London - Old Mutual, Britain's third-biggest insurer, said first-half sales rose 8 percent as this year's acquisition of Skandia boosted business in Europe.
Worldwide life insurance sales increased to £802 million (R10.37 billion), the company said yesterday. That compares with £740 million as restated to include Skandia sales from the first half a year ago.
Old Mutual's sales would have fallen 2.2 percent without the Skandia acquisition.
Chief executive Jim Sutcliffe paid 56 billion kronor (R53.3 billion) in February to buy Stockholm-based Skandia.
Old Mutual is counting on the purchase to counter more sluggish sales in the US and South Africa, where Old Mutual is the biggest insurer.
"South Africa was a bit slower than expected," said Mikir Shah, an analyst at Fox-Pitt Kelton in London.
Shah has an outperform rating on the stock and said the overall results were strong.
"We have seen good growth in the UK. Skandia growth is better than expected."
Old Mutual shares fell 2.4 percent to £154.25 at midday in London yesterday, valuing the company at £8.5 billion. Britain's FTSE 100 index was down 1.4 percent after authorities in London said there was a plot to blow up planes.
Old Mutual shares have fallen 5 percent this year, making them the second-worst performer on the FTSE all share life insurance index.
"There was nothing really to get excited about," said Colin Morton, a Leeds-based fund manager who oversees $1.8 billion (R12.2 billion), including Old Mutual shares, for Rensburg Sheppards. "Obviously it wouldn't have been ahead without Skandia," he said.
European life insurance sales rose 16 percent to £491 million in the first half.
In the UK, life insurance sales rose 22 percent to £311 million. Britain's so-called A-day relaxed pension rules in April and helped boost Old Mutual's UK sales by 86 percent to £122 million, the company said.
"Life insurance sales are being driven by A-day and transfer activity," Sutcliffe said on a conference call. Friends Provident and Standard Life both said the government's pension changes boosted sales.
In the US, Old Mutual's life sales fell 17 percent to $230 million. The company is seeking to make the unit self-sufficient and a contributor to company profit by 2007.
Life insurance sales in South Africa rose 4 percent to R2.06 billion, held back by declining healthcare sales.
The company said it would restructure the healthcare line.
"We want to see if we can try and get the trustees to combine or to centralise" the nine plans the company offered, Sutcliffe said yesterday. "It is a relatively low-margin business. It is not central to us."
Sutcliffe predicted in June that the Skandia unit's contributions to earning would triple by 2008. Old Mutual also announced plans in June to cut about 800 jobs, or about 13 percent of Skandia's workforce. About 600 cuts were expected to be in the UK and as many as 100 in Sweden.
"With over 60 percent of our sales now in Europe, Skandia's progress has been ahead of our original expectations," the company stated. "We now have a business that is genuinely international," Sutcliffe said.
Old Mutual's worldwide unit trust sales rose 72 percent to £4.12 billion. In the UK, unit trust sales jumped 74 percent to £525 million. Sutcliffe said the company was doing well with unit trusts and open architecture products, which allowed investors to choose how they invest in funds.
The company is set to report its first-half earnings on September 14. - Bloomberg