Old Mutual results highlight the plight of consumers

Financial services firm Old Mutual on Monday (23 March) published its full year results for the year ended December 2020, showing a drastic drop in earnings, impacted by a difficult macro environment and significant market volatility brought on by the Covid-19 pandemic.

The group said that its customers had less disposable income in 2020 and that it saw a significant rise in claims as a result of the pandemic, especially during the second half of the year, all of which had a negative bearing on its earnings.

Despite the negative impact of Covid-19 on its earnings, Old Mutual said it is well capitalised, and its liquidity position is strong.

Old Mutual reported that the impact of directly attributable Covid-19 items on its results amounted to some R6.1 billion before tax. Results from Operations (RFO) excluding direct Covid-19 impacts demonstrated resilience in this environment, with most segments seeing a recovery in the second half of the year.

Adjusted headline earnings per share declined 74% to 54.3 cents per share, while adjusted headline earnings of R2.5 billion were down 75% on the prior year, impacted further by lower shareholder investment returns and Nedbank earnings.

Results from operations (RFO) were resilient on a pre-Covid basis at R7.7 billion, 14% down on the prior year, it said.

Old Mutual declared a dividend of 35 cents per share, in line with the dividend policy.

Chief executive officer Iain Williamson said: “The mass and foundation customer base was particularly vulnerable to the impacts of the pandemic, and it was here that we paid many of our Covid-related mortality claims. Encouragingly, we witnessed a solid and sustained growth in productivity and sales during the second half of the year and this momentum is continuing.

He said that the Old Mutual Investments segment demonstrated some encouraging trends.

Looking ahead Williamson said the pace of the recovery will depend on GDP growth and equity market levels. He said that the group expects to achieve this recovery by 2023, and these targets have been included in executive remuneration incentive plans.

“We remain committed to delivering R750 million of pre-tax run rate cost savings by the  end of 2022. We expect these savings to be delivered largely through efficiency improvements in Old Mutual Insure, Personal Finance and Wealth Management as well as simplification and digitalisation in our enabling functions.”

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Old Mutual results highlight the plight of consumers