Avior Capital Markets - Old Mutual Ltd. (1A6B) OMU | Outperforming | FY18 earnings preview

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Avior Capital Markets

Warwick Bam

OMU | Outperforming | FY'18 earnings preview

Old Mutual (OMU) will release their maiden full year results as a pure play African insurer on Monday 11 Mar â€˜19. Since listing on 25 Jun â€˜18, OMU has outperformed the market with a total return of 9.2% (JALSH: 3.4%). We believe OMU's forward P/E of 10.2x is distorted by excess assets of R2.31/share. Excluding the excess assets, OMU is trading at an 8x forward P/E. Isolating OMU's insurance and asset management operations the forward P/E falls to 7.6x. We believe OMU's mass foundation segment is resilient and will continue growing at 8% to 15% annually for five-years. OMU's rewards programme will facilitate cross-sell to c.10m existing policyholders assisting growth in the middle-income segment. We expect the market to look through weak investment returns, focusing on OMU's operating result and new business volumes. We expect Group volumes (APE) to fall 6% y/y and VNB to fall 7% y/y. The Personal Finance segment experienced unusually high death and disability claims in H1'18 which we expect to have normalised in H2'18.

08/03/2019 11 EN

Underlying

Old Mutual Ltd.

Old Mutual Limited is a financial service company, which is focused on providing financial solutions to individuals, businesses, corporations and institutions across 17 countries and three regions Africa and Asia. Its business includes Old Mutual Personal Finance offers wealth creation and protection products, as well as asset management, in the middle-income market; Old Mutual Mass & Foundation Cluster offers savings and protection products to customers in the lower-income and foundation market; Old Mutual Corporate provides investment, insurance and consultancy services to retirement funds and companies of all sizes; Old Mutual Wealth & Investments Cluster offers clients access to an array of investment offerings, styles and asset classes; Old Mutual Insure that provides short-term insurance services to personal, commercial and corporate customers, and Old Mutual Africa offers life and savings, property and casualty, asset management and banking services.

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ZAE000255360 Johannesburg Stock Exchange South Africa

Provider

Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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Analysts

Warwick Bam

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OMU | Outperforming | FY'18 earnings preview

With a more favourable environment, OLD MUTUAL LTD improves to Slightly Positive

Avior Financials | Old Mutual and MTM trading updates | Jun '19 BA 900 data | GTB results | Specialty Finance valuations and ASISA stats

SA Insurance | Under pressure

Tiger Brands | ESG | Pressed to execute

SA Investment Strategy | Review of January 2020 for SA investors: Coronavirus weighs on the ZAR

SA Banks | Low credit risk in commercial property | Time to buy SA banks

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