Old Mutual stalks life insurers with UK growth in mind

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Old Mutual, the South African insurance giant, is eyeing up acquisition opportunities in the UK and is considering snapping up a British life insurance company next year.

Old Mutual, the South African insurance giant, is eyeing up acquisition opportunities in the UK and is considering snapping up a British life insurance company next year.

The company, which listed in London nearly three years ago, wants to diversify its business away from South Africa, which accounts for 80 per cent of its earnings, and believes Britain offers some of the best growth opportunities in the world.

Old Mutual is likely to look at asset managers as well as insurance companies. There are plenty of asset management businesses on the market at the moment, including Jupiter, which is being sold by its German parent Commerzbank. But the company is most interested in life insurance companies, because that is where its roots and expertise lie.

The life business of Royal & SunAlliance is already on the market. Others are likely to follow because of growing financial weakness and uncertainty about new demands that might be made on life companies in a plethora of Government reviews. Companies are also suffering from a concerted lack of confidence in them and their products among consumers.

Old Mutual, which has a market capitalisation of nearly £4bn, would have the muscle to pick up something sizeable. It already owns a series of small business in the UK, including the stockbrokers Gerrard and the specialist funds company Selestia, but has no significant presence in the life market.

It is delaying wading in because it is still bedding down another large life assurer it bought in America last year. The company believes it has impressed analysts by achieving strong profits growth in the company, Fidelity & Guaranty, already, which should make investors more willing to back its plans for the UK.

Its expertise would especially be felt in the field of with-profits. Rules governing the products are set to change substantially after a Government-sponsored review into how they work by Ron Sandler, the former chief executive of the Lloyd's insurance market.

One change Mr Sandler may suggest is that with-profits funds should no longer contain both money belonging to shareholders and policyholders. The move would cause consternation for many established UK life insurers, which have been operating under this system for decades. But Old Mutual could benefit, as it already operates such a system in South Africa.

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