Confirmed: Old Mutual to break up business

British-South African life insurance giant Old Mutual has confirmed it will break up its company into four parts, following a week of intense speculation.

Reporting its annual results on Friday morning, the company said the break-up would be completed by 2018. The separate companies will be Old Mutual Emerging Markets, Old Mutual Wealth, Nedbank and OM Asset Management.

Old Mutual group chief executive Bruce Hemphill described the break-up as a “bold new course to unlock value currently trapped within the Group structure”.

He went on: “We have four strong businesses that can reach their full potential by freeing them from the costs and constraints of the Group. As you can see from our results, these businesses are performing strongly, have excellent competitive positions in sizeable markets and the underlying growth potential to flourish independently.”

Group chairman Patrick O’Sullivan said: “After much careful thought, we have taken the important decision that the best interests of shareholders will be served by enabling these businesses to chart independent courses over the medium term.”

Today’s announcement of the break-up of the London and Johannesburg-listed company follows a strategic review announced in November, when Hemphill, who had been with Standard Bank, took over as CEO.

Initially the market responded positively to the news, with the share price opening up six points on the previous day. But it quickly lost all those gains. At 12:35 it was down 2.32% on the previous day, putting it almost back to where it was last Friday, before rumours of the break-up surfaced on the weekend.

Results

Overall, the business reported before tax profit of  £1.7bn, a 11% constant currency increase on the 2014 figure (or 4% in reported currency). It announced a second interim dividend of 6.25 pence, and full-year dividend of 8.9 pence, a 2% increase on 2014.

Of the four units of the business, Nedbank was the most profitable, delivering before-tax adjusted operating profit (AOP) of £754 million, down 2% on the previous year. The second most profitable unit was the Emerging Markets business, with AOP of £615, flat on the previous year.

Old Mutual Wealth saw the biggest year-on-year increase, delivering before tax profit of £307m, up 35% on 2014. OM Asset Management delivered AOP of £149m, a 14% rise on the previous year.

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