It’s been more than a week since South Africa’s biggest insurer, Sanlam announced its new CEO, Paul Hanratty. The former Old Mutual senior executive will now lead the firm that he watched overtake his former employer over the years, both in terms of footprint and market capitalization.
Sanlam's incoming CEO left the almost 175-year old Old Mutual as chief operations officer in 2014 just weeks before former Liberty CEO Bruce Hemphill, succeeded Julian Roberts, and was tasked with restructuring the insurer and relocating its headquarters to 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'll be renewed pressure on the green brand to name a person who will please the markets when it 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. The insurer's spokesperson, Tabby Tsengiwe said the company is still in the process of recruiting a replacement.
The insurer had to put the process on hold in July when the Johannesburg High Court ruled that it should reinstate Moyo and that it cannot appoint anyone else as CEO. But three weeks ago, the same court, but different judge dismissed Moyo’s bid to block the recruitment process and two days later, the Supreme Court of Appeal dismissed Moyo’s attempt to remain Old Mutual CEO.
While this has cleared the ground for Old Mutual to make the long awaited announcement, Tsengiwe said the company can't 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," she said.
Tsengiwe said Old Mutual is committed to internal succession planning as shown by its recent executive appointments. "It is worth noting that of the group’s recent four executive committee appointments, three have been internal candidates thus highlighting the group’s commitment to succession," she said.
These internal appointments included new MD for Old Mutual’s Rest of Africa business, MD of Old Mutual Corporate and MD of Old Mutual Personal Finance.
Sense of urgency
Old Mutual's share price performed poorly compared to the life insurers index after its protracted legal battle with Moyo in 2019. The insurer closed the year down 12% on 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 the court rulings came out in favour of Old Mutual – the insurer's share price has moved more or less in line with most of its competitors, although it's still the biggest loser falling some 43% while Sanlam and Discovery are down 32% and 28% respectively.
Graeme Franck, portfolio manager at PSG Wealth said the single biggest uncertainty weighing on the Old Mutual stock now is the CEO succession. "This needs to be addressed ASAP", he said.
He added that the announcement of new Sanlam CEO has placed extra pressure on Old Mutual now.
But with the coronavirus (Covid-19) bulldozing most local stocks and the looming global recession threatening to make life difficult for insurers as consumers cut back on certain expenses, Warwick Bam, head of research at Avior Capital Markets said 2020 is a complex period to introduce a new CEO.
"While I believe Old Mutual is acting swiftly, I would not be concerned if the new CEO’s start date is delayed to limit additional internal disruption while Ian Williamson and his team manage Old Mutual through the current economic crisis," said Bam.
He said 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 tough task for an external candidate to take over in the current environment, maybe a handover period, similar to what Sanlam has done? But they are certainly in desperate need for solid leadership to take the group forward," he said.
He said the insurer is however under pressure to finalize the succession process and should have a few shortlisted individuals now.