Old Mutual Plans Africa Acquisitions as Profit Beats Estimates

Old Mutual Plc, Africa’s biggest insurer, set aside 5 billion rand ($550 million) for acquisitions in fast-growing countries on the continent after full-year profit beat analysts’ estimates.

The insurer, based in London, will spend the money on majority and minority stakes in firms selling insurance and savings products to Africa’s growing middle class over the next three to five years, Chief Executive Officer Julian Roberts said today on a call with reporters.

“We’re very committed to growing in Africa, growing organically, growing by acquisitions, and it won’t necessarily be by buying 100 percent of businesses,” he said.

Old Mutual paid 1 billion pounds ($1.5 billion) as a special dividend last year after reducing debt and selling its U.S. life-insurance arm, which caused the firm to lose money during the financial crisis and forced out previous management including former CEO Jim Sutcliffe. Old Mutual is now focusing on selling life insurance in faster-growing countries such as Kenya and Namibia in Sub-Saharan Africa as well as fund management in the U.K.

The shares increased as much as 3.2 percent, trading at 206.20 pence at 9:08 a.m. in London, up 1.8 percent. They have gained 15.7 percent this year.

Profit Surge

Operating profit, adjusted for goodwill, long-term investments and currency swings, climbed 18 percent to 1.61 billion pounds in 2012, beating the 1.57 billion-pound estimate of seven analysts, according to data compiled by Bloomberg. The firm increased its full-year dividend to 7 pence a share, beating the analysts’ estimate of 6.5 pence.

The results show “how the company wants to position itself, as the emerging-market dividend play,” said Alan Devlin, a London-based analyst at Barclays Plc with a hold rating on the stock. “They’re starting to push the dividend up, albeit from a low base compared with the rest of the sector.”

Old Mutual’s net income for 2012 jumped 76 percent to 1.17 billion pounds. Operating profit for emerging markets rose 19 percent to 605 million pounds as life insurance sales increased in Kenya and among South Africa’s growing middle class, the company said. The firm also said it is exploring ways to cut costs in Europe.

Old Mutual has “no timetable set” for a planned initial public offering of its U.S. asset-management unit, Roberts said.

“We’re pleased with progress of that business but it hasn’t yet got to the stage where we think it would be value enhancing to do an IPO,” he said.

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