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The Actuary The magazine of the Institute & Faculty of Actuaries

Old Mutual US stake takes hit on guarantees

The Financial Times has reported that Old Mutual’s US business needed a £150m injection in recent months due to falling equity markets.

Income guarantees offered as part of Old Mutual’s variable annuity products became more costly, as higher than expected market volatility in Asia took its toll. Old Mutual had put in place appropriate hedges to insulate itself from market fluctuations. However, these only provided 60% of the required protection.

Sales of the product in Asia had been buoyant, nevertheless, Old Mutual has said that it will now be withdrawing all products with inadequate hedging. Jim Sutcliffe, Old Mutual’s CEO said that the news had overshadowed an otherwise robust performance.