South Africa-based life insurer Old Mutual Ltd (LSE:OMU) has cautioned about the impact of rising levels of Covid infections on its cash flow and reserves.
COVID-19 provisions were increased by R2bn (£100mln) at the end of 30 June 2021 to take into account the emerging expectations of wave 3 and 4 as well as potential future outbreaks, it said in a statement.
Mortality claims paid relating to COVID-19 in the life businesses are driving negative Net Client Cash Flows (NCCF) it added although this is being offset by inflows in Asset Management and Wealth businesses.
Old Mutual added its mortality experience through the Covid crisis has been worse than anticipated though the release of provisions has helped mitigate this.
Business interruption claims paid in the first half of the year were offset by the reserves raised at the end of 2020, added the statement, with a significant turnaround in the profitability in Credit Guarantee Insurance Corporation (CGIC) business as large COVID-19 related claims in the prior year did not repeat.
Headline earnings for the six months to end June 2021 are now expected in a range of R2.8bn-R3bn, with basic earning per share of 61.4c-74.3c.