National Mutual grapples with crisis

PUBLISHED : Monday, 24 January, 1994, 12:00am
UPDATED : Monday, 24 January, 1994, 12:00am

THIS will be a crunch week for National Mutual Asia, the target of a dirty-tricks campaign.

The insurer saw its stock plummet at the end of last week after the sudden departure of chief executive Andrew Yang and a smear campaign against the group.

On Friday its stock was the worst performer of the day, dropping 16 per cent, $1, to close at $5.20, its lowest level since late October. On Wednesday it lost 55 cents.

Its turnover, 35.24 million shares worth about $181.7 million, made it the seventh heaviest stock traded by volume and value.

Such heavy turnover indicates that significant institutional selling was behind the fall.

At meetings over the weekend, senior executives grappled with plans to get the company and its share price back on an even keel.

There were rumours that the company was financially insecure and that it was losing hundreds of agents.

Market gossip suggested Mr Yang had joined another insurance company in Hong Kong, possibly NZI, and that the group's agents were being approached to leave National Mutual.

It is not known whether Mr Yang is directly joining the group - involving Top Glory, Cheung Kong and Seapower - or is staying on the sidelines as a consultant.

The chaos in the market and confusion among policy-holders has stirred concern in government circles.

National Mutual is threatening legal action against Mr Yang. Insurance market observers believe such action, if taken, would be designed to stop Mr Yang from working in the insurance industry.

The company has called a meeting of agents for Wednesday ''to hear the truth''.

The company claims that agents are being misled in an organised effort to discredit the firm.

''This campaign is being carried out by a group of individuals intent on harming the business of the company, the well-being of its agency representatives and the protection of the company's more than 500,000 policyholders,'' National Mutual said.

A hot-line has been set up for agents and policy-holders to make inquiries.

A team has been established to investigate thoroughly applications by policy-holders to surrender their contracts.

As the only listed insurance company in Hong Kong, and given the sensitivity of listed companies to rumours and the underhand tactics sometimes used in the insurance industry, National Mutual is unusually susceptible to an orchestrated smear campaign.

From the investors' view, the kind of losses incurred last week in a smaller company are shocking but reversible.

It is probable that many institutions will continue to sell and take their profits until they are reassured that the threat to the company's team of insurance agents - the life-blood of new annual premium business - has been defeated.

But insurance companies do not tend to dissolve overnight.