Old Mutual Sees Tougher Second Half as Rand Continues to Slide

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Old Mutual Plc, South Africa’s biggest insurer, said its second-half performance would probably be affected by the rand’s decline.

“The second half in sterling terms will be tough,” Julian Roberts, chief executive officer of the London-based insurer, said by phone on Thursday. “The main movement of the rand has been in the past few months.”

Old Mutual, which moved its headquarters to London in 1999 and also has U.S. operations, still makes the bulk of its earnings in South Africa. The rand has declined 4.2 percent against the pound since the end of June and reached a record 19.95 against the U.K. currency Wednesday.

Old Mutual’s first-half profit rose 25 percent to 419 million pounds ($655 million), the company said in a statement earlier. Boosted by growth in its South African operations, including Nedbank Group Ltd., and in the rest of the continent, basic earnings per share climbed 20 percent to 5.4 pence.

The earnings were better than market expectations “due to strong performances in Nedbank and Old Mutual Asset Management following a much quieter period for the group in terms of strategic developments,” Eamonn Flanagan, an analyst at Shore Capital Group Ltd. in London who has a hold rating on the stock, said in a note to clients.

U.S. Plans

Old Mutual rose 2.7 percent to 224.4 pence as of 8:54 a.m. in London trading, its highest intraday level since the end of May. It was the best performer on the eight-member FTSE 350 Life Insurance Index, which climbed 0.9 percent.

Old Mutual is focused on increasing sales of life insurance in faster-growing African markets and long-term savings products in the U.K., while developing its asset-management operations in the U.K., the U.S. and South Africa, where the company started 170 years ago

After the sale of a further stake in its U.S. asset manager, the unit’s “shareholder base is much improved,” Roberts said. While there are no plans to sell down any more shares, OMAM could choose to use its stock to buy stakes in affiliates, which would dilute the parent company’s holdings.

In West Africa, Old Mutual has sought to gain from its relationship with Ecobank Transnational Inc., Africa’s most geographically diverse lender and 20 percent owned by Nedbank. The insurer sells bancassurance products in Ghana through 35 Ecobank branches and will expand that to 79 branches by year end. Ecobank said in June it may sell stakes in its Nigerian business.

Ecobank Relationship

While Old Mutual is “comfortable” with its Ecobank relationship, the new CEO will have to decide on any plans for the alliance, Roberts said. Bruce Hemphill from Standard Bank Group Ltd. and previously Liberty Holdings Ltd., starts in the role on Nov. 1, he said.

Asked about his own plans, Roberts, 58, said he hoped to be able to pass on skills he has acquired in 15 years with Old Mutual and at other insurers before that.

“I need a break and to recharge,” he said, adding that in January he will be going to the Australian Open tennis tournament with his wife rather than traveling to Davos for the World Economic Forum. “I have had so many experiences it would be a shame not to mentor people and nurture that. But right now I actually need a break.”

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