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AMP confirms Mohl as CEO
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Australian life insurer and funds manager AMP Ltd. confirmed Monday that Andrew Mohl will take over permanently as CEO. But the market reacted harshly to the news, sending shares in the embattled company tumbling again. Mohl has been acting chief since last Monday, when incumbent Paul Batchelor stood down to take responsibility for the recent dramatic plunge in the company's share price. AMP stock has been driven down by concerns about the company's disclosure and handling of troubles in its Pearl business in the United Kingdom, exacerbated by the fall in the global equity markets. Mohl's appointment, announced to the Australian Stock Exchange Monday morning, has coincided with a plunge of 6 percent in AMP shares in the morning session. They are down to A$11.57, off 6.01 percent, after going as low as A$11.50. The broader market, measured by the S&P/ASX200, is down about 1.5 percent. AMP also said Monday it could raise up to A$1.15 billion ($626 million) in an issue of new reset preference shares, A$150 million more than its original prospectus called for. Availability of candidatesAMP chairman Stan Wallis, announcing Mohl's appointment, said the board had taken advice about the availability of suitable candidates. "We have ... decided that an extended international search for a new CEO is not in the best interests of AMP's shareholders, customers and employees," he said. When Batchelor quit last week, Wallis also said he would step down within six months of a new CEO being appointed. At the heart of the management and board upheaval at AMP is its handling of its U.K. business, where its Pearl with-profits fund has been in breach of minimum-capital requirements. The head of the U.K. Financial Services Authority, Sir Howard Davies, told Australian television Sunday that the authority knew AMP was not meeting its U.K. capital requirements "a few months ago." Prospectus
But the first the Australian market knew of the Pearl shortfall was in a prospectus on September 19 for AMP to sell up to A$1 billion ($544 million) in new reset preference shares. AMP said in the prospectus it expected Pearl to meet the minimum capital requirements by year-end, subject to capital management and no further "material deterioration" in its investment markets. AMP was forced to issue a statement the next day, saying it would make available £500 million ($775 million) to support Pearl by the end of the year. It also said it would look at putting more money in if London's FTSE index fell below 3,700 points. The FTSE subsequently fell to 3,671, but Mohl said AMP would not have to inject more shareholder capital. "The situation with the Pearl with-profits fund is a difficult one, but it is entirely manageable," Mohl said last Wednesday. He said AMP's proposed measures could cope even with a FTSE level of 3,000. In a new supplementary prospectus issued Monday, AMP said it could now raise up to A$1.15 billion through the issue of reset preference shares, by lifting the permissible level of oversubscriptions from A$250 million to A$400 million. Heavy focus on U.K., EuropeAMP, which has about 73 percent of its A$266 billion in assets under management in the United Kingdom and Europe, has been rocked by the fall in global equity markets this year. AMP noted in its statement on September 20 that the FTSE has fallen by 27 percent from its level of 5,217.4 reached on December 31 last year. The FTSE closed Friday at 3,907.20, up 1.47 percent for the day. Last month, Batchelor cited the toughest market conditions in 20 years for a 25 percent drop in first-half earnings to A$303 million ($165 million). (Full story) AMP shares touched a record low of A$10.73 last Wednesday. They are off more than 40 percent from a one-year high of A$19.76 in March.
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