AMP buyback hint in chief's campaign

IN A display of optimism likely to surprise shareholders, AMP's chief says the troubled financial services giant will be cash-rich and possibly ready to buy back shares by the end of 2005.

Chief executive Andrew Mohl will get his chance on Monday to see if investors share his bullish mood when he meets analysts in Sydney to outline his plans.

British policyholders may have to wait longer to see the benefits. The Financial Services Authority said on Friday that Pearl, AMP's main UK life fund, was not committed to transfer surpluses from its with-profits fund to shareholders until at least 2014 to protect policyholders.

AMP now has approval in principle from the FSA and the Australian Prudential Regulation Authority (Apra) to demerge its British and Australian business. The split is due in December.

Mohl told Australian television that AMP would have gearing of about 43% after the demerger. 'It's a level we expect will calm down significantly over the next 18 months (after the demerger),' he said.

AMP must inject £34m into its British operations to satisfy the FSA and take over its £1bn debt.

AMP must also push ahead with plans for a A$1.2bn (£497m-issue rights to help fund the split. Over the past year AMP has raised more than A$3bn in equity capital to pour into the British operations, which have been haemorrhaging cash due to falling stock markets.

Investors in Sydney shrugged off the latest rights issue plan, even though it contradicts AMP's past promise that it would not need more funds. That is largely because the issue will be attached to the more profitable Australian entity, to be listed as AMP on the Australian Stock Exchange. The British business, to be known as HHG, will list in London.

Further capital raising would only be necessary if the market deteriorated, Mohl said.

'There will be a significant reduction in debt between next year and 2005,' he said.

Investors could look forward to a steady improvement in gearing in AMP projects, Mohl said, provided the market remained positive,

Apra chairman John Laker said the case had been an unusual one.

With little option but the split, approval was imperative if AMP were to survive.

'We had a clear mandate to protect the interests of AMP policy holders and depositors in Australia,' Laker said. 'Apra has in the past had these sorts of requirements, so we satisfy ourself that the institution remains strong from a capital perspective.'