Old Mutual Wealth moves strongly into profit as it prepares for life after OM plc

Old Mutual Wealth, the UK-based arm of Old Mutual plc, moved strongly into profit in the six months to the end of June, compared with a loss of £23m in the same six-month period of 2016, as it prepares for its eventual divestment from its FTSE 100-constituent parent.

In its scheduled half-yearly earnings statement this morning, Old Mutual Wealth said post-tax profit in the six months to the end of June totalled £42m, helped by solid gains in its investment operations. The pre-tax operating margin was 30%, compared with 28% in 2016.

Its Old Mutual International operation also performed well, as measured by net client cash flows (NCCF)  in its various regional operations, OMW said.

Net client cash flow across the OMW business grew by 53% to £4.9bn, while gross sales leapt 34% to £14.1bn; funds under management grew by 10% to £127.3bn.

With respect to the international (OMI) operation specifically, net client cash flows were double those of the prior year, at £400m, with particularly strong growth reported in the Middle East, where NCCF more than doubled, to  £203m, from £96m, the half-year data showed.

“The UK continued the strong momentum experienced through the whole of 2016, and NCCF grew by 36% in [the first half of 2017] to £103m, as the sales integration with the UK domestic business gained traction,” OMW said.

Funds under management 

Funds under management in the international business grew 5%, to £17.8bn, from the end of December,  on a like-for-like basis after removing £2bn in FUM for the South Africa branches.

Profit in the international area was described as “broadly flat” at £25m on a reported basis, “though on a like-for-like basis, ie, excluding the South African branches in H1 2016, profit was up 14%”, Old Mutual Wealth said in its statement.

The first half of 2017 saw OMI launch two new products: its Select Bond, a new model offshore bond, and the so-called Wealth Portfolio, which is a collaboration between OMI and its Old Mutual Wealth sibling business, Quilter Cheviot, that aims to “deliver enhanced investment outcomes for UK expats” in the form of a bond that is designed to be fully portable in the event that the client ever returns to the UK.

OMW’s UK advisory business, Intrinsic, posted lackluster results in the first six months of 2017, as its loss grew to £13m, from £9m in the same period of 2016. Half of this increase, OMW said, was due to increased contributions to the Financial Services Compensation Scheme, while the remainder was attributed to “costs associated with the growth of the business”.

Old Mutual Wealth acquired Intrinsic in 2014 from a group of life companies that owned it jointly. The previous year it had bought another advisory business, Positive Solutions, from Aegon. Earlier this year, it announced it would acquire Caerus, another advisory business.

Old Mutual Wealth chief executive Paul Feeney, pictured, said the results were “excellent”, and that in spite of “continued questions over the strength and resilience of the UK economy…we saw continued growth in net client cash flows,  with a particularly noteworthy performance in the UK platform and by both the multi-asset and single-strategy businesses in Old Mutual Global Investors.

“2017 continues to be a year of transition for Old Mutual Wealth, as we move towards our separation from Old Mutual plc, and we are excited about the opportunities ahead.”

As reported, Old Mutual plc announced in March 2016 that it would break itself into four parts in order to, as Old Mutual group chief executive Bruce Hemphill put it at the time, “unlock value currently trapped within the Group structure”.

In May, the possibility that the divestment of Old Mutual Wealth from its parent might take the form of a “small” initial public offering was mentioned in a routine trading update, published  ahead of the Old Mutual plc annual general meeting.

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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