AMP LIMITED

==> picture [540 x 101] intentionally omitted <==

8 August 2018 Manager Client and Market Services Team ASX Market Announcements NZX Limited Australian Securities Exchange Level 1, NZX Centre, 11 Cable Street Level 4, 20 Bridge Street PO Box 2959 Sydney NSW 2000 Wellington, New Zealand

AMP Limited (ASX/NZX: AMP)

Half year financial results

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Part One: Appendix 4D Appendix 3A.1 Part Two: AMP reports 1H 18 results

Part Three: Investor presentation Part Four: Investor report

Part Five: Directors‘ report and financial report

==> picture [20 x 15] intentionally omitted <==

Part Six: Chairman and Acting Chief Executive remuneration arrangements

==> picture [7 x 8] intentionally omitted <==

Public Affairs

T 02 9257 6127 E [email protected] W AMP.com.au/media

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

AMP_AU

AMP Limited ABN 49 079 354 519

Directors’ report and Financial report for the half year ended 30 June 2018

DIRECTORS’ REPORT

For the half year ended 30 June 2018

Your directors present their report on the consolidated entity consisting of AMP Limited and the entities it controlled at the end of or during the half year ended 30 June 2018.

Directors’ details

The directors of AMP Limited during the half year ended 30 June 2018 and up to the date of this report are shown below. Directors were in office for this entire period except where stated otherwise:

Non-executive:

– David Murray AO (Chairman) (appointed 21 June 2018) – BBus, MBA

– Catherine Brenner (Chairman) (resigned 30 April 2018) – BEc, LLB, MBA – Patricia Akopiantz – BA, MBA

– Andrew Harmos – BCom, LLB (Hons)

– Holly Kramer (resigned 8 May 2018) – BA (Hons), MBA

– Trevor Matthews – MA

– John O’Sullivan (appointed 20 June 2018) – BA, LLB, LLM – Geoff Roberts – BCom, MBA

Peter Varghese AO – BA (Hons)

– Vanessa Wallace (resigned 8 May 2018) – BCom, MBA

Executive:

– Mike Wilkins AO (Acting Chief Executive Officer and Managing Director) – BCom, MBA

– Craig Meller (Chief Executive Officer and Managing Director) (resigned 20 April 2018) – BSc (Hons)

Operating and financial review

Principal activities

AMP is Australia and New Zealand’s leading wealth management company, with an expanding international investment management business and a growing retail banking business in Australia.

We provide retail customers in Australia and New Zealand with financial advice and superannuation, retirement income and investment products. We also provide superannuation services for businesses, administration, banking and investment services for self-managed superannuation funds (SMSF), income protection, disability and life insurance, and selected banking products. These products and services are delivered directly from AMP and through a network of close to 3,100 aligned and employed financial advisers in Australia and New Zealand and extensive relationships with third-party distributors.

Through AMP Capital, we manage investments across major asset classes including equities, fixed income, infrastructure, real estate, diversified, multi-manager and multi-asset funds, for domestic and international customers. AMP Capital also provides commercial, industrial and retail real estate management services.

We have over 5,900 employees, around 750,000 shareholders and manage and administer $260 billion in assets.

AMP Capital has a strategic alliance with leading Japanese bank, Mitsubishi UFJ Trust and Banking Corporation (MUFG: Trust Bank) through which MUFG: Trust Bank holds a 15% minority interest in AMP Capital Holdings Limited. AMP Capital holds a 15% stake in China Life AMP Asset Management Company Limited, a funds management company which offers retail and institutional investors in China access to leading investment solutions. AMP also owns a 19.99% stake in China Life Pension Company.

In this report, our business is divided into six areas: Australian wealth management, AMP Capital, AMP Bank, Australian wealth protection, New Zealand financial services and Australian mature.

The Australian wealth management business provides customers with superannuation, retirement income, investment, SMSF software and administration and financial advice services (through aligned and owned advice businesses).

AMP Capital is a diversified investment manager, managing investments across major asset classes including equities, fixed interest, infrastructure, real estate, diversified, multi-manager and multi-asset funds.

AMP Bank is an Australian retail bank participating in residential mortgage lending, and retail and platform deposits. AMP Bank’s mission is to help customers with their goals for life, providing them with targeted retail banking solutions focused on wealth creation in support of their goals. AMP Bank also provides financing to AMP financial planning businesses. AMP Bank’s products and services enable AMP to be relevant over a wider set of financial goals, earlier in the customer’s lifecycle and with higher customer interaction.

Australian wealth protection comprises term life, disability and income protection insurance products sold on an individual and group basis. Insurance products can be bundled with a superannuation product or held independently.

New Zealand financial services provides tailored financial products and solutions to New Zealanders both directly and through a network of financial advisers. New Zealand financial services has a leading market position in both wealth protection and wealth management, in addition to being a market advocate for quality financial advice.

The Australian mature business is the largest closed life insurance business in Australia. Australian mature AUM comprises capital guaranteed products (77%) and market linked products (23%). Australian mature products include whole of life, endowment, investment linked, investment account, Retirement Savings Account, Eligible Rollover Fund, annuities, insurance bonds, personal superannuation and guaranteed savings accounts.

AMP Limited

DIRECTORS’ REPORT

For the half year ended 30 June 2018

Resetting the business

On 27 July 2018, AMP outlined a series of actions to reset the business, prioritise customers and strengthen risk management systems and controls.

These actions include:

Accelerating advice remediation – to ensure impacted advice customers are appropriately compensated. 1H 18 results include a provision of $290 million (post-tax) for potential advice remediation in relation to ASIC reports 499 and 515, which require an industry-wide ‘look back’ of advice provided from 1 July 2008 and 1 January 2009, respectively.
Delivering improved value for around 700,000 customers – through fee reductions to AMP’s flagship MySuper products in 3Q 18. See Events occurring after reporting date.
Investing to strengthen risk management systems and controls – increased investment of approximately $35 million (post-tax) per annum to upgrade risk management controls and strengthen compliance systems across the business over the next two years.
Reprioritising the portfolio review – to realise capital from the manage for value businesses. AMP remains in active discussions with a number of interested parties.

Shareholder class actions

During May and June 2018, AMP Limited was served with five competing shareholder class actions, one filed in the Supreme Court of NSW and the others filed in the Federal Court of Australia. The actions follow the financial advice hearing block in the Royal Commission in April 2018 and allege breaches by AMP Limited of its continuous disclosure obligations. Each action is on behalf of shareholders who acquired an interest in AMP Limited shares over a specified time period, the longest of which is between 10 May 2012 and 15 April 2018. The claims are yet to be quantified and participation has not been determined. AMP Limited has filed its defence in the action brought in the Supreme Court of NSW. The various other competing proceedings are receiving focus with a view to the consolidation of all of the competing class actions into one court. AMP Limited intends to vigorously defend these actions.

ASIC civil penalty proceedings

AMP Financial Planning Pty Limited (AMPFP), a wholly owned subsidiary of AMP Limited, is the subject of proceedings brought by ASIC on 27 June 2018. The proceedings allege contraventions of the Corporations Act 2001 (Cth) by AMPFP relating to the alleged conduct of certain of its authorised financial advisers in providing advice to customers in relation to the replacement of life insurance policies by cancellation and new application rather than by transfer. ASIC’s claim is in respect of 6 advisers and 40 instances of advice. ASIC is seeking declarations that AMPFP contravened various sections of the Corporations Act and orders that AMPFP pay pecuniary penalties of an unspecified amount. AMPFP is currently considering, and will respond to, the statement of claim served on it on 25 July 2018.

Review of operations and results

The profit attributable to shareholders of AMP Limited for the half year ended 30 June 2018 was $115 million (1H 17: $445 million).

AMP’s underlying profit for the half year ended 30 June 2018 was $495 million (1H 17: $533 million).

Underlying profit is AMP’s key measure of business profitability, as it normalises investment market volatility stemming from shareholder assets invested in investment markets and aims to reflect the trends in the underlying business performance of the AMP group. Underlying profit excludes the impact of market volatility, accounting mismatches and other items.

Basic earnings per share for the half year ended 30 June 2018 on a statutory basis were 4.0 cents per share (1H 17: 15.3 cents per share). On an underlying basis, the earnings per share were 17.0 cents per share (1H 17: 18.1 cents per share).

Key performance measures were as follows:

1H 18 underlying profit of $495 million decreased 7% from $533 million in 1H 17, driven by a deterioration in experience and one-off capitalised losses in Australian wealth protection earnings partly offset by growth in AMP Bank (+20%), Australian wealth management (+6%) and AMP Capital (+2%).
Australian wealth management earnings of $204 million increased 6% from 1H 17, largely due to growth in other revenue and lower controllable costs offsetting elevated margin compression driven by MySuper transitions in Q2 17.
Australian wealth management net cash outflows were $873 million, down from net cashflows of $1,023 million in 1H 17, reflecting subdued cashflows in Q2 18. 1H 17 benefited from $521 million in Corporate Super mandate wins and higher member contributions in the lead up to the 1 July 2017 changes to contribution limits.
AMP Capital external net cashflows were $1,591 million, down from $2,439 million in 1H 17. Net cashflows were driven by strong flows into real asset classes (infrastructure and real estate).
Underlying return on equity decreased 0.7 percentage points to 13.8% in 1H 18 from 1H 17, reflecting reduced operating earnings in the Australian wealth protection business.

AMP’s total assets under management (AUM) and administration were $260 billion at 30 June 2018 ($257 billion at 31 December 2017).

Capital management and dividend

Equity and reserves of the AMP group attributable to shareholders of AMP Limited decreased to $7.0 billion at 30 June 2018 from $7.2 billion at 31 December 2017.

AMP remains adequately capitalised, with $1.8 billion in shareholder regulatory capital resources, above Minimum Regulatory Requirements (MRR) at 30 June 2018 ($2.3 billion at 31 December 2017).

AMP’s interim 2018 dividend is 10.0 cents per share, franked to 50%. AMP will continue to offer the dividend reinvestment plan (DRP) to eligible shareholders. For the 2018 interim dividend, no discount will apply to the DRP allocation price. AMP intends to issue new shares to participants in the DRP.

AMP Limited DIRECTORS’ REPORT

For the half year ended 30 June 2018

Events occurring after reporting date

On 27 July 2018 AMP announced pricing reductions which will be implemented in the third quarter of 2018 and are expected to lower Australian wealth management investment related revenue (IRR) by an annualised $50 million from 2019. Australian wealth management IRR for the six months ended 31 December 2018 is expected to be reduced by $12 million. This announced pricing reduction has had no effect on the 30 June 2018 results of the AMP group or the carrying value of any goodwill or intangible assets as at the date of this report.

Other than this matter, as at the date of this report, the directors are not aware of any matters or circumstances that have arisen since the reporting date that has significantly affected, or may significantly affect the group’s operations; the results of those operations; or the group’s state of affairs in future periods.

Rounding

In accordance with the Australian Securities and Investments Commission Corporations Instrument 2016/191, amounts in this directors’ report and the accompanying financial report have been rounded off to the nearest million Australian dollars, unless stated otherwise.

iii

AMP Limited DIRECTORS’ REPORT For the half year ended 30 June 2018

Auditor’s independence declaration to the directors of AMP Limited

The directors have obtained an independence declaration from the company’s auditor, Ernst & Young, for the half year ended 30 June 2018.

==> picture [481 x 496] intentionally omitted <==

==> picture [224 x 27] intentionally omitted <==

AMP Limited DIRECTORS’ REPORT For the half year ended 30 June 2018

Signed in accordance with a resolution of the directors.

==> picture [131 x 56] intentionally omitted <==

David Murray Chairman

==> picture [121 x 63] intentionally omitted <==

Mike Wilkins Acting Chief Executive Officer

Sydney, 8 August 2018

AMP LIMITED ABN 49 079 354 519 HALF YEAR FINANCIAL REPORT 30 JUNE 2018

Financial statements

Consolidated Income Statement

Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows

Notes to the financial statements

Section 1: About this report

1.1 Basis of preparation of the half year financial report 1.2 Understanding the AMP financial report

Section 2: Results for the half year

2.1 Segment performance
2.2 Taxes
2.3 Dividends

Section 3: Investments and intangibles

3.1 Investments in financial instruments
3.2 Intangibles
3.3 Fair value information

Section 4: Capital structure

4.1 Contributed equity
4.2 Interest-bearing liabilities

Section 5: Life insurance and investment contracts

5.1 Life insurance contract liabilities
5.2 Impact of changes in assumptions
5.3 Life insurance contracts – Insurance risk sensitivity analysis
5.4 Analysis of life insurance and investment contract profit

Section 6: Other disclosures

6.1 Provisions and contingent liabilities
6.2 New accounting standards
6.3 Events occurring after reporting date

Directors’ declaration

Independent auditor’s report

AMP Limited financial report Consolidated Income Statement

for the half year ended 30 June 2018

	Note	30 Jun	30 Jun	30 Jun
		2018		2017
		$m		$m
Income and expenses of shareholders, policyholders, external unitholders and
non-controlling interests 1
Life insurance contract related revenue		1,210		1,212
Life insurance claims recovered from reinsurers		226		135
Fee revenue		1,554		1,577
Other revenue		79		40
Interest income, dividends and distributions and net gains on financial assets and liabilities
at fair value through profit or loss		3,648		4,247
Interest income on assets not at fair value through profit or loss		437		388
Share of profit of associates accounted for using the equity method		19		11
Life insurance contract claims expense		(1,083)	(1,076)
Life insurance premiums ceded to reinsurers		(484)		(282)
Fees and commission expenses		(835)		(841)
Staff and related expenses		(553)		(530)
Other operating expenses		(942)		(496)
Finance costs		(278)		(285)
Movement in external unitholder liabilities		(485)		(438)
Change in policyholder liabilities
- life insurance contracts		55		(166)
- investment contracts		(2,347)	(2,762)
Income tax expense	2.2	(93)		(274)
Profit for theperiod		128		460
Profit attributable to shareholders of AMP Limited		115		445
Profit attributable to non-controlling interests		13		15
Profit for the period		128		460
Earnings per share		cents		cents
Basic		4.0		15.3
Diluted		3.9		15.2
1 Income and expenses include amounts attributable to shareholders' interests, policyholders' interests in AMP Life's			statutory
funds and controlled entities of those statutory funds, external unitholders' interests and non-controlling interests.

AMP Limited financial report Consolidated Statement of Comprehensive Income for the half year ended 30 June 2018

	30 Jun	30 Jun
	2018	2017
	$m	$m
Profit for theperiod	128	460
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Fair value reserve
- net gain (loss) on fair value asset reserve	6	(1)
- tax effect on fair value asset reserve gain	(2)	-
- amount transferred toprofit for theperiod	-	(2)
	4	(3)
Cash flow hedges
- net loss on cash flow hedges	(12)	-
- tax effect on cash flow hedge loss	4	-
- amount transferred to profit for the period	6	6
- tax effect on amount transferred toprofit for theperiod	(2)	(2)
	(4)	4
Translation of foreign operations and revaluation of hedge of net investments
- exchange gains (losses) on translation of foreign operations and revaluation of
hedge of net investments	22	(14)
	22	(14)
Items that will not be reclassified subsequently to profit or loss
Defined benefit plans
- actuarial gains	18	18
- tax effect on actuarialgains	(5)	(5)
	13	13
Other comprehensive income for theperiod	35	-
Total comprehensive income for theperiod	163	460
Total comprehensive income attributable to shareholders of AMP Limited	150	445
Total comprehensive income attributable to non-controllinginterests	13	15
Total comprehensive income for theperiod	163	460

AMP Limited financial report Consolidated Statement of Financial Position as at 30 June 2018

	Note	30 Jun	31 Dec
		2018	2017
		$m	$m
Assets
Cash and cash equivalents		3,408	3,602
Receivables		2,543	2,151
Current tax assets		9	7
Planner registers held for sale and prepayments		147	138
Investments in financial assets	3.1	136,485	136,675
Investment properties		134	134
Investments in associates accounted for using the equity method		802	749
Property, plant and equipment		75	75
Deferred tax assets	2.2	887	686
Reinsurance asset - ceded life insurance contracts		963	804
Intangibles	3.2	3,216	3,218
Total assets of shareholders of AMP Limited, policyholders, external unitholders
and non-controlling interests		148,669	148,239
Liabilities
Payables		1,548	1,752
Current tax liabilities		577	71
Provisions	6.1	602	153
Employee benefits		241	325
Other financial liabilities	3.1	973	591
Interest-bearing liabilities	4.2	21,952	21,009
Deferred tax liabilities	2.2	1,683	2,190
External unitholder liabilities		14,209	14,468
Life insurance contract liabilities	5.1	23,484	23,683
Investment contract liabilities		74,957	75,235
Reinsurance liabilitiy - ceded life insurance contracts		1,377	1,450
Defined benefitplan liabilities		13	29
Total liabilities of shareholders of AMP Limited, policyholders, external unitholders
and non-controlling interests		141,616	140,956

Net assets of shareholders of AMP Limited and non-controlling interests		7,053	7,283
Equity
Contributed equity	4.1	9,408	9,376
Reserves		(1,993)	(2,010)
Retained earnings		(454)	(164)
Total equity of shareholders of AMP Limited		6,961	7,202
Non-controllinginterests		92	81
Total equity of shareholders of AMP Limited and non-controlling interests		7,053	7,283

AMP Limited financial report Consolidated Statement of Changes in Equity

for the half year ended 30 June 2018

	F o reign currency Share- translatio n and based C apital F air C ash flo w hedge o f net T o tal N o n- C o ntributed D emerger payment pro fits value hedge investments T o tal R etained shareho lder co ntro lling T o tal equity reserve 1 reserve 2 reserve 3 reserve reserve reserves reserves earnings equity interest equity $ m $ m $ m $ m $ m $ m $ m $ m $ m $ m $ m $ m Equity attributable to shareho lders o f A M P Limited
30 June 2018 Balance at 31 December 2017 Impact of adoption of new accountingstandards	9,376 (2,566) 100 329 7 26 94 (2,010) (164) 7,202 81 7,283 - - - - 3 - - 3 (1) 2 - 2
Balance at 1 January 2018 Profit Other comprehensive income	9,376 (2,566) 100 329 10 26 94 (2,007) (165) 7,204 81 7,285 - - - - - - - - 115 115 13 128 - - - - 4 (4) 22 22 13 35 - 35
Total comprehensive income Share- based payment expense Share purchases Net sale of treasury shares Dividends paid4 Dividends paid on treasury shares4 Sales and acquisitions of non- controlling interests	- - - - 4 (4) 22 22 128 150 13 163 - - 12 - - - - 12 - 12 1 13 - - (20) - - - - (20) - (20) (3) (23) 32 - - - - - - - 2 34 - 34 - - - - - - - - (423) (423) - (423) - - - - - - - - 4 4 - 4 - - - - - - - - - - - -
Balance at 30 June 2018	9,408 (2,566) 92 329 14 22 116 (1,993) (454) 6,961 92 7,053
30 June 2017 Balance at 1 January 2017 Profit Other comprehensive income
	9,619 (2,566) 93 329 8 16 148 (1,972) (185) 7,462 79 7,541 - - - - - - - - 445 445 15 460 - - - - (3) 4 (14) (13) 13 - - -
Total comprehensive income Share- based payment expense Share purchases Net purchase of treasury shares Dividends paid4 Dividends paid on treasury shares4 Sales and acquisitions of non- controlling interests	- - - - (3) 4 (14) (13) 458 445 15 460 - - 10 - - - - 10 - 10 1 11 (200) - (19) - - - - (19) - (219) (2) (221) (78) - - - - - - - (5) (83) - (83) - - - - - - - - (414) (414) (8) (422) - - - - - - - - 4 4 - 4 - - - - - - - - - - (2) (2)
Balance at 30 June 2017	9,341 (2,566) 84 329 5 20 134 (1,994) (142) 7,205 83 7,288

1 Reserve to recognise the additional loss and subsequent transfer from shareholders' retained earnings on the demerger of AMP’s UK operations in December 2003. The loss was the difference between the pro- forma loss on demerger_and the market- based fair value of the UK operations.

2 The Share- based payment reserve represents the cumulative expense recognised in relation to equity- settled share- based payments less the cost of shares purchased on market in respect of entitlements.
3 The Capital profits reserve represents gains attributable to shareholders of AMP on the sale of minority interests in controlled entities to entities outside the AMP group.
4 Dividends paid include dividends paid on treasury shares. Dividends paid on treasury shares are required to be excluded from the consolidated financial statements by adjusting retained earnings.

AMP Limited financial report Consolidated Statement of Cash Flows

for the half year ended 30 June 2018

	30 Jun	30 Jun
	2018	2017
	$m	$m
Cash flows from operating activities 1
Cash receipts in the course of operations	7,385	9,413
Interest received	1,056	998
Dividends and distributions received2	691	554
Cash payments in the course of operations	(10,796)	(11,155)
Finance costs	(382)	(273)
Income taxpaid	(300)	(216)
Cash flows used in operating activities	(2,346)	(679)
Cash flows from investing activities 1
Net proceeds from sale of (payments to acquire):
- investments in financial assets3	1,348	(1,409)
- operating and intangible assets	(13)	-
Payments to acquire operating controlled entities and investments in associates accounted for
usingthe equitymethod	(19)	(68)
Cash flows(used in) from investing activities	1,316	(1,477)
Cash flows from financing activities
Net movement in deposits from customers	629	927
Proceeds from borrow ings - non-banking operations 1	396	163
Repayment of borrow ings - non-banking operations 1	(83)	-
Net movement in borrow ings - banking operations	99	1,088
On-market share buy-back	-	(200)
Dividendspaid4	(418)	(410)
Cash flows from financing activities	623	1,568
Net decrease in cash and cash equivalents	(407)	(588)
Cash and cash equivalents at the beginning of the half year	7,222	8,810
Effect of exchange rate changes on cash and cash equivalents	(1)	(4)
Cash and cash equivalents at the end of the period 1	6,814	8,218

1 Cash flow s and Cash and cash equivalents include amounts attributable to shareholders' interests, policyholders' interests in AMP Life's statutory funds and controlled entities of those statutory funds, external unitholders' interests and non-controlling interests. Cash equivalents for the purpose of the Consolidated Statement of cash flow s includes short-term bills and notes.

2 Dividends and distributions received are amounts of cash received mainly from investments held by AMP Life's statutory funds and controlled entities of the statutory funds. Dividends and distributions reinvested have been treated as non-cash items.

3 Net proceeds from sale of (payments to acquire) investments in financial assets also includes loans and advances made (net of payments) and purchases of financial assets (net of maturities) during the period by AMP Bank.

4 The Dividends paid amount is presented net of dividends on treasury shares.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 1: About this report

This section outlines the structure of the AMP group, information useful to understanding the AMP group’s financial report and the basis on which the half year financial report has been prepared.

1.1 Basis of preparation of the half year financial report
1.2 Understanding the AMP financial report

1.1 Basis of preparation of the half year financial report

The consolidated economic entity (the AMP group or AMP) comprises AMP Limited (the parent entity), a company limited by shares, and incorporated and domiciled in Australia, and all the entities it controlled during the period (subsidiaries).

The consolidated entity prepares a general purpose financial report. This general purpose financial report has been prepared in accordance with the Corporations Act 2001 and AASB134 Interim Financial Reporting . AMP group is a for-profit entity for the purposes of preparing financial statements.

This half year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial position and financial performance of the AMP group as that given by the annual financial report. As a result, this report should be read in conjunction with the 2017 annual financial report of the AMP group and any public announcements made in the period by the AMP group in accordance with the continuous disclosure requirements of the Corporations Act 2001 and the ASX Listing Rules.

Comparative information has been reclassified where required for consistency with the current half year’s presentation. The principal accounting policies and methods of computation adopted in the preparation of the 2018 half year financial report are consistent with the accounting policies and methods of computation adopted in the preparation of the 2017 annual financial report; except for the impact of new accounting standards adopted at 1 January 2018 which are disclosed in note 6.2.

1.2 Understanding the AMP financial report

The consolidated financial statements of AMP Limited include the financial information of its controlled entities.

AMP business operations are carried out by a number of these controlled entities including AMP Life Limited (AMP Life) - a registered life insurance entity and its related controlled entities, AMP Bank Limited (AMP Bank) and AMP Capital investment management companies.

The business of AMP Life is conducted through statutory funds and relates to the provision of wealth management and life insurance products to investors, referred to as policyholders. The investment assets of the statutory funds represent the majority of the assets of the AMP group, a large proportion of which is held on behalf of policyholders. The corresponding liabilities to policyholders are classified as either life investment or life insurance contract liabilities. Under Australian Accounting Standards, some assets held on behalf of policyholders (and the related tax balances) are included in the financial statements at different values to those used in the calculation of the liability to policyholders in respect of the same assets. The impact of these differences flows through to shareholder profit and they are referred to as accounting mismatches in the segment disclosures in note 2.1(b).

AMP Capital operates a large number of registered managed investment schemes and other pooled investment vehicles. AMP Life makes significant policyholder investments into these vehicles. In many cases, this results in the vehicle being controlled and therefore consolidated in its entirety into the AMP group financial statements, including the portion that represents the shareholdings of external parties, known as non-controlling interests.

As a consequence, these consolidated financial statements include not only the assets and liabilities, income and expenses and cash flows attributable to AMP Limited’s shareholders but also the assets and liabilities, income and expenses and cash flows of the statutory funds attributable to policyholders and non-controlling interests.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 2: Results for the half year

This section provides insights into how the AMP group has performed in the current period and provides additional information about those individual line items in the financial statements that the directors consider most relevant in the context of the operations of the AMP group.

Statutory measures of performance disclosed in this report are:

Interim dividend; and
Profit after tax attributable to the shareholders of AMP

Underlying profit is AMP’s key measure of business performance. This performance measure is disclosed by the AMP operating segment within Segment performance.

2.1 Segment performance
2.2 Taxes
2.3 Dividends

2.1 Segment performance

The AMP group identifies its operating segments based on separate financial information that is regularly reviewed by the Acting Chief Executive Officer and his immediate team in assessing performance and determining the allocation of resources. The operating segments are identified according to the nature of profit generated and services provided, and their performance is evaluated based on a post-tax operating earnings basis.

Reportable segment	Segment description
Australian wealth management (WM)	Financial advice services (through aligned and owned advice businesses), platform administration (including SMSF), unit-linked superannuation, retirement income and managed investment products business. Superannuation products include personal and employer sponsored plans.
AMP Capital	A diversified investment manager with a growing international presence, providing investment services for domestic and international customers. AMP Capital manages investments across major asset classes including equities, fixed interest, real estate, infrastructure and multi-manager and multi-asset funds. AMP Capital also provides commercial, industrial and retail real estate management services. AMP Capital and Mitsubishi UFJ Trust and Banking Corporation (MUFG: Trust Bank) have a strategic business and capital alliance, with MUFG: Trust Bank holding a 15% ownership interest in AMP Capital. In November 2013, AMP Capital established a funds management company in China with China Life called China Life AMP Asset Management Company Limited (CLAMP). AMP Capital is a founding shareholder, holding a 15% stake, with the balance held by China Life Asset Management Company, a subsidiary of China Life.
Australian wealth protection (WP)	Includes individual and group term, disability and income protection insurance products. Products can be bundled with a superannuation product or held independently of superannuation.
AMP Bank	Australian retail bank offering residential mortgages, deposits, transaction banking and SMSF products. It also has a portfolio of practice finance loans. AMP Bank distributes through AMP’s aligned distribution network as well as third party brokers, and direct to retail customers via phone and online.
New Zealand financial services (NZFS)	Risk insurance, wealth management and mature book (traditional participating business), with growth in wealth management driven by KiwiSaver.
Australian mature (Mature)	A business comprising products which are largely closed to new business and are in run-off. Products within Australian mature include whole of life, endowment, investment-linked, investment account, Retirement Savings Account, Eligible Rollover Fund, annuities, insurance bonds, personal superannuation and guaranteed savings accounts.

Segment information is not reported for activities of the AMP group office companies as it is not the function of these companies to earn revenue and any revenues earned are only incidental to the activities of the AMP group.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 2: Results for the half year

2.1 Segment performance (continued)

(a) Segment profit

(a) Segment profit
							Total
		AMP		AMP			operating
	WM	Capital1	WP2	Bank	NZFS2	Mature2	segments
30 June 2018	$m	$m	$m	$m	$m	$m	$m
Segment profit after income tax	204	94	1	78	56	70	503
External customer revenue	716	234	1	201	56	70	1,278
Intersegment revenue4	56	126	-	-	-	-	182
Segment revenue 3	772	360	1	201	56	70	1,460
30 June 2017
Segmentprofit after income tax	193	92	52	65	65	75	542
External customer revenue	736	228	52	172	65	75	1,328
Intersegment revenue4	57	120	-	-	-	-	177
Segment revenue 3	793	348	52	172	65	75	1,505

1 AMP Capital segment revenue is reported net of external investment manager fees. Segment profit after income tax is reported net of 15% minority interest attributable to MUFG: Trust Bank.
2 Segment revenue is reported as Segment profit after income tax for WP, NZFS and Mature. This represents gross revenue less claims, expenses, movement in insurance contract liabilities and tax.
3 Segment revenue excludes revenue, expenses and tax relating to assets backing policyholder liabilities.

4 Intersegment revenue represents operating revenue betw een segments priced on an arm’s-length basis and is eliminated on consolidation.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 2: Results for the half year

2.1 Segment performance (continued)

(b) Reconciliations

Segment profit after income tax differs from Profit attributable to shareholders of AMP Limited due to the exclusion of the following items:

	30 Jun	30 Jun
	2018	2017
	$m	$m
Segment profit after income tax	503	542
Groupoffice costs	(29)	(33)
Total operating earnings	474	509
Underlying investment income1	52	50
Interest expense on corporate debt	(31)	(26)
Underlying profit	495	533
Royal Commission	(13)	-
Advice remediation and related costs	(312)	-
Portfolio review and related costs	(19)	-
Other items2	(41)	(9)
Amortisation of acquired intangible assets3	(40)	(43)
Profit before market adjustments and accounting mismatches	70	481
Market adjustment - investment income1	(10)	(23)
Market adjustment - annuity fair value4	8	1
Market adjustment - risk products5	15	(8)
Accountingmismatches6	32	(6)
Profit attributable to shareholders of AMP Limited	115	445
Profit attributable to non-controlling interests	13	15
Profit for theperiod	128	460

1 Underlying investment income consists of investment income on shareholder assets invested in income producing investment assets (as opposed to income producing operating assets) normalised in order to bring greater clarity to the results by eliminating the impact of short-term market volatility on underlying performance. Underlying returns are set based on long-term expected returns for each asset class, except for a short-term return, equivalent to a one-year government bond, set annually for the implicit deferred acquisition costs (DAC) component of shareholder assets. Market adjustment - investment income is the excess (shortfall) betw een the underlying investment income and the actual return on shareholder assets invested in income producing investment assets.

2 Other items largely comprise the net of one-off and non-recurring revenues and costs. 30 June 2018 includes non-advice

remediation charges of $16m (HY17: nil) and cost of significant regulatory and compliance projects of $14m (HY17: $16m).
3 Amortisation of acquired intangibles includes amortisation of intangibles acquired through business combinations, notional intangibles included w ithin the carrying value of equity accounted associates and acquired client registers.
4 Market adjustment - annuity fair value relates to the net impact of investment markets on AMP's annuity portfolio.
5 Market adjustment - risk products relates to the net impact of changes in market economic assumptions (bond yields and CPI) on the valuation of risk insurance liabilities.
6 Under Australian Accounting Standards, some assets held on behalf of the policyholders (and related tax balances) are recognised in the financial statements at different values to the values used in the calculation of the liability to policyholders in respect of the same assets. Therefore, movements in these policyholder assets result in accounting mismatches w hich impact profit attributable to shareholders. These differences have no impact on the operating earnings of the AMP group.

(c) Segment assets

Asset segment information has not been disclosed because the balances are not provided to the Acting Chief Executive Officer or his immediate team for the purpose of evaluating segment performance, or in allocating resources to segments.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 2: Results for the half year

2.2 Taxes

This sub-section outlines the impact of income taxes on the results and financial position of AMP. In particular:

the impact of tax on the reported result;
amounts owed to/receivable from the tax authorities;
deferred tax balances that arise due to differences in the tax and accounting treatment of balances recorded in the financial report; and
discussion of the impacts of life insurance policyholder tax.

These financial statements include the disclosures relating to tax required under accounting standards. Further information on AMP’s tax matters can be found in the AMP Tax Report at amp.com.au/shares.

(a) Income tax expense

The income tax expense amount reflects the impact of both income tax attributable to shareholders as well as income tax attributable to policyholders. In respect of income tax expense attributable to shareholders, the tax rate which applies is 30% in Australia and 28% in New Zealand.

Income tax attributable to policyholders is based on investment income allocated to policyholders less expenses deductible against that investment income. The impact of the tax is charged against policyholder liabilities. A number of different tax rate regimes apply to policyholders. In Australia, certain classes of policyholder life insurance income and superannuation earnings are taxed at 15%, and certain classes of income on some annuity business are tax-exempt. The rate applicable to New Zealand life insurance business is 28%.

The following table provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the half year and the income tax expense recognised in the Income statement for the half year.

	30 Jun	30 Jun
	2018	2017
	$m	$m
Profit before income tax	221	734
Policyholder tax expense recognised as part of the change in policyholder liabilities in determining
profit before tax	(51)	(141)
Profit before income tax attributable to shareholders and non-controlling interest	170	593
Tax at the Australian tax rate of 30% (2017: 30%)	(51)	(178)
Shareholder impact of life insurance tax treatment	(6)	(11)
Tax concessions including research and development and offshore banking unit	4	3
Non-deductible expenses	(13)	(19)
Non-taxable income	8	34
Other items	9	(14)
Over (under) provided in previous years	3	(3)
Utilisation of previously unrecognised tax losses	-	49
Differences in overseas tax rates	4	6
Income tax expense attributable to shareholders and non-controlling interest	(42)	(133)
Income tax expense attributable topolicyholders	(51)	(141)
Income tax expenseper Income statement	(93)	(274)

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 2: Results for the half year

2.2 Taxes (continued)

(b) Analysis of income tax expense

(b) Analysis of income tax expense
	30 Jun	30 Jun
	2018	2017
	$m	$m
Current tax expense	(821)	(832)
Increase in deferred tax assets	227	202
Decrease in deferred tax liabilities	498	360
Over(under) provided inpreviousyears includingamounts attributable topolicyholders	3	(4)
Income tax expense	(93)	(274)

(c) Analysis of deferred tax balances

(c) Analysis of deferred tax balances
	30 Jun	31 Dec
	2018	2017
	$m	$m
Analysis of deferred tax assets
Expenses deductible and income recognisable in future years	737	470
Unrealised movements on borrow ings and derivatives	24	32
Unrealised investment losses	40	40
Losses available for offset against future taxable income	60	87
Other	26	57
Total deferred tax assets	887	686
Analysis of deferred tax liabilities
Unrealised investment gains	1,280	1,736
Other	403	454
Total deferred tax liabilities	1,683	2,190
(d) Amounts recognised directly in equity
	30 Jun	30 Jun
	2018	2017
	$m	$m
Deferred income tax expense related to items taken directlyto equityduringtheperiod	(5)	(7)

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 2: Results for the half year

2.3 Dividends

Dividends paid and proposed during the half year are shown in the table below:

	2018	2017	2017	2016
	Interim	Final	Interim	Final
Dividend per share (cents)	10.0	14.5	14.5	14.0
Franking percentage	50%	90%	90%	90%
Cost (in $m)	292	423	423	414
Payment date	28 September 2018	28 March 2018	29 September 2017	31 March 2017
	30 Jun		30 Jun
	2018		2017
	$m		$m
Dividends paid
Previousyear final dividend on ordinaryshares	423		414
Total dividendspaid1	423		414

Interim dividendsproposed but not recognised	292		423

1 Total dividends paid includes dividends paid on treasury shares $4m (30 June 2017: $4m).

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 3: Investments and intangibles

This section highlights the AMP group’s assets used to support the AMP group’s activities.

3.1 Investments in financial instruments
3.2 Intangibles
3.3 Fair value information

3.1 Investments in financial instruments

3.1 Investments in financial instruments
	30 Jun	31 Dec
	2018	2017
	$m	$m
Financial assets measured at fair value through profit or loss1
Equity securities and listed managed investment schemes	54,980	58,538
Debt securities2	32,789	32,457
Investments in unlisted managed investment schemes	24,781	22,398
Derivative financial assets	751	1,092
Other financial assets	-	5
Total financial assets measured at fair value through profit or loss	113,301	114,490
Financial assets measured at fair value through other comprehensive income
Equity securities and managed investment schemes	64	68
Debt securities3	2,301	-
Total financial assets measured at fair value through other comprehensive income	2,365	68
Financial assets measured at amortised cost
Loans and advances	20,338	19,554
Debt securities	481	2,563
Total financial assets measured at amortised cost	20,819	22,117
Total financial assets	136,485	136,675
Other financial liabilities
Derivative financial liabilities	830	489
Collateral deposits held2	143	102
Total other financial liabilities	973	591

1 Financial assets measured at fair value through profit or loss are mainly assets of AMP Life's statutory funds and their controlled entities.

2 Included within debt securities are assets held to back the liability for collateral deposits.

3 Debt securities measured at fair value through other comprehensive income are assets of AMP Bank and were previously

measured at amortised cost. Refer to note 6.2 for details of the classification change resulting from_the adoption of AASB 9 Financial Instruments .

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 3: Investments and intangibles

3.2 Intangibles

3.2 Intangibles
			Value of
		Capitalised	in-force	Distribution	Other
	Goodwill1	costs	business	networks	intangibles	Total
	$m	$m	$m	$m	$m	$m
30 June 2018
Balance at 1 January 2018	2,123	434	498	147	16	3,218
Additions through acquisitions of controlled
entities	5	-	-	5	-	10
Additions through separate acquisitions	-	-	-	20	-	20
Additions through internal development	-	97	-	-	-	97
Transferred to inventories	-	-	-	(9)	-	(9)
Transferred through disposal	-	-	-	(6)	-	(6)
Amortisation expense	-	(61)	(39)	(13)	(1)	(114)
Impairment loss	-	-	-	-	-	-
Balance at 30 June 2018	2,128	470	459	144	15	3,216
Cost	*2,904*	*1,554*	*1,191*	*370*	*110*	*6,129*
Accumulated amortisation and impairment	*(776)*	*(1,084)*	*(732)*	*(226)*	*(95)*	*(2,913)*
31 December 2017
Balance at 1 January 2017	2,117	382	600	99	1	3,199
Additions through acquisitions of controlled
entities	6	-	-	24	-	30
Additions through separate acquisitions	-	-	-	26	15	41
Additions through internal development	-	191	-	-	-	191
Reductions through disposal	-	-	-	(13)	-	(13)
Transferred from inventories	-	-	-	46	-	46
Amortisation expense	-	(138)	(102)	(31)	-	(271)
Impairment loss	-	(1)	-	(4)	-	(5)
Balance at 31 December 2017	2,123	434	498	147	16	3,218
Cost	2,899	1,457	1,191	360	110	6,017
Accumulated amortisation and impairment	(776)	(1,023)	(693)	(213)	(94)	(2,799)

1 Total goodw ill comprises amounts attributable to shareholders of $2,113m (2017: $2,108m) and amounts attributable to policyholders of $15m (2017: $15m).

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 3: Investments and intangibles

3.3 Fair value information

The following table shows the carrying amount and estimated fair values of financial instruments and investment properties, including their levels in the fair value hierarchy.

levels in the fair value hierarchy.
	Carrying				Total fair
	amount	Level 1	Level 2	Level 3	value
30 June 2018	$m	$m	$m	$m	$m
Financial assets measured at fair value
Equity securities and listed managed investment schemes	55,044	51,496	1,100	2,448	55,044
Debt securities	35,090	1	34,962	127	35,090
Investments in unlisted managed investment schemes	24,781	-	23,168	1,613	24,781
Derivative financial assets	751	296	455	-	751
Investment properties	134	-	-	134	134
Other financial assets	-	-	-	-	-
Total financial assets measured at fair value	115,800	51,793	59,685	4,322	115,800
Financial assets not measured at fair value
Loans and advances	20,338	-	20,332	-	20,332
Debt securities	481	-	481	-	481
Total financial assets not measured at fair value	20,819	-	20,813	-	20,813
Financial liabilities measured at fair value
Derivative financial liabilities	830	207	623	-	830
Collateral deposits held	143	-	143	-	143
Investment contract liabilities	74,957	-	1,878	73,079	74,957
Total financial liabilities measured at fair value	75,930	207	2,644	73,079	75,930
Financial liabilities not measured at fair value
AMP Bank
- Deposits	10,285	-	10,322	-	10,322
- Other	8,922	-	8,940	-	8,940
AMP Corporate entities - bonds and notes	2,257	-	2,276	-	2,276
Borrow ings w ithin investment entities controlled by AMP
Life statutory funds	488	-	488	-	488
Total financial liabilities not measured at fair value	21,952	-	22,026	-	22,026
31 December 2017
Financial assets measured at fair value
Equity securities and listed managed investment schemes	58,606	55,942	728	1,936	58,606
Debt securities	32,457	1	32,344	112	32,457
Investments in unlisted managed investment schemes	22,398	-	20,964	1,434	22,398
Derivative financial assets	1,092	210	882	-	1,092
Investment properties	134	-	-	134	134
Other financial assets	5	-	5	-	5
Total financial assets measured at fair value	114,692	56,153	54,923	3,616	114,692
Financial assets not measured at fair value
Loans and advances	19,554	-	19,549	-	19,549
Debt securities - held to maturity	2,563	-	2,567	-	2,567
Total financial assets not measured at fair value	22,117	-	22,116	-	22,116
Financial liabilities measured at fair value
Derivative financial liabilities	489	148	341	-	489
Collateral deposits held	102	-	102	-	102
Investment contract liabilities	75,235	-	2,028	73,207	75,235
Total financial liabilities measured at fair value	75,826	148	2,471	73,207	75,826
Financial liabilities not measured at fair value
AMP Bank
- Deposits	9,655	-	9,653	-	9,653
- Other	8,819	-	8,867	-	8,867
Corporate entity borrow ings	1,938	-	1,992	-	1,992
Borrow ings w ithin investment entities controlled by AMP
Life statutoryfunds	597	-	597	-	597
Total financial liabilities not measured at fair value	21,009	-	21,109	-	21,109

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 3: Investments and intangibles

3.3 Fair value information (continued)

AMP’s methodology and assumptions used to estimate the fair value of financial instruments are described below:

Equity securities and	The fair value of equity securities traded in an active market and listed managed investment schemes
listed managed	reflects the quoted bid price at the reporting date. In the case of equity securities and listed managed
investment schemes	investment schemes where there is no active market, fair value is established using valuation techniques
	including the use of recent arm’s length transactions, references to other instruments that are substantially
	the same, discounted cash flow analysis and option pricing models.
Debt securities	The fair value of listed debt securities reflects the bid price at the reporting date. Listed debt securities that
	are not frequently traded are valued by discounting estimated recoverable amounts. The fair value of
	unlisted debt securities is estimated using interest rate yields obtainable on comparable listed
	investments. The fair value of loans is determined by discounting the estimated recoverable amount using
	prevailing interest rates.
Loans	The estimated fair value of loans represents the discounted amount of estimated future cash flows
	expected to be received, based on the maturity profile of the loans. As the loans are unlisted, the discount
	rates applied are based on the yield curves appropriate to the remaining term of the loans. The loans may
	be measured at an amount in excess of fair value due to fluctuations on fixed rate loans. As the
	fluctuations in fair value do not represent a permanent diminution and the carrying amounts of the loans
	are recorded at recoverable amounts after assessing impairment, it is not appropriate to restate their
	carrying amount.
Unlisted managed	The fair value of investments in unlisted managed investment schemes is determined on the basis of
investment schemes	published redemption prices of those managed investment schemes at the reporting date.
Derivative financial	The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is
assets and liabilities	based on quoted market prices (current bid price or current offer price) at the reporting date. The fair value
	of financial instruments not traded in an active market (eg over-the-counter derivatives) is determined
	using valuation techniques. Valuation techniques include net present value techniques, option pricing
	models, forward pricing, swap models, discounted cash flow methods and comparison to quoted market
	prices or dealer quotes for similar instruments. The models use a number of inputs, including the credit
	quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective
	currencies, currency basis spreads between the respective currencies, interest rate curves and forward
	rate curves of the underlying commodity. Some derivative contracts are significantly cash collateralised,
	thereby minimising both counterparty risk and the Group’s own non-performance risk.
Corporate borrowings	Borrowings comprise commercial paper, drawn liquidity facilities, various floating-rate and medium-term
	notes and subordinated debt. The estimated fair value of borrowings is determined with reference to
	quoted market prices. For borrowings where quoted market prices are not available, a discounted cash
	flow model is used, based on a current yield curve appropriate for the remaining term to maturity. For
	short term borrowings, the par value is considered a reasonable approximation of the fair value
AMP Bank deposits and	The estimated fair value of deposits and other borrowings represents the discounted amount of estimated
other borrowings	future cash flows expected to be paid based on the residual maturity of these liabilities. The discount rate
	applied is based on a current yield curve appropriate for similar types of deposits and borrowings at the
	reporting date.
Investment properties	The fair value of investment properties is determined by independent valuers, having appropriate
	recognised professional qualifications and recent experience in the location and category of the properties
	being valued. The valuers apply ‘comparable sales analysis’ and the ‘capitalised income approach’ by
	reference to annual net market income, comparable capitalisation rates and other property-specific
	adjustments as well as ‘discounted cash flow analysis’, where the expected net cash flows are discounted
	to their present value using a market-determined risk adjusted discount rate.
Investment contract	Investment contract liabilities are liabilities of AMP Life and relate to wealth management products such as
liabilities	savings, investment-linked and retirement income policies. The liability to policyholders, other than for
	fixed retirement income policies, is linked to the performance and value of the assets that back those
	liabilities. The fair value of such liabilities is therefore the same as the fair value of those assets.
	For fixed retirement income policies, the liability is linked to the fair value of the fixed retirement income
	payments and associated management services element. The fair value of the fixed retirement income
	payments is calculated as their net present value using a fair value discount rate. The fair value of the
	associated management services element is the net present value, using a fair value discount rate, of all
	expenses associated with the provision of services and any profit margins thereon.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 3: Investments and intangibles

3.3 Fair value information (continued)

The financial assets and liabilities measured at fair value are categorised using the fair value hierarchy which reflects the significance of inputs into the determination of fair value as follows:

Level 1: the fair value is valued by reference to quoted prices in active markets for identical assets;
Level 2: the fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices);
Level 3: the fair value is estimated using inputs for the asset or liability that are not based on observable market data.

For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

There have been no significant transfers between Level 1 and Level 2 during the 2018 financial half year. Transfers to and from Level 3 are shown in the Reconciliation of Level 3 values table later in this note.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 3: Investments and intangibles

3.3 Fair value information (continued)

Level 3 fair values

For financial assets categorised within Level 3 of the fair value hierarchy, the valuation processes applied in valuing such assets are governed by the AMP Capital asset valuation policy. This policy outlines the asset valuation methodologies and processes applied to measure non-exchange traded assets which have no regular market price, including investment property, infrastructure, private equity, alternative assets, and illiquid debt securities. All significant Level 3 assets are referred to the appropriate valuation committee who meet at least every six months, or more frequently if required.

The following table shows the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used.

used.
Type	Valuation technique	Significant unobservable inputs
Equity securities and listed managed investment schemes	Discounted cash flow approach utilising cost of equity as the discount rate.	Discount rate Terminal value growth rate Cash flow forecasts
Debt securities	Discounted cash flow approach.	Discount rate Cash flow forecasts
Investments in unlisted managed investment schemes	Published redemption prices.	Judgement made in determining unit prices
Investment contract liabilities	Published unit prices and the fair value of backing assets.	Fair value of financial instruments Cash flow forecasts Credit risk
Investment properties	Comparable sales analysis. Capitalised income approach. Discounted cash flow approach utilising market determined risk adjusted discount rate.	Capitalisation rate Discount rate Cash flow forecasts

Sensitivity analysis

Reasonably possible alternative assumptions could have been used in determining the fair values of financial instruments categorised as Level 3. The following table shows the sensitivity to changes in key assumptions, calculated by changing one or more of the significant unobservable inputs for individual assets. This included assumptions such as credit risk and discount rates for determining the valuation range on an individual estimate.

	(+) $m (-) $m (+) $m (-) $m 30 June 2018 31 December 2017
Financial assets Equity securities and listed managed investment schemes 1 Financial liabilities Investment contract liabilities2	92 (90) 111 (103) 4 (3) 4 (3)

1 The discounts rate used to value the assets range from 7.30% to 14.00%. Sensitivities have been determined by up to +/- 100 basis point change in the discount rates.

2 Sensitivities disclosed illustrate the impact of a +/- 50 basis point change in discount rate for term annuity business and a +/- 100 basis point change in equities volatility for the North Guarantee.

AMP Limited financial report Notes to the financial statements

for the half year ended 30 June 2018

Section 3: Investments and intangibles

3.3 Fair value information (continued)

Level 3 fair values (continued)

Reconciliation of Level 3 values

The following table shows movements in the fair values of financial instruments categorised as Level 3 in the fair value hierarchy:

								Total gains and
								losses on
	Balance at					Net	Balance at	assets and
	the beginning	FX gains	Total gains/	Purchases/	Sales/	transfers	the end of	liabilities held at
	of the period	or losses1	losses1	deposits	withdrawals	in/(out)2	the period	reporting date
	$m	$m	$m	$m	$m	$m	$m	$m
30 June 2018
Assets classified as Level 3
Equity securities and listed managed investment schemes	1,936	-	158	98	(20)	276	2,448	158
Debt securities	112	-	3	13	(1)	-	127	3
Investments in unlisted managed investment schemes	1,434	-	76	68	(18)	53	1,613	76
Investment properties	134	-	-	-	-	-	134	-
Other financial assets	-	-	-	-	-	-	-	-
Liabilities classified as Level 3
Investment contract liabilities	73,207	2	1,786	3,957	(5,873)	-	73,079	1,786
31 December 2017
Assets classified as Level 3
Equity securities and listed managed investment schemes	2,499	-	268	439	(1,088)	(182)	1,936	271
Debt securities	19	-	(20)	174	(50)	(11)	112	(20)
Investments in unlisted managed investment schemes	942	-	(159)	1,392	(955)	214	1,434	(163)
Investment properties	127	-	-	7	-	-	134	-
Other financial assets	5	-	(1)	(1)	-	(3)	-	(1)
Liabilities classified as Level 3
Investment contract liabilities	69,327	(17)	6,010	10,150	(12,263)	-	73,207	6,006

1 Gains and losses are classified in investment gains and losses or change in policyholder liabilities in the Consolidated Income statement.

2 The AMP group recognises transfers as at the end of the reporting period during which the transfer has occurred. Transfers are recognised when there are changes in the observability of the pricing of the relevant securities or where the AMP group cease to consolidate a controlled entity.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 4: Capital structure

This section provides information relating to AMP group’s capital management and equity and debt structure.

The capital structure of the AMP group consists of equity and debt. AMP determines the appropriate capital structure in order to finance the current and future activities of the AMP group and satisfy the requirements of the regulator. The directors review the group’s capital structure and dividend policy regularly and do so in the context of the group’s ability to satisfy minimum and target capital requirements, and to protect and meet the needs of the policyholders.

4.1 Contributed equity
4.2 Interest-bearing liabilities

4.1 Contributed equity

4.1 Contributed equity
	30 Jun	31 Dec
	2018	2017
	$m	$m
Issued capital1,3
2,918,469,137 (2017: 2,918,469,137) ordinary shares fully paid	9,547	9,547
Treasury shares2
26,811,459(2017: 32,887,493)treasuryshares	(139)	(171)
Total contributed equity
2,891,657,678 (2017: 2,885,581,644) ordinary shares fully paid	9,408	9,376
Issued capital
Balance at the beginning of the period	9,547	9,747
Nil(2017: 39,268,827)on-market share buy-back	-	(200)
Balance at the end of theperiod	9,547	9,547
Treasury shares
Balance at the beginning of the period	(171)	(128)
Net sales(purchases)duringtheperiod	32	(43)
Balance at the end of theperiod	(139)	(171)

Holders of ordinary shares have the right to receive dividends as declared and, in the event of the winding up of the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Fully paid ordinary shares carry the right to one vote per share. Ordinary shares have no par value.

1 Under the terms of the dividend reinvestment plan (DRP), shareholders may elect to have all or part of their dividend entitlements satisfied in shares rather than being paid cash. The DRP applied for the 2017 final dividend (paid in March 2018) at 14.5 cents per share. AMP settled the DRP for the 2017 final dividend by acquiring shares on market and, accordingly, no new shares were issued.

2 Of the AMP Limited ordinary shares on issue 24,685,072 (2017: 30,761,106) are held by AMP Life on behalf of policyholders. ASIC has granted relief from restrictions in the Corporations Act 2001 to allow AMP Life to hold and trade shares in AMP Limited as part of the policyholder funds' investment activities. The cost of the investment in these treasury shares is reflected as a deduction from total contributed equity. The remaining balance is held by AMP Foundation Limited as trustee for the AMP Foundation.

3 Mitsubishi UFJ Trust and Banking Corporation (MUFG: Trust Bank) has an option to require AMP Limited to purchase MUFG: Trust Bank's interest in AMP Capital Holdings Limited (AMPCH) in certain circumstances. As consideration for the acquisition of AMPCH shares, AMP would be required to issue ordinary shares in AMP Limited to MUFG: Trust Bank (or its nominee).

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 4: Capital structure

4.2 Interest-bearing liabilities

Section 4: Capital structure 4.2 Interest-bearing liabilities
	Current Non- current Total Current Non- current Total $m $m $m $m $m $m 30 June 2018 31 December 2017
Interest-bearing liabilities AMP Bank - Deposits1 - Other Corporate entity borrowings2 - 6.875% GBP Subordinated Guaranteed Bonds (maturity 2022) - AMP Subordinated Notes 2 (first call 2018, maturity 2023)3 - AMP Wholesale Capital Notes4 - AMP Capital Notes- 20153 - AMP Capital Notes- 20175 - Syndicated loan facility6 - Commercial paper - Medium Term Notes7 - Other Borrowings within investment entities controlled by AMP Life statutory funds	10,241 44 10,285 9,627 28 9,655 2,251 6,671 8,922 3,382 5,437 8,819 - 71 71 - 69 69 - 325 325 - 324 324 - 277 277 - 276 276 - 264 264 - 264 264 - 250 250 - 250 250 - 737 737 - 497 497 148 - 148 229 - 229 - 154 154 - - - 31 - 31 28 1 29 74 414 488 89 508 597
Total interest-bearing liabilities	12,745 9,207 21,952 13,355 7,654 21,009

1 Deposits comprise at call retail cash on deposit and retail term deposits at variable interest rates within the AMP Bank.

2 The current / non-current classification of corporate entity borrowings is based on the maturity of the underlying debt instrument. The carrying value of corporate entity borrowings includes interest payable of $11m (2017: $8m) which is expected to be settled within the next 12 months.

3 AMP Subordinated Notes 2 were issued on 18 December 2013 and are listed on the ASX. In certain circumstances, AMP may be required to convert some or all of AMP Subordinated Notes 2 into AMP ordinary shares.

4 AMP Wholesale Capital Notes and AMP Capital Notes were issued on 27 March and 30 November 2015, respectively. They are perpetual notes with no maturity date. In certain circumstances, AMP may be required to convert some or all of the Notes into AMP ordinary shares.

5 Floating Rate Subordinated Unsecured Notes were issued on 1 September 2017 and mature 1 December 2027. AMP has the right, but not the obligation, to redeem all or some of the notes on 1 December 2022 or, subject to certain conditions, at a later date. In certain circumstances, AMP may be required to convert some or all of the Notes into AMP ordinary shares.

6 The facility was renegotiated effective 14 December 2017 and includes tranches of $300m, $300m and $150m, maturing 22 March 2020, 22 March 2022 and 22 March 2023 respectively. On adoption of AASB 9 Financial Instruments, a gain on modification of $15m was recognised as an adjustment to 1 January 2018 retained earnings, as a result of the change in the terms negotiated in 2017. This gain is also recognised as an offset to the carrying value of the syndicated loan facility and will amortise over the life of the facility. The amortisation of the gain is recognised as an increase to Finance costs on the Income statement. During the six months ended 30 June 2018, $3m of finance costs were attributable to the amortisation of the gain on the modification of the syndicated loan facility.

7 CHF110m Senior Unsecured Fixed Rate Bonds were issued on 19 June 2018 and mature 19 December 2022.

AMP Limited financial report Notes to the financial statements

for the half year ended 30 June 2018

Section 5: Life insurance and investment contracts

This section summarises the key financial results of AMP’s liabilities in respect of life insurance and investment contracts. It also details the key components of the profits that are recognised in respect of life insurance contracts and the sensitivity of those profits to variations in assumptions.

5.1 Life insurance contract liabilities
5.2 Impact of changes in assumptions
5.3 Life insurance contracts – Insurance risk sensitivity analysis
5.4 Analysis of life insurance and investment contract profit

5.1 Life insurance contract liabilities

5.1 Life insurance contract liabilities
	30 June	31 Dec
	2018	2017
	$m	$m
Life insurance contract liabilities determined using projection method
Best estimate liability
- value of future life insurance contract benefits	15,012	15,007
- value of future expenses	4,542	4,616
- value of future premiums	(12,018)	(12,078)
Value of future profits
- life insurance contract holder bonuses	3,392	3,354
- shareholders’profit margins	2,064	2,183
Total life insurance contract liabilities determined using theprojection method 1	12,992	13,082
Life insurance contract liabilities determined using accumulation method
Best estimate liability
- value of future life insurance contract benefits	8,460	8,703
- value of future acquisition expenses	(54)	(58)
Total life insurance contract liabilities determined using the accumulation method	8,406	8,645
Value of declared bonus	154	290
Unvested policyholder benefits liabilities 1	2,346	2,312
Total life insurance contract liabilities net of reinsurance	23,898	24,329
Reinsurance asset- ceded life insurance contracts	963	804
Reinsurance liability - ceded life insurance contracts2	(1,377)	(1,450)
Total life insurance contract liabilitiesgross of reinsurance	23,484	23,683
1 For participating business in the statutory funds, part of the assets in excess of the life insurance contract and other liabilities
calculated under MoS are attributed to policyholders. Under the Life Act, this is referred to as policyholder retained profits. For
the purpose of reporting under accounting standards, this amount is referred to as unvested life policyholder benefits liabilities
and is included w ithin life insurance contract liabilities even though it is yet to be vested as specific policyholder entitlements.
2 Reinsurance liability - ceded life insurance contracts reflects the present value of the net obligation from the active lives portfolio
to transfer cashflow s under the 60% quota share reinsurance arrangement w ith Gen Re and Munich Re, in return		for upfront
commission received. It also reflects the reinsurance position of the surplus reinsurance arrangement w ith Gen Re.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 5: Life insurance and investment contracts

5.2 Impact of changes in assumptions

Key assumptions are regularly reviewed and updated where required. For the half year ended 30 June 2018, certain key assumptions have been strengthened as follows:

TPD claims assumptions for certain lump sum portfolios;
IBNR reserves for components of group risk business; and
Termination rates for certain income protection portfolios.

Under MoS, for life insurance contracts valuations using the projection method, changes in assumptions are recognised by adjusting the value of future profit margins in life insurance contract liabilities. Future profit margins are released over future periods.

Changes in assumptions do not include market related changes in discount rates such as changes in benchmark market yields caused by changes in investment markets and economic conditions. These are reflected in both life insurance contract liabilities and asset values at the reporting date.

The impact on future profit margins of actual changes in assumptions from 31 December 2017 to 30 June 2018 in respect of life insurance contracts (excluding new business contracts which are measured using assumptions at reporting date) is as shown in the table below.

		Change in life
	Change in	insurance	Change in
	future profit	contract	shareholders’
Assumption change	margins	liabilities	profit & equity
	$m	$m	$m
Mortality and morbidity	(110)	33	(23)
Other assumptions1	15	(33)	23

1 Other assumption changes include premium changes.

In most cases, the overall amount of life insurance contract liabilities and the current period profit are not affected by changes in assumptions. However, where in the case of a particular related product group, the changes in assumptions at the end of a period eliminate any future profit margins for the related product group, and results in negative future profit margins, this negative balance for all forecasted future periods is recognised as a loss in the current period. If the changes in assumptions in a period are favourable for a product group currently in loss recognition, then the previously recognised losses are reversed in the period.

Critical accounting estimates and judgements

The measurement of insurance contract liabilities is determined using the MoS methodology. The determination of the liability amounts involves judgement in selecting the valuation methods, profit carriers and valuation assumptions for each type of business. The determination is subjective and relatively small changes in assumptions may have a significant impact on the reported profit. The Board of AMP Life is responsible for these judgements and assumptions, after taking advice from the Appointed Actuary. Insurance risk sensitivities updated for assumption changes in the period ending 30 June 2018 are disclosed in note 5.3.

AMP Limited financial report Notes to the financial statements

for the half year ended 30 June 2018

Section 5: Life insurance and investment contracts

5.3 Life insurance contracts – Insurance risk sensitivity analysis

Following the assumption changes, sensitivity results have been updated.

This table shows information about the sensitivity of Australian Wealth Protection life insurance contract liabilities and current period shareholder profit after income tax and equity, to a number of possible changes in assumptions. The expected impacts on other lines of business from these possible changes in assumptions are not material.

business from these possible changes in assumptions are not material.
	Change in life insurance contract liabilities Change in shareholder profit after income tax and equity
	Gross of reinsurance Net of reinsurance Gross of reinsurance Net of reinsurance
Variable Change in variable	$m $m $m $m
Mortality 10% increase in Australian Wealth Protection mortality rates Morbidity - lump sum disablement 20% increase in Australian Wealth Protection lump sum disablement rates Morbidity - disability income 10% increase in Australian Wealth Protection incidence rates Morbidity - disability income 10% decrease in Australian Wealth Protection recovery rates Discontinuance rates 10% increase in Australian Wealth Protection discontinuance rates	86 14 (60) (10) 197 57 (138) (40) 202 85 (142) (59) 355 168 (248) (117) 101 29 (71) (20)

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 5: Life insurance and investment contracts

5.4 Analysis of life insurance and investment contract profit

Section 5: Life insurance and investment contracts 5.4 Analysis of life insurance and investment contract profit
	30 June	30 June
	2018	2017
	$m	$m
Components of profit related to life insurance and investment contract liabilities:
- planned margins of revenues over expenses released	211	243
- profits (losses) arising from difference betw een actual and assumed experience	1	(3)
- losses arising from changes in assumptions	(23)	(40)
- capitalised (losses) reversals	(9)	3
Profit related to life insurance and investment contract liabilities	180	203
Attributable to:
- life insurance contracts	89	103
- investment contracts	91	100
Profit related to life insurance and investment contract liabilities	180	203

Investment earnings on assets in excess of life insurance and investment contract
liabilities	28	52

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 6: Other disclosures

This section includes disclosures other than those covered in the previous sections, required for the AMP group to comply with the accounting standards and pronouncements.

6.1 Provisions and contingent liabilities
6.2 New accounting standards
6.3 Events occurring after reporting date

6.1 Provisions and contingent liabilities

6.1 Provisions and contingent liabilities
	Consolidated
	30 Jun	31 Dec
	2018	2017
	$m	$m
(a) Provisions
Restructuring1	16	22
Advice remediation	460	51
Other	126	80
Total provisions	602	153

Advice remediation			460	51
Other			126	80
Total provisions			602	153
		Advice
	Restructuring1	remediation	Other	Total
	$m	$m	$m	$m
(b) Movements in provisions - consolidation
Balance at the beginning of the period	22	51	80	153
Additional provisions made during the period	5	415	69	489
Provisions used duringtheperiod	(11)	(6)	(23)	(40)
Balance at the end of theperiod	16	460	126	602

1 Restructuring provisions are recognised in respect of programs that materially change the scope of the business or the manner in w hich the business is conducted.

Accounting policy – recognition and measurement

Provisions are recognised when:

the AMP group has a present obligation (legal or constructive) as a result of a past event;
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. For provisions other than employee entitlements, the discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.

A contingent liability is disclosed where a legal or constructive obligation is possible, but not probable, or where the obligation is probable, but the financial impact of the event is unable to be reliably estimated.

Critical accounting estimates and judgements

Provisions are reviewed on a regular basis and adjusted for management’s best estimates, however significant judgement is required to estimate likely outcomes and future cash flows. The nature of these judgements means that future amounts settled may be different from those provided.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 6: Other disclosures

6.1 Provisions and contingent liabilities (continued)

From time to time, the AMP group may incur obligations arising from litigation or various types of contracts entered into in the normal course of business, including guarantees issued by the parent for performance obligations to controlled entities in the AMP group. Where it is determined that the disclosure of information in relation to a contingent liability can be expected to seriously prejudice the position of the AMP group (or its insurers) in a dispute, accounting standards allow the AMP group not to disclose such information and it is the AMP group’s policy that such information is not to be disclosed in this note. A contingent liability exists in relation to actual and potential legal proceedings.

Industry and regulatory compliance investigations

AMP is subject to review from time to time by regulators, both in Australia and offshore. In Australia, AMP’s principal regulators are APRA, ASIC and AUSTRAC, though, other government agencies may have jurisdiction depending on the circumstances. The reviews conducted by regulators may be industry wide or specific to AMP and the outcomes of those reviews can vary and may lead, for example, to the imposition of penalties, the compensation of customers, enforceable undertakings or recommendations and directions for AMP to enhance its control framework, governance and systems.

More recently, the Australian financial services industry is responding to a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Royal Commission is currently investigating conduct, practices, behaviour or business activities by financial services entities including AMP that may amount to potential misconduct or that may fall below community standards and expectations.

The Royal Commission may make findings that AMP (including persons or entities acting on its behalf) has engaged in misconduct including breaches of law or conduct that falls below community standards and expectations. AMP will continue to respond to those matters in its written submissions. Findings made by the Royal Commission may result in litigation, fines, penalties, revocation, suspension or variation of conditions of relevant regulatory licences or other regulatory action.

There are currently a number of investigations being undertaken by ASIC, some of which are industry wide. These investigations cover a range of matters, including adviser conduct, customer fees, the quality of advice and the monitoring and supervision by AMP of its advisers. AMP is also undertaking reviews concurrently with these regulatory investigations to determine, amongst other things, where customers may have been disadvantaged. In some instances compensation has been paid and where the results of our reviews have reached the point that customer compensation is likely and can be reliably estimated then a provision has been raised.

Advice remediation

Inappropriate advice

AMP continues to progress with a customer review and remediation program to identify and compensate customers who have suffered loss or detriment as a result of receiving inappropriate advice from their adviser. The scope of the review includes the period from 1 January 2009 to 30 June 2015 specified by ASIC in Report 515 Financial advice: Review of how large institutions oversee their advisers and extended to 30 June 2017, as well as including any instances of inappropriate advice identified through ongoing supervision and monitoring activities.

In some instances compensation has been paid and a provision exists for further compensation payable as the review progresses and client reviews are completed. AMP has adjusted its provision estimate for future compensation based on the actual experience of remediating clients and this has resulted in an increase in the provision at 30 June 2018. The provision includes a component for advisers for which a remediation review has not yet commenced and the determination of compensation for any given client is not known with certainty until immediately prior to payment.

Advice service fee (fees for no service)

An AMP program has been established in response to the ASIC project to review the extent of failure to deliver ongoing advice services to financial advice customers who were paying fees to receive those services. This issue, also known as fee for no service, is industrywide and for AMP covers:

fees charged by advisers without the provision of service; and
fees charged by licensees without the provision of service when customers were without an advisor.

Remediation is largely complete for fees charged by licensees without the provision of service. Compensation of $5m has been paid to affected customers.

The program is focussed on the identification and compensation of customers of advisers who have been charged an ongoing service fee without the provision of service. This involves a large-scale review of fee arrangements from 1 July 2008 as specified by ASIC in Report 499 Financial advice: Fees for no service . Sampling of customer files has been conducted across AMP licensees and has identified instances in the review period where customers have paid fees and there is insufficient evidence to support that the associated service had been performed.

AMP is developing a process for customer review and remediation within a reasonable timeframe, which on current estimates is three years. AMP has been engaging with ASIC on this process and will seek to reach agreement on principles to be applied when remediating customers but agreement is outstanding at the date of this report. The principles to be applied could have a considerable impact on the amount of compensation payable and the variability in outcomes could be significant.

A provision for advice service fee customer compensation has been raised as at 30 June 2018. This provision is judgemental and has been estimated using multiple assumptions derived from the sampling conducted to date. Assumptions used include evidence failure incidence rates, average fees to be refunded and compensation for lost interest or earnings. The actual compensation to customers could be significantly higher or lower than the amount provided.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 6: Other disclosures

6.1 Provisions and contingent liabilities (continued)

The final agreement on program and remediation principles with ASIC and the pattern and timing of individual customer compensation could also have a significant impact on the final expenditure.

Provisions for advice remediation do not include amounts for the future costs of executing the program or for potential recoveries from advisers and insurers.

Buy-back arrangements

AMP has a number of contractual arrangements with financial advice businesses in the AMP advice network to purchase their client registers at agreed values subject to certain conditions being met. These buy-back arrangements include arrangements known as Buyer of Last Resort (BOLR). Advice businesses must register their intention to invoke buy-back arrangements, which have six to twelve month lead times and are subject to audit prior to finalising the purchase price. The pipeline of buy-back arrangements over the twelve months to 30 June 2019, where notice of intent has been submitted, is $90m. Client registers are either acquired outright by AMP or AMP facilitates a sale to an existing business within the AMP advice network. AMP’s experience and expectation is that the value of the client registers to AMP is greater than the potential purchase price. Accordingly, these arrangements are not considered onerous under current regulatory settings and AMP has not recognised any liability related to the notified and potential acquisitions of client registers.

Litigation

Shareholder class actions

ASIC civil penalty proceedings

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 6: Other disclosures

6.2 New accounting standards

a) New and amended accounting standards adopted by the AMP group

A number of new accounting standards and amendments have been adopted effective 1 January 2018. These have not had a material effect on the financial position or performance of the AMP group.

AASB 15 Revenue from Contracts with Customers

AASB 15 Revenue from Contracts with Customers (AASB 15) became effective for periods beginning on 1 January 2018. AASB 15 defines principles for recognising revenue and introduces new disclosure requirements. Under AASB 15, revenue is recognised at an amount that reflects the consideration which an entity expects to be entitled to in exchange for transferring goods or services to a customer. Revenue from contracts with customers, as defined by AASB 15, is disclosed as Fee revenue and Other revenue on the Consolidated Income Statement.

AMP has applied the ‘cumulative effect’ method in adopting AASB 15 which requires an adjustment to the retained earnings at 1 January 2018 for contracts that remained open as at that date. The cumulative effect at 1 January 2018 was less than $1m as the primary impact on the AMP group was the change in presentation of some revenue from gross to net or vice versa which did not have any profit impact. AASB 15 also changes the timing of the recognition of performance fees for certain closed end funds, the impact of which will emerge in future years.

AASB 9 Financial Instruments

AASB 9 Financial Instruments (AASB 9) became effective for periods beginning on 1 January 2018. AASB 9 makes changes to the classification and measurement of financial instruments, introduces a new expected loss model when recognising expected credit losses (ECL) on financial assets, and also introduces new general hedge accounting requirements.

AMP has applied AASB 9 retrospectively without restating the comparative information for 2017 as permitted by the transitional provisions of the standard. The difference between the previous carrying amount of financial instruments and the carrying amount of those instruments at 1 January 2018 measured in accordance with AASB 9 has been recorded as an adjustment to retained earnings at 1 January 2018. As permitted by AASB 9 the group has chosen to continue to apply the hedge accounting requirements of AASB 139 Financial Instruments: Recognition and Measurements.

From a classification perspective, the impact to the group was minimal as the majority of the groups financial instruments continue to be classified as measured at fair value through profit or loss. We note the following classification changes as a result of the adoption of AASB 9:

Financial instruments which were previously classified as loans and receivables are now classified as amortised cost.
• Equity instruments which were previously classified as available-for-sale are now classified as fair value through other comprehensive income (FVOCI). FVOCI movements are recognised in the Fair value reserve within the Consolidated statement of changes in equity.
Debt securities held by AMP Bank were previously classified as held-to-maturity and measured at amortised cost. AMP has reclassified these financial instruments as FVOCI as the debt instruments meet the contractual cash flow characteristics and will be held both to collect cash flows and to manage liquidity needs. This has resulted in a $4m increase in value at 1 January 2018. This increase in value has been recorded as an adjustment to the Fair value reserve at 1 January 2018.

The following table identifies the impacts the adoption of AASB 9 on the reserves and retained earnings balances at 1 January 2018:

	Retained	Fair value
	earnings	reserve	Total equity
	$m	$m	$m
Balance at 31 December 2017	(164)	7	7,283
Expected credit losses - AMP Bank loans and advances	(12)	-	(12)
Expected credit losses - trade receivables	(5)	-	(5)
Gain on modification of syndicated loan	15	-	15
Reclassification of Debt securities from amortised cost to FVOCI	-	4	4
Tax impact	1	(1)	-
Balance at 1 January 2018	(165)	10	7,285

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 6: Other disclosures

6.2 New accounting standards (continued)

b) New accounting standards issued but not yet effective

A number of new accounting standards and amendments have been issued but are not yet effective, none of which have been early adopted by the AMP group in this financial report. These new standards and amendments, when applied in future periods, are not expected to have a material impact on the financial position or performance of the AMP group, other than as set out below.

AASB 16 Leases

AASB 16 Leases (AASB 16) is effective for periods beginning on 1 January 2019. AASB 16 requires lessees to recognise most leases on balance sheet as lease liabilities, with the corresponding right-of-use assets. Lessees have the option not to recognise ‘short-term’ leases and leases of ‘low-value’ assets.

Impact assessment for the adoption of AASB 16 is ongoing.

AASB 17 Insurance Contracts

AASB 17 Insurance Contracts (AASB 17) is effective for periods beginning on 1 January 2021. The new standard will introduce significant change to the accounting for life insurance contracts and the reporting and disclosures in relation to those contracts.

The new standard, of itself, does not change the underlying economics or cash flows of the life insurance business. However, it is anticipated that there will be an impact on profit emergence profiles from life insurance contracts. Subject to any changes to regulation or legislation which may be made in response to the new standard, there may also be an impact on the determination of capital requirements and income tax.

The detailed requirements of the standard are complex, and in some cases, the final impact of these requirements will not be determined until interpretations and regulatory responses to the new standard are developed. The AMP group is continuing to develop its implementation plan for the adoption of AASB 17.

AMP Limited financial report Notes to the financial statements for the half year ended 30 June 2018

Section 6: Other disclosures

6.3 Events occurring after reporting date

On 27 July 2018 AMP announced pricing reductions which will be implemented in the third quarter of 2018 and are expected to lower Australian wealth management investment related revenue (IRR) by an annualised $50m from 2019. Australian wealth management IRR for the six months ended 31 December 2018 is expected to be reduced by $12m. This announced pricing reduction has had no effect on the 30 June 2018 results of the AMP group or the carrying value of any goodwill or intangible assets as at the date of this report.

AMP Limited financial report Directors’ declaration for the half year ended 30 June 2018

In accordance with a resolution of the directors of AMP Limited, we state for the purposes of section 303(4) of the Corporations Act 2001 that, in the opinion of the directors:

(a) there are reasonable grounds to believe that AMP Limited will be able to pay its debts as and when they become due and payable; and
(b) the financial statements and the notes of AMP Limited and the consolidated entity for the financial half year ended 30 June 2018 are in accordance with the Corporations Act 2001 , including section 304 (compliance with accounting standards) and section 305 (true and fair view).

==> picture [131 x 55] intentionally omitted <==

David Murray Chairman

==> picture [120 x 61] intentionally omitted <==

Mike Wilkins Acting Chief Executive Officer

Sydney, 8 August 2018

Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au

==> picture [71 x 81] intentionally omitted <==

Independent Auditor's Review Report to the Members of AMP Limited

Report on the Half-Year Financial Report

Conclusion

We have reviewed the accompanying half-year financial report of AMP Limited (the Company) and its subsidiaries (collectively the Group), which comprises the statement of financial position as at 30 June 2018, income statement and statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the half-year financial report of the Group is not in accordance with the Corporations Act 2001 , including:

a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the half-year ended on that date; and
b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity (ASRE 2410), in order to state whether, on the basis of the procedures described, anything has come to our attention that causes us to believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s consolidated financial position as at 30 June 2018 and its consolidated financial performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of the Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

Page 2

==> picture [71 x 81] intentionally omitted <==

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

==> picture [115 x 35] intentionally omitted <==

Ernst & Young

==> picture [74 x 55] intentionally omitted <==

Andrew Price Partner Sydney 8 August 2018

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

AI assistant

AMP LIMITED — Interim / Quarterly Report 2018

64379_rns_2018-08-07_2bacb94b-e7d6-4be0-aab3-ddc07dea13ac.pdf

Half year financial results

RESULTS FOR ANNOUNCEMENT TO THE MARKET

AMP Limited

DIRECTORS’ REPORT

Directors’ details

Operating and financial review

Principal activities

AMP Limited

DIRECTORS’ REPORT

Resetting the business

Shareholder class actions

ASIC civil penalty proceedings

Review of operations and results

Capital management and dividend

Events occurring after reporting date

Rounding

Auditor’s independence declaration to the directors of AMP Limited

AMP LIMITED ABN 49 079 354 519 HALF YEAR FINANCIAL REPORT 30 JUNE 2018

Contents

Financial statements

Notes to the financial statements

Section 1: About this report

Section 2: Results for the half year

Section 4: Capital structure

AMP Limited financial report Consolidated Statement of Changes in Equity

Section 1: About this report

1.1 Basis of preparation of the half year financial report

1.2 Understanding the AMP financial report

Section 2: Results for the half year

2.1 Segment performance

Section 2: Results for the half year

2.1 Segment performance (continued)

(a) Segment profit

Section 2: Results for the half year

2.1 Segment performance (continued)

(b) Reconciliations

(c) Segment assets

Section 2: Results for the half year

2.2 Taxes

(a) Income tax expense

Section 2: Results for the half year

2.2 Taxes (continued)

(b) Analysis of income tax expense

(c) Analysis of deferred tax balances

Section 2: Results for the half year

2.3 Dividends

Section 3: Investments and intangibles

3.1 Investments in financial instruments

Section 3: Investments and intangibles

3.2 Intangibles

Section 3: Investments and intangibles

3.3 Fair value information

Section 3: Investments and intangibles

3.3 Fair value information (continued)

Section 3: Investments and intangibles

3.3 Fair value information (continued)

Section 3: Investments and intangibles

3.3 Fair value information (continued)

Level 3 fair values

Sensitivity analysis

Section 3: Investments and intangibles

3.3 Fair value information (continued)

Level 3 fair values (continued)

Reconciliation of Level 3 values

Section 4: Capital structure

4.1 Contributed equity

Section 4: Capital structure

4.2 Interest-bearing liabilities

Section 5: Life insurance and investment contracts

5.1 Life insurance contract liabilities

Section 5: Life insurance and investment contracts

5.2 Impact of changes in assumptions

Critical accounting estimates and judgements

Section 5: Life insurance and investment contracts

5.3 Life insurance contracts – Insurance risk sensitivity analysis

Section 5: Life insurance and investment contracts

5.4 Analysis of life insurance and investment contract profit

AMP LIMITED Interim / Quarterly Report 2018