London-listed financial services group Old Mutual weathered the turbulent global market conditions in the first half of the financial year, with all but one of its continuing business units producing good results, it said on Wednesday.
Earnings were maintained at a similar level to last year despite the downturn in markets.
As the difficult market conditions continue, the group says it will maintain its focus on delivering organic growth while keeping a tight rein on expenses and improving risk management.
The group has also stated its “absolute determination” to address the issues at its Bermuda business.
“Overall, we should not lose sight of the fact that our business has produced a good result. We have solid foundations, a clear strategy and a robust business that is operating well, and we look forward with confidence,” CEO Jim Sutcliffe said.
“Our business model — specifically the breadth of our product offerings and our geographic spread — gives us resilience and provides an excellent foundation for growth,” he said.
The group continued its strong investment performance. While most global equity markets fell about 15% to 20% during the first six months of the year, with the exception of the JSE, funds under management were down just 7%. This achievement “will not be lost on our clients”, Sutcliffe noted.
Net client cash inflows at 2% of opening funds under management on an annualised basis is a good result in these difficult markets, he noted.
“We achieved this investment performance as a result of the dynamic investment strategies adopted by our United States affiliates, the early success of Skandia Investment Group and an improved contribution from Old Mutual Investment Group South Africa as the boutique asset-management model becomes more established,” he said.
“We have continued to maintain a tight control over costs and this has contributed to an increase in adjusted operating profit,” he said.
In South Africa, profits at Nedbank and Old Mutual South Africa grew strongly, up 19% and 13% respectively.
The major disappointment in the period relates to the Bermuda book in the US Life business, which has overshadowed an otherwise robust performance by the group.
However, Sutcliffe noted that he has set up a far-reaching exercise that is already under way to “ensure we deal with the issue once and for all”.
“US Life is an important part of our group and I am determined that we take all the necessary steps to restore it to a proper level of profitability. We will report on our progress on remedial actions at the time of our preliminary results announcement in February next year,” he said.
Remedial action includes changes to management and a review of every aspect of the US Life business, paying particular attention to systems, management and risk.
He added that the integration of Skandia is complete and the business is delivering against the targets set following the acquisition.
“We are on track to achieve profits which are three times the 2005 level and we have delivered cost and revenue synergies of £79-million against the initial target of £70-million. We have built a solid foundation from which we can leverage further growth opportunities and operational excellence.
“Since the acquisition we have seen considerable growth in funds under management and have considerably enhanced our proposition for clients,” he said.
In India, Old Mutual’s joint venture business is performing well, and it has continued to build its distribution channels and has met its branch number target.
The new regional head office in Hong Kong is fully staffed and operational.
“Although markets have been weaker and are becoming more competitive, our team is focused on growing our geographic presence, distribution capability and product range, and continues to recruit high-quality people.
“Our Chinese business faced a more difficult market, and we are busy renovating the product range to face ever-increasing competition,” he said.
Old Mutual earlier reported adjusted operating earnings per share (IFRS basis) of 7,7 pence for the six months ended June from 8,2 pence the same period a year ago. Basic earnings per share were up 17% to 11,2 pence from 9,6 pence a year earlier.
The group’s adjusted operating profit from continuing operations (EEV basis) was up 26% to £937-million from £746-million previously, while adjusted operating profit from continuing operations (IFRS basis) was up 3% to £745-million from £721-million.
The interim dividend was up 6,5% to 2,45 pence, or 34,84 South African cents per share. — I-Net Bridge