1. It has been a year now since you unveiled your strategic
review. How much progress have you made?
Our strategy is to build a long-term savings, protection and
investment group. One year into a three-year process, we have made
significant operational progress.
When we announced our strategy, we said we would streamline and
simplify the Group where we could create shareholder value. We have
set some criteria to test this, which are:
- Does the business meet or can it meet our RoE target?
- Does the business contribute to or can it contribute to other
parts of the Group?
- Can it become meaningful in the context of the Group's
As a result of applying these criteria, we have agreed to sell our
US Life business for US$350 million.
We are making good progress in achieving the operational targets
we set. We have delivered £59 million of run-rate savings against
our target of £100 million. For our Long-Term Savings business, we
set a return on equity target of 16-18%: last year, its RoE was
18.5% and we aim to ensure that this is sustained. We remain
committed to reducing our debt by £1.5 billion by 2012.
In addition, we have implemented a new, more effective
governance and control system. This is already working well, with
the number of one-off operational losses reducing significantly
during 2010. We have strengthened our management team with new CEOs
in Nordic, US Asset Management, Mutual & Federal (M&F) and
So we have made a good start to meeting our strategic objectives
- though we recognise we still have a lot of work to do over the
next two years.
2. What are the major challenges and opportunities for the
Group in 2011?
We have achieved a lot in 2010. The challenge now is to ensure
we maintain that rate of progress.
We saw good profit growth last year, and sustaining that
momentum is crucial. While the global outlook remains somewhat
volatile, we believe that, as long as we maintain what we have been
doing, we can continue to grow our sales and profits.
This year we must deliver further on our strategy. We need to
continue to deliver cost savings, reduce our debt and work on
leveraging our strengths across the Long-Term Savings division.
In Emerging Markets, we will focus on designing new products for
our customers and ensuring we have the right methods of selling to
them. We are excited by the opportunities we see in Emerging
Markets and the potential for expanding our footprint in
Our restructuring programme in Nordic is intended to reduce its
costs and increase its profitability. Retail Europe is rolling out
a suite of new products and Wealth Management will continue
reducing costs and improving efficiency.
We have a new CEO at US Asset Management, whose declared
priorities are maintaining investment discipline to improve
performance and net client cash flow, driving growth and improving
margins. We are continuing to explore a partial IPO of this
At Mutual & Federal, our new MD will be driving its Step
Change Programme, which is necessary to refocus and grow the
business. And Nedbank has a clear strategy for growing its retail
business and non-interest revenue.
3. How are you putting the customer at the centre of everything
Putting the customer at the centre requires us to understand
what our customers need, offering them the right products through
the right distribution channels in each of our markets, while
providing unrivalled customer service. This will create long-term,
sustainable competitive advantage.
We have to develop specific products, distribution systems and
processes to meet the needs of customers in two distinct types of
market: developed countries and emerging markets.
In the UK, for example, we offer flexible, transparent products
primarily through our Skandia platform. Evidence of the development
of the platform business can be found through our growing share of
the UK savings market: by the end of the third quarter of 2010 we
had achieved a 7.4% share, up from 6.4% at the end of 2009.
In Emerging Markets, we have a wider product set, often centred
on regular-premium protection products and distributed through the
channels that suit our customers. We focus on delivering value -
making sure that our products are transparent, our fees are clear
and our customers get what they want and need.
4. How would you judge Old Mutual's performance last year?
I am very pleased with our performance in 2010 and would say it
has been a year of substantial improvement. Our adjusted operating
profit was up 14%, adjusted earnings per share were up 20% and
Group return on equity was up from 9.1% to 12.2%. In light of these
strong results, our Board has recommended an increased final
dividend of 2.9p, making a total of 4.0p for the year.
Our funds under management increased during the year to £309
billion and our financial position remains robust.
Looking at our performance in more detail, we saw 7% growth in
life sales on an APE basis and 28% growth in unit trust sales in
Long-Term Savings. Each of our Long-Term Savings businesses grew
its profits during the year. Our Wealth Management business had a
particularly good year, with profits up 86%, and the UK platform
attracted gross inflows of £5.2 billion. Nordic grew its profits by
66% and Emerging Markets also achieved good sales and profit
Our short-term insurance business, Mutual & Federal, had one
of its best underwriting performances to date. And Nedbank reduced
impairments, increased non-interest revenue and grew headline
earnings by 15%.
So we achieved a good performance overall, with all our
businesses delivering progress. Our focus going forward will be on
keeping up the good work.