Good afternoon, everyone. Thank you for your attendance and the Avior team for hosting today's investor call. Today is actually the 27th time that Avior has hosted Frans or myself presenting the results, on a biannual basis. We're hoping that Avior can give us a medal after our 30th innings on this. I'll first of all run through our overall results, go through the divisional performance, some of our focus areas, run through some return and trading stats, and finally conclude. We'll go into the Q&A session. If you look at the group structure, we've got a stable structure, unchanged in the past 13 years. The PSG Wealth division is our largest division and contributed 57% of earnings during the first six months.
That division consists of the following business units: Wealth Advisory Business, the multi-manager, our stockbroking, our life and PSG Invest, which is a listed company, and employee benefits. Asset management consists of our single asset manager, as well as the offshore and local ManCo. PSG Insure, we own 60% of Western RSA, and Santam the other 40%. It includes Insure distribution, our advisory business, and our short-term admin business. I think one of the benefits to have had a stable structure and a stable management team to navigate the various market conditions that one's experienced over the years. One of the defining features of PSG Financial Services is our distribution network and broad footprint. We're able to service our clients where they reside. We had 972 advisors and operate through 265 offices throughout South Africa and Namibia. Business characteristics. We've listed five business characteristics.
First of all, the equity market dependent. During the current period, securities markets gave us a benefit with positive market growth, good investment performance, as well as some performance fees. Admin, business, and system dependent. We've invested ZAR 3 billion over the past 10 years in technology, and we continue to invest there. Not very balance sheet intensive. Mainly Western, which has got the insurance license, is the main business there. Very free cash flow generative. Our cash earnings actually exceed our headline earnings. We have 21 regulatory licenses, 17 in South Africa and four foreign licenses. If we just look at some of the macroeconomic indicators. If you look at the rand/dollar, very stable, the start and end point. If one looks at on a six-monthly basis, so from year-end until now, there's actually a 5% appreciation in the rand/dollar. The JSE delivered a 22% return.
S&P 500, 14% in Rand terms. Property index was up 12%, and cash provided an 8% return, and that's from H1 2025 to H1 2026. If we then focus on our overall results. First of all, headline and recurring headline earnings, we generated ZAR 726 million, which is up 19% from the previous period. We bought back some shares. That's why we had a decrease in the number of shares, resulting in our recurring headline earnings per share being up 21%. Assets under management were up 19% at ZAR 518 billion, and assets under administration up 21% at ZAR 721 billion. Premium up 6% at ZAR 4 billion. If we then look at our divisional earnings. The wealth division, ZAR 407 million of earnings, was up 15%. Asset management up 25% with ZAR 197 million. Insure was up 26% with ZAR 122 million, giving us our overall ZAR 726 million.
What we're particularly pleased with is really that all three business units delivered good double-digit returns during this period. Particularly if you look at the results delivered over the period there from H1 2022 to H1 2026, shows consistent growth that we've achieved across all of our business units. Our 10-year track record and stats. This is what we refer to the Jannie Mouton slide. You always used to look at how have you performed in your most recent period and compare that against your past 10-year track record. If we look at assets under management, that's one of our key metrics, was up 19% in what we've delivered over the previous 10 years, a compound growth of 13%. If I look at headline earnings, we're up from ZAR 341 million- ZAR 1,272 million for the year end 2025.
If one looks at operating margin, you can see how we've managed to grow that over the different periods. Return on equity is one of our highlights. Delivered a 28.6% return on equity here. Credit rating, we've had five credit rating upgrades in the past 10 years, and an SCR ratio of 2.99. Business has grown, both on advisors and employees, as we've built scale and delivered the growth that's shown on that slide. If we turn to the wealth business. The number that we'd like you to focus on is the total managed assets. We started the year at just under ZAR 410 billion. Market movement gave ZAR 27 billion, which shows really the positive investment outcomes our clients enjoyed during that period. Net flows of ZAR 11.7 billion, giving us just under ZAR 449 billion of managed assets, which was up 10%.
That's really the main area that we focus on. The stockbroking custody assets, we only really earn transactional revenues when clients trade, giving us total wealth assets of just under ZAR 653 billion. If you look at the net flows that the business has brought in on a six-monthly basis over the past five years, we've brought in ZAR 11.7 billion during this period. If we look at the overall unit trust inflows over this period, it indicates that we brought in just over 50% of the industry inflows. Something that we are proud of as a business, and particularly to be able to bring that in over various different periods, I think is a good indication of the quality of service and the product offering that we provide our clients. If we look at the advisers, remained stable, the wealth advisers at 635.
I think we've also focused on very much on our ideal office, and some of our investment in systems and infrastructure has improved some of the efficiencies and scalability, and we can always touch on any more details in Q&A. If we look at the asset management business, assets under management started the period at ZAR 60.7 billion. Market movement of ZAR 6.9 billion and net flows of ZAR 944 million, giving us total assets under management of ZAR 68.6 billion. The multi-manager, where they perform the ManCo activities, had ZAR 223 billion of multi-managed assets, giving total assets with the ManCo of ZAR 292 billion. If we look at asset management, that also depicts on a six-monthly basis their net flows. Brought in ZAR 944 million during that period.
If one looks at the investment performance track record, particularly if one looks at the three to five year period, which would be the relevant time period to look at for these type of multi-asset funds, have delivered top quartile performance over that period, and we're pleased with the returns that they've delivered for clients there.
If I look at the insurer business, first of all at Western National Insurance, which is a gross written premium. Part of the reason for that being slightly lower is that we disposed of Western National Insurance Namibia business right at the beginning of the year. Actually, on the 2nd of March. In the previous year, ZAR 140 million of the ZAR 1,363 related to the Western National Insurance Namibia, which wasn't in the results for the current period. That's also shown under non-headline earnings, the ZAR 51 million gain that we realized from the sale of that business.
The next block, showing a GWP of ZAR 938 million, is linked to the short-term admin business, which is also more enabling business. The bottom block, with the ZAR 2,626 of premium, relates to the insurer distribution and advisory business. If we look at the insurer advisers, had an uptick of one adviser during the period. Ended up with 337 insurer advisers. If we move across to Western National Insurance, achieved underwriting results during this period of 15.2%. Pleased with these results. We had no CAT events during that period, and we also achieved good investment income on our shareholder assets. Overall, our shareholder assets, we had a 10% equity exposure. During the previous financial period, we had a 9%. We've kept that fairly stable during that period. If we look at really our focus areas, what we continue to focus is our top-line revenue growth.
It's important to be able to grow the top line. It shows that you're able to build franchise, and it's enabled us to invest in the business for the long term. Delivering overall top line of ZAR 4,831. Performance fees that we generated during this period, 7.3%. In the previous equivalent financial period was 6%, and it's varied between 2.5% and 7.8%. Recurring headline earnings per share of ZAR 58.1, almost doubled over that period. Our operating margin of 17.1%. Operating margin excluding performance fees is 16%. A cost income ratio of 59.3%. We've continued to invest in technology and systems, having invested about ZAR 3 billion over the past 10 years. As indicated, we had a 15% increase in IT and technology spend during this period. Return on equity of 28.6%.
We generated an excluding performance fees of 26.6%, and was delivered on an unleveraged basis. If I take you across to our total return, this really shows what return a shareholder would have received, where they put in ZAR 100,000 when the business first started trading over the counter, which is equivalent to $16,379. Each time we paid out a dividend, they used the after-tax dividend to reinvest in the shares. That would've grown to $683,519, which gives you a 20.1% U.S. dollar compound annual growth rate over that period, or having convert ZAR 100,000 to ZAR 12.1 million. We compare it to the JSE ALSI, which over the same period, ZAR 100,000 would've grown to ZAR 1.4 million.
If we look at really the share price and our earnings, if you look at our recurring headline earnings per share, excluding amortization, during that period is up 19.6%, and our share price up 21.7%. You can see a very close correlation between your share price and growth in headline earnings per share. Our key metric that we focus on is really growing our headline earnings per share as well as ROE. During this period, the ROE net of inflation, 25.3%, is a record and something we're pleased to have delivered during this period. If I look at trading stats, during the period of 16.9% of shares traded, so one can see good liquidity in the shares, particularly post the unbundling of PSG Financial Services from PSG Group. About 52% of our shares are owned by institutional investors, and we've got about 18,500 shareholders in total.
Just some final concluding remarks. Got a formidable advisor network in South Africa, broad geographic footprint. We continue to expand. Strong governance structures. We've got relatively small market shares and clear growth opportunities for our business, and one of the reasons we've continued to invest in the business. We've been able to demonstrate a history of superior shareholder returns, and we continue to focus on optimizing our risk-adjusted returns per share by being restrictive on the issuance of new shares, and you can actually see how we've actually reduced our share count over that period. Yeah, thank you. I think that concludes this part of the presentation, and we'll then open up for Q&A.
Perfect. Thank you so much, Mike. Yeah, the questions are coming through. You can just raise your hand. We'll start off with Matthew.
Thanks very much, and thanks for your time, Mike and Francois. Just a question on your advisor headcount within the Wealth business. What's the environment looking like at the moment for your ability to attract new advisors into the business? A second question related to your existing advisor base. What is their capacity like? Obviously, it'll average between the tenure of the advisor, but how are you feeling about the capacity of your existing advisor base to add clients? Obviously, we saw the St. James's Place debacle was kind of advisor non-compliance around kind of advice, and a lot of that was put down to advisors having too many clients. What are you guys thinking about that if you look at your current advisor base? How much capacity to grow from your existing set?
Whenever you see the securities markets doing well, then the people that we can potentially acquire, they always gather more confidence. Yeah, it doesn't affect the pipeline. It just delays the pipeline and sometimes perhaps increases the price that they want. That doesn't mean that, of course, one pays those prices. I think two things have changed over time with acquisitions. The first is, I think independent financial advisors have come to realize that it's quite difficult to deliver on a independent value proposition, which is delivering the whole market to end clients, because you have to have the systems and infrastructure to be able to do that. If you haven't got that, it burdens you with lots of administration. In practice, they've struggled to really deliver on what they thought was the initial proposition.
The other thing I think that's happened over time is part of the reason why IFAs were independent is because they wanted to own their businesses and then capitalize at some point, on a sale. Again, in practice, I think that's been difficult to realize. Initially, there was some interest by private equity firms and so on buying these wealth management businesses in particular, but that didn't really provide with the advisors and their client base, more particularly with succession. Because if the advisor wants to leave, who's going to service the book? That kind of stopped. The other one is it's not really an option to collateralize advisor books because the banks won't fund that. Again, in practice, if you want to exit, you have to fund your own exit, which clearly isn't ideal.
I think what has happened over time is the good idea of independence and the view of owning your own business, I think that's been diluted substantially. There's always periods of panic and then there's confidence. It's a market cycle. When you have periods where the markets tend to do well, that structural effect
is somewhat diluted, that will change. I don't think the structural trend will change. I think it'll just continue to accelerate. Getting to the St. James's Place thing, there was a variety of reasons why that happened. One was upfront fees, one was exit penalties, and so on. There was a variety of reasons why that occurred. As you say, I think the issue was not so much that they didn't give advice, but that the record-keeping of that advice, particularly the record of advice, wasn't adequate. To be honest, in our case, we've got six steps of advice starting with a needs analysis. You have to do all of that. We closely watched what happened with St. James's Place. There's other things like the COFI Bill and so on that's also come through in South Africa.
At the beginning of this year, we got Norton Rose to review all our documentation, again. Then what we've done is we had BDO come in and verify our practices and processes. When you've got as many clients as we have and as many advisors, there's always things that you can improve. We've implemented those improvements, then subsequent to that, our legal and compliance teams have gone back in and checked those, and we've also sent internal audit in. Hopefully by the end of this year, we'll have a documented process demonstrating that we adhere to all the best practices as communicated to us by Norton Rose. By the way, there wasn't very many changes, but more importantly, that we can now verify that we've checked it ourselves and that there's ongoing verification of documentation and proof of advice.
That at each client, on a barcode per client, you can actually draw that documentation, and if the regulator decides to come in and check that with us, then I think that's a pretty good route to It's quite preventative because it's well in advance of anything that will ever come to South Africa, but I think in due course, that will come here. On productivity itself, that's obviously an ongoing effort on our side. The incentive for the advisors for them to increase their operating margins, so to the extent that they use our systems, infrastructure, and technology, not only does that reduce their own costs, and not only does that improve our compliance with regulations and so on, but it also allows them time to spend with clients. The productivity of our advisors are continuing to increase.
Also what we're doing is, rules and regulations have changed, so the Employment Equity Act has taken effect from 1 September. Four years prior to that, we launched what we call a ADP program, an Advanced Development Program, bringing in African, Coloured and Indian advisors and putting them as paraplanners under our advisors. I think that's partly what slowed down our headcount, because what's happening is there was a kind of a transition, particularly in the lower areas of our advisor network, where some of our advisors weren't always as productive as they could've been. We brought in these ADPs. This year, there'll be 65 of them. Next year, it'll be 70 of them. We subsidize 50% of the salaries. Then, we put them through a training program.
You get three badges over a five year We call it badges, but it's a five-year program, after which you have CFPs and so on. Then you actually qualify to, within bigger practices, under supervision from senior advisors, service clients. I think long story short, good pipeline, but you're always subject to periods of fluctuation depending on market conditions. Feel that the St. James's Place issue, if the regulators decide to do a similar thing in South Africa, by September, we'd have a nice thick file to present to them. As it relates to productivity, yes, that's an ongoing effort, but it's not only just the people that matter, it's also the systems, infrastructure, and technology.
Great. Thank you. Appreciate that.
Sure.
While we're waiting for more questions to come through, Francois, maybe just on, you might have mentioned it in part now, but as I understand, most of the PSG offices are, it's almost run like a private office, the advisors. Then, PSG as the group provides the marketing and on all the compliance technology. What incentivizes those? If I were to instantly have a PSG office in Port Elizabeth, and I was happy with the amount of AUM I have under my management, I don't want to grow it anymore. What incentivizes these folks to keep on growing? I actually want to touch on the point on inflows into the AUM, how we can see that going forward.
Yeah. The model works that the advisors retain 70% of their income. We take 30%. Then, as you say, we provide them with various services. It's quite a comprehensive set of services, because bear in mind what I've just said about St. James's Place. We've got a technical advisory team that help them with complicated cases, help them with regulation. We've got a regulatory team of 10 people. We've got a legal and compliance team of just short of 35 people. We've got a whole finance team. We've got a big technology team because we support them with a client management backbone. We've got compliance systems. We've got commission management systems. We've got documentation systems and so on. All these things are very, very hard to replicate if you're an IFA. I think that's another potential threat for the IFAs.
I've mentioned two, but the third one is obviously, if you want to grow your practice in a complicated, highly regulated, digitized environment, you need capital, you need investment. You need the time to monitor and manage all of that stuff. There's a lot that we do for our advisors, and that's why our advisors are able to go out and get clients and generate ZAR 11 billion of net new inflows. Now, the best advisors are extremely successful financially. Like most things in life, the highest performers don't just do it for the money. They do it because they're competitive. We produce monthly league tables on seven key statistics, premium growth. There's a variety of other stats which include compliance with documentation, which we call the iComply process.
You can see per office what the compliance is of that particular office in relation to the question I just answered for Matthew. By the way, we can tell you by office what the Employment Equity stats is, for example, to take account of the new legislation that's just been promulgated from 1st of September. Every month, we produce these league tables, and every office can see where they land in that league table. They're extremely competitive. It's a matter of pride and professionalism, and it's well beyond the compensation. To the extent that we have advisors that are not motivated, the ultimate penalty is that when they want to exit, and bear in mind, that's a further value proposition at PSG. If they want to exit, we manage that exit with them, and we fund any purchasers on their behalf.
If they slow down, they're not going to get full value for their businesses. More importantly, I think what we've done over the last five years in particular is to articulate to these advisors because they're competitive, they want to win. They've talked amongst themselves and we've defined what we call the ideal office. What do you have to do to win? For example, one of the innovations that we've done during that period is to have office managers, because the problem with advisors is they're incredibly busy. They haven't got time to always use all the various technologies that we have, all the benefits that we can produce to end clients. The office managers serve as interface between the franchise providing all these activities, which as I said, is finance-related, marketing-related, legal and compliance-related, technology-related, and so on. The list goes on. Technical services.
They basically manage the offices of those various practices, which in their own right has become relatively large. It's a very sophisticated environment. I think the days where it's just one guy sitting in one office praying for rain, I think those days are over. I think it's a highly professional environment, a highly competitive environment. People do it not just for financial reasons. They've of course got their incentives, but they do it for pride, and they do it for professionalism. I think that's perhaps one of the things that distinguishes us from other firms.
Perfect. Thanks, Francois. Still don't see other questions, I'll just go on. Maybe we can talk on the operating leverage and some of the margins. Sorry, we do have a question. I'll pause it on. We have a question from Shane.
Hi. Thank you for the opportunity. Just one question. I just want to understand how, as you mentioned, the high-performing advisors are doing quite well. I just want to understand in that sense, how competitors are behaving in terms of trying to acquire these advisors and how PSG is able to retain them or any measures we are using to keep them onto our platform and whether the benefits of staying in PSG is more than going into other platforms is something we are trying to make them aware of at that point in time.
Yeah, you broke up a little bit, but I think I've got the gist of what you said, Shane. Basically what you're asking is how are we managing to retain our advisors and what's the measures through which we do that?
Yes
Yeah. Look, again, that's one of the distinguishing features of PSG. We service clients from cradle to grave and over multiple generations. The length of service at PSG is extremely long. There's push and obviously pull factors. The principal reason I believe why our advisors stay, and we have almost zero attrition rate. If people leave, it's because they come to the end of their term in terms of work or we've had a handful of advisors immigrate, but that's it. People don't really leave here. I believe it's because it's a happy environment. I think it's an environment in which they can thrive. You've got the best of both worlds with us. Because on the one hand, you get to own your business. You can exit that business. We will fund that. That's a benefit relative to IFAs.
At the same time, the headaches that you have, if you're IFA or third-party provider, all the rest of it, we take care of that headache, that administrative headache, all the other things that I've mentioned that you get. The irony always is that our own advisors sometimes get complacent because they assume that all these things that we provide them with, they just take it for granted. It's very interesting when we get people from the outside coming in, and they actually look at the systems, the infrastructure, and they look at the value proposition. It's quite interesting what their perspective is. When they get into our strategy sessions and are meeting with our advisors, it's always a good sanity check for what we do relative to what other people do.
Long story short, retention isn't a problem that we have at PSG. I don't say that in a gratuitous way. I say that objectively based on the number of people that exit from the firm. We don't have people that go to other firms. The reason why I'm confident also about our value proposition is not just because our retention is extremely high, but also we're an employer of choice. Part of what we're trying to do is to manufacture controlled growth. In some respects, there's many more acquisitions that we can do, but you want to make sure that whoever you acquire, you can integrate into the firm. At the same time, I think it's really important because we always get lots of questions about acquisitions and all the rest of it. Acquisitions is about 20% of what we do.
The majority of what we're doing is to manufacture organic growth. Part of the reason why we don't want to overemphasize the new advisors coming into our practices is because we don't want to take our eye off the ball. If you're taking in ZAR 11 billion on a half yearly basis or over ZAR 20 billion a year, that's a lot of volume hitting you. You want to make sure that you do it in a thoughtful way and that you land it in a controlled manner.
Got it. Thank you.
While we still wait for some questions to follow up, I'm just going to back on my operating margin question. It seems like operating margins, they've been down since H1 2022, coming down now it's up again in H1 2026. I know technology spending it's a big part of PSG, and of course, it enables the advisors from an old time and probably some cybersecurity as well. what portion of that technology spending actually is in place for some margin increase in going forward?
Yeah.
Where do you guys see margins from here on out?
Yeah. Let me just say, we want to digitize, we want to automate. The ultimate quest of any financial services company is to generate growth at zero marginal cost. The reality is, as you're building systems and infrastructure, as you build target operating models, as you transition into a world where the way of work is not waterfall-based, but more epics and features-based, where you roll out things that meet the needs of clients, that necessitates that you continue to invest heavily in systems and infrastructure, which is what we've done. We have zero objective to open our operating margins up. In fact, quite the opposite. What we've said consistently is we'll continue to invest in systems and infrastructure at somewhere between 15%-18%.
The reason I'm giving you a range is because, as Mike has indicated, we expense our technology expenditure as and when. It can be bumpy from time to time as you go throughout that cycle. It doesn't always arrive in a linear fashion. The second thing I think that matters and, sorry, bear in mind, if you've got a consistent growth rate in expenditure, then what happens sometimes is when you have good markets, your operating margin tends to open up. When you have not so good markets, your operating margin can decline. The volatility is not so much related to the costs or the revenues.
If you could quantify the revenues in unit terms, it's more the function of the markets that's moving up and down. Sometimes what it looks like is, it looks like your margins are going up and coming down, but it's not related to the cost at all. What we do is we try and look through the cycle and we say to ourselves: What is our sustainable growth rate? Then we plan our expenditure around that. If there's short-term volatility in operating margin, then so be it. In this period, it was beneficial to us, but there's been years where it wasn't beneficial to us. The other thing that you have to bear in mind is operating margin doesn't include investment income, but the bonus provisions, which is in the operating margin, includes a component of that.
That's another factor sometimes why the operating margin is an accurate reflection of the profitability of the firm. What we tend to do is we look at the return on capital, the return on equity. That takes everything into account. That takes into account all revenues, all costs. Since we're a financial services company, you can't ignore investment income. You express that as a percentage of your capital base. That's why the number that we focus on is the return on equity, which was 28.6%, and after inflation is above 25%. That's a pretty solid return on capital.
If you look at that over time, it demonstrates that the per unit retention of capital that we've got in the firm, as we've been able to deploy at a rate which is higher than the preexisting rate, otherwise our return on equity wouldn't be rising. That's kind of how we look at the firm and how we try and manage it. Our core belief is that our market shares are relatively low. We've got a long runway of growth. If you want to capitalize on that, you have to invest. That's why we don't try and open our operating margins up, and we avoid cost-cutting at all costs. It's not a smart thing to do if you think that you've got a long runway for growth.
Perfect. Thanks, Francois. And a question from Matthew
Thanks very much. Francois, I'd be interested to get your views on the rise of DFMs and what that means for the industry. Does it make life a little bit easier for an independent financial advisor to survive, and the fact that they're no longer picking funds or having to provide the clients with comfort that they've actually had a proper look at.
Yeah
The whole of market? Just your thoughts on that.
Look, there's two perspectives on it. One is what I think about DFMs. Does that really help advisors or not? Let's start with the advisor part. What happened over time is advisors felt like they could just pick the funds themselves. It's a good illustration of how, over time, IFAs have started to realize that things are a little bit more complicated than just going out there and picking an institution or picking a fund. You have to do due diligence. You have to demonstrate your due diligence. You have to monitor that. You have to have fact sheets and so on and so on. Over time, I think, in order to protect themselves from a regulatory point of view and also from a PI point of view, they've tried to find solutions. Most of them have been reluctant to give up fees.
There's various fee-sharing models. That's what they've done. I can give you 10 other examples, but that's just the most visible to outsiders. The problem is that that doesn't meet all the requirements of an advisor. You have to do a needs analysis. You have to do a solutioning of the needs. You have to develop a financial plan. You have to do due diligence. You have to do reporting, and so on and so on. What's happened with third-party providers is they report on the funds, but they don't necessarily relate them back to the plans. Now you have to build systems that are compatible with the DFMs, but the DFMs haven't got capital themselves. The IFAs haven't got capital. You've got two insufficiently capitalized institutions trying to help each other on what is essentially a capital-intensive problem.
I think they've tried to meet a need. The advisors have kind of bought the solution for now, but I don't think it's workable. By the way, what's also happened, it's not just fund related. What we're seeing a lot of IFAs do is buy a variety of other products also, guaranteed products and so on. The due diligence that they've done in relation to that, some of them extremely complicated products, is also insufficient. This is a big problem, and usually what happens is somebody has to fail. Or there's a market setback. Then I think these fault lines are likely to be exposed. On the DFM side itself, I really don't think these are business models that are enduring.
I think there's a fight between them starting the business and hoping to vertically integrate into funds and providing the fund solutioning, which is really where you make the margin. The IFAs don't want to give up the margin in the first place, now you're in this tussle. Again, I just don't buy their business models, and I personally just don't believe that they will be successful. That's my view, but time will tell. We'll see how this situation You can quote me. Write it down. Maybe when we do that 30th presentation with Avior, and they give us that medal, then you can tell me whether it worked or it didn't work.
While I've got the mic, just a quick question on We saw a big shift over the last, I suppose really it was the last three, four years, of the high government bond yields, big volumes of guaranteed annuities being sold in the market. Just maybe a feeling of to what extent your advisors used guaranteed annuities. I know you guys don't obviously write them, but to what extent do advisors use those, and to what extent the falling long bond yields have assisted you guys in producing a lot more flows into your asset management products? Possibly there was a bit of leakage previously because it was quite an easy sell to sell a client a guaranteed annuity when rates were high. Now it's a bit more difficult, and something like a living annuity, which is asset-linked, is more compelling.
Maybe just a shift on how, whether that impacted your flow dynamics at all in the last couple of years.
If you look at our flow dynamics, as you can see into the multi-manager stockbroking and third-party funds, which excludes any of the guaranteed, that hasn't gone down. Also, a large number of our clients, they've got additional voluntary and discretionary money. I think the guaranteed products work well for clients at a particular asset base level and income level. We need a much higher level of certainty. As you go up the asset base and affluent line, you're actually going to prefer to probably be invested in the market because there's quite a big cost for those guarantees as well there. It is something that the advisors are able to offer if there's a specific client need based on their asset base. What we've found, the more affluent type of client would rather be invested in the market.
The cost of the guarantee, and all of those complexities, and also looking at the counterparty strength, has meant that they've generally favored to be invested in the market in a multi-asset fund that, over a longer period, is going to deliver superior returns to what you'd get in a guaranteed product. It's almost linked to your risk appetite. If you need X amount to survive, you're going to put it into guaranteed. I think once you're above that level, you would prefer to be in the more voluntary type of product.
Makes sense. Maybe just a quick question on Western National Insurance. We've seen pretty good insurance margins across the industry. Are you guys seeing any increase in competition or pricing changes made by the industry following what's been a pretty benign underwriting cycle?
I wouldn't say it's benign. It was pretty tough since 2020. I think the last 18 months have been better, and the last six months have been reasonably good.
Yeah. That's what I'm referring to.
Okay. I would say what happened in the last six months, in our view, is a little bit different. You've had a very sharp re-rating of your reinsurance, so you had to pass that through. The rate of increase in that has actually slowed. We think it's plateaued out. The other thing that's happened over the last 12 months, it's the full period that the higher rates have been in place. Then quite fortuitously, particularly in the last, I would say, six or eight months, touch wood, you haven't really had a major catastrophe. Gee, it's a bit early to say whether that's going to be sustained or not. Of course, the thing that worries us is the broken infrastructure that you have in South Africa. I'm not going to go into that, but I think that's kind of well known.
The other side of it, which I think is not so well known, is Sasria's increased prices on the 1st of October somewhere between 50% and 100%. It was a surprise to the industry. Yeah, it's excessive. Of course, they are a monopoly. We thought that what they would do was to talk to the National Treasury and the Minister of Finance about it, that they would moderate the increases because they've said to the industry that they're adequately capitalized with a 2x SCR ratio. They've taken a view that the risk of riots leading up to the municipal elections is high, the probability of loss is significant, and that they can't rely on a bailout from government.
Instead of putting these price increases through over a more reasonable period, maybe three years or so, which is what the industry has been arguing for, they've essentially done it in one year. I think it's been quiet because it's just happened, it's going to reprice as it goes through. You can imagine if you're in the trucking industry and so on, your premium rates on Sasria has just gone up by 70% or 80%, you can imagine what noise that's going to create in the system. You also have to imagine that individuals in particular, but businesses also, are under financial stress. If your wallet size remains the same, you have to reprioritize. You're going to have to reallocate.
Yeah, it's a little bit early to predict how this thing will play itself out, there's a lot of noise in the industry. What surprises me is there's very little noise in the popular press, that will come. The other thing I think that's been a little bit surprising for us is, if that's what you're expecting, we would expect as financial institutions, when we face risk, you'd make an attempt to mitigate that risk. You would work with the security services and so on to try and deal with this. Yeah, they haven't really been able to explain it to us. Yeah, I think they've certainly thrown a pebble in a pond, we'll see how those ripples go out.
Okay. Thank you.
Maybe, Francois, there's five minutes left. Maybe I can throw in one more question. Just on the SCR ratio, close to 300%, how's management's thoughts around I know you just started to do a buyback in the first half, but additional buybacks, special dividends, how does management think about that?
Yeah, we think we can be more highly capitalized. That's our aim. I say that jokingly, but the more serious side is, we operate in a very uncertain environment. I don't want to list all the problems that you've got in South Africa, but you have to add to that all the problems that you've got worldwide. It's a highly risky environment, we have a basic philosophy. You try and protect the downside at all costs. What you want to be as a financial services company is you want to be strong when other people are weak, you want to make sure that whatever happens, you don't have to dilute yourself, or you can take advantage of opportunities when difficult times come. It shouldn't be surprising to our investors that we highly capitalize at this point when everybody's highly exuberant.
What happened in 2010, it happened in 2000, and so on, every 10 years or so, with banks, insurance companies, and so on, everybody starts talking about capital optimization, they buy back, they pay special dividends, they return capital, they try to push their ROEs up, and this and that, at exactly the point when they probably are likely to become most vulnerable. We're very, very comfortable with our current capital position, we think it's correct. The other question, of course, is we would be much harder on ourselves if the capital that we retain, we weren't able to invest at high rates. To be generating, in real terms, 25% on the capital that we retain, I think people are going to struggle to get better returns than that. I think that's the other factor.
We think as a margin of safety, that's always how we think about things, and as a return metric, we are comfortable with what our present position is. Of course, if opportunities present themselves to buy back stock at the margin, we will do that, depending, of course, on where the price is and what the opportunities are.
Perfect. Thank you, Francois. I don't see other questions. I don't know, Mike, Francois, if you guys want to close with a closing remark or, otherwise we can just call it.
Just to say, the thing always with the six month result number is people always tend to focus on the short-term things that affect you. In many ways, when we think about the six months results, we think it's more a function of 10 years of investment. When we look at our results, we try and ask ourselves, what has happened over the medium term? What's happened over the long term? Mike has shown you the 10-year numbers. We also look at the four year numbers because the four year numbers, we've doubled our earnings over what was a pretty competitive period. That's what gives us confidence about what we've been trying to do, and it also gives us confidence to continue to invest in our business, notwithstanding some of the difficulties that we spoke about in the presentation.
Other than that, thank you for giving us the opportunity to tell you about PSG.
Thank you so much, Francois. Thank you, Mike, and well done once again, well done. A great set of results. Have a great day further.
Yeah. Thank you.