Jenni ReidPan-African financial services group Old Mutual has reported a sharp increase in new business in the nine months to 30 September after taking a significant hit from the coronavirus pandemic, but also from plummeting net client cash flow and an uncertain landscape ahead.
New business volume quadrupled to R1.099bn (£51.9m) from R274m (£12.9m) while net client cash flow fell to a R2.6bn loss from a R3.6bn profit.
Volatile environment
The Cape Town, South Africa-based group said its life businesses had experienced more mortality claims than expected due to Covid-19, impacting profit by around R6.6bn so far this year, and flagged vaccine hesitancy as a concern for the future.
“The global economy continues to demonstrate strong growth however the recovery remains uneven due to large differences in vaccination rates between countries,” the group said in a statement.
“We continue to closely monitor our mortality claims experience as future waves and their impacts remain uncertain.”
Sales improved
Old Mutual said it had seen some favourable business conditions and that its Mass and Foundation Cluster, Personal Finance and Wealth Management divisions were recovering with higher sales than in the previous year, but that sales in Corporate remained subdued.
“Although the investment markets where we operate continue to recover ahead of pre-Covid-19 levels, the environment remains volatile as we navigate the challenging impact of the pandemic,” the group said.
Profits were also impacted by digitisation and innovation costs and lower rental income.
The group said a 10% decline in Loans and Advances to R18.194bn was due to the tightening of credit criteria which would result in a “better credit experience” given its risk appetite in the current environment.
Old Mutual added it is on track to deliver R750m in cost savings by the end of 2022.
Capital position
The solvency ratio for the nine months ended 30 September was 225%, above the group’s target range of 175%–210% and an increase from 30 June. The improvement was largely driven by the impact of the issuance of R1.5bn subordinated debt and the introduction of a collar structure on the majority of the retained Nedbank stake.
Old Mutual unbundled its 12.2% stake on 8 November, which is expected to decrease group solvency by three percentage points.
Read more: Old Mutual reports profits boost
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