A piece of long-ago history has come out of the woodwork as Old Mutual gears up to split itself into two new listed vehicles later in 2018, with two US companies lodging a claim against it in a New York court relating to US assets Old Mutual sold eight years ago.
The claim, by The Travelers Companies and St Paul Fire and Marine Insurance, is understood to relate to Baltimore-based Fidelity & Guarantee Life, which Old Mutual bought in 2001 from St Paul, which was a predecessor of Travelers, and then sold in 2011 to Harbinger Capital.
Old Mutual said on Tuesday that it believed the US action was "without merit and we will resist accordingly".
The claim comes as Old Mutual gears up to present what could be its last set of full-year results on Thursday, before it separates itself into two new listed companies: its SA and emerging-markets businesses, housed in Old Mutual Ltd, which will have its primary listing in Johannesburg, and its UK wealth-management business, Quilter, with a primary listing in London. The group has said the listings would follow as soon as possible after the results.
Subsidiary Nedbank is expected to be unbundled from Old Mutual later in 2018.
The group said on Tuesday it continued to believe this managed separation remained "on track for material completion by the end of 2018".
Analysts say it is not unusual for claims such as this to emerge at the last minute before demergers
Analysts say it is not unusual for claims such as this to emerge at the last minute before demergers such as that of Old Mutual, which had set aside £130m in provisions to cover contingent liabilities and in 2017 settled an old pension claim.
The provisions are part of the total $360m of head office costs the group has estimated it will incur to complete its managed separation process.
The market will be looking to the results announcement for details on the timing of the new listings and the process to be followed in the managed separation. Analysts are also keen to see what the balance sheets and capital positions of the two new listed entities will look like, and whether there will be any cash left in Old Mutual that could be distributed to shareholders.
That will depend in part on the outcome of any claims against the group, which bought Fidelity & Guarantee to give it a presence in the US life insurance market as part of the expansion drive it embarked on after it demutualised and listed in London in 1999. But Fidelity & Guarantee proved to be one of Old Mutual’s less successful acquisitions and was sold as part of the group’s efforts to streamline its international portfolio and improve returns.
The Old Mutual share price is now well up on its November low, thanks mainly to the rally in South African banking shares, but is still trading at a discount to the valuations analysts put on the sum of what the parts of the group could be worth once they are unbundled.
The government has welcomed Old Mutual’s "coming home" ahead of the group’s planned listing of the new Old Mutual Ltd on the JSE.
In January, the Competition Tribunal approved, with conditions, the restructuring to create Old Mutual Ltd, which is chaired by former finance minister Trevor Manuel, with Peter Moyo as its CEO.