Wrap Text
Voluntary Operating Update
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
ISIN: ZAE000255360
LEI: 213800MON84ZWWPQCN47
JSE Share Code: OMU
LSE Share Code: OMU
NSX Share Code: OMM
MSE Share Code: OMU
ZSE Share Code: OMU
("Old Mutual" or “Company” or “Group”)
Ref 25/21
23 November 2021
OLD MUTUAL VOLUNTARY OPERATING UPDATE FOR THE PERIOD ENDED 30 SEPTEMBER 2021
The global economy continues to demonstrate strong growth however the recovery
remains uneven due to large differences in vaccination rates between countries.
Although the investment markets where we operate continue to recover ahead of
pre-COVID-19 levels, the environment remains volatile as we navigate the
challenging impact of the pandemic.
Our South African retail segments, Mass and Foundation Cluster, Personal Finance
and Wealth Management continue to demonstrate recovery in productivity from the
low levels in the prior year driven by initiatives implemented by management
which have resulted in higher issued sales. Sales in Corporate remain subdued
with annuity quotes improving relative to 2020. Issued sales in Personal Finance
continue to be above 2019 levels with issued sales in other South African retail
segments remaining below 2019 levels due to the continued tough economic
environment.
Capital position
The solvency ratio for the Old Mutual Life Assurance Company South Africa for
the nine months ended 30 September 2021 was 225%, above our target range of 175%
- 210%. The increase in our solvency ratio from 206% as at 30 June 2021, was
largely driven by the impact of the issuance of R1.5bn subordinated debt and the
introduction of a collar structure on the majority of the retained Nedbank stake.
The Prudential Authority approved the unbundling of 12.2% of Nedbank held by Old
Mutual, which was implemented on 8 November 2021. This is expected to decrease
the Group solvency ratio by approximately 3 percentage points. We continue to
monitor the Group solvency ratio of 184% which remains strong relative to our
target range of 165% - 195%.
Financial performance for the period ended 30 September 2021
The table below sets out certain key performance indicators for the period ended
30 September 2021.
Key Performance Indicators 30 September 30 September % change
(R millions unless otherwise 2021 2020
indicated)
Life APE Sales 8 136 6 890 18%
Value of New Business (VNB) 1 099 274 Greater than
100%
Gross Flows 146 631 137 449 7%
Net Client Cash Flow (NCCF) (Rbn) (2,6) 3,6 Greater than
(100%)
Funds Under Management1 (FUM) (Rbn) 1 202,4 1 104,6 9%
Loans and Advances1 18 194 20 320 (10%)
Gross Written Premiums 15 103 14 093 7%
1Comparative amounts represent FY2020 balance sheet amounts.
Results from operations are above the prior year. This is driven mainly by
improved profits in Mass and Foundation Cluster resulting from strong risk sales
and improved credit experience due to a deliberate focus on tightening of credit
criteria and more selective offers to customers in Old Mutual Finance. The non-
repeat of significant mark to market losses that occurred in the prior year and
higher asset-based fees in Old Mutual Investments positively impacted profits.
The non-repeat of the significant level of COVID-19 business interruption and
rescue claims from the prior year as well as the release of Credit Guarantee
Insurance Corporation (CGIC) reserves in Old Mutual Insure further contributed
to improvement in profits. We remain on track to deliver on our R750 million
cost savings target by the end of 2022 through our South African insurance and
savings businesses, allowing us to further pursue our investment in innovation
and other initiatives.
During the year, our central costs increased largely due to the investment
towards digitalisation and innovation initiatives. In addition, lower rental
income received as our tenants continue to implement various working from home
initiatives for their employees had an adverse impact on our central costs.
Sales momentum has continued into Q3, compared to the same period in the prior
year, which was impacted by the lockdown period, with Life APE Sales up 18%.
Current year sales benefited from strong risk sales in Mass and Foundation
Cluster as productivity levels continue to gradually lift from prior year levels
as well as higher risk and guaranteed annuity sales in Personal Finance driven
by the recovery in single and recurring premium sales. Higher living annuity and
endowment sales in Wealth Management - with fixed bonds sales contributing
significantly - and higher risk sales in China further contributed to total sales
growth. These were partially offset by a decline in group risk and umbrella fund
sales in Corporate.
The significant growth in VNB was largely driven by increased sales volumes of
high margin products, the VNB margin of 2.3% is well within our medium-term
target range of 2.0% - 3.0%.
Gross flows are up 7% due to good flows from single premium annuity sales in
Personal Finance and strong flows in Wealth Management’s platform resulting from
improved rates on the fixed bond products. In addition, strong flows were secured
into our Liability Driven Investment solutions (LDI) in Old Mutual Investments.
These were partially offset by the non-repeat of significant inflows into our
Asset Management businesses in East Africa and Southern Africa.
Despite the increase in gross flows, negative NCCF were largely due to significant
volumes of mortality claims related to COVID-19 in our life businesses, higher
client disinvestments in Personal Finance and Wealth Management as well as large
client terminations in Corporate for the year to date. FUM increased largely due
to strong equity markets, despite negative NCCF.
The decline in Loans and advances was driven by the decline in disbursements due
to tightening of credit criteria in the prior year in Old Mutual Finance that
has resulted in better credit experience as we manage our risk appetite in the
current environment. In addition, reduced footfall in branches further impacted
new loans and advances in South Africa and Rest of Africa, which has not yet
fully recovered to pre-COVID-19 levels.
Strong growth in Gross Written Premiums was supported by growth experienced
across all lines of business except for the commercial and agricultural portfolio
in Old Mutual Insure, mainly driven by increased economic activity in the current
year and a 10% premium increase in the CGIC business. Good customer retention,
pleasing acquisition rates and economic activity as well as new business sales
contributed to growth in Gross Written Premium for Rest of Africa.
COVID-19 update
In our South African life businesses, provisions were raised at 30 June 2021
based on our own claims experience and South African Medical Research Council
(SAMRC) excess mortality data as well as an assumption for vaccination hesitancy.
The rate of vaccine hesitancy observed in South Africa has, however, been higher
than anticipated at the half year resulting in higher levels of claims. In our
Namibian life business, we have also experienced increased claims relative to
expectation as a result of the high infection rates in the country.
Our life businesses had a worse mortality claims experience than anticipated,
which has resulted in the excess deaths impact on profit of approximately R6.6bn
for year to date. In order to partially offset the excess deaths impact on profit
for the year to date, R4.9bn of the pandemic provision was released. Taking into
account the release of the provision, there is approximately R1bn of the pandemic
provision remaining for expected excess mortality claims related to COVID-19.
We continue to closely monitor our mortality claims experience as future waves
and their impacts remain uncertain. The adequacy of the provision will be assessed
at 31 December 2021.
Investor engagement
We will be hosting an Investor Update on Tuesday, 23 November 2021, from 14h00,
CAT. The agenda will focus on the Group’s strategy, with an overview of Old
Mutual Investments, Old Mutual Corporate, Old Mutual Insure and Rest of Africa
and to provide a business update. Investors and Media are invited to attend and
register on the following link:
http://www.overendstudio.co.za/events/OldMutual/2021/InvestorUpdate/accept.html
The financial information in this voluntary operating update is the
responsibility of the Old Mutual Board of Directors and has not been reviewed or
reported on by the Group’s external auditors.
Sandton
Sponsors
JSE Merrill Lynch South Africa (Pty) Limited t/a BofA
Securities
Namibia PSG Wealth Management (Namibia) (Proprietary)
Limited
Zimbabwe Imara Capital Zimbabwe plc
Malawi Stockbrokers Malawi Limited
Enquiries
Investor Relations
Sizwe Ndlovu T: +27 (0)11 217 1163
Head of Investor Relations M: +27 (83) 500 8019
E: tndlovu6@oldmutual.com
Communications
Vuyo Mtawa M: +27 68 422 8125
Head: Group Communications E: VMtawa@oldmutual.com
Notes to Editors
About Old Mutual Limited
Old Mutual 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 14 countries. Old Mutual’s primary operations are in South
Africa and the Rest of Africa, and we have a niche business in China. With over
176 years of heritage across sub-Saharan Africa, Old Mutual is a crucial part of
the communities they serve and the broader society on the continent.
For further information on Old Mutual and its underlying businesses, please visit
the corporate website at www.oldmutual.com.
Date: 23-11-2021 07:05:00
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