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About this report
We take our reporting obligations seriously and we provide concise and up-to-date
information about your company at amp.com.au/shares
AMP’s board-approved corporate governance statement, dated 11 February 2021,
is available on our website at amp.com.au/corporategovernance
The Directors’ report, Financial report and Independent auditor’s report are dated
and current as at 11 February 2021.
Unless otherwise specified, all amounts are in Australian dollars.
AMP Limited ABN 49 079 354 519. Authorised for release by the AMP Limited Board.
We have delivered a resilient business
performance in 2020 despite significant
market volatility.
Our business was not immune to the economic impacts of
COVID-19 but despite the external and internal headwinds
we faced, we made material progress in the execution of
our transformation strategy.
Our people were agile as they adapted to a new way of
working and maintained their focus on serving our clients as
we navigated through a challenging operating environment.
Contents
Business review
Directors’ report
Financial report
22 Directors’ report
32 Remuneration report
2 About AMP
4
2020 highlights
6 Chair’s message
8 CEO’s message
10 Strategy
12 AMP performance
16 Sustainability
18 Our board and management
20 Financial summary
66
64 Consolidated income statement
Consolidated statement
65
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
67
68
69 Notes to the financial statements
132 Directors’ declaration
133 Independent Auditor’s Report
139 Securityholder information
143 Glossary
AMP 2020 annual report
1
Introduction About AMP
AMP has evolved over the course
of its 172-year history to meet
the changing needs of clients.
Principal activities
Founded in 1849, AMP is Australia and New Zealand’s leading wealth management company offering clients financial advice
and superannuation, retirement income, banking, and investment products across our portfolio of businesses. The company also
provides corporate superannuation products and services for workplace super and self-managed superannuation funds (SMSFs).
AMP has a long history of helping clients manage their finances and realise their financial ambitions. Our commitment to
this is articulated in our purpose statement – Realise human ambitions. It explains the kind of company AMP wants to be and
the positive impact we seek to make in the world. We do this by helping our clients manage risks and reduce uncertainties of
financial outcomes to reach their goals.
AMP is headquartered in Sydney, Australia. Together with its subsidiaries, the company has over 5,900 employees globally,
predominantly based in Australia and New Zealand.
In 2020, the organisation was streamlined to three business units – AMP Australia (wealth management and bank), AMP Capital,
and New Zealand wealth management.
AMP Bank offers residential mortgages,
deposits, and transaction banking.
In 2020, AMP made a significant
investment in the enhancement and
modernisation of the bank’s core
platform system to improve client
experience, strengthen risk controls and
support scaled growth in the future.
AMP Australia
AMP Australia aims to help
Australians manage and grow their
wealth throughout their lives.
In November 2019, AMP brought
together its Australian wealth
management and AMP Bank divisions
under one leadership team to drive a
more integrated organisation with the
aim of delivering significant value to
our clients, AMP, and our shareholders.
Australian wealth management
provides financial advice services
(through aligned and owned advice
businesses), platform administration
(including SMSF), unit linked
superannuation, retirement income
and managed investment products.
The reinvention of wealth
management, to better deliver
whole-of-wealth services to clients is
a key priority in AMP’s transformation
strategy. The simplification of our
wealth management platforms
combined with a focus on compliant,
professional, and productive advice
will deliver better outcomes for our
clients and growth for the company.
Through our employed and aligned
advice network, we support over
1,500 advisers in Australia to provide
quality financial advice to clients.
2
AMP 2020 annual report
Sale of wealth protection and mature businesses
On 1 July 2020, AMP announced the completion of the sale of the Australian and New Zealand wealth protection and mature
businesses to Resolution Life Australia Pty Ltd (Resolution Life).
The gross sale proceeds were $3.0 billion comprising:
–
–
$2.5 billion cash; and
$500 million equity interest in Resolution Life Australasia, a new Australian-domiciled, Resolution Life-controlled holding
company that is now the owner of the Australian and New Zealand wealth protection and mature businesses.
Resolution Life was on risk for all experience and lapse losses from 1 July 2018 until 30 June 2020 and was entitled to all Australian
and New Zealand wealth protection and mature businesses’ net earnings during that period. The sale completed on 30 June 2020.
AMP continue to report the results of Australian and New Zealand wealth protection and mature businesses through to 30 June 2020.
AMP Capital
New Zealand
wealth management
Strategic partnerships
AMP Capital is a diversified investment
manager across major asset classes
including infrastructure debt,
infrastructure equity, real estate,
equities, fixed interest, diversified,
multi-manager and multi-asset funds.
AMP Capital’s aspiration is to build the
best global private markets platform in
the world, underpinned by real assets.
Simultaneously, AMP Capital’s public
markets business will be refocused to
support its key strategic partners.
On 1 September 2020, AMP completed
the repurchase of Mitsubishi UFJ Trust
and Banking Corporation’s (MUTB) 15%
shareholding in AMP Capital, resulting
in 100% ownership of AMP Capital
and the conclusion of the existing
business and capital alliances between
MUTB, AMP Limited and AMP Capital.
AMP Capital and MUTB continue to
cooperate strategically, building on
their mutually beneficial business
relationship in Japan with AMP Capital
continuing to deliver its investment
products through MUTB’s network.
The New Zealand wealth management
business (NZWM) encompasses the
wealth management, financial advice,
and distribution business in New Zealand.
It provides clients with a variety
of wealth management solutions
including KiwiSaver, corporate
superannuation, retail investments,
a wrap investment management
platform and general insurance.
A decision to retain and grow the
business was announced in May
2020. The retention strategy included
investment in the automation of
client-facing technology and customer
processes and a simplified distribution
model with advisers now either
employed or independently contracted.
Localisation of operations including the
repatriation of all offshore processing
to eliminate risk was also completed as
part of the 2020 transformation strategy.
AMP holds several strategic partnerships
including:
–
–
–
19.62% equity interest in Resolution
Life NOHC Pty Ltd (Resolution Life
Australasia) subsequently reduced
to 19.13% on 22 January 2021
19.99% equity interest in China
Life Pension Company (CLPC)
14.97% equity interest in China Life
AMP Asset Management Company
Ltd, a funds management company
which offers retail and institutional
investors in China access to leading
investment solutions
–
24.9% equity interest in US real estate
investment manager, PCCP LLC.
AMP 2020 annual report
3
About AMP 2020 highlights
We have delivered a resilient business
performance in 2020 despite significant
market volatility and economic impacts.
The pandemic has fundamentally disrupted the way our clients,
people, and community work, live and think about their finances.
It has been a year of change for AMP, including the completion of
the sale of our life insurance business, changes in our executive and
board leadership and the commencement of a review of our portfolio.
$295m
full year 2020 net profit after tax
(NPAT) (underlying) reflected the
impacts of COVID-19 on financial
markets, the economy, and increased
operating costs to service clients.
90%
of 2020 market commitments
delivered; three-year transformation
strategy on track; including sale of
AMP Life, upgrades to AMP Bank’s core
technology platform and significant
advancement of advice reshape.
$121m
of cost-out delivered in full year 2020;
accelerated cost reduction initiatives
in second half 2020 after COVID-19
related investment in first half 2020.
$344m
from AMP Life sale proceeds paid to
shareholders via a special dividend of
10 cents per share in October 2020.
$1.8b
paid in early release of super
to clients in need.
$2m
in grants to support COVID-19 impacted
charities through AMP Foundation’s
emergency grants program.
4
AMP 2020 annual report
Our community: Mental Health Legal Centre
In 2020, charities faced momentous challenges as they tried to meet increased
demand while staying afloat.
The Melbourne-based Mental Health Legal Centre (MHLC), which works
with vulnerable community members, was one of 23 non-profit organisations
awarded an AMP Foundation COVID-19 Community Boost grant. The grants
were designed to help non-profits meet increased demand for their support,
and included providing funding to implement new technologies and in some
instances fund salaries through a challenging period for fundraising.
MHLC used its $130,000 AMP Foundation grant to fund a part-time financial
counsellor, a financial counsellor intern and a part-time social worker to help
clients with their financial issues as well as provide them access to tele-health
and other community services.
MHLC General Manager Charlotte Jones said the funding had helped the non-profit
build capacity during the pandemic to support the rise in new clients experiencing
homelessness, dealing with evictions, hardship, and relationship breakdowns.
“These people have been struggling and COVID made things harder… it’s been
phenomenal what we have been able to do for them with the AMP Foundation’s
grant. Philanthropic support enables us to take apart people’s complex problems
and then pass them around to our team of specialists to help solve each issue.”
Financial highlights
Operational highlights
Sustainability highlights
–
–
$295 million full year 2020 net profit
after tax (NPAT) (underlying) reflected
the impacts of COVID-19 on financial
markets, the economy and increased
operating costs to service clients
FY 2020 earnings impacted by decline
in assets under management (AUM)
in Australian wealth management
(AWM) (down 8%) and AMP Capital
(down 7%)
–
AMP Bank maintained its position
with $20.2 billion residential mortgage
book in a competitive lending market
–
NZWM AUM increased $128 million
to $12.4 billion in 2020
$36m
$110m
–
–
–
–
$121 million of gross cost savings
delivered in full year 2020;
accelerated cost reduction initiatives
in second half 2020 after COVID-19
related investment in first half 2020
Client remediation program 80%
complete at 31 December 2020, costs
for program tracking to expectations
Strong capital position, $521 million
capital surplus above requirements
$344 million from AMP Life sale
proceeds paid to shareholders via
a special dividend of 10 cents per
share in October 2020
$521m
capital surplus above requirements.
$139m
$119m
2020 net profit after tax (underlying)
Australian wealth management
AMP Bank
AMP Capital
New Zealand wealth management
Clients
–
Paid $1.8 billion in early release
of super to clients in need.
–
–
Launched partnership with
Good Shepherd to provide free
confidential financial counselling to
AMP clients experiencing hardship.
Supported AMP Capital tenants
with flexibility of rent payment
terms and trading hours.
People
–
Rapidly scaled remote working
technologies enabling 95% of
employees to work flexibly.
–
–
Coordinated and delivered key projects
including one of the largest successor
fund transfers (SFT) in Australian
history while working remotely.
Initiated inclusive leadership
training for senior leaders – all
employee rollout scheduled for 2021.
Community
–
$2 million in support for
COVID-19 impacted charities
through emergency grants
program from AMP Foundation.
–
–
Launched Innovate Reconciliation
Action Plan (RAP), building on
strong progress since 2019 launch
of AMP Capital’s Reflect RAP.
Converted several AMP Capital
infrastructure assets to COVID-19
crisis centres and community
assessment clinics.
AMP 2020 annual report
5
2020 highlights Chair’s message
2020 was an extraordinary year
for the world, and within AMP.
Our full year performance reflects the disruption and
economic impacts of COVID-19 and the significant transition
that is occurring within our business environment as we progress
into the second year of our three-year transformation strategy.
I am pleased to present the AMP Limited Annual report
for 2020.
Despite the challenges to our operating environment
brought on by external and internal disruption, we remained
agile. Providing help and support to our clients during the
pandemic has been our priority, as volatile markets impacted
their investments and financial plans. While strong progress
has been made in delivering to our ambitious transformation
agenda and historical remediation issues, we acknowledge
that AMP’s organisational instability has adversely impacted
shareholder experience. We have earnestly listened to your
feedback and the board and management commit to take
all necessary actions to restore confidence and trust in
our company.
There are a number of key matters I would like to address
in this message including an update on our capital
management strategy, the portfolio review, business
performance, our work on corporate culture and our
standing on the critical issue of sustainability.
Dividend and capital
As announced at our half year results, a 10 cents per
share special dividend was paid in October, following the
completion of the AMP Life sale. As also indicated, the board
has resolved not to declare a final full year 2020 dividend.
However, the board understands the importance of dividends
to our shareholders and we are committed to restarting
the group’s capital management initiatives including the
payment of dividends, share buyback and other initiatives
in 2021. This is subject to market conditions and business
performance. We maintain a strong financial position and
remain prudent with our capital with a surplus above total
requirements of $521 million.
Portfolio review
Our company experienced significant change in 2020.
The sale of AMP Life, our wealth protection and mature
businesses in Australia and New Zealand, to Resolution
Life Australia Pty Limited marked a historic moment
for our company as AMP ceased to be a life insurer
after 170 years.
Following the completion of the sale, the board initiated a
portfolio review to assess and respond to increased interest
in the group’s assets and business. This included engagement
with Ares Management Corporation (Ares), a US-based
investment manager, on a non-binding, indicative and
conditional proposal for a whole of company acquisition.
Although discussions on a whole of company acquisition have
now ceased, we have entered into a non-binding Heads of
Agreement and a 30-day period of exclusivity to pursue the
formation of a joint venture for AMP Capital’s private markets
businesses of infrastructure equity and infrastructure debt,
real estate and other minority investments (Private Markets)
on 26 February 2021. There is no certainty that a transaction
will proceed, or the terms on which it would proceed, but
we will provide an update (to the market) on the outcome
as soon as possible.
Our review has confirmed that AMP’s transformation
strategy for the AMP Australia (wealth management and
AMP Bank) and New Zealand wealth management businesses
is the strategy to drive value for shareholders. The AMP board
has therefore concluded the review of these assets.
2020 business performance
Business performance in 2020 remained resilient despite the
market volatility and COVID-19 impacts on clients and asset
performance. Our underlying net profit after tax (NPAT) was
down 33% to $295 million. This was a result of volatile financial
markets in our wealth management businesses in Australia
and New Zealand, and our investment management business,
AMP Capital. The COVID-19 related weakness in the Australian
economy also led us to take a provision for potential mortgage
defaults in AMP Bank, although reassuringly credit quality
has remained strong.
Despite the conditions, our teams made strong progress
on transforming the business. We have simplified our
superannuation business and reduced fees for clients,
continued to reshape our financial advice business and
delivered a major technology platform upgrade in AMP
Bank. In AMP Capital, we continued to invest in and grow
our private markets businesses in global infrastructure
and real estate.
6
AMP 2020 annual report
In recognition of the potential risk of losing key executives
during the portfolio review process, the board has approved
some limited retention payments to be paid later in 2021.
Looking forward, we have made a number of changes to
our remuneration framework from 2021 to ensure focus
on driving sustainable, long-term results. All changes are
explained in further detail in our 2020 remuneration report.
Sustainability
The board prioritises addressing and advancing shareholder
interests by focusing on long-term sustainable returns while
balancing near-term objectives. Importantly, community
interests and other non-financial considerations are also
factored into board decision-making where they impact
shareholder value. We recognise that economic, social
and environmental issues can have a material impact on
business performance and society. AMP’s non-financial
disclosures have evolved significantly, and our 2020
Sustainability report represents the positive steps taken
by AMP towards best practice.
Board changes
The composition of our board changed significantly
throughout 2020. Former Chairman David Murray AO
and former non-executive director John Fraser resigned in
August and I would like to take this opportunity, on behalf
of the board, to thank them both for their significant
contributions to AMP.
Earlier in 2020 Mike Wilkins AO, Andrew Harmos, Peter
Varghese AO and Trevor Matthews retired from the board.
We sincerely thank them all for their dedicated service and
contribution. We welcomed three new additions to the board
in 2020 with Rahoul Chowdry, Michael Sammells and Kate
McKenzie. The board composition now meets our 40:40:20
target for gender diversity.
In 2021, ongoing stability, retention of corporate knowledge
and ensuring that the board has the appropriate skill set
to provide oversight of the business and its continuing
transformation are key areas of focus.
Looking forward
In 2020, AMP delivered against major milestones of its
transformation strategy to become a more client-led, simple,
and growth-oriented business in particularly challenging
circumstances. In 2021 we intend to build on this successful
execution momentum while always acting in shareholders’
best interests and with absolute alignment to AMP’s values
and purpose.
I am personally very encouraged by the number of people
who expressly want to see AMP succeed in its ambitious
transformation and am also buoyed by the resilience and
passion of our people.
On behalf of our board, I sincerely thank you for your
ongoing support.
Debra Hazelton
Chair
AMP 2020 annual report
7
Culture
Our industry is competitive and continuously changing,
and achieving our goals requires a high-performance culture.
The board and I are aware of the disappointment felt after
questions about our company’s culture were raised last year.
Improving corporate culture, including risk culture, is a core
priority for AMP and is critical to the success of our three-year
transformation program.
Following my appointment as Chair in September 2020, we
committed to accelerating existing culture change initiatives
and to introduce further initiatives to build a culture that is
more inclusive, accountable and performance driven. The board
was particularly involved in the establishment of the Board
Culture Working Group, of which I was Chair, and initiated
a review of workplace conduct. A major task of the Culture
Working Group was to set down the board’s shared beliefs in
terms of culture, governance and strategy. This work is now
complete and provides the board and management with a
clear framework for expectations and system design.
The comprehensive review of workplace conduct has also
been completed and while it pleasingly found that AMP does
not have a systemic issue with regard to sexual harassment
or misconduct in our workplace, it has identified some key
improvement areas to meet global best practice standards.
The board stands firm with our CEO, Francesco De Ferrari,
in his continued prioritisation of this important work.
Remuneration
Following feedback on the 2019 Remuneration report,
the board has taken the time to complete a formal review
of our remuneration framework.
We are committed to setting the remuneration targets of our
executives at levels that align with the company’s performance
and meet shareholder expectations. Our remuneration approach
must also balance the need to retain talent and reward
performance that delivers strong outcomes for clients.
AMP’s performance in 2020 is reflected in the variable
remuneration outcomes for the CEO and key management
personnel (KMP). The decision to not pay any short-term
incentives to the CEO and current KMP reflects the board’s
view to align remuneration with shareholder outcomes.
Chair’s message CEO’s message
Throughout our history, AMP has been
a source of support for our clients and
the community in times of crisis.
Amid a challenging year for many of our clients, I’m pleased
that AMP continued to deliver on this commitment.
Over the course of 2020, we provided early access to
superannuation, paying $1.8 billion to our super fund
members in need; we paused home loan repayments
for 11% of our mortgage clients; we provided rent relief
and other assistance to our real estate tenants; and
we re-purposed some of our infrastructure assets as
COVID-19 crisis centres to support communities.
We stepped up our support for clients who contacted us
during the initial peak of the pandemic early in the year.
Most pleasingly, we delivered this support amid a period
of intense change in our business.
In late 2019 we set out a three-year strategy to transform
AMP, to create a simpler and client-led business which
would deliver growth to shareholders again. In our first
year of that strategy in 2020, we achieved 90% of the
objectives we set. We completed the sale of AMP Life
and took the decision to retain our New Zealand wealth
management business to develop and grow it. We
accelerated the simplification of our superannuation
business and pushed forward on a challenging reshape
of our financial advice business. We have also set our
bank up for future growth through the successful
renovation of our core banking platform, and we
continued to improve our wealth business and see
growth in our North platform.
We pivoted our strategy for AMP Capital, focusing
on the growth of our private markets businesses of
infrastructure equity, infrastructure debt and real estate,
while working on plans to increase the scale of our
public markets business. As we concluded our work on
the portfolio review of our assets this year, the board
concluded that a joint venture with Ares Management
Corporation (Ares) and AMP Capital’s Private Markets
business would accelerate growth and drive best returns
for shareholders and clients. We announced on 26
February 2021 that AMP has entered into a non-binding
heads of agreement with Ares for a 60:40 joint venture of
our private markets businesses. If agreed, this proposed
partnership would enable our private markets business
to leverage Ares’ powerful distribution and investment
expertise, enabling further growth of this business.
2020 financial performance
Our performance in 2020 was reflective of a challenging
operating environment and the wide-ranging impacts
of COVID-19 on our business.
Our net profit after tax (NPAT) (underlying) was
$295 million due largely to the unforeseen weakening
in economic conditions and impacts of the pandemic on
investment markets. The net profit after tax (statutory)
was $177 million (2019: loss $2.5 billion). This result
was improved by the gain on sale of AMP Life and a
significant reduction in impairments compared to 2019.
AMP Capital experienced several internal changes
and was not immune to the impacts of COVID-19.
Despite this, the business maintained its focus and
saw some strong returns on infrastructure asset
sales and continued support for fundraises.
AMP Bank delivered resilient performance in an
increasingly competitive market, growing deposits
by 12% and maintaining a steady, disciplined approach
on loan credit quality. Pleasingly, the bank had over
80% of clients on mortgage repayment pauses
returning to repayments by 31 December 2020.
8
AMP 2020 annual report
2021 presents an opportunity for
us to take our company forward
with the same commitment, hard
work and resilience shown by our
people in 2020.
Australian wealth management continued to consolidate
and strengthen practices to improve the productivity
and quality of advice. The North platform continued
to perform favourably and the simplification of super
saw a reduction in the number of MasterTrust products
from 70 to 11.
Our New Zealand wealth management business
showed continued stability in 2020, growing KiwiSaver
cashflows and increasing assets under management.
As we committed, our client remediation program
remained a priority. The program is now more than
80% complete and we remain on track to fully
complete it by mid-2021.
Despite additional investment in supporting clients
through the pandemic, we delivered $121 million in
gross cost savings in 2020. Although we missed our
2020 target of $140 million, we are committed to our
$300 million in cumulative gross cost savings by the
end of 2022. While a majority of changes as part of
the cost-out program were announced in 2020, we
will continue to drive towards building a simpler,
more efficient business.
2021 outlook
In the coming year, our focus will be firmly placed
on continuing to deliver our transformation program
in Australian wealth management, establishing our
growth strategy in New Zealand wealth management,
and reaching a conclusion on portfolio review and
the potential joint venture for AMP Capital’s private
markets business.
AMP is becoming a leaner and simpler business, and
we will continue to focus on reducing our cost base to
drive returns to shareholders. We will also continue to
drive forward with our initiatives to embed a culture
that is inclusive, accountable and performance driven.
While we face ongoing headwinds in wealth
management in Australia, we are responding, and
we are focusing on driving earnings growth in both
the bank and the platforms business.
While 2020 has been a turbulent year, the COVID-19
pandemic has shown that we are adaptable and resilient.
Despite the challenges, the collaboration between
governments, businesses and the wider community
to respond to the pandemic illustrates what can be
achieved by working together. I take great pride in the
amazing work of our people and am encouraged by
the support shown across our teams to lift and support
each other.
I thank our people for their support and hard work
this year and the board for its stewardship. Finally,
while COVID-19 will continue to shape our business
in different ways throughout 2021, I look forward to
working with our people to grow our iconic business
and remain optimistic on the outlook for AMP in 2021.
Francesco De Ferrari
Chief Executive Officer
AMP 2020 annual report
9
CEO’s message Strategy
In 2019, AMP announced a three-year
transformation strategy to become a simpler,
client-led, growth-oriented business.
At that time, the disruption and economic impacts of the
COVID-19 pandemic could not have been predicted.
Despite the significant challenges and disruptions faced in
2020, we delivered on a significant majority of our market
commitments. The COVID-19 pandemic enabled our business
to demonstrate its resilience as we adapted to a new way of
working to support our clients, people, and the community.
Our people remained agile through the uncertainty and
prioritised serving our clients, but a disciplined approach
and focus on the delivery of key objectives of the strategy
was also maintained.
The sale of AMP Life, our Australian and New Zealand
wealth protection, and mature businesses, was completed
on 30 June 2020 and represented a significant milestone in
the simplification of our business, reducing our risk liabilities
and allowing a fundamental reset of our capital management
initiatives. As part of the transaction, our people delivered
one of the largest successor fund transfers in Australian
history with teams working remotely during the COVID-19
lockdowns. AMP now retains a residual 19.13% equity
interest in Resolution Life Australasia.
A decision to retain and grow the New Zealand wealth
management (NZWM) business was announced in May
2020. To date, substantial progress has been made to further
simplify the business, including the acceleration of digital
enhancements for clients, the automation of client-facing
technology including the repatriation of all offshore processing
and a simplified distribution model with ~66% of AUM
managed via AMP and AdviceFirst employed advisers.
In AMP Australia, we made significant progress with 75% of the
advice reshape program complete, super simplification through
the reduction in products and a core technology renovation
and improved digital services for our AMP Bank clients.
In AMP Capital, we shifted our focus towards private markets
and continued to deploy capital and make divestments. We
refocused our public markets businesses to better support
clients with a view to transferring our multi-asset group to
AMP Australia in the near future.
In 2021, our efforts will shift to building on these foundations
as we look to capitalise on the execution momentum achieved
in 2020. Our focus will turn to delivering on 10 priorities in
four key areas:
–
– Grow the New Zealand business
–
– Create a simpler, leaner business.
Expand asset management footprint in private markets
Reinvent wealth management in Australia
Reinventing AMP
Refocusing our portfolio to higher growth, higher return businesses
Australian
wealth management
Simpler, client-led
wealth manager with
tailored offering to
meet the needs
of Australians
AMP Bank
Technology enabled
challenger bank that
integrates with clients’
wealth management
needs
AMP Capital
Leading global asset
manager, expanding
private markets
through differentiated
active management
capabilities
New Zealand
wealth management
Leading wealth manager
and general insurance
provider
Partnerships
Strategic partnerships
giving access to
diversified shareholder
returns and strategic
growth opportunities
Enablers of long-term shareholder value
Refining the business portfolio by shifting capital allocation to higher growth, higher return assets
Disentangling the value chain to enable operational efficiency and improved cost management
Strengthening our culture to drive accountability, inclusion and high performance
10
AMP 2020 annual report
2021 Strategic priorities
Reinvent wealth
management in
Australia
1. Complete reshape of advice
In 2021, we will complete the advice reshape
program to establish a commercially sustainable
and competitive business model. We will
deliver technology solutions to enable practice
efficiencies, increase advice accessibility by
uplifting our phone-based advice capabilities
and continue our support for our adviser network
as we complete client migration to Annual Advice
and Service Agreements.
2. Complete next phase of
superannuation simplification
Building on the execution momentum of 2020,
our next phase of building a best-in-class
superannuation business will reposition the
business for growth. We will refine our product
offering, with a primary focus on stabilising
outflows by improving investment returns
and reducing operating costs while retaining
a competitive market position.
3. Grow platforms business
We remain steadfast in our commitment to equip
advisers with the necessary tools and information to
better serve our clients. To deliver on our growth targets,
we will leverage existing relationships within the adviser
community to grow our external financial adviser (EFA)
cashflows and position North as the platform that best
enables adviser efficiency. We will continue our work on
the enhancement of North’s functionality and optimise
our retirement offering to ensure North is fit-for-purpose
and equipped to capitalise on industry trends.
4. Recover growth in AMP Bank
To support the delivery of this priority, we will further
upgrade our technology offering through MyAMP
enhancements to drive an increase in penetration, while
continuing to refine our operations to sustain a better
than peer cost-to-income ratio. Digital and direct sales
capabilities will be enhanced while we simultaneously
strengthen our broker channel engagement and expand
our whole-of-wealth offer to our existing workplace
super members.
Grow the New
Zealand business
5. Complete investment renovation and
reposition for growth; leverage AdviceFirst
leadership position through practice acquisitions
In February we completed our first advice practice
acquisition for 2021 and expect to extend our leadership
position with further acquisitions in the year.
With ambitions to further build out this key part of the
business, we expect to grow AUM directly managed
through AMP and AdviceFirst employed advisers. We will
continue to drive the localisation of the business, with
an ongoing commitment to our digital transformation
to deliver a leading digital experience for our clients.
Expand asset
management
footprint in
private markets
Create a simpler,
leaner business
6. Scale flagship infrastructure equity and
infrastructure debt fund series
Our priority in 2021 is the continued deployment
of over $4 billion of uncalled committed capital
available to invest in quality infrastructure and
real estate assets on behalf of our clients around
the world. As we continue to fundraise in the
highly successful Global Infrastructure Fund (GIF)
and Infrastructure Debt Fund (IDF) series, we
will also look at opportunities to enhance and
expand our global footprint. A key focus will be to
explore opportunities in adjacent sectors where
we are able to capitalise on market dislocation
and emerging macroeconomic trends.
8. Deliver $250 million in cumulative
gross cost savings
We remain committed to delivering $300 million
cumulative gross cost savings in our original
FY 2022 timeframe. As at 31 December 2020,
$121 million of gross cost savings have been
delivered, with a further $130 million of
additional gross cost-out targeted in FY 2021.
7. Successfully manage real estate through market
disruption
In 2021, we will transfer our multi-asset group (MAG) to
AMP Australia to create an end-to-end superannuation
and investment-platform business. For our listed equities
and fixed-income business, we will explore partnership
opportunities to scale the business and accelerate its
growth to maximise shareholder value.
9. Continue to embed an inclusive, accountable,
and high-performance culture
Recognising the importance of our people in transforming
our business, our commitments will be underpinned by
ongoing initiatives to embed an inclusive, accountable,
and high-performing culture within AMP.
10. Complete buyback once portfolio review
has concluded, repay corporate debt
The board is committed to restarting AMP’s capital
management initiatives including the share buyback
and payment of dividends in 2021.
AMP 2020 annual report
11
Strategy
AMP performance
AMP Australia
Australian wealth management
$110m
Net profit after tax
Full year 2020 business unit highlights
–
A decrease in net profit after tax to $110 million (FY 2019: $195 million)
reflects the impact to revenue from weaker investment markets due
to COVID-19.
–
–
Early release of super payments to clients and the exit of previously
announced corporate super clients accounted for $3.6 billion of the
net cash outflow of $8.3 billion. Pension payments to clients in
retirement of $2.1 billion in 2020 are also reported as cash outflows.
The flagship North platform continued to perform favourably with
cashflows of $3.7 billion.
Performance highlights
–
The Super business began its separation and simplification in the
first half of 2020, successfully completing a $60 billion Successor Fund
Transfer – one of the largest in Australian history – as part of the sale
of AMP Life. Simplification supported reduction from approximately
70 super products to 11, reducing complexity for clients. The number
of Trustees was also reduced from two to one.
–
Strong progress on reshaping the adviser network. The program is
well advanced with a 37% reduction in practice numbers to 595 and
a 26% reduction in adviser numbers to 1,573 as we move towards
a more professional, compliant and productive network.
12
AMP 2020 annual report
Our people: AMP Australia
Workplace managers
Jessica Arambulo (NSW) and Stephen
Daly (Queensland) are two members
of AMP’s team of Workplace managers.
Their teams are dedicated to helping our
members understand their super and
what steps they need to take to reach
their retirement goals.
“I am passionate about helping people
of all ages better understand their
options, opportunities and what’s
possible so they can make informed
financial decisions today, while setting
themselves up for the life they want
later,” says Stephen. “Every person I talk
to goes away with a few things to look
into. The challenge we face is getting
people to engage with what could be
their largest investment they have –
a lot of people don’t know where
their money is invested, if they have
insurance or not, the importance of a
beneficiary nomination or tax effective
contribution strategies.”
Jessica explains, “Through the volatility
of COVID-19, our team were able to
remind members that super is a long-
term investment and that markets
generally recover. Every day I see the
positive difference we make in the life
of our members. The most common
feedback I get is that they get peace of
mind from feeling more in control of
their finances and understanding the
ins-and-outs of their super investment.”
“I’ll never really know the full impact on
a client’s situation after our conversation
in terms of exact quantum but I do take
enormous pride in educating Australians
about their super and feel very privileged
that I have helped client set up for
success down the track.”
AMP Australia
AMP Bank
$119m
Net profit after tax
Full year 2020 business unit highlights
–
In 2020, AMP Bank made a provision for credit losses in response to
economic impacts of COVID-19 on mortgage holders. The provision is
reflected in net profit after tax of $119 million (FY 2019: $141 million).
–
–
–
Mortgage book resilient at $20.2 billion amid increased competition due
to easing of regulatory restrictions on lending and lower interest rates.
Good credit quality maintained with 90+ day arrears 0.62%
improving on FY 2019 (0.66%).
Net interest margin was 1.59% in FY 2020, 10 bps lower than FY 2019
driven by higher funding and deposit costs.
Performance highlights
–
Strong deposit growth with an increase of 12% to $16.1 billion
(FY 2019: $14.4 billion) strengthening funding base.
–
The renovation of AMP Bank’s core technology was completed on time
and under budget. Digital enhancements and automation capabilities
including the launch of Apple Pay and upgrades to automated credit
decisioning and straight-through processing on loans were also delivered
increasing efficiencies and growth opportunities.
Our clients: Good
Shepherd partnership
At AMP, we are committed to
supporting our clients.
The uncertainty created by the
pandemic, from both a health and
economic perspective made 2020
a particularly tough year for many.
Through the AMP Foundation,
we launched a partnership with
Good Shepherd, a non-profit,
financial inclusion leader, to
provide specialised assistance
through these challenging times.
AMP and Good Shepherd have
established a specialist team of
financial wellbeing experts to help
AMP clients in financial hardship,
empowering them with a greater
understanding of the options
available to them.
This initiative brings together our
expertise as a company, our passion
to support and care for our clients
and our purpose of helping realise
human ambitions.
AMP 2020 annual report
13
AMP performance AMP performance
AMP Capital
$139m
Net profit after tax
Full year 2020 business unit highlights
–
AMP Capital aims to be a trusted partner of its clients delivering
consistent investment performance. Although the market volatility
experienced in 2020 made this more challenging, as at 31 December
66% of AUM outperformed market benchmarks over a three-year
time period.
AMP Capital’s FY 2020 net profit after tax decreased to $139 million1
(FY 2019: $204 million) with transaction and performance fees down
due to the impact of COVID-19 on investment markets.
AUM-based earnings proved relatively resilient, in light of the
challenging economic environment and equity market volatility.
Average AUM decreased to $193.8 billion reflective of challenging
market conditions.
International institutional client base grew by 42 to 400 in FY 2020,
AUM up 8% to $22.0 billion.
–
–
–
–
Performance highlights
–
Continued momentum in infrastructure debt and infrastructure
equity series of funds with $3.5 billion of capital deployed in 2020.
A strong commitment to real estate capabilities with $4.1 billion2
of uncalled committed capital available to be deployed.
–
–
1
2
Delivered a robust investment performance in real estate with
72% of AUM outperforming benchmarks over a three-year period.
Exceptional performance throughout a period of extreme volatility
in global equities and fixed income with 94% of AUM outperforming
benchmark over three years.
The AMP Capital business unit results and any other impacted line items are shown net
of minority interests. AMP regained 100% ownership of AMP Capital and MUTB’s minority
interest consequently ceased on 1 September 2020.
$1.0 billion infrastructure debt; $1.8 billion infrastructure equity; $1.3 billion real estate.
14
AMP 2020 annual report
Our community:
AMP Capital assets
repurposed during COVID-19
We provided support through the
pandemic by repurposing some
of our AMP Capital real estate and
infrastructure assets to support
community and health initiatives.
In Australia, Perth’s 60,000-seat Optus
Stadium was used as a crisis centre
and hub for Western Australia Police’s
COVID-19 response effort. In Ireland, The
Convention Centre Dublin was selected
as a temporary venue for parliamentary
sittings of the Irish Government as the
venue could safely seat all 160 members
while still allowing for appropriate
social distancing.
One of the four key sectors of AMP
Capital’s infrastructure equity
strategy is infrastructure health.
Valley Healthcare, our primary care
centre business in Ireland, committed
€1.5 million to build temporary
community assessment clinics in the
carparks of its primary care centres.
In Australia, non-clinical spaces in
Sydney’s Royal North Shore Hospital
were quickly converted into clinical
spaces, including a new 40-bed ward.
New Zealand
wealth management
$36m
Net profit after tax
Full year 2020 business unit highlights
–
Net profit after tax fell 18% to $36 million (FY 2019: $44 million)
impacted by the closure of legacy products as part of the business’
transformation strategy and COVID-19 related lockdown impacting
the business’ ability to generate advice-related income.
–
AUM of $12.4 billion increased $1.0 billion from FY 2019. Increase
was predominantly driven by a combination of investment market
gains ($526 million) offset by negative foreign exchange movements
($341 million) and net cash outflows of $57 million which improved
from FY 2019 net cash outflows of $433 million largely due to
improved KiwiSaver performance.
–
Accelerated the delivery of enhanced digital capabilities with a focus
on improving client outcomes and experience.
Performance highlights
–
Maintained position as a leading non-bank provider of KiwiSaver1,
with KiwiSaver generated net cash inflows of $229 million.
–
Remains largest provider of corporate super with ~45% market
share and $3.2 billion in AUM.2
Our clients: Change in
investment strategy at New
Zealand wealth management
In October 2020, New Zealand wealth
management (NZWM) announced
a change in the way it manages
investments for clients, including
those in KiwiSaver – New Zealand’s
retirement savings scheme.
The business will move to a
predominantly index-based
investment strategy in the first half
of 2021 to provide a simpler and
more cost-effective investment
structure, with the aim of improving
performance and driving better
outcomes for clients.
Through the revised investment
approach, NZWM is also aiming
to increase its focus on helping to
reduce the impacts of climate change.
The move to a predominantly passive
investment approach is in response to
a change in expectations among our
NZWM clients, as well as regulators
and governments, who are looking
for simple and value-adding
solutions for KiwiSaver plans.
1
2
Measured by AUM. Source: FundSource Limited September 2020.
Based on September 2020 market share data.
AMP 2020 annual report
15
AMP performance Sustainability
To AMP, sustainability is our
ability to meet the needs of the
present without compromising
future generations.
Operational
impacts and
supply chain
N
U
M
M
O
C
Climate
change
Community
investment
Human capital
management
Y
T
I
P
E
O
P
L
E
Ethical
conduct and
governance
AMP’S PURPOSE
Realise human ambitions
AMP’S SUSTAINABILITY VISION
AMP is committed to creating a
sustainable and equitable future
for our stakeholders
Digital
disruption
and security
S
T
Responsible
investment
I
L
C
Client experience
and investment
performance
N
E
Regulatory
and legislative
environment
As custodians of our clients’ money and future,
we face complex economic, social and environmental
challenges which present both risks and opportunities.
AMP annually assesses the issues of greatest importance and impact
to our stakeholders including clients, employees, advisers, investors,
government and the wider community. This process has identified
nine material sustainability issues grouped under three key
stakeholder pillars: our clients, our people and our community
to form the foundations of our Sustainability framework.
Read more about our sustainability performance in our
GRI and SASB-aligned Sustainability report online at
corporate.amp.com.au/about-amp/corporate-sustainability.
16
AMP 2020 annual report
Our clients
AMP is committed to reinventing our
business to deliver better outcomes for
our clients and meet their future financial
needs and ambitions.
In 2020, we supported our retail and
institutional clients through the economic
disruption caused by COVID-19 through
a range of special support programs.
We simplified our superannuation
business following the sale of AMP Life.
We supported government measures
through early access to super and
remain committed to meeting our
legislative and regulatory commitments
by strengthening risk and control systems.
We enhanced our digital capabilities
and upgraded our channels for clients
to access information.
While enhanced digital access has
increased the likelihood of cyber-related
threats, AMP continues to remain vigilant
to protect client data and privacy.
–
–
–
Paused home loan repayments for
~11% of AMP Bank’s mortgage clients.
Received over one million client calls
during 2020; FY 2020 NPS score at
highest level in two years, increased
11 points on FY 2019.
Supported AMP Capital tenants with
flexibility of rent payment terms and
trading hours.
$1.8b
paid in early release of super
payments to clients in need.
Our people
Our community
Our shareholders
Following the successful completion
of the AMP Life sale, we returned
$344 million in capital to shareholders
through a special dividend of 10
cents per share.
With restrictions in place due to the
outbreak of COVID-19, we delivered
the first AMP Virtual Annual General
Meeting (AGM) and increased
participation in the meeting by
50%, with 877 attendees.
We connected 1,200 ‘lost’ shareholders
with their shareholdings representing
250,000 shares.
We have ~709,000 shareholders.
In 2020, we increased the number
of shareholders receiving electronic
communications by 5% to 309,000.
We acknowledge the importance of
creating a safe and inclusive culture as
essential in attracting and retaining the
best talent to improve client outcomes.
We recognise the broader impacts of
our investments, operations and supply
chains and have taken action to address
environmental and social issues.
In 2020, following stakeholder feedback,
we made changes to our board and
executive team and implemented a
range of measures to drive cultural
change focusing on strengthening
accountability and inclusion.
These changes include updates
to policies, a third party review of
workplace conduct and establishing
an employee-led Inclusion Taskforce
to advise on key employee and
culture measures.
We continued to invest in a strong risk
culture that supports whistleblowers
to hold ourselves to the highest
professional standards.
We provided support to our advisers
to ensure they meet ongoing standards
of educational and professional
development.
–
Initiated and completed inclusive
leadership training for senior
leaders with an all-employee
roll out scheduled for 2021.
–
Achieved 40:40:20 board
gender targets.
In 2020, we launched a new sustainable
managed portfolio available through our
flagship platform, MyNorth. It provides
clients and advisers access to a leading
responsible investment strategy.
We published our first Modern Slavery
Statement under Australian legislation,
outlining the actions we have taken to
address risks of modern slavery across
our business activities.
We remained carbon neutral across
our operations with an 18% reduction
in scope 1 and 2 emissions across our
offices from 2019.
Our philanthropic arm, the AMP
Foundation, supported the not-for-profit
sector with $2 million in COVID-19
support grants. We also continued our
Tomorrow Fund program, providing
$1 million to Australians doing great
things in and for our community.
–
–
A+/A ratings in Principles of
Responsible Investment (PRI)
across our AMP Capital managed
asset classes.
Supported COVID-19 impacted
charities through emergency
$2 million grants program
through the AMP Foundation.
95%
of employees enabled to work remotely
following implementation of rapidly-
scaled remote working technologies.
A-
leadership rating in the
annual Carbon Disclosure
Project (CDP) benchmark.
309k
shareholders receiving electronic
communications only.
AMP 2020 annual report
17
Sustainability Our board and management
Our board
See pages 27 and 28 for details of the board’s roles, responsibilities and experience.
Debra Hazelton, Chair
Francesco De Ferrari, Chief Executive Officer
and Managing Director
Rahoul Chowdry, Independent,
Non-executive director
Kate McKenzie, Independent,
Non-executive director
John O’Sullivan, Independent,
Non-executive director
Michael Sammells, Independent,
Non-executive director
Andrea Slattery, Independent,
Non-executive director
Our management team
David Cullen, Group General Counsel
James Georgeson, Chief Financial Officer
Scott Hartley, Chief Executive, AMP Australia
Helen Livesey, Group Executive,
People and Corporate Affairs
Phil Pakes, Group Chief Risk Officer
Blair Vernon, Chief Executive,
New Zealand Wealth Management
18
AMP 2020 annual report
Our management team
Francesco De Ferrari, Chief Executive Officer
See page 28 for details of Francesco’s roles, responsibilities
and experience.
David Cullen, Group General Counsel
David joined AMP in September 2004 and was appointed
Group General Counsel in May 2018. David has group-wide
responsibility for AMP’s legal and governance functions.
Experience
David has over 25 years experience in the legal profession
with extensive experience in the areas of mergers and
acquisitions, corporate law, and corporate governance, having
worked in law firms in Perth and Sydney and with the ASX.
Prior to his appointment as Group General Counsel, David
was the Group Company Secretary and General Counsel,
Governance at AMP, which included acting as Company
Secretary for AMP Limited. David also worked full-time
on AMP’s merger with AXA APH.
David holds a Bachelor of Commerce and Bachelor of Laws
from the University of Western Australia and a Master of
Laws from the University of Sydney. He is a Fellow of the
Governance Institute of Australia.
James Georgeson, Chief Financial Officer
James was appointed Chief Financial Officer (CFO) in February
2020 after previously holding the position of Acting CFO from
August 2019. James’ portfolio is also responsible for strategic
partnerships and delivering AMP’s technology strategy, which
includes data architecture, governance frameworks and cyber
security strategy for the group.
Prior to this, he was Deputy CFO of AMP, with responsibility
for AMP’s group performance reporting, strategic planning
and forecasting, portfolio and capital management and
AMP’s mergers and acquisitions functions.
James was appointed to the AMP Capital Holdings Limited
Board in September 2020.
Experience
Since joining AMP in 2001, James has held senior finance
positions across the group including Chief Financial Officer,
AMP wealth management; Director of Group Finance, Chief
Financial Officer, AMP New Zealand; Chief Risk Officer and
Director of Strategy (AMP New Zealand).
James holds a Master of Commerce from Macquarie University,
Bachelor of Accounting from University of Technology Sydney,
and is a Chartered Accountant with the Institute of Chartered
Accountants of Australia and New Zealand.
Scott Hartley, Chief Executive, AMP Australia
Scott was appointed CEO of AMP Australia in January 2021,
responsible for AMP’s wealth management and banking
divisions with a focus on strategy implementation and
long-term growth of the business.
Experience
Scott has more than 25 years experience in executive
management roles including 20 years in the wealth
management industry.
Most recently, Scott was the CEO of Sunsuper. Under his
leadership from 2014 to 2019, Sunsuper grew to become the
fourth largest (by number of clients) and fastest growing ‘Top 10’
superannuation and retirement business. Strong organic growth
of the business was also supplemented by two successful
mergers with Kinetic Super ($4 billion and 250,000 members)
and Austsafe Super ($2.7 billion and 100,000 members).
Prior to Sunsuper, Scott was the Executive General Manager
of Corporate and Institutional Wealth at NAB Wealth from
2009 to 2013, including leading subsidiaries Plum Financial
Services and Jana Investment Advisors.
Scott is also a Fellow of the Association of Super Funds
in Australia. and a Governor of the American Chamber
of Commerce in Australia.
Helen Livesey, Group Executive,
People and Corporate Affairs
Helen joined AMP in 1999 and was appointed Group Executive,
People and Corporate Affairs in May 2019. Helen leads the
development of people systems, policies, processes and
workforce strategies. She also has group-wide responsibility
for brand, reputation, communications and managing the
business’ relationship with key stakeholders.
Experience
Helen has held several senior roles at AMP, including Group
Executive, Public Affairs and Chief of Staff, Director Brand and
Marketing and Director Corporate Communications. Helen has
over 20 years experience in corporate affairs, marketing and
brand management across a range of industries in Australia
and the UK in both consultancy and in-house roles.
Phil Pakes, Group Chief Risk Officer
Phil joined AMP in April 2019 as the Chief Audit Executive and
was appointed Group Chief Risk Officer in April 2020. Phil has
group wide responsibility for AMP’s risk management function.
Experience
Phil has more than 30 years experience in audit and risk
management roles in the financial services industry.
Phil joined AMP from Citi Private Bank in Hong Kong where
he held roles as the global Chief Auditor, Managing Director
and Chief Audit Executive.
Phil also held senior audit and risk roles in Deutsche Bank,
ABN AMRO and Bankers Trust in Australia and Hong Kong.
Phil is a Fellow of the Institute of Chartered Accountants in
England and Wales and holds a Bachelor of Science (Hons)
degree in Physics from the University of Sheffield (UK).
Blair Vernon, Chief Executive,
New Zealand Wealth Management
Blair joined AMP in 2009 and was appointed Chief Executive
AMP Wealth Management, New Zealand in 2019. Blair was
previously Managing Director from January 2017, and prior
to this served as AMP’s Director Retail Financial Services;
Director of Advice and Sales and General Manager Marketing
and Distribution. Blair has over 25 years experience across
the financial services industry in New Zealand and Australia.
From August 2020 to January 2021, Blair also served as
Acting CEO for AMP Australia where he was responsible
for AMP’s wealth management and banking divisions.
Experience
Blair has over 25 years experience in financial services in
New Zealand and Australia with significant capability across
a range of disciplines.
Blair is also a Director of the Financial Services Council
Board (appointed October 2016), working to improve
outcomes for New Zealanders by helping them build
and protect their wealth.
AMP 2020 annual report
19
Our board and management Financial summary
Profit and loss
Revenue
AUM based revenue
Non-AUM based revenue
Performance and transaction fees
Net interest income
Other revenue1
Total revenue
Variable costs
Investment management expense
Marketing and distribution
Brokerage and commissions
Loan impairment expense
Other2
Total variable costs
Gross profit
Controllable costs
Employee costs
Technology
Regulatory, insurance and professional services
Project costs
Property costs
Other operating expenses3
Total controllable costs
EBIT
Interest expense4
Investment income5
Tax expense
Minority interests MUTB (post-tax)6
NPAT (underlying) by business unit
Australian wealth management
AMP Bank
AMP Capital
New Zealand wealth management
Group Office7
NPAT (underlying)
Items reported below NPAT8
Market and other adjustments9
AMP Life earnings10
NPAT (statutory)
FY 2020
$m
2H 2020
$m
1H 2020
$m
FY 2019
$m
FY
%
870
2,023
(14.5)
1,586
96
51
391
207
772
34
13
195
114
814
62
38
196
93
1,773
130
84
387
294
2,331
1,128
1,203
2,668
(309)
(21)
(69)
(31)
(171)
(601)
1,730
(741)
(157)
(149)
(179)
(80)
(53)
(1,359)
371
(85)
118
(93)
(16)
295
110
119
139
36
(109)
295
(185)
(62)
129
177
(150)
(10)
(35)
4
(77)
(268)
860
(370)
(81)
(80)
(97)
(40)
(27)
(695)
165
(39)
60
(38)
(2)
146
47
69
64
18
(52)
146
(144)
(28)
–
(159)
(11)
(34)
(35)
(94)
(333)
(354)
(23)
(68)
(10)
(190)
(645)
(371)
(76)
(69)
(82)
(40)
(26)
(664)
206
(46)
58
(55)
(14)
149
63
50
75
18
(57)
149
(41)
(34)
129
(746)
(177)
(129)
(178)
(70)
(74)
(1,374)
649
(96)
87
(165)
(36)
439
195
141
204
44
(145)
439
(2,878)
(70)
42
(26)
203
(2,467)
(10.5)
(26.2)
(39.3)
1.0
(29.6)
(12.6)
12.7
8.7
(1.5)
n/a
10.0
6.8
0.7
11.3
(15.5)
(0.6)
(14.3)
28.4
1.1
(42.8)
11.5
35.6
43.6
55.6
(32.8)
(43.6)
(15.6)
(31.9)
(18.2)
24.8
(32.8)
93.6
11.4
n/a
n/a
1
2
3
4
5
6
Includes seed and sponsor income, SuperConcepts, Advice and other revenues.
Includes payment of commissions, employed planner expenses and other variable selling costs.
Includes travel, marketing, printing, administration and other related costs.
Includes interest expense on corporate debt and seed and sponsor financing costs.
Includes equity accounted share of profits from investments in associates and underlying investment income returns on Group Office investible capital.
The AMP Capital business unit results and any other impacted line items are shown net of minority interests. AMP regained 100% ownership of AMP
Capital and MUTB’s minority interest consequently ceased on 1 September 2020.
Includes Group Office costs, investment income and interest expense on corporate debt.
7
8 NPAT (underlying). Refer to Glossary for details.
9
10
Includes market adjustment for investment income and accounting mismatches.
AMP has completed the sale of its life insurance business, AMP Life (the Australian and New Zealand wealth protection and mature businesses)
to Resolution Life. Operating earnings for AMP Life accrue to Resolution Life from 1 July 2018 until 30 June 2020. AMP has reported these earnings
through to 30 June 2020.
20
AMP 2020 annual report
FY 2020
2H 2020
1H 2020
FY 2019
Earnings
EPS – underlying (cps)1
EPS – actual (cps)2
RoE – underlying3
RoE – actual2
Dividend
Special dividend per share (cps)
Franking rate4
Ordinary shares on issue (m)1
Weighted average number of shares on issue (m) – basic1
– fully diluted1
– statutory
– low
– high
Share price for the period ($)
Market capitalisation – end period ($m)
Capital and corporate debt
AMP shareholder equity ($m)
Corporate debt (excluding AMP Bank debt) ($m)
S&P gearing
Interest cover – underlying (times)3
Interest cover – actual (times)2
8.6
5.2
6.3%
3.8%
10.0
100%
3,437
3,437
3,493
3,428
1.11
2.08
5,361
4,283
2,130
26%
6.1
4.1
4.2
(0.8)
6.6%
(1.2%)
–
–
3,437
3,437
3,493
3,434
1.28
1.89
5,361
4,283
2,130
26%
6.1
4.1
4.3
5.9
6.0%
8.2%
10.0
100%
3,437
3,437
3,493
3,421
1.11
2.08
6,392
5,007
2,130
23%
6.3
1.4
Margins
Australian wealth management AUM based revenue to average AUM (bps)
AMP Capital management fees to average AUM (bps)
AMP Bank net interest margin (over average interest earning assets)
73
34.1
1.59%
71
32.6
1.55%
75
35.5
1.63%
Cashflows and AUM
Australian wealth management net cashflows ($m)
Australian wealth management AUM ($b)5
AMP Capital real asset net cashflows ($m)
AMP Capital public markets net cashflows ($m)
AMP Capital net cashflows ($m)
AMP Capital AUM ($b)6
Non-AMP Capital managed AUM ($b)7
Total AUM ($b)7
Controllable costs (pre-tax) and cost ratios
Total controllable costs ($m)
Cost to income ratio
Controllable costs to average AUM (bps)
(8,306)
124.1
2,682
(14,512)
(11,830)
190
65
255
(3,945)
124.1
599
(8,526)
(7,927)
190
65
255
(4,361)
121.0
2,083
(5,986)
(3,903)
190
63
253
1,359
75.5%
52
695
77.5%
54
664
73.5%
50
14.0
(79.5)
8.2%
–
–
–
3,437
3,127
3,156
3,105
1.60
2.66
6,598
4,910
2,139
20%
8.1
–
82
36.1
1.69%
(6,341)
134.5
2,735
(7,924)
(5,189)
203
69
272
1,374
66.0%
50
1 Number of shares has not been adjusted to remove treasury shares.
2
3
4
5
6
7
Includes AMP Life.
FY 2019 includes AMP Life.
Franking rate is the franking applicable to the dividend for that year.
Excludes SuperConcepts assets under administration.
FY 2020 includes AMP Capital’s 24.9% share of PCCP.
Includes investments held in cash, directly in equities or with external fund managers and SuperConcepts AUA.
AMP 2020 annual report
21
Financial summary
Directors’ report
for the year ended 31 December 2020
This directors’ report provides information on the structure
and progress of our business, our 2020 financial performance,
our strategies and prospects for the future and the key risks
we face. It covers AMP Limited and the entities it controlled
during the year ended 31 December 2020.
Operating and financial review
Principal activities
AMP is Australia and New Zealand’s leading wealth
management company offering clients financial advice and
superannuation, retirement income, banking and investment
products across our portfolio of businesses. We also provide
corporate superannuation products and services for workplace
super and self-managed superannuation funds (SMSFs).
AMP holds several strategic partnerships including:
–
–
–
–
19.62% equity interest in Resolution Life NOHC Pty Ltd
(Resolution Life Australasia) subsequently reduced to
19.13% on 22 January 2021
19.99% equity interest in China Life Pension
Company (CLPC)
14.97% equity interest in China Life AMP Asset
Management Company Ltd (CLAMP), a funds management
company which offers retail and institutional investors
in China access to leading investment solutions
24.9% equity interest in US real estate investment
manager, PCCP LLC
On 1 September 2020, AMP completed the repurchase of
Mitsubishi UFJ Trust and Banking Corporation’s (MUTB) 15%
shareholding in AMP Capital. This resulted in 100% ownership
of AMP Capital and the conclusion of the existing business and
capital alliances between MUTB, AMP Limited and AMP Capital.
AMP Capital and MUTB continue to cooperate strategically,
building on their mutually beneficial business relationship in
Japan with AMP Capital continuing to deliver its investment
products through MUTB’s network.
For the purposes of this report, our business is divided into
three areas: AMP Australia (which includes Australian wealth
management and AMP Bank), AMP Capital and New Zealand
wealth management.
Description of business units
AMP Australia aims to help Australians to manage and
grow their wealth throughout their lives. In November 2019,
AMP brought together its Australian wealth management
and AMP Bank divisions under one leadership team.
–
–
Australian wealth management provides financial advice
services (through aligned and owned advice businesses),
platform administration (including SMSF), unit linked
superannuation, retirement income and managed
investment products.
AMP Bank offers residential mortgages, deposits and
transaction banking. The business will continue to
act in its clients’ best interests, while at the same
time seek opportunities to integrate with Australian
wealth management.
22
AMP 2020 annual report
AMP Capital is a diversified investment manager across
major asset classes including infrastructure debt, infrastructure
equity, real estate, equities, fixed interest, diversified and
multi-manager and multi-asset funds. AMP Capital’s aspiration
is to build the best global private markets platform in the
world, underpinned by real assets. Simultaneously, AMP
Capital’s public markets business will be refocused to
support its key strategic partners.
The New Zealand wealth management business encompasses
the wealth management, financial advice and distribution
business in New Zealand. It provides clients with a variety
of wealth management solutions including KiwiSaver,
corporate superannuation, retail investments, a wrap
investment management platform and general insurance.
COVID-19 Impacts
AMP’s earnings in 2020 have been materially impacted
by market volatility in Australian wealth management,
AMP Capital (including negative valuation movements) and
New Zealand wealth management and the impact of the
economic downturn requiring credit loss provisioning in
AMP Bank ($24 million post-tax).
AMP has prioritised servicing clients throughout the pandemic,
which has resulted in additional servicing costs as well as
impacting the pace of investment spend, including the cost
reduction program. AMP remains committed to delivering
$300 million of gross annual run-rate cost savings and its
transformation investment of $1.0 billion to $1.3 billion
by 2022.
Sale of Australian and New Zealand wealth protection
and mature businesses
On 1 July 2020, AMP announced the completion of the sale of
the Australian and New Zealand wealth protection and mature
businesses to Resolution Life Australia Pty Ltd (Resolution Life).
The gross sale proceeds were $3.0 billion comprising:
–
–
$2.5 billion cash; and
$500 million equity interest in Resolution Life Australasia,
a new Australian-domiciled, Resolution Life-controlled
holding company that is now the owner of the Australian
and New Zealand wealth protection and mature businesses.
Resolution Life was on risk for all experience and lapse
losses from 1 July 2018 until 30 June 2020 and was entitled
to all Australian and New Zealand wealth protection and
mature businesses’ net earnings during that period. The sale
completed on 30 June 2020. AMP has reported the results of
the Australian and New Zealand wealth protection and mature
businesses through to 30 June 2020.
Client remediation
AMP’s client remediation program remains on track for
completion in 1H 2021. The program was 80% complete
by the end of 2020.
Total program spend to date is $405 million including program
costs and money repaid to clients. An additional provision
of $68 million in 2020 relates to recognition of additional
lost earnings and recognition of other legacy advice matters.
Overall remediation costs remain in line with the original
estimate provided in November 2018.
Portfolio review
In 2H 2020, the board initiated a portfolio review following
increased interest in the assets and business of the AMP
group. The board maintains its commitment to AMP’s
transformation strategy and is confident in the delivery
of long-term value for shareholders. Goldman Sachs and
Credit Suisse were appointed to manage the review which
tests all strategic alternatives against the benchmark of the
transformation strategy.
Good progress is being made, with a focus on maximising
value to shareholders and we are confident in bringing
the portfolio review to a conclusion in the near future.
2020 performance
The profit attributable to shareholders of AMP Limited
for the year ended 31 December 2020 was $177 million
(2019: loss of $2,467 million).
Basic earnings per share for the year ended 31 December
2020 on a statutory basis was 5.2 cents per share
(2019: basic loss of 79.5 cents per share). On an underlying
basis, the earnings per share was 8.6 cents per share
(2019: 14.0 cents per share1).
Key performance measures were as follows:
–
–
–
–
–
–
–
2020 NPAT (underlying)2 of $295 million declined 33%
from $439 million in 2019. This decrease largely reflects
the impact of weaker Australian wealth management
earnings (–44%), AMP Capital earnings (–32%), and
AMP Bank earnings (–16%), with COVID-19 negatively
impacting all business unit performance
Sold businesses operating earnings (to the benefit
of Resolution Life) were $129 million in 2020
AMP’s total assets under management (AUM) were
$255 billion3 at 31 December 2020 (2019: $272 billion)
Australian wealth management net cash outflows were
$8.3 billion in 2020 compared to net cash outflows of
$6.3 billion in 2019. 2020 was impacted by previously
announced mandate losses in corporate super amounting
to $1.8 billion and $1.8 billion of COVID-19 Early Release
of Super (ERS) payments
AMP Capital external net cash outflows were $1.7 billion,
with positive cash inflows of $2.4 billion across
infrastructure and $0.7 billion across real estate, offset
by cash outflows of $4.8 billion across public markets
AMP Bank’s total loan book decreased 1% to $20.6 billion
in 2020 from $20.7 billion in 2019, while deposits
increased 12% to $16.1 billion from $14.4 billion in 2019
AMP’s controllable costs (excluding AMP Life) decreased
$15 million to $1,359 million, reflecting cost savings
offset by group initiatives and structural cost increases,
including regulatory and compliance costs and COVID-19
related costs
–
–
–
The group’s cost to income ratio was 75.5% in 2020, up
from 66.0% in 2019, driven by lower revenue impacted
by market volatility
Underlying return on equity was 6.3% in 2020
2020 total eligible capital resources were $521 million
above total requirements, down from $529 million at
31 December 2019
Operating results by business area
The operating results of each business area4 for 2020
were as follows:
Australian wealth management – NPAT (underlying)
declined from $195 million in 2019 to $110 million in 2020.
The decline in NPAT (underlying) was driven by lower revenue
predominantly from weaker investment markets and the
impact of pricing and legislative changes, offset by lower
investment management expenses from weaker markets
and lower variable and controllable cost reduction initiatives.
AMP Bank – 2020 NPAT (underlying) of $119 million declined
$22 million (16%) from 2019 predominantly from the
recognition of a $24 million (post-tax) credit loss provision
reflecting the uncertain and challenging economic outlook.
AMP Capital – 2020 NPAT (underlying) of $139 million
declined 32% from 2019 reflecting lower performance
and transaction fees which were adversely impacted by
COVID-19.
New Zealand wealth management – 2020 NPAT (underlying)
of $36 million declined $8 million (18%) from 2019 due to
the proactive closure of two legacy schemes in 2019 and
the impact of COVID-19.
Capital management and dividend
Equity and reserves of the AMP group attributable to
shareholders of AMP Limited decreased to $4.3 billion at
31 December 2020 from $4.9 billion at 31 December 2019.
AMP remains well capitalised, with $521 million eligible
capital above total capital requirements at 31 December
2020 ($529 million at 31 December 2019).
On 13 August 2020, AMP announced the return of
capital of up to $544 million to shareholders, comprising
a $344 million fully franked special dividend and up to
$200 million in the form of an on market share buyback
during the course of the next 12 months, subject to
market conditions. The dividend was paid in October 2020.
The $200 million on market share buyback is on hold
pending the completion of the portfolio review.
The board has resolved not to declare a final 2020
dividend. The board is committed to restarting the group’s
capital management initiatives including the payment
of dividends, share buyback and other capital initiatives
in 2021. This is subject to the completion of the portfolio
review, market conditions and business performance.
1
2
3
4
2019 underlying earnings per share has been re-presented to exclude WP and mature businesses.
NPAT (underlying) represents shareholder attributable net profit or loss after tax excluding market adjustments, accounting mismatches and non-
recurring revenue and expenses.
Includes SuperConcepts assets under administration.
Operating results have been re-presented to align to the FY 2020 Investor Report.
AMP 2020 annual report
23
Directors’ report Strategy and prospects
First outlined in 2019, AMP’s three-year transformation
strategy will transform the company into a simpler, client-led,
growth-oriented business.
AMP remained agile and our people showed resilience as they
adapted to a new way of working. Servicing clients throughout
the pandemic was a priority but a disciplined approach and
focus on the delivery of key objectives of the strategy was also
maintained. Despite the challenges and disruptions faced in
2020, a significant majority of 2020 market commitments
have been delivered.
An update on the outcomes achieved is as follows:
Simplify portfolio
–
Complete sale of Wealth Protection (WP) and
mature businesses
The sale of Australian and New Zealand wealth protection
and mature businesses was completed on 30 June 2020, de-
risking AMP and enabling a fundamental reset of AMP’s capital
framework. Our people delivered one of the largest successor
fund transfers in Australian history with teams working
remotely during COVID-19 lockdowns. AMP now retains a
residual 19.13% equity interest in Resolution Life Australasia.
–
Update on New Zealand wealth management
(NZWM) divestment process at or before 1H 2020
A decision to retain and grow the New Zealand wealth
management business was announced at AMP’s 1H 2020
results. Significant progress has been made to further simplify
the business, laying the foundation for future growth:
–
–
–
The acceleration of digital releases to help clients
manage their money
The automation of client-facing technology and processes,
including complete repatriation of all offshore processing
A simplified distribution model with ~66%5 of AUM
managed via AMP and AdviceFirst employed advisers
The business has maintained its position as one of the largest
non-bank KiwiSaver providers and the largest provider of
corporate superannuation with ~45% market share6.
NZWM announced it will move to a predominantly index-
based investment approach in 1H 2021, providing a simpler
and more cost-effective investment structure that aims to
improve performance for clients.
Reinvent wealth management in Australia
Australian wealth management navigated an unprecedented
period of market volatility and industry disruption but was able
to significantly progress against its 2020 market commitments.
Reshape advice
–
The reshape of advice is well advanced with practice
exits delivered to plan in 2020 and the program now 75%
complete. During 2020 more than ~85,000 advice clients were
transitioned to new Annual Advice and Service Agreements
and the removal of all grandfathered commissions allowing
benefits to be returned to clients. The business also
consolidated and strengthened its advice practices from
942 (2019) to 595 practices (2020) improving productivity
and the quality of advice.
5
6
Based on 31 December 2020 data.
Based on September 2020 market share data.
24
AMP 2020 annual report
– Building a best-in-class superannuation business
The business has delivered the next phase of its superannuation
simplification program, reducing the number of Master Trust
products from approximately 70 to 11 to deliver better client
outcomes. Simplification initiatives delivered reduced fees on
MySuper and cash products and an uplift in processes and
procedures also enhanced operational risk management in
line with regulatory requirements.
– Growing a successful platform business
Functionality and products have continued to be enhanced
on the North platform.
– Maintaining growth momentum in AMP Bank
AMP Bank successfully completed the renovation of its
core technology – on time and under budget, has increased
business efficiency and provided operational capacity for future
growth. Enhanced technology and automation capabilities
included upgraded automated credit decisioning, straight-
through processing on loans and the launch of new digital
enhancements such as Apple Pay.
AMP Capital: Building the best global private markets platform
AMP Capital maintained momentum in real assets amid
a challenging year in investment markets and significant
internal change.
– Private markets
Momentum was maintained in real assets with $600 million of
capital deployed (and $800 million of commitments) in quality
infrastructure equity assets including energy transmission
projects in India and electric public transportation vehicles in
Chile. The divestment of assets – Alpha Trains, Adven and Axion
achieved money multiples and IRR in excess of two times and
20% for GIF I. The business also managed a resilient investment
performance with 72% of AUM outperforming benchmarks
over a three-year period.
AMP Capital: Refocusing public markets to support
strategic partners
– Public markets
Delivered strong performance throughout a period of extreme
market volatility with 94% of global equities and fixed income
AUM outperforming benchmark over three years.
Create a simpler, leaner business
The organisation has been streamlined to three operating
business units, AMP Australia, AMP Capital and New Zealand
wealth management with established end-to-end business
accountabilities.
– Reshape cost base, delivering gross savings by 2022
Following a deliberate slowdown in 1H 2020 to focus on
support for clients during COVID-19, the program is back on
track following an acceleration of cost reduction initiatives
in 2H 2020. The business has delivered $121 million of
cumulative gross cost savings by the end of 2020.
Strengthen risk management, controls, and governance
–
Continued to deploy $100 million (pre-tax) investment
program to further strengthen risk management, internal
controls and governance. Increased efficiency of the risk
function including a refresh of risk management frameworks
was also completed.
– Driving an inclusive and high-performance culture
Culture transformation is a core strategic priority for AMP and
a critical enabler of its three-year transformation program.
AMP progressed several initiatives to accelerate its
culture transformation during 2H 2020, including:
–
–
–
–
–
–
–
–
Invested to build inclusive leadership capability
across all levels in AMP; executive team and senior
leaders completed in 2H 2020
Established an employee-led inclusion taskforce to develop
a diversity framework and drive inclusion focus areas
Recommitted to gender targets; hit 40:40:20 at board
Instituted a Group Integrity Office, strengthening
whistleblowing and conduct management
Established a consequence management committee
to ensure diversity, experience and consistency in
decision-making
Reviewed workplace conduct; assessed against
five best practice pillars: reporting/measurement;
inclusive leadership and culture; internal capability;
confidentiality, transparency and risk; policy and process
Board culture working group formalised to set
expectations on culture, governance and strategy;
group now closed, with culture added as a standing
board agenda item
Updated performance management system linked to
strategic priorities, risk leadership and conduct overlays
Key risks
Risk is inherent to our business and AMP takes measured
risks within our risk appetite to achieve our strategic objectives.
We have a clear strategic plan to drive our business forward
and an Enterprise Risk Management framework to identify,
measure, control and report risks.
The Enterprise Risk Management (ERM) framework provides
the foundation for how risks are managed across AMP.
There are five key elements of the ERM framework including
governance, strategy and appetite, people and culture, systems
and data and the risk management process (encompassing
how AMP identifies, measures, controls and reports risk).
The guiding principles assist with effective risk management
practices and enable AMP to meet its legislative and regulatory
requirements, codes and ethical standards, as well as internal
policies and procedures.
AMP’s ERM framework includes a risk management strategy
which establishes the principles, requirements, roles and
responsibilities for management of risk across AMP. It enables
business leaders to make informed decisions and supports
AMP in achieving its business strategy. The integrated
framework details how risks are to be managed to fulfil
the obligations to key stakeholders, clients, shareholders,
policyholders and regulators to achieve financial and non-
financial outcomes.
The Risk Appetite Statement articulates the nature and level
of risk the board and management are willing to accept in
the pursuit of delivering their strategic objectives. Alignment
between AMP’s corporate strategy and the risk appetite of
the AMP Limited Board seeks to ensure that decisions are
consistent with the nature and level of risk the board and
management are willing to accept.
Further information can be found in AMP’s Enterprise
Risk Management Policy, available on our website at:
amp.com.au/corporategovernance.
Key business challenges
Given the nature of our business environment, the financial
services industry faced unprecedented challenges from the
COVID-19 pandemic and other natural disasters. COVID-19
continues to have an adverse impact on the business but
AMP remains focused to deliver its transformational strategy.
Significant business challenges (in alphabetical order) include
but are not limited to the following:
Business, employee and business partner conduct
The conduct of financial institutions continues to be an area
of significant focus for the financial services industry both
globally and in Australia and New Zealand. AMP devotes
significant effort to ensure that our business practices,
management, staff or business partner behaviours adequately
meet the expectations of regulators and customers, and
safeguard our reputation and value proposition to customers.
Our code of conduct outlines how AMP seeks to conduct its
business and how it expects people to conduct themselves.
The principles that define the high standards outline the
behaviour and decision-making practices, including how
we treat our employees, customers, business partners
and shareholders. We are committed to ensuring the right
culture is embedded in our everyday practices. AMP has
commissioned an external review of its internal policies
on managing conduct and continues to strengthen its risk
culture by management led initiatives and driving a diverse
and inclusive working environment.
AMP embraces a safe and respectful work environment
that encourages our people to report issues or concerns in
the workplace. Directors, employees (current and former),
contractors, service providers or any relative or dependants
of any of these people can utilise the Whistleblowing
program to report misconduct or unethical behaviours.
Climate change
AMP, its clients and its external suppliers may be adversely
affected by the physical and transitional risks of climate
change. These effects may directly impact AMP and its
customers on a range of physical, financial and legal risks to
our business, the investments we manage on behalf of our
clients and the wider community.
Initiatives to mitigate or respond to adverse impacts of
climate change may in turn impact market and asset prices,
economic activity, and customer behaviour, particularly in
geographic locations and industry sectors adversely affected
by these changes.
AMP’s approach to managing climate related risks and
opportunities includes, providing low carbon and green
investment choices to clients, managing and disclosing
investment risks, leveraging our influence as an investor
and reducing our own operational impacts.
AMP remains committed to meeting the Task Force on
Climate-related Financial Disclosures (TCFD) recommendations
over time and it has long been reporting against other climate-
related disclosure frameworks, aligned with the TCFD. In 2020,
AMP retained an A– rating (second highest rating available) in
the annual Carbon Disclosure Project (CDP) investor disclosure
program, indicating leadership in our management of climate
related risks and opportunities. AMP has been carbon neutral
across its operations since 2013 to address the direct impacts
of our business activities.
AMP 2020 annual report
25
Directors’ report Competitor and customer environment
The financial services industry continues to face challenges
from the COVID-19 pandemic but AMP remains focused on
supporting clients and employees during these unprecedented
times. We have supported clients with banking repayment
pauses and early release of super initiatives during COVID-19
and through bushfires and flooding disasters in 2020.
Customer expectations are evolving which is intensifying
competition within wealth management as COVID-19 causes
market volatility, affecting the performance of its assets
under management across the industry. AMP continues to
adapt its capabilities and operating model in order to remain
competitive and relevant to customers, but an on-going
pandemic may impact on new business and retention of
existing business. This could have a material adverse impact
on the financial performance and position of AMP.
In 2020, AMP continued to reposition as a simpler, client-led,
growth-oriented business. The strategy to reinvent AMP as
a contemporary wealth manager is a three-year investment
program to fund growth, reduce costs and fix legacy issues.
The strategy builds on core strengths and market positions
with whole-of-wealth solutions.
Cyber security threats
Cyber risk continues to be a threat in a rapidly changing
technological environment as the magnitude of the costs of
cybercrime vary depending on the nature of the attack. We
are committed to enhancing our cyber security capability and
control posture as we recognise the current environment of
cybercrime activity has increased across the industry during
this COVID-19 period.
AMP is investing in a three-year program to further uplift its
cyber defences to mitigate malicious threats and cybercrime
activities. Cyber risk will retain its position as a key risk as AMP
continues to mature and evolve its cyber security operating
model. This will assist in preventing, detecting and responding
to cyber incidents, in order to protect AMP’s assets and
business operations.
Operational risk environment
Operational risk exposures, relevant to the industries in which
AMP operates, relate to losses resulting from inadequate or
failed internal processes, people and systems or from external
events. These include, but are not limited to, information
technology, human resources, internal and external fraud,
money laundering and counter-terrorism financing, bribery
and corruption. High operational risks are driven by a complex
operating environment associated with legacy products,
systems and, in some cases, manual controls. This environment
will be further stressed by the key business challenges included
in this section.
We are committed to containing operational risk by reducing
operational complexity and strengthening risk management,
internal controls and governance. We continue to work
towards remediating clients and reshaping the Adviser
network and simplifying the superannuation product and
investment options. The AMP operational risk profile reflects
these exposures and the financial statements of AMP contain
certain provisions and contingent liability disclosures for these
risks in accordance with applicable accounting standards.
Organisational change
In 2020, AMP successfully separated and sold the Australian
and New Zealand wealth protection and mature businesses
to Resolution Life. This coincided with additional changes to
simplify the internal operating model. The strategy continues
26
AMP 2020 annual report
to progress from 2020 and further changes are expected
in 2021 to fully establish our target operating model and
to achieve further operating cost savings.
There is a risk that business momentum is lost due to
conflicting leader focus on organisational changes. The
increase in volume of change may have an adverse impact to
employees as they deliver on our strategy and transformation
initiatives. These risks will be mitigated by maintaining
leadership and performance focus on the business.
AMP continues to invest in adopting new ways of working
to drive efficiency and improve our practices to increase
accountability and build on core strengths. We recognise
that failure to execute appropriately on the implementation
of these changes can increase the risks of disruption to
AMP’s business operations.
Regulatory environment
AMP operates in multiple jurisdictions across the globe,
including Australia and New Zealand, and each one of
these jurisdictions has its own legislative and regulatory
requirements. The financial services industry both globally
and in Australia and New Zealand continues to face further
challenges as temporary regulatory changes were introduced
causing disruption to the wealth industry.
AMP continues to respond and adjust its business processes
for these changes, however, failure to adequately anticipate
and respond to future regulatory changes could have a
material adverse impact on the performance of its businesses
and achieving its strategic objectives. AMP’s commitment
to strengthen its risk management practices, its control
environment and enhancing its compliance systems across
the businesses, will address these legislative and regulatory
requirements. AMP’s internal policies, frameworks and
procedures seek to ensure any changes in our domestic and
international regulatory obligations are complied with in
each jurisdiction. Regulatory and compliance risk that results
in reportable breaches are reported to AMP management
committees and regulators in accordance with internal policies.
Regulatory consultations and interactions are reported and
monitored as part of AMP’s internal risk and compliance
reporting process. AMP actively participates in these
interactions and co-operates with all regulators to resolve
such matters.
More information about our approach to these challenges
can be found in the 2020 Sustainability Report.
The environment
In the normal course of its business operations, AMP is subject
to a range of environmental regulations of which there have
been no material breaches during the year. You can find further
information about AMP’s environmental policy and activities at
amp.com.au/corporate-sustainability.
Significant changes to the state of affairs
Apart from elsewhere disclosed in this report, there were no
significant changes in the state of affairs during the year.
Events occurring after the reporting date
As at the date of this report and except as otherwise
disclosed, the directors are not aware of any other matters
or circumstances that have arisen since the reporting date
that have significantly affected, or may significantly affect,
the group’s operations; the results of those operations; or
the group’s state of affairs in future periods.
The AMP Limited board of directors
The directors of AMP Limited during the year ended
31 December 2020 and up to the date of this report are
listed below. Directors were in office for this entire period
except where stated otherwise:
Current non-executive directors:
– Debra Hazelton (appointed Chair 23 August 2020)
–
Rahoul Chowdry (appointed 1 January 2020)
– Kate McKenzie (appointed 18 November 2020)
–
– Michael Sammells (appointed 1 March 2020)
– Andrea Slattery
John O’Sullivan
Former non-executive directors:
– Mike Wilkins AO (retired 14 February 2020)
– Andrew Harmos (retired 8 May 2020)
–
–
– David Murray AO (resigned 23 August 2020)
John Fraser (resigned 23 August 2020)
–
Peter Varghese AO (retired 8 May 2020)
Trevor Matthews (retired 1 July 2020)
Executive director:
–
Francesco De Ferrari (Chief Executive Officer
and Managing Director)
Debra Hazelton, Chair
BA (Hons), MCom, GAICD
Debra was appointed to the AMP Limited Board as a non-
executive director in June 2019 and as the Chair in August
2020. She is also the Chair of the Nomination Committee and
is a member of the Remuneration, Audit and Risk Committees.
Debra is the Chair of the AMP Bank Board and is a member of
its Audit and Risk Committees.
In addition, Debra was appointed to the AMP Capital Holdings
Limited Board in June 2018.
Experience
Debra brings significant experience from more than 30 years in
global financial services, including as the local Chief Executive
of Mizuho Bank in Australia and Commonwealth Bank (CBA)
in Japan. She has expertise across global corporate culture
transformation, institutional banking, risk management,
treasury, financial markets and human resource management.
Debra is also a non-executive director on the boards of Treasury
Corporation of Victoria, Persol Asia Pacific Pte Ltd (Singapore)
and the Australia-Japan Foundation. Her previous board
experience includes Australian Financial Markets Association
(AFMA), Asia Society and Women in Banking and Finance. She
has graduate and post-graduate degrees in Japanese language,
literature and philosophy as well as economics and finance.
Directorships of other ASX listed companies: None
Government and community involvement
–
Director, Treasury Corporation of Victoria
(appointed August 2018)
Director, Australia-Japan Foundation
(appointed October 2015)
Executive Member, Australia-Japan Business Cooperation
Committee (AJBCC) (appointed October 2020)
Member, Australian Chamber Orchestra –
Japan Advisory Committee (appointed May 2019)
Adviser, Japan Women’s Innovation Network
(appointed December 2020)
Member, Chief Executive Women (CEW) Australia
(appointed January 2020)
–
–
–
–
–
Rahoul Chowdry, Independent Director
BCom, FCA
Rahoul was appointed to the AMP Limited Board as a non-
executive director in January 2020. He is a member of the
Remuneration, Nomination, Audit and Risk Committees
and was appointed as Chairman of the Risk Committee in
May 2020. In January 2020, he was appointed to the AMP
Bank Board and is a member of its Audit Committee and the
Chairman of the Risk Committee.
Experience
Rahoul has 40 years experience in professional services,
advising complex multinational organisations in Australia
and overseas.
He is currently Partner and National Leader of Minter Ellison
Consulting’s financial services practice in Australia. Prior to
this, Rahoul was a Senior Partner at PwC for almost 30 years,
where he undertook a number of leadership roles, delivering
audit, assurance and risk consulting services to major financial
institutions in Australia, Canada and the United Kingdom.
Directorships of other ASX listed companies: None
Government and community involvement
–
Member, Reserve Bank of Australia, Audit Committee
(appointed February 2018)
Kate McKenzie, Independent Director
BA, LLB
Kate was appointed to the AMP Limited Board as a non-
executive director in November 2020 and is a member of
the Audit, Nomination, Risk and Remuneration Committees.
At the same time, Kate was appointed to the AMP Bank
Board and its Audit and Risk Committees.
Experience
Kate has more than 25 years of experience in other board
and senior executive leadership roles.
She is currently non-executive director of NBN Co. and
Stockland Corporation Limited and has previously served on
the boards of Allianz Australia, Foxtel, Telstra Ventures, Sydney
Water and Workcover. Kate was the Chief Executive Officer
of Chorus, the New Zealand telecommunication group, listed
on the ASX and NZX, from February 2017 to December 2019,
and held several executive roles at Telstra, including as Chief
Operating Officer, prior to this.
Kate has a track record for leading change and managing
diverse stakeholders across government, communities,
investors and employees. She has earned a reputation for
integrity, great judgement and building collaborative and
effective teams.
Directorships of other ASX listed companies
–
Stockland Corporation Limited
(appointed December 2019)
– Allianz Australia (January 2012 – June 2020)
Government and community involvement
–
Member, Chief Executive Women (CEW) Australia
(January 2006)
AMP 2020 annual report
27
Directors’ report Experience
Andrea has substantial experience as a non-executive
director and senior executive in financial services, retirement
and superannuation, government relations, infrastructure,
professional services, academia and innovation, spanning
more than 28 years.
Andrea was the Managing Director and CEO of the SMSF
Association for 14 years from 2003 to 2017, which she
co-founded. Prior to this, Andrea founded her own consulting
and advisory business, practiced as an accountant and financial
adviser and worked at the University of South Australia.
Her previous Government Advisory Committee appointments
include the Federal Government’s Innovation Investment
Partnership, Stronger Super Peak Consultative Group,
Superannuation Advisory Group, the Future of Financial
Advice, the Shadow Ministry’s Infrastructure and Innovation
and Superannuation and Industry Partnerships.
Directorships of other ASX listed companies
– Argo Global Listed Infrastructure (appointed April 2015)
–
Centrepoint Alliance Limited
(November 2018 – January 2019)
Government and community Involvement
–
Director of Clean Energy Finance Corporation
(appointed February 2018)
Deputy Chairman of Woomera Prohibited Area
Advisory Board (appointed July 2019)
–
– Member, Chief Executive Women (CEW) Australia (2017)
Francesco De Ferrari, Chief Executive Officer
MBA, BS (Econ) (IntBus)
Francesco was appointed Chief Executive Officer (CEO) of
AMP Limited by the AMP Limited Board, joining in December
2018. As CEO, he is responsible for leading the AMP business.
Francesco was appointed to the AMP Limited Board in January
2019 and the Boards of AMP Bank Limited and AMP Capital
Holdings Limited in February 2019.
In August 2020, Francesco assumed the role of Acting Chief
Executive for AMP Capital on an interim basis while a search
process is conducted for a new CEO of that business.
Experience
Francesco has more than 20 years experience in the
wealth management industry including private banking
and management consulting. He spent 17 years in executive
roles at Credit Suisse in Asia and Europe, leading businesses
that grew substantially under his leadership.
During almost seven years as Head of Credit Suisse’s Asia
Pacific private banking business, he overhauled the operating
model, increased assets under management and profitability,
and improved culture and controls within the business.
As CEO of South East Asia and Frontier Markets, Francesco
was responsible for Credit Suisse’s business in Investment
Banking, Global Markets, Private Banking in ASEAN and
frontier markets across the Asia Pacific.
Francesco was conferred the Institute of Banking and Finance
(IBF) Distinguished Fellow award in 2016 for excellence
in professional stature, integrity and achievement in the
financial industry.
Directorships of other ASX listed companies: None
John O’Sullivan, Independent Director
BA, LLB, LLM
John was appointed to the AMP Limited Board in June 2018.
He was appointed a member of the Audit, Nomination, Risk
and Remuneration Committees in January 2019.
In February 2019, John was appointed to the AMP Bank
Board and as a member of its Audit and Risk Committees.
Experience
John has over 40 years experience in the legal and
financial services sectors in Australia. He started his career
at Freehill Hollingdale & Page (Herbert Smith Freehills),
later becoming a partner at the firm where he was
recognised as one of Australia’s leading corporate and
mergers and acquisitions lawyers.
From 2003 to 2008, John was General Counsel of the
Commonwealth Bank of Australia before spending 10 years
at Credit Suisse Australia where he was Executive Chairman,
Investment Banking and Capital Markets, Australia until
February 2018. John is a member of the Takeovers Panel.
He holds a Bachelor of Laws and Bachelor of Arts from
the University of Sydney and a Master of Laws from the
University of London.
Directorships of other ASX listed companies: None
Government and community involvement
–
Ambassador of the Australian Indigenous
Education Foundation (appointed 2008)
Director of the WestConnex entities
(appointed May 2018)
Director of Serendipity Capital Holdings Limited
(appointed April 2020)
–
–
Michael Sammells, Independent Director
BBus, FCPA, GAICD
Michael was appointed to the AMP Limited Board as a
non-executive director in March 2020. He is the Chairman
of the Remuneration Committee and a member of the Audit,
Nomination and Risk Committees. In March 2020, Michael
was also appointed to the AMP Bank Board and is a member
of its Audit and Risk Committees.
Michael is also the Chairman of the AMP Capital Holdings
Limited Board.
Experience
Michael has over 35 years of professional experience, with
significant experience in senior executive financial and
commercial roles. His experience as Chief Financial Officer
spans over 20 years from 1999 to 2019, where he held this
role in government, private and ASX listed companies.
Michael is also a non-executive director of Sigma Healthcare
Limited and has served on numerous private boards for the
last 12 years.
Directorships of other ASX listed companies
–
Sigma Healthcare Limited (appointed February 2020)
Andrea Slattery, Independent Director
BAcc, MCom, FCPA, CA, FSSA, FAICD
Andrea was appointed to the AMP Limited Board as a
non-executive director in February 2019 and is a member of
the Audit, Nomination, Risk and Remuneration Committees.
At the same time, she was appointed to the AMP Bank Board
and its Audit and Risk Committees. She was appointed
Chairman of the AMP Limited and AMP Bank Limited
Audit Committees in May 2019.
28
AMP 2020 annual report
Attendance at board and committee meetings
The AMP Limited Board met 24 times during the year ended 31 December 2020. The Chair and directors also attended other
meetings, including board committee meetings, special purpose committees, strategy sessions and working groups. The Chair
and directors also frequently attended meetings of subsidiary boards and committees, special purpose committees, and working
groups of which they were not a director or member during the year.
The table below shows details of attendance by directors of AMP Limited at meetings of boards, committees and working groups
of which they were members during the year ended 31 December 2020. Any voluntary attendances by directors in the capacity as
observers are not included in the table below.
Board/committee
Held/attended
Debra Hazelton5
Rahoul Chowdry6
John O’Sullivan
Michael Sammells7
Andrea Slattery
Kate McKenzie8
Mike Wilkins9
Andrew Harmos10
Peter Varghese11
Trevor Matthews12
David Murray13
John Fraser14
AMP Limited
Board Meetings1
Audit
Committee
Risk
Committee
Nomination
Committee
Remuneration
Committee
A
B
24
24
24
21
24
2
2
6
6
12
16
16
23
24
24
21
24
2
2
6
6
12
16
16
A
4
4
4
3
4
1
1
2
2
2
–
3
B
4
4
4
3
4
1
–
2
2
2
–
3
A
7
7
7
6
7
1
1
3
3
3
4
4
B
7
7
7
6
7
1
1
3
3
3
4
4
A
3
1
1
1
1
1
1
–
2
–
3
2
B
3
1
1
1
1
1
1
–
2
–
3
2
A
6
6
6
4
6
1
2
3
3
3
4
4
B
6
6
6
4
6
1
1
3
3
3
4
4
Subsidiary
board and
committee
meetings2
A
B
16
16
–
–
8
–
–
7
33
33
–
21
33
8
–
21
31
7
33
33
–
–
16
16
Additional
committees3
Working
groups4
B
4
17
19
16
4
–
–
–
3
–
8
4
B
5*
5*
3^
–
5*, 3^
–
–
–
–
3^
–
–
3
4
Column A – indicates the number of meetings held while the director was a member of the board/committee. Directors may, and frequently do, attend
meetings as observers if they are not a member of the board/committee.
Column B – indicates the number of those meetings attended.
1
2
Where board and committee meetings of AMP Limited and AMP Bank Limited were held concurrently, only one meeting has been recorded.
Subsidiary board and committee meetings refer to meetings of the boards and committees of the following main-subsidiaries: AMP Life Limited
(AMP Life) until 1 July 2020; The National Mutual Life Association of Australasia Limited (NMLA) until 1 July 2020; AMP Bank Limited and AMP Capital
Holdings Limited. Where board and committee meetings of AMP Life and NMLA were held concurrently, only one meeting has been recorded.
Additional committees were convened during the year on matters including the portfolio review, the sale of AMP Life to Resolution Life, the
composition of the trustee board, compliance and financial results.
Additional working groups of the board were convened during the year. Specifically, a board Culture Working Group (*) and Advice Working Group (^).
All members of the board Culture Working Group and Advice Working Group attended all meetings and frequently other directors attended in an
observer capacity.
Debra Hazelton was appointed as the Chair of AMP Limited effective 23 August 2020.
5
6
Rahoul Chowdry was appointed as a director of AMP Limited effective 1 January 2020.
7 Michael Sammells was appointed as a director of AMP Limited effective 1 March 2020.
8
9 Mike Wilkins retired as a director of AMP Limited effective 14 February 2020.
10 Andrew Harmos retired as a director of AMP Limited effective 8 May 2020.
11
12 Trevor Matthews retired as a director of AMP Limited effective 1 July 2020.
13 David Murray resigned as the Chairman of AMP Limited effective 23 August 2020.
John Fraser resigned as a director of AMP Limited effective 23 August 2020.
14
Kate McKenzie was appointed as a director of AMP Limited effective 18 November 2020.
Peter Varghese retired as a director of AMP Limited effective 8 May 2020.
AMP 2020 annual report
29
Directors’ report Company secretary details
Details of the company secretary of AMP Limited as at the
date of this report, including her qualifications and experience,
are set out below.
Marissa Bendyk, General Counsel, Corporate
Governance and Group Company Secretary
LLB (Hons), BCom (Accounting), GAICD
Marissa was appointed as the Company Secretary for AMP
Limited on 6 May 2019 and is also secretary of several other
AMP group companies. Before joining AMP, Marissa worked at
APA Group and King & Wood Mallesons focusing on corporate
governance, mergers and acquisitions, and corporate and
commercial law.
Indemnification and insurance of directors
and officers
Under its constitution, the company indemnifies, to the
extent permitted by law, all current and former officers of the
company (including the non-executive directors) against any
liability (including the costs and expenses of defending actions
for an actual or alleged liability) incurred in their capacity as
an officer of the company. This indemnity is not extended to
current or former employees of the AMP group against liability
incurred in their capacity as an employee, unless approved by
the AMP Limited Board.
During, and since the end of, the financial year ended
31 December 2020, the company maintained, and paid
premiums for, directors’ and officers’ and company
reimbursement insurance for the benefit of all of the officers
of the AMP group (including each director, secretary and
senior manager of the company) against certain liabilities as
permitted by the Corporations Act 2001. The insurance policy
prohibits disclosure of the nature of the liabilities covered,
the amount of the premium payable and the limit of liability.
In addition, the company and each of the current and former
directors are parties to deeds of indemnity, insurance and
access. Those deeds provide that:
–
–
–
–
the directors will have access to board papers and specified
records of the company (and of certain other companies)
for their period of office and for at least 10 (or, in some
cases, seven) years after they cease to hold office (subject
to certain conditions);
the company indemnifies the directors to the extent
permitted by law, and to the extent and for the amount
that the relevant director is not otherwise entitled to be,
and is not actually, indemnified by another person;
the indemnity covers liabilities (including legal costs)
incurred by the relevant director in their capacity as
a current or former director of the company, or as a
director of any AMP group company or an AMP
representative to an external company; and
the company will maintain directors’ and officers’
insurance cover for the directors, to the extent permitted
by law, for the period of their office and for at least
10 years after they cease to hold office.
Indemnification of auditors
To the extent permitted by law, the company has agreed to
indemnify its auditor, Ernst & Young, as part of the terms
of its audit engagement agreement, against claims by third
parties arising from the audit, other than where the claim is
determined to have resulted from any negligent, wrongful or
wilful act or omission by or of Ernst & Young. No payment has
been made to indemnify Ernst & Young during or since the
financial year ended 31 December 2020.
Rounding
In accordance with the Australian Securities and Investments
Commission Corporations Instrument 2016/191, amounts in
this directors’ report and the accompanying financial report
have been rounded off to the nearest million Australian dollars,
unless stated otherwise.
30
AMP 2020 annual report
Auditor’s independence declaration to the directors of AMP Limited
The directors have obtained an independence declaration from the company’s auditor, Ernst & Young, for the financial year ended
31 December 2020.
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s independence declaration to the directors of AMP Limited
As lead auditor for the audit of AMP Limited for the financial year ended 31 December 2020, I declare to the best of my knowledge
and belief, there have been:
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of AMP Limited and the entities it controlled during the financial year.
Ernst & Young
Andrew Price
Partner
Sydney, 11 February 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Non-audit services
The Audit Committee has reviewed details of the amounts paid or payable to the auditor for non-audit services provided to the
AMP group during the year ended 31 December 2020, by the company’s auditors, EY.
The directors are satisfied that the provision of those non-audit services by the auditor is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001 and did not compromise the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
–
–
–
all non-audit assignments were approved by the CFO, or his nominated delegate, or the Chairman of the Audit Committee;
no non-audit assignments were carried out which were specifically excluded by the AMP Charter of Audit Independence; and
the proportion of non-audit fees to audit fees paid to EY of 7% (2019: 10%), as disclosed in note 6.5 to the financial report is not
considered significant enough to compromise EY’s independence or cause a perception of compromise.
Remuneration disclosures
The remuneration arrangements for AMP directors and senior executives are outlined in the remuneration report which forms part
of the directors’ report for the year ended 31 December 2020.
Directors’ and senior executives’ interests in AMP Limited shares, performance rights and options are also set out in the
remuneration report on the following pages.
AMP 2020 annual report
31
Directors’ report Remuneration report
“The AMP Board’s approach to remuneration has
sought to achieve a difficult balance between
shareholder experience, financial outcomes and
remuneration that retains and incentivises our
people for delivery and performance through
extraordinary circumstances.”
Key messages from the Chair
of the Remuneration Committee
Dear shareholder
The 2020 financial year has seen extraordinary challenges
in the external environment from the devastating bushfires
to the ongoing COVID-19 pandemic and continuing industry
transformation. Closer to home, the company has also faced
unprecedented pressure with unrelenting public scrutiny
related to high profile employment issues and uncertainty
stemming from the portfolio review. Despite this complexity,
AMP remained focused on executing our transformation
strategy, winning back the confidence of clients and our
people and ensuring delivery of appropriate shareholder
returns. Under the leadership of our CEO, Francesco De Ferrari,
a number of key transformation milestones were delivered
including the sale of AMP Life; completion of the first phase
of superannuation simplification; hitting our FY 2020 target
of 80% completion of our remediation program; and delivery
of in-year gross cost savings of $102 million.
Against this challenging backdrop, the AMP Limited
Board’s approach to remuneration has sought to achieve
a difficult balance between shareholder experience,
financial outcomes and remuneration that retains and
incentivises our people for delivery and performance
through extraordinary circumstances.
At last year’s annual general meeting, 67% of shareholders
voted against our 2019 Remuneration Report, expressing a
level of dissatisfaction that demands resolution. Both our
new Chair, Debra Hazelton, and I want to assure you that we
have heard your concerns and are taking action. Throughout
the year, we have reviewed the feedback and sought wider
perspectives through meetings with investors, proxy advisers
and other shareholder representatives to fully understand the
issues and test proposed action. In the interests of improved
transparency, we have summarised the feedback received
and actions taken are outlined in the response to the 2019
strike. Moreover, we are determined to continually improve
and, as you will see in this report, have sought to increase
transparency, better explain the rationale for remuneration
decisions and significantly strengthen and simplify our
overall approach to remuneration – with a new framework
introduced for 2021.
Executive remuneration outcomes for FY 2020
Given the strike in 2019 and the ongoing work in developing a
new remuneration framework for 2021, the board considered
2020 as a transition year for our remuneration structure and
sought to balance outcomes for our people and investors by
more actively applying board discretion.
In determining the 2020 remuneration outcomes, the board
actively considered a range of factors including: overall group
performance, progress against key milestones in delivering
our three-year transformation strategy, instability driven by
the portfolio review, feedback from investors in relation to our
2019 Remuneration Report and appropriate risk overlays.
Specifically, despite challenging circumstances, management
made strong progress in delivering on key strategic priorities.
Assessment against our group scorecard showed the majority
of the key priorities achieved or exceeded their target
(full details provided in section 5.2).
However, importantly, AMP’s financial performance remains
significantly below plan with Net profit after tax (underlying)
of $295 million. As a result, the remuneration outcomes
for our key executives have been adjusted to align with the
shareholder experience. Specifically:
–
–
–
–
–
No short-term incentives (STI) were awarded to the
CEO and current key management personnel (KMP).
No 2020 long-term incentive (LTI) awards were granted
to the CEO or KMP.
No fixed remuneration increases were awarded for
FY 2021 to any disclosed executives in their current roles.
However, the 2019 Transformation Incentive awards for
the Chief Financial Officer (CFO) and Chief Risk Officer
(CRO) were adjusted upon permanent appointment to
their roles (refer section 7.3 for details).
Non-executive directors (NEDs) fees also remained
unchanged and the Chair’s fee was reduced from $850,000
to $660,000 from 1 March 2020. NED fees will be reviewed
following the completion of the portfolio review.
Full details of the remuneration outcomes for the CEO and
KMP are provided in section 5 with the inclusion of a new table
(refer section 5.6) which sets out the executive remuneration
received during 2020. This table outlines the remuneration
which vested or was actually received by the CEO and KMP
versus the incentives awarded but forgone.
32
AMP 2020 annual report
Retention payments
In September 2020, in response to increased unsolicited
interest in its assets and businesses, the board announced
that it would undertake a portfolio review in order to assess
all opportunities in a considered and holistic manner with a
focus on maximising shareholder value. This review created
significant additional workload for our key executives and
generated substantial additional challenge and uncertainty
across the group. The position was exacerbated through
a series of executive departures which disrupted business
operations, leaving those remaining critical to stabilising the
business, retaining corporate knowledge and continuing to
drive the turnaround strategy. Faced with these extraordinary
circumstances, the board, having examined market precedents
and tested the concept with a range of investor representatives,
sought to stabilise the management team by introducing a
one-off retention payment for KMP and critical talent across
the organisation. As part of the discussion in relation to the
retention of the CEO’s direct reports, the board and CEO agreed
that the CEO should not be considered for a retention award
based on the precedents, market feedback and his previously
disclosed remuneration arrangements. Therefore, the CEO
did not participate in the retention awards.
Retention awards for KMP totalled $3.89 million with
the quantum of the award equivalent to 100% of fixed
remuneration deferred in its entirety. The deferral period
will see 60% vest on 31 October 2021 (delivered as cash)
with the remaining 40% (delivered as share rights) vesting
on 31 October 2024 subject to continued employment.
This decision has not been taken lightly. However, the
board believes there were very few alternatives under
the circumstances, to maintain stability and protect
shareholder value through the portfolio review.
Similar retention awards have been made to other, select
individuals across the group, seen as instrumental to the
stability of AMP. These payments have been scaled according
to the nature of the roles.
Board discretion
In 2020, the board developed a set of principles for the exercise
of board discretion. This framework guides the application
of discretion to remuneration outcomes by prompting
consideration of: the circumstances warranting discretion;
to whom discretion should apply; the accountability of the
individual and/or group for the issue at hand; and the
appropriate impact to remuneration, or other consequences.
In addition, the board retains discretion to claw back variable
incentive equity awarded to executives if it becomes aware
of any information that, had it been available at the time the
awards were determined, would have resulted in a different
(or zero) amount being granted.
In the context of the portfolio review, should there be a partial
or full change in control, unvested awards may vest in part or in
full at the discretion of the board. In exercising this discretion,
the board is focused on determining vesting outcomes that
are consistent, fair and reasonable, and balance multiple
stakeholder interests.
New executive remuneration framework for 2021
The Remuneration Committee has listened to your feedback
and completed a formal review of the executive remuneration
framework. As a result of this review, we have introduced a new
approach that better aligns performance, risk management,
remuneration and the shareholder experience.
Effective from January 2021, the new framework simplifies
the variable remuneration components of executive pay
and ensures a focus on driving sustainable, long-term
results in order to better align the interests of executives
and shareholders. All changes to the framework, and any
awards in respect of 2021 will be explained in further detail
in the 2021 Remuneration Report. However, a high-level
summary is provided in the Actions taken in response to
2019 strike section.
Thank you
The board appreciates the feedback we have received from
our shareholders, proxy advisers and clients over the year
and will continue to engage as the company delivers on its
transformation strategy. Thank you for taking the time to read
our 2020 Remuneration Report. We welcome your feedback.
Michael Sammells
Remuneration Committee Chair
AMP 2020 annual report
33
Directors’ report Actions taken in response to 2019 strike
The table below outlines the feedback provided through consultation with investors, proxy advisers and other shareholder
representatives to the 2019 Remuneration Report and the actions taken in response.
Remuneration element
Issues raised
Response
Performance
outcomes and
transparency
Remuneration
quantum
The 2019
Remuneration
Report was too
complex and
lacked a clear link
between business
and remuneration
outcomes
Total remuneration
for executives was
high relative to
market and/or
shareholder
experience
Transformation
Incentive (TI)
Quantum
of awards
The award may
vest if the total
shareholder
return (TSR)
underperforms
in comparison
to peers
The 2020 report seeks to clearly articulate the link between business
performance and remuneration outcomes, including the delivery of strategic
initiatives and the application of board discretion (see section 5 for details).
The rationale for and details of retention payments has also been included
(see Chair’s letter and section 6.1 for details).
The concerns regarding remuneration quantum primarily focused on the
maximum potential value of the one-off Transformation Incentive awards (TI)
allocated in 2019, noting that insufficient explanation of these awards was
provided. These concerns have been addressed by changing the executive
remuneration framework to align with market practice from 1 January 2021;
ensuring transparency around the structure and value of future LTI awards;
and clarifying how discretion may be applied at the TI award vesting date.
Refer to additional comments below on TI.
Specific to the CEO, the statutory remuneration reported on an accounting
basis included the value of awards that the CEO received when he joined the
company which were approved by shareholders in 2018. These awards were
designed to replace incentives that were on foot at the CEO’s former employer.
The board reviewed the TI award and undertakes to apply appropriate discretion
at the time of vesting rather than retrospectively altering the terms of the award
during the performance period.
At the time the TI was approved, it was intended to replace the annual long-term
incentive (LTI) grants for the 2019 and 2020 performance years. The quantum
was significantly larger than a single year LTI grant, recognising the period and
STI was likely to be depressed during the Transformation program. Accordingly,
the board did not grant an LTI award in 2020. For the CEO and current KMP
as at 31 December 2020, the maximum value (based on full vesting) of the TI
is approximately $17.5 million with a minimum value of $0 (based on no vesting).
The award’s design provides for 25% vesting if AMP’s TSR was at 75% of the
index return. In addition, under the award’s performance gateway, no vesting
will occur if AMP’s TSR is negative and below 100% of the index. Furthermore,
the board will take into account shareholder value creation, length of service and
contribution of executives to the transformation of AMP when considering the
application of discretion at the vesting date.
34
AMP 2020 annual report
Remuneration element
Issues raised
Response
Remuneration
approach
Revised executive
remuneration
framework
effective from
1 January 2021
Based on feedback the board has undertaken a review of the executive
remuneration framework applicable for the CEO and KMP and introduced a new,
simplified framework for 2021. The new framework responds to the concerns
raised via stakeholder feedback and reflects an approach to remuneration that
is more aligned to market practice.
Full details of the new remuneration framework will be outlined in the 2021
Remuneration Report; however, in summary:
–
–
–
–
–
STI target remains set at 100% of Fixed Remuneration (‘FR’) for the CEO and
KMP (70% of FR for CRO), with the maximum opportunity capped at 200%
(140% of FR for CRO) of Fixed Remuneration.
The deferral rate for STI awards has been increased to 60% of the award value,
from 40%.
The LTI award quantum will target 100% of Fixed Remuneration for the
CEO and KMP, which is considered market appropriate, and well below the
quantum of the Transformation Incentive.
LTI vesting occurs four years post-award, subject to satisfying applicable
performance hurdles.
Minimum LTI vesting occurs for relative TSR performance at the median of
ASX 100 Financials companies, ex A-REITs, over a three-year performance
period.
–
The first grants for LTI are expected to be made prospectively in FY 2021.
The volume of board work and formal meetings has significantly increased
given AMP’s operating environment and fees were set to reflect this workload.
Despite this, the Chair’s fee was reduced from $850,000 to $660,000 effective
1 March 2020.
During 2020, the total remuneration paid to AMP Limited NEDs was $3.4 million
being 74% of the shareholder approved fee pool. This represents an overall 10.1%
cost reduction in aggregate NED fee spend year on year (see section 8.1 for more
information).
NED fees will be considered for review following completion of the portfolio
review and any subsequent outcomes.
Non-executive
director (NED)
remuneration
NED remuneration
is above market
cap and excessive
in comparison to
selected peer groups
Board discretion
There is insufficient
information on
the application of
board discretion
and disclosure of
the criteria applied
in considering
adjustments
In 2020, the board developed a set of principles for discretion for this purpose,
and a framework that assesses: the situation and circumstances warranting
discretion, to whom discretion should apply, the accountability of the individual
and/or group, and the appropriate impact commensurate with the conduct or
action observed (see sections 1 and 3.1 for details).
Under conditions where remuneration outcomes are not clearly supported
by business results, the board will apply discretion and be transparent about
its considerations and rationale in the Remuneration Report (see section 1
for details).
Minimum
shareholding
AMP’s minimum
shareholding
requirement is
inconsistent with
market practice
To align with current market practice, we have increased our minimum
shareholding requirement for KMP during 2020 to the following
(see section 6.3 for more information):
– CEO – two times fixed remuneration.
– Executives – one times fixed remuneration.
AMP 2020 annual report
35
Directors’ report Remuneration report
This report details the remuneration arrangements for our key management personnel (KMP) in 2020. It has been prepared and
audited against the disclosure requirements of the Corporations Act 2001.
Remuneration strategy and framework
Remuneration governance
Risk and remuneration
Contents
1
2
3
4 Key management personnel (KMP) and leadership renewal
5
6
7 Other executive remuneration disclosures
8 Non-executive director remuneration
Performance and reward outcomes
Executive remuneration details
page 36
page 39
page 40
page 41
page 41
page 47
page 54
page 59
1 Remuneration strategy and framework
1.1 Remuneration strategy
The board is committed to long-term, sustainable value creation for our shareholders. While financial performance is a key indicator
of AMP’s success, the board is also mindful that longer-term value creation results from delivery of both financial and key non-
financial objectives.
The focus on long-term value creation is evident in our approach to performance and remuneration (as shown diagrammatically
below). Through the annual planning process, each business unit identifies the key strategic, financial, people leadership, client and
risk priorities to deliver AMP’s transformation strategy. These business unit priorities form the basis for setting key objectives and
assessing achievements at both the team and individual level.
1
AMP strategy
Simplify portfolio
Business unit plan
2
Reinvent wealth
management in Australia
Continue to grow
a successful asset
management franchise
Create a simpler,
leaner business
Transform our culture to
be more client-focused,
entrepreneurial and
accountable
3
AMP Australia
Performance year goals
AMP Capital
New Zealand wealth
management
Corporate services
Financial
Client
Strategic
Leadership
Risk
4
Performance assessment
‘What’
‘How’
Reward
5
Financial
Client
Strategic
Leadership
Short-term incentives
Risk
Long-term incentives
Culture of performance, inclusion and innovation
Behaviour and conduct expectations
Consequence management
Outcomes awarded under our remuneration framework reflect both ‘what’ our strategy seeks to deliver and ‘how’ it is delivered, as
performance assessment explicitly considers not only the strategic objectives delivered, but also relies on the visible demonstration
of our desired culture, behaviours and conduct expectations.
36
AMP 2020 annual report
1 Remuneration strategy and framework (continued)
1.2 Remuneration framework
AMP’s remuneration strategy seeks to align performance, prudent risk management and reward outcomes. It is designed to support
the attraction, retention and reward of the high performing talent required to deliver strong client outcomes and sustained returns
to shareholders.
We have reviewed and simplified our remuneration principles in 2020 to provide the flexibility to address challenges in attracting
and retaining talent, remain competitive in the market and differentiate for performance.
The following diagram illustrates the remuneration framework that applied to our executives during 2020.
Remuneration principles
Linked to strategy
and sustainable value
creation
Balances interests of
clients, people and
shareholders
Market competitive
to attract and retain
the right talent
Differentiates
for performance;
adjusts for risk
Reflect our values,
behaviours and
conduct expectations
Remuneration structure for 2020
Purpose and link to strategy
Benchmark/Measures
Delivery
Fixed remuneration
Short-term incentives
Market competitive
remuneration to attract
and retain.
Set taking into account
role and experience.
Reward for achieving key
financial and non-financial
priorities during the financial
year which align to AMP strategy.
Relevant benchmark
such as ASX 100 financial
organisations.
Base salary, superannuation
and salary sacrifice benefits.
Mix of key strategic, financial,
people and client goals
during the financial year.
– 60% delivered as cash.
–
40% delivered as share rights
deferred for four years.
Long-term incentives
Reward for sustainable long-
term growth in shareholder
value measured through relative
total shareholder return (TSR).
Performance against an
equally weighted index
consisting of ASX 100
financial organisations.
100% delivered as share rights
subject to a performance hurdle
with a three-and-a-half-year
performance period (or four
years where required to comply
with regulation).
Supported by the remuneration governance, risk management and consequence management framework
– All variable remuneration is subject to board discretion in the determination of outcomes and before vesting.
–
Set rules govern minimum shareholding requirements for executives.
– Hedging of AMP shares (including unvested rights) is prohibited.
AMP 2020 annual report
37
Directors’ report
1 Remuneration strategy and framework (continued)
1.2 Remuneration framework (continued)
In conjunction with the remuneration principles and structures outlined on the previous page, a framework has been developed to
guide the board in applying discretion to remuneration outcomes. The framework (below) sets out the approach the board will take
and criteria it will consider when determining whether and how discretion should be applied.
Framework for applying discretion
Situation
Do the circumstances warrant adjustment?
Target
To whom should the adjustment apply?
Accountability
How accountable is the person/group?
Impact
What quantum of adjustment is required?
Is there a material event?
Do outcomes reflect the context?
Related to an individual or a group?
Adjustment to outcome or pool?
How much influence did the individual have?
Was the event reasonably foreseeable?
What is the impact on the company?
Is the adjustment reasonable?
1.3 Remuneration mix
The graph below shows the 2020 remuneration mix for disclosed KMP (excluding the Chief Executive, AMP Capital (CE AMPC) who
was eligible to participate in the AMP Capital Enterprise Profit Share plan).
The CRO’s remuneration mix has a higher proportion of fixed remuneration which reflects the independent nature of the role from
the group’s business activities.
Incentive targets are set that reflect the remuneration structure of the role, the group’s business plans and the operating
environment. The percentages shown for 2020 have been calculated based on target opportunity.
CEO
33%
20%
13%
33%
Variable remuneration 66%
Group Executives
(excluding CE AMPC, Group CRO)
33%
20%
13%
33%
Group CRO
37%
16%
10%
37%
Variable remuneration 66%
Variable remuneration 63%
Fixed
STI cash
STI deferred
LTI
38
AMP 2020 annual report
2 Remuneration governance
2.1 Governance framework
There are a number of remuneration governance and oversight processes in place at AMP, primarily exercised through the AMP
Limited Board, subsidiary boards and the Remuneration Committee. The Remuneration Committee assists the various boards to fulfil
their remuneration obligations by developing, monitoring and assessing remuneration strategy, policies and practices across AMP.
Members of the Remuneration Committee are independent non-executive directors. More information on the role of the
Remuneration Committee can be found in the corporate governance section of AMP’s website. The board believes that, to make
prudent remuneration decisions, it needs both a robust framework and the ability to exercise judgement. Therefore, the board
retains discretion to adjust remuneration outcomes as required to ensure outcomes are appropriate.
From time to time the Remuneration Committee may seek external guidance from independent remuneration advisers. Any advice
provided by external advisers is used as a guide and is not a substitute for consideration of all the issues by each non-executive
director of the Remuneration Committee.
During the 2020 year, the Remuneration Committee engaged PwC as independent remuneration advisers to provide guidance on
remuneration for executives. No remuneration recommendations, as defined in the Corporations Act, were made by PwC.
The following diagram articulates AMP’s remuneration governance framework.
AMP Limited Board
AMP subsidiary boards
AMP Limited Risk Committee
Assists the board with oversight of
the implementation and operation of
AMP’s risk management framework.
Makes recommendations to the
Remuneration Committee on:
– risk-related adjustments for
the group incentive pool; and
– risk related matters that may
require the application of malus
or clawback or in-year reduction
to incentives.
Remuneration Committee
Advises the AMP Limited Board and the boards of AMP subsidiaries in setting and
overseeing AMP’s remuneration policy and practices. Key responsibilities include:
–
–
–
–
–
–
reviewing AMP’s remuneration policy including effectiveness and compliance
with regulatory requirements;
reviewing the remuneration arrangements, performance objectives, measures
and outcomes for executives and senior management;
reviewing the remuneration arrangements for non-executive directors;
reviewing AMP’s remuneration disclosures;
overseeing all incentive plans; and
reviewing and making recommendations in relation to equity-based plans
including malus and clawback.
Management
The CEO makes recommendations to the Remuneration Committee
on the performance and remuneration outcomes for his direct reports.
Management advises the Remuneration Committee and provides
information on remuneration-related matters.
Independent remuneration advisers
The Remuneration Committee engages
remuneration advisers when it needs
additional information to assist the
AMP Limited Board in making
remuneration decisions.
During 2020, the decision was made to dissolve the Management Remuneration Committee to facilitate structural and governance
efficiencies. Management oversight of remuneration matters will be the responsibility of the CEO AMP with the support of the
Group Executive, People and Corporate Affairs, Group Director People and other executives as required.
AMP 2020 annual report
39
Directors’ report 3 Risk and remuneration
3.1 Risk management in remuneration
The board has a range of mechanisms available to adjust remuneration and incentive outcomes to reflect behavioural, risk or
compliance outcomes. The table below summarises the range of mechanisms available and their intended operation.
Risk
assessment
Enterprise and
business unit levels
Risk and
conduct outcomes
All employees
Malus and
clawback provisions
Board
discretion
All incentive plans
Allows the board to adjust
or lapse (malus) unvested
incentive awards or reclaim
(clawback) vested incentives
in certain circumstances.
All deferred incentives are
subject to a conduct and risk
review before vesting.
This applies to current and
former employees.
The board may apply its
discretion to adjust vesting
outcomes, subject to the
equity incentive plan rules
governing the plan and in
compliance with the relevant
policies.
The Chief Risk Officer reports
the overall assessment of risk
management as an input
to the determination of the
group incentive pool.
Employees’ risk management
behaviour and conduct is
specifically considered as
part of their performance
assessment and in
the determination of
remuneration outcomes.
The consequence
management framework
ensures that behaviour
which does not meet
expectations is actively
and consistently managed,
including adjustments
to remuneration. The
establishment of the
Consequence Management
Committee in 2020 aims to
achieve further consistency
across the AMP group in
relation to conduct-related
remuneration adjustments.
The board exercises discretion to apply remuneration consequences to executives with overall accountability for matters arising in
their business units with adverse risk, client and/or reputational impacts.
AMP’s consequence management framework was further strengthened in 2020. During the year there were a number of conduct
matters that resulted in the application of formal consequences. Every substantiated conduct case resulted in the application of
formal consequences. There were 46 cases considered as serious conduct breaches warranting the application of remuneration
or management consequences, including formal warnings and performance-based remuneration reductions. Of the 46 cases, 24
resulted in termination of employment. At the time of this report, the annual remuneration review process is about to commence
for employees (outside KMP) where conduct performance will be factored into any remuneration decisions.
While 2020 presented many challenges from a people perspective, conduct cases involving interpersonal behavioural issues have
remained relatively low and are largely consistent with 2019 levels. This is a positive outcome, with the work environment risks
mitigated by a significant range of mental health and other support services provided to employees during the year.
40
AMP 2020 annual report
4 Key management personnel (KMP) and leadership renewal
Key management personnel (KMP) are the individuals who have authority and responsibility for planning, directing and controlling
the activities of AMP. This includes the Chief Executive Officer (CEO), nominated direct reports of the CEO and AMP’s non-executive
directors (NEDs). In this report, the term ‘executive’ means the CEO and the other executives who are KMP.
2020 KMP are detailed below. Each KMP held their position for the whole of 2020, unless stated otherwise.
Non-executive Directors
Current
KMP
Current
KMP Position
Debra Hazelton (appointed Chair 23 August 2020)
Francesco De Ferrari
Chief Executive Officer
Rahoul Chowdry (appointed 1 January 2020)
David Cullen
Group General Counsel
Kathryn McKenzie (appointed 18 November 2020)
James Georgeson
Chief Financial Officer
(appointed 3 February 2020)
John O’Sullivan
Michael Sammells (appointed 1 March 2020)
Andrea Slattery
Helen Livesey
Group Executive, People and Corporate Affairs
Phil Pakes
Blair Vernon
Chief Risk Officer
(appointed 4 April 2020)
Acting Chief Executive, AMP Australia
(appointed 6 August 2020)
Non-executive Directors
KMP
KMP Position
Former
John Fraser (up to 23 August 2020)
Andrew Harmos (up to 8 May 2020)
Trevor Matthews (up to 1 July 2020)
David Murray (up to 23 August 2020)
Peter Varghese (up to 8 May 2020)
Mike Wilkins (up to 14 February 2020)
Former
Megan Beer
Jenny Fagg
Boe Pahari
Craig Ryman
Adam Tindall
Alex Wade
Chief Executive, AMP Life
(up to 30 June 2020)
Chief Risk Officer
(up to 3 April 2020)
Chief Executive, AMP Capital
(1 July 2020 to 23 August 2020)
Chief Operating Officer
(up to 28 May 2020)
Chief Executive, AMP Capital
(up to 30 June 2020)
Chief Executive, AMP Australia
(up to 5 August 2020)
Board changes
Debra Hazelton was appointed Chair of the board and Rahoul Chowdry, Kathryn McKenzie and Michael Sammells were appointed
as Directors during the year.
Executive changes
Changes to the executive KMP include:
–
–
Permanent appointment: James Georgeson (Chief Financial Officer) and Phil Pakes (Chief Risk Officer).
Interim appointment: Blair Vernon (Acting Chief Executive, AMP Australia).
5 Performance and reward outcomes
5.1 Performance objectives and assessment
The board is committed to providing increased transparency regarding the financial and non-financial objectives used to assess
company and executive performance.
The successful delivery of the multi-year transformation strategy is underpinned by key strategic, financial, people leadership, client
and risk goals linked to the annual objectives set by the board. These form the overall group scorecard and achievement against
these objectives is used by the board as a key input in determining the group incentive pool.
A risk overlay is independently conducted by the Chief Risk Officer, reviewed by the AMP Limited Board Risk Committee and
approved by the AMP Limited Board. This serves as an additional input in determining the group incentive pool and influences any
reward outcomes for the CEO or KMP.
In addition, when assessing overall performance, the board may choose to exercise discretion to take into account any factors not
reflected in the assessment against annual objectives or risk overlay to ensure reward outcomes appropriately balance employee
and shareholder outcomes.
AMP 2020 annual report
41
Directors’ report 5 Performance and reward outcomes (continued)
5.2 Group performance outcomes for 2020
The overall company objectives for 2020 and the board’s assessment of performance against each are set out in the table below.
Despite challenging circumstances, management made strong progress in delivering on key strategic priorities. Assessment against
the group scorecard indicated almost two-thirds of the key priorities achieved or exceeded target.
However, notwithstanding the delivery of some key transformation milestones, AMP’s financial performance remained significantly
below plan with net profit after tax (underlying) of $295 million.
In determining the 2020 group incentive pool the board was therefore very cognisant of the shareholder experience and the
impacts of organisational instability on AMP’s reputation, our employees and clients.
Strategic pillar
Strategic initiatives
Performance outcome
Performance commentary
Client
Client
experience
Significantly
below
Below
Achieved
Exceeded
Financial
Client
remediation
Profit (loss) after
tax attributable
to shareholders
Net profit after
tax (underlying)
Return on equity
(underlying)
Strategic
priorities
Simplify
portfolio
Significantly
below
Below
Achieved
Exceeded
Significantly
below
Below
Achieved
Exceeded
Significantly
below
Below
Achieved
Exceeded
Significantly
below
Below
Achieved
Exceeded
Significantly
below
Below
Achieved
Exceeded
Reinvent wealth
management in
Australia
Significantly
below
Below
Achieved
Exceeded
Customer NPS improved from +15 to +27 points
in the year. This reflected concerted effort in
client engagement during COVID-19, significant
progress in simplifying our product offering,
streamlining the number of Master Trust products
from 70 to 11, and delivering ~$130 million in
member benefits.
Client remediation is 80% complete, and on track
for completion by mid 2021.
The result of $177 million was favourable to
plan and positively impacted by one off items.
Underlying results were subdued, with COVID-19
impacting the entire business, including market
impacts on AUM revenue. Net profit after tax
(underlying) was significantly below target at
$295 million.
Underlying ROE was below target at 6.3%, despite
prudent capital management and strong cost
management. The result reflects the impact of
COVID-19 on earnings.
The successful sale and separation of AMP Life,
which included one of the largest successor
fund transfers in corporate Australia’s history,
was a significant achievement, particularly in
a COVID-19 work-from-home environment.
This represents a critical milestone in AMP’s
transformation.
The first phase of the superannuation
simplification program was successfully
executed, returning value to clients through
a more streamlined product offering.
Further progress was made in re-shaping
the Advice business, which continues to
face challenging conditions and disruption.
The North platform displayed resilience and
continued to make inroads servicing external
financial advisers with an enhanced offering.
42
AMP 2020 annual report
5 Performance and reward outcomes (continued)
5.2 Group performance outcomes for 2020 (continued)
Strategic pillar
Strategic initiatives
Performance outcome
Performance commentary
Strategic
priorities
(continued)
Maintain growth
momentum
in AMP Bank
Grow asset
management
Significantly
below
Below
Achieved
Exceeded
Significantly
below
Below
Achieved
Exceeded
Create simpler,
leaner business
Strengthen
operating model
Significantly
below
Below
Achieved
Exceeded
Significantly
below
Below
Achieved
Exceeded
Leadership
Drive employee
engagement
Significantly
below
Below
Achieved
Exceeded
Transform
culture
Significantly
below
Below
Achieved
Exceeded
Risk
Strengthen risk
management
Significantly
below
Below
Achieved
Exceeded
The AMP Bank platform upgrade was delivered on
time and within budget, positioning the bank for
future growth.
Successful buyout of the MUTB 15% shareholding
created strategic flexibility. Continued momentum
in the real assets business, evidenced by further
fundraising in the highly successful Infrastructure
Debt Fund strategy. However, leadership instability
has limited progress and identifying a long-term
Chief Executive for AMP Capital (CE AMPC) remains
a priority.
Strong performance delivered through cost-
management programs, with in-year gross
savings delivered reaching $102 million.
Phase 2 of the operating model program has
further enhanced end-to-end accountability
within each of the three primary businesses
(AMP Capital, AMP Australia and New Zealand
wealth management). Control and enablement
functions were centralised to strengthen
accountability and oversight.
Conduct issues and leadership instability impacted
employee engagement. Overall Employee
Satisfaction (eSat) score at the end of 2020 was 67
points against a target of 70 points. While the score
demonstrates resilience, the prevailing employee
experience of the year is considered to have been
below target.
High profile cultural issues had a profound impact
on the reputation of our business. While there
was heavy investment in improving culture, and
progress made would otherwise be considered
successful, this element is considered below plan.
Completed a $100 million investment in
strengthening risk across AMP. Investment has
yielded improved risk management strategy,
steady improvement in risk culture, and positive
outcomes across major external reviews. Despite
organisational instability and reputational issues,
the response to COVID-19 demonstrated strong
operational readiness and enabled successful
completion of the AMP Life sale.
AMP 2020 annual report
43
Directors’ report 5 Performance and reward outcomes (continued)
5.3 Group performance
The remuneration outcomes for executives and employees reflect overall subdued group financial performance. 2020 net profit
after tax (underlying) of $295 million has reduced 33% from $439 million in 2019 and return on equity decreased to 6.3%.
In July 2020, AMP announced the completion of the sale of the AMP Life insurance business to Resolution Life. The sale represented
a significant step in transforming AMP and positioning the company for future growth.
Following the completion of the AMP Life sale, the board committed to return up to $544 million of excess capital to shareholders via:
–
–
a $344 million special dividend of 10 cents per share fully franked (paid on 1 October 2020), and
an on market buyback of up to $200 million – currently on hold pending completion of the portfolio review.
The table below illustrates AMP’s performance over the last five years and the remuneration outcomes.
Financial results
Profit (loss) after tax attributable to shareholders ($m)
Net profit after tax (underlying) ($m)2
Cost to income ratio (%)
Shareholder outcomes
Total dividend (cents per share)
Share price at 31 December ($)
Remuneration outcomes
Relative TSR percentile
LTI vesting outcome (% of grant)
Average STI received by KMP (as % of maximum opportunity)
2016
2017
2018
20191
2020
(344)
486
63.7
848
1,040
46.2
28
5.04
31st
22
0
29
5.19
27th
0
58
28
680
55.8
14
2.45
8th
0
0
(2,467)
439
66.0
0
1.91
0
0
23
177
295
75.5
10
1.56
0
0
0
1
2
Results have been presented on a continuing basis and re-presented for the year ended 31 December.
NPAT (underlying) represents shareholder attributable net profit or loss after tax excluding market adjustments, accounting mismatches and non-
recurring revenue and expenses.
5.4 CEO and executive performance and outcomes
The performance assessment of the CEO considers overall company performance against a scorecard (as detailed in section 5.2)
with a further qualitative and quantitative assessment of his individual contribution including consideration of risk management
and behavioural outcomes.
The board assessed the CEO’s performance for 2020 in line with company performance and individual contribution and thanks
him for his leadership in an extraordinarily challenging year. Despite significant market and internal disruption, the CEO continued
to drive the turnaround strategy and delivered a number of key transformation milestones. In addition to the group performance
outcomes noted at section 5, the CEO specifically delivered:
–
–
–
–
Strong capital and liquidity positions amid extreme market volatility.
COVID-19 response: prioritisation of client support during the COVID-19 pandemic; $1.8 billion of early release of super
payments and paused home loan repayments for ~11% of AMP Bank mortgage clients.
Employees: Implemented a refined performance management framework as an enabler of a high-performance culture.
Portfolio review: led and conducted a strategic portfolio review.
Despite strong personal contribution and progress of strategic delivery, the CEO has agreed with the board’s assessment that
AMP’s 2020 financial performance and resulting shareholder expectation, does not warrant award of an STI award for the year.
For KMP, executive contribution is aligned to group performance outcomes through the cascade of the company’s overall objectives
to respective portfolios of accountability. In this way, an executive’s performance is aligned to both company performance and their
individual business unit performance.
Again, reflecting overall performance of the group and aligned shareholder experience, no STI awards are being made for KMP
performance for 2020.
For all other employees, their performance assessment reflects achievement against agreed objectives combined with
consideration of risk management, behaviour and conduct.
44
AMP 2020 annual report
5 Performance and reward outcomes (continued)
5.4 CEO and executive performance and outcomes (continued)
The following table shows the STI awarded to current and former executives for the 2020 performance year. This table seeks
to demonstrate payments made and/or forgone. It differs from the statutory table in section 7.1 which is prepared according to
Australian Accounting Standards.
Maximum STI
opportunity value
$’000
Percentage
of maximum STI
opportunity awarded
Percentage
of target STI
opportunity awarded
Current executives
Francesco De Ferrari
David Cullen
James Georgeson
Helen Livesey
Phil Pakes1
Blair Vernon1
Former executives
Megan Beer
Jenny Fagg
Boe Pahari2
Craig Ryman
Adam Tindall2
Alex Wade
4,400
1,500
1,500
1,700
728
683
1,800
1,800
n/a
1,800
n/a
1,940
0%
0%
0%
0%
0%
0%
0%
0%
n/a
0%
n/a
0%
0%
0%
0%
0%
0%
0%
0%
0%
n/a
0%
n/a
0%
1
2
Phil Pakes’ and Blair Vernon’s maximum STI opportunity values are pro-rated for the time they were appointed to KMP.
The % of maximum STI opportunity for Adam Tindall and Boe Pahari is not applicable as their opportunity for STI under the AMP Capital Enterprise
Profit Share Plan is uncapped with no applicable target STI.
5.5 Long-term incentive performance
Long-term incentive vesting outcomes determined in 2020 are detailed below.
To assess the 2017 LTI awards vesting in 2020, AMP’s TSR performance was compared against the top 50 companies based on
market capitalisation rank in the S&P/ASX 100 index, measured for the period 1 January 2017 to 31 December 2020. The 2017
LTI award performance hurdles were not achieved, resulting in nil vesting of the award which will lapse in full.
Grants that were tested for vesting in 2020
Grant date
Performance
period
start date
Performance
period
end date
Measure
Threshold
target
(50% vests)
Maximum
target
(100% vests)
AMP’s TSR
performance
Vesting
outcome
(portion of
tranche vested)
19 May 2017
1 Jan 2017
31 Dec 2020
TSR
21.9%
50th percentile
68.5%
75th percentile
(57.5%)
0%
The table below provides details of the approved performance measures and targets for current unvested LTI grants (the
Transformation Incentive) with a performance end date up to 2023. During the 2020 year, the board heard extensive shareholder
feedback with regards to the maximum potential value and vesting hurdles applied to the Transformation Incentive award.
These concerns have been addressed by:
–
Clarifying the rationale for the quantum of the grant which was intended to replace the 2019 and 2020 LTI grants and to
recognise that STI for executives was likely to be subdued during the transformation period.
Confirming that under the Transformation award’s performance gateway, no vesting will occur if AMP’s TSR is negative and
below 100% of the index.
Ensuring transparency around the structure and value of future LTI awards.
Rather than retrospectively altering the contractual terms of the grant during the performance period, undertaking to apply
appropriate discretion at the time of vesting. Specifically, the board will take into account shareholder value creation, length
of service and contribution of executives to the transformation of AMP in applying discretion (either positively or negatively)
at the vesting date.
–
–
–
Grants to be tested for vesting at a future date
Grant date
Performance
period
start date
Performance
period
end date
Measure
Threshold
target
(50% vests)
Maximum
target
(100% vests)
Board-
approved
performance
outcome
Vesting
outcome
(portion of
tranche vested)
12 Sep 2019
1 Aug 2019
15 Feb 2023
CAGR TSR
75% of index
110% of index
TBA
TBA
In keeping with the intent of the 2019 Transformation Incentive (August 2019), no LTI grants were made for 2020.
AMP 2020 annual report
45
Directors’ report
5 Performance and reward outcomes (continued)
5.6 Remuneration received by current executives in 2020
Under AMP’s remuneration framework, executives are eligible to receive a mix of fixed remuneration, STI (delivered part in cash and
part deferred as share rights) and an LTI award.
The table below sets out the remuneration actually received by the CEO and current KMP and the value of any equity awarded in
prior years (either as deferred STI and/or LTI) vesting to these executives during 2020. The table also shows the maximum value
of total remuneration forgone (this includes both the STI opportunity that was not awarded in respect of the 2020 year and any
previous years’ equity awards which were due to vest in 2020 but did not meet the relevant hurdles and were lapsed).
Presenting this information to shareholders is designed to provide more clarity and transparency of actual executive remuneration.
This approach differs from the statutory remuneration table which presents remuneration in accordance with accounting
standards. Details on Statutory disclosures are found in section 7.1.
Name
Francesco De Ferrari
David Cullen
James Georgeson
Helen Livesey
Phil Pakes
Blair Vernon
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Fixed
remuneration1
$
Short-term cash
incentive2
$
2,200,000
2,200,000
–
1,320,000
739,481
700,000
745,492
189,000
850,000
850,000
520,219
–
341,701
–
–
260,000
–
78,000
–
280,000
–
–
–
–
Equity received
during reporting
period deferred
from previous
years4
$
Total
remuneration
received during
reporting period
$
–
–
203,892
49,143
48,726
109,425
2,200,000
3,531,000
943,373
1,009,143
796,018
377,425
330,907
97,946
1,180,907
1,227,946
–
–
–
–
520,219
–
365,101
–
Other
benefits3
$
–
11,000
–
–
1,800
1,000
–
–
–
–
23,400
–
Total
forgone
during the
reporting
period5
$
4,400,000
990,000
1,500,000
820,964
1,500,000
251,682
1,969,100
1,065,641
728,306
–
683,402
–
1
2
3
4
5
Remuneration received is reflected for time in role for the relevant reporting period. James Georgeson commenced as a KMP during 2019 and Phil
Pakes and Blair Vernon commenced as KMP during 2020.
STI payments made to KMP during the relevant year based on outcomes related to the applicable year’s performance. Blair Vernon received a retention
payment during 2020 in relation to his role as the CEO New Zealand wealth management in the amount of $98,873 which has been pro-rated for the
time he was KMP and has not been included in the table above.
Other benefits include non-monetary benefits and any related FBT exempt benefits and FBT payable benefits, for example car-related expenses,
insurances, professional memberships and subscriptions. Non-monetary benefits for Francesco De Ferrari during 2019 comprise relocation costs.
The value of vested equity awards was calculated based on the units which vested multiplied by the five-day volume weighted average price (VWAP)
up to and including the date of vesting exercise. The CEO Buyout Incentive awards which vested during 2020 are excluded from the table as these
awards were designed to replace remuneration forgone from his former employer. Full details of the Buyout Incentive award values are provided in
section 5.7.
Total forgone values are inclusive of prior year LTI awards which lapsed because performance hurdles were not achieved and/or the amount of
maximum STI opportunity not received due to no STI being awarded.
5.7 CEO Buyout Incentive
Buyout Incentive awards were granted to the CEO, Mr Francesco De Ferrari, in 2018 for remuneration forgone from his former
employer on resignation to join AMP. In addition to the total remuneration received for 2020 outlined in section 5.6, the following
Buyout awards (granted in 2018) vested during the year:
–
Buyout Incentive rights (tranche 1) representing 50% of the total grant vested on 15 February 2020 totalling 1,020,408 units
with a vesting value of $1,866,494; and
Buyout Incentive restricted shares (tranche 2) representing 20% of the total grant vested on 15 August 2020 totalling 408,164
units with a vesting value of $624,490.
–
46
AMP 2020 annual report
6 Executive remuneration details
Our executive arrangements are structured to ensure that the total remuneration for each individual is linked to both their
business unit and overall company performance and is aligned to long-term shareholder value creation.
6.1 Executive 2020 remuneration arrangements
Given the 2019 remuneration strike and the ongoing review of the executive remuneration framework, 2020 was a year of
transitional remuneration arrangements for AMP. In the interests of transparency, this section sets out the arrangements that
applied to executives in the 2020 performance year:
–
–
–
–
Eligibility for STI: all executives were eligible to participate in AMP’s group incentive plan with the exception of the Chief
Executive, AMP Capital. The Chief Executive, AMP Capital was eligible to participate in the AMP Capital Enterprise Profit Share
plan, an incentive plan for the executives of AMP’s investment management business. It should be noted that Mr De Ferrari
was not eligible to participate in this plan during his time as Acting Chief Executive, AMP Capital in 2020.
Eligibility for LTI: while the executives were eligible for an LTI under the prevailing remuneration framework, the board made
the decision not to grant a long-term incentive (LTI) award for 2020, taking into account the timing, intent and size of the
Transformation Incentive (TI) award granted in August 2019. This award was designed to replace the standard 2019 and
2020 LTI grants and compensate for subdued STI during the transformation period.
Remuneration related to new roles: supplementary Transformation Incentive awards were made for Mr James Georgeson,
Chief Financial Officer and Mr Phil Pakes, Chief Risk Officer on permanent appointment to their roles to align with other KMP.
Retention awards: the portfolio review created significant additional workload for our key executives and generated substantial
additional challenge and uncertainty across the group. This was exacerbated through a series of executive departures which
disrupted business operations, leaving those remaining critical to stabilising the business, retaining corporate knowledge and
continuing to drive the turnaround strategy. Faced with these extraordinary circumstances, the board, having examined market
precedents and tested the concept with a range of investor representatives, sought to stabilise the management team by
introducing a one-off retention payment for KMP and critical talent across the organisation. As part of the discussion in relation
to the retention of the CEO’s direct reports, the board and CEO agreed that the CEO should not be considered for a retention
award based on the precedents, market feedback and other previously disclosed remuneration arrangements.
Retention payments for KMP totalled $3.89 million with the quantum of the award equivalent to 100% of fixed remuneration
deferred in its entirety. The deferral period will see 60% vest on 31 October 2021 (delivered as cash) with the remaining 40%
(delivered as share rights) vesting on 31 October 2024 subject to continued employment.
This decision was not taken lightly. However, the board believes there were very few alternatives under the circumstances,
to maintain stability and protect shareholder value through the portfolio review.
–
Overall quantum of remuneration: responding to shareholder feedback regarding the overall quantum of remuneration
being out of line with market, the average face value of incentives awarded in 2020 for the KMP, including the retention
award, was 100% of fixed remuneration. This compares to an average face value of incentives awarded in 2019 (including
the Transformation Incentive) of 568% (albeit subject to performance hurdles).
KMP average face value
of incentives as % of
fixed remuneration
2019
568%
2020
100%
AMP 2020 annual report
47
Directors’ report
6 Executive remuneration details (continued)
6.2 Terms of executive remuneration
The following common terms apply to the incentive plans outlined below:
Format of award
Awards delivered in rights to AMP Limited shares have no exercise price and carry no dividend or voting
rights until the rights vest and have been converted to shares, subject to the available trading window.
However, dividends that have accrued will be paid as additional shares after vesting.
How rights are
converted to shares
At the end of the deferral period for each tranche, any rights that have vested are converted into
AMP Limited ordinary shares on behalf of participants. Participants then become entitled to shareholder
benefits, including dividends and voting rights.
If there is a change
in control of AMP
If AMP is subject to a takeover or change of control, the board has discretion to determine the treatment
of any unvested rights.
Board discretion on
malus and clawback
The board may apply its discretion in adjusting for malus and clawback. The board may reduce or
clawback awards in certain circumstances, such as:
–
–
the participant’s employment is terminated for misconduct;
the participant acting fraudulently, dishonestly or in a manner which brings the AMP group into
disrepute or being in material breach of their obligations to the group;
– to protect the financial soundness or position of AMP;
–
to respond to a material change in the circumstances of AMP, or a significant unexpected or
unintended consequence affecting AMP that was not foreseen by the Remuneration Committee
(including any misstatement of financial results); and/or
– to ensure no unfair benefit to the participant.
If the executive
leaves AMP
If any rights have not yet vested and an executive resigns from AMP or their employment is terminated
for misconduct any unvested rights will lapse.
If an executive leaves AMP due to retirement or redundancy any unvested rights may be retained, and
vesting will continue subject to the vesting conditions as would apply if the person had remained in
AMP employment.
2020 AMP Group Incentive Plan
Eligible
participants
All executives, excluding the Chief Executive, AMP Capital.
Format of award
The award is delivered 60% in cash and 40% in rights to AMP Limited shares deferred for four years.
How individual
performance is
measured
Individual performance is measured against the performance of each executive’s business area as well as
their personal objectives. Performance measures for the executives and business areas are agreed with the
board at the start of each year.
How the incentive
pool is calculated
The board determines the group incentive pool, based on performance against the group incentive pool
measures (refer to section 5.1), taking into account AMP’s financial results and the progress of AMP’s
strategic objectives.
How the awards
are allocated
The CEO AMP recommends to the board for its approval the executive incentive allocations based on
company and individual performance. Separately the board assesses the CEO AMP’s performance against
the overall company performance measures and objectives to determine an allocation.
STI deferral
100% of the award vests between two or four years depending on legislative requirements. Vesting is
subject to ongoing employment and compliance with AMP policies and is subject to board discretion (as
described above under ‘Board discretion’). It is AMP’s practice to buy on market the shares to be delivered.
48
AMP 2020 annual report
6 Executive remuneration details (continued)
6.2 Terms of executive remuneration (continued)
2020 AMP Capital Incentives
Eligible
participants
Format of award
Chief Executive, AMP Capital and selected AMP Capital employees.
The total variable pay award for the Chief Executive, AMP Capital is made up of eligibility to participate in
an AMP Capital Enterprise Profit Share (EPS) award and eligibility for LTI participation.
How individual
performance is
measured
Performance of the Chief Executive, AMP Capital is measured against the performance of AMP Capital and
performance against personal objectives. Performance measures for the Chief Executive, AMP Capital and
the AMP Capital business are agreed with the board at the start of each year.
How the
incentive pools
are calculated
An agreed percentage of AMP Capital pre-tax profit is made available for the Enterprise Profit Share plan.
The percentage is determined by the board at the start of the performance year and is not disclosed due to
the commercially sensitive nature of the information.
The board may adjust the pool up or down at its discretion to recognise non-profit-related performance,
including changes in market conditions and broader financial factors or if AMP Capital management
operates outside board-approved risk appetite levels.
How the awards
are allocated
Based on a recommendation from the CEO AMP, the board approves any allocation to the Chief Executive,
AMP Capital based on his performance. Following this allocation, the Chief Executive, AMP Capital
determines the allocation of the remaining enterprise profit share pool to other eligible participants on
a discretionary basis subject to final approval by the CEO AMP.
Incentive deferral
A minimum of 50% of any EPS allocation is deferred into an equal split of rights to AMP Limited shares and
a deferred cash component that is notionally invested into a general portfolio of AMP Capital Funds.
Rights to AMP Limited shares
Any entitlement to AMP Limited shares will be delivered as share rights that will convert to AMP Limited
shares (vest) after one and two years, subject to AMP’s trading policy.
Vesting is subject to ongoing employment and compliance with AMP policies and is subject to board
discretion (as described above under ‘Board discretion’). Upon vesting the executive receives one fully paid
ordinary AMP Limited share in exchange for each right held. It is AMP’s practice to buy on market the shares
to be delivered.
Notional investment
The deferred cash portion is notionally invested into a general portfolio of AMP Capital managed funds.
This investment is described as ‘notional’ because the Chief Executive, AMP Capital does not directly hold the
underlying securities in this basket of managed funds. The value of the retained amount will vary as if these
amounts were directly invested in AMP Capital managed funds, giving the Chief Executive, AMP Capital an
effective economic exposure to the performance of the securities over the four-year period.
Vesting is subject to ongoing employment and compliance with AMP policies and is subject to board
discretion (as described above under ‘Board discretion’). Upon vesting the executive receives the cash amount
adjusted upwards or downwards for any notional return generated by the portfolio of AMP Capital Funds.
2020 Long-Term Incentive
Eligible
participants
The board determined that no LTI would be granted in 2020 due to the value of existing awards granted in
prior financial years, in particular the Transformation Incentive awards granted in 2019, developed to replace
LTI awards for 2019 and 2020.
It is intended to award new LTI awards in the 2021 financial year as part of the revised remuneration
framework to avoid a period of at least two years in which no potential vesting would occur to
support retention.
AMP 2020 annual report
49
Directors’ report 6 Executive remuneration details (continued)
6.2 Terms of executive remuneration (continued)
2020 Retention awards
Eligible
participants
A selected group of senior employees including KMP but excluding the CEO and Managing Director.
Format of awards
Awarded 60% as cash deferred to October 2021 and 40% as share rights in rights to AMP Limited shares
deferred for four years to October 2024.
Vesting conditions
Awards are subject to continued service with AMP until applicable vesting dates for deferred cash and share
rights.
How the awards
are allocated
To applicable executives the award is up to 100% of Fixed Remuneration and was offered in recognition of the
fact that no other incentive (short or long term) will be awarded during, or in respect of 2020. Awards have
been made to KMP and a small group of select individuals outside the KMP, seen as instrumental to the
stability of AMP and critical to ensuring a successful portfolio review outcome.
Group Incentive
Plan, AMP Capital
Enterprise Profit
Share (EPS)
and Enterprise
Performance
Incentive (EPI)
All employees
2018 and 2019
Share rights
Notional
investment
(EPS only)
n/a
n/a
Incentive awards for KMP awarded prior to 2020 but not yet vested
Award
Transformation
Incentive award
CEO LTI
CEO Recovery
Buyout Incentive
CEO Buyout
Incentive
Eligible
participants
CEO, KMP plus
selected senior leaders
CEO
Awarded
2019
2019
CEO
2018
CEO
2018
Awarded as
Performance
rights
Performance
rights
Performance
rights
Restricted shares
and share rights
February 2022
February 2023
AMP share
price of $2.45
n/a
n/a
Performance
period ends
Performance
hurdle
Vesting conditions
and date/s
February 2023
February 2023
As for
Transformation
Incentive award
As per
Transformation
Incentive award
AMP compound
average growth
rate (CAGR) in total
shareholder return
(TSR) related to an
equal weighted index
of ASX 100 financial
services excluding
A-REITs
In addition to the
performance hurdle,
vesting is also subject
to both a risk and
conduct gateway as
well as a performance
gateway with holding
locks up to September
2023 if required by
the Banking Executive
Accountability Regime
50
AMP 2020 annual report
Ongoing service
to applicable
vesting dates in
August 2021 and
February 2022
Deferral of
annual incentives.
Vesting dates
up to February
2024 subject to
continued service
Up to 50% of award
may vest in February
2022 if share price
is $2.45 or higher.
Up to 100% of
award will vest in
February 2023 if the
share price is $2.75
or higher (less any
award which may
have vested in 2022)
6 Executive remuneration details (continued)
6.3 Executive shareholding
Minimum shareholding changes for 2020
During 2020, listening to feedback from investors and shareholder representatives, the board revised the minimum shareholding
requirement for executives to more closely align to current market practice. Under the revised approach, the increased minimum
shareholding requirement for KMP as follows:
– CEO – two times fixed remuneration.
–
Executives – one times fixed remuneration.
Executives are expected to achieve the minimum shareholdings within a five-year period from commencement in their role.
The minimum shareholding values contained in the table below include the revised calculation methodology applied for 2020.
AMP includes the following equity holdings to determine whether an executive meets this requirement:
– AMP Limited shares: ordinary AMP Limited shares registered in the executive’s name or a related party.
– AMP share rights: granted to executives through AMP’s employee share plans.
Share rights that are allocated to executives are included to meet their minimum holding requirement only where future vesting
is not subject to any further performance condition (other than a continued service condition). AMP Limited shares and/or share
rights cannot be hedged.
Executives are not expected to purchase shares to meet the requirement. Rather it is expected that executives would not sell any
shares held (other than to cover tax liabilities arising) and that they will retain shares awarded to them by the Company until the
minimum requirement is reached.
Minimum shareholding summary
Name
Executive director
Francesco De Ferrari
Group executives
David Cullen
James Georgeson
Helen Livesey
Phil Pakes
Blair Vernon
Fixed pay1
$
Total unit
balance
Total value
of holding2
$
Target date
to meet the
requirement
2,200,000
3,121,144
4,868,985
Achieved
750,000
750,000
850,000
700,000
845,018
562,437
456,808
593,292
177,514
436,432
877,402
Achieved
712,620 1 February 2025
Achieved
925,536
276,922
3 April 2025
5 August 2025
680,834
1
2
Fixed pay includes cash salary plus superannuation and has been captured as an annualised amount in Australian dollars (or equivalent for Blair Vernon)
to calculate MSR values.
The total value of each holding was calculated as at 31 December 2020 using a closing price of $1.56 and total number of eligible securities held by
the KMP currently.
AMP 2020 annual report
51
Directors’ report
6 Executive remuneration details (continued)
6.4 Executive employment contracts
Contract term
CEO
Length of contract
Open-ended
Executives
Open-ended
Notice period
6 months by AMP or by Francesco De Ferrari
6 months by AMP or the executive (with the
exception of one executive for whom the notice
period by AMP is 12 months)
Entitlements on
termination
– Accrued fixed pay, superannuation and other statutory requirements;
–
–
–
–
Executives eligible for incentives may be awarded on a pro-rata basis for the current period in the
case of death, disablement, redundancy, retirement or notice without cause, subject to the original
performance periods and hurdles;
Unvested deferred incentive awards may continue in the case of death, disablement, redundancy,
retirement or notice without cause, subject to the original performance periods and hurdles;
Vested deferred incentive awards will be retained except in the case of serious misconduct or breach
of contract; and
In the case of redundancy, the AMP Redundancy, Redeployment and Retrenchment Policy in place at
the time will be applied. This is the same policy that applies to all employees at AMP.
Restrictions on
termination benefits
AMP will not make payments on termination that require shareholder approval or breach the
Corporations Act.
Post-employment
restraint
6-month restraint on entering employment with a competitor and 12-month restraint on solicitation of
AMP clients and employees.
52
AMP 2020 annual report
6 Executive remuneration details (continued)
6.5 Summary of executive exit arrangements
The table below summarises the exit arrangements for former KMP who left the company during 2020. Further details are provided
in the statutory disclosure table in section 7.1.
Executive
Exit arrangement
Megan Beer
ceased as KMP
30 June 2020
Jenny Fagg
ceased as KMP
3 April 2020
Craig Ryman
ceased as KMP
28 May 2020
Adam Tindall
ceased as KMP
30 June 2020
Alex Wade
ceased as KMP
5 August 2020
–
Unvested LTI, STI Deferral and Transition Incentive awards were retained in accordance with plan rules
and subject to original terms
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Payment in lieu of balance of notice
Provision of other benefits required by law
A pro-rated portion of the unvested Transformation Incentive award was lapsed and the remaining
balance was retained in accordance with plan rules and subject to original terms
Unvested STI Deferral and Transition Incentive awards were retained in accordance with plan rules and
subject to original terms
Payment in lieu of balance of notice
Provision of other benefits required by law
A pro-rated portion of the unvested Transformation Incentive award was lapsed upon cessation of
employment and the remaining balance was retained in accordance with plan rules and subject to
original terms
Unvested LTI, STI Deferral and Transition Incentive awards were retained in accordance with plan rules
and subject to original terms
Provision of other benefits required by law
Unvested LTI, STI Deferral and Notional Investment awards were retained in accordance with plan rules
and subject to original terms
Restricted shares granted as part of Mr Tindall’s participation in the employee share plans were
released in full in accordance with plan rules
Provision of other benefits required by law
Unvested Transformation Incentive and STI Deferral awards were lapsed in full in accordance with
plan rules
Restricted shares purchased as part of Mr Wade’s participation in the employee share plans were
released in full and AMP-funded matching shares were forfeited in accordance with plan rules
AMP 2020 annual report
53
Directors’ report 7 Other executive remuneration disclosures
The following disclosures provide additional information and/or are required under the Corporations Act. This includes the 2020
executive remuneration that is prepared according to Australian Accounting Standards.
7.1 Statutory remuneration disclosure
The table below shows the remuneration that was received by executives in 2020 as well as any incentive rewards that have been
awarded but not yet received. This includes fixed remuneration and the value of current and previous incentive payments which
have not yet vested.
Short-term employee benefits
Post-
employment
benefits
Share-based payments4
Long-term benefits
Termination
payments
Cash
salary1
$’000
Cash
short-term
incentive2
$’000
Other
short-term
benefits3
$’000
Super-
annuation
benefits
$’000
Rights
and
options
$’000
Restricted
shares
$’000
Deferred
incentive5
$’000
Other6
$’000
Cash
payments
$’000
Total
$’000
Current disclosed executives
Francesco De Ferrari
Chief Executive Officer
David Cullen
Group General
Counsel
James Georgeson
Chief Financial
Officer
Helen Livesey
Group Executive,
People and
Corporate Affairs
Phil Pakes
Chief Risk Officer,
AMP Group
Blair Vernon
Acting Chief
Executive,
AMP Australia
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2,177
2,177
–
1,320
17
1,711
705
668
720
182
827
802
483
–
292
–
–
260
–
78
–
280
–
–
–
–
53
8
59
1
93
16
59
–
199
–
3,613
4,124
910
4,072
23
22
25
25
25
7
846
531
609
115
23
22
1,072
617
18
–
72
–
323
–
86
–
–
–
–
–
–
–
–
–
–
–
–
–
9
5
80
13
174
3
22
17
2
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
6,749
13,431
1,709
1,505
1,587
386
2,037
1,754
885
–
650
–
–
–
–
–
–
–
–
–
–
–
The continuation of the table and footnotes 1 to 6 can be found on the following page.
54
AMP 2020 annual report
7 Other executive remuneration disclosures (continued)
7.1 Statutory remuneration disclosure (continued)
Short-term employee benefits
Post-
employment
benefits
Share-based payments4
Long-term benefits
Termination
payments
Cash
salary1
$’000
Cash
short-term
incentive2
$’000
Other
short-term
benefits3
$’000
Super-
annuation
benefits
$’000
Rights
and
options
$’000
Restricted
shares
$’000
Deferred
incentive5
$’000
Other6
$’000
Cash
payments
$’000
Total
$’000
436
860
–
655
237
877
–
684
137
–
366
846
–
129
–
225
–
165
–
200
–
150
–
–
–
200
–
–
501
56
–
222
16
43
–
70
3
–
(46)
43
–
81
12
25
–
23
11
22
–
22
–
–
117
641
–
623
948
283
–
582
132
–
19
25
1,406
552
–
24
–
(80)
450
878
–
1,442
85
30
37
25
1,298
1,090
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
104
–
–
–
–
–
19
13
–
(11)
(4)
2
–
(26)
–
–
–
–
1,085
1,820
–
419
–
2,096
467
–
–
967
1,675
1,427
–
2,449
–
–
376
–
(6)
40
1,277
–
3,016
1,706
–
7
–
1,808
–
1,969
392
639
(64)
19
890
–
3,088
4,123
545
909
–
298
–
400
46
581
–
–
–
31
26
39
–
18
(392)
392
(201)
659
–
556
–
–
–
–
–
–
(1)
1
510
–
533
2,981
–
(4)
–
1,202
–
2,101
Former disclosed executives
Megan Beer
2020
Former Chief Executive, 2019
AMP Life
Sally Bruce
2020
Former Group Executive, 2019
AMP Bank
2020
Jenny Fagg
Former Chief Risk Officer 2019
2020
2019
Gordon Lefevre
Former Chief
Financial Officer
Boe Pahari7
2020
Former Chief Executive, 2019
AMP Capital
Craig Ryman
Former Chief
Operating Officer
2020
2019
Paul Sainsbury
2020
Former Group Executive, 2019
Wealth Solutions
and Customer
Adam Tindall
2020
Former Chief Executive, 2019
AMP Capital
Alex Wade
2020
Former Chief Executive, 2019
AMP Australia
2020
Fiona Wardlaw
Former Group Executive, 2019
People and Culture
1
2
3
4
Cash salary is inclusive of base salary and short-term compensated absences.
Cash short-term incentive for 2020.
Other short-term benefits include non-monetary benefits and any related FBT, for example, short-term allowances, insurances and the net change in
annual leave accrued. In addition, it reflects the pro rata expense in relation to retention awards.
Share-based payments expense is inclusive of adjustments that may be made in the current period in relation to unvested awards including those
related to cessation of employment.
5 Deferred incentives reflect the accounting expense for cash incentive notionally invested as part of deferred incentive arrangements in AMP Capital.
6 Other long-term benefits represent the net change in long service leave accrued.
7
While a zero STI outcome was awarded to Mr Pahari for his role as KMP, he remained eligible to participate in the AMP Capital Enterprise Profit Share
(EPS) plan in his capacity as Global Head of Infrastructure Equity and the Northwest region. For this role, consistent with prior years, he received a
payment awarded under the AMP Capital EPS plan. The pro-rated amount of the EPS award was $937,724 for the time during which he was the Chief
Executive, AMP Capital.
Carried interest
Carried interest is a form of performance fee funded by investors where participating employees hold a direct interest in the fund’s
success. It is a structured long-term performance fee sharing arrangement that is standard market practice for closed-end funds.
No carried interest was payable in 2020.
AMP 2020 annual report
55
Directors’ report
7 Other executive remuneration disclosures (continued)
7.2 Executive shares and share rights holding
The following table shows the number of shares and share rights held by executives or their related parties during 2020.
A related party is typically a family member of the executive and/or is an entity in which the executive has direct or indirect control.
The definition of units includes AMP Limited shares and share rights which are not subject to any future performance conditions.
Holding at 1 Jan 2020
Holding at 31 Dec 2020
Shares
Share
rights1
Total
number
of units at
1 Jan 2020
Share
rights
granted
during
20202
Shares
granted
during
2020
Restricted
shares
released3
Share
rights
converted
to shares3
Share
rights
forfeited
or lapsed
Other
market
trans-
actions4
Shares
Total
number
of units at
31 Dec 2020
Share
rights
Current KMP
Francesco De Ferrari 2,040,816 2,040,816 4,081,632 264,000
– 408,164 1,020,408
– (1,224,488) 1,836,736 1,284,408 3,121,144
David Cullen
98,435
237,245
335,680 226,054
James Georgeson
177,331
49,423
226,754 230,054
Helen Livesey
Phil Pakes5
Blair Vernon5
60,995
279,036
340,031 253,261
–
11,200
11,200 162,450
95,867
145,105
240,972 195,460
–
–
–
–
–
–
–
–
–
–
106,382
25,423
172,653
–
–
–
–
–
–
–
703
205,520
356,917
562,437
–
–
202,754
254,054
456,808
233,648
359,644
593,292
3,864
3,864
173,650
177,514
–
95,867
340,565
436,432
Shares
Share
rights1
Total
number
of units at
1 Jan 2020
Share
rights
granted
during
20202
Shares
granted
during
2020
Restricted
shares
released3
Share
rights
converted
to shares3
Share
rights
forfeited
or lapsed
Other
market
trans-
actions4
Shares
Share
rights
Total
number of
units on
date ceased
as KMP
Former KMP6
Megan Beer
Jenny Fagg
Boe Pahari
132,272
286,154
418,426 120,000
9,793
212,765
222,558
40,000
218 1,596,257 1,596,475
–
Craig Ryman
80,543
282,256
362,799
40,000
Adam Tindall
501,525
303,630
805,155 576,800
–
–
–
–
–
–
–
–
–
–
Alex Wade
537,815
–
537,815
80,000
– 209,747
–
179,771
106,382
–
1,143
313,186
226,383
539,569
–
(106,382)
9,793
146,383
156,176
–
–
–
218 1,596,257 1,596,475
175,873
196,814
–
(103,214)
153,202
146,383
299,585
–
–
1,144
699,483
683,616 1,383,099
1,361
539,176
80,000
619,176
1
2
3
4
5
6
Share rights give the participant the right to acquire one fully paid ordinary share in AMP Limited after a specified service period. Rights are granted
at no cost to the participant and carry no dividend or voting rights until they vest. Rights may be settled through an equivalent cash payment at the
discretion of the board.
Share rights awarded on 1 April 2020 relate to the 2019 short-term incentive (STI). The number of rights granted was determined using the volume
weighted average price of $1.25 per share right and share rights awarded on 23 November 2020 relate to retention awards. The number of rights
granted was determined using a volume weighted average price of $1.7236 per share right.
Unless otherwise stated, restricted shares and share rights converted during 2020 relate to awards granted in prior years.
Other market transactions are a result of executives or their related parties trading AMP Limited shares on the open market or may include shares
awarded as part of the executive’s participation in the AMP Share Purchase Plan (SPP) allotment at a market value of $1.34 per share.
The opening balances shown for Phil Pakes and Blair Vernon are reflective of their respective holdings as at the date on which they became KMP.
Former executives’ opening and closing balances are reflective of their respective holdings for the time they were KMP.
56
AMP 2020 annual report
Total
David Cullen
Total
James Georgeson2
Total
Helen Livesey3
Total
Phil Pakes4
Total
Blair Vernon
Total
Former KMP
Megan Beer5
Total
Jenny Fagg6
Total
Boe Pahari
Total
Craig Ryman7
Total
Adam Tindall5
Total
Alex Wade8
Total
7 Other executive remuneration disclosures (continued)
7.3 Executive performance rights holdings
The following table shows the performance rights which were granted, exercised or lapsed during 2020.
Grant
date
Performance
condition
Fair
value per
performance
right
$
Holding at
1 Jan 2020
Rights
granted in
2020
Rights
exercised
in 2020
Rights
forfeited,
lapsed or
cancelled
in 2020
Vested and
exercisable
at
31 Dec 2020
Holding at
31 Dec 2020
Current KMP
Francesco De Ferrari1 21/08/18
12/09/19
12/09/19
Share Price Targets
Share Price Targets
CAGR of TSR
0.82
0.62
1.21
12/09/19
CAGR of TSR
1.21
1,656,976
2,500,000
3,867,402
8,024,378
1,933,701
1,933,701
–
–
–
–
–
–
12/09/19
CAGR of TSR
1.21
828,729
828,729
828,729
828,729
19/05/17
12/09/19
TSR
CAGR of TSR
2.24
1.21
172,500
2,348,066
2,520,566
–
–
–
12/09/19
CAGR of TSR
1.21
–
–
–
276,243
276,243
1,104,972
1,104,972
–
–
–
–
1,656,976
–
–
–
–
–
– 1,656,976
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,500,000
3,867,402
6,367,402
1,933,701
1,933,701
1,657,458
1,657,458
172,500
2,348,066
2,520,566
1,381,215
1,381,215
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Grant
date
Performance
condition
Fair
value per
performance
right
$
Holding at
1 Jan 2020
Rights
granted in
2020
Rights
exercised
in 2020
Rights
forfeited
or lapsed
in 2020
Holding on
date ceased
as KMP
Vested and
exercisable
at
31 Dec 2020
19/05/17
TSR
2.24
12/09/19
CAGR of TSR
1.21
–
–
–
180,000
180,000
2,486,187
2,486,187
–
–
19/05/17
12/09/19
TSR
CAGR of TSR
2.24
1.21
225,000
2,486,187
2,711,187
19/05/17
TSR
2.24
12/09/19
CAGR of TSR
1.21
240,000
240,000
2,679,558
2,679,558
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180,000
180,000
2,486,187
2,486,187
–
–
225,000
2,486,187
2,711,187
240,000
240,000
2,679,558
2,679,558
–
–
–
–
–
–
–
–
–
–
–
–
–
1
2
3
4
5
6
7
8
Performance rights granted to Francesco De Ferrari under the 2018 LTI award were cancelled following approval by shareholders at the 2020 AGM on
8 May 2020.
Performance rights were granted to James Georgeson under the 2019 LTI award reflecting his permanent appointment to the role of Chief Financial
Officer. The number of rights granted was determined using the fair value price of $1.81 per right.
Performance rights granted to Helen Livesey under the 2017 LTI award will lapse in full, TSR hurdle not achieved following the 31 December 2020
testing date.
Phil Pakes’ opening balance is calculated from the time he was appointed to KMP and includes performance rights awards granted prior to his
appointment. Performance rights were granted to him under the 2019 LTI award reflecting his permanent appointment to the role of Chief Risk
Officer. The number of rights granted was determined using the fair value price of $1.81 per right.
Performance rights granted to Megan Beer and Adam Tindall under the 2017 LTI award will lapse in full, TSR hurdle not achieved following the
31 December 2020 testing date.
Performance rights granted to Jenny Fagg under the 2019 Transformation Incentive award were partially lapsed in the amount of 2,011,989 units
upon cessation of employment and the remaining balance is held on foot until the vesting date is reached, and performance tested. The remaining
balance of the award totals 474,198 rights.
Performance rights granted to Craig Ryman under the 2019 Transformation Incentive award will partially lapse in the amount of 1,839,202 units upon
cessation of employment and the remaining balance is held on foot until the vesting date is reached, and performance tested. The remaining balance
of the award totals 646,985 rights. Performance rights granted under the 2017 LTI award will lapse in full, TSR hurdle not achieved following the 31
December 2020 testing date.
Performance rights granted to Alex Wade under the 2019 LTI award in the amount of 2,679,558 rights will lapse in full upon cessation of employment.
Current and former executives’ opening and closing balances are reflective of their respective holdings for the time they were KMP.
AMP 2020 annual report
57
Directors’ report
7 Other executive remuneration disclosures (continued)
7.4 Executive options holdings
The following table shows the options that were granted, exercised or lapsed during 2020.
Name
Grant
date
Exercise price
$
Holding at
1 Jan 2020
Options
granted in
2020
Options
exercised in
2020
Options
cancelled in
20201
Holding at
31 Dec 2020
Vested and
exercisable at
31 Dec 2020
Francesco De Ferrari
14 Dec 2018
5.50
8,000,000
Total
8,000,000
–
–
–
8,000,000
–
8,000,000
–
–
–
–
1
Options were cancelled following approval by shareholders at the 2020 AGM on 8 May 2020.
7.5 Loans and other transactions
AMP provides home loans to Australians to help them buy, build or renovate properties. The table below includes loans offered
to executives in the ordinary course of business. These loans are on equivalent terms to those offered to other employees and
shareholders.
Balance at
1 Jan 2020
$’000
Written off
$’000
Net
advances
(repayments)
$’000
Balance at
31 Dec 2020
$’000
Interest
charged
$’000
Interest not
charged
$’000
Highest
indebtedness
during year
$’000
Number in
group
Total loans to KMP
KMP and their related parties
9,212
–
(174)
9,038
203
–
13,959
5
Loans to KMP exceeding $100,000
James Georgeson
Helen Livesey
Craig Ryman
Adam Tindall
Alex Wade
991
1,838
2,002
2,212
2,169
–
–
–
–
–
(37)
(118)
3,483
(2,212)
(1,290)
954
1,720
5,485
–
879
15
26
85
15
62
–
–
–
–
–
991
1,838
5,485
2,482
3,164
Other transactions
During 2020, the executives and their related parties may have access to other AMP products. Again, these products are provided to
executives within normal employee terms and conditions. The products may include:
–
–
– financial investment services.
personal banking with AMP Bank;
the purchase of AMP insurance and investment products; and
58
AMP 2020 annual report
8 Non-executive director remuneration
Non-executive director fees are paid to NEDs in recognition of their contribution to the board and the associated committees on
which they serve. The NED fees consist of three components and are paid inclusive of superannuation:
– AMP Limited Board base fee;
– AMP Limited committee fees; and
– AMP main subsidiary board and committee fees.
AMP Limited NEDs receive a base fee for their membership on the AMP Limited Board. AMP Limited NEDs also serve on AMP Limited
committees, including special purpose committees formed from time to time such as the Portfolio Review Committee, and on
boards and committees of one or more of AMP’s main subsidiaries. AMP Limited NEDs, excluding the AMP Limited Chair, receive
additional fees for serving as members of these committees and boards. No additional fees are paid to NEDs for their membership
or for chairing the AMP Bank Limited Board and committees.
The AMP Limited Chair receives a base fee only which covers all the Chair’s responsibilities, including chairing the AMP Limited
and AMP Bank Limited Boards, chairing or membership of any of their board committees, including any special committees, and
chairing or membership of boards and committees of any main subsidiary.
NEDs do not receive any performance-related remuneration linked to their or AMP’s performance and no retirement benefits
are paid to NEDs. This structure supports the independence and impartiality of their roles in making decisions about the future
direction of the group and the interests of NEDs are aligned with the long-term interests of shareholders through the minimum
shareholding requirement (MSR) for NEDs which requires all NEDs to hold AMP shares (refer to section 8.4).
8.1 Non-executive director fees
The Remuneration Committee is responsible for reviewing NED fees for AMP Limited and its main subsidiaries. In reviewing these
fees, the Remuneration Committee has regard to a range of factors, including:
the complexity of AMP’s operations and those of its main subsidiaries;
–
fees paid to board members of other Australian corporations of a similar size and complexity; and
–
the responsibilities and workload requirements of each board and committee.
–
The total amount of NED fees paid is capped at a maximum aggregate fee pool that is approved by shareholders. The current
fee pool is $4,620,000, which was approved by shareholders at the 2015 annual general meeting (AGM).
During 2020, the total remuneration paid to AMP Limited NEDs was $3,416,074 which represents 74% of the shareholder-approved
fee pool. This represents an overall 10.1% reduction in aggregate NED fee spend year on year.
8.2 Base fees and fee reductions during 2020
The Remuneration Committee commissions market data analysis and matching services from external remuneration advisers,
where it considers necessary, and recommends any proposed fee changes to the AMP Limited Board for approval.
In February 2020, the board reviewed the Chair’s fees and determined that there would be a 22% reduction to these fees, from
$850,000 to $660,000 (inclusive of superannuation contributions) effective 1 March 2020. The Chair’s fee continues to include all
associated responsibilities, including as Chair of the AMP Bank Limited Board. All other AMP Limited NEDs received a base fee of
$240,000 per annum (inclusive of superannuation contributions).
In December 2020, the board considered the fees paid to NEDs and deferred the review of fees until the completion of the portfolio
review. This decision to defer the review of fees, including a potential decrease, was made having regard to (amongst other matters)
the work and complexity associated with the ongoing transformation and portfolio review processes. The NED fees will be reviewed
following the completion of the portfolio review process in the context of the overall size and complexity of the company and
associated work going forward.
AMP 2020 annual report
59
Directors’ report 8 Non-executive director remuneration (continued)
8.3 2020 non-executive director remuneration
The following table shows the annual NED fees for the board and permanent committees of AMP Limited and its main subsidiaries
for 2020. As noted above, the Chair’s fees were reduced during AMP’s 2020 financial year and the details are set out below. All fees
paid are inclusive of statutory superannuation.
AMP Limited
Board
Audit Committee
Risk Committee
Remuneration Committee
Nomination Committee2
AMP Bank4
Board
Audit Committee
Risk Committee
AMP Capital Holdings
Board
Audit and Risk Committee
AMP Life Limited and NMLA5
Board
Audit Committee
Risk Committee
Chair base fee1,3
Member base fee
1 Jan 2020
$
31 Dec 2020
$
1 Jan 2020
$
31 Dec 2020
$
850,000
55,000
55,000
55,000
–
–
–
–
660,000
55,000
55,000
55,000
–
–
–
–
124,000
28,200
124,000
28,200
90,300
10,000
10,000
–
–
–
240,000
25,400
25,400
25,400
–
–
–
–
78,900
16,900
56,300
5,000
5,000
240,000
25,400
25,400
25,400
–
–
–
–
78,900
16,900
–
–
–
1
2
3
4
5
The Chair of AMP limited does not receive separate committee fees.
No fee is paid for membership or for chairing the Nomination Committee.
The AMP Limited Chair fee was reduced by over 20% to $660,000 effective 1 March 2020.
No additional fees are paid to NEDs for their membership or for chairing the AMP Bank Limited Board and committees.
These fees ceased to be paid following the completion of the sale of AMP Life to Resolution Life effective 1 July 2020.
60
AMP 2020 annual report
8 Non-executive director remuneration (continued)
8.3 2020 non-executive director remuneration (continued)
The following table shows the remuneration earned by AMP Limited NEDs for 2020.
Short-term benefits
Post-
employment
benefits
AMP Limited
Board and
committee fees
$’000
Fees for other
group boards
$’000
Additional
board duties1
$’000
Super-
annuation2
$’000
420
153
312
–
33
–
294
287
254
–
325
274
447
831
191
287
113
316
169
287
–
103
104
287
37
289
43
79
–
–
–
–
–
–
68
–
33
38
–
–
80
58
38
76
50
140
–
22
24
77
33
66
–
–
14
–
–
–
43
–
14
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18
19
24
–
5
–
22
24
20
–
21
22
11
19
13
24
10
24
9
24
–
9
8
24
2
22
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Total
$’000
481
251
350
–
38
–
359
311
356
–
379
334
458
850
284
369
161
416
228
451
–
134
136
388
72
377
Current NEDs
Debra Hazelton
Chair
Rahoul Chowdry
Non-executive Director
Kathryn McKenzie
Non-executive Director
John O’Sullivan
Non-executive Director
Michael Sammells
Non-executive Director
Andrea Slattery
Non-executive Director
Former NEDs
David Murray
Former Chairman
John Fraser
Former Non-executive Director
Andrew Harmos
Former Non-executive Director
Trevor Matthews
Former Non-executive Director
Geoff Roberts
Former Non-executive Director
Peter Varghese
Former Non-executive Director
Mike Wilkins
Former Non-executive Director
1
2
Additional work for special committees and projects.
Superannuation contributions have been disclosed separately in this table but are included in the base NED fees disclosed elsewhere in this report.
AMP 2020 annual report
61
Directors’ report
8 Non-executive director remuneration (continued)
8.4 Non-executive director minimum shareholding
The minimum shareholding requirement (MSR) for the NEDs is set out in AMP’s minimum shareholding policy. Under this policy
NEDs are required to accumulate and hold a minimum value of AMP shares to ensure their interests are closely aligned with the
long-term interests of AMP shareholders. As at the date of this report, these minimum values are:
– AMP Limited Chair: $660,000 – the equivalent of the AMP Limited Chair base fee.
– Other AMP Limited NEDs: $240,000 – the equivalent of the AMP Limited NED base fee.
NEDs are ordinarily expected to achieve these levels within four years of their appointment. The policy expects NEDs to apply at
least 25% of their base fee each year to acquire AMP shares until the MSR has been met. NEDs are also encouraged to increase their
ownership over their tenure. Any such acquisition of AMP shares may only occur when permitted to do so in accordance with AMP’s
Trading Policy.
8.5 Shares and other securities held by non-executive directors
The following table details the shareholdings and movements in those shareholdings in AMP Limited held directly, indirectly or
beneficially by NEDs or their related parties during the year and as at 31 December 2020. For this purpose, a NED’s related parties
are their close family members (as defined in the applicable accounting standard) and any entities over which the NED (or a close
family member) has control, joint control or significant influence (whether direct or indirect).
Current NEDs
Debra Hazelton
Rahoul Chowdry
Kathryn McKenzie
John O’Sullivan
Michael Sammells
Andrea Slattery
Former NEDs
John Fraser
Andrew Harmos
Trevor Matthews
David Murray
Peter Varghese
Mike Wilkins
Balance of
holding at
1 Jan 2020
Shares
acquired
during the
year
Shares
disposed
during the
year
Balance of
holding at
31 Dec 20201
Value of
holding at
31 Dec 20202
$
Progress
against MSR
102,877
–
–
54,086
–
58,475
21,875
36,818
100,000
291,375
85,575
108,525
28,100
100,000
–
34,108
30,000
27,000
11,580
–
–
–
30,000
–
–
–
–
–
–
–
–
–
–
–
–
–
130,977
100,000
–
88,194
30,000
85,475
33,455
36,818
100,000
291,375
115,575
108,525
204,324
156,000
–
137,583
46,800
133,341
47,841
51,913
188,500
416,666
162,961
198,058
On track
On track
On track
On track
On track
On track
n/a
n/a
n/a
n/a
n/a
n/a
1
2
As at the date of this report, each of the current NEDs held a ‘relevant interest’ (as defined in the Corporations Act 2001) in the number of AMP
shares disclosed above for that NED, except for Peter Varghese and Kathryn McKenzie. Peter Varghese held an interest in 80,075 shares as at the
date of this report, with the balance of the holdings disclosed above held directly and beneficially by a close family member. Kathryn McKenzie
holds no shares in AMP.
The value of the AMP shareholding for current NEDs was calculated using the closing AMP share price on the ASX of $1.56 as at 31 December 2020.
In the case of former NEDs, the closing price on the date they ceased to be an AMP Limited director.
Signed in accordance with a resolution of the directors.
Debra Hazelton
Chair
Sydney, 11 February 2021
Francesco De Ferrari
Chief Executive Officer and Managing Director
62
AMP 2020 annual report
Financial report
for the year ended 31 December 2020
Table of contents
Main statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
About this report
(a) Understanding the AMP financial report
(b) Basis of consolidation
(c) Significant accounting policies
(d) Critical judgements and estimates
Section 1: Results for the year
1.1 Segment performance
1.2 Other operating expenses
1.3 Earnings per share
1.4 Taxes
1.5 Dividends
Section 2: Loans and advances, investments, intangibles and working capital
2.1 Loans and advances
2.2 Investments in other financial assets and liabilities
2.3 Intangibles
2.4 Other assets
2.5 Receivables
2.6 Payables
2.7 Fair value information
64
65
66
67
68
69
69
70
70
71
75
76
77
79
80
83
85
86
87
87
88
Section 3: Capital structure and financial risk management
3.1 Contributed equity
92
3.2 Interest-bearing liabilities
93
95
3.3 Financial risk management
101 3.4 Derivatives and hedge accounting
104 3.5 Capital management
Section 4: Employee disclosures
105 4.1 Defined benefit plans
108 4.2 Share-based payments
Section 5: Group entities
117 5.1 Controlled entities
118 5.2 Discontinued operations
120 5.3 Investments in associates
121 5.4 Parent entity information
122 5.5 Related party disclosures
Section 6: Other disclosures
124 6.1 Notes to Consolidated statement of cash flows
125 6.2 Commitments
125 6.3 Right of use assets and lease liabilities
127 6.4 Provisions and contingent liabilities
130 6.5 Auditors’ remuneration
130 6.6 New accounting standards
131 6.7 Events occurring after reporting date
132 Directors’ declaration
133
Independent Auditor’s Report
Financial report
AMP 2020 annual report
AMP 2020 annual report
63
63
Consolidated income statement
for the year ended 31 December 2020
Fee revenue
Interest income using the effective interest method
Other investment income
Share of profit or loss from associates
Other income
Total revenue
Fee and commission expenses
Staff and related expenses
Finance costs
Other operating expenses
Total expenses
Profit (loss) before tax
Income tax credit
Profit (loss) after tax from continuing operations
Profit (loss) from discontinued operations
Profit (loss) for the year
Profit (loss) attributable to:
Shareholders of AMP Limited2
Non-controlling interests
Profit (loss) for the year
Earnings (loss) per share
Basic
Diluted
Earnings (loss) per share from continuing operations
Basic
Diluted
Note
1.1(b)
5.3
1.2
1.4
5.2
Note
1.3
1.3
1.3
1.3
20201
$m
2,407
721
32
81
186
20191,3
$m
2,862
855
88
72
145
3,427
4,022
(851)
(1,211)
(424)
(890)
(1,145)
(1,196)
(567)
(3,205)
(3,376)
(6,113)
51
19
70
124
194
177
17
194
(2,091)
260
(1,831)
(603)
(2,434)
(2,467)
33
(2,434)
2020
cents
2019
cents
5.2
5.1
1.6
1.5
(79.5)
(79.5)
(60.0)
(60.0)
1
2
Results have been presented on a continuing basis and re-presented for the year ended 31 December 2019.
Profit (loss) attributable to shareholders of AMP Limited is comprised of $53m profit (2019: $1,864m loss) from continuing operations and $124m
profit (2019: $603m loss) from discontinued operations.
3 Fee revenue and Fee and commission expenses have been restated. Refer to note 1.1(b) footnote 3.
64
AMP 2020 annual report
Consolidated statement of comprehensive income
for the year ended 31 December 2020
Profit (loss) for the year from continuing operations
Other comprehensive income
Note
20201
$m
20191
$m
70
(1,831)
Items that may be reclassified subsequently to profit or loss
Fair value reserve
– net gain on fair value asset reserve
–
– net amount transferred to profit or loss for the year
–
tax effect on fair value asset reserve gain
tax effect on amount transferred to profit or loss for the year
Cash flow hedges
– net loss on cash flow hedges
–
– net amount transferred to profit or loss for the year
–
tax effect on cash flow hedge loss
tax effect on amount transferred to profit or loss for the year
Translation of foreign operations and revaluation of hedge of net investments
Items that will not be reclassified subsequently to profit or loss
Fair value reserve – equity instruments held by AMP Foundation
Defined benefit plans
– actuarial gains (losses)
–
tax effect on actuarial gains or losses
4.1(a)
Other comprehensive loss for the year from continuing operations
Total comprehensive income (loss) for the year from continuing operations
Profit (loss) for the year from discontinued operations
Other comprehensive loss for the year from discontinued operations
Total comprehensive income (loss) for the year
Total comprehensive income (loss) attributable to shareholders of AMP Limited
Total comprehensive income attributable to non-controlling interests
Total comprehensive income (loss) for the year
1
Results have been presented on a continuing basis and re-presented for the year ended 31 December 2019.
40
(12)
–
–
28
(40)
13
24
(7)
(10)
(44)
(44)
(1)
(1)
5
(1)
4
(23)
71
(21)
(9)
3
44
(67)
20
7
(2)
(42)
2
2
7
7
(23)
7
(16)
(5)
47
(1,836)
124
(96)
(603)
(6)
75
(2,445)
58
17
75
(2,478)
33
(2,445)
AMP 2020 annual report
65
Financial report
Consolidated statement of financial position
as at 31 December 2020
Assets
Cash and cash equivalents
Receivables
Current tax assets
Investments in other financial assets
Loans and advances
Investment properties
Investments in associates
Right of use assets
Deferred tax assets
Reinsurance asset – ceded life insurance contracts
Intangibles
Other assets
Total assets1
Liabilities
Payables
Current tax liabilities
Employee benefits
Other financial liabilities
Provisions
Interest-bearing liabilities
Lease liabilities
Deferred tax liabilities
External unitholder liabilities
Life insurance and reinsurance contract liabilities
North guarantee liabilities
Investment contract liabilities
Defined benefit plan liabilities
Total liabilities1
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity of shareholders of AMP Limited
Non-controlling interests
Total equity of shareholders of AMP Limited and non-controlling interests
Note
2020
$m
2019
$m
6.1
2.5
2.2
2.1
5.3
6.3
1.4
2.3
2.4
2.6
2.2
6.4
3.2
6.3
1.4
4.1
3.1
2,428
702
160
5,087
20,526
–
1,442
174
828
–
640
177
4,426
2,699
465
114,644
20,660
161
851
245
1,261
1,222
877
173
32,164
147,684
291
70
357
503
1,056
24,916
211
229
–
–
151
–
98
2,465
123
395
1,050
976
22,852
266
2,492
15,295
25,020
121
71,550
101
27,882
142,706
4,282
4,978
10,349
(2,404)
(3,671)
4,274
8
10,299
(1,930)
(3,509)
4,860
118
4,282
4,978
1
2019 comparatives include assets and liabilities relating to policyholders of AMP’s wealth management and wealth protection businesses which have
been sold.
66
AMP 2020 annual report
Consolidated statement of changes in equity
for the year ended 31 December 2020
Equity attributable to shareholders of AMP Limited
Contributed
equity
$m
Demerger
reserve1
$m
Share-
based
payment
reserve2
$m
Capital
profits
reserve3
$m
Fair
value
reserve
$m
Foreign
currency
translation
and hedge
of net
investments
reserves
$m
Cash
flow
hedge
reserve
$m
Total
reserves
$m
Retained
earnings
$m
Total
shareholder
equity
$m
Non-
controlling
interest
$m
Total
equity
$m
2020
Balance at the beginning of the year 10,299
–
Profit (loss) from continuing operations
Profit (loss) from
discontinued operations6
Other comprehensive income
(loss) from continuing operations
Foreign currency translation
reserve recycled6
–
–
–
Total comprehensive income (loss)
Share-based payment expense
Share purchases
Deconsolidation of treasury shares6
Dividends paid4
Sales and acquisitions of
non-controlling interests
–
–
–
50
–
–
(2,566)
–
109
–
321
–
72
–
(34)
–
168
–
(1,930)
–
(3,509)
53
4,860
53
118 4,978
70
17
–
–
–
–
–
–
–
–
–
–
–
–
–
21
(12)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
124
124
–
124
27
(10)
(44)
(27)
–
27
–
–
–
–
–
(96)
(96)
(10)
–
–
–
–
(140)
–
–
–
–
(123)
21
(12)
–
–
4
–
181
–
–
–
(343)
(23)
–
(23)
(96)
–
(96)
58
21
(12)
50
(343)
17
1
(1)
–
(17)
75
22
(13)
50
(360)
–
(360)
–
–
–
(360)
–
(360)
(110)
(470)
Balance at the end of the year
10,349
(2,566)
118
(39)
99
(44)
28
(2,404)
(3,671)
4,274
8 4,282
9,502
(2,566)
105
329
21
–
–
–
–
–
2019
Balance at the beginning of the year
Impact of adoption of new
accounting standards
Balance at the beginning
of the year – restated
Profit (loss) from continuing operations
Profit (loss) from
discontinued operations6
Other comprehensive income (loss)
from continuing operations
Other comprehensive income (loss)
from discontinued operations6
Total comprehensive income (loss)
Share-based payment expense
Share purchases
Net sale (purchase) of treasury shares
Dividends paid4
Dividends paid on treasury shares4
New capital from shares issued
during the year5
Sales and acquisitions of
non-controlling interests
9,502
–
(2,566)
–
105
–
329
–
–
–
–
–
–
–
5
–
–
792
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28
(24)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8)
8
–
8
–
–
21
–
–
51
(42)
–
51
–
–
–
–
–
–
–
–
(42)
–
–
–
–
–
–
–
172
(1,931)
(886)
6,685
106 6,791
–
–
(7)
(7)
–
(7)
172
–
(1,931)
–
(893)
(1,864)
6,678
(1,864)
106 6,784
33 (1,831)
–
2
(6)
(4)
–
–
–
–
–
–
–
–
(603)
(603)
–
(603)
11
(16)
(6)
–
(5)
(6)
(2,483)
–
–
(17)
(117)
1
(2,478)
28
(24)
(12)
(117)
1
–
–
(5)
(6)
33 (2,445)
30
(24)
(12)
(138)
1
2
–
–
(21)
–
–
–
792
–
792
(8)
(2)
(10)
5
28
(24)
–
–
–
–
(8)
Balance at the end of the year
10,299
(2,566)
109
321
72
(34)
168
(1,930)
(3,509)
4,860
118 4,978
1
2
3
4
5
6
Reserve to recognise the additional loss and subsequent transfer from shareholders’ retained earnings on the demerger of AMP’s UK operations in
December 2003. The loss was the difference between the pro-forma loss on demerger and the market-based fair value of the UK operations.
The Share-based payment reserve represents the cumulative expense recognised in relation to equity-settled share-based payments less the cost of
shares purchased on market in respect of entitlements.
Capital profits reserve represents the difference between the acquisition or sale price of minority interest and the carrying value of net assets acquired
or sold from or to entities outside the AMP group. On 1 September 2020, AMP repurchased Mitsubishi UFJ Trust and Banking Corporation’s 15 per cent
shareholding in AMP Capital, resulting in a $360m reduction in Capital profits reserve.
Dividends paid include dividends paid on treasury shares. Dividends paid on treasury shares are required to be excluded from the consolidated
financial statements by adjusting retained earnings.
New capital raised under the institutional placement and share purchase plan is $771m, net of $13m directly attributable transaction costs (net of
tax). Refer to note 3.1 for further details. Remaining $21m relates to shares issued under dividend reinvestment plan.
Relates to the deconsolidation of WP and mature businesses.
AMP 2020 annual report
67
Financial report
Consolidated statement of cash flows
for the year ended 31 December 2020
Cash flows from operating activities1
Cash receipts in the course of operations
Interest received
Dividends and distributions received2
Cash payments in the course of operations
Finance costs
Net movement in deposits from customers
Income tax paid
Cash flows used in operating activities
Cash flows from investing activities1
Net proceeds from sale of (payments to acquire):
investments in financial assets3
–
– operating and intangible assets
–
operating controlled entities and investments in associates
accounted for using the equity method
– AMP Capital minority interest
Proceeds from sale of the WP and mature businesses
Cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings – non-banking operations1
Repayment of borrowings – non-banking operations1
Net movement in borrowings – banking operations
Proceeds from issue of shares
Proceeds from issue of subordinated debt
Repayment of subordinated debt
Lease payments
Dividends paid4
Cash flows (used in) from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents prior to the deconsolidation of WP and mature businesses1
Cash and cash equivalents deconsolidated5
Note
2020
$m
2019
$m
6,536
1,191
671
(12,165)
(450)
1,892
(417)
13,271
1,906
2,108
(25,403)
(627)
1,430
(456)
6.1
(2,742)
(7,771)
1,496
(83)
(89)
(451)
2,341
8,104
(55)
99
–
–
3,214
8,148
265
(507)
(1,048)
–
–
(275)
(63)
(360)
(1,988)
(1,516)
8,069
(4)
871
(791)
(604)
766
271
–
(67)
(138)
308
685
7,382
2
6,549
8,069
(3,896)
–
Cash and cash equivalents at the end of the year
6.1
2,653
8,069
1
2
3
4
5
Cash flows and cash and cash equivalents include amounts attributable to shareholders’ interests, policyholders’ interests in AMP Life’s statutory
funds and controlled entities of those statutory funds, external unitholders’ interests and non-controlling interests. Cash equivalents for the purpose
of the Consolidated statement of cash flows includes short-term bills and notes.
Dividends and distributions received are amounts of cash received mainly from investments held by AMP life insurance entities’ statutory funds and
controlled entities of the statutory funds. Dividends and distributions reinvested have been treated as non-cash items.
Net proceeds from sale of (payments to acquire) investments in financial assets also include loans and advances made (net of payments) and
purchases of financial assets (net of maturities) during the period by AMP Bank.
Dividends paid includes dividends paid to minority interest holders and is presented net of dividends on treasury shares.
The sale of the WP and mature businesses completed on 30 June 2020, resulting in the deconsolidation of cash and cash equivalents held by these
businesses as at 30 June 2020.
68
AMP 2020 annual report
About this report
This section outlines the structure of the AMP group, information useful to understanding the AMP group’s financial report
and the basis on which the financial report has been prepared.
(a) Understanding the AMP financial report
The AMP group (AMP) is comprised of AMP Limited (the parent), a holding company incorporated and domiciled in Australia,
and the entities it controls (subsidiaries or controlled entities). The consolidated financial statements of AMP Limited include
the financial information of its controlled entities.
The consolidated financial report:
–
–
is a general purpose financial report;
has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards
including Australian Accounting Interpretations adopted by the Australian Accounting Standards Board (AASB) and
International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board;
is presented in Australian dollars with all values rounded to the nearest million dollars ($m), unless otherwise stated;
has been prepared on a going concern basis generally using a historical cost basis; however where permitted under accounting
standards a different basis may be used, including the fair value basis;
presents assets and liabilities on the face of the Consolidated statement of financial position in decreasing order of liquidity
and therefore does not distinguish between current and non-current items; and
presents reclassified comparative information where required for consistency with the current year’s presentation within the
annual report.
–
–
–
–
AMP Limited is a for-profit entity and is limited by shares.
The financial statements for the year ended 31 December 2020 were authorised for issue on 11 February 2021 in accordance with
a resolution of the directors.
Sale of wealth protection and mature businesses
The sale of the Australian and New Zealand wealth protection (WP) and mature businesses to Resolution Life Australia Pty Ltd
(Resolution Life) completed on 30 June 2020 and these businesses have been deconsolidated from the AMP group at that date.
The results of these businesses are presented as discontinued operations in accordance with AASB 5 Non-current Assets Held for Sale
and Discontinued Operations. The comparative Consolidated Income statement and Statement of comprehensive income have been
re-presented in order to present the results of the sold businesses as discontinued operations. Further details are provided in note
5.2 Discontinued operations.
COVID-19 impacts
The COVID-19 pandemic has resulted in significant disruptions to the global economy during the year ended 31 December 2020
and there remains substantial uncertainty over the ultimate duration and extent of the pandemic as well as the corresponding
economic impacts. These uncertainties have been incorporated into the judgements and estimates used by management in the
preparation of this report, including the carrying values of the assets and liabilities. Where the judgements and estimates are
considered significant they have been disclosed in the notes to this report.
(b) Basis of consolidation
Entities are fully consolidated from the date of acquisition, being the date on which the AMP group obtains control, and continue
to be consolidated until the date that control ceases. Control exists where the AMP group is exposed, or has rights, to variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Income, expenses, assets, liabilities and cash flows of controlled entities are consolidated into the AMP group financial statements,
along with those attributable to the shareholders of the parent entity. All inter-company transactions are eliminated in full,
including unrealised profits arising from intra-group transactions.
The share of the net assets of controlled entities attributable to non-controlling interests is disclosed as a separate line item on
the Consolidated statement of financial position.
Materiality
Information has only been included in the financial report to the extent that it has been considered material and relevant
to the understanding of the financial statements. A disclosure is considered material and relevant if, for example:
–
–
–
–
the amount in question is significant because of its size or nature;
it is important for understanding the results of the AMP group;
it helps explain the impact of significant changes in the AMP group; and/or
it relates to an aspect of the AMP group’s operations that is important to its future performance.
AMP 2020 annual report
69
Notes to the financial statements (c) Significant accounting policies
The significant accounting policies adopted in the preparation of the financial report are contained in the notes to the financial
statements to which they relate. All accounting policies have been consistently applied to the current year and comparative period,
unless otherwise stated. Where an accounting policy relates to more than one note or where no note is provided, the accounting
policies are set out below.
Interest, dividends and distributions income
Interest income measured at amortised cost is recognised in the Consolidated income statement using the effective interest
method. Revenue from dividends and distributions is recognised when the AMP group’s right to receive payment is established.
Foreign currency transactions
Transactions, assets and liabilities denominated in foreign currencies are translated into Australian dollars (the functional currency)
using the following applicable exchange rates:
Foreign currency amount
Applicable exchange rate
Transactions
Monetary assets and liabilities
Non-monetary assets and liabilities carried at fair value
Date of transaction
Reporting date
Date fair value is determined
Foreign exchange gains and losses resulting from translation of foreign exchange transactions are recognised in the Consolidated
income statement, except for qualifying cash flow hedges, which are deferred to equity.
On consolidation the assets, liabilities, income and expenses of foreign operations are translated into Australian dollars using the
following applicable exchange rates:
Foreign currency amount
Income and expenses
Assets and liabilities
Equity
Reserves
Applicable exchange rate
Average exchange rate
Reporting date
Historical date
Reporting date
Foreign exchange differences resulting from translation of foreign operations are initially recognised in the foreign currency
translation reserve and subsequently transferred to the Consolidated income statement on disposal of the foreign operation.
(d) Critical judgements and estimates
Preparation of the financial statements requires management to make judgements, estimates and assumptions about future
events. Information on critical judgements and estimates considered when applying the accounting policies can be found above
and in the following notes:
Accounting judgements and estimates
Note
Tax
Impairment of financial assets
Fair value of financial assets
Goodwill and acquired intangible assets
Consolidation
Provisions and contingent liabilities
1.4 Taxes
2.1 Expected credit losses (ECLs)
2.2 Investments in other financial assets and liabilities
2.3 Intangibles
5.1 Controlled entities
6.4 Provisions and contingent liabilities
Page
78
82
84
86
117
127
70
AMP 2020 annual report
Section 1: Results for the year
This section provides insights into how the AMP group has performed in the current year and provides additional information
about those individual line items in the financial statements that the directors consider most relevant in the context of the
operations of the AMP group.
Statutory measures of performance disclosed in this report are:
–
Statutory earnings per share (EPS) – basic and diluted
– Annual dividend
–
Profit (loss) after tax attributable to the shareholders of AMP
NPAT (underlying) is AMP’s key measure of business performance. This performance measure is disclosed by the AMP operating
segment within Segment performance.
1.1 Segment performance
1.2 Other operating expenses
1.3 Earnings per share
1.4 Taxes
1.5 Dividends
1.1 Segment performance
The AMP group identifies its operating segments based on separate financial information that is regularly reviewed by the Chief
Executive Officer and his executive team in assessing performance and determining the allocation of resources. The operating
segments are identified according to the nature of profit generated and services provided, and their performance is evaluated based
on a post-tax operating earnings basis.
Reportable segment
Segment description
Australian wealth
management (WM)
Wealth management provides financial advice services (through aligned and owned advice
businesses), platform administration (including SMSF), unit linked superannuation, retirement
income and managed investment products.
AMP Bank
AMP Capital
AMP Bank offers residential mortgages, deposits and transaction banking. The business will
continue to act in its clients’ best interests, while at the same time seek opportunities to integrate
with Australian wealth management.
AMP Capital is a diversified investment manager across major asset classes including infrastructure,
real estate, equities, fixed interest, diversified and multi-manager and multi-asset funds.
AMP Capital’s aspiration is to build the best global private markets platform in the world,
underpinned by real assets while at the same time continue to grow in select differentiated
capabilities in public markets.
On 1 September 2020 AMP completed the repurchase of Mitsubishi UFJ Trust and Banking
Corporation’s (MUTB) 15% shareholding in AMP Capital, resulting in 100% ownership of
AMP Capital and the conclusion of the existing business and capital alliances between MUTB,
AMP Limited and AMP Capital. AMP Capital and MUTB continue to cooperate strategically,
building on their mutually beneficial business relationship in Japan with AMP Capital
continuing to deliver its investment products through MUTB’s network.
New Zealand wealth
management (NZWM)
Encompasses the wealth management and financial advice and distribution business in New
Zealand. Customers are provided with a variety of wealth management solutions including KiwiSaver,
corporate superannuation, retail investments and a wrap investment management platform.
Segment information is not reported for activities of the AMP group office companies as it is not the function of these departments
to earn revenue and any revenues earned are incidental to the activities of the AMP group.
AMP 2020 annual report
71
Notes to the financial statements 1.1 Segment performance (continued)
(a) Segment profit
2020
Segment profit after income tax
External customer revenue
Intersegment revenue2
Segment revenue
Other segment information
Income tax expense
Depreciation and amortisation
2019
Segment profit after income tax
External customer revenue
Intersegment revenue2
Segment revenue
Other segment information
Income tax expense (credit)
Depreciation and amortisation
WM
$m
110
1,055
7
1,062
46
50
195
1,244
18
1,262
79
56
AMP
Bank
$m
AMP
Capital1
$m
NZWM
$m
Total
$m
119
401
–
401
51
–
141
408
–
408
60
–
139
510
207
717
39
33
204
591
248
839
69
22
36
151
–
151
14
5
44
159
–
159
18
4
404
2,117
214
2,331
150
88
584
2,402
266
2,668
226
82
1
2
AMP Capital segment revenue is reported net of external investment manager fees. AMP regained 100% ownership of AMP Capital and Mitsubishi
UFJ Trust and Banking Corporation’s (MUTB) minority interest consequently ceased on 1 September 2020.
Intersegment revenue represents operating revenue between segments priced on a market related basis and is eliminated on consolidation.
72
AMP 2020 annual report
1.1 Segment performance (continued)
(b) The following table allocates the disaggregated segment revenue from contracts with customers to the group’s
operating segments (see note 1.1(a)):
2020
Investment related
Management fees
Performance and transaction fees
Net interest income
Other revenue
Total segment revenue per segment note
Presentation adjustments1
Total statutory revenue from contracts with customers
2019
Investment related
Management fees
Performance and transaction fees
Net interest income
Other revenue
Total segment revenue per segment note
Presentation adjustments1
Total statutory revenue from contracts with customers
Statutory revenue from contracts with customers
Fee revenue
–
– Financial advisory fees2
Investment management and related fees
Other revenue
Total statutory revenue from contracts with customers
WM
$m
907
–
–
–
155
1,062
1,070
–
–
–
192
1,262
AMP
Bank
$m
–
–
–
391
10
401
–
–
–
387
21
408
AMP
Capital
$m
NZWM
$m
Total
$m
564
96
51
–
6
717
586
130
84
–
39
839
115
–
–
–
36
151
117
–
–
–
42
159
1,586
96
51
391
207
2,331
254
2,585
1,773
130
84
387
294
2,668
324
2,992
2020
$m
20193
$m
1,696
711
2,407
178
2,001
861
2,862
130
2,585
2,992
1
2
3
Presentation adjustments primarily reflect the difference between total segment revenue and statutory revenue from contracts with customers, as
required by AASB 15 Revenue from Contracts with Customers. These adjustments include revenue from sources other than contracts with customers
and expense items which are presented net in the segment results, but presented gross in the Consolidated income statement.
A substantial majority of the Financial advisory fees received are paid to advisers. With the exception of the matter in footnote 3 where AMP is acting
as agent, for statutory reporting, Financial advisory fees are presented gross of the related cost which is presented in Fee and commission expenses
in the Consolidated income statement.
Prior year adjustment – Certain Investment management and related fees and Financial advisory fees were presented gross of related expenses
of $316m ($96m and $220m respectively), with no impact to profit. These items have been adjusted and reported on a net basis, in accordance
with Australian Accounting Standards. After incorporating these adjustments and presenting comparative results on a continuing operations basis,
Investment management and related fees have decreased by $62m and Financial advisory fees have increased by $17m. The related expenses have
been adjusted accordingly, with no impact to reported profit.
AMP 2020 annual report
73
Notes to the financial statements
1.1 Segment performance (continued)
(c) Reconciliations
Segment profit after income tax differs from profit (loss) attributable to shareholders of AMP Limited due to the exclusion of the
following items:
Segment profit after income tax
Group office costs
Total operating earnings
NPAT (underlying)1
Gain on sale of AMP Life
AMP Life separation costs
Client remediation and related costs
Risk management, governance and controls
Transformation cost out
Impairments
Other items2
Amortisation of acquired intangible assets
NPAT before market adjustments and accounting mismatches
AMP Life earnings3
Market and other adjustments3
Accounting mismatches4
Profit (loss) attributable to shareholders of AMP Limited
Profit attributable to non-controlling interests
Profit (loss) for the year
2020
$m
404
(109)
295
295
299
(208)
(73)
(29)
(51)
(32)
(33)
(58)
110
129
(62)
–
177
17
194
2019
$m
584
(145)
439
439
–
(183)
(153)
(33)
(28)
(2,407)
22
(96)
(2,439)
42
(69)
(1)
(2,467)
33
(2,434)
1
2
3
4
NPAT (underlying), represents shareholder attributable net profit or loss after tax excluding market adjustments, accounting mismatches and non-
recurring revenue and expenses.
Other items largely comprise the net of one-off and non-recurring revenues and costs, including the cost of implementing significant regulatory
changes.
AMP Life profit includes operating earnings, underlying investment income, market adjustment – investment income, market adjustment – annuity
fair value and market adjustment – risk products related to AMP Life. Market adjustment – annuity fair value relates to the net impact of investment
markets on AMP’s annuity portfolio. Market adjustment – risk products relates to the net impact of changes in market economic assumptions (bond
yields and CPI) on the valuation of risk insurance liabilities.
Under Australian Accounting Standards, some assets held on behalf of the policyholders (and related tax balances) are recognised in the financial
statements at different values to the values used in the calculation of the liability to policyholders in respect of the same assets. Therefore, movements
in these policyholder assets result in accounting mismatches which impact profit attributable to shareholders. These differences have no impact on
the operating earnings of the AMP group.
Total segment revenue differs from Total revenue as follows:
Total segment revenue
Add revenue excluded from segment revenue
–
– Other revenue
Investment gains and losses (excluding AMP Bank interest revenue)
Add back expenses netted against segment revenue
–
– External investment manager and adviser fees paid in respect of certain assets under management
Interest expense related to AMP Bank
Remove intersegment revenue
Total revenue
2020
$m
2019
$m
2,331
2,668
32
186
377
715
(214)
88
145
513
874
(266)
3,427
4,022
74
AMP 2020 annual report
1.1 Segment performance (continued)
(d) Segment assets
Segment asset information has not been disclosed because the balances are not provided to the Chief Executive Officer or his
executive team for the purpose of evaluating segment performance, or in allocating resources to segments.
Accounting policy – recognition and measurement
Revenue from contracts with customers
For AMP, revenue from contracts with customers arises primarily from the provision of investment management and financial
advisory services. Revenue is recognised when control of services is transferred to the customer at an amount that reflects the
consideration which AMP is entitled to in exchange for the services provided. As the customer simultaneously receives and
consumes the benefits as the service is provided, control is transferred over time. Accordingly, revenue is recognised over time.
Fee rebates provided to customers are recognised as a reduction in fee revenue.
Investment management and related fees
Fees are charged to customers in connection with the provision of investment management and other related services. These
performance obligations are satisfied on an ongoing basis, usually daily, and revenue is recognised as the service is provided.
Financial advisory fees
Financial advisory fees consist of commissions and fee-for-service revenue and are earned for providing customers with financial
advice and performing related advisory services. These performance obligations are satisfied over time. Accordingly, revenue is
recognised over time.
A substantial majority of the financial advisory fees received are paid to advisers. Financial advisory fees are presented gross
of the related cost which is presented in Fees and commission expenses in the Consolidated income statement.
1.2 Other operating expenses
Impairment of goodwill and other intangibles
Movement in expected credit losses
Movement in North guarantee liabilities
Information technology and communication
Professional and consulting fees
Amortisation of intangibles
Depreciation of property, plant and equipment
Other expenses
Total other operating expenses
2020
$m
(5)
(7)
(30)
(239)
(288)
(126)
(74)
(121)
2019
$m
(1,839)
1
(7)
(292)
(293)
(188)
(73)
(514)
(890)
(3,205)
AMP 2020 annual report
75
Notes to the financial statements
1.3 Earnings per share
Basic earnings per share
Basic earnings per share is calculated based on profit attributable to shareholders of AMP and the weighted average number of
ordinary shares outstanding.
Diluted earnings per share
Diluted earnings per share is based on profit attributable to shareholders of AMP and the weighted average number of ordinary
shares outstanding after adjustments for the effects of all dilutive potential ordinary shares, such as options and performance rights.
Profit (loss) attributable to shareholders of AMP
Continuing operations
Discontinued operations
Profit (loss) attributable to shareholders of AMP
Weighted average number of ordinary shares for basic EPS1
Add: potential ordinary shares considered dilutive2
Weighted average number of ordinary shares used in
the calculation of dilutive earnings (loss) per share
Earnings (loss) per share
Basic
Diluted
Earnings (loss) per share for continuing operations
Basic
Diluted
Earnings (loss) per share for discontinuing operations
Basic
Diluted
2020
$m
2019
$m
53
124
177
(1,864)
(603)
(2,467)
2020
millions
2019
millions
3,428
56
3,105
–
3,484
3,105
2020
cents
2019
cents
5.2
5.1
1.6
1.5
3.6
3.6
(79.5)
(79.5)
(60.0)
(60.0)
(19.5)
(19.5)
1
2
The weighted average number of ordinary shares outstanding is calculated after deducting the weighted average number of treasury shares held
during the period.
Performance rights have been determined to be dilutive; however, if these instruments vest and are exercised, it is AMP’s current practice to buy AMP
shares on market so there will be no dilutive effect on the value of AMP shares.
76
AMP 2020 annual report
1.4 Taxes
Our taxes
This sub-section outlines the impact of income taxes on the results and financial position of AMP. In particular:
–
–
–
the impact of tax on the reported result;
amounts owed to/receivable from the tax authorities; and
deferred tax balances that arise due to differences in the tax and accounting treatment of balances recorded in the financial
report.
These financial statements include the disclosures relating to tax required under accounting standards. Further information on
AMP’s tax matters can be found in the AMP Tax Report at amp.com.au/shares.
(a) Income tax credit
The following table provides a reconciliation of differences between prima facie tax calculated as 30% of the profit or loss before
income tax for the year and the income tax expense or credit recognised in the Consolidated income statement for the year.
Profit (loss) before income tax
Tax at the Australian tax rate of 30% (2019: 30%)
Tax concessions including research and development and offshore banking unit
Non-deductible expenses
Non-taxable income
Other items
Goodwill impairment
Over provided in previous years
Utilisation of previously unrecognised tax losses
Differences in overseas tax rates
Income tax credit per Consolidated income statement
1
Results have been presented on a continuing basis and re-presented for the year ended 31 December 2019.
(b) Analysis of income tax credit
Current tax expense
Increase in deferred tax assets
(Increase) decrease in deferred tax liabilities
Income tax credit
20201
$m
51
(15)
1
(25)
14
25
–
3
–
16
19
20201
$m
(7)
57
(31)
19
20191
$m
(2,091)
627
2
(31)
22
29
(453)
9
45
10
260
20191
$m
(108)
264
104
260
1
Results have been presented on a continuing basis and re-presented for the year ended 31 December 2019. The increase in deferred tax assets (DTA)
and deferred tax liabilities (DTL) during the year arises primarily from the deconsolidation of DTA and DTL held in WP and mature businesses.
(c) Analysis of deferred tax balances
Analysis of deferred tax assets
Expenses deductible and income recognisable in future years
Unrealised movements on borrowings and derivatives
Unrealised investment losses
Losses available for offset against future taxable income
Other
Total deferred tax assets
Analysis of deferred tax liabilities
Unrealised investment gains
Other
Total deferred tax liabilities
2020
$m
2019
$m
478
54
19
43
234
828
43
186
229
1,015
42
6
43
155
1,261
1,995
497
2,492
AMP 2020 annual report
77
Notes to the financial statements
1.4 Taxes (continued)
(d) Amounts recognised directly in equity
Deferred income tax (expense) credit related to items taken directly to equity during the current year
(e) Unused tax losses and deductible temporary differences not recognised
Revenue losses
Capital losses1
1 Unused capital losses not recognised do not include projected capital losses from the sale of the WP and mature businesses.
2020
$m
(7)
2020
$m
112
741
2019
$m
13
2019
$m
112
656
Accounting policy – recognition and measurement
Income tax expense
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction
and adjusted for changes in deferred tax assets and liabilities. These changes are attributable to:
–
temporary differences between the tax bases of assets and liabilities and their Consolidated statement of financial position
carrying amounts;
unused tax losses; and
the impact of changes in the amounts of deferred tax assets and liabilities arising from changes in tax rates or in the manner
in which these balances are expected to be realised.
–
–
Adjustments to income tax expense are also made for any differences between the amounts paid, or expected to be paid, in relation
to prior periods and the amounts provided for these periods at the start of the current period.
Any tax impact on income and expense items that are recognised directly in equity is also recognised directly in equity.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences and are measured at the tax rates which are expected to
apply when the assets are recovered or liabilities are settled, based on tax rates that have been enacted or substantively enacted for
each jurisdiction at the reporting date. Deferred tax assets and liabilities are not discounted to present value.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Tax consolidation
AMP Limited and its wholly owned Australian controlled entities are part of a tax-consolidated group, with AMP Limited being
the head entity (the company). A tax funding agreement has been entered into by the head entity and the controlled entities
in the tax-consolidated group and requires entities to fully compensate the company for current tax liabilities and to be fully
compensated by the company for any current or deferred tax assets in respect of tax losses arising from external transactions
occurring after 30 June 2003, the implementation date of the tax-consolidated group.
Critical accounting estimates and judgements:
The AMP group is subject to taxes in Australia and other jurisdictions where it has operations. The application of tax law to the specific
circumstances and transactions of the AMP group requires the exercise of judgement by management. The tax treatments adopted
by management in preparing the financial statements may be impacted by changes in legislation and interpretations or be subject
to challenge by tax authorities.
Judgement is also applied by management in determining the extent to which the recovery of carried forward tax losses is probable
for the purpose of meeting the criteria for recognition as deferred tax assets.
78
AMP 2020 annual report
1.5 Dividends
Dividends paid and proposed during the year are shown in the table below:
2020
Final
2020
Special dividend
2019
Final
2019
Interim
Dividend per share (cents)
Franking percentage
Dividend amount ($m)
Payment date
–
–
–
–
10.0
100%
343
1 October 2020
Dividends paid
Previous year final dividend on ordinary shares
Special dividend on ordinary shares
Total dividends paid1
–
–
–
–
2020
$m
–
343 –
343
–
–
–
–
2019
$m
117
117
1
Total dividends paid includes dividends paid on Treasury shares $nil (2019: $1m).
Dividend franking credits
Franking credits available to shareholders are $76m (2019: $175m), based on a tax rate of 30%. This amount is calculated from
the balance of the franking account as at the end of the reporting period, adjusted for franking credits that will arise from the
settlement, after the end of the reporting date, of liabilities for income tax and receivables for dividends.
The company’s ability to utilise the franking account credits depends on meeting Corporations Act 2001 (Cth) requirements to
declare dividends.
Franked dividends are franked at a tax rate of 30%.
AMP 2020 annual report
79
Notes to the financial statements
Section 2: Loans and advances, investments, intangibles and working capital
This section highlights the AMP group’s assets and working capital used to support the AMP group’s activities.
2.1 Loans and advances
2.2 Investments in other financial assets and liabilities
2.3 Intangibles
2.4 Other assets
2.5 Receivables
2.6 Payables
2.7 Fair value information
2.1 Loans and advances
(a) Loans and advances
Housing loans1
Practice finance loans
Total loans and advances2
Less: Provisions for impairment
Individual provisions
– Housing loans
– Practice finance loans
Collective provisions
Total provisions for impairment
Total net loans and advances
Movement in provisions:
Individual provision
Balance at the beginning of the period
Increase in provision – housing loans
Increase in provision – practice finance loans
Bad debts written off
Provision released
Balance at the end of the period
Collective provision
Balance at the beginning of the period
Increase/(decrease) in provision
Balance at the end of the period
2020
$m
2019
$m
20,289
391
20,314
478
20,680
20,792
(13)
(94)
(47)
(154)
(11)
(101)
(20)
(132)
20,526
20,660
112
4
1
(3)
(7)
107
20
27
47
17
5
91
–
(1)
112
21
(1)
20
1
2
Total loans and advances includes net capitalised costs of $76m (2019: $77m).
Total loans and advances of $16,317m (2019: $17,091m) is expected to be received more than 12 months after the reporting date.
80
AMP 2020 annual report
2.1 Loans and advances (continued)
(b) Expected credit losses
The following table provides the changes to expected credit losses (ECLs) relating to loans and advances during the year. The new
and increased provisions during the period are inclusive of adjustments to macro-economic factors (including unemployment,
property prices, ASX index and cash rate) that reflect the downturn in the economy as a result of the COVID-19 pandemic.
Stage 1
collective
$m
Stage 2
collective
$m
Stage 3
$m
2020
Balance at the beginning of the year
Transferred to Stage 1 (12-months ECL – collective provision)
Transferred to Stage 2 (lifetime ECL credit impaired – collective provision)
Transferred to Stage 3 (lifetime ECL credit impaired – specific provision)
New and increased provisions during the year (net of collective provision released)
Bad debts write-offs
Provision for practice finance loans
Balance at the end of the year
2019
Balance at the beginning of the year
Transferred to Stage 1 (12-months ECL – collective provision)
Transferred to Stage 2 (lifetime ECL credit impaired – collective provision)
Transferred to Stage 3 (lifetime ECL credit impaired – specific provision)
New and increased provisions during the year (net of collective provision released)
Bad debts write-offs
Provision for practice finance loans
Balance at the end of the year
11
7
–
(1)
14
–
–
31
8
4
–
(2)
1
–
–
11
9
(2)
1
(1)
9
–
–
16
13
(3)
1
(5)
3
–
–
9
112
(5)
(1)
2
6
(3)
(4)
107
17
(1)
(1)
7
5
(1)
86
112
132
Total
$m
132
–
–
–
29
(3)
(4)
154
38
–
–
–
9
(1)
86
Accounting policy – recognition and measurement
Financial assets measured at amortised cost – loans and advances and debt securities
Loans and advances and debt securities are measured at amortised cost when both of the following conditions are met:
–
the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
–
Financial assets measured at amortised cost are initially recognised at fair value plus transaction costs that are directly attributable
to the acquisition or issue of the financial asset. These assets are subsequently recognised at amortised cost using the effective
interest rate method. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
Loans and advances are financial assets with fixed or determinable payments that are not quoted in an active market. They
arise when AMP Bank provides money directly to a customer, including loans and advances to advisers, and with no intention of
trading the financial asset. Loans and advances are initially recognised at fair value including direct and incremental transaction
costs relating to loan origination. They are subsequently measured at amortised cost using the effective interest method, less any
provision for impairment.
As a resultant impact of COVID-19 AMP Bank introduced loan repayment deferral arrangements to mortgage customers.
The repayment deferrals were considered a continuation of customers’ existing loans and recognised as non-substantial loan
modifications as they continue to accrue interest on deferred repayments. A request for repayment deferrals is not automatically
treated as, but may result in, a significant increase in credit risk, subject to management assessment.
AMP 2020 annual report
81
Notes to the financial statements
2.1 Loans and advances (continued)
Impairment of financial assets
An allowance for expected credit losses (ECLs) is recognised for financial assets not held at fair value through profit or loss.
ECLs are probability weighted estimates of credit losses and are measured as the present value of all cash shortfalls discounted
at the effective interest rate of the financial instrument. The key elements in the measurement of ECLs are as follows:
–
–
PD – the probability of default is an estimate of the likelihood of default over a given time horizon.
EAD – the exposure at default is an estimate of the exposure at a future default date, taking into account expected changes
in the exposure after the reporting date.
LGD – loss given default is an estimate of the loss arising in the case where default occurs at a given time. It is based on the
difference between cash flows due to the group in accordance with the contract and the cash flows that the group expects
to receive, including from the realisation of any collateral.
–
The group estimates these elements using appropriate credit risk models taking into consideration a number of factors including
the internal and external credit ratings of the assets, nature and value of collateral and forward-looking macro-economic scenarios.
Other than ECL on trade receivables, where a simplified approach is taken, the group applies a three-stage approach to measure
the ECLs as follows:
Stage 1 (12-month ECL)
The group collectively assesses and recognises a provision at an amount equal to 12-month ECL when financial assets are current
and/or have had a good performance history and are of low credit risk. It includes financial assets where the credit risk has
improved, and the financial assets have been reclassified from Stage 2 or even Stage 3 based on improved performance observed
over a predefined period of time. A financial asset is considered to have low credit risk when its credit risk rating is equivalent to
the globally understood definition of ‘investment grade’.
Stage 2 (Lifetime ECL – not credit impaired)
The group collectively assesses and recognises a provision at an amount equal to lifetime ECL on financial assets where there
has been a significant increase in credit risk since initial recognition but the financial assets are not credit impaired.
The quantitative criteria used to determine a significant increase in credit risk is a series of relative and absolute thresholds.
Financial assets that were 30 days past due at least once over the last six months are deemed to have significant increase in credit
risk since initial recognition. For loans and advances, other risk factors like hardship, loan to value ratio (LVR) and loan to income
ratio (LTI) are also considered in order to determine a significant increase in credit risk.
Stage 3 (Lifetime ECL – credit impaired)
The group measures loss allowances at an amount equal to lifetime ECL on financial assets that are determined to be credit
impaired based on objective evidence of impairment. Financial assets are classified as impaired when payment is 90 days past
due or when there is no longer reasonable assurance that principal or interest will be collected in their entirety on a timely basis.
Critical accounting estimates and judgements:
Impairment
The impairment provisions (individual and collective) are outputs of ECL models with a number of underlying assumptions regarding
the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting estimates and
judgements include:
–
–
–
–
–
the AMP group’s internal grading which assigns PDs to the individual grades;
the AMP group’s estimates of LGDs arising in the event of default;
the AMP group’s criteria for assessing if there has been a significant increase in credit risk;
development of ECL models, including the various formulas, choice of inputs and assumptions; and
determination of associations between macroeconomic scenarios and their probability weightings, to derive the economic inputs
into the ECL models.
At the reporting date, COVID-19 is the key driver of macro-economic outcomes and significant judgement has been exercised in the
determination of the duration, impact and severity of the macro-economic impacts of COVID-19 for estimation of the ECL provision.
Future macro-economic conditions which differ from management’s assumptions and estimates could result in changes to the timing
and amount of credit losses to be recognised.
82
AMP 2020 annual report
2.2 Investments in other financial assets and liabilities
Financial assets measured at fair value through profit or loss
Equity securities and listed managed investment schemes
Debt securities
Unlisted managed investment schemes
Derivative financial assets
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Debt securities1
Equity securities
Total financial assets measured at fair value through other comprehensive income
Other financial assets measured at amortised cost
Debt securities
Total other financial assets measured at amortised cost
Total other financial assets
Other financial liabilities
Derivative financial liabilities
Collateral deposits held
Total other financial liabilities
2020
$m
2019
$m
28
1,132
149
369
57,698
29,821
23,358
1,699
1,678
112,576
2,768
59
1,960
63
2,827
2,023
582
582
45
45
5,087
114,644
376
127
503
880
170
1,050
1 Debt securities measured at fair value through other comprehensive income are assets of AMP Bank.
Accounting policy – recognition and measurement
Recognition and derecognition of financial assets and liabilities
Financial assets and financial liabilities are recognised at the date the AMP group becomes a party to the contractual provisions
of the instrument. At initial recognition, financial assets are classified as subsequently measured at fair value through profit or loss,
fair value through other comprehensive income (OCI), and amortised cost. The classification of financial assets at initial recognition
depends on the financial asset’s contractual cash flow characteristics and the group’s business model for managing them.
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or are transferred.
A transfer occurs when substantially all the risks and rewards of ownership of the financial asset are passed to an unrelated third
party. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.
Financial assets measured at fair value through profit or loss
Financial assets measured on initial recognition as financial assets measured at fair value through profit or loss are initially
recognised at fair value, determined as the purchase cost of the asset, exclusive of any transaction costs. Transaction costs are
expensed as incurred in profit or loss. Any realised and unrealised gains or losses arising from subsequent measurement at fair
value are recognised in profit or loss in the period in which they arise.
Financial assets measured at fair value through profit or loss – debt securities
Debt securities can be irrevocably designated, at initial recognition, as measured at fair value through profit or loss where doing
so would eliminate or significantly reduce a measurement or recognition inconsistency or otherwise results in more relevant
information. Fair value on initial recognition is determined as the purchase cost of the asset, exclusive of any transaction costs.
Transactions costs are expensed as incurred in profit or loss. Subsequent measurement is determined with reference to the bid
price at the reporting date. Any realised and unrealised gains or losses arising from subsequent measurement at fair value are
recognised in the Consolidated income statement in the period in which they arise.
AMP 2020 annual report
83
Notes to the financial statements
2.2 Investments in other financial assets and liabilities (continued)
Financial assets measured at fair value through OCI – debt securities
Debt securities are measured at fair value through OCI when both of the following conditions are met:
–
the instrument is held within a business model, the objective of which is achieved by both collecting contractual cash flows
and selling financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
–
Fair value through OCI instruments are subsequently measured at fair value with gains and losses arising due to changes in fair
value recognised in OCI. Interest income and foreign exchange gains and losses and impairment losses or reversals are recognised
in profit or loss in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are
recognised in OCI. The accumulated gains or losses recognised in OCI are recycled to profit and loss upon derecognition of the assets.
The group classifies debt securities held by AMP Bank under this category.
Financial assets measured at fair value through OCI – equity securities
Upon initial recognition, the group can elect to classify irrevocably its equity investments as equity instruments designated at fair
value through OCI when they meet the definition of equity under AASB 132 Financial Instruments: Presentation and are not held
for trading. The classification is determined on an instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the
statement of profit or loss when the right of payment has been established. Equity instruments designated at fair value through
OCI are not subject to impairment assessment.
The group elected to classify equity investments held by AMP Foundation, a controlled entity of the AMP group, under this category.
Financial assets measured at amortised cost – debt securities
Refer to note 2.1 for details.
Critical accounting estimates and judgements:
Financial assets measured at fair value
Where available, quoted market prices for the same or similar instruments are used to determine fair value. Where there is no market
price available for an instrument, a valuation technique is used. Management applies judgement in selecting valuation techniques
and setting valuation assumptions and inputs. Further detail on the determination of fair value of financial instruments is set out in
note 2.7.
84
AMP 2020 annual report
2.3 Intangibles
Goodwill1
$m
Capitalised
costs2
$m
Value of
in-force
business
$m
Distribution
networks
$m
Other
intangibles
$m
2020
Balance at the beginning of the year
Additions through acquisitions of controlled entities
Additions through separate acquisitions
Additions through internal development
Reductions through disposal2
Transferred to inventories
Amortisation expense3
Impairment loss
Balance at the end of the year
2019
Balance at the beginning of the year
Additions through acquisitions of controlled entities
Additions through separate acquisitions
Additions through internal development
Reductions through disposal
Transferred from inventories
Amortisation expense3
Impairment loss4
Balance at the end of the year
172
–
–
–
(15)
–
–
–
157
2,130
10
–
–
–
–
–
(1,968)
172
223
–
–
93
(12)
–
(64)
(1)
239
505
2
–
112
–
–
(94)
(302)
223
341
–
–
–
(177)
–
(50)
–
114
420
–
–
–
–
–
(79)
–
341
127
8
83
–
(66)
(3)
(26)
(4)
119
138
55
33
–
(8)
1
(55)
(37)
127
14
–
–
–
–
–
(3)
–
11
15
–
–
–
–
–
(1)
–
14
Total
$m
877
8
83
93
(270)
(3)
(143)
(5)
640
3,208
67
33
112
(8)
1
(229)
(2,307)
877
1
2
3
4
Total goodwill comprises amounts attributable to shareholders of $157m (2019: $157m) and amounts attributable to policyholders of $nil (2019: $15m).
Includes intangible assets derecognised as part of sale of the WP and mature businesses.
Amortisation expense includes amortisation related to the WP and mature businesses of $17m (2019: $41m).
Includes $468m of impairment loss relating to the WP and mature businesses.
Accounting policy – recognition and measurement
Goodwill
Goodwill acquired in a business combination is recognised at cost and subsequently measured at cost less any accumulated
impairment losses. The cost represents the excess of the cost of a business combination over the fair value of the identifiable
assets acquired and liabilities assumed.
Capitalised costs
Costs are capitalised when the costs relate to the creation of an asset with expected future economic benefits which are capable
of reliable measurement. Capitalised costs are amortised on a straight-line basis over the estimated useful life of the asset,
commencing at the time the asset is first put into use or held ready for use, whichever is the earlier.
Value of in-force business
The value of in-force business represents the fair value of future business arising from existing contractual arrangements of
a business acquired as part of a business combination. The value of in-force business is initially measured at fair value and is
subsequently measured at fair value less amortisation and any accumulated impairment losses.
Distribution networks
Distribution networks such as customer lists, financial planner client servicing rights or other distribution-related rights, either
acquired separately or through a business combination, are initially measured at fair value and subsequently measured at cost
less amortisation and any accumulated impairment losses.
AMP 2020 annual report
85
Notes to the financial statements
2.3 Intangibles (continued)
Amortisation
Intangible assets with finite useful lives are amortised on a straight-line basis over the useful life of the intangible asset.
The estimated useful lives are generally:
Item
Capitalised costs
Value of in-force business – wealth management and distribution businesses
Distribution networks
Useful life
Up to 10 years
Up to 20 years
2 to 15 years
The useful life of each intangible asset is reviewed at the end of the period and, where necessary, adjusted to reflect current assessments.
Impairment testing
Goodwill and intangible assets that have indefinite useful lives are tested at least annually for impairment. Other intangible assets are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units or CGUs). An impairment loss is recognised when the CGU’s carrying amount exceeds the CGU’s
recoverable amount. When applicable, an impairment loss is first allocated to goodwill and any remainder is then allocated to
the other assets on a pro-rata basis.
Composition of goodwill
The goodwill of $157m (2019: $157m) arose from historical acquisitions where the AMP group was the acquirer.
Goodwill attributable to the relevant CGUs is presented in the table below.
New Zealand wealth management (NZWM)
AMP Capital
2020
$m
70
87
157
2019
$m
70
87
157
The annual impairment assessment for both NZWM and AMP Capital resulted in significant headroom in both the CGUs.
There was no reasonably possible change to a key assumption used in the impairment assessment that would result in an
impairment at 31 December 2020.
Critical accounting estimates and judgements:
Management applies judgement in selecting valuation techniques and setting valuation assumptions to determine the:
–
–
–
acquisition date fair value and estimated useful life of acquired intangible assets;
allocation of goodwill to CGUs and determining the recoverable amount of the CGUs; and
assessment of whether there are any impairment indicators for acquired intangibles and internally generated intangibles,
where required, in determining the recoverable amount.
2.4 Other assets
Planner registers held for sale
Prepayments
Property, plant and equipment
Total other assets
Current
Non-current
86
AMP 2020 annual report
2020
$m
28
59
90
177
73
104
2019
$m
19
56
98
173
66
107
2.5 Receivables
Investment related receivables
Life insurance contract premiums receivable
Reinsurance receivables
Client register receivables
Collateral receivables
Trade debtors and other receivables
Total receivables1
Current
Non-current
2020
$m
3
–
–
62
203
434
702
651
51
2019
$m
1,403
311
220
17
205
543
2,699
2,693
6
1
Receivables are presented net of ECL of $11m (2019: $5m).
Accounting policy – recognition and measurement
Receivables
Trade debtors, client register, collateral, reinsurance and other receivables are measured at amortised cost, less an allowance for
ECLs. Investment related receivables and Life insurance contract premium receivables backing investment contract liabilities and life
insurance contract liabilities are financial assets measured at fair value through profit or loss.
The group applies a simplified approach in calculating ECLs for receivables. Therefore, the group does not track changes in credit
risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The group has established a provision
matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the
economic environment.
2.6 Payables
Investment related payables
Life insurance and investment contracts in process of settlement
Accrued expenses, trade creditors and other payables
Reinsurance payables
Total payables
Current
Non-current
2020
$m
12
–
279
–
291
288
3
2019
$m
1,108
341
977
39
2,465
2,332
133
Accounting policy – recognition and measurement
Payables
Payables are measured at the nominal amount payable. Given the short-term nature of most payables, the nominal amount
payable approximates fair value.
AMP 2020 annual report
87
Notes to the financial statements
2.7 Fair value information
The following table shows the carrying amount and estimated fair values of financial instruments including their levels in the fair
value hierarchy.
Carrying
amount
$m
Level 1
$m
Level 2
$m
Level 3
$m
2020
Financial assets measured at fair value
Equity securities and listed managed investment schemes
Debt securities
Unlisted managed investment schemes
Derivative financial assets
87
3,900
149
369
80
2,413
–
–
–
1,487
108
369
Total financial assets measured at fair value
4,505
2,493
1,964
7
–
41
–
48
Total fair
value
$m
87
3,900
149
369
4,505
Financial assets not measured at fair value
Loans and advances
Debt securities
Total financial assets not measured at fair value
Financial liabilities measured at fair value
Derivative financial liabilities
Collateral deposits held
North guarantee liabilities
Total financial liabilities measured at fair value
Financial liabilities not measured at fair value
AMP Bank
– Deposits
– Other
Corporate borrowings
Total financial liabilities not measured at fair value
2019
Financial assets measured at fair value
Equity securities and listed managed investment schemes
Debt securities
Unlisted managed investment schemes
Derivative financial assets
Investment properties
20,526
582
21,108
376
127
151
654
16,129
6,443
2,344
24,916
57,761
31,781
23,358
1,699
161
–
–
–
–
–
–
–
–
–
–
–
54,552
1,771
–
71
–
–
582
582
376
127
–
503
16,129
6,503
2,344
24,976
694
29,883
20,687
1,628
–
20,649
–
20,649
582
20,649
21,231
–
–
151
151
–
–
–
–
2,515
127
2,671
–
161
376
127
151
654
16,129
6,503
2,344
24,976
57,761
31,781
23,358
1,699
161
Total financial assets measured at fair value
114,760
56,394
52,892
5,474
114,760
Financial assets not measured at fair value
Loans and advances
Debt securities
Total financial assets not measured at fair value
Financial liabilities measured at fair value
Derivative financial liabilities
Collateral deposits held
Investment contract liabilities
North guarantee liabilities
Total financial liabilities measured at fair value
Financial liabilities not measured at fair value
AMP Bank
– Deposits
– Other
Corporate borrowings
Borrowings within investment entities
controlled by AMP Life’s statutory funds
Total financial liabilities not measured at fair value
88
AMP 2020 annual report
20,660
45
20,705
880
170
71,550
121
72,721
12,442
7,492
2,445
473
22,852
–
–
–
186
–
–
–
186
–
–
–
–
–
–
45
45
20,663
–
20,663
45
20,663
20,708
694
170
1,484
–
–
–
70,066
121
880
170
71,550
121
2,348
70,187
72,721
12,442
7,504
2,461
473
22,880
–
–
–
–
–
12,442
7,504
2,461
473
22,880
2.7 Fair value information (continued)
AMP’s methodology and assumptions used to estimate the fair value of financial instruments are described below:
Equity securities
and listed managed
investment schemes
The fair value of listed equity securities traded in an active market and listed managed investment
schemes reflects the quoted bid price at the reporting date. In the case of equity securities where there
is no active market, fair value is established using valuation techniques including the use of recent
arm’s length transactions, references to other instruments that are substantially the same, discounted
cash flow analysis and option pricing models.
Debt securities
The fair value of listed debt securities reflects the bid price at the reporting date. Listed debt securities
that are not frequently traded are valued by discounting estimated recoverable amounts.
Loans
The fair value of unlisted debt securities is estimated using interest rate yields obtainable on
comparable listed investments. The fair value of loans is determined by discounting the estimated
recoverable amount using prevailing interest rates.
The estimated fair value of loans represents the discounted amount of estimated future cash flows
expected to be received, based on the maturity profile of the loans. As the loans are unlisted, the
discount rates applied are based on the yield curve appropriate to the remaining term of the loans.
The loans may, from time to time, be measured at an amount in excess of fair value due to
fluctuations on fixed rate loans. In these situations, as the fluctuations in fair value would not
represent a permanent diminution and the carrying amounts of the loans are recorded at recoverable
amounts after assessing impairment, it would not be appropriate to restate their carrying amount.
Unlisted managed
investment schemes
The fair value of investments in unlisted managed investment schemes is determined on the basis
of published redemption prices of those managed investment schemes at the reporting date.
Derivative financial
assets and liabilities
Corporate borrowings
The fair value of financial instruments traded in active markets (such as publicly traded derivatives)
is based on quoted market prices (current bid price or current offer price) at the reporting date.
The fair value of financial instruments not traded in an active market (e.g. over-the-counter
derivatives) is determined using valuation techniques. Valuation techniques include net present value
techniques, option pricing models, discounted cash flow methods and comparison to quoted market
prices or dealer quotes for similar instruments. The models use a number of inputs, including the
credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective
currencies, currency basis spreads between the respective currencies, interest rate curves and
forward rate curves of the underlying instruments. Some derivatives contracts are significantly cash
collateralised, thereby minimising both counterparty risk and the group’s own non-performance risk.
Borrowings comprise commercial paper, drawn liquidity facilities, various floating-rate and medium-
term notes and subordinated debt. The estimated fair value of borrowings is determined with
reference to quoted market prices. For borrowings where quoted market prices are not available,
a discounted cash flow model is used, based on a current yield curve appropriate for the remaining
term to maturity. For short-term borrowings, the par value is considered a reasonable approximation
of the fair value.
AMP Bank deposits and
other borrowings
The estimated fair value of deposits and other borrowings represents the discounted amount of
estimated future cash flows expected to be paid based on the residual maturity of these liabilities.
The discount rate applied is based on a current yield curve appropriate for similar types of deposits
and borrowings at the reporting date.
North guarantee
liabilities
The fair value of the North guarantee liabilities is determined as the net present value of future
cash flows discounted using market rates. The future cash flows are determined using risk neutral
stochastic projections based on assumptions such as mortality rate, lapse rate and asset class
allocation/correlation. The future cash flows comprise expected guarantee claims and hedging
expenses net of expected fee revenue.
AMP 2020 annual report
89
Notes to the financial statements 2.7 Fair value information (continued)
The financial assets and liabilities measured at fair value are categorised using the fair value hierarchy which reflects the
significance of inputs into the determination of fair value as follows:
–
–
–
Level 1: the fair value is valued by reference to quoted prices and active markets for identical assets or liabilities;
Level 2: the fair value is estimated using inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
Level 3: the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the group determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input
that is significant to the fair value measurement as a whole) at the end of each reporting period.
There have been no significant transfers between Level 1 and Level 2 during the 2020 financial year. Transfers to and from Level 3
are shown in the Reconciliation of Level 3 values table later in this note.
Level 3 fair values
For financial assets measured at fair value on a recurring basis and categorised within Level 3 of the fair value hierarchy, the
valuation processes applied in valuing such assets was governed by the AMP Capital asset valuation policy. This policy outlined the
asset valuation methodologies and processes applied to measure non-exchange traded assets which have no regular market price,
including investment property, infrastructure, private equity, alternative assets, and illiquid debt securities. All significant Level 3
assets were referred to the appropriate valuation committee who met at least every six months, or more frequently if required.
The following table shows the valuation techniques used in measuring Level 3 fair values of financial assets measured at fair value
on a recurring basis, as well as the significant unobservable inputs used.
Type
Valuation technique
Significant unobservable inputs
Equity securities and listed
managed investment schemes
Discounted cash flow approach utilising
cost of equity as the discount rate
Debt securities
Discounted cash flow approach
Unlisted managed
investment schemes
Investment contract
liabilities
North guarantee
liabilities
Published redemption prices
Published unit prices and the
fair value of backing assets
Discounted cash flow approach
Discount rate
Hedging costs
Sensitivity
The following table illustrates the impacts to profit before tax and equity resulting from reasonably possible changes in
key assumptions.
Financial assets
Equity securities and listed managed investment schemes
Unlisted managed investment schemes
Financial liabilities
North guarantee liabilities
Investment contract liabilities
2020
20191
(–)
$m
(1)
(4)
(3)
n/a
(+)
$m
86
134
–
224
(–)
$m
(86)
(134)
(7)
(224)
(+)
$m
1
4
1
n/a
1
In 2019, the investments in equity securities and listed managed investment schemes and unlisted managed investment schemes predominantly
related to policyholder assets. Accordingly, any movements in the value of the assets were largely offset by a corresponding movement in Investment
contract liabilities.
90
AMP 2020 annual report
Discount rate
Terminal value growth rate
Cash flow forecasts
Discount rate
Cash flow forecasts
Credit risk
Judgement made in determining
unit prices
Fair value of financial instruments
Cash flow forecasts
Credit risk
2.7 Fair value information (continued)
Level 3 fair values (continued)
Reconciliation of Level 3 values
The following table shows movements in the fair values of financial instruments measured at fair value on a recurring basis and
categorised as Level 3 in the fair value hierarchy:
Total gains
and losses on
assets and
liabilities
held at
reporting
date
$m
–
–
4
–
35
–
164
10
95
16
Balance
at the
beginning of
the period
$m
FX gains
or losses1
$m
Total
gains/
losses1
$m
Purchases/
deposits
$m
Sales/
withdrawals
$m
Net
transfers
in/(out)
$m
Balance at
the end of
the period
$m
2020
Assets classified as Level 3
Equity securities and listed
managed investment schemes
Debt securities
Unlisted managed
investment schemes
Investment properties
Liabilities classified as Level 3
North guarantee liabilities
Investment contract liabilities
2,515
127
2,671
161
–
–
–
–
(11)
–
2
3
63
–
158
–
(2,567)
(127)
(2,831)
(164)
121
70,066
–
(7)
35
(6,201)
4
2,008
(9)
(65,866)
7
–
41
–
–
–
7
–
41
–
151
–
2019
Assets classified as Level 3
Equity securities and listed
managed investment schemes
Debt securities
Unlisted managed
investment schemes
Investment properties
Liabilities classified as Level 3
North guarantee liabilities
Investment contract liabilities
2,364
117
1,898
145
115
66,817
–
–
–
–
–
2
145
10
61
16
11
4
567
–
(5)
(2)
(19)
–
–
(2)
164
–
2,515
127
2,671
161
18
10,242
1
7,043
(13)
(14,038)
–
–
121
70,066
18
10,240
1
Gains and losses are classified in investment gains and losses or change in policyholder liabilities in the Consolidated income statement.
AMP 2020 annual report
91
Notes to the financial statements
Section 3: Capital structure and financial risk management
This section provides information relating to:
–
–
the AMP group’s capital management and equity and debt structure; and
exposure to financial risks – how the risks affect financial position and performance and how the risks are managed, including
the use of derivative financial instruments.
The capital structure of the AMP group consists of equity and debt. AMP determines the appropriate capital structure in order to
finance the current and future activities of the AMP group and satisfy the requirements of the regulator. The directors review the
group’s capital structure and dividend policy regularly and do so in the context of the group’s ability to satisfy minimum and target
capital requirements.
3.1 Contributed equity
3.2 Interest-bearing liabilities
3.3 Financial risk management
3.4 Derivatives and hedge accounting
3.5 Capital management
3.1 Contributed equity
Issued capital1
3,436,599,241 (2019: 3,436,599,241) ordinary shares fully paid
Treasury shares²
2,126,387 (2019: 29,342,125) treasury shares
Total contributed equity
3,434,472,854 (2019: 3,407,257,116) ordinary shares fully paid
Issued capital
Balance at the beginning of the year
Nil (2019: 9,064,722) shares issued under dividend reinvestment plan1
Nil (2019: 406,250,000) shares issued under institutional placement
Nil (2019: 83,856,183) shares issued under share purchase plan
Deconsolidation of discontinued operations
Balance at the end of the year
Treasury shares
Balance at the beginning of the year
Decrease due to deconsolidation of discontinued operations
Decrease due to purchases less sales during the year
Balance at the end of the year
2020
$m
2019
$m
10,355
10,402
(6)
(103)
10,349
10,299
10,402
–
–
–
(47)
9,610
21
638
133
–
10,355
10,402
(103)
97
–
(6)
(108)
–
5
(103)
1
2
Under the terms of the dividend reinvestment plan (DRP), shareholders may elect to have all or part of their dividend entitlements satisfied in shares
rather than being paid cash.
Of the AMP Limited ordinary shares on issue 2,126,387 (2019: 2,126,387) are held by AMP Foundation Limited as trustee for AMP Foundation.
At 31 December 2019, 27,215,738 shares were held by AMP Life on behalf of policyholders.
Holders of ordinary shares have the right to receive dividends as declared and, in the event of the winding up of the company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Fully paid ordinary shares carry the right to one vote per share. Ordinary shares have no par value.
92
AMP 2020 annual report
3.1 Contributed equity (continued)
Accounting policy – recognition and measurement
Issued capital
Issued capital in respect of ordinary shares is recognised as the fair value of consideration received by the AMP Limited entity.
Incremental costs directly attributable to the issue of certain new shares are recognised in equity as a deduction, net of tax,
from the proceeds.
Treasury shares
The AMP group is not permitted to recognise Treasury shares in the Consolidated statement of financial position. These shares,
plus any corresponding Consolidated income statement fair value movement on the shares and dividend income, are eliminated
on consolidation.
AMP Foundation also holds AMP Limited shares. These shares, plus any corresponding Consolidated income statement fair value
movement on the shares and any dividend income, are eliminated on consolidation.
3.2 Interest-bearing liabilities
(a) Interest-bearing liabilities
Interest-bearing liabilities
AMP Bank
– Deposits1
– Other
Corporate entity borrowings2
– 6.875% GBP Subordinated Guaranteed Bonds
(maturity 2022)
– AMP Notes 3 (first call 2023, maturity 2028)3
– AMP Subordinated Notes3
– AMP Wholesale Capital Notes4
– AMP Capital Notes4
– AMP Capital Notes 24
– USD Medium Term Notes5
– CHF Medium Term Notes5
– Other
Borrowings within investment entities
controlled by AMP Life’s statutory funds
2020
2019
Current
$m
Non-current
$m
Total
$m
Current
$m
Non-current
$m
Total
$m
15,990
3,976
139
2,467
16,129
6,443
12,291
2,811
151
4,681
12,442
7,492
–
–
–
–
266
–
398
–
–
–
63
250
250
–
–
271
–
846
–
–
63
250
250
–
266
271
398
846
–
–
–
–
–
277
–
–
–
–
34
464
69
250
250
–
265
271
437
592
–
9
69
250
250
277
265
271
437
592
34
473
Total interest-bearing liabilities
20,630
4,286
24,916
15,877
6,975
22,852
1 Deposits comprise at call customer deposits and customer term deposits at variable interest rates with AMP Bank.
2
The current/non-current classification of corporate entity borrowings is based on the maturity of the underlying debt instrument and related principal
repayment obligations. The carrying value of corporate entity borrowings includes interest payable of $10m (2019: $13m) which is expected to be
settled within the next 12 months.
AMP Notes 3 and AMP Subordinated Notes are floating rate subordinated unsecured notes. These were issued 15 November 2018 and 1 September
2017 respectively, and mature 15 November 2028 and 1 December 2027 respectively. Subject to APRA approval, AMP has the right, but not the
obligation, to redeem all or some of the Notes on 15 November 2023 and 1 December 2022 respectively, or, subject to certain conditions, at a later
date. In certain circumstances, AMP may be required to convert some or all of the Notes into AMP ordinary shares.
AMP Capital Notes (ASX: AMPPA) and AMP Capital Notes 2 (ASX: AMPPB) were issued 30 November 2015 and 23 December 2019 respectively. Subject
to APRA approval, AMP has the right, but not the obligation, to redeem all or some of the Notes on 22 December 2021 and 16 December 2025
respectively, or, subject to certain conditions, at a later date. They are perpetual notes with no maturity date. In certain circumstances, AMP may be
required to convert some or all of the Notes into AMP ordinary shares. On 27 March 2020, AMP redeemed the AMP Wholesale Capital Notes.
USD 300m 4 per cent Bond was issued 14 March 2019 and matures 14 September 2021. CHF 110m Senior Unsecured Fixed Rate Bond was issued
19 June 2018 and matures 19 December 2022. This Bond was subsequently increased by CHF 50m on 19 September 2018. CHF 140m Senior
Unsecured Fixed Rate Bond was issued 18 April 2019 and matures 18 July 2023. This Bond was subsequently increased by CHF 100m on 3 December
2019. CHF 175m Senior Unsecured Fixed Rate Bond was issued 3 March 2020 and matures 3 June 2024.
3
4
5
AMP 2020 annual report
93
Notes to the financial statements
3.2 Interest-bearing liabilities (continued)
(b) Financing arrangements
Loan facilities and note programs
Loan facilities and note programs comprise facilities arranged through bond and note issues, as well as financing facilities provided
through bank loans under normal commercial terms and conditions.
Available loan facilities1
Note program capacity
Used
Unused facilities and note programs at the end of the year
1 Available loan facilities include bilateral facilities of $450m which mature on 31 August 2021.
(c) Changes in liabilities arising from operating and financing activities
1 January
Cash flows
Deconsolidation of WP and mature businesses1
Other
31 December
2020
$m
1,450
14,087
(3,117)
2019
$m
2,265
14,993
(4,316)
12,420
12,942
2020
$m
2019
$m
22,852
327
1,795
(58)
21,650
1,177
–
25
24,916
22,852
1
Super and platform related deposits previously held by the WP and mature businesses are no longer eliminated on consolidation.
Accounting policy – recognition and measurement
Interest-bearing liabilities are initially recognised at fair value, net of transaction costs. They are subsequently measured at
amortised cost using the effective interest rate method.
It is AMP’s policy to hedge currency and interest rate risk arising on issued bonds and subordinated debt. When fair value hedge
accounting is applied, the carrying amounts of borrowings and subordinated debt are adjusted for changes in fair value related to
the hedged risk for the period that the hedge relationship remains effective. Any changes in fair value for the period are recognised
in the Consolidated income statement. In cash flow hedge relationships the borrowings are not revalued.
Finance costs include:
(i) borrowing costs:
interest on bank overdrafts, borrowings and subordinated debt;
amortisation of discounts or premiums related to borrowings;
–
–
exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to
interest costs; and
(ii)
(iii) changes in the fair value of derivative hedges together with any change in the fair value of the hedged assets or liabilities
that are designated and qualify as fair value hedges, foreign exchange gains and losses and other financing-related amounts.
Changes in the fair value of derivatives in effective cash flow hedges are recognised in the cash flow hedge reserve. The
accounting policy for derivatives is set out in note 3.4.
Finance costs are recognised as expenses when incurred.
94
AMP 2020 annual report
3.3 Financial risk management
The AMP Limited Board has overall responsibility for the risk management framework including the approval of AMP’s strategic
plan, risk management strategy and risk appetite. Specifically, financial risk arises from the holding of financial instruments and
financial risk management (FRM) is an integral part of the AMP group’s enterprise risk management framework.
This note discloses financial risk in accordance with the categories in AASB 7 Financial Instruments: Disclosures:
– market risk;
–
–
liquidity and refinancing risk; and
credit risk.
These risks are managed in accordance with the board-approved risk appetite statement and the individual policies for each risk
category and business approved by the Chief Financial Officer (CFO) under delegation from the AMP Group Asset and Liability
Committee (Group ALCO).
(a) Market risk
Market risk is the risk that the fair value of assets and liabilities, or future cash flows of a financial instrument, will fluctuate due to
movements in the financial markets including interest rates, foreign exchange rates, equity prices, property prices, credit spreads,
commodity prices, market volatilities and other financial market variables.
The following table provides information on significant market risk exposures for the AMP group, which could lead to an impact on
the AMP group’s profit after tax and equity, and the management of those exposures.
Market risk
Exposures
Interest rate risk
The risk of an impact on the AMP
group’s profit after tax and equity
arising from fluctuations in the
fair value or future cash flows
of financial instruments due to
changes in market interest rates.
Interest rate movements could
result from changes in the absolute
levels of interest rates, the shape of
the yield curve, the margin between
yield curves and the volatility of
interest rates.
Currency risk
The risk of an impact on the AMP
group’s profit after tax and equity
arising from fluctuations of the fair
value of a financial asset, liability
or commitment due to changes in
foreign exchange rates.
The AMP group’s long-term
borrowings and subordinated debt.
AMP Bank interest rate risk from
mismatches in the repricing terms of
assets and liabilities (term risk) and
variable rate short-term repricing
bases (basis risk).
Foreign currency denominated assets
and liabilities.
Foreign equity accounted associates and
capital invested in overseas operations.
Foreign exchange rate movements on
specific cash flow transactions.
Equity price risk
The risk of an impact on the AMP
group’s profit after tax and equity
arising from fluctuations in the
fair value or future cash flows of a
financial instrument due to changes
in equity prices.
Exposure for shareholders includes listed
and unlisted shares and participation in
equity unit trusts.
Management of exposures
and use of derivatives
Interest rate risk is managed by entering
into interest rate swaps, which have the
effect of converting borrowings from
floating rate to fixed rate.
AMP Bank uses natural offsets, interest
rate swaps and basis swaps to hedge
the mismatches within exposure limits.
Group Treasury manages the exposure
in AMP Bank by maintaining a net
interest rate risk position within the
limits delegated and approved by the
AMP Bank Board.
The AMP group uses swaps to hedge
the interest rate risk and foreign
currency risk on foreign currency
denominated borrowings but does
not hedge the capital invested in
overseas operations.
The AMP group hedges material
foreign currency risk originated by
receipts and payments once the
value and timing of the expected
cash flow is known.
In addition, the AMP group will at
times pre-hedge any future (but not
expected) foreign currency receipts
and payments, subject to market
conditions.
Group Treasury may, with Group
ALCO approval, use equity exposures
or equity futures or options to
hedge other enterprise-wide
equity exposures.
AMP 2020 annual report
95
Notes to the financial statements 3.3 Financial risk management (continued)
(a) Market risk (continued)
Sensitivity analysis
The table below includes sensitivity analysis showing how the profit after tax and equity would have been impacted by changes
in market risk variables. The analysis:
–
shows the direct impact of a reasonably possible change in market rates and is not intended to illustrate a remote, worst
case stress test scenario;
assumes that all underlying exposures and related hedges are included and the change in variable occurs at the reporting
date; and
does not include the impact of any mitigating management actions over the period to the subsequent reporting date.
–
–
The categories of risks faced and methods used for deriving sensitivity information did not change from previous periods.
Sensitivity analysis
Change in variables
Interest rate risk
Impact of a 100 basis point
(bp) change in Australian and
international interest rates.
Currency risk
Impact of a 10% movement
of exchange rates against the
Australian dollar on currency
sensitive monetary assets and
liabilities.
Equity price risk
Impact of a 10% movement in
Australian and international
equities. Any potential impact
on fees from the AMP group’s
investment-linked business
is not included.
–100bp
+100bp
10% depreciation of AUD
10% appreciation of AUD
10% increase in:
Australian equities
International equities
10% decrease in:
Australian equities
International equities
2020
2019
Impact on
profit after tax
increase
(decrease)
$m
Impact
on equity1
increase
(decrease)
$m
Impact on
profit after tax
increase
(decrease)
$m
(0.4)
(0.5)
0.2
(0.5)
0.6
0.2
(0.4)
(0.9)
2.9
(3.7)
86.7
(71.3)
0.6
0.2
(0.4)
(0.9)
(1.5)
(15.2)
3.8
(4.4)
7.8
7.2
(8.6)
(8.3)
Impact
on equity1
increase
(decrease)
$m
7.2
(26.1)
175.9
(145.1)
7.8
7.2
(8.6)
(8.3)
1
Included in the impact on equity is both the impact on profit after tax as well as the impact of amounts that would be taken directly to equity in
respect of the portion of changes in the fair value of derivatives that qualify as cash flow hedges for hedge accounting.
(b) Liquidity and refinancing risk
Risk
Exposures
Management of exposures
The AMP group corporate debt portfolio,
AMP Bank and AMP Capital through
various investment funds, entities or
mandates that AMP manages or controls
within the AMP group.
Group Treasury maintains a defined
surplus of cash to mitigate refinancing
risk, satisfy regulatory requirements
and protect against liquidity shocks
in accordance with the liquidity risk
management policy approved by the
Group ALCO.
Liquidity risk
The risk that the AMP group is
not able to meet its obligations
as they fall due because of an
inability to liquidate assets
or obtain adequate funding
when required.
Refinancing risk
The risk that the AMP group is
not able to refinance the full
quantum of its ongoing debt
requirements on appropriate
terms and pricing.
96
AMP 2020 annual report
3.3 Financial risk management (continued)
(b) Liquidity and refinancing risk (continued)
Maturity analysis
Below is a summary of the maturity profiles of AMP’s undiscounted financial liabilities and off-balance sheet items at the reporting
date, based on contractual undiscounted repayment obligations. Repayments that are subject to notice are treated as if notice were
to be given immediately.
2020
Non-derivative financial liabilities
Payables
Borrowings1
Lease liabilities
Subordinated debt
North guarantee liabilities
Derivative financial instruments
Interest rate and cross-currency swaps
Off-balance sheet items
Credit-related commitments – AMP Bank2
Lease commitments
Buy-back arrangement commitments
Investment commitments
Total undiscounted financial liabilities
and off-balance sheet items
2019
Non-derivative financial liabilities
Payables
Borrowings1
Lease liabilities
Subordinated debt
North guarantee liabilities
Investment contract liabilities
External unitholders’ liabilities
Derivative financial instruments
Interest rate and cross-currency swaps
Off-balance sheet items
Credit-related commitments – AMP Bank2
Lease commitments
Buy-back arrangement commitments
Investment commitments
Total undiscounted financial liabilities
and off-balance sheet items
Up to
1 year
$m
1 to 5
years
$m
Over
5 years
$m
Not
specified
$m
Total
$m
288
17,279
58
46
–
50
3,398
–
89
–
3
2,771
127
235
–
84
–
208
–
–
–
796
58
1,354
–
21
–
527
–
–
–
–
–
–
151
291
20,846
243
1,635
151
–
155
–
–
–
217
3,398
735
89
217
21,208
3,428
2,756
368
27,760
2,332
15,554
58
72
–
350
–
48
3,522
–
228
–
133
4,761
165
345
–
834
–
85
–
155
7
–
–
1,151
87
1,643
–
849
–
23
–
593
–
–
–
–
–
–
121
69,584
15,295
–
–
–
–
417
2,465
21,466
310
2,060
121
71,617
15,295
–
156
3,522
748
235
417
22,164
6,485
4,346
85,417
118,412
1
2
Borrowings include AMP Bank deposits.
Credit-related loan commitments are off-balance sheet as they relate to unexercised commitments to lend to customers of AMP Bank.
AMP 2020 annual report
97
Notes to the financial statements
3.3 Financial risk management (continued)
(c) Credit risk
Credit risk management is decentralised in business units within AMP, with the exception of credit risk directly and indirectly
impacting shareholder capital, which is measured and managed on an aggregate basis by Group Treasury at the AMP group level
and reported to Group ALCO.
Risk
Exposures
Credit risk
Credit default risk is the risk of financial
or reputational loss due to a counterparty
failing to meet their contractual
commitments in full and on time.
Concentration of credit risk arises when
a number of financial instruments or
contracts are entered into with the
same counterparty or where a number
of counterparties are engaged in similar
business activities that would cause their
ability to meet contractual obligations
to be similarly affected by changes in
economic or other conditions.
Wholesale credit risk, including portfolio
construction, in the fixed income
portfolios managed by AMP Capital.
Credit risk arising in AMP Bank as part
of lending activities and management
of liquidity.
Management of exposures
and use of derivatives
Managed by individual investment
teams. There is also a dedicated credit
research team and a specific credit
investment committee. The investment
risk and performance team provides
reports to the AMP Capital Investment
Committee.
Managed as prescribed by AMP Bank’s
Risk Appetite Statement and reported
to AMP Bank Credit Risk Committee
(lending activities) and AMP Bank ALCO
(management of liquidity).
Specific detail relating to credit risk
management of the AMP Bank loan
portfolio is outlined below.
The AMP Concentration and Credit Default Risk Policy sets out the assessment and determination of what constitutes credit
concentration risk. The policy sets exposure limits based on each counterparty’s credit rating (unless special considerations are
defined). Additional limits are set for the distribution of the total portfolio by credit rating bands. Compliance with this policy
is monitored and exposures and breaches are reported to portfolio managers, senior management and the AMP Board Risk
Committee through periodic financial risk management reports.
Group Treasury also might enter into credit default swaps to hedge the concentration risk exposure against a specific issuer,
or aggregated at the parent entity, when material exposures are over the authorised limit.
The exposures on interest-bearing securities and cash equivalents which impact AMP’s capital position are managed by Group
Treasury within limits set by the AMP Concentration and Credit Default Risk Policy.
Impairment assessment
Definition of default
AMP Bank considers a financial asset defaulted and hence Stage 3 impaired when payment is 90 days past due or when there
is no longer reasonable assurance that principal or interest will be collected in their entirety on a timely basis.
AMP Bank’s internal risk grading and PD estimation process
AMP Bank’s credit risk management department runs expected credit loss models for the residential mortgage book as well
as the practice finance loans.
–
The Bank’s residential mortgage book is a portfolio with a low number of defaults. In recent times, the Bank’s residential
mortgage book has grown significantly, and a larger history of default data has been captured.
This has enabled the Bank to successfully develop its internal behavioural scorecards which have been used to replace the
benchmark PDs in an endeavour to better risk rank order the portfolio by credit risk worthiness.
–
Internal risk grades for the residential mortgage book are as follows:
Internal credit rating grade
Internal credit rating grade description
Performing
Past due but not impaired
Impaired
Not in arrears in the past six months
Accounts in arrears but have not been past 90 days in the last six months
90 days past due over the last six months
–
For practice finance loans a Probability of Default risk grade model is applied that includes weighted risk factors such as
Interest Coverage Ratio, revenue growth, licence compliance rating, experience in business and arrears levels. Practices on
watch-list are also downgraded. Credit judgement may be applied to arrive at the final risk grade.
98
AMP 2020 annual report
3.3 Financial risk management (continued)
(c) Credit risk (continued)
Internal risk grades for practice finance book are as follows:
Internal risk grade
Internal risk grade description
Broadly corresponds with Standard & Poors ratings of
A to H
I
Sub-investment Grade
Impaired
BB+ to CCC
D
The Bank’s interbank and financial institutions exposures as well as exposures to interest-bearing securities are based on external
credit rating of the counterparties as follows:
Internal risk grade description
Broadly corresponds with Standard & Poors ratings of
Senior Investment Grade
Investment Grade
Sub-investment Grade
AAA to A–
BBB+ to BBB–
BB+ up to but not including defaulted or impaired
Exposure at default (EAD)
EAD is modelled by applying assumptions in relation to the amortisation of the loans based on scheduled principal and interest
repayments except for Stage 3 loans.
Loss given default (LGD)
For the residential mortgage portfolio the key driver for the LGD calculation is the value of the underlying property, as in a
foreclosure scenario the proceeds from the sale of a property are secured by the Bank to repay the loan. The value of the underlying
residential property is captured via the LVR which factors both changes in loan balance and estimated value of the collateral using
market data and indices. Both floor and haircuts are applied to provide for model risk.
For practice finance loans, the LGD is calculated via assumptions to the reduction in valuations of practices (being a multiple of
their recurring cash flows) in the event of default, such as client run-off or deterioration in valuation due to compliance issues.
In addition, haircuts are applied to cater for the volatility observed in the register values in the event of default but also general
volatility in valuations over time.
Grouping of financial assets for expected credit losses (ECL) calculation
Asset classes where the bank calculates ECL on an individual basis include all Stage 3 assets, and interbank and debt securities
at FVOCI.
For all other asset classes ECL is calculated on a collective basis taking into account risk factors for each loan and arriving at the
ECL estimate and then aggregating the number for the relevant portfolio.
Forward-looking information
The Bank’s ECL model incorporates a number of forward-looking macroeconomic factors (MEF) that are reviewed on a quarterly
basis and approved by the Credit Risk Committee (CRC). The MEF include unemployment, property prices, ASX Index and Cash Rate.
At least three different scenarios with fixed weightings are used in the model. The weightings are reviewed on an annual basis.
The ECL is calculated as the probability weighted average of the provision calculated for each economic scenario.
Management overlay
Management overlay is required to mitigate model risk and any systemic risk that is not recognised by the model.
The management overlays are reviewed on an annual basis or more frequently if required and presented to the CRC and Board
Audit Committee (BAC) for sign off.
Write-offs
Financial assets are written off either partially or in their entirety only when there is no reasonable expectation of recovery.
Recovery actions can cease if they are determined as being no longer cost effective or in some situations where the customers
have filed for bankruptcy.
Credit risk of the loan portfolio in AMP Bank (the Bank)
The Bank is predominantly a lender for residential properties – both owner occupied and for investment. In every case the Bank
completes a credit assessment, which includes cost of living allowance and requires valuation of the proposed security property.
Approximately 20% of the Bank’s residential loan portfolio is externally securitised and all loans in securitisation trusts are loans
that have LMI thereby further mitigating the risk. The Bank’s CRC and Board Risk Committee (BRC) oversee trends in lending
exposures and compliance with the Risk Appetite Statement. The Bank secures its housing loans with mortgages over relevant
properties and as a result manages credit risk on its loans with conservative lending policies and particular focus on the LVR.
The LVR is calculated by dividing the total loan amount outstanding by the lower of the Bank’s approved valuation amount or
the purchase price. Loans with LVR greater than 80% are fully mortgage insured. Mortgage insurance is provided by Genworth
Mortgage Insurance Australia Ltd and QBE Lenders Mortgage Insurance Ltd who are both regulated by APRA. The Bank has
strong relationships with both insurers and experienced minimal levels of historic claim rejections and reductions.
AMP 2020 annual report
99
Notes to the financial statements 3.3 Financial risk management (continued)
(c) Credit risk (continued)
The average LVR at origination of AMP Bank’s loan portfolio for existing and new business is set out in the following table:
LVR
0–50
51–60
61–70
71–80
81–90
91–95
> 95
Existing
business
2020
%
New
business
2020
%
Existing
business
2019
%
New
business
2019
%
17
11
18
36
14
3
1
6
7
13
50
16
8 3
–
17
11
18
37
12
9
2
7
8
14
50
12
–
Renegotiated loans
Where possible, the Bank seeks to restructure loans for borrowers seeking hardship relief rather than take possession of collateral.
This may involve capitalising interest repayments for a period and increasing the repayment arrangement for the remaining term
of the loan. Once the term has been renegotiated, the loan is no longer considered past due or an impaired asset unless it was
greater than 90 days in arrears in the previous six months or a specific provision has been raised for the loan. The Bank assisted
customers by renegotiating $2,391m (2019: $214m) of loans during the year, of which $2,263m (2019: nil) relates to hardship
granted due to COVID-19, that otherwise would be past due or impaired. Hardship assistance granted due to COVID-19 includes
assistance in the form of repayment deferrals. As at 31 December 2020, $1,542m of the total $2,263m hardship loans have exited
the repayment deferral program and are considered to be performing loans. The impact to the Consolidated income statement of
loan modifications is not considered to be material.
Collateral and master netting or similar agreements
The AMP group obtains collateral and utilises netting agreements to mitigate credit risk exposures from certain counterparties.
(i) Derivative financial assets and liabilities
The credit risk of derivatives is managed in the context of the AMP group’s overall credit risk policies and includes the use of Credit
Support Annexes to derivative agreements which facilitate the bilateral posting of collateral as well as the clearing of derivative
positions on the London Clearing House.
Certain derivative assets and liabilities are subject to legally enforceable master netting arrangements, such as an International
Swaps and Derivatives Association (ISDA) master netting agreement. In certain circumstances, for example when a credit event
such as a default occurs, all outstanding transactions under an ISDA agreement are terminated, the termination value is assessed
and only a single net amount is payable in settlement of all transactions.
An ISDA agreement does not automatically meet the criteria for offsetting in the Consolidated statement of financial position.
This is because the AMP group, in most cases, does not have any current legally enforceable right to offset recognised amounts.
If these netting arrangements were applied to the derivative portfolio, the derivative assets of $369m would be reduced by
$160m to the net amount of $209m and derivative liabilities of $376m would be reduced by $160m to the net amount of
$216m (2019: derivative assets of $1,699m would be reduced by $192m to the net amount of $1,507m and derivative liabilities
of $880m would be reduced by $192m to the net amount of $688m).
(ii) Other collateral
The AMP group has collateral arrangements in place with some counterparties in addition to collateral deposits held with respect
to repurchase agreements. The amount and type of collateral required by AMP Bank on housing loans depends on an assessment
of the credit risk of the counterparty. Guidelines are in place covering the acceptability and valuation of each type of collateral.
AMP Bank holds collateral against its loans and advances primarily in the form of mortgage interests over property, other registered
securities over assets and guarantees.
Management monitors the market value of collateral and will request additional collateral in accordance with the underlying
agreement. In the event of customer default, AMP Bank can enforce any security held as collateral against the outstanding claim.
Any loan security is usually held as mortgagee in possession while AMP Bank seeks to realise its value through the sale of property.
Therefore, AMP Bank does not hold any real estate or other assets acquired through the repossession of collateral.
Collateral generally consists of 11am loans and deposits and is exchanged between the counterparties to reduce the exposure
from the net fair value of derivative assets and liabilities between the counterparties. As at 31 December 2020 there was $127m
(2019: $170m) of collateral deposits (due to other counterparties) and $204m (2019: $181m) of collateral loans (due from other
counterparties) relating to derivative assets and liabilities.
100 AMP 2020 annual report
3.4 Derivatives and hedge accounting
The group is exposed to certain risks relating to its ongoing business operations. To mitigate the risks the group uses derivative
financial instruments such as cross-currency swaps and interest rate swaps. When the group designates certain derivatives to
be part of a hedging relationship, and they meet the criteria for hedge accounting, the hedges are classified as:
–
–
–
cash flow hedges;
fair value hedges; or
net investment hedges.
Derivative financial instruments are held for risk and asset management purposes only and not for the purpose of speculation.
Not all derivatives held are designated as hedging instruments. The group’s risk management strategy and how it is applied to
manage risk is explained further in note 3.3.
(a) Hedging Instruments
The following table sets out the notional amount of derivative instruments designated in a hedge relationship by relationship type
as well as the related carrying amounts.
2020
Hedge type
Cash flow
Fair value
Fair value
Fair value and cash flow
Net investment
Total
2019
Hedge type
Cash flow
Fair value
Fair value
Fair value and cash flow
Net investment
Total
Hedging instrument
Interest rate swaps
Cross-currency swaps
Interest rate swaps
Cross-currency interest rate swaps
Foreign currency forward contract
Hedging instrument
Interest rate swaps
Cross-currency swaps
Interest rate swaps
Cross-currency interest rate swaps
Foreign currency forward contract
Notional
amount
$m
Fair value
Assets
$m
Fair value
Liabilities
$m
9,568
83
63
1,254
390
11,358
8,648
83
67
988
366
10,152
32
–
6
–
23
61
24
–
7
37
9
77
122
22
–
20
1
165
99
19
–
–
2
120
AMP 2020 annual report 101
Notes to the financial statements
3.4 Derivatives and hedge accounting (continued)
(b) Hedged items
The following table sets out the carrying amount of hedged items in fair value hedge relationships, and the accumulated amount
of fair value hedge adjustments in these carrying amounts. The group does not hedge its entire exposure to a class of financial
instruments, therefore the carrying amounts below do not equal the total carrying amounts disclosed in other notes.
2020
6.875% GBP Subordinated Guaranteed Bonds (maturity 2022)
Medium Term Notes
2019
6.875% GBP Subordinated Guaranteed Bonds (maturity 2022)
Medium Term Notes
Carrying amount
of hedged items
Assets
$m
Liabilities
$m
Accumulated amount
of fair value adjustments
on the hedged items
Assets
$m
Liabilities
$m
–
–
–
–
63
1,172
69
951
16
16
11
–
–
–
–
35
Fair value hedge relationships resulted in the following changes in the values used to recognise hedge ineffectiveness for the year:
Gain/(loss) on hedging instrument
Gain/(loss) on hedged items attributable to the hedged risk
Hedge ineffectiveness recognised in the income statement
2020
$m
(62)
56
(6)
2019
$m
37
(35)
2
Derivative instruments accounted for as cash flow hedges
The group is exposed to variability in future interest cash flows on non-trading assets and liabilities which bear interest at fixed
and variable rates. The group uses interest rate swaps to manage interest rate risks and many of the swaps are cash flow hedges
for accounting purposes.
Methods used to test hedge effectiveness and establish the hedge ratio include regression analysis and, for some portfolio hedge
relationships, a comparison to ensure the expected interest cash flows from the portfolio exceed those of the hedging instruments.
The main potential source of hedge ineffectiveness from cash flow hedges is mismatches in the terms of hedged items and hedging
instruments, for example the frequency and timing of when interest rates are reset.
During the year the AMP group recognised $nil (2019: $nil) due to ineffectiveness on derivative instruments designated as cash
flow hedges.
Derivative instruments accounted for as fair value hedges
Fair value hedges are used to protect against changes in the fair value of financial assets and financial liabilities due to movements
in exchange rates and interest rates.
Hedge effectiveness is assessed by comparing the overall changes in the fair value of the hedging instrument against the changes
in the fair value of the hedged items attributable to the hedged risks. The main potential source of ineffectiveness on fair value
hedges is currency basis spread, which is included in the valuation of the hedging instrument, but excluded from the value of the
hedged item.
Hedges of net investments in foreign operations
The group hedges its exposure to changes in exchange rates on the value of its foreign currency denominated seed pool
investments. Hedge effectiveness is assessed based on the overall changes in the fair value of the forward contract, primarily using
the cumulative dollar offset method.
The AMP group recognised $nil (2019: $nil) due to the ineffective portion of hedges relating to investments in seed pool foreign
operations.
102 AMP 2020 annual report
3.4 Derivatives and hedge accounting (continued)
(b) Hedged items (continued)
The following table sets out the maturity profile of derivative instruments in a hedge relationship.
2020
Interest rate swaps
Cross-currency swaps
Cross-currency interest rate swaps
Foreign currency forward contract
2019
Interest rate swaps
Cross-currency swaps
Cross-currency interest rate swaps
Foreign currency forward contract
0 to 3 months
$m
3 to 12 months
$m
1 to 5 years
$m
Over 5 years
$m
Total
$m
1,569
–
–
390
1,889
–
–
366
3,814
–
426
–
3,542
–
–
–
3,686
83
828
–
2,782
83
988
–
562
–
–
–
502
–
–
–
9,631
83
1,254
390
8,715
83
988
366
Accounting policy – recognition and measurement
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value exclusive of any transaction costs on the date a derivative
contract is entered into and are subsequently remeasured to their fair value at each reporting date. All derivatives are recognised as
assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from the change
in fair value of derivatives, except those that qualify as effective cash flow hedges, are immediately recognised in the Consolidated
income statement.
Hedge accounting
AMP continues to apply the hedge accounting requirements under AASB 139 Financial instruments: Recognition and Measurement.
Cash flow hedges
The effective portion of changes in the fair value of cash flow hedges is recognised (including related tax impacts) in Other
comprehensive income. The ineffective portion is recognised immediately in the Consolidated income statement. The balance of
the cash flow hedge reserve in relation to each particular hedge is transferred to the Consolidated income statement in the period
when the hedged item affects profit or loss. Hedge accounting is discontinued when a hedging instrument expires or is sold or
terminated, or when a hedge no longer meets the criteria for hedge accounting. The cumulative gain or loss existing in equity at
that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Consolidated income
statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred to the Consolidated income statement.
Fair value hedges
Changes in the fair value of fair value hedges are recognised in the Consolidated income statement, together with any changes
in the fair value of the hedged asset or liability that are attributable to the hedged risk. If a hedge no longer meets the criteria for
hedge accounting, the cumulative gains and losses recognised on the hedged item will be amortised over the remaining life of
the hedged item.
Net investment hedges
The effective portion of changes in the fair value of net investment hedges is recognised (including related tax impacts) in Other
comprehensive income. Any ineffective portion is recognised immediately in the Consolidated income statement. The cumulative
gain or loss existing in equity remains in equity until the foreign investment is disposed of.
AMP 2020 annual report 103
Notes to the financial statements
3.5 Capital management
AMP holds capital to protect customers, creditors and shareholders against unexpected losses. There are a number of ways AMP
assesses the adequacy of its capital position. Primarily, AMP aims to:
–
–
maintain a sufficient surplus above minimum regulatory capital requirements (MRR) to reduce the risk of breaching MRR; and
maintain the AMP group’s credit rating.
These factors are balanced when forming AMP’s risk appetite as approved by the AMP Limited Board.
Calculation of capital resources
The AMP group’s capital resources include ordinary equity and interest-bearing liabilities. The AMP group excludes the interest-
bearing liabilities of its banking subsidiary, AMP Bank Limited, and controlled investment subsidiaries and trusts from the AMP
group capital resources.
Adjustments are also made relating to cash flow hedge reserves and to exclude the net assets of the AMP Foundation.
The table below shows the AMP group’s capital resources at reporting date:
AMP statutory equity attributable to shareholders of AMP Limited
Accounting mismatch, cash flow hedge resources and other adjustments
AMP shareholder equity
Subordinated debt1
Senior debt1
Total AMP capital resources
2020
$m
4,274
9
4,283
876
1,254
6,413
2019
$m
4,860
50
4,910
1,151
988
7,049
1 Amounts shown for subordinated debt and senior debt are the amounts to be repaid on maturity.
Capital requirements
A number of the operating entities within the AMP group of companies are regulated and are required to meet minimum
regulatory capital requirements (MRR). In certain circumstances, APRA or other regulators may require AMP and other entities of the
AMP group to hold a greater level of capital to support its business and/or require those entities not to pay dividends on their shares
or restrict the amount of dividends that can be paid by them. Any such adjustments would be incorporated into the minimum
regulatory requirements and/or capital policies as required.
The main minimum regulatory capital requirements for AMP’s businesses are:
Operating entity
Minimum regulatory capital requirement
AMP Bank Limited (AMP Bank)
N. M. Superannuation Pty Limited
Capital requirements as specified under
the APRA ADI Prudential Standards
Operational Risk Financial Requirements as specified under
the APRA Superannuation Prudential Standards
AMP Capital Investors Limited and
other ASIC regulated businesses
Capital requirements under AFSL requirements
and for risks relating to North Guarantees
AMP’s businesses and the AMP group maintain capital targets reflecting their material risks (including financial risk, product risk
and operational risk) and AMP’s risk appetite. The target surplus is a management guide to the level of excess capital that the AMP
group seeks to carry to reduce the risk of breaching MRR.
AMP Limited and AMP Bank have board-approved minimum capital levels above APRA requirements, with additional capital
targets held above these amounts. Capital targets are also set for AMP Capital to cover risk associated with seed and sponsor
capital investments and operational risk. Other components of AMP group’s capital targets include amounts relating to Group
Office investments, defined benefit funds and other operational risks.
All of the AMP group regulated entities have at all times during the current and prior financial year complied with the externally
imposed capital requirements to which they are subject.
104 AMP 2020 annual report
Section 4: Employee disclosures
This section provides details on the various programs the AMP group uses to reward and recognise employees, including key
management personnel.
4.1 Defined benefit plans
4.2 Share-based payments
4.1 Defined benefit plans
AMP contributes to defined benefit plans which provide benefits to employees, and their dependants, on resignation, retirement,
disability or death of the employee. The benefits are based on years of service and an average salary calculation. All defined benefit
plans are now closed to new members.
The characteristics and risks associated with each of the defined benefit plans are described below:
Plan details
Australia
New Zealand
Plan names
Entitlements of
active members
Governance
of the plans
AMP Australia Plan I and
AMP Australia Plan II.
AMP New Zealand Plan I and
AMP New Zealand Plan II.
A lump sum or pension on retirement.
Pensions provided are lifetime indexed
pensions with a reversionary spouse pension.
The plans’ trustees (Super Directions Fund
from 15 May 2020 to 31 December 2020
and AMP Superannuation Savings Trust
from 1 January 2020 to 15 May 2020, of
which the Australian plans are sub-funds)
– this includes administration of the plan,
management and investment of the plan
assets, and compliance with superannuation
laws and other applicable regulations.
Accumulation benefits and a lump sum
payment on retirement.
The plans’ trustees – this includes administration
of the plan, management and investment of
the plan assets, and looking after the interests
of all beneficiaries.
Valuations required
Every year.
Every three years.
Key risks
The risk of actual outcomes being different to the actuarial assumptions used to estimate
the defined benefit obligation, investment risk and legislative risk.
Date of valuation
31 March 2020.
31 December 2020.
Additional
recommended
contributions
10% to 15% of members’ salaries
plus plan expenses.
No additional contributions are required
until 30 June 2021, at which point the
requirement will be reassessed.
(a) Defined benefit liability
Present value of wholly-funded defined benefit obligations
Less: Fair value of plan assets
Defined benefit liability recognised in the Consolidated statement of financial position
Movement in defined benefit liability
Deficit at the beginning of the year
Plus: Total income (expenses) recognised in the Consolidated income statement
Plus: Employer contributions
Plus: Foreign currency exchange rate changes
Plus: Actuarial gains (losses) recognised in Other comprehensive income1
2020
$m
(882)
784
(98)
(101)
1
1
(4)
5
2019
$m
(919)
818
(101)
(77)
(2)
1
–
(23)
Defined benefit liability recognised at the end of the year
(98)
(101)
1
The cumulative net actuarial gains and losses recognised in the Statement of comprehensive income is a $98m gain (2019: $93m gain).
AMP 2020 annual report 105
Notes to the financial statements
4.1 Defined benefit plans (continued)
(b) Reconciliation of the movement in the defined benefit liability
Balance at the beginning of the year
Current service cost
Past service cost/curtailments
Interest (cost) income
Net actuarial gains and losses
Employer contributions
Contributions by plan participants
Foreign currency exchange rate changes
Benefits paid
Balance at the end of the year
(c) Analysis of defined benefit surplus (deficit) by plan
Defined benefit
obligation
Fair value of
plan assets
2020
$m
(919)
–
1
(10)
(14)
–
–
2
58
2019
$m
(833)
(3)
–
(19)
(118)
–
–
2
52
(882)
(919)
2020
$m
818
–
–
10
19
1
–
(6)
(58)
784
2019
$m
756
–
–
17
94
1
–
2
(52)
818
AMP Australia Plan I
AMP Australia Plan II
AMP New Zealand Plan I
AMP New Zealand Plan II
Total
Fair value of
plan assets
Present value of
plan obligation
Net recognised
surplus (deficit)
Actuarial
gains/(losses)
2020
$m
281
400
17
86
784
2019
$m
291
415
20
92
818
2020
$m
(334)
(386)
(24)
(138)
2019
$m
(339)
(427)
(25)
(128)
(882)
(919)
2020
$m
2019
$m
2020
$m
2019
$m
(53)
14
(7)
(52)
(98)
(48)
(12)
(5)
(36)
(101)
(5)
24
(1)
(13)
5
(3)
(21)
1
–
(23)
(d) Principal actuarial assumptions
The following table sets out the principal actuarial assumptions used as at the reporting date in measuring the defined benefit
obligations of the Australian and New Zealand defined benefit funds:
Weighted average discount rate
Expected rate of salary increases
AMP Plan I
AMP Plan II
Australia
New Zealand
Australia
New Zealand
2020
%
2.1
n/a
2019
%
2.8
n/a
2020
%
0.9
n/a
2019
%
1.5
n/a
2020
%
2.4
3.3
2019
%
3.0
3.5
2020
%
1.4
3.0
2019
%
2.2
3.0
(e) Allocation of assets
The asset allocations of the defined benefit funds are shown in the following table:
AMP Plan I
AMP Plan II
Australia
New Zealand
Australia
New Zealand
2020
%
2019
%
2020
%
2019
%
2020
%
2019
%
2020
%
2019
%
41
41
8
4
6
46
38
10
1
5
38
38
4
14
6
38
38
4
14
6
15
59
6
8
12
25
57
7
1
10
46
34
4 4
14
2 2
46
34
14
Equity
Fixed interest
Property
Cash
Other
106 AMP 2020 annual report
4.1 Defined benefit plans (continued)
(f) Sensitivity analysis
The defined benefit obligation has been recalculated for each scenario by changing only the specified assumption as outlined
below, whilst retaining all other assumptions as per the base case. The table below shows the increase (decrease) for each
assumption change. Where an assumption is not material to the fund it has been marked as n/a.
AMP Plan I
AMP Plan II
Australia
New Zealand
Australia
New Zealand
(+)
$m
(–)
$m
(+)
$m
(–)
$m
(+)
$m
(–)
$m
(+)
$m
(–)
$m
2020
Assumption
Discount rate (+/– 0.5%)1
(18)
Expected salary increase rate (0.5%)
n/a
Expected deferred benefit crediting rate (0.5%) n/a
Pensioner indexation assumption (0.5%)2
20
n/a
Pensioner mortality assumption (0.5%)
n/a
Life expectancy (additional 1 year)
2019
Assumption
(20)
Discount rate (+/– 0.5%)
Expected salary increase rate (0.5%)
n/a
Expected deferred benefit crediting rate (0.5%) n/a
22
Pensioner indexation assumption (0.5%)
n/a
Pensioner mortality assumption (0.5%)
n/a
Life expectancy (additional 1 year)
20
n/a
n/a
(18)
13
n/a
22
n/a
n/a
(20)
13
n/a
n/a
n/a
n/a
1
n/a
1
n/a
n/a
n/a
1
n/a
1
2
n/a
n/a
n/a
n/a
n/a
2
n/a
n/a
n/a
n/a
n/a
(26)
–
2
26
n/a
n/a
(32)
1
3
30
n/a
n/a
29
n/a
n/a
(23)
11
n/a
35
n/a
n/a
(28)
12
n/a
n/a
n/a
n/a
14
n/a
4
n/a
n/a
n/a
13
n/a
4
18
n/a
n/a
n/a
n/a
n/a
16
n/a
n/a
n/a
n/a
n/a
1
2
(–1%) discount rate applied to AMP New Zealand Plan I and II.
1% indexation increase applied to AMP New Zealand Plan I and II.
(g) Expected contributions and maturity profile of the defined benefit obligation
Expected employer contributions ($m)
Weighted average duration of the defined benefit obligation (years)
AMP Plan I
AMP Plan II
Australia
New
Zealand
Australia
New
Zealand
–
11
–
9
1
13
–
14
Accounting policy – recognition and measurement
Defined benefit plans
The AMP group recognises the net deficit or surplus position of each fund in the Consolidated statement of financial position.
The deficit or surplus is measured as the difference between the fair value of the funds’ assets and the discounted defined benefit
obligations of the funds, using discount rates determined with reference to market yields on high quality corporate bonds at the
end of the reporting period.
After taking into account any contributions paid into the defined benefit funds during the period, movements in the net surplus or
deficit of each fund, except actuarial gains and losses, are recognised in the Consolidated income statement. Actuarial gains and
losses arising from experience adjustments and changes in actuarial assumptions over the period and the returns on plan assets
are recognised (net of tax) directly in retained earnings through Other comprehensive income.
Contributions paid into defined benefit funds are recognised as reductions in the deficit.
AMP 2020 annual report 107
Notes to the financial statements
4.2 Share-based payments
AMP has multiple employee share-based payment plans. Share-based payment plans help create alignment between employees
participating in those plans (participants) and shareholders. Information on plans which AMP currently offers is provided below.
The following table shows the expense recorded for AMP share-based payment plans during the year:
Performance rights
Share rights and restricted shares – equity settled
Share rights – cash settled
Options
Total share-based payments expense
2020
$’000
12,123
7,461
1,873
53
2019
$’000
5,654
23,198
1,544
52
21,510
30,448
(a) Performance rights
The AMP Group Executive Committee, as well as selected senior executives, receive their long-term incentive (LTI) awards in
the form of performance rights. This is intended to further align the interests of those executives, who are able to most directly
influence company performance, with the interests of shareholders.
Plan
LTI awards
Overview
Vesting conditions
Performance rights give the participant the right to acquire one fully paid ordinary share in AMP
Limited upon meeting specific performance hurdles. They are granted at no cost to the participant
and carry no dividend or voting rights until they vest. This award may be settled through an
equivalent cash payment, at the discretion of the board.
2017 LTI award
The performance hurdles for rights granted in 2017 are:
–
100% subject to AMP’s total shareholder return (TSR) performance relative to entities in the
Comparator Group1 (being the top 50 industrial companies in the S&P/ASX 100 Index, based on
market capitalisation rank at the start of the applicable performance period) over four years.
AMP’s TSR performance against its peer comparator group was measured for the period 1 January 2017
up to 31 December 2020. The outcome resulted in nil vesting of the 2017 LTI award and the award will
be lapsed in full.
2018 LTI award
No performance rights were granted under an LTI plan in 2018.
2019 LTI award (Transformation Incentive Award)
The vesting of the performance rights is subject to two separate gateways:
a.
Risk and Conduct Gateway – if a participant’s performance and conduct is not in line with
AMP’s expectations, the board has discretion to amend the vesting outcome (including to zero).
Performance Gateway and Hurdle – a performance gateway is included so that no awards will
vest if both the Compound Annual Growth Rate (CAGR) is negative and the CAGR is below the
benchmark index2. For risk and control roles i.e. Chief Risk Officer – the vesting outcome in relation
to 25% of the award will be determined by the Remuneration Committee at its sole discretion.
The other 75% of the award will be subject to the performance hurdle.
b.
The 2019 Transformation Incentive awards for the CFO and CRO were adjusted upon permanent
appointment to their roles.
2020 LTI award
No performance rights were granted under an LTI plan in 2020.
1
2
–
–
Vesting period
In determining the Comparator Group, all entities other than those in the global industry classification standard
(GICS) energy sector and GICS metals and mining industry are classified as industrial companies.
The benchmark index is constructed from an equal weighted index of ASX 100 financial services companies
(excluding A-REITs).
2017 LTI award – 4 years for rights granted in 2017.
2019 LTI award – 3.5 years for rights granted in 2019.
Vested awards
Vested performance rights are automatically converted to shares on behalf of participants.
Unvested awards
Unvested awards are forfeited if the participant voluntarily ceases employment or is dismissed
for misconduct.
108 AMP 2020 annual report
4.2 Share-based payments (continued)
(a) Performance rights (continued)
CEO (Original) Recovery Incentive Rights Award
As part of the Chief Executive Officer’s (CEO’s) incentive package on appointment in 2018, the CEO was granted an award of
rights with a performance condition. Following shareholder approval at the 2020 AGM, performance rights granted in 2018 as
part of Mr Francesco De Ferrari’s Recovery Incentive Rights were cancelled in full.
CEO Replacement Recovery Incentive Rights Award
Prior to his start date of 1 December 2018, and in the period immediately afterwards, AMP’s share price and performance were
impacted by a range of events outside Mr De Ferrari’s influence. Taking into account feedback from a range of shareholders, the
board resolved to adjust Mr De Ferrari’s incentives to reflect the share price of the group immediately preceding his start date and
implement share price performance hurdles on the Recovery Incentive, which better reflect the challenges currently facing the
AMP group.
In 2019, the CEO’s remuneration package was reviewed and adjusted to ensure the CEO is appropriately incentivised and aligned
with shareholders during the transformation of AMP. As part of this update, the CEO was granted a new award of rights with a
performance condition. This award is intended to replace the original Recovery Incentive Award to better align the CEO with the
long-term interests of shareholders.
Plan
CEO Replacement Recovery Incentive Rights Award
Overview
Vesting conditions
The Recovery Incentive performance rights give the CEO the right to acquire one fully paid ordinary
share in AMP Limited (per right) upon meeting specific performance hurdles, being the achievement
of multiple share price targets. They were granted at no cost to the CEO and carry no dividend or
voting rights until they vest. This award may be settled through an equivalent cash payment, at the
discretion of the board.
The share price targets that will be tested on the specified dates:
–
First Testing Date – 50% of rights granted will vest if the share price is $2.45 at the testing date
(adjusted for any significant capital initiatives).
Second Testing Date – if the first share price target of $2.45 is not met at the first testing date, it
will be retested and 50% will vest if the $2.45 target is met. The remaining balance may also vest
depending on the share price being higher than $2.45 and will vest on a straight-line basis with
100% vesting if the share price is $2.75 (adjusted for any significant capital initiatives).
–
Vesting period/
testing dates
The board will test the share price targets on or around the following testing dates:
–
–
15 February 2022 (First Testing Date); and
15 February 2023 (Second Testing Date).
If the share price targets are met, the rights will vest and become exercisable.
Vested awards
Vested rights are automatically converted to shares on behalf of the CEO.
Unvested awards
Unvested awards are forfeited if the CEO voluntarily ceases employment or is dismissed
for misconduct.
Valuation of performance rights
The values for performance rights are based on valuations prepared by an independent external consultant. The valuations are
based on the 10-day volume weighted average share price over the 10-day trading period prior to the start of the award’s valuation
period. Assumptions regarding the dividend yield and volatility have been estimated based on AMP’s dividend yield and volatility
over an appropriate period.
In determining the share-based payments expense, the number of instruments expected to vest has been adjusted to reflect the
number of employees expected to remain with AMP until the end of the performance period; this is revisited each reporting date.
Valuations are prepared by an independent external consultant. The valuations are based on AMP’s closing share price at the
valuation date. Assumptions regarding the dividend yield and volatility have been estimated based on AMP’s dividend yield and
volatility over an appropriate period.
AMP 2020 annual report 109
Notes to the financial statements 4.2 Share-based payments (continued)
(a) Performance rights (continued)
The following table shows the factors considered in determining the value of the performance rights granted during the year:
Grant date
Share price
19/05/2017
12/09/2019
$5.08
$1.85
Contractual
life (years)
Dividend
yield
Volatility1
4.0
3.4
5.2%
4.0%
23%
33%
1
Applies to performance rights subject to a relative TSR performance hurdle.
TSR
performance
hurdle
discount
TSR
performance
rights fair
value
56%
35%
$2.24
$1.21
Risk-free
rate1
1.8%
0.9%
For the 2017 LTI (TSR) award granted on 19 May 2017, AMP’s TSR performance against its peer comparator group was measured for
the period 1 January 2017 up to 31 December 2020. The outcome resulted in nil vesting of the award and the award will be lapsed
in full.
The following table shows the factors considered in determining the value of the CEO Recovery Incentive Rights Awards with a
share price target granted during the year:
Grant date
Share price
21/08/2018
12/09/2019
$3.45
$1.85
Contractual
life (years)
Dividend
yield
4.5
3.4
5.3%
4.0%
Volatility
22%
33%
Risk-free
rate
Share rights
fair value
2.2%
0.9%
$0.82
$0.62
The following table shows the movement in number of performance rights outstanding during the year:
Grant date
19/05/2017
21/08/2018
12/09/2019
12/09/2019
12/09/2019
Total
Balance at
1 Jan 2020
Granted
during
the year1
Exercised
during
the year
Lapsed
during
the year
Balance at
31 Dec 2020
1,880,700
1,656,976
2,500,000
1,933,701
33,895,010
–
–
–
–
3,729,281
–
–
–
–
–
–
(1,656,976)
–
–
(11,700,864)
1,880,700
–
2,500,000
1,933,701
25,923,427
41,866,387
3,729,281
–
(13,357,840)
32,237,828
1
LTI awards for the CFO and CRO were adjusted upon permanent appointment to their roles.
110 AMP 2020 annual report
4.2 Share-based payments (continued)
(b) Share rights
–
LTI participants below the AMP Group Executive Committee may be awarded share rights as part of their overall LTI award.
–
–
–
–
–
Short-term Incentive Deferral Plan participants are nominated executives and selected senior leaders who have the ability
to impact AMP’s financial soundness. This requires a portion of the participant’s annual short-term incentive outcome to be
deferred and awarded as share rights.
Transition Incentive award was made to select participants of AMP’s Group Executive Committee in the form of share rights
as a transitionary award between remuneration arrangements and the finalisation of strategy.
Enterprise Profit Share Plan supports AMP Capital’s remuneration framework by aligning its strategic intent and rewarding
behaviour that leads to sustainably increased profit and shareholder value. The participants are the AMP Capital Leadership
Team whereby a portion of their annual profit share outcome is deferred into share rights.
Deferred Bonus Equity Plan applies to selected AMP Capital participants whereby a portion of their annual short-term incentive
outcome (above a specified threshold) is deferred into share rights.
Retention awards were made to selected senior leaders who are critical to on-going operations and the delivery of AMP’s
strategy during the portfolio review and the completion of any subsequent corporate transactions.
Plan
Long-term Incentive Plan
Short-term Incentive Deferral Plan,
Transition Incentive award and
Retention award
Enterprise Profit Share Plan and
Deferred Bonus Equity Plan
Overview
Vesting
conditions/period
Share rights give the participant the right to acquire one fully paid ordinary share in AMP Limited after
a specified service period. They are granted at no cost to the participant and carry no dividend or voting
rights until they vest. This award may be settled through an equivalent cash payment at the discretion
of the board.
AMP Group participants
Continued service of four years
for the 2017 grant. No share
rights under the LTI plan were
granted in 2018, 2019 or 2020.
AMP Capital participants
Continued service for
three years.
Some awards may also vary
where the share rights are
awarded as a sign-on equity
award or to retain an
employee for a critical period.
All awards are also subject
to ongoing employment,
compliance with AMP policies
and the board’s discretion.
Short-term Incentive
Deferral Plan
Continued service for two
or four years and subject
to ongoing employment,
compliance with AMP policies
and the board’s discretion.
Transition Incentive award
This 2019 grant is split into
two tranches with continued
service for approximately
one and two years respectively.
These are also subject to
ongoing employment,
compliance with AMP policies
and the board’s discretion.
Retention award
40% of the award was granted
in share rights and is subject
to a one-year service condition
and ongoing compliance with
AMP policies and the board’s
discretion. After this period, an
additional three-year holding
period with vesting scheduled
to occur in 2024.
Enterprise Profit Share Plan
The grant is split into two
tranches with continued
service for two and three years
respectively. These are also
subject to ongoing employment,
compliance with AMP policies
and the board’s discretion.
For awards relating to the
2018 performance year, share
rights were granted to select
participants. The award was
subject to a one-year service
condition, ongoing compliance
with AMP policies and the
board’s discretion. After this
period, an additional three-year
non-vesting holding period
is applicable to participants
except for the AMP Capital
Chief Executive Officer where
the non-vesting holding period
is a further four years.
Deferred Bonus Equity Plan
The grant is split into two
tranches with continued
service for two and three years
respectively. These are also
subject to ongoing employment,
compliance with AMP policies
and the board’s discretion.
Vested awards
Vested share rights are automatically converted to shares on behalf of participants.
Unvested awards
Unvested awards are forfeited if the participant voluntarily ceases employment or is dismissed
for misconduct.
AMP 2020 annual report 111
Notes to the financial statements
4.2 Share-based payments (continued)
(b) Share rights (continued)
CEO Buy-out Incentive Rights Award
As part of the CEO’s incentive package on appointment in 2018, the CEO was granted an award of share rights with a service
(employment) condition to compensate for incentives forgone from the CEO’s previous employer.
In 2019, the CEO’s remuneration package was reviewed and adjusted to ensure the CEO is appropriately incentivised and aligned
with shareholders during the transformation of AMP. As part of this update, the CEO was granted an additional award of share
rights with a service (employment) condition. All other terms of the additional share rights award are consistent with the original
Buy-out Incentive Rights Award.
Plan
CEO Buy-out Incentive Rights Award
Overview
The Buy-out Incentive share rights give the CEO the right to acquire one fully paid ordinary share in
AMP Limited (per right) after a specified service period. They were granted at no cost to the CEO and
carry no dividend or voting rights until they vest. This award may be settled through an equivalent
cash payment at the discretion of the board.
Vesting
conditions/period
The rights will vest in accordance with the vesting schedule set out below:
–
–
–
50% on 15 February 2020
30% on 15 February 2021
20% on 15 February 2022
Vesting is subject to continued service and in compliance with AMP policies and the board’s discretion.
Vested awards
Vested share rights are automatically converted to shares on behalf of the CEO.
Unvested awards
Unvested awards are forfeited if the CEO voluntarily ceases employment or is dismissed for misconduct.
Valuation of share rights
The fair value of share rights has been calculated as at the grant date, by external consultants using a ‘discounted cash flow’
methodology. Fair value has been discounted for the present value of dividends expected to be paid during the vesting period to
which the participant is not entitled. For the purposes of the valuation it is assumed share rights are exercised as soon as they have
vested. Assumptions regarding the dividend yield have been estimated based on AMP’s dividend yield over an appropriate period.
In determining the share-based payments expense, the number of instruments expected to vest has been adjusted to reflect the
number of employees expected to remain with AMP until the end of the performance period.
For the CEO’s share rights awards, the valuations are also prepared by an independent external consultant. The valuations are based
on AMP’s closing share price at the valuation date. Assumptions regarding the dividend yield and volatility have been estimated
based on AMP’s dividend yield and volatility over an appropriate period.
The following table shows the factors which were considered in determining the independent fair value of the share rights granted
during the period:
Grant date
1/04/2020
1/04/2020
1/04/2020
1/04/2020
1/04/2020
1/04/2020
1/04/2020
23/11/2020
Share price
Contractual
life (years)
Dividend
yield
Dividend
discount
Fair value
$1.41
$1.41
$1.41
$1.41
$1.41
$1.41
$1.41
$1.71
1.9
3.9
1.0
3.9
0.9
1.9
2.9
4.0
4.0%
4.0%
4.0%
0.0%
0.0%
0.0%
4.0%
5.0%
7%
14%
14%
0%
0%
0%
11%
18%
$1.31
$1.21
$1.21
$1.41
$1.41
$1.41
$1.26
$1.40
112 AMP 2020 annual report
4.2 Share-based payments (continued)
(b) Share rights (continued)
The following table shows the movement in share rights outstanding during the period:
Grant date
27/04/2017
19/05/2017
02/04/2019
02/04/2018
13/08/2018
03/12/2018
21/08/2018
08/03/2019
25/03/2019
01/04/2019
10/05/2019
17/05/2019
24/05/2019
19/07/2019
13/08/2019
20/09/2019
01/04/2020
23/11/2020
Total
Balance at
1 Jan 2020
Granted during
the year
Exercised during
the year
Lapsed during
the year
Balance at
31 Dec 2020
1,040,678
1,570,713
713,708
2,678,286
106,382
285,713
1,453,488
23,166
24,261
2,312,980
1,914,885
773,997
33,039
144,927
587,328
22,099
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,239,879
1,627,444
(1,040,678)
(531,000)
(713,708)
(1,005,163)
(53,191)
(142,856)
(726,744)
(23,166)
(24,261)
–
(957,438)
–
(33,039)
(53,140)
(293,664)
(13,812)
–
–
–
(65,250)
–
(165,623)
–
(102,041)
–
–
–
(185,057)
–
–
–
–
–
–
(882,402)
–
–
974,463
–
1,507,500
53,191
40,816
726,744
–
–
2,127,923
957,447
773,997
–
91,787
293,664
8,287
7,357,477
1,627,444
13,685,650
9,867,323
(5,611,860)
(1,400,373)
16,540,740
(c) Options
CEO Recovery Incentive Options Award
As part of the CEO’s incentive package on appointment in 2018, the CEO was granted an award of options. Following shareholder
approval at the 2020 AGM, the 2018 Recovery Incentive Options award was cancelled in full and will not be replaced.
(d) Restricted shares
CEO Buy-out Incentive Shares Award
As part of the CEO’s incentive package on appointment in 2018, the CEO was awarded restricted shares with a service
(employment) condition to compensate for incentives forgone from the CEO’s previous employer.
In 2019, the CEO’s remuneration package was reviewed and adjusted to ensure he is appropriately incentivised and aligned with
shareholders during the transformation of AMP. As part of this update the CEO was granted an additional award of restricted shares
with a service (employment) condition. All other terms of the additional restricted shares award are consistent with the original award.
Plan
CEO Buy-out Incentive Shares Award
Overview
The Buy-out Incentive restricted shares are fully paid ordinary shares in AMP Limited that are held in
the AMP Employee Share Trust on behalf of the CEO until the specified service period has been met.
They were granted at no cost to the CEO and carry the same dividend or voting rights as other fully
paid ordinary shares. Any dividends paid on shares are received in the ordinary course on the dividend
payment date(s).
Vesting
conditions/period
The restricted shares are released in accordance with the vesting schedule set out below:
–
–
–
60% on 15 August 2019
20% on 15 August 2020
20% on 15 August 2021
Vesting is subject to continued service and in compliance with AMP policies and the board’s discretion.
Vested awards
On the relevant vesting dates, the restriction on the shares is released.
Unvested awards
Unvested awards are forfeited if the CEO voluntarily ceases employment or is dismissed for misconduct.
AMP 2020 annual report 113
Notes to the financial statements 4.2 Share-based payments (continued)
(d) Restricted shares (continued)
AMP Capital Enterprise Profit Share Plan
The AMP Capital Leadership Team is comprised of a select group of senior executives who are eligible to participate in the Enterprise
Profit Share Plan. This plan was designed to support AMP Capital’s remuneration framework by aligning its strategic intent and
rewarding behaviour that leads to sustainably increased profit and shareholder value. It is required that 40% of the participants’
profit share outcomes be deferred. 50% of the deferred component is awarded in the form of restricted shares for participants
who reside in Australia with the exception of the AMP Capital Chief Executive Officer. The objective of this was to create greater
alignment with our shareholders. The equity component of this plan was granted in 2019.
Plan
AMP Capital Enterprise Profit Share Plan
Overview
The deferred component of the 2018 Enterprise Profit Share award was granted in the form of
restricted shares. Restricted shares are fully paid ordinary shares in AMP Limited that are held in the
AMP Employee Share Trust on behalf of the participant until the specified service/holding period has
been met. They were granted at no cost to participants and carry the same dividend or voting rights
as other fully paid ordinary shares. Any dividends paid on shares are received in the ordinary course on
the dividend payment date(s).
Vesting
conditions/period
The restricted shares will vest after one year and continue to be subject to a disposal restriction for
an additional three-year period. Prior to each of the vesting date and the release date, the board will
undertake a conduct/risk review to confirm that vesting and release of the award aligns with the
conduct and risk outcomes of the Group.
Vested awards
On the relevant release dates, the restriction on the shares is released.
Unvested awards
Unvested awards are forfeited if the participant voluntarily ceases employment or is dismissed
for misconduct.
AMP Executive Performance Incentive Plan
The Executive Performance Incentive (EPI) Plan was newly introduced for the 2018 performance year and takes a combined
incentive approach, whereby a portion of the participant’s annual EPI outcome is paid out in cash and the other part deferred into
restricted shares. The objective of this plan is to create equity ownership across a select group of senior executives if performance
objectives are met. The equity component of this plan was granted in 2019.
Plan
AMP Executive Performance Incentive Plan
Overview
The deferred component of the Executive Performance Incentive Plan was granted in the form of
restricted shares. Restricted shares are fully paid ordinary shares in AMP Limited that are held in the
AMP Employee Share Trust on behalf of the participant until the specified service/holding period has
been met. They were granted at no cost to participants and carry the same dividend or voting rights
as other fully paid ordinary shares. Any dividends paid on shares are received in the ordinary course on
the dividend payment date(s).
Vesting
conditions/period
The restricted shares will vest after one year and continue to be subject to a disposal restriction for
an additional three-year period. Prior to each of the vesting date and the release date, the board will
undertake a conduct/risk review to confirm that vesting and release of the award aligns with the
conduct and risk outcomes of the AMP group.
Vested awards
On the relevant release dates, the restriction on the shares is released. Some shares may be released
early for participants who ceased employment to assist participants in managing their tax liability.
Unvested awards
Unvested awards are forfeited if the participant voluntarily ceases employment or is dismissed
for misconduct.
No restricted share awards were granted under the above disclosed Plans in 2020.
114 AMP 2020 annual report
4.2 Share-based payments (continued)
(d) Restricted shares (continued)
2019 AMP Employee Share Plan – $1,000 Tax Exempt Plan
AMP has given permanent employees the opportunity to become shareholders in AMP through the launch of the AMP Employee
Share Plan (AESP). All permanent employees as at 12 December 2018 were offered a $1,000 gift of shares subject to employment
on the allocation date in March 2019. These shares are subject to a restriction on sale and transfer for up to three years from the
date they are allocated. Any shares acquired as a gift will be released to the participant at the end of the three-year period or when
they leave employment with AMP (whichever is earlier).
2020 AMP Employee Share Plan – $1,000 Tax Exempt Plan
For the period from 1 April 2020, eligible participants may acquire $1,000 fully paid ordinary shares in AMP by sacrificing $1,000
of their 2019 short-term incentive (STI) award. These shares are subject to a restriction on sale and transfer for up to three years
from the date they are allocated. Any shares acquired will be released to the participant at the end of the three-year period or
when they leave employment with AMP (whichever is earlier).
The AMP $1,000 Tax Exempt Plan will not be reoffered to employees in 2021 in its current format.
2019 and 2020 AMP Employee Share Plan – $5,000 Salary Sacrifice Plan
AMP has given permanent employees the opportunity to become shareholders in AMP through the launch of the AMP Salary
Sacrifice Share Plan (SSP). All permanent employees in Australia were offered the opportunity to salary sacrifice between
$2,500 to $5,000 over a 12-month period to acquire shares in AMP. AMP offered a matching contribution on a 1:5 basis, meaning
that employees who opted to salary sacrifice $5,000 would receive an upfront matched allocation of $1,000 in AMP shares.
The salary sacrifice and matching shares are both held in an employee share plan trust on behalf of the employees and are
subject to a restriction on sale and transfer for up to three years from the date they are allocated.
Any purchased and matching shares acquired during 2019 will be released to the participant at the end of the three-year period.
Any purchased shares acquired during 2020 will be released at the end of the three-year period and matching shares will be
released at the end of the two-year period or when they leave employment with AMP (whichever is earlier). Matching shares
are forfeited if a participant voluntarily ceases employment before the end of the three-year holding period.
The AMP $5,000 Salary Sacrifice Plan will not be reoffered to employees in 2021 in its current format.
Valuation of restricted shares and AMP Employee Share Plan
The restricted share awards are based on valuations prepared by an independent external consultant. The valuations are based on
the 10-day volume weighted average share price over the 10-day trading period prior to the start of the award’s valuation period.
Assumptions regarding the dividend yield and volatility have been estimated based on AMP’s dividend yield and volatility over an
appropriate period.
For the AMP Employee Share Plan $1,000 Tax Exempt Plan and $5,000 Salary Sacrifice Plan, the fair value of the shares was
determined as the market price of AMP ordinary shares on the grant date. As employees holding restricted shares are entitled to
dividend payments, no adjustment has been made to the fair value in respect of future dividend payments.
In determining the share-based payments expense for the period, the number of instruments expected to vest has been adjusted
to reflect the number of employees expected to remain with AMP until the end of the vesting period.
AMP 2020 annual report 115
Notes to the financial statements 4.2 Share-based payments (continued)
(d) Restricted shares (continued)
Grant date
25/02/2019
25/02/2019
25/02/2019
14/03/2019
26/04/2019
17/05/2019
17/05/2019
13/08/2019
13/08/2019
13/08/2019
28/04/2020
Share price
Contractual life
(years)
Vesting date
Dividend yield
Fair value
$2.38
$2.38
$2.38
$2.39
$2.39
$2.20
$2.20
$1.81
$1.81
$1.81
$1.68
1.0
2.0
3.0
3.0
3.0
0.8
1.0
0.0
1.0
2.0
2.0
15/02/2020
15/02/2021
15/02/2022
14/03/2022
26/04/2022
15/02/2020
15/05/2020
15/08/2019
15/08/2020
15/08/2021
30/04/2022
n/a
n/a
n/a
n/a
n/a
4.2%
4.2%
4.0%
4.0%
4.0%
n/a
$2.38
$2.38
$2.38
$2.39
$2.39
$2.20
$2.20
$1.81
$1.81
$1.81
$1.68
The following table shows the movement in restricted shares outstanding for the year:
Grant date
25/02/2019
14/03/2019
26/04/2019
17/05/2019
13/08/2019
28/04/2020
Total
Balance at
1 Jan 2020
Granted during
the year
Released during
the year
Lapsed during
the year
Balance at
31 Dec 2020
1,119,211
2,048,955
358,818
1,587,347
234,932
–
–
–
–
–
–
352,474
–
(602,811)
(69,034)
(52,761)
–
(45,654)
(328,068)
–
(26,006)
(226,380)
–
(17,083)
791,143
1,446,144
263,778
1,308,206
234,932
289,737
5,349,263
352,474
(770,260)
(597,537)
4,333,940
Accounting policy – recognition and measurement
Equity-settled share-based payments
The cost of equity-settled share-based payments is measured using their fair value at the date on which they are granted.
The fair value calculation takes into consideration a number of factors, including the likelihood of achieving market-based
vesting conditions such as total shareholder return (market conditions).
The cost of equity-settled share-based payments is recognised in the Consolidated income statement, together with a
corresponding increase in the share-based payment reserve (SBP reserve) in equity, over the vesting period of the instrument.
At each reporting date, the AMP group reviews its estimates of the number of instruments that are expected to vest and any
changes to the cost are recognised in the Consolidated income statement and the SBP reserve, over the remaining vesting period.
Where the terms of an equity-settled share-based payment are modified and the expense increases as a result of the modification,
the increase is recognised over the remaining vesting period. When a modification reduces the expense, there is no adjustment
and the pre-modification cost continues to be recognised.
Where an equity-settled award does not ultimately vest, expenses are not reversed; except for awards where vesting is conditional
upon a non-market condition, in which case all expenses are reversed in the period in which the award lapses.
Cash-settled share-based payments
Cash-settled share-based payments are recognised when the terms of the arrangement provide the AMP group with the discretion
to settle in cash or by issuing equity instruments and it has a present obligation to settle the arrangement in cash. A present
obligation may occur where the past practice has set a precedent for future settlements in cash.
Cash-settled share-based payments are recognised, over the vesting period of the award, in the Consolidated income statement,
together with a corresponding liability. The fair value is measured on initial recognition and re-measured at each reporting date
up to and including the settlement date, with any changes in fair value recognised in the Consolidated income statement. Similar
to equity-settled awards, numbers of instruments expected to vest are reviewed at each reporting date and any changes are
recognised in the Consolidated income statement and corresponding liability. The fair value is determined using appropriate
valuation techniques at grant date and subsequent reporting dates.
116 AMP 2020 annual report
Section 5: Group entities
This section explains significant aspects of the AMP group structure, including significant investments in controlled operating
entities and entities controlled by AMP Life’s statutory funds, and investments in associates. It also provides information on
business acquisitions and disposals made during the year.
5.1 Controlled entities
5.2 Discontinued operations
5.3 Investments in associates
5.4 Parent entity information
5.5 Related party disclosures
5.1 Controlled entities
(a) Significant investments in controlled operating entities are as follows:
Operating entities
Name of entity
AMP AAPH Limited
AMP Advice Holdings Pty Ltd
AMP Bank Limited
AMP Capital Funds Management Limited
AMP Capital Holdings Limited
AMP Capital Investors (New Zealand) Limited
AMP Capital Investors Limited
AMP Capital Office and Industrial Pty Limited
AMP Capital Shopping Centres Pty Limited
AMP Financial Planning Pty Limited
AMP Group Finance Services Limited
AMP Group Holdings Limited
AMP Life Limited
AMP Services (NZ) Limited
AMP Services Limited
AMP Superannuation Limited
AMP Wealth Management New Zealand Limited
Hillross Financial Services Limited
ipac Group Services Pty Ltd
AMP Life Services Pty Ltd
AMP Wealth Management Holdings Pty Ltd
N.M. Superannuation Pty Ltd
National Mutual Funds Management (Global) Limited
National Mutual Funds Management Ltd
National Mutual Life Nominees Pty Limited
NMMT Limited
The National Mutual Life Association of Australasia Limited
Country of
registration
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Share type
2020
2019
% holdings
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord A
Ord
Ord
Ord A
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
–
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
–
100
100
100
100
–
100
–
100
100
100
85
85
85
85
85
85
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Critical accounting estimates and judgements:
Judgement is applied in determining the relevant activities of each entity, whether AMP Limited has power over these activities and
whether control exists. This involves assessing the purpose and design of the entity and identifying the activities which significantly
affect that entity’s returns and how decisions are made about those activities. In assessing how decisions are made, management
considers voting and veto rights, contractual arrangements with the entity or other parties, and any rights or ability to appoint, remove
or direct key management personnel or entities that have the ability to direct the relevant activities of the entity. Management also
considers the practical ability of other parties to exercise their rights.
Judgement is also applied in identifying the variable returns of each entity and assessing AMP Limited’s exposure to these returns.
Variable returns include distributions, exposure to gains or losses and fees that may vary with the performance of an entity.
AMP 2020 annual report 117
Notes to the financial statements
5.2 Discontinued operations
(a) Sale of wealth protection and mature business
Consideration for the sale comprised $2,500m cash and non-cash consideration of 20% equity interest in Resolution Life
NOHC Pty Ltd (Resolution Life Australasia), a new Australian-domiciled Resolution controlled holding company that became the
owner of WP and mature businesses upon completion. The accounting fair value of AMP’s initial 20% equity interest in Resolution
Life Australasia at 30 June 2020 was determined to be $500m.
Under the terms of the sale agreement, certain purchase price adjustments were made to the cash consideration to determine the
completion payment from Resolution Life. The adjustments included profits earned by the WP and mature businesses since 1 July
2018, profits emerging within AMP Life from businesses other than WP and mature, dividends paid by AMP Life since 1 July 2018,
capital contributions made by AMP since 1 July 2018 up to the completion date and some other adjustments, the majority of which
have been finalised.
The sale of the WP and mature businesses resulted in an after-tax gain of $91m (net of transaction cost and separation costs)
recognised within the financial report for the year ended 31 December 2020. The gain includes estimates of purchase price
adjustments as well as estimated provisions for future separations costs, warranties and indemnities under the sale agreement
and onerous contracts resulting from the separation where reliable estimates can be made.
Gain on sale of the WP and mature businesses disclosed in the Segment performance note excludes $208m of separation costs
and related provisions.
(b) Treatment of equity interest in Resolution Life Australasia
AMP’s initial 20% equity interest in Resolution Life Australasia is accounted for as an investment in associate using the equity
method in accordance with AASB 128 Investments in Associates and Joint Ventures. AMP’s interest has subsequently reduced. Refer
to note 5.3 for details related to the carrying value and ownership interest of AMP’s investment in Resolution Life Australasia.
(c) Profit or loss for the period from discontinued operations
The results of the WP and mature businesses included within the AMP group’s Consolidated income statement are set out below,
including comparative information.
Following the sale of the WP and mature businesses, certain service arrangements will continue between AMP and those
businesses; for example, investment management services. Where relevant, revenues and expenses attributable to continuing
operations from such arrangements have been presented within continuing operations to reflect the ongoing nature of such
arrangements. The results of the discontinued operations presented below have been adjusted for these arrangements.
Total revenue of WP and mature businesses1
Total expense of WP and mature businesses2
(Loss) profit before tax from WP and mature businesses
Income tax credit (expense)
6 months to
30 June 2020
$m
2019
$m
(23,391)
22,823
19,383
(18,986)
(568)
601
397
(1,000)
Profit (loss) for the period from discontinued operations before disposal of WP and mature
33
(603)
Loss on disposal of WP and mature before tax
Income tax credit resulting from the loss on disposal of WP and mature
Gain on disposal of WP and mature after tax3
Profit (loss) for the period from discontinued operations
(13)
104
91
124
–
–
–
(603)
1
2
3
Total revenue of WP and mature businesses includes investment losses of $24.7b (2019: gains of $16.9b).
Total expense of WP and mature businesses includes decreases in external unitholder liabilities of $18.4b (2019: increases of $2.1b) and decreases in
investment contract liabilities of $5.9b (2019: increases of $11.1b).
Gain on sale of the WP and mature businesses disclosed in the Segment performance note excludes $208m of separation costs and related provisions.
118 AMP 2020 annual report
5.2 Discontinued operations (continued)
(d) Cash flows from/(used in) discontinued operations
The cash flows from/(used in) discontinued operations for the period up to the loss of control (30 June 2020) included within the
Consolidated statement of cash flows are set out below, including comparative information.
Net cash used in operating activities
Net cash from investing activities
Net cash outflows from discontinued operations
2020
$m
2019
$m
(5,410)
4,159
(8,424)
7,694
(1,251)
(730)
Other than the sale of WP and mature businesses there were no individually or collectively significant acquisitions or disposals of
controlled operating entities during the year.
Critical accounting estimates and judgements:
The gain/(loss) recognised on the sale of the WP and mature businesses includes management’s judgements in relation to assumptions
used to determine of the fair value of AMP’s initial 20% interest in Resolution Life Australasia as well as estimates of purchase price
adjustments, estimated provisions for future separation costs, warranties and indemnities under the sale agreement and onerous
contracts resulting from the separation.
AMP 2020 annual report 119
Notes to the financial statements
5.3 Investments in associates
Investments in associates accounted for using the equity method
Associate
Principal activity
Place of
business
Ownership interest
Carrying amount1
2020
%
19.62
19.99
2019
%
n/a
19.99
Life insurance company
Australia
Pension company
China
Investment management
China
14.97
14.97
Resolution Life NOHC Pty Ltd2,3
China Life Pension Company3
China Life AMP Asset
Management Company Ltd
Global Infrastructure
Fund Sponsor4
Global Infrastructure Fund II4
AMP Capital Infrastructure
Debt Fund IV
AMP Capital Infrastructure
Debt Fund V
PCCP LLC
Other
(individually immaterial associates)
Fund
Fund
Fund
Fund
Cayman Islands
Cayman Islands
4.74
2.81
Luxembourg
1.25
Luxembourg
3.08
United States
24.90
4.74
5.02
1.25
n/a
24.90
n/a
n/a
Investment management
2020
$m
514
348
57
80
91
56
66
137
93
1,442
2019
$m
–
325
53
101
124
31
–
144
73
851
Total investments in associates accounted for using the equity method
1
2
3
4
The carrying amount is after recognising $81m (2019: $72m) share of current period profit or loss of associates accounted for using the equity method.
On 22 January 2021 AMP’s ownership interest in Resolution Life NOHC Pty Ltd was diluted to 19.13%.
The AMP group has significant influence through representation on the entity’s board.
Entities within the AMP group have been appointed investment manager, therefore the group is considered to have significant influence.
Accounting Policy – recognition and measurement
Investments in associates
Investments in associates accounted for using the equity method
Investments in entities, other than those backing investment contract liabilities and life insurance contract liabilities, over which
the AMP group has the ability to exercise significant influence, but not control, are accounted for using the equity method of
accounting. The investment is measured at cost plus post-acquisition changes in the AMP group’s share of the associates’ net
assets, less any impairment in value. The AMP group’s share of profit or loss of associates is included in the Consolidated income
statement. Any dividend or distribution received from associates is accounted for as a reduction in carrying value of the associate.
Any impairment is recognised in the Consolidated income statement when there is objective evidence a loss has been incurred.
It is measured as the amount by which the carrying amount of the investment in entities exceeds the recoverable amount.
Investments in associates measured at fair value through profit or loss
Investments in entities held to back investment contract liabilities and life insurance contract liabilities are exempt from the
requirement to apply equity accounting and have been designated on initial recognition as financial assets measured at fair value
through profit or loss.
120 AMP 2020 annual report
5.4 Parent entity information
(a) Statement of comprehensive income – AMP Limited entity
Dividends and interest from controlled entities
Service fee revenue
Share of profit or loss of associates accounted for using the equity method
Operating expenses
Impairment of investments in controlled entities
Finance costs
Income tax credit1
Loss for the year
Total comprehensive loss for the year
(b) Statement of financial position – AMP Limited entity
Current assets
Cash and cash equivalents
Receivables and prepayments2
Current tax assets
Loans and advances to subsidiaries
Non-current assets
Investments in controlled entities
Investments in associates
Loans and advances to subsidiaries
Deferred tax assets3
Total assets
Current liabilities
Payables2
Current tax liabilities
Provisions
Subordinated debt4
Non-current liabilities
Subordinated debt4
Deferred tax liabilities
Total liabilities
Net assets
Equity – AMP Limited entity
Contributed equity
Share-based payment reserve
Other reserve
Retained earnings5
Total equity
2020
$m
2019
$m
427
12
33
10
(2,295)
(39)
20
153
17
–
(20)
(3,173)
(44)
58
(1,832)
(3,009)
(1,832)
(3,009)
16
141
153
570
5,336
358
250
52
9
325
392
253
6,838
–
1,558
51
6,876
9,426
395
70
2
265
772
10
565
–
2
277
1,036
–
1,514
1,880
5,362
7,546
10,402
27
(10)
(5,057)
10,402
24
–
(2,880)
5,362
7,546
1
Dividend income from controlled entities $413m (2019: $128m) is not assessable for tax purposes. Income tax credit includes $nil (2019: $45m)
utilisation of previously unrecognised tax losses.
Receivables and payables include tax-related amounts receivable from subsidiaries $97m (2019: $125m) and payable to subsidiaries $359m (2019: $533m).
2
3 Deferred tax assets include amounts recognised for losses available for offset against future taxable income $43m (2019: $43m).
4
The AMP Limited entity is the issuer of: AMP Wholesale Capital Notes; AMP Capital Notes, AMP Capital Notes 2, AMP Subordinated Notes and AMP
Notes 3. Further information on these is provided in note 3.2.
Changes in retained earnings comprise $1,832m loss (2019: $3,009m loss) for the year less dividends paid of $343m (2019: $117m).
5
(c) Contingent liabilities of the AMP Limited entity
The AMP Limited entity has entered into deeds to provide capital maintenance and liquidity support to AMP Bank Limited.
At the reporting date, the likelihood of any outflow in settlement of these obligations is considered remote.
AMP 2020 annual report 121
Notes to the financial statements
5.5 Related party disclosures
(a) Key management personnel
Compensation of key management personnel
Short-term benefits
Post-employment benefits
Share-based payments
Other long-term benefits
Termination benefits
Total
2020
$’000
2019
$’000
12,537
454
10,767
728
3,143
21,248
510
14,757
718
4,396
27,629
41,629
Compensation of the group’s key management personnel includes salaries, non-cash benefits and contributions to the post-
employment defined benefit plans (refer to note 4.1). Executive officers also participate in share-based incentive programs
(refer to note 4.2). The amounts disclosed in the table are recognised as an expense during the reporting period.
Loans to key management personnel
Loans to key management personnel and their related parties are provided by AMP Bank and are on similar terms and conditions
generally available to other employees within the group. No guarantees are given or received in relation to these loans. Loans have
been made to five key management personnel and their related parties. Details of these loans are:
Balance as at the beginning of the year
Net (repayments) advances
Balance as at the end of the year
Interest charged
2020
$’000
2019
$’000
9,212
(174)
11,666
1,792
9,038
13,458
203
368
Key management personnel access to AMP’s products
From time to time, key management personnel or their related entities may have had access to certain AMP products and services
such as investment products, personal banking and financial investment services. These products and services are offered to key
management personnel on the same terms and conditions as those entered into by other group employees or customers.
122 AMP 2020 annual report
5.5 Related party disclosures (continued)
(b) Transactions with related parties
Transactions with non-executive directors
Some of the non-executive directors hold directorships or positions in other companies or organisations. AMP may provide
or receive services from these companies or organisations negotiated based on arm’s length terms. None of the non-executive
directors were, or are, involved in any procurement or board decision making regarding the companies or organisations with
which they have an association.
Transactions with Resolution Life Australasia
Transactions during the period involve activities in conjunction with the sale of the WP and mature businesses to Resolution Life
Australasia. Refer to note 5.2 Discontinued operations for further details of this sale. To facilitate the transition of these businesses
to new ownership, the group provides operational services under a Transitional Services Agreement (TSA). Fees charged under the
TSA are in accordance with negotiated terms equivalent to those that prevail in arm’s length transactions.
The group also provides Resolution Life Australasia with investment management and advice-related services in the normal course
of business.
Resolution Life Australasia currently has funds on deposit with AMP Bank for which interest expense has been incurred and accrued
for by the group.
Transactions with other associates
The group provides investment management and banking services under general service level agreements with other associates
as well as support to financial advice practices.
Dividends were received from associates.
Transactions with investment entities
In conjunction with the establishment of new investment funds managed by AMP Capital or other group associates, the group,
from time to time, invests seed and sponsor capital. The structure of the fund or the group’s level of ownership may result in the
fund being treated as an associate of the group. See note 5.3 for details of the group’s associates. Management fees are earned
by AMP or its associates for managing and administering these investment funds.
All transactions between the group, its associates and the funds are on an arm’s length basis.
Accounting policy – recognition and measurement
Short-term benefits – Liabilities arising in respect of salaries and wages and any other employee entitlements expected to be
settled within 12 months of the reporting date are measured at their nominal amounts.
Post-employment benefits – Defined contribution funds – The contributions paid and payable by the AMP group to defined
contributions funds are recognised in the Consolidated income statement as an operating expense when they fall due. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Share-based payments – Refer to note 4.2.
Other long-term benefits – Other employee entitlements are measured at the present value of the estimated future cash
outflows to be made in respect of services provided by employees up to the reporting date. In determining the present value of
future cash outflows, discount rates are determined with reference to market yields at the end of the reporting period on high
quality corporate bonds or, in countries where there is no deep market in such bonds, by using market yields at the end of the
period on government bonds.
AMP 2020 annual report 123
Notes to the financial statements Section 6: Other disclosures
This section includes disclosures other than those covered in the previous sections, required for the AMP group to comply with the
accounting standards and pronouncements.
6.1 Notes to Consolidated statement of cash flows
6.2 Commitments
6.3 Right of use assets and lease liabilities
6.4 Provisions and contingent liabilities
6.5 Auditors’ remuneration
6.6 New accounting standards
6.7 Events occurring after reporting date
6.1 Notes to Consolidated statement of cash flows
(a) Reconciliation of cash flow from operating activities
Net profit (loss) after income tax
Depreciation of operating assets
Amortisation and impairment of intangibles
Investment gains and losses and movements in external unitholders’ liabilities
Dividend and distribution income reinvested
Share-based payments
Decrease (increase) in receivables, intangibles and other assets
(Decrease) increase in net policy liabilities
(Decrease) increase in income tax balances
Increase in deposits, other payables and provisions
Cash flows used in operating activities
(b) Reconciliation of cash
Comprises:
Cash and cash equivalents
Short-term bills and notes (included in Debt securities)
Cash and cash equivalents for the purpose of the Statement of cash flows
2020
$m
2019
$m
194
74
144
7,846
(1,223)
9
281
(10,476)
(1,136)
1,545
(2,434)
74
2,546
(7,472)
(4,180)
4
(567)
3,315
279
664
(2,742)
(7,771)
2,428
225
4,426
3,643
2,653
8,069
Accounting policy – recognition and measurement
Cash and cash equivalents
Cash and cash equivalents comprise cash-on-hand that is available on demand and deposits that are held at call with financial
institutions. Cash and cash equivalents are measured at fair value, being the principal amount. For the purpose of the Consolidated
statement of cash flows, Cash and cash equivalents also include other highly liquid investments not subject to significant risk of
change in value, with short periods to maturity, net of outstanding bank overdrafts. Bank overdrafts are shown within Interest-
bearing liabilities in the Consolidated statement of financial position.
124 AMP 2020 annual report
6.2 Commitments
(a) Commitments for leases not yet commenced
The future lease payments for which the group is committed but the leases have not yet commenced as at 31 December 2020 are $735m
(2019: $748m). Lease commitments do not include non-lease components per AMP’s accounting policy based on AASB 16 Leases.
(b) Buy-back arrangements
AMP has contractual arrangements with financial advice businesses in the aligned AMP advice network to purchase their
client registers at agreed multiples to revenue subject to certain conditions being met. These buy-back arrangements include
arrangements known as Buyer of Last Resort (BOLR). Advice businesses must register their intention to invoke buy-back
arrangements, which have six to 18-month lead times and are subject to audit prior to finalising the purchase price. The pipeline
of buy-back arrangements where an intention to invoke has been registered is $89m (2019: $235m), all of which relates to
arrangements expected to settle in the next 12 months. The commitment value has been disclosed as the unaudited value as
advised by the advice businesses. AMP’s experience is that the ultimate purchase price after audit is typically less than the initially
advised value and not all of the buy-backs progress to completion. Over the 12 months ended 31 December 2020, $155m was paid
for executed buy-back arrangements.
Where a notice of intention to invoke the buy-back arrangement has been received or is considered likely to be received in future
periods and AMP has concluded that the purchase price of the register exceeds the value of the client register to AMP, or where
ongoing service arrangements would be unable to be serviced or sold, a provision has been raised for the difference. Refer to note
6.4 for further details.
(c) Investment commitments
At 31 December 2020 AMP Capital Finance Limited, a controlled entity of AMP Limited, had uncalled investment commitments
of $217m (2019: $417m) in relation to certain funds managed by AMP Capital. Subsequent to the reporting date, $nil of this
committed capital was invested by AMP Capital Finance Limited into AMP Capital managed funds. These investment commitments
will only be called when suitable investment opportunities arise, and the exact timeline could not be specified.
(d) AMP Bank credit-related commitments
At 31 December 2020 AMP Bank had credit-related commitments of $3,398m (2019: $3,522m), which include undrawn balances
on customer approved limits as well as loan offers pending signing by customers and signed loan contracts pending settlement.
The bank expects that not all of the credit-related commitments will be drawn before their contractual expiry.
6.3 Right of use assets and lease liabilities
The AMP group adopted AASB 16 Leases (AASB 16) from 1 January 2019. Per AASB 16, the group recognises leases on balance sheet
as lease liabilities except for short-term leases and leases of low value, with corresponding right of use assets being recognised on
balance sheet as well.
(a) Right of use assets
The main type of ROU asset recognised by the group is buildings. The following table details the carrying amount of the ROU assets
at 31 December 2020 and the movements during the year.
Opening balance
Additions (derecognitions) during the year
Impairment expense1
Depreciation expense
Foreign currency exchange rate changes and other
Closing balance
2020
$m
245
(5)
(11)
(51)
(4)
174
2019
$m
199
96
–
(50)
–
245
1
This relates to the impairment of ROU assets arising from the sale of WP and mature businesses. This expense has been recognised within the gain/
loss from the discontinued operations.
AMP 2020 annual report 125
Notes to the financial statements
6.3 Right of use assets and lease liabilities (continued)
(b) Lease liabilities
The following table details the carrying amount of lease liabilities at 31 December 2020 and the movements during the year.
Opening balance
Additions (derecognitions) during the year
Interest expense
Payments made
Foreign currency exchange rate changes and other
Closing balance
2020
$m
266
(7)
10
(54)
(4)
211
2019
$m
209
100
10
(53)
–
266
The AMP group paid $8m (2019: $13m) in relation to short-term leases and $1m (2019: $1m) in relation to variable lease payments.
The total cash outflow for leases in 2020 was $63m (2019: $67m).
Accounting policy – recognition and measurement
At inception, the AMP group assesses whether a contract is or contains a lease. Such assessment involves the application of
judgement as to whether:
–
–
–
the contract involves the use of an identified asset;
the group obtains substantially all the economic benefits from the asset; and
the group has the right to direct the use of the asset.
It is AMP’s policy to separate non-lease components when recognising the lease liability.
The group recognises a right of use (ROU) asset and a lease liability at the lease commencement date. The ROU asset is initially
measured as the present value of future lease payments, plus initial direct costs and restoration costs of the underlying asset, less
any lease incentives received. The ROU asset is depreciated over the shorter of the lease term and the useful life of the underlying
asset. The ROU asset is tested for impairment if there is an indicator, and is adjusted for certain remeasurements of the lease liability.
A lease liability is initially measured at the present value of future lease payments discounted using the group’s incremental
borrowing rate. Lease payments generally include fixed payments and variable payments that depend on an index, eg CPI.
A lease liability is remeasured when there is a change in future lease payments from a change in an index, or if the group’s
assessment of whether an option will be exercised changes.
Interest expense on lease liabilities is recognised within finance costs in the Consolidated income statement.
The group has elected not to recognise ROU assets and lease liabilities for leases where the lease term is less than or equal to
12 months. Payments for such leases are recognised as an expense on a straight-line basis over the lease term.
126 AMP 2020 annual report
6.4 Provisions and contingent liabilities
(a) Provisions
Restructuring1
Client remediation
Buy-back arrangements
Obligations relating to the sale of WP and mature
Other2
Total provisions
2020
$m
2019
$m
18
579
67
258
134
1,056
27
652
116
–
181
976
Restructuring1
$m
Client
remediation
$m
Buy-back
arrangements
$m
Obligations
relating to the
sale of WP
and mature
$m
Other2
$m
Total
$m
(b) Movements in provisions
Balance at the beginning of the year
Additional provisions made during the year
Provisions used during the year
Provisions relating to discontinued operations
Balance at the end of the year
27
28
(37)
–
18
652
68
(141)
–
579
116
22
(71)
–
67
–
294
(36)
–
258
181
166
(120)
(93)
976
578
(405)
(93)
134
1,056
1
2
Restructuring provisions are recognised in respect of programs that materially change the scope of the business or the manner in which the business
is conducted.
Other provisions are in respect of various other operational provisions. $16m (2019:$24m) is expected to be settled more than 12 months from the
reporting date.
Accounting policy – recognition and measurement
Provisions
Provisions are recognised when:
–
–
–
the AMP group has a present obligation (legal or constructive) as a result of a past event;
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
a reliable estimate can be made of the amount of the obligation.
Critical accounting estimates and judgements:
The group recognises a provision where a legal or constructive obligation exists at the balance sheet date and a reliable estimate can
be made of the likely outcome. Provisions are reviewed on a regular basis and adjusted for management’s best estimates, however
significant judgement is required to estimate likely outcomes and future cash flows. The judgemental nature of these items means
that future amounts settled may be different from those provided for.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the reporting date. For provisions other than employee entitlements, the discount rate used to determine the present
value reflects current market assessments of the time value of money and the risks specific to the liability.
A contingent liability is disclosed where a legal or constructive obligation is possible, but not probable; or where the obligation is
probable, but the financial impact of the event is unable to be reliably estimated.
From time to time, the AMP group may incur obligations or suffer financial loss arising from litigation or contracts entered into
in the normal course of business, including guarantees issued by the parent for performance obligations of controlled entities
within the AMP group. Legal proceedings threatened against AMP may also, if filed, result in AMP incurring obligations or suffering
financial loss. A contingent liability exists in relation to actual and likely potential legal proceedings.
Where it is determined that the disclosure of information in relation to a contingent liability can be expected to seriously prejudice
the position of the AMP group (or its insurers) in a dispute, accounting standards allow the AMP group not to disclose such
information. It is AMP group’s policy that such information is not disclosed in this note.
AMP 2020 annual report 127
Notes to the financial statements
6.4 Provisions and contingent liabilities (continued)
Industry and regulatory compliance investigations
AMP is subject to review from time to time by regulators, both in Australia and offshore. In Australia, AMP’s principal regulators
are APRA, ASIC and AUSTRAC, although other government agencies may have jurisdiction depending on the circumstances. The
reviews and investigations conducted by regulators may be industry-wide or specific to AMP and the outcomes of those reviews
and investigations can vary and may lead, for example, to the imposition of penalties, variations or restrictions to licences, the
compensation of clients, enforceable undertakings or recommendations and directions for AMP to enhance its control framework,
governance and systems.
AMP is undertaking additional reviews concurrently with these regulatory investigations to determine, amongst other things,
where clients or other stakeholders, including employees, may have been disadvantaged. In some instances, compensation has
been paid and where the results of our reviews have reached the point that compensation is likely and can be reliably estimated
then a provision has been raised.
Client remediation
AMP is progressing with its customer review and remediation programs which are seeking to identify and compensate clients who
have suffered loss or detriment as a result of either:
inappropriate advice from their adviser; or
–
where clients have been charged an advice service fee without the provision of financial advice services (or insufficient
–
evidence of the provision of financial services).
Provisions have been raised for both of these items, inclusive of the costs to perform the review and implement the remediation
process. The measurement of provisions is based on assumptions used to estimate the customer remediation payments, including
evidence failure rates and compensation amounts, which require significant judgement. As the review progresses, additional
information may arise or further issues may be identified, which could have a significant impact on the final compensation and the
costs of the programs. Consequently, the total costs associated with this matter remain uncertain.
Provisions for client remediation do not include amounts for potential recoveries from advisers and insurers.
Inappropriate advice
AMP continues to progress with the identification and compensation of clients who have suffered loss or detriment as a result of
receiving inappropriate advice from their adviser. The scope of the review includes the period from 1 January 2009 to 30 June 2015
specified by ASIC in Report 515 Financial advice: Review of how large institutions oversee their advisers. AMP has extended its
review to 30 June 2017. The provision also includes any instances of inappropriate advice identified through ongoing monitoring
and supervision activities.
Compensation has been and continues to be paid and a provision exists for further compensation payable as the review progresses
and client reviews are completed. AMP has adjusted its provision estimate for future compensation based on the actual experience
of remediating clients and the expected future costs of operating the program. The provision includes a component for advisers for
whom a remediation review has yet to be completed and the determination of compensation for any given client is not known with
certainty until immediately prior to payment.
Advice service fee (fees for no service)
AMP has progressed on the identification and compensation of clients of advisers who have been charged an ongoing service
fee without the provision of financial advice services (or where there is insufficient evidence of the provision of financial advice
services). This involves a large-scale review of fee arrangements from 1 July 2008 as specified by ASIC in Report 499 Financial advice:
Fees for no service. Sampling of customer files has been conducted across AMP licensees and has identified instances in the review
period where clients have paid fees and there is insufficient evidence to support that the associated service had been performed.
In such instances, clients have been remediated.
AMP has developed a process for client review and remediation, which is expected to finish mid-2021. AMP has made significant
progress in the execution of the remediation program, including agreeing major policies with ASIC. Throughout the program AMP
continues to engage with ASIC on its progress and approach.
The provision for advice service fee client compensation and the future costs of executing the remediation program is judgemental
and has been estimated using multiple assumptions derived from the sampling conducted to date. Assumptions used include
evidence failure rates, average fees to be refunded and compensation for lost earnings.
Other matters
In addition to the inappropriate advice and advice service fee reviews, other reviews in relation to fees charged to clients have
been performed during the year. These reviews are ongoing and where the reviews have identified instances of clients having
suffered loss or detriment, compensation has been paid. As at 31 December 2020, provisions of $55m have been recognised for
the estimated remaining compensation due to clients, including lost earnings, for these matters. The provisions are judgemental
and the actual compensation to clients could vary from the amounts provided.
128 AMP 2020 annual report
6.4 Provisions and contingent liabilities (continued)
Buy-back arrangements
AMP has contractual arrangements with financial advice businesses in the aligned AMP advice network to purchase their
client registers at agreed multiples to revenues subject to certain conditions being met. These buy-back arrangements include
arrangements known as Buyer of Last Resort (BOLR). Advice businesses must register their intention to invoke buy-back
arrangements, which have six to 18-month lead times and are subject to audit prior to finalising the purchase price. Client registers
are either acquired outright by AMP or AMP facilitates a sale to an existing business within the aligned AMP advice network.
Where a notice of intention to invoke the buy-back arrangement has been received, or is considered likely to be received in future
periods, and AMP has concluded that the purchase price of the register exceeds the value of the client register to AMP, or where
ongoing service arrangements would be unable to be serviced or sold, a provision has been raised for the difference.
The provision is judgemental and the actual notices received and resulting loss incurred upon settlement of the arrangements
may vary significantly from the provision.
Litigation
Shareholder class actions
During May and June 2018, AMP Limited was served with five competing shareholder class actions, one filed in the Supreme Court
of NSW and the others filed in the Federal Court of Australia. The actions follow the financial advice hearing block in the Royal
Commission in April 2018 and allege breaches by AMP Limited of its continuous disclosure obligations. Each action is on behalf
of shareholders who acquired an interest in AMP Limited shares over a specified time period. The claims are yet to be quantified
and participation has not been determined. Subsequently, the four proceedings commenced in the Federal Court of Australia were
transferred to the Supreme Court of NSW. The Supreme Court of NSW determined that a consolidated class action (of two of the
class actions) should continue, and the other three proceedings were permanently stayed. An appeal against that decision was
filed by one of the unsuccessful plaintiffs. Whilst that appeal was subsequently dismissed, that decision was subject to an appeal
to the High Court of Australia, which was heard in November 2020, with judgement reserved. AMP Limited has filed its defence
to the proceedings. Currently it is not possible to determine the ultimate impact of these claims, if any, upon AMP. AMP Limited is
defending these actions.
Superannuation class actions
During May and June 2019, certain subsidiaries of AMP Limited were served with two class actions in the Federal Court of Australia.
The first of those class actions relates to the fees charged to members of certain of AMP superannuation funds. The second of
those actions relates to the fees charged to members, and interest rates received and fees charged on cash-only fund options. The
two proceedings were brought on behalf of certain superannuation clients and their beneficiaries. Subsequently, the Federal Court
ordered that the two proceedings be consolidated into one class action, a consolidated claim was filed and defences were filed on
behalf of the respondent AMP Limited subsidiaries. The claims are yet to be quantified and participation has not been determined.
Currently, it is not possible to determine the ultimate impact of these claims, if any, upon AMP. The proceedings are being defended.
Financial adviser class action
In July 2020, a subsidiary of AMP Limited was served with a class action in the Federal Court of Australia, namely, AMP Financial
Planning Pty Limited (AMPFP). The proceeding is brought on behalf of certain financial advisers who are or have been authorised by
AMPFP. The claim relates to changes made by AMPFP to its Buyer of Last Resort policy in 2019. The claim is yet to be quantified and
participation has not been determined. Currently it is not possible to determine the ultimate impact of this claim, if any, upon AMP.
AMPFP is confident in the actions it took in 2019 and will defend the proceeding accordingly.
Insurance advice class action
In July 2020, certain subsidiaries of AMP Limited were served with a class action in the Federal Court of Australia, namely, AMPFP
and Hillross Financial Services Limited (Hillross). The class action relates to advice provided by some aligned financial advisers in
respect of certain life and other insurance products. The claim is yet to be quantified and participation has not been determined.
Currently, it is not possible to determine the ultimate impact of this claim, if any, upon AMP. AMPFP and Hillross will defend the
proceedings. In December 2020, the Federal Court ordered that this class action and the subsequent noted commissions for advice
class action be consolidated. A statement of claim which consolidates the two class actions has not been served.
Commissions for advice class action
In August 2020, AMP Limited, and certain subsidiaries of AMP Limited, were served with a class action in the Federal Court of
Australia, namely, AMPFP, Hillross and Charter Financial Planning Limited (Charter). The class action primarily relates to the
payment of commissions to some aligned financial advisers in respect of certain life insurance and other products and in respect
of allegations of charging of fees where advice services were not provided. The claim is yet to be quantified and participation has
not been determined. Currently, it is not possible to determine the ultimate impact of this claim, if any, upon AMP. AMP Limited,
AMPFP, Hillross and Charter will defend the proceedings. In December 2020, the Federal Court ordered that this class action and
the immediately preceding noted insurance advice class action be consolidated. A statement of claim which consolidates the two
class actions has not been served.
AMP 2020 annual report 129
Notes to the financial statements 6.4 Provisions and contingent liabilities (continued)
Indemnities and warranties to Resolution Life
Under the terms of the sale agreement for the sale of the WP and mature businesses to Resolution Life, AMP has given certain
covenants, warranties and indemnities in favour of Resolution Life in connection with the transaction. A breach of these covenants
or warranties or the triggering of an indemnity, may result in AMP being liable for some future payments to Resolution Life.
Management’s best estimate of future payments for these indemnities and warranties has been recognised within these financial
statements where these can be reliably estimated. There remain other indemnities and warranties for which no provision has been
recognised and a contingent liability exists should such indemnities and warranties be called upon or where actual outcomes differ
from management’s expectations.
6.5 Auditors’ remuneration
Audit and review services
– Group
– Controlled entities
Total audit and review services remuneration
Statutory assurance services
Other assurance services
Total assurance services remuneration
Total audit, review and assurance services remuneration
Other non-audit services
Taxation and compliance services
Other services
Total other non-audit services remuneration
Total auditors’ remuneration1
2020
$’000
20192
$’000
1,444
3,901
1,767
4,964
5,345
6,731
351
1,253
444
1,861
1,604
2,305
6,949
9,036
84
425
509
499
354
853
7,458
9,889
1
Total amount excludes fees paid or payable for Trust and Fund audit/non-audit and/or review services for entities not consolidated into the group.
Total fees excluded are $10,520k (2019: $8,675k) of which $572k (2019: $218k) is for non-audit services.
2 Amounts for 2019 include $1,289k related to WP and mature businesses audit and non-audit services.
Statutory assurance services relate to AFSL audits and certain APRA reporting assurance required to be performed by the statutory
auditor. Other assurance services primarily relate to other compliance reporting, derivative risk statement assurance and internal
controls reviews. Other services include transaction support and benchmarking services.
6.6 New accounting standards
(a) New and amended accounting standards adopted by the AMP group
A number of new accounting standards amendments have been adopted effective 1 January 2020. These have not had a material
effect on the financial position or performance of the AMP group other than as described below.
Interest Rate Benchmark Reform
Background
Transition from Interbank Offered Rates (IBORs), primarily but not exclusively the London Interbank Offered Rate (LIBOR),
to Alternative Reference Rates (ARR) is an area of ongoing industry focus with regulators signalling the need to use alternative
benchmark rates. As a result, existing benchmark rates are expected to be discontinued or the basis on which they are calculated
may change. Some such developments have occurred in certain jurisdictions already such as the adoption of European Short-
Term Rate (ESTR) by the European Central Bank as the regulated Risk-Free Rate which replaced European Overnight Index
Average (EONIA) in 2019.
The transition to new interest rate benchmarks, given the extent of these changes, may affect the value of a broad array of
financial products, including any IBOR-based securities, loans and other financial products and may impact the availability and
cost of hedging such products in the future. Forthcoming changes will require amendments to existing financial contracts and
investments with a substitution to a revised, replacement benchmark rate.
130 AMP 2020 annual report
6.6 New accounting standards (continued)
(a) New and amended accounting standards adopted by the AMP group (continued)
Group Approach to IBOR Transition
In response to the significant future changes that interest rate benchmark reforms pose, the group has undertaken the following
actions;
–
the group is monitoring local and international regulatory guidance and requests to prepare for transition from IBORs to
Risk Free Rate benchmarks;
the group has maintained continuous engagement with regulators on the group’s transition plans and potential impacts;
the group is working closely with industry bodies to understand and manage the impact of transition on our businesses and
the markets in which we operate;
the group has established and resourced transition projects and a program of work to plan for, monitor and resource future
transition needs; and
the group has undertaken a detailed assessment to prepare for any potential customer, business or operational impacts.
–
–
–
–
Amendments to hedge accounting requirements
The Australian Accounting Standards Board issued amendments to hedge accounting requirements within Standards AASB
7, 9 and 139 in October 2019 (IBOR reform Phase I) to address Interest Rate Benchmark Reforms. The amendments to hedge
accounting requirements provide relief from the potential effects of the uncertainty caused by the transition associated with
interest rate benchmark reform and are effective for annual periods on or after 1 January 2020. Management has considered the
impacts of IBOR Transition on existing hedge accounting arrangements and other than as described below the changes have not
had a material financial impact on the group.
The most significant interest rate benchmark to which the group is exposed is Bank Bill Swap Rate (BBSW). Locally, there has
been no regulatory announcement indicating the discontinuation of BBSW similar to that from the Financial Conduct Authority
concerning LIBOR and therefore the group does not expect the current IBOR reforms to have a direct impact on its hedge
accounting arrangements, apart from those discussed below.
Interest rate benchmarks to which the group’s hedging relationships are impacted by IBOR transition arise via the usage of interest
rates swaps and cross currency swaps for both fair value and cash flow hedges. The most significant IBOR exposure for the group’s
hedge accounting arrangements are for interest rate and cross-currency swaps which reference the GBP LIBOR benchmark. As at
31 December 2020, the notional amounts of the group’s interest rate swap exposures designated in hedge accounting relationships
are $146.1m representing $83.4m of cross-currency swaps denominated in GBP and AUD and $62.7m of interest rate swaps
denominated in GBP, relating to the hedging of debt issuance activities. The carrying value of foreign currency denominated
debt liabilities for which with interest rate hedging relationships apply is $68.5m.
IBOR reform Phase I provides reliefs which require the group to assume that hedging relationships are unaffected by the
uncertainties caused by IBOR reform. This includes assuming that hedged cash flows are not altered as a result of IBOR reform.
Also, the reliefs allow the group to not discontinue hedging relationships as a result of retrospective or prospective ineffectiveness.
Phase II
Additional amendments have been issued by the Australian Accounting Standards Board in relation to interest rate benchmark
reform for AASB 7, 9, 16 and 139. These amendments will come into effect for reporting periods beginning on or after 1 January
2021 and have not been early adopted by the group. These amendments are in addition to the Phase I amendments that were
announced in October 2019. The Phase II amendments focus on the effect of applying accounting standards when changes are
made to contractual cash flows or hedging relationships because of the interest rate benchmark reform. The group is currently
assessing the impact of these amendments.
These amendments will impact the group’s financial instruments that reference an IBOR rate. The group’s financial instruments
are mainly exposed to BBSW, which, as indicated above, is expected to remain a benchmark rate for the foreseeable future.
The group has begun to manage the transition to alternative benchmark rates for the affected financial instruments and expects
to apply the amendments and reliefs provided under Phase II.
(b) New accounting standards issued but not yet effective
A number of new accounting standards and amendments have been issued but are not yet effective, none of which have been early
adopted by the AMP group in this financial report. These new standards and amendments, when applied in future periods, are not
expected to have a material impact on the financial position or performance of the AMP group, other than the potential impact
from Phase II of interest rate benchmark reforms as discussed in note 6.6(a).
6.7 Events occurring after reporting date
As at the date of this report, the directors are not aware of any other matters or circumstances that have arisen since the end of the
financial year that have significantly affected, or may significantly affect:
–
–
–
the AMP group’s operation in future years;
the results of those operations in future years; or
the AMP group’s state of affairs in future financial years.
AMP 2020 annual report 131
Notes to the financial statements
Directors’ declaration
for the year ended 31 December 2020
In accordance with a resolution of the directors of AMP Limited, for the purposes of section 295(4) of the Corporations Act 2001,
the directors declare that:
(a)
(b)
in the opinion of the directors there are reasonable grounds to believe that AMP Limited will be able to pay its debts as and
when they become due and payable;
in the opinion of the directors the financial statements and the notes of AMP Limited and the consolidated entity for the
financial year ended 31 December 2020 are in accordance with the Corporations Act 2001, including section 296 (compliance
with accounting standards) and section 297 (true and fair view);
(c)
the notes to the financial statements of AMP Limited and the consolidated entity for the financial year ended 31 December
2020 include an explicit and unreserved statement of compliance with the International Financial Reporting Standards; and
(d)
the declarations required by section 295A of the Corporations Act 2001 have been given to the directors.
Debra Hazelton
Chair
Sydney, 11 February 2021
Francesco De Ferrari
Chief Executive Officer and Managing Director
132 AMP 2020 annual report
Independent Auditor’s Report
to the Shareholders of AMP Limited
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Report on the Financial Report for the Year Ended 31 December 2020
Opinion
We have audited the financial report of AMP Limited (the Company) and its subsidiaries (collectively the Group or AMP), which
comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement of comprehensive
income, statement of changes in equity and statement of cash flows for the year then ended; notes to the financial statements,
including a summary of significant accounting policies; and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a.
giving a true and fair view of the consolidated financial position of the Group as at 31 December 2020 and of their financial
performance for the year ended on that date; and
b.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group
in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of
how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our
report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond
to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.
AMP 2020 annual report 133
Independent Auditor’s Report
Report on the Financial Report for the Year Ended 31 December 2020 (continued)
Provisions – Customer Remediation
Financial report reference: Section 6.4: Provisions and contingent liabilities
Why significant
How our audit addressed the matter
–
–
–
The Group has recorded provisions in relation to customer
remediation programs amounting to $579 million and
disclosed related contingent liabilities at 31 December
2020 as set out in Section 6.4. The remediation provision
has arisen due to obligations to compensate customers
as a result of either:
–
–
–
inappropriate advice from their advisor;
where customers have been charged an advice fee
without the provision of financial advice services
(or insufficient evidence of provision of financial
services); or
other situations where a customer may not have
been treated fairly.
Provisions for remediation can only be raised when
it is possible to reliably estimate the quantum of the
remediation cost and if this is not possible, they are
disclosed as a contingent liability.
Significant judgement was involved in assessing customer
remediation matters and in determining a reliable
measurement of the required provisions. Accordingly,
we considered this to be a key audit matter.
Key areas of judgement included:
–
–
–
whether sufficient information existed to allow
provisions to be reliably measured;
completeness of the provision for the disclosure
requirements of IAS 1.129;
the determination of model assumptions including
remediation rates, average compensation amounts,
resources required and time to complete the
program; and
–
timing of probable remediation payments.
Our audit procedures included the following:
–
–
–
–
–
–
we evaluated evidence of potential obligations through
an assessment of customer complaints, regulatory and
breach notifications, claims and litigation;
we considered the status of the Group’s various
customer remediation programs including the results
of management investigations, engagement with
regulators and key decisions made by the Group
regarding the program approach through discussions
with management and directors, and review of Board
minutes and papers;
we assessed key modelling assumptions used to
calculate provisions;
we involved modelling specialists to test arithmetic
accuracy and consistency of the financial models;
we assessed the manner in which remediation
costs have been accounted for and whether this
is in accordance with Australian Accounting
Standards; and
we assessed the disclosures of the assumptions,
uncertainties and associated judgments in relation
to these matters for those matters where the Group
determined that a sufficiently reliable estimate
of the obligation could not be made, we assessed
this conclusion and the related contingent liability
disclosures required by Australian Accounting
Standards.
134 AMP 2020 annual report
Report on the Financial Report for the Year Ended 31 December 2020 (continued)
Impairment of Advice Related Assets and Buyer of Last Resort Obligations
Financial report reference: See References Below
Why significant
How our audit addressed the matter
Our audit procedures included the following:
–
–
–
–
–
we assessed the Group’s review and application
of key assumptions in impairment models, to assess
the reasonableness of carrying values and impairment
outcomes;
we considered the Group’s assessment of market and
contractual factors in determining whether an onerous
contract exists at 31 December 2020 in relation to BOLR
arrangements;
we considered the Group’s assessment of market
and contractual factors in determining the loan
impairment recognised against the practice finance
loan book and whether the discounts applied are
within an appropriate range and provision coverage
was reasonable;
we assessed the disclosures of the assumptions,
uncertainties and associated judgments in relation
to these matters; and
we assessed the appropriateness of contingent
liability disclosures against the requirements of
Australian Accounting Standards.
The Group has exercised significant judgement in recording
provisions for the following matters:
–
As disclosed in Section 6.4 of the financial report, the
Group has significant exposure in relation to the Buyer
of Last Resort (BOLR) arrangements arising from:
–
–
–
historic purchases of planner registers which
remain on balance sheet;
the contingent right and obligation to purchase
future registers; and
registers held as collateral supporting practice
finance loans.
As disclosed in Section 2.2 of the financial report,
AMP has acquired advice registers which are recorded
as inventory or intangibles depending on their nature.
As disclosed in section 3.3 of the financial report, AMP
Bank also has practice finance loans provided to Advisors
as at 31 December 2020, for which provisions for expected
credit losses are required to be booked in accordance with
Australian Accounting Standards.
–
–
Key areas of judgement include:
–
–
–
assumptions within the impairment model for the
valuation of the planner registers such as recurring
revenue multiples, period of projected revenue flows
and the discount rates used in the impairment model;
for practice finance loan facilities with the practice
registers as collateral, assumptions used in assessing
expected credit losses include the historical data of
practice revenue and collateral discounts applied to
consider volatility in register valuations; and
whether the BOLR terms and other contractual
arrangements represent an onerous contract and
require a provision to be recorded.
Due the high level of judgment required in determining
these amounts, we considered this to be a key audit matter.
AMP 2020 annual report 135
Independent Auditor’s Report
Report on the Financial Report for the Year Ended 31 December 2020 (continued)
Taxation
Financial report reference: Section 1.4: Taxation
Why significant
How our audit addressed the matter
–
As presented in the consolidated statement of financial
position and Section 1.4 of the financial report, the Group
has significant tax balances as at 31 December 2020, being
a current tax asset of $160.0 million, a current tax liability
of $70.0 million, a deferred tax asset of $828.0 million,
and a deferred tax liability of $229.0 million.
Due to the complexity and high level of judgment required
in the following areas, we considered this to be a key audit
matter:
–
–
–
–
the tax consequences of changes to the entities within
the AMP Limited tax consolidated group in the period;
the recoverability of the deferred tax assets in future years;
the recoverability of current tax assets; and
the adequacy of provisioning and disclosure in
accordance with accounting standard requirements.
Our audit procedures included the following:
–
–
–
–
we considered the Group’s assessment of the impacts
of entities leaving and joining the tax consolidated
group on the determination of tax balances;
we examined the Group’s deferred tax asset
recoverability assessment and evaluated the
reasonableness of key assumptions, including
forecast of future taxable income;
we considered management’s assessment of the
recoverability of current tax assets including the
underlying tax principles applied and management
forecasts; and
we assessed the appropriateness of the tax disclosures
against the requirements of Australian Accounting
Standards.
Gain on sale of Australian and New Zealand Wealth Protection and Mature Businesses
Financial report reference: Section 5.2: Discontinued operations
Why significant
How our audit addressed the matter
–
On 30 June 2020 AMP Limited successfully completed the
sale of the Australia and New Zealand Wealth Protection
and Mature business and has recognised a gain on sale of
$91.0 million in the period.
Due to the high level of judgment required in the following
areas, we considered this to be a key audit matter:
–
–
–
–
–
valuation of the consideration received in accordance
with the terms of the contractual arrangements, as
presented in section 5.3 of the financial report;
estimation of future separation costs to align with the
requirements of the contractual arrangements;
completeness of provisions, including indemnities
and warranties, for ongoing contractual agreements
with the acquirer and the costs of separation;
whether the contractual arrangements represented
an onerous contract or contingent liability to be
recorded; and
the disclosures supporting the assumptions in the
calculation of the above provisions and contingent
liabilities recorded with respect to the sale.
Our audit procedures included the following:
–
–
–
–
we reviewed the sale contracts and considered the
Group’s valuation of consideration received against
the terms of the contract;
we examined the Group’s assessment of the
completeness of provisions for ongoing contractual
arrangements with the acquirer and costs related to
the separation;
we considered the impact of the gain on sale in ongoing
discussions with the acquirer through discussions
with management and directors, and review of Board
minutes and management papers; and
we assessed the appropriateness of the presentation
and disclosure of the sale against the requirements
of Australian Accounting Standards.
136 AMP 2020 annual report
Information Other than the Financial Report
and Auditor’s Report Thereon
The directors are responsible for the other information.
The other information comprises the information included in
the Company’s 2020 Annual Report other than the financial
report and our auditor’s report thereon. We obtained the
Directors’ Report (including the remuneration report)
that is to be included in the Annual Report, prior to the
date of this auditor’s report, and we expect to obtain the
remaining sections of the Annual Report after the date of
this auditor’s report.
Our opinion on the financial report does not cover the other
information and we do not and will not express any form
of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to
be materially misstated.
If, based on the work we have performed on the other
information obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the Directors
for the Financial Report
The directors of the Group are responsible for the preparation
of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of
the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible
for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern
and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the
Audit of the Financial Report
Our objectives are to obtain reasonable assurance about
whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance but is not a guarantee
that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing
Standards, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
–
–
–
–
–
–
Identify and assess the risks of material misstatement
of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the
Group’s internal control.
Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and
related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of
the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or,
if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of
the financial report, including the disclosures, and whether
the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities
within the Group to express an opinion on the financial
report. We are responsible for the direction, supervision
and performance of the Group audit. We remain solely
responsible for our audit opinion.
AMP 2020 annual report 137
Independent Auditor’s Report Auditor’s Responsibilities for the Audit
of the Financial Report (continued)
We communicate with the directors regarding, among other
matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the directors with a statement that we
have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we
determine those matters that were of most significance in
the audit of the financial report of the current year and are
therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should
not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the
directors’ report for the year ended 31 December 2020.
In our opinion, the Remuneration Report of AMP for the year
ended 31 December 2020, complies with section 300A of the
Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Ernst & Young
Andrew Price
Partner
Sydney
11 February 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional
Standards Legislation
138 AMP 2020 annual report
Securityholder information
Distribution of AMP Capital Notes 2 holdings as at 11 February 2021
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
Number of holders
Notes held
% of issued Notes
2,887
266
21
19
2
3,195
849,380
540,846
159,109
560,682
639,983
2,750,000
30.88
19.67
5.79
20.39
23.27
100.00
Twenty largest AMP Capital Notes 2 holdings as at 11 February 2021
Rank
Name
Notes held
% of issued Notes
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
BNP Paribas Nominees Pty Ltd
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