TIDMOMU
RNS Number : 4564R
Old Mutual Limited
08 March 2021
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
ISIN: ZAE000255360
LEI: 213800MON84ZWWPQCN47
JSE Share Code: OMU
NSX Share Code: OMM
MSE Share Code: OMU
ZSE Share Code: OMU
("Old Mutual" or "Company" or "Group")
Ref 2/21
8 March 2021
TRADING STATEMENT FOR THE YEARED 31 DECEMBER 2020
Shareholders are advised that Old Mutual Limited is currently in
the process of finalising its annual results for the twelve months
ended 31 December 2020 ("current period"). This trading statement
provides an indication of a range for Headline Earnings per
ordinary share (HEPS) and earnings attributable to equity holders
of the Group per ordinary share (EPS) in terms of paragraph 3.4(b)
of the JSE Limited Listings Requirements compared to the year ended
31 December 2019 ("comparative period"). The Group's annual results
will be released on the Stock Exchange News Service of the JSE
Limited on Tuesday, 23 March 2021.
Although stimulus measures and vaccine breakthroughs led to a
recovery in local and global equity markets in the second half of
the year, the impact of the recessionary environment on our
customers' disposable income and the significant impact of COVID-19
on claims and reserving has adversely affected our earnings. We
exercised tight cost control across the business to part mitigate
negative earnings impacts. Despite the impact to earnings, strong
gross flows throughout the year drove a significant increase in
NCCF demonstrating the resilience of our business. We have observed
a good recovery in sales and productivity levels during the second
half of 2020, after a significant decline in volumes in the second
quarter when the national lockdown was most restrictive. The
gradual reopening of worksites and branches and the digital
enablement of advisers to sell remotely supported the recovery of
productivity levels, with the fourth quarter trending towards
historic levels. The majority of premium relief initiatives offered
to our customers ended in the fourth quarter and reinstatement
rates are encouraging, with a continued strong focus across the
business on retention and customer loyalty activities.
Our Group remains well capitalised despite some material one off
negative items impacting our 2020 earnings, which are referred to
in this announcement. Throughout the year, we performed rigorous
stress tests to assess our liquidity and solvency position under
various recovery scenarios. Our liquidity levels remain positive
and our solvency ratio remains within our target range in all
scenarios.
In H1 2020 we raised a short term provision of R1,339 million
for the anticipated impacts of worsening mortality, morbidity and
persistency related to COVID-19. At the time we had noted a trend
of increasing mortality and morbidity claims in the second quarter
and into the initial weeks of the third quarter. There was limited
observed data and significant uncertainty around the length and
severity of this experience. The provision was intended to provide
for expected experience in the second half of 2020.
In South Africa, actual claims in the second half of the year
were higher than the provision raised in H1 2020, with an
acceleration in infection and excess mortality rates at the end of
the fourth quarter. This acceleration was consistent with early
patterns of second waves noted in other countries. Since the start
of 2021 we have continued to monitor the excess mortality and
infection data released weekly by the South African Medical
Research Council, our own claims experience and other observable
sources. This data confirms that Wave 2 experience is significantly
worse than Wave 1.
There are also emerging expectations of a third wave given
evidence of virus mutation, the slow pace of the vaccination
rollout and upcoming public holidays and the winter season. In
light of this, we have increased our short term provision by R3,962
million. The impact of this has been in part mitigated by the
release of discretionary reserves of R1,112 million related to
mortality experience in the Mass and Foundation Cluster. We
continue to closely monitor claims experience in 2021 and have
recorded approximately R1.9 billion of COVID-19 related mortality
claims for January and February of 2021. Taking into account the
release of the H1 provision, there is approximately R2 billion of
the pandemic reserve remaining for mortality risk related to
COVID-19 that may arise.
We previously communicated to shareholders on the 25 January
2021, that we anticipated an increase of between R85 million to
R140 million in the net business interruption and business rescue
reserves reported for the year ended December 2020 compared to the
R464 million reported in June 2020. Subsequent to the previous
communication we have refined our estimated reserve as additional
data has become available which allowed us to refine key
assumptions. This has resulted in an increase in net business
interruption reserves of approximately R300 million, versus that
reported for the half year.
Although credit spreads narrowed in the second half of 2020, the
onset of the second wave of the pandemic in the fourth quarter in
South Africa added pressure to business operations of certain
counterparties resulting in further negative mark to market losses
at the end of the year. These were however broadly in line with
those reported in H1 2020. The uncertainty around the pace of
economic recovery and the low interest rate environment continued
to depress earnings forecasts for some of our unlisted equity
portfolios and has resulted in downward revaluations of certain
assets.
Taking into account the operating environment and factors
outlined above shareholders are advised that the Group's key profit
measures are expected to fall within the ranges outlined below:
Key Performance Indicators Estimated Estimated 30 December
(R million unless stated % change 31 December 2019
otherwise) 2020
Results from Operations (79%) to (89%) 1,884 - 987 8,972
---------------- -------------- -------------
Adjusted Headline Earnings (70%) to (80%) 2,957 - 1,971 9,856
---------------- -------------- -------------
AHEPS (cents)(1) (69%) to (79%) 64.9 - 44.0 209.3
---------------- -------------- -------------
(1) AHEPS defined as Adjusted Headline Earnings divided by WANS
adjusted to reflect the Group's BBE shares and shares held in
policyholder and consolidated investment funds.
Shareholders are reminded that the impairments in respect of the
carrying value of our investment in Nedbank and the goodwill
related to our investment in Old Mutual Finance were recognised in
the IFRS income statement in the first half of the year, with no
further downward revaluations expected in the second half of the
year. They are however, not recognised in Headline Earnings, and
accordingly not recognised in Adjusted Headline Earnings (AHE), as
this is an explicit adjusting item in accordance with the JSE
Circular.
Headline earnings is higher than AHE, as AHE excludes the
results related to the operations of Residual plc and Zimbabwe and
the adjustment in respect of investment return for group equity and
debt instruments held in life funds, all of which were positive in
FY 2020.
Taking into account the decrease in operating earnings and the
significant impairments outlined above shareholders are advised
that HEPS and Basic EPS are expected to fall within the ranges
outlined below:
Key Performance Indicators Estimated Estimated profit/(loss) 30 December
2019
(R million unless stated % change 31 December
otherwise) 2020
Headline Earnings (42%) to (62%) 6,172 - 4,044 10,641
------------------ ------------------------- -------------
HEPS (cents) (40%) to (60%) 141.7 - 94.4 236.1
------------------ ------------------------- -------------
IFRS profit after tax attributable
to equity holders of the
parent (146%) to (166%) (6,195) - (4,318) 9,386
------------------ ------------------------- -------------
Basic EPS (cents) (147%) to (167%) (139.5) - (97.9) 208.3
------------------ ------------------------- -------------
The financial information in this trading statement is the
responsibility of the Old Mutual Limited Board of Directors and has
not been reviewed or reported on by the Group's external
auditors.
Sandton
Sponsors
JSE Merrill Lynch South Africa (Pty) Limited
Namibia PSG Wealth Management (Namibia) (Proprietary)
Limited
Zimbabwe Imara Capital Zimbabwe plc
Malawi Stockbrokers Malawi Limited
Enquiries
Investor Relations
Sizwe Ndlovu T: +27 (0)11 217 1163
Head of Investor Relations E: tndlovu6@oldmutual.com
Tokelo Mulaudzi T: +27 (0)11 217 1042
Investor Relations Manager tmulaudzi3@oldmutual.com
Communications
Tabby Tsengiwe T: +27 (11) 217 1953
General Manager of Public M: +27 (0)60 547 4947
Affairs and Communications E: ttsengiwe@oldmutual.com
Notes to Editors
About Old Mutual Limited
Old Mutual is a premium African financial services group that
offers a broad spectrum of financial solutions to retail and
corporate customers across key markets segments in 14 countries.
Old Mutual's primary operations are in South Africa and the rest of
Africa, and it has a niche business in Asia. With over 175 years of
heritage across sub-Saharan Africa, we are a crucial part of the
communities we serve and broader society on the continent.
For further information on Old Mutual, and its underlying
businesses, please visit the corporate website at www.oldmutual.com
.
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END
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