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MMI charts new vision

Published: Sep 14, 2011 8:00:00 AM South Africa Standard Time

MMI Holdings Limited (MMI) today communicated its group strategy to be a leader in meeting financial services needs on the back of a good set of maiden full-year results to June 2011, with core headline earnings increasing by 12% to R2.6 billion.

Born from the merger of Metropolitan and Momentum, MMI listed on the Johannesburg Stock Exchange (JSE) on 1 December 2010. It now has six operating divisions, offering a wide range of financial products and services to all market segments in South Africa, as well as chosen African and other selected international markets.

Speaking at the presentation of MMI's full-year results, chief executive officer, Nicolaas Kruger, said that the group had charted a way forward to maximise the benefits of bringing Metropolitan and Momentum together.

"As a group, we have identified four strategic pillars, being the areas in which we have to excel if we are to achieve our strategic objectives. These pillars - in-depth market knowledge, innovative solutions, effective distribution and an entrepreneurial culture - are the solid foundation on which MMI will build," says Kruger.

"These pillars will be the key to success in attaining our six strategic objectives, which we have defined as: developing strong client relationships; building market-leading divisions; maximising integration benefits; optimising capital management; competing in profitable markets; and growing our people," continued Kruger.

The year-end results that accompanied the release of the MMI strategy were good despite a continued volatile economic environment.

These MMI statutory results comprise Momentum's results for the 12 months ended 30 June 2011 and Metropolitan's results for the 7 months ended 30 June 2011. "In order to provide a meaningful basis for comparison, the full-year results for the combined MMI reflect the performance of the Group for the year ended 30 June 2011, compared to the corresponding prior year ended 30 June 2010. These results have been prepared on the basis that Metropolitan and Momentum had been combined since 1 July 2009," said Kruger

The group's value of new business grew by 35% to R632 million, while its new business annual premium equivalent was 15% higher at R5.8 billion and core headline earnings increased by 12% to R2.6 billion.

"Thanks to prudent capital management, MMI remains in a sound financial position. The capital adequacy ratio (CAR) cover of both of our life companies stands at 2.3 times, ahead of the implementation of the Financial Services Board's risk-based solvency assessment and management (SAM) regime in 2014," says Kruger.

The robust results were underpinned by balanced contributions from all six MMI operating divisions.

"Both our retail businesses posted strong results, with Metropolitan Retail achieving significantly improved new business margins and Momentum Retail remaining responsible for the largest share of the group's value of new business and operating profit. Our decision to keep the Metropolitan Retail and Momentum Retail distribution channels separate so that they would be able to focus on delivering and developing products that meet the unique needs of their respective target markets has paid off," says Kruger.

The investments division has just concluded a rebranding exercise to unite its various business units under the Momentum brand. "With R275 billion assets under management, I believe Momentum Investments has taken a significant step forward in bedding down what I believe will become a strong player in traditional asset management, alternative assets, collective investments, properties and as a manager of managers," says Kruger.

Momentum Employee Benefits saw very strong growth in their umbrella fund and risk offerings of 38%, and total new business volumes grew by 15% on an annual premium equivalent basis. "The division also realised some cost savings in their systems and an improvement in their operating efficiencies as a result of the merger," says Kruger.

MMI has an extensive African footprint, with Metropolitan International present in 12 countries outside South Africa to offer both health and life insurance. The international health business saw a 7% increase in lives covered but recorded negative results, primarily due to higher than expected claims experience. New life insurance business grew 28% on an annual premium equivalent basis, with large new business contributions from Botswana and Nigeria.

"The recent release of the National Health Insurance (NHI) green paper is a positive step forward in providing affordable healthcare for a greater proportion of the South African population. Metropolitan Health has a wealth of expertise and experience in servicing and managing risk for most of the country's largest medical schemes at low cost and a proven track record of delivery, with a total client base of more than 3 million lives," says Kruger.

"The integration processes within the group as a whole as well as within the various divisions are progressing well. Reorganisation, restructuring and the finalisation of business and information technology strategies are on track. Merger synergies have also been identified that will enable us to achieve cost savings of R500 million over the next three years. We remain acutely aware of the people challenges posed by change and continue to engage with our staff in a concerted effort to confront these challenges head on and deal with them expeditiously. MMI has, however, been infused with new energy and excitement, and our people are united behind us in our striving to take the group to where we want it to be. We are currently undergoing processes to define our core values to help achieve MMI's vision of becoming a leader in meeting financial services needs," concluded Kruger.

Key aspects of results

Rm Change
Value of new business 632 +35%
New business *APE 5 848 +15%
Segmental core headline earnings 2 588 +12%
Final dividend per share (cps) 63 +5%
Total dividend for year (cps) 126 +26%
Embedded value per share (cps) 1 912 +6%

Momentum Retail

2010 2011 Change
Rm Rm
Total funds received 25 243 28 310 12%
New business **PVP 25 840 28 758 11%
Recurring 1 152 1 237 7%
Single 19 846 22 673 14%
Value of new business 248 288 16%
PVP margin 1.0% 1.0%
Operating profit after tax 600 699 17%

Metropolitan Retail

2010 2011 Change
Rm Rm
Total premium income 5 806 6 393 10%
New business PVP 4 095 5 698 39%
Recurring 773 921 19%
Single 1 205 1 901 58%
Value of new business 116 257 >100%
PVP margin 2.8% 4.5%
Operating profit after tax 367 394 7%

Momentum Employee Benefits

2010 2011 Change
Rm Rm
Total funds received 8 585 8 187 (5)%
New business PVP 7 072 8 300 17%
Recurring 546 753 38%
Single 3 496 2 778 (21)%
Value of new business 91 62 (32)%
PVP margin 1.3% 0.7%
Operating profit after tax 204 187 (8)%

Metropolitan International

2010 2011 Change
Rm Rm
Life insurance
Total premium income 1 402 1 637 17%
New business PVP 696 967 39%
Value of new business 14 25 79%
PVP margin 2.0% 2.6%
Membership 117k 125k 7%
Claims ratio 67% 77% 15%
Operating profit after tax 77 32 (58)%

Momentum Investments

2010 2011 Change
Rbn Rbn
Funds received 52.4 47.0 (10)%
Funds paid out 79.1 62.8 (21)%
Net flows from 3rd party clients (26.7) (15.8) 41%
Assets under management 267 275 3%
Rm Rm
Operating profit after tax 165 131 (21)%

Metropolitan Health

2010 2011 Change
Rbn Rbn
Gross inflows 28.8 32.3 12%
Gross outflows 24.2 28.9 19%
Total principal members
Momentum open scheme 91 075 93 885 3%
***GEMS 475 234 559 981 18%
Other schemes 531 946 544 066 2%
Rm Rm
Operating profit after tax 97 114 18%

*APE - Annual Premium Equivalent

**PVP - Present Value of Premiums

***GEMS - Government Employees Medical Scheme

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