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Michael Paff Director, Wealth Protection Products

Michael Paff Director, Wealth Protection Products. Agenda. Michael Paff Introduction Phil Ruthven Life Insurance into the 2 nd Decade Bernadene Gordon Service Enhancements Chris Kirby Product Enhancements Dan Powell Summary. Phil Ruthven.

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Michael Paff Director, Wealth Protection Products

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  1. Michael Paff Director, Wealth Protection Products

  2. Agenda Michael Paff Introduction Phil Ruthven Life Insurance into the 2nd Decade Bernadene Gordon Service Enhancements Chris Kirby Product Enhancements Dan Powell Summary

  3. Phil Ruthven The Economic, Social & Political Backdrop for Life Insurance into the Second Decade

  4. Topics The Economic Scene The Political Scene The Social Scene Life Insurance, Planners & Success

  5. 1.The Economic Scene

  6. World GPD GrowthReal growth (PPP), 1950-2011(F) Purchasing Power Parity (PPP) terms • 2008 3.2% • 2009 -2.5% • 2.5% (F) • 2.7% (F) Past 25 years 3.5% p.a 1950-1969 growth in US$ market terms IMF/Economist//IBISWorld: 09/05/10

  7. Public Debt: 2010 (F)% of GDP Serious serious trouble Serious trouble Serious trouble Serious trouble Serious trouble Serious trouble Serious trouble Virtuous, thanks to the Howard/Costello government 31% of world economy is in countries with Public Debt of >90% of GDP The Economist/IBISWorld: 10/05/10

  8. Australian Index of Consumer Sentiment2 months progressive to April 2010 Recession Level Year commencing June Source: Westpac-Melbourne Institute (IAESR), IBIS estimates 14/034/0

  9. Economic GrowthAnnual real GDP growth (%) progressed in quarters to December 2009 (and forecast to June 2013) Average long business cycle is 34 quarters (81/2 years) Forecast 36 qtrs. 34 qtrs 34 qtrs 33 qtrs 38 qtrs 33 qtrs? 36 qtrs ? Years, ended June Source: IBISWorld: 04/03/10

  10. Australia’s Industry MixValue added basis Shares of GDP in constant F2007 price terms C2009 Pers. & Other Serv. Hospitality (2.2%) Agriculture 2.6% Cult & Rec. Serv. Mining 6.8% Utilities 2.4% 1.8% 0.9% Health 5.9% Education 4.1% 8.4% Manufacturing Ind. Taxes 8.1% 6.9%Construction Govt. Adm. 5.0% 4.5% W’Saling O’Ship Dwells. 7.2% 11.3% Prop. & Business Services 4.5%Retailing 9.9% 4.9% Transport Finance & Ins. 2.8% Sectors Primary Secondary Tertiary Quaternary Quinary Communications GDP $1260 billion (current prices) $1208 billion (constant F2008) ABS 5206-26 /IBISWorld

  11. Australia’s Industries GrowthCAGR (trend), next 5 years to C2014 (constant prices) 2.0 -1.0 Percent Source: IBISWorld 13/04/10

  12. 2. The Political Scene

  13. 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

  14. The Henry Tax Review Report • 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

  15. 3.The Social Scene

  16. Australian Population1850-2051 37.8 Million Forecasts (IBISWorld) 33.4 29.3 25.6 22.3 Year, ended June

  17. Household incomeAverage/household 1986-2010 (F) Average 2010(F) $127,370 per household Constant 2009 prices (CPI) Real growth 1999-2009 1.9% pa Income ($‘000) Actual prices Year, ended June Source: ABS/IBISWorld 29/01/10

  18. Australian Household ExpenditureYear to December 2009 Depreciation 6.7% Propty Interest 4.6% Consumer Debt Int 1.2% Unincorp. Interest 0.8% Transfers 0.4% H’Hold durables 3.4% Motor vehicles 2.0%Other 1.0% Savings 3.1% Taxes (& social contributions) Capital Related 13.7% 13.5% 6.4% Durables Fin. & Ins. Serv. 8.6% 17.7% Non-durables Rent1 12.5% 3.7%Health Mobility 4.6% 2.3% 7.8% (& other dwelling costs) 2.3% 3.7% Entertainment & Gaming Hospitality Other Services Food 7.3% Alc.& Tobacco 2.4%Clothing 2.1% Utilities 1.5% Veh. Operation 3.4% Other 1.0% Education Communicns. 1.7%Fares 1.9% $ 1052 billion ($123, 540 per household) Note: 1 includes imputed rent (home ownership) Source: ABS5206/IBISWorld

  19. Indicator Lending RatesAustralia F1975 – 2013(F) Credit Cards Overdraft (small business, variable) Interest Rate (%) Mortgage (standard bank) Year, ended June Source: IBISWorld/Reserve Bank

  20. Household Savings% of Gross Household Income (4-qtr. Moving average), 1960 – December 2009 Year, ended June Source: ABS 5206-36 11/03/10

  21. Australian Household Assets & DebtJune 2010 (F) Assets $ 7300 billion, Net Assets $ 5870 billion . Per H’Hold $ 680,070 Including unfunded Super. & Life Housing (owner-occupied) Including Securities & Loans 19.9% Household Debt $ 1430 billion ($165,830 per household) Shares 5.3% 42.2% Deposits 9.1% (& currency) 13.7% Other2.4% Durables3.4% Equipment, Inventories H’hold durables, collectables) Debt servicing comes from wages (mainly), rental property returns, and interest & dividends from liquids & securities Other Prop. 4.1% Invest. Housing Commercial & Rural $ 7300 billion ($ 846,550 per household) Sources: Reserve Bank Statistical Tables B20; ABS 5204-51, IBISWorld estimates 22/04/10

  22. Household Income and Wealth DistributionShare of total by Quintile, F2009 Household Income Wealth 20.0% 20.0% 20.0% 20.0% 20.0% Richest Well Off Middle Struggle Poorest Among 8.4 million households: >1,000,000 millionaires 46000 > $ 5 million 7,200 > $10 million 45.1% 24.5% 16.3% 9.6% 4.5% 61.2% 20.0% 12.1% 5.7% 1.0% 1.68 million H’Holds $125,120 $635,800 Average Source: ABS/IBISWorld 10/03/10

  23. 4. Life Insurance, Financial Planners & Success

  24. Perspective F2010 (F) Life Insurance Financial Advisers 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%

  25. Key Success Factors for Planners • 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

  26. Australian Profitability by CohortsReturn on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009 23% > Best Practice (ROSF 22.2%) 42% > Average (ROSF 12.6%) 43% > Cost of capital (12.0%) 68% > Bond Rate (5.4%) 11% Losses -10.5 -128.0 Percent Source: IBISWorld 19/11/09

  27. What the Best Enterprises Are Doing 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.

  28. Bernadene Gordon Head of Product Proposition

  29. What’s important to you? awareness of the offer sales support product claims access lodgement underwriting relationships process

  30. Electronic lodgement process Challenge • Choice – the ability to offer different options • Cost to your business – paperwork + administration • Compliance – the need to protect your business lodgement process

  31. Electronic Lodgement process John Solution • Options • Reduced admin • Electronic Lodgement Authority Form

  32. Underwriting Challenge • Access to the decision-maker • Potential long e-2-e time frames • Cost to business underwriting

  33. AMP Underwriting Concierge Service Solution • Electronic Pre-Assessment Service • Dedicated Underwriter from start to finish • AMP arranges medical tests directly with client

  34. Claims Challenge • Direct access to decision-maker • Quick turnaround of claim assessment • Tailored communication • Dedicated service claims

  35. AMP Claims Concierge Service Solution • Direct access to decision-maker • 24 hour turnaround on claims review and assessment. • Dedicated claims assessor.

  36. What else is coming? TODAY TOMORROW access to the right information merged PDS and plan rules “one source of truth” sales support to help grow my business AMP Risk Bulletin more cover for more people changes to our underwriting philosophy collateral that resonates with the need for insurance new AMP risk look and feel

  37. New AMP Wealth Protection brand identity

  38. Chris Kirby Head of Technical Strategies

  39. Income Protection – the challenge Advisers Want the choiceto 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.

  40. Definition of Total Disablement now includes both the “10 hour” definition and “duty” based definition. Choice at claim Income Protection – the solution 10 hour based Duty 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. Unable to carry out one duty, or combination of duties, which are critical to the proper performance of their usual occupation.

  41. Advisers Want the professional packageto include all white collar occupations. Clients Want personal, tailored solutions. Income Protection – the challenge

  42. Professional and white collar occupations have no requirement to be totally disabled during the waiting period to qualify for a “partial disability benefit”. Partial disability from Day 1 Day 1 Day 30 No offsets for professional and white collar occupations. Income from workers compensation, accident and public liability schemes. Income Protection – the solution

  43. Advisers Want the choice to offer a quality Standard Income Protection plan. Clients Want a quality, affordable Income Protection plan. Income Protection – the challenge

  44. All Partial Disability Benefits are payable for the Full Benefit period until the plan expires. Income Protection – the solution Income Protection Standard Temporary Salary Continuance 2 year 5 year to age 60 to age 65 2 year to age 65

  45. Advisers Want TPD eligibility as highly subjective. Clients Want greater certainty that genuine claims will be paid. Total & Permanent Disablement – the challenge

  46. The definition of TPD now includes the objective measure of the insured’s ability to earn income. Total & Permanent Disablement – the solution 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”.

  47. Advisers Want flexibility to package according to individual client need and simple underwriting solutions. Clients Want affordable cover they can understand. Trauma – the challenge

  48. Trauma – the solution • Separate full benefits from Partial Benefits. • Create a comprehensive Partial Package as an option. Trauma Cover Optimum Trauma Cover Standard Full Benefit Package Full Benefit Package Trauma Cover Optimum Covers 48 “Full” conditions Trauma Cover Standard Covers 15 “Full” conditions Partials Package Option Partials Package Option Covers 18 “Partial” conditions Covers 18 “Partial” conditions Children’s Trauma Cover Children’s Trauma Cover Covers 20 “Full” conditions Covers 20 “Full” conditions

  49. 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

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