Good morning, ladies and gentlemen, welcome to Old Mutual's Investor Update this July 2023. We are joined by investors from across the globe, from the U.K., the U.S., and across the African continent. We're also joined by some of our investors here in person in our Mutual Park offices in Cape Town. Thank you for taking an interest in our business. Our executive management team is here in the room with me, together with select members of our board. I am Celiwe Ross I'm the Director for Group Strategy and Group Human Capital at Old Mutual Limited. In this role, I have a very unique vantage point of our organization. Firstly, I'm part of the team that helps to set our long-term strategy, but I also get to see us unleash the creative, problem-solving ability of all our people in deploying that strategy.
It really is a unique view. We have a full program today, and we'll be together for about two and a half hours. At our 2022 Annual Results presentation in March of that year, we shared the expected impact of IFRS 17 on our business and our responses. In November 2022, we invited you to our business update, where we shared our capital management framework. With that as a base, we will take you through the more detailed impact of IFRS 17, as well as how we optimize capital. This now brings us back to the beginning, our ambitions, and how our customers are at the center of them. Iain Williamson, our Chief Executive Officer, will recap on our victory condition and how we are building the integrated financial services company of the future, including our new bank build. Zureida Ebrahim will join him.
She's our Chief Operating Officer. She will cover how all of this comes to life through our core businesses and also our ambitions and how our customers are at the center of them. Iain Williamson, our Chief Executive Officer, will recap on our victory condition and how we are building the integrated financial services company of the future, including our new bank build. Zureida Ebrahim will join him. She's our Chief Operating Officer. She will cover how all of this comes to life through our core businesses and also what we have achieved to date. A very exciting update is coming there. Ladies and gentlemen, I've now gone through the main items of our agenda for today. I hope you're excited to hear about what we've been up to, as we are. You will get an opportunity to participate. We will have two Q&A sessions.
The first one will be after the strategy session, which will be presented by Ian and Zureida. You can queue up your questions on the webcast platform whilst all of our speakers are going through their presentations. The second Q&A will be after the section on IFRS 17 and our capital optimization presentations. That section is gonna be led by Casper Troskie, our Chief Financial Officer, as well as Ranen Thakor-Din, our General Manager for Group Reporting and Insights.
He will be joined by Nico van der Colff, our Group Actuary. Dial-in details for the Q&A are on the screen, and they'll be shared again when we get to each Q&A section, and I'll remind you of them. As I welcome now Ian and Zureida to join me on the stage, I'd like to remind you about what we do and who we do it for w hen we get to each Q&A section, and I'll remind you of them. As I welcome now Ian and Zureida to join me on the stage, I'd like to remind you about what we do and who we do it for.
Have you ever thought about the word mutual? Mutual respect, mutual admiration, mutual interests, mutual benefits. It's a little word with big meaning because it describes a state of commonality, of shared experiences or beliefs, and of close relationships. For us, at Old Mutual, the word mutual is much more than just a part of our name. It's a promise we make to those we serve. Through our core business activities of gathering capital, investing it on behalf of our customers, and transferring risk, we are working to create a more socially inclusive, resource-efficient, and low-carbon future for all our stakeholders. It's this that makes us the first-choice financial partner for millions of Africans. We understand what is important to people and businesses on the continent and what challenges they face.
They trust us to help them overcome those challenges, protect what is important, and transform their dreams into reality while constantly evolving how we deliver on our purpose and keep our promises. The reason why we do it is the same today as it was almost two centuries ago: to become our customers' first choice to sustain, grow, and protect their prosperity by offering a range of integrated financial services that truly meet the needs of our customers throughout their lifetime, enabling entrepreneurship. Embracing diversity and inclusion. Supporting financial well-being. Delivering quality education and skills development. Offering a range of integrated financial services that truly meet the needs of our customers throughout their lifetime. Enabling entrepreneurship. Embracing diversity and inclusion. Supporting financial well-being. Delivering quality education and skills development. That together, we can do great things every day.
Good morning, everybody, and a warm welcome from me to those of you who've joined us here this morning, as well as everybody who's joined us virtually from around the globe. We're kicking off today's presentation to talk about how we are building the integrated financial services business of the future. This is key for me and for our business. It's a journey we started several years ago, and today is an opportunity to share the natural progression of our strategy with you. I should mention, I think, explicitly, that we're not changing our strategy. We have made no changes to our strategy at all. We are seeking to share more detail of how we bring it to life and the progress we've made in executing against that.
I want to start this morning by a little bit of context, a snapshot of our environment and our customer base. I'll then go through a quick recap of our strategy, followed by a more clarity on our approach to integrated financial services and how we, as Old Mutual, view that. Zureida will come up and will give us more detail around how we are progressing our financial services, integrated financial services ambitions in the context of growing our core business. I'll come back at the end to talk about our new growth engines, and in particular, about the build-out of our bank, which is a critical building block in our ambitions. I want to start at the beginning with a part that's literally the most important to us, and that's our customers.
I don't think anyone in the room needs reminding that we've been through one heck of a difficult recent few years, both for our customers and for our businesses across the continent. We've seen an economic downturn right across the regions that we operate in. Sub-Saharan Africa growth is expected to decline this year, and that'll be the second consecutive year of decline. While inflation has started to trend lower in recent months, it's still at higher levels than it was in 2021. We've seen interest rate increases in South Africa of some 425 basis points since November 2021. As we all know, sitting here, the energy crisis in South Africa has intensified, with year-to-date load shedding in 2023 being more severe than the entire 2022 full year.
All of these factors have a disproportionate impact on small businesses and on consumers. On top of that, I think COVID-19 has had an impact on consumer psyche. One in three South Africans are earning less today, post-COVID, than they were before COVID. I think consequently, we've seen a level of social unrest in the country impacting an already strained consumer base. The cumulative impact of all of this impacts those most susceptible to economic hardship disproportionately. The reason I paint that backdrop is not to, you know, paint a pessimistic cust picture of the environment, but as a reminder, in a sense, that what we, as Old Mutual, do and how we do it, matters most to those that rely on us to help them to navigate their financial lives.
We differentiate ourselves by firmly putting all 12 million of our customers front and center of our business, allowing us to make a real impact at scale. Research shows that trust is the second most important driver of purchase consideration in a business, and that comes after quality of service, but before even price. Our customers associate the Old Mutual brand very strongly with trust. A recent Brand Finance survey shows that not only is Old Mutual the number 1 ranked insurance brand in South Africa, and that comes after quality of service, but before even price. Our customers associate the Old Mutual brand very strongly with trust. A recent Brand Finance survey shows that not only is Old Mutual the number one ranked insurance brand in South Africa, but it's also the most trusted financial services brand in South Africa across the broad category of financial service.
Given the importance that consumers place on that trust, that puts us in a strong position to continue to win hearts and minds as we move forward. Most of you will know that broad-based sustainability is absolutely central to Old Mutual's identity. We strive to create a positive and sustainable impact across our value chain, into the environment and broader society, and we continue to work towards positive economic, environmental, and social outcomes, which ultimately make a contribution to making our markets more sustainable. We're recognized as a leader in the ESG space, as seen by numerous accolades received, including that of the best ESG responsible investor in Africa for the second consecutive year.
With that as context, as I said earlier, our strategy remains unchanged. I will cover a recap of it briefly to provide both a foundation for the rest of this morning's presentation, as well as an introduction for those of you who may not be familiar with it. Our strategy remains anchored in our victory condition of seeking to become our customers' first choice to sustain, grow, and protect their prosperity. We provide sustenance or sustain our customers through our banking and lending propositions. We help them to grow through our asset management, savings, retirement, and investment solutions. We provide protection to improve through our life, annuity, and property and casualty solutions. By offering holistic solutions and financial advice, we ensure relevance and resonance with our customer base. This, I think, is at the core of what enables us to seek to become their first choice.
By doing all of this well, the outcome is that we will responsibly and sustainably build the most valuable businesses in our industry, and we track this actively by reference to our value drivers. These are the levers that directly deliver shareholder value. We hold ourselves accountable by assessing all of the initiatives we pursue against the contribution that they make to these value drivers. The rest of today, we will share details around build the most valuable businesses in our industry, and we track this actively by reference to our value drivers. These are the levers that directly deliver shareholder value. We hold ourselves accountable by assessing all of the initiatives we pursue against the contribution that they make to these value drivers.
The rest of today, we will share details around how we seek to ensure that we get these value drivers to operate at maximum in pursuit of becoming our customers' first choice. We seek to integrate the realization of our purpose with ensuring our sustainability and continued profitability. We introduced this value creation framework to you as part of our year-end results announcement. On how we seek to ensure that we get these value drivers to operate at maximum in pursuit of becoming our customers' first choice. We seek to integrate the realization of our purpose with ensuring our sustainability and continued profitability.
We introduced this value creation framework to you as part of our year-end results announcement at the end of 2022, and you see that we categorize our business into two broad themes: that of growing and protecting the core and unlocking new growth engines. We've taken a deliberate portfolio-based approach to growth. At the portfolio level, we seek to generate sustainable long-term value for all our stakeholders. Our core businesses form the vast bulk of our portfolio, and they currently contribute to stable cash generation and to earnings. The new growth engines are a smaller part of our portfolio currently. They will deliver new revenue streams and future earnings for the group over the longer term, and we will continue to make strategic investments in this regard, in line with a disciplined capital allocation framework.
Casper and Ranen have a dedicated slot later on the agenda to unpack the framework that we use into quite a lot of detail. We also have a number of exciting developments to share around new partnerships that we've entered into recently. For the remainder of the presentation, I will give further detail on these strategic focus areas, and in future, at all of our results updates, we will update our strategic progress in line with this framework. Integrated financial services is a natural extrapolation of our victory condition.... We view our customer base as one of our biggest assets, and so seeking to serve that customer base more fully is at the heart of this. It's what we are building to make sure that we're strong, true, and centered around the ever-evolving needs of our customers.
Our integrated financial services ecosystem has a lot of components, and some of them are currently being built. I want to lift out a few key points that I think make this distinctive and valuable. A truly integrated financial services business, in our minds, satisfies a number of stringent criteria. It's not just about a variety of products. Our integrated financial services ecosystem has a lot of components, and some of them are currently being built. I want to lift out a few key points that I think make this distinctive and valuable. A truly integrated financial services business, in our minds, satisfies a number of stringent criteria. It's not just about a variety of products from a variety of different sectors or cross-selling in, in that language. It's really about creating engaging experiences for customers that serve to educate, empower, and encourage them on their journey to financial wellness.
We seek to connect with our customers in the way that they want, either digitally, in person, through an advisor, or through our branches, and this increases our access to them and their access to us. We seek to have valuable conversations with our customers that can change their lives, armed with more data, enabled by trust, and powered by digital tools. Advisors can fundamentally impact customers' financial wellness journeys through truly connected conversations. It's not just about providing better advice, but about ensuring that there's a consistent quality of that advice right across the system. What are the hallmarks of this integrated financial services system that we're building? The first is that it is an advice-led system. To help customers on their journey, we believe that you need to know and understand them, and advise them accordingly.
Advice is right at the forefront, seeking to provide the right solutions to customers at the right time. Fortunately, for us, advice is a well-developed capability in the group, given that our core solution set for many years has been anchored in our life and retirement savings business. We now support our advice capability with an industry-leading set of advice tools that help advisors to deliver a consistent quality service. We deliver this through a vast network of continuously trained and highly skilled advisors. We have more than 14,000 tied advisors across all of our markets, in addition to a large network of independent advisors. With data collected through our platforms, we seek to get to know our customers better and more intimately than others, in the belief that a deeper understanding of their needs allows us to form long-lasting and meaningful relationships with them.
This is underpinned by deep expertise from a long history of training and working with such a large advisor network, which is bigger than almost any other on the continent. This is core and has been core to who we are and how we serve our customers for many, many years. The second key feature of this ecosystem is that it is truly integrated, or needs to be truly integrated. The solution set must be holistic and joined up, so that the solutions complement each other and work with each other to strengthen the overall offer. We seek to provide a holistic set of financial services to meet customers' needs as they navigate their lifelong financial journeys. Customers can benefit tangibly through our rewards program from either essentially having multiple solutions with us or from making better financial decisions in support of their personal financial goals.
We seek to embed advice and guidance into every part of the value chain and into every interaction that we have with customers. This ecosystem is also what I've described, to describe as tech forward. The heart of the always-on experience, the data collection, and the where you need it, when you need it delivery, is enabled by modern technology. Customer expectations have risen. There's an always-on mentality, demanding faster response times via the channel of their choice. We've put the building blocks in place to deliver an integrated customer experience, and we've made significant investments in technology to deliver a seamless experience for customers through the integrated financial services ecosystem. Zureida will share quite a lot more detail on the building blocks, where we are in the build-out, and the next steps that we will take.
We seek to allow customers to interact with us on their own terms. We use a variety of channels in a way that best suits them, and the focus on a tech-forward approach gives us a better chance at retaining customer relationships for longer. Finally, one of the most important forms of currency in today's business landscape, which I've alluded to a number of times this morning already, is that is trust. Customers want to support brands that show accountability. This is a key driver of consideration and brand usage, and therefore, a critical enabler of business performance. Customers associate our brand with trust. We've worked hard over a century and a half to earn that trust, and we'll continue to ensure that we earn customers' trust every day. Given this backdrop, I'd like to welcome Zureida to come and talk to you.
She will guide you through how we're bringing this ecosystem that I've described to life across our core business, including the progress that we've made in building it out, as well as sharing highlights of what's next in the journey. Then when she's done that, I'll return to conclude with a few remarks and an update on how we're progressing on the new growth engine side of our portfolio. Zureida, over to you.
Thanks, Ian. I was gonna start with a joke about between Ian earlier and Casper later is Zureida. I heard that you don't have to start an investor presentation with a joke. What I am gonna say is that between vision and results lies execution, and we recognize that in order for us to achieve the meaningful impact Ian just spoke about and our desired financial results, we must prioritize and excel at execution. We must be able to translate the strategic aspiration of becoming an integrated financial services business into tangible outcomes. What our five strategic focus areas that Ian just shared with you does is align our resources and our actions across the organization to help us meet these objectives. I'm gonna talk a little bit more about what we mean by growing and protecting the core.
Three out of five of our focus areas is actually about maintaining and growing our core business. Our core business is the business in South Africa and our other Southern African operations. It's our established cash-generative businesses, where we know and do well, where we operate from a position of strength. We've got a sizable customer base here. Nine of the 12 million customers that Ian referred to earlier are in the core. The trust and loyalty that Ian referred to is critical in helping us grow, and business in South Africa and our other Southern African operations. It's our established cash-generative businesses, where we know and do well, where we operate from a position of strength. We've got a sizable customer base here. Nine of the 12 million customers that Ian referred to earlier are in the core.
The trust and loyalty that Ian referred to is critical in helping us grow and protect this core business. A growing and profitable core also means that we generate enough funds to invest in new opportunities and new business, which Ian will talk about later. Let's look at the three areas in growing and protecting the core. The first one is holistic coverage of customer needs. Here, like Ian referred to, it's about a comprehensive set of financial solutions that allow us to take a more holistic approach to customers' financial wellness needs. It means that customers have the convenience of being able to access these multiple products and services from a single place. It also makes it easier for customers to manage their finances, and it allows them to take a more holistic and integrated approach to, to financial planning and getting advice.
From our perspective, it builds a greater and stronger relationship with Old Mutual, and it allows us the opportunity to meet a bigger proportion of customers' needs, increasing their life- lifetime value to us. The second focus area here is distribution and digital engagement. This is really about us finding new ways to reach existing and new customer segments, to increase our brand reach, but also to leverage new technologies to offer better advice solutions, better product solutions, and greater experiences to both customers and advisors.
The third focus area here is operational efficiencies, this is really about supporting our sustainable growth by optimizing costs, but also leveraging our benefits of scope, where we can deliver a broader set of solutions to customers, meet a greater proportion of customers' needs, but also where we can leverage the same set of resources and skills internally in order to meet this more holistic value proposition. Let's take a look at what we've been doing in each one of these areas. If we look at holistic coverage of customer needs, I'll reiterate some of the points that Ian made earlier. For us, integrated financial services is about providing this wide range of financial services within the Old Mutual ecosystem, but it's also more than that.
It's about the seamless and cohesive experience that is coupled with offering multiple solutions across multiple channels. With the addition of banking to our solution set, we're now able to get into the everyday lives of our customers and truly claim the title of holistic. Again, as Ian said, it goes beyond that. For us, it is about the advice and the trusted conversations that we add. It's about the seamless and cohesive experience that is coupled with offering multiple solutions across multiple channels. With the addition of banking to our solution set, we're now able to get into the everyday lives of our customers and truly claim the title of holistic. Again, as Ian said, it goes beyond that. For us, it is about the advice and the trusted conversations that we add to our solutions and our services that we offer our customers.
We see significant untapped value in our existing customer base, and so we want to focus on cross-sell and upsell to this customer base. Obviously, doing this at a lower acquisition cost, and then leveraging this broad set of customer data that we get to provide deeper insight and opportunities to innovate even further. As Ian said, this is not a new journey for us, so let's look at what we've delivered against this commitment already to date. The first one is the launch of Old Mutual Protect, which is our flagship risk proposition, which we took to market in 2021. Old Mutual Protect is unique in its construct. It is flexible and modular. It actually allows customers to tailor their cover in line with their changing needs. Customers can increase or decrease cover depending on their changing financial circumstances.
What this means is that we don't see customers canceling their product as much due to affordability issues, and, and this has a positive impact on persistency. This is all as a result of the nature of the solution that we, that we have put down. We see how this has impacted our Mass and Foundation Cluster business. In, in the Mass and Foundation Cluster, we've moved from being able to go beyond providing just funeral cover, to customers having access to simple and fully underwritten life cover. This has made a really significant difference. In fact, Old Mutual Protect has had a record sales year in the Mass and Foundation Cluster this year.
From a financial wellness perspective, it helps us help our customers move beyond just providing for the funeral, but where customers are actually able to provide for their families post-death in a better way. We've also enhanced our rewards program. Our rewards membership is now in excess of two million members. On this rewards program, the customers who, who are actively engaged in it have a 35% higher number of needs met with Old Mutual than customers who don't. We see this having grown from 30% in the last year. We also see, especially in the Mass and Foundation Cluster, a positive impact on persistency in that business. More recently, we've launched Old Mutual Home Solutions. This, this is in conjunction with Genric, which was acquired by Old Mutual Insure in 2022. This solution is about providing affordable cover to lower-income earners.
One of the, the, the capabilities that we've implemented this year, which is, is not yet at the stage of, of, of demonstrating the value we talk about there, but which is showing great results, is our SMEgo capability. We have launched this platform for small businesses. We already have in excess of 4,500 small businesses accessing business finance and other business services on the platform. Again, this creates the opportunity for more employee benefits and business services that we get to offer to these businesses who are using our platform. Let's look at the next phase of delivery. Ian's going to talk more about our bank later, and that is obviously core to our core business. He will, he will expand on that, on that later.
What, what you can expect to see within the core business is the launch of our savings and income proposition. The savings and income proposition, like Old Mutual Protect, will also be flexible and modular in nature, and very importantly, on the same chassis as Old Mutual Protect. I'll talk more about what that means just now. We will further integrate Old Mutual Rewards across our solution set. Old Mutual Rewards will be integrated into the bank. It will also be integrated into our financial wellness platform, where we get to reward more than just having products. Where we get to reward customers for good financial behavior, for learning more about their finances, for, for keeping their products longer, and so forth. Then finally, we are launching a home ecosystem where we offer customers home loans.
In addition to that, we will also be bringing other services, like access to solar solutions, and so forth, to the market. This presents a great opportunity, for example, Old Mutual Insure, who now has access to this set of customers to offer short-term benefits.... The third area, distribution and digital engagement. For us, when we think about this, it's really about amplifying the success of our face-to-face channels that we've seen to date. We wanna do this through new distribution partners as well as through new distribution channels. It enables us to scale the advice and the trusted conversations that we have very successfully been able to deliver through our advisors to date. We will leverage new technologies to enable advisors, but also to empower customers to connect with us through the channel of their choice.
This means that we will make it easier for advisors to do business with us, so that they can focus on doing what matters most, their customers. Equally, for customers who want to engage with us digitally, we will continue to invest into the MyOldMutual ecosystem to drive rich, regular, and personalized engagements directly with these customers. Let's take a look at what we've already done here. We've made selective acquisitions and entered into strategic partnerships to grow our face-to-face reach. Some of the notable ones are up there in front of you, including Genric Insurance, which I just mentioned. Old Mutual Insure also have a partnership with Letsema Broker Services and Pineapple Insurance.
The Mass & Foundation Cluster have a relationship with Bridge Taxi Finance and Two Mountains more recently, which is still up for regulatory approval, I must, I must mention. We are expanding our reach through partnerships quite significantly. We have very recently launched a fintech solution in Zimbabwe, called O'mari. O'mari is a mobile money, insurtech, and healthtech service. It's available through an app, but also through USSD. What's incredible is we have reached 50,000 customers in just 5 weeks. Of these 50,000 customers, 84% of these customers are new to Old Mutual. We're looking for opportunities to scale this to the relevant markets. We've also made several enhancements to our service processes. We have created new service models for advisors.
We have removed significant amounts of friction within our servicing channels, and we've automated several servicing transactions, both for customers and advisors. What this has resulted in is an improvement in our net promoter score to 70%. That is a world-class number. Net effort score, which measures how easy it is for advisors to do business with us, has improved to 75% this year. The next phase of delivery is about driving more frequent customer engagement through guided conversations on our MyOldMutual ecosystem. The heart of this will be delivered through a needs-based goals and financial wellness platform, which will be integrated with our rewards program. The goals functionality offers support to both customers and advisors.
Customers will be able to set their goals, they will be able to track their goals, and they will be empowered with information and guidance on improving their situation every step of the journey. For advisors, advisors will be able to get a holistic picture of their customers' goals and have more meaningful engagements with customers based on this. We are taking an iterative view. We launch very soon in the next quarter. We will pilot it with one or two goals, but we intend to extend to the full suite of the 12 financial goals we have identified in line with the customer's lifetime financial needs.
Another important delivery for us in this space is what we refer to as enabling a digital advice, and this is really about improving the advisor experience by making it easier for them to do business with us. The less friction we have in our internal system, the easier it is for them to do business, but it's also the more likely that they do business with us, and this is a very key component of our digital transformation story. We're really excited to announce a partnership that we have with OneConnect Financial Technology, part of the Ping An Group, where they bring together their leading insurance and technology expertise to build new digitized products. One such being the Omni-channel Agent Solution, which we believe will do really well in the South African environment.
Excited to announce a partnership that we have with OneConnect Financial Technology, part of the Ping An Group, where they bring together their leading insurance and technology expertise to build new digitized products. One such being the Omni-channel Agent Solution, which we believe will do really well in the South African environment. We've started the development of this new platform, and we're already in pilot with a select advisor group, and we intend to commence scaling it to the broader advisor community in this year still. Operating efficiencies, as I said earlier, enables us to not only extract the benefits of scale from lower unit costs, but the benefits of scope by applying our resources more broadly, and also being able to, to offer customers a broader set of, of solutions. I'm going to show you a video that shows you what this looks like in practice.
Technology is changing the world at an unprecedented rate, but some things will never change. Since 1845, there's only been one thing at the center of our business, our customer. Now, we're ready for the next big steps, revolutionizing how we help our customers achieve their financial goals through market-leading risk insurance and savings and investment solutions. Our new cloud-based digital platform empowers our advisors to serve our customers in faster, smarter, and more personalized ways than ever before. Yes, it is about using technology to put a whole new business model in place that will ensure a better overall experience. Next big steps, revolutionizing how we help our customers achieve their financial goals through market-leading risk insurance and savings and investment solutions. Our new cloud-based digital platform empowers our advisors to serve our customers in faster, smarter, and more personalized ways than ever before.
Yes, it is about using technology to put a whole new business model in place that will ensure a better overall experience for our customers and our advisors. What does this mean for you? It means faster online sales and servicing processes with increased automation, pre-population of information, built-in validations, and digital consent. While policies that don't require medical tests can be issued immediately. An automated solution recommendation engine, dynamic quote process, and a choice of underwriting models helps advisors design solutions that better meet customers' financial needs. More efficient processing of claims and other service requests with straight-through processing. The reduction of admin, follow-up, and the need for paper-based forms makes the entire process more efficient for all. Now, our advisors' prime focus can be talking to customers, providing more personalized advice, and a tailored customer experience.
This new digital ecosystem, built around our customers' financial needs, gives them a much more intimate connection to Old Mutual. We're now better equipped to craft industry-leading solutions, offering our customers exactly what they need, so that they can aspire towards a better tomorrow. Enter a world where we help make dreams come true. A world where what used to take days now takes minutes. Enter tomorrow.
What you see there is I'm sure many of you have heard us reference SA Transformation before. We've been on a multi-year technology modernization strategy, which was really about modernizing our core retail life administration platform that services South Africa and Namibia. It's at the back of this new platform that we launched Old Mutual Protect, and we've since enhanced it over time. As you saw, what this new platform affords us is several new capabilities, which give us an edge in the market. First, we have a full set of risk benefits, including funeral, simplified, and underwritten life, as well as disability and ill health benefits across all of our retail channels on one platform. What it means is that advisors only need to know one sales journey. For us, it means we only have to train advisors once.
Advisors benefit from direct ex-execution themselves onto the appropriate risk solution for a particular customer. Onboarding is 100% paperless. It's powered with an auto-underwriting process. 97% of policies today are fulfilled automatically. Old Mutual Rewards has been embedded into the underwriting process, allowing advisors and customers to see immediate benefits accruing from the benefit choice they've just made. Whilst on the one hand, you saw how this integrated approach has allowed us to offer a wider solution set to customers, what you now see is how the same approach has substantially improved our advisor productivity, our servicing cycle times, but our operational efficiency across the entire business. This has been one of the key drivers of our market share recovery in the Mass & Foundation cluster, as well as the improvement in our value of new business.
This competitive edge will be further enhanced when we integrate our savings and income solutions onto this very same chassis, and reap the scale benefits of our entire South African and Namibian risk and savings solution on one administration platform. We've also, as part of this modernization journey, migrated 100% of our South African life estate onto the cloud. We already see the benefits of reliability and faster execution times. We have also streamlined our digital assets, consolidating 13 of our public websites into a single platform, improving both our sales and service experience across our different regions. What can you expect next?
We expect to migrate our old generation risk book very imminently, and then our savings book thereafter onto the same platform, the exact same chassis that we referred to, and we will websites into a single platform, improving both our sales and service experience across our different regions. What can you expect next? We expect to migrate our old generation risk book very imminently. Then our savings book thereafter onto the same platform, the exact same chassis that we referred to, and we will then proceed with decommissioning our old platform and all the peripheral systems associated with that.
In addition to that, we're busy migrating Old Mutual Insure and our Africa Regions' IT estate to the cloud as well, and Old Mutual Insure is also making good progress on the modernization of their IT estate at the moment. So as I've explained, our integrated approach is not just about expanding customer solutions or becoming more efficient, but it's the interaction of all of these strategic focus areas together which accelerate our growth across our core businesses. The holistic coverage of customer needs makes sure that we are delivering more value to customers, and that we are also deriving more value from customers. Driving distribution and digital engagement expands our reach, it also is about expanding customer solutions or becoming more efficient.
It's the interaction of all of these strategic focus areas together, which accelerate our growth across our core businesses. The holistic coverage of customer needs makes sure that we are delivering more value to customers, and that we are also deriving more value from customers. Driving distribution and digital engagement expands our reach, it also gives us the proportion, the opportunity to meet a greater proportion of, of customers' needs. Driving operational efficiencies improve our margin. Bringing these three things together is really the key for us to unlocking growth in the core. We've shared with you today that we have a compelling vision, we have aligned leadership, I'll, I'll talk to you a little bit about our margin. Bringing these three things together is really the key for us to unlocking growth in the core.
We've shared with you today that we have a compelling vision, we have aligned leadership, and I'll talk to you a little bit about empowered employees and how bringing those three things together create our success. We have a unified vision, and it's now really about driving unified action across our organization to make this happen. We have embarked on an agile transformation journey so that we create empowered cross-functional teams to work together to bring these customer-centric solutions to market faster and more efficiently. It's because we recognize that we're a large organization, and that with 30,000 passionate employees, who are not just aligned to our strategy, but who are empowered to act, will turn this dream into a reality for us and our customers. I'll hand back to you, Iain, on that.
Cool. All right, thanks so much, Zureida. I'm now gonna shift gears a little bit to talk about our new growth engines. The core is what keeps us running profitably today, and this next section now talks to how we re- keep that sustainable over a longer-term future. This encompasses the last two of our five focus areas, spanning both strategic growth businesses as well as strategic growth markets. Improvements to the core, which we've talked about in a lot of detail this morning, improve returns fairly quickly. Investing capital into new growth engines will help us yield sustainable growth over the long term. For the rest of this presentation, I'm gonna focus on our strategic growth businesses, including a deep dive into our bank build and what we are doing there.
Our aim in this portfolio is to drive customer access, new offerings, and new capabilities through digital-led solutions, including ecosystem-based ventures and strategic relationships. Our strategic growth businesses span what we call internally our NEXT 176 portfolio and the new transactional banking capability. Just as a reminder, we established NEXT176 towards the end of 2021, so it's just over 18 months old, with a mandate to accelerate the growth and innovation agenda at an enterprise level. Included in that portfolio is the pursuit of large-scale strategic relationships, supporting distribution channel expansion, product innovation opportunities, and capitalizing on the growing trend of disaggregation of financial services value chains through embedded finance. It's a different kind of integrated financial services, but it's integrated nonetheless.
The bridges that NEXT176 is building for us into the likes of retailers, including online retailers, retailers and mobile service providers, allows us to be more fully connected to our customers' worlds. By achieving that integration, we establish a presence and offer solutions to a broader set of customers in a different way, and that's what embedded finance is all about... We're excited to announce that Old Mutual through NEXT176, have entered into a strategic relationship with the Vodacom Group. We will leverage our respective customer bases and capabilities to distribute innovative solutions and services across the continent.
The start of this has seen Old Mutual transferring its mobile estate to Vodacom, providing finance for backup power solutions, supporting Vodacom's ESG efforts through Tweak Carbon, which is NEXT176's carbon accounting software venture. We are also exploring insurance solutions between ours and the VodaPay platform. This then takes us to one of the more exciting and important parts of our future, which is the building out of our bank. Why a bank? This is a question that I've been asked a number of times since we first announced our intention to build the bank in November 2022. Apart from meeting some specific customer needs and allowing us to complete the IFS ecosystem, building the right kind of bank helps us with quite a few things. Firstly, it enhances our ability to have regular, natural, business-driven interactions with customers.
The nature of the long-term insurance business is that natural business interactions are less frequent. It gives us proximity to customer data directly into the national payment system, and that increases our cross-sell opportunities. It allows us access to cheaper sources of funding for our loan book, as we will be taking deposits on our own balance sheet. We are building the bank through a digital-led set of functionality that will target upper-mass and lower-affluent customers, primarily. It's also worth noting that banking and lending is not new to the group. We're building on existing capabilities. In South Africa, Namibia, and Kenya, we already offer lending, although we don't offer full transactional banking. In Zimbabwe, we have CABS, which itself is a full-service bank. The building out of a fully-fledged transactional capability in South Africa builds on these existing strengths and capabilities.
It also builds on the trust element that I referred to earlier, that our customers have in us. This is really, really important. It builds on the existing relationships we have with our nine million customers in our core business, and it builds on profitable banking operations that already exist and existing infrastructure and network of branches and advisors. It provides us with a fast path to deposits as a source of funding for Old Mutual Finance, and we are able to significantly leverage Old Mutual Rewards to provide tailored offerings to our existing group customers, network of branches and advisors. It provides us with a fast path to deposits as a source of funding for Old Mutual Finance, and we are able to significantly leverage Old Mutual Rewards to provide tailored offerings to our existing group customers.
With all that said, it's gonna cost us money and investment before we start to make a return. We've been very deliberate in the initial scope of services we will offer and in building out our capabilities for sustainable competitive advantage. Let me just call out a few of the hallmarks of what we are building. We believe that the capabilities we've invested in to date will contribute to differentiation in the context of an admittedly crowded South African retail banking landscape. Firstly, the capability we're building is cloud native, and it sits on a software-as-a-service model. This allows us to do a number of things. We can reinvent the customer experience paradigm. It allows us to react faster to changing customer needs and to changes in the competitive environment. It allows us to quite significantly differentiate the offering by cost to serve.
Real-time connectivity, combined with major advances in data analytics, in processing capability, in software-as-a-service, artificial intelligence, and machine learning, allow for abilities that legacy systems, processes, and structures simply cannot cater for. In many ways, the existing operating models of incumbent banks are the opposite of what these new technologies enable. Building this app from the ground up on this type of set of new capabilities allows us to pursue different opportunities. We're not the only ones that are excited by what we are doing. We've partnered with a company called 10x, which is a core banking system service provider, founded by Antony Jenkins, who used to be the chairman of Barclays globally, and he is now both the founder and the CEO of 10x.
10x has played a key role in delivering transformative digital propositions globally, including underpinning the launch of Chase Bank in the UK, as well as the new Westpac chairman of Barclays globally, and he is now the, both the founder and the CEO of 10x. 10x has played a key role in delivering transformative digital propositions globally, including underpinning the launch of Chase Bank in the UK, as well as the new Westpac banking platform in Australia. I'm going to play you a short video where Antony shares his thoughts on what we are doing with 10x.
I'm Antony Jenkins. I'm the founder, chair, and Chief Executive of 10x Bank. After 30 years in the financial services industry, I founded 10x 7 years ago to create the technology I always wished I'd had when I was working in the industry. The purpose of 10x is in the name. We seek to make banking 10 times better. Better for banks and financial institutions, better for their customers, and better for society. What are those 10x benefits? What can we offer to our clients and their customers? The first thing, and most importantly, we've built something I always wish I'd had when I was in the industry, and that is the ability to build and deploy new products without having to write a line of code.
In the old-fashioned way of operating inside a financial institution, a new product requires months, sometimes years, of work to write business requirements, software requirements, code, testing, and so on. In the 10x world, a product manager can sit down at a desktop and configure a new product in a matter of minutes. This no-code product development tool is world-leading. We've made sure that the data in the platform is available to our clients in real time. This means that you can look at how a customer is performing. Are they using you more or less? Are they performing in a way that gives you more or less concern about risk? Does that mean you feel more able to extend credit to them or less able to extend credit to them? That access to data in real time is a real competitive advantage.
Finally, we've built an integrated customer relationship management tool into the platform, so that our clients don't have to develop that functionality for themselves. Most of all, when we think about total cost of ownership, we have been told by our clients that it's at least 80% cheaper to operate their business on 10x than doing it the old-fashioned way. Old Mutual's objective to be our customers' first choice to sustain, grow, and protect their prosperity is a huge aspiration. Very, very important to the citizens of South Africa and highly congruent with our own ambition to make banking 10 times better. Bringing the 10x capability in support of that objective is what we have teamed up to do, and this will manifest itself in a number of key roles for the customers of Old Mutual.
Firstly, it will allow them to deliver radical transparency and protect their prosperity. Is a huge aspiration, very, very important to the citizens of South Africa and highly congruent with our own ambition to make banking 10 times better. Bringing the 10x capability in support of that objective is what we have teamed up to do, and this will manifest itself in a number of key roles for the customers of Old Mutual. Firstly, it will allow them to deliver radical transparency. Gone are the days where the customer can't understand the services they're getting and how they pay for them. Our technology allows Old Mutual to be very clear with their customers exactly what they're getting and how much it's costing them. The second thing is, using our no-code product development tool, Old Mutual can constantly update and iterate.
Gone are the days where the customer can't understand the services they're getting and how they pay for them. Our technology allows Old Mutual to be very clear with their customers exactly what they're getting and how much it's costing them. The second thing is, using our no-code product development tool, Old Mutual can constantly update and iterate their product offerings in line with customer needs and in line with the direction of the market. This means that they can always be on the forefront, both in terms of the feature functionality of the products and the customer's user experience. Finally, because of the much lower operating costs of the 10x platform and all the great work that Old Mutual have done to operationalize that, the value created by that can be shared with their customers.
I am incredibly excited, knowing the South African market as I do, about the value proposition that's being brought to market by Old Mutual. I have no doubt that our partnership with Old Mutual will allow them to deliver on that objective of being the customer's first choice to sustain, grow, and protect their prosperity.
Okay, with that, let's get concrete and talk about where we are with the bank build. The board-approved expenditure I've shared with you before, to complete the build of the transactional capability, is ZAR 1.75 billion. To date, we've spent ZAR 1.2 billion, with ZAR 267 million of that being capitalized. We are still targeting to launch the bank in 2024, and we are targeting break even for the new capability in 2027. We received our Section 13 approval under the Banks Act from the Prudential Authority in September of last year, and we've subsequently submitted our Section 16 application, which is the next phase of the regulatory approval process, to the Prudential Authority, and we await their feedback. We continue to make good progress on the build-out of the platform.
The next steps will be to complete the build for the launch value proposition, and to garner the approval of the regulator for our Section 16 application. That approval is referred to as Section 17. What that will allow us to do is to then integrate what we have built into the national payment system in production, and to do the necessary integration testing with the various payment clearing houses. That is then followed by a friends and family launch of the capability, and then finally, by a full-scale market launch. We're confident that what we're building will be a valuable addition to our ability to attract and retain customers, and to drive revenue growth for the group.
To wrap up this section, we are energized by the work that's been done to date across the portfolio in progressing our integrated financial services ambitions, in pursuit of our victory condition of becoming our customers' first choice. We're confident that execution across our 5 focus areas will generate sustainable shareholder returns. We will communicate new medium-term strategic targets across our focus areas as part of our interim results in September. I'm gonna close there and ask Thuliwe to take the floor and facilitate the Q&A session. Thanks.
Thank you very much, ladies and gentlemen. As Ian said, we are gonna kick off our first Q&A session after the strategic update that you just heard about. Essentially, we were talking about our strategic ambition and the direction that we're taking the company in, but also giving you a state of update around what we've achieved to date and what we still have to do. You will see on your screens that we're sharing details of the dial-in number, for you to be able to dial into the line and ask questions. I am gonna start with the investors in the room who have questions.
In order to make sure that we run this as efficiently, as fairly as possible, I'm going to ask that everybody ask two questions, and then we'll go around the room and finish those, and I'll go into the webcast. There are roving mics available, and if you just raise your hand, a mic will be brought to you. Please, can I request you to first start by introducing yourself and letting us know which company you represent? As I said, I'm going to limit each question or each person to two questions at a time, so that we can give everybody an opportunity to engage, in this instance, with Iain and Zureida, and if the questions get really tough, I'll bring the MDs of the businesses in. Let's get going.
I want to be able to see Warwick.
Good morning, everyone. It's Warwick-
Request you to first start by introducing yourself and letting us know which company you represent. As I said, I'm going to limit each question or each person to two questions at a time, so that we can give everybody an opportunity to engage, in this instance, with Ian and Zureida, and if the questions get really tough, I'll bring the MDs of the businesses in. Let's get going.
I want to be able to see Warwick.
Good morning, everyone. It's Warwick Bam from RMB Morgan Stanley. Ian, Zureida, thanks very much for the presentation. I think one of the themes of your strategy is improving client engagement, and, you know, that will naturally have sort of a self-reinforcing impact on the business. But with 12 million customers and 14,000 advisors, it still looks like quite a challenging task to increase the frequency of engagement. Just give us a sense of... You know, you obviously measure it, and you've got science, you know, in terms of how you apply customer engagement. Just give us a sense of where you're at now, how you think it could improve.
If I just think over the last three years, you've actually reduced, certainly in the MFC business, I think you've reduced your advisor headcount slightly, yet, you know, sales volumes, as you rightly said, are, are slightly above pre-pandemic and hitting, hitting new records. Give us a sense of whether some of the initiatives you've already mentioned are starting to have an impact, and then, you know, what you're looking for in terms of further improvement from a client engagement perspective.
Only one question, Warwick? Thank you. Ian, do you want to go-
Yeah, I'll start.
Maybe Zureida will step in?
We can always ask others to contribute. Okay, thanks, Warwick, for that. I think if you look at it-- I think it's important to first say, a lot of our energies to date has been South Africa-focused and to some extent, Namibia-focused. That's obviously, you know, 600 and something million customers out of the 12, if you like. There is an opportunity to think about, you know, how do we extrapolate some of that logic at a later stage into other markets. It's obviously more difficult at that point in terms of just the portability of some of the issues, the regulatory stuff, the tax stuff, et cetera. But the more-- I think Zureida's slides implies, imply things that are worth making more explicit.
By having done Old Mutual Protect, we've essentially, I think, we've built the answer largely for the risk business. There, we can still make further improvements to that. We had a blueprint which we had set out initially, and we by no means achieved all the aspects of that blueprint. There's still some incremental benefit that could be had from further improvements within that vertical, if I can use that language. The next big shift will be when we get the savings and income piece included. We had set out initially, and we by no means achieved all the aspects of that blueprint. There's still some incremental benefit that could be had from further improvements within that vertical, if I can use that language.
The, the next big shift will be when we get the savings and income piece included. If you put yourself in the, in the shoes of an intermediary today, that services a customer across the breadth of life risk, savings, retirement. What we're essentially asking them to do right now is to use one set of tools, a nice modern set of tools, a really great advice support framework for the risk business. Then if they want to have a conversation with a customer about savings and, and retirement solution business, they actually have to go out of there and use an entirely different set of tools, which frankly, are old, off the arc, and archaic, because it's our old stuff. At the point where we, we make that shift, those advisors' lives become one time.
What we're essentially asking them to do right now is to use one set of tools, a nice modern set of tools, a really great advice support framework for the risk business. Then if they want to have a conversation with a customer about savings and, and retirement solution business, they actually have to go out of there and use an entirely different set of tools, which frankly, are old, off the ark, and archaic, because it's our old stuff. At the point where we, we make that shift, those advisors' lives become 100% easier. I expect that ease of business score to, you know, to further improve quite a lot when we get that right.
The quality of the conversation, because of we'll provide similar tool support around the advice and solution recommendation process, the quality of the conversation around the savings and income business also to elevate. I guess, in a way, that's the most immediate next step in the, call it, the intermediary customer experience, and then you can extrapolate from that, you know, the logic of, of how we then start incorporating other things. That, that's kind of the next immediate frontier for me.
Zureida, do you have anything to add before I-
Yeah, I think the only thing I would add to that conversation is expanding our rewards program across the different product needs will also deepen the customer engagement. So, you know, we integrate into retirement goals, like in the next few months, and we, you know, we've got a plan around integrating into the various goals over the next period, and, and that also adds to the engagement.
Yeah, sorry, on that, I think there's one thing I would add to that, now that you've triggered it as well, is we were very cautious when we started Rewards in terms of how we rolled it out. We didn't put any marketing behind it. We didn't make it easy and integrate it into, for example, Old Mutual Protect quotes package on day one. The reason for that was, we wanted to prove our own hypothesis to ourselves, that the customer behavior changes that we were seeing justify the cost of the Rewards program before it got to crazy scale. We only had the confidence to, if I can use that language, to open that up more fully in the last 6 months to a year. So now we have, as Zureida said, we've now integrated into the Old Mutual-
Mm-hmm
Protect quotes package. We've pushed our advisors to market it, and the membership numbers are starting to ramp. The reason we were cautious initially is we wanted to make absolutely sure that the financial algorithm underneath it actually worked and made sense. It does seem to work, and we continue to track it. If anything, it's got better. We're comfortable, and we really are now pushing that forward, and I think it's paying quite good dividends.
Okay, awesome. Thanks, Ian and Zureida. Just gonna look into the room if there are any more questions before I go to the webcast.
I just-
I don't see any. I'm just gonna move to the webcast. Again, if I can ask for you to introduce yourself first and the company that you represent, and then you can go ahead and ask your question. Webcast, over to you.
We have a question from Andrew Sinclair of Bank of America.
Thank you, good afternoon, everyone. 2 questions from me, please. First one is on, is on efficiency. And just really looking for some thoughts on, on, on cost-income ratios. You, you've talked a lot about being more tech forward. You've talked about efficiencies, 97% straight through processing, 100% of SA Life on cloud. But, but what's that really meant in terms of, of cost-income ratios? Where are you today? How much has that improved the cost-income ratio so far? And where can that get us to over the next few years? I, I don't know if you'll maybe be giving a cost-income ratio target in, in September. That's my first question. Second question, much shorter.
Just on banking, just really wondered if you can give us some color on customer numbers that you expect to move to your, your banking offering and, and really, what, what's the catalyst to over the next few years? I, I don't know if you'll maybe be giving a cost-income ratio target in, in September. That's my first question. Second question, much shorter. Just on banking, just really wondered if you can give us some color on customer numbers that you expect to move to your, your banking offering, and, and really, what, what's the catalyst that will make them move to, to your bank accounts? Thanks.
Ian, those sound like questions for you, the cost-to-income ratio one first.
Yes, yeah, I can't give you a concrete number. Casper might be able to help, but the in principle-... We've seen the unit efficiency at the level of the Old Mutual Protect sort of streamlining and some of the other streamlining we've done. That's Zureida talked to. However, we're currently at a point in a cycle where we have built the new, but not always switched off the old. Part of that is because we can't switch off the old yet. The background here is that within the Personal Finance business, the legacy risk and savings products are sitting on the same set of kit. And that, and the reason we actually started...
You know, it's worth saying that I think unlike many other businesses, we were forced, in a sense, to start our modernization journey at the back and not at the front, because of risk in the back-end systems. Which is not the way I would necessarily have chosen to do it in a different world. That said, you know, we've, we've made a lot of progress. We're, we're on the cusp of being able to get the risk business moved. We should be able to get the savings business moved in due course, and then we can switch off a bunch of stuff.
That will significantly help us from an efficiencies perspective across the piece. While we see unit efficiency at the marginal servicing and new business transaction for a new policy, we still have an in-force book that is not giving us the benefits of scale. That, that's a sort of a forthcoming attraction, which we, we hope to be able to realize, you know, in the next, in the next period. Casper, do you want to add anything to that?
Cost to income ratio?
No. I, I, I don't want to talk about the cost to income ratio at this stage. We'll, we'll give more color when we come back in future. A lot of the cost targets that we communicated to the markets in the past, and the delivery of those cost targets were in the core. The move into the cloud of our IT systems allowed us to take quite a lot of costs out, and we gave you detail on those, on those deliveries in last year's set of results. I think, just to reiterate Iain's point, that we had a cost peak because we're running most of our large systems simultaneously, and we'll only be able to switch those off in the next few years.
We, and we've seen significant pressure on revenues given the economic environment in the last few years. What I'm keen to focus on and talk about going forward is how do we improve revenue versus costs, and how do we widen the doors? We'll be talking about, you know, how much faster we can widen revenues relative to cost as opposed to a specific cost to income ratio.
Was largely related to customer value proposition for our existing circle, 500,000 customers, and then what the additional value could be for new customers. That was essentially the question.
For the bank.
For the bank, yes.
Yeah.
I think the, the, the, we've done a lot of work on, I guess, the new to group value proposition for the bank. As I, as I mentioned in the, in the presentation, some of the key differentiators, I don't want to say price, but certainly value. Secondly, just customer experience and customer journey. You can think about it in a way from the perspective of, we will seek to charge for value and not simply penalize customers for bad behavior, which I think is quite a pervasive incumbent behavior. Because of the, the cost to serve advantage that we think we can bring to bear, that's a, that's a sharing that value to customers in the way that Antony Jenkins described is, is doable. So there should be a, there should be a differentiation from that perspective.
What we are still busy with right now is the existing group customer value proposition and what that might look like. We will seek to, in all likelihood, create a leg of the rewards program that helps us to deal with that issue, so. Or to, to pass enhanced value to customers who are already loyal Old Mutual customers, who consume a lot of services from us. Just as a principle, generally in our system, we don't discount pricing at a per product level. We seek to provide any benefit to customers back through the rewards program at the portfolio level of what it is that they do with us. We think that that's a much cleaner and simpler system to look after over time.
Awesome. I'm gonna take another question on the line. Once again, if you could just introduce yourself and the company that you're from before you ask your two questions.
We do not have any questions at the moment.
I've got two questions that have come through in writing, Ian, both of them from Bairon Nkomo, from J.P. Morgan. The first one is: Can you recap or elaborate further on the nature of the relationship with Vodacom? The second question is, you mentioned record sales this year in MFC. Is this for the six months to June? To what would you attribute the strong performance?
Okay, on Vodacom, essentially, we describe it as a strategic relationship. Essentially, the conversation has been what you could describe as a value exchange. We've provided certain business to them, they've provided certain business to us, not all of which we are publicly talking about at this stage. Equally, it's, it's, it's a little bit like the way we used to...
I would describe it a little bit like the way we used to conduct our relationship with Nedbank, which is there's an open, collaborative conversation with each other that is likely to mature over time, which is arm's length commercial, but acknowledges that there is a, you know, a relationship between the two that allows us to be aware of all of the opportunities on both sides of the fence that emerge, and each of us can choose to pursue those opportunities as we go forward. We're working quite closely with a number of different parts of the Vodacom stable to, to look at, you know, how we develop that, but I do expect it to be a little bit organic in the way that it, it evolves over time. You know, the early signs are very encouraging.
The other question was on record sales in MFC.
Okay.
Did say the top questions would go. They'll just bring a mic over to him. Ian, maybe you can open, and then we give Clarence an opportunity to-
Yeah, I think the reference is, is really to the, the first part of this year. I think there are multiple factors underpinning it. One of them, one of the more important ones from my perspective, has been the introduction of simplified underwritten life into the, into the MFC base. Now, that's a, that's a differentiator in the market, in that particular part of the market, and we've seen really good traction.
Clarence?
Clarence?
Yeah. Mic is on.
It's on.
Yeah. I was very tempted to say to Byron, maybe we should wait until the twenty-seventh of September, then we can have a conversation. First of all, my team is still busy putting the results together. I'm going to present those results to Iain and my colleagues on Monday. I don't know yet in terms of records and everything around that. What Zureida was referencing was OMP. In terms of OMP, we're starting from a low base because we started OMP in 2021, and we're building momentum on that over, you know, the past two, three halves. In the Q1 , we did mention that we saw the sales momentum, and that includes OMP. We will talk to you in September whether we have smashed records or not. For now, let's just wait. Yeah.
Awesome. Thanks, Clarence. You can keep the mic there for Kieran, please. I'm gonna read two more questions before I check in the room. This question, I'll rephrase it. I think that's what it's trying to ask, but let me read it as it's written. "Regarding digital distribution penetration, can you comment on the nature of channels you have and how these are contributing to pulling younger customers, particularly in Personal Finance?" I think the question is asking about digital distribution and how that will contribute to pulling younger customers, if, if I've interpreted it correctly. I'll give that one to Kieran. Let me read the second one. "Can you give more color on the assumptions behind the bank's breakeven?
What level of customer deposits and credit markets are you expecting at that point?" Casper, I'm gonna give you a few minutes to think about that one whilst Kieran responds on the younger customer penetration. The mic doesn't seem to Oh, there we go.
There we go. We have a few of our sort of starting our products, so things that are, that are relevant typically to people in their sort of early twenties, available on our digital platform. You can buy those products both via app, via our website.
Customer penetration. The mic doesn't seem to be... Ah, there we go.
There we go. We have a few of our sort of starting out products, so things that are, that are relevant typically to people in their sort of early twenties, available on our digital platform. You can buy those products both via app, via our websites. In addition, we have sort of what, what I've referred to, you know, people tend to think about digital as online or app, but we also see direct distribution happening via WhatsApp channels, via telesales, and we have those available in those markets as well.
I think the take-up is good. We do see them growing strongly. We've had double-digit growth in digital for sort of the last, you know, probably three, four years in a row, but off a very low base. It's one of those things that, we, we kind of intellectually go, "People should all do stuff online," but, very few do in, in actuality.
Yeah. Thanks, Kieran. There was a question just around breakeven costs, Casper, and then I'll close.
Thanks.
For the bank?
Yeah, for the bank, just a reminder of what we've told you before, because we're not telling you much more than that. We are following a gated approach. Our board is approving the build and launch of the bank, based on achieving key milestones. Iain has alerted you to the next milestone, which is getting Section 17. And then we will, you know, launch the bank to the public. I think at that point in time, we'll be able to give you more detail around the expected customer reach and the profitability and the profile of profitability that we expect to reach break even. I don't think we're comfortable doing that at this stage.
Thank you. Thank you, Casper. I would have loved to take more questions, but I do also have to observe time and time constraints, and we still have quite a lengthy and meaty discussion on IFRS 17 and capital, capital optimization coming later. The idea now is to take a break. We are scheduled to take a 20-minute break between now and the next session. On my watch, it is almost 12:25 P.M., so 20 minutes onto that will take us to 12:45 P.M., South Africa time, we'll be back. For those who are in the room here with us in Cape Town, there are snacks through those two doors at the back. You're welcome to get some refreshments and interact with the rest of our management team.
If you need any assistance, there's a number of our Investor Relations team in the room that can guide you. If you're dialing in from wherever you are, you'll have to get your own snack at home, and we're hoping to meet next at 12:45 P.M. South Africa time, as we join the session on IFRS 17 and capital optimization. Thank you very much. Ladies and gentlemen, welcome back to our Investor Update. I hope you had a good break and a leg stretch as we get into the really meaty part of our day. We're under no illusion that this next part of the presentation is probably the one that's top of mind from an investor interest perspective. It has been a while since our...... Ladies and gentlemen, welcome back to our Investor Update.
I hope you had a good break and a leg stretch as we get into the really meaty part of our day. We're under no illusion that this next part of the presentation is probably the one that's top of mind from an investor interest perspective. It has been a while since our sector has been impacted as much by an accounting standard as we have now, and our finance teams across all our various businesses have really worked hard under tremendous pressure to be able to produce the pace basis that you're about to hear about today. I dare say that they've done some excellent work. As I said earlier, I'm joined by two of my colleagues, our Group Chief Financial Officer, Casper Troskie, and Ranen Thakor-Din who is our General Manager for Group Reporting and Insights. I'm gonna hand over straight to them. Thank you.
Thank you, Celiwe, and good morning to everyone. The implementation of IFRS 17 has been one of the most complex accounting standard changes in the financial services industry. This implementation process has been long and arduous, and we have done our best to simplify the key impacts for you. Ranen Tharkurdin, our Head of Group Reporting and Insights, will also be taking you through some of the finer technical details. Those are the pieces I don't understand. I'll start off with our provisional numbers and impacts on key metrics. IFRS 17 is an international accounting change introduced to provide consistent principles for all aspects of accounting for insurance contracts, with the intention of enabling more meaningful comparisons across the industry. It is important at the outset to reiterate that IFRS 17 does not actually impact the underlying fundamentals of our business.
It does not directly impact our cash generation or solvency position. It does not impact the value of our business, nor our ability to pay dividends, noting that we will maintain our current dividend trajectory in relation to the free surplus generation of the business, and it does not impact our ability to invest in our new growth engines. What it does change is how we report on our life and savings, and property and casualty businesses, and it changes the timing of profit recognition. How does it do this? It does this via the contractual service margin or what we call the CSM, which is an unearned profit reserve on our in-force book. Under IFRS 17, certain items that were taken to profit are now taken to the CSM. The CSM thus becomes a store of future value that releases into profit over time.
While complex, IFRS 17 does not have a long-term economic impact. There are some transitional economic and accounting impacts that relate to the rebalancing of our hedging portfolios, that Ranen will discuss in respect of 2022, which we will highlight in our June results. We will be covering the following today: Our recent performance under IFRS 4, as well as highlights for changes to equity and earnings, KPIs under IFRS 17, changes to the balance sheet and its impact on earnings, and changes to embedded value and the value of new business. Lastly, we will conclude. We have set aside time for Q&A, so please keep note of your questions, and we'll address them at the end of the capital presentation later today. To kick things off, let's have a quick reminder of how our business performed under IFRS 4.
Overall, the results were good despite a very tough environment. Results from operations improved by 99% post-COVID, with overall profit being weighed down by weak equity and bottom market performance. We had strong cash generation, adjusting for the distribution of the stake in Nedbank, we were able to grow the dividend at 13%. We have seen good traction in regaining market share and improving the mix of business in our South Africa retail operations, which benefited profits as well as the value of new business, which grew by 16%. We did, however, note that the economic climate was placing heightened pressure on consumers and on persistency in the Mass & Foundation Cluster. We also flagged to you some of the specific impacts included in these results, the most notable of which were the material net COVID-19 impact releases and further discretionary margin releases in the business.
These were partially offset by mortality and persistency basis strengthening. Some of these items are treated differently under IFRS 17, which we will cover shortly. Before discussing the IFRS 17 2022 results, I would like to recap the transitional balance sheet impacts. As at December 31, 2021, there was a reduction to share this equity on transition of ZAR 4.5 billion. This arises from the calculation of IFRS liabilities, which includes a contractual service margin of ZAR 61 billion and a risk adjustment of ZAR 6 billion. The CSM is set up at the start of an insurance policy, and it represents a store of future profit held on the balance sheet, which, together with the risk adjustment, will be released into profit over the life of our insurance contracts.
Moving on to 2022, I would like to take you through earnings on an IFRS 17 basis. As I mentioned, our underlying earnings ability remains unaffected, but IFRS 17 changes how that profit emerges over time. One of the key changes relate to the treatment of discretionary margins. Under IFRS 4, discretionary margins were set up for a specific risk and were released to profit to offset experience variances and assumption changes associated with that particular risk, or were no longer required. Under IFRS 17, there are no discretionary margins, but the CSM does defer certain earnings impacts. Using an example, for 2022, one of the differences would be the release into IFRS profit of any excess COVID-19 provisions. Under IFRS 17, this would be partially accounted for in the CSM and released into profit over time.
As you can see, our RFO and AHE are materially similar when adjusting for these differences in the discretionary margins and the CSM mechanism. Turning now to the impact on our life segments. The biggest impact was in Mass and Foundation Cluster, reducing earnings by ZAR 925 million. Under IFRS 4, we saw the positive impact from the release of excess claims provision and various other discretionary reserves, which was partially offset by the strengthening of our persistency basis. Under IFRS 17, there are no discretionary margins to provide the positive impact, resulting in part of the basis strengthening and experience variances leading to a reduction in 2022 earnings. We see a similar but smaller impact from discretionary margins in Personal Finance and Wealth, Old Mutual Corporate, and the Old Mutual Africa region results.
We will be covering Return on Net Asset Value or RONAV, as we call it, in more detail in our capital presentation later today, as well as our approach and actions to uplift it. For now, I want to highlight the impact of IFRS 17. The definition of RONAV remains unchanged as we move from IFRS 4 to IFRS 17. However, on an adjusted basis, the ratio is impacted as both our adjusted headline earnings, or AHE, and our equity changed under IFRS 17, with the reduction in AHE being more than offset by the reduction in equity, resulting in an increase in RONAV. As we explained with our year-end results, the 2022 RONAV was weighed down by weak equity and bond markets. Assuming similar returns to 2021, we would have seen a 100 basis point uplift to RONAV.
Given that the fundamentals of our business have not changed, the KPIs we use to measure and steer our business are largely unaffected. Adjusting for the differences between the regimes, the most pertinent being the discretionary margins under IFRS 4 compared to the CSM under IFRS 17, our RFO, RONAV, and AHE are at materially similar levels. As IFRS 17 is an accounting impact, only changing the timing of profit recognition, our solvency, value of new business, and embedded value are not materially impacted. There are some nuances in the detail, and Ranen will take you through these.
Thanks, Casper. For those of you who don't know me, you can remember me as the guy that drew the short straw when Old Mutual was deciding who needs to explain IFRS 17 to the market. Now that Casper has provided you with an overview of the key impacts of IFRS 17, I'm going to try and cover a more detailed explanation of the IFRS 17 mechanics to help you with interpreting our results going forward. In order to do that, I'm going to start off by explaining the balance sheet, and in particular, I'm going to highlight the CSM. I'm then going to run through some theory on the CSM, because that is now our biggest driver of profits. I will then cover the actual CSM build-up over 2022, and I'm going to focus on the CSM release into profit.
From there, I'm going to move from the CSM release to our 2022 results from operations. Then I'm finally going to tie the results from operations to our adjusted headline earnings and IFRS profits. Let's start with a more detailed explanation of the balance sheet. As Casper's mentioned, there's no material change to the size of our balance sheet. There is, however, a change to its composition. The best estimate liabilities are calculated by discounting the expected cash flows from our policies. That's similar to what the IFRS four liabilities used to be, but without the margins. It's also worth noting that we've had a reclassification of some of our liabilities from IFRS nine to IFRS 17. The main change introduced by IFRS 17 is a contractual service margin or CSM.
The CSM represents a store of value that's held on balance sheet and that will emerge into profits over time. Finally, IFRS 17 introduced a risk adjustment, which reflects the compensation that's required for non-financial risk. The risk adjustment will be released over the life of the contract as risk expires. On the asset side, there was very little difference. We only had minor changes relating to deferred tax and the treatment of reinsurance contracts. Overall, what these changes did, is they resulted in a small reduction into our, on our shareholders' equity on transition. As the CSM represents a key driver of the profits, it's critical for us to now pause and understand how it works and how it evolves over time. I'm going to unpack some of the key guiding principles behind what flows through the CSM and what flows directly to profit.
There are three important factors here: whether a contract is onerous or non-onerous, the type of the product, and then the nature of the assumption change or experience variance. As I said, the first key factor is whether a contract is onerous or not onerous. An insurance contract is deemed to be onerous if at initial recognition, the discounted cash flows from that contract is a net outflow. For all our onerous contracts, the impact of basis changes and experience variances will reflect directly in profit. All other contracts are deemed to be non-onerous, and just for ease of reference, I'm going to be referring to them as profitable contracts. For these contracts, the treatment of the assumption changes and experience variances will depend on the product type and subsequently, the valuation approach that we've used.
IFRS 17 introduces two main valuation approaches, being the general measurement model and the variable fee approach. Our risk and annuity products fall under the general measurement model approach, and our smooth bonus and with-profit products fall under the variable fee approach. Finally, within those valuation approaches, the last factor is the type of experience change or assumption change. For each of those factors, the outcome is either going to reflect in profit or the CSM. Broadly speaking here, the principle that needs to be applied is that experience items, so any variances or assumption changes that relate to current periods service, is going to reflect in profits. Anything that relates to future period service is going to reflect in the CSM. Okay, there's a lot more nuances in the finer technical details.
I'll highlight those where there's a material impact on our results as I go through the presentation. Let's now move on to the CSM build-up and what that looks like for the 2022 financial year. I'm going to start with the focus on the changes in the CSM over the period, as this explains most of our profit outcome for 2022. Changes in our CSM can be broken up into predictable components and then those that are less predictable. From our opening position of ZAR 61 billion at January 1, 2022, the main movements are the effect of writing new business for 2022, annual interest, which is added to the CSM each year.
For our general measurement model products, the CSM is grown at the locked-in interest rates, and then for our variable fee approach, the unwind at current interest rates is added to the CSM. Okay, then the key item to note here is that the CSM is then released into profit based on an allocation rate, and that allocation rate or release of the CSM is driven by coverage units, what we call coverage units, which is a driver of that service delivery of each product. That ZAR 6.8 billion that you can see is the biggest driver of our profits for the 2022 year. Importantly to note here, these items are predictable for our in-force book. We know these drivers in advance, and it results in a known profit profile for us.
We bring in the impact of experience variances and assumption changes that impact the CSM, as well as any foreign exchange impacts on profitable contracts. Now that you understand the movement of the CSM for 2022, let's build to the 2022 RFO outcome, which I'm going to do in two pieces. I'm first going to talk about the expected profits in this slide, and then in the next slide, I'm going to cover the variances. We can see the main driver of profitability is the CSM allocation of ZAR 6.8 billion. That's the number I covered on the previous slide. We can also see the impacts of profits that we expect to make from our other business that doesn't have a CSM. Those are things like our short-dated contracts and our IFRS9 contracts. We have this.
I'm first going to talk about the expected profits in this slide, and then in the next slide, I'm going to cover the variances. Okay, we can see the main driver of profitability is the CSM allocation of ZAR 6.8 billion. That's the number I covered on the previous slide. We can then also see the impacts of profits that we expect to make from our other business that doesn't have a CSM. Those are things like our short-dated contracts and our IFRS9 contracts. We then have the expected investment return, which includes the difference between our expected investment returns and the rate that was locked in at inception on the CSM. Then the next item is the risk adjustment, which is less material, and we don't expect that number to be volatile over time.
The last piece is our forecasted expenses that are not attributed directly to the policies. Okay, so that deals with the expected profits, and then we have the other items that are more specific to the year in question. This is where the principles that I was covering about the CSM earlier are particularly important in terms of what goes directly to profit versus what unlocks the CSM. To get to the RFO for the period, we add new business strain together with the assumption changes and the experience variances that directly impact profit. That gets us to our life and savings RFO, and then we add the profits from our other operations to get to the total RFO for 2022.
Now that you understand how we get to RFO, I'm now going to turn to the reconciliation between RFO and adjusted headline earnings as well as IFRS profits. AHE includes our segment RFO, as well as our share of the investment return, finance costs, and income from associates. Most of the difference between the IFRS 17 and IFRS four RFO is due to the difference in the way discretionary margins have been accounted for. That's what Casper explained, with the discretionary margins contributing ZAR 2 billion to the 2022 earnings on the IFRS four. The movement in the shareholder investment return of ZAR 500 million is mainly due to the allocation to segments of the return on the assets that are needed to back the increased transition liabilities. That doesn't have an impact on our total AHE.
It's just a reallocation between the shareholder investment return line and segment RFO. Okay, moving now to the reconciliation of adjusted headline earnings to IFRS profits. The main changes relate to the change in profits that I've just discussed for adjusted headline earnings, and then the change in the treatment for accounting mismatches. There's two items I want to flag here. Under IFRS four, we used to eliminate treasury. It's just a reallocation between the shareholder investment return line and segment RFO. Okay, moving now to the reconciliation of adjusted headline earnings to IFRS profits. The main changes relate to the change in profits that I've just discussed for adjusted headline earnings, and then the change in the treatment for accounting mismatches. There's two items I want to flag here.
Under IFRS four, we used to eliminate treasury shares, even where those treasury shares were in assets backing our policyholder liabilities. What that did, is it created an artificial mismatch on our balance sheet that we had to fix. IFRS 17 now allows us to adjust for that mismatch, and so we don't need to make this adjustment anymore. The other difference that's sitting here is that for the 2022 year, our actual market hedges were based on our IFRS 4 liabilities. That hedging difference is not something that we expect to continue or to be material post-2024, because we're currently rebasing our hedges to match our IFRS 17 liabilities. Okay, the last section I'd like to cover is the fundamentals of value and how that was impacted by IFRS 17.
It's important to highlight that embedded value is still a key measure of value for us, but under IFRS 17, we've constructed it slightly differently. We did that because we wanted to link the embedded value calculation to the audited information that's already available under IFRS 17. With that change in methodology, the underlying value of our life and savings business didn't change. What that means is embedded value serves as this anchor and a point of consistency amongst these IFRS changes, and it's really a useful tool for us to understand the full performance of the business. Earlier, I was explaining the asymmetry in the treatment between profitable and onerous contracts, with parts of our experience items going directly to profit, but with others being smoothed over time by the CSM.
What that means is, if you want to understand the full performance of the business, you need to understand the profit impacts together with the moves in the CSM. What embedded value earnings is doing is it's combining both of those impacts. As I mentioned earlier, IFRS 17 provides us with an opportunity to derive our value of new business and embedded value metrics directly from our IFRS disclosures with some appropriate adjustments. I trust that we've been able to paint a clearer picture of the impacts and the mechanics of IFRS 17 to help you understand our business and our performance going forward. With that, I'll hand over to Casper to wrap up.
Ranen, thanks for that quick tour of some of the nuances. There is a lot more in the detail, but we trust that this covers the salient matters, and we will pick up on the finer points in our future engagements. Before we look forward to our future reporting, I would first like to pause and publicly thank our broader team. IFRS 17 has not been easy for anyone, and it is due to their resolve and resilience that we've been able to stand up here today. To all my colleagues that have worked so tirelessly, thank you. We will be reporting externally under IFRS 17 for the first time on September 22.
IFRS 17 has not been easy for anyone, and it is due to their resolve and resilience that we've been able to stand up here today. To all my colleagues that have worked so tirelessly, thank you. We will be reporting externally under IFRS 17 for the first time on September 22 when we will release our June 2023 results. This will include comparatives with June 2022, as well as a bridging pack that will clearly walk through the changes from IFRS four to IFRS 17, and some additional guidelines to assist with interpreting our results. I would like to conclude by emphasizing that IFRS 17 does not impact the fundamental economics of our business. It simply changes the timing of profit recognition and does not impact our strategy, cash generation, or the value of our business.
We will continue to declare underlying dividends based on our cash-generating ability and the capacity of our regulatory balance sheet, which is unchanged. We will still create value in the same way, still pay our dividends, and still be able to invest in our growth ambitions and those of our customers. We look forward to updating you on this in September. I will now hand over to Celiwe.
Thank you very much, Casper. I just wanna echo Casper's statements to many of our finance colleagues. Some are, who are here in the room with us, many joining us on the webcast across the continent, listening to today's investor update. It has been a tireless effort by many of you, and on behalf of Casper, Ian, and the rest of the executive team, we really are grateful. I know that many of you are wanting to ask your questions already.
As Casper said, much of the detail is still going to be unpacked. Before we get there, though, let's go into a short session around our capital management and our principles that govern how we manage our capital, because we believe that this will help answer some of the questions that may have formed as part of the IFRS 17 presentation. W ith that, I'm gonna hand back to Casper.
Capital is the fuel that drives the Old Mutual machine. How we allocate that capital and how well it performs defines the pace at which we can deliver on our strategic ambitions, and ultimately underpins both our value proposition and our share price. For this reason, we are measured in our approach, neither too conservative or too aggressive. This has stood us in great stead thus far and will continue to do so in the future. The earlier glimpse into the mechanics of IFRS 17 has hopefully provided you with a stronger basis for understanding how IFRS 17 impacts on our future results, capital, and value. We will now take you into the engine room so that you can understand how we see capital and how we manage it.
As you heard from Ian earlier today, our victory condition is to be our customer's first choice to sustain, grow and protect their prosperity, and in doing so, to responsibly build the most valuable business in our industry. Our value drivers creates a link between our strategic actions and the value creation impact for the group. Our priorities are assessed against our value drivers to ensure that we are consistently creating business and customer value. We split our strategic objectives into two categories, namely our core portfolio and our new growth portfolio. The return profile of the core portfolio and the new growth portfolios are very different, and this will impact the group's overall return on capital profile.
To continue to successfully realize our strategy and to make sure we are the kind of business our customers and investors need us to be, we need to remain disciplined in everything we do, particularly in the management of our capital. We will take you through the 3 key principles underlying our disciplined capital management approach. We will cover our balance sheet, how the machine is currently performing, its strength and its resilience. We will talk through how we have deployed capital historically and how we will continue to do so. When it comes to deciding where to deploy our capital, there are 2 key mechanisms: returning capital to you, our shareholders, and we'll show you how, how we have returned that to date, or reinvesting that capital into future growth.
We have developed a rigorous framework that ensures the clear decision-making, regardless of external pressures and trends. We'll show you how this will impact capital deployment. We will then cover where we are in our balance sheet efficiency journey, which remains a very key focus for our Group. As a starting point, let's show you under the hood, inside the machine, so you can understand how it works. Part of our disciplined capital management approach is to set appropriate targets to ensure that our balance sheet is adequately capitalized with enough liquidity. We set our solvency and liquidity targets relative to the regulatory minimum requirements and the risk capacity of the Group and its subsidiaries in the countries where we operate.
At all points, we need to make sure that we are appropriately balanced for protection and potential so that we can be resilient through perfect storm scenarios while still investing in our future. The group regularly models the impact of these extreme but plausible sequence of events that could lead to a perfect storm scenario on our solvency, capital, and liquidity positions. These stress tests are calibrated as a 1 in 200-year stress event, and ensure that we remain sufficiently capitalized with appropriate liquidity. Our resilience and continued delivery to customers through recent extreme events, such as COVID-19, the Russia-Ukraine war, the banking crisis, riots, and floods, is testament to this approach. This resilience is what leads our customers to place such trust in us over the long term.
Let's go beyond the theory and show you how this has developed over the last few years. Since listing in 2018, the group's solvency position and balance sheet has remained strong and resilient to market volatility. This was especially evident during the pandemic, where we remained at the upper end of our set solvency target range. We have been actively managing the group balance sheets and have significantly reduced complexity over the last 5 years, including the sale of our Latin American business, substantial capital returns from our UK-based entities, unbundling our stake in Nedbank to shareholders, implementing the three-manager model, and unlocking surplus in the net asset values of our investment businesses.
These actions have improved the efficiency of our balance sheet while retaining our strong group solvency ratio. This frame the capital available for deployment, and we have a measured way of assessing how we deploy this capital, which Ranen will take you through.
On capital deployment. On capital deployment, I'm going to cover two themes: how we have returned capital to shareholders and how we have reinvested capital for growth using our free surplus generated and our discretionary capital. Returning capital to shareholders is one of the mechanisms we use to reduce the complexity in the business and to optimize our return on net asset value, or RONAV. We've returned capital via special dividends, share buybacks, and the unbundling of certain of our business interests. Upon completion of the ZAR 1.5 billion share buyback that we announced earlier this year, we will have returned just over ZAR 60 billion to our shareholders since 2018 in the form of special distributions. Those included a special dividend of ZAR 4.9 billion in 2018, and a share buyback of ZAR 4.9 billion in 2019.
Those were funded from the sale of our Latin America operations and distributions from Residual PLC. We also unbundled 32% of Nedbank in 2018. Then we unbundled a further stake of 12.2% in 2021. The combined value of that unbundling was just under ZAR 50 billion. That deals with the history. I'll now turn to how we reinvest our capital. In particular, I want to explain what we mean by free surplus generated and discretionary capital. Free surplus generated represents the cash that is generated by our operations, that is paid to the holding companies. As Casper mentioned, this doesn't change on IFRS 17. I do wanna emphasize this point, that for the cash to count as free surplus generated, operating subsidiaries must pay that cash to the holding company.
This metric is actually a key mechanism for us to create capital discipline in the group, because it provides our exco and our board with a very clear line of sight on how cash is being generated in the group. Our operating segments have continued to generate a high proportion of cash earnings, which are paid to the holding company. The free surplus for the period did benefit from once-off optimization initiatives that we had completed. The free surplus is net of our central costs, and we use it first to fund our ordinary dividend, after which it contributes to our discretionary capital balance. Discretionary capital represents the surplus assets that we have that is available for investment or for special distributions. The group proactively manages its discretionary capital by optimizing that allocation within the group.
The balance that we have of ZAR 3.5 billion, that we started at, at, at the year, we've invested a portion of that into group growth initiatives. We also announced the ZAR 1.5 billion share buyback that proactively manages its discretionary capital by optimizing that allocation within the group. The balance that we have of ZAR 3.5 billion that we started at, at, at the year, we've invested a portion of that into group growth initiatives. We also announced the ZAR 1.5 billion share buyback that we're implementing this year. We are just under halfway through completing that share repurchase program. The balance that we have doesn't include top-ups that have occurred since year-end. We'll update you on that in our June results.
The Q1 2023 discretionary balance of ZAR 1.4 billion is earmarked for continued investments in our new growth initiatives, including our transactional capabilities, the acquisition in the equity stake of the Two Mountains Group, which is still subject to regulatory approvals, and then some other smaller transactions that we have in the pipeline. Casper will now take you through the framework that guides how we reinvest our discretionary capital.
Over the last few years, we have provided insights into the framework within which we make-
is earmarked for continued investments in our new growth initiatives, including our transactional capabilities, the acquisition in the equity stake of the Two Mountains Group, which is still subject to regulatory approvals, and then some other smaller transactions that we have in the pipeline. Casper will now take you through the framework that guides how we reinvest our discretionary capital.
Over the last few years, we have provided insights into the framework within which we make-
Which is still subject to regulatory approvals, and then some other smaller transactions that we have in the pipeline. Casper will now take you through the framework that guides how we reinvest our discretionary capital.
Over the last few years, we have provided insights into the framework within which we make our capital decisions and how we deploy capital in the group. We follow a structured framework to new investments, whether they form part of the core or new growth opportunities. This gated approach on new ventures ensures an appropriate split of capital between growth opportunities and the growth portfolio to balance profitability and long-term growth. For each potential transaction, we ask, "Is it fit for purpose?" We assess the strategic fit against our segment and group goals. Is it fit for profit? We assess the commercial fit across several metrics, including our RONAV, growth, and value targets. Are there any execution or other risks that could be deal breakers?
For each potential transaction, we ask, "Is it fit for purpose?" We assess the strategic fit against our segment and group goals. Is it fit for profit? We assess the commercial fit across several metrics, including our RONAV, growth, and value targets. Are there any execution or other risks that could be deal breakers, or could significantly impact on our ability to generate value from a transaction post its conclusion? Other factors are considered through the process, such as the fungible nature of the capital and the impact on the wider group operating model. This framework aligns all acquisitions with our strategy, while ensuring that the return generated over time will exceed the cost of equity, and will ultimately result in an increased Return on Net Asset Value. We have assessed multiple transactions over the last 3 years, and have walked away from over 20 transactions.
Here, we show you some of the examples of transactions that have met our criteria over the last 3 years. All of these transactions are already adding value. We will continue to maintain this disciplined approach in our pursuit of both opportunistic and targeted investments. Not only do we use this framework to assess new transactions, but it is also used to continually monitor our existing portfolio. As a result, here we show you some of the examples of transactions that have met our criteria over the last 3 years. All of these transactions are already adding value. We will continue to maintain this disciplined approach in our pursuit of both opportunistic and targeted investments. Not only do we use this framework to assess new transactions, but it is also used to continually monitor our existing portfolio.
As a result, we have identified a few investments that we are currently in the process of exiting, and given the sensitivities, we'll provide further details once these are concluded. Now that you understand our balance sheet and how we maintain and deploy capital, let's discuss how we maintain the efficiency of our balance sheet. We are committed to generating long-term shareholder value by delivering sustainable cash generative growth at returns on capital that exceed the cost of equity. Our core businesses are expected to deliver stable and high returns in the near to long term. Our growth portfolio is expected to deliver lower returns in the near to medium term, but with higher growth. As the growth portfolio reaches scale, it will support our longer-term return targets.
Improvements to core RONAV are dependent on three factors: external market factors and investment returns, how we are able to further optimize our balance sheet, and the market share recovery, recovery of our retail segments. As mentioned earlier today, external factors, including the macroeconomic environment, challenging GDP growth, and weak equity and bond markets, weigh down our 2022 RONAV. Assuming similar equity market returns to 2021, we would have seen a 100 basis point uplift to RONAV. Since 2018, we have made a concerted effort to reduce complexity, return capital to shareholders, and optimize our RONAV. We will continue to improve return on net asset value through: removing identified working capital inefficiencies, various Old Mutual Africa Regions initiatives, including the turnaround of loss-making entities and exiting certain operations, strategies to unlock trapped capital in our non-life businesses, and more efficient capital holding structures.
Finally, on the retail front, we will continue to recover market share through improved efficiencies in our core life and savings platforms, resulting in increased automatization and improved digital sales and servicing processes to advisors and clients. Strong market share recovery in both Personal Finance and the Mass and Foundation Cluster, which are expected to result in increased operating profits, boosting our own NAV. As these are such significant businesses, any improvement will increase our overall returns, and I'm pleased to see the positive results of the actions in these core businesses, with both retail segments starting to show market share gains. Strong market share recovery in both Personal Finance and the Mass and Foundation Cluster, which are expected to result in increased operating profits, boosting our own NAV.
As these are such significant businesses, any improvement will increase our overall returns, and I'm pleased to see the positive results of the actions in these core businesses, with both retail segments starting to show market share gains. We trust you have a clearer understanding of how we make decisions around capital allocation. Being there for our customers when they need us is our victory condition. Our balanced and measured approach to capital management is paramount to the re- realization of our goals, and to help our customers and shareholders realize those. On that note, I'd like to hand back to Bonga Mjiba, our Interim Head of Investor Relations, to take us through Q&A. Over to you, Bonga.
Greetings everyone in the room and those that are joining us, those.
On that note, I'd like to hand back to Bonga Mjiba, our Interim Head of Investor Relations, to take us through Q&A. Over to you, Bonga.
Greetings, everyone in the room and those that are joining us online, a special thanks to Casper. As we are about to start our Q&A session, I would like to ask Nico, who heads up our Group Actuarial, to please join us on stage. While Nico is looking to settle, while I was sitting on the couch, I had a moment that took me to three different places: one of panic, one of great joy, and one of just pure relief. It turns out that when we were sending out the links for people to register, I might have shared my own personal link. Now, everyone who's loading questions onto the webcast comes under my name. The moment of joy that came with that was just that I was thinking, They finally cloned a human being, this masterpiece that I am.
I went down to relief when I actually realized that it was just it. We have mics that are roaming around in the room, and if there's anyone who would like to ask a question, I would like to ask you to please lift up your hand. We will do like we did the last time in terms of limiting it to about two or three questions per person, per round. I see two hands on this side. After we're done with that, we will go on to the operator, and then I will run through the questions that I was referring to here earlier on. We will start with on the side.
Hi. Okay, I'll try to ask only two out of my 10 questions today. Thank you for the opportunity-
If you could please start with introducing yourself as well.
Okay. Frans Retief from Anchor Stockbrokers.
Thank you.
First question, just. I think you've, you've indicated on one of the slides that the CSM is expected to be released at a rate of about between 8% and 12% per year. I see your 2022 release was at 11.2%. Can you give us an indication whether. Yeah, certainly the 2022 release pattern was ahead of normal levels or whether you've just given us a fairly conservative range there? It is a fairly wide range as well. Maybe you wanna narrow that a bit for us. Second question relates to the buildup of CSM from one year to the next. You've given us the unwind or the interest rate impact on that.
I think that was ZAR 4.2 billion, ZAR 4.1 billion, which amounts to 6.7% of the opening CSM. Can you give us, is that an indication of the risk discount rate implicit, built into, locked into the CSM? Yeah, I guess I'm out of my two questions.
Thank you. I, I think narrowing the range, we probably won't be doing at this point. I think it's important that we don't assume excessive importance to the percentage allocation and realize that actually the more useful driver is the size of the CSM from which you're allocating, because that's where the real levers sit. The, the, the driver of the allocation percentage is what your coverage units are, and those coverage units are things that generally you wouldn't want to control to get you a faster release. It would be for a, I mean, there were choices around this, but it would be typically things like for a protection product, something like some assured in force for an annuity, you know, benefit payments in force for a savings contract, the underlying, that's where the real levers sit.
The, the, the driver of the allocation percentage is what your coverage units are, and those coverage units are, things that generally you wouldn't want to control to get you a faster release. It would be for a, I mean, there were choices around this, but it would be typically things like for a protection product, something like some assured.
In force for an annuity, you know, benefit payments in force for a savings contract, the underlying item, think of it like the, the unit reserve. Typically, those are things that you're happy to see growing into the future. Whereas to get a faster allocation, you should see shrinkage into the future. It's the wrong way around to try and worry about getting the allocation percentage up to get a better profit. It's more about growing the CSM on which you're getting that allocation percentage. That was the first one. What was the second one, Bonga?
Please remind us again, Francois.
Yeah. The, the interest rate is a, is a slightly trickier mix because on the general model business, your CSM is growing, it's adding interest. Accreting was the IFRS 17 word at the locked-in interest rate, which is a historical interest rate relating to, for some business, the point at which it was sold. For some business, a fixed point in time with a weighted average over history. It's, it's, potentially a, a higher rate than what you might currently be earning too. Whereas for the, the variable fee business, it's a current rate, and so it ends up being a bit of a, a mix between those things. Yeah, maybe that's all that's worth saying.
Okay. We're gonna move over into.
For some business, the point at which it was sold. For some business, a fixed point in time with a weighted average over history, but it's, it's, potentially a, a higher rate than what you might currently be earning, too. Whereas for the, the variable fee business, it's a current rate, and so it ends up being a bit of a, a mix between those things. Yeah, maybe that's all that's worth saying.
Okay. We're gonna move over there. There's a hand over there, too.
3 from me. Just Can you just expand on what assumptions you've elected in the calculation of your risk adjustment? You know, in your assessment, what kind of level of prudence is, is applied? You spoke a little bit about realigning hedging strategies to IFRS 17. Between hedging can be a material cost. Just give us a sense of whether there's cost differences between the old and new. Potentially, if you can go back to that slide where you've got the segmental, you know, breakdown and different differences between IFRS 4 and, and IFRS 17. If you could just go back to that and just explain some of the differences by segment, just in terms of product and timing. Thanks.
Maybe I'll just start. I'll start with the first and the last question, and then, you know, Nico can or Ron can talk to the other items. Warwick, under IFRS 4, we hedge both on liabilities and the discretionary margins. We share all the risk. Because we no longer hold those discretionary margins, the size of our hedging program will reduce quite significantly. The costs associated with that program should reduce going forward. That's one aspect. In terms of Mass & Foundation as an example. Last year was a extraordinary year in terms of, you know, just what happened in the year. We moved from 2021, where we had set up massive discretionary margins for COVID, and then given what we were...
That's one aspect. In terms of Mass & Foundation as an example. Last year was an extraordinary year in terms of, you know, just what happened in the year. We moved from 2021, where we had set up massive discretionary margins for COVID. Then, given what we were seeing at the beginning of that year, and then during the course of the year, those were released. We also saw a significant increase in lapses in Mass & Foundation and in persistency. In our IFRS 4 results, you had offsetting impacts. If you look at the EV result for Mass & Foundation for, you know, the prior, you would have seen that there was a just over ZAR 1 billion knock to value in Mass & Foundation.
If you then normalize, for example, our Mass & Foundation profits, we've, we've shown you about a ZAR 900 million impact, which takes the profit to, you know, mid ZAR 1 billion-ZAR 1.5 billion. You should add back to get to a normalized number, assuming we were running on our assumption for persistency, which we, we're not assuming in the short term, you'd get to closer to, like, ZAR 2.3 billion for our Mass and Foundation business as a, as a run rate. We are, however, expecting persistency to run at higher levels, given the, the very difficult economic conditions we are operating in. And, you know, the impacts for the other businesses are a lot smaller, and therefore, you know, numbers we've published are a lot closer to what the, the normal sort of run rate would be. I don't know, Nico or Ron, if any of you want to take the, the other question.
We can start with the, the risk adjustment one quickly. We've targeted a confidence interval, which we have to disclose, as 75% over a year. We are allowing for diversification between the various non-hedgeable risks when we set that. That's the, the kind of, 1 in 4-year protection level that we targeted for the risk adjustment. On the-- What was the other one? There was another one. On the, on the segmental profit picture, I think the, that, that's probably gonna be part of the extra detail you'll be discussing when, when interims get disclosed. It's, it's not something I think that's worth going too deeply in today.
Maybe the only other point on the hedging thing, clearly, it's quite a tricky thing that a material piece of a liability now is a CSM that is effectively unhedgeable, because part of it is on locked-in rates that you cannot earn anywhere anymore. Its behavior is a big part of why there's a bit of economic variability in the shorter term. It's not completely unexpected, but it is something we will have to live with as differences between those higher locked-in rates and what you can actually earn varies a bit over the next couple of years. We will perpetually be moving between current rates and locked-in rates as something that creates a bit of profit volatility.
Thank you. Thank you, Warwick. I'm gonna check with the operator if we have any people that are queuing up to, on the dial-in details we shared earlier on.
We have no questions on the conference call at the moment.
Thank you so much. I'm gonna run through some of the ones that came through. Like I tried to put a disclaimer earlier on, I will not entirely know from whom it actually is, but I will just read the question as it is here. It says: Having disclosed both equity and the CSM of about ZAR 60 billion each, how should we think about that in the context of a valuation of the company? Is it simply a summation of the two, or are there any additional factors that we need to take into account?
Yeah, I mean, it's, it's not a bad starting point. That's how we are deriving our EV now. Remember that the future profits are still pre-tax. Step one is to make sure that you remember that there's future tax supposed to come off. For us, that we're used to do our value work for group equity value on a market-consistent basis, you will see that even if you took tax off that CSM and added it to the NAV, you'd be getting a number a little bit north of ZAR 100 million for 2022. The own funds, which we disclosed, is of the order of ZAR 90 something million, and our group equity value is gonna be just under ZAR 90 million.
The, the group equity value allows for other leakages in the system, but there's quite a bit of growing alignment between those various systems. If you put the other embedded value systems into the mix, just to add a bit more of the complexity, clearly, what is not counted at this point as future profit is that the risk adjustment is also a reward for risk taken into the future. Conceptually, you could have said that the risk adjustment with some level of risk discount rate could also be in embedded value type calcs, if you wanted to do a value calc on a, on a European embedded value basis.
Lots of complexity. I'm sure we'll deal with anyone who's interested in that one-on-one as we, as we head into interims, but it's not a bad starting point. It gives a fair set of audited numbers of which to build a group equity value into the future.
Maybe, just to add, previously, obviously, our EV disclosures were not audited. What happens now is that because we are required to account for the CSM as part of our IFRS numbers, the auditors are looking and signing off on our assumptions and our calculations. I think there's added, you know, certainty to. Not that a lot of these things can be certain, but at least we know that the CSM amount is audited going forward, so it's a good point of reference for value in future.
It will also be a bit more comparable across insurers if they're all disclosing CSMs and NAVs. At least you're getting some value building blocks that is more consistent than what embedded value stuff was in the past, so it is a useful starting point.
Thank you. We'll then combine 2 questions, or maybe let me just read them both, and then you can.
Comparable across insurers, if they're all disclosing CSMs and, and NAVs, at least you're, you're getting some value building blocks that is more consistent than what embedded value stuff was in the past. It is, is a useful starting point.
Thank you. We'll then combine two questions, or maybe let me just read them both, and then you can address them separately. The first one is: Does IFRS 17 bring your annual earnings, as reported under IFRS, closer to the actual cash flows generated in the business versus under IFRS 4 on an annual basis? There's a disclaimer that kind of talks to, I understand the timing differences might come through from time to time. The second question is from Baron, the one person who was able to escape being me: Can you discuss the policy Old Mutual has taken to determine the coverage units for the CSM release? Those are the questions.
Yeah, I, I think that first one is, is a tricky question unless you really drop to a lower level, because cash for life insurance particularly is, is a slightly more complicated thing, because a premium is cash and a benefit payment is cash. But how much reserve you set up from it used to be a very judgmental item, and so various companies ended up with very different relationships between profit and cash anyway. I think because the reserving system is now a lot more prescribed under IFRS 17, the relationship between profit and cash is more likely to be similar across companies, but I don't think it is, in all instances, moving closer to cash. 'Cause you could, in the old system, with discretionary margins and other things, generate something that approximates cash better. Now, you cannot necessarily do that.
The answer is, some products, it's a bit closer, and some products, it's actually gonna be further away from cash, and that's also gonna differ between companies. In terms of choices to get to coverage units, I've kind of half-answered, I think, the things we're using as coverage units, which are choices that you could make within guidance and restrictions. Maybe the only other point that's worth mentioning is just there's also a choice around whether you then discount those coverage units or leave them undiscounted. Because what allocates every year is this year's coverage unit over the sum of all future coverage units, simplistically, it means that if you discount the coverage units, you put a lot less weight on the future coverage units, and things emerge more quickly, but potentially on a CSM that's growing.
So that's why the default in the industry, and I've, I've seen this from other companies, too, is to apply a form of discounting to coverage units. We've also done discounting of coverage unit, where the discount rate has typically been a function of what the underlying item that you use in the coverage unit, what it's likely to grow at. Typically for, for business where that underlying thing is gonna be growing with, with real investment returns, we'd, we'd be discounting at nominal rates. Whereas for something that's gonna be growing, less like that, we would typically have discounted at inflation to kind of try and get to the service we're providing being more, correctly reflected in the release from the CSM. It kind of stabilizes the CSM releases over time a bit when you do that.
I'd just like to, you know, in Ruaan's presentation, we made the point to look at the true performance, look at both profitability and the growth in the CSM on an annual basis. We place, and you would have seen it in our presentation, we place a lot of value on the cash that we generate, and we, we place a lot of value on the strength of our balance sheets, which underpins, you know, the value that we generate in the group. Those are critical factors that we assess.
Thanks, Casper. I'm just gonna check with the operator, without which, any questions on there, I will finally finish off with two of the ones I've got in front of me. Operator? I take the silence as no questions. Let's move on to the second last question on my side. It says: Of your total life insurance policies in force, what proportion will be measured under the GMM, first, as well as under the variable fee approach, if you're able to tell?
It's very close to 50/50.
Okay.
That's probably more than people expect for variable fee, and that relates to what Ranen shared in the slides when he said quite a bit of what used to be IFRS9 in the previous disclosure set is now in scope for us of IFRS 17. That's just because we used to separate a single policy between parts of it that we could value under IFRS9, and the rest we did under IFRS 4 in the past. Now we have to value a whole other policy in a single standard, and so quite a lot of those policies became in scope for IFRS 17, and that means we've got quite a large CSM actually relating to our savings business.
Thank you. The last question before I hand over to Delia. It says. It's quite a long one, but I'll try and capture as much of it as I can. Can you please speak to the reduction in your IFRS 17 equity as it relates to Mass& Foundation, and how this reconciles with the lower focused earnings for the same business? It may be useful to unpack MFC earnings between backbook and new business. If cash flows are unchanged, can you please explain when the MFC profit recognition will pick up meaningfully to offset the lower upfront profit recognition issue?
I'll just start. I did, I did explain earlier, just what is impacting, you know, if you compare IFRS 4 to IFRS 17 profits for MFC in 2022, the, the assumption change, plus the impact of persistency on MFC profits in the short term, has had an impact. I don't know, Nick, if you want to talk to the other points.
Yeah, the, the other piece, which I think Casper had shared at one of our, our previous results sets, was that in MFC, you must remember, there was also quite a bit of front-end loading of profits. Because prescribed margins on lapses when you have relatively high early lapse rates resulted in a relatively large piece of profit emergence quite quickly and dropping off quite quickly after the sale of a new policy. Under IFRS 17, we had to go back and say, "No, no, no, all those early releases aren't allowed to have released into profit yet. It has to be amortized based on the coverage unit." And for a lot of that book, the coverage unit is, is some assured in force, and so it ends up back-end loading a lot more of those profits. And interestingly enough, that also contributes-
Partially to the initial drop in profits, because it, I mean, it's not as material as the once-off items Casper's mentioned, but there's a bit of initial downwards profit with more of an increase into the future on that business, just because you're picking a driver of the underlying profit that is a little bit further into the future than what you were used to. Because they've been a growing book, you end up loading more of the profits from that growing book that would happen early into further into the future.
Thank you. For any additional questions that may be available or might come up later, you are welcome to send them through to our investor relations mailbox. Before we move off, our friends normally ask us to add quite a lot of color, whenever they're asking us questions, so and I'm hoping that the grin that you see on the screen has done that work. As we move off the stage, I now welcome Celiwe and Iain to conclude, please.
Thank you very much to Bonga, but more specifically to Casper, Ranen, and Nico for handling what was probably the most technically challenging part of this afternoon. I'm grateful I didn't have to take some of those questions. Iain has joined me on the stage. Iain, why don't you come and stand here as we close together? You started out the day today talking about our customers. I'd like to end the day by going back to them and asking you how it feels, and your own reflections about being the leader of a company that has the responsibility for, say, 12 million customers across the continent.
Well, I think, first of all, it's an absolute privilege to sit on a business that has the scale of resources that we have and the ability to make such a big impact, both across that 12 million customer base as well as, in the broader ecosystem of the countries that we are in. I often say to our staff that essentially, if you break our business right down to its bare basics, we essentially collect a few hundred ZAR a month from all of those 12 million people, aggregate them into a pool, either manage risk or invest that money.
We have the privilege of being able to choose, in many cases, where we invest that money, how we invest that money, which allows us to build infrastructure, support companies through equity investment, support companies through debt investment, and support economies to grow generally, as well as to then help people to manage risk. Ultimately, it's an absolute privilege to be able to be in that position, to be able to do that.
I think then, but also a huge responsibility to continue to make sure that that trust that I mentioned earlier, that we preserve it, retain it, and continue to make sure that it is earned, and not, and not broken. You know, that old saying of you build up trust over a lifetime and destroy a reputation in three minutes, I think is very much true. We do need to just continue to bear that in mind and take that responsibility seriously.
You've touched on the importance of trust, but also the great impact that our organization has across the African continent and our joint responsibility in making sure we continue to uphold that. Is there more that we can do, though?
There's always more you can do. you know, I think a lot of what we described today is... 'cause I, I always think that people talk about impact in, in, in macro terms around things like environmental issues, climate change, infrastructure and stuff, and those are all relevant and true, but our first responsibility is to make sure that we deliver on our promise to our customers. you know, if, if a gogo in the Eastern Cape has got a funeral policy with us, our first responsibility is we're solvent, and we're able to pay that claim and meet that promise when it comes to you.
Equivalently, if someone's invested their retirement savings with us, is to make sure that we deliver value for money to them in terms of return that we earn on that, on that investment, and we fulfill their expectations in terms of what they've asked of us for their own future and their own retirement. All the rest is then secondary, but there are huge opportunities to use the scale and that pooling that I mentioned to then scale up that impact. I think as long as we always clear on the priorities of the order in which we service those opportunities, then I think we take responsible decisions around how we scale up the impact that we can have.
To end off the day, Ian, you are celebrating 30 years with Old Mutual this year, and to say you took over during a very challenging time would be an understatement of note. I'm sure you can reflect over that time period since you started and the various times of volatility that we faced, and the particularly challenging one in which you took over. My last question to you is, looking back, what's the one thing that you would say you're proudest of as the CEO of Old Mutual Limited?
If I pick one, it would be how we navigated COVID, in, in simple terms. You know, if I think about the way we showed up for the nurses and the medical professionals in South Africa, the way that Old Mutual Insure showed up for their customers from a business interruption perspective, assisting people with essentially discount, discounted premiums in a very tough time, and the sheer scale of the benefits that we paid out to claimants who lost loved ones during COVID. Our participation in administering the Solidarity Fund, the role that we played in the vaccine rollout. You know, I think we, we showed up in all of our strength, in the most holistic way possible, into the community, and continued to meet those promises to customers I talked about earlier. That, that would be the one thing if I had to pick one.
Awesome. Well, ladies and gentlemen, you've heard from Ian and the rest of us today as well. This now brings to conclusion our program for the day. A special appreciation to all of you for joining us here in person in Mutual Park in Cape Town, also to everyone who joined us on the line, the various Bonga Mrigas who are asking questions as well. We believe you had the opportunity to leave knowing more about where Ian and all of us as the executive management team, want to take this business and what's in it for you, ultimately, as investors. The recording of this event, including all the audio files and the transcript, will be made available in short order. Thank you very much for joining us. Have an awesome weekend.