AMP Financial Services Briefing

Transcription

1 ASX Announcement 18 September 2006 Manager Company Announcements Office Australian Stock Exchange Level 4, 20 Bridge Street Sydney NSW 2000 Manager Market Information Services Section New Zealand Stock Exchange Level 9, ASB Tower, 2 Hunter Street Wellington New Zealand Announcement No: 52/06 AMP Financial Services Briefing An information session will be held today for analysts and investors to provide background on the AMP Financial Services (AFS) business, focusing on Contemporary Wealth Protection and New Zealand Financial Services (NZFS). The presentations will be delivered by Director of Product Manufacturing AFS, Craig Meller, and Managing Director NZFS, Greg Camm. A copy of the slides to be used in the presentation is attached. The presentation will be webcast live from 2.30pm at

2 AMP Financial Services briefing Australian Contemporary Wealth Protection New Zealand Financial Services Craig Meller Greg Camm Director, Product Manufacturing Managing Director, NZFS 18 September 2006

3 AFS s contemporary wealth protection business is managed within Product Manufacturing AMP Financial Services Advice Based Distribution Product Manufacturing New Zealand Financial Services Savings & Retirement* AMP Banking Corporate Superannuation Risk Insurance Mature products Product Manufacturing Operations Contemporary wealth management (CWM) Contemporary wealth protection (CWP) Business support * Includes lifetime annuities which are classified as contemporary wealth protection 2

4 High quality, profitable business AFS s contemporary wealth protection business is a high quality business with an attractive growth profile Our competitive advantage is based on the Product Manufacturing strategy of delivering market competitive products at the lowest unit cost This delivers high returns, the ability to pay a high percentage of profits back to AMP Ltd and solid prospects 3

5 Australian contemporary wealth protection size and focus Contemporary wealth protection primarily comprises: Total market size AMP share Lifetime annuities 1 $18m 39% Group risk 2 $1.5b 8% Individual risk 2 $3.5b 11% AMP s focus is on the individual risk segment of this market Contemporary wealth protection market has significant potential for growth, with under-insurance gap estimated by IFSA at $1.3 trillion 3 1 Source: Company estimates 2 Source: Plan for Life December Source: Under Insurance Key Facts - August 2005 (IFSA) 4

6 Rationale for AMP s focus on the individual risk market segment This segment is attractive because: it has potential for good market growth rates with significant under-insurance it is a natural product to provide as part of holistic advice, alongside superannuation of the opportunity for high returns it holds, given AMP s market position in distribution and superannuation 5

7 Competitive strategy in individual risk Our focus is on profitable expansion through value growth rather than absolute premium growth Primary distribution through AMP planners and within superannuation increases stickiness and profitability of business Sharp value proposition for planners and customers: Simple market competitive product backed by industry leading support and service Payment of genuine claims Pricing strategy is to be competitive, not a market leader We are market median for term insurance and competitive in income protection Superior returns delivered by pursuing a lowest unit cost positioning 6

8 Strategy driving strong growth in individual risk segment Growth in annual premium income (API) Factors driving growth in annual premium income (API) in 1H AMP CAGR = 10.7% Market CAGR = 10.4% (34.1) A$m Jun-03 Jun-04 Jun-05 Jun-06* AMP Market 2500 A$m 0 A$m API 1/7/2005 New business Lapses / claims Price increases Age + CPI increases API 30/6/2006 Source: Plan for Life * Jun 06 estimate 7

9 Drivers of lowest unit cost claims ratio Reduced from 40% of API in 2002 to 33% of API in 1H 06 Three key drivers: writing less high risk business (stringent underwriting standards) more active management of disability claims improved population mortality 8

10 Drivers of lowest unit cost industry leading, low lapse rates AMP s 2005 lapse rate was 9.4% compared to the industry average of approximately 12% As deferred acquisition costs of 200%+ of first year premiums are typical of the industry, the longer a policy lasts the lower the annual cost of management and the more profitable it becomes Lower lapse rates drive faster growth in API 9

11 Individual risk changing business mix In-force as at June % is income protection 37% of in-force risk business is written within superannuation, up from 29% in 2003 Sales in 1H 06 12% of sales are income protection 67% of individual risk sales in 1H 06 were written within retail superannuation 10

12 Future developments Automated underwriting Provides immediate cover for a high percentage of clients Improves service experience for planners/customers Greatly improves planner productivity Enables lower cost capture of high quality business 11

13 Summary For AMP Financial Services, contemporary wealth protection: is a high quality business with a particular focus on individual risk has strong competitive advantages which leverage AMP s core strengths generates high returns and the ability to pay a high percentage of profits back to AMP Ltd has good growth prospects 12

14 Appendix

15 14 AMP has a competitive pricing position for Term/TPD Scenario: male non-smoker, linked term & temporary and permanent disability cover $500,000 25% 20% 15% 10% 5% 0% -5% -10% Premiums relative to AMP FLP death -15% 60 $7702 3/8 Q3 55 $3786 4/8 Q3 50 $1938 4/8 Q3 45 $1080 5/8 Q2 40 $706 4/8 Q3 35 $575 6/8 Q2 30 $536 5/8 Q2 25 $601 4/8 Q3 Age AMP premium rating against competitors quartile Position of rates March 2006 AMP death Asteron Aviva Stepped AXA/ACL Life ING Life Zurich Life MLC PL MLC STD

16 AMP has a very competitive pricing position for income protection 160% Scenario: male non-smoker, occ 2A (white-collar), $4k per month, 30 day waiting period, monthly to age % 140% 130% 120% 110% 100% 90% 80% Age AIG AC&L AMP Asteron ING MLC AVIVA 15

17 Automated underwriting what it is Automated underwriting will revolutionise the way risk is written in Australia much as it did in the UK AMP is piloting an automated risk insurance underwriting program called EasyWrite The software programme automatically assesses client risk for standard life insurance applicants on behalf of a planner, without the need for the application to be forwarded to an underwriter for a decision It is the most comprehensive risk insurance underwriting programme currently in operation in Australia, featuring 261 high level rules and 5,600 questions 16

18 New Zealand Financial Services Greg Camm Managing Director, NZFS

19 The New Zealand market Superannuation saving is not compulsory A generous, indexed, non-means tested universal old age pension, along with the Cullen Fund, has led many to believe the Government will take care of them in retirement The tax environment has historically discriminated against managed funds and towards direct equity and property ownership Government is addressing these factors, with the launch of the KiwiSaver scheme and implementation of investment taxation changes in October 2007 The AMP New Zealand business is fundamentally a life insurance business which has a savings & investment business on the side Circa 90% of profit and value is derived from life insurance Today s presentation is primarily focused on the New Zealand contemporary life insurance business 2

20 Strong Portfolio strategy Reverse Mortgages Workplace Savings Workplace savings: Growth outlook 15-20% p.a., albeit at low margins. Strong capability and market leader. Strategy: Invest to stay ahead of competitors, and leverage scale. Market growth outlook Weak Mortgages General Insurance Retail Savings Life Insurance Distribution Management Conventional Life insurance: A core strength. Best in market on all measures % p.a. market growth outlook, with good margins. Strategy: Leverage strengths to build share. Broaden products, expand distribution. Distribution Management: A unique capability. Strategy: Grow aggressively. Conventional: Strong capability, historic strength. Strategy: Investigate options to develop market and leverage customer base. Weak Strong AMP New Zealand capability 3

21 Despite significant macro differences between the Australian and NZ markets, life insurance drivers are largely generic Same Value drivers persistency and claims ratios Competitors Degree of underinsurance Opportunities e.g. automated underwriting Different No downstream opportunity as generated by superannuation in Australia NZ planners are more focused on life insurance 4

22 Outperforming market growth since Life Insurance inforce API ($m) (Contemporary) 1, , NZ$m NZ$m AMP (LHS) Market (RHS) Source: Investment Savings and Insurance Association - Life, Income, TPD, Trauma 5

23 10 consecutive quarters of market share growth Life Insurance (Contemporary) Inforce Annual Premium Income Quarter Dec 02 Mar 03 Jun 03 Sep 03 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 CAGR NZ$m AMP % NZ$m Market % Market Share % Growth % (0.06) Source: Investment Savings and Insurance Association - Life, Income, TPD, Trauma 6

24 Sales momentum building Real new business PI (excludes age & CPI premium increases) % CAGR NZ$m 0 1H 04 2H 04 1H 05 2H 05 1H 06 7

25 Market leading persistency Life insurance (contemporary) Persistency - rolling 12 month average to Q % 93.2% 92% Percentage retained 90% 88% 86% 90.0% 88.8% 88.4% 88.1% 87.7% 86.8% 85.8% 85.7% 84.6% 84% 83.6% 83.1% 82% 80% AMP Sovereign Tower Market Asteron AXA Fidelity Westpac AIA ING Group BNZ CIGNA Source: Investment Savings and Insurance Association - Life, Income, TPD, Trauma 8

26 Strong sales growth + low lapse rates 2.0 Ratio of new business to discontinuances 6 months to 30 June ratio AMP ING Group Sovereign Fidelity Medical BNZ Westpac CIGNA AIA Asteron Tower AXA Source: Investment Savings and Insurance Association - Life, Income, TPD, Trauma 9

27 AMP now second for in-force share, up from 4 th in % Life Insurance (Contemporary) Inforce Annual Premium Income Q % shown is market share 200 NZ$millions API % 10.49% 9.43% 8.45% % 5.60% 5.44% 4.30% 4.23% 2.13% 0.84% 0 Sovereign AMP AXA Asteron AIA ING Group Source: Investment Savings and Insurance Association - Life, Income, TPD, Trauma Fidelity Westpac BNZ Tower CIGNA Medical 10

28 There is more potential beyond market share gain alone Life insurance cover of New Zealand households 31% Insured adequately 45% Under-insured No insurance 24% Source: AMP Under-insurance Research Report TNS, February

29 Expansion of aligned adviser practice network is key to growth New adviser recruitment Adviser practice recruitment Total number of advisers Numbers of advisers New recruits Est. EOY 80 Number of adviser practices Total Est. EOY YTD 2006 EOY YTD EOY Existing adviser practices and mergers/splits organic growth New adviser practices from outside network inorganic growth 12

30 Distribution management focus: New business growth Practice professionalism & sophistication Quality of advice & compliance Recruitment organic & inorganic New adviser support, retention & productivity 13

31 Summary Tax changes are favourable over medium term Our distribution capability is unique in the NZ market Adviser regulation is coming Under-insurance represents further growth opportunities We have growth momentum Iconic brand 300,000+ customer base 14