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MMI - MMI Holdings Limited - MMI poised to realise growth potential
MMI Holdings Limited
Incorporated in the Republic of South Africa
Registration Number: 2000/031756/06
JSE share code: MMI
NSX share code: MIM
ISIN: ZAE000149902
("MMI")
MMI poised to realise growth potential
MMI, born out of the merger of Metropolitan and Momentum, released its financial
results for the six months ended 31 December 2010 earlier today (Wednesday 9
March).
According to group CEO Nicolaas Kruger, each of the six MMI business units has
embarked upon a detailed strategic planning and integration process to optimise
operating structures and business models, which has included the identification
of target markets, distribution channels and product offerings. A number of
opportunities have been singled out during the integration processes currently
underway and synergies are expected to flow through over the next two years.
MMI has adopted 30 June, the year-end of Momentum, as its financial year-end. In
terms of the accounting guidelines, Momentum is the acquirer and Metropolitan
the acquiree in the merger transaction. The group`s interim results therefore
constitute a consolidated set of figures, comprising six months of Momentum
(July to December 2010) and one month of Metropolitan (December 2010).
Given the limited value of statutory figures such as these in reporting on the
operational performance of the merged entity for the period under review, an
additional set of pro forma results (combining six months of Momentum and six
months of Metropolitan (July to December 2010 in both instances) has been
included.
"MMI`s operational scale across its six businesses is immediately apparent from
the pro forma figures. Our larger geographic footprint in South Africa and the
12 African countries outside South Africa plus the greater diversity of products
and services that we offer are major contributory factors in ensuring benefits
of scale and revenue growth opportunities," says Kruger.
"Our overall financial robustness is equally obvious. However, some of the
benefits of the merger - our enhanced skills base for example - will only become
evident over time."
The fact that the MMI group had an embedded value of R31.1 billion (1 939 cents
per share) at the end of the reporting period is further proof of its financial
strength. Embedded value comprises a life assurer`s net asset value (R18
billion for MMI) plus the present value of the future profits expected to be
generated by its current book of business (R13 billion in the case of MMI). It
is widely regarded as the appropriate base for measuring the value of a business
of this nature.
An impressive annualised pro forma return on embedded value of 18.9% over the
period testifies to MMI`s ability to capitalise on improving investment markets
despite ongoing volatility, thereby adding value for shareholders.
With an aggregated group statutory capital adequacy requirement (CAR) cover of
2.5 times, MMI`s actuarial balance sheet also bears out Kruger`s claims
regarding the group`s healthy financial position.
Although the Financial Services Board`s (FSB) solvency assessment and management
(SAM) project will change the way MMI determines its economic capital in future,
the R15.3 billion capital held by the group at 31 December 2010 comfortably
exceeded its current economic capital requirement.
"The group remains appropriately capitalised, with a particularly strong balance
sheet," says Kruger.
MMI`s total assets under management and administration, amounting to R424
billion, is another of the measures that confirms the scale of this newly
created player in the life insurance sector.
New business is the lifeblood of any company, and life insurers are no
exception. On a pro forma basis, total new business amounted to R21 972 million
over the six month period, written at a profit margin of 1.6%. The value of new
business across the group amounted to R356 million. These numbers all confirm
MMI`s strong distribution capability, which brings with it solid future
prospects in terms of new business growth.
Confirmation of the well-diversified nature of MMI`s income streams was provided
by the fact that each of its six businesses contributed to core headline
earnings for the six months to December 2010. The largest contributors to the
group`s pro forma core headline earnings of R1 228 million were Momentum Retail
(29%) and Metropolitan Retail (18%).
"Pro forma core headline earnings of 77 cents per share represent a stake in the
ground for MMI; we will be striving to surpass what should be regarded as a
benchmark against which to measure future performance," says Kruger.
MMI declared an interim ordinary dividend of R948 million, or 63 cents per share
(42 cents normal plus 21 cents special), thereby confirming the board`s
confidence in the group`s financial strength and operational outlook. The normal
dividend cover, on the basis of pro-forma core headline earnings per share, is
1.9 times.
This declaration means that Metropolitan shareholders will be receiving a higher
dividend payout than the 60 cents they were awarded a year ago. Although
currently the MMI group`s pro forma diluted core headline earnings of 77 cents
per share are lower than those of Metropolitan for the second half of 2009 (79
cents), the embedded value per share has increased from 1 811 cents to 1 939
cents.
"Solvency II has been on international radar screens for quite some time and in
South Africa the FSB is following this lead with its SAM project, in which MMI
is actively involved, " says Kruger. "Consequently 2011 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.
"Our board believes that as a group MMI has begun implementing the appropriate
strategies to unlock value and generate a satisfactory return on capital for
shareholders over time."
Please refer to MMI`s statutory announcement for further details of the results
or see the following page for a summary
Summary of MMI group`s pro forma interim financial results to December 2010
December
2010
Diluted earnings R1 369m
Diluted earnings per share 86c
Diluted core headline earnings R1 228m
Diluted core headline earnings per share 77c
Embedded value R31 118m
Diluted net asset value R17 570m
Value of in-force business R13 548m
Embedded value per share 1 939c
Return on embedded value 18.9%
Discount to embedded value at 31 December 2010 14%
Total dividend per ordinary share 63c
Normal 42c
Special 21c
Dividend cover (normal, based on pro forma core 1.9
HEPS)
Total assets under management and administration R424bn
New business PVP (present value of future R21 972m
premiums)
Value of new business R356m
New business margin (PVP basis) 1.6%
Notes
- Core headline earnings are a particularly appropriate measure of the
performance of financial services groups such as MMI in that items of both a
once-off and an inherently volatile nature are eliminated, such as changes to
the valuation basis, investment variances, fair value movements on shareholder
assets and the amortisation of any intangible assets recognised due to business
combinations.
- Diluted figures have all 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 MMI`s
strategic empowerment partner, Kagiso Trust Investments (KTI).
ISSUED BY SUE SNOW
FINANCIAL MEDIA SPECIALIST
MMI HOLDINGS LIMITED
CELL 083 300 9745
DATE 9 MARCH 2010
QUERIES NICOLAAS KRUGER
GROUP CHIEF EXECUTIVE
MMI HOLDINGS LIMITED
CELL 082 800 7216
PRESTON SPECKMANN
GROUP FINANCE DIRECTOR
MMI HOLDINGS LIMITED
CELL 083 285 6454
Date: 09/03/2011 07:09:04 Supplied by www.sharenet.co.za
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