Old Mutual First-Half Profit Climbs as Insurer’s Split Looms

JOHANNESBURG (Capital Markets in Africa) – Old Mutual Plc, the London insurer planning to split into four separate businesses, said first-half profit almost doubled after it reduced debt and sold shares in its U.S. asset management unit.

Pre-tax adjusted operating profit rose 37 percent and net income climbed to 531 million pounds ($689 million) from 284 million pounds a year earlier, the London-based insurer said in a statement on Friday. Diluted basic earnings per ordinary share increased to 10.8 pence from 5.6 pence and the interim dividend advanced 32 percent to 3.53 pence.

The insurer, which started in South Africa more than 150 years ago, plans to split its business into four units by the end of next year to help boost value for investors. South Africa entered a recession this year and the pound has weakened in its home market while the rand strengthened. The insurer’s focus is now on preparing its emerging markets and wealth units to be standalone businesses while preparing for initial public offerings after full-year profit is reported in 2018.

Old Mutual is working on changes to the boards and management teams of its units, with its biggest task before the end of the year being finalizing balance sheets for the wealth and emerging-markets units, Chief Executive Officer Bruce Hemphill said by phone from London. While the impending South African IPO takes place against a “chaotic backdrop” in that country, it’s the nature of emerging markets and “those are the risks we understand,” he said.

Credit Due
“Despite the significant volatility amidst the political and financial arenas in which it operates across the U.K., U.S. and South Africa, management deserve real credit for the delivery to date,” Eamonn Flanagan, an analyst at Shore Capital, said in a note. “At a strategic level, the managed separation is progressing well,” he said, maintaining his buy recommendation.

After an initial surge in Johannesburg and London, Old Mutual reversed gains. It declined 1.9 percent to 1.97 pence at 8:47 a.m. in London as the FTSE 100 and the FTSE 350 Life Insurance Index both fell.