) funds. Of the other asset classes, 4% of cash, 16% of passive international equities and 54% of international equities AUM met or exceeded benchmark.

	AUM as at June 2007	June 2007	December 2006
Investment performance	A$b	%	%
Percentage of AUM meeting or exceeding benchmark1
Listed assets	72.9	74	76
Infrastructure	3.4	86	71
Private equity	1.5	95	99
Property	17.0	96	93
Future Directions funds	16.8	64	83
Total	111.6	76	78
By major asset class
Domestic equities	20.6	53	60
Domestic fixed interest	24.9	81	68
International equities	21.3	80	81
Balanced funds	19.4	86	85
International fixed interest	2.8	53	81
Listed property	2.4	63	95
Property direct	14.9	96	93

1 Performance figures are on a 12 month rolling basis.

36 AMP Capital Investors AMP Investor Report 1H 07

AMP Capital Investors cont’d

A summary of investment performance across the various funds/styles is shown in the table below. In instances where there is more than one fund for an investment style, investment performance of the ”flagship” fund has been quoted.

Investment performance across funds/styles

		Out/under			Out/under
	Absolute	performance		Absolute	performance
Equities	return (%)	(%)	Property (direct and listed)	return (%)	(%)
Fund/style name			Fund/style name
Sustainable Future (SRI)	28.4	(0.3)	Australian Core Property Portfolio	19.3	10.5
Capital	23.8	(4.9)	Wholesale Office Fund	22.9	13.6
Active Quant	28.9	0.2	Shopping Centre Fund	16.3	7.0
Value	23.6	(5.1)	Property Income Fund	15.3	(3.8)
Enhanced Index	28.3	(0.3)	New Zealand Direct Property	36.2	n/a
Small Companies	54.2	9.7	Australian Listed Property Trusts	28.0	2.1
New Zealand Equities	21.8	1.7	Global Listed Property Trusts	21.8	2.2
Fixed interest			Infrastructure
Fund/style name			Fund/style name
Core Plus Strategies	4.2	0.3	Infrastructure Equity Fund	18.4	8.1
Structured High Yield	11.0	4.6
Enhanced Yield	9.9	3.7
Corporate Bond	5.2	1.2
New Zealand Fixed Interest	2.3	0.4
				Internal rate
International funds (multi-manager)			Private equity	of return
Fund/style name			Fund/style name
International Equities	9.6	1.9	Business Development Fund 2	71.2	43.1
International Fixed Interest	6.9	1.2	Private Equity Fund 3	32.0	n/a

AMP Investor Report 1H 07 AMP Capital Investors 37

AMP Capital Investors cont’d

Business initiatives

AMPCI’s key strategic objectives in 2007 are to:

• continue to build its presence in growth markets – the Australian retail market and Asia

• access high ”value-add” investment opportunities, particularly in infrastructure and property

• strengthen its talent and capability base

• strengthen the business’s operational capability.

In line with these, AMPCI undertook the following initiatives during 1H 07:

Continued to build its presence in growth markets

AMPCI has identified the Australian retail and Asian markets as a significant opportunity to grow and diversify its client base. AMPCI is also looking to Asia to source new high value-add/high margin assets for its clients. As a result of this, during 1H 07:

• in the Australian retail market, AMPCI:

• raised A$661m AUM for its key retail funds:

  • A$224m – Enhanced Yield Fund (total AUM A$1.4b at 30 June 2007)

These assets also offer AMPCI attractive margins. In respect of these assets, AMPCI undertook the following initiatives over 1H 07:

• in property, AMPCI:

  • acquired A$586m in new properties, including:

    • the Palms Shopping Centre in Christchurch, New Zealand (A$198m)

    • an office building at 222 Exhibition Street, Melbourne (A$163m)

  • secured third party commitments of over A$180m for the Global Direct Property Fund, including funds under due diligence. The Fund also secured two major overseas acquisitions; the University Corporate Centre, Orlando Florida, United States (A$28m), and an office property in Breda, Milan, Italy (A$30m)

  • established a joint venture company with Meridien Retirement Living, AMP Capital Meridien Lifestyle, to source and manage properties in the burgeoning retirement living sector

  • continued the A$1.8b redevelopment of its shopping centre assets

  • restructured and strengthened its ability to source new property opportunities, with the establishment of a Strategic Transactions Team.

• A$176m – Structured High Yield Fund (AUM A$703m)

  • In infrastructure, AMPCI:

• A$205m – Global Property Securities Fund (AUM A$559m)

• A$56m – Core Property Fund (AUM A$165m)

• received some excellent results for its brand in the Wealth Insights Brand Tracking Study. The overall health of the AMPCI brand, measured by its ”brand equity”, doubled over the past 12 months

• added to its suite of products offered direct to the retail market, with the launch of the AMP Capital Sustainable Share Fund. AMPCI now offers five funds through this channel, which also includes Core Property Fund, Global Property Securities Fund, Enhanced Yield Fund and Small Companies Fund. Total AUM for this channel was A$148m at 30 June 2007.

This AUM growth followed approvals by dealer groups and the inclusion of the funds on major master trusts.

• in Asia, AMPCI:

• officially opened its office in Singapore

• expanded its distribution network to the Republic of Korea after Samsung (Korea’s largest distributor) awarded AMPCI a mandate to manage global REITs. The Fund was launched in May 2007. AMPCI now distributes products in five Asian countries – Japan, Taiwan, Singapore, Malaysia and Korea

• generated net cashflows of more than A$1.0b from Japan and Taiwan

• in China, established a partnership with China Life Asset Insurance Management Company (China’s largest institutional investor) to source Chinese infrastructure investment opportunities.

Accessed high ”value-add” investment opportunities, particularly in property and infrastructure

• raised a further A$150m from investors for the Strategic Infrastructure Trust of Europe

• successfully completed a A$350m equity raising for listed company DUET (jointly managed with Macquarie Bank) to fund the acquisition of Duquesne Light Inc. in the US

• through Principal Aged Care, completed the purchase of the operating business conducted by the Moran Group at 39 aged care facilities (already owned by Principal Healthcare Finance Trust). Principal Aged Care is now the third largest private operator of residential aged care facilities in Australia.

Strengthened its talent and capability base

AMPCI undertook a number of initiatives over 1H 07 to improve the capability of its people. Initiatives included:

• a new coaching program for all staff

• an annual mentoring program (34 staff are involved in 2007)

• the fourth instalment of its Investment Leadership Initiative – an overseas study tour for key staff. The theme for this tour is ”leading strategic change”.

AMPCI concluded its annual survey of its leadership capability of its leaders, with the results improving further on those for 2005 and 2006.

Strengthened the business’s operational capability

During 2006, AMPCI commenced a program to improve the business effectiveness and efficiency. This program addresses the organisational and functional structure and the overall operating platform of the business. This program continued in 2007 and will be completed in 2009.

There is strong demand from AMPCI’s clients for high value-add investment opportunities, particularly infrastructure and property.

38 Cobalt/Gordian AMP Investor Report 1H 07

Cobalt/Gordian

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Profit and loss
Net claims experience1	82	18	44	62	355.6
Commutation savings	5	6	18	24	(16.7)
Net expenses2	(9)	(9)	(10)	(19)	-
Operating earnings	78	15	52	67	420.0
Underlying investment income	20	21	20	41	(4.8)
Underlying operating profit after income tax	98	36	72	108	172.2

1 Net claims experience includes earned premium and investment income on technical funds.

2 Net expenses comprise controllable costs net of external Cobalt revenue.

Business overview

Cobalt/Gordian is focused on achieving a profitable run-off of AMPs remaining books of general insurance business while maximising returns to shareholders.

The business includes:

• the residual general insurance portfolios including the international reinsurance business and the old AMP corporate insurance portfolios not divested in 2001

• Cobalt Solutions, a specialist management service organisation, which manages the run-off of the AMP general insurance business as well as providing services to non-AMP clients.

Key priorities for 2007

These include:

• maintaining focus on commutations and effective claims management to achieve targeted operating earnings, risk reduction and capital releases

• continuing to manage and evaluate capital efficiency options

• developing Cobalt Solutions third party business.

Operating earnings

The Cobalt/Gordian 1H 07 profit was abnormally large, driven by the successful settlement of a series of claims below reserved balances.

Operating earnings are based primarily on the movement in claim liabilities. These liabilities are, in many cases, dependent on the finalisation of litigation or the determination of ultimate loss suffered.

There is a prescriptive methodology applied to reserving for general insurance business, which meets APRA requirements. Whilst the reserving on an individual claim and portfolio-wide basis is rigorously determined, the results at an operating earnings level can be volatile.

The main components of the operating earnings in 1H 07 were:

Actuarial valuations and capital adequacy

Actuarial valuations are conducted by internal actuaries (approved by APRA) and peer reviewed by independent external actuaries.

The claims liabilities of A$475m (net of reinsurance recoveries) at 30 June 2007 were determined on a best estimate basis in accordance with APRA Prudential Standards and the professional standards of the Institute of Actuaries of Australia. Risk margins of A$86m are added to increase the probability that the liabilities are adequately provided for. The capital adequacy is currently 4.8 times the minimum regulatory capital requirement.

Capital initiatives

Capital was reduced in 1H 07 by A$205m following achievement of the required 99.5% risk threshold in Gordian Runoff Ltd set by APRA. This included A$92m based on 30 June 2006 and A$113m based on 31 December 2006 balances. Further capital reductions based on 30 June 2007 balances are expected in 2H 07.

Capital reductions are being used to pay down inter-company loans. Loans to the parent reduced by A$61m during 1H 07 to A$423m.

Composition of the run-off liabilities

The run-off strategy commenced in 1999 and 2001 for the Reinsurance and Corporate Insurance portfolios respectively. Gross claim liabilities have since been reduced from A$2.6b to A$0.6b. The remaining liabilities are comprised of long tail classes of business such as for direct insurance - professional indemnity, directors and officers, medical malpractice and public liability and for reinsurance - liability, aviation and marine.

Events resulting in individual claims have all occurred; however, the claims remain outstanding due to notification of the loss or crystalisation of its value. Re-estimation of liabilities over time is based on the most recent available information and therefore, can produce some volatility in operating earnings.

In the absence of any other initiatives, such as pro-active commutation of liabilities, it is estimated that the liabilities will reduce to half their current net value of A$561m by 2011 with the balance reduced to less than A$100m by 2016.

• successful settlement of claims below reserved balances

• positive net claims experience resulting from claims management practices

• savings from commutations resulting from the finalisation of reinsurance contracts for less than reserves

• steady operating costs

• a comparatively low effective tax rate as a result of the utilisation of past tax losses.

AMP Investor Report 1H 07 Capital structure 39

Capital management

30 June 2007

30 June 2007
					AMP			Loan from
			AMP		Capital	Cobalt/3	Group	Cobalt/Gordian
A$m	Total AMP	AMP Life	Banking	Total AFS	Investors	Gordian	Office	to Group Office
Total capital resources	3,234	1,618	196	1,814	327	497	1,019	(423)
Intangibles1	(653)	(450)	(30)	(480)	(101)	-	(72)	-
Tangible capital resources	2,581	1,168	166	1,334	226	497	947	(423)
Non allowable hybrid instruments	(107)
Senior debt	(711)
Other deductions2	(32)
Regulatory capital resources	1,731
Shareholder minimum regulatory
capital requirements (MRR)	904	567	125	692	50	137	25	-
Regulatory capital resources
above MRR	827

31 December 2006

					AMP			Loan from
			AMP		Capital	Cobalt/3	Group	Cobalt/Gordian
A$m	Total AMP	AMP Life	Banking	Total AFS	Investors	Gordian	Office	to Group Office
Total capital resources	3,689	1,611	182	1,793	290	617	1,473	(484)
Intangibles1	(641)	(450)	(27)	(477)	(93)	-	(71)	-
Tangible capital resources	3,048	1,161	155	1,316	197	617	1,402	(484)
Non allowable hybrid instruments	(107)
Senior debt	(611)
Other deductions2	(26)
Regulatory capital resources	2,304
Shareholder minimum regulatory
capital requirements (MRR)	886	522	113	635	62	159	30	-
Regulatory capital resources
above MRR	1,418

Regulatory capital resources

Regulatory capital resources
A$m	30 June 2007	31 December 2006
AMP shareholder equity	2,173	2,728
Allowable hybrid Tier 1 instruments	-	-
Less: goodwill and other intangibles	(653)	(641)
Less: other deductions2	(32)	(26)
Tier 1	1,488	2,061
Allowable upper Tier 2 instruments	-	-
Allowable lower Tier 2 instruments	243	243
Tier 2	243	243
Total regulatory capital (Tier 1 + Tier 2)	1,731	2,304

1 Refer to page 45 for definition. Intangibles include capitalised costs.

2 Other deductions relate to employee defined benefit scheme surpluses.

• 3 To reflect its fair value, Cobalt/Gordian’s 30 June 2007 total capital of A$679m (31 December 2006 A$809m) has been adjusted for provisions of A$182m (31 December 2006 A$192m).

40 Capital structure AMP Investor Report 1H 07

Capital management cont’d

Movement in 1H 07 total capital resources

==> picture [344 x 202] intentionally omitted <==

----- Start of picture text -----

5,000
561
4,000
(394)
3,689
100 28
3,000 (750) 3,234
2,000
1,000
0
Total capital resourcesas at 31 Dec 06 1H 07 profit Dividends paid less dividends reinvested Capital return Increase in Group debt Other movementsTotal capital resources as at 30 Jun 07
A$m
----- End of picture text -----

Capital movements

Capital resources fell by A$455m in 1H 07 due to:

• dividends paid (A$394m)

• capital return paid in June 2007 (A$750m).

Offset by:

• 1H 07 profits (A$561m)

• increase in Group debt (A$100m)

• other (A$28m).

Capital management

AMP targets a level of capital equal to the MRR plus a target surplus. AMP’s surplus capital position remains above its target range following strong profits and sharemarkets and investment out performance in 1H 07. AMP’s capital management strategy is now focusing on optimising its capital mix.

MRR

The shareholder minimum regulatory capital requirement (MRR) is the amount of shareholder capital required by each of AMP’s regulated businesses to meet their capital requirements as set by the appropriate regulator. These requirements are:

• AMP Life – solvency, capital adequacy and management capital requirements as specified under the Life Insurance Actuarial Standards

Target surplus

The majority of the target surplus relates to the AMP Life Statutory Funds and is set by reference to a probability of breaching regulatory capital requirements. This is a 2 tiered test where the target surplus is set as the greater of the amount required for a:

• 0.5% probability of breaching solvency over one year

• 10% probability of breaching capital adequacy over one year.

Capital allocation

AMP regularly reviews business line capital allocation taking into account improved control processes and growth or changes in the business unit requirements.

The end of period tangible capital resources for each of the AFS business lines has been provided in the respective profit and loss tables.

Capital was reallocated in the AFS business on 30 June 2007. Capital held against the contemporary wealth management business was reduced at 30 June 2007 reflecting improved controls for both preventing operational errors and/or identifying errors earlier if they do occur. Conversely, additional capital was allocated to the New Zealand business. In the past the contemporary Australian businesses were, to a small extent, subsidising the New Zealand business.

• AMP Banking – capital requirements as specified under the APRA Banking Prudential Standards

• AMPCI – capital and liquidity requirements under its Australian Financial Services Licence

• Cobalt/Gordian – capital requirements as specified under APRA General Insurance Prudential Standards.

AMP Investor Report 1H 07 Capital structure 41

Capital management cont’d

Total capital resources (A$m)	30 June 2007	31 December 2006
Equity
Contributed equity	3,828	4,067
Capital reserve1	-	509
Equity contribution reserve	1,019	1,019
Other reserves	87	74
Retained earnings2	444	328
Demerger loss reserve	(3,585)	(3,585)
Total AMP statutory equity attributable to shareholders	1,793	2,412
Accounting mismatches	380	316
Total AMP shareholder equity	2,173	2,728
Group debt	1,061	961
Total capital resources	3,234	3,689

1 Capital reserve reduced to nil as part of the June 2007 capital return.

2 The movement in retained earnings (A$116m) is comprised of profit after mismatch items (A$470m) less dividends (A$394m) and adjustment for AIFRS (A$40m), eg reversal of dividends related to treasury shares.

A$m	30 June 2007	31 December 2006
International equities	531	455
Domestic equities	570	657
Property	318	430
International fixed interest	233	182
Domestic fixed interest	458	370
Cash1	324	1,099
Total shareholder funds	2,434	3,193
Other2	147	(145)
Tangible capital resources	2,581	3,048
Intangibles	653	641
Total capital resources	3,234	3,689

1 Cash includes cash balances held as bank deposits and short term fixed interest securities.

2 Other includes partially offsetting assets and liabilities, including A$187m (FY 06 A$361m) of cash held backing liabilities and at 30 June 2007 seed pool assets of A$120m.

Key changes during period

• property exposure reduced primarily due to the reallocation of seed pool assets (A$167m at 31 December 2006) from shareholder funds to other assets. The returns on these property investments are now included in AMPCI operating earnings

• the significant cash holding at 31 December 2006 was reduced during 1H 07 to fund the June 2007 capital return.

Nominal versus effective exposure

Asset class allocation shown above is based on the profile of each asset’s income return. The risk profile of the assets differs to the income return profile due to the use of derivatives. Approximately half of the domestic and international equity allocation includes derivative positions that provide downside risk protection.

Management of market risks in the shareholders funds

The market risks in the shareholder funds are managed by reference to the probability of loss over a one year time horizon at a 99% confidence level. This loss tolerance is currently set at 3% of shareholder funds (with a tolerance range of + or - 0.5%) under a fat-tailed distribution.

Underlying investment income

AMP calculates the underlying investment income that is allocated to the business units and Group Office, for management reporting purposes, by applying an underlying rate of return to business unit and Group Office shareholder assets invested in income producing investment assets (as opposed to operating assets). The underlying after tax rate of return used for 1H 07 was 5.20% pa.

Shareholder funds invested in income producing investment assets may be higher or lower than business unit capital due to the working capital requirements of the business unit.

AFS contemporary wealth management underlying investment income

In the AFS contemporary wealth management business, AMP Banking income producing investment assets are excluded from the calculation of underlying investment income. The return on AMP Banking income producing investment assets is included in operating earnings.

42 Capital Structure AMP Investor Report 1H 07

Debt overview

		30 June 2007			31 December 2006
A$m	Group	Operational	Total	Group	Operational	Total
Subordinated bonds/notes	350	100	450	350	100	450
Total subordinated debt (Tier 2)	350	100	450	350	100	450
Domestic commercial paper and NCDs	-	818	818	-	378	378
Euro medium term notes	941	-	941	941	-	941
Domestic medium term notes	-	-	-	-	-	-
Loan from Group Office to AMP Banking	(230)	230	-	(330)	330	-
Total senior debt	711	1,048	1,759	611	708	1,319
Deposits-in	-	1,612	1,612	-	1,835	1,835
Total debt	1,061	2,760	3,821	961	2,643	3,604
Corporate gearing ratio
Book gearing - debt/(debt + equity)	33%			26%
S&P gearing	8%			12%
Interest cover - underlying (times)	18.4			15.2
Interest cover - actual (times)	20.2			16.4
Total Group debt by year of repayment
Repayment 0 - 3 years	349			249
Repayment in 4 years	230			230
Repayment in 5 years	398			-
Repayment in 6 years	-			398
Repayment in 7 - 10 years	-			-
Repayment in 10 + years	84			84

Increase in Group debt

During 1H 07 Group Office recalled A$100m of the short term loan of A$330m provided to AMP Banking during 2H 06, to partially fund the A$750m June 2007 capital return. The balance of the loan from Group Office to AMP Banking was A$230m at 30 June 2007.

At the point at which the remainder of the loan is repaid to Group Office, AMP’s Group debt will increase by the size of the repayment.

Change in S&P gearing methodology

During 1H 07 Standard & Poor’s revised its gearing methodology. The new methodology now includes a number of new items in equity. The most significant of these is the inclusion of 100% of the value of in force AFS business (previously S&P included only 50% of the value of in force). This change has contributed to a further reduction in AMP’s S&P gearing ratio during 1H 07 despite the A$750m June 2007 capital return and A$100m increase in Group debt.

Reconciliation of AMP’s total borrowings per
AMP Limited half year financial statements (A$m)
Total Group and operational debt at 30 June 2007	3,821
Plus policyholders obligations	2,073
Value of cross currency interest rate swaps, fair value
adjustments on borrowings and net discounts and
transaction costs	(139)
Bank securitisation brought back on balance sheet as a
result of AIFRS	5,407
Total borrowings and subordinated debt as per AMP
Limited Financial Report for the half year ended
30 June 2007	11,162

Additional information AMP Investor Report 1H 07 43

Group Office

A$m	1H 07	1H 06	2H 06	FY 06	% 1H/1H
Group Office costs not recovered from business units	(19)	(18)	(19)	(37)	5.6
Underlying investment income on Group Office capital	20	30	21	51	(33.3)
Cobalt/Gordian fair value provision release	10	10	10	20	n/a
Investment income market adjustment	29	1	76	77	n/a
Interest expense on Group debt	(26)	(31)	(32)	(63)	(16.1)
Employee defined benefit schemes	3	2	3	5	n/a
Fair value adjustments	(4)	3	(1)	2	n/a
Other items	(1)	(2)	1	(1)	n/a
Total Group Office	12	(5)	59	54	n/a
Interest expense summary
Average volume of debt	969	1,291	1,244	1,266
Weighted average cost of debt1	7.75%	6.86%	7.28%	7.07%
Tax rate	30%	30%	30%	30%
Interest expense on Group debt	26	31	32	63
Franking credits
AMP dividend franking credits at face value at end of period2	210			239

1 Weighted average cost of debt as at 30 June 2007 is 7.56% pa (post tax 5.29%).

2 Balance of franking account adjusted for franking credits which will arise from the payment of income tax provided for in the financial statements. After franking the interim dividend, the balance of franking credits will be A$60m.

Group Office costs not recovered from business units increased from A$18m in 1H 06 to A$19m in 1H 07.

Underlying investment income on Group Office capital decreased from A$30m in 1H 06 to A$20m in 1H 07 as a result of capital returned to shareholders in 2006 and 2007.

Interest expense on Group debt fell from A$31m in 1H 06 to A$26m in 1H 07. The decrease in interest expense is a result of the decrease in Group debt. During 2H 06, AMP sought to reduce the level of Group debt by providing a short term loan of A$330m to AMP Banking. During 1H 07 A$100m was repaid by AMP Banking.

The Cobalt/Gordian fair value provision was written down by A$10m to A$182m reflecting the continued run down in claim liabilities. Pending continued satisfactory run-off of the book, the provision is likely to amortise by A$20m per annum for the next four years.

44 Glossary of terms and independent review AMP Investor Report 1H 07

Accounting treatment and definitions

Capital treatment: regulatory and ratings

Security type	Regulatory credit (as described by APRA regulations)	Ratings credit (Standard & Poor’s)
Ordinary equity	Full capital credit	Full capital credit
Value of future shareholder profits	No capital credit	50% credit for capital adequacy purposes and 100% credit for gearing purposes
Non-Innovative Tier 1	Up to 25% of total Tier 1 capital (Innovative Tier 1 cannot exceed 15% of total Tier 1 capital)	For capital adequacy purposes up to 25% of TAC1and for gearing purposes up to 15% of TAC
Innovative Tier 1
Upper Tier 2	Up to 100% of total Tier 1 capital (Lower Tier 2 cannot exceed 50% of total Tier 1 capital)
Lower Tier 2
Senior debt	No capital credit	No capital credit

1 TAC = Total Adjusted Capital as defined by Standard & Poor’s.

Accounting mismatches – Under AIFRS, some assets held on behalf of the policyholders (and related tax balances) are included in the accounts at different values to the value used in the calculation of policy liabilities in respect of the same asset. Movements in these policyholder assets flow through to shareholder profit. These differences have no impact on the true operational profits and losses of the Group. Mismatch items that may impact the profit and loss account arise from policyholder interests in the following:

• treasury shares (AMP Limited shares held by the statutory funds on behalf of policyholders)

• owner-occupied properties

• life company statutory funds’ investments in controlled entities

• deferred tax balances.

For Investor Report purposes, the profit and loss impact and equity adjustments associated with these mismatch items have been excluded from the Group results and equity.

An archived copy of AMP’s AIFRS announcement is available on the AMP website at www.amp.com.au.

Annual premium income – Contractual annual premium income payable on all in-force individual and group risk policies.

Book gearing – Group debt divided by total capital resources (Group debt plus AMP shareholder equity).

Commutation savings (Cobalt/Gordian) – The savings achieved through payment of an amount less than the current book value of a general insurance exposure, which extinguishes the obligations under that contract.

Controllable costs – Include operational and project costs and exclude variable costs, provision for bad and doubtful debts and interest on Group debt.

Controllable costs to AUM – Calculated as controllable costs divided by average AUM.

Cost to income ratio – Calculated as controllable costs divided by gross margin. Gross margin is calculated as total operating earnings and underlying investment income before income tax plus controllable costs. An income tax rate of 30% (New Zealand 33%) has been used to gross up the AFS numbers.

Debt

• Group debt – Total AMP borrowings including subordinated debt less policyholder obligations and operational debt (primarily relating to AMP Banking).

• Operational debt – Debt raised directly by a subsidiary to fund its operations. Operational debt primarily relates to AMP Banking.

Discontinuance rates – The assumed future rates for voluntary discontinuance (lapse) of contracts for the purposes of determining the embedded value. These rates vary by individual product or product groups and where appropriate by other factors such as duration in-force, or age attained.

Dividend payout ratio – Calculated as dividend per share divided by EPS (underlying).

Embedded value – A calculation of the economic value of the shareholder capital in the business and the profits expected to emerge from the business in-force.

Employee defined benefit schemes – A scheme that provides a retirement benefit, usually based on salary and/or a pre-determined formula for calculating that benefit. Unlike an accumulation scheme, the retirement benefit and method of calculation is known to the member at all times.

Enterprise value – Calculated as the median of major stockbroking analyst valuations of AMP at a point in time.

EPS (actual) – Calculated as profit attributable to shareholders of AMP Limited before accounting mismatches divided by the basic weighted average number of ordinary shares.

EPS (underlying) – Calculated as underlying profit divided by the basic weighted average number of ordinary shares.

External AUM (AMPCI) – Assets managed by AMPCI sourced directly from institutional clients (including corporate, public sector and industry superannuation funds, and large non-superannuation funds), non AMP dealer groups, private clients and international clients.

Fair value adjustments – Represents items whose accounting treatment does not reflect the underlying commercial position. These items include the movement in the fair value of assets and liabilities that are effectively hedged and the depreciation of capitalised expenditure on owner occupied properties.

Full-time equivalent (FTE) – A measure of the total level of staff resources used. The FTE of a full-time staff member is equal to 1.0. The calculation of FTE for part-time staff is based on the proportion of time worked compared to that worked by full-time staff.

Glossary of terms and independent review AMP Investor Report 1H 07 45

Accounting treatment and definitions cont’d

Group risk cash inflows – Premiums received for insurance cover offered via superannuation plans administered by corporate superannuation.

Individual risk lapse rate – Calculated as annualised voluntary cancellations as a percentage of average annual premium income prior to cancellations. Policies expiring due to maturities, death or disablement are excluded from the calculation.

Intangibles – Represent goodwill from the acquisition of GIO and acquired asset management mandates and capitalised costs.

Interest cover (actual) – Calculated on a rolling 12 month basis as profit after income tax before other items and interest expense on Group debt for the year divided by interest expense on Group debt after income tax for the same period.

Interest cover (underlying) – Calculated on a rolling 12 month basis as underlying profit before interest expense on Group debt for the year divided by interest expense on Group debt after income tax for the same period.

Internal AUM (AMPCI) – Assets managed by AMPCI sourced from another AMP business.

Investment income market adjustment – The excess (or shortfall) between the underlying investment income and actual return on shareholder assets invested in income producing investment assets (as opposed to income producing operating assets).

Investment performance – The percentage of AUM meeting or exceeding their benchmarks.

Net claims experience (Cobalt/Gordian) – The movement, since the last balance date, in the present value of claims liabilities, net of any reinsurance recoveries, plus earned premium and investment income on investments held to pay claims liabilities.

Operating earnings – Represent shareholder attributable profits or losses that relate to the underlying performance of the BU. The principles of life insurance accounting are used in reporting the results of AFS. Operating earnings exclude investment earnings on shareholder capital and one-off items such as transformation costs and asset sales.

Persistency – Calculated as opening AUM less outflows during the period divided by opening AUM. AFS AUM numbers are adjusted to exclude shareholder amounts so as to reflect product AUM levels.

RoE (actual) – Calculated as annualised profit after income tax before other items divided by average monthly shareholder equity for the period.

RoE (underlying) – Calculated as annualised underlying profit divided by average monthly shareholder equity for the period.

Sensitivities – profit and capital – For the sensitivities on page 8, the following apply:

Sensitivities are only indicative, because:

• they are not always linear or symmetrical, because of the asymmetric nature of risks facing insurance companies, including the scope for policyholders to exercise options against the company or to benefit from guarantees

• they assume that the particular variable moves independently of all others

• they are based on the 1H 07 position, ie not “forward looking”, and make no allowances for events subsequent to 30 June 2007

• in general, for profit, they assume the movement occurs evenly over the year; for capital, they assume the movement occurs at 30 June 2007.

Other assumptions include:

• parent company shareholders’ equity is fully invested and there are no adjustments for investments which are outside index weightings

• currency movements in investments in self-sustaining operations do not impact profit

• sales sensitivity assumes the same product mix as that in underlying sales during 1H 07

• investment income sensitivity is based on the amount of investments held as at 30 June 2007

• all profit sensitivities shown are a full year impact.

Shareholder minimum regulatory capital requirements – Capital resources being used to meet the minimum capital requirements of all regulatory bodies which impact the BU. This is after taking account of any other resources, eg policyholder retained earnings.

Return on embedded value – Calculated as the increase in embedded value in the period before transfers, divided by embedded value at the beginning of the period.

RoBUE – Return on BU equity is calculated as BU underlying operating profit after income tax (including underlying investment income) over the BU’s average monthly capital resources less goodwill on the acquisition of GIO (for AFS) and acquired asset management mandates (for AMPCI) (pre-transfers) over the period. No allowance is made for the benefit of gearing, which occurs at Group level.

46 Glossary of terms and independent review AMP Investor Report 1H 07

Accounting treatment and definitions cont’d

S&P gearing – Senior debt plus non-allowable hybrids divided by economic capital available plus hybrids plus senior debt. Economic capital available is as defined by Standard & Poors.

Total capital resources – Total capital invested in BUs and Group Office including both tangible and intangible capital.

Underlying investment income – The investment income on shareholder assets invested in income producing investment assets (as opposed to income producing operating assets) attributed to the BUs (including Group Office) has been normalised in order to bring greater clarity to the results by eliminating the impact of short term market volatility on underlying performance. The excess (or shortfall) between the underlying return and the actual return is disclosed separately. Underlying returns are set based on long term expected returns for each asset class. The return on AMP Banking income producing investment assets is included in contemporary wealth management operating earnings.

Underlying profit – Calculated as total operating earnings (which include BU operating earnings and Group Office costs not recovered from BUs) less interest on Group debt plus underlying investment income, transitional tax relief, and Cobalt/Gordian fair value provision release.

Value of new business – A calculation of the economic value of the profits expected to emerge from the new business written over a particular period, net of the cost of providing supporting capital.

Variable costs – Include costs that vary directly with the level of related business (eg planner fees and commissions, investment management fees and Banking securitisation costs).

Glossary of terms and independent review AMP Investor Report 1H 07 47

Life insurance accounting

Contract classification

The accounting treatment of the life insurance business varies depending on the nature of the contract.

The majority of the business of AMP Life relates to wealth management products such as savings, investment linked and retirement income where there is no insurance risk and no discretion over the vesting of policyholder benefits (ie non-participating). These contracts are classified as “investment contracts” and are accounted for at fair value under the Australian equivalents to International Financial Reporting Standards (AIFRS) for Financial Instruments and Revenue.

AMP Life also issues contracts that either:

• transfer significant insurance risk from the policyholder such as death, disability or longevity, or

• provide discretionary participating benefits.

These contracts are classified as “life insurance contracts” and are accounted for using Margin on Services (MoS).

Investment contracts

Life investment contracts may consist of a financial instrument and an investment management services element, both of which are measured at fair value. Apart from fixed retirement income policies, the resulting liability to policyholders is tightly linked to the performance and value of the assets (after income tax) that back those liabilities. The fair value of such liabilities is therefore the same as the fair value of those assets, after income tax on the basis charged to policyholders. There has been an accounting mismatch, as deferred income tax on unrealised gains (or losses) was often charged to policyholders on a discounted basis, whereas under AIFRS the related deferred income tax liability must be established on a non-discounted basis. During 2006, the accounting of deferred tax charged to policyholders was largely removed and the associated accounting mismatches reversed, with the remaining reversals appearing in 2007.

Fees and other charges passed to the shareholder are reported as revenue.

For fixed retirement income policies, the financial instruments element is the fair value of the fixed retirement income payments, which is their present value at a risk-free discount rate. The fair value of the associated management services element is the net present value at a risk-free discount rate of all costs associated with the provision of services and any profit margins thereon.

Life insurance contracts

MoS is the financial reporting methodology developed to report on the life insurance business of Australian companies. It continues to apply to life insurance contracts issued by Australian companies or their subsidiaries.

Under MoS, the profits that are expected to be earned on life insurance contracts emerge over the life of the business as services are provided and income received, hence the name Margin on Services.

Detailed description of MoS

MoS policy liabilities are ordinarily determined using a projection method, whereby estimates of policy cashflows (premiums, benefits, costs and profit margins to be released in future periods) are projected into the future. The policy liability is calculated as the net present value of these projected cashflows.

The policy liabilities have two components:

• the best estimate liabilities (to cover future benefits and costs, and allowing for future premiums)

• the value of future profit margins (based on the appropriate profit carrier).

A risk-free discount rate is used unless policyholder benefits are linked to performance of assets backing the contract, in which case the discount rate is the expected future earnings rate on those assets.

No profit is normally recognised on inception of new business. Instead, profit margins on new business (after allowing for the recoverability of acquisition costs) enhance the existing value of future profit margins, to be released over the future life of the business.

The expected profit margins are related to a profit carrier which best reflects the provision of services under the contract and emerge as a proportion of that profit carrier.

MoS policy liabilities are calculated using best estimate assumptions about future conditions. In the case of maintenance costs, the assumption must be sufficient to cover the budgeted costs in the following year.

If actual experience differs from that expected, the financial effects of these differences are recognised as experience profits or losses in addition to the expected profits.

The best estimate assumptions are reviewed and revised as necessary at each reporting date. Changes generally do not affect policy liabilities and reported profit; their effect is absorbed in the value of future profit margins, to emerge in the future.

The exception is market related changes in the investment earning assumption for non-participating business. In this case, the policy liabilities are altered and, to the extent that such change is not matched by a similar movement in the value of assets, a profit or loss emerges.

Where future losses are expected, they must be recognised immediately. If a favourable change in assumptions subsequently occurs, or if profitable new business is written, previously recognised losses may be reversed.

An accumulation method may be used if it produces results that are not materially different from those produced by a projection method. A modified accumulation method is used for some discretionary participating contracts, where the policy liability is the accumulation of amounts invested by policyholders, less fees specified in the policy, plus investment earnings and vested benefits, adjusted to allow for the fact that crediting rates are determined by reference to investment income over a period greater than one year. This accumulation may be adjusted to the extent that acquisition costs are to be recovered from future margins between fees and costs.

A similar approach is used for some risk business except that the basic accumulation is the amount of unearned premium plus outstanding and unreported claims at the valuation date.

48 Glossary of terms and independent review AMP Investor Report 1H 07

Definitions of business units (BUs) and exchange rates

AMP

AMP Financial Services, AMP Capital Investors, Cobalt/Gordian and Group Office.

AMP Financial Services

AMP Financial Services provides financial planning and advice to customers in Australia and New Zealand, primarily through selfemployed financial planners and advisors. These planners and advisors may recommend products manufactured by AMP and products of other financial institutions. AMP Financial Services also manufactures a range of other products and services, including:

• superannuation, retirement income and other investment products for individuals

• bundled superannuation services for businesses and employer sponsored schemes

• term, disability and income protection insurance

• selected banking products.

Cobalt/Gordian

Cobalt/Gordian comprises:

• international reinsurance business

• corporate general insurance portfolios

• Cobalt Solutions, the manager of the above businesses and provider of similar services to the insurance industry.

Group Office

Group Office comprises:

• Group Office operations

• Group debt.

Demerged entities

Demerged entities comprised:

UK Financial Services, Henderson Global Investors – North, AMP’s share of VirginMoney and Pearl GB non-core and UK Group Office.

These products and services are primarily distributed through financial planners aligned with AMP Financial Services.

AMP Capital Investors

AMP Capital Investors comprises:

• AMP’s investment management operations in Australia, New Zealand and Asia

• commercial, industrial and retail property management services.

Exchange rates				AUD/GBP	AUD/NZD
2007	1H	07	– closing	0.4229	1.0982
			– average	0.4100	1.1201
2006	FY	06	– closing	0.4027	1.1179
			– average	0.4101	1.1574
	2H	06	– closing	0.4027	1.1179
			– average	0.4033	1.1710
	1H	06	– closing	0.4017	1.2177
			– average	0.4157	1.1524

Glossary of terms and independent review AMP Investor Report 1H 07 49

1H 07 financial results

1H 07 financial results
	AMP Financial	AMP Capital	Cobalt/	Group
Analysis of operating results (A$m)	Services	Investors	Gordian	Office	Total
BU operating earnings	323	78	78	-	479
Group Office costs not recovered from business units	-	-	-	(19)	(19)
Total operating earnings	323	78	78	(19)	460
Underlying investment income	44	6	20	20	90
Interest expense on Group debt	-	-	-	(26)	(26)
Cobalt/Gordian fair value provision release	-	-	-	10	10
Underlying profit	367	84	98	(15)	534
Investment income market adjustment	-	-	-	29	29
Profit after income tax before other items	367	84	98	14	563
Employee defined benefit schemes	-	-	-	3	3
Fair value adjustments	-	-	-	(4)	(4)
Other items	-	-	-	(1)	(1)
Profit attributable to shareholders of AMP Limited before
accounting mismatches	367	84	98	12	561
Total capital resources (A$m)			30 June 2007	31	December 2006
Equity
Contributed equity			3,828		4,067
Capital reserve			-		509
Equity contribution reserve			1,019		1,019
Other reserves			87		74
Retained earnings			444		328
Demerger loss reserve			(3,585)		(3,585)
Total AMP statutory equity attributable to shareholders			1,793		2,412
Accounting mismatches			380		316
Total AMP shareholder equity			2,173		2,728
Group debt			1,061		961
Total capital resources			3,234		3,689

50 Glossary of terms and independent review AMP Investor Report 1H 07

AMP Limited – major ASX announcement index for 1H 07

Announcement date		Subject	Announcement no.
February	15	AMP release the following with the announcement of its 2006 full year results:	03/07
		Part One: AMP underlying profit up 11 per cent in 2006 to A$893 million
		Part Two: Investor Presentation
		Part Three: Investor Report
		Part Four: Appendix 4E
	15	AMP proposes 40c a share capital return and increases final dividend payment	04/07
	15	Update on AMP Financial Planning Enforceable Undertaking with ASIC	05/07
March	6	Presentation by AMP Limited Chief Executive Officer, Andrew Mohl and Chief Financial	10/07
		Officer, Paul Leaming to Offshore Investor Roadshow - March 2007
	6	Presentation by AMP Limited Chief Executive Officer, Andrew Mohl to Citigroup 4th Annual	11/07
		Investment Conference - London
	30	AMP release the following in relation to the 2006 full year financial reports and 2007 AGM:	14/07
		Part One: Full Annual Report 2006
		Part Two: Concise Annual Report 2006
		Part Three: Shareholder Review 2006
		Part Four: Notice of Meeting 2007
		Part Five: Proxy Form 2007
April	4	AMP Final 2006 Dividend Reinvestment Plan Price	15/07
	16	Presentation by AMP Limited Chief Financial Officer, Paul Leaming and AMP Financial	16/07
		Services Managing Director, Craig Dunn to Asian Investor Roadshow - April 2007
	24	ATO ruling on proposed capital return	19/07
May	4	AMP releases the following in relation to the March quarter net cashflows & presentation:	20/07
		Part One: AMP Financial Services announces March quarter net cashflows
		Part Two: Presentation to Macquarie Securities conference
	17	AMP release the following in relation to the Chairman and CEO Addresses to Shareholders:	22/07
		Part One: Annual General Meeting – Chairman’s Address to Shareholders
		Part Two: Annual General Meeting – CEO’s Address to Shareholders
	17	Results of the AMP Limited Annual General Meeting held on 17 May 2007	23/07
	17	Reduction of Option Exercise Prices	24/07
	18	Confirmation of capital return dates	25/07
June	8	AMP advises 2007 interim dividend key dates	28/07
	19	Letter from the Chairman - Capital Return payment	29/07
	21	AMP release the following in relation to the UBS Presentation & Enforceable Undertaking Update:	30/07
		Part One: Update on AMP Financial Planning Enforceable Undertaking with ASIC
		Part Two: Presentation to UBS Financial Services Conference by AMP Financial Services
		Managing Director Craig Dunn

This summary excludes administrative type announcements eg, changes in directors interests, substantial holdings, etc.

Glossary of terms and independent review AMP Investor Report 1H 07 51

Independent review statement

Independent review report of selected information contained in the AMP Limited Investor Report for the half year ended

30 June 2007

To management of AMP Limited

The Investor Report and management’s responsibility

The management of AMP Limited is responsible for the Investor Report including pages 29 and 49.

Embedded Value

Scope

We have conducted an independent review of the embedded value assumptions set out on page 29 of the Investor Report of AMP Limited (“the Investor Report”) for the half year ended 30 June 2007 in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the embedded value assumptions as stated on page 29 are not reasonable for their intended purpose.

We disclaim any assumption of responsibility for any reliance on this review report to any person other than management of AMP Limited.

Our review has been conducted in accordance with Australian Auditing Standards applicable to review engagements. Our review was limited primarily to review of AMP Limited’s documentation to support the embedded value assumptions, inquiries of AMP Limited’s personnel and analytical procedures applied to the financial data. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Statement

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the embedded value assumptions as stated on page 29 of the Investor Report for the half year ended 30 June 2007 are not reasonable for their intended purpose.

Analysis of Operating Results

Scope

We have conducted an independent review of the half year results (“financial information”) set out on page 49 of the Investor Report of AMP Limited for the half year ended 30 June 2007. We have performed the review of the financial information set out on page 49 of the Investor Report in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the financial results on page 49 of the Investor Report are not materially consistent with the definitions of operating earnings, underlying investment income and total capital resources set out on pages 45 and 46. We disclaim any assumption of responsibility for any reliance on this review report to any person other than management of AMP Limited.

Our review has been conducted in accordance with Australian Auditing Standards applicable to review engagements. Our review was limited primarily to review of the reconciliation of financial information to the Financial Report of AMP Limited, review of the determination of the operating earnings, underlying investment income and total capital resources in accordance with the definitions set out on page 45 and 46, inquiries of AMP Limited’s personnel and analytical procedures applied to the financial data. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Statement

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the financial results set out on page 49 of the Investor Report for the half year ended 30 June 2007 are not materially consistent with the definitions of operating earnings, underlying investment income and total capital resources as set out on pages 45 and 46.

Independence

We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

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Ernst & Young

Sydney

23 August 2007

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Website

For additional information on the 2007 half year results, visit the AMP website at amp.com.au/shareholdercentre

You will find:

• Background information on AMP, business units, management and policies.

• Statutory reporting at the AMP Limited level (incorporating shareholder, policy holder and unattributed interests).

• Archived webcasts of presentations to investors and analysts.

• Archived ASX announcements and historical information from 2003.

• Definitions, details of assumptions and calculations of key ratios.

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Registered Office Level 24 33 Alfred St SyDNEy NSW 2000 Australia

amp.com.au

NS1679 07/07