UPDATE 1-Annual profit at Australia’s AMP plunges as domestic wealth unit sees heavy outflows

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FILE PHOTO: The logo of AMP Ltd adorns their head office building in Sydney, Australia February 9, 2017. REUTERS/David Gray/File Photo

(Reuters) – AMP Ltd said on Thursday its annual profit plunged as expected and flagged large outflows from its funds as investors pulled their money out of the wealth manager due to damaging revelations of wrongdoing. Annual underlying net profit fell 35 percent to A$680 million as lost distribution fees due to the sale of its life insurance unit hurt its flagship wealth management business, AMP said in a statement.

“2018 has been a challenging year for AMP,” said Chief Executive Francesco De Ferrari, acknowledging headwinds faced by its wealth management arm.

“The Royal Commission has been a confronting but valuable experience for the financial services industry and has served as a catalyst for change at AMP.”

Net cash outflows from its Australian wealth management unit were A$3.97 billion during the year, compared with net cash inflows of A$931 million during the previous year.

The company began hemorrhaging funds last year after revelations of misconduct at the government-backed public inquiry, known as a Royal Commission.

The inquiry heard testimony that AMP had taken fees from dead customers, charged thousands of people for financial advice they never received, and conspired at board level to deceive regulators about such practices.

AMP confirmed statutory profit fell 97 percent to A$28 million, as high costs of remediating customers for misconduct and losses from divestitures wiped off its earnings, which the company had flagged on Jan. 25.

AMP declared a final dividend of 4 cents per share, lower than the 14.5 cents a share given out last year.

Reporting by Ambar Warrick and Rushil Dutta in Bengaluru; editing by Susan Fenton and James Dalgleish

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