Old Mutual Holdings Plc has announced a Sh249 million net profit in the half-year period to June 2024, driven by lower finance costs and a reduced tax burden.
This is the insurer’s first half-year profit since 2022 when it made a net profit of Sh252 million, and marks a significant turnaround from a net loss of Sh348 million it reported in the six months to June 2023.
“The improvement is due to significant reduction in finance costs, which have reduced from Sh1.8 billion to Sh529 million following the conversion of the shareholder borrowing to equity in 2023,” said Old Mutual.
Last year, Old Mutual East Africa Holdings Group Limited, one of the insurer’s main shareholders, converted a dollar-denominated loan of $48,183,511 (Sh6.2 billion at current exchange rates) and a local currency loan of Sh1.927 billion into equity.
In turn, the firm received 1.754 billion preference shares of Sh5 each with a total valuation of Sh8.77 billion.
“As at the time of this publication, the conversion is pending approval by the National Treasury and is therefore still classified as capital awaiting allotment,” said Old Mutual in a notice on Friday.
Old Mutual’s earnings also benefited from a change in the effective tax rate from 150 percent last year to 70 percent.
While the insurer’s insurance revenue rose by seven percent to Sh16.8 billion from Sh15.7 billion, its operating profits fell by 27 percent to Sh1.6 billion from Sh2.2 billion.
The firm’s operations in Kenya were hard hit by the El Nino floods, which increased claims. Further, its reinsurance expenses jumped to Sh1.98 billion up from Sh357 million, which it has attributed to its operations in Uganda.
“(This was) due to lower insurance service results, driven by higher medical and flooding claims in Kenya and higher reinsurance expense in our Uganda general business,” it said.
As was the case last year, Old Mutual shareholders will not receive an interim dividend. The company paid a final dividend of 81 cents last year after narrowing its loss for the full year to December 2023 to Sh114 million up from a loss of Sh2.2 billion in the previous year.
Old Mutual is also facing a lawsuit from shareholder Joel Kibe, who has sued the insurer and is demanding to be bought out at a price likely to exceed Sh1 billion.
The businessman is the sixth largest shareholder in Old Mutual, having bought 1.54 million shares in the insurer between 2014 and 2015 for Sh290.9 million.
In his suit at the Nairobi High Court, Mr Kibe said that the shareholder loans, which are set to be converted into equity, will dilute small investors.
“We also acknowledge receipt of a court order suspending the allotment pending the outcome of the court process,” the insurer said.
Old Mutual also announced that the disposal of its Tanzanian subsidiary, UAP Insurance Tanzania, was completed on August 1, 2024. The insurer sold the unit for Sh73.5 million.
