Old Mutual’s CEO resigns after facing writedowns

Jim Sutcliffe, chief executive of London-based financial services company Old Mutual, has resigned from the firm after it reported it would face heavy writedowns in its US life insurance division, US Life.

Julian Roberts has been appointed as the firm's new chief executive. Roberts has been chief executive of Skandia, the company’s European insurance subsidiary, since February 2006, and before that was group finance director of Old Mutual. 

"Old Mutual is a great company with fantastic potential but also a number of challenges, which I look forward to tackling," said Roberts.

The announcement on September 7 that the US government has nationalised mortgage entities Fannie Mae and Freddie Mac resulted in a sharp fall in the preferred stock value of these companies. Old Mutual said this has led to a $135 million writedown in US Life’s portfolio holdings of this preferred stock. In addition, Old Mutual has decided it will recognise additional guarantee reserves of $155 million.

According to Old Mutual’s half-year 2008 results, pre-tax adjusted operating profit (calculated on an International Financial Reporting Standards basis) for its US Life business had reduced by 80% year on year to $12 million. The firm reported difficult credit markets over the first half of 2008 resulted in higher impairment losses and volatile equity markets increased the costs associated with the guaranteed benefits on US Life’s variable annuity contracts.

In addition, first-half results revealed US Life's fixed-income portfolio had been affected by poor economic and financial market conditions, which resulted in impairments of $149 million on 21 securities over the first half of the year, over half of which were either directly or indirectly linked to subprime credit assets or monoline insurer exposures.

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