REG - Old Mutual Ltd - Final Results

Old MutualAnnouncement

14/03/2023 07:00

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RNS Number : 8765S  Old Mutual Limited  14 March 2023

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 "OM" or "the Company" or "the Group")

 

Ref: 11/23

 

14 March 2023

 

REVIEWED PRELIMINARY ANNUAL RESULTS AND FINAL DIVIDEND DECLARATION FOR THE
YEAR ENDED 31 DECEMBER 2022

 

A message from the Chief Executive Officer

 

 

Overview

The Group delivered a solid set of financial results in 2022 despite the
difficult macro-economic environment and market volatility. The pressure on
our operating earnings caused by the COVID-19 pandemic has lifted as the
ongoing impact of the pandemic becomes muted.

Our good sales performance was achieved on the back of successful execution of
our strategy as we continued to enhance our customer and adviser experience.
We are also building our transactional capabilities in South Africa as a key
component of becoming our customers' first choice to sustain, grow and protect
their prosperity.

We implemented our Broad-Based Black Economic Empowerment deal, Bula Tsela in
November 2022. This transaction aims to increase our B-BBEE ownership to above
30% and has enabled us to deliver on our transformation commitments. The Bula
Tsela deal was shortlisted for the 2022 Exxaro DealMakers BEE Deal of
the Year Award.

Operating environment

While 2021 experienced significant post COVID-19 growth, 2022 was
characterised by the after effects of the rebound, including supply chain
constraints, resurgence of COVID-19 in China and the ongoing impact of
Russia's war in Ukraine. These factors weighed on global economic activity in
2022. Inflation continued to accelerate as economies experienced a rapid rise
in food and energy prices. This resulted in significant interest rate
increases as central banks attempted to combat the rise in inflation across
most developed and emerging economies.

The South African economy grew by 2% in 2022, lower than the 4.9% achieved in
2021. Severe load shedding and flooding in KwaZulu-Natal, which damaged
infrastructure and manufacturing facilities, further hampered economic growth.

Inflation averaged 6.9% in 2022, up from 4.5% in the prior year, supported by
increased fuel and food prices. The South African Reserve Bank raised the
policy rate by a cumulative 325 basis points during 2022 to combat
rising inflation. This, together with a relative slow recovery in employment
post COVID-19 and the lingering impacts of the 2021 civil unrest, negatively
impacted real income growth.

This downward pressure on disposable income growth, combined with depressed
confidence made it difficult for customers to maintain or increase their
contributions to protection, savings and investment products. Our corporate
customers' growth and liquidity levels were also negatively impacted.

The South African equities markets declined relative to the prior year on the
back of global market volatility.

The operating environment across our Africa regions was similarly challenging
with policymakers also having to grapple with exchange rate volatility and
shrinking economic resources. In Kenya, Malawi and Ghana, the fiscal pressures
resulting from increased debt repayments forced governments into International
Monetary Fund budget support programmes. Furthermore, in Malawi, acute dollar
scarcity led to fuel shortages and challenges in meeting dollar-denominated
obligations. These economic conditions led to reduced customer spending due to
lower disposal income and poverty levels, which have limited the affordability
of insurance and savings products. Socio-political risk continued to heighten
in several countries, exacerbated in Zimbabwe and Nigeria by upcoming
elections.

All selected equity indices across our Africa regions (except for Malawi) have
decreased relative to the prior year on the back of global market volatility.

Key performance overview

Sales maintained momentum throughout the year in our retail segments. We made
progress in regaining market share in Mass and Foundation Cluster and Personal
Finance during the year, as evidenced by external market surveys.

Life APE sales increased by 10% mainly due to strong risk and credit life
sales in Mass and Foundation Cluster coupled with higher corporate and retail
sales in Namibia. Our China business also delivered strong savings sales from
the broker channels. This was partially offset by lower pre-retirement and
annuity sales in Old Mutual Corporate.

The value of new business grew by 16% due to strong sales growth in Mass and
Foundation Cluster as well as a change in mix towards higher margin business
in Mass and Foundation Cluster and Old Mutual Corporate. This was partially
offset by the reduction in Personal Finance value of new business arising from
challenges faced with sales volumes and business mix. We have, however, seen
an improvement in the second half of the year due to management actions
implemented to improve the business mix to higher margin risk business. The
value of new business margin of 2.2% remains within our medium-term target
range of 2% to 3%.

Gross flows declined by 9% due to the prior year including large transactions
in Old Mutual Investments and Old Mutual Corporate which did not repeat in the
current year. Lower annuity sales and a decrease in demand for offshore
investments in Personal Finance and Wealth Management also contributed to the
decline in gross flows. This was partially offset by strong flows in Old
Mutual Africa Regions and growth in the sales of savings products in China.

The Group reported negative net client cash flow for the year. This was
primarily due to the decline in gross flows combined with large disinvestments
and terminations in Wealth Management and Old Mutual Investments respectively.
We are confident that the overall health of our pipeline will support
improvements in net client cash flow. Our funds under management of R1.2
trillion declined by 4% due to weaker market performance in South Africa and
globally.

Results from operations increased to R8.7 billion, primarily driven by
improved profits on the back of strong sales and core operational performance
across the Group. Our life profits benefited from a refinement in hedging
methodology, enabling a material release of excess discretionary margins as
well as lower mortality in the current year as the effects of COVID-19 eased.
All remaining COVID-19 provisions were released but the impact was mostly
offset by the strengthening of our mortality basis to allow for endemic
COVID-19 claims, and worsened persistency as the challenging economic
conditions continue to impact our retail customers.

The Group return on net asset value improved to 11.1% due to strong growth in
earnings and a lower average adjusted IFRS equity base, resulting from the
unbundling of 12.2% of the Group's stake in Nedbank in 2021, thus delivering
on our promise to simplify the Group's capital structure and provide a
substantial return of capital to our shareholders. We remain committed to
returning capital to our shareholders, with R59.3 billion returned through
special distributions since 2018.

The Group solvency ratio remains robust at 190%, within our target range of
170% - 200%. Old Mutual Life Assurance Company (South Africa) Limited
(OMLACSA) solvency ratio was at 214%, above the target range of 175% to 210%.

Our dividend policy targets an ordinary dividend cover range of 1.5x to 2x
adjusted headline earnings. The Old Mutual Limited Board declared a final
dividend of 51 cents per share, taking the full dividend for the year to 76
cents. Adjusting for the impact of Nedbank in 2021, dividend growth was up 13%
from the prior year.

We have further earmarked between R1 billion and R1.5 billion for return to
shareholders as a share buyback and we have initiated approval processes with
the Board and Prudential Authority.

 

We have largely delivered on our medium-term targets which were set for 2023.
Our results from operations target for 2023 was to deliver the 2019 results
plus 5% to 10%. We have met this target on a comparable basis to 2019,
excluding the cost of our transactional capability and NEXT176. This was
achieved on the back of decisive and focused management actions through this
recovery phase resulting in our sales and gross flows recovering to pre
COVID-19 levels. We have also exceeded our cost efficiencies target and remain
within the ranges set for value of new business margin and Group solvency.
Return on net asset value continues to recover and is approaching our cost of
equity. Old Mutual Insure's net underwriting margin is below our target range
owing to the severe catastrophe events experienced during 2022.

We continue to evaluate the impact of IFRS 17 and refine the new financial
reporting processes, systems and controls that will underpin our IFRS 17
results. Whilst IFRS 17 will not change the underlying fundamentals of our
insurance business, our cash generation or our capital strength, it will
significantly change how we report on our insurance business. We remain on
track to report under IFRS 17 for the first time for the half-year ended 30
June 2023 and restated comparative information for 2022 will be provided.

 

Outlook for 2023

Economic activity continues to be hampered by significant interest rate
increases as central banks attempt to combat rising inflation caused by
Russia's war in Ukraine. Severe COVID-19 lockdowns in China dampened growth in
2022, with the recent reopening paving the way for a faster than expected
recovery. The International Monetary Fund World Economic Outlook for January
2023 forecasts global economic growth of 2.9% for 2023.

Load shedding in South Africa continues to affect economic activity. Failure
to address load shedding will have an impact on crop failure, higher food
prices and shortages of certain food products, which will further dampen
economic growth. In January 2023, the South Africa Reserve Bank increased the
repo rate by 25 basis points to control inflation levels. The International
Monetary Fund's World Economic Outlook for January 2023 has forecast growth in
Sub-Saharan Africa at 3.8% for 2023.

The macro-economic environment in our markets is expected to remain
challenging, which will continue to exacerbate financial pressure on our
customers. We remain focused on driving sales volumes and profitable sales mix
to improve market share growth in our segments. Despite the challenging
headwinds, we are through our recovery phase and have largely delivered on our
medium- term targets one year ahead of schedule. Our next set of results will
be prepared on an IFRS 17 basis and we will communicate the revised
medium-term targets in due course.

I would like to thank all my colleagues for their contributions in achieving
this pleasing set of results. Our focus over 2023 is to continue putting our
customers first and remaining a certain friend in uncertain times for our
customers, employees and the communities in which we operate.

Iain Williamson

Chief Executive Officer of Old Mutual Limited

 

Group highlights

Key performance indicators

 Rm (unless otherwise stated)                                             FY 2022  FY 2021  Change
 Results from operations                                                  8 743    4 384    99%
 Adjusted headline earnings                                               6 371    5 402    18%
 Headline earnings((1))                                                   7 948    7 209    10%
 IFRS profit after tax attributable to equity holders of the parent((1))  7 325    6 662    10%
 Return on net asset value (%)                                            11.1%    9.0%     210 bps
 Group equity value                                                       89 398   91 993   (3%)
 Discretionary capital (Rbn)((2))                                         3.5      -        -
 Group solvency ratio (%)((1))                                            190%     184%     600 bps
 Dividend cover                                                           1.73     1.51     15%

 

Per share measures

                                            FY 2022  FY 2021   Change
 Adjusted headline earnings per share((3))  139.8    118.5     18%
 Headline earnings per share((1))           180.1    163.8     10%
 Basic earnings per share((1))              166.0    151.3     10%
 Total dividend per share                   76       76        0%
  Interim                                   25       25        0%
  Final                                     51       51        0%
 Group equity value per share((4))          1 819.3  1 952.2   (7%)

 

(1)     These metrics include the results of Zimbabwe. All other key
performance indicators exclude Zimbabwe.

(2)     Discretionary capital was externally disclosed since September
2022 at R3.5 billion.

(3)     Adjusted headline earnings is calculated with reference to adjusted
weighted average number of ordinary shares. Weighted average number of shares
used in the calculation of the adjusted headline earnings per share is
4 557 million (FY 2021: 4 558 million).

(4)     Group equity value calculated with reference to closing number of
ordinary shares. Closing number of shares used in the calculation of the group
equity per share is 4 914 million (FY 2021: 4 709 million).

 

 

Supplementary performance indicators

 Rm (unless otherwise stated)           FY 2022    FY 2021   Change
 Life and Savings and Asset Management
 Gross flows                            178 027    194 757   (9%)
 Net client cash flow                   (12 425)   92        (>100%)
 Funds under management (Rbn)           1 228.9    1 273.6   (4%)
 Life and Savings
 Life APE sales                         12 501     11 400    10%
 Value of new business                  1 465      1 266     16%
 Value of new business margin (%)       2.2%       1.9%      30 bps
 Banking and lending
 Loans and advances                     19 009     18 907    1%
 Net lending margin (%)                 13.4%      16.4%     (300 bps)
 Property and Casualty
 Gross written premiums                 22 344     19 982    12%
 Net underwriting margin (%)            0.5%       1.6%      (110 bps)

 

Short-form announcement

This short-form announcement is the responsibility of the Board. It is only a
summary of the information contained in the full announcement available on
SENS and the Company's website on 14 March 2023. This short-form announcement
does not contain full or complete details pertaining to the Group's results
and should be read in conjunction with the full announcement. The short form
announcement has itself not been reviewed, however, the financial information
included herein has been extracted from the reviewed condensed consolidated
financial statements which have been reviewed by the independent joint
auditors, Ernst & Young Inc. and Deloitte & Touche, who expressed an
unmodified review conclusion. Any reference to future financial performance
has not been reviewed by or reported on by the Group's auditors. The reviewed
condensed consolidated financial statements and the independent joint auditors
review report is available on the Company's website at
www.oldmutual.com/investor-relations/reporting-centre/reports
(https://eur01.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.oldmutual.com%2Finvestor-relations%2Freporting-centre%2Freports&data=05%7C01%7CAWILCOX%40oldmutual.com%7Cff0f18dc08a44238938208db215cdf95%7C00691924e0824301a3dc1732afd14289%7C0%7C0%7C638140456256299664%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=vaBWrVDNumFkmuyp8e2ljcVhBZRU3b9h5DniMWgVaIw%3D&reserved=0)
. Any investment decisions by investors and/or shareholders should therefore
be based on consideration of the full announcement accessible via the JSE
 link https://senspdf.jse.co.za/documents/2023/jse/isse/OMUE/FY22Result.pdf
(https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fsenspdf.jse.co.za%2Fdocuments%2F2023%2Fjse%2Fisse%2FOMUE%2FFY22Result.pdf&data=05%7C01%7CAWILCOX%40oldmutual.com%7Cff0f18dc08a44238938208db215cdf95%7C00691924e0824301a3dc1732afd14289%7C0%7C0%7C638140456256299664%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=3HTbkP6pFXVcP%2BNpIB7Z1jkeDKzK5NeGKrM8cdnt07c%3D&reserved=0)
and published on our website at
www.oldmutual.com/investor-relations/reporting-centre/reports
(https://eur01.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.oldmutual.com%2Finvestor-relations%2Freporting-centre%2Freports&data=05%7C01%7CAWILCOX%40oldmutual.com%7Cff0f18dc08a44238938208db215cdf95%7C00691924e0824301a3dc1732afd14289%7C0%7C0%7C638140456256299664%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=vaBWrVDNumFkmuyp8e2ljcVhBZRU3b9h5DniMWgVaIw%3D&reserved=0)
. The full announcement is available for inspection at the registered offices
of the Company and the Sponsor, at no charge, during office hours from the
date of this announcement for a period of 30 days.

Final dividend declaration

The Old Mutual Limited Board declared a final dividend of 51 cents per
ordinary share. This results in a full dividend cover of 1.73 times for the
2022 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 to all ordinary
shareholders recorded on the record date. The dividend will be payable to all
shareholders, except for Old Mutual Limited shareholders on the London Stock
Exchange (LSE), on 14 April 2023. The dividend payment date for Old Mutual
Limited shareholders on the LSE is 15 May 2023.

Shareholders on the London, Zimbabwean, Malawian and Namibian registers will
be paid in the local currency equivalents of the final dividend.

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
4 913 880 491.

                                                                                JSE, MSE, NSX, ZSE         LSE
 Declaration date                                                               Tuesday, 14 March 2023     Tuesday, 14 March 2023
 Finalisation announcement and exchange rates announced                         Wednesday,                 Wednesday,

                                                                                22 March 2023 by 11.00     22 March 2023 by 11.00
 Transfers suspended between registers                                          Close of business          Close of business

                                                                                on Wednesday,              on Wednesday,

                                                                                22 March 2023              22 March 2023
 Last day to trade cum dividend for shareholders on the South African Register  Tuesday,                   N/A
 and Malawi, Namibia and Zimbabwe branch registers

                                                                                11 April 2023
 Ex-dividend date for shareholders on the South African Register and Malawi,    Wednesday,                 N/A
 Namibia and Zimbabwe branch registers

                                                                                12 April 2023
 Last day to trade cum dividend for shareholders on the UK register             N/A                        Wednesday, 12 April 2023
 Ex-dividend date for shareholders on the UK register                           N/A                        Thursday, 13 April 2023
 Record date (South African Register and Malawi, Namibia and Zimbabwe branch    Close of business          N/A
 registers)

                                                                                on Friday, 14 April 2023
 Record date (UK register)                                                      N/A                        Close of business

                                                                                                           on Friday, 14 April 2023
 Transfers between registers restart                                            Opening of business        Opening of business

                                                                                on Monday, 17 April 2023   on Monday, 17 April 2023
 Final dividend payment date                                                    Monday, 17 April 2023      Monday, 15 May 2023

 

(1) Tuesday, 21 March is Human Rights Day.

Share certificates for shareholders on the South African register may not be
dematerialised or rematerialised between Wednesday, 12 April and Friday, 14
April 2023, both dates inclusive. Transfers between the registers may not take
place between Wednesday, 22 March and Friday, 14 April 2023, both dates
inclusive. Trading in shares held on the Namibian branch register through Old
Mutual (Namibia) Nominees (Pty) Limited will not be permitted between
Wednesday, 22 March and Friday, 14 April 2023, both dates inclusive.

For South African shareholders, the dividend will be subject to dividend
withholding tax of 20% for all shareholders who are not exempt from or do not
qualify for a reduced rate of withholding tax. International shareholders who
are not exempt or are not subject to a reduced rate in terms of a double
taxation agreement will be subject to dividend withholding tax at a rate of
20%. The net dividend payable to shareholders subject to withholding tax at a
rate of 20% amounts to 40.800 cents per ordinary share. Distributions made
through the dividend access trust or similar arrangements established in a
country will not be subject to South African withholding tax but may be
subject to withholding tax in the relevant country. We recommend that you
consult with your tax adviser regarding the in country withholding tax
consequences.

Shareholders that are tax residents 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/
(https://www.oldmutual.com/investor-relations/dividend-information/)

 

 

Notes to Editors

A webcast of the presentation of the 2022 Annual Results and Q&A will be
broadcast live on 14 March 2023 at 11:00 am South African time on the
Company's website www.oldmutual.com. Analysts and investors who wish to
participate in the call may do so using the following link or telephone
numbers below:
http://live.eclipse-streaming.co.za/oldmutual/OMInvestorRelations/

 

South Africa +27 105 004 108

UK +442 036 088 021

Australia +61 739 111 378

USA +14 123 170 088

International +27 105 004 108

Replay Access Code 43676

 

Pre-registration to participate in the call is available at the following
link: https://om.eventpress.co.za/e/519 (https://om.eventpress.co.za/e/519)

 

The replay will be available until 14 April 2023.

 

Sponsors

JSE equity sponsor:
Merrill Lynch South Africa (Proprietary) Limited t/a BofA Securities

JSE debt sponsor:
 
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

MSE:
 
Stockbrokers Malawi Limited

NSX:
 
PSG Wealth Management (Namibia) (Proprietary) Limited

ZSE:
 
Imara Capital Zimbabwe plc

 

 

 

Enquiries

Investor Relations

Bonga Mriga

Interim:  Head of Investor Relations

M: +27 67 866 6348

E: bmriga@oldmutual.com

 

Communications

Vuyo Mtawa

Head: Group Communications

M: +27 68 422 8125

E: vmtawa@oldmutual.com (mailto:vmtawa@oldmutual.com)

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