AMP books $2.5bn full-year loss as underlying earnings fall 32pc

Embattled wealth group AMP has reported a 32 per cent slump in underlying profit, copping mammoth outflows of $6.3bn and a $2.5bn net loss.

Picture: Hollie Adams

Embattled wealth group AMP has reported a 32 per cent slump in 2019 underlying profit, as earnings were dragged lower by its wealth unit and mammoth fund outflows of $6.3bn.

The statutory result came in as a $2.5bn loss, largely due to a $2.35bn impairment taken in the first-half, which was topped up by an additional $55m charge in the latter six months to reflect “additional reductions in value of client registers and associated practice finance loan impairments”.

Underlying profit — which removes one-offs and market volatility — printed at $464m for the 12 months ended December 31, down from $680m for 2018, the 171-year-old company said in an ASX statement on Thursday.

Analysts expected net income to come in at $565.5m for the full year.

AMP chief executive Francesco De Ferrari said 2019 was a year of “fundamental reset” at the company.

“In a period of unprecedented legislative and regulatory pressure we have established a strong three-year roadmap for recovery. Our focus is now on delivery,” he added.

“Amid the reset, AMP Capital had an outstanding year, delivering on its long-term global growth plan.

“AMP Bank and New Zealand wealth management also delivered resilient performances in competitive markets. In Australian wealth management, we took bold steps on our plans to reshape advice, working with advisers to support them make a decision on their path forward, and ensure our network is professional, productive and compliant.”

In a move that may anger investors, the statement also noted that AMP’s board had approved an increase in the maximum short-term bonus opportunity to 200 per cent of the CEO’s base salary. That is up from a maximum short-term incentive of up to 120 per cent of base salary, set when Mr De Ferrari was appointed in August 2018.

AMP’s shares slid 1.9 per cent to $1.79 in early trading on Thursday.

Shaw and Partners analyst Brett Le Mesurier reiterated his “sell” rating on the stock after the result, highlighting further pressure ahead for AMP.

“The guidance is for the new and lower underlying profit to be stable at $464m from 2019 to 2020,” he said.

“The issue is whether or not this represents a new level of stability. This is most likely not the case.”

AMP Capital, the real estate and infrastructure unit, saw operating earnings climb 18.6 per cent to $198m, while wealth management posted an almost 50 per cent slide to $182m.

The accounts showed net cash outflows of $6.3 billion in 2019 including $2.4 billion in pension payments to customers in retirement. “Cashflows were impacted by weaker external inflows and higher outflows, reflecting ongoing reputational impact and strong competition,” they said.

In the fourth quarter net cash outflows were $1.3 billion, compared to $1.6 billion in the same period in 2018. Approximately 440 advisers exited the AMP network in 2019 as part of the company’s overhaul of its wealth operations.

AMP Bank and the NZ wealth division also had lower full-year earnings as did the divested AMP Life business.

The company confirmed a report in The Australian earlier this week that it had received key approval for the $2.5bn sale of its life insurance business to Resolution Life.

AMP noted it was in talks with “a number of interested parties” for the divestment of its wealth unit in NZ.

The company’s board also highlighted that Mike Wilkins was this week retiring from his post as a non-executive director, to be replaced by Sigma board member Michael Sammells.

Mr Wilkins was separately announced as the new chairman of QBE Insurance on Thursday

AMP’s shares are 4.7 per cent lower so far this year and closed on Wednesday at $1.825.