Old Mutual Split Forges Ahead Even as Brexit Risks Returns

  • Insurer to separately list South African, wealth businesses
  • CEO Hemphill sees extended period of rand, market weakness

Old Mutual Plc logo sits in Johannesburg.

Photographer: Nadine Hutton/Bloomberg

Old Mutual Plc plans to split into a South African holding company that will consist mainly of its emerging-markets businesses and another company comprising its wealth management operations, with shares traded on the London Stock Exchange.

The insurer will spin off a significant portion of its stake in Nedbank to investors, leaving the South African company with a strategic holding in the lender through Old Mutual Life Assurance Co., the insurer said in a statement on Tuesday. It will pursue a demerger of its wealth businesses and continue reducing its 65.8 percent stake in Old Mutual Asset Management, which will be used to reduce debt, it said.

“It is highly complex,” Chief Executive Officer Bruce Hemphill said by phone. The plan isn’t cast in stone and Old Mutual “will continue to interrogate options as they come to us,” he said.

Old Mutual has received interest in various assets within the group, mainly for U.S.-based OMAM and the U.K. wealth business, and will consider any offer that makes sense, the CEO said, declining to comment further. Hemphill, who took the job in November, said in March he plans to split up the company to reverse years of flagging returns.

The U.K.’s vote to leave the European Union won’t affect the company’s strategy or the plan to have the separation completed by the end of 2018, although it may affect underlying businesses because of increased volatility, Hemphill said. As part of the process, Old Mutual has cut 15 percent of its permanent workforce at its London headquarters, with more reductions expected, the company said in the statement. 

Extended Weakness

“We’re in for an extended period of rand weakness, increased volatility and lower equity markets, all three of which will impact our operating results,” Hemphill said.

The company’s performance so far this year has been “broadly in line” with the board’s expectations, Old Mutual said. While gross sales have been strong, it will incur one-off expenses related to capping of exit fees, and larger-than-expected claims in its South African property and casualty and corporate businesses.

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