Old Mutual's earnings off 30%

Insurer Old Mutual PLC reported Wednesday a 30 percent drop in 2008 profits as its U.S. Life unit made a large loss, hurt by the collapse of financial institutions such as Lehman Brothers and Freddie Mac and Fannie Mae.
MAR 04, 2009
By  Bloomberg
Insurer Old Mutual PLC reported Wednesday a 30 percent drop in 2008 profits as its U.S. Life unit made a large loss, hurt by the collapse of financial institutions such as Lehman Brothers and Freddie Mac and Fannie Mae. The company, which has operations in the U.S., Europe and South Africa, reported a post-tax operating profit of 641 million pounds ($901 million), down from 914 million pounds in 2007. Old Mutual saw a net outflow of client cash of 1.2 billion pounds, compared to an inflow of 23.4 billion pounds in 2007. U.S. Life lost 270 million pounds in 2008, compared to a profit of 260 million pounds the year before. The unit's fixed income portfolio recorded impairments of $237 million in the fourth quarter, raising the full-year total to $768 million. That included losses of $78 million on the failure of Washington Mutual, $50 million on the collapse of Lehman brothers, $98 million on three foreign financial institutions which were not identified and $151 million on preferred stock in Freddie Mac and Fannie Mae. Funds under management ended the year at $20.7 billion, down 14 percent from the opening position primarily due to a 21 percent decrease in the market value of the funds. "The rapid deterioration combined with volatility in global financial markets, most notably in the fourth quarter, gave rise to an extremely difficult operating environment, while we faced a number of specific issues in our U.S. Life business," said Chief Executive Julian Roberts. "Nevertheless, many parts of the group delivered strong performances, especially in the markets where we have scale and strong market positions. "As a group we remain well capitalized with strong surpluses over required capital levels in each of our business units, but due to the very uncertain market conditions, we have decided to conserve capital and cash levels despite our ability to withstand significant further deterioration in market conditions." Investors welcomed the earnings report, sending Old Mutual shares up 2.1 percent at 38.3 pence on the London Stock Exchange. The company said its portfolio of businesses was too broad, operating in too many places and conducting too many lines of business. "However in the current environment, major rationalization of our portfolio of businesses would be extremely difficult and, if achievable, would almost certainly destroy value for our shareholders," the report said. "At this stage, we have therefore concluded that it will take some time to achieve our optimal business structure." Old Mutual has agreed to sell its Australian business and it has withdrawn from Portugal. It plans to close its office in Hong Kong while general scaling back its aspirations in Asia.

Latest News

NASAA moves to let state RIAs use client testimonials, aligning with SEC rule
NASAA moves to let state RIAs use client testimonials, aligning with SEC rule

A new proposal could end the ban on promoting client reviews in states like California and Connecticut, giving state-registered advisors a level playing field with their SEC-registered peers.

Could 401(k) plan participants gain from guided personalization?
Could 401(k) plan participants gain from guided personalization?

Morningstar research data show improved retirement trajectories for self-directors and allocators placed in managed accounts.

UBS sees a net loss of 111 financial advisors in the Americas during the second quarter
UBS sees a net loss of 111 financial advisors in the Americas during the second quarter

Some in the industry say that more UBS financial advisors this year will be heading for the exits.

JPMorgan reopens fight with fintechs, crypto over fees for customer data
JPMorgan reopens fight with fintechs, crypto over fees for customer data

The Wall Street giant has blasted data middlemen as digital freeloaders, but tech firms and consumer advocates are pushing back.

The average retiree is facing $173K in health care costs, Fidelity says
The average retiree is facing $173K in health care costs, Fidelity says

Research reveals a 4% year-on-year increase in expenses that one in five Americans, including one-quarter of Gen Xers, say they have not planned for.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.