Construction Arrangements Shaping Up Accordingly to IAIN WILLIAMSON
New and Improved Old Mutual:
Old Mutual is thriving and embracing innovative, forward-thinking, comprehensive growth strategies to foster sustainable growth. While the current share price may not fully reflect this potential, calls to "split up" or spin off successful components disregard the essential pieces coming together for our integrated financial services architecture to take flight. Splitting up now would undermine the progress made on our mission to unlock value.
Our recent 17% increase in headline earnings shows our strategy is on track. This growth is far from ordinary. Although it might not match some competitors' rates, we gained market share in the fourth quarter and have consistently grown market share in South Africa in recent years. Although the share price may lag, the numbers are moving in the right direction.
Comparing competitor share prices can be tricky. Most are trading at a discount to intrinsic value, and although Old Mutual has a lower overall value, this is understandable. We've demonstrated our focus on improving numbers and have avoided slashing and burning investor capital by investing even in challenging times. Our goal is steady, sustainable, long-term growth. We've invested heavily in technology, which impacts short-term profitability, but sets the stage for future success.
Zooming in on slower growth in the Personal Finance and Mass & Foundation units disregards significant one-offs in the numbers, like a debt write-off, which will even out. A more realistic view would be to acknowledge that overall, our results from operations are broadly on course. Focusing solely on one-off issues also overlooks the impressive impact our turnaround strategy has already made. For instance, our short-term insurance business had an outstanding year, posting positive cyclically high numbers. Our wealth management arm also shined.
We acknowledge hurdles ahead, and economic uncertainty and more challenging conditions will make things tough. Customer persistency in our Mass & Foundation Cluster remains challenging, and we need to focus on premium collection and ensuring customers meet their payment obligations. Growing new business in Personal Finance remains difficult during tough economic times. While the middle market monthly premium policy base has been hard to grow within the industry for the past six years, current events like tariff wars, potential US recession, and political instability in South Africa may prolong the tough conditions.
Despite these challenges, Old Mutual now has a solid foundation to weather storms. Our strength lies in the diverse earnings the combined segments deliver for our customers.
The evidence of our strategy is evident through the launch of OM Bank to the public, followed by a campaign to convert as many as possible of our profitable Money Account transactional business's 1-million customers into banking customers. We're also boosting our retail mass market business by scaling the Two Mountains acquisition and rolling out our own mobile virtual network operator.
We're reclaiming and expanding our market share in the affluent market and continuing to diversify and grow our Wealth Management franchise, which we view as a significant growth opportunity for the group.
Old Mutual Insure has undergone a full transformation, and we're scaling our businesses in Old Mutual Africa regions where we've exited unprofitable markets like Nigeria and Tanzania, thereby significantly mitigating risk in the portfolio.
We continue to grow our peer-leading Private Markets franchise, providing our institutional clients with a unique value proposition in asset management.
OM Bank is the last piece of the integrated financial services puzzle. It's a digital-first bank delivered at scale, allowing Old Mutual to translate cost savings and tailored, intelligent, and flexible solutions to customers. Its unique model means it can be scaled up quickly and adapted to changing needs. Our capital investment and profit trajectory are in line with or even ahead of similar ventures worldwide.
As a company, we've staked our claim in integrated financial services. This means we present ourselves as a one-stop shop with a wide range of solutions. After five years at the helm, I'm extremely satisfied that these solutions are largely in place. When I retire early in August, the gears will be in motion for this model to hum and unlock long-term value.
Williamson is CEO of Old Mutual
Insight: Old Mutual's growth initiative includes market prioritization, strategic restructuring, customer-centric solutions, operational excellence, employee engagement, financial advisory strengthening, and capital utilization. Key highlights include launching OML Thrive in Kenya, doubling profits in the Africa Regions unit, and leveraging a strong capital position for growth investments.
- Old Mutual is persistently working on innovative strategies for comprehensive, sustainable growth, despite the current share price not fully reflecting this potential.
- The recent 17% increase in headline earnings demonstrates Old Mutual's strategy is on track, outpacing market share in the retail sector.
- Despite slower growth in certain units, Old Mutual's strategy is broadly on course, with significant one-offs in the numbers like a debt write-off being accounted for.
- Old Mutual is investing heavily in technology and retail, which though impacting short-term profitability, sets the stage for future success.
- Economic uncertainty and challenging conditions will require customer persistency improvement and new business growth focus in Old Mutual's personal finance and mass market units.
- To strengthen its position, Old Mutual is converting its profitable Money Account transactional business customers into banking customers, scaling its retail mass market business, and reclaiming and expanding market share in the affluent market.
- Old Mutual Insure has undergone a transformation, scaling its businesses in African regions and exiting unprofitable markets, thereby mitigating risk in the portfolio.
- Old Mutual is growing its peer-leading Private Markets franchise, providing institutional clients with a unique value proposition in asset management, and launching OM Bank, a digital-first bank, as the last piece of the integrated financial services puzzle.
