TIDMOMU
RNS Number : 1566T
Old Mutual Limited
23 March 2021
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
ISIN: ZAE000255360
LEI: 213800MON84ZWWPQCN47
JSE Share Code: OMU
MSE Share Code: OMU
NSX Share Code: OMM
ZSE Share Code: OMU
("Old Mutual" or "OM" or "the Company") Ref
03/21
23 March 2021
Short-form announcement: Annual results for the year ended 31
December 2020
A MESSAGE FROM OUR CEO
2020 was one of the most challenging years our organisation has
ever faced. Our business remained well capitalised through the
execution of decisive management actions and our liquidity position
was strong, despite the material negative impact COVID-19 had on
our earnings. The fundamentals of our business were tested through
this extreme scenario but we remained true to our purpose of
championing mutually positive futures every day and our diversified
business model enabled us to demonstrate resilience in this
environment.
We remained deeply committed to supporting our customers,
employees and communities through these unprecedented times. During
2020 we supported customers and their families through fast tracked
payment of approximately R13 billion in mortality claims during the
year. As part of our ongoing relief initiatives to customers we
made interim payments in respect of business interruption claims to
qualifying SME customers, to enable them to continue operating. We
offered various financial support initiatives to provide relief to
customers, intermediaries, communities and our employees. We have
extended premium free cover to frontline healthcare workers in
South Africa, Malawi and Zimbabwe. In many of our operations across
the continent we donated medical supplies, protective equipment and
funding to frontline health care workers and regional
hospitals.
Despite the impact to earnings, strong gross inflows throughout
the year drove a significant increase in NCCF demonstrating the
resilience of our business. We have experienced good recovery in
adviser productivity levels and new business sales volumes in the
second half of the year following the very low levels in the second
quarter at the height of lockdown restrictions in South Africa.
Lockdown restrictions had a material impact on our ability to
interact face to face with our customers, particularly during the
second quarter. Digital offerings to enhance the customer
experience, that were already in development as part of our vision
to build a leading African digital platform business, were
accelerated and rolled out during the year, enabling us to meet
customer needs remotely. In South Africa, we introduced alternative
direct digital channels such as email, USSD and WhatsApp platforms
to pay funeral claims and facilitate disinvestments. Take up rates
of these channels have accelerated significantly in the fourth
quarter with strong traction in 2021. In the Southern and East
African regions, we introduced USSD features and a Facebook
Messenger Chatbot to assist customers with to open investment
accounts, manage their accounts and request withdrawals. We have
refreshed our public websites and mobile applications to provide
access to all of our solutions in one place with intuitive
navigation according to customer needs. Through this we achieved
the automation of various key customer journeys and experienced
strong growth in our active digital customer count.
We have made good strides operationally and simplification
remains a key focus area to enhance efficiencies across the
business. Areas of progress include the consolidation of debt
programmes, continued digital enablement and the migration of
approximately 15% of workloads to cloud infrastructure to date. We
have seen significant progress in the roll out of Old Mutual
Protect, more than 10,000 advisers are accredited to provide the
new product offerings and enabled to make use of the digital
platform. Approximately 202,000 applications were issued for Old
Mutual Protect in 2020, with over 125,000 of these issued in the
fourth quarter. During 2021, a savings and income proposition will
be offered alongside the Old Mutual Protect range utilising the
same core infrastructure, which will complete the refresh of our
Life and savings offering in South Africa and Namibia. In addition,
the simplified new non advice funeral product rolled out in
branches and distributed through loan consultants has been well
received by customers.
We have presented a view of Results from Operations where we
exclude certain direct COVID-19 impacts, this being a non-IFRS
measure. Only items that are directly attributable to COVID-19,
separately identifiable and reliably measurable have been excluded
in this view. We have not made any pro forma adjustments for
impacts such as the loss of earnings due to lower sales activity
resulting from lockdown restrictions. Results from Operations
excluding direct COVID-19 impacts decreased by 14% from the prior
year largely due to lower sales volumes in Life and Savings
impacted by lockdown restrictions, the non repeat of significant
positive basis changes in the prior year and higher credit losses
in the banking business as customers continue to face financial
pressure. These impacts were partially offset by the optimisation
of hedging strategies which led to a reserve release of R1.8
billion due to a reduction in interest rate risk. Results from
Operations decreased by 81% from the prior year largely due to the
net pandemic impact of R4,393 million. Business interruption and
rescue reserves of R791 million and mark to market losses of R704
million related to unlisted equity and a portfolio of credit
exposures further contributed to the decrease in profits. A
management overlay referencing several possible economic recovery
scenarios and their impact on the credit environment resulted in an
increase of R169 million in the expected credit loss provision in
South Africa, Namibia and East Africa. We have excluded the total
positive underwriting result of R293 million in the Personal lines
business in Old Mutual Insure as we benefitted from a significant
reduction in claims volumes as a result of lower customer activity
levels due to lockdown restrictions.
We are excited to have launched our Truly Mutual strategy,
underpinned by five interconnected strategic pillars. When we
listed in Africa in 2018 we communicated our medium term focus
areas and reported on these over the past reporting periods. In
parallel, we have been formulating a longer term strategy that was
approved by the Board. In setting our new strategy the overarching
vision is to be our customers' first choice for their financial
needs through the services we offer. We believe that successful
execution on the five pillars will enable us to be our customers'
first choice and allow us to build the most valuable businesses in
the industry, delivering sustainable long term value for
shareholders.
Iain Williamson
Chief Executive Officer
GROUP HIGHLIGHTS
% change
(FY 2020
vs
(Rm unless otherwise stated) FY 2020 FY 2019 FY 2019)
Adjusted Headline Earnings
(AHE) 2,484 9,856 (75%)
-------- -------- -----------
Adjusted Headline Earnings
per share (cents) 54.3 209.3 (74%)
-------- -------- -----------
Results from Operations (RFO)
excluding direct COVID-19 impacts 7,742 8,972 (14%)
-------- -------- -----------
Results from Operations (RFO) 1,663 8,972 (81%)
-------- -------- -----------
Final dividend per share (cents) 35 75 (53%)
-------- -------- -----------
Return on Net Asset Value (RoNAV)
(%) 3.8% 15.2% (1140 bps)
-------- -------- -----------
FUM (Rbn) 1,104.6 1,048.5 5%
-------- -------- -----------
Life APE sales 9,786 12,268 (20%)
-------- -------- -----------
Gross flows 187,137 170,689 10%
-------- -------- -----------
NCCF (Rbn) 9.6 2.2 >100%
-------- -------- -----------
Free Surplus Generated from
Operations 4,700 6,794 (31%)
-------- -------- -----------
% of AHE converted to Free
Surplus Generated 189% 69% 12000 bps
-------- -------- -----------
Group Solvency ratio(%)(1,2) 185% 189% (400 bps)
-------- -------- -----------
1 These metrics include the results of Zimbabwe. All other key
performance indicators exclude Zimbabwe
2 We have re-presented the December 2019 solvency position in
line with the final group designation by the Prudential Authority
received during 2020.
Changes in the macro environment including negative GDP growth
forecasts and interest rate cuts, have resulted in increased
uncertainty around future cashflow projections for certain assets.
We continue to remain cautious in assessing the valuations of
underlying investments. During the first half of the year, we
recognised an impairment of goodwill in respect of our investment
in Old Mutual Finance. This was largely driven by the decline in
GDP growth outlook for South Africa. We also recognised an
impairment in respect of our investment in Nedbank, triggered by
the significant decline in the Nedbank share price. As
part of our full year assessment, we have reviewed the
assumptions and economic recovery scenarios in our valuation models
and concluded that no further impairments were required. These
impairments are recognised in the IFRS income statement, however,
are not recognised in Headline Earnings (HE) as this is an explicit
adjusting item in accordance with the JSE Circular. Accordingly,
they are also not recognised in AHE.
% change
IFRS HIGHLIGHTS (FY 2020 vs
(Rm unless otherwise stated) FY 2020 FY 2019 FY 2019)
IFRS (Loss)/Profit after tax attributable
to equity holders of the parent (5,097) 9,386 (>100%)
-------- -------- -------------
Headline Earnings (HE) 5,088 10,641 (52%)
-------- -------- -------------
Basic earnings per share (cents) (116.3) 208.3 (>100%)
-------- -------- -------------
Headline Earnings per share (HEPS) 116.1 236.1 (51%)
-------- -------- -------------
OUTLOOK
During the second half of the year, we focused on maintaining
strong levels of solvency and liquidity and identifying
opportunities for simplification and efficiencies in our business.
This will continue to be an important focus as we transition the
business out of this period of global crisis. We are focused on
driving recovery in RFO to 2019 levels and improving RoNAV to above
cost of equity as rapidly as possible, however the pace of the
recovery will depend on GDP growth and equity market levels. We
expect to achieve this recovery by 2023, and these targets have
been included in executive remuneration incentive plans. Our VNB
margin is unlikely to fully recover in 2021, however as sales and
productivity levels return to historic levels this will improve the
VNB margin. In the medium term we are targeting a VNB margin of
between 1.5% and 3%. We remain committed to delivering R750 million
of pre-tax run rate cost savings by the end of 2022. We expect
these savings to be delivered largely through efficiency
improvements in Old Mutual Insure, Personal Finance and Wealth
Management as well as simplification and digitalisation in our
enabling functions. The targets included in this announcement do
not constitute profit forecasts and have not been reviewed or
reported on by the Group's auditors.
FINAL DIVID DECLARATION
The Board of directors has approved and declared a final
dividend of 35 cents per ordinary share.
The final dividend of 35 cents per share, results in a dividend
cover of 1.50 times of Adjusted Headline Earnings for the 2020 year
which is in line with Old Mutual Limited's dividend cover target
range of 1.50 times to 2.00 times. The final dividend will be paid
out of distributable reserves and is payable on 24 May 2021 to all
ordinary shareholders recorded on the record date.
Shareholders on the London, Malawian, Namibian and Zimbabwean
registers will be paid in the local currency equivalents of the
final dividends. Old Mutual Limited's income tax number is
9267358233. The number of ordinary shares in issue in the company's
share register at the date of declaration is 4,708,553,649.
Declaration date Tuesday, 23 March 2021
Finalisation announcement and Monday, 29 March 2021 by 11.00
exchange rates announced
-------------------------------
Transfers suspended between registers Close of business on Monday,
29 March 2021
-------------------------------
Last day to trade cum dividend Tuesday, 13 April 2021
for shareholders on the South
African Register and Malawi, Namibia
and Zimbabwe branch registers
-------------------------------
Ex-dividend date for shareholders Wednesday, 14 April 2021
on the South African Register
and Malawi, Namibia and Zimbabwe
branch registers
-------------------------------
Last day to trade cum dividend Wednesday, 14 April 2021
for shareholders on the UK register
-------------------------------
Ex-dividend date for shareholders Thursday, 15 April 2021
on the UK register
-------------------------------
Record date (all registers) Close of business on Friday,
16 April 2021
-------------------------------
Transfers between registers restart Opening of business on Monday,
19 April 2021
-------------------------------
Final Dividend payment date Monday, 24 May 2021
-------------------------------
Share certificates for shareholders on the South African
register may not be dematerialised or rematerialised between
Wednesday, 14 April and Friday, 16 April 2021, both dates
inclusive. Transfers between the registers may not take place
between Tuesday, 30 March and Friday, 16 April 2021, both dates
inclusive. Trading in shares held on the Namibian section of the
principal register through Old Mutual (Namibia) Nominees (Pty)
Limited will not be permitted between Monday, 29 March and Friday,
16 April 2021, both dates inclusive.
For South African shareholders, the dividend will be subject to
a dividend withholding tax of 20% for all shareholders who are not
exempt from or do not qualify for a reduced rate of withholding
tax. The net dividend payable to shareholders subject to
withholding tax at a rate of 20% amounts to 28 cents per share.
Shareholders that are tax resident in jurisdictions other than
South Africa may qualify for a reduced rate under a double taxation
agreement with South Africa. To apply for this reduced rate, non-SA
taxpayers should complete and submit a declaration form to the
respective registrars. The declaration form can be found at
https://www.oldmutual.com/investor-relations/dividend-information/dividend-tax-considerations.
SHORT FORM ANNOUNCEMENT
This short form announcement is the responsibility of the
directors. It is only a summary of the information contained in the
full announcement and does not contain full or complete details.
Any investment decision should be based on the full announcement
accessible from Tuesday, 23 March 2021, via the JSE link
https://senspdf.jse.co.za/documents/2021/jse/isse/OMUE/FY20Result.pdf
and also available on the Company's website at
https://www.oldmutual.com/investor-relations/reporting-centre/results.
Copies of the full announcement may also be requested by contacting
Investor Relations per details below.
The short form announcement has itself not been audited,
however, the financial information included herein has been
extracted from the audited consolidated annual financial statements
which have been audited by KPMG Inc. and Deloitte & Touche, who
expressed an unmodified opinion thereon. The audit opinion includes
key audit matters related to the valuation of life insurance
contract liabilities and investment contract liabilities with
discretionary participating features, the valuation of the net best
estimate business interruption reserve, the valuation of
investments and securities, the assessment of expected credit
losses on loans and advances and the valuation of investment
property. The Old Mutual Limited Audited Annual Financial
Statements containing the audit opinion, including key audit
matters, can be obtained on the Company's website via the link
https://www.oldmutual.com/investor-relations/reporting-centre/reports
.
A webcast of the presentation of the 2020 Final Results and
Q&A will be broadcast live on 23 March 2021 at 11.00 am South
African time on the Company's website www.oldmutual.com. Analysts
and investors who wish to participate in the webcast can
pre-register using the following link:
https://78449.themediaframe.com/dataconf/productusers/oldmutual/mediaframe/43670/indexl.html
Analysts and investors who wish to participate in the call may
do so using the following link or telephone numbers below:
https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=8903603&linkSecurityString=da8c1ae27
South Africa +27 10 500 4108
UK +44 203 608 8021
Australia +61 73 911 1378
USA +1 412 317 0088
International +27 10 500 4108
Replay Access Code 38691
The replay will be available for five business days.
Sponsors
Johannesburg Stock Exchange
Merrill Lynch South Africa (Pty) Limited
Namibia
PSG Wealth Management (Namibia) Proprietary Limited
Zimbabwe
Imara Capital Zimbabwe plc
Malawi
Stockbrokers Malawi Limited
Enquiries
Investor Relations
Sizwe Ndlovu
Head of Investor Relations
T: +27 (0)11 217 1163
E: tndlovu6@oldmutual.com
Tokelo Mulaudzi
Investor Relations Manager
T: +27 (11) 217 1042
E: tmulaudzi3@oldmutual.com
Communications
Tabby Tsengiwe
General Manager of Public Affairs and Communications
T: +27 (11) 217 1953
M: +27 (0)60 547 4947
E: ttsengiwe@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 175 years
of heritage across sub-Saharan Africa, we are a crucial part of the
communities we serve and broader society on the continent.
For further information on Old Mutual, and its underlying
businesses, please visit the corporate website at
www.oldmutual.com.
Click on, or paste the following link into your web browser, to
view the associated PDF document:
http://www.rns-pdf.londonstockexchange.com/rns/1566T_1-2021-3-23.pdf
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END
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