AAP - Sydney
Monday 11th August 2003
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AMP will release its results for the six months to June 30, 2003, on August 20.
"However, AMP management can confirm that preliminary results for business unit operating margins, underlying group earnings and UK writedowns are broadly in line with the guidance given on 1 May 2003," the company said.
On May 1 AMP said it would demerge its business along geographic lines - Australasia and the UK.
As part of the demerger, and particularly the reduction of risks in the UK Life Sciences business, book writedowns of about $A2.6 billion ($NZ2.94 billion) were expected, AMP said at the time.
The financial services group also said that if current market conditions, particularly in the UK, weakened further or remained at current levels, the group's profitability would be adversely affected.
AMP chief executive officer Andrew Mohl today issued an update on the demerger proposal, in response to speculation about the business.
"The uncertainty is understandable given the complexity of the proposed demerger and continuing uncertainty about the state of the UK life and pensions industry," Mohl said.
He said AMP was still working through many of the issues associated with the demerger, but was anxious to ensure that shareholders understood the company's current position.
In terms of its AMP Australia brand, the company said preliminary Plan for Life data released last week show that AMP recorded a net inflow of $A58 million in the June quarter, a strong result compared with major competitors.
For the year ended June 2003, AMP recorded a net inflow of $A751 million, the second best result among the top five managers, and around 11% of industry net flows.
Mohl said the figures demonstrated the strength of the AMP brand despite the difficult conditions in which the company in the second quarter.
"Australian Financial Services is more than holding its own, despite the tough market conditions and our corporate challenges, demonstrating the resilience and underlying strength of this business," Mohl said.
AMP said progress had been made on the structure of its demerger proposal, and it remained on target to achieve the demerger and associated steps by the end of 2003, subject to shareholder and necessary regulatory approvals.
Mohl said AMP was particularly concerned about persistent market speculation about the post-demerger capital structure of `new' AMP, and in particular its Reset Preferred Securities (AMPKPA).
AMP said the final capital structure for both new entities is yet to be resolved and remains subject to ongoing discussions with regulators.
It will also be dependent on the outcome of asset sales, with the proceeds of any asset sales to be used to reduce the debt of 'new' AMP.
"However a restructuring of the RPS as part of the demerger proposal is likely," AMP said.
"AMP would only initiate any such restructuring with the approval of AMP shareholders to the demerger proposal -- that is, any restructuring would occur post the EGM.
"In the event of the demerger not being approved, it is likely the RPS will remain as part of AMP's capital base as it will continue to be a relatively low cost form of capital."
Full details of the proposed capital structures of both new entities will be provided in the explanatory memorandum detailing the demerger proposal, expected to be available from mid October.
As previously stated, AMP said it had received several approaches for its UK businesses.
"These approaches have not at this stage led to a detailed proposal to be considered by the AMP board," it said.
"As stated in the 12 June 2003 demerger update, any formal offers will be given proper consideration and, if appropriate, brought to shareholders.
"Obviously, if this were to occur, the demerger proposal and related capital restructuring would not proceed."
AMP shares hit record lows last week after an internal audit found AMP's global funds management arm, Henderson, may have been at risk of breaching client mandates.
But AMP said the review team had not found any breaches.
Global credit ratings agency Moody's also downgraded ratings for the entire AMP group, with a negative outlook.
Mohl said AMP recognised that there was considerable speculation in markets about its demerger which, in part, reflected a range of possible scenarios and outcomes.
"We are working to inform investors on the status of AMP against this uncertainty and the fact that a number of the complex issues associated with the demerger are yet to be resolved," Mohl said.
"Ultimately, we are focused on maximising the long term value of the businesses in AMP and the demerger proposal remains the primary strategic initiative to achieve that."
AMP also said strategic plans for the new entities, the `new' AMP and `new' Henderson, had been prepared for review by the AMP Ltd board and would be outlined in the explanatory memorandum.
It said discussions with regulators were well underway.
"Regular discussions are being held with APRA with the key area of focus being AMP's capital structure as a result of the demerger.
"The Financial Services Authority in the UK is also reviewing the demerger proposal.
"The FSA is also focussing on the capital arrangements and the consequent implications for policyholders and other customers of the AMP Group in the UK."
Rothschild has been appointed to give an independent expert's opinion as to whether the proposed demerger is in the best interests of shareholders.
Investment banks Cazenove and UBS have been appointed in the UK to investigate the feasibility of an early London Stock Exchange listing of 'new' Henderson, in addition to an ASX listing.
AMP said Ernst & Young is continuing to develop the investigating accountant's report, which will include historic pro formas for each of the demerged entities.
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