28th May 2020 09:07
(Alliance News) - Old Mutual Ltd said Thursday it expects to report a fall in earnings for the first half of 2020, following a mixed first quarter performance affected by the continued spread of Covid-19.
For the three months to the end of March, life annual premium equivalent sales dropped by 15% to ZAR2.46 billion from ZAR2.89 billion the year before, due to lower recurring premium flows across the Anglo-South African insurance firm's business.
As at March 31, funds under management declined by 7% year-on-year to ZAR979.7 billion from ZAR1.048 trillion, as equity market levels decreased. Old Mutual reported a net client cash inflow of ZAR800 million, swinging from an outflow of ZAR800 million.
Gross written premiums increased by 7% to ZAR4.97 billion on strategic partnerships in Old Mutual Insure and acquisitions in East Africa.
Beyond the first quarter period, Old Mutual said that despite the easing of lockdown restrictions in South Africa and other countries where the group operates, the pandemic is still expected to affect Old Mutual's performance for the rest of 2020.
The value of issued life sales in April was significantly lower than the year before, which is expected to hurt profit and the value of new business for the six months to the end of June.
In fact, for the first half, Old Mutual expects basic earnings per share to be more than 20% lower from the 127.3 rand cents reported for the year before.
Headline earnings per share is also set to decline by more than 20% from 128.1 cents the prior year.
"The risk of rising infection rates may adversely impact mortality experience, whilst other Covid-19 related claims such as business interruption claims could also negatively impact underwriting experience. We have seen an increase in business interruption incidents in April and May, however we expect to be able to rely on our existing reinsurance programme," Old Mutual said.
"The consumer will remain under significant pressure, with increased levels of unemployment expected. This is likely to reduce levels of disposable income resulting in lower sales volumes, worse persistency and higher credit losses on our loan book," the group added.
Shares in Old Mutual were down 0.9% at 60.54 pence on Thursday in London, while its Johannesburg shares were 0.2% lower at ZAR12.97.
By Dayo Laniyan; [email protected]
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