Our opinion on the current state of OMU

Old Mutual (OMU) is a premium African financial services group that offers a broad spectrum of financial solutions to retail and corporate customers across key market segments in seventeen countries. Old Mutual's primary operations are in South Africa and the rest of Africa, and it has niche businesses in Latin America and Asia. This company is what is left after Quilter, Brightsphere and most of Nedbank were unbundled from the original Old Mutual Plc which was listed on the London Stock Exchange. Some estimates indicate that Old Mutual is about 30% below the company's embedded value. Currently, the company has about R1 trillion under management.

A large part of its loss in the period was the R8bn write-down in its investment in Nedbank which is now recovering. The company unbundled 62m Nedbank shares into the hands of shareholders worth about R10.4bn in the ratio of 1.32 Nedbank shares for every one hundred Old Mutual shares held. Obviously, insurers like OMU are vulnerable to the impact of the pandemic and the company announced a R2bn increase in its provisions in this regard.

In its financials for the six months to 30th June 2023, the company reported headline earnings per share (HEPS) down 8% and group equity value (net asset value) up 3% at 1880.6c per share. The value of new business rose by 2.6% and gross written premiums increased by 16%. The company said, "Sales grew by 14% across our segments driven by improved productivity levels, which contributed to strong growth in the value of new business."

In a voluntary update for the 3 months to 30th September 2023, the company reported Life APE sales up 4% and loan and advances up 2%. Gross written premiums increased 15%. The company said, "Excluding China, Life APE sales recorded strong growth of 13% from the nine months ended 30 September 2022 (the "prior period")."

In a trading statement for the year to 31st December 2023, the company estimated that adjusted HEPS would rise by between 14% and 34%. The company said, "Old Mutual recorded robust results from operations ("RFO") growth due to strong operational performance underpinned by exceptional growth in new business and value of new business as we continue to gain market share across our segments."

On a PE of 10.08 and a dividend yield (DY) of 5.44%, we see this blue-chip share as relatively cheap now. Technically, the share has been falling since October 2021. Our advice was to wait for a clear break above the downward trendline - which came on 10th November 2022 at 1097c. Since then, the share has moved up to 1221c.