Old Mutual a step closer to seeing off Peter Moyo
The marathon of litigation between dismissed Old Mutual CEO Peter Moyo and the Old Mutual board headed by former finance minister Trevor Manuel is nearing the finish line. This week, three high court judges upheld Old Mutual's appeal allowing it to dismiss Moyo, which the company originally tried to do in June 2019.But Moyo confirmed to Business Times that his lawyers are planning to submit a case to the Supreme Court of Appeal in Bloemfontein. His deadline is February 14. When Old Mutual relisted as a focused African insurer, many expected the share price to take off. But even after it rallied this week after the verdict in favour of the company, at R19.50 it is still just 20% off its 12-month low."Of course we would have liked to settle," says Old Mutual head of investor relations Tabby Tseliwe, "but not at the expense of good corporate governance." Allan Gray portfolio manager Jacques Plaut says the ruling confirms his view that Old Mutual was justified in letting Moyo go and "removes some fears that Moyo might be reinstated or get a huge settlement". But Plaut says the outlook for Old Mutual is difficult. Its funeral policy and microlending businesses are in a tough space thanks to competition from Capitec and FNB.Investing, through the Old Mutual Investment Group, is also likely to show muted profit as the equity market has been weak over the past five years."Nevertheless we believe the share price is reflecting an even bleaker future than what we expect for Old Mutual," says Plaut. The share makes up 2.6% of the assets of the Allan Gray Equity fund, SA's largest general equity fund. It is the second-largest financial share in the fund after Investec.Gavin Wood, chief investment officer of Kagiso Asset Management, has sold his Old Mutual shares, as he believes there are increasing threats to its business model in its highly profitable mass-market segment. "Why would a Capitec client wait for the next presentation from an Old Mutual group schemes agent selling funeral policies when he can buy what he needs at a branch or even on an app?" he asks. Wood says the main attraction of holding Old Mutual shares up to mid-2018 was to get hold of shares in Quilter, the UK wealth management business now listed separately. It has performed far better, gaining 30% over the past 12 months. Quilter now accounts for 5% of the assets of the top-performing Kagiso Equity Alpha Fund.It is hard to judge the impact of the Moyo drama on the Old Mutual brand, but those pictures of Moyo and Manuel cutting cake at the 2018 listing seem a distant memory.Moyo says that the team he recruited is still implementing his strategy, though he "won't comment" on the competence of acting CEO Iain Williamson.But some shareholders are starting to look at Williamson as a permanent CEO. At 49 he is the right age to take Old Mutual over the next decade. "Williamson would be an excellent choice," says Truffle portfolio manager Iain Power.But Avior Capital head of research Warwick Bam says Williamson's experience equips him better for the COO role, which he held before he was appointed interim CEO.Moyo made no secret of the fact that his heir apparent was Karabo Morule, who ran personal finance, Old Mutual's core, historically white, business. Morule resigned in 2019, driven out by the unpleasant atmosphere. She is by all accounts a brilliant actuary, one of the first black women to qualify in SA and still under 40. No doubt Old Mutual's headhunter will approach her for the job. Another casualty of the drama was board member Pinky Moholi, who did most of the press communication for the directors, which Manuel was reluctant to do. As a former Nedbank executive and CEO of Telkom she is a candidate for the Old Mutual CEO position in her own right, and could be the right person to rebuild the group's image among shareholders and clients. She is a little older than Morule and Williamson but still younger than Ian Kirk, CEO of competitor Sanlam.All senior executive committee members will be considered for the job, including Clarence Nethengwe, head of the mass market business, and Clement Chinaka, who runs the rest-of-Africa businesses. But both are probably too operationally focused and do not have the strategic experience needed.Good outside candidates such as Jurie Strydom at Sanlam or Hylton Kallner at Discovery are unlikely to consider a move to Old Mutual while it remains on the back foot.