Old Mutual looks at paying dividend

OLD Mutual, this year’s best-performing European insurance stock, might consider paying dividends again by year end, the group said this week.

‘Hopefully at the end of 2009 we’ll have the capital and the liquidity to look at dividends,’ chief executive Julian Roberts said in London. ‘Probably my hardest decision has been to recommend to the board not to pay a dividend.’
Old Mutual said in March it would not pay dividends this year after hedging failures at its US unit and investment declines slashed last year’s profit by 55 percent.
Roberts replaced Jim Sutcliffe as chief executive in September after the credit crisis triggered investor concerns that Africa’s biggest insurer might need to raise capital.
‘Old Mutual undoubtedly alienated shareholders with the decision to pass the dividend,’ said Chris Gilmour, an analyst at Absa Asset Management Private Clients.
‘They can make big repairs to those relationships by declaring a dividend as soon as possible.’
Roberts, a former finance director at Old Mutual, conducted a strategic review of the 164-year-old insurer.
The company’s capital surplus rose 29 per cent to ‘900 million (N$11,9 billion) in the first quarter, after dropping by more than half from ‘1,5 billion in the previous three months.
Old Mutual has gained 23 per cent this year in London trading, compared with an 11 per cent decline in the 33-member Bloomberg Europe insurance index. The stock slumped 53 per cent last year.
The company paid a dividend of 2,45p last year, down from 6,85p in 2007.
‘People in South Africa said too early that Old Mutual had messed up again – it was just a US Life position,’ said Roberts. ‘That’s why our share price had been in the doldrums.’
Last year, Old Mutual had write-downs of US$531 million (N$4,4 billion) on investments in companies such as Lehman Brothers and US$474 million tied to its US life insurance business.
‘I’m less worried about the US than I was six months ago,’ Roberts said. While there were no further defaults in the quarter, a recovery in North America was ‘still some way off’.
Roberts aims to boost revenue by expanding the company’s Skandia life insurance business in the UK. ‘We’ve got a very good business that’s growing very strongly even in this market,’ Roberts said.
Old Mutual bought Skandia for US$7,4 billion in 2006 after a 10-month hostile takeover.
There were no imminent asset sales, Robert said, after two failures to sell its South African short-term insurer, Mutual & Federal, last year. Deteriorating market conditions made it difficult to execute a sale, he added. -Bloomberg