Old Mutual acquired a majority stake in AIVA, the Latin American distribution business, for an undisclosed sum, the JSE and London-listed life insurer said on Monday.
This acquisition will strengthen Old Mutual’s distribution capability in emerging markets.
Old Mutual’s move shows that the company is steadfast in its resolve to focus only on emerging markets. It unveiled this strategy after its fingers were badly burnt in US when its life business lost billions in failed hedges.
In 2010, it sold its US life business to hedge fund Harbinger Capital for $350m (£219m) in a deal that helped the company pay down debt as it jettisoned businesses that hurt its financial position during the financial crisis.
The sale cut Old Mutual’s capital position by about £100m but reduced significantly its exposure to credit risk by shedding a business that was carrying mark-to-market losses of more than $2bn at the depths of the crisis.
The acquisition of AIVA would enhance Old Mutual’s presence in selected emerging markets particularly in Latin America and deepen AIVA’s existing relationship with Old Mutual.
Following the completion of the transaction, AIVA would work with Old Mutual to expand distribution in the region.
The transaction is conditional on relevant regulatory approvals and is expected to be completed in early 2013. Consideration is not being disclosed.
AIVA is a family-owned, high quality business platform and distribution business based in Uruguay and spanning the Latin American region.
It employs 120 people and provides services to a network of IFAs, wealth managers and other institutions. It has assets under management of over $800 million.
Old Mutual and AIVA have had a long-standing relationship for over 15 years. AIVA currently works with Old Mutual in a number of areas, including administration and servicing as well as in the investment space.
AIVA, together with Old Mutual’s Emerging Markets businesses, will take advantage of operational synergies in Colombia and Mexico in due course.
Paul Hanratty, CEO of Old Mutual’s Long-Term Savings business said: “The deepening of the relationship between Old Mutual and AIVA provides a firm base from which we can capitalise on opportunities in these fast-developing investment markets in an efficient and low capital manner.”
Carlos Parra, one of the founding partners of AIVA, said: “The combination of our distribution experience and Old Mutual’s size and strength means that together we are well placed in Latin America to take advantage of attractive growth opportunities.”