Old Mutual expects to miss its growth target of two percentage points above nominal GDP growth in results from operations. Picture: BLOOMBERG/SIMON DAWSON
Old Mutual expects to miss its growth target of two percentage points above nominal GDP growth in results from operations. Picture: BLOOMBERG/SIMON DAWSON

Old Mutual, SA’s second-largest insurer by market value, will miss 2020 growth targets, citing the coronavirus outbreak, which has forced it into restricting business travel.

The company’s share price fell 16.14% to R12.05 on Monday, in line with the broader stock market as investors worldwide remained worried the pandemic will trigger a global recession even as central banks in the US, Europe and Asia pumped money into the system to cushion the blows.

Old Mutual said it expected to miss its growth target of two percentage points above nominal GDP growth in results from operations — a measure of the company’s underlying performance excluding items such as returns from invested capital and finance costs. "Given the anticipated disruption in global equity markets and significant downward pressure on GDP growth rates, we do not anticipate being able to achieve this target for the 2020 financial year," the insurer said.

In the year to end-December, Old Mutual reported a 2% decline to R8.97bn in results from operations. The drop in the bottom line comes in the year when the company has been in a public mudslinging match with former CEO Peter Moyo, whom it fired in June over an alleged conflict of interest and set off a lengthy court battle that barredit from filling Moyo’s position for months.

The company, which has since won the right to appoint a new CEO while it prepares to defend its decision to sack the former Vodacom executive, is also grappling with weak consumer confidence in an economy that slipped into its second recession in two years.

Diversified business

But Old Mutual, which operates in several other African countries and coronavirus-hit China, said that its diversified business would allow it to protect value for shareholders in tough times.

It said its business in China had seen an increase in demand for its services, which include life insurance and disability and critical illness cover.

"The other interesting outcome, as a consequence of the outbreak, is that customers are more aware of the need for our products. There’s been an increase in demand, which has been quite interesting to see," acting CEO Ian Williamson told Business Day.

Growth in demand, which the company did not specify, came via digital channels as face-to-face client interaction had been affected by the public health crisis, said Williamson, who has thrown his name into the hat for the role of CEO at the insurer.

"We have nine branches in China, one of which is in Wuhan. Of the nine, two have been completely closed since the Chinese New Year, effectively at the end of January, and the other seven have been operating under government guidelines in terms of how people work and how many people are in the office," Williamson said.

In a normal year, about one-third of Old Mutual’s business in the Asian country is through digital channels, said Williamson, But so far in 2020, this had been almost entirely digital, "with a few exceptions", he said.

Old Mutual, which expects the economy to grow 0.8% this year, said it was confident that its capital reserves would hold up in the current volatile environment.



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