Chronicle Editor
OLD Mutual homecoming may get even rockier next year as an ongoing battle with its former head risks distracting the South African insurer from handling weak economic growth and rising competition.
The firm will end 2019 still sparring with ex-chief executive officer, Mr Peter Moyo. The dispute has been in court since June, about a year after Old Mutual moved its listing back to Johannesburg.
“They want to be pan-African and there are going to be opportunities, but I am not sure they’re going to be in the right frame of mind to capitalise on those,” said Warwick Bam, head of research at Avior Capital Markets.
“That’s what everyone is concerned about — the internal disruption.”
Old Mutual is struggling to grow sales and operating earnings amid tepid capital markets, a moribund South African economy and the Zimbabwe economic challenges. Rivals, meanwhile, are moving ahead. Liberty Holdings and Momentum Metropolitan Holdings re-organised their businesses to cope with the downturn, while Sanlam sealed a $1bn deal that made it Africa’s number 1 financial-services firm outside of banking.
Old Mutual’s shares have slumped 13 percent since the company said in May that it had suspended Moyo, making it the second-worst performer on the five-member FTSE/JSE Africa Life Assurance Index. The stock hit a record low on September 3. While Old Mutual’s distribution is a key asset, this can “be eroded if management’s attention is distracted or if they have less bandwidth because they have to deal with other noise,” he said. “Succession planning and depth of management are the main concerns as to why nobody is willing to have strong convictions over the growth in Old Mutual.”
Interim CEO Iain Williamson said management continued to execute and make progress on strategy despite the challenging external environment.
“While it would be disingenuous to suggest that the litigation initiated by our former CEO, Peter Moyo, has not had an impact on the organisation, our teams are focused on their priorities and our operations continue uninterrupted by the ongoing litigation,” he said.
Old Mutual’s exposure to the rest of Africa, where it has operations in 13 countries, isn’t pain free either. After turning around its East African business, the company is still restructuring its West African unit to reduce costs, and has had to exclude Zimbabwe from its key financial metrics because of hyper-inflation. — Fin24/Bloomberg.
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