Tough conditions hold Old Mutual back


Tough conditions hold Old Mutual back

Published Date: 2019-09-03 | Source: Stephen Gunnion | Author: Stephen Gunnion

Tough conditions hold Old Mutual back

The life assurer doesn't expect a significant financial impact from litigation over its decision to fire Peter Moyo as its CEO.

Old Mutual says it's in the process of exiting its investment in NMT Capital, the company behind the fall out and subsequent termination of Peter Moyo's contract as CEO of the life insurer. Releasing its interims result yesterday, the group said it received R47 million in cash from NMT subsequent to the end of the reporting period, reflecting the full repayment of the outstanding preference shareholding in the company. Negotiations to exit were at an early stage, it said.

Old Mutual issued Moyo with a further notice terminating his employment last month after the High Court ruled that he should be reinstated. That's after it followed a flawed process when it first fired him in June over a conflict of interest in his position as CEO of the group and non-executive director and shareholder of NMT. Concern had been raised over non-payment of dividends at the time.

The fracas with Moyo aside, interim CEO Iain Williamson said the group had made good progress in the first half of the year despite a challenging operating environment in SA and other key regions in its Rest of Africa operations. A 2% increase in its Results from Operations (RFO) to R4.51 billion for the six months to end-June was more muted that the prior year due to a tougher macroeconomic environment. However, an improvement in sales in the second quarter of the year had continued into the third quarter. The group grew funds under management by 5% to R1.08 trillion. Life APE (annual premium equivalent) sales, a measure used to compare life insurance revenue, rose 4%. Adjusted headline earnings per share increased by 10% to 109.1c, supported by higher investment returns in SA and good profit growth in its Personal Finance and Rest of Africa operations. It's maintained its interim dividend at 45c per share.

The group said it was on track to meet its cost efficiency target of R1 billion of run rate savings by the end of the year. It achieved R116 million of recurring savings over the period, adding to last year's R750 million. It bought back shares worth R2.5 billion and plans to repurchase another R2.4 billion's worth.

It said it didn't expect the ultimate resolution of litigation related to its decision to terminate Moyo's appointment to have a significant adverse impact on its financial position.

Its shares declined 2.4% to R17.76 yesterday.

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