Wrap Text
Short form announcement: Unaudited interim results for the six months ended 31 December 2021 & dividend declaration
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)
Short form announcement: Unaudited interim results for the six months ended 31 December 2021 and dividend declaration
Short form announcement
Basic Diluted
1HF2022 1HF2021 change % 1HF2022 1HF2021 change %
Earnings (R million) 697 909 (23)% 697 909 (23)%
Headline earnings (R million) 1 316 809 63% 1 316 809 63%
Normalised headline earnings (R million) 1 525 1 012 51%
Operating profit (R million) 785 890 (12)%
Investment return (R million) 740 122 >100%
Earnings per share (cents) 48.4 62.8 (23)% 48.4 62.8 (23)%
Headline earnings per share (cents) 91.4 55.9 64% 91.4 55.9 64%
Normalised headline earnings per share (cents)1 101.7 67.6 50%
Total dividend per share (cents) 35 25 40%
Present value of new business premiums 36 995 29 992 23%
(R million)
Value of new business (R million) 400 334 20%
Value of new business margin (%) 1.1% 1.1%
Diluted embedded value per share (R) 28.39 27.39 4%
Return on embedded value (annualised %) 10.8% 13.2%
Return on equity (%) 15.9% 10.1%
1 Normalised headline earnings adjust the 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 held by policyholder funds and the iSabelo Trust, the amortisation of
intangible assets arising from business combinations, B-BBEE costs and the amortisation of the discount at which the iSabelo Trust acquired the Momentum
Metropolitan treasury shares. The adjustment for the impact of treasury shares removes mismatches that are unique to financial institutions that invest in
their own securities on behalf of clients.
2 Operating profit represents the profits (net of tax) that are generated from the Group's operational activities and reflects normalised headline earnings
excluding the investment return on shareholder funds.
3 Return on equity expresses normalised headline earnings as a percentage of net asset value, adjusted for the items outlined in footnote 1, and the adjusting
items to determine headline earnings. Comparatives are reported for the first time.
Net asset value
R million 1HF2022 1HF2021 change %
Total assets 590 611 520 716 13%
Total liabilities (568 038) (497 368) 14%
Total equity 22 573 23 348 (3)%
Momentum Metropolitan delivers double-digit sales growth
Focus on clients and advisers reaps rewards
Introduction
Momentum Metropolitan delivered a solid performance during the six months ended 31 December 2021, the first half of the financial year 2022 (F2022). The
value of the Group's diversified financial services business model was evident, with strong positive contributions from Momentum Investments, Momentum
Corporate and Guardrisk, ensuring that Group results remained resilient, despite some business units being adversely impacted by Covid19 mortality claims
and weather-related claims. The highlight of the reporting period is the strong recovery in headline earnings, as well as strong growth in new business
premium volumes. We believe this is due to maintaining a proactive, external focus on our advisers and clients during the pandemic.
Group consolidated earnings
Normalised headline earnings increased by 51% to R1 525 million for the six months ended 31 December 2021, consisting of a 12% decline in operating profit,
offset by investment returns increasing substantially.
The year-on-year decline of 12% in operating profit from R890 million to R785 million was largely attributable to net mortality losses of R378 million (net
of reinsurance, releases from existing Covid-19 provisions, and tax), after the release of R1 113 million of existing Covid-19 provisions. Momentum Life and
Momentum Metropolitan Africa were most severely impacted by Covid-19 related claims. Operating profit in Momentum Life and Metropolitan Life was further
impacted by negative investment variances, resulting from changes in the shape (flatter curve) and level (decline at long durations) of the yield curve as
well as an increase in market implied inflation. Operating profit in Momentum Investments was negatively impacted by the ongoing implementation expenses of
replacing the legacy investment platform in Momentum Wealth. Momentum Corporate benefited from materially improved underwriting results. Non-life Insurance
benefited from excellent underlying operational growth in Guardrisk, offset by the negative impact from wet weather claims in Momentum Insure.
The significant increase in investment returns from R122 million to R740 million resulted from the general recovery of investment markets, fair value gains
from the revaluation of the Group's investment in venture capital funds and foreign exchange gains on foreign currency-based assets.
Normalised headline earnings per share increased by 50% from 67.6 cents to 101.7 cents. Headline earnings per share increased by 64% from 55.9 cents to 91.4
cents. Whereas earnings per share of 48.4 cents declined from 62.8 cents, 23% lower relative to the prior period. This decline in earnings is largely
attributable to a partial write-off of the goodwill recognised on the acquisition of the Alexander Forbes Short-term Insurance business.
The following table outlines the contribution from operating profit and investment returns to normalised headline earnings per business unit:
1HF2022 1HF2021 change %
R million Operating Investment Normalised Operating Investment Normalised Operating Investment Normalised
profit return headline profit return headline profit return headline
earnings earnings earnings
Momentum Life (44) 74 30 274 58 332 <(100)% 28% (91)%
Momentum Investments 438 51 489 460 (20) 440 (5)% >100% 11%
Metropolitan Life 232 36 268 298 30 328 (22)% 20% (18)%
Momentum Corporate 302 68 370 (236) 24 (212) >100% >100% >100%
Momentum Metropolitan Health 93 1 94 90 (4) 86 3% >100% 9%
Non-life Insurance 123 180 303 241 17 258 (49)% >100% 17%
Momentum Metropolitan Africa (30) 37 7 190 114 304 <(100)% (68)% (98)%
Normalised headline earnings from operating business units 1 114 447 1 561 1 317 219 1 536 (15)% >100% 2%
New Initiatives (300) 1 (299) (258) 1 (257) (16)% 0% (16)%
Shareholders segment (29) 292 263 (169) (98) (267) 83% >100% >100%
Normalised headline earnings 785 740 1 525 890 122 1 012 (12)% >100% 51%
More details on the Group's earnings performance, including a detailed analysis of the impact of Covid-19 on the Group and segmental information on the
performance of the Group's businesses, can be found in the Group's full results announcement and condensed consolidated interim financial statements for the
six months ended 31 December 2021, available on the Group's website at https://www.momentummetropolitan.co.za/en/investor-relations/financial-results.
Group new business performance
The excellent new business performance in our retail businesses was a highlight for the Group.
Key metrics 1HF2022 1HF2021 change %
Recurring premiums (R million) 2 299 1 791 28%
Single premiums (R million) 26 684 21 597 24%
PVNBP (R million) 36 995 29 992 23%
Value of new business (R million) 400 334 20%
New business margin (%) 1.1% 1.1%
The Group's present value of new business premiums for the six months was R37.0 billion, an improvement of 23% from the prior period. Momentum Life saw
lower protection new business volumes; this was slightly offset by improved volumes on long-term savings new business volumes. Momentum Investments
delivered solid growth in structured products, annuities and on Momentum Wealth's investment platform business. Metropolitan Life saw good growth in annuity
single premiums and recurring premium protection new business, most notably in the higher-margin funeral product range. Momentum Corporate delivered
pleasing new business volume growth in recurring premium group risk products together with good growth in annuities. Momentum Metropolitan Africa also saw
pleasing new business volume growth, driven by corporate savings new business in Lesotho and Botswana, together with strong retail annuity and protection
business sales in Namibia.
The 20% improvement in value of new business to R400 million was driven by strong new business volumes and good expense management across the Group. The
Group's new business margin was 1.1%.
Return on equity and embedded value
Return on equity for 1HF2022 was 15.9%, up from 10.1% in the prior period. The improvement follows the Group's financial performance improvement and is
evidence of the benefits of the diversified set of businesses in the Group's corporate portfolio.
Group embedded value per share was R28.39 on 31 December 2021. The return on embedded value per share was an annualised 10.8% for the first half of F2022,
assisted by an improvement in operating experience variance and strong investment markets.
Solvency
The Group remains well capitalised. The regulatory solvency positions of all the Group's entities remain within their target ranges. For Momentum Metropolitan
Life, the Group's main life insurance entity, the Solvency Capital Requirement (SCR) cover improved from 1.73 times SCR at 30 June 2021 to 1.77 times SCR at
31 December 2021. The group SCR cover for Momentum Metropolitan Holdings remained unchanged at 1.5 times SCR.
Dividends
An interim ordinary dividend of 35 cents per ordinary share was declared, representing a 40% increase from the 25 cents per share interim ordinary dividend
declared in the prior period. The interim ordinary dividend represents a dividend cover of 2.9 times normalised headline earnings.
The dividend is payable out of income reserves to all holders of ordinary shares recorded in the company's register 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 final dividend of 28 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 Wednesday, 9 March 2022
Last date to trade cum-dividend Tuesday, 29 March 2022
Trading ex-dividend Wednesday, 30 March 2022
Record date Friday, 1 April 2022
Payment date Monday, 4 April 2022
Share certificates may not be dematerialised or rematerialised between Wednesday, 30 March 2022 and Friday, 1 April 2022, both days included.
Reinvent and Grow strategy
The implementation of our Reinvent and Grow strategy commenced in earnest during the first half of F2022. The main elements of the strategy, which will
receive our focus, include:
- Mastering digitalisation, which will result in a significant change in how we interact with clients and advisers, improving both efficiencies and user experience.
All our business units have embraced the challenge to rethink products and processes and several digital transformation initiatives are underway. A recent highlight
was the roll-out of our VIA adviser engagement platform used in the Momentum retail ecosystem, which will serve as a platform for further improvements in
future.
- Ensuring that the strategic objectives deliver revenue and efficiency improvements that will contribute to our objective of improving the Group's return on equity
to between 18% and 20% by F2024.
- Achieving above-average growth from Non-life Insurance, which will be an important contributor to achieving our financial objectives. The
challenges experienced at Momentum Insure in the recent past are a setback, but we are confident that the mitigating actions put in place will support the
business in getting back on a growth path.
- Launching several initiatives across the Group to create alternative distribution opportunities that are better suited for digital-native consumers.
- Refreshing our existing distribution channels, including consolidating on the recent improvements in the Metropolitan Life agency channel to ensure that we develop
these into sustainable competitive advantages.
Outlook
We are satisfied with the underlying operational performance of the Group, and we are encouraged by the growth in new business volumes. The sales growth
speaks to our improved ability to meet adviser and client needs. We are however determined to address those areas where sales volumes are lagging.
Looking ahead, we remain cautious about the pace of economic recovery across our operations, as disposable income remains under pressure because of
depressed economic activity and the impact of international political turbulence. The timing and magnitude of future Covid-19 waves also remain uncertain.
We foresee an ongoing hybrid way of work and our spatial planning suggests long-term cost savings from reduced need for office space. However, we are also
looking forward to connecting in a physical office environment with our employees, to the extent that Covid-19 allows. We want to get optimal productivity
back on track - particularly in areas such as client service where delivery suffered due to people working from home.
We are navigating through this challenging period with strong solvency and liquidity positions and a strong governance framework around capital allocation
decisions. This financial strength enables our portfolio of businesses to focus on delivering on the strategic objectives under their control and not be
constrained by any external shocks that might arise. This allows us to remain focused on delivering the objectives of our Reinvent and Grow strategy,
especially the various digital transformation-related initiatives that are receiving increased attention.
While earnings could remain volatile in some of the Group's businesses, the benefits of a diversified corporate portfolio are clear. We continue to estimate
that in the absence of extraneous shocks, the underlying level of normalised headline earnings for the Group is around R800 million to R900 million per
quarter. We also believe that the Reinvent and Grow financial targets for F2024 (normalised headline earnings of R4.6 billion to R5.0 billion and ROE of between
18% and 20%) remain realistic, despite the modest macroeconomic backdrop.
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 condensed consolidated interim financial statements. It is only a summary of the information contained in the full announcement
and does not contain complete details. Any investment decision should be based on the full SENS announcement accessible from Wednesday, 9 March 2022, via
the JSE link and on the Company's website at https://www.momentummetropolitan.co.za/en/investor-relations/financial-results.
The condensed consolidated interim financial statements can be found on the Group's website at https://www.momentummetropolitan.co.za/en/investor-
relations/financial-results. 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 while 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/2022/jse/isse/MTME/1H22Result.pdf
SENS issue: 9 March 2022
Equity sponsor
Merrill Lynch South Africa (Pty) Ltd t/a BofA Securities
Debt sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 09-03-2022 07:05:00
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