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Insurer Old Mutual said on Tuesday (September 1, 2020) that it will eliminate its interim dividend amid the ongoing uncertainty created by the Covid-19 pandemic.
“There is still a considerable amount of uncertainty about what we can expect in the next 12 months,” said Iain Williamson, CEO of Old Mutual. “Due to the significant level of uncertainty in the current environment, we have postponed our decision to declare an interim dividend.”
The group said a difficult macroeconomic environment and significant market volatility as a result of the ongoing Covid-19 pandemic negatively affected its results.
He said the impact of directly attributable Covid-19 elements on his results amounted to about R2.8 billion before taxes. However, it noted that excluding these Covid-19 impacts, its overall Normalized Results of Operations (RFO) were very similar to the first half of 2019, with most segments showing resilient performance despite challenging conditions. operational.
“While the Cluster Mass and Foundation has been the hardest hit by the pandemic, the Personal Finance RFO has held up relatively well. The wealth segment benefited from the strong performance of Old Mutual International. As for Old Mutual Insure, there was a much better normalized underwriting gain over the period, “said Williamson.
Adjusted headline earnings for the period were down 67% to R1.7 billion, compared to R5.2 billion for the same period last year, while adjusted headline earnings per share were down 66%.
“This was largely driven by much lower new business sales volumes as a result of the lockdown, lower average levels of the stock market across the board, as well as increased short-term provisions in anticipation of the downturn. mortality, morbidity and persistence expected in the second half of the year, ”said Williamson.
Continued financial pressure on customers led to a decline in sales activity and a bad persistence experience, adversely affecting distribution efficiency. Clients also opted for lower-margin risk and investment products, Old Mutual said.
The group said it expects HEPS and EPS for the year ending December 2020 to be more than 20% lower than reported HEPS and EPS for the comparable period, due to the significant impact of Covid-19 on its business.
Higher levels of forecasted risk and observed variability in potential recovery scenarios have made it increasingly difficult to provide guidance on achieving previously disclosed medium-term goals, the group said.
“In light of this, we are withdrawing our guidance regarding these goals and replacing them with more appropriate goals to measure our progress as we transition the business through the crisis,” he said.
During the second half of 2020, Old Mutual said it will focus on improving adviser productivity to standardized levels, improving client access through increased digitization and finding opportunities for greater cost efficiency.
“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 and come out even stronger than before, “said Williamson.
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