AMP AGM 2023 CEO address
I’m pleased to have the opportunity to meet with our shareholders today, and to give you an update on the significant progress we have made in our transformation over the past year.
Since the release of our annual results, I’ve had the opportunity to hear from many shareholders and other stakeholders and I can assure you that the team and I are listening to the feedback. Today as well as highlighting our achievements for the year I want to take the opportunity to address some of that feedback. I also want to lay out very clearly our priorities for the 12 months ahead, as we set the business up to deliver long term, sustainable growth for shareholders.
Reflections on achievements for the year
Despite the uncertainty of the operating environment – driven by global market volatility – we are very confident in the strength of our position with a healthy balance sheet and liquidity following the sales of the AMP Capital businesses. That position takes into account the A$1.1 billion capital we are in the process of returning to shareholders as a result of our asset sales and simplification.
We have made great progress on the path to a new AMP. We have executed the AMP Capital sales, while also achieving significant progress in repositioning our existing businesses, creating opportunities for growth and demonstrating innovation.
The three key pillars of our strategy, first outlined in November 2021, have been the subject of a consistent focus right across every team at AMP.Those pillars remain: reposition, simplify and explore.
Reposition
Firstly, our focus on repositioning is about how we ensure each of our businesses can ‘win’ in their respective markets.
Last year you would have heard me talk about how our Bank and Platforms businesses are the growth engines that we are focused on investing in and driving performance from.
We operate in competitive markets in both industries – and so we’ve been working hard to win and retain business in both.
In Bank, that’s included investing in our service proposition and the relationships with our broker network to drive growth in an ultra-competitive market. I’m very pleased with our progress in FY22 having delivered loan growth of A$2.0 billion – or 9.4 per cent for the year. We achieved this through new customer acquisition via traditional channels and through a small loan-book purchase. We achieved year-on-year customer growth of 16 per cent, across both loans and deposits. We also launched a new direct to customer proposition with our digital mortgage, which I will talk more about shortly.
In Platforms, our focus has been on making sure the solution is competitively priced, meets customer’s digital needs and has the investment choices being demanded by clients. We also launched our new retirement solutions which gives customers confidence about their income in retirement. These focuses allowed us to grow our footprint in 2022 with Platform net cashflows of A$936 million. These innovations mean we continue to see a positive upward trajectory in flows from those independent advisers which we continue to target.
In both Platforms and our Superannuation business, we also took the strategic decision to reprice these offers, to better compete in the market. While this impacted our profit in FY 22 it will benefit both of these businesses as we move forward.
In our Advice business we successfully drove down costs for the second year in a row and more than halved the losses in that business, to further improve AMP’s overall profit position. Continuing to drive our Advice business towards breakeven is one of the business’ highest priorities and good progress continues to be made. In addition, relationships with the broader adviser community and AMP continue to improve which is a critical factor for success.
Our New Zealand business has produced resilient earnings despite the challenging investment markets. We continue to be the leading corporate super provider in the New Zealand market. We have maintained discipline on costs – reducing expenses to offset inflation with controllable costs down 2.8 per cent for the year.
Simplify
Now, turning to our strategic pillar – simplify.
The completion of the two recent sales of the AMP Capital businesses is a significant milestone as it finally completes our divestment of AMP Capital. The final transaction, which settled on 24 March, was complicated but it is important that we now have clarity for the people and clients of that business. In 2022 we completed the remainder of the Life sale, the infrastructure debt transaction, our funds management business, and in 2023 the international infrastructure business and finally the remaining local infrastructure and real estate sales. These were all major transactions and importantly enable the focus of management to move squarely onto driving the go-forward businesses of banking in Australia and wealth management in Australia and New Zealand.
The sales and simplification underpin the A$1.1 billion capital return that we have talked about today, and the reestablishment of dividends which is an important demonstration of our confidence in the future profitability and stability of AMP.
As the Chair mentioned we are undertaking a balance sheet review with the intention of really challenging ourselves and the capital requirements of the business now it has been reshaped. While we assess that we have in the order of A$500 million of capital that may be surplus to our liquidity needs, the current environment means it is appropriate for us to retain this funding in the interim. When the capital and balance sheet review are completed, which is due no later than August, the return of any excess capital will be considered taking into account the market conditions prevailing at that time.
Importantly, and I know this is something that a number of you have raised – now that we are a smaller business – the next step is to right-size our operating model for agility and efficiency. This means reducing our costs and simplifying our operating model.
We acknowledge that our cost base is too high for the size of the company we are today. However, we have been through significant change in the last years and still have work to completely separate the businesses that have been sold. 2023 will see flat costs in a period of higher inflation than we have seen for some time. This means that we need to take actions to both deal with the upward cost inflation and the additional costs that have emerged from the sales.
The team and I know that as we move forward we have to drive further efficiencies and right size the organisation for the future. No-one is shying away from this and we have publicly committed to coming to our shareholders with further detail in our half year results.
Explore
While much work is already underway to simplify and reposition AMP, we have also been looking to the future and exploring new opportunities for growth.We have launched new products that are unique in their markets, as we shift the organisation towards a growth mindset. We have delivered new retirement solutions to address the ‘fear of running out’ that many retirees face, which are now available on our North platform – through a financial adviser.
We have also created a direct-to-customer offer in Bank with the launch last year of our digital mortgage – where customers can now refinance, entirely online, in just 30 minutes.
I’m proud of the work that the teams have shown in being able to deliver these innovative offers, which align to our strategy of putting customers at the centre of our decision making.
For many Australians their home and their superannuation are their two biggest assets and we are here to support them to manage and leverage those assets to help them create their tomorrow.
The Retirement solutions and Digital mortgage are great examples of what we can achieve when we put sustained focus on innovation.
Enablers
The significant progress we have made on the strategy is underpinned by our Purpose and Values. We have embedded our Purpose – helping people create their tomorrow – throughout our business over the past 12 months. Our continued focus on culture is also being positively reflected in our employee engagement scores. In 2022 our engagement score continued to increase reaching 73, up from 71 the year prior.
AMP has also launched a new brand campaign designed to raise awareness of its banking and wealth solutions for Australians, which was played at the beginning of the meeting. You may have also seen this on TV or advertised on bus shelters and in public areas on your travels. Personally, I am really pleased to see AMP’s brand back out in the market promoting who we are and being proud of what we do.
The brand campaign is another sign that we are building momentum – and that we are positioning AMP for the future and for growth.
Business performance and share price
I would now like to specifically discuss our business performance for the FY22 year.
As the Chair mentioned – some shareholders raised concerns about the fall in share price following AMP’s results announcement.
Let me first say that the market response to our results was also disappointing to me.
I want to emphasise that we take our obligation to keep the market fully informed very seriously – and we believe that our profit announcement was largely in line with our guidance. This reporting period was complicated by our multiple asset sales and the profit of those sold businesses being moved into our discontinued operations. Clearly, we also delivered our result in a period where there were broader market factors at play.
As the Chair mentioned, in 2022 the share price outperformed the market, reflecting the significant progress we have made on the strategy that I’ve just been outlining. While the more recent performance has reversed some of this price gain – we are focused on continuing to execute on the strategy to deliver long term growth and value for shareholders.
Results
So, let’s take a look at how the businesses did perform for FY 22.
Despite the challenging operating environment, and the impact of strategic pricing decisions that I’ve already referred to, the AMP businesses delivered a resilient performance during FY 22 with a A$184 million underlying net profit after tax.
We took a disciplined approach to growing the Bank in a competitive environment, but even with that approach we were successful in growing the mortgage book above ‘system’.
Platforms and MasterTrust earnings were both impacted by falls in investment markets that led to overall reductions in the value of their assets under management, as well as the re-pricing initiatives I’ve talked about. More positively, Platforms net cashflows were up and that is in part due to our renewed focus on independent financial advisers.
The transformation and reduced costs in Advice helped the bottom line with losses improving by A$78 million.
New Zealand business earnings also remained resilient, but were slightly lower than the prior period, mainly due to the impact of investment markets.
Meanwhile our China Life joint ventures are continuing to deliver growth in earnings and value.
Our focus on simplification also saw controllable costs across the business reduce by A$76 million offset by CPI increases of A$22 million.
While the business is subject to ongoing volatile market conditions, we have completed important transformation work and investment in our businesses that will make them more resilient, and translate into improved business performance.
Growing sustainably
Over the past year we have also continued our commitment to running a business that prioritises sustainability for the benefit of all our stakeholders.
We have continued to make progress on our climate-related strategies. This includes establishing a baseline for scope 3 financed emissions in AMP Bank. In our superannuation business we are taking a more active position on climate related investment directing the votes of our external fund managers (where available to us) on initiatives for select energy, materials and utility companies.
These actions build on our long-standing carbon neutral commitment across our operations - both scope 1 and scope 2 emissions, which has been in place since 2013.
We are also proud to be celebrating the 30th anniversary of our Foundation, AMP’s independently funded philanthropic arm. It has contributed more than A$110 million to Australian communities through social impact investing, direct donations, innovative grant programs, and is engaging AMP employees through dollar matching donations and volunteering.
Looking forward
Looking forward, I am incredibly optimistic about the future of AMP, while also very clear on the work we still have to do to meet my own high expectations for this business, and the expectations of all stakeholders.
Reputation remains important to our success. AMP has an iconic brand that is entwined with the history of Australia, and it is important that we protect and leverage it. We have a robust risk culture and together with our purpose and values led approach are confident of continuing to move beyond the legacy issues that have in recent history held us back.
Clearly, in an organisation like ours, our people are key to our success. I am personally dedicated to ensuring we have a highly engaged, high-performing team that delivers constantly for our customers and goes above and beyond to make AMP successful for all stakeholders.
Conclusion
As CEO, I can assure you that the executive team remains focussed on our strategic priorities and will continue to work tirelessly for our stakeholders, including, importantly, our shareholders. We most certainly have more hard work to do but we are well positioned to navigate the market challenges ahead.
During 2022 we did deliver on our promises, simplified the business and are ready to focus on the go-forward strategy. AMP has the potential for a highly successful future, and we have a motivated management team determined to ensure it reaches that potential.
Thank you.
I will now hand back to the Chair.