AXA merger stills makes sense: Dunn

THE AMP chief executive, Craig Dunn, insists the growing financial stresses in Europe over the past year has not diminished the attractiveness of last year's $14.6 billion move on rival AXA Asia Pacific.

THE AMP chief executive, Craig Dunn, insists the growing financial stresses in Europe over the past year has not diminished the attractiveness of last year's $14.6 billion move on rival AXA Asia Pacific.

Nine months into the merger, Mr Dunn said the justification for the deal was stronger than ever. "Getting an opportunity to merge with AXA - that doesn't come along very often," he said.

The structure of the transaction, using AMP shares to fund the deal, was also designed to protect shareholders from falling markets. Under the deal, AMP sold AXA's Asian businesses to France's AXA SA.

But bringing the two Australian wealth managers together would create a more efficient business, while revenue growth would come over time, regardless of uncertain markets, Mr Dunn said.

"You are starting to see value in the short term, but you will also see value longer term, and strategically this business is very different and much [stronger] than it ever was because of the merger," he said.

He was speaking as AMP posted a net profit of $668 million for the year to December 31. This was down 11 per cent on the previous corresponding period, mostly due to the drop in the valuation of the company's investment holdings.

However, underlying profit, AMP's preferred measure of profitability given it smooths out volatility, rose 19.6 per cent to $909 million.

The underlying result included contributions from the Axa business AMP bought early last year.

Mr Dunn said Axa filled the gaps in AMP's product range. For example, AXA was stronger on platforms that financial advisers use to manage client money, while AMP was a major player in superannuation.

AMP is still targeting merger synergies of $140 million as a result of the merger, with savings coming through faster than expected.

Under Mr Dunn, AMP is trying to turn itself into a one-stop financial house, offering advice, funds management and superannuation, as well as banking services.

The result was driven by a 6 per cent rise in earnings from the wealth management business to $322 million. Earnings from life insurance and income protection rose 56 per cent to $215 million, helped by Axa's contribution. Earnings from AMP's funds management arm fell slightly to $83 million, while banking profits were up 45 per cent to $65 million.

AMP declared it will pay a final dividend of 14?, down 1?, payable on April 5.

Shareholders were caught off-guard after Mr Dunn said AMP planned to lower its dividend payout ratio to 70 to 80 per cent of profits. This is to help keep capital topped up before expected tougher regulatory requirements for wealth managers.

AMP shares ended down 2.3 per cent at $4.29.

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