Old Mutual Ltd. · JSE:OMU
Old Mutual — FY2015 Earnings Presentation
39 slides from Old Mutual's earnings presentation, Mar 11, 2016
Slide 1: Preliminary Results 2015
PRELIMINARY RESULTS 2015 11 March 2016 INVESTMENT | SAVINGS | INSURANCE | BANKING
Slide 2: Disclaimer
DISCLAIMER This presentation may contain certain forward-looking statements with respect to certain of Old Mutual plc’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and u
Slide 3: Agenda
AGENDA Strategy Bruce Hemphill, CEO 2015 performance Bruce Hemphill, CEO Financial review Ingrid Johnson, GFD Concluding remarks Bruce Hemphill, CEO Q&A 3
Slide 4: Strategy
STRATEGY 11 March 2016 INVESTMENT | SAVINGS | INSURANCE | BANKING
Slide 5: 4 Strong Businesses with Great Prospects
4 STRONG BUSINESSES WITH GREAT PROSPECTS • A leader in African Financial Services • Integrated Financial Services offering EMERGING MARKETS • Uniquely positioned in Mass Foundation • Strong Retail Affluent and Wealth proposition • Africa’s most admired bank • Corporate and Commercial strength • ETI
Slide 6: Strategic Review
STRATEGIC REVIEW Work undertaken: Key considerations: Conclusions: • Engaged independent • Strategic logic • 4 strong businesses capable experts of standing alone • Leadership economics • Worked with internal team • No compelling strategic • BU growth ambitions and logic for group structure • Review
Slide 7: Strategic Path
STRATEGIC PATH Current state New strategy: Managed separation End state EMERGING MARKETS EMERGING MARKETS EMERGING MARKETS Group Group 7
Slide 8: Current State
CURRENT STATE Current state • Strong businesses • Each with clear strategy in chosen markets • Excellent growth prospects EMERGING MARKETS But: • Little commonality or synergy Group • Group costs • Regulatory burden • Misalignment of shareholders 8
Slide 9: Desired End State
DESIRED END STATE End state • Strong independent businesses • Excellent growth prospects • Enhanced performance • Alignment of investors and assets EMERGING MARKETS • Reduced cost of central activities • Nedbank strategic shareholding 9
Slide 10: New Strategy: Managed Separation
NEW STRATEGY: MANAGED SEPARATION Managed separation • Strong team to deliver • Optimal execution route, balancing value to shareholders, cost, time & risk EMERGING MARKETS • Engagement with stakeholders • Defined plc role • Reduce central costs Group • Revised capital management policy • Substantial
Slide 11: Unlocking Value
UNLOCKING VALUE GHO costs 2 Actions: Old Mutual Hybrid 1 Deliver enhanced business performance 1. Emerging 3 Markets debt costs 2 Reduce cost of central activities 2. 3 Manage down Group debt 3. Conglomerate 5 1 discount Nedbank 4 Outcomes: Old Mutual Market 4 Valuation re-rating of the businesses 4
Slide 12: 2015 Business Performance
2015 BUSINESS PERFORMANCE 11 March 2016 INVESTMENT | SAVINGS | INSURANCE | BANKING
Slide 13: Strong Financial Performance in 2015
STRONG FINANCIAL PERFORMANCE IN 2015 AOP1 £1.7bn, up 11%2: Strong local profit growth Adjusted EPS 19.3 pence, up 15%2 NCCF3, excluding Rogge, £6.6bn (2014: £11.2bn) FUM3, excluding Rogge, up 8%2 to £304bn Total 2015 dividend 8.9 pence per share, up 2% Further portfolio simplification: Switzerland,
Slide 14: Old Mutual Emerging Markets
OLD MUTUAL EMERGING MARKETS Rbn 2015 ∆ Operating results1 (Rbn) AOP (pre-tax) (Rm) 12,001 9% +11% 4.0 Gross sales 216 17% +14% 3.0 Covered sales (APE) 12.7 31% 2.0 Non-covered sales 155 15% +16% -7% +23% NCCF 34.3 61% 1.0 +1% +246% FuM 989.9 9% 0.0 SA SA SA OMIG P&C Rest of Asia & ROE2 22.6% (20bps)
Slide 15: Nedbank
NEDBANK Rm 2015 ∆ Headline Earnings1 (Rbn) AOP (pre-tax)1 14,729 7% 6.0 +10% Net interest income 23,885 4% 5.0 Non-interest revenue 21,748 7% +11% 4.0 2014 2015 3.0 Impairments (Rm) 4,506 4,789 Credit loss ratio 0.79% 0.77% 2.0 +9% Common equity +94% 11.6% 11.3% 1.0 Tier 1 ratio ROE (exc. goodwill)
Slide 16: Old Mutual Wealth
OLD MUTUAL WEALTH £bn 2015 ∆ Pre-tax AOP (£m) 120 AOP (pre-tax) (£m) 307 35% -24% 100 AOP exc. Quilter Cheviot (£m) 273 20% 80 +115% Gross sales 20.8 30% 60 +35% NCCF 6.9 86% 40 +74% -8% +89% FuM 104.4 27% 20 Operating margin 40% 400 bps 0 UK UK International OMGI Quilter Europe Heritage 2 Platform
Slide 17: Update on OMW Business Transformation
UPDATE ON OMW BUSINESS TRANSFORMATION 2014 H1 2015 FY 2015 Objectives • Selection of • Additional scope for • KPMG detailed review - • Market-leading, flexible & IFDS/Bluedoor front-end “open door” need to de-risk through: scalable system • High level project • Annuity / drawdown • Phased delivery •
Slide 18: OMAM
OMAM $bn 2015 ∆ 25 Annualised revenue on NCCF3 ($m) AOP1 (pre-tax) ($m) 229 9% 20 20.0 NCCF (5.1) (154%) 15 18.4 19.1 13.5 FuM 212 (4%) 10 11.3 5 Operating margin2 33% - 0.7 0 (3.0) Annualised revenue impact of 18.9 (65%) -5 (6.6) net flows3 ($m) -10 ROE4 14.0% (250bps) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014
Slide 19: 4 Strong Businesses Performing Well
4 STRONG BUSINESSES PERFORMING WELL • AOP up 9% • Gross sales up 17% EMERGING MARKETS • NCCF R34.3bn, FuM R989.9bn • ROE 22.6% • Headline earnings up 10% • Non-interest revenue up 7% • CET1 ratio 11.3% • AOP up 35% • Gross sales up 30% • NCCF £6.9bn, FuM £104.4bn • Operating margin 40% • AOP up 9% •
Slide 20: Financial Review
FINANCIAL REVIEW 11 March 2016 INVESTMENT | SAVINGS | INSURANCE | BANKING
Slide 21: Agenda
AGENDA Macro background Profit & returns Cash, liquidity & debt Capital & dividend Financial summary 21
Slide 22: Equity Markets, Currency & GDP
EQUITY MARKETS, CURRENCY & GDP Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary Equity markets1 Currency (ZAR:GBP) 24 120 22 Avg YTD: 23.04 20 110 18 2015 avg: 19.52 2014 avg: 17.87 16 H1 2015 H2 2015 Jan/Feb 2016 100 GDP growth2 5.0% 90 2014 2015 2016 4.0% 3.5% 2.9
Slide 23: Operating Profit Analysis (AOP)
OPERATING PROFIT ANALYSIS (AOP) Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary Change in Change in £m 2014 2015 reported currency constant currency Old Mutual Emerging Markets 617 615 - 9% Nedbank 770 754 (2%) 7% Old Mutual Wealth 227 307 35% 35% Institutional Ass
Slide 24: AOP & Returns
AOP & RETURNS Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary Return on Return on Group RoE target: 12-15% Average ave. Average ave. AOP shareholders’ shareholders’ shareholders’ shareholders’ post-tax & equity excl. equity excl. equity incl. equity incl. 2015 (£m)
Slide 25: Conversion of Business Unit AOP to PLC Cash
CONVERSION OF BUSINESS UNIT Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary AOP TO PLC CASH1 AOP BU cash (post-tax Free surplus deployed / 2015 % of AOP 2014 % of AOP 2015 (£m) & NCI) generated retained BU remittance2 remitted remitted OM Emerging Markets 418 289 1
Slide 26: Sources and Uses of PLC Cash
SOURCES AND USES OF PLC CASH Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary £m 2014 2015 PLC opening balance 545 1,003 BU operational remittances - Rand1 310 330 Total £493m - Hard currency1 154 163 Central costs & dividend - Ordinary cash dividends (411) (426) SA
Slide 27: Liquidity & Debt
LIQUIDITY & DEBT Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary 31 Dec 31 Dec 2014 2015 Liquidity headroom1 (£bn) 1.8 1.6 Group gross debt (IFRS basis, £m)2 1,540 1,731 Total gross gearing (IFRS basis) 13.3% 15.8% Total interest cover 16.8x 14.0x Hard interest cov
Slide 28: Group Capital: FGD
GROUP CAPITAL: FGD Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary 164% 160% FX sensitivity At 1GBP to ZAR30, cover ratio £436m (£422m) at 31 Dec 2015 would have (£180m) been 167% (£383m) £398m (£262m) Quilter Cheviot Net debt capital £2.1bn UAP raised and settled
Slide 29: Evolving Capital Regime
EVOLVING CAPITAL REGIME Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary 160% 135% 229% Clarity on methodology: • Inherently conservative £0.9bn £4.6bn Restricted surplus1 • Standard formula £1.6bn Surplus 2 • Restriction on surplus from South Africa £1.7bn Capital
Slide 30: Resilience of Solvency II Ratio
RESILIENCE OF SOLVENCY II RATIO Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary Capital Group Coverage Restricted £bn Requirements surplus ratio surplus Base 4.4 1.6 135% 0.9 Equity markets: 25% fall 4.2 1.5 135% 0.7 Group Solvency II ratio is Lapses1: Immediate 10
Slide 31: Local Capital
LOCAL CAPITAL Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary Local statutory cover OMLAC(SA) M&F Nedbank OM Wealth Businesses retain strong and (31 December 2015) (Rbn)1 (Rbn)2 (Rbn)3 (£m)4,5 resilient local statutory capital cover which is a determinant of Capita
Slide 32: 2015 Dividend
2015 DIVIDEND Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary • Declared 2015 second interim dividend1 of 6.25 Dividend (pence per share)3 p/share: • 2015 full year dividend 8.9 p/share, up 2% Special • 25% increase in full year rand dividend2 1 Final / Second Inte
Slide 33: Capital Management Policy for the Managed Separation
CAPITAL MANAGEMENT POLICY FOR Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary THE MANAGED SEPARATION Complexity of considerations Ordinary dividend policy during the managed separation: Business unit requirements • Reflects the operational cash generation, investme
Slide 34: Financial Summary
FINANCIAL SUMMARY Macro Profit & returns Cash, liquidity & debt Capital & dividend Financial Summary Good underlying profit growth • £1.7bn AOP pre-tax & NCI, up 11% in constant currency • Strong local profit growth and cash generation • 2016 earnings growth challenged by FX and market volatility St
Slide 35: Concluding Remarks
CONCLUDING REMARKS 11 March 2016 INVESTMENT | SAVINGS | INSURANCE | BANKING
Slide 36: Concluding Remarks
CONCLUDING REMARKS Strong financial performance in 2015 4 strong businesses constrained by current Group structure Long-term interests of stakeholders best served by 4 independent businesses Execution route will balance value, risk, time and cost Substantial completion of managed separation by end 2
Slide 37: Unlocking Value for Shareholders
UNLOCKING VALUE FOR SHAREHOLDERS Current state Managed separation End state EMERGING MARKETS EMERGING MARKETS EMERGING MARKETS Group Group 2015 2016-2018 2019 37
Slide 38: Q&A
Q&A 11 March 2016 INVESTMENT | SAVINGS | INSURANCE | BANKING
Slide 39: Preliminary Results 2015
PRELIMINARY RESULTS 2015 11 March 2016 INVESTMENT | SAVINGS | INSURANCE | BANKING