Old Mutual earnings fall as weak SA economy, sliding asset prices bite

By Vernon Wessels

(Bloomberg) – Old Mutual Ltd. said full-year adjusted earnings fell as a weak South African economy and sliding asset prices weighed on business and caused the insurer to miss its target for results from operations.

Adjusted earnings declined to R11.51bn ($798m) compared with R12.95bn a year earlier, the Johannesburg-based company said in a statement

“Persistently high unemployment rates, a value added tax-rate increase and fuel hikes contributed to lower real disposable incomes for our retail customers in South Africa,” it said. “This adversely affected our customer acquisition and persistency, especially in the middle-income market.”

Key insights

The insurer didn’t meet its target for growth in results from operations of gross domestic product expansion plus 2%. While it is confident of hitting all its other objectives in the medium term, achieving the goal from operations will be difficult, Old Mutual said. The operating results were hurt by changes in its net reserves, mortality and morbidity losses in its personal finance business and Zimbabwe’s currency challenges.

The 174-year-old insurer is reporting its maiden annual results since the company’s return to South Africa after a foray into London that culminated with Old Mutual selling off it US asset-management division, hiving off its UK wealth unit and some of its shares in Nedbank Group Ltd., and started trading its remaining African businesses.

Market reaction

The stock has declined 1.7% this year following gains of 5.2% in 2018, the best performer that year in the FTSE/JSE Africa Life Assurance Index.

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