| Thu 10 May 2012, 8:00 | | OML - Old Mutual Plc - Old Mutual plc Interim Management Statement for the |
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OML
OLOML
OML - Old Mutual Plc - Old Mutual plc Interim Management Statement for the
three months ended 31 March 2012
OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
10 May 2012
Old Mutual plc Interim Management Statement
For the three months ended 31 March 2012
Business improvement continues
- Funds under management in core operations up 6% to GBP284.2 billion
- NCCF of GBP3.7 billion, USAM NCCF GBP2.5 billion
- Sale of Nordic completed for GBP2.1 billion
Julian Roberts, Group Chief Executive, commented:
"With growth in funds under management and further strategic progress, overall
this has been another good quarter for Old Mutual. We have seen positive net
client cash flows throughout the Group including at USAM where investment
performance is improving.
"Sales continued to be strong in Emerging Markets, with another excellent
performance in the South African mass foundation cluster. The prolonged
turmoil in the eurozone has continued to undermine investor confidence
creating a subdued retail investment market in Europe as a whole.
"Nedbank maintained the momentum it established last year by delivering
positive margins, strong growth in non-interest revenue and continued
reductions in credit losses.
"Our strong franchises and significant exposure to higher growth emerging
markets underpin prospects for the year as a whole."
Enquiries
External communications
Patrick Bowes UK +44 (0)20 7002 7440
Investor relations
Kelly de Kock SA +27 (0)21 509 8709
Media
William Baldwin-Charles +44 (0)20 7002 7133
+44 (0)7834 524 833
GROUP RESULTS
Group highlights for the three Q1 2012 Q1 2011 % of Q1 2011
months to (constan openin (as
31 March 2012 (GBPbn) t g reported
currency FUM(1) )
basis)
Net client cash flow
Long-Term Savings 0.8 0.7 3% 0.7
Nedbank 0.4 0.2 16% 0.2
US Asset Continuing 2.6 (0.6) 8% (0.6)
Management operations(2)
Held for sale or (0.1) (3.2) (2)% (3.1)
disposed(2)
NCCF from core operations 3.7 (2.9) 6% (2.8)
Group highlights at 31 March 2012 31 31 % 31 %
(GBPbn) March December change December chang
2012 2011 2011 (as e
(constan reported
t )
currency
basis)
Funds under management
Long-Term Savings 116.1 109.8 6% 108.5 7%
Nedbank 10.6 9.9 7% 9.7 9%
Mutual & Federal 0.2 0.2 - 0.2 -
US Asset Continuing 138.3 125.3 10% 128.8 7%
Management operations(2)
Held for sale or 19.0 19.5 (3)% 20.0 (5)%
disposed(2)
FUM from core operations 284.2 264.7 7% 267.2 6%
Group highlights for the three Q1 2012 Q1 2011 % Q1 2011 %
months to (constan change (as chang
31 March 2012 (GBPm) t reported e
currency )
basis)
Life assurance sales (APE)
Emerging Markets 116 106 10% 115 1%
Wealth Management 153 193 (21)% 193 (21)%
Total life assurance sales 269 299 (10)% 308 (13)%
(APE)
Non-covered sales(3)
Emerging Markets 1,941 1,403 38% 1,527 27%
Wealth Management 1,117 1,168 (4)% 1,168 (4)%
Long-Term Savings 3,058 2,571 19% 2,695 13%
US Asset Continuing 271 383 (29)% 375 (28)%
Management operations(2)
Held for sale or 73 173 (58)% 170 (57)%
disposed(2)
Total non-covered sales 3,402 3,127 9% 3,240 5%
Note percentage movements on reported figures in the above table are based on
rounded sterling numbers.
1) Annualised NCCF
2) Continuing operations exclude the results of OMCAP, Lincluden and Dwight,
which were held for sale or disposed at 31 March 2012
3) Non-covered sales includes mutual funds, unit trust and other sales
Overview
Unless otherwise stated, the figures given throughout this document are for
the three months to 31 March 2012 (the period) and comparative figures are for
the same period in 2011 (the comparative period). Comparative figures
presented in GBP are on a constant currency basis.
Group funds under management
Funds under management (FUM) increased by GBP19.5 billion (7%) from 31
December 2011 to GBP284.2 billion at 31 March 2012. Equity markets contributed
GBP16.9 billion of the GBP19.5 billion increase, with the S&P 500 up 12%, the
FTSE 100 up 4% and the JSE ALSI up 5%.
In our Long-Term Savings division (LTS) FUM increased 6% to GBP116.1 billion.
Emerging Markets increased by 3% to GBP52.7 billion, due to increased net
client cash flows (NCCF) supported by strong non-covered sales and a general
improvement in markets. Wealth Management FUM increased 8% from GBP58.6
billion at 31 December 2011 to GBP63.4 billion at 31 March 2012, also driven
by positive market movements and net client cash inflows. UK FUM increased 6%
over the period to GBP35.6 billion, with UK Platform FUM of GBP20.4 billion up
15% from 31 March 2011 and up 8% from 31 December 2011.
FUM from continuing operations1 at USAM increased 10% to GBP138.3 billion, of
which 8% was due to positive market movements and 2% was due to improvements
in NCCF.
Long-Term Savings
Net client cash flow
LTS achieved positive NCCF of GBP0.8 billion (Q1 2011: GBP0.7 billion), driven
by strong inflows in Latin America and large deals secured into Emerging
Markets` OMIGSA boutiques.
Wealth Management NCCF was GBP0.5 billion (Q1 2011: GBP1.0 billion), with
gross inflows of GBP2.6 billion (Q1 2011: GBP2.9 billion). NCCF for the UK
Platform fell to GBP0.5 billion from GBP1.0 billion, as continued market
volatility weakened investor confidence.
Sales
LTS sales on an annual premium equivalent (APE) basis decreased by 10% to
GBP269 million, with weak UK and European sales partially offset by strong
regular premium sales in Emerging Markets. LTS non-covered sales, including
unit trust and mutual fund sales, increased by 19% to GBP3,058 million.
APE sales in Emerging Markets increased by 10% to GBP116 million, driven by
growth of 17% in the Mass Foundation Cluster (MFC). Non-covered sales
increased by 38% to GBP1,941 million, with strong unit trust and mutual fund
sales in South Africa and Latin America. Other non-life sales were boosted by
the inclusion of the other African countries (Kenya, Malawi, Zimbabwe and
Swaziland) in Q1 2012 but not in the comparative period and significant
inflows into OMIGSA`s Dibanisa boutique.
Wealth Management APE sales decreased by 21% to GBP153 million, reflecting
continued market volatility and weakening investor confidence. This has
particularly impacted the single premium dominated propositions that we offer
in most of our markets. Wealth Management sales were up 13% on Q4 2011. The UK
Platform gross sales were GBP1.1 billion (Q1 2011: GBP1.4 billion). Wealth
Management mutual fund and unit trust sales were down 4% to GBP1,117 million.
We continue to make good progress on our preparations for the Retail
Distribution Review (RDR), while waiting for the definitive rules to be
finalised. In April we announced that we will be combining Old Mutual Asset
Managers UK (OMAM UK) and Skandia Investment Group (SIG).
US Asset Management
Net client cash inflow from continuing business1 was GBP2.6 billion, with
strong investment performance and reduced volatility in global markets. There
was GBP0.1 billion of net outflows from USAM`s affiliates held for sale at 31
March 2012.
Gross inflows(1) were GBP6.4 billion (Q1 2011: GBP4.2 billion), driven
predominantly by sales from long-term fixed income products, while
international value equities, global value equities, and emerging market
equities also experienced strong sales. The fees on fixed income AUM tend to
be lower than USAM`s overall average, though flows in this key asset class
help further diversify our sources of earnings. Gross outflows1 were GBP3.8
billion (Q1 2011: GBP4.8 billion), largely in US equities.
1) Excludes results of OMCAP, Lincluden, and Dwight Asset Management, which
were held for sale or disposed at 31 March 2012.
US and international equity strategies outperformed benchmarks contributing to
enhanced investment performance. For the one-year period ended 31 March 2012,
80% of assets in continuing business outperformed benchmarks (Q1 2011: 47%).
Over the three- and five-year periods, 70% (Q1 2011: 48%) and 65% (Q1 2011:
57%) of assets outperformed benchmarks.
The sale of USAM`s domestic retail business, OMCAP, to Touchstone Investments
closed on 13 April 2012. USAM will retain assets through its role as sub-
advisor to 13 of the 17 mutual funds reorganised into Touchstone Funds as part
of the strategic transaction to exit the US mutual fund business. The
previously announced sale of USAM`s fixed income affiliate, Dwight Asset
Management Company LLC, to Goldman Sachs Asset Management is progressing as
planned and is expected to close in Q2 2012.
Nedbank
Nedbank maintained the momentum established in 2011. Net interest income grew
by 11% to R4.8 billion and non-interest revenue increased 15% to R4.1 billion.
The credit loss ratio from impairments improved from 1.15% in the comparative
period to 1.09%. Nedbank`s capital ratios remained well above current
regulatory minima and expected Basel III regulatory minima, with a Core Tier 1
ratio of 10.7% (31 December 2011: 11.0%).
The full text of Nedbank`s Q1 2012 trading update, released on 4 May 2012 and
also announced by Old Mutual plc on the same day, can be accessed on Nedbank`s
website at: http://www.nedbankgroup.co.za/financialQuaterlyResults.asp
Mutual & Federal
At Mutual & Federal gross written premiums for the period increased by 7% to
R2.4 billion. The trading environment continued to be highly competitive.
Capital and liquidity
The pro-forma Financial Groups Directive (FGD) surplus was GBP2.7 billion at
31 March 2012 (31 December 2011: GBP2.0 billion). The profit on the sale of
Nordic increased the FGD surplus by GBP1.6 billion, but this was partially
offset by GBP1.2 billion committed by the Group to pay special and ordinary
dividends on 7 June 2012. The remaining GBP0.3 billion increase in the FGD
surplus was primarily due to improved surpluses in Bermuda, Emerging Markets
and Wealth Management during the period, and the strengthening of the Rand
from the year-end closing-rate. This was partially offset by increased capital
requirements at Nedbank. All our businesses remained well capitalised
throughout the period.
At 31 March 2012, the holding company had total liquidity headroom of GBP3.4
billion (31 December 2011: GBP1.5 billion). From these resources the Group
will pay GBP1.0 billion of special dividend and GBP0.1 billion in ordinary
dividends on 7 June 2012. As part of the dividend payment process, the Group
settled its intercompany loan with its South African holding company.
The Group repaid the remaining Euro200 million of the Euro750 million euro
bond during the period. We do not intend to repay further debt until after the
payment of the special dividend.
The Group has no exposure to the sovereign debt of Portugal, Italy, Ireland,
Greece and Spain. The Group`s exposure to French sovereign debt is GBP2
million.
Material events and transactions
During the quarter, the Group completed the sale of its Nordic businesses for
GBP2.1 billion. The Group also announced the combination of its Retail Europe
businesses into Wealth Management.
Share consolidation and share count
A share consolidation was completed, in the period between close of business
on Friday 20 April 2012 and opening of business on Monday 23 April 2012,
reducing the number of shares in issue from 5,567 million to 4,871 million,
with 7 new shares being issued in exchange for 8 existing shares. As a
consequence the share consolidation reduces the weighted average number of
shares (WANS) used to determine the Group`s per share calculations.
The WANS for the market consistent embedded value (MCEV) and basic earnings
per share (EPS) calculations reflects the share consolidation from the date it
occurred. The WANS used for the adjusted operating EPS calculation will treat
the share consolidation as having taken place at 1 January 2012 and is 4,756
million. The comparative period will be restated for adjusted operating EPS
only.
Dividends per share will be declared and calculated on the actual share count.
As previously announced, we expect to set the 2012 interim dividend as 30% of
the 2011 full-year dividend.
The long-term rate for the long-term investment return (LTIR) for Emerging
Markets will remain at 9% for 2012. The long-term rate for 2012 for Mutual &
Federal and Wealth Management was reduced to 8.6% (2011: 9.0%) and 1.5% (2011:
2.0%) respectively. The reduction in nominal yields on fixed income and cash,
and lower equity appreciation in recent years is likely to reduce the long-
term rate in the future.
Bermuda
At 31 March 2012, the estimated gross cash cost of meeting fifth anniversary
guarantees to Guaranteed Minimum Accumulation Benefit (GMAB) policyholders
over the next two years reduced to approximately $463 million (31 December
2011: $689 million; 30 September 2011: $738 million) due to higher equity
markets. In March 2012 Bermuda enhanced its hedging strategy by implementing
an option-based hedging arrangement to protect the cost of meeting fifth
anniversary payments.
Notes to Editors:
A conference call for analysts and investors will take place at 09.00 (UK
time), 10.00 (Central European time) and 10.00 (South African time) today.
Analysts and investors who wish to participate in the call should dial the
following numbers quoting conference ID 311209#:
UK and International (outside South Africa and US) +44 (0)20 3140 0668
South Africa +27 (0)11 019 7051
US +1 631 510 7490
Please dial in 10 minutes before the scheduled start time of the call to avoid
excess holding.
A replay facility will be available until midnight on 24 May 2012 on the
following numbers, quoting access code 384194#:
UK / standard international +44 (0)20 3140 0698
Copies of this update, together with high-resolution images and biographical
details of the Executive Directors of Old Mutual plc, are available in
electronic format to download from the Company`s website at
http://www.oldmutual.com.
This Interim Management Statement has been prepared in accordance with section
4.3 of the Disclosure and Transparency Rules (DTR) and covers the period 1
January 2012 to 9 May 2012. The business update is included in this Interim
Management Statement. A Disclosure Supplement relating to the Company`s
business update can be found on our website. This contains key financial data
for the three months ended 31 March 2012.
Life assurance APE sales are calculated as the sum of (annualised) new regular
premiums and 10% of the new single premiums written in an annual reporting
period. Our joint ventures in India and China are not consolidated for APE
purposes.
Foreign exchange rates used for constant currency calculations
Q1 2012 Q1 2011 Appreciation / FY 2011 Appreciation /
(depreciation) (depreciation)
of local of local
currency currency
Rand Average 12.19 11.20 (9)% 11.64 (5)%
Rate
Closing 12.23 10.87 (13)% 12.56 3%
Rate
USD Average 1.57 1.60 2% 1.60 2%
Rate
Closing 1.60 1.61 1% 1.56 (3)%
Rate
Cautionary statement
This announcement has been prepared solely to provide additional information
to shareholders to assess the Group`s strategies and the potential for those
strategies to succeed. It should not be relied on by any other party or for
any other purpose.
This announcement contains forward-looking statements with respect to certain
of Old Mutual plc`s and its subsidiaries` 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 subsidiaries 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
out 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.
Interim Management Statement - Appendix
Financial History
Year Adjusted Reported Year-end Adjusted Dividend
WANS (m) adjusted shares in Group per share
operating issue MCEV per (p)(2)
EPS (p)(1) less share
treasury (p)(2)
shares
(m)
2011 - after share 4,756 18.0 4,866 207.8(4) 5.71
consolidation(3)
2011 5,435 15.7 5,562 194.1 5.00
2010 5,359 14.3 5,456 202.2 4.00
2009 5,229 11.6 5,279 171.0 1.50
2008 5,230 14.9 5,277 117.6 2.45
2007 5,411 16.9 5,405 166.3 6.85
1) Latest reported figure
2) Dividends were paid on ordinary shares in issue (excluding treasury shares)
at the Record Date. Adjusted Group MCEV per share is calculated on shares in
issue (excluding treasury shares) at 31 December 2011
3) Figures were not reported for 2011 and have been included here for
illustrative purposes only
4) Including proceeds from disposal of Nordic and payments of GBP1.0 billion
special dividend
Long-term Savings - Emerging Markets
APE Sales
Rm
By Cluster: Gross single Gross regular Total APE
premiums premiums
Q1 Q1 % Q1 Q1 % Q1 Q1 %
`12 `11 `12 `11 `12 `11
South Africa
Mass Foundation 7 14% 494 423 17% 495 424 17%
Cluster 8
Retail Affluent 2,054 2,412 (15)% 340 312 9% 545 553 (1)%
Corporate 1,081 (39)% 88 35 151% 154 143 8%
656
OMIGSA 700 (52)% - - n/a 33 70 (53)%
333
Total South Africa 4,200 (27)% 922 770 20% 1,227 1,190 3%
3,051
Rest of Africa 194 105% 109 48 127% 149 67 122%
397
Asia & Latin America* 64 58 10% 33 24 38% 39 30 30%
Total Emerging 3,512 4,452 (21)% 1,064 842 26% 1,415 1,287 10%
Markets
Rm
By Product: Gross single Gross regular Total APE
premiums premiums
Q1 Q1 % Q1 Q1 % Q1 Q1 %
`12 `11 `12 `11 `12 `11
South Africa
Savings 2,484 3,666 (32)% 427 382 12% 675 749 (10)%
Protection - - n/a 495 388 28% 495 388 28%
Annuity 567 534 6% - - n/a 57 53 8%
Total South Africa 3,051 4,200 (27)% 922 770 20% 1,227 1,190 3%
* Includes Mexico only
Non-covered sales* including unit trust / mutual fund sales
Rm
Unit trust/ mutual Other non-covered sales Total non-covered
fund sales sales
Q1 `12 Q1 % Q1 `12 Q1 `11 % Q1 `12 Q1 `11 %
`11
South 6,189 4,609 34% 10,846 7,513 44% 17,035 12,122 41%
Africa
Rest of 932 1,143 (18)% 575 66 >100% 1,507 1,209 25%
Africa
Asia & 4,727 3,242 46% 386 531 (27)% 5,113 3,773 36%
Latin
America
Emerging 11,848 8,994 32% 11,807 8,110 46% 23,655 17,104 38%
markets
* Non-covered sales exclude Zimbabwe CABS deposits
Long-term Savings - Wealth Management
APE Sales
GBPm
Gross single Annualised regular Total APE
premiums premiums
Life new Q1 `12 Q1 % Q1 Q1 % Q1 Q1 %
business `11 `12 `11 `12 `11
UK market
Pensions 475 569 (17)% 14 18 (22)% 62 75 (18)%
Bonds 90 126 (29)% - - n/a 9 13 (31)%
Protection - - n/a 2 2 - 2 2 -
Savings - - n/a 1 2 (50)% 1 2 (50)%
Total UK 565 695 (19)% 17 22 (23)% 74 92 (19)%
Of which UK 506 611 (17%) 8 9 (11)% 59 70 (16)%
Platform
Of which UK 59 84 (30)% 9 13 (31)% 15 22 (29)%
Legacy
International
Unit-linked 29 70 (59)% 3 9 (67)% 6 16 (63)%
Bonds 282 314 (10)% 7 6 17% 35 37 (5)%
Total 311 384 (19)% 10 15 (33)% 41 53 (23)%
International
Wealth
Management
Europe
Unit-linked 245 306 (20)% 14 18 (22)% 38 48 (21)%
Total Wealth 1,121 1,385 (19)% 41 55 (25)% 153 193 (21)%
Management
Unit trust / mutual fund sales
GBPm
Mutual fund new business Q1 `12 Q1 `11 %
Institutional 230 56 >100%
Mutual funds 316 470 (33)%
ISA 245 324 (24)%
Total UK market 791 850 (7)%
Of which UK Platform 561 766 (27)%
Of which UK Legacy 230 84 >100%
International 317 309 3%
Wealth Management Europe 9 9 -
Total Wealth Management 1,117 1,168 (4)%
Bermuda reserve development
The sensitivity to capital markets on GMABs with UGO is highlighted in the
table below, showing quarterly GMAB reserves and estimated fifth-anniversary
guarantees over the past 21 months:
$m
Period UGO GMAB reserve Estimated UGO
fifth-anniversary top-up
30 June 2010 996 775
30 September 2010 824 458
31 December 2010 660 334
31 March 2011 573 303
30 June 2011 620 346
30 September 2011 1,144 738
31 December 2011 1,035 689
31 March 2012 794 463
Date: 10/05/2012 08:00:01 Produced by the JSE SENS Department.
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