Wrap Text
Annual results for the year ended 31 December 2020
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
ISIN: ZAE000255360
LEI: 213800MON84ZWWPQCN47
JSE Share Code: OMU
MSE Share Code: OMU
NSX Share Code: OMM
ZSE Share Code: OMU
("Old Mutual" or "OM" or "the Company") Ref
03/21
23 March 2021
Short-form announcement: Annual results for the year ended 31 December 2020
A MESSAGE FROM OUR CEO
2020 was one of the most challenging years our organisation has ever faced. Our business remained well capitalised through the execution of decisive
management actions and our liquidity position was strong, despite the material negative impact COVID-19 had on our earnings. The fundamentals of our business
were tested through this extreme scenario but we remained true to our purpose of championing mutually positive futures every day and our diversified business
model enabled us to demonstrate resilience in this environment.
We remained deeply committed to supporting our customers, employees and communities through these unprecedented times. During 2020 we supported customers and
their families through fast tracked payment of approximately R13 billion in mortality claims during the year. As part of our ongoing relief initiatives to
customers we made interim payments in respect of business interruption claims to qualifying SME customers, to enable them to continue operating. We offered
various financial support initiatives to provide relief to customers, intermediaries, communities and our employees. We have extended premium free cover to
frontline healthcare workers in South Africa, Malawi and Zimbabwe. In many of our operations across the continent we donated medical supplies, protective
equipment and funding to frontline health care workers and regional hospitals.
Despite the impact to earnings, strong gross inflows throughout the year drove a significant increase in NCCF demonstrating the resilience of our business. We
have experienced good recovery in adviser productivity levels and new business sales volumes in the second half of the year following the very low levels in
the second quarter at the height of lockdown restrictions in South Africa. Lockdown restrictions had a material impact on our ability to interact face to face
with our customers, particularly during the second quarter. Digital offerings to enhance the customer experience, that were already in development as part of
our vision to build a leading African digital platform business, were accelerated and rolled out during the year, enabling us to meet customer needs remotely.
In South Africa, we introduced alternative direct digital channels such as email, USSD and WhatsApp platforms to pay funeral claims and facilitate
disinvestments. Take up rates of these channels have accelerated significantly in the fourth quarter with strong traction in 2021. In the Southern and
East African regions, we introduced USSD features and a Facebook Messenger Chatbot to assist customers with to open investment accounts, manage their accounts
and request withdrawals. We have refreshed our public websites and mobile applications to provide access to all of our solutions in one place with intuitive
navigation according to customer needs. Through this we achieved the automation of various key customer journeys and experienced strong growth in our active
digital customer count.
We have made good strides operationally and simplification remains a key focus area to enhance efficiencies across the business. Areas of progress include the
consolidation of debt programmes, continued digital enablement and the migration of approximately 15% of workloads to cloud infrastructure to date. We have
seen significant progress in the roll out of Old Mutual Protect, more than 10,000 advisers are accredited to provide the new product offerings and enabled to
make use of the digital platform. Approximately 202,000 applications were issued for Old Mutual Protect in 2020, with over 125,000 of these issued in the
fourth quarter. During 2021, a savings and income proposition will be offered alongside the Old Mutual Protect range utilising the same core infrastructure,
which will complete the refresh of our Life and savings offering in South Africa and Namibia. In addition, the simplified new non advice funeral product
rolled out in branches and distributed through loan consultants has been well received by customers.
We have presented a view of Results from Operations where we exclude certain direct COVID-19 impacts, this being a non-IFRS measure. Only items that are
directly attributable to COVID-19, separately identifiable and reliably measurable have been excluded in this view. We have not made any pro forma adjustments
for impacts such as the loss of earnings due to lower sales activity resulting from lockdown restrictions. Results from Operations excluding direct COVID-19
impacts decreased by 14% from the prior year largely due to lower sales volumes in Life and Savings impacted by lockdown restrictions, the non repeat of
significant positive basis changes in the prior year and higher credit losses in the banking business as customers continue to face financial pressure. These
impacts were partially offset by the optimisation of hedging strategies which led to a reserve release of R1.8 billion due to a reduction in interest rate
risk. Results from Operations decreased by 81% from the prior year largely due to the net pandemic impact of R4,393 million. Business interruption and rescue
reserves of R791 million and mark to market losses of R704 million related to unlisted equity and a portfolio of credit exposures further contributed to the
decrease in profits. A management overlay referencing several possible economic recovery scenarios and their impact on the credit environment resulted in an
increase of R169 million in the expected credit loss provision in South Africa, Namibia and East Africa. We have excluded the total positive underwriting
result of R293 million in the Personal lines business in Old Mutual Insure as we benefitted from a significant reduction in claims volumes as a result of
lower customer activity levels due to lockdown restrictions.
We are excited to have launched our Truly Mutual strategy, underpinned by five interconnected strategic pillars. When we listed in Africa in 2018 we
communicated our medium term focus areas and reported on these over the past reporting periods. In parallel, we have been formulating a longer term strategy
that was approved by the Board. In setting our new strategy the overarching vision is to be our customers' first choice for their financial needs through the
services we offer. We believe that successful execution on the five pillars will enable us to be our customers' first choice and allow us to build the most
valuable businesses in the industry, delivering sustainable long term value for shareholders.
Iain Williamson
Chief Executive Officer
GROUP HIGHLIGHTS
% change
(FY 2020 vs
(Rm unless otherwise stated) FY 2020 FY 2019 FY 2019)
Adjusted Headline Earnings (AHE) 2,484 9,856 (75%)
Adjusted Headline Earnings per share (cents) 54.3 209.3 (74%)
Results from Operations (RFO) excluding direct
COVID-19 impacts 7,742 8,972 (14%)
Results from Operations (RFO) 1,663 8,972 (81%)
Final dividend per share (cents) 35 75 (53%)
Return on Net Asset Value (RoNAV) (%) 3.8% 15.2% (1140 bps)
FUM (Rbn) 1,104.6 1,048.5 5%
Life APE sales 9,786 12,268 (20%)
Gross flows 187,137 170,689 10%
NCCF (Rbn) 9.6 2.2 >100%
Free Surplus Generated from Operations 4,700 6,794 (31%)
% of AHE converted to Free Surplus Generated 189% 69% 12000 bps
Group Solvency ratio(%)1,2 185% 189% (400 bps)
1 These metrics include the results of Zimbabwe. All other key performance indicators exclude Zimbabwe.
2 We have re-presented the December 2019 solvency position in line with the final group designation by the Prudential Authority received during 2020.
Changes in the macro environment including negative GDP growth forecasts and interest rate cuts, have resulted in increased uncertainty around future cashflow
projections for certain assets. We continue to remain cautious in assessing the valuations of underlying investments. During the first half of the year, we
recognised an impairment of goodwill in respect of our investment in Old Mutual Finance. This was largely driven by the decline in GDP growth outlook for
South Africa. We also recognised an impairment in respect of our investment in Nedbank, triggered by the significant decline in the Nedbank share price. As
part of our full year assessment, we have reviewed the assumptions and economic recovery scenarios in our valuation models and concluded that no further
impairments were required. These impairments are recognised in the IFRS income statement, however, are not recognised in Headline Earnings (HE) as this is an
explicit adjusting item in accordance with the JSE Circular. Accordingly, they are also not recognised in AHE.
IFRS HIGHLIGHTS % change
(Rm unless otherwise stated) (FY 2020 vs
FY 2020 FY 2019 FY 2019)
IFRS (Loss)/Profit after tax attributable to equity holders of
the parent (5,097) 9,386 (>100%)
Headline Earnings (HE) 5,088 10,641 (52%)
Basic earnings per share (cents) (116.3) 208.3 (>100%)
Headline Earnings per share (HEPS) 116.1 236.1 (51%)
OUTLOOK
During the second half of the year, we focused on maintaining strong levels of solvency and liquidity and identifying opportunities for simplification and
efficiencies in our business. This will continue to be an important focus as we transition the business out of this period of global crisis. We are focused on
driving recovery in RFO to 2019 levels and improving RoNAV to above cost of equity as rapidly as possible, however the pace of the recovery will depend on GDP
growth and equity market levels. We expect to achieve this recovery by 2023, and these targets have been included in executive remuneration incentive plans.
Our VNB margin is unlikely to fully recover in 2021, however as sales and productivity levels return to historic levels this will improve the VNB margin. In
the medium term we are targeting a VNB margin of between 1.5% and 3%. We remain committed to delivering R750 million of pre-tax run rate cost savings by the
end of 2022. We expect these savings to be delivered largely through efficiency improvements in Old Mutual Insure, Personal Finance and Wealth Management as
well as simplification and digitalisation in our enabling functions. The targets included in this announcement do not constitute profit forecasts and have not
been reviewed or reported on by the Group's auditors.
FINAL DIVIDEND DECLARATION
The Board of directors has approved and declared a final dividend of 35 cents per ordinary share.
The final dividend of 35 cents per share, results in a dividend cover of 1.50 times of Adjusted Headline Earnings for the 2020 year which is in line with Old
Mutual Limited's dividend cover target range of 1.50 times to 2.00 times. The final dividend will be paid out of distributable reserves and is payable on 24
May 2021 to all ordinary shareholders recorded on the record date.
Shareholders on the London, Malawian, Namibian and Zimbabwean registers will be paid in the local currency equivalents of the final dividends.
Old Mutual Limited'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
4,708,553,649.
Declaration date Tuesday, 23 March 2021
Finalisation announcement and exchange rates announced Monday, 29 March 2021 by 11.00
Transfers suspended between registers Close of business on Monday, 29 March 2021
Last day to trade cum dividend for shareholders on the Tuesday, 13 April 2021
South African Register and Malawi, Namibia and Zimbabwe
branch registers
Ex-dividend date for shareholders on the South African Wednesday, 14 April 2021
Register and Malawi, Namibia and Zimbabwe branch registers
Last day to trade cum dividend for shareholders on the UK Wednesday, 14 April 2021
register
Ex-dividend date for shareholders on the UK register Thursday, 15 April 2021
Record date (all registers) Close of business on Friday, 16 April 2021
Transfers between registers restart Opening of business on Monday, 19 April 2021
Final Dividend payment date Monday, 24 May 2021
Share certificates for shareholders on the South African register may not be dematerialised or rematerialised between Wednesday, 14 April and Friday, 16 April
2021, both dates inclusive. Transfers between the registers may not take place between Tuesday, 30 March and Friday, 16 April 2021, both dates inclusive.
Trading in shares held on the Namibian section of the principal register through Old Mutual (Namibia) Nominees (Pty) Limited will not be permitted between
Monday, 29 March and Friday, 16 April 2021, both dates inclusive.
For South African shareholders, the dividend will be subject to a dividend withholding tax of 20% for all shareholders who are not exempt from or do not
qualify for a reduced rate of withholding tax. The net dividend payable to shareholders subject to withholding tax at a rate of 20% amounts to 28 cents per
share. Shareholders that are tax resident 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-SA 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/dividend-tax-considerations.
SHORT FORM ANNOUNCEMENT
This short form announcement is the responsibility of the directors. It is only a summary of the information contained in the full announcement and does not
contain full or complete details. Any investment decision should be based on the full announcement accessible from Tuesday, 23 March 2021, via the JSE link
https://senspdf.jse.co.za/documents/2021/jse/isse/OMUE/FY20Result.pdf and also available on the Company's website at https://www.oldmutual.com/investor-
relations/reporting-centre/results. Copies of the full announcement may also be requested by contacting Investor Relations per details below.
The short form announcement has itself not been audited, however, the financial information included herein has been extracted from the audited consolidated
annual financial statements which have been audited by KPMG Inc. and Deloitte & Touche, who expressed an unmodified opinion thereon. The audit opinion
includes key audit matters related to the valuation of life insurance contract liabilities and investment contract liabilities with discretionary
participating features, the valuation of the net best estimate business interruption reserve, the valuation of investments and securities, the assessment of
expected credit losses on loans and advances and the valuation of investment property. The Old Mutual Limited Audited Annual Financial Statements containing
the audit opinion, including key audit matters, can be obtained on the Company's website via the link https://www.oldmutual.com/investor-relations/reporting-
centre/reports.
A webcast of the presentation of the 2020 Final Results and Q&A will be broadcast live on 23 March 2021 at 11.00 am South African time on the Company's
website www.oldmutual.com. Analysts and investors who wish to participate in the webcast can pre-register using the following link:
https://78449.themediaframe.com/dataconf/productusers/oldmutual/mediaframe/43670/indexl.html
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=8903603&linkSecurityString=da8c1ae27
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 38691
The replay will be available for five business days.
Sponsors
Johannesburg Stock Exchange
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
Head of Investor Relations
T: +27 (0)11 217 1163
E: tndlovu6@oldmutual.com
Tokelo Mulaudzi
Investor Relations Manager
T: +27 (11) 217 1042
E: tmulaudzi3@oldmutual.com
Communications
Tabby Tsengiwe
General Manager of Public Affairs and Communications
T: +27 (11) 217 1953
M: +27 (0)60 547 4947
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 we have a niche
business in China. With over 175 years of heritage across sub-Saharan Africa, we are a crucial part of the communities we serve and broader
society on the continent.
For further information on Old Mutual, and its underlying businesses, please visit the corporate website at www.oldmutual.com.
Date: 23-03-2021 07:05:00
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