Mutual & Federal – geared for growth

Growth in the insurance industry over the past two years has been hard to come by. Besides the added pressure to comply with new regulation, there have been added cost pressures and underwriting margins which do not allow companies much room for growth.

Overcoming this challenge is hard for companies, particularly in the short-term industry where catastrophes, such as the storms in 2012 and 2013 as well as the recent fires experienced in the Western Cape, have seen some companies paying out significantly more than they expected to over those periods.

Mutual & Federal is currently in the midst of an ambitious growth phase. While the company has a proud history dating back over 180 years, many believe growth in the market is still possible.

We have been working hard on living up to values stipulated by the Financial Services Board with regards to offering value to customers. This is being achieved through staff members and key partnerships with brokers and financial advisers.

The company has been in a steady state of decline in recent years, both from a market share and a profitability perspective. This required us to spend time formulating our strategy for the next decade, which is encapsulated in our vision to grow our market share in South Africa and to make a contributions to the profits of Old Mutual Emerging Markets.

Financial performance

The final 2014 financial results were announced with the Old Mutual Group’s financial results on 27 February. Some highlights included:

• An underwriting margin of 0.9%, which is a significant improvement compared to our prior year result of -5.8%.
• An expense ratio of 19.4%, which contributed significantly to our core underwriting result.
• Net claims ratio of 63.1%, which is considerably better than the previous year (69.9%). Savings achieved in our claims procurement initiatives amounted to approximately R226 million.

Growing the corporate team

The company recently appointed a new HR Executive, Dr Liziwe Masoga, and a new Chief Risk Officer, Jacques du Preez. This completes our executive team, and allows us to focus on product delivery to customers and to brokers and advisers.

Power in collaboration

Mutual & Federal has always been part of the Old Mutual Group, sharing a similar heritage. The leadership agreed that 2015 will be spent driving stronger alignment, as a means to unlock value that sits in the Old Mutual customer base, its brand and distribution channels.

Meeting our aspirations requires us to significantly grow our market share over the next five years, and working closely with Old Mutual forms a key part of achieving this. We want brokers and financial advisers to see the group as a key partner for the range of products and services we offer. Our customer value propositions need to relevant and provide value both independently and as a package across the banking, insurance, savings and risk needs of our customers.

Brand positioning

At the release of the company’s 2014 final financial results, a question was posed about the future of the Mutual & Federal brand.

While we are clear that the core value proposition of our business remains intact, and our focus on restoring the business to profitability remains a key objective, we know that many customers look at Mutual & Federal as part of the Old Mutual Group.

They have told us that they value the expectations that stem from this fact. We know that we have to grow our capacity tremendously to achieve the Group’s aspirations for both South Africa and the Rest of Africa and that there may be opportunities to leverage Old Mutual’s economies of scale in this regard.

We are therefore conducting an extensive brand assessment which will include views from some of our brokers, staff and other key stakeholders to inform everyone about the brand decision we make.

Determining the most appropriate brand to grow the short-term business, is a key factor in achieving Mutual & Federal’s strategic objectives.

This work will take a few months to complete, as the necessary processes will be followed to make an informed decision. We will continue to keep you updated as this work progresses over the next few months.

CARE philosophy

Our goal is not the ruthless pursuit of growth for growth’s sake. We care about the things we do and the people we work with. As insurers, we distinguish ourselves in terms of claims handling.

We recognise that we would not have been around for more than 180 years without the support of dedicated brokers. Brokers are at the heart of our business. They are the face of our policies, and therefore, we treat them as equal partners. Our brokers will continue to be business partners on our journey towards growth.

Ultimately they deliver much of the care that customers value.

Our commitment is to continue to care, to look for ways in which we can serve our customers better, and to continue to build long term partnerships with both our broker partners and our mutual customers. This is what has brought us to be a successful Group over many years and will continue to serve us.