Equity investments gains drive Old Mutual net earnings

OLD Mutual Zimbabwe posted a 614% increase in profit after tax to $89,4 million for the half year ended June 30, 2017 buoyed by a strong performance in equity investments.

BY TATIRA ZWINOIRA

Old Mutual chief executive officer, Jonas Mushosho making a presentation at the company’s analyst briefing held in Harare on Wednesday

Old Mutual chief executive officer, Jonas Mushosho making a presentation at the company’s analyst briefing held in Harare on Wednesday

In the same period last year, the group posted an after tax profit of $12,5 million.

In a statement accompanying Old Mutual Zimbabwe’s financial results for the half-year ended June 30, board chairman, Johannes Gawaxab said the increase in the profit after tax was partly due to a strong performance of their investments in the stock market.

“This was driven by a good operating performance, as already reported, as well as the strong performance of the stock market currently being experienced in 2017, which has led to a significant increase in unrealised investment gains compared to the same period in 2016,” he said.

“Adjusted operating profit, which highlights the performance of the core business operations, was $36,8 million, which is a growth of 11% on 2016, buoyed by life assurance and asset management profits. Life profits were driven significantly by improved risk profits as a result of an improved claims ratio.

Gawaxab said capital charges on funds administered “increased on the back of a higher asset base following the performance of the ZSE”.

The asset management business experienced higher fee income in the period under review than in the prior year due to the recovery of the stock market, he said.

Old Mutual Zimbabwe group CEO, Jonas Mushosho told NewsDay at the release of the company’s results on Wednesday that the positive results were due to an increase in equity prices of their investments on the stock market.

“So, this time last year, equities were down and they are significantly up this year, so you have this massive change in results and that is why when we report we actually do adjusted operating profit because we take away this short-term fluctuations and report on a long term return,” he said.

“So, it is equities [listed equities], property, alternative investments and today we have shared with you, a typical example of these alternative investments like this hydro power station in Kupinga. We have alternative investments types that we have done, but we felt this was very special for us to share with you.”

Old Mutual Zimbabwe reported total assets increased by 10% to $2,39 billion, mainly due to the growth in investments and securities from a 2016 comparative figure of $2,16 billion, while total liabilities grew by 8%.

Old Mutual Zimbabwe investment group managing director, Marjorie Mayida said they made moves for stocks in Econet, Delta, Seedco, Innscor, British American Tobacco, Hippo Valley and OK Zimbabwe.

Investment returns was up 987% to $216,4 million from a loss making position of $24,4 million.

The emerging inflationary pressures, concerns over the sustainability of the budget deficit, coupled with low interest rates, injection of bond notes are discouraging investors from holding monetary assets pushing them to real assets such as equities.

The move has resulted in a strong performance on the Zimbabwe Stock Exchange.