Old Mutual Ltd. · JSE:OMU
Old Mutual — FY2001 Earnings Presentation
53 slides from Old Mutual's earnings presentation, Feb 25, 2002
Slide 1: Analyst Presentation: Preliminary results for the year to 31 December 2001
Analyst Presentation Preliminary results for the year to 31 December 2001
Slide 2: Introduction
Jim Sutcliffe Chief Executive Introduction
Slide 3: Agenda
Agenda • Jim Sutcliffe - Highlights • Julian Roberts - Finance and operating review • Jim Sutcliffe - 2002 and beyond • Questions and Answers
Slide 4: Key financial highlights - Sterling
Key financial highlights - Sterling % 2001 2000 change Operating profit (smoothed) £856m £911m -6 Operating EPS 13.2p 17.0p -22 Dividend per share 4.8p 4.7p +2 Embedded value @ 31/12 £3,522m £5,553m -37 Value of new business £84m £74m +14
Slide 5: Key financial highlights - Rand
Key financial highlights - Rand % 2001 2000 change Operating profit (smoothed) R10,601m R9,585m +11 Operating EPS 163.4c 179.4c -9 Dividend per share *72.7c 49.5c +47 Embedded value @ 31/12 R61,364m R62,831m -2 Value of new business R1,053m R782m +35 Indicative only
Slide 6: 2001 Key accomplishments - operational
2001 Key accomplishments - operational • South Africa - New generation of products launched - Building sales force, bancassurance - Nedcor and M&F remain strong • US - Positive net cash flow from asset management - Record 4th quarter premium flows at F&G • UK - Gerrard integration complete
Slide 7: 2001 Key accomplishments - strategic
2001 Key accomplishments - strategic • Shift to clear geographic focus • Powerful management team • Group financing costs lowered • US asset management affiliates now finalised in four groups • Acquired F&G Life
Slide 8: Finance and operating review
Julian Roberts Group Finance Director Finance and operating review
Slide 9: South Africa
South Africa
Slide 10: South African profit & loss account
South African profit & loss account % Rm 2001 2000 change Life assurance - operating profit 3,085 2,630 +17 - LTIR 1,830 *1,765 +4 Asset management 458 484 -5 Banking 3,593 2,829 +27 General insurance 570 463 +23 Operating profit 9,536 *8,171 +17 Operating profit (£m) 770 824 -7 * Restated for the e
Slide 11: South Africa Life - new business premiums
South Africa Life - new business premiums* Individual Business Group Business Rm 1,467 1,573 1,300 1,842 3,040 3,142 3,500 3,000 675 810 2,500 2,000 1,500 475 389 421 200 2,467 1,000 2,230 1,152 1,367 500 1,078 1,100 0 2000 H1 2000 H2 2001 H1 2001 H2 2000 2001 Total Total Annual premium equivalent
Slide 12: Operating review - OMSA
Operating review - OMSA % 2001 2000 change New business margins 27% 23% Value of new business (Rm) 840 726 +16 Funds under management 283 253 +12 (OMSA – Rbn) Return on capital 24% 23%
Slide 13: Bancassurance
Bancassurance • Current initiatives: - Personal financial planning - Proposed OMBS / Permanent Bank merger - Group schemes / Peoples Bank • Premium flow to Old Mutual up 77% • OMBS / Permanent Bank merger cost savings R150m + p.a.
Slide 14: Operating review - Nedcor
Operating review - Nedcor % 2001 2000 change Total income (Rm) 11,418 9,024 +27 Total assets (Rm average) 197,691 158,259 +25 ROA 2.22% 2.16% ROE 25.1% 24.0% Efficiency ratio 49.3% 50.3%
Slide 15: Operating review - M&F
Operating review - M&F % 2001 2000 change Net premiums (Rm) 4,306 3,152 +37 Operating ratio 97.9% 99.9% Operating income 569 463 +23 (based on LTIR) Net reserves 2,057 2,007 +2
Slide 16: United States
United States
Slide 17: US profit & loss account
US profit & loss account $m 2001 *2000 Life assurance 19 - Asset management 166 69 Operating profit 185 69 Operating profit (£m) 129 44 2000 comparatives are fourth quarter only
Slide 18: Operating review - US asset management
Operating review - US asset management 2001 2000 Operating profit ($m)* OMAM (US) 55 23 PBA 42 17 OMA - strategic 31 12 - financial 38 17 Total 166 69 Average b.p. fee rate OMAM(US) 29 33 PBA 88 84 OMA - strategic 49 51 - financial 51 49 2000 comparatives are fourth quarter only
Slide 19: US asset management divestitures
US asset management divestitures Number of * Funds under $m affiliates management 2000 2 7,507 2001 10 22,960 2002 2 5,230 Total OM(US)H 14 35,697 * At time of sale
Slide 20: US funds under management
US funds under management 31 Dec Net cash Market 31 Dec $bn 2000 Divested flows movement 2001 OMAM(US) 74.9 - *6.5 -4.7 *76.7 PBA 17.5 - 0.8 -5.7 12.6 OMA - strategic 37.4 - -0.7 0.8 37.5 Sub Total 129.9 - 6.5 -9.6 126.8 OMA - financial 48.0 -22.9 -2.1 0.1 23.1 Total OM(US)H 177.9 -22.9 4.4 -9.5 149
Slide 21: Embedded value review - US life
Embedded value review - US life 6 months 2001 New business premiums ($m EV Basis) APE 121 Value of new business ($m) 18 New business margin 15% EV discount rate @ 31/12/01 9.5%
Slide 22: Operating review - US life
Operating review - US life 6 months 2001 F&G return on capital 10% Operating profit ($m) F&G 45 Acquisition costs (13) Americom (13) Operating profit 19
Slide 23: United Kingdom and Rest of World
United Kingdom and Rest of World
Slide 24: UK and Rest of World
UK and Rest of World £m 2001 2000 Life assurance (2) 13 Asset management (3) 34 Gerrard 2 26 Gerrard integration costs (12) (14) OMAM 6 14 Other financial services 1 8 Banking – Nedcor / GPB 79 58 Operating profit 74 105
Slide 25: Gerrard revenues
Gerrard revenues Pro-forma % £m 2001 2000 change Fees 59 68 -13 Commissions 78 112 -30 Total revenue 137 180 -24 Average funds 19.4 21.4 -9 under management (£bn) Average number of 2,550 3,700 -31 daily bargains
Slide 26: Overview of group finances
Overview of group finances
Slide 27: Rand depreciation
Rand depreciation Spot rate 12 month trailing average 10 12 14 16 18 20 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Source: Bloomberg
Slide 28: Operating profit - Sterling
Operating profit - Sterling % £m 2001 2000 change Group operations 973 973 0 Other (29) (34) +15 Debt servicing costs (67) (28) -139 Write-down (21) - Operating profit before tax 856 911 -6 Tax (209) (191) -9 Minorities (179) (145) -23 Smoothed post tax 468 575 -19 operating profit EPS (p) 13.2 17.0
Slide 29: Operating profit - Rand
Operating profit - Rand % Rm 2001 2000 change Group operations 12,050 10,237 +18 Other (359) (357) -1 Debt servicing costs (830) (295) -181 Write-down (260) - Operating profit before tax 10,601 9,585 +11 Tax (2,591) (2,010) -29 Minorities (2,215) (1,525) -45 Smoothed post tax 5,795 6,050 -4 operatin
Slide 30: Capital management
Capital management • Debt - short-term US$1.6bn acquisition financing facility replaced with: - US$650m convertible bond issue - £900m five year revolving credit facility • Gearing 34% (net) • EBITDA interest cover of 13.8x • Group return on average equity 15.5%
Slide 31: Goodwill impairment review
Goodwill impairment review • Impairment of £500m - £335m with respect to US asset management - £165m with respect to Gerrard • Methodology - In accordance with provisions of FRS 11 - 5 year discounted cash flow valuation - Conservative estimate of future growth
Slide 32: Embedded value £m
Embedded value £m 227 99 211 84 1,559 823 500 421 172 Value of in-force 898 4,730 Adjusted 2,624 net worth 31-Dec-00 New capital New Existing Return on FX Goodw ill Nedcor MV Dividend 31-Dec-01 business business net w orth Impairment return
Slide 33: Embedded value Rm
Embedded value Rm 4,821 6,196 2,859 1,183 5,220 2,639 1,053 2,606 9,314 Value of 15,648 in-force 53,517 Adjusted 45,716 net worth 31-Dec-00 New New Existing Return on FX Goodwill Nedcor MV Dividend 31-Dec-01 Capital Business Business net worth Impairment return
Slide 34: Summary
Summary • Growth in local currency in South Africa continues to be strong • Restructuring in USA complete • Re-engineering of UK commenced • Focus on expense reduction
Slide 35: 2002 and beyond
Jim Sutcliffe Chief Executive 2002 and beyond
Slide 36: We are internationalising Old Mutual...
We are internationalising Old Mutual...
Slide 37: Why?
Why? • There are good growth opportunities • We can create shareholder value
Slide 38: ...and we have the skills and the expertise
….and we have the skills and the expertise
Slide 39: Internationalising Old Mutual
Internationalising Old Mutual Demutualisation & listing July 1999 Establish credible Phase I international presence Drive value from Phase II acquisitions & grow in SA Synergy & organic growth & Phase III complementary international acquisitions
Slide 40: We will focus on asset gathering and asset management
We will focus on asset gathering and asset management
Slide 41: Geographical focus
Geographical focus OMA Gerrard OMA Financial Strategic OMS Deliver Value Rebuild Profits OMAM AM GNI PBA USA UK Old OMAM F&G Mutual Life plc Americom Selestia South Africa M&F OMSA OMAM Nedcor Group PB NIB JVs OMB Individual Perm Grow
Slide 42: Group synergies
Group synergies • Bancassurance - OMBS / Permanent Bank • Technology from South Africa - US websites - Selestia at one-third UK cost • South Africa assets managed in US • Life companies using in-house asset managers - OMLAC(SA) and OMAM(SA) - F&G and Dwight • PBA sub-advisory agreements • Gerrard Pr
Slide 43: The strategy - South Africa...
The strategy - South Africa… • World class products and profitability • Dominant distribution - Number 1 in each customer segment • Bancassurance • Cross-border servicing • Targets - 2004 - Real profits growth of 2-3x real GDP - ROE of 20% - 25%
Slide 44: ... in the USA...
…in the USA… • Asset management - Multi-style specialist asset managers - Central and local distribution capability and mutual funds - Targets - 2004 - $5bn p.a. of net client inflows - 10% ROC • Life - Focused on fixed annuities and term life - Distributed by MGAs, banks and independent agents - Ta
Slide 45: ...and in the UK
...and in the UK • Focus on HNW asset management • Build reinvigorated Gerrard base - Tighten expenses - Move towards 50% discretionary management • Targets - 2004 - £1bn of net client inflow p.a. - £40m of operating profit after tax
Slide 46: Internationalising Old Mutual
Internationalising Old Mutual • We will focus on asset management and asset gathering • In SA, USA and UK • By customer-focused, regional strategies • That gain from and contribute to the whole • Right now, much to do organically - grow in SA, deliver value in USA, rebuild profits in UK
Slide 47: Analyst Presentation: Preliminary results for the year to 31 December 2001
Analyst Presentation Preliminary results for the year to 31 December 2001
Slide 48: Appendix
_ Appendix
Slide 49: South Africa Life - value of new business
South Africa Life – value of new business Rm 2001 Margin 2000 Margin Individual 506 21% 399 18% Group 334 49% 309 38% Total SA life 840 27% 708 23%
Slide 50: OMLAC(SA) financial position
OMLAC(SA) financial position December December Rbn 2001 2000 Assets (net of provisions and current liabilities) 257 227 Policy liabilities (223) (192) Excess assets 34 34 Statutory capital adequacy requirement 12.7 11.4 Multiple 2.7x 3.0x
Slide 51: OMLAC(SA) net cash flow
OMLAC(SA) net cash flow Individual Group 2000 Rm Business Business Total Restated Single premiums 11,654 7,409 19,063 19,213 Recurring premiums 9,380 3,432 12,812 12,446 Total premiums 21,034 10,841 31,875 31,659 Maturities 9,141 - 9,141 8,378 Annuities 3,309 1,899 5,208 5,197 Death & disability 2,1
Slide 52: Composition of OMLAC(SA) policy liabilities
Composition of OMLAC(SA) policy liabilities 2001 (%) 2000 (%) Individual business 58 58 Smoothed bonus 22 24 Market-related 22 21 Non-profit 14 13 Group business 42 42 Smoothed bonus 34 34 Market-related 7 7 Non-profit 1 1 Total 100 100 Smoothed bonus 56 58 Market-related 29 28 Non-profit 15 14
Slide 53: Adjusted net worth
Adjusted net worth £m 2001 South Africa Nedcor 902 M&F 112 Portfolio investments - SA 548 Portfolio investments - international 313 SA asset management 55 Cash and other (9) US US asset management (incl. goodwill) 1,252 US life (incl. goodwill) 304 UK and Rest of World UK asset management (incl. goo