AMP LIMITED — M&A Activity 2010

Nov 14, 2010

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ASX Announcement
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15 November 2010

Manager Company Announcements Office Australian Securities Exchange Level 4, 20 Bridge Street Sydney NSW 2000

Manager Market Information Services Section New Zealand Stock Exchange Level 2, NZX Centre, 11 Cable Street Wellington New Zealand

Announcement No: 41/10

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

AMP proposed merger with AXA APH’s Australian and New Zealand businesses

Please find attached supporting material:

• Media release

• Presentation

AMP Limited (AMP) ASX Announcement

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

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Media release
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15 November 2010

AMP Limited 33 Alfred Street Sydney NSW 2000 Australia Public Affairs Tel: 02 9257 6127 Email: media@amp.com.au

AMP proposes merger with AXA APH’s Australian and New Zealand businesses

AMP Limited (AMP) has today announced a proposal to merge its business with AXA Asia Pacific Holdings’ (AXA APH) Australian and New Zealand businesses.

The proposed transaction is a joint proposal with AXA SA under which AXA SA would acquire 100 per cent of AXA APH’s Asian business.

The independent directors of AXA APH have advised they are considering the proposal.

Under the proposal, AXA APH shareholders would receive the equivalent of A$6.43[1] per share, consisting of cash and AMP shares, as well as the receipt of AXA APH’s 2010 final dividend of up to 9.25 cents per share.

The proposed transaction would deliver significant value to both AXA APH and AMP shareholders by creating a wealth management company with the scale and capability to offer greater competition in a fast changing and high growth market.

The key points of the proposal are:

• AXA APH minority shareholders would receive A$6.43[1] per share, comprised of 0.73 AMP shares for each AXA APH share and A$2.55 cash, as well as receiving AXA APH’s 2010 final dividend.

• The value AXA APH shareholders receive would be protected against movements in the AMP share price down to a 10 day post-scheme VWAP of A$4.50. Any cost of downside protection would be met by AXA SA.

• AMP would issue 695 million new shares to AXA APH shareholders and pay A$455 million cash[2] .

• The value of the AXA APH Australia and New Zealand businesses on a debt free basis would be A$4.15 billion based on AMP’s 10 day VWAP of A$5.32, as at 12 November 2010. This represents a forward price to earnings multiple[3] of 16.0 times before expected synergies.

1 Based on AMP’s 10 day volume-weighted average share price (VWAP) of A$5.32 as at 12 November 2010 and excluding AXA APH’s 2010 final dividend of up to 9.25cps. 2 This cash contribution would fall if AMP’s 10 day post-scheme VWAP exceeds A$5.80.

3 Based on purchase price of A$4.15b and FY 2011 analysts’ consensus for operating earnings and investment income with estimated A$24m in corporate office overlay assumed to relate to the A&NZ business.

AMP Life Limited ABN 84 079 300 379 AFSL No 233671

• AMP has assumed the same level of economic synergies (A$120 million per annum) and integration costs (A$285 million) as it did for its earlier proposals to merge with AXA APH.

• The proposed transaction is expected to be EPS neutral for AMP from 2012, (that is year 2 after acquisition) and accretive thereafter.

• AMP would issue A$600 million of subordinated debt, sub-underwritten by AXA SA to fund its cash contribution to the transaction and one half of the expected integration costs.

• AMP will not undertake a separate equity capital raising to fund this transaction.

• AMP intends to integrate AXA APH’s Australian and New Zealand businesses with its own following any transaction.

• Two directors of AXA APH would be invited to join the board of the enlarged AMP Group.

• AXA SA would acquire AXA APH’s Asian businesses, and following any transaction, would no longer be a shareholder of AXA APH.

• AXA SA’s purchase price for the AXA APH Asian business would be A$10.4 billion[4] .

• The proposed acquisition would be implemented by a scheme of arrangement to be voted on by AXA APH minority shareholders and would be subject to due diligence, execution of final transaction documents and further regulatory approvals.

In the event the proposed transaction proceeds, AXA APH shareholders would be offered downside price protection against negative movements in the AMP share price, with a total value of A$6.43 per AXA APH share (excluding AXA APH’s 2010 final dividend) protected down to an AMP 10 day post-scheme VWAP of A$4.50.

If the AMP VWAP over 10 trading days immediately after the effective date of the scheme is higher than A$5.60, AXA APH minority shareholders would participate in 50 per cent of this upside. A summary of the downside protection and upside benefits is outlined below.

	AMP 10 day Post Scheme VWAP(A$)
	4.50 5.00 5.32 5.60 5.80 6.00 6.25
AMP scrip (A$) AMP cash (A$) AXA SA cash (A$) Offer value (A$)	3.29 3.65 3.88 4.09 4.23 4.38 4.56 0.48 0.48 0.48 0.48 0.48 0.44 0.40 2.67 2.30 2.07 1.86 1.79 1.75 1.71 6.43 6.43 6.43 6.43 6.50 6.58 6.67

The proposed merger is expected to be attractive to both AMP and AXA APH shareholders given the significant benefits and opportunities that would be derived from combining the two businesses.

The structure of the proposed transaction demonstrates AMP’s continued financial discipline, including similar levels of EPS accretion to those anticipated under AMP and AXA SA’s December 2009 proposal, while offering AXA APH shareholders fair value.

AMP Chairman Peter Mason said: “This proposal represents compelling value for AXA APH shareholders, who would receive a significant premium on the value of their shares along with the opportunity to participate in the ongoing earnings of a stronger and more competitive AMP. AMP shareholders will also benefit from their continued investment in a stronger AMP.

4 Based on AMP’s 10 day VWAP of A$5.32 on 12 November 2010 and based on A$9,834m equity value and A$592m debt.

2

“We encourage the AXA APH independent directors to endorse this proposal and recommend it to their minority shareholders.”

Following the merger, AMP would remain soundly capitalised and would maintain its policy of paying out 75-85 per cent of its underlying profit in dividends.

AMP Chief Executive Craig Dunn said: “This proposed merger clearly meets our stated M&A criteria. It makes economic sense, is an excellent strategic fit with our current business and has a risk profile we understand and are well-placed to manage.

“The combined businesses would see AMP become the leading wealth management company in one of the world’s most attractive wealth management markets which is expected to more than double over the next decade. AMP would hold the number one market position for risk insurance, retail superannuation and retirement income in Australia. In New Zealand AMP would be number one in the growing corporate superannuation market.

“AMP and AXA APH are natural partners to build a company that would have the scale and distribution to provide greater competition to the big banks in the wealth management market and create a much needed fifth pillar in the financial services landscape.

“We would use the strengths that both companies bring, including over 2,900 aligned financial planners and relationships with a further 6,500 independent financial advisers to build a financial services company with financial advice at its heart.

“This merger would accelerate our drive to broaden and diversify our distribution giving consumers greater choice in how they deal with us. AXA APH’s multi-brand distribution model would complement AMP’s existing range of planner models and would play a significant role in ensuring consumers have access to a planner model that best suits their needs.

“The management and employees of AXA APH have built a highly regarded and attractive contemporary business that, like AMP, values its relationships with both financial planners and clients. The ethos of AXA APH’s business has a strong cultural alignment with AMP.

“In addition to having an expanded planner footprint we are also looking forward to the opportunity to have a significant and ongoing presence in Melbourne,” Mr Dunn said.

Over the last year AMP has completed a major renovation of its Financial Services business in response to evolving consumer preferences and anticipated regulatory change.

“We have led the industry in delivering simpler, more affordable and contemporary products to our customers. We are now in an excellent position to execute the integration of the AXA APH and AMP businesses to maximise the synergies and deliver real benefits to shareholders of both companies.

“This proposal represents AMP’s determination to deliver long-term value to the shareholders in the merged business,” Mr Dunn said.

AMP has already received confirmation that the Australian Competition & Consumer Commission would not oppose the proposed transaction and has also received approval from the New Zealand Commerce Commission.

3

The proposal is still subject to satisfactory due diligence, execution of final transaction documents, approval by AXA APH minority shareholders and further regulatory approvals.

If this proposal is recommended it is expected that the proposal would be submitted to the AXA APH shareholders for their approval by the end of the first quarter of 2011.

AMP is being advised by UBS and Clayton Utz.

Media enquiries Investor enquiries Jane Anderson Howard Marks +61 2 9257 9870 +61 2 9257 7109 +61 402 967 791 +61 402 438 019

Amanda Wallace Stuart Kingham +61 2 9257 6168 +61 9257 5207 +61 422 379 964 +61 401 139 067

AMP shareholder enquiries

Computershare Australia 1300 654 442 New Zealand 0800 448 062

4

AMP’s proposal to merge with AXA Australia & New Zealand

Craig Dunn Chief Executive Officer

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15 Nov 2010

AMP & AXA SA confirm proposal for AXA Asia Pacific Holdings

• AMP and AXA SA’s proposal offers AXA Asia Pacific 1

• Holdings (AXA APH) minority shareholders A$6.43 a share , via a scheme of arrangement

• Proposal delivers AXA APH minority shareholders benefits of scrip and cash, along with downside share price protection provided by AXA SA

• Proposal demonstrates AMP’s continued financial discipline, while offering compelling value for AXA APH minority shareholders

• Combined group would create Australian financial services fifth pillar

• AXA APH independent directors are considering the proposal

• Based on AMP’s 10-day VWAP of A$5.32 on 12 Nov 2010 and excluding AXA APH final FY 10 dividend of up to 9.25cps.

2

Proposal terms and key metrics

1  AXA APH minority shareholders would be offered per share

• 0.73 AMP shares

• A$2.55 cash, plus the AXA APH final FY 10 dividend of up to 9.25 cents

 AMP would acquire AXA APH Australia and New Zealand business debt free for A$4.15b1 using scrip (A$3.70b)1 and cash (A$455m)1

• Price to earnings multiple2 of 16.0x, before synergies

• Expected to be EPS neutral from FY 12 (ie year 2 after acquisition) and accretive thereafter – no material change to previous EPS assumptions (refer appendix)

• Assuming same level of economic synergies (A$120m) and integration costs (A$285m) as in lapsed December proposal

• No separate equity capital raising required to fund transaction

• AMP additional contribution above lapsed December proposal fixed at 38m shares and a maximum of A$140m cash; AXA SA contributing additional A$456m3 cash

• Based on AMP’s 10-day VWAP of A$5.32 on 12 Nov 2010. Cash amounts may vary based on AMP’s 10-day post scheme VWAP.

• Based on purchase price of A$4.15b and FY 11 analysts’ consensus for A&NZ operating earnings and investment income with estimated A$24m in corporate office overlay assumed to relate to the A&NZ business.

• Cash amount may vary based on AMP’s 10-day post scheme VWAP.

3

Proposal metrics compare favourably

Metrics of A&NZ transaction Cash (A$m) Shares (m) Total (A$m) Expected to be EPS neutral from FY12 4and accretive thereafter Forward price earnings multiple A&NZ share of total acquisition Implied value of AXA APH (A$m) AXA SA acquires AXA APH Asia business (A$m) (including Asian debt) AMP acquires AXA APH A&NZ debt free Recent wealth management transactions5 Select Managed Funds & AUW Aviva & NAB Perennial Investment & IOOF Promina & Suncorp ING Australia & ANZ Transaction NOTE: Numbers impacted by rounding 1. New proposal based on AMP’s 10-day VWAP of A$5.32 on 12 Nov 2010. 2. Based on A$9,834m equity value and A$592m debt. 3. 4. 5.		4 +A$140m 455 315 +38m shares 695 657 (A$259m) 4,154 4,413 Yes Yes 16.0x 3 18.6x 28% 31% +A$539m 14,579 14,040 +A$799m 10,426 1,2 9,627 15 Nov 2010 14 Dec 2009 Change New proposal 1 Lapsed proposal 16.8x 16.0x 31.1x 18.4x 13.3x Forward price/earnings multiple Based on FY 11 analysts’ consensus for A&NZ operating earnings & investment income with estimated A$24m in corporate office overlay assumed to relate to the A&NZ business. See appendix for EPS assumptions. RBS Equities research, Sept 2010
	Cash (A$m) Shares (m) Total (A$m) AMP acquires AXA APH A&NZ debt free
	AXA SA acquires AXA APH Asia business (A$m) (including Asian debt)
	Implied value of AXA APH (A$m)
	Metrics of A&NZ transaction
	Expected to be EPS neutral from FY12 4and accretive thereafter Forward price earnings multiple A&NZ share of total acquisition
	Recent wealth management transactions5
	Transaction	Forward price/earnings multiple
	ING Australia & ANZ	13.3x
	Promina & Suncorp	18.4x
	Aviva & NAB	16.0x
	Perennial Investment & IOOF	31.1x
	Select Managed Funds & AUW	16.8x

Additional terms of proposal

• AXA APH shareholders would also receive AXA APH’s final FY 10 dividend of up to 9.25cps but not AMP’s final FY 10 dividend

• AXA APH would be offered two seats on the board of the combined entity

• 1

• AXA SA would acquire AXA APH’s Asian businesses for A$10.4b

• 2

• AXA APH debt of A$1.3b would be assumed and retired by AXA SA

• AXA SA would sub-underwrite A$600m subordinated debt issued by AMP

 Expected to qualify as Tier 2 regulatory capital

• Transaction would be subject to satisfactory due diligence, execution of final form agreements, court, regulatory and shareholder approvals

 AMP has secured Australian and New Zealand competition regulator approvals

1. Based on AMP’s 10-day VWAP of A$5.32 on 12 Nov 2010 and on A$9,834m equity value and A$592m debt. 2. As at 30 June 2010.

5

Proposal meets AMP’s clear M&A criteria to drive value for AMP shareholders

• Cements position as leading independent wealth management company, creating Australian financial services fifth pillar

• Accelerates growth profile

• Increases scale and strengthens competitiveness

• Broadens and deepens distribution footprint

• Enhances earnings potential and diversity

• Improves capacity to capitalise on changing consumer and regulatory environment

• Enhances capacity to execute two-box platform strategy for wealth management, serving mass market and HNW

• See appendix for assumptions.

• Generates value, with EPS expected to be neutral from FY12 (ie year 2 after acquisition)1 and accretive thereafter

• Assumes same level of annual net synergy benefits (A$120m) and integration costs (A$285m) as previous proposals

• Scrip component ensures market and regulatory risks shared between AMP and AXA APH minority shareholders

• Maintains AMP capital and liquidity strengths by using A$600m subordinated debt issue to fund half the integration costs (A$145m) & AMP cash payment to AXA APH shareholders of A$455m

• Balance of integration costs to be funded through existing capital resources and project savings during integration period

• Enables AMP to maintain dividend payout ratio at 75%-85% of underlying profit

• Well understood core businesses in local markets

• Transaction subject to satisfactory due diligence

• Low execution risk, with competition regulator approvals secured in Australia & New Zealand

• Clear integration path would utilise strength of both businesses to build new market force

6

Proposal delivers AXA APH minority shareholders benefits of scrip, with downside protection

• AXA APH minority shareholders would receive cash and 1

• scrip , with downside share price protection and upside potential, plus

• Exposure to high growth Australian wealth management market

• Participation in Australia’s largest wealth management company, including synergies of merged group

• Benefits of AMP’s historically higher dividend payout ratio and franking capacity

• Post acquisition, AXA APH minority shareholders would own 25% of AMP2

• CGT scrip-for-scrip roll-over relief is expected to be available for AMP shares received by AXA APH minority shareholders. 2. Based on issuing 695.3m AMP shares to AXA APH minority shareholders.

7

Proposed structure offers downside protection and some upside potential

• 1

• Proposal value of A$6.43 per share maintained between AMP share price (post scheme VWAP2) of A$4.50 and A$5.60

• AXA APH minority shareholders would participate in 50% of upside of AMP share price (post scheme VWAP[2] ) above A$5.60

• AMP would share in 25% of upside above A$5.80

Price protected value (excluding AXA APH final FY10 dividend)

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7.00 10-day Current
VWAP spot price 6.67
6.58
6.50
6.43 6.43 6.43 6.43 6.43
6.50
6.00
5.50
5.00
4.50 5.00 5.32 5.33 5.60 5.80 6.00 6.25
AMP post scheme VWAP (A$)
Value to AXA AP shareholders (A$)
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Note: chart not to scale

1. Excludes AXA APH final FY 10 dividend of up to 9.25 cents.

2. 10 trading days immediately after effective date of scheme (ex dividend).

8

Proposal structure provides high level of security

• Price protection creates stable proposal structure for AXA APH minority shareholders

• AMP share price has not closed below A$4.88 in past 12 months

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AMP share price and 10-day VWAP over past 12 months
$7.00
$6.50
$6.00
1 Sep 2010
Low est AMP 10 day
VWAP: $4.99
$5.50
$5.00
25 Aug 2010
Low est AMP
close: $4.88
$4.50 price floor
$4.50
$4.00
Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10
AMP share price AMP 10 day VWAP
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9

Mechanics of share price protection structure

		AMP 10 day Post Scheme VWAP (A$)
	4.50	6.67 6.58 6.50 6.43 6.43 6.43 1.71 1.75 1.7~~9~~ 1.86 2.0~~7~~ 2.30 0.40 0.44 0.48 0.48 0.48 0.48 4.56 4.38 4.23 4.09 3.88 3.65 6.25 6.00 5.80 5.60 5.32 5.00
Offer value (A$) AXA SA cash (A$) AMP cash (A$) AMP scrip (A$)	6.43 2.67 0.48 3.29

• To provide downside protection to AXA APH minority shareholders – and share some upside:

• AMP’s scrip contribution is fixed at 695m shares

• AMP’s cash contribution is fixed at a maximum of A$455m, although this will reduce if AMP’s share price (10-day post scheme VWAP) is above A$5.80, when AMP receives 25% of upside

• AXA SA’s cash contribution will reduce if AMP’s share price (10-day post scheme VWAP) is above A$5.32, to compensate AXA SA for bearing downside risk to A$4.50

  • From A$5.32-A$5.60, AXA SA receives 100% of upside

  • From A$5.60-A$5.80, AXA SA and AXA APH share equally in upside

  • From A$5.80, upside shared 50% AXA APH, 25% each AXA SA and AMP

• AXA SA will top up proposal value with additional cash consideration if AMP’s share price (10-day post scheme VWAP) moves below A$5.32, to a limit of A$4.50

10

NOTE: Numbers in table may not add to ‘offer value’ due to rounding.

Appendix

11

EPS calculation assumptions – no material change

 Expected EPS outcomes maintained because:

• revised price based on lower relative multiple for AXA APH earnings

• proposal funded by greater proportion of cash versus shares

	Lapsed proposal 14 Dec 2009	New proposal 15 Nov 2010
120 120 Assumed synergy benefits – after tax (A$m)
60% 60% Rate of synergies assumed to be realised in year 2
285 285 Integration costs – after tax (A$m)
600 600 Subordinated debt issued by AMP (A$m) 1
695 657 Number of AMP shares issued to minorities as part of transaction (m)

1. Assumes pre-tax interest rate of 6.8% under lapsed offer and 7.6% under new proposal.

12

Summary and comparison of calculations

	Lapsed proposal Lapsed proposal	Lapsed proposal Lapsed proposal	Lapsed proposal Lapsed proposal	Lapsed proposal Lapsed proposal	Agreed transaction New proposal	Agreed transaction New proposal	Agreed transaction New proposal	Agreed transaction New proposal	Agreed transaction New proposal
	14 December 2009 14 December			2009		25 October 2010 15 November			2010
	A$ per share A$ per share	A$m		A$m	A$ per share A$m A$ per share				A$m
0.6896 AMP shares per AXA APH share	4.30
0.73 AMP shares per AXA APH share								3.88 1
Cash per AXA APH share	1.92							2.55
Total consideration per AXA APH share	6.22							6.43
Implied value of AXA APH equity			12,864						13,291 2
Debt attributable to AXA APH A&NZ				675					696 3
Debt attributable to AXA APH Asia				501					592 3
Total AXA APH debt				1,176					1,288
Implied enterprise value for AXA APH			14,040						14,579
Transaction for AMP
AMP acquires AXA APH A&NZ on debt-free basis				4,413					4,154
Acquisition funded through: Share issue	4.30			4,098				3.88	3,699 4
Cash payment for remaining purchase price	0.33			315				0.48	455
Transaction for AXA SA
Acquisition of 100% of AXA APH Asia equity				9,125					9,834
Acquisition funded through:
Sale of 54% of AXA APH equity				6,936					7,167
Retirement of A&NZ debt				675					696
Cash payment for remaining purchase price	1.59			1,514				2.07	1,970
Total consideration to minority shareholders
AMP shares	4.30			4,098				3.88	3,699
Cash	1.92			1,829				2.55	2,425
Total	6.22			5,927				6.43	6,124
NOTE: Numbers impacted by rounding 1. Based on AMP’s 10 day VWAP of A$5.32 on 12 Nov 2010. 2 Bd n ttl AXA APH id hr f 2067m	3. As at 30 June 2010. 4.Minority shares outstanding of						952m.		13

NOTE: Numbers impacted by rounding 1. Based on AMP’s 10 day VWAP of A$5.32 on 12 Nov 2010. 2. Based on total AXA APH issued shares of 2,067m.

13

Combined AMP and AXA APH would lead market

Market share - Australian retail superannuation market[1] Total market: $235b

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23.6%
20.3%
17.4%
13.3%
10.4%
9.7%
6.2% 5.9%
5.2%
2.0%
AMP NAB/MLC/ AMP CBA/ WBC/BT ANZ/ AXA Mercer IOOF Macquarie
& AXA Aviva Colonial ING
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Market share - Australian retirement income market[1] Total market: $102b

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19.0%
17.7%
12.5%
11.3%
10.2%
9.2%
7.8%
5.9%
4.4% 4.3%
AMP CBA/ NAB/MLC/ AMP WBC/BT ANZ/ AXA IOOF Macquarie Challenger
& AXA Colonial Aviva ING
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Market share - Retail managed funds (ex CMTs)[1] Total market: $471b

Market share - Individual risk[2] Total market : $5.8b

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18.7% 19.6% 19.0%
15.9%
15.0%
13.7%
12.3%
11.3% 11.6%
10.7%
10.0%
8.5% 9.0% 8.8%
6.5% 6.9%
5.1% 5.0%
3.3% 3.5%
AMP NAB/MLC/ CBA/ AMP WBC/BT ANZ/ AXA Macquarie IOOF Mercer AMP NAB/MLC/ CBA/ ANZ/ AMP TOWER AXA SuncorpWBC/BT Zurich
& AXA Aviva Colonial ING & AXA Aviva Colonial ING
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NOTE: Numbers impacted by rounding

1. Plan for Life retail managed funds report, June 2010 2. Plan for Life detailed risk statistics, June 2010

14

Combined group would create leading financial advice footprint

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Total number of Australian financial planners
Combined 17%
AMP 10%
AXA 7%
Other 48%
ANZ/ING 12%
CBA 7%
WBC/SGB 6%
NAB/MLC/Aviva 10%
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• AMP / AXA APH group would have 2,900+ aligned and owned financial planners in Australia – 17% of total planner market

• In addition, 6,500 IFA planners offer AXA products

15

• Money Management , July 2010; selection of prominent networks. Total estimated number of aligned financial planners in Australia was 17,369 as at March 2010.