14th Nov 2005 07:02
Old Mutual PLC14 November 2005 Old Mutual plc Trading update for the nine months to 30 September 2005 Strong performance across the Group Our business around the world is continuing to deliver excellent results, withlife assurance sales (on an annual premium equivalent (APE) basis) showing anincrease of 18% to £502 million over the nine months to 30 September 2005compared with the equivalent period last year, reflecting significant growth inIndividual and Group Business sales in South Africa and retail sales in the USA.Funds under management of £175 billion at the end of September 2005, increasedby 25% from the year end position. • Embedded value per share of 156.0p (R1,749c) at 30 September 2005, (30 June 2005: 137.5p (R1,645c)), a rise of 13%. • Life assurance sales (on an APE basis) • South Africa: up 18% to R3.0 billion, as our focus on investing in our distribution capability continues to impact sales positively. Individual Life sales increased by 11% to R2.1 billion during the first nine months, with Group Business sales increasing by 40% to R0.9 billion. • USA: up 15% to $431 million, as the business continued to deliver strong retail sales growth, in particular in life products and offshore annuity sales through Old Mutual Bermuda. • Funds under management • South Africa: up 11% to R466 billion as the net cashflow position for the third quarter stabilised and the JSE performed well. • USA: up 21% to $224 billion, with net inflows of client assets reaching $27 billion for the nine months at our US asset management business. • UK: up 38% to £5.8 billion, as organic growth continued, with excellent hedge fund performance driving net fund inflows of £0.4 billion at OMAM (UK) and Selestia continuing to build critical mass with sales for the nine months to 30 September 2005 of £0.5 billion. • Nedbank: net interest income up 17% with good growth in retail assets. Strategic recovery programme continues to be on track. • Mutual & Federal: continued to perform well with a 7% increase in gross premiums to R6.0 billion and a strong underwriting surplus for the nine months to 30 September 2005 despite ongoing softening of the short term insurance market. Jim Sutcliffe, Chief Executive, commented: "Each of our businesses hascontributed to this excellent performance. The strong organic growth in salesand assets across all disciplines and product areas continues, providing a clearplatform for long-term growth." 14 November 2005 Enquiries: Old Mutual plc Media: Tel: +44 (0) 20 7002 7133Miranda Bellord (UK) Tel: +27 (0) 82 553 7980Nad Pillay (SA) Investors: Tel: +44 (0) 20 7002 7264Andrew Parkins (UK) Tel: +27 (0) 21 509 8709Deward Serfontein (SA) College Hill (UK) Tel: +44 (0) 20 7457 2020Tony FriendAlex Sandberg Julian Roberts, Group Finance Director, will host a conference call for analystsand investors at 08.30 UK time, 09.30 Swedish time and 10.30 South African timethis morning. The call will include a brief introduction and an opportunity forquestions. Analysts and investors who wish to participate in the conference callshould dial the following toll-free numbers: UK participants: 0800 953 1444SA participants: 0800 994090Swedish participants: 0200 895 350Std International dial-in (not toll-free): + 44 (0) 1452 542 300 The Third Quarter 2005 Trading Statement Financial Disclosure Supplement, can befound on the website at www.oldmutual.com. Forward-looking statements This announcement contains certain forward-looking statements with respect tothe financial condition and results of operations of Old Mutual plc and itsgroup companies, which by their nature involve risk and uncertainty because theyrelate to events and depend on circumstances that may occur in the future.Factors that could cause actual results to differ materially from those in theforward-looking statements include, but are not limited to, global, national andregional economic conditions, levels of securities markets, interest rates,credit or other risks of lending and investment activities, and competitive andregulatory factors. Life and asset management business - South Africa Strong growth in life and non-life sales Life sales of R3.0 billion (including South African sales into Old MutualInternational (OMI)) for the nine months to 30 September 2005 on an AnnualPremium Equivalent (APE) basis have increased by 18% compared to the equivalentperiod last year, as our focus on investing in our distribution capabilitycontinued to benefit sales. Both Individual and Group Business life sales werehigher, the latter showing particularly strong growth. Unit trust sales grew in both our broker and agency channels, with sales for thenine months increasing by 93% to R6.3 billion, taking net cash flows for thisbusiness to R2.5 billion for this period, compared with R0.5 billion for theequivalent period last year. The Pension Funds Adjudicator has continued to hear complaints and makedeterminations against retirement annuity funds. While discussions between theindustry, the regulator and the National Treasury continue, our philosophy ofensuring that our products provide good value to our customers continues to beimplemented. Continued investment in distribution results in Individual Business life salesup 11% Individual Business life sales of R2.1 billion for the nine months to 30September 2005 (including South African sales into OMI) were 11% higher than theR1.9 billion achieved in the equivalent period last year, with good growthexperienced across all product categories. The 14% increase in single premiums has been positively impacted by the growthin bancassurance life sales through the Nedbank channel, up 78% for the ninemonths to 30 September 2005 compared with the equivalent period last year. Goingforward, OMSA and Nedbank will continue to work closely together to focus ongrowing sales through this channel. South Africa life single premium sales intoOMI were up 32%. Recurring premiums for the nine months to 30 September 2005 increased by 9% toR1.5 billion from R1.4 billion last year, with growth in savings, protection andGroup Schemes business all up by similar amounts. This result reflects theongoing benefit from sales growth through our own agency channel and the GroupSchemes sales forces as we continue to invest in growing our advisor headcount. Group Business sales growth continues Group Business sales (including Healthcare) increased by 40% to R909 million forthe nine months compared with R649 million for the equivalent period last year.Healthcare sales were up by 7% on the equivalent period in 2004, whilst Groupprotection recurring premium sales increased by 50%. Group single premiums atR340 million were 127% higher than the prior period as a result of good annuitysales to retirement funds. Sales have continued to benefit from the investment in our sales management,processes and capability. Margins increase to 17% New business margins have increased to 17% for the nine months to 30 September2005 from 15% for the half year. The Individual Business margin at 14% reflectsinvestment in distribution and the switch to lower margin products. This hasbeen enhanced by the 22% Group Business margin. Quarterly net client cashflows flat Net client cashflows for the nine months have stabilised at the half year levelof negative R17 billion which includes the impact of the R10 billion withdrawalof funds by the Public Investment Corporation in the first half. As a result primarily of higher equity markets, customer funds under managementof R343 billion at the third quarter, were 10% higher than at the year end. Strong investment performance Old Mutual Asset Managers (South Africa) (OMAM (SA)) continued to deliver stronginvestment performance, being ranked second out of the eleven institutionalasset managers in the Alexander Forbes South African Global Manager Watch(Large) Survey over the year to the end of September 2005 and second out of nineover three years. At 30 September 2005, 95% of funds managed by OMAM (SA)weighted by value over one year and 91% over three years, outperformed theirbenchmarks. Business developments In August, OMSA announced a Black Economic Empowerment (BEE) deal in itsHealthcare business which would result in its BEE partner acquiring a 26%interest in the merged business and would result in approximately 45,000additional members. The acquisition of Marriott Properties and Marriott AssetManagement, with R20 billion of funds under management was announced in October.Both transactions are subject to approval by the Competition Commission. Banking - South Africa The full text of Nedbank Group's trading update for the third quarter of 2005,released today, can be accessed on Nedbank's website, http://www.nedbankgroup.co.za. Delivering improved performance Nedbank's financial performance has continued to improve, with trading resultsfor the nine months to 30 September 2005 slightly ahead of managementexpectations, driven primarily by the continued positive banking and creditenvironment, tight expense control and favourable property investmentrevaluations. Return on equity (ROE) of 15.23% for the nine months to 30 September 2005 hasimproved from the half year level of 14.63%. Nedbank remains committed toachieving the 20% ROE target by 2007 despite the dilutive effects of the BEEtransaction and the accounting impacts of International Financial ReportingStandards (IFRS). The business delivered an improved efficiency ratio for the nine months to 30September 2005 of 67.1% (excluding the impact of BEE), compared to 68.6% at thehalf year, driven by a 1.2% decline in expenses. Growth of 17% in net interest income (NII) Positive growth of 17% in NII helped to increase the net interest margin for thenine months to 30 September to 3.45% from 3.18% for the year to 31 December2004. The margin has benefited from strong asset growth in Nedbank Retail, thesale of non-core assets and from the various initiatives undertaken in 2004.These have more than offset the industry margin pressure resulting from thelower interest rate environment. Non-interest revenue (NIR) set to grow NIR of R5.8 billion for the nine months was marginally higher than thecorresponding period last year (R5.7 billion). Whilst NIR has been negativelyimpacted by the sale of subsidiaries in 2004, deal-flow continues to improvewith commissions and fees showing good growth. Assets up 9% (annualised) Total assets at 30 September 2005 increased by 9% (annualised) to R350 billionfrom R328 billion at the year end, with strong growth experienced in retailadvances and in particular residential home loans. General Insurance - South Africa Strong results in a softening cycle Mutual & Federal has continued to perform strongly despite an ongoing softeningof the short term insurance market and increasing pricing pressure on premiumincome. Total gross premiums for the nine months to 30 September 2005 increasedby 7% to R6.0 billion (30 September 2004: R5.6 billion), assisted by the firsttime consolidation of Credit Guarantee Insurance Corporation. Healthy underwriting surplus maintained The underwriting surplus for the nine months to 30 September 2005 has remainedbroadly in line with the equivalent period last year, as the management ofclaims and expenses continues to positively impact results. Life Business - United States Growth in retail sales continues Total sales for the nine months to 30 September 2005 were $431 million on an APEbasis, an increase of 15% over the equivalent period in 2004. Life product sales for the nine months grew by 51%, illustrating the success ofour market penetration strategies. Offshore annuity sales through Old MutualBermuda grew by 80%. The increasingly efficient use of outsourced underwritingand administration services continues to differentiate the US operations bydelivering quality service combined with lower unit costs than our competitors. Management is taking the opportunity to prune distribution and products in thefinal quarter in order to complete the year within its targeted capital plansand to evolve the business to a more efficient distribution network. Margins stabilise The margin of 19% for the nine months to 30 September 2005 calculated underEuropean embedded value (EEV) methodology, reflects the positive investmentyields and premium volumes experienced over the first half of the year. Thethird quarter margin of 16% is, however more in line with long term expectationsunder EEV. On track to release capital by 2007 With funds under management achieving the $20 billion threshold, the businessremains on track to release capital in 2007. Asset Management - United States Record net cash flows: $27 billion Funds at our US Asset Management business increased by 21% to $224 billion at 30September 2005 from $185 billion at 31 December 2004, driven by record netinflows of client assets totalling $27 billion. During the third quarter of 2005, funds under management increased by $15billion or 7%. Net fund inflows during the quarter amounted to $7 billion,arising mainly in value equity and fixed income funds, as well as cashcollateral assets. Strong investment performance and net positive marketmovements accounted for the remaining $8 billion increase in total funds undermanagement. Progress has continued with our retail initiative, which has nowgenerated $1.2 billion in gross sales for the nine months. Divestitures of non-strategic firms and the addition of Investment Counselors ofMaryland accounted for a net reduction of $145 million in funds under managementduring the quarter. An announcement was made during the quarter that Barrow,Hanley, Mewhinney & Strauss would assume leadership of Pacific FinancialResearch (PFR) following the resignation of certain key employees of PFR. It isanticipated that this reorganisation may result in net outflows of PFR fundsover the remainder of this year. A controlling interest was acquired in Larch Lane, a New York-based hedge fundspecialist, in late October. Larch Lane currently manages funds totalling $0.7billion, invests in hedge funds and provides capital to early stage hedge fundmanagers. This acquisition further diversifies the asset management capabilitiesof the wider business. United Kingdom Excellent hedge fund performance The strong organic growth of the UK business continued during the third quarterwith funds under management at 30 September 2005 increasing to £5.8 billion, a£1.6 billion or 38% increase since the start of the year, with net cash inflowscontributing £0.9 billion to the increase. OMAM (UK), driven by excellent hedgefund performance, contributed £0.4 billion to net fund inflows. Selestia'sinvestment platform continued to attract new funds, with new business sales of£0.5 billion for the nine months to 30 September 2005, taking funds undermanagement to £1.3 billion. Group capital resources Old Mutual plc EUR500 million Upper Tier 2 transactionA Euro-denominated Upper Tier 2 transaction was announced on 21 October 2005resulting in the placement of EUR500 million of fixed to floating rate step-upundated subordinated notes to be listed on the London Stock Exchange with acoupon of 5%. This transaction places Old Mutual in a strong position to fund the potentialacquisition of Skandia, with any residual funds being used to make senior debtrepayments. R3.0 billion 8.92% subordinated callable note Separately, Old Mutual Life Assurance Company (South Africa) Limited (OMLAC(SA))approached the South African domestic market in October to raise regulatorycapital for its own purposes. The issue took advantage of a recent change inpolicy by the South African insurance regulator, the Financial Services Board,which now permits South African insurers to raise regulatory debt capital,subject to prior approval. OMLAC(SA)'s objective for issuing the instrument was to strengthen its capitalbase at a time when South African interest rates were low and credit appetitestrong, and to seek the diversification and greater flexibility of its capitalbase. Julian RobertsGroup Finance Director 14 November 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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