2012 annual report
AMP 2012 annual report
All amounts are in Australian dollars,
unless otherwise specifi ed. The information
in this report is current as at 1 March 2013.
AMP Limited ABN 49 079 354 519
Financial report
Income statement
Contents
Chairman’s foreword
1
Five-year fi nancial summary
2
2012 results at a glance
3
4
Directors’ report
11 Remuneration report
29 Analysis of shareholder profi t
30 2012 corporate governance statement
37
38
39 Statement of comprehensive income
40 Statement of fi nancial position
41 Statement of changes in equity
43 Statement of cash fl ows
44 Notes to the fi nancial statements
126 Directors’ declaration
127 Independent auditor’s report
128 Shareholder information
IBC Glossary
Chairman’s foreword
‘While 2013 will be a period of
signifi cant change in our industry,
we are well positioned for the future.’
Peter Mason AM
Chairman
Welcome to AMP’s 2012 annual report
AMP has grown in strength and competitiveness in 2012, as
our vision for how a combined AMP and AXA could better meet
the needs of our customers came to life. As a united company
we are seeing the benefi ts of our strengthened product offering,
our expanded fi nancial planning network, increased funds
under management and the cost effi ciencies we have achieved.
Our superannuation, advice and investment businesses have
performed particularly well. We made considerable progress
against our strategy during 2012 and we are well positioned to
take advantage of changes currently taking place in our industry.
While the global fi nancial services industry is undergoing
a period of intense regulatory change, the scale and breadth
of our business is giving us the fl exibility and effi ciency to
capitalise on these changes. In 2012 we have acted decisively
to position the company for future growth, and in 2013 we
will continue this approach, while maintaining a sharp cost
and capital focus.
We are pleased to have seen the benefi ts of bringing the
two businesses together emerging faster than expected
and integration will continue to be an important focus of
the business in 2013. Along with integration, responding to
regulatory change will also be a high priority. We began work
early on these regulatory changes, and implemented key
elements two years ago, so that strategically we are well
placed. However, the implementation timeframes for
some of the changes are challenging.
Dividend and capital position
Your board has declared a fi nal dividend of 12.5 cents
a share, which will be 65 per cent franked and will be paid
on 11 April 2013. This is a fi nal payout ratio of 76 per cent of
underlying profi t, which is within AMP’s target payout range
of between 70 per cent and 80 per cent of underlying profi ts.
Given our strong capital position, the board has decided
this is an appropriate time to remove the discount on the
dividend reinvestment plan.
Our capital position strengthened through the year and at
31 December 2012 we held $2.4 billion in regulatory capital
resources above minimum regulatory requirements. This is an
increase of $0.9 billion from 2011. We have deliberately built
up our capital position over the past few years to ensure we are
well prepared to meet stringent new capital standards being
introduced in 2013. Further information on the impact of the
new capital standards can be found on page nine of this report.
Board
After nine years, Nora Scheinkestel has announced her
retirement as a director on our board at the end of the next
annual general meeting. Her extensive knowledge, sound
judgement, insight and governance expertise (and her wit)
have proved invaluable over the many years of her involvement
and we greatly appreciate the contribution she has made to
our company.
Outlook
While 2013 will be a period of signifi cant change in our
industry, we are well positioned for the future. The increased
strength and competitiveness of our organisation has given
us a strong platform for growth, on which we will capitalise
in the year ahead.
Peter Mason
Chairman
1
Five-year financial summary
Year ended 31 December
Consolidated Income statement
Net premium, fee and other revenue
2012
$m
2011
$m
2010
$m
2009
$m
2008
$m
4,798
4,219
2,824
2,665
2,877
Investment gains (losses)
12,084
1,464
4,840
8,250
(13,843)
Profi t (loss) before income tax from continuing operations
Income tax (expense) credit
Profi t from discontinued operations held for sale after income tax
Non-controlling interests
Profi t after tax attributable to shareholders of AMP Limited
1,384
(697)
–
17
704
673
3
–
12
688
881
(126)
–
20
775
1,228
(505)
–
16
(1,094)
1,668
6
–
739
580
Consolidated Statement of fi nancial position
Cash and cash equivalents
Investment assets
Intangibles
Assets of disposal groups
Other assets
4,207
106,263
4,175
187
3,919
4,652
96,972
4,347
–
4,319
3,325
85,120
919
–
2,241
2,409
84,171
946
–
2,304
2,056
80,641
939
–
3,114
Total assets
118,751
110,290
91,605
89,830
86,750
Borrowings and subordinated debt
Life insurance contract liabilities
Investment contract liabilities
Liabilities of disposal groups
Other liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Retained earnings
12,493
25,055
58,385
74
15,213
12,359
24,399
52,940
–
13,695
11,136
17,762
48,579
–
11,130
12,350
18,380
47,239
–
9,227
12,376
19,250
41,510
–
11,497
111,220
103,393
88,607
87,196
84,633
7,531
6,897
2,998
2,634
2,117
9,339
(2,156)
251
9,080
(2,534)
283
5,051
(2,565)
452
4,814
(2,563)
320
4,481
(2,598)
154
Total equity attributable to shareholders of AMP Limited
7,434
6,829
2,938
2,571
2,037
Non-controlling interests
Total equity
97
7,531
68
60
63
6,897
2,998
2,634
80
2,117
Other fi nancial data
Basic earnings per ordinary share
Diluted earnings per ordinary share
Dividends per ordinary share
Number of ordinary shares
Assets under management
2012
2011
2010
2009
2008
($ps)
($ps)
($ps)
(m)
($b)
$0.25
$0.25
$0.25
2,930
173
$0.26
$0.26
$0.29
2,855
159
$0.38
$0.38
$0.30
2,094
115
$0.37
$0.37
$0.30
2,049
112
$0.31
$0.31
$0.40
1,993
105
2
AMP 2012 annual report
2012 results at a glance
Profi t
Profi t attributable to shareholders was $704 million
for 2012, compared with $688 million in 2011 ▲ 2%
Underlying profi t was $955 million for 2012, compared
with $909 million in 2011 ▲ 5%
The 2011 profi t fi gures include only a nine-month contribution
from AXA (AMP merged with AXA Australia and New Zealand
in March 2011). Underlying profi t is AMP’s preferred measure
of profi tability as it best refl ects the underlying performance
of AMP. It is the earnings base on which the board determines
the dividend payment.
The main difference between the two numbers comes
from movements in investment markets and merger costs.
A reconciliation of profi t attributable to shareholders and
underlying profi t can be found on pages eight and 58.
Dividend
Final dividend of 12.5 cents per share
This brings the total dividend for 2012 to 25 cents per share.
The fi nal dividend will be 65 per cent franked and will be paid
on 11 April 2013.
The payout ratio for the full 2012 dividend is 76 per cent
of the underlying profi t from 2012, which is within AMP’s
target payout range of 70–80 per cent of underlying profi t.
Full year profi t
$ million
Profi t attributable to shareholders
Underlying profi t
1,000
750
500
250
0
2
7
7
9
3
7
5
7
7
0
6
7
0
1
8
0
8
5
9
0
9
5
5
9
8
8
6
4
0
7
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
Dividends and payments to shareholders
cents per share
Final dividends
Interim dividends
2 cent Cobalt sale
0
4
6
1
2
2
40
30
20
10
0
0
3
6
1
0
3
5
1
9
2
4
1
5
4 1
1
5
1
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
5
2
.
5
2
1
.
5
2
1
2
1
0
2
3
Directors’ report
for the year ended 31 December 2012
Peter Mason AM
Chairman
Craig Dunn
Chief Executive Offi cer
and Managing Director
Patricia (Patty) Akopiantz
Director
Your directors present their report on the consolidated
entity consisting of AMP Limited and the entities it controlled
at the end of or during the year ended 31 December 2012.
Directors’ details
The directors of AMP Limited during the year ended
31 December 2012 and up to the date of this report are
shown below. Directors were in offi ce for this entire period:
Peter Mason (Chairman), Craig Dunn (Chief Executive Offi cer
and Managing Director), Patricia Akopiantz, Richard Allert,
Catherine Brenner, Brian Clark, Paul Fegan, John Palmer,
Nora Scheinkestel, Peter Shergold.
Details of each director’s qualifi cations, experience and
special responsibilities are set out below.
Peter Mason AM
Chairman
BCom (Hons), MBA, Hon.DBus (UNSW), FAICD. Age 66
Peter was appointed to the AMP Limited Board in October
2003 and assumed the role of Chairman in September 2005.
He is a member of the People and Remuneration Committee
and the Nomination Committee.
Experience
Peter has 40 years experience in investment banking and
is currently a Senior Advisor to UBS Investment Bank. He
was Chairman of JP Morgan Chase Bank in Australia from
2000–2005. Prior to this he was Chairman and Chief Executive
of Schroders Australia Limited and Group Managing Director
of Schroders’ investment banking businesses in the Asia Pacifi c
region. He was a member of the Council of the University of
New South Wales for 13 years, a Director of the Children’s
Hospital in Sydney for 12 years and Chairman of the Children’s
Hospital Fund for eight years. In 1995, Peter was appointed
a member of the Order of Australia for his contribution to
the Children’s Hospital.
Listed directorships
–
Chairman of David Jones Limited (appointed as a Director
from November 2007 and Chairman from January 2013)
Director of Singapore Telecommunications Limited
(appointed September 2010)
–
Director of the University of New South Wales Foundation
Chairman of the UBS Australia Foundation Pty Limited
Other directorships/appointments
–
–
– Director of Taylors Wines Pty Limited
–
Chairman of the Centre for International Finance
and Regulation
– Trustee of the Sydney Opera House Trust
4
AMP 2012 annual report
Craig Dunn
Chief Executive Offi cer and Managing Director
BCom, FCA. Age 49
Craig was appointed Chief Executive Offi cer (CEO) and Managing
Director in January 2008. He has been a Director of AMP Life
Limited since April 2002, a Director of AMP Capital Holdings Limited
since January 2008 and was appointed to The National Mutual Life
Association of Australasia Limited (NMLA) Board in March 2011.
Experience
Prior to becoming CEO, Craig was Managing Director, AMP
Financial Services from 2002–2007. He joined AMP in January
2000 and has held a number of senior roles including Managing
Director of AMP Bank Limited and Director, Offi ce of the CEO.
Before joining AMP, Craig was CEO of a Malaysia-based insurance
company, a joint venture of Colonial Limited. He worked for KPMG
throughout Europe and in Indonesia before joining Colonial.
Listed directorships
Within the three years immediately before the end of the
last fi nancial year, Craig served as a Director of AMP Capital
Investors Limited (responsible entity of AMP Capital China
Growth Fund, a managed investment scheme listed on the
ASX) (2008–December 2011).
Other directorships/appointments
–
Advisory Board Member with the Australian Government’s
Financial Literacy Foundation
Member of the Australian Government’s Financial Services
Advisory Committee
Leaders Forum Member of the Australian Institute for
Population Ageing Research
–
–
– Panel Member of the Australian Financial Centre Taskforce
–
Executive Member of the Australia Japan Business
Co-operation Committee
Patricia (Patty) Akopiantz
Director BA, MBA. Age 49
Patty was appointed to the AMP Limited Board and the People
and Remuneration Committee in March 2011. She was appointed
a Director of AMP Bank Limited in November 2011, a member of
its audit committee in June 2012 and as Chairman of that audit
committee in February 2013.
Experience
Patty has over 25 years senior management and consultancy
experience, primarily in the retail and consumer industries
both in Australia and overseas. Over the last 13 years, she has
served on numerous boards including AXA Asia Pacifi c Holdings
Limited and Coles Group Limited. In 2003, she was awarded a
Centenary Medal for services to Australian society in business
leadership. She has an MBA from Harvard Business School.
Richard (Rick) Allert AO
Director
Catherine Brenner
Director
Brian Clark
Director
Listed directorships
Within the three years immediately before the end of
the last fi nancial year, Patty served as a Director of AXA
Asia Pacifi c Holdings Limited (April 2006–March 2011)
and Wattyl Limited (September 2005–September 2010).
Other directorships/appointments
– Director of the NSW State Library Foundation
– Member of Chief Executive Women
Richard (Rick) Allert AO
Director FCA. Age 70
Rick was appointed to the AMP Limited Board and the
Audit Committee in March 2011.
Experience
Rick has over 40 years of senior business appointments
including, Chairman of AXA Asia Pacifi c Holdings Limited,
Chairman of Tourism Australia, Chairman of Coles Group
Limited, Chairman of Southcorp Limited, Chairman of
Voyages Hotels and Resorts and President of the National
Heart Foundation. In 1997, Rick was appointed a member
of the Order of Australia for his service to business and the
community, particularly through his work with the National
Heart Foundation. In 2003, Rick was awarded a Centenary
Medal for service to Australian society through rail transport,
business and taxation. In 2007, he was appointed an
Offi cer of the Order of Australia for service to the business
sector through leadership and promotion of corporate social
responsibility, and to the community through involvement
with and support for a range of artistic, charitable and
educational organisations.
Listed directorships
–
Chairman of Western Desert Resources Limited
(appointed January 2011)
– Director of Genesee & Wyoming Inc. (appointed July 2011)
Within the three years immediately before the end of the
last fi nancial year, Rick served as a Director of AXA Asia Pacifi c
Holdings Limited (September 1995–March 2011, Chairman
from April 2000) and as Deputy Chairman of Gerard Lighting
Group Limited (March 2010–October 2012).
Chairman of the Aboriginal Foundation of South Australia Inc
Other directorships/appointments
–
– Deputy Chairman of Cavill Power Products Pty Limited
– Director of Genesee & Wyoming Australia Pty Limited
– Director of RG & RT Trott Pty Limited
– Member of the Australian Forces Entertainment Board
Chairman of Ikara Wilpena Enterprises Pty Ltd and
–
Wilpena Pound Aerodrome Services Pty Ltd
Catherine Brenner
Director BEc, LLB, MBA. Age 42
Catherine was appointed to the AMP Limited Board in June
2010. She was appointed to the AMP Life Limited Board in
May 2009 and became Chairman in May 2011. Catherine is
a member (and former Chairman) of the AMP Life Limited
Audit Committee. She was appointed Chairman of The National
Mutual Life Association of Australasia Limited (NMLA) Board
and a member of the NMLA Audit Committee in March 2011.
Experience
Catherine is a former Managing Director, Investment Banking
at ABN AMRO where she held various senior roles. Prior to this
she was a corporate lawyer.
Listed directorships
– Director of Boral Limited (appointed September 2010)
– Director of Coca-Cola Amatil Limited (appointed April 2008)
Within the three years immediately before the end of the last
fi nancial year, Catherine served as a Director of Centennial
Coal Company Limited (2005–September 2010).
Other directorships/appointments
– Trustee of the Sydney Opera House Trust
– Member of the Takeovers Panel
– Council Member of Chief Executive Women
Brian Clark
Director DSc. Age 64
Brian was appointed to the AMP Limited Board in
January 2008. He is a member of the Nomination Committee
and the People and Remuneration Committee. Brian is Chairman
of the AMP Capital Holdings Limited Board and a member of
its Audit Committee.
Experience
Brian spent 10 years in a variety of senior executive roles at
Vodafone internationally, most recently in the United Kingdom
as Group Human Resources Director. He was Chief Executive
Offi cer (CEO) of Vodafone’s Australian business as well as
CEO of the Asia Pacifi c region, based in Tokyo. Before joining
Vodafone, Brian spent three years as CEO of Telkom SA Ltd,
in South Africa. Brian has degrees in physics and mathematics
from the University of Pretoria, and has completed the
Advanced Management Program at the Harvard Business School.
Listed directorships
– Director of Boral Limited (appointed May 2007)
Within the three years immediately before the end of the
last fi nancial year, Brian served as Chairman of AMP Capital
Investors Limited (responsible entity of AMP Capital China
Growth Fund, a managed investment scheme listed on the
ASX) (2008–December 2011).
5
Directors’ report
for the year ended 31 December 2012 continued
Paul Fegan
Director
John Palmer ONZM
Director
Dr Nora Scheinkestel
Director
Professor Peter Shergold AC
Director
Paul Fegan
Director MBA. Age 51
Paul was appointed to the AMP Limited Board in August 2009.
He was appointed to the Audit Committee in November 2009
and became Chairman of that committee in December 2010.
Paul was Chairman of AMP Bank Limited from May 2012–
February 2013 and served as a Director on that board from
April 2010–February 2013.
Experience
Paul has over 30 years experience in the fi nancial services
industry. He was appointed Chief Financial Offi cer of Genworth
Australia in January 2013. Paul was Group Managing Director,
Strategy and Corporate Services with Telstra from February
2011–January 2012 and was the Chief Executive Offi cer (CEO)
of St.George Bank from November 2007 and CEO and Managing
Director from February 2008 until its merger with Westpac
Banking Corporation in December 2008. He was also a Director
of St.George’s funds administration subsidiary, Asgard Wealth
Solutions. Prior to joining St.George, Paul was based in the UK
as Chief Operating Offi cer of Yorkshire Bank. He held director
positions in both Yorkshire Bank and Clydesdale Bank and a
series of senior appointments with National Australia Bank
in Australia, the US, Hong Kong, the UK and Ireland.
John Palmer ONZM
Director BAgrSc, FNZID. Age 65
John was appointed to the AMP Limited Board in July 2007.
He is Chairman of the People and Remuneration Committee.
John has been a Director of the AMP Life Limited Board since
May 2004. He was appointed to The National Mutual Life
Association of Australasia Limited (NMLA) Board in March 2011.
Experience
John has extensive experience as a director and chairman of
companies in the agricultural and fi nance sectors. He has a
track record of successfully leading change and reconstruction
of diverse corporates in marketing, agribusiness and aviation.
In 1998, John received the Bledisloe Cup for outstanding
contribution to the New Zealand fruit industry. In 1999, he
was awarded with an Offi cer of the New Zealand Order of
Merit (ONZM) for service to the New Zealand kiwifruit industry.
Listed directorships
–
Chairman of Air New Zealand Limited
(appointed November 2001)
Other directorships/appointments
– Chairman of Rabobank New Zealand Limited
– Director of Rabobank Australia Limited
Dr Nora Scheinkestel
Director LLB (Hons), PhD, FAICD. Age 52
Nora was appointed to the AMP Limited Board in September
2003. She is Chairman of the Nomination Committee, a
Director of AMP Capital Holdings Limited and a member
of its Audit Committee.
Experience
Nora is an experienced director having served as a
non-executive chairman and director of companies in a
wide range of industry sectors and in the public, government
and private spheres. Nora’s executive background is as a
senior banking executive in international and project
fi nancing, responsible for the development and fi nancing
of major projects in Australasia and South East Asia. She
consults to government, corporate and institutional clients
in areas such as corporate governance, strategy and fi nance.
In 2003, Nora was awarded a Centenary Medal for services
to Australian society in business leadership.
Listed directorships
– Director of Orica Limited (appointed August 2006)
– Director of Pacifi c Brands Limited (appointed June 2009)
–
Director of Telstra Corporation Limited (appointed
August 2010)
Within the three years immediately before the end of the
last fi nancial year, Nora served as a Director of AMP Capital
Investors Limited (responsible entity of AMP Capital China
Growth Fund, a managed investment scheme listed on the
ASX) (2004–December 2011).
Other directorships/appointments
–
Associate Professor at the Melbourne Business School
at Melbourne University
– Member of the Takeovers Panel
Professor Peter Shergold AC
Director BA (Hons), MA, PhD, FAICD. Age 66
Peter was appointed to the AMP Limited Board in May 2008.
He is a member of the Audit Committee and has been a
Director of the AMP Life Limited Board since August 2008.
Peter is also a member of the AMP Life Limited Audit Committee.
He was appointed to The National Mutual Life Association
of Australasia Limited (NMLA) Board in March 2011 and is a
member of its Audit Committee.
Experience
Peter is Chancellor and Chair of the board of trustees of the
University of Western Sydney. He serves on a wide range
of private sector, government and not-for-profi t boards.
6
AMP 2012 annual report
Previously, Peter served as Secretary of the Department
of the Prime Minister and Cabinet for fi ve years, CEO of
the Aboriginal and Torres Strait Islander Commission,
Public Service Commissioner, Secretary of the Department
of Employment, Workplace Relations and Small Business,
and Secretary of the Department of Education, Science
and Training. He was appointed a member of the Order
of Australia in 1996, awarded a Centenary Medal in 2003
and made a Companion of the Order of Australia in 2007
for public service.
Other directorships/appointments
– Director of Corrs Chambers Westgarth
– Chairman of QuintessenceLabs Pty Limited
–
Chairman of the National Centre for Vocational
Education Research
– Director of the General Sir John Monash Foundation
– Director of the National Centre for Indigenous Excellence
–
Chairman of the NSW Public Service Commission
Advisory Board
– Deputy Chairman of the Sydney Writers’ Festival
– Chairman of the Aged Care Reform Implementation Council
– Director of the Queensland Public Sector Renewal Board
Company secretaries’ details
Details of each company secretary of AMP Limited, including
their qualifi cations and experience, are set out below.
Brian Salter
General Counsel BA, LLB (Hons), LLM (Hons), MAICD, F. ASF
Brian joined AMP on 1 July 2008. Before joining AMP, Brian
was a partner with a major Australian law fi rm for 19 years.
He has more than 30 years experience advising many of
Australia’s leading fi nancial and wealth management companies.
Brian is a member of the Legal Committee of the Australian
Government’s Corporations and Markets Advisory Committee,
the Law Committee of the Australian Institute of Company
Directors, the Corporations Committee of the Business Law
Section of the Law Council of Australia, the Attorney General’s
Expert Group on Private International Law and a Director
of AMP Superannuation Limited, N.M. Superannuation
Proprietary Limited and SCECGS Redlands Limited.
Darryl Mackay
Head of Secretariat and Company Secretary BSc, FIAA
Darryl joined AMP in March 2011 from AXA Asia Pacifi c Holdings
Limited, where he held the roles of Company Secretary and
General Manager, Group Chief Executive’s Offi ce. In his 33
years at AXA, Darryl held a range of senior roles including
General Manager Group Human Resources and Deputy Chief
Executive International. Darryl is currently a director of various
AMP subsidiaries, including AMP Superannuation Limited and
N.M. Superannuation Proprietary Limited.
Vicki Vordis
Company Secretary BEc, LLB (Hons), GradDipACG, ACIS
Vicki is a Company Secretary of AMP Life Limited and The
National Mutual Life Association of Australasia Limited.
She joined AMP in December 2000 and held various legal
roles before moving into a secretariat role in 2006. Prior to
2000, Vicki worked as a lawyer in several city law practices.
She holds a graduate diploma in Applied Corporate Governance
and is an Associate of Chartered Secretaries Australia.
Attendance at board and committee meetings
The table below shows details of attendance by directors of AMP Limited at meetings of boards and the committees of which they
were members during the year ended 31 December 2012. The directors also attended other meetings, including management
meetings and meetings of subsidiary boards or committees of which they were not a member during the year.
Board/Committee
Held/Attended
Peter Mason3
Craig Dunn
Patty Akopiantz
Rick Allert
Catherine Brenner
Brian Clark
Paul Fegan
John Palmer
Nora Scheinkestel
Peter Shergold
AMP Limited
Board
A
B
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
9
9
10
Audit
Committee
Nomination
Committee
People and
Remuneration
Committee
Diversity
Advisory
Committee
Ad hoc
committees1
Subsidiary
board and
committee2
A
–
–
–
6
–
–
6
–
–
6
B
–
–
–
6
–
–
6
–
–
6
A
4
–
–
–
–
4
–
–
4
–
B
4
–
–
–
–
4
–
–
4
–
A
5
–
5
–
–
5
–
5
–
–
B
5
–
5
–
–
5
–
5
–
–
A
–
3
–
–
3
3
–
–
3
3
B
–
3
–
–
3
3
–
–
3
3
A
2
2
–
–
–
–
–
–
–
–
B
2
2
–
–
–
–
–
–
–
–
A
–
19
11
–
16
11
9
12
16
16
B
–
18
11
–
16
10
9
11
16
16
Column A – indicates the number of meetings held while the director was a member of the board/committee.
Column B – indicates the number of those meetings attended.
1 Ad hoc committees of the board were constituted during the year in relation to fi nancial results.
2
Subsidiary board and committee meetings include AMP Life/NMLA, AMP Bank and AMP Capital Holdings. Where meetings of AMP Life/NMLA
were held concurrently, only one meeting has been recorded in the above table.
The chairman attended a number of Audit Committee and subsidiary board and committee meetings held during 2012 in an ex offi cio capacity.
3
7
Directors’ report
for the year ended 31 December 2012 continued
Operating and fi nancial review
Principal activities
AMP is Australia and New Zealand’s leading independent
wealth management company, with a retail banking business in
Australia and a growing international investment management
business. It provides fi nancial advice, products and services and
investment opportunities to help people and organisations build
fi nancial security.
In March 2012, AMP Capital formed a strategic business
and capital alliance with a leading Japanese bank, Mitsubishi
UFJ Trust and Banking Corporation (MUTB). The alliance will
accelerate AMP Capital’s growth in Asia and signifi cantly expand
its distribution capabilities in Japan. MUTB acquired a 15 per
cent minority interest in AMP Capital Holdings Limited, the
parent company of the AMP Capital group of companies, for
$425 million.
The company serves fi ve million retail customers in Australia
and New Zealand and almost 400 institutional clients in these
markets. It also serves clients in Asia, Europe, the Middle East
and North America. AMP has 5,829 employees, around 873,000
shareholders and $173 billion of assets under management.
AMP Financial Services
AMP Financial Services provides customers in Australia
and New Zealand with fi nancial planning and advice,
superannuation, retirement income and other investment
products for individuals, superannuation services for businesses,
income protection, disability and life insurance and selected
banking products. These products and services are primarily
provided through a network of 4,276 self-employed fi nancial
planners and advisers, as well as through extensive relationships
with independent fi nancial advisers.
In June 2012, AMP announced the acquisition of the Cavendish
Group’s self-managed superannuation fund (SMSF) and
investment portfolio administration operations and became
Australia’s leading SMSF administrator. Cavendish is Australia’s
largest SMSF administrator, with more than 5,000 funds. The
acquisition was completed on 3 July 2012.
AMP Bank has approximately 100,000 customers, a mortgage
book of $12.4 billion and a deposit book of $8.3 billion.
AMP Financial Services reports as Australian Wealth
Management (WM), Australian Wealth Protection (WP),
Australian Mature (Mature) and AMP Financial Services
New Zealand (AFS NZ) business units.
The WM business provides customers with fi nancial planning
services (through aligned and owned advice businesses),
superannuation, retirement income, investment, SMSF
administration and banking products.
WP comprises individual and group term, disability and income
protection risk products. Products can be bundled with a
superannuation product or held independently.
The Mature business is the largest closed life insurance business
in Australia. Mature AUM supports capital guaranteed products
(73 per cent) and market linked products (27 per cent). Mature
products include whole of life, endowment, investment linked,
investment account, retirement savings account (RSA), eligible
rollover fund (ERF), annuities, insurance bonds, personal
superannuation, guaranteed savings accounts (GSA) and
traditional participating products.
AFS NZ provides tailored fi nancial products and solutions to
New Zealanders through the largest network of accredited
fi nancial advisers in New Zealand. AFS NZ’s risk business is the
second largest by market share and is complemented by the
industry’s largest wealth management business. KiwiSaver is
providing strong growth for the wealth management business.
AMP Capital
AMP Capital is one of Asia Pacifi c’s largest diversifi ed investment
managers, managing around $129 billion in assets for investors.
Through a team of in-house investment professionals and a
carefully selected global network of investment partners, AMP
Capital invests in equities, fi xed interest, property, infrastructure,
multi-manager and multi-asset funds. AMP Capital also provides
commercial, industrial and retail property management services.
AMP Capital has established operations in Australia and New
Zealand and a growing international presence with offi ces
in Bahrain, China, Hong Kong, India, Japan, Luxembourg,
the United Kingdom and the United States.
8
AMP 2012 annual report
Review of operations and results
AMP operates in one of the largest and fastest growing
wealth management markets in the world. It holds market-
leading positions in fi nancial advice and key product
categories, achieved through high quality, award-winning
products, platforms and investment capabilities and a broad
distribution footprint. The company’s scale, effi ciency, large
and diverse customer base and trusted brand are a
competitive set of advantages.
AMP’s profi t attributable to shareholders of AMP Limited
for the year ended 31 December 2012 was $704 million.
The profi t attributable to shareholders of AMP Limited for
the year ended 31 December 2011, which included only
a nine-month contribution from the Australian and New
Zealand businesses of AXA Asia Pacifi c following its merger
with AMP on 30 March 2011, was $688 million.
Basic earnings per share for the year ended 31 December 2012
on a statutory basis was 24.7 cents per share (2011: 26.3 cents
per share).
Underlying profi t is the basis on which the board determines the
dividend payment. It is AMP’s preferred measure of profi tability
as it removes merger related costs and some of the impact of
investment market volatility. AMP’s underlying profi t for the year
ended 31 December 2012 was $955 million (2011: $909 million,
including nine months of AXA). On an underlying basis, earnings
were 33.0 cents per share (2011: 34.3 cents per share).
AMP’s key performance measures were as follows:
–
–
underlying profi t $955 million was up fi ve per cent on 2011
cost to income ratio was 47.3 per cent for the year to
31 December 2012 compared to 47.9 per cent in 2011
– growth measures
–
AMP Financial Services net cashfl ows of
$1,152 million, up from net cashfl ows of $581 million
in 2011; AMP Capital external net cash outfl ows were
$1,784 million, compared with net cash outfl ows of
$1,166 million in 2011
AMP Financial Services value of risk new business
was down $12 million on 2011 to $203 million
underlying return on equity decreased 2.3 percentage
points to 12.8 per cent in 2012 from 2011, refl ecting
higher capital which offset the growth in underlying profi t.
–
–
Total AMP assets under management were $173 billion at
31 December 2012, up from $159 billion at 31 December 2011,
including assets under management of $7 billion arising from
acquisitions by the SMSF business unit established in June 2012.
Differences between underlying profi t and statutory profi t
The 31 December 2012 underlying profi t of $955 million
excludes the impact (net of any tax effect) of:
–
investment income and annuity market value adjustments
losses of $21 million
risk product market adjustments loss of $4 million
net benefi t from one-off and non-recurring items of
$34 million
merger and acquisition transaction costs of $4 million
AXA integration costs of $128 million
amortisation of AXA acquired intangible assets of
$99 million
accounting mismatch losses of $29 million.
–
–
–
–
–
–
A reconciliation between underlying profi t and statutory
profi t is provided in note 3 of the fi nancial report.
Under Australian Accounting Standards, some assets held on
behalf of policyholders (and related tax balances) are recognised
in the fi nancial report 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 profi t
attributable to shareholders. These differences have no impact
on the operating earnings of the group.
The accounting mismatches arise from policyholder interests
in the following:
–
treasury shares (AMP Limited shares held by the
statutory funds on behalf of policyholders) – loss of
$36 million created by rises in the AMP share price
(2011: $28 million profi t)
owner-occupied properties – loss of $3 million
(2011: $1 million loss)
AMP life insurance statutory funds’ investments in controlled
entities – profi t of $1 million (2011: $38 million loss)
AMP life insurance statutory funds’ superannuation
products invested with AMP Bank – profi t of $9 million
(2011: $8 million loss).
–
–
–
The operating results of each of the business segments
were as follows (2011 operating earnings for each segment
included only a nine-month contribution from the Australian
and New Zealand businesses of AXA Asia Pacifi c which
merged with AMP on 30 March 2011):
–
Australian Wealth Management (WM) – Operating
earnings increased by $25 million (eight per cent) to
$347 million in 2012 from $322 million in 2011. The
increase in operating earnings was driven by stronger
net cashfl ows and improving investment markets,
mortgage growth in AMP Bank and continued cost
focus including the realisation of cost synergies.
Australian Wealth Protection (WP) – Operating earnings
decreased $25 million (12 per cent) to $190 million in
2012 from $215 million in 2011 on worsening lapse and
claims experience.
Australian Mature – Operating earnings increased by
$14 million (nine per cent) to $167 million in 2012 from
$153 million in 2011. Operating earnings benefi ted from
higher investment markets including bond yields and lower
controllable costs offset by expected portfolio run off.
AMP Financial Services New Zealand – Operating earnings
decreased by $3 million (four per cent) to $73 million in 2012
from $76 million in 2011 primarily as a result of experience
losses driven primarily by higher lump sum claims.
AMP Capital – Operating earnings after minority interests
increased by $16 million (19 per cent) to $99 million in
2012 from $83 million in 2011. Operating earnings increased
as a result of investment performance driving higher
performance fees, increased AUM-based management fees
generated by higher average AUM and fee rates and a strong
contribution from shareholder investments in AIMS AMP
Capital Industrial REIT and other assets.
–
–
–
–
Likely developments
In the opinion of the directors, disclosure of further information
about likely developments in AMP’s businesses is commercially
sensitive and would likely be detrimental and result in
unreasonable prejudice to the company.
Capital management
Equity and reserves of the AMP group attributable to
shareholders increased to $7.43 billion at 31 December 2012
from $6.83 billion at 31 December 2011. This increase was due
to profi ts over the period, proceeds from completion of the
MUTB strategic business and capital alliance and additional
share capital issued under the dividend reinvestment plan.
AMP remains well capitalised, with $2.42 billion in regulatory
capital resources above minimum regulatory requirements
(MRR) at 31 December 2012 ($1.54 billion at 31 December 2011)
consisting of $1.64 billion of shareholder capital resources
above MRR and $0.78 billion of policyholder surplus.
AMP continues to actively manage its capital position in
light of continuing market volatility and regulatory changes.
AMP has declared a fi nal dividend of 12.5 cents per share,
franked to 65 per cent. The dividend payout ratio is 76 per
cent of underlying profi t for the year ended 31 December
2012. AMP’s dividend policy is to pay out 70 – 80 per cent of
underlying profi t, franked to the maximum extent possible.
AMP will continue to offer a dividend reinvestment plan
(DRP) for shareholders. No discount will apply in determining
the DRP allocation price. The DRP will not be underwritten
and new shares will be issued.
Political donations
AMP’s policy is that it does not make donations to political
parties. AMP did not make any political donations during 2012.
AMP did contribute $20,000 to the Menzies Research Centre
and $20,000 to the Chifl ey Research Centre to assist with public
policy development. These contributions are permitted under
AMP’s policy.
Signifi cant changes to the state of affairs
Details of capital changes during 2012 are set out earlier in
this report.
Events occurring after the reporting date
As at the date of this report, the directors are not aware of
any matter or circumstance that has arisen since the reporting
date that has signifi cantly affected or may signifi cantly affect
the entity’s operations in future years; the results of those
operations in future years; or the entity’s state of affairs in
future years which is not already refl ected in this report,
other than the following:
–
From 1 January 2013, revised APRA Life and General
Insurance Capital (LAGIC) standards apply to AMP Life
Limited and The National Mutual Life Association of
Australasia Limited (the AMP life insurance entities) and
the North guarantee product. Under LAGIC, the AMP group
regulatory capital resources above MRR of $2,420 million
will exclude the policyholder surplus of $776 million.
While not included in the capital position, policyholder
surpluses remain available to absorb adverse markets
and other impacts in the participating business.
As a result of applying LAGIC on 1 January 2013, AMP
group’s capital requirement increased by $272 million.
AMP group strengthened its capital position during
2012 in anticipation of these changes and AMP group’s
shareholder surplus above MRR increased from $990 million
at 31 December 2011 to $1,644 million at 31 December
2012. The LAGIC requirements have now reduced the surplus
to $1,372 million at 1 January 2013. A number of capital
effi ciency initiatives are being targeted in 2013 to reduce
capital requirements in the AMP life insurance entities
and for the North product. The AMP life insurance entities
continue to meet minimum regulatory requirements.
–
On 21 February 2013, AMP announced a fi nal dividend
on ordinary shares of 12.5 cents per share. Details of the
announced dividend and dividends paid and declared during
the year are disclosed in note 18 of the fi nancial 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. Further information
on AMP’s environment policy and activities is included in the
2012 corporate governance statement.
Indemnifi cation and insurance of directors and offi cers
Under AMP’s constitution, the company indemnifi es, to
the extent permitted by law, all offi cers of the company
(including the directors) against any liability (including the
costs and expenses of defending actions for an actual or alleged
liability) incurred in their capacity as an offi cer of the company.
9
Directors’ report
for the year ended 31 December 2012 continued
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. No such
indemnities have been provided during or since the end of the
fi nancial year.
During the fi nancial year, the company agreed to insure all of
the offi cers (including all directors) of the AMP group against
certain liabilities as permitted by the Corporations Act 2001.
The insurance policy prohibits disclosure of the nature of the
cover, the amount of the premium, the limit of liability and
other terms.
In addition, the company and each of the directors are parties
to deeds of indemnity and access, as approved by the board.
Those deeds of indemnity and access provide that:
–
the directors will have access to the books of the company
for their period of offi ce and for seven years after they cease
–
–
–
to hold offi ce (subject to certain conditions)
the company indemnifi es the directors to the extent
permitted by law
the indemnity covers liabilities incurred by the directors in
their capacity as offi cers of the company and of other AMP
group companies, and
the company will maintain directors’ and offi cers’ insurance
cover for the directors to the extent permitted by law for the
period of their offi ce and for seven years after they cease to
hold offi ce.
Rounding
In accordance with the Australian Securities and Investments
Commission Class Order 98/0100, amounts in this directors’
report and the accompanying fi nancial report have been
rounded off to the nearest million Australian dollars, unless
stated otherwise.
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 year ended
31 December 2012.
Ernst & Young Centre
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
www.ey.com/au
Auditor’s Independence Declaration to the Directors of AMP Limited
In relation to our audit of the fi nancial report of AMP Limited for the fi nancial year ended 31 December 2012, to the best of my
knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001
or any applicable code of professional conduct.
Ernst & Young
Andrew Price Partner
21 February 2013
Liability limited by a scheme
approved under Professional
Standards Legislation
Andrew Price played a signifi cant role in the audit of AMP for
the fi ve successive fi nancial years ending 31 December 2011.
In order to comply with legal requirements, the board was
required to pass a resolution to approve Andrew Price playing
a signifi cant role in the audit of AMP for a sixth fi nancial year
(the year ended 31 December 2012).
The board has approved Andrew Price playing a signifi cant
role in the audit of AMP for the year ended 31 December 2012.
The approval:
–
is consistent with maintaining the quality of the audit
provided to AMP, and
does not give rise to a confl ict of interest situation
(as defi ned in section 324CD of the Corporations Act 2001),
–
for the reasons set out below:
–
Andrew Price’s detailed knowledge of the corporate history
of the AMP group will:
–
assist Ernst & Young to maintain the quality of the
audit and provide the board with an appropriate level
of independent assurance, whilst the integration of the
AXA businesses into the AMP group continues, and
provide continuity and assist the Audit Committee
chairman and chief fi nancial offi cer, who have been
in their roles since December 2010 and January 2012
respectively, and
–
Non-audit services
The Audit Committee has reviewed details of the amounts paid
or payable for non-audit services provided to the AMP group of
companies during the year ended 31 December 2012, by the
company’s auditor, Ernst & Young.
The directors are satisfi ed 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 and did not compromise the auditor independence
requirements of the Corporations Act for the following reasons:
all non-audit assignments were approved in accordance
–
with the process set out in the AMP charter of audit
independence
no non-audit assignments were carried out which
were specifi cally excluded by the AMP charter of audit
independence, and
the level of fees for non-audit services amounted to
$2,822,000 or 17 per cent of total audit fees (refer to note 33
of the fi nancial report for further details).
–
–
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 2012.
–
his involvement will not impair the actual or perceived
independence of the 2012 audit, due to the auditor
independence policies operated by AMP and Ernst & Young.
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.
10
AMP 2012 annual report
Remuneration report
The directors are pleased to present this year’s remuneration report, which is divided into the following sections:
1 2012 remuneration overview
2 Remuneration strategy and governance
3 Remuneration structure in 2012
4 The link between company performance and remuneration
5 Remuneration for the nominated executives in 2012
6 Contractual arrangements for nominated executives
7 Non-executive director remuneration.
1 2012 remuneration overview
1.1 Remuneration strategy and structure
AMP’s remuneration strategy is to align remuneration with the creation of value for shareholders by attracting and retaining
employees who will contribute to AMP’s success and motivating them to achieve outstanding performance against AMP’s business
objectives. This is enabled through AMP’s remuneration structure, which included the following key components in 2012:
Employee group
Fixed remuneration
Short-term incentives
(STI)1 or profi t share2
Long-term incentives
(LTI)
Other equity
arrangements
Non-executive
directors
Nominated
executives3
Other senior
leaders
Other employees
Board fees,
committee fees and
superannuation
None
None
Annual base salary
and superannuation
Annual awards
dependent on
individual, business
unit and company
performance assessed
against fi nancial
and non-fi nancial
measures
Performance rights:
rights to AMP Limited
shares subject to a
three-year relative
total shareholder
return (TSR)
performance hurdle
Performance rights
and/or share rights:
selected employees
received performance
rights (as above) and/
or rights to AMP
Limited shares that are
subject to a three-year
service condition
None
26% of fees required
to be taken as shares
bought on market
Minimum shareholding
required
STI deferral: deferral
of 40% of the STI into
rights to AMP Limited
shares subject to a two-
year service condition
STI deferral: selected
senior leaders defer
40% of their STI into
rights to AMP Limited
shares subject to a two-
year service condition
STI match: selected
employees receive
rights to AMP Limited
shares valued at an
additional 50% of their
STI, subject to a two-
year service condition
1
2
A limited number of investment management and sales employees also participated in tailored business unit plans, which are based on
individual/team fi nancial measures and delivered in cash.
The managing director of AMP Capital and selected senior leaders of AMP Capital participated in the AMP Capital enterprise profi t share plan
(profi t share) as outlined in section 3.2.3.
3 The nominated executives are the chief executive offi cer (CEO) of AMP Limited and his direct reports as listed in section 1.2.
11
Directors’ report
for the year ended 31 December 2012 continued
1.2 Remuneration received by the nominated executives in relation to 2012
The table below details the remuneration actually received by the nominated executives in relation to 2012. Long-term incentive
(LTI) values are zero as the performance hurdles were not met. There is an accounting value for LTI, however, which is shown in
section 5.1 in accordance with statutory disclosure requirements.
Actual share income
Fixed
remuneration
$’000
Cash
short-term
incentive (STI)
$’000
Total cash
$’000
STI deferral
vested during
2012
$’000
Long-term
incentive (LTI)
and other
vested
during 2012
$’000
1,750
1,407
3,157
1,065
852
1,917
Name
Craig Dunn
Chief Executive Offi cer
and Managing Director
Craig Meller
Managing Director,
AMP Financial Services
Stephen Dunne
Managing Director, AMP Capital
1,065
1,068
2,133
Colin Storrie1
Chief Financial Offi cer
Brian Salter
General Counsel
Lee Barnett
Chief Information Offi cer
Paul Sainsbury
Integration Director and
Managing Director, AMP SMSF
Matthew Percival
General Manager, Public Affairs
Fiona Wardlaw
General Manager, Human Resources
Jonathan Deane
General Manager, Group Strategy
950
770
765
650
565
640
525
537
1,487
447
1,217
498
1,263
612
1,262
321
886
387
1,027
315
840
Total
8,745
6,444
15,189
2012 total
remuneration
$’000
2011 total
remuneration
$’000
3,157
3,008
1,917
1,828
2,133
1,893
1,487
n/a1
1,217
1,203
1,263
1,213
1,262
1,076
886
897
1,027
1,015
840
843
15,189
12,976
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Colin Storrie was appointed as Chief Financial Offi cer on 1 January 2012 but was not key management personnel (KMP) in 2011.
All other executives listed above were KMP during 2011.
The total remuneration received by the nominated executives for 2012 was consistent with 2011. This refl ects the board’s focus
on linking pay with performance:
–
–
–
fi xed remuneration costs were held fl at for executives and most senior leaders: AMP froze the pay of executives at April 2011
levels, while a budget of up to two per cent of fi xed pay increases was made available for some leaders (excluding promotions
and other exceptional adjustments). These limits did not apply to staff covered by an enterprise agreement who received higher
increases as required.
STI outcomes for the nominated executives remained consistent with 2011 STI outcomes: The variable amount actually received
by the nominated executives for 2012 performance, as a percentage of opportunity, also remained consistent with historical levels.
performance based LTI did not vest: The performance period for the 2009 LTI completed in July 2012. The performance rights
issued under the 2009 LTI lapsed as the relative total shareholder return (TSR) hurdle was not met.
12
AMP 2012 annual report
1.3 Initiatives to enhance the effectiveness of AMP’s remuneration approach
Remuneration framework changes
As part of AMP’s commitment to ensuring remuneration supports the creation of value for AMP shareholders, the People and
Remuneration Committee (PRC) commissioned an extensive review of AMP’s remuneration framework and practices in late 2009.
Following the review, the board endorsed a three-phased approach to enhancing the effectiveness of AMP’s remuneration:
Phase 1
Phase 2
Phase 3
Formalise the AMP Limited Board’s and the PRC’s role in
remuneration governance in line with Australian Prudential Regulation
Authority requirements
Implemented in 2010
Design and implement a remuneration framework that complies with
prudential regulation and supports business objectives
Implemented in 2011
Review the AMP group performance management approach and short-term
incentive plan to ensure it continues to be aligned to business strategy
Implemented in 2012
Changes introduced during phase 3 included:
–
–
–
providing further clarity in the setting of performance goals to ensure alignment with AMP’s business strategy
updating the STI allocation processes with a focus on rewarding AMP’s highest performers
fully integrating the AMP behaviours into employees’ overall performance assessments.
Increased participation in enterprise profi t share
AMP Capital added 14 participants to its enterprise profi t share plan (profi t share), joining the managing director of AMP Capital
(AMP Capital MD) and his management team. Participants were selected for their ability to contribute to AMP Capital profi t and
to provide input into AMP Capital’s strategy. The profi t share plan is detailed in section 3.2.3.
1.4 Changes to remuneration approach in 2013
The 2013 LTI award for the nominated executives will introduce a second performance measure. The nominated executives and
selected other senior leaders previously received LTI awards in the form of performance rights which were subject to a single relative
total shareholder return (TSR) performance hurdle. A review of market practices was conducted during 2012, after which it was
determined that AMP should introduce a second measure, specifi cally a return on equity (RoE) measure. This refl ects the importance
for AMP of managing its capital base, a key contributor to creating sustainable shareholder value. It is proposed that for the 2013
LTI awards:
–
50 per cent of the LTI award value, granted as performance rights, will be subject to TSR performance relative to the top
50 industrial companies in the S&P/ASX 100 Index, and
– 50 per cent of the LTI award value, granted as performance rights, will be subject to an RoE measure.
1.5 Key management personnel
For the purpose of this remuneration report and Australian Accounting Standard AASB 124 Related Party Disclosures (refer to note 32
to the fi nancial statements), key management personnel (KMP) are defi ned as including all non-executive directors (NEDs), the chief
executive offi cer (CEO) and other persons having authority and responsibility for planning, directing and controlling the activities of
the entity. They include the nominated executives and the non-executive directors of the AMP Limited Board.
13
Directors’ report
for the year ended 31 December 2012 continued
2 Remuneration strategy and governance
2.1 The role of remuneration in supporting business strategy
AMP’s remuneration strategy is to align remuneration with the creation of value for shareholders, as illustrated below.
AMP’s remuneration strategy
Attract, motivate and retain employees who will contribute to AMP’s success
Drive outstanding performance against business objectives
Support AMP’s desired culture and risk appetite
Create value for shareholders
AMP has a comprehensive remuneration policy which outlines the responsibilities of the board, PRC and management in
maintaining alignment with the remuneration strategy. Of particular note, the policy requires that remuneration arrangements
are simple, practical and supported by a governance framework that avoids confl icts of interest, defi nes clear accountabilities and
ensures that proper checks and balances are in place. Where an external perspective is needed, the PRC requests market practice,
regulatory and governance input from its external board remuneration advisor, PricewaterhouseCoopers.
2.2 Remuneration value
AMP generally positions fi xed remuneration at the median (ie the 50th percentile) of the market. When determining the relevant
‘market’ for each role, AMP considers companies from which AMP sources talent and to whom it could potentially lose talent. For
the nominated executives, AMP sources data for Australian listed companies of comparable size to AMP, both within the fi nancial
services sector and across the general market. Within that market, AMP looks at roles in the same area of expertise, with similar
seniority and responsibility to the relevant individual.
Variable remuneration aims to provide the nominated executives with comparable remuneration to their peers in other companies
for equivalent performance. Total remuneration above the market median can be realised through the achievement of ‘stretch’
performance targets.
2.3 Remuneration mix
All of the nominated executives have a signifi cant component of their total remuneration linked to performance. This is illustrated
below, using the midpoint for the STI (the STI midpoint is halfway between the minimum outcome of zero per cent and the maximum
outcome, which varies for each executive and is outlined in section 4.2). The STI and LTI are ‘at risk’ remuneration and will only be
paid if specifi ed performance hurdles are met.
38%
31%
CEO
32%
Other nominated executives1
36%
Fixed remuneration 31%
STI cash 19%
STI deferral 12%
LTI 38%
Fixed remuneration 36%
STI cash 19%
STI deferral 13%
LTI 32%
12%
19%
13%
19%
1 The AMP Capital MD is excluded from the above illustration as he participates in the AMP Capital enterprise profi t share plan.
14
AMP 2012 annual report
3 Remuneration structure in 2012
During 2012, remuneration for the nominated executives and other senior leaders comprised four key components:
Fixed or ‘guaranteed’
remuneration
Fixed remuneration
Total fi xed remuneration package including
superannuation, salary sacrifi ced benefi ts and
fringe benefi ts tax thereon
Cash
Variable or ‘at risk’
remuneration
STI cash
Annual cash award based on individual, business
unit and company performance against fi nancial
and non-fi nancial measures
STI deferral
LTI
Portion of STI delivered in rights to AMP Limited
shares subject to a two-year service condition and
possible forfeiture
Deferred equity
Annual grant of rights to AMP Limited shares
subject to a three-year relative total shareholder
return (TSR) performance hurdle
Most employees were generally eligible for fi xed remuneration and STI cash only. However, high-potential employees at a senior
leader level were also eligible to receive an equity award under AMP’s STI match plan (refer to section 3.2.2).
3.1 Fixed remuneration
Fixed remuneration at AMP is expressed as an annual salary package and is generally targeted at the median of the market
(refer to section 2.2 for more detail). From this amount, AMP deducts the required superannuation contributions and any additional
superannuation contributions or salary-sacrifi ced benefi ts at the employee’s election. Any fringe benefi ts tax incurred by AMP in
providing benefi ts is on-charged to the employee.
Fixed remuneration for the nominated executives is reviewed by the PRC and approved by the AMP Limited Board annually
(but not necessarily increased), with consideration to:
–
–
–
market remuneration ranges for the role
the individual’s capability, performance and criticality to AMP
the available budget for remuneration increases.
3.2 Short-term incentives
AMP’s short-term incentive (STI) plans provide the nominated executives and other permanent employees with rewards for
annual performance against measures set at the beginning of the performance period. The nominated executives participate in
the following plans:
–
–
–
CEO: CEO STI plan (refer to section 3.2.1)
direct reports to the CEO (other than the AMP Capital MD): AMP group STI plan (refer to section 3.2.2)
AMP Capital MD: AMP Capital enterprise profi t share plan (refer to section 3.2.3).
Other permanent employees participate in the AMP group STI plan and/or tailored business unit plans based on individual/team
fi nancial measures.
3.2.1 CEO short-term incentive plan
The CEO’s maximum STI opportunity is 200 per cent of fi xed remuneration. To determine the annual STI award, the PRC assesses
the performance of the CEO against objectives set and approved by the board at the start of each year. The PRC then recommends
an STI payment to the board for approval.
In 2012, the CEO’s award was based on the measures and weightings provided in 3.2.2, which were selected to reward the CEO
for performance that would drive sustainable growth in shareholder value.
15
Directors’ report
for the year ended 31 December 2012 continued
3.2.2 AMP group short-term incentive plan
The nominated executives and other permanent employees earn STI awards based on the achievement of AMP’s group-wide
measures and personal objectives. Information on the STI opportunity for the nominated executives is provided in section 4.2.
STI pool
The board determines the size of the STI pool, assessing AMP’s performance against group-wide measures set and approved by the
board at the start of each year. The CEO then distributes the STI pool among business units and AMP group functions based on their
contribution to AMP’s performance.
Group-wide measures
The following AMP group-wide measures were used in 2012 to determine the size of the STI pool (the STI scorecard). These measures
were chosen because they align with the company’s strategy, objectives and goals as approved by the board, and provide an overall
view of performance.
Financial measures: weighting 60%
Non-fi nancial measures: weighting 40%
Measures
– Underlying profi t after tax
– Underlying return on equity
Value of net cash fl ows and
–
risk new business
– Cost to income ratio
Link to strategy
–
These fi nancial measures are
key drivers of shareholder value
Investment performance for clients
–
– Customer advocacy and service
– Growth in planner/adviser numbers
–
People and talent, including diversity,
culture and employee engagement
Other key strategic priorities, including
the AXA integration, growth strategies for
SMSF and Asia, staying ahead of regulatory
change and prudent risk management
These measures are key indicators of how
successfully the company is delivering
against its goals and strategy
–
–
The STI pool is calculated based on performance against the STI scorecard and is then adjusted downwards if AMP management
operates outside board-approved risk appetite levels. The risk adjustment can be anywhere from 0–100 per cent. The board also has
the discretion to consider the quality of AMP’s fi nancial results, business leadership and the realisation of strategic opportunities in
determining the fi nal STI pool.
Individual performance and development plans (PDPs)
Individual PDPs are set at the start of each year and are designed to focus employees on activities that will drive the achievement
of AMP’s strategic objectives.
PDPs for the nominated executives typically include some or all of the AMP group measures (refer to Group-wide measures above)
and additional business unit/individual measures. People measures apply to all of the nominated executives. Additionally, all
employees are measured on the extent to which they exhibit the ‘AMP behaviours’. These are the behaviours AMP has identifi ed
as critical to driving business performance and growth.
Performance objectives for the nominated executives are agreed with the CEO and approved by the board. The board also
approves the setting of performance objectives for individuals who it considers have the ability to impact AMP’s fi nancial soundness
(specifi ed individuals). At the end of the fi nancial year, the CEO recommends STI payments for his direct reports and other specifi ed
individuals based on their performance against the agreed measures, for board approval.
For employees below this level an individual’s STI payment will be determined on the basis of AMP’s overall performance, the
individual’s business unit performance and their own performance as assessed against the performance and behavioural goals
outlined in their PDP. Recommendations are signed off by the CEO and general manager, Human Resources to ensure group-wide
consistency and equity, particularly from a gender pay perspective.
STI deferral plan
The nominated executives and selected other senior leaders who have the ability to impact AMP’s fi nancial soundness,
participate in the AMP STI deferral plan. The plan requires that 40 per cent of a participant’s STI award be delivered in rights to
AMP shares (share rights). The share rights convert to AMP Limited shares (ie vest) after a two-year deferral period. Vesting is
subject to ongoing employment, compliance with AMP policies and the board’s discretion. The 2012 STI deferral awards will be
granted in April 2013, following the release of AMP’s full-year fi nancial results and calculation of 2012 STI outcomes. The fi rst grant
of share rights was made under the STI deferral plan during 2012 based on 2011 STI outcomes. These share rights will convert to
AMP Limited shares, subject to the above conditions, in 2014.
STI match plan
For each given year, high potential employees at a senior leader level are eligible for nomination to participate in the STI match
plan, which provides an award of share rights to the value of 50 per cent of the individual’s STI. The STI match award is provided
in addition to the STI cash opportunity. Employees at this level are not eligible to participate in AMP’s long-term incentive plan.
As the STI match is based on the STI plan, the number of share rights awarded to the participant depends on the individual’s
contribution to company performance during the fi nancial year.
16
AMP 2012 annual report
As with the STI deferral plan, STI match share rights convert to AMP Limited shares (ie vest) after a two-year deferral period.
Vesting is subject to ongoing employment, compliance with AMP policies and the board’s discretion. The 2012 STI match awards
will be granted in April 2013, following the release of AMP’s full-year fi nancial results and calculation of 2012 STI outcomes. The
fi rst grant of share rights was made under the STI match plan during 2012 based on 2011 STI outcomes. These share rights will
convert to AMP Limited shares, subject to the above conditions, in 2014.
3.2.3 AMP Capital enterprise profi t share plan
Select leaders from AMP Capital, including the AMP Capital MD, participate in the AMP Capital enterprise profi t share plan
(profi t share). Profi t share provides participants with a share of AMP Capital’s adjusted pre-tax profi t, allowing for an appropriate
cost of capital. The size of the profi t share pool is agreed upfront by the board. The board has the discretion to adjust the size of the
pool to recognise non-profi t related performance including AMP behaviours, changes in market conditions and broader fi nancial
factors such as AMP’s capacity to pay. The board also has the discretion to adjust the profi t share pool downwards if AMP Capital
management operates outside board-approved risk appetite levels (as per the AMP group STI plan).
Allocation to individuals is determined on a discretionary basis with consideration given to an individual’s performance against
their annual fi nancial and non-fi nancial objectives and AMP behaviours. Allocations are delivered partly in cash at the end of
the fi nancial year (60 per cent of the award), with the remainder deferred into share rights, which vest two years subsequently
(40 per cent of the award). The deferred portion is delivered through the AMP group STI deferral plan (described in section 3.2.2).
Allocations to the AMP Capital MD are recommended by the CEO for approval by the board. Allocations to other participants are
recommended by the AMP Capital MD for approval by the CEO.
Profi t share is the exclusive variable remuneration arrangement for participants, except for the AMP Capital MD who also
participates in the LTI plan.
3.3 Long-term incentives
AMP’s long-term incentive (LTI) plan provides the nominated executives and selected senior leaders with rewards delivered
in equity if conditions are met over a three-year period. LTI awards are granted annually, which provides ongoing benefi ts to
participants for increasing shareholder value. The nominated executives and selected other senior leaders receive their LTI in
the form of performance rights, which are subject to a relative total shareholder return (TSR) hurdle (refer to section 3.3.1).
Other participants may take a portion or all of their LTI in share rights, which are subject to their ongoing service (refer to
section 3.3.2).
3.3.1 Performance rights
A performance right is a right to acquire one fully paid ordinary share in AMP Limited after a three-year performance period
for no consideration (ie effectively a share option with a zero exercise price), provided a specifi c performance hurdle is met.
The nominated executives are required to take their full LTI award in performance rights. Performance rights are awarded at
no cost to the participant.
Performance hurdle
Vesting of performance rights is dependent on AMP’s TSR performance relative to a comparator group of Australian listed companies
over a three-year performance period. TSR measures the benefi t delivered to shareholders over the given period, which includes
dividend payments, capital returns and movement in the share price. The performance hurdle was chosen because it requires
participants to outperform major ASX listed companies before the awards generate any value.
3.3.2 Share rights
AMP also awards share rights under the LTI plan. LTI share rights are used to recognise senior leaders who contribute signifi cantly
to AMP’s overall business success, but have a reduced ability to infl uence the creation of shareholder value compared to the
nominated executives. LTI share rights are rights to acquire one fully paid ordinary share in AMP Limited after a three-year vesting
period subject to ongoing service. Share rights are awarded at no cost to the participant and do not carry dividend entitlements.
As this program is a means of recognising and retaining employees, no performance hurdles apply during the vesting period, other
than continued service.
In years prior to 2011, AMP awarded restricted shares instead of share rights. A restricted share is an ordinary AMP share that
has a holding lock in place until a three-year vesting period ends. During this time, the holder is eligible to receive dividends,
but is unable to sell, transfer or hedge their award.
Hedging
AMP policy prohibits employees from entering into any hedging arrangement in relation to any vested or unvested shares,
options, share rights or performance rights in any AMP share plan. Breaches of this policy will lead to forfeiture of the relevant
award. In accepting equity awards, participants are required to agree that they will not enter into any hedging arrangements
in relation to the award.
Treatment of LTI on cessation of employment and change of control
Typically, unvested LTI awards lapse at the end of the employee’s notice period if the participant resigns from AMP or their
employment is terminated for misconduct or inadequate performance. In other cases, such as retirement and redundancy,
LTI awards may be retained by the participant, with vesting continuing to be subject to the same vesting conditions as if they
had remained in AMP employment. In the event that AMP is subject to a takeover or change of control, unvested performance
rights, granted prior to September 2011, typically vest.
Commencing from the performance rights granted in September 2011, the board has the discretion to determine an alternative
treatment on cessation of employment and change of control (ie to determine that the LTI awards would lapse, are retained or
vest when they would not have otherwise), if deemed appropriate in the light of specifi c circumstances.
17
Directors’ report
for the year ended 31 December 2012 continued
Source of shares
The board has the discretion to satisfy vested rights by either acquiring shares on-market or through the issuance of shares.
AMP’s practice has been, and intention is to continue, to source the shares to satisfy LTI awards on-market, so that the issue of
LTIs does not dilute the value of AMP Limited shares. In the case of the CEO, the vesting of shares may only be provided by AMP
procuring the transfer of shares purchased on-market.
3.3.3 Performance rights and share rights granted in 2012
Determining the value of the award and the number of securities
Participation in the LTI and the value of awards is recommended by the PRC for approval by the board (and by shareholders in
the case of the award to the CEO). When recommending the value of awards for each participant, the PRC, on advice from the CEO,
considers the recipient’s seniority, infl uence on AMP’s long-term performance and contribution to AMP over the past 12 months or
more. The number of securities is calculated by dividing the value of the award by the fair value of the LTI instrument, which is based
on the 10-day average daily closing share price prior to the offer being made. Fair values are discounted for the value of foregone
dividends and, in the case of performance rights, the risk of performance conditions not being met.
Vesting of performance rights granted, and subject to performance testing during 2012, is dependent on AMP’s TSR performance
relative to a comparator group of Australian listed companies over a three-year performance period. The comparator group was the
top 50 industrial companies in the S&P/ASX 100 Index (based on market capitalisation rank) as defi ned at the start of the relevant
performance period. The performance testing period is provided in the following table.
Plan
2012
annual award
2011
executive award
2011
CEO award
2010
annual award
Grant date
07/06/2012
09/09/2011
09/06/2011
08/09/2010
2009
annual award
12/03/20101
Performance period
01/03/2012–
28/02/2015
01/08/2011–
31/07/2014
01/05/2011–
30/04/2014
01/08/2010–
31/07/2013
01/08/2009–
31/07/2012
1
The grant timing was later than usual as a result of pending changes to taxation rules. To ensure continuity in long-term performance
assessment, the vesting conditions were applied from August 2009.
Vesting schedule
The proportion of performance rights that vest for each of the above grants was/will be determined according to the vesting
schedule depicted below.
% of performance
rights that vest
100%
50%
50th
percentile
75th
percentile
AMP’s TSR ranking against
the comparator group
At the end of the performance period, an independent external consultant provides the PRC with AMP’s TSR ranking against
the comparator group. The PRC then determines the number of performance rights, if any, that vest, with reference to the vesting
schedule shown in the diagram above. There is no subsequent performance retesting. Consequently, any awards that do not vest
at the end of the vesting period are forfeited.
Conversion to shares
If the awards vest, they are automatically converted to shares on behalf of participants. Upon conversion, participants become
entitled to shareholder benefi ts, including dividends and voting rights.
18
AMP 2012 annual report
3.4 Other equity arrangements
3.4.1 Executive minimum shareholding requirement
In 2006, the PRC introduced guidelines outlining the minimum number of AMP shares the nominated executives are expected
to hold. The guidelines were introduced to strengthen the alignment between the interests of the nominated executives and
shareholders in the long-term performance of AMP. The nominated executives were expected to establish and maintain the
following minimum shareholdings by 2011 (or within fi ve years of appointment if appointed after 2006):
–
–
CEO: 300,000 shares
direct reports to the CEO: 60,000 shares.
Share rights allocated to nominated executives as a result of STI deferral will be included in balances for the purpose of minimum
shareholding requirements. The table below summarises the movements in the holdings of shares in AMP Limited held by the
nominated executives and their personally related entities over the reporting period.
Date by which
minimum holding
must be met
Holding at
1 Jan 2012
Granted as
remuneration
during the period
Received on exercise
of performance
rights or options
Other changes1
Holding at
31 Dec 2012
Name
Craig Dunn
Craig Meller
Jan 2013
558,497
Oct 2012
96,207
Stephen Dunne
Jul 2011
209,396
Colin Storrie
Brian Salter
Lee Barnett
Paul Sainsbury
Matthew Percival
Fiona Wardlaw
Jonathan Deane
Jan 2017
Jul 2013
Jul 2011
Dec 2015
Jul 2011
Aug 2013
Jan 2013
39,416
21,978
53,078
19,928
45,000
61,294
93,683
247,513
146,961
158,867
69,060
82,872
85,635
78,453
63,535
71,923
60,825
–
–
–
–
–
–
–
–
–
–
–
–
–
–
782
–
806,010
243,168
368,263
108,476
105,632
138,713
(19,928)
78,453
–
2,287
–
108,535
135,504
154,508
1 Other changes represent individuals’ purchases and sales made during the period or participation in the AMP dividend reinvestment plan.
All nominated executives have acquired the necessary number of shares to meet the executive minimum shareholding requirement.
3.4.2 Employee share acquisition plan
From time to time, AMP has provided employees (including the nominated executives) with the opportunity to become
shareholders in AMP through the employee share acquisition plan (ESAP), typically by way of salary sacrifi cing their fi xed
remuneration or STI to acquire shares. Depending on the terms of the particular award, participants may be entitled to receive
matching shares for shares acquired under the ESAP (eg the most recent awards provided one free share for every 10 shares
acquired via salary sacrifi ce). Additionally, AMP can provide employees with free shares under the ESAP. Where the awards are
acquired at no cost to the participant, service-based conditions must be met for the participant to receive their full entitlement.
The plan was suspended midway through 2009 in Australia due to the changes to the taxation treatment of employee share plan
awards. Accordingly, no awards were made under this plan in 2010, 2011 or 2012. The plan continues to operate in New Zealand.
19
Directors’ report
for the year ended 31 December 2012 continued
4 The link between company performance and remuneration
4.1 Company performance and short-term incentive expenditure
The following table shows how STI outcomes compared to AMP’s fi nancial results over the past fi ve years. STI outcomes and
company results are not expected to be perfectly correlated as AMP’s STI performance assessment involves a broader consideration
of AMP’s progress in generating future value for shareholders (eg non-fi nancial performance and fi nancial results relative to the
targets set by the board and shareholder expectations).
Financial results
Underlying profi t ($m)
Operating earnings ($m)
Underlying return on equity
STI pool ($m)
STI pool as % of underlying profi t
Average STI as % of maximum opportunity
for the nominated executives
Total dividend (cents per share)
Share price at 31 December
2008
810
737
39%
43
5%
39%
40
$5.42
2009
772
701
32%
72
9%
67%
30
$6.77
2010
760
686
26%
62
8%
65%
30
$5.29
2011
909
792
15.1%
891
9.8%
60%
29
$4.07
2012
955
815
12.8%
962
10.1%
63%
25
$4.81
1
The STI pool for 2011 was higher than in 2010 because of the increase in AMP’s headcount following AMP’s merger with the Australian and New
Zealand businesses of AXA Asia Pacifi c Holdings and other structural changes in the balance of at-risk remuneration for a number of employees.
2 The STI pool is inclusive of the CEO STI plan and the AMP group STI plan.
With regard to the non-fi nancial measures as outlined in section 3.2.2, AMP performed strongly overall and particularly against
AMP’s key strategic priorities. Further commentary is provided below:
Non-fi nancial measures
2012 performance
Customer and clients
Investment performance (% AUM
meets or exceeds benchmarks)
–
Investment performance has improved from 69% to 71% over three years
and is at 81% over 12 months.
Customer advocacy (% of
customers who are advocates)
– This has remained steady over the 12-month period.
Business partners
Increase in numbers
of planners/advisers
Employees
Employee engagement
Retention of talent
and high performers
Performance against
diversity targets
Other key priorities
Deliver integration
Build an SMSF business
Build preferential
distribution
partnerships in Asia
20
AMP 2012 annual report
–
This was signifi cantly above target (a net increase of 209 new advisers). This refl ects
the acquisition of Futuro Financial Services, the effectiveness of the Horizon’s Academy
and the good retention of advisers/planners despite signifi cant competitor activity.
–
Engagement is above target representing strong employee focus for the
merger of AXA and AMP.
– The retention of talent and high performers signifi cantly exceeded target.
–
The percentage of women in senior executive roles has increased from
27% to 31% in the year although there was a 1% decrease in the percentage
of women in middle management from 38% to 37%.
–
Upgraded post tax synergy benefi ts by $10m at half year to $150m.
Annual post tax cumulative run rate synergies ahead of plan at $120m.
– The SMSF business was launched in June 2012 and has exceeded growth targets.
– AMP acquired the Cavendish SMSF administration business.
–
–
–
Good progress has been made with the MUTB alliance generating net cashfl ows
greater than $530m.
AMP won its fi rst mandate from China’s almost $150b National Council for
Social Security Fund (NCSSF).
Added a number of domestic and international investment professionals
including expanded Asian equities capability now located in Hong Kong.
4.2 Company performance and 2012 STI outcomes for the nominated executives
The following table shows STI opportunities for each nominated executive (as a percentage of fi xed remuneration) and
the proportions of STI opportunity awarded and forfeited during 2012. On average, the nominated executives were awarded
63 per cent of their maximum opportunity. The 2012 STI outcomes for the nominated executives were typically consistent with
the 2011 STI outcomes (when the average percentage awarded was 60 per cent).
Executive
Position
Maximum STI
opportunity
Awarded2
Not awarded
Craig Dunn
Craig Meller
Chief Executive Offi cer and Managing Director
Managing Director, AMP Financial Services
Stephen Dunne
Managing Director, AMP Capital
Colin Storrie
Brian Salter
Lee Barnett
Chief Financial Offi cer
General Counsel
Chief Information Offi cer
Paul Sainsbury
Integration Director and Managing Director, AMP SMSF
Matthew Percival
General Manager, Public Affairs
Fiona Wardlaw
General Manager, Human Resources
Jonathan Deane
General Manager, Group Strategy
Average
200%
200%
n/a1
175%
175%
175%
175%
175%
175%
175%
67%
67%
n/a1
54%
55%
62%
90%
54%
58%
57%
63%
33%
33%
n/a1
46%
45%
38%
10%
46%
42%
43%
37%
1
The AMP Capital MD has STI opportunity delivered under the AMP Capital enterprise profi t share plan (refer to section 3.2.3) and this opportunity
is uncapped. Accordingly STI opportunity, % awarded and % not awarded, is not applicable.
2 The amounts awarded are inclusive of the deferred component (ie includes both the cash and deferred share rights).
4.3 Company performance and long-term incentive vesting
Performance rights awarded to nominated executives are subject to a total shareholder return (TSR) hurdle whereby AMP’s TSR
must be equal to or greater than the median TSR of the top 50 industrial companies in the S&P/ASX 100 Index (refer to section 3.3.3
for more detail).
The table below illustrates how LTI outcomes for the nominated executives are linked to shareholder returns. For each LTI grant
made during the last four years, the table provides the relevant performance period, and for all completed performance periods:
–
–
AMP’s TSR for that period (absolute and relative to the specifi ed comparator group for the relevant LTI award)
details of whether the award vested.
Year
2009
2010
2011
Award
Performance period for the LTI grant
Annual award
01/08/2009–31/07/2012
AMP’s TSR
for that
period1
-7.58%
AMP’s ranking
relative to the LTI
comparator group
37th
Vesting
status at
31 Dec 2012
Lapsed
Annual award
01/08/2010–31/07/2013
Performance period not complete
CEO award
01/05/2011–30/04/2014
Performance period not complete
Executive award
01/08/2011–31/07/2014
Performance period not complete
2012
Annual award
01/03/2012–28/02/2015
Performance period not complete
1 TSR was calculated as the growth in share price (using the ASX adjusted price series) plus dividend payments and capital returns over the period.
As shown above, performance rights issued under the 2009 LTI offer lapsed as the TSR hurdle was not met.
21
Directors’ report
for the year ended 31 December 2012 continued
5 Remuneration for the nominated executives in 2012
5.1 Accounting value of 2012 remuneration
The following table shows the remuneration details for the nominated executives for the year ended 31 December 2012.
The share-based payments shown below are not amounts actually received by nominated executives during the year, as they
include accounting values for unvested share awards.
Short-term employee benefi ts
Post-
employment
benefi ts
Share-based payments1
Cash
salary2
$’000
Short-term
incentive3
$’000
Other
short-term
benefi ts
$’000
Super-
annuation
benefi ts4
$’000
Subtotal
$’000
Rights5
$’000
Matching
shares6
$’000
2012
2011
1,713
1,648
1,407
1,344
2012
2011
1,026
1,014
852
798
2012
2011
1,048
1,014
1,068
863
2012
911
537
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
716
730
733
731
536
634
524
536
603
609
479
497
447
450
498
465
612
426
321
345
387
390
315
330
12
–
14
–
–
–
14
12
–
12
–
64
–
1
–
12
–
–
–
25
16
3,157
3,008
2,306
2,370
25
16
17
16
1,917
1,828
1,070
971
2,133
1,893
1,085
971
25
1,487
283
42
23
20
16
50
16
40
16
25
16
46
16
1,217
1,203
1,263
1,212
1,262
1,076
886
897
1,027
1,015
840
843
721
724
719
717
514
407
532
531
602
600
496
492
8,289
6,444
141
315
15,189
8,328
7,413
5,411
–
151
12,975
7,783
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
1
Other
long-term
benefi ts
Cash
distributions
on equity
plans
$’000
–
–
–
–
–
-4
Grand
total7
$’000
5,463
5,378
2,987
2,799
3,218
2,860
–
1,770
–
–
–
–
–
–
–
–
–
–
–
–
1,938
1,927
1,982
1,929
1,776
1,483
1,418
1,428
1,629
1,616
1,336
1,335
–
23,517
-4
20,755
Executive
Craig Dunn
Chief Executive Offi cer
and Managing Director
Craig Meller
Managing Director,
AMP Financial Services
Stephen Dunne
Managing Director,
AMP Capital
Colin Storrie8
Chief Financial Offi cer
Brian Salter
General Counsel
Lee Barnett
Chief Information Offi cer
Paul Sainsbury
Integration Director
and Managing Director,
AMP SMSF
Matthew Percival
General Manager,
Public Affairs
Fiona Wardlaw
General Manager,
Human Resources
Jonathan Deane
General Manager,
Group Strategy
2012 total
2011 total
1
2
For accounting purposes, all share-based payments are equity-settled as per the relevant Australian Accounting Standard (AASB 2 Share-based
Payment).
Fixed remuneration remained fl at for all nominated executives during 2012, having not increased for the majority of executives since April 2011.
Consequently, fi xed remuneration for 2012 may appear higher comparative to 2011 full year fi xed remuneration.
3 Short-term incentive values represent 60% of the total STI award, with 40% being deferred into STI deferral plan share rights.
4 Superannuation benefi ts for 2012 include contributions made above statutory requirements.
5
Includes performance rights, share rights and STI deferral plan share rights. The fair value of share rights and performance rights has been
calculated as at the grant date by external consultants using Monte Carlo simulation techniques. Fair value has been discounted for the
probability of not meeting the performance hurdles. The value of the award made in any year is amortised over the vesting period.
Under the employee share acquisition plan (ESAP) participating employees may receive matching shares at the end of the specifi ed vesting
period. The employee has no right to dividends on these matching shares until after they are granted. Each matching share has been valued by
external consultants as the face value of an AMP ordinary share at grant date less the present value of the expected dividends (not received).
The value of the award made in any year is amortised over the vesting period.
6
7 No termination payments, non-monetary benefi ts or other post-employment benefi ts were made to nominated executives during 2012.
8 Colin Storrie was appointed as Chief Financial Offi cer on 1 January 2012 and was not a KMP in 2011.
22
AMP 2012 annual report
5.2 Performance rights holdings
The table below summarises the movements, by number, in the nominated executives’ holdings of performance rights granted
by AMP Limited, for the year ended 31 December 2012. For details of the fair valuation methodology, refer to note 27 to the
fi nancial statements.
Name
Grant date
Fair value per
performance
right
Market
price on
exercise
Holding at
1 Jan 2012
Rights
granted in
2012
Rights
exercised in
20121
Rights
lapsed in
2012
Holding at
31 Dec 2012
Vested2 and
exercisable at
31 Dec 2012
Craig Dunn
Total
Craig Meller
Total
Stephen Dunne
Total
Colin Storrie
Total
Brian Salter
Total
Lee Barnett
Total
Paul Sainsbury
Total
Matthew Percival
Total
Fiona Wardlaw
Total
Jonathan Deane
12/03/10
08/09/10
09/06/11
07/06/12
$3.53
$2.50
$2.39
$1.28
–
–
–
–
777,778
697,675
729,167
–
–
–
–
1,110,406
–
–
–
–
777,778
–
–
–
–
697,675
729,167
1,110,406
2,204,620
1,110,406
–
777,778
2,537,248
12/03/10
08/09/10
09/09/11
07/06/12
12/03/10
08/09/10
09/09/11
07/06/12
12/03/10
08/09/10
09/09/11
07/06/12
12/03/10
08/09/10
09/09/11
07/06/12
12/03/10
08/09/10
09/09/11
07/06/12
12/03/10
08/09/10
09/09/11
07/06/12
12/03/10
08/09/10
09/09/11
07/06/12
12/03/10
08/09/10
09/09/11
07/06/12
12/03/10
08/09/10
09/09/11
07/06/12
$3.53
$2.50
$1.92
$1.28
$3.53
$2.50
$1.92
$1.28
$3.53
$2.50
$1.92
$1.28
$3.53
$2.50
$1.92
$1.28
$3.53
$2.50
$1.92
$1.28
$3.53
$2.50
$1.92
$1.28
$3.53
$2.50
$1.92
$1.28
$3.53
$2.50
$1.92
$1.28
$3.53
$2.50
$1.92
$1.28
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
342,593
307,309
400,376
–
–
–
–
540,609
1,050,278
540,609
342,593
307,309
400,376
–
–
–
–
540,609
1,050,278
540,609
–
–
75,188
–
–
–
–
409,898
75,188
409,898
259,260
232,559
246,053
–
–
–
–
332,233
737,872
332,233
256,667
230,233
244,455
–
–
–
–
330,076
731,355
330,076
148,149
132,891
207,707
–
–
–
–
280,456
488,747
280,456
190,000
170,432
180,546
–
–
–
–
243,781
540,978
243,781
214,815
192,692
204,512
–
–
–
–
276,142
612,019
276,142
175,926
157,808
167,764
–
–
–
–
226,522
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
342,593
–
–
–
–
307,309
400,376
540,609
342,593
1,248,294
342,593
–
–
–
–
307,309
400,376
540,609
342,593
1,248,294
–
–
–
–
–
259,260
–
–
–
–
–
75,188
409,898
485,086
–
232,559
246,053
332,233
259,260
810,845
256,667
–
–
–
–
230,233
244,455
330,076
256,667
804,764
148,149
–
–
–
–
132,891
207,707
280,456
148,149
621,054
190,000
–
–
–
–
170,432
180,546
243,781
190,000
594,759
214,815
–
–
–
–
192,692
204,512
276,142
214,815
673,346
175,926
–
–
–
–
157,808
167,764
226,522
Total
501,498
226,522
–
175,926
552,094
1 None of the nominated executives exercised performance rights during 2012.
2 No performance rights vested during 2012.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23
Directors’ report
for the year ended 31 December 2012 continued
5.3 Analysis of movements in the value of performance rights and option holdings
The following table summarises the movement of options and performance rights, by value, during 2012. No performance rights
were exercised during 2012. No options were granted or exercised during 2012.
Name
Craig Dunn
Craig Meller
Stephen Dunne
Colin Storrie
Brian Salter
Lee Barnett
Paul Sainsbury
Matthew Percival
Fiona Wardlaw
Jonathan Deane
Value of
performance
rights granted
during 2012
$’000
Value of
performance
rights exercised
during 2012
$’000
Value of
performance
rights lapsed
during 2012
$’0001
1,421
692
692
525
425
422
359
312
353
290
–
–
–
–
–
–
–
–
–
–
3,119
1,374
1,374
–
1,040
1,029
594
762
861
705
1
Lapsed performance rights are valued using the relevant Australian Accounting Standard (AASB 2 Share-based Payment). For the performance
rights granted this is the fair value on the date of grant. For the performance rights lapsed this is the closing share price on the date the
performance rights lapsed.
5.4 Other incentive arrangements that will impact remuneration in future periods
5.4.1 Employee share acquisition plan matching shares
The following table provides details of the matching shares that may be provided to nominated executives in future years, if the
individual meets service conditions in the three-year period subsequent to their acquisition of the shares under the employee share
acquisition plan (ESAP). If the participant resigns prior to the end of the three-year period, the award will be forfeited. No shares
were acquired in Australia under the ESAP in 2010, 2011 or 2012.
Name
Fiona Wardlaw
Jonathan Deane
Date shares acquired
under the ESAP
Number of
shares acquired
Matching shares
granted in 20121
Maximum number of
matching shares in future
Estimated value vesting
in future years
2009
2009
1,000
527
100
52
–
–
–
–
1
The nominated executives received 100% of the possible matching share entitlement in respect of shares acquired through the ESAP during
2009 as they met the service requirements for these entitlements.
24
AMP 2012 annual report
6 Contractual arrangements for the nominated executives
The table below provides a summary of the key contractual terms agreed with the nominated executives.
Contract term
CEO contract
Other nominated executives
Length of contract
Open-ended
Open-ended
Notice period
Employee benefi ts
not forming part of
fi xed remuneration
(refer to section 3.1)
Entitlements on
termination
–
–
–
Employment may be terminated at any
time by AMP giving 12 months’ notice or
by Craig Dunn giving six months’ notice.
AMP may terminate Craig Dunn’s
employment immediately in certain events,
including serious misconduct and material
breach of contract.
In each case, AMP may pay the fi xed
remuneration for the balance of any
notice period in order to bring an earlier
end to his employment.
Not applicable
–
–
–
–
–
Accrued fi xed salary and statutory
entitlements.
Pro-rata STI may be paid for the period
since the last 1 January except in case of
misconduct or breach of contract. Where
provided, the STI is pro-rated for time served
and calculated based on performance to the
date of termination.
Unvested LTI performance rights may
be allowed to continue in the relevant
LTI plan in the case of death, disablement,
redundancy or notice without cause by AMP.
In this case, the awards will continue to be
subject to the original performance hurdles
and performance periods.
In the case of termination by AMP, or
termination due to death, disablement or a
material change in circumstances, the most
recent LTI award at the time of termination
will be reduced pro-rata if 12 months have
not passed since the award was granted.
Vested performance rights will be retained on
cessation of employment except in the case
of serious misconduct or breach of contract.
As for CEO, except:
–
Most of the other nominated executives
may terminate immediately if there is a
material adverse change in their role.
AMP is required to give some longer-serving
nominated executives six months’ notice if it
wishes to terminate for poor performance.
–
Long-serving nominated executives are entitled
to up to $7,500 annually in reimbursement for
taxation, legal or fi nancial planning advice.
As for CEO, except:
–
Some longer-serving nominated executives
are entitled to 50% of their maximum annual
STI opportunity for the balance of the notice
period on redundancy or termination by AMP
without cause.
For contracts agreed after 1 January 2010,
the above entitlement was removed, as the
payment of such amounts would result in
termination payments above the threshold
requiring shareholder approval.
The most recent LTI award at the time of
termination does not lapse pro-rata for time
served (in the case of termination by AMP,
termination due to death, disablement or
a material change in circumstances).
–
–
Post-employment
restraint
Craig Dunn is contractually restrained from
entering employment with a competitor for
six months, and has a 12 months’ restraint on
solicitation of AMP clients and employees.
–
–
Most of the other nominated executives are
not restricted from entering employment
with a competitor.
Restraints on solicitation of AMP clients and
employees are either for six or 12 months.
Effective since 2010, employment contracts issued to newly appointed employees (including any new nominated executives)
provide that an employee’s termination entitlements are limited to amounts not requiring shareholder approval under the
Corporations Act 2001 (ie their termination payments are capped at one year’s base salary as defi ned for the purpose of
section 200B of the Corporations Act 2001).
25
Directors’ report
for the year ended 31 December 2012 continued
7 Non-executive director remuneration
7.1 Philosophy
Fees paid to non-executive directors of the AMP Limited Board are recommended by the Nomination Committee with regard to
advice provided by AMP remuneration specialists and the Nomination Committee’s appointed external remuneration adviser.
Factors taken into consideration include:
–
–
–
the level of fees paid to board members of other Australian corporations
the complexity of AMP’s operations
the responsibilities and workload requirements of board members.
In order to maintain their independence, none of the non-executive directors’ remuneration is linked to performance.
7.2 Structure
During 2012, non-executive director remuneration comprised three components.
Benefi ts
Fees
Superannuation and an expense allowance
Committee and subsidiary board fees
AMP Limited Board fees
These fees and benefi ts are subject to the maximum non-executive director fee pool of $3.85 million.
7.2.1 AMP Limited Board fees
The annual base fee for a non-executive director was unchanged in 2012. The base fees provided to each director are as follows:
Base fee (excluding superannuation) 2012
Chairman
Other non-executive directors
$585,000
$170,000
The AMP Limited Board chairman receives an overall fee in relation to regular duties. No additional fees are paid for his membership
of board committees or subsidiary boards, or for his attendance at board meetings or meetings of board committees of which he is
not a member. An extra fee may be paid for additional board duties. Board fees are not paid to the CEO as responsibilities regarding
board membership are considered to be part of the CEO’s normal employment conditions.
7.2.2 Committee and subsidiary board fees
Individual non-executive directors are paid additional fees for duties associated with membership of board committees,
membership of AMP subsidiary boards and for duties associated with special purpose committees. The 2012 fees (excluding
superannuation) are presented below:
AMP Bank Audit Committee
AMP Bank Board
AMP Capital Holdings Audit Committee
AMP Capital Holdings Board1
AMP Life/NMLA Audit Committee
AMP Life/NMLA Board
Audit Committee
Diversity Advisory Committee2
Nomination Committee
People and Remuneration Committee
Board/committee
chairman
Board/committee
member
$25,000
$80,000
$25,000
$110,000
$28,750
$158,000
$42,000
$7,000
$15,000
$36,750
$15,000
$50,000
$15,000
$70,000
$17,250
$98,000
$21,000
$5,000
$7,500
$18,350
1
2
Non-executive directors of AMP Capital Holdings received the same fees in 2012 as were payable to non-executive directors of AMP Capital
Investors in 2011. The AMP Capital Investors Board was restructured in 2011 and now consists only of executive directors.
In 2013, the People and Remuneration Committee will take over the responsibilities of the Diversity Advisory Committee, which has been
dissolved.
26
AMP 2012 annual report
During 2012, the Nomination Committee instructed PricewaterhouseCoopers (PwC), its external remuneration adviser, to provide
market benchmarking services for the non-executive director roles. PwC did not provide any remuneration recommendations and
as such, are not considered to be a remuneration consultant as defi ned under the Corporations Act 2001. As a result of the market
review, and of the People and Remuneration Committee’s expanded responsibilities, the annual fees payable to the chairman and
the members of the People and Remuneration Committee will increase to $42,000 and $21,000 respectively, with effect from
1 January 2013.
7.2.3 Benefi ts
Benefi ts provided to directors are as follows:
–
Superannuation: Superannuation contributions totalling nine per cent of total fees are paid in addition to fees and allowances.
Directors may also elect to salary-sacrifi ce their fees into superannuation.
Expense allowance: An annual expense allowance of $6,000 is paid to each director, except the chairman, for incidental expenses
related to the business of the company.
Retirement benefi ts: No retirement benefi ts are provided to directors.
–
–
7.3 AMP non-executive directors’ share plan (NED share plan)
A minimum of 26 per cent of non-executive directors’ fees must be taken in the form of AMP shares which are held in the NED
share plan for 10 years, or until the director resigns from the AMP Limited Board, unless otherwise withdrawn with the approval
of the People and Remuneration Committee. There are no performance hurdles attached to this plan, as non-executive directors
use part of their fees to acquire these shares.
Non-executive directors do not participate in any other equity plans.
Shareholdings
The following table summarises the movements in AMP Limited shares held by the non-executive directors and their personally
related entities during 2012.
Non-executive director
Peter Mason
Patricia Akopiantz
Richard Allert
Catherine Brenner
Brian Clark
Paul Fegan
John Palmer
Nora Scheinkestel
Peter Shergold
Holding at
1 Jan 2012
Purchased
through the NED
share plan
Other changes1
Holding at
31 Dec 2012
474,698
35,926
31,925
542,549
10,846
10,440
–
21,286
67,237
10,440
38,305
10,440
43,941
10,440
4,661
1,742
3,141
82,338
50,487
57,522
23,487
10,440
–
33,927
62,238
10,439
4,335
77,012
112,253
10,439
7,600
130,292
32,784
10,439
2,412
45,635
1 Other changes are a result of participation in the dividend reinvestment plan.
AMP Notes are debentures issued by AMP Group Finance Services Limited, a subsidiary of AMP Limited. In addition to their AMP
Limited shareholdings above, Brian Clark and Nora Scheinkestel hold 980 and 150 AMP Notes respectively. There were no changes
to these AMP Note holdings between 1 January 2012 and 31 December 2012.
27
Directors’ report
for the year ended 31 December 2012 continued
7.4 Accounting value of 2012 non-executive director remuneration
The table below shows the remuneration details for the non-executive directors of AMP Limited for 2012.
Short-term benefi ts
Post-
employment
benefi ts
AMP Limited
Board and
committee
fees1
$’000
Fees for other
group boards1
$’000
Other short-
term benefi ts
$’000
Additional
board duties
$’000
Non-monetary
benefi ts
$’000
Superannuation
$’000
Total
$’000
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Peter Mason
Chairman
Patricia Akopiantz
Non-executive director
Richard Allert
Non-executive director
Catherine Brenner
Non-executive director
Brian Clark
Non-executive director
Paul Fegan
Non-executive director
John Palmer
Non-executive director
Nora Scheinkestel
Non-executive director
Peter Shergold
Non-executive director
Total for 2012
Total for 20112
585
576
188
141
191
143
175
172
201
198
212
209
207
204
192
193
196
192
2,147
2,097
–
–
58
5
–
–
175
153
125
125
68
50
98
109
118
150
115
108
757
762
–
–
6
4
6
4
6
6
6
6
6
6
6
6
6
6
6
6
–
100
–
–
–
15
–
55
–
–
–
55
–
15
–
–
–
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16
16
23
14
18
13
32
33
30
30
26
27
28
29
28
31
29
28
601
692
275
164
215
175
388
419
362
359
312
347
339
363
344
380
346
364
48
46
–
310
–
–
230
237
3,182
3,452
1
2
Details of the non-executive directors’ committee memberships and directorships of subsidiary boards are provided in the corporate governance
statement.
In line with disclosure requirements, the totals for the year ended 31 December 2011 relate to individuals disclosed in the 2011 annual report
and so do not equal the sum of amounts disclosed for individuals specifi ed for the 2012 annual report.
Signed in accordance with a resolution of the directors.
Peter Mason
Chairman
Sydney, 21 February 2013
Craig Dunn
Chief Executive Offi cer and Managing Director
28
AMP 2012 annual report
Analysis of shareholder profit
for the year ended 31 December 2012
This table shows an analysis of the source of profi t after income tax attributable to shareholders of AMP Limited.
All amounts are after income tax
AMP Financial Services
AMP Capital
Business unit operating earnings
Group offi ce costs
Total operating earnings
Underlying investment income
Interest expense on corporate debt
AMP Limited tax loss recognition
Underlying profi t
Market adjustment – investment income
Market adjustment – annuity fair value
Market adjustment – risk products
Other items
Profi t after income tax before AMP AAPH merger related adjustments and accounting mismatches
Merger and acquisition transaction costs
AMP AAPH integration costs
Amortisation of AMP AAPH acquired intangibles
Accounting mismatches
Profi t attributable to shareholders of AMP Limited
2012
$m
777
99
876
(61)
815
226
(86)
–
955
(12)
(9)
(4)
34
964
(4)
(128)
(99)
(29)
704
2011
$m
766
83
849
(57)
792
183
(82)
16
909
(50)
13
53
4
929
(42)
(105)
(75)
(19)
688
29
2012 corporate governance statement
Approach to corporate governance
The AMP Limited Board and management have a set of values
that recognise the group’s responsibilities to all its stakeholders,
including shareholders, customers and clients, business partners
and advisers, employees and the community.
The board places great importance on the highest standards of
governance and periodically reviews its governance practices to
address AMP’s obligations as a responsible corporate citizen.
In accordance with the ASX Corporate Governance Principles
and Recommendations (ASX Recommendations), AMP has
posted copies of its governance practices (including copies
of relevant charters, policies and terms of reference) in the
corporate governance section of its website: amp.com.au/
corporategovernance. The board believes AMP’s governance
practices were consistent with all of the ASX Recommendations
during 2012. The information in this statement is current as
at 25 February 2013.
ASX Principle 1: Lay solid foundations for management
and oversight
Role of the AMP Limited Board and management
Role of the AMP Limited Board
The board is responsible to AMP’s shareholders for the
overall governance and performance of the AMP group.
–
–
–
–
–
–
–
reviewing and approving policies that seek to ensure
the AMP group’s businesses are conducted ethically
reporting to AMP shareholders
considering AMP shareholders’ views on the management
and direction of the AMP group
considering the interests of all stakeholders in the
AMP group, including its shareholders, customers and
clients, business partners and advisers, employees and
the community
approving policies that seek to ensure AMP group’s
compliance with its legal and regulatory obligations
reviewing and approving AMP group’s strategic risk
management and seeking to ensure appropriate
group-wide compliance and risk frameworks are in place
approving major decisions concerning the fi nancial
capital of the AMP group
– monitoring the AMP group’s fi nancial results
– determining dividends
–
approving the half and full year fi nancial results for
the AMP group
approving releases to the Australian Securities Exchange
(ASX) on major matters
approving the delegation of powers to the CEO and
senior management.
–
–
The role of the board includes:
–
providing strategic direction to AMP through constructive
engagement with senior management in the development,
execution and modifi cation of AMP’s strategy and in
approving AMP’s strategic plan
approving major business initiatives within the
AMP group
guiding and monitoring the businesses within the
AMP group
appointing the managing director and chief executive
offi cer (CEO), the chief fi nancial offi cer (CFO) and the
company secretaries
– monitoring the CEO’s performance
–
providing advice and counsel to senior management
of the AMP group
approving succession plans for the CEO and reviewing
the succession planning policy and approach for the
direct reports of the CEO and for critical business roles
approving AMP group’s talent management strategy,
including seeking to encourage diversity on the boards
of AMP and its key operating subsidiaries and in senior
management
approving remuneration policies and practices, including
the total remuneration package, performance objectives
and performance appraisal for the CEO, the direct reports
of the CEO and other persons whose individual activities
may, in the People and Remuneration Committee’s opinion,
affect the AMP group’s fi nancial soundness or that of its
key operating subsidiaries
overseeing and approving AMP group’s governance
model, including monitoring and overseeing the work of
the boards of the key operating subsidiaries and monitoring
the implementation by those boards of the policies and
decisions of the AMP Limited Board
seeking to ensure the effectiveness of the boards of AMP and
its key operating subsidiaries; approving the remuneration
for AMP and key operating subsidiary non-executive
directors, as recommended by the Nomination Committee
–
–
–
–
–
–
–
–
The board’s responsibilities are documented in the AMP
Limited corporate governance charter, which has been adopted
by the board and is available on AMP’s website: amp.com.au
Details on the role of the chairman are set out in this statement
under ASX Principle 2: Structure the board to add value.
Role of the CEO and management
The CEO is responsible for the overall management and
fi nancial performance of the AMP group. The CEO manages
the organisation in accordance with the strategy, plans, risk
appetite and policies approved by the board. An executive
leadership team assists the CEO with implementing the
policies and strategies set by the board and running the
general operations and fi nancial business of AMP.
Directors decide what matters are delegated to management
and seek to ensure that adequate controls are in place to
oversee the operation of these delegated powers. The areas
of authority which have been delegated to senior executives
are documented in a delegations of authority framework,
which has been adopted by the board.
Allocation of individual responsibilities
Each non-executive director has been issued with a formal
letter of appointment, setting out key terms and conditions
and other corporate expectations. Each member of the executive
leadership team has clearly defi ned goals and accountabilities
and an employment contract setting out their term of
employment, duties, rights and responsibilities and
entitlements on termination.
Performance evaluation and induction of executive managers
Performance evaluation process
AMP’s remuneration strategy is to align executive rewards
with the creation of shareholder value. Performance is assessed
using a combination of quantitative and qualitative measures
that take into account the performance of the AMP group,
business unit, division and individual over the past year.
Performance objectives and performance appraisals for
executive managers were reviewed by the People and
30
AMP 2012 annual report
Remuneration Committee and recommended to the board
for approval during 2012. Further information about the
process for evaluating the performance of executive managers
is set out in the remuneration report. Further details of the
People and Remuneration Committee’s responsibilities are
set out in this statement under ASX Principle 8: Remunerate
fairly and responsibly.
(in the case of the chairman, this disclosure would be made
to the chairman of the Nomination Committee or to
the board, as appropriate)
take necessary and reasonable steps to resolve any
confl ict of interest
comply with the Corporations Act 2001 requirements
about disclosing interests and restrictions on voting.
–
–
Induction
AMP has procedures and courses for the induction of
managers, to assist them in participating fully and actively
in management decision-making at the earliest opportunity.
ASX Principle 2: Structure the board to add value
Independent directors
Independent decision-making
Directors are entitled to seek independent professional
advice on AMP-related matters at AMP’s expense. Directors
must ensure the costs are reasonable and must advise the
chairman before the advice is sought. Any advice received
must be made available to the rest of the board unless
otherwise agreed by the chairman or the board.
The chairman and other non-executive directors hold
meetings from time to time without management present.
It is important that the board operates independently of
executive management. During the year, the board reviewed
the criteria for director independence set out in Box 2.1 of
the ASX Recommendations and concluded that each of the
non-executive directors was independent of management.
In making its assessment, the board noted that certain AMP
Limited directors are also directors or offi cers of suppliers
or customers to the AMP group. The board has noted these
directors are not directly involved in the provision of services
to AMP and dealings have been at arm’s length:
Peter Mason is a Director of Singapore
–
Telecommunications Limited and Nora Scheinkestel is
a Director of Telstra Corporation Limited, both of which
provide telecommunications services to AMP
Peter Mason is the Chairman of David Jones Limited,
which currently leases four stores in AMP Capital
shopping centres and has entered into agreements
to lease three further stores.
Peter Mason is a senior adviser to UBS Investment Bank,
which periodically provides transaction advisory services
to AMP
Paul Fegan is the Chief Financial Offi cer of Genworth
Australia, which provides lenders’ mortgage insurance
to AMP Bank
Peter Shergold is a Director of Corrs Chambers Westgarth,
which is on AMP’s panel of nine preferred law fi rms for
commercial advice.
–
–
–
–
From time to time, AMP:
–
purchases various securities and fi nancial instruments
issued by companies in which AMP’s directors hold board
positions, for the purpose of investing shareholders’ funds,
unitholders’ funds and policyholders’ funds
operates corporate superannuation schemes for employees
of companies in which AMP’s directors hold board positions.
–
The board is of the view that these relationships are not
material and do not interfere with the exercise of the directors’
independent judgement and their ability to act in the best
interests of AMP. Materiality for the board’s assessment was
based on the:
–
strategic importance to AMP’s business of the services
or advice purchased by the AMP group
– nature of the services or advice
– nature and value of the transaction to the AMP group.
Potential related party transactions (other than those
occurring at arm’s length) must be discussed with the chairman,
reported in writing to the company secretary and, where
appropriate, raised for consideration at the next board meeting.
In the meantime, the director concerned should not commit to
the transaction.
A list of directors’ interests is regularly reviewed by directors
as circumstances change. If the board concludes a director has
lost their independent status, that conclusion will be disclosed
to the market in a timely manner.
Role of the chairman
The chairman is appointed by and from the independent
non-executive directors of the board. The chairman’s
responsibilities include:
–
providing appropriate leadership to the board and the
AMP group
facilitating board discussions
maintaining a regular dialogue and mentor relationship
with the CEO
–
–
– monitoring board performance
–
guiding and promoting the effectiveness of the board and
individual directors.
There is a clear division of responsibilities between the chairman
and the CEO, which is set out in the AMP Limited corporate
governance charter.
Nomination Committee
Membership, attendance and terms of reference
Throughout 2012, the Nomination Committee had the
following three independent directors as its members:
Nora Scheinkestel (Chairman), Brian Clark and Peter Mason.
Attendance records for the committee are shown in the
directors’ report and a copy of the committee’s terms of
reference is available on AMP’s website.
Responsibilities
The committee supports and advises the board on board
matters including policies, performance, remuneration,
composition, fi tness and propriety of directors and the board
(as required by the Australian Prudential Regulation Authority)
and succession planning. This includes identifying, evaluating
and recommending candidates to the board, having regard to
relevant expertise, skills, personal attributes, diversity, current
board size, availability and tenure of directors, the requisite
business needs and time commitments required. The committee
also oversees and recommends to the AMP Limited Board the
appointment of non-executive directors to the boards of key
operating subsidiaries.
Board selection and competencies
Succession planning is a regular item on the Nomination
Committee’s agenda. As part of the process of searching for
new directors, the committee considers a wide base of potential
directors. It identifi es, evaluates and recommends candidates to
the board, taking into account the range of skills and experience
required in relation to the:
– current composition of the board
– need for independence
– desirability of achieving diversity on the board
– strategic direction of the AMP group
– geographic spread and mix of AMP’s businesses.
Directors are required to monitor and disclose any potential
confl ict of interest that may arise. Directors must:
–
disclose to the chairman any actual or potential confl icts
of interest that may exist as soon as the situation arises
From time to time, the committee uses external consultants
to assist in its considerations. The board aims to achieve
a mix of skills and diversity, including business experience
(in different industries and countries), age, background,
31
2012 corporate governance statement
continued
professional expertise or qualifi cations and gender, while also
considering succession for the chairman of the board and the
chairmen of board committees. During 2012, the committee
engaged an external consultant to conduct a search for new
directors of AMP Limited and its key operating subsidiaries.
The committee gave the consultant guidance on the attributes
that would complement the skills and experience of each
entity’s current directors. In each case, the committee gave
consideration to the diversity of the relevant board in making
its recommendations.
Further details on AMP’s gender diversity objectives are set out
in this statement under ASX Principle 3: Promote ethical and
responsible decision-making. Biographical details setting out
the skills, experience and expertise of, and period of offi ce held
by, each of the directors in offi ce at the date of this statement
are set out in the directors’ report.
Composition and commitment of the AMP Limited Board
The AMP constitution (which is available on AMP’s website)
provides that there will be a minimum of three directors and a
maximum of 16 directors. As at the date of this statement, the
board is made up of nine independent non-executive directors
and one executive director, the CEO.
Prior to appointment or re-election, non-executive directors
advise the Nomination Committee of their other commitments
and confi rm they will have suffi cient time to meet their
expected requirements as an AMP Limited director.
Any proposed non-AMP Limited Board or executive
appointments being considered by directors must be discussed
with the chairman. Directors must advise AMP of such
appointments to other companies as soon as possible after the
appointment is made.
Re-appointment of directors
No director (other than the CEO) may hold offi ce for more
than three years without being re-elected by shareholders.
Re-appointment is not automatic. The board reviews whether
retiring directors should stand for re-election, having regard
to their contribution to the board. A director appointed by the
board to fi ll a casual vacancy or as an addition to the existing
directors will hold offi ce until the next annual general meeting
(AGM) when that director is required to stand for election.
A non-executive director can continue to hold offi ce after a
nine-year term provided they are re-elected by shareholders
at every subsequent AGM.
Board performance
Board performance assessment
Board and director performance reviews are conducted annually
and prior to any director standing for re-election at a general
meeting of the company. Reviews are conducted either directly
or through a third party. During 2012, the chairman facilitated
evaluations of the performance of the board and of each
director by holding one-on-one meetings with the directors.
The board then held discussions about:
–
–
–
the AMP group as a whole
the board’s role, processes and performance
the skills and experience of directors individually and
the board collectively
– board group dynamics
– any other relevant issues.
During 2012, the chairman of the Nomination Committee led
a review of the chairman’s performance by holding one-on-one
meetings with the other directors.
Performance reviews of the Audit, Nomination and People
and Remuneration Committees were conducted in 2012.
Questionnaires were completed by committee members
and regular meeting attendees, with the results discussed
in committee meetings and noted by the board. The boards
and the committees of key operating subsidiaries also review
their own performance.
Induction and education
The Nomination Committee considers board policies relating
to the orientation and education of new directors and the
continuing education and development of directors. All
directors participate in a formal induction process co-ordinated
by the secretariat. Board meetings regularly include sessions
on developments in governance, regulatory, accounting and
capital management matters. Each non-executive director is
allocated an annual budget to spend on education, training
and professional development, specifi c to their professional
development needs.
Access to information
Directors are able to access members of senior management to
request information. When conducting board business, directors
will question, request information, raise any issue of concern
to them, canvass fully all aspects of any issue confronting AMP
and vote on any resolution according to their own judgement.
Directors keep confi dential all board discussions, deliberations
and decisions except where decisions are required to be
disclosed publicly.
Company secretaries
AMP Limited has three appointed company secretaries,
whose biographical details and qualifi cations are set out in the
directors’ report. The company secretaries are responsible for
advising the board on governance matters and facilitating the
fl ow of information between the board and its committees, and
between executive managers and directors. All directors have
access to the advice and services of the company secretaries,
whose appointment and removal are a matter for decision by
the board.
ASX Principle 3: Promote ethical and responsible decision-making
Code of conduct
AMP’s reputation as a trusted and respected company is our
most valuable asset. The AMP Limited Board has adopted a code
of conduct, which was reviewed and updated in 2012. The code
outlines the standards of behaviour expected of all directors,
offi cers, employees, contractors and consultants of the AMP
group. The code reinforces an already strong ethical culture
for the benefi t of AMP’s shareholders, customers and clients,
business partners and advisers, employees and the community.
AMP has a whistleblowing policy and processes to support
people who report suspected breaches of the code in good faith.
A copy of the code of conduct is provided to all directors and
employees on joining AMP and is available on AMP’s website.
Diversity policy
AMP is creating a competitive advantage by attracting and
retaining diverse talent and leveraging this diverse talent to
build a culture that sparks innovative thought, supports robust
discussion and through this drives outstanding business results.
In 2010, AMP established a Diversity Advisory Committee to
guide its diversity strategy. Throughout 2012, the fi ve members
of the committee were Nora Scheinkestel (Chairman), Catherine
Brenner, Brian Clark, Peter Shergold and the CEO, Craig Dunn.
The committee reviewed and reported on the proportion of
women and men across all levels of AMP, annually reviewed the
progress made against specifi c, measurable gender diversity
objectives (set by the board on an annual basis) and reviewed
the implementation of initiatives to drive the wider diversity
agenda. The People and Remuneration Committee took over
the responsibilities of the Diversity Advisory Committee from
2013 onwards. Further details on the People and Remuneration
Committee are set out in this statement under ASX Principle 8:
Remunerate fairly and responsibly.
AMP was one of the founding members of the Diversity
Council of Australia, has remained a committed supporter for
over 25 years and recently became a key sponsorship partner.
In 2012, AMP was again recognised as an employer of choice
for women by the Equal Opportunity for Women in the
Workplace Agency (EOWA).
32
AMP 2012 annual report
AMP’s diversity and inclusion policy was updated in 2012
and is available on AMP’s website. The policy highlights AMP’s
commitment to creating an inclusive environment where all
employees are encouraged to reach their full potential and
where individual differences are valued and respected.
AMP strongly believes that success in leveraging diversity
comes from having an integrated framework of practices that
support the attraction, development and retention of diverse
talent, and a culture of inclusion. To foster an inclusive culture:
–
senior leaders at AMP attend cultural development
programs, to help encourage a culture that accepts
and leverages difference of opinion and raise leaders’
awareness of unconscious bias.
AMP has a formal career development program for both
men and women, to foster key talent in the organisation,
provide networking opportunities and showcase strong
role models. This helps build a stronger and deeper team
of women (and men) who have the potential, skills,
experience and desire to move to the senior leadership
levels of the business.
AMP helps employees manage their work and home
commitments by providing employees 14 weeks paid
parental leave, a formal program to keep parents connected
to the business while on parental leave, a sponsored child
care centre in Sydney, onsite carers’ rooms, fl exible work
arrangements and a leave purchase scheme. Building
awareness and acceptance of the benefi ts and viability of
fl exible work arrangements for both men and women will
continue to be a priority in 2013.
–
–
AMP recognises that although the group has taken some
steps to increase gender diversity, this is an area of continuous
improvement for our organisation.
Gender diversity objectives and reporting
AMP set gender diversity objectives in 2010, including
specifi c targets for the representation of women in middle
management and senior executive positions and on the
board. The gender diversity objectives were fi rst published
in the 2011 annual report. The top two per cent of the
workforce were included in the senior executives band and
the next most senior 30 per cent of the workforce were
included in the middle management band.
Following a review of market practice AMP has adjusted
which roles are included in the middle management and
senior executive bands. This change has been made to
ensure AMP can appropriately benchmark its gender diversity
data against the data reported by other listed companies.
Based on these new bands, the top eight per cent and the
next most senior 23 per cent of the total AMP workforce are
considered to be in senior executive and middle management
roles, respectively.
If AMP had continued to report on the basis of the previous
bands, at 31 December 2012, 21 per cent of senior executives
and 37 per cent of middle management positions would have
been held by women.
Representation of women in roles against 2015 targets
ASX Principle 4: Safeguard integrity in fi nancial reporting
Audit Committee
Membership, attendance and terms of reference
Throughout 2012, the Audit Committee had the following
three independent directors as its members: Paul Fegan
(Chairman), Rick Allert and Peter Shergold. Paul Fegan has
over 30 years experience in the fi nancial services industry,
Rick Allert is a chartered accountant and all members have
appropriate fi nancial expertise. The chairman of the committee
is not the chairman of the board. Attendance records for the
committee are shown in the directors’ report and a copy of the
committee’s terms of reference is available on AMP’s website.
Responsibilities
The primary function of the Audit Committee is to assist
the board to discharge its corporate governance responsibilities
in regard to the:
–
integrity and appropriateness of the fi nancial statements
and related external fi nancial communications
oversight of the enterprise risk management framework
including compliance and internal controls
performance and independence of the internal audit
function and the external auditor
adequacy of the AMP group’s insurance program, including
directors’ and offi cers’ professional indemnity insurance cover.
–
–
–
The AMP Limited chairman and CEO attend committee meetings
where appropriate. The chairman of the committee reports on
any matters of substance at the next full board meeting and the
minutes of committee meetings are provided to the board. The
committee regularly holds private sessions with internal and
external auditors, without management present.
Further details on the committee’s role in reviewing risk
management and internal control systems are set out in this
statement under ASX Principle 7: Recognise and manage risk.
Internal auditors
The committee is responsible for assessing whether the internal
audit function is independent of management and adequately
resourced, and for reviewing and approving the appointment or
replacement of the head of internal audit, in consultation with
the CEO. AMP has an internal audit charter which is approved
by the committee. As required by the internal audit charter, the
head of internal audit maintains an internal quality assurance
and improvement program. There is also an external quality
assessment of the internal audit function on a periodic basis.
Further details about the role of internal audit are set out in this
statement under ASX Principle 7: Recognise and manage risk.
External auditors
The independence of the external auditor is of particular
importance to shareholders and the board. The board has
adopted a charter of audit independence, which covers the
following key points:
–
–
the rotation of the senior audit partner
the annual confi rmation by the auditor that it has satisfi ed
all professional regulations relating to auditor independence
2015 objectives for the
representation of women in roles
31 December 20121
31 December 20111,2
Roles
AMP Limited Board
Senior executives
Middle management
All employees
1 All fi gures include both full-time and part-time positions.
2 2011 fi gures have been restated based on the new bandings.
30%
35%
43%
n/a
30%
31%
38%
51%
30%
27%
39%
54%
33
2012 corporate governance statement
continued
–
–
reporting on the levels of audit and non-audit fees
the specifi c exclusion of the audit fi rm from work which
may give rise to a confl ict.
AMP requires the external auditor to rotate the lead and
independent review audit partners in accordance with the
Corporations Act 2001, and have suitable succession planning
in place to ensure consistency for AMP. During 2012, on the
committee’s recommendation, the board resolved to approve
an extension in the tenure of AMP’s lead audit partner, to
permit his involvement in the audit for a sixth successive
fi nancial year. Details of the reasons for the committee’s
recommendation are set out in the directors’ report.
The committee receives a quarterly report, detailing the level
of audit and non-audit fi nancial service fees paid to the external
auditor, and each half year, reviews and reports to the board on
the independence of the external auditor. Details of fees paid
or payable for non-audit services during 2012 are set out in the
directors’ report.
The committee is responsible for reviewing the performance
of the external auditor and for recommending to the board
the terms of engagement and fees of external auditors for
AMP and its group companies. A performance evaluation of
Ernst & Young was conducted during 2012 using the results
from a questionnaire which was completed by committee
members and regular meeting attendees.
If it becomes necessary to replace the external auditor for
independence or performance reasons then the committee
will formalise a procedure for the selection and appointment
of the new auditor and make a recommendation to the board.
ASX Principle 5: Make timely and balanced disclosure
Continuous disclosure policy
AMP is committed to ensuring that all shareholders and the
market are provided with timely and balanced disclosure of
all material matters concerning AMP. This commitment to
continuous disclosure is set out in AMP’s market disclosure
policy, which is available on AMP’s website. The guiding
principle of the policy is that AMP must immediately notify
the market via an announcement to the ASX of any information
concerning AMP that a reasonable person would expect to
have a ‘material’ effect on the price or value of AMP securities.
The policy permits exceptions to immediate notifi cation in
accordance with the ASX Listing Rules.
AMP’s Market Disclosure Committee ensures that company
announcements:
– are made in a timely manner
– are factual
–
are expressed in a clear and objective manner that allows
investors to assess the impact of the information when
making investment decisions
– do not omit material information.
AMP provides commentary on its fi nancial results in an
annual shareholder review and produces an investor report
for each full year and half year. AMP makes presentations of
the full and half year results to the investment community
immediately after the public release of those results.
The board will review and update AMP’s market disclosure
policy in 2013, to address expected updated ASX guidance
on continuous disclosure.
ASX Principle 6: Respect the rights of shareholders
Communications policy
AMP is committed to transparency and quality in its
communication to shareholders. The group’s approach to
communicating with shareholders and fi nancial markets
is set out in AMP’s market disclosure policy, which is available
on AMP’s website. Information is communicated to
shareholders through the distribution of the annual report,
shareholder review and other communications as required.
Electronic communication
Annual reports, shareholder reviews, notices of meeting and
all other signifi cant information is posted in the shareholder
centre section of AMP’s website as soon as it is disclosed
to the ASX. Presentations of full and half year results are
webcast and the presentation materials are uploaded to the
website. Shareholders can elect to receive all communications
electronically or elect not to receive some communication
materials by visiting amp.com.au/shareholdercentre or by
contacting AMP’s share registry. Benefi cial owners of shares
and other members of the public are encouraged to register
for free email alerts on AMP’s website.
Annual general meeting
All shareholders are encouraged to attend and/or participate
in AMP’s AGM. The meeting is webcast live or shareholders can
attend in person or send a proxy as their representative. Online
completion and lodgement of the proxy form is also available
for all shareholders prior to the meeting. In 2012, AMP became
one of the fi rst Australian companies to offer shareholders the
option of appointing proxies through their smartphone, using
a specially designed website.
Directors and senior management attend the AGM, along
with a representative from the external auditor. Full details of
the 2013 AGM are included in the 2013 notice of meeting and
are available on the shareholder section of AMP’s website.
Briefi ngs
AMP follows a calendar of regular disclosures to the ASX on
its fi nancial and operational results. The calendar is on the
shareholder section of AMP’s website and allows users to
set up automatic diary reminders of the dates of upcoming
announcements and presentations.
AMP conducts group and one-on-one briefi ngs in accordance
with its market disclosure policy. Briefi ngs are coordinated
and attended by AMP Investor Relations. Where practical,
AMP webcasts group briefi ngs. Notes of briefi ngs and a
record of those present are retained by Investor Relations.
ASX Principle 7: Recognise and manage risk
Enterprise risk management policy
Enterprise risk management framework
The AMP Limited Board has overall responsibility for
establishing a system of risk management, internal controls
and compliance across the business and for monitoring
and reviewing its effectiveness. It also has responsibility
for approving the risk appetite of the AMP group and the
risk management related policies to support that appetite,
and seeking to ensure these are implemented. A summary
of the enterprise risk management policy, which sets out
the principles, processes, roles and responsibilities for the
management of risk at AMP, is available on AMP’s website.
While the board is responsible for risk management, specifi c
responsibility for the monitoring and evaluation of the
effectiveness of risk management and the internal control
environment has been delegated to the Audit Committee.
The Audit Committee also oversees AMP’s accounting policies,
reporting practices and production of fi nancial statements and
monitors the application of appropriate management controls.
It considers internal and external audit reports and reviews
AMP’s procedures and internal controls in order to monitor
enterprise-wide risks. Risk and compliance processes and
reporting procedures provide assurance to the board and Audit
Committee that the preparation of the fi nancial statements
and the control systems underlying them are adequate.
Compliance is a key element of risk management. The
board has overall responsibility for the establishment of
processes to manage compliance with the laws, regulations,
contracts, industry codes, internal standards and policies
applicable to AMP’s operations and for monitoring and
reviewing their effectiveness.
34
AMP 2012 annual report
While the board is responsible for AMP’s compliance
framework, specifi c responsibility for the monitoring of
compliance has been delegated to the Audit Committee. The
Audit Committee oversees the system of compliance that has
been implemented across AMP’s businesses. The system covers
a broad range of legal requirements, duties and responsibilities.
Any compliance issues or incidents are reported quarterly to the
Audit Committee, or more urgently if required.
As required by the Corporations Act 2001, AMP’s Australian
fi nancial services’ licensed entities have adopted individually-
tailored confl ict of interest policies.
Material business risks
Management engages in a regular process to review risks
and how they are being managed. AMP manages risks across
the following four main risk categories:
– strategic risk
– operational risk (including compliance risk)
– fi nancial risk
– product and insurance risk.
Management of material business risks
Risk management structures
The Audit Committee is supported by the risk management
structures which exist throughout the organisation, including
the Group Asset and Liability Committee, the Group Risk and
Compliance Committee and business unit risk committees. The
Audit Committee relies on the work of the Audit Committees
of key operating subsidiaries on risk and compliance matters
relating to those subsidiaries. The enterprise risk management
framework enables the business to identify and assess risks and
controls, respond promptly and appropriately and continue to
monitor risks and issues as they evolve. Risk and compliance
information is reported quarterly to the Audit Committee,
or more regularly if required.
AMP’s risk management structures and procedures are
continually being enhanced or updated. In addition, the
internal audit function provides independent and objective
assurance to the board that risks are being managed
effectively across the group.
Management has reported to the board that AMP’s material
business risks have been managed effectively for the year
ended 31 December 2012. The board has assessed and
accepted that report.
The enhancement of the risk management and internal
control systems is the subject of ongoing attention and
effort. Where internal control defi ciencies are identifi ed during
the year, additional tests of procedures or tests of resulting
account balances included in the fi nancial statements are
undertaken to confi rm there has been no material impact
on the fi nancial statements.
Internal audit
AMP’s internal audit function provides the board and executive
management with an independent and objective evaluation of
the adequacy and effectiveness of management’s control over
risk. The internal audit function conducts audits for AMP Limited
and its subsidiaries by following a risk-based planning approach.
The head of internal audit has a functional reporting line to the
chairman of the Audit Committee. Further information about
the internal audit function is set out in this statement under
ASX Principle 4: Safeguard integrity in fi nancial reporting.
CEO and CFO assurance
The board receives regular reports about the fi nancial condition
and operational results of AMP and its controlled entities. The
board has received and considered the annual certifi cation from
the CEO and the CFO in accordance with ASX Recommendation
7.3. The certifi cation states that the declaration provided in
accordance with section 295A of the Corporations Act 2001 is
founded on a sound system of risk management and internal
control and that the system is operating effectively in all
material respects in relation to fi nancial reporting risks.
ASX Principle 8: Remunerate fairly and responsibly
People and Remuneration Committee
Membership, attendance and terms of reference
Throughout 2012, the People and Remuneration Committee
had the following four independent directors as its members:
John Palmer (Chairman), Patty Akopiantz, Brian Clark and
Peter Mason. Attendance records for the committee are shown
in the directors’ report and a copy of the committee’s terms of
reference is available on AMP’s website.
Responsibilities
The committee advises the board on the effectiveness,
integrity and legal compliance of AMP’s remuneration policy,
plans and practices. Each year the committee also reviews and
reports on remuneration by gender. Other key responsibilities
include annually reviewing and recommending to the board
the succession planning and talent management approach.
The committee also reviews the AMP group short-term incentive
pools, the total remuneration package, performance objectives
and performance appraisal for the CEO, direct reports of the
CEO and other persons whose individual activities may, in the
committee’s opinion, affect the fi nancial soundness of the
AMP group and its key operating subsidiaries. During 2012,
performance evaluations for key executives were carried out
in accordance with the process disclosed in the 2012
remuneration report. The committee has access to advice on
remuneration policies from management, but no individual
is directly involved in deciding their own remuneration. The
committee also engages external consultants as and when
required to assist it in fulfi lling its responsibilities.
Remuneration policy
Comprehensive information on AMP’s remuneration policies
and practices is contained in the remuneration report.
AMP uses a variety of equity-based remuneration
arrangements to align employee interests with shareholders’
long-term interests and aid in the retention of selected
individuals. AMP’s policy on hedging of equity incentives
prohibits employees from using any hedging arrangements over
the restricted shares, share rights, share bonus rights, options
or performance rights held by employees in any of AMP’s equity
incentive plans. The purpose of the policy is to ensure that the
alignment between employee and shareholder interests is not
undermined by the use of hedging arrangements.
Non-executive directors’ and executives’ remuneration
There is a clear distinction between the remuneration
structure for non-executive directors and executives.
Further information is available in the remuneration report.
The Nomination Committee is responsible for reviewing
the remuneration policies for non-executive directors on the
AMP Limited Board and on boards of key operating subsidiaries.
The non-executive directors do not receive options, bonus
payments or retirement benefi ts, other than superannuation.
Details of the termination entitlements of AMP’s key
management personnel are set out in the remuneration
report. AMP also disclosed details of Craig Dunn’s termination
entitlements to the ASX on announcing his appointment
as Chief Executive Offi cer, in September 2007.
Comparison of NZX and ASX corporate governance rules
As an overseas listed issuer, AMP is deemed to satisfy and
comply with all the New Zealand Stock Exchange (NZX) Listing
Rules so long as it remains listed on the ASX. The only NZX
requirements applicable to AMP are to give the NZX the same
information and notices it is required to give to the ASX and
to include a statement (referred to below) in its annual report.
The ASX Listing Rules and the ASX Recommendations may
materially differ from NZX’s corporate governance rules and the
principles of the NZX Corporate Governance Best Practice Code.
Further information about the ASX Corporate Governance
Principles and Recommendations (ASX Recommendations)
may be obtained from the ASX website: asx.com.au/
professionals/listed-companies-information.htm
35
2012 corporate governance statement
continued
Corporate responsibility at AMP
Founded in 1849, AMP has played a substantial role in shaping
modern Australia and New Zealand by helping millions of
customers build fi nancial security, providing protection for
families and fi nancing property and infrastructure.
AMP contributes to the long-term sustainability of its business
and the communities that it serves by using its expertise to:
–
help customers build superannuation and investments
– minimise AMP’s environmental impact
– encourage good corporate governance
–
invest in the communities where it operates.
Helping customers build superannuation and investments
for tomorrow
AMP provides customers with the fi nancial advice, products
and services they need to build and protect superannuation
and investments for the future.
AMP also helps to educate the community on the importance
of good fi nancial management through online tools, research
into fi nancial issues facing the community and participation
in public conversations. AMP shares its experience and insights
with the government and local community to encourage the
provision of incentives for long-term superannuation and
investments within effi cient and competitive fi nancial
services markets and an informed community.
Minimising AMP’s environmental impact
AMP is committed to fi nding ways to enable the company’s
resource effi ciency and reduce its environmental impact.
The AMP environment policy guides improvements in direct
environmental impacts including the use of energy, water,
paper and other materials. It also outlines environmental
considerations in purchasing decisions and product design.
A copy of the policy is available on AMP’s website.
Environmental programs and initiatives are coordinated by
the Environment Leadership team which is chaired by the
managing director of AMP Capital. The team has established
targets and strategies for reducing carbon emissions and
improving waste management practices.
The AMP Green Tomorrow initiative and a network of green
champions help raise environmental awareness within the
business and engage employees in adopting approaches that
contribute toward improving environmental performance.
Over the past three years, AMP has introduced programs to
increase waste recycling and reduce offi ce-based energy use.
These include:
− waste management strategies for major tenancies
− upgrading building control management systems
− an automatic PC shutdown system
− maximising server effi ciency to minimise energy usage
installing low energy lighting and roof top signage
−
using automatic sensor-controlled lighting in
−
meeting rooms
providing additional video conferencing facilities to
reduce air travel.
−
A carbon offset program helps to further reduce greenhouse
gas emissions. This includes the purchase of greenhouse gas
emission reductions from a portfolio of projects that meet
international verifi cation standards.
In 2012, AMP sought to reduce or offset carbon emissions
from its tenanted sites and business air travel by 50 per cent.
With an estimated annual carbon footprint of approximately
38,000 tonnes, AMP purchased over 39,000 tonnes of carbon
offsets. AMP reports annually to the Australian Government
Department of Resources, Energy and Tourism and the
Department of Climate Change and Energy Effi ciency on
compliance with the Energy Effi ciency Opportunities Act 2006
and the National Greenhouse and Energy Reporting Act 2007.
AMP reports on environmental performance at an AMP Limited
level, with AMP Capital making up a core component of the
reporting through its property and infrastructure divisions.
During 2012, AMP Capital remained an active member of
the Investor Group on Climate Change and a signatory to
the Carbon Disclosure Project.
AMP’s 2012 report on energy effi ciency opportunities
and further information on AMP’s environmental activities
and Carbon Disclosure Project submission are available
on AMP’s website.
Encouraging good corporate governance
AMP Capital is one of the longest standing managers of
responsible investment funds in Australia. As an investor
in companies and assets on behalf of clients, AMP Capital
recognises the strong link between an organisation’s
environmental and social impacts, the quality of its
corporate governance, and its long-term business success.
As a signatory to the Principles for Responsible Investment since
2007, AMP Capital is committed to integrating environmental,
social and corporate governance factors into its investment
decision-making and active ownership practices, across all
asset classes.
This is achieved through integrating investment guidelines
and policies, investment research and analysis and engaging
with investee boards and management teams on their
corporate governance practices, environmental performance
and relationship with society as a whole. AMP Capital also
engages with boards and management teams on issues
such as executive remuneration, board composition and
risk management, and lodges considered proxy votes on
all resolutions.
Further information on AMP Capital’s environmental,
social, governance and responsible investment philosophy
and activities is available at ampcapital.com.au/esg
Investing in the community
AMP has a tradition of supporting the community.
In 1992, AMP set up the AMP Foundation taking a strategic
approach to philanthropy by forming long-term community
partnerships. Since then, the AMP Foundation has donated
more than $66 million to the community. In 2012, the
AMP Foundation donated more than $6 million to charities
by funding education and employment programs for
disadvantaged young people (focusing on indigenous
students), supporting the non-profi t sector to operate
more effectively and facilitating the volunteering and
fundraising efforts of AMP employees. In 2012, AMP
employees raised more than $700,000 for charity and also
volunteered their time and skills with numerous charities.
Further information on the AMP Foundation’s activities
can be found at amp.com.au/ampfoundation
AMP fi nancial planners provide free fi nancial planning
advice to cancer patients and their families through an
AMP Foundation-funded program with the Cancer Council.
36
AMP 2012 annual report
Financial report
for the year ended 31 December 2012
Inventories and other assets
Income
Investment gains and (losses)
Table of contents
Income statement
Statement of comprehensive income
Statement of fi nancial position
Statement of changes in equity
Statement of cash fl ows
Notes to the fi nancial statements
1. Basis of preparation and summary of signifi cant accounting policies
2. Signifi cant accounting judgements, estimates and assumptions
3. Segment information
4.
5.
6. Expenses
7.
Income tax
8. Receivables
9.
10. Investments in fi nancial assets and other fi nancial liabilities
11. Investment property
12. Property, plant and equipment
13. Intangibles
14. Payables
15. Provisions
16. Borrowings
17. Subordinated debt
18. Dividends
19. Contributed equity
20. Life insurance contracts
21. Other life insurance and investment contract disclosures
22. Risk management and fi nancial instruments information
23. Capital management
24. Notes to statement of cash fl ows
25. Earnings per share
26. Superannuation funds
27. Share-based payments
28. Group controlled entity holdings
29. Associates
30. Operating lease commitments
31. Contingent liabilities
32. Related-party disclosures
33. Auditors’ remuneration
34. Events occurring after reporting date
Directors’ declaration
Independent auditor’s report to the members of AMP Limited
38
39
40
41
43
44
44
54
56
59
59
60
61
62
63
63
64
65
66
68
68
69
69
70
71
72
80
84
97
99
101
101
105
110
119
121
121
122
125
125
126
127
37
Income statement
for the year ended 31 December 2012
Income and expenses of shareholders, policyholders,
external unitholders and non-controlling interests1
Life insurance premium and related revenue
Fee revenue
Other revenue
Investment gains and (losses)
Life insurance claims and related expenses
Operating expenses
Finance costs
Share of profi t or (loss) of associates accounted for using
the equity method
Movement in external unitholder liabilities
Change in policyholder liabilities
life insurance contracts
–
–
investment contracts
Income tax (expense) credit
Profi t for the year
Profi t attributable to shareholders of AMP Limited
Profi t (loss) attributable to non-controlling interests
Profi t for the year
Consolidated
Parent
Note
2012
$m
2011
$m
2012
$m
2011
$m
4
4
4
5
6
6
6
29
20
7
2,218
2,268
312
12,084
(2,048)
(3,824)
(817)
5
(880)
(934)
(7,000)
(697)
687
704
(17)
687
1,877
1,962
380
1,464
(1,790)
(3,425)
(917)
4
225
25
868
3
676
688
(12)
676
–
12
–
297
–
(13)
–
–
–
–
–
5
301
301
–
301
–
16
–
283
–
(16)
–
–
–
–
–
69
352
352
–
352
1
Income and expenses include amounts attributable to shareholders’ interests, policyholders’ interests in the AMP life insurance entities’
statutory funds, external unitholders’ interests and non-controlling interests. Amounts included in respect of the AMP life insurance entities’
statutory funds have a substantial impact on most of the consolidated Income statement lines, especially Investment gains and losses and
Income tax (expense) credit. In general, policyholders’ interests in the transactions for the period are attributed to them in the lines Change in
policyholder liabilities.
Earnings per share for profi t attributable to
ordinary shareholders of AMP Limited
Basic
Diluted
Consolidated
2012
cents
2011
cents
24.7
24.6
26.3
26.2
38
AMP 2012 fi nancial report
Statement of comprehensive income
for the year ended 31 December 2012
Profi t
Other comprehensive income recognised in retained earnings
Defi ned benefi t plans1
–
–
actuarial gains and (losses)
income tax (expense) credit
Other comprehensive income recognised in reserves
Cash fl ow hedges2
– gains and (losses) in fair value of cash fl ow hedges
–
–
–
income tax (expense) credit
transferred to profi t for the year
transferred to profi t for the year – income tax (expense) credit
Owner-occupied property revaluation
– gains (losses) in valuation of owner-occupied property
–
income tax (expense) credit
Exchange difference on translation of foreign operations
– exchange gains (losses)
–
–
–
income tax (expense) credit
transferred to profi t for the year
transferred to profi t for the year – income tax (expense) credit
Revaluation of hedge of net investments
– gains and (losses) in fair value of hedge of net investments
–
–
–
income tax (expense) credit
transferred to profi t for the year – gross
transferred to profi t for the year – income tax (expense) credit
Consolidated
Parent
2012
$m
2011
$m
2012
$m
687
676
301
2011
$m
352
53
(16)
37
(44)
13
20
(6)
(17)
12
(1)
11
30
–
3
(1)
32
(1)
–
(3)
1
(3)
(177)
53
(124)
(34)
11
16
(5)
(12)
9
(1)
8
3
–
2
–
5
3
–
–
–
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total comprehensive income for the year
747
556
301
352
Total comprehensive income attributable to shareholders of AMP Limited
Total comprehensive income (loss) attributable to non-controlling interests
Total comprehensive income for the year
764
(17)
747
568
(12)
556
301
–
301
352
–
352
1
2
Actuarial gains and (losses) are determined in accordance with AASB 119 Employee Benefi ts. This is not the same as the calculation methods used
to determine the funding requirements for the plans.
Cash fl ow hedge movements are predominantly in respect of interest rate swaps used to manage AMP Bank’s interest rate risk on its mortgage portfolio.
39
Statement of financial position
as at 31 December 2012
Consolidated
Parent
Note
2012
$m
2011
$m
2012
$m
2011
$m
Assets
Cash and cash equivalents
Receivables
Current tax assets
Inventories and other assets
Investments in fi nancial assets measured
at fair value through profi t or loss
Investments in fi nancial assets measured at amortised cost
Investment properties
Investments in associates accounted for using the equity method
Property, plant and equipment
Deferred tax assets
Intangibles
Investments in controlled entities
Assets of disposal groups
Total assets of shareholders of AMP Limited, policyholders,
external unitholders and non-controlling interests
Liabilities
Payables
Current tax liabilities
Provisions
Other fi nancial liabilities
Borrowings
Subordinated debt
Deferred tax liabilities
External unitholder liabilities
Life insurance contract liabilities
Investment contract liabilities
Defi ned benefi t plan liabilities
Liabilities of disposal groups
8
9
10
10
11
29
12
7
13
28
14
15
10
16
17
7
20
21
26
28
4,207
2,043
22
201
85,373
14,301
6,508
81
468
1,185
4,175
–
187
4,652
2,221
248
276
76,528
12,905
7,424
115
479
1,095
4,347
–
–
1
59
–
–
–
620
–
–
–
65
–
10,807
–
1
3
–
–
–
767
–
–
–
333
–
10,807
–
118,751
110,290
11,552
11,911
1,868
82
578
2,317
11,382
1,111
1,392
8,690
25,055
58,385
286
74
1,932
86
556
2,604
11,410
949
923
7,224
24,399
52,940
370
–
35
27
3
–
–
–
–
–
–
–
–
–
65
98
180
3
–
–
–
–
–
–
–
–
–
281
Total liabilities of shareholders of AMP Limited, policyholders,
external unitholders and non-controlling interests
111,220
103,393
Net assets of shareholders of AMP Limited and non-controlling interests
7,531
6,897
11,487
11,630
Equity1
Contributed equity
Reserves
Retained earnings
Total equity of shareholders of AMP Limited
Non-controlling interests
19
9,339
(2,156)
251
7,434
97
9,080
(2,534)
283
6,829
68
9,610
15
1,862
9,297
10
2,323
11,487
–
11,630
–
Total equity of shareholders of AMP Limited and non-controlling interests
7,531
6,897
11,487
11,630
1 Further information on Equity is provided in the Statement of changes in equity on the following page.
40
AMP 2012 fi nancial report
Statement of changes in equity
for the year ended 31 December 2012
Equity attributable to shareholders of AMP Limited
Contributed
equity
$m
Equity
contribution
reserve1
$m
Share-
based
payment
reserve2
$m
Cash fl ow
hedge
reserve3
$m
Owner-
occupied
property
revaluation
reserve4
$m
Foreign
currency
translation
reserve5
$m
Hedge
of net
investment
reserve6
$m
Capital
profi ts
reserve7
$m
Demerger
loss
reserve8
$m
Retained
earnings
$m
Total
shareholder
equity
$m
Non-
controlling
interest
$m
Total
equity
$m
9,080 1,019
–
–
35
–
(17)
–
74
–
(64)
–
4
–
– (3,585) 283 6,829
704
–
704
–
68 6,897
687
(17)
–
–
–
(17)
11
32
(3)
–
–
37
60
–
60
–
(17)
11
32
(3)
–
–
–
(54)
–
–
313
–
–
–
–
–
–
–
–
–
27
(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
329
–
741
764
(17)
747
–
–
–
–
–
–
27
(1)
–
–
27
(1)
(23)
(762)
(77)
(762)
–
(5)
(77)
(767)
–
12
12
–
12
–
–
–
313
–
313
–
329
51
380
9,339 1,019
61
(34)
85
(32)
1
329 (3,585) 251 7,434
97 7,531
Consolidated
2012
Balance at the
beginning of the year
Profi t (loss)
Other comprehensive
income
Total comprehensive
income
Share-based
payment expense
Share purchases
Net sale/(purchase)
of ‘treasury shares’
Dividends paid9
Dividends paid on
‘treasury shares’9
New capital from
shares issued10
Sales and acquisitions of
non-controlling interest7
Balance at the
end of the year
2011
Balance at the
beginning of the year
Profi t (loss)
Other comprehensive
income
5,051 1,019
–
–
8
–
(5)
–
66
–
(69)
–
–
–
–
(12)
8
5
Total comprehensive
income
Share-based payment
expense
Share purchases
Net sale/(purchase)
of ‘treasury shares’
Dividends paid9
Dividends paid on
‘treasury shares’9
New capital from
shares issued10
Sales and acquisitions
of non-controlling interest
–
–
–
(59)
–
–
4,088
–
–
–
–
–
–
–
–
–
–
(12)
28
(1)
–
–
–
–
–
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
1
–
3
3
–
–
–
–
–
–
–
– (3,585) 452 2,938
688
–
688
–
60 2,998
676
(12)
–
–
(124)
(120)
–
(120)
–
–
–
–
–
–
–
–
–
564
568
(12)
556
–
–
–
–
–
–
28
(1)
(8)
(736)
(67)
(736)
–
11
11
–
–
–
–
–
28
(1)
(67)
(736)
11
–
–
– 4,088
– 4,088
–
–
20
20
Balance at the
end of the year
9,080 1,019
35
(17)
74
(64)
4
– (3,585) 283 6,829
68 6,897
Footnotes 1 to 10 are listed over the page.
41
Statement of changes in equity
for the year ended 31 December 2012 continued
AMP Limited parent
2012
Balance at the beginning of the year
Profi t
Other comprehensive income
Total comprehensive income
Share-based payment expense
Share purchases
Loss on sale of ‘treasury shares’ recognised directly in retained earnings
Dividends paid9
New capital from shares issued10
Contributed
equity
$m
Share-
based
payment
reserve2
$m
Retained
earnings
$m
Total
shareholder
equity
$m
9,297
–
–
–
–
–
–
–
313
10
–
–
–
5
–
–
–
–
2,323
301
–
301
–
–
–
(762)
–
11,630
301
–
301
5
–
–
(762)
313
Balance at the end of the year
9,610
15
1,862
11,487
2011
Balance at the beginning of the year
Profi t
Other comprehensive income
Total comprehensive income
Share-based payment expense
Dividends paid9
New capital from shares issued10
Balance at the end of the year
5,209
–
–
–
–
–
4,088
9,297
6
–
–
–
4
–
–
2,707
352
–
352
–
(736)
–
7,922
352
–
352
4
(736)
4,088
10
2,323
11,630
1
2
3
4
5
6
7
8
9
There has been no movement in the Equity contribution reserve established in 2003 to recognise the additional loss on the demerger of AMP’s
UK operations in December 2003. This loss was the difference between the pro-forma loss on demerger (based upon directors’ valuation of
the UK operations and the estimated net assets to be demerged) and the market-based fair value of the UK operations (based upon the share
price of the restructured UK operations on listing and the actual net assets of the UK operations on demerger).
The Share-based payment reserve represents the cumulative expense recognised in relation to equity settled share-based payments less the
cost of shares purchased and transferred to share-based payments recipients upon vesting.
The Cash fl ow hedge reserve represents the cumulative impact of changes in the fair value of derivatives designated as cash fl ow hedges
which are effective for hedge accounting. Hedge gains and losses are transferred to the Income statement when they are deemed ineffective
or upon realisation of the cash fl ow.
The Owner-occupied property revaluation reserve represents cumulative valuation gains and losses on owner-occupied property required to
be recognised in equity.
Exchange differences arising on translation of foreign controlled entities within the AMP group are recognised in Foreign currency translation
reserve. Exchange gains and losses are transferred to the Income statement upon realisation of the investment in the foreign controlled entity.
The Hedge of net investment reserve refl ects gains and losses on effective hedges of net investments in foreign operations. Hedge gains
and losses are transferred to the Income statement when they are deemed ineffective or upon realisation of the investment in the foreign
controlled entity.
The capital profi ts reserve represents gains attributable to shareholders of AMP on the sale of minority interests in controlled entities to
entities outside the AMP group.
There has been no movement in the Demerger loss reserve established in 2003 to recognise the transfer from shareholders’ retained earnings
of the total loss on the demerger of AMP’s UK operations in December 2003.
Dividends paid includes the dividends paid on ‘treasury shares’. Dividends paid on ‘treasury shares’ are required to be excluded from the
consolidated fi nancial statements by adjusting retained earnings.
10 New capital from shares issued includes shares issued under dividend reinvestment plan $313m (2011: $286m) and in 2011, shares issued to
minority shareholders of AMP AAPH Limited (formerly AXA Asia Pacifi c Holdings Limited) on the acquisition of the company $3,802m.
42
AMP 2012 fi nancial report
Statement of cash flows
for the year ended 31 December 2012
Consolidated
Parent
2012
$m
2011
$m
2012
$m
Cash fl ows from operating activities1
Cash receipts in the course of operations
Interest and other items of a similar nature received
Dividends and distributions received2
Cash payments in the course of operations
Finance costs
Income tax refunded/(paid)
Cash fl ows from operating activities
investment property
investments in fi nancial assets1,3
Cash fl ows from investing activities1
Net proceeds from sale of/(payments to acquire):
–
–
– operating and intangible assets
Acquisition of AMP AAPH Limited4
Payments to acquire other subsidiaries and other businesses5
Loan to controlled entities
Payments to option holders in AMP AAPH Limited
18,135
2,391
996
(19,689)
(749)
(151)
16,295
2,595
329
(17,225)
(850)
(333)
933
811
989
(2,054)
(175)
–
(14)
–
–
(64)
(1,847)
–
1,673
–
–
–
Cash fl ows from (used in) investing activities
(1,254)
(238)
Cash fl ows from fi nancing activities1
Proceeds from borrowings – non-banking operations
Net movement in deposits from customers
Repayment of borrowings – non-banking operations
Net movement in borrowings – banking operations
Proceeds from issue of subordinated debt
Proceeds from the sale of 15% of AMP Capital Holdings Limited
Dividends paid6
Cash fl ows from (used in) fi nancing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate changes on cash and cash equivalents
500
416
(984)
(30)
150
425
(437)
40
(281)
9,436
16
931
1,189
(1,221)
(370)
600
–
(440)
689
1,262
8,168
6
Cash and cash equivalents at the end of the period1
9,171
9,436
9
2
295
–
–
(4)
302
–
–
–
–
–
147
–
147
–
–
–
–
–
–
(449)
(449)
–
1
–
1
2011
$m
17
3
280
–
–
13
313
–
–
–
–
–
205
(69)
136
–
–
–
–
–
–
(450)
(450)
(1)
2
–
1
1
2
3
4
5
6
Cash fl ows and cash and cash equivalents include amounts attributable to shareholders’ interests, policyholders’ interests in AMP life insurance
entities’ statutory funds and controlled entities of those statutory funds, external unitholders’ interests and non-controlling interests. Amounts
included in respect of AMP life insurance entities’ statutory funds and controlled entities of those statutory funds have a substantial impact on
cash fl ows from operating activities and investing activities and proceeds from and repayments of borrowing – non-banking operations, and
cash and cash equivalents balances.
Dividends and distributions received are amounts of cash received mainly from investments held by AMP life insurance entities’ statutory
funds and controlled entities of those statutory funds. Dividends and distributions reinvested have been treated as non-cash items.
Net proceeds from sale of/(payment to acquire) investments in fi nancial assets includes loans and advances made (net of payments) and
purchases of fi nancial assets (net of maturities) during the period by AMP Bank.
The net cash fl ows in 2011 from the acquisition of AMP AAPH Limited comprise $2,164m cash and cash equivalents held by AMP AAPH group
at acquisition date less cash consideration paid of $491m. The cash consideration paid consists of $455m for AMP’s share of the cash paid to
minority shareholders, $69m paid to options holders less $33m adjustment payments received from AXA SA prior to reporting date. A further
$1,970m of cash consideration paid to minority shareholders was funded by AXA SA.
Payments to acquire other subsidiaries and other businesses (net of cash acquired) did not have a material impact on the composition of the
AMP group.
The dividends paid amount is presented net of dividend reinvestment plan and dividends on ‘treasury shares’. See Statement of changes in
equity for further information.
43
Notes to the financial statements
for the year ended 31 December 2012
1. Basis of preparation and summary of signifi cant accounting policies
The consolidated economic entity (the AMP group) comprises
AMP Limited (the parent entity), a company limited by shares,
and incorporated and domiciled in Australia, and all entities
that it controlled during the period and at the reporting date.
–
(a) Basis of preparation
This general purpose fi nancial report has been prepared in
accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting
Standards Board (AASB), and the Corporations Act 2001.
AMP group is a for-profi t entity for the purposes of preparing
fi nancial statements. The fi nancial report also complies with
International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The signifi cant accounting policies adopted in the preparation
of the fi nancial report are set out below. These policies have
been consistently applied to the current year and comparative
period, unless otherwise stated. Where necessary, comparative
information has been reclassifi ed to be consistent with current
period disclosure.
The AMP group is predominantly a wealth-management
business conducting operations through registered life
insurance companies (AMP life insurance entities) and other
entities. Where permitted under accounting standards, the
assets and liabilities associated with life insurance contracts
and investment contracts are generally measured on a fair
value basis and other assets and liabilities are generally
measured on a historical cost basis.
Assets and liabilities have been presented on the face of the
Statement of fi nancial position in decreasing order of liquidity
and do not distinguish between current and non-current items.
The majority of the assets of the AMP group are investment
assets held to back investment contract and life insurance
contract liabilities. Although the amount of those assets which
may be realised and those liabilities which may be settled
within 12 months of the reporting date are not always known,
estimates of amounts expected to be recovered or settled
(a) no more than 12 months after the reporting date, and
(b) more than 12 months after the reporting date, have been
provided in footnotes to the relevant notes.
Changes in accounting policy
Since 1 January 2012, the AMP group has adopted all
Australian Accounting Standards which have become
mandatory for adoption including:
–
AASB 2010-8 Income Taxes (amendment) –
Deferred Tax: Recovery of Underlying Assets
AASB 2010-6 Amendment to Australian Accounting
Standards – Disclosures on Transfers of Financial Assets
AASB 1054 Australian Additional Disclosures.
–
–
Adoption of these standards has not had any material effect
on the fi nancial position or performance of the AMP group.
Australian Accounting Standards issued but not yet effective
A number of new accounting standards and amendments
have been issued but are not yet effective. The AMP group
has not elected to early adopt any of these new standards
or amendments in this fi nancial report. These new standards
and amendments, when applied in future periods, are not
expected to have a material impact on the fi nancial position
or performance of the AMP group, other than as set out below:
44
AMP 2012 fi nancial report
AASB 10 Consolidated Financial Statements, AASB 11
Joint Arrangements, AASB 12 Disclosure of Interests in
Other Entities, revised AASB 127 Separate Financial
Statements, revised AASB 128 Investments in Associates and
Joint Ventures and AASB 2011-7 Amendments to Australian
Accounting Standards arising from the Consolidation and
Joint Arrangements Standards. These standards change the
criteria for determining which entities are to be consolidated
and which entities are to be accounted for using the equity
method in preparing consolidated accounts and the required
disclosures in relation to such entities. Each of these
standards is mandatory for adoption by the AMP group
in the year ending 31 December 2013.
There is ongoing industry discussion as to the interpretation
and application of the requirements of AASB 10, including
consideration by the AASB of the section of AASB 1038
Life insurance contracts which may impact the application
of AASB 10 to life insurers. Finalisation of these matters may
result in changes to the impact described below. Until these
matters are fi nalised and a full consolidation is performed, it
is not possible to determine precisely the effects of adopting
AASB 10 on the AMP group.
The AMP group has reviewed all entities within the
AMP group which are less than 100 per cent owned. This
review was completed, based on current expectations of
the interpretation and application of AASB 10, and has
determined that the following additional entities would
be controlled by the AMP group on adoption of AASB 10:
AMP Capital Strategic Infrastructure Trust of Europe
–
No 1, No 2, No 3 and No 4
Aged Care Trust No 1 & No 2
AMP Capital Infrastructure Equity Fund
AMP Capital China Growth Fund
AMP Foundation Trust
AMP Foundation Income Benefi ciary Pty Ltd.
–
–
–
–
–
Had the AMP Foundation Trust and AMP Foundation
Income Benefi ciary Pty Ltd (AMP Foundation entities)
been consolidated from 1 January 2012 the impact on the
income statement for 2012 would have been an increase of
$5m to profi t and a corresponding $5m increase to profi t
attributable to non-controlling interests. There would have
been no impact to profi t attributable to the shareholders
of AMP Limited.
Each of the other entities listed above are currently
accounted for as associates measured at fair value through
profi t or loss. Quantitative data for these entities is set out
in note 29(b).
These entities will be consolidated into the results of
the AMP group from 1 January 2013 with retrospective
adjustments for 2012. Accordingly, the AMP group will
no longer recognise these entities at fair value and it will
now recognise 100 per cent of these entities’ revenues,
expenses, assets, liabilities and cash fl ows. Also, a liability
to external unitholders and a non-controlling interest will
be recognised.
Other than for the AMP Foundation entities, investments
in these entities are held on behalf of policyholders and the
AMP life entities’ statutory funds recognise a liability to the
policyholders. In certain cases, the amount of the net assets
1. Basis of preparation and summary of signifi cant accounting policies continued
–
–
–
–
–
–
of the controlled entities recognised in the consolidated
fi nancial statements may not match the valuation of
the relevant liability to the policyholder which results
in certain policyholder asset movements impacting the
profi t attributable to shareholders of AMP Limited.
AASB 13 Fair Value Measurement. This standard centralises
the defi nition and guidance for calculating fair values
where required to be applied by various other accounting
standards and removes some minor inconsistencies that
previously existed between the guidance for determining
fair value in these standards. The new standard requires
quantitative and qualitative disclosures of all fair value
measurements. AASB 13 is mandatory for adoption by
the AMP group in the year ending 31 December 2013.
The fi nancial impact on the AMP group of adopting
AASB 13 is not expected to be material.
Revised AASB 119 Employee Benefi ts. Under the current
AASB 119, an amount is recognised in profi t or loss for the
expected earnings on the assets of defi ned benefi t funds,
with any difference between the expected return and the
actual return taken directly to equity. Under the revised
AASB 119, the amount recognised in profi t or loss will be
determined using a risk-free rate rather than expected
earnings. The revised AASB 119 is mandatory for adoption
by the AMP group in the year ending 31 December 2013.
The fi nancial impact on the AMP group of adopting the
revised AASB 119 is not expected to be material.
Revised AASB 101 Presentation of Financial Statements.
The revised AASB 101 requires items in the Statement of
comprehensive income to be segregated between those
that will be eventually realised in the Income statement
in future periods and those that will not. The revised AASB
101 is mandatory for adoption by the AMP group in the year
ending 31 December 2013. The changes to AASB 101 relate
to presentation only and are not expected to have a fi nancial
impact on the AMP group.
AASB 2012-2 Amendments to Australian Accounting
Standards – Disclosures – Offsetting Financial Assets and
Financial Liabilities. This standard amends the required
disclosures in AASB 7 Financial Instruments: Disclosures
to include information that will enable users of an entity’s
fi nancial statements to evaluate the effect or potential
effect of netting arrangements, including rights of set-off
associated with the entity’s recognised fi nancial assets
and recognised fi nancial liabilities, on the entity’s fi nancial
position. These amendments are mandatory for adoption
by the AMP group in the year ending 31 December 2013.
These changes are not expected to have a fi nancial
impact on the AMP group.
AASB 2012-3 Amendments to Australian Accounting
Standards – Offsetting Financial Assets and Financial
Liabilities. These amendments clarify the meaning of
‘currently has a legally enforceable right to set off’.
The amendments also clarify the application of AASB
132 Financial Instruments: Presentation offsetting criteria
to settlement systems which apply to gross settlement
mechanisms that are not simultaneous. These amendments
are mandatory for adoption by the AMP group in the year
ending 31 December 2014. These changes are not
expected to have a fi nancial impact on the AMP group.
AASB 9 Financial Instruments. This standard makes
signifi cant changes to the way fi nancial assets are classifi ed
for the purpose of determining their measurement basis
and also to the amounts relating to fair value changes which
are to be taken directly to equity. In subsequent phases,
the AASB will address hedge accounting and impairment
of fi nancial assets. AASB 9 is mandatory for adoption by
the AMP group in the year ending 31 December 2015.
The fi nancial impact to the AMP group of adopting
AASB 9 has not yet been quantifi ed.
Change in estimates
AASB 119 Employee Benefi ts requires employee benefi t
provisions and defi ned benefi t plan liabilities to be determined
by discounting future cash fl ows using discount rates
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, using market
yields at the end of the period on government bonds.
In re-estimating Australian employee benefi t provisions and
defi ned benefi t plan liabilities for fi nancial reporting purposes
at 31 December 2012, AMP group has changed from using
market yields on Commonwealth government bonds to a
blend of market yields on Commonwealth government and
state government bonds. This has resulted in a decrease in the
Australian defi ned benefi t plan liabilities of $34m after tax
effect. The impact of changes in discount rates on employee
benefi t provisions was not material.
Change in presentation of the Statement of cash fl ows
The Statement of cash fl ows has been enhanced to treat
reinvested distributions from controlled managed investment
schemes as non-cash transactions and exclude them from
the Statement of cash fl ows, and to consistently apply the
defi nition of cash and cash equivalents across the managed
investment schemes controlled by the AMP life insurance
entities. Previously reinvested distributions from controlled
managed investment schemes had been included in the
Statement of cash fl ows on a gross basis as Dividends and
distributions received and Payments to acquire investments
in fi nancial assets and the defi nition of cash and cash
equivalents was not consistently applied for certain
controlled managed investment schemes controlled by
the AMP life insurance entities.
These changes have resulted in a decrease in Dividends and
distributions received and Cash fl ows from operating activities
of $1,702m (2011: $2,743m), a decrease in Net payments
to acquire investments in fi nancial assets and Cash fl ows
used in investing activities of $3,422m (2011: $3,443m), a
decrease in the net decrease in Cash and cash equivalents of
$1,700m (2011: an increase in the Net increase in cash and
cash equivalents of $700m) and an increase in Cash and cash
equivalents at the end of the period of $2,420m (2011: $700m).
Comparatives have been restated to be consistent with current
year disclosures.
(b) Principles of consolidation
The fi nancial statements consolidate the fi nancial information
of controlled entities. Control is determined as the power to
govern the fi nancial and operating policies of an entity so as
to obtain benefi ts from its activities. The majority of the AMP
life insurance entities’ investments are held through controlling
interests in a number of managed investment schemes
and companies.
The fi nancial information for controlled entities is prepared for
the same reporting date as the parent entity, using consistent
accounting policies. Where dissimilar accounting policies may
exist, adjustments are made to bring these into line.
Consolidation principles require the total amounts of each
underlying asset, liability, income and expense of the controlled
entities to be recognised in the consolidated fi nancial statements.
When a controlled managed investment scheme is consolidated,
the share of the unitholder liability attributable to the AMP
group is eliminated but amounts due to external unitholders
remain as liabilities in the consolidated Statement of fi nancial
position. The share of the net assets of controlled companies
attributable to non-controlling interests is disclosed as a
separate line item on the Statement of fi nancial position.
45
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
1. Basis of preparation and summary of signifi cant accounting policies continued
In the Income statement, the profi t or loss of the AMP group is
allocated between profi t or loss attributable to non-controlling
interests and profi t or loss attributable to the parent entity.
Controlled entities acquired are accounted for using the
acquisition method of accounting. Information from the fi nancial
statements of controlled entities is included from the date
the parent entity obtains control until such time as control
ceases. Where the AMP group ceases to control an entity, the
consolidated fi nancial statements includes the results for the
part of the reporting period during which the parent entity
had control.
In 2011 AMP group acquired AMP AAPH Limited (formerly
AXA Asia Pacifi c Holdings Limited). 2011 consolidated revenues
and expenses include a nine-month contribution from the
AMP AAPH Limited group from the date of acquisition.
Most other acquisitions and disposals of controlled entities
are in relation to managed investment schemes with underlying
net assets typically comprising investment assets and cash.
The consideration for acquisitions or disposals refl ects the fair
value of the investment assets at the date of the transactions
after taking into account non-controlling interests.
All inter-company balances and transactions are eliminated
in full, including unrealised profi ts arising from intra-group
transactions.
Consolidation impact of investments of the AMP life
insurance entities
AMP life insurance entities conduct wealth-management
business through separate life statutory funds. Income,
expenses, assets and liabilities attributable to policyholders
within the life statutory funds are consolidated into the AMP
group fi nancial statements, along with those attributable
to the shareholders of the parent entity.
The majority of the AMP life insurance entities’ statutory
funds’ investments are held through controlling interests
in a number of managed investment schemes and companies.
These investment assets are held on behalf of policyholders
and the AMP life insurance entities’ statutory funds recognise
a liability to the policyholders valued as described in
note 1(s) for Life insurance contract liabilities, and note 1(t)
for Investment contract liabilities. In certain cases, the amount
of the net assets of the controlled entities recognised in the
consolidated fi nancial statements may not match the valuation
of the relevant liability to the policyholder which results in
certain policyholder asset movements impacting the profi t
attributable to shareholders of AMP Limited.
Certain controlled entities of the AMP life insurance
entities’ statutory funds are operating companies which
carry out business operations unrelated to the core wealth
management operations of the AMP group.
Securitisation vehicles
The banking operation of the AMP group sells mortgage
loans to securitisation vehicles (also referred to as special
purpose entities) through its loan securitisation program.
These securitisation vehicles are controlled by the AMP
group and are therefore consolidated.
(c) Accounting for wealth-management and
life insurance business
The accounting treatment of certain transactions in this
fi nancial report varies depending on the nature of the
contract underlying the transactions. The two major contract
classifi cations relevant to the wealth-management and
insurance business of the AMP group are investment
contracts and life insurance contracts.
For the purposes of this fi nancial report, holders of
investment contracts or life insurance contracts are
collectively and individually referred to as policyholders.
Investment contracts
The majority of the business of the AMP life insurance
entities relates to wealth-management products such as
savings, investment-linked and retirement income policies.
The nature of this business is that the AMP life insurance
entities receive deposits from policyholders and those
funds are invested on behalf of the policyholders. With the
exception of fi xed retirement income policies, the resulting
liability to policyholders is linked to the performance and value
of the assets that back those liabilities. For fi xed retirement
income policies, the resulting liability is linked to the fair value
of the fi xed retirement income payments and associated
management services.
Under Australian Accounting Standards such contracts
are defi ned as life investment contracts and described as
investment contracts throughout this fi nancial report.
Life insurance contracts
AMP life insurance entities also issue contracts that transfer
signifi cant insurance risk from the policyholder, covering death,
disability or longevity of the insured. In addition, there are some
policies known as discretionary participating contracts, that are
similar to investment contracts, but the timing of the vesting of
the profi t attributable to the policyholders is at the discretion
of the AMP life insurance entities.
Under Australian Accounting Standards, such contracts are
defi ned as life insurance contracts.
Assets measurement basis
Assets backing investment contract and life insurance contract
liabilities are measured on a basis that is consistent with the
measurement of the liabilities, to the extent permitted under
Australian Accounting Standards.
Investment contract liabilities are measured at fair value
as described in note 1(t) and life insurance contract liabilities
are measured as described in note 1(s). Assets backing
such liabilities are measured at fair value, to the extent
permitted under Australian Accounting Standards. Realised
and unrealised gains and losses arising from changes in the
fair value are recognised in the Income statement, to the
extent permitted under Australian Accounting Standards.
The accounting policies for individual asset classes are
described later in note 1.
All assets that back investment contract liabilities and life
insurance contract liabilities are included within the AMP
life insurance entities’ statutory funds and, as such, are
separately identifi able.
(d) 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
fi nancial institutions. Cash and cash equivalents are measured
at fair value, being the principal amount. For the purpose of
the Statement of cash fl ows, cash also includes other highly
liquid investments not subject to signifi cant risk of change in
value, with short periods to maturity, net of outstanding bank
overdrafts. Bank overdrafts are shown within Borrowings in
the Statement of fi nancial position.
(e) Receivables
Receivables that back investment contract liabilities and
life insurance contract liabilities are fi nancial assets and
are measured at fair value. Reinsurance and other recoveries
are discounted to present value. Receivables that do not back
investment contract and life insurance contract liabilities are
measured at nominal amounts due, less any allowance for
doubtful debts. An allowance for doubtful debts is recognised
when collection of the full amount is no longer probable.
Bad debts are written off as incurred. Given the short-
term nature of most receivables, the recoverable amount
approximates fair value.
46
AMP 2012 fi nancial report
1. Basis of preparation and summary of signifi cant accounting policies continued
(f) Inventories
Assets held for sale in the ordinary course of business, in the
process of production for such sale or in the form of materials
or supplies to be consumed in the production process or in the
rendering of services are classifi ed as inventories.
Inventories are measured at the lower of cost and net realisable
value. Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs necessary to
make the sale.
(g) Investments in fi nancial assets
Investments in fi nancial assets measured at fair value through
profi t or loss
Investments in fi nancial assets designated on initial recognition
as fi nancial assets measured at fair value through profi t or loss
are initially recognised at fair value determined as the purchase
cost of the asset, exclusive of any transaction costs. Any
realised and unrealised gains or losses arising from subsequent
measurement at fair value are recognised in the Income
statement in the period in which they arise.
Subsequent to initial recognition, the fair value of investments
measured at fair value through profi t or loss is determined
as follows:
–
the fair value of equity securities in an active market and
listed managed investment schemes refl ects the quoted bid
price at the reporting date. In the case of equity securities
and listed managed investment schemes where there is
no active market, a 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 fl ow analysis and
option pricing models.
the fair value of listed debt securities refl ects the bid price
at the reporting date. Listed debt securities that are not
frequently traded are valued by discounting estimated
recoverable amounts. 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 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.
the fair value of derivative fi nancial assets is determined
in accordance with the policy set out in note 1(q).
–
–
–
There is no reduction for realisation costs in determining
the fair value of fi nancial assets measured at fair value
through profi t or loss.
Investments in fi nancial assets measured at amortised cost
Investments in fi nancial assets measured at amortised cost
are mainly assets of AMP Bank. Loans, advances and other
receivables which arise when AMP Bank provides money
directly to a customer including loans and advances to
advisors, with no intention of trading the fi nancial assets are
measured at amortised cost. All other debt securities held by
AMP Bank are classifi ed as held to maturity investments. Held
to maturity investments are non-derivative assets with fi xed or
determinable payments and fi xed maturities that management
has the positive intention and ability to hold to maturity.
Investments in fi nancial 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 fi nancial
asset. These assets are subsequently recognised at amortised
cost using the effective interest rate method.
Investments in controlled entities
Investments by the parent entity in controlled entities are
measured at cost (which, in the case of the investment in
AMP Group Holdings Limited, was determined as net asset value
on demutualisation) less any accumulated impairment losses.
(h) Investments in associates accounted for using
the equity method
Associated entities are defi ned as those entities over which the
AMP group has signifi cant infl uence but there is no capacity
to control. Investments in associates, other than those backing
investment contract liabilities and life insurance contract
liabilities, are initially measured at cost plus any excess of the
fair value of AMP’s share of identifi able assets and liabilities
above cost at acquisition date subsequently adjusted for AMP
group’s share of post-acquisition profi t or loss and movements
in reserves net of any impairment. AMP group’s share of profi t
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.
Investments in associates 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 fi nancial assets measured
at fair value through profi t or loss.
(i) Investment property
Investment property is held to earn revenue from rentals and/
or for the purposes of capital appreciation. Investment property
includes all directly held freehold and leasehold properties but
excludes owner-occupied properties. See note 1(j). There are no
property interests held under operating leases accounted for as
investment property.
Investment property is initially recognised at cost, including
transaction costs. Subsequent to initial recognition, investment
property is measured at fair value.
Changes in value of investment property are taken directly to
the Income statement and may comprise changes in the fair
value from revaluation of investment property, and fair value
adjustments in relation to:
–
–
the straight-lining of fi xed rental income
tenant incentives including rent free periods, landlord
and tenant owned fi t-out contributions, and
capitalised leasing fees.
–
The process adopted to determine fair values for investment
properties is set out in note 11.
( j) Property, plant and equipment
Owner-occupied property
Under Australian Accounting Standards, where the whole or
a signifi cant portion of a property owned by the AMP group is
held for use by the AMP group in the production or supply of
goods or services, or for administrative purposes, that property
is classifi ed for accounting purposes as owner-occupied property
within Property, plant and equipment in the Statement of
fi nancial position.
Owner-occupied property is initially recognised at cost, including
transaction costs. It is subsequently measured at the revalued
amount, being its fair value at the date of the revaluation, less
any subsequent accumulated depreciation and accumulated
impairment losses. Fair value is determined on the same basis
as investment property in note 11.
When a revaluation increases the carrying value of a property,
the increase is recognised directly in Other comprehensive
income through the owner-occupied property revaluation
reserve. However, an increase is recognised in the Income
statement to the extent that the amount reverses a revaluation
decrease of the same asset previously recognised in the Income
statement. When the carrying value of an asset is decreased
as a result of a revaluation, the decrease is recognised in the
Income statement. However, any decrease is recognised in the
owner-occupied property revaluation reserve to the extent that it
reverses a balance existing in the reserve in respect of that asset.
47
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
1. Basis of preparation and summary of signifi cant accounting policies continued
Gains or losses on disposals are measured as the difference
between proceeds and the carrying amount and are
recognised in the Income statement. The balance of the
owner-occupied property revaluation reserve, in respect of
a property disposed of, is transferred to retained earnings.
Each part of an owner-occupied property, except land, that
is signifi cant in relation to the total property is depreciated
on a systematic basis over the useful life of the asset, being
a period not exceeding 40 years.
To the extent any owner-occupied property is held by the life
insurance entities’ statutory funds, the amounts recognised
for the asset in the consolidated fi nancial statements may
not match the valuation of the relevant liability to the
policyholder which results in certain policyholder asset
movements impacting the profi t attributable to shareholders
of AMP Limited.
Plant and equipment
Plant and equipment is initially measured at cost, including
transaction costs. It is subsequently measured at cost less
any subsequent accumulated depreciation and accumulated
impairment losses. The written down amount approximates
fair value.
Each item of plant and equipment is depreciated on
a systematic basis over the useful life of the asset of
three to 10 years.
Leasehold improvements
Leasehold improvements are recognised as an asset only
when it is probable that future economic benefi ts associated
with the asset will fl ow to AMP group and the cost of the item
can be reliably measured.
–
(k) Intangible assets
Goodwill
When the aggregate of the fair value of the consideration
transferred in a business combination, the recognised amount
of any non-controlling interest and the fair value of any
previously held equity interest in the acquiree exceeds the
fair value of the identifi able assets acquired and liabilities
assumed, the excess is recognised as goodwill. Subsequently,
goodwill is measured at cost less any accumulated
impairment losses. Goodwill is not subject to amortisation.
Capitalised costs
Costs are capitalised and carried forward only where
the costs relate to the creation of an asset with expected
future economic benefi ts which are capable of reliable
measurement. Otherwise, all costs are recognised as expenses
in the period in which they are incurred. Capitalised costs are
amortised on a straight-line basis over the estimated useful
life of the asset, commencing at the time the asset is fi rst put
into use or held ready for use (whichever is the earlier). The
useful lives of such assets generally do not exceed fi ve years,
however a useful life of up to seven years has been applied
to some capitalised costs relating to IT systems development
projects where AMP group expects benefi ts to fl ow over a
longer period.
Management rights
Rights to receive fees for asset management services acquired
either directly or as part of a business combination are
recognised as an intangible asset when they can be separately
identifi ed and reliably measured and it is probable that the
expected benefi ts will fl ow to the AMP group. Management
rights are initially measured at cost. Management rights
have been assessed to have an indefi nite useful life where
the contractual rights to manage the assets have no fi xed
term. These management rights are not amortised. Where
management rights are subject to contractual terms, the
useful life is determined to be the contractual term and the
asset is amortised over that period.
48
AMP 2012 fi nancial report
Value of in-force business
An intangible asset is recognised in a business combination
for the fair value of future business arising from the existing
contractual arrangements of the acquired businesses with its
customers. The value of in-force business is measured initially
at fair value and is subsequently amortised on a straight-
line basis over its useful life. Value of in-force business
has a useful life of 10 years for wealth management and
distribution business and 20 years for wealth protection
and mature business.
Distribution networks
An intangible asset is recognised in a business combination
for the fair value of the existing contractual distribution
arrangements of the acquired entity. Distribution networks
intangibles are also recognised where AMP group acquires
customer lists or other distribution related rights other than
through a business combination. Distribution networks are
measured initially at fair value and subsequently amortised
on a straight-line basis over their useful lives of three to
15 years.
Other intangible assets
Other intangible assets comprise:
–
amounts recognised in a business combination for the
value of the software assets of the acquired entity where
it is expected that future economic benefi ts will be
derived. Software is recognised initially at fair value and
is subsequently amortised on a straight-line basis over its
useful life. Software has a useful life of two to four years.
Software maintenance costs are expensed as incurred.
acquired customer relationships recognised as a result
of business combinations when they can be separately
identifi ed, reliably measured and it is probable that
expected benefi ts will fl ow to the AMP group. These
intangible assets are initially measured at cost and are
subsequently amortised on a straight-line basis over
the estimated useful life of each asset.
Reassessment of useful life
The useful life of each intangible asset is reviewed at the
end of the period and, where necessary, adjusted to refl ect
current assessments.
(l) Impairment of assets
Assets measured at fair value, where changes in value
are refl ected in the Income statement, are not subject to
impairment testing. As a result, fi nancial assets, measured at
fair value through profi t or loss, and investment properties,
are not subject to impairment testing. Other assets such as
property, plant and equipment, intangible assets including
goodwill, investments in associates accounted for using the
equity method, investments in fi nancial assets measured
at amortised cost and (in the case of the parent entity)
investments in controlled entities are subject to
impairment testing.
Intangible assets that have indefi nite useful lives, such as
goodwill, are not subject to amortisation but are tested at
least annually for impairment. Other assets are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
Any impairment loss, being the amount by which the
carrying amount of an asset exceeds its recoverable amount,
is recognised in the Income statement. The recoverable
amount is the higher of an asset’s fair value less costs to
sell and its value in use.
For the purposes of assessing impairment of goodwill, assets
are grouped at the lowest levels for which there are separately
identifi able cash fl ows (cash generating units). Impairment is
determined by assessing the recoverable amount of the cash
generating unit to which the goodwill relates.
1. Basis of preparation and summary of signifi cant accounting policies continued
(m) Taxes
Tax consolidation
AMP Limited and its wholly-owned controlled entities
which are Australian domiciled companies comprise a tax-
consolidated group of which AMP Limited is the head entity.
Following the AMP group’s sale of 15 per cent ownership
interest in AMP Capital Holdings Limited (AMPCH) on
1 March 2012, AMPCH and its wholly-owned controlled
entities which are Australian domiciled companies left the
AMP Limited tax-consolidated group and formed their own
tax consolidated-group of which AMPCH is the head entity.
The implementation date for the AMP Limited tax-consolidated
group was 30 June 2003.
Under tax consolidation the head entity assumes the following
balances from entities within the tax-consolidated group:
–
current tax balances arising from external transactions
recognised by entities in the tax-consolidated group,
occurring after the implementation date, and
deferred tax assets arising from unused tax losses and
unused tax credits recognised by entities in the tax-
consolidated group.
–
A tax funding agreement has been entered into by the head
entity and the controlled entities in the tax-consolidated
group. Entities in the tax-consolidated group continue to be
responsible, by the operation of the tax funding agreement,
for funding tax payments required to be made by the head
entity arising from underlying transactions of the controlled
entities. Controlled entities make (receive) contributions to
(from) the head entity for the balances assumed by the head
entity, as described above. The contributions are calculated in
accordance with the tax funding agreement. The contributions
are payable as set out in the agreement and refl ect the timing
of the respective head entities’ obligations to make payments
to the Australian Taxation Offi ce.
Assets and liabilities which arise as a result of balances
transferred from entities within the tax-consolidated group
to the head entity are recognised as related-party balances
receivable and payable in the Statement of fi nancial position
of AMP Limited. The recoverability of balances arising from
the tax funding arrangements is based on the ability of the
tax-consolidated group to utilise the amounts recognised
by the head entity.
Income tax expense
Income tax expense/credit 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 attributable to:
–
temporary differences between the tax bases of assets
and liabilities and their Statement of fi nancial 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/credit 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.
Investment contracts liabilities and life insurance
contracts liabilities are established in Australia net, and in
New Zealand gross, of the policyholders’ share of any current
tax payable and deferred tax balances of the AMP group.
Arrangements made with some superannuation funds
result in the AMP life insurance entities making payments
to the Australian Taxation Offi ce in relation to contributions
tax arising in those funds. The amounts paid are recognised
as a decrease in investment contract liabilities and not
included in income tax expense.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates which are expected to apply when
the assets are recovered or liabilities are settled, based on
those tax rates which are enacted or substantively enacted
for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts
of deductible and taxable temporary differences to measure the
deferred tax asset or liability. An exception is made for certain
temporary differences arising from the initial recognition of an
asset or a liability. No deferred tax asset or liability is recognised
in relation to these temporary differences if they arose in a
transaction, other than a business combination, that at the
time of the transaction did not affect either accounting profi t
or taxable profi t or loss.
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.
Deferred tax assets and liabilities are not recognised for
temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent
entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Deferred tax, including amounts in respect of investment
contracts and life insurance contracts, is not discounted to
present value.
Goods and services tax
The AMP group operates across a number of tax jurisdictions
and offers products and services that may be subject to
various forms of goods and services tax (GST) imposed by
local tax authorities.
All income, expenses and assets are recognised net of
any GST paid, except where they relate to products and
services which are input taxed for GST purposes or where
the GST incurred is not recoverable from the relevant tax
authorities. In such circumstances, the GST paid is recognised
as part of the cost of acquisition of the assets or as part of
the relevant expense.
Receivables and payables are recorded with the amount
of GST included. The net amount of GST recoverable from
or payable to the tax authorities is included as either a
receivable or payable in the Statement of fi nancial position.
Cash fl ows are reported on a gross basis refl ecting any GST
paid or collected. The GST component of cash fl ows arising
from investing or fi nancing activities which are recoverable
from, or payable to, local tax authorities are classifi ed as
Operating cash fl ows.
Income tax for investment contracts business and
life insurance contracts business
The income tax expense recognised in the Income statement
of AMP group which arises in respect of the AMP life insurance
entities refl ects tax imposed on shareholders as well
as policyholders.
(n) Payables
Payables that back investment contract and life insurance
contract liabilities are fi nancial liabilities and are measured
at fair value. Other payables are measured at the nominal
amount payable. Given the short-term nature of most payables,
the nominal amount payable approximates fair value.
49
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
1. Basis of preparation and summary of signifi cant accounting policies continued
(o) 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 outfl ow of resources embodying
economic benefi ts will be required to settle the
obligation, and
a reliable estimate can be made of the amount of
the obligation.
–
–
Where the AMP group expects some or all of a provision
to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but
only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the
Income statement net of any reimbursement.
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 refl ects current
market assessments of the time value of money and the
risks specifi c to the liability.
Employee entitlements
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. All other employee entitlements
are measured at the present value of the estimated future
cash outfl ows to be made in respect of services provided
by employees up to the reporting date. In determining the
present value of future cash outfl ows, discount rates used
are based on the interest rates attaching to government
securities which have terms to maturity approximating
the terms of the related liability.
Restructuring
A restructuring provision is only recognised when it is
probable that future costs will be incurred in respect of
a fundamental reorganisation or change in focus of the
business of the AMP group. A provision is recognised
when the AMP group is demonstrably committed to the
expenditure and a reliable estimate of the costs involved
can be made. The provision is measured as the best estimate
of the incremental, direct expenditures to be incurred
as a result of the restructure and does not include costs
associated with the ongoing activities of the AMP group.
(p) Borrowings and subordinated debt
All borrowings and subordinated debt are fi nancial liabilities
and are initially recognised at fair value. In the case of
borrowings and subordinated debt which are subsequently
measured at amortised cost, initial fair value is calculated net
of directly attributable transaction costs. For borrowings and
subordinated debt which are subsequently measured at fair
value through profi t or loss, directly attributable transaction
costs are expensed.
Borrowings and subordinated debt, other than those
held by controlled entities of the AMP life insurance
entities’ statutory funds, are subsequently measured at
amortised cost. Any difference between the proceeds
(net of transaction costs) and the redemption amount is
recognised in the Income statement over the period of the
contract 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 to borrowings and subordinated debt,
the carrying values of borrowings and subordinated debt are
adjusted for changes in fair value for the period that the fair
value hedge relationship remains effective. See note 1(q).
50
AMP 2012 fi nancial report
Borrowings of controlled managed investment schemes of
the AMP life insurance entities’ statutory funds are measured
at amortised cost for the purpose of determining the unit price
of those schemes. These borrowings are measured at amortised
cost in this fi nancial report with any difference between the
proceeds (net of transaction costs) and the redemption amount
recognised in the Income statement over the period of the
contract using the effective interest rate method.
All other borrowings of the controlled entities of the statutory
funds are subsequently measured at fair value with movements
recognised in the Income statement.
(q) Derivative fi nancial assets, derivative fi nancial liabilities
and hedging
The AMP group is exposed to changes in interest rates and
foreign exchange rates as well as movements in the fair value
of investment guarantees it has issued in respect of its products.
To mitigate the risks arising from these exposures, the AMP
group uses derivative fi nancial instruments such as cross-
currency and interest rate swaps, forward rate agreements,
futures, options and foreign currency contracts. Derivative
fi nancial instruments are also used to gain exposure to various
markets for asset and liability management purposes.
Derivatives are initially recognised at fair value exclusive of any
transactions costs on the date on which a derivative contract
is entered into and are subsequently remeasured to their fair
value at the end of each reporting period. All derivatives are
recognised as assets when their fair value is positive and as
liabilities when their fair value is negative.
The method of recognising the movement in fair value depends
on whether the derivative is designated as a hedging instrument
and, if so, the nature of the item being hedged. The AMP group
designates a hedge as either:
–
a hedge of the fair value of recognised assets or liabilities
or a fi rm commitment (fair value hedge)
a hedge of highly probable forecast transactions
(cash fl ow hedge), or
a hedge of a net investment in a foreign operation
(net investment hedge).
–
–
AMP group documents the relationship between hedging
instruments and hedged items at inception of the transaction,
as well as the AMP group’s risk management and strategy for
undertaking various hedge transactions. The AMP group also
documents its assessment of whether the derivatives used in
hedging transactions have been, and will continue to be, highly
effective in offsetting changes in fair values or cash fl ows of
hedged items. This assessment is carried out both at hedge
inception and on an ongoing basis.
Accounting for hedges
(i) Fair value hedges:
–
–
changes in the fair value of derivatives that are
designated and qualify as fair value hedges are recorded
in the Income statement together with any changes in
the fair value of the hedged asset or liability that are
attributable to the hedged risk, and
if a hedge no longer meets the criteria for hedge
accounting, the adjustment to the carrying amount of
a hedged item, for which the effective interest method
is used, is amortised to the Income statement over the
period to maturity.
(ii) Cash fl ow hedges:
–
the effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
fl ow hedges is recognised in equity in the Cash fl ow
hedge reserve. The balance of the Cash fl ow hedge
reserve in relation to each particular hedge is transferred
to the Income statement in the period when the
hedged item affects profi t or loss
1. Basis of preparation and summary of signifi cant accounting policies continued
–
–
–
the gain or loss relating to any ineffective portion
of a hedge is recognised immediately in the
Income statement
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 Income statement, and
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 Income
statement.
(iii) Net investment hedges:
–
hedges of a net investment in a foreign operation,
including a hedge of a monetary item that is accounted
for as part of the net investment, are accounted for in
a similar way to cash fl ow hedges. Gains and losses
on the hedging instrument relating to the effective
portion of the hedge are recognised (including related
tax impacts) in the Hedge of net investment reserve,
while any gains or losses relating to the ineffective
portion of the hedge are recognised in profi t or loss.
On disposal of the foreign operation, the cumulative
value of any such gains or losses recognised directly
in equity is transferred to the Income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative fi nancial instruments do not qualify
for hedge accounting. Changes in the fair value of any
derivative fi nancial instrument that does not qualify for
hedge accounting are recognised in the Income statement
in the period in which they arise.
Fair value estimation
The fair value of fi nancial instruments traded in active
markets (such as publicly traded derivatives) is based on
quoted market prices at the reporting date. The quoted
market price for fi nancial assets is the current bid price;
the quoted market price for fi nancial liabilities is the
current offer price.
The fair value of fi nancial instruments not traded in an
active market (for example, over-the-counter derivatives) is
determined using valuation techniques. Valuation techniques
include net present value techniques, option pricing models,
discounted cash fl ow methods and comparison to quoted
market prices or dealer quotes for similar instruments.
(r) Recognition and de-recognition of fi nancial assets
and liabilities
Financial assets and fi nancial liabilities are recognised at
the date the AMP group becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised
when the contractual rights to the cash fl ows from the
fi nancial assets expire, or are transferred. A transfer occurs
when substantially all the risks and rewards of ownership
of the fi nancial asset are passed to an unrelated third party.
Financial liabilities are derecognised when the obligation
specifi ed in the contract is discharged, cancelled or expires.
(s) Life insurance contract liabilities
The fi nancial reporting methodology used to determine
the fair value of life insurance contract liabilities is referred
to as margin on services (MoS).
Under MoS, the excess of premium received over claims
and expenses (the margin) is recognised over the life of the
contract in a manner that refl ects the pattern of risk accepted
from the policyholder (the service). The planned release of this
margin is included in the movement in life insurance contract
liabilities recognised in the Income statement.
Life insurance contract liabilities are usually determined
using a projection method, whereby estimates of policy cash
fl ows (premiums, benefi ts, expenses and profi t margins to be
released in future periods) are projected using best-estimate
assumptions about the future. The liability is calculated as
the net present value of these projected cash fl ows. When the
benefi ts under a life insurance contract are linked to the assets
backing it, the discount rate applied is based on the expected
future earnings rate of those assets. Where the benefi ts are
not linked to the performance of the backing assets, a risk-free
discount rate is used. The risk-free discount rate is based on
the zero coupon government bond rate and a liquidity margin,
which depends on the nature, structure and terms of the
contract liabilities.
An accumulation method may be used if it produces results
that are not materially different from those produced by
a projection method. A modifi ed accumulation method is
used for some discretionary participating business, where
the life insurance liability is the accumulation of amounts
invested by policyholders, less fees specifi ed in the policy, plus
investment earnings and vested benefi ts, adjusted to allow
for the fact that crediting rates are determined by reference
to investment income over a period of greater than one year.
The accumulation method may be adjusted to the extent that
acquisition expenses are to be recovered from future margins
between fees and expenses.
Allocation of operating profi t and unvested policyholder benefi ts
The operating profi t arising from discretionary participating
contracts is allocated between shareholders and participating
policyholders by applying the MoS principles in accordance
with the Life Insurance Act 1995 (Life Act) and, for NMLA, the
Memorandum of Demutualisation.
Once profi t is allocated to participating policyholders it can
only be distributed to these policyholders. Any distribution
of this profi t to shareholders is only allowed for overseas
business with specifi c approval of the regulators.
Profi t allocated to participating policyholders is recognised
in the Income statement as an increase in policy liabilities.
Both the element of this profi t that has not yet been allocated
to specifi c policyholders (ie unvested) and that which has
been allocated to specifi c policyholders by way of bonus
distributions (ie vested) are included within life insurance
contract liabilities.
Bonus distributions to participating policyholders are
merely a change in the nature of the liability from unvested
to vested and, as such, do not alter the amount of profi t
attributable to shareholders.
The principles of allocation of the profi t arising from
discretionary participating business are as follows:
Investment income (net of tax and investment
(i)
expenses) on retained earnings in respect of discretionary
participating business is allocated between policyholders
and shareholders in proportion to the balances of
policyholders’ and shareholders’ retained earnings.
This proportion is, mostly, 80 per cent policyholders
and 20 per cent shareholders.
(ii) Other MoS profi ts arising from discretionary
participating business are allocated 80 per cent
to policyholders and 20 per cent to shareholders,
with the following exceptions:
–
the profi t arising from New Zealand corporate
superannuation business is apportioned such that
shareholders are allocated 15 per cent of the profi t
allocated to policyholders
the profi t arising in respect of Preservation
Superannuation Account business is allocated
92.5 per cent to policyholders and 7.5 per cent
to shareholders
–
51
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
1. Basis of preparation and summary of signifi cant accounting policies continued
–
–
–
the profi ts arising from NMLA’s discretionary
participating investment account business where
100 per cent of investment profi t is allocated to
policyholders and 100 per cent of any other profi t or
loss is allocated to shareholders, with the over-riding
provision being that at least 80 per cent of any profi t
and not more than 80 per cent of any loss be allocated
to policyholders’ retained profi ts of the relevant
statutory fund
the underwriting profi t arising in respect of NMLA’s
Participating Business Super Risk business is allocated
90 per cent to policyholders and 10 per cent
to shareholders,
for AMP Life, additional tax on taxable income to
shareholders in respect of Australian superannuation
business is allocated to shareholders only.
(iii) All profi ts arising from non-participating business, including
net investment returns on shareholder capital and retained
earnings in life entities’ statutory funds (excluding retained
earnings dealt with in (i) above) are allocated to shareholders.
Allocation of expenses within the life insurance entities’
statutory funds
All operating expenses relating to the life insurance contract
and investment contract activities are apportioned between
acquisition, maintenance and investment management
expenses. Expenses which are directly attributable to an
individual life insurance contract or investment contract or
product are allocated directly to a particular expense category,
fund, class of business and product line as appropriate.
Where expenses are not directly attributable, they are
appropriately apportioned, according to detailed expense
analysis, with due regard for the objective in incurring that
expense and the outcome achieved. The apportionment basis
has been made in accordance with Actuarial Standards and
on an equitable basis to the different classes of business in
accordance with the Life Act.
The costs apportioned to life insurance contracts are included
in the determination of margin described above.
Investment management expenses of the life statutory
funds are classifi ed as operating expenses. See note 1(aa).
(t) Investment contract liabilities
An investment contract consists of a fi nancial instrument and
an investment management services element, both of which are
measured at fair value. With the exception of fi xed retirement-
income policies, the resulting liability to policyholders is closely
linked to the performance and value of the assets (after tax) that
back those liabilities. The fair value of such liabilities is therefore
the same as the fair value of those assets (after tax charged to
the policyholders) except where accounting standards prevent
those assets from being measured at fair value.
For fi xed retirement-income policies, the fi nancial instrument
element of the liability is the fair value of the fi xed retirement-
income payments, being their net present value using a
fair value discount rate. The fair value of the associated
management services element is the net present value, using
a fair value discount rate, of all expenses associated with the
provision of services and any profi t margins thereon.
(u) Contributed equity
Issued capital
Issued capital in respect of ordinary shares is recognised as
the fair value of consideration received by the parent 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 Australian Securities and Investments Commission (ASIC)
52
AMP 2012 fi nancial report
has granted relief from restrictions in the Corporations Act 2001
to allow AMP’s life insurance entities to hold and trade shares
in AMP Limited as part of the policyholder funds’ investment
activities. These shares (defi ned by Australian Accounting
Standards as treasury shares) are held on behalf of policyholders
and, as a result, the AMP life insurance entities’ statutory funds
also recognise a corresponding liability to policyholders.
Under Australian Accounting Standards, the AMP group cannot
recognise ‘treasury shares’ in the consolidated Statement of
fi nancial position. These assets, plus any corresponding Income
statement fair value movement on the assets and dividend
income, are eliminated when the AMP life insurance entities’
statutory funds are consolidated into the AMP group. The cost
of the investment in the shares is deducted to arrive at the
amount of contributed equity.
However, the corresponding investment contract and life
insurance contract liabilities, and related Income statement
change in the liabilities, remain on consolidation. At the AMP
group consolidated level, this mismatch results in policyholder
asset movements impacting the profi t attributable to
shareholders of AMP Limited.
(v) Foreign currency transactions
Functional and presentation currency
The consolidated fi nancial report is presented in Australian
dollars (the presentation currency). Items included in the
fi nancial statements for each of the AMP group entities
are measured using the currency of the primary economic
environment in which the entity operates (the functional
currency). The functional currency of the parent entity is
Australian dollars.
Transactions and balances
Income and expense items denominated in a currency
other than the functional currency are translated at the spot
exchange rate at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated
at the rate of exchange ruling at the reporting date, with
exchange gains and losses recognised in the Income statement.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value was determined.
Translation of controlled entities
Where the functional currency of a controlled entity is not the
presentation currency, the transactions and balances of that
entity are translated as follows:
–
income and expenses are translated at average exchange
rates, unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction
dates. In this case, income and expenses are translated at
the dates of the transactions
assets and liabilities are translated at the closing rate at
the reporting date
all resulting exchange differences are recognised as a
separate component of equity in the foreign currency
translation reserve.
–
–
When a foreign operation is sold, the cumulative amount
in the foreign currency translation reserve relating to that
operation is recognised in the Income statement as part of the
gain or loss on sale. If a portion of the operation is sold, the
proportionate share of the cumulative amount is recognised.
(w) Insurance premium and related revenue
Life insurance contracts
Life insurance contract premiums are separated into
their revenue and deposit components. Premium amounts
earned by bearing insurance risks are recognised as revenue.
Other premium amounts received, which are in the nature
of deposits, are recognised as an increase in life insurance
contract liabilities.
1. Basis of preparation and summary of signifi cant accounting policies continued
Premiums with no due date or fi xed amount are recognised
on a cash-received basis. Premiums with a regular due date
are recognised on an accruals basis. Unpaid premiums are only
recognised during the days of grace or where secured by the
surrender value of the life insurance contract and are reported
as outstanding premiums and classifi ed as receivables in the
Statement of fi nancial position.
Investment contracts
There is no premium revenue in respect of investment
contracts. Amounts received from policyholders in respect
of investment contracts comprise:
–
origination fees, advice fees and ongoing investment
management fees. See note 1(x)
amounts credited directly to investment contract liabilities.
See note 1(t).
–
(x) Fee and other revenue
Fees are charged to customers in connection with investment
contracts and other fi nancial services contracts. Revenue is
recognised as services are provided. In some cases, services are
provided at the inception of the contract, while other services
are performed over the life of the contract.
An investment contract consists of a fi nancial instrument and
an investment-management services element. The payment
by the policyholder includes the amount to fund the fi nancial
instrument and a fee for the origination of the contract. In
many cases, that origination fee is based on amounts paid to
fi nancial planners for providing initial advice. The fi nancial
instrument is classifi ed as an investment contract and is
measured at fair value. See note 1(t).
The revenue that can be attributed to the origination service is
recognised at inception. Any amounts paid to fi nancial planners
is also recognised as an expense at that time. See note 1(aa).
Fees for ongoing investment management services and other
services provided are charged on a regular basis, usually daily,
and are recognised as the service is provided.
Fees charged for performing a signifi cant act in relation to
funds managed by the AMP group are recognised as revenue
when that act has been completed.
(y) Investment gains or losses
Dividend and interest income is recognised in the Income
statement on an accruals basis when the AMP group obtains
control of the right to receive the revenue.
Net realised and unrealised gains and losses include realised
gains and losses being the change in value between the
previously reported value and the amount received on sale
of the asset, and unrealised gains and losses being changes
in the fair value of fi nancial assets and investment property
recognised in the period.
Rents raised are on terms in accordance with individual leases.
Certain tenant allowances that are classifi ed as lease incentives
such as rent-free periods, fi t-outs and upfront payments are
capitalised and amortised over the term of the lease. The
aggregate cost of incentives is recognised as a reduction to
revenue from rent over the lease term.
(z) Insurance claims and related expense
Life insurance contracts
Life insurance contract claims are separated into their
expense and withdrawal components. The component that
relates to the bearing of risks is treated as an expense. Other
claim amounts, which are in the nature of withdrawals, are
recognised as a decrease in life insurance contract liabilities.
Claims are recognised when a liability to a policyholder
under a life insurance contract has been established or
upon notifi cation of the insured event, depending on the
type of claim.
Investment contracts
There is no claims expense in respect of investment contracts.
Amounts paid to policyholders in respect of investment
contracts are withdrawals and are recognised as a decrease
in investment contract liabilities. See note 1(t).
(aa) Operating expenses
All operating expenses, other than those allocated to life
insurance contracts, see note 1(s), are expensed as incurred.
Expenses of controlled entities of the AMP life insurance
entities’ statutory funds represent the business costs of those
entities and are consolidated into the results of the AMP group.
The majority of investment contracts issued result in
payments to external service and advice providers. Where
the amount paid equates to a fee charged to policyholders
for the provision of advice, the amount is expensed either at
inception or over the period of the contract consistent with
the basis for recognising the fee revenue on the respective
contracts. See note 1(t).
Operating lease payments
Operating lease payments are recognised as an expense in
the Income statement on a straight-line basis over the lease
term or other systematic basis representative of the patterns
of the benefi ts obtained. Operating incentives are recognised
as a liability when received and subsequently reduced by
allocating lease payments between rental expense and
reduction of the liability.
(bb) Finance costs
Finance costs include:
(i) Borrowing costs:
–
–
interest on bank overdrafts, borrowings and
subordinated debt, and
amortisation of discounts or premiums related
to borrowings.
(ii) Exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an
adjustment to interest costs.
(iii) Changes in the fair value of derivative hedges together
with any change in the fair value of the hedged asset or
liabilities that are designated and qualify as fair value
hedges, foreign exchange gains and losses and other
fi nancing related amounts. The accounting policy for
derivatives is set out in note 1(q).
Borrowing costs are recognised as expenses when incurred.
(cc) Share-based payments
The AMP group issues performance rights, restricted
shares and other equity instruments to employees as a
form of equity-settled share-based compensation. Equity-
settled share-based compensation to employees is considered
to be an expense in respect of the services received and is
recognised in the Income statement over the vesting period
of the instrument with a corresponding amount in the
share-based payment reserve within equity.
The expense is based on the fair value of each grant,
measured at the date of the grant. For performance rights
and similar instruments the fair value is determined by
an external valuer. 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. The fair value determined at grant date
is not altered over the vesting period. Non-market vesting
conditions are included in assumptions about the number
of instruments that are expected to vest. At each reporting
date, the AMP group reviews its estimates of the number of
instruments that are expected to vest. Any changes to the
original estimates are recognised in the Income statement
and the share-based payment reserve, over the remaining
vesting period.
53
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
1. Basis of preparation and summary of signifi cant accounting policies continued
Where the terms of an equity-settled share-based payment
are modifi ed and the expense increases as a result of the
modifi cation, the increase is recognised over the remaining
vesting period. When a modifi cation reduces the expense,
there is no adjustment and the pre-modifi cation cost
continues to be recognised.
Expenses for awards that do not ultimately vest are reversed
in the period in which the instrument lapses, except for
awards where vesting is conditional upon a market condition,
in which case no reversal is recognised.
When instruments vest, shares are purchased on-market
and transferred to the employee. The cost of the purchase
is recognised in the share-based payments reserve.
(dd) Superannuation funds
The AMP group operates superannuation funds that
provide benefi ts for employees and their dependants on
resignation, retirement, disability or death of the employee.
The funds have both defi ned contribution and defi ned benefi t
sections – refer to note 26 for further information on the funds.
The contributions paid and payable by AMP group to defi ned
contributions funds are recognised in the 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.
For the defi ned benefi t sections of superannuation funds
operated by the AMP group, the AMP group recognises the
net defi cit or surplus position of each fund in the Statement
of fi nancial position as defi ned by AASB 119 Employee Benefi ts.
This does not represent an assessment of the funds’ funding
positions. The defi cit or surplus is measured as the difference
between the fair value of the funds’ assets and the discounted
defi ned benefi t obligations of the funds, using discount rates
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, using market
yields at the end of the period on government bonds.
The defi ned benefi t obligation is calculated annually,
with half-yearly reviews, by independent actuaries.
After taking into account any contributions paid into the
defi ned benefi t funds during the period, movements in the net
surplus or defi cit of each fund, except actuarial gains and losses,
are recognised in the Income statement. Actuarial gains
and losses arising from experience adjustments and changes
in actuarial assumptions over the period are recognised
(net of tax), directly in Other comprehensive income.
Contributions paid into defi ned benefi t funds are recognised
as reductions in the defi cit.
(ee) Earnings per share
Basic earnings per share is calculated by dividing the
consolidated profi t attributable to shareholders of AMP Limited,
by the weighted average number of ordinary shares outstanding
during the period. The weighted average number of ‘treasury
shares’ held during the period is deducted in calculating the
weighted average number of ordinary shares outstanding.
Diluted earnings per share is calculated by dividing the profi t
used in the determination of basic earnings per share by the
weighted average number of shares outstanding during the
period adjusted for potential ordinary shares considered to be
dilutive. Potential ordinary shares are contracts such as options
and performance rights that may entitle the holder to ordinary
shares. These potential ordinary shares are considered dilutive
when their conversion into ordinary shares would be likely to
cause a reduction in earnings per share. The weighted average
number of ‘treasury shares’ held during the period is deducted
in calculating the weighted average number of ordinary shares
outstanding for diluted earnings per share.
(ff) Disposal groups held for sale
A disposal group is a group of assets to be disposed of
together as a group in a single transaction, and liabilities
directly associated with those assets that will be transferred in
the transaction. Disposal groups are classifi ed as held for sale
if their carrying amounts will be recovered principally through
a sale transaction rather than through continuing use. The
criteria for held for sale classifi cation is regarded as met only
when the sale is highly probable, the disposal group is available
for immediate sale in its present condition, management is
committed to a plan to sell the group and a sale is expected
to be completed within a year.
Disposal groups classifi ed as held for sale are measured at
the lower of their carrying amount and fair value less costs
to sell. Assets and liabilities of disposal groups are shown
separately from other assets and liabilities in the Statement
of fi nancial position.
2.
Signifi cant accounting judgements, estimates and assumptions
The making of judgements, estimates and assumptions is a
necessary part of the fi nancial reporting process and these
judgements, estimates and assumptions can have a signifi cant
effect on the reported amounts in the fi nancial statements.
Estimates and assumptions are determined based on
information available to management at the time of preparing
the fi nancial report and actual results may differ from these
estimates and assumptions. Had different estimates and
assumptions been adopted, this may have had a signifi cant
impact on the fi nancial statements. Signifi cant accounting
judgements, estimates and assumptions are re-evaluated at
each reporting period in the light of historical experience
and changes to reasonable expectations of future events.
Signifi cant accounting judgements, estimates and
assumptions include but are not limited to:
(a) Consolidation
Entities are included within the consolidated fi nancial
statements of the AMP group where AMP Limited has control
of these entities, being the power to govern the fi nancial and
operating policies of an entity so as to obtain benefi ts from its
activities. Judgement is applied by management in assessing
whether control exists, and in particular whether the rights
held by AMP Limited amount to being the power to govern the
fi nancial and operating policies of those entities and whether
AMP Limited is able to use such power to obtain benefi ts from
the activities of the entities.
54
AMP 2012 fi nancial report
2.
Signifi cant accounting judgements, estimates and assumptions continued
(b) Fair value of investments in fi nancial assets
The AMP group measures investments in fi nancial assets,
other than those held by AMP Bank and loans and advances
to advisers, at fair value through profi t or loss. 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 fi nancial
instruments is set out in note 22.
(c) Fair values of investment properties and
owner-occupied property
The AMP group measures investment properties at fair
value through profi t or loss. Owner-occupied property is
measured at fair value at last valuation date less subsequent
depreciation. The valuation of investment properties and
owner-occupied property requires judgement to be applied
in selecting appropriate valuation techniques and setting
valuation assumptions. The AMP group engages independent
registered valuers to value each of its investment properties
on a rolling annual basis. Further detail on the determination
of fair values of investment properties is set out in note 11.
(d) Acquired intangible assets
Subject to some exceptions, accounting standards require
the assets and liabilities of businesses acquired through a
business combination to be measured at their acquisition
date fair values. Management apply judgement in selecting
valuation techniques and setting valuation assumptions to
determine the acquisition date fair values and to estimate
the useful lives of these assets. Note 24 provides details of
intangibles acquired through business combinations during
the period.
Accounting standards require management to assess, at
each reporting period, whether there are any indicators of
impairment in relation to the carrying value of intangible
assets. Where an impairment indicator is identifi ed, and at
least annually for assets with indefi nite useful lives, the
recoverable amount of the asset must be determined and
compared to the carrying amount.
Judgement is applied by management in assessing whether
there are any impairment indicators and, where required,
determining the recoverable amount. For further details on
impairment of intangibles, refer to note 13.
(e) Goodwill
Goodwill is required to be allocated to cash generating units
and tested for impairment on an annual basis. Management
apply judgement in determining cash generating units and
allocating the goodwill arising from business combinations to
these cash generating units. Impairment is assessed annually
by determining the recoverable amount of each cash generating
unit which has a goodwill balance. Management applies
judgement in selecting valuation techniques and setting
valuation assumptions to determine the recoverable amount.
Note 13 sets out further information on the impairment
testing of goodwill.
(f) Tax
The AMP group is subject to taxes in Australia and other
jurisdictions where it has operations. The application of tax
law to the specifi c circumstances and transactions of the AMP
group requires the exercise of judgement by management.
The tax treatments adopted by management in preparing
the fi nancial 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. Note 7 sets out information
on carried forward tax losses for which a deferred tax asset has
not been recognised.
(g) Provisions
A provision is recognised for items where the AMP group has a
present obligation arising from a past event, it is probable that
an outfl ow of economic resources will be required to settle the
obligation and a reliable estimate can be made of the amount
of the obligation. The provision is measured as the best estimate
of the expenditure required to settle the present obligation.
Management apply judgement in assessing whether a particular
item satisfi es the above criteria and in determining the best
estimate. Note 15 sets out further information on provisions.
(h) Insurance contract liabilities
The measurement of insurance contract liabilities is
determined using the margin on services (MoS) methodology.
The determination of the liability amounts involves judgement
in selecting the valuation methods and profi t carriers for
each type of business and setting valuation assumptions.
The determination is subjective and relatively small changes
in assumptions may have a signifi cant impact on the reported
profi t. The board of each of the life entities is responsible for
these judgements and assumptions, after taking advice from
the Appointed Actuary. Further detail on the determination
of insurance contract liabilities is set out in note 20.
(i) Investment contract liabilities
Investment contract liabilities are measured at fair value.
For the majority of contracts, the fair value is determined
based on published unit prices and the fair value of backing
assets, and does not generally require the exercise of judgement.
For fi xed income products and the North capital guarantee,
fair value is determined using valuation models. Judgement
is applied in selecting the valuation model and setting the
valuation assumptions. Further details on investment contract
liabilities are set out in note 21.
( j) Defi ned benefi t plan liabilities
The defi ned benefi t plan liabilities of the AMP group are
measured as the difference, for each fund, of the fair value
of the fund’s assets and the actuarially determined present
value of the obligation to fund members. AASB 119 Employee
Benefi ts requires defi ned benefi t plan liabilities to be measured
using discount rates determined with reference to market yields
at the end of the reporting period or high quality corporate
bonds or in countries where there is no deep market in such
bonds, using market yields on government bonds. Judgement
is applied in assessing whether there is a deep market in high
quality corporate bonds and in the selection of government
bonds used to determine the yield.
The determination of the fair value of the fund’s assets is also
subject to the other judgements, estimates and assumptions
discussed at (b) above. The calculation of the obligation to fund
members requires judgement to be applied in the setting of
actuarial assumptions. Further detail on the determination
of defi ned benefi t plan liabilities is set out in note 26.
55
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
3. Segment information
(a) Segments – background
Operating segments have been identifi ed based on separate
fi nancial information that is regularly reviewed by the Chief
Operating Decision Maker (CODM). The term CODM refers
to the function performed by the Chief Executive Offi cer and
his immediate team, as a team, in assessing performance
and determining the allocation of resources. The operating
segments are identifi ed according to the nature of profi t
generated and services provided. Segment information in this
note is reported separately for each operating segment. AMP
group evaluates the performance of segments on a post-tax
operating earnings basis.
Segment information is not reported for activities of AMP
group offi ce companies as it is not the function of these
departments to earn revenue and any revenues earned are
only incidental to the activities of the AMP group.
Asset segment information has not been disclosed because
the balances are not provided to the CODM for the purposes
of evaluating segment performance and deciding the allocation
of resources to segments.
(b) Description of segments
AMP Financial Services
AMP Financial Services provides a range of products and services
to customers in Australia and New Zealand. These products
and services are primarily distributed through self-employed
fi nancial planners and advisers, as well as through extensive
relationships with independent fi nancial advisers.
AMP Financial Services is reported as four separate divisions:
–
Australian Wealth Management (WM) – Financial planning
services (including owned advice businesses), platform,
including SMSF, administration, unit-linked superannuation,
retirement income and managed investment products
business. Superannuation products include personal and
employer sponsored plans.
–
–
–
WM includes AMP Bank, which is a direct Australian bank
offering residential mortgages, deposits, transactional
banking as well as practice loans to AMP aligned planners.
Australian Wealth Protection (WP) – Includes personal and
group term, disability and income protection insurance
products. Products can be bundled with a superannuation
product or held independently of superannuation.
Australian Mature (Mature) – A business comprising products
which are mainly in run-off. Closed products include whole
of life, endowment, investment linked, investment account,
RSA, GSA, annuities and personal superannuation.
AMP Financial Services New Zealand (AFS NZ) –
A risk insurance business and mature book (traditional
participating business), with a growing wealth
management business driven by KiwiSaver.
AMP Capital
AMP Capital is a diversifi ed investment manager, providing
investment services for domestic and international customers.
Through a team of in-house investment professionals and
a carefully selected global network of investment partners,
AMP Capital manages investments across major asset classes
including equities, fi xed interest, property, infrastructure and
multi-manager and multi-asset funds. AMP Capital also provides
commercial, industrial and retail property management services.
AMP Capital has established operations in Australia and
New Zealand and a growing international presence with
offi ces in Bahrain, China, Hong Kong, India, Japan, Luxembourg,
the United Kingdom and the United States, allowing it to source
competitive offshore opportunities.
On 1 March 2012, AMP Capital and Mitsubishi UFJ Trust and
Banking Corporation (MUTB) completed the transaction which
formed the strategic business and capital alliance between
the two parties and resulted in MUTB acquiring a 15 per cent
ownership interest in AMP Capital.
56
AMP 2012 fi nancial report
3. Segment information continued
(c) Segment profi t
2012
Segment profi t after income tax1
Other segment information4
External customer revenue
Intersegment revenue5
Income tax expense
Depreciation and amortisation
2011
Segment profi t after income tax1
Other segment information4
External customer revenue
Intersegment revenue5
Income tax expense
Depreciation and amortisation
WM
$m
WP2
$m
Mature2
$m
AFS NZ2
$m
AMP Capital3
$m
Total operating
segments
$m
347
190
167
73
99
876
1,536
113
147
40
190
–
81
6
167
–
72
5
73
–
28
3
240
222
37
11
2,206
335
365
65
322
215
153
76
83
849
1,383
90
138
60
215
–
92
8
153
–
66
–
76
–
30
4
220
206
26
8
2,047
296
352
80
1
2
3
4
5
Segment profi t after income tax differs from Profi t attributable to shareholders of AMP Limited due to the exclusion of the following items:
i
ii
iii
iv
group offi ce costs
investment return on shareholder assets invested in income producing investment assets
interest expense on corporate debt
other items (refer to note 3(d) for further details). These items do not refl ect the underlying operating performance of the operating
segments, and
v
accounting mismatches, market adjustments (annuity fair value and risk products) and amortisation of AMP AAPH acquired intangible assets.
Statutory reporting revenue for Australian Wealth Protection, Australian Mature and AMP Financial Services New Zealand includes premium
and investment gains and losses. However, for segment reporting, external customer revenue is operating earnings which represents gross
revenue less claims, expenses, movement in insurance contract liabilities and tax relating to those segments.
AMP Capital segment revenue is reported net of external investment manager fees paid in respect of certain assets under management.
AMP Capital segment profi t for 2012 is reported net of 15 per cent attributable to MUTB from March 2012. Other AMP Capital segment
information is reported before deductions of minority interests.
Other segment information excludes revenue, expenses and tax relating to assets backing policyholder liabilities.
Intersegment revenue represents operating revenue between segments priced on an arm’s length basis.
57
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
3. Segment information continued
(d) Reconciliation of segment profi t after tax
Australian Wealth Management
Australian Wealth Protection
Australian Mature
AMP Financial Services New Zealand
AMP Financial Services
AMP Capital
Business unit operating earnings
Group offi ce costs
Total operating earnings
Underlying investment income1
Interest expense on corporate debt
AMP Limited tax loss recognition
Underlying Profi t
Market adjustment – investment income1
Market adjustment – annuity fair value2
Market adjustment – risk products3
Other items4
Profi t after income tax before AMP AAPH merger related
adjustments and accounting mismatches
M&A transaction costs
AMP AAPH integration costs
Amortisation of AMP AAPH acquired intangible assets
Accounting mismatches5
Profi t attributable to shareholders of AMP Limited
(e) Reconciliation of segment revenue
Total segment revenue
Add revenue excluded from segment revenue
–
–
Investment gains and (losses) – shareholders and policyholders (excluding AMP Bank interest revenue)
Revenue of investment entities controlled by the life entities’ statutory funds which carry out
business operations unrelated to the core wealth management operations of the AMP group
Other revenue
Add back expenses netted against segment revenue
–
Claims, expenses, movement in insurance contract liabilities and tax relating to Australian
Wealth Protection, Australian Mature and AMP Financial Services New Zealand businesses
Interest expense related to AMP Bank
External investment manager and advisor fees paid in respect of certain assets under management
–
–
–
Remove intersegment revenue
Total revenue6
2012
$m
347
190
167
73
777
99
876
(61)
815
226
(86)
–
955
(12)
(9)
(4)
34
964
(4)
(128)
(99)
(29)
704
2011
$m
322
215
153
76
766
83
849
(57)
792
183
(82)
16
909
(50)
13
53
4
929
(42)
(105)
(75)
(19)
688
2,541
2,343
11,213
223
89
1,788
696
667
(335)
612
270
110
1,433
685
526
(296)
16,882
5,683
1
Underlying investment income consists of investment income on shareholder assets invested in income producing investment assets (as opposed
to income producing operating assets) normalised in order to bring greater clarity to the results by eliminating the impact of short-term
market volatility on underlying performance. Underlying returns are set based on long-term expected returns for each asset class, except for
a short term return, equivalent to a one year government bond, set annually for the implicit DAC component of shareholder assets. Market
adjustment – investment income is the excess (shortfall) between the underlying investment income and the actual return on shareholder
assets invested in income producing investment assets.
2 Market adjustment – annuity fair value relates to the net impact of investment markets on AMP’s annuity portfolio.
3
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. For NMLA, this also included the impact of changes in the market value of equities up until June 2011. Equities were
removed from backing the asset allocation in June 2011 following the merger.
Other items include one-off and non-recurring revenues and costs.
Under Australian Accounting Standards, some assets held on behalf of the policyholders (and related tax balances) are recognised in the
fi nancial 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 profi t attributable to shareholders. These
differences have no impact on the operating earnings of the AMP group.
Revenue as per the Income statement of $16,882m (2011: $5,683m) comprises Premiums and related revenue $2,218m (2011: $1,877m),
Fee revenue $2,268m (2011: $1,962m), Other revenue $312m (2011: $380m) and Investment gains and (losses) gains of $12,084m (2011:
gains of $1,464m).
4
5
6
58
AMP 2012 fi nancial report
4.
Income
(a) Life insurance premium and related revenue
Life insurance contract premium revenue
Reinsurance recoveries
Total life insurance premium and related revenue
(b) Fee revenue
Investment management and origination fees
Financial advisory fees
Service fees – subsidiaries
Total fee revenue
(c) Other revenue
Defi ned benefi t plan income
Other revenue1
Total other revenue
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
2,105
113
1,786
91
2,218
1,877
1,745
523
–
1,517
445
–
2,268
1,962
7
305
312
2
378
380
–
–
–
–
–
12
12
–
–
–
–
–
–
–
–
16
16
–
–
–
1
Other revenue includes trading revenue of investment entities controlled by the AMP life entities’ statutory funds which carry out business
operations unrelated to the core wealth management operations of the AMP group.
5.
Investment gains and (losses)
Investment gains and (losses)
Interest1
Dividends and distributions
– subsidiaries
– associated entities not equity accounted
– other entities
Rental income
Net realised and unrealised gains and (losses)2
Other investment income
Total investment gains and (losses)3
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2,391
2,586
–
231
2,467
653
6,262
80
–
261
3,192
676
(5,294)
43
12,084
1,464
2
295
–
–
–
–
–
297
2011
$m
3
280
–
–
–
–
–
283
1
2
3
Interest includes interest income from fi nancial assets designated at fair value through profi t or loss upon initial recognition, with the
exception of $838m (2011: $820m) interest income from held to maturity investments and loans and advances in banking operations, which
are measured at amortised cost.
Net realised and unrealised gains and losses include net gains and losses on fi nancial assets and fi nancial liabilities designated at fair value
through profi t or loss upon initial recognition.
Investment gains and losses include amounts attributable to shareholders’ interests, policyholders’ interests in the AMP life insurance entities’
statutory funds, external unitholders’ interests and non-controlling interests.
59
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
6. Expenses
(a) Life insurance claims and related expenses
Life insurance contract claims and related expenses
Outwards reinsurance expense
Total life insurance claims and related expenses
(b) Operating expenses
Commission and advisory fee-for-service expense
Investment management expenses
Fee and commission expenses
Wages and salaries
Contributions to defi ned contribution plans
Defi ned benefi t fund expense
Share-based payments expense
Other staff costs
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
(1,953)
(95)
(1,714)
(76)
(2,048)
(1,790)
(1,015)
(267)
(911)
(257)
(1,282)
(1,168)
(938)
(90)
(2)
(27)
(73)
(869)
(62)
(9)
(26)
(139)
–
–
–
–
–
–
(4)
–
–
(5)
(1)
–
–
–
–
–
–
(6)
–
–
(4)
(1)
Staff and related expenses
(1,130)
(1,105)
(10)
(11)
Occupancy and other property related expenses
Direct property expenses1
Information technology and communication
Professional fees
Advertising and marketing
Travel and entertainment
Impairment of intangibles2
Amortisation of intangibles
Depreciation of property, plant and equipment
Other expenses4
Other operating expenses
Total operating expenses3
(c) Finance costs
Interest expense on borrowings and subordinated debt
Other fi nance costs
Total fi nance costs
(108)
(179)
(296)
(122)
(41)
(42)
(56)
(218)
(44)
(306)
(103)
(179)
(209)
(150)
(50)
(38)
(29)
(163)
(37)
(194)
(1,412)
(1,152)
–
–
–
–
–
–
–
–
–
(3)
(3)
–
–
–
–
–
–
–
–
–
(5)
(5)
(3,824)
(3,425)
(13)
(16)
(747)
(70)
(817)
(807)
(110)
(917)
–
–
–
–
–
–
1
2
3
4
Direct property expenses relate to investment properties which generate rental income.
Impairment of intangibles includes $40m in relation to controlled entities of AMP life insurance entities’ statutory funds. Further information
is provided in note 13.
Total operating expenses include certain trading expenses of investment entities controlled by the AMP life insurance entities’ statutory funds
which carry out business operations unrelated to the core wealth management operations of the AMP group.
Other expenses in 2012 includes $84m (before tax) provided for costs of implementing regulatory change.
60
AMP 2012 fi nancial report
7.
Income tax
(a) Analysis of income tax (expense) credit
Current tax (expense) credit
Increase (decrease) in deferred tax assets
(Increase) decrease in deferred tax liabilities
Over (under) provided in previous years including
amounts attributable to policyholders
Income tax (expense) credit
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
(300)
10
(497)
90
(697)
(405)
300
139
(31)
3
14
(1)
–
(8)
5
4
43
–
22
69
(b) Relationship between income tax expense and accounting profi t
The following table provides a reconciliation of differences between prima facie tax calculated as 30 per cent of the profi t before
income tax for the year and the actual income tax expense recognised in the Income statement for the year. The income tax expense
amount refl ects the impact of both income tax attributable to shareholders as well as income tax attributable to policyholders.
In respect of income tax expense attributable to shareholders, the tax rate which applies is 30 per cent in Australia and 28 per cent
in New Zealand.
Income tax attributable to policyholders is based on investment income allocated to policyholders less expenses deductible against
that investment income. The impact of the tax is charged against policyholder liabilities. A number of different tax rate regimes
apply to policyholders. In Australia, certain classes of policyholder life insurance income and superannuation earnings are taxed
at 15 per cent, and certain classes of income on some annuity business are tax-exempt. The rate applicable to New Zealand life
insurance business during the year is 28 per cent.
Profi t before income tax
Policyholder tax (expense) credit recognised as part of the change
in policyholder liabilities in determining profi t before tax
Profi t before income tax excluding tax charged to policyholders
Prima facie tax at the rate of 30%
Shareholder impact of par-business tax treatment
Non-deductible expenses
Non-taxable income
Tax offsets and credits
Dividend income from controlled entities
Other items
Tax effect of differences between amounts of income and expenses
recognised for accounting and the amounts deductible/taxable in
calculating taxable income:
–
–
–
–
–
–
Over (under) provided in previous years after excluding
amounts attributable to policyholders1
Benefi t arising from previously unrecognised tax losses
Differences in overseas tax rate
Income tax (expense) credit attributable to shareholders
Income tax (expense) credit attributable to policyholders
Income tax (expense) credit per Income statement
Consolidated
Parent
2012
$m
1,384
(561)
823
(247)
(22)
(65)
5
83
–
(14)
83
31
10
(136)
(561)
(697)
2011
$m
673
265
938
(281)
24
(39)
16
17
–
(11)
(33)
41
4
(262)
265
3
2012
$m
296
–
296
(89)
–
(1)
–
–
89
1
(7)
12
–
5
–
5
2011
$m
283
–
283
(85)
–
(1)
–
–
84
3
22
46
–
69
–
69
1
The over provision in prior years reported in 2012 mainly relates to the release of provisions previously held against the tax treatment of
amounts for which additional evidence has been obtained and analysis performed during the period supporting the validity of the original tax
treatment. The under provision in 2011 mainly relates to the reassessment of deductions previously recognised in respect of managed funds.
61
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
7. Income tax continued
(c) 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
(d) Analysis of deferred tax liabilities
Unrealised investment gains
Unrealised movements on borrowings and derivatives
Other
Total deferred tax liabilities
(e) Amounts recognised directly in equity
Deferred income tax (expense) credit related to items
taken directly to equity during the current period
Consolidated
Parent
2012
$m
2011
$m
2012
$m
344
59
100
600
82
350
55
273
356
61
1,185
1,095
770
86
536
1,392
274
62
587
923
1
–
–
59
5
65
–
–
–
–
(51)
58
–
2011
$m
1
–
–
329
3
333
–
–
–
–
–
(f) Unused tax losses and deductible temporary differences not recognised
Revenue losses
Capital losses
121
485
116
560
110
408
104
477
8. Receivables
Investment income receivable
Investment sales and margin accounts receivable
Life insurance contract premiums receivable
Reinsurance and other recoveries receivable
Reinsurers’ share of life insurance contract liabilities
Trade debtors
Other receivables
Other receivables – subsidiaries tax related amounts
Consolidated
Parent
2012
$m
111
656
369
29
530
227
121
–
2011
$m
193
689
355
11
477
309
187
–
2012
$m
2011
$m
–
–
–
–
–
1
2
56
59
–
–
–
–
–
1
2
–
3
Total receivables1
2,043
2,221
1
$464m (2011: $455m) of Total consolidated receivables is expected to be recovered more than 12 months from reporting date and nil (2011: nil)
of Total receivables of the parent is expected to be recovered more than 12 months from reporting date.
62
AMP 2012 fi nancial report
9.
Inventories and other assets
Inventories1
Prepayments
Other assets2
Total inventories and other assets3
Consolidated
Parent
2012
$m
145
53
3
201
2011
$m
202
71
3
276
2012
$m
2011
$m
–
–
–
–
–
–
–
–
1
2
3
Inventories include inventories and development properties of investment entities controlled by the life entities’ statutory funds which carry
out business operations unrelated to the core wealth management operations of the AMP group. Inventories also include fi nancial planning
client servicing rights held for sale in the ordinary course of business. AMP group has arrangements in place with certain fi nancial planning
advisers whereby AMP group is required, subject to the adviser meeting certain conditions, to pay a benefi t to those advisers on surrender of
the client servicing rights. The benefi t paid under these arrangements is calculated based on value metrics attributable to the client register
at the valuation date. AMP has the right to change the multiples used to determine the benefi t paid (subject to a notice period). In some
cases, the arrangements can be changed without notice should legislation, economic or product changes render them inappropriate. In the
normal course of business, AMP group seeks to on-sell the client servicing rights to other fi nancial planning advisers and accordingly any client
servicing rights acquired under these arrangements are classifi ed as inventory.
Other assets are assets of investment entities controlled by the life entities’ statutory funds which carry out business operations unrelated to
the core wealth management operations of the AMP group.
$93m of inventories and other assets is expected to be recovered more than 12 months from the reporting date. The basis for determining this
estimate has changed from the prior year. Had the revised basis been applied in the prior year, the expected amount to be recovered more than
12 months from the reporting date for 2011 would have been $102m.
10. Investments in fi nancial assets and other fi nancial liabilities
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
Investments in fi nancial assets measured at fair value through profi t or loss1
Equity securities and listed managed investment schemes
Debt securities2
Investments in unlisted managed investment schemes
Derivative fi nancial assets
Other fi nancial assets3
Total investments in fi nancial assets measured at fair value
through profi t or loss
Investments in fi nancial assets measured at amortised cost
Loans and advances – to subsidiaries
Loans and advances
Debt securities – held to maturity
37,083
30,696
15,305
2,144
145
32,223
29,082
12,793
2,251
179
85,373
76,528
–
12,462
1,839
–
11,254
1,651
Total investments in fi nancial assets measured at amortised cost
14,301
12,905
Other fi nancial liabilities
Derivative fi nancial liabilities
Collateral deposits held4
Total other fi nancial liabilities
1,263
1,054
1,155
1,449
2,317
2,604
–
–
–
–
–
–
620
–
–
620
–
–
–
–
–
–
–
–
–
767
–
–
767
–
–
–
1
2
3
4
Investments measured at fair value through profi t or loss are mainly assets of the life entities’ statutory funds and controlled entities of the
life entities’ statutory funds.
Included within debt securities are assets held to back the liability for collateral deposits held in respect of debt security repurchase
arrangements entered into by the life entities’ statutory funds and the controlled entities of the life entities’ statutory funds.
Other fi nancial assets include investments of the life entities’ statutory funds and controlled entities of the life entities’ statutory funds.
Collateral deposits held represents the obligation to repay collateral held in respect of debt security repurchase arrangements entered into by
the life entities’ statutory funds and the controlled entities of the life entities’ statutory funds.
63
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
11. Investment property
Investment property
Directly held
Total investment property
Movements in investment property
Balance at the beginning of the year
Additions – through direct acquisitions
Additions – subsequent expenditure recognised in carrying amount
Acquisitions (disposal) through business combinations
Disposals
Net gains (losses) from fair value adjustments
Foreign currency exchange differences
Transfer from inventories
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
6,508
7,424
6,508
7,424
7,424
465
104
(793)
(766)
70
4
–
7,122
–
85
11
(21)
176
2
49
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at the end of the year1
6,508
7,424
1
Investment property of $3,066m (2011: $3,701m) held by controlled entities of the life entities’ statutory funds has been provided as security
against borrowings of these controlled entities of the life entities’ statutory funds.
Valuation of investment property
Investment property is measured at fair value at each reporting date. Fair value represents the amount at which the assets
could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction.
Fair values of the AMP group’s properties are determined by independent registered valuers who have appropriate registered
professional qualifi cations and recent experience in the location and category of the property being valued.
The fair value appraisals are obtained on a rolling annual basis. The valuation schedule may be altered when a property is either
undergoing or being appraised for redevelopment, refurbishment or sale, or is experiencing other changes in assets or tenant
profi les which may signifi cantly impact value: or when there have been signifi cant changes in the property market and broader
economy such as updates to comparable property sales which may have an impact on the individual asset values. The carrying value
of each investment property is assessed at reporting date to ensure there has been no material change to the fair value since the
valuation date.
The valuers apply ‘comparable sales analysis’ and the ‘capitalised income approach’ by reference to annual net market income,
comparable capitalisation rates and other property-specifi c adjustments as well as discounted cash fl ow analysis where the
expected net cash fl ows are discounted to their present value using a market determined risk adjusted discount rate. The fair
value of investment property does not refl ect future capital expenditure that will improve or enhance the property.
Primary assumptions used in valuing investment property
Capitalisation rates
Market determined, risk adjusted discount rate
6.00%–10.00%
8.75%–11.00%
6.00%–9.75%
9.00%–10.50%
–
–
–
–
Consolidated
Parent
2012
2011
2012
2011
64
AMP 2012 fi nancial report
12. Property, plant and equipment
2012
Property, plant and equipment
Gross carrying amount
Less: accumulated depreciation and impairment losses
Property, plant and equipment at written down value
through direct acquisitions
Movements in property, plant and equipment
Balance at the beginning of the year
Additions
–
– subsequent expenditure recognised in carrying amount
Increases (decreases) from revaluations recognised directly in equity
Depreciation expense
Transfer to disposal group
Other movements
Balance at the end of the year
2011
Property, plant and equipment
Gross carrying amount
Less: accumulated depreciation and impairment losses
Property, plant and equipment at written down value
through direct acquisitions
Movements in property, plant and equipment
Balance at the beginning of the year
Additions
–
– subsequent expenditure recognised in carrying amount
Acquisitions through business combinations
Increases (decreases) from revaluations recognised directly in equity
Depreciation expense
Balance at the end of the year
Owner-
occupied
property1
$m
Leasehold
improvements
$m
Plant and
equipment2
$m
Total
$m
732
(264)
468
313
(181)
132
154
479
26
–
–
(31)
(15)
(2)
36
2
12
(44)
(15)
(2)
132
468
322
(168)
154
136
24
–
22
–
(28)
154
707
(228)
479
452
29
4
22
9
(37)
479
321
–
321
311
–
2
12
(4)
–
–
321
311
–
311
301
–
4
–
9
(3)
311
98
(83)
15
14
10
–
–
(9)
–
–
15
74
(60)
14
15
5
–
–
–
(6)
14
1
2
Owner-occupied property is measured at fair value; had the asset been measured at historic cost the amortised carrying value would have
been $198m (2011: $200m).
Plant and equipment includes operating assets of investment entities controlled by the life entities’ statutory funds which carry out business
operations unrelated to the core wealth management operations of the AMP group.
65
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
13. Intangibles
Goodwill1
$m
Capitalised
costs
$m
Management
rights
$m
Value of
in-force
business
$m
Distribution
networks
$m
Other
intangibles
$m
Total
$m
2012
Intangibles
Gross carrying amount
Less: accumulated amortisation
and/or impairment losses
2,888
691
16
1,191
(144)
(462)
(15)
(180)
Intangibles at written down value
2,744
229
1
1,011
173
(30)
143
139
5,098
(92)
47
(923)
4,175
Movements in intangibles
Balance at the beginning of the year
Additions (reductions) through acquisitions
(disposal) of controlled entities2
Additions through separate acquisition
Additions through internal development
Transferred to disposal groups
Amortisation expense3
Impairment losses4
Other movements
2,815
23
–
–
(54)
–
(40)
–
Balance at the end of the year
2,744
171
–
–
120
–
(60)
(2)
–
229
15
1,114
128
104
4,347
–
–
–
–
–
(14)
–
–
–
–
–
(103)
–
–
13
27
–
–
(20)
–
(5)
1
1,011
143
(3)
–
–
(19)
(35)
–
–
47
33
27
120
(73)
(218)
(56)
(5)
4,175
2011
Intangibles
Gross carrying amount
Less: accumulated amortisation
and/or impairment losses
2,919
571
(104)
(400)
Intangibles at written down value
2,815
171
16
(1)
15
1,191
(77)
1,114
138
(10)
128
161
4,996
(57)
(649)
104
4,347
Movements in intangibles
Balance at the beginning of the year
Additions (reductions) through
acquisitions (disposal) of controlled
entities and other businesses2
Additions through separate acquisition
Additions through internal development
Disposals
Amortisation expense3
Impairment losses4
Other movements
Balance at the end of the year
702
162
20
–
–
35
919
2,140
2
–
–
–
(29)
–
2,815
–
–
61
–
(50)
–
(2)
–
–
–
(5)
–
–
–
1,191
–
–
–
(77)
–
–
95
43
–
–
(10)
–
–
94
1
–
–
(26)
–
–
3,520
46
61
(5)
(163)
(29)
(2)
171
15
1,114
128
104
4,347
1
2
Total goodwill comprises amounts attributable to shareholders of $2,682m (2011: $2,659m) and amounts attributable to policyholders of
$62m (2011: $156m).
Additions arose from the purchase of the remaining 50 per cent share of AMP Capital Brookfi eld Pty Limited, Cavendish Pty Limited and
acquisition of distribution networks related to planner businesses. 2011 additions arose from the acquisition of AMP AAPH Limited.
3 Amortisation expense for the year is included in Operating expenses in the Income statement.
4
Impairment of goodwill relates to goodwill of controlled entities of the life entities’ statutory funds, which carry out business operations
unrelated to the core wealth management operations of the AMP group.
66
AMP 2012 fi nancial report
13. Intangibles continued
Impairment testing of goodwill
Goodwill includes balances attributable to shareholders and balances attributable to policyholders in investment entities controlled
by the AMP life insurance entities’ statutory funds.
Australian WM – goodwill attributable: $1,405m (2011: $1,390m)
Australian WP – goodwill attributable: $668m (2011: $668m)
Australian Mature – goodwill attributable: $350m (2011: $350m)
AMP Financial Services New Zealand – goodwill attributable $172m (2011: $172m)
AMP Capital – goodwill attributable $87m (2011: $79m).
Goodwill attributable to shareholders
$2,682m (2011: $2,659m) of the goodwill is attributable to shareholders and arose from the acquisition of AMP AAPH Limited group
in the prior year, a previous Life Act Part 9 transfer of life insurance business into the statutory funds of AMP Life and other business
combinations where AMP group was the acquirer.
Each of the businesses acquired included activities conducted in the same business units already operated by AMP. Those business
units are Australian Wealth Management (WM), Australian Wealth Protection (WP), Australian Mature, AMP Financial Services
New Zealand and AMP Capital and those business units are identifi ed as the cash generating units for the purpose of assessing
goodwill impairment.
For the purposes of impairment testing, the amount is allocated to the cash generating units as follows:
–
–
–
–
–
AMP Capital has other intangible assets of $nil (2011: $15m) with an indefi nite useful life. There were no other intangible assets
with indefi nite useful lives allocated to these cash generating units.
The recoverable amount for each cash generating unit has been determined using the ‘fair value less costs to sell’ basis. For each
cash generating unit, other than AMP Capital, the recoverable amount has been determined considering a combination of the
estimated embedded value plus the value of one year’s new business times a multiplier. These are generally regarded as features
of a Life insurance business that, when taken together, would be an estimate of fair value. Embedded value is a calculation which
represents the economic value of the shareholder capital in the business and the future profi ts expected to emerge from the
business currently in-force expressed in today’s dollars.
The key assumptions applied in estimating the embedded value and value of one year’s new business are: mortality, morbidity,
discontinuance rates, maintenance unit costs, future rates of supportable bonus for participating business, franking credits, risk
discount rates, investment returns and infl ation rates. Premium and claim amounts are estimated over the expected life of the
in-force policies which varies depending on the nature of the product. Future maintenance and investment expenses are estimated
based on unit costs derived from budgeted amounts for the following year and increased in future years for expected rates of
infl ation. Assumptions applied in this valuation are consistent with the best estimate assumptions used in calculating the policy
liabilities of AMP’s life insurance entities except that the value of in-force and new business calculation includes a risk discount
rate. Note 1(s) and note 20 provide extensive details with respect to the assumptions, management’s approach to determining the
values assigned to each key assumption and their consistency with past experience and external sources of information. All relevant
business is projected for the embedded value and the description of the assumptions in note 20 applies even where that business
is not valued by projection methods for profi t reporting. The value of in-force and new business calculation uses a risk discount rate
based on the zero coupon government bond curve plus a discount margin of three per cent: Australia 6.3 per cent (2011: 6.7 per cent),
New Zealand 6.6 per cent (2011: 6.8 per cent).
The recoverable amount for the AMP Capital cash generating unit is determined based on an observable market price.
The conclusion from the goodwill impairment testing is that there has been no impairment to the amount of the goodwill
recognised and there is no reasonably possible change in key assumptions that could cause the carrying amount to exceed the
recoverable amount.
Goodwill attributable to policyholders
The policyholder goodwill has arisen on acquisitions of operating subsidiaries controlled by the AMP life insurance entities’ statutory
funds, which carry out business operations unrelated to the core wealth management operations of the AMP group. The goodwill
represents the future value of cash fl ows expected to be derived from those operating subsidiaries.
The individual goodwill components are not signifi cant in comparison with the total carrying amount of goodwill attributable
to policyholders. Impairment testing resulted in an impairment of $40m recognised during the year ended 31 December 2012
(31 December 2011: $29m). Of this amount, $26m was incurred as a result of a decline in projected future cash fl ows in underlying
operating subsidiaries controlled by the AMP life insurance entities’ statutory funds. The remaining $14m was recognised on the
classifi cation of operating subsidiaries controlled by the AMP life insurance entities’ statutory funds as disposal groups held for sale
which required the basis for determining the recoverable amount to be changed from ‘value in use’ to ‘fair value less cost to sell’.
Impairment testing of these goodwill balances is based on each asset’s value in use, calculated as the present value of forecast
future cash fl ows from those assets using discount rates of between 11.9 per cent and 15.0 per cent (2011: 12.8 per cent and
16.2 per cent).
The forecast cash fl ows used in the impairment testing for operating subsidiaries are based on assumptions as to the level of
profi tability for each business over the forecast period. Forecasts for the following 12 months have in each case been extrapolated
based on terminal value growth rates of between 2.7 per cent and 4.0 per cent per annum (2011: 3.0–5.0 per cent per annum).
The projected revenues are based on the businesses in their current condition. The assumptions do not include the effects of any
future restructuring to which the entity is not yet committed or of future cash outfl ows by the entity that will improve or enhance
the entity’s performance.
At the reporting date, there is no reasonably possible change in key assumptions that could cause the carrying amount to exceed
the recoverable amount.
Shareholders have no direct exposure to movements in goodwill attributable to policyholders. However, due to the impact of the
accounting for investments in controlled entities of the AMP life insurance entities’ statutory funds (see note 1(b)), policyholder
asset movements (including goodwill) can impact the net profi t after tax attributable to shareholders. Any impact is temporary
in nature, reversing no later than the point at which AMP group ceases to control the investments.
67
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
14. Payables
Consolidated
Parent
Investment purchases and margin accounts payable
Life insurance and investment contracts in process of settlement
Accrued expenses
Interest payable
Trade creditors
Other payables
– subsidiaries
– subsidiaries tax related amounts
– other entities
2012
$m
454
314
154
24
100
–
–
822
2011
$m
551
349
112
34
237
–
–
649
Total payables1,2
1,868
1,932
2012
$m
2011
$m
–
–
–
–
–
13
21
1
35
–
–
–
–
–
13
84
1
98
1
2
Total payables include payables of investment entities controlled by the AMP life insurance entities’ statutory funds which carry out business
operations unrelated to the core wealth management operations of the AMP group.
$1m (2011: $45m) of Total payables of the AMP group is expected to be settled more than 12 months from the reporting date and nil (2011: nil)
of Total payables of the parent is expected to be settled more than 12 months from the reporting date.
15. Provisions
(a) Provisions
Employee entitlements1
Restructuring2
Other3
Total provisions
(b) Movements in provisions – consolidated
Balance at the beginning of the year
Additional provisions made during the year
Unused amounts reversed during the year
Provisions used during the year
Foreign exchange movements
Transferred to disposal group
Balance at the end of the year
(c) Movements in provisions – parent
Balance at the beginning of the year
Additional provisions made during the year
Unused amounts reversed during the year
Provisions used during the year
Balance at the end of the year
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
289
16
273
578
267
50
239
556
3
–
–
3
3
–
–
3
Employee
entitlements1
$m
Restructuring2
$m
Other3
$m
Total
$m
267
408
(1)
(380)
2
(7)
289
3
–
–
–
3
50
29
(17)
(46)
–
–
16
–
–
–
–
–
239
169
(20)
(104)
(6)
(5)
273
–
–
–
–
–
556
606
(38)
(530)
(4)
(12)
578
3
–
–
–
3
1
2
3
Provisions for employee entitlements are in respect of amounts accumulated as a result of employees rendering services up to the reporting
date. These entitlements include salaries, wages, bonuses, annual leave and long service leave, but exclude share-based payments.
$17m (2011: $15m) of the consolidated balance is expected to be settled more than 12 months from the reporting date. $2m (2011: $2m)
of the parent balance is expected to be settled more than 12 months from the reporting date.
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. Nil (2011: $4m) is expected to be settled more than 12 months from the reporting date.
Other provisions are in respect of probable outgoings on data quality and integrity projects, settlements, and various other operational
provisions. $12m (2011: $26m) is expected to be settled more than 12 months from the reporting date.
68
AMP 2012 fi nancial report
16. Borrowings
Bank overdrafts
Bank loans
Bonds and notes
Deposits1
Other borrowings
Total borrowings2
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
7
520
6,113
4,687
55
4
850
6,228
4,271
57
11,382
11,410
–
–
–
–
–
–
–
–
–
–
–
–
1
2
Deposits mainly comprise at call retail cash on deposit and retail term deposits at variable interest rates within the AMP Bank.
Total borrowings comprise amounts to fund:
i
Corporate and other shareholder activities of AMP group $701m (2011: $594m). Of this balance $701m (2011: $204m) is expected to be
settled more than 12 months from the reporting date
AMP Bank and securitisation trusts borrowings $9,667m (2011: $9,277m). Of this balance $4,816m (2011: $4,204m) is expected to be
settled more than 12 months from the reporting date
Statutory fund borrowings and borrowings within controlled entities of AMP Life are $1,011m (2011: $1,539m). Of this balance $671m
(2011: $1,182m) is expected to be settled more than 12 months from the reporting date, and
AMP Capital borrowing from Mitsubishi UFJ Trust and Banking Corporation (MUTB) $3m (2011: nil) as part of the MUTB strategic business
and capital alliance. All of this balance is expected to be settled more than 12 months from the reporting date.
ii
iii
iv
17. Subordinated debt
AMP Bank Floating Rate Subordinated Unsecured Notes
(fi rst call date 2017, maturity 2022)1
6.875% GBP Subordinated Guaranteed Bonds (maturity 2022)
Floating Rate Subordinated Unsecured Notes (fi rst call date 2016, maturity 2021)2
A$ AMP Notes (fi rst call date 2014, maturity 2019)3
NZ$ AMP Notes (fi rst call date 2014, maturity 2019)3
Total subordinated debt4
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
150
67
600
202
92
1,111
–
63
599
199
88
949
–
–
–
–
–
–
–
–
–
–
–
–
1
2
3
4
AMP Bank fl oating rate subordinated unsecured notes have a 10 year maturity and non-callable for fi ve years. $150m is net of issue costs and
accrued interest.
In the event that AMP does not call the subordinated debt at the fi rst call date the note holders have the right to exchange the notes for AMP
shares at a small discount to volume weighted average price at that time.
In the event that AMP does not call the subordinated debt at the fi rst call date the note holders have the right to an interest margin 150 per cent
higher than that at issue.
Subordinated debt amounts are to fund corporate activities of AMP group. All of this balance (2011: all) is expected to be settled more than
12 months from the reporting date.
69
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
18. Dividends
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
Final dividends paid
2011 fi nal dividend paid in 2012: 14 cents per ordinary share franked to 50%
(2010 fi nal dividend paid in 2011: 15 cents per ordinary share franked to 60%)
400
314
400
314
Interim dividends paid
2012: 12.5 cents per ordinary share franked to 55%
(2011: 15.0 cents per ordinary share franked to 30%)
Total dividends paid1,2
Final dividends proposed but not recognised
2012: 12.5 cents per ordinary share franked to 65%
362
762
422
736
362
762
422
736
366
n/a
366
n/a
Dividend franking account3,4
Franking credits available to shareholders of AMP Limited (at 30%)
191
165
191
165
1
2
3
4
Total dividends paid includes dividends paid on ‘treasury shares’. See Statement of changes in equity for further information regarding the
impact of ‘treasury shares’ on dividends paid and retained earnings.
All dividends are franked at a tax rate of 30 per cent.
The franking credits available to shareholders are based on the balance of the dividend franking account at the reporting date adjusted for:
i
ii
iii
iv franking credits that the entity may be prevented from distributing in subsequent years.
The company’s ability to utilise the franking account credits depends on meeting Corporations Act requirements to declare dividends. The impact
of the proposed dividend will be to reduce the balance of the franking credit account by $102m.
franking credits that will arise from the payment of the current tax liability
franking debits that will arise from the payment of dividends recognised as a liability at the year end
franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated group at the year end, and
70
AMP 2012 fi nancial report
19. Contributed equity
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
Movements in issued capital
Balance at the beginning of the year
Nil (2011: 695,262,564) shares issued for acquisition of AMP AAPH Limited1
75,750,762 (2011: 64,986,020) shares issued under dividend reinvestment plan2
9,297
–
313
5,209
3,802
286
9,297
–
313
Balance at the end of the year
9,610
9,297
9,610
5,209
3,802
286
9,297
Total issued capital
2,930,423,546 (2011: 2,854,672,784) ordinary shares fully paid
9,610
9,297
9,610
9,297
Movements in ‘treasury shares’
Balance at the beginning of the year
(Increase) arising from acquisition of AMP AAPH Limited
(Increase) decrease due to purchases less sales during the year
Balance at the end of the period
Total treasury shares3
55,473,106 (2011: 40,653,518) treasury shares
(217)
–
(54)
(271)
(158)
(10)
(49)
(217)
(271)
(217)
–
–
–
–
–
–
–
–
–
–
Total contributed equity
2,874,950,440 (2011: 2,814,019,266) ordinary shares fully paid
9,339
9,080
9,610
9,297
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.
1
2
3
Shares issued in 2011 to minority shareholders of AMP AAPH Limited for the acquisition of its business recognised at fair value of $3,803m less
deduction for costs of issue $1m.
Under the terms of the dividend reinvestment plan (DRP), shareholders may elect to have all or part of their dividend entitlements satisfi ed
by the issue of new shares rather than being paid cash. Shares were issued under the DRP for the 2011 fi nal dividend (paid in April 2012) at
$3.94 per share, 2012 interim dividend (paid in October 2012) at $4.35 per share.
Of the AMP Limited ordinary shares on issue 55,473,106 (2011: 40,653,518) are held by controlled entities of AMP Limited. AMP’s life insurance
entities hold 53,720,838 (2011: 38,901,250) shares on behalf of policyholders. ASIC has granted relief from restrictions in the Corporations Act
2001 to allow AMP’s life insurance entities to hold and trade shares in AMP Limited as part of the policyholder funds’ investment activities.
The cost of the investment in these ‘treasury shares’ is refl ected as a deduction from total contributed equity.
71
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
20. Life insurance contracts
The AMP group’s life insurance related activities are conducted through two registered life insurance companies, AMP Life Limited
(AMP Life) and, from 30 March 2011, The National Mutual Life Association of Australasia Limited (NMLA).
(a) Assumptions and methodology applied in the valuation of life insurance contract liabilities
Life insurance contract liabilities, and hence the net profi t from life insurance contracts, are calculated by applying the principles of
margin on services (MoS). Refer to note 1(s) for a description of MoS and the methods for calculating life insurance contract liabilities.
The methods and profi t carriers used to calculate life insurance contract liabilities for particular policy types are as follows:
Business type
Method
Conventional
Investment account
Retail risk (lump sum)
Retail risk (income benefi ts)
Group risk (lump sum)
Group risk (income benefi ts)
Participating allocated annuities – AMP Life Modifi ed accumulation
Life annuities
Projection
Modifi ed accumulation
Projection
Projection
Accumulation
Accumulation
Projection
Profi t carriers (for business
valued using projection method)
Bonuses
n/a
Expected premiums
Expected claims
n/a
n/a
n/a
Annuity payments
Key assumptions used in the calculation of life insurance contract liabilities are as follows:
(i) Risk-free discount rates
Except where benefi ts are contractually linked to the performance of the assets held, a risk-free discount rate based on current
observable, objective rates that relate to the nature, structure and term of the future obligations is used. The rates are determined
as shown in the following table.
Business type
Basis1
Australia
New Zealand
Australia
New Zealand
31 December 2012
31 December 2011
Retail risk (other than income
benefi t open claims)
Retail risk and group risk
(income benefi t open claims)
Life annuities2
Non-CPI
CPI
Zero coupon government
bond yield curve
Zero coupon government
bond yield curve (including
liquidity premium)
Zero coupon government
bond yield curve (including
liquidity premium)
Commonwealth indexed
bond yield curve (including
liquidity premium)
1 The discount rates vary by duration in the range shown above.
2 Australian non-CPI annuities and all CPI annuities are AMP Life only.
2.6%–4.4% 2.5%–4.1% 3.2%–4.6% 2.5%–4.1%
2.9%–4.7% 2.8%–4.4% 3.8%–5.2% 2.8%–4.4%
3.0%–4.8% 2.9%–4.5% 3.8%–5.1% 2.8%–4.8%
0.8%–1.8% 1.0%–2.0% 1.5%–2.2%
1.3%
72
AMP 2012 fi nancial report
20. Life insurance contracts continued
(ii) Participating business discount rates
Where benefi ts are contractually linked to the performance of the assets held, as is the case for participating business, a discount
rate based on the expected market return on backing assets is used. The assumed earning rates for backing assets for participating
business are largely driven by long-term (eg 10 year) government bond yields. The 10 year government bond yields used at the
relevant valuation dates are as shown below.
Assumed earning rates for each asset sector are determined by adding to the bond yield various risk premiums which refl ect the
relative differences in expected future earning rates for different asset sectors. For products backed by mixed portfolio assets, the
assumption varies with the proportion of each asset sector backing the product. The risk premiums applicable at the valuation date
are shown in the following table:
Australia
31 December 2012
31 December 2011
New Zealand
31 December 2012
31 December 2011
10 year
government
bonds
Local
equities
International
equities
Property
Fixed
interest
Cash
Risk premiums
3.3%
4.5%
3.5%
2.5%
3.7%
4.5%
3.5%
2.5%
3.6%
4.5%
3.5%
2.5%
3.8%
4.5%
3.5%
2.5%
AMP Life: 0.8%
NMLA: 0.9%
AMP Life: 0.8%
NMLA: 1.1%
AMP Life: 0.8%
NMLA: 0.0%
AMP Life: 0.8%
NMLA: 0.0%
(0.5%)
(0.5%)
(0.5%)
(0.5%)
The risk premiums for local equities include allowance for imputation credits. The risk premiums for fi xed interest refl ect credit
ratings of the portfolio held.
The averages of the asset mixes assumed for the purpose of setting future investment assumptions for participating business at the
valuation date are as shown in the table below for each life company. These asset mixes are not necessarily the same as the actual
asset mix at the valuation date as they refl ect long term assumptions.
Australia
31 December 2012
31 December 2011
New Zealand
31 December 2012
31 December 2011
AMP Life
NMLA
AMP Life
NMLA
AMP Life
NMLA
AMP Life
NMLA
Equities
Property
Fixed interest
Cash
30%
37%
30%
37%
40%
48%
40%
48%
11%
13%
11%
13%
17%
2%
17%
2%
39%
35%
39%
35%
37%
40%
37%
40%
20%
15%
20%
15%
6%
10%
6%
10%
The asset mix in the table above includes both conventional and investment account business for AMP Life, but only conventional
business for NMLA. As described in note 1(s), 100 per cent of investment profi ts on NMLA’s investment account business are
allocated to policyholders.
Where an assumption used is net of tax, the tax on investment income is allowed for at rates appropriate to the class of business
and asset sector, including any allowance for imputation credits on equity income. For this purpose, the total return for each asset
sector is split between income and capital gains. The actual split has varied at each valuation date as the total return has varied.
(iii) Future participating benefi ts
For participating business, the total value of future bonuses (and the associated shareholders’ profi t margin) included in life
insurance contract liabilities is the amount supported by the value of the supporting assets, after allowing for the assumed
future experience. The pattern of bonuses and shareholders’ profi t margin assumed to emerge in each future year depends on
the assumed relationship between reversionary bonuses (or interest credits) and terminal bonuses. This relationship is set to
refl ect the philosophy underlying actual bonus declarations.
Actual bonus declarations are determined to refl ect, over time, the investment returns of the particular fund and other factors
in the emerging experience and management of the business. These factors include:
–
–
–
–
allowance for an appropriate degree of benefi t smoothing
reasonable expectations of policyholders
equity between generations of policyholders applied across different classes and types of business
ongoing capital adequacy.
Given the many factors involved, the range of bonus structures and rates for participating business are extremely diverse.
73
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
20. Life insurance contracts continued
Typical supportable bonus rates on major product lines are as follows (31 December 2011 in parentheses).
Reversionary bonus
Australia
New Zealand
Bonus on sum insured
Bonus on existing bonuses
AMP Life
NMLA
AMP Life
NMLA
0.4%–0.9% (0.2%–0.8%)
0.6%–1.4% (0.6%–1.4%)
0.4%–0.7% (0.3%–0.5%)
(0.9%)
0.9%
0.7%–0.9% (0.4%–0.8%)
1.2%–2.0% (1.2%–2.0%)
0.4%–0.7% (0.3%–0.5%)
(1.3%)
1.3%
Terminal bonus
The terminal bonus scales are complex and vary by duration, product line, class of business and country for AMP Life and NMLA.
Crediting rates (investment account)
Australia
New Zealand
AMP Life
NMLA
AMP Life
NMLA
2.2%–4.6% (1.6%–3.7%)
3.9%–7.8% (5.2%–9.8%)
2.9%–3.1% (2.4%–2.9%)
3.0%–5.0% (3.3%–5.5%)
(iv) Future maintenance and investment expenses
Unit maintenance costs are based on budgeted expenses in the year following the reporting date (including GST, as appropriate,
and excluding one-off expenses). For future years, these are increased for infl ation as described in (v) below. These expenses include
fees charged to the life statutory funds by service companies in the AMP group. Unit costs vary by product line and class of business
based on an apportionment that is supported by expense analyses.
Future investment expenses are based on the fees currently charged by the asset managers.
(v) Infl ation and indexation
Benefi ts and premiums under many regular premium policies are automatically indexed by the published consumer price index
(CPI). Assumed future take-up of these indexation options is based on AMP Life’s and NMLA’s own experience with the annual
CPI rates derived from the difference between long-term government bonds and indexed government bonds.
The assumptions for expense infl ation have regard to these rates, recent expense performance, AMP Life’s and NMLA’s current
plans and the terms of the relevant service company agreement, as appropriate.
The assumed annual infl ation and indexation rates at the valuation date are shown in the following table:
Australia
New Zealand
31 December 2012
31 December 2011
AMP Life and NMLA
AMP Life and NMLA
2.7% CPI, 3.0% expenses
2.6% CPI, 3.0% expenses
2.5% CPI, 3.0% expenses
2.5% CPI, 3.0% expenses
(vi) Bases of taxation
The bases of taxation (including deductibility of expenses) are assumed to continue in accordance with legislation current at the
valuation date.
(vii) Voluntary discontinuance
Assumptions for the incidence of withdrawals, paid ups and premium dormancy are primarily based on investigations of AMP
Life’s and NMLA’s own historical experience. These rates are based upon the assessed global rate for each of the individual products
(or product groups) and then, where appropriate, further adjusted for duration, premium structure, smoker status, age attained
or short-term market and business effects. Given the variety of infl uences affecting discontinuance for different product groups,
the range of voluntary discontinuance rates across AMP Life and NMLA are extremely diverse.
The assumptions for future rates of discontinuance for the major classes of life insurance contracts are shown in the following table.
Business type
Conventional
Investment account
Retail risk (lump sum)
Retail risk (income benefi t)
Retail risk (lump sum)
Retail risk (income benefi t)
Flexible Lifetime Super (FLS)
risk business (ultimate rate)
Life company
AMP Life
NMLA
NMLA
AMP Life
AMP Life
NMLA
NMLA
AMP Life
31 December 2012
31 December 2011
Australia
New Zealand
Australia
New Zealand
2.1%–3.0%
3.6%–4.1%
4.8%–22.7%
1.3%–2.5%
4.2%–4.9%
7.0%–8.0%
11.9%–22.0% 10.5%–12.0%
7.0%–12.0%
11.3%
8.8%–9.4% 10.3%–10.6%
8.0%–20.0%
11.5%–13.4%
2.1%–3.0%
3.6%–4.1%
5.2%–23.9%
9.0%–20.0%
10.0%–11.0%
9.9%–11.2%
8.8%–9.4%
1.3%–2.5%
4.2%–4.9%
7.0%–8.0%
10.5%–12.0%
7.0%–12.0%
11.3%
10.3%–10.6%
8.8%–22.7%
n/a
7.5%–13.0%
n/a
Voluntary discontinuance assumptions have increased from those used at 31 December 2011 for AMP Life retail risk and NMLA retail
risk (lump sum only).
74
AMP 2012 fi nancial report
20. Life insurance contracts continued
(viii) Surrender values
The surrender bases assumed for calculating surrender values are those current at the reporting date. There have been no changes
to the bases during the year (or the prior year) that would materially affect the valuation results.
(ix) Mortality and morbidity
Standard mortality tables, based on national or industry wide data, are used (eg IA95-97, IM(F)L00, IA90-92 and PNM(F)L in
Australia and New Zealand). These are then adjusted by factors that take account of AMP Life’s and NMLA’s own experience.
Rates of mortality assumed at 31 December 2012 are unchanged from those assumed at 31 December 2011 in Australia and
New Zealand, except for:
–
–
–
AMP Life Australian and New Zealand conventional business – added an adjustment to allow for future mortality improvements
AMP Life Term (Retail risk lump sum) in Australia has reduced
NMLA Term (ex-AC&L retail risk lump sum business only) has reduced.
Typical mortality assumptions, in aggregate, are shown in the following table:
Conventional – % of
IA95-971 (AMP Life)
Conventional – % of
IA90-92 (NMLA)
Term – % of
IA95-97 (AMP Life)
FLS Risk – % of
IA95-97 (AMP Life)
Individual – % of
IA90-92 (NMLA)
Male
Female
Male
Female
Male
Female
Male
Female
Male
Female
Risk products
Australia
New Zealand
67.5%
73%
67.5%
73%
60%
81%
68%
95%
60%
63%
60%
63%
63%
63%
63%
63%
60%
68%
60%–64%
60%–77%
1 Base IA95-97 table modifi ed for future mortality improvements.
AMP Life
NMLA
Male – % of IML00*
Female – % of IFL00*
Male – % of PNML00
Female – % of PNFL00
Annuities
Australia and New Zealand
95%
80%
80%
80%
For disability income business, the claim assumptions are currently based on IAD89-93, which is derived from Australian experience.
It is adjusted for AMP Life’s and NMLA’s experience, with the adjustment dependent on age, sex, waiting period, occupation,
smoking status and claim duration. For AMP Life, rates have changed for Australia from those at 31 December 2011 resulting in a
higher incidence rate for future claims overall and a lower rate for termination of claims. For NMLA, incidence and termination rates
are unchanged from those at 31 December 2011.
Typical morbidity assumptions, in aggregate, are shown in the following table:
Incidence rates
– % of IAD89-93
(AMP Life)
Incidence rates
– % of IAD89-93
(NMLA)
Termination rates
(ultimate)
– % of IAD 89-93
(AMP Life)
Termination rates
(ultimate)
– % of IAD 89-93
(NMLA)
Income protection
Australia
New Zealand
52%–113%
60%
60%–253%
30%–312%
63%–94%
54%–90%
18%–235%
60%–172%
For trauma cover, standard tables are not available and so assumptions are mostly based on Australian population statistics, with
adjustment for smoking status as well as recent claims experience. Trauma assumptions at 31 December 2012 have increased from
those used at 31 December 2011.
The actuarial tables used were as follows:
IA95-97
IA90-92
A mortality table developed by the Institute of Actuaries of Australia based on Australian insured lives experience
from 1995–1997.
A mortality table developed by the Institute of Actuaries of Australia based on Australian insured lives experience
from 1990–1992.
IML00*/IFL00*
IML00 and IFL00 are mortality tables developed by the Institute of Actuaries and the Faculty of Actuaries based on
United Kingdom annuitant lives experience from 1999–2002. The tables refer to male and female lives respectively
and incorporate factors that allow for mortality improvements since the date of the investigation.
IML00* and IFL00* are these published tables amended for some specifi c AMP experience.
PNML/PNFL
The UK 00 series tables represent the latest annuitant/pensioner experience and therefore replace the 80 series
tables, which are based on experience from 1979 to 1982. Pensioner tables are used given that the NZ annuitants
did not voluntarily obtain annuities as they received one automatically from their pension plan.
IAD 89-93
A disability table developed by the Institute of Actuaries of Australia based on the Australian disability income
experience for the period 1989–1993.
75
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
20. Life insurance contracts continued
(x) Impact of changes in assumptions
Under MoS, for life insurance contracts valuations using the projection method, changes in assumptions are recognised
by adjusting the value of future profi t margins in life insurance contract liabilities. Future profi t margins are released over
future periods.
Changes in assumptions do not include market related changes in discount rates such as changes in benchmark market yields
caused by changes in investment markets and economic conditions. These are refl ected in both life insurance contract liabilities
and asset values at the reporting date.
The impact on future profi t margins of changes in assumptions from 31 December 2011 to 31 December 2012 in respect of life
insurance contracts (excluding new business contracts which are measured using assumptions at reporting date) is as shown in
the following table for the two life companies.
Assumption change
Non-market related changes to discount rates
Mortality and morbidity
Discontinuance rates
Maintenance expenses
Other assumptions1
AMP Life
Change in
life insurance
contract
liabilities
$m
–
–
–
–
–
Change in
future profi t
margins
$m
(21)
(38)
(211)
35
56
Change in
shareholders’
profi t & equity
$m
Change in
future profi t
margins
$m
NMLA
Change in
life insurance
contract
liabilities
$m
Change in
shareholders’
profi t & equity
$m
–
–
–
–
–
(2)
(6)
(314)
(22)
90
(12)
–
–
(2)
3
9
–
–
1
(2)
1 Other assumptions changes include the impact of product and premium rate changes.
In most cases, the overall amount of life insurance contract liabilities and the current period profi t are not affected by changes
in assumptions. However, where in the case of a particular related product group, the changes in assumptions at the end of a
period eliminate any future profi t margins for the related product group, and results in negative future profi t margins, this negative
balance is recognised as a loss in the current period. If the changes in assumptions in a period are favourable for a product group
currently in loss recognition, then the previously recognised losses are reversed in the period.
(b) Insurance risk sensitivity analysis – life insurance contracts
For life insurance contracts that are accounted for under MoS, amounts of liabilities, income or expense recognised in the
period are unlikely to be sensitive to changes in variables even if those changes may have an impact on future profi t margins.
This table shows information about the sensitivity of life insurance contract liabilities for AMP Life and NMLA, current
shareholder period profi t after income tax, and equity, to a number of possible changes in assumptions relating to insurance risk.
Variable
Change in variable
Change in life insurance
contract liabilities
Change in shareholder profi t
after income tax, and equity
Gross of
reinsurance
$m
Net of
reinsurance
$m
Gross of
reinsurance
$m
Net of
reinsurance
$m
AMP Life
Mortality
Annuitant mortality
10% increase in mortality rates
50% increase in the rate of
mortality improvement
Morbidity – lump sum disablement 20% increase in lump sum disablement rates
Morbidity – disability income
Morbidity – disability income
Discontinuance rates
Maintenance expenses
10% increase in incidence rates
10% decrease in recovery rates
10% increase in discontinuance rates
10% increase in maintenance expenses
NMLA
Mortality
Annuitant mortality
10% increase in mortality rates
50% increase in the rate of
mortality improvement
Morbidity – lump sum disablement 20% increase in lump sum disablement rates
Morbidity – disability income1
Morbidity – disability income1
Discontinuance rates1
Maintenance expenses1
10% increase in incidence rates
10% decrease in recovery rates
10% increase in discontinuance rates
10% increase in maintenance expenses
(1)
(1)
1
–
–
–
–
–
–
–
–
115
227
28
27
1
–
–
–
–
–
–
–
–
113
211
27
27
1
(1)
–
–
–
–
–
–
–
–
(81)
(159)
(20)
(19)
1
(1)
–
–
–
–
–
–
–
–
(79)
(148)
(19)
(19)
1
At 31 December 2011, changes in assumptions fully absorbed future profi t margins on NMLA’s retail ordinary disability income products and
these products remain in a capitalised loss position at 31 December 2012. Any improvement in the assumptions for these products would be
recognised initially as a reversal of the previously recognised loss.
76
AMP 2012 fi nancial report
20. Life insurance contracts continued
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
(c) Analysis of life insurance contract premium and related revenue
Total life insurance contract premiums received and receivable
Less: component recognised as a change in life insurance contract liabilities
Life insurance contract premium revenue1
Reinsurance recoveries
3,203
(1,098)
2,105
113
2,900
(1,114)
1,786
91
Total life insurance contract premium and related revenue
2,218
1,877
(d) Analysis of life insurance contract claims and related expenses
Total life insurance contract claims paid and payable
Less: component recognised as a change in life insurance contract liabilities
Life insurance contract claims expense
Outwards reinsurance expense
(3,448)
1,495
(1,953)
(95)
(3,099)
1,385
(1,714)
(76)
Total life insurance contract claims and related expenses
(2,048)
(1,790)
(e) Analysis of life insurance contract operating expenses
Life insurance contract acquisition expenses
– commission
– other expenses
Life insurance contract maintenance expenses
– commission
– other expenses
Investment management expenses
(f) Life insurance contract liabilities
Life insurance contract liabilities determined using projection method
Best estimate liability
– value of future life insurance contract benefi ts
– value of future expenses
– value of future premiums
Value of future profi ts
–
– shareholders’ profi t margins
life insurance contract holder bonuses
(109)
(148)
(191)
(427)
(54)
(102)
(132)
(164)
(369)
(50)
19,423
4,958
(18,987)
19,310
4,959
(19,156)
2,320
3,230
2,054
3,389
Total life insurance contract liabilities determined using the projection method2 10,944
10,556
Life insurance contract liabilities determined using accumulation method
Best estimate liability
– value of future life insurance contract benefi ts
– value of future acquisition expenses
11,593
(6)
11,386
(7)
Total life insurance contract liabilities determined using accumulation method
11,587
11,379
Value of declared bonus
Unvested policyholder benefi ts liabilities2
Total life insurance contract liabilities before reinsurance
Add: Reinsurers’ share of life insurance contract liabilities
Total life insurance contract liabilities
221
1,773
24,525
530
359
1,628
23,922
477
25,055
24,399
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
2
Life insurance contract premium revenue consists entirely of direct insurance premiums; there is no inward reinsurance component.
For participating business in the statutory funds, part of the assets in excess of the life insurance contract and other liabilities calculated under
MoS are attributed to policyholders. Under the Life Act, this is referred to as policyholder retained profi ts. For the purpose of reporting under
accounting standards, this amount is referred to as unvested policyholder benefi ts liabilities and is included within life insurance contract
liabilities even though it is yet to be vested as specifi c policyholder entitlements.
77
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
20. Life insurance contracts continued
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
(g) Reconciliation of changes in life insurance contract liabilities
Total life insurance contract liabilities at the beginning of the year
Additions through the acquisition of the AXA APH Australia
and New Zealand businesses
Change in life insurance contract liabilities recognised in the Income statement
Premiums recognised as an increase in life insurance contract liabilities
Claims recognised as a decrease in life insurance contract liabilities
Change in reinsurers share of life insurance contract liabilities
Foreign exchange adjustment
24,399
17,762
–
934
1,098
(1,495)
53
66
6,840
(25)
1,114
(1,385)
69
24
Total life insurance contract liabilities at the end of the year
25,055
24,399
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(h) Life insurance risk
The life insurance activities of AMP Life and NMLA involve a number of non-fi nancial risks concerned with the pricing, acceptance
and management of the mortality, morbidity and longevity risks accepted from policyholders, often in conjunction with the
provision of wealth-management products.
The design of products carrying insurance risk is managed to ensure that policy wording and promotional materials are clear,
unambiguous and do not leave AMP Life and NMLA open to claims from causes that were not anticipated. Product prices are set
through a process of fi nancial analysis, including review of previous AMP Life, NMLA and industry experience and specifi c product
design features. The variability inherent in insurance risk, including concentration risk, is managed by having a large geographically
diverse portfolio of individual risks, underwriting and the use of reinsurance.
Underwriting is managed through a dedicated underwriting department, with formal underwriting limits and appropriate training
and development of underwriting staff. Individual policies carrying insurance risk are underwritten on their merits and are generally
not issued without having been examined and underwritten individually. Individual policies which are transferred from a group
scheme are generally issued without underwriting. Group risk insurance policies meeting certain criteria are underwritten on the
merits of the employee group as a whole.
Claims are managed through a dedicated claims management team, with formal claims acceptance limits and appropriate training
and development of staff to ensure payment of all genuine claims. Claims experience is assessed regularly and appropriate actuarial
reserves are established to refl ect up-to-date experience and any anticipated future events. This includes reserves for claims incurred
but not yet reported.
AMP Life and NMLA reinsure (cede) to specialist reinsurance companies a proportion of their portfolios or certain types of insurance
risk, including catastrophe. This serves primarily to:
reduce the net liability on large individual risks
–
obtain greater diversifi cation of insurance risks
–
provide protection against large losses.
–
The specialist reinsurance companies are regulated by the Australian Prudential Regulation Authority (APRA) or industry regulators
in other jurisdictions and have strong credit ratings from A- to AA+.
78
AMP 2012 fi nancial report
20. Life insurance contracts continued
Terms and conditions of life insurance contracts
The nature of the terms of the life insurance contracts written by AMP Life and NMLA is such that certain external variables can be
identifi ed on which related cash fl ows for claim payments depend. The following table provides an overview of the key variables upon
which the timing and uncertainty of future cash fl ows of the various life insurance contracts issued by AMP Life and NMLA depend.
Type of
contract
Detail of contract
workings
Nature of compensation
for claims
Non-participating
life insurance
contracts with fi xed
and guaranteed
terms (term life and
disability and yearly
renewable)
These policies provide guaranteed
benefi ts, which are paid on death
or ill-health, that are fi xed and not
at the discretion of the Life Company.
Premium rates for yearly renewable
business are not guaranteed and may
be changed at the Life Company’s
discretion for the portfolio as a whole.
Benefi ts, defi ned by the insurance
contract, are not directly affected
by the performance of underlying
assets or the performance of any
associated investment contracts
as a whole.
Life annuity contracts
Conventional life
insurance contracts
with discretionary
participating benefi ts
(endowment and
whole of life)
AMP Life investment
account contracts
with discretionary
participating features
In exchange for an initial single
premium, these policies provide
a guaranteed regular income for
the life of the insured.
These policies combine life insurance
and savings. The policyholder pays
a regular premium and receives the
specifi ed sum assured plus any accruing
bonuses on death or maturity. The
sum insured is specifi ed at inception
and guaranteed. Reversionary bonuses
are added annually, which once added
(vested) are guaranteed. A further
terminal bonus may be added on
surrender, death or maturity.
The gross value of premiums received
is invested in the investment account
with fees and premiums for any
associated insurance cover being
deducted from the account balance.
Interest is credited regularly.
The amount of the guaranteed
regular income is set at inception of
the policy including any indexation.
Benefi ts arising from the discretionary
bonuses are based on the performance
of a specifi ed pool of contracts and the
assets supporting these contracts.
Payment of the account balance is
generally guaranteed, although it
may be subject to certain penalties
on early surrender or limited
adjustment in adverse markets.
Operating profi t arising from these
contracts is allocated between the
policyholders and shareholders in
accordance with the Life Act. The
amount allocated to policyholders
is held as an unvested policy liability
until it is distributed to specifi c
policyholders as interest credits.
Key variables affecting
future cash fl ows
Mortality, morbidity,
lapses, expenses and
market earning rates
on assets backing the
liabilities.
Longevity, expenses
and market earning
rates on assets
backing the liabilities.
Market earning
rates on assets
backing the liabilities,
interest rates,
lapses, expenses,
and mortality.
Fees, lapses, expenses
and market earning
rates on the assets
backing the liabilities,
interest rates.
NMLA investment
account contracts
with discretionary
participating features
The gross value of premiums received
is invested in a unitised pool of assets.
Fees and premiums for any associated
insurance cover are deducted from the
account balance when due. Interest
is credited and is guaranteed to be at
least zero (after fees).
Payment of the account balance is
generally guaranteed. Penalties may
apply on early surrender particularly
in adverse markets. Bonuses are
credited to the account balance
based on the performance of assets
supporting these contracts.
Fees, discontinuance
rates, expenses and
investment returns
on the assets backing
the liabilities.
(i) Liquidity risk and future net cash outfl ows
The following table shows the estimated timing of future net cash outfl ows resulting from insurance contract liabilities.
This includes estimated future surrenders, death/disability claims and maturity benefi ts, offset by expected future premiums or
contributions and reinsurance recoveries. All values are discounted to the reporting date using the assumed future investment
earning rate for each product.
Total AMP Life and NMLA
2012
2011
Up to 1 year
$m
1 to 5 years
$m
Over 5 years
$m
Total
$m
1,026
1,029
2,411
2,532
8,169
7,453
11,606
11,014
79
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
21. Other life insurance and investment contract disclosures
(a) Analysis of life insurance and investment contract profi t
Components of profi t related to life insurance and investment contract liabilities:
– planned margins of revenues over expenses released
– profi ts (losses) arising from difference between actual and assumed experience
– capitalised (losses) reversals
Profi t related to life insurance and investment contract liabilities
Attributable to:
–
–
life insurance contracts
investment contracts
Investment earnings on assets in excess of life insurance and investment contract liabilities
Consolidated
2012
$m
2011
$m
498
(32)
21
487
324
163
134
478
114
2
594
438
156
113
(b) AMP life insurance entities statutory funds
AMP Life and NMLA conduct investment linked and non-investment linked business. For investment linked business, deposits
are received from policyholders, the funds are invested on behalf of the policyholders and the resulting liability to policyholders
is linked to the performance and value of the assets that back those liabilities.
The Life Act requires the life insurance business of AMP Life and NMLA to be conducted within life statutory funds.
AMP Life has three statutory funds as set out in the following table:
No. 1 fund
Australia
Capital guaranteed business (whole of life, endowment,
investment account, retail and group risk, and immediate annuities).
New Zealand
All business (whole of life, endowment, investment account, retail
and group risk, investment-linked and immediate annuities).
No. 2 fund
Australia
Investment-linked superannuation business (individual
and group investment-linked and deferred annuities).
No. 3 fund
Australia
Investment-linked ordinary business.
NMLA has six statutory funds as set out in the following table:
No. 1 fund
Australia
Capital guaranteed ordinary business (whole of life, endowment,
investment account, retail and group risk).
New Zealand
All business (whole of life, endowment, investment account, retail and
group risk, retail and group investment-linked and immediate annuities).
No. 2 fund
Australia
Investment-linked superannuation business (individual and group
investment-linked and deferred annuities).
No. 3 fund
No. 4 fund
No. 5 fund
No. 6 fund
Taiwan
Australia
Australia
Australia
All business (individual whole of life, endowment, term and group life).
Capital guaranteed superannuation business (whole of life, endowment,
investment account, and retail (lump sum only) and group risk).
Investment-linked ordinary business.
North longevity guarantee.
80
AMP 2012 fi nancial report
21. Other life insurance and investment contract disclosures continued
Investments held in the life statutory funds can only be used in accordance with the relevant regulatory restrictions imposed under
the Life Act and associated rules and regulations. The main restrictions are that the assets in a life statutory fund can only be used
to meet the liabilities and expenses of that life statutory fund, to acquire investments to further the business of the life statutory
fund or as distributions provided solvency, capital adequacy and other regulatory requirements are met. See further details about
solvency and capital adequacy in note 21(d).
Australian Accounting Standards require the income, expenses, assets and liabilities in the fi nancial statements of AMP Life
and NMLA to include amounts attributable to policyholders in investment linked and non-investment linked business of the
life statutory funds. The following table shows a summary of the balances in the life statutory funds disaggregated between
non-investment linked and investment linked business:
Assets of life entities’ statutory funds
Net assets of life entities’ statutory funds
attributable to policyholders and shareholders
Attributable to policyholders
Life insurance contract liabilities
Investment contract liabilities
2012
AMP Life and NMLA
2011
AMP Life and NMLA
Non-
investment
linked
$m
Investment
linked
$m
Total life
entities’
statutory
funds
$m
Non-
investment
linked
$m
Investment
linked
$m
Total life
entities’
statutory
funds
$m
32,297
54,731
87,028
30,943
49,613
80,556
25,055
4,093
–
54,207
25,055
58,300
24,399
3,728
–
49,131
24,399
52,859
29,148
54,207
83,355
28,127
49,131
77,258
Attributable to shareholders
3,149
524
3,673
2,816
482
3,298
The net assets of life statutory funds attributable to shareholders represent the interests of shareholders including funds
required to meet regulatory requirements as well as further amounts of shareholder funds in excess of regulatory requirements.
Impact of the life statutory funds amounts on the AMP group consolidated fi nancial statements
To the extent that investments by the life statutory funds are held through wholly or partly owned controlled entities of the life
statutory funds, the balances of those controlled entities are consolidated by AMP Life and NMLA and therefore become part of
the consolidated balances of this AMP group fi nancial report. The consolidated balances include 100 per cent of the underlying
investments in fi nancial assets, investment property, and other net operating assets of the controlled entities of AMP life entities’
statutory funds. Most of the controlled entities are managed investment schemes and the share of the consolidated profi t and net
assets of those managed investment schemes attributable to unitholders other than the AMP Life statutory funds is recognised in
the consolidated income statement as Movement in external unitholders’ liabilities and in the consolidated Statement of fi nancial
position as External unitholders’ liabilities.
81
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
21. Other life insurance and investment contract disclosures continued
The following table shows a summary of the consolidated balances of AMP life entities’ statutory funds and the entities controlled
by AMP life entities’ statutory funds.
Income statement
Insurance premium and related revenue
Fee revenue
Other revenue
Investment gains and (losses)
Insurance claims and related expenses
Operating expenses including fi nance costs
Movement in external unitholders’ liabilities
Change in life insurance contract liabilities
Change in investment contract liabilities
Income tax (expense) credit
Profi t
Assets
Cash and cash equivalents
Investments in fi nancial assets measured at fair value through profi t or loss
Investment property
Other assets
Total assets of policyholders, shareholders and non-controlling interests
Liabilities
Life insurance contract liabilities
Investment contract liabilities
Other liabilities
External unitholders’ liabilities
Total liabilities of policyholders, shareholders and non-controlling interests
Net assets
Life entities’ statutory
funds consolidated
2012
$m
2011
$m
2,218
1,006
265
11,305
(2,048)
(2,463)
(922)
(934)
(6,997)
(840)
1,877
944
326
629
(1,790)
(2,450)
196
25
931
(34)
590
654
7,254
84,806
6,829
2,414
7,128
76,349
7,734
3,480
101,303
94,691
25,055
58,300
5,518
8,741
24,399
52,859
6,173
7,902
97,614
91,333
3,689
3,358
82
AMP 2012 fi nancial report
21. Other life insurance and investment contract disclosures continued
(c) Capital guarantees
Life insurance contracts with a discretionary participating feature
– amount of the liabilities that relate to guarantees
Investment linked contracts
– amount of the liabilities subject to investment performance guarantees
Other life insurance contracts with a guaranteed termination value
– current termination value
Consolidated
2012
$m
2011
$m
19,856
19,840
1,228
1,232
154
169
(d) Solvency and capital adequacy
Registered life insurance entities are required to hold prudential reserves, over and above their life insurance contract and
investment contract liabilities, as a buffer against adverse experience and poor investment returns. These prudential reserving
requirements are specifi ed by the Life Act and accompanying prudential standards. AMP Life and NMLA hold additional amounts of
reserves to provide a higher level of security for policyholder benefi ts than would be achieved by holding the statutory minimum.
Under the Life Act, there are two requirements for each life statutory fund in each life company:
–
–
the solvency requirement
the capital adequacy requirement.
Solvency requirement
The solvency requirement is the absolute minimum that must be satisfi ed for the business to be allowed to continue to operate.
Its purpose is to ensure, as far as practicable, that at any time the fund will be able to meet all existing life insurance contract
liabilities, investment contract liabilities and other liabilities as they become due.
The appointed actuaries of AMP Life and NMLA have confi rmed that the available assets of each life statutory fund have
exceeded the solvency reserve required at all times during the reporting period. Across all the life statutory funds, the excess assets,
expressed as a percentage of the solvency reserve, at 31 December 2012 were 53 per cent for AMP Life and 166 per cent for NMLA
(31 December 2011: 62 per cent for AMP Life and 100 per cent for NMLA).
Capital adequacy requirements
The capital adequacy requirement is a separate requirement (usually higher) that must be satisfi ed for each life entity to be
allowed to make distributions to its shareholders and to operate without regulatory intervention. Its purpose is to ensure, as far
as practicable, that there is suffi cient capital in each life statutory fund for the continued conduct of the life insurance business,
including writing new business, in a way which is in the interests of policyholders and in accordance with the Life Act.
The appointed actuaries of AMP Life and NMLA have confi rmed that the available assets of each life statutory fund have
exceeded the capital adequacy reserve required at all times during the reporting period. For this purpose, the capital adequacy
reserve is defi ned as the solvency reserve, plus the difference between the capital adequacy requirement and the solvency
requirement. Across all the life statutory funds, the excess assets, expressed as a percentage of the capital adequacy reserve,
as at 31 December 2012 was 33 per cent for AMP Life and 53 per cent for NMLA (31 December 2011: 34 per cent for AMP Life
and 27 per cent for NMLA).
(e) Actuarial information
Mr Rocco Mangano, as the Appointed Actuary of AMP Life and Mr Daniel Shuttleworth, as the Appointed Actuary of NMLA, are
satisfi ed as to the accuracy of the data used in the valuations in the fi nancial report and in the tables in this note and note 20.
The liabilities to policyholders (being the sum of the life insurance contract and investment contract liabilities, including any
asset or liability arising in respect of the management services element of an investment contract) and solvency reserves have
been determined at the reporting date in accordance with the Life Act.
(f) Amounts which may be recovered or settled within 12 months after the reporting date
Based on assumptions as to likely withdrawal patterns of the various product groups, it is estimated that approximately
$11,936m (2011: $11,158m) of policy liabilities may be settled within 12 months of the reporting date.
83
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
22. Risk management and fi nancial instruments information
Financial risk management
The board has ultimate responsibility for risk management and governance, including ensuring that an appropriate risk framework
and appetite is in place and is operating effectively. This includes setting the fi nancial risk appetite and approval of the AMP group
fi nancial risk management framework (FRM framework), its sub-policies, the shareholder capital investment strategy, capital and
fi nancing plans.
The principal objective of AMP’s fi nancial risk management is to establish a robust structure for identifying, assessing, managing,
quantifying, reporting and escalating fi nancial risks. The FRM framework is consistent with both the AMP group risk appetite
statement, which outlines AMP’s appetite, to take certain risks in order to grow its profi ts and the AMP enterprise risk management
policy which establishes the principles, requirements, roles and responsibilities for the management of all categories of risk
across AMP.
The FRM framework includes delegations, roles and responsibilities, escalations and reporting, as well as outlining AMP group’s
FRM objectives. In addition, the FRM framework provides an overview of each of the key fi nancial risks including the nature of the
risks, objectives in seeking to manage the risks, the key policy variables for the management of the risks and the business unit
responsibility for managing and reporting them.
Executive Committees oversee the management and monitoring of fi nancial risks and capital management. These committees
include Group Asset and Liability Committee (Group ALCO) for AMP group, AFS ALCO for both AMP Life and The National Mutual
Life Association of Australasia (NMLA), Bank ALCO for AMP Bank and the Financial Risk and Capital Committee (FRCC) for AMP
Capital. AMP group Treasury (Group Treasury) is responsible for the execution of the FRM framework and capital and fi nancing
plans in compliance with board approved targets and limits. Group Treasury is also responsible for the execution of the approved
investment strategy for AMP shareholder capital, for analysis and reporting of fi nancial risks and the capital position to Group
ALCO, the AMP Limited Audit Committee and the board, monitoring compliance with the FRM framework, and for identifying
and reporting breaches of policy to Group ALCO, relevant Audit Committees and the board.
The Audit Committee ensures the existence of effective FRM policies and procedures, and is responsible for the oversight of the
execution of the FRM framework. The AMP Life, NMLA, AMP Capital and AMP Bank Audit Committees are delegated responsibility
for the elements specifi c to their respective businesses. Internal Audit reviews the design and operational effectiveness of the
FRM framework as part of its ongoing audit cycle.
Operating entities are required to comply with the board approved risk appetite and are also responsible for approving policyholder
asset and liability strategies (in the case of AMP Life, NMLA and for the North Guarantee).
The appointed actuaries provide oversight to the AMP Life Board, NMLA Board, Audit Committee, Group ALCO, AFS ALCO, as well
as externally to APRA, on the fi nancial condition of AMP Life and NMLA. The appointed actuaries are also responsible for giving
advice to AMP Life and NMLA on the distribution of profi ts, premium rates, charges, policy conditions and reinsurance arrangements.
The Life Insurance Act (Life Act) also imposes obligations on appointed actuaries to bring to the attention of AMP Life, NMLA,
or in some circumstances, APRA, any matter that the appointed actuaries believe requires action to avoid prejudice to the
interests of policyholders.
Information about the capital management activities within the AMP group, including the relationship with regulatory
requirements on the regulated entities, is provided in note 23.
(a) Risks and mitigation
For the purposes of the FRM framework, risk management involves decisions made about the allocation of investment assets
across asset classes and/or markets and includes the management of risks within these asset classes.
Financial risk in the AMP group is managed by reference to the probability of loss relative to expected income over a one-year
time horizon at a 90 per cent confi dence level (profi t at risk). In respect of investments held in the shareholder fund and in the life
statutory funds, the loss tolerance over the discretionary investments is set at a low level because AMP has equity market exposure
in its businesses (for example through fees on assets under management).
The risk appetite of the AMP group includes an allocation of risk to the seed pool. The seed pool is designed to assist business
growth through the acquisition of assets to create investment products for clients and grow AMP Capital’s assets under
management. The AMP group seeks to generate future revenues from the subsequent on-sale of these assets to clients through
new or existing funds.
Financial risks arising in the AMP group include market risk (investment risk, interest rate risk, foreign exchange risk, currency risk,
property risk, and equity price risk); liquidity and refi nancing risk; and credit risk. These risks are managed according to the FRM
framework including through the use of derivative fi nancial instruments such as cross-currency and interest rate swaps, forward
rate agreements, futures, options and foreign currency contracts to hedge risk exposures arising from changes in interest rates and
foreign exchange rates.
Market risk is the risk that the fair value of assets and liabilities, or future cash fl ows of a fi nancial instrument will fl uctuate due to
movements in the fi nancial markets. These movements include foreign exchange rates, interest rates, credit spreads, equity prices
or property prices. Market risk in the AMP group arises from the management of insurance contracts and investment of shareholder
capital including investments in equities, property, interest bearing investments and corporate debt.
84
AMP 2012 fi nancial report
22. Risk management and fi nancial instruments information continued
(b) Market risk sensitivity analysis
The paragraphs below include sensitivity analysis tables showing how the profi t after tax and equity would have been impacted by
changes in market risk variables including interest rate risk and currency risk as defi ned in AASB 7 Financial Instruments: Disclosures.
They show the direct impact on the profi t after tax or equity of a reasonably possible change in factors which affect the carrying
value of fi nancial assets and fi nancial liabilities held at the end of the reporting period.
The sensitivity is required to show the impact of a reasonably possible change in market rate (it is not intended to illustrate a
remote, worst case, stress test scenario nor does it represent a forecast. In addition it 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.
There is no market risk relating to any fi nancial instruments of the parent. All comments and analysis in the remainder of this note
relate to the AMP group.
Interest rate risk
(i)
Interest rate risk is the risk of an impact on AMP group’s profi t after tax and equity from movements in market interest rates,
including changes in the absolute levels of interest rates, the shape of the yield curve, the margin between different yield curves
and the volatility of interest rates.
Interest rate risk arises from interest bearing fi nancial assets and fi nancial liabilities in various activities of the AMP group.
Management of those risks is decentralised according to the activity. Details are as follows:
–
AMP group’s long-term borrowings and subordinated debt – interest rate risk arises in relation to long-term borrowings and
subordinated debt raised through a combination of Australian dollar, New Zealand dollar, pound sterling and euro denominated
fi xed-rate and fl oating-rate facilities. The foreign denominated debt is converted to fl oating-rate Australian dollars through
cross-currency swaps. Interest rate risk is managed by entering fl oating-to-fi xed interest rate swaps, which have the effect
of converting borrowings from fl oating rates to fi xed rates. Under the interest rate swaps, the AMP group agrees with other
parties to exchange, at specifi ed intervals (mainly quarterly), the difference between fi xed contract rates and fl oating-rate
interest amounts calculated by reference to the agreed notional principal amounts.
AMP group policy is to maintain between 40–60 per cent of borrowings and subordinated debt at fi xed rates. This can be
altered with Group ALCO approval to hedge other interest rate exposures across the group. At the reporting date, 50 per cent
(2011: 57 per cent) of the AMP group’s borrowings and subordinated debt were effectively at fi xed rates.
Group Treasury may also, subject to Group ALCO approval, enter into interest rate derivative exposures to hedge other
enterprise-wide interest rate exposures.
–
AMP Life and NMLA – as discussed in note 1(b), AMP Life and NMLA conduct their wealth management and life insurance
business through separate life statutory funds. Investment assets of the life statutory funds including interest-bearing fi nancial
assets are held to back investment contract liabilities, life insurance contract liabilities, retained profi ts and capital.
The interest rate risk of AMP Life and NMLA which impacts shareholders arises in respect of fi nancial assets and liabilities held in
the shareholder fund and in the life statutory funds. A risk arises to the extent that there is an economic mismatch between the
timing of payments to life policyholders and the duration of the assets held in the life statutory funds to back the policyholder
liabilities. Where a liability in respect of investment contracts is directly linked to the value of the assets (where applicable, net of
related liabilities) held to back that liability (investment-linked business), there is no residual interest rate exposure which would
impact shareholders.
Management of various risks associated with investments undertaken by life statutory funds and the life shareholder fund, such
as interest rate risk is subject to the relevant regulatory requirements governed by the Life Act. AMP Life and NMLA are required
to satisfy solvency requirements, including holding statutory reserves to cater for interest rate risk to the extent that assets are
not matched against liabilities.
AMP Life and NMLA manage interest rate and other market risks pursuant to an asset and liability management policy that
has regard to policyholder expectations and risks to the AMP Life and NMLA Board’s target surplus philosophy for both capital
adequacy and solvency as advised by the appointed actuaries.
–
AMP Bank – interest rate risk arises in AMP Bank from mismatches of repricing terms (for example, a three-year fi xed rate
loan funded with a 90 day term deposit – term risk) and variable rate short-term repricing bases (basis risk). AMP Bank uses
natural offsets, interest rate swaps and basis swaps to hedge the mismatches within exposure limits. Group Treasury manages
the interest rate exposure in AMP Bank by maintaining a position, which is generally neutral, within the limits delegated and
approved by the AMP Bank Board.
85
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
22. Risk management and fi nancial instruments information continued
Interest rate risk sensitivity analysis
This analysis demonstrates the impact of a 100 basis point change in Australian and International interest rates, with all other
variables held constant, on profi t after tax and equity. It is assumed that all underlying exposures and related hedges are included
in the sensitivity analysis, that the 100 basis point change occurs as at the reporting date and that there are concurrent movements
in interest rates and parallel shifts in the yield curves. The impact on equity includes both the impact on profi t 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 fl ow hedges for hedge accounting. A sensitivity level of 100 basis points is determined considering the range
of interest rates applicable to interest bearing fi nancial assets and fi nancial liabilities in the AMP group.
Change in variables
+100 basis points
-100 basis points
2012
2011
Impact on
profi t after tax
Increase
(decrease)
$m
Impact
on equity
Increase
(decrease)
$m
Impact on
profi t after tax
Increase
(decrease)
$m
Impact
on equity
Increase
(decrease)
$m
(44)
39
(28)
23
(9)
30
2
20
(ii) Currency risk
Currency risk is the risk of an impact on AMP group’s profi t after tax and equity from movements in foreign exchange rates.
Changes in value would occur in respect of translating the AMP group’s capital invested in overseas operations into Australian
dollars at reporting date (translation risk) or from foreign exchange rate movements on specifi c cash fl ow transactions
(transaction risk).
Other than where the impact would be immaterial, corporate debt is typically converted to Australian dollars through cross-
currency swaps, individual investment assets in shareholder capital (excluding the international equities portfolio attributable to
shareholders within the life Statutory Fund No.1 fund) and in the seed pool are hedged, and expected foreign currency receipts
and payments are hedged once the value and timing of the expected cash fl ow is known. Subject to Group ALCO approval, Group
Treasury may allow for natural hedging of foreign exchange risk through unhedged foreign currency borrowings, or enter into
discretionary foreign exchange transactions to hedge enterprise-wide exposures.
AMP group does not hedge the capital invested in overseas operations (other than foreign seed pool investments), thereby
accepting the foreign currency translation risk on invested capital.
Currency risk sensitivity analysis
This analysis demonstrates the impact of a 10 per cent movement of currency rates against the Australian dollar, with all other
variables held constant, on the profi t after tax and equity due to changes in fair value of currency sensitive monetary assets and
liabilities at the reporting date. It is assumed that the 10 per cent change occurs as at the reporting date. A sensitivity level of
10 per cent is determined considering the range of currency exposures in the AMP group.
Change in variables
10% depreciation of AUD
10% appreciation of AUD
2012
2011
Impact on
profi t after tax
Increase
(decrease)
$m
Impact
on equity
Increase
(decrease)
$m
Impact on
profi t after tax
Increase
(decrease)
$m
Impact
on equity
Increase
(decrease)
$m
2
(3)
2
(3)
3
(3)
3
(3)
86
AMP 2012 fi nancial report
22. Risk management and fi nancial instruments information continued
(iii) Equity price risk
Equity price risk is the risk of an impact on AMP group’s profi t after tax and equity from movements in equity prices. The AMP group
measures equity securities at fair value through profi t or loss. Group Treasury may, with Group ALCO approval, use equity exposures
or equity futures or options to hedge other enterprise-wide equity exposures.
Equity price risk sensitivity analysis
The analysis demonstrates the impact of a 10 per cent movement in Australian and International equities held at the reporting date.
This sensitivity analysis has been performed to assess the direct risk of holding equity instruments. Any potential indirect impact
on fees from AMP group’s investment linked business is not included. A sensitivity level of 10 per cent is determined considering the
widely spread portfolios held by the AMP group and the range of movements in equity markets for the periods.
10% increase in Australian equities
10% increase in International equities
10% decrease in Australian equities
10% decrease in International equities
2012
2011
Impact on
profi t after tax
Increase
(decrease)
$m
Impact
on equity
Increase
(decrease)
$m
Impact on
profi t after tax
Increase
(decrease)
$m
Impact
on equity
Increase
(decrease)
$m
19
13
(17)
(6)
19
13
(17)
(6)
16
3
(9)
(3)
16
3
(9)
(3)
(c) Liquidity and refi nancing risk
Liquidity risk is the risk that the AMP group is not able to meet its debt obligations or other cash outfl ows as they fall due because of
an inability to liquidate assets or obtain adequate funding when required. Refi nancing risk, a sub-set of liquidity risk, is the risk that
the maturity profi le of existing debt is such that it would be diffi cult to refi nance (or rollover) maturing debt, or there is excessive
exposure to potentially unfavourable market conditions at any given time.
To ensure that the AMP group has suffi cient funds available, in the form of cash, liquid assets, borrowing capacity and un-drawn
committed funding facilities to meet its liquidity requirements, Group Treasury maintains a defi ned surplus of cash plus six months
of debt maturities to mitigate refi nancing risk, satisfy regulatory requirements and protect against liquidity shocks in accordance
with the liquidity risk management policy approved by the AMP Limited Board.
Jeminex Pty Limited, a controlled entity of AMP group, did not meet its gearing ratio covenant for the September 2012 quarter.
This breach is expected to persist for the December 2012 calculation, which is based on the audited fi nancials, and the March 2013
quarter. Loans with a carrying amount of $112m were in breach. Lenders have agreed not to take action as a result of the September
breach and have indicated they will take no action regarding breaches in subsequent quarters pending the outcome of the current
sale process of Jeminex’s Industrial and Safety division (refer to note 28).
AMP Capital Geared Australian Share Fund, a controlled entity of AMP group, was in breach of an interest cover ratio at 31 December 2011.
Loans with a carrying amount of $138m were in breach but formal waivers from fi nanciers have been (requested and are expected
to be) obtained.
Financiers of loans owing by controlled entities of the life statutory funds do not have legal recourse beyond the operating
subsidiary borrower and there is no direct effect on any other AMP group debt.
87
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
22. Risk management and fi nancial instruments information continued
The following table summarises the maturity profi les of AMP group’s undiscounted fi nancial liabilities and off-balance sheet items
at the reporting date. The maturity profi les are based on contractual undiscounted repayment obligations. Repayments that are
subject to notice are treated as if notice were to be given immediately.
Maturity profi les of undiscounted fi nancial liabilities and off balance sheet items
2012
Non-derivative fi nancial liabilities1
Payables
Borrowings
Subordinated debt
Investment contract liabilities
External unitholders’ liabilities
Derivative fi nancial instruments
Cross currency swaps
– outfl ows
–
Interest rate swaps
infl ows
Off balance sheet items
Loan commitments – AMP Bank4
Loan commitments – Securitisation vehicles4
Total undiscounted fi nancial liabilities
and off balance sheet items3
2011
Non-derivative fi nancial liabilities1
Payables
Borrowings
Subordinated debt
Investment contract liabilities
External unitholders’ liabilities
Derivative fi nancial instruments
Cross currency swaps
– outfl ows
–
Interest rate swaps
infl ows
Off balance sheet items
Loan commitments – AMP Bank4
Loan commitments – Securitisation vehicles4
Total undiscounted fi nancial liabilities
and off balance sheet items3
Up to 1
year or
no term
$m
(1,859)
(5,548)
(79)
(1,579)
–
(11)
13
9
(1,619)
(1,012)
1 to 5
years
$m
Over 5
years
$m
Other2
$m
Total
$m
(9)
(5,345)
(1,198)
(1,075)
–
–
(2,835)
(88)
(1,790)
–
–
–
–
(54,426)
(8,690)
(1,868)
(13,728)
(1,365)
(58,870)
(8,690)
(318)
240
(203)
–
–
(74)
154
399
–
–
–
–
–
–
–
(403)
407
205
(1,619)
(1,012)
(11,685)
(7,908)
(4,234)
(63,116)
(86,943)
(1,900)
(6,020)
(76)
(1,251)
–
(423)
340
(9)
(1,649)
(885)
(32)
(4,350)
(1,094)
(1,126)
–
–
(1,791)
(115)
(1,825)
–
–
–
–
(49,364)
(7,224)
(1,932)
(12,161)
(1,285)
(53,566)
(7,224)
(421)
324
9
–
–
(209)
745
13
–
–
–
–
–
–
–
(1,053)
1,409
13
(1,649)
(885)
(11,873)
(6,690)
(3,182)
(56,588)
(78,333)
1
2
3
4
The table provides maturity analysis of AMP group fi nancial liabilities including fi nancial liabilities of controlled entities of the life entities’
statutory funds and non-linked investment contracts including term annuities.
Investment contract liabilities of $54,426m (2011: $49,364m) are liabilities to policyholders for investment linked business linked to the
performance and value of assets that back those liabilities. If all those policyholders claimed their funds, there may be some delays in settling
the liability as assets are liquidated, but the shareholder has no direct exposure to any liquidity risk. External unitholders’ liabilities all relate to
controlled entities of the life entities’ statutory funds and would only be paid when the corresponding assets are realised.
Estimated net cash outfl ow profi le of life insurance contract liabilities, disclosed in note 21, are excluded from the above table.
Loan commitments relate to commitments to provide credit to customers of AMP Bank.
88
AMP 2012 fi nancial report
22. Risk management and fi nancial instruments information continued
(d) Credit risk
Credit risk includes both settlement credit exposures and traded credit exposures. Credit default risk is the risk of an adverse impact
on results and asset values relative to expectations due to a counterparty failing to meet their contractual commitments in full and
on time (obligator’s non-payment of a debt). Traded credit risk is the risk of an adverse impact on results and asset values relative to
expectations due to changes in the value of a traded fi nancial instrument as a result of changes in credit risk on that instrument.
The AMP concentration risk policy sets out the assessment and determination of what constitutes credit risk. The policy has set
exposure limits for each counterparty and credit rating. Compliance with this policy is monitored and exposures and breaches are
reported to senior management and the AMP Audit Committees through weekly and quarterly FRM reports.
Credit risk management is decentralised in business units within the AMP group. However, credit risk directly and indirectly
(ie in the participating business) impacting shareholder capital is measured and managed by Group Treasury on a group basis,
by aggregating risk from credit exposures taken in business units, as detailed below.
–
–
–
AMP Life and NMLA – credit risk on the invested fi xed income portfolios in the AMP Life and NMLA statutory funds is managed by
the AMP Capital Risk and Compliance Committee (AMP Capital R&C) and reported to the fund managers, within specifi ed credit
criteria in the mandate approved by the AMP Life and NMLA boards. The shareholder portion of credit risk in AMP Life
and NMLA is reported to Group ALCO by Group Treasury.
AMP Capital – credit risk on fi xed income portfolios managed by AMP Capital (consistent with interest rate and foreign currency
risk) is managed by the AMP Capital R&C Committee and reported to the fi xed income desk. This credit risk arises as part of a
broader portfolio of investments under investment mandates with AMP Capital and, when relating directly to shareholder funds,
is included in the aggregation by Group Treasury and reported to Group ALCO.
AMP Bank – credit risk arising in AMP Bank as part of lending activities and management of liquidity is managed as prescribed
by AMP Bank’s Risk Management Systems Description (RMSD) and reported to AMP Bank ALCO monthly. Exposures relating
directly to shareholder funds are included in the aggregation by Group Treasury and reported to Group ALCO.
(i) Management of credit risk concentration
Concentration of credit risk arises when a number of fi nancial 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. Concentration of credit risk is managed through
both aggregate credit rating limits and individual counterparty limits, which are determined predominantly on the basis of the
counterparty’s credit rating.
At reporting date, there is no specifi c concentration of credit risk with a single counterparty arising from the use of fi nancial
instruments, other than the normal clearing-house exposures associated with dealings through recognised exchanges.
The counterparties to non-exchange traded contracts, at the time of entering those contracts, are limited to companies with
investment grade credit (BBB- or greater). The credit risks associated with these counterparties are assessed under the same
management policies as applied to direct investments in AMP group’s portfolio.
Compliance is monitored and exposures and breaches are reported to senior management and the AMP AC through the weekly
and quarterly FRM Report.
(ii) Exposure to credit risk
The exposures on interest bearing securities and cash equivalents which impact the AMP group’s capital position are managed by
AMP Treasury within limits set by the AMP Concentration Risk Policy. The following table provides information regarding the credit
risk exposures for items monitored by AMP Treasury according to the credit rating of the counterparties.
AAA
AA- to AA+
A- to A+
BBB- to BBB+
BB+ and below
Total fi nancial assets with credit risk exposure monitored by AMP Treasury
2012
$m
2011
$m
3,609
12,078
3,098
1,298
83
4,770
10,423
4,101
1,556
185
20,166
21,035
89
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
22. Risk management and fi nancial instruments information continued
(iii) Credit risk of the loan portfolio in AMP 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.
About 30 per cent of the Bank’s residential loan portfolio is securitised and all loans in securitisation vehicles are mortgage insured
thereby further mitigating the risk. The Bank’s Credit Committee and board oversee trends in lending exposures and compliance
with concentration limits as a further basis of limiting lending risk. The Bank secures its loan with mortgages over relevant
properties and as a result manages credit risk on its loan with conservative lending policies and particular focus on the loan to
value ratio (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 per cent are fully mortgage insured. The potential credit exposure to
the loan mortgage insurers has been assessed to be minimal due to the stable historical relationship with the Bank and minimal
level of historic claims rejections and reductions. The minimum level credit rating for the loans and lender mortgage insurers is
AA- under Standard & Poor’s rating and A3 under Moody’s rating. The average LVR of the 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
2012
New
business
2012
Existing
business
2011
New
business
2011
17%
11%
15%
40%
14%
2%
1%
11%
8%
12%
50%
17%
1%
1%
18%
11%
16%
40%
12%
2%
1%
10%
8%
12%
51%
16%
2%
1%
(iv) Past due but not impaired fi nancial assets
The following table provides an aging analysis of fi nancial assets that are past due as at reporting date but not impaired. No
disclosures are required for the parent entity as the parent entity does not have any fi nancial assets that are past due but not
impaired at reporting date.
2012
Receivables
– Trade debtors
– Other receivables
Debt securities
– Loans and advances
Total1
2011
Receivables
– Trade debtors
– Other receivables
Debt securities
– Loans and advances
Total1
Past due but not impaired
Less than
31 days
$m
31 to
60 days
$m
61 to
90 days
$m
More than
91 days
$m
12
11
332
355
10
2
343
355
3
2
55
60
3
–
28
31
–
–
16
16
3
–
4
7
15
2
52
69
6
5
16
27
Total
$m
30
15
455
500
22
7
391
420
1
For investment-linked business in AMP Life and NMLA, the liability to policyholders is linked to the performance and value of the assets that
back those liabilities. The shareholder has no direct exposure to any credit risk in those assets. Therefore, the tables in this section do not show
the past due fi nancial assets backing investment-linked business in AMP Life.
90
AMP 2012 fi nancial report
22. Risk management and fi nancial instruments information continued
(v) Adjustment for own credit risk in the determination of the fair value of life investment contract policy liabilities
The fair value of non-investment linked investment contract liabilities includes the following allowance for the credit risk that
an external party would ascribe to an amount due from AMP Life and NMLA:
Cumulative adjustment
Change during the period
2012
$m
20
(7)
2011
$m
27
8
The adjustment has been determined as the difference between the fair value recognised and an amount calculated on the same
basis using a risk-free interest rate in place of the fair value discount rate.
(vi) Impaired fi nancial assets and impairment assessment
The Bank maintains individual provisions and collective loan impairment provisions against impaired loans.
The AMP Bank Credit Committee reviews the portfolio for provisioning at least quarterly. The review considers:
–
–
–
–
current provisioning amount
portfolio growth and performance – for both on and off balance sheet exposures
current arrears position and specifi c loan provisions
current and forecast state of economy, interest rate movements etc.
It also makes recommendations to the AMP Bank Board and Audit Committee.
(vii) Collective impairment loan loss provision
The collective impairment loan loss provision methodology is a statistically based model that removes subjectivity from the
provisioning process and makes the provision refl ective of historical loss performance.
The model utilises historical losses incurred by AMP Bank and researches external data sources to develop a series of probability
of default and loss, given default factors that can be applied to loans and advances in arrears. The model also includes the ability
to apply a management overlay if it is deemed that the economic environment is not representative of historical loss performance.
The model is reviewed quarterly and specifi c factors are formally validated every six months and reported to the AMP Bank
Audit Committee.
(viii) Specifi c provision
The specifi c provision is created when there is clear evidence that AMP Bank will suffer a loss with little chance of recovery
and the amount of the loss is measurable. This provision is reviewed quarterly and recommendations are made to the AMP
Bank Audit Committee.
(ix) Collateral
AMP Life enters into debt security repurchase agreements and part of the agreement includes the receipt of collateral which
is required to be returned to the counterparty on settlement.
AMP Bank uses residential property as collateral against its loans to customers. AMP Bank may take control of the collateral in
the event the customer defaults.
(e) Derivative fi nancial instruments
Derivative fi nancial instruments are measured at fair value in the Statement of fi nancial position as assets and liabilities.
Asset and liability values on individual transactions are only netted if the transactions are with the same counterparty and the cash
fl ows will be settled on a net basis. Changes in values of derivative fi nancial instruments are recognised in the Income statement
unless they qualify as effective cash fl ow hedges or net investment hedges for accounting purposes, as set out in note 1(q).
(i) Derivative transactions undertaken by AMP life insurance entities as part of life insurance operations
The AMP group uses derivative fi nancial instruments including fi nancial futures, forward foreign exchange contracts, exchange
traded and other options and forward rate agreements to hedge the impact of market movements on the value of assets in the
investment portfolios, and to effect a change in the asset mix of investment portfolios.
In respect of the risks associated with the use of derivative fi nancial instruments, price risk is controlled by exposure limits, which
are subject to monitoring and review. Foreign exchange hedges are monitored on a regular basis to ensure they are effective in
the reduction of price risk.
(ii) Derivative transactions undertaken in relation to the North product capital guarantee
AMP group supports the North product (North) which enables clients to invest their superannuation, pension and ordinary
savings in a range of managed funds, with part or all of the total value of the investments guaranteed. The North guarantees
are either term-based capital guarantees or provide a guaranteed level of income throughout the life of a client’s retirement.
At 31 December 2012 $1.51b (2011:$1.31b) of funds under management were invested subject to the North guarantees.
A fair value of $85m (2011: $82m) was recorded for the North guarantee liability at 31 December 2012.
Hedging techniques are used to protect the AMP group against changes in the expected guarantee claim payments from market
movements. AMP group also has the ability to review the periodic charge for new and existing clients. To the extent that the fair
value of the guarantee is based on assumptions that may not be borne out in practice and that the hedge instruments used are
not a perfect match for the expected guarantee payments, there is a residual risk that deviations from these assumptions may
result in a profi t or loss to shareholders.
91
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
22. Risk management and fi nancial instruments information continued
Hedging of the North Capital guarantee is performed based on the ‘economic value’ of the guarantee. The ‘economic value’
is consistent with the accounting fair value except that the calculation of accounting fair value applies a minimum liability, on
a contract by contract basis, of the amount that would be payable on demand at reporting date, whereas the ‘economic value’
does not include this minimum. The difference in the movement of accounting fair value and the movement in the ‘economic
value’ of the guarantee also results in a profi t or loss to the shareholder.
(iii) Other derivative transactions undertaken by non-life insurance controlled entities
AMP Treasury and AMP Bank use derivative fi nancial instruments to hedge fi nancial risk from movements in interest rates and
foreign exchange rates. Swaps, forwards, futures and options in the interest rate and foreign exchange markets may be used.
A description of each of these derivatives is given below.
–
–
–
Swaps – a swap transaction obliges the two parties to the contract to exchange a series of cash fl ows at specifi ed payment or
settlement dates. Swap transactions undertaken by the AMP group include interest rate swaps, which involve the contractual
exchange of fi xed and fl oating interest rate payments in a single currency based on a notional amount and a reference rate
(for example BBSW), and cross-currency swaps which involve the exchange of interest payments based on two different currency
principal balances and reference interest rates, and generally also entail exchange of principal amounts at the start and/or end
of the contract.
Forward and futures contracts – these are agreements between two parties establishing a contractual interest rate on a
notional principal over a specifi ed period, commencing at a future date. Forward contracts are tailor-made agreements that
are transacted between counter parties in the over-the-counter market (OTC), whereas futures are standardised contracts
transacted on regulated exchanges.
Options – an option contract gives the option buyer the right, but not the obligation, to buy or sell a specifi ed amount of a given
commodity or fi nancial instrument at a specifi ed price during a certain period or on a specifi c date. The seller of the option contract
is obliged to perform if the holder exercises the right contained therein. Options may be traded OTC or on a regulated exchange.
(iv) Risk relating to derivative fi nancial instruments
The market risk of derivatives is managed and controlled as an integral part of the fi nancial risk of the AMP group. The credit risk
of derivatives is also managed in the context of the AMP group’s overall credit risk policies.
(f) Accounting for hedges
The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and whether the hedge
qualifi es for hedge accounting.
Derivative transactions may qualify either as fair value hedges or cash fl ow hedges or hedges of net investments in foreign
operations. The AMP group’s accounting policies for derivatives designated and accounted for as hedging instruments are explained
in note 1(q), where terms used in the following section are also explained.
The AMP group also enters into derivative transactions that provide economic hedges but do not meet the requirements for hedge
accounting treatment.
(i) Derivative instruments accounted for as fair value hedges
Fair value hedges are used to protect against changes in the fair value of fi nancial assets and fi nancial liabilities due to movements
in exchange rates and interest rates.
During 2012, the AMP group recognised a net loss of $7m (2011: $1m gain) on hedging instruments. The net gain on hedged items
attributable to the hedged risks amounted to $6m (2011:$2m loss).
(ii) Derivative instruments accounted for as cash fl ow hedges
The AMP group is exposed to variability in future interest cash fl ows on non-trading assets and liabilities which bear interest at fi xed
and variable rates. The AMP group uses interest rate swaps and cash fl ow hedges to manage interest rate risks.
The following schedule shows, as at reporting date the periods when the hedged cash fl ows are expected to occur and when they
are expected to affect profi t and loss:
2012
Cash infl ows
Cash outfl ows
Net cash infl ow/(outfl ow)
2011
Cash infl ows
Cash outfl ows
Net cash infl ow/(outfl ow)
0–1 year
$m
1–2 years
$m
2–3 years
$m
3–4 years
$m
4–5 years
$m
139
(173)
(34)
105
(115)
(10)
77
(95)
(18)
50
(54)
(4)
44
(48)
(4)
32
(30)
2
9
(10)
(1)
7
(6)
1
4
(5)
(1)
–
–
–
Nil (2011: nil) was recognised in the Income statement due to hedge ineffectiveness from cash fl ow hedges.
92
AMP 2012 fi nancial report
22. Risk management and fi nancial instruments information continued
(iii) Hedges of net investments in foreign operations
AMP group hedges its exposure to changes in exchange rates on the value of its foreign currency denominated seed pool
investments. Gains or losses on effective seed pool hedges are transferred to equity to offset any gains or losses on translation
of the net investment in foreign operations.
AMP group recognised a profi t of nil (2011: nil) due to the ineffective portion of hedges relating to investments in seed pool
foreign operations.
(g) Fair values
The following table summarises the carrying amounts and fair values of those fi nancial assets and liabilities not presented on
the Statement of fi nancial position at fair value. Bid prices are used to estimate the fair value of assets, whereas offer prices are
applied for liabilities.
Financial assets
Debt securities – held to maturity
Loans and advances
Total fi nancial assets
Financial liabilities
Bank loans
Bonds and notes
Deposits
Subordinated fl oating rate note
Other borrowings
Total fi nancial liabilities
Carrying
amount
2012
$m
Aggregate
fair value
2012
$m
Carrying
amount
2011
$m
Aggregate
fair value
2011
$m
1,839
12,462
1,866
12,236
1,651
11,254
1,504
11,174
14,301
14,102
12,905
12,678
520
6,113
4,687
1,111
55
696
6,373
4,687
1,124
55
850
6,228
4,271
949
57
850
6,462
4,271
1,061
57
12,486
12,935
12,355
12,701
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in
an arm’s length transaction.
(i) Debt securities
The estimated fair value of loans and interest bearing securities represents the discounted amount of estimated future cash fl ows
expected to be received, based on the maturity profi le of the loans and interest bearing securities. 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 be measured at an amount in excess of fair value due to fl uctuations on fi xed rate loans. As the fl uctuations in fair
value do not represent a permanent diminution and the carrying amounts of the loans are recorded at recoverable amounts after
assessing impairment, it is not appropriate to restate their carrying amount.
(ii) Borrowings
Borrowings comprise domestic commercial paper, drawn liquidity facilities and various fl oating-rate and medium-term notes.
The fair values of borrowings are predominantly hedged by derivative instruments – mainly cross-currency and interest rate swaps.
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 fl ow model is used, based on a current yield curve appropriate for the remaining term
to maturity.
(iii) Subordinated debt
Subordinated debt comprises listed securities and their fair value is determined with reference to the actual quoted market prices
at reporting date. The fair value of subordinated debt is predominantly hedged by derivative instruments – mainly cross-currency
and interest rate swaps.
93
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
22. Risk management and fi nancial instruments information continued
(h) Fair value measures
Financial instruments measured at fair value are categorised under a three level hierarchy, refl ecting the availability of observable
market inputs when estimating the fair value. If different levels of inputs are used to measure a fi nancial instrument’s fair value,
the classifi cation within the hierarchy is based on the lowest level input that is signifi cant to the fair value measurement. The three
levels are:
Level 1: Valued by reference to quoted prices in active markets for identical assets or liabilities. These quoted prices represent actual
and regularly occurring market transactions on an arm’s length basis.
Level 2: Valued 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), including: quoted prices in active markets for similar assets or liabilities, quoted
prices in markets in which there are few transactions for identical or similar assets or liabilities, and other inputs that are not quoted
prices but are observable for the asset or liability, for example interest rate yield curves observable at commonly quoted intervals,
currency rates, option volatilities, credit risks, and default rates.
Level 3: Valued in whole or in part using valuation techniques or models that are based on unobservable inputs that are neither
supported by prices from observable current market transactions in the same instrument nor based on available market data.
Unobservable inputs are determined based on the best information available, which might include the AMP group’s own data,
refl ecting the AMP group’s own estimates about the assumptions that market participants would use in pricing the asset or liability.
Valuation techniques are used to the extent that observable inputs are not available, and include estimates about the timing of
cash fl ows, discount rates, earnings multiples and other inputs.
The following table shows an analysis of fi nancial instruments measured at fair value by each level of the fair value hierarchy:
2012
Assets
Equity securities and listed managed investment schemes
Debt securities
Investments in unlisted managed investment schemes
Derivative fi nancial assets
Other fi nancial assets
Level 1
$m
Level 2
$m
Level 3
$m
36,050
–
–
180
–
248
29,997
14,643
1,964
145
785
212
662
–
–
Total
fair value
$m
37,083
30,209
15,305
2,144
145
Total fi nancial assets
36,230
46,997
1,659
84,886
Liabilities
Derivative fi nancial liabilities
Collateral deposits held
Investment contract liabilities
Total fi nancial liabilities
2011
Assets
Equity securities and listed managed investment schemes
Debt securities
Investments in unlisted managed investment schemes
Derivative fi nancial assets
Other fi nancial assets
Total fi nancial assets
Liabilities
Derivative fi nancial liabilities
Collateral deposits held
Investment contract liabilities
Total fi nancial liabilities
62
1,054
–
1,201
–
3,566
–
–
54,819
1,263
1,054
58,385
1,116
4,767
54,819
60,702
31,474
1,130
–
283
–
12
27,641
12,001
1,968
179
737
311
792
–
–
32,223
29,082
12,793
2,251
179
32,887
41,801
1,840
76,528
54
1,449
–
1,101
–
3,065
–
–
49,875
1,155
1,449
52,940
1,503
4,166
49,875
55,544
94
AMP 2012 fi nancial report
22. Risk management and fi nancial instruments information continued
The following table shows a reconciliation of the movement in the fair value of fi nancial instruments categorised within Level 3
between the beginning and the end of the reporting date:
Balance on
acquisition
of AXA
$m
FX gains
or losses
$m
Total
gains/
losses
$m
Purchases/
deposits
$m
Sales/
withdrawals
$m
Net
transfers
in/(out)
$m
Total gains
and losses on
assets and
liabilities held
at reporting
date
$m
Balance
at the end
of the
period
$m
Balance
at the
beginning
of the
period
$m
737
311
792
1,840
49,875
49,875
659
228
341
–
2012
Assets
Equity securities and listed
managed investment schemes
Debt securities
Investments in unlisted
managed investment schemes
Total fi nancial assets
Liabilities
Investment contract liabilities
Total fi nancial liabilities
2011
Assets
Equity securities and listed
managed investment schemes
Debt securities
Investments in unlisted
managed investment schemes
Derivative fi nancial assets
Total fi nancial assets
1,228
–
–
–
–
–
–
41
85
240
–
366
Liabilities
Investment contract liabilities
46,584
6,116
Total fi nancial liabilities
46,584
6,116
–
–
–
–
5
5
–
–
–
–
–
6
6
(8)
(2)
(38)
(48)
83
20
86
(22)
(143)
(5)
26
785
212
(24)
(154)
662
189
(189)
(133)
1,659
(8)
6
(47)
(49)
6,029
8,618
(9,614)
(94) 54,819
5,732
6,029
8,618
(9,614)
(94) 54,819
5,732
28
(6)
15
–
37
43
27
117
–
(12)
(60)
(74)
–
(22)
37
153
–
737
311
792
–
187
(146)
168
1,840
28
(6)
15
–
37
(1,734)
9,221
(10,304)
(14) 49,875
1,535
(1,734)
9,221
(10,304)
(14) 49,875
1,535
95
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
22. Risk management and fi nancial instruments information continued
The following table shows the sensitivity of the fair value of Level 3 instruments to changes in key assumptions:
2012
Assets
Equity securities and listed managed investment schemes
Debt securities
Investments in unlisted managed investment schemes
Liabilities
Investment contract liabilities
2011
Assets
Equity securities and listed managed investment schemes
Debt securities
Investments in unlisted managed investment schemes
Liabilities
Investment contract liabilities
Carrying
amount
$m
785
212
662
1,659
54,819
54,819
737
311
792
1,840
49,875
49,875
Effect of reasonably possible
alternative assumptions1
(+)
$m
29
–
–
29
6
6
41
–
–
41
9
9
(-)
$m
(29)
–
–
(29)
(6)
(6)
(17)
–
–
(17)
(9)
(9)
1
The sensitivity has been calculated by changing key inputs such as discount rates and earnings multiples by a reasonably possible amount.
96
AMP 2012 fi nancial report
23. Capital management
The AMP group holds capital to protect customers, creditors and shareholders against unexpected losses to a level that is
consistent with AMP’s risk appetite, approved by the board.
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. Included within interest-bearing liabilities are subordinated debt and other instruments that would qualify
as regulatory capital under Australian Prudential Regulation Authority (APRA) standards, or have received transitional arrangements
approved by APRA.
The AMP group makes adjustments to the statutory shareholder equity. Under Australian Accounting Standards, some assets held
on behalf of the policyholders (and related tax balances) are recognised in the fi nancial report 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 profi t attributable to shareholders. Mismatch items include:
–
–
–
treasury shares (AMP Limited shares held by the statutory funds on behalf of policyholders)
AMP Life Limited statutory funds’ investments in controlled entities
other – owner-occupied properties and AMP Life Limited statutory funds’ superannuation products invested in AMP Bank
Limited assets.
Adjustments are also made relating to cash fl ow hedge reserves.
The table below shows the AMP group’s current capital resources at reporting date:
AMP statutory equity attributable to shareholders of AMP Limited
Accounting mismatch items and cash fl ow hedge reserves
AMP shareholder equity
Subordinated debt1
Senior debt1
Total AMP capital resources
2012
$m
7,434
310
7,744
879
700
9,323
2011
$m
6,829
185
7,014
879
657
8,550
1
Amounts shown for subordinated debt and senior debt are the amounts to be repaid on maturity. Amounts recognised in the Statement of
fi nancial position in respect of these debts are measured at amortised cost using the effective interest rate method.
The AMP group assesses the adequacy of its capital requirements against regulatory capital requirements. The AMP group’s capital
management plan forms part of the AMP group’s broader strategic planning process.
In addition to managing the level of capital resources, the AMP group also attempts to optimise the mix of capital resources to
minimise the cost of capital and maximise shareholder value.
A number of the operating entities within the AMP group of companies are regulated. The AMP group of companies includes
an authorised deposit-taking institution, life insurance companies and approved superannuation trustees all regulated by APRA.
A number of companies also hold Australian Financial Services Licences.
97
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
23. Capital management continued
The minimum regulatory capital requirements (MRR) is the amount of capital required by each of AMP’s regulated businesses
to meet their capital requirements as set by the appropriate regulator. The main requirements are as follows:
–
AMP Life Limited and The National Mutual Life Association of Australasia Limited (NMLA) – solvency, capital adequacy
and management capital requirements as specifi ed under the Life Act and APRA Life Insurance Prudential Standards.
From 1 January 2013, these will be replaced with revised APRA Prudential Standards (see note 34)
AMP Bank Limited – capital requirements as specifi ed under APRA Banking Prudential Standards. From 1 January 2013,
these will be replaced with revised APRA Prudential Standards
AMP Capital Investors Limited – capital and liquidity requirements under its Australian Financial Services Licence.
Revised AFSL requirements applied from 1 November 2012
National Mutual Funds Management Limited – capital and liquidity requirements as specifi ed under its Australian Financial
Services Licence, and an amount of capital for the risks associated with the North guarantee. Revised AFSL requirements applied
from 1 November 2012.
–
–
–
All of the AMP group regulated entities have at all times during the current and prior fi nancial year complied with the externally
imposed capital requirements to which they are subject.
AMP holds a level of capital above its MRR. At reporting date the regulatory capital resources above MRR were $2,420m
(2011: $1,543m). The regulatory capital resources above MRR will vary throughout the year due to investment market movements,
dividend payments and the retention of profi ts.
AMP’s businesses and the AMP group maintain capital targets (target surplus), refl ecting their material risks (including fi nancial risk,
insurance and product risk and operational risk) and AMP’s risk appetite. The target surplus is a management guide to the level of
excess capital that AMP seeks to carry to reduce the risk of breaching MRR.
AMP’s regulated businesses each target a level of capital equal to MRR plus a target surplus. Prior to 1 January 2013, the AMP Life
and NMLA target surplus was set by reference to a probability of breaching regulatory capital requirements. This is a two tiered
test where the target surplus was set as the greater of the amount required for a:
–
–
1 per cent probability of breaching solvency over one year
10 per cent probability of breaching capital adequacy over one year.
Target surplus policies for AMP Life Limited and NMLA have been revised following the introduction of revised life insurance
APRA Prudential Standards, which take effect 1 January 2013 (see note 34).
AMP Bank’s target surplus refl ects an additional 0.75 per cent of risk-weighted assets above the APRA minimum requirements.
Other components of AMP’s target surplus include amounts relating to the North guarantee, group offi ce investment risks,
defi ned benefi t fund market risks, and operational risks.
APRA is developing Prudential Standards relating to Capital Adequacy for conglomerate groups. The revised prudential standards
are expected to commence 1 January 2014, with no changes to existing supervision until that date. Draft Prudential Standards
relating to Capital Adequacy are expected to be available in 1H 2013.
APRA is yet to confi rm how the recently fi nalised APRA Prudential Standards relating to the Insurers or ADIs will affect the
Conglomerate proposals. Nonetheless, APRA has confi rmed transition arrangements with AMP, relating to the subordinated debt
held at a group level continuing to be 100 per cent recognised as eligible capital under the revised standards until the earlier of
each relevant instrument’s fi rst call date or March 2016.
In addition to the above, APRA has introduced revised Prudential Standards relating to minimum fi nancial requirements
of superannuation funds. These revised prudential standards will commence on 1 July 2013, with transition arrangements
applying over the three years following the commencement date.
AMP continues to maintain a prudent approach to capital.
98
AMP 2012 fi nancial report
24. Notes to Statement of cash fl ows
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
(a) Reconciliation of the net profi t after income tax
to cash fl ows from operating activities
Net profi t 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
(Decrease) increase in other payables and provisions
687
44
274
(6,267)
(1,702)
26
137
6,101
603
1,030
676
37
192
3,211
(2,995)
27
18
(1,973)
(567)
2,185
Cash fl ows from (used in) operating activities
933
811
301
–
–
–
–
5
(56)
–
115
(63)
302
1
–
–
–
1
352
–
–
–
–
–
95
–
(235)
101
313
1
–
–
–
1
–
–
–
–
–
–
–
3,631
576
(7)
4,971
3,797
855
(4)
4,788
9,171
9,436
377
379
–
2,490
(1,256)
2,939
(941)
1,234
1,998
13,385
(6,651)
14,272
(7,358)
6,734
6,914
–
–
–
–
–
–
(b) Reconciliation of cash
Comprises:
Cash on hand
Cash on deposit
Bank overdrafts (included in Borrowings)
Short-term bills and notes (included in Debt securities)
Balance at the end of the period
(c) Financing arrangements
(i) Overdraft facilities
Bank overdraft facility available
(ii) Loan facilities
In addition to facilities arranged through bond and note issues
(refer notes 16 and 17), fi nancing facilities are provided through
bank loans under normal commercial terms and conditions.
Available
Used
Unused
(iii) Bond and note funding programs
Available
Used
Unused
(d) Acquisitions and disposal of controlled entities
Operating entities
During the year ended 31 December 2012 AMP acquired the following entities:
–
on 3 July 2012 AMP acquired 100 per cent of the self-managed superannuation fund (SMSF) administration and
investment administration business of Cavendish Pty Limited and its controlled entities for $20m, consisting of $18m cash
and a $2m deferred payment
in June 2012 AMP increased its ownership interest in Exford Pty Limited and in AMP Capital Brookfi eld Limited (previously
associates) from 50 per cent to 100 per cent, for cash consideration of $4m in each case. The principal activities of these
entities are fi nancial planning and asset management, respectively.
–
The acquired entities are consolidated from their respective acquisition dates.
On 30 March 2011, AMP Limited acquired 100 per cent of AMP AAPH Limited (formerly AXA Asia Pacifi c Holdings Limited).
The principal activity of AMP AAPH is wealth management. The AMP group profi t for the year ended 31 December 2011 included
the results of AMP AAPH Limited for the nine-month period from acquisition date, whereas the AMP group profi t for the year ended
31 December 2012 includes the results of AMP AAPH Limited for the full year.
On 31 December 2011, AMP group disposed of its 100 per cent interest in the shares of AMP General Insurance Distribution
Limited, and AMP group ceased to consolidate the entity from that date. AMP group did not continue to hold any ownership
interest following the disposal. A gain on sale of $38m was recognised and is included in investment gains and (losses) in the
Income statement. Cash consideration of $39m was received in January 2012.
There were no other signifi cant acquisitions or disposals of operating entities in 2012 or 2011.
99
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
24. Notes to statement of cash fl ows continued
The impact of acquisitions of operating entities is as follows:
Assets
Cash and cash equivalents
Receivables
Current tax assets
Inventories and other assets
Investments in fi nancial assets measured at fair value through profi t or loss
Investments in fi nancial assets measured at amortised cost
Investments in associates accounted for using the equity method
Investment property
Property, plant and equipment
Deferred tax asset
Intangible assets
Total assets
Liabilities
Payables
Current tax liabilities
Provisions
Derivative fi nancial liabilities
Deferred tax liabilities
External unitholders liabilities
Life insurance contract liabilities
Investment contract liabilities
Defi ned benefi t plan liability
Total liabilities
Impact in 2012
$m
Impact in 2011
$m
(14)
3
–
–
–
–
(14)
–
–
–
36
469
984
8
12
12,962
10
22
11
22
524
3,520
11
18,544
10
–
1
–
–
–
–
–
–
11
518
11
308
34
398
310
6,840
6,131
149
14,699
Controlled entities of AMP life insurance entities’ statutory funds
In the course of normal operating investment activities, the AMP life insurance entities’ statutory funds acquire equity interests in
entities which, in some cases, result in AMP holding a controlling interest in the investee entity.
Most acquisitions and disposals of controlled entities are in relation to managed investment schemes with underlying net assets
typically comprising investment assets including cash. The consideration for acquisitions or disposals refl ects the fair value of the
investment assets at the date of the transactions after taking into account minority interests.
Certain controlled entities of the life entities’ statutory funds are operating companies which carry out business operations
unrelated to the core wealth management operations of the AMP group.
During 2012 AMP lost control over the AMP Capital Pacifi c Fair and Macquarie Shopping Centre Fund as a result of a reduction
in its ownership interest. The impact of this transaction is as follows:
Assets
Cash
Investment property
Investments in fi nancial assets measured at fair value through profi t or loss
Other assets
Total assets
Liabilities
Payables
Borrowings
Other fi nancial liabilities
External unitholder liabilities
Total liabilities
100
AMP 2012 fi nancial report
Impact in 2012
$m
(7)
(793)
438
(12)
(374)
(9)
(208)
(19)
(138)
(374)
25. Earnings per share
(a) Classifi cation of equity securities
Ordinary shares have been included in the calculation of basic earnings per share.
In accordance with AASB 133 Earnings per Share, options over unissued ordinary shares and performance rights have been classifi ed
as potential ordinary shares and have been considered in the calculation of diluted earnings per share. As all options were out
of the money for 2012 and 2011, they have been determined not to be dilutive for those periods. Performance rights have been
determined to be dilutive in 2012 and 2011. Although performance rights have been determined to be dilutive in accordance with
AASB 133 Earnings per Share, if these instruments vest and are exercised, it is AMP’s policy to buy AMP shares ‘on market’ so there
will be no dilutive effect on the value of AMP shares.
Since the end of the year and up to the date of the report, no performance rights have been issued, no performance rights have
been exercised, and no performance rights have lapsed. During the same period no share rights have been issued, no share rights
have been exercised, and no share rights have lapsed. There have been no movements in the number of shares on issue.
Of the AMP Limited ordinary shares on issue 55,473,106 (2011: 40,653,518) are held by controlled entities of AMP Limited.
AMP’s life insurance entities hold 53,720,838 (2011: 38,901,250) shares on behalf of policyholders. The Australian Securities
and Investments Commission (ASIC) has granted relief from restrictions in the Corporations Act 2001 to allow AMP’s life insurance
entities to hold and trade shares in AMP Limited as part of the policyholder funds’ investment activities. The cost of the investment
in these ‘treasury shares’ is refl ected as a deduction from total contributed equity.
(b) Weighted average number of ordinary shares used
Weighted average number of ordinary shares used in calculation of basic earnings per share
Add: potential ordinary shares considered dilutive
Weighted average number of ordinary shares used in calculation of diluted earnings per share
(c) Level of earnings used
Basic
Diluted
(d) Earnings per share
Basic
Diluted
26. Superannuation funds
Consolidated
2012
million
shares
2,845
22
2,867
2011
million
shares
2,613
16
2,629
$m
$m
704
704
688
688
cents
cents
24.7
24.6
26.3
26.2
AMP contributes to funded employer-sponsored superannuation funds that exist to provide benefi ts for employees and their
dependants on resignation, retirement, disability or death of the employee. The funds consist of both defi ned contribution sections
and defi ned benefi t sections.
The defi ned contribution sections receive fi xed contributions from AMP group companies and the group’s legal obligation is limited
to these contributions. The defi ned benefi t sections provide members with a choice of lump sum benefi ts or pension benefi ts based
on years of membership and fi nal salary. New employees are only offered defi ned contribution style benefi ts. The disclosures in this
note relate only to the defi ned benefi t sections of the plans.
The following tables summarise the components of the net amount recognised in the Income statement, Statement of
comprehensive income, the movements in the defi ned benefi t obligation and plan assets and the net amounts recognised in the
consolidated Statement of fi nancial position for the defi ned benefi t funds, determined in accordance with AASB 119 Employee
Benefi ts. However, for the purposes of recommending contributions to the defi ned benefi t funds, fund actuaries consider the
positions of the funds as measured under AAS 25 Financial Reporting by Superannuation Plans (Australia) and Professional standard
number 2 Actuarial Reporting for Superannuation Schemes (New Zealand) both of which determines the funds’ liabilities according
to different measurement rules than those in AASB 119 Employee Benefi ts, largely due to the use of different discount rates in
valuing benefi ts. Refer to note 26 (g) for details of the funding of the AMP defi ned benefi t funds.
101
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
26. Superannuation funds continued
(a) Defi ned benefi t plan income (expense)
Current service cost
Interest cost
Expected return on plan assets1,2
Foreign currency gains and losses
Total defi ned benefi t plan income (expense)
(b) Movements in defi ned benefi t obligation
Balance at the beginning of the period
Balance on acquisition of controlled entity
Current service cost
Interest cost
Contributions by plan participants
Actuarial gains and losses3
Foreign currency exchange rate changes
Benefi ts paid
Other expenses
Balance at the end of the period
(c) Movement in fair value of plan assets
Balance at the beginning of the period
Balance on acquisition of controlled entity
Expected return on plan assets
Actuarial gains and losses
Foreign currency exchange rate changes
Employer contributions
Contributions by plan participants
Benefi ts paid
Other expenses
Balance at the end of the period
(d) Defi ned benefi t (liability) asset
Present value of wholly funded defi ned benefi t obligations
Less: Fair value of plan assets
Defi ned benefi t (liability) asset recognised on the Statement of fi nancial position4
Movement in defi ned benefi t (liability) asset
(Defi cit) surplus at the beginning of the period
Plus: Balance on acquisition of controlled entity
Plus: Total income (expenses) recognised in income
Plus: Employer contributions
Plus: Foreign currency exchange rate changes
Plus: Actuarial gains (losses) recognised in Other comprehensive income5
Defi ned benefi t (liability) asset recognised at the end of the period
Consolidated
2012
$m
(7)
(30)
45
(3)
5
(988)
–
(7)
(30)
(1)
14
(7)
51
4
(964)
618
–
45
39
4
26
1
(51)
(4)
678
(964)
678
(286)
(370)
–
5
26
–
53
(286)
2011
$m
(11)
(35)
39
–
(7)
(341)
(524)
(11)
(35)
(1)
(113)
(5)
42
–
(988)
274
375
39
(64)
4
31
1
(42)
–
618
(988)
618
(370)
(67)
(149)
(7)
31
(1)
(177)
(370)
1
2
3
4
5
The expected return on plan assets is determined at the beginning of the period, and is based on fi nancial modelling of expected real returns for
each of the major asset classes, combined with the price infl ation assumption to arrive at a nominal value for expected returns on plan assets.
The actual return on fund assets for the period was a gain of $84m (2011: $25m loss).
As explained in note 1(dd), actuarial gains and losses are recognised directly in Other comprehensive income.
The defi ned benefi t liability is measured in accordance with the requirements of AASB 119 Employee Benefi ts and does not represent a
current obligation to provide additional funding to the plans. For the purposes of recommending contributions to the defi ned benefi t funds,
fund actuaries consider the positions of the funds as measured under AAS 25 Financial Reporting by Superannuation Plans (Australia) and
Professional standard number 2 Actuarial Reporting for Superannuation Schemes (New Zealand) both of which determines the funds’ liabilities
according to different measurement rules than those in AASB 119, largely due to the use of different discount rates in valuing benefi ts. Refer
to note 26(g) for details of the funding of the AMP defi ned benefi t funds.
The cumulative amount of the net actuarial gains and losses recognised in the Statement of comprehensive income is a $109m loss
(2011: $162m loss).
102
AMP 2012 fi nancial report
26. Superannuation funds continued
(e) Historical analysis of defi ned benefi t (defi cit) surplus
AMP Australian defi ned benefi t (liability) asset
Present value of wholly funded defi ned benefi t obligations
Less: Fair value of plan assets
Net defi ned benefi t (liability) asset recognised
in the Statement of fi nancial position
Actuarial gains and (losses) arising on plan liabilities
Actuarial gains and (losses) arising on plan assets
AMP AAPH Australian defi ned benefi t (liability) asset
Present value of wholly funded defi ned benefi t obligations
Less: Fair value of plan assets
Net defi ned benefi t (liability) asset recognised
in the Statement of fi nancial position
Actuarial gains and (losses) arising on plan liabilities
Actuarial gains and (losses) arising on plan assets
AMP New Zealand defi ned benefi t (liability) asset
Present value of wholly funded defi ned benefi t obligations
Less: Fair value of plan assets
Net defi ned benefi t (liability) asset recognised
in the Statement of fi nancial position
Actuarial gains and (losses) arising on plan liabilities
Actuarial gains and (losses) arising on plan assets
AMP AAPH New Zealand defi ned benefi t (liability) asset
Present value of wholly funded defi ned benefi t obligations
Less: Fair value of plan assets
Net defi ned benefi t (liability) asset recognised
in the Statement of fi nancial position
Actuarial gains and (losses) arising on plan liabilities
Actuarial gains and (losses) arising on plan assets
Consolidated
2012
$m
2011
$m
2010
$m
2009
$m
(333)
244
(372)
239
(317)
260
(312)
267
(89)
(133)
24
14
(54)
(24)
(451)
348
(458)
305
(103)
(153)
5
22
(32)
19
(13)
(1)
1
(148)
67
(81)
(14)
2
(36)
(34)
(30)
15
(15)
(4)
(2)
(128)
59
(69)
(19)
(4)
(57)
(4)
(10)
–
–
–
–
–
(24)
14
(10)
–
(1)
–
–
–
–
–
(45)
47
17
–
–
–
–
–
(33)
22
(11)
(3)
–
–
–
–
–
–
(f) Principal actuarial assumptions
The following table sets out the principal actuarial assumptions used as at the reporting date in measuring the defi ned benefi t
obligations of the Australian and New Zealand defi ned benefi t funds:
Discount rate
Expected return on
assets (before tax)
Expected rate of
pension increases
Expected rate of
salary increases
Proportion of
benefi ts expected to
be taken as pensions
Australia
New Zealand
Australia
New Zealand
AMP
AMP AAPH
2012
2011
2012
2011
2012
2011
2012
2011
2.7%–5.5% 2.9%–6.2% 1.8%–2.9% 1.7%–2.9% 2.7%–5.5% 2.9%–6.2% 1.8%–2.9% 1.7%–2.9%
n/a
8.0%
8.3%
8.3%
n/a
8.0%
8.3%
2.5%
2.5%
1.9%
1.9%
2.5%
2.5%
2.5%
4.0%
4.0%
4.0%
4.0%
4.0%
3.5%
4.0%
8.3%
2.5%
4.0%
60.0%
60.0%
n/a
n/a
75.0%
75.0%
90.0% for
pre-1995
members
60.0% for
post-1994
members
90.0% for
pre-1995
members
60.0% for
post-1994
members
103
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
26. Superannuation funds continued
In 2012, the discount rate for Australian defi ned benefi t funds was determined based on a blend of Commonwealth and state
government bonds. In 2011 they were determined based on current market yields for Australian Commonwealth government bonds.
(g) Arrangements for employer contributions for funding defi ned benefi t funds
Funding methods and current recommendations – AMP Australia
The AMP Australian defi ned benefi t fund’s funding policy is intended to fully cover benefi ts by the time they become payable.
The method of funding adopted is the attained age normal method. This funding method aims to spread the cost of future benefi ts
for current members evenly over their future working lifetimes.
The economic assumptions used to determine the current contribution recommendations are the same as the actuarial
assumptions in note 26 (f), except for the discount rate for the purposes of determining accrued benefi ts.
As at the most recent actuarial review, 31 March 2012, the fund actuary did not identify any defi cit for funding purposes and no
additional contributions are required. As at the date of this report, the fund actuary has not indicated any change to this position.
Funding methods and current recommendations – AMP AAPH Australia
The AMP AAPH Australian defi ned benefi t fund’s funding policy is intended to fully cover benefi ts by the time they become payable.
The method of funding adopted is the attained age normal method. This funding method aims to spread the cost of future benefi ts
for current members evenly over their future working lifetimes.
The economic assumptions used to determine the current contribution recommendations are the same as the actuarial
assumptions in note 26 (f), except for the discount rate for the purposes of determining accrued benefi ts.
As at the most recent actuarial review, 30 September 2012, the fund actuary did not identify any defi cit for funding purposes and no
additional contributions are required. As at the date of this report, the fund actuary has not indicated any change to this position.
Funding methods and current recommendations – AMP New Zealand
The AMP New Zealand defi ned benefi t fund’s funding policy is intended to fully cover benefi ts by the time they become payable.
The main group of benefi ts is pension rights of retired members and their spouses. The retirement benefi ts of active members are
valued on a simplifi ed actuarial projection basis as they are not material to the valuation of the fund.
AMP has adopted the fund actuary’s recommendation for AMP to make additional contributions of $2m per annum until the
fi nancial position of the plan is suffi ciently improved.
Funding methods and current recommendations – AMP AAPH New Zealand
The AMP AAPH New Zealand defi ned benefi t fund’s funding policy is intended to fully cover benefi ts by the time they become
payable. The main group of benefi ts is pension rights of retired members and their spouses. The retirement benefi ts of active
members are valued on a simplifi ed actuarial projection basis as they are not material to the valuation of the fund.
AMP has adopted the fund actuaries’ recommendation that AMP makes additional contributions of $3m per annum.
(h) Allocation of assets
The asset allocations of the defi ned benefi t funds are shown in the following table:
Australia1
New Zealand1
Australia1
New Zealand1
2012
2011
2012
2011
2012
2011
2012
2011
AMP
AMP AAPH
Equity
Property
Fixed interest
Cash
Other
37%
5%
39%
12%
7%
59%
18%
14%
3%
6%
55%
8%
26%
11%
0%
59%
11%
23%
7%
0%
37%
5%
39%
12%
7%
57%
5%
25%
1%
12%
44%
6%
33%
17%
0%
38%
7%
49%
6%
0%
1
The investment assets of the plans may at times include either direct or indirect investments in AMP Limited shares. These investments are
part of normal investment mandates within the plans and are not signifi cant in relation to total plan assets. The plans do not hold any other
assets which are occupied or used by AMP group.
104
AMP 2012 fi nancial report
27. Share-based payments
(a) Summary of AMP’s share-based payment plans
AMP has a number of employee share-based payment plans. Share-based payments place employees participating in those plans
(participants) in the position of the shareholder, and in doing so, reward employees for the generation of value to 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:
Plans currently offered
Performance rights
Share rights
Restricted shares
Employee share acquisition plan – matching shares
Total share-based payments expense
Consolidated
2012
$’000
2011
$’000
13,137
9,524
4,123
68
14,500
1,331
9,271
115
26,852
25,217
(b) Performance rights
Plan description
The CEO and his direct reports, as well as selected senior executives, are required to take their long-term incentive (LTI) awards
in the form of performance rights. This is to ensure that those executives, who are most directly able to infl uence company
performance, are appropriately aligned with the interests of shareholders. All other LTI participants are provided with a degree
of choice over whether their LTI grant is composed of performance rights, share rights or a combination of the two.
A performance right is a right to acquire one fully paid ordinary share in AMP Limited after a three-year performance period at
no cost to the participant, provided a specifi c performance hurdle is met. Prior to conversion into shares (vesting), performance
rights holders do not receive dividends or have other shareholder benefi ts (including any voting rights). From September 2011,
performance rights may be settled through a cash payment in lieu of shares, at the discretion of the board.
AMP has, from time to time, offered share bonus rights to employees in overseas domiciles when it is not possible or tax-effi cient
to grant performance rights. The terms and conditions of the share bonus rights are identical to the terms and conditions of the
performance rights, except settlement is in cash rather than equity instruments.
The performance hurdle
The number of performance rights that vest is determined by a vesting schedule based on the performance of AMP relative
to a comparator group of listed Australian companies over a three-year performance period.
The performance measure is AMP’s total shareholder return (TSR) relative to the top 50 industrials companies in the S&P/ASX 100
Index as at the start of the performance period. In order for any awards to vest, AMP’s TSR must be at or above the median of the
comparator group; for this level of performance 50 per cent of the awards vest. The proportion of awards vesting increases on a
straight-line basis until performance at the 75th percentile of the comparator group, at which point the awards vest in full. The
performance hurdle and vesting schedule were chosen because they require participants to outperform AMP’s key competitors
for shareholder funds before the awards generate any value.
At the end of the performance period, an independent external consultant provides the People and Remuneration Committee (PRC)
with AMP’s TSR ranking against the comparator group. The PRC then determines the number of performance rights that vest, if any,
by applying this data to the vesting schedule. If the performance hurdle is not achieved, the performance rights lapse immediately
without opportunity to re-test performance at a later stage.
Exercising performance rights
If the awards vest, they are automatically exercised on behalf of the participant (ie converted to shares). Upon exercise, participants
become entitled to shareholder benefi ts, including dividends and voting rights. For performance rights issued from 2008–2010, if
performance rights are not automatically exercised on the participant’s behalf, the participant has two years from the end of the
performance period to exercise vested awards. When performance rights are exercised, the AMP shares needed to satisfy the awards
are bought on market through an independent third party, so that there is no dilutionary effect on the value of existing AMP shares.
Treatment of performance rights on ceasing employment and change of control
Typically, unvested performance rights lapse if the participant resigns from AMP or is terminated for misconduct or inadequate
performance. In other cases, such as retirement and redundancy, performance rights may be retained by the participant with
vesting continuing to be subject to the same vesting conditions as if they had remained in AMP employment. In the event that
AMP is subject to a takeover change of control, unvested performance rights, granted prior to September 2011, typically vest.
105
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
27. Share-based payments continued
Commencing from the performance rights granted in September 2011, the board has the discretion to determine an alternative
treatment on cessation of employment and change of control (ie to determine that the performance rights lapse, are retained
or vest when they would not have otherwise), if deemed appropriate in the light of the specifi c circumstances.
Plan valuation
The fair value of performance rights has been calculated as at the grant date, by external consultants using a simulation technique
known as a Monte Carlo simulation. Fair value has been discounted for the probability of not meeting the TSR performance hurdles.
In determining the share-based payments expense, the number of instruments expected to vest has been adjusted to refl ect the
number of employees expected to remain with AMP until the end of the performance period.
For the purposes of the valuation it is assumed performance rights are exercised as soon they have vested. Assumptions regarding the
dividend yield and volatility have been estimated based on AMP’s actual historic 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 performance rights
granted during 2012 and the comparative period (2011):
Grant date
07/06/2012
09/09/2011
09/06/2011
09/06/2011
Share
price
$3.85
$4.15
$4.88
$4.88
Contractual
life
2.7 years
2.9 years
2.8 years
2.1 years
Dividend
yield
6.3%
5.9%
5.5%
5.5%
Volatility
Risk-free rate
26%
34%
36%
36%
2.3%
3.7%
4.8%
4.8%
Performance
hurdle
discount
67%
54%
51%
55%
Fair
value
$1.28
$1.92
$2.39
$2.19
The following table shows the movements during the period of all performance rights:
Grant date
12/03/2010
08/09/2010
09/06/2011
09/06/2011
09/09/2011
07/06/2012
Total
Exercise
date
01/08/2012
01/08/2013
01/08/2013
01/05/2014
n/a3
n/a3
Exercise
price
Balance at
1 Jan 20121
Exercised
during
the year
Granted
during
the year
Lapsed
during
the year
Balance at
31 Dec 20122
Nil
Nil
Nil
Nil
Nil
Nil
4,879,286
4,114,332
88,040
729,167
5,759,283
–
–
–
–
–
–
–
–
–
–
–
–
7,133,636
4,879,286
4,984
–
–
52,403
–
–
4,109,348
88,040
729,167
5,706,880
7,133,636
15,570,108
– 7,133,636 4,936,673 17,767,071
1
2
3
The weighted average remaining contractual life of performance rights outstanding at the end of the period is 1.6 years.
The share rights granted on 9 September 2011 and 7 June 2012 have no exercise date as they are automatically exercised upon vesting.
The performance rights granted on 9 September 2011 and 7 June 2012 have no exercise date as they are automatically exercised upon vesting.
From the end of the fi nancial year and up to the date of this report, no performance rights have been issued, no performance rights
have been exercised, and no performance rights have lapsed. Of the performance rights outstanding at the end of the period, none
have vested or become exercisable.
(c) Share rights
Plan description
As described above, LTI participants below the CEO and his direct reports may be eligible to take some of their award in share rights.
A share right is a right to acquire one fully paid ordinary share in AMP Limited after a specifi ed service period at no cost to the
participant, provided a specifi c service condition is met. The service period is typically three years, but may vary where the share
rights are awarded to retain an employee for a critical period. Prior to conversion into shares (vesting), share rights holders do not
receive dividends or have other shareholder benefi ts (including any voting rights).
As this program is designed as a means of recognising and retaining employees, no performance hurdles apply, other than continued
service for the duration of the three-year period.
AMP has, from time to time, offered share bonus rights without performance conditions to employees in overseas domiciles when
it is not possible or tax-effi cient to grant share rights or restricted shares. The terms and conditions of the share bonus rights are
identical to the terms and conditions of the share rights, except settlement is in cash rather than equity instruments.
106
AMP 2012 fi nancial report
27. Share-based payments continued
Exercising share rights
If the awards vest, they are automatically exercised on behalf of the participant (ie converted to shares). Upon exercise, participants
become entitled to shareholder benefi ts, including dividends and voting rights. When share rights are exercised, the AMP shares
needed to satisfy the awards are bought on market through an independent third party, so that there is no dilutionary effect on the
value of existing AMP shares.
Treatment of share rights on ceasing employment and change of control
Typically, unvested share rights lapse if the participant resigns from AMP or is terminated for misconduct or inadequate
performance. In other cases, such as retirement and redundancy, the participant typically retains their share rights at the board’s
discretion. In the event that AMP is subject to a takeover change of control, treatment of unvested share rights is subject to the
board’s discretion.
Plan valuation
The fair value of share rights has been calculated as at the grant date, by external consultants using a ‘discounted cash fl ow’
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.
In determining the share-based payments expense, the number of instruments expected to vest has been adjusted to refl ect the
number of employees expected to remain with AMP until the end of the performance period.
For the purposes of the valuation it is assumed share rights are exercised as soon they have vested. Assumptions regarding the
dividend yield have been estimated based on AMP’s actual historic dividend yield over an appropriate period.
STI deferral plan
The nominated executives and selected other senior leaders who have the ability to impact AMP’s fi nancial soundness, participate
in the AMP STI deferral plan. The plan requires that 40 per cent of a participant’s STI award be delivered in rights to AMP shares
(share rights). The share rights convert to AMP Limited shares (ie vest) after a two-year deferral period. Vesting is subject to
ongoing employment, compliance with AMP policies and the board’s discretion.
STI match plan
For each given year, high potential employees at a senior leader level are eligible for nomination to participate in the STI match
plan, which provides an award of share rights to the value of 50 per cent of the individual’s STI. The STI match award is provided in
addition to the STI cash opportunity. Employees at this level are not eligible to participate in AMP’s long-term incentive plan. As the
STI match is based on the STI plan, the number of share rights awarded to the participant depends on the individual’s contribution
to company performance during the fi nancial year.
STI match share rights convert to AMP Limited shares (ie vest) after a two-year deferral period. Vesting is subject to ongoing
employment, compliance with AMP policies and the board’s discretion.
The following table shows the factors which were considered in determining the independent fair value of the share rights
granted during 2012 and the comparative period (2011). Included in this table are the share bonus rights granted to overseas
executives to mimic restricted share awards (disclosed under the heading of ‘restricted shares’ in prior year annual reports).
Share bonus rights without performance conditions have terms that are identical to share rights, except that they are settled
in cash rather than equity instruments.
Grant date
07/06/2012
22/05/2012
27/04/2012
09/09/2011
09/09/2011
Share
price
Contractual
life
Dividend
yield
Dividend
discount
$3.85
$3.87
$4.25
$4.15
$4.15
2.7 years
1.7 years
1.8 years
2.9 years
2.0 years
6.3%
6.3%
6.3%
5.9%
5.9%
17%
11%
11%
16%
11%
Fair
value
$3.19
$3.46
$3.78
$3.50
$3.69
107
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
27. Share-based payments continued
The following table shows the movement in share rights (and share bonus rights without performance conditions) outstanding
during the year.
Grant date
12/03/2010
12/03/2010
28/05/2010
08/09/2010
09/09/2011
09/09/2011
27/04/2012
27/04/2012
22/05/2012
07/06/2012
Total
Exercise
period
Exercise
price
Balance at
1 Jan 2012
23/02/2012–22/02/2014
01/08/2012–31/07/2014
22/03/2012–21/03/2014
01/08/2013–31/07/2015
n/a2
n/a2
n/a2
n/a2
n/a2
n/a2
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
41,867
212,155
35,211
115,575
35,630
2,780,917
–
–
–
–
Exercised
during
the year
Granted
during
the year
41,867
212,155
35,211
–
–
–
–
–
–
–
–
–
–
–
–
–
1,902,884
999,335
247,513
2,220,558
Lapsed
during
the year
–
–
–
–
–
40,452
–
–
–
–
Balance at
31 Dec 20121
–
–
–
115,575
35,630
2,740,465
1,902,884
999,335
247,513
2,220,558
3,221,355
289,233
5,370,290
40,452
8,261,960
1
2
The weighted average remaining contractual life of share rights (and share bonus rights without performance conditions) outstanding at the
end of the period is 1.7 years.
The share rights granted on 9 September 2011, 27 April 2012, 22 May 2012 and 7 June 2012 have no exercise period as they are automatically
exercised upon vesting.
From the end of the fi nancial year and up to the date of this report, no share rights have been issued, no share rights have been exercised,
and no share rights have lapsed. Of the share rights outstanding at the end of the period, none have vested or become exercisable.
(d) Restricted shares
Plan description
From time to time, AMP awards restricted shares to retain critical employees. Additionally, prior to 2011, Australian LTI participants
were eligible to take some of their award in restricted shares (rather than share rights).
A ‘restricted share’ is an ordinary AMP share that has a holding lock in place until the specifi ed vesting period ends. The vesting
period is typically three years, but may vary where the restricted shares are awarded to retain an employee for a critical period.
During this time, the holder is eligible for dividends, but is unable to sell, transfer or hedge their award.
As this program is designed as a means of recognising and retaining employees, no performance hurdles apply, other than
continued service for the duration of the three-year holding lock. If the individual resigns from AMP (or employment is terminated
for misconduct or inadequate performance) during the holding period, the shares are forfeited.
In cases such as retirement and redundancy, the individual retains their restricted shares; however the holding lock remains in place
until the end of the three-year vesting period. Restricted shares are bought on market and granted at no cost to employees.
Plan valuation
The fair value of restricted shares has been 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 refl ect the number of employees expected to remain with AMP until the end of the vesting period.
The following table shows the number of restricted shares that were granted during 2012 and the comparative period (2011), and
the fair value per instrument of restricted shares as at the grant date.
Grant date
20/08/2012
09/09/2011
09/06/2011
Number
granted
Weighted
average fair
value
65,211
221,725
39,416
$4.42
$4.15
$4.88
108
AMP 2012 fi nancial report
27. Share-based payments continued
(e) Employee share acquisition plan
Plan description
From time to time, AMP has provided employees and executives with the opportunity to become shareholders in AMP through
the employee share acquisition plan (ESAP), typically by way of salary sacrifi cing their fi xed remuneration or short-term incentive
to acquire shares. Depending on the terms of the particular award, participants may be entitled to receive matching shares for
shares acquired under the ESAP (eg the most recent awards provided one free share for every 10 shares acquired via salary
sacrifi ce). Additionally, AMP can provide employees with free shares under the ESAP. Where the awards are acquired at no cost
to the participant, service-based conditions must be met for the participant to receive their full entitlement. There are no
performance hurdles applying to the plan as it is primarily designed to encourage employee share ownership.
The plan was suspended mid-way through 2009 in Australia due to the changes to the taxation treatment of employee
share plan awards. Consequently, no shares have been acquired by Australian employees under the ESAP plan since mid-2009.
The plan continues to operate in New Zealand.
If applicable, matching shares are bought on market through an independent third party.
Participants who cease to be employed within the AMP group within the three-year holding period may lose their entitlement
to some or all of their matching shares or free shares, depending on the reason for leaving the company. To receive the maximum
entitlement, participants must be employed by AMP for the whole three-year period.
Plan valuation
All awards made during 2012, and the comparative year (2011), were offers to salary sacrifi ce to acquire shares, with matching
shares awarded on a one-for-ten basis after a three-year vesting period. Each matching share has been valued by external
consultants as the face value of an AMP ordinary share at the date the salary sacrifi ce shares were acquired, less the present value of
the expected dividends (to which the participant is not entitled until the end of the vesting period). The number of matching shares
expected to be granted is estimated based on the average number of shares held in the ESAP by each employee at the beginning of
each year. In determining the share-based payments expense for the period, the number of matching shares expected to be granted
has been adjusted to refl ect the number of employees expected to remain with AMP until the end of the three-year vesting period.
The following table shows the number of matching shares expected to be granted based on the shares purchased by employees
under the ESAP during the current period and the comparative period, and the fair value.
Grant date
2012 – various
2011 – various
Estimated
number of
matching
shares to be
granted
Weighted
average fair
value
535
652
$3.51
$3.98
109
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
28. Group controlled entity holdings
Name of entity
Country of registration
Share type
Footnote
2012
2011
% Holdings
140 St Georges Terrace Pty Limited
255 George Street Investment A Pty Ltd
255 George Street Investment B Pty Ltd
35 Ocean Keys Pty Limited
AAPH Australia Staff Superannuation Pty Ltd
(formerly AXA Australia Staff Superannuation Pty Ltd)
AAPH Executive Plan (Australia) Pty Ltd
(formerly AXA APH Executive Plan (Australia) Pty Ltd)
AAPH GESP Exempt (Australia) Pty Ltd
(formerly AXA APH GESP Exempt (Australia) Pty Ltd)
AAPH Hong Kong Finance Limited
(formerly AXA Hong Kong Finance Limited)
AAPH New Zealand Finance Pty Ltd
(formerly AXA New Zealand Finance Pty Ltd)
AAPH New Zealand HJV Limited
(formerly AXA New Zealand HJV Limited)
Abbey Capital Real Estate Pty Limited
Accountants Resourcing (Australia) Pty Ltd
ACIT Finance Pty Limited
ACN 100 509 993 Pty Ltd
ACN 155 075 040 Pty Limited
ACPP Industrial Pty Ltd
ACPP Offi ce Pty Ltd
ACPP Retail Pty Ltd
AdviceFirst Limited
(formerly Charter Financial Solutions Ltd)
Adviser Resourcing Pty Ltd
Aged Care Investment Services No. 1 Pty Limited
(formerly PHF No. 1 Management Pty Limited)
Aged Care Investment Services No. 2 Pty Limited
(formerly PHF No. 1 Pty Limited)
Allmarg Corporation Limited
AMP (UK) Finance Services Plc
AMP AAPH Finance Limited
(formerly AXA Asia Pacifi c Finance)
AMP AAPH Limited
(formerly AXA Asia Pacifi c Holdings Limited)
AMP ASAL Pty Ltd
AMP Australian Financial Services Holdings Limited
AMP Bank Limited
AMP Capital AB Holdings Pty Limited
AMP Capital Advisors India Private Limited
AMP Capital Asia Limited
(formerly AMP Capital Brookfi eld (HK) Limited)
AMP Capital Bayfair Pty Limited
AMP Capital Core Infrastructure Pty Limited
AMP Capital Finance Limited
AMP Capital Funds Management Limited
AMP Capital Holdings Limited
AMP Capital Investment Management (UK) Limited
(formerly AMP Capital Brookfi eld (UK) Limited)
AMP Capital Investment Management Pty Limited
(formerly AMP Capital Brookfi eld Pty Limited)
AMP Capital Investments No 11 Limited
AMP Capital Investments No. 14 Limited
AMP Capital Investments No. 2 Limited
AMP Capital Investments No. 8 Limited
AMP Capital Investors (Hong Kong) Limited
AMP Capital Investors (Jersey No. 2) Limited
AMP Capital Investors (Luxembourg No. 3) S.à r.l.
AMP Capital Investors (Luxembourg No. 4) S.à r.l.
AMP Capital Investors (Luxembourg No. 5) S.à r.l.
AMP Capital Investors (Luxembourg No. 6) S.à r.l.
AMP Capital Investors (Luxembourg) S.à r.l. [formerly
AMP Capital Redding Investors Luxembourg Limited]
AMP Capital Investors (New Zealand) Limited
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
UK
Australia
Australia
Australia
Australia
Australia
Australia
India
HK
Australia
Australia
Australia
Australia
Australia
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord, Class A Pref.
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord, Pref
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
UK
Ord A &B
Australia
New Zealand
New Zealand
New Zealand
New Zealand
Hong Kong
Jersey
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Ord A &B
Ord A & B
Ord A & B, Pref
Ord A & B, Pref
Ord A & B, Pref
Ord
Ord
Ord
Ord
Ord
Ord
Luxembourg
New Zealand
Ord
Ord
3
1
3
3
3
2
3
3
3
3
3
3
1,3
3
3
3
3
3
3
3
3
3
3
3
85
100
100
100
100
100
100
100
100
100
100
100
100
100
100
85
85
85
65
100
100
100
100
100
100
100
100
–
100
85
85
85
85
85
85
85
85
85
85
100
100
100
100
85
85
85
85
85
85
85
85
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
67
100
100
100
100
100
100
100
100
100
100
100
100
49
100
100
100
–
100
49
50
100
100
100
100
100
100
100
100
100
100
100
100
110
AMP 2012 fi nancial report
28. Group controlled entity holdings continued
Name of entity
Country of registration
Share type
Footnote
2012
2011
% Holdings
AMP Capital Investors
(Property Funds Management Jersey) Limited
AMP Capital Investors (Singapore)
Private Property Trust Limited
AMP Capital Investors (Singapore) Pte Ltd
AMP Capital Investors (UK) Limited
AMP Capital Investors (US) Limited
AMP Capital Investors Advisory (Beijing) Limited
AMP Capital Investors International Holdings Limited
AMP Capital Investors Japan KK
AMP Capital Investors KK
AMP Capital Investors Limited
AMP Capital Investors Property Japan KK
AMP Capital Investors Real Estate Pty Limited
AMP Capital Lifestyle Limited
AMP Capital Offi ce & Industrial (Singapore) Pte Limited
AMP Capital Offi ce and Industrial Pty Limited
AMP Capital Palms Pty Limited
AMP Capital Property Nominees Ltd
AMP Capital SA Schools No. 1 Pty Limited
AMP Capital SA Schools No. 2 Pty Limited
AMP Capital Shopping Centres Pty Limited
AMP CMBS No. 1 Pty Limited
AMP CMBS No. 2 Pty Limited
AMP Crossroads Pty Limited
AMP Custodian Services (NZ) Limited
AMP Davidson Road Pty Limited
AMP Direct Pty Ltd
(formerly AMP Private Wealth Management Pty Limited)
AMP Finance Limited
AMP Finance Services Limited
AMP Financial Investment Group Holdings Limited
AMP Financial Planning Pty Limited
AMP Financial Services Holdings Limited
AMP GBS Limited
AMP GDPF Pty Limited
AMP Global Property Investments Pty Ltd
AMP Group Finance Services Limited
AMP Group Holdings Limited
AMP Group Services Limited
AMP Holdings Limited
AMP Insurance Investment Holdings Pty Limited
AMP Investment Management (NZ) Limited
AMP Investment Services No. 2 Pty Limited
AMP Investment Services Pty Limited
AMP Lending Services Limited
AMP Life (NZ) Investments Holdings Limited
AMP Life (NZ) Investments Limited
AMP Life Limited
AMP Macquarie Holding Pty Limited
AMP Macquarie Pty Limited
AMP New Zealand Holdings Limited
(formerly AXA New Zealand Limited)
AMP Pacifi c Fair Pty Limited
AMP Personal Investment Services Limited
AMP Planner Register Company Pty Limited
AMP Private Capital New Zealand Limited
AMP Private Capital No. 2 Pty Limited
AMP Private Capital Pty Limited
AMP Private Investments Pty Limited
AMP Property Investments (Qld) Pty. Ltd.
AMP Real Estate Advisory Holdings Pty Limited
AMP Remuneration Reward Plans Nominees Pty. Limited
AMP Riverside Plaza Pty Limited
AMP Royal Randwick Pty Limited
Jersey
Singapore
Singapore
UK
USA
R.O.C.
Australia
Japan
Japan
Australia
Japan
Australia
Australia
Singapore
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Fixed
Ord
Ord
Ord
Ord
Ord
Ord A, Ord B,
Red Pref B Class
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
3
3
3
3
3
3
3
3
3
3
3
3
2
3
3
3
3
1,3
1,3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
1
3
3
85
85
85
85
85
85
85
85
85
85
85
85
–
85
85
85
85
85
85
85
100
100
85
85
85
100
100
100
100
100
100
100
85
100
100
100
100
100
100
85
85
85
100
100
100
100
85
85
100
85
100
100
85
85
85
85
100
100
100
85
85
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
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
100
100
100
100
100
–
100
100
100
111
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
28. Group controlled entity holdings continued
Name of entity
Country of registration
Share type
Footnote
2012
2011
% Holdings
New Zealand
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
AMP Services (NZ) Limited
AMP Services Holdings Limited
AMP Services Limited
AMP SMSF Holding Co Limited
AMP SMSF Investments Pty Limited
AMP Superannuation (NZ) Limited
AMP Superannuation Limited
AMP Warringah Mall Pty Ltd
AMP Wealth Management New Zealand Limited
(formerly AXA Wealth Management Limited)
AMP/ERGO Mortgage and Savings Limited
Arrive Wealth Management Limited
Associated Planners Financial Services Pty Ltd
Associated Planners Strategic Finance Pty Ltd
Assure Nominees Limited
Auburn Mega Mall Pty Limited
Australian Mutual Provident Society Pty Limited
Australian Securities Administration Limited
AWOF New Zealand Offi ce Pty Limited
AXA APH GESP Deferred (Australia) Pty Ltd
AXA Funds Management Pty Ltd
BMRI Financial Services Pty Ltd
Carter Bax Pty Ltd
Cavendish Administration Pty Ltd
Cavendish Pty Ltd
Cavendish Superannuation Holdings Pty Ltd
Cavendish Superannuation Pty Ltd
CBD Financial Planning Pty Limited
Charter Financial Planning Limited
Client Reserve Limited
Clientcare Financial Planning Pty Ltd
Collins Place No. 2 Pty Ltd
Collins Place Pty Limited
Didus Pty Limited
Donaghys Australia Pty Limited
Donaghys Industries Limited
Donaghys International Limited
Donaghys Limited
Donaghys Pty Limited
Enemelay Investments Pty Ltd
Exford Pty Ltd
Financial Composure Pty Ltd
Financially Yours Holdings Pty Ltd
Financially Yours Pty Ltd
First Quest Capital Pty Ltd
Focus Property Services Pty Limited
Foundation Wealth Advisers Pty Ltd
Garrisons (Rosny) Pty Ltd
Genesys Group Holdings Pty Ltd
Genesys Group Pty Ltd
Genesys Holdings Limited
Genesys Kew Pty Ltd
Genesys Wealth Advisers (WA) Pty Ltd
Genesys Wealth Advisers Ltd
Glendenning Pty Limited
GWM Spicers Limited
New Zealand
(formerly Gould Wealth Management Limited)
Australia
Hillross Alliances Limited
Australia
Hillross Financial Services Limited
Hillross Innisfail Pty Limited
Australia
Hillross Wealth Management Centre Melbourne Pty Limited Australia
Australia
Hindmarsh Square Financial Services Pty Ltd
Australia
Hindmarsh Square Wealth Advisers Pty Ltd
Australia
Honeysuckle 231 Pty Limited
Australia
INSSA Pty Limited
Australia
ipac Asset Management Limited
New Zealand
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
3
2
3
3
1
1
1
1
2
2
2
2
2
2
2
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord, Redem Pref
Ord
Ord, Pref
Ord A & B
Ord A, B & E
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
100
100
100
100
100
100
100
85
100
100
100
96
96
–
85
100
100
85
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
–
–
–
–
–
–
100
96
80
80
96
92
57
100
100
96
96
96
100
96
100
100
100
100
100
100
100
73
60
100
100
100
100
100
100
100
100
100
100
100
100
100
95
95
100
100
100
100
100
100
100
100
100
–
–
–
–
100
100
100
100
100
100
100
58
58
58
58
58
100
50
95
80
80
95
92
57
100
100
95
95
95
100
95
100
100
100
100
100
100
100
72
60
100
100
112
AMP 2012 fi nancial report
28. Group controlled entity holdings continued
Name of entity
Country of registration
Share type
Footnote
2012
2011
% Holdings
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
ipac Financial Care Pty Ltd
ipac Group Services Pty Limited
Ipac Portfolio Management Limited
ipac Securities Limited
ipac Taxation Services Pty Ltd
Jeminex Pty Limited
Jigsaw Support Services Limited
(formerly AXA Financial Planning Limited)
John Coombes & Company Pty Ltd
Kent Street Pty Limited
King Financial Services Pty Ltd
Kiwi Kat Limited
KiwiPlus Limited
Knox City Shopping Centre Investments (No. 2) Pty Limited Australia
Australia
Kramar Holdings Pty Limited
Australia
Lidomain Pty Ltd
Australia
LifeFX Pty Ltd
Australia
Lindwall Group Pty Ltd
Australia
Marrickville Metro Shopping Centre Pty Limited
Australia
Monitor Money Corporation Pty Ltd
New Zealand
Mortgage Backed Bonds Limited
Mowla Pty. Ltd.
Australia
Multiport Malaysia SDN BHD
Malaysia
(formerly Resourcing Services SDN BHD)
Multiport Pty Ltd
Australia
Multiport Resources Pty Ltd (formerly AR Group Pty Limited) Australia
Australia
National Fire Holdings Pty Limited
New Zealand
National Mutual CPS Management Limited
Australia
National Mutual Funds Management (Global) Limited
Australia
National Mutual Funds Management Limited
New Zealand
National Mutual Leasing NZ Limited
Australia
National Mutual Life Nominees Limited
NM Computer Services Pty Ltd
Australia
NM New Zealand Nominees Limited
(formerly AXA New Zealand Nominees Limited)
NM Rural Enterprises Pty Ltd
NM Superannuation Pty Ltd
NMMT Limited
Northstar Lending Pty Ltd
Omega (Australia) Pty Limited
One Group Retail Holdings Pty Limited
Pajoda Investments Pty Ltd
Parkside Investorplus Solutions Pty Ltd
PHFT Finance Pty Limited
PPS Lifestyle Solutions Pty Ltd
PremierOne Mortgage Advice Pty Limited
Principal Healthcare Finance No. 2 Pty Limited
Principal Healthcare Finance Pty Limited
Principal Healthcare Holdings Pty Limited
Priority One Agency Services Pty Ltd
Priority One Financial Services Limited
Private Wealth Managers Pty Ltd
Quadrant Securities Pty Ltd (formerly Garrisons Pty Ltd)
Quantum Financial Solutions Limited
Quay Mining (No. 2) Limited
Quay Mining Pty Limited
Roost 2007 Limited
S.G. Holdings Limited
Scrabster Bay Pty Limited
SG (Aust) Holdings Pty Ltd
Silverton Securities Pty Ltd
SMSF Advice Pty Ltd
(formerly Monere Financial Planning Limited)
Solar Risk Pty Ltd
Spicers Portfolio Management Limited
SPP No. 1 (Alexandra Canal) Pty Limited
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Bermuda
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Ord
Ord
Converting Class A 3
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord, Red Pref
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
2
2
2
3
2
2
3
2
2
100
100
85
100
75
51
100
55
100
88
70
–
100
–
–
100
100
85
100
100
100
100
100
100
51
–
100
100
–
100
100
100
100
100
100
100
85
52
55
100
100
100
100
100
100
100
100
100
100
96
100
100
100
–
100
–
100
100
100
100
100
86
67
100
100
100
75
51
100
55
100
35
70
100
100
78
100
100
100
100
100
100
100
80
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
52
55
100
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
100
100
100
100
100
86
113
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
28. Group controlled entity holdings continued
Name of entity
Country of registration
Share type
Footnote
2012
2011
% Holdings
Australia
SPP No. 1 (Cowes) Pty Limited
Australia
SPP No. 1 (H) Pty Limited
Australia
SPP No. 1 (Hawthorn) Pty Limited
Australia
SPP No. 1 (Mona Vale) Pty Limited
Australia
SPP No. 1 (Mornington) Pty Limited
Australia
SPP No. 1 (Mt. Waverley Financing) Pty Limited
Australia
SPP No. 1 (Mt. Waverley) Pty Limited
Australia
SPP No. 1 (Newcastle) Pty Limited
Australia
SPP No. 1 (North Melbourne) Pty Limited
Australia
SPP No. 1 (Pakenham) Pty Limited
Australia
SPP No. 1 (Point Cook) Pty Limited
Australia
SPP No. 1 (Port Melbourne) Pty Limited
Australia
SPP No. 1 (Q Stores) Pty Limited
Australia
SPP No. 1 (Rosebery) Pty Limited
Australia
SPP No. 1 Holdings Pty Limited
Australia
SPP No. 3A Investments Pty Limited
Australia
Stephenson & Watt Pty Ltd
New Zealand
Sterling Portfolio Management Limited
Australia
Sterrey Financial Planning Pty Ltd
Australia
Strategic Planning Partners Pty Ltd
Australia
Strategic Wealth Solutions Pty Ltd
Australia
Sugarland Shopping Centre Pty Limited
Australia
Sunshine West Development Pty Limited
Australia
Sunshine West Income Pty Limited
Australia
Suwarraow Pty Ltd
Australia
Synergy Capital Management Ltd
Australia
TFS Financial Planning Pty Ltd
The India Infrastructure Fund LLC
Mauritius
The National Mutual Life Association of Australasia Limited Australia
Australia
TM Fallback Options Pty Ltd
Australia
TM Securities Pty Ltd
Australia
TOA Pty Ltd
Australia
Tynan Mackenzie Holdings Pty Ltd
Australia
Tynan Mackenzie Pty Ltd
Australia
United Equipment Holdings Pty Limited
Australia
Walker Lawrence & Associates Pty Ltd
Australia
Waterfront Place (No. 2) Pty. Ltd.
Australia
Waterfront Place (No. 3) Pty. Ltd.
Australia
Wilsanik Pty Ltd
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Red Pref
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
86
86
86
86
86
86
86
86
86
86
86
86
86
86
86
85
–
–
–
100
100
85
75
85
100
96
100
100
100
–
100
100
73
98
56
–
100
100
100
86
86
86
86
86
86
86
86
86
86
86
86
86
86
86
100
100
100
98
100
100
100
75
100
100
95
100
100
100
100
100
100
73
98
56
100
100
100
100
3
2
2
2
3
3
2
2
1
2
3
Controlling interest acquired in 2012.
Controlling interest lost in 2012.
On 1 March 2012, AMP group completed its sale of 15 per cent of the issued capital of AMP Capital Holdings Limited, a controlled entity,
to Mitsubishi UFJ Trust and Banking Corporation (MUTB).
Trusts and other entities
Name of entity
140 St Georges Terrace Trust
ACPP Holding Trust
ACPP Industrial Trust
ACPP Offi ce Trust
ACPP Retail Trust
Active Quant Share Fund
AFS Alternative Fund 1
AFS Australian Equity Enhanced Index Fund 1
AFS Australian Equity Growth Fund 1
AFS Australian Equity Value Plus Fund 1
AFS Australian Property Securities Fund 1
AFS Australian Share Fund 8
AFS Extended Alpha Fund
(formerly AMP Capital Sustainable Extended Alpha Fund)
AFS Global Property Securities Fund 1
AFS International Share Fund 1
114
AMP 2012 fi nancial report
Country of
registration
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
% Holdings
Footnote
2012
2011
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
76
–
–
–
–
100
–
100
100
100
1
1
1
1
1
28. Group controlled entity holdings continued
Trusts and other entities
Name of entity
Aggressive Enhanced Index Fund
AHGI Martineau Fund
AHGI Martineau Galleries Fund
AMP Capital Alternative Defensive Fund – Delayed Redemption
AMP Capital Asia ex-Japan Fund
AMP Capital Asia Local Currency Bond Fund
AMP Capital Asian Equity Growth Fund
AMP Capital Australian Equity Income Fund
AMP Capital Australian Equity Long Short Fund
AMP Capital Australian Equity Opportunities Fund
AMP Capital Australian Small Companies Fund
AMP Capital Business Space REIT
AMP Capital Corporate Bond Fund
AMP Capital Credit Strategies Fund
AMP Capital Extended Multi-Asset Fund
AMP Capital Global Equities Sector Rotation Fund
AMP Capital Global Infrastructure Securities Fund (Hedged)
AMP Capital Global Infrastructure Securities Fund (Unhedged)
AMP Capital Global Resource Fund
AMP Capital Global Tactical Asset Allocation Fund
AMP Capital Infrastructure Trust 1
AMP Capital Macro Strategies Fund
AMP Capital Multi-Asset Fund
AMP Capital Pacifi c Fair and Macquarie Shopping Centre Fund
AMP Capital Shell Fund 1
AMP Capital Shell Fund 2
AMP Capital Sustainable Share Fund
AMP Capital Wholesale Offi ce Fund
AMP Life Cash Management Trust
AMP Macquarie Holdings Trust
AMP Macquarie Trust
AMP Pacifi c Fair Trust
AMP Private Capital Trust No.9
AMP Shareholder Cash Fund
AMP Shareholder Fixed Interest Fund
AMP UK Shopping Centre Fund
AMPCI FD Infrastructure Trust
Assure Australasian Equities
Australian Credit Fund
Australian Equities Franked Value Fund
Australian Government Fixed Interest Fund
Australian Pacifi c Airports Fund
AWOF New Zealand Offi ce Trust
Balanced Enhanced Index Fund
Booragoon Trust
Bourke Place Unit Trust
Cautious Enhanced Index Fund
Cavendish Administration Unit Trust
China Strategic Growth Fund
Commercial Loan Pool No. 1
Conservative Enhanced Index Fund
Core Plus Fund
Crossroads Trust
Davidson Road Trust
Diversifi ed Strategies – Diversifi ed Strategy No. 6
EFM Australian Share Fund 1
EFM Australian Share Fund 2
EFM Australian Share Fund 3
EFM Australian Share Fund 4
EFM Australian Share Fund 6
EFM Australian Share Fund 7
EFM Fixed Interest Fund 2
EFM Fixed Interest Fund 3
EFM Fixed Interest Fund 4
EFM Infrastructure Fund 1
EFM International Share Fund 3
Country of
registration
Footnote
2012
2011
% Holdings
1
1
1
1
1
1
2
2
1
1
3
2
2
2
1
1
2
2
3
1
3
1
2
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
75
100
100
81
54
85
76
91
71
100
80
80
100
–
100
85
73
–
65
100
68
35
100
–
–
–
100
100
100
100
97
–
99
–
100
66
36
100
100
25
100
100
100
100
99
100
100
100
–
97
99
98
94
99
98
96
95
94
95
97
100
100
100
–
100
–
73
–
100
–
51
100
86
93
–
100
84
84
–
100
100
84
99
90
–
–
66
37
100
90
90
90
100
–
–
100
97
100
99
100
100
66
37
100
–
26
100
–
100
100
98
100
100
100
59
97
99
98
94
99
98
97
96
94
96
97
115
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
28. Group controlled entity holdings continued
Trusts and other entities
Name of entity
EFM International Share Fund 5
EFM International Share Fund 7
EFM Listed Property Fund 1
Emerging Market Fund
Enhanced Index International Share Fund
Enhanced Index Share Fund
Executive Share Plan Trust
FD Australian Share Fund 1
FD Australian Share Fund 3
FD Global Property Securities Fund 1
FD International Share Fund 1
FD International Share Fund 3
FD International Share Fund 4
Floating Rate Income Fund
Future Directions Asia ex Japan Fund
Future Directions Australian Bond Fund
Future Directions Australian Share Fund
Future Directions Australian Small Companies Fund
Future Directions Balanced Fund
Future Directions Conservative Fund
Future Directions Core International Share Fund 2
Future Directions Credit Opportunities Fund
Future Directions Diversifi ed Alternatives Fund
Future Directions Emerging Markets Share Fund
Future Directions Enhanced Index Australian Share Fund
Future Directions Enhanced Index Global Property Securities Fund
Future Directions Enhanced Index International Bond Fund
Future Directions Geared Australian Share Fund
Future Directions Global Credit Fund (formerly FD International Bond Fund 3)
Future Directions Global Government Bond Fund
Future Directions Growth Fund
Future Directions Hedged Core International Share Fund
Future Directions High Growth Fund
Future Directions Infl ation Linked Bond Fund
Future Directions Infrastructure Fund
Future Directions International Bond Fund
Future Directions International Share Fund
Future Directions Moderately Conservative Fund
Future Directions Opportunistic Fund
Future Directions Private Equity Fund 1A
Future Directions Private Equity Fund 1B
Future Directions Private Equity Fund 2A
Future Directions Private Equity Fund 2B
Future Directions Private Equity Fund 3A
Future Directions Private Equity Fund 3B
Future Directions Property (Feeder) Fund
Future Directions Total Return Fund
Genesys Participation Trust
Global Credit Fund
Global Credit Strategies Fund
Global Government Fixed Interest Fund
Global Growth Opportunities Fund
Global Listed Infrastructure Fund
Goldman Sachs Commodity Index Light Energy – E92 Portfolio
Hindmarsh Square Financial Services Trust
International Bond Fund
Investment Services Unit Trust
ipac Diversifi ed Investment Strategy No2
ipac Diversifi ed Investment Strategy No4
Kent Street Investment Trust
Kent Street Unit Trust
Loftus Street Trust
Macquarie Balanced Growth Fund
Managed Treasury Fund
Moderately Aggressive Enhanced Index Fund
Moderately Conservative Enhanced Index Fund
Country of
registration
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
% Holdings
Footnote
2012
2011
2
2
1
2
1
2
1
1
3
97
91
96
–
81
89
100
97
93
–
95
99
96
96
74
96
93
90
98
95
59
95
97
52
97
97
–
93
95
92
97
61
95
95
97
95
58
95
97
97
100
97
100
97
100
97
98
100
100
87
100
96
100
–
100
93
100
63
69
100
100
36
83
92
100
100
97
92
96
98
82
90
100
97
93
94
95
99
97
97
74
96
94
89
98
94
58
97
–
51
97
96
81
92
89
–
96
63
95
97
97
93
57
95
97
97
100
97
100
100
100
96
97
100
100
87
100
96
100
96
100
91
100
–
–
100
100
37
78
76
100
100
116
AMP 2012 fi nancial report
28. Group controlled entity holdings continued
Trusts and other entities
Name of entity
Monash House Trust
Multi-Manager Portfolio – Australian Equities Sector
Multi-Manager Portfolio – Balanced
Multi-Manager Portfolio – Growth
Multi-Manager Portfolio – High Growth
Multi-Manager Portfolio – International Equities Sector
Multi-Manager Portfolio – International Shares-Hedged
Multi-Manager Portfolio – Property Sector
Multi-Manager Portfolio – Secure
Multi-Manager Portfolio – Secure Growth
Principal Healthcare Holdings Trust
Private Equity Fund IIIA
Private Equity Fund IIIB
Progress 2005-1 Trust
Progress 2005-2 Trust
Progress 2006-1 Trust
Progress 2007-1G Trust
Progress 2008-1R Trust
Progress 2009-1Trust
Progress 2010-1Trust
Progress 2011-1Trust
Progress 2012-1Trust
Progress 2012-2Trust
Progress Warehouse Trust No1
Progress Warehouse Trust No2
Responsible Investment Leaders Conservative Fund
Responsible Investment Leaders Growth Fund
Responsible Investment Leaders High Growth Fund
Riverside Plaza Trust
Select Property Portfolio No. 1
Short Term Credit Fund
Sydney Cove Trust
The Glendenning Trust
The Pinnacle Fund
Warringah Mall Trust
Wholesale Australian Bond Fund
Wholesale Australian Equity – Industrials Fund
Wholesale Core Australian Equity Growth Fund
Wholesale Core Australian Equity Value Fund
Wholesale Global Diversifi ed Yield Fund
Wholesale Global Equity – Growth Fund
Wholesale Global Equity – Growth Fund (Hedged)
Wholesale Global Equity – Index Fund (Hedged)
Wholesale Global Equity – Index Fund (Unhedged)
Wholesale Global Equity – Value Fund (Hedged)
Wholesale Unit Trusts NZ Shares Fund
Country of
registration
Footnote
2012
2011
% Holdings
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
1
1
2
3
2
2
2
1
100
100
100
100
100
100
100
100
100
100
100
94
94
100
100
100
100
100
100
100
100
100
100
100
–
95
97
100
100
86
100
100
100
99
50
90
–
–
–
100
84
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
94
94
100
100
100
100
100
100
100
100
–
–
100
100
94
96
100
100
86
100
100
100
99
67
93
77
100
100
99
79
100
100
100
100
–
1 Controlling interest acquired in 2012.
2 Controlling interest lost in 2012.
3 Not more than 50 per cent holding, but consolidated because AMP retains control over the operating functions.
117
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
28. Group controlled entity holdings continued
In the course of its normal operating investments activities the AMP life insurance entities’ statutory funds acquire equity interests
in entities which, in some cases, results in AMP holding a controlling interest in some of these investees. Certain controlled entities
of the AMP life entities’ statutory funds are operating companies which carry out business operations unrelated to the core wealth
management operation of the AMP group.
The AMP group has classifi ed operating companies, which are controlled entities of the AMP life entities’ statutory funds, as disposal
groups held for sale where they are subject to active sale processes at 31 December 2012 and a sale is expected to be completed
within a year. These operating companies are being disposed in accordance with the investment strategy of the fund which holds
the investment in these entities. As disclosed in note 13, an impairment of $14m to goodwill was recognised on classifi cation of
these operating companies as disposal groups held for sale due to the recoverable amount for impairment testing purposes being
calculated on a fair value less cost to sell rather than a value in use basis. All disposal groups are held within the Australian Wealth
Management operating segment.
The major classes of assets and liabilities of the disposal groups as at 31 December 2012 are as follows:
Assets
Receivables
Inventory and other assets
Property, plant and equipment
Intangibles
Total assets of the disposal groups
Liabilities
Payables
Current tax liability
Provisions
Borrowings
Total liabilities of the disposal groups
Net assets of the disposal groups
2012
$m
55
44
15
73
187
47
2
12
13
74
113
118
AMP 2012 fi nancial report
29. Associates
(a) Investments in associates accounted for using the equity method
AIMS AMP Capital Industrial REIT1,2
AIMS AMP Capital
Property Management Ltd
AIMS AMP Capital Industrial
REIT Management Ltd
AMP Capital Brookfi elds Limited3,4
All Financial Services Pty Ltd5
Australian Financial
Risk Management Pty Ltd
IMB Financial Planning Limited4
PSK Financial Services Group Pty Ltd
Super IQ Pty Limited
Treysta Wealth Management Pty Ltd
Other (each less than $3m)
Principal
activities
Industrial property trust
Property management
Investment management
Investment management
Provision of fi nancial services
Provision of risk insurance advice
Provision of fi nancial services
Provision of fi nancial services
Investment management
Provision of fi nancial services
Ownership interest
Carrying amount
2012
%
2011
%
2012
$m
2011
$m
Country of
incorporation
5
50
50
–
49
40
–
24
49
41
14
50
50
50
–
40
50
24
49
41
26
58
Singapore
5
5
–
4
3
–
8
3
6
21
4
4
7
–
3
3
7
5
4
20
Singapore
Singapore
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Total investments in associates accounted for using the equity method
81
115
1
2
3
4
5
The combination of the 14 per cent investment in AIMS AMP Capital Industrial REIT and the joint control of the manager companies is considered
to represent signifi cant infl uence by AMP.
The value of AMP’s investment in AIMS AMP Capital Industrial REIT based on published quoted prices as at 31 December 2012 is $26m
(31 December 2011: $45m).
Prior to 1 April 2012, AMPCH group held 50 per cent interest in AMP Capital Investment Management Ltd (formerly known as AMP Capital
Brookfi eld Ltd) applying equity method. From 1 April 2012, AMPCH group acquired the remaining 50 per cent holding in the joint venture
making it a wholly owned subsidiary, consolidated as part of the AMP group.
Ceased being an associate entity during 2011.
Became an associate entity during 2011.
Aggregated fi nancial information extracted from the fi nancial statements of associates accounted for using the equity method
Assets
Liabilities
Revenues
Expenses – including tax
Profi t
Share of contingent liabilities incurred in relation to associates accounted for using the equity method
2012
$m
1,073
359
121
56
65
nil
2011
$m
773
241
203
136
66
nil
119
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
29. Associates continued
(b) Investments in associates held by the life entities’ statutory funds measured at fair value through profi t or loss1,2
Ownership interest
Carrying amount
Principal
activity3
2012
%
2011
%
2012
$m
Companies3
Diversifi ed Commercial Backed
Mortgage Securities Pty Ltd
Gove Aluminium Finance
Asian Giants Infrastructure
43
Investment in
mortgage securities
Investment into aluminium 30
smelter Tomago, NSW
Infrastructure investment
37
Unit trusts3
Aged Care Investment Trust No. 1
Aged Care Investment Trust No. 2
AMP Capital China Growth Fund
AMP Capital Global Property Securities Fund
AMP Capital Infrastructure Equity Fund
(formerly Infrastructure Equity Fund)
AMP Capital NZ Shares Index Fund4
AMP Capital NZ Shares Fund
(formerly AIF Equity Units)
AMP Capital Pacifi c Fair and
Macquarie Shopping Centre Fund4
AMP Capital Property Portfolio
AMP Capital Shopping Centre Fund
AMP Capital Strategic NZ Shares Fund
AMP Equity Trust
AMP Investments World Index Fund5
Australian Pacifi c Airports Fund 3 C Class5
Darling Park Property Trust
Esplanade Property Trust
Future Directions International Small Companies
Listed Property Fund
Marrickville Metro Trust
Property Income Fund
Responsible Investments Leader Balanced Fund
Schroder Fixed Income Fund4
Specialist Investment Strategies – International
Strategies – Alternative Income Strategy No 1
Specialist Investment Strategies – Australian
Strategies – Australian Share Strategy No 1
Specialist Investment Strategies – International
Strategies – Global Emerging Markets Strategy No 1
Specialist Investment Strategies – International
Strategies – International Fixed Interest Strategy No 2
Specialist Investment Strategies – International
Strategies – International Share Strategy No 2
Specialist Investment Strategies – Australian
Strategies – Australian Cash Strategy No 1
Strategic Infrastructure Trust Europe 1
Strategic Infrastructure Trust Europe 2
Sugarland Shopping Centre Trust
Value Plus Australia Share Fund
Wholesale Cash Management Trust
Wholesale Global Equity Value Fund
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
Investment trusts
48
48
38
36
31
38
23
26
27
34
28
42
–
–
50
50
–
31
50
30
44
24
26
24
24
25
23
21
41
41
50
23
33
37
43
30
37
48
48
38
27
29
–
43
–
38
37
32
42
46
36
50
50
40
–
50
35
42
–
25
24
22
24
21
20
34
34
50
25
33
33
–
122
20
73
73
87
466
131
74
75
304
244
632
121
189
–
–
228
165
–
57
83
126
229
178
333
808
69
190
191
123
80
81
52
52
129
76
2011
$m
29
138
12
69
69
81
268
190
–
96
–
229
642
126
181
51
64
231
158
137
–
82
216
212
–
301
721
57
180
161
125
73
73
51
51
139
74
1
2
3
4
5
Investments in associated entities that back investment contract and life insurance contract liabilities are treated as fi nancial assets and are
measured at fair value. Refer to note 1(g).
The reporting date for all signifi cant associated entities is 31 December.
In the course of normal operating investment activities, the life statutory fund holds investments in various operating businesses. Investments
in associated entities refl ect investments where the life statutory fund holds between a 20 per cent and 50 per cent equity interest. Investments
in associated companies and unit trusts are listed where the carrying value is greater than $20m and $50m respectively.
Trust became an associated entity during 2012.
Trust ceased being an associated entity during 2012.
120
AMP 2012 fi nancial report
30. Operating lease commitments
Operating lease commitments (non-cancellable)
Due within one year
Due within one year to fi ve years
Due later than fi ve years
Total operating lease commitments
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
79
360
169
608
75
261
201
537
–
–
–
–
–
–
–
–
Lease commitments are in relation to AMP group’s offi ces in various locations. Under these arrangements AMP generally pays rent
on a period basis at rates agreed at the inception of the lease.
At 31 December 2012, the total of future minimum sublease payments expected to be received under non-cancellable subleases
was $68m (2011: $13m).
31. Contingent liabilities
The AMP group and the parent entity from time to time may incur obligations arising from litigation or various types of contracts
entered into in the normal course of business – including guarantees issued by the parent for the performance of obligations by
controlled entities in the AMP group.
The parent entity has entered into deeds to provide capital maintenance and liquidity support to AMP Bank Limited. At the reporting
date the likelihood of any outfl ow in settlement of these obligations is considered to be remote.
Where it is determined that the disclosure of information in relation to a contingent liability can be expected to prejudice seriously
the position of the AMP group (or its insurers) in a dispute, accounting standards allow AMP group not to disclose such information
and it is AMP group’s policy that such information is not to be disclosed in this note.
At the reporting date there were no other material contingent liabilities where the probability of any outfl ow in settlement was
greater than remote.
121
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
32. Related-party disclosures
(a) Key management personnel (KMP) details
AASB 124 Related Party Disclosures defi nes key management personnel as including all non-executive directors (NEDs), the Chief
Executive Offi cer (CEO) and other persons having authority and responsibility for planning, directing and controlling the activities of the
entity (group executives). The following non-executive directors, CEO and group executives of AMP Limited held offi ce during the year:
Chairman
Chief Executive Offi cer
and Managing Director
Non-executive directors
Executives
Peter Mason
Craig Dunn
Patricia Akopiantz
Richard Allert
Catherine Brenner
Brian Clark
Paul Fegan
John Palmer
Nora Scheinkestel
Peter Shergold
Craig Meller
Stephen Dunne
Colin Storrie
Brian Salter
Lee Barnett
Paul Sainsbury
Matthew Percival
Fiona Wardlaw
Jonathan Deane
Managing Director, AMP Financial Services
Managing Director, AMP Capital
Chief Financial Offi cer
General Counsel
Chief Information Offi cer
Integration Director and Managing Director, AMP SMSF
General Manager, Public Affairs
General Manager, Human Resources
General Manager, Group Strategy
(b) Performance rights and options holdings of key management personnel
The following table summarises the holdings of performance rights and options granted to the executive key management personnel.
Name
Performance rights
Craig Dunn
Craig Meller
Stephen Dunne
Colin Storrie
Brian Salter
Lee Barnett
Paul Sainsbury
Matthew Percival
Fiona Wardlaw
Jonathan Deane
Holding at
1 Jan 2012
2,204,620
1,050,278
1,050,278
75,188
737,872
731,355
488,747
540,978
612,019
501,498
Granted
Exercised
Lapsed
Holding at
31 Dec 2012
Vested and
exercisable at
31 Dec 2012
1,110,406
540,609
540,609
409,898
332,233
330,076
280,456
243,781
276,142
226,522
–
–
–
–
–
–
–
–
–
–
777,778 2,537,248
342,593 1,248,294
342,593 1,248,294
485,086
810,845
804,764
621,054
594,759
673,346
552,094
–
259,260
256,667
148,149
190,000
214,815
175,926
–
–
–
–
–
–
–
–
–
–
122
AMP 2012 fi nancial report
32. Related-party disclosures continued
(c) Shareholdings of key management personnel
The following table summarises the movements in holdings of shares in AMP Limited held by the key management personnel and
their personally related entities.
Name
Non-executive directors
Patricia Akopiantz
Richard Allert
Catherine Brenner
Brian Clark3
Paul Fegan
Peter Mason
John Palmer
Nora Scheinkestel3
Peter Shergold
Executives
Craig Dunn2
Craig Meller
Stephen Dunne
Colin Storrie
Brian Salter
Lee Barnett
Paul Sainsbury
Matthew Percival
Fiona Wardlaw
Jonathan Deane
Holding at
1 Jan 2012
Granted as
remuneration
during the
period
Received on
exercise of
performance
rights or
options
Purchased
through
AMP NEDs
Share Plan
Other
changes1
Holding at
31 Dec 2012
10,846
67,237
38,305
43,941
23,487
474,698
62,238
112,253
32,784
558,497
96,207
209,396
39,416
21,978
53,078
19,928
45,000
61,294
93,683
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
52
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,440
10,440
10,440
10,440
10,440
35,926
10,439
10,439
10,439
–
–
–
–
–
–
–
–
–
–
–
4,661
1,742
3,141
–
31,925
4,335
7,600
2,412
–
–
–
–
782
–
(19,928)
–
2,287
–
21,286
82,338
50,487
57,522
33,927
542,549
77,012
130,292
45,635
558,497
96,207
209,396
39,416
22,760
53,078
–
45,000
63,681
93,735
1
2
3
Other changes include the purchases and sales of shares on market by key management personnel and their related parties and participation
in the dividend reinvestment plan.
AMP Notes are debentures issued by AMP Group Finance Services Limited, a subsidiary of AMP Limited. In addition to his AMP Limited
shareholding above, Craig Dunn’s related parties hold 1,000 AMP Notes. There were no changes to this holding of AMP Notes between
1 January 2012 and 31 December 2012.
In addition to their AMP Limited shareholdings above, Brian Clark and Nora Scheinkestel hold 980 and 150 AMP Notes respectively. There were
no changes to these holdings of AMP Notes between 1 January 2012 and 31 December 2012.
(d) Share rights holdings of key management personnel
The following table summarises the movements in holdings of share rights held by the key management personnel.
Name
Executives
Craig Dunn
Craig Meller
Stephen Dunne
Colin Storrie
Brian Salter
Lee Barnett
Paul Sainsbury
Matthew Percival
Fiona Wardlaw
Jonathan Deane
Holding at
1 Jan 2012
–
–
–
47,620
–
–
–
–
–
–
Granted as
remuneration
during the
period1
247,513
146,961
158,867
69,060
82,872
85,635
78,453
63,535
71,823
60,773
Exercised
Lapsed
Holding at
31 Dec 2012
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
247,513
146,961
158,867
116,680
82,872
85,635
78,453
63,535
71,823
60,773
1
Granted as remuneration during the period includes STI deferral plan share rights. Information regarding the STI deferral plan can be found in
note 27 Share-based payments.
123
Notes to the fi nancial statements
for the year ended 31 December 2012 continued
32. Related-party disclosures continued
Remuneration of key management personnel
The following table provides a total of the remuneration received by the key management personnel. For further details regarding
remuneration of key management personnel see the remuneration report which forms part of the directors’ report.
Short-term
benefi ts
$’000
Post
employment
benefi ts
$’000
Share-based
payments
$’000
Other long-
term benefi ts
$’000
Termination
benefi ts
$’000
Non-executive directors1
2012
2011
As disclosed in 20112
Key management personnel excluding
non-executive directors
2012
2011
As disclosed in 20112
All key management personnel
20123
20113
As disclosed in 20112
2,952
3,042
3,215
14,874
12,824
14,374
17,826
15,866
17,589
230
221
237
315
151
167
545
372
404
–
–
–
8,328
7,784
8,746
8,328
7,784
8,746
–
–
–
–
(4)
(4)
–
(4)
(4)
Total
$’000
3,182
3,263
3,452
23,517
20,755
–
–
–
–
–
1,694
24,977
–
–
26,699
24,018
1,694
28,429
Non-executive directors are not entitled to short-term incentive payments. Short-term benefi ts only include fees and allowances.
This represents the amount paid to those individuals considered key management personnel and disclosed as such in the 2011 fi nancial report.
1
2
3 These amounts represent the total remuneration paid to the key management personnel listed in note 32(a) for 2012 and 2011.
(e) Transactions with key management personnel
During the year, key management personnel and their personally related entities have entered into transactions with the parent
entity or its subsidiaries. All such transactions have occurred within a normal employee, customer or supplier relationship on terms
and conditions no more favourable than those that it is reasonable to expect AMP would have adopted if dealing at arm’s length
with an unrelated individual. These transactions include:
–
–
–
normal personal banking with AMP Bank Limited including the provision of credit cards
the purchase of AMP insurance and investment products
fi nancial investment services.
Information about such transactions does not have the potential to affect adversely decisions about the allocation of scarce
resources made by users of this fi nancial report, or the discharge of accountability by the specifi ed executives or specifi ed directors.
The following tables provide details of loans made to key management personnel and their related parties by AMP or any of
its subsidiaries.
Balance at
1 Jan 2012
$’000
Written off
$’000
Net advances
(repayments)
$’000
Balance at
31 Dec 2012
$’000
Interest
charged
$’000
Interest not
charged
$’000
Number
in group
Key management personnel
and their related parties1
5,182
–
(1,826)
3,356
320
–
5
Individuals and their related parties with loans above $100,000 during the reporting period.
Craig Dunn
Lee Barnett
Jonathan Deane
Craig Meller
Paul Sainsbury
Balance at
1 Jan 2012
$’000
Written off
$’000
Net advances
(repayments)
$’000
Balance at
31 Dec 2012
$’000
Interest
charged
$’000
Interest not
charged
$’000
692
44
543
2,030
1,873
–
–
–
–
–
(145)
(44)
(207)
(216)
(1,214)
547
–
336
1,814
659
41
1
24
134
120
–
–
–
–
–
Highest
indebtedness
in period
$’000
706
133
543
2,160
3,750
1
All 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.
124
AMP 2012 fi nancial report
33. Auditors’ remuneration
Amounts received or due and receivable by auditors of AMP Limited for:
Audit services
Audit or review of fi nancial statements
Other audit services1
Total audit service fees
Total non-audit services2
Consolidated
Parent
2012
$’000
2011
$’000
2012
$’000
2011
$’000
11,372
2,383
10,966
1,932
13,755
12,898
2,822
1,187
140
–
140
–
140
–
140
–
Total amounts received or due and receivable by auditors of AMP Limited3,4
16,577
14,085
140
140
1
2
3
4
Other audit services includes fees for reviews of the full year and half year investor reports, compliance audits and other audit procedures
performed for vehicles controlled by AMP life insurance entities’ statutory funds and those managed by AMP Capital.
Non-audit services include tax and compliance advice, AMP Bank securitisation opinions, business project advice, services in relation to a target
operating model and other procedures performed for investment vehicles owned by AMP Life insurance entities’ statutory funds.
Includes fees paid to Ernst & Young affi liates overseas.
Periodically, the AMP group gains control of entities whose incumbent auditor is an audit fi rm other than Ernst & Young. In addition to the
audit fees paid to Ernst & Young for auditing the AMP group, immaterial audit fees are also paid to these non-Ernst & Young audit fi rms in
relation to the audit of those periodically controlled entities. The non-Ernst & Young audit fi rms are also independently contracted to provide
other services to other controlled entities of the AMP group, unrelated to their audit work.
34. Events occurring after reporting date
As at the date of this report, the directors are not aware of any matter or circumstance that has arisen since the reporting date that
has signifi cantly affected or may signifi cantly affect the entity’s operations in future years; the results of those operations in future
years; or the entity’s state of affairs in future years which is not already refl ected in this report, other than the following:
–
From 1 January 2013, revised APRA Life and General Insurance Capital (LAGIC) standards apply to AMP Life Limited and
The National Mutual Life Association of Australasia Limited (the AMP life insurance entities) and the North guarantee product.
Under LAGIC, the AMP group regulatory capital resources above MRR of $2,420m will exclude the policyholder surplus of $776m.
While not included in the capital position, policyholder surpluses remain available to absorb adverse market and other impacts
in the participating business.
As a result of applying LAGIC on 1 January 2013, AMP group’s capital requirement increased by $272m. AMP group strengthened
its capital position during 2012 in anticipation of these changes and AMP group’s shareholder surplus above MRR increased
from $990m at 31 December 2011 to $1,644m at 31 December 2012. The LAGIC requirements have now reduced the surplus to
$1,372m at 1 January 2013. A number of capital effi ciency initiatives are being targeted in 2013 to reduce capital requirements
in the AMP life insurance entities and for the North product. The AMP life insurance entities continue to meet minimum
regulatory requirements.
–
On 21 February 2013, AMP announced a fi nal dividend on ordinary shares of 12.5 cents per share. Details of the announced
dividend and dividends paid and declared during the year are disclosed in note 18 of the fi nancial report.
125
Directors’ declaration
for the year ended 31 December 2012
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) in the opinion of the directors there are reasonable grounds to believe that the company will be able to pay its debts
as and when they become due and payable
(b) in the opinion of the directors the fi nancial statements and the notes 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 fi nancial statements include an explicit and unreserved statement of compliance with the International
Financial Reporting Standards as discussed in note 1(a)
(d) the directors have been given the declarations required by section 295A of the Corporations Act 2001.
Peter Mason
Chairman
Sydney, 21 February 2013
Craig Dunn
Chief Executive Offi cer and Managing Director
126
AMP 2012 fi nancial report
Ernst & Young Centre
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
www.ey.com/au
Independent auditor’s report to the members of AMP Limited
Report on the fi nancial report
We have audited the accompanying fi nancial report of AMP Limited, which comprises the statements of fi nancial position as at
31 December 2012, the statements of comprehensive income, the statements of changes in equity and the statements of cash fl ows
for the year then ended, notes comprising a summary of signifi cant accounting policies and other explanatory information, and the
directors’ declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year’s
end or from time to time during the fi nancial year.
Directors’ responsibility for the fi nancial report
The directors of the company are responsible for the preparation of the fi nancial report that gives a true and fair view in accordance
with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are
necessary to enable the preparation of the fi nancial report that is free from material misstatement, whether due to fraud or error.
In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the
fi nancial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the fi nancial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial report.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
fi nancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to
the entity’s preparation and fair presentation of the fi nancial report 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 entity’s internal controls. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the fi nancial report.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to
the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report.
Opinion
In our opinion:
a. the fi nancial report of AMP Limited is in accordance with the Corporations Act 2001, including:
i
giving a true and fair view of the company’s and consolidated entity’s fi nancial positions as at 31 December 2012 and
of their performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. the fi nancial report also complies with International Financial Reporting Standards as disclosed in Note 1.
ii
Report on the remuneration report
We have audited the Remuneration Report included in the directors’ report for the year ended 31 December 2012. 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.
Opinion
In our opinion, the remuneration report of AMP Limited for the year ended 31 December 2012 complies with section 300A of the
Corporations Act 2001.
Ernst & Young
Andrew Price
Partner
Sydney
21 February 2013
Liability limited by a scheme
approved under Professional
Standards Legislation
127
Shareholder information
Distribution of shareholdings as at 22 February 2013
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–200,000
200,001 and over
Total
Number of holders
Ordinary shares held
% of issued capital
612,758
223,971
22,817
12,164
174
871,884
270,377,662
457,443,121
162,080,052
269,726,394
1,770,796,317
2,930,423,546
9.23
15.61
5.53
9.20
60.43
100.00
At the end of 2012, AMP ran a Small Shareholding Sale Facility to provide shareholders who held small numbers of AMP shares
with the opportunity to sell their shares, free of change, at a market price. Through the Sale Facility, 43,669 shareholders sold
1,941,443 shares and a further 510 shareholders donated $31,508 in sale proceeds to charity. As at 22 February 2013, the total
number of shareholders holding less than a marketable parcel of 95 shares is 6,008.
Twenty largest shareholdings as at 22 February 2013
Rank
Name
Ordinary shares held
% of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited – GSCO ECA
AMP Life Limited
HSBC Custody Nominees (Australia) Limited
Australian Foundation Investment Company Limited
Argo Investments Limited
RBC Investor Services Australia Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
Djerriwarrh Investments Limited
RBC Investor Services Australia Nominees Pty Limited
Share Direct Nominees Pty Ltd <10026 A/C>
Navigator Australia LTD
Buttonwood Nominees Pty LTD
586,408,158
378,156,686
328,194,165
82,225,556
47,216,696
44,604,685
26,736,122
24,763,837
24,153,483
21,058,346
20,100,422
12,231,674
11,864,032
11,175,185
9,524,220
5,713,115
5,477,848
4,998,402
4,882,023
4,765,587
20.01
12.90
11.20
2.81
1.61
1.52
0.91
0.85
0.82
0.72
0.69
0.42
0.40
0.38
0.33
0.19
0.19
0.17
0.17
0.16
1,654,250,242
56.45%
Substantial shareholders
The company has received no substantial shareholding notices.
Total number of holders of ordinary shares and their voting rights
As at 22 February 2013, the share capital of AMP Limited consisted of 2,930,423,546 ordinary shares held by 871,884 shareholders.
The voting rights attached to the shares are that each registered holder of shares present in person (or by proxy, attorney or
representative) at a meeting of shareholders has one vote on a vote taken by a show of hands, and one vote for each fully
paid share held on a vote taken at a poll.
Total number of options over unissued shares and option holders
As at 22 February 2013, AMP Limited had no options on issue over unissued ordinary shares in AMP Limited.
Stock exchange listings
AMP Limited is listed on the Australian Securities Exchange and on the New Zealand Stock Exchange.
Restricted securities
There are no restricted securities on issue.
Buyback
There is no current on-market buy-back.
128
AMP 2012 annual report
Glossary
Closed products
Products within AMP’s Mature
business that are not open to
new customers.
Contingent liabilities
A situation existing at reporting
date, where past events have led to
a possible obligation, the outcome
of which depends on uncertain
future events, or an obligation
where the outcome is not suffi ciently
probable or reliably measurable to
warrant recognising the liability
at this reporting date.
Controllable costs
Costs that AMP incurs in running its
business. Controllable costs include
operational and project costs and
exclude variable costs, provision for
bad and doubtful debts and interest
on corporate debt.
Demerger
AMP’s demerger on 23 December
2003 created separate businesses:
AMP in Australasia and Henderson
Group in the United Kingdom.
Earnings per share
Each earnings per share (EPS)
calculation represents the relevant
profi t amount divided by the
weighted average number of
shares on issue during the year.
Embedded value
A calculation relating to the AMP
Financial Services business, other
than AMP Bank, of the economic
value of the shareholder capital
in the business and the future
shareholder profi ts expected to
emerge from the business currently
in-force (expressed in today’s dollars).
Franked dividends
Dividends paid which have franking
credits attached. The franking credits
represent the income tax paid by
the company paying the dividend,
which can be used as a tax credit
by Australian resident shareholders
receiving the dividend.
Investment performance
A measure of how well we manage
funds on behalf of our customers.
The percentage of assets managed
by AMP which met or exceeded their
respective benchmarks.
Short-term incentive (STI)
A cash payment based on
performance during the year
against pre-defi ned business
objectives aligned to company
strategy.
Underlying investment income
Underlying investment income
is based on long-term expected
rates of return. Actual investment
income can be higher or lower than
the long-term rate from year to year.
Underlying profi t
Underlying profi t (which removes
one-off costs and some of the
effect of investment market
volatility) is calculated by
aggregating operating earnings,
interest expense on corporate
debt, recognition of tax losses and
underlying investment income.
Underlying return on equity
A measure of the return a company
makes on shareholder equity.
Return on equity (RoE) for the
year is calculated as underlying
profi t divided by average monthly
shareholder equity during the year.
Vesting
Remuneration term defi ning
the point at which the required
performance hurdles have been
met and a fi nancial benefi t may
be realised by the recipient.
Long-term incentive
A long-term incentive (LTI) is an
award primarily provided in the form
of performance rights or share rights,
to align an executive’s interest with
the interests of shareholders. LTIs at
AMP are subject to a performance
hurdle and/or a service requirement.
Operating earnings
Total operating earnings are the
shareholder profi ts that relate to
the performance of AMP’s operating
units (AMP Financial Services, AMP
Capital and group offi ce). Operating
earnings exclude investment
earnings on shareholder capital
and certain one-off items.
Option
A right to acquire an AMP share at
a pre-determined price during an
exercise period, subject to meeting
performance hurdles. AMP has not
offered options under its employee or
executive option plans since 2002.
Performance right
A form of executive remuneration
designed to reward long-term
performance. Selected executives
are granted performance rights.
Each performance right is a right
to acquire one AMP share after a
three-year performance period, as
long as a specifi c performance
hurdle is met.
Restricted share
A form of executive remuneration
designed to reward long-term
performance. Selected executives
are granted restricted shares.
A restricted share is an ordinary
AMP share that has a holding lock
in place until a three-year vesting
period ends.
AMP is committed to actively reducing its impact on the environment
and has printed this document on paper derived from certifi ed well
managed forests and manufactured by an ISO 14001 certifi ed mill.
The document has also been printed at an FSC accredited printer.
Contact the AMP share registry
web
email
amp.com.au/shareholdercentre
ampservices@computershare.com.au
Australia
phone
fax
mail
1300 654 442
1300 301 721
AMP share registry
Reply Paid 2980
MELBOURNE VIC 8060
New Zealand
phone
fax
mail
0800 448 062
09 448 8787
AMP share registry
PO Box 91543
Victoria Street West
AUCKLAND 1142
Other countries
phone
fax
mail
+613 9415 4051
+612 8234 5002
AMP share registry
GPO Box 2980
MELBOURNE VIC 3001
AUSTRALIA
Registered offi ce of AMP Limited
phone
fax
mail
+612 9257 5000
+612 9257 7178
Level 24, 33 Alfred Street
SYDNEY NSW 2000
AUSTRALIA
AMP Limited is incorporated and domiciled in Australia.
Company Secretary: Darryl Mackay
3
1
/
3
0
7
4
2
1
S
N