How thoroughly un-British! The boss of a Footsie financial has been Crunched.
Old Mutual plc today announces that Jim Sutcliffe, Chief Executive, has decided to step down with immediate effect. The Board has accepted his resignation.
Turns out that the US Life business of Old Mut is a substantial holder of Fannie Mae and Freddie Mac preferred stock – which had their coupons suspended in the weekend bailout of the GSEs. The result is a $135m writedown and executives are working fast to make sure the American insurance division is “appropriately capitalised.”
And that’s not all. US Life also has a continuing problem with the variable annuity guarantees it has been writing, which have become painfully unprofitable amid the hike in equity market volatility and the recovery of the dollar. That’s led to a further $155m being set aside and the injection of $250m of capital to support its Bermuda-based guarantee-writer.
A number of actions have been underway with the aim of limiting Old Mutual Bermuda’s exposure to the guarantees, including withdrawing products, currency hedging, improved fund mapping to reduce basis risk and reviewing options available to de-risk the in-force book through various corporate actions.
The new ceo will be Julian Roberts, who used to be finance director at the company, before becoming the boss of Skandia in early 2006.
For Sutcliffe, this looks like a sad and sudden end. He has led Old Mut for eight years.
But why is he going, when the heads of so many rival banks and insurers in Britain have held onto their positions despite much deeper financial damage? Maybe it’s because Old Mut is really a South African company, albeit listed in London and with substantial operations in the States.
Related links:
Old Mutual forced into £150m US injection – FT story from August