Old Mutual expecting sharp increase in operational results

Old Mutual says the significantly higher results from operations was mainly due to improved profits from strong sales and core operational performance across the group. Picture: Karen Sandison/African News Agency(ANA)

Old Mutual says the significantly higher results from operations was mainly due to improved profits from strong sales and core operational performance across the group. Picture: Karen Sandison/African News Agency(ANA)

Published Feb 26, 2023

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Old Mutual expects its financial results from operations to increase between 89% and 109% in the year to December 31, the life assurance and financial services group said in a trading statement on Friday.

The share price traded 1.35% higher to R12.04 Friday morning, which is 30.23% up on the 52-week low of R9.21.

Adjusted headline earnings (AHE) for the group was expected to increase 7%-27% to between R5.79bn and R6.87bn compared with the same time last year. Adjusted headline earnings per share was expected to rise 7%-27% to between 127.2 cents and 150.9 cents, compared with 118.5 cents last year.

The group, which trades in 14 countries and is one of South Africa’s biggest financial institutions, said the significantly higher results from operations was mainly due to improved profits from strong sales and core operational performance across the group.

“Our life profits benefited from a refinement in hedging methodology, enabling a material release of excess discretionary margins as well as lower mortality in the current year as the effects of Covid-19 eased.”

All remaining Covid-19 provisions were released, but the impact was offset by the strengthening on mortality basis to allow for endemic Covid-19 claims and worsened persistency as the challenging economic conditions continued to impact retail customers.

In 2021, AHE included equity accounted earnings from the stake in Nedbank, which was unbundled in November 2021.

The 12.2% stake that was distributed contributed R646 million of the R5.4bn of AHE in the comparative period.

Excluding the impacts of Nedbank, Old Mutual’s AHE was expected to increase by between 23% and 43%.

Headline earnings were higher than adjusted headline earnings, as adjusted headline earnings exclude earnings from operations in Zimbabwe, adjustments from equity and debt instruments held in life funds, as well as the impact of restructuring.

The movement in headline earnings and adjusted headline earnings relative to the prior year was mainly driven by much better operating profits, partially offset by the deferred tax associated with the unbundling of Nedbank and a decline in Zimbabwe earnings.

Lower Zimbabwe earnings was largely due to the weakening of Zimbabwean dollar to the rand and falling investment returns on equities traded on the Zimbabwe Stock Exchange (ZSE) relative to the prior year.

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