5 July 2001
AMP may restructure some of its British direct financial services joint ventures with Sir Richard Branson's Virgin group in the wake of Tuesday's deal to buy a UK Internet financial services company.
While AMP has been heartened by the recent performance of the Virgin ventures, with the centrepiece Virgin Direct turning a small profit of about #100,000 ($272,000) in calendar 2000, it may quit the direct mortgages venture, Virgin One.
The speculation comes as AMP yesterday led the Australian sharemarket lower, falling 65c to $20.65 as investors continued this week's switch from strongly performing financial stocks into cyclical sectors such as building materials.
AMP has also reeled from a Standard & Poor's decision to place its key insurance subsidiaries on negative outlook because of competitive concerns in the UK market.
Virgin One, which has 30,000 customers in Britain and about #2.4 billion in outstanding loans, is half-owned by one of the country's biggest banks, the Royal Bank of Scotland, and half-owned by Virgin Direct. In turn, Virgin Direct is half-owned by AMP.
It is understood Royal Bank of Scotland is considering buying the rest of Virgin One for practical reasons which, in part, reflect AMP's recent decision to launch its own branded bank in the UK, replicating the banking business it has operated in Australia for the past four years.
Virgin Direct, which sells financial products such as individual savings accounts over the phone and the Internet, is a larger proposition with 330,000 customers and #2.6 billion in assets under management.
Virginmoney.com, launched in June 2000, provides independent online financial services offering simple investment products from a range of suppliers. The site reflects AMP's broader push in Britain and Australia to develop both independent and aligned channels to sell financial services.
AMP's agreed takeover of Interactive Investor International for #52 million (but an effective price of #7.5 million because of cash holdings on Interactive's balance sheet) is designed to bolster the recently launched Net site, Ample, AMP's own branded site from which it sells retirement products.
Analysts said the acquisition was unlikely to have a material impact on AMP's profits but Interactive offered critical mass of 1.2 million registered users for the similar Ample site.
AMP had sought to exit its relationship with Virgin last year through a float of the Virgin ventures but the market for technology related shares sank.
There has been speculation that AMP and Virgin are at odds over the future of the ventures, with Britain's Guardian newspaper this week reporting that AMP was close to completing a year-long review of the Virgin ventures aimed at ``extracting value".
But the managing director of AMP's International and Technology Ventures division, Mr Tim Wade, said this week the Virgin ventures were offering products much different from those on the Ample Web site. Virgin has tended to attract young customers seeking savings products, while AMP's life insurance operations, including Pearl, target retirees.
The Virgin relationship includes rights to expand the ventures worldwide.
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