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(Alliance News) - Old Mutual Ltd said Monday it expects a sharp drop in interim earnings, as new business sales volumes took a hit during the national lockdowns put in place to help combat the spread of the coronavirus.
The pan-African investment, savings, insurance and banking firm said the pandemic "continues to have an unprecedented impact" on its business.
For the six months to June 30, Old Mutual expects results from operations to fall by between 61% and 71% - landing between ZAR1.31 billion and ZAR1.76 billion.
Adjusted headline earnings are guided to fall 62% to 72% to between ZAR1.46 billion and ZAR1.98 billion.
Old Mutual is guiding for loss after tax attributable to shareholders of ZAR128.5 million to ZAR154.2 million, compared to a ZAR127.3 million profit the year before.
"Government enforced restrictions to control the spread of Covid-19 in most geographies we operate in have dramatically reduced the level of economic activity during the first half of 2020 and negatively impacted growth forecasts for the remainder of the year," Old Mutual said.
Amid this "challenging environment", Old Mutual said, new business sales volumes took a hit - as most of the company's tied advisers were unable to sell during the lockdown period due to the partial closure of the branch network and lack of access to customers' homes, worksites and branches.
"Although lockdown restrictions have been eased, and economic activity has somewhat resumed, sales levels remain below prior year levels. This impact was most severe in the Mass & Foundation Cluster, where sales volumes were too low to cover the largely fixed initial expenses and this resulted in negative value of new business for the first half for this segment," Old Mutual added.
Despite the "tough" economic situation, Old Mutual noted its solvency capital has remained "strong".
"While there is still much uncertainty around the pandemic and the impact that it will have on experience, we have raised short term provisions in anticipation of worsening mortality, morbidity and persistency experience in the second half of 2020. These reserves are intended to allow for expected short term variances to our long term assumptions," Old Mutual said.
Shares in Old Mutual were down 1.0% in London at 55.72 pence each. In Johannesburg, the shares were 1.8% lower at ZAR12.41.
By Paul McGowan; paulmcgowan@alliancenews.com
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