AMP Limited (AMP) Earnings Call Transcript

Good morning, everyone, and welcome to AMP's Investor Day for 2021. So disappointing that yet again, we're holding this virtually and won't get to meet you physically, but I hope, and I know I'm going to get to see some of you in person over the coming days. So I really look forward to that. Now before we talk about what we're going to introduce you to today, let me acknowledge the traditional owners of the lands on which we hold this meeting today. For me, that's the Gadigal People of the Eora Nation, and I'd like to pay my respects to the Elders past, present and emerging and pay my respects to all First Nations People. So to today. What are we going to talk about in this very special day for us here at AMP? Firstly, I think it's really important that we give you an update on where we're up to in terms of the demerger and take a little bit of time to remind you why we're on the track to demerger. Secondly, I'll have the opportunity to present to you where we're going in terms of AMP Limited. I've been in the job for just over 100 days now, and I think we've done a lot of work in that period of time in thinking about what we want to be in that post-demerged environment. We're also lucky enough to have our CEO of AMP Capital, or PrivateMarketsCo, here virtually also today, Shawn Johnson, and I'm really looking forward to him being able to share his vision of the new company; and of course, a person well-known to many of you, James Georgeson, our CFO, who will walk you through the financials. And I hope you appreciate that we've listened to the feedback about being a little more open about our financial position, about our segment accounting, and we've given you a lot more information today. I'm also joined today by some very important members of our management team. In the room here today, we have Kylie O'Connor, who is our Head of Real Estate. We have Sean O'Malley, who is the Head of our Bank; and on the phone, we have Blair Vernon, our Head of New Zealand Wealth Management; and of course, Scott Hartley, our Head of Australian Wealth Management, and they'll be involved if the need arises or if you have some specific questions. Of course, as always, everything is posted on the website and on ASX, but I know already that many of you have started to digest that information. So let's kick off and start with the demerger. Now before I talk about where we're up to, I think it's important to just step back and say, "What are these 2 companies that we're looking to demerge? What are the differences?" Now firstly, if I look at AMP Limited, we're a retail business, predominantly Australian and New Zealand operated and focused, about 1.5 million customers and $130 billion. So very much retail, domestic Australia and New Zealand business. If we look at PrivateMarketsCo, it's an institutional business. I think we all understand that. Less than 500 clients, and we have assets across the globe. Yes, we have a big real estate business locally, but we've got assets across the globe. So they are very, very different businesses with different cultures, remunerations and outlooks. So I know you're probably sick of hearing this, but let's go back to why we are doing this demerger. Firstly, you heard me talk about it, different businesses, different culture, different rem structures, but the demerger also allows us as management teams to be much more focused, focused on what the core businesses are of both these organizations, and as we look to the future and look to those growth aspects, it also allows us to come to the market with individual propositions. So I feel really clear in my mind that it's the right way forward for the businesses, the right way forward for our shareholders, our customers and, of course, our people. So where are we up to today on this demerger process? This is a complex beast. There is a lot of work to be done, and there is a lot of work that has been done, and before I talk about what's coming next, I think it's important to reflect on where we're actually up to now and what we have achieved. So firstly, just to remind you, this has only been announced in April this year. Since that day, we sold our GEFI business. We've announced that we're going to transition our MAG business across to limited, and that gives us end-to-end superannuation and investment opportunities. We've also announced new Chair and Deputy Chair elect, and I know those names of Patrick Snowball and Andy Fay will be very familiar to many of you listening to us today, and that was a really important milestone. Shawn's also announced his new management structure for PrivateMarketsCo, making it global structure, so we can try and work together to really take advantages of those opportunities we see, and as we come to December, there'll be an operational separateness with the functional heads reporting in to Shawn. Yes, there's a lot still to be done, and I don't want to underestimate the complexity of moving towards that June demerger date. We've still got regulatory reliefs to achieve. We've still got separation exercises to undertake. We've still got to complete the MAG transition, although that will be happening in the coming weeks; and of course, the GEFI sale. But we've got a dedicated team, and I feel comfortable that we're moving towards those dates at the right trajectory. Both the management, including myself, and the Board had dedicated committees monitoring and providing oversight to this delivery. So now we've talked about the demerger. Let's talk about what AMP Limited is going to look like, and that's the business I will be responsible for as the CEO. Before we look forward, though, I think it's important to think about what we actually have done, and I don't incorporate myself in they have done because the team has very much worked on this. So we have made progress, but there's a long way to go. What have we done? We did sell the Life business, and we've just completed the sale of the remaining ownership, and at this point, it looks like those transitional service arrangements will roll off mid next year, a major achievement to our simplification agenda. We spent time and effort upgrading our core banking system. Now you may say, "What's the point of that?" But it really allowed us to increase our operational capacity, and I'll talk about the bank a little later and the opportunities we see for growth there. The team has spent an enormous amount of effort and work reshaping our aligned adviser network, setting up new terms, explaining to the advisers the services that we're going to offer into the future and get rid of those overhangs of institutional ownership and BOLR. We've sold our AMP employed advice network into a joint venture, and I'll talk a little bit more about that later because that is something we haven't really talked about, although immaterial from a financial perspective. The team have done the hard yards about repricing our superannuation solutions, whether that's on the platform or whether it's in our Master Trust, whether it's default or whether it's choice, and we are on track to deliver those $300 million savings that were committed to the market. $40 million of that will be delivered in '22, but we are on track for FY '21. And I think it's important to say that I am not walking away from those commitments. As a new CEO, it would be easy to do that, but I think it's very important that we continue to deliver on those commitments we've made around costs, and I'll talk a little more later about what else we're needing to do there. And of course, we just recently announced the retention of the management rights around our AWOF fund or office fund. Now we have to do more work there, clearly, but it's great to be able to let the team get back to doing the business that I know they're great at, and so I think that is a milestone we should be proud of. There's more to be done in '22. As I said, we have to get this demerger done. We have to complete it by that June period. We need to finalize the Life TSA arrangements and make sure that is a clean cut with Resolution Life. In the next weeks, we'll transfer the Multi-Asset Group, or MAG, across, which will give us that end-to-end super offering. The GEFI sale needs to come, and we have to work through the mechanics of what it means to separate balance sheets between 2 companies that have lived together for some time. I think the fact that we reset our balance sheet last week also gives you comfort that we've had a good hard look at the assets on that balance sheet, making sure they're going to help us deliver value in the coming years. I'm also proud of the fact that over the last 3 months, we have spent a lot of time thinking about where we sit in the market, what does the competitive environment look like and what do we want to be, both companies, in that demerged environment. So now let's talk about AMP, and before we do that, I want to just hit you with a few trends that we've considered as we laid down the strategy we're presenting today. Some of these will be well-known to many of you. What's happening? We know, especially in Australian superannuation, it's becoming a game of fewer players, bigger, fewer players. Margins, because of transparency, because of the regulatory environment, are starting to decrease, and that's a good thing for our customer base, much greater focus on the propositions that we're delivering. We know there's an aging population in Australia, and we know there's not good retirement solutions out there. You've heard me talk about it before, the digital data, automation, you can't just talk about that now. It has to be part of our DNA, and I've already said that I wanted a technology person to sit at our executive team, and we'll be having announcements about that shortly. And we all know the need for advice. In our country, especially in Australia, good advice is a difference between a great retirement and an average retirement, but it's just not accessible to many Australians today. So how, as an industry and as a major player in that industry, do we face into that challenge? And of course, we're going to have ongoing regulatory change, and we're going to have supervision of our industry. It's an important industry. It's a big industry, and I'm not scared of that. When I think about the levers for success for our company, I don't think they're rocket science, the things we've been talking about for years, but I think they hold well into the future. We have to be important in customers' lives. We have to have competitive and compelling options. Scale is going to be important. We're a big player today. We need to continue to be a big player to be able to compete. We've got to simplify the rest of our legacy products. A lot of work has been done, but I don't want to be distracted by the past, and it's good for us to move and be more agile and be more nimble. Digital and data, you heard me mention it many times, and it remains important. And of course, in this new world, we have to understand that we can't build everything ourselves. We don't have the capacity. We don't have the capability, and in my mind, learning to partner better with fintechs, traditional suppliers and other players in the market will become a skill that we have to hone, very important skill. So over the last 3 months, I really have sat down with the teams and thought about what do we need to be, what is my one-page strategy of where we want to go as a group, and I came up with 3 things that I think we need to focus on: repositioning our existing business, continuing to simplify but not only being internally focused, being very aware of what's going out in the environment we compete in. So explore is something I thought was absolutely necessary to have on this page. Now I'd like to be standing here today with the purpose that we had determined up top that was excitable to our customers, to our shareholders and to our people. We haven't got that purpose today. We're very much working on it, and we'll have it by the time we hit demerger, but I still think it will definitely have that element of customer in it, and once we get that enduring purpose, it will be part of everything we do at AMP. I want to very much be a purpose-led organization. So let me quickly take you through the pillars and the enablers, I think, are important before we delve into those in a bit more detail. Firstly, repositioning the existing businesses. I think the 2 growth opportunities for us in the short to medium term are the bank and are our platforms. I've talked about both of those in the past, and I see both of those as great opportunities for growth. We need to focus on efficiencies in our Master Trust and New Zealand Wealth Management businesses. They're both really important businesses. They're both well run, but as we look forward, there's going to be challenges around margins. So continuing to build on efficiencies, continuing to deliver those customer propositions will be important. And lastly, in that space, we have to accelerate the transformation of Advice. Advice has been a core part of AMP, and it's hard to imagine that it won't be core part of AMP, but it has to be sustainable for us and for our advice partners, and James later will share some of the economics around that business. If I talk about simplify, I know I'm going to say it again and again, but we need to forward -- move forward on the demerger. More importantly, we have to rightsize the operating model. We're going to be a much smaller company. We have to think differently, act differently, make decisions differently, think about our committee structures differently, and together with our Head of New Zealand, we're working on some of that right now to make us a more streamlined organization going forward. And of course, I have to think about disciplined capital management, and I know you, as our shareholders, have given me feedback on that. So that's reposition and simplify, but as I said before, that's not enough. That's what we have to do, but we also have to think about where can we be different, where are our growth opportunities outside our traditional models, and so there's a couple of things there we're talking about. The retirement space, you've heard me talk about that as an opportunity, definitely in line with our brand parameters. I think we need to start to think about direct-to-consumer, not suggesting that's opportunity in the very short term, but we know our customers are moving in that direction. And I want to be aware of the changes that are happening in our industry. We have to participate in those discussions. We have to be able to make concrete decisions about where and where not to go. And of course, enabling all these things are things like purpose and culture. You heard me talk about that. Brand and reputation. I said on day 1 to our people that restoring our reputation to the iconic nature of the brand is really important to me, and it's important that our customers know who we're going to be going forward. Digital and data, talked about that a number of times. And finally, respect risk, and I use those words very carefully because it's not avoid risk. It's not take no risk. It's be respectful of risk and be conscious of the risks that we're taking. So let's -- now let's talk about reposition and delve into those businesses that I've talked about in a little more detail. Before doing that, let me just quickly talk to the dynamics of these. Again, this is not rocket science. Many of you will be very familiar with these dynamics. If we look at the bank, I think we all know that the brokers are becoming more and more important to the customers when they're looking for that home ownership. It still is a very confusing process for many people, and so we see an increasing reliance on brokers. But the digital self-serve, follow-ups, et cetera, are becoming hygiene factors, and we've got to continue to build that capability, and as we look longer term, I think we can always all see a world where mortgages in a completely digital environment are likely to happen. We come to the New Zealand space. It's voluntary superannuation there, although we are starting to see the KiwiSaver balances grow, and we are seeing our Kiwis show greater interest in saving in that form, but property remains the dominant asset class. That doesn't mean we're going to be running to a bank in New Zealand at this point, but I think it's important to acknowledge that. And it is an outlook that's going through similar changes to what Australia has done with greater transparency around fees and investment performance, and I feel we've got great experience to enable us to be successful there. On the Wealth Management side, you heard me talk about a few of the drivers that are influencing our thinking here, the aging population and, of course, retirement, and that covers both our Master Trust space and our platform space. In platforms, you've got these monoline competitors really starting to focus their businesses and provide good competition, and we have to make sure we can keep up with them. You've got adviser trends, which I know most of us are familiar with. Had large exodus of advisers from the market over the last few years, but we know the need for Advice continues to increase. But at what price and how can we do that differently? And as a result of those reducing adviser numbers, they're very much moving into the high net wealth area and how we're going to service that mass affluent and mass area. We know as we move forward in Master Trust that margins are not going to increase. Pricing is competitive. Pricing is transparent, as it should be, but we need to make sure that we can continue to deliver that competitive pricing. Investment performance, absolutely critical, and it's great to see the criticality and the importance of that being demonstrated outside now as well as internally. As we move to the changed environment of stapling and transparency of investment performance, there's opportunities there around direct-to-consumer, but we all know that scale is important, and when we come to advice, all the trends I've talked about, declining numbers of advisers focused in one area, cost of advice currently is not what people want to pay or, for that matter, can afford to pay. So how do we make it more accessible? The cross-subsidization of the past has stopped, and we have to make sure our businesses can stand alone, can offer to customers, yes, but be sustainable in their own rights, and of course, we have to embrace technologies everywhere we turn. Technology is changing our world. We're not in the fourth revolution and cut for no reason, and we can't ignore that. So that's the trends that we think about when we put forward our strategy. So now let's delve into the individual businesses, and let me start with the bank, and we probably haven't talked about bank enough in AMP. So I thought it would be good to give you a flavor for the book that we have, and remind you, we are a simple bank. We are a challenger bank. We have 2 solutions, mortgages and deposits. We have no branches. We are a digital bank, and if I look at our book, I see a really clean book. It's principally owner-occupied, principally P&I, in that age bracket of 30 to 50 and really good LVRs. So it's a well-managed book, but we're small. I think when I was looking at June, around 1% market share. So real opportunities for us. Let's just look about what we've done in our bank and why I think we're really at a point when we can deliver growth. Firstly, you heard me mention it at the start, but we spent the time replatforming the back end. We did have an old system. We needed to modernize it to enable us to be able to cope with more volume. That work is being done, and we've seen the efficiencies from it. We've absolutely focused on the auto credit decisioning rates, and that is important to ensuring we can get a time to decision for customers that meets their needs. Now today, we know that can be weeks, but if we look into the future, I know that's coming back to days and potentially hours. One of the things I'm really proud of at AMP is that we've consistently ranked among top 5 for service with the brokers, and you remember, I mentioned that one of the important trends is that brokers are playing an increasing role in that space. So maintaining that service ranking is really important. And while our NIM is great at the moment, I understand that there's pressures on that, but I don't think they're pressures that cannot continue to support both our ambitions financially as well as our ambitions from a customer perspective. So yes, I see some decline, but I certainly feel that we're well positioned in that space. So I see real opportunities in the bank. We're a small bank. We don't have branches. We have simple solutions. We have a good cost-to-income ratio. We have good return on equity, and then we have a NIM that I think is well positioned. So how are we going to grow this? Well, firstly, I could sit here, and I could talk to you that we're going to build a customer value proposition that's very focused on the ideal customer for us, and we will do that, but it is an immediate priority for us. As I talked before, the operational capacity has been our constraint, not necessarily the ability to attract customers, and by doing the work we've been doing around replatforming, auto credit decisioning, we're giving ourselves greater capacity. So yes, that will come but not right now. We do need to focus on our lending origination and make that more streamlined, and we're currently looking for partners to help us with that. It comes back to the points I said before. We don't have to build everything ourselves. Partnering is a skill we must have, we must develop and we need to move forward on. And of course, we've got to get better at digital. That is always the case of getting better at the digital because it's what our customers expect. It's what the brokers expect, and to be honest, it's what we expect. And finally, we've just launched our brand campaign. Now I know that one brand campaign does not make a company, but I think that brand campaign was really important in laying down what the AMP of the future looks like. We are not a life insurance company. We are a bank. We are a super provider. We are a retirement provider, and we are an advice provider, and the early signs of that are that people are starting to see the changes that we have at this organization. So what are our ambitions here? We want to grow 2 to 3x system, 2 in the earlier years and 3 in the later years. Why do I believe we can do that? Just before I walked in here, the statistics came out for the month, and we did 1.9 this month and have been well above 1.5 in the last 3 months. So there's really good signs there that we can continue to deliver these ambitions. We have been good at maintaining our funding ratios of deposits around 75%, 80%, and we need to continue to do that. Importantly, we have to continue to be highly rated in terms of service. That is critical for us to get the flows in the future, and of course, we want to optimize our NIM acknowledging we're doing pretty well at the moment, and we may have to have some declines there, but I'm very convinced that we've got a growth opportunity here. Now let's work to our Australian Wealth Management business, which is our advice super business, including both Master Trust and Platforms. I won't spend a lot of time talking through the dynamics again here. We've talked about the aging population. We've talked about the capacity constraints of advice, but what I also think is important to highlight is we have a platform which is in the highest growth phase of this industry, of course, platforms and not-for-profit, and we have a good platform. We have a platform that is in that growth part of the business. That's what's important for us to think about. So in Wealth Management, what do we want to be? And where have we been? And let's talk about each of these individually before we dive into them. Firstly, in Platforms, let's be honest with ourselves. A while ago, we typically relied on a line distribution. We had multiple legacy products, and we'd probably under invested in that business. What do we want to be going forward? We want to be a market competitive platform. We don't have to be leading in everything, but we have to be a market competitive platform. We want to be able to support, of course, our aligned advisers. They're part of our history, they're part of our future, but we need to be competitive in that external financial advice market as well, and that is our aim. And we want to deliver some innovative retirement solutions and see that as a competitive advantage. In Master Trust, again, we had very much relied on our aligned advice distribution and our corporate super channels, and that continues to be important, but we have to be able to compete in the multichannel opportunities, and that includes direct-to-consumer. In Advice, I think we'll all agree, in the past, not today, it's been very much a product-focused play, and moving forward, we need to be a professional advice service provider, and we need to do that sustainably, and you'll see later that we've got some work to do there. So now let's talk about each of these businesses in a little more detail. If we come to the platform space, let's look about where we are and where we've been. When I've talked to you at the half year, I mentioned that we did have one material service gap, which is the managed equity portfolios now addressed. Pricing, implemented. We have competitive pricing, and we need to continue to have competitive pricing. We have good options there in terms of guarantees and nonguaranteed products, and we have many manager options, and we've got a leadership team in there now, which is dedicated to platforms, not split across, and really thinking about how can we be different going forward, how can we deliver growth, how can we deliver service to our customers. So I feel really optimistic about this because we do have a good platform today in MyNorth. We do have good service, and I think we have more than a good team. We have a great team to enable us to push forward. So how are we going to grow this space? Firstly, we need to accept that we have to rely on advice support, not just from our traditional aligned networks, but from the external market. I don't think that necessarily means changing our solutions we're offering today because, as I said before, they're very competitive solutions, whether from a price or offering perspective, but we do have to change our mindset that we've got to get out there, sell our product to that external environment and be confident enough that we can get the flows. So Scott and the team are very much working on that right now. We have to continue to build our digital experience, that goes without saying, but I really think there's an opportunity for us to differentiate in this space, and it goes across to our Master Trust in the retirement play. We've just brought on a team who's completely focused on retirement, and I think you agree, we don't have great solutions in this country in that space. We've got a lot of history from our life ownership, from the guarantees that we've put on to those, and so we've really set ourselves some hard tasks in bringing to new solutions to market through '22, the first one with the lifetime pension. We have to maintain service standards. We have to be highly rated by all those independent experts, but I really want our success to be judged by how many new flows we can bring in from that external market. There's still a bit of cleanup to do on some more legacy products as well, which we'll focus on through '22. So great opportunity for us in that platform space. Let's now move to Master Trust. And I haven't lived through the changes in Master Trust in AMP, but as I was sitting here getting ready for today, you look at what the team's achieved, and it's quite. phenomenal. We've completely rationalized the number of trustees, the number of super funds, the number of systems, the number of products. Really, it's quite phenomenal in terms of the amount of work that's been done. And more recently, we've really faced into those pricing issues, making sure we are now competitively priced, and we've addressed the back front book issues that we've traditionally had. On top of that, we relaunched the brand campaign. Now I said before, a brand campaign does not start momentum. It doesn't change things immediately, but it really is starting to reset the agenda on what the new AMP looks like. Again, we're a bank. We're a super provider. We're a retirement provider, and I think that has helped with our Master Trust solutions and particularly with our adviser support and our corporate super support. So a lot of work has been done, and that really sets us up for the business we need to drive forward. So let's talk about what we want to be here. Firstly, of course, we have to continue to be competitive in terms of price. I think we've taken most of those price reductions. Although if you look further out, there could be some more in those latter years. We have to focus on investment performance, and the MAG transition really allows us to have end-to-end opportunity for our customers, and the fact that we've now got rid of the life insurance structure around that certainly assists us continuing with that simplicity agenda. Asset management capability is going to be important. The other thing is we know we need to do further work in terms of efficiencies, but we don't have an abundant amount of money to put into this space. So we've got to be creative about how we think about those efficiencies, and we're talking to partners, both traditional and fintechs, about how they can help us in this space because that will be important going forward, that constant focus on efficiency and in delivering those customer propositions. So in this space, efficiency, brand, customer needs continue to be important. And finally, in the reposition, let's talk about Advice. We've done a lot of work in Advice, and I was very glad to see that the team didn't stop when I hadn't arrived at AMP. We've almost finished the remediation from an accounting perspective, provided still some cash to go to the customers, but that is a major thing to get that behind us because it's just a focus that management doesn't need. We need to be focused on the future. Of course, we have to deal with the past. Great to see that we're nearly there, there. We've set up new commercial terms with advisers, and we've been transparent with our advisers. We've removed BOLR, effective 1 January. We've removed institutional ownership, effective 1 January, and we've really said to our advisers, "We've got to be thoughtful about the services we're going to offer you going forward, and they have to be charged at a rate that is sustainable for our adviser partners but also for us." And when you look at the numbers, you'll see we've got some work to do there. So we have to be competitive, but we have to be sustainable. And I should highlight here is one thing on that journey is we recently sold our employed advice network into a minority joint venture. That was important for us because we weren't the best managers of that business. So we moved that to a place where we feel they are better managers, albeit we take the opportunities still to have that service. So where are we going with Advice? I'm not standing here today saying our targets here are not ambitious. They are ambitious. We're putting out very ambitious targets to make this a breakeven business by the end of FY '24, but as a team, we know that we have to really push to get there. That does not mean that we want to drop every service. That does not mean that we're not going to have our best staff at the front line. We absolutely are, and the costs will come from the whole organization, but we have to drive towards that breakeven point. At the same time, let's look for growth opportunities in Advice. There are some practices out there who need capital to be able to grow, maybe combined with other practices. So we'll be very diligent about that, but we may well take equity stakes where we see opportunities. And where we don't have the capability, where we don't have the capital, we will partner, and I think in the Advice space, there's been some very good examples of that with the recent working with CreativeMass and, of course, Salesforce, and that will continue to be important in that space because we have to deliver services to our advisers, but we have to deliver it in a different way. That's great, but we all know this isn't going to solve the industry issues, and as a big player in Advice, I think we need to engage with industry bodies with regulators, with government to work towards better solutions around Advice, better ways to deliver advice in ways it can be accessible to the everyday Australian because it is important for Australians to get advice in an environment which is quite complex. So ambitious targets in Advice. We want to be in a 0 position by FY '24. We want to improve our revenue per adviser, and we want to make sure we can bring a lot of those costs forward to '22. Now let's talk to New Zealand, and we often don't get the opportunity to talk to New Zealand in these spaces. If I look at our New Zealand business, it's a well-run, efficient business. There's not a lot of growth opportunities in the short term as we see it in New Zealand, but I want to make sure that our business is as well run, is as efficient as it can be. So when those opportunities present themselves, we can take advantage of it. We've done a lot of work in that business. Interestingly, we have moved more towards employed advice a little bit away from the IFA market, but we have also changed our distribution arrangements for general insurance. So going into the future, we're not taking risk in that space. So we've done the hard yards. Where do we see this business going? As I said before, we have to continue to focus on efficiencies, and I know the team there is doing that. We have to fix any product gaps we've got, and we will launch a new digital unit pricing solution in 2022, and we have to continue to focus on the customer. When opportunities present themselves, I know our business is in a good shape, and that's what we're focused on with New Zealand right now. So I expect a relatively stable position. So that's where our businesses are in reposition. Let's talk to simplify, and you've probably heard me talk a little bit about this already, but simplification is one of my top agendas. I know you'd expect me to say this, and you probably want me to say this, but one of the things we really have to focus on is our operating model. We have built an operating model for a company that was much bigger. We make decisions for a company in a way that a company that was much bigger would make decisions. We have committee structures in place for a company that was much bigger, and I know we have to challenge ourselves to think differently going forward. So firstly, I'm not walking away from the commitments we've made to the outside world. We do have to deliver those $300 million of costs -- controllable cost savings by 2022, and that means another $40 million on top of what we've delivered to date. Not walking away from that, but I know that, that is enough if we're going to be successful in the future. I know we need to invest in our business to take advantage of those growth opportunities that I've talked about, and so as a result, I need to make a commitment that we will deliver further costs than that $40 million. And so we're saying that we need to deliver an additional $115 million over the planned '22 to '24. Again, I'm not suggesting they're easy targets. They absolutely are not, but as a team, we all know that it is important for us to commit to that to, A, enable us to grow; but B, make sure we can be successful into the future. What does that actually mean? We've talked about Advice. We need to simplify that. We need to continue to focus on Master Trust, but we've got to look at our functions. We've got to sit down and say, "In this new world, what do we want our functions to look like?" I'm doing that. So are the rest of my team. We have to continue to look at simplifying our entities, our governance, our decision-making and, of course, explore those partnerships where they make sense. This will give us the ability to grow. This will give us the ability to focus on the things that are important. So we're talking about $155 million of costs over the 3-year period, certainly ambitious targets. And finally, I want to talk about our portfolio of assets. Now I just want to be clear, there is nothing on the agenda today. There are no big announcements today, but I think it's important for us as an organization to have that constant discipline of asking ourselves regularly, "Are we the right owners for these assets? Are we the owners that can help these assets flourish and add value into the future?" Now we've done a lot of that work already. You're very familiar with what we've done, life insurance, GEFI, MAG, all that's an integration. I've just talked about employed advice, and of course, we're having a bit of a change in tack on technology, but we have to continue to make sure that we challenge ourselves in that area and always ask, "Are we the right owners of these assets into the future?" Now let's talk about explore. So I've talked about where the business is at now, where we see the growth opportunities, how we need to continue to simplify, but I believe we've got to constantly challenge ourselves that there is a big world out there. We have to understand what the changes are. We have to understand what competitors are doing. We have to understand what the fintechs are doing, and we have to be involved in those discussions, including with our industry bodies. And I see 2 real opportunities here. The first one is retirement. You heard me talk a little bit about it, but our brand has been synonymous with retirement. We had a life insurance business in our entities. So we know about guarantees. We know about what the future looks like and how we can manage those retirement options. We've brought in a fantastic team, and I'm really excited by some of the work they're doing there because I think this can be a differentiator for us at AMP. And what -- why do I say differentiator? Because we have all the elements. We have the investment management now. We have the advice component where we can think about how our customer would react. And of course, we have the various platforms. So I think this is a real opportunity for us. We'll start launching new product next year. And I think the team is really thinking about the interplays with aged care, with the pension system and how we can optimize those benefits for our customers, so a very exciting opportunity. The second thing which we've really committed to is the direct-to-consumer space. Now we've talked about that it's important in the master trust space. It's important in the bank space. In fact, it's going to be important for everything going forward. The logical place for us to start learning from this is in the bank. And so we're really focused on working on a digital mortgage to be launched in the near term. I'm not suggesting that we're going to get huge revenue from that in the short term. But I think it's really an opportunity for us to learn about how consumers want to interact and to take those learnings across the rest of the business. And I would say the super business is the obvious choice. Of course, the self-serve digital offerings have to continue to enhance. That's not what I'm talking about. I'm talking about engagement in the digital space. And so that is a focus for us with learnings to go across the business. We've just recently hired a new head of brand and marketing, and it's helping us with this. And as I said, we'll be announcing a new CTO in the coming days, so an exciting opportunity. And by no means last in terms of value, but it's our China assets. I know we don't spend much time talking about these, but we do have a strategic alliance with China Life and the China Life Pension Company. China, as you know, it's not very mature in terms of superannuation yet, and we are offering advice to them about how they can interact with their customers. I do want to overplay this space. I think it's an opportunity for us. We've got our first cash dividend this year, which is really exciting. But it's an opportunity that we sit there and we need to continue to watch and understand how it can create value going forward. It would be remiss of me not to talk about the enablers because I've talked about our business, but enablers are important for us to deliver this. And so let me just quickly go through my views on what our enablers are and why they're important. I've probably talked about purpose enough. Purpose is incredibly important to me. I want to be the leader of a purpose-led company, and we are feverishly working on that now. We've got import from customers. We've got input from our people. We're getting input from shareholders with a view of becoming a purpose-led company and having that launched as we demerge. The second thing that's really important for me is our brand and reputation. I've talked about the brand campaign, but we know that's not enough. We need to think differently about what we want to be. I'm really pleased that we saw a recent uptick in our reputation ratings, but we've still got a long way to go. And for me, that's about constantly delivering on our promises, and I am certainly committed to doing that. And of course, we must treat ESG important, and I'm not just talking about the E. E is really important and I think we've got a well-understood climate change policy, but so are the S and G. We have a foundation that's doing amazing work in the community but perhaps we don't talk about it enough. And I think we all know that we need to continue to get better and better at that G. I'm not going to talk anymore about digital and data. Don't worry. But I think you know -- I think it's really important. I was even listening to a podcast this morning where we said in less than a year's time, customers want us as providers to know what they want and provide it at the right times. And of course, respect risk. It's not avoid risk, it's not create risk, but it's respect risk. So let's understand the risks we are taking, be aware of the risks we are taking but not avoid those risks because I think it is important that in our business, we take risks. We just need to know what they are. So as we move forward, on demerge, we will be launching our purpose. We will be launching new values. We have a new strategy. And of course, we have a financial position that we want to enhance going forward. So what does all this mean? And where do we want to be in 3 years' time at AMP? Firstly, you've heard me talk about the strategy, reposition. We want to grow our bank. We want to grow our platforms. We want to protect our New Zealand and Master Trust businesses, which means being efficient, and we need to and want to accelerate the transformation of advice. We're targeting 2 to 3x systems growth for our bank, and as I said, 1.9 in October. So we're well on the way. We need to increase the flows from that external advice market. And of course, we've got to focus on cost reduction in our master trust area. And as you've heard me talk about, breakeven and advice. Ambitious I know but towards the end of '24. In simplify, we've got to complete the demerger. We have to rightsize the operating model. We have to think like a smaller company. We need to keep the discipline of reviewing assets, and we've got to be conscious every day we come in about how we're managing capital in a disciplined way. So there, we've targeted more controllable and some variable cost reduction over the period, $155 million, '22 to '25, and we want to deliver the low double-digit return on equity through that period. When we come to explore, we've got to remind ourselves there's an external world out there and we have to be thinking about it. That means looking at direct-to-customer. That means looking at retirement. That means looking at partnerships. And that means participating in industry discussions. And so we've made a few commitments there about the services that we'll deliver through the '22 and '23 year. So that's our ambition through the cycle, but let's be a little more tangible now and bring it back to what about next year, what about 2022. And for me, the priorities that I lay out today are not too different to where I was when I started. Complete the demerger, critical, critical for both these businesses. Focus on the operating model, focus on the cost reduction. We need it to invest in our growth but we need it for the future success of our company. Grow the bank. We've shown we can do it. We need to keep that momentum going. It might be slightly more difficult market next year, but with our market share, I only see upside. Focus on independent financial advice network flows. Yes, we have a great aligned network. We need to continue to support them. They're incredibly important. They give us knowledge we wouldn't get anywhere else, but we need to go outside and make sure we can compete there as well. While we're doing all this, we've got to keep thinking about what is changing in this outside world. What discussions do we need to be part of? What discussions do we not need to be part of? How do we partner better? I'm really conscious that is important. And of course, continuing the cultural changes that we've been party to over the last years. I think we have a culture here that really wants to get on with this job, and that's what I'm going to harness into the future. So as I stand here today as the CEO, I remain really excited about what we've got going forward. Yes, there are some challenges but there are some enormous opportunities as well, and I'm certainly looking forward to embracing those. So thank you for listening to me for a very, very long time now. I'm sure you all need a quick break. So what we would do with your forbearance is take a 5-minute break now, so if we can be back just after 12:00, and then we'll listen to Shawn Johnson, our CEO of PrivateMarketsCo. Thank you. [Break]

Well, welcome back, everyone. I hope you had a chance to get a cup of tea, maybe have a biscuit. I am very pleased now to welcome our CEO of AMP Capital or formerly known as AMP Capital, now PrivateMarketsCo, and welcome him now to talk about that business from our New York office. Hopefully, technologies will continue to work for the next 40 minutes or so. So over to you, Shawn.

Thanks, Lex. Thank you very much, and good afternoon, everyone. I am coming to you from our New York office, and I should be in Sydney early in the new year. So it's great to talk to you today about PrivateMarketsCo, a business you would know as AMP Capital, and talk to you about our strategy and how we're going to go forward as our own public company in June of next year. Now we focus on the private markets industry. And specifically within that, we'll focus on infrastructure and real estate. And the team has put together a little video that I want to share with you to just give you an idea of the things that we do in our asset management business. So if you could roll the video, please? [Presentation]

Thank you. I hope that, that presentation gave you some sense of just the depth and the breadth of the PrivateMarketsCo business. And I'm going to take you through now a bit of the market opportunity that is in front of us and how it is we are going to execute. First, what is the market backdrop? This is what the growing global demand for private market assets looks like. So if you see the chart going from 2019 to 2025, the 3 colors at the top are infrastructure, real estate and private credit. That's where we really play. The big purple box at the bottom is the private equity part of the marketplace. Now while that is quite large, it is also very competitive on a global basis, and we are focused more in the niche areas of infrastructure, private credit and private real estate, all of which are growing quite quickly. And these are U.S. dollars in trillions, just to give you the size of the market opportunity. I think the most important bullet on this slide is the first one. As we get to 2024, global private markets assets under management are forecasted to represent 17% of the total industry AUM, but it's going to capture 49% of the growing revenue potential. So that's a product of 2 things: one, it's growing; and also, fees are being compressed in other areas of the portfolio. So this is where the revenue opportunity really is going forward. So what does our business look like today? As the video articulated, we have a really unique investment platform, certainly a premier real estate business. We have both core and value-added infrastructure equity capabilities. We have a mezzanine infrastructure debt capability. We generally focus on deals in the $200 million to $700 million range, what we would classify as mid-market. We have about 492 of leading institutional clients around the world. About 77% of our direct institutional clients are outside of Australia. So this is a very different business than AMP Limited. So we have over 100 investment professionals around the world. We have a deep track record, 30 years' experience in the real asset space, consistently strong investment performance. And with $50 billion in AUM, we've grown over 10% per year since 2015. Over 100 high-quality assets really throughout the world; very, very strong ESG credentials, which are very important to many of our institutional investors; and we certainly can add value across the life cycle of assets that we own. If you take a look at the $50 billion and how it's divided up amongst the 3 areas of our business, the real estate business is our largest, just under half of the assets, principally in Australia and New Zealand business, focused on retail, office and logistics management. Our infrastructure equity business is really a global business with operations both in Australia and around the world at $19 billion in assets. It's just slightly smaller than our real estate business with expertise in transportation and logistics, energy and utilities, health and social investing, digital infrastructure and public-private partnerships as well. We are a global leader in infrastructure debt. As the video pointed out, it is our smallest business at $6.9 billion with expertise in transportation, energy and digital infrastructure. Now this map sort of shows you 2 things. One, it shows you where the volatility in the world or where the assets are in the world that we invest and where our locations are around the world in red. Our real estate business is a team of over 500 professionals, 75 assets managed across Australia and New Zealand, 53 investments in our infrastructure equity platform with over 50 investment professionals. And our infrastructure debt business has 18 investment professionals and have made over 90 investments over the last 20 years. As mentioned earlier, about 77% of our clients are outside of Australia. You can see the growth in our clients by region on the left-hand side of the chart. Currently, the largest region for us is Asia. The clients that we have by location, you can sort of see Australia, New Zealand by AUM at 46%. And then over on the right are direct clients by AUM type, most of our clients are either pension funds or fund of funds. Now the bullets here, I think what's really interesting is the U.S. market is largely untapped for us. Less than 2% of our direct AUM under management comes from the U.S. We have very strong performance in South Korea, and it's an indicator for more opportunity for us across Asia. Europe is our most established market outside of Australia, and there are room to grow in both Europe and Australia for our business. Looking at how we grow across each of those areas, you can see in North America, we are now at about $6 billion in AUM sourced there. Since you know it's not really a U.S. footprint, it's principally Canada. Europe, Middle East and Africa has grown quite nicely, now at $9 billion in AUM. And in Asia, we've hit $7 billion. The balance of our assets are across our Australia, New Zealand platform, which is both our real estate business and our core infrastructure equity business. You can see that each of the number of clients, 55 in North America, 124 in Europe, Middle East and Africa, just under 200 in Asia, and 114 in Australia and New Zealand, all of this is underpinned by a global solutions team, a global client solutions team that work across all markets and products. So where are we going to go from here? Really, our strategy is very straightforward in 4 steps. First, we have to complete the demerger. The -- right now, we will move to operational separation at the year-end. We should be listed on the ASX in June of 2022 and then full separation from AMP as we exit any transition services agreements. The second step is we have to simplify our business. I have implemented an organizational structural change to make our firm truly global, and we need to create some efficiencies and remove some duplications across the firm. Then we need to grow our client base. We have a great client solutions team. We need to scale the existing funds that we have. Generally, our clients use us for one strategy only. And we'll have to grow our infrastructure debt and our infrastructure equity business that we have today. And lastly, we're going to diversify the product offering. We have a lot of ideas for new products since I've come on board almost 5 months ago now. I think I've done 65 client meetings, and we have lots of interesting ideas that we can put in front of our clients. The enablers for our business are a strong balance sheet, which we'll talk about in a minute, and our cost management program as well. We have embedded ESG philosophy across all of our businesses, and we really have talented people and a leadership team that will be aligned with our shareholders and our clients. This is a chart similar to the one that Lex showed in her presentation. Key on this is operational separation in December. You can then see the demerger scheme booklet coming out in the March time frame. The GEFI sale completes in April. We have the AGM and shareholder meeting in the May time frame. And then after approval, we would demerge on the ASX. Step 2 is to simplify and restructure our cost base. So AMP Capital at year-end 2020, which was everything, had a cost base of about $522 million. Our MAG transfer, which also was highlighted in the presentation from Lex, will move over to AMP Australia. Our GEFI sale will remove about $26 million in costs. There'll be about $144 million in costs to be removed. About $70 million of that is related to some public markets operations that have to go over to AMP Australia as well as then about 74 million have to come out of PrivateMarketsCo itself. Then there is actually an add-back of about $10 million to $15 million that we have to stand ourselves up as a stand-alone business. We are targeting a $300 million run rate in costs for the 2023 year. So that gives you an idea of how we're getting there. Now how do we grow our client base? You can see that our global client solutions team is made up of 4 functions: our sales function globally, our client relations folks, our consultant relations teams and our marketing brand and digital team. All of those come together under global client solutions function, and their job is to represent to clients all of our investment capabilities around the world. So it will enable us to serve our clients much better and also give them access across geography. Now the last step is to diversify our product offering. We'll be implementing a client-led product innovation process, as I mentioned earlier. With 492 clients around the world, we have a very good idea of what clients would like to do and where they would like to move money. So we're assessing the client demand on the left-hand side of the chart both from a geographic standpoint, a sector standpoint, what type of legal vehicle clients like and those sorts of things. And on the right-hand side, we have to assess that relative to our strengths. What can we do? We have certain skills in-house. We certainly have a good global footprint for providing deal flow. We really have a market-leading development capability, and we are pioneers in ESG, which is very important to some of our largest clients in particular. On the right-hand side are just a sampling of some products we're already thinking about that clients have talked to us about. We will, of course, have to assess all of these, prioritize and decide which ones to do, which ones not to do as we grow the business going forward. As I mentioned, ESG is very important to all that we do from an investment standpoint, not just the E, but the S and the G as well. And you'll notice over on the right that we were an early signatory to the UN Principles for Responsible Investment back in 2007. ESG is embedded throughout the entire investment life cycle across all of our assets. First, in origination, we make an assessment then. And in the acquisition process, if we choose to make an investment, then we actually have an active management process to review our ESG capabilities and impact. And then lastly, and something I'm adding more resources to, is to monitor and disclose better just how we have impacted the assets in which we own or invested in or lent to over the time in which we have held it. I want to talk now a little bit about what we call our closed-ended funds process. This is very different than the fund structures that you're used to seeing in Australia. Australia is more of an open-ended fund marketplace. Private assets are generally owned outside of Australia in closed-end funds. And you can see by this chart, some of the funds that we have launched and now about 41% of our revenue actually comes from closed-end fund product. A little bit of a difference between the open-end versus the closed-end fund. Open-ended funds, clients can redeem or add capital. They may have some schedule at which they have to follow to do that. Fees are generally based as a percentage of AUM. They may or may not have annual performance fees associated with them, but they generally have a perpetual life. So long as you keep clients, you keep the fund operating. Your job is to maintain performance and grow your assets. That's most classically the way the Australian fund market works. In closed-end funds, there are no redemptions or additions to capital after the final close. So you run around and you raise a fund. Once the final close occurs, that's the amount of money you have to invest in that particular strategy. The fees are also based as a percentage of AUM. Now most funds that are created that way will have a hurdle rate that the investment manager will have to come above. But once above that hurdle rate, there is a carried interest where the fund manager and the teams get to share in returns above the target for clients. Typically, a fund might range from 8 to 12 years in life. It's often about a 10-year with 2 1-year extensions as an example. But key to this is you need to generate returns above the hurdle and then you have to continually raise new funds faster than you were selling assets and your funds are maturing. So different fee structures exist. You can see in the graph there, some fees may be charged on committed capital. In other cases, fees might be charged only once you put the capital to work. But over the life of that strategy, you would want to see the value of the assets rise because you're managing those private assets well. And then over time, your fees will come down as you start to sell assets out of the fund. So here, you can see what the steps are in management fees upon receipt of committed capital, that's the way our GIF fund series works. That's our international equity fund. But on invested capital, that's how our debt funds work. These are more annuity-like. But over time, if you influence the NAV, you would influence your revenue. The investment hold period is driven a bit by how the fund is structured or what it is investing in. IDF tends to be a bit shorter because they make generally loans that may be refinanced after 3 years. And so to the extent a borrower wants to refinance that, that money would be paid back and then it would go back out to the fund investors. GIF fund series generally are much longer-dated. They tend to hold assets in the 5- to 7-year category before they would start a sales program. During the divestment period, you get fees and you're trying to generate returns in excess of your hurdle. And so the fees are generated towards the end. Those carry fees are at the end. So when people say, is this like a hedge fund business? The answer is not really. In the hedge fund business, you might get some performance fees every year. In a closed-end fund structure, it's generally towards the end of the fund life cycle. And so you can see here the existing closed-end fund calendar is on the right-hand side of this chart. Here is a breakdown of our historical earnings within private -- the PrivateMarketsCo piece of what we call AMP Capital. So we've carved out the pieces that will not be demerged. And you can see there is a strong base management fee structure. The non-AUM-based management fees are the next layer. There are performance and transaction fees that may occur, both an open-ended or close-ended types of funds. You can see the first carried interest payment actually hit in 2020. And then seed and sponsor revenue, which I'll talk about in a minute, is the money that we take off our own balance sheet and invest it and align it with our clients. So that is what the revenue mix looks like. Now recent developments to highlight why it has come off between 2019 and 2020 and sort of how that's impacting us going forward, we did lose the AMP Capital Australia Diversified Property Fund in the first half of '21. So that will reduce revenue. We have some margin compression in our real estate and core infrastructure businesses as we move to defend those businesses. And we may have slower or reduced fundraising just as we're doing this demerger period that causes the hesitancy in part of clients. And so we are observing that in some of our funds. Sponsor alignment of capital. This is typical or more typical in what we see in the private funds marketplace and will make us very different than asset managers who are more traditionally invested in stocks and bonds and liquid markets. When we demerge, we'll have about $1 billion in sponsor investments to support growth. Roughly speaking, just over half of our balance sheet will be invested to support the real estate business but just under 1/3 in our infrastructure equity business and just less than 20% in infra debt. Now these all generate returns in the private markets business. Your clients can request somewhere between 0 and 5% or the typical numbers depending upon the type of strategy. And so we anticipate that this portfolio will generate sort of mid- to high single-digit returns coming back to us. So we will have the yield coming back into the company. That will allow us additional sponsor capital to redeploy in new products. Likewise, some of those sales that may occur will generate principal that will come back to the company, and we can again use that to recycle it into new products to fuel growth. As we think about our people, this is a very important aspect of our business particularly in private markets because we have such long-lived investment strategies. And we have a very global business. So we have to compete for talent around the world. And we want to align our investment teams, in particular, with a share of success with our clients as well as the share of success with our shareholders. And we want to be recognized as the employer of choice for the talented people that exist around the world. As a result, as we demerge, we're implementing a management equity plan. As I mentioned, we compete with global businesses, and you can see some of them there in the middle of the page and how much employee ownership [Audio Gap] compete directly and for human capital. So we've put in place a management equity plan. The quantum is up to 12% of the equity would be available for the PrivateMarketsCo investment management and broader management team. That puts us just below the Blackstone or KKR type of opportunity. Of course, 4% of that would be service-based, and then the 8% is something that we, as the management team, would have to earn over a very long period of time. It goes out with vesting as far as 2028. So as we think about our outlook for the business, we have a very stable core revenue base from management fees. Then we have an episodic portion of our revenue, which is driven by transaction fees, performance fees or carried interest that we also have to fund-raise to offset assets that we may be selling out of our closed-end fund structure. And our growth will be driven by new product development and product diversification with our client base. We're targeting a cost run rate basis in FY '23 of about $300 million. Our EBIT will likely be in the 20% to 25% range in the short run as we transition away from AMP. And then in the longer run, it should be targeted more in the 30% to 35% range, a bit more in the 30% range because our global footprint is actually expensive but it is also a competitive advantage for us. So that will show up somewhat in our cost structure relative to if we had just a few locations around the world. So in summary, it's a global private markets business. It's highly attractive to our clients, and we certainly are in the markets which we think have significant momentum. We are poised for future growth although, as I said, 2022 is a bit of a transition year. Our strategy is quite straightforward. It's separate from AMP and the demerger. We're going to simplify our business, we're going to grow by marketing our products to our existing client base, and we're going to diversify by offering new products and grow around the world.

Thank you very much, Shawn. And we look forward to hearing more from you later. I know we had one small hiccup there, and you probably didn't realize it but we managed to get through that. So thank you very much. Listen, we're going to take about a 20-minute break now. So I think we're looking at 12:35. If people can be back at about 1:00 p.m., that would be great, gives you an opportunity to stretch your legs. So we'll see you at 1:00 p.m. when we'll walk through the financials. [Break]

Welcome back, everyone. For those who don't know me, my name is James Georgeson, and I am the AMP Group Chief Financial Officer. You will see today that we've continued to enhance our disclosures with additional business unit splits for both AMP Limited and PrivateMarketsCo and also reviewed our cost allocation for group costs to more reflect the usage of central services. In the detailed appendices to the pack, we show the historic P&Ls of the businesses across full year '19, full year '20 and the first half of '21. This is how we will report going forward. I will now take some time to go through what we expect the financials to look like for both businesses post the merger. I will first cover how the earnings will be split going forward between the 2 businesses. Second, I will cover an overview of the results from each of the sub-business units. Thirdly, I will cover the expected movements in group surplus capital and corporate debt. And lastly, I will finish with a summary of our new cost ambitions going forward. Starting on Slide 71, which shows a summary of the earnings following the demerger of PMCo. The chart illustrates how the group's 1H '21 reported underlying earnings of $181 million would have been split between AMP Limited with $148 million and PrivateMarketsCo with $33 million. The split reflects the perimeter changes of moving MAG and CLAMP from AMP Capital to AMP Limited. Of the $28 million of first half 2021 earnings being transferred to AMP Limited, $20 million relates to the MAG business and $8 million for CLAMP. The GEFI business, which has been sold to Macquarie, will be included in the group's results up until settlement, which is expected in early Q2 of next year. As you can see, the GEFI business result for the first half of '21 was negligible. Slide 72 shows the underlying profit summary for the AMP Limited business on a pro forma basis over the last 2.5 years. Please note the numbers shown here are for full year 2019, full year 2020 and only a half year for 2021. There are a number of key comments I'd like to make here. Firstly, we have split out the Australian Wealth Management business into its component parts or platforms, superannuation master trust and advice. Second, the adjusted P&L also reflects the transfer of MAG and CLAMP into AMP Limited. The MAG earnings will emerge across our superannuation master trust platforms of wealth management and other business segments, $11 million, $6 million and $3 million, respectively, in relation to the first half of '21. CLAMP earnings will be reported in investment income alongside the share of our CLPC earnings. And thirdly, we'll move to allocate more group costs to business units to better reflect the usage of those costs. This change resulted in approximately $38 million of cost to be allocated to the business units in first half '21. Of this, $31 million is expected to emerge in wealth management and the rest across the bank and New Zealand. On an annual basis, this new allocation is expected to be $70 million to $75 million of pretax additional group costs allocated to business units. This has been reflected in the numbers on this chart. In terms of some of the movements between the various periods, the bank result was impacted by COVID-related provisions in full year '20, approximately $35 million pretax, of which $12 million has been reversed in our first half '21 results. The growth in platform earnings was impacted in full year '20 by lower average investment markets given the large market falls post the initial COVID outbreak in March 2020. Our superannuation master trust results have also been significantly impacted by a number of factors since full year '19. These include the successive fund transfer migration in relation to the AMP Life sale, regulatory impacts from the protecting of super legislation and the cessation of grandfather commissions, and pricing impacts as a result of product simplification. You can also see the advice business incurs a significant loss, reflecting the high support costs for being an advice licensee. The advice 1H21 result included a one-off $18 million pretax impairment relating to the carrying value of practice investments. The removal of grandfather commissions has also impacted the advice business results over the last 18 months. As we've discussed today, we have an ambition of breakeven for the advice business by full year '24. Investment income, which is net of interest expense, reflects the growth in returns from our China investments along with our returns from our residual stake in resolution which were included in the second half of '20 results and the first half of '21 results. Following our recent announcement to dispose of the investment resolution stake, no further returns are expected post the first half of '21. Turning to Slide 73, which shows a summary of the PMCo business and the contribution by each sub-business line. Again, please note the numbers here are shown for full year 2019, full year '20 and only a half year for 2021. In terms of the business perimeter, it excludes the GEFI, MAG and CLAMP results and therefore shows the key segments as real estate, infrastructure equity and infrastructure debt. There is also a corporate center, including the finance, risk, people and culture and legal teams. In terms of some of the movements between periods, for real estate, the 1H '21 earnings are lower, reflecting the partial impact from the loss of ADPF, and the full year '20 results included a one-off adjustment in relation to our PCCP investment. The infrastructure equity business earnings in full year '20 and the first half of '21 were impacted by materially lower performance and transaction fees given the impact of COVID on infrastructure assets, particularly airports. In addition, there was a one-off commitment fee from the launch of GIF II in full year '19. The infrastructure debt business earnings were supported in full year '20 by the first carry payment out of the IDF series of approximately $20 million. The first half '21 results for infrastructure debt has been impacted by higher staff and retention costs as the business looks to expand its client offering. Turning to Slide 74, which shows the 30 June 2021 pro forma capital surplus and associated movements we've announced since the half year results. The 30 June 2021 pro forma capital surplus is expected to be in the order of $440 million and reflects the following movements since our last reporting period. We received $459 million of net proceeds from the divestment of the Resolution Life stake. This is net of the $65 million of warranty and indemnity provisions required. We've also allocated $470 million of alignment capital to support the real estate business. $250 million of capital was freed up by redirecting surplus Tier 2 instruments to support group office capital. And $250 million of capital was consumed by the impairments we announced last Friday as well as the APRA and forceful undertaking we announced the week before. This results in a pro forma capital position in the order of $440 million. Please note, it is before the demerger costs and the split of the balance sheet to reflect the demerger of PMCo. In relation to the merger costs, as previously guided, we expect posttax costs of approximately $200 million across full year '21 and full year '22. We're still working through the exact split of the balance sheet, levels of leverage and allocations of surplus capital. A further update on capital will be provided closer to the date of the demerger. The Board continues to maintain a prudent approach to capital management to support the transformation of the business. The capital management strategy and the payment of dividends will be reviewed closer to the demerger. As you've just heard from Alexis, we have bold ambitions for the growth of the bank, and hence, we'll be investing to grow that business. Accordingly and as previously guided, we do not expect to pay a final full year '21 dividend, and it's also unlikely for there to be dividends in full year '22 given the impacts of the demerger, continued transformation of both businesses and the growth of the bank. Moving to Chart 75, which shows the movements in our corporate debt position since the 30th of June. As you can see and as previously guided, by the end of this year, we'll have repaid approximately $700 million of corporate debt. As a result, we expect pro forma corporate debt position at 31 December 2021 to be approximately $1.4 billion. Looking forward, we expect to further reduce corporate debt in full year '22 as we rightsize the balance sheet post the merger. As mentioned in the previous slide, the split of the balance sheet and any associated debt between AMP Limited and PrivateMarketsCo is still being considered. Chart 76 shows the expected controllable cost position of AMP Limited ex AMP Capital in full year '21 and our future ambitions post that. As previously guided, and I can confirm again today, we are expecting controllable costs to land at $775 million for full year '21. We are continuing to make good progress in delivering sustainable cost savings. Therefore, by the end of 2021, as Alexis has previously raised, we will have achieved approximately $260 million of our $300 million of gross cost savings. On a net basis, this translates into approximately $160 million of total cost savings, leaving only $40 million of residual savings to be delivered in 2022 to complete the overall cost-out program. Looking forward, we are targeting controllable cost base for AMP Limited in the order of $710 million by full year '24, which reflects a net $135 million reduction from the 2021 controllable cost base once adjusting for the transfer of MAG costs. The $135 million reduction reflects the final $40 million from the previously announced $300 million cost-out program and a further $95 million of net cost savings across the next 2 to 3 years. Furthermore, we see a further $20 million of net savings emerging in variable costs, bringing the cumulative total further cost reductions by full year $24 million to $155 million. Stepping back, for the AMP Limited business, we are targeting a low double-digit return on equity by full year 2024. On Slide 77, we summarize the key drivers of this outcome. Firstly, we expect growth in the North cash flows with double-digit growth in AUM and for total wealth management flows to be positive by full year '23. Second, we are targeting strong growth in AMP Bank with the team targeting 2 to 3x system growth over the next 3 years. Thirdly, we are targeting significant cost reductions of approximately $155 million, reflected in completion of the $300 million cost-out program and further cost reductions between 2022 and 2024. Fourth, we also have ambition to break even in Advice by 2024. And lastly, we expect to see continued growth in investment income from both our Chinese investments and the impact of lower corporate debt. However, this will be partly offset by margin compression expected across a number of our businesses, with margin compression in the wealth business expected to be 10 basis points in full year 2022 and a further 5 bps in full year '23. The higher amount in 2022 reflects the full run rate of the Master Trust simplification repricing changes that we announced and implemented in October 2021. We are also expecting some compression in the NIM in the bank with up to a 10% compression from current levels as we target above-system growth over the next few years. In addition to these impacts on underlying profits, we will also be completing the demerger and the transformation cost-out programs with a total of $300 million of post-tax costs expected here, approximately $200 million on the demerger and approximately $100 million on the transformation cost-out. And as previously mentioned, we are looking to aggressively grow the bank, which means we'll be reinvesting that business, limiting dividends over the next 18 months. And in terms of the PrivateMarketsCo on Slide 78. The PrivateMarketsCo business has performed well over the last 5 years with strong investment performance in the 3 businesses and a good history of fundraisings, although COVID has impacted performance in transaction fees in 2020 and 2021. The events of the last 12 months, including the portfolio review and the demerger, have created some client uncertainty, and consequently, it has slowed fundraising activities. We've also seen some impacts to AUM-based revenue as a result, and you can see the impacts on this slide. Some of the revenue impacts we flagged here are expected to recover in full year '23. With Shawn as our CEO for Private Markets and Patrick Snowball as the Chair designate, with the AWOF business retained, we are making good progress towards operational separation by the end of full year 2021. Whilst performance and transaction fees remain uncertain, the investment of co-alignment capital in the real estate business is expected to increase seed and sponsor income substantially in full year '22. And from an industry perspective, there are strong tailwinds which support a strong growth outlook into the future, with Shawn and the team targeting an EBIT margin in the order of a 30% to 35% range over the medium term. So that now concludes the formal presentation part of today. To recap, you've heard from Alexis on the progress we're making on the demerger and our strategy for AMP Limited with a particular focus on growing the bank and the platforms business, reducing the losses in Advice and continuing to simplify and reduce our cost base. Shawn then talked about the PrivateMarketsCo business and the growth opportunities in global private markets. And I've just covered the main financial elements of the respective strategies and the impacts on the group's earnings, capital, debt and cost positions. We'll now move to Q&A. So I'll hand over to Jason, our Director of Investor Relations, to run this part of the session.

Thank you, James. We'll now open the phone lines to Q&A. [Operator Instructions] Thank you. We'll now hand over to the operator to introduce our first question.

Question comes from Matthew Dunger with Bank of America.

If I could ask a first one on the intended payout ratio, I know you're flagging no dividend over the next 18 months. Should we still be thinking about that 40% to 60% payout ratio target as being relevant particularly given the growth in the bank?

Thank you, Matthew. Maybe I'll take that and then ask James to talk more about it. I mean I think you're right, we've been very clear today that given the fact that we are growing the bank and platforms over the next period of time, it's very unlikely, and I want to stress that, that we would be paying any dividends in that period. We haven't yet set our dividend policy for post that. We need to consider that both for PrivateMarketsCo and for Limited into the future. So at this point, I don't really want to commit to a payout ratio. But James, is there anything else you wanted to say?

Look, I think that's the right message for today, Matt. We are aggressively targeting growth in the bank, which will mean we'll recycle most of the profits there back into the capital of the business. Definitely, that's the plans over the next 2 to 3 years. And I think post that, we'll then review what the broader go-forward dividend payout ratio is. But again, I think Alexis has given us the right context for how to think about that for the next 12 or 18 months.

Great. And if I could ask a follow-up just on the Private Markets business, you talked about $500 million set aside for growth in real estate. What will be required to grow infrastructure and private debt on the back of some of those opportunities that Shawn talked about this morning?

Yes. Thanks for that question. And Shawn, I might pass to you to answer those questions in relation to growth in Private Markets and what we would need.

Yes. Thanks, Lex. It depends a little bit on exactly the product profile that we launched in the given quarters and years. So again, somewhere between 0% to 5% is required typically in the Private Markets business. Traditionally, it's been a little less in the debt business and a little bit more in the equity business. So if we launch different strategies, some of them may be smaller in size but something that clients are very interested in. So it -- I do believe we'll be able to fund most of our seed or sponsor requirements through the cash flows coming off of the balance sheet that we have. We may have some deadlines if necessary, but I think we'll be able to fund it ourselves.

Matt, maybe just to give some further context on that question is in our current infrastructure debt, series, as Shawn rightly said, it's -- our capital commitment is up to 5% but capped at USD 50 million. And in the current infrastructure equity series, the commitment is up to 5% but capped at USD 150 million. So that is the current fundraising -- the capital commitment needed in those funds. But as Shawn says, it will depend a little on the product and the location they're going in, but that's just the last couple of funds we've done.

Thank you, Matt.

Your next question comes from Kieren Chidgey with Jarden.

I've got a couple of questions. Just firstly on costs, just hoping you can help me understand the $70 million that was called out on Slide 53 relating to the AMP sort of capital public markets costs that need to be removed by AMP Limited, how that sort of fits in with the AMP Limited cost-out targets of $95 million from a controllable cost point of view. So any overlap between those 2 numbers?

Yes. Thanks, Kieren. A really good question. James, would you like to answer that one?

Yes. No, that's right. So we would see the $70 million is really related to the sale of GEFI to Macquarie and the Public Markets operations or the back office that supports GEFI and MAG. That is in addition to the $155 million that we've announced as the gross cost savings today. Effectively, most of those costs will exit very soon after the business is transferred to Macquarie. So we will probably have a small amount of stranded that will happen through 2022. It's probably in the order of $10 million, $15 million, something like that. But we would be hoping to remove that fully by the end of 2022. So it's in addition to the $155 million, Kieren.

Okay. And we see the new cost-out target you've given beyond the current $300 million cost program. I know with that initial cost program, there was a proportion that were expected to be reinvested. But with this new number, you're saying that, that is a number we should expect to hit the bottom line. Is that correct? And in Slide 24, the number you put up of $710 million for controllable costs, are you assuming sort of no additional inflation between now and then?

Yes, the $710 million is net of inflation. So we thought it was easier just to provide the net reduction that we're delivering. But yes, that would be meaning that we would take inflation into account as we delivered in the numbers. So effectively, you've got to deliver a little more than $155 million to get to that net number.

But there is still some transformation costs there as one-off costs through the next 2 years.

Yes.

Okay. And my second question was just on Australian Wealth Management in regards to a couple of the revenue comments you made. Firstly, on the fee pressure in '22 and '23, I think sort of '22 is probably more a function of the repricing you've done more recently from October on the Master Trust. But can you just clarify what the '23 5 basis points change is sort of really reflecting?

Yes, you're very right there that the play through '22 is a result of the price reductions we made to both Master Trust and our platform business through '21. I mean I think we've looked out into '23 conservatively and have another slight reduction there, optimistic that won't have, but we've built it into the revenue forecast in that '23 year. And I think that's...

That's right. So you will see the very last little bit of the -- given the Master Trust repricing, the big change happens in October, so we'll get the pull-through, all of that into '22. We will see some further investment menu simplification, which will probably likely lead to a couple of extra basis points in '23 secure. And that's probably what you would see why we sort of said the further 5 in FY '23. We probably think that's, say, at the upper end. But from where we can see 18 months out, that's about the right level.

Okay. And finally, just on the advice line within AWM, and it's great to see the full profitability or, I should say, fairly large losses there currently. But just keen to understand if you're looking to take that from moving $240 million of EBIT currently to breakeven by '24. What is sort of the composition there between revenues and costs and how you think about the revenue side of things?

Yes. Do you want to walk through that?

Yes, sure. So look, if you kind of double where we were at the half year, you're looking at a run rate at the NPAT level of circa $140 million. The sale of the employed advice channel will free up about -- it will create an improvement of about $20 million to $25 million at the NPAT level because we've got about $65 million of costs, which emerge primarily in variable costs, and about $35 million of revenue. So we would see a revenue hit and a big variable cost reduction in the first -- as a first move. We would then see probably $15 million to $20 million of revenue uplifts as we reprice the fees to advisers. So it's the change we flagged in relation to removing BOLR but higher licensee fees to our advisers. And we probably see in the order of $30 million, $35 million of controllable cost reductions. Now they're all the 2022 numbers, and then you probably see a further similar amount of controllable costs coming out next in 2023, 2024. So I think fair to say that it's a majority cost, which is exiting employed advice and the big cost reductions, but we probably would see at least half of the additional cost-out that we've announced today coming from advice.

But I think it's important to note that won't just be the facing people. We've got to cut that out across the functions, which is why you'll see the benefits coming through other business units as well.

Your next question comes from Simon Fitzgerald with Evans & Partners.

Just the first one, you mentioned that the surplus capital allocation between AMP Capital and AMP Limited still needs to be worked out. From memory, AMP Capital's capital requirements would be fairly light. So can we rely just on the $440 million as being very close to that level? Obviously, there's some other costs associated with the separation there that you've mentioned as well, but it shouldn't be too far from that number, I wouldn't have thought?

Maybe I'll open and then I'll pass to James to add some flavor. But firstly, I think it is important that we've got demerger costs to be offset against that in the realm of about $200 million post tax. I do think it's important to understand that's yet to come through, and that will come through obviously some this year and the rest into the first half of '22. The other thing is we really have a lot of work to do in terms of making sure we separate this balance sheet and prepare both those companies for success into the future. We've still got 6 months to go to the demerger, so there's still many things that keep changing. We need to monitor that, which is why we haven't made a commitment today about what each of the balance sheets look like, what the surpluses may or may not be in either of those. We also want to make sure we set them both up to take advantage of the growth opportunities. So I think at this point, I'd remind you about the demerger costs, and then we just will continue to update you on development. Is there anything else you want to add?

The only thing, Lex, I would add is we're currently one larger group, and we'll move ourselves post the merger into 2 smaller businesses. So we will look to see what is the right levels of leverage that we have in each company. So I did allude to it that at the group level, we'd probably expect to pay some further corporate debt down over the next 12 to 18 months. So as we sort of rightsize both businesses, we will look at overall leverage levels. So if there was to be a reduction, further reduction in leverage, we would obviously need to think about how that impacted the capital base as well.

That's clear. Another question just about retirement products. You mentioned, Alexis, in your presentation that there weren't a lot of options available in this country in terms of choice of products for retirement. Wondering what other sort of products you had in mind in terms of where you think there might be some gaps but you think are worthwhile offering to the market.

Well, I mean I don't want to go into too much information because we don't want to remove our competitive advantage, but I know Scott would be happy to elaborate. I think there is opportunity for us to look at the whole system. There's not too many products that think about the interplays into aged care and into the pension products. That's why we've hired, Scott would say, the best in the business to come in and help us develop these solutions. And I probably don't want to go into too much more detail yet. We'll be launching the first product mid-next year.

Your next question comes from Lafitani Sotiriou with MST.

Thank you for the increased disclosure. I just wanted to follow up on the PrivateMarketsCo and the $74 million I believe you've identified in efficiencies for your cost-out for the, firstly, business. Can you give us an idea of what the run rate of that cost-out program will be by 2023 and if there's any costs associated with you achieving that cost-out?

Thanks very much, Laf, and thanks for that question. I'll ask Shawn to comment on that because there is a $74 million reduction, as you said, and whether there's any costs. So Shawn?

The answer is there are costs associated with that, yes, and some of those costs are people costs. So that's where we would see that over some period of time going into 2023. Some of them, those costs are also associated with simply the fact that we're a smaller business without the GEFI assets or the MAG assets. So we would, in a sense, have stranded costs in our business. And so that's part of what's calculated in that number.

But Shawn, I don't expect that -- I don't think you're expecting any one-off costs to achieve those. It is mainly a reduction in our people costs predominantly.

Yes, that's correct. There are also some systems costs as well because we won't need certain systems because we're not in the listed markets business...

So in the guidance we provided, Laf, on the demerger costs, we have an allowance for redundancies and program costs that we'd look to remove or to support the removal of that sort of $74 million of PMCo-related costs. So that will be mainly redundancies because it's generally corporate staff that have been supporting both the Public Markets and the Private Markets business within AMP Capital.

Got it. And just the rough timing of that cost-out, so is it pretty evenly split as we head towards 2023 or keep it backloaded? Or how should we think about it?

No. I think, Laf, we would sort of probably see the team trying to get across most of that in full year '22 with the residual coming through in full year '23.

Okay. Got it. And just a follow-up question to the advice piece. So thank you for breaking in detail first year how you get to the half -- to a large number, roughly half of this reduction in the cost of the loss rate. Can you just give us a bit more idea around the -- what's in the controllable cost buckets and specifics for just not only the current year but the future years as well?

Well, I'll let James focus on that, but maybe we'll just focus on the current years, which we've done more work on.

So in terms of some of the -- yes, so thanks. Some of the activities we'll be doing is, and some of it has started, which is we now have a small aligned network. So we will have -- need to sort of shrink our support costs. We have come from an adviser network, which is more than 2,000 advisers, and we're now probably heading towards half of that number. So therefore, that's sort of reducing the field support. It's making sure also the services we provide are actually tailored to be the right services for the advisers, the ones that they need, so that is another reduction. And we're also trying to look at how do we automate some of the compliance activities that we do. So we do a lot of manual physical vetting checks. There's lots of other things that test best interest duty. And so we're looking to probably put more system-related activities around them. We have partnered with CreativeMass as well as Salesforce to kind of deploy better technical technology solutions to adviser practices, which also reduce some of our costs. So that would be some of the things that we're looking to do. But it's also -- as Lex has said, there are support costs that sit in finance and legal that also support the advice business. And as we rightsize those support costs, that will help also reduce some of the things. But one of the big drivers is also removing that employed network. Whilst that's not included in the $155 million, it does go to support the big improvement in the advice result because it loses $20 million to $25 million at the NPAT level annually. So it's a big uplift just from exiting that business, which will complete early in the new year.