ASX Announcement by Levone


									                                                         ASX Announcement

17 November 2009

Manager                                          Manager
Company Announcements Office                     Market Information Services Section
Australian Securities Exchange                   New Zealand Stock Exchange
Level 4, 20 Bridge Street                        Level 2, NZX Centre, 11 Cable Street
Sydney NSW 2000                                  Wellington New Zealand

Announcement No:     63/09

AMP Limited (ASX/NZX: AMP)
(also for release to AMP Group Finance Services Limited (ASX: AQNHA & NZX: AQN010))

  AMP CEO Craig Dunn’s address to the Trans-Tasman Business Circle
AMP Chief Executive Officer, Craig Dunn will be presenting at the Trans-Tasman Business
Circle lunch today. Attached is a copy of his speech.

                                                              AMP Limited (AMP) ASX Announcement
                                                                                         AMP Limited
                                                                            Level 24, 33 Alfred Street
                                                                         Sydney NSW 2000 Australia
                                                                                ABN 49 079 354 519
                      Managing AMP for short and long-term success

                           An address by AMP CEO Craig Dunn
                     to the Trans Tasman Business Circle, Melbourne
                                Tuesday 17 November 2009

Last week, AMP proposed a merger with the Australian and New Zealand operations
of AXA Asia Pacific.

This afternoon I want to explain why we’ve made this proposal and what it signals,
about AMP and AXA, and indeed what it says about Australia and its internationally
recognised retirement savings system. I also want to talk about the competitiveness
of our financial services sector.

There are, of course, many benefits in merging the Australian and New Zealand
operations of these two great companies, but this afternoon I’m going to focus on just
three of them.

1. First, Australians need and deserve the strongest possible non-bank competitor in
   the important wealth management sector.

2. Second, by combining AMP and AXA, we can build a new financial force that will
   deliver superior benefits to the customers and shareholders of both companies.

3. Third, a combined AMP and AXA will bring more affordable financial advice to
   many more Australians. That’s important for their future financial security and
   prosperity, and that of the nation.

The strongest possible non-bank competitor

Ten years ago, only two commercial banks were among the top 10 fund managers in
this country. Back then, Commonwealth Bank was ranked fifth
and Westpac ninth. 1

Since then many of the large, independent fund managers have been absorbed by
the big four banks in what has been an ongoing wave of consolidation in the
Australian financial services sector.

Today, largely through acquisition, our big four banks control almost half the wealth
management market between them 2 .

I greatly respect our major banks and the responsible way they’ve managed their
institutions. Unlike most other western countries our banks have stood us in very
good stead during the global meltdown of the past 18 months.

    ASSIRT Research Bulletin, 19 November 1999
    Plan for Life retail and wholesale QDS – June 2009
But I also have no doubt that Australians can only benefit from having an even
stronger, home grown non-bank competitor in this market. One that has a long and
proud history, with one of the most recognisable brands in the country.

If successful, our merger with AXA’s Australian and New Zealand operations would
provide a new way forward – the building of a fifth pillar in the financial services
sector in Australia. And I mean a fifth pillar, not in policy terms, but in competitive

A successful merger between AMP and AXA would deliver even greater choice and
improved access to advice for millions of Australians and New Zealanders.

AMP has delivered this for 160 years. AXA, as the former National Mutual, for 140

Indeed, I like to think of this proposal as a great Australian company buying back the
farm to create a combined company that is stronger and more competitive than either
company is today.

Together, we would improve the competitive landscape by offering consumers an
even more competitive alternative. What we’re talking about here is maintaining
competitive tension in a market that is critically important to all our futures.

Because at the core of the wealth management market is our superannuation

AMP already has the most efficient superannuation business in Australia.
And more and more, we’re passing those efficiencies onto our customers.

First, with our market leading Signature Super product, that led fees down in
employer sponsored superannuation and which provides low cost, quality
superannuation for thousands of employees in companies right across Australia.

And more recently, with the launch of one of the lowest cost retail superannuation
products in the market.

What this merger will do, if it goes ahead, is allow us to improve our scale,
further improve our cost efficiencies and therefore enhance our capacity to compete.

AMP also has its own retail banking licence which we’d like to develop and grow
more strongly over time. This merger will enable the combined company to offer
those competitive banking services to more Australians, and it will increase the
financial resources we have to back our bank’s continued growth.

Creating a new financial force

This brings me to the second major benefit I want to talk to you about today –
the creation of a new financial force in Australia and what this means for the
customers and shareholders of both companies.
The new, combined company would hold leading positions in financial advice,
superannuation, risk insurance, retirement incomes and asset management.

We would take the best products and platforms from both companies
and ensure they're offered to more Australians.

With our combined strength and greater financial resources, we would invest more in
developing new products and services for customers and planners.

Bringing the two companies together would also create substantial cost synergies.
This was recognised by AXA’s parent company when it chose AMP as its partner on
this proposal.

And more than one million Australian and New Zealand shareholders              would
be owners of this merged company.

We’ve carefully structured our proposal for AXA minority shareholders to ensure that
not only would they receive a substantial premium on their current shareholding, but
they would also share in the future benefits that this new financial force would

Importantly, AXA shareholders would hold nearly a quarter of the shares
in what would be the leading wealth management company in Australia.

It’s interesting to observe that some Australians, perhaps because it’s so familiar to
them, tend to overlook the huge attractions of the wealth management market in this
country. In fact, I often find when I talk to offshore investors
that they see those attractions much more clearly from a distance.

We have the fifth largest private pensions market in the world, and one of, if not, the
fastest growing. 3

That’s partly because of our mandatory superannuation system and partly because
of our strong economy, which has emerged as one of the most resilient in the
western world in recent years.

One of the reasons for that economic strength is, of course, our alignment with Asia,
particularly through our rapidly increasing trade links with China.

In fact, many overseas investors view Australia as a very attractive proxy for
investing in Asia, given our economy’s exposure to Asian growth, coupled with the
legal and market protections of a well developed economy.

AMP is, of course, also pursuing its own growth strategy in Asia, focused on funds
management in selected Asian countries with large savings pools.

    Watson Wyatt Global Pension Assets Study – January 2009
While it is still early days in the roll out of this strategy, earlier this week we
announced that we’ve formed a strategic partnership with China Life to pursue
opportunities in asset management and pensions. China Life, by the way, is the
largest insurance group in China and is now the largest publicly listed life insurance
company in the world.

So the proposal we are making to AXA shareholders includes:
        a very significant premium on their current shareholding
        part ownership in what would be the leading company in one of the
          largest, fastest growing wealth management markets in the world
        and participation in AMP’s historically higher dividend yield and greater
          franking capacity.

Frankly, these all add up to a very compelling offer.

But let me be very clear on one point. While the proposed merger with AXA is a
transaction we want to do, it’s not a transaction we have to do.

We have significant opportunities for organic growth in our businesses in Australia
and Asia. As the lowest cost provider in the industry, we have a large capacity for
competitive response.

Indeed, in a recent global study, Goldman Sachs rated AMP, along incidentally with
China Life, as one of the top five insurance companies in the world in terms of our
capacity to sustain our competitive advantage.

Combining with AXA would accelerate the delivery of key parts of our strategy
and make us even more competitive, but it only makes sense at a price that’s
economically responsible.

We’re a financially disciplined company and will remain so.

Making financial advice more affordable and accessible

That said, we’d very much like this transaction to work, because of the benefits it
would deliver to both AMP and AXA shareholders.

It clearly meets the three M&A tests that we set ourselves at AMP. And it has the
potential to do more.

So the third major benefit of this proposal that I want to mention this afternoon
is the capacity to make financial advice more affordable and more accessible to
everyday Australians.
AMP and AXA both share a very strong commitment to the value of financial advice
and the difference this advice makes to people’s lives.

A combined AMP/AXA business would have financial advice at its very heart.

As a bigger, stronger organisation, with greater financial resources and scale, we
would have an increased capacity to help our planners lower their cost to consumers,
and so reach more Australians.
Clearly, financial planners and advisers have suffered some reputational damage
over the past 18 months - sometimes appropriately, though often not.

And it’s important in the current regulatory debate that we don’t forget what financial
planners actually do.

They meet a real human need.

People trust people. And when people are discussing their financial affairs,
they want to look someone in the eye and decide whether they can trust them or not,
and so build a relationship with another human being.

Similarly, it’s because our business model meets a real human need that integrated
businesses like AMP’s and AXA’s prosper.

People trust people. But they also value their security.

So while they want a personal relationship with their financial planner,
they like that relationship to be backed by a big brand they can trust and rely on –
rely on to have checks and balances in place, and to have the financial strength and,
importantly, the will to put things right, if by chance they do go wrong.

AMP stands behind the advice its financial planners give. It always has. It always

Of course, no business model is perfect - this is not a perfect world - and there are
some potential conflicts of interest in integrated businesses like AMP’s that need to
be managed carefully to ensure good outcomes for customers.

But in this world, people make trade-offs about what’s most important to them. And
for many people, the security and the quality that our model brings clearly outweigh
other considerations.

Different people make different trade-offs, however, and a healthy market recognises
and caters for that.

That’s why we believe it’s important to maintain a choice of models in the financial
planning market, and why we are strong supporters of independent financial advisers

We do not agree with some of the changes to planner models proposed by some
larger financial groups in their submissions to the Ripoll inquiry
because they would make many IFA businesses uneconomic.

Ultimately, that would drive planners out of the market, reduce competition,
and actually leave Australians worse off.

We need to make financial advice more affordable and more accessible for all
Australians and New Zealanders – and that means more planners, not less.
Planners in the community
AMP is passionate about the value that financial planners bring to the community.

They help people save for their retirement. They help people protect their families in
the event of tragedy. And they help them pay off their homes more quickly.

So Australians benefit from financial advice in many ways, and that’s not going to
change whatever the regulatory landscape looks like.

No doubt, there will be some changes in that landscape over the next few years.
And as you’d expect we’re actively engaged in the discussions and debates about
the changes we believe will really deliver benefits for our customers.

It’s interesting – and perhaps very natural – that many people’s first response to
potential change is fear, with a focus on all the risks that change might bring. And
that fear often blinds people to the opportunities that also come with change.

One of the opportunities we see from the industry reform – including the move away
from commissions – is that it will help increase public confidence in financial planning
and so drive up demand.

We believe the move away from commissions will also shift the focus away from how
people pay for advice to rightly focus more on the value of that advice.

So we see a new, brighter world for financial planners where they can offer more
affordable advice to even more Australians with a new level of confidence in the
value they bring.

National savings
It’s very important, as we work through the many reviews and debates about our
industry that we don’t forget the most critical issue of all – adequacy.

We need to keep asking ourselves: “Will the average Australian really save enough
to afford a comfortable retirement?”

Indeed, this is part of a much bigger debate we need to have as a nation
on ways to increase our national savings pool.

Australians, by and large, aren’t natural savers. In fact, the average Chinese
consumer saves at almost 30 times the rate that the average Australian does. 4

It’s been our mandatory savings in superannuation which have helped cushion the
worst impacts of the global financial crisis.

It’s this stable source of funds that has enabled many of Australia’s corporations,
including our major banks, listed property trusts and both AMP and AXA, to
strengthen their capital position over the past 18 months.

    Source: Global Household Savings Ratios – Bloomberg, Datastream and AMP Capital Investors
This has limited the fall in commercial property values, and prevented a much worse
recessionary outcome than would otherwise be the case.

And it demonstrated very clearly that in a major financial crisis, access to equity
capital is as important – indeed, in some cases, more important –
than access to more debt capital.

It’s important that these points are considered in the current debate about the need
for potential tax incentives for retail deposits.

There is a critical difference between superannuation and retail deposit savings. One
generates long-term, largely equity capital. The other is more short-term, debt and
housing focused.

So, despite not being natural savers, Australia has built up a big national savings
pool that is not only helping us prepare for the future, but has also stood us in good
stead through the crisis.

But of course, we should and can always do more.

So we’ve decided, as a company, to increase the superannuation contribution we
pay for our employees to 12 per cent by 2014. In fact, in our view, the issue of
whether 9 per cent is enough needs to be debated more broadly.


So, let me come back to where I started.

We’re very positive about the potential a combined AMP and AXA business holds –
for customers of both companies, for shareholders of both companies,
for planners of both companies, for the community in general and for the overall
competitiveness of the Australian financial services sector.

Our proposed merger would create the strong, non-bank competitor that Australians

We would use the best of both businesses to build a new financial force to bring
competitive new products and services to our customers, along with significant
benefits to all shareholders.

And it would accelerate our plans to bring more affordable financial advice to more
Australians, to help them secure their futures.

And in my view, that’s a great set of outcomes right across the board.


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