Old Mutual First-Half Profit Rises 10% 

(Bloomberg) -- South African insurer Old Mutual Ltd. said first-half profit rose 10% from a year earlier as higher investment returns boosted earnings, offsetting tepid economic growth in its home market.

Adjusted earnings before one-time items increased to 5.2 billion rand ($342 million), the Johannesburg-based firm said in a statement on Monday. Results from operations increased 2%, while revenue from premium sales rose 4%. Net income fell 55% to 5.82 billion rand after gains from the disposal of assets a year earlier weren’t repeated and earnings from discontinued operations weren’t included, the company said.

Old Mutual’s target of expanding its results from operations at 2% above the compound annual growth rate of gross domestic product is going to be challenging to achieve over the next three years, Chief Financial Officer Casper Troskie said. Old Mutual has worked on getting “costs out of the business,” he said. The company is on course to meet cost-cutting targets by the end of this year to cope with the “lower-growth environment,” while also improving services and Old Mutual’s digital capabilities.

Key Insights

• The 174-year-old insurer is locked in a legal battle with its on-and-off Chief Executive Officer Peter Moyo, who was fired in June amid allegations that he failed to manage a potential conflict of interest related to his investment firm NMT Capital. Moyo was reinstated by a court but has been kept out of the office with Old Mutual’s board kicking back against his return. The parties are yet to resume arguments in Johannesburg.
• Beyond its boardroom squabbles, Old Mutual is battling to accelerate growth in operating results. The insurer’s retail consumers in South Africa have less to spend on the back of rising utility bills and taxes. They are also being hammered by the country’s persistently high jobless rate.
• Old Mutual’s clash with Moyo comes as the company pushes ahead with a plan to defend and grow its operations in its home market, while turning around its ailing businesses in East Africa. The company has a footprint spanning 13 African countries.

Market Reaction

• Old Mutual’s shares have slumped 19% this year, the second-worst performer on the five-member FTSE/JSE Africa Life Assurance Index.

Get More

• Read the statement
• More on Old Mutual’s fight with Peter Moyo
• How Old Mutual has struggled to grow results from operations

To contact the reporter on this story: Roxanne Henderson in Johannesburg at rhenderson56@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, Jacqueline Mackenzie

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