The fees for no service scandal at AMP in many ways just created...

The fees for no service scandal at AMP in many ways just created focus on the long term value of AMP based on past, current and potential industry changes, margin compression and AMP strategy. It created a re-rating of the stock.

For you to believe it is a $5 stock you have to believe it is a billion dollar profit company with future prospects. Or you have to value the components at $15 billion.

When I looked at the results yesterday, I think I came up with a valuation, after deduction of debt (I may have deducted wrong amount), 20% ownership of AMP Capital, and using what I thought were reasonable multiples, a valuation of....

$8.5 billion + the life insurance business + China Life + SMSF

In this I have assumed that the Wealth Management business is still fully valued at 15 times profit even though there are questions about this given threat to advice model.

I cannot value the life business in a narrow range. We do know it is 50% reinsured and it’s 6 month profit has m0ved from $50m to $1m. Is it worth $1.5 billion or is worth $3 billion? No one has rushed in to buy it. I suspect AMP wants 3 but buyers want to pay less than 1.

If you value the life business at $1.5 billion you actually get pretty close to the current share price. If you want it to be worth 50% more, as Barnarse suggests there are many factors in play and many things have to go the right way for AMP.

This is why the “excellent results” have had no meaningful impact on shifting the value of AMP. It looks like a $10 billion company for now. It was before the Royal Commission.