| Thu 24 May 2007, 8:00 | | NSX - OML - Old Mutual Plc - Results For The Quart |
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OML
OLOML
NSX - OML - Old Mutual Plc - Results For The Quarter Ended 31 March 2007
OLD MUTUAL PLC
ISIN CODE: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Results for the quarter ended 31 March 2007
Good operating performance and positioning for further sustainable growth
* Excellent investment performance driving continued
strong net inflows of GBP4.5 billion
* Funds under management increased 5% to GBP249 billion
and are on track to reach GBP300 billion by the end of 2008
* APE sales up 9% with contributions from investment in
retail and offshore distribution channels in life
businesses, strong bancassurance results, as well as
the continued success of Skandia`s open architecture
platform
* On a local currency basis, all geographic segments
achieved increases in adjusted operating profits:
Africa up 33%; US up 11%; Europe up 38% Group
adjusted operating profit increased 5% and adjusted
earnings reached 4.2p per share
Jim Sutcliffe, Chief Executive, commented:
"The overall start to 2007 has been positive, with good increases in life
sales in South Africa, continued growth in our US asset management business
and strong performance by Nedbank. The Skandia results continue to exceed
our acquisition plans and will be accretive this year as forecast. We are
on track to achieve our target of GBP300 billion of funds under management
by the end of 2008 with a satisfying 5% growth during the first quarter.
While we still expect exchange rates and synergy and infrastructural costs
to hold back earnings growth this year, the operating delivery from the
Group is good and we are well positioned to grow strongly in 2008."
Financial highlights
Adjusted operating profit* (IFRS basis) up 5% to GBP398 million
(Q1 2006: GBP380 million)
Profit for the quarter attributable to equity holders of the
parent (IFRS basis) GBP248 million
(Q1 2006: GBP170 million)
Adjusted operating earnings per share* (IFRS basis) unchanged
at 4.2p (Q1 2006: 4.2p)
Basic earnings per share (IFRS basis) 4.9p (Q1 2006: 3.8p)
Net cash flow in relation to funds under management of GBP4.5
billion (Q1 2006: GBP4.2 billion) representing 1.9% of opening
funds under management
Funds under management of GBP249 billion at 31 March 2007 (31
December 2006: GBP237** billion),
an increase of 5.1%
Total life assurance sales, on an Annual Premium Equivalent
(APE) basis, of GBP421 million, an increase of 8.8% (Q1 2006:
GBP387 million)
PVNBP of GBP3,325 million, an increase of 9.3% (Q1 2006:
GBP3,041 million)
Adjusted embedded value per share (EEV basis) 159.0p at 31
March 2007 (31 December 2006: 157.2p)
Enquiries
Investor
Relations
Malcolm Bell UK +44 (0)20 7002 7166
Deward Serfontein SA +27 (0)21 509 8709
Media
James Crampton UK +44 (0)20 7002 7133
Nad Pillay SA +27 (0)21 504 8026
College Hill (UK)
Tony Friend UK +44 (0)20 7457 2020
Gareth David UK
Notes
Wherever the terms asterisked in the Financial highlights are used, whether
in the Financial highlights, the Chief Executive`s Statement, the Group
Finance Director`s Review or the Business Review, the following definitions
apply:
*For long-term and general insurance business, adjusted operating profit is
based on a long-term investment return, includes investment returns on life
funds` investments in Group equity and debt instruments and is stated net
of income tax attributable to policyholder returns. For all businesses,
adjusted operating profit excludes goodwill impairment, the impact of
acquisition accounting, initial costs of Black Economic Empowerment
schemes, the impact of closure of unclaimed shares trusts, profit / (loss)
on disposal of subsidiaries, associated undertakings and strategic
investments and dividends declared to holders of perpetual preferred
callable securities.
Adjusted operating earnings per ordinary share is calculated on the same
basis as adjusted operating profit. It is stated after tax attributable to
adjusted operating profit and minority interests. It excludes income
attributable to Black Economic Empowerment trusts of listed subsidiaries.
The calculation of the adjusted weighted average number of shares includes
own shares held in policyholders` funds and Black Economic Empowerment
trusts.
**2006 restated due to sale of Spanish business
Forward-looking statements
This announcement contains forward-looking statements with respect to
certain of Old Mutual plc`s plans and its current goals and expectations
relating to its future financial condition, performance and results. By
their nature, all forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances that are beyond Old
Mutual plc`s control, including, among other things, UK domestic and global
economic and business conditions, market-related risks such as fluctuations
in interest rates and exchange rates, policies and actions of regulatory
authorities, the impact of competition, inflation, deflation, the timing
and impact of other uncertainties or of future acquisitions or combinations
within relevant industries, as well as the impact of tax and other
legislation and other regulations in territories where Old Mutual plc or
its affiliates operate.
As a result, Old Mutual plc`s actual future financial condition,
performance and results may differ materially from the plans, goals and
expectations set forth in Old Mutual plc`s forward-looking statements. Old
Mutual plc undertakes no obligation to update any forward-looking
statements contained in this announcement or any other forward-looking
statements that it may make.
Notes to Editors:
A conference call for analysts and investors will take place at 9.00 a.m.
(UK time) and 10.00 a.m. (Swedish and South African time) today. Analysts
and investors who wish to participate in the call should dial the following
toll free numbers:
UK 0800 953 1444
Sweden 0200 895 350
South Africa 0800 994 090
Copies of these results together with high-resolution images (at
http://oldmutual.com/vpage.jsp?page_id=2220) and biographical details of
the executive directors of Old Mutual plc, are available in electronic
format to download from the Company`s website.
A Financial Disclosure Supplement relating to the Company`s Q1 results can
be found on the website. This contains a summary of key financial data for
the first quarters of 2007 and 2006.
For further information on Old Mutual plc, please visit our website at
www.oldmutual.com.
Chief Executive`s Statement
A positive start to the year
Old Mutual`s open architecture model and good investment performance from
our investment managers have continued to win strong net inflows in the
first quarter, with net client cash flow of GBP4.5 billion. Overall funds
under management by the Group increased 5.1% to GBP249 billion from the
2006 year-end position of GBP237 billion, benefiting from positive equity
markets in the main countries in which we operate. Earnings on an IFRS
basis were flat in Sterling terms, at 4.2p, but the strength of Sterling
against the Rand and the US dollar for the first quarter of 2007 compared
to the first quarter of 2006 disguises some underlying good performances by
our businesses in local currency terms.
Europe
Skandia`s open architecture offerings have continued to propel strong new
business growth in the UK and offshore UK, with total Europe net inflows of
GBP1.5 billion for the first quarter. Pension sales have continued to
benefit from post-A Day demand, increasing by 24% compared to the first
quarter of 2006. Unit trust sales were down by 3%. Offshore sales have also
recovered markedly from the weakness experienced at the beginning of 2006.
IFRS profit for the UK & Offshore increased by 16% for the period.
Profits at Skandia Nordic were unusually high, benefiting from higher
levels of funds under management, which increased by SEK 4 billion and some
exceptional profits in smaller lines of business. However, sales were
depressed by the removal of the tax privileges of a key product,
Kapitalpension, and by our early adoption of a level commission structure.
Margins on new business fell with lower volumes affecting experience ratios
and the costs of the new Skandia Liv arrangements which have now been put
in place. Good progress is being made in putting this division on to a
sounder footing for the future, and investing in a solid IT base. We are
looking forward to welcoming our new CEO for the Nordic business, Bertil
Hult, who is expected to join us in September 2007.
Within Skandia`s European and Latin American businesses, Poland again
performed well but Italian sales disappointed. Funds under management grew
by 20% and the value of new business grew by 15%. Margins remained above
target at 19%.
Our plans for significant spending on achieving the previously announced
synergies at Skandia during 2007 remain in place, with the bulk of the
expenditure coming through during the rest of the year. We remain on track
to meet our stated targets.
South Africa
Our South African life business achieved good sales growth during the
quarter benefiting from the investment we have made in our distribution
network over the past few years. Retail life sales grew strongly up 27%
partially offsetting lower Institutional sales. Bancassurance sales
achieved through the Nedbank channel have also continued to grow strongly.
Lumpy Institutional life sales were down for the quarter and funds under
management were adversely affected by the loss of two large investment
mandates. Investment performance by our South African asset management
business, which went through an adverse patch in 2006, has recovered
strongly. We have now completed the transformation of our asset management
business to a boutique model and we remain confident that it will benefit
our clients. Profits benefited from the strong JSE and some one-off items,
and are up 34% in Rand terms.
Nedbank has continued its return to health, with a 24% increase in headline
earnings in Rand terms. Nedbank exceeded its 2007 target of 20% RoE for the
first time in the first quarter. Its cost to income ratio for the quarter
was below its target of 55% for the year, although this will be affected
during the rest of 2007 by Nedbank`s continuing high levels of investment
in its retail programme. Nedbank`s market share statistics improved during
the quarter, but loan impairments deteriorated as a result of the tighter
credit environment.
The combined ratio at our general insurance business, Mutual & Federal, was
affected by some adverse weather-related and motor claims that led to its
result being slightly higher in local currency terms for the period, even
though the premium cycle does now appear to have turned, with a recent
hardening of rates. Contribution from its long-term investment return was
lower than in the equivalent period of 2006 as a result of the significant
amount of capital returned to its shareholders under the special dividend
paid last year.
USA
Our asset management business attracted USD6.2 billion of net cash inflow
from clients during the first quarter, which, together with powerful market
and investment performance, raised its total funds under management by
USD16 billion to USD290 billion. IFRS adjusted operating profit was up by
27% in local currency terms for the period. Sales by Old Mutual Capital
Partners rose by 17%, with mutual funds up by 40%, underlining the
potential of our retail strategy initiatives. We completed the acquisition
of Ashfield, our new large cap manager, during February. Old Mutual Asset
Managers (UK), which is now reported as part of the US asset management
division, had an excellent three months, with unit trust sales up by 50%.
Sales at our US life business were strong, at USD1.1 billion gross (Annual
Premium Equivalent of USD132 million), an increase of 25% (APE basis) on
the equivalent period in 2006 when there was a slow start to the year.
Margins were a healthy 18%, helped by strong sales by the Bermudan business
and strong demand for equity indexed annuities. IFRS adjusted operating
profit was lower than the equivalent period in 2006, but in line with the
2006 full year run rate, as a result of some adverse annuitant mortality
experience and increases in the prevailing interest rate environment. The
business remains on track to return cash to the Group by the end of 2007.
Our previously-announced review of the historic book of the US life
business continues and we aim to complete this by August 2007. Two of the
key items under review are hedging and longevity modelling; the latter
produced an experience loss of USD9 million in the quarter, while the
former broke even.
Asia Pacific
Our businesses in the Asia Pacific region have continued to make good
progress, with strong growth in life sales in India and China.
Outlook
The overall start to 2007 has been positive, with good increases in life
sales in South Africa, continued growth in our US asset management business
and strong performance by Nedbank. The Skandia results continue to exceed
our acquisition plans and will be accretive this year as forecast. We are
on track to achieve our target of GBP300 billion of funds under management
by the end of 2008 with a satisfying 5% growth during the first quarter.
While we still expect exchange rates and synergy and infrastructural costs
to have an effect this year, the operating delivery from the Group is good
and we are well positioned to grow strongly in 2008.
Jim Sutcliffe
Chief Executive
Group Finance Director`s Review
GROUP RESULTS
Group Highlights (GBPm) Q1 2007 Q1 2006 Change
Adjusted operating profit (IFRS 398 380 5%
basis) (pre-tax)
Profit before tax (IFRS) 478 401 19%
Adjusted operating earnings per 4.2p 4.2p -
share (IFRS basis)
Basic earnings per share (IFRS 4.9p 3.8p 29%
basis)
Value of new business 58 59* (2%)
PVNBP 3,325 3,041* 9%
Life assurance sales (APE) 421 387* 9%
Unit trust / mutual funds sales 1,935 2,165* (11%)
Net fund inflows (GBPbn) 4.5 4.2 7%
Group Highlights Q1 2007 FY 2006 Change
Embedded Value (GBPbn) 8.7 8.6 1%
Adjusted Embedded Value per share 159.0p 157.2p 1%
(EEV basis)
Funds under management (GBPbn) 249 237** 5%
Return on equity (annualised 13.7% 12.0%
basis) (%)***
Strong sales and net fund inflows continued in the first quarter of 2007
driving funds under management (FUM) to GBP249 billion, well on the way to
our target of GBP300 billion by the end of 2008. Adjusted operating profit
rose 5% in the period with higher FUM and operational leverage driving
strong cash generation and a corresponding increase in return on
shareholders equity.
Skandia continues to exceed expectations delivering GBP1.5 billion net fund
inflows and GBP66 million in adjusted operating profits during the quarter
and our US business powered ahead to USD291 billion FUM. Elsewhere Nedbank
and OMSA delivered very strong growth in profits offsetting the 31% decline
in the Rand compared to the first quarter of 2006.
The first quarter of 2007 although good for unit trust sales was not as
strong as the equivalent period last year due to the market correction in
February and a period of poor investment performance at OMSA in 2006.
Adjusted Embedded Value per share up by 1.1%
Adjusted Group Embedded Value (EV) increased to GBP8.7 billion at 31 March
2007 (31 December 2006: GBP8.6 billion). The adjusted Group EV per share
has increased to 159.0p at 31 March 2007 from 155.9p (restated from 157.2p
after a fair value adjustment to the prior period balance sheet). This was
driven by excellent investment performance, solid operating profits and the
market value increase of our subsidiaries offset by adverse movement in
foreign exchange rates.
*Pro forma three months
**2006 restated due to sale of Spanish business
***Return on equity is calculated using adjusted operating profit after tax
and minority interests on an IFRS basis with allowance for accrued coupon
payments on the Group`s hybrid capital. The average shareholders` equity
used in the calculation excludes hybrid capital
Group Finance Director`s Review
Skandia synergies on track
The Skandia acquisition provides significant opportunities for growth
throughout Europe. In addition the integration and synergy benefits of
GBP70 million per annum (announced in June 2006) are on track to be
delivered by the end of 2008. 2007 is the key year for investment in
synergy initiatives with GBP10 million incurred in the first quarter and it
is expected that GBP46 million will be incurred in 2007 as a whole.
Value of new business flat
The value of new business in the first quarter of 2007 was GBP58 million
driven by growth in the US and Europe offset by lower value of
institutional business in South Africa coupled with the impact of foreign
exchange movements.
Capital position
The Group`s gearing level remains comfortably within our target range, with
senior debt gearing at 31 March of 1.9% (6.0% at 31 December 2006) and
total gearing, including hybrid capital, of 21.5% (21.8% at 31 December
2006).
In January 2007, the Group issued EUR750 million of Lower Tier 2 Preferred
Callable Securities, the proceeds of which were used in part to finance the
maturity of a EUR400 million senior Eurobond that matured in April 2007.
Old Mutual discloses strong Economic Capital position
Old Mutual plc today announces for the first time results from its Economic
Capital (EC) Programme. These results show that, as at 31 December 2006,
the Group had available financial resources (AFR) significantly in excess
of the amount of economic capital the Group believes would be required to
support its target rating.
Old Mutual plc`s Economic Capital requirement as at 31 December 2006 stood
at GBP4.1 billion. The corresponding AFR of the Group was GBP7.1 billion,
giving an economic surplus of 73%. A comfortable surplus also exists
within each of our South African, US and European regions, meaning that the
Group is not reliant for its economic solvency on the need to transfer
capital between geographies.
Jonathan Nicholls
Group Finance Director
24 May 2007
COMPARATIVE INFORMATION
Following the acquisition of Skandia by Old Mutual plc, and the resultant
listing of Old Mutual plc shares on the Stockholm Stock Exchange, Old
Mutual plc has adopted quarterly reporting from the period ended 30
September 2006. The reporting format for the first quarter 2007 reporting
period is as follows:
All group comparative quarterly reporting information on earnings include
Skandia from the date of acquisition of 1 February 2006.
Within the financial statements the Europe division comparative information
is from the date of acquisition of 1 February 2006
Where Europe information is shown within the business review this has been
adjusted on a pro forma basis to reflect ownership from 1 January 2006.
For the full first quarter announcement, please visit Old Mutual`s website
www.oldmutual.com
Date: 24/05/2007 08:00:04 Produced by the JSE SENS Department.
