For AMP, the prize was the dominant share in retail superannuation financial planning, and life insurance the buyout would deliver. AMP saw the Axa deal as delivering Australia’s mythical “fifth pillar”. Instead, Axa was the beginning of the decade-long unravelling of AMP.
The wealth manager had paid a premium to dominate life and financial planning just as the industry was about to hit a structural turning point. Likewise, the economics of retail super were about to change dramatically. Then there was the bitter cultural differences between the conservative Melbourne-based Axa, and Sydney’s flashy AMP.
AMP was valued at a little over $14bn when it lobbed its bid for Axa. Today, it’s valued at a little more than $4bn.
The difference follows a slow-moving fire sale, with AMP’s shareholders footing the bill with billions lost.
But out of the wreckage of AMP-Axa, the little known North platform has found its roar to become the new value driver for Alexis George’s AMP.
According to brokerage Macquarie, the platform business represents more than 75 per cent, or $3.2bn, of the valuation of today’s AMP. The investment bank has pegged the super business at 10 per cent and the bank at 15 per cent.
Chief executive George has signalled a growing confidence as she showcased the two wealth businesses: Platforms and retail super. Of these, the North platform, used by planners and now number three in the market, has become AMP’s earnings engine. North has undergone a sustained period of net inflows and, helped with the launch of a suite of new retirement products, has just cracked $80bn in funds under administration. (It had barely $1bn on it when AMP moved in).
The past few months have seen North deliver the best numbers yet, scooping up nearly $1.7bn in financial adviser flows in June quarter. This follows more than $5.3bn of inflows in the past year.
The second key marker in AMP’s long recovery is monitoring the performance of a long-time problem child – its retail superannuation arm, which includes corporate super products. This has seen years of outflows, with the brand taking a hammering. But George believes it is now at a turning point.
For the first time since mid-2017, superannuation delivered positive cashflows ($33m) with more funds coming in than flowing out. However, AMP will need more than one quarter to prove the business has truly stabilised.
AMP’s retail super under management threatened to break below $30bn this time last year, it’s now up to $33.5bn. Corporate super has remained flat but a suite of new products and consistent performance has George saying doors are starting to open.
With industry funds suffering on cyber protection, AMP is highlighting its investment in tech can be a selling point for corporate and retail super. Everything helps.
It’s been a slow rebuild and there’s plenty to go. AMP now has a dramatically slimmed back portfolio, helped by asset sales, its cost base has been reset and some of the sale proceeds have been used to pay down debt, which is now at a third of the levels from at its peak. Under George, the former ANZ wealth boss, AMP has also had what it has sorely needed for four years, a stable executive team.
George says the hard work is behind AMP. To be sure, it’s been a big deconstruction job under a string of bosses. There’s the sale of the infrastructure debt platform, and the global equities and fixed income business. Other units to go have been infrastructure and real estate, as well as the rationalisation of adviser networks.
“We’ve been through some difficult times,” George says. “There was no reason for people to open the door to us”. Today, though, it’s a different conversation.
AMP has seized on a shift in the market where it is positioning itself. This is around looking to tap into superannuation, moving from accumulation to the pension phase. Where industry super funds have been able to dominate on accumulation, they are struggling with the right products as members transition to retirement. This is where AMP sees an opening, including with new longtail products like Lifetime Super sold on North. This is a hybrid-capital protected retirement income.
George says the demographics are on AMP’s side. By 2060, a third of the population will be in retirement phase. At the same time, we are living longer, which means there will be demand for more sophisticated planning around retirement.
“We know there’s a huge opportunity here. $750bn of assets will move into the retirement phase over the next six years. We know Australians have a fear of running out. And how do we, as a major provider, help them do this?”
It’s not all out of the woods. With a $23.5bn loan book, AMP’s bank remains sub-scale and too capital hungry to grow like Macquarie. AMP needs to make a call at some point about what sort of banking business it wants with margins to remain under pressure. However, it is confident a suite of new digital offerings can deliver the organic growth it needs.
Still, after years of introspection, George is now talking about AMP becoming a growth brand again. There is still a lot of ground to cover after a lost decade.
Land landmark
Macquarie’s sale of Paraway Pastoral is shaping up to be Australia’s biggest land deal and could represent yet another foreign investment test for Treasurer Jim Chalmers. Built up under the watch of Macquarie’s agriculture boss Elizabeth O’Leary, the portfolio being tested by Macquarie is huge, and represents some of the nation’s most valuable farmland across the East Coast.
Any sale for a mooted $2.5bn-plus would be closely watched as a new benchmark for landmark land deals. Depending on how the portfolio is structured, the sale could finally spur on industry fund interest in Australian agriculture. However, big Canadian and US pension funds are expected to show an interest.
Paraway runs more than 220,000 cattle and 250,000 sheep across 25 stations covering almost 4.5 million hectares. It includes properties such as Davenport Downs in Queensland, as well as a stake in cotton grower Cubbie Station. Macquarie says it hasn’t made a final decision on a sale, which depends on market interest.
Vale Peter Ryan
Our thoughts go out to Peter Ryan’s family and colleagues after the veteran ABC business journalist passed away following a long illness.
It was only last month Peter retired from the job he loved to focus on his health. His career spanned a marathon 45-year run in journalism across print and broadcast. I worked against the ever-friendly Peter running on two decades, bumping into him at various jobs across Sydney. If anything was breaking in business, or catching headlines, he’d be there. Peter always did his homework; he was a straight shooter; his questions cut through the rabble of any press pack. He was among the hardest-working journalists going, and made it a point to turn up. This was part of his legend. It’s how he got the interviews and built the contacts, and this remains a lesson in an age of desktop journalism. Shortly after his retirement, Peter told me in his own mind he was still flying along, chasing big yarns. Go well Peter.
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When AMP won its high-priced bidding war for Axa Asia Pacific in 2011, the fledgling North platform that came with the $4.6bn deal was largely an afterthought.