Barclays downgrades Old Mutual as it 'pauses for breath'

Barclays downgraded insurance group Old Mutual (OM) to ‘equalweight from ‘overweight’’ and lowered its price target to 193p from 220p as it feels the stock may move sideways after a strong performance this year.

The company announced in March that it hoped to unlock value trapped in it corporate structure by separating its four primary businesses, Old Mutual emerging markets (OMEM), Old Mutual Wealth (OMW), Nedbank and Old Mutual Asset Management (OMAM).

OMAM, the US asset management operations, which is already listed in the US, can be sold down and the proceeds used to pay down debt according to the bank, leaving shareholders a share in UK operations (OMW) and a share in the OMEM African business, while Nedbank would then be spun off to OMEM shareholders.

Barclays supports the separation and feels that OM has been the best performing UK life insurance group this year, outperforming Prudential, Standard Life, Legal’s and Aviva.

The stock however could ‘pause for breath’ as the separation unfolds according to the bank, leading to the downgrade.

The company’s first half operating earnings were "disappointing", with many items responsible pertaining to the managed separation and current macroeconomic climate.

The share price fell 1.42% to 194.80p at 1012 GMT on Monday.