21 May - 9 min read

Voluntary operating update for the three months ended 31 March 2021

Voluntary operating update for the three months ended 31 March 2021

Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
ISIN: ZAE000255360
LEI: 213800MON84ZWWPQCN47
JSE Share Code: OMU
NSX Share Code: OMM
MSE Share Code: OMU
ZSE Share Code: OMU
("Old Mutual" or “Company” or “Group”)


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21 May 2021

OLD MUTUAL VOLUNTARY OPERATING UPDATE FOR THE THREE MONTHS ENDED 31 MARCH 2021

Having passed the one-year mark since the onset of the COVID-19 pandemic, global
and local economies showed signs of economic recovery in the first quarter of
2021 as lockdown restrictions were eased, coupled with the emerging benefits of
vaccine rollouts. South African equity markets outperformed most other emerging
and developed markets, recording strong gains for the quarter. Economic growth
in the countries in which we operate in Rest of Africa remains muted and dependent
on successful vaccine rollout strategies. Continued stimulus measures and the
scale of vaccine rollouts in many countries globally bodes well for a fuller
economic recovery in the second half of 2021. The pace of economic recovery in
South Africa could be delayed given slower than anticipated vaccination and
emerging signs of a potential third wave of infections.

Our employees and intermediaries remain resilient and motivated while adapting
to new ways of working. Intermediaries are servicing customers while taking
necessary precautions in branches and worksites. Some of our employees continue
to work from home with critical employees being on site in office locations as
we embark on a managed process towards a hybrid model of working. The Group will
partner with government and other relevant stakeholders to assist in the vaccine
rollout, leveraging our Responsible Business programmes.

There has been a positive recovery in productivity levels in our South African
retail segments, Mass and Foundation Cluster and Personal Finance with strong
momentum in issued life sales levels in March, which has continued into April.
Improved adviser productivity and the increased use of direct channels have
supported sales growth although sales levels have not yet recovered to 2019
levels. Ongoing management actions to support intermediaries to sell remotely
have contributed to the recovery in productivity levels. We continue to make
significant progress in building a digital capability that enables enhanced
engagement as well as sales and servicing to customers and intermediaries while
ensuring a seamless transition from physical to digital interaction. In the first
quarter we introduced new service features and products through WhatsApp and
USSD platforms to help customers do even more from the comfort of their homes,
including managing their Old Mutual Rewards. We continue to prioritise the
optimisation of data analytics and robotics in particular to offer a personalised
customer experience that will improve the longevity of customer relationships.
Through the continuous delivery of data-driven insights we support intermediaries
to proactively service and assist our customers to achieve their financial goals.

Capital position and liquidity

The solvency ratio for OMLACSA for the three months ended 31 March 2021 was 207%,
at the upper end of our target range of 175% - 210%. The decrease in our solvency
ratio from the 215%1, as reported to the Prudential Authority, was largely due
to an increase in capital requirements to support risk sales and higher market
risk capital requirements due to improved market levels and a higher equity shock
prescribed by the Regulator. The Group also remains well capitalised and our
solvency and liquidity positions remain strong, supported by robust hedging
programmes. We continue to monitor our Group solvency ratio and this remains
strong relative to our target range of 155% - 175%.

(1)The increase in the OMLACSA solvency ratio of 215% as submitted to the Prudential Authority
compared to the 206% as disclosed in the FY2020 results is mainly due to updates to participation
values and the impact of reported COVID-19 provisions which reduced the solvency capital
requirement.

Financial performance for the three months ended 31 March 2021

The table below sets out certain key performance indicators for the three months
ended 31 March 2021.

 Key Performance Indicators                   31 March           31 March       % change
 (R millions unless otherwise                 2021               2020
 indicated)
 Results from Operations                      1,814              1,227          48%
 Life APE Sales                               2,429              2,461          (1%)
 VNB                                          304                290            5%
 Gross Flows                                  44,263             50,568         (12%)
 Net Client Cash Flow (Rbn)                   (4.2)              0.8            (>100%)
 Funds Under Management1 (FUM) (Rbn)          1,146.9            1,104.6        4%
 Loans and Advances1                          19,425             20,320         (4%)
 Gross Written Premiums                       5,073              4,971          2%
(1)Comparative   amounts represent FY2020 balance sheet amounts.

Profitability for the year to date improved as a result of strong performance in
local equity markets which drove higher asset based fees due to an increase of
6% in average FUM, closing FUM at the end of the first quarter being 23% above
March 2020 levels. The higher closing FUM balance provides a strong asset base
on which to earn higher fees in the second quarter. Improved credit experience
due to a deliberate focus on tightening of credit criteria and more selective
offers to customers in Old Mutual Finance in South Africa, the non-repeat of the
negative mark to market losses in Old Mutual Investments in the prior year and
a positive claims experience not related to COVID-19 in our Credit Guarantee
Insurance Corporation business positively impacted profits. Expenses were managed
well in the first quarter and we remain on track to deliver our cost-savings
target of R750 million at the end of 2022.

Life APE sales were marginally behind the prior year despite good momentum in
productivity levels as observed in issued sales which will be reflected as
reported life sales in the second quarter. Lower single premium pre-retirement
and annuity sales in Old Mutual Corporate were the main drivers of the decrease
in Life APE sales. While we saw an improvement in umbrella quote activity relative
to the levels at the end of 2020, corporate sales are typically lumpy in nature
and lower single premium sales were recorded in the first quarter compared to Q4
2020. The decrease in Life APE sales in Rest of Africa was mainly due to lower
credit life sales in Namibia, coupled with a deterioration in corporate sales
because of the economic environment. Life APE sales decreased marginally in Mass
and Foundation Cluster driven by lower credit life sales following continued
actions to manage our credit exposure in Old Mutual Finance and lower issued
risk sales in Q4 2020. This was partially offset by higher risk sales of Old
Mutual Protect. Personal Finance delivered significant growth in single-premium
annuity sales and strong growth in risk sales, partially offset by lower recurring
savings sales. Higher risk sales were recorded in China during the first quarter.
VNB recovered well from 2020 levels due to a better mix of business sold in the
first quarter, with a VNB margin of 2.1% for the quarter being well within our
medium-term target range of 1.5% - 3% as communicated in our FY2020 results. The
negative impact of very low levels of issued sales in the second quarter of 2020
and the pressure on customers’ disposable income at the height of the pandemic
adversely affected VNB in 2020.

Gross flows decreased when compared to the same period in the prior year. The
non-repeat of significant inflows into our Asset Management businesses in East
Africa resulted in a decline of more than 50% from the prior year. Lower inflows
in Futuregrowth, partially offset by strong inflows in Marriott and our Liability
Driven Investment (LDI) capability resulted in a decrease in Gross flows in Old
Mutual Investments. A significant decrease in single premium flows in Old Mutual
Corporate was experienced, the result of the non-repeat of large single premium
pre-retirement savings flows in the prior year. These decreases were partially
offset by strong flows in Old Mutual International and on the retail platform of
our Wealth Management business, with strong momentum experienced towards the end
of the quarter.

Negative NCCF stemmed from the decrease in Gross Flows and significant volumes
of mortality claims in our South African life businesses. These claims were
largely in line with expected claims levels assumed in the December 2020 pandemic
reserve, set up for the anticipated impacts of COVID-19 in 2021. FUM increased
largely due to strong equity markets, despite negative NCCF.

The decrease in Loans and Advances from the prior year was mainly driven by lower
footfall in retail branches in South Africa which has not yet fully recovered to
pre-COVID levels, and the further tightening of credit criteria in Old Mutual
Finance as we manage our risk appetite in the current environment. Growth in
Loans and Advances in Rest of Africa showed marginal growth, largely due to the
relaxation of lockdown restrictions in East Africa and the ongoing recession in
Namibia driving an increase in government payroll-linked disbursements. Gross
Written Premiums showed good growth, the result of good customer retention and
pleasing acquisition rates in East Africa and Nigeria as well as ongoing benefits
from various strategic partnerships in Old Mutual Insure.

Operating update

The second wave of the pandemic led to an increase in excess death claims with
approximately R2.7 billion of COVID-19 related mortality claims recorded in the
first quarter. However, persistency was stronger than expected when provisions
were assessed at 31 December 2020. A portion of the December 2020 pandemic
reserve of approximately R4 billion was released to partially offset the excess
death experience to date. Taking into account the release of the provision, there
is approximately R1.3 billion of the pandemic reserve remaining for mortality
risk related to COVID-19. We continue to closely monitor our claims experience
as future waves and their impacts remain uncertain. We have actively engaged
with brokers and consultants in our Property and Casualty business regarding
business interruption and rescue claims processes and we continue to pay claims
as documentation is received. We paid R281 million of gross claims in the first
quarter.

The unrealised mark to market losses related to unlisted equity and a portfolio
of credit exposures in our Specialised Finance business that arose in 2020 remain
largely unchanged and we expect these mark to market losses to unwind when
further economic recovery occurs. We are actively engaging with counterparties
to assess the ongoing pressure on their business operations and the impact of
these on our profits.
Outlook

We continue to focus on initiatives to improve productivity levels to increase
sales and to service and support our customers. Higher FUM at the end of the
quarter compared to the prior year provides a strong asset base on which to earn
fees in the second quarter. Customer retention has been better than expected
although policy lapses in future months remain dependent on the pace of economic
recovery. Uncertainty over the vaccine rollout and potential third and subsequent
waves could place pressure on earnings in the short term. However, we remain
confident that the strength of our balance sheet and liquidity will enable us to
withstand this volatility, deliver on our promises to customers and provide a
platform to accelerate growth as opportunities arise.

The financial information in this voluntary operating update is the
responsibility of the Old Mutual Limited Board of Directors and has not been
reviewed or reported on by the Group’s external auditors. Following the SENS
announcement we released on 3 May 2021 advising shareholders of the appointment
of Ernst & Young Incorporated as joint auditor for the 2022 financial year, the
Group has received approval from the Prudential Authority.

Investor engagement

We will be hosting a Capital Markets Day on Thursday, 24 June 2021 from 13:00 –
17:00 CAT.   The agenda will focus on the Group’s strategy, capital position
relative to targets and other relevant business updates.      Investors and Media
are invited to attend and register on the following link:
http://www.overendstudio.co.za/events/OldMutual/2021/CapitalMarketsDay/rsvp.php

Sandton

Sponsors
JSE                             Merrill Lynch South Africa (Pty) Limited
Namibia                         PSG Wealth Management (Namibia) (Proprietary)
                                Limited
Zimbabwe                        Imara Capital Zimbabwe plc
Malawi                          Stockbrokers Malawi Limited

Enquiries
Investor Relations
Sizwe Ndlovu                    T: +27 (0)11 217 1163
Head of Investor Relations      M: +27 (83) 500 8019
                                E: tndlovu6@oldmutual.com
Communications
Tabby Tsengiwe                  T: +27 (11) 217 1953
General Manager of Public       M: +27 (0)60 547 4947
Affairs and Communications      E: ttsengiwe@oldmutual.com




Notes to Editors

About Old Mutual Limited

Old Mutual is a premium African financial services group that offers a broad
spectrum of financial solutions to retail and corporate customers across key
market segments in 14 countries. Old Mutual's primary operations are in South
Africa and the Rest of Africa and it has a niche business in Asia. With over 176
years of heritage across sub-Saharan Africa, we are a crucial part of the
communities we serve and the broader society on the continent.


For further information on Old Mutual and its underlying businesses, please visit
the corporate website at www.oldmutual.com.

Date: 21-05-2021 07:05:00
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