Old Mutual profit rises by 22%

LONDON – Insurer Old Mutual met forecasts yesterday with a 22 per cent rise in profit and boosted its dividend, but it warned exchange rates and investments in Europe and South Africa could hold back earnings growth in 2007.

In its first full-year results since the acquisition of Sweden’s Skandia last year, South Africa’s largest insurer said it was on track to meet cost-saving targets from the deal and said growth momentum would help offset this year’s headwinds – including the weak dollar and South African rand. “If currencies stayed where they are today, it’s a penny negative and the costs of these various expenses are another penny.Against that, you have underlying growth, which is really strong, and the impact of the LTIR (long-term investment return) going upwards,” Chief Executive Jim Sutcliffe told reporters.”There are pluses and minuses in there.”The insurer’s adjusted operating profit – boosted by a better-than-expected result from Skandia and strong sales – came in at 1,69 billion pounds on a European embedded value (EEV) basis, exactly in line with a Reuters poll of analyst estimates.That compares with 1,39 billion pounds last year.Statutory operating profit rose 16 per cent to 1,46 billion pounds and helped boost the dividend 14 per cent to 6,25 pence for the full year, at the high end of forecasts.”The acquisition of Skandia really seems to be kicking in.(There are) higher margins in the life business, good funds flow in the asset management business and the cashflow profile of the group looks good, as measured by IFRS profits,” analyst Raghu Hariharan at Fox-Pitt, Kelton said.Adjusted earnings per share, however, were hit by the dilutory effect of the Skandia deal and were down 18 per cent on a statutory basis and down 14 per cent under EEV.Nampa-Reuters”If currencies stayed where they are today, it’s a penny negative and the costs of these various expenses are another penny.Against that, you have underlying growth, which is really strong, and the impact of the LTIR (long-term investment return) going upwards,” Chief Executive Jim Sutcliffe told reporters.”There are pluses and minuses in there.”The insurer’s adjusted operating profit – boosted by a better-than-expected result from Skandia and strong sales – came in at 1,69 billion pounds on a European embedded value (EEV) basis, exactly in line with a Reuters poll of analyst estimates.That compares with 1,39 billion pounds last year.Statutory operating profit rose 16 per cent to 1,46 billion pounds and helped boost the dividend 14 per cent to 6,25 pence for the full year, at the high end of forecasts.”The acquisition of Skandia really seems to be kicking in.(There are) higher margins in the life business, good funds flow in the asset management business and the cashflow profile of the group looks good, as measured by IFRS profits,” analyst Raghu Hariharan at Fox-Pitt, Kelton said.Adjusted earnings per share, however, were hit by the dilutory effect of the Skandia deal and were down 18 per cent on a statutory basis and down 14 per cent under EEV.Nampa-Reuters