Old Mutual Limited

Good day and welcome to Old Mutual 2003 Annual Results. We are coming to you live from our offices in Johannesburg, South Africa. Before I get carried away and get ahead of myself, let me introduce myself. My name is Lange Mangaile. I am the Head of Investor Relations at Old Mutual. We have already uploaded our reporting suite on the website, so for those of you who have not seen it, you may already download it from there. When we get to the Q&A stage, I'll give you further instructions on the conference call. The operator will be available to assist you with questions. And for those who are on the webcast, I will be selecting the questions and reading them to you. Moving on to the agenda for today, we have our standard items, which we are really excited to present to you. First off is our Group CEO, Ian Williamson. He will take the stage and give us a strategic review. He will shortly be followed by Cass Patroski, our Group CFO, who will give you the financial review. After that, Ian, I'll ask Ian to come back to the stage. to cover the looking forward item on the agenda. I will then pick it up from there to cover the Q&A. Once we are done with the Q&A, Ian will close the day for us. So on that note, I would like to call Ian to the stage. Thank you.

Thank you, Langa, and welcome everyone to our 2023 results presentation. It's our strongest set of results, I think, since we listed back in Johannesburg in 2018, and it really is a privilege and a pleasure to stand here and to unpack them a little bit for you. These results demonstrate a clear link between the strategic choices that we've made, market share gains we've seen in key business segments, and the improved profitability of our businesses. We've seen good strategic delivery against our group targets and real progress towards our victory condition with robust underlying operational delivery. We have high conviction in our strategy, which I will get to shortly. So as I said, strategic choices across our segments are driving profitable top line growth. We gain market share in key market segments with life APE sales showing continuing strong momentum and growing by 17% to 14.6 billion rand. If we strip China out of the numbers, like for like life APE sales were up 25%. On the gross return premium side, we saw an increase of 14% to R25.5 billion, driven by both new sales and good client retention. From a value perspective, our top-line growth has been profitable in a competitive environment, with VNB up 37% to R1.9 billion, and we believe that this is a sustainable base to drive forward from. This is driven by higher margin risk sales, and obviously with the top line growth expanding, you've also seen margins expanding somewhat. Return on ad asset value up 170 basis points to 11.1%, driven by both the increase in RFO as well as higher shareholder investment returns. This is not yet where we would like it to be, but it is heading in the right direction. From a capital and returns perspective, the board approved a final dividend of 49 cents per share, bringing the total dividend for 2023 to 81 cents, an increase of 7% on 2022. We also should note that we concluded our share buyback of R1.5 billion during the second half of 2023. Just as a reminder, our strategic framework, which is our true north, has not changed. It's anchored in our victory condition of becoming our customers' first choice to sustain, grow, and protect their prosperity. And we use the value drivers on the right hand of the slide to link our strategic actions to our value creation process. We're building out an integrated financial services business underpinned by both a growth vector in growing our core business as well as in unlocking new growth engines for longer term growth in the future. So to recap on why we've chosen an integrated financial services strategy. This represents our strategic choice to deliver value through deeply engaging experiences for our customers partnering with them on a journey to lifetime financial wellness and we really care deeply about this it's deep in the dna of old mutual the integrated financial services is built around what we refer to as the my old mutual ecosystem which is a data rich platform bringing together customers and advisors with old mutual rewards underpinning a value-sharing system for customers who fulfill their lifetime goals with us. This ecosystem is advice-led, integrated, tech-forward, and underpinned by trust. So moving then on to strategic delivery. We said that we would measure our progress under five pillars. the first three of which sit underneath are growing and protecting the core theme. Holistic coverage of customer needs, distribution and digital engagement and operational efficiency. So under holistic coverage of customer needs, Old Mutual Protect continues to drive further increases in underwritten sales, particularly in our Mason Foundation cluster business. And this has provided us with a platform for strong profitability. We've also added an affordable private healthcare solution for low-income earners, which is delivered through their employers. And this highlights the benefit of group synergies we've been able to unlock with this product being underwritten by the recently acquired generic business in our mutual insurer stable. We launched our old mutual rewards program into our Namibian customer base during 2023. This has taken the total membership of our rewards program to 2.2 million customers. That's an increase of 22% on the prior year. Work in progress in this pillar includes the pilot of our old mutual home loan solution. This is a friends and family pilot. In conjunction with SA Home Loans as an origination partner, we originate assets onto the Omlaxa balance sheet directly. Turning into distribution and digital engagement. On the 1st of December, we concluded the acquisition and took management control of the Two Mountains business. This complements our existing Mason Foundation cluster businesses. and allows us vertical integration across the funeral services value chain. It also allows us to expand our distribution presence across five provinces in South Africa, and we believe there is material scope to further scale this business in partnership. Our My Old Mutual app has now reached 1.4 million of our customers, an increase of 17% on the prior year. Work in progress in this pillar includes the pilot phase of the digital advisor enablement tool set that we have built in partnership with One Connect Technology Solutions. So moving in onto operational efficiencies, the highlight of the second half of 2023 was that we migrated our entire green light risk book of business onto our new old mutual protect platform. This constitutes the migration of 1.85 million risk policies. Having them now on the same platform as Old Mutual Protect allows us to deliver operational efficiencies and will allow further efficiencies over time as we decommission the legacy administration systems. And on that note, work in progress is in fact the decommissioning of our legacy platforms. We have started this to start to unlock efficiencies the real benefits will only emerge when the systems are completely switched off. We also are progressing the finalization of the build of our savings and income proposition, which will be consolidated onto the same old neutral protect platform, resulting in further scale and efficiency benefits. So moving into the new growth engines and starting with These are intended to grow our profitability and our earnings in the longer term through both the high-growth strategic markets in Old Mutual Africa regions and through accelerating our integrated financial services capabilities with the build of both the bank and the Next 176 ecosystem. In strategic growth markets, we've continued the pivot to corporate on the live side, as well as the turnaround in our P&C business, which is now bearing fruit. We've seen gross flows in these regions up 54%, driven by new mandates in East Africa. And the P&C turnaround has contributed significantly to profitability, with East Africa as a region now turning to profitability. We continue to execute against a perimeter review of this business, assessing all our businesses in market for their potential to achieve a top three market position. In line with this framework, we've decided to exit the UAP insurance business in Tanzania with the sale of that business pending regulatory approval. Work in progress in strategic growth markets includes our focus on expanding our distribution and refining our product set in China. We've signed a headquarter-to-headquarter agreement with Everbright Bank, and I think I should acknowledge at this point that during 2023, we've experienced significant headwinds in China, both from a regulatory perspective as well as from a market and interest rate volatility point of view. In the area of strategic growth businesses, on the bank build, the review of our Section 16 application by the Prudential Authority is underway. They have confirmed that our application is legally complete and that they are reviewing it and will get back to us. The core capabilities of the bank are now complete, both on time and within the budget envelope of R1.75 billion that our board had approved. The capabilities that have been built on that platform have been independently reviewed by external auditors and certified to the PA as being fit for purpose and capable of supporting the running of a fully-fledged bank. We now shift in this program from project mode to what we are referring to as a transition phase before the launch. Once we receive our Section 17 license, which is a conditional bank license, we will be required to conduct an extensive industry testing period, which will take at least three months. During that period, we integrate into the national payment system and into all the payment clearinghouses in the Payments Association. We've set aside a budget of approximately R800 million for this phase. and we expect to complete this phase towards the end of this year. That will then take us to a position where the bank is ready for launch to the public. Work in progress in this pillar includes the further building out of our early stage innovative venture portfolio in NEXT 176. It's a bit early to opine on the success of that portfolio. as well as on orchestrating new strategic investments and partnerships for the group. Two examples of success in this area in the second half of 2023, we launched a branded digital wool solution under the Teba brand in partnership, and we launched a micro SME lending capability in Kenya in partnership with Standard Chartered Ventures. As a group we remain hugely proud of our efforts in sustainability. We are funders into 39% of the installed capacity of renewable energy in South Africa as a country. OMIC has invested R167 billion in the green economy amounting to around 37% of their assets under management And of this, we've invested 30 billion Rand, almost 31 billion Rand in renewable energy. We've received independent third party recognition for our efforts in this area with S&P Global increasing our ESG score to 43 in 2023. And that's an improvement of 34% over the prior year. OMIG also won an award as the best sustainable investment manager in Africa from European Global Investment, sorry, European Global Business. A few brief remarks on the operating environment that we needed to navigate during 2023. I don't think I need to tell anyone that lives in South Africa or indeed on the African continent just how tough it's been out there. We've seen severe growth constraints in the South African economy, with GDP growth in 2023 revised down to 0.6%. We've seen heightened market volatility across many of the Africa region's markets, with currency volatility and US dollar shortages being almost par for the course in many of these markets. As a consequence, businesses and consumers have faced tight financing conditions, low business confidence and constrained disposable and discretionary income. So in responding to these headwinds as a business, we've relied on our ecosystem partnerships to unlock new growth opportunities, as well as on the trust that consumers have in our brand and the depth of our customer relationships to retain and grow our customer base. And I think our intermediary force in particular has done a magnificent job of navigating through this environment. From an outlook perspective, we do believe that the interest rate cycle has peaked both in South Africa as well as generally across the continent. And we do expect rates to start to come down now in the medium term. In South Africa, a significant rollout of private power generation capacity is underway, which should start to alleviate the burden of load shedding on a forward-looking basis. These factors combined should serve as a catalyst and be growth positive in our key markets going forward. I'm now going to move on to a brief commentary of the performance of each of our segments, and then I will hand over to Kasper to take you through the detailed financial results. Starting with Mason Foundation Cluster, claims that his team have delivered a great outcome, underpinned by the power of our diverse distribution channels and focusing on margin accretive risk sales, which has delivered profitable growth. We're accelerating market share gains in the life insurance business in this segment with life APE sales up 14% driven by underwritten sales growth. Our top line growth in this segment is highly profitable and our VNB margin came out at 8.8% at the upper end of our target range. Persistency remains a key concern in the medium term. We continue to grow our lending book responsibly with the book growing 6% to 16.3 billion, but we have seen both higher borrowing costs and pressure on disposable income, leading to a credit loss ratio of 7.2% for the period and a decline in our net lending margin by 220 basis points. In our personal finance and wealth business, we've continued to scale our advisor footprint and deployed tech-forward productivity tool sets to help to drive productivity and growth in our channels. Kevin and her team have delivered strong profit growth and strong growth in top-line metrics. We're gaining market share with the material opportunities still in front of us to make further inroads in this regard. Life APE sales increased by 15%. driven by, in particular, guaranteed annuity sales, which were up 57%. And our value of new business grew by 64%, with the margin increasing by 30 basis points. We continue to enhance our client value proposition to further drive flows. Gross flows increased by 7% to 82.8 billion. We launched our high net worth proposition, Private Clients by Old Mutual Wealth, expanding that proposition and increasing assets under management in that area by 30% over the year. In Old Mutual Investments, we continue to benefit from the diverse capability set that we have, including our peer leading private markets franchise. And we delivered resilient results in difficult markets. Both assets under management and gross flows grew in a challenging environment with assets under management up 8% to R839 billion and gross flows increasing by 3% to R32.8 billion. This was supported by high inflows into money market, fixed income and into our private markets franchise. Our differentiated investment capability underpins the quality of earnings in this business. We again recorded an exceptional 14.7 billion Rand capital raise in the private markets business, supporting solid growth in non-annuity revenue and highlighting the benefits of this franchise. In Old Mutual Corporate, we continue to focus on both expanding our core business through new solution offerings and harnessing group synergies to drive growth. We delivered really strong top-ground growth in this business and enhanced profitability in the core. Life APE sales were up 68%, with the value of new business growing by 85%. The margin with rounding stayed at 1% relative to the prior year, but clearly given the higher increase in V&B, it did improve a little bit. We're broadening our value proposition to expand the core offering. Our REM channel consulting service has extended its suite of solutions to large corporate clients, and our SME Go offering to SMEs has expanded the range of business enabling and financial solutions that it offers over the period. A huge shout out to Prabhashni and her team for really excellent delivery during 2023. In Old Mutual Insure, we have also seen very pleasing top line growth from a combination of the benefit of the acquisitions that we've done, as well as operational efficiencies, supporting insurance revenue momentum. Acquisitions and partnerships have helped to drive both growth and product innovation. generic and one financial services contributed about four percent to our top line growth with acquisitions adding 266 million rand to the insurance service result and to that top line growth both our retail and specialty classes of business were impacted severely by the weather events in both the western cape and gauteng during 2023. We've also seen higher net reinsurance costs negatively impacting our underwriting margin, and we continue to invest in climate risk modeling capabilities to assist us to better manage extreme weather event risks on a forward-looking basis. I'm pleased to confirm that Charles Nocquier, who is the CEO of CGIC, has agreed to take on the role of Acting Managing Director of Old Mutual Insurer, following Gaut Napier's decision to leave the group. And finally, turning to Old Mutual Africa regions, Clement and the team have delivered another excellent year of profitability growth. The continued pivot to corporate and the strategic P&C turnaround has driven this improvement in profitability. Life APE sales were up 27%, driven by growth in corporate mandates, specifically in Kenya and across both retail and corporate in Uganda. The value of new business margin increased by 60 basis points to 2.8%, and on the short-term side, gross return premiums were up 3%, but particularly pleasing was the strong improvement in the underwriting margin by 870 basis points to near break even. We launched US dollar unit trust funds in Uganda to help to drive sales and assets under management. And in Zimbabwe, our Omari Fintechs platform reached 600,000 active customers a few short months after launch. So with that, I will hand you over to the capable hands of Kasper to take you through our financial results in detail. Kasper, over to you.

Thank you, Ian, and good morning all. I'm really pleased with the continued track record of delivery with a strong set of results for the 2023 year. In this presentation, we will be focusing on our IFRS 17 results. Please refer to our bridging pack for a comparison to our 2022 IFRS 4 results. Our diverse business delivered improvements on most of our earnings capital and value targets. Our results from operations increased by 14% to 8.3 billion. Adjusted deadline earnings grew 21%, further bolstered by increased returns on our shareholder portfolios, with cash generation remaining strong at 82%. Our return on net asset value increased to 11.1%, due to earnings growth and continued capital optimization. Final dividend of 49 cents per share was declared in line with our dividend policy, bringing the total dividend for the year to 81 cents, an increase of 7%. I remain extremely pleased with our sales traction, with the value of new business, or V&D, increasing substantially by 37%, to 1.9 billion and the v b margin increasing to 2.3 percent remaining well within our target range our contractual service margin or csm grew four percent translating to a return of 14.5 percent for 2023 unpacking the rfo in a bit more detail rfo in mass and foundation cluster grew by 22% to $1.8 billion, largely due to higher life profits, partly offset by lower profits from the banking and lending businesses. Life profits showed a strong improvement due to higher risk sales volumes, higher returns on the CSM, and better retention outcomes relative to stronger assumptions. Banking and lending profits declined due to the higher credit losses and the negative impacts of increased funding costs from higher interest rates. RFO and PFN wealth grew by 10% to 3.7 billion. Personal finance RFO benefited from better returns due to higher rates, interest rates on our CSM, positive reinsurance based changes and higher mobility profits. Our mortality experience was better in 2023. However, profits lowered due to the prior year benefiting from further excess COVID-19 provision releases. In wealth management, higher annuity revenue was supported by higher average assets levels. Non-annuity revenue increased significantly to improve market valuations of seed capital investments. RFO and all mutual investments reduced by 1% to $1.2 billion. Higher RFO in the alternatives business was offset by lower earnings in asset management and a reduction in specialised finance earnings due to market adjustments and higher overall expenses as a result of vacancies filled, investment in revenue generating initiatives and technology. Warfrix RFO increased by 19% to 1.7 billion. This performance was driven by high returns on the CSM, better than expected mortality underwriting experience, with prudent expense management also contributing to profits. Home Mitchell Insurer RFO decreased by 23% to $524 million. mainly due to the decline in underwriting results. The net underwriting result decreased by 92% to 46 million and an underwriting margin of 0.3%. This decrease was due to significant increase in reinsurance costs, higher weather-related claims experienced in our retail business, a once-off impairment in IOs, as well as an increase in insurance service expenses. African regions showed exceptional growth in RFA, more than doubling to 1.1 billion. This was driven by very strong growth in life and savings and profit casualty profits, with solid growth in asset management, partially dampened by reduced banking and lending profits due to continued challenging macroeconomic environments. Life and savings profit was driven by the ongoing shift towards more profitable corporate business as well as improved portality experience. Property and casualty RFO increased due to good top-line growth and improved underwriting margins, as Ian explained. The loss of net result from group activities, which includes our investment in new growth and innovation initiatives, increased by 22% to $1.8 billion. The increase in shell operational costs was primarily due to increased product and advisor platform project costs, with the rest of expenses increasing in line with inflation. As we transition, the existing and new product platforms are being run in parallel, resulting in duplicate costs which will reduce as old platforms are decommissioned. IFRES 17 implementation costs also contributed to higher expenses, and this will not repeat following the successful implementation in 2023. Adjusted headline earnings grew 21% to $5.9 billion, driven by strong operational growth and a significant increase in the shareholder investment return. The increase in the shareholder investment return is largely driven by higher equity and bond returns in South Africa and higher equity returns in our Africa regions. The increase in finance costs is driven by high interest rates in South Africa, as well as the issuance of 1.5 billion of subordinated floating rate debt during the year. The loss from associates represents our investment in China, Our loss increased as a result of decreased new business growth, increased claims, and rising reserve costs due to a downward trending yield curve. Shareholder tax increased as a consequence of increased profits. The effective tax rate remains above the statutory rate primarily due to the apportionment of expense deductions for tax. The main movement between adjusted headline earnings to headline earnings results from our operations in Zimbabwe, which remain excluded from adjusted headline earnings due to us not being able to access the majority of our capital. Zimbabwe profits of 2 billion rand were largely offset by the increase in the balance sheet foreign currency translation reserve with the net impact and increase in net asset value of 450 million. Accounting mismatches consist mainly of once-off hedging losses that arise from the transition of the hedging program to IFRS 17, which is now concluded. The impact of residual PLC on our profits continues to decrease as we unwind our operations and reduce cash balances, with a dividend of £3 million paid to the group in 2023. Overall, IFRE's earnings increased by 35% to $7.1 billion. I think this is my favorite slide. Our opening contractual service margin on 1 January 2023 was $59.8 billion. New business written grew the CSM by 5.3% in 2023. Annual interest contributed a further 9% compared to 5.6%. for 2022. The $1 billion positive economic experience is driven by actual returns being higher than expected on policyholder funds, resulting in an increase in expected asset-based fee income on most investment and smooth bonus products across the group. A key item to note is the $6.5 billion that is released into profit at an allocation rate of 9.4%. which is within the expected range, resulting in an overall return of 14.5% on the opening CSM balance. The group's value of new business increased by 37% to 1.9 million, and the VNB margin increased to 2.3%. Our VNB margin is sensitive to mix and volume changes between segments. Whilst we saw strong growth in higher margin risk business in MSC and PF, the margin was diluted by a very large RAND value accretive transaction in our corporate business. Given these outcomes, we will continue to target a VNB range as we prioritize growth in RAND value of new business at profitable margins. The strong growth in VNB is reflected in the three billion RAND increase in embedded value. with operating embedded value earnings increasing to 7.3 billion. Development costs relate mainly to new platforms to deliver proposition, digital and advisor platforms to support our integrated financial services strategy. Experience variances improved with positive mortality and expense variances partially offset by worse persistency. This resulted in a return on embedded value of 11.2%. Group equity value represents management's view of the market value of the group based on a sum of the parts valuation by line of business. The share price continues to trade at a significant discount to group equity value. We believe that the combination of improved margins and returns from our core business as well as the traction on our new growth engines, will close the gap between our market capitalization and the group equity value. We remain committed to our capital management framework, consisting of balance sheet strength, concerted capital deployments, and balance sheet efficiency as a means to enhancing value for shareholders. Our group solvency ratio of 178% remain solid and within our solvency target range. The reduction relative to 2022 is due to the inclusion of our China operations on a South African prudential basis for the first time this year. With approval from the Prudential Authority, this had previously been included on the local Chinese regulatory basis called CROS. Our view of the economic risks we are carrying aligns much more closely with CROS than the South African basis. Therefore, this change does not impact the group's cash generation, dividend-paying ability, or discretionary capital. We expect cash generation to be between 70% and 80% of adjusted headline earnings before capital optimizations. Operating segments generated gross free surplus of $4.8 billion in 2023, representing 82% of adjusted headline earnings, with $0.8 billion contributing to discretionary capital. We continue with various initiatives to optimize our capital, which will support capital generation in the medium term. This then brings us to our discretionary capital. The capital allocation for the year includes the acquisition of an equity stake in the Two Mountains Group, the generic acquisition and minority buyout of Old Mutual Finance Namibia and IWISE. In addition, capital support was provided to fund growth and innovation initiatives with the largest allocation to the bank build. $1.5 billion was returned to shareholders via the share buyback. The December discretionary capital balance of R1.1 billion has been earmarked for the continued investment in our growth and innovation initiatives. An OMLAXA special dividend of R2 billion has been approved by the Board. Should regulatory approval be obtained, this will increase our discretionary capital balance in 2024 and will therefore be available to fund growth or a return of capital to shareholders. Our group, RONAV, continues to trend upwards, supported by significant improvements in adjusted headline earnings. RONAV, excluding new growth initiatives, increased by 210 basis points to 13.1%, now above our cost of equity. Improvements to our RONAV, excluding growth initiatives, are dependent on three factors. The ongoing optimization of our balance sheet, the continued market share recovery of our retail segments, and the impacts of external market factors and investment returns. We have delivered on most of our medium-term targets and will continue to focus on improving our net owner writing margin and our RO-NAV. I am really proud of our team who has delivered this excellent set of results here today. And with that, over to you, Ian. Thank you.