Old Mutual South Africa revamps its structure

As part of a series of restructuring initiatives, life insurer Old
Mutual’s South African unit, Old Mutual South Africa (OMSA), has
sold its 50 percent stake in Old Mutual Bank (OMB) to its 51
percent-owned banking subsidiary Nedbank for ZAR140 million ($21
million). Formed in 2003 as a 50:50 joint venture between OMSA and
Nedbank, OMB focuses on the marketing of products such as vehicle
finance, mortgages, credit cards, transaction accounts and
investments via intermediary and broker channels.

OMB, which has always operated as a division of Nedbank, has 46
branches, deposits of ZAR10.7 billion and advances of ZAR10.5
billion. Advances are predominantly made up of mortgage loans to
Old Mutual clients.

“Old Mutual Bank has been a successful venture, providing great
service to our clients and sourcing new mortgages and deposits from
our intermediaries in large volumes,” said OMSA’s managing
director, Paul Hanratty. “The concept has proven itself and the
time has come to expand the services to clients and intermediaries
via a wider branch network. We will do this by adopting the
intermediary-friendly concept, applied by Old Mutual Bank, across
the entire Nedbank branch network.”

Nedbank has 835 national outlets including 441 conventional
branches.

In another restructuring move, OMSA announced in November that it
is in talks that may lead to the sale of between 60 and 70 percent
of its 75 percent holding in South Africa’s second-largest general
insurer, Mutual & Federal (M&F), to Royal Bafokeng Holdings
(RBH), in a deal that values M&F at about ZAR8 billion. RBH is
the investment unit of a 300,000-strong community of black South
Africans, based largely in North West Province, who derive
substantial income from the leasing of platinum and chrome mining
rights.

Indicating strongly that the deal is a fait accompli, M&F said
in a statement: “Subject to the satisfaction of certain conditions,
it is expected that these discussions will result in RBH submitting
to the company a firm intention to make an offer to all
shareholders in mid-December 2007.” In the statement, M&F also
announced that it would return ZAR580 million surplus capital to
shareholders by way of a capitalisation award.

For OMSA, the proposed sale of all but a small portion of its stake
in M&F represents a notable about-turn in strategy. In early
2004, OMSA made an offer to acquire full control of M&F, an
offer that was successfully opposed by minority shareholders led by
Roy McAlpine, a retired director of rival life insurer Liberty
Group.

Founded in 1831, M&F reported gross premium income of ZAR4.6
billion in the six months to June 2007 and profit after tax of
ZAR501 million.