Old Mutual’s Roberts ends on a high note

Julian Roberts returned company to its emerging markets focus, writes Hilary Joffe

DEPARTING Old Mutual CEO Julian Roberts presented his last set of results yesterday, to much praise, write Hilary Joffe and Moyagabo Maake.

Mr Roberts will leave Old Mutual at the end of October after 15 years at the group — nine of them as CEO, during which he has had to spend a lot of time doing the difficult work of fixing, sorting and streamlining a sprawling group.

While there has been much preoccupation with the question of whether Old Mutual should move its head office back to SA, location seems to be secondary for Mr Roberts.

Rather, the question was whether it had an emergingmarkets business and a “northern hemisphere” business, he said yesterday.

Old Mutual posted a 20% rise in first-half profit due to a strong performance at its African, wealth and fund management units.

It also got a boost from extending its offering to lowincome earners, reporting a 60% surge in profit at its Mass Foundation business unit. Old Mutual Emerging Markets CEO Ralph Mupita said one of the drivers behind Mass Foundation’s performance was that more clients were staying on.

WHEN a CEO presents his or her last set of results, it is traditional for a member of the analyst community to express the community’s thanks and good wishes.

But departing Old Mutual CEO Julian Roberts received a rare tribute yesterday after he ended the group’s interim results presentation in London, when Bank of America Merrill Lynch analyst Blair Stewart described the 2011 deal in which Mr Roberts sold the Nordic business of Old Mutual’s subsidiary Skandia as “the best deal I have ever seen”.

Mr Stewart recounted how he had had to check four times that Mr Roberts had actually sold the Nordic business for as much as his colleagues told him in an early morning call.

And Old Mutual had never looked back from that deal, with the share price having increased sixfold since then, said Mr Stewart.

“Julian kept the faith and kept his nerve,” he said.

But he also alluded to how difficult the Nordic deal would have been for Mr Roberts, who as Old Mutual’s then finance director was an architect of the 2006 deal in which the group bought Skandia, and acted as Skandia’s CEO for a time.

He leaves Old Mutual at the end of October after 15 years at the group, nine of them as CEO — in which role he has had to spend a lot of his time doing the difficult work of fixing, sorting and streamlining the sprawling group he inherited.

Getting rid of Skandia’s Nordic and continental European businesses was part of that, as was selling the group’s US life business and managing its Bermuda exposure.

When Mr Roberts took over as CEO in 2008 his concern, he said in an interview yesterday, had been that “we didn’t have the capital to grow in every jurisdiction”. The complexity of regulation also meant it made sense to seek to be dominant in a smaller number of countries — instead of “having a lot of dots on the map”.

As he sees it, it was essential to give clarity of vision to the group. And its shape is now quite different from the one he took over. He has moved Old Mutual back to being an SAbased emerging markets business, which is expanding in the rest of Africa. And it has come out of smaller noncore European businesses to focus on its UK wealth and asset management operations, as well as its US institutional asset management operation.

“The question now for my successor is: is this an optimal structure?” Mr Roberts said.

While media, politicians and investors such as the Public Investment Corporation tend to be preoccupied with the question of whether Old Mutual should move its head office back to SA, the location question seems to be a secondary one for Mr Roberts. Rather, the question is whether Old Mutual has an emerging markets business and a “northern hemisphere” business.

The group has wealth management businesses in both, and there is cross-fertilisation potential. “But are there huge synergies between the emerging market and northern hemisphere businesses? No, there are not,” he said.

But it’s for Bruce Hemphill, who takes over as CEO on November 1, to contemplate such issues. Mr Roberts’s focus has foremost been to ensure that Old Mutual has businesses that are performing as they should be.

He has succeeded, too, in right-sizing the group’s debt, which for a while was too large. The Nordic sale was one of the transactions through which Old Mutual pared its debt and improved its capital structure.

When he took over the group had been in an expansion phase, raising capital to fund acquisitions. That meant the South African operations tended to generate all the cash with which the group paid dividends, while the profits from the UK and US businesses had to go to service debt. Since 2008 Mr Roberts has turned that around, and all the group’s businesses now fund their share of the dividend payout.

The strong interim results reflected that “basic principle”, Mr Roberts said.

He is excited about the growth prospects for Old Mutual’s operations in the UK and US, as well as in Africa. But in presenting the interim results yesterday he chose to focus less on the future than on the fundamental changes that have shaped the industry over the past 15 years.

Those include the increased regulatory burden, on both the prudential side and the regulation of conduct. But he points also to the far-reaching changes in the relationships financial services companies have with their customers, and the need for them to be “intimate” with their customers and find solutions they want — in contrast to the past, when insurance and banking groups tended simply to push out products.

Old Mutual is investing heavily in the technology it needs to pursue that intimacy with its customers.

But again, that’s something for Mr Roberts’s successor.

As he sees it, it was essential to give clarity of vision to the group. Its shape is now quite different to the one he took over