AMP warns of investment losses ahead


CEO Paul Batchelor said in May that AMP would hit its growth targets for 2002

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Australia's largest life insurer and funds manager AMP Ltd has warned that falling global equity markets will see it deliver negative returns on its investments for the first six months of this year.

That marks a change from its statement in mid-May that investment income for the first half of 2002 would be stronger than the same half of 2001, assuming investment markets remained at "prevailing levels".

The warning sent AMP shares lower Tuesday morning, with the stock falling 21 cents or 1.3 percent to Aust $15.79. The broader market is down about 0.67 percent.

AMP shares touched a two-year low of A$15.33 last week.

AMP also said in May it expected to meet its long-term goal of 10 percent-plus growth in core operating margins this year(Full Story).

'Substantial falls'

But in a statement to the Australian Stock Exchange Tuesday, AMP said international investment markets had "experienced substantial falls" since May.

"In particular, the UK FTSE index has fallen 11.5 percent between 16 May and 30 June 2002, and the ASX100 has fallen almost 5 percent in the same period," it said.

Based on preliminary calculations, it said it now expected investment income for the January-June 2002 half-year would be "weaker than in the first half of 2001" and was expected to be "slightly negative".

AMP will report its 2002 interim results on August 22.

At its annual general meeting on May 16, chief executive Paul Batchelor said that even if markets ended 2002 "at current levels, we would expect to report a net profit for the full year well above 2001 figures."

Profit dropped in 2001

In February this year AMP reported a 40 percent drop in 2001 net profit to about $365 million (Aust. $690 million). There was a $14 million loss in investment income.

AMP operates in 16 markets, with most of its activity in Australia, New Zealand and the U.K.

About a quarter of its assets under management are in Australia and New Zealand, without about 73 percent in the U.K./Europe and 2 percent in North America.