Old Mutual Ltd. (ODMUF -7.07% ▼ ) has held its Q4 earnings call. Read on for the main highlights of the call.
Old Mutual Ltd.’s recent earnings call painted a picture of a company experiencing robust growth and strategic success, yet facing certain regional challenges. The sentiment was largely positive, driven by strong earnings growth, increased dividends, and the successful launch of Old Mutual Bank. However, issues such as credit loss ratio increases and persistency problems in certain African regions were highlighted as areas of concern. Despite these challenges, the performance in Old Mutual Insure and Wealth Management sectors stood out as significant positives.
Strong Double-Digit Earnings Growth
Old Mutual Ltd. reported a 17% increase in adjusted headline earnings per share, reaching ZAR1.506 per share. This growth underscores the company’s strong financial performance and its ability to generate substantial shareholder value.
Increased Dividend
The Board declared a final dividend of ZAR0.52 per share, culminating in a total annual dividend of ZAR0.86. This represents a 6% increase year-on-year, reflecting the company’s commitment to returning value to its shareholders.
Growth in Funds Under Management
Funds under management saw a 10% increase, reaching ZAR1.5 trillion. This growth was supported by improved equity market performance in South Africa, highlighting the company’s effective asset management strategies.
Launch of Old Mutual Bank
The launch of Old Mutual Bank marks a significant milestone for the company. Initially available to employees, the bank plans to expand to the public by 2025, positioning itself as a major growth catalyst for Old Mutual.
Exceptional Performance in Old Mutual Insure
Old Mutual Insure reported a 9% increase in gross written premiums, totaling ZAR21.9 billion. The net underwriting margin improved to 6.2%, surpassing the target range and demonstrating strong operational performance.
Growth in Wealth Management
Wealth Management assets under management increased by 14% to ZAR420.4 billion, with annuity revenue rising by 12%. This growth highlights the strength of Old Mutual’s wealth management offerings.
Improved Sustainability Ratings
Old Mutual improved its MSCI ESG rating from AA to AAA and maintained its Level 1 BEE rating since 2019, showcasing its commitment to sustainability and responsible business practices.
Credit Loss Ratio Increase
The credit loss ratio in Old Mutual Finance increased to 8.9%, primarily due to impairments in the secured loan book. This presents a challenge that the company will need to address moving forward.
Challenges in Africa Regions
The company faced a decrease in VNB margin by 260 basis points to 0.2% in African regions, with issues in Nigeria and Tanzania affecting the net underwriting margin.
Impact of Persistency Issues
Persistency issues led to a strengthening of assumptions, negatively impacting the value of new business and contractual service margin.
Decline in Old Mutual Corporate Life APE Sales
Life APE sales in Old Mutual Corporate saw a decline due to a high base effect from a large single premium savings deal in the previous year.
Suspension of Trading in Zimbabwe
The suspension of trading of Old Mutual shares on the Harare Stock Exchange continues to impact operations in Zimbabwe, posing a challenge for the company.
Forward-Looking Guidance
Looking ahead, Old Mutual provided comprehensive guidance for fiscal year 2024, indicating robust financial performance and strategic advancements. The company expects continued growth in earnings per share and funds under management. Despite challenges such as hyperinflation in some African regions, Old Mutual is focused on expanding its value of new business margin and increasing Life APE sales within the Mass and Foundation Cluster. Strategic initiatives include the launch of Old Mutual Bank and investments in digital transformation, aiming to enhance customer experience and operational efficiency. The company also emphasizes its commitment to sustainability with significant investments in the green economy and a reduction in carbon emissions.
In conclusion, Old Mutual Ltd.’s earnings call reflected a positive overall sentiment, driven by strong financial growth and strategic initiatives. While challenges remain, particularly in certain African regions, the company’s focus on sustainability and digital transformation positions it well for future success. Investors and market watchers will be keen to see how Old Mutual navigates these challenges and capitalizes on its growth opportunities.
