Mutual cause for satisfaction

Halfway through what has been a busy year for Old Mutual, and a
volatile one for the markets, how satisfied are you with these results?

I am satisfied with the results. I think what we’ve seen is that the existing
businesses have all produced well.
We’ve seen good IFRS profits at Nedbank. We’ve seen an 11% increase in IFRS
earnings in the US life business. And we’ve seen growth in unit trust sales of
70%, which is clearly a highlight, showing that the customers are giving us more

There has been continued good investment performance in the
US asset management business, with over 80% of the clients receiving returns in
excess of their benchmarks. So the old Old Mutual businesses have all done

And then we’ve seen the Skandia businesses, which I think are ahead of
expectations in IFRS terms. And I think the sales results have come through
well, too. Each of those three businesses ­ Skandia in Nordic, Skandia in
Europe, and Skandia in the UK ­ have all produced good profits.
On the back of that we’ve been able to declare an increase in the dividend of
13.5%, to 2.1p, which I think reflects our underlying comfort with the way the
business is going.

You say that Skandia has transformed the shape of the business. What
exactly do you mean by that?

There are the obvious things. Clearly, the VNB (value of new business) has more
than doubled because of the acquisition of Skandia. Assets under management are
up £42bn. Sales are more than double as well.

So you’re seeing those kind of growth statistics change the shape of the
results that we produce on days like today.

But I think in addition to that it has changed the whole aspect of Old
Mutual, because the growth trajectory of the business is now hugely higher. The
risk profile is much lower. The base for going forward as an international
business is much better. We’ve moved ourselves from being a business with two
centres to being a genuinely international business.

You also say that Skandia will provide a significant enhancement in
European embedded value (EEV) earnings from 2007 onwards. Can you be more
specific? And what about the other targets that you’ve set Skandia?

Certainly as far as EEV earnings go, what we’ve said is we expect EEV to be
accretive from next year onwards. We continue to expect that.

The exact rates of accretion and so on will depend on the development of all
the businesses, but if you look at the developments in the first half of this
year, it’s most definitely on track.

The other primary target that was laid out ­ we’re not ducking any of them,
they’re all there ­ but the primary target was the tripling of IFRS earnings
from 2005 to 2008. And with that in particular you’ve seen a very fast start.
We’re over halfway there, in fact, if you just look at the rate that was
delivered in the first half of 2006.

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