Sales levels down from 2019 – Old Mutual trading update

Old Mutual has released a trading update, ahead of results which are to be released on September 1. The Cape Town-based insurance company has emphasised the influence that the Covid-19 pandemic and the resultant lockdown has had on the economy and in turn on their half-year results. The 175-year old company says that while it expects the effects of the lockdown to continue impacting their business and clients, the company will “remain cautiously optimistic that the easing of lockdowns everywhere will be positive for us”, according to CEO Iain Williamson. Old Mutual will release its H1 results on the September 1. – Jarryd Neves

Old Mutual media statement: 

Old Mutual today issued an operational trading update, ahead of the release of its 2020 Interim Results on 1 September. The Group has underscored the impact of a difficult macro environment and significant market volatility as a result of the ongoing Covid-19 pandemic and lockdown on its H1 Results.

According to Old Mutual CEO Iain Williamson, new business sales volumes were negatively impacted as many of its tied advisers were unable to sell during the lockdown period due to the partial closure of the branch network and a lack of access to customers’ homes, worksites and branches. “Although lockdown restrictions have been eased and economic activity has somewhat resumed, sales level remain lower than last year’s levels,” noted Williamson.

“Although there has been some recovery since the start of the second quarter of the year, average equity market levels were 12,1% lower than last year during H1. We have also noted a widening of credit spreads in the second quarter, which has resulted in unrealised market-to-market losses on our equity and credit portfolios. These unrealised losses may, however, be reversed in future periods as market conditions recover.”

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Williamson outlined the actions already taken by the financial services giant to mitigate against the depressed market conditions as well as to continue providing relief to both customers and the communities in which the Group operates. These include:

  • Raising short term provisions in anticipation of worsening mortality, morbidity and persistency experience in H2. These reserves are intended to allow for expected short term variances to the Group’s long term assumptions.
  • Increasing provisions for expected credit losses in Old Mutual Finance in recognition of declining GDP forecasts, and the anticipated impact of this on future credit losses.
  • The decision to offer commercial settlements to certain qualifying Small, Medium and Micro Enterprise (SMME) customers to enable them to continue operating. This to the tuned of some R57-million.
  • The Old Mutual Insure support plan includes ongoing customer relief worth R300-million, leveraging buying power, financing to support service providers and collaborating to support communities
  • Writing down the value of its investments in Old Mutual Finance and Nedbank to reflect the deterioration in economic conditions.
  • Across our operations, we have made significant pledges to Covid-19 relief efforts to causes with the most acute needs. This include free life cover to frontline workers to the value of R4-billion, as well as around R67-million towards addressing educational needs, hygiene awareness, nutritional support, and access to personal protective equipment for essential service workers.
  • Old Mutual is also the fund administrator of the Solidarity Response Fund, working on a pro bono basis to support this special purpose vehicle to fulfil its mandate.

“Despite the very challenging trading conditions, we continue to progress well against our strategic priorities, including implementing a range of significant digital improvements for customers and employees in record time as well as continuing to provide market-leading solutions that we can all be proud of. This progress is underpinned by our strong balance sheetand capital position, which stand us in good stead to outride this storm as we have done so many times before as well as to allow us to invest in growth opportunities.

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“While we expect the ongoing fallout of the pandemic to continue to put pressure on our customers and affect our performance for the remainder of 2020, we remain cautiously optimistic that the easing of lockdowns everywhere will be positive for us,” concludes Williamson.

Old Mutual releases its 2020 Interim Results on Tuesday 1 September 2020.

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