LONDON, Aug. 9, 2001 (PRIMEZONE) -- London Pacific Group Limited (NYSE:LDP) (LSE:LPG) today reported consolidated net income for the quarter ended June 30, 2001 of $29.4 million, or $0.54 per diluted share and ADR, compared with net income of $339.8 million, or $5.62 per diluted share and ADR, for the second quarter of 2000.
For the six months ended June 30, 2001, the consolidated net loss was $150.8 million, or $(2.94) per diluted share and ADR, compared with $284.3 million of net income, or $4.72 per diluted share and ADR, for the same period in 2000.
Arthur I. Trueger, London Pacific Group executive chairman, said: "It is a pleasure to report a profit in the second quarter to shareholders. This comes mainly as a result of equity market improvements after what appears to have been an equity market low point in April. Sales of annuity products continue to be strong and London Pacific Advisors announced two significant institutional relationships."
London Pacific Group Limited, based in Jersey, Channel Islands, is a financial services company with four business areas: annuities, financial advisory services, asset management and venture capital management. London Pacific's operating companies gather assets through their distribution networks in the U.S. and U.K.
Highlights:
-- Net realized and unrealized investment gains of $32.3 million were responsible for the second quarter net income due to the improvements in the values of listed technology holdings. Finisar Corporation acquired Shomiti Systems during the period. The most significant public technology stocks, held by Group operating companies at the end of the quarter, were Saba Software (2,456,151 shares valued at $40.3 million), New Focus (4,615,386 shares valued at $38.1 million) and Packeteer (2,446,302 shares valued at $30.7 million).
-- Book value per share was $7.42 as of June 30, 2001, reflecting the net asset value of the Group before the deduction of the cost of the shares held by the employee benefit trusts.
-- Assets under management, consulting or administration as of June 30, 2001 were $5.7 billion, up from $4.6 billion as of March 31, 2001, after the addition of new institutional business at London Pacific Advisors ("LPA").
-- Since the end of the first quarter of 2001, LPA has announced new institutional relationships with Wells Fargo and CSFBdirect Institutional for LPA's web-based investment consulting services.
-- A semi-annual dividend of 11.0 cents per share gross, or 8.8 cents per ADR, will be paid to shareholders and ADR holders on the register as of August 24, 2001. The dividend will be paid on September 4, 2001 to shareholders, with an ex-dividend date of August 22, 2001. The dividend will be paid to ADR holders on September 14, 2001, with an ex-dividend date of August 22, 2001.
The news release, in its entirety, including the financial tables and Chairman's Statement, can be found at the following link:
http://www.primezone.com/files/LDP_Earnings.doc
Statements contained herein which are not historical facts are forward-looking statements that involve a number of risks and uncertainties that could cause the actual results of the future events described in such forward-looking statements to differ materially from those anticipated in such forward-looking statements. Factors that could cause or contribute to deviations from the forward-looking statements include, but are not limited to, (i) variations in demand for the Group's products and services, (ii) the success of new products and services provided by the Group, (iii) the credit ratings of the Group's insurance subsidiaries, (iv) significant changes in net cash flows in or out of the Group's businesses, (v) fluctuations in the performance of debt and equity markets worldwide, (vi) the enactment of adverse state, federal or foreign regulation or changes in government policy or regulation (including accounting standards) affecting the Group's operations, (vii) the effect of economic conditions and interest rates in the U.S., the U.K. or internationally, (viii) the ability of the Group's subsidiaries to compete in their respective businesses, and (ix) the ability of the Group to attract and retain key personnel. The Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise.
Chairman's Statement
It is a pleasure to report a profit in the second quarter to shareholders. Net income for the quarter was $29.4 million. This comes mainly as a result of equity market improvements after what appears to have been an equity market low point in April. We will maintain the interim dividend at 11 cents per share gross or 8.8 cents per ADR.
Shareholders should expect to see our results fluctuate along with the equity market impact on our public equity and venture capital holdings in operating subsidiaries, such as London Pacific Life & Annuity and London Pacific Assurance. Until Nasdaq improves substantially our reported results will be negatively affected. Most commentators do not expect substantial improvement this year.
The Nasdaq downturn is driven by a significant reintrenchment in the technology investment business. That business has been excellent in recent years but is now experiencing its worst correction in recorded memory. Much of this is due to over building in the telecommunications sector, and the much trumpeted burst of the dot com bubble.
Your company has navigated through this minefield reasonably well, avoiding the dot.com disaster totally. The telecom sector has been a bit more complicated for us and we have written down or written off companies in this sector. Despite this some of our telecom investments continue to thrive especially those enhancing existing networks for large incumbent carriers or providing software to ease provisioning of their networks. Anything with "next generation" in it or aimed at the newer phone companies is not selling in this market. We are beginning to see some increase in semiconductor demand but this has not yet played through to our semiconductor portfolio.
A slow year in the equity markets is a boom year for fixed return products. Both of our annuity companies are showing strong premium growth and we expect this to continue. Investors flee to products which guarantee principal and interest when equity markets are uncertain. We are also seeing strong new asset growth where we offer investment styles which are conservative and defensive. Berkeley Capital Management brought in substantial new assets for its value investment style in the first half of this year. It is exciting to see the power of these distribution channels working together. Your company could bring in as much as $1 billion in new assets this year. We are of the opinion that fees in distribution or administration can be comparable to fund management with the assets being less volatile since they are not dependent on investment performance. The twin strategies of adding assets in conservative product classes and administration begin to produce strong asset growth which bulks up the company and improves critical mass. Such a strategy actually works better in down markets.
London Pacific Advisors appears to be maturing as a company. It recently announced two new relationships with Wells Fargo Bank and Credit Suisse. Both of these are software platforms which model portfolio composition and performance for networks of independent financial advisors. We have extensive experience dealing with these professionals since other companies in the group distribute through this channel. We hope to exit the year with up to ten clients and profitability in the fourth quarter. The elegance of this model is that it grows with the client. As they add assets our fees increase without additional expenditure on our part.
This is one of the three themes driving the company. The London Pacific Advisors business model leverages the success of well funded independent, bank and brokerage networks of financial advisors. As they grow, we grow. We are baked in as a format for the presentation of their services. Distribution is the second theme. Sweep in asset growth through growing advisor networks of our own at London Pacific Life & Annuity and London Pacific Assurance. Again the independent financial advisor is the preferred way to acquire assets. At Berkeley Capital Management enjoy comparable asset growth through wrap brokerage relationships with premier brokerage firms. Try to hold assets through competitive investment performance. Last but not least, enhance asset performance in operating subsidiaries through venture capital performance. Wait out the bad equity market environment and enjoy the turnaround when it comes.
That is the strategy we are implementing. We are very much in a cash preservation and capital protection mode. We will make new investments selectively where the valuation and prospects are compelling. We do not expect market conditions to improve materially in 2001 but when they do we will be well positioned to participate forcefully.
Arthur I. Trueger Executive Chairman
August 9, 2001
London Pacific Group Limited
Condensed Consolidated Statements of Income Under US GAAP
(unaudited)
In thousands, except per share and ADR amounts
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Investment income $ 35,603 $ 27,547 $ 70,591 $ 53,332
Insurance policy charges 1,455 2,011 2,836 3,838
Financial advisory
services, asset
management and
other fee income 6,588 7,231 13,192 16,996
Net realized investment
gains (losses) (10,235) (8,596) 20,866 188
Change in net unrealized
investment gains and
losses on trading
securities 42,548 426,338 (176,097) 354,193
75,959 454,531 (68,612) 428,547
Expenses:
Interest credited on
insurance policyholder
accounts 29,601 22,330 57,051 42,775
Amortization of deferred
policy acquisition costs 5,869 5,947 11,551 11,242
Operating expenses 13,665 16,039 26,845 29,260
Goodwill amortization 58 57 115 115
Interest expense 658 2 1,336 14
49,851 44,375 96,898 83,406
Income (loss) before
income tax expense 26,108 410,156 (165,510) 345,141
Income tax expense
(benefit) (3,275) 70,325 (14,667) 60,848
Net income (loss) $ 29,383 $339,831 $(150,843) $284,293
Interim dividend
declared(1)(2) - (2001
and 2000: 110 cents
per share gross;
88 cents per ADR) -- -- $ 4,504 $ 4,608
Basic earnings (loss)
per share and ADR $ 0.58 $ 6.57 $ (2.94) $ 5.59
Diluted earnings (loss)
per share and ADR $ 0.54 $ 5.62 $ (2.94) $ 4.72
(1) Dividend payable on September 4, 2001 to shareholders on the
register as of August 24, 2001, with an ex-dividend date of
August 22, 2001
(2) Dividend payable on September 14, 2001 to ADR holders on the
register as of August 24, 2001, with an ex- dividend date of
August 22, 2001
London Pacific Group Limited
Condensed Consolidated Balance Sheets Under US GAAP
(unaudited)
In thousands, except share amounts
June 30, December 31,
2001 2000
Assets:
Cash and cash equivalents $ 97,737 $ 114,285
Investments, principally of life
insurance subsidiaries:
Fixed maturities:
Available-for-sale, at fair value
(amortized cost: $1,562,677 and
$1,352,313 as of June 30, 2001
and December 31, 2000,
respectively) 1,524,789 1,292,015
Held-to-maturity, at amortized cost
(fair value: $108,137 and
$129,400 as of June 30, 2001 and
December 31, 2000, respectively) 105,476 127,514
Equity securities:
Trading, at fair value (cost:
$84,128 and $99,747 as of June
30, 2001 and December 31, 2000,
respectively) 162,181 353,896
Available-for-sale, at fair value
(cost: $265,712 and $238,942 as
of June 30, 2001 and December
31, 2000, respectively) 259,126 229,403
Policy loans 10,559 10,301
Total investments 2,062,131 2,013,129
Accrued investment income 33,032 28,629
Deferred policy acquisition costs 164,665 168,102
Assets held in separate accounts 230,891 206,325
Receivables 29,629 17,222
Other assets 19,003 15,296
Total assets $ 2,637,088 $ 2,562,988
Liabilities:
Life insurance policy liabilities $ 1,893,297 $ 1,691,601
Liabilities related to separate accounts 224,173 203,806
Notes payable 36,874 35,556
Income taxes payable 23,304 2,674
Deferred income tax liabilities 4,046 41,587
Accounts payable, accruals and
other liabilities 40,866 20,022
Total liabilities 2,222,560 1,995,246
Commitments and contingencies
Shareholders' equity:
Ordinary shares, $005 par value per share:
authorized 86,400,000 shares; issued
and outstanding 64,439,073 and
64,433,313 shares as of June 30, 2001
and December 31, 2000, respectively 3,222 3,222
Additional paid-in capital 68,274 67,591
Retained earnings 421,996 580,176
Employee benefit trusts, at cost
(shares: 13,698,181 and 12,811,381 as
of June 30, 2001 and December 31,
2000, respectively) (63,599) (58,003)
Accumulated other comprehensive
income (loss) (15,365) (25,244)
Total shareholders' equity 414,528 567,742
Total liabilities and
shareholders' equity $ 2,637,088 $ 2,562,988
This news release can be found in its entirety, including the "Limited Condensed Consolidated Statements of Cash Flows" financial table which is not included above, at http://www.primezone.com/files/LDP_Earnings.doc