Old Mutual is concerned about policy lapses
Old Mutual, the second-biggest life insurer in South Africa, is bracing for an increase rise in policy lapses as consumers take strain, Moneyweb reports. “It turns into two things for us: new business is harder to come by if people can’t afford it. Secondly – the bigger issue actually – is can people afford to repay their loans; can they afford to pay the premiums on their insurance policies? Those pressures are significant,” Old Mutual chief executive Iain Williamson told Moneyweb following the release of the group’s results for the year to 31 December 2022.
Despite reporting a 10% increase in headline earnings to R7.9 billion, Old Mutual said its retail customers continue to be affected by the challenging economic environment. And although mortality claims were significantly lower, helped by Covid-19 shifting from a pandemic to an endemic, the group saw significantly worse persistency in its Mass and Foundation Cluster.
Old Mutual grew gross written premiums by 12% to R22.3bn, and new life insurance sales by 10% to R12.5bn.
Real income growth was impacted by higher interest rates, inflationary pressures, and a slow recovery in employment following the pandemic, as well as the impact of the civil unrest in KwaZulu-Natal in July 2021. “This downward pressure on disposable income growth, combined with depressed confidence made it difficult for customers to maintain or increase their contributions to protection, savings and investment products,” the company said.
Old Mutual’s profits rise 10%
Old Mutual’s headline earnings rose 10% to R7.9 billion for the year to the end of December 2022, up from R7.2bn in the previous reporting period. Headline earnings per share also increased 10% to 180.1 cents per share, compared with 163.8c per share in the prior year.
The insurer benefited from lower mortality claims as the effects of the Covid-19 pandemic eased.
Results from operations almost doubled to R8.743bn, while the value of new business grew 16% to R1.465bn after an improved sales performance in its Mass and Foundation Cluster, as well as increased higher-margin business.
The Mass and Foundation Cluster saw an 11% drop in results from operations to R2.442bn.
Old Mutual Insure’s results from operations fell 9% to R495 million because of the impact of crime and the flooding in KwaZulu-Natal.
Old Mutual Corporate’s results from operations rose more than 100% to R1.978bn. The segment experienced lower preretirement and annuity sales, reflecting the difficult operating environment.
The results from operations of the business’s investment side increased 12% to R1.24bn. However, funds under management declined 4% to R1.2 trillion because of weaker financial markets, while the poor economic environment affected the ability of clients to maintain or increase savings.
Santam buys MTN’s device insurance book
Santam announced this week that it has agreed to buy MTN South Africa’s device insurance book for an undisclosed amount. MTN’s device insurance book has just over 400 000 policies, with annual gross written premiums of almost R400 million.
The transaction is subject to the fulfilment of various conditions, including regulatory approvals, which are expected to be fulfilled within the next 12 months. On 13 March, the Competition Commission approved the acquisition without any conditions.
The agreement follows the announcement in November 2022 of a separate deal between Sanlam and MTN Group that will see them jointly distribute insurance and investment products across Africa. Sanlam owns 62.3% of Santam, while MTN Group is the holding company that owns MTN SA.
RAF applies to Supreme Court over medical scheme claims ruling
The Road Accident Fund (RAF) has applied to the Supreme Court of Appeal for leave to appeal against a judgment indicting the RAF from implementing an internal directive to reject all claims for medical expenses where these expenses were paid by medical schemes, not by the claimants.
In January, the High Court dismissed the RAF’s application for leave to appeal.
Read: Ruling in dispute between Road Accident Fund and Discovery Health over claims
Meanwhile, Discovery Health has applied to the High Court to compel the enforcement of the unlawfulness of the RAF’s directive.
