Old Mutual (LON:OML) has updated investors on its recent performance this morning.
Highlights from the company statement:
Old Mutual Chief Executive Bruce Hemphill said: "We have started executing the managed separation and I am pleased with the progress that we have made since the announcement three months ago. We are now in a position to provide further guidance on our plans. Increased market volatility following the referendum decision to leave the EU does not affect our strategy although it may impact the performance of the underlying businesses.
"The expected headwinds of weaker and more volatile foreign exchange and equity markets to which we made reference at our preliminary results have materialised. However, the average value of the rand year-to-date 2016 has decreased by 22% as compared to the first half of 2015. We continue to keep operational management focused on maximising returns.
"We are working intensively with the businesses to prepare them for separation. We remain confident that the managed separation process will lead to the creation of shareholder value, and strong businesses for our customers, staff and other stakeholders."
At our preliminary results, we stated that we expected 2016 to be a challenging year if the rand remained weak for an extended period and if lower market levels continued. Following the occurrence of both in the year to date, Old Mutual has traded broadly in line with the Board's expectations. Gross sales in the year to date have been strong but we have seen continued weakness of the rand, the currency in which we generate most of our profits, volatility in other African currencies and lower average equity markets. Additionally, in OMW we will incur one-off expenses regarding the capping of exit fees in our Heritage book and in South Africa for the year to date we have seen larger than expected claims experiences in both Property & Casualty and the Corporate business.
Managed separation update
At Old Mutual's preliminary results for 2015, the company announced that the long term interests of its shareholders and other stakeholders would best be served by a managed separation of the Group into its four constituent businesses: Old Mutual Emerging Markets ("OMEM"), Nedbank, OMW and OMAM.
The managed separation will be effected in a manner that maximises value to shareholders over time and we expect it to be materially complete by the end of 2018. Implementing the managed separation will require a balance to be struck between the key criteria of value, cost, time and risk. During this period Old Mutual will:
· Continue to work with the businesses in delivering enhanced performance relative to their peer groups
· Manage Group debt obligations, central cost reductions and distributions to shareholders
· Fulfil its on-going regulatory obligations.
When we announced our preliminary results in 2015, we indicated that an extended period of a weaker rand would have an impact on our reported sterling results and lower equity market levels may put pressure on revenues. It is our expectation that the outcome of the EU Referendum on 23 June 2016 may add increased levels of market volatility which may impact the performance of the underlying businesses.