Upbeat AMP reports $1.83b recovery

By RICHARD BRADDELL

AMP yesterday shrugged off the vestiges of its 1999 annus horribilis by reporting a $A1.5 billion ($1.83 billion) recovery in net profit last year - $A100 million better than the top end of analysts' forecasts.

The $A1.15 billion bottom line profit dispelled memories of the $A424 million 1999 loss and a company wracked by internal strife following its disastrous hostile takeover of the Australian general insurer, GIO.

For AMP's 106,000 New Zealand shareholders, accounting for 10 per cent of the $A300 billion giant's register, the news was all good with earnings per share turning round from a negative A39c to $A1.44.

A final dividend of A24c takes the total for the year to A47c.

Following the announcement, the shares traded up to 1.5 per cent higher.

Announcing the result in Sydney yesterday, chief executive Paul Batchelor could congratulate himself for being well on the way to achieving the unspoken goal of financial institutions: to be boringly profitable.

A core strength in the result was the paring back of AMP's high dependence on investment earnings.

While investment earnings slipped in difficult market conditions to $A617 million from $A860 million, earnings from operations leaped 65 per cent to $A981, explaining the strength of the bottom line.

Mr Batchelor said the strong result was only the beginning, with AMP well positioned to take advantage of double-digit growth in superannuation driven by demand from baby boomers.

"We are in the right businesses, in the right markets, at the right time."

He pointed to three factors: strong net cash inflows with 70 per cent of the $A60 billion coming from overseas; disciplined capital management releasing funds for future growth; and cost management.

On the latter front, cost savings were being achieved ahead of time and were better than budgeted.

The general insurance division, which embraces GIO, achieved $A177 million of a $A200 million two-year target for integration savings, while the UK financial services group produced £67 million ($225 million) in savings.

Mr Batchelor said the result was sustainable and had been delivered without mortgaging AMP's future. "Our cost cutting has not been at the expense of future revenue opportunities and we have continued to invest in the future."

However, he was less effusive on rumours that AMP might be on the verge of selling its general insurance business.

While the unit had produced a great result last year, said Mr Batchelor, it could do better and AMP wanted the right results for its investors.