OMI flows down by 33% due to QROPs drop
Net client cash flows to Old Mutual International have dropped 33% due to QROPs issues, parent Old Mutual Wealth revealed, as it announced its interim results earlier today.
Old Mutual Wealth (OMW) has reported a 31% drop in adjusted operating profit for the half year as at 30 June, compared to the same period in 2015, despite strong client cash flows, due to what the company has called “operational challenges and tough markets”.
In an announcement of its interim results earlier today, OMW said its international business, Old Mutual International, saw NCCF (net client cash flows) decrease by 33% to £0.2bn compared to 2015’s £0.3bn figure. This was due to what the company said were “economic conditions deteriorating in some regions and sales of QROPs being lower following last year’s pension reforms which removed some of the benefits of transferring to a QROPS for certain customers”.
However, funds under management increased by 6% to £16.9bn since the start of the year, the company said in its statement.
Adjusted operating profit, as at 30 June this year, for Old Mutual Wealth was down 31% to £104m (from £151m), including a £21m charge from changes to customer fees in the closed book Heritage operation, and lower operating margins generally. At Heritage the company capped pension exit fees at 1% for over 55’s and restructured Heritage fees elsewhere.
Cash flows up 39%
However, despite overall drop in profits net client cash flows (NCCF) were up 39% to £3.2bn, despite the period seeing many other investment companies suffer large outflows. In particular, flows into Old Mutual Global Investors (OMGI), led by Richard Buxton, were strong, with FUM up 7% from the end of 2015 to £111.2bn.
Elsewhere the statement highlighted that discretionary investment management through Quilter Cheviot saw NCCF at £0.4bn, in line with figures of the prior year period. FUM increased by 7% from the start of the year to £19bn with Quilter Cheviot expanding its geographic footprint by opening an office in Dubai.
Also, earlier this week, as reported, the company also finalised the sale of Old Mutual Wealth Italy with ERGO Italia, owned by Cinven, for €278m cash, plus interest to completion.
Paul Feeney, chief executive of Old Mutual Wealth, said: “This has been a challenging six months for Old Mutual Wealth, and the whole industry, with volatile markets dominating the first half of this year, indeed it was the worst period for net retail flows for the industry in 20 years. Against this backdrop, I am pleased with the resilient net client cash flow that the business delivered of £3.2bn, up 39% on that of the prior year.
“Our advice-led, vertically integrated strategy is delivering year on year growth in net flows, increasing our funds under management despite weaker markets. We are in a great position to build competitive advantage and deliver sustainable long-term growth in profits, cash generation and value.”
Fenney predicted more “challenging markets” as details of the UK’s exit from the EU are worked through but he said that he was confident that the company will “continue to make good progress in the run up to the eventual separation from Old Mutual plc.”
As reported here, in March, Old Mutual plc announced its intention to deliver Old Mutual Wealth into the hands of Old Mutual plc’s shareholders by way of a demerger and listing on both the London and Johannesburg Stock Exchanges. This remains subject to change and stakeholder consent as the firm plans to separate Old Mutual Emerging Markets (OMEM) and Old Mutual Wealth (OMW) and list on the Johannesburg and London Stock Exchanges.
“Significant work is being undertaken to prepare the businesses for independence, which is critical for success of managed separation. Business readiness, particularly for OMEM and OMW, is the main determinant for the timing of the process,” the statement said.
Old Mutual Wealth also said that it had reshaped its executive committee with Steven Braudo, chief operating officer, and Iain Wright, chief risk officer, both joining the company in 2016. The process of appointing an independent non-executive chairman is underway, the firm said. Simon Davies, Jane Hanson and Andy Pomfret have all decided to step down from the Old Mutual Wealth board in October.