Photo: Simphiwe Mbokazi

Johannesburg - Old Mutual, Africa’s largest insurer, said it still plans to sell stock this year in its US asset-management arm, whose inflows rose in the second quarter even as a weak rand hurt profit at the rest of the firm.

“In the first quarter there was a concern on outflows, but in the second quarter it bounced back very strongly,” chief executive Julian Roberts said in a phone interview from London today.

“We’re still on track for sometime this year” for the initial public offering, he said.

The stock sale could value the US business at more than $3 billion (R32 billion), according to a note from Shore Capital today.

Old Mutual filed for a New York IPO of the unit in June after first discussing it in the wake of the 2008 global financial crisis.

Roberts has said he wanted to wait until the business was profitable and stable.

The insurer also said today that profit through June dropped 5 percent as the rand weakened with the economy in South Africa, the company’s biggest market.

Adjusted earnings for the year through June were 424 million pounds ($714 million), down from 448 million pounds a year earlier, Old Mutual said in a statement.

Adjusted earnings per share fell 5 percent to 8.8 pence, while the insurer boosted its dividend 17 percent to 2.45 pence.


‘Real Progress’


Shares of the South African-founded, London-based company dropped 2.6 percent to 188.8 pence at 10:30 am in UK trading, and fell as much as 3.9 percent to its lowest level in almost five months.

“Unfortunately the vagaries of the rand continue to overhang the stock, which is a shame as the group is making real progress for shareholders,” Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital, said in today’s note.

“There is scope for good outperformance once the forex world stabilises, with the potential IPO of the US asset management business likely to be received positively by the market.”

Adjusted operating profit rose 17 percent on a constant- currency basis, Roberts said in the statement.

South Africa’s gross domestic product contracted an annualised 0.6 percent in the first three months of the year as mining output dropped 25 percent, the most in almost half a century.

The economy remained “fragile” in the rest of the first half, Old Mutual said.

Old Mutual started in South Africa more than 100 years ago and is diversifying by selling life insurance in fast-growing African countries such as Ghana and Kenya and long-term savings products in the UK After cutting costs, selling assets and paying down debt, it’s now considering selling debt in South Africa to take advantage of its positive credit ratings.

“We expect the external conditions for our emerging markets businesses to continue to be challenging in the next six months, particularly given the lower gross domestic product growth expectation in South Africa,” the company said.

“We continue to explore opportunities to expand our business in Africa through investing for growth both organically and inorganically.” - Bloomberg News