Image By: Canva
The original article can be found here.
Insurance and investment group Old Mutual reported on Thursday that it carved out additional market share among SA’s lower-income customers, but investment in its growth initiatives weighed on half-year profits.
This includes spending on its new bank, OM Bank, which will now only be launched in the first quarter of next year.
Headline earnings per share rose 7% in the six months to end-June, helped by R1.5 billion in share buybacks in 2023, with a further R1 billion buyback proposed for 2024.
Its result from operations (a profit indicator), however, fell 3% to R4.2 billion. Excluding its “growth initiatives” (primarily its new bank), this would have risen 4%, while headline earnings would have risen 12%, Old Mutual said.
Key investment
Finance costs climbed by a fifth, as the group continued investing in its new bank and digital modernisation in its business. Old Mutual announced plans to launch a new bank before the end of 2024 two years ago.
The technical and operational progress is ahead of schedule, with successful industry testing and integration into the National Payments System already completed, Old Mutual said. The bank will now focus on meeting the remaining regulatory conditions and “continue refining systems and capabilities to ensure a seamless launch”.
Shares in the group, which is valued at almost R64 billion on the JSE, had lifted almost 2% on Thursday morning and have risen by about 10% in the past year.
The group reported strong results across its insurance businesses in the past six months, with life annual premium equivalent sales (new life assurance sales) increasing by 6% to R6.6 billion, while gross written premiums increased by 9% to R13.8 billion, boosted by Old Mutual Insure.
Exceptional turnaround
Old Mutual Insure, which provides non-life insurance products, delivered an “exceptional turnaround through better risk selection and disciplined expense management”, the group said. Its premiums grew by 10%, while its net underwriting result (an indicator of profit) increased by more than 100%.
Its Mass and Foundation cluster, which provides services like savings and funeral cover to the lower-income market, reported sales growth of 14%, with a multi-channel strategy continuing to bolster market share and support sustainable margins, it said. The value of new business margin of 8.6% remained at the upper end of its target range of 6% to 9%, reflective of strong funeral insurance sales.
Image By: Canva
The result from operations in this business jumped 30% to R944 million, with Old Mutual seeing strong growth in the value of new business.
Its Personal Finance and Wealth Management business, which is aimed at higher-income clients, reported sales growth of 8%, driven by higher guaranteed annuities and recurring premium savings sales.
Assets under management in the investments business grew 3% to R863 billion after benefiting from market performance in SA. But its result from operations fell 27% to about R1.4 billion, hit by an increased number of large claims.
Its business in other African countries, meanwhile, saw an increase of 17% in gross written premiums and a 5% lift in life sales (excluding the effect of currency movements).
Positive investor sentiment
“We have delivered strong cash generation, optimised shareholder value and sustained top-line growth as we continue to drive towards our goal of becoming Africa’s largest and best integrated financial services provider,” CEO Iain Williamson said in a statement.
Williamson added that positive investor sentiment in South Africa following the general election, along with the recent policy rate cut and further possible cuts expected later in the year, has reset the base case for growth.
“We are geared for growth, helping our customers thrive and supporting the communities we serve. Our focus remains on creating and preserving value for all stakeholders. We are responsibly building the most valuable business in our industry while being our customers’ first choice to sustain, grow and protect their prosperity,” he said.
