AMP shares ended higher in yesterday’s volatile market after reporting a solid recovery in full year earnings, and a higher dividend.
The shares of the country’s biggest wealth manager rose 2.4% to end at $6.66 – in a market which rose, fell sharply and then rose again during trading yesterday.
AMP said full-year net profit rose 32% to $884 million as it made clear it has all but recovered from the sales and profit downgrades associated with problems in its life insurance business – especially income protection insurance.
The fund manager boosted its final dividend by 17% to 13.5c a share. That took the total for the year to 26c a share from 23c for 2013, when the problems in the wealth management business hit home.
The higher dividend represents a FY 14 payout ratio of 74% of underlying profit and is within AMP’s target range of paying 70% to 80% of underlying profit.
The company said underlying profit rose 23% to $1.045 billion.
AMP 1Y – AMP net profit up 32%, dividend also higher
The problem business – life insurance division – improved last year, helping AMP report $188 million in operating earnings across its wealth protection operations. That was almost three times the $64 million reported in 2013.
The life insurance business, like many of its competitors, had been suffering from a rise in policy lapses, a spike in claims and problems with advisers churning customers to drive fee income. AMP management has spent the best part of 18 months trying to get on top of the problems, and judging by yesterday’s results they seem to be doing just that.
“Pleasingly the wealth protection business improvement plan is delivering results and our focus is now on ensuring the changes are sustained with continued improvement to processes, products and culture,” chief executive Craig Meller said in a statement with the profit report yesterday.
The recovery in the business and in the group’s overall profitability has been well anticipated by the market with the shares up more than 40% in the past year, against the 9.4% rise in the ASX200.
Mr Meller said the 23% rise in underlying profit reflected a strong result in the group’s wealth and investment management businesses, targeted offshore expansion and improving performance in its life insurance division.
“In 2014 we made marked progress on our strategy to be an increasingly customer-driven organisation that is leaner and more efficient. The other element of AMP’s strategy, to invest selectively in Asia and take our expertise into new markets, is starting to deliver good cashflows with strong long-term growth potential,” he said.
Interestingly, the AMP managed to trim its costs last year – the group’s cost-to-income ratio dropped to 44.8% last year, down from 49.4% in 2013. It now has a cost to income ratio similar to the big four banks.
The group’s assets under management also rose 9% to $109.5 billion during the period against a relatively flat market.
