Old Mutual reported an 18% improvement in life annual premium equivalent (APE) sales in an unscheduled trading update on Tuesday, to ZAR 8.14bn (£390m).
The London-listed life insurer and financial services group said the value of new business rocketed to ZAR 1.1bn for the period ended 30 September, from ZAR 274m a year earlier, while gross flows were 7% higher at ZAR 146.63bn.
Net client cash flows swung to the negatives, however, coming in at ZAR -2.6m, compared to a positive ZAR 3.6m in the period ended 30 September 2020.
Funds under management totalled ZAR 1.2bn as at 30 September, up 9% year-on-year, while loans and advances were 10% weaker for the period at ZAR 18.19bn.
Gross written premiums expanded by 7%, to total ZAR 15.1bn by the end of September.
“The global economy continues to demonstrate strong growth however the recovery remains uneven due to large differences in vaccination rates between countries,” the Old Mutual board said in its statement.
“Although the investment markets where we operate continue to recover ahead of pre-Covid-19 levels, the environment remains volatile as we navigate the challenging impact of the pandemic.”
Old Mutual said its South African retail segments, Mass and Foundation Cluster, Personal Finance and Wealth Management continued to demonstrate recovery in productivity from the low levels in the prior year, driven by management initiatives, resulting in higher issued sales.
“Sales in Corporate remain subdued with annuity quotes improving relative to 2020.
“Issued sales in Personal Finance continue to be above 2019 levels with issued sales in other South African retail segments remaining below 2019 levels due to the continued tough economic environment.”
Despite the increase in gross flows, the board put the negative net client cash flows down to “significant volumes” of mortality claims related to Covid-19 in its life businesses, higher client disinvestments in Personal Finance and Wealth Management, as well as large client terminations in Corporate for the year-to-date.
The increase in funds under management, meanwhile, was due to “strong” equity markets, despite negative net client cash flows.
Old Mutual said the decline in loans and advances was driven by the decline in disbursements following the tightening of credit criteria in the prior year for Old Mutual Finance, which had resulted in a better credit experience as the company managed its risk appetite.
In addition, reduced footfall in branches further impacted new loans and advances in South Africa and the Rest-of-Africa geography, which had not yet fully recovered to pre-pandemic levels.
“In our South African life businesses, provisions were raised on 30 June based on our own claims experience and South African Medical Research Council (SAMRC) excess mortality data, as well as an assumption for vaccination hesitancy,” the board said of the Covid-19 impact.
“The rate of vaccine hesitancy observed in South Africa has, however, been higher than anticipated at the half year resulting in higher levels of claims.
“In our Namibian life business, we have also experienced increased claims relative to expectation as a result of the high infection rates in the country.”
The company said its life businesses had worse mortality claims than expected, resulting in the excess deaths impacting on profit of approximately ZAR 6.6bn for the year-to-date.
“In order to partially offset the excess deaths impact on profit for the year to date, ZAR 4.9bn of the pandemic provision was released.
“Taking into account the release of the provision, there is approximately ZAR 1bn of the pandemic provision remaining for expected excess mortality claims related to Covid-19. ”
Old Mutual said it was continuing to closely monitor its mortality claims experience as future waves and their impacts remained uncertain.
“The adequacy of the provision will be assessed on 31 December.”
At 0941 GMT, shares in Old Mutual were up 0.23% in London, at 66.45p.
