OLD MUTUAL’s share price declined by more than 5 percent on the JSE yesterday morning after the financial services group reported a loss of R5.1 billion for the year to end December, hurt by direct Covid-19 impacts of R6.1bn. The shares closed the day 4.10 percent lower at R11.93.
The group reversed a profit of R9.39bn reported last year.
Its adjusted headline earnings fell by 75 percent to R2.5bn and adjusted headline earnings per share declined by 74 percent to 54.3 cents a share.
The direct Covid-19 impact of R6.1bn was due to an increase in pandemic reserves, business interruption and rescue claims and negative markto-market losses in the group’s credit and private equity portfolios, it said.
Chief executive Iain Williamson said the year was one of the most challenging years their organisation has ever faced.
“Our business remained well capitalised through the execution of decisive management actions and our liquidity position was strong, despite the material negative impact Covid-19 had on our earnings. The fundamentals of our business were tested through this extreme scenario but we remained true to our purpose of championing mutually positive futures every day and our diversified business model enabled us to demonstrate resilience in this environment,” Williamson said.
Its results from operations (RFO), excluding direct Covid-19 impacts, declined by 14 percent to R7.74bn while including the Covid-19 impacts, it fell by 81 percent to R1.66bn.
Old Mutual fast-tracked the payment of mortality claims worth R13bn to support its customers and their families and committed R400 million towards customer relief initiatives with R290m disbursed in 2020.
Old Mutual’s earnings were further impacted by business interruption and rescue reserves of R791m and mark to market losses of R704m related to unlisted equity and a portfolio of credit exposures.
The group declared a final dividend of 35c despite taking a hit from Covid-19, but it was 53 percent lower than the 75c declared a year earlier.
However, its net client cash flows surged by more than 100 percent to R9.6bn. Old Mutual’s equity value was robust at R98.5bn and it has maintained its strong balance sheet and capital positions and a solvency ratio of 185 percent.
Looking ahead, Old Mutual said during the second half of the year, it focused on maintaining strong levels of solvency and liquidity and identifying opportunities for simplification and in its business.
“This will continue to be an important focus as we transition the business out of this period of global crisis.
“We are focused on driving recovery in RFO to 2019 levels and improving return on net asset value to above cost of equity as rapidly as possible, however the pace of the recovery will depend on gross domestic product growth and equity market levels. We expect to achieve this recovery by 2023,” the group said.
BUSINESS REPORT ONLINE