Old Mutual CEO keeping an eye on Nedcor

Posted On Thursday, 01 April 2004 02:00 Published by
Rate this item
(0 votes)
Old Mutual plc (OML), the London and South African-listed financial services company that is South Africa's largest life insurer, has reinforced its support for troubled banking subsidiary Nedcor (NED), while at the same time maintaining a tough line on its future performance.

By Lynn Bolin

Old Mutual plc (OML), the London and South African-listed financial services company that is South Africa's largest life insurer, has reinforced its support for troubled banking subsidiary Nedcor (NED), while at the same time maintaining a tough line on its future performance.

Nedcor, which is 52% owned by Old Mutual, produced very poor results in 2003, heavily impacted by the cost of holding excess dollars as the rand strengthened. Margins were affected by fixed rate debt and deposits, which were expensive as interest rates declined.

Writing in the company's 2003 Annual Report, Old Mutual CEO Jim Sutcliffe said: "Nedcor is an important part of Old Mutual: decisive action has been taken to address its problems and management will not countenance any shortfall from the highest standards of integrity and transparency.

"New governance procedures have been introduced to ensure stronger oversight of the bank's affairs and to ensure the coherence of Nedcor with Old Mutual standards and strategy."

Sutcliffe added that Nedcor's new management has "focused its energies on plans to ensure Nedcor returns to producing results commensurate with its status as a premier South African bank. These include achieving world-class service and expense benchmarks."

To ensure the problems of 2003 were not repeated, plans were being put in place to address all areas of the business, he reassured investors.

Sutcliffe added that the group saw many opportunities for South Africa and for Old Mutual arising from the new South African Financial Sector Charter, which sets out targets for the involvement of previously disadvantaged individuals in the local financial services sector, and would continue to inform the markets on its progress in addressing the Charter's objectives during 2004.

Regarding the year ahead, Sutcliffe noted that Old Mutual's capital position at 31 December 2003 was strong, with its gearing of 19.4% at year-end well inside its limits.

The company was also able to support the Nedcor's R5.0-billion rights issue comfortably.

"We have much to do to recover from poor 2003 results, but we enter 2004 with renewed determination, and with equity markets around the world at higher levels than last year," he wrote. "We have taken the necessary steps to put Nedcor on the path to recovery.

"We will continue to apply top quality investment skills, be they in equity, lending, real estate or elsewhere, to help our clients build and protect their savings and investments. We expect our industry to grow as those savings and investments accumulate, and we intend to provide a correspondingly growing stream of earnings to our shareholders," he concluded.

Old Mutual reported adjusted operating profit for the year to December 31, 2003, of sterling 650 million, equivalent to 10 pence per share (2002:sterling 724 million and 11.3 pence respectively). Group adjusted operating profit in rand terms was R8.04-billion, equivalent to 123.8 cents per share (2002: 11.43 billion and 179 cents respectively).

Solid profits in its core South African life assurance business, good profit growth in its US and UK businesses, and excellent results from some of its smaller units were offset by a collapse in earnings at Nedcor.

The strong rand further boosted the sterling results, but adversely affected the results when expressed in South African currency terms.

Return on equity was disappointing at 13.9%. Old Mutual's adjusted embedded value increased by 5% to sterling 4.1 billion at year-end, equivalent to

107.5 pence per share.

I-Net Bridge 01 April 2004


Publisher: Inet Bridge
Source: Business Day

Most Popular

Investec Property Fund launches first REIT sustainability-linked ESG bond in Africa

Apr 22, 2021
Darryl_Mayers_CEO
Investec Property Fund (‘IPF’ or ‘the Fund’) today became the first South African real…

Rethinking office space in post pandemic SA

Apr 20, 2021
90_Rivonia_results
Since the beginning of the pandemic, one of the biggest questions in real estate has been…

EPP’s new app takes tenant relations to the next level

Apr 22, 2021
Tomasz_Trzósło
Johannesburg Stock Exchange listed EPP, Poland’s biggest retail landlord, continues to…

4 simple rules to getting a good credit score

Apr 21, 2021
Carl_Coetzee_BetterBond_CEO
Make buying your dream home an informed purchase by knowing your credit score.

Western Cape ripe with affordable housing potential

Apr 20, 2021
Tuhf_Hi_res24
The TUHF Western Cape regional team believes that even though COVID has had an impact on…

Please publish modules in offcanvas position.