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COVID-19 – Impact on financial results

Over the last few weeks some of the major financial services companies released their results. How, if at all, have headline earnings been impacted because of the coronavirus pandemic and the associated lockdown?

Here is a summary of a few of the results:

Sanlam

Sanlam reported a resilient underlying operational performance and a healthy solvency position amidst the most challenging period faced by the Group in many decades, caused by the global coronavirus (COVID-19) pandemic. “General restrictions on face-to-face sales had a severe impact on new life (covered) business sales and the value of new covered business written (VNB). The impact on new business was particularly severe at the outset of the restrictions, but there has been a continued recovery as digital technology was rapidly adopted to allow for new business to be written,” Sanlam reported.

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Old Mutual

A difficult macro environment and significant market volatility because of the ongoing Covid-19 pandemic negatively impacted results. The Group has, however, maintained a strong balance sheet and capital position and remains optimistic about weathering the Covid-19 storm. Adjusted Headline Earnings for the period were down 67% to R1.7 billion, compared to R5.2 billion for the same period last year. “This was largely driven by much lower new business sales volumes as a result of the lockdown, lower average equity market levels across the board, as well as the raising of short-term provisions in anticipation of worsening mortality, morbidity and persistency expected in the second half of the year.”

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Momentum Metropolitan

Momentum Metropolitan’s new business volumes, as measured by the present value of new business premiums (PVNBP), declined by 10% to R50.5 billion. The Group’s headline earnings per share declined by 58% to 71.3 cents and earnings per share declined by 92% to 12.3 cents. Group’s CEO, Hillie Meyer, added that the Group is working hard to minimise the impact of the pandemic – not just on the company, but also on the economy and the country. “It will be speculative to provide firm guidance on our financial results for the next year, however, we will be disappointed if the Group does not improve materially on the current year’s results”.

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