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Momentum Metropolitan Unaudited Interim Results for the six months ended 31 December 2019
Momentum Metropolitan Holdings Limited
(Previously MMI Holdings Limited)
Incorporated in the Republic of South Africa
Registration number: 2000/031756/06
JSE Share Code: MTM
NSX Share Code: MMT
ISIN: ZAE000269890
(“Momentum Metropolitan” or “the Group”)
Momentum Metropolitan Life Limited
(Previously MMI Group Limited)
Incorporated in the Republic of South Africa
Registration number: 1904/002186/06
Company code: MMIG
Momentum Metropolitan unaudited interim results for the six months ended 31 December 2019
Summary of key metrics
Basic Diluted
1H2020 1H2019 change% 1H2020 1H2019 change%
Earnings (R million) 1 518 1 241 22% 1 518 1 241 22%
Headline earnings (R million) 1 465 1 356 8% 1 484 1 365 9%
Normalised headline earnings (R million) 1 1 753 1 609 9% 1 772 1 618 10%
Earnings per share (cents) 104.3 83.2 25% 103.6 82.2 26%
Headline earnings per share (cents) 100.7 90.9 11% 100.1 89.8 11%
Normalised headline earnings per share (cents) 1 120.5 107.8 12% 118.2 105.3 12%
Operating profit (R million) 2 1 858 1 706 9%
Interim ordinary dividend per share - March (cents) 40 35 14%
Present value of new business premiums (R million) 26 234 28 790 (9)%
Value of new business (R million) 160 335 (52)%
Value of new business margin 0.6% 1.2%
Diluted embedded value (EV) per share (R) 28.56 26.60 7%
Return on EV (annualised) 10.7% 6.8%
Return on EV per share (annualised) 10.6% 9.4%
Diluted number of shares in issue (million) 1 499 1 499 -
Diluted weighted average number of shares (million) 1 499 1 536 (2)%
1 Normalised headline earnings adjust the standard JSE definition of headline earnings for the impact of treasury
shares, the amortisation of intangible assets arising from business combinations and BEE costs. The first
adjustment removes mismatches that might arise from elimination of treasury shares (potential mismatches that
are peculiar to financial institutions that invest in their own securities on behalf of clients).
2 Operating profit is diluted normalised headline earnings less tax, investment income and fair value gains.
Net asset value
R million 1H2020 1H2019 change%
Total assets 511 529 462 322 11%
Total liabilities (487 164) (439 429) 11%
Total equity 24 365 22 893 6%
Focus pays off for Momentum Metropolitan
- Group posts double-digit earnings growth
Operational highlights
Momentum Metropolitan has reached the half-way milestone in its three-year
Reset and Grow turnaround strategy and has successfully executed on most of
our plans for the “Reset” phase. We are now increasingly turning our focus
to the “Growth” objectives.
In pursuit of the Reset and Grow strategy, great strides were made in a
number of important aspects:
- Embedding a culture of financial discipline: efficiency improvements are
a common theme across the various South African operations.
- Scaling our short-term insurance business: on 31 January 2020 we concluded
the acquisition of Alexander Forbes Insurance, which offers a
complementary value proposition to our suite of short-term insurance
products and client segments.
- Delivering innovative products and improving client service: over the last
few months, product innovations were introduced for investments (e.g.
Enhanced Guaranteed Option) and product enhancements in the Myriad range
of protection products. We have also made meaningful improvements in
service levels.
- Retail investment new business: Momentum Investments saw strong new
business volumes growth, driven by exceptional Momentum Wealth investment
platform inflows.
- Increased support from independent financial advisers (“IFAs”): new
business volumes from IFAs across Momentum branded retail protection,
savings and investment products increased by 17% year-on-year.
- Maintaining a strong balance sheet: our solvency capital ratio has
strengthened to 2.2 times SCR at 31 December 2019.
- New Initiatives performing in line with expectations: over the six months
our share of losses on new initiatives has reduced, with the India joint
venture losses bottoming out.
- Sustaining our Broad Based Black Economic Empowerment (B-BBEE) Level 1
status: we are proud to have retained our Level 1 B-BBEE contributor
status under the revised Financial Sector Charter, which was confirmed in
February 2020.
Business performance
Diluted normalised headline earnings of R1.8 billion for the six months ended
31 December 2019 represents an increase of 10% year-on-year. On a per share
basis, diluted normalised headline earnings increased by 12%, reflecting the
impact of the share buy-back programme that was completed in November 2018.
The diluted normalised headline earnings at segmental level were as follows:
R million 1H2020 1H2019 change%
Momentum Life 483 462 5%
Momentum Investments 270 261 3%
Metropolitan Retail 349 333 5%
Momentum Corporate 335 319 5%
Non-life Insurance 143 135 6%
Momentum Metropolitan Africa 208 94 +100%
Diluted normalised headline earnings from 1 788 1 604 11%
operating segments
New Initiatives (240) (248) 3%
Shareholders 224 262 (15)%
Diluted normalised headline earnings 1 772 1 618 10%
This operating result supports our continued commitment to grow our diluted
normalised headline earnings to between R3.6 billion and R4.0 billion by
F2021.
The growth in diluted normalised headline earnings was supported by resilient
performance in our core South African life insurance businesses. Life
insurance diluted normalised headline earnings growth was underpinned by
disciplined expense management and steady underwriting results. The Health
operations, included in Momentum Corporate, performed well and in Non-life
Insurance, Guardrisk contributed strongly to overall growth in diluted
normalised headline earnings, partly offset by a decline in Momentum Short-
term Insurance. In the Africa business unit, higher earnings in Lesotho and
Botswana offset a decline in the contribution from Namibia. The sale of loss
making operations in Africa also led to an improvement.
Investment in distribution capabilities, refocusing the client experience
and enhancing its comprehensive suite of product solutions within the Group’s
portfolio have been key drivers in its new business performance:
- Total present value of new business premiums declined by 9% year-on-year,
while total value of new business declined by 52%. This can be explained
by a reduction in Momentum Corporate, for which the prior period included
the impact of a R5 billion with-profit annuity transaction in Momentum
Corporate, while the current period saw a shift of sales towards lower
margin products.
- Present value of new business premiums for the South African retail
operations increased by 13%, while the value of new business for these
operations increased by 24%.
Solvency
Momentum Metropolitan Life Limited, the Group’s main life insurance entity,
strengthened its strong solvency cover on the regulatory basis from 2.1 times
the Solvency Capital Requirement (SCR) at 30 June 2019 to 2.2 times SCR at
31 December 2019.
Interim dividend declaration
Dividends on ordinary shares were reinstated in March 2019, following the
successful completion of a R2 billion share buy-back programme in November
2018. The Group declared an interim ordinary dividend of 40 cents per ordinary
share, a 14% increase on the prior period’s interim ordinary dividend. The
dividend is payable out of income reserves to all holders of ordinary shares
recorded in the register of the company on Record Date. The dividend will be
subject to local dividend withholding tax at a rate of 20% unless the
shareholder is exempt from paying dividend tax or is entitled to a reduced
rate. This will result in a net interim dividend of 32 cents per ordinary
share for those shareholders who are not exempt from paying dividend tax.
The number of ordinary shares at the declaration date was 1 497 475 356.
The income tax number of Momentum Metropolitan is 975 2050 147.
Publication of declaration data Thursday, 5 March 2020
Last date to trade cum-dividend Tuesday, 24 March 2020
Trading ex-dividend Wednesday, 25 March 2020
Record date Friday, 27 March 2020
Payment date Monday, 30 March 2020
Share certificates may not be dematerialised or rematerialised between
Wednesday, 25 March 2020 and Friday, 27 March 2020, both days inclusive.
Outlook
Looking ahead, Momentum Metropolitan will focus on successfully completing
the execution of the “Growth” objectives in each of the business units as
well as at a Group level. We will continue to invest carefully in new revenue
generating opportunities and in improved ways of work, while maintaining a
clear focus on running the core South African life insurance operations
optimally.
We are pleased with the positive set of results for 1H2020, however we caution
against annualising these results. Consumers are under strain from the
continued slow growth in disposable income and uncertain economic
environment. This could have a moderating impact on the Group’s operational
performance in the second half of F2020.
Beyond F2020, we remain cautiously optimistic that we will successfully
deliver our Reset and Grow target of diluted normalised headline earnings
between R3.6 billion to R4.0 billion in F2021.
Short form statement
This announcement is the responsibility of the directors. The information in
this short form announcement, including the forecast financial information
on which the outlook is based, has not been reviewed and reported on by
Momentum Metropolitan’s external auditors. It is only a summary of the
information contained in the full announcement and does not contain full or
complete details. Any investment decision should also take into consideration
the information contained in the full announcement, published on 5 March
2020, via the JSE link
https://senspdf.jse.co.za/documents/2020/jse/isse/MTME/HY20Result.pdf and
also available on the Group's website at www.momentummetropolitan.co.za, as
well as other information which can be found on the Group’s website.
Copies of the full announcement may also be requested from the office of the
Group Company Secretary, Gcobisa Tyusha, Tel +27 12 673 1931 or
gcobisa.tyusha@mmltd.co.za, alternatively collected from the Group's
registered office, 268 West Avenue, Centurion, or the offices of the Group’s
sponsor, Merrill Lynch South Africa (Pty) Ltd, 138 West Street, Sandton,
weekdays Monday to Friday during office hours from 09:00–16:00.
SENS issue date: 5 March 2020
Sponsor in South Africa:
Merrill Lynch South Africa (Pty) Limited
Sponsor in Namibia
Simonis Storm Securities (Pty) Limited
Debt Sponsor:
Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 05-03-2020 07:05:00
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