Old Mutual Limited

...and pleasure it is to have you join us today. Before we start though, a couple of housekeeping items. For those in the room, just a reminder to keep our phones and mobile devices on silent and to avoid as many distractions as possible. And for those of us joining us on the webcast, please feel free to ask questions at any point during the presentation. And if you happen to be on the conference line, you're also welcome to ask questions and instructions will be provided to you after the presentation concludes. Onto today's agenda. We'll kick off today with a strategic review by Ian Williamson, our Chief Executive Officer. He'll then be followed by Kasper Trotsky, who will then do our financial review. And then Ian will return just for a short looking ahead section before we open up the floor for questions and answers. Thank you again. Over to you, Ian.

Thank you, Cesar, and welcome, everybody. It's a pleasure and a privilege to be here presenting a really good, solid set of results. Particularly pleasing that we've got quite a number of people here in the room, as well as a number on the webcast and phones. And to not have to talk about COVID for the first time in two and a half years is really a pleasure from my point of view. I think the 87% increase we've seen in our result from operations speaks to the strong recovery and growth we've experienced in our business. And our objective today is to give you a really good sense of the results that we have produced as well as the execution of our strategy. speaking to how we're starting to shift gears and accelerate growth in our business. So I'm going to start with a very brief overview of the financial highlights. Kasper will obviously give you a lot more detail on this later on. From a top line perspective, we've had live APE sales showing strong growth in a tough environment, 15% up, maintaining our new business margins within our target range of two to 3%, finalizing that margin at 2.2%. Our gross return premiums on the short term side were up 9%, and we've seen our group solvency ratio increase a further 300 basis points to 187%, so a very strong balance sheet. We've seen a small decline in funds under management. That's partly driven by market volatility, in particular increasing bond yields and obviously the value of bonds coming down, but also a small negative net climb cash flow, which we'll talk about in a bit more detail later. The headline number from the results result from operations up 87%. and that really excellent outcome, driving an increase in our return on net asset value up to 9.6%. The board has agreed to declare an interim dividend per share of 25 cents. That's flat on the prior year interim dividend, despite the fact that we distributed our stake in Nedbank during the second half of last year. Casper will provide further update on these and other group KPIs later in the presentation. By now I think you're all familiar with our strategic framework. We set our victory condition in 2019 as being to become our customers' first choice to sustain, grow and protect their prosperity. And we execute a series of initiatives in pursuit of that goal. And then we prioritize those initiatives utilizing a framework of value drivers, of revenue growth, expanding operating margins, improving competitive strength, efficient execution and delivery, and capital optimization. I spoke at our Capital Markets Day last year about an execution framework around rectify, simplify and amplify. And I'm pleased to say that rectification and simplification are substantially complete and we're shifting our focus very much onto amplifying. And we intend to do this by focusing on both growing and protecting our core business and on unlocking new growth engines. And we define the core as being those businesses in South Africa and the SADC countries, which are both very large and where we have relatively dominant market shares in those markets. And you can think about the growth engines as consisting of our East and West Africa businesses, our business in China, our investment in our transactional capability, and the next 176 cluster of businesses which are focusing on growth in adjacent markets and through partnerships. We believe if we execute well against all of this, we will responsibly build the most valuable businesses across the industry sectors that we choose to participate in. Shared value and sustainable transformation are embedded and integrated into the DNA of AltMutual and are at the core of how we do business. We became recently the first South African insurer to join the Net Zero Asset Owners Alliance and our asset manager, Omeg, also joined the Net Zero Asset Managers Initiative. And our leadership in the investment space of ESG has been confirmed by a multitude of industry awards, including some received during the period under review. From a transformation perspective, our deals both at future growth and at the group level, being the Bulatela transaction, are landmark transactions that demonstrate our continued leadership in transforming markets. In its core makeup, the bullet-sealer transaction follows our demutualization process from more than 20 years ago, where we provided millions of old mutual shares to all of our customers at the time. And this is set on the foundation of a fundamental belief that sustainability and inclusive growth are good for our customers and for our business in the long term. At all of our recent results announcements, I have given you updates on these seven commitments that we have made to our investors and which underpin the execution of our strategy. And I'm pleased to say that we continue to see solid delivery across all of these. In changing the trajectory of the customer experience, we've opened three new channels for customers to initiate claims, giving them choice and ease. These are largely digital in nature, including both WhatsApp and USSD channels. We've also built out further our old mutual rewards program, which now has one and a half million members. And crucially, from a financial perspective, the members on our rewards program have a higher average needs met per customer and better persistency than our customers who are not members of the rewards program. We're on track to meet our commitment to realize 750 million rand of cost savings by the end of this year. And in the mass and foundation cluster, we continue to regain our competitive advantage. We have entered into a partnership with Bridge Taxi Finance in the period under review. This provides us with access to 300,000 commuters daily. We intend to provide free Wi-Fi in the taxis to help us to gain customer insights and to provide a distribution channel for some of our solutions that are suitable for digital distribution. From a group perspective, it will also provide an incremental 130 million rand of GWP to Old Mutual Insure. And I think this transaction gives you a sense of how we are thinking about partnerships, trying to approach them from an enterprise perspective with multiple business units benefiting from the relationship. In personal finance and wealth, we continue to grow our restricted financial advisor numbers. They grew strongly in the half under review, with one of our network brands increasing their advisor network by over 30%. In our investment business, we see continued strong momentum in investment performance. At the end of the half, we had 94% of our funds performing above benchmark over a one-year period and 81% over a three-year period. These are the best relative performance figures we've had in our investment business for probably a decade. And finally, in embedding digitalization more firmly in our business, we have now concluded 95% of the migration of our South African technology estates to the cloud. At the end of June, that was sitting at 88%, and by the end of July, at 95%. And we intend to complete this process by the end of this year. I'd like to make a few comments around the operating environment that we faced in the first six months of the year. I don't think it's a surprise to anyone that it was a particularly challenging macro environment. There are a few variables that are particularly critical to our business. The first of these is inflation, and particularly consumer price inflation. It's been trending up globally around the world following the Russia-Ukraine conflict and supply chain disruption around the world. At the end of June, South African CPI came in at 7.4% and trended further upwards in July to 7.8%. We do, however, expect this number to come down in the next two months as we expect quite substantial reductions in the petrol price over the coming months. Inflation has also been trending upwards across all the other markets that we operate in. The unemployment situation in South Africa also continues to worsen, and we have had negative year-on-year income growth. So collectively, this results in consumers that are under a great deal of financial pressure, and for our business, translates into increased headwinds regarding new businesses, the need for continued vigilance on premium and loan repayment collections where customers are struggling to meet their obligations. The final thing I want to talk about in respect of these key variables is the producer price inflation. This is particularly material for the short-term insurance business. PPI in South Africa has been running at 15% to 20%, so much higher than consumer price inflation. And for me to ensure this impacts on the cost of replacement car parts, the price of used cars, and has resulted in us needing to critically re-evaluate our pricing levels in the short-term insurance business. Turning now to equity markets, which are the other, or markets in general, which are the other key drivers for our business from a macro perspective. We believe that equity markets are likely to remain volatile for the foreseeable future as global authorities struggle to get inflation under control and the Ukraine-Russia crisis plays out. The markets in South Africa was flat by the end of June on prior year, having enjoyed a period of good performance in the period up to June. And markets across the rest of the continent generally trended downwards over the period. And as I mentioned earlier, bond values are obviously under pressure, giving increased interest rates. This is relevant for us because we are in a significant proportion of our income from asset-based fees. I'm now going to comment briefly on the highlights of each of our business units' performance over the period, starting with the Masson Foundation cluster. The story in the Masson Foundation cluster is a really good one, and I think we're on a sustainable recovery trajectory. Momentum has been fantastic with risk sales stronger, improved savings sales and a consistent improvement in productivity across our distribution channels. Life AP sales were up 9% and the net client cash flow up 14%. We've now fully embedded our non-advised funeral product into our old mutual finance branches. The combination of the beta volumes and disciplined expense management has resulted in a further expansion of our VNB margin to 7.7%, solidly within the target range for this business. On the lending side, we've been deliberately cautious in our approach to loan book growth, and we have an unchanged loan book period on period. Our credit loss ratio is starting to normalize towards the revised long-term range of 6% to 8%, and we've revised this long-term range downwards from a 7% to 9% range communicated previously. We've seen a continued higher rate of collections from the performing book and have maintained good credit quality across the whole book. And finally, we are excited by the enterprise-wide opportunities presented by our new partnership with Bridge Taxi Finance. Moving on to personal finance and wealth. These two business clusters delivered 2 billion rand in neckline cash flow in the six months, up 85% over the prior year. Our live APE sales are still 13% above the pre-pandemic levels from H1 of 2019. We've delivered further enhancements to our Old Mutual Protect product offering based on feedback from intermediaries and advisors. However, we have seen quite a substantial pressure on our new business margins. And these were impacted by a tilting in the market out of higher margin guaranteed annuities to living annuities, as well as within our risk products from living benefits to the more commoditized death benefits. We are addressing the VNB decline by a number of concrete actions to boost volumes and to move our mix in the right direction. and these include a continued drive around weekly advisor activity, finishing off the last of the improvements on our risk product proposition to deliver slick processes in the complex risk space, improved and enriched customer data from a variety of sources, and integrating our rewards program into our product quotes, enabling us to better cross-sell to the existing client base, And we have made changes to management incentivization across our sales channels to drive desired focus areas. We will continue to further push advisor acquisition in the experienced advisor space where the customer network lies in the appropriate upper middle income segment. In our wealth business, we've seen improved sales through our independent distribution network as well as through our restricted advice channels. Funds under management have inevitably been somewhat impacted by overall weaker markets. We've seen significantly lower sales on the old mutual international side given market volatility, particularly in the U.S., but this has been more than offset by much increased support on our local platform. We look forward to launching our new savings and income propositions and range of solutions in pilot form in quarter four of this year. Moving on to the investment group. Both annuity and non-annuity revenue were up solidly in the period, with assets under management being strong after a buoyant second half of 2021. We have a very healthy, secured yet to flow, committed pipeline of business. And we've seen outstanding investment performance over the period. We continue to build on the product innovation that was commenced last year with the launch of the Future Growth High Growth Development Fund, which has a venture capital focus. This comes on the back of launching various new funds last year which all have good long-term scale potential. The ownership deals we've announced in this space show our commitment to transformation and will provide us with a competitiveness boost as we will be 51% black owned in both future growth as well as in the manager of all our listed South African assets. In old neutral corporate, we've seen a resilient, strong, all-round performance in a tough environment. With live AP sales up and the group assurance division being an absolute highlight with pleasing sales, scheme retention, and intelligent repricing, driving up the value of new business by 62%. We've seen increased quote activity in the market, and our net line cash flow has been boosted by lower benefit payments and fewer terminations relative to the prior period. We've successfully launched the second version now of our SME Go platform, following a successful pilot. And we intend to further complement this proposition following the acquisition of a stake in Preference Capital and SME Lender, which will further cement this offering. In a tough and fiercely competitive environment which impacted overall margins, Corporate has worked really hard with growing success. I'm going to play you a short video to illustrate how the customers of the SME Go platform are experiencing the offering.

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