OLD MUTUAL LIMITED - Old Mutual Voluntary operating update for the period ended 30 September 2021

Old Mutual Voluntary operating update for the period ended 30 September 2021

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”)


23 November 2021


OLD MUTUAL VOLUNTARY OPERATING UPDATE FOR THE PERIOD ENDED 30 SEPTEMBER
2021

The global economy continues to demonstrate strong growth however the recovery remains
uneven due to large differences in vaccination rates between countries. Although the
investment markets where we operate continue to recover ahead of pre-COVID-19 levels, the
environment remains volatile as we navigate the challenging impact of the pandemic.


Our South African retail segments, Mass and Foundation Cluster, Personal Finance and Wealth
Management continue to demonstrate recovery in productivity from the low levels in the prior
year driven by initiatives implemented by management which have resulted in higher issued
sales. Sales in Corporate remain subdued with annuity quotes improving relative to 2020. Issued
sales in Personal Finance continue to be above 2019 levels with issued sales in other South
African retail segments remaining below 2019 levels due to the continued tough economic
environment.


Capital position


The solvency ratio for the Old Mutual Life Assurance Company South Africa for the nine months
ended 30 September 2021 was 225%, above our target range of 175% - 210%. The increase in our
solvency ratio from 206% as at 30 June 2021, was largely driven by the impact of the issuance of
R1.5bn subordinated debt and the introduction of a collar structure on the majority of the
retained Nedbank stake. The Prudential Authority approved the unbundling of 12.2% of
Nedbank held by Old Mutual, which was implemented on 8 November 2021. This is expected to
decrease the Group solvency ratio by approximately 3 percentage points. We continue to
monitor the Group solvency ratio of 184% which remains strong relative to our target range of
165% - 195%.




Financial performance for the period ended 30 September 2021


The table below sets out certain key performance indicators for the period ended 30 September 2021.
    Key Performance Indicators                 30 September      30 September       % change
    (R millions unless otherwise indicated)    2021              2020
    Life APE Sales                             8 136             6 890              18%
    Value of New Business (VNB)                1 099             274                Greater   than
                                                                                    100%
    Gross Flows                                146 631           137 449            7%
    Net Client Cash Flow (NCCF) (Rbn)          (2,6)             3,6                Greater   than
                                                                                    (100%)
    Funds Under Management1 (FUM) (Rbn)        1 202,4           1 104,6            9%
    Loans and Advances1                        18 194            20 320             (10%)
    Gross Written Premiums                     15 103            14 093             7%
Comparative amounts represent FY2020 balance sheet amounts.





Results from operations are above the prior year. This is driven mainly by improved profits in
Mass and Foundation Cluster resulting from strong risk sales and improved credit experience
due to a deliberate focus on tightening of credit criteria and more selective offers to customers
in Old Mutual Finance. The non-repeat of significant mark to market losses that occurred in the
prior year and higher asset-based fees in Old Mutual Investments positively impacted profits.
The non-repeat of the significant level of COVID-19 business interruption and rescue claims from
the prior year as well as the release of Credit Guarantee Insurance Corporation (CGIC) reserves
in Old Mutual Insure further contributed to improvement in profits. We remain on track to
deliver on our R750 million cost savings target by the end of 2022 through our South African
insurance and savings businesses, allowing us to further pursue our investment in innovation
and other initiatives.


During the year, our central costs increased largely due to the investment towards digitalisation
and innovation initiatives. In addition, lower rental income received as our tenants continue to
implement various working from home initiatives for their employees had an adverse impact
on our central costs.


Sales momentum has continued into Q3, compared to the same period in the prior year, which
was impacted by the lockdown period, with Life APE Sales up 18%. Current year sales benefited
from strong risk sales in Mass and Foundation Cluster as productivity levels continue to
gradually lift from prior year levels as well as higher risk and guaranteed annuity sales in
Personal Finance driven by the recovery in single and recurring premium sales. Higher living
annuity and endowment sales in Wealth Management - with fixed bonds sales contributing
significantly - and higher risk sales in China further contributed to total sales growth. These were
partially offset by a decline in group risk and umbrella fund sales in Corporate.
The significant growth in VNB was largely driven by increased sales volumes of high margin
products, the VNB margin of 2.3% is well within our medium-term target range of 2.0% - 3.0%.


Gross flows are up 7% due to good flows from single premium annuity sales in Personal Finance
and strong flows in Wealth Management’s platform resulting from improved rates on the fixed
bond products. In addition, strong flows were secured into our Liability Driven Investment
solutions (LDI) in Old Mutual Investments. These were partially offset by the non-repeat of
significant inflows into our Asset Management businesses in East Africa and Southern Africa.


Despite the increase in gross flows, negative NCCF were largely due to significant volumes of
mortality claims related to COVID-19 in our life businesses, higher client disinvestments in
Personal Finance and Wealth Management as well as large client terminations in Corporate for
the year to date. FUM increased largely due to strong equity markets, despite negative NCCF.


The decline in Loans and advances was driven by the decline in disbursements due to
tightening of credit criteria in the prior year in Old Mutual Finance that has resulted in better
credit experience as we manage our risk appetite in the current environment. In addition,
reduced footfall in branches further impacted new loans and advances in South Africa and Rest
of Africa, which has not yet fully recovered to pre-COVID-19 levels.


Strong growth in Gross Written Premiums was supported by growth experienced across all lines
of business except for the commercial and agricultural portfolio in Old Mutual Insure, mainly
driven by increased economic activity in the current year and a 10% premium increase in the
CGIC business. Good customer retention, pleasing acquisition rates and economic activity as
well as new business sales contributed to growth in Gross Written Premium for Rest of Africa.


COVID-19 update


In our South African life businesses, provisions were raised at 30 June 2021 based on our own
claims experience and South African Medical Research Council (SAMRC) excess mortality data
as well as an assumption for vaccination hesitancy. The rate of vaccine hesitancy observed in
South Africa has, however, been higher than anticipated at the half year resulting in higher
levels of claims. In our Namibian life business, we have also experienced increased claims
relative to expectation as a result of the high infection rates in the country.


Our life businesses had a worse mortality claims experience than anticipated, which has
resulted in the excess deaths impact on profit of approximately R6.6bn for year to date. In order
to partially offset the excess deaths impact on profit for the year to date, R4.9bn of the pandemic
provision was released. Taking into account the release of the provision, there is approximately
R1bn of the pandemic provision remaining for expected excess mortality claims related to
COVID-19.
We continue to closely monitor our mortality claims experience as future waves and their
impacts remain uncertain. The adequacy of the provision will be assessed at 31 December 2021.


Investor engagement


We will be hosting an Investor Update on Tuesday, 23 November 2021, from 14h00, CAT. The
agenda will focus on the Group’s strategy, with an overview of Old Mutual Investments, Old
Mutual Corporate, Old Mutual Insure and Rest of Africa and to provide a business update.
Investors and Media are invited to attend and register on the following link:


http://www.overendstudio.co.za/events/OldMutual/2021/InvestorUpdate/accept.html


The financial information in this voluntary operating update is the responsibility of the Old
Mutual 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, a division of Nedbank Limited


Enquiries
 Investor Relations
 Sizwe Ndlovu                       T: +27 (0)11 217 1163
 Head of Investor Relations         M: +27 (83) 500 8019
                                    E: tndlovu6@oldmutual.com
 Communications
 Vuyo Mtawa                         M: +27 68 422 8125
 Head: Group Communications         E: VMtawa@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 176 years of heritage across sub-Saharan Africa, Old
Mutual is a crucial part of the communities they serve and the 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: 23-11-2021 07:06:00
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