Insurer Old Mutual on Friday confirmed speculation that it would separate its four core business units following a strategic review, in a bid to cut millions in costs. It will also reduce its stake in majority-owned Nedbank to a minority position.

The group said Old Mutual Emerging Markets — which has operations stretching from SA to India —Nedbank, Old Mutual Wealth and US-listed OM Asset Management, which delivered combined pretax profits of £1.8bn, would be separated into standalone units by the end of 2018.

“We have four strong businesses that can reach their full potential by freeing them from the costs and constraints of the group,” said Old Mutual CEO Bruce Hemphill.  “These businesses are performing strongly, have excellent competitive positions in sizeable markets and the underlying growth potential to flourish independently.”

Mr Hemphill said the new strategy would allow each business to have simpler access to capital markets, funding growth more easily and allowing markets to value them appropriately, with straightforward regulatory arrangements.

Though Nedbank was expected to continue its relationship with Old Mutual Emerging Markets as both work towards extracting R1bn in synergies, the group eventually planned to reduce its majority holding in the banking group to a strategic minority shareholding.

“The exact mechanism to achieve any reduction in Old Mutual’s shareholding has yet to be finally determined,”  said Old Mutual.

“Old Mutual currently envisages reducing its shareholding in Nedbank primarily by way of distribution of Nedbank shares to the shareholders of Old Mutual in an orderly manner and at an appropriate time in the context of the managed separation and does not intend to sell any part of its shareholding in Nedbank to a new strategic investor.”

The group sees Nedbank’s shares being widely held after the reduction.

The managed separation process is expected to shave millions off Old Mutual’s central costs, which reached £80m last year.

Outgoing chief operations officer Paul Hanratty, who leaves his post in March, will draw up a structure for the separation process until the end of May, then act as a consultant to Mr Hemphill until September.  He will then act as an independent consultant to the group.

Mr Hemphill has also roped in Rex Tomlison, former deputy CEO of Old Mutual rival Liberty, to “operationalise”  the strategy.