Brexit uncertainty weighs on Quilter’s cash flows
If investor sentiment does not change soon, the situation could look dire by the time the company reports its half-year results
Uncertainty in Britain continued to hit former Old Mutual UK subsidiary Quilter hard in the first quarter of 2019 as investors sit on their money pending clearer indications on what the final Brexit terms will be.
The wealth manager, which houses most of Old Mutual’s former UK operations, including the Old Mutual Wealth UK Platform, Old Mutual International and the Old Mutual Wealth Heritage life assurance business, reported £200m net client cash outflows in the first three months of 2019.
“[It] reflects the impact that the uncertainty of the UK political environment continues to have on discretionary investor sentiment,” the company said in a statement.
Net client cash flows are the difference between what investment and wealth management companies receive from their customers in premiums and investment deposits and what they pay out over a specific financial period. A net outflow means more money left Quilter’s coffers in claims and withdrawals than clients invested.
However, when excluding money paid out in life claims from Quilter Life Assurance, Quilter’s net client inflows increased by £0.5bn. Excluding the impact of the life assurance business gives a fairer indication of the wealth and investment businesses’ performance as Quilter has deliberately been reducing its institutional book in the life business. Quilter Life Assurance recorded outflows of £900m of which a big part (£600m) was due to this reduction.
Excluding the life assurance business, Quilter increased assets under management by 2% on an annualised basis, which was substantially lower than the 8% increase reported in the first quarter of 2018.
If investor sentiment does not change soon, the situation could look dire by the time the company reports its half-year results as the wealth manager said it is expecting £200m to be drawn from its Quilter Cheviot business in the second quarter. Overall, Quilter’s assets under management stood at £114.9bn, a 5.1% increase since the end of 2018.
CEO Paul Feeney said that despite the macro-economic factors affecting investment by clients, Quilter’s integrated flows have been resilient and the company is satisfied by the level of customer asset retention across its businesses. Customer asset retention stood at 89% at the end of 2018.
“While near-term headwinds remain, this demonstrates that our clients and their advisers value Quilter’s integrated advice-led model, and continues to be supportive of our operating margin and revenue outlook.”