Fund manager and diversified financial services business AMP Limited (ASX: AMP) this morning posted an underlying net profit of $1,045 billion for the full year ending December 31, 2014. The underlying profit is up 23% over the prior corresponding period (pcp), with double digit growth achieved in all contemporary businesses.
A final dividend of 13.5 cents per share was declared which is franked to 80% and up 17% over the pcp.
Wealth Protection
The highlight of the result was the continued turnaround of the Australian Wealth protection business with full operating earnings of $188 million almost triple those posted in the pcp.
The insurance business has a recent history of losing policyholders as the business failed to impress upon customers the value of their insurance. It's notable then that while today's result suggests AMP is making progress in reversing the insurance division's problems, whether it is out of the woods remains debatable. The life and income insurance products for example continue to face mixed outlooks as this kind of insurance becomes a tougher sell in a more competitive environment.
Wealth Management
The investment management business posted operating earnings of $374 million, up 13% on the pcp with the benefit of rising equity markets and Australia's compulsory superannuation system.
The group also said it enjoyed the benefits of good retail net cash flows and cost controls.
Other operating divisions including AMP Bank, AMP Capital and New Zealand financial services all saw operating earnings growth in the low-double digits for the full year.
While the headline numbers may seem impressive it is notable that AMP is coming off some very average past performance, reflected by the fact that the stock's return over the past five-year period is flat, despite the support of a rampaging bull market.
AMP is also operating in a competitive space alongside other large fund managers such as BT Investment Management Ltd (ASX: BTT) and Colonial First State the wealth management arm of Commonwealth Bank of Australia (ASX: CBA).
Outlook
The stock hit a multi-year high of $6.80 in morning trade with the business targeting an improved customer focus and cost controls in the year ahead to keep driving shareholder returns.
Selling for $6.80 the group trades on around 19x underlying earnings per share of 35.2 cents which means it looks fully valued given its size alone means any turnaround remains a work in progress that will take more time.
