Old Mutual continues on recovery path despite COVID-19 impact

  • COVID-19 mortality claims worse than anticipated
  • The virus-related provisions have been increased by R2 billion
  • Headline earnings expected to slide by between 20% to 30%
  • basic EPS expected to swing from prior year loss of 128.5 cents

South African insurer, Old Mutual Limited says it continues to demonstrate agility in response to the impact of COVID-19 on their business as evidenced by a recovery in sales and earnings for the half year ended 30 June 2021.

In a trading update for the period under review, the Group said productivity levels in its South African retail segments, Mass and Foundation Cluster, and Personal Finance have materially improved in the first half of the year.

“There has been a strong customer take up in the Old Mutual Protect (OMP) proposition, which has seen rapid growth supporting the recovery in risk sales,” Old Mutual said.

“In Mass and Foundation Cluster, issued sales in the first half of the year were above the comparative period due to the significant impact that lockdown had on issued sales in 2020.”

However, the Group is expecting profits for the half year period to be lower than the same period last year as COVID-19 impact has seen the group increase the virus-related provisions by R2 billion as at the end of the review period.

This, according to the insurance services giant is to take into account the emerging expectations of waves 3 and 4 as well as potential future waves in addition to the anticipated impact of the proposed vaccination rollout plan.

The mortality claims paid relating to COVID-19 in the Group’s life businesses are driving negative Net Client Cash Flows (NCCF), although offset by inflows in Asset Management and Wealth Business.

“Our mortality experience has been worse than anticipated with impact on profits mitigated by a partial release of provisions raised at the end of 2020,” Old Mutual said.

By the end of this year’s first quarter alone, the Group had paid out R2.7 billion worth of COVID-19 related death claims, reporting then that it had left about R1.3 billion in reserves set aside to help it manage the pandemic.

As such, headline earnings for the six months to June 30 2021 are expected to slide by between 20% to 30% from R4.215 million last year to a range of R2.946 million and R3.368 million.

Headline earnings per share (HEPS) are expected to come in between R66.9 cents and R76.5 cents, representing a 21% to 31% fall from last year’s R96.3 cents.

“Headline earnings is lower than the prior year as adjusted headline earnings exclude adjustments in respect of equity and debt instruments held in life funds, the impact of restructuring as well as the results related to Residual Plc which were all lower than H1 2020, partially offset by higher results related to Zimbabwe,” said the Group.

Meanwhile, basic EPS are expected to range between R61.4 and R74.3 cents, swinging from a loss per share of R128.5 cents.

In Old Mutual Insure, business interruption claims paid in the first half of the year were offset by the reserves raised at the end of 2020.

About Old Mutual Limited

Old Mutual is a premium African financial services group that offers a broad spectrum of financial solutions to retail and corporate customers across key market segments in 14 countries. Old Mutual’s primary operations are in South Africa and the Rest of Africa and it has a niche business in Asia. With over 176 years of heritage across sub-Saharan Africa, Old Mutual is a crucial part of the communities they serve and the broader society on the continent.

The Group’s interim results for the half year period will be released on the Stock Exchange News Service of the JSE Limited on Tuesday, 31 August 2021.

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