20th Jun 2006 07:03
Old Mutual PLC20 June 2006 Old Mutual Plc Skandia Market Update Growth potential greater than expected Old Mutual plc ("Old Mutual") will today update the market on progress followingthe 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 Skandiaover 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 £70 million per annum and on track for delivery from mid 2008. Total restructuring costs are estimated at £80 million • Skandia's EEV, restated to align with Old Mutual's market-consistent basis, was SEK 36.5bn (£2.7bn) 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 £9.5bn (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 everybit as good a business as we believed, with the potential to double in size overthe next five years. Sales growth is strong and there is a talented team inplace keen to move the business forward as we implement a series of initiativesto deliver Skandia's fullest potential." Jim Sutcliffe, Chief Executive of Old Mutual, added: "The acquisition of Skandiais a step up for Old Mutual. We are now a truly international company withboosted growth and a lowered average weighted cost of capital - both of whichcreate value for our shareholders." 20 June 2006 This presentation will start at 09.00 hours (UK time) and can be viewed as awebcast via www.oldmutual.com where the slide presentation will be available. Aninterview with Jim Sutcliffe, Chief Executive, Old Mutual in video/audio andtext is now available on the Company's website and on http://www.cantos.com. ENQUIRIES: Old Mutual plcMalcolm Bell - Investor Relations (UK) + 44 (0) 20 7002 7166Miranda Bellord - Media Relations (UK) + 44 (0) 20 7002 7133Deward Serfontein - Investor Relations (SA) + 27 (0) 21 509 8709Nad Pillay - Media Relations (SA) + 27 (0) 21 504 8026 College HillTony Friend + 44 (0) 20 7457 2020Gareth David + 44 (0) 20 7457 2020 For further information about Old Mutual plc visit www.oldmutual.com and forSkandia, visit www.skandia.com, where a Swedish version of this release isavailable. Notes to editors 1. Old Mutual made its £4.0 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 £248 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 respectto certain of Old Mutual plc's plans and its current goals and expectationsrelating to its future financial condition, performance and results. By theirnature, all forward looking statements involve risk and uncertainty because theyrelate to future events and circumstances which are beyond Old Mutual plc'scontrol including amongst other things, UK domestic and global economic andbusiness conditions, market related risks such as fluctuations in interest ratesand exchange rates, the policies and actions of regulatory authorities, theimpact of competition, inflation, deflation, the timing and impact of otheruncertainties of future acquisitions or combinations within relevant industries,as well as the impact of tax and other legislation and other regulations in thejurisdictions in which Old Mutual plc and its affiliates operate. As a result,Old Mutual plc's actual future financial condition, performance and results maydiffer materially from the plans, goals and expectations set forth in Old Mutualplc's forward looking statements. Old Mutual plc undertakes no obligation toupdate the forward looking statements contained in this press release or anyother forward looking statements we may make. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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