AMP grows net profit but underlying earnings shrink

Thursday, 18 Aug 2016 07:52:48 | Stephen Letts

The AMP logo. (Supplied)

Wealth manager AMP has increased its first half profit by 3 per cent to a record $523 million.

However, on an underlying basis – with one-off gains and losses stripped out – profit was down 10 per cent on the previous year to $513 million, a bit below market expectations.

The company pointed to higher claims in Australian wealth protection and volatile investment market conditions as a significant drag on earnings.

AMP's costs also pushed up by around 1 per cent, with the key cost-to-income ratio up 2.4 per cent to 45.5 per cent.

Australian wealth protection – which includes life insurance and income protection products - saw earnings more than halved to $47 million.

It is a disappointing result for AMP which, in recent years, had appeared to be turning the often struggling life insurance division around.

AMP chief executive Craig Meller described the first-half claims experience as poor.

"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.

Wealth management earnings slip

The financial planner driven wealth management arm reported a 6 per cent decline in operating earnings to $195 million and was affected by market turbulence and election speculation surrounding changes to superannuation.

Cashflows in wealth management sagged from $1.2 billion a year ago to $582 million in the first half, as flows into retail and corporate superannuation platforms dried up.

The speculation about changes to superannuation entitlements did not help investor sentiment.

"Cashflows were subdued, reflecting investment market volatility and weaker investor confidence given uncertainty around proposed changes to superannuation," Mr Meller said.

AMP Capital was one of the stronger performers, lifting first half earnings by 15 per cent on a solid growth in fee income and switch in focus overseas as well as infrastructure and property investments.

AMP maintained its interim dividend at 14 cent per share, representing a payout ratio of 81 per cent of underlying earnings.

Concerns about a return to weakness in wealth protection and rising costs worried investors and, at 10:30am (AEST), AMP shares were down 6 per cent to $5.46.

External Link: AMP profit results

AustraliaPlus

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AMP grows net profit but underlying earnings shrink

Wealth management earnings slip

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