Old Mutual will consider raising India joint venture stake: CEO

Looks to expand in sub-Saharan Africa despite rising prices

Anglo-South African financial services firm Old Mutual will discuss with partner Kotak Mahindra about raising its stake in their Indian joint insurance venture following a rule change, its chief executive said on Wednesday.

Old Mutual is still looking to expand in sub-Saharan Africa, Julian Roberts told Reuters in an interview, though prices are rising for insurance businesses, as European and South African firms compete for a slice of this underpenetrated market. Indian Prime Minister Narendra Modi resorted to a rarely-used executive decree last month to enable foreign firms to increase their stakes in insurance joint ventures to 49 per cent from the previous 26 per cent. Old Mutual currently has a 26 per cent stake in its joint venture.

“I am a real fan of India,” Roberts said, though he added the market was currently a difficult one, with regulation curtailing business.

“We will be considering over the next few months with our partners whether we are going to change that shareholding,” he added.

India has 24 life insurance companies, all joint ventures with foreign partners. In Africa, Old Mutual has spent 700 million rand ($61 million) of a 5 billion rand programme to acquire businesses in sub-Saharan Africa, focusing on Ghana, Kenya and Nigeria.

Roberts said he was prepared to wait to buy businesses at the right price, that can generate returns on equity of around 16 per cent on a five-year horizon.

“The multiples people are paying are astronomical — we do not want to overpay.”

The firm would not need to raise share capital for acquisitions, as its businesses had low leverage and were strong cash generators.