Old Mutual reports 2% rise in equity value per share for 2025

Adjusted headline earnings rose 24% to R8.3bn and group equity value per share increased 2% to R19.80 for the year ended Dec 31, 2025. Final dividend of 56c (total 93c, +8% y/y) and R700m completed of a R3bn buyback (R2.3bn still committed) as discretionary capital nearly doubled to R6.1bn. Value of new business fell 52% to R850m (VNB margin 1.2% from 2.5%) due to strengthened persistency assumptions and weaker annuity/retirement sales, while shareholder solvency stood at 162% and RoNAV was 15.2%.

Analysis

Old Mutual’s report should be read as a capital-allocation story more than a pure life-insurance earnings miss. The firm’s balance-sheet buffer and growing discretionary capital create optionality to accelerate buybacks or deploy into higher-return M&A, which tends to compress free float and supports per-share metrics even if new-business economics are soft. Insurer divisions showing better underwriting economics point to differentiated pricing power in non-life lines — a structural advantage versus peers that remain life-heavy and distribution-dependent.

Primary tail risks live in emerging-market currency and persistency dynamics rather than core South African macro: translation swings and localized liquidity squeezes can produce outsized earnings volatility from relatively small exposure pockets. Reserve shocks from third-party structures and one-off provisions are classic catalytic events — they crystallize quickly (days-weeks) and can force conservative management actions (capital conservation or delayed buybacks) over the next 3–12 months. Regulatory scrutiny of insurer capital returns in a higher-rate, volatile EM backdrop is a medium-term reversal risk.

The market is likely treating the value-of-new-business drop as permanent franchise decay; that’s a blunt read. Distribution mix and persistency experience can normalize within 12–24 months with focused sales-channel fixes and pricing resets, unlocking margin recovery without needing higher top-line growth. If management converts discretionary capital into sustained buybacks or accretive bolt-ons, re-rating upside is concentrated in the next 6–12 months as EPS and ROE trajectories become clearer.

Short-term monitoring: pace of further capital returns, quarterly persistency prints, and Malawi/other EM currency flows. A sequence of normalized persistency metrics or an announced acceleration of repurchases are asymmetric positive catalysts; conversely, fresh reserve hits or widening currency-implied spreads are high-probability downside triggers over the next 90 days.

Key Decisions for Investors

• Long OMU (Old Mutual, JSE:OMU) with downside protection — buy equity and buy a 12-month 10–15% OTM put (or put spread) to cap loss; target 20–35% upside if buyback acceleration + persistency normalization materialize within 6–12 months, max loss = premium paid.
• Pair trade: long OMU / short SLM (Sanlam, JSE:SLM) over 3–12 months — thesis: OMU has faster optionality to return capital and a non-life underwriting cushion while SLM is more exposed to life VNB deterioration; target relative performance >10% with stop if OMU underperforms SLM by 8% in 60 days.
• Long JSE-listed specialty insurers (e.g., SNT/Santam, JSE:SNT) on a 6–12 month horizon — play insurers with pricing power benefiting from hardening commercial lines; position size 3–5% portfolio, take profits if outperformance exceeds 25% or market-implied loss ratios revert.
• Hedge EM currency/translation risk: buy 3–6 month USDZAR implied volatility or purchase ZAR put options sized to cover FX translation of OMU net asset exposure; this reduces tail risk from sudden EM FX shocks at modest cost.