South Africa strikes to weigh on Old Mutual full-year sales

By Richa Naidu

LONDON (Reuters) – Anglo-South African financial group Old Mutual said the economic fallout from mining strikes across South Africa would weigh on full-year sales, sending shares in the 165-year-old company down as much as 4 percent on Thursday morning.

The FTSE 100 insurer's chief executive said a pick up in inflation coupled with two sets of mining strikes in South Africa, its main market, had affected economic growth and in turn, consumer sentiment.

"The consumer is under pressure and that will feed through into lower sales (than expected)," CEO Julian Roberts told Reuters, adding annual premium equivalent (APE) growth would be at the lower end of the cycle forecast of 10-15 percent.

APE, a sales measure used by British insurers and asset managers, estimates the sales of an asset by taking the value of regular premiums and adding 10 percent of any new single premiums written for the fiscal year.

Old Mutual, which provides life insurance, banking and wealth management services in Africa, Britain and the United States, reported a 17 percent increase in first-half adjusted operating profit to 761 million pounds ($1.3 billion) on a constant currency basis.

Profit was 5 percent lower in reported currency in the six months ended June compared with the year before, while funds under management were 300.5 billion pounds, up 5 percent in constant currency, and up 2 percent in reported currency, compared with the figure at the end of 2013.

While the underlying result serves as further indication of the potential within Old Mutual, the stock continues to be suppressed by concerns over economic growth in South Africa, performance of the rand and a weak U.S. dollar, Bernstein Research analyst Edward Houghton wrote in a note.

Old Mutual's London-listed shares were down 1.3 percent at 191.3 pence by 0845 GMT, the third-biggest percentage decline on the FTSE 100 on Thursday morning.

The company raised its interim dividend 17 percent to 2.45 pence.

(1 US dollar = 0.5939 British pound)