Wrap Text
Trading update for the three months ended 30 September 2014
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" or "the group")
Trading update for the three months ended 30 September 2014
Operational highlights
- The MMI group had a good quarter from a new business perspective, with
the total present value of premiums (PVP) increasing 30% on the prior
year, primarily on the back of continued good employee benefits
production.
- Strong single premium inflows continued, ending 30% higher than the
strong prior year comparative quarter.
- New business recurring premiums increased 22% compared to the same
quarter of 2013, mainly due to good growth in employee benefits.
- Overall, satisfactory client retention was experienced across the
group.
- This growth in a very difficult operating environment reflects the
strength of the diverse distribution channels and the alignment of the
comprehensive product offerings in the group with their respective
target markets.
- Good progress has been made in implementing the client-centric
operating model and the group will continue to invest in the
initiatives required to achieve its long-term strategic goals.
Group overview and operating environment
- Growth in the South African economy slowed significantly and this will
put pressure on the disposable income of our clients.
- During this quarter the investment market volatility continued with
the JSE all-share index falling about 4%. The absolute levels,
however, remained higher than the previous year.
- The appropriateness of MMI’s new client-centricity strategy has been
confirmed by developments in the operating environment, including
challenging economic conditions, regulatory changes and changing
client behaviour.
Growth initiatives
- Progress has been made with the strategic initiatives to diversify the
group’s earnings streams.
- The acquisitions of Cannon Assurance in Kenya and Carecross have
become unconditional.
- During October MMI announced that it had entered into a Memorandum of
Understanding with Aditya Birla Financial Services Group (‘ABFSG’),
the financial services arm of India's leading conglomerate, Aditya
Birla Group (‘ABG’). MMI and ABFSG intend setting up a joint venture,
which will enter the health insurance market in India.
- MMI is investing in a number of growth initiatives across the group,
including the middle market and Momentum Short-term Insurance
businesses.
1
Momentum Retail *
3 months 3 months
3 months to Change
to to
30-Sept-12 30-Sept-13 30-Sept-14 vs 2013
Rm Rm Rm %
New business
Recurring premiums 247 268 254 (5)%
Single premiums 2 667 3 862 4 011 4%
Annual premium equivalent
514 654 655 -
(APE)
Present value of premiums
4 054 5 338 5 415 1%
(PVP)
* Covered business includes on-balance sheet business only.
- Risk sales matched the comparative period’s performance; however less
recurring savings premiums were recorded.
- Strong single premium new business growth continued, ending 4% above
the exceptional prior quarter’s total and well ahead of the 2012
number.
- New business volumes (PVP) for the quarter similarly ended marginally
higher than those recorded in the prior year and well up on the 2012
total.
- The mix of new business continues to favour single premium
investments.
- There has been good growth in the new business written by Momentum
Short-term Insurance; however the recent claims ratio has increased
slightly to above the long-term target.
- Steady progress is being made with the middle market initiative and
new business has been written with effect from August 2014.
- Client service remained at satisfactory levels.
Metropolitan Retail @
3 months
3 months to 3 months to Change
to
30-Sept-12 30-Sept-13 30-Sept-14 vs 2013
Rm Rm Rm %
New business
Recurring premiums 235 279 293 5%
Single premiums # 202 253 283 12%
Annual premium equivalent
255 305 321 5%
(APE)
Present value of premiums
1 220 1 339 1 316 (2)%
(PVP)
# Single premium income and maturity claims now exclude retirement annuity lump
sum contributions received that mature immediately for purposes of
reinvestment. New business single premiums, APE and PVP comparatives have been
restated accordingly. The value of new business is not affected.
@ All figures exclude FNB Life.
- Steady recurring premium new business was recorded, ending slightly
above the September 2013 total, despite the economic pressure clients
are experiencing and changes being made within the Metropolitan
distribution channels.
2
- Single premium income continued to perform very well.
- In light of challenging economic conditions, persistency continues to
be monitored closely.
Corporate and Public Sector
Employee benefits
3 months
3 months to 3 months to Change
to
30-Sept-12 30-Sept-13 30-Sept-14 vs 2013
Rm Rm Rm %
New business
Recurring premiums 112 235 413 76%
Single premiums 1 919 1 252 2 666 113%
Annual premium equivalent
304 360 680 89%
(APE)
Present value of premiums
2 771 3 426 6 481 89%
(PVP)
- Good recurring premium new business was recorded in the first quarter,
particularly in the FundsAtWork umbrella fund space, resulting in
recurring premium new business of almost twice the level recorded in
the prior comparative for the business unit as a whole.
- Single premium levels remained high, with single premium annuities in
particular doing well in this quarter.
- Securing new business in the group insurance and investment markets
remains highly competitive.
- Client retention remains at good levels.
Guardrisk
- Good progress was made to further align Guardrisk within MMI to
enhance the client-value proposition and extract business synergies.
Investments
- Focus on investment excellence is starting to pay off, with equity
and balanced fund performance showing satisfactory improvement.
- The longer-term outlook for the investment management business
remains positive as the alignment within the group is strengthened.
Health
- Total members under administration remain steady at 1.2 million
principal members.
- The administration contract with the Government Employees Medical
Scheme (GEMS) was renewed.
- Good progress has been made with the further roll-out of the Multiply
rewards programme.
International §
3 months 3 months 3 months
Change
to to to
30-Sept- 30-Sept- 30-Sept-
vs 2013
12 13 14
Rm Rm Rm %
New business
Recurring premiums 71 73 85 16%
3
Single premiums 35 49 78 59%
Annual premium equivalent
74 78 93 19%
(APE)
Present value of premiums
399 420 449 7%
(PVP)
Health (lives) (‘000)# 381 390 418 7%
§ New business includes MMI’s share of life insurance new business written by
all Metropolitan International subsidiaries.
# Health includes Namibia.
- Good recurring and single premium new business volumes were recorded
in Namibia, Botswana and Lesotho during the period under review.
- Strong growth was experienced in Namibia through the FundsAtWork
umbrella fund offering, while up-selling contributed to the increase
in Botswana.
- The medical claims ratio has remained at satisfactory levels.
Kagiso Tiso Holdings (KTH) / MMI preference shares
- During 2004 and 2005 MMI issued 75 million A1 preferences shares, 13
million A2 preference shares and 34 million A3 preference shares to
KTH at the listed ordinary share price at the date of issue.
- These shares were fully paid for by KTH, have full voting rights and
are redeemable by MMI if they are not converted into ordinary shares
within an agreed period of time.
- In June 2012 KTH requested the conversion of all of the A1 and A2
preference shares.
- KTH have requested that 1.1 million of the A3 preference shares be
converted into ordinary shares. These converted shares were listed on
13 November 2014.
- The KTH / MMI relationship has recently celebrated its ten year
anniversary. It is gratifying to note that 73% of the original
preference shares have now been converted into ordinary shares.
MMI subordinated debt
- MMI issued R500 million of subordinated debt in December 2006.
- This debt has a first-call date of December 2014.
- In line with the original intention and timeline MMI is redeeming this
debt and at the same time MMI is issuing another R500 million of
subordinated debt.
AGM
- The MMI AGM was held on 18 November 2014 and all resolutions tabled
were passed with the required majority of votes.
Opportunities and challenges
- MMI has achieved scale in its main established operations, creating an
excellent base for future growth.
- Cross-selling and other new business opportunities are being pursued
across the group.
4
- 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 30 September 2014 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
Date
26 November 2014
Queries
NICOLAAS KRUGER PRESTON SPECKMANN TYRREL MURRAY
GROUP CHIEF GROUP FINANCE GROUP FINANCE & INVESTOR
EXECUTIVE DIRECTOR RELATIONS
MMI Holdings MMI Holdings MMI Holdings
TEL 021 940 5083 OR 082 889
TEL 012 673 7438 TEL 012 673 7446
2167
Sponsor
Merrill Lynch South Africa (Pty) Ltd
5
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