AMP sees 25 percent profit fall in first half


AMP chief Paul Batchelor called the result "solid" in difficult market conditions

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Australia's biggest life insurer and funds manager, AMP Ltd, posted a 25 percent drop in first-half earnings to A$303 million ($165 million), with management blaming the toughest market conditions in 20 years.

AMP chief executive Paul Batchelor said he clearly wanted the business to do better, but in the context of difficult markets, the profit result was "solid."

Core recurring operation margins rose 3 percent to A$470 million ($255 million).

Batchelor said earnings per share fell to A$0.27 in the six months to June 30, down from A$0.36 in the previous half. Return on equity fell from 9.6 percent to 7.0 percent.

Last month Batchelor warned that the fall in global equity markets would see AMP deliver negative returns on its investments for the first half of 2002. (Full Story)

The interim results released Thursday show an investment loss of A$6 million, compared with a A$25 million gain in the first half of 2001.

Focus on costs

Cost-cutting saw an improvement in cost-to-income ratio. Batchelor said AMP's continued focus would be on managing costs, return on capital, and building up its U.K. financial services business.

AMP operates in 16 markets, with most of its activity in Australia, New Zealand and the U.K. It also opened businesses in India and Japan this year, and bought the Italian wealth management business CAMI.

About a quarter of its A$266 billion in assets under management are in Australia and New Zealand, about 73 percent are in U.K./Europe, with the remainder in North America and Asia.

Batchelor said that with market conditions expected to remain difficult for the rest of the year, core recurring operating margins in 2002 were likely to be about the same as 2001.

Risks to recovery

"While there are risks to the economic recovery which we are seeing around the world, on balance we believe the global economy will be stronger in 2003," he said.

AMP shares closed Thursday 0.42 percent higher at A$14.31. The broader Australian market, measured by the S&P/ASX200, rose 1 percent.

The company has taken a battering on the share market in recent weeks, hitting a record low of A$12.70 on August 6.