- Old Mutual published a trading update on Thursday.
- Many of its businesses sold more in the first three months of 2022 than they did last year.
- And the insurer does not need to raise additional Covid-19 provisions yet, which bodes well for half-year profits.
This year started off on a high note for Old Mutual, with life insurance sales up 19% for the first three months compared to the same period last year. The value of new business (VNB) is up 53% to R454 million.
In addition, the policies and investments that the company sells are more profitable. Its VNB margin rose by 70 basis points to 2.8%.
"Sales momentum has continued into the first quarter of 2022, compared to the same period in the prior year which was impacted by lockdowns," said the insurer in a trading announcement on Thursday.
If this trend continues in the second quarter, the insurer might report better profits for the first half of 2022 because it has not needed to raise additional Covid-19 provisions this time around. It said the fourth wave claims were well within provisions it had already raised.
In the past, Old Mutual received much higher claims than it had provided for. Also, it had to raise additional provisions, which ate away its profits.
The business that predominantly sells funeral cover and insurance to low-income earners, the Mass and Foundation Cluster, was the star performer in terms of new risk cover sales.
Old Mutual put greater focus on that business this year after its funeral cover sales lagged 2019 levels by 2% at the end of 2021. The insurer recruited more advisors to bring in new business and protect its market share since the cluster is the biggest unit in its South African business.
The insurer said its second-biggest business, Personal Finance and Wealth Management, also recorded improved savings and funeral sales. But its risk and annuity product sales remained under pressure.
The business unit providing employee benefits, Old Mutual Corporate, grew group risk sales by 79% compared to the first three months of 2021. It secured substantial employer scheme deals in the first quarter, the company said.
Life insurance sales from the Rest of Africa business also shot up by 62% as Namibia, Malawi and East Africa are expanding their employee benefits businesses. Even in China, Old Mutual grew sales by 77%.
The businesses that bucked this trend were Old Mutual Investments, the lending business and the retirement savings operations of Old Mutual Corporate.
The group's total funds under management declined by 3% after Old Mutual recorded R5 billion in net client outflows.
In the lending business, loans and advances fell by 2% to R18.5 billion. Old Mutual said the decline was driven by lower disbursements in the Rest of Africa, due to a tougher economic climate and increased competition in various markets.
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