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Substantial improvement in sentiment toward AMP: Mohl

Monday 1st December 2003

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AMP is on the verge of winning what its chief executive Andrew Mohl calls a major mandate out of Asia in listed properties fund management.

Mohl told a Securities Institute of Australia luncheon in Auckland yesterday, that AMP post demerger sees growth not only in Australia and New Zealand, but also in Asia - on a targeted basis.

Mohl will become chief executive of the new regionalised AMP should shareholders give their blessing to the demerger of the Australasian business from its troubled United Kingdom Henderson Global (HHG) operation at a special meeting on December 9.

Mohl left NZ industry participants and watchers in no doubt the new AMP will choose its partners very carefully. While the Henderson Global connection in the United Kingdom had been a very good one for passive funds management, it had not been for active equities.

However, Mohl said the worst of the impact from its troubles on AMP's brand and businesses in New Zealand and Australia were now over.

There had been a substantial improvement in sentiment toward AMP in the past few months and the key planner/customer relationships were now back at its traditionally very strong levels, he said.

After the proposed demerger, the New Zealand side of the business will move from contributing less than 5% of group profit to about 10%.

Mohl says the new AMP will be a wealth management powerhouse with strong competitive positioning in advice-based distribution, product manufacturing and investments.

"We intend to pursue cost leadership in product manufacturing to drive down unit costs, notwithstanding a market-leading 40% cost to income ratio in the first half of 2003," he said.

AMP also intended to build and diversify its advice-based distribution.

"In simple terms, higher productivity and planner numbers will drive top line growth while the focus in product manufacturing will lower unit costs," he said.

Recent estimates showed the embedded value of AMP Financial Services is likely to be around $6.5 billion at year end, before transfers, while the value of new business is likely to be around $230 million.

Mohl said both figures are strongly up on the first half results and reflect the impact of the business changes AMP has made as well as the improvement in market conditions.

An AMP Financial Services presentation on Friday said the business is expected to achieve an operating margin of $347 million to $383 million for the current year ending December 2003.

Mohl warned shareholders and advisers to not be in a rush to get rid of their HHG shares post demerger. Shareholders will get one HHG share and one new AMP share for every AMP share they hold if the demerger goes ahead.

He said HHG was like a good bottle of red - needing time to breathe and prove itself, but with real promise.
If investors could hold their nerve, HHG could prove extremely valuable.

"It's all about propensity to risk," he said, adding some investors had indicated they intended to "hoover up" the stock.

Mohl said the fundamental reason for the demerger was it was better for the customers and shareholders if HHG was able to develop its own strengths as a UK-listed company. HHG gets no benefit from being owned by the UK branch of an Australian parent.

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