Wrap Text
MET/MTD - Metropolitan Holdings - Metropolitan robustly capitalised despite
economic turmoil
Metropolitan Holdings Limited
Incorporated in the Republic of South Africa
Registration Number: 2000/031756/06
JSE share code: MET
NSX share code: MTD
ISIN: ZAE000050456
("Metropolitan" or "the company" or "the group")
METROPOLITAN ROBUSTLY CAPITALISED DESPITE ECONOMIC TURMOIL
Diversified financial services group Metropolitan released its financial results
for the year ended 31 December 2009 earlier today (Wednesday 10 March). The
group`s healthy capital position and increase in dividend were key features due
largely to good capital management practices.
"We are particularly pleased with our success in monitoring and managing our
equity market exposure, given the roller-coaster ride that was 2009," says
Wilhelm van Zyl, group chief executive. "Dynamic asset allocation and capital
protection strategies such as hedging, together with other de-risking
activities, enabled us not only to maintain adequate levels of capital but also
to strengthen our balance sheet in the face of unprecedented equity market
volatility."
With its statutory capital adequacy requirement (CAR) covered 3.7 times (2008:
3.1 times) at group level and 2.8 times (2008: 2.0 times) at life company level,
Metropolitan ended 2009 in an even healthier capital position than it began the
year, a reassuring achievement in the light of the market turbulence experienced
throughout the year.
Metropolitan also uses its own internal capital model to determine the
appropriate level of capital that it should hold, known as its economic or long-
term capital requirement. This amount remained virtually unchanged during the
year despite ongoing refinements to ensure that all its underlying risks had
been taken into account and properly addressed.
An impressive return of 12% on embedded value is further evidence of how well
Metropolitan weathered the volatile economic environment.
The group`s embedded value grew to R12 billion or 1 811 cents per share (2008:
R11.3 billion or 1 709 cents per share) despite the fact that Metropolitan paid
out 95 cents per share in dividends during 2009. Embedded value comprises a life
assurer`s net asset value plus the value of its in-force book of business and is
widely regarded as an appropriate base for measuring the current value of such a
business.
On the back of strong investment performance, the group`s return on its net
worth surged to R846 million (2008: -R281 million) while positive investment
variances contributed R442 million (2008: -R982 million).
Metropolitan declared a final dividend of 60 cents per share, 9% higher than the
year-end declaration in 2008. "Our prudent approach to capital management plus
the fact that we are generating strong cash returns is continuing to pay
dividends, literally and figuratively speaking," is how Van Zyl puts it.
The group`s strategic empowerment partnership with Kagiso Trust Investments
(KTI) was refinanced by a consortium of banks for another three years from
October 2009, testimony to how successful the partnership has been, and
continues to be. At an estimated 20% after the refinancing, the group`s direct
black ownership percentage remains amongst the highest in the financial services
sector and well above legislated requirements.
In its most recent review of Metropolitan (December 2009), Fitch Ratings
maintained the group`s ratings at AA- (zaf) (national insurer financial
strength) and A+ (zaf) (national long-term), a reflection of the group`s
capital soundness as well as its business position and prospects.
"A great deal of uncertainty remains as to the direction in which markets will
move next, with many of the determining factors in the hands of foreign and
local policymakers," says Van Zyl. "Solvency II has been on international radar
screens for quite some time and in South Africa the Financial Services Board is
following the lead with its solvency assessment and management (SAM) project, in
which we are actively involved.
"Consequently 2010 will be another year of focus on capital management, with the
optimum allocation and utilisation of capital to add value for stakeholders
remaining a top priority for us."
Other key features of the results
- At 141 cents per share diluted core headline earnings for the year held up
well in a tough environment, decreasing only 7% over 2008 (151 cents).
- However, operating profit across all the businesses in the group was
negatively affected by the recessionary economic conditions.
- Earnings and headline earnings per share, at 188 cents and 197 cents
respectively, were boosted by mark-to-market gains and recorded
significant increases compared to the losses of (27 cents) and (20 cents)
respectively disclosed in the previous year.
- Despite severe pressure on cash flows from clients as a result of the
recession, net inflows of R1.5 billion were recorded by the group.
- Total new recurring premium business to the value of R1 159 million was
written in 2009 while single premium business amounted to R3 422 million.
- The value of the group`s new insurance business for the year was R119
million.
Please refer to Metropolitan`s statutory announcement for further details of the
results or turn over for a summary.
Summary of Metropolitan`s results to December 2009
December 2008 December 2009
Earnings (R319m) R1 129m
Diluted earnings per share (27c) 188c
Diluted core headline earnings R1 011m R934m
Diluted core headline earnings 151c 141c
per share
Embedded value per share 1 709c 1 811c
Return on embedded value (2.1%) 11.9%
Embedded value per share 1 709c 1 811c
Total dividend per ordinary 95.00c 100.00c
share
Total premiums received R11.9bn R11.2bn
Total assets under management R98bn R103bn
Notes
Core headline earnings are a particularly appropriate measure of the performance
of financial services groups such as Metropolitan in that they eliminate items
of both a once-off and an inherently volatile nature, such as changes to the
valuation basis, investment variances and capital appreciation/depreciation.
Diluted core headline earnings have been adjusted for the convertible redeemable
preference shares, the staff share scheme shares and the treasury shares in
issue - all dilutory in nature. The preference shares were issued to
Metropolitan`s strategic empowerment partner, Kagiso Trust Investments (KTI).
ISSUED BY SUE SNOW
FINANCIAL MEDIA SPECIALIST
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406119 OR 083 300 9745
DATE 10 MARCH 2010
QUERIES WILHELM VAN ZYL
GROUP CHIEF EXECUTIVE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406637 OR 082 515 3841
PRESTON SPECKMANN
GROUP FINANCE DIRECTOR
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406634 OR 083 285 6454
TYRREL MURRAY
GENERAL MANAGER: GROUP FINANCE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405083 OR 082 889 2167
Sponsor
Merrill Lynch South Africa (Pty) Ltd
Date: 10/03/2010 08:03:02 Supplied by www.sharenet.co.za
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