REG - Old Mutual Ltd - Old Mutual Limited Interim Results

Old MutualAnnouncement

26/09/2024 07:00

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RNS Number : 7777F  Old Mutual Limited  26 September 2024

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: 61/24

26 September 2024

Interim results announcement: Unaudited Interim results and interim dividend
declaration for the six months ended 30 June 2024

 

A message from the Chief Executive Officer

We are pleased with the solid performance delivered while investing for the
future. Adjusted headline earnings, an important metric for distributable
earnings, grew by 3% supported by a robust 14% increase in shareholder
investment returns due to improved performance in South African equities.
Adjusted headline earnings per share increased by 7% to 73.5 cents bolstered
by the R1.5 billion share buyback executed in 2023.

Return on net asset value increased by 70 bps to 12.6%, driven by the growth
in earnings and capital optimisations. The return on net asset value excluding
new growth initiatives increased by 210 bps to 15.5% which is within our
medium-term target range of cost of equity plus 2% to 4%.

 

Operating environment

Positive investor sentiment on South Africa following the general election
outcome and the forecasted policy rate cuts reset the base case for growth
during the second quarter of the period under review. While business and
consumer confidence remains low, there has been a slight improvement in the
period. Significant currency depreciation and inflation in our Africa regions
added strong headwinds to the operating environment.

Despite the complexity in the operating environment, we increased our life
sales by 6% and grew our gross written premiums by 9%. Positive market
performance led to a 5% rise in funds under management. Gross flows increased
by 7%, with net client cash flow improving by 56%.

In an increasingly competitive environment, our continued investment in new
growth engines and technology modernisation reflects our intention to
future-proof the business and achieve our victory condition to be our
customers' first choice to sustain, grow and protect their prosperity.

 

Key performance overview

Life APE sales increased by 6% to R6 598 million benefiting from strong growth
in risk sales across all channels in Mass and Foundation Cluster, and higher
guaranteed annuities sales, better recurring premium savings sales in Personal
Finance. This was partially offset by lower group risk sales in Old Mutual
Corporate due to the non-repeat of a large risk product deal secured in the
prior period.

Gross written premiums increased by 9% to R13.8 billion, supported by strong
new customer acquisitions and intermediary productivity in Old Mutual Insure,
particularly in the Specialty business, and better renewals in the general and
health insurance businesses in Kenya and Uganda.

Results from operations declined by 3%, with our short-term results impacted
by our deliberate strategy to invest in new growth engines. Excluding new
growth engines, results from operations increased by 4%. This was driven by
improved performance in the Mass and Foundation Cluster and Old Mutual Insure,
partially offset by lower life profits in Personal Finance mainly due to lower
economic variances and an increased number of large claims. The disposable
income of our customers in the Mass and Foundation Cluster remained
constrained and we continue to monitor persistency trends.

We delivered value of new business margin of 2.4% which is well within our
medium-term target range of 2% to 3%. Coming from a high base in the first
half of 2023, value of new business of R858 million was lower by 8%. Our
growth trend in value of new business remains strong as evidenced by a
compound annual growth rate of 10% from June 2022, with continued market share
growth in retail from Mass and Foundation Cluster.

Gross flows increased by 7% to R101 billion, driven by higher inflows in local
collective investment schemes, Private Clients and the offshore platform in
Wealth Management. New mandates secured in Malawi and strong unit trust flows
in Uganda also contributed to higher gross flows.

Net client cash outflows improved by a material 56% to R3.2 billion,
reflecting a positive turnaround in Wealth Management due to robust inflows
and the non-repeat of higher outflows recorded in the prior period. This was
partially offset by higher retrenchment benefit outflows in Old Mutual
Corporate and significant outflows in Old Mutual Investments' money market and
low margin indexation funds where large investors continue to adjust their
investment strategies.

Funds under management grew by 5% to R1.4 trillion largely due to improved
equity market performance.

The Group return on embedded value remained strong at 12.5% supported by
higher expected returns, profitable new business written and positive risk
experience variances, partially offset by worse persistency and once-off
expense experience.

Our balance sheet remained robust with a Group shareholder solvency ratio of
188% for the half year ended 30 June 2024, which is well within our target
range of 170% to 200%. Old Mutual Life Assurance Company (South Africa)
Limited's (OMLACSA) regulatory solvency ratio remained strong at 201% and
within our target range of 175% to 210%. As part of our debt management and
cost of capital optimisation strategy, the total value of subordinated debt
in issue was reduced to R9.5 billion with OMLACSA issuing R1 billion and
redeeming R2 billion in subordinated debt.

Our dividend policy targets an ordinary dividend cover range of 1.5 times to
2.0 times adjusted headline earnings. Considering our strong liquidity levels
and well capitalised balance sheet, the Old Mutual Board declared an interim
dividend of 34 cents per share, which amounts to 6% growth and a dividend
cover of 2.0 times.

Headline earnings were up by 34% mainly as a result of increased profits from
our Zimbabwe operations which we exclude from adjusted headline earnings due
to barriers to access capital.

We are evaluating the functional currency of the Zimbabwean banking business,
CABS, as we see a shift in the banking environment towards US dollar
denominated loans. If we change the functional currency from ZiG to US
dollars, we do not expect CABS to continue reporting the same level of foreign
exchange gains, and we expect reduced transfers to the foreign currency
translation reserve in the future. This will substantially reduce IFRS profits
and headline earnings but will have no impact on adjusted headline earnings.

 

Strategic overview

I am proud of the continued progress in the disciplined execution of our
strategy and considered capital allocation. This has translated into the
successful completion of industry testing and integration of OM Bank into the
National Payment System in line with the Prudential Authority's section 17
conditions.

We have made progress in our perimeter review in Old Mutual Africa Regions,
setting us on the path to achieve our ambition to be in the top three market
positions. We remain focused on simplifying our IT estate and delivering
efficiencies following the successful Greenlight migration in 2023.

We expect the delivery of these strategic initiatives to significantly enhance
our competitive strengths, revenue growth, capital efficiencies and operating
margins in the medium to long term.

Growing and protecting the core

With our life IT estate now moved to the cloud, our focus is on cost
optimisation and leveraging the potential scale benefits. We continue to
reduce our legacy estate by decommissioning and migrating to new platforms
across our technology systems. The build phase of our new Savings and Income
proposition is materially complete, with national rollout planned for 2025.

From a customer and adviser experience perspective, we recorded a slight
decrease in our Net Promoter Score to 68, marginally down from 70 at December
2023. Despite continued service improvement, customers' perceptions of Old
Mutual was negatively impacted by the social media case in March 2024.

Unlocking new growth engines

Our South African bank initiative, OM Bank, remains a key priority of our
strategy to build an integrated financial services business. The technical and
operational progress is ahead of schedule, with successful industry testing
and integration into the National Payments System already completed. Pending
the remaining Section 17 regulatory conditions, unrelated to technical
readiness, we anticipate the public launch in Q1 2025. For the rest of the
year, we are focused on meeting the remaining Section 17 conditions and
continue refining systems and capabilities to ensure a seamless launch.

Across our Africa regions, the execution of our perimeter review supported
disciplined capital allocation and shareholder value creation. We concluded
the exit of the life and general insurance lines of business in Nigeria and
Tanzania. The turnaround in Property and Casualty in Southern and East Africa
supported by actions to improve claims management and experience-based pricing
led to improved underwriting margins in these regions. This was more than
offset by a negative net underwriting margin in West Africa. Excluding Nigeria
there was improvement in the net underwriting margin. Our 'pivot to corporate'
strategy continues to yield results with increased profitability in our Life
insurance business across East and West Africa.

Sustainable value creation

Sustainability is integral to our business, driving positive economic and
social outcomes while delivering value. As a leader in responsible investing,
Old Mutual Investment Group integrates ESG factors across investment
decisions, practices active stewardship, and develops return-seeking and
sustainability focused products. Old Mutual Investment Group was recognised as
the Leading Sustainable African Investment Manager by the European Magazine
Awards for the third consecutive year and received the Best Asset Manager -
Sustainable Investing in South Africa award.

 

Outlook for H2 2024

We are encouraged by the cautiously optimistic outlook in South Africa
following the formation of the Government of National Unity. Growth is
expected to be muted with GDP forecasted between 1% and 1.4%. Moderate
inflation outlook and the 25 bps rate cut, the first since 2020, ushering in
an interest rates easing cycle from the latter half of the year should bolster
consumer spending, alleviate pressure on households' disposable income and
boost sentiment.

The outlook for our Africa regions suggests a challenging yet slightly
improved economic environment. Growth for Sub-Saharan Africa is expected to
rise to between 3.5% and 3.7%, reflecting gradual recovery despite continued
elevated debt levels, high inflation, external financing pressures and climate
change impacts in some parts of the regions.

East Africa's economies are showing resilience with growth projected at
approximately 5.1% in 2024, while inflation is likely to moderate by the end
of the year. We expect fiscal risks in East and West Africa to remain largely
contained either through debt restructuring or recourse to debt markets.

 

Iain Williamson

Chief Executive Officer of Old Mutual

 

 

 

Group highlights

Key performance indicators

 Rm (unless otherwise stated)                                           H1 2024  H1 2023  FY 2023  Change
 Results from operations                                                4 243    4 366    8 343    (3%)
 Adjusted headline earnings                                             3 267    3 160    5 861    3%
 Headline earnings(1)                                                   5 825    4 358    7 380    34%
 IFRS profit after tax attributable to equity holders of the parent(1)  5 241    4 354    7 065    20%
 Return on net asset value (%)                                          12.6%    11.9%    11.1%    70 bps
 Return on net asset value excluding new growth initiatives (%)(2)      15.5%    13.4%    13.1%    210 bps
 Group equity value(3)                                                  89 761   91 624   90 114   (0.4%)
 Discretionary capital (Rbn)(3)                                         1.4      1.0      1.1      40%
 Shareholder solvency ratio (%)(1,3,4)                                  188%     186%     190%     (200 bps)
 Regulatory solvency ratio (%)(1,3)                                     175%     186%     177%     (200 bps)
 Dividend cover (times)                                                 2.0      2.0      1.5      -

 

Per share measures

 

 Cents                                    H1 2024   H1 2023   FY 2023   Change
 Results from operations per share(5)     95.5      95.1      183.6     0.4%
 Adjusted headline earnings per share(6)  73.5      68.8      129.0     7%
 Headline earnings per share(1)           133.6     96.8      165.5     38%
 Basic earnings per share(1)              120.2     96.7      158.4     24%
 Total dividend per share                 34        32        81        6%
 Interim                                  34        32        32        6%
 Final                                                        49
 Group equity value per share(3,7)        1 873.5   1 880.6   1 880.9   (0.4%)

 

Supplementary performance indicators

 

 Rm (unless otherwise stated)           H1 2024   H1 2023   FY 2023   Change
 Life and Savings
 Life APE sales                         6 598     6 249     14 604    6%
 Value of new business                  858       937       1 921     (8%)
 Value of new business margin (%)       2.4%      2.6%      2.3%      (20 bps)
 Life and Savings and Asset Management
 Gross flows(8)                         101 487   95 160    198 863   7%
 Net client cash flow                   (3 165)   (7 254)   (7 510)   56%
 Funds under management (Rbn)(3)        1 394.4   1 300.4   1 331.0   5%
 Banking and Lending
 Loans and advances(3)                  19 919    19 255    19 391    3%
 Net lending margin (%)                 8.3%      10.7%     11.3%     (240 bps)
 Property and Casualty
 Gross written premiums                 13 764    12 591    25 513    9%
 Insurance revenue                      13 336    12 245    25 204    9%
 Net underwriting margin (%)            4.4%      0.2%      0.1%      420 bps

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

2  Return on net asset value excluding new growth initiatives excludes
adjusted headline earnings and equity impacts as well as any expected
investment over the next 12 months into these initiatives. The June 2023 core
return on net asset value of 13.1% has been re-presented as return on net
asset value excluding new growth initiatives to 13.4%

3  The % change was calculated with reference to FY 2023

4  Shareholder solvency ratio is a new key performance indicator which
represents the regulatory solvency ratio adjusted for material differences in
the way the Group manages capital and is consistent with the basis on which
the current Old Mutual target range was established

5  Results from operations per share is calculated as results from operations
divided by the adjusted weighted average number of shares. The adjusted
weighted average number of shares is adjusted to reflect the Group's BEE
shares and retail scheme shares as being in the hands of third parties,
consistent with the treatment of the related revenue in results from
operations. Adjusted weighted average number of shares used is 4 443 million
(H1 2023: 4 590 million)

6  Adjusted headline earnings per share is calculated with reference to
adjusted weighted average number of ordinary shares

7  Group equity value per share is calculated with reference to closing
number of ordinary shares. Closing number of shares used in the calculation of
the Group equity value per share is 4 791 million (FY 2023: 4 791 million)

8  The comparative amounts for Old Mutual Investments were re-presented to
include institutional products that are an alternative to bank deposits on a
net flow basis

 

Interim results announcement

 

This results announcement is the responsibility of the Old Mutual Board. It is
only a summary of the information contained in the Group Interim results for
the six months ended 30 June 2024 (Interim results). The Interim results can
be found on our website at
https://www.oldmutual.com/investor-relations/reporting-centre/reports
(https://www.oldmutual.com/investor-relations/reporting-centre/reports) . This
results announcement has not been reviewed or reported on by Old Mutual's
independent joint auditors.

 

Any investment decisions by investors and/or shareholders should be based on
consideration of the Interim results accessible via the JSE cloudlink
https://senspdf.jse.co.za/documents/2024/jse/isse/OMUE/
(https://senspdf.jse.co.za/documents/2024/jse/isse/OMUE/) HY
(https://senspdf.jse.co.za/documents/2024/jse/isse/OMUE/HY24Result.pdf) 2
(https://senspdf.jse.co.za/documents/2024/jse/isse/OMUE/HY24Result.pdf) 4
(https://senspdf.jse.co.za/documents/2024/jse/isse/OMUE/HY24Result.pdf) Result
(https://senspdf.jse.co.za/documents/2024/jse/isse/OMUE/HY24Result.pdf) .pdf
(https://senspdf.jse.co.za/documents/2024/jse/isse/OMUE/HY24Result.pdf) and on
our website above as the information in this announcement does not provide all
the details. The Interim results are available for inspection at the
registered office of the Company and the Sponsors, at no charge during office
hours from the date of this announcement for a period of 30 days.

 

Interim dividend declaration

The Old Mutual Board declared an interim dividend of 34 cents per share. This
results in a dividend cover of 2.0 times for the half year ended 30 June 2024,
which is in line with Old Mutual's dividend cover target range of 1.5x to 2.0x
adjusted headline earnings over the financial year. The growth in the interim
dividend from the prior period was due to our resilient operational
performance and strong capital and liquidity position. The interim dividend
will be paid out of distributable income reserves to all ordinary shareholders
recorded on the record date.

Shareholders on the London, Malawian and Namibian registers will be paid in
the local currency equivalents of the interim dividend. Shareholders on the
Zimbabwean register will be paid the equivalent of the interim dividend in
United States dollars.

Old Mutual'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 4 790 906
428.

                                                                                JSE, MSE, NSX, ZSE                              LSE
 Declaration date                                                               Thursday, 26 September 2024                     Thursday, 26 September 2024
 Finalisation announcement and exchange rates announced                         Tuesday, 1 October 2024                         Tuesday, 1 October 2024
 Transfers suspended between registers                                          Tuesday, 1 October 2024                         Tuesday, 1 October 2024
 Last day to trade cum dividend for shareholders on the South African register  Tuesday, 15 October 2024                        N/A
 and Malawi, Namibia and Zimbabwe branch registers
 Ex-dividend date for shareholders on the South African register and Malawi,    Wednesday, 16 October 2024                      N/A
 Namibia and Zimbabwe branch registers
 Last day to trade cum dividend for shareholders on the UK register             N/A                                             Wednesday, 16 October 2024
 Ex-dividend date for shareholders on the UK register                           N/A                                             Thursday, 17 October 2024
 Record date (South African register and Malawi, Namibia and Zimbabwe branch    Close of business on Friday, 18 October 2024    N/A
 registers)
 Record date (UK register)                                                      N/A                                             Friday, 18 October 2024
 Transfers between registers restart                                            Opening of business on Monday, 21 October 2024  Opening of business on Monday, 21 October 2024
 Interim dividend payment date                                                  Monday, 21 October 2024                         Friday, 15 November 2024

 

Share certificates for shareholders on the South African register may not be
dematerialised or rematerialised between Wednesday, 16 October and Friday, 18
October 2024, both dates inclusive. Transfers between the registers may not
take place between Tuesday, 1 October and Friday, 18 October 2024, both days
inclusive. Trading in shares held on the Namibian branch register through Old
Mutual (Namibia) Nominees Proprietary Limited will not be permitted between
Tuesday, 1 October and Friday, 18 October 2024, both days inclusive.

The dividend for South African shareholders 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 of 20%. The net
dividend payable to shareholders subject to withholding tax of 20% amounts to
27.20000 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 shareholders consult with their
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-South African 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 for the 2024 Interim results and Q&A will be
broadcast live on Thursday, 26 September 2024 at 11:00 South African time on
the Investor Relations website: https://www.oldmutual.com/investor-relations/
(https://www.oldmutual.com/investor-relations/) . 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=8554084&linkSecurityString=23421b6d3
(https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=8554084&linkSecurityString=23421b6d3c)
c
(https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=8554084&linkSecurityString=23421b6d3c)

 

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 46631

 

To access the replay using an international dial-in number, please select the
link below:

https://services.choruscall.com/ccforms/replay.html
(https://services.choruscall.com/ccforms/replay.html)

 

The replay will be available until 1 October 2024.

 

Sponsors

JSE equity sponsor: Tamela Holdings (Proprietary) Limited

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

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

ZSE: Imara Capital Zimbabwe plc

MSE: Stockbrokers Malawi Limited

 

Enquiries

Investor Relations

Langa Manqele

M: +27 (0)82 295 9840

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

 

Communications

Wendy Tlou

M:  +27 (0)82 906 5008

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

 

About Old Mutual

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 12 countries. Old Mutual's primary operations are in Africa
and it has a niche business in China. With over 179 years of heritage across
sub-Saharan Africa, Old Mutual is a crucial part of the communities it serves
as well as 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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