Wrap Text
Trading Update for the Three Months Ended 30 September 2015
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 2015
Operational overview
- The MMI group continued to attract new single premium inflows, ending
3% higher than the very strong prior year comparative quarter with
Momentum Retail, Metropolitan Retail and International all
contributing strongly.
- New business recurring premiums were lower than the same quarter of
2014, mainly held back by lower Corporate and Public Sector sales and
the distribution restructuring that is taking place in Metropolitan
Retail.
- Satisfactory client retention was experienced across the group.
- The growth in the market value of investment assets under management
has been curtailed by the performance of markets as a whole,
resulting in pressure on top-line asset-based fee income in the
current year.
- Good expense management across the group in MMI’s established
operations, on the other hand, is contributing positively.
- MMI continues to invest in strategic growth initiatives in line with
the group’s strategy, including the middle market, International,
Investments and Momentum Short-term Insurance businesses, to achieve
long-term goals.
- MMI is successfully implementing its client-centric strategy.
- Good progress has been made with the Product and Solutions Centres of
Excellence under the client-centric operating model, enabling related
optimisation opportunities.
Operating environment
- Growth in the South African economy has continued to slow down and
this is putting substantial pressure on the disposable income of our
clients.
- Equity market volatility continued with the JSE all-share index
falling about 3% during the quarter.
- According to the Momentum / UNISA South African Wealth Index, South
Africa households’ net wealth decreased in real terms in the second
quarter of 2015.
- There are, however, still opportunities for MMI in the various market
segments as identified by the client-centric focussed distribution
teams.
Momentum Retail
3 months to 3 months to Change
30-Sept-14 30-Sept-15 vs 2014
Rm Rm %
New business
Recurring premiums 307 309 1%
Single premiums 4 070 4 812 18%
Annual premium equivalent (APE) 714 790 11%
Present value of premiums (PVP) 5 995 6 649 11%
Off balance sheet (APE) 286 307 7%
- Overall Momentum Retail delivered pleasing new business growth.
- New recurring risk premiums were positive compared to the prior
quarter while savings premiums reduced slightly.
- Strong single premium new business growth continued, ending 18% above
the prior quarter’s total.
- New business volumes (PVP) for the quarter ended 11% higher than those
recorded in the prior year.
- The mix of new business continues to favour single premium
investments.
- Steady progress is being made with developing new client-value
propositions.
- Mortality experience profits during the quarter were below our longer-
term expectations.
- Client service and retention remained at satisfactory levels.
Metropolitan Retail
3 months to 3 months to Change
30-Sept-14 30-Sept-15 vs 2014
Rm Rm %
New business
Recurring premiums 290 258 (11)%
Single premiums 283 346 22 %
Annual premium equivalent (APE) 318 292 (8)%
Present value of premiums (PVP) 1 309 1 250 (5)%
- Single premium income once again performed very well, increasing by
22% over the prior quarter.
- Recurring premium new business continues to be impacted by the
distribution model changes implemented earlier this year, however
there is noted progress with the performance in the current quarter
exceeding that of the last two quarters of the previous financial
year.
- Persistency is monitored closely, especially in light of the tough
market conditions. It is therefore pleasing that it has improved
slightly during the quarter and remains better than the targeted
range.
- Overall the distribution model changes are having a positive impact on
the business and the productivity per agent has started increasing.
Further new business improvements are expected over the next three
quarters.
Corporate and Public Sector
3 months to 3 months to Change
30-Sept-14 30-Sept-15 vs 2014
Rm Rm %
New business
Recurring premiums 363 111 (69)%
Single premiums 2 607 1 979 (24)%
Annual premium equivalent (APE) 624 309 (50)%
Present value of premiums (PVP) 5 909 2 882 (51)%
- After a very strong performance during the year to June 2015 both risk
and investment recurring premium new business slowed down during this
quarter.
- Single premium levels remained solid, with retirement funds and
investments doing well when compared against an excellent quarter in
2015. The current performance is still one of the top three quarters
recorded over the past four years. This business is traditionally
lumpy in nature.
- Securing new business in the group insurance and investment markets
remains highly competitive.
- A new business pipeline of potential opportunities has been identified
and is being actively pursued.
International
3 months to 3 months to Change
30-Sept-14 30-Sept-15 vs 2014
Rm Rm %
New business
Recurring premiums 85 121 42%
Single premiums 78 118 51%
Annual premium equivalent (APE) 93 133 43%
Present value of premiums (PVP) 449 707 57%
Health (lives) (‘000) 418 449 7%
- International continued to deliver strong new business growth.
- Good new business volumes were recorded in almost all the life
insurance operations during the period under review.
- Strong growth was experienced in Namibia through the new combined
product range.
- The medical claims ratio has deteriorated slightly when compared with
the prior year, putting pressure on profitability in the health
businesses.
- The good growth in members under health-care administration continued.
- MMI is increasing its stake in the Indian joint Venture to 49%. Good
progress has been made in submitting the required regulatory
applications.
Products and Solutions – Centres of Excellence
Investments and Savings
- Aluwani Capital Partners, the new BEE asset manager announced to the
market in September 2015, has obtained an asset management licence
and will commence trading in December 2015.
- Implementation of the partnership with RMI, as disclosed with the
year-end results, has continued to make good progress.
- The longer-term outlook for the Investment and Savings Centre of
Excellence remains positive as the alignment with the outcomes-based
investment strategy is strengthened.
Health
- The various health businesses within MMI have aligned as a Centre of
Excellence under a single strategy.
- Good progress has been made with optimising the restricted scheme
administration business in anticipation of the departure of two
administration contracts, in January 2016, as disclosed as part of the
2015 year-end results announcement.
- The business continues to submit tenders when opportunities arise and
MMI is pleased that the health business has recently managed to secure
some new contracts.
- The growth in the number of members in the Momentum Health open scheme
continued during the quarter.
Short-term insurance
- New business growth has slowed as Momentum Short-term Insurance
continues to implement process and pricing improvements.
- Premiums for the quarter grew year-on-year by 34%, with an improvement
in the quality of business written through changing the channel mix
and repricing new business.
- The claims ratio for the quarter improved to 87%, but remains above
the longer-term target.
Kagiso Tiso Holdings (KTH) / MMI preference shares
- KTH requested that a further 1.0 million of the A3 preference shares
be converted into ordinary shares. These converted shares were listed
on 5 October 2015.
MMI subordinated debt
- MMI issued R1 000 million of subordinated debt in September 2006 with
a first-call date of September 2015.
- In line with the original intention and timeline MMI redeemed this
debt during September 2015.
AGM
- The MMI AGM was held on 20 November 2015 and all resolutions tabled
were passed with the required majority of votes.
Comments / qualifications
- All figures are provisional and unaudited, and are for the period 1
July to 30 September for all years presented as reported 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.
- The current disclosure reflects the new client-centric operating
model. Where appropriate certain prior year comparatives have been
adjusted to reflect the new structure.
End
Date
25 November 2015
Queries
NICOLAAS KRUGER MARY VILAKAZI 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 7443 TEL 021 940 5083 OR 082 889 2167
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
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