It is not easy to put Old Mutual into one bracket because the UK/South African-based group offers asset management services, life assurance, banking and general insurance. However, one thing that is clear is that trading in 2009 started on a pretty dreadful note but showed a steady improvement as the year progressed.
The poor trading climate that prevailed in the earlier part of the year resulted in net earned premium income falling from £4.82bn to £3.45bn. However, Old Mutual was quick to address the problems that were principally in the group's Bermuda operation and the US life business, which resulted in the Bermuda operation being put into run-off, while the US operation was scaled back significantly. Life sales in that business declined 57 per cent last year, but measures taken to reduce overheads resulted in a 33 per cent reduction in the cost base and a return to profitability, with margins at an impressive 20 per cent. Overall group life assurance sales actually held up pretty well, falling just 6 per cent to £1.38bn, which reflected weakness in the European business - sales in the region fell from £91m to £67m - and the US, where sales declined 50 per cent to £68m.
On the asset management side, funds under management increased from £265bn to £285bn, but that was not that impressive considering how strongly markets performed last year. In fact, there was a group net cash outflow of £3.1bn, most of which was accounted for by a £4.1bn outflow in US asset management in the fourth quarter. Still, Old Mutual's balance sheet remains in good shape, and funds held in excess of Financial Group Directive requirements doubled to £1.5bn.
Subject to revision, Keefe Bruyette & Woods expects 2010 EPS of 13.2p.
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| OLD MUTUAL (OML) | ||||
|---|---|---|---|---|
| ORD PRICE: | 122p | MARKET VALUE: | £6.62bn | |
| TOUCH: | 121-122p | 12-MONTH HIGH: | 125p | LOW: 35p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | na | |
| NET ASSET VALUE: | 197p* | EMBEDDED VALUE: | 145p** | |
| Year to 31 Dec | Gross premiums (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 4.47 | 1.61 | 25.1 | 5.50 |
| 2006 | 4.71 | 1.71 | 17.0 | 6.25 |
| 2007 | 5.57 | 1.75 | 19.2 | 6.85 |
| 2008 | 5.16 | 0.60 | 8.6 | 2.45 |
| 2009 | 3.82 | 0.25 | -7.8 | 1.50 |
| % change | -26 | -58 | - | -39 |
Ex-div: 12 May Payment: 25 Jun *Includes intangible assets of £5.16bn, or 95p a share **Calculated on a market consistent embedded value basis | ||||
