Wrap Text
Trading update for the three months ended 30 September 2013
MMI Holdings Limited Group
Incorporated in South Africa
(Registration number 2000/031756/06)
ISIN: ZAE0001149902
JSE share code: MMI
NSX share code: MIM
("MMI" or the “Company”)
Trading update for the three months ended 30 September 2013
Group overview and operational highlights
• Total new business recurring premiums increased by 26% compared with
the same quarter of the prior year, reflecting the strength of the
diverse distribution channels and the alignment of the comprehensive
product offerings in the group with their respective target markets.
• Strong single premium inflows continued, ending 12% higher than the
comparative quarter; a period which included exceptional flows in the
employee benefits division.
• Overall, very good client retention was experienced across the group.
• A number of growth initiatives have commenced; the benefits of which
will only emerge in future reporting periods.
• The group has further strengthened internal resources, and good
progress has been made in building new system capabilities in the
short-term insurance operation.
• The group has substantially completed the merger integration phase and
is transforming from an integration focus to a growth focus.
Acquisitions
• The acquisition of Guardrisk, a cell captive provider of tailored risk
solutions was announced earlier this month. The purchase price of R1.6
billion will be funded out of MMI’s existing capital resources. The
transaction is subject to regulatory approvals
• In addition, the recently announced acquisition of Providence
Healthcare Risk Managers will strengthen Metropolitan Health’s
position as the country’s largest healthcare administrator.
• A number of growth opportunities are being pursued across the group,
including acquisitions in Africa.
Market conditions and environment
• The group is operating in a highly competitive market with ongoing
pressure on clients’ disposable income.
• 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 volatile, continue to be strong.
Momentum Retail *
3 months 3 months 3 months
to to to Change
vs
30-Sept-11 30-Sept-12 30-Sept-13 2012
Rm Rm Rm %
New business
Recurring premiums 257 247 268 9
Single premiums 2 305 2 667 3 862 45
Annual premium equivalent
(APE) 488 514 654 27
Present value of premiums
(PVP) 3 681 4 054 5 338 32
* Momentum Retail includes Odyssey but excludes new markets and FNB Life.
* Covered business includes on-balance sheet business only.
• The upper-income risk market continues to be very competitive.
• New business volumes (PVP) for the quarter were 32% higher than those
recorded in the prior year.
• Single premium new business surprised on the upside ending 45% higher
as a result of very strong structured product premium flows.
• The mix of new business continues to favour single premium
investments.
• Client service remained at very satisfactory levels.
• Good mortality experience continued during the quarter.
• The benefits from increased brand awareness activities are starting to
emerge.
Metropolitan Retail #
3 months 3 months 3 months
to to to Change
vs
30-Sept-11 30-Sept-12 30-Sept-13 2012
Rm Rm Rm %
New business
Recurring premiums 285 255 285 12
Single premiums 401 299 366 24
Annual premium equivalent
325 285 322 13
(APE)
Present value of premiums
1 445 1 350 1 457 8
(PVP)
# Metropolitan Retail includes new markets and FNB Life (2011/2 10%; 2013
4% from 1 July 2013), but excludes Odyssey.
• Good recurring premium new business was recorded, ending 12% higher
than September 2012, highlighting the benefits achievable through
market segmentation.
• The reduction in the profit-share agreement with FNB Life from 10% to
4% (effective 1 July 2013) has resulted in a lower contribution from
this channel to recurring new business and to the value of new
business.
• Excluding new business from FNB Life, strong recurring premium growth
of 19% was recorded from the other distribution channels.
• Single premium income performed very well delivering a 24% increase
for the quarter.
• Early duration persistency remained at acceptable levels.
• The process and systems renewal projects are proceeding as planned.
• Expenses were well managed during the period under review.
• Excellent client-service levels continued as confirmed by the Ask-
Orange index while the Metropolitan brand strength moved up from 4th to
2nd position in the Sunday Times brand survey.
Momentum Employee Benefits
3 months 3 months 3 months
to to to Change
vs
30-Sept-11 30-Sept-12 30-Sept-13 2012
Rm Rm Rm %
New business
Recurring premiums 116 112 235 >100
Single premiums 403 1 919 1 252 (35)
Annual premium equivalent
156 304 360 18
(APE)
Present value of premiums
1 255 2 771 3 426 24
(PVP)
• Good recurring premium new business was recorded in the first quarter,
particularly in the umbrella fund space, resulting in recurring
premium new business of more than twice the level recorded in the
prior comparative for the division as a whole.
• Following the record levels of single premiums received in the prior
year, strong single premium production was again written during this
period.
• Securing new business in the group insurance and investment markets
remains highly competitive.
• Client retention remains at good levels.
• Expense efficiency initiatives are continually being implemented.
• The Momentum Health open scheme, which is now part of the Momentum
Employee Benefits division, continues to provide an attractive
offering to clients, increasing membership over the period while
further strengthening the reserves in the scheme.
Metropolitan International §
3 months 3 months 3 months
to to to Change
30-Sept- 30-Sept- 30-Sept-
11 12 13 vs 2012
Rm Rm Rm %
New business
Recurring premiums 64 71 73 3
Single premiums (incl EB) 53 35 49 39
Annual premium equivalent
(APE) 69 74 78 6
Present value of premiums
(PVP) 331 399 420 5
Health membership (‘000)# 126 381 390 2
§ New business includes MMI’s share of life insurance new business
written by all Metropolitan International subsidiaries.
# Health membership includes Namibia.
• Good new business volumes were recorded in Namibia, Lesotho and
Swaziland during the period under review.
• Strong single premium production was experienced in Botswana.
• The medical claims ratio has remained at satisfactory levels.
• Expense management initiatives are being implemented.
• A number of growth initiatives are being pursued or are in the process
of being implemented.
Momentum Investments
• Institutional and retail interest on the back of continued strong
investment performance in our Momentum Africa product is yielding
positive net inflows.
• The Momentum Balanced Fund unit trust investment performance ended
either top or second quartile over 3 months and 1,3 and 5 years.
• Institutional core equity mandates have been committed on the back of
equity fund performance.
• The measurement of the unconstrained strategies team’s institutional
performance commenced at the beginning of the quarter and significant
alpha in the domestic equity and global contrarian fund performances
has been realised.
• On the back of increased market levels, performance fees and
controlled costs, the Momentum Investment division’s cost-to-income
ratios improved for the quarter.
• The longer term outlook for the investment management business in
general remains positive, but earnings will be dependent on the levels
and mix of assets under management, as well as expense ratios.
• Building competitive investment management capabilities for the MMI
group as well as third parties remain core to the growth strategy.
Metropolitan Health
• Further growth, albeit slower, was recorded in the Government
Employees Medical Scheme.
• Despite losing the administration contracts on a few smaller schemes
the business is confident that the key administration and managed care
contracts will be successfully renewed.
• Good progress has been made with the strategic repositioning of the
health risk management business and the roll-out of the Multiply
rewards programme.
• Business efficiency initiatives remain on track.
• The business continues to position itself for industry consolidation
and health reform.
Opportunities and challenges
• MMI is an extremely well diversified financial services group with
scale in all the established operations.
• Merger synergies will continue to emerge as projects are completed.
• Cross-selling and other new business 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 contained in this trading update have not been reviewed or
reported on by the Company’s auditors and are for the period 1 July to
30 September 2013 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.
• The new business figures are all net of outside shareholder interests.
End
Queries
NICOLAAS KRUGER PRESTON SPECKMANN TYRREL MURRAY
GROUP CHIEF GROUP FINANCE GROUP FINANCE & INVESTOR
EXECUTIVE DIRECTOR RELATIONS
MMI Holdings MMI Holdings MMI Holdings
TEL 012 673 7438 TEL 012 673 7446 TEL 021 940 5083 OR 082 889 2167
Centurion
28 November 2013
Sponsor in South Africa
Merrill Lynch South Africa (Pty) Ltd
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