| Wed 7 Nov 2007, 11:59 | | MET - Metropolitan Holdings Limited - Operational |
|
MET
MET
MET - Metropolitan Holdings Limited - Operational performance for the nine
months ended 30 September 2007
METROPOLITAN HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN: ZAE000050456
JSE Share Code: MET
NSX Share Code: MTD
("Metropolitan")
Operational performance for the nine months ended 30 September 2007
Group overview
- Management is confident that the actions taken over the past year will
continue to generate positive results for the group as a whole.
- Group present value of premiums (PVP) increased by 12% year on year.
- The 34% growth in retail PVP over the nine months was driven by a change
in the business mix.
- Growth of between 5% and 10% in retail recurring premium new business for
the full year remains achievable.
- The corporate business has continued to take advantage of profitable
opportunities in the market through innovative solutions, achieving a
143% growth in recurring new business premiums.
- The 45% growth in Metropolitan International recurring individual life
new business was driven mainly by the Namibia and Botswana businesses.
- Metropolitan Health Group (MHG) continued its successful take-on of
new -GEMS members while two major existing contracts are in the process
of being renewed.
- The group`s capital management activities continue to receive focused
attention, with further refinements being made to the capital model.
- The net cash received from clients, including all Metropolitan
businesses, was R8.7 billion.
Retail business
9 months to 9 months to Change 9 months to Change
30-Sept-05 30-Sept-06 30-Sept-07
Rm Rm % Rm %
New business
Recurring premiums 527 587 11 578 (2)
Single premiums 954 1 402 47 1 853 32
APE 622 727 17 763 5
PVP 3 296 4 424 34
Cashflow
Recurring premiums 2 599 2 847 10 3 126 10
Single premiums 954 1 402 47 1 853 32
Claims paid 2 110 2 955 40 2 988 1
Net cashflow 1 443 1 294 (10) 1 991 54
New business
- New business improved across most of the distribution channels over the
corresponding period for 2006.
- In particular, telemarketing, direct writers and Odyssey broker business
delivered strong contributions.
- The increased direct marketing lapse rate assumptions, implemented at the
end of 2006, have understated the year-to-date growth in recurring
premium new business. This effect will not be reflected in the full year
results as the 2006 full year results already incorporated these
assumptions.
- Gross new recurring premium business is 10% above that for 2006.
Cashflow
- Both total recurring and single premium income increased well in excess
of inflation and contributed to the growth of the in-force book.
- Claims experience remained in line with expectations, with the rate of
growth slowing considerably during the period under review.
- Retention rates for our core business remained within acceptable limits;
continued attention is being given to that business secured via the
direct marketing channel.
- The net result of these factors is a 54% increase in net cash received.
Challenges and opportunities
- Changes to the commission structure and transitional arrangements.
- Re-alignment of the value chain and related restructuring.
- Inclusion of HTG Life (Union Life) within the Retail business cluster.
Corporate business
9 months to 9 months to Change 9 months to Change
30-Sept-05 30-Sept-06 30-Sept-07
Rm Rm % Rm %
New business
Recurring 35 68 94 165 143
premiums
Single 309 2 583 - 1 655 (36)
premiums
APE 66 326 394 331 2
PVP 3 005 2 731 (9)
Cashflow
Recurring 1 087 1 171 8 1 357 16
premiums
Single 309 2 583 736 1 655 (36)
premiums
Off-balance 321 -
sheet
Claims paid 2 829 2 088 (26) 2 211 6
Net cashflow (1 433) 1 987 238 801 (60)
New business
- The employee benefits market remains a challenging one in which to secure
new business.
- The 143% growth in recurring new business was generated mainly from
group risk and disability solutions.
- Excluding the recent two large single premium transactions (R1.1 billion
in 2007 and R2.2 billion in 2006), the residual single premium business
grew by 45%, the majority of which was smoothed bonus type products.
- The pipeline for future new business remains healthy but we are cautious
about the very aggressive pricing practices in the market for risk and
single premium annuity contracts at the moment.
Cashflow
- Recurring premium income increased substantially over 2006, confirming
the stability introduced by the growth in the EB book over the last few
years.
- The ability of the corporate business to successfully administer large
schemes on the MRA platform is gaining increased recognition, which bodes
well for the future positioning of this business.
- The increase reflected in claims paid is as a result of the large volumes
of annuity and risk business sold over the last few years. Claims
experience on risk schemes remained within pricing parameters. For the
year to date, annuity claims are more than double those for the similar
period last year. Overall both these claim increases have been offset by
favourable investment termination experience.
- Net cash flow for the year to date remains positive but is down on 2006
owing to the very large inflow in the third quarter of that year. It is
expected to remain positive for the full financial year.
International business
9 months to 9 months Change 9 months Change
to to
30-Sept-05 30-Sept- 30-Sept-07
06
Rm Rm % Rm %
New business
Recurring 83 70 (16) 85 21
premiums
Individual life 60 55 (8) 80 45
Employee 23 15 (35) 5 (67)
benefits
Single premiums 133 147 11 77 (48)
(incl EB)
APE 96 85 (11) 93 9
PVP 379 356 (6)
Cashflow
Recurring 575 585 2 614 5
premiums
Single premiums 160 185 16 93 (50)
Claims paid 394 452 15 510 13
Net cashflow 341 318 (7) 197 (38)
New business
- Conditions in the Lesotho and Botswana markets remained challenging,
whilst the Namibian business showed some improvement.
- The new operation in Ghana is progressing according to expectations,
although progress in Kenya is slower than anticipated.
- UBA Metropolitan Life Insurance in Nigeria is currently assessing the
implications of a recent court ruling against the national regulator
that has restricted the rollout of the business.
Cashflow
Net cashflow position remained positive.
Asset management business
9 months to 9 months Change 9 months Change
to to
30-Sept-05 30-Sept- 30-Sept-07
06
Rm Rm % Rm %
Cashflow
Third party 334 (3 472) - 240 -
mandates - net
Collective 3 092 3 003 (3) 5 066 69
investments - net
- Flows into collective investments have continued to exceed expectations.
- The outlook for asset management remains positive.
New appointments
Robert Walton was appointed managing director of Metropolitan Asset Managers
at the end of June 2007.
Romeo Makhubela has been appointed to the position of chief investment officer
(CIO) at MetAM with effect from January 2008. He spent close on nine years
with Stanlib where he was a senior portfolio manager involved in the recently
established multi-asset franchise as well as the core equity franchise.
Current CIO Liston Meintjes, whose contract with MetAM expires at the end of
June
next year, will assist with the CIO handover process.
At the same time, Craig Whittle will be joining the MetAM team as senior
portfolio manager for small/mid cap portfolios. He will also assume
responsibility for the management of the Metropolitan Industrial Fund.
Craig has previously been with PricewaterhouseCoopers in London, Coronation
Fund Managers and more recently OMIGSA (OMAM) where he was a senior research
analyst and co-managed the Old Mutual High Yield Opportunity Fund.
Wouter de Goede joined MetAM at the beginning of October as a liability-driven
and hybrid investments analyst assisting with the Metropolitan Life annuity
books. He previously spent time at ABSA Treasury, trading interest rate and
bond options and later assuming a structuring role in both the interest rate
and foreign exchange markets.
Health business
- At 30 September 2007 GEMS had 167 200 registered, fee-paying members,
with membership continuing to increase month on month.
- Principal members under administration and franchise stood at 634 174.
- On the contract renewal front, Transmed is about to sign a 5-year
contract while negotiations with Polmed are being finalised for the
renewal of its contract.
- Performance levels across the board are in line with contracted service
level agreements with the various schemes under administration.
- Outlook remains positive.
Strategic initiatives
Metropolitan Card Operations
Metropolitan Card Operations (MCO), launched in September 2006, completed its
first full year in business at the end of the third quarter of 2007.
During its inaugural twelve months, new business growth of approximately R200m
in loans advanced was achieved.
The original direct marketing business model was revised throughout the year
in accordance with several business alliances or joint venture partnerships
that evolved. These were both internal, involving Retail and the Metropolitan
Health Group (MHG), and external in the form of the newly created Union Money
business and the associated workplace opportunities.
Leveraging such initiatives while continuing to optimise the direct marketing
channels will provide excellent client acquisition vehicles for growth through
2008 and beyond.
Metropolitan in two joint ventures with NUMSA
Metropolitan has recently entered into two joint ventures with the National
Union of Metalworkers of South Africa (Numsa - 260 000 members) via its
investment company.
- The company formerly known as HTG Life, which was previously 100% owned
through a Numsa investment, is now owned jointly by Metropolitan and
Numsa and has been renamed Union Life. Union Life will target clients
with whom Numsa has preferred access arrangements/existing relationships,
as well as marketing and distributing its products via the branch offices
of Doves countrywide. (Doves Funerals is also a Numsa investment.) Union
Life will continue to operate as a separate business, with Metropolitan
Life providing additional skills and other resources as appropriate. No
new business figures have been included in this report.
- Union Money is the second of the joint ventures between Numsa and
Metropolitan (50/50). Union Money has been established with a single
purpose in mind: to identify the specific needs of union members and
develop financial products and services tailored to meet those particular
needs. It is anticipated that the majority of these products will be
provided by companies within the Metropolitan group and Union Life. The
products will include life insurance, banking type products and medical
scheme administration.
Group perspective
Capital management
- The group continues actively to monitor the capital position throughout
its operations with a view to increasing the return on shareholder
investments while keeping the capital adequacy risk at an acceptable
level
- During the quarter under review the group re-commenced share buy back
activities, with an additional 16.5 million shares (R257 million) being
repurchased (refer to the separate SENS announcement for further
details).
FitchRatings confirms Metropolitan`s strong capital position
Metropolitan Life Limited, the primary operating entity and leading life
insurance company in the Metropolitan Holdings group, maintained its financial
strength (IFS) rating of AA- (double minus) (zaf) in 2007.
Metropolitan Holdings Limited, holding company of the group, was awarded a
national long-term rating of A (zaf).
Administration expenses
Administration expenses continue to be a key area of focus. Overall life
insurance administration expenses were well contained and remain within
budget.
Curatorship of Ovation
Shareholders are referred to the directors report (p84) of the 2006 annual
report. A second report from the curators has recently been released, which
contains new information on how the fraud was perpetrated. However, the full
facts of this fraud are not yet known and it will still take a while for these
to be established. We are monitoring the progress of the curators and will
consider an appropriate course of action once we have obtained more
information. In addition, we also want to consider and assess any recoveries
made by the curators, details of which have been very sketchy to date.
Comments / qualifications
- All figures are provisional and unaudited.
- 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. (Figures calculated on the latter basis are
normally referred to as production figures.) It should be noted that
there can be a delay of up to three months between these two dates.
- The new business figures are all net of outside shareholder interests.
- The percentage ownership by the group in the international subsidiaries
is as follows:
- Metropolitan Botswana - 76%
- Metropolitan Namibia - 81%
- Metropolitan Kenya - 67%
- Metropolitan Ghana - 60%
ISSUED BY NICO OOSTHUIZEN
MANAGER: INVESTOR RELATIONS
METROPOLITAN HOLDINGS LIMITED
TEL 021 940 6111 OR 083 285 7092
DATE 7 NOVEMBER 2007
QUERIES PETER DOYLE
GROUP CHIEF EXECUTIVE
METROPOLITAN HOLDINGS LIMITED
TEL 021 940 5681 OR 082 880 2690
PRESTON SPECKMANN
GROUP FINANCE DIRECTOR
METROPOLITAN HOLDINGS LIMITED
TEL 021 940 6634 OR 083 285 6454
TYRREL MURRAY
GENERAL MANAGER: GROUP FINANCE
METROPOLITAN HOLDINGS LIMITED
TEL 021 940 5083 OR 082 889 2167
Sponsor
Merrill Lynch South Africa (Pty) Limited
End
Date: 07/11/2007 11:59:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
