Old Mutual intends using cash raised from its recent divestments to redeem £350m worth of perpetual preference shares listed in London, the insurance group said on Tuesday.

Old Mutual is offering holders of its perpetual preference shares a 3% premium to their par value.

Capitec, Investec and several other JSE-listed banks have bought back preference shares recently.

South African banks have been prompted to do this because under Basel 3 rules, the contribution of perpetual preference shares to capital adequacy limits is gradually being phased out.

However, this did not apply to Old Mutual, said the insurance group’s investor relations manager, Sizwe Ndlovu.

"We’re using cash that has become available to reduce borrowing," he said.

On Monday, the insurance group announced the completion of its €278m sale of Old Mutual Wealth Italy to Cinven subsidiary Phlavia Investimenti.

On December 20, Old Mutual said its gross proceeds from reducing its holding in US subsidiary OM Asset Management to 51% was $291m.

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