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Old Mutual streamlines savings business as profits drop 66 per cent

Old Mutual is streamlining its long-term savings businesses under a single operating structure but will maintain Skandia and other brands.

The news comes as the insurer unveils a 66 per cent drop in pre-tax profits from £1.75bn in 2007 to £595m in 2008.

The pre-tax profits adjusted to reflect long-term investment returns were down from £1.62bn in 2007 to £999m in 2008.

Skandia UK and offshore adjusted pre-tax profits were down three per cent from £173m to £167m.

The strategic review announced in its preliminary full year results today also includes the sale of Old Mutual’s Australian business and the group’s exit from Portugal, but the streamlining of savings businesses is not expected to result in job losses.

Chief executive Julian Roberts says the group’s portfolio of businesses is currently too broad geographically and in its scope of business lines.

He says: “2008 presented major challenges for the group. The rapid deterioration combined with volatility in global financial markets, most notably in the fourth quarter, gave rise to an extremely difficult operating environment, while we faced a number of specific issues in our US life business.”

“Nevertheless, many parts of the group delivered strong performances, especially in the markets where we have scale and strong market positions.

“As a group we remain well capitalised with strong surpluses over required capital levels in each of our business units, but due to the very uncertain market conditions, we have decided to conserve capital and cash
levels despite our ability to withstand significant further deterioration in market conditions.

Roberts adds: “Going forward, I am determined to rigorously drive performance improvement and strengthen governance, while at the same time reshaping the group.”

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