2018 full year results
2018 was a difficult year for AMP, and for you, our shareholders.
The business faced significant challenges notably the impact of the Royal Commission’s proceedings on AMP’s reputation, an imperative to remediate clients in our advice business and a deterioration in the performance of the insurance business. These challenges are reflected in AMP’s full year financial results for 2018, with AMP reporting an underlying profit of A$680 million for the year to 31 December 2018, and profit attributable to shareholders of A$28 million.
Capital and dividend
Recognising the 2018 profit results, the related impact on AMP’s capital position and the uncertainty in the operating environment, AMP’s Board took the difficult decision to declare a reduced 2018 final dividend of 4 cents per share, franked at 90%. The dividend will be paid on 28 March 2019. The total dividend paid for the 2018 year is 14 cents per share.
The dividend reflects the Board’s view that AMP, as a customer facing enterprise, must maintain a strong capital position. The company finished 2018 with a capital surplus of A$1.65 billion over minimum regulatory requirements.
The Board anticipates maintaining a strong capital surplus ahead of the completion of the sale of our Australian and New Zealand life insurance and mature businesses to UK-based Resolution Life, which is expected to be in the third quarter of this year. Following completion, the Board has committed to returning the majority of net cash proceeds to shareholders.
2018 operating earnings in our core businesses were resilient. AMP Bank performed well in a highly competitive market with operating profits up 6%. While AMP Capital’s growth momentum continued with operating profits up 7%, reflecting continued international expansion.
Our Australian wealth management business faced a number of external challenges, including the reputational impact of the Royal Commission. In response, we focused on retention and took action to improve the competitiveness of our MySuper products through fee reductions. Whilst this was the right thing to do for our customers, this action reduced revenues in the second half.
In New Zealand, the wealth management business delivered another stable contribution to the group, delivering largely steady earnings through disciplined cost management.
Finally, the operating earnings of the Australian and New Zealand insurance and mature businesses - which we are selling to Resolution Life - were reduced by negative claims experience. This resulted in changes to best estimate assumptions and resulted in capitalised losses in the second half.
In response to the challenges faced in 2018, AMP has taken decisive action to reshape our business portfolio, prioritise customers and hold management to account.
These actions include:
- Significant Board renewal: including my appointment as Chairman and the subsequent appointment of three highly experienced financial services leaders as non-executive directors – Andrea Slattery, John O’Sullivan and John Fraser.
- Appointment of a new Chief Executive Officer – Francesco De Ferrari.
- Appointment of a new Chief Executive, Australian Wealth Management – Alex Wade.
- Appropriate consequence management including forfeiture of long and short-term incentives for a number of former executives and a reduction in Board Director fees for 2018.
- Decision to award zero short-term incentives for AMP’s leadership team in 2018 (excluding AMP Capital).
- Acceleration of a coordinated advice remediation program to compensate impacted customers as quickly as possible.
- A commitment to invest A$100 million (pre-tax) over two years to strengthen risk management governance and controls.
Most significantly, AMP agreed to sell our Australian and New Zealand life insurance and mature businesses (AMP Life) to Resolution Life in October last year. This was a necessary decision given the volatility and capital intensity of these businesses. The sale of AMP Life will substantially change the shape of AMP – providing an opportunity to return capital to shareholders and focus on our growth businesses.
2019 will be a year of transition as we position our business for the future. Management will be primarily focused on the separation of our insurance and mature businesses to Resolution Life, prioritising our advice remediation program, strengthening our risk management, controls and governance and developing the future strategy. Beyond these programs, management will remain focused on the performance of our core operating businesses of Australian and New Zealand wealth management, AMP Bank and AMP Capital. We will update you on our progress and longer-term plan at the half-year 2019 results in August.
We know there is much more work to be done to deliver better outcomes for our shareholders and customers. The Board, management team and all our employees are determined to earn back the trust and drive the turnaround of AMP.
Join the live webcast of our financial results briefing at 12.30pm (Sydney time) on Thursday 14 February 2018. A replay of the presentation will be available shortly after the briefing.
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