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MMI HOLDINGS LIMITED - Newly appointed MMI Holdings CEO to focus on client-centric strategy execution

Release Date: 07/03/2018 07:07
Code(s): MMI     PDF:  
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Newly appointed MMI Holdings CEO to focus on client-centric strategy execution

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")

Media release
MMI Interim Results to 31 December 2017
7 March 2018

Newly appointed MMI Holdings CEO to focus on client-centric strategy
execution

MMI Holdings Limited (MMI) today announced its results for the six months to
31 December 2017. The newly appointed MMI CEO, Hillie Meyer, says MMI remains
committed to its client-centric strategy but a greater focus will be placed
on the effective execution of this strategy.

“The MMI client-centric strategy, launched in 2014, is now well ingrained in
the various business areas, and we are starting to see the benefit of the
execution focus coming through in a number of areas such as our product
offering, technology environment, and footprint growth in Momentum Retail and
Momentum Corporate. We will increase our efforts to grow our core South
African businesses,” says Meyer.

R2 billion set aside for share buy-back

The group has decided to update its dividend policy to be consistent with its
planned capital deployment and projected capital coverage profile. The group
will also take a more proactive approach to capital management than in the
past.

Financial Director for MMI, Risto Ketola, explains, “After much deliberation
and careful consideration of the impact on our shareholders, we have decided
to distribute capital to shareholders by means of a share buy-back in lieu of
paying dividends. Given the current discount to embedded value, we are of the
opinion that a share buy-back is the most efficient use of capital and will
enhance value to shareholders. We plan to distribute R2 billion to
shareholders through share buy-backs during the next 12 months.” In future,
the group will target a dividend cover range centred around 2.5x core
headline earnings compared to the 1.5x to 1.7x core headline earnings
referenced previously.

With a capital buffer of R4.1 billion at 31 December 2017, MMI’s capital
position is strong, allowing for statutory capital requirements, strategic
growth initiatives and the share buy-back programme. At 31 December 2017 MMI
held capital equal to 2.8x the minimum required statutory capital.

Earnings growth impacted by large investments in growth initiatives

The group reported diluted core headline earnings of R1.6 billion, a 3%
reduction in the corresponding six months to December 2016. This was largely
due to weaker persistency in Metropolitan Retail, weaker profitability in
both new generation and legacy life products at Momentum Retail, and an
increase in MMI’s share of losses, in line with business plans, on new
initiatives such as the India joint venture.

MMI’s operating businesses contributed R1.3 billion to core headline
earnings, a 4% improvement compared to the same period in 2016. If MMI
excludes its early-stage India, aYo and Money Management strategic
initiatives, operating profit growth from core operating businesses was 11%.

MMI recorded an embedded value of R43.4 billion (R27.05 per share) and
embedded value earnings of R2.3 billion, reflecting an 11.2% return on
embedded value, nearly 7% higher compared to the prior period number of 4.5%,
largely driven by supportive investment markets.

Momentum Retail recorded a R567 million contribution to earnings, 10% lower
than the previous period. Metropolitan Retail contributed R317 million, a 15%
reduction on the previous period, but Momentum Corporate increased its
earnings contribution by 42% to R455 million. MMI’s international operations
in the rest of Africa and the joint venture in India reduced their losses by
56% to R27 million.

“Mortality underwriting experience in the retail segments, as well as
Momentum Corporate, contributed positively to the results. Group disability
experience, although still negative, showed a material improvement following
the rate reviews across the disability book,” says Meyer.

Value of new business was slightly down by 1% to R288 million compared to the
half-year to December 2016. Momentum Retail’s value of new business declined
by 16% to R89 million, while Metropolitan Retail increased its embedded value
of new business by 38% to R130 million. Momentum Corporate recorded a value
of new business result of R44 million, 4% lower than the previous period,
while MMI’s international businesses experienced a 46% decline in value of
new business to R25 million.

Overall new business sales (measured on a present value of premiums basis)
declined by 5% to R20.3 billion compared to the same period in 2016. Both of
the retail operations grew new business sales, but sales were lower in
Momentum Corporate and in the international businesses. Momentum Retail’s
sales was R11.2 billion, Metropolitan Retail contributed R2.9 billion,
Momentum Corporate new business sales was R4.9 billion and the international
businesses contributed R1.4 billion.

Strategic initiatives progressing well

Momentum Health, MMI’s open medical scheme, increased its membership by 11%
to 161 739 principal members. “The recently concluded Metropolitan Health
strategic partnership with the Thebe Health Group and the Validate-
Workerslife Consortium is also an exciting milestone for the group and
positions our health business for growth in the closed scheme and public
sector space,” says Meyer.

MMI continues to invest in the Multiply programme, a key component of its
client engagement strategy that aims to improve retention, cross-selling and
underwriting experience.

Momentum Short-term Insurance performed well during the six months mainly due
to good underwriting results as well as prudent expense management. The
claims ratio improved from 78% to 71% year-on-year.

Guardrisk, MMI’s cell captive insurer, continued to post positive results
with earnings growth at 42% for the first half of the financial year compared
to the prior year. This was achieved on the back of a recovery in
underwriting results and good growth in management fees representing the core
of the business.

MMI is progressing well to rationalise its Africa portfolio and the health
insurance joint venture in India continues to be MMI’s largest ongoing
strategic initiative outside South Africa. The health insurance joint venture
with Aditya Birla in India demonstrated excellent progress and at 31 December
2017, the business had more than 800 000 insured lives.

In conclusion

“I am encouraged by MMI’s commitment to enhancing the lifetime financial
wellness of people, their communities and their businesses. We will achieve
this by adopting a performance-focused culture, and by empowering business
leaders to be accountable for their performance,” concludes Meyer.

End

Centurion
7 March 2018

SPONSOR - SOUTH AFRICA: Merrill Lynch South Africa (Pty) Ltd

SPONSOR - NAMIBIA: Simonis Storm Securities (Pty) Ltd




                                                                               
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