Old Mutual Confirm Separation Of Businesses, Chief Executive Says Brexit Will Not Affect Performance

Old Mutual

Old Mutual is planning to split its four units in a bid to improve growth.

Old Mutual is to be run as a separate business alongside OM Asset Management and Nedbank, companies which are based in US and South Africa respectively. Old Mutual will be split into four units in order to bring about growth to the company and to lower its regulatory costs.

However, Old Mutual will remain stationed in the UK. It is well known that the company has been working from its head office based in London since 1999.

According to Bruce Hemphill, the company’s chief executive, it would not matter for Old Mutual even if the UK voted to leave the European Union. He showed confidence in the company’s ability to perform well even with UK withdrawing from the EU.

The division of Old Mutual will be achieved by the end of 2018. Mr. Bruce Hemphill found the structure of the company to be inefficient. He also believes that it is an act of common sense to take on the split option. It was after his review that the fate of Old Mutual was finally announced.

One of the things that hindered the company is the regulatory changes that occurred after the crisis giving the FTSE 100 group a hard time to continue the usual business. When describing this, Mr. Hemphill said:

 “It is a costly structure with insufficient synergies to justify those costs.”

Nearly half of Old Mutual’s earnings come in the South African currency. So it was normal for the company’s profit to suffer as the value of the rand currency fell.  The company’s dividend however is paid out to investors in pounds.

The chief executive also stated:

“We have four strong businesses that can reach their full potential by freeing them from the costs and constraints of the group.”

Mr. Hemphill also demonstrated strong confidence when he stated that the business will boom because of its large base in the UK regardless of its presence in the EU.

“We’re comfortable that whether we’re in or out, our business will prosper because we have a very large base that we are going after in the UK – and to the extent that we need to have a strategy in Europe, we have businesses set up there to do so, so it wouldn’t be a negative,” Mr. Hemphill claimed.

Mr. Hemphill also pledged not to “envisage” his company’s withdrawal from UK, highlighting the stay of Old Mutual in London to be quite decisive. The company has a secondary listing in Johannesburg, however, it is not yet decided if it will list separately in the UK.

The company also reported at the time that their 2015 pre-tax adjusted operating profit was up to £1.66bn, a rise of 4 per cent. Under the European rules, its solvency II ratio was disclosed by the company to be at 135 per cent.

Old Mutual have a large enough ratio capital of 100per cent that enables is to resist a one in 200 years financial devastation. Yet, the company performed quite poor in when compared to other highly recognized insurers whose earnings were reported this year.

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