Old Mutual Limited

Good morning, ladies and gentlemen, and thank you very much for taking the time to be with us today. With me today in Cape Town and Johannesburg is the Old Mutual Leadership Team. Looking at the agenda, I'll spend some time reflecting on how we fared against our strategy in all areas of the business. I'll then hand over to our CFO, Kasper Trotsky, to provide a financial review before making some concluding remarks, which will be followed by a question and answer session. For the better part of two centuries, Old Mutual has stood for a promise that we will work to champion mutually positive futures. This did not change in 2020. This past year was one of extreme crisis and uncertainty, a year in which Old Mutual prevailed and kept its promises. The impact of COVID-19 on human life was immense and the impact on capital markets and economies significant. By now, We've all been affected in some way by the pandemic. We offer our condolences to all those who have experienced loss, including members of the old mutual family. In 2020, we were extremely sensitive to the pressures our customers were facing, undertaking meaningful initiatives designed to assist them, their families and businesses. We paid mortality claims to the value of 13 billion rand, supporting our customers and their loved ones in their times of need. We also stood in solidarity with our frontline healthcare workers who were battling this pandemic by providing 4 billion rand of premium free life cover. And we played the important role of fund administrator for the Solidarity Fund, as well as pursuing various other initiatives across the continent. On the operational front, we redoubled our efforts to make sure that our customers kept receiving the high quality of service they have come to expect from us. We enhanced the digital capability of advisors to sell remotely across our channels while keeping our staff safe. Our diversified business model proved to be resilient, and we have remained profitable despite some material one-off items relating to the pandemic. In contrast to the economic slowdown witnessed in the year, our product rollout accelerated its pace, as our teams all stepped up to take control of our fortunes and those of our customers. Our balance sheet remains strong, and I'm pleased to tell you that the Board has declared a final dividend for 2020 of $0.35 per share, consistent with our dividend policy. I'm proud of the difference we were able to make in these remarkable, unsettling times. I'm proud of our people and the many ways in which we kept our promises to our customers. On this slide, we cover the macro environment in our operations. The South African economy went through a severe COVID-induced fall in Q2 of 2020, before recovering sharply in Q3 2020. and ending the year better than most commentators had expected. As the economy rebounded, the investments we had made in products, in digital, and in making our delivery as lockdown-proof as possible, meant we were well-equipped to maximise every opportunity. On the right-hand side, you can see how South African equity markets slumped at the time of hard lockdown, before beginning a gradual but sustained recovery to end the year at levels similar to those at the end of 2019. Finally, equity markets in our other African markets suffered more pronounced losses with a similar recovery pattern, except for Namibia, which remains well below its pre-pandemic market levels. On the left of this slide is data confirming the weekly excess mortality we experienced in South Africa and a forecast up to the end of September 2021. Our wave two experience was significantly worse than that of wave one, with infections and deaths accelerating in the fourth quarter. Despite this, our wave two increase in excess deaths has not been as severe as the national experience. The forecast by the South African Medical Research Council is key to considering the likelihood, timing, and severity of a third wave. We've been closely monitoring infection rates and mortality data on a weekly basis. The short-term provision raised in half one was utilized by the year end, and we incurred 1.9 billion rand of claims during the first two months of 2021. We have set aside two billion rand for experience beyond February, which includes an anticipated third wave at similar but less severe levels than wave one. Despite continuing uncertainty around this virus, we believe this is a solid basis on which to provide for the future effects of the pandemic. This slide gives a quick snapshot of Old Mutual's resilience in the face of the events of 2020. Our reported result from operations was 81% down compared to 2019. Excluding the direct impact of the pandemic, these were down 14%. From a business point of view, COVID has remained an earnings event and not one that has impacted the strength of the fabric of our business. Strong growth flows drove increased positive net client cash flow, which speaks to the underlying strength of the business. The positive momentum experienced in the last quarter has continued into the first quarter of 2021 and is gathering pace. Our life, as well as property and casualty businesses, bore the brunt of the COVID impacts. through mortality and business interruption claims and reserves, as well as indirectly through the lockdown and financial pressures that clients experienced. Casper will go into more detail about COVID-related impacts on our earnings. Our cash generation remains extremely solid and the decisive actions we've taken resulted in our liquidity and solvency levels remaining robust in all stress scenarios. Our customer-facing segments fared differently during the year, but all demonstrated that our commitment to be a certain friend in uncertain times ultimately prevailed. The Masson Foundation plus the customer base was particularly vulnerable to the impacts of the pandemic, and it was here that we paid out many of our COVID-related mortality claims. Encouragingly, we witnessed solid and sustained growth in productivity and sales from H2, which momentum is continuing. Recovery in the cluster's life sales was robust and the Q4 result was just 15% lower than that recorded in the same quarter of 2019. Similarly, our credit loss ratio has improved following the unwinding of pricing pressure on a cohort of loans granted 18 months ago. Personal finance and wealth management experienced increased demand for risk over savings products and a growing preference for single premium business. The business managed its expenses extremely well to deliver flat expense growth from the prior year while focusing on digital enablement of the sales force in a very competitive environment. Personal finance's pre-COVID results for the year include substantial overall net positive basis changes, whereas in 2019, these were negative. However, even without these changes and COVID impacts, the segment's performance was encouraging. I might mention here as well that both Mass and Foundation and Personal Finance have had very encouraging reinstatement rates among those customers who took up our offer of premium relief. All mutual investments demonstrated some encouraging trends in 2020. Highlights were good origination in alternatives business and encouraging neckline cash flow performance, which was driven by buoyant retail inflows to our income solutions franchise. The first half equity slump penalized the segment's equity fund performance following earlier long South Africa investment calls. However, asset values recovered well in the second half and short-term listed investment performance has been good. The segment maintained high levels of deal flow during the year, originating more than R15 billion, particularly in unlisted equity, infrastructure and credit, which will allow it to take advantage of subsequent opportunities. Our group assurance offering in Old Mutual Corporate experienced substantial mortality losses and the segment was further impacted by a limited ability to generate new business, as employers took a cautious view in responding to the pandemic. Old Mutual Insure achieved pleasing growth in most of its business lines, although the underwriting result, as well as margins, suffered. CJIC experienced an unprecedented level of claims in the first half as the economy struggled. But I'm pleased to report that from late August last year, we've seen a sustained recovery in CJIC's business performance, and our digital short-term offering, IWAS, surpassed a billion rand in premium income for the first time. The impact of COVID-19 on the rest of Africa business has been much lower than that of South Africa, our largest market. We continue to make improvements in our rest of Africa business during 2020. Our property and casualty business showed good top-line growth, asset management recorded strong inflows, and Malawi continued to achieve good growth, particularly in the life business. Also pleasing was the extent to which our West Africa operations losses have reduced. I am confident that we are poised for growth in this portfolio. Across the business, in the face of everything that the year threw at us, our fundamentals, our brands and our channels remain solid. This slide gives a sense of how lockdown affected our ability to drive new business and the recovery we saw in the second half of the year. In quarter one, weekly activity levels were tracking close to prior year in the mass and foundation cluster and personal finance and wealth management. And then hard lockdown was imposed. The impact was sudden and severe for both segments. During this time, we fast-tracked our digital offerings and supported our advisors by enabling remote selling in several dynamic, practical ways. As we gradually mobilized our on-the-ground presence and rolled out our fully digital risk product, Old Mutual Protect, a more encouraging picture began to emerge. By quarter four, both Masson Foundation and Personal Finance and Wealth Management were recovering, and this momentum continues to date. The quarter four green shoots I pointed to in the previous slide derived largely from our three-phase coronavirus response strategy, which we first communicated to you six months ago. The first phase was about stabilization. We continue to do well in optimizing our capital, and the dividend declaration in line with our policy points to our ability to continue to reward shareholders. The well-being of our people and customers was always a non-negotiable. And I'm satisfied that we did everything we could to minimize the health risks posed by the pandemic. Six months ago, I shared with you that we had already embarked on phase two, transitioning out of the immediate first effects of COVID-19 and working to mitigate the impacts on our results and business for the medium term. We also focused on accelerating digital transformation and broadening our solution set. After stabilizing and transitioning our business, moving it beyond risk to opportunity, we embarked on the final phase. This involves re-envisioning a nimble, impactful old mutual that unashamedly puts the customer front and center of a refreshed strategy. I'll briefly touch on how we see re-envisioning the business as a forward-looking process It builds on our core strengths to meet the opportunities presented by a rapidly changing world. A world in which competition is fiercer than ever and disruption is a given. We have an extremely solid core based on diversity of markets, products and delivery channels. We will keep this core strong. It's been the lifeblood of Old Mutual for over 175 years and the reason why our brand remains so strong. and it split for purpose, the purpose which is now embodied in our new strategy. We began re-envisioning Old Mutual before anyone had heard of COVID-19. This manifested itself in our digital transformation, which in this time of severe crisis has stood us in good stead, making us more robust, more adaptable, and more relevant to our customers. In the next few slides, I'll discuss how our strategy is deliberate in aggressively driving brand differentiation, providing solutions that meet changing customer needs, and enabling a seamless transition between face-to-face and digital customer journeys. In 2019, we refreshed our strategy and transitioned from a tactical plan which we referred to as the Eight Battlegrounds and into our truly mutual strategy. We believe that we can become our customers' first choice to sustain, grow, and protect their prosperity by delivering on the five interconnected pillars summarized by the acronym CARES. Old Mutual CARES means that we will be always present first for our customers, wherever and whenever they need us. with propositions and advice that are relevant to their needs. Increasingly, we will offer customers rewarding digital engagements. Engaged employees who feel a deep sense of belonging and connection with our purpose will deliver a customer experience which embodies our truly mutual strategy. They will deliver solutions that lead whatever the need or product may be. We will continue to invest in our core propositions, which are advice, insurance and investing. And as we move forward, we will deepen our capabilities in transactional and lending solutions. When we bring these five pillars together, they work coherently and in an interconnected way to generate mutually beneficial outcomes for all our stakeholders. So that every time we interact with a customer or design a product or solution, We're thinking about how we can make a difference and demonstrate that all mutual cares. As we succeed in delivering on these pillars, we will become our customers' first choice, and ultimately this will enable us to build the most valuable businesses in our industry in a responsible manner. This slide covers proof points pointing to some of the ways in which we have delivered against our care strategy. We've invested more than 140 billion rand in the green economy to preserve our planet and its people for the next generation. Our funds are invested in renewable energy, housing, agriculture, and a variety of sustainable ventures. And they are delivering risk-adjusted returns. We play a stewardship role over assets totaling more than 300 billion rand to meet our fiduciary obligations in managing client funds. I've already mentioned the 13 billion Rand we paid in mortality claims to our customers, keeping our promises at a key moment of truth for them. The ways in which we consistently keep our promises helped to make Old Mutual the fifth most valued brand in Africa in 2020. In independent customer satisfaction benchmarks, Old Mutual Insure and the South African Life Operation were rated first and second respectively in their categories. In September, I told you that in South Africa we were rapidly developing, testing and deploying new digital channels. In the second half of the year, we continued along that path, expanding our platforms through public websites, mobile apps, as well as WhatsApp and USSD channels across our regions. We continue to increase digital adoption by our customers, and today we have 406,000 active digital customers worldwide. an exceptional growth of 50% from the prior year. Our rewards program continues to retain and attract customers. To date, we've awarded an amazing 1.6 billion points, which customers can redeem with a growing set of rewards partners. We greatly value the way in which our people persevered and serviced our customers despite the multiple challenges of working from home. A distributed workforce pilot will support new ways of working, and our diversity and inclusion strategy has enhanced how we work together. At our interim results, I told you how we were working hard to keep employees in the loop about our business, despite them being physically dispersed. I'm therefore pleased to note that a recent culture survey found our people remain engaged, that they feel a sense of belonging and connection to the organisation. Six months ago I also mentioned that we had processed 14,000 applications for our new flexible digital risk proposition, Old Mutual Protect, in South Africa and Namibia. I can tell you that since then we've processed more than 202,000 applications for this groundbreaking product. This time a year ago I told you that we were using automation to drive down costs, improve operational efficiency, and to make greater use of data-driven new business leads. We have delivered on all of these aspirations. In South Africa, Old Mutual Insurer has deployed a software tool that allows prices, rules, adjustments, and risk scores to be deployed into the market in real time. This will enable us to be more competitive and improve the customer and intermediary experience. In Malawi, we've launched insurance products tailored for women, as well as SME retailers. And in South Africa and Malawi, we've launched non-advised funeral products, which are affordable and easily accessible. All these achievements represent how we remain resilient, focused on our customers' features and our growing ability to develop and implement compelling digital tools and services in an age of increasing disruptions. I'll now hand you over to Kasper to take you through our 2020 financials. Kasper, over to you.

Thank you, Ian, and good morning, ladies and gentlemen. I will be focusing on our financial delivery for the 2020 financial year and will deal with key movements in our earnings. Firstly, results from operations were resilient on a pre-COVID basis at $7.7 billion. 14% down on the prior year. Direct COVID impacts for the full year amounted to $6.1 billion due to an increase in pandemic reserves, business interruption claims and negative mark-to-market losses in our credits and private equity portfolios. Adjusted headline earnings of $2.5 billion was 75% down on the prior year. impacted further by lower shareholder investment returns and net bank earnings. Our group solvency ended the year in a very strong position with the benefits of key regulatory approvals and other capital management actions offsetting significant stress from lower earnings and additional provisions raised for COVID-19. The return on embedded value remained positive despite the substantial provision raised for COVID-19 impacts. On a pre-COVID basis, the profitability of most of my businesses was further impacted by negative GDP growth, job losses, and the significant drop in investment markets at the end of the first quarter. This negatively impacted asset returns, sales levels, and persistency levels. Our mutual insurer had an excellent year on a pre-COVID basis, given much slower claims experienced. Net expenses from central functions were higher, mainly due to lower interest earned on central cash balances and a small treasury loss on central assets held, more than offsetting a decrease in gross expenses. Given improved activity levels towards the end of the year, we expect a strong recovery in operating earnings in all our businesses in 2021. We have applied a methodology largely consistent with our half year reporting to identify direct COVID related COVID-19 related items, business interruption and rescue reserves in respect of only to ensure CGIC and rest of Africa, including IBNRs of 791 million have been provided for. We have included profit of 293 million relating to the personal lines motorbook, given the abnormal circumstances in the year resulting in lower claims. Unrealised mark-to-market losses across the investment, credits and private equity portfolios, which we carry at fair value, had an aggregate impact of $704 million. The impact on the credit portfolio is largely due to the widening of credit spreads during the year. The equity portfolio has seen some fair value adjustments in line with listed sectors impacted by the pandemic. These impacts are expected to reverse as spreads normalise and we are largely satisfied with the quality of our investment credit portfolio. We have increased our expected credit loss provisions in our mutual finance and Fahulu by $169 million to allow for the deterioration in forward-looking economic forecasts. We have also incurred incremental net expenses of $350 million directly due to the pandemic to stabilise and transition our mutual out of the crisis. On this slide, we analyzed movements in pandemic reserves to 31 December 2020. We raised total reserves of $1.3 billion at the half year. In total, actual claims in the second half of the year were $204 million higher than the provision raised at the half-year, with an acceleration in infection and excess death rates in the fourth quarter. As Ian explained, we therefore raised additional reserves of $3.9 billion at year-end, bringing the total amount provided for to $5.5 billion. Of the $3.9 billion, we have already recorded COVID-related mortality claims of $1.9 billion in January and February, leaving $2 billion for future claims. We have released discretionary reserves of $1.1 billion relating to mortality in Mass and Foundation, reducing the overall income statement impact to $4.4 billion. We have discussed the results from operations both on a pre- and post-COVID basis. The reduction in the shareholder investment return was mainly due to the lower interest rate environment, the decline in the average shareholder asset base, and fair value losses on unlisted equity portfolios. Finance costs were down due to lower average debt levels and fair value gains on interest rate swaps. Income from associates was down 64%, from $2.5 billion to $970 million, largely due to the decrease in net banks' earnings. The decrease in non-controlling interest is driven by lower profits in own mutual finance. A reminder that adjusted headline earnings is the key earnings measure that is used to set management targets for earning growth and RO-NAF. Here we provide a reconciliation of adjusted headline earnings to headline earnings as well as a reconciliation of headline earnings to IFRS earnings. Items excluded from adjusted headline earnings are the elimination of negative investment return on policy of the investments in group equity and debt instruments. The impact of restructuring includes the reversal of a data provision in wealth related to prior year provision raised for the take-on of an international IT platform from CULTA. Zimbabwe recorded profits of $1.1 billion, where substantial investment returns exceeded continued hyperinflation and the devaluation of the Zimbabwean dollar. We caution investors that these returns may reverse in future, and we remain concerned that the required IFRS accounting treatment results in income statement profits being partially offset by FCT losses recorded in reserves. Residual PLC reported a profit of $229 million as losses on residual investments and running costs were more than offset by a tax refund received. Excluded from headline earnings are impairment of goodwill and other intangibles mainly relating to a mutual finance and the write-down of investment in associate undertakings in respect of net bank to recoverable value. Here we focus on key areas of emphasis from a finance perspective. The first relates to significant balance sheet judgments finalized during the year end. The finalization of the pandemic reserve in the life business was dependent on getting accurate, up-to-date information on the extent of waves to infections and deaths, which only peaked in late January and early February, as well as taking into account potential further waves given the slow rollout of vaccines in South Africa. Equally, provision for business option interruption remained complex as the impact of court cases and further interpretations of potential reinsurance outcomes caused us to revise our estimates post the year end. We reassessed the value of use in respect of Nedbank with no further impairment required. and additional provisions were also raised in East Africa following a balance sheet remediation exercise. On the market risk front, we made solid progress in the implementation of the three-manager model, which allows us to better manage risk across the whole balance sheet. We successfully executed the change in investment strategy in respect of our risk products, which resulted in a substantial de-risking of our balance sheet, as well as a once-off financial benefit of R1.8 billion. We will continue to focus on capital optimisation as well as expense reduction initiatives. We are pleased with the group as well as the Omlaxa solvency positions, which have remained extremely robust. In Omlaxa, the reduction of the NetBank share price reduced both owned funds and the capital requirements. The transfer of 12.4% of NetBank shares to Omnitral Emerging Markets further decreased owned funds and capital requirements. The OML 2019 ratio has been re-presented to reflect the insurance group designation, treating NetBank as an equity rather than on a Basel III basis and increasing the ratio from 161% to 189%. Both own funds and the Solentik requirement reduced during the year due to the reduction in the value of NetBank. We are in the process of revising our group target ranges of 155% to 175% for OML and expect an upward revision of that target range. The actual ratio of 185% is expected to remain in the upper end of our target range. An ongoing recovery in the economy and reduced risk levels could see an acceleration of capital returns to shareholders in the near to medium term. Our return on embedded value was positive with new business value of $621 million and existing business contributions of $5.8 billion, exceeding the impact of negative operating variances, basis changes and economic changes. Extremely pleasing were the positive expense variances given strong expense management during the year. Basis changes were dominated by short-term COVID-related changes of $4.3 billion and and a strengthening of mortality and persistency bases, partially offset by the positive impacts following the change in investment strategy on our risk books. Group equity value represents management's view of equity valuations for each of the underlying businesses and is reduced to $98.5 billion from $116.5 billion in the prior year. Our life and savings business, or covered business, was valid using embedded value, where embedded value recognises future profit streams for business that is in existence at the end of the year, but does not recognise future new business, and excludes the value of our asset management and lending businesses. Material non-covered businesses were valued at fair value using a combination of discounted cash flow models or comparable price earnings or price-to-book multiples. We reflect owned funds that have been calculated in accordance with the regulatory rules. The key differences between owned funds and our group equity value is the lower value that the regulatory basis requires for net banking. offset by the inclusion of subordinated debts and the non-recognition of intangible assets and participation spoken about earlier. For NetBank, we have used the recoverable value of future dividend streams that we expect to receive over time, discounted at an appropriate interest rate. It should be noted that the share price currently trades at a substantial discount to all measures of value including IFRS net asset value. Thank you for your time. I will now hand you back to Ian.

Thanks, Kasper. Ladies and gentlemen, thanks for your attention this morning and for your ongoing interest in Old Mutual. We've come through an exceptionally difficult year in good shape and extremely well equipped to build on our core, our brand, our strategy, and our strengths. Already this year, we're seeing strong evidence of how productivity levels are recovering. Our digital rollout stood us in good stead in 2020, and we will keep delivering on digital at pace as we continue with the dynamic ongoing process of re-envisioning Old Mutual. Kasper and I have discussed our COVID-19 provisions for the rest of 2021, and we're confident these are appropriate. We believe that the disciplined and accelerated execution of our refresh strategy will put us in a good position to win in the market as the economy recovers. With engaged employees in 2021, we're succeeding in gaining new customers by being always present first with simpler, more impactful, improved product sets with solutions that lead delivered through a rewarding digital experience. As we give customers a richer, more rewarding old mutual experience, we're increasingly enhancing and expanding our suite of products, including transactional and lending, to improve our customer value proposition. While our business was challenged under the pandemic, we're confident that our result from operations and return on net asset value will recover to their 2019 levels by 2023. Given good economic tailwinds, possibly sooner. In the medium term, we're targeting a new business margin of 1.5% to 3% across our segments. We anticipate our underwriting margin target will remain at between 4% and 6%. And by the end of 2022, we are confident of having delivered on our target run rate cost savings of R750 million. Delivery of this will come from automation and process efficiencies in our core life and short-term businesses. As Casper has said, barring unanticipated risks materialising, we anticipate an acceleration in the pace of capital returns to shareholders in the medium term as we refine our capital ranges. We look forward to giving you further detail on these developments at a Capital Markets Day in June. We'll now open up for any questions that you may have. Thanks very much.