Bleeding ends with AMP's $6.2b loss

By PAULA OLIVER

It isn't every day that a company unveils a loss of more than $6 billion and sees its share price rise in applause.

But that is exactly what happened yesterday to financial services group AMP after it reported the second-largest net loss in Australia's corporate history.

The final figure of A$5.5 billion ($6.2 billion) was expected, and while it was painful, analysts were heartened by a promising underlying result signalling that the worst was behind AMP.

"Dealing with the problems of the past has been an extremely painful process - but doing nothing in the hope that things would get better was simply not an option," said chief executive Andrew Mohl.

The tumultuous year was marked by writedowns and a costly demerger of AMP's Australian and New Zealand arm from its UK business after an ill-fated expansion plan.

Mohl bluntly told reporters that "squander" was the only word that could be used to describe the way shareholders' money was lost.

However, the second half of last year had been promising and sales this year were so far "encouraging".

The new AMP recorded a profit after tax before other items of A$619 million - 16 per cent more than was forecast in the explanatory memorandum which accompanied the demerger.

That, coupled with Mohl's assurance that "this is it - the chapter of writedowns and shocks is behind us", spurred investors to push AMP's shares up 16c on the NZX to close at $5.61.

Once again the company's New Zealand arm shone with a lift in profit for the year to $51.9 million, up 3.6 per cent on the previous period.

Local managing director Ross Kent said that a tight focus on costs and good results from risk products had helped make up the profit.

Asked what areas he saw for growth in the local business, Kent said that increasing the level of retirement savings among the private sector was a big opportunity.

Gaining customers inside the main cities was also a focus.

Staffing numbers have fallen in both Australia and New Zealand.

Locally staff have been reduced by between 5 and 10 per cent, and in Australia an aggressive approach has seen a 20 per cent fall from 4969 employees to 3961.

Office consolidation has also been aggressive - with 40 locations becoming 14 and 10 in Sydney becoming just two.

Mohl said that subsidiary boards were more disciplined, and while there was still a lot of work to do he was confident that the worst was behind AMP.

The profit for the demerged entity for the year was better than expected because the financial services and fund management businesses had strong finishes to the year, Mohl said.

There was also a favourable one-off tax ruling.

Cashflows into AMP's funds had picked up by about 25 per cent this year, and costs would continue to fall as there was further "rationalisation", Mohl said.

The group's reinsurance company Cobalt/Gordian was no longer considered a core business and AMP would not rule out selling it if an attractive offer was made.

Asked if the company would consider overseas acquisitions again after the UK disaster, Mohl said the new board was firmly focused on the Australian and New Zealand region and getting that business "firing".

Mohl conceded that it would take a long time for the AMP brand to fully recover from its hard times, but obstacles that were hindering the company's performance had been cleared.

His message to suffering shareholders was that "the decks have been cleared", and the final chapter in the UK "adventure" had been closed.

The new AMP, he claimed, was a robust company with a solid future.

After delivering three negative financial results, Mohl said he was determined to make sure the next one was positive.

AMP's red ink: Year to December 31, 2003

* Net loss: A$5.542 billion ($6.25 billion), the second largest* ever in Australia.

* Net loss previous corresponding period: A$896 million

* Underlying net profit: A$619 million

* Loss on demerger: A$3.585 billion

* Restructuring and demerger costs: A$502 million

* Assets under management: A$76 billion

* Final dividend: 9Ac

* News Corp had loss of A$11.96 billion in 2001/02