OM projects gloomy Zim outlook

HARARE - Insurance giant Old Mutual plc (OM) says its Zimbabwean prospects are subdued due to the country’s economic downturn.

“Zimbabwean prospects are subdued, but elsewhere in Africa we see attractive opportunities to grow our business through both organic and also inorganic activity,” the group said in financials for the half year to June 2014.

The group said it continues to look for appropriate investment opportunities in the rest of Africa.

This comes as Zimbabwe recently revised its 2014 economic growth target from 6,1 percent to 3,1 percent on the back of depressed economic activity.

Finance minister Patrick Chinamasa said the downward revision reflected subdued business and investment confidence, an acute liquidity crisis and subdued international prices for major exports.

The country’s slowing gross domestic product growth, rising inflation, unemployment and the financial pressure on consumers all weigh on the insurance sector’s operating environment.

Some local insurance industry players Zimbabweans now view insurance as a luxury due to low disposable incomes.

Meanwhile, OM recorded a 17,5 percent slump in revenue for the period under review as South Africa (SA)’s slowing economic growth affected premiums, making operations outside South Africa important to the group.

The London-and Johannesburg-listed financial services firm said the rand weakened four percent from the start of the year which affected business.

However, the revenue slump did not affect operating profit, at £761 million; which was 17 percent higher on a constant currency basis but, was 5 percent lower in reported currency.

“We expect the external conditions for our emerging markets businesses to continue to be challenging in the next six months, particularly given the lower GDP growth expectation in South Africa.

“We will focus on what we do best: meeting the needs of our customers through innovative, attractively priced and transparent investment, savings, insurance and banking products as well as continually improving the operating efficiencies of our business,” said Julian Roberts OM group chief executive.

OM reduced expenses by 16,4 percent to £7,4 billion.

Turnover slumped from £9,6 billion to £8 billion.

Earnings per share based on profit from continuing operations was down 49,4 percent to £4,5 as the group declared a interim dividend of £2,45 per share.

Apart from Zimbabwe and SA, the rest of the continent is showing “positive trends” including high GDP growth and robust domestic demand.

Contribution from OM’s rest-of-Africa business is still very small, at just four percent of the group’s adjusted operating profit for the period under review.

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