(Alliance News) - Old Mutual Ltd on Wednesday said Covid-19 related mortality claims have been higher than expected over the first half, with the financial services firm battening down the hatches for further waves of the pandemic.
Old Mutual is a Top 40-listed investment, savings, insurance and banking group.
For the six months to June 30, headline earnings per share are expected to come in between 66.9 and 76.5 rand cents, a 21% to 31% fall from last year's 96.3 cents.
"Headline earnings is lower than the prior year as adjusted headline earnings excludes adjustments in respect of equity and debt instruments held in life funds, the impact of restructuring as well as the results related to Residual PLC which were all lower than the first half of 2020," Old Mutual said.
Basic EPS are expected to range between 61.4 and 74.3 cents, swinging from a loss per share of 128.5 cents.
Old Mutual said that "productivity levels" in the South African retail segments, Mass & Foundation Cluster and Personal Finance have improved in the first half.
However, Covid-19 mortality claims in the company's life businesses are driving negative net client cash flows, Old Mutual said, although this was offset by inflows in the Asset Management & Wealth business.
"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," Old Mutual said.
The company has increased its Covid-19 provision by ZAR2 billion, at June 30, "to take into account the emerging expectations of wave 3 and 4 as well as potential future waves".
In March, Old Mutual said it had recorded about ZAR1.9 billion of Covid-19 related mortality claims in the first two months of the year alone. At the time, Old Mutual had said there was around ZAR2 billion left of the pandemic reserve - which included an initial ZAR1.3 billion set aside in the first half of last year and then a ZAR3.9 billion top up at the beginning of this year.
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.
Old Mutual shares were down 5.5% at 63.05 pence in London early Wednesday. The open of trading on the Johannesburg Stock Exchange has been delayed.
By Greg Roxburgh; gregroxburgh@alliancenews.com
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Old Mutual Lim. (OMU)