Past 25 years 3.5% p.a 1950-1969 growth in US$ market terms Purchasing Power Parity (PPP) terms IMF/Economist//IBISWorld: 09/05/10 2008 3.2% 2009 -2.5% 2010 2.5% (F) 2011 2.7% (F) World GPD Growth Real growth (PPP), 1950-2011(F)
The Economist/IBISWorld: 10/05/10 Serious serious trouble Virtuous, thanks to the Howard/Costello government 31% of world economy is in countries with Public Debt of >90% of GDP Serious trouble Public Debt: 2010 (F) % of GDP Serious trouble
Source: Westpac-Melbourne Institute (IAESR), IBIS estimates 14/034/0 Australian Index of Consumer Sentiment 2 months progressive to April 2010 Recession Level Year commencing June
36 qtrs. 34 qtrs 34 qtrs 33 qtrs 38 qtrs 33 qtrs? 36 qtrs ? Source: IBISWorld: 04/03/10 Average long business cycle is 34 quarters (8 1 / 2 years) Years, ended June Forecast Economic Growth Annual real GDP growth (%) progressed in quarters to December 2009 (and forecast to June 2013)
ABS 5206-26 /IBISWorld Agriculture 2.6% Utilities 2.4% 4.9% Transport GDP $1260 billion (current prices ) $1208 billion (constant F2008) Finance & Ins. 4.5% W’Saling Mining 6.8% Govt. Adm. 5.0 % O’Ship Dwells. 7.2% 4.5% Retailing 6.9% Construction 2.8% 9.9% Communications 11.3% Prop. & Business Services Education 4.1% Health 5.9% Cult & Rec. Serv. 1.8% Pers. & Other Serv. Hospitality (2.2%) 8.4% Manufacturing Sectors Primary Secondary Tertiary Quaternary Quinary 0.9% Ind. Taxes 8.1 % Australia’s Industry Mix Value added basis Shares of GDP in constant F2007 price terms C2009
Percent Source: IBISWorld 13/04/10 2.0 Australia’s Industries Growth CAGR (trend), next 5 years to C2014 (constant prices)
Big deficit in F2010, a year without a recession! Gave households $17 billion as a stimulus in F2009 (they already had $60 billion more discretionary income anyway!) Tried to enact ETS legislation before Copenhagen and instead of a direct Carbon tax system ! Conducted “comprehensive” Taxation Study, leaving out GST ! Wasted billions on insulation and education infrastructure No meaningful action from expensive 2020 Conference Federal Government Scorecard
GST excluded from review (ours 10%, OECD 17.5% average), so not a serious review and not the “most comprehensive ever” Very few recommendations to be pushed by Rudd government Super levy up to 12%, but again to be paid by employers (better to have 15%, with 5 of that by employee) Super tax on super mining profits (but how defined and for how long?) ETS deferred (forever?) Vast majority of over 100 reforms shelved The Henry Tax Review Report
Forecasts (IBISWorld) Million 37.8 29.3 25.6 22.3 33.4 Year, ended June Australian Population 1850-2051
Source: ABS/IBISWorld 29/01/10 Actual prices Year, ended June Income ($‘000) Constant 2009 prices (CPI) Average 2010(F) $127,370 per household Real growth 1999-2009 1.9% pa Household income Average/household 1986-2010 (F)
$ 1052 billion ($123, 540 per household) H’Hold durables 3.4% Motor vehicles 2.0% Other 1.0% Capital Related 17.7% Non-durables 6.4% Durables Taxes (& social contributions) 4.6% 13.5% Depreciation 6.7% Propty Interest 4.6% Consumer Debt Int 1.2% Unincorp. Interest 0.8% Transfers 0.4% Entertainment & Gaming Hospitality Rent 1 12.5% 13.7% Food 7.3% Alc.& Tobacco2.4% Clothing 2.1% Utilities1.5% Veh. Operation3.4% Other 1.0% Education 3.7% Other Services Communicns.1.7% Fares1.9% 2.3% Fin. & Ins. Serv. 8.6% 7.8% 3.7% Health Note: 1 includes imputed rent (home ownership) Source: ABS5206/IBISWorld 2.3% Mobility Savings 3.1% (& other dwelling costs) Australian Household Expenditure Year to December 2009
Source: IBISWorld/Reserve Bank Year, ended June Interest Rate (%) Credit Cards Overdraft (small business, variable) Mortgage (standard bank) Indicator Lending Rates Australia F1975 – 2013(F)
Source: ABS 5206-36 11/03/10 Year, ended June Household Savings % of Gross Household Income (4-qtr. Moving average), 1960 – December 2009
$ 7300 billion ($ 846,550 per household ) Housing (owner-occupied ) Invest. Housing Super. & Life Commercial & Rural Other 2.4% Deposits 9.1% (& currency) Shares 5.3% Sources: Reserve Bank Statistical Tables B20; ABS 5204-51, IBISWorld estimates 22/04/10 Household Debt $ 1430 billion ($165,830 per household) Assets $ 7300 billion, Net Assets $ 5870 billion. Per H’Hold $ 680,070 Debt servicing comes from wages (mainly), rental property returns, and interest & dividends from liquids & securities 42.2% 13.7% 19.9% Equipment, Inventories H’hold durables, collectables) Other Prop. 4.1% Including Securities & Loans Durables 3.4% Including unfunded Australian Household Assets & Debt June 2010 (F)
Source: ABS/IBISWorld 10/03/10 Household Income Wealth 1.68 million H’Holds $125,120 $635,800 Average 20.0% 45.1% 24.5% 16.3% 9.6% 4.5% 1.0% 61.2% 20.0% 12.1% 5.7% Among 8.4 million households: >1,000,000 millionaires 46000 > $ 5 million 7,200 > $10 million Richest Well Off Middle Struggle Poorest Household Income and Wealth Distribution Share of total by Quintile, F2009
4. Life Insurance, Financial Planners & Success
Revenue ($billion) 54.5 4.8 Growth to F’15 (% pa ave.) 1.4 7.8 Contribn. To GDP (% ) 0.29 0.22 Enterprises 28 3040 Employment (‘000) 27.0 16.0 Wages ($ billion) 1.6 1.6 Largest Players AMP 26.5% 9.6% NAB 23.0% 7.0% ING 17.7% AXA 8.6% Westpac 6.2% 8.0% Life Insurance Financial Advisers Perspective F2010 (F)
Ability to effectively communicate and negotiate Having a loyal customer base Having a good reputation Market research and understanding Qualified work force in a unique organisational culture Key Success Factors for Planners
Percent Source: IBISWorld 19/11/09 23% > Best Practice (ROSF 22.2%) 42% > Average (ROSF 12.6%) 43% > Cost of capital (12.0%) 68% > Bond Rate (5.4%) 11% Losses -128.0 -10.5 Australian Profitability by Cohorts Return on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009
1.They stick to one business at a time and do not diversify 2.They aim to dominate some segment (s) of their market 3.They are forever innovative, valuing the business’ IP. 4.They outsource non-core activities to enable growth. 5. They don’t own “hard” assets. 6.They have good and professional financial management. 7.They plan from the outside-in not the inside-out 8.They anticipate any new industry lifecycle changes. 9. They follow world best practice for their own type of business. 10.They develop strategic alliances. 11.They develop unique organisational cultures. 12.They value leadership first and management second. What the Best Enterprises Are Doing
What’s important to you? awareness of the offer sales support access relationships lodgement underwriting claims product process
Electronic lodgement process Challenge Choice – the ability to offer different options Cost to your business – paperwork + administration Compliance – the need to protect your business process lodgement
Electronic Lodgement process Solution Options Reduced admin Electronic Lodgement Authority Form John
Underwriting Challenge Access to the decision- maker Potential long e-2-e time frames Cost to business underwriting
AMP Underwriting Concierge Service Solution Electronic Pre- Assessment Service Dedicated Underwriter from start to finish AMP arranges medical tests directly with client
Claims Challenge Direct access to decision-maker Quick turnaround of claim assessment Tailored communication Dedicated service claims
AMP Claims Concierge Service Solution Direct access to decision-maker 24 hour turnaround on claims review and assessment. Dedicated claims assessor.
merged PDS and plan rules “one source of truth” AMP Risk Bulletin changes to our underwriting philosophy new AMP risk look and feel access to the right information sales support to help grow my business more cover for more people collateral that resonates with the need for insurance What else is coming? TODAY TOMORROW
Income Protection – the challenge Advisers Want the choice to recommend a definition of Total Disablement appropriate to their client’s occupation. Clients Want a product that is flexible enough to meet their future needs.
Income Protection – the solution Definition of Total Disablement now includes both the “10 hour” definition and “duty” based definition. Choice at claim 10 hour based Unable to carry out any of the duties which are critical to the proper performance of their usual occupation for more than 10 hours a week. Duty based Unable to carry out one duty, or combination of duties, which are critical to the proper performance of their usual occupation.
Advisers Want the professional package to include all white collar occupations. Clients Want personal, tailored solutions. Income Protection – the challenge
Income Protection – the solution Professional and white collar occupations have no requirement to be totally disabled during the waiting period to qualify for a “partial disability benefit”. Day 1 Partial disability from Day 1 Day 30 No offsets for professional and white collar occupations. Income from workers compensation, accident and public liability schemes.
Advisers Want the choice to offer a quality Standard Income Protection plan. Clients Want a quality, affordable Income Protection plan. Income Protection – the challenge
Income Protection – the solution All Partial Disability Benefits are payable for the Full Benefit period until the plan expires. Income Protection Standard 2 year 5 year to age 60 to age 65 Temporary Salary Continuance 2 year to age 65
Advisers Want TPD eligibility as highly subjective. Clients Want greater certainty that genuine claims will be paid. Total & Permanent Disablement – the challenge
Total & Permanent Disablement – the solution The definition of TPD now includes the objective measure of the insured’s ability to earn income. Definition The insured person is totally and permanently disabled if, “the illness or injury means that the insured person is unlikely to ever work in any regular remunerative work for which they are reasonably fitted by education, training or experience, and which allows them to earn greater than 25% of their pre-disability income”.
Advisers Want flexibility to package according to individual client need and simple underwriting solutions. Clients Want affordable cover they can understand. Trauma – the challenge
Trauma – the solution Separate full benefits from Partial Benefits. Create a comprehensive Partial Package as an option. Partials Package Option Trauma Cover Optimum Covers 48 “Full” conditions Children’s Trauma Cover Covers 18 “Partial” conditions Covers 20 “Full” conditions Partials Package Option Trauma Cover Standard Covers 15 “Full” conditions Children’s Trauma Cover Covers 18 “Partial” conditions Covers 20 “Full” conditions Full Benefit Package
Trauma – the solution Short form conversion for all existing trauma plans to Trauma Cover Optimum Crisis Care Crisis Care Advanced Trauma Advanced Trauma Standard Application only Trauma Premier
Access to AMP Flexible Protection AMP Flexible Super Simple product Investment choice – low cost Modular features No commission on investment component AMP will undertake the paperwork / consolidation follow-up Multiple insurance solutions – choice Flexible Protection (Life) Flexible Protection - Our full retail insurance offering, including underwriting, multiple commission option eg upfront from 130/11% to level 30.3%/30.3%.
Income Protection & Temporary Salary Continuance Summary Partial Disability from Day 1 Zero Offsets Dual Disability Definition Partial Disability to Expiry Trauma Feature Entry Ages Interim Cover & Cooling Off Period Death Cover, Trauma, TPD Funeral Benefit 25% TPD Definition Trauma Optimum & Partials Package Hepatitis B & C Occupationally Acquired Cancer Definition Enhanced Trauma Definitions Children’s Trauma Cover Entry and Expiry Ages Cooling Off Period