SA’s third-largest insurer, Old Mutual, has repriced premiums on new policies for the unvaccinated after experiencing higher Covid-related death claims than it had modelled for.
“We have responded by repricing our group life business and individual business on the expiry of the guaranteed terms, as well as repricing new business for unvaccinated lives,” CEO Iain Williamson said on Tuesday during the results presentation.
“In our response to Covid, we have taken into account all views, research and expert projections, including those of medical experts. After what we experienced with the fourth wave, wider but less severe infections, we now believe that the world may finally be getting to grips with Covid.”
Williamson’s comments echo sentiments expressed by the Association for Savings and Investment SA, which said this week the R3.7-trillion life insurance industry is considering writing policies that take into account the life-saving benefits of the jabs and the financial risk that unvaccinated policy holders pose to companies.
SA has inoculated almost half its adult population, giving insurers a potential breathing space after they paid out billions of rand throughout the pandemic to settle death and other claims.
Old Mutual — whose competitor Discovery signalled last year that members who refuse a Covid-19 vaccine could push up life insurance premiums — paid out R13bn in claims in 2021 and excess death claims stood at R6.8bn. Net client flows dropped to R100m from R9.6bn in 2020, as a result of Covid-19 claims.
Net client cash flows refer to the difference between money received from customers — from premiums, deposits and investments — and money given back to them via claims, surrenders and maturities.
Its biggest competitor, Sanlam, paid out R22bn in 2021, which was 76% higher than 2020, indicating the sheer devastation the pandemic has caused for the industry.
However, Old Mutual has R2.9bn in remaining pandemic provisions that should be sufficient to cover additional mortality claims as the pandemic begins to tail off, according to Rowan Williams, director at Nitrogen Fund Managers.
“Return on equity of 9% remains below management’s target of 16%, which appears only attainable in the 2023 financial year.
“Old Mutual appears to have ceded some market share to competitors, including new entrants in the funeral insurance space, and has work to do to make up lost ground in an increasingly competitive space,” Williams said.
The underlying businesses recovered strongly during the review period, boosted mainly by a strong performance by the domestic equity market, which bolstered performance fees on the assets that the company managed. Gross flows rose 4% to R194.8bn due to strong inflows in Old Mutual investments and wealth management. The value of new business grew to R1.3bn from R621m due to strong new business sales.
The personal finance business exceeded 2019 sales as a result of what the company said was a focus on adviser productivity and improving customer experience.
The group net income was R6.66bn, swinging from a loss of R5.1bn a year before.
Results from operations — the measure of operating profit — rose 18% to R9.1bn excluding the direct Covid-19 impact.
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