Old Mutual profits up 30% in 2005

Old Mutual profits up 30% in 2005

	Published : Tue, 28 Feb 2006 22:10 By : David Simms Print this Story

LONDON: South African insurance firm Old Mutual Plc. reported a 30 per cent increase in 2005 operating profit aided by strong investment sales in South Africa and an earnings recovery in one of its banking units, Nedbank.

London-headquartered Old Mutual said its adjusted operating profit increased to 1.24 billion pounds from 954 million in 2004.

Chief Executive Jim Sutcliffe said 2005 marked strong organic growth for the company, particularly in its South African and U.S. investment operations. As the company has now virtually annexed Swedish savings group Skandia for 3.9 billion pounds, Sutcliffe expected further growth.

Old Mutual now owns 89.54 per cent of Skandia and Skandia investors have time until March 14 to accept the offer.

The increase in profits had been on account of a strong performance from South African banking unit Nedbank, where profits rose 78 per cent following a successful restructuring programme. Profits at the South African life assurance and asset management division rose 2 per cent, but the division incurred higher investment costs and faced stiff competition. The insurer had decided to cut its prices in order to be competitive in the market, which had affected the profit margin on new life business -- which is down 16 per cent from 21 per cent in the previous year. At Mutual & Federal, the South African general insurance unit, profits were down 1 per cent due to a cyclical downturn in premium prices.

In the U.S., there had been strong sales in the first three quarters, but reserve charges of $40 million brought down profits by 9 per cent.

Sutcliffe said the company will not go for a single global brand. Instead it will have several brands under the Old Mutual umbrella. Skandia will be one of them and in total there are some 30 different brands.

Old Mutual said its embedded value per share would drop to 165 pence from 175.6 pence at the end of 2005, because of the issuing of stocks to Skandia shareholders.

The company has set its final dividend at 3.65 pence per share, taking the total payout for 2005 to 5.5 pence, a 5 per cent increase over 2004.

Old Mutual shares in London fell 1 per cent to 194 pence.