Plan on track to unlock value

THE OLD MUTUAL GROUP POINTS TO IMPROVED RESULTS AS IT ADVANCES ITS UNIT SEPARATION MANAGEMENT STRATEGY, WRITES

SANDILE MCHUNU

OLD Mutual Emerging Markets (OMEM) will make a return to South Africa before the end of the year on the back of a strong annual performance from the group, Old Mutual plc.

The group posted a 22% increase in pre-tax adjusted operating profit (AOP) to £2 billion (R33bn), up from last year’s £1.7bn for the year to end-december – ahead of market expectations .

The group said this week its strategy of managed separation aimed to unlock and create significant long-term value for shareholders, and remove the costs arising from it.

OMEM will list on the JSE as Old Mutual Limited (OML) before the end of the year. The group said it would also have a standard listing on the London Stock Exchange and secondary listings on stock exchanges in Malawi, Namibia and Zimbabwe.

The group said the old structure inhibited the efficient management and funding of future growth plans for the individual businesses, restricting them from reaching their full potential.

“We intend to unlock value through the separation of the three underlying businesses:

Old Mutual Emerging Markets (OMEM), Nedbank and Old Mutual Wealth (OMW), with OM Asset Management having already been separated,” the group said.

Chief executive Bruce Hemphill said the group had delivered on both of the commitments it made in March 2016.

“Firstly, as these results demonstrate, we have improved the performance of the underlying businesses and set them up for continued future growth. Secondly, we have carried out the preparation needed to give effect to the managed separation,” Hemphill said.

He added that the process had already delivered significant value through cost and debt reduction, “and we are on track for material completion of the managed separation with the listings of Old Mutual Limited and Quilter within our expected timetable”.

OMEM also reported growth during the period, achieving a 5% increase in pre-tax adjusted operating profit to R13.3bn, reflecting an exceptional growth in Old Mutual Insure (previously Mutual & Federal) and the Rest of Africa business.

Profit was up 46% to R10.21bn, from R7bn reported a year ago.

OMEM current chief executive and Old Mutual Limited chief executive designate Peter Moyo, said: “Our business performed well in a tough economic and competitive environment, thanks to the momentum we gained as we continued to make progress on our eight battlegrounds.”

He added that 2017 was a tale of two halves, with good growth in gross flows in the Mass and Foundation Cluster, Wealth and Investments and in Latin America during the second half of the year.

“We delivered full-year net client cash flow (NCCF) of R14.5bn. Particularly pleasing was the positive NCCF from Wealth and Investments of R14.1bn, compared to R1.8bn at the half-year. Funds under management closed at an impressive R1.2 trillion,” Moyo said.

Looking ahead, the group said OML’S investment case was strong.

“Our business remains highly cash generative and is wellpositioned, in the right markets, to drive added value from our franchises.

“We are privileged to have a business with a robust capital and liquidity position, which will further benefit from residual Old Mutual plc net assets following the managed separation,” Moyo said.

However, this week a legal claim was lodged in the US that reportedly involves the Travelers Companies, the US insurance giant, and St

Paul Fire and Marine Insurance Company. Old Mutual said it would resist a legal claim made against it by Travelers related to assets Old Mutual sold in 2011.

“We believe that this action is without merit and we will resist accordingly,” Old Mutual said, according to Stockmarketwire.com.