London-listed financial services group Old Mutual plc announced it will sell its U.S. life insurance operations as it released a strong earnings report for the first half of 2010.
Old Mutual said it agreed to sell the U.S. operations to affiliates of Harbinger Capital Partners LLC, a New York private investment fund for $350 million (263.6 million euros). The transaction is expected to be completed on or after Dec. 31, 2010, Old Mutual said.
The announcement came as Old Mutual released its first-half earnings, showing a net profit of 810 million pounds (972 million euros), up from 188 million pounds for the same period a year earlier. Annual premium equivalent sales rose 28% to 814 million pounds in the half, as Old Mutual reported a “rapid rise” in U.K. life and pension sales, and strong sales in South Africa, the group’s home country.
Old Mutual said the U.S. sale will “result in a significant reduction in the group’s exposure to U.S. credit markets, and a corresponding reduction in economic capital at risk.”
Net proceeds from the sale will be used to reduce the group’s net debt. Old Mutual said the sale will also allow it to redeploy about $115 million in capital from an associated reinsurance captive, OM Re.
Old Mutual said it currently finances $775 million of redundant U.S. reserves with a letter of credit. The group will continue to finance $300 million of reserves on the annuity business, a commitment that is expected to run down until it is refinanced by the buyer on or before Dec. 31, 2015.
Barry L. Bulakites
