The FT has reported:
Old Mutual shares rose 6 per cent in early trading on Wednesday after it announced the closure to new business of a troubled unit in Bermuda.
I think we will be hearing a lot more of this. The realisation will grow that offshore destroys value. As a result shareholders will reward those who pull out.
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Shocking Rubbish again!
Old Mutual Closes Its Bermuda Unit to New Customers (Update3)
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By Jon Menon
March 18 (Bloomberg) — Old Mutual Plc, South Africa’s biggest insurer, is closing its Bermuda-based U.S. life- insurance unit to new customers to control potential liabilities and cut costs.
Old Mutual Bermuda, which has “significant” excess capital above its regulatory needs, the London-based company said today in a statement. About two-thirds of its 30 staff will leave, Matthew Gregorowski, a spokesman for Old Mutual in London, said in an interview.
The closure “will provide greater certainty in respect of the business’s future liabilities and will therefore strengthen the group as a whole,” Chief Executive Officer Julian Roberts said in the statement. “One of our key priorities is strengthening governance and risk management.”
Old Mutual this month scrapped dividends and said profit fell 55 percent last year partly because of losses at its U.S. unit, which offered guaranteed investor returns on annuities and only partially hedged against the risk of market declines. The Standard & Poor’s 500 Index dropped 38 percent last year amid the worst economic crisis since the Great Depression.
Old Mutual rose 2.5 percent, to 41.3 pence in London trading, valuing the insurer at 2.2 billion pounds ($3.1 billion).
Hedging effectiveness at the Bermuda unit improved to 94 percent this year to March 8, from 92 percent in the fourth quarter, Old Mutual said.
Old Mutual on March 4 said it transferred $582 million to the Bermuda unit last year as the division posted a loss of $508 million and reserves increased on the annuity contracts. The company at the time said it would develop new investment and insurance products at the division.
“It was pretty much on the cards and was predictable” that the unit would close to new business,” said Greig Paterson, an analyst at Keefe, Bruyette & Woods Ltd. in London who has a “market perform” rating on the stock.
To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net
Sirron
I wonder what you think is the shocking rubbish?
It seems to me that the key phrase within the report is as follows:
“The closure “will provide greater certainty in respect of the business’s future liabilities and will therefore strengthen the group as a whole,” Chief Executive Officer Julian Roberts said in the statement. “One of our key priorities is strengthening governance and risk management.”
Quite so. no one can be sure of liabilities hidden inside the secrecy jurisdiction like Bermuda. And everyone knows that governance in such places is poor and risk management weak.
Old Mutual have admitted it. They are not an organisation I greatly admire, but there candour on this one appears entirely appropriate
Now what are you upset about?
Richard