Old Mutual warns of lower earnings as Covid-19 impacts sales

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Old Mutual warns of lower earnings as Covid-19 impacts sales

Published Date: 2020-05-29 | Source: Stephen Gunnion | Author: Stephen Gunnion

Old Mutual warns of lower earnings as Covid-19 impacts sales

The life assurer says many of its agents have been unable to sell policies, impacting productivity and new business acquisition over the past two months.

Old Mutual says it will report a decline in first-half earnings after sales of policies fell due to the lockdown. It expects sales to remain under pressure and more customers to cancel their policies due to the weak economy and increased levels of unemployment.

Many of its tied advisers - those employed directly by the company - had been unable to sell policies during the lockdown period due to the partial closure of the branch network and lack of access to customers' homes and worksites. The majority of its branch consultants were unable to work from home, with the result that it closed most of its branch network, slowing loan disbursements and negatively impacting funeral, savings and credit life sales. It said these factors had significantly impacted productivity and new business acquisition over the past two months.

Although lockdown restrictions in SA and many other countries were it operates were easing, the life assurer said in a trading update that it expected the Covid-19 pandemic to affect its performance for the rest of the year as levels of uncertainty continued to impact the economy and consumer confidence. The value of issued life sales last month was significantly lower than a year earlier, while distribution cost base remained largely fixed. It said this would have a negative impact on its reported profits and Value of New Business (VNB) for the period. Premium holidays, discounts and deferrals of rate increases for customers posed further downside pressure on revenue levels.

The group said shareholder investment returns were expected to be below last year due to the a decline in equity markets and negative fair value movements on come classes of invested shareholder assets. For the six months to end-June, it said earnings and headline earnings per share were likely to be more than 20% down from last year.

Despite the short-term pressure on earnings, Old Mutual said its capital and liquidity remained at appropriate levels, with its solvency capital ratio only likely to fall marginally below its target range only in the most extreme scenario.

It had made R4 billion of free life cover available to around 430,000 registered healthcare workers across the country and had pledged R50 million towards Covid-19 relief efforts. Similar initiatives were launched in other countries including Namibia, Kenya and Zimbabwe.

Its shares fell 5.2% to R12.33 yesterday.





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