Old Mutual Sheds Acquisitive Past to Grow African Businesses

LAGOS (Capital Markets in Africa) – Old Mutual Ltd. plans to grow its existing insurance, asset-management and lending business in Africa, spurning the acquisitive approach taken by its parent.

“We’re definitely not shopping,” Chief Executive Officer Peter Moyo said in an interview. “Don’t expect any acquisitions from us.”

The 173-year-old insurer is refocusing its efforts on Africa after being spun out of Old Mutual Plc and listing its shares on the Johannesburg Stock Exchange on Tuesday. Its London-based parent also terminated trading on the London bourse, 19 years after moving its headquarters from Cape Town and embarking on a global acquisition spree that ended with it unbundling and selling businesses in the U.K., Europe, the U.S., Latin America and Asia.

The shares opened trading at 28.50 rand and closed at 29.40 rand. The seven-member FTSE/JSE Africa Life Assurance Index declined 0.3 percent, led by a 2.3 percent drop in Sanlam Ltd., Old Mutual’s biggest competitor in Africa.

Old Mutual has 12 million retail customers and 5,700 corporate and institutional clients ranging from small to large businesses across 12 countries in Africa. While the company is “well positioned” in Southern African markets like South Africa, Namibia and Zimbabwe, and Kenya and Malawi in East Africa, it has “limited exposure” to West Africa, according to its prospectus.

West Africa “is a very difficult market,” Moyo said. “The real work is only just beginning, particularly in Nigeria,” where the company last month received its bancassurance license.

Here are other highlights from the interview:

On Old Mutual’s share price:

• “I quite frankly did not have a particular number pencilled in.”
• “There is one thing that I know: It’s that whatever we started off with, for us to deliver value to our shareholders it’s got to be much higher than that to make sure our stock is attractive in the medium to the long term.”

On whether it has surplus cash:

• “At this point we don’t believe we have excess capital.”

On Kenyan business:

• “In Kenya we have every line of business” represented throughout the company.
• On Faulu Microfinance Bank Ltd., the nation’s second largest small-loans provider: “We’ve got to make sure our lending business can stand up on its own.”
• “Our healthcare business has turned the corner. Our life business is more or less there. Our general insurance business we’ve got to do quite a bit of work on it, just like our property business. On the short-term business, we need to manage the cost of claims.”
• “On the property side, it actually sounds quite simple. We’ve got some very prestigious buildings, we’ve actually just got to make sure we’ve got the right tenants.”

On why it kept KPMG:

• “Because we have no reason to dump them. KPMG have actually told us all their problems and what we have said is ‘go and do a thorough review and the come back to us.’”
• Old Mutual appointed Deloitte as joint external auditors with KPMG, which has lost some of its biggest clients after becoming embroiled in a series of scandals for doing work for a family accused of using its relationship with former South African President Jacob Zuma to win government business, claims they both deny.

On hiring:

• “We’ve brought in a few people on the banking side to spearhead our digital” offering
• “We are actually seeing more inquiries from people who want to work for us. That in itself tells you what the company is doing right in its war for talent.”

Source: Bloomberg Business News