AMP profit plunges 97 per cent as wealth unit sees $4b in outflows
AMP's hammering from the banking royal commission just got worse with the wealth manager saying it recorded net cash outflows across its wealth management business of nearly $4 billion over the year due to the reputational impact from the inquiry.
AMP's problems appear to be accelerating, with the wealth manager taking the majority of the hit to its wealth management outflows in the fourth quarter of 2018, after the September hearings of the royal commisison where more concerns were raised about the fees charged by the group. For the quarter, AMP recorded net outflows of around $1.6 billion.
That outflow was higher than the $1.5 billion outflow AMP recorded in the third quarter of 2018.
AMP chief financial officer Gordon Lefevre said the group expected a similar level of outflows in the first quarter of 2019.
Mr Lefevre said a "reasonable" percentage of the funds outflow was driven by people switching from AMP to industry super. As revealed by The Age and the Sydney Morning Herald on Thursday, Australian Super, says it has received nearly $4 billion in super savings directly from the retail sector in the past seven months, while Hostplus said membership had jumped a net 350 per cent during 2018.
News of the vast number of people pulling their superannuation out of AMP came as the group reported a net profit of only $28 million for the year, down from the $848 million it reported a year earlier, a 97 per cent fall.
AMP's profit took a hit from the $469 million it had to set aside during the year to compensate customers who were charged fees for no service or received poor advice.
AMP's underlying net profit, which strips out the impairments the group had to take during the year and other items, fell 35 per cent to $680 million for 2018.
AMP took the biggest hit in its Australian wealth management arm with operating earnings falling 7 per cent to $363 million during the year.
The group recorded a $3 million operating loss in the life insurance business it is in the process of selling to Resolution Life in a controversial $3.3 billion sale.
The group also said it plans to defer the initial public offering of its its New Zealand wealth management deal until it completes the separation of its life business.
AMP chief executive Francesco De Ferrari, who took up the top job at the wealth manager in late 2018, said the year had been a challenging one for the group.
"Our core businesses have delivered resilient results, with continued growth in AMP Capital and AMP Bank offsetting the headwinds faced in Australian wealth management," he said.
“The royal commission has been a confronting but valuable experience for the financial services industry and has served as a catalyst for change at AMP."
"We have undertaken board and leadership renewal, accelerated client remediation and sharpened our focus on delivering better value to customers including reducing fees on our MySuper products."
AMP will pay a final dividend of 4 cents per share, taking the full year dividend to 14 cents. The final dividend will be franked at 90 per cent and is payable on March 28.