AMP’s history of self-harm

AMP’s bosses need to turn their backs on their Circular Quay views and return the firm to its roots as an Australian icon.

The view from AMP’s taller Circular Quay building.

Over the last few decades AMP has regularly inflicted harm on itself.

This week’s incredible revelations to the banking royal commission about breaking the law to boost profits takes the AMP tradition of self-harm to new, low levels and almost certainly it will result in yet another clean out of directors and top executives.

Already shareholders have suffered yet another sickening loss.

What makes AMP executives and directors regularly impose a crisis on themselves?

Could it be that their spectacular views of Circular Quay — arguably the best views offered to any set of Australian directors and executives---dull their senses and take them apart from the real world.

I am not seriously suggesting this is the case, but it’s a bizarre theory that fits a lot of facts so let’s add some light humour to serious situations.

I am old enough to remember the days before the AMP office on Circular Quay when the AMP was close to the most respected institution in the land. In every state it had major offices that attracted excellent and influential state boards and executives. Whether you lived in Brisbane or Perth, and anything in between, AMP was a cornerstone of your community. I was mates with AMP hockey players in Melbourne and attended their annual dinners in the Collins Street head office. They were so proud of AMP and where they worked that they played sport under its brand.

It’s true that at that time AMP was a mutual and had a business model that would not work today, but no one could have conceived what their successors would do to the great organisation.

And yet the amazing thing is that despite all the mismanagement, the AMP created by those faithful staff and directors is still a great business and, at least until now, has been trusted.

If I recall correctly, it was the early 1960s (when I was living in Sydney and a regular user of the Mosman ferry) when AMP top executives and directors first began to enjoy the speculator views of Circular Quay. Later, there was a move to an even taller building with even better views just behind the original AMP Circular Quay building (the second building is now being redeveloped and AMP is back to its first Circular Quay digs).

AMP’s Circular Quay buildings, left.

When did AMP start its succession of executive/director crises?

It really began when the Circular Quay mob started to have a brawl with the gang on the banks of the Yarra River. The AMP and National Mutual had an all-out brawl in the 1980s and both offered policies that had capital guarantees in them that after the 1987 share crash were disasters. National Mutual was the most aggressive and had to sell 40 per cent to the French insurer AXA to survive the losses.

The Circular Quay mob reckoned that now they had shown they were better than the Yarra gang, it was time to take on the world. “If we can beat the Yarra gang just imagine what we will do in London”, was the catchcry at Circular Quay.

And so in 1989-90 AMP made a major plunge into the UK, buying two great names — Pearl and London Life.

No-one noticed that four years earlier, right in the backyard of the Circular Quay mob, an upstart called Challenger began offering a different style of annuity — an AMP base product.

As they watched the ferries go back and forth there was much chortling in the AMP office: Challenger could never take on the great AMP in annuities.

And then in 1998 AMP floated at around $18 a share and watched the shares go to almost $23. The view had never looked so good.

It was time to use that public issue cash to buy some more British assets and have a $3 billion plunge in Australia. The Australian plunge (GIO) quickly cost AMP $1 billion. And so there was another crisis and it was time to change the top and a bunch of directors. The CEO and the chairman all were forced to relinquish their view of Circular Quay.

But the new members of the Circular Quay gang didn’t enjoy the view for long when London blew up. The Circular Quay mob had been issuing capital guaranteed products and backing them with share investments. When the share market collapsed there was disaster. Unbelievably that’s what AMP and to greater extent National Mutual had done in Australia. The corporate memory had been lost.

And so AMP got another set of directors and a new chairman.

This time it was really serious. I discovered later that at one point AMP was technically broke, if you say that assets were less than liabilities. Two heroes saved the AMP----Andrew Mohl as CEO and his amazing chairman Peter Willcox.

When the job was done, exhausted hero Peter Willcox stood down and became the first AMP chairman in quite a while to leave voluntarily.

But the old Circular Quay curse stayed with him and the Melburnian joined the board of James Hardie and had to take responsibility for false media statements and he was suspended as a director for three years.

With Peter Mason chairing AMP, the Circular Quay mob bought out the Yarra gang (the National Mutual) and there was a time of relative tranquillity. But it was no easy task to change AMP from a high-cost operator with the best views in town to a lower-cost one. There were many issues of sales commissions.

Challenger also ran into its own set of problems but was rescued by Kerry Packer. It never looked back.

But now, in 2018, the Circular Quay mob has in many ways reached a lower ebb than any of the previous crises. We are yet to find out to what extent the board was invoked in the lying and unlawful activities. But even if they were not involved the practice in past AMP crises is that the board takes responsibility and there are mass resignations. Fascinatingly it is a board that a has close to and equal gender balance — it was a pioneer. But it is also balanced towards Circular Quay.

With the treasurer of Australia saying that AMP executives could face jail, we look set for yet another AMP board clean-out.

This time AMP needs to turn its back on the views and return to its roots as an Australian icon. If it can.