Old Mutual First-Half Earnings Rise on Emerging-Market Sales
Earnings in the period through June were 555 million pounds ($852 million), compared with 487 million pounds a year earlier, the London-based insurer said today in a statement. While the dividend increased 20 percent percent to 2.1 pence, adjusted earnings per share rose to 9.1 pence, missing the 9.5 pence median estimate of three analysts surveyed by Bloomberg.
Emerging markets performed well and “our U.S. asset management business had a very strong half, substantially contributing to our positive net client cash flows,” Chief Executive Officer Julian Roberts said in the statement.
Old Mutual has operations in Europe, the U.K., Latin America, Nigeria and South Africa. The U.K. this year banned fund management and life insurance firms from paying commission to financial advisers in return for sales, undermining demand for some products. Old Mutual, which set aside 5 billion rand ($505 million) for expansion in emerging markets, is focusing on fast-growing countries such as Kenya where it said in July it plans to buy a stake in lender Faulu Kenya DTM Ltd.
“We are working with our retail customers in South Africa to help them through a challenging economic environment,” the company said. “We are seeing improved conditions in the U.S. and the U.K., and sub-Saharan Africa continues to grow strongly.”
The stock rose 2.9 percent to 198.1 pence at the close of trading in London. Old Mutual has risen 11 percent in London this year, less than the average 25 percent gain on the eight-member FTSE 350 Life Insurance Index.
South Africa’s rand has weakened 14 percent against the dollar and more than 10 percent against the pound this year, making it the worst-performer of 16 major currencies tracked by Bloomberg.
The rand’s weakness took 1 pence off Old Mutual’s first-half earnings per share, Philip Broadley, the insurer’s chief financial officer, said on a conference call from London. While the weaker rand makes dividend growth higher for South Africa shareholders, continued weakness may take 2 pence or more off the full-year earnings per share figure, he said.
“The trends show progress in sales and operational effectiveness, but profit and balance sheet measures have been held back by currency movements,” Marcus Barnard, an analyst at Oriel Securities Ltd., said today in a note to investors. “Future share price moves should reflect the improvements in the underlying operating performance.”
Net income fell to 414 million pounds from 930 million pounds a year earlier following asset sales last year. The U.S. asset management operations are showing more consistent growth, according to Roberts, and an initial public offering of the business may be considered again sometime in the future after plans were delayed, he said.
Old Mutual started in South Africa more than 100 years ago and also owns Nedbank Group Ltd. (NED), the country’s fourth largest bank.
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