Old Mutual shake-up disappoints

London - Insurer Old Mutual said it would sell its US life unit and list its funds operation in the US as part of a strategic overhaul, disappointing investors who had hoped for a more far-reaching shake-up.

Old Mutual said it would also quit some markets altogether as it refocused on its most profitable businesses, but provided no details or timetable, and stressed it would keep a majority stake in the US asset management operation.

"This announcement could be seen as disappointing. After the strong run these shares have had, we would expect to see some profit-taking," Oriel Securities analyst Marcus Barnard wrote in a note.

Old Mutual, a sprawling Anglo-South African conglomerate with banking, insurance and asset management operations in over 30 countries, is under pressure to slim down amid shareholder concerns its complex structure is holding back its share price.

The company has previously faced calls to refocus on insurance and asset management by selling its majority stake in Nedbank, or concentrate on its highly profitable South African businesses by demerging its European and US operations.

Repayment target

Old Mutual chief executive Julian Roberts on Thursday declined to comment on whether the company would keep Nedbank in the long term, but said maintaining operations in all three of South Africa, Europe and the US was no longer a priority.

"The three equal legs the company had in the past, we are moving away from that sort of concept," he told reporters. "What I'm more interested in is having businesses that give a good return. I'm not that concerned which geography they are in."

Floating the US funds operation and selling the life unit there will help Old Mutual cut at least £1.5bn from its £2.3bn debt pile, the company said, adding it was also targeting cost savings of £100m a year by the end of 2012.

The planned disposal of Old Mutual's US life business was widely reported last month.

Old Mutual's second-biggest shareholder, Swedish activist fund Cevian Capital, said on February 26 that the restructuring had the potential to nearly double the company's share price.

Analysts said Old Mutual's overhaul also reflected a need for the company to retrench ahead of the European Union's strict Solvency II capital regime for insurers in 2012.

"What it's driven by is the risk that they don't have the equity, particularly post-Solvency II, to hang on to what they've got," said S&P Equity Research Tony Silverman.

"(Shareholders) are not getting a strategy review, what they're getting is downsizing."

- Reuters