By Renee Bonorchis
(Bloomberg) —Â Old Mutual Plc plans to separate its four units as Chief Executive Officer Bruce Hemphill breaks up the U.K. financial services company to reverse years of flagging returns.
The insurer will separate OM Asset Management, its controlling stake in South African lender Nedbank, its U.K. wealth business and the emerging-market business run out of South Africa by the end of 2018, London-based Old Mutual said in a statement on Friday. The separation will be done in a way to maximize value to shareholders and give the different businesses more room to expand, it said.
The breakup culminates aÂ
“Our new strategy will allow each business to have simpler access to capital markets to fund its growth more easily and be valued more appropriately, with more straight forward regulatory arrangements,” Hemphill said in the statement. “These businesses are performing strongly, have excellent competitive positions in sizable markets and the underlying growth potential to flourish independently.”
Read also: Old Mutual’s big day – returning to SA roots after 17 year misadventure
Old Mutual’s return on equity, a measure of profit, has declined since the company moved its head office to London from Johannesburg in 1999 to escape foreign exchange laws that made it difficult to pursue acquisitions outside the country. With the move also came increased regulation and Old Mutual must now follow solvency rules. The London-listed securities have increased just 23 percent since they started trading compared with an almost tripling in the South African shares over the period.
Old Mutual’s top two executives are South Africans. Hemphill was previously the head of wealth and insurance at Standard Bank Group Ltd., Africa’s biggest lender by assets, which last year sold a controlling stake in its U.K. operations after increased regulation tied up capital and caused costs to rise. Old Mutual Finance Director Ingrid Johnson spent 20 years with Nedbank before joining the lender’s parent in 2014.
Old Mutual also released full year results to December and net income rose 4.8 percent to 945 million pounds ($1.34 billion) from 902 million pounds a year earlier, the company said in the statement. Adjusted operating earnings per share gained 8 percent on a reported currency basis to 19.3 pence, beating the 19.1 pence median estimate of 10 analysts surveyed by Bloomberg.
Old Mutual says to split up, asset management sale eyed
By Carolyn Cohn and Noor Zainab Hussain
LONDON, March 11 (Reuters) – Anglo-South African financial services group Old Mutual Plc said on Friday it would split up into its four main businesses, strengthening expectations of the sale or listing of its UK asset management arm.
The break-up of the company, which is listed in London and Johannesburg and has insurance, asset management and banking operations, follows a strategic review announced in November, when former Standard Bank executive Bruce Hemphill took over as chief executive.
Changes to the regulatory environment in Europe and South Africa have made the company, which started out in 1845 as a life insurance firm in Cape Town, more complex to run, it said in a statement.
“It’s a costly structure with insufficient synergies to justify those costs,” Hemphill said.
Old Mutual’s solvency capital ratio under new European rules was 135 percent, lower than many of the other major insurers that have reported earnings so far this year.
The group said it had not yet decided how it would go about spinning off the units but that it expected the separation to be largely completed by the end of 2018.
The company’s four units are Old Mutual Emerging Markets, Old Mutual Wealth, Nedbank Group and OM Asset Management.
It said it planned to cut its majority stake in Nedbank to a minority one.
Old Mutual’s shares have risen since Sky News reported the break-up plans last weekend, and said private equity firms had tabled a multi-billion pound cash bid for Old Mutual Wealth.
Analysts said the unit would be worth 3-4 billion pounds.
The group said its pretax adjusted operating profit for 2015 rose 4 percent in reported currency terms to 1.7 billion pounds ($2.4 billion).
