2018 RESULTS
AGENDA 2018 OVERVIEW Peter Moyo, Group CEO FINANCIAL REVIEW Casper Troskie, Group CFO CONCLUDING REMARKS Peter Moyo, Group CEO Q&A 2
2018 – A YEAR OF DELIVERY AND EXECUTION Progress on our eight battlegrounds Managed Separation activities and transactions completed On track to deliver against our medium term targets, although some headwinds ahead Delivered in a sustainable and responsible way 3 3
IMPACT OF THE SOUTH AFRICA MACRO ENVIRONMENT Equity market levels 1 Impact on our business Closing equity market levels down 14% 1 14,000 in 2018 13,000 Average FUM levels in SA of R957 billion, 12,000 up 3%, supported by strong NCCF 11,000 10,000 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Real GDP and inflation growth 2 % Impact on our customers 4.9% 4.6% 4.5% 4.4% Low GDP growth, low real wage growth 2.2% 1.4% and higher VAT rate putting pressure on levels of disposable income -0.4% Real GDP Reduction in propensity to save Inflation -2.6% Q1 2018 Q2 2018 Q3 2018 Q4 2018 1. Market level s represents the JSE Shareholder Weighted Index (SWIX) 2. Real GDP growth is seasonally adjusted and calculated on a quarter-on-quarter (QoQ) annualised basis 4 Source: Bloomberg
OVERVIEW OF THE REST OF AFRICA MACRO ENVIRONMENT Zimbabwe Kenya Real GDP Real GDP and inflation growth 2 Equity market levels 1 Inflation % 600 6.2% 6.0% 5.8% 5.7% 5.7% 500 4.8% 4.3% 400 300 200 100 0 Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Q1 2018 Q2 2018 Q3 2018 Q4 2018 17 18 18 18 18 18 18 18 18 18 18 18 18 Real GDP and inflation growth 2 Real GDP Nigeria % Real GDP Inflation Real GDP and inflation growth 2 Inflation % 42.1% 13.3% 11.4% 11.3% 11.2% 2.4% 2.0% 1.8% 5.4% 1.5% 3.0% 2.7% 2.9% 2.9% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018 1. Market levels Equity market level represents the Zimbabwe Industrial Index 2. Real GDP growth is not seasonally adjusted and is calculated on a year-on-year (YoY) basis 5 Source: Bloomberg
DELIVERING AGAINST OUR MEDIUM TERM TARGETS Performance KPI Target 2018 Average COE 1 + 4% RETURNS RoNAV 18.6% Results from GROWTH CAGR of Nominal GDP + 2% Down 4% operations Cost R1 billion by end 2019 pre-tax run-rate cost savings R750 million efficiencies EFFICIENCY Underwriting Old Mutual Insure underwriting margin of 4%-6% 5.3% result Old Mutual Limited: 170% Old Mutual Limited: 155%-175% CAPITAL Solvency OMLACSA: Greater than 200% OMLACSA: 225% Ordinary dividend cover of 2.04x CASH Dividend cover Target cover 1.75 to 2.25x RETURNS 1.10x including special dividend 6 1. Cost of Equity (COE) = 13.4%
ATTRACTIVE CAPITAL RETURNS IN 2018 AND BEYOND R45.9 billion distributed in 2018 At least R5.6 billion to be Total distributed in 2019 value 930 cents per share Interim Special Nedbank Final Share dividend dividend unbundling dividend buyback R51.5 billion R2.2 billion R2 billion R3.6 billion R4.9 billion R38.8 billion 1 1,042 cents per share 45 cents per 40 cents per 100 cents per 785 cents per 72 cents per share share 2 share share share 1. 158,726,732 shares at closing price on 12 October of R244.87 7 2. Calculated as R2 billion divided by number of issued shares outstanding at 31 December 2018 (4,942 million)
SOLID PROGRESS ON OUR BATTLEGROUNDS 1. Defend and grow SA market share in Mass and Corporate markets 8. Cost efficiency 2. Defend and grow in SA Personal Finance market leadership Management 7. Refresh the 3. Improve the competitiveness of Wealth and Investments technology offering actions 4. Continued turnaround 6. Win the war of Old Mutual Insure for talent 5. Turnaround East African business and improve returns across Rest of Africa 8
DEFEND AND GROW SA MARKET SHARE IN MASS MARKET +12% +37% 4,579 16,518 Strong sales despite economic headwinds 4,091 Life APE sales up 12% due to higher average 12,070 adviser headcount and improved productivity 2017 Loans and advances up 37% due to higher 2018 consultant productivity, customer take-on enhancements and improved scorecard Life APE sales Loans and advances (Rm) (Rm) Growing distribution footprint +3% -1% Opened 25 new branches in 2018 to 348 3,129 1,236 1,222 3,052 211,000 active money accounts, up 67%, 1 million money accounts opened to date 2017 Reduced claim pay out times – claims initiated via 2018 the Money Account app or call centre paid in 4 RFO VNB hours (Rm) (Rm) 9
DEFEND AND GROW SA MARKET SHARE IN CORPORATE MARKET +9.1 +15% 3,133 2.0 2,719 Excellent flows in competitive environment Life APE sales up 15% - reflects good growth across all major product lines except annuities 2017 2018 -7.1 Life APE sales NCCF improved following new mandates (Rm) NCCF secured and improved termination (Rbn) experience +8% +22% Launch of new self service portal for Old Mutual SuperFund customers 1,703 309 1,576 254 Good profit growth as a result of management actions and resolution of risk exposures 2017 2018 RFO VNB (Rm) (Rm) 10
DEFEND AND GROW IN SA PERSONAL FINANCE MARKET +2% -0.8 2,556 2,502 Stable Life APE sales, decline in NCCF Good growth in single premium and annuity sales 2017 Lower recurring premium savings sale, risk flat -2.8 2018 -3.6 Life APE sales (Rm) NCCF NCCF weaker due to poor claims experience and (Rbn) higher disinvestments +14% -36% Distribution channels generated gross flows of over R69.2 billion, R37.2 billion reported in Wealth and Investments 3,150 418 366 2,021 Increased focus on digital sales channels 2017 Profit lower due to lower year on year reserve releases 2018 and poor mortality and morbidity experience RFO VNB (Rm) (Rm) 11
IMPROVE THE COMPETITIVENESS OF WEALTH AND INVESTMENTS -3.3 +1% Strong flows in difficult market and competitor 14.1 88.3 89.2 environment 10.8 Strong retail flows in Old Mutual International and on the Wealth platform 2017 Positive NCCF supported by excellent retail 2018 flows (up 35%). Outflows in Alternatives Gross flows NCCF (Rbn) (Rbn) following asset realisations and low margin terminations by multi-managers internalising indexation capabilities +8% -2% 1,611 737 724 Improved investment performance 1,490 Good profit growth and operating margin of 32%, demonstrating strength of diversified earnings 2017 stream 2018 RFO AUM Khaya Gobodo appointed as MD (Rm) (Rbn) 12
CONTINUED TURNAROUND OF OLD MUTUAL INSURE +6% +28% Modest Gross Written Premium (GWP) growth in 13,218 670 12,481 challenging market conditions 524 Growth driven by pricing improvements 2017 Increase in flows through strategic partnerships 2018 GWP RFO Strong growth in iWyze (Rm) (Rm) Underwriting margin maintained at upper end of our +1.6 +54% range – 5.3% for 2018 vs target of 4%-6% 480 5.3 Significant increase in RFO given low claims 3.7 312 experience, especially in H1 2018 and tight expense management 2017 Garth Napier appointed as MD 2018 Underwriting result Underwriting margin (Rm) (%) 13
TURNAROUND EAST AFRICAN BUSINESS AND IMPROVE RETURNS ACROSS ROA -4% -36% +37% -1% Mixed top line growth reflects difficult economic 3,654 11,241 3,512 environment 7,219 Southern Africa – gross flows flat despite impact 2017 of recession in Namibia. Large non life inflows secured in Malawi 2018 East Africa – Life sales up 23% due to improved GWP Loans and advances (Rm) (Rm) productivity. Gross Written Premium (GWP) down 2% due to increased competitor activity and tough economic environment West Africa – gross flows up 13% reflecting higher RFO by region (Rm) +16% +37% non life sales in Ghana. Life sales and GWP -91 1,254 impacted by slower than expected rollout in -255 1,081 Ecobank 11 765 R1,254 Increase in RFO reflects robust profits in Southern 824 Africa and evidence of turnaround in some markets RFO Southern Africa - Ex Zim West Africa Zimbabwe – RFO impacted by functional currency (Rm) Zimbabwe Central expenses change East Africa 14 Indicates growth rate before applying the functional currency change for Zimbabwe
WIN THE WAR FOR TALENT Built a diverse, engaged and talented Extensive engagement with our employees Executive team to lead the organisation to drive required culture shifts Executive team build completed with Engaged 10,000 employees through appointments of Khaya Gobodo and face to face and mobile campaign, Garth Napier approximately a third of our employees Transformed and renewed executive Committed to embed the desired team culture shifts required to transform the organisation. We are building teams that are: Diversity of age, experience, gender Delivery orientated and race Customer centric Average age of our Executive team has reduced Externally competitive Youngest member is 37 Investing in leadership development and youth talent programmes to build future generation of our leadership 15
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