International long-term savings, investment and protection group Old Mutual plc (OML) indicated on Friday that its preliminary results for 2011, scheduled for release on 9 March 2012, are expected to reflect continued strong operational performance in the second half of 2011.

Sterling earnings from the group's South African businesses, it said, were favourably impacted by Rand movements in the first half of 2011.

“The Rand has weakened in the second half, which negatively impacted Sterling earnings for the full 2011 year and reduced the Group's Sterling unaudited net asset value at 31 December 2011. The translation impact on the Group's Sterling net asset value as at 30 June 2011 of the Rand depreciation was approximately GBP940m.

“However, this reduction in net assets will be partially offset by profits earned over the period, the inclusion of the other African operations in the consolidated results of the Group and other financial and foreign exchange movements,” the group, which has listings in Johannesburg and London, said.

It added that management information indicated that in the fourth quarter of 2011 net client cash flows in the Long Term Savings business remained positive and although APE life assurance sales for the fourth quarter were below those of the equivalent period in 2010, unit trust sales were ahead of the fourth quarter of 2010.

“The Nordic business within Long Term Savings has continued to benefit from its product depth and good operational performance.”

Turning to South Africa, Old Mutual said that Nedbank was in a good position to deliver solid earnings growth in the second half of 2011, notwithstanding the strong second half of 2010.

In the US Asset Management business, net client cash outflows were expected to continue during the fourth quarter of 2011 largely due to short-term outflows.

“The carrying value of goodwill included in the US Asset Management statement of financial position is dependent on growth rate assumptions. As part of its results process, the Group is reviewing these assumptions in the context of the outlook for US nominal GDP growth.

“It is likely that the growth rate will be reduced as a result of the review, in which case it is expected that there would be a goodwill impairment charge of approximately GBP270 million. The impairment charge would be excluded from Adjusted Operating Profit but would reduce IFRS net income and the net asset value in the 31 December 2011 statement of financial position.

“As indicated in the third quarter interim management statement, certain African businesses will be consolidated for the first time for the year ended 31 December 2011. It is expected that this will result in an increase in net assets of approximately GBP200 million,” Old Mutual said.

Regarding its treasury and capital operations, the group said that the pro-forma Financial Groups Directive surplus was GBP1.9 billion at 30 September 2011. All the Group's businesses remained well capitalised throughout the period. The Financial Groups Directive surplus at 31 December 2011 was estimated to be in line with that at 30 September 2011.

“Since the third quarter interim management statement, the Group repaid on 18 January 2012 the remaining Euro200 million (GBP166.5 million) of the Euro750 million Euro bond that was partially redeemed in July 2011. The Group has therefore completed the repayment of GBP0.6 billion in cash towards the Group's target of GBP1.5 billion debt repayment by 31 December 2012,” Old Mutual said.

Referring to its non-core businesses, the group said Bermuda remained a non-core business in run-off. Reserves in respect of Guaranteed Minimum Accumulation Benefits, to which shareholders were exposed, had reduced by $42 million (GBP26.6 million) in the first half of 2011, but increased by $541 million (GBP342.2 million) in the third quarter of 2011.

“The Group estimates Guaranteed Minimum Accumulation Benefits reserves as at 31 December 2011 to be below those announced for 30 September 2011 in the third quarter interim management statement.” - I-Net Bridge