it lost $135 million through the nationalisation of Fannie Mae and Freddie Mac. ... Last month it admitted losing over £100m through failing to properly hedge itself against falls in Asian stock markets. At the time Sutcliffe blamed certain employees at its US Life arm for "not doing their jobs properly".The company immediately announced Sutcliffe's replacement, Julian Roberts, the head of Old Mutual's Skandia operations and was previously finance director of Old Mutual. Besides the problems associated with Fannie Mae and Freddie Mac according to the Financial Times' Alphaville blog,
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.While Sutcliffe's departure was viewed with surprise by some, according to the Business Times,
In recent weeks, there has been a groundswell in investment circles – among sell and buy-side analysts, portfolio managers, equity sales teams and investment bankers, to name a few - clamouring for Sutcliffe’s departure. They want change, and they want it now. They point to Old Mutual’s indifferent equity market performance and a litany of troublesome acquisitions and the associated snowballing goodwill.The real question remains, what will Roberts do that might be different from Sutcliffe? Will the insurer find itself a takeover target or are the problems still in need of correction before this even becomes a possiblility? Old Mutual should be able to weather the storm if the right moves are made.