Old Mutual Holdings PLC posted a 216% growth in profit before tax in the year ended December 31st, 2022, to close at a profit before tax of Kes 202 million, driven by solid topline growth and higher investment income.
The record improvement is a recovery from a loss before taxes of Kes175 million registered during a similar review period in 2021.
This growth trickles down from the significant improvement of 47% in operating profits before finance costs from Kes 1.2 billion in 2021 to Kes 1.8 billion in 2022, a Kes 600 million improvement in operating profits. However, the smaller improvement in profits before tax when compared to operating profits is due to increased financing costs on both external and internal debts as interest rates increased and the Kenya Shilling weakened against the US Dollar.
Giving his remarks on the Group’s performance, Old Mutual Group Chief Executive Officer Arthur Oginga said, “The performance during 2022 is a significant recovery from what we recorded in 2021. This is a testament to our team’s hard work and dedication and demonstrates our unwavering commitment to our clients and stakeholders. Despite the challenges posed since the pandemic, we have focused on delivering exceptional service and value to our customers. We are confident that our continued efforts to innovate and adapt to the market’s evolving needs will enable us to sustain this positive momentum and drive long-term growth for our Old Mutual”.
Besides the gross income increase, Old Mutual posted a 15% increase in Net earned premiums to Kes.23 billion, while the Net investment income was up by 14% to Kes 5.24 billion, driven by higher interest rates and improved investment balances on the back of solid topline growth and disciplined debtor management. Gross written premiums were up 20%, driven by the short-term insurance business, having sustained the strong growth recorded in 2021.
The improvements were, however, partly offset by increased claim costs, higher operating expenses, and higher finance costs. For Instance, operating expenses were up 20% compared to 2021. Marketing and publicity to support the rebranding exercise in Kenya contributed to some of the increase in expenses, incremental software expenses and premium taxes related to the growth in revenues, USD-denominated cost growth on the back of currency depreciation, and higher staff-related costs due to recruitment of critical positions that were vacant in the prior year, and general inflationary growth.
Looking into 2023, old Mutual predicts a challenging operating environment across East Africa, with rising inflation and interest rates expected to sustain in the first half of 2023.
“This will pressure disposable household incomes and thus impact topline growth in some of our business segments. In our core Kenya market, fiscal pressures due to significant debt repayments are expected to lead to an increase in taxation for both businesses and individuals, resulting in reduced spending and thus lower economic growth,” said Oginga
For South Sudan, the macroeconomic environment during the review period remained mainly unstable due to the country’s unstable political environment. The outlook, while positive, has some risks due to the political climate.
The outlook for the other East African countries, Uganda, Rwanda, and Tanzania, is predicted to remain positive due to the resumption of economic activity, improved performance of the tourism sector, and a slowdown in inflation.