Old Mutual Reports 14% Increase In Funds Under Management
November 7, 2013 by A.M. Best
Emphasizing its “continued shift from traditional insurance to modern investment products, “London-based financial services group Old Mutual plc reported a 14% increase in funds under management to 287.5 billion pounds ($US460.2 billion) since the beginning of 2013.
In releasing results for the third quarter, Old Mutual also said gross sales rose to 6.5 billion pounds from 5.9 billion pounds in the third quarter of 2012. Net client cash flow was 2.6 billion pounds, equal to 4% of opening funds under management, on an annualized basis, Old Mutual said. The third quarter of 2012 had seen an outflow of 800 million pounds.
Funds under management stood at 262.2 billion pounds at the end of 2012.
Marcus Barnard, an equity analyst at Oriel Securities in London, said Old Mutual’s cash flows looked good. But he expressed some disappointment at the figure for funds under management. While the U.S. figure “seems to be progressing quite nicely,” he said, the sterling figure was less than his expectations.
“It’s quite a complicated company because they have various operating segments,” Barnard told Best’s News Service.
Apart from its variety of activities, Barnard said, Old Mutual reports in sterling, South African rand and U.S. dollars, the last two of which were affected by currency movements. Despite its head office presence in London, Barnard estimates 70% of Old Mutual’s revenues are rand-based.
Asked about Old Mutual’s transition, Barnard pointed to the success of Old Mutual Wealth subsidiary Skandia in selling investment products. Old Mutual “has got some quite ambitious targets,” Barnard said. “And to date it seems to be going quite well.”
Old Mutual, which lists its business as insurance, investment, savings and banking, said its growth strategy will involve expansion in South Africa and in emerging markets. In the developed markets, Old Mutual hopes to increase the business of Old Mutual Wealth and build U.S Asset Management. Across the group ,Old Mutual wants to improve efficiencies and simplify its operations.
Emerging Markets had net client cash flow of 300 million pounds in the third quarter, up from an outflow of 200 million pounds in the previous year. Old Mutual Wealth had third-quarter cash flow of 600 million pounds, up from 500 million pounds. Nedbank Group Ltd., Old Mutual’s South African banking operation, had cash flow of 200 million pounds, up from 500,000 pounds. U.S. Asset Management had cash flow of 1.5 billion pounds, compared to an outflow of 1.6 billion pounds a year earlier.
“Our strong momentum continued with a third consecutive quarter of positive net client cash flow in all our businesses, “Julian Roberts, group chief executive, said in a statement.
Roberts pointed “healthy” sales in emerging markets and increased business from Old Mutual Wealth in the United Kingdom and by Old Mutual Global Investors. “U.S. Asset Management produced positive cash flows of 1.5 billion pounds.”
Roberts said he is confident that “our strategy and our geographic focus underpinned by our financial discipline leaves us well positioned for future growth.”
Barnard sees a determination from the current management of Old Mutual to focus on core activities. This strategy could include selling off or closing businesses, he said.
In two years, Barnard expects to see continued growth in emerging markets in Africa, outside of South Africa. But such ambitions, he added, must be balanced against the economic dominance of South Africa itself. Countries with potential for growth, he said, include Kenya, Nigeria, Ghana and Mozambique.
Barnard said he would not be surprised to see a partial initial public offering of Old Mutual’s U.S. Asset Management business, whose performance, he noted, has improved in recent years. The group also expects to see continued growth in wealth management.
A successful sale of Nedbank, Barnard said, “would simplify the group dramatically. However, I struggle to see how anyone could buy it, because there aren’t many buyers of the right size with the right sort of balance sheet.”
(By Robert O’Connor, London editor: Robert.OConnor@ambest.com)
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