Old Mutual_FY 2025_SENS

Old Mutual Limited (AIM:OMU) reported its annual results for the year ended 31 December 2025, revealing a modest 2% increase in group equity value per share to R19.80. This growth was primarily driven by strong performances in its Insure and Wealth Management segments, although it faced challenges due to strengthened persistency assumptions in its Life and Savings division, which reduced the value of new business margin to a disappointing 1.2%. The company declared a final dividend of 56 cents per share, culminating in a total dividend of 93 cents per share for the year, reflecting an 8% year-on-year increase. Results from operations rose 13% to R9.8 billion, while adjusted headline earnings surged by 24% to R8.3 billion, indicating a robust operational performance despite some headwinds.

The strategic context of these results is significant, as Old Mutual has reset its corporate priorities to enhance shareholder value and drive growth. The company has established a clear value creation framework, focusing on two phases: Unlocking Value and Generating Growth. This strategy is anchored in four key priorities: enhancing competitiveness in South Africa, deepening market leadership in Southern Africa, establishing a strong position for OM Bank, and selectively pivoting in growth markets. The new operating model aims to empower cluster profit-centres with greater accountability for business delivery, which is expected to facilitate improved execution and operational efficiency moving forward.

From a financial perspective, Old Mutual's shareholder solvency ratio remains robust at 162%, and discretionary capital has nearly doubled to R6.1 billion. This healthy capital position suggests that the company is well-placed to support its strategic initiatives and operational needs. However, the reported increase in operational costs, which rose by 11% to R1.889 billion due to restructuring efforts, raises questions about the sustainability of cost management in the future. The restructuring costs of R440 million are intended to reduce future expenditures, but the immediate impact on operational costs could pose a challenge if not managed effectively.

In terms of valuation, Old Mutual's current market capitalisation is not explicitly stated in the announcement, but its operational metrics provide insight into its financial health. The adjusted headline earnings of R8.3 billion and a return on net asset value of 15.2% indicate a solid performance relative to its peers. To assess its valuation, one can compare it with similarly sized companies in the financial services sector. For instance, peers such as Investec plc (LSE:INVP) and Sanlam Limited (JSE:SLM) provide a useful benchmark. Investec, with a market cap in the range of £3 billion, trades at a price-to-earnings ratio of approximately 10, while Sanlam, with a market cap of around R100 billion, has a price-to-earnings ratio of about 12. This suggests that Old Mutual, with its growth trajectory and strategic focus, may be undervalued if it can successfully execute its strategic priorities.

The company’s funding runway appears secure, particularly given the strong discretionary capital position. However, the ongoing share buyback programme, which has seen R0.7 billion completed as of December 2025, raises potential dilution concerns if the buyback does not yield sufficient value accretion for shareholders. The continuation of this programme will depend on market conditions and the company's ability to generate cash flows that justify further repurchases.

Execution risk remains a critical concern, particularly in light of the challenges faced in the Life and Savings segment, where the value of new business has declined sharply. The company has acknowledged the need to restore margins and improve the quality of new business, but the effectiveness of these measures will be closely scrutinised in the coming quarters. Additionally, the economic environment in Malawi, where the company has significant exposure, poses a risk due to potential currency devaluation and inflationary pressures, which could adversely affect earnings.

Looking ahead, the next measurable catalyst for Old Mutual will be the anticipated marketing campaigns for OM Bank in Q2 2026, which are expected to drive customer and deposit trends. The success of these initiatives will be crucial in determining whether the company can achieve its growth targets and restore profitability in its Life and Savings segment.

In conclusion, while Old Mutual's recent results reflect a solid operational performance and a commitment to enhancing shareholder value through strategic initiatives, the challenges in its Life and Savings division and the economic environment in key markets present significant risks. The announcement can be classified as moderate in materiality, as it indicates a positive trajectory in earnings and dividends, but also highlights areas of concern that could impact future performance and valuation. The focus on execution and strategic clarity will be essential for the company to navigate these challenges and unlock its full potential in the coming years.

Key insights

• ●Equity value per share rose 2% to R19.80.
• ●Total dividend increased 8% year-on-year to 93 cents.
• ●Adjusted headline earnings surged 24% to R8.3 billion.

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