Old Mutual warns of weaker results
OLD Mutual shareholders were told at the group’s annual meeting to expect weaker results because of the softer rand and lacklustre markets.
But CEO Bruce Hemphill said that with all the recent noise it was easy to forget how much progress SA had made over the past 20-odd years, and that the group’s businesses in the country remained strong.
Investors will have to wait until August 11 and the interim results for details on trading but Hemphill conceded that there were higherthan-expected claims at Mutual & Federal as well as the employee benefits business.
There was a cap on exit penalties on investment products in the UK, which had affected the income of Old Mutual Wealth.
But chairman Patrick O’Sullivan said the business remained strongly capitalised and resilient to stress scenarios, including the managed separation of the group into four standalone business.
The four separate units will be Old Mutual Emerging Markets, Old Mutual Wealth UK, Omam US and Nedbank.
Hemphill said that in less than three years he hoped to “switch off the lights” and close the head office. He has already made a start by cutting 15% of the head count — about 40 jobs — saying there was limited scope to redeploy head office staff in the subsidiaries.
But the timing of the process would require a balance to be struck between value, cost, time and risk, he said. Head office would still be around to continue to work with the businesses in remaining competitive with their peers, to manage group debt obligations, central cost reductions and distributions to shareholders as well as fulfilling regulatory obligations.
O’Sullivan said it was essential that the constituent parts of Old Mutual observed the same environmental, social and governance regime as Old Mutual plc once they were independent.
Hemphill said Old Mutual Life Assurance Company SA was likely to keep its 17% holding in Nedbank, as it was part of its statutory capital but the remaining 37% held by Old Mutual Group Holdings (OMGH) was likely to be distributed, though the exact percentage had not been decided.
But this would take place only once OMGH was listed, by when it should have a predominantly South African shareholder base.
He expected Old Mutual Wealth UK to be demerged from the group and listed separately at the right time.
O’Sullivan confirmed that shareholders had approved the election of former finance minister Trevor Manuel to the board. On
Friday he will become chairman of OMGH and will play an important role in its listing.
The sale of bond fund managers Rogge Global Partners to Allianz Global Investors was completed on June 1, and on June 14 Omam US acquired 60% of Landmark, a leading global secondary private equity, real estate and real asset investment firm.
Hemphill said Brexit would have no effect on the managed separation strategy but the increased levels of market volatility might affect the performance of the underlying businesses.
At the group’s annual general meeting, more than 81% of shareholders present voted in favour of the revised remuneration policy. In a general meeting afterwards, 81% voted for its plan to reward executives for implementing the managed separation process.
Shareholders approved Hemphill’s generous remuneration package in the separate general meeting. The influential UK research group Institutional Shareholder Services recommended Old Mutual’s shareholders vote yes for the deal.
Old Mutual said the managed separation incentive plan was not covered in the existing remuneration report, requiring a separate vote.
“We are pleased that the resolution has been passed, while noting the views of those who voted against,” said spokesman William Baldwin-Charles.
“We consulted widely with our shareholders before proposing the plan, and this plan aligns management incentives with shareholder interests.”
A resolution that failed to earn overwhelming support from shareholders was the re-election of Nedbank chairman Vassi Naidoo to the Old Mutual board. “It was a technical vote against Mr Naidoo as he has been appointed to the audit committee while a non-independent,” said Baldwin-Charles.