THE BOTTOM LINE
Will the JSE be kind to Old Mutual shareholders?
Muted reaction so far greets the move of the company’s primary listing from London to Johannesburg
Old Mutual’s “homecoming” from London is something of a misnomer. The 173-year old insurance group never really left South Africa, which, despite a two-decade global venture, remains the most substantive contributor to earnings.
For the six million policyholders who reside in SA (half of Old Mutual’s customer base), the location of its primary listing is immaterial, as is the fact that it no longer owns a US-based asset manager or a UK wealth manager.Perhaps unsurprisingly then, trade in Old Mutual Ltd’s shares has been muted and range-bound since it moved its primary listing to the JSE on Tuesday.
Investors who already own the shares are holding on to them, waiting to see how the next chapter unfolds. Still others are waiting to interrogate management, read analysts’ research reports and get to grips with a stock that is now wholly an emerging markets investment.
That it has now rid itself of non-emerging market assets means Old Mutual will migrate towards a more natural shareholder base – investors who want to own African assets, rather than a company with a bit of everything.
Notwithstanding its 12 million customers, Old Mutual has its work cut out. Economic conditions in its most important market are dire for life insurers as cash-strapped consumers draw on their savings, save less or simply cancel policies to free up cash.
A spending, rather than a saving, culture further hampers new wealth creation. All this is reflected in a life insurance index that is 12% weaker this year. Old Mutual shareholders anticipating a rerating of the stock, now free from the “conglomerate discount”, may have to wait.