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Old Mutual headquarters in Sandton, Johannesburg. Photo: William Horne
- Old Mutual released its financial results for the semester ended June 30 on Monday.
- The insurer Adjusted total earnings fell 67% to R1.7 billion, compared to R5.2 billion for the same period last year.
- The decline is largely due to a R2.8 billion hit from Covid-19, as the insurer sets aside reserves for future claims.
Insurance group Old Mutual has become the latest victim of Covid-19, which caused a R2.8 billion hole in the company’s finances in the six months to June after it set aside reserves for future claims, while that many of his advisers were unable to sell during the strict shutdown.
This cocktail of unfavorable events caused Old Mutual’s adjusted overall earnings for the first half of 2020 to rise 67% to R1.7 billion, compared to R5.2 billion for the same period last year.
Old Mutual said in a business update Tuesday that due to the “significant level of uncertainty in the current environment” it had decided to postpone its decision to declare an interim dividend.
The insurance group, which entered 2020 battered by a protracted battle with its former chief executive Peter Moyo, still performed better than Liberty Group, the only other pair in the life insurance sector to have reported interim results.
Liberty went from a profit of R2 billion in the first half of 2019 to an overall loss of R2.2 billion in June of this year. However, Liberty had a pandemic reserve of R3 billion from Covid-19, while Old Mutual has reserved R1.3 billion in its life business and R464 million for business interruption claims, as part of the impact of R2. 8 billion Covid-19.
But reserves are only part of the problems induced by Covid-19. On the sales side, Old Mutual’s new business sales volumes were significantly lower than the previous year, with the value of new businesses falling 85% to R125 million, from R862 million in June 2019.
Old Mutual’s Foundations and Mass Cluster, the business unit that serves primarily low-income individuals, was the hardest hit, with a 57% drop in operating profit.
Old Mutual’s new CEO Iain Williamson said the group’s personal finance unit, its second-largest business unit, held up relatively well. Meanwhile, its wealth segment benefited from a strong performance from Old Mutual International.
“This is a business that continues to prove its resilience time and time again, especially in the face of adversity. We have weathered many storms throughout our 175-year history and remain optimistic that the business will overcome these challenges, still emerging. stronger We remain committed to delivering shared value for all of our shareholders and stakeholders alike, “said Williamson.
