18 August 2016
Michael Roddan Reporter Melbourne @michaelroddan
The nation’s biggest wealth manager AMP has unveiled a hefty fall in underlying profitability as wealth management inflows shrink amid the government’s proposed superannuation shake-up, and as insurance claims surge.
AMP (AMP) today booked a net profit of $523 million for the six months through June, a 3 per cent increase year-on-year. The group said its underlying profit was down 10 per cent as higher claims in its wealth protection business and volatile investment conditions hampered earnings.
Revenue, however, slumped 29 per cent to $6.1 billion during the period.
AMP shares opened down 5 per cent at a five-week low of $5.50.
The slide in revenue came as cashflows into AMP’s Australian wealth management business dropped by 50 per cent to $582m, down from net cashflows of $1.15bn the same time last year. AMP said its weak retail and corporate super platform net cashflows were a product of investment market volatility and weaker investor confidence given uncertainty around proposed changes to superannuation.
“AMP Capital, AMP Bank and our New Zealand business have performed strongly, while Australian wealth management has demonstrated resilient performance in a difficult market environment,” chief executive Craig Meller said.
“While first half claims experience was poor, we continue to focus on improving the outcomes for customers and shareholders in our wealth protection business, with actions underway to improve capital efficiency and reduce volatility,” he said.
Mr Meller said AMP would be overhauling its insurance business to stem the tide of claims. The wealth protection arm booked operating earnings of $47m, down from $99m a year go.
“To address performance in the insurance business AMP is strengthening income protection assumptions, repricing, continuing the transformation of claims management and accelerating our capital management initiatives,” Mr Meller said.
AMP has over 5,400 employees and manages more than $220bn in assets and will pay a 14c interim dividend, in line with the prior year’s final dividend.