AMP’s balance sheet has become the latest battleground for the opposition to attack the government’s financial services reforms.
For the six months to June 30, AMP posted a net profit of $383 million, a 10 per cent rise on the previous corresponding period.
The rise was largely the result of the wealth-management giant’s merger with AXA Asia Pacific in March last year, which was a contributor to the underlying profit growth.
Analysts were generally impressed with the performance despite AMP warning that it expects the business environment to look very different in the future.
“We’re seeing structural change across the financial services sector as we manage the effects of market uncertainty, changing consumer preferences and the emergence of new technologies combined with the challenges and opportunities of an ageing population and significant regulatory change,” said AMP chief executive Craig Dunn.
“While we’re well advanced in our preparedness for the new regulatory framework, we’re still waiting to see the necessary policy detail that will allow us to finalise the required business changes.”
AMP expects the one off cost to the company of implementing the Future of Financial Advice (FoFA), Stronger Super and other regulatory changes over the next 12 to 18 months to be in the range of $60 million to $75 million after tax, of which $52 million was provisioned as of June 30, 2012.
However, it notes that the final costs may vary from this depending on final legislation and regulatory guidance, market practice and the future competitive landscape.
Sound and fury in the shadows
Shadow Minister for Financial Services and Superannuation, Senator Mathias Cormann, said the increase in financial-services red tape was “there for all to see in the release of AMP’s 2012 half-year results”.
“Just the cost of system changes alone for AMP to implement Labor’s FoFA and a number of other regulatory changes recently pushed through Parliament is estimated at $60 million to $75 million,” he said in a statement.
“AMP also revealed today that it had a team of 50 people working to implement FoFA and other regulatory changes imposed by the Gillard government over the past year.
“These are the costs incurred to pay for Bill Shorten’s additional red tape by just one company.
“No wonder Bill Shorten never took his FoFA changes through a proper regulatory impact assessment to assess the cost/benefit equation, arrogantly failing to comply with the rules set by his own government.
“Across the whole financial services industry conservative estimates are that FoFA will cost about $700 million to implement with $375 million in additional compliance costs every year.”
How AMP sees it
AMP Financial Services operating earnings were $412 million for the first half of 2012, up nine per cent compared with $378 million for the second half of 2011.
The company said it had continued to achieve growth across its planner businesses.
Planner and adviser numbers were up 128 over the last six months in Australia and New Zealand to 4259 at June 30.
Dunn said the merger with AXA continues to track well with the integration expected to be complete six months earlier than planned.
“We’ve hit all our key targets since the integration began and a new, stronger and more competitive AMP is emerging with greater opportunities for future growth,” he said.
“We’ve completed the roll-out of the North platform to AMP and Hillross planners, and AMP’s market-leading low-cost retail superannuation and retirement product, Flexible Super, is now available to the AXA adviser network, together resulting in $202 million of new inflows in 1H 12.”
Another ‘make work’ scheme!
@myles – I think AMP were referring to Flexible Super as low cost rather than North.
I wonder what the cost of implementing FSR was back in 2003/2004?
Not sure what “low cost North product” Craig is talking about. The cost of the North product is substantially higher than its competitors and the functionality is questionable