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Old Mutual receives more than 2 200 flood claims

Old Mutual Insure (OMI) has received more than 2 200 claims related to the floods in KwaZulu-Natal in April.

In a trading update published on 26 May, Old Mutual said reinsurance agreements would reduce the short-term insurer’s portion of the gross claims, and it expected the net impact on OMI to be between R100 million and R150m.

“OMI remains well capitalised, and all valid claims received on our policies will be settled,” Old Mutual said.

In April, OMI said most of the claims related to homeowner, motor and commercial policies, as well as speciality cover on factories and equipment.

According to the trading update, gross written premiums grew by 8% to R5.4bn in the first quarter of this year. Old Mutual attributed this largely to higher renewal rates and business acquisitions in the corporate and retail channels in Kenya and Uganda, as well as higher premiums in OMI.

Higher life insurance sales

The update shows that the group is selling more life insurance compared to the first quarter of last year.

Life annual premium equivalent sales were up 19% to R2.890bn compared to the March 2021 quarter.

Old Mutual said this was driven by strong risk sales in Mass and Foundation Cluster and improved savings and funeral sales in Personal Finance and Wealth Management.

Group risk sales in Old Mutual Corporate were 79% higher compared to the prior year because of “substantial deals” secured in the quarter.

However, single-premium pre-retirement sales declined from the prior year.

Life insurance sales in Rest of Africa jumped 62% because of improved corporate volumes in Namibia, Malawi and East Africa.

Sales growth of 77% was achieved in China, largely through the promotion of savings products in the broker channels.

The value of new business (VNB) improved by 53% to R464m because of strong growth in issued sales in the Mass and Foundation Cluster and higher corporate business in Rest of Africa.

The VNB in Personal Finance declined due to a methodology change at the end of 2021 and a shift in the sales mix.

The VNB margin of 2.8% was at the upper end of Old Mutual’s target range of 2% to 3%.

Net outflows increase

Gross flows decreased by 9% to R40.1bn because of lower asset management flows in Old Mutual Investments. This was largely due to the non-repeat of large new mandates in the prior year.

Old Mutual Corporate saw a decline in single- and recurring-premium flows, primarily due to Superfund client liquidations and lower volumes. These were partially offset by higher flows in the asset management business in Namibia and in the life business in East Africa.

Net client cash outflows increased by 19% to R5bn, impacted by the decline in gross flows. Net client cash flows are the difference between money received from customers (via premiums, deposits and investments) and money given back to them in the form of claims, surrenders and maturities.

Funds under management decreased by 3% to R1.2bn, which Old Mutual attributed to market movements and the strong rand, which reduced the value of funds managed offshore.

In the lending and loan business, loans and advances fell 2% to R18.4bn, driven by lower disbursements in the Rest of Africa, while activity in the Mass and Foundation Cluster was flat.

Old Mutual said the Rest of Africa’s performance remained under pressure because of the tougher economic climate and increased competition.

Results from operations marginally better

Old Mutual said that results from operations for the quarter were marginally ahead of those in the prior year, mainly due to materially lower excess deaths in Personal Finance.

In the first quarter of 2021, Old Mutual recorded significant excess deaths in Personal Finance, which were largely offset by provision releases.

The improved mortality in Personal Finance were partially offset by lower underwriting results in OMI and Old Mutual Corporate, as well as an increase in expenses because of investments in digitalisation and “innovation initiatives”.

Covid provisions ‘more than adequate’

The group said it has not had to raise additional Covid-19 provisions.

“Covid-19 impacts were better than our expectations, with existing provisions more than sufficient given the experience in the first quarter of 2022. We continue to monitor experience for the second quarter across our markets.”

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