South African insurer Old Mutual Ltd has reported that while higher interest rates have brought some benefits, they have also had a significant impact on customers, leading to a net negative effect. The company expects the pressure from tightening monetary policy to continue until it stabilizes in 2024. Old Mutual CEO Iain Williamson stated that although the higher interest rates allowed for better returns on shareholder capital, the economic policy pressures have had a substantial negative impact on consumers.
Old Mutual, like other insurers in South Africa, typically benefits from a higher interest rate environment, as it results in better returns on the investment of premiums collected from clients. However, the company has also observed increased disinvestments on savings and investments, with customers choosing to fund their liquidity needs.
The South African Reserve Bank has maintained the country’s main interest rate, following a series of 10 consecutive hikes aimed at controlling rising inflation. Williamson expressed optimism that the situation would likely improve into the next year.
Despite the challenges, Old Mutual declared an interim dividend of 32 cents per share, representing a 28% increase year-on-year, even as it posted an 8% decline in half-year profit. Following the announcement, the company’s shares experienced a slight drop of about 0.9%.