Old Mutual predicts tough macro-economic environment to persist

Johannesburg Stock Exchange (ZSE) listed financial services group, Old Mutual Limited, says the obtaining challenging macro-economic environment in its markets is likely to persist, which will affect its customers and business.

According to the financial services giant, economic activity continues to be hampered by significant interest rate increases as central banks attempt to combat rising inflation caused by among other things the war in Ukraine.

This also comes as severe Covid‐19 lockdowns in China dampened growth in 2022.

For the South African market, load shedding has been a major challenge to economic activity grounding businesses to their knees impacting crop production, food prices, shortages of certain food stuffs and dampen economic growth.

“The macro‐economic environment in our markets is expected to remain challenging, which will continue to exacerbate financial pressure on our customers,” said chief executive officer (CEO) Iain Williamson in an update for the year to December 31, 2022.

The group is, however, focused on recovery and driving sales, despite the headwinds.

“We remain focused on driving sales volumes and profitable sales mix to improve market share growth in our segments. Despite the challenging headwinds, we are through our recovery phase and have largely delivered on our medium‐ term targets one year ahead of schedule,” said Williamson.

During the FY22, the value of new business grew by 16 percent due to strong sales growth in Mass and Foundation Cluster as well as a change in mix towards higher margin business in Mass and Foundation Cluster and Old Mutual Corporate.

The value of new business margin of 2,2 percent remains within its medium‐term target range of 2 percent to 3 percent.

Gross flows declined by 9 percent due to the prior year including large transactions in Old Mutual Investments and Old Mutual Corporate, which did not repeat in the current year.

The Group reported negative net client cash flow for the year. This was primarily due to the decline in gross flows combined with large disinvestments and terminations in Wealth Management and Old Mutual Investments respectively.

“We are confident that the overall health of our pipeline will support improvements in net client cash flow. Our funds under management of R1,2 trillion declined by 4 percent due to weaker market performance in South Africa and globally,” said Williamson.

The group return on net asset value improved to 11,1 percent due to strong growth in earnings and a lower average adjusted IFRS equity base, resulting from the unbundling of 12,2 percent of the group’s stake in Nedbank in 2021, thus delivering on our promise to simplify the group’s capital structure and provide a substantial return of capital to our shareholders.-ebusinessweekly