Old Mutual PLC

1999–2003

Total Assets: £37 billion (2003)

Stock Exchanges: Johannesburg London Frankfurt

Ticker Symbol: OML.L

NAIC: 522110 Commercial Banking; 524113 Direct Life Insurance Carriers; 524114 Direct Health and Medical Insurance Carriers; 551112 Offices of Other Holding Companies

Old Mutual PLC has shrugged off nearly 150 years as an almost exclusively South African financial services business, emerging as a major up-and-comer on the international market. Demutualized in 1999, Old Mutual has switched its headquarters to London in order to be able to join the FTSE 100--the company is valued at more than £5 billion ($8 billion) and has more than £134 billion ($214 billion) in assets under its management. In less than five years, Old Mutual has successfully shifted its geographic mix--by 2003 just 60 percent of the group's business came from South Africa, while the United States contributed 30 percent, and the United Kingdom 10 percent. The company intends to continue to re-balance its operations so that its business is divided equally among these three primary markets. Concurrent with its geographic expansion, Old Mutual also has moved to reinvent itself as a major assets gathering and assets management group. In South Africa, the group's operations are based around a core of Old Mutual (South Africa), the largest provider of financial services, including insurance products, in the country; a majority shareholding in the country's leading domestic bank, Nedcor; and Mutual & Federal, a leading South African general insurer. In the United States, the company has gained a position among the industry's top ten by building a multistyle asset management operation through an aggressive, multibillion-dollar acquisition drive. The group's main U.S. operations include US Asset Management, a grouping of 23 affiliated asset management companies; and US Life, which generates more than $4 billion in new business each year. The company's holdings in the United Kingdom, which included Gerrard, a leading private client broking business until its sale in December 2003, are focused around Old Mutual Financial Services, a major U.K. assets management firm. Old Mutual expects to continue its international acquisition campaign into the middle of the decade as it refines the scope and scale of its operation. The company is listed on the London, Johannesburg, and Frankfurt stock exchanges. Old Mutual is led by Chairman Mike Levett and CEO Jim Sutcliffe.

Mutually Exclusive in South Africa in the 19th Century

operations include US Asset Management, a grouping of 23 affiliated asset management companies; and US Life, which generates more than $4 billion in new business each year.

1845–1966

Old Mutual's origins trace back to the mid-19th century, and the beginnings of the mutual aid movement that had helped transform the British housing market in the United Kingdom. In 1845, a Scotsman, John Fairburn, led a group of 166 members in the formation of South Africa's first mutual aid society, Mutual Life Assurance Society of the Cape of Good Hope. The society's members were also its first customers--and their premiums represented the group's sole capital.

Yet the group grew strongly through the end of the century, already claiming a position as a leader in South Africa's financial services market. In 1885, the company changed its name, to South Africa Mutual Life Assurance Society, to reflect its status as an insurance provider for the entire South African colony. Faced with a growing number of competing mutual groups--many of whom began introducing themselves to customers as "the mutual"--the company began referring to itself as the "old" Mutual, emphasizing its status as the colony's first mutual society. The name caught on, and the group eventually formally adopted the corporate name of Old Mutual.

Where South Africa's economy had been based, in large part, on agriculture, the discovery of gold in the Transvaal region in 1870, and the discovery and exploitation of the region's vast mineral resources, including diamonds, helped transform the colony into a regional economic leader. The rising wealth of the colony transformed into a rising number of policyholders for Old Mutual, and growing economic and political influence for the society.

Old Mutual's importance for the colony was confirmed after South Africa was granted its independence in 1910, and Chairman John X. Merriman was elected as the new British commonwealth's first premier. Over the next several decades Old Mutual became one of South Africa's most dominant institutions, capturing as much as a one-third share of the country's insurance market. In the face of the government's strict exchange controls, Old Mutual, like many South African companies, focused its energies primarily on its domestic market. Similarly, the society's investment portfolio reflected the increasing ostracism of the apartheid state; unable to invest in corporations outside of South Africa, Old Mutual became a major shareholder in a number of South African institutions, such as the future Nedcor bank, Richemont, the diversified Rembrandt group, Standard Bank, industrial group Barlow, mining group Anglo American, and others.

Despite its focus on South Africa, Old Mutual nonetheless established operations elsewhere on the African continent. The early 1900s saw the group extend into then-Rhodesia, and into German South West Africa. In 1927, Old Mutual set up sales operations in Zimbabwe, in Salisbury (later the capital city of Harare). Soon after, the company added Kenya to its scope, and in 1930 set up a new office in Nairobi. Into the 1950s, the society continued to follow the region's rapidly expanding mining sectors into Tanzania, Zambia, and elsewhere.

By 1954, the company had issued its one millionth policy. Old Mutual also continued to expand its range of financial services, and in 1966 set up a new subsidiary, South African Mutual Unit Trust Company, which took over the society's mutual fund and unit trust products. By the beginning of the 1970s, Old Mutual income from premiums had topped R 100 million per year. By the beginning of the 1990s, the company's yearly premium totals topped R 1 billion for the first time. By then, the group had achieved the ranking as number 38 among the world's top insurance companies.

1986–1999

Throughout its history, the company had actively recruited South Africa's black population into its membership, in part by actively promoting group memberships and group-based insurance and other financial products--one popular Old Mutual product was that of advance-sale funerals. By the late 1990s, more than half of the society's member-customers, which by then numbered more than three million, were black South Africans.

Run-Up to "Demutualization" in the 1990s

With international pressure to abolish South Africa's apartheid policies mounting in the mid-1980s, Old Mutual made its first moves to test the international waters. In 1986, the mutual bought Providence Capital, based in the United Kingdom, which later formed the foundation of the group's Old Mutual International subsidiary. The end of apartheid and the creation of a new South African government led by Nelson Mandela in 1994, signaled the start of a new era for the country and for its leading financial services group.

Old Mutual began preparations for its "demutualization" and conversion to a public limited company. Faced with impending new competition at home, as trade embargoes against South Africa were lifted on the one hand, and the country's exchange restrictions were abolished on the other, Old Mutual began preparing its full-scale foray into the global market. In 1993 the company created a new subsidiary, OMAM (for Old Mutual Assets Managers), which acted as an umbrella for the grouping of affiliated assets managers. In 1995, the group set up a new business in Boston, Massachusetts, Old Mutual Investment Advisors. That same year, Old Mutual opened offices in Hong Kong and Guernsey.

Old Mutual launched its international expansion in earnest in 1997, when it acquired Capel-Cure Myers, based in the United Kingdom and that country's leading private client stockbroker and investment management firm. The following year, as the group prepared its demutualization, the company struck again, acquiring U.K. stockbroking firm Alfred E. Sharp for more than £40 million. That operation was then merged with Capel-Cure Myers, forming Capel-Cure Sharp. The new company was immediately one of the leading assets groups in the United Kingdom, with more than £10 billion in assets under its control.

Old Mutual faced criticism for its plans to shift its headquarters to London, in order to list its share on that city's stock exchange--and satisfy the requirements for listing its shares in the FTSE 100. Nonetheless, the windfall, represented by the group's public offering, handed out to the group's three million policyholders in the form of shares in the group--and that represented more than a year's earnings for many of the participants in the offering, as well as the group's promise not to eliminate South African jobs--allowed the offering to go through in 1999. The company transferred its headquarters to London, then listed its stock on the London, Johannesburg, and Frankfurt exchanges, as well as in Zimbabwe and Malawi to satisfy mutual members in those markets.

2001–2004

With the proceeds from its public offering, Old Mutual launched an ambitious acquisition drive to propel itself among the ranks of international financial services groups. Yet the group, which maintained its insurance operation in South Africa, also sought to redefine itself, at least internationally, as an assets "gathering" and assets management group.

International Assets Management Group in the New Century

That process got underway when Old Mutual sold off its existing U.K. insurance operations. Instead, the newly public company put up £525 million to acquire the Gerrard Group, a prominent fund manager in the United Kingdom. The Gerrard acquisition led the company to restructure its Capel-Cure Sharp holding under the Gerrard brand, which now asserted itself as one of the United Kingdom's leading private client wealth managers in that market.

Soon after the Gerrard purchase, Old Mutual struck again, this time in the United States, where it agreed to pay $2.2 billion to buy up United Asset Management Corporation (UAM, later renamed as Old Mutual Assets Management US). That acquisition catapulted the company not only into the top ranks of U.S. assets groups, but also made it a world player.

The UAM acquisition set the stage for Old Mutual's entry into the U.S. insurance market as well. In March 2001, the company paid $45 million to acquire Kansas's Unified Life Insurance Co. Although a relatively small company, Unified Life (renamed as Americom) brought with it licenses authorizing Old Mutual to operate in 43 states across the country. The Unified Life acquisition provided the springboard for Old Mutual's next purchase: the $635 million acquisition of Baltimore's Fidelity & Guaranty Life Insurance Co. (F&G). That year, in addition, the company created a U.S. branch of OMAM.

By 2003, Old Mutual's expansion phase had evolved into a consolidation of its operations. The group began refocusing its holdings, shedding nearly half of the affiliated companies added in its acquisitions. By the end of 2003, Old Mutual's affiliated company list had been whittled down to less than 25. Among the companies sold off were Gerrard Management Services, bought by Barclays in December 2003. Old Mutual nonetheless remained committed to providing a full range of asset management styles and products, while maintaining its insurance wing as a means of providing equity income. In January 2004, the company strengthened its South African insurance holdings when it agreed to buy out the minority shareholders of its publicly listed Mutual & Federal subsidiary. After nearly 160 years in business, Old Mutual had proved capable of renewing itself for a new century.