Old Mutual expects third wave due to slow vaccine rollout, sets aside a fund to cover Covid-19 claims
HARARE, Financial services group Old Mutual expects a substantial drop in its full-year profit, after setting aside nearly R4bn worth of provisions to cover Covid-19-related claims.
Headline earnings per share (HEPS), the main profit measure in SA that excludes exceptional items, will drop by between 40% and 60% in the year to end-December, the company said in a statement on Monday.
The fallout from Covid-19 has been particularly felt among insurance companies as they set aside billions of rand worth of reserves to cover various Covid-19-related claims from their clients.
Old Mutual said actual claims in the second half of the year were higher and outpaced its initial provision of R1.3bn, with an acceleration in infection and excess mortality rates at the end of the fourth quarter.
Over the past week, Momentum Metropolitan and Liberty Holdings also noted the effect of excess death rates in their respective results, indicating that the second wave of the virus has been more deathly. The national Covid-19 death toll was 50,658 on Sunday night.
Old Mutual said there were expectations of a third wave, given the evidence of virus mutation, the slow pace of the vaccination rollout, upcoming public holidays and the winter season, hence the R3.9bn provision to cover potential claims.
“The impact of this has been in part mitigated by the release of discretionary reserves of R1.112bn related to mortality experience in the mass and foundation cluster.
“We continue to closely monitor claims experience in 2021 and have recorded approximately R1.9bn of Covid-19-related mortality claims for January and February of 2021,” Old Mutual said..Economic Times