AMP profits dive, chief pay restructured

Reporting a 50% drop in wealth management profits, AMP conceded chief executive Francesco De Ferrari's remuneration will have to be reconsidered in light of share price tumbles.

The group reported an underlying profit of $309 million for the first half of 2019, a 38% fall in profit from 1H 2018.

A major contributor to the profit dive, Australian wealth management earnings came in at just $103 million - down 50% on the prior corresponding period.

Wealth management net cash outflows were $3.096 billion, which included $1.228 billion of pension payments. AMP says these outflows reflected a range of factors including the impact of AMP's appearance at the Royal Commission in 2018 and changes to MySuper pricing.

As for the advice business, the cessation of internal distribution arrangements between advice and the Australian wealth protection businesses drove a revenue decrease of $40 million to just $17 million.

This half's results were also impacted by Buyer of Last Resort arrangements. AMP says the impact of practices submitting Buyer of Last Resort notices and other factors resulted in a revaluation of client registers.

The AMP board decided not to declare an interim 2019 dividend - at least until the completion of the sale of AMP Life.

AMP Life earnings of $31 million were down 69% on 1H 2018 which the company puts down to the Protecting Your Super changes, capitalised losses and other one-off experience items.

Profit was propped up by the success of AMP Capital, which enjoyed a 28% growth spurt.

AMP Capital's assets under management increased by $12.3 billion to $199.6 billion compared to the same time last year.

Regulatory and compliance costs were felt by AMP with cost to income ratio at 60.2%, up from 45.9% 1H 2019.

Meanwhile, AMP chief financial officer designate John Patrick Moorhead has decided to leave the group to pursue other opportunities. Moorhead was only appointed in May but had not yet commenced in the role.

James Georgeson, who was deputy chief financial officer, will continue to act as chief financial officer and commence handover with retiring chief financial officer Gordon Lefevre.

AMP said De Ferrari's remuneration has now been reconsidered as his initial incentives were based on AMP's share price which was impacted by factors outside his influence.

AMP chair David Murray said: "As foreshadowed at the 2019 annual general meeting, the board recognises that the original announcement of the sale of AMP Life, and a number of other company-specific matters that affected our share price, occurred before our new chief executive took office."

"A number of shareholders have also expressed concern that the current long-term incentives may no longer be realistic."

He said the board considered De Ferrari's remuneration in light of the agreement to sell AMP Life and the new strategic plan.

The board "made these changes to Mr De Ferrari's remuneration arrangements to retain, motivate and align him to shareholder interests."

"Originally the Buyout and Recovery Incentives were designed to compensate for Mr De Ferrari's previously-earned remuneration. Together the adjustments made today do not fully compensate for the reduction in their value due to factors outside Mr De Ferrari's influence," Murray said.

Read more: Mr De FerrariFrancesco De FerrariBuyer of Last ResortDavid MurrayJohn Patrick MoorheadGordon LefevreJames GeorgesonMySuperRoyal Commission
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