LONDON, May 16, 2003 (PRIMEZONE) -- This announcement contains a report from the Board of Old Mutual plc (Other OTC:ODMTF) (LSE:OML) (the Company) on trading in the four months ended 30 April 2003. Nedcor Limited, the Company's separately JSE-listed banking subsidiary, is also giving concurrently with this release a detailed update on its own trading. The full text of Nedcor's statement is available on the Company's website, www.oldmutual.com.
Old Mutual's trading in the first four months of 2003 has followed the patterns of the last quarter of 2002 with solid performance in difficult trading conditions. Lower equity markets, particularly in South Africa, and a strengthening Rand have again been the backdrop. Our capital remains strong. Total assets have held up well, with funds under management at our US asset management business maintained at the year end level, and our embedded value per share has increased from 104p at the year end to 111p at 30 April 2003.
Our US life business achieved strong earnings growth, as profit from sales made last year continued to flow through. This earnings growth was offset by lower profits in our equity-oriented businesses and unrealised translation losses at Nedcor. These unrealised losses have reduced to R300 million at 15 May 2003. Due to this, overall, earnings were lower in Rand, but the effect was dampened in Sterling.
Total life sales on an Annual Premium Equivalent (APE) basis for the four months to 30 April 2003 were 166 million pounds, compared to 168 million pounds in the equivalent period in 2002. Our US life sales on an APE basis were lower than last year at 85 million pounds, compared to 103 million pounds in the equivalent period in 2002. Volumes are being controlled at levels lower than 2002 by conservative pricing, in a market where some competitors are being more aggressive. In South Africa, new business APE was flat at 81 million pounds. South African recurring premiums have been satisfactory, but retail single premiums, affected by the poor investment climate for equities, are some 21% lower than last year. Group single premiums, always lumpy, have benefited from the transfer of Nedcor's multi-management business to Old Mutual South Africa.
Life assurance margins were somewhat lower. In the USA, we had to give back some margin following the intentional slowdown in sales at the end of last year, against the background of aggressive competitor behaviour. In South Africa, product level margins have been firm. A different product mix has meant that our overall margins have returned to our target range, as our group business multi-manager sales have a lower margin than with-profit annuities, which were a major source of sales last year.
In the USA, we have been successful in securing positive net fund inflows of $1.3 billion in the asset management business (including $0.5 billion from the life business). Our distribution efforts have continued to deliver good results, but generally at lower margins due to the increasing proportion of fixed interest business. South African life assurance customers have been deterred by poor local equity markets and low absolute returns, and net cash flow from customers was again negative.
Nedcor's earnings were lower than those for the comparative period in 2002. Its operating result was adversely impacted by significant losses on the translation of offshore assets, reflecting Rand strength during the period, and tough market conditions. Organic growth in advances has been in line with credit extension and interest margins have been maintained, but the poor market for private equity and investment banking assets has held back non-interest revenue. The integration of BoE is on track and on target to achieve total merger benefits of R905 million by 2006.
Investment performance remains good in the US institutional businesses and has improved at OMAM(UK) and OMAM(SA).
Gerrard's trading activity remained robust during the period. Expenses were lower, and have been constrained generally - this is a key focus at present in all our businesses.
Capital During the past week, we have announced the successful issue of $750 million Guaranteed Cumulative Perpetual Preferred Securities, yielding 8% p.a. at issue, as part of our continuing financing programme. This issue strengthens our capital base, reduces dependence on short term debt and diversifies our sources of funding. Its success demonstrates the increasing acceptance of our name and credit among investors in the credit financing markets.
Holders of $636 million of our $650m Convertible Bonds did not exercise their put option, and these Bonds remain outstanding until maturity in May 2005.
Outlook Currency fluctuations and equity market movements have affected the performance of our Group and we are not expecting trading conditions to change dramatically over the immediate future. We remain well capitalised. This, together with our diversity, our focus on customer segments, the strength of our market positions and balance sheet give us confidence for the rest of the year.
Julian Roberts, Group Finance Director, will be hosting a conference call for analysts and investors at 8.30 a.m. GMT (9.30 a.m. South African time) this morning. The call will include a brief introduction followed by an opportunity for questions. Details of the dial-in and access arrangements were released yesterday.