Johannesburg — OLD Mutual had worked hard to build a "considerable buffer" of capital over the past year just in case there was a double dip in the investment markets, CEO Julian Roberts said yesterday.

At the start of the financial year to December 31 last year, the group's capital resources were low, but the capital position of all the subsidiaries was strong now and the group held surplus cash of about £1bn at the centre.

The persistency on life product sales had worsened during the year and life policy assumptions had to be changed, but there was a chance these would need to be revised in two years' time if the current assumptions were found to be too pessimistic.

The group, which operates in about 30 countries, recently re- delineated its strategy, which included the possible initial public offering (IPO) of its US asset management businesses and the sale of its US life business over the next three years.

Roberts said there was quite a "wide range" of values that could be applied to the sale of the US life business because, for instance, its book value was £600m-£700m, while its embedded value was minus £300m.

He said staff had worked hard in the past year to ready the US life business for its potential sale and the possible IPO of the US asset management business, which consists of about 20 investment boutiques. The sale and IPO might occur next year or in 2012.

"We are confident we can get a number of people who are interested in the group," Roberts said in reference to the company's US life business.

Old Mutual last week announced plans to cut costs by £100m over three years as part of its new strategy, but some market analysts have said the figure did not appear an aggressive enough target.

Roberts, however, said the cost cuts would be a "stretch" for the group considering the rationalisation that had taken place last year in the US and other regions, and the fact that £70m had already been cut out of the Skandia subsidiary in Europe.

About £45m of the expected cost cuts would come out of the wealth management division, where the aim was to capture the strong growth in the platform business, which was a relatively low-margin operation and where there was growing demand for better support and transparency.

Roberts said the group was trying to get as much project work as possible done in SA, in line with the strategy to leverage off group capabilities in as many operational regions as possible, and to cut costs.

For instance, responsibility for emerging markets had been moved to Old Mutual SA, an appointment had been made in SA for product development in the long-term savings unit, and administration and finance jobs would be created in SA.

Roberts said reaction "so far" from shareholders to the changes in strategic direction and to the last financial results was that they were happy with the figures. In addition, there had been no surprises and shareholders liked the corporate restructuring plans.