FirstRand Limited · JSE:FSR
FirstRand — FY2009 Earnings Presentation
35 slides from FirstRand's earnings presentation, Oct 7, 2009
Slide 1: Momentum Group financial & operating review
MOMENTUM O U GGROUP OU financial & operating review Nicolaas Kruger
Slide 2: Resilient business model mitigates impact of markets
Resilient business model mitigates i impactt off markets k t Negative impact of economic environment • Market impact on investment businesses • Slowdown in new business volumes Resilient operational p p performance New business • Individual risk and group new business volumes remain robust • Satisfa
Slide 3: Negative impact of economic environment
Negative impact of economic environment
Slide 4: Challenging market conditions
Challenging market conditions 31,000 70 29,000 60 Reduction in asset-based fees 27,000 50 25,000 40 Reduction in bonus -29% stabilisation reserves 23,000 30 +3% Increase in maturity 21,000 20 guarantee reserves 19,000 10 17,000 0 Jun ’08 Dec ’08 Jun ’09 JSE All-Share All Share Index SA Volatility In
Slide 5: Reduction in personal disposable income impacts lapse rates
Reduction in personal disposable income impacts lapse rates 10% Actual Projected* 30% 8% 25% 6% Slowdown in new business volumes 20% 4% Increase in lapse rates 2% 15% 0% Gradual projected recovery 10% -2% Dec Dec Dec Dec Dec Dec Jun Jun Jun 5% 4% 03 04 05 06 07 08 09 10 11 -4% -6% 0% Growth in perso
Slide 6: Investment-related business dominates
Investment-related business dominates % of total earnings 1% Other 40% Risk 59% Investment
Slide 7: Financial performance satisfactory given markets
Financial performance satisfactory given markets June ’09 June ’08 % change Normalised earnings (Rm) 1 649 2 004 (18) Return on Equity (%) 23 30 Annualised new business (Rm) 8 078 8 405 (4) Value of new business (Rm) 544 596 (9)
Slide 8: Unpacking the decline in earnings
Unpacking the Unpacking decline the declineininoperating earnings profit R millions 2,200 2 004 -2% -18% 2,000 -19% 1,800 +3% 1 649 +1% -3% +2% 1 600 1,600 1,400 1,200 1,000 800 Jun 08 New business Markets Margins and Systems FNB Insurance Investment Jun 09 strain experience integration income
Slide 9: Resilient operational performance: New business
Resilient operational performance New business Diversification Existing operations Capital management
Slide 10: Economic environment impacted new business volumes
Economic environment impacted new business volumes R millions (APE) 3,500 -3% 3% 3,000 -15% 2,500 +>100% 2,000 , 1,500 -5% 1,000 +22% +37% 500 -2% % 0 Retail Retail lump Institutional Group FNB Short-term Health recurring sums investments Insurance June 2008 June 2009
Slide 11: Risk products support retail new business
Risk products support retail new business R millions (API) -5% Endowments and RA’s -25% impacted by: • Pressure on disposable income -4% • New commission dispensation +13% Risk new business satisfactory
Slide 12: Money market unit trusts support retail lump sum investments
Money market unit trusts support retail lump sum investments R millions -3% -13% Shift from living to guaranteed annuities +28% +7% RMB Unit Trust (money market) sales strong -38% Global crisis impacted negatively on offshore linked products +83% Endowments impacted by pressure on -52% disposable in
Slide 13: Strong group new business
Strong group new business R millions (APE) 800 700 +22% 600 Umbrella funds – growth in broker footprint 500 +21% 400 Up and cross cross-sell sell initiatives 300 Good progress in corporate risk 200 broker channel 100 +28% 0 Jun 08 Jun 09 Umbrella funds Group risk
Slide 14: New business margins sustained
New business margins sustained Value of new business as % of present value of future premiums 3 0% 3.0% 2.6% 2.5% 2.2% 2.2% 2.2% 2.2% 2.0% 1 5% 1.5% 1.0% 0.5% 0.0% 2005 2006 2007 2008 2009 Momentum margin Margin added to RMBAM
Slide 15: Resilient operational performance: Diversification
Resilient operational performance New business Diversification Existing operations Capital management
Slide 16: New business benefits from channel diversification
New business benefits from channel diversification Contribution to APE
Slide 17: Internal bank channel contributes to segment diversification
Internal bank channel contributes to segment diversification Contribution to retail recurring API
Slide 18: Product diversification provides protection
Product diversification provides protection R millions (APE)
Slide 19: Build growth platform through geographical diversification
Build growth platform through geographical hi l di diversification ifi ti 11 countries in African continent Profitable in 5 countries 90 000 lives Momentum Namibia launched with FNB Namibia
Slide 20: Resilient operational performance: Existing operations
Resilient operational performance New business Diversification E i ti operations Existing ti Capital management
Slide 21: FNB Life growth continues
FNB Life growth continues Minimal exposure to equity markets Mass market segment less affected by negative conditions 374 800 301 500 Increased marketing efforts for funeral policies paying off New business mix: 175 500 178 400 • Credit Life 61% • Funeral 35% • PA 4%
Slide 22: Good progress in healthcare administration
Good progress in healthcare administration Lives under administration 553 200 +16% 477 000 System integration completed 374 800 Take-on of large restricted 301 500 scheme gives scale Month-on-month profitability 175 500 178 400
Slide 23: Short-term insurance maiden profit
Short-term insurance maiden profit Claims ratio in line with target Slower new business
Slide 24: Early terminations (lapses and surrenders) normalising
Early terminations (lapses and surrenders) normalising Quarterly number of early terminations as % of in-force policy count 3% 2%
Slide 25: Contextualising RMBAM investment performance
Contextualising RMBAM investment performance Asset managers of life insurers B ti Boutique managers RMBAM Alexander Forbes Global Large Manager Watch survey: 3-year performance ranking
Slide 26: Operational performance underpins embedded value
Operational performance underpins embedded value R millions Embedded value profit
Slide 27: Unpacking the contribution from operations
Unpacking the contribution from operations R millions
Slide 28: Resilient operational performance: Capital management
Resilient operational performance New business Diversification Existing operations Capital Cap a management a age e
Slide 29: Strengthened capital base
Strengthened capital base R millions 1.8 x CAR 1.6 x CAR 1.4 x CAR Momentum continues to generate capital
Slide 30: Return on capital in line with targeted return
Return on capital in line with targeted return 30% 24% 25% 24% 25% 23% Momentum continues to generate capital
Slide 31: Improving outlook
Improving outlook • Gradual recoveryy of economic conditions • Subdued new business levels • Gradual stabilisation of persistency • Earnings remain sensitive to investment markets • Strategic focus • Further product, segment, channel and geographical diversification • Maximise benefits of the integr
Slide 32: Banking Group financial & operating review
BANKING GROUP financial & operating review Sizwe Nxasana
Slide 33: Tough year for Banking Group
Tough year for Banking Group • N Normalised li d earnings i d down 31% • ROE down to 13% (2008: 20%) • Key y drivers • Legacy portfolios • Bad debts
Slide 34: Losses from legacy portfolios continued, but reducing
Losses from legacy portfolios continued, but reducing • R335m R335 lloss iin FY2009 (i (incl. l R219 R219m iimpairment i t& Dealstream R116m losses on positions assumed on default) International • Positions remain $18m equities • No losses in last q quarter Developed markets credit • Losses in FY200
Slide 35: Impairment charge totals R8bn; tough times not over yet
Impairment charge totals R8bn; tough times not over yet R millions 1,400 1,200 1,000 800 600 400 200 - Residential Credit card Vehicle and asset Other retail Wholesale mortgages g g finance 6m to Jun '08 6m to Dec '08 6m to Jun '09