AMP Limited

Good morning everyone and welcome to AMP's half-year results today. Very pleased to have Blair Vernon with me here today. He's our new CFO as you're aware, but someone who has worked with AMP for many years and is very passionate about making sure we build a future for the company. Before we start today's presentation, I would like to acknowledge the traditional owners of the land on which we hold this meeting today, which for us is the Gadigal people of the Eora Nation. And I'd like to pay my respects to the elders past and present in this important time for First Nations people. So today we are of course going to do an overview of the first half results. We will then deep dive into the individual business units with a particular focus on costs and capital, which I know is something you're all going to be wanting to hear about before we summarise the results and turn to questions. So if I look at our results for the half year, We delivered an underlying NPAT of $112 million, which is flat with the same time last year, but up on the second half last year. Pleasingly, the underlying result certainly demonstrates better performance in our operating businesses. I want to remind you we've delivered $610 million of returned capital to our shareholders over the last 12 months. And with the declaration of a two and a half cents dividend today, franked 20%, that will deliver another 70 million in September. And we're committed to completing the second tranche of the buyback by October, depending on volumes. So that's 750 million of shareholder capital will return by October of this year. We also, as part of our capital and liquidity review, have paid down $300 million of debt in July, which is important as we deleverage the organisation, and we're committed to paying further debt down at the end of this year and into next year. Our EPS has improved to 3.8 cents per share, and for us that is a great result and something we want to continue going forward. We have in these results taken a provision for the bowler class action of 50 million. That 50 million represents our best estimate of the judgment as we sit here today and understand it. There is further work to be done here and of course we reserve our right to appeal. But I want to remind you, we only just put our orders in yesterday and don't have the final orders from the judgment yet. As a result of that uncertainty around the litigation, we have today made a decision to pause the third tranche of the capital return, being $350 million. Now, I do want to stress the word pause here, because our second tranche will continue into October. We will, in that period when we're pausing that tranche, make a commitment to no material M&A. And I say that again, no material M&A. And we'll come back to the market on our position on the capital return by the end of the year, by no later than the end of the year. Today we also, as we promised, announced a cost review program with $120 million taken out over the next two years. That's $60.24 million and $60.25 million with a one-off investment of $120 to $150 million. And we expect those costs out to be in the area of IT, continued focus on advice, master trust re-platforming, and of course focusing on the group and stranded costs that have come through from the transactions. This result is delivered in a market condition that's interesting. We're still in an environment of higher inflation and interest rates, albeit that appears to be abating. But we're well positioned. Our bank is well capitalised. We have a good credit quality in the book. And whilst there has been a small uptick in arrears, it's nothing that I remain concerned about and we are well provisioned. Our LVR and our dynamic basis are at 53% as we stand here today. Having said that, we know that some of our customers are experiencing hardship and we're well placed to be able to cater for their needs in the coming months. If I look at our platform business, it is being impacted by some of the environment I just talked about, particularly in relation to our IDPS environment and our cash flows. But we have to remain focused on the longer term around retirement solutions where they're particularly strong. The regulatory environment is as positive as it's been for a company like ours. The government is now committed to implementing parts of the quality advice review, at least the first stream which relates to our traditional financial advisors and the second stream which would allow superannuation to provide further advice to customers. For us, with our footprint, that is a definite bonus. On the first stream, it relieves some of that compliance burden for our financial advisors which should allow them to see new clients again and bring more flows into the industry. And secondly, on the superannuation, we're clearly a company focused on retirement and super, and being able to give better advice to our customers to enable them to have a richer retirement will be important. On the unquestionably strong, our capital ratios in the bank remain incredibly strong, and we're very much playing in that retirement stream that we've heard our regulators talk about recently. If we move to a progress on our strategy for the first half of 23, and this strategy is no surprise to you. On reposition, we want to grow our bank and grow our platforms. We have grown the bank at 1.1 times system for the first six months. I do want to stress, though, the market remains competitive. We've taken a very prudent approach to growth, making sure we deliver return on capital. So while we want to continue to grow, it is important that we make sure we deliver return on capital. In the north platform, while the flows have come off from the same half last year, we continue to grow the IFA footprint, which is incredibly important for us, and it's up 48% from the same time last year. And with our new retirement solutions, we continue to push on that front. New Zealand, stable results as they have delivered for several years, and they just need to keep delivering on those stable results. And in our Master Trust business, while the flows have reduced or the net cash flows out have reduced, it's a point in time where we need to rethink the platform there so we can engage better with customers in terms of digital and education. On the Simplify, we have largely dealt with the AMP capital sales and super concepts in the half. And that really gives us free air to be able to focus on the future. We continue to drive efficiency in our advice businesses, making sure we can focus on those services that our advisors want and are willing to pay for. We have committed today to cost reductions, and we continue to focus on those costs, the stranded costs from the transactions, the group costs that were fit for an organisation of the past, and we're absolutely committed to delivering on that. We have delivered shareholder returns in terms of capital and will continue to focus on that, making sure though that we are prudent in relation to our capital and liquidity. And we continue to resolve those legacy issues, working through them methodically and rationally. On the explore side, we continue to invest in our digital and customer interactions to make sure we're well positioned for the future. We also continue to build on that leading position in retirement, and we've won so many awards in that space that I remain incredibly proud of. And we want to continue to grow those platform businesses and the bank business and examine all propositions for advice. And you've heard me say before, we need to consider all propositions for advice, but they need to be viable propositions, not just for AMP, but for our advice partners, who are an incredibly important stakeholder for us. If I look at our stakeholders, shareholders always remain top of mind, but there are other players that we need to make sure are being met in terms of needs. On the customers, we've paid out over a billion in retirement. We've delivered over 4,000 new home loans. We're being proactive for those customers who are experiencing hard times at the moment. And our My North solutions in terms of retirement have won many, many innovation awards, and we're all very proud of that. On people, we have been going through massive transformation over the last couple of years, but our engagement remains above 70. Would I like it to be higher? Absolutely. But I think given the changes we've been going through, that is something that should be noticed. And our trust and NPS with our advisor partners is improving and continues to improve. On communities, our AMP Foundation, which is a very large foundation, as part of its 30th year anniversary this year, was able to deliver two $1 million grants to Global Sisters and the First Australian Capitals to do good work in the community. And coming back to our shareholders, we very much listened to your feedback at the full year about making sure there's alignment between executive performance and shareholder outcomes. And we've taken a good hard look at our performance framework and at our outcomes and reviewed those to make sure there is that greater alignment. And they're included today in our financial packs. So on that note, I will pass it through to Blair to walk through the detailed financial results.

Thanks, Lex. It's a pleasure to be here. I'm going to just recap an overview of some of the group numbers. As Lex mentioned, then I'm going to focus on the individual operating business units and a bit of a deep dive in each of those. I particularly want to talk about cost and capital. As Lex has mentioned, they were particular focus areas for us based on feedback, but also our own agenda of work in the first half of this year. So just turning to the group overview, as Lex mentioned, an impact underlying of $112 million, square, half on half, but pleasingly the operating business units carried more of the weight during that period as we saw some decline in terms of our sponsor returns, and I'll talk to that a little bit later. AUM revenue is obviously a little softer based on the overall mix and particularly margin, but that's an area we continue to focus on. Interest expense did rise during the period. Again, as Lex has mentioned, that corporate debt repayment will improve that as we look into the second half. And our focus on controllable costs continues. So we are broadly flat in the half. That's after absorbing quite a significant amount of inflation and some of those stranded costs that we've talked about a number of times in terms of the sale activity. And that continues to be a focus for us. Broadly speaking, though, from a half and half point of view, I think $112 million is certainly something we're very proud of. If I turn now just to the operating business unit overview at a high level, importantly, I think we want to focus on making sure we're clear about performance focus across all of these business units. As Lex has mentioned, AMP Bank and platforms are clearly a key growth area for us. We want to continue to focus on margin management of the bank in terms of NIM, but also margins across our platform businesses, acknowledging that we've got some subdued cash flows. I think importantly for me, the cost of income performance in those two businesses is really positive and obviously the half-on-half profit uplift is a positive story for us. That performance focus will continue as we absorb cost increases naturally in those businesses and look to preserve those cost of income performances. Again, as Lex mentioned, New Zealand Wealth Management are flat on the half in an environment of higher inflation in that market and we would look to continue that kind of performance and that kind of cost of income outcome that we see in that business unit. For Master Trust and Advice, that is an area of key improvement for us. While the Master Trust cost of income starts in this period at 67%, we expect to see improvements in that area as we roll out our cost and simplification program. Again, as Lex mentioned, we've improved the advice performance, but that continues to be an area of focus for us. And in our new template this year, apart from those five operating business units, we've obviously now consolidated into a group performance as we take into account our strategic partnerships and the other retained interests from our AMP capital sales and offset that against other items that we're holding at group. And that's principally some of the stranded costs that we see around the property and legacy technology as a result of the substantial changes in the group over the last few years. Just turning to items below NPAT, and that does continue to be a significant feature for us in the first half, as you would naturally expect given the sale activity and the number of one-off items. Just picking up a couple of points, again, in terms of litigation and remediation, as Lex mentioned, we've taken that provision in the first half. You can see that coming through in that cost. Transformation cost out continues. That's the conclusion of our three-year program. And so that continues this half, and I'll talk a little more in terms of our guidance about how we see the second half. But that does represent the completion of a substantial phase of transformation. We'll talk more about the cost out as we look into future years. Importantly, in other items, that largely comprises the gains on our sale activity, a substantial first half for us in terms of both the AMP capital divestments, two separate transactions, and also the super concepts transaction, which we've already identified has caused us to rebase our cost position so that we've got a comparable half on half. So an impact at a statutory level of $261 million overall. Just a couple of further comments in terms of that overall. As I mentioned earlier, that flat position and impact, I think, does talk to the operating business units carrying more of that burden. Pleasingly, bank revenue was up, and that offsets sponsor valuation movements, which post-tax are down $16 million on the half. And so it throws five operating business units have performed very well through this period. I think an area that we obviously continue to focus on is the subdued cash flows and we've highlighted that in our reporting. I'll talk to that a little more in a moment. Importantly, I think as we look into that, the important element for us is to really be mindful of margin management across our AUM businesses and our existing performance in terms of stocks. So retention is also a key focus for us as much as we continue to focus on improving that net cash flow position. Just turning now then to the operating business units in a little more detail. AMP Bank, particularly pleasing in terms of an impact improvement of nearly 24%. Obviously improved mortgage book growth, as Lex mentioned, slightly above system and appropriately less than we were originally targeting given the intense competition in that market. The cost-to-income ratio continues to improve, and we think that's very important, acknowledging we've got some NIM compression in this period, and we see that continuing to be an area of focus. Our strong cost-to-income position gives us a good performance basis to start from in this segment. For me, importantly, the funding is key in this business. Pleasingly, more than half of our customer deposits are acquired by digital channels, and that continues to be a significant focus for us. And as Lex mentioned, our view on the book and arrears continues to be an intense focus. We've seen some uplift in 90-day arrears, but we've got a really important focus in terms of curing those situations, particularly as they emerge in the 30-day numbers. And just turning to some of those details, you can see that uplift in the 30- and 90-day numbers. Pleasingly, we're seeing an improvement in those 30-day numbers as we look through and particular focus on helping customers in that early stage of the intervention. As I mentioned, the cost of income, we think, certainly compares favourably to our regional peers. And a big focus for us is obviously balancing that growth focus with our return on capital, mindful of meeting those expected benchmarks and continuing to focus on that. Just turn to platforms. As I mentioned, impact up 25% or just a little over. That's larger result of improvement in the north guarantee. So that's that's a pleasing feature. This half offset obviously by subdued cash flows 741 million x of the pension payments. And when we include pension payments, a slight negative and a half that will continue to be a focus on a forest but I think reflects some of the wider industry dynamic around subdued cash flows as well. Pleasingly, as again, as Lex mentioned, we're really focused on extending our footprint, not just from our very valued relationship with our aligned advisors, but extending that north platform offer into the IFA market. And obviously, our income product has been significant in that, but also our managed portfolios, which now are exceeding $10 billion through this half, which is very pleasing. Just on platforms in a little more detail, the mix we see in terms of our business is more weighted towards superannuation and pension. We think that gives us some positive momentum going forward as we think about the momentum of flows, and particularly the more investment-orientated flows, which may not be coming onto platforms more generally, and we've certainly seen that in our case. Overall, that push into IFAs continues to be improving half and half, as I mentioned, and that will continue to be a focus for us as we open up more IFA opportunities through our north offer, which the team are very focused on. Just turning to New Zealand briefly, main focus for New Zealand in this half has been the continued diversification of revenue streams. That's important in that market given the focus on looking to extend beyond just the KiwiSaver footprint. The core KiwiSaver product though has started to see some positive cash flow and importantly positive member movement, which has been important. That acquisition we completed in this half of a business called EnableMe allows us to extend that fee-based coaching revenue model, which is very positive, and that's a key opportunity for us in the New Zealand business. We've also continued to simplify the New Zealand business as we move forward, so we divested a small legacy book. That has some margin impact on us, but we think significantly de-risks the portfolio as we look forward. Turning to Master Trust, a very pleasing performance in this half. MPAT improved slightly, and margins, while they were impacted by some of our simplification, we think that continues to reflect our focus on improving and simplifying our offer to customers. We think that that will be a key feature going forward, and that obviously features in our cost out program as we look forward, so we'll talk about that in a little moment. Importantly, net cash flows are continuing to improve in terms of outflows. It is important to recognise, though, that the previously announced mandate loss has now concluded, and so this past weekend, $4.3 billion of outflow will obviously reflect in our second-half results. Pleasingly, that cost of income has improved, and that will be a key area of focus for us, as I said, in terms of our drive for performance in this business as we not only replatform but look at our offer overall. Now I turn to advice, an area that we've again been focused on in the last few years. You'll see we've continued to improve our impact performance, obviously posting a loss still, but the team remain very focused on balancing our improving cost position by making sure we deliver services that are valued by our advisors, as well as looking to support our advice network as they go through and continue to go through substantial change. Pleasingly, our revenue per practice continues to be very strong. And our position in terms of scaled practices relative to the market, we think positions us very strongly in terms of the upcoming changes in the advice market, as Lex mentioned, and a really strong advisor franchise that we continue to work very closely with. At a group level, as I mentioned earlier, we've obviously made substantial changes to the way we report here. Our strategic partnerships did see a reduction in this half based on sponsor movements. That was 20 million pre-tax, 16 post-tax, as I mentioned. Pleasingly, our partnerships in China, CLPC and CLAMP, continue to deliver in line with expectations. The important thing for me in terms of this group position is really opening the jaws between that impact from the partnerships and continuing to reduce the costs. And that's both in terms of tax expense, but mostly in terms of the stranded costs. And that's principally around technology, but also some of the property-related costs that we've naturally seen stranded as we're starting to complete now and finish the separation of the AP Capital businesses. Just turning to costs, particularly, given that's been a significant area of focus for us in the first half. In terms of FY23, we've closed the half at $362 million. That's comparable to the prior half, and naturally we've rebased the 22 numbers to account for that super concepts exit. We're forecasting for the second half a landing zone somewhere in the region of $380 to $390 million. So that's an improvement on the second half last year. That would see us landing in a range of $745 to $755 million of controllable costs, which is slightly better than the comparable last year and certainly in line with how it guided the market. And we'll continue to focus on improving that right through the second half. Importantly, for 2024 and 2025, We're announcing today a further program of business simplification. We expect that will deliver $120 million of cost out over that FY24 and 25 years. Broadly, we see that being roughly equal across those years, so $60 million out across each of them. We see ourselves delivering that inside the envelope of absorbing cost uplift as well, and so we think that's a significant improvement. Broadly speaking, if we look at our forecast, that would see us improving our cost-to-income ratio into the low 60s, which we think is a good position to be in. As we mentioned, we think that's going to require us a one-off investment spend in the region of $120 to $150 million, again, over those two years. We see that really landing in three core areas, and we're going to very tightly focus in terms of that spend. The first is what I would call core basics, so this ongoing simplification that we continue to drive through the business, and a particular focus on project spend and investment-driving outcomes. The second is what I would broadly call solutions. As Lex mentioned, we're now at a point where we can turn our mind to the sort of central replatforming of the master trust business, particularly the technology, which is tying up significant complexity and cost for us. Equally, we know that the advice business continues to have a cost base that doesn't match the revenue profile, self-evident in terms of the results over the last few years. Certainly not a reflection of the work we're doing because we're continuing to improve that performance, but we're looking for further step change as we look forward to that break-even position by FY24 and consider what are the future positions in terms of advice models. So that will require investment. Thirdly, the area of stranded costs. We clearly have a group technology platform that is configured for a much more complex business than we are today, and so that requires right-sizing, but it will require investment. And similarly, property and corporate contracts, that'll be a continued work on for us as we look to compress all of those costs to better match the organisation that we are today and the simplicity of what we expect going forward. Turning now to capital, We have laid out here our position in terms of target capital as we finish the half and broadly speaking that target capital position has decreased and that's a reflection of some uplift in minimum regulatory requirements as you would expect relative to growth in those businesses, particularly bank but also regulatory requirements. We've seen a board buffer decline as we continue to simplify our business and the board becomes more comfortable about the buffer required to deal with unknowns. That's come down as a result of the anti-capital sales significantly. That leaves us with a surplus capital position, and I just want to step through exactly where that surplus capital bridge is from where we got to at FY22 and where we are now. So we closed FY22 at 9.23. You can see the stat MPAT uplifts. We've obviously, as Lex has mentioned, been conducting buybacks, dividends. We've got some net business activity movements. That reduction in board target, you can see, leaves us with $9.88 million at the half. But importantly, we've already flagged today our dividend and also remaining share buybacks, which would give us a pro-form position of around $848 million. Importantly, our view, as Lex again has mentioned, is to take a very cautious and careful approach to that position, hence the pausing of the capital return, but we stress the point pause. And that will be a focus for us as we look into H2. Just turning to H2 and activity we've already got underway, we mentioned and committed to our capital review during the half that's been completed and engaged with stakeholders. That's already seen us take action, and that particularly relates to the pay down of corporate debt, which we mentioned at the outset. That's $302 million of reduction, so that's obviously come off that cash position at 1H23. The important thing for us is continuing to make sure that capital is all available, so we've got a lot of work ongoing as we continue to simplify the legal entity structure in terms of the operational footprint of the business. And obviously we'll continue to review the right time in terms of the approach there. Just to recap that capital return program, by the time we complete that dividend and the remaining tranche two, that'll bring us to that $750 million of commitment. We expect that to be October based on volumes around the buyback. And as Lex has mentioned, we'll be back to the market before the end of the year to update on tranche three. Now, just turning to a view on guidance for the remainder of the year, I just want to step through the key elements. In terms of bank, we continue to target above system growth, although we would expect, given the competitive environment, that would be similar to our position in H1. Our view on NIM is that there will be some slight compression based on where we finish the half, and so we're expecting a landing range somewhere in the 130 to 135 basis point range. On platforms, we do see continued subdued cash flows. You would expect cash flows to be similar to H1. Big focus for us, though, is margin management, and we do expect that to be broadly in line with our position, so around the 48 basis points. On Master Trust, similarly, we're expecting steady margins, so around that 63 basis point level. As I mentioned earlier, we have seen that outflow of that substantial mandate that's now complete. And we are seeing, we have an expectation that there will be some slightly higher cost in Master Trust. There were some timing differences in terms of the way our technology spend for required technology upgrades occurred in Master Trust, and so there will be a little more uplift in the second half. For advice, the focus continues in terms of that cost-out activity and continuing our operational improvement and delivering services that advisors value. So we would expect to see some continued efficiency improvements in advice. On controllable costs, setting aside our forecast for 24 and 25, just for 23, we will expect to see that landing zone 745, 755, as I mentioned, that compares favourably with our rebased FY22. We will see some below-the-line costs come through, as we've previously noted. That's the completion of that transformation program I talked about, as well as the finalisation of the separation activity of the range of transactions that were in the concluding stages of separating. So we expect that to be in the region of $45 million post-tax. And just on strategic partnerships, now that we've reset the way we report on that, we would expect the strategic partnerships component to deliver us in the region of a 10% per annum return on investment. That's our anticipation. The balance of retained interest that we have in that portfolio X of the AMP Capital business obviously will be subject to market movements. With that, I'll hand back to Lex for a summary.

Thank you very much, Blair. right let's move to the second half focus and as you would expect no surprises here if i talk about our reposition pillar we want to focus on growing the bank in a disciplined manner and it's a very competitive market at the moment both for funding and for mortgages and we need to remain focused on that return on capital In our platforms business, we want to continue to grow and manage portfolios and continue to leverage off the innovation awards we run in our retirement solutions and grow that IFA network as well as respecting our line network. And of course, we've got to focus on those advice costs that don't deliver value for our advisor partners. We've been doing that for some time now, but that work will continue in the second half of this year. If I look at Simplify, we've talked about the cost base today. As we move through the second half, we need to set ourselves up for those cost reductions we've committed to today through 24 and 25, and we have a good plan there to achieve that. I want to make sure we continue to deleverage the balance sheet. As Blair has mentioned before, we've already paid that $300 million. There's more to come in the second half and into the first quarter of next year in these higher interest rate environments. We've talked about preservation of capital and I'll say it again, it is important that we preserve capital, we manage it prudently and we'll continue to do that and make sure we come back to our shareholders no later than the end of the year about that third trench of capital. If I look at our explore function, again no surprises. Continue to develop innovative solutions in that retirement space where we have a natural advantage. We are going to continue to work on those proposals for advice and we're working with our advice partners now and discussing with them some different ideas. But as I've said, it needs to be viable from a financial perspective, not just for AMP, but for our advice partners as well. So if I just take a minute to summarise the results as I see them. I think we're making progress against the commitments we've made to our shareholders. We have largely dealt with the sale of AMP capital and super concepts. We've delivered shareholder return of capital of $610 million with a further commitment of $140 million by October in terms of the dividend and remaining buyback. We've commenced delivering the outcomes of the capital and cost review. deleveraging, making sure we can deal with the liquidity and the many legal entities we have and looking at the opportunity pay down for the debt. We are dealing with our legacy issues and we have had legacy issues to deal with but we work through them methodically and rationally. There's certainly headwinds as we move through 23 and 24, but I think we've laid down a good strategy today to deal with those headwinds in terms of cost, in terms of capital, and in terms of liquidity. So if I stand here today and look forward, I think our core businesses are much better positioned. We have largely a portfolio that we want to take into the future. We're dealing with those historical issues and we certainly as an executive are very much focused on performance into the next generation. So thank you and I'll now turn to the operator for questions.