Old Mutual takes a hit from the war in Iran

Old Mutual expects its operating results to grow strongly when it reports its interim financial performance on 8 September. 

The insurance group expects results from operations to rise by between 2% and 12%. Results from operations per share will increase by 6% to 16%. 

Old Mutual considers these the primary measures of operating business performance, as it strips out the impact of shareholder investment returns. 

This is the fair value gains or losses incurred when investing the insurance float generated by premiums. This is the money Old Mutual holds to pay out claims. 

The cash is typically invested in highly liquid fixed-income instruments and can be immensely profitable for insurers if market conditions are favourable. 

Thus, the investment performance of these funds does impact Old Mutual’s profitability. However, they do not reflect the business’s operational performance. 

In its trading statement, Old Mutual said the business’ operational performance was strong.

Life APE sales rose by 21%, driven by strong group risk and annuity sales in Old Mutual Corporate and higher living annuity and endowment sales in Wealth Management. 

This translated into strong gross inflows, which rose by 21% to R128.9 billion. This figure was partly boosted by the inclusion of 10X Investments, which Old Mutual acquired in 2025. 

Old Mutual Investment Group reported strong inflows, driven by improved activity from third-party clients across key investment offerings.

Net client cash flow improved, driven by the strong gross flows during the period and the non-repetition of low-margin indexation outflows that were reported in the prior period. 

Gross written premiums increased by 3%, supported by growth in Old Mutual Insure, partially offset by currency movements and lower renewals in the Africa Regions.

Crucially, the new business is profitable, with the margin rising to 1.4%. The value of new business surged by 32% to R569 million. 

However, when the impact of shareholder investment returns is included, Old Mutual’s financial performance looks markedly weaker. 

While the returns do not reflect the performance of the insurer’s operations, they do impact the bottom line and, in turn, its headline earnings calculations. 

And so, while operating results are expected to rise strongly, headline earnings will fall by 1% to 11%, and profit growth will be negative. 

The decrease in adjusted headline earnings was driven by lower shareholder investment returns compared to the prior period, Old Mutual said.

The shareholder portfolio’s performance tracked the Equity and Bond Indices over the period. 

This should be seen against the backdrop of sharp risk-off conditions driven by ongoing geopolitical conflicts in the Middle East, which have negatively impacted equity and bond performance, it said. 

Headline earnings and IFRS profits benefited from a strong performance in Zimbabwe, which is not included in adjusted headline earnings.

Old Mutual also said it continues to invest heavily in scaling its banking operations, which it expects to break even by 2028. 

The insurer has invested R3 billion in building out its banking capabilities so far and projects losses of R1.1 billion to R1.3 billion over the next two financial years.