Are your clients reluctant to take on insurance? AMP’s wealth protection division has seen $37m in experience losses due to lapses and customers reducing their levels of cover, and it’s now targeting planners to help stop the rot.
According to AMP’s Financial Services (AFS) cash flow and assets under management report, “third quarter experience in Contemporary Wealth Protection has been poor”.
This was similar to the division’s experiences during the third quarter of last year, said the report.
“Experience losses were $37m in Q3 12, compared to experience profits of $5m in 1H 12. This reflected the volatile nature of experience from period to period across an in-force portfolio of $1.7bn,” it said.
Total claims experience losses for the quarter came in at $25m, with lapse experience losses totalling $12m.
Additionally, higher income protection claims were experienced across both the AMP and AXA life companies, due to lower rates of claims closure than during the first half of the year.
“Lapse experience on retail risk products deteriorated across both the income protection and lump sum businesses with more customers reducing their levels of cover and poorer lapse experience at higher premium levels,” said the report.
“AMP is taking steps to improve retention and claims management through expanding underwriting, claims and retention resources, targeted retention campaigns at both the customer and planner level and implementing new claims management policies focussed on high cost claims and earlier intervention.”
Overall, however, risk insurance annual premium income for AMP and AXA’s risk businesses increased 3.1% at the end of the quarter to $2b – compared to $1.9bn in 30 June 2012.
AUM on the rise
Looking at the bigger picture, Australian Contemporary Wealth Management assets under management (AUM) was up 14% on the first half of 2012, at $94.2bn. This included $10bn of AUM in AMP SMSF.
AMP Capital Investors AUM at 30 September 2012 was $126.9bn – up 3% for the quarter.
Net cash flows were $605m for the quarter, compared to a net cash outflow of $335 million for the same quarter last year.
“AFS’s growth initiatives continued to deliver positive results in Q3 12 with growth in the business’ core contemporary platforms – predominantly North as well as AMP’s new business unit AMP SMSF,” said the report.
Other highlights for Q3 12 were:
North cemented its position as a leading wrap platform with $3.7bn in AUM, up 26% on 30 June 2012. Net cash flows more than doubled to $644m, up from $242m in Q3 11, mainly due to stronger cash inflows, in part from the increased take-up of North by AMP’s aligned planner network.
AMP Flexible Super AUM increased 15% to $6.5bn in Q3 12, compared to $5.7bn on 30 June 2012. Net cash flows for Q3 12 were $639m, compared to $788m in Q3 11 due to lower internal product flows and higher pension payments on the back of higher AUM balances.
Corporate superannuation net cash outflows were $116m, compared with net cash outflows of $40m in Q3 11, reflecting a mandate loss during the quarter.
AMP SMSF, comprising Cavendish, Multiport, Ascend, and AMP’s 49% shareholding in SuperIQ, had net cash flows of $209m for the quarter – up from $40m in Q3 11.
As at 30 September 2012, AMP SMSF administered more than 9,000 funds, up from 3,090 member funds at 1H 12. This includes funds from the Cavendish acquisition (4,780) and from Smart Super (965) which was acquired by SuperIQ in the quarter.
External platforms had net cash flows of $194m in Q3 12, compared to net cash outflows of $323m in Q3 11. This increase is mainly due to a number of new financial planning practices joining Hillross during the period.
New Zealand KiwiSaver net cash flows were $99m for Q3 12, compared to $168m for Q3 11 – mainly due to the NZ Government reducing its matched KiwiSaver contributions. Total New Zealand AUM at 30 September 2012 increased 6% to A$10.1bn, due to higher investment markets.
Mature net cash outflows were $144m, an improvement on Q3 11 cash outflows which were $470m – due to $320m from the rollover of AXA’s National Preservation Trust product into the AMP mature book.
AMP Bank’s mortgage book grew to $12.2bn in Q3 12, up from $12bn as at 1H 12 – while its deposit book remained relatively stable at $8.5bn. Retail deposits fell $460m over the quarter due to a change in AMP Bank’s desired funding mix.