There's no miracle recovery ahead for AMP - CEO Mohl

By NZPA

Friday 28th February 2003

AMP chief executive Andrew Mohl today defended AMP's performance saying it had been little different from that of other battered life insurers in Europe and Britain.

"The sort of experience we're having is pretty symptomatic of what's happening across the European and UK life industry," he told NZPA two days after the company posted a record $A896 million ($NZ972 million) annual loss. "MP's share price performance was basically indistinguishable against companies like Prudential, Legal and General, Aviva and so on," he said.

"Everybody is basically facing the same problems because of the collapse in asset markets."

AMP's shares have slumped to $7.81 from $23.10 a year ago.

Mr Mohl acknowledged that shareholders had had "a very rough run" and he gave no promises on the timing of an improvement.

"We're sailing in a force 10 gale, conditions are tough --togh for everybody-- but a lot of it is of our own making.

"While it's difficult today, it will get better, we just have to stay the course."

"There's no miracle recovery I'm afraid. We are going to have to manage the business hard and over time we'll restore value, but it will take considerable time."

He gave some assurance to the 355,000 AMP New Zealand policy holders that their funds were well secured -- noting that AMP was highly capitalised with a double A credit rating.

AMP has $A350 billion ($NZ381 billion) of total funds under management. While the funds are secure, their peformance would depend on what happens in the markets they are invested in, Mr Mohl said.

He took over the distressed company in October from Paul Batchelor with a brief to turn the company around.

He has led a change of strategy -- minimising risk, reducing costs and selling non-core assets.

He acknowledged the company was a takeover target at the current share price.

"But we're always a takeover target. If we're doing well, then people want to buy us, and if we're not, then our share price is under pressure. We're a public company and we can be bought."

He said the troublesome British Pearl business, in AMP's books at $A5.1 billion, was in "rundown" mode. AMP was not selling but attempting to get its money back over time. Last year it had to shore up Pearl with a $A1 billion capital injection.

AMP had taken out hedging and derivative contracts to limit any further downside risk to its UK business should markets there fall further. Mr Mohl would not reveal details of those contracts which are likely to limit upside moves should markets there recover.

Commenting on a story today in the Australian Financial Review that AMP was embroiled in a $125 million tax dispute with the New Zealand Inland Revenue, he said the dispute went back five years to when AMP listed.

"We are very firm in our position."

AMP is yet to get any formal detail from the IRD.

"It's part of the general nature of doing business," he said, adding that he had no idea when it would be resolved.

IRD claims that a binding ruling issued in 1997 giving AMP tax exemption for certain financial transactions was based on insufficient information and misrepresentation by AMP - a claim the company denies and is responding to with legal action.

Mr Mohl said AMP's New Zealand operations had done well in a shrinking market.

AMP Financial Services New Zealand made an underlying net profit of $50.1 million profit against $56.2 million in 2001.

He noted that investors" confidence had fallen and people were unwilling to commit in the current environment.

"People tend to buy high and sell low," he said, possibly reflecting the company's own position in the troublesome UK market.

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