Old Mutual profits jump but warns of volatility ahead

Old Mutual’s net profit jumped 75 per cent to 5.22billion South African rand (£260milllion) in the first half, but the firm has warned of challenging months ahead.

The Anglo-South African group declared an interim dividend of 25 cents per ordinary share, which amounts to 44 per cent of adjusted headline earnings. 

‘We were able to maintain a dividend in line with our prior interim dividend due to our robust operational performance and our strong capital and liquidity position’, boss Iain Williamson, said. 

He added: ‘Strong operating performance and muted Covid-19 impacts led to an increase in Results from operations of 87 per cent to R4.1 billion. 

‘Despite the large relative drop in market levels, our Adjusted headline earnings would have been up 19 per cent on a like for like basis if the income from Nedbank had been excluded from the comparative period.’

Group solvency ratio, a measure of financial strength, stood at 187 per cent, against  177 per cent a year ago.

Meanwhile, lower market levels in South Africa and globally drove a 7 per cent decline in funds under management. 

The company said: ‘With a balance sheet that remains well capitalized and our solvency ratios within or slightly above the target range, we are well set up to weather the challenging operating environment across all of our operating regions.’

‘Global growth is expected to slow over the rest of 2022, especially in the large economies of the USA and Europe where high inflation will likely result in further interest rate increases. The International Monetary Fund’s (IMF) World Economic Outlook for July 2022 revised its global economic growth forecast downward, from 4.4 per cent to 3.2 per cent.

‘In South Africa, ongoing pressure on consumers, combined with loadshedding risk, will likely further impact economic growth. The IMF has forecast growth in Sub-Saharan Africa to slow to 3.8 per cent from the 4.6 per cent recorded in 2021.

‘The macro-economic environment in our markets is expected to remain challenging. 

‘Low wage growth across sectors limits options for the pass-through of rising cost inflation, exacerbating the financial pressure experienced by our retail customers.

‘Rising inflation further impacts our corporate customers’ growth and liquidity levels. These factors continue to put strain on persistency levels across the Group. Increased market volatility and resultant decreases in asset levels puts further pressure on asset-based fees.’

Old Mutual shares fell today and were down 3.09 per cent or 1.80p to 56.40p in late morning trading, having fallen over 25 per cent in the last year.