Old Mutual’s full-year profit likely to tumble by 60%
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DURBAN - OLD MUTUAL fell more than 3 percent on the JSE yesterday after the financial services group said it expected its profits for the year to tumble as Covid-19 related claims and provisions continued to have a negative impact on its operations.
The group said its headline earnings per share (Heps) for the year to end December would decline between 40 and 60 percent, to be between 94.4 cents a share and 141.7c, from last year’s Heps of 236.1c after it raised a short-term provision of R1.34 billion in the first half for the anticipated impacts of worsening mortality, morbidity and persistency related to Covid19.
“In South Africa, actual claims in the second half of the year were higher than the provision raised in the first half of 2020, with an acceleration in infection and excess mortality rates at the end of the fourth quarter,” the group said.
Old Mutual has since increased the short-term provision by R3.92bn on emerging expectations of a third wave given evidence of virus mutation, the slow pace of the vaccination rollout and upcoming public holidays and the winter season.
“The impact of this has been in part mitigated by the release of discretionary reserves of R1.11bn related to mortality experience in the Mass and Foundation Cluster,” the group said.
“We continue to closely monitor claims experience in 2021 and have recorded approximately R1.9bn of Covid-19-related mortality claims for January and February of 2021.”
The group said that it had set aside approximately R2bn of the pandemic reserve remaining for mortality risk related to Covid-19 that may arise.
Last week, Momentum Metropolitan Holdings reported that it increased its Covid-19 provision by an additional R655 million, net of tax, in the six months to end December.
This was an addition to the provision of R983m net of tax that South Africa’s largest insurance-based financial services group set aside in the previous financial year.
Old Mutual said it expected results from operations to decline between 79 and 89 percent while adjusted headline earnings were projected to fall between 70 and 80 percent, to be between R1.97bn and R2.96bn from last year’s R9.86bn. It is expected to release its results this month.
Old Mutual shares closed 3.18 percent lower at R13.40 on the JSE yesterday.