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Colonial's Posts 49 Per Cent Profit For 1999

MEDIACOM-RELEASE-COLONIAL

COLONIAL'S GROWTH AND STRONG OPERATING PERFORMANCE RESULTS IN 1999 PROFIT OF $A455 MILLION

New Zealand and Australian listed company Colonial today announced a net profit after tax for the year to 31 December 1999 of A$455 million, a 49 per cent increase on the 1998 result of $306 million.

Earnings per share increased by 26 per cent on 1998 to 45.9 cents per ordinary share.

A fully franked final dividend for 1999 of 11 cents per ordinary share will be paid on 3 April 2000 to owners of ordinary shares at the close of business on 10 March 2000. Total dividend for the year was 20 cents, a 33 per cent increase on 1998.

Group Managing Director and Chief Executive Officer, Mr Peter Smedley, said Colonial's success in delivering on its core strategy generated sustained growth and a strong operating performance during 1999.

"Our strategy is to build a balanced life insurance, retirement savings, banking and funds management business across selected geographic regions," Mr Smedley said.

"During 1999, Colonial reinforced its position as Australia's leading `allfinanz' business and benefited from efficiencies of scale arising both from sustained organic growth and the successful integration of acquired businesses.

"Notably, the integration of the Prudential and Legal & General businesses acquired in 1998 had produced annualised cost savings of $162 million by the end of 1999, well ahead of the schedule that had been set.

"Each of the group's three operating divisions reported significant increases in profitability compared to 1998 and there was a 41 per cent rise in group new business to $17.9 billion."

Highlights for the year to 31 December 1999

Total assets held and under management rose more than 20 per cent for the year to $87.3 billion.

Group insurance and superannuation new business totalled $3.7 billion, 97 per cent growth on 1998.

Group new lending business increased 11 per cent to $6.3 billion. In addition to new loan drawdowns for the Australian banking operation, this figure includes the results for Colonial UK's lending business and for Colonial National Bank in the Fiji Islands.

Group funds management inflows of external funds were up 53 per cent on 1998, at $8.7 billion.

The Australian Financial Services cost-to-income ratio - the best indication of Colonial's efficiency in operating an `allfinanz' business - dropped to 48.8 per cent from 57.9 per cent at the end of 1998.

At 31 December 1999, the level of group debt to total capital was 24 per cent. Colonial's capital base was further strengthened during the year by the successful $800 million issue of Colonial Income Securities.

Prudent investment in technology development allowed for a smooth transition to the Year 2000, and ensured the successful replacement of the Australian banking system.

Australian Financial Services

Australian Financial Services - which comprises the Australian insurance, superannuation and banking operations - made a profit of $324 million for the year, 53 per cent ahead of its result for the previous year.

The successful integration of the Australian businesses of Legal & General and Prudential has produced annualised cost savings of $109 million.

The Australian insurance and superannuation business showed a profit of $185 million, up 113 per cent on 1998. This reflects increased new business sales and premium income growth generated by Australian Financial Services' broad retail, wholesale, corporate and licensed distribution channels.

With over $3 billion in sales, insurance and superannuation new business grew 120 per cent on 1998. In particular, sales of master funds were very strong, rising more than 220 per cent and giving Colonial 8.4 per cent market share.

The expanded Australian banking operation reported a profit of $139 million, an 11 per cent increase on the previous year.

The acquisition of Trust Bank in Tasmania is providing efficiencies of scale and a leading position in a new banking market.

Total loans outstanding for the enlarged Australian banking operation grew 27 per cent to almost $20 billion, or 12 per cent excluding the Trust Bank acquisition.

Expansion of the franchised retail network included the rollout of in-store supermarket banking. By the end of 1999, Colonial had eight in-store branches operating in Coles supermarkets, with a further five opened across Australia in early 2000.

`Single site' franchises and a community banking enterprise have helped Colonial to maintain face-to-face banking services in rural and remote locations where a traditional branch is not viable.

Success in broadening the scope of products sold to Colonial's expanded Australian customer base has lifted the `allfinanz' cross- sell ratio to 21 per cent by the end of 1999.

International Financial Services

International Financial Services - which comprises the group's insurance, retirement savings and banking operations in the UK, New Zealand, Asia and the Fiji Islands - reported a profit of $125 million, an increase of 33 per cent on the result for 1998.

Colonial UK

Colonial UK contributed a profit of $57 million, compared to $68 million for 1998.

The decrease in profit against the previous year was largely due to lower investment returns from fixed interest securities compared to the buoyant investment market conditions of 1998.

The underlying performance of the business was solid, with an operating result 277 per cent ahead of 1998.

Colonial UK's lending business continued to perform well with 82 per cent growth in new business.

New business losses were reduced by 42 per cent to $12 million.

Colonial New Zealand

Colonial New Zealand achieved a profit of $35 million, a 192 per cent increase on the 1998 result of $12 million.

The successful integration with Prudential has created a business of significant scale in the New Zealand life insurance market and resulted in annualised cost savings of $20 million.

The retention and development of key distributor relationships resulted in an expanded distribution network which delivered a 129 per cent increase in new business sales for 1999.

CMG Asia

CMG Asia improved profitability by 136 per cent on 1998 to post a result of $33 million for 1999, arising from strong new business growth for each of its operating companies and improving economic conditions across Asia.

In particular, the group's operating companies in Hong Kong and Thailand achieved increased market prominence during 1999. CMG in Hong Kong is now fourth for new business, following 148 per cent growth in sales during 1999. Ayudhya CMG in Thailand is now third for new business - with 9 per cent market share - after growing sales by 62 per cent during the year.

Embedded value of CMG Asia grew by 24 per cent on the end 1998 figure to $607 million, while the value of one year's sales doubled to $30 million.

Acquisition of a majority share of the National Bank of Fiji (now Colonial National Bank) added a new business stream and broadened Colonial's retail distribution network in the Fiji Islands. The group's share of profit from the Bank is included in the result for CMG Asia.

A joint venture life insurance company was formed by Colonial and China Life Insurance Company in Shanghai. Key appointments have been made to the company, China Life CMG, and preparations to commence operations are well progressed.

Colonial was awarded the first Vietnamese licence for a life insurance joint venture between a local and international company. Bao Minh CMG will commence selling policies in March 2000.

Colonial First State Investments

As a result of continuing strong levels of funds inflows and investment performance, Colonial's international funds management business, Colonial First State Investments, reported a profit for 1999 of $70 million. This represented a 67 per cent increase on the previous year's result of $42 million.

Funds under management grew 20 per cent to $54.9 billion at 31 December 1999. This included $7.8 billion of funds under overlay management through Tactical Global Management.

The integration of the funds management businesses acquired in 1998 from Legal & General Australia and Prudential Australia and New Zealand is complete, and has produced annualised cost savings of $33 million.

The acquisition of the Asian and UK business of Nicholas- Applegate boosted the Asian operation, adding a presence in Singapore and positioning the Hong Kong business to play a significant role in the group's participation in the Mandatory Provident Fund market.

In Australia, four listed property trusts were merged to form Colonial First State Property Group, resulting in a price re-rating, improved liquidity, management cost efficiencies and expected cost of capital advantages.

The group's private equity business was broadened through the acquisition of a 50 per cent stake in the venture capital firm Hambro Grantham, with a schedule to take full ownership in three years.

Colonial First State Investments was named Money Management magazine's `Fund Manager of the Year' for 1998, the second time the business has received this award in the past three years.

The group's investment credentials in the UK market were further developed through a retail product launch and the centralisation of the group's international equities operation in the UK.

The successful product repositioning and rationalisation achieved by Colonial First State Investments in New Zealand was reinforced with the awarding of a four-star rating from leading international researcher, Morningstar.

Despite reinvestment in the business through a number of strategic initiatives, the cost-to-income ratio for Colonial First State Investments improved to 60.4 per cent, down from 62.1 per cent at December 1998.

Additional information for shareholders

Colonial Limited's dividend reinvestment plan is available to shareholders in Australia, New Zealand and the Fiji Islands and provides an opportunity for shareholders to receive dividends in the form of additional shares in Colonial Limited at a discount of 5 per cent. Colonial has established a UK Dividend Plan which means that UK shareholders receive their ordinary share dividend payments from Colonial (UK) Trustees Ltd, a UK wholly owned controlled entity, and will receive their dividend together with the related UK tax credit.

Colonial is a diverse financial services group with core businesses in insurance, retirement savings, banking, and funds management. It has a presence in twelve markets and employs more than 28,000 staff and distributors around the world. Listed on the Australian and New Zealand stock exchanges, Colonial currently has a market capitalisation for all listed securities of $6.9 billion.

Notes to editors

Additional information for New Zealand editors is attached As at 5:00pm AEST 29 February, AUD 1 NZD 1.26 Full details of Colonial's 1999 annual results are available on Colonial's Internet site at www.colonial.com.au Colonial operates as CMG in China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

For further information please contact: Media enquiries Investor enquiries Simon Morgan Amanda Fischer Group Public Affairs Manager Manager Investor Relations Colonial Colonial Tel +613 9200 6459 Tel +613 9200 6044 Cell +61414 393 249 Email: afischercolonial.com.au Email: smorgancolonial.com.au

Additional information for New Zealand editors

To be read in conjunction with comments relating to Colonial's New Zealand operations in media release. All figures are in Australian dollars unless noted otherwise.

Colonial New Zealand - life insurance and retirement savings

Operating income increased from $101 million for 1998 to $250 million for 1999. Result includes a full year's contribution from the former Prudential New Zealand business acquired in 1998. Cost-to-income ratio improved from 27.6 per cent at end 1998 to 17.1 per cent at end 1999. New business sales increased from $75 million for 1998 to $165 million for 1999. On a `like for like' basis (ie comparing to 1998 new business including a full year's sales for the former Prudential business), new business grew by 12 per cent when measured in local currency terms. Risk products repackaged and relaunched under Totalcare brand, well received in the market. This was reflected in significantly increased sales of risk products during the year. The level of inforce premiums - in local currency terms - has been maintained. (In Australian dollar terms, inforce premiums decreased from $269 million at 31 December 1998 to $255 million at 31 December 1999.)

Jacques Martin New Zealand - funds administration

New Zealand's leading provider of financial product administration services for financial institutions and fund trustees. Administers the National Provident Fund and sophisticated master funds and wrap accounts for leading financial planning groups. Investments under the company's administration total more than NZ$5 billion.

Colonial First State Investments - funds management

Integration of Colonial First State Investments with Prudential's New Zealand funds management operation was successfully completed in 1999. Launch of a new listed property trust during 1999 attracted more than NZ$53 million in external investment.

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