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Trading statement for the six months ended 30 June 2020 - OMLI
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
JSE alpha code: OMLI
("Old Mutual" or “Company” or “Group”)
24 August 2020
TRADING STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2020
Debtholders are advised that Old Mutual is currently in the process of finalising its interim results for the six months
ended 30 June 2020 ("current period"). This trading statement provides an indication of a range for Headline Earnings
per ordinary share (HEPS) and earnings attributable to equity holders of the Group per ordinary share (EPS) in terms
of paragraph 3.4(b) of the JSE Limited Listings Requirements compared to the six months ended 30 June 2019
("comparative period"). The Group's interim results will be released on the Stock Exchange News Service of the JSE
Limited on Tuesday, 1 September 2020.
Further to our previous communication to shareholders on the 29 May 2020, the COVID-19 pandemic continues to
have an unprecedented impact on our business, our lives and how we work and interact. Government enforced
restrictions to control the spread of COVID-19 in most geographies we operate in have dramatically reduced the level
of economic activity during the first half of 2020 and negatively impacted growth forecasts for the remainder of the
year. In this challenging environment we adapted to this new normal by leveraging our digital capability to enable
most of our employees and certain of our advisers to work remotely.
New business sales volumes were negatively impacted, as most of our tied advisers were unable to sell during the
lockdown period due to the partial closure of the branch network and lack of access to customers’ homes, worksites
and branches. Although lockdown restrictions have been eased, and economic activity has somewhat resumed, sales
levels remain below prior year levels. This impact was most severe in the Mass and Foundation Cluster, where sales
volumes were too low to cover the largely fixed initial expenses and this resulted in negative Value of New Business
for H1 2020 for this segment.
Although local and global equity markets have recovered in the second quarter, the JSE SWIX was down 8% at the end
of June 2020 and average equity market levels were 10% lower than the prior year. During the second quarter we saw
credit spreads widening by between 50bps and 100bps, more than increases in previous market crises.
Throughout the period, in this tough economic environment, our solvency capital has remained strong. At the end of
June 2020, the solvency ratio was 182% for the Group and 208% for OMLACSA. This demonstrates the capital strength
and resilience of our Group to withstand periods of prolonged market stresses and positions us well to take advantage
of growth opportunities as they arise.
The significant deterioration in the operating environment compared to the comparative period has however
negatively impacted our earnings. While there is still much uncertainty around the pandemic and the impact that it
will have on experience, we have raised short term provisions in anticipation of worsening mortality, morbidity and
persistency experience in the second half of 2020. These reserves are intended to allow for expected short term
variances to our long term assumptions.
Weaker growth forecasts and higher observed credit spreads have led to notable unrealised mark to market losses in
the first half of the year in our unlisted equity and credit portfolios in Specialised Finance, although we believe the
quality of our credit book remains high. As these are unrealised they could reverse in future periods as market
conditions recover. We have also increased our provisions for expected credit losses in Old Mutual Finance in
recognition of declining GDP forecasts, and the anticipated impact of this on future credit losses.
There was an increase in business interruption (BI) claims in Old Mutual Insure during the second quarter. We also
made a decision to offer commercial settlements to certain qualifying Small, Medium and Micro Enterprise (SMME)
customers to enable them to continue operating.
Taking into account the operating environment and factors outlined above shareholders are advised that the Group’s
key profit measures are expected to fall within the ranges outlined below:
Key Performance Indicators
(R million unless stated otherwise) Estimated Estimated
% change 30 June 2020 30 June 2019
Results from Operations (61%) to (71%) 1,760 - 1,308 4,512
Adjusted Headline Earnings (62%) to (72%) 1,980 - 1,459 5,211
AHEPS (cents)¹ (60%) to (70%) 43.7 - 32.7 109.1
1AHEPS defined as Adjusted Headline Earnings divided by WANS adjusted to reflect the Group's BBE shares and shares held in policyholder and
consolidated investment funds.
The notable decrease in the GDP growth for South Africa and increased uncertainty around future cashflow projections
is expected to result in the recognition of material impairments in respect of the carrying value of our investment in
Nedbank and the goodwill related to our investment in Old Mutual Finance. These impairments are recognised in the
IFRS income statement, however, are not recognised in Headline Earnings as this is an explicit adjusting item in
accordance with the JSE Circular. Accordingly they are also not recognised in Adjusted Headline Earnings (AHE).
Headline earnings is higher than AHE, as AHE excludes the results related to the operations of Residual plc and
Zimbabwe and the adjustment in respect of investment return for group equity and debt instruments held in life funds,
all of which were positive in H1 2020.
Taking into account the decrease in operating earnings and the significant impairments outlined above shareholders
are advised that HEPS and Basic EPS are expected to fall within the ranges outlined below:
Key Performance Indicators
(R million unless stated otherwise) Estimated Estimated 30 June
% change 2020 30 June 2019
Headline Earnings (23%) to (33%) 4,507 - 3,922 5,854
HEPS (cents) (20%) to (30%) 102.5 - 89.7 128.1
IFRS profit after tax attributable to equity Greater than (100%) (5,621) - (6,745) 5,817
holders of the parent
Basic EPS (cents) Greater than (100%) (128.5) - (154.2) 127.3
The financial information in this trading statement is the responsibility of the Old Mutual Limited Board of Directors
and has not been reviewed or reported on by the Group’s external auditors.
Sandton
Debt Sponsor
Nedbank Corporate and Investment Banking
Enquiries
Investor Relations
Sizwe Ndlovu T: +27 (0)11 217 1163
Head of Investor Relations E: tndlovu6@oldmutual.com
Tokelo Mulaudzi T: +27 (0)11 217 1042
Investor Relations Manager tmulaudzi3@oldmutual.com
Communications
Tabby Tsengiwe T: +27 (11) 217 1953
Head of Communications 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 markets segments in 14 countries. Old Mutual's primary operations are in South
Africa and the rest of Africa, and it has a niche business in Asia. With over 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: 24-08-2020 08:01:00
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