Old Mutual profit drops 10%

LONDON – South Africa’s largest insurer, Old Mutual, unveiled a 10 per cent drop in annual operating profit on Monday and said it was increasing its stake in ailing banking unit Nedcor via a rights issue.

The London-listed company said it would take up R2,5 billion worth of shares in Nedcor’s R5 billion rights issue later this year. Losses at Nedcor, which has been hit by bookkeeping adjustments, poor trading and persistent high costs from its merger with smaller bank BoE, helped drag Old Mutual’s annual operating profit down 10 per cent to 650 million pounds.Clouded by uncertainty over the size of Nedcor’s losses, a Reuters poll of 10 analysts showed a range of 580 million to 713 million pounds for operating profit with a median forecast of 656 million.The operating figure includes returns on long-term investments, giving a clearer picture of an insurer’s financial health.Old Mutual has underwritten a 76 per cent part of Nedcor’s R5 billion rights issue alongside Merrill Lynch International and Deutsche Bank, who have jointly underwritten the balance.Old Mutual, whose businesses also include asset management and banking, already lent the 52-per cent-owned Nedcor US$288 million in December to shore up its balance sheet.Old Mutual’s shares in Johannesburg fell three per cent to R11,50 at the opening before retracing part of the drop to stand at R11,70, while Nedcor fell more than four per cent to R64,20 before recovering to trade unchanged.Old Mutual puts its embedded value – its underlying asset value plus prospects for profitability, a key indicator of an insurer’s worth – at 4,124 billion pounds.The group said life sales were 529 million pounds compared to 557 million the year before on an annual premium equivalent (APE) basis, an industry measure used to iron out volatility.It proposed an unchanged 4,8 pence-per-share dividend for the year.- Nampa-ReutersLosses at Nedcor, which has been hit by bookkeeping adjustments, poor trading and persistent high costs from its merger with smaller bank BoE, helped drag Old Mutual’s annual operating profit down 10 per cent to 650 million pounds. Clouded by uncertainty over the size of Nedcor’s losses, a Reuters poll of 10 analysts showed a range of 580 million to 713 million pounds for operating profit with a median forecast of 656 million. The operating figure includes returns on long-term investments, giving a clearer picture of an insurer’s financial health. Old Mutual has underwritten a 76 per cent part of Nedcor’s R5 billion rights issue alongside Merrill Lynch International and Deutsche Bank, who have jointly underwritten the balance. Old Mutual, whose businesses also include asset management and banking, already lent the 52-per cent-owned Nedcor US$288 million in December to shore up its balance sheet. Old Mutual’s shares in Johannesburg fell three per cent to R11,50 at the opening before retracing part of the drop to stand at R11,70, while Nedcor fell more than four per cent to R64,20 before recovering to trade unchanged. Old Mutual puts its embedded value – its underlying asset value plus prospects for profitability, a key indicator of an insurer’s worth – at 4,124 billion pounds. The group said life sales were 529 million pounds compared to 557 million the year before on an annual premium equivalent (APE) basis, an industry measure used to iron out volatility. It proposed an unchanged 4,8 pence-per-share dividend for the year. – Nampa-Reuters