LONDON, May 18, 2001 (PRIMEZONE) -- At the Annual General Meeting of Old Mutual plc ("Old Mutual") (LSE:OML), held in London today, Mike Levett, Chairman & Chief Executive, made the following comments:
"The past year saw Old Mutual take two substantial steps toward our strategic goal of becoming a truly international financial services business. In April 2000 we completed the acquisition of Gerrard Group for 525 million pounds. Since then, Greig Middleton, the largest business in the Gerrard Group, has been combined with our Capel Cure Sharp business to form the largest private client stockbroking business in the UK. The combined business was re-launched under the Gerrard brand in January this year, and the integration of these businesses is currently moving ahead according to plan.
"In September we bought United Asset Management Corporation ("UAM') in the US for $2.2 billion. We have already taken major steps to re-organize UAM. Pilgrim Baxter, one of the key UAM affiliates, has been established as our principal mutual fund operation in the USA. Seven of the other UAM firms have been combined into a new US multi-style fund management firm, which we are calling OMAM US. We are also working with UAM's existing management to review and refocus the remaining UAM businesses. This process has entailed a number of sales of non-core affiliates, the main two so far being Murray Johnstone, which we sold to Aberdeen Asset Management in October, and Pell Rudman which we have recently agreed to sell to Amvescap for approximately $200 million.
"We have recently taken major steps to realize our plans to create a significant life assurance business in the USA with the proposed acquisition of Fidelity and Guaranty Life and the launch of Americom, both of which were announced towards the end of April. We launched a $650 million convertible bond in April, which was heavily over-subscribed. Total borrowings are carefully matched to assets and the key gearing ratio is being tightly controlled. Our pro forma gearing is at a comfortable level of 26%.
"We now have a solid platform for future development and can concentrate on delivering value from these acquisitions.
"In our Annual Report, I commented that economic conditions affecting our business were important to future performance and that conditions in 2001 might prove challenging. During the first quarter, the Group's performance has been affected by the trends in global currency and investment markets. The South African equity market was at approximately the same level at the end of last year and March of this year as at the start of 2000. On the other hand, the UK and US markets have seen declining equity values in the first quarter. Charges levied on assets are key drivers of the Group's life assurance and asset management operating profits. During the first quarter of 2001, the average Rand/Sterling exchange rate was 11.42, a decline of 8.5% compared to the average for 2000. Both market levels and exchange rates will have an important influence on the Group's results for the year.
"In South Africa, during the first quarter, life assurance new business premium levels have continued to be affected by market uncertainty. Agent recruitment, however, remains on target and expense levels continue to be aggressively managed.
"In Asset Management, the level of total funds under management held by the Group has been affected by market falls, although the diversified nature of the portfolios of UAM's affiliates has partly offset this. Net cash flows into US retail funds were satisfactory in light of market conditions in the three months to March, although trading volumes in the Group's UK financial services businesses were low.
"Average asset levels at Nedcor, our banking business, have increased in early 2001, and deposit levels remain positive, leading to increase an in market share. Non-interest revenues are strong and cost efficiencies continue to be realized in Nedcor's main businesses, but interest margins remain under pressure.
We are working hard to drive through our strategy and have achieved substantial growth in our first two years as a plc. The economic environment affecting our businesses (including equity market levels and exchange rates) continues to be important to our future performance. We remain confident, however, that the foundations we have laid provide a sound platform for building value for the future."
Notes to Editors:
Old Mutual plc is an international financial services company based in London, with expanding operations in life assurance, asset management, banking and general insurance. As the former South African Mutual Life Assurance Society, the company has operated in Africa for over 155 years. Following de-mutualization, the renamed Old Mutual plc listed on the London Stock Exchange in July 1999, and also listed on the Johannesburg, Namibian, Malawi and Zimbabwe stock exchanges. Market capitalization is approximately 5.6 billion pounds as at May 17, 2001.
Life Assurance
In Southern Africa, Old Mutual provides life, disability, health, retirement savings and investment products to individuals and groups. With over 3.2 million policyholders, a majority of whom it is estimated comes from formerly disadvantaged groups; Old Mutual has approximately 30% of the life assurance market in South Africa.
The Group recently reorganized its individual life operations into three segments to improve service and the quality of products offered. Old Mutual also offers leading eCommerce services. There are partnerships in networks and systems, working with Nedcor and Dimension Data, including joint investments in Internet Solutions, a leading South African corporate internet service provider, and Miraculum, a business-to-business electronic marketplace.
Old Mutual International is the offshore and international investment subsidiary, providing individually tailored offshore investments, life assurance and unit trusts from product companies based in Guernsey.
The group has also made two significant moves into the US life market this year. In March it acquired Unified Life Insurance Company, which was subsequently re-branded as Americom and will provide a platform to sell a suite of annuity and term products in the US through brokers. In April, Old Mutual announced the proposed $635 million acquisition of Fidelity and Guaranty Life.
During 2001, Old Mutual, in a joint venture with Kotak Mahindra Finance Ltd., one of India's largest financial services companies, has launched its first life assurance products in India.
Asset Management
Old Mutual is a world top 30-asset manager, with funds under management of about 169bn pounds at December 31, 2000. Old Mutual Asset Managers (OMAM) provides a multi-country asset management capability with global investment and asset management expertise, and has operations in three key financial centers: Johannesburg, London, and the USA. In retail investments Old Mutual Unit Trusts is the leading unit trust provider in South Africa.
Following the completion of the acquisition of Gerrard Group plc, parent company of Greig Middleton in March 2000, Old Mutual's subsidiary, Albert E. Sharp Securities, and Greig Middleton's institutional and stockbroking businesses, merged in May 2000 to form Old Mutual Securities, which focuses on the growth sector of corporate and advisory services for smaller and medium sized UK and European companies.
Old Mutual's merged private client businesses, Greig Middleton and Capel Cure Sharp, have been rebranded under the Gerrard name and are now under one management. The Gerrard Group is the leading provider of portfolio management and stockbroking services to high net-worth individuals in the UK. GNI is Old Mutual's specialized brokering and derivatives market subsidiary.
At the end of September 2000, Old Mutual plc completed the $2.2bn acquisition of United Asset Management Corporation, one of the largest investment management organizations in the world. UAM's operations are being reorganized: Seven member firms or "affiliates" have come together to form Old Mutual Asset Managers (US); Pilgrim Baxter, its largest affiliate, committed to a new long-term arrangement with Old Mutual designed to optimize future growth opportunities; new arrangements are being entered into with the remaining UAM affiliates on a case by case basis, including sale or MBO, where this maximizes shareholder value to Old Mutual.
Banking
Old Mutual's banking business is conducted principally by Nedcor, in which the company has a 53.4% controlling interest. Nedcor is the highest rated bank listed on the Johannesburg Stock Exchange. Its activities include retail, commercial, corporate and investment banking and asset management, with more than 2.4 million banking customers. Old Mutual and Nedcor's partnership with Dimension Data Holdings plc, a global network services company listed in London, has been restructured leaving the bank with an 8% interest in the listed company. In July 2000 it also acquired FBC Fidelity Bank, which will merge with Peoples Bank to create the biggest empowerment bank in South Africa.
General Insurance
Old Mutual holds a 51% controlling interest in Mutual & Federal, which writes motor, fire, accident, engineering and marine business. Mutual & Federal is one of the largest general insurers in South Africa. It is listed on the Johannesburg Stock Exchange, with operations in South Africa, Namibia, Botswana and Zimbabwe. During October 2000, it completed the acquisition of CGU Holdings Ltd., which lifted its market share from 12% to 20%.
Old Mutual Plc - Financials Results for the year ended December 31, 2000:
-- Operating profits based on a long-term investment return increased
38% to 911m pounds, in Rand terms up 47% to R9,585m.
-- Operating earnings per share based on a long-term investment
return also rose 38% to 17 pence, in Rand terms up 48% to 179.4\
cents.
-- Asset Management operating profit rose 158% to 124m pounds.
-- Continuing life assurance operating profits rose 12% to 478m
pounds, in Rand terms up 24% to R5,029m.
-- Embedded Value of 5.553m pounds, up 3% in Sterling terms and 17%
in Rand terms.
-- Banking operating profits increased 56% to 327m pounds.
Summary
Key Events 1999
-- May - Policyholders in the South African Mutual Life Assurance
Society approve de-mutualization
-- July - Listing of Old Mutual plc on LSE, JSE, ZSE, MSE, and NSE
Key Events 2000
-- March - 525m pounds acquisition of Gerrard Group
-- May - Greig Middleton and Albert E. Sharp Securities merged to
form Old Mutual Securities
-- September - $2.2bn acquisition of United Asset Management
Corporation
-- October - Mutual & Federal acquisition of CGU Holdings for 115m
pounds
-- October - Sale of Murray Johnstone by UAM for 150m pounds
-- December - Restructuring of UAM and formation of OMAM US
-- December - Re-branding of Capel Cure Sharp and launch of Gerrard
brand
Key Events 2001
-- March - Acquisition of Unified Life Insurance Company for $25m
-- April - Nedcor and Old Mutual join forces in offshore private
banking venture in the acquisition of Fleming Offshore Banking
-- April - Proposed acquisition of Fidelity and Guaranty Life for
$635 million
-- April - Launch of Americom Life
-- April - Launch of $650m convertible bond issue
-- April - Sale of UAM affiliate Pell Rudman for $200m