Old Mutual has reported a solid performance in the first quarter that saw gross written premiums rise by almost a fifth despite its customers’ disposable income coming under pressure from accelerating inflation and rising interest rates.
The Cape Town-headquartered group said in a voluntary trading update on Thursday that gross written premiums rose 19% to R6.512bn in the three months to end-March, up from R5.465bn in the corresponding period the previous year. Gross flows also increased by 22% to R49.046bn thanks to a strong performance from Old Mutual Investments, which saw higher inflows into money market, fixed income and corporate cash products in subsidiary Futuregrowth.
The increase in flows was also driven by higher alternative flows compared to the prior period, increased new business secured and higher unit trust sales in East Africa. Net client cash flows saw a complete turnaround, coming in at R899m, though this was partially offset by large outflows in Wealth Management across all platforms.
Despite the robust first quarter performance, Old Mutual adopted a cautionary tone in the trading update against a difficult global economic backdrop.
“The global macro-economic environment remains challenging, however easing of the Covid-19 policy in China has boosted economic activity,” the group said. “Our customers’ disposable income remains under pressure due to rising inflation and interest-rate increases. The sustained high levels of load-shedding in South Africa continues to reduce customers’ confidence.”
Old Mutual’s Life APE (annual premium equivalent) sales were marginally lower at R2.873bn due to lower savings product sales in the broker channel in China as the group ceased selling certain products in anticipation of regulatory changes in that market. Excluding China, Life APE sales were 7% higher than the prior period due to growth in credit life sales and strong risk sales in the group’s mass and foundation cluster.
Personal Finance and Wealth Management delivered higher single premium guaranteed annuity sales and better recurring premium savings sales compared to the prior period, which Old Mutual put down to improved productivity. Sales in Old Mutual’s Africa Regions were above the prior period mainly due to corporate sales growth in East Africa driven by new business secured, renewals and improved productivity.
Old Mutual said its group solvency ratio remains stable and within its target range of 170%-200%.
The group’s discretionary capital balance as at end-March decreased to R1.4bn from the R3.5bn reported at end-December 2022. This was mainly due to capital allocation decisions, including the R300m acquisition of the Genric Insurance Company and the N$214m minority buyout of Old Mutual Finance Namibia in the first quarter, as well as the R1.5bn share buyback programme.
The group said its discretionary capital balance of R1.4bn has been earmarked for the acquisition of an equity stake in the Two Mountains Group, which is still subject to regulatory approvals. It will also allocate these funds towards continued investment in growth and innovation initiatives.
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