Slide 1: Disclaimer
DISCLAIMER This presentation may contain certain forward-looking statements with respect to certain of Old Mutual Limited and Old Mutual plc’s plans and its current goals and expectations relating to its future financial condition, performance and results and, in particular, estimates of future cash
Slide 2: Today's Presenters
TODAY’S PRESENTERS Trevor Manuel Chairman Peter Moyo Chief Executive Officer Casper Troskie Chief Financial Officer 2
Slide 3: Supported by a Market Leading Executive Management Team
SUPPORTED BY A MARKET LEADING EXECUTIVE MANAGEMENT TEAM Delivering Old Mutual to our customers Mass & Personal Old Mutual Wealth & Old Mutual Rest of Customer LatAm Foundation Insure Africa Solutions and Asia Finance Corporate Investments Cluster Director Clarence Karabo Clement Dave Hannes Jonas Ra
Slide 4: Agenda for the Day
AGENDA FOR THE DAY Welcome Trevor Manuel Our Investment Case and Battlegrounds Peter Moyo Our Group KPIs and Peter Moyo Operational Performance Q&A with Executive Management Peter Moyo & Executive Management Coffee Break Financial Review Casper Troskie Conclusion Peter Moyo Q&A Lunch 4
Slide 5: We Are Excited to Bring Old Mutual Back to Africa
WE ARE EXCITED TO BRING OLD MUTUAL BACK TO AFRICA Part of South Africa’s and wider Africa’s financial and social fabric Homecoming Committed to doing our part for the societies we serve Aligned to improved political and macro sentiment within South Africa African financial services group wit
Slide 6: Extensive Process in Preparation for Our Listing
EXTENSIVE PROCESS IN PREPARATION FOR OUR LISTING Complete To Listing Post Listing (at 20 April) Old Mutual Limited Extensive review of Key competencies Nedbank Unbundling (OML) OML’s business finally incorporated strategy into OML existing Targeting within 6 capability months of OML Readin
Slide 7: Old Mutual Limited Analyst Presentation
Old Mutual Limited Analyst Presentation 17 May 2018
Slide 8: Agenda for the Day
AGENDA FOR THE DAY Welcome Trevor Manuel Our Investment Case and Battlegrounds Peter Moyo Our Group KPIs and Peter Moyo Operational Performance Q&A with Executive Management Peter Moyo & Executive Management Coffee Break Financial Review Casper Troskie Conclusion Peter Moyo Q&A Lunch 8
Slide 9: What We Will Be Discussing Today
WHAT WE WILL BE DISCUSSING TODAY Progress on our 8 battlegrounds and strategy update Detail on 2017 performance Our KPIs and guidance on key metrics Our financial and capital position Management incentivisation 9
Slide 10: A Compelling Investment Proposition
A COMPELLING INVESTMENT PROPOSITION 2017: RoNAV2 AHE Average CoE + 4% Strong business with leading market positions R13.4bn Results from operations3 of FUM Nominal GDP + 2% Positioned for longer term sustainable growth R1.2trn SAM Solvency Ratio4 155% – 175% NCCF1 Sustained high cash generation R14.
Slide 11: Key Strengths Supporting the OML Equity Story
KEY STRENGTHS SUPPORTING THE OML EQUITY STORY Over 12 MILLION STRONG CAPITAL BASE CUSTOMERS with OML catering with future upside from Residual plc for all CUSTOMER NEEDS Largest multi-channel STRONG MANAGEMENT DISTRIBUTION NETWORK TEAM aligned to deliver and reach amongst traditional SA peers1 DIVER
Slide 12: Progress on Our 8 Battlegrounds
PROGRESS ON OUR 8 BATTLEGROUNDS Consolidating and growing our 1 Defend SA market share in mass market & corporate leadership position 2 Defend and grow in SA Personal Finance market 3 Improve the competitiveness of Wealth and Investments Improving key underperforming businesses 4 Continued turnaroun
Slide 13: Consolidating and Growing Our Leadership Position
CONSOLIDATING AND GROWING OUR LEADERSHIP POSITION Progress to date 1 Maintained market leadership Defend SA One of the most competitive transactional solutions in SA1 share in Mass & Leading corporate market share in umbrella funds Corporate Solid growth in SuperFund membership 2 Launch of
Slide 14: Improving Key Underperforming Businesses
IMPROVING KEY UNDERPERFORMING BUSINESSES Progress to date 3 Momentum in NCCF and deal flow Improve the competitiveness Strong investment performance of Wealth & Investments Improved advice proposition and platform 4 On track to deliver underwriting margin within the near term target range of
Slide 15: Building Long-Term Competitive Advantage
BUILDING LONG-TERM COMPETITIVE ADVANTAGE Progress to date 6 Number 1 employer in 15 countries1 Win the war Key hires across group and segments for talent Accelerated talent development programmes 7 Significant technology upgrades Refresh the Investment in digital channels technology offeri
Slide 16: All Battlegrounds Actively Being Advanced
ALL BATTLEGROUNDS ACTIVELY BEING ADVANCED – PROGRESS ALREADY SEEN AND FURTHER STRATEGIC GAINS EXPECTED IN BOTH NEAR & MEDIUM TERM East Africa People and technology as multiplying factor OM Insure W&I Costs MFC, Corporate, PF & SADC Strategic delivery Short term Medium term Long term 16
Slide 17: Deriving Value from Our Relationship with Nedbank
DERIVING VALUE FROM OUR RELATIONSHIP WITH NEDBANK 19.9% shareholding negotiated with Nedbank together with SARB and the FSB in order to provide stability to the broader financial system and to the Nedbank and OML investor bases during managed separation, whilst also supporting our ongoing commercial
Slide 18: OML Group KPIs
OML GROUP KPIs 1 Results from Operations 2 Adjusted Headline Earnings 3 RoNAV 4 Free Surplus Generation 5 SAM Solvency Cover Cost efficiencies a key focus area to deliver and support the above KPIs 18
Slide 19: Consistent Track Record of Growth with Balanced Earnings Stream
CONSISTENT TRACK RECORD OF GROWTH WITH BALANCED EARNINGS STREAM Results from Operations – improved Y-o-Y growth Results from Operations by Segment (2017)1 (Rmillion) 5% 9% 27% 4.7% 7.7% 5% R10.98bn2 14% 13% 27% 10,976 10,195 9,735 Mass & Foundation Cluster Personal Finance Wealth & Investments Old M
Slide 20: MFC: Solid Results in a Tough Operating Environment
1 MFC: SOLID RESULTS IN A TOUGH OPERATING ENVIRONMENT Results from Operations1 Gross Flows Strategic growth drivers (Rmillion) (Rmillion) 1 Entrenched distribution footprint Branch network continues to deliver better persistency experience and best-in-class 2,843 3,052 12,022 productivity, delive
Slide 21: Personal Finance: Solid Performance in a Tough Market
2 PERSONAL FINANCE: SOLID PERFORMANCE IN A TOUGH MARKET Results from Operations NCCF Strategic growth drivers (Rmillion) (Rbillion) Re-focusing on our core customer markets 1 10,1 7,7 6,6 Expanding customer penetration in Gauteng (0,2) Growing needs met per customer 3,421 (3,1) (2,8) 3,073 3,1
Slide 22: W&I: Strong Momentum Built Through 2017
3 W&I: STRONG MOMENTUM BUILT THROUGH 2017 Results from Operations and Revenue Old Mutual Investment Performance Strategic growth drivers Composition Core Retail Funds (31 December 2017) (Rmillion) 1 Investment Performance Quartile Rank Morningstar 80% 87% 88% Rating Improved top quartile performa
Slide 23: Corporate: Asset-Based Fees Drive Profits
4 CORPORATE: ASSET-BASED FEES DRIVE PROFITS Results from Operations NCCF Strategic growth drivers (Rmillion) (Rbillion) 1 Defend SA share in Corporate Winning standalone to umbrella conversions, 4,7 diversifying and refining product propositions 3,7 2 Continued Product Innovation 1,522 1,576 1,4
Slide 24: OM Insure: Increased Profitability as Remediation Efforts Bear Fruit
5 OM INSURE: INCREASED PROFITABILITY AS REMEDIATION EFFORTS BEAR FRUIT Results from Operations GWP Strategic growth drivers (Rmillion) (Rmillion) Ongoing remediation 1 Significant progress made to achieve iWYZE profitability 524 12,082 12,481 Focusing on improving quality of the book and 497 1
Slide 25: ROA: Improving ROA Performance at Headline Level
6 ROA: IMPROVING ROA PERFORMANCE AT HEADLINE LEVEL Results from Operations Loans & Advances Strategic growth drivers (Rmillion) (Rmillion) SADC 1 11.7% 11.4% 11.8% Malawi life business growth driven by first mover advantage in pension scheme reform Seize opportunities in infrastructure 1,081 1
Slide 26: Q&A
Q&A 26
Slide 27: Supported by a Market Leading Executive Management Team
SUPPORTED BY A MARKET LEADING EXECUTIVE MANAGEMENT TEAM Delivering Old Mutual to our customers Mass & Personal Old Mutual Wealth & Old Mutual Rest of Customer LatAm Foundation Insure Africa Solutions and Asia Finance Corporate Investments Cluster Director Clarence Karabo Clement Dave Hannes Jonas Ra
Slide 28: Agenda for the Day
AGENDA FOR THE DAY Welcome Trevor Manuel Our Investment Case and Battlegrounds Peter Moyo Our Group KPIs and Peter Moyo Operational Performance Q&A with Executive Management Peter Moyo & Executive Management Coffee Break Financial Review Casper Troskie Conclusion Peter Moyo Q&A Lunch 28
Slide 29: Financial Review: What We Will Cover Today
FINANCIAL REVIEW: WHAT WE WILL COVER TODAY Understanding our income statement and balance sheet going forward Solvency and how this may evolve under the new SAM regulatory regime Our gearing and liquidity Composition of Residual plc Bringing together our KPIs Dividend policy OML target
Slide 30: Financial Review: Our Income Statement and Balance Sheet Drivers
FINANCIAL REVIEW: OUR INCOME STATEMENT AND BALANCE SHEET DRIVERS 30
Slide 31: Stepping Through Our New Income Statement
STEPPING THROUGH OUR NEW INCOME STATEMENT Results from Operations Adjusted Headline Earnings (post tax) Headline earnings (Rmillion) (Rmillion) (Rmillion) 6.2% 16.9% 2.4% 10,976 13,409 12,526 13,014 13,144 9,735 10,195 10,765 9,814 2015 2016 2017 2015 2016 2017 2015 2016 2017 % 2015 – 2017 CAGR 2,34
Slide 32: Understanding Our New Income Statement Over Time
UNDERSTANDING OUR NEW INCOME STATEMENT OVER TIME Income Statement line items/year 2017 2018 Beyond Segments A OML segments Central Functions B Central expenses Results from Operations Finance costs, shareholder investment return, shareholder tax, non-controlling interests Other Group C Nedbank 19.9%
Slide 33: Reconciliation to Adjusted Headline Earnings
RECONCILIATION TO ADJUSTED HEADLINE EARNINGS (Rmillion) 2015 2016 2017 Results from operations 9,735 10,195 10,976 Finance costs represent interest charges associated with long-term debt only 1 Finance cost (296) (529) (622) (excludes Residual Plc, banking and operational debt). 2017 only partiall
Slide 34: Reported Shareholder Investment Return: Moving from Smoothed to Actual
REPORTED SHAREHOLDER INVESTMENT RETURN: MOVING FROM SMOOTHED TO ACTUAL Shareholder Investment Assets Split1 (As at December 2017, %) Shareholder returns are Reported on an actual basis, i.e. 1% without smoothing: SA Interest-bearing & Property 15% Primary earnings measure reflects actual investm
Slide 35: Transitioning Our Balance Sheet from plc to OML
TRANSITIONING OUR BALANCE SHEET FROM PLC TO OML 2017 OML Pro-forma NAV Recon from OM plc (Rbillion) (38,1) 0,5 (45,4) 136,7 25,7 79,3 OM plc before Pro-forma Quilter plc Demerger and Nedbank Unbundling Nedbank Equity Accounting 2 Disposal of LatAm OML Pro-forma NAV 3 Adjustments Admission (and other
Slide 36: Segment Balance Sheet Review
SEGMENT BALANCE SHEET REVIEW 15 – 17 Emerging Markets financial position1 (Rmillion) 2015 2016 2017 Segments CAGR 1 Goodwill and other intangibles 9,485 7,813 6,653 (16.2%) 1 Goodwill impairments in East Africa and 2 Loans and advances 20,820 20,517 21,483 1.6% Uruguay Investments and securities 60
Slide 37: Appropriate Gearing Supported by Diverse Liquidity Pools
C1 APPROPRIATE GEARING SUPPORTED BY DIVERSE LIQUIDITY POOLS The principal subsidiaries are responsible for managing their own liquidity in terms of group approved limits, to cater for stress scenarios Debt Summary (excl. Residual plc) – Nedbank liquidity managed separately with no OML commitment t
Slide 38: Solvency Assessment and Management Framework
SOLVENCY ASSESSMENT AND MANAGEMENT FRAMEWORK1 FSB in process of implementing SAM framework - expected in force from 1 July 2018 Overview OMEM has been producing SAM in parallel, but moved our capital management onto a SAM basis with effect Dec 2017 All OML SAM numbers presented are pro-forma a
Slide 39: Reconciliation from OML NAV to SAM Own Funds
RECONCILIATION FROM OML NAV TO SAM OWN FUNDS (Rbillion) 8,7 33,9 (8,7) (1,9) 6,9 2,8 (3,8) 98.3 (2,3) 62,8 Closing Scoping Treasury shares Residual plc Goodwill and Technical Subordinated Fungibility and Foreseeable SAM Group Adjusted IFRS adjustment in policyholder assets other provisions (net debt
Slide 40: Our SAM Solo & Group Solvency Positions
OUR SAM SOLO & GROUP SOLVENCY POSITIONS OML SAM Own Funds and SCR Ratios as at 31 Dec 2017 (Rbillion) SCR 243% 196% 148% 100% 143% 167% Ratio: Target: (5) 155% – 175% Target: Greater than 31 200% 3 (25) Target: 180% – 210% 17 98 78 52 OMLAC(SA)1 Strategic assets 2 OMLAC(SA) Nedbank 4 Residual plc 5
Slide 41: Solvency Remains Resilient Under Stress
SOLVENCY REMAINS RESILIENT UNDER STRESS Changes in SAM solvency ratio during a stress scenario OMLAC(SA) Stress testing of the regulatory capital is Change: (22%) 5% (8%) 43% used to identify potential capital and liquidity risk exposures, the resources 286% available to address the risks and the
Slide 42: Residual plc Delivers Positive NAV, Upside for OML in Time
D1 RESIDUAL PLC DELIVERS POSITIVE NAV, UPSIDE FOR OML IN TIME FY2017 Residual plc pro-forma NAV1 Future Development of Residual plc NAV The speed of release of any surplus to OML is subject to the ruling of the UK court3 £million Rmillion Assets4 within the Old Mutual plc legal entity to largely
Slide 43: Financial Review: Return on Net Asset Value, Free Surplus and Dividend
FINANCIAL REVIEW: RETURN ON NET ASSET VALUE, FREE SURPLUS AND DIVIDEND 43
Slide 44: OML Group KPIs
OML GROUP KPIs KPI Description 1 Primary measure of operational performance and quantifies the segments’ contribution to Group AHE Results from Operations Pre-tax and minority earnings of operations, less central expenses, excluding net investment return on shareholder assets and finance costs 2
Slide 45: Returns Supported by Improved Focus on Cost and Capital Allocation
RETURNS WILL BE SUPPORTED BY IMPROVED FOCUS ON COST AND CAPITAL ALLOCATION FY2015 – FY2017 Group RoNAV Zimbabwe shareholder Revised Operating and Financial Model (%) returns drove strong 2017 result Fundamental multi-year (3 – 4) transformation of finance function, transitioning from a legal entit
Slide 46: Conceptual Illustration of Cost Efficiency Target
CONCEPTUAL ILLUSTRATION OF COST EFFICIENCY TARGET R1.0 billion of pre-tax run-rate cost savings by end 2019, net of costs to achieve this. This will be based off the 2017 IFRS administrative cost base (as defined), and adjusted for inflation and foreign exchange movements over 2018 and 2019 Rbillion
Slide 47: High Cash Generation but Impacted by Fungibility Constraints and Nedbank Treatment
HIGH CASH GENERATION BUT IMPACTED BY FUNGIBILITY CONSTRAINTS AND NEDBANK TREATMENT 2017 Free Surplus Generation1 Free Surplus Generation as % of AHE: (Rbillion) FY2015 – FY2017 R13.4bn ~(15%) ~(22%) R8.0bn R6.1bn R8.0bn R6.2bn ~(2%) 62% 57% 60% ~60% Adjusted Headline Net capital Fungibility Nedbank
Slide 48: Our Solvency & Cash Generation Supports a Sustainable Dividend Policy
OUR SOLVENCY & CASH GENERATION SUPPORTS A SUSTAINABLE DIVIDEND POLICY Target full year ordinary dividends covered by Adjusted Headline Earnings between 1.75 to 2.25 times Target an interim dividend at 40% of the current year interim Adjusted Headline Earnings Any dividends will take into accou
Slide 49: Our Financial Targets
OUR FINANCIAL TARGETS Returns RoNAV1 Average COE + 4% (weighted average COE) Growth Results from Operations CAGR of Nominal GDP + 2% over the three years to 2020 (nominal GDP growth is defined with reference to South Africa) Cost efficiencies R1bn by end 2019 (pre-tax run-rate cost savings net
Slide 50: Agenda for the Day
AGENDA FOR THE DAY Welcome Trevor Manuel Our Investment Case and Battlegrounds Peter Moyo Our Group KPIs and Peter Moyo Operational Performance Q&A with Executive Management Peter Moyo & Executive Management Coffee Break Financial Review Casper Troskie Conclusion Peter Moyo Q&A Lunch 50
Slide 51: Remuneration Policy Aligned with Shareholders Interest to Deliver Value
REMUNERATION POLICY ALIGNED WITH SHAREHOLDERS INTEREST TO DELIVER VALUE Objective: Attract, retain, motivate critical talent through competitive reward that Short-term incentive plan weighting (%) aligns employees’ interests with shareholders Remuneration Committee: Four independent non-executiv
Slide 52: A Compelling Investment Proposition
A COMPELLING INVESTMENT PROPOSITION 2017: RoNAV2 AHE Average CoE + 4% Strong business with leading market positions R13.4bn Results from operations3 of FUM Nominal GDP + 2% Positioned for longer term sustainable growth R1.2trn SAM Solvency Ratio4 155% – 175% NCCF1 Sustained high cash generation R14.
Slide 53: Q&A
Q&A 53
Slide 54: Appendices
APPENDICES 54
Slide 55: Established Board with Broad Sector and Public Market Experience
ESTABLISHED BOARD WITH BROAD SECTOR AND PUBLIC MARKET EXPERIENCE Continuing non-executive board members New non-executive board members Trevor Manuel (Chair) Ingrid Johnson Thys du Toit James Mwangi From 1 July 2018 to at least 31 March 2019 Paul Baloyi Nosipho Molope John Lister Ignatius Sehoole Pe
Slide 56: Agreement with the Economic Development Department
AGREEMENT WITH THE ECONOMIC DEVELOPMENT DEPARTMENT 25% BEE ownership within 3 years after listing BEE Within 5 years, OML BEE ownership of at least equal to that of its best empowered peer 1 No merger-related job losses Employment Commitments Increase in the number of FTEs2 within OML South
Slide 57: New Holdco Structure Pre and Post Unbundling
NEW HOLDCO STRUCTURE PRE AND POST UNBUNDLING OM plc Old Mutual Limited Other Quilter OMGUK Old Mutual plc OMGH OM BV Subsidiaries Other Other OM BV OMGUK OMEM OMPH Subsidiaries Subsidiaries Other OMGH Subsidiaries OMLAC(SA) c.19.9%1 OMEM OMPH Nedbank OMLAC(SA) Nedbank HoldCo OpCo Residual Co 52% (in
Slide 58: Headline Earnings to IFRS Reconciliation
HEADLINE EARNINGS TO IFRS RECONCILIATION (Rmillion) 2015 2016 2017 Headline earnings 12,526 13,014 13,144 Impairment of goodwill and other intangibles1 (267) (1,783) (1,106) Impairment of investments in associates - (557) - Profit/(loss) on disposal of subsidiaries, associated undertakings and strat
Slide 59: Recon from AOP to AHE
RECON FROM AOP TO AHE (Rmillion) 2015 2016 2017 AOP (pre-tax) 12,418 12,731 13,326 1 Shareholder returns are no longer smoothed and actual returns are 1 LTIR (2,838) (2,951) (2,974) included to derive Adjusted Headline Earnings 2 Shareholder investment return 1,914 2,375 5,120 3 Amortisation of ac
Slide 60: Results from Operations Reconciliation by Segment
RESULTS FROM OPERATIONS RECONCILIATION BY SEGMENT 2017 2016 (Rmillion) Investment Amortisation Investment Amortisation AOP Impairment of Results AOP Impairment of Results return on of acquired return on of acquired (pre-LTIR and intangibles, from (pre-LTIR and intangibles, from insurance intangibles
Slide 61: Our Current Cost Base in Context of Cost Efficiency Leadership
OUR CURRENT COST BASE IN CONTEXT OF COST EFFICIENCY LEADERSHIP (Rmillion) 2015 2016 2017 Computation of cost base to reference measurement Total other operating & administrative expenses 23,141 25,286 26,993 OML operating and admin expenses of R27bn plc Head Office and Old Mutual Bermuda (2,251) (