AMP AGM 2022 Chair address
Today is the second AMP AGM I have attended as Chair, and I am pleased that we are now able to meet in person, albeit with COVID safety precautions front and centre.
I would like to acknowledge your support as a shareholder during the past twelve months. The board is pleased to report significant progress in AMP’s transformation has been made since we last met.
Indeed, AMP has delivered on a large majority of our transformation milestones and a solid underlying business performance. Moreover, with the recent announcements of the separation and sale of the Collimate Capital businesses, AMP’s capital and liquidity position will further improve, and importantly, shareholders will benefit from a substantial capital return.
I will talk to these achievements in more detail later in my speech, however we believe that AMP is now well positioned for its future as a focused, customer-centred and purpose-led bank and retail wealth manager in Australia and New Zealand.
Your board has been listening to you – shareholders and all stakeholders –and is committed to addressing your concerns. We are making significant progress dealing with legacy matters, simplifying the business and setting AMP up for a better future, focusing on growth and delivering better shareholder outcomes.
We will continue to listen, and the board and management and I look forward to being able to talk to the shareholders who have been able to join us at the conclusion of today’s AGM.
We acknowledge the disappointing shareholder experience – in terms of share price and a lack of dividends – reflecting a period of disruption in the financial services industry, and internally within AMP.
The current board, new CEO and management are absolutely committed to substantively improving the performance of AMP.
In order to address legacy issues and unlock value in AMP a portfolio review was undertaken last year. It became very clear that we needed to separate AMP Capital – our global investment and asset management business – from what is now our go-forward AMP Limited business.
At around the same time the board instigated an external review of AMP’s workplace culture to inform a comprehensive Management Action Plan to drive prevention and improved response to misconduct in the workplace.
We also welcomed the highly respected and experienced Alexis George as our new Chief Executive of AMP. It’s great to have her here today at her first AMP AGM. Alexis has already made a very positive impact on the business, and her focus on purpose and values has deeply resonated with our people. She has effectively set AMP on its new strategic path, announced in November last year.
While much has been achieved, there remains much work to do. However, based on the significant achievements to date, and the current momentum, I am confident we have the foundations in place to restore AMP’s position as a trusted, iconic Australian company delivering for its customers and its shareholders.
Today’s agenda
As you are aware we invited shareholders to submit questions in advance of today’s meeting. Among those questions, the areas of most interest were the announced sale of the AMP Capital infrastructure and real estate businesses, the overall performance of AMP, its future focus and the plans for capital return and dividends.
I will cover each topic in detail.
Sale of the AMP Capital real estate and infrastructure businesses
With regards to the recent announcements of the sales of AMP Capital infrastructure and real estate businesses (known as Collimate Capital) I would like to take you through why we decided on the sales rather than a demerger and separate listing.
One of the key findings of last year’s portfolio review was that AMP was made up of two distinct businesses that would be stronger apart. As separate businesses they could better focus on growth opportunities in their respective markets and realise efficiencies - creating more value for shareholders.
As a result, we began the complex process of separation and simplification with plans to demerge Collimate Capital from AMP Limited.
As we progressed this strategy to unlock value we were approached by several parties with compelling offers for parts of Collimate Capital’s business.
As a board, we considered these approaches in line with our obligation to act in the best interests of shareholders. Discussions eventually led to the sale agreements announced to the market last month.
The first transaction agreement achieved was the sale of the Collimate Capital real estate and domestic infrastructure equity business to Dexus – a leading Australian real estate investment manager – for up to $730 million. The second transaction was the agreement to sell the international infrastructure equity business to DigitalBridge – a global infrastructure investment manager – valuing that business at up to $699 million.
The two transactions followed the sale of our infrastructure debt platform in February this year to Ares Management, a compelling value creation opportunity for shareholders that realised $578 million.
The sale of the public markets Global Equities and Fixed Income business (GEFI) for $63 million to Macquarie Asset Management in March was in line with our previously announced strategic decision that this business needed greater scale to prosper.
Combined, the recent sales realise value of $2.1 billion – and a potential of up to $2.5 billion with earn-outs.
When considered against the demerger, the two most recent transactions were judged to deliver greater value and certainty for shareholders and accelerate the realisation of that value, while providing greater stability for Collimate Capital’s clients and employees.
The transactions also significantly strengthen our capital position which enables a sizable return of capital to shareholders, likely to be by way of on-market share buyback and capital return. The board has committed to returning the majority of net cash proceeds to shareholders, after allowing for the paydown of some debt.
We expect the transactions to complete towards the end of this year. Management is currently working through the potential size and optimal structure of the capital return. We plan to share more details later this year, closer to sales completion.
With the demerger no longer proceeding, our AMP teams will focus on finalising the separation of the businesses in preparation for the transfer to their new owners.
I would like to take this opportunity to thank the Collimate Capital board designates – Patrick Snowball and Andy Fay – for their significant contributions over the past six months. Patrick and Andy will step down from their designate positions. We wish them continued success.
Following these sales, we will accelerate our strategy to grow and enhance the competitiveness of our retail banking and wealth management businesses under Alexis George’s strong leadership, with the benefit of a stronger capital and liquidity position.
Explaining 2021 financial performance and dividend
I would now like to explain how we intend to improve AMP’s financial performance so that we can return to paying regular dividends. The board acknowledges that AMP’s financial performance has been challenged and disappointing in recent years. Under-performance was in large part the result of the significant disruption throughout the industry driven by regulatory change based on findings of the Financial Services Royal Commission in 2018.
We have made good progress in the last 18 months to improve performance with AMP delivering a 53 per cent increase in underlying net profit after tax of $356 million.
We are driving a significant reduction in costs, leveraging digital knowhow and data, and creating a performance-driven, purpose-led culture in which our employees are empowered to deliver.
As we address legacy issues and streamline the business we have had to recognise certain impairments. This resulted in the reported statutory loss in 2021 of $252 million. It is important to note that this is not a reflection of the underlying business performance.
Throughout the transformation program we have necessarily taken a conservative approach to capital management, and while it was difficult, we took the prudent decision not to declare a dividend for 2021.
We fully understand that this was disappointing for shareholders. Today we are not in a position to resume the payment of regular dividends, however we do intend to return the majority of the proceeds from the recent Collimate sales to shareholders via share buybacks and a capital return. At the conclusion of these activities we will review our regular dividend policy. We intend to hold a strong capital position and balance sheet as we head into this period of global economic uncertainty.
Share consolidation
Our announcements to sell the Collimate Capital businesses means our plan for a share consolidation will not proceed at this time. The board will consider the merits of undertaking a share consolidation following completion of the sale transactions.
I want to assure shareholders that a share consolidation process alone would not change the value of the total shares held by each shareholder. It is simply a mechanism to reduce the number of shares on issue, improving efficiency and reducing the total number of shares to something more comparable to peers. At present AMP has one of the largest share registers in Australia with 3.26 billion shares on issue.
We will communicate any future plans to undertake a share consolidation, which will be subject to shareholder approval.
Future focus for AMP
A number of shareholders have asked about the strategic focus of AMP, following the exit of our life insurance and asset management businesses.
As a board, our portfolio decisions over recent years have set a clear vision for AMP as a retail-focused wealth management and banking group in the Australian and New Zealand markets. Alexis will talk to the strategy and our future focus shortly.
I would now like to speak to you about the actions that the board, specifically, is taking to transform AMP.
Governance
Making AMP future-fit also requires us to ensure that we meet the highest standards of governance and stewardship, and I would like to acknowledge the board directors for their strong commitment to this end, while creating the opportunity for AMP to redefine and execute its future strategy. The delivery of strategic commitments in the past 12-18 months is clear testament to the dedication of the directors, management team and employees across AMP.
Your board is made up of individuals with deep financial sector experience and capability and palpable commitment to the successful turnaround of the company and sustainable growth for shareholders. This board has been completely refreshed since 2019, so as Chair I commit to ensure that we maintain a strong and stable board for the future.
It is hopefully clear from our Annual Report and comments already made today, your board has a strong mix of experience and skills to set strategy, meet challenges and take all opportunities to build competitive advantage, while always understanding and respecting risks, culture and sustainability. As mentioned earlier, we are well progressed in the recruitment of a new non-executive director to join our Board and we hope to share more details on this shortly.
In today’s meeting, you will have the opportunity to vote on the election of Mike Hirst to the board and the re-election of Andrea Slattery. Both bring strong insight to the board drawing on extensive financial services experience. I will invite them both to say a few words during the items of business later in the meeting.
As I acknowledged earlier, non-executive director John O’Sullivan stepped down in April this year to pursue other external opportunities. John has been a valuable member of the board since June 2018 and I would like to take this opportunity, on behalf of the board, to thank him for his service and significant contribution to AMP.
As a board, we have taken decisive leadership action to further enhance governance and oversight including in key areas of culture, strategy risk and sustainability.
We have been very clear on the importance of setting the tone from the top to establish an inclusive culture to drive performance. As mentioned earlier, the board has been intensively engaged in oversight of AMP’s work to strengthen the corporate culture. We have also met our commitment to share the case study of this extensive work with others in the industry to help the creation of safer, more inclusive, and respectful workplaces.
In terms of strategy, the board continues to actively collaborate with the CEO and management to set strategic direction.
The board has also been focused on its role in risk oversight by ensuring that the risk management framework is consistent with AMP’s strategy and risk appetite and following up on management's implementation of risk management policies and procedures on an ongoing basis.
To AMP, sustainability is our ability to meet the needs of the present without compromising future generations. As custodians of our customers’ money and future, we face complex economic, social, and environmental challenges which bring both risks and opportunities to our customers, people and community.
As can been seen in our annual Sustainability report, there have been marked improvements in the level of transparency of reporting across a range of financial and non-financial measures in line with best practice.
AMP is committed to creating a sustainable and equitable future for our stakeholders – one that has shared value for customers, shareholders, employees, the community, and the environment. The board is passionate and diligent in its oversight of delivering to this commitment.
Remuneration
In designing our current remuneration framework, the board’s remuneration committee consulted with shareholders, investors and proxy advisers. We have listened carefully to concerns raised and have acted on them.
We are confident we now have a remuneration framework and outcomes that deal with the difficult balance between the current shareholder experience and the fundamental need to attract, retain and motivate the right talent to continue to transform and grow our business to benefit shareholders in the longer term.
I will talk to the remuneration report in further detail during the formal items of business later in the meeting.
New purpose and values
Critical to the delivery of our strategy and transformation is the establishment of a clear sense of purpose and shared values for AMP.
Alexis has driven the development of our new purpose statement, launched last month. It was informed by insights from employees and customers over the past six months including surveys, consumer and employee testing, with more than one-third of employees participating in workshops.
Our new purpose - helping people create their tomorrow - is simple, impactful and connected to our rich heritage.
Our purpose statement carries the hallmarks of AMP’s foundation more than 170 years ago and recognises the important role AMP will continue to play for Australians to achieve their goals.
Our purpose drives our commitment to achieve the best outcomes for our customers and employees, which in turn will drive long-term sustainable value for our shareholders.
Conclusion
I will conclude by thanking you for your support and your patience. I recognise 2021 was another challenging year for shareholders, however I am sure you agree that we have accomplished significant milestones to rebuild AMP.
As a board, we are very aware that every decision we make must reflect the long-term interests of our shareholders as we focus on future growth and creating value.
The board and our talented, dedicated management team and people are determined to successfully progress AMP’s transformation with the exceptional leadership of our new CEO
With that, I would like to ask Alexis to address the meeting.
