AMP looking towards an easier future

By RICHARD BRADDELL

WELLINGTON - After a disastrous foray into Australian insurer GIO and more successful acquisitions in Britain, AMP says it now sees its future growth coming from alliances, partnerships and joint ventures.

Chief executive Paul Batchelor, who is visiting Wellington and Auckland from Sydney headquarters, said the hostile GIO takeover that produced losses approaching $2 billion was inconsistent with AMP's values.

And it had deprived AMP of the opportunity of doing due diligence on the company, which had a reinsurance business AMP did not want and which had produced huge losses.

While the GIO debacle cost former chief executive George Trumbull his job, calls have been made for the cuts to go deeper at board level - even as high as chairman Ian Burgess.

Mr Batchelor, who succeeded Mr Trumbull in the middle of last year, said AMP now had a mostly new management team which combined a "talented blend" of newcomers and old AMP experience.

But the GIO experience has caused AMP shares to drop more than a third in the last year, although they rose more than 8 per cent yesterday in expectation that rival Colonial was to be the subject of a friendly $A9 billion ($11.2 billion) takeover by ASB Bank's controlling shareholder, Commonwealth Bank of Australia.

What AMP may do with its 7 per cent Colonial stake has yet to be decided.

But although it is more than twice Colonial's size, with $A260 billion in assets, AMP is also seen as a potential takeover target, possibly by National Australia Bank.

AMP's 5 per cent shareholding cap still has more than three years to run, but, like Colonial, it can be overturned by a 75 per cent shareholder vote.

The CBA/Colonial merger would create a rival with the largest superannuation base in Australia, but Mr Batchelor is unconcerned, saying that separately or together, the two companies are strong competitors.

He said New Zealand was the strongest performer of AMP's three regions, with a 24 per cent return on capital after a 59 per cent rise in profitability last year.

Australian and British businesses were struggling to better 11 per cent, and were now still trying for only 15 per cent.

"There's no doubt we get a good return on investment in New Zealand," Mr Batchelor said.

This was despite New Zealand's being used to test many products and technologies for use in the rest of the group.

And while AMP's New Zealand banking operation had taken off, with 7 per cent of new market share, growth had been more subdued in Australia, where the share was a more modest 2 to 3 per cent.

AMP banking lost $A48 million last year, reflecting setup costs and costs of new customer acquisition. It is expected to break even in 2001.

A new British branch of AMP banking is about to open, and Mr Batchelor said this would complement its 50 per cent-owned Virgin Direct bank.

It was also possible that the new UK bank would take over support services to Virgin now provided by Royal Bank of Scotland.