‘BECOMING AN EAST AFRICAN FINANCIAL SERVICES CHAMPION’
CONTENTS 1. Strategic Overview 2. Macroeconomic Review 3. Capital Markets Performance 4. Key Financial Highlights 5. Overview of Financial Performance 6. 2017 Outlook 7. Q&A 1
Peter Mwangi Group CEO 2
1. STRATEGIC OVERVIEW – MANAGED SEPARATION STRATEGIC PATH 1. Deliver enhanced business performance ACTIONS 2. Reduce cost of central activities STRATEGIC RATIONALE: 3. Manage down Group debt “Unlocking Value” OUTCOMES 4. Valuation re-rating of the businesses 5. Removal of conglomerate discount TRANSACTIONS TO ACTUALISE MANAGED SEPARATION STRATEGY Material completion Phased reduction of OMAM 66% stake Target completion end-2018 Creation of two separate entities, both listed in both London and Johannesburg • Old Mutual Wealth operations • Creation of a new South African holding company to hold remaining plc assets (principally OMEM & Nedbank) EMERGING MARKETS Distribution of significant proportion of current stake in Nedbank • Appropriate strategic minority stake retained plc Material reduction in holding company debt and reshaping the balance sheet 3
1. STRATEGIC OVERVIEW – INTEGRATED FINANCIAL SERVICES PLAY In 2015, The Old Mutual Group acquired a 60.7% interest in UAP Holdings Limited (“UAPHL”) for a total consideration of KES 23.5bn. 4
1. STRATEGIC OVERVIEW – INTEGRATED FINANCIAL SERVICES PLAY The merger expanded Old Mutual’s geographic footprint further in Eastern Africa 5
1. STRATEGIC OVERVIEW – INTEGRATED FINANCIAL SERVICES PLAY The UAP OM Group offers customers a wide array of financial products and services 6
1. STRATEGIC OVERVIEW – INTEGRATED FINANCIAL SERVICES PLAY The combined Group at a glance 7
1. STRATEGIC OVERVIEW – INTEGRATED FINANCIAL SERVICES PLAY Our General Business has the #2 position in Kenya while our Life Business is a leading contender for a top 3 position in the near future ■ UAP OM has a top market position in Kenya, Uganda and South Sudan with a strong position in the other countries. ■ The integration process continues well and will be finalised in the second half of this year post regulatory approvals. This will result in us having scaled life and asset management businesses in our core Kenyan market. Kenya: 3Q 2016 General Insurance Market Share Kenya: 3Q 2016 Life Assurance Market Share Jubilee 10.9% Britam 23.2% UAP OM 8.3% Jubilee 15.0% APC 7.7% ICEA 13.7% CIC Sanlam 7.1% 6.9% Britam UAP OM 5.6% 6.5% ICEA 5.5% Liberty 6.3% Heritage 4.7% CIC 5.7% GA 4.2% Pioneer Assurance 5.1% AAR Kenindia 3.6% 4.8% First Assurance Madison 3.5% 3.4% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Source: IRA for market share statistics. 8
1. STRATEGIC OVERVIEW – KEY WINS IN 2016 ■ UAP Old Mutual Brand Launch – thematic campaign dubbed “Keep Good Company”, well received by the market ■ UAP Old Mutual Tower completion – staff have moved as of December 2016 with final relocation of remaining staff by March 2017 ■ M-Tiba Launch – mass market health product launched in collaboration with Safaricom and Carepay. Good uptake with ramp up in 2017 ■ Faulu – expanded its product offering to include Visa branded debit cards and countrywide ATMs ■ Good progress in the journey to build East Africa’s leading Integrated Financial Services provider ■ Sisi Centre launch and merger of countrywide branches, branding also complete 9
CONTENTS 1. Strategic Overview 2. Macroeconomic Review 3. Capital Markets Performance 4. Key Financial Highlights 5. Overview of Financial Performance 6. 2017 Outlook 7. Q&A 10
2. MACROECONOMIC REVIEW Generally stable Macros for the East African Region 3Q 2016 GDP Growth 2016 December Inflation Rate 2016 Currency vs. USD 0.0% 7.0% 18.0% -0.2% 6.2% -3.0% 16.0% 15.3% -5.0% 6.0% 5.7% -7.0% 14.0% 5.2% -8.6% -10.0% 5.0% 12.0% 11.0% -15.0% 4.0% 10.0% 8.0% -20.0% 3.0% 2.5% 6.4% 5.7% 6.0% 5.0% -25.0% 2.0% 1.8% 4.0% 1.0% -30.0% 2.0% -31.6% 0.0% 0.0% -35.0% Tanzania Kenya Rwanda DRC Uganda DRC Rwanda Kenya Uganda Tanzania DRC Rwanda Uganda Tanzania Kenya 11
2 . MACROECONOMIC REVIEW CONT’D Macroeconomic highlights on Kenya, our largest market Inflation Rates ■ Driven by stable food prices and low oil prices, annual Inflation trended downwards 9.00% 8.00% from 7.74% in January 2016 to 6.35% in 7.00% 6.00% December 2016. 5.00% 4.00% 3.00% 2.00% 1.00% ■ General downward trend in yields Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 supported by a stable inflation rate regime Inflation Y-o-Y Upper Limit Lower Limit and forex. Impact of Banking Amendment Act 2016 realized towards the later part of T-Bill Yields the year with a substantial shift by banks into 16.0 government paper. 14.0 12.0 10.0 8.0 % 6.0 ■ KES strengthened in 1H 2106 due to low oil 4.0 2.0 prices, diaspora remittances and inflows 0.0 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 from the horticulture and tourism sectors. 91-Day 182-Day 364-Day KES vs. USD Performance ■ In 2H 2016, Towards the end of the year, KES weakened due to the 0.25% rate hike in the 0.0% -0.2% -0.2% Federal Funds Rate, markets' positive -2.0% -1.2% -4.0% reaction to the conclusion of the US election -6.0% -4.8% -5.1% and USD demand from local -8.0% importers/corporates. -10.0% -12.0% -11.3% 2011 2012 2013 2014 2015 2016 12
2 . MACROECONOMIC REVIEW CONT’D South sudan is a key market accounting for 8.8% of group GWP Currency devaluation has increased the cost of living and • consequently the cost of doing business. Negative impact on businesses with some entities closing their • Economic operations. Highlights Food Inflation is at420%. • The exchange rate in the black market at an all time high of97 • SSP:1USD as the currency devaluation continues. Increase in the number of states to from 10 to 28. In January 2017 an • addition of 4 more states. The implication to our businesses is that the Central Equatoria State • Regulatory Insurance Regulatory Authority has now been renamed as the Jubec Highlights State Authority. The insurance bill is yet to be signed into law and the supervisory arm of • the BoSS that regulates insurance is still not functional. 13
CONTENTS 1. Strategic Overview 2. Macroeconomic Review 3. Capital Markets Performance 4. Key Financial Highlights 5. Overview of Financial Performance 6. 2017 Outlook 7. Q&A 14
3. CAPITAL MARKETS PERFORMANCE Kenya’s poor capital markets performance is in stark contrast to a robust global performance 2016 Kenya Asset Class Returns ■ The NSE 20 and NASI indices shed 21.1% and 8.5% respectively in 2016 as the equity market FTSE Bond Index 13.0% was rattled by the introduction of the Interest Rate Cap legislation in the second half of the 91 Day T-Bill 8.6% year and its impact on the future earnings growth of the listed bank stocks that comprise a significant weight of the equity NASI -8.5% market. NSE 20 -21.1% ■ All major asset classes finished positive in -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2016. In Q4, U.S. stocks rallied after the presidential election while other asset classes 2016 Global ETF Returns declined. Commodities 18.6% US Equities ■ The Fed hiked the FFR with expectations of 12.0% more hikes in 2017. This contributed to a Real Estate 8.6% strengthened dollar which could have further adverse impacts on the NSE. Gold 8.3% Foreign Equities 4.9% US Bonds 2.4% 0.0% 5.0% 10.0% 15.0% 20.0% Source: Bloomberg. Personal Capital: Capital Markets Reviews and Outlook 4Q 2016. 15
CONTENTS 1. Strategic Overview 2. Macroeconomic Review 3. Capital Markets Performance 4. Key Financial Highlights 5. Overview of Financial Performance 6. 2017 Outlook 7. Q&A 16
4. KEY FINANCIAL HIGHLIGHTS Track record of consistent topline growth and returns to shareholders GWP (KES Bn) PBT and Dividends (KES Bn) 2.5 25.0 2.3 2.2 19.4 2.0 20.0 1.7 16.9 1.5 14.8 1.2 15.0 12.7 1.0 0.7 9.1 10.0 0.4 0.4 0.4 0.4 0.5 5.0 - - 2012 2013 2014 2015 2016 - PBT Dividends 2012 2013 2014 2015 2016 Total Assets (KES Bn) Total Equity (KES Bn) 57.0 60.0 20.0 17.8 17.7 17.2 18.0 48.7 50.0 16.0 14.8 42.1 14.0 40.0 11.6 33.1 12.0 30.0 10.0 24.7 8.0 20.0 6.0 4.0 10.0 2.0 - - 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 17
4. DIVIDEND 2016 DIVIDEND PROPOSAL OF KES 1.70 PER SHARE (KES 359M) Board recommendation to pay-out KES 1.70 9.8 per share in dividend for the financial year 7.8 2016. This is subject to shareholders’ approval 7.0 at the Annual General Meeting. 5.4 Pay-out ratio is higher than previous years but 3.1 is appropriate given that no dividend was 1.7 1.7 1.7 1.5 paid for the 2015 financial year. 0 2012 2013 2014 2015 2016 Dividend recommendation based on: EPS DPS Our goal to continue providing a cash o return to our shareholders PAYOUT RATIO (DPS/EPS) The need to retain enough resources in 31% o the business to fund expected growth in 24% order to maximize both present and 22% future returns to our shareholders. 15% 0% 2012 2013 2014 2015 2016 18
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