Michael PaffDirector, Wealth Protection Products

Agenda

Michael Paff IntroductionPhil Ruthven Life Insurance into the 2nd DecadeBernadene Gordon Service EnhancementsChris Kirby Product EnhancementsDan Powell Summary

Phil RuthvenThe Economic, Social & Political Backdrop for Life Insurance into the Second Decade

Topics

1. The Economic Scene2. The Political Scene3. The Social Scene4. Life Insurance, Planners & Success

1.The Economic Scene

-11-10

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101112

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Per

cen

t

Past 25 years 3.5%

p.a

1950-1969 growthin US$ market terms

Purchasing Power Parity (PPP) terms

IMF/Economist//IBISWorld: 09/05/10

2008 3.2% 2009 -2.5% 2010 2.5% (F)2011 2.7% (F)

World GPD GrowthReal growth (PPP), 1950-2011(F)

7

19

2830

35

43

47

49

49

4954

60

60

62

64

6972

75

77

80

91

99

101108

115

118192

0 20 40 60 80 100 120 140 160 180 200 220

RussiaAustraliaS KoreaIndonesi

TaiwanMexico

BrazilTurkey

ArgentinaThailand

WorldSpainIndia

NetherlanIreland

UKCanadaPortugal

GermanyFrance

USABelgiumIcelandGreece

ItalySingapor

Japan

The PIGS Group

The Economist/IBISWorld: 10/05/10

Serious serious trouble

Virtuous, thanks to the Howard/Costello government

31% of world economy is in countries with Public Debt of >90% of GDP

Serious troubleSerious trouble

Serious trouble

Serious troubleSerious trouble

Public Debt: 2010 (F)% of GDP

Serious trouble

Source: Westpac-Melbourne Institute (IAESR), IBIS estimates 14/034/0

Australian Index of Consumer Sentiment2 months progressive to April 2010

65

70

75

80

85

90

95

100

105

110

115

120

125

130

135

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

Recession Level

Year commencing June

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

36 qtrs. 34 qtrs 34 qtrs 33 qtrs 38 qtrs 33 qtrs?

36 qtrs ?

Source: IBISWorld: 04/03/10

Average long business cycle is 34 quarters (81/2 years)

Years, ended June

Forecast

Economic GrowthAnnual real GDP growth (%) progressed in quarters to December 2009 (and forecast to June 2013)

ABS 5206-26 /IBISWorld

Agriculture

2.6%Utilities

2.4%

4.9% Transport

GDP $1260 billion (current prices) $1208 billion (constant F2008)

Finance & Ins.

4.5% W’Saling

Mining

6.8%

Govt. Adm. 5.0%

O’Ship Dwells. 7.2%4.5% Retailing

6.9%

Construction

2.8%

9.9%

Communications

11.3% Prop. & Business

Services

Education 4.1%

Health 5.9%

Cult & Rec. Serv.

1.8%

Pers. & Other Serv.Hospitality

(2.2%)

8.4% Manufacturing

Sectors Primary

Secondary Tertiary

Quaternary

Quinary

0.9%

Ind. Taxes 8.1%

Australia’s Industry MixValue added basis Shares of GDP in constant F2007 price terms C2009

2.5

2.5

2.8

3.0

3.0

3.4

4.0

4.1

4.2

4.8

5.8

5.9

3.5

3.4

3.3

3.2

3.2

3.1

3.6

2.2

-1 0 1 2 3 4 5 6 7 8

ManufacturingEducation

Other ServicesProp/Rental Serv

HospitalityRetail Trade

UtilitiesConstruction

W'Sale TradeAdmin Serv

Dwelling O'ShipGDP

TransportGovt Adm/Def

Retail TradeCult & Recn ServCommunications

HealthProf/Tech Serv

Finance & InsAgriculture

Mining

Percent

Source: IBISWorld 13/04/10

-1.02.0

Australia’s Industries GrowthCAGR (trend), next 5 years to C2014 (constant prices)

2. The Political Scene

• Big deficit in F2010 , a year without a recession!

• Gave households $17 billion as a stimulus in F2009 (they already had $60 billion more discretionary income anyway!)

• Tried to enact ETS legislation before Copenhagen and instead of a direct Carbon tax system !

• Conducted “comprehensive” Taxation Study, leaving out GST !

• Wasted billions on insulation and education infrastructure

• No meaningful action from expensive 2020 Conference

Federal Government Scorecard

• GST excluded from review (ours 10%, OECD 17.5% average), so not a serious review and not the “most comprehensive ever”

• Very few recommendations to be pushed by Rudd government

• Super levy up to 12%, but again to be paid by employers (better to have 15%, with 5 of that by employee)

• Super tax on super mining profits (but how defined and for how long?)

• ETS deferred (forever?)

• Vast majority of over 100 reforms shelved

The Henry Tax Review Report

3.The Social Scene

02468

10121416182022242628303234363840

1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Forecasts

(IBISWorld)

Million 37.8

29.3

25.6

22.3

33.4

Year, ended June

Australian Population1850-2051

Source: ABS/IBISWorld 29/01/10

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

1501

98

0

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

Actual prices

Year, ended June

Inco

me

($‘0

00)

Constant 2009 prices (CPI)

Average 2010(F)

$127,370 per household

Real growth

1999-2009 1.9% pa

Household incomeAverage/household 1986-2010 (F)

$ 1052 billion ($123, 540 per household)

H’Hold durables 3.4%

Motor vehicles 2.0%Other 1.0%

Capital Related

17.7% Non-durables

6.4% Durables

Taxes(& social contributions)

4.6%

13.5%

Depreciation 6.7% Propty Interest 4.6% Consumer Debt Int 1.2%Unincorp. Interest 0.8%Transfers 0.4%

Entertainment & Gaming

Hospitality

Rent1 12.5%

13.7%

Food 7.3% Alc.& Tobacco2.4%Clothing 2.1%Utilities 1.5%Veh. Operation 3.4%Other 1.0%

Education

3.7%

Other Services

Communicns.1.7%Fares1.9%

2.3%

Fin. & Ins. Serv. 8.6%

7.8%

3.7% Health

Note: 1 includes imputed rent (home ownership) Source: ABS5206/IBISWorld

2.3%Mobility

Savings

3.1%

(& other dwelling costs)

Australian Household ExpenditureYear to December 2009

Source: IBISWorld/Reserve Bank

0

2

4

6

8

10

12

14

16

18

20

22

241

96

0

19

63

19

66

19

69

19

72

19

75

19

78

19

81

19

84

19

87

19

90

19

93

19

96

19

99

20

02

20

05

20

08

20

11

20

14

20

17

20

20

Year, ended June

Inte

rest

Rat

e (%

)

Credit Cards

Overdraft(small business, variable)

Mortgage(standard bank)

Indicator Lending RatesAustralia F1975 – 2013(F)

Source: ABS 5206-36 11/03/10Year, ended June

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

Household Savings% of Gross Household Income (4-qtr. Moving average), 1960 – December 2009

$ 7300 billion ($ 846,550 per household)

Housing(owner-occupied)

Invest.Housing

Super. & Life

Commercial & Rural

Other 2

.4% Deposits 9.1%

(& currency)

Shares 5.3%

Sources: Reserve Bank Statistical Tables B20; ABS 5204-51, IBISWorld estimates 22/04/10

HouseholdDebt

$ 1430 billion($165,830

per household)

Assets $ 7300 billion, Net Assets $ 5870 billion .

Per H’Hold $ 680,070

Debt servicing comes from wages (mainly), rental property

returns, and interest & dividends from liquids & securities

42.2%

13.7%

19.9%

Equipment, Inventories

H’hold durables, collectables) O

ther

Pro

p. 4

.1%

Including Securities & Loans

Dura

bles 3

.4%

Includingunfunded

Australian Household Assets & DebtJune 2010 (F)

8.42 million $1053 billion $5351 billion

Source: ABS/IBISWorld 10/03/10

Household Income Wealth

1.68 million H’Holds $125,120 $635,800 Average

20.0%

20.0%

20.0%

20.0%

20.0%

45.1%

24.5%

16.3%

9.6%4.5% 1.0%

61.2%

20.0%

12.1%5.7%

Among 8.4 million households:

>1,000,000 millionaires 46000 > $ 5 million 7,200 > $10 million

Richest

Well Off

Middle

Struggle

Poorest

Household Income and Wealth DistributionShare of total by Quintile, F2009

4. Life Insurance, Financial Planners & Success

Revenue ($billion) 54.5 4.8

Growth to F’15 (% pa ave.) 1.4 7.8

Contribn. To GDP (% ) 0.29 0.22

Enterprises 28 3040

Employment (‘000) 27.0 16.0

Wages ($ billion) 1.6 1.6

Largest Players AMP 26.5% 9.6% NAB 23.0% 7.0% ING 17.7% AXA 8.6% Westpac 6.2% 8.0%

Life Insurance Financial Advisers

Perspective F2010 (F)

• Ability to effectively communicate and negotiate

• Having a loyal customer base

• Having a good reputation

• Market research and understanding

• Qualified work force in a unique organisational culture

Key Success Factors for Planners

9.911.112.5

13.815.6

17.719.7

21.824.7

28.635.2

48.9

3.2

158.0

12.6

4.25.66.77.9

-2.50.21.02.1

9.0

-50 -40 -30 -20 -10 0 10 20 30 40 50 60

Worst 5024th 5023rd 5022nd 5021st 5020th 5019th 5018th 5017th 5016th 5015th 5014th 5013th 5012th 5011th 50

Average10th 50

9th 508th 507th 506th 505th 504th 503rd 502nd 50

Best 50

PercentSource: IBISWorld 19/11/09

23% > Best Practice (ROSF 22.2%)

42% > Average (ROSF 12.6%)

43% > Cost of capital (12.0%)

68% > Bond Rate (5.4%)

11% Losses

-128.0-10.5

Australian Profitability by CohortsReturn on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009

1. They stick to one business at a time and do not diversify 2. They aim to dominate some segment (s) of their market 3. They are forever innovative, valuing the business’ IP. 4. They outsource non-core activities to enable growth. 5. They don’t own “hard” assets. 6. They have good and professional financial management. 7. They plan from the outside-in not the inside-out 8. They anticipate any new industry lifecycle changes. 9. They follow world best practice for their own type of business.

10. They develop strategic alliances.11. They develop unique organisational cultures.12. They value leadership first and management second.

What the Best Enterprises Are Doing

Bernadene GordonHead of Product Proposition

What’s important to you?

awareness of

the offer

sales support

access

relationships

lodgement

underwriting

claims product

process

Electronic lodgement process

Challenge

• Choice – the ability to offer different options

• Cost to your business – paperwork + administration

• Compliance – the need to protect your business

process

lodgement

Electronic Lodgement process

Solution

• Options

• Reduced admin

• Electronic Lodgement Authority Form

John

Underwriting

Challenge

• Access to the decision-maker

• Potential long e-2-e time frames

• Cost to business

underwriting

AMP Underwriting Concierge Service

Solution

• Electronic Pre-Assessment Service

• Dedicated Underwriter from start to finish

• AMP arranges medical tests directly with client

Claims

Challenge

• Direct access to decision-maker

• Quick turnaround of claim assessment

• Tailored communication

• Dedicated service

claims

AMP Claims Concierge Service

Solution

• Direct access to decision-maker

• 24 hour turnaround on claims review and assessment.

• Dedicated claims assessor.

merged PDS and plan rules “one source of truth”

AMP Risk Bulletin

changes to our underwriting philosophy

new AMP risk look and feel

access to the right information

sales support to help grow my business

more cover for more people

collateral that resonates with the need for insurance

What else is coming?

TODAY TOMORROW

New AMP Wealth Protection brand identity

Chris KirbyHead of Technical Strategies

Income Protection – the challenge

Advisers

Want the choice to recommend a definition of Total Disablement appropriate to their client’s occupation.

Clients

Want a product that is flexible enough to meet their future needs.

Income Protection – the solution

Definition of Total Disablement now includes both the “10 hour” definition and “duty” based definition.

Choice at claim

10 hour based

Unable to carry out any of the duties which are critical to the proper performance of their usual occupation for more than 10 hours a week.

Duty based

Unable to carry out one duty, or combination of duties, which are critical to the proper performance of their usual occupation.

Advisers

Want the professional package to include all white collar occupations.

Clients

Want personal, tailored solutions.

Income Protection – the challenge

Income Protection – the solution

Professional and white collar occupations have no requirement to be totally disabled during the waiting period to qualify for a “partial disability benefit”.

Day 1

Partial disability from Day 1

Day 30

No offsets for professional and white collar occupations.

Income from workers compensation, accident and public liability schemes.

Advisers

Want the choice to offer a quality Standard Income Protection plan.

Clients

Want a quality, affordable Income Protection plan.

Income Protection – the challenge

Income Protection – the solution

All Partial Disability Benefits are payable for the Full Benefit period until the plan expires.

Income Protection Standard

2 year

5 year

to age 60

to age 65

Temporary Salary Continuance

2 year

to age 65

Advisers

Want TPD eligibility as highly subjective.

Clients

Want greater certainty that genuine claims will be paid.

Total & Permanent Disablement – the challenge

Total & Permanent Disablement – the solution

The definition of TPD now includes the objective measure of the insured’s ability to earn income.

Definition

The insured person is totally and permanently disabled if, “the illness or injury means that the insured person is unlikely to ever work in any regular remunerative work for which they are reasonably fitted by education, training or experience, and which allows them to earn greater than 25% of their pre-disability income”.

Advisers

Want flexibility to package according to individual client need and simple underwriting solutions.

Clients

Want affordable cover they can understand.

Trauma – the challenge

Trauma – the solution

• Separate full benefits from Partial Benefits.• Create a comprehensive Partial Package as an option.

Partials Package Option

Trauma Cover Optimum

Trauma Cover OptimumCovers 48 “Full” conditions

Children’s Trauma Cover

Covers 18 “Partial” conditions

Covers 20 “Full” conditions

Partials Package Option

Trauma Cover Standard

Trauma Cover StandardCovers 15 “Full” conditions

Children’s Trauma Cover

Covers 18 “Partial” conditions

Covers 20 “Full” conditions

Full Benefit Package Full Benefit Package

Trauma – the solution

Short form conversion for all existing trauma plans to Trauma Cover Optimum

• Crisis Care• Crisis Care Advanced• Trauma Advanced• Trauma Standard

Application only• Trauma Premier

Access to AMP Flexible Protection

AMP Flexible Super

• Simple product• Investment choice – low cost• Modular features• No commission on investment component• AMP will undertake the paperwork / consolidation follow-up • Multiple insurance solutions – choice

Flexible Protection (Life)

• Flexible Protection - Our full retail insurance offering, including underwriting, multiple commission option eg upfront from 130/11% to level 30.3%/30.3%.

Income Protection & Temporary Salary Continuance

Summary

Partial Disability from Day 1

Zero Offsets

Dual Disability Definition

Partial Disability to Expiry

Trauma Feature

Entry Ages

Interim Cover & Cooling Off Period

Death Cover, Trauma, TPD

Funeral Benefit

25% TPD Definition

Trauma Optimum & Partials Package

Hepatitis B & C Occupationally Acquired

Cancer Definition

Enhanced Trauma Definitions

Children’s Trauma Cover

Entry and Expiry Ages

Cooling Off Period

Dan PowellDirector, Alliances & Distribution