AMP Limited

Well, good morning, everyone, and thank you very much for joining us today on Valentine's Day for the presentation of the AMP full-year results for 23. I'm very glad to be, of course, joined by our CFO, Blair Vernon. And before we start proceedings today, may I please just acknowledge the traditional custodians of the land on which we hold this meeting today, which for me is the Gadigal people of the Eora Nation, and I'd like to pay my respects to the elders past and present. Today, we'd like to give you an overview of the 2023 results, and then Blair will give a much more detailed presentation on the business units with particular focus on costs and capital. And of course, then I'll do a quick wrap up before we open for Q&A. If I look at our 2023 results, Firstly, we have delivered a 6.5% uplift in net profit underlying to $196 million. We have actually delivered on our cost promises and slightly more at $744 million. And we remain absolutely focused on continuing to deliver on our costs, on our corporate costs and resizing AMP for the future. We have dealt with several of the large legacy items during 2023. We settled our shareholder class action and we've agreed to settle the buyer of last resort class action. And I think putting some of those legacy items behind us really gives us some free air. On top of that, we completed the AMP capital transactions. Firstly, earlier in the year and the DEXIS transaction later in the year. And we also completed the sale of our super concepts. business and that now leaves us with a much more simplified portfolio that we can continue to focus on to grow and make more efficient. We deleveraged our balance sheet and that's something we've been focusing on again for a while and we'll continue to look at opportunities for further deleveraging and we've predominantly pre-funded the TFF which will continue to roll off through the first half of this year. And I think importantly for many of our shareholders, today we announced the commencement of the third tranche of the capital return, the remaining $350 million of that $1.1 billion that we promised. We announced a $0.02 dividend today, which will deliver about $55 million, and then we'll commence buyback in the next couple of days of up to $295 million. Of course, we're going to review the dividend situation at the half-year deadline, And at the moment, we expect that buyback will continue through most of 2024. As I said, we really spent some time in 2023 dealing with some legacy items and simplifying the portfolio. And as we sit here today, we really have five business units together with some partnerships. You know, in our AMP bank, it is uncertain times. We knew some of that was coming and we announced our strategy in relation to the consumer and small bank late last year. We continue to remain focused there on capital and on NIM management. And of course, you would have seen in the second half that there was nominal and in fact negative growth in our loan book. In the platform space, we launched our retirement solutions last year. We won several innovation awards there. And we continue to focus on being a retirement specialist on growing that independent financial advisor footprint. In advice, we need to move that business to be a sustainable business. And we continue to look at opportunities with our advice part. In our master trust business, there were outflows last year. But we're right now focused on retention. And I'd like to remind you, we have $120 billion in funds under management across platforms and Master Trust, and are managing that margin, which remains very important. And in New Zealand, it continues to perform. We made a small acquisition there last year, which also allows us to diversify some of the revenue. When we come to our partnerships, let me first start with PCCP. I've said in a number of these forums, that an interest in a real estate business in the US is probably not a strategic relationship for us. But the market in the US for those assets at the moment is poor. We have a really good business in PCCP, and we'll just continue to monitor that situation to be able to talk with the founders about monetising that. With China, with the borders now being relieved, we have been able to visit China a couple of times in the last 12 months, and we really are rebuilding those relationships with our China partnership. We see that as a growth asset over the long term, but clearly want to focus on dividend payout and helping them continue to grow and deliver those sustainable profits. Let me first make a few comments on the market. Yeah, we are in uncertain times, but I think if we look at the underlying dynamics of the spaces we play, the fundamentals remain strong. In super, we're moving towards the contributions of 12%. I think we're starting to establish ourselves as a retirement specialist. We launched solutions last year for the platforms. We'll continue to look at launching solutions later this year in our master trust space. And as we consider that 55% of the wealth is now in that 55 plus bracket, that is really important for us to continue to innovate in that space. We're probably in one of the best positions for advice as we move into 2024. The regulatory environment has started to recognise the importance of advice for our customers and really started to reduce some of that burden. And I think we're well positioned in our full financial advice with our advice partners, but also in our intra-fund advice to take advantage of that and something we're certainly going to remain focused on. And while the economic environment has been difficult over the last couple of years, as we look forward, we see that inflation is starting to abate and we are expecting some interest rate reductions later in the year, which will certainly relieve some of the pressure that our customers in the environment are experiencing. So as we look forward, you'll see we remain focused on three things. Driving that business line profitability, and customer experience. In the bank, remaining vigilant about NIM and managing it through the loan growth. In platforms, we want to continue to invest in sales and in service and growing that footprint in the independent financial advisor space. Not to say that our advisors that we license aren't important. They are critically important. In master trusts, our focus remains there on bringing some of the innovation we've done with our platforms business into the master trust space and focusing on retention. And in New Zealand, it's just keep doing what they've been doing. On capital, we're going to continue to focus on managing our capital in a disciplined way. And I think the commitment to the third tranche of the capital return demonstrates that. And of course, we remain focused on costs and we'll continue to to reposition those corporate costs for the business we are into the future. And lastly, I think because of the way we've got our portfolio simplified now, we can genuinely start to talk about growth, improve our digital experience, diversify our channels, and really continue to deliver product innovation. So on that front, I'll pass to you, Blair, to go through the detailed results.

Thanks, Lex. Good morning, everyone. I'm going to cover five key topics today. I'll give an overview of the group results in a little more detail than Lex provided. I'll obviously make some comments about individual business units. Most importantly, provide an update on cost and also our capital position and capital management. And then finally, some guidance for FY24. So turning to the results at a high level that Lex has already mentioned, our MPAT up 6.5% in underlying level to $196 million. Our total revenue was down slightly, with a number of mixed items that I'll talk to you through the presentation. That is offset, as Lex mentioned, by good cost control, and that came through both in controllable costs, but also the variable cost lines. We obviously benefited from a higher interest rate environment, and then at the statutory level, you can see we delivered a $265 million profit. That reflects both the gain on sales from the completion of the M&A transactions that we've talked to through the year, offset by litigation costs. If I just talk to that statutory impact reconciliation in a little more detail. As Lex mentioned, pleasingly, we reached outcomes in the shareholder class action and an agreement to settle the bowler class action. Those two components, net of insurance proceeds that we talked to in terms of the shareholder class action and also after tax, see an impact of $99 million recorded below the line in FY23. As we previously guided, our transformation program that's been running over the last three years to simplify the business did conclude in the second half, and you can see that reflected in the below-the-line impacts. Other items is obviously mostly impacted by the gain on sale for $245 million across those various transactions. And so while NPAT is down at a statutory level year on year, obviously there's significant items in terms of M&A activity through those last two years. Just briefly across the business units, at a high level, we had a solid FY23 for Platforms, Master Trust and New Zealand. Advice losses continued to improve year on year, and as we'd previously indicated, the bank was impacted in H2, particularly by NIM compression. At a group level, we were down year on year, and that's principally an impact of our partnerships businesses delivering lower profit. Overall, our group cost of income ratio, though, fell 2.6% to 69%, And that reflects the growing momentum we have on our cost management strategy that we've previously guided to. If we just talk to impact underlying and the key movements there, as I've mentioned, you can see the impacts, the twin impacts really, of both the reduction in PCCP earnings during the year and also our China partnerships. In large part, that was offset though by improvements in the North Guarantee product, recovering from previous year experiences negatively and delivering positively this year. You can also see the post-tax impacts of our cost savings program, both in controllable and variable costs, so delivering that 6.5% lift overall. Finally, at a macro level, just a comment on stock and flows. We'd flagged quite significantly the Master Trust mandate loss in H2 when we talked at the half year, and that did eventuate. That, together with subdued cash flows overall, saw our cash flows down year on year, which is something that we had anticipated. Against that, markets obviously performed well, and so we finished the year with an overall AUM position of nearly $134 billion across our three wealth management franchises. Importantly, as Lex mentioned, the key focus in those franchises is also around margin management, and I think the results demonstrate that we've attended to that very well in FY23, and it remains a key focus for us in FY24. Now turn to individual business units. The bank profit fell to $93 million in impact level off the back of NIM contraction of 11 basis points over the full year. The NIM contraction, obviously, something we'd previously guided to. We operate a relatively simple bank, originating residential mortgages and then raising call and turn deposits to fund that book. Both those market niches experience significant competition through FY23, and particularly in the second half of the year, we saw that competition being especially fierce. Against that backdrop, though, our simple focus allows us to maintain a quality book, and you can see that reflected in our 90-day arrears rate at 62 basis points, and if I look through that and think about items like our dynamic LVR, that in fact reduced through the year. Liquidity and capital ratios are considerably positioned, And so our absolute focus in the bank will be on NIM management and improving our return on capital metrics. Just turning to NIM specifically, we've broken the NIM waterfalls into two halves because we really think of the year as a game of two halves. And in particular, you can see the NIM compression in H2 flowing through. Within that waterfall, the dominant factor is clearly the market conditions we faced around call and turn deposits, with a contraction of 16 basis points through the half. That's a particularly intensified focus for us, and we experience more competition in that space because of our lack of a comprehensive transaction account offering. As Lex mentioned, that's something we expect to remedy with our already announced strategy in terms of our small business and consumer banking offer. Responding to that NIM compression, we did address very quickly our mortgage growth focus, and you can see the speed at which we dialed back that growth in the second half. delivering a near flat position for the second half growth numbers in the loan book. As I mentioned, despite the NIM challenges, we do maintain a conservative capital position, a solid arrears performance, and I think a still strong cost-to-income ratio relative to peers. That leaves our absolute focus on NIM management and improving return on capital metrics from here. and that will also see us examining further cost options within the bank given the prevailing conditions for FY24. Turning now to platforms, where impact for the year is up 38%. Cash flows were subdued in FY23, as was flagged in H1, but against that I think we delivered a very good margin management performance, with margins down just 1% for the year. Controllable costs are up, but that's exactly as we planned and had flagged. And that reflects our ongoing investment in this critical business unit. The most significant move for platforms year-on-year is obviously the return to positive performance of the North Guarantee product. That's highlighted particularly in the NPAT waterfall here. You can see the North Guarantee movement is accentuated, though, year-on-year because of the underperformance against our plan in FY22. Platformers also benefited, obviously, from increased interest rates or higher interest rates, and those positives helped offset that investment that I talked to. Particularly, that investment in platforms is focused on continuing to enhance our technology and product offer, but also continuing to expand our distribution efforts. As I mentioned, cash flows were subdued relative to FY22. In part, that's because of outflows in investment products. but also you can see on this slide the higher pension payments we experience year on year as a result of some of the changes in regulatory conditions. Those mixed features aren't unusual for us given the considerable weighting we have towards pension products on our platform, which as a function of that drives a relatively stable AUM base for our platform business. You can see in the IFA flow graph we continue to improve our share of IFA flows as a percentage of our total, year on year, and that's reflective of that ongoing development and investment we're making in distribution in particular. Now turning to advice, where we continue to make improvements and reduce losses by 30% year on year. We continue to pursue cost-out strategies across the advice business as we look to simplify it and make sure we're delivering services that advisors value. And we'll continue to examine alternative options to best manage this important business. Pleasingly, as Lex mentioned, the agreement around settling BOLA sets a good platform for our go forward in this segment and a key milestone for us. You can see some improvement in advisor sentiment year on year, which we think lays a good platform for FY24 after years of significant change in this business. Those changes in advice, as I mentioned, have seen our network consolidate. both in terms of practices and advisor numbers, but we see advisor numbers becoming more stable year on year as evidenced in the graph. Our revenue per advisor and also our revenue per practice is significantly above industry norms, and that gives us a strong position in partnership with our advisors as we look into 24. As Lex mentioned, we see conditions generally being more positive for this segment, which is important. Now turning to MasterTrust, the business had a strong year, delivering NPAT of $53 million. While flat year-on-year, we clearly absorbed the significant impact of a major mandate loss that we'd previously advised. We were very proactive in addressing our cost out to match that revenue out, and at the same time margins were managed well, only modestly down year-on-year. With most of our multi-year product simplification program now complete, The team under the leadership now of Melinda Howes is very focused on driving cash flow improvements and returning to growth. For New Zealand, the business delivered a 6.3% improvement in impact despite tough economic conditions in New Zealand. Cost of living pressures impact our cash flows more significantly in New Zealand where the KiwiSaver system has got a lower contribution rate and is voluntary in nature. So it's softer market dynamic overall. Costs in the business are well managed, and our business strategy in New Zealand to diversify our revenue streams continues. In FY23, we completed the acquisition of EnableMe into our Advice First business. Now to group. Impact declined in FY23, and there are really two key drivers of that. A reduction in our partnerships performance and an increase in group costs. Our China partnerships experienced lower year-on-year profits. That was a function of margin and mix changes coming through that business. Our PCCP joint venture performed well, but our smaller sponsor stake did experience write-downs as a result of negative market conditions for US real estate. Costs, as we had flagged, are up at a group level, and that's mostly a function of stranded costs emerging across both technology and premises as a result of the M&A transactions that we conducted through both FY22 and 23, come into a conclusion. Just talking to those partnerships in a little more detail, as Lex referenced at the opening of the presentation. Our China joint ventures have performed very strongly over time, and we have a preeminent local partner in China Life. The market growth prospects continue to be significant by almost any measure we look at, particularly with the Pillar 3 pension focus now emerging. PCCP has a carrying value of around $240 million for us. As I mentioned, the joint venture is the significant part of that, about 75%, and that continues to perform well. The sponsor stake did experience write-downs, as I mentioned, but we wouldn't necessarily expect that to be repeated and go forward years. So to cost specifically. FY23 controllable costs are delivered just ahead of our guidance to the market at $744 million. We think that's a very solid position. The waterfall shows you where most of that cost out emerged, which is as we had anticipated and planned through both advice and master trust. As I've previously said, platform costs increased, but that's a deliberate strategy to continue to invest in that business. Group costs, as just mentioned, were impacted by those stranded costs, something we're very focused on as we look into FY24. What I would note is the combination of our technology and project cost at a group level is in fact reducing, and that's a reflection of a move to more persistent teams and a simplification of our overall project portfolio as we look forward. FTE reductions were around 11% for the year, but they were significantly weighted towards the back half. In fact, as we look forward to FY24, FTE reductions are a significant driver of our momentum already being seen. We reduced FTE by around 11% through the year. Actually, only 1% of those FTE reductions were in the first half, with 10% emerging in the second half, a significant weighting towards Q4. So that momentum sets us up for a very clear focus on delivering our controllable costs of $690 million controllable costs in FY24. We would expect further cost savings in Advice and Master Trust, but as I've mentioned, we'll also be examining costs across the bank. And we are particularly focused on harvesting those cost savings from stranded costs around both technology as well as property, which is already well underway. And as Lex mentioned, with the simplification of the business, we'll continue to examine all of our corporate center structure to best match that to the appropriate cost base going forward. As we've guided, we expect about $60 to $75 million of our business simplification program to emerge as expense in FY24, and that will be repeated in FY25. as we pursue the $120 million cost-out program that we've announced previously. That would see us with an FY25 cost position of between $620 to $640 million, as we've previously guided. Now to capital. The FY23 capital waterfall shows our twin focus of both delivering returns to shareholders by wealth capital return and also simplifying and deleveraging our balance sheet. That's in line with the commitments we've made to the market. MRR did increase slightly as we responded to increased capital standards from APRA. Offsetting that, though, was a reduction in the board buffer following the sale of the anti-capital businesses and the simplification of our business generally. So on an overall basis, our target capital level, in fact, fell just over $100 million. You can see surplus capital at year end was down to $565 million, substantially reduced from our FY22 close. As Lex mentioned, earlier today we announced a two cent per share partially franked final dividend, and that forms part of our critical tranche three capital return of $350 million, delivering on our commitment of the $1.1 billion capital return program announced in 2022. That buyback will continue throughout the year and see our surplus capital trend down towards a level more consistent with the business of our shape and complexity going forwards. At the same time, you can see we've reduced debt by $337 million during the year, and we continue to focus on deleveraging our balance sheet. You'll note our group cash resources are slightly elevated at year end, and that, in fact, reflects our pre-funding already of maturities emerging in the first half of this year. We thought that was the appropriate prudent position to take as we look into the first half of the year. So the guidance for FY24. obviously set against current marketing conditions, which are somewhat uncertain. But for AMP Bank, we're expecting the first half to continue to be very competitive. That leads us to a full year NIM guidance of 110 to 115 basis points. For both platforms and master trust, we would expect margins to be broadly in line with FY23. Controllable costs, as I've just mentioned, we expect to be in the region of 690 million for the year. and we expect around half of our simplification spend, so about $60 to $75 million pre-tax, to emerge through the year. In strategic partnerships, we're anticipating a 10% return through the cycle. I'll now hand back to Lex.

Thank you very much, Blair. So if we come to our focus for the first half, there should be no surprises here. As I mentioned before, we continue to focus on the business line profitability and improving our customer experience. And for us, that means managing the bank loan growth very carefully as we've discussed today to optimise return on capital. In terms of platforms, we want to invest in sales and service, particularly in the technology area. In New Zealand, it's about maintaining performance. And in advice, it's that continued execution towards a sustainable business unit. And in master trust, leverage off the benefits that we've had with the retirement solutions in platforms and start to deploy those in those solutions when we know we've got an ageing population. The second focus, manage our capital and costs appropriately for the size of the organisation we are today. We've committed to ongoing reductions in controllable costs, and we're all absolutely focused on making sure that happens. We want to right-size the corporate for the organisation we are today, not the organisation we were, and we've taken major strides to that and will continue through the first half. We want to continue to make sure we have the right capital and debt mix for going forward. And as Blair and I have both said, we'll look to deleveraging opportunities where they're appropriate, and focus on getting that capital back to the shareholders through this year. All of that needs to be done, but we also want to focus on new revenue sources and making sure we have sustainable businesses going forward and sustainable differentiation. For us, that means focusing on the digital experience, focusing on our digital advice, and looking for distribution channels that remain untapped at this point. So if I look at 2023, there's probably three things I want to lead you with. We are delivering on our commitments. We've delivered on cost. We've delivered on capital. And we're delivering on the simplification of the portfolio. And we'll continue to deliver on those commitments. Our portfolio is now simpler and allows us to focus on growth and continued efficiencies. And we do have a clear strategic focus for this reshaped business. And it's really up to us to just continue to execute on that strategy. So thank you very much for your attention and I'll now pass to the operator for questions.