1

1 Terms of Reference

The report was directed by the University as a result of an assessment of the Marketing

Management Program. Requirement of producing a marketing plan of an assigned FTSC

100 Companies. The writer was assigned Old Mutual PLC and was asked to produce a

marketing plan consisting of three thousand words in length to be submitted on Tuesday

18 December, 2007.

2

2 Methods of Data Collection

All data was collected from using secondary data, which was sourced from Old Mutual

website (2006 Annual Report).

3

3 Company Situation

Old Mutual is an international financial services group focusing on asset gathering and

asset management. The group primarily operates in the UK and South Africa, it also has

operations in the US, Europe, Latin America and China. It is headquarter in London, UK

and employs about 53,152 people. The group recorded revenues of £19,918 million

during the fiscal year ended December 2006, an increase of 38.6% over 2005. The net

profit was £836 million in fiscal year 2006, a decrease of 3.6% over 2005.

OLD MUTUAL PLC

Type: Public Limited Company

Founded: 1845

Headquarters: London, England, UK

Key People: Christopher Collins, Chairman

Jim Sutcliffe, CEO

Industry: Insurance, banking and asset management

Revenue: £4,713 million (2006)

Operating Income: £1,714 million (2006)

Net Income: £1,093 million (2005)

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3.1 Group Structure

Through numerous acquisitions, Old Mutual plc has become firmly established in the

global financial services arena. It has used the broad and well-established Old Mutual

(South Africa) base to create a multinational business.

Old Mutual’s operations globally, cover the following areas outside South Africa:

Africa

Asia

Australia

Europe

South America

United Kingdom

United States

The penetration of these areas enables us to benefit from economies of scale and sector

and geographic diversification. It allows us to weather market fluctuations and other

challenges more robustly than the smaller more regional competitors.

3.2 Old Mutual Subsidiaries

3.2.1 Old Mutual South Africa

OMSA financial services business, comprising life and asset management business,

and has at its core one of the largest distribution capabilities in the South African

insurance industry.

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3.2.2 Ned bank Group

Ned bank Group Limited, which is 53% owned by the group, is a bank holding company

that is one of the four largest banking groups in South Africa.

3.2.3 Mutual and Federal (General Insurance)

Mutual and Federal provides insurance services to the personal, commercial and

corporate markets in South Africa, Namibia, Botswana and Zimbabwe.

3.2.4 US Subsidiaries

Fidelity and Guaranty Life, OMNIA Life (Bermuda)

3.2.5 UK and Offshore

Skandia UK includes four business units: Skandia Life, Selestia/Skandia Mulitfunds,

Skandia Investment management, and Skandia International. Skandia is one of the fastest

growing UK savings company with over a million customers and £35 billion under

management.

3.3 Skandia Company Overview

Skandia is an independent provider of solutions for long-term savings. The company is

engaged in the provision of unit-linked assurance, mutual funds, life assurance, banking

and other related services. Skandia is a fully owned subsidiary of Old Mutual Group,

which owns 98.2% stake in the company. It primarily operates in Sweden, Norway,

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Denmark, Australia, Asia and Latin America. The company is headquartered in

Stockholm, Sweden and employs about 5,800 people.

A.M.Best Co. has assigned a financial strength rating of A (excellent) and an issuer credit

rating of A+ to Skandia Insurance Company Limited (Sweden) and Skandia Life

Assurance Company Limited (UK). The outlook for both ratings is stable.

3.4 Mission Statement and Vision

Skandia’s vision is to be the strongest and most successful long term insurer in our

chosen markets.

Skandia’s mission statement is to provide superior insurance solutions to protect client’s

assets through:

Accountability – Being prepared to make commitments and be judged against these.

Delivering on commitments

Taking ownership for actions and problems and being responsible for

actions.

Respect - Treating others as you would have them treat you.

Leveraging the strengths of diversity

Actively listening to others and treating people with dignity.

Pushing beyond boundaries – Playing the maximum as individuals, teams and as an

Organisation, across boundaries.

Always striving to break new ground with innovation and creativity.

Being passionate and committed and always striving for improvement.

Integrity - Being honest, trustworthy, consistent and open.

Acting in accordance with the highest ethical standards.

Passion - Giving the best and being dependable in exceeding goals successfully.

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Having confidence and willingness to take action in order to achieve a

recognised benefit.

Having a sense of optimism and enthusiasm to spend energy voluntarily.

3.5 Skandia’s Financial Summary

Highlights (£m)

2006

2005

Change

IFRS adjusted operating profit

Embedded Value adjusted operating profit

(covered business)

Life Assurance Sales

Mutual Fund sales

Value of New Business

Net Funds inflows

Return on Invested Capital

Return on embedded value(covered business)

Funds under management (£ bn)

231

394

881

4,306

127

6.3

8.1%

13.5%

52

111

328

781

2,715

113

-

-

-

44

108%

20%

13%

59%

12%

-

-

-

18%

Adjusted operating profit for the eleven months to December 31, 2006 increased to £231

million, building on growth in funds under management and strong sales volumes, which

delivered higher fund and premium-based income growth. Value of new business grew

by 12%, driven by an increase in APE. This also contributed positively to the return on

embedded value of 13.5%.

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4 The UK Insurance Industry

The UK insurance industry is an important contributor to the economy, a major

employer and a significant source of overseas earning. It helps businesses to protect

themselves from risk and provides a wide range of services to ordinary people, from

car and home insurance to pensions, life cover and savings. The UK insurance

industry is:

the largest in Europe

the third largest in the world

employs 339,000 people, almost a third of all financial services jobs

controls 17% of investment in the London stock market

pays out almost £156 million per day in pension and life insurance benefits and

£54 million per day in general insurance claims

4.1 Structure of the UK Insurance Market

1,167 companies are authorised to carry out insurance business in the UK, 870 for

general business only (such as motor, household and commercial insurance), 237 for

long-term business (such as life insurance and pensions), and 60 for both. The market is

therefore highly competitive.

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4.2 Market Share

The long-tern insurance business sector total market for 2005 was £87 billion, the market

consists of 237 companies authorised to carry out long-term insurance business in the

UK. Skandia controls approximately 5% of the market (£4 billion), which puts them in

the top ten in the industry.

General Insurance Business

Total Net Premiums £31.2 bn

(All figures in £bn)

Motor

Property

Other

Net Premiums

Total Expenditure

Underwriting Profit/loss

Long-term insurance Business

Total Premiums

Of which:

10.2

10.3

0.1

8.5

7.7

0.8

87

12.5

11.7

0.8

Life insurance

Individual pensions

Group pensions

Of which pension annuities

Life annuities

Income protection and critical

illness

31

24

30

11

0.3

1.9

Figure 4.1 the UK Insurance Business

Source: Association of British Insurers 2005 UK-Key Facts

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4.3 The Importance of the UK Insurance Industry

Around 339,000 people are employed directly and indirectly in the insurance

industry. This is over one and a half times as many as employed in motor vehicle

manufacturing and more than two and a half times the number employed in the

electricity, gas and water supply sectors combined.

Each day in 2004, insurance companies paid out £141 million to pensioners and

long-term savers, compared to £135 million paid out by the UK government in

state pension provision.

The UK insurance net exports of £6.4 billion in the year were equivalent to nearly

two-thirds of total UK food, beverage and tobacco export, or almost half of the

value of UK oil exports.

Insurance companies are the largest domestic owners of UK shares-owning 17%

of UK ordinary shares. This compares to 16% held by company pension’s funds,

2% by unit trusts and 11%by other financial institutions.

4.4 Political and Regulatory Environment

The UK market is the main market for Skandia, which has a very stable government, one

that is very conducive to business and possesses a positive long-term outlook, the pound

sterling is the main currency of this market, when compared to other currencies it is very

strong. The Office of Fair Trade in the UK has policies to assure that businesses compete

fairly and honestly, observing all anti-trust and competition laws. The Association of

British Insurers, ensures that insurance companies operate within the insurance

regulations

The Pensions Act 2007 seeks to re-establish the link between earnings and the basic state

pensions. The state pension’s age would be raised from 65 to 66 years by 2024.

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4.5 Economic Environment

The GDP in the UK has grown at an average rate of 2% per annum. Due to the strength

of the sterling and the high price of crude oil have resulted in more disposable income

which increased consumer spending. Inflation rate for 2005 was at 5%. However, the

distribution of income gap between high and low income earners are widening and the

unemployment rate is growing. This brought about the need for more savings from low

and middle income earners. It is widely believed that the overall level of saving should be

substantially increased.

4.6 Social Factors

The UK has a population of 60.6 million people. Nearly 44% of the UK adults are over

50 years and the distribution of wealth is heavily skewed towards the older generation.

There are more women employed now in the UK. This is a result of falling marriage rate,

higher divorce rates and later motherhood, which resulted in higher demand by women

for life insurance and pension funds.

4.7 Technological Factors

The internet has opened up a new frontier for insurance companies; improvement in

computer technology has improved the IT sector which has led to greater economies of

scale. Therefore, less people are doing more specialised jobs.

4.8 Suppliers

Skandia has many suppliers which are located close to the establishments. These

suppliers are chosen based on their ability to provide quality products and reliable

services at competitive prices.

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4.9 Intermediaries

Skandia solutions are distributed via independent financial advisors and agents

throughout the UK. They have an intensive distribution system via field officers who

interfaces directly with clients.

4.10 Public

The company operates through their environmental best practice policies.

4.11 Customers

Skandia’s market is segmented by age, income and professional status.

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4.12 Skandia’s SWOT

Strengths

Strong market position

Reputable brand

Financially strong

Old Mutual’s experience and ‘know

how’

Strong Marketing expertise

Loyal customer base

Quality distribution system

The Selestia Investment Solution (open

architecture)

Weaknesses

High dependence on the UK market

Strong focus on the Selestia Investment

Solution

High dependence on IT unit

Opportunities

Buoyant UK economy

Changes in the UK Pensions System

The need for higher savings by low and

middle income earners

High percentage of UK population over

55 years

Higher number of women working and

seeking long-term insurance coverage

Threats

Intense competition

Changes in the tax system on allowance

for pension and mutual funds

Currency Fluctuation

Stock exchange fluctuations

Competitors introducing their own

version of open fund architecture

Figure 4.2 Skandia’s SWOT

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5 Competition

There are 237 companies who are authorised to provide long-term insurance in the UK.

All of which are major players in the market, making it highly competitive. Allianz and

AIG are Skandia’s closest competitors.

5.1 Allianz’s SWOT

Strengths

Market leading positions

Focus on branding

Quality distribution system

Weaknesses

Weakness of the annuity business

Sensitivity to equity markets

Weak operating performance

Opportunities

Recovery in equity markets

New product offerings

Strong growth in institutional annuities

Growth in retirement business

Threats

Low interest rates

Pricing pressures

Dispute with UK legislators

Estate tax regulation

Intense competition in the US life

insurance

Figure 5.1 Allianz’s SWOT

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5.2 AIG’s SWOT

Strengths

Strong and reputable brand

High brand awareness through

sponsorship of Manchester United FC

Global brand name

Market leader position

Weaknesses

Slow down of the US economy

High reliance on North American

market

Unstable currency

Opportunities

Buoyant UK economy

High percent of wealth in the hands of

the top 10-15% of population

Changes in the legislation governing

pensions fund

Increased acceptance of open

architecture system

Threats

Increased competition by Old Mutual

takeover of Skandia

The Sterling increased in value vs. the

US dollar

Legislation governing pensions fund

Figure 5.2 AIG SWOT

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5.3 Porters Five Forces Model

Figure 5.3 Porter Five Forces Model

Source: Michael E. Porter – Competitive Strategy, Free Press, 1980

Competitors

Skandia

Allianz

AIG

Threat of new entrants

Very competitive

Entry and Exit in statute

bound

Mature market

Highly capital intensive

Reputation/ Reliability is

a barrier

Buyers

Changing needs

Product

solutions to suit

needs

Loyalty

Buyers market

Suppliers

Very attractive

Many suppliers

Good

Relationship with

suppliers

Threat of Substitute Products

Banking Sector

Substitutes

insignificant

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6 Skandia Corporate Strategy

Skandia’s corporate strategy is meet customers needs for savings by offering innovative,

world-class services and products. Our strategy is to focus on the links in the value chain

in which we are best, while forging alliances with partners who are world leaders in their

area, according to the specialist in cooperation concept.

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7 Marketing Objectives

7.1 Qualitative Objectives

Skandia will be a global market leader in defined product areas and create sustained

shareholder value to place priority on developing new markets. Also, to continue to treat

diversity positively, to increase return on investment and to aggressively increase market

share over the next three years.

7.2 Quantitative Objectives

The group’s financial target is to achieve a minimum rate of return of 10% in 2007 which

is equal to £141 million through an increase in sales of 15%. In 2008 an increase in rate

of return of 10% which is equal to £155 million through a 15% increase of sales. In 2009,

an increase in rate of return of 10% which is equal to £170 million through a 15%

increase of sales.

Cutting cost by £70 million during the next three years through synergies in the

operations of Skandia.

2007- Streamlining of IT department and outsourcing some aspects of this

operation. This would result in a staff reduction from 300 employees to just 45 of

which 200 of them would be placed within the corporate structure. This would

result in a savings of £20 million.

2008- The focus will be on operation efficiencies which will achieve core savings

of £30 million, and will result in reductions of 300 more jobs. This is mainly due

to the integration of Selestia and Skandia multifunds to form the Selestia Open

Architecture Platform fund. These savings are largely achieved through reduction

in staff (both field and admin), office rental and system administrations.

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2009 – We will improve the efficiency of administration and customer service by

applying Old Mutual streamlined E-enabled administrative engine which will

enable Skandia to improve service quality and reduce cost. Together with

improvements made in 2007 and 2008 and therefore in 2009 the resulting savings

will be £20 million.

During the period 2007 to 2009, Skandia will invest £900 million in internet marketing

and internet advertising.

7.3 Assumptions

There are greater customer awareness, government initiatives to move away from state

funded pensions, increased acceptance of open architecture solutions and the increasing

wealth of the top 20 % of the population.

7.4 Constraints

Continuing fluctuations in the world’s currency market, instability in the world’s main

stock markets and the forecasted slow down of the US economy

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8 Positioning Statement

The market for life insurance products for persons between the ages of 35-50 years,

recently married and who owns a home and a car and earns between £28000-£36,000 per

annum. This category is about 30% of the population, of which only 5% now have life

insurance. Therefore, there is a target market of 25% of the population. Together with the

rest of the population a target market of 35% was established.

Therefore a market penetration strategy is recommended. This is in line with the

marketing objective which is to aggressively increase market share in 2007.

8.1 Pricing Strategy

Clients in this category are especially sensitive to value. We must therefore ensue that our

price is perceive to be good value. We must offer several payment options to our clients

that are also convenient. Many insured are on fixed income and receive their income on a

set day of each month or a pay check on a particular day. We might have to also make

allowances for credit and debit card payments. Our premium should be set at £200 a

month for £100,000 of benefit.

8.2 Promotional Strategy

All advertising should focus on the low premium and the brand name of the company

Skandia. We must also sell the company’s excellent record on fast and prompt payouts.

Intensive advertising in all major newspapers, radio and television stations, sponsorship

of major football clubs, rugby clubs and cricket clubs. Direct mailing of prospectus to

target markets.

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8.3 Product

The product is a value sensitive life insurance. It will be packaged in the form of a

prospectus and sold as a legal contract. The prospectus would contain information, such

as premium amount, benefit payment, length of contract to reach maturity and all other

legal requirements. All fees and charges would be clearly stated and disclaimer would be

appropriately highlighted. The methods of executing the contract would also be presented

and the necessary documents needed would be outlined. The prospectus would be easy to

read and understand.

8.4 Place

The product would be distributed by Independent Financial Agencies (IFA) and brokers

all across the UK situated in mainly towns and cities. The product would be very

attractive to market for these agents due to the significant volume uplift and market share

gains, although the product margin will be small. Skandia would offer incentives to these

agents by giving cash incentives for volume sales. Skandia would also work in

partnership with IFA in building up their distribution.

8.5 Sales Strategy

Through our commitment to work closely with the IFA, we would emphasize the benefit

of targeting professionals and white collar workers who could fall in the target income

bracket. Using Skandia’s strong and stable business reputation to enhance selling

strategy.

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8.6 Sales Forecast

Skandia sales forecast for 2007 is £500 million.

January £10 m

February £20 m

March £30 m

April £40 m

May £50 m

June £30 m

July £25 m

August £20 m

September £50 m

October £75 m

November £100 m

December £25 m

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8.7 Budget- 2007

All figures in £m

Activities

Total

Launch

Administration

Commissions

Advertising

Training and Consultation

Sales Meetings (Quarterly)

Marketing Expenses

Distribution Expense

Other Expenses

Total Expenses

5

2

200

50

5

5

2

1

2

272

Figure 8.1 Budget Expenses 2007

The sales of the product would be monitored by a specific team of experts in the Life

Insurance Department. They would review the sales results for the previous week every

Monday to gauge success rate, and effect any changes that may become necessary.

Quarterly sales meetings and training would be held with the IFA to ensure that they are

motivated and updated with any new developments and so on. Random testing of

communication (advertising) effectiveness would be done and appropriate changes made.

Cost to be monitored and efficiency testing are continuous.

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9 Product Development Strategy

There is robust growth in the UK’s economy driven by high oil prices and a strong

financial sector. GDP is at an all time high and the elite top twenty of society is

increasingly benefiting. Incomes for CEO’s and other professionals are improving

enormously. High percentage of population over 55 years who tend to be very wealthy

and looking for investment opportunities. Demand for with-profits products has

collapsed. They are hit by adverse publicity and increased realization that investment risk

can be better managed through unit-linked solutions. Consumers increasingly see the

flexibility and investment choice of open architecture and the ease of making financial

decisions, using investment platforms.

All of these have made the market for open architecture very attractive- Skandia and Old

Mutual are the pioneers of this system and still has a market leader position in this

market. Skandia’s unique business model, committed and stable management team is best

placed to take advantage of this potential. By combining Old Mutual, Selestia and

Skandia multifunds to form the Selestia Open Architecture Platform Fund. It targets

affluent investors, being the wealthiest 10-15% of the UK population, the elite who are

big business owners and CEO’s of MNC’s and cooperation.

9.1 Product

Selestia Open Architecture Platform Fund – The product is made up of the following

elements:

Fund Supermarkets- Broaden fund range (multiple funds- 1000 external funds)

Bonds Component

Pension Funds component

Selection would be self selection from complete fund range or Skandia chooses for you.

The product will be packaged in a prospectus and sold as and investment solution. The

prospectus will highlight the main characteristic of this product is that there is a big

25

opportunity to manage people solutions, both on the accumulation phase of life, but also

on the decumulation, that is, after retirement.

9.2 Place

Skandia will offer their products through a wide distribution range, including IFA, their

own sales force and online. Skandia has a well trained, knowledgeable and experienced

sales force. Skandia has an established track record with fund managers and IFA’s

existing relationship with over 25 top fund managers in the industries, exclusive

distribution deals with IFA’s within UK retail Open Architecture Funds distribution

markets.

Distributors will benefit from significant volume uplifts, market share gains, improved

margins, increased business volumes and enhanced profit potential. Introduction of

internet software that will allow investors to access the fund platform and make

investments and so on.

9.3 Promotion

The market is very exclusive and selective; therefore the communication would have to

be suitable to this affluent market. Advertisements would be placed in trade journals,

business magazines and selected sports magazines (golf and yachting), business sections

in major national newspapers and during business sensitive programs on national

television such as BBC Business updates. Prospectus would be put into stock exchange

magazines. Prospectus would be mailed out to target market.

Skandia would also host dinners at Chambers of Commerce to introduce a high profile

launch of this fund and invite these affluent investors, CEO’s and owners of cooperations

and so on.

26

Internet Marketing and Advertising – a price skimming strategy would be used. The

minimum investment in this fund would start at £200,000, with no high limit.

9.4 Sales Strategy

This would include taking out these affluent investors to power dinners and lunches,

where our trained, professional sales representatives, agents or IFA’s would outline the

Skandia’s selling points with the products (Selestia Open Architecture Platform Fund)

and the potential accrued benefits (returns) of the fund.

9.5 Sales Forecast for 2008 and 2009

In 2008 sales is forecasted to reach £575 million and in 2009, it is forecasted to reach

£660 million.

The table below shows the sales forecast for 2008 and 2009.

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All Figures in £m

Months

2008

2009

January

February

March

April

May

June

July

August

September

October

November

December

TOTAL

30

40

50

50

50

30

30

40

60

75

120

50

575

30

40

50

60

60

40

40

40

60

80

130

40

670

Figure 9.1 Forecast 2008-2009

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Figure 9.2 shows the budget of expenditure for 2008 and 2009.

All figure in £m

Budget

2008

2009

Launch

Administrative Expenses

Advertising

Commissions

Training and Consultation

Sale Meetings

Marketing expenses

Distribution expenses

Internet Advertising

TOTAL

10

2

50

200

5

2

5

5

50

330

-

3

75

300

3

2

5

5

40

434

Figure 9.2 Budget of expenditure 2008-2009

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9.6 Monitoring and Control

Regular management meeting with fund managers to ensure that revenue and sales are in

line with projections. If there is need for any changes, decisions are taken immediately

and corrective action implemented. Fund managers would take hands on approach day to

day operation within the first six months. Continuous training and evaluations of sales

force of this fund is introduced because of the necessary professionalism needed to

interface with target investors.

30

10 Bibliographies and References

Kotler, P. 2003. Marketing Management. 11th

edn. New Jersey. Prentice Hall Publishers.

Weekes, P. 2007. Managing People, Finance and Marketing. 1st edn. Harlow. Pearson

Educational Limited

Wall, S. and Rees, B. I nternational Business. 2nd

edn. Harlow. Pearson Educational

Limited

Old Mutual Annual Report. 2006. [online] [cited on 10

th December, 2007]

Available at: URL:http://www.oldmutualhome.com

Allianz Annual Report. 2006. [online] [cited on 10th

December, 2007]

Available at: URL:http://www.allianz.org

AIG Group Annual Report. 2006. [online] [cited on 10th

December, 2007]

Available at: URL:http://www.aig.com