AMP - How low will it go???

Weakness in AMP continues with last at $11.27 down 4.4% for the day - directly related to weakness in world markets and specifically in FTSE.

How low do we believe it will go???

AMP are trying everything to reassure the market that AMP is strong enough to mitigate and substantial decline in FTSE... the recent ASX announcement regarding the JP Morgan Conference makes interesting reading for those following the stock.

Regards,

Hotdog

Speech Notes for JP Morgan Conference

AMP LIMITED 2002-10-04 ASX-SIGNAL-G

HOMEX - Sydney

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TITLE SLIDE

Good afternoon everyone.

* I'm Tom Fraser, Managing Director of UK Financial Services. UKFS is
one of the 3 large business units within the AMP Group.

* This presentation today is similar to a presentation by AMP's CEO
Andrew Mohl to US investors earlier this week

* What I want to do in the next 20 mins is talk to you about AMP and
it's plans to achieve a major turnaround in this potentially great
business worldwide. I'd also like to talk in more detail about the
UKFS business and the Pearl fund capital requirements

* Then it'll be over to you to ask questions.

* So let me start by telling you a bit about the overall AMP group

* AMP is a wealth management company, with key operations in
Australia, New Zealand and the UK. Wealth management is all we do and
have done through our 153 year history.

* We have the great privilege of helping about 8 million people
around the world, save for and enjoy a better life in retirement as
well as our original role of giving families protection from
unexpected loss of life or physical disability to income earners.

* We operate in an industry with strong long term growth prospects.

* Throughout the industrialised world, communities are growing older
and this is changing societies and economies everywhere.

* Over the next 50 years, the number of people over 60 will treble.

* Governments simply can't afford to pay them all a pension. So they
are beginning to shift that responsibility back to the individual.

* Of course, the flipside to this picture is increasing government
and third party scrutiny not surprising when you are dealing with
peoples' long term savings.

* Strong fund flows and growth also ensure a highly competitive
industry with increasing pressure on margins.

* At AMP, we believe we are well placed to capitalise on this global
market phenomenon with our expertise in advice-based distribution,
pension fund design and administration, investments and a powerful
brand in Australasia.

* So, you may well ask, with this heritage and capabilities, why have
AMP shares been trading recently at under $11 or 50% lower than it's
peak 2001 levels?

* To state the obvious, investors have clearly not been comfortable
with the returns being achieved by the business relative to the risks
being run, compounded by a prolonged bear market that has highlighted
the leveraged nature of our business to equity markets.

THE WEEK THAT WAS

* Let me make a couple of comments about what has been happening with
AMP recently.

* While the UK has been a key focus for the better part of this year,
last week in particular was a tumultuous week for all of us at AMP.

* As you can see by the list on the slide, we've had to do more in
the seven days commencing 23 September than most companies manage in
seven months.

* Further, these last two weeks was preceded by an extended period of
speculation and uncertainty, which has also been reflected in our
share price.

* AMP basically had two key problems.

* One has been the impact of incredibly tough markets on AMP
businesses, including the regulatory capital position in the UK
funds. AMP, like most businesses with insurance operations in the UK,
has been hurt by the severe bear market conditions that have nearly
halved average share prices since the peak.

* Our other problem has been caused by how AMP has communicated to
stakeholders the impact of these markets on our UK business and the
actions being taken to address it, in particular, the minimum
regulatory capital position of the Pearl with-profits fund.

* One of AMP's key priorities is improving the level of confidence in
AMP of our customers, our shareholders, our planners and our
employees.

* As a listed company in Australia, AMP has to meet the highest
standards in its communications given its status in the investment
and wider community.

* Andrew Mohl - confirmed on Monday as AMP's new CEO - has already
publicly declared AMP will be more transparent and open with every
stakeholder

* The series of statements made by AMP in the past two weeks have
already demonstrated this resolve and the rest of the AMP senior
management team and I are passionate about continuing this standard
of disclosure in all our communications.

* AMP communications will be clear, simple and to the point.

* For the business, AMP's primary focus will be on driving up the
returns from invested capital and shareholder equity.

ROIC

* The chart shows return on invested capital for our three major
businesses. This calculation includes all goodwill on acquisitions in
the baseline capital and all non-recurring gains or losses in the
returns. The impact of gearing is reflected only in the Group return
on equity.

* AMP's underlying philosophy is that if the businesses can average
returns of at least 1.5 times the cost of capital or 13 to 15% return
on capital, then Group return on equity can approach or even exceed
18% with the benefits of gearing

* Looking at the portfolio, Australian Financial Services is now
achieving a 15% return and is set to move higher in 2003 with
improved capital management.

* Our asset manager, Henderson Global Investors, is around 11%
including sizeable goodwill. This is lower than we would like but
solid in the face of the third year of bear markets.

* Returns in UK Financial Services have been steadily falling and
were down to 9.3% in 1H 02. This reflects the program to transform
the UK business and ongoing impact of weak markets and poor investor
sentiment. This ROIC was before the allocation of an additional
GBP500m of capital to be allocated in 2002 which will lower returns
further.

* AMP now has around half its capital invested in the UK financial
services businesses and the returns we're getting, after adjusting
for risk, need to be better.

* We need to improve those risk-adjusted returns and that will be our
key focus.

* Finally, AMP International which is not shown in the chart, has
just under 10% of the Group's capital invested in AMP Banking and a
number of Asian and European ventures and is generating little net
return at present.

* Overall, at the Group level, return on equity on a normalised
basis, that is, after smoothing the effects of volatile investment
markets, is around 12% currently, down from FY 00 and FY 01 levels.
This is a mediocre return given the quality of assets in the Group
and below the average in our international peer group.

* The impacts of weak investment markets have lowered ROE on an
actual basis to just 7% this year. Markets, of course, go up and
down, so the return on equity on a normalised basis is the superior
indicator.

COSTS

* As a wealth management group, our revenues are strongly leveraged
to global equity markets, and there's very little sign of improvement
in these markets at the moment.

* This means that one of AMP's priorities has to be controlling
costs.

* As this slide demonstrates, we've got quite a solid record on cost
management.

* But we think we can do more.

* AMP has taken about $160m out of the cost base of Australian
Financial Services over the past 3 years where the cost to income
ratio is down to 41%.

* Henderson has kept tight control over its cost base and managed to
push its cost to income ratio down towards best practice levels,
despite a marked decline in revenues as markets have fallen.

* And we're in the early stages of a GBP100 million cost reduction
programme completed in FY 2003 in UKFS which is progressing to plan
with a cost ratio under 60% for the first time in 1H 02.

* Clearly, it's the UK where we've got great potential for taking out
costs and where we'll be looking particularly hard to make more
savings.

* Now that's been a quick helicopter view of AMP, looking at some of
the macro measures across the Group.

Let's look more closely at the AMP portfolio of major businesses. You
can see that there are some high quality assets, and some others that
need a bit of work and attention.

BUSINESS UNIT PERFORMANCE SUMMARY

* In Australia and New Zealand, AMP has a strong financial services
business, which holds leading market positions and services about 3.5
million customers through a flexible, multi-channel distribution
platform.

* At the heart of this business are 2300 financial planners - the
largest and most productive financial planning franchise in the
entire market.

* This is a business that has been transformed over the past decade
from a low productivity, sales driven, capital intensive, product
based insurance company into a profit focused, advice-based wealth
manager, with capital efficient, new generation investment products.
That transition reflects an AMP core competency - the ability to
transform in a transitioning market.

* Probably the best financial measure of this transformation is the
improvement in the value of new business. This is a measure of the
future value to shareholders of the new business we are writing
today.

* This measure has improved more than six-fold in four years, rising
from A$37 million in 1997 (pre-demutualisation) to A$249 million last
year.

* For all that, the executives in this business believe the job is not
much more than half-done and have aggressive plans for the years
ahead.

HENDERSON

* Our international asset manager, Henderson Global Investors, is
another quality asset.

* Henderson has got a strong market position in Australia, good market
share in the UK, is building momentum in Europe and in Asia, and is
increasingly focused on higher margin specialist products.

* It's still got some capability and scale gaps, but it knows where
these are and it has practical plans to plug them.

* These are not great times for any asset manager, but Hendersons have
battened down the hatches to ride out the storm. While earnings are
down slightly, this is a strong result in relative terms and reflects
the diversified nature of the Henderson's business with its mix of
internal and external funds and listed and unlisted assets.

* Of course, investment performance is critical to the success of an
asset manager.

* Henderson has delivered good investment performances over recent
years, but this record has come under pressure in recent times in
some key asset classes.

* Henderson's earnings are expected to be subdued in the second half
of this year and will only recover slowly even if markets recover
shortly given the pricing and Assets Under Management lags. But we
remain confident of the quality of this franchise in the longer term.

UKFS

* Turning to the UK Financial Services business, we've got both
capital and strategic issues to deal with in this market.

* In strategic terms, the UK market is about as complex and uncertain
as any and we are coping with a raft of regulatory reviews and the
expectation of major market reforms ahead. These will almost
certainly lead to lower margins overall and potentially lower sales
volumes in real terms.

* We have been criticised for lack of scale, brand, capital and
distribution power to compete in this challenging new world and we
accept those criticisms as valid.

* Our Australian experience, however, tells us that in an open
architecture world, large traditional companies carry considerable
baggage and focused innovative "new world" companies can excel in
distribution, product design and packaging and asset management and
capture significant market share.

* We are positioning ourselves with a range of options for this new
world including:

# 100% owned IFA distribution (Towry Law);

# IFA distribution through the acquired NPI;

# Corporate Pensions channel;

# Direct channels;

# Pearl's Direct salesforce; and

# the development of Wrap capability to support both owned and IFA
distribution.

* We will be focusing on our mature portfolio of funds and customers
with a view to enhancing the embedded value to shareholders through
cost, retention and balance sheet management initiatives. Now to
explain Pearl minimum regulatory capital..

PEARL MINIMUM REGULATORY CAPITAL

* The capital issues are complex but manageable.

* To summarise, one of our funds, the Pearl with-profits fund, which
currently doesn't meet the "minimum regulatory capital requirements"
set by the UK regulator, the Financial Services Authority.

* These requirements set a level of reserves of the fund sufficient to
withstand substantial further falls in markets and this particular
fund is struggling to do this at current FTSE levels.

* But remember, this is regulatory capital we are talking about.

* In terms of economic solvency, the fund remains sound and
comfortably able to meet policyholders' reasonable expectations. The
Pearl fund has over GBP1.4bn in additional economic assets sitting
within the fund, which are currently inadmissible for the minimum
regulatory capital perspective.

* To manage the regulatory situation, we have taken a number of
initiatives involving fund assets and liabilities and we have agreed
a plan of action with the UK Financial Services Authority that is
expected to see the Pearl with-profits fund meet MRC requirements by
the end of the year.

* These initiatives include managing liabilities through accelerating
product changes, managing the fund exposure to equities and reducing
bonuses. On the asset side we have worked to improve assets for
regulatory solvency.

* The capital actions flagged here cover us for FTSE levels of 3700,
in addition, we have submitted a contingency plan to the FSA to
satisfy RMM down to FTSE levels of 3000 at year end which will not
involve additional investment of shareholder capital.

FINANCIAL STRENGTH OF THE GROUP

* Over recent months the ongoing speculation on capital position has
created much concern about financial strength. As discussed earlier,
this is centered on the Pearl With Profits fund. Let me reiterate
here - the issue is minimum regulatory capital (not economic
solvency). The issue is restricted to one fund sitting within one
business unit in the UK.

* There is no question as to the economic strength of the AMP Group.
AMP Life and AMP Pearl are AA- rated by Standard & Poors for
insurance financial strength. The AA banding indicates 'very strong
financial security characteristics'.

* Add to this the recent Standard & Poor's announced intention to move
AMP Group Holdings to Credit Watch positive upon successful
completion of the Reset Preferred Securities issue that further
supports the groupwide financial strength.

* AMP recognises that much of this speculation was in part fuelled by
our ongoing but at times unclear disclosures - the volume of which
has far exceeded that released by local market companies. That is
part of our challenge of complying with multiple regulators whose
disclosure requirements can differ significantly.

* We need to ensure that even when disclosure is voluminous, it is
simple and clear.

KEY PERFORMANCE INDICATORS

* AMP management and the Board are focused on achieving a much
stronger return on equity in the medium term.

* The Board have agreed to align management incentives with relative
total shareholder returns and earnings per share growth.

* This will align executive focus with the interests of shareholders.

* AMP is confident that as well as continuing to grow our businesses
strongly at lower unit costs that it can also achieve a major release
of capital into the medium term to help achieve strong outcomes in
these drivers.

# Australian Financial Services is more than self-funding in capital
terms for at least five years and will continue to generate strong
cash flows from its powerful competitive position.

# Hendersons is a light user of capital as a modern asset manager.

# UK Financial Services has been a consumer of additional capital in
the past period but we expect to turn this around from here on both
through active management of the mature book and growth oriented to
the new book. And maybe, just maybe, a major recovery in share
markets.

THE NEW CHIEF EXECUTIVE'S REFORM AGENDA

*In managing the business to achieve a much stronger return on
invested capital, Andrew Mohl has made it quite clear AMP will be
pursuing a five-pronged reform agenda:

# First, addressing channels and product lines with inadequate returns
on capital - our decisions will include exits and closures, as well as
transformation programs to rejuvenate low return areas based on cost
cutting and capital initiatives.

# Secondly, closely managing our growth ambitions in the near term
outside our main businesses to ensure maximum focus on the areas
where our A$14 billion of capital is invested.

# Thirdly, increasing the transparency and quality of our disclosure
so that AMP is regarded as a truly outstanding corporate citizen.

# Fourthly, Andrew intends to tackle some of the sacred cows and
embedded behaviours in our business that inevitably develop in a
longstanding company, particularly one with all but four years of its
153 year history as a mutual society.

# Finally, and most importantly, he will be leading AMP with passion,
commitment and absolute integrity, role modelling what some call
"values based leadership", which is a leadership style wonderfully
aligned with our rich heritage and fervently desired by all the
people of AMP.

LOGO

* With a focus on core businesses, true values based leadership, and a
passion to execute with excellence to deliver quality products and
services for our customers, this will lay the foundation for a major
turnaround in the fortunes of AMP.

* We believe that success comes from running core businesses very
well. Our strategy is hardly unique so to be successful, we must
execute brilliantly.

* That's why Andrew and the management team are religious that success
in financial services is 10% strategy, 90% execution.

* We will seek to create a virtuous circle where momentum feeds on
itself and morale and confidence rise with each step forward towards
our shared objectives.

* That's the way AMP will be run - and that's the way forward.