group cuts pearl with-profits bond and london life secure pension plus as market slackens
Following a market-led slump in profits AMP is planning cuts to the product offerings from its Pearl and London Life subsidiaries.
The Pearl with-profits bond will be closed to new business and AMP will instead offer with-profits products through its NPI with-profits fund.
In addition, London Life will stop offering its Secure Pension Plus annuity product bringing the AMP annuity range down to just two products, the conventional London Life annuity and a NPI income drawdown product.
The two products combined represent less than 10% of AMP's UK business, the company said. The NPI with-profits fund was opened two years ago and has a 100/0 structure between policyholders and shareholders unlike the Pearl fund which has a 90/10 structure. The Pearl fund size stands at around £11.8bn as at the end of last year while the NPI portion of the fund is just £0.5bn.
AMP believes the NPI with-profits fund structure is more modern, open and less capital intensive than the Pearl product. Similarly, the dropping of Secure Pensions Plus strips out the group's most capital intensive annuity product and least modern offering.
The closures come amid a streamlining of the UK business of the Australian-based AMP group. Heavy declines since June in the UK equities market has accelerated this process, the group's chief financial officer Marc de Cure, said. De Cure added the group has been progressively reducing the proportion of UK equities held in all its long-term funds. This has been done by selling shares, the use of derivatives and by not reweighting the equity asset allocation as markets have fallen.
The Pearl with-profits fund, which is the largest fund in AMP's UK business, now has exposure of around 35% to UK equities. Market Value Adjustments between 3% and 15% have also been applied to NPI with-profits fund products with its ethical with-profits products attracting an MVA of up to 21%.
De Cure said: 'Should markets decline further, AMP can take additional actions on these and other initiatives to meet regulatory requirements in the UK. It is important to note that AMP still has flexibility in areas such as outward reinsurance protection or securitisation.'
He added that if markets continue at around current levels AMP's expectation is that it is unlikely to achieve its long-term goal of 10% or more growth in core recurring operating margins for its 2002 financial year.
In June AMP announced it was slashing its UK workforce by 20% over the next year following the merger of NPI, London Life and Pearl under the AMP brand. This would result in cost savings of around £100m over the next 18 months, the company said, and would reduce its UK workforce by 1,500 to around 5,000 by the end of 2003.
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