Old Mutual Limited (OMU) Earnings Call Transcript & Summary

Hi there, and welcome to Old Mutual's Capital Markets Day. My name is Celiwe Ross. I'm the Human Capital Director and your MC for today. I've just been reading the recent updates we've put out to the market about how we are recovering from the impacts of COVID-19. What we are excited to share with you today is how we are transforming the business along the themes of rectify, simplify and amplify, which continues to gain traction and momentum into 2021. I'm sitting here under this beautiful tree at Old Mutual House in Cape Town, reflecting on our 176th anniversary this year and that it has been 3 years since our return back home to Africa. We have not changed our belief and confidence in the growth opportunities of this great continent and together with our core values, this has driven our truly mutual strategy. A strategy that aims to responsibly build the most valuable business in our industry. During the course of today, we will be sharing how we will become our customers' first choice. The combined strength of our portfolio will meet and provide for our customers' financial needs and deliver shareholder value. But more on this later. My ride is about to arrive. I'm excited about today's virtual event and the engagements that follows. We, as the Old Mutual executive team have listened to all your feedback and have designed today with that in mind. Now that we here, I'll see you in a bit. A warm welcome to everyone joining us from across the globe. I would have loved to see you all in person today, but we're so grateful that you're able to dial in from your respective locations. Thanks to the wonders of technology, we are fortunate enough to be able to host a safe, yet intimate Capital Markets Day. With me today and studios are our presenters and sitting in their respective homes is our executive team who are on hand to answer all your questions. Today's agenda has been developed to ensure that you walk away with an understanding of our truly mutual strategy, which we summarize as Caerus. We won't cover all of the Old Mutual businesses today, but we'll do so at our next Capital Markets Day in November. For today, though, we will be sharing the strategic drivers of our growth our approach to winning back market share in the Mass and Foundation Cluster, Personal Finance and Wealth Management and most importantly, how we will deliver value to our shareholders, all supported by our investments in technology and digital innovation. But before we begin, some housekeeping. You would have noticed that each section is followed by a 5-minute Q&A. [Operator Instructions] We will aim to answer as many questions as we can within the allocated time and for the questions that we are unable to get to, we will respond to you directly in the coming days. Lastly, some of you may not be able to stay with us for the full afternoon, which is why the presentation and full webcast will be made available on our website in the Investor Relations section. Our first speaker today hardly needs an introduction. In a sector that is known to be complex, his steely leadership and knack for simplification has created a path for Old Mutual to lead. What I appreciate about his leadership is that he is decisive, empowering and steady during moments of crisis. His 28-year career with Old Mutual gives him the unparalleled knowledge of our business, where it comes from, but also where it needs to go. Please welcome the architect behind our journey of rectifying, simplifying and amplifying our business, our Chief Executive Officer, Iain Williamson. Iain you have the stage.

Thank you Celiwe, and welcome, everybody. The last time we hosted a Capital Markets Day like this was in the middle of 2018, immediately before managed separation, and our primary listing of Old Mutual on the JC on the 26th of June that year. It's been 3 years of a great deal of our people and change. But ironically, we've experienced a lot more stability since the beginning of 2020, despite COVID ravaging the world. But as the old saying goes, never let a good crisis go to waste, what doesn't kill you indeed makes you stronger. We appreciate your time. We'll make it well worth your while, and we've got a lot to get through. We're going to talk about where we were, where we were going and why we've decided on a new, better and different destination. We're going to share with you the journey we've been on since 2018, and what we've been up to in the background. And we're going to explain how we see our role in the world and make you believe in all of this as much as our staff, management and I do. But as with all good stories, except those by Tarantino, we're going to take a few steps back to the beginning. 2018 was the year President Ramaphosa took office as South Africa's President, remember Ramaphoria. It was also the year that Harry married Megan and the year that wildfire swept through California. And it was the year that we launched our so-called 8 battlegrounds strategy. We put the 8 battlegrounds in place as an initial call to action after the listing, recognizing that they were at best, medium term in nature and that we would need to do more work to refine our longer-term strategy. Just as a reminder, the battlegrounds were to defend and grow market share in the Mass and Foundation and Corporate segments as well as in Personal Finance; to improve the competitiveness of our Wealth & Investment business; to continue the turnaround that was underway at Old Mutual Insure; to effect our East African business; and improve returns from our Rest of Africa portfolio; to win the war for talent; to refresh the technology offering; and finally, to deliver cost efficiency to the tune of ZAR 1 billion or more by the end of 2019. And things were going well. While we needed to do more to optimize our balance sheet and deliver earnings growth, our SAM solvency ratio was at the top end of our target range at 175%. We were paying dividends in line with our dividend policy, and we had declared a special dividend as well as completed a successful share buyback. Also, we were clearly on target to deliver on our cost savings target in 2019. However, by the end of 2018, it was already clear that the 8 battlegrounds would run out of road in a few short years. Work started on a longer-term strategy to replace the battlegrounds in due course. We needed something that would accommodate the accelerating pace of change and technological innovation. We realized that we needed to embrace speed and agility while establishing a victory condition, that could keep us pointed in the right direction as we move forward. And so we find ourselves faced with a choice of two parts. Do we continue to fight based on rules that made sense in a world that had probably ceased to exist. And look, we all know the cliche examples of Kodak, Blockbuster and the CD store around the corner that failed to respond to innovative change. We don't want to be that company or indeed that industry. Or did we use this opportunity to redefine ourselves, our direction and our business in this new world, to take this as an opportunity to be better and leap higher? We had to decide what we wanted to focus on, where we wanted our center of attention to be and what we wanted our business to become. It seemed that our focus was on too much of the what and not nearly enough of the why. It is a tactical approach without a long-term lens. We understood how to move forward, but not what to move toward. There was no guiding principle or what we've called a victory condition. We needed to revisit our purpose. What role did we play in the lives of our customers, and more importantly, could we and should we be more? After all, as we've seen over the last few years, customers' needs are evolving rapidly. The expectations are being formed by the interactions with online retailers and instant availability on social media, where we blindly carrying on with business as usual in the hope that they still need us. We developed our refresh strategy as a result of this process of self reflection. And we agreed that we exist to ensure that we champion mutually positive features for our customers and stakeholders every day. We do this through the breadth of solutions that we offer to assist customers to navigate their life financial journeys. A fundamental decision was to make our strategy unapologetically all about our customers. And the belief that if we become our customers' first choice, we will deliver a quality business and sustainably best-in-class returns to our shareholders. So we agreed to define becoming customers' first choice as our victory condition. Now I know this is the same idea we've shared before when we introduced our key strategy. And I don't want to take you through this all again. but I just felt it was important to remind you of that victory condition. We believe that in order to win in the future, we need to think and deliver differently from how we've done in the past, the metrics of success are changing. Yesteryear's businesses were measured on and judged on hard numbers, profits, margins, targets, turnover, almost at the expense of everything else. The Gordon Gekko School of Business, we agreed is good. Businesses that survive this crisis and the next will be the ones that customers want to survive, they decide. The constantly changing dynamics of the market reflect the need for a level of healthy paranoia rather than complacency. These businesses are built around people and purpose. This graph summarizes research from Prem Shamdasani, who is the Professor of Marketing at the National University of Singapore. On the vertical axis, you can see the maturity of the value proposition and the horizontal shows a distinction between companies that are market driven and companies that are market drivers. And essentially, what this research says is that sustainable differentiation and market leadership is driven by the intangible features that drive customer experience. In building out our strategy, we're paying explicit attention to these intangible aspects. Personalization and individual relevance are top of our agenda, and we've invested in the data and analytic capabilities to drive this both through enabling intermediaries better and through our digital engagement platforms. And we're not the only ones. Global brands like Amazon and Unilever are defined by their customer centricity, and have become icons to deliver value in very different context from each other. Truly Mutual gives us a purpose and a license to be more, to achieve more meaningful things, to move from the tangible, to including the intangible. We're heading in, in our hats on this, our hats are collective futures, careers and bonuses. We recognize that in the world of today, there may be many paths to victory. We've defined a clear destination and defined it around our customers and around delivering differentiated experiences to them. And I'm pleased to say that our staff have been energized and galvanized by being part of driving this agenda. It's grounded in the belief that if we win our staff, they win the customer and customer value will create shareholder value. And this is getting noticed by our customers and the market at large. According to Brand Finance in 2020, our brand has increased to being #4 in South Africa across all industries, and we're the only African insurer in the global top 100. So what does this all mean in practical terms? It means fundamentally understanding customer needs and paying points and creating products and solutions that meet those needs, making them available when they're needed and wherever that may be. This means customers are substantially more likely to buy from us and to buy more from us. It differs from the typical large corporate format of our way or the highway. It means hyperscaling the technology and data available to engage with customers, partners, brokers and the world in ways that are faster, more efficient and save metric tons of time and money that can be better spent elsewhere. It means giving our employees the tools and support to get us to our big picture, our victory condition, to make all this a reality, that means creating a company worth no equal. To add further concrete to the strategy, we've defined value drivers for our business. These won't be surprising to you: Revenue growth, operating margins, capital efficiencies, competitive strength, execution and delivery. These are the levers that directly drive shareholder value. maximizing after-tax returns and delivering long-term sustainable return on capital. All of the initiatives we deliver in pursuit of our victory condition of becoming our customers' first choice are interrogated for their contribution to these value drivers, and they only get the go ahead if they shift the dial. In each of the presentations that follow, look out for the examples and linkages to these value drivers. This is a big strategic shift and it's long term. So we realized we needed to break this down and define a tactical 3-step approach that can be understood and executed throughout our business and be allowed to how we approach every aspect within it, procedures, product, solutions, systems, et cetera. Together, the 3-steps create a flywheel effect. They're not strictly linear or sequential, but they do logically follow each other. These steps are first, rectify, then simplify and then amplify. Rectify means looking at every aspect of our business to fix where needed, get it back on track, reorient it, bring it in line with our thinking, and this lays a foundation. Once we've done this, we simplify, which is looking at processes and products, simplifying them, eradicating waste and duplication, consolidating and harmonizing. And this gets us to the point where we can amplify, that is to exponentially increase the results, the effects and the value that we can launch from this sturdy, simplified foundation to deliver for customers and ultimately, for shareholders. So is it the right approach? The results say yes, resoundingly so and objectively so. I'll share a few examples, and the teams during the course of the afternoon will share more. In Personal Finance in 2020, we agreed to take a back-to-basics approach. A while back, we had decided to enhance our customer experience, almost at the expense of our intermediaries and the other parts of the value chain. And we realized that this had been a misstep, heads the back-to-basics approach, where the focus now is on the entire value chain and on the quality of life improvements for our intermediaries. I'd like to draw an analogy to a very different industry. Nokia made great phones, or so everyone thought at the time, for all their customers. They used a customer-centric approach, got customer input onto the phone design and design now simple phones that worked well. Apple came along with the iPhone and took a completely different approach, developing a developer-centric platform that allowed the developers in turn to create the most customer experience through the millions of apps that have been developed for that platform. And we all know who won that little tussle. Thus, similarly, we've consciously focused on improving our intermediary propositions during 2020 and the first part of 2021. We've delivered enhancements to advice and practice management tools that are digitalized and device agnostic. We've put an explicit focus on the ease of doing business with us and on service levels to intermediaries. We've created more transparency and better data to enable improved customer and cross-servicing, ultimately, a full partnership approach. Before the end of 2020, we were settling our intermediaries with our data tools and paper-based ways of working in delivering on our life cover products. We also had a Personal Finance product range that was running on end-of-life technology. So we decided to build Old Mutual Protect. So what exactly is this Old Mutual Protect. The tech folk in the business would describe this as a rebuild of the entire life company from front to back, from policy administration to premium collection, to claims payment, to policy changes, to servicing to underwriting, to valuations and to finance, complemented by a set of tools for intermediaries to assist customers to find optimal solutions. The actuarial folk would describe this as a holistic modular set of products, which is comprehensive, supported by a complementary set of tools that allow intermediaries to tailor solutions to customers' unique situations. Hence, our advert shown on the screen. The system is paperless with a high degree of straight-through processing. For me, the biggest impact of Old Mutual Protect has been that it delivers a step change in intermediary and customer experience in a critical area of our solution set. And it's been a great success, with 705,000 benefits in force at the end of May. And in fact, right now, an Old Mutual Protect product is sold every 5 seconds. Based on how hugely successful Old Mutual Protect has been, we will be taking the same approach with other products and product sets. And this will allow us to amplify. Ultimately, it's our job to take the momentum we've created through rectification and simplification and amplify the impact of this for the benefits of our customers and shareholders. One example of this that comes to mind is our Old Mutual Rewards program. Having only been launched in July 2018, it's already grown to over a million members in under 3 years, and it's probably the fastest-growing financial services rewards program in South Africa. A key focus of the program is driving cross-servicing opportunities and encouraging members to meet more of their financial needs with Old Mutual. Customers who are members have 30% higher average needs met and take our products for additional financial needs at twice the rate of nonmembers. We're also tracking the impact on persistency and are already observing lower lapse rates among Old Mutual Rewards members on our recurring premium policies. Our rewards program also supports more frequent effective engagement with our customers, enabling them to feel closer to our brand. We've had customers creating videos on YouTube, explaining the benefits of Old Mutual rewards. It's fantastic to see. Rewards works entirely online and as such has been the key driver of digital adoption amongst our customer base. Every one of those 1 million members has full access to all our online portals, be that the web, mobile app or WhatsApp. The successful launch of our rewards program has established a strong platform that we expect to leverage in many different ways into the future to amplify our competitiveness and our relevance to customers. And you're going to hear more examples of this approach as we go into the more detailed presentations later. You'll hear how the base we built in technology is significantly altering experience at every touch point in our business. Not to mention enabling some massive cost savings that we can reinvest into our business. Clarence and Sunny will show how this approach has given us back our competitive edge in the Mass and Foundation Cluster, and how we're taking back our market share. And you'll hear from Fahad and Kerrin about the work they've done in Wealth Management and Personal Finance to reenergize the adviser and customer experience and change our offering. And as I made clear upfront, the whole reason for these changes is to create value for customers and investors. The approach guides our direction, but our numbers measure how successful we've been at implementation. So what did the numbers say? As you saw in our trading update issued yesterday morning, we've materially recovered our profitability when compared to last year. Bearing in mind, the first quarter of last year was not significantly impacted by COVID. Results from operations is up 52% year-on-year to the end of May. Our VNB margins are 2.1% with VNB almost 15x what it was in 2020. This is driven by higher volumes as well as an improved mix of business. Expenses have been tightly managed, increasing only 1% year-on-year, and gross written premiums are up 6% across our short-term businesses with improving underwriting margins. Net client cash flow in wealth and investments has been strong. Although, our overall net client cash flow has been impacted by death claims related to COVID. I particularly want to highlight the sales numbers from the Products and Benefits directly in the scope of the Old Mutual Protect product range to illustrate the impact that our focus in this area has had. In Personal Finance, issued risk sales are up 40% year-on-year and are 5% above the equivalent period in 2019. In Mass and Foundation Cluster, issued funeral and risk sales are similarly 6% ahead of 2019 levels, although overall sales are dampened by lower credit life sales. Last night, we also announced the unbundling of our 12.2% of Nedbank that we hold in the Old Mutual Emerging Markets business. We will unpack further details of this transaction later this afternoon. At this stage, we've not refreshed our outlook statement that we provided with our year-end results. Clearly, given the movement in equity markets, you might think that it would be appropriate for us to do so. However, given the uncertainties around the current wave 3 of COVID, we've decided to defer this update to our interim results. You should note, that management's targets set by the Board for incentive purposes are to recover profitability to at or above 2019 levels, as soon as possible. And are significantly more stretching than the outlook we provided with our year-end numbers. We've spoken about where we were going and why we changed trajectory. We've also spoken about what we've done since. The path ahead is just as important. We will continue to invest in our core businesses for growth, especially in future distribution growth and in enhancing and building out our core capabilities. We will invest in enhancing our transactional offering to further increase our relevance to customers. We will amplify the Old Mutual Protect chassis by adding both savings and income product ranges to it. We will complete the migration of our foundation technology to the cloud to give us the flexibility we need to continue to digitize the current business. And we will seek the right investments to enhance growth in our short-term insurance, Africa and China businesses. And of course, we will constantly enhance update and rework the customer and the intermediary experience. In the next 2 hours, I'll ask you to listen to the things we've done as each of our presenter team shares their actions with you. View each one with the victory condition in mind, coming our customers' first choice with the value drivers as the engine and view the presentation through the eyes of customers. You are, at the end of the day, our customers too, and you know the kind of company you want looking after your financial life. We are intentionally building better businesses with purpose at the core, the actual real needs of customers front and center and an understanding of the entire value chain, through markets, intermediaries and families. There's a lot of value getting created. There's energy and excitement in the business with purpose uniting our staff in pursuit of a clear victory condition, with execution proceeding at pace in an agile fashion that allows us to adapt to changes in the environment and in customer needs, and it's paying dividends. So I'm delighted that we appear to be back on the right track again. And I'm excited to leave you in the hands of my fantastic team for now. I'll see you again later.

Thank you, Iain. I think the point you made about the evolving needs of our customers over a period of time is really important. We do not serve the same customers we did when we were formed 176 years ago, so we definitely cannot be the same company we were back then. Sizwe, who is our Head of Investor Relations, joins me now on stage to tell us about the types of questions that he is seeing in our chatbox.

Thanks, Celiwe. So far, we're seeing questions around our trading update that we released yesterday and also which was really well received by the market. We're also seeing quite a lot of positive reaction to yesterday's announcement that we're unbundling a portion of our holding in Nedbank, that we hold through mutual emerging markets, as well as, also our recent share price performance. There are also some questions for our international investors, around the impact of the third COVID-19 wave is having on our business in South Africa and the activity that we're seeing on the ground. I'd like to really encourage everybody to use the chat box on your screen. And please note that whilst we're virtual, we do really want to engage with you, to hear your thoughts and answer your questions. We do have our full executive team here at your disposal.

Awesome. It's great to hear that there's so much activity in the chat box and a reminder to all of you that you can only ask questions if you are not in the full-screen mode. So please keep those questions coming. And Sizwe, thanks. We'll see you a bit later. Here is our first question for today. This one is for Iain Williamson. Talking about evolving with our customers, could you take us through some of the positive outcomes of your truly mutual strategy?

Good question. I think the most obvious one right now is through a combination of the Old Mutual Protect launch, where I genuinely believe that we are offering a much more flexible and customized solution to customers in that area of our business. As I said in my presentation, we will seek to do that across our entire product range. So customers are getting a much more personalized solution to their risk needs. And we're seeing the results of that in our sales numbers for those particular products, as I've also spoken about. In particular, I think, notable personal finance sales 40% up in that particular area year-on-year and already above 2019 levels. So we're really encouraged by both the, if you like, the theory of matching the products to customer needs as well as the outcome that we're starting to see through -- see come through practically in our numbers.

Thank you, Iain. Sounds like the personalization of outcomes for our customers is critical, and it's starting to yield results I have a second question for Garth Napier, who is the Managing Director of Old Mutual Insure. Garth, your question is as follows: Old Mutual Insure remains a fairly small part of your business. How much of a role does growing or integrating the property and casualty play if you want to help customers protect their prosperity?

Afternoon to all our participants. Yes, I think it definitely does play a core part of our offering. We have about a 4% penetration into the personal finance customer base, and we're working with Kerrin and her team expanding and increasing our penetration of short-term insurance into that customer is at the heart of making sure we can offer a holistic financial offering for our customers. We've made good strides in the last few years. Our Personal Finance customer base has been the fastest growing within our Mutual Insure, but there's still a big opportunity to increase that 4% going forward.

Thank you very much. Definitely, a focus on great and collaboration opportunities more importantly, more immediately with Personal Finance but continuing to grow those collaborations with our short-term insurance business. I am told we have another question. And it's a question for Iain Williamson. Between your 5 value drivers, where do you see the greatest opportunities? And how would you measure success?

Thanks for that question. I think the main opportunity is in growing the revenue line faster, but in a more -- in a way that focuses as much on margin as on the revenue growth itself. So it's a balancing act. I'm not sure you can take a single one of those lines ever in complete isolation. If we cut our margins to negative, the revenue line would probably shoot through the roof. So it is a balancing act, I think, between ensuring that we retain that differentiation to ensure that our products don't become completely commoditized to protect margin and then driving the revenue line through investments, as I've said, in the distribution and in our core capabilities.

It certainly sounds like quite a balancing act, but one we're very consciously aware of. I have another question now for Raymond Berelowitz. He is the Director of Customer Solutions. Ray, your question is as follows. What is the annual cost of the rewards program?

Since we launched about 3 years ago, we've paid out about ZAR 150 million. In terms of points costs and the program costs us about ZAR 30 million to ZAR 40 million per year to run from an operational cost perspective.

It seems like we've come to the end of our questions for this section. Ladies and gentlemen, thank you very much. I encourage you to continue to place questions in the chat box. Any that haven't been responded to in this section, we will get back to you in the coming days. We will now take a 10-minute break. Please enjoy a leg stretch and be back in time to continue with the program. [Break]

Welcome back, everyone. I hope you're all ready for the next session, which happens to be one I am very excited for and not because the presenters and I are all engineers. Please welcome our very own global citizen, Chief Information Officer, Johnson Idesoh, who has an unparalleled love and commitment for the African continent. Johnson spent the bulk of his career with British multinational insurance company, AVEVA, where he held various roles. Initially, he was involved in the relaunch of the general insurance business from a change and technology perspective. Thereafter, he progressed to the IT Strategy and Architecture Director, accountable for 33 countries and focused on modernizing AVEVA's technology to support an improved customer experience. Johnson sees technology as a key enabler to deliver our truly mutual strategy. Customer, adviser and employee expectations have shifted fundamentally influenced greatly by technology. We are rapidly digitalizing our customer, adviser and employee experience built on cloud-based solutions like Amazon Web Services, Microsoft and Workday. This gives us a level of business agility and reach to customers, advisers and employees previously not possible with prior generations of technology. Johnson is joined by our Chief Digital and Data Officer, Vuyo Mpako, whose infectious smile seems to have been part of Old Mutual much longer than the 3 years he has been with us. Vuyo's appointment is part of our strategic imperative to strengthen our ability to respond to digital disruption and development, underpinned by data. This was essential for the sustained growth of our organization over the years to come. With over 20 years experience in banking, insurance and telecommunications Vuyo is known for his entrepreneurial thinking being a digital disruptor and a leading innovator in the industry. The incredible growth we've seen in both our technology and digital footprint is largely due to their efforts and I cannot wait to see what they both achieved in the coming years. Digital and data innovation is a cornerstone of our growth strategy, and we've been making great strides in improving the adviser experience. For our customers, this means more ways to connect with us, greater choice and, of course, improved service, all at a lower cost. Here are Vuyo and Johnson to talk about our purpose-led technology journey.

Thank you Celiwe. Good morning or afternoon to everyone on the line. My name is Vuyo. And hello, I'm Virtual Vuyo, here to help Vuyo introduce this segment. Thanks Virtual Vuyo, now let's get started. We are sure you are all aware of the evolving operating environment has seen a widening of the competitive landscape, introducing a plethora of new nontraditional competitors and products at an accelerating rate. Now the ability to differentiate ourselves as a company is becoming more and more difficult, but it is also more important to do so. The experiences we create for our customers and our advisers is how we're setting ourselves apart not only from other insurers, but from other companies, be they telecom providers, fiber providers or retailers. Now just let me, this may mean different forms of AI, chatbots and the like, but enough for me. Let's hand over to Johnson.

Hello, everyone. At Old Mutual, we use the phrase purpose-led technology. By this, we mean technology focused on the outcome of excellence in customer and adviser experience. We know that remarkable experiences underpin loyalty with our customers. And we know that Old Mutual is a strong and trusted brand. Purpose-led technology helps us reinforce experience, build our brand and ultimately accelerate our business performance. Over the next 20 minutes Vuyo and I, will share with you how we have set ourselves up to succeed, what the future looks like for Old Mutual customers and advisers and the benefits that we achieved through this approach. Now our approach to digital is premised on Caerus, which you heard Iain speak about earlier. This is from ensuring that our solutions help our customers to making sure our products are easily accessible and that we consistently land from customer behavior through data, amongst others. This is underpinned by our value drivers, many of which digital, is at the core of delivery. I told mutually, we are always here for our customers and our communities in times of need. Many companies say this, but let me use some examples that I think reinforces time and time again. At the start of the pandemic, recognizing that frontline health care workers needed us. We offer them life cover for free. As wave 2 of COVID-19 swept across South Africa early this year, we set ourselves a target of paying 90% of all valid funeral claims within 4 hours of receipt. We could do this because of the investments we made in digitalization. Today, we pay over 98% of valid claims in under 4 hours, and that is not our end. More recently, when fire broke out on the slopes of Table Mountain in Cape Town, thousands were displaced from their homes. We opened our premises for the receipt of the daily essentials. I think more importantly than that, hundreds of our staff gave their time freely to package these in individual care packs, which are then distributed to those in need.

Now what Johnson has said is important. It is important because it sets the tone to why we do what we do. Our success will be driven by doing what we do because it is right. Ultimately, that is what Old Mutual digital transformation is about. It's doing the right thing for the right reason, viewing our business through the lens of our customers and not the other way around, and becoming the Old Mutual our customers and advisers want and need us to be. What this means is that our customers will look forward to an improvement in the ease of use and understanding of our products and services, increased product relevance, and the business we look forward to, a reduction in waste and clutter. I am sure you want to understand the business impact of this.

We delivered our 2017 to 2019 commitment of ZAR 1 billion in run rate savings. And we set out a commitment to deliver a further ZAR 750 million between 2019 and the end of 2022. We will achieve this by digitalization of our customer and adviser experiences. -- driving excellence in experience and lowering operating costs. In total, this amounts to ZAR 1.75 billion over the 5 years. This short video introduces you to how we are doing this in our retail life businesses. [Presentation] Before we get to where we are currently, I think it's important to reflect on where we've come from in 2019 as we focused on rectifying. We started this deliberate digitalization of customer and adviser experience built upon a robust and focused technology platform at that time. In October 2019, we announced our strategic partnership with Amazon Web Services as our preferred cloud provider. Today, 1/3 of our in-scope IT estate in South Africa is running on AWS. Our entire business in Ghana is running on AWS. More important than the percentage are the critical applications we now have running on the cloud. including, for example, our life insurance platform that supports our businesses in the rest of Africa, our fund management solutions in South Africa and Namibia and our customer correspondence solution, just to name a few. The scale and the reliability of the underlying infrastructure enables us to deliver better customer and adviser experience, and it is 25% cheaper on average per workload. We are not only migrating applications to the cloud. This platform is also being used to unite our customer data on shackling on the silos and disparate platforms that we previously had across our business. As I speak to you today, our data platform has all the information relating to our over 6 million customers in South Africa, and we are using it to power MyOldMutual which we will talk about later. We're following the same path across our other markets. Information for 4.5 million customers is on the data platform for 8 other countries right now. We will complete our migration to the cloud by the end of 2022. In parallel, we are deliberately investing in our own technology capability with 15% of our IT colleagues holding at least 1 AWS certification today.

Now the onset of the COVID-19 pandemic meant that our teams increasingly work from home. This resulted in lower footfall and occupancy in our buildings. We responded quickly, and we're able to renegotiate vendor contracts, which had the impact of reducing our variable costs. We understand that this type of operating model is likely to be with us into the near future. And rather than wait, we're implementing a hybrid working model that will allow us to continue to leverage our investment from enabling people to work from home as well as maintain the benefits from lowering our occupancy rates by between 30% to 40% in the long term. We anticipate that the cost savings from optimizing our footprint will contribute 16% of our overall cost savings targets. To date, we have already delivered 36% of these savings. Now some of what I've taken you through in the past few minutes is reflective of the immense effort we have taken to simplify our business structures. As I said earlier, we have a heritage of separate business segments and products. Now this has over time resulted in an intimate understanding of our markets, but with duplication of customer and adviser experience and operational inefficiency. Now we took these deliberate steps to converge and digitalize our customer experiences. This will make everything easier, easier to engage, understand and see value. Simplicity also reduced costs for Old Mutual and thus our customers. Externally, one of the things we have done is to drive a unified experience. We have migrated from multiple websites with different technology platforms to assemble website experience in 10 markets across the group. Kenya, Nigeria and Ghana will also go live in the next few weeks. The app experience has also changed as we have reduced our mobile apps from 7 to a single one. 20,000 downloads of this new app were made in the first month. Now the MyOldMutual app provides simpler access and greater functionality to our customers. Our retail live customers in South Africa are now able to submit death and funeral claims across all of our digital platforms, being WhatsApp, USSD, the web and the app. For the current taxes in South Africa, we are now sending more than 700,000 tech certificates through a mixture of WhatsApp and in-app notification on the MyOldMutual platforms. Reminding customers to obtain these critical documents on our digital platforms rather than wait for them in the post. Our more than 1 million rewards customers are soon going to be able to spend their rewards points on MyOldMutual app to buy prepaid, all retail vouchers, including electricity, airtime, clicks and jet or we can donate these points for a cause of their choice. Please have a look at MyOldMutual app. [Presentation] Now we have already seen traction. At the end of Q1 2021, 25% of all debt and general claims received were submitted on our digital platforms. This is up significantly from less than 1% at the end of Q1 2020. We have seen an exponential rise in active digital users. More than 500% increase in South Africa and the lower yet still impressive 238% across all our businesses outside of South Africa. At the end of Q1 2021, we had over 1 million active digital users across our markets in South Africa and RoA. Now this means 1 in 10 of our customers are currently engaging digitally, and we are confident that this number will continue to improve.

I'd like to round off our section on simplify by describing some other examples of what we've delivered across the group. In our short-term insurance business, Old Mutual Insure, a very frequent customer touch point is vehicle glass breakages. We set ourselves the target of 15 minutes is all it takes from the first notification by our customer to contact from an approved glass supplier for the replacement. We partnered with 3 glass suppliers integrating our processes and data. The efficiencies we have realized not only mean that customers are contacted within 15 minutes of a claim, but also that our claim handlers can now handle 515 claims each month versus 280 previously. We have restructured several existing relationships with our IT partners, focusing on some key strategic partnerships, I've already talked about one. This streamlining has already realized 10% of our 2019 to 2022 savings target. We do this through modernization, as I've mentioned, with the cloud migration, removing duplication and building a stronger IT delivery capability. We have also in partnership with our human capital team modernized and for the very first time, introduced a single employee platform across the group. Every one of our employees uses this solution to manage their career at Old Mutual. It is driving improved engagement and ultimately enables our employees to better serve our customers. In closing this section on rectify and simplify, Vuyo and I have, I trust giving you specific examples of how we've digitalized our business for our customers, advisers and indeed employees. And how this is also lowering cost, enabling us to meet our R750 million commitment by the end of 2022.

Now let's transition to how we are building on what we have been doing in simplify to how these will amplify value for our shareholders. Now we don't want to make promises about things we're not sure about. So if we tell you here, it is because we are confident and we're as excited about these developments. Now before the end of the year, there are a number of things that will be amplifying our experiences while continuously reducing rental costs.

I'll now spend a few minutes describing a little bit more about our work enabling our advisers. Our advisers are critical partners in the experience our customers have with Old Mutual. Our flagship protection proposition is deployed to all of our Personal Finance and Mass and Foundation Cluster advisers in South Africa and Namibia. Advisers and customers have highly configurable solution options for their risk cover. At the end of May, we had more than 700,000 policies in force. This is increasing by 60,000 a month, and each day, more than 8,000 advisers use the platform. I think most importantly, 80% of these policies are issued to our customers on the same day submitted. We are proud to say that this platform is a finalist in the IDC Global Awards for excellence in digital innovation. This is not the first time Old Mutual is featured in awards. Our integrated wealth platform was a BCX finalist last year as well. We will now extend this platform to the savings and income range. And remember, I spoke about the data platform earlier. In the second half of this year, we're using this to take a step further to provide advisers with an improved and enriched customer summary. This will assist them to better serve our customers. This next video shows how we've extended this digitalization approach to servicing with our advisers. [Presentation]

We have a best-in-class money management capability 22seven. This is inspired by leading international financial institutions like BBVA, voted best digital platform by the list of Forrester. During the second half of this year, -- We plan to scale 22seven solution using our group assets, starting with MyOldMutual, allowing us to deliver on our objective of creating leading solutions for our customers and advisers, while simultaneously increasing our revenue opportunities. As I noted earlier, customers are key to our success, and we will, therefore, be focusing on driving adoption of MyOldMutual across all our countries of operation. In our endeavor to ensure that each and every customer achieves the financial goals, we have launched 2 pilots where we'll digitally show how our customers are tracking against their goals. and reward them for taking corrective actions when necessary. Now select retail customers in South Africa can now see track risk goals on MyOldMutual app and initiate an advice conversation with the advisers. We expect that the combination of rewards and goals will help us achieve our brand promise of achieving positive features for our customers, strengthen the customer-adviser relationships, increased revenue by new cross-sell and upsell opportunities as well as improved retention. We are targeting a rollout of 200,000 customers, which will drive improved sales and retention in South Africa. We have also started implementing machine lending models to drive smarter decisions. Now leveraging automated AI platforms such as DataRobot, we are now able to conduct machine learning models across our customers in South Africa, Kenya and Zimbabwe. Now we use these models to determine propensities for our customers to affordably fulfill a financial need. This has the proportion of low affordability scoring customers taking up a product and reduces our overall acquisition costs. We're also using automation to drive efficiency. To date, we have developed over 175 robots across 50 processes. Now these robots execute 44,000 transactions a week and have totaled over 9 million machine minutes per annum. Now this equates to more than 120 working years if one person were doing the task. At a minimum, we plan to double this by the end of 2022.

Vuyo and I have explained our philosophy that customer and adviser experience, enabled by purpose-led technology is also lower in cost. We believe that this will grow our revenue by attracting and retaining new customers through renewed access efficiency, simplicity and relevance. It will improve our margins by streamlining the inefficiencies inherent in a non-digital legacy organization. It will improve our capital efficiency by enabling us to make the right decisions through better data, and we believe that this focus on customer and adviser experience is a competitive strength for Old Mutual and will drive our future performance. From an execution and delivery perspective, we've shown you a number of capabilities that have already been delivered, which position us for the long term. Please welcome [ Vorto Johnson ] to help us conclude.

Hello, everyone. I am Vorto Johnson. I hope you enjoyed what Vuyo, and [ Vorto ] Vuyo and Johnson shared with you today. Our ultimate aim is to be the business Africa wants and actually needs us to be. We do this for our customers, investors, advisers, colleagues and communities because it is the right thing to do. We thank you for your time. And thank you, Vorto Johnson. We will now take your questions. Over to you, Celiwe.

Thank you, Johnson and Vuyo and your cobots. After every presentation that you guys do, I continue to be inspired by how you keep pushing boundaries to create an extraordinary adviser and customer experience. which, at the end of the day is for the financial well-being of our customers and the communities we operate in. Let's have a look at the chat for questions. This is a question for both Johnson and Voya. I will start with Voya on Teams. We've seen good download figures for the insurance app elsewhere in the world, but sometimes low utilization, such as Aviva. How regularly do customers interact after they download your apps and join the loyalty program? We I'll take you first.

Thank you. Celiwe, and that's a really, really great question. It is for exactly that reason that we will deliberate about not benchmarking against downloads, but also benchmarking around what we call the active digital users because ultimately, the activity is what really, really matters. So we've seen a really, really great progress. We're excited about the progress that we've seen over the last couple of years or so. I think when we started the web in South Africa, this is at the end of 2018 in South Africa, and less than 80,000 active users at the end of 2018. At the end of 2020, we've reached 400,000 in South Africa. In fact, at the end of Q1 this year, between South Africa and the rest of the Africa market, we've reached over 1 million active digital users. So effectively, 1 in almost 10 of our clients onto engaging with us on the digital platform. And our strategy is not just the app. It is all the app as well as platforms like USSD and WhatsApp because we are cognizant of the scenarios where clients can't afford their mobile apps. And so WhatsApp and USSD are also critical part because they enable those quick on the gold card transactions.

Also, I think it's great to highlight that it's not just about the download figures for the app, as you rightly said Vuyo, but very much about how we connect our customers to all of our solutions. I hear we have a question directly for Johnson this time. So let's take that question. Johnson, we have seen some of our competitors pursue partnerships with mobile telecommunications players and banks as part of their new world distribution journey. Do you have a philosophy on partnerships? Or will you go it alone on this digitalization journey. I'll put the second part of this question to Vuyo on the digitalization journey, but would love to hear Johnson's thoughts on partnerships?

Thank you very much for that question. This is real Johnson, not the Virtual Johnson here. Hopefully, as you've seen from the presentation, we absolutely believe in pursuing partnerships I think in this world of digitalization, it would be naive to think that we could deliver everything by ourselves. So just as you've seen, we mentioned one, very strong strategic partnership. We obviously explore these continuously, whether it's with banks or with telcos. So to answer to your question, do we expect to do these through partnerships is absolutely, yes, building more and more of an ecosystem for the benefit of our customers and our advisers.

Thank you, Johnson. And possibly back to you, Vuyo, just to talk about how we continue to drive that alternative distribution channel using digital means?

Yes. Thanks Celiwe. I think there's 3 parts, that we think of, there is one where, I think, which is what we spoke about quite a lot today, our deliberate focus on our own digital platforms that we've been building out, which is being a big part of the conversation today. But in parallel to that, there is also a lot of work that we do both in South Africa as well as the markets outside of South Africa or in partnering with banks, mobile operators and [ telcos ] And I think, in fact, we've had a lot of success outside of South Africa than we have in SA on some of those partnerships, whether it is in Malawi, whether it's in Kenya and markets in Nigeria, in Nigeria, Ghana and some of them even in Eswatini with the likes of MTN. And then on the far extreme, we're also starting to really think about new digital platform and ecosystems that clients are going to be kind of working on. So how do we play both on our own digital platforms, partnering with other retailers, banks, mobile operators, but also think about building new platform opportunities in new ecosystems in the future.

Thanks very much Vuyo. We have one final question for Johnson. Johnson on the AWS partnership, does the security cost and responsibility lie solely with Amazon Web Services? Or is it shared between AWS and Old Mutual. If it is shared, what is the sharing percentage -- And how much of that will be in ZAR terms on Old Mutual's books?

Thank you. We take information security very, very seriously at Old Mutual, and we have done for a very, very long period of time. In fact, we've had an embedded security philosophy as part of everything we do in technology for very, very long. So we think of this as something that is never outsourced. It remains our accountability. Clearly, we use the very best solutions that AWS has to offer, but we would similarly use the same capability from any of our partners. So it remains our responsibility, and we're very clear on that. I would love to make just one comment on the question we were asked about usage of our mobile apps. I often remind people that 9 out of 10 of our customers used to physically have to come to branches to engage with us. So we're focused on making our apps frictionless and easy and I was at Aviva when we started the digitalization journey there. And I think that's one critical difference between what you'll see in places like Aviva in the U.K. and the digital solutions that we are delivering.

It's a great point and a great place for us to in. As I told you, I was greatly looking forward to the session with Vuyo and Johnson and their cobots. It's a big part of Old Mutual, where we are doing great things every day.

Today, 1/3 of our in-scope IT estate in South Africa is running on AWS. Our entire business in Ghana is running on AWS. More important than the percentage are the critical applications we now have running on the cloud. including, for example, our life insurance platform that supports our businesses in the rest of Africa, our fund management solutions in South Africa and Namibia and our customer correspondence solution, just to name a few. The scale and the reliability of the underlying infrastructure enables us to deliver better customer and adviser experience, and it is 25% cheaper on average per workload. We are not only migrating applications to the cloud. This platform is also being used to unite our customer data on shackling on the silos and disparate platforms that we previously had across our business. As I speak to you today, our data platform has all the information relating to our over 6 million customers in South Africa, and we are using it to power MyOldMutual which we will talk about later. We're following the same path across our other markets. Information for 4.5 million customers is on the data platform for 8 other countries right now. We will complete our migration to the cloud by the end of 2022. In parallel, we are deliberately investing in our own technology capability with 15% of our IT colleagues holding at least 1 AWS certification today.

Now the onset of the COVID-19 pandemic meant that our teams increasingly work from home. This resulted in lower footfall and occupancy in our buildings. We responded quickly, and we're able to renegotiate vendor contracts, which had the impact of reducing our variable costs. We understand that this type of operating model is likely to be with us into the near future. And rather than wait, we're implementing a hybrid working model that will allow us to continue to leverage our investment from enabling people to work from home as well as maintain the benefits from lowering our occupancy rates by between 30% to 40% in the long term. We anticipate that the cost savings from optimizing our footprint will contribute 16% of our overall cost savings targets. To date, we have already delivered 36% of these savings. Now some of what I've taken you through in the past few minutes is reflective of the immense effort we have taken to simplify our business structures. As I said earlier, we have a heritage of separate business segments and products. Now this has over time resulted in an intimate understanding of our markets, but with duplication of customer and adviser experience and operational inefficiency. Now we took these deliberate steps to converge and digitalize our customer experiences. This will make everything easier, easier to engage, understand and see value. Simplicity also reduced costs for Old Mutual and thus our customers. Externally, one of the things we have done is to drive a unified experience. We have migrated from multiple websites with different technology platforms to assemble website experience in 10 markets across the group. Kenya, Nigeria and Ghana will also go live in the next few weeks. The app experience has also changed as we have reduced our mobile apps from 7 to a single one. 20,000 downloads of this new app were made in the first month. Now the MyOldMutual app provides simpler access and greater functionality to our customers. Our retail live customers in South Africa are now able to submit death and funeral claims across all of our digital platforms, being WhatsApp, USSD, the web and the app. For the current taxes in South Africa, we are now sending more than 700,000 tech certificates through a mixture of WhatsApp and in-app notification on the MyOldMutual platforms. Reminding customers to obtain these critical documents on our digital platforms rather than wait for them in the post. Our more than 1 million rewards customers are soon going to be able to spend their rewards points on MyOldMutual app to buy prepaid, all retail vouchers, including electricity, airtime, clicks and jet or we can donate these points for a cause of their choice. Please have a look at MyOldMutual app. [Presentation] Now we have already seen traction. At the end of Q1 2021, 25% of all debt and general claims received were submitted on our digital platforms. This is up significantly from less than 1% at the end of Q1 2020. We have seen an exponential rise in active digital users. More than 500% increase in South Africa and the lower yet still impressive 238% across all our businesses outside of South Africa. At the end of Q1 2021, we had over 1 million active digital users across our markets in South Africa and RoA. Now this means 1 in 10 of our customers are currently engaging digitally, and we are confident that this number will continue to improve.

I'd like to round off our section on Simplify by describing some other examples of what we've delivered across the group. In our short-term insurance business, Old Mutual Insure, a very frequent customer touch point is vehicle glass breakages. We set ourselves the target of 15 minutes is all it takes from the first notification by our customer to contact from an approved glass supplier for the replacement. We partnered with 3 glass suppliers integrating our processes and data. The efficiencies we have realized not only mean that customers are contacted within 15 minutes of a claim, but also that our claim handlers can now handle 515 claims each month versus 280 previously. We have restructured several existing relationships with our IT partners, focusing on some key strategic partnerships, I've already talked about one. This streamlining has already realized 10% of our 2019 to 2022 savings target. We do this through modernization, as I've mentioned, with the cloud migration, removing duplication and building a stronger IT delivery capability. We have also in partnership with our human capital team modernized and for the very first time, introduced a single employee platform across the group. Every one of our employees uses this solution to manage their career at Old Mutual. It is driving improved engagement and ultimately enables our employees to better serve our customers. In closing this section on rectify and simplify, Vuyo and I have, I trust giving you specific examples of how we've digitalized our business for our customers, advisers and indeed employees. And how this is also lowering cost, enabling us to meet our R750 million commitment by the end of 2022.

Now let's transition to how we are building on what we have been doing in simplify to how these will amplify value for our shareholders. Now we don't want to make promises about things we're not sure about. So if we tell you here, it is because we are confident and we're as excited about these developments. Now before the end of the year, there are a number of things that will be amplifying our experiences while continuously reducing rental costs.

I'll now spend a few minutes describing a little bit more about our work enabling our advisers. Our advisers are critical partners in the experience our customers have with Old Mutual. Our flagship protection proposition is deployed to all of our Personal Finance and Mass and Foundation Cluster advisers in South Africa and Namibia. Advisers and customers have highly configurable solution options for their risk cover. At the end of May, we had more than 700,000 policies in force. This is increasing by 60,000 a month, and each day, more than 8,000 advisers use the platform. I think most importantly, 80% of these policies are issued to our customers on the same day submitted. We are proud to say that this platform is a finalist in the IDC Global Awards for excellence in digital innovation. This is not the first time Old Mutual is featured in awards. Our integrated wealth platform was a BCX finalist last year as well. We will now extend this platform to the savings and income range. And remember, I spoke about the data platform earlier. In the second half of this year, we're using this to take a step further to provide advisers with an improved and enriched customer summary. This will assist them to better serve our customers. This next video shows how we've extended this digitalization approach to servicing with our advisers. [Presentation]

We have a best-in-class money management capability 22seven. This is inspired by leading international financial institutions like BBVA, voted best digital platform by the list of Forrester. During the second half of this year, -- We plan to scale 22seven solution using our group assets, starting with MyOldMutual, allowing us to deliver on our objective of creating leading solutions for our customers and advisers, while simultaneously increasing our revenue opportunities. As I noted earlier, customers are key to our success, and we will, therefore, be focusing on driving adoption of MyOldMutual across all our countries of operation. In our endeavor to ensure that each and every customer achieves the financial goals, we have launched 2 pilots where we'll digitally show how our customers are tracking against their goals. and reward them for taking corrective actions when necessary. Now select retail customers in South Africa can now see track risk goals on MyOldMutual app and initiate an advice conversation with the advisers. We expect that the combination of rewards and goals will help us achieve our brand promise of achieving positive features for our customers, strengthen the customer-adviser relationships, increased revenue by new cross-sell and upsell opportunities as well as improved retention. We are targeting a rollout of 200,000 customers, which will drive improved sales and retention in South Africa. We have also started implementing machine lending models to drive smarter decisions. Now leveraging automated AI platforms such as DataRobot, we are now able to conduct machine learning models across our customers in South Africa, Kenya and Zimbabwe. Now we use these models to determine propensities for our customers to affordably fulfill a financial need. This has the proportion of low affordability scoring customers taking up a product and reduces our overall acquisition costs. We're also using automation to drive efficiency. To date, we have developed over 175 robots across 50 processes. Now these robots execute 44,000 transactions a week and have totaled over 9 million machine minutes per annum. Now this equates to more than 120 working years if one person were doing the task. At a minimum, we plan to double this by the end of 2022.

Vuyo and I have explained our philosophy that customer and adviser experience, enabled by purpose-led technology is also lower in cost. We believe that this will grow our revenue by attracting and retaining new customers through renewed access efficiency, simplicity and relevance. It will improve our margins by streamlining the inefficiencies inherent in a non-digital legacy organization. It will improve our capital efficiency by enabling us to make the right decisions through better data, and we believe that this focus on customer and adviser experience is a competitive strength for Old Mutual and will drive our future performance. From an execution and delivery perspective, we've shown you a number of capabilities that have already been delivered, which position us for the long term. Please welcome [ Vorto Johnson ] to help us conclude.

Hello, everyone. I am Vorto Johnson. I hope you enjoyed what Vuyo, and [ Vorto ] Vuyo and Johnson shared with you today. Our ultimate aim is to be the business Africa wants and actually needs us to be. We do this for our customers, investors, advisers, colleagues and communities because it is the right thing to do. We thank you for your time. And thank you, Vorto Johnson. We will now take your questions. Over to you, Celiwe.

Thank you, Johnson and Vuyo and your cobots. After every presentation that you guys do, I continue to be inspired by how you keep pushing boundaries to create an extraordinary adviser and customer experience. which, at the end of the day is for the financial well-being of our customers and the communities we operate in. Let's have a look at the chat for questions. This is a question for both Johnson and Voya. I will start with Voya on Teams. We've seen good download figures for the insurance app elsewhere in the world, but sometimes low utilization, such as Aviva. How regularly do customers interact after they download your apps and join the loyalty program? We I'll take you first.

Thank you. Celiwe, and that's a really, really great question. It is for exactly that reason that we will deliberate about not benchmarking against downloads, but also benchmarking around what we call the active digital users because ultimately, the activity is what really, really matters. So we've seen a really, really great progress. We're excited about the progress that we've seen over the last couple of years or so. I think when we started the web in South Africa, this is at the end of 2018 in South Africa, and less than 80,000 active users at the end of 2018. At the end of 2020, we've reached 400,000 in South Africa. In fact, at the end of Q1 this year, between South Africa and the rest of the Africa market, we've reached over 1 million active digital users. So effectively, 1 in almost 10 of our clients onto engaging with us on the digital platform. And our strategy is not just the app. It is all the app as well as platforms like USSD and WhatsApp because we are cognizant of the scenarios where clients can't afford their mobile apps. And so WhatsApp and USSD are also critical part because they enable those quick on the gold card transactions.

Also, I think it's great to highlight that it's not just about the download figures for the app, as you rightly said Vuyo, but very much about how we connect our customers to all of our solutions. I hear we have a question directly for Johnson this time. So let's take that question. Johnson, we have seen some of our competitors pursue partnerships with mobile telecommunications players and banks as part of their new world distribution journey. Do you have a philosophy on partnerships? Or will you go it alone on this digitalization journey. I'll put the second part of this question to Vuyo on the digitalization journey, but would love to hear Johnson's thoughts on partnerships?

Thank you very much for that question. This is real Johnson, not the Virtual Johnson here. Hopefully, as you've seen from the presentation, we absolutely believe in pursuing partnerships I think in this world of digitalization, it would be naive to think that we could deliver everything by ourselves. So just as you've seen, we mentioned one, very strong strategic partnership. We obviously explore these continuously, whether it's with banks or with telcos. So to answer to your question, do we expect to do these through partnerships is absolutely, yes, building more and more of an ecosystem for the benefit of our customers and our advisers.

Thank you, Johnson. And possibly back to you, Vuyo, just to talk about how we continue to drive that alternative distribution channel using digital means?

Yes. Thanks Celiwe. I think there's 3 parts, that we think of, there is one where, I think, which is what we spoke about quite a lot today, our deliberate focus on our own digital platforms that we've been building out, which is being a big part of the conversation today. But in parallel to that, there is also a lot of work that we do both in South Africa as well as the markets outside of South Africa or in partnering with banks, mobile operators and [ telcos ] And I think, in fact, we've had a lot of success outside of South Africa than we have in SA on some of those partnerships, whether it is in Malawi, whether it's in Kenya and markets in Nigera, in Nigeria, Ghana and some of them even in Eswatini with the likes of MTN. And then on the far extreme, we're also starting to really think about new digital platform and ecosystems that clients are going to be kind of working on. So how do we play both on our own digital platforms, partnering with other retailers, banks, mobile operators, but also think about building new platform opportunities in new ecosystems in the future.

Thanks very much Vuyo. We have one final question for Johnson. Johnson on the AWS partnership, does the security cost and responsibility lie solely with Amazon Web Services? Or is it shared between AWS and Old Mutual. If it is shared, what is the sharing percentage -- And how much of that will be in ZAR terms on Old Mutual's books?

Thank you. We take information security very, very seriously at Old Mutual, and we have done for a very, very long period of time. In fact, we've had an embedded security philosophy as part of everything we do in technology for very, very long. So we think of this as something that is never outsourced. It remains our accountability. Clearly, we use the very best solutions that AWS has to offer, but we would similarly use the same capability from any of our partners. So it remains our responsibility, and we're very clear on that. I would love to make just one comment on the question we were asked about usage of our mobile apps. I often remind people that 9 out of 10 of our customers used to physically have to come to branches to engage with us. So we're focused on making our apps frictionless and easy and I was at Aviva when we started the digitalization journey there. And I think that's one critical difference between what you'll see in places like Aviva in the U.K. and the digital solutions that we are delivering.

It's a great point and a great place for us to in. As I told you, I was greatly looking forward to the session with Vuyo and Johnson and their cobots. It's a big part of Old Mutual, where we are doing great things every day.We will now be looking at our Mass and Foundation Cluster a major part of our business and one of our crown jewels. MFC, as we call it, consists of 3.5 million customers, and that number is growing. Here to take you through the full MFC multichannel strategy as the Managing Director, Clarence Nethengwe. There are a few people better suited to head up MFC than Clarence. He was in the [ Leeds ], so to speak, as a provincial general manager, then the General Manager for Sales and Distribution in MFC. Let's just say that he was a very good salesman, you know how persuasive lawyers can be. His experience leading the sales channel has made them acutely aware of what drives our sales force. He's joined by MFC's business transformation executive Sanelisiwe Nkuta, better known as Sane. Don't be fooled by soft-spoken and useful Sane. She's 1 of less than 30 black female actuaries in the country and as part of the team leading the organizational redesign of MFC to yield optimal customer and shareholder value. Please welcome Clarence and Sane.

Thank Celiwe.Thank you for that warm introduction. Sanelisiwe and I will today take you through the Mass and Foundation Cluster business, which is a critical business within Old Mutual Limited. The Mass and Foundation Cluster focuses on the low-income market segment, which is the biggest or largest market segment in South Africa. We will take you through the following: who we are and who we save. Our business strategy, the challenges we have faced over the past couple of years. Our responses to those challenges and the early results from our responses. And I will wrap it up by giving you key takeouts, which are centered around our strategy to solidify and amplify our growth targets. We use 2020 to rectify and amplify the business through deliberate management actions. Key to our approach is to leverage our existing assets which include our diversified channel and in particular our tighter adviser force. And our 3.2 million strong customer base leveraging advanced technologies and our rewards program to cross-sell and upsell to these customers. Sanelisiwe and I believe that we will provide enough context as to how we are positioning to deliver profitable growth in this market segment.

Thank you, Clarence, and good afternoon to our audience. Let's kick off by recapping the makeup of our business and the target market we look to service.

That's a very interesting observation because a lot of people tend to think we are a one-trick pony, who is forecast on selling insurance and mutual life. I always describe our business as a 4-in-1 business, made up of the following businesses: our foundation market business, which is focused on serving customers who and less than 8,000 and we provide them with group risk solutions and individual non-advice risk solutions. Then we've got our big retail individual business called retail mass market, commonly known as Old Mutual Group schemes and black communities. This is a market -- a business that serves a market that ends between 8,000 per month and 25,000 per month. We provide individual advisory solutions, simple saving solutions as well as simple lending and transactional solutions to this market. We also have our Old Mutual Finance business, which is our unsecured lending and banking business. And the newbie in our little group is called Old Mutual funeral services, which is basically a business that is going to help us to extend our distribution reach into a market that is booming in black communities that is conveying funeral insurance and various services. For us, that is very important because we want to tap into that strategic partnership. And I know Sanelisiwe is going to talk quite at length about it at the later stage.

Thanks, Clarence. I think what is important to note is we do have a stronghold in this retail mass market, but the market has viewed this as reducing over the past couple of years. Let's unpack this a bit. Prior to 2019, it was clearly a story of growth and this coincides with a new with the Head of Distribution. But post that, in 2019 and 2020, we do see that there were year-on-year reductions in the APE sales that we produced. The market has faced many challenges, but what was specific to the MFC environment that led to this decline?

Yes. Sanelisiwe, you make me feel like as if I'm superman, but the reality is that I'm not superman, the conditions that existed at the time when I was leading that distribution network was completely different from what existed over the past 3 years. Our market realities have been influenced by 4 key internal and external challenges. The first one is imaging an increase in competition from nontraditional players, such as banks and telcos. They have got large distribution networks and have got huge customer bases, and they are able from day 1 to deliver high volumes of non-advisory solutions, which they are distributing as a commodity. So it they have leveraged that in order to win in that space. Then secondly, it talks to the poor economic performance of South Africa's economy over the past 3 years. And the low-income market segment has experienced a brand of that economic downturn with customers experiencing in certain instance, up to 63% reduction in income. And I'm known to many of you who are here. We generate over 70% of our new business from existing customers. That is the reality of the space that we find ourselves because people are either increasing [ CAVR ] or including other people to be insured as part and parcel of their policies. So when there is a reduction in the disposable income, you will see a company like Old Mutual, which has got such a large customer base, reducing its new businesses. Thirdly, we experienced ineffectiveness in terms of our distribution force. We had high production numbers in terms of issued volumes. But these issued volumes were not being tanned into confirmed sales. which again links back to the economic performance as an issue, which was manifesting itself in high issue sales but not confirm sales. And then the last one is related to the products that we were selling. They were no longer competitive. They were inflexible because we had not rephrased them over a long period of time, Sanelisiwe.

While on the topic of challenges, I think it's best to address 2020. I know that our management team took very deliberate actions to try and rectify some of the challenges that we had faced in the past by making the most of the downtime that we faced?

Yes. So this next slide, it's my favorite slide in the entire presentation. And the reason why it is very interesting for me, you see a huge crash and then a nice bounce up back in Q1 of this year. Let me explain then why for me, I'm always intrigued by it and some misconception of what really happened in 2020. And I will unpaid. So face-to-face channels were -- and they continue to be our biggest trend. But face-to-face engagement with discouraged in 2020 due to the pandemic and the lockdown. So we had to look for alternative opportunities to reach the market. And part and parcel of doing that was to enable our channels to sell digital. But there was a period for over 8 weeks or 2 months, and you can see on that graph again. So productivity dropped to 0.3 end of April. And then it picks up again when the conditions will improve through easing of the lockdown. But then it flattens for a period of 2 months. What basically happened during that period and is represented by that rest cycle on that period. We took our tight adviser force through training on our new risk proposition, Old Mutual Protect. And Old Mutual Protect is not about just a product. It's also about the system that they were going to use to reach customers. And we also had to take them through device. So we lost effectively [ 0.5 billion ] of sales during that period. And I don't see it as a loss I see it more as an investment because I believe that we will recover those sales over a long period of time. So that for me, it's the exciting part about it because immediately after they have been trained. Then you see productivity shooting up. And today, as we speak, at the end of Q1, it was sitting at 6.25 lives or policies per week. And that for me is the good story about this graph in an easy way.

So Clarence, we made sure that we could recover effectively from 2020 and enabled a hybrid model that we can leverage going forward. Now with the awareness of these challenges, combined with the actions that we've taken, we still persist great strengths in how we do business.

Sane, I'm very optimistic that we'll reclaim our leading position because of 2 things that really set us apart. The first one is our integrated financial services strategy or IFS approach, and I'll talk a little bit about that at the later stage. And then the second one is about our more than 4 decades of in-built competitive advantages, which include our tight adviser force, the relationship that we have with stakeholders, our community outreach programs, the fact that we recruit our financial advisers from the communities and we send them back to the same communities. And an interesting fact that happens when we recruit from these communities and they go back to the communities, is that when they see something wrong in the communities, for example, if they go pass the school, and they see a broken window, -- They don't just simply go pass and behave if they don't see that as a broken window. They come to us and say, Clarence, we have got communities that have got broken windows and we go to those exercise to engage with customers. So surely, we can't just pretend as if nothing is happening. And as an organization, we engage with those communities and those schools or clinics and whatever, and we fix those things. That is why the brand Old Mutual Group scheme is very powerful in that market because we are fully embedded in those. So let me talk about our integrated financial services strategy that I mentioned earlier on. Our vision is to be South Africa's leading provider of integrated financial services to the Mass and Foundation Markets. Our intention is to deliver a one-stop shop because customers are looking for that. They're looking for a company that services all their financial needs under one roof. And that business must be a business that understands them and values them. And our solutions must be enabled by strong data and data analytics backed by strong technological advancement because in order to deliver an integrated financial services strategy, you need data, you need tech in order to understand what customers are looking for, what do they have, include behavioral economics to understand how they behave with the finances and likes. So it is in that we deliver those things as part and parcel of our integrated financial services. And this needs to be underpinned by our competitive advantage, which is appropriate propositions that are delivered through diversified channels. And this channel, by the way, are supported by strong branch net of over 368 branches in these communities. It is not about channels for the sake of channels. It must be channels that are managed strongly. And from a performance management perspective, we are unrivaled in the industry. For example, the tight advised productivity stood at 6.3 policies per week. Our direct telesales channels has got productivity levels of 12.9 policies. That is absolutely unrivaled in the market area. Since the advent of these nontraditional players such as the banks that I mentioned, we have started building a more nonadvised channels through digitalization, telesales and using lending consultants to start selling issues. We've got 1,600 lend out there that we're not selling insurance. Now we are leveraging all that. We are fighting back against these nontraditional players. And of course, our alternative channels have also been set up to diversify the business reliance on the tight adviser force. I just want to show you a very interesting graph on the next slide. which shows the strength of our integrated financial service model that it is working. This is reflected in the proportion of sales generated through our field channel versus the other channels. The others have increased their contribution of APE sales from 44% in 2018 to 54% in 2020. So remember I said to you the 1- to pony, that is exactly it. You guys or a lot of people are there, they think 80% of our sales come from worksites, but it proves you only 46% of those sales are coming from worksites, the other 54% from the other channels. Furthermore, if you look at the next graph, you will see something very interesting in 2020 when our tight adviser force was locked up, it could not do sales either because of the lockdown or when we're training them. The other alternative channel able to deliver R1.4 billion of sales in 2020. So if we were only reliant on the tight adviser force and worksite, there's no way we would have delivered that R1.4 billion extra sales. So it shows that our strategy of diversifying our channels as well as IFS is really, really working.

Definitely because we have now created multiple entry points for our customers across their numerous life stages. What our experience has shown is that customers are a lot more loyal when they hold a wider product basket with us, hence, our integrated financial services strategy. What you see on the graph on this slide is that as a customer increases the number of needs that we need for them, we see better persistency from that customer, especially for customers who have been with us for longer than 2 years. You can see that as you move from 1 to 2 needs, there is a significant increase. And the further along you move across the need spectrum, the better it becomes. To this end, we are targeting to increase our proportion of our current 3.2 million customers with 2 or more needs serviced by Old Mutual from 33% to 50% of our current customers over the next 10 years. Let's take a look at how we are then going to do this through the lens of our value drivers.

So Sanelisiwe, I always say you can have IFS, you can have all needs met and everything. If you're not growing your revenue, it doesn't make sense. So it is intended to grow our revenue through the retention of our customers, getting new customers, cross-selling to existing customers and those that have come on board, upselling to them, making sure that all their needs are met and we get right quality revenue into the organization. And that is underpinned, of course, by strong distribution channels that are diversified. And the products themselves need to be refreshed and must be appropriately priced in order for us to get the right margin. What is also important for us is to grow our share of the risk solution market, thereby delivering good risk VNB margin, particularly funeral and underwritten life. Let me pause a little bit on the underwritten life part, Sanelisiwe. And I know you're going to talk quite a lot later on about under underwritten life. I go to communities, attend funerals go to parties, because I'm a townships boy, and I always go back to the townships. These are my people, and they come to me and say Clarence, you and Old Mutual, we are always selling funeral, funeral, funeral into our space. Surely, when you have cashed out that funeral policy, that is the end of it and our children are left with no legacy whatsoever. Please can you provide the right solutions. That is the reason why is Old Mutual, we have started a movement called Plus Life where we want to shift more and more into underwritten life. And Sanelisiwe is going to talk quite a lot about it at the later stage. And of course, cost optimization remains a core forecast of what we do. So I am convinced that by playing to our strength and executing our integrated financial services approach, we will grow our premium income, our net interest revenue, our noninterest income and our transactional income at market-leading rates. Our customers ultimately, Sanelisiwe, receive mass bank with us. They must be ensured by us, and we need to make sure that they save their money with us. And if they don't have money, they need to borrow from us. Everything must happen under one roof.

And for that to happen, Clarence, we need to ensure that we take the right proposition to the market, which is made up of the correct product as well as engagement style. You've already spoken to how we've refreshed the risk product over the past year, but we need to also ensure that we continue to take steps to reach our customers in a manner that is most convenient and simple to them. Vuyo has spoken to how we have enabled digital servicing through USSD and WhatsApp, which is bearing fruit, with 25% of our funeral claims being received through this medium. We are also looking to amplify our reach into the nonadvice space through the launch of 2 new channels in 2020. The first, leveraging our existing lending consultants in our retail branches, as you mentioned earlier was over 368 branches that house 1,600 lending consultants who were equipped with our non-advice risk product. The second is a foundation market-specific worksite channel. Both these non-advised channels will focus on selling to the foundation market, the customers that earn below R8,000 because this is where we have a very low penetration of 11% in our current customer base. and a huge opportunity exists. Where does this leave us overall? We have effectively continued to build a new kind of integrated financial services company. new for us, new for South Africa, and we are built strong with over 40 decades of strength, but we're also building to be flexible such that the next stress that comes to us, we can handle better than ever. We also believe that the offering we are taking to customers is most optimal. It is flexible, it is competitive, and we will continue enhancing that, especially on the savings and investment side. All of this enabled by the latest technology. The results are already quite encouraging. As at May 2021, we had overtaken our pre-COVID numbers on the risk sales which is significant. On the credit life and savings slide, we are still seeing the numbers below that level. So overall, our sales are slightly behind, but I still believe that this is such a tremendous recovery, which will continue, also on the back of our productivity recovery. Now the question is, are we chasing growth for the sake of growth or is it about being profitable as we grow our market share? -- and no doubt about it, we need to deliver profitable market share growth. No matter what we do, it seems like the perception from the market is that our profits will continue thinning in the face of increased competition. but we wanted to spell this because we are not in a game of playing price wars with the others. That is the reason we are pushing the jewel play in the advice and non-advice space. such that the customers who want to are not willing to pay for advice and the benefits that come from it can be serviced by us. As such, we are looking to increase the number of underwritten sales as we head into 2023. This will make up a bigger proportion of our book. All of this is measured best through our VNB margin. The key drivers of our VNB are productivity, product mix, premium collection mechanism and expenses. For the first time, what we're showing to you as our investment community is the product split of our VNB margin such that you can truly understand how our different products within our basket contribute to our reported VNB. As you can see, historically, we have showed a very healthy risk VNB margin. That has been stronger than our traditional competitors. On the savings side, it is in the lower end range which makes sense because that is how the savings propositions are set up. Also, we saw a much higher proportion of savings in our competitors. And this contributes to how the reported VNB moves from the risk high to the range that we have shown historically of about 13%. In the long run, we expect the total VNB margin to be in the range of 69% as we continue to target an increased proportion of risk sales with the underwritten focus while still meeting our customers' needs with a suitable savings product, which will be refreshed in 2022. The mix of these products contribute to how we efficiently run our business. To that end, we are also reviewing our remuneration structure to find a sustainable balance between fixed and variable incentives across our channels to ensure that we can manage the outcomes that we want to deliver. As you can tell, we are being a lot more deliberate about managing the trade-off between price, volume, quality and the expenses that come with generating the volumes that we bring. That is the reason I say it is about profitable market share growth. While here, let's quickly look at the lending book and how that pans out. Over the past 2 years, we have been telling you the market about how we have been focused on responsible lending, updating our scorecard practices and pricing. This has led to the reduction in our loan book size, which we are now looking to manage for quality margin rather than an unsustainable margin on a large base. To this end, we will also ensure that infrastructure that backs the lending book is appropriate for where we are headed. And we will look to bring our net lending margin around the range of 11% through our responsible lending practices. It's not only about the short to medium term, but also ensuring long-term sustainability. We want to make sure that clients that we can build a business that one day in 20 years' time, when you're a retire and you're sitting on your rocking share deep and limpopo, you can look back with pride. And we have a number of actions in the pipeline that are also worth mentioning. We will continue building a stronger IFS offering by applying the same paint brush that was used on Old Mutual Protect to our savings and investment proposition that we'll launch next year to ensure that we continue meeting our customers in the optimal manner. We're also looking to grow transactional account holders to 5 million by 2030. This will be done through a number of actions, which also includes updating the front end that customers engage with. On the nonadvice front, we want to increase the reach into our foundation market. We will continue to look for appropriate partnerships in the market, specifically the Old Mutual funeral services, which is in conversation with some really interesting partners in the undertaking space that have a great reach into the market that we want to play into. In addition, we will look to leverage the white labeling capabilities that we have internally such that retailers can also provide these nonadvised products to their customers. In light of knowing that our customers who have more needs met with us are more persistent. The rewards program looks to incentivize customers to increase their financial needs with us, which links powerfully with our IFS strategy. Securing the customer in this way drives increased customer lifetime value for the shareholder. We will leverage the 70% of over 1 million existing customers on the rewards program, which belong to the Mass and Foundation Cluster as well as over 245 nonexisting customers that have signed up on the platform, the majority of which are within our segment. This will be done by building off data analytics, behavioral economics and all the capabilities that data and digital will continue to build for Old Mutual such that we can cross-sell and upsell into the segment. With that being said, I think this provides enough clarity on what we need to execute now to ensure that you can look back with pride when our customers and investors reap the benefits in the future.

Sane, it's a very exciting strategy. And I can safely and confidently say to the investor community that we have a very clear growth strategy. Our integrated financial services strategy extracts customer lifetime value through customers banking with us, as I said earlier on, borrowing from us, saving with us and being insured by us. And this -- they will be supported by the biggest distribution network in the financial services in South Africa, which we have strengthened and expanded and we will continuously innovate around it. I can also confidently say we will continue to deliver high risk margin. And I will repeat that again. We will continue to deliver higher risk margin, which is above the overall VNB margin. And let me tell you, Sanelisiwe, and I want the investor community, the analysts out there and the fund managers that are here with us. They need to know that we will be #1 but we will be a profitable #1. That for me, it's very, very important. And the reason why we will be able to do that and become #1, Sanelisiwe, is not because of the strategy only, but it is because of the great talent that we have in Old Mutual. Talent like yourself Sanelisiwe, there are a lot of Sanelisiwe, in our business. talented young people who are very good at execution of strategy. with the older generation have passed on to them that retail mass market or MFC ability to execute on a strategy and they will help us execute to do that. So you can be confident as you go back to report back to a line that we will deliver a reported VNB margin. In the range of 6% to 9% with a strong forecast on driving it to the upper end as quickly as possible. And I will repeat this again, we will drive it to the upper end as quickly as so we're going to wait for to who will do it as quickly as possible, but you need to do patiently. We will increase the number of our current 3.2 million customers who have more than 1 need met to 50% in 10 years' time, as Sanelisiwe mentioned because that's where the real valuable growth will come from. Growth won't come only from insurance only it comes from making sure that you meet all the financial services needs of the customer. We will win in terms of extracting as much value for our shareholders through that integrated financial service strategy. And lastly, we will, through responsible lending, stabilize our net lending margin at 11% in the medium to long term. That is the strategy. that I have signed up for and my management team and everybody in the business have signed up to deliver and we will deliver. Mark my words on that.

Thank you, Clarence and Sane. It certainly sounds like you have a clear plan to grow MFC's transactional customer base to 5 million by 2030. There's enormous value potential and the improvements we have made to our intermediary relationships will certainly help us achieve that potential. I'm told we have a large number of questions for Sane and Clarence, and we're going to kick into it immediately. Clearance, do you think we should be concerned with emerging competitors in MFC?

Well, definitely, we have to be. We can't ignore the competition that is out there. In particular, those who are now providing funeral insurance as a commodity. We have spoken about it when we were presenting that we have seen the emergence of nonadvised players and most of them are in the banking space who are leveraging their distribution network to provide nonadvised solutions, in particular funeral insurance. So we have to be concerned, and we have to make sure that we've got strategies to counter that. And I'm quite confident that we have articulated to you today a strategy that speaks to how we are already counter, not how are we, but we're already countering that [indiscernible] that is coming from the competition. Because we realized that in the period 2018 to 2020, because we're sort of slow of the blocks. They were able to get into some of our new business market share, but we are countering that. So we are definitely keeping a strong eye on to that and we are not ignoring it to you.

Thank you, Clarence. Great to hear that we are countering and focusing on that nonadvisor competitor base. Let's see what our next question is. And this is for Sanelisiwe Nkuta. Sane, do you have an expectation of how the digitalization drive of the adviser process could improve adviser productivity. I'll send this question to Clarence. Do you have an expectation of how the digitalization of the adviser process could improve adviser productivity? Karen, over to you.

Yes. So we did a piece of web by good friend Karen, as part of our adviser digitalization, enabling the project -- So what came out of that is that we are likely to see 60 hours to advise team through the digitalization of the advice -- And in the MSE space, in particular, we could increase productivity by something like 0.5 policies per adviser per week. And that will probably also give us additional APE of around 66,000 to adviser on an annual basis. And of course, VNB will also improved as a result of that because they will have more time to get more sales and will have eliminated some of the expenses that are part and parcel of the current manual [indiscernible] processes that they are currently involved in. We will now be looking at our Mass and Foundation Cluster a major part of our business and one of our crown jewels. MFC, as we call it, consists of 3.5 million customers, and that number is growing. Here to take you through the full MFC multichannel strategy as the Managing Director, Clarence Nethengwe. There are a few people better suited to head up MFC than Clarence. He was in the [ Leeds ], so to speak, as a provincial general manager, then the General Manager for Sales and Distribution in MFC. Let's just say that he was a very good salesman, you know how persuasive lawyers can be. His experience leading the sales channel has made them acutely aware of what drives our sales force. He's joined by MFC's business transformation executive Sanelisiwe Nkuta, better known as Sane. Don't be fooled by soft-spoken and useful Sane. She's 1 of less than 30 black female actuaries in the country and as part of the team leading the organizational redesign of MFC to yield optimal customer and shareholder value. Please welcome Clarence and Sane.

Thank Celiwe.Thank you for that warm introduction. Sanelisiwe and I will today take you through the Mass and Foundation Cluster business, which is a critical business within Old Mutual Limited. The Mass and Foundation Cluster focuses on the low-income market segment, which is the biggest or largest market segment in South Africa. We will take you through the following: who we are and who we save. Our business strategy, the challenges we have faced over the past couple of years. Our responses to those challenges and the early results from our responses. And I will wrap it up by giving you key takeouts, which are centered around our strategy to solidify and amplify our growth targets. We use 2020 to rectify and amplify the business through deliberate management actions. Key to our approach is to leverage our existing assets which include our diversified channel and in particular our tighter adviser force. And our 3.2 million strong customer base leveraging advanced technologies and our rewards program to cross-sell and upsell to these customers. Sanelisiwe and I believe that we will provide enough context as to how we are positioning to deliver profitable growth in this market segment.

Thank you, Clarence, and good afternoon to our audience. Let's kick off by recapping the makeup of our business and the target market we look to service.

That's a very interesting observation because a lot of people tend to think we are a one-trick pony, who is forecast on selling insurance and mutual life. I always describe our business as a 4-in-1 business, made up of the following businesses: our foundation market business, which is focused on serving customers who and less than 8,000 and we provide them with group risk solutions and individual non-advice risk solutions. Then we've got our big retail individual business called retail mass market, commonly known as Old Mutual Group schemes and black communities. This is a market -- a business that serves a market that ends between 8,000 per month and 25,000 per month. We provide individual advisory solutions, simple saving solutions as well as simple lending and transactional solutions to this market. We also have our Old Mutual Finance business, which is our unsecured lending and banking business. And the newbie in our little group is called Old Mutual funeral services, which is basically a business that is going to help us to extend our distribution reach into a market that is booming in black communities that is conveying funeral insurance and various services. For us, that is very important because we want to tap into that strategic partnership. And I know Sanelisiwe is going to talk quite at length about it at the later stage.

Thanks, Clarence. I think what is important to note is we do have a stronghold in this retail mass market, but the market has viewed this as reducing over the past couple of years. Let's unpack this a bit. Prior to 2019, it was clearly a story of growth and this coincides with a new with the Head of Distribution. But post that, in 2019 and 2020, we do see that there were year-on-year reductions in the APE sales that we produced. The market has faced many challenges, but what was specific to the MFC environment that led to this decline?

Yes. Sanelisiwe, you make me feel like as if I'm superman, but the reality is that I'm not superman, the conditions that existed at the time when I was leading that distribution network was completely different from what existed over the past 3 years. Our market realities have been influenced by 4 key internal and external challenges. The first one is imaging an increase in competition from nontraditional players, such as banks and telcos. They have got large distribution networks and have got huge customer bases, and they are able from day 1 to deliver high volumes of non-advisory solutions, which they are distributing as a commodity. So it they have leveraged that in order to win in that space. Then secondly, it talks to the poor economic performance of South Africa's economy over the past 3 years. And the low-income market segment has experienced a brand of that economic downturn with customers experiencing in certain instance, up to 63% reduction in income. And I'm known to many of you who are here. We generate over 70% of our new business from existing customers. That is the reality of the space that we find ourselves because people are either increasing [ CAVR ] or including other people to be insured as part and parcel of their policies. So when there is a reduction in the disposable income, you will see a company like Old Mutual, which has got such a large customer base, reducing its new businesses. Thirdly, we experienced ineffectiveness in terms of our distribution force. We had high production numbers in terms of issued volumes. But these issued volumes were not being tanned into confirmed sales. which again links back to the economic performance as an issue, which was manifesting itself in high issue sales but not confirm sales. And then the last one is related to the products that we were selling. They were no longer competitive. They were inflexible because we had not rephrased them over a long period of time, Sanelisiwe.

While on the topic of challenges, I think it's best to address 2020. I know that our management team took very deliberate actions to try and rectify some of the challenges that we had faced in the past by making the most of the downtime that we faced?

Yes. So this next slide, it's my favorite slide in the entire presentation. And the reason why it is very interesting for me, you see a huge crash and then a nice bounce up back in Q1 of this year. Let me explain then why for me, I'm always intrigued by it and some misconception of what really happened in 2020. And I will unpaid. So face-to-face channels were -- and they continue to be our biggest trend. But face-to-face engagement with discouraged in 2020 due to the pandemic and the lockdown. So we had to look for alternative opportunities to reach the market. And part and parcel of doing that was to enable our channels to sell digital. But there was a period for over 8 weeks or 2 months, and you can see on that graph again. So productivity dropped to 0.3 end of April. And then it picks up again when the conditions will improve through easing of the lockdown. But then it flattens for a period of 2 months. What basically happened during that period and is represented by that rest cycle on that period. We took our tight adviser force through training on our new risk proposition, Old Mutual Protect. And Old Mutual Protect is not about just a product. It's also about the system that they were going to use to reach customers. And we also had to take them through device. So we lost effectively [ 0.5 billion ] of sales during that period. And I don't see it as a loss I see it more as an investment because I believe that we will recover those sales over a long period of time. So that for me, it's the exciting part about it because immediately after they have been trained. Then you see productivity shooting up. And today, as we speak, at the end of Q1, it was sitting at 6.25 lives or policies per week. And that for me is the good story about this graph in an easy way.

So Clarence, we made sure that we could recover effectively from 2020 and enabled a hybrid model that we can leverage going forward. Now with the awareness of these challenges, combined with the actions that we've taken, we still persist great strengths in how we do business.

Sane, I'm very optimistic that we'll reclaim our leading position because of 2 things that really set us apart. The first one is our integrated financial services strategy or IFS approach, and I'll talk a little bit about that at the later stage. And then the second one is about our more than 4 decades of in-built competitive advantages, which include our tight adviser force, the relationship that we have with stakeholders, our community outreach programs, the fact that we recruit our financial advisers from the communities and we send them back to the same communities. And an interesting fact that happens when we recruit from these communities and they go back to the communities, is that when they see something wrong in the communities, for example, if they go pass the school, and they see a broken window, -- They don't just simply go pass and behave if they don't see that as a broken window. They come to us and say, Clarence, we have got communities that have got broken windows and we go to those exercise to engage with customers. So surely, we can't just pretend as if nothing is happening. And as an organization, we engage with those communities and those schools or clinics and whatever, and we fix those things. That is why the brand Old Mutual Group scheme is very powerful in that market because we are fully embedded in those. So let me talk about our integrated financial services strategy that I mentioned earlier on. Our vision is to be South Africa's leading provider of integrated financial services to the Mass and Foundation Markets. Our intention is to deliver a one-stop shop because customers are looking for that. They're looking for a company that services all their financial needs under one roof. And that business must be a business that understands them and values them. And our solutions must be enabled by strong data and data analytics backed by strong technological advancement because in order to deliver an integrated financial services strategy, you need data, you need tech in order to understand what customers are looking for, what do they have, include behavioral economics to understand how they behave with the finances and likes. So it is in that we deliver those things as part and parcel of our integrated financial services. And this needs to be underpinned by our competitive advantage, which is appropriate propositions that are delivered through diversified channels. And this channel, by the way, are supported by strong branch net of over 368 branches in these communities. It is not about channels for the sake of channels. It must be channels that are managed strongly. And from a performance management perspective, we are unrivaled in the industry. For example, the tight advised productivity stood at 6.3 policies per week. Our direct telesales channels has got productivity levels of 12.9 policies. That is absolutely unrivaled in the market area. Since the advent of these nontraditional players such as the banks that I mentioned, we have started building a more nonadvised channels through digitalization, telesales and using lending consultants to start selling issues. We've got 1,600 lend out there that we're not selling insurance. Now we are leveraging all that. We are fighting back against these nontraditional players. And of course, our alternative channels have also been set up to diversify the business reliance on the tight adviser force. I just want to show you a very interesting graph on the next slide. which shows the strength of our integrated financial service model that it is working. This is reflected in the proportion of sales generated through our field channel versus the other channels. The others have increased their contribution of APE sales from 44% in 2018 to 54% in 2020. So remember I said to you the 1- to pony, that is exactly it. You guys or a lot of people are there, they think 80% of our sales come from worksites, but it proves you only 46% of those sales are coming from worksites, the other 54% from the other channels. Furthermore, if you look at the next graph, you will see something very interesting in 2020 when our tight adviser force was locked up, it could not do sales either because of the lockdown or when we're training them. The other alternative channel able to deliver R1.4 billion of sales in 2020. So if we were only reliant on the tight adviser force and worksite, there's no way we would have delivered that R1.4 billion extra sales. So it shows that our strategy of diversifying our channels as well as IFS is really, really working.

Definitely because we have now created multiple entry points for our customers across their numerous life stages. What our experience has shown is that customers are a lot more loyal when they hold a wider product basket with us, hence, our integrated financial services strategy. What you see on the graph on this slide is that as a customer increases the number of needs that we need for them, we see better persistency from that customer, especially for customers who have been with us for longer than 2 years. You can see that as you move from 1 to 2 needs, there is a significant increase. And the further along you move across the need spectrum, the better it becomes. To this end, we are targeting to increase our proportion of our current 3.2 million customers with 2 or more needs serviced by Old Mutual from 33% to 50% of our current customers over the next 10 years. Let's take a look at how we are then going to do this through the lens of our value drivers.

So Sanelisiwe, I always say you can have IFS, you can have all needs met and everything. If you're not growing your revenue, it doesn't make sense. So it is intended to grow our revenue through the retention of our customers, getting new customers, cross-selling to existing customers and those that have come on board, upselling to them, making sure that all their needs are met and we get right quality revenue into the organization. And that is underpinned, of course, by strong distribution channels that are diversified. And the products themselves need to be refreshed and must be appropriately priced in order for us to get the right margin. What is also important for us is to grow our share of the risk solution market, thereby delivering good risk VNB margin, particularly funeral and underwritten life. Let me pause a little bit on the underwritten life part, Sanelisiwe. And I know you're going to talk quite a lot later on about under underwritten life. I go to communities, attend funerals go to parties, because I'm a townships boy, and I always go back to the townships. These are my people, and they come to me and say Clarence, you and Old Mutual, we are always selling funeral, funeral, funeral into our space. Surely, when you have cashed out that funeral policy, that is the end of it and our children are left with no legacy whatsoever. Please can you provide the right solutions. That is the reason why is Old Mutual, we have started a movement called Plus Life where we want to shift more and more into underwritten life. And Sanelisiwe is going to talk quite a lot about it at the later stage. And of course, cost optimization remains a core forecast of what we do. So I am convinced that by playing to our strength and executing our integrated financial services approach, we will grow our premium income, our net interest revenue, our noninterest income and our transactional income at market-leading rates. Our customers ultimately, Sanelisiwe, receive mass bank with us. They must be ensured by us, and we need to make sure that they save their money with us. And if they don't have money, they need to borrow from us. Everything must happen under one roof.

And for that to happen, Clarence, we need to ensure that we take the right proposition to the market, which is made up of the correct product as well as engagement style. You've already spoken to how we've refreshed the risk product over the past year, but we need to also ensure that we continue to take steps to reach our customers in a manner that is most convenient and simple to them. Vuyo has spoken to how we have enabled digital servicing through USSD and WhatsApp, which is bearing fruit, with 25% of our funeral claims being received through this medium. We are also looking to amplify our reach into the nonadvice space through the launch of 2 new channels in 2020. The first, leveraging our existing lending consultants in our retail branches, as you mentioned earlier was over 368 branches that house 1,600 lending consultants who were equipped with our non-advice risk product. The second is a foundation market-specific worksite channel. Both these non-advised channels will focus on selling to the foundation market, the customers that earn below R8,000 because this is where we have a very low penetration of 11% in our current customer base. and a huge opportunity exists. Where does this leave us overall? We have effectively continued to build a new kind of integrated financial services company. new for us, new for South Africa, and we are built strong with over 40 decades of strength, but we're also building to be flexible such that the next stress that comes to us, we can handle better than ever. We also believe that the offering we are taking to customers is most optimal. It is flexible, it is competitive, and we will continue enhancing that, especially on the savings and investment side. All of this enabled by the latest technology. The results are already quite encouraging. As at May 2021, we had overtaken our pre-COVID numbers on the risk sales which is significant. On the credit life and savings slide, we are still seeing the numbers below that level. So overall, our sales are slightly behind, but I still believe that this is such a tremendous recovery, which will continue, also on the back of our productivity recovery. Now the question is, are we chasing growth for the sake of growth or is it about being profitable as we grow our market share? -- and no doubt about it, we need to deliver profitable market share growth. No matter what we do, it seems like the perception from the market is that our profits will continue thinning in the face of increased competition. but we wanted to spell this because we are not in a game of playing price wars with the others. That is the reason we are pushing the jewel play in the advice and non-advice space. such that the customers who want to are not willing to pay for advice and the benefits that come from it can be serviced by us. As such, we are looking to increase the number of underwritten sales as we head into 2023. This will make up a bigger proportion of our book. All of this is measured best through our VNB margin. The key drivers of our VNB are productivity, product mix, premium collection mechanism and expenses. For the first time, what we're showing to you as our investment community is the product split of our VNB margin such that you can truly understand how our different products within our basket contribute to our reported VNB. As you can see, historically, we have showed a very healthy risk VNB margin. That has been stronger than our traditional competitors. On the savings side, it is in the lower end range which makes sense because that is how the savings propositions are set up. Also, we saw a much higher proportion of savings in our competitors. And this contributes to how the reported VNB moves from the risk high to the range that we have shown historically of about 13%. In the long run, we expect the total VNB margin to be in the range of 69% as we continue to target an increased proportion of risk sales with the underwritten focus while still meeting our customers' needs with a suitable savings product, which will be refreshed in 2022. The mix of these products contribute to how we efficiently run our business. To that end, we are also reviewing our remuneration structure to find a sustainable balance between fixed and variable incentives across our channels to ensure that we can manage the outcomes that we want to deliver. As you can tell, we are being a lot more deliberate about managing the trade-off between price, volume, quality and the expenses that come with generating the volumes that we bring. That is the reason I say it is about profitable market share growth. While here, let's quickly look at the lending book and how that pans out. Over the past 2 years, we have been telling you the market about how we have been focused on responsible lending, updating our scorecard practices and pricing. This has led to the reduction in our loan book size, which we are now looking to manage for quality margin rather than an unsustainable margin on a large base. To this end, we will also ensure that infrastructure that backs the lending book is appropriate for where we are headed. And we will look to bring our net lending margin around the range of 11% through our responsible lending practices. It's not only about the short to medium term, but also ensuring long-term sustainability. We want to make sure that clients that we can build a business that one day in 20 years' time, when you're a retire and you're sitting on your rocking share deep and limpopo, you can look back with pride. And we have a number of actions in the pipeline that are also worth mentioning. We will continue building a stronger IFS offering by applying the same paint brush that was used on Old Mutual Protect to our savings and investment proposition that we'll launch next year to ensure that we continue meeting our customers in the optimal manner. We're also looking to grow transactional account holders to 5 million by 2030. This will be done through a number of actions, which also includes updating the front end that customers engage with. On the nonadvice front, we want to increase the reach into our foundation market. We will continue to look for appropriate partnerships in the market, specifically the Old Mutual funeral services, which is in conversation with some really interesting partners in the undertaking space that have a great reach into the market that we want to play into. In addition, we will look to leverage the white labeling capabilities that we have internally such that retailers can also provide these nonadvised products to their customers. In light of knowing that our customers who have more needs met with us are more persistent. The rewards program looks to incentivize customers to increase their financial needs with us, which links powerfully with our IFS strategy. Securing the customer in this way drives increased customer lifetime value for the shareholder. We will leverage the 70% of over 1 million existing customers on the rewards program, which belong to the Mass and Foundation Cluster as well as over 245 nonexisting customers that have signed up on the platform, the majority of which are within our segment. This will be done by building off data analytics, behavioral economics and all the capabilities that data and digital will continue to build for Old Mutual such that we can cross-sell and upsell into the segment. With that being said, I think this provides enough clarity on what we need to execute now to ensure that you can look back with pride when our customers and investors reap the benefits in the future.

Sane, it's a very exciting strategy. And I can safely and confidently say to the investor community that we have a very clear growth strategy. Our integrated financial services strategy extracts customer lifetime value through customers banking with us, as I said earlier on, borrowing from us, saving with us and being insured by us. And this -- they will be supported by the biggest distribution network in the financial services in South Africa, which we have strengthened and expanded and we will continuously innovate around it. I can also confidently say we will continue to deliver high risk margin. And I will repeat that again. We will continue to deliver higher risk margin, which is above the overall VNB margin. And let me tell you, Sanelisiwe, and I want the investor community, the analysts out there and the fund managers that are here with us. They need to know that we will be #1 but we will be a profitable #1. That for me, it's very, very important. And the reason why we will be able to do that and become #1, Sanelisiwe, is not because of the strategy only, but it is because of the great talent that we have in Old Mutual. Talent like yourself Sanelisiwe, there are a lot of Sanelisiwe, in our business. talented young people who are very good at execution of strategy. with the older generation have passed on to them that retail mass market or MFC ability to execute on a strategy and they will help us execute to do that. So you can be confident as you go back to report back to a line that we will deliver a reported VNB margin. In the range of 6% to 9% with a strong forecast on driving it to the upper end as quickly as possible. And I will repeat this again, we will drive it to the upper end as quickly as so we're going to wait for to who will do it as quickly as possible, but you need to do patiently. We will increase the number of our current 3.2 million customers who have more than 1 need met to 50% in 10 years' time, as Sanelisiwe mentioned because that's where the real valuable growth will come from. Growth won't come only from insurance only it comes from making sure that you meet all the financial services needs of the customer. We will win in terms of extracting as much value for our shareholders through that integrated financial service strategy. And lastly, we will, through responsible lending, stabilize our net lending margin at 11% in the medium to long term. That is the strategy. that I have signed up for and my management team and everybody in the business have signed up to deliver and we will deliver. Mark my words on that.

Thank you, Clarence and Sane. It certainly sounds like you have a clear plan to grow MFC's transactional customer base to 5 million by 2030. There's enormous value potential and the improvements we have made to our intermediary relationships will certainly help us achieve that potential. I'm told we have a large number of questions for Sane and Clarence, and we're going to kick into it immediately. Clarence, do you think we should be concerned with emerging competitors in MFC? :p id="577853636" name="Clarence Nethengwe" type="E" /> Well, definitely, we have to be. We can't ignore the competition that is out there. In particular, those who are now providing funeral insurance as a commodity. We have spoken about it when we were presenting that we have seen the emergence of nonadvised players and most of them are in the banking space who are leveraging their distribution network to provide nonadvised solutions, in particular funeral insurance. So we have to be concerned, and we have to make sure that we've got strategies to counter that. And I'm quite confident that we have articulated to you today a strategy that speaks to how we are already counter, not how are we, but we're already countering that [indiscernible] that is coming from the competition. Because we realized that in the period 2018 to 2020, because we're sort of slow of the blocks. They were able to get into some of our new business market share, but we are countering that. So we are definitely keeping a strong eye on to that and we are not ignoring it to you.

Thank you, Clarence. Great to hear that we are countering and focusing on that nonadvisor competitor base. Let's see what our next question is. And this is for Sanelisiwe Nkuta. Sane, do you have an expectation of how the digitalization drive of the adviser process could improve adviser productivity. I'll send this question to Clarence. Do you have an expectation of how the digitalization of the adviser process could improve adviser productivity? Karen, over to you.

Yes. So we did a piece of web by good friend Karen, as part of our adviser digitalization, enabling the project. So what came out of that is that we are likely to save 60 hours per advice of the annum through the digitalization of the advice process. And in the MFC space, in particular, we could increase productivity by something like 0.5 to -- 0.5 policies per advice of the week. And that will probably also give us additional APE of around 66,000, the adviser on an annual basis. And of course, VNB will also be improved as a result of that because they will have more time to get more sales, and we will have eliminated some of the expenses that are part and parcel of the current manual hedging processes that they are currently involved in. So the...

That's great, Clarence. And certainly getting a sense of how digitalization can help the MFC business drive both VNB and APE. I have a question now for Sunny. Sunny, is the money app looking -- is the money app only linked to Nedbank accounts? Or can clients link any bank accounts to our money account?

Thanks, Celiwe. Our money account app is linked to all bank accounts. You can engage with it in any conventional manner. The current infrastructure is not on Nedbank, but it is an app that allows our customers to engage in a very updated and fresh way.

That's awesome. It's great that our customers have that number of touch points with us. I hear that we have another question and this time for Clarence. Clarence, could you please unpack the funeral insurance business? What is its quantum?

Well, I think 60% of our new business sales are funeral insurance, and the remaining -- I mean, the remaining 40% is split between credit life and the savings solutions that we provide. So 35% is saving solutions and 5%, it is credit life. So 60%, definitely funeral insurance.

Thank you, Clarence. The questions keep rolling in. We've got another one for Sunny. And if possible, at the end, we can add a comment from Clement Chinaka to deal with the rest of Africa portion of this question. The question, Sunny, is, what is your strategy on offering funeral services in South Africa? And then Clement will deal with the rest of Africa question.

Thanks, Celiwe. What we've identified is that by extending our value chain to meet our customers' needs across their multiple life stages, we can get a lot more value out to them. To that end, like we have said, we have Old Mutual Funeral Services, which is going to market by looking for strategic equity partnerships with existing funeral undertakers in South Africa. As I mentioned earlier, we are in conversation with some of the players in this market.

It's a great part of the growth story of MFC and Clement Chinaka, the MD of Rest of Africa will touch on the same aspect, the funeral service business in the rest of the continent. Clement, over to you.

Thank you, and good afternoon to all the participants. In the Rest of Africa, the funeral services are a strategy in development. Right now, we only offer funeral services in Malawi, which we launched late last year. And this we did as a way -- as an entry into their retail mass market because our business in Malawi is largely corporate. So that's what we are doing. We are running the funeral services in conjunction with the management consultancy of a large funeral services provider from Zimbabwe. That's in Malawi. The other country where we are looking at it is in Zimbabwe itself. We're also looking to part now its established funeral services provider. But what we are looking to do there is to capture more of the value chain in the funeral services, what we have seen is people who buy funeral policies are not excited about regularly reviewing their sums assured because of hyperinflation. So people prefer to buy a package of funeral. So that's why we are looking at doing that. It's not in play yet. We are still -- it is still in development. Thank you.

Thank you, Clement. Funeral service is definitely a growth area, not only in Mass and Foundation Cluster in South Africa, but pockets of growth in the rest of the continent as well. Questions continue to roll in. [Operator Instructions] The next question, Clarence, is for you. What support is available for black funeral parlors who are also the key stakeholder for the mass market cluster? What support is available for black funeral parlors who are also the key stakeholder base for the mass market?

So we have established what we call an accelerator program, and it is intended to provide them with financial management skills, business management skills and related staff. And we also provide underwriting to most of them. But we don't force any of them to be underwritten by Old Mutual. They avoid a choice, but we provide that accelerator program to any funeral parlor who is available to take it up business.

Thank you. Thanks very much, Clarence. Sunny, would you like to add anything around the support that we provide into those funeral parlors?

I think what we do know is with what we're doing with the Old Mutual Funeral Services and going into it with equity partnerships. We are finding ways to empower black funeral undertakers in a relationship with Old Mutual but still leveraging the skills that they have been able to build up over the years.

Wonderful. Well, Sunny and Clarence, thank you so much for many of the questions you've already fielded. But believe it or not, they continue to come through. And as we've committed, we're going to try and get as many of these. So much interest in this large business in Old Mutual that we feel it's just credible for us to try and get as many of them today. Here's our next question. Can you talk about the seasonality of the sales productivity throughout a normal year? In other words, what did the 2019 year look like on that productivity chart shown? Clarence, that's a question for you.

So usually, it moves from around 5.8 policies per week in Q1 and starts picking up. By the end of Q1, it sits at around 6.5. And then it reach its highest peak usually in Q3 of any year. So in 2019, I think, it was sitting at something like 6.8 at Q3. And then Q4, it tends to go down. If you look back at that very same graph, you would have seen that somewhere around November, December, it just simply goes down. For a simple reason, a lot of advisers, they take leaves during December. So you will have a handful of advisers waiting. So it tends to seem to simply go down. But at the beginning of the year, it picks up again. So its highest peak is usually Q3 of each and every year -- but the highest -- if you compare H1 and H2, our highest APE sales are generated in H2, West of April. So in 2019, for example, ZAR 1.7 billion of APE was generated -- in the life business was generated in H1, and ZAR 2.2 billion was generated in H2.

Thank you very much, Clarence. A very detailed and comprehensive answer there. Much appreciated. Another question for you. How many work sites have you lost due to businesses closing?

Yes. There's a lot of work which is still being done by the team. We've got a market management team that is working with our sales management team to do website review. And that work is not yet complete. So we don't know how many we have lost yet. But there are businesses where they have closed down and we are no longer operating in them. But we don't know the exact number now. We are waiting for the -- that work around work site reviews to be completed.

It sounds like once the work site review is completed, we'll be able to bring a more comprehensive answer to that question. We have another question for you, Clarence. What makes you think you are regaining market share in MFC? New business growth seems to suggest otherwise, particularly in comparison to Capitec or MMH. What's your view, Clarence?

So I think Sunny also spoke about how we almost -- I think 8% above 2019 in terms of our risk sales, in particular, funeral and under retail sales, but where things are not looking good is around our credit life. Credit life is almost 50% down on 2019, and our savings is also down. So when you look at our overall sales, the picture that you see is a picture of sales that has not recovered to 2019 levels and you then do a comparison with our competitor. But you are not comparing apples with apples, you are comparing apples with bananas and pears at the very same time. So when you do a clear cleanout and compare apples with apples, you will realize that our risk, particularly funeral market share, we have really regained. And if I recall very well and Michael wrote a very beautiful broker [indiscernible]. He said, "For the first time, we realized that Old Mutual have lost its #1 position in terms of funeral insurance to Sanlam at the end of 2020." My view is that when you look at how we have recovered our funeral sales now, his opinion will be changed either in H1 or in H2 because we would have got back to our #1 position. So that's how I look at market share gain, in particular, and why it is important to talk about funeral and underwritten life is because that's where our VNB margins actually are generated. When you look at our savings solutions, they import about 1% to 3% VNB margin, but they are very much important in the big scheme of things. For the simple reason that [ Celiwe ] articulated that when a customer have more product holdings with us, they tend to be more persistent. So it is good for shareholders for us to have savings as part and parcel of the solutions that we provide to our customers. So that they can also get the upside from the risk solutions that generate better and good margins. So if you compare our margins on the risk side versus what our competitors are generating, we are not really [ shaping ].

Thank you, Clarence. Definitely a story of managing the portfolio of products that we offer in MFC and their contribution to VNB margin. I have another question for you, Clarence. How price sensitive are your clients in the lower income market? How does Old Mutual's pricing compare to our peers? And how does our churn or persistency compare?

Great question. And the last, particularly that persistence one because I really want to say something on that. And it makes my blood boils a little bit, but let me start with the price part of it. The pricing part of it, we are very competitive. I mean, I always -- with my CFO was saying -- Johan, and I talked to Lorraine and everybody says guys, from a competitive perspective, are we priced competitively in the market? And we continuously do the work in terms of checking whether we are price competitive. There are certain cohorts of our solution and particularly for [ parents ]cover and related stuff, where we can still do good work around it. But the team is working very hard on things like -- but we are very, very competitively priced as we are on par with the market. The persistency issue, and this is the thing that really, really makes my blood boil, you have other in the market, people say at the end of 3 months, only 42% of the customers that we signed or all the policies that we signed up are still enforced, and the whole world celebrates that. For me, the most important thing is that when you write policies, out of the 100, at least 70 of them must last more than 12 months. It is not just using customers as sort of a voting for the -- where we just write them and after 3 months, 50%, 60% of them are gone. We are damaging the market when we do it. I -- 10, 5 years from today, if that practice continues, the customers, particularly the black communities, are going to be distrustful of insurance companies because they will realize that they have been taken for a ride because you write them, they pay 1 or 2 premiums, they are out of -- they fall off because they can't afford. So you must do rigorous check -- affordability checks that make sure that the product is appropriate for that particular person. So please forgive me, I'm very much passionate when it comes to this because these customers are human beings, and these are people that are living within our communities. And these are the people that we see suffering when some of these things are happening. So we should not celebrate things like those. We should make sure that this persistency, it's a thing that we really value and we make sure that we keep -- because it is about solving customers' problems. It's not about profitability only. Solve customers' problems. And when you do that, they will gravitate towards you more and more. But if we do the other stuff, [indiscernible]. Back with my last [indiscernible], the industry will pay a heavy price 5 to 10 years from today.

It's a great point. Thank you very much, Clarence. Persistency driving long-term relationships for us with our customers rather than the one-off sales, that can be a focus area. We have another question that I'd like to put now to Sunny. Do you know what the margin difference is between the funeral product and the underwritten life product in the MFC segment? Do you know what the margin difference is between the funeral product and the underwritten life product in MFC?

I think that's a really sneaky question that we have gotten in there. And I will answer it without giving too much away and making sure that we remain as competitive as possible. What we have done with our products is to ensure that even on the funeral side or where we're selling non advice, we manage our book in such a way that it is efficient and the channels that we take forward can provide the necessary uplift in that manner. When it comes to the underwritten life sales, you can imagine that an actual sale may take slightly longer in order to generate the actual APE from that just because of the way that the advice works. And as a result, we need to ensure that as we go into the market on funeral and underwritten life, we manage the margin difference quite carefully. I will not give the margin difference at this point in time, Clarence may be quite comfortable to. But what is important to note is that, overall, when we look at the VNB margin for our risk portfolio, it has been very healthy over the past couple of years, and we will continue to manage it in -- through our VNB drivers to ensure that over the years to come, value is delivered to our customers and our shareholders.

Awesome, a focus on value.

The only thing i say to that is...

Go ahead, Clarence. Clarence, go ahead.

The only thing I'd say is that it is not too shabby so they can just work out what I mean by that.

It's a good answer. That margin is not too shabby. We have 1 last question, and I'm going to give this one to Sunny. Sunny, do you know how profitable the non-sales versus own tied agency is? How do we compare the two distribution channels?

I'll take the question to basically try and compare our in-house sales versus those that go out into the field, both of which are actually tied to us and work on a salary plus variable incentives over and above that. What we do see, as Clarence mentioned earlier, is that there is very strong productivity in the range of about 6 lives per week, that comes through from all our intermediaries. When it comes to in-house, we see a lot more productivity around the ranges of 10 to -- 11 to 12, whereas our tied field, which is tied adviser force, which is much larger, comes through around that 6 range. With that in mind, those 2 channels need to ensure that they can meet their cost base with -- for the field, it is about making sure that you can meet your S&T -- sorry, let me make sure I use the terms that are appropriate for the market. You can make sure that you can meet the costs that are incurred as you go out into market to generate that versus someone who sits in a branch who has a seat allocated to them. In terms of profitability, I would say that we see a lot of efficiencies coming through from our in-house channel, and we will to continue to optimize the manpower in our field channel in order to garner more efficiencies going forward.

Thank you, Sunny. Providing lots of clarification there. And thank you, ladies and gentlemen, for all your questions to MFC today, so much engagement on this very important segment at Old Mutual and any questions that we haven't been able to get to in this allotted time, we will respond to you directly in the coming days. Please enjoy your break. We're going to take 10 minutes and return 10 minutes from now. Thank you so much. [Break]

Welcome back, everyone. I hope you're feeling refreshed and ready for the last 2 sessions of the day. Thank you for all of your comments and questions. And if the last session is anything to go by, the engagement levels are really high and so many issues that are top of mind for you. Our next session will cover Personal Finance and Wealth Management. Kerrin Land, the Managing Director of Personal Finance and Wealth Management; and Farhad Sader, Managing Director of Old Mutual Wealth, will take us through the focus and investment placed in the adviser space. And they will share plans to ensure the continued success of Wealth Management. Kerrin has played an instrumental role throughout her 26 years at Old Mutual. She is known for her sharp wit, look out for some of her quips during her presentation. She's extremely intelligent and has an ability to always look at the bigger picture whilst taking the back-to-basics approach. She's such a pleasure to work with. And in the short time that she has headed Personal Finance has managed to make a tremendous difference. Farhad, on the other hand, joined Old Mutual in 2004 on our IT Graduate Program, giving him a strong foundation in operations and customer service. Whilst he started his career in IT, he has delivered outstanding results across various roles, including operation strategy, investment administration, and he even ran a sales channel. Prior to this role, Farhad was the Chief Operating Officer of the Wealth and Investment Cluster, and was one of the youngest people to be appointed at executive level. Farhad is a gym and cycling fanatic on the surface, but I have it on good word that he's at the mercy of his 3 little girls. Over to you, Kerrin and Farhad.

Hi, everyone. And to those of you that haven't had the pleasure of meeting in person, I'm Kerrin. Not to be confused with Farhad by my side here. The title of our presentation today is Earning Our Place. And for me, that place is to be a leading provider of solutions into the retail middle and affluent markets in South Africa. I say earning because as you are all well aware, the last 5 years have been challenging for us with slowly declining market share and profits that have been difficult to pin down, erratic, and overall, I think failing to grow in that nice inflation plus line that you, as the investor community, look for. I think it's fair to say that we've disappointed. We are determined to change that. And over the next half hour, we'll outline the road we've already walked and the path that we're on to get back to that pole position so that you'll be able to predict earnings better and the returns you get will be a pleasure rather than a pay. So first, to describe our businesses a little bit. Old Mutual Personal Finance is the area that takes accountability for clients earning from around the ZAR 30,000 a month level. And then through to the high income and high net worth clients that Farhad takes care of in Wealth. I'm currently focusing most of my attention on the personal finance part of that having spent the last few years in the wealth business. So in Personal Finance, we provide risk, recurring savings and income solutions, mostly the guaranteed kind of income solution to middle market customers, so sort of ZAR 30,000 to ZAR 80,000. And we do that through tried and independent advisers as well as through our direct businesses. For me, this middle class is the traditional heartland of Old Mutual. It's the kind of client that John Fairbairn was trying to serve when he founded Old Mutual, those 176 years ago. Being from the free state in South Africa, it's also the kind of client I feel the most affinity for. And it certainly suits me better than my designer suited colleague here, Farhad.

I must admit, Kerrin, it does feel really good to put on a suit after this whole year spent working in t-shirts. Good afternoon, everyone. As Kerrin said, my name is Farhad. I look after Old Mutual Wealth. Old Mutual Wealth is a business that houses Old Mutual's retail investment proposition for affluent and high net worth clients. This proposition covers the entire spectrum of products and services across the investment value chain, and that includes everything from planning and advice, the implementation of their advice through our administration platforms and the underlying investment solutions. We have over ZAR 300 billion in assets under management and administration, and have a profit base of about ZAR 450 million.

Thanks, Farhad. I think now that it's clear where the different bits of our cluster sits because we are carved up a little bit differently to the competitor sets in South Africa. Let's move on to what we believe we need to be to be successful in this market. I think ultimately, it comes down to delivering a great client experience from the point of sale to the point where that customer gets the outcome they need from a benefit or investment they've made with us. Those experiences then drive positive recommendations, which drive more clients to do business with us. We live, after all, in very much a socially media-driven world. Now for me, customer experience has 3 vital supports to it, just like the 3 legs of a bar stool that you see on the picture behind me. You can tell I probably had a bit of a misspent youth and too much time on bar stools, but I like this analogy. So if I move to the 3 legs that we believe need to work on the next slide. First, client relevance and client-focused design. We need to design our products so that they center around the different personalities, the different needs, the different life stages of the clients that are under our care. Secondly, we need to be adviser-led and adviser orientated, enabling and partnering with advisers. Now all of us in this community are financially astute. And I think we have a bit of a love-hate relationship with advisers and think that they don't add value. but actually advisers are at the shop end of making a client experience come to life. Our business in South Africa is intermediated, and it's likely to stay so for a very long time. So that enablement and partnering is absolutely essential. Then our third leg, internal processes that are future focused and are hyperefficient, that are simple, and they take full advantage of technology so that we can bring the costs down. Basically to deliver great value to clients while still managing to make a decent margin and profit to deliver to you the investment community. If 1 of these 3 elements is unbalanced, then just like a wobbly stool, you have predictable splat consequences. Now I've already said that the last 5 years from your perspective and ours have been challenging. And I think there are 2 major causes. So firstly, relevance. Relevance to the client base is a moving target. Everyone in the industry is constantly upping their game, doing new things, doing different things, and it takes continued effort to stay ahead of that curve. Now we've been working on our proposition and our product set for a number of years, but we've taken too long about it. I think that's because Old Mutual Protect, which we refer to as OMP, and our upcoming savings range are not just new innovative products. It has been a complete overhaul of our end-to-end business process and technology deck to move us into this future-fit digital world. So we've replaced the product admin system, the service processes, the application and underwriting systems the adviser front end, also take us from what was largely paper-based and clunky to online and automated. We had to do it to move us forward and into this digital world, but it was far more complex and time consuming than just coming out with new products. And as a result, we've lost some ground in the process. However, I'm pleased to say we now have Old Mutual Protect on the shelf, and we've got Savings and Income following in 2022. It does feel a little bit like taking a shot with a bow and arrow. You sort of need to pull back the string in order to shoot forward and hit the targets. I think our next issue is that while customer experience is critical, the adviser experience because of our intermediated world is paramount. And while we've been doing this renewal on our stack, we've taken our eye off that adviser ball. Money and finance in the South African context is really an emotionally fought topic. And I think I've set in too many client sessions where we sort of do focus groups and listen to them. And I'll never forget being described as lower than the annual visit to the dentist on someone's order of priority. So the reality is no matter how slick an AI adviser process that we might decide to build, getting customers to actually open it and interact with it in the South African context is very tricky. We believe that advisers are that human touch point that is the sort of voice of conscience of the clients. They remind the client what to do. They make them look at their finances every year. And because of that, they will remain our hands and feet on the ground for the foreseeable future. So we focused on that customer proposition on renewing that whole stack and as a result, had our eye a little bit off that advisable for the last few years and lost productivity. But looking forward and earning that place to recap and to link the legs of the store with where we've struggled. Our strategy is centered on client relevance as our North Star with constant and rapid adaptation of our propositions as expectations shift, been advice-led and adviser orientated so that we can empower advisers to be better to be faster, to be stronger in the ways in which they serve their clients. And in so doing, actually grow their own successful practices and then being future-focused and hyper efficient so that we can successfully scale and deliver cost advantage and profits. Now this all sounds great, but I don't have to stand here, fortunately, and sell you rainbows and unicorns through my scintillating presentation skills because we actually have made some progress in these 3 areas over the last few years. Absolutely, we have a lot of work to still do, but we started this journey a few years ago in wealth. So Farhad is going to tell you a little bit about the progress we've made there.

Thanks, Kerrin. Several years ago, Old Mutual had a number of investment businesses or rather more like product offerings in the retail market. But even at that stage, those propositions were already decades old. And with lots of duplication and no end-to-end coordination of the value chain, it's no surprise that market share was declining. To rectify this, we brought these disparate product offerings together and created a new end-to-end business called Old Mutual Wealth, with 3 objectives, much like Kerrin's barstool. Firstly, to rebuild the retail investment value proposition in the context of what was then an evolving regulatory landscape with the advent of RDR and so on; secondly, to simplify the business, given the 25 years of history and legacy that we inherited; And thirdly, and very simply, we really just wanted to make this business competitive again. So starting with the client proposition. There were a number of changes that we made, but at the heart of it was the shift away from the highly commoditized product-based world into one that was primarily focused on managing client outcomes. So we believe that by helping clients answer some of the most fundamental questions about their futures was also the best way to differentiate our business and make it commercially sustainable. And the way we would do that was because it would enable us to create far deeper relationships with our clients. and it would open up a lot more opportunities across the broader value chain, especially in areas where we didn't have any presence or capabilities at the time. In fact, it was this thinking that led to the creation of our Private Clients and Fiduciary businesses, which now manages over ZAR 40 billion. But coming back to the shift we made towards managing client outcomes, we also knew that in order to be successful, we would need to radically reduce the total cost to clients. So we implemented a simple and transparent pricing structure, making it very easy to see exactly who earn what across the value chain. We also stripped out all rebates and other cross charges, and we pass this entire value back to clients. We then kept our administration fees so that effectively for any investment above ZAR 2.3 million, you pay 0 administration fees, making Old Mutual Wealth one of the most competitive price platforms in the market then and now. And in fact, the total impact of these pricing changes has meant that over the years, we've actually reduced the total cost to clients by anywhere between 0.5% and 1% on average, which is significant. The second component of rebuilding the proposition involves partnering with independent financial advisers to deliver this proposition to clients. So this was based on the fundamental principle that our market is actually best served by independent advisers. And for those of you who know any independent advisers, you will know that they are not all the same. And so we created different partnership models working with advisers in a way that suits them. So there are some that only really just want to use us for implementation. All they want is a capable platform, competitive pricing, and appropriate range of solutions and great service. Then there are those who buy into our advice philosophy and our investment strategy approach, which links advice and outcomes. And then there are those who go even further and also make use of our integrated wealth planning capability, our teams of specialists and even our business management capability, which is actually less about clients and more geared towards helping advisers run better practices and more sustainable businesses. Now I've mentioned integrated wealth planning a few times, so perhaps it might be useful to give you a quick overview of what it looks like so that you actually get a sense of how it enables advisers to model the clients' complex needs in an integrated way but with an easy-to-use and intuitive interface. [Presentation]

So the value add in building a financial plan this way is very easy to see. So it's actually no surprise that today, over half our inflows that we receive on our platform are linked to the use of our advice tools. And while this is a great outcome for clients, we also have the data to show that advisers who use our tools consistently have over time grown their asset base at twice the rate of those who do not. So that broadly sums up the key changes we've made to rebuild our retail investment proposition to clients and advisers. However, as I mentioned earlier, we had also taken on 25 years of built-up legacy, and so in parallel to building and launching this new proposition, we've also spent a significant amount of time simplifying the business. In fact, some of you may even recall the names of the businesses that we started out with at the time. So there was Galaxy, Investment Frontiers, Fairbairn Capital, Axis and so on. And so aside from losing market relevance at the time, there was also a significant amount of duplication across these businesses. And so over the years, we've either shut down, we've migrated or we've repurposed them into a new and coherent value chain as part of Old Mutual Wealth. And it's been a mammoth task, merging multiple retirement funds, terminating licenses, closing legal entities and of course, the most difficult bit for anybody, which is the migration of major IT platforms, which we've had to actually do every year since 2013. And in fact, we have 1 more plan laid for later this year. I must admit, though, that in simplifying the business, we have not made it simplistic or one-dimensional. It is still very much a complex business and necessarily so, but it's in the way that we've organized and aligned that complexity and how we represent it externally to clients and advisers that makes all the difference. So now the key question is, in doing all of this, have we made the business more compelling for our stakeholders? Personally, I actually think there's still a lot to be done, but I certainly believe that we're on the right track. So is it better for clients? Absolutely. Our advice-led approach puts clients at the front and center of our business, making sure that they get the outcomes they require. They now also have access to a much broader set of capabilities, which is especially important in the high net worth segment. Our simple and transparent approach also makes it very easy to understand the value added at each step in the process and what it costs. And speaking of costs, earlier, I shared some of the changes we made on the pricing side. The impact of these changes has meant that we've given back almost ZAR 400 million per annum to clients. Is it better for advisers? Well, prior to Old Mutual Wealth, I actually do believe that Old Mutual had taken its eye off the ball in the independent adviser space. But our competitive client proposition and partnership approach to doing business with independent advisers has certainly changed that. And especially when you consider the impact that our advice offering has had. So if you take those advisers who have partnered with us on advice, they now make up over ZAR 100 billion in assets on our platform. They tend to grow at a much faster rate than anyone else. They have significantly better client retention because their relationships with their clients are much deeper due to the advice process, and they are able to charge higher advice fees because their clients actually see and feel the value of the advice that they provide. And finally, what does this mean for investors? At the outset, I mentioned that one of the shifts we made was that we were going to focus more on share of wallet and not just share of clients. And so I think we've broadly achieved that where we see over the years a significant shift in the percentage of assets that are managed internally. But at the same time, we've actually been able to defend what still remains a dominant market position. And this is despite not being active in what has actually been the fastest-growing segment of the platform market, and that is in the third-party DFM space. In terms of our profits, our contribution has been pretty flat, but that is because we've had to balance revenue reduction from all the money that we've given back to clients with cost savings from our simplification efforts and keeping our management expenses down. That's actually been no small task given the ZAR 400 million per annum revenue reduction. However, going forward, I believe that we now have a profit base, which is far more robust and a clear reasonable base on which to project future growth.

Thanks, Farhad. As I said earlier, we have walked a journey with wealth. And the people in wealth are evangelists, as you can tell. We are still on that journey, but we do have a positive track record of delivering IT migrations, of delivering simplification, of delivering client benefits. And we've accomplished a great deal over the past few years to put us in a place from which we can grow. I think the learnings from that will translate swiftly in what we're trying to do on the personal finance side of the business. And having had that experience, we'll be able to do it that much faster. First of all, in terms of customer relevance, we have already started. So we've been working on that customer leg of the stool for the last few years. And although it's taken longer than expected, as we discussed earlier, OMP has been launched in the second half of 2020, and it's been rolled out to both our tied channels and most of the independent markets. We will be finished that rollout process by half year. It's the right product at the right time for me. It's a very flexible highly modular products and really allows advisers to customize precisely to the clients' needs on one hand or in this COVID environment, if the customer has a budgetary constraint allows for customization of that package of benefits to what the client can afford. It also builds on online straight-through processing technology with a lot of automation behind it. And the front end is entirely online and entirely digital, again, working very well in our current context. That's not to say that we're leaving it alone since launch, as we've received feedback from the field, we've refined it, we've made adjustments. And we will continue to improve it so that we remain in a good place off this space that we've now built. We still have to do our savings product, and that's coming in 2022. As you heard from Vio and Johnson earlier, we're also continuously improving our digital experience for our customers. So between the new product proposition and the digital relevance to customers, I think on the client relevance portion, we're in reasonably good shape. We just have to keep it refreshed and keep it renewed. In terms of advisory experience, we still have a lot of work to do on the personal finance side. This is the area where we have been a little bit behind. So in 2020, given the challenges around the pandemic, we focused, so to speak, on the easy stuff, the quick wins. We simplified so that we could cut out things that were relatively easy to do without IT intervention. So we're really looking at our processes, looking at unnecessary compliance steps, unnecessary bureaucracy where we could cut things out without increasing risk. We also tried to make sure that our energy was spent on the basics of productivity, that advisers spending time in the field visiting clients, not doing admin and unnecessary admin, are really trying to take that off their plates and into the business. We still have a lot of work to do on the adviser toolset and on our service models, but we did launch a really good adviser app last year, where advisers can actually get communication on what's going on in their customer portfolios, what's going on with the new business they have submitted and really see everything in one place. As I said earlier, we are able to replicate a lot of what we've done successfully in the wealth space, and we feel that we can roll that out relatively quickly over the next few years. The results of that client relevance work and the adviser experience work that we accomplished in 2020 is for being reflected in our early sales indicators of 2021. We'll talk a little bit more about the numbers later. But suffice to say that the APE has significantly improved. And we're not only up on the 2020 levels, which, to be fair, is a low bar and fairly depressed due to COVID, but we have also improved on 2019 levels. And I think this is a good predictor of what we can achieve once we also have our savings and income range on the shelf. If we move to the next slide, in terms of being future-focused and hyper efficient, We fast-tracked driving efficiency and really cutting out those unnecessary layers. We've also made use of the technology we already have. So for example, we've used the benefits of remote working to better structure our sales management layers. We used to have a sales manager in every little time even if they were only managing 4 advisers but now we're able to instead target adviser to manage our ratios and have sales managers assigned to quite broad radiuses rather than particular times in offices. As a result, our noncommission expenses for personal finance for 2020 were actually 3% lower in absolute terms. So inflation is far lower in absolute terms than 2019. And in fact, across the cluster between Wealth and Personal Finance, we were 1% lower than 2019. Now rectifying and simplifying will get us to a point. And it's a good point because there's a lot of market share to regain that we have lost and getting that back will ensure that profits grow quite nicely. But we also need to be pushing growth levers. In order to grow from this point, there are some sustainable things that we need to do to make sure that the recovery is there for the long term. So we are starting with some initiatives in wealth. So Farhad, over to you.

Thanks, Kerrin. As I mentioned earlier, we've put a lot of effort into simplifying our business, but one of the things that's meant is that we've had to make some hard trade-offs about what we could and couldn't do. And so there are still a few areas where we have to catch up. One of those areas, and it's something that I did refer to earlier, is in the third-party DFM space where, to be honest, we really just don't compete at the moment as the IFAs that bought into DFM solutions only really support platforms that can administer those models effectively and efficiently. And right now, our capability just isn't where we need it to be. So that remains high on our list of priorities. And then one of the other things that we've also seen since we've launched Old Mutual Wealth has been a gradual shift of our client base. So essentially, a drop off at the lower end of the market and an increase in the number of high net worth clients, especially to the significant growth of our private clients and our offshore business. I think I mentioned earlier that our Private Client business now manages over ZAR 40 billion, and our offshore platform has actually doubled in size over the last 5 years in dollar terms. So this shift in our client base is actually not surprising. But what it has highlighted is the significant opportunity for us to still grow our market share, especially given our history, which, as Kerrin described, being in the Heartland or deeply rooted in the middle market. So we're looking to expand our high net worth capabilities and our product set in this space even further. And then related to the growth in this high net worth segment is the work we're doing to further grow our offshore platform, but especially the share of assets that we manage in that space. which has actually grown quite nicely, as you've seen over the last few years. But it's still way below where we think it should be. And especially considering that we've only really just started to launch our funds in that space very recently.

On the personal finance side, we are similarly investing in the future. First, the area that is critical in catering for those millennials that are going to grow up and actually have money to save and want risk cover in the next 15 to 20 years. So we are investing in the direct space and in the digital space. We have iWYZE Life, which operates side-by-side with our short-term business and is our direct brand into the market. We've also added to our offerings on the Old Mutual digital platform and continue to add to those. Now digital and direct currently only account for a little bit under 10% of our total sales, and we're very small, if I look at the direct industry in South Africa as a whole. So there's significant room for us to grow. iWYZE Life offers underwritten product and funeral products, which will be launched shortly. And on the digital front, we have mostly focused on the savings products like tax-free savings accounts. But we have new offerings in the works, and I think that they will serve us well into the future. I think next, we also are making sure that we are an attractive home for advisers. So regardless of how they prefer to work or run their practices whether that is in an employed model and tied model or whether it is where you want to run your own business in your own way. we need to align with adviser preferences and trends. So we've launched our RFA businesses within the cluster. And in fact, we have three. Fairbairn Consult is the latest one, which we launched last March and is already up to over 75 advisers in that network. At [ Vice Works ], where we set that business up some years ago, has over 100 advisers operating mostly in the investment space. And lastly, private wealth management is a strong business in the wealth space. They're all growing strongly and exponentially. And the assets under management in those practices, so to speak, is over ZAR 70 billion. But we are looking to grow them further into the future. So we have a very clear idea of what we need to rectify and what we need to simplify. We have some experience and a journey that we have walked before. So we feel like we know the path to this rectification and simplification. And in terms of future, we think we have a number of lines in the water which will lead to sustainable growth going forward. We've set ourselves the goal coming out of that of increasing adviser productivity and growing sales at an aggressive rate as you can see on the slide behind me, all while contributing to the overall Old Mutual cost-saving targets. Now we are seeing early signs that we're on the right path and it's a good path. As mentioned earlier, our sales are looking good, particularly on the risk side, where we're up significantly. And the numbers you see are those percentages you see are from 2019. We're actually 35% ahead of 2020 in terms of the overall PF sales, albeit that, that is a low base, and 5% ahead of 2019. On the Wealth side, our gross flows are actually over 22% higher than in 2019, which is a really great result. So if we follow these actions and we follow this path, we believe we'll see the rising productivity that will enable our sales to grow, and more sales leads to more revenue. Our automation and simplification will lead to a lower cost base. And together, those give us the ability to deliver to you as investors an improved operating margin. Most importantly, we think this will allow us to reach our ambition over the course of the next 3 years of being a top provider of solutions in the South African market to this client segments. So as I look to the future, I look forward to alongside Farhad delivering predictability, consistency and the growing profit stream that you're looking for. Thank you for your attention.

Thank you, Kerrin and Farhad. As a wealth client myself, I must say I've been a personal benefactor of the tools that we've invested into this business. The clarity that it gives to me as a client for my understanding stand, but also where I go is super useful. I also like the Barstool analogy. And besides this reference to Kerrin's misspent youth, it does actually describe the foundation of how we approach our work. client-focused, adviser-led and hyper efficient. I see we have quite a few questions coming through. So let's start taking those questions.

This is one is for Kerrin. To what extent do you see nontraditional robo competitors like OUTvest as threats?

I think, Celiwe, they are a threat for me in the medium to long term. As your younger generation who are more comfortable with online transacting and do-it-yourself methodologies start growing up, so to speak, and making more and more investments. I think the other user group that uses platforms like that is the really sort of investment-comfortable and investment-savvy investor. But as I articulated earlier, for the majority of our middle market customer base, Advice is still critical. They don't actually engage with those online things voluntarily. They don't engage with their finances voluntarily. And it requires a conversation to really get them investing and thinking about the future. So threats, but when I think we have time to build [ onsestu ]. And in terms of the investment we're making in our direct platforms, I think we'll get there pretty shortly in terms of ability to compete.

That's certainly very encouraging, Kerrin. Farhad, we have a question for you now. What are your views on the third-party DFM space if you haven't been present here? Why haven't you been present?

Thanks, Celiwe. I think the third-party DFM space is an important and growing segment. In fact, it's probably one of the fastest-growing segments in the platform space. And quite simply, we don't yet have a fully fledged capability to be able to administer the models efficiently and effectively and particularly where certain segments of the IFA market use models. They just won't support our platform if we don't have the ability to do that. Why don't we have the ability to do that? Well, as I've said, we've been spending a lot of our time simplifying and consolidating and migrating a lot of the legacy that we sit with. And it's just -- it's been a trade-off around capacity and priority. So with the migration we've got planned in the next few months, hopefully, with that behind us, we will then focus purely on getting our DFM capability to where it needs to be and start competing more effectively.

Yes. With Farhad's background in IT, I'm sure we're in safe hands with that migration towards the end of the year, taking us swiftly into the DFM space. Let's see the next question, which is for you, Kerrin. Can you please give us an indication of profit split between risk, savings and retirement income solutions for PF?

Okay. So it's been quite volatile over the last couple of years because we've had a number of pretty large basis changes in the risk space as I think the investor community is well aware. If I had to look at a sort of a baseline long-term split without all the basis changes in sort of 25% to 30% risk, 30% to 35% on the savings side. And then the remainder, a split between annuity or income product, so to speak, and our legacy book. So our old products.

Thank you very much, Kerrin. I just want to check if we have any more questions from the chat box, and we do. How does rewards compete in the affluent market against shared value programs like Vitality or Multiply, which directly target mortality and morbidity risks? That's for you.

So I think it's fair to say our rewards program when we launched it was very much focused on our middle -- our mass market. So the initial benefits we offered, the initial targeting was very much in clearance's space. And that was deliberate because there aren't a lot of reward programs there. So it was so speak, wide open space and a good place for us as an organization to start. We have started adding more and more partners that talk to the retail affluence space over the course of the last couple of years. And we've recently actually moved into the wellness space. So you're able to, on the rewards program, track your fitness, your sort of wellness and actually get discounts onto our new risk products. So we're moving into that space. It was, again, I suppose a little bit of a priority thing in terms of where we start and where we sort of grow.

Definitely sounds like we're leveraging the rewards program in the Personal Finance space. A question for you, Farhad. In Old Mutual Wealth, you spoke of a ZAR 400 million in fee reductions. Is this process of fee reductions now complete?

Yes. In 1 word.

Great news. Let's see if we have another question in the chat box before we close off this section. Thank you so much for your engagement and the great quality of questions that we're receiving. Hopefully they're providing you with significant clarity in this session. We have another question for Kerrin. How do direct margins compare to advised margins in PF?

I don't think we want to kind of disclose those splits, Celiwe. But we do aim to make good margins relative to sort of the norms in both those spaces. And I think we're getting that right. So direct is a little bit different. We have a mix of underwritten and non-underwritten in that space whereas our advised business is predominantly underwritten. So that also accounts for a little bit of difference. But we definitely look at competitiveness and making industry comparative margins in all of those areas and manage it very carefully.

Excellent. MFC got a similar question on margin as well. So well answered. We have one last question that I'll take, which is also for Kerrin. Prior to COVID, PF had a volatile few years for underwriting performance. How confident are that these issues are now behind us?

Yes. So we did obviously do a very material basis change in our Greenlight book, which is our previous risk product in 2019. It was really too early to tell whether those basis changes were entirely correct. So we made them at the end of 2019. We had sort of 4, 5 months of experience in 2020 before the COVID numbers started coming in. I think we did a huge amount of work on them. In terms of that basis change, I think the work was, it was robust. It was sound. So I do believe we have largely put it behind us. Of course, in the retail affluent markets and the wealth markets, we have got large covers in place. And sometimes you have volatility because of some very large claims. So that I don't think will go away, but I think the basis holistically is sound.

I think basis changes for me are the big difference between accounting and actuarial science. Thank you very much for that complete answer, Kerrin and Farhad. Thank you for joining me on stage today. And ladies and gentlemen, thank you for your questions. To the extent that there are any questions remaining pertaining to PF and Wealth, we will respond to those in the coming days. Thank you very much. [Presentation]

For our final session this afternoon, our Chief Financial Officer, Casparus Troskie; and our General Manager of Finance, Ranen Thakurdin will unpack our capital management structure and philosophy. They will share how we've simplified and optimized our balance sheet and discretionary capital. Casper, for me is the epitome of a great leader. He has intentionally created spaces for people and his team to grow either by establishing the Finance Young Board or setting up on Caliber, a platform that creates a sense of belonging and collaboration for all our chartered accountants across the group. When we talk about creating leaders of tomorrow, I think of Casper. In line with ensuring the safety of our team, Casper will be presenting from home today. Besides being an avid gardener and a doting father, Ranen is an actuary who recently took over the finance portfolio. He describes himself as enjoying a good strategic challenge and what a talent he's experiencing now in finance, but also has been fascinated by the finance field. Ranen is wise beyond his years and speaks with the critical wisdom that makes even the boardroom listen. Joining them a little bit later, we will have Iain Williamson back on stage to unpack the exciting developments in our business, the unbundling of a portion of Old Mutual stake in Nedbank. For now, Casper and Ranen, you have the stage.

Thank you and good afternoon. Historically, when it comes to capital allocation Old mutual has seemed to be lacking. Unfortunately, the boat has sailed and this is not something we can fix. That said, we've been working credibly hard over the last while to put us back in a position to demonstrate strong capital allocation principles and an improved capital position. As with the rest of the business, we have followed the principle of rectify, simplify and amplify in the presentation. As a quick overview, and before we get into the detailed numbers, in terms of rectifying the business, I will take you through the year, which have improved how we manage the balance sheet. Firstly, how we improved the link between our strategy to how we drive value for shareholders. Secondly, our financial management framework, which clarifies how we manage capital in income and thirdly, the 3 manager model, which we implemented to improve asset and liability management. Using books that rectified how we managed the balance sheet. We took substantial actions both from a structure, operations and capital management perspective. Ranen will be taking you through what has been delivered in this area since many separation. We can see this as a continuing journey with a long road ahead. We have [Audio Gap] targets, capital ratio ranges, our capital acquisition framework and the hurdle rates required, which will allow us to amplify returns to shareholders over time. The next few minutes, we'll show you what we've done and what we plan to do in the future. 1 to rectify the business. The business strategy is to drive superior shareholder through sustainable long-term return on net asset value or RoNAV and earnings growth. while maintaining strategy through capital and liquidity targets. We have integrated approach to our business, finance and risk strategy in order to align the group's scarce resources to drive shareholder value. This set in our value drivers being revenue growth, operating margin capital efficiencies which is the focus of this presentation, our competitive strengths and execution and delivery. We measure shareholder value as the book value, and this aim to lock the discount in our share price through delivering on our earnings growth, value of new business and stable relevance. The OML financial management franchise is how we manage capital from both a solvency and liquidity perspective. This has been up to the changes to the Insurance Act and a number of other methodology changes [Audio Gap] speaking of Nedbank, the iterative risk margin and accessible capital. The lower bound of the optimal range is the minimum of capital required to stand in extreme but plausible sequence leading to a perfect store. We manage our shareholder liquidity levels in effect to ensure we can cover the group liquidity requirements within a perfect storm year. We strive to manage our capital within the optimal range given external risks, the outlooks and potential calls on capital. A core focus within our mutual life assurance company OMLACSA has been the drive to improve the management of pocket risk, liquidity risk and fee. This has led to the implementation of the 3 manager model, [indiscernible], which splits the business into liability managers seeking life products, asset managers, the businesses requiring funding for investment purposes, middle managers responsable for the overall management of risk as well as funding allocation. The 3 manager models include having profit-generating business units focused on those activities along with their respective expertise and core skill sets, middle manager acts and mitigate financial risks and ensures efficient scarce resource allocation, in this case, funding to generate investment returns in line with risk appetite. Ranen will tell you the impact on the business of these simplifications.

Casper has just taken you through the journey of how we rectified our frameworks. I will be discussing how we used those frameworks to substantially simplify the balance sheet. I'm going to kick off with the impact of the 3 manager model, I will then highlight other transactions we have implemented to simplify the balance sheet. And lastly, I will summarize how those simplifications have enabled us to return substantial value to shareholders. The implementation of the 3 management model has had a significant impact on how we manage market and liquidity risk, and we have derived 4 key benefits from the implementation. Firstly, we released ZAR 3.3 billion worth of reserves due to the strength of our new processes and the confidence we now have in managing our market and liquidity risks. Secondly, with the 3 manager model in place, we navigated the COVID market and liquidity volatility with negligible losses. The third benefit is that we can now hedge more effectively with reduced costs as we take advantage of internal offsets of market risk on our balance sheet. And lastly, we have also future fit the ALM capability of our organization for the requirements of IFRS 17. In terms of other simplifying transactions, I will be discussing 3 areas where we've optimized the balance sheet, including how we improve the capital structure, the cleanup of non-core assets that don't link to our strategy and aligning our regulatory treatment of the balance sheet to the underlying risks. So starting off with the capital structure and using the principles of the financial management framework that Casper just took you through, we issued ZAR 4 billion worth of subordinated debts insisting at highly competitive prices. The subordinated debt supported reducing the cost of our capital structure, whilst maintaining our balance sheet strength. In terms of cleaning up non-core assets and simplifying our existing operations, we have been closing of the residual PLC operations, which to date have resulted in a release of just under ZAR 8 billion of capital. In 2019, we sold our Latin America business for just over ZAR 4 billion. And we are also rigorously simplifying our operations, legal entities and balance sheet structures across the group, and this has released a further ZAR 1.5 billion worth of capital to date. Lastly, in terms of aligning our regulatory treatments with the underlying risks, we've obtained approval for the use of the iterative risk margin in 2020, which improved the life license capital coverage ratio by greater than 20%. We also restructured some of our policyholder participations to rectify a regulatory anomaly in their treatment, which has released ZAR 2.6 billion, and we expect further releases from the participations in time as we complete that restructuring process. These simplifications have enabled us to return significant value to shareholders since listing. We returned just under ZAR 39 billion through the Nedbank unbundling in 2018. We completed special distributions of just under ZAR 10 billion, which included a share buyback and special dividends. And lastly, we delivered ordinary distributions of just under ZAR 13 billion. That gets us to a massive total of ZAR 61 billion of value that we've returned to our shareholders since listing. But importantly, we made those returns whilst maintaining our strong balance sheet and investing in the core operations. With that behind us, we look at the future and how we plan to amplify returns to shareholders. Casper will take you through how we aim to continue optimizing our leverage ratio, our future capital ratio targets, and how we will be consciously deploying capital going forward.

Thanks, Ranen. In terms of our debt program, OMLACSA and OML insured domestic medium-term note program into a single program and added OML assure. This has enabled the ability to issue senior debt funding at an OML level to source further liberty to target our optimal financial leverage ratio. The group's optimal financial leverage ratio has been set at 15% to 20%. This was derived based on minimizing the weighted average cost of capital, guidance from our credit rating agency and align for operating leverage in the. They have it to be a long-term strategic feature in our capital structure, and hence, we intend on issuing ZAR 1 billion to ZAR 2 billion of debt with a 5-year term from OMLACSA on an annual basis, create a smooth maturity profile and reduce our weighted average cost of capital. This will result in a maximum of ZAR 10 billion subordinated debt issued out of OMLACSA under the consolidated period. The maturity profile shown in the table includes debt issuances from prior years. which creates the current irregular profile. This will be managed period and after 2025, we'll have a smooth profile. Ranen has taken you through the additional distributions and balance sheet optimism we had. Despite the additional distributions, our capital ratio has another improvement since managed separation. Following the approval of material applications from entity, we have remodeled the impact of the perfect storm event on the OMLACSA and OML sheets. Going forward, the OMLACSA solvency target range remains the same at 175% to 210%. The OML solvency target range has shifted to 165% to 195%. And if the Prudential Authority approves the accounting consolidation, the range will change to 170% to 200%. Liquidity solutions are actively managed within solvency target ranges with [indiscernible] intention in managing the business. And this is dependent on market conditions, our business strategy opportunities for growth. The majority of our capital is [ diversification ]. These businesses achieved healthy cash generation and substantially exceed cost of equity. Earnings and runoff performance from 2020 as a result of market and business conditions following the [Audio Gap] However, we expect to start meeting cost of equity by 2022 and earned cost of equity by 2023. [indiscernible] and Rest of Africa businesses are delivering lower [Audio Gap] We expect higher growth from these businesses over the medium term. In future, capital will be deployed to investing in capabilities to ensure our core business remains [ creative ] improving our transactional and lending capabilities, growing core businesses through broker roll-up in our life and short-term business, structurally simplifying the business to drive cost efficiencies, achieving scale in selected on the Rest of Africa and driving innovation. Any deployment of excess capital must meet our acquisition to the OML strategy and generating returns in excess of the cost of equity, while excess capital is returned to share holders, enhancing roadmap. Overall, we believe our approach to capital allocation has delivered substantial capital returns to shareholders and has the ability to drive value for customers and shareholders and has resulted in our balance sheet and capital has been optimized. And with the disciplined way we're approaching the allocation of capital both efficiency and growth will set us up to win. Thank you. And now over to Iain.

Thank you, Casper. As you've all seen in the announcement we made last night, we've made a decision to unbundle the 12.2% of our Nedbank holding that is held in Old Mutual Emerging Markets. At yesterday's closing price was worth approximately ZAR 10.4 billion. The key driver of this decision was that our discussions to expand our strategic relationship with Nedbank, we're not advancing. The most important thing I wish to highlight is that whilst the unbundling has optimized our future return on capital, our capital position remains appropriate to support our growth ambitions and maintain our dividend policy. Other key points pertaining to the transaction are that the mechanics are similar to the previous unbundling that we undertook in 2018. Our group solvency ratio is expected to decline by approximately 3 percentage points on a pro forma basis, remaining towards the upper end of our solvency range. The remaining Nedbank stake in OMLACSA is part of our solvency capital, and we manage that in line with our normal financial management framework. Capital gains tax costs will be paid by the company and further updates will follow in the second half of the year. The unbundled stake will be treated as held for sale under IFRS for our half year results until the transaction is concluded. And I'm absolutely confident that this move will allow us to focus on accelerating the execution of our strategy. Thanks very much. That brings us to the conclusion of our presentation content, and we will open for questions and answers again.

Thank you, Casper, Ranen and Iain. This unbundling certainly reiterates our commitment to the ongoing execution of our strategy. Now Cesar tells me that the questions have continued to roll in over the course of the presentations, I see a lot of interest around our capital management strategy, Mass & Foundation Cluster and Personal Finance. But given the news we've just shared, let's start with the questions on the unbundling.

I have a question for Casper. Simplification implies efficiency gains. Are you able to quantify the cost savings gains you expect through simplifications similar to the ZAR 1 billion target in 2019? Or do you see these benefiting primarily clients or shareholders?

We've already communicated a cost savings targets to save costs of ZAR 750 million on a net basis. So the actual gross cost savings are expected to be more ZAR 1 billion, the cost to achieve those savings, bringing to a net ZAR 750 million on a run rate basis by the end of 2022, and we're well on track to achieve that target. And then obviously, along with it from you and Johnson, we expect to add cost savings over time.

Yes, definitely working very hard...

[indiscernible]

Definitely, working towards those cost saving targets are not only informed by what we're doing in digital and data, but overall simplification across the group. Thank you, Casper. Iain, I have a question for you. Does the unbundling of Nedbank change your capital target range?

No. Not at this stage is a short answer. We have held Nedbank simply as equity in our capital ranges. So it certainly won't change the range at OMLACSA level. But at the group level, we will come back with whether there are any changes there.

Thanks, Iain. So we'll revert with more detail as things become clearer on that one. Here's another question. it's also for you, Iain. Why did Old Mutual decide to unbundle the Nedbank stake rather than just sell it? Is it an indication that Old Mutual doesn't see any opportunities for inorganic growth in the market?

Okay. So there's actually 2 separate questions there. As I indicated in my voice over, the decision to unbundle the stake was largely because we could no longer justify the strategic rationale for holding on to 19.5% in a single stock. Given that, as I said earlier, our strategic conversations to broaden our relationship further. We're not progressing. The -- sorry, I've forgotten the second part of the question. Could we just stick it back up?

Could I just ask that we show the question again? Is it an indication that Old Mutual doesn't see any opportunities for inorganic growth in the market?

Okay. As I said in my voice over as well, we've quite carefully balance the extent of unbundling to ensure that we're comfortable with the amount of capital we're sitting on including capital for future growth both organically and inorganically. But equally, one, we are conscious of our responsibility to not sit on an excessive amount of capital in the face without having very concrete opportunities in front of us. So I think it's -- we've sort of tried to tread that line quite carefully to make sure that we've retained enough to allow us to pursue growth in what we believe are appropriate ways, but also not to retain too much.

Definitely, a balancing act there, Iain. Let's see if we have any more questions from the chat box. We do. And this one is for you and for Garth. How do we -- how does the sale of Nedbank impact on our collaboration program with Nedbank? Will we remain the product provider for complex life and P&C products?

So the way our agreement with Nedbank construction is that while we continue to hold above 15%, the agreement remains in place. So essentially, until we receive the regulatory approval for the unbundling, the agreement will remain in place. As we've indicated in our announcement, we expect that to take control around November. So we have time to have extensive discussions with Nedbank on the way forward. Having said that, our view remains that, first of all, all our relationships with Nedbank in our relationship agreement are struck on an arms-length basis. And secondly, that the commercial benefits are quite finely balanced between the 2 parties. So there is not any incentive, if you like, for either party to upset that balance too much in the short term. So I think it's an area where no doubt there will be ongoing conversations, ongoing negotiation, but not an area that I'm particularly concerned about.

Thank you. Garth, do you want to specifically respond to the question on P&C with Iain having covered all the comments around the arms-length relationship which continues between ourselves and Nedbank?

Yes. I think, Celiwe, I'd add to Iain's point that I think the agreement we have with Nedbank on the P&C side is very market related. And I think both parties benefit from our partnership, and we believe we can continue that partnership beyond us reducing our stake in Nedbank, and we will engage with them on that basis.

Thank you, Garth. Our next question is for you again, Iain. Is Old Mutual determined to be all things to all people or will it exit underperforming sectors?

Our strategy is to provide services across the range of areas that are indicated in the opening presentation earlier today. But businesses that consistently do not perform will have to either perform or be exited. So I think we're quite clear on that, and we have no intention of indefinitely pursuing underperforming opportunities.

Thank you, Iain. I'm going to check if we have any more questions. Another one. This one is for Nico. While I tee him up, I will read out the question. Given the increase in mortality rates in the first quarter, will Old Mutual need to increase its COVID provision, given it's paid out ZAR 2.7 billion in claims. Nico, over to you.

I think it's useful to realize that when we set up the provisions at December 2020, we had set up about ZAR 4 billion for additional COVID claims in 2021, of which about ZAR 3 billion was, I'm using round numbers here, but it was for the second wave and about ZAR 1 billion for the third wave. And we'd agreed that to the extent that we have areas where actual experience is better than provisions for the second wave. We'll keep that behind for the third wave. Now at this point in time, the bulk of the second wave was hitting in the first quarter. April, May, things kept getting better because we were on the runoff at the end of the wave. So ZAR 2.5 billion claim sounds like a lot, but when you put it next to ZAR 3 billion provision. And at this point in time, I think the right answer there is that, that was kind of mostly in line with expectations. Some segments were a bit better. Some segments were a bit worse. But it wasn't a complete disaster. And in terms of the third wave, the real problem, I suppose, is that -- that piece we set aside for the third wave, you have to really have a good crystal ball to know whether that's enough or not. We will be finalizing the provisions for entrants only around about the middle to end of July to make sure that we've got a good enough handle on where the third wave had peaked. At this point in time, though, it's useful to realize that we've got the ZAR 1 billion left over from the third wave provision we'd set up in December as well as some extra from provisions we've set aside for wave 2 that haven't been utilized on things like persistency and morbidity. So there is a bit of money left already. The confidence intervals around this is still quite wide. The models are kicking out numbers where you can easily get plus 50% or minus 50% for the third wave. But current provisions are kind of falling within those confidence intervals. So at this point, it does not yet look like there's a major problem, but we'll know in about a month's time.

That's Nico van der Colff, our group actuary, talking to us about how the provisions are a bit of a crystal ball gazing exercise at times with the uncertainty that we face. Iain, a question for you. Is there a plan to offer a fully fledged transactional banking service?

As I said in my opening presentation, we do intend to enhance the service we currently offer, which is quite widespread through the money account and to offer a broader set of transactional capability to the market. It's something that we are working on as we speak, and we will give you more information on that in due course.

Excellent. And I'm told that the check box is busy and buzzing. We have many more questions still to come, so brace yourself. Here is another one. Do you need to be above the top end of your optimal capital range to consider buybacks and special cash dividends? Until Casper is no longer with us. Iain, you've got that. And we've got Ranen on standby behind you, should you need some backup.

Yes. I can answer that. No, not necessarily. I think we would want to be somewhere towards the upper end of our range, but we wouldn't need to be above the top end of our range to consider a further special dividend or buyback. As Casper said in his narrative earlier, it will depend on a combination of factors where we are in the range. And we would, I think, have to be towards the upper end to consider such action. What we see as foreseeable growth opportunities for investment and what is the current operating environment look like and the sort of foreseeable risks that we have as we consider and make those decisions. But the short, simple answer is we don't necessarily need to be above the range. We just need to be in the upper end of the range for those kind of considerations to come into play.

Within the upper range. Thank you very much for your response, Iain. Another one for you. Do you need to do a bolt-on acquisition to bring your lending business to the appropriate scale?

We don't believe so in the unsecured lending business. We're comfortable with the scale where we're at. It is appropriate given our risk appetite for unsecured credit in the current macro environment. So we're not seeking to scale that particular business unit up inorganically.

Thank you, Iain. I think we do still have more questions. Here's the next one. You previously talked about the excess capital in the Life business, discretionary margins, for example, rather than the Nedbank stake as potential for returns to shareholders. Please provide an update on how you're thinking about excess capital in the Life business.

Okay. So as I said earlier, the Nedbank stake that we are -- remains is part of the capital in the Life business. As you've seen from the numbers that Casper has shared with you, we are -- the solvency ratio does not move materially downwards as a consequence of the distribution that we've made. And so therefore -- and doesn't actually change the ratio in OMLACSA, so in the South African Life business. So having said that, I don't think we anticipate necessarily any immediate further action in that area. So it's an area we will keep considering we will keep being responsible about how we think about our capital and using it optimally.

Thank you, Iain. Definitely needing to be responsible and considered in how we usher one of our most important resources, which is our capital. The next question for you as well, Iain, is why would we continue to hold approximately 7% of Nedbank?

So again, as we said, we will deal with that stake as part of our normal financial management framework in the future. And we will take into account what we believe we need from a capital perspective. Obviously, we'll take into account where we think value is sitting and other considerations as we work that through. But within our normal capital management framework, not with any sort of special considerations applied to that stake or any other holding in our capital structure.

Thank you, Iain. I'm going to move on to a question back to you, Nico. Is the targeted financial leverage ratio for OMLACSA, not too conservative compared to our peers.

Okay. I'll do my best someone later on and feel free to jump in if I get this wrong. It was set by trying to optimize the mix of capital we wanted to get to the sort of weighted cost of capital at the point that optimizes what we get versus what we pay. So it came from an exercise on that. And Clearly, there's a lot of debate you can have around a little bit more, a little bit less. Considering where we're currently sitting at almost feels as if the point is a little bit moot because we're below the bottom end of our optimal range at this point anyway.

Ranen has joined us now on stage to help answer that question. Just trying to get it back up on the screen to give them an optimal chance to be able to respond to it.

Yes. So Nico is correct. We've effectively looked at 2 considerations for setting the leverage ratio. One is to reduce the weighted average cost of capital for the group. But within that optimization, we consider that we want to be able to survive a moderate stress event whilst maintaining the strength of our balance sheet, and that's what we've used to calibrate that range, and we're quite comfortable with that at this stage.

Thank you. Awesome. A great team effort there by our finance colleagues. We've got another one on solvency, which I'm going to send back to Nico. Nico, I'll read the question out to you. You state that the pro forma impact on OML solvency is a negative 3%. Please explain that. ZAR 10 billion is quite sizable compared to your own funds at ZAR 92 billion at group level at the end of 2020, and it indicates a larger impact surely.

So it's useful to remember that, that ZAR 10 billion is owned funds that wasn't sitting in the Life company. It was sitting in a holding company. And the way our regulatory system works is that you also have a capital requirement on holding companies and the capital requirement on unregulated holding companies, unregulated entities was actually an equity shock on its NAV, assuming that it's another equity. Now that means that it's a shock of -- somewhere I'm going to use the -- it's got the symmetric adjustment in the regulation around it, but call it a roughly 50% shock. So it means that, that asset was sitting in our books with the ZAR 10 billion value, but a ZAR 5 billion ACR around it, meaning that on its own, you say that the asset, let's say, had a 200% solvency ratio, which if you remove it from the group, you can hear it's a little bit of the average for the rest of the group. And therefore, the group solvency ratio drops a little bit. Now it gets a little bit more complicated because that shock isn't exactly 50%. It can be materially lower, in which case, the impact is bigger or it can be higher and then impacts smaller. But I think it explains why the ratio doesn't move by quite that much. You've got ZAR 10 billion of ZAR 90 billion that could, let's say, be sitting above the group average, which you're removing, but the rest of the group is not going to completely disappear when you do that. It's -- it was a mix to get to the group at, let's say, [ 185 of 190 ] of this [ 200 ] and a couple of stuff that's, let's say, [ 80-something ]. And when you remove the [ 200-ish ] number, the average only drops a little bit, maybe that helps.

Thank you very much, Nico. A very comprehensive response to our last question of the day. Ladies and gentlemen, thank you so much for your engagement. To the extent that you still have questions that we have not been able to get to today, kindly continue to post them in the chat group, and we will make sure that we respond to you in great detail in the next few days. As we draw to a close, we've prepared this summary video of all that you have heard today. [Presentation]

I, for one, have a great deal of comfort, not only in the current Rectify, Simplify and Amplify themes, but in the tangible progress we continue to make against our stated truly mutual strategy. I'm excited about what the future holds for us at Old Mutual, for our teams, those who will especially be executing on what we have laid out today. I believe that the last few hours have given you the detail you need to inform your thinking of Old Mutual and have addressed some of the key questions that you may have had. We haven't been able to get to all the questions asked today, but we do promise to directly respond to you in the coming days. As a last reminder, the presentation and full webcast will shortly be made available on our website in the Investor Relations section. With that, I'd like to hand over to Iain to conclude the day.

Thanks, Celiwe. Well, so what you've heard today is a story of how we've evolved as a business since we came back to Africa with managed separation. And using the teams Rectify, Simplify and Amplify, we've taken you through a journey of how we will ultimately emerge as a stronger business. Today, you've heard from the Mass Foundation Cluster, Personal Finance and Wealth segments as well as our data and digital team who've unpacked our technology essential to our future. We'll be back with you in November for an update this time with Old Mutual Insure, the Rest of Africa and the Corporate and Investment businesses. We remain focused on delivering our 2030 vision and responsibly building the most valuable businesses in our industry across all the markets that we play in. The future has immense opportunity for us. And to highlight a few key takeouts from today. We've established a clear and singular victory condition for our business becoming our customers' first choice. Our business is energized and united behind that objective. We've got a clear execution framework in place in the Rectify, Simplify and Amplify framework with value drivers as the engine. We've optimized our balance sheet significantly, which should allow us to deliver a sustainable enhancement in our reNAV.

Thank you, Iain, and thank you to all of our presenters today. A huge thank you to all of you for joining us today. This brings us to the end of our 2021 Capital Markets Day. We will see you again at our interim results in August. And until then, I say [Foreign Language] and [Foreign Language]