AMP set for massive bounce

Announcement released last night indicates there is no problem in the UK.

Here is the announcement:

ASX Code: AMP
Announcement: Pearl`s Capital Position

Date: 20 September 2002 - 20:35:00
Market Sensitive: Yes

AMP LIMITED 2002-09-20 ASX-SIGNAL-G

HOMEX - Sydney

+++++++++++++++++++++++++
ASIC has requested AMP to provide additional clarification about its
discussions with the Financial Services Authority (FSA) and its
Minimum Regulatory Capital (MRC) requirements.

PEARL WITH-PROFITS FUND

The Pearl with-profits fund is a large fund but has a relatively
small proportion of the overall Group new business, accounting for
around 10 per cent of AMP's UK new business.

PEARL'S CAPITAL POSITION

Pearl has an insurance financial strength rating of AA-(negative
outlook)/Aa2 from Standard & Poor's/Moody's.

The market value of assets in the Pearl with-profits fund exceeded
Australian GAAP liabilities by an amount that includes over $5.4
billion of unattributed equity at 30 June 2002.

MINIMUM REGULATORY CAPITAL

What is it?

The MRC test is one indicator used by the Financial Services
Authority (FSA) to assess the financial strength of a life fund. It
is a conservative test and is not a measure of the economic solvency
of an organisation.

How and when is it calculated?

A formal MRC calculation is a detailed process, conducted annually,
that requires a full actuarial valuation as well as potential
consultation with the FSA. The FSA allows up to three months for
preparation, due to its complexity. The 31 December 2002 date is the
next date at which a formal actuarial valuation of the fund will be
undertaken.

Pearl's situation

The Pearl with-profits fund has fluctuated both above and below
the MRC as FTSE levels and bond yields have moved sharply in recent
months. To address its MRC requirements, Pearl maintains an ongoing
dialogue with the FSA. This dialogue is common for all UK life
companies given current volatile markets.

MANAGING THE CAPITAL IN THE PEARL WITH-PROFITS FUND

The FTSE has fallen from 5217.4 at 31 December 2001 to its close on
19 September 2002 at 3813.5, a decline of 27 per cent. AMP has been
liaising closely with the FSA since mid-June 2002 in relation to its
ongoing regulatory review.

In response to this decline in the FTSE, AMP has implemented a number
of capital initiatives and agreed a plan of action with the FSA so
that Pearl's with-profits fund can meet its MRC position.

DISCUSSIONS WITH THE FSA

As part of its plan of action, AMP is to make available additional
resources of GBP500 million to support the Pearl with-profits fund by
31 December 2002 on the understanding that if the FTSE falls below
3700, the adequacy of these resources will be further reviewed. The
first part of this allocation of A$1 billion (GBP331 million) was
announced on 21 June 2002 and used to acquire inadmissible assets
from the Pearl with-profits fund in July. The balance will be used to
further restructure inadmissible assets and will come largely from
the proceeds of the sale of Cogent which was owned by AMP (UK) plc
and Pearl.

Pearl continues to liaise with the FSA on the implementation of its
capital management initiatives. The FSA has not intervened with the
continuing operation of the business.

AMP has previously announced its intention to close the Pearl
with-profits fund at the end of 2003. The closure of this fund will
result in Pearl ceasing to write new business through this fund and
enable the progressive release of capital over time. While AMP does
not expect the FSA to take formal action they could stop Pearl's
with-profits fund writing new business. In the unlikely event this
did occur, AMP does not believe this would be material to the AMP
Group, given the announced closure of the Pearl with-profits fund and
given that it represents only 10 per cent of AMP's UK new business.

FLEXIBILITY TO UNDERTAKE FURTHER INITIATIVES IF THE FTSE FALLS
FURTHER

AMP retains the capacity to implement further initiatives if required
and would agree such initiatives with the FSA if the FTSE continues
to fall further.

These initiatives could include further restructuring of GBP1.4
billion inadmissible assets, reinsurance or securitisation
initiatives, the acceleration of the closure of the Pearl
with-profits fund, or a combination of the above. Given AMP's
intention to close the Pearl with-profits fund, the preference is to
undertake these planned initiatives rather than contributing further
capital.

USE OF RPS PROCEEDS

AMP confirms that its issue of RPS will be used to reduce short-term
debt, increase the Group's capital resources and generally reinforce
its financial strength. This will provide the AMP Group with a more
efficient and stronger capital structure.

MARKET UPDATES

Given the extreme volatility in UK markets and market concerns about
the performance of most UK life companies, AMP has provided the
market with regular updates, since June 2002, on the steps being
taken to improve its MRC position in its UK Financial Services
business. An outline of these statements are set out in Attachment A.

CONCLUSION

AMP Chief Executive Officer Paul Batchelor said: "These are extremely
complex issues and we are seeking to manage a volatile situation in
the best interests of all our stakeholders.

"It is important to AMP that its shareholders are kept fully informed
and we regret any confusion.

"The AMP Group as a whole has a strong capital position. We remain
well-capitalised and able to support our UK Financial Services
operation."



ATTACHMENT A

21 JUNE 2002

AMP announced at a market briefing that it intended to increase the
capital allocated to its UK Financial Services business by around A$1
billion in 2002.

This decision to make this allocation, which was effected in July,
was due to the decline in the FTSE which closed on 20 June 2002 at
4580.3.

29 JULY 2002

AMP further updated the market on a number of capital management
initiatives in the UK, due to a further fall in the FTSE of 13 per
cent since 20 June 2002 to 4016.6.

These initiatives included the closure of Pearl and London Life
with-profits bond and annuity products; reduction in UK equities
exposure; and a review of bonus declaration levels.

AMP also announced that should markets decline further, AMP could
implement further initiatives to enable Pearl's with-profit fund to
meet its regulatory capital requirements in the UK at 31 December
2002.

22 AUGUST 2002

At AMP's interim results announcement for the six months to 30 June
2002, the company confirmed its capital management initiatives.

AMP also confirmed to the market at this time that these steps,
together with further initiatives, meant that the company would meet
MRC requirements for all its UK funds at FTSE levels "several hundred
points below current levels". On 21 August 2002, the FTSE closed at
4364.8.

The company also disclosed in its Investor Report for the six months
to 30 June 2002 that "Pearl meets MRC requirements subject to the
current level of bond yields remaining stable, and AMP implementing
capital management initiatives". It noted if there were further falls
in the UK equity market, AMP had a number of alternatives which would
enable Pearl to meet requirements well below these levels.

17 SEPTEMBER 2002

AMP lodged the prospectus for an offer of around A$750 million in
Reset Preferred Securities, with the funds to be used to reduce
short-term debt, increase its capital resources and generally
reinforce the AMP Group's financial strength.

The FTSE closed at 4044.3 on 16 September 2002.