Old Mutual Holdings PLC posted a 216 per cent growth in profit before tax in the year ended December 31, 2022, to close at a profit before tax of Sh202 million, driven by solid top-line growth and higher investment income.
The record improvement is a recovery from a loss before taxes of Sh175 million registered during a similar review period in 2021.
This growth trickles down from the significant improvement of 47 per cent in operating profits before finance costs from Sh1.2 billion in 2021 to Sh1.8 billion in 2022, a Sh600 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.
Old Mutual Group CEO Arthur Oginga says the performance in the period under review is a significant recovery from what was corded in 2021.
"This is a testament to our team hard work and dedication which demonstrates our unwavering commitment to our clients and stakeholders,'' Odinga said.
Besides the gross income increase, Old Mutual posted a 15 per cent increase in net earned premiums to Sh23 billion, while the net investment income was up by 14 per cent to Sh5.24 billion, driven by higher interest rates and improved investment balances on the back of solid top-line growth and disciplined debtor management.
Gross written premiums were up 20 per cent, 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 per cent 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, dollar-denominated cost growth and higher staff-related costs.
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,'' the financial service firm said.
Controlled Disclosure repayments are expected to lead to an increase in taxation for both businesses and individuals, resulting in reduced spending and thus lower economic growth,'' Odinga said.
The outlook, while positive, has some risks due to the political climate.
It forecasts other East African countries, Uganda, Rwanda, and Tanzania, to remain positive due to the resumption of economic activity, improved performance of the tourism sector, and a slowdown in inflation.
