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Old Mutual optimistic about growth

Promises to grow from the higher base achieved in FY2021.
The group says it’s set to continue consolidating and simplifying systems and processes that remain a barrier to building an agile business. Image: Bloomberg

Despite a subdued growth outlook, Old Mutual is confident of delivering on its medium term targets in its new financial year, similar to how it delivered on promises made at the beginning of the 2021 year. This is the view shared by Old Mutual CEO Iain Williamson in presenting the life office’s figures for the year to end-December 2021 on Tuesday.

“At mid-year, I made commitments to our stakeholders, and I believe that the results show that we delivered on these promises,” says Williamson, noting that Old Mutual succeeded in revitalising customer experience and distribution, made progress on achieving R750 million in cost savings by the end of 2022, and improved its investment performance.

“Looking forward, we expect continued growth in 2022, albeit at a slower pace than 2021. Our business is substantially rectified, a lot simpler than it was only a few years ago, and it is already starting to be amplified in many areas.

“Notwithstanding the uncertainties posed by potential new Covid-19 variants, as well as recent events in Europe, we remain optimistic in the group’s ability to shift gears and accelerate our growth trajectory,” he says.

On the economy …

Old Mutual expects the global economy to grow by 4.4% this year, in line with the latest forecast made by the International Monetary Fund (IMF). Sub-Saharan Africa economic growth is projected at 3.8% for 2022, as low vaccination rates, Covid-19-related restrictions and other challenges continue to pose a risk.

Read: Old Mutual to expand West African market share with acquisitions

Williamson points out that the IMF revised South Africa’s growth forecast downward to only 1.9% for 2022, with a weaker outlook for investment as business sentiment remains subdued.

“In addition, the Reserve Bank increased the repo rate by 25 basis points to 4% and has indicated that more interest rate hikes can be expected to manage the expected increase in inflation.

“The conflict in Ukraine has dramatically increased the level of uncertainty around global economic growth and inflation, with a stagflation scenario now more likely,” says Williamson.

“The recent oil price hikes and the risk of negative sentiment towards emerging markets are also likely to lead to an increase in inflation and lower growth in our local markets.”

Williamson indicates that Old Mutual is better positioned to head off challenges and take advantage of opportunities in that the group has recovered from the impact that Covid-19 had on its operational and financial performance during 2020.

Earnings and outlook

Adjusted headline earnings increased by some 117% to R5.4 billion in 2021, compared to R2.5 billion in the previous year.

Headline earnings per share increased by 41% to R1.64.

Management highlights that the balance sheet remains well-capitalised with strong liquidity to help withstand the challenging operating environment.

“Our focus for 2022 is to continue putting our customers first and consolidating and simplifying systems and processes that remain a barrier to building an agile business.

“The recent corporate activities within the group positioned us well for the future to ensure sustainable growth,” says Williamson, referring to Old Mutual Insure’s acquisition of a 51% stake in One Finance Services Holdings, the sale of 21.2% of its stake in Futuregrowth to African Women Chartered Accountants Investment Holdings, and the unbundling of its stake in Nedbank Group to shareholders.

Read: Futuregrowth almost half black-owned after Old Mutual sale

Analysts’ views

Thabiso Mamathuba, investment analyst at FNB Wealth and Investments, shares her comments on the group’s results here:


Gershwin Long, assistant portfolio manager at Vunani Fund Managers, says Old Mutual delivered good results, as well as enhanced returns to shareholders by declaring higher dividends and by distributing its stake in Nedbank, returning some R11 billion to shareholders.

“Since 2018, Old Mutual has returned R74 billion in the form of ordinary dividends, special distributions, unbundling Nedbank and share buy-backs,” says Long.

He notes that the 2021 dividend showed a remarkable recovery from the impact of Covid-19 on the group’s performance. The dividend increased to 75 cents per share (cps) compared to 35cps in 2020.

“Productivity gains and margin improvement supported profitability and additional Covid-19 provisions raised to mitigate against potential future excess mortality claims.

“There might still be some work to be done as earnings, margins and returns are yet to recover historical levels,” says Long.

While noting the improvement in all the important numbers, such as the healthy increase in earnings, inflow of investments and improved investment returns, Long indicates that shareholders could expect further improvement.

“We note that the group’s return on embedded value deteriorated on account of excess mortality claims. Covid-19 provisions raised in December 2020 and June 2021 totalled R5.2 billion, but did not offset the R6.8 billion in excess death claims during 2021.

“Old Mutual raised additional provisions of R3.3 billion to cater for future waves and additional excess mortality claims,” says Long.

He notes that the share is currently trading at a discount to its embedded value.

Nevertheless, investors seemed to have appreciated Old Mutual’s numbers.

The share was one of only a handfull of shares that closed higher on Tuesday, if only by a few cents and below recent highs.

In comparison, the JSE extended losses on Tuesday with the JSE Top 20 index falling by 1 255 points or nearly 2%. It is now some 10% lower than its recent peak.

Listen: Fifi Peters speaks to Williamson on Old Mutual’s latest results 



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