Wrap Text
Old Mutual plc Interim Management Statement
OLD MUTUAL PLC
ISIN: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Old Mutual plc
Ref 45/13
09 May 2013
Old Mutual plc Interim Management Statement
A good first quarter with positive NCCF in all businesses
• Funds under management up 7% to £288.4 billion
• Net Client Cash Flow of £3.9 billion, representing an annualised 6% of opening FUM
• Gross Sales are up 14% in the life and savings businesses
• Africa expansion progress:
o Nigerian life insurance business gaining customers and recording sales for the first
time
o Terms agreed for Nigerian general insurance acquisition
o Nedbank acquires a stake in a Mozambican bank
Julian Roberts, Group Chief Executive, commented:
“Old Mutual has had a good start to the year, with positive net client cash flow in all of our
businesses.
“Sales in Emerging Markets were strong. The UK recorded positive net flows despite some
market disruption following the introduction of the Retail Distribution Review.
“Nedbank has continued the progress it has established over the past 18 months and the
improvement at USAM continued with net client cash flow of £2.6 billion.
“We are pleased with the continuing trends in performance of our businesses, following the
rising equity markets in the first quarter and against a backdrop of continued challenging
macroeconomic conditions, we are confident in the prospects for the Group for the full year.”
Enquiries
External communications
Patrick Bowes UK +44 20 7002 7440
Investor relations
Dominic Lagan UK +44 20 7002 7190
Kelly de Kock SA +27 21 509 8709
Media
William Baldwin-Charles +44 20 7002 7133
+44 7834 524833
GROUP RESULTS
Group highlights for the three months ended
% of opening Q1 2012 (as % change
31 March 2013 (£bn)
Q1 2013 FUM ¹ reported) (reported)
Net client cash flow (NCCF)
Emerging Markets 0.4 3% 0.3 33%
Old Mutual Wealth ³ 0.4 2% 0.5 (20)%
Nedbank 0.5 17% 0.4 25%
US Asset Management ² 2.6 8% 2.5 4%
NCCF from core operations 3.9 6% 3.7 5%
31 December
Group highlights at 31 March 2013 (£bn) 2012
(constant % change 31 December
31 March currency (constant 2012 (as % change
2013 basis) currency) reported) (reported)
Funds under management (FUM)
Emerging Markets 54.6 51.7 6% 52.6 4%
Old Mutual Wealth ³ 74.5 69.2 8% 69.2 8%
Nedbank 12.4 11.5 7% 11.8 5%
Mutual & Federal 0.2 0.2 0% 0.2 0%
US Asset Management 146.7 137.3 7% 128.4 14%
FUM from core operations 288.4 269.9 7% 262.2 10%
Q1 2012
Group highlights for the three months ended (constant % change
31 March 2013 (£m) currency (constant Q1 2012 (as % change
Q1 2013 basis) currency) reported) (reported)
Gross sales
Emerging Markets 2,512 2,295 9% 2,616 (4)%
Old Mutual Wealth ³ 3,085 2,602 19% 2,602 19%
Total gross sales 5,597 4,897 14% 5,218 7%
Covered sales (APE)
Emerging Markets 121 102 19% 116 4%
Old Mutual Wealth 148 153 (3)% 153 (3)%
Total covered sales (APE) 269 255 6% 269 0%
Non-covered sales ?
Emerging Markets 1,770 1,702 4% 1,941 (9)%
Old Mutual Wealth ³ 1,546 1,117 38% 1,117 38%
US Asset Management ² - 349 (100)% 344 (100)%
Total non-covered sales 3,316 3,168 5% 3,402 (3)%
1 Annualised NCCF for core businesses
2
2 2012 comparative includes the results of OMCap, Dwight, and Lincluden, which were sold on 1 April 2012, OMAM(UK), which was transferred to Wealth
Management on 1 April 2012, and 2100 Xenon Group, 300 North Capital, Analytic Investors, Ashfield Capital Partners and Larch Lane Advisors, which
were sold during 2012.
3 Comparative period has not been restated for OMAM(UK)
4 Non-covered sales includes mutual funds, unit trust and other non-covered sales
Overview
External Environment
While the economy in South Africa continues to grow, it remains affected by continued global economic weakness and by the
lack of growth in Western Europe in particular. The International Monetary Fund (IMF) expects GDP growth in South Africa to
be 2.8% for 2013.
Growth in the other African countries where we operate remains strong, with the IMF’s World Economic Outlook forecasting
growth in sub Saharan Africa to average 5.6% in 2013 and 6.1% in 2014. In the UK, the savings market post the Retail
Distribution Review (RDR) has been disrupted with many Independent Financial Advisers (IFAs) experiencing challenges in
transitioning to the new regulatory framework. While these challenges are expected to remain in the short-term, we remain
confident that we are well placed to be net beneficiaries of the RDR.
Group Overview
Funds under Management (FUM) at the quarter end increased by 7% to £288.4 billion from £262.2 billion (as reported) at 31
December 2012 due to positive market movements and net client cash flow of £3.9 billion across the Group, with all core
business units contributing positive flows.
Emerging Markets
Emerging Markets maintained its momentum with a strong first quarter in 2013. Net inflows for the quarter were R5.7 billion, up
R1.5 billion on Q1 2012 largely due to a strong performance in Asia and Latin America, in particular from a large corporate deal
in Colombia and higher sales in China and Mexico. FUM increased by 6% from the year end to R765 billion. Gross sales rose
9% to R35 billion on the comparative period.
Life Annual Premium Equivalent (APE) sales were up 19% with the South African Mass Foundation Cluster (MFC) up 16%,
benefiting from a larger sales force and the inclusion of credit life sales, Rest of Africa up 18%, and Asian sales being
reclassified from non-covered sales to life APE sales. We are now trading in Nigeria via our joint venture with Ecobank. Non-
covered sales were up 4% to R24.6 billion, with particularly strong performances in Latin America and the Rest of Africa.
Old Mutual Wealth
Old Mutual Wealth had a resilient start to the year. Net client cash flow of £0.4 billion was flat (including OMAM(UK) in the
comparative period), in spite of a £225 million net outflow during the quarter following the sale of Skandia Nordic last year.
Total FUM of £74.5 billion was up 8% from the start of the year. Gross sales of £3.1 billion were up 19% on Q1 2012.
Our International business had a strong quarter with net inflows of £134 million, significantly higher than in Q1 2012 with an
improvement in sales in all regions where we operate, other than the UK. The continued uncertainty around new regulations
has had an impact on distribution in the UK, such that the UK platform net client cash flow was down 10% at £498 million. Old
Mutual Global Investors (OMGI) gross sales for the period were £1.5 billion, up 68%, helped in part by positive markets, but
more significantly by the first time inclusion of OMAM(UK) sales and an internal transfer into OMGI’s Select range. Further
Nordic outflows are expected in OMGI during 2013. OMGI continued to deliver strong investment performance in the period.
US Asset Management
US Asset Management had an encouraging first quarter with net client cash flow for the quarter totalling $4.1 billion with inflows
into a broad range of strategies. At the end of the quarter, FUM stood at $222.8 billion, up 7% ($14.2 billion) from the year end,
of which 4.8% of the increase was due to positive markets. Investment performance was stable compared to that at 31
December 2012 and continues to be key to future flows.
Nedbank
In the quarter, Nedbank grew net interest income by 7% to R5.1 billion. Non-interest revenue increased by 8% to R4.4 billion
driven by continued growth in commission and fee income. Nedbank remains on track to meet its earnings growth target in
2013, notwithstanding the more challenging economic environment. The credit loss ratio rose to 1.22% from 1.08% for Q1
2012. Nedbank agreed the acquisition of an initial 36% stake in Banco Unico in Mozambique for $24 million, subject to
regulatory approvals.
Mutual & Federal
The first quarter saw a continuation of the challenging claims environment experienced in 2012, with several large fire claims in
the Corporate and Commercial business lines, in addition to large weather-related claims in the agricultural business. We
continue to take steps to improve underwriting performance, including cost containment and selective pricing action on poor
performing lines of business, whilst developing the client base and broadening distribution channels. Terms were agreed in
respect of acquiring Ecobank’s general insurance operation in Nigeria and we are now awaiting regulatory approval.
Bermuda
At 31 March 2013, the estimated remaining cash cost of meeting future fifth anniversary guarantees to Universal Guaranteed
Option (UGO) Guaranteed Minimum Accumulation Benefit (GMAB) policyholders was $49 million (31 December 2012: $105
million, 30 September 2012: $305 million). The aggregate surrender rates remained in line with our assumptions. At 31 March
2013, 84% of the UGO GMAB contracts by guarantee amount had passed their five year top-up date with an aggregate
surrender rate of 79% for non-Hong Kong and 62% for Hong Kong contracts.
3
Outlook
We are pleased with the continuing trends in the performance of our businesses, following the rising equity markets in the first
quarter and, against a backdrop of continued challenging macroeconomic conditions, we are confident in the prospects for the
Group for the full year.
Notes to Editors:
A conference call for analysts and investors will take place at 09.00 (UK time) and 10.00 (South African time)
today. Analysts and investors who wish to participate in the call should dial the following numbers quoting
conference pin 97034284#:
UK and International (outside South Africa and US) +44 20 3139 4830
South Africa +27 21 672 4008
US + 1 718 873 9077
Please dial in 10 minutes before the scheduled start time of the call to avoid excess holding.
A replay facility will be available until midnight on 23 May 2013 on the following number, quoting access pin
638579#:
UK / standard international +44 20 3426 2807
Copies of this update, together with high-resolution images and biographical details of the Executive Directors of
Old Mutual plc, are available in electronic format to download from the Company’s website at
www.oldmutual.com.
This Interim Management Statement has been prepared in accordance with section 4.3 of the Disclosure and
Transparency Rules (DTR) and covers the period 1 January 2013 to 9 May 2013. Unless otherwise stated, all
percentage movements are presented on a local currency basis to exclude the impact of foreign exchange
movements. The business update is included in this Interim Management Statement. A Disclosure Supplement
relating to the Company’s business update can be found on our website. This contains key financial data for the
three months ended 31 March 2013.
Life assurance APE sales are calculated as the sum of (annualised) new regular premiums and 10% of the new
single premiums written in an annual reporting period.
Foreign exchange rates used for constant currency calculations versus GBP
Appreciation / Appreciation /
(depreciation) of local (depreciation) of local
Q1 2013 Q1 2012 currency FY 2012 currency
Average Rate* 13.90 12.19 (14)% 13.01 (7)%
Rand
Closing Rate 14.01 12.23 (15)% 13.77 (2)%
Average Rate* 1.55 1.57 1% 1.58 2%
USD
Closing Rate 1.52 1.60 5% 1.62 6%
* Average rate is for the three months to 31 March.
Cautionary statement
This announcement contains forward-looking statements relating to certain of Old Mutual plc’s plans and its
current goals and expectations relating to its future financial condition, performance and results. By their nature,
all forward-looking statements involve risk and uncertainty because they relate to future events and
circumstances that are beyond Old Mutual plc’s control including, among other things, global, and UK and South
African domestic, economic and business conditions, market-related risks such as fluctuations in interest rates
and exchange rates, policies and actions of regulatory authorities, the impact of competition, inflation, deflation,
the timing and impact of other uncertainties or of future acquisitions or combinations within relevant industries,
and the impact of tax and other legislation and other regulations in territories where Old Mutual plc or its affiliates
operate.
As a result, Old Mutual plc’s actual future financial condition, performance and results may differ materially from
the plans, goals and expectations set out in its forward-looking statements. Old Mutual plc undertakes no
obligation to update any forward-looking statements contained in this announcement or any other forward-looking
statements that it may make.
Old Mutual Emerging Markets
Gross sales*
Rm
Q1 2013 Q1 2012 % change
Mass Foundation Cluster 1,812 1,593 14%
Retail Affluent 12,106 11,561 5%
Corporate 3,524 2,712 30%
OMIGSA 6,227 8,486 (27)%
Total South Africa 23,669 24,352 (3)%
Rest of Africa 2,574 2,297 12%
Asia & Latin America 8,656 5,246 65%
Total Emerging Markets 34,899 31,895 9%
* Gross sales are cash inflows for the period and thus include prior period recurring premium flows
Covered sales (APE)
Rm
Single premium APE Regular premium APE Total APE
By Cluster: Q1 '13 Q1 '12 % Q1 '13 Q1 '12 % Q1 '13 Q1 '12 %
South Africa
Mass Foundation ¹ 1 1 0% 575 494 16% 576 495 16%
Retail Affluent 231 238 (3)% 348 340 2% 579 578 0%
Corporate 122 66 85% 43 88 (51)% 165 154 7%
Total South Africa 354 305 16% 966 922 5% 1,320 1,227 8%
Rest of Africa 48 40 20% 128 109 17% 176 149 18%
Asia & Latin America ² 89 6 1,383% 100 33 203% 189 39 385%
Total Emerging Markets 491 351 40% 1,194 1,064 12% 1,685 1,415 19%
Rm
Single premium APE Regular premium APE Total APE
By Product: Q1 '13 Q1 '12 % Q1 '13 Q1 '12 % Q1 '13 Q1 '12 %
Emerging Markets
Savings ² 385 281 37% 609 528 15% 994 809 23%
Protection - - 0% 585 536 9% 585 536 9%
Annuity 106 70 51% - - 0% 106 70 51%
Total Emerging Markets 491 351 40% 1,194 1,064 12% 1,685 1,415 19%
Non-covered gross sales
Rm
Unit trust / mutual fund sales Other non-covered sales Total non-covered sales
Q1 '13 Q1 '12 % Q1 '13 Q1 '12 % Q1 '13 Q1 '12 %
South Africa 6,454 6,189 4% 9,219 10,846 (15)% 15,673 17,035 (8)%
Rest of Africa 1,110 932 19% 659 575 15% 1,769 1,507 17%
Asia & Latin America ² 7,148 4,727 51% - 386 (100)% 7,148 5,113 40%
Emerging markets 14,712 11,848 24% 9,878 11,807 (16)% 24,590 23,655 4%
¹ MFC includes OMF credit life sales of R48 million in 2013
² Sales from Asia have been reclassified from non-covered to covered APE sales from 2013
Old Mutual Wealth
Gross sales* and funds under management
£bn
Market and
other
1-Jan-13 Gross Sales Redemptions Net flows movements 31-Mar-13
Invest & Grow markets
UK Platform 22.6 1.0 (0.5) 0.5 1.6 24.7
International 4 13.9 0.4 (0.2) 0.2 0.7 14.8
OMGI 13.8 1.5 (1.4) 0.1 1.1 15.0
Total Invest & Grow 50.3 2.9 (2.1) 0.8 3.4 54.5
Manage for Value markets
OM Wealth Europe - open book ¹ 5.9 0.4 (0.2) 0.2 0.3 6.4
Heritage business ² ? 19.0 0.4 (0.7) (0.3) 1.3 20.0
Total Manage for Value 24.9 0.8 (0.9) (0.1) 1.6 26.4
Elimination of intra-Group assets ³ (6.0) (0.6) 0.3 (0.3) (0.1) (6.4)
Total Old Mutual Wealth 69.2 3.1 (2.7) 0.4 4.9 74.5
* Gross sales are cash inflows for the period and thus include prior period recurring premium flows
¹ Includes business written in France, Italy and Poland
² Includes UK Heritage and OMW Europe closed book (Germany, Austria and Switzerland)
³ Represents assets and flows managed by OMGI on behalf of other Old Mutual Wealth businesses
4 From Q1 2013, the Lichtenstein business has been reported within OMW Europe (closed book) rather than International. Comparatives for 2012
have been restated
Covered sales
£m
Gross single premiums APE regular premiums Total APE
Q1 '13 Q1 '12 % Q1 '13 Q1 '12 % Q1 '13 Q1 '12 %
Invest & Grow markets
UK Platform 433 506 (14)% 6 8 (25)% 49 59 (17)%
International 399 311 28% 7 10 (30)% 47 41 15%
Total Invest & Grow 832 817 2% 13 18 (28)% 96 100 (4)%
Manage for Value markets
OM Wealth Europe – open book ¹ 359 238 51% 3 7 (57)% 39 31 26%
Heritage business ² 31 66 (53)% 10 16 (38)% 13 22 (41)%
Total Manage for Value 390 304 28% 13 23 (43)% 52 53 (2)%
Total Old Mutual Wealth 1,222 1,121 9% 26 41 (37)% 148 153 (3)%
¹ Includes business written in France, Italy and Poland
² Includes UK Heritage and OMW Europe closed book (Germany, Austria and Switzerland)
Non-covered gross sales
£m
Q1 '13 Q1 '12 %
Invest & Grow markets
UK Platform 489 560 (13)%
OMGI ¹ 873 331 164%
Total Invest & Grow 1,362 891 53%
Manage for Value markets
OM Wealth Europe – open book ³ 16 6 167%
Heritage business ² 168 220 (24)%
Total Manage for Value 184 226 (19)%
Total Old Mutual Wealth 1,546 1,117 38%
¹ Excludes the transfer of intra-group assets. Comparative does not include OMAM(UK) sales of £270 million
² Includes UK Heritage and OMW Europe closed book (Germany, Austria and Switzerland)
³ OMW Europe open book business written in France, Italy and Poland
Bermuda reserve development
The movement in guarantee reserves over the last three years is shown below:
$m
Guarantee reserves Actual cumulative Estimated remaining Total estimated
Calculation date for UGO GMAB top-ups paid top-up payment cash cost
31-Mar-11 573 - 303 303
31-Mar-12 794 18 463 481
31-Mar-13 153 473 49 522
Financial Groups Directive
The Financial Groups Directive (FGD) surplus was £2.0 billion at 31 March 2013.
Exposure to sovereign debt in Portugal, Italy, Ireland, Greece, Spain, Cyprus and France
The Group has no exposure to the sovereign debt of Portugal, Italy, Ireland, Greece, Spain or Cyprus. The
Group’s exposure to French sovereign debt is £4.7 million.
Lead Sponsor:
Merrill Lynch South Africa (Pty) Ltd
Joint Sponsor:
Nedbank Capital
7
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