Old Mutual reports rise in earnings, declares dividend

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NZINGA QUNTA: My name is Nzinga Qunta, standing in for Fifi Peters [on the SAfm Market Update]. Old Mutual Limited says results from operations are up 87% to R4.1 billion.

Chief executive officer Iain Williamson joins me now. A very good evening. Thanks so much for your time.

These results [for the six months to end June] are ones that exclude the income from your investment in Nedbank and, according to you, not defined by Covid-19.

IAIN WILLIAMSON: Yes. Good evening. And thanks for having me, and good evening to your listeners.

Yes. I joked a little with our investors when we started our update this morning – that this is the first time in two-and-a-half years I haven’t had to spend most of my time talking about Covid and its impact on our business.

We saw literally no impact on our business from a net level for the six-month period, which is indeed a fantastic milestone to have got through.

Hopefully on a forward-looking basis we can look forward to more of the same.

NZINGA QUNTA: You’ve said that Life APE [annual premium equivalent] sales have increased by 15%, and that’s driven by strong recoveries in the Mass and Foundation Cluster, as well as your Rest of Africa business.

IAIN WILLIAMSON: Yes, that’s right. So our Life APE sales [reflect] the premium that we collect on life business from our customers. Our new business there was up 15%.

The similar result from our businesses outside South Africa was actually up 27%, so that was a big driver of that result.

And then Mass and Foundation Cluster continues a strong recovery with now eight quarters of consecutive growth in sales in that business.

NZINGA QUNTA: Okay. And the group reported a 7% decrease in funds under management. Talk to me about that.

IAIN WILLIAMSON: Yes, there were two main drivers of that.

The funds under management represent the funds that we manage on behalf of customers who are invested in various markets, both in South Africa and globally.

And while equity markets in South Africa were flat over the six-month period, the bond market capital values were down, with interest rates having gone up; and the offshore equity markets were all down quite materially. As most people will know, the US market has been in a big bear market for the last two months.

NZINGA QUNTA: So the launch of your Bula Tsela scheme makes you the first insurer to offer shares directly to the South African public, and the first to also include lower-income earners via your retail scheme. Just talk to me about that and how it fits in with Old Mutual’s strategy going forward.

IAIN WILLIAMSON: We launched Bula Tsela and the retail component as very much a broad-based empowerment transaction. We previously did something similar to this when Old Mutual demutualised in 1999 and we distributed free shares to all our customers at the time.

Read: Old Mutual approves new black empowerment share scheme

The retail scheme prospectus was issued last Monday. So if anyone is interested in investing, they should take a look at that document.

We will be doing a road show around the country through shopping malls and things like that to assist anybody who either wants some assistance in understanding the scheme, any assistance with understanding the prospectus, or any assistance in understanding what they need to do if they are interested in applying for shares under the retail scheme.

NZINGA QUNTA: All right, Iain, just talk to me about your medium-term targets. You’ve said you’ve got four clear focus areas for developing and deploying a number of new growth engines.

IAIN WILLIAMSON: Yes, over the medium term, [we are] seeking to deliver a return on capital above our cost of capital. We are investing in a few major areas for growth over and above our core business. That is in what we call our Next176 portfolio, which is really a portfolio of fintech-orientated innovation business ideas.

We have an investment in a transactional capability that we are building.

We have our China business, which is growing very fast with sales having gone up by more than a 100% year on year.

And we have our East Africa and West Africa businesses, which are showing a lot of promise.

NZINGA QUNTA: Old Mutual CEO, Ian Williamson joined me on the line there, talking about their results and their future plans as well. Thanks so much for your time, Iain, on the SAfm Market Update with Moneyweb.

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