Old Mutual Shares Rise As Insurer Announces HY Results, Tips Sales Increases

Financial services provider Old Mutual rose on Wednesday as it predicted further sales growth following a resilient first-half performance.

At 54p per share, Old Mutual’s share price was last 4.7% higher in midweek business.

Revenues at the company — a major player in South Africa’s life insurance market — rose 14% during the six months to June. Old Mutual attributed this uptick to improved productivity that boosted the value of new business.

Life annual premium equivalent (APE) sales edged 1% higher over the period to 6.2 billion South African rand. Turnover in the previous year benefitted from significant sales in China’s broker channel which the firm stopped selling ahead of possible regulatory changes.

Excluding China, life APE sales increased 14% year on year.

The value of new business rose almost a third in the first half, to 937m rand. New business margins meanwhile increased 40 basis points to 2.6%.

Headline earnings per share dropped 8% over the period to 96.8 South African cents. On an adjusted basis earnings per share increased 21% to 68.8 cents.

Old Mutual’s solvency ratio dropped 2% year on year to 186%, though this was still within a targeted range of 170% to 200%. The business hiked the interim dividend 28% year on year to 32 cents per share.

Sales Tipped To Keep Rising

Old Mutual said that it “performed well across most of our key performance indicators with good top line growth in our core businesses,” noting that South Africa’s economy rebounded in the first half of 2023 after shrinking at the end of last year.

It commented that “despite the dual impact of electricity shortages and a confidence crisis, more efficient production processes combined with significant private sector energy generation supported economic activity.”

High inflation and elevated levels of unemployment continue to put pressure on citizens’ disposable incomes, however. This has led to “increased disinvestments on savings and investments as customers seek to fund their liquidity requirements,” the firm said.

The rand also dropped to record lows against the US dollar in the period.

The Cape Town-based business said that net client cash outflows totalled 7.3 billion rand in the first half. This was up 67% from the same 2022 period.

Old Mutual added that the trading environment was also difficult in its other African markets. It commented that “the slow economic recovery post COVID-19, high inflation and borrowing costs continued to exacerbate pressure on our customers’ disposable incomes.”

Looking ahead, Old Mutual said that “we expect sales and value of new business to remain robust for the remainder of 2023.”

It added that “South African economic growth is still very weak but has proven its resilience despite challenges,” noting that inflation is beginning to reverse and predicting that interest rates have likely peaked.