A profit rise of 41% was reported by Old Mutual on Tuesday, but the insurer’s shares fell more than 2% as it raised provisions for the higher-than-expected claims linked to COVID-19 deaths.
Earnings per share, which is South Africa’s main measure of profit, rose from 116.1 cents to 163.8 cents last year.
The company’s basic earnings per share were 151.3 cents, compared with a loss last year, as Old Mutual recovered from the pandemic, although the virus is still causing mortality claims.
“I am proud and very pleased with the resilience and agility we demonstrated,” CEO Iain Williamson said in a statement, adding this resulted in a strong recovery in sales and earnings.
Despite excess death claims of 6.8 billion rand, its operating profit increased more than twofold to 4.38 billion rand ($289.98 million).
Old Mutal shares climbed off session lows to trade down 1.1% at 12.87 rand at 1006 GMT.
According to Williamson, the excess deaths from COVID-19 are likely to continue for the next few years, but they should decline over time unless a more severe variant regains dominance.
As these claims once again exceeded the insurer’s expectations, it had to raise provisions by 2.2 billion rand in the second half of the year.
In contrast to rivals, Old Mutual has repeatedly had to top up its provisions as pandemic-related claims increased.
It declared a final dividend of 51 cents per share.
Old Mutual is currently holding 2.9 billion rand in reserves for future waves of infections. However, said provisions may need to be raised again in the event of new mutations or if the benefits of vaccination prove to be too optimistic.