2019 Annual Report
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2019 Annual report AMP was founded in 1849 on a simple yet bold idea: that all individuals should have the power and ability to control their money and achieve their financial goals. AMP 2019 annual report Contents 2 Message from the Chairman 4 Message from the CEO 6 Who we are and what we do 8 Reinventing AMP 10 Corporate sustainability 12 Our board 16 Our management team 18 Five-year financial summary 19 Analysis of shareholder profit 20 Directors’ report 28 Remuneration report 53 Financial report 54 Consolidated income statement 55 Consolidated statement of comprehensive income 56 Consolidated statement of financial position 57 Consolidated statement of changes in equity 58 Consolidated statement of cash flows 59 Notes to the financial statements 130 Directors’ declaration 131 Independent Auditor’s Report 137 Securityholder information IBC Glossary AMP Limited ABN 49 079 354 519 Unless otherwise specified, all amounts are in Australian dollars. The directors’ report, financial report and independent auditor’s report are dated and current as at 13 February 2020. AMP 2019 annual report 1 Message from the Chairman As I foreshadowed last year, 2019 was a year of transition Client remediation for AMP. As a board, and as a company, we have taken The company is dealing with a number of legacy issues the necessary action to begin to address our legacy including the remediation of clients of advisers who issues, in order to reinvent our 170-year-old business. received inappropriate advice, or who paid fees where Our performance reflects the significant changes there was no evidence of services delivered. The program underway as we execute our new strategy, reposition accelerated as we said it would in 2019. Total program the sale of AMP Life, address legacy issues, and navigate spend to date, including program costs and money an increasingly complex regulatory environment. repaid to clients, is $264 million with $190 million paid in the second half of the year. The program remains Sale of AMP Life on track for completion in 2021. The sale of our Australian and New Zealand wealth protection and mature businesses, now known as Board renewal AMP Life, to Resolution Life is critical to AMP’s longer- We commenced the program of board renewal in term success. In August 2019, we announced a revised 2018 and were pleased to have the support of our agreement to sell AMP Life to Resolution Life for shareholders at the 2019 AGM for the new directors. $2.5 billion in cash, as well as a $500 million equity The new appointments to our board bring valuable interest in Resolution Life Australia, a new Australian- insights to AMP as the industry navigates increasing based company controlled by Resolution Life. regulatory, governance and risk obligations. This agreement replaces the original transaction Turning to our more recently appointed directors, with Resolution Life, which could not progress due Debra Hazelton joined the board as an independent to challenges in achieving regulatory approvals. non-executive director in June 2019, bringing more than The board assessed a number of options but remains 30 years’ experience in global financial services, including convinced that the sale to Resolution Life will deliver roles as the local Chief Executive of Mizuho Bank in the best outcomes for our shareholders, policyholders Australia and Commonwealth Bank (CBA) in Japan. and business. We continue to progress the transaction, Rahoul Chowdry joined the board as a non-executive which is expected to complete by 30 June 2020. director in January 2020. Rahoul has 35 years’ experience 2 AMP 2019 annual report Message from the Chairman “In 2019, AMP announced a three-year transformational strategy to become a client-led, simpler, growth-oriented business. There is still much work to do to drive this turnaround but the foundations are now in place.” in professional services, advising complex multinational It is important to understand that this does not affect organisations including Minter Ellison and PwC in the financial stability of our business. Australia and overseas. To ensure we maintained our capital position, and to Michael Sammells joined the board as a non-executive enable management to begin implementing the new director in March 2020. Michael brings more than strategy immediately, AMP undertook a capital raising in two decades of experience as a CFO across private and 2019 through an institutional placement and a retail share ASX-listed companies. He is currently a non-executive purchase plan. We were pleased with the strong support director of Sigma Healthcare Limited. from new and existing retail and institutional shareholders. We have also announced the retirement of three directors. AMP remains well capitalised. Level 3 eligible Firstly, I want to acknowledge Mike Wilkins AO, who capital above minimum regulatory requirements was stepped down from the AMP Limited Board in February $2.5 billion at 31 December 2019, up from $1.65 billion 2020. Mike has served AMP and its shareholders with at 31 December 2018. distinction throughout his time on the board, particularly To maintain balance sheet strength and prudent capital when he stepped into an executive capacity as interim management through a period of significant change, the Chairman and CEO at a deeply challenging time for the board has resolved not to declare a final dividend in FY 19. company in 2018. Mike will remain a non-executive This position will be reviewed after completion of the director on the board of AMP Life until the completion AMP Life sale. of the sale of the business to Resolution Life. AMP anticipates that any capital in excess of target surplus Further, Peter Varghese AO and Andrew Harmos will post completion will first be used to fund delivery of the also retire as directors at the conclusion of the AGM in new AMP strategy. Beyond this, AMP will assess all capital May 2020. Andrew will remain a non-executive director management options with the intent of returning the on the board of AMP Life until the completion of the excess above target surplus to shareholders, subject to sale of the business to Resolution Life. unforeseen circumstances. I would like to thank Mike, Peter and Andrew for their significant contributions to AMP over the past few years Reinventing AMP and wish them well for the future. In 2019, AMP announced a three-year transformational strategy to become a client-led, simpler, growth-oriented 2019 performance and dividend business. There is still much work to do to drive this The business reported an underlying profit of $464 million turnaround but the foundations are now in place. for the year. This was 32% lower than underlying profit in 2018 and largely reflected the challenging conditions faced by Australian wealth management. The net loss attributable to shareholders for the year was $2.5 billion. This is due to a predominantly non-cash impairment of $2.35 billion (post-tax) taken in the first half to David Murray AO reset the business and support the new strategy. Chairman AMP 2019 annual report 3 Message from the CEO In my first year as CEO, we have set the foundations to And following the devastating bushfires over the summer, turn our business around. AMP answered the call. We partnered with advisers to 2019 was a year of fundamental reset for our business as offer pro bono advice and other relief packages, while AMP we took bold but necessary action to address legacy issues employees and the AMP Foundation contributed financially and position AMP for the future. This was a critical first to the Australian Red Cross Disaster Relief Appeal. step in our transformational strategy to become a client-led, simpler, growth-oriented company and rebuild a business 2019 financial performance that you, our shareholders, can be proud of. Our performance in 2019 reflects the ongoing challenges As a three-year strategy, there is still much to do, but we face as a business but was broadly in line with I’m confident we’re on the right course. We are driven our guidance. by our purpose and motivated by our shared desire to Our underlying profit was $464 million, down from serve our clients. $680 million in 2018, following a decline in earnings in AMP was founded on a simple yet bold idea: that Australian wealth management. The net loss attributable financial security enables people to live with dignity. to shareholders for the year was $2.5 billion. This is due Our commitment to improving financial literacy and to a predominantly non-cash impairment of $2.35 billion making advice affordable to all Australians will help our (post-tax) taken in the first half of 2019 to reset the clients live with the dignity that has been core to AMP’s business and support the new strategy. purpose for over 170 years. AMP Capital had an outstanding year, particularly in AMP’s commitment to our clients and the community infrastructure and real estate investments. In 2019, remains as strong as it has ever been. The character of our AMP Capital delivered two of the 10 largest infrastructure company was on full display in 2019. The AMP Foundation fundraisings in the world. AMP Bank put in a resilient continued to support the broader community, donating performance in a competitive market, growing both its 100 millionth dollar to a deserving charity partner. deposits and residential loans. 4 AMP 2019 annual report Message from the CEO “It will take a concerted team effort to build the new AMP and I know our employees are ready for the challenge. With your ongoing support, I’m confident we can harness this unique opportunity to reinvent our iconic business.” Australian wealth management increased its assets under AMP is in a unique position as a result of the disruption management over the year but its earnings were lower as in the market currently.