Insurance group Old Mutual has warned that profits will drop by more than a fifth in its six months to June due to the Covid-19 pandemic, with the group also forced to step in to limit losses for clients on some of its investment products.

Old Mutual warned on Thursday that Covid-19 was weighing on its ability to sell new products, with many advisers unable to work due to the partial closure of its branch network and lack of access to customer’s homes and workplaces.

Headline earnings per share (Heps) for the six months to end-June are likely to be at least 20% lower than the 128.1c reported previously, the group said.

Heps is a widely used profit measure in SA that strips out one-off items to give a better indication of the underlying performance of a business.

Old Mutual also said it its Absolute Growth Portfolios had seen a negative payment — decreasing the value of clients' investments — for the first time as Covid-19 battered global investment markets in March.

The group used its discretion to limit the loss to 5%, when it would have been 15%.

“The consumer will remain under significant pressure, with increased levels of unemployment expected,” the group said.

This is likely to reduce disposable income, resulting in reduced sales and higher credit losses on the group’s loan book, the statement read.

In lunchtime trade on Thursday, Old Mutual's share price was down 3.23% to R12.58, having fallen 36% so far in 2020.

Update: May 28 2020
This article has been updated with changes throughout and share price information


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