Wrap Text
Unaudited interim results for the six months ended 31 December 2022
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
LEI: 378900E0A78B7549C212
Company code: MMIG
(Momentum Metropolitan Life)
Unaudited interim results for the six months ended 31 December 2022 and dividend declaration
Short-form announcement
Basic Diluted
1H2023 1H2022 Change% 1H2023 1H2022 Change %
Earnings (R million) 2 393 697 >100% 2 412 697 >100%
Headline earnings (R million) 1 875 1 316 42% 1 894 1 316 44%
Normalised headline earnings (R million)1 2 230 1 525 46%
Operating profit (R million)2 1 898 895 >100%
Investment return (R million) 332 630 (47)%
Earnings per share (cents)3 171.3 48.9 >100% 167.8 48.9 >100%
Headline earnings per share (cents)3 134.2 92.4 45% 131.8 92.4 43%
Normalised headline earnings per share (cents)3 148.8 99.9 49%
Interim dividend per share (cents) 50 35 43%
Present value of new business premiums 33 268 36 995 (10)%
Value of new business 324 400 (19)%
Value of new business margin 1.0% 1.1%
Diluted embedded value per share (R) 31.39 28.39 11%
Return on embedded value per share 15.6% 11.0%
Return on equity4 18.4% 15.9%
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 1H2022 has been restated for a correction in the calculation of the weighted average number of shares.
4 Return on equity expresses normalised headline earnings as a percentage of start of year net asset value, adjusted for the items outlined in footnote 1,
as well as the adjusting items to determine headline earnings.
Net asset value
R million 1H2023 1H20225 Change %
Total assets 596 308 591 493 1%
Total liabilities (570 483) (568 920) -
Total equity 25 825 22 573 14%
5 1H2022 assets and liabilities restated, refer to note 12 in the condensed financial statements for further detail.
Momentum Metropolitan reports strong earnings growth
Reinvent and Grow strategy on track
Introduction
We are pleased with Momentum Metropolitan's financial results for the six-month period, and we are further encouraged by the headway made in a wide range of
strategic initiatives.
Most business units performed in line with expectations, delivering earnings we can be proud of. The results were positively impacted by improved mortality experience and
improved investment variances.
Group consolidated earnings
The Group delivered normalised headline earnings of R2 230 million for the six months ended 31 December 2022, up 46% on the prior period. While the prior
period's results were negatively impacted by heightened mortality experience resulting from Covid-19 (net of releases of Covid-19 reserves), mortality
experience in the current period has normalised to levels last seen in 2019.
Operating profit more than doubled to R1 898 million, from R895 million in the prior period. This result was supported by the improved mortality experience,
coupled with an improvement in investment variances. All business units, except Momentum Investments and Non-life Insurance, grew operating earnings.
Momentum Investments reported lower operating earnings mainly because of reduced revenue on the Momentum Wealth platform driven by lower new business
volumes and weak market performance. Within the Non-life Insurance segment, Momentum Insure was negatively affected by a high claim ratio.
The Group's investment return declined by 47% to R332 million, mainly driven by negative fair value movements on the Group's investment in venture capital (VC)
funds. The prior period included significant fair value gains on these VC funds.
Normalised headline earnings per share increased from 99.9 cents to 148.8 cents. Headline earnings per share increased from 92.4 cents to 134.2 cents and
earnings per share improved from 48.9 cents to 171.3 cents. This high growth in earnings per share was to an extent due to the partial write-down in the
prior period of the goodwill previoulsy recognised in the acquisition of the Alexander Forbes Short-term Insurance business.
Earnings growth was further boosted by a sizeable positive adjustment to the carrying amount of the Group's remaining interest in our health insurance joint venture
in India, Aditya Birla Health Insurance (ABHI), following the dilution of the Group's investment as a result of the introduciton of a new shareholder.
The following table outlines the contribution from operating profit and investment return to normalised headline earnings per business unit:
1H2023 1H2022 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 642 47 689 (44) 74 30 >100% (36)% >100%
Momentum Investments 383 58 441 438 51 489 (13)% 14% (10)%
Metropolitan Life 237 31 268 232 36 268 2% (14)% -
Momentum Corporate 494 62 556 302 68 370 64% (9)% 50%
Momentum Metropolitan Health 144 2 146 93 1 94 55% 100% 55%
Non-life Insurance 217 26 243 233 70 303 (7)% (63)% (20)%
Momentum Metropolitan Africa 44 78 122 (30) 37 7 >100% >100% >100%
Normalised headline earnings from operating business units 2 161 304 2 465 1 224 337 1 561 77% (10)% 58%
New Initiatives (247) 3 (244) (300) 1 (299) 18% >100% 18%
Shareholders segment (16) 25 9 (29) 292 263 45% (91)% (97)%
Normalised headline earnings 1 898 332 2 230 895 630 1 525 >100% (47)% 46%
More details on the Group's earnings performance, including 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 2022, available on the Group's
website at https://www.momentummetropolitan.co.za/en/investor-relations/financial-results.
Group new business performance
Key metrics 1H2023 1H2022 Change%
Recurring premiums (R million) 2 417 2 299 5%
Single premiums (R million) 23 227 26 684 (13)%
PVNBP (R million) 33 268 36 995 (10)%
Value of new business (R million) 324 400 (19)%
New business margin 1.0% 1.1%
The Group's PVNBP declined to R33.3 billion, 10% lower than the prior period. Momentum Corporate delivered pleasing growth in both single and recurring
premium new business in FundsAtWork. Momentum Life's improved PVNBP on long-term savings products was partly offset by modest protection new business
volumes. Metropolitan Life's PVNBP remains in line with the prior period. Momentum Investments' new business volumes declined due to lower flows on both the
local and international Wealth platforms. Momentum Metropolitan Africa saw a decline in new business volumes, mainly driven by the non-repeat of large
corporate deals secured in the prior period in Namibia and Lesotho.
The Group's VNB declined to R324 million, 19% lower than the prior period, mainly impacted by reduced volumes. Momentum Corporate however delivered a strong
VNB contribution of R74 million from higher sales. Momentum Life's VNB of negative R7 million resulted from lower new business volumes on higher margin
protection products, increased expenses, and higher cost of capital. Momentum Investments' VNB declined to R183 million, mainly due to a change in new
business mix away from higher margin offshore investments in Momentum Wealth and lower assumed credit spreads on annuities. This was partly offset by a
reduction in renewal expenses. Metropolitan Life's VNB of R84 million declined from the prior period and is mainly due to a change in product mix towards
lower margin savings products and the adverse impact of policies that lapsed before the first premium was paid, leading to distribution expenses being
incurred without the commensurate revenue. A negative R10 million VNB contribution from Momentum Metropolitan Africa resulted from further deterioration in
Namibia's VNB, partly offset by a positive contribution from Lesotho and Botswana. Overall Group new business margin declined to 1.0%, from 1.1% in the
prior period.
Return on equity and embedded value
Return on equity (ROE) for the period was 18.4% (annualised), up from 15.9% in the prior period. This increase follows the Group's earnings improvement
together with an ongoing focus on capital efficiency.
Group embedded value per share was R31.39 on 31 December 2022. The return on embedded value per share was enhanced by our share repurchase programme,
ultimately reflecting a 15.6% return (annualised) for the period. This is an improvement from the 11.0% reported in the prior period.
Solvency
The Group remains well capitalised. The regulatory solvency positions of most of the Group's regulated entities remain toward the upper end of their
specified target solvency ranges. For Momentum Metropolitan Life, the Group's main life insurance entity, the Solvency Capital Requirement (SCR) cover
decreased from 2.03 times SCR at 30 June 2022 to 1.98 times SCR at 31 December 2022, predominantly due to an increase in the SCR and following the dividend
and share buyback programme. Momentum Metropolitan Holdings had a group SCR cover of 1.6 times SCR at 31 December 2022, in line with the 1.6 times SCR at 30 June 2022.
Share repurchase programme
During the period the Group repurchased 45 million of its own shares (3.0% of the shares in issue at the time), for a total consideration of R750 million
and at an average purchase price of R16.74 per share. On 31 October 2022 the final tranche of these repurchased shares was cancelled. In line with our
capital management framework and in consideration of the strong capital and liquidity position, the Board has approved a further R500 million for the
repurchase of the Group's ordinary shares. These repurchases will commence following the release of the interim financial results. The repurchases are
subject to the share price remaining at a discount of at least 25% to embedded value.
Dividends
An interim ordinary dividend of 50 cents per ordinary share was declared, representing a 43% increase from the 35 cents per share interim ordinary dividend
declared in the prior period. The interim dividend represents a payout ratio of 34% of normalised headline earnings.
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 40 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 1 452 676 497.
The income tax number of Momentum Metropolitan is 975 2050 147.
Publication of declaration data Wednesday, 8 March 2023
Last date to trade cum-dividend Tuesday, 28 March 2023
Trading ex-dividend Wednesday, 29 March 2023
Record date Friday, 31 March 2023
Payment date Monday, 3 April 2023
Share certificates may not be dematerialised or rematerialised between Wednesday, 29 March 2023 and Friday, 31 March 2023, both days inclusive.
Outlook
We are pleased by the good earnings achieved by the Group over the past six months despite the headwinds faced in the current economic environment. The
positive mortality experience variances in our main life insurance business units continue to suggest that the Covid-19 pandemic has reached its endemic
phase.
The normalisation of mortality experience, combined with the disciplined execution of our strategy and ongoing focus on efficiency, means that we expect our
earnings to be robust for the rest of the financial year. We will continue to focus on achieving the Reinvent and Grow financial targets for F2024, namely
normalised headline earnings of R4.6 billion to R5.0 billion and ROE of 18% to 20%.
While our earnings outlook has improved over the past eighteen months, recent pressure on sales volumes is a concern. Disposable income remains under
pressure due to rising interest rates and high inflation, as well as the lack of economic growth in South Africa. This is likely to put ongoing
affordability pressure on new business volumes, particularly on long-term savings and protection business. Investment business is negatively affected by
other factors, such as low confidence in SA asset classes and by consumer preference to maintain assets in liquid low-risk investments.
We are a proudly South African company and will continue to invest and build our core operations, despite the numerous challenges our country is facing.
If given the opportunity, the private sector can make a huge difference to improving our economic growth outlook. Over the last five years we have established
a trend of success despite the pandemic and tough economic conditions. We will continue to focus on what is under our control to add value to our clients
and stakeholders, and contribute positively towards building a better South Africa for all.
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 full or complete details. Any investment decision should be based on the full SENS announcement accessible from Wednesday, 8 March
2023, via the JSE link and also available 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
at the Company's registered office, weekdays Monday to Friday during office hours from 09:00 to 16:00.
The JSE link is as follows: https://senspdf.jse.co.za/documents/2023/jse/isse/MTME/1H23Result.pdf
SENS issue: 8 March 2023
Equity sponsor
Merrill Lynch SA (Pty) Ltd t/a BofA Securities
Debt sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 08-03-2023 07:05:00
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