georgenow! Hell says its time!, page-28

AMP will fall short of the mark.$$DOOMED$$ AMP will fall short of the mark
By Sharon Kemp
July 30 2002


AMP yesterday confessed it would fall short of its 10 per cent 2002 growth target - something investors already suspected as they watched it battle hostile UK investment markets.

The financial services giant has also withdrawn two "with-profit" insurance policies in the UK, replacing them with less capital-intensive alternatives.

AMP claims it will not have to raise more capital to pay bonuses it has promised in with-profit contracts.

It was unclear yesterday whether AMP's financial situation in the UK would force it to cancel the current buyback.

Analysts said AMP's share price was likely to fall when trade resumed this morning.

The company issued yesterday's statement after trading closed.

Its share price had risen 3.3 per cent, or 47c, to $14.57.

AMP has followed most other UK life insurers in withdrawing with-profit policies, which have been all but phased out in Australia.

The policies offer investors smoother investment returns over the life of the contract by reserving some profits made on investments in good years and paying them out in bad years.

AMP said in yesterday's statement that the replacement products would require 80 per cent less capital per pound of sales.

In May, AMP chief financial officer Marc de Cure said the company would transfer $1 billion in capital into the company's UK Financial Services division in order to restore capital efficiency.

The company went a step further yesterday, replacing assets that the UK's Financial Services Authority refused to count when calculating solvency levels.

AMP also admitted yesterday to selling some equities and hedging others as it attempted to stem losses in its UK business.

Dismal European and UK markets have coincided with modernisation of the UK financial services market.

Compliance to the new regime will cost AMP an estimated £35 million ($102 million) in 2003.

AMP is in a blackout period during which it gives out only select information the month before reporting full financial results.

It is due to report its interim profit on August 22 and was giving away no information on estimates yesterday.

Mr de Cure said in May that AMP's core operating margins were expected to grow by 5 per cent.

However, analysts are expected to question this target as they reassess the company's earnings forecasts.

The group made a first half net profit of $403 million last year which it would hope to exceed.

Mr de Cure's assertions that the group would not have to raise capital to cover the UK division's financial position provided some comfort to analysts yesterday.

Other UK life insurers have had to raise capital in the wake of a 13 per cent fall in the benchmark UK FTSE index since June 12.

In many cases, their share prices have taken worse dives than AMP's.