Investors eye Old Mutual progress
Old Mutual investors will focus on progress made with the managed separation process
Insurer Old Mutual is expected to revise its outlook for the 2017 year on Friday, when it announces the group’s results for the six months to end-June.
On announcing its full-year results for 2016 in March, CEO Bruce Hemphill said its South African-based emerging markets business saw the economic outlook improving, but expected customers to remain under pressure. Banking subsidiary Nedbank would report diluted headline earnings in excess of nominal GDP in 2017.
"The investment markets globally as well as in SA have seen significant volatility and these conditions create headwinds for the insurance companies to grow new business volumes and fund-based fee income will also be under pressure," said Adrian Cloete, portfolio manager at PSG Wealth.
[Old Mutual] investors will be less preoccupied with the results, but more focused on the progress made with the managed separation process, as this has the greatest potential for unlocking value to shareholdersAdrian Cloete
Last week, Nedbank reported its first contraction in earnings since the global financial crisis as associate Ecobank Transnational weighed on earnings. Diluted headline earnings per share had fallen 3.7% to 1,078c, below SA’s first-quarter GDP contraction of 0.7%.
Old Mutual Emerging Markets’ performance is less clear, as it is one of the unlisted units of the group. But if competitors Sanlam and Liberty are anything to go by, it is in for a hard time in its largest segment.
In June, Sanlam said discretionary single-premium business in Sanlam Personal Finance’s mass-affluent segment suffered due to risk aversion in the uncertain political and economic environment. Sanlam Personal Finance’s new business fell 10% as a result.
Cloete said consensus expectations for Sanlam’s full year showed a 6% decline in headline earnings.
Liberty’s individual arrangements unit experienced a slight 3.6% increase in new business for the six months to June. Overall headline earnings across the group fell 15%, to R1.5bn.
"[Old Mutual] investors will be less preoccupied with the results, but more focused on the progress made with the managed separation process, as this has the greatest potential for unlocking value to shareholders," said Cloete.