| Tue 20 Jun 2006, 8:00 | | Old Mutual Plc - Skandia Market Update |
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OML
OLOML
Old Mutual Plc - Skandia Market Update
Old Mutual Plc
ISIN CODE: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Skandia Market Update
Growth potential greater than expected
Old Mutual plc ("Old Mutual") will today update the market on progress following
the acquisition of Forsakringsaktiebolaget Skandia (publ) ("Skandia").
Growth Potential - Doubling Funds Under Management in five years
- Old Mutual acquired Skandia because its businesses operated in countries
with attractive demographics which, combined with Skandia"s open
architecture business model, were expected to deliver significant growth.
- Since completing the transaction on 3 February 2006 Old Mutual has
conducted a thorough review of Skandia and concluded that the growth
potential of the business is significantly better than anticipated during
due diligence. Skandia"s funds under management are now expected to
increase by 15% per annum, doubling in five years. This, coupled with
operating efficiency gains, will triple Skandia"s IFRS contribution to Old
Mutual by 2008.
No Surprises - Embedded Value and Balance Sheet in line with expectations
- Furthermore, Old Mutual confirms no surprises in Skandia"s balance sheet
and only modest changes to Skandia"s Net Asset Value (NAV) and Embedded
Value (EV), well within Old Mutual"s assumptions at the time of the
acquisition.
Financial Targets - value confirmed
During the presentation Old Mutual will unveil financial targets for Skandia
over the next five years, including:
- The doubling of Skandia"s funds under management within five years with the
UK and ELAM, in particular, showing better than expected growth potential.
- Significant enhancement of Old Mutual"s EEV earnings. Skandia will be EEV
earnings per share accretive from 2007 if not earlier.
- Initial IFRS earnings dilution in line with expectations. However, with
sales growth out-pacing cost increases and operating efficiency gains
driving margin improvements, Skandia"s contribution to Old Mutual"s IFRS
earnings is expected to increase at least threefold by 2008.
- Skandia is generating sufficient cash to fund its own growth. All Skandia
divisions will be strongly cash generative by 2007.
- As a result of synergies, Skandia plans to deliver divisional pre-tax
margin improvements by 2008 of: UK 2 % to 3%, Nordic 1% to 2% and ELAM 2%
to 3%.
- Targets for Skandia are 15% Return on Embedded Value (ROEV) by 2008 and 12%
Return on Invested Capital (ROIC).
- Overall synergies are confirmed at GBP70 million per annum and on track for
delivery from mid 2008. Total restructuring costs are estimated at GBP80
million
- Skandia"s EEV, restated to align with Old Mutual"s market-consistent basis,
was SEK 36.5bn (GBP2.7bn) for 2005, in line with expectations.
- Following adoption of Old Mutual"s accounting policies and actuarial
assumptions, the enlarged Group had an embedded value of GBP9.5bn (174p per
share) at 31 March 2006, or 183p per share including the value of
synergies.
Julian Roberts, Skandia"s Chief Executive, commented today: "Skandia is every
bit as good a business as we believed, with the potential to double in size over
the next five years. Sales growth is strong and there is a talented team in
place keen to move the business forward as we implement a series of initiatives
to deliver Skandia"s fullest potential."
Jim Sutcliffe, Chief Executive of Old Mutual, added: "The acquisition of Skandia
is a step up for Old Mutual. We are now a truly international company with
boosted growth and a lowered average weighted cost of capital - both of which
create value for our shareholders."
20 June 2006
This presentation will start at 09.00 hours (UK time) and can be viewed as a
webcast via www.oldmutual.com where the slide presentation will be available.
An interview with Jim Sutcliffe, Chief Executive, Old Mutual in video/audio and
text is now available on the Company"s website and on http://www.cantos.com.
ENQUIRIES:
Old Mutual plc
Malcolm Bell - Investor Relations (UK) + 44 (0) 20 7002 7166
Miranda Bellord - Media Relations (UK) + 44 (0) 20 7002 7133
Deward Serfontein - Investor Relations (SA) + 27 (0) 21 509 8709
Nad Pillay - Media Relations (SA) + 27 (0) 21 504 8026
College Hill
Tony Friend + 44 (0) 20 7457 2020
Gareth David + 44 (0) 20 7457 2020
For further information about Old Mutual plc visit www.oldmutual.com and for
Skandia, visit www.skandia.com, where a Swedish version of this release is
available.
Notes to editors
1. Old Mutual made its GBP4.0 billion acquisition of Skandia as part of its
strategy to become a world-class international financial services group.
Today Old Mutual operates in five principal geographic regions, with the
value of the Group"s life new business in the first quarter of 2006 evenly
derived as follows: South Africa 24%, UK 23%, Nordic 19%, US 18%, and ELAM
(Europe and Latin America) 16%.
2. Old Mutual had funds under management of GBP248 billion at 31 March 2006,
making it the sixth largest insurance company in Europe.
3. Old Mutual will report on a quarterly basis from November 2006 and Old
Mutual will provide a one-off update on sales on 10 August 2006.
This press release 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 which are beyond Old Mutual plc"s
control including amongst other things, UK domestic and global economic and
business conditions, market related risks such as fluctuations in interest rates
and exchange rates, the policies and actions of regulatory authorities, the
impact of competition, inflation, deflation, the timing and impact of other
uncertainties of future acquisitions or combinations within relevant industries,
as well as the impact of tax and other legislation and other regulations in the
jurisdictions in which Old Mutual plc and 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 the forward looking statements contained in this press release or any
other forward looking statements we may make.
Date: 20/06/2006 08:00:08 AM Produced by the JSE SENS Department
