IAIN WILLIAMSON: Building blocks are falling into place

Old Mutual is alive and kicking and adopting plenty of new, cutting-edge, holistic growth initiatives to ensure enhanced, sustainable growth.

While the company’s share price does not fully reflect this potential, any call to “break up” or relist successful parts of the business misses the point: All the building blocks are falling into place for our integrated financial services model to take off, and it would make absolutely no sense to sacrifice all that good work now in the name of short-term profits. Any calls for a “breakup” would only derail what we have put in place over the past few years on our journey to unlock value.

Our recent 17% growth in headline earnings shows our strategy is well on track. This growth is certainly not “pedestrian.” It may not be as high as that of some competitors, yet we gained market share in the fourth quarter and have consistently gained market share in South Africa in recent years. A lot is right, though this is not reflected in the share price.

It is tricky to compare competitor share prices. Most are trading at a discount to intrinsic value, and though Old Mutual has a lower value, this is understandable. We have demonstrated to shareholders that we focus on moving our numbers to the right place. Our return on equity is rising every year. We are improving returns and have not slashed and burnt investor capital by investing through the cycle. Our strategy is to ensure we are moving steadily to sustainable long-term growth. We have made an enormous investment into technology to get us there, which has cost some short-term profitability.

Shining a light on slower growth in the Personal Finance and the Mass & Foundation units ignores the fact that there are big one-offs in the numbers, such as a debt write-off, that will wash out. These one-offs should be stripped out to gain a better perspective of the future. A more realistic view would be to note that, overall, our results from operations are broadly on course. Focusing on one-off issues also overlooks the fact that the turnaround strategy already has had an immense impact. The short-term insurance business, for instance, had a knockout year with positive cyclically high numbers. Wealth also had a cracker of a year.

We acknowledge hurdles to overcome, and economic uncertainty and more challenging conditions will not make life any easier when gaining new business. Customer persistency in our Mass & Foundation Cluster remains a challenge, and we need to focus intently on premium collection and making sure customers honour their payment obligations. Personal Finance new business growth remains difficult while the economy is tough. Still, the middle market monthly premium policy base has been hard to grow for the entire industry over the past six years. Based on current events, such as tariff wars, possible recession in the US and a GNU and budget fallout in South Africa, there is a realistic chance that conditions will be tougher for longer, and we may see some consolidation across the industry.

Yet Old Mutual now has a firm foundation to ensure we can weather storms. Our strength lies in the diversity of earnings that the sum of the parts delivers for our customers.

The clear proof of this strategy can already be seen through the launch of OM Bank to the public, which will be followed up by a campaign to convert the maximum possible number of our profitable Money Account transactional business’s 1-million customers, of which 400,000 are active customers, into bank customers.

We are also further boosting our retail mass market business by scaling the Two Mountains acquisition we announced last year and rolling out our own mobile virtual network operator.

We are recapturing and growing market share in the affluent market and continuing to diversify and grow our Wealth Management franchise. We regard this market as a material growth opportunity for the group.

Old Mutual Insure has been turned around completely, and we are scaling our businesses in Old Mutual Africa regions where we have already exited the unprofitable markets (Nigeria and Tanzania), thus significantly derisking the portfolio.

We continue to grow our peer-leading Private Markets franchise, which gives our institutional clients a differentiated asset management value proposition.

OM Bank is the final piece of the integrated financial services puzzle. It is a digital-first bank delivered at scale, enabling Old Mutual to translate cost savings and intelligent, data-driven, tailored and flexible solutions to customers. Its unique model means it can be scaled fast and adapted to changing needs. Our capital investment and profit trajectory are in line with, if not ahead of, similar ventures worldwide.

As a company, we have pinned our colours to the mast of integrated financial services. This means we show up as a one-stop shop with a wide range of solutions. After five years at the helm, I am incredibly pleased that these solutions are largely in place. When I take early retirement in August, the wheels will be in motion for this model to be humming and unlocking long-term value.

Williamson is CEO of Old Mutual