Old Mutual forecasting severe loss for 2020

0

Old Mutual forecasting severe loss for 2020

The South African insurer Old Mutual has today advised it is in the process of finalizing its annual results for full-year 2020 and provided an interim trading statement. The insurer has warned of a full-year loss and expects its headline earnings to halve due to the recessionary environment and the impact of COVID on claims and reserves.

In its trading statement, Old Mutual predicted an after-tax loss of up to 6.2 billion rand (approx. $399 million) and said its headline earnings per share for full year 2020 are expected to drop from 236.1 cents in 2019 to between 60% and 40% respectively to 94.4 and 141.7 cents. The insurer has also increased its short-term provision by 3.9 billion rand, which is in addition to the 1.3 billion rand set aside in H1 2020.

Commenting on the provision, the group said: “We continue to closely monitor claims experience in 2021 and have recorded approximately 1.9 billion rand of COVID-19 related mortality claims for January and February of 2021. Taking into account the release of the H1 provision, there is approximately two billion rand of the pandemic reserve remaining for mortality risk related to COVID-19 that may arise.”

Old Mutual noted that the slow pace of the vaccine rollout in South Africa, as well as expectations of a third wave, public holidays and the winter season could weigh heavily on its earnings. However, it noted that despite this, strong gross flows throughout the year drove a significant increase in net client cash flow (NCCF) demonstrating its resilience, and that the group saw a good recovery in sales and productivity levels during the second half of 2020, following a significant decline in Q2 volumes when the national lockdown was most restrictive.

“The gradual reopening of worksites and branches and the digital enablement of advisers to sell remotely supported the recovery of productivity levels, with the fourth quarter trending towards historic levels,” the insurer said. “The majority of premium relief initiatives offered to our customers ended in the fourth quarter and reinstatement rates are encouraging, with a continued strong focus across the business on retention and customer loyalty activities.”

The group noted that it remains well capitalized despite some material one-off negative items impacting its 2020 earnings and that it has performed rigorous stress tests to assess its liquidity and solvency position under various recovery scenarios. Its liquidity levels remain positive and its solvency ratio remains within its target range in all scenarios.

Source link

Orbem News

Leave A Reply

Your email address will not be published.