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AMP shares hammered further by investors


Wednesday 22nd January 2003

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Investors continued to punish AMP after its unexpected profit warning yesterday and possible negative impact on its ratings.

Yesterday, AMP revealed that despite a profit warning in December, it had not accounted for all the bad news in its British business.

The company now predicts a worse than expected annual net loss of $A900 million ($NZ975.6 million) for 2002, largely because of lower than expected margins in AMP's British financial services unit.

AMP shares tumbled a further 55c today to a record low of $10.70, after losing 85c following yesterday's announcement. AMP shares peaked in New Zealand at more than $27 in June 2001.

The company anticipated an annual operating profit of $A500 million before write-downs, asset sales and restructuring costs, which would push its loss to $A900 million.

The company said late last year it would post a loss of up to $A600 million for 2002, compared with its net profit of $A690 million in 2001.

Last year AMP said $A1.2 billion worth of asset writedowns and $A320 million in restructuring costs last year would hit its 2002 earnings.

However, the company revealed yesterday it had not properly accounted for the impact of weak equity markets on margins.

As with all life insurers, AMP's returns have been hammered by falling share markets, creating a shortfall in the assets needed to back future payouts to policyholders.

Operating margins for AMP's United Kingdom business were likely to be down by Stg36 million from an earlier estimate of Stg112 million, as a result of poor international markets.

AMP said in December its estimate of Stg112 million was based on Britain's benchmark FTSE-100 index trading at 4200.

The index has slipped to about 3800, a far cry from AMP's expectation of 4700 by the end of this year which would provide a Stg104 million 2003 operating profit.

AMP has more than $A7 billion invested in the UK.

The company said today it would cut bonuses on some savings products sold through its UK units Pearl and NPI Life, becoming the latest insurer to take this route to fight falling markets.

That meant returns on those policies maturing this year would be on average 20 percent lower than last year.

Ratings agency Standard & Poor's warned yesterday that AMP's ratings could be affected if the financial services giant released any more major bad news.

"Although the current revision of estimates will depress 2002 profitability, the revision is in the context of what was already anticipated to be a significant loss year for the company," S&P Financial Services Ratings group associate director Kate Thomson said.

The ratings on AMP were placed on CreditWatch with negative implications on November 17.

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