Group writes down value of some investments and expects pressure from rising death claims
24 August 2020 - 08:45Insurance group Old Mutual has warned of a hefty first-half loss as it braces for increased claims and subdued economic activity in the wake of the Covid-19 pandemic.
The group expects a loss of R5.62bn-R6.74bn in the six months to end-June, from profit of R5.81bn previously, saying in a trading update it will write down some of its investments due to a deteriorating economic environment. “While there is still much uncertainty around the pandemic and the impact that it will have on experience, we have raised short-term provisions in anticipation of worsening mortality, morbidity and persistency experience in the second half of 2020,” the group said. Persistency refers to the amount of business, such as policies, an insurance group is able to retain.
Old Mutual said it has also increased provisions for expected credit losses in Old Mutual Finance, in recognition of declining GDP forecasts, and the anticipated impact of this on future credit losses. Adjusted headline earnings per share, which does not include the effects of the writedowns, is expected to fall 60%-70% from the prior period’s 109.1c.
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