Financial services provider Old Mutual rose on Wednesday as it predicted further sales growth after a resilient first-half performance.
At 54p a share, Old Mutual’s share price was 4.7% higher in mid-week trading.
Revenue at the company, a major player in South Africa’s life insurance market, rose 14% in the six months to June. Old Mutual attributed the growth to improvements in productivity that increased the value of new business.
Life annual premium equivalent (APE) sales increased 1% in the period to 6.2 billion South African rand. Last year’s turnover benefited from significant sales in the China broker channel, which the company stopped selling through ahead of potential regulatory changes.
Excluding China, Life APE sales grew 14% year over year.
The value of new business rose by almost a third in the first half to 937 million rand. Meanwhile new business margin increased by 40 basis points to 2.6%.
Headline earnings per share fell 8% to 96.8 South African cents in the period. Earnings per share rose 21% to 68.8 cents on an adjusted basis.
Old Mutual’s solvency ratio fell 2% year-on-year to 186%, although it was still within the target range of 170% to 200%. The business increased its interim dividend by 28% year on year to 32 cents a share.
Sales expected to continue increasing
Old Mutual said it “has performed well across most of our key performance indicators with good top line growth across our core businesses,” noting that South Africa’s economy will expand in the first half of 2023 after shrinking at the end of last year. Came back.
It commented that “despite the dual impact of power shortages and confidence crises, more efficient production processes combined with significant private sector energy production supported economic activity.”
However, high inflation and high levels of unemployment continue to put pressure on citizens’ disposable income. This has led to an increase in disinvestment on savings and investments as customers look to meet their liquidity needs, the firm said.
The rand also fell to a record low against the US dollar during this period.
The Cape Town-based business said net customer cash outflows totaled 7.3 billion rand in the first half. This was 67% more than the same period in 2022.
Old Mutual said the trading environment in its other African markets was also difficult. It commented that “the slow economic recovery following COVID-19, high inflation and borrowing costs continue to exert upward pressure on our customers’ disposable income.”
Looking ahead, Old Mutual said that “we expect new business sales and value to remain strong throughout the remainder of 2023.”
It added that “South African economic growth is still very weak but has proven its resilience despite the challenges,” noting that inflation has begun to reverse and predicting that interest rates have possibly peaked.