World news – Old Mutual remains cautious about Covid-19

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The presentation of Old Mutual’s results for the year through December was noticeably gritty as management unpacked the effects of the Covid-19 pandemic and warned that the crisis may not be over.

Some key facts illustrated the impact of the pandemic. First, CEO Iain Williamson mentioned that Old Mutual paid unprecedented R13 billion life insurance claims during the year.

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Second, the life insurer identified more than R 6 billion in additional costs caused by the pandemic.

Williamson and CFO Casper Troskie told their audience that Old Mutual had performed well and operating income was only 14% lower – before taking the additional costs into account.

The effect of the separately identifiable direct Covid-19 items ultimately led to the adjusted headline result of 9.8 billion R2 in 2019 by 75% to less than 2.5 billion R2 in 2020 sank.

It was one of the most challenging years Old Mutual has ever faced, Williamson said. It was a time of extreme crises and insecurities that left no human life untouched.

« We experienced unprecedented volatility in local and global capital markets as lockdowns and travel restrictions affected economic growth locally and globally. » said Williamson.

Williamson referred to the high mortality rates published by the SA Medical Research Council (SAMRC). rather than deaths from Covid-19 infections? to illustrate the severity of the pandemic.

Overall mortality rate shows essentially higher than normal deaths from all reasons, including those related to the extremely difficult economic challenges posed by lockdowns.

Williamson pointed out that the SAMRC expects a further increase in excess mortality due to a third wave of Covid-19 infections and deaths. His estimate shows that the third wave could hit in winter and that the number of deaths could be higher than during the first wave.

The Old Mutual management team mentioned other concerns, such as the challenges of vaccine adoption, their effectiveness, uncertainty about duration of immunity and the possibility of more new variants of Covid.

Proof that the pandemic is still grave? Although life has returned to normal, with shorter curfews and few restrictions on the sale of alcohol, tobacco and T-shirts. This is because Old Mutual paid massive R1 9 billion deaths in January and February 2021.

This number suggests that the death toll in the new fiscal year could be as high as it will be in 2020 when the third wave of infections and deaths hits.

Old Mutual has prepared for this opportunity. The insurer increased the initial special reserves raised in mid-2020 and left around 2 billion R2 billion to cover unexpected events.

In addition to the R13 billion receivables paid in 2020, Old Mutual has provided financial assistance to customers, brokers, communities and employees. These included reduced premiums for policyholders, the provision of free insurance of R 4 billion for health care workers and interim payments for business interruption claims.

Read: Old Mutual Assure You That The Latest Loser In The Fight For Covid-19 (November 2020) Is « Tsunami ». for legal reasons insurers have to pay now (Jan 2021)

Old Mutual donated medical supplies, protective equipment and funding to frontline health workers and regional hospitals in African countries where the company operates.

We are also involved in a pipeline project to supply oxygen to Queen Elizabeth Central Hospital in Malawi. We are actively involved in Business For South Africa’s (B4SA) vaccination support program and will use our public voice in promoting safe vaccinations across the continent. says Williamson in his message to shareholders accompanying the results.

Like most companies, Old Mutual accelerated the development of its business towards a business model that is increasingly supported by new technologies.

« We have made good progress operationally and simplification remains a key to increasing efficiency across the company. » Williamson says, adding that the process began long before anyone even heard of Covid-19.

He notes that digital activation has resulted in approximately 15% of workloads being migrated to a cloud infrastructure so far and the process continuing.

« Digital offerings to improve the customer experience, which were already in development, were accelerated and introduced during the year so that we can meet customer needs remotely. » said Williamson.

In SA, Old Mutual introduced alternative direct digital channels such as email, USSD and WhatsApp to pay funeral claims and facilitate divestments, with their usage increasing significantly towards the end of the year and through 2021. Interestingly, an increase in usage is claimed. Artificial intelligence and robotic processing have improved the speed of claims authorization, with 80% of funeral claims being paid within four hours.

In the South and East African regions, Old Mutual introduced USSD capabilities and a Facebook Messenger chatbot to help clients open investment accounts, manage their accounts and request withdrawals.

Old Mutual noted the success of new websites and mobile applications providing access to its range of products by spearheading strong growth in active digital customer numbers. 406,000 active digital customers were reported, an increase of 50% over the previous year.

In addition, employees and some consultants could work remotely. A new secure digital platform enables consultants to conduct an online needs analysis, make recommendations, fill out personal information in advance, verify customer identity and store consulting documents securely in the cloud for easy access, according to Update. To date, more than 10,000 consultants have been accredited to use the new digital platform.

Williamson and Troskie reiterated that Old Mutual is financially strong enough to weather the crisis and ready to resume growth once the economy recovers.

These directors approved a final dividend of 35 cents (albeit much lower than the 75 cents in 2019) to add credibility to their demand.

Unfortunately, investors still seem to need a lot of patience. The share price is still less than half what it was at the beginning of 2019 (around R24), with the decline in Nedbank’s share price from R40 to R124 bearing much of the blame.
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Troskie found that Old Mutual Finance’s book value (mainly the Nedbank investment) had increased by 8.7 billion. R was written off. He says no further adjustments should be necessary, adding that Nedbank is currently trading at a discount to all measures of value.

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