amp – driving sustainable...

ASX Announcement

10 October 2006 Manager Manager Company Announcements Office Market Information Services Section Australian Stock Exchange New Zealand Stock Exchange Level 4, 20 Bridge Street Level 9, ASB Tower, 2 Hunter Street Sydney NSW 2000 Wellington New Zealand

Announcement No: 55/06

Presentation by AMP Chief Executive Officer, Andrew Mohl Please find attached a presentation to be given by AMP CEO Andrew Mohl to the ASA/ASX Investor Hour in Sydney today, titled AMP and the evolving financial services industry.

AMP and the evolving financial AMP and the evolving financial services industryservices industry

Andrew MohlChief Executive Officer

October 2006

2

Outline

Market overview

AMP business model

Business performance

People and culture

Capital management and shareholder returns

Outlook

Market overviewMarket overview

4

Australian private pension market is a highly attractive market with mandated growth

Compulsory superannuation framework

Contribution rate currently mandated at 9%, with coverage extending to 90% of Australian workforce*

Recent Budget initiatives confirm superannuation is the Federal Government’s flagship long-term savings vehicle

Ageing population^

Almost half of Australians will be older than 50 by 2051

Working-age population between 15-64 years projected to decline from 67% in 2004 to between 57-59% in 2051

Strong, stable business and regulatory environmentAustralia named best country for fund managers to do business#

Sources:* Australian Treasury 2005 “Inquiry into improving superannuation savings of people under age 40“.^Australian Bureau of Statistics. Population Projections, Australia 2002 to 2101.# Cerulli Associates, Cerulli Global Update Mid-Year 2005, Axiss Australia.

5

Australian private pension market set to triple in 10 years and exceed all of Asia

2005Total US$1,452 billion

2015Total US$3,744 billion

Australia51.0%

South Korea7.3%

4.3%

China3.6%

Other countries9.8%

US$1,908.7b

Australia36.3%

Singapore

Hong Kong2.7%

South Korea2.2%

Other countries1.7%

US$527.5b

4.7%

India

Japan52.4%

Japan23.9%

Source: Allianz Global Investors. Asia-Pacific Pensions, Reform Trends and Growth opportunities, June 2005, Axiss Australia

6

Growth outlook for superannuation industry and key sectors for AMP is robust

13.3%

24.8%

1.8%

13.0%

9.9%

5.8%

9.4%

40.2%

23.5%

2002 - 2005

12.9%734,129Total industry - AUM*

17.8%95,303Industry funds

2.2%62,214Corporate funds

19.9%59,996Employer sponsored (master trust)

8.4%60,813Retirement income

6.4%134,410Savings and investment

13.2%128,047Retail superannuation

20.1%23,289Wrap

15.1%170,057Self-managed funds (DIY)

2005 - 20102005AUM industry profile

CAGRSize

Source: DEXX&R Market Projections Report, June 2006, based on data as at 30 June 2005 (released after the May 2006 Budget announcement)

* Total industry AUM excludes public sector funds

7

AMP holds leading market positions

1 17.01 17.7220.8 186.5

43 11.111.03.7Individual risk

Total annual inflows A$billion

33 11.812.1438.5Total retail managed funds

Unit trusts excluding cash management trusts

Retirement income

Funds under management A$billion

Market position

(rank)

Total market

size A$b

Market share %

Market position

(rank)

Total market

size A$b

Market share - Australia

3.3

369.1

1

11 15.916.3289.3Total superannuation & retirement income 244.8

2

Superannuation including rollovers

3

June 2006 June 2005

Market share %

68.5 2 12.1 2 12.458.3

116.4141.2 10 3.7 10 3.6

March 2006 March 2005

1. Source: Plan for Life June 2006, Retail Managed Funds Report.

2. Note: Excludes cash management trusts.3. Source: Plan for Life detailed risk statistics March 2006 – in force premiums individual risk.

AMP business modelAMP business model

9

Key drivers and enablers of AMP business model

Six drivers

Products & Platforms

CostEfficiency

Asset ManagementDistribution PackagingBrand

Four enablers

People & Culture

Operations & Risk Management

Capital ManagementTechnology

10

Comparative advantage of AMP in planner distribution – scale, quality and tenure

Number of Australian financial plannersJune 2006

Adviser turnover – June 2004 to June 2005

Source: Money Management, June 2006

*1,553 based on AMP’s 1H 06 Investor Report and includes AMP Financial Planning (Australia only) and Hillross.**Based on internal data as at 31 March 2006.

Source: Brennan Partners report, November 2005

(1) This survey included 18 dealer groups representing approximately 45% of all planners in the Money Management Top 100 Dealer Groups (June 2005).

Number of Certified Financial Planners**

Planner tenure

17% more than 10 yearsMedian of dealer groups surveyed

49% more than 10 yearsAMPFP

18%Median

23%Upper quartile

4% to 47%Range

14%Lower quartile

Dealer groups surveyed (1)

14%AMPFP turnover

642

1800

1,5531600

14001,231

1,10612001,028

1000 904

800

600 511

400

200

0AMP* NAB CBA WBC ANZ/ING AXA

11

Comparative advantage of AMP in corporate super – scale, cost efficiency and downstream benefits

Market leader in employer sponsored master trusts – 19.4% market share*

SignatureSuper grown to $4.1b in 20 months

Scale and cost efficiency create shareholder value

Sticky administration / trustee contracts with strong revenue growth – 3-4% member/wage inflation growth plus retained investment earnings

Profits on investment management, including AMP Capital multi-manager

Group insurance profits

Lowers unit costs in other parts of business due to use of common systems and supply chain

Downstream benefits for retail product – superannuation, pensions and insurance

* Source: DEXX&R Market Share Report, June 2006

Business performanceBusiness performance

13

Highlights of 1H 06 Group performance

Encouraging progress on all five key performance indicatorsUnderlying return on equity up from 22.9% to 26.6%AFS value of new business1 up 22%; AFS embedded value1 up 12% in 1H 06Operating earnings up 15% to A$342mCost ratio down from 41.9% to 40.1%; costs up 5% in 1H 0684% of Australian AUM at or > benchmark in year to June

Major progress on goal to double value from mid 2005 to mid 201040% increase in value of AMP in 12 months to June 2006, based on median analysts’ valuation plus dividends and capital returnNow targeting mid 2009 to achieve goal

Capital management initiatives continueGroup office capital A$1.5b at June 2006 post A$750m capital return Underlying interest cover increased to 14.6xInterim dividend up from 14 cents to 19 cents, 85% franked2006 payout ratio policy and franking rate both lifted from 75% to 85%

1 Traditional basis, @ 3% discount margin

14

Growth remains robust

Assets under management Group up 15% on 1H 05 to A$110b

AMPCI up 14% on 1H 05 to A$96b

AFS up 17% on 1H 05 to A$71b

Net cashflowsAFS up from A$0.9b in 1H05 to A$2.8b

AMPCI net external cashflows A$1.1b in both 1H 05 and 1H 06

Risk premium incomeAustralian individual risk up 11% on 1H 05 to A$403m

15

AFS – net retail cashflows and industry shareAMP rolling 12 month net cashflows (excl CMTs), AMP ranking

and AMP cashflows as % of industryAMP

net cashflows% of industry

total

6,000 18%

Source: Plan for Life June 2006, Retail Managed Funds Report

Note: Number above box represents relative industry ranking in year ending quarter /rankings exclude badged products

AMP net retail cashflows (ex CMTs) as % of industry total

16%

15,000

14%

4,000 12%

10%33 23,000 28%3

23212,000 6%233

4%61,000 7

89 2%

0 0%A$m

Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun-02 02 02 03 03 03 03 04 04 04 04 05 05 05 05 06 06

16

Group cost ratio down to 40.1%

397 399 392412

46.5%43.9%

41.9%40.1%

0

100

200

300

400

500

600

1H 03* 1H 04* 1H 05* 1H 060

5

10

15

20

25

30

35

40

45

50

A$m %

Controllable costs Cost to income ratio

* Some minor restatements to reflect a change in the definition of controllable costs

17

Underlying return on equity up to 26.6% and set to exceed 30% in 2007

21.0%22.9%

26.6%

32%

35

30

25

20

15

10

5 6.9%

% 01H 03* 1H 04 1H 05 1H 06 1H 06 modelling full

impact of 2006 capitalreturn

*Pre-demerger Underlying return on equity

18

Major progress on 5 year goal to double the value of an investment in AMP from mid 2005 to mid 2010

40% change in 12 months from mid 200516.23.4

0.70.5

11.6

A$bOpening value – June 05

median analysts’ valuation*

Dividends (2H 05 + 1H 06)

Capital return –1H 06

Change in median analysts’ valuation

over 12 months

Closing value* –June 06

* Measured by calculating the value of dividends and capital returns paid to shareholders, and increases in enterprise value. Enterprise value is measured by calculating the median of the major stockbroking analyst valuations of AMP in each year, beginning June 2005.

Business unit performanceBusiness unit performance

20

Australian contemporary wealth management –a high growth, high return business

30.4%

A$34.7b

83.8%

A$1,496m

54.4%

A$172m

A$89m

1H 051H 05

37.6%

A$44.7b

83.1%

A$3,309m

48.5%

A$175m

A$116m

1H 061H 06

ContemporaryContemporarywealth managementwealth management

- 0.7 percentage pointsPersistency

+ 121%Net cashflows

+ 2%Controllable costs1

- 5.9 percentage pointsCost to income ratio

+ 30%Operating earnings

+ 29%AUM

+ 7.2 percentage pointsReturn on equity2

ChangeChange

1 Include planner support costs of the distribution business recovered from the Australian mature and contemporary wealth protection businesses through a fee on AUM.

2 Return on BU equity, ungeared, excluding goodwill. Based on monthly average BU capital numbers.

21

Australian contemporary wealth protection – a solid growth, high return business

28.2%

A$1.7b

9.6%

A$403m

22.2%

A$31m

A$59m

1H 061H 06

Contemporary Contemporary wealth protectionwealth protection

29.3%

A$1.7b

9.3%

$363m

25.1%

A$33m

A$55m

1H 051H 05

- 1.1 percentage points

Steady

+ 0.3 percentage points

+ 11%

- 2.9 percentage points

- 6%

+ 7%

ChangeChange

Individual risk lapse rate

Individual risk annual premium income

Controllable costs

Cost to income ratio

Operating earnings

AUM

Return on equity1


22

Australian mature – long tail, large scale, outstanding return business

+ 0.6%A$18.1bA$18.2bAUM

+ 0.1 percentage point87.6%87.7%Persistency

+ 8%(A$614m)(A$564m)Net cashflows

- 3%A$31mA$30mControllable costs

n/a0.33%0.32%Controllable costs/AUM1

+ 11%A$83mA$92mOperating earnings

+ 35.3 percentage points47.2%82.5%Return on equity2

1H 051H 051H 061H 06

ChangeChangeMatureMature

1 Based on monthly average AUM.2 Return on BU equity, ungeared, excluding goodwill. Based on monthly average BU capital numbers.

23

New Zealand – a life risk-driven, high return business

+ 1 percentage point5.9%6.9%Lapse rates

+ 3% (+ 16% in local currency)A$77mA$79mRisk annual premium income

n/a(A$53m)A$10mNet cashflows

SteadyA$23mA$23mOperating earnings

+ 19%A$26mA$31mControllable costs

+ 3.7 percentage points40.7%44.4%Cost to income ratio

- 4.4 percentage points27.4%23.0%Return on equity1

SteadyA$4.2bA$4.2bAUM

1H 051H 051H 061H 06

ChangeChangeNew ZealandNew Zealand


24

AMP Capital Investors – a high growth, high return asset management business

+ 12%A$93mA$104mControllable costs

+ 19%A$152mA$181mFee income

+ 14%A$84.4bA$96.4bAUM

+ 14.1 percentage points45.9%60.0%Return on equity1

A$1,055m

58.4%

A$42m

1H 051H 05

A$1,144m

55.2%

A$55m

1H 061H 06

AMP Capital InvestorsAMP Capital Investors

+ 8%Net external cashflows

- 3.2 percentage pointsCost to income ratio

+ 31%Operating earnings

ChangeChange

1 Return on BU equity, excluding intangibles. Based on monthly average BU capital numbers.

25

AMPCI – out-performance against benchmarks across all asset classesAustralian AUMAustralian AUM

Jun-06 Dec-05

83%90%

94% 94%

78%84%

79%

89% 86%

76%

91%

79%

Listed assets Infrastructure Private equity Property FutureDirections

Funds

Total

Target 75%

% indicates assets under management meeting or exceeding benchmarks

People and culturePeople and culture

27

Developing and retaining our most valuable resource

Our most valuable resource is our people

We’re building a constructive culture as it is a key long term driver of high performing companies

One of the tools AMP has been using to measure culture since 1996 is the Organisational Culture Inventory (OCI) tool

OCI identifies an organisation’s culture as having one of three dominant styles: constructive (blue), passive/defensive (green) and aggressive/defensive (red)

2006 results show continued improvement in constructive styles, in particular becoming a more achievement-oriented place to work

AMP also compares well against the financial services industry as a whole

Encouraging results to date - but more work to be done

29

AMP culture – more constructive than finance industry as a wholeFinancial services industry comparison

Source: Human Synergistics InternationalCopyright © 2005. All rights reserved

Base profile = AMP 2006Overlay = Finance industry

Capital management and Capital management and shareholder returnsshareholder returns

31

Capital management strategy

Capital efficiency has been pursued by:leveraging the strong share market performance since early 2003 growing the contemporary and asset management businesses that are relatively low in capital intensityrunning off the more capital intensive mature life and Cobalt/Gordian businessesachieving sustained out-performance in managing assets of mature life business‘derisking’ the mature business and shareholder capital through a range of initiativesdeveloping sophisticated monitoring systems and sensitivity modellingreturning A$1.5b in excess capital to shareholders.

32

Three major capital initiatives to date

First capital return of A$750m in June 2005

Second capital return of A$750m in June 2006

Third initiative - ordinary dividend payout ratio policy increased to 85% of underlying profit this year and franking rate also lifted to 85%

Possibility of a fourth capital initiative in FY 07

Balance sheet currently supports a fourth initiative

Quantum, timing and form have not yet been determined – likely announcement in February 2007 with FY 06 results

Initiative will continue to be framed against the objective to maintain the Group’s ‘A’ credit rating

33

Dividends and capital returns since 2003

713 14 199

1418

40

40

7275

5960

45

2730

16

15

0cents2003 2004 2005 2006*

15% franked - interim85% franked - final

75% franked75% franked 85% franked

Interim dividend Final dividend Capital return

*Final 2006 dividend will be advised at AMP’s full year results announcement in February 2007

34

Strong business performance and disciplined capital management driving total shareholder return

60

80

140

30 S

ept 2

002

= 10

0

49% since Dec 200428% since Dec 2005

120

100

AMP total return 28% since Sept 200235% since Dec 2002123% since Dec 2003

40

20Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06

OutlookOutlook

36

Medium term positioning of AMP is attractive

Retirement savings industry set to grow by over 10% pa in next decade*AMP holds top three positions in key product segments of this market

Retail superannuation Retirement incomes Corporate superannuation Individual risk

AMP has strong competitive advantage in two key distribution channels

PlannersEmployer sponsored master trusts

AMP Capital Investors leverages broad internal funds baseTargets external growth in selected asset classes and markets inAustralia and Asia

* Source: Dexx&R Market Projections Report May 2006 (9th edition)

37

Strategic focus centred on core business

Focus on “running the business better than it’s ever been run before” to drive shareholder value is working

Capturing scale benefits from volume and market growth

Sustaining lowest unit cost position in the industry

Pursuing strong growth in our core businesses

Attractive value proposition for our customersSecurity

Performance

Fairness

Measuring our success in 2006 by five key indicatorsUnderlying return on equity Cost ratio

Operating earnings Investment performance

Value metrics

38

Medium term outlook

Sound platform for future growthGood industry, good operating environment, good business model

Sharp focus on the basics of our businessThe better we get at running the business, the more opportunities we find to improve

Broad basis for growthRetail super, corporate super, retirement income products, risk insurance, retail and institutional fundsFederal Budget provides further stimulus to industry in 2006-07 and medium term

Strong balance sheet and cash flowEnabling capital returns and higher dividends

Upgraded medium term goalOriginal goal to double value of an investment in AMP in 5 years to mid 2010 = growth of 15% a yearNow targeting mid 2009 to achieve this goal

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