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Old Mutual suspended its interim dividend as the fallout from the coronavirus pandemic hit earnings, and it will only make a decision on resuming payments when it has more clarity on the economic outlook.
Earnings excluding one-time items fell 67% in the six months to June, the Johannesburg-based insurer said in a statement Tuesday. Profits from South African operations, excluding accounting charges and the effect of Covid-19, fell 4% from the previous year.
The decision to eliminate the interim dividend comes after the South African Prudential Authority urged companies to increase reserves before payments to shareholders.
“While the mass group and foundations were under a lot of pressure, overall our businesses held up pretty well,” CEO Iain Williamson said by phone. “Looking to the future, it encourages us.”
A drop in sales and an increase in business interruption and funeral claims as a result of South Africa’s closure to contain the spread of the virus weighed on the insurer’s profits. Since the restrictions were eased, there has been a steady increase in activity, Williamson said.
South Africa’s oldest insurer addressed the coronavirus pandemic after a lengthy legal battle with its former CEO. Since being appointed permanently in July, Williamson, who has spent nearly three decades with the company, has had to grapple with the confusion surrounding his listing in Zimbabwe.
Along with other insurers locally and globally, Old Mutual is also dealing with dealing with virus-related business interruption claims and offering settlements to clients.
“We have about 1,500 policies in our entire book that have this cover and vary in size,” said Williamson. “It’s something that we’d rather see fairly quick certainty from a legal clarification perspective.”
Looking for clarity
Old Mutual shares trimmed previous losses to trade 1.3% higher at R11.33 as of 10:29 am in Johannesburg, while the five-member FTSE / JSE Africa life insurance index rose to 1 ,5%.
The company, which also manages mutual funds and makes loans, will focus on improving the productivity of its advisers and managing costs in the second half. Still, he expects full-year earnings to decline more than 20%. More details on future earnings will be released once there is more clarity on the outlook.
While the company is revamping its strategy, it remains committed to its presence on the African continent, Williamson said.
“East and West Africa are still subscale and we are still looking for options there that will help us take those businesses to the kind of scale that we think we need,” he said.
© 2020 Bloomberg
