27 February 2007

South Africa: Old Mutual to Use Unclaimed Share Money for Charity Projects

Johannesburg — OLD Mutual will ask shareholders at its annual general meeting in May to approve a R1bn investment in small business, consumer education and community initiatives in SA.

CEO Jim Sutcliffe said yesterday the R1bn would come from the money left in its unclaimed share trust. Sutcliffe said about R1,4bn remained in the trust as a result of policyholders who had not claimed their free shares following the group's demutualisation in 1999. Some money would be held back to cover future claims, he said.

Sutcliffe was speaking at the release of the financial services group's results for the year to December.

With the acquisition of Skandia now under its belt, Sutcliffe said all engines at the group were delivering. SA and the Nordic region were providing steady growth through their large market shares and well known brands, while strong growth was coming from its businesses in the US, the UK and Europe. The group expected longer-term growth to come from Asia and Latin America, with a strong focus on China and India. Old Mutual had shot up the league tables in China, from number 21 when it opened for business there in 2005 to about the tenth-biggest life assurer. Growth in China and India would probably be organic, with no acquisitions planned.

For the year, the group reported a 137% rise in annual premium equivalent (APE) sales to £1,54bn. Unit trust sales rose 185% to £8bn. The value of new business was 116% higher at £244m, with net client cash flow 11% higher at £24bn. Funds under management at the group rose 31% to £239bn. This included funds from Skandia on a pro forma basis following its acquisition last February. "We do have much better growth potential than we did a year ago and a more diversified risk profile," Sutcliffe said.

Adjusted operating profit on an IFRS (international financial reporting standards) basis was 16% higher at £1,5bn. However, IFRS-adjusted operating earnings a share were 18% lower at 15,1p. This was due to the additional shares the group issued to help fund the acquisition of Skandia. The group raised its full-year dividend 14% to 6,25p.

Sutcliffe said the group would invest in new IT systems in Sweden. This would allow it to offer customers improved service and better products. While this had been anticipated when Old Mutual bought Skandia, he said the IT spending was more urgent than was previously thought.

Khaya Gobodo, head of equities at Renaissance Specialist Fund Managers, said the results were in line with his expectations. He said the company's move to quarterly reporting made expectations more predictable.

He said Old Mutual SA had delivered a reasonable performance given the problems the industry has faced. However, sales of life wrapped savings products remained under pressure as investors moved towards unit trusts.

Gobodo said the results of Old Mutual's South African operations were boosted by the continued turnaround at Nedbank and a good performance from its asset management business.

"The truth is, the profit on the life side is under pressure. It was in line with expectations but was not a great performance," Gobodo said.

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