LONDON (ShareCast) - (Sharecast News) - Old Mutual updated the market on its financial expectations for the year on Wednesday, amid the recovery in equity markets locally in South Africa, and globally, as lockdown restrictions eased.
The London-listed, Africa-focussed banking group said markets had "rallied" ahead of pre-pandemic levels, but cautioned that the environment remained volatile as it navigated the "challenging impact" of the Covid-19 crisis.

It said that, as at 30 June, it was expecting its result from operations to fall in the range of ZAR 2.11bn (£100m) to ZAR 2.27bn, making for an increase of 37% to 47% year-on-year.

At the same time, adjusted headline earnings were forecast to be 65% to 75% higher than the prior year at ZAR 2.81bn to ZAR 2.98bn.

Its IFRS profit after tax was set to be between ZAR 2.7bn to ZAR 3.27bn, swinging from losses of ZAR 5.62bn year-on-year, with basic earnings per share swinging to 61.4 to 74.3 cents, compared to losses of 128.5 cents a year earlier.

"We continue to demonstrate agility in our response to the impact of the pandemic on our business, with good recovery in sales and earnings for the first half of the year," the Old Mutual board said in its statement.

"Productivity levels in our South African retail segments, Mass and Foundation Cluster and personal finance have materially improved in the first half of the year.

"There has been a strong customer take up in the Old Mutual Protect (OMP) proposition, which has seen rapid growth supporting the recovery in risk sales."

Old Mutual said that in the Mass and Foundation Cluster, issued sales in the first half of the year were above the comparative period due to the "significant" impact that lockdown had on issued sales in 2020.

That was supported by an improved credit experience in the banking business, it added, while personal finance had higher single and recurring premiums, driven by an increase in productivity.

"In Old Mutual Corporate, SuperFund umbrella quote activity improved relative to the comparative period.

"The recovery in local equity markets, combined with positive flows in our asset management business have benefited Old Mutual Investments.

"In [the] rest of Africa, we continue to upgrade the digital channels to improve customers experience and provide connectivity support to enable intermediaries to work remotely."

Old Mutual said the mortality claims paid relating to Covid-19 in its life businesses were driving negative net client cash flows (NCCF), although that was being offset by inflows in the asset management and wealth businesses.

"Our mortality experience has been worse than anticipated with impact on profits mitigated by a partial release of provisions raised at the end of 2020.

"Our Covid-19 provisions have been increased by ZAR 2bn as at 30 June, to take into account the emerging expectations of waves three and four, as well as potential future waves."

The company said the provisions were updated to take into account the additional available data to date, as well as the expected impact of the proposed vaccination rollout plan.

"In Old Mutual Insure, business interruption claims paid in the first half of the year were offset by the reserves raised at the end of 2020.

"The reserves raised in the comparative period still remain as the best estimate and no further provisions were raised."

There was a "significant turnaround" in the Credit Guarantee Insurance Corporation (CGIC) business profitability, the firm reported, due to large Covid-19-related claims in the prior year that did not repeat, as well as lower attritional claims in the current year.

At 0919 BST, shares in Old Mutual were down 3.6% at 64.3p.

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