Old Mutual sells US life business for £220m

Old Mutual has sold its US life business to US hedge fund Harbringer Capital for £220 million while announcing a 43% rise in profits in its half-year results.

The Anglo-South African insurer reported that operating profits grew to £735 million for the six months to 30 June from £513 million  according to IFRS accounting standards in 2009. Old Mutual also reported a 28% increase in annual premium equivalent sales to £814 million from £634 million in 2009.

Old Mutual credited a strong performance from its Skandia platform for a 54% increase in annual premium equivalent (APE) sales to £412 million from £267 million in the first half of 2009 from its wealth management division. UK pensions sales soared by 93% to £1.1 billion from £589 million in 2009, while bond sales also grew by 57% to £296 million from £188 million across the same period.

Platform sales were driven by new business but also the transfer of legacy business, noted Old Mutual. Switches from Skandia's Skandia Life platform to Skandia Investment Solutions made up 12% of Skandia's overall UK sales. The insurer expected the migration of legacy products to the platform to continue but at a reduced rate over the rest of the year.  

Old Mutual said the deal will reduce the risk the group is exposed to and will help cut its £2.5 billion debt position. Old Mutual paid off £44 million of this debt in the first half of 2010 and aims to repay £100 million by 2012. ‘I am delighted to announce the sale of our US life business. This deal marks further progress towards our strategic objectives of simplifying the group, lowering our risk profile and improving our returns on equity,’ said Julian Roberts (pictured), chief executive of Old Mutual.

Roberts would not comment on intense speculation that Old Mutual was preparing to sell its South African banking operation Nedbank to either HSBC or Standard Charted. ‘I can’t comment on the speculation about Nedbank,’ said Roberts.

Old Mutual has increased its capital surplus, measured according to FGD standards, to £1.7 billion from £1.5 billion in December 2009.

It share price rose a further 3.2p to 126.8p.