Old Mutual to Invest in African Acquisitions as Sales Slow

By | November 5, 2014

Old Mutual plc, Africa’s biggest insurer, has 4.3 billion rand ($386 million) for acquisitions on the continent, where growth rates higher than advanced countries may help boost sales after third-quarter growth declined.

“We’ve identified Nigeria, Kenya and Ghana as the key markets,” Ingrid Johnson, chief financial officer, said in a phone interview from London today. “There are opportunities to look at Mozambique” after banking unit Nedbank Group Ltd. took a stake in Banco Unico, she said. Old Mutual is also looking for ways to work more closely with Lome, Togo-based Ecobank Transnational Inc., where Nedbank owns 20 percent.

While Old Mutual, which was founded in South Africa more than 150 years ago, moved headquarters to London in 1999, its original market remains its largest. The insurer set aside 5 billion rand in March 2013 to expand across the continent and has since bought a stake in Faulu Kenya Ltd.

“It would be fantastic if we could find more opportunities to invest,” Johnson said. “The first prize would be to find something in those key countries. The team is looking at a lot of things.”

Old Mutual this year completed an initial public offering for its asset management unit in New York and agreed to buy U.K.-based Quilter Cheviot Ltd. for as much as 585 million pounds ($930 million) to boost its wealth management business. It also bought Intrinsic Financial Services Ltd., a U.K. firm, gaining access to 3,000 financial advisers. Earlier in the year, Old Mutual sold what it termed non-core European units.

Sales Decline

Old Mutual’s gross sales fell 4.6 percent in the third quarter to 6.2 billion pounds from 6.5 billion pounds a year earlier, as economic activity in South Africa slowed, the insurer said in a statement today. That was in line with the 6.21 billion-pound estimate of 11 analysts surveyed by the company. Funds under management rose 5 percent to 307.6 billion pounds.

“We reiterate our hold recommendation, but highlight the continued excellent progress the group is making at the underlying level, especially as a regards asset accumulation, and its positioning in the U.K.,” Eamonn Flanagan, an analyst at Shore Capital Group Ltd. in London, said in a research note today.

Old Mutual is looking at product innovations to increase gross sales, Johnson said. “The lapse rates were higher than we would have liked. You can’t always defy gravity.”

Old Mutual was 0.2 percent higher at 192.3 pence as of 9 a.m. in London trading.

Old Mutual was 0.2 percent higher at 192.3 pence as of 9 a.m. in London trading.

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