Old Mutual on £1bn hunt for UK life fund

Old Mutual, the London and Johannesburg-quoted life assurer,has once again reiterated its intention to make a £1bn acquisition in the UK, revealing that its focus was on finding a substantial closed life fund rather than an asset management business.

Old Mutual, the London and Johannesburg-quoted life assurer,has once again reiterated its intention to make a £1bn acquisition in the UK, revealing that its focus was on finding a substantial closed life fund rather than an asset management business.

In an interview following the company's interim results yesterday, Julian Roberts, the finance director, said the group believed that it could afford to finance a deal of up to £1bn without affecting its credit rating. However, he played down the company's interest in the fund management sector, in which it has spent much of the last two years scouring for a deal.

Last year, the group was believed to have come close to making a bid for Henderson Global Investors, the UK fund management arm of HHG, which was spun out of the Australian insurance group AMP last year. However, no formal bid was tabled.

Since then, the company has sold its wealth management business, Gerrard, to Barclays. Mr Roberts said its strategy for Old Mutual Asset Management, its UK investment arm, was now to grow the business organically.

The group first announced its intention to make a major UK acquisition more than two years ago, but has so far failed to clinch any of the companies it has been interested in. However, Mr Roberts said he believed the closed life fund sector was now moving into a period which would make it more ripe for consolidation.

"The issue of why it has taken us a period of time is that there's been a lot of change in the UK life sector," Mr Roberts said. "But more life businesses have now completed [the regulatory changes] and it's no surprise to me that we've seen [Life Assurance Holding Company] and the Royal & SunAlliance life businesses sold."

Royal & SunAlliance anno-unced the sale of its closed UK life funds to Resolution Life Group for £850m last month.

The group reported a relatively strong set of first results yesterday, with operating profits up 9 per cent on the same period last year, to £468m.

Its strongest performance came in the US, where it doubled its margin on new life business and saw profits in its asset management division rise by more than 40 per cent.

Mr Roberts said Nedcor - South Africa's fourth largest bank in which it owns a 52 per cent stake - had stabilised following a £400m rights issue this year. The group said it expected the bank to make progress towards achieving its target of a 20 per cent return on equity by the end of 2006.

In London, the company's shares rose 5p to 103.75p yesterday, giving the group a market value of £4bn.