Issue: June/August 09


The letter that J R never wrote

Sometimes, a better policy than honesty is to say nothing. To help a certain chief executive, we’ve dreamed up what he might have said.

Dear TT

As a London-listed company, we’re grateful to the JSE (where we have our secondary listing) that it has no rule compelling us to video-conference the agm to our many SA shareholders. If it did, pests like yourself and Theo Botha would be able to attend. You’d force us to engage in debate. London directors don’t appreciate this kind of thing.

They consider it impolite. They go out of their way to avoid controversy. Imagine how embarrassed they’d have felt if a shareholder had asked, for example, about how much money we’d taken from SA and how we’ve spent it. We’ve got the golden goose by the short and curlies, if you know what I mean.

While it’s unfortunate for you that we couldn’t be in the country that generates our profits, there are other solid reasons for having held the agm in London rather than Johannesburg. The snacks provided by the Guildhall are better than we might have expected from the Sandton Holiday Inn. And we could easily get to the meeting in our limos rather than negotiate our way past your taxis.

Frankly, we can’t understand why you’re kicking up a fuss. Of course, dear boy, you could have come to London. We didn’t offer to pay for you because, our profits being what they are, it already cost us an arm and a leg to pay for our two esteemed SA directors to sit in the front of the plane. Although I’m sure you would have been prepared to sit at the back, it wasn’t in the interests of our shareholders (always our top concern) to incur the additional cost. Anyway, if we’d made the offer I suppose you’d have said we were trying to buy you off.

Now let me come to what you fancifully describe as “propositions”. I can tell you that there are two things we’ve learned from our US experience. The one is how to lose money. The other is how to plead the fifth amendment, i.e. not to answer questions likely to prove incriminating. As we pay a small fortune to Merrill Lynch for advising us – a good choice, given how this US bank lost money – I’m going to learn from its experience and won’t say anything more than absolutely necessary.

You carry on about our destruction of capital. Ha! Some analyst hotheads in SA put the amount at R50bn over the past 10 years. Ha! Don’t we always tell you not to try timing the markets? Why don’t you think about the next 10 years? And the 10 after that? We think of markets for the long term, as you should be thinking too.

I notice your obsession with the collapse in our share price. Your argument is unbalanced. Okay, so people who bought our shares a year ago have seen the price halve. But those who bought in March have seen the price double! Timing, dear boy, timing...

You blame the board for an offshore strategy that went wonky. Remember that in this company we only fire the chief executive, not the directors who approved the strategy. I should know, having been its financial director for years.

Then you get onto those poor BEE comrades who’ll struggle to pay the interest on their loans because we’d passed the dividend. Well, since one of the comrades is Bulelani Ngcuka and a few others are said to be supporters of Cope, I guess your government won’t be crying too many tears. We obviously made the right choices at the time.

Don’t consider my comments frivolous. Our decision to pass the dividend was painful. But once Anglo had done it, it was easy. The proper order of priorities is to worry about our executive bonuses now and our BEE partners later.

Don’t consider my comments frivolous. Our decision to pass the dividend was painful. But once Anglo had done it, it was easy. The proper order of priorities is to worry about our executive bonuses now and our BEE partners later.

You suggested that we don’t do anything in London, that there’s no need for a London head office. You’re wrong. You yourself have calculated that the cost of the London head office has been almost R1bn over the past two years. (It’s probably a lot higher, but we won’t go there.) Obviously, it’s impossible to spend this kind of money by doing nothing.

No hard feelings. When you get to the UK, do look us up.

You’ll find that where we hang out in the English countryside is most congenial. We’ll happily treat you to some awfully pleasant tea and scones which we can comfortably afford on our sterling remuneration.

Your friend


Old Mutual Plc was asked by email on April 24 to let TT know how much money has left Old Mutual SA for Old Mutual Plc in each of the past three financial years and how much Old Mutual Plc is wanting to take from Old Mutual SA in the current financial year.

A spokesperson replied. He gave details of SA government policy on dividends received by SA non-residents being freely remittable, and added: “We do not disclose the flow of money between any of our businesses or between our businesses and Old Mutual Plc.”

On the day after the company’s agm, this email was received in response to the TT request for its propositions (see article on previous pages) to be addressed:

We received a number of requests for questions to be addressed at the agm. Therefore a decision was taken to respond to these requests individually. As yours are not specific questions but rather the principal points in your article you wish us to pick up on, I trust that the following response addresses them adequately.

With regards to our international strategy, as Julian Roberts said in March, we recognise that our portfolio of businesses is too broad. We operate in too many geographies and have too many lines of business, a number of which are sub-scale in their respective markets. This makes the Group complex and difficult to manage on a decentralised basis as we have done in the past. It therefore requires simplification.

However, in the current environment, major rationalisation of our portfolio of existing businesses would be extremely difficult and, if achievable, would almost certainly destroy value for our shareholders. It will therefore take some time to achieve our optimal business structure and any streamlining activity will be based on enhancing efficiency and our strategic focus.

With respect to your comments about Old Mutual’s board structure and its SA component, we have two very distinguished SA nonexecutive directors (B Nqwababa and R J Khoza) on our board, as well as Russell Edey, who has a large amount of SA experience and is chairman of Anglogold Ashanti.

You also made reference to the issues in our US business. We recently announced that Old Mutual Bermuda had been closed to new business and announced yesterday that further steps are being taken to reduce the risks in its existing book by restricting the number of funds that holders of certain of its products can invest into. We have also taken steps during 2009 to reduce the number of products sold by our US Life business and have significantly reduced our target level of new sales as part of the restructuring and rightsizing of this business.

While our share price has underperformed relative to our SA peers, it needs to be seen in the context of the global economic environment and the performance of our UK peers against which we are benchmarked. These are extraordinary times and, unlike our SA peers, we have been significantly impacted by the global market turmoil. It should be noted that, so far this year, Old Mutual is actually outperforming the rest of the UK insurance sector and last year we were exactly in line with the sector.