Risk, Return & Growth Getting the Balance Right Jim Sutcliffe, CEO 4 October 2006
Old Mutual is part way through a journey End 01 H1 06 FUM 143bn 218bn Life sales in Europe nil 60% MSCI EM Europe FTSE #76 #35 ROE 10% 14% ELAM 15% Nordic 12% ELAM 5% UK 10% VNB H1 2006 111m Nordic 17% UK 24% EV 30 June 2006 7.9bn US 20% Other 3% SA 24% US 20% SA 50% Slide 2
to building a premier international financial services group More Growth consistent net client cashflow consistently strong investment performance for customers Less Risk balanced market exposures 1/3 US, 1/3 Europe, 1/3 SA equity and fixed interest asset management and asset gathering AND Returns accepting that growth and IFRS profit are not alternatives 1 Cash, 2 RoE and 3 RoEV Slide 3
by targeting trends driving our industry Demography baby boomers in US/Europe - flexible prolonged gradual retirement emerging middle classes in Africa and Asia Increased transparency, freedom of choice and flexibility open architecture and wrap platforms lower front-end charges guarantees only where explicitly required shift from Life to Unit Trust/Mutual funds Core and Satellite Asset Management low charges for index performance fees for alpha Outsourcing Be the best or buy the best Slide 4
Positioning for growth driven by demography US - baby boomers Europe even more baby boomers SA emerging middle class Asia & LatAm more middle income clients than in the USA Largest savings market in the world Apply institutional AM skills to build Mutual Fund and VA business. Provide low risk product for decumulators UK stay focused on strengths to win net fund inflows Europe participate as governments encourage private saving Participation in economic growth Wider distribution, cross selling institutional and retail Emerging affluence - organically build a sizeable business over 5 years Slide 5
Customers want increased transparency, freedom of choice and flexibility UK industry growth Platforms CAGR 2002-05 38% US 401K experience UK bond sales EPI bn (single premiums) 15 6 10 7 Life industry 2002 2003 2004 2005 Unit linked bonds 3 9 2 13 0% 17 With-profit bonds 1 AUM US$bn 3,000 2,500 2,000 1,500 1,000 500 0 1984 1990 1995 2000 2003 Mutual Funds Bank Insurer 2001 2002 2003 2004 2005 * Source: ABI, IMA, AILO, covering: UK life and pensions, Mutual funds, Offshore Slide 6
benefiting Old Mutual as an open architecture leader US Europe SA Capability Multi-boutique AM capability, flexible annuity designer Skandia an early adopter Service record in UK for Skandia & Selestia IT platform well developed Financial strength Multi managers in Nedbank & OMSA Opportunity Multi manager mutual funds and VA, platform participation Fastest growing sector UK: Fully exploit leadership post A-day Build platform functionality Use brand/financial strength to gain advantage in low front end charge environment Ride with trend towards unit trusts rather than resist Slide 7
Multi boutique model a winner in the shift to core & satellite money management US Europe SA Capability Multi boutique asset manager, life insurer Award winning Skandia multifunds products Strong OMAM(UK) track record Introduced boutique asset manager structure Multi managers in Nedbank & OMSA Opportunity Capacity to manage additional money, add additional style capabilities, develop hybrid products More product at SIML Add more teams to OMAM(UK) Deliver excellent investment returns and attract fund inflows Retain clients in this format Slide 8
Outsourcing - be the best or buy the best US Europe SA Capability Long experience with outsourced life administration, both fixed annuity and variable Selestia platform (built in SA) is newer and cheaper Low administrative costs Opportunity Flexibility, speed to market with new products Halve unit admin costs in UK by 2008. Use outsourcing more widely, both internal and external Provide further service to other business units Use internal outsourcing to bear down on expenses Slide 9
What we ve delivered for shareholders since 12/01 2.5bn profit attributable to shareholders* since 12/01 Total shareholder return 01-06 4.6bn +141% EV up from 3.5bn to 7.9bn 1H 2006 dividend 2.1p/share +13.5% Assets x Margin Expenses = Profit Slide 10 *Adjusted operating profit after tax and MI
Our priorities Build our presence in Europe & US deliver Skandia targets sales, margins, profits build onshore VAs and retail distribution in the US stay alert for market opportunities Grow with SA - leverage the economic opportunity and our brands Build size and scope in India and China Slide 11
Old Mutual a powerful set of engines Profits and cash now High growth now High growth long-term FUM 46bn IFRS profits 637m South Africa Nordic FUM 170bn IFRS profits 218m USA UK Europe FUM 2bn IFRS profits 0m Asia Pacific Latin America Offering high quality investment management solutions to build and protect client assets Slide 12 Note 1: IFRS profits pre-debt, other shareholders income and expenses, pre minorities and tax 2: Europe includes complete results for ELAM