Old Mutual refocuses: Cost savings, digital innovation and growing market shares

Old Mutual’s bank is gaining 5 000 new clients a day and is part and parcel of a refreshed strategy put in place by the CEO of five months, Jurie Strydom, to improve competitiveness, deepen market leadership, and unlock long-term value.

“Through cost savings, balance sheet strength, and digital innovation, we are creating a simpler, faster, and more connected business that is closer to customers, more agile in the face of change, and well positioned to deliver long-term, sustainable growth for shareholders and society,” Strydom said in an address at the group’s Capital Markets Day on Tuesday.

Cost targets for the group, which has 13.7 million customers, entail R2.5 billion in savings by the end of the 2027 financial year and R1 billion by the end of the 2026 year.

Margin recovery would be driven through leaner operations and digital transformation. Competitiveness would be strengthened in South Africa, while profitable growth would be scaled in the broader region. OM Bank was on track, after about R5 billion spent to establish the bank, to reach monthly break-even by the 2028 financial year.

In terms of capital and shareholder value initiatives, a R3bn share buyback was underway, a cash-based dividend policy was introduced, the solvency ratio is being optimised while maintaining a strong balance sheet, and from the R27.6bn cash generated since the 2022 year, over half had been returned to shareholders through dividends.

He said their strategy changes were being implemented with discipline, simplifying the business, embedding efficiency, and sharpening accountability at every level.

New financial targets have been introduced for the group, including 6% to 9% dividend per share growth on a three-year rolling target, and a return on gross embedded value (RoGEV) of 14% to 16% over the medium term - RoGEV was 14.8% and 11.9% in the 2024 and 2023, respectively.

The net underwriting margin target for its insurance operations increased to 5% to 8%, from a 4% to 6% target previously. The value of the new business margin target remains the same at between 2% and 3%. The return on net asset value target was 15% to 17% - it was 14.5% in the 2024 financial year.

Clarence Nethengwe, CEO of OM Bank, said the bank launched earlier this year without fanfare and it has onboarded 140 000 customers, demonstrating strong early traction. To expand in the South African market, the bank has good credit and funding capabilities, including a R15.5bn loan book through some 346 branches, and access to a 7 million strong customer base. It is targeting to acquire between 2.3 million and 3 million customers by the 2028 financial year.

Nethengwe said they are investigating the possible rollout of ATMs as some of their clients have indicated they need to be able to draw cash from ATM's. The digital and physical bank’s products include a pay-as-you-use bank account for R4.95 per month.

Strydom said the group would focus on four priorities: drive competitiveness in the South African business, deepen market leadership in Southern Africa, establish the right to win for OM Bank, and evaluate and pivot on growth markets.

Old Mutual is also deepening its digital and investment propositions through the acquisition of 10X Investments, with R68 billion in assets under management, which would strengthen the group’s direct and digital offerings and position it to benefit from the global shift towards passive and low-cost investment solutions.

Across its broader investment platform, the group now oversees R1.2 trillion in assets, including R213bn in Futuregrowth and R123bn in Old Mutual Alternatives, Africa’s largest private-market and infrastructure investment manager.

In terms of streamlining operations, over the past few months, the group has been recreated into two key segments: Old Mutual Life and Savings, which includes Old Mutual Insure and Old Mutual Investments, while the second segment is OM Bank. The creation of these two segments, each with its own CEO for the past three months, would also result in a leaner corporate structure at the centre, said Strydom.

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