UK-based long-term savings group Old Mutual plc (OML.L) reported Thursday a decline in fiscal 2009 pre-tax profit, on IFRS basis, while the company slipped to an after-tax loss, mainly due to the impact of marking-to-market of debt, and high tax rate. Adjusted operating profit before tax rose 3% in the year. Long-Term Savings segment recorded strong revenues in the year, benefited from improved market conditions, mainly in the second half. Further, the company said it is returning to dividend payment, with the recommendation of a final dividend.
On an IFRS basis, fiscal 2009 profit before tax fell to GBP 247 million from GBP 595 million a year ago. In the year, income tax expense was GBP 365 million, compared to last year's income tax credit of GBP 88 million.
On an after tax basis, the company recorded a loss of GBP 118 million, compared to prior year's profit of GBP 683 million. Loss for the year attributable to equity holders of the parent was GBP 340 million or 7.8 pence per share, while last year's profit was GBP 441 million or 8.1 pence per share. Old Mutual attributed the loss in the year largely to the impact of marking-to-market of Group debt, as the improvement in the external valuation of Group debt in 2009 negatively impacted profit after tax by GBP 263 million for the year, reversing the positive impact of GBP 503 million of marking-to-market its own debt instruments in 2008. The movement was also driven by the unusually high effective tax rate on the IFRS results.
Excluding certain items, IFRS adjusted operating profit before tax for 2009 was GBP 1.17 billion, up 3% from GBP 1.14 billion a year ago. Adjusted operating profit for the second half of 2009 was GBP 636 million, compared to GBP 316 million for the second half of 2008. Adjusted operating profit after tax attributable to ordinary equity holders declined to GBP 633 million from last year's GBP 778 million. Adjusted operating profit earnings per share were 12.1 pence for 2009, down 19% from 14.9 pence in 2008. The adjusted operating profit earnings per share for the second half of 2009 was 6.8 pence compared to 6.2 pence a year earlier.
On Market Consistent Embedded Value, or MCEV, basis, full-year total Group earnings before tax was GBP 1.93 billion, compared to a loss of GBP 1.06 billion in the prior year period.
Total Group MCEV earnings after tax for the financial year was GBP 1.78 billion, versus a loss of GBP 1.05 billion in the year-ago period. Group MCEV earnings for the financial year attributable to equity holders of the parent was GBP 1.56 billion, as against a loss of GBP 1.28 billion in the previous year period. Basic total Group MCEV earnings per ordinary share were 31.3 pence, compared with a loss of 25.7 pence a year ago.
Adjusted operating Group MCEV earnings after tax dropped to GBP 805 million from GBP 843 million last year, and adjusted operating Group MCEV earnings per share declined 3% to 10.7 pence from 11.0 pence a year ago. Adjusted operating Group MCEV earnings from core operations was GBP 581 million or 11.1 pence per share, lower than GBP 813 million or 15.5 pence per share in the year earlier period.
Group MCEV was GBP 7.63 billion or 144.5 pence per share, compared to prior year's GBP 5.26 billion or 99.7 pence per share. Adjusted Group MCEV for the financial year rose 45% to GBP 9.03 billion from GBP 6.21 billion in the same period last year. Adjusted Group MCEV per share were 171 pence, up from 117.6 pence last year, largely driven by the substantial reduction in corporate bond credit spreads in US Life, an increase in equity markets, positive exchange rate movements, and operating earnings from covered business, among other things. This was partially offset by a lower result in operations in Europe, and by an increase in the market value of listed debt and fair value of non-listed debt.
On IFRS basis, total revenues for the year was GBP 21.85 billion, compared to revenues of GBP 47 million in the previous year. Gross earned premiums for the year declined to GBP 3.82 billion from GBP 5.16 billion last year, and net earned premiums fell to GBP 3.45 billion from prior year's GBP 4.82 billion. In the year, the company's investment return, non-banking, was GBP 11.62 billion, compared to last year's negative return of GBP 11.58 billion.
Long-Term Savings, or LTS, segment recorded revenues of GBP 15.65 billion revenues in the year, compared to negative revenues of GBP 4.84 billion last year. LTS division's IFRS operating profits surged 52% from 2008 to GBP 685 million, largely driven by the turnaround in US Life.
Revenues from Emerging Markets surged to GBP 4.95 billion from GBP 1.81 billion a year ago, and Nordic revenues were GBP 2.52 billion, compared to last year's negative revenues of GBP 1.63 billion. Retail Europe recorded revenues of GBP 786 million, compared to negative revenues of GBP 785 million a year ago, and Wealth Management's revenues were GBP 6.03 billion, compared to negative revenues of GBP 5.61 billion in 2008. US Life generated revenues was GBP 1.358 billion, slightly lower than prior year's GBP 1.377 billion. Nedbank division's revenues were GBP 4.76 billion, higher than GBP 4.57 billion in the previous year.
Life assurance sales, on APE basis, dropped 6% to GBP 1.38 billion from last year's GBP 1.47 billion. Life assurance sales, on PVNBP basis, fell 6% to GBP 10.20 billion from GBP 10.81 billion a year ago. Unit trust/mutual fund sales for the year were GBP 7.57 billion, up 15% from GBP 6.60 billion in 2008.
In the year, the company's Funds under management, as of December 31, 2009 were GBP 285 billion, up 8% from GBP 265 billion at the end of 2008. US Asset Management's funds under management grew 9% to $261 billion.
Commenting on the results, Julian Roberts, Group Chief Executive, said, "Our operating results for 2009 are ahead of the previous year despite the highly volatile markets over the period. We benefited from improved market conditions in the second half, which resulted in greater demand for equity-based products from our clients, but the improvement also reflects our aggressive expense management as part of our drive to improve business performance. In the fourth quarter we saw especially good sales growth, with the strongest LTS quarterly sales performance for two years."
Roberts added, "We will rigorously drive performance improvement across all of our businesses and have introduced challenging three-year cost saving and return on equity targets. We anticipate further rationalisation of our activities and will exit markets where we do not have scale or our operations are not capable of achieving a return on equity of 15% over the next three years. We are exploring the disposal of US Life and anticipate a partial IPO of US Asset Management. However, we will only execute transactions when markets allow us to maximise value for shareholders."
"Together with further growth in assets under management as market conditions continue to improve, these actions are expected to have a significantly positive impact on underlying operating profitability and return on equity", he said.
Further, the company said its Board recommended a final dividend of 1.5 pence per 10p share for 2009. Subject to shareholders' approval, the dividend will be paid on June 25, 2010 to shareholders on the register at the close of business on May 14, 2010. The company is planning to offer, for the first time, a scrip dividend alternative for eligible shareholders subject to finalising the associated logistics and timetable.
On the London Stock Exchange, OML.L is currently trading at 120.20 pence, down 3.40 pence or 2.75%, on a volume of 8.1 million shares.
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