Old Mutual (JSE:OMU) Q2 2026 Earnings Call

0:01 Good morning, everyone, and thank you for joining us today. My name is Langa Manqele, and I'm the head of investor relations for All Mutual Group. I'd like to welcome you all on behalf of our board and the management team. And I must add that today is a particularly exciting day for us, which I will not steal the thunder from you as you have seen on our SENS announcement this morning. On the agenda for the day as per usual, Jurie will kick us off with a strategic update together with an operational review. Shortly after that, Jurie will hand over to Caspar. Caspar is our group CFO who will then provide the financial review. Shortly after Caspar, Jurie will come back on the stage to provide us with his outlook and the concluding message for the presentation. At that stage, I will then call back Caspar, who will be joined on stage by Ranen to help answer the Q&A. And with that, may I hand over to you, Jurie?

0:52 Thank you. Good morning, everybody. Great to be with you. Thank you for everybody that's all our investors that are joining us online. It's great to be with you for the interim results for Mutual for 2026. I have been in the job of Group CEO now for 15 months. And so this is actually my second set of interims. And I really can confirm to you a growing confidence in the Group That we are on track, we are where I had hoped and as a team we'd hoped to be at this point in our strategy. You'll recall that we set out our strategy last year at the Capital Markets Day and so we've been tracking execution proof points along the way and so what I'll be doing this morning is taking you through a highlights piece and then going back to strategy and just taking you through how we are executing against that strategy.

2:01 But before I do that, just a call out on, Langa alluded to it, an exciting announcement for us this morning, and that is the announcement of Ronan Takudin as the CFO, the next CFO of Old Mutual. Caspar, of course, well known to you, is retiring in April next year. Cas, a lot of work between now and April next year, but I'm sure you're also delighted to have Ronan appointed as CFO designate. Ronan will take over as CFO designate from 1 January and then walk alongside Caspar really for the sort of year end and then take over from Caspar in April next year, officially as CFO when Caspar retires. Let me just say that as Group CEO, I am delighted to have someone of Ronan's experience and expertise within the Group to be able to do this internal succession. I've worked closely with Ronan, both in his finance roles, but also as Chief Risk Officer more recently.

3:03 And I really can assure investors that in terms of strategy and execution is concerned, Old Mutual is not going to miss a beat. And so I'm absolutely delighted with this transition. Congratulations, Ronan. So turning back to the highlights, I said I'm going to give you a sense of sort of highlights of the half and then track it back to what we said we were going to do. And I always say internally, we're going to become a company that is famous for doing what we say we're going to do. And I think we've got growing confidence that these results actually showcase that. So from a highlights perspective, the two return metrics, 12.7% ROGEV, you'll know that we brought ROGEV in as a sort of key metric, key value metric last year.

3:51 That is significantly up on last year. Last year, of course, we had the adjustments to the MFC persistency basis, and so a significant uptick. On RONAV, also normalized RONAV, also up to 12.6%. Now, both of those return metrics, I would reflect to you, they're not yet in the range of respectively 14 to 16 and 15 to 17. But it is the first time when those two return metrics have actually exceeded what we would consider to be our cost of capital, which is about 12.5%. And so we really do believe that we are on track to getting into that medium term range. The dividend, again, the range is 6% to 9% growth and an 8% increase in the dividend. And our confidence in the value of our business, as reflected in the group equity value of R20.66 for the half, is reflected in that additional R1 billion share buyback that we're announcing this morning.

4:43 From a sort of sales and margins perspective, a very good performance. Life AP sales up 21%, gross flows up 21%. So that's been a strong performance. We have called out that there are some large gains, particularly the corporate business in there. So that will moderate. But even if you allow for that, it moderates to an underlying growth of about 12% for the half. And so that was one of our key proof points. And I'm pleased that we're hitting it. From an RFO perspective, RFO per share up 11%, and that's despite quite a noisy environment from an economic variance perspective. And so there also, you know, we are tracking well. We are signaling today, which Caspar will do, that that RFO per share growth of about 10 to 14% is, you know, that's the RFO growth that we believe puts us in the range on our other medium-term targets.

5:34 And so we are at this point comfortably also within that range. So to go back, I just want to draw you back a little bit to the strategy as we announced it at Capital Markets Day last year. And you'll recall we talked about unlocking value and generating growth as these sort of two phases of strategy for mutual driving competitiveness in the South African businesses through old mutual life and savings, AIM Insure and AIM Investments. Deepening market leadership in Southern Africa. So recognizing across the African continent, we have in Southern Africa leadership positions. We've been in those markets a very long time and we are number one in a number of those. But what we want to do is to convert that scale into better margins and returns so that we can really put a value on those businesses and that value becomes more visible to investors. We want to establish the right to win for OM Bank.

6:26 And as I'll talk to you later, we are in fact shifting our thinking already from establishing the right to win to actually really contesting the banking profit pool. And then finally, evaluating and pivoting on growth markets. And that's just a recognition that in our African portfolio, in East and West Africa, In contrast to some of the other in Southern Africa where we are already market leaders in East and West Africa, we really are wanting to build market leadership, but we first have to demonstrate through returns and margins that we can earn the right to deploy capital there. So what we did with these strategic focus areas, and we did this actually in March when we presented to you, we translated that into the medium term targets and how they relate to what we call an execution proof points. And those proof points were the delivery of cost savings, our persistency variances, our new business volumes, getting traction in OM bank and OM margins and returns.

7:18 And so it's those are the lead indicators that will ultimately get us to the lag indicators of our medium term targets. So I want to spend a moment just talking about each of those and where we are in terms of executing against those targets. Let me first say that I am very pleased with, I think 12 months is a long time, but when I was talking to you 12 months ago, I was talking about how we were restructuring the group, we were creating our clusters, we were creating end-to-end accountability, giving people line-of-sight targets, and really creating a management machine that would be driving towards execution. And we have a growing confidence, and in fact, A high conviction that we're already seeing that machinery at work. I see it in our quarterly cycles, see it through incentives, we see it through the execution that's coming through in the businesses.

8:04 So I think a very high degree of alignment around these priorities and you can see it in the results we're producing. On cost savings, we talked about $1 billion by the end of this year and $2.5 billion by the end of next year. We are at $1 billion already virtually completed by mid this year, so on track for those cost savings. On persistency, a very significant, decisive actions that have been taken actually on, particularly on new business, but also on collections in MFC, on distribution incentives, areas of loss-making business. So we have conviction that we're starting to see those come through. Q1 was still, there was some, we signaled to you in the operating update, still some negative persistency variances, but it really came through in line with bases in Q2. And overall experience is variances healthy.

8:50 So we are confident that the basis changes we made are going to be appropriate and that actually the management actions we've got in place are starting to work and are getting us to where we need to be. From a new business perspective, we talked about it. I talked about life AP sales and gross flows, but I'll also call out old mutual investments where gross flows are up 48% and largely within OMEG and future growth. In OM Bank, we are up to, at the end of June, it was about 750,000 customers. We will cross the million customer threshold in the next couple of weeks. We had deposit growth to 1.4 billion. In June, we are, at the end of August, at 1.6 billion. And the progress in kind of integrating all mutual funds in OM Bank, which I'll get to in a second, that has progressed well.

9:35 We really have created an organization that is a much more fully-fledged, all-rounded banking proposition than what it was a year ago. Finally, in Omar, there have been actions on pricing, on managing the portfolio, on driving sales. And so we are also seeing margins expand there from the underwriting margin to significant improvement. VNB margin, we know with that VNB number, it is a volatile, it has been volatile historically, but certainly the management actions are there and we've seen an improvement in the margin up to 2% for the half. So I want to spend a moment on OM Bank because I think clearly in all of the execution pieces OM Bank is a major growth initiative for us and it is a key differentiator for us as we move into that generating growth phase of our business.

10:20 And so this is just an illustration of the OM Bank ecosystem and how we're positioning OM Bank, the old mutual ecosystem, how we're positioning Old Mutual Bank as C.A. C.A. C.A. We've got 40,000 work sites. We've got opportunities to create integrated propositions across the stack, across Life and Savings and OM Insure into OM Bank. Just an illustration there of the opportunity set we have of 140 billion of inflows and outflows that go through our group through Life and Savings. And then our 3.4 million reward members and increasingly those redemptions happening through OM Bank.

11:11 So the clarity that I want to bring this morning is on the, we've spoken previously about breakeven in 2028 for the bank on a monthly basis. We're now looking at this as a cluster. And so we're looking at OM Banking Cluster RFO targeting nought to 200 million annually in 2028. and giving you a breakdown of what are the key targets that we need to hit to achieve those numbers. And so I've talked about customers. We haven't changed the target for customers of 2.5 million, 2.8 million. The levers there are, you know, we've got, it's ultimately about NIR there, and we've got bundled rewards and bundled products that we can drive, extended value-added services, our non-advice funeral proposition that we can scale.

11:59 And so that's the opportunity set there. In terms of growing retail deposits, we are well on track and pleased with our progress in retail deposits, but we're targeting eight to 10 billion by the end of 2028. There it really is around leveraging our mutual distribution, in particular repositioning our MFC savings proposition, launching fixed deposit products and the like. From a lending point of view, we have a lending business, of course, in bold mutual finance that is largely our lending business, a personal loans business. We want to scale that from the 16.4 billion currently up to that sort of 23 to 26 billion range. And importantly, We're going to be supplementing that strong personal loans business of about 15 billion, scaling it also in other areas. So secured lending, investment bank loans, home loans, and credit cards.

12:46 And we want to grow that portion of the lending business. Again, part of this theme of building out OM Banking as a much more fully-fledged, all-rounded banking proposition. I want to now turn to the operational review and just spend a moment on each of the clusters and some of the business units before I hand over to Casper for a more detailed financial review. All Mitchell Life and Savings is a significant part of our group. So pleased there with Life FB sales up 21% and VNB up 47%. We've spoken about VNB margin and VNB margin obviously being under some pressure across the market with reduced guaranteed annuity sales. But importantly, if you look at this VNB actually as a percentage of opening GEV and a percentage of ROGEV actually significantly advancing. If we go into each of the underlying business units, wealth management and corporate standout performers in this half within life and savings.

13:47 Wealth management, of course, now having 10x investments included in that business. We are delighted with that business and it really is going to become an important part of our proposition going forward. But sales there growing 21%, VNB margin also ticking up to 1.1%. On the personal finance side, and I want to iterate here, personal finance sales more muted. Got to remember that both personal finance and wealth management are actually, and this is in line with peers, are part of a unified distribution engine. So we are overall, in the personal finance and wealth segment, we are pleased with sales in general. There has been a tilt in mix more towards wealth management products, particularly from guaranteed annuities into linked annuities, but comfortable with the progress there.

14:35 If I then look at the other two business units within Life and Savings, Massen Foundation, Life and Funeral Sales up 9%, which is good. We are certainly calling out that the management actions that we're taking, and it's particularly primarily on new business, is we are targeting loss-making areas of new business that we do believe will moderate sales somewhat in the second half. But that is in the pursuit of value accretive activity and value accretive new business. That margin, that's the primary actions to drive the expansion of that margin again. You can see we reported the VNB of 4.5% for Massen Foundation last year. That has actually, what we've done now is we've moved credit life into the bank because credit life along with lending is a sort of key profit driver within the bank.

15:24 And so looking at MFC on its own, that 2.5% for the half, And that's the piece where really we're looking at both persistency and management actions there, but also ultimately expenses to make sure that we have a healthy margin there. Corporate standout performer for the half. And this really is the leading operator in its segment. And very pleased both with margins and with volumes in this business. We have called out, you know, with these large schemes, there is a kind of non-recurring nature to some of that. But the business is lumpy, but very pleased with progress. Old Mutual Banking, this is now the cluster together. You can see that I've talked about the clients and the deposits. Our loans and advances are flat for the half.

16:10 You will see there was some additional credit provisioning within Old Mutual Finance. We are looking to grow this business from here and to increasingly drive lending through the bank and start launching lending through the bank in the second half of this year. and then just pointing you again to that combined RFO picture where we are moving toward targeting that from break even to 200 million RFO in 2028. And again, just pointing you to those levers that I pointed out, that I showed you earlier. Those are the real markers to see that we are tracking from a revenue and a cost perspective to be able to hit that break even. Audition Investments, a strong half, gross flows up 48%. That actually excludes alternatives, because alternatives, capital raises actually are not in gross flows. Alternatives also having an excellent capital raise here, 97% up to 6.7 billion. That is a fantastic business, but also then looking at, you know, there's gross flows in asset management in OMEG and in future growth.

17:10 Very, very strong assets under management, flat over the period in line with markets, but ROFO up 40% and partly as a result of this growth in non-annuity revenue. And so very pleased with the performance of the investments cluster. I'll mutually ensure it was a tougher period this half than it was in the prior period from a large claim perspective. There were flood claims, catastrophe claims that came through. I really believe that the 7.6% underwriting margin is a very resilient performance actually in this half. I have been quite bold I know in my investor meetings telling you that I believe and I back in a previous life I had once run a motor insurance business I do know what the levers are of success in a business like this and the foundations that have been put in place through data and through operations both you know all the way through from pricing and and underwriting claims and claims management I do believe the foundations we've got in this place in this in place in this business now are C.A. C.A. C.A.

18:31 But overall, and this is also the business which has led our group on the implementation of AI, where its AI program is actually well, you know, three or four years, and its data program three or four years into implementation. And I think that's part of the results that we're seeing, which notwithstanding a claims ratio going from 47% to 50%, I think a number of years ago, that would have been a very difficult thing to manage through for this business. But we're seeing it come through with resilience. And then finally, I'll meet your Africa regions. Sales up by 35%. And this call out on margins being a big focus. So whilst that margin is volatile in life, we're pleased with the performance there to getting us to 2%. And on the short-term side, that again, you know, the implementation of focus on margins, pricing actions, you know, looking at renewals, looking at how you manage your portfolio, it did result in some pressure on top line, but we believe well worth it when you look at how the impact that will come through in margins.

19:35 So overall, before I hand over to Caspar, I think... I'm pleased we are where I'd hoped we would be at this half. I'm very confident that as a team we are focused as a business. And there's a growing confidence internally that the green machinery in Old Mutual is focused on the delivery of the key proof points in our business. And I think that you'll see more of that now from Caspar's presentation. Over to you, Caspar. Thank you, Jurie. I will now take us through the financial review focusing on earnings, value, and capital.

20:26 And starting with earnings, we have seen robust underlying operating growth in results from operations, or RFO, even after our deliberate increased investment in OM Bank. We have assessed our forward-looking medium-term earnings profile and the 11% increase in RFO per share is within our target range of 10 to 14% sustainable growth per share based on our 2025 base. The 11% growth was supported by improved operating performance in our mutual investments and our mutual Africa regions and reduced shareholder costs in other group activities. Turning to the cluster-specific RFO performance and starting with all mutual life and savings, which was of 4%, mass and foundation increased by 19%, which was largely due to the strengthening of the long-term persistency basis on our funeral book in the prior year and was further supported by improved mortality and persistency outcomes, partially offset by negative IFRS economic variances during the first half.

21:39 Personal Finance RFO decreased by 11%, mainly due to negative IFRS economic variances, partially offset by positive mortality and persistency experience. Wealth Management Profits increased by 49% due to stronger revenue from higher average assets under management, A change to the retail margin agreement with wealth retaining 70% of the retail margin previously reported by Omichael Investments. This represents the margin on assets managed on behalf of wealth clients, better aligning revenue with the management of those assets. And our mutual corporate RFO decreased by 8%, largely due to flat IFRS economic variances in the current period compared to the strong positive contributions from markets in the prior period, and was partially offset by positive mortality and morbidity variances.

22:40 We continue to see the benefits of our diversified own mutual investments business, with our diversified revenue streams driving strong operating growth. Results from operations increased by 40%, largely due to a significant increase in non-annuity revenue, supported by higher preferred returns and fair value gains. Annuity revenue grew by 6% to 1.5 billion due to increased fund commitments and portfolio growth. This is a particularly good result in light of the change to our retail margin agreement I mentioned earlier, which impacted annuity revenue. Results from operations in Omnitral Insure decreased by 25%, reflecting lower underwriting earnings relative to the strong pari period outcome and a reduction in investment returns on insurance funds.

23:38 The insurance service result decreased by 21%, driven mainly by elevated catastrophe losses of 376 million net of reinsurance due to the severe flooding events in the East and Western Cape in quarter two. Our net underwriting margin remained resilient at the upper end of our target range. Umptal Africa Region's RFO increased by 65%, driven mainly by growth in Malawi and East and West Africa. Our Malawi operations continue to face challenges brought on by high levels of inflation and foreign currency shortages. While exchange rates did influence Malawi's results, the underlying performance in Malawi remained strong across all lines of business, reflective of management's response to the economic environment.

24:35 Results from operations in East and West region increased from 10 million to 125 million, driven by improved performance in all lines of business except banking and lending. Zimbabwe remains an important business of substantial scale, but due to the inability to access capital, we have ring-fenced their results since 2019, and we have excluded their results from adjusted headline earnings, RONAV, and other group KPIs. We have made material progress in addressing these constraints, with improving conditions supporting potential inclusion in our group results, subject to achieving the required capital repatriation milestones.

25:25 Zimbabwe saw strong equity market performance in the first half of 2026, with higher investment returns being the main contributor to the growth in adjusted headline earnings. We will continue to assess gas generation, fungibility and the macro environment and will provide an update at our 2026 annual results. Shareholder operational costs decreased by 57% with the prior year including a R440 million restructuring provision. Excluding the once-off restructuring provision, shareholder operational costs reduced by 225 million, or 31%, driven by our commitment to a lean corporate centre.

26:13 The reduction of treasury contribution relates to lower interest and cash balances and a once-off impact related to a tax provision unwind in the prior year. In addition, our asset liability program outcomes, although in line with targets, were lower than the prior period. As I outlined in our 2025 annual results, cost savings are being tracked through a two-pronged approach. Firstly, savings will be evidenced through improvements in our key efficiency metrics over time. Secondly, we are tracking total savings by reconciling our IFRS expense base in the financial statements to our controllable expense base, with detailed reconciliations provided from 2024 through to June 2026.

27:06 As outlined in this waterfall, controllable expenses are then reconciled to our achieved net savings after allowing for inflation, foreign currency movements, and once-off costs to save future costs, which are removed in the subsequent year. This waterfall also adjusts for business boundary changes to controllable expenses, with the only adjustment being the impact of 10x. For the first half of 2026, we achieved savings of R338 million. This takes our cumulative savings to R936 million, while on track to achieve savings by the end of 2026 of at least R1 billion.

27:51 We highlighted 2025 savings of 450 million at our 2025 annual results. This was an initial view with actual 2025 savings at 598 million post-completion of our IFRS expense reconciliations. Adjusted Headline Earnings or AHE per share was down 27%, driven mainly by shareholder investment returns being below what we would expect on a normalised basis. Overall, South Africa's shareholder investment returns were in line with strategic asset allocation return benchmarks. With the additional reduction below the benchmark return being driven by active bond positions taken to increase bond duration and reduce solvency volatility.

28:43 Year on year IFRS profits reduced, impacted by the reduction in adjusted headline earnings, which was partially offset by a substantial increase in Zimbabwe's IFRS profits due to higher investment returns. Now moving to value, Group Equity Value or GEV per share increased to R20.66 with growth in value exceeding distributions and the per share GEV supported by the completion of our share buyback. We saw solid growth in our covered business and in our property and casualty business, reflecting the resilient underlying underwriting performance in All Mutual Insure. Banking and lending was flat, reflecting continued pressure on consumers and the deliberate focus on sustainable risk-adjusted growth in All Mutual Finance, as well as the reallocation of All Mutual Specialized Finance to the other lines of business.

29:44 The reduction in other is mainly due to the completion of the remaining 2.3 billion of the share buyback. Our ROE give for the first half was 12.7%, improving from 4.1% in December. This was driven by strong growth in covered EV being offset by lower growth in non-covered banking earnings. Total embedded value operating earnings was 4.8 billion, resulting in a strong analyzed return on embedded value of 15.3%. This was driven by higher expected existing business contributions and higher new business contributions, positive risk experience across the business, and the once-off impact of mass lapse reinsurance in all mutual corporates at the end of 2025.

30:37 Our group value of new business increased by 32% to 569 million, whilst our value of new business margin increased to 1.4%. As you will see in the graph on the left, our margin improvement was driven by strong sales volumes, particularly in all mutual corporates, wealth management and all mutual Africa regions. and was further supported by a more profitable new business mix. These positive impacts were partially offset by the negative impacts of lower opening yield curves during the period. Moving to the Contractual Service Margin or CSM. This represents the store of future life profits for the bulk of our life business.

31:26 New business written in the first six months of 2026 increased the Contractual Service Margin by 1.7 billion and was further supported by interest on the CSM and positive experience variances. The allocation rate to profit was 5.9% for the first half at the upper end of our expected range of 8% to 12% annually. Now turning to capital. Our horizon-based approach guides decision-making as we seek to optimize RONAV in the shorter term and generate growth and value in the longer term. Capital allocation decisions are based on our RONAV delivery aligned to the two value creation phases.

32:14 On a normalized basis, we remain in Horizon 1, below the 15% to 17% target range, and we will continue to prioritize shareholder distributions and only consider deployments of capital that are tightly coupled to strategy and are time sensitive. As Ronev improves into Horizon 2 and 3, our focus will shift towards generating growth where other opportunities to deploy capital will be considered. We expect cash remitted to be between 70% and 80% of adjusted headline earnings before optimizations and special dividends. We have seen sustained cash generation in line with our target ratio during the period, with the prior year benefiting from significant optimizations.

33:06 The comparative reduction in OMLAXA was due to a lower capital ratio reported at December 2025, resulting in lower dividends. This then brings us to our discretionary capital balance, which reduced to 3.1 billion, driven mainly by the completion of the 3 billion share buyback, with the balance of 2.3 billion being settled during the period. Our discretionary capital balance of $3.1 billion includes an expected capitalization of OM Bank in 2026 and 2027 of $2 billion in line with plan and $1 billion has been earmarked for the board approved share buyback. Looking forward to the end of the year, the discretionary capital is expected to remain robust, driven by cash remittances from subsidiaries, and we expect at least 50% of the declared 4 billion omlaxa interim dividend to add to discretionary capital in the second half of the year. This discretionary capital balance will be available to return to shareholders or fund growth opportunities in line with our horizon-based capital application framework and we will provide an update on this at our 2026 annual results.

34:27 Return on net asset value was supported by robust underlying growth in results from operations and the completed share buyback. As we signaled at our 2025 annual results, we will now target normalised RONAV, which adjusts for the difference between actual and expected returns. OMAL's shareholder solvency remains within our target, improving by 10% from December to 172% at the end of June. The improvement was driven mainly by the issuance of subordinated debt and further yield curve movements. The ratio also benefited from weaker equity market performance, which resulted in a reduction in the prescribed equity stress.

35:17 These positive impacts were partially offset by the allowance for foreseeable dividends, which include the OML interim dividend and the announced one billion share buyback. Following the issuance of 1.8 billion of debt in half one 2026, the OML gearing ratio ended at 16.9% and within range. We will continue to optimize our capital profile and gearing ratio to ensure the efficiency of our balance sheets. Whilst we have updated our solvency ranges, the interim dividends for OML and OMLAXA were based on the old solvency ranges. For OML, the lower bound of the range decreases from 155% to 150% and the upper bound from 185% to 180%. And for MLAXA, the range changes from 165% to 200% to 150% to 180%. The width of the range caters for interest rate volatility, as we saw during the course of the last nine months. We will report again against these new ranges for our 2026 annual results. And with that, over to you, Jurie.

36:58 Thanks, Cas. I think just moving on to the outlook and some reflections, I think to emphasize to you, I think we have a growing confidence internally. I have a growing confidence around the traction we have towards implementing our strategy and our execution proof points. What we've got here in this final slide is just a summary of where we were on those key targets. C.A. C.A. C.A. Normalized Ronev going up to 12.6%. Both Rogev and Normalized Ronev not yet in the ranges that we've set for them, but we do believe that we are tracking along in our way we had hoped to be at this point.

37:57 V&B margin was going from 1.2% to 1.4%. Clearly, there are headwinds in lifting VNB margin, and guaranteed annuity sales, which is an industry-wide phenomenon, is part of that. So there's lots of more work to be done to lift VNB margin up to that 2% to 3% range. And then finally, net underwriting margin of 5% to 8%, and despite what was a tougher half, actually coming in at 7.6%. Our execution proof points, we will be coming back to those half after half until we have fully achieved what we set out to do. And the message for this morning is that we are on track with each of those as we set out in the slides earlier. I do want to just emphasize a couple of things that were part of Caspar's presentation. The sustainable RFO per share growth of 10 to 14% that we're targeting off the 2025 base and that we are in range at 11% for this half.

38:54 The one billion share buyback that we've announced this morning, which reiterates our confidence in the value of where our share is currently trading relative to GEV. Then looking forward, the four billion AMLACSA dividend in the second half of which two billion at least will contribute to discretionary capital. And then finally, also forward looking the reduction in solvency ranges in AMLACSA and in OML, which will further support our efforts around capital efficiency. So I think to summarize, we are progressing. We have a growing confidence and we are where we'd hoped to be. But of course, the work continues. I am confident that the old mutual execution machinery that we've put in place is starting to progress and that we're seeing traction.

39:44 So with that, I'm going to hand back to Langa. I think Langa for Q&A.

40:06 Thank you very much, Yuri, for moving us through the presentation so efficiently together with Caspar. Caspar, if I may kindly ask you to please join Yuri on stage for the Q&A. As per usual, we will start by taking the questions on the chorus call. We will permit just two questions per person. If I may ask those who are online who have queued up to take the calls to please introduce themselves. Mention the name of the firm and if you may kindly just direct the question to either Jurie, Caspar or Ranen here on stage. If the question is not so clear, I will handle it. I will take two rounds of these questions and if we still do have time, we may have a bonus one question per person. We will see where we land with the questions. At this stage, if I may ask the operator to just please remind us on the procedure to take the questions.

41:01 Thank you. For those on the conference call, if you wish to ask a question, you may press star and then 1 to join the question queue. If you do however wish to withdraw your question, you may press star and then 2 to remove yourself from the question queue. Once again, if you wish to ask a question, you may press star and then 1. We have a question from Harry Berta of Bank of America Securities. Please go ahead.

41:31 Thanks very much. Well done on the thanks. Thanks so much. Well done on the bank's customer growth. I think in the 25 results you gave active customer numbers or percentage. I think it was 62%. Are you able to share what percentage of the 784,000 are active? And just to confirm, have all the 500,000 existing customers transferred over? Could you also possibly share any details of the new customers that you're adding within that customer base? And then second question is just on the 10x impact in the second quarter, please, if you could possibly share the impact on RFI, please.

42:09 Thank you. I will ask Yuri to please start and then Clarence, if you may, jump in. Yeah, so, I mean, there's a couple of questions around customers in there. We are acquiring about half our customer acquisition is neutral, mutual, and about half is existing. And I think that activity rates, Clarence, that's in our 2028 numbers, is at a 35%. 35 to 38% activity rate. And I think we are, we're sort of tracking, we're tracking with a rapid customer acquisition, I think we're tracking just below that, but I think we're on track. I think on 10X maybe I'll ask Caspar to comment. Jurie, we haven't disclosed the 10X. We will look at whether we disclose that on a forward-looking basis.

43:02 Thanks. Next question, please. At this time, we don't have any other questions in the queue.

43:11 Okay. I will take some questions that have come through online in the meantime. We have a question from Tapelo Investec. Tapelo would like to know, are you able to quantify the level of cat losses in the short-term insurance so we can get a better understanding of your additional performance? We do have, I think, Sol on the line. Sol, if you are able to come through, would you please just give a comment on that question? Yeah, morning, Langa. Sure. We've had R376 million in catastrophe losses from the storms in May and, yeah, that effectively translates to our traditional performance being better In H1, 2026 than in H1, 2025. So actually the business's underlying performance has improved materially.

44:10 That 376 million translates to about a 3% underwriting margin delta if the storm didn't occur. Thanks, Langa.

44:21 Thank you very much Sol. I will also just continue with the questions. The next question is from Peron. Peron is from JP Morgan. He says, in all mutual investments, how should we think about the durability or sustainability of the alternative non-annuity revenue? Zulfa, if you may please. Thanks, Baden. I was meant to stand on that side, but I have to stand on this side. We do have the benefit of the alts business delivering a non-annuity revenue and a level of non-annuity revenue. It is, of course, lumpy. The way we plan for that is that effectively we look at the potential fund life cycle that we have in our existence when they effectively are paying out and what the performance is.

45:15 So we do anticipate a level of some non-annuity revenue. The timing of that of course is dependent on when those funds exit. And this year we did have some exits earlier than we anticipated. So I'm expecting some of that to taper off just where we are in some of our funds at the moment. But we do continue to see a level and expect a level of non-annuity revenue.

45:38 Thank you very much Zulfa. We'll continue with the questions coming in. We've got a question from Sanamile that's from Standard Bank. Firstly, it says, congratulations, Ranen, and congratulations for the operational performance on the business. The questions are, may you please give us more insight on which specific line of business in Malawi contributed positively to RFO increase. That's the first question. I will throw that to you, Caspar. Second question is still on Omar. Clement says, GWP increase of 3% is relatively modest. Is there a view to grow the market share? Three, may you please give us insight on what makes up the central cost and how we should think about this going forward? So there are two questions for you, Caspar, and one for Clement.

46:30 So we did see markets. So we saw a slight deterioration in what we see as our management view of the exchange rates, and that's the rate we can extract cash from Malawi. We saw markets down actually Ndiaye Ndiaye Ndiaye Ndiaye We are working to improve the margins across that portfolio.

47:15 You saw we were very negative last year. We have improved that somewhat. So the effort is mainly on pricing. We have had strong new business flows, but at the same time, because of our pricing actions, we also lost some accounts that we had. So our renewal was hit. But I think going forward, we continue with our pricing actions and improving margins, but we are still quite competitive.

47:43 Thank you very much, Clement, for that. There are more questions that are coming through. Operator, may I please check if we have any questions online on the cross-caller. Those will continue taking the questions that have come through via the webcast. We don't have any questions on the telephone lines.

47:58 Okay, we will continue. There is a question from Jared. Jared is from Allweather. He would like to know, please explain in more detail the duration extension overlay which detracted from SA shareholder returns and whether this is expected to retrace in the second half of the year. That's the first question I will take. Let me look at the other one. I'll hand over that one to Rania. Matthew would like to know, of the 1.4 billion in bank deposits, can you indicate the proportion of this? That is the new to bank versus what has come from the bid versus money account. Clarence, if you may kindly please assist with that one.

48:44 We still have got more to go. Okay, thanks. Thanks, Jared. On the Shielder investment portfolio, we have an allocation that goes into bonds. What we've done is we've extended the duration on those bonds largely to manage the capital interest rate sensitivity in our balance sheet, and that caused a bit of a loss in the first half. To your question, it's actually come back a little bit since then, and so that loss is partially reversed. Thank you, Rana. Over to you, Clarence. Yeah, so the 1.4 billion, about 80, more than 80% of it is from the money account customers that were on Bitvest. And about 20% it's from new customers. But what is also encouraging is to see the growth almost on a month-to-month basis of the new customers in terms of their deposits.

49:31 So we're very hopeful that going forward we'll see a growth in terms of

49:36 Thank you very much. Staying with the operational review section, I will take two questions from Michael Crystalis at UBS as well as from WAWIC. That's RMB, Morgan Stanley. Michael is asking, may you please provide more detail on mortality and lapse variances by segment? I will ask Kieranen to give that a step. Then the second one is removing credit life sales revealed a low 2.5 VNB margin for mass and foundation. And you would like to know, so the VNB margin for personal finance is still negative. When should we expect VNB margin to start rising and remind us what VNB target we are looking to achieve for mass and foundation as well as personal finance?

50:23 That one I will hand over to Prabashini to handle. Ranen, if you may just comment on mortality lapses and variances by segment. Okay, thanks. So Michael, we've had good mortality experience across pretty much all our clusters. So in personal finance, mass and foundation, corporate and in OMAR, there have been positive mortality variances. As we've been communicating, The corporate variance has started to reduce slightly, but still remains positive. Then on lapse variances, you will see that we have the negative persistency variance on the embedded value. It's actually split across three segments. So in mass and foundation, there was a negative for the first quarter, but as Jurie's mentioned, we're now in line with basis in the second quarter, but that small portion came through from the first quarter. We then also had a small Persistency, negative variance in personal finance and OMA.

51:20 We've dug into that and it's related to very specific books of business that Prabashini and Clement are actioning. So we're expecting the persistency variance to normalize in the future. Thanks. Thank you very much.

51:31 Over to you, Prabashini. Thanks. Thanks for the question, Michael. So on the MFC sales side in particular, we made our material persistency basis change at the half year last year, which had an impact on the VNB margins. So that was recognizing a few things, including the competitiveness in the market and a systemic shift in market dynamics. And then when we remove credit life for the first half, you've seen 2.5% VNB. We continue to focus, as Jurie mentioned, on being more targeted on our sales by different channels to remove and eliminate those loss-making pockets of business.

52:18 Cost take-out remains a significant focus area of ours, and then growing sales from a quality sales perspective. We've previously indicated a 5% to 7%. V&B Range for mass foundation including credit life. We're not revising that. On personal finance, what's very important to remember is we've had an additional shift away from guaranteed annuities. Guaranteed annuity is quite margin rich. It's down almost 40% in terms of volumes versus prior year. And despite that, our PF margin has remained flat. So we continue to focus on expenses and quality sales volumes.

53:05 Thank you very much. Please hold on to the mic. There are more questions for you coming through from Warwick. Warwick would like to know two things, Prabashini. Firstly, how should we think about the trajectory in the corporate RFO? That's the question, which I felt by 8% due to moderation in risk variances. Should we expect variances to moderate further? Does the mix and volume of new business support growth from here? That's the first portion of the question. The second one is, could you provide some color on the two-part retirement withdrawals of 1.7 billion in the current period? Do you think members have exhausted their ability to withdraw the legacy savings part now, or will there be more withdrawals in FY27?

53:52 Thank you. So thanks for those questions. Firstly, on corporate profit trajectory, we did indicate from our mortality experience perspective, it is cyclical and we're coming off a particularly high cycle in terms of pricing and as pricing starts to harden, if I'm using that correctly, the hardening is happening, anyway. The margins start reducing. It gets more competitive. And as we've seen, the mortality profits have consistently been reducing year on year. It's difficult to call the bottom. So it's a cyclical thing. We respond to competitive pressures and we price competitively. So the profits have actually been very strong in terms of their fundamentals.

54:41 On the product mix in corporate, we've had quite a bit of group assurance or risk sales this half. The deals are lumpy. You know, it's not improbable that we have another half where the majority of the deals, the sales that flow might be on the savings side, which, you know, come with different margins. So it's difficult to call. I think the business is in a good position for sustainable, normalized sales growth. And in the mix, it's lumpy. That's the best I can do, Warwick. On the two-pot, it is interesting. Last year, first half, we had just under a billion rand of two-pot withdrawals.

55:27 And this year, half year, it's 1.7%. I think it's indicative of the financial pressure that people are under. We did a lot of education, a lot of member engagement, encouraging people only to withdraw if they absolutely need it. And I think that had a positive impact last year. I think consumers are simply under pressure. I don't expect huge outflows flowing for the rest of the year it's typically as the new tax year starts that people have the opportunity to withdraw. We see much muted withdrawals through the rest of the year.

56:03 Thank you very much, Prabashini, for managing those questions. We've got a couple of questions. I will try and stack these ones together. They are largely on central costs and the capital stack. Tapelo from Investec would like to know, I will read the question as is. Where did you attain the 936 million cost savings? How much of this was in the current six-month period? And how should we think about timing? On a forward-looking basis and where the source of the remaining 1.5 balance is likely to come from. That's one question. The second question is from Daniel. It says Daniel would like to know, first this is well done on the delivery on the cost savings thus far. Could you give us some color on where the balance of the targeted 2.5 billion savings will come from? How much will be reinvested and how much will come through the margins?

57:00 So those are the questions. Let me just quickly scroll and see if there's any other on course that I may have missed. Matthew, okay, this is a different question. It's about Zim. I will take this next. If you could please just comment on those two. Okay, there's a bit of detail there, so I'm going to keep it a bit simple. So about 50% of the savings to date have come from our covered business and 50% from our non-covered business. And we're expecting on a forward-looking view a very similar outlook for the remaining one and a half billion that we still need to deliver. There was a question about how much of that came in the first half, so we had just below 600 last year and just north of 300, so it's about 330-odd in the first half this year. There's a question about trajectory. I think an important thing to understand is that when we do take our costs, there's a bit of a delay in terms of how it arises in the savings. Because for the period that we incur the cost, for example, if we close a vacancy, you only start seeing the savings in the subsequent months.

58:02 So I wouldn't regard the historic trajectory as a view that we need a fundamental acceleration of pace. There's just something to understand in the way that the numbers come through that the annualized savings are being generated and you should see the uptick going forward. In terms of margins, so within the covered business and within VNB, we should see a benefit of the cost savings coming through in VNB over time. Less on the embedded value that's already captured in the embedded value and we've largely taken it into account. And then on RoNav, in terms of margins, I think that that is going to benefit. So what we already saw in the first half is OM Insure and OM Investments benefiting. Their profits actually reflect their savings. It dropped through in profitability. So Insure and Investments and our non-covered business in Omar, for that remaining savings of the $1.5 billion, that will continue to drop into the profit number.

58:55 During the course of next year, and that should then uplift the RONAV. On underwriting margin, that's the other place that will directly flow into the underwriting margin and enhance the robustness of our underwriting margin. So largely margins will still benefit from the remaining $1.5 billion.

59:15 This came from Jarrett as well as Tapelo. Tapelo would like to know the Omluxa dividend paid to group declined year on year as we've seen in the presentation. He says, please give us a bit of color around that. And what would you say is a normal run rate? That's the first part on the question. Omluxa Dividend. Jared says, given the Omluxa Dividend that came through, to come through in H2 and DC build up in the updated ranges on solvency, why was only just one billion buyback initiated? Ask Jurie to please take that. Okay, Caspar, over to you. So I think, I don't think you should look at the one billion dividends in isolation. We did see solstice ranges reduce for the reasons we mentioned at the year end.

1:00:13 Higher Prescribed Equity Stressors and we saw lowering bond yields put pressure on Solvency Ratio. So we had a lower dividend at the end. That's recovered in the half year and you'll see, so I would look at the two dividends together, the $1 billion plus the $4 billion from OMLAXA. That's a strong dividend. and the rest of the panel. in the Omlaxa business. We obviously don't separately disclose Omlaxa. So we only declare dividends out of capital that sits at the group. So until we receive the dividends from subsidiaries, including Omlaxa, Those are not available as discretionary capital.

1:01:14 That's how we work. So the OML board of directors need to have the capital to declare the dividends. So we'll see those, and as we've said, we'll see quite a lot of capital moving up to OML in the second half, and the board can then deliberate on whether that's a... Return to shareholders or to funding growth. We have told you very clearly that we will follow the horizon-based capital allocation framework. So we will prefer returns to shareholders in situations where RO-NAV is below target range and we're trading at a discount to our group equity value.

1:01:56 Thank you very much, Caspar. I think that concludes the Q&A. There is one, I think this one is not really a question, it's a request for an update. Just a voiceover from you on the recent changes that have happened at the board in terms of appointments, a voiceover for participants, as well as in any senior management teams. Yeah, so, well, I mean, I think just, you know, highlighting, of course, that at the executive level, the CFO succession, which, of course, is something that we've been working towards, and so delighted to appoint Ron into that position as CFO designate from 1 January. At the board, of course, we've had a commitment. We have our chair, Roger Jardine, who took over upon Trevor Manuel's retirement in the middle of the year. As part of that, there is the so-called succession cliff at the board as such that we've had a number of directors who then have stepped off in succession and there is that process that continues now over the next couple of years. But I think as you've seen from the most recent appointments, I think we've got the board succession process well in hand.

1:03:03 Thank you very much. Thanks, Yuri. Thanks, Caspar. And thanks, Ranen. That basically concludes the Q&A session for us. Just as a reminder, our presentation, the results booklet, is available on our website together with all materials that are accompanying it. And we are looking forward to engaging with you on our roadshows, as you can see there on the screen. So once more, on behalf of the board and the management team, we thank you very much for joining us this morning. Thank you, and bye.