| Wed 10 Sep 2008, 8:14 | | OML - Old Mutual Plc - Update on Old Mutual US Life |
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OML
OLOML
OML - Old Mutual Plc - Update on Old Mutual US Life
Old Mutual plc
ISIN CODE: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Update on Old Mutual US Life
At the interims in August 2008, Old Mutual plc ("Old Mutual") announced a
strengthening of reserves in its US Life business to reflect the impact of
volatile equity markets on variable annuity product guarantees. Continuing
market volatility and a significant strengthening of the US dollar have led to
a further increase in the costs associated with the guaranteed benefits on
these variable annuity contracts. Old Mutual has therefore recognised
additional guarantee reserves of $155 million. Under current group accounting
policy, $93 million of this will be taken through adjusted operating profits
reflecting the ineffective portion of the hedge and the remaining $62 million
will be recognised in adjusted operating profits over five years.
Separately, the announcement on 7 September 2008 that the US Government has
placed Fannie Mae and Freddie Mac in conservatorship has resulted in a sharp
fall in the market value of the preferred stock of these companies. This has
led to a write down of around $135 million in the value of the preferred stock
in these companies held by the Old Mutual US Life business. Under the Old
Mutual group accounting policy, this write down will be taken through adjusted
operating profits over five years.
As calculated today, these two charges are likely to result in a combined
impact for 2008 of 1.2p per share on adjusted operating EPS (IFRS basis) and
2.9p per share on basic EPS (IFRS basis) and adjusted operating EPS (EEV
basis), as there is unlikely to be any tax credit associated with these
charges.
A number of actions have been underway with the aim of limiting Old Mutual
Bermuda`s exposure to the guarantees, including withdrawing products, currency
hedging, improved fund mapping to reduce basis risk and reviewing options
available to de-risk the in-force book through various corporate actions.
Whilst this work has made good progress, it will take some time before the
benefits from these actions are realised. In the meantime, if market
conditions remain adverse, it is likely that further reserve strengthening
will be required. The Board has therefore decided to set aside a further $250
million of capital to support the ongoing capital needs of the Bermuda
business. The Board expects to inject some or all of this capital by the end
of the year, depending on business performance in the light of actual market
conditions.
Following the preference share write downs in the US Life business, we are
reviewing the options we have to ensure that the US Life business continues to
be appropriately capitalised.
Apart from the US Life business, the rest of the Old Mutual`s businesses
continue to perform in line with our expectations at the time of the interims
on 6 August 2008.
A conference call for analysts and investors will be held this morning.
Details are set out below. Please quote conference call ID: 64092649
Time: 8.00am UK time
UK dial-in: 0800 694 0257
US dial-in: 1866 966 9439
South Africa dial-in: 0800 980 759
Playback is available until 23 September 2008, access code: 64092649#
UK: 0800 953 1533
US: 1866 247 4222
International: +44 (0) 1452 55 0000
Enquiries
Investor Relations
Mary Jackets UK +44 (0)20 7002 7149
Aleida White UK +44 (0)20 7002 7287
Deward Serfontein SA +27 (0)82 810 5672
Media
Matthew Gregorowski UK +44 (0)20 7002 7133
Mike Smith UK (Finsbury) +44 (0)20 7251 3801
Brian Cattell UK (Finsbury) +44 (0)20 7251 3801
Notes to Editors
Old Mutual
Old Mutual plc is an international savings and wealth management company based
in the UK. Originating in South Africa in 1845, the group has a portfolio of
businesses offering asset management, life assurance, banking and general
insurance services in over 40 countries in Europe, the Americas, Africa and
Asia-Pacific. Old Mutual plc is listed on the London Stock Exchange and the
JSE, among others.
In the year ended 31 December 2007, the group reported adjusted operating
profit of GBP1.62 billion (on an IFRS basis) and had GBP279 billion of funds
under management at the year end. The Company has approximately 53,000
employees.
For further information on Old Mutual plc, please visit the corporate website
at www.oldmutual.com
Forward-looking statements
This announcement or presentation may contain certain 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 presentation or any other forward-looking statements that
it may make.
10 September 2008
Sponsor
Merrill Lynch South Africa (Proprietary) Limited
Date: 10/09/2008 08:14:02 Produced by the JSE SENS Department.
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