AMP has downgraded profit as it moves to repair its reputation

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  • AMP has downgraded its first half profit expectations and its cuts fees and starts to repair its reputation.
  • The company will post a provision of $290 million for potential advice remediation.
  • A significant portion of that will be to compensate customers for potential lost earnings.
  • AMP also warned of lower dividends for shareholders.

Financial services giant AMP today downgraded its profit outlook as it launches a program to repair its reputation, “earn back trust” and cut fees on its superannuation products.

The company says first half underlying profit will be in the range of $490 million to $500 million, dragged down by a provision of $290 million post-tax for potential advice remediation.

AMP says a significant portion of the provision relates to compensation to customers for potential lost earnings.

The company says it is targeting a total 2018 dividend payout at the lower end of the 70% to 90% guidance range.

In early trade, AMP shares were down 3.8% to $3.34.

Today’s moves follow further damaging media reports about charging customers for no service, including a program on ABC’s Four Corners this week: “How corporate greed and deception cost AMP its trusted place in Australian life.”

“Today’s announcement reflects our commitment to take decisive action to reset AMP and establish a platform from which the business can recover rapidly,” says Acting CEO Mike Wilkins.

“We’re facing squarely into the issues that have impacted our reputation and the community’s confidence in AMP.

“Our remediation provision responds to industry-wide issues raised by (corporate regulator) ASIC…

“This remediation program is complex as it will address both employed and aligned advisers, and we understand it is one of the first programs to do so.

“We are working on the program with our advisers, the vast majority of whom are dedicated, professional and committed to meeting the advice needs of their clients.

“Customer needs are our immediate priority as we firmly believe this will also best serve the long term interests of shareholders. We know it will take time to earn back trust, however today is an important milestone in that process.”

AMP today outlined a series of actions being taken to reset the business, prioritise customers and strengthen risk management systems and controls.

The program is estimated to cost $50 million post-tax a year over the next three years.

AMP today announced fee reductions to its flagship MySuper products.

“These reductions will improve member outcomes, reducing fees for around 700,000 existing customers, and enhance the competitiveness of AMP’s MySuper product suite,” says AMP.

AMP will also invest in enhancements to the company’s risk management controls and compliance systems.

This is expected to result in approximately $35 million a year of one-off costs over the next two years.