Old Mutual ready to put Covid-19 volatility behind it as operational earnings rocket 87%

Old Mutual almost doubled its profit from operations in the first half of 2022 as the impact of Covid-19 on the insurer’s financials is becoming “muted”.

The green insurer posted an 87% increase in its operating profit – termed results from operations – to R4.1 billion in the six months to 30 June, from R2.1 billion in the first half of 2021. In fact, Old Mutual’s results from operations in the first half of 2022 came close to the R4.38 billion the group generated in the entire 2021 financial year.

“Strong operating performance and muted Covid-19 impacts led to an increase in results from operations,” wrote the insurer in a statement on Tuesday morning.

While South Africa and the other countries it operates in experienced their fourth and fifth waves of Covid-19 infections during the first half of 2022, the pandemic impacts were “relatively benign”.

“The volatility in our operating earnings caused by the pandemic over the last two years has stabilised,” said Old Mutual.

Furthermore, the removal of lockdown restrictions has seen more staff return to the office on a hybrid-model basis, and Old Mutual is starting to see the benefits of increased face-to-face collaboration on productivity.

The group grew its gross written premiums by 9% to R10.9 billion. Its life insurance sales – measured in annual premium equivalent (APE) – increased by 15% to R6.2 billion. The group’s value of new business (VNB) decreased by 4%, but its VNB margin, which measured the profitability of newly sold products, held steady within the company’s target range at 2.2%. It has recovered significantly from the low of 0.5% in the first half of 2020, even though Old Mutual’s Personal Finance business is still taking strain on that front.

But when the group did well operationally, Old Mutual’s adjusted headline earnings decreased by 7% because it didn’t have the income distributed from its Nedbank stake in 2021. Old Mutual finalised the unbundling of its Nedbank stake in November 2021.

The group said its adjusted headline earnings would have been up 19% on a like-for-like basis when excluding income earned from Nedbank in the previous year.

Old Mutual’s share price fell by 2% on Tuesday morning, while the JSE’s All Share index was up half a percent. The company’s shares have lost 25% of their value over the past year.  – news24.com