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AMP clarifies size of investment loss

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    AMP clarifies size of investment loss
    By Anthony Hughes
    July 5 2002

    AMP shares produced a much-needed recovery yesterday after the financial services group clarified the extent of its investment losses at the prompting of the Australian Stock Exchange and as renewed takeover speculation helped stir traders.

    AMP shares finished 59c higher at $16.05 after the company "reconfirmed" the sensitivity of its investment income to weak equity markets.

    Investment income represents the return on AMP's $10 billion in shareholder capital, held separately from the $300 billion it manages on behalf of clients.

    AMP said the return on this $10 billion portfolio of equities, bonds, cash and other investments would be about -0.25 per cent, equating to $25 million, for the six months to June 30.

    Analysts said they had already factored a figure close to this into their forecasts, prompting some earlier this week to cut AMP's first-half profit forecasts from more than $500 million in some cases to under $300 million as the portfolio is "marked to market".

    The loss is primarily driven by the 5 per cent-plus fall in the local sharemarket over this period, equating to more than $60 million of profits and more than $90 million from the 11.5 per cent slump in UK equity markets.

    Some analysts also traced AMP's rise to the return of long-running speculation that National Australia Bank might seek to merge with the group as the bank seeks to move back into acquisition mode after its disastrous HomeSide losses last year.

    This accompanied speculation that NAB would exit its St George Bank stake, though some analysts dismissed the likelihood of such a move yesterday.

    The ASX confirmed that, like Insurance Australia Group earlier this week, it had asked AMP to provide more detail for investors relating to the issue.

    "We obviously had some discussions with them and they sought to clarify and that's where it stands," an ASX spokesman said.

    AMP has had several run-ins with the exchange, including last year's market disclosure controversy when AMP was accused of selectively briefing analysts on the same issue of investment income. On Monday, IAG confirmed it might report a loss in the full year because of weak equity markets.

    IAG shares fell 6c to $3.07.

    AMP said the actual investment income figure would not be known until it was finalised for the half-year profit due in August.

    Meanwhile, the Commonwealth Bank felt the brunt of another profit downgrade relating to the same issue, as Credit Suisse First Boston joined other analysts in slightly cutting expectations for the investment earnings of the bank's life operations. CBA closed 26c lower at $31.40.

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