Life insurer Old Mutual has used more than half of the R4bn worth of provisions to settle Covid-19 related death claims in the three months to the end of March, saying the fallout of the second wave of infections was worse than initially anticipated.
In an operational update on Friday, Old Mutual said only R1.3bn worth of reserves was left in the kitty and it was monitoring the situation amid emerging signs of a third wave of infections in SA, which is by far the hardest hit on African continent. Old Mutual had set side R4bn earlier in 2021 for Covid-19 related claims
Life insurance companies have been at the coalface of the pandemic, which has killed 55,568 people to date since its outbreak more than a year, according an official death tally. The SA Medical Research Council estimates there have been about 157,000 excess deaths from natural causes over the past 12 months.
Claims and benefit payments to life cover policyholders rose 6.5% to R522.7bn in 2020, up from the previous year’s R491bn, according to statistics released by the Association for Savings and Investment SA in March. But not all claims were Covid-19 related.
"The second wave of the pandemic led to an increase in excess death claims with approximately R2.7bn of Covid-19 related mortality claims recorded in the first quarter. However, persistency was stronger than expected when provisions were assessed at 31 December 2020," Old Mutual said in a statement
Individuals and small businesses in particular have been feeling the squeeze after the economy crumbled 7% in 2020, prompting job losses and little-to-no wage growth for many.
Old Mutual said it had paid out R281m in the first quarter regarding the business interruption and rescue claims.
Its measure of operating profit rose 48% to R1.8bn in the March quarter, benefiting from a strong performance in the local share market, which drove higher investment fees. Funds under management were 23% higher from a comparable period a year ago.
The JSE all share rose about 14% in the first quarter, driven mostly by mining shares as optimism of a rebound in the global economy from Covid-19 spurred demand for commodities.
"Global and local economies showed signs of economic recovery in the first quarter of 2021 as lockdown restrictions were eased, coupled with the emerging benefits of vaccine rollouts," Old Mutual said in a statement.
"South African equity markets outperformed most other emerging and developed markets, recording strong gains for the quarter. Economic growth in the countries in which we operate in the rest of Africa remains muted and dependent on successful vaccine rollout strategies."
The share price rose 2.90% on Friday to close at R13.11, giving Old Mutual a market value of R61.7bn.
Gregory Katzenellenbogen, senior portfolio manager at Sanlam Private Wealth, said the positive market reaction stemmed from the "increase in profitability and the possibility that we’ve seen the worst in terms of death claims related to the pandemic".
Update: May 21 2021
This article has been update with more information an the share price.
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