Nedbank Wealth has operations in SA and London, on the Isle of Man, Jersey and Guernsey and in the Middle East. The cluster is structured into three business divisions, which include:
Responsible for Nedbank’s high-net-worth client segment, which is serviced through Nedbank Private Wealth. In addition it also provides fiduciary services locally and internationally, as well as stockbroking and financial planning.
Nedgroup Investments offers a range of local and international best-of-breed unit trusts, cash and multimanagement solutions. In addition, the division provides active client management and research supporting the high-net-worth segment and stockbroking business of Nedbank Private Wealth.
This provides life and short-term insurance solutions as well as insurance broking of Nedbank and third- party products.
REVIEW OF 2012
Nedbank Wealth achieved significant progress against its key strategic objectives during 2012.
The consolidation of the high-net-worth offerings of BoE Private Clients and Fairbairn Private Bank under the new brand of Nedbank Private Wealth was completed and launched in 2012.
The introduction of Nedbank Private Wealth signifies a step change in strategic direction for the high-net-worth segment through consolidation of the various value propositions and brands into a single distinctive international high-net-worth business. This move eliminates previous confusion linked to multiple brands and enables Nedbank Private Wealth to leverage Nedbank’s strong brand equity.
Nedbank Private Wealth’s existing and prospective clients, both in SA and internationally, will have access to an integrated wealth management solution that includes investments, banking, fiduciary, insurance and philanthropy. Clients also benefit from a ‘first in SA’ mobile stockbroking application, which enables portfolio views as well as share trading via mobile devices. Nedbank Private Wealth offers high-net-worth clients access to an online consolidated view of their financial portfolio, locally and internationally.
Nedbank Private Wealth was commended for the Best International Service Initiative and achieved Best International Wealth Provider status for the fourth consecutive year at the 2012 International Fund and Product awards in London for the offshore ﬁnancial services industry.
Significant progress has been made in the restructuring and turnaround of the local fiduciary operations, which in 2012 were rebranded Nedgroup Trust.
Our financial advisers achieved exemplary pass rates in the regulatory examinations in terms of the Financial Advisory and Intermediary Services Act (’FAIS Act‘), in excess of 95%, demonstrating a commitment to professional and appropriate advice to clients.
Nedgroup Investments has a unique Best of Breed™ proposition in the investment market.
Asset Management delivered excellent fund performance across all fund ranges. Nedgroup Investments continued to attract strong net inflows both locally and internationally and was nominated as one of the top 3 Large Fund Houses in SA at the 2012 Morningstar awards for the fourth year in a row. Nedgroup Investments also achieved overall third position in the Domestic Fund Manager category in the Plexcrown fund ratings.
The cash solutions range achieved strong growth during 2012 and attained an AA+/V1 Fitch rating for the Nedgroup Investments Money Market Fund.
Nedgroup Investments announced changes and enhancements to its investments product range following the resignation of Prescient Investment Management and continue to research, select and monitor the best available investment managers on an ongoing basis.
In line with the Old Mutual commitment to the United Nations Principles for Responsible Investment (UNPRI) and the Codes for Responsible Investment SA (CRISA), Nedgroup Investments now participates in the Group Responsible Investment Committee, which aims to integrate environmental, social and governance criteria into all investment decisions. We are also actively encouraging our Best of Breed™ partners to adopt and comply with the CRISA.
Insurance experienced strong growth in 2012, particularly in life insurance, with a significant increase in the value of new business. We saw pleasing growth across traditional and new products, including credit life, single-premium investments, funeral and simple savings solutions as well as the niche motor vehicle value-added range.
Short-term insurance experienced a volatile year from low claims in the first half of 2012 to significant weather-and fire-related claims in the latter half. The strategy to introduce a direct personal-lines short-term insurance offering has been delayed and will be implemented during 2013.
Significant progress has been made on initiatives to align distribution and marketing efforts of the life and short-term insurance offerings to create a single, client-centred Nedbank insurance experience.
The implementation of a new short-term insurance system is on track for 2013, with replacement of the life system to follow shortly thereafter. These new systems will enhance our ability to bundle innovative insurance solutions for Nedbank clients.
The Insurance Division made excellent progress toward complying with initial Solvency Assessment and Management (SAM) regulation requirements with regard to the appointment of additional technical actuarial resources and the alignment of insurance risk management processes to the existing Nedbank Enterprisewide Risk Management Framework.
|Year ended||% change||2012||2011|
|Headline earnings (Rm)||9,5||716||654|
|Credit loss ratio (%)||0,61||0,25|
|NIR: expense ratio (%)||136,8||132,2|
|Efficiency ratio (%)||61,5||62,3|
|Assets under management (Rm)||34,1||150 495||112 231|
|Embedded value (EV) (Rm)||33,4||2 030||1 522|
|Value of new business (VNB) (Rm)||37,7||563||409|
|Headline economic profit (Rm)||15,7||399||345|
|Return on equity (ROE) (%)||29,6||27,7|
Nedbank Wealth achieved headline earnings growth of 9,5% to R716m for the 2012 financial year. This was primarily the result of solid performance from the asset management and insurance businesses, partially offset by reduced activity and increased impairments in Wealth Management. Economic profile (EP) grew to R399m, up 15,7% from 2011, while return on assets (ROE) increased to 29,6%.
During 2012 the existing high-net-worth businesses of BoE Private Clients and Fairbairn Private Bank were rebranded under a single high-net-worth brand, Nedbank Private Wealth. Adjusting for the once-off rebranding costs of R31,5m (post-tax), headline earnings and EP growth would have been 14,4% and 24,4% respectively.
These results were achieved despite pressure on impairments and a considerably worsened short-term insurance claims environment for the second half of 2012.
Net interest income (NII) increased by 2,3%, with the international environment of continued low interest rates resulting in a modest decline in the overall interest margin. We saw a deterioration of the credit loss ratio (CLR) in Nedbank Private Wealth mainly due to the impact of a subdued property market. However, with provisioning at R118m, this is immaterial from a group perspective. Strong growth in insurance and asset management supported the overall increase in non-interest revenue (NIR) of 16,2%.
Expenses grew by 12,4% owing to continued investment in skills and capacity enhancement, new-product development, and the once-off rebranding costs associated with the launch of Nedbank Private Wealth. The NIR-to-expense ratio increased to 136,8%.
During the year under review our Wealth Management businesses were impacted by the uncertainty in Europe and the subdued local property market. The increase in impairments, coupled with continued weak stockbroking and fiduciary activity, resulted in an overall reduction in year-on-year earnings.
Financial Planning delivered strong growth in advice-based sales on the back of increased collaboration across Nedbank Group, higher productivity levels and improved lapse ratios.
The performance by Asset Management was supported by strong local and international net inflows of R24,5bn. The cash solutions offering that was launched in 2011 achieved exceptional growth in 2012. Total assets under management increased to R150,5bn, up 34,1% from 2011.
Continued growth in retail volumes as well as success in life single-premium product lines underpinned a strong overall insurance earnings uplift. Life annual premium equivalent (APE) grew by 29,4%, while value of new business (VNB) increased by 37,7%. The benign claims environment, which positively impacted short-term insurance earnings during the first six months, deteriorated considerably in the second half of the year. Short-term insurance delivered gross written premium growth of 7,2%.
Nedbank Wealth’s key focus areas include:
- Profiling Nedbank Private Wealth proposition.
- Cross-sell, collaboration and new-client acquisition.
- Strategic reposition of stockbroking and trust operations.
- Maintaining momentum across propositions.
- Delivering new growth opportunities.
- Ongoing focus on performance and Nedgroup Investments brand profile.
- Further product expansion and bundling opportunities.
- Continued collaboration, distribution and marketing alignment.
- Enhance risk and governance framework.
We have favourable growth expectations for Wealth Management given any normalisation of impairments and improvement in stockbroking and fiduciary activity. Nedbank Private Wealth’s focus for 2013 will be on the acquisition of new clients through collaboration and cross-sell activities as well as profiling of the distinctive high-net-worth proposition.
Nedgroup Investments, our asset management division, will focus on sustaining excellent fund performance as well as maintaining momentum achieved in the cash solutions and best-of-breed offerings.
The lower growth rates in secured and unsecured lending volumes in Retail are likely to result in a gradual slowing of earnings from traditional insurance products. Notwithstanding delays in the launch of direct personal-lines short-term insurance, we see significant opportunities through bundling and continued product expansion initiatives, which will support growth for the future. We are in the process of launching a differentiated and innovative credit life solution that will be a leader in price and benefits in the unsecured market.
At Nedbank, sustainability informs the way we do business. It ensures that we are in a position to make a lasting contribution in helping to address the environmental, social, cultural and economic issues affecting our bank and our country.
In April 2012 the Nedbank Wealth Sustainability Forum ran a campaign aimed at increasing staff volunteerism within the cluster. The Sustainable Lives campaign afforded staff an opportunity to make a tangible, ongoing and positive difference in the lives of the less fortunate. Further, it sought to engender a sense of belonging and pride in being part of project teams, Nedbank Wealth and Nedbank Group.
A financial incentive was attached to the initiative with prizes to the value of R60 000 for the charities of the top six teams. Teams of volunteers identified causes that would benefit from Nedbank’s support, registered team projects and took on the task of making a measurable difference in their chosen communities within the campaign period. Winning teams were judged based on the time volunteers spent at the charity, the total funds raised, the number of items donated and the sustainability of the initiative.
A total of 19 teams registered, 96 staffmembers volunteered, over R103 000 was raised, and 1 992 people and 600 animals benefited from Nedbank Wealth’s support, making it the most far-reaching and successful initiative the Nedbank Wealth Sustainability Forum has run to date.