Old Mutual withholds half-year dividend amid COVID-19 uncertainties

Insurance giant Old Mutual has faced the harsh realities of the COVID-19 pandemic, leading to the withholding of its half-year dividend as uncertainties loom. The company's adjusted earnings per share have plummeted by 66%, driven by lower sales volumes, volatile markets, and increased provisions in anticipation of higher mortality rates. Old Mutual CEO, Iain Williamson, joined CNBC Africa to shed light on the financial impacts of the pandemic and the company's outlook moving forward. One of the key challenges the company faced was the explicit COVID-19 number impacting operations, totaling 2.8 billion rand pre-tax. This figure includes provisions and asset re-evaluations directly related to the pandemic. Although significant, there are more indirect impacts on the business that are not reflected in this number. Old Mutual also set aside approximately 500 million rand for business interruption claims and saw a surge in funeral-related claims amid the pandemic, necessitating further provisions. Despite the ongoing uncertainty and challenges posed by lockdowns, Old Mutual has seen a gradual improvement in sales activity across its business units as economic activity picks up. Sales levels have reached around 60% to 80% of pre-COVID levels, indicating a positive trend in the company's performance. In Zimbabwe, where Old Mutual has a longstanding presence, the company remains committed despite economic challenges. With a strong balance sheet and a solid capital position, Old Mutual is not considering pulling out of the country and is focused on leveraging its brand and customer base. The company's solvency ratio stands at 182%, well above regulatory requirements, providing stability amidst market volatilities. The decision to defer the dividend was a precautionary measure to ensure financial resilience in the face of potential future challenges. While some companies are turning to shareholders for capital support, Old Mutual's robust balance sheet and capitalization levels offer a sense of confidence and stability in uncertain times. Despite the current hardships, Old Mutual remains dedicated to navigating through the storm and emerging stronger on the other side.