Johannesburg - Analysts believe that Old Mutual CEO Jim Sutcliffe's decision to step down is as a result of the US operations confirming it would write down another US$155m.
The write-down comes on the back of weak equity markets and exposure to US mortgage lenders Freddie Mac and Fannie Mae, both of which have seen their share prices battered in recent months.
News service Bloomberg quoted Royal Bank of Scotland analyst Youssef Ziai as saying the company's US business had "caused more pain and heads had to roll". "The uncertainty lingers on until we get more clarity in the credit markets and the company puts a figure on these types of losses."
Sutcliffe, whose decision to resign was announced on Wednesday morning, did not provide reasons for his move. He is being replaced by Julian Roberts, the former head of Old Mutual's Skandia operations.
Sutcliffe has been in charge of Old Mutual for eight years.
Reuters on Wednesday quoted Old Mutual's non-executive chairperson Chris Collins as saying: "Jim felt that he should resign after the surfacing of further issues (in the US life business)."
Shareholders and analysts have long been critical of Sutcliffe for destroying value at the London listed insurer and wealth manager.
Over the last five years, the Old Mutual share price has moved from 1 275c to a high of 2 673c in February 2007 and fallen back to a current price of 1 380c.
Over the five years, the company has produced a total return of 8.23% (excluding dividends) for shareholders who held the share over the entire period.
In comparison over the same period, local competitor Sanlam has returned 140%, while the Liberty Group has produced 44%.
This is despite owning a majority stake in cash-flush short-term insurer Mutual & Federal, which has regularly rewarded its shareholders with large special dividends.
Sutcliffe and his management team have described the business as "non-core" and will be attempting to sell it off in a competitive bid process this month.
Personal responsibility
In August, following the release of the company's results to end-June, Sutcliffe said he was "determined to resolve the difficulties in our US Life business and to return it to a proper level of profitability."
He continued: "I have set up a far-reaching exercise which is already underway to ensure we deal with the issue (Old Mutual's Life operations) once and for all... I am determined that we take all the necessary steps to restore it to a proper level of profitability."
Sutcliffe had reassured investors and industry analysts that he would be looking forward to reporting positive feedback in February next year when the insurer's full-year results were announced.
He concluded by saying: "I hope I have left you in no doubt about my own and my team's absolute determination to address the issues at our Bermuda business."
Less than six weeks later, Sutcliffe has left the building.
Disappointed fund managers
As reported in August, many major institutional funds had placed a lot of faith in the Old Mutual story.
During the second quarter of 2008, funds added nearly R80m worth of Old Mutual stock to their portfolios.
The highly rated Investec Equity Fund added nearly R50m in Old Mutual shares to its portfolio.
Since hitting a quarterly high of 1 962c in April 2008, the share has lost nearly 30% of its value.
Over the same period the JSE FINDI30 index (representing top financial and industrial stocks) has lost roughly 1.9%, while Sanlam has been flat and Liberty Holdings has lost just 5%.
In a recent note to unit holders of the Investec Equity Fund, Gail Daniel of Investec Asset Management said banks, insurers and retailers "continue to suffer from downgrades and we do not see any respite for them on the macroeconomic front".
- Fin24.com