Reuters is reporting that Old Mutual has issued a statement that highlights the effects of CoronaVirus on the insurance sector. Although the eventual claims bill is a matter of speculation right now, the one thing everyone is certain of is that profits will take a hit this year for many insurers and underwriters. Staff at the SA based insurer are taking measures to contain the virus after one employee tested psitive, according to local media reports.
Old Mutual said full-year adjusted profit rose 7%, versus the already flagged expected increase of up to 9% – which it attributed mostly to higher returns on invested capital due to an improved market, as opposed to performance.
Old Mutual’s results from operations – its measure of operating profit – fell 2%, verses a potential decline of as much as 5% flagged in a trading statement earlier in March.
The insurer pointed to economic deterioration in its home market, by far its largest and which tipped into recession this year. Many of its markets outside of South Africa also suffered. The South African insurer also spent time and money on fighting a high profile lagal battle after parting ways with its CEO last year.
The spread of coronavirus has caused disruption in global equity markets, and as much of Old Mutual’s customer base is in Africa, the effects of a pandemic on a continent with limited helathcare resources could be profound. There may well be further intervention by the IMF later this year, depending on how Covid-19 spreads across Africa.
IMF SUPPORT FOR COUNTRIES LIKE SOUTH AFRICA HIGHLY LIKELY
Earlier in March the IMF announced an initial $50 billion liquidity package to support countries affected by Corona Virus. Undoubtedly there is more to come, with the IMF noting on March 4th that;
“Under any scenario, global growth in 2020 will drop below last year’s level. How far it will fall, and for how long, is difficult to predict, and would depend on the epidemic, but also on the timeliness and effectiveness of our actions.
This is particularly challenging for countries with weaker health systems and response capacity—calling for a global coordination mechanism to accelerate the recovery of demand and supply.”