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Trading Update for the Nine Months ended 31 March 2014
MMI Holdings Limited Group
Incorporated in South Africa
(Registration number 2000/031756/06)
JSE share code (primary listing): MMI
NSX share code: MIM
ISIN NO. ZAE000149902
"MMI Holdings" or "the Company"
Trading update for the nine months ended 31 March 2014
Group overview and operational highlights
Total new business recurring premiums increased by 12% compared with the same
period of the prior year.
Strong single premium inflows continued, ending 13% higher than the
comparative nine-months of the prior year; a period which included
exceptional inflows in the employee benefits division.
The combined new business flows resulted in a 15% increase in respect of the
year-to-date present value of premiums (PVP) for MMI as a whole.
This reflects the strength of the diverse distribution channels and the
alignment of the comprehensive product offerings in the group with their
respective target markets.
Overall, satisfactory client retention was experienced across the group.
MMI is investing in a number of growth initiatives; the benefits of which
will only emerge in future reporting periods.
The group has substantially completed the merger integration phase and has
transformed from an integration focus to a growth focus.
A new client-centric operating model is being developed for MMI in order to
capture growth opportunities in the fast-changing environment.
The cumulative merger expense target of R500 million has been achieved ahead
of the due date.
Market conditions and environment
The group operates in a highly competitive market and the economic
environment remains challenging.
Equity markets overall have continued to perform strongly, increasing the
total assets under management.
Consumers are feeling the pressure of rising food prices and transport
inflation against lower wage and salary increases.
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.
Momentum Retail *
9 months to 9 months to 9 months to Change
31-March-12 31-March-13 31-March-14 vs 2013
Rm Rm Rm %
New business
Recurring premiums 841 828 775 (6)
Single premiums 7 062 7 802 10 882 39
1
Annual premium equivalent (APE) 1 547 1 609 1 863 16
Present value of premiums (PVP) 11 802 12 638 15 266 21
* Covered business includes on-balance sheet business only.
Competition in the upper-income recurring premium risk market continues to be
very tough.
Year-to-date new business volumes increased by 21% on a PVP basis, assisted
by strong single premiums (up 39%) on the back of good guaranteed endowment
flows.
Positive risk experience continued, confirming the benefits of focussing on
good quality new business.
Business efficiency initiatives have resulted in good expense management in
the current period.
Metropolitan Retail #
9 months to 9 months to 9 months to Change
31-March-12 31-March-13 31-March-14 vs 2013
Rm Rm Rm %
New business
Recurring premiums 702 722 800 11
Single premiums 793 845 1 094 29
Annual premium equivalent (APE) 781 806 910 13
Present value of premiums (PVP) 3 810 4 001 4 112 3
# Metropolitan Retail excludes FNB Life for all periods shown.
The markets in which Metropolitan Retail operate continue to be tough as
increasing food and transport inflation erode available income.
Recurring premium new business recovered well with the year-to-date total
ending 11% higher than March 2013, boosted by the third-quarters’ increase of
14%.
Single premiums continued to perform very well, delivering a 29% increase for
the nine-months ended 31 March 2014.
The process and systems renewal projects are progressing well.
Expenses were well managed during the period under review.
Momentum Employee Benefits
9 months
9 months to 9 months to Change
to
31-March-
31-March-12 31-March-13 vs 2013
14
Rm Rm Rm %
New business
Recurring premiums 591 535 782 46
Single premiums 2 898 4 520 2 932 (35)
Annual premium equivalent (APE) 881 987 1 075 9
Present value of premiums (PVP) 7 123 8 402 9 590 14
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Good risk and investment recurring premium new business was secured during
the period, particularly in the small medium and micro enterprise (SMME)
space.
Following the record levels of single premiums received in the prior year,
strong retirement fund single premiums were again written during the current
period.
Client retention remains at good levels.
The Momentum Health open scheme, which is part of the Momentum Employee
Benefits division, continues to provide an attractive offering to clients.
The incorporation of Guardrisk into the MMI group is progressing well.
Guardrisk will be included in the MMI results from March 2014, however, as
this business is classified as “non-covered,” no new business information has
been included in this report.
Metropolitan International §
9 months to 9 months to 9 months to Change
31-March-12 31-March-13 31-March-14 vs 2013
Rm Rm Rm %
New business
Recurring premiums 161 235 236 -
Single premiums 156 122 154 26
Annual premium equivalent
177 247 252 2
(APE)
Present value of premiums
884 1 285 1 334 4
(PVP)
Membership (health) (‘000) 390 387 402 4
§ New business includes MMI’s share of life insurance new business written by all
Metropolitan International subsidiaries.
The acquisition of Cannon Assurance, an insurance company in Kenya, is
awaiting regulatory approvals.
The medical claims ratio remained at acceptable levels.
The total lives under administration in the health business increased to
402 000 at the end of March 2014 driven by member growth in the Namibian
operation, however growth in other countries remains slow due to price
competitiveness.
A number of growth and business process efficiency improvements are being
implemented.
Momentum Investments
The strong equity market performance has increased the total assets under
management.
Earnings are positively impacted by the levels and mix of assets under
management, together with improved expense ratios.
The longer term outlook for the investment management business in general
remains positive as the alignment with the group is strengthened.
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Metropolitan Health
The total number of principal members under administration has remained
constant during the quarter under review.
Good progress has been made in the roll-out of the Multiply Wellness and
Rewards programme.
Continued product enhancements and operational efficiencies are being
pursued.
Other corporate activity
During the quarter under review MMI Group Ltd issued R1.5 billion worth of
subordinated debt – as disclosed on SENS.
New client-centric operating model
MMI has decided to pursue a new client-centric operating model.
The vision, purpose and strategic focus areas have been finalised.
A new group executive committee (EXCO) has been identified and work has
commenced to identify what changes are needed in order to implement the new
operating model with effect from 1 July 2014.
The reconstituted MMI exco members are:
o Nicolaas Kruger (Group Chief Executive Officer),
o Segment businesses: Mark van der Watt (Momentum Retail), Khanyi Nzukuma
(Metropolitan Retail), Blum Khan (International)
o Products and solutions: Etienne de Waal (group-wide)
o Group-wide functions: Preston Speckmann (Group Finance), Danie Botes
(Chief Operating Officer), Jan Lubbe (Chief Risk Officer), Mary
Vilakazi (Balance Sheet Management), Ngao Motsei (Strategic HR and
Transformation), Vuyo Lee (Brand and Corporate Affairs)
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 contained in this trading update are provisional, have not been
reviewed or reported on by the Company’s auditors 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.
The new business figures are all net of outside shareholder interests.
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End
Date
26 May 2014
Queries
NICOLAAS KRUGER PRESTON SPECKMANN TYRREL MURRAY
GROUP CHIEF EXECUTIVE GROUP FINANCE DIRECTOR GROUP FINANCE: INVESTOR RELATIONS
MMI Holdings MMI Holdings MMI Holdings
TEL 012 673 7438 TEL 012 673 7446 TEL 021 940 5083 OR 082 889 2167
Sponsor
Merrill Lynch South Africa (Pty) Ltd
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Date: 26/05/2014 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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