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Trading Update for the nine months ended 31 March 2013
MMI HOLDINGS LIMITED
Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN Code: ZAE000149902
JSE Share Code: MMI
NSX Share Code: MIM
("MMI" or "the company")
Trading update for the nine months ended 31 March 2013
Group overview and operational highlights
• Total group new business PVP (present value of premiums) for the
quarter increased by 11% compared with the corresponding figure of the
prior year, and 11% year-to-date, confirming the need for financial
products and the benefits to MMI from product and market segment
diversification.
• Capital management projects are ongoing and the group remains
appropriately capitalised.
• Delivering on expense management and merger efficiencies remain one of
the top priorities; however the medium-term focus has moved to growth
initiatives.
Market conditions and environment
• The group is currently operating in a challenging economic
environment.
• Pressure on disposable income is increasing and the market remains
highly competitive.
• The need for and importance of investment and protection products
within MMI’s client base remains an integral part of their financial
planning and wellness.
• Investment markets, while relatively strong, continue to be volatile.
Momentum Retail *
9 months to 9 months to Change
31-March-12 31-March-13 vs 2012
Rm Rm %
New business
Recurring premiums 841 828 (1)
Single premiums 7 062 7 802 10
Annual premium equivalent (APE) 1 547 1 609 4
Present value of premiums (PVP) 11 802 12 638 7
* Momentum Retail includes Odyssey but excludes new markets and FNB Life.
* Covered business includes on-balance sheet business only.
* Includes only two periods as a result of the change in the definition
of covered business to exclude off-balance sheet Wealth business.
• Competition in the upper-income risk market continues to be very
tough.
• Year-to-date new business volumes increased by 7% on a PVP basis
assisted by strong single premium flows.
• The mix of new business favours single premium investments with lower
inherent margins.
• Good mortality experience continued during the quarter.
• Business efficiency initiatives are ongoing.
• The Odyssey conversion whereby 180 000 policies were transferred onto
the Momentum administration platform was completed successfully and
the expense savings target was achieved.
Metropolitan Retail #
9 months to 9 months to 9 months to Change
31-March-11 31-March-12 31-March-13 vs 2012
Rm Rm Rm %
New business
Recurring premiums 680 777 788 1
Single premiums 1 441 901 832 (8)
Annual premium equivalent 823 868 873 1
(APE)
Present value of premiums 4 247 4 057 4 117 1
(PVP)
#Metropolitan Retail includes new markets and FNB Life, but excludes
Odyssey.
• The markets in which Metropolitan Retail operate have become tougher
as a result of increased competition, together with food and transport
inflation.
• The regulatory exams that dampened new business in the first quarter
of FY2013 are no longer having a material impact on new business
activity in subsequent quarters.
• Recurring premium new business continued to recover, increasing 7% in
the last quarter when compared to the prior year.
• The reduction in single premium income over the past few reporting
periods was the result of the closure of certain less profitable
products and also some distribution channels; good growth has
continued in the remaining products and channels.
• Early duration persistency in some lines of business showed signs of
deterioration; however overall experience remains within the valuation
basis.
• Expenses were well managed during the period under review.
Momentum Employee Benefits
9 months to 9 months to 9 months to Change
31-March-11 31-March-12 31-March-13 vs 2012
Rm Rm Rm %
New business
Recurring premiums 546 591 535 (9)
Single premiums 2 062 2 898 4 520 56
Annual premium equivalent 752 881 987 12
(APE)
Present value of premiums 5 839 7 123 8 402 18
(PVP)
• Securing new business in the group insurance and investment markets
remains highly competitive.
• The division recorded exceptional new business during the quarter –
the highest since the merger.
o Strong single premium new business was recorded throughout the
year.
o A number of large recurring risk schemes were secured during the
quarter.
• Client retention remains satisfactory while positive risk experience
continued.
• Expense efficiency initiatives are continually being investigated and
implemented.
• The division remained in a strong cash flow positive position.
Metropolitan International §
9 months to 9 months to 9 months to Change
31-March-11 31-March-12 31-March-13 vs 2012
Rm Rm Rm %
New business
Recurring premiums 122 161 225 40
Single premiums (incl EB) 103 156 204 31
Annual premium equivalent 132 177 245 38
(APE)
Present value of premiums 619 884 1 285 45
(PVP)
Membership (health) (‘000) 367 390 387 (3)
§ New business includes MMI’s share of life insurance new business
written by all Metropolitan International subsidiaries.
• Strong growth in new business volumes was recorded in Namibia,
supported by the Botswana and Lesotho operations.
• The acquisition of a life insurance company in Mauritius has been
finalised and the other two new life operations, namely Zambia and
Tanzania, are progressing according to plan.
• The medical claims ratio improved as a result of appropriate re-
pricing and improved claims controls.
• The total lives under administration in the health business increased
from 381 000 at the end of December 2012 to 387 000 at the end of
March 2013.
• A number of new growth and business process efficiency improvements
are being implemented.
Momentum Investments
• Strong inflows into unit trusts for the quarter aided by flows into
the Momentum-managed enhanced yield, property and Africa fund
offerings together with continued positive flows into the white label
boutique asset managers resulted in positive net flows for the
quarter.
• These flows, together with the strong equity market performance, have
increased the total assets under management.
• The longer term outlook for the investment management business in
general remains positive, but the earnings will be dependent on the
levels and mix of the assets under management, as well as expense
ratios.
• Building competitive third party investment management capabilities
remain core to the growth strategy.
Metropolitan Health
• The division administered 1.3 million principal members (3.1 million
lives) at the end of March 2013.
• Growth in membership was recorded in both the Momentum Health open
scheme and the Government Employees Medical Scheme.
• A couple of smaller schemes terminated their agreements with
Metropolitan in order to amalgamate into larger schemes administered
by other administrators.
• Good progress has been made in the roll-out of the Multiply rewards
programme.
• Further operational efficiencies are being pursued.
• The business continues to position itself for health reform. In this
regard, in association with the Alpha Pharm National Health Network,
the business is rolling out in-store primary healthcare clinics. These
clinics will provide services to insured and uninsured members of the
public.
Other corporate activity
• During the quarter under review MMI Holdings Ltd acquired the
floating-rate, irredeemable preference shares, issued by Momentum
Group Limited (since renamed to MMI Group Limited) in 2005 from
FirstRand Limited in order to simplify and optimise the group’s
capital structure. The transaction was approved by the Financial
Services Board and the effective date of the transaction was 25 March
2013.Following this transaction, all the ordinary and preference
shares issued by MMI Group Limited are owned by MMI Holdings Limited.
• On 20 May 2013 the High Court approved the amalgamation of MMI’s two
main South African long-term insurance companies into MMI Group
Limited. The use of a single licence simplifies the group structure
and facilitates effective deployment of capital within the MMI
Holdings group.
Opportunities and challenges
• MMI is a well diversified financial services group with scale in all
the established operations.
• Merger synergies will continue to emerge as projects are completed.
• Cross-selling opportunities are being pursued across the group.
• Growth in new business volumes will, however, remain dependent on the
economic environment, including a recovery in employment and stronger
disposable income levels.
Comments / qualifications
• All figures are provisional and unaudited and are for the period 1
July to 31 March as presented in the current internal management
accounts.
• The basis on which the new business figures have been calculated is
the same as that used for embedded value purposes. Premium income is
included from the date on which policies come into force as opposed to
the date on which they are accepted. (Figures calculated on the latter
basis are normally referred to as production figures.) It should be
noted that there can be a delay of up to three months between these
two dates.
• The new business figures are all net of outside shareholder interests.
End
Queries
NICOLAAS KRUGER
GROUP CHIEF EXECUTIVE
MMI Holdings
TEL 012 673 7438
PRESTON SPECKMANN
GROUP FINANCE DIRECTOR
MMI Holdings
TEL 012 673 7446
TYRREL MURRAY
GROUP FINANCE & INVESTOR RELATIONS
MMI Holdings
TEL 021 940 5083 OR 082 889 2167
Bellville
29 May 2013
Sponsor in South Africa
Merrill Lynch South Africa (Pty) Ltd
Sponsor in Namibia
Simonis Storm Securities (Pty) Ltd
5
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