Good day, and welcome to the Old Mutual Q1 Voluntary Update. 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 the star and then zero on your telephone keypad. Please note that this event is being recorded. I'd like to hand you over to your host, who's Head of Investor Relations. Langa, please go ahead.
Thank you very much, Judith, and good day to everyone who's joined us on the call. My name is Langa Manqele, as introduced. I head up investor relations. We issued our SENS on the 29th, so hopefully you have time to digest it. I would like to just quickly introduce you and who is on the call. We have on the call Jurie Strydom. You will all recall Jurie Strydom is his first day. We are excited to have Jurie at the helm of the group, so he's joined us. Formally, he's on the driving seat. You all know Casper. Casper is on the call, our Group Chief Financial Officer. Also on the call joining us today is Ranen Thakurdin. Ranen has transitioned from the Head of Group Reporting and Insight and is now our Chief Accountant.
As part of his portfolio, he still oversees group reporting and insights. I would like to hand over to you, Jurie, to say a few words, and you may kindly hand over to Casper shortly thereafter. Thank you.
Thanks, Langa. Afternoon, everybody. As Langa said, this is day one, actually the afternoon of day one, so a good way to start with a voluntary update and investor call. Yeah, so I'm obviously delighted to be leading this group from today onwards. I think I'm pleased to have been on the board for 18 months or so just over. I think what that's given me is a sense of orientation around the major issues and obviously the people and the organization itself. I think feeling like I can hit the road running with the team. I think, as I'm sure you'll appreciate, there's a process of getting in and getting feet under the desk and driving forward some of the initiatives with the team.
I'm going to hand over to Casper to, I think, cover the voluntary update and then I'm happy to jump into the Q&A later.
Thanks, Jurie. From an operating environment perspective, the global economy remains uncertain, and we've seen growth forecasts being reduced during the year. In South Africa, market sentiment has been affected by political uncertainty around the GNU and the impact of U.S. tariffs. Inflation slowed to 2.7% year-on-year in March, but high interest rates continue to pressure consumer affordability and persistency. We did hardly see that small rate reduction last week, which should hopefully help going forward. Africa region's experienced mixed performance in Q1 2025, influenced by tariffs, donor funding withdrawals, inflationary pressures, and currency volatility. In terms of life savings and asset management, our life APE sales decreased by 2% to ZAR 3.1 billion, mainly due to a 39% decrease in guaranteed annuity sales in personal finance, in line with a market-wide decline due to reduced yields.
The high base in the prior year from the non-repeats of savings sales contributed to a 38% decrease in Old Mutual Corporate life APE. Mass and Foundation Cluster was up 7% due to good risk sales. Our African region's APE was up 12%, driven by strong corporate sales, particularly in Namibia and Malawi. Gross flows increased by 6% to ZAR 53.2 billion from the prior year, driven by a 28% increase in wealth management due to inflows across both local and offshore platforms, and in particular, private accounts and cash liquidity solutions. A 12% increase in our Old Mutual Africa regions came from higher asset management inflows in Namibia. This was partially offset by a reduction in Old Mutual Investments and Old Mutual Corporate. Our net client cash flow was negative at ZAR 4.8 billion, despite 6% gross flows.
This was mainly impacted by a low margin indexation outflow of ZAR 6.4 billion from a large offshore mandate within Old Mutual Investments and terminations of ZAR 3.6 billion in Old Mutual Corporate in respect of the exit of unprofitable business that we made during the course of this year. We have not seen an improvement in Mass and Foundation Cluster persistency, but we continue to closely monitor the impacts on the economic recovery reserve and reassess the need to strengthen our persistency basis at 30 June. We will only be completing our work the latest possible in terms of the whole year process so that we can have the most up-to-date view when we come to markets in September. The regulatory solvency ratio for MLACSA remains strong at the upper end of our target range, while the group shareholder solvency ratio remains within our target range.
Gross written premiums grew by 7% to ZAR 7.4 billion, driven by 12% gross written premium growth in Old Mutual Insure, supported by strong management actions and repricing adjustments in specialty, as well as the benign weather experience coupled with strong investment performance. The granularity and diversity of the Old Mutual Insure revenue in Old Mutual Insure makes it increasingly resilient to claims correlated to climate change. This was offset by a 5% decrease in gross written premiums in Old Mutual Africa regions. Current advances of ZAR 18.7 billion were flat from the prior year, in line with our cautious lending approach. The launch of OM Bank remains on track for public rollout later this year. I'll stop there, and hopefully we can go to questions. I don't know if anyone wants to add any points that I might have missed on our team.
Thanks, Casper. We can now go to the head of state for questions. At this point, I'd like to ask Judith to just remind all the participants on the procedure to put through their questions. Over to you, Judith.
Thank you, sir. Ladies and gentlemen, if you'd like to ask a question, please press star and 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 and then two if you decide to leave the question queue. Just a reminder, if you'd like to ask a question, you're welcome to press star and then one.
I do not see any hands at this point, Judith, on my end, so happy for those who are ready to just put through their questions.
In fact, sir, we do have a question that has just come through from Francois du Toit of Anchor Capital. Please go ahead.
Hi guys. Maybe, Jurie, if you can comment on immediate plans you've got, maybe more in relation to current strategies of the executive, especially maybe in relation to buybacks. Do you think in the short term that will continue? I think there's been approval granted for further buybacks. That's the first question. Is it possible for you to give us a bit of color on new business value? I know the new business value would be quite sensitive to interest rates as well, which I think moved nicely in your favor because you used the year-end interest rates right for your new business value calculations. To what degree does the lower interest rates offset the reduction in guaranteed annuities? Just trying to get a sense of the new business margins in the period.
Maybe if you can comment on persistency for us and your view about the potential, or maybe if we can sort of have a rule of thumb impact on the EV of persistency changes that would get rid of all of the negative variances in the absence of any operational or in the absence of any environmental changes. What would you need to do to actual assumptions to fix the actual lapse risk? Let's say there's a ZAR 1 billion negative variances. Would you need to have ZAR 7 billion? What sort of multiple, what sort of capitalization factor, what sort of PE ratio would need to be applied to fix the actual assumptions completely to provide sufficiently for that in the absence of any operational changes, any environmental changes?
You can also just comment about what operational interventions you think can be had and the impact that it's likely to have.
Hi, Francois . Hope you're well. Can I go, Langa? Yeah. I mean, I suppose maybe just, as I said, it is day one. What I can do is give you a flavor a little bit for what the priorities are that we've got as a team. We have a process now of obviously coming as new CEO. There's some strategic work of kind of reviewing where we are with our strategies, much of which is to do with the implementation execution rather than a complete strategic overhaul. There is that process that we'll go through as a team with our board over the next couple of months. I think the next real stop for us is insurance, where we'll be able to communicate much more clearly around some of the things you've raised. After that, more broader market engagement.
I mean, what I would say to you at this stage is I think the priorities are obvious and will be familiar to you. For me, I think getting to grips with where the persistency experience is. I think we've alluded to the fact that we did allude to what's happened, what we've observed this quarter, that we've not seen an improvement. It hasn't deteriorated from last year. We've not seen an improvement as we expected. I think there are operational interventions around collections. There's also some product and distribution and competitive-related aspects there that the team has been looking at and that our city will be getting up to speed on and will be looking at in greater detail.
Looking at the PF space, there will also be work done there around the competitiveness of our offering there and how we stack up and the experience of intermediaries in that market. I'd say the third sort of big operational area is, of course, the readiness of our launch for OM Bank. I think we've alluded to the fact that we're comfortable with where we're tracking there. Those are kind of the three comfortable for our planned public rollout towards the end of the year. I think those are the areas that I'm going to be getting into initially as Group CEO as a priority with the team. Also mindful of some of what we've said to you before around costs and expenses and the role that plays ultimately in margins and returns. That's certainly a very live issue for us as well.
I will just comment that I think if you look at the performance of the businesses, I do think we must also acknowledge and we're pleased with the turnaround that we've seen in Old Mutual Insure, both in business overall, but in particular in margin. And also the performance of the wealth business, I think, continues to be something that's a positive. Casper, I think I'm going to ask you to comment on maybe one or two of the more specific questions that I expect we're not in a position to give clarity on yet.
Yeah, first I'll say I think to give you detailed clarity on your question at this point would be difficult when we haven't completed the work. We'd obviously want to see how much of the persistency issue we can deal with via management actions and how the rest is expected to run. We will be able to give you more detailed updates at the half year around what that looks like. In the meantime, the only publicly available information you would have would be the sensitivities we've published in our financials. I mean, you can have a look at that. We've also given you a sense of how long these provisions have been set aside for.
Generally, we were expecting to get from the end of 2024, we were expecting to get back to sort of a normalized position by the end of 2026, maybe a little bit into 2027. You can look. If that was not to come back, you can try and gauge the size of the adjustment required from that. That is also publicly available information, the shape of that curve. I mean, on the buybacks, I think what we said, sorry, we gave an update at the AGM. What we said on Friday was that we will update you on the work we have been doing on capital optimizations, our discretionary capital position, and our views on capital going forward at the half year. We will be able to give you then comprehensive updates at that point.
Thank you. Maybe also a quick one on your short-term insurance premiums. Gross written premium growth accelerating, very strong compared with BS as well. Can you maybe give a bit of color? I think you've mentioned it comes from specialist lines largely. They increase. Are we seeing that the pricing is reducing or not growing as fast anymore in the motor books and that there's still scope for premium increases elsewhere? Am I reading too much into that? And maybe if you can also just give us the gross, sorry, the net earned premium growth rate for the period.
Thanks. Over to you, Casper.
Thanks. Francois, we haven't disclosed that net earned premium growth rate. Unfortunately, we won't be able to give you that for the period. Just to comment on the gross written premium growth of 12%, it is linked to a number of pricing actions. It is also linked to the improvements in almost all the books where we've been able to put the business on a new footing. It also talks to being more successful in our specialty business, which has been a problem in the past. It is a broad-based improvement across most of our books. Obviously, with the new Sky Portfolio, we continue to see that portfolio performing well, which is off a very low base.
Excellent. Thank you very much for the time to ask questions.
Thanks, Casper.
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. It appears we have no further questions. My apologies. We have a question from Marius Strydom of Austin Lawrence Gidon. Please go ahead.
Hi, Jurie and team. Jurie, my first question to you is, insofar as Old Mutual strategy goes, are there any sacred cows from your perspective? Number two, Casper, the time you are taking over the buyback, should we read anything into your outlook for earnings and the ability to build your discretionary capital? Those are my questions.
Thanks. I think on the sacred cow question, I mean, I think the correct answer is, of course, coming in, and I come in with a fresh pair of eyes to a degree. Of course, we will be looking at all aspects of the strategy. I will say the emphasis, I think we have got a lot going on and lots of things that have been in the pipeline, including our own bank, but also a number of other things that you will know from a technology point of view and so on to improve the competitiveness of our businesses. That is a lot more about execution than it is about change in strategy. That is on the one hand. I think on the other hand, we will be determined also to make sure that we demonstrate the kind of good capital stewardship.
Capital allocation is going to be an important theme for us going forward to make sure that as we allocate the capital from the group, that that gets done appropriately and in a value-creating way. That certainly is going to be a big focus at the group strategy level. Casper, segue to you on that.
No, that's fine. Marius, I've said to you we'll give you guys an update. As you said on Friday, one of our key targets is to actually try and get the roadmap up. We are working very hard at trying to optimize the balance sheets and make sure we can free up further efficiencies on a forward-looking basis. Yeah, effectively, no, we are continuing to work on our long-term objective of getting the roadmap into a region where it's acceptable to our investors.
If I may ask a quick other question about OM Bank, you gave us guidance. I think it was startup losses of ZAR 1.2 billion-ZAR 1.3 billion per annum. I'd just like to know if those costs would include client acquisition costs once the bank is actually launched?
Yes, those would include client acquisition costs. The guidance we gave was a run rate that was similar to 2024 for 2025, maybe a little bit higher, and then reducing to a break-even moving to F2028, a break-even on the monthly position moving F2028. That would include any revenues and any acquisition costs for clients in the bank.
Okay. Thank you very much.
Our next question comes from Jarred Houstn of All Weather Capital. Please go ahead.
Afternoon, Jurie, Casper, and the rest of the team on the call. Can I just ask, I mean, obviously, a lot of time has elapsed.
The passcode has been confirmed. Please wait while you are joined to the conference.
Ladies and gentlemen, apologies.
Sorry, I'm losing a bit of participant on the call.
Ladies and gentlemen, please remain on the line.
Yeah, let's just get Jarred's question. He can respond to all the emails. Yeah, I'll get Jarred's question and just respond off email. Apologies for that. I have no idea what happened there technically. I'll check up with the CrossCall team. Thank you.
Okay. Thanks, Andrew.
That is fine. Okay. Cheers.
Thank you. Ladies and gentlemen, it appears we have no further questions on the telephone lines. I will now hand back for closing remarks.
Jarred, we had lost contact with you for the past five minutes or so. We had Jarred online asking a call. Could you just check if he's still available so we can close out the call and then wrap up the call? We've lost quite a number of participants.
Jarred, if you could please dial star and then one. That will place you in the question queue. Jarred is connected. I am just going to go directly to his line and open it. Thank you. Jarred, your line is open. You can continue with your question.
I am speaking. Can you guys hear me now?
Yes, we can. Please go ahead.
Yes, we can.
Got it. Perfect. Sorry about that. The line dropped completely on my side. My question was just, given how much time has elapsed since the March end, we have had a full two months here, are you able to give us some color in terms of either sales or persistency trends post the March period? Also, if you can give some comment on how different parts of the business have held up in the volatility within the market in April in particular, if there are any dislocations or anything to note, just given how volatile a period it has been.
Thank you, Jarred. Over to you, Casper.
Yeah. Look, Jarred, we have not given you any entry on the period post March, so I think it would be appropriate to give you comment now. What I would say is, yes, we did see some disturbance in the market levels beginning of April, but that has largely been restored. We have not seen any material sort of impact on our solvency ratios and our risk positions or anything like that. The balance sheet remains very strong. Yeah. We have obviously monitored what has happened post-31 March from a risk perspective. We are comfortable with that. We will be able to give you an update on the trends post March as soon as we come to market and as soon as we do the next update to the market, which is in about what we will be doing July and August. Thanks. Is there anything? Oh, sorry.
We just not in a position to comment on anything often like that.
Yeah. Thanks. Thanks very much.
There are no— Thanks, Jarred. There are no further people queuing up for Q&A on my side, Jared. Happy for you to double-check, and then let's wrap up the call.
Thank you very much, sir. Ladies and gentlemen, at this point, we have no further questions on the lines. I will now hand back for closing remarks.
Thank you. Over to you, Casper, for the closing remarks.
Yes. Thank you, everyone, for joining us today. Yeah. Once again, to reiterate that it was a difficult trading period, as you saw, lots of volatility in the markets. We were able to grow our gross flows, and we were able to steady the ship in terms of like APE sales, despite some onslaughts in the prior year. We continue to work on trying to widen the doors, i.e., improve revenues more than costs. We have a very strong focus on managing our costs during this period. We continue to work on our balance sheets and the balance sheet optimization initiatives. As we said before, we will come back with more detail into our market results. Thanks.
Thank you.
Thank you, sir.
Bye.
Ladies and gentlemen, thank you for joining us for this event. You may now disconnect your lines.