AMP Ltd last Friday (July 31) provided an update on its 1H20 interim operating earnings, showing bruising effects from covid-19, including market volatility and a credit loss provision in AMP Bank.
Expected 1H20 earnings from the AMP wealth management program was slated at $60m – down from $103m in 1H19; AMP Capital, $70m – down from $120m; and AMP Bank, $50m – down from a 1H19 operating profit of $71m.
The pandemic had also affected “the pace of investment spend”, including the cost reduction program. But AMP said it “remained committed” to deliver $300m of annual run-rate cost savings and its $1.0-1.3bn transformation investment.
CEO Francesco De Ferrari said: “The pandemic has presented many challenges but has not distracted us from our mission to transform AMP into a simpler, client-led, growth orientated business.”
AMP had in 1H20 made significant progress in delivering its strategy, including the completion of the “highly complex sale of AMP Life, which simplifies our portfolio and sets us up well for the future”.
AMP’s interim results came after it was served with two more class actions in Federal Court. Shine Lawyers has filed a class action on behalf of policyholders who were sold AMP Flexible Lifetime insurance by AMP Financial Planning- (AMPFP) and Hillross Financial Services-appointed financial advisers (FAs). The law firm is investigating a similar charge against AMP’s Charter Financial Planning.
Shine alleges AMPFP, Charter and Hillcross FAs failed to inform their clients they could get similar or substantially better insurance policies from alternative insurers for lower premiums. The law firm further alleges the FAs were incentivised through commissions and other financial and non-financial benefits to recommend insurance with their related party AMP Life Ltd, resulting in their clients paying higher premiums.
Shine claims the FAs failed to act in their clients’ best interests and AMP should compensate an estimated 100,000 affected clients for the excess premiums they had paid.
The class action follows a Federal Court judgment in February, after ASIC brought proceedings against AMP, which was ordered to pay a $5.175m penalty for “insurance churn”, described as “morally reprehensible” and a breach of AMP’s obligations to its clients.
Furthermore, AMP is defending a class action Corrs Chambers Westgarth has brought against AMPFP in Federal Court on behalf of outgoing aligned FAs who claim to be burdened with debt after buyer of last resort contract changes in 2019, when AMP reduced the price it would pay for retiring FAs’ client books, from four times annual revenue to 2.5 times.
AMP said AMPFP was confident in the actions it took in 2019 and would defend the proceeding. It is also defending the class action against AMPFP and Hillcross, saying they were “committed” to complying with their obligations to ensure their FAs acted “in the best interests of clients and take these obligations seriously.
The two new class actions follow two class actions Maurice Blackburn filed in the wake of the financial services royal commission. A class action one behalf of shareholders against AMP was consolidated last year with a Gordon & Slater shareholder class action.
Last year, MB also filed a class action on behalf of AMP super account holders alleging AMP trustees and AMP group companies contravened several statutory and/or general law obligations, which resulted in AMP members being overcharged administration fees for an extended periods.