International wealth savings and management group Old Mutual on Thursday reported a solid performance for the first quarter in what it described as significantly more challenging market conditions.
The group’s pro forma Financial Groups Directive (FGD) surplus was £0,9-billion at March 31 2009 compared to £749-million at December 31 2008 with the increase during the period principally as a result of accrued profits as well as approximately £40-million from a Nedbank subordinated debt issue.
Julian Roberts, group chief executive, commented: “The group has delivered a solid performance for the first quarter despite the operating environment being profoundly different to the same period last year.
“Sales were affected by a shift in consumer sentiment, the closure of Bermuda to new business and the deliberate downsizing of our US Life business. Our Nordic and South African businesses, where we have significant scale, once again performed well.
“Funds under management have held up well over the past year relative to the marked fall in equity markets, and we continue to tighten expenses across the group.
“Strengthening our capital position remains a key priority for the group and I am pleased to report that our FGD surplus now stands at £0,9-billion, a significant increase on the year end principally as a result of accrued profits and a Nedbank subordinated debt issue.”
The group said that global market conditions had had an effect on its total funds under management.
“However, at £245-billion, these were reduced by only 7% from the position at December 31 2008 and reduced by only 6% since 31 March 2008. This reflects the relatively defensive nature of our clients’ assets, neutral client cash flows and overall sound investment performance.
“On a like-for-like basis, net of Skandia Australia which was sold during the period, funds under management were down only 6%. Net client cash outflows of £2,9-billion were mainly affected by the withdrawal of certain PIC funds in OMSA [as previously announced] as well as negative flows in our US Asset Management boutiques. Europe, however, contributed positive flows of £0,6-billion, demonstrating resilience in light of the market conditions. The overall Group APE margin was in line with expectations.”
Group life assurance sales (APE) declined by 25% to £316-million while long-term savings sales were down 14% to £315-million.
Unit trust sales were also down 14% to £1,458-billion.
The group said its overall capital position remains comfortable, with gearing in line with the internal target.
“All our long-term savings businesses are well capitalised. Our products in Europe are capital-light by their nature and therefore present very little capital risk. In South Africa, we have the strongest capital position and credit rating in the long-term insurance industry. We have hedges in place to protect against equity falls and have changed the asset allocation to reduce our exposure to equities.
“Our Bermuda business has significant excess capital over regulatory requirements and our US Life business maintained a Risk Based Capital ratio in line with its operating target. Nedbank’s key ratios also demonstrate its strong capital position.
“The group continues to meet group and individual entity capital requirements, and day-to-day liquidity needs through the group’s available credit facilities.
“The company’s primary existing revolving current facility of £1,25-billion does not mature until September 2012. The group’s available cash and facilities have not changed materially since December 31 2008.” — I-Net Bridge