PRINESHA NAIDOO: Old Mutual is coming home. At least, its African business is. Old Mutual Limited (OML) the South African Holding company formed out of Old Mutual Plc’s managed separation, is due to list on the JSE next month.
Peter Moyo, CEO of the business, has had quite a day wooing local analysts and potential investors. He joins me now. Peter thank you so much for joining us.
PETER MOYO: Thanks, Prinesha.
PRINESHA NAIDOO: Peter, if we can start off, what is the investment case for OML that you’ve been presenting to potential investors?
PETER MOYO: Well, we are starting off by saying that OML is a very good business, which is anchored in the biggest financial services market on the African continent [and] with good prospects. We have a history of delivering very good profits, in fact among our local peers we probably have bigger profits than almost all our peers. We have opportunities to grow this business in some of the growing parts of our continent. We have a very good management team, the company is highly cash generative and we think there is potential for delivering essential business improvement and taking out costs. So, [we have] very good profits, we’re well positioned in key markets and of course very very good cash generation.
PRINESHA NAIDOO: Let’s talk strategy for a moment because you’ve been quite clear about OML’s strategy – you’ve divided it into the eight battlegrounds, and it seems like the South African business is going to take centre stage. Given the heightened competition in the local market, just how much value can Old Mutual Limited still unlock?
PETER MOYO: We actually believe that there is quite a lot of value still to be unlocked. Let’s start with what we call our eight battle grounds. We divided those into three: in the areas where we have to defend and continue to win; in the areas where we think we still need to do much better and build the capabilities that will take us forward; [and] in the areas where we think we can continue to lead. Where we are leading, is in our mass and foundation cluster and it’s our corporate business.
We continue to do very well in our mass and foundation cluster. This is our business that focuses on the low-income end of the market and we have very big footprint. We are enhancing the solutions that we offer to our customers, we are improving service [and] we are also enabling our advisors to deal better with our customers
We have actually entered into transactional banking – one of the things that is not known is we actually have very very big plans in that part of the business. We’ve got a transactional account, Old Mutual’s Money Account and we’ve also been rolling out Old Mutual ATMs. There is a lot that we are doing in that space.
In our corporate business, we are clear leaders. Essentially what one would say is that in the pension fund space, the retirement fund space and in corporate sponsored schemes, we’ve got the biggest umbrella. We’ve got so much product for retirement, our insurance products for group life and for disability has got to be one of the best and we continue to do very well.
Our Personal Finance business is actually quite strong. We see lots of competition in that space [so] we are strengthening our advisor force, we are also serving our customers and selling to them on the digital side [and] also looking at how we go into the direct space. So there is room for growth.
Moving onto the businesses where we say that we need to pay attention, well we’ve got our wealth and investment business and the asset management business that we have in South Africa, [which] is possibly one of the biggest or even the biggest outside of the PIC. We’ve put that together, under the the same leadership as our wealth business and that performance is coming through very nicely, that actually gives us confidence to talk to advisors about some of our solutions. We offer a wide range of solutions and, like I said, our investment performance is coming through and it actually enables us to start talking to the top end of the market in terms of investment solutions.
[In] our short term insurance business, Old Mutual Insure, we also seen very good progress. We are at the bottom end of what we set as the target of what we want to do in the short to medium term. So, we are comfortable with the actions that are happening in that part of the business and we see that growing.
On the Rest of Africa, we are doing very well in the SADC region: Namibia, Malawi, Zimababwe. We’ve said that we want to focus on improving our businesses in East Africa – we see a lot of areas in East Africa where we are growing but we still have some way to go. We have a small business with a capitalised strategy in West North Africa, which is supported by our key competencies.
Winning the war for talent [is another battleground]. Last year, as you probably know, we were voted the top employer in South Africa and we were certified as a top employer in all the countries that we operate in and we also were voted the top employer in Ghana. So certified top employer in 13 countries, number one in South Africa and number one in Ghana. We actually see ourselves being able to attract more talent, the kind of talent that we want in the organisation going forward.
We continue to invest in digital initiatives and we also say that there is an opportunity to take significant costs out of the business.
In its totally, those are the things that we are going to be talking about in the next few years. Our strategy is galvanised around these initiatives.
PRINESHA NAIDOO: You mentioned banking with the Old Mutual Money Account, which as I understand is the most inexpensive transactional account in country at the moment, [and] you also said that you’re going to be rolling out some Old Mutual branded ATMs. That brings into question your relationship with Nedbank going forward because you’re going to be listing with a controlling stake in that bank and that is then going to be sold down to just under 20%. How is your relationship with Nedbank going forward?
PETER MOYO: Well, starting off with the listing, there is the shareholding issue. Right now we own about 54% of Nedbank [and] when we list OML, we will be owning 54% of Nedbank. Essentially, what is going to happen as we list is that (on the day before) for every three shares that a shareholder has of PLC, they will receive one Quilter share [and] on the following day they will get three OML shares for three PLC shares and in that, we will still be holding 54% of Nedbank within Old Mutual Limited. When the register settles, we are going to unbundle Nedbank and we will move from owning 54% of Nedbank to just under 20% – we talk about a number of 19.9%.
We have a very good relationship with Nedbank, we’ve got a very good commercial relationship with Nedbank. In fact, our commercial relationship with Nedbank gives better economics for both entities going forward than when we are 5a 4% shareholder. We’ve announced the details of that relationship agreemeent. It’s an exciting relationship, we will continue collaborating with Nedbank and we will have the right to speak on its board, even at 19.9%. And with everything going well, I will sit on that board.
PRINESHA NAIDOO: But, at the same time, you are going to roll out or amp up your own transactional offerings?
PETER MOYO: Yes. For now, the is the focus on the lower-income area of the market and we looked at our ability to serve customers better. For example, paying funerals benefits into our Money Accounts, we can do that within four hours. Part of it is not just the product but also service to our customers.
PRINESHA NAIDOO: Now, on the listing. When list, you’re also going to be listing with some of PLC’s residual liabilities. PLC recently was the subject of a US court case, which of course, was dropped. But that does raise some questions about how OML is going to manage its own balance sheet together with PLC’s liabilities.
PETER MOYO: I don’t want to dwell too much on the Travelers case, because that case was dropped. What we are inheriting is a NAV-positive PLC residual balance sheet. The assets that we are getting from PLC will exceed the liabilities and we clearly understand how those liabilities are managed and we will continue to manage those liabilities. We can do our own oversight to make sure that we manage those liabilities better. We can manage that residual asset for the benefit of our shareholders. We have done our own due diligence and we are comfortable with what we are taking. Some of these contingent liabilities will continue to be managed but it is important to understand that we are taking a PLC with a positive Net Asset Value.
PRINESHA NAIDOO: And lastly, in preparation for this listing, there has been a leadership shake-up. You were appointed CEO last year, Casper Troskie was recently [appointed] CFO and Trevor Manuel as Chairman. The spotlight is going to turn from PLC to OML. Is there a change in the culture of this business that is underway?
PETER MOYO: Yes, part of our direction is to change the culture significantly. We would actually say that we are moving from a product-led organisation to a customer-led organisation. But I’m not going to talk about it.
We must be careful when we say there was a shake-up. A big chunk of our leadership team are people that understand this business; executives who have grown up in the business, which talks to our ability to grow our own timber. We have supplemented that leadership team with external skills. Casper has been a CEO of a listed insurance business – the business in South Africa was not listed so we needed to add those skills – and he holds not only insurance skills but also banking skills. In addition, he is also a chartered accountant – we needed to bring those skills.
We’ve also brought in a very very strong board with skills in banking, skills is risk management and skills in asset management. We’ve actually looked at how we position this business going forward. And I must say that as a CEO, it makes my job easy because I have what I believe to be a very strong team going forward.
In the first quarter of this year, we are trading within our expectations. We are excited, we have an energized team but we are going to be changing. We are all committed to changing the culture and to ensuring that we are running a modern, agile company that is customer-led. We are excited about the future.
PRINESHA NAIDOO: We are also excited to see what this listing brings. Peter Moyo, chief executive of Old Mutual Limited, thank you for your time.