TIDMOMU
RNS Number : 1922T
Old Mutual Limited
23 November 2021
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 PERIODED 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%
------------- ------------- -------------
Greater than
Value of New Business (VNB) 1 099 274 100%
------------- ------------- -------------
Gross Flows 146 631 137 449 7%
------------- ------------- -------------
Net Client Cash Flow (NCCF) Greater than
(Rbn) (2,6) 3,6 (100%)
------------- ------------- -------------
Funds Under Management(1) (FUM)
(Rbn) 1 202,4 1 104,6 9%
------------- ------------- -------------
Loans and Advances(1) 18 194 20 320 (10%)
------------- ------------- -------------
Gross Written Premiums 15 103 14 093 7%
------------- ------------- -------------
(1) Comparative 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
.
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END
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