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Old Mutual selling share in Chinese JV?

Companies
Johannesburg - Old Mutual refused to comment on reports that it has put up for sale its 50 percent stake in a Chinese insurance joint venture Guodian Corporation.

People with direct knowledge on the matter said the move was part of the group’s revamp amid a tough market for foreign insurers in China.

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Workers clean windows outside the Cape Town headquarters of Anglo-South African financial services company Old Mutual.

The insiders claimed Old Mutual was working with financial advisers on selling its holding in the 13-year-old life insurance joint venture with Guodian to one or more local firms. Old Mutual yesterday refused to deny or confirm the reports.

William Baldwin-Charles, head of corporate affairs, said: “It is our policy not to comment on rumour or speculation.”

However, Richard Hasson of Electus Fund Managers said Old Mutual indicated during its recent results that its Old Mutual Emerging Markets (OMEM) future focus would now shift to sub-Saharan Africa.

Restructuring

“In my opinion selling sub-scale businesses outside of their sub-Saharan focus area makes sense as these are generally small assets relative to the size of OMEM, but which require a large amount of management time due to differing regulatory requirements across different geographies and different business models,” said Hasson.

“The move to consider selling is seen as the part of Old Mutual’s restructuring exercise to exit noncore and smaller operations.

“The restrictive ownership limit and the tough competition from local firms, many of them state-backed, have impacted the smaller foreign insurance joint ventures such as Old Mutual’s in China.”

In 2015, Old Mutual reported in its annual report its share of profit in the joint venture was $2.50 million (R34.5 million).

Last year, the insurer said the venture’s insurance business income in the fourth quarter rose 12 percent to $17.16 million.

Read also: Old Mutual makes Africa appointment

Analysts said given the venture’s small size, it was not immediately possible to estimate the potential sale value of Old Mutual’s stake.

Guodian is one of China’s five major state-run power generation companies. It aims to list or sell its emerging markets business and is sharpening focus on its sub-Saharan Africa business.

There have been a lot of activities in the group since chief executive Bruce Hemphill announced a strategic review of the business in November 2015.

At the beginning of this month, Old Mutual announced the appointment of Peter Moyo as the new chief executive of Old Mutual Emerging Markets. He will take up his new position in June to replace Ralph Mupita who resigned in October.

The group also sold a 25 percent stake in its Old Mutual Asset Management business last month to China’s HNA for $446 million.

Last year it sold its Italian wealth management business for $297 million.

Besides China, Old Mutual’s Asia presence includes a joint venture in India with the Kotak Mahindra Group.

Old Mutual shares rose 0.34 percent on the JSE to close at R32.64. 

Additional reporting by Reuters.

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