FIFI PETERS: Old Mutual topped up provisions related to Covid-19 mortality claims after the insurer reported that the actual claims paid out in 2021 exceeded its initial expectations. It also hasn’t ruled out the possibility of needing to raise provisions further in the event of a new Covid-19 variant playing out. That came out in its results reported today.
We have the CEO of Old Mutual, Iain Williamson, [with us] for more on the story. Iain, thanks so much for your time. I suppose it’s difficult to have predicted exactly how the Covid-19 variants would have played out, but I do see that you [paid] excess death claims of R6.8 billion in the 2021 financial year – perhaps an indication that the worst of the worst-case scenario played out in your business as it related to Covid-19 claims. But what is the situation looking like now, three months from your year-end?
IAIN WILLIAMSON: Obviously, as I think we all know, we’ve come through the so-called Omicron wave, and that wave was milder than anticipated, having followed on from Delta, which was the very pathogenic variant that created the third wave of Covid. So currently we’re in a lull and, having had Omicron, I think we all would like to believe that the world has dealt with the pandemic and that we can kind of move on. Certainly, from a provisioning perspective, we have more than adequately provided for that kind of scenario.
The risk remains, though, as you said in your opening remarks, that there is a breakout variant – which is what the epidemiologists call it – that effectively mutates in such a way that evades either the vaccines or previous immunity from prior infection; if that happens, then very much a lot depends on what the nature of that variant is.
I don’t think that’s the most likely scenario, but it is a possibility and certainly a risk that we are cognisant of, looking forward.
FIFI PETERS: Sure. I saw a headline earlier on today that we could possibly be in for the fifth wave in April. I was speaking with Stephen Saad of Aspen last week and he was reflecting on the fact that as this continent remains the most unvaccinated in the world, the possibility of new variants coming out from Africa [is] quite high. The question then becomes: What are the major lessons learned from the previous waves that you will be applying in your business in the event that future waves do materialise?
IAIN WILLIAMSON: We’ve taken all the action that we can to protect our business financially, and that includes repricing business that we can reprice to price for the risk, as you suggested, putting aside money essentially to pay the claims that may come through in future. Other than that, lessons learnt are really around the efficacy of vaccine, the efficacy of masks and social distancing, and just observing protocols.
I think it’s now well understood that restrictions in movement and that kind of thing are not that effective in constraining the spread of the virus. I think what’s being referred to by Aspen and, for what it’s worth our view, is that the next wave will also arrive in April. So that’s consistent. I think what’s emerging from the discussions with Aspen is [that] the more the virus spreads the more chance it has to mutate. So cutting down on the spread of the virus through vaccination, through containment measures, also reduces the risk of further mutations, which is what the world needs.
FIFI PETERS: Talking about vaccination, you were one of the companies that took the mandatory approach to vaccination on your employees. What has the response rate from them been so far?
IAIN WILLIAMSON: We’ve got over 95% of our employees either vaccinated or having applied for an exemption. The remaining 5% or so is mainly an administrative issue of us having to go through the balance of the staff to identify exactly what the situation is there. We expect that to take a few more weeks.
FIFI PETERS: All right. So you did face a bit of resistance. The sense that I’m getting is it wasn’t material, as most people played their part and queued up and got the jab, as it were.
IAIN WILLIAMSON: That’s right. Certainly there are those who are very unwilling to be vaccinated, and we’ve accommodated those people by allowing regular PCR testing as an alternative.
FIFI PETERS: Okay. Just speaking to our market watcher a little earlier, she commended the group for what was a strong performance. So, for the 2022 financial year I am interested in what the main opportunities for the group are in terms of growth, and what the main risks could possibly be that still keep you up at night.
IAIN WILLIAMSON: From this base, we still see substantial growth opportunity. I do think the South African macroeconomic climate will remain challenging, and consumers will be under pressure because of essentially imported oil-price inflation, courtesy of the crisis in Ukraine. So that’s just something; I think we know how to navigate that.
We do see real growth in both our South African business, particularly our retail businesses, which have got really good momentum at the moment, as well as from our rest of Africa and China businesses. So I think all in all we’re quite confident about our growth prospects for 2022.
FIFI PETERS: All right. And the risks that keep you up at night, if you had to list three?
IAIN WILLIAMSON: I think really there’s two big ones. One is the Ukrainian conflict and what that might mean for global markets, for macroeconomics and inflation around the world. And then, as I said, as we’ve already discussed, the possibility or the prospect of a particularly nasty variant of Covid emerging.
FIFI PETERS: All right. We’ll leave it there for now. I can hear that someone else is trying to get hold of you. But thanks so much for your time this evening. Iain Williams, CEO of Old Mutual.