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UK writedowns push AMP into red
CNN's Geoff Hiscock, Asia Business Editor
SYDNEY, Australia (CNN) -- Writedowns in its UK business have pushed Australian insurer and funds manager AMP to a record half year loss of Aust. $2.16 billion ($1.42 billion). The result was a little better than market expectations, with AMP shares rising 2.5 percent to A$4.84 by midday Wednesday on the Australian Stock Exchange. The UK writedowns were in line with a £900 million estimate given on May 1, when AMP announced a demerger into two regionally based entities -- one covering Australia/New Zealand and the other including the loss-making UK operations. The half-year result to June 30 was released just before the market opened Wednesday. It compares with a A$303 million profit in the same period of 2002. Operating profit after tax but before other items was down 7 percent to A$317 million, compared with A$341 million a year earlier. AMP chief executive Andrew Mohl said that while the loss was very disappointing, it had been well-flagged and reflected the poor situation in the company's UK life insurance operations in the face of prolonged bear markets and what he said were ill-timed acquisitions. Asset writedowns were A$2.268 million, plus another A$344 million covering goodwill, increases in policy liabilities and restructure/demerger costs, for a total of A$2.612 billion. But Mohl said the group's Australian financial services business remained resilient. Looking ahead, Mohl said there were encouraging signs of a turn in the investment market cycle. "This is the first six-month period for four years in which global equity markets have finished the half at a higher level than at the start of the period," he said. Figures released by AMP showed its total assets under management fell from A$265 billion at December 2002 to A$239 billion at June 2003, mainly reflecting the strengthening of the Australian dollar against the UK pound. Mohl said the demerger, known as "New AMP" for Australasia and "New Henderson" for the UK, remained the best strategic option. Shareholders will get an explanatory memorandum in October, with a completion target of the end of 2003. Mohl said earlier this month that AMP had received several approaches for its UK businesses, which include the NPI pension business, Pearl Assurance, London Life and Towry Law. None of these approaches had yet led to a detailed proposal to put to the AMP board. (Full story) Any asset sales will have an impact on the final capital structure of AMP's proposed new entities.
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