Old Mutual Listings on Track as Insurer Splits Businesses

JOHANNESBURG (Capital Markets in Africa) – Old Mutual Plc said it’s on track to complete a plan to split into four financial services businesses by the end of this year.

The U.K.-based insurance company is separating its wealth management, emerging markets, lender Nedbank Group Ltd. and U.S.-based OM Asset Management Plc units after concluding that the company traded at a discount to the value of its assets. Old Mutual, which was founded in South Africa more than 150 years ago, expects operational savings of about 95 million pounds ($133 million) from the split by the end of the year. The cost is estimated at 130 million pounds in cash.

Planning the separation and listings has involved “huge amounts of unglamorous, nitty-gritty work,” Chief Executive Officer Bruce Hemphill said in a phone interview on Thursday. He added that he plans to eventually leave the company, with a date yet to be finalized, while most of the about 130 workers in the London head office will depart by September. A skeleton staff will remain in 2019.

The impending listing in the U.K. will be coupled with a secondary offering of up to 9.6 percent of Quilter Plc, followed by the South African listing of Old Mutual Ltd., the London-based company said in a statement on Thursday. The anticipated distribution of a majority of the stake in Johannesburg-based Nedbank to Old Mutual shareholders is planned for about six months after the South African listing, with that unit to retain 19.9 percent of the bank, the insurer said.

Beats Estimates
Old Mutual’s emerging-markets unit will be Africa-focused after its Johannesburg listing, and the company is willing to negotiate with potential buyers of assets outside the continent, Hemphill said. No further sales or acquisitions are needed for the insurer’s three other units, he said.

The insurer’s adjusted net asset value increased to 242.3 pence a share from 228.6 pence a year earlier, Old Mutual said in the same statement. Adjusted operating earnings per share rose 25 percent to 24.3 pence, compared with 19.4 pence a year earlier, beating the 22.4 pence average estimate of six analysts surveyed by Bloomberg.

The shares rose 1.6 percent to 254.90 pence as of 9:16 a.m. in London, bringing the stock’s gain to 10 percent this year.

“In our key market of South Africa, we expect sentiment and confidence to improve following the appointment of the new South African president and we expect improved gross domestic product growth in the coming year,” Old Mutual said in the statement. “In the U.K., while there remains uncertainty over the outcome of the Brexit negotiations, the economy continues to grow.”

Old Mutual Ltd. will be targeting a sustainable return on net asset value at its average cost of equity plus 4 percent, the unit said. “To support this, we have also launched a cost-efficiency leadership program designed to deliver 1 billion rand ($84.6 million) of pre-tax, run-rate cost savings by the end of 2019.”

“Global markets have performed strongly which, combined with geopolitical developments, means that there are downside risks to our businesses,” the company said.