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.

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 2 Methods of Data Collection

All data was collected from using secondary data, which was sourced from Old Mutual
website (2006 Annual Report).

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 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 231 111 108%

Embedded Value adjusted operating profit 394 328 20%
(covered business)

Life Assurance Sales

881 781 13%
Mutual Fund sales
4,306 2,715 59%
Value of New Business
127 113 12%
6.3 - -
Net Funds inflows
8.1% - -
Return on Invested Capital
Return on embedded value(covered business) 13.5% - -
Funds under management (£ bn) 52 44 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 10.2 8.5 12.5

Total Expenditure 10.3 7.7 11.7
Underwriting Profit/loss 0.1 0.8 0.8
Long-term insurance Business
Total Premiums 87
Of which:

Life insurance 31
Individual pensions 24
Group pensions 30
Of which pension annuities 11
Life annuities 0.3
Income protection and critical 1.9
illness
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 Weaknesses
Strong market position High dependence on the UK market
Reputable brand Strong focus on the Selestia Investment
Financially strong Solution
Old Mutual’s experience and ‘know High dependence on IT unit
how’
Strong Marketing expertise
Loyal customer base
Quality distribution system
The Selestia Investment Solution (open
architecture)

Opportunities Threats
Buoyant UK economy Intense competition
Changes in the UK Pensions System Changes in the tax system on allowance
The need for higher savings by low and for pension and mutual funds
middle income earners Currency Fluctuation
High percentage of UK population over Stock exchange fluctuations
55 years Competitors introducing their own
Higher number of women working and version of open fund architecture
seeking long-term insurance coverage

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 Weaknesses
Market leading positions Weakness of the annuity business
Focus on branding Sensitivity to equity markets
Quality distribution system Weak operating performance

Opportunities Threats
Recovery in equity markets Low interest rates
New product offerings Pricing pressures
Strong growth in institutional annuities Dispute with UK legislators
Growth in retirement business 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 Weaknesses
Strong and reputable brand Slow down of the US economy
High brand awareness through High reliance on North American
sponsorship of Manchester United FC market
Global brand name Unstable currency
Market leader position

Opportunities Threats
Buoyant UK economy Increased competition by Old Mutual

High percent of wealth in the hands of takeover of Skandia

the top 10-15% of population The Sterling increased in value vs. the

Changes in the legislation governing US dollar

pensions fund Legislation governing pensions fund

Increased acceptance of open

architecture system

Figure 5.2 AIG SWOT

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5.3 Porters Five Forces Model

Threat of new entrants

Very competitive
Entry and Exit in statute
bound
Mature market
Highly capital intensive
Reputation/ Reliability is
a barrier

Suppliers Competitors
Very attractive Skandia
Allianz Buyers
Many suppliers Changing needs
AIG
Good Product
Relationship with solutions to suit
suppliers needs
Loyalty
Buyers market

Threat of Substitute Products

Banking Sector
Substitutes
insignificant

Figure 5.3 Porter Five Forces Model

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

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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 5
Administration 2
Commissions 200
Advertising 50
Training and Consultation 5
Sales Meetings (Quarterly) 5
Marketing Expenses 2
Distribution Expense 1
Other Expenses 2
Total Expenses 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

24
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.

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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 30 30
February 40 40
March 50 50
April 50 60
May 50 60
June 30 40
July 30 40
August 40 40
September 60 60
October 75 80
November 120 130
December 50 40
TOTAL 575 670

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 10 -
Administrative Expenses 2 3
Advertising 50 75
Commissions 200 300
Training and Consultation 5 3
Sale Meetings 2 2
Marketing expenses 5 5
Distribution expenses 5 5
Internet Advertising 50 40
TOTAL 330 434
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.

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 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 10th 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

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