Old Mutual Limited (OMU) Earnings Call Transcript & Summary

Okay. good morning, ladies and gentlemen. My name is Iain Williamson. As most you know, I've recently hosted a number of these results presentations, but this is the first since I was appointed as Group CEO in July. Before I start, I want to let you know that we heard yesterday of the sudden and unexpected passing of our former Chairman, Mike Levett, who was the architect of our demutualization. We express our sincere condolences to his family. Allow me to quickly repeat my thanks to the Board and to our stakeholders, including many of you taking part today for your support. I've got an exceptionally talented and established executive team at my side. And with their ongoing support and that of our Board, I've no doubt that we will continue to consistently reward your confidence and trust. So thank you again. The 6-month period for which we've gathered, albeit remotely, to discuss today were certainly the most challenging faced by this organization and is on a scale more severe than the global financial crisis of 2008. We could say we're in the midst of the great lockdown crisis. First up, I'll give you an overview of our delivery against strategy in these 6 months. Our CFO, Casper Troskie, will then unpack the numbers. After which, I will provide some concluding remarks and give you a sense of how we intend to move ahead in both the short and longer term. Casper, myself and our senior executives will then be only too happy to answer your questions. This slide gives you a summary of the strategy we shared with you in March. At that time, I spoke about the 5 strategic pillars, which we were then in the process of finalizing. The pillars or building blocks of our refreshed long-term strategy are premised on demonstrating that we care, that Old Mutual has an unwavering commitment to sustain, protect and grow the prosperity of its customers and communities. More than ever before, this period has tested just how much Old Mutual cared, how engaged our employees were, how good our digital engagement was and whether we were really present in providing solutions that lead. I'm pleased to be able to tell you today that our strategic focus has more than weathered this global crisis. We've remained true to our commitment to putting our customers first, to growing our digital business and to always finding new ways to do things better. I'm also pleased to report that we remain a strong, well-capitalized group with formidable liquidity and solvency. A group that is well positioned, not only to recover, but to accelerate growth and to exploit opportunities that will emerge as we recover from this crisis. The first half of 2020 was a period of extreme crisis, a crisis of immense financial, social and human impacts across the globe. What began in China as a health crisis quickly spread to the rest of the world, sparking a series of government audit interventions, including lockdowns and limitations on the movement of people and goods. Before I go into how we as a business responded to COVID-19, I must pause to acknowledge the very sad toll it has taken on some of our employees and their loved ones. To date, 8 of our colleagues have passed away, having contracted COVID-19. We remember them with sadness and gratitude. South Africa has so far borne the brunt of the pandemic with other territories in which we have a presence lagging, but all have been impacted to a greater or lesser extent. I don't need to remind any of you of how volatile global markets were during the first half of the year. The graph on the left shows the JSE SWIX, which despite plowing back most of its COVID-induced losses, ended the period 8% lower than at the start of the year. Furthermore, credit spreads widened, while GDP stalled and then quickly began to contract. In South Africa and across Africa, the pattern which first unfolded in the Northern Hemisphere was repeated. We've already seen the severe impact COVID-19 has had on our sector as reflected in recent trading updates and results announcements. Of course, the trajectory of the pandemic remains uncertain. And given the heightened forecasting risk, we are taking a scenario-based approach, which Casper will elaborate on. We decided to tackle COVID-19 in 3 distinct stages. The first stage was stabilization, stabilizing our business to deal with the immediate changes of the disease, to keep delivering exceptional service to our customers, to protect the health and safety of our staff, to support relief efforts in the community and to ensure the continued strength of our solvency and liquidity positions. When it became apparent that COVID-19 was one of the biggest crises in our 175-year history, we established a high-level internal crisis committee to protect our people and ensure business continuity. We also are focused on enterprise-wide risk management and the heightened cybersecurity threats that we anticipated would emerge. The well-being of our people was nonnegotiable, and I'm satisfied that we did everything possible to minimize the health risks to the 30,000 people who work for Old Mutual all over Africa. As early as May, we embarked on the second phase of our COVID-19 response, transitioning to mitigate the effects of the pandemic on our results for 2020 and to ensure that we sustain our market-leading positions. Making sure that we've got the capacity and resources to compete even stronger than before resulted in us incurring short-term cost. Over and above our normal payments of salaries and commissions to outside advisers, we invested ZAR 40 million in remuneration underpins to ensure that we retain necessary capacity for the longer term. We're in the early stages of the reimagine phase where we intend to bake into our plans our emerging view of what a new normal will look like and our response to ensure that we optimize the opportunities that this will present. Obvious examples include new ways of working, combining work from anywhere models with collaboration in our traditional office settings as well as a significant acceleration in our digitalization ambitions. Our early adoption of cloud-based technology systems means that we're already well positioned in this area. We plan to accelerate that leadership based on what we've learned and what we've achieved under lockdown. Done right, digitalization gives us a tremendous opportunity to meaningfully reward our customers and accelerate productivity gains. In the short term, we've done everything humanly possible to ensure minimal disruption to our service delivery. Across the group, 23,000 of our people were able to effectively keep working from home. Pandemic lockdown conditions were hardly conducive to launching new products, but we succeeded in bringing our strategically important new risk product range, Old Mutual Protect, to market. And to date, we've processed some 22,000 applications for it. We focused intently on ensuring tight expense management. We froze new hires and deferred salary increases in the interest of sustainability and anticipated capacity that we will require in the medium term. We've also begun working towards further cost efficiencies, and we're committed to delivering a further ZAR 750 million of like-for-like savings by the end of 2022. We demonstrated that Old Mutual really does care by extending free life cover worth ZAR 4 billion to 430,000 health care workers in South Africa and similar free cover with ZWD 2 billion to those in the medical front line in that country. As well as spending ZAR 67 million across our territories on the direct fight against the virus, we worked with multiple like-minded partners to provide infrastructure, equipment and poverty relief. Our liquidity and solvency are major strengths of the group and all important buffers against extreme uncertainty. Despite this, given the range of possible scenarios that could unfold in the short term, the Board has deemed it advisable to defer a dividend decision to the full year results. We will communicate the outcome of this decision in March. Let's have a brief look at some of the ways in which we've gone to work with multiple stakeholders to use our strength and our footprint to assist our people and our communities across Africa through this crisis. [Presentation]

We present here our results, excluding directly attributable COVID impacts to give investors a better understanding of the underlying performance of our business. Nevertheless, the normalized result from operations, which you see, retain some significant impacts from the pandemic such as significantly impacted sales volumes, which cannot be sensibly isolated out. Our overall normalized RFO was very similar to that of H1 2019, the lack of growth reflecting an ongoing recession in our biggest market, South Africa, and very real economic challenges elsewhere. Most segments retained resilient performances under the circumstances, and excluding the direct impacts of COVID, some performed very well. Casper will unpack the line items directly attributable to COVID-19 as well as the central expenses line. I would just like to highlight that the COVID-19 impact is substantially related to provisions that we've set aside for experience we anticipate in H2 rather than impacts that have already occurred in H1. They're about looking forward much more than they are about reflecting on our 2020 results to date. The segment that's been most affected by the state of the economy and by COVID-19 was the Mass and Foundation Cluster where the economic slowdown translated into considerable pressure on customers' ability to pay, to service retail loans and to honor premium payments. While we remain confident in the segment's business model, it is, as you know, very dependent on gaining work site access to customers. And of course, this was particularly impossible in quarter 2. The result was a negative value of new business in this business unit, reflecting sizable distribution costs, and RFO inevitably suffered under what we hope will be once-in-a-lifetime conditions. As with MFC, Personal Finance and Wealth restricted adviser access to customers also impacted their results. Despite this, Personal Finance RFO held up well. Wealth, which now reports to the Head of Personal Finance, benefited from a strong performance by Old Mutual International. Should new business volumes recover, we would expect our VNB margins to normalize across our South African life business. A much better normalized underwriting profit was registered by Old Mutual Insure. Underwriting profit benefited from significantly lower motor accident claims under lockdown. Weighing on Old Mutual Insure's result, though, were negative outcomes from CGIC related to the economic cycle. The rest of Africa segment's RFO was up 27% and 23% in constant currency, a solid performance under difficult conditions. I might also mention here that when physical contact became impossible, we developed, tested and deployed new digital tools to further enhance our customers' digital experiences. These included new USSD, WhatsApp, e-mail and Facebook Messenger options, most of which will become part and parcel of our invigorated client interface. Our ongoing move to the cloud had started to pay tangible dividends in simplifying processes and improved productivity as well as in saving costs. With that, let me hand you over to our CFO, Casper Troskie.

Thank you, Iain, and good morning, ladies and gentlemen. I will be focusing on our financial delivery during the first half and will deal with key movements in adjusted headline earnings, which were down 67% to ZAR 1.7 billion; the direct impacts of COVID-19 on our results, which had an impact of ZAR 2.8 billion before tax; key movements in our group solvency position, which ended the period in a very strong position at 182%; an analysis of the movements in our embedded value, which ended the period at ZAR 67.8 billion; and the results of our stress tests and key management actions that we are taking. Iain has taken you through the normalized results of our operating segments of ZAR 5.4 billion, which was 4% down on the prior period. Net expenses from central functions increased as a result of lower cash balances held in the center, earning less interest, partially offset by lower one-off costs. The impact of directly attributable COVID-19 items of ZAR 2.8 billion was substantial, and I will unpack this in detail later. The reduction in the shareholder investment return was due to lower equity markets, which were 8% down in the period. Despite fair value losses on our listed equity portfolio, we outperformed our benchmark as a result of our protected equity strategy. The value of our unlisted equity portfolio reduced in line with lower markets, partially offset by higher interest earned and a recovery in the investment returns in the rest of Africa. Finance costs were down due to the redemption of the OMLACSA debts in March 2020 and fair value gains on interest rate swaps due to a reduction in the repo rates. Income from associates was down 75% from ZAR 1.40 billion to ZAR 364 million. Our joint venture in China contributed ZAR 104 million of this decline, following lower sales in equity markets in the first quarter despite some recovery in the second quarter. The rest of the decline of ZAR 963 million is due to a reduction in Nedbank's earnings as a result of higher -- substantially higher credit impairments and lower noninterest revenue earned following a reduction in transactional activity levels. Noncontrolling interests were positive due to the minority share of losses in the Old Mutual Finance business. On this slide, we unpack those items directly attributable to COVID-19, which we had an impact of ZAR 2.8 billion. The biggest impact of ZAR 1.3 billion relates to additional short-term provisions for mortality and persistency where we expect the short-term experience to be worse than our long-term assumptions in the second half of the year. Our experience variances in the first half were positive, with positive mortality and experience variances being partially offset by the negative persistency variances. However, we saw an increase of deaths in June and July, resulting in an increase in actual over expected claims. This required additional short-term provisions to ensure IFRS reserves were not understated. The provision assumed elevated mortality experience for 3 months from July with a tapering off to the year-end. Business interruption claims in respect of Old Mutual Insure and business rescue claims in respect of CGIC, including IBNRs of ZAR 464 million, have been provided for. Unrealized mark-to-market losses across the investment credits and private equity portfolios, which we carry at fair value, had an aggregate impact of ZAR 696 million. The impact on credit portfolio is largely due to a widening of credit spreads, both in the first and the second quarters. These impacts are expected to reverse as spreads normalize, and we remain confident of the quality of our investment credit portfolio. We have increased our expected credit loss provisions in Old Mutual Finance by ZAR 125 million to allow for the deterioration in forward-looking economic forecasts. We have also incurred incremental net expenses of ZAR 169 million directly as a result of the pandemic to stabilize and transition Old Mutual out of the crisis. This included IT and data cost measures to keep our people and advisers working during lockdown. It also included the cost of implementing COVID-19 safety measures at our offices and branches for the benefit of staff and customers. And we have netted off savings on travel and utilities because of the lockdown. I will now deal with key items not included in adjusted headline earnings and as set out on Page 22 of the results booklet. The investment return on group equity and debt instruments was negative, but is required to be eliminated from IFRS perspective, resulting in a positive adjustment to headline and IFRS earnings of ZAR 1.3 billion. The impact of restructuring was positive following the resolution of data differences, allowing for the release of data provisions in Old Mutual International. The results of Zimbabwe of ZAR 411 million decreased by 31% from the prior year and was supported mainly by the investment returns from investments held on the Zimbabwe Stock Exchange. This profit was negated by foreign currency translation losses due to the decrease in the Zimbabwe dollar relative to the rand. Residual plc recorded a profit of ZAR 253 million, mainly as a result of a tax refund during the period. During the period, we impaired goodwill of ZAR 1.1 billion in respect of Old Mutual Finance, following a reduction in the GDP growth outlook. We have also written down the value of our investments in Nedbank by ZAR 8.7 billion. We're required to, in terms of IFRS, account for Nedbank at the higher of the recoverable value and the fair value. And the recoverable value is based on the discounted value of expected future dividends. Here, we show you how the key movements in our embedded value have performed. Whilst new business remained positive, this reduced sharply from the prior period, mainly as a result of a reduction in the value of new business in the Mass and Foundation Cluster where sales were materially lower. Expected profits from our in-force book were ZAR 2.9 billion, but more importantly, experience variances were positive in a period of extreme stress, highlighting the robustness of our existing assumptions. Assumption changes relate mainly to the short-term provisions that I have already taken you through. The economic variances follow from lower-than-expected investment returns for equities, bonds and cash given the performance of the markets and the reduction in the repo rate by the ZAR. Capital outflows relate mainly to dividends paid to OML to support the group dividend paid in the first half. Our embedded value remains robust at ZAR 67.8 billion, given the extreme market conditions that we are facing. We are pleased with the group as well as the OMLACSA solvency positions, which remain extremely healthy. Starting with OMLACSA, the reduction in own funds is due to a fall in the Nedbank share price during the period, which reduces the weight of the positive contribution of Nedbank to the OMLACSA ratio. The solvency capital ratio was further impacted by the repayment of subordinated debt of ZAR 962 million in the first quarter. OML's ratio has been represented, taking into consideration the approval received from the Prudential Authority to bring Nedbank in on an equity holding basis versus the previous Basel III basis as well as a number of other refinements. This resulted in a substantial uplift in the ratio from 161% to 189% as at 31 December 2019. We have applied for the use of the iterative risk margin and the accounting consolidation method. Either of these applications, if approved, will further have positive impact on our actual ratios. And once it is approved, will allow us to update and communicate updated target ranges for OML. We have performed substantial work to try and understand the impact of the crisis on our business under a number of different scenarios. These scenarios differ in severity with the L-shaped scenario being the most severe. In the L-shaped scenario, we assume, for example, cumulative GDP contraction to 2022 of about 12%, equity market levels remaining below 70% of 2019 levels, significant excess tests as a result of COVID-19, fairly substantial business interruption claims, elevated persistency losses and outflows and a large operational loss. As set out on this slide, our capital position remains resilient under all 3 scenarios with the capital position ending at the lower end of the optimal range in the L scenario. We are therefore focused on a number of management actions, including immediate expense savings, longer-term efficiencies relating to simplification and digitalization as well as further initiatives to improve balance sheet efficiencies. I will now hand back to Iain for his concluding remarks.

Looking to the future right now is, of course, clouded by unprecedented uncertainty. I do believe, however, that we've succeeded in containing the worst fallout from this contagion and that we are adequately prepared for a fairly rapid return to a more normal operating performance. On pandemic-related claims, I might just mention that our experience points to our COVID-19 funeral claims having peaked in July, although it may be too early to say that the supplies on underwritten business as the claims cycle there tends to lag. Given the extreme market and economic uncertainty caused by this pandemic, Old Mutual's medium-term targets, which you will know well, are of little relevance to our short-term performance right now. Therefore, we intend replacing several medium-term targets with shorter-term targets. On RFO, instead of targeting a GDP-plus growth figure, we believe that by improving efficiencies through simplification and digitalization, we can realistically achieve run rate expense savings of ZAR 750 million with a stretch target of ZAR 1 billion by 2022. In due course, we will give guidance on an RFO range we will be targeting for the full 2020 year. Delivering positive net client cash flow also remains a key focus for us. Guided by these new short-term targets, as a management team, we're pursuing the second phase of our response to COVID, transitioning our way out of this crisis. In this phase, we're concerned with getting adviser productivity back to normalized levels as rapidly as possible. If anything, our market-leading digitalization drive has only been boosted by the pandemic, and we will continue to forge ahead with this to improve our customers' access and their experiences of Old Mutual. Digitalization is already translating into simplification, and this will be actively pursued in H2 while we focus more acutely on improving efficiencies and driving down costs. Like almost every other business in the world, we haven't been able to maintain anything like business as usual in the past few months. For those businesses like Old Mutual, which have proven their resilience during COVID, I do not believe there ever can or should be any going back to business as usual. We thank you again for your interest and your virtual attendance today. We look forward to receiving any questions that you may have. Operator, if we could please check for any questions on the line.

[Operator Instructions] The first question comes from Michael Christelis of UBS.

Can you hear me?

We can, Mike.

Three questions, if I can. You've mentioned a few times that you've got what you think are market-leading digital capabilities. I mean I wonder if you can maybe just elaborate on -- maybe give us a few examples or just what gives confidence that you are actually market leading relative to some of your peers on your digital capabilities. So that's the first question. Secondly, you talked about a ZAR 750 million cost-saving target. What is that as a percentage of your sort of forecast costs for 2022? I'm trying to understand to what degree you're expecting to cut cost. And is that sort of fairly represented across the businesses? Is it more skewed towards the life-covered businesses or some of the other areas of the business? Maybe if you can give us a bit more color there. And then lastly, just on the COVID provision. Just to make this clear, it sounds like you've only provided for worsening experience this year. Am I right in saying that you haven't allowed for, firstly, a second wave of the virus? And thirdly -- and also -- sorry, that you haven't allowed for anything beyond December. So what you're implying here is that by December, we should have gone back to normal from a mortality and persistency perspective. I just want to make I understand what -- how exactly you've calculated your provision.

Thanks, Michael. Heloise, if you could maybe tackle the digitalization question.

Can everybody hear me?

Yes.

So we have been on a journey for the last 2 years where we have invested quite heavily on our technology infrastructure and renewing our business, and thereby, it was just at the right time for us when the COVID-19 happened that we were more than ready to take up some of these challenges. We have changed and actually put in a new system, which is MyOldMutual, which is on the website. We've enabled our customers to do business now through USSD, WhatsApp. And we're actually growing that particular platform quite aggressively. We've done extensive work on data and data lakes and data platforms. And all of that work we've been doing the last 18 months is now delivering those capabilities to us. And we have quite an extensive program for the rest of the 2 to 3 years. Just also to answer the question on the work that we did on the savings. As we're going to be -- as we're using these technologies, we are digitizing our business completely where our customers and advisers can actually do their services digitally. And that will enable us then to reduce the cost of our businesses by the digitization. And we've done extensive work on robotics and AI. And all of these things allow us a -- and I wouldn't call it cost cutting, I would call it a better price point, but actually a better customer and individual experience through using these key technologies aggressively.

Thanks, Heloise. Yes, maybe, Michael, if I can build on it as well. The Old Mutual Protect proposition that we've rolled out has also got both an adviser set of tools attached to it, which effectively enables straight-through processing of the vast majority of our risk business, which is something else that most of our competitors can't emulate at this stage. Casper, do you want to talk to the provisions question?

The provisions or the cost savings, Iain?

I think Michael asked both. So COVID means, both. Yes.

Okay. Yes. Okay. I'll do both. So Michael, so yes, we -- firstly, the -- we were comfortable with the level of our reserving in any event. And as you can see in the experience variances, we were generating positive experience variances pre any of these assumptions. And so we have to -- in taking our thoughts around that, we are starting from a comfortable position. We've made it very explicit that the extra provisions that you've raised are intended to cover variances from the long-term assumption in the second half. But we believe that those have been set at a fairly prudent level. And if we do then see elevated this or continued persistency going into 2021 or 2022, we'd have to look at it at that point. But we'd have to look at it relative to the experience we're seeing on the rest of the book, which, as I said, has been fairly positive. On expenses, the -- and this is just a back of the cigarette box calculation. They're greater by 3% to 4% of the cost base. And you'll note that Iain mentioned like-for-like. So that would exclude any acquisitions or changes we make to the business, so that's like-for-like on the current base.

But I think also, Michael, just to maybe go into one more aspect of your question on that one, we would expect to see savings coming from both the, I guess, effectively, from a spread of all our businesses. That's not necessarily focused in one particular business unit.

The next question comes from Warwick Bam of Avior Capital Markets.

Iain and Casper, 3 questions from my side. Just first, can you isolate the lost income from premium relief in the first half? And can you give us what your expectation is for the second half? And I'm assuming you've included an expectation in that COVID provision. And then in your COVID provision, can you just split out persistency versus mortality and morbidity losses for H2 or negative experience variances? And then my last question, in terms of the quantum of COVID-19 restructured debt in MFC, what is the quantum? And how have you treated that, those restructured loans, from an accounting perspective? Are they sitting in default or current?

Casper, would you like to lead again and perhaps pull in any other members of your team?

Yes. Is Nico on the line? No. Okay. Then I -- if you just give me a second, I'll try and get that detail for you. Maybe ask another question in or get another question.

Okay. Operator, while Casper is checking for that detail, if we could perhaps check for the next question.

Warwick, you're welcome to press * and 1 again to come back into the queue. [Operator Instructions] The next question comes from Francois Du Toit of Renaissance Capital.

Just want to check. Can you hear me?

Yes, we can hear you.

Okay. Excellent. Just first question, can you give a sense of what your normal level of new investment strain is? The reason I'm asking is because I think you have changed the definition of new business costs a bit in this period and also it increased quite a bit second half of last year. So should we expect on -- should go back in the second half of last year's level in the life business? Obviously, it's been very elevated in this time because of the inability to spread those new business costs. Just then second question relates to the positive experience variances, which added around ZAR 500 million to earnings in this half year in the life business. Obviously little bit unexpected given that mortality contributed in all of the South African businesses to positive variances as well. Can you explain that? Maybe it's because you -- I don't think you've had this level of positive variances in the recent past. And can you ascribe it to lockdown accidental death savings? I know the Medical Research Council has shown that there's been lower total deaths in South Africa up to about 15th of June than expected then in the past and I would suggest that you could benefit that in the period from that as well. And also related to the positive experience variances, experience variances in the life business was about twice as positive as it's been in the last few half years. Can we expect that to recur going forward? In other words, can we start accounting for the level of positive earnings contribution that we've seen in the last year or this half year then? Also, in terms of the short-term insurance business, if you could maybe give us a sense of how much of the good motor insurance experience do you expect to recur as people continue to work from home and utilize motor vehicles less? So would you expect certainly strong numbers in the second half of this year as well, for example? And then what has your recent experience been in that regard?

Okay. Thanks, Francois. Maybe I'll start with a brief introductory comment on the mortality variances, then ask Garth to talk to the motor book, and then we can go back to Casper for the rest of your question as well as Warwick's earlier question. On the mortality side, yes, we certainly did see a reduction during particularly the level 5 lockdown in April of, let's call it, the unnatural causes of death aspects, which would have contributed a portion of the mortality variance. Effectively, the pattern was that we had a significantly positive experience roughly up until the middle of June, and then a fairly material spike in claims from that point onward. So that's pretty much the picture on the mortality side. On expenses, I think the positive expense variance is something that I think we have done a lot of work on. And I would think that given the focus and the discipline continuing around expenses, as we've indicated, one would expect to hopefully maintain that kind of a position. Garth, do you want to perhaps chip in on the motor book before we go back to Casper? See if we can get Garth. Garth, are you there? Possibly not. Okay, if we're not able to ask Garth, then I'll deal with that question as well. I think, Francois, what we have seen is that the claim rates on motor, in particular, but also on things like household break-in related issues and that kind of thing had a significant reduction, but it correlated almost totally to the level of lockdown. So at level 5, they're at the lowest. At level 4, there was a bit more. At level 3, a bit more, et cetera. So I would expect that most of that experience will normalize, if you like, to precrisis levels if we get back to a level 1 kind of scenario where the economy is operating again. To the extent that there's permanent consumer behavior, I guess that will come through. But I wouldn't think that one would predict that it's necessarily the most likely outcome. It's a possibility. So Garth is indicating he's on, but we can't hear him. Garth, do you want to try again and see if you've got anything to add to that answer? Okay. We're having problems with Garth's sound. Casper, can I go back to you for the earlier question and the balance of the question from Francois now?

Yes. So Francois, just remind me if I miss something out. So if we just look the makeup of the additional short-term provisions. In PF, most of that relates to mortality, a little bit on mobility and some additional provisions -- provisioning for persistency in the second half. But the bulk of that was for mortality. In Mass and Foundation Cluster, the bulk of the additional provisions relates to mortality only. And then the Corporate segment, we have raised additional mortality in the second half, so I'd suggest in the second half. And then we've raised an additional amount for retrenchments in the second half. And then there were some small persistency adjustments in the rest of Africa, which gets you to the total provision of ZAR 1.36 million. We also have made some VIF adjustments where -- for the second half where we expect some impacts on VIF from a persistency perspective. Those weren't made in IFRS because we feel that with the IFRS provisions that we've already raised, we sufficiently reserved at 30 June. So I hope that answers your question.

And Francois, does that conclude your question?

Yes. Just on the new business strategy, if you can give us a sense of how elevated it was in this half year relative to normal levels. Should I use second half of last year's level as a normal level? And sorry, how fast can you -- do you think you can return new business strain to normalized levels because, I guess, your fixed cost still remains relatively high and activities low in new business production?

So Iain, I don't -- maybe Clarence and Kerrin should give a respective view of their businesses?

Yes. Clarence, would you like to go?

Yes. Can you hear me, Iain?

Very well. Thanks.