AMP profit edges up on cost-cutting drive

AMP Financial Services New Zealand has reported a 2% increase in operating earnings to $68 million and a 2% rise in underlying profit to $77 million in the year ended December 2009.

The company credited the improvement to a reduction in costs as well as an increase in life insurance sales and income.

An 11% reduction in controllable costs helped to drive a 3.5% reduction in cost to income ratio to 37.9%.

Total life insurance sales increased by 5% to $31 million and there was a 9% increase in life insurance annual premium income.

There was also a near doubling of cash flows, which increased by 95% to $292 million.

According to AMP the cash flows increase was due to KiwiSaver but customer retention campaigns and the redesign of AMP’s wealth management business also contributed.

AMP Financial Services New Zealand managing director Jack Regan said that AMP had delivered a “positive result” for the second year running in a “difficult economic environment and turbulent market conditions.”

The company’s underlying profit had grown by 26% over the past two years.

However, the re-pricing of life-insurance policies ahead of the tax changes coming into effect in July, combined with economic stress, led to an “expected level” of policy cancellations that led to experience losses.

Mr Regan said adviser regulation would be a key focus in 2010 now that the Securities Commission has set December 6 as the date the new regime comes into effect.

“The unprecedented wave of regulatory change has been well anticipated by the business over the last three to five years,” he said.

“AMP is at the forefront of developing the industry’s response to adviser regulation and our own plans to apply to become a QFE are well advanced.”