Insurer Old Mutual, which has recently been beset by weak new business volumes and hefty business interruption claims as a result of the Covid-19 pandemic, says its successful raising of R2bn through a bond issuance is a sign of the underlying value of its business.

The group initially intended to raise R1.5bn in its bond issuance last week, but increased this to R2bn, after a “hugely positive response”, the group said in a statement.

The five-year bonds maturing November 12 2025 form part of Old Mutual’s R25bn multi-issuer note programme and will allow it to smooth its debt maturity profile and optimise its cost of capital by taking advantage of current lower interest rates.

“With this outcome, the group has effectively secured listed-debt financing at highly favourable rates despite the extremely difficult prevailing market conditions,” Old Mutual said.

Following this sale, Old Mutual’s multi-issuer note programme has issued a total of R7.25bn in debt, of which R6.75bn accrues to its SA life assurance business and R500m to its insurance arm, Old Mutual Insure. That leaves the group with a further R17.75bn in available debt from programme, which can be tapped to meet long-term growth and balance sheet requirements.  

“Staying true to the essence of our business, built over 175-years, Old Mutual continues to work tirelessly to deliver real value to investors with a sense of assuredness and calm, especially in the face of adverse market conditions,” CEO Iain Williamson said in a statement.  

Old Mutual had swung into a R5.6bn loss in its six months to end-June, from profit of R5.8bn previously, hit by low new business volumes and writedowns to its businesses.

Old Mutual shares fell 0.32% on Tuesday to R12.46, having fallen 36.6% so far in 2020. This gives the group a market capitalisation of R58.67bn.

Update: November 17 2020
This article has been updated with comment and information throughout.



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