Profits strengthen at Old Mutual despite third wave

(Sharecast News) - Old Mutual reported a rise in profits on Wednesday, but cautioned that South Africa's economic recovery could be hindered by a third wave of Covid-19 infections and the slow pace of the continent's vaccination programme.
The South African insurer said profitability in the year to date had improved on the same period last year, primarily due to higher asset-based fees following a 13% increase in average funds under management.

In the five months to 31 May, its preferred measure of operating profit - results from operations - rose 52% to 2.6bn rand. Closing FUM as at 31 May were up 17% on May 2020 levels.

The London-listed firm said: "The global economy continues to slowly recover and vaccination rates are progressing well in many of the advanced economies. The rebound in global economic activity has positively impact the South African equity market levels through strong commodity prices as demand picks up, which has contributed to the strengthening of the rand."

However, it also conceded: "The pace of economic recovery in South Africa could be delayed given the energy supply shortfall, the slow vaccination drive and high third-wave infections."

Vaccination rollouts across Africa have been slow, and according to Bloomberg data, only eight countries have vaccinated more than 5% of their populations to date.

Old Mutual said it was too early to determine whether additional provisions relating to Covid-19 would be required in the first half. Its claims experience is currently in line with the levels assumed in its December 2020 pandemic reserve, which was established to managed the impact of Covid-19 in the current year.

In the first quarter, the firm - South Africa's second-largest insurer - paid out 2.7bn rand worth of Covid-19 related death claims.

As at 1325 BST, shares in Old Mutual were ahead 2% at 65.75p.