LONDON, March 6, 2001 (PRIMEZONE) -- Old Mutual plc (LSE:OML.L) announces preliminary results for the year ended 31 December 2000:
Commenting on the results, Mike Levett, Old Mutual's Chairman and Chief Executive issued the following:
This past year has seen the Group move rapidly to develop its core businesses and build an international presence through acquisitions in the United Kingdom and the United States. Our acquisitions of the Gerrard Group in March 2000 and United Asset Management Corporation (UAM) in October 2000 have strengthened our international platform to complement our formidable base in the South African financial services market.
Our operating profit of £911 million has grown by 38%, with our newly acquired companies contributing £33 million in the periods of 2000 for which their results were consolidated. Operating earnings per share has increased by 38% to 17.0 pence and embedded value increased 3% to £5,553 million.
The Group was delighted to obtain an A2 senior unsecured issuer rating from Moody's Investor Service in November. This rating is important to the Group in optimising its capital structure through appropriate use of debt finance.
Life Assurance
Operating profit at our life operations was £478 million, an increase of 12% in Sterling terms (20% in Rand terms). You will remember that the comparative figures for 1999 include a number of one-off positive effects arising from last year's very strong investment market.
The underlying value of new business on an embedded value basis increased 16% to £72 million after taking into account the impact of the new tax regime in South Africa and demutualisation effects.
The Group reorganised its individual life operations in South Africa into three segments this year to improve service and the quality of products offered to customers. We have also successfully launched a number of individual and group product ranges and bancassurance initiatives, and have managed costs effectively to enhance shareholder value.
Internationally, the Group entered into a joint venture in life assurance with Kotak Mahindra in India, in September. We have recently announced the acquisition of Unified Life, which will provide a platform to sell a suite of annuity and term products in the U.S. through brokers.
Asset Management
The operating profit of our asset management businesses increased 158% to £124 million from £48 million in 1999.
Our asset management business took a significant step forward following the acquisition of UAM for $2.9 billion in October. This acquisition added some $200 billion of funds under management. As part of our ongoing review of the business, we have commenced the restructuring of UAM's operations, forming Old Mutual Asset Managers (US) from seven affiliates who, together with Pilgrim Baxter, have entered into new arrangements designed to allow full earnings participation rather than operating in accordance with the revenue-sharing arrangements previously in place. We are delighted with the way the management of these enterprises have endorsed these initiatives.
Our private client business has also undergone significant change this year, following completion of the acquisition of Gerrard Group plc for £529 million in March 2000. Greig Middleton and Capel Cure Sharp have been relaunched under the Gerrard name and are now under one management. As with any large integration, there are some hurdles to overcome over the short term, however, we are confident of meeting the challenges ahead. The money market operations of Gerrard & King, the discount house acquired as part of Gerrard Group, were wound down over the last quarter of 2000, and its collateral management capability was rehoused under its fellow subsidiary, GNI.
Banking
The operating profit of our banking business increased by 56% to £327 million from £210 million in 1999, with the main contributor to these results being Nedcor, our 53% owned subsidiary. Nedcor continues to meet world class operational standards, whilst investing prudently in technology and retail joint ventures that will provide future opportunities for growth and development. Following the successful flotation of Dimension Data Holdings plc on the London Stock Exchange in December, Nedcor restructured its holdings in the Dimension Data group, retaining an 8% interest in the listed company. This restructuring resulted in a gain of £356 million being recorded in the profit and loss account as a non-operating item.
General Insurance
The contribution of Mutual & Federal Insurance Company, our 51% owned general insurance subsidiary, to the Group's operating earnings, benefited from a marked improvement in underwriting results in the second half of 2000, as well as from its £106 million acquisition of CGNU's South African business during the fourth quarter. Investment return was lower as a result of the impact of special dividends on asset values. Mutual & Federal has maintained its position as one of the leading general insurers in South Africa.
Market factors
The Group's presentation of operating earnings using a long term rate of investment return smooths out the volatile effects of market movements on the Group's results for the year. The effect of actual market movements on shareholder investment values is depicted as short term fluctuations, which were an adverse £180 million in 2000, principally reflecting movements in the JSE All Share Index. Profit after tax and minority interest for the year was £506 million compared to £1,066 million for 1999.
Whilst operating earnings in South Africa have been strongly positive in Rand terms, their contribution to Group profit has been affected by the continued depreciation in the Rand/Sterling exchange rate, which, using average rates, is some 7% down on 1999. This reduced operating profits for 2000 by approximately £59 million, compared to the average exchange rate that prevailed in 1999.
Management/Employees
I am pleased that in the last year we have significantly strengthened management of the Group. Jim Sutcliffe joined as Chief Executive, Life, in January 2000, and Julian Roberts as Group Finance Director in August 2000, following Eric Anstee's appointment as Chief Executive, Financial Services. Richard Laubscher, Chief Executive of Nedcor, was appointed as an Executive Director of the Company from 1 January 2001.
In addition to appointing a new Chief Executive for our South African Life operations, we have recruited key personnel for our UK businesses, and taken important steps to restructure and strengthen management within our newly acquired U.S. operations. To all our new colleagues in the Group, I would like to extend a particularly warm welcome. I would also like to thank all employees of the Group for their contribution to Old Mutual plc in an exciting and successful year.
Dividend
The directors are proposing a final dividend of 3.1p per share, making a total dividend for the year of 4.7p per share, an increase of 18% on last year's proforma. Using current exchange rates, this represents a final dividend of 32.7c and a total for the year of 49.5c, an increase of 26%. The dividend is covered 3.6 times by an operating earnings per share of 17.0p.
The dividend, which is subject to approval at the AGM on 18 May 2001, will be paid to shareholders on the register at the close of business on 20 April 2001 (record date) for all the exchanges where Old Mutual plc's shares are listed. The shares will trade ex-dividend from the opening of business on 18th April 2001. The local currency equivalents of the proposed dividend for shareholders on the South African, Malawi and Zimbabwe branch registers and the Namibian section of the principal register will be determined using exchange rates on 12 April 2001. The conversion rates will be announced by the Company on 17 April 2001.
Outlook
The Group set itself a great deal to accomplish in 2000 and has worked hard to drive through its strategy. The economic environment affecting our businesses remains important to future performance, and conditions may prove challenging in 2001. We are confident however that the foundations we have established this year provide a sound platform for building value for the future.