Financial service provider Old Mutual says it is on track to launch its banking proposition this year with only a few regulatory hurdles standing in its way.
CEO Iain Williamson said on Wednesday that the group had covered a lot ground in getting the mooted bank ready to go to market before the end of the year.
“We completed the build of the core bank infrastructure at the end of last year within budget, or R1.75bn. One of the regulator requirements that we had to meet as part of our regulatory application process is to get an external audit firm to come and audit the system and confirm that everything we have is fit for purpose and we will in fact be capable of running a bank appropriately,” Williamson said after the release of the group’s results.
“That has been done. We have independently verified functionality that is complete and build. We have submitted and had confirmation from the regulator that our application for a conditional banking licence is complete.
“We are in a period we call transition at the moment. What that means is that having built the infrastructure of the bank, we are required by regulation to once we receive this next round of approval, to integrate the bank into all the payment clearing houses. That is a three months process.”
The group said its section 16 submission for the bank build was completed and submitted early in 2024. It was awaiting approval from the Prudential Authority.
Williamson said the bank build is central to the company’s integrated financial services business of the future.
Old Mutual reported a 26% rise in headline earnings for the year to end-December as it generated strong new business and maintained sales momentum in 2023.
Headline earnings rose 26% to R7.38bn, while headline earnings per share (HEPS), which excludes one-off items, were up 28% to 165.5c. A final dividend of 49c per share was declared.
“We delivered double-digit sales growth of 17% across our life segments as we grow market share profitably within our key markets,” Williamson said in a statement .
“Consequently, we delivered exceptional value of new business growth of 37%. We also delivered good growth of 14% on gross flows and gross written premiums.”
Confident
During the year, the group concluded several strategic corporate actions, and it says it is confident that these strategic relationships will deliver enhanced growth and profitability.
One of the key strategic partnerships, the Two Mountains Group, increases Old Mutual’s distribution footprint across five provinces and enables it to vertically integrate the funeral services value chain into its value proposition.
Life annual premium equivalent (APE) sales recorded robust growth of 17%, due primarily to strong savings sales in Old Mutual Corporate, resilient retail and corporate sales in East Africa, and higher guaranteed annuities sales in personal finance, Williamson said.
Gross flows rose 14% from the previous year, due mainly to strong single premium inflows in Old Mutual Corporate, new business secured and higher unit trust sales in East Africa.
Value of new business rose 37%, with a corresponding increase of 10 basis points (bps) in the value of new business margin. This was driven by higher risk sales and effective cost management in the mass and foundation cluster and a higher proportion of profitable corporate sales in East and West Africa.
The strong growth in guaranteed annuities sales and a shift in mix towards higher margin funds in personal finance contributed positively to the value of new business and value of new business margin. The value of new business margin of 2.3% remains within the group’s medium-term target range of 2%-3%.
Gross written premiums were up 14% from the year-earlier period, driven largely by an increase of 17% in Old Mutual Insure due to strong new business growth, renewals and the acquisition of Genric Insurance Company. Excluding Genric Insurance Company, gross written premiums in Old Mutual Insure increased 13%.
Net client cash outflows of R7.5bn improved by 40% from the prior year, driven by good inflows across the life businesses.
The group delivered return on embedded value of 11.2% and return on net asset value of 11.1% increased by 170 bps from the year-earlier period.
Update: March 27 2024
This story has been updated with more information.
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