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AMP FY net profit falls 11%

Thursday 16th February 2012

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Australia-based insurer AMP's full-year profit fell 11 percent to A$688 million due to the costs of taking over AXA and lower investment returns.

Its preferred underlying profit measure, which removes the takeover costs and some of the impact of volatility in investment markets, rose 20 percent to A$909 million for calendar 2011. The result includes a nine-month contribution from AXA.

Chief executive Craig Dunn said challenging market conditions continue to impact on the business but AMP is well positioned to continue delivering on its growth strategy while maintaining disciplined capital and cost management.

“The new AMP is strong competitively, has a more diversified, balanced mix of business, a powerful domestic franchise and growing opportunities offshore,” Dunn said.

“Our investment in growth initiatives, combined with the benefits of the merger with AXA, has put AMP in a market-leading position in key segments in our target markets,” he said. “The resilience of the business is evident from our growth in banking, risk insurance and new wealth management products, despite the very challenging business conditions.”

Dunn said integrating AXA with AMP is tracking well with full-year run-rate synergies of A$55 million after tax achieved by Dec. 31, exceeding its A$30 million estimate and reflecting earlier-than-expected benefits from supply chain negotiations and the new organisational design.

As well, integration costs to date are lower than anticipated due to the timing of costs incurred. AMP's estimates of overall integration costs at A$310 million after tax and synergies of A$140 million are unchanged, he said.

The New Zealand financial services operations contributed A$76 million to the overall result, up from A$58 million in 2010.

While Europe and other parts of the world are at risk of recession, Australia is in relatively good shape with higher interest rates by global standards, allowing fro greater monetary stimulus if necessary, Dunn said.

“Despite the challenging environment, the merged AMP is in a powerful competitive position to deliver on its growth strategy and achieve better outcomes for customers,” he said.

AMP will pay a final dividend of 14 cents per share, down from 15 cents last year, franked to 50 percent. That took the full-year payout to 29 cents from 30 cents the previous year.

The company said the payout ratio for calendar 2011 is 84 percent of underlying profit, near the top of its current target range of between 75 percent and 85 percent.

AMP is lowering this target to between 70 percent and 80 percent of underlying profit because of expected higher capital requirements to meet growth, increasing demand for more capital intensive products and an anticipated increase in regulatory requirements.

The company held A$1.54 billion more in capital at Dec. 31 than the minimum regulatory requirements.

“AMP continues to have a bias towards holding more capital than less, given the current economic environment and ahead of anticipated changes in regulatory capital requirements,” Dunn said.

AMP shares, which trade on both the ASX and NZX exchanges, were down 1 cent at NZ$5.54 on the NZX. That's up from the NZ$4.55 low in September last year but down from the year high at NZ$7.88 in April last year.

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