11th March 2016
Old Mutual has announced it will split up the business, which investment analysts say will be a challenge in the current climate.
Insurer Old Mutual confirmed in its full year results that it would split its business into four units as a way to unlock value; Old Mutual Emerging Markets, Old Mutual Wealth, Nedbank Group, and OM Asset Management.
As part of the reshuffle Old Mutual , which has a majority share in Nedbank, will reduce its stake to a minority by distributing its share to holders of Old Mutual.
‘The market should note that the company has no plans to find a new strategic investor for the business, although there have been reports this week of a takeover bid for its Wealth unit from private equity firms,’ said Helal Miah, investment research analyst at The Share Centre.
Miah said he was ‘supportive of Old Mutual’s plans’ but ‘a low growth environment and global volatility remains a challenge’.
‘As a result, we are currently recommending Old Mutual as a ‘hold’, as the volatility of the South African rand and financial pressures on consumers continue to be a significant headwind to the group’s performance,’ he said.
The separation of the businesses is expected to be completed by end of 2018
Paul Feeney, chief executive of Old Mutual Wealth, said: ‘Beating the objectives we set three years ago, our company has delivered outstanding results for 2015 despite being faced with some of the most difficult global stock markets I have ever seen…Our vertically integrated business strategy is now delivering results for our customers and shareholders. It is this strategy which truly differentiates us from our industry peers.’
Bruce Hemphill, group chief executive, said: ‘The strategy we have announced today sets out a bold new course to unlock value currently trapped within the group structure. We have four strong businesses that can reach their full potential by freeing them from the costs and constraints of the group.’
In the 12 months to 31 December 2015 Old Mutual made a pre-tax operating profit of £1.7 billion, an increase of 11% on the previous year.