Good day, ladies and gentlemen, and welcome to the Old Mutual Q1 2024 Voluntary Update. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If you should require operator assistance during the conference, please press star and then zero on your telephone keypad. Please note that this conference is being recorded. I will now hand you over to Langa. Please go ahead, sir.
Thank you, operator, and good afternoon to everyone who's joined us. This is our Q1 2024 voluntary operational update. I know it's been a very eventful day already in our capital markets today. A lot of information with the election sentiment, the SARB rate decision, so we will jump right straight into it. Without further ado, the call will be hosted by our Group CEO, Iain Williamson. He's joined by the Group CFO, Casper Troskie. They are also joined by Ranen Thakurdin, who is our Head of Group Reporting and Insights, as well as Nico van der Colff, who is our group actuary to assist during the Q&A. I'll now turn over the call to Iain. Over to you, Iain.
Thanks, Langa, and good afternoon, everyone, and thanks for your time. So just briefly, you've seen the announcement we put out, about lunchtime today. I'm just gonna very quickly go through the highlights of that, and we'll leave most of the time for questions. So starting with the macro, I think we all know that the global economy has remained resilient, although I think it is a bit of a concern that conflict continues to escalate, both, you know, with the ongoing Ukraine crisis and in the Middle East. China's economic growth was certainly stronger than expected in quarter one, at 5.3%, and likely, we think that will likely continue with incremental policy change to achieve a stated 5% growth target this year.
Central banks globally, though, appear to be cautious of the impact of inflation, and interest rates are likely to remain higher for longer than we previously thought. And we all know, we all now know that the SARB kept the rates locally unchanged at the MPC meeting today. I think that was not unexpected. I'm cautiously optimistic we might see a cut in July. Economic conditions continue to impact customers' disposable income negatively, particularly in the retail segments. Overall, we expect our business and its diversification to remain well positioned for growth. We delivered double-digit sales growth across our business for the quarter ending 31 March. But just to update on the top-line metrics across the board, the Life APE sales showed robust growth of 10% to ZAR 3.17 billion on a year ago.
Within that, the Mass and Foundation Cluster was up 22% to ZAR 1.108 billion. That's supported by higher risk sales, reflecting better headcount in the channels, a reduction in NTU rates, and the inclusion of Two Mountains, which was not in the base. And in the PF and Wealth business, we were up 7% to ZAR 1.16 billion. That was driven by higher guaranteed annuity sales, strong recurring premium savings and funeral sales, but partially offset by lower risk sales, you know, excluding the funeral piece. From a gross flows perspective, up 4% to ZAR 51.1 billion. We saw higher inflows in the offshore business, with wealth up 22%, and strong inflows in our Africa Regions business, with new mandates in Malawi and higher unit trust sales in East Africa.
That was offset by lower inflows in Old Mutual Investments, particularly into fixed income and Community Property Fund for Futuregrowth and lower flows in alternatives. Net client cashflow, while positive, remains under pressure. Wealth recorded growth in net client cashflow of over 100%, driven by strong inflows and better retention in the offshore business. PF experienced higher disinvestments, thanks to annuity payments, as well as higher risk claims compared to the prior period. NCCF in Old Mutual Investments was negative due to net outflows in fixed income and money market funds in Futuregrowth. We continue to see corporate counterparties seeking liquidity. On the short-term side, gross written premiums are up 7% to ZAR 6.9 billion, with Old Mutual Insure recording a strong 10% growth in sales, driven by retail and specialty, with strong new business growth.
Africa Regions was flat in rand terms, but did appreciate, you know, in constant currency terms. Loans and advances were muted and higher by 3% to ZAR 20 billion, just over ZAR 20 billion, with Mass and Foundation Cluster growing their book by 2% and in line with a cautious, ongoing lending strategy in South Africa. Africa Regions increased the book there by 12%, supported mostly actually by the depreciation of the rand against the Kenyan shilling, rather than in a constant currency basis. Turning into strategic delivery, I think I just want to highlight a few main points. The first is that the group's perimeter review is on track with the announcement of the exit of both our general insurance business in Tanzania, following the exit of our general and life businesses in Nigeria.
Both of those transactions are pending final regulatory approvals, and they followed a thorough strategic review in line with a disciplined approach to capital allocation and in support of strengthening our return on net asset value. We announced in April that the Prudential Authority had granted the group a Section 17 approval to establish OM Bank, subject to certain license conditions. We started the process of testing with partner banks just over two weeks ago, 2.5 weeks ago now, and this, there's been substantive progress on both, with that testing, it's going well.
Substantive progress on both the perimeter review and the bank build are concrete proof points of focus on strategic execution to accelerate value creation. So I'm pleased with the progress we've made in the first quarter. I think, I think we've, we've moved forward materially, both strategically and operationally. With that, I'm happy to open up for questions that anyone may have. Thanks, Langa.
Thank you.
Operator, could you please take the next?
Thank you, sir. Ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask a question, please press star then one on your telephone keypad or the keypad on your screen. A confirmation tone will indicate that your line is in the question queue. You may press star two to exit the question queue. In the interest of time, we ask that you please limit yourselves to a maximum of three questions. Thereafter, you're welcome to rejoin the question queue for any additional questions. Just a reminder, if you'd like to ask a question, you're welcome to press star and then One. The first questions come from Michael Christelis of UBS. Please go ahead.
Good afternoon, Iain. Thanks, thanks for the time. I'll use up all three questions if I can. Firstly, can you give us any update on the special dividend that you announced at full year from OMLACSA to the group, the ZAR 2 billion, whether that's been approved yet, and, and if you can update us on any plans for that that ZAR 2 billion? The second one just around persistency and the trends you're seeing.
You mentioned, I think, a reduction in NTUs in your opening comments, but maybe just some commentary around just what the various levels of persistency are looking like across the different business units, including sort of shorter and longer duration. And then lastly, Two Mountains. Can you just give us a sense of how large the Two Mountains group sales were for, say, 2023, just to give us an idea of, you know, what we should be thinking about in our models for the uplift this year? Thank you.
Okay. Thanks, Michael. Casper, can I ask you to deal with the special? And then I'll comment on persistency in Two Mountains, and then maybe ask Nico or Ranen to add.
Yeah, Michael, we're still in the regulatory process. They've asked the auditors to soon be able to do a bit of work for them. So the auditors are busy with that, and hopefully we'll hear after that. So it's in process. That's all I can say. And then we'll obviously, once we've got the answer, I think we can give you an update at the half year as to, you know, what we're gonna be doing with that. But we've said previously that we'll either earmark some of it for growth or return to shareholders. So we'll be able to update that, you know, on the half year.
Thanks, Casper. And then on persistency, nothing material to comment on in PF that I can recall from, you know, in terms of any particular deviations. On the MFC side, the economic recovery, based on my commentary, is lagging a little bit, I think, relative to what we might have expected in November last year, given the rate cutting cycle is likely to be a bit later. And consequently, I think there is a little bit of pressure there.
Having said that, it's a slightly difficult one to judge at this stage because the quarter one persistency numbers are under a little bit of pressure. But having said that, we had a very good collections month, probably our best collections month for quite a while in April. So it's a little bit of a, you know, maybe too early to tell where it's gonna land for the half year at this point. Nico, anything to add to that?
No, no, that's spot on. We started the year with a bit of pressure. It's not clear whether it recovers by June, and it's pretty clear we're not yet in a position where we would have expected any of that to flow through into a concern about the longer term reserving yet. It, it feels more like a variance-to-date conversation, if there's something.
Thanks, Nico. And then finally, Michael, on Two Mountains, just to give you a sense, off the top of my head, I don't have last year's number, but I'll give you the quarter one contribution. The quarter one contribution to sales was relatively modest, at ZAR 9 million from Two Mountains to the MFC sales. So, you know, I, we would like to think that you'll have more than four times that by the end of the year. But, but, you know, you can get a sense of the order of magnitude at this stage.
Thank you. Our next question comes from Warwick Bam of RMB Morgan Stanley. Please go ahead.
Good afternoon, Iain, Casper, Langa, and the team. Thanks for the update and conference call. Just three short questions to start. Can you talk to mortality and morbidity experience for the period? How have you found trading conditions post this period, so post 31 March? And can you talk to underwriting experience in general insurance? Thanks.
Okay, thank you. Nico, do you wanna go on the mortality, and then I'll talk to the other two questions?
Yeah, sure. Holding up reasonably on the retail books, so no, no material new concerns on those. A couple of large claims in PF created a bit of a flutter. We'll have to see what that picture looks like by interim, but some random fluctuation is expected in that world, and sometimes it'll go against you. On the corporate segment book, typically the summary would be a little bit better than probably expected, and some of the good news from last year is still holding up.
Thanks, Nico. And then on GI, we're extremely good first quarter with the benign weather patterns in the first quarter, assisting that position. As I think I previously communicated to everybody, we're pretty comfortable with the quality and the pricing across sort of specialty retail, CGIC, et cetera. The only concerning book has been the premier book, and we are... Remediation of that remains in progress, but quarter one was a good, a very good quarter.
We sort of bank it and run for now, you know, because that's normally has the potential to be one of the bad weather quarters. And so we've got some sort of, I guess, we've got some in the kitty for quarter four, if we have bad weather in quarter four. Trading conditions post end of March, I wouldn't say noticeably different to, to the first quarter in a sense. You know, just sort of, very much business as usual. So I think, I think nothing material to, to sort of say that would indicate that it was particularly different to the first quarter in that sense. Operator, maybe take the next set of questions.
Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, you're welcome to press star and then one. You're also welcome to rejoin the queue for additional questions. The next question comes from Larissa van Deventer of Barclays. Please go ahead.
Thank you, and good afternoon. Two from my side, please. The first one, thank you for the elaboration on the comments on the bank. If you can give us indication of your expected timing at this point, and also whether the costs are still running according to plan. And then the second question is on margin development. There are, they appear to be more commonly skewed towards risk products rather than savings. But can you give us indication of how you see margin development happening this year if the economic assumptions remain constant, please?
Okay, thanks, Larissa. On the bank, it is very much on track for, I think, a previously communicated quarter four go live at this stage. And costs, you know, absolutely within the previously communicated ZAR 800 million for transition. So nothing that's awry there. I suppose, in a way, the biggest risk to the go live date is that we have some sort of a glitch in our testing that we're busy with at the moment. So the way the process works is that once we admit it by PASA into the payment testing environment, we have to do a cycle of three months of work, of which the final month is an error-free month. And if there is an error somewhere in that error-free month, you go back to the beginning and start again.
We think we've done everything we can to mitigate against there being an error there, and we're not expecting a problem. So I would say on track, but there remains that risk that if something goes wrong in the testing, then we would be materially delayed. It's just the way it works. So we... I think in terms of all the stuff we can control, I think we've got it under control, and everything so far is going well. On margin development, Casper, Nico, Ranen, anyone wanting to comment?
I can start. So, Nico, do you wanna go?
It might be good for someone to give some of the... The only point I thought was important to make is, margin development this early in the year is very much gonna be a function of mix for the rest of the year. And so if we sell higher volumes of, let's say, MFC protection stuff, or if we sell higher volumes in PF of annuities, which was what we were seeing little bits of in the first quarter, then that's good for the margin. But it ends up being a mixed thing, and this early in the year, the new business to date is not necessarily a great predictor of where the mix will end the year.
Because it responds to things like what yields and everything else does for the rest of the year. So it's not something that you can track forward from the baseline that we've got to date, to be saying, what's margin gonna be doing over the rest of the year? It's too much of it is a volume driver.
Yeah. Thanks, Nico. I think that's great.
Thank you. Ladies and-
No, sorry, maybe just to mention one additional point to add to Nico is, we also need to, we need to wait for the, timing to unfold. We do have a durational impact to our, to our new business inflows, particularly in MFC. So a lot of the secured business, actually only gets confirmed in the, in the second quarter. So we, we don't have as strong a sense of volume until that concludes, so the interims will be a better indication.
Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, you're welcome to press star and then one to place yourself in the question queue. We have a follow-up question from Michael Christelis of UBS. Please go ahead.
Hi, guys. Seeing as nobody else wants to ask anything, maybe, you know, I, I'll be the first to confess, I haven't really spent as much time as I should have on your rest of African operations. I mean, can you just talk a little bit about where you see yourselves strategically, say, over the next sort of five years? It does feel like you're slimming down on your, on your footprint considerably. Which, which of these sort of territories are the ones we should be focusing on as, as key, and, and what business lines? If, if maybe you can give us that, that answer. And then secondly, just your, your readiness for the implementation of Two-Pot in September. Is everything on track there, and, and are you comfortable you've done enough member training on that? Thank you.
Yeah, sure. Okay. I think, sorry, just with respect to Africa regions, I think, as you know, we've thought about it historically in sort of three subregions: SADC, you know, we're pretty much dominant across most of the markets that we operate in there. We've been number one or two in most of them. I think the one exception is Botswana. And then as far as East and West Africa go, obviously West Africa, we're now pretty much Ghana, and East Africa, I would say the primary kind of focus markets are likely to be Kenya and Uganda. So you can think about it in those terms. We're quite relatively in Uganda, although it's not a big business in absolute terms, relatively, the life business is quite big, but the P&C business has growth potential.
I think in Kenya, we would like to grow, you know, across the spectrum. But in most of these markets, the scale of the market is such that that sort of thinking about growth from one particular business line isn't, I don't think, really the optimal way of thinking about it. So it is more about having that integrated approach and being able to grow across a broadish base.
Having said that, the reason that we adopted a pivot to corporate strategy, particularly on the life side, is just because of the, you know, the high distribution costs relative to premium on the retail side, and also the time to profitability. So the pivot to corporate has aided us significantly on the life side, and I think that continues to be a focus. And then, you know, obviously, we would then seek to grow the P&C and asset management pieces because they contribute to profitability quicker and consume less capital. I don't know, Casper, or if you wanna add anything to that?
No, Ian, I think you've covered it. Obviously, we see Kenya, Ghana's high growth, high GDP growth markets going forward, and we've got scale efficiencies in Namibia and Malawi. So although those are not very big businesses, they're very profitable. So, yeah, it's along there.
Thanks. Sorry, Michael, did you have a second question? I feel like you did, but I didn't... Oh, no.
Readiness on Two-Pot. Readiness on Two-Pot.
Two-pot readiness. Yes, you did have a second question. Yeah. So I think internally, we are on track, and we're comfortable that we, we're ready. We've done quite a bit of, of client and member communication and member training. It's one of those, you know, how much is enough kind of questions. My concern remains mainly around whether all the regulatory umbrella issues are in place in time. Because I think there is a risk that although in theory, we could be... You know, there could be a public expectation that September, suddenly you can start paying out money. Unless fund rules have been changed, you know, tax stuff has all been locked down, et cetera, et cetera, there could be a risk that there's, there's a regulatory impediment to being able to satisfy client expectations. It won't apply to just us, it will apply to everybody.
So I think closer to the time, if that's looking like a big risk, I think we'll start making a bit of a noise about it to try and manage expectations. But that, that's my biggest concern, is client expectations versus the regulatory ability that we may have to comply with those expectations. But from an operational and training and an educational perspective, I think we've done, we've done a lot.
Great. Thank you very much, sir. Ladies and gentlemen, it appears we have come to the end of our question and answer session. I will now hand over for closing remarks.
All right. I think all I really want to say is, guys, thanks for the time and thanks for the questions. I hope you found it useful and constructive. And, you know, look forward to updating you again when we get to the lead-up to the interim results. And, yeah, I think we're on a t he momentum that we saw last year does continue, although I think the environment, if anything, has got a bit, a little bit tougher. But I think, there's prospects to believe that it should be a bit easier in the second half. So thanks very much.
Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.