Wrap Text
Audited financial results for the year ended 30 June 2020 and changes to the Board
MOMENTUM METROPOLITAN HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 2000/031756/06
JSE share code: MTM
A2X share code: MTM
NSX share code: MMT
ISIN code: ZAE000269890
(“Momentum Metropolitan” or “the Group”)
MOMENTUM METROPOLITAN LIFE LIMITED
Incorporated in the Republic of South Africa
Registration number: 1904/002186/06
Company code: MMIG
(“Momentum Metropolitan Life”)
Audited financial results for the year ended 30 June 2020
and changes to the Board
Financial results for the year ended 30 June 2020 – short form announcement
Basic Diluted
F2020 F2019 Change % F2020 F2019 Change %
Earnings (R million) 178 2 255 (92)% 178 2 275 (92)%
Headline earnings (R million) 1 036 2 474 (58)% 1 036 2 494 (58)%
Normalised headline earnings (R million)1 1 521 3 074 (51)%
Earnings per share (cents) 12.3 153.1 (92)% 12.3 151.6 (92)%
Headline earnings per share (cents) 71.3 168.0 (58)% 71.3 166.2 (57)%
Normalised headline earnings per share (cents)1 101.5 202.5 (50)%
Interim dividend per share - March (cents) 40 35 14%
Final dividend per share - September (cents) - 35
Total dividend per share (cents) 40 70 (43)%
Present value of new business premiums 50 447 55 783 (10)%
Value of new business 280 541 (48)%
Value of new business margin 0.6% 1.0%
Diluted embedded value per share (R) 25.70 27.48 (6)%
Return on embedded value (3.7)% 8.0%
Return on embedded value per share (3.8)% 9.4%
Diluted number of shares in issue (m) 1 499 1 499 -
Diluted weighted average number of shares (m) 1 499 1 518 (1)%
1 Normalised headline earnings adjust the standard JSE definition of headline earnings for the dilutive impact of finance
costs related to preference shares that can be converted into ordinary shares of the Group, the impact of treasury shares,
the amortisation of intangible assets arising from business combinations and B-BBEE costs. The adjustment for the impact
of treasury shares 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). The definition of normalised headline
earnings remains unchanged.
Net asset value
R million F2020 F2019 ?%
Total assets 506 393 502 605 1%
Total liabilities (483 446) (479 059) (1)%
Total equity 22 947 23 546 (3)%
Momentum Metropolitan looks beyond Covid-19
Financial performance
Momentum Metropolitan remained on track to deliver on its Reset and Grow target of normalised headline
earnings between R3.6 billion to R4.0 billion by F2021, until the Covid-19 pandemic started to impact South Africa
in early March 2020. It is pleasing that the initial focus and success on the Reset objectives enabled us to start
making progress on the Grow objectives. The Reset and Grow strategy was the right strategy at the right time,
as it certainly put us in a better position to handle the impact of the pandemic, and it contributed to good
operational results in F2020, despite the Covid-19 related turmoil in the second half of the financial year.
In line with our external environment, Momentum Metropolitan was and continues to be impacted by the expected
worsening in claims experience, lower new business volumes, increased risk of policy lapses or withdrawals,
lower investment returns, and additional expenses related to operational and risk management initiatives to
effectively deal with the crisis.
Momentum Metropolitan Holdings Limited (“Momentum Metropolitan” or “Group”) delivered normalised headline
earnings of R1 521 million for the 12 months, which includes a loss of R251 million for the second half of the year.
This loss was largely due to additional provisions that were raised, with a net negative impact of R983 million for
potential adverse claims experience and policyholder lapses and withdrawals related to the Covid-19 pandemic.
Furthermore, the partial recovery of investment markets during the last quarter did not fully offset the impact of
severe market related losses reported in the third quarter of the year. The net market losses included in
normalised headline earnings for the year was R975 million.
Covid-19 therefore significantly impacted our results for F2020. Excluding the impact of these two items, earnings
from operational activities of R3 479 million (after-tax) demonstrate a continuation of our pre-Covid-19 momentum
and robustness of our underlying results.
Normalised headline earnings by business unit were as follows:
R million F2020 F2019 ?%
Momentum Life 416 883 (53)%
Momentum Investments 303 512 (41)%
Metropolitan Life 302 610 (50)%
Momentum Corporate 260 601 (57)%
Non-life Insurance 405 164 147%
Momentum Metropolitan Africa 317 262 21%
Earnings from operating segments 2 003 3 032 (34)%
New Initiatives (509) (492) (3)%
Shareholders 27 534 (95)%
Normalised headline earnings 1 521 3 074 (51)%
Momentum Investments continued its growth trajectory and saw good new business and investment flows
throughout the year. In Metropolitan Life the sustained operational focus to improve the quality of business
resulted in improved new business margins despite lockdown-related costs in its agency force. The Non-life
Insurance operations continued to deliver good growth, further supported by the acquisition and integration of
Momentum Insurance (formerly Alexander Forbes Insurance). The businesses in other African countries
contributed with positive earnings growth year-on-year on the back of satisfactory operating performance, despite
the impact of the additional provisions related to Covid-19.
We maintained our stringent focus on efficiency initiatives and the controllable administration expenses increased
by 2%, well below inflation. Increases in expenses to accelerate developments of our digital capabilities and
servicing platforms, as well as cost to enable working from home, were offset by tight control on headcount and
a reduction in items such as travel and entertainment – this partially due to the lockdown restrictions.
New business volumes, as measured by the present value of new business premiums (“PVNBP”), and value of
new business declined by 10% and 48% to R50.5 billion and R280 million, respectively. Excluding the impact of
a R5 billion with-profit annuity transaction included in the prior year, the PVNBP remained flat year-on-year. This
is a commendable achievement, considering the impact of the national lockdown and the slowdown in economic
activity during the fourth quarter.
The value of new business was negatively impacted by additional costs incurred in the distribution channels to
support staff and business partners during the lockdown phase.
Key new business metrics F2020 F2019 Change %
Recurring premiums (R million) 3 417 3 952 (14)%
Single premiums (R million) 33 189 34 183 (3)%
PVNBP (R million) 50 447 55 783 (10)%
Value of new business (R million) 280 541 (48)%
New business margin 0.6% 1.0%
Solvency
The Group remains well capitalised with a strong balance sheet. The regulatory solvency position of Momentum
Metropolitan Life, the Group’s main life insurance entity, decreased from 2.08 times the Solvency Capital
Requirement (“SCR”) at 30 June 2019 to 1.85 times SCR at 30 June 2020. The decline in the solvency position
is due to the impact of the pandemic, including the falls in investment markets and additional provisions for Covid-
19 related claims and policyholder behaviour, as well as the recent acquisition of Momentum Insurance.
Final dividend declaration
The Group’s dividend policy is to declare ordinary dividends within a dividend cover range of 2.0 to 3.0 times
normalised headline earnings. As a result of the negative normalised headline earnings during the second half of
the year, a final ordinary dividend has not been declared in respect of the 12 months ended 30 June 2020.
The Group remains comfortable with its dividend policy and expect that ordinary dividends will be resumed in line
with the dividend policy as the normalised headline earnings recover.
Changes to the Board
Retirement of JJ Njeke and appointment of Sello Moloko as Chairman of the Momentum
Metropolitan Board
JJ Njeke, the Chairman of the Momentum Metropolitan Board will retire at the annual general meeting on
26 November 2020. JJ has been providing guidance and direction to the business since 2011 when the Group
was formed through the merger of the Momentum Group and Metropolitan Holdings. Before the merger, he was
Chairman of the Metropolitan Holdings Board. The Group would like to sincerely thank JJ for his wisdom and
valuable counsel, and for successfully leading the board in the first chapter of the Group’s history.
The Group is pleased to announce that Sello Moloko will assume the role of Chairman of the Board at the annual
general meeting to be held on 26 November 2020. Sello joined the Board on 1 March 2019 and is currently the
Lead Independent Director. Sello has a wealth of business experience and was previously Chief Executive Officer
of Old Mutual Asset Managers and Chairman of the Alexander Forbes Group, General Reinsurance Africa, and
Sibanye-Stillwater. He is currently the Executive Chairman and co-founder of the Thesele Group, a black-owned
investment holding company.
Changes to Board Committees
The Board wishes to advise the shareholders of the following changes to Board Committees, with immediate
effect:
• Ms Linda de Beer has been appointed as a member of the Nominations Committee
• Ms Lisa Chiume and Ms Jeanette Cilliers (Marais) have been appointed as members of the Fair Practices
Committee
• Mr Paballo Makosholo has been appointed as a member of the Investments Committee as well as the
Social, Ethics and Transformation Committee
Furthermore, Mr Kehla Shubane and Mr Johan van Reenen will retire from the Board at the Group’s annual
general meeting on 26 November 2020. Following the retirement of Mr Kehla Shubane, Dr Sharron McPherson
will become Chairman of the Social, Ethics and Transformation Committee, effective 27 November 2020.
Broadening our ownership
Momentum Metropolitan is committed to social and economic inclusivity. We consider the alignment of the
interests of various stakeholders as the most effective way of achieving meaningful value creation for all
stakeholders. The Group is proposing the establishment of a broad-based employee share ownership scheme,
which will acquire 3% of the Group’s ordinary share capital. The share ownership scheme is structured as a trust
to the benefit of all the Group’s South African based employees. The scheme is subject to certain suspensive
conditions, including approval from existing shareholders. The scheme aspires to realise broad-based black
socio-economic transformation, through the empowerment of employees to participate as shareholders in the
business.
Operational highlights
• Continued delivery on product innovation: in order to help relieve the financial burdens of our clients
during this difficult time, the Group enhanced the portfolio of product offerings.
• Retaining a robust capital position: we regularly assess our solvency levels to ensure our position
remains strong, even under extreme economic scenarios. Given the recent falls observed in the
investment markets, our balance sheet can weather the Covid-19 pandemic.
• High quality service and productive distribution channels: our face-to-face advisors and service
centres remained engaged with our clients, maintaining good levels of operational service and
productivity, as the plans to work-from-home involved minimal disruption.
• Greater focus on business continuity and driving efficiency gains: we continued to focus on driving
efficiencies through disciplined expense management. This is a common theme across the various
businesses.
• Deploying capital on growth assets: the plans to scale our short-term operations have been
successfully achieved and the strength of our India operations is evident by its sustained business growth.
• Looking after our people: we have quickly adapted to the changes in our operating environment to keep
our people engaged, connected and supported as we transition to this new phase of business operations.
Outlook
We are satisfied with Momentum Metropolitan’s resilient performance during the Covid-19 pandemic, and we are
optimistic about our ability to effectively manage the demands of a post-Covid-19 environment. However, the
uncertainty about the path of the pandemic and the expected long-term negative impact on the economy will
probably lead to weaker investment returns and lower new business and persistency levels in the medium term.
As a result of the Covid-19 pandemic we will most likely not achieve the Reset and Grow target of normalised
headline earnings between R3.6 billion to R4.0 billion in F2021. Given the uncertainty of the current situation, it
will be speculative to provide firm guidance on our financial results over the next year, however, we will be
disappointed if the Group does not improve materially on the current year’s results.
Despite the trying environment, many of the “Grow” initiatives within the Reset and Grow strategy are still relevant.
We continue to work on delivering on these initiatives that largely revolve around sales and service, product
improvements, advancement of digital capabilities, and greater cost efficiencies. Even before the start of the
Covid-19 pandemic, we had initiated a process to assess and redefine our strategic goals beyond F2021. The
changing environment brought about by Covid-19 has been incorporated into this planning work. We will continue
to build on our strengths and successes to date.
Short form statement
This announcement is the responsibility of the directors. The information in this short form announcement,
including the financial information on which the outlook is based, has not been reviewed and reported on by
Momentum Metropolitan’s external auditors. Financial figures in this announcement have been correctly extracted
from the audited annual financial statements, on which the auditors expressed an unqualified opinion. 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 be based on the full SENS announcement accessible from Wednesday 9 September
2020, via the JSE link and also available on the Company’s website at
https://www.momentummetropolitan.co.za/en/investor-relations/financial-results.
The annual financial statements, including key audit matters can be found on the company website at
www.momentummetropolitan.co.za. A printed copy of the full SENS announcement may also be requested from
the Group Company Secretary's Office, Gcobisa Tyusha, Tel: +27 12 673 1931 or gcobisa.tyusha@mmltd.co.za
and is available for inspection by appointment whilst observing the necessary Covid-19 restrictions, at the
Company’s registered office, weekdays Monday to Friday during office hours from 09:00 - 16:00.
The JSE link is as follows: https://senspdf.jse.co.za/documents/2020/jse/isse/MTME/FY20Result.pdf
SENS issue: 9 September 2020
Equity sponsor
Merrill Lynch SA (Pty) Ltd
Debt sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 09-09-2020 07:05:00
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