AMP profit plummets 74 per cent
AMP’S first-half profit has plunged 74 per cent after it was forced to set aside more than $300 million to compensate customers who were given bad financial advice.
The wealth management heavyweight yesterday reported a net profit of $115 million for the six months to June, down from $445 million for the same period a year ago.
Despite suffering hefty financial and reputational damage from the advice scandal, AMP made an even greater profit in its wealth management division, with operating earnings up 6 per cent to $204 million.
Operating earnings is a measure of profitability that excludes costs such as tax.
In AMP’s banking division, operating earnings were up 20 per cent to $78 million. They increased 2.2 per cent to $94 million in the group’s investment division, AMP Capital.
Earnings went backwards in its insurance operations, however, clocking in at just $1 million — down from $52 million a year ago.
The major cause in the fall was a surge in income protection insurance claims.
Overall, AMP reported an underlying profit of $495 million, down 7.1 per cent.
Underlying profit sets aside one-off and extraordinary items, including $312 million in customer remediation payments and $13 million in costs tied to the financial services royal commission.
AMP also excluded a further $81 million in amortisation and other costs it said were one-offs, and $45 million to account for market adjustments and “accounting mismatches”, further boosting the underlying profit figure.
“Our first half results have demonstrated AMP’s resilience through a difficult period,” AMP acting chief Mike Wilkins said.
“While there will be further challenges ahead, we have a strong foundation on which to reset the business and restore the confidence of our customers and wider community.”
The company is the target of five shareholder class actions announced after a series of damning revelations at the financial services royal commission in recent months.
AMP confirmed yesterday that it would fight all five actions.
The group also confirmed the corporate regulator, the Australian Securities and Investments Commission, had sought declarations that the company contravened the Corporations Act with regard to alleged advice to customers about the cancellation and issue of new insurance policies.
It is yet to respond to ASIC’s claim.
AMP revealed Mr Wilkins was to be paid $1.46 million for eight months acting as chief executive and a further $70,000 for the seven weeks when he also took on the role of acting chair.
New chair David Murray has received an annual salary of $850,000 for the nonexecutive role.’
The company also announced yesterday former Federal Treasury secretary John Fraser was joining its board.
Shareholders will receive and interim dividend of 10c a share, down from 14.5c a year ago.
The dividend will also only be half franked, which Mr Wilkins said reflected AMPs expectation of paying a lower tax rate this year.
AMP shares rallied on the results, closing 3.9 per cent, or 13c, higher at $3.48.