AMP shares fell 6% at one stage yesterday after it shocked the market with a very weak first quarter report which revealed a near 40% slide in cashflow in its key wealth management division.
AMP is Australia’s largest wealth manager, with wealth management the biggest business and main earnings driver. The shares ended down 5.3% at $5.51.
The update, made before yesterday’s AGM, saw the company blame the weak and volatile financial markets in the three months to March for the slide in cash inflows. It will see analysts recast their forecasts for the AMP’s June 30 half year.
At the same time another spiking life insurance claims added to the pressures, just as the company and its shareholders thought they had put problems in that division behind them.
“Domestic and global investment market conditions continued to be challenging during the first quarter, subduing cashflows across our business,” AMP chief executive Craig Meller said in the update.
"Ongoing claims volatility continues to be a feature in Australian wealth protection. Despite these challenges we remain confident in the overall long-term outlook for AMP.
"The sharemarket volatility we saw in second half 2015 has continued into 2016. The first quarter cashflows we announced today are subdued as a result, as we have seen right across the industry,” he told the meeting.
"As we have consistently flagged, we expected insurance claims experience to be volatile as we work to strengthen and fix our life business."
"In the first quarter of this year, claims have been higher than expected. However, our claims change program is delivering improved business capabilities, and more importantly, better customer outcomes, and so we remain confident in our insurance strategy and the long-term outlook for this business,” Mr Meller said.
And chairman Simon McKeon (who stepped down after the meeting) told shareholders:
"Looking at the current year, investment market conditions have continued to be volatile. The first quarter cashflows we announced today are subdued as a result. This is consistent with what we have seen across the industry.
The first quarter also proved challenging for our life insurance business with ongoing volatility in our claims experience. We have previously advised that we expect volatility in these results while we continue to fix and strengthen the life business, but we remain committed to our strategy and confident that we are on the right track."
AMP 1Y – AMP shares slip to 1-month low
For the three month period ended March 31, 2016 AMP’s wealth management division reported a 38.9% fall in net quarterly cashflow from $342 million to $209 million.
The Australian “wealth protection" division, which sells life insurance, also reported a disappointing first quarter showing cashflows of $231 million, down 6.1% from $246 million in the first quarter of 2015.
AMP Bank, the company’s retail banking division, showed a modest rise in quarterly cashflow to $15.3 million compared to $15.2 million in the first quarter of 2015.
AMP Capital had net cash outflows in Q1 16 of $1,540 million, comprising external net cash outflows of $477 million and internal net cash outflows of $1,063 million. External cashflows were impacted by challenging domestic and international market conditions.
AMP Capital Assets Under Management at the end of March was $156.5 billion, down 2% from $159.9 billion at the end of December, 2015 and $160.5 billion at the end of March 2015. Average AUM decreased 1% during the quarter to $157.2 billion, reflecting the rise in market volatility in the first quarter.
