Old Mutual profits up 58%

Diversified financial services provider, Old Mutual Namibia has recorded a 57.5% jump in pre-tax adjusted operating profit to N$449 million for the 2012 financial year.
Managing Director for Old Mutual Africa Operations, Johannes !Gawaxab attributed the big jump in profits to improved sales in both non-life sales (21%) and life sales (4%) as well as the positive investment returns in the company’s fund management operations.
Non-life sales increased by 21% to end the year at N$5.46 billion compared to N$4.52 billion in 2011 while total funds under management increased 22% to N$26.6 billion.
In an interview with the Economist, !Gawaxab said: “The equity markets have been doing very well and we had very good operational efficiencies in the business and there were a couple of once-offs in terms of the experience variances; less people died than we had forecast.”
In the period under review, Old Mutual recorded a return on capital of 49% up from 37% the previous year despite expenses increasing 13% to N$550 million. !Gawaxab explained the increase in expenses: “That’s basically more commission expenses. If sales are getting more, you pay more commission; if sales are doing well, your commission expenses are going to increase. The core expenses were very much inflationary increases and the big jump in increases is very much a function of an increase in sales.”
While the Namibian operations for the international financial services group have been profitable, the Old Mutual supremo said the company has experienced challenges of economies of scale in the local operating environment.
“You have in other jurisdictions millions and millions of customers and in our case we have about 260,000 customers. So although it is a profitable operation, the economies of scale could be much better,” !Gawaxab said.
Scarcity of insurance skills and top leadership skills have also hampered the growth of the business as has the high unemployment rate which, !Gawaxab said, affects the business’ client base.
Going forward the Africa Operations MD said he expects the company to go from strength to strength.“It is a very well run organization; it is well positioned to benefit from economic growth; it is a business that over the next couple of years is probably going to become one of THE businesss in the country,” he said.