Old Mutual explains why it suspended CEO Peter Moyo – as shares dip

Insurer Old Mutual on Friday (24 May) suspended its chief executive officer, Peter Moyo, citing a breakdown in trust.

“The separation was a result of a material breakdown of trust and confidence, which occurred due to the management of conflicts of interest in business relations with related parties. These business relations pre-exist the appointment of Mr Moyo as CEO of Old Mutual and were considered at the time of the appointment to be manageable,” Old Mutual said in a note on SENS.

“The competing interests were regulated in the chief executive’s contract of employment and were disclosed in the Old Mutual pre-listing statement and the annual financial statements. Unfortunately the Board and Mr Moyo have disagreed materially on how the conflict of interest has been managed, resulting in a breakdown in the required mutual trust and confidence.”

Old Mutual said that the decision to separate with the chief executive officer “is neither the result of performance or financial misconduct related to the Old Mutual business, and is purely related to the conflict of interest issue”.

The board has appointed Old Mutual’s chief operating officer, Iain Williamson, as acting CEO.

Moyo told Reuters that he was suspended after a disagreement over how the company should engage with an investment firm he founded.

He told Reuters by phone that his suspension related to ‘how different parties thought Old Mutual should engage with NMT Capital, which he founded and in which an Old Mutual subsidiary is an investor’.

“That relationship has always been there from the day I started and it was properly disclosed,” he told Reuters by phone, emphasising the suspension was the result of differences on the approach to engagement rather than the relationship itself.

“There is actually absolutely no wrongdoing on my part,” he said.

Also on Friday, Old Mutual delivered an operating update for the 3 months ended March 2019. “In South Africa, our largest market, the economic environment remains challenging with low economic growth and rising fuel prices expected to place further pressure on our customers’ disposable income levels,” it said.

“Whilst equity markets in South Africa are up from December 2018 the absolute levels are still below where they were in the first quarter last year, placing pressure on earnings,” it said.

Despite the challenging economic environment, Old Mutual  said it continues to attract new business from customers. Life APE sales of R2,945 million were 4% ahead of prior year largely due to higher recurring premium SuperFund sales in Old Mutual Corporate.

Gross flows of R39.3 billion were 10% behind prior year due to lower flows in Wealth and Investments and lower single premium sales in Old Mutual Corporate. NCCF in the first quarter of 2019 was negative (-R1.1 billion) mainly reflecting lower net flows in Wealth and Investments, the financial services group said.

Funds under Management was up from December 2018 at R1.084 billion in line with equity market returns in South Africa.

Looking ahead, Old Mutual said its RFO target of GDP + 2% CAGR will become increasingly challenging to achieve over the three year target period due to negative RFO growth in 2018.

“If poor economic conditions persist during 2019 in our key markets, this will further challenge the achievement of this target. We remain on track to deliver on our other medium term targets.”

Shares in the company dipped on afternoon trade on Friday.

Read: Old Mutual announces first financial results after JSE listing

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Old Mutual explains why it suspended CEO Peter Moyo – as shares dip