Old Mutual CEO explains decision to pay dividend despite COVID-19 challenges

Old Mutual, one of South Africa's largest insurance companies, recently released their financial results, revealing a 51 per cent drop in headline earnings attributed to the impact of the Covid-19 pandemic on sales. Despite this significant decline, the company announced a dividend payout of 35 cents per ordinary share, a decision that has sparked debate among stakeholders. CEO Iain Williamson defended the dividend payment during an interview with CNBC Africa, emphasizing the company's robust balance sheet and liquidity position. Williamson stressed that while the pandemic had indeed affected their earnings in 2020, the company's financial stability enabled them to proceed with the dividend payout. One of the major challenges faced by Old Mutual was the increase in mortality claims due to Covid-19. Williamson explained that the company had proactively accounted for both the claims incurred in 2020 and provisions for expected claims in 2021, including potential future waves of the virus. He highlighted that the company had already paid out significant amounts in claims related to the pandemic, indicating a proactive approach to managing their financial obligations amidst uncertain times. Addressing concerns about business interruption claims, Williamson clarified that Old Mutual had been making interim payments to small businesses to support their cash flow during the crisis. While larger businesses were also eligible for claims, the assessment process was more complex due to the nature of calculating loss of earnings over a specific period. Despite the challenges, Old Mutual remained committed to meeting valid claims and supporting businesses through these difficult times. Looking towards the future, Williamson outlined Old Mutual's long-term plans and strategies for adapting to the changing business landscape. The company acknowledged the need to enhance digital capabilities and optimize workforce productivity in a post-pandemic environment. Williamson highlighted the transition to a hybrid working model, combining remote work with office-based collaboration to balance operational efficiency and employee well-being. In response to a question about South Africa's GDP performance, Williamson expressed optimism about the country's economic recovery, projecting a growth of around three and a half percent for the current year. He underscored Old Mutual's confidence in its ability to navigate competitive challenges and drive productivity enhancements. Williamson credited the company's resilient performance in recent quarters and anticipated a continued recovery trajectory moving forward. Overall, Old Mutual's decision to maintain dividend payments amidst the Covid-19 challenges reflects a strategic approach to balancing financial stability with shareholder expectations. The company's proactive measures in managing claims, optimizing workforce dynamics, and positioning for future growth signal resilience and adaptability in a rapidly evolving business landscape.