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More than a week has passed since South Africa’s largest insurer, Sanlam announced its new CEO, Paul Hanratty. The former Old Mutual senior executive will now lead the company that saw his former employer outperform over the years, both in terms of presence and market capitalization.
Incoming Sanlam CEO left nearly 175-year-old Old Mutual as COO in 2014, just a few weeks before former Liberty CEO Bruce Hemphill succeeded Julian Roberts, and was tasked with restructuring the insurer and the relocation of its headquarters in Johannesburg.
Some analysts see Hanratty’s intimate knowledge of Old Mutual’s operations as an advantage in the fierce battle for market share in the country. As such, there will be renewed pressure on the green brand to appoint a person who will please the markets when he announces the permanent CEO.
Old Mutual has been without a permanent CEO since May last year when the board suspended Peter Moyo before firing him a month later. Insurer spokesman Tabby Tsengiwe said the company is still in the process of recruiting a replacement.
The insurer had to suspend the process in July when the Johannesburg High Court ruled that it should reinstate Moyo and that he cannot name anyone else as CEO. But three weeks ago, the same court, but a different judge, dismissed Moyo’s offer to block the recruitment process, and two days later, the Supreme Court of Appeals dismissed Moyo’s attempt to remain CEO of Old Mutual.
Still recruiting
While this has cleared the ground for Old Mutual to make the long-awaited announcement, Tsengiwe said the company cannot yet provide an indication of when the Board will announce the appointment of a permanent CEO.
“They are considering internal and external candidates for the role,” he said.
Tsengiwe said Old Mutual is committed to internal succession planning as evidenced by his recent executive appointments. “It is worth noting that of the four recent appointments to the group’s executive committee, three have been internal candidates, underscoring the group’s commitment to succession,” he said.
These internal appointments included a new CEO for the rest of Africa business at Old Mutual, the CEO of Old Mutual Corporate and the CEO of Old Mutual Personal Finance.
Feeling of urgency
Old Mutual’s stock price underperformed compared to the life insurers index after its protracted legal battle with Moyo in 2019. The insurer closed the year with a 12% drop in the JSE, while its Rivals like Sanlam and Liberty had less than 1% movement during the year. But since the beginning of this year, as all court rulings were pronounced in favor of Old Mutual, the insurer’s share price has moved more or less in line with most of its competitors, although it remains the highest. loser falling 43% while Sanlam and Discovery are down 32% and 28% respectively.
Graeme Franck, portfolio manager at PSG Wealth, said the biggest uncertainty weighing on Old Mutual’s shares now is the CEO’s estate. “This needs to be addressed as soon as possible,” he said.
He added that the announcement of the new Sanlam CEO has put additional pressure on Old Mutual now.
Convenient delay?
But with the coronavirus (Covid-19) sweeping away most local stocks and the impending global recession threatening to make life difficult for insurers as consumers cut back on spending, Warwick Bam, chief research officer at Avior Capital Markets said that 2020 is a complex period to introduce a new CEO.
“While I believe Old Mutual is acting quickly, I would not be concerned that the new CEO’s start date would be delayed to limit further internal disruption as Ian Williamson and his team manage Old Mutual during the current economic crisis,” said Bam.
He said that while Hanratty’s experience will benefit Sanlam, Old Mutual also has competent senior management to support day-to-day operations, which is what companies will need to differentiate themselves over the next 12 months, rather than the strength of a single CEO.
Karl Gevers, head of research at Benguela Global Fund Managers agrees: “It would be a difficult task for an outside candidate to take over in the current environment, perhaps a turnaround period, similar to what Sanlam has done? But certainly they are desperate for solid leadership to move the group forward, “he said.
However, he said the insurer is under pressure to finish the succession process and that it should now have some shortlisted people.
