TIDMOMU
RNS Number : 3477Z
Old Mutual Limited
21 May 2021
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
ISIN: ZAE000255360
LEI: 213800MON84ZWWPQCN47
JSE Share Code: OMU
NSX Share Code: OMM
MSE Share Code: OMU
ZSE Share Code: OMU
("Old Mutual" or "Company" or "Group")
Ref 13/21
21 May 2021
OLD MUTUAL VOLUNTARY OPERATING UPDATE FOR THE THREE MONTHSED 31
MARCH 2021
Having passed the one-year mark since the onset of the COVID-19
pandemic, global and local economies showed signs of economic
recovery in the first quarter of 2021 as lockdown restrictions were
eased, coupled with the emerging benefits of vaccine rollouts.
South African equity markets outperformed most other emerging and
developed markets, recording strong gains for the quarter. Economic
growth in the countries in which we operate in Rest of Africa
remains muted and dependent on successful vaccine rollout
strategies. Continued s timulus measures and the scale of vaccine
rollouts in many countries globally bodes well for a fuller
economic recovery in the second half of 2021. The pace of economic
recovery in South Africa could be delayed given slower than
anticipated vaccination and emerging signs of a potential third
wave of infections.
Our employees and intermediaries remain resilient and motivated
while adapting to new ways of working. Intermediaries are servicing
customers while taking necessary precautions in branches and
worksites. Some of our employees continue to work from home with
critical employees being on site in office locations as we embark
on a managed process towards a hybrid model of working. The Group
will partner with government and other relevant stakeholders to
assist in the vaccine rollout, leveraging our Responsible Business
programmes.
There has been a positive recovery in productivity levels in our
South African retail segments, Mass and Foundation Cluster and
Personal Finance with strong momentum in issued life sales levels
in March, which has continued into April. Improved adviser
productivity and the increased use of direct channels have
supported sales growth although sales levels have not yet recovered
to 2019 levels. Ongoing management actions to support
intermediaries to sell remotely have contributed to the recovery in
productivity levels. We continue to make significant progress in
building a digital capability that enables enhanced engagement as
well as sales and servicing to customers and intermediaries while
ensuring a seamless transition from physical to digital
interaction. In the first quarter we introduced new service
features and products through WhatsApp and USSD platforms to help
customers do even more from the comfort of their homes, including
managing their Old Mutual Rewards. We continue to prioritise the
optimisation of data analytics and robotics in particular to offer
a personalised customer experience that will improve the longevity
of customer relationships. Through the continuous delivery of
data-driven insights we support intermediaries to proactively
service and assist our customers to achieve their financial
goals.
Capital position and liquidity
The solvency ratio for OMLACSA for the three months ended 31
March 2021 was 207%, at the upper end of our target range of 175% -
210%. The decrease in our solvency ratio from the 215%(1) , as
reported to the Prudential Authority, was largely due to an
increase in capital requirements to support risk sales and higher
market risk capital requirements due to improved market levels and
a higher equity shock prescribed by the Regulator . The Group also
remains well capitalised and our solvency and liquidity positions
remain strong, supported by robust hedging programmes. We continue
to monitor our Group solvency ratio and this remains strong
relative to our target range of 155% - 175%.
(1) The increase in the OMLACSA solvency ratio of 215% as
submitted to the Prudential Authority compared to the 206% as
disclosed in the FY2020 results is mainly due to updates to
participation values and the impact of reported COVID-19 provisions
which reduced the solvency capital requirement.
Financial performance for the three months ended 31 March
2021
The table below sets out certain key performance indicators for
the three months ended 31 March 2021.
Key Performance Indicators 31 March 31 March % change
(R millions unless otherwise 2021 2020
indicated)
Results from Operations 1,814 1,227 48%
--------- --------- ---------
Life APE Sales 2,429 2,461 (1%)
--------- --------- ---------
VNB 304 290 5%
--------- --------- ---------
Gross Flows 44,263 50,568 (12%)
--------- --------- ---------
Net Client Cash Flow (Rbn) (4.2) 0.8 (>100%)
--------- --------- ---------
Funds Under Management(1) (FUM)
(Rbn) 1,146.9 1,104.6 4%
--------- --------- ---------
Loans and Advances(1) 19,425 20,320 (4%)
--------- --------- ---------
Gross Written Premiums 5,073 4,971 2%
--------- --------- ---------
(1) Comparative amounts represent FY2020 balance sheet
amounts.
Profitability for the year to date improved as a result of
strong performance in local equity markets which drove higher asset
based fees due to an increase of 6% in average FUM, closing FUM at
the end of the first quarter being 23% above March 2020 levels. The
higher closing FUM balance provides a strong asset base on which to
earn higher fees in the second quarter. Improved credit experience
due to a deliberate focus on tightening of credit criteria and more
selective offers to customers in Old Mutual Finance in South
Africa, the non-repeat of the negative mark to market losses in Old
Mutual Investments in the prior year and a positive claims
experience not related to COVID-19 in our Credit Guarantee
Insurance Corporation business positively impacted profits.
Expenses were managed well in the first quarter and we remain on
track to deliver our cost-savings target of R750 million at the end
of 2022.
Life APE sales were marginally behind the prior year despite
good momentum in productivity levels as observed in issued sales
which will be reflected as reported life sales in the second
quarter. Lower single premium pre-retirement and annuity sales in
Old Mutual Corporate were the main drivers of the decrease in Life
APE sales. While we saw an improvement in umbrella quote activity
relative to the levels at the end of 2020, corporate sales are
typically lumpy in nature and lower single premium sales were
recorded in the first quarter compared to Q4 2020. The decrease in
Life APE sales in Rest of Africa was mainly due to lower credit
life sales in Namibia, coupled with a deterioration in corporate
sales because of the economic environment. Life APE sales decreased
marginally in Mass and Foundation Cluster driven by lower credit
life sales following continued actions to manage our credit
exposure in Old Mutual Finance and lower issued risk sales in Q4
2020. This was partially offset by higher risk sales of Old Mutual
Protect. Personal Finance delivered significant growth in
single-premium annuity sales and strong growth in risk sales,
partially offset by lower recurring savings sales. H igher risk
sales were recorded in China during the first quarter. VNB
recovered well from 2020 levels due to a better mix of business
sold in the first quarter, with a VNB margin of 2.1% for the
quarter being well within our medium-term target range of 1.5% - 3%
as communicated in our FY2020 results. The negative impact of very
low levels of issued sales in the second quarter of 2020 and the
pressure on customers' disposable income at the height of the
pandemic adversely affected VNB in 2020.
Gross flows decreased when compared to the same period in the
prior year. The non-repeat of significant inflows into our Asset
Management businesses in East Africa resulted in a decline of more
than 50% from the prior year. Lower inflows in Futuregrowth,
partially offset by strong inflows in Marriott and our Liability
Driven Investment (LDI) capability resulted in a decrease in Gross
flows in Old Mutual Investments. A significant decrease in single
premium flows in Old Mutual Corporate was experienced, the result
of the non-repeat of large single premium pre-retirement savings
flows in the prior year. These decreases were partially offset by
strong flows in Old Mutual International and on the retail platform
of our Wealth Management business, with strong momentum experienced
towards the end of the quarter.
Negative NCCF stemmed from the decrease in Gross Flows and
significant volumes of mortality claims in our South African life
businesses. These claims were largely in line with expected claims
levels assumed in the December 2020 pandemic reserve, set up for
the anticipated impacts of COVID-19 in 2021. FUM increased largely
due to strong equity markets, despite negative NCCF.
The decrease in Loans and Advances from the prior year was
mainly driven by lower footfall in retail branches in South Africa
which has not yet fully recovered to pre-COVID levels, and the
further tightening of credit criteria in Old Mutual Finance as we
manage our risk appetite in the current environment. Growth in
Loans and Advances in Rest of Africa showed marginal growth,
largely due to the relaxation of lockdown restrictions in East
Africa and the ongoing recession in Namibia driving an increase in
government payroll-linked disbursements. Gross Written Premiums
showed good growth, the result of good customer retention and
pleasing acquisition rates in East Africa and Nigeria as well as
ongoing benefits from various strategic partnerships in Old Mutual
Insure.
Operating update
The second wave of the pandemic led to an increase in excess
death claims with approximately R2.7 billion of COVID-19 related
mortality claims recorded in the first quarter . However,
persistency was stronger than expected when provisions were
assessed at 31 December 2020. A portion of the December 2020
pandemic reserve of approximately R4 billion was released to
partially offset the excess death experience to date. Taking into
account the release of the provision, there is approximately R1.3
billion of the pandemic reserve remaining for mortality risk
related to COVID-19. We continue to closely monitor our claims
experience as future waves and their impacts remain uncertain. We
have actively engaged with brokers and consultants in our Property
and Casualty business regarding business interruption and rescue
claims processes and we continue to pay claims as documentation is
received. We paid R281 million of gross claims in the first
quarter.
The unrealised mark to market losses related to unlisted equity
and a portfolio of credit exposures in our Specialised Finance
business that arose in 2020 remain largely unchanged and we expect
these mark to market losses to unwind when further economic
recovery occurs. We are actively engaging with counterparties to
assess the ongoing pressure on their business operations and the
impact of these on our profits.
Outlook
We continue to focus on initiatives to improve productivity
levels to increase sales and to service and support our customers.
Higher FUM at the end of the quarter compared to the prior year
provides a strong asset base on which to earn fees in the second
quarter. Customer retention has been better than expected although
policy lapses in future months remain dependent on the pace of
economic recovery. Uncertainty over the vaccine rollout and
potential third and subsequent waves could place pressure on
earnings in the short term. However, we remain confident that the
strength of our balance sheet and liquidity will enable us to
withstand this volatility, deliver on our promises to customers and
provide a platform to accelerate growth as opportunities arise.
The financial information in this voluntary operating update is
the responsibility of the Old Mutual Limited Board of Directors and
has not been reviewed or reported on by the Group's external
auditors. Following the SENS announcement we released on 3 May 2021
advising shareholders of the appointment of Ernst & Young
Incorporated as joint auditor for the 2022 financial year, the
Group has received approval from the Prudential Authority.
Investor engagement
We will be hosting a Capital Markets Day on Thursday, 24 June
2021 from 13:00 - 17:00 CAT. The agenda will focus on the Group's
strategy, capital position relative to targets and other relevant
business updates. Investors and Media are invited to attend and
register on the following link:
http://www.overendstudio.co.za/events/OldMutual/2021/CapitalMarketsDay/rsvp.php
Sandton
Sponsors
JSE 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 T: +27 (0)11 217 1163
Head of Investor Relations M: +27 (83) 500 8019
E: tndlovu6@oldmutual.com
Communications
Tabby Tsengiwe T: +27 (11) 217 1953
General Manager of Public M: +27 (0)60 547 4947
Affairs and Communications 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 it has a niche business in Asia. With over 176 years of
heritage across sub-Saharan Africa, we are a crucial part of the
communities we 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
.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
UPDAMMATMTJTBFB
(END) Dow Jones Newswires
May 21, 2021 02:00 ET (06:00 GMT)
Old Mutual (LSE:OMU)
Historical Stock Chart
From Apr 2024 to May 2024
Old Mutual (LSE:OMU)
Historical Stock Chart
From May 2023 to May 2024