How Old Mutual must be rueing the day it decided it was too big for South Africa! The venerable old insurer demutualised in 1999, moved its headquarters to London, and embarked on a series of ill-timed and costly transactions in the UK and US, using its profitable South African operations as a cash cow to pay for its international capers. At the time of listing, the share price was R11.25 and Old Mutual had a market capitalisation of almost R37 billion, comfortably larger than its nearest rival, Sanlam, which decided to stay focused on South Africa. These days, Old Mutual’s share price is R5.60, giving it a market capitalisation of just over R31 billion.
Today, Old Mutual announced that it was abandoning its international expansion and returning its focus to South Africa. But it is too late for many investors who bought the “out of Africa at all costs” strategy. An enormous amount of value has been destroyed (if I had held onto my 500 Old Mutual shares which I received when the company demutualised, my investment would have shrunk by more than 50%. Luckily I sold them years ago, when the share price was R19. The poor sod who bought my shares must be kicking himself). Sanlam has overtaken Old Mutual as South Africa’s biggest life insurer. To be sure, life insurers worldwide have done badly over the past year, but Old Mutual has consistently underperformed its peers.
Why there isn’t a shareholders revolt over this I don’t know.