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AMP's Profit Is Up 10%, But Misses Forecasts

Reuters
Wednesday, 13 Feb 2008 | 7:37 PM ET

AMP Ltd, Australia's top pension administrator, missed estimates with a 10 percent rise in full-year underlying profit, but said it was well positioned to grow despite current market volatility.

AMP, Australia's third-biggest retail funds manager, reported full-year underlying profit of A$960 million (US$857 million). Six analysts on average had forecast AMP's profit to be A$999 million, with estimates ranging from A$977 million to A$1.023 billion. Net profit attributable to shareholders rose 8 percent to A$985 million.

Shares in AMP, like many other companies leveraged to the stock markets, have been sold off by investors on concerns about a prolonged downturn in equity markets.

AMP said in a statement on Thursday that its balance sheet was strong, with a low level of gearing, and it had no direct exposure to subprime mortgages.

AMP's newly appointed Chief Executive Officer Craig Dunn said in a statement that market volatility could impact AMP, but said the company was well placed to weather any storm.

"While AMP is not immune to investment market volatility, the company's transformation in recent years from a traditional life insurance company to a modern wealth management business means we are well placed to withstand these conditions," said Dunn. "The company has diverse earnings streams and a bias to more stable product cashflows such as superannuation contributions," he said.

Australian funds managers have benefited from five straight years of gains in equity markets, while a mandatory pension plan, known as superannuation, has boosted flows into money managers.

Recent stock market volatility has hurt sentiment for companies geared to stock markets as investment returns drop due to the market downturn.

AMP said a 10 percent decline in Australian equities would wipe away about A$40 million from its operating earnings.

Shares in AMP, which manages about A$129 billion, are down 22 percent so far this year compared with 12 percent fall in the benchmark S&P/ASX 200 Index.

In December, AMP sold its closed reinsurance and general insurance business Cobalt/Gordian to Enstar Group for A$585 million.

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