London - Investigations into Old Mutual by Britain's Financial Conduct Authority (FCA) could delay its break-up plans, its chief executive said on Thursday as it reported a nine percent fall in first-half operating profit.
Old Mutual plans to break into four parts comprising its South African bank Nedbank and US, UK and emerging markets businesses.
The financial services provider said on Thursday it was on track to complete the process by the end of 2018.
Old Mutual Wealth is one of UK six insurance firms placed under investigation earlier this year over the treatment of long-time insurance customers.
“These things take time...it is theoretically possible that it could impact [the break-up timetable],” CEO Bruce Hemphill told Reuters by phone, adding there was leeway for the break-up process to extend beyond 2018. “We've got the flexibility.”
Read also: Old Mutual’s profit drops in tough climate
The firm's preferred option is to list its wealth and emerging markets businesses although it hasn't ruled out sales of the firms.
Analysts say the wealth business should carry a price tag of at least three billion pounds.
Hemphill said the FCA's probe could affect the value of the wealth business if it requires Old Mutual to compensate customers.
Deutsche Bank's sale of British insurer Abbey Life is facing delays as bidders struggle to decide on a valuation due to the FCA investigations, sources familiar with the matter told Reuters earlier this year.
The FCA has not given any timing for the completion of its investigations.
Old Mutual reported a 9 percent drop in first-half adjusted operating profit to 709 million pounds ($922.34 million), short of the 769 million forecast by analysts in a company-supplied poll.
“An uncertain environment continues in our three largest markets of South Africa, UK and US which may lead to further challenges,” the firm said in a trading statement.
Old Mutual shares were down 5.9 percent to 212 pence by 0759 GMT, making it one of the worst performers in the FTSE 100 index . “Whilst we acknowledge the strategic rationale for a break-up, we are yet to be convinced that it will add value to shareholders in the near term,” Bernstein analysts said in a note.
The firm said it would pay an interim dividend of 2.67 pence per share, a one percent rise on a year earlier.
REUTERS
For more on this, pick up a copy of Business Report tomorrow.