AMP says it is in a strong position to take advantage of an expected improvement in financial market conditions next year, after posting a fall in first-half net profit as the value of its investments slumped.
But shares in AMP rose by more than 6 per cent yesterday after Australia's biggest corporate funds manager reported an earnings increase of 2.7 per cent on the back of strong growth at its insurance division.
AMP also announced plans to raise subordinated debt to strengthen its capital position during the difficult market environment and refinancing liabilities maturing in 2009. AMP is focused on expanding its existing businesses in Australia and New Zealand to tap the growing demand for funds management and insurance products as mandated retirement savings increase, while it sells investment products selectively into Asia.
Chief executive Craig Dunn said the company was focused on organic growth and that AMP was in a good position to take advantage of an expected recovery in the Australian economy next year, although he cautioned conditions were likely to remain volatile for the rest of calendar 2008.
''M&A [merger and acquisition] is legitimate but it would have to be strategically relevant,'' he said.
AMP's operating earnings grew to $394 million from $382 million. Underlying net profit AMP's preferred measure because it excludes the effects of market volatility fell by 2 per cent to $437 million.
But net profit for the six months to June 30 fell by 22 per cent to $366million, although the previous first-half result had been boosted by an $88 million contribution from the divested Cobalt/Gordian business.
The bottom line was hit by a loss of $122 million on investment values and an adjustment of $41 million on fixed income holdings that back AMP's annuity products.
AMP shares rose by 41c, or 6.4 per cent, to close at $6.82, the highest since August 12.
Tyndall Asset Management analyst Jason Kim said, ''AMP is a pretty sound company and it's a solid result given the current environment.
''Given the environment in Australia with superannuation, and you've got Kiwisaver now in New Zealand, there's plenty of room to get good organic growth.''
The first-half results ''demonstrate financial strength and the strength of the business model.
''We saw very strong earnings in the insurance business and our businesses that are most impacted by the sharemarket also held up.''
Mr Dunn said the slowing Australian economy was likely to improve in 2009 on probable interest rate declines and as the price of oil stabilised at a lower level.
The New Zealand economy was facing tougher conditions.
The company is also planning a selective expansion into Asian markets through AMP Capital Investors.
Mr Kim said, ''The thing about Asia is they are good savers and their wealth is increasing.
''If they tap into the right networks in Asia and come up with the right product, then they could make some really good money.''
Most Asian economies, including China and India, were still growing at significantly stronger rates than the rest of the world, despite a recent slowdown, AMP said.
AMP's insurance business operating earnings grew by 29 per cent to $76 million due to improved claims performance. AAP
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