AMP wealth management NZ has reported a more than 10 per cent year-on-year decline in net profit during the first half of 2022 as falling market share and share market volatility hit revenue.
According to the broader AMP group results released last week, the AMP NZ business turned in a net profit after tax of A$17 million for the six months to the end of June compared to A$19 million over the same period last year.
The AMP NZ wealth arm lost market share in all three reported retail fund sectors – unit trust, corporate super and KiwiSaver – compared to March 31, 2021, with most of the damage coming via its loss of default scheme status last year.
Already in a multi-year decline, the AMP KiwiSaver market share fell to 6.5 per cent (or $5.8 billion) at the end of March this year against 8 per cent 12 months previously.
In total, the AMP KiwiSaver scheme saw net outflows of over $780 million over the annual period with more than $600 million sheeted to the loss of almost 62,700 default members in the government-enforced diaspora at the end of November last year.
AMP NZ also reported slight market share falls in the corporate superannuation master trust market (where it still is the largest player) and the retail unit trust sector, which remains a small concern for the firm with about $1 billion under management.
Overall, AMP NZ assets under management dropped by 16 per cent over the 12 months to June 30 to close the period at A$10.2 billion.
Funds management revenue declined by A$12 million (or 20 per cent) for the first half of 2022 compared to the same time last year as both the impact of asset-loss and lower fees of the new BlackRock index-based investment strategy hit the bottom-line in equal measure.
On the upside, AMP NZ also clawed back some margin on the back of falling variable costs, mostly due to the reduction in investment management fees under the BlackRock regime. The move to the passive fund strategy saw AMP NZ investment expenses drop to just A$7 million for the 2022 half-year, down from A$15 million during the same period in 2021, as comparative asset-based revenue fell to A$47 million from A$59 million.
Variable costs shrunk some 31 per cent to total A$22 million for the six months to June 30 against A$32 million for the first half of last year while AMP NZ other costs remained steady.
Funds management delivered A$10 million to the AMP NZ net profits while advice added a steady A$7 million to the tally. However, AMP NZ adviser numbers slumped to 52 in the latest report from 66 as at the end of June, 2021.
AMP NZ employed advisers account for almost 56 per cent of the group’s funds under management with the wholly-owned AdviceFirst subsidiary contributing about 11 per cent, the report shows. About a third of the AMP NZ assets have come through external advisory firms.
While AMP has steadied the ship somewhat in NZ, underlying net profit is expected to fall again in the second half of this year “given volume headwinds and amended general insurance arrangements”, according to the half-year disclosures that lay out an ambition to “deliver stable earnings and optimal client outcomes” for the business on this side of the Tasman.
As usual NZ, once slated for sale, remains a small cog in the, admittedly much-shrunk, ASX-listed AMP machine that is set to complete the sale of its final fund management assets by November this year.
After booking gains of about A$2 billion on the sale of its once-mighty AMP Capital assets to disparate buyers including Ares Investment Management, Dexus, DigitalBridge and Macquarie, the group – now headed by Alexis George – is on track to hand back about A$1.1 billion to shareholders by way of a stepped capital return process, starting with an on-market share buy-back already under way.
The group says a “further A$750 million of capital returns planned in FY 23 subject to regulatory and shareholder approval…. expected to comprise a combination of capital return, special dividend or further on-market share buyback”.
A further A$400 million of surplus capital will be used to pay down debt.
With AMP now largely out of funds manager, after exiting the life insurance game last year, the group will focus primarily on re-tooling its still-unprofitable Australian wealth management arm (including platforms and advice), growing the bank business and maintaining NZ.
“We have built strong momentum on the transformation of AMP into a simpler and more efficient organisation which is well placed to grow. The agreed sales of the Collimate [AMP] Capital businesses are on track to complete in the second half of the year. Post completion there will be a renewed focus for AMP as a leading wealth management and banking business in Australia and New Zealand,” George said in a release.
“The first half of the year has seen a challenging economic backdrop. Despite the decline in investment markets, our business is well positioned with a robust balance sheet that will help us to drive forward through a period of continued economic uncertainty.”
Losses in the AMP Australian advisory chain should halve in the 2022 financial year as the group slims down, rearranges the business model and completes the client remediation and legal costs (of A$1 billion plus) incurred by the fallout from the Australian Royal Commission behind it.
Now only listed on the ASX after closing the NZX window earlier this year, the AMP share price closed down a little last Friday at A$1.13, still up from the A$0.85 12-month (and historical) low point.