| Fri 30 May 2008, 12:00 | | MET - Metropolitan - Operational Performance For The Three Months Ended |
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MET
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MET - Metropolitan - Operational Performance For The Three Months Ended
31 March 2008
METROPOLITAN HOLDINGS LTD
(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 three months ended 31 March 2008
Message from Wilhelm van Zyl, new group chief executive
Although I only officially succeeded Peter Doyle on 1 April (i.e. at the
conclusion of the first quarter of 2008), I have been assuming more of the
group responsibilities since the beginning of the year to facilitate a smooth
transition and disruption-free change-over.
As a group, we are committed to strengthening and extending our brand to
embrace a broader range of financial products and services, to expanding our
reach further into Africa and to earning and retaining the trust and loyalty
of our customers and clients through quality service delivery and the
provision of an enhanced value proposition. There is no doubt in my mind that
we at Metropolitan can continue to build on an already sustainable business
and I am greatly looking forward to pitting our combined expertise and
experience, energy and enthusiasm against the challenges that lie ahead.
Certain key leadership positions are still being filled, especially in view of
the wealth of opportunities confronting the group at present.
Group overview
- Retail new business on a present value of premiums basis (PVP) grew by
27%, boosted mainly by successes in the single premium markets.
- This growth is proof of the increased reach of the Metropolitan brand in
line with group strategy.
- The increased awareness in our target markets of the importance of
savings and insurance is pleasing.
- Measured over a longer term, the all-round successes in the corporate
business continued.
- The international business officially launched its Nigerian operation and
continued to make progress with their other new ventures, increasing
their annual premium equivalent (APE) by 68%.
- Metropolitan Health further increased the number of members under
administration while maintaining exceptional levels of service,
highlighting the sound underlying business model.
- The new management team within asset management settled in and started to
secure new inflows.
- Overall the net cashflow remained positive at R2.8 billion.
- Capital management activities received ongoing focus.
- The global investment, financial and economic markets remain challenging.
Retail business
3 months to 3 months to 3 months to 3 months to Increase
31-Mar-05 31-Mar-06 31-Mar-07 31-Mar-08 2008 on 2007
Rm Rm Rm Rm %
New business
Recurring 168 153 175 188 7
premiums
Single 266 375 485 869 79
premiums
APE 195 191 224 275 23
PVP 1 308 1 662 27
Cashflow
Recurring 829 908 1 011 1 067 6
premiums
Single 276 374 492 869 77
premiums
Claims paid 650 801 875 1 102 26
Net 455 481 628 834 33
- The growth of 27% in total new business (PVP) was as a result of:
- Increased single premiums from all distribution channels.
- Improved new business flows from direct writers.
- Continued focus on the quality of new business being issued.
- The business remains well-positioned because:
- Claims experience is in line with expectations, with the increase
mainly asset-level related.
- Due to the economic pressures experienced by all consumers, we
expect retention rates to come under pressure.
- Lapses at inception for ordinary business remain below the group
target of 15%.
- Direct marketing`s persistency is receiving ongoing attention.
- Both recurring and single premium income continue their healthy
increase, confirming the growth of the in-force book.
- The re-alignment of the value chain within Retail, with a view to
increasing the value propositions, remains on track.
Looking ahead
- The prospects for Retail remain directly correlated to that of its target
markets.
- Food and transport inflation as well as credit extension are still the
biggest challenges.
- Any further increases, unless compensated by an equivalent increase in
salary inflation, will curtail new business prospects and could threaten
the persistency of the in-force book.
Corporate business
3 months to 3 months to 3 months to 3 months to Increase
31-Mar-05 31-Mar-06 31-Mar-07 31-Mar-08 2008 on 2007
Rm Rm Rm Rm %
New business
Recurring 17 34 58 49 (16)
premiums
Single 79 161 1 209 295 (76)
premiums
APE 25 50 179 79 (56)
PVP 1 589 641 (60)
Cashflow
Recurring 358 374 442 421 (5)
premiums
Single 79 161 1 209 295 (76)
premiums
Claims paid 791 1 090 670 1 043 56
Net (354) (555) 981 (327) -
While the market conditions remain challenging, cognizance must be taken of
the following:
- The group insurance business market has responded positively to players
with strong rating expertise and high service ratings.
- Metropolitan has considerably increased its group insurance market share
over the past few years - further growth in this area is thus expected to
be at a slower pace.
- Excluding the large single premium secured in the first quarter of 2007,
single premium income is 97% higher than 2007. The longer term trend
remains positive.
- Unique opportunities still exist for solution-driven suppliers.
- Certain funds are again recognising the value of investment protection,
given current market volatility.
- The increase in benefits paid was largely due to the growth in the book
of business as well as a higher than expected number of disinvestments
and terminations. Disinvestments are normally partial and are often
anticipated, being made to fund benefit payments. On the other hand,
terminations constitute the withdrawal of total investments.
Looking ahead
- Various smoothed bonus product enhancements have been rolled out over the
past few months, and a new multi-manager fully vesting product has
attracted inflows and interest from a spread of brokers and consultants.
- Ongoing efforts to reduce the business`s dependence on large
transactions, which are intermittent by nature, included a stronger focus
on small to medium sized investment and annuity business.
- Securing new risk business continued to be impacted by competitive market
conditions.
- A new administration product with many innovative features will be
introduced to the market during 2008.
- Exciting opportunities exist in the large fund administration market with
a number of good prospects for Metropolitan.
International business
3 months to 3 months to 3 months to 3 months to Increase
31-Mar-05 31-Mar-06 31-Mar-07 31-Mar-08 2008 on 2007
Rm Rm Rm Rm %
New business
Recurring 23 16 19 35 84
premiums
Individual 19 15 19 28 47
life
Employee 4 1 - 7 -
benefits
Single 67 24 32 24 (25)
premiums
(incl EB)
APE 30 18 22 37 68
PVP 173
Cashflow
Recurring 190 184 204 202 (1)
premiums
Single 74 30 38 24 (37)
premiums
Claims paid 123 161 203 170 (16)
Net 141 53 39 56 44
- Business conditions remain challenging in all the markets in which we
operate.
- Ghana made a significant contribution to the new business production.
- As expected, premium income has started slowing down in the established
businesses.
- The Nigerian business was officially launched in April 2008.
- The unrest in Kenya impacted severely on the planned development of that
business.
- Two new CEOs were appointed; Oupa Mothibatsela in Botswana and Muzi
Dlamini in Swaziland.
- Appropriate new product roll-outs in all of the operations remain a
priority.
- Overall, the net cashflow position remained positive.
Asset management business
3 months to 3 months to 3 months to 3 months to
31-Mar-05 31-Mar-06 31-Mar-07 31-Mar-08
Rm Rm Rm Rm
Third party mandates - (51) (298) 58 790
net
Collective investments 968 1 297 3 169 1 027
- net
- New management team in place and starting to deliver.
- Key vacancies in Metropolitan Asset Managers have all now been filled.
The diversified knowledge and skills of the full complement of investment
professionals are complementary in all respects.
- Concerted efforts to increase third party assets under management are
starting to pay dividends, with new mandates secured in the first quarter
of 2008, the highest figure for the past four first quarters.
- Collective investment`s performance was distorted by a significant once-
off inflow during 2007.
- At R20.3 billion, collective investment assets under management exceeded
the R20 billion mark for the first time, compared to R16.2 billion in the
equivalent period of the previous year.
- At the 2008 Micropal Investment Fund Awards, presented in partnership
with Financial Mail, the Metropolitan Gilt Fund achieved first place (out
of 16 funds) in the bond sector based on its relative risk-adjusted
return over a three-year period. The fund was also runner-up for its risk-
adjusted one-year performance.
- The net cashflows of the business remained positive.
Health business
- Main focus is on managing existing clients and the smooth take-on of
members joining the GEMS scheme.
- In total, principal members under administration rose to 700 000 (1.7
million lives) vs 555 000 in 2007 (440 000 in 2006).
- GEMS growth continues at approximately 450 new principal members per day.
Qualsa continued to increase its managed healthcare business by being
awarded new mandates.
- Performance levels across the board are in line with service level
agreements.
- MHG and Qualsa have submitted a combined proposal for services to the
Road Accident Fund, the outcome of which is anticipated shortly.
- With the four largest restricted schemes remaining firmly under MHG
administration, the business is well placed for ongoing sound
performance.
Group perspective
Administration expenses
- Administration expenses continue to be a key area of focus, especially in
the current economic environment.
- Overall life insurance administration and other expenses remain well-
controlled and within budget.
Capital management
- The group`s capital management initiatives are ongoing.
- Further refinements are being made to the economic capital model with a
view to extending it down to a product level.
- The group has been active in the market buying back Metropolitan shares
on price weakness.
- Implementation of the new embedded value guidance is on track for the
full-year 2008 results.
Corporate developments
Improved empowerment ranking
In the most recent Financial Mail/Empowerdex Top Empowerment Companies survey
(April 2008), we achieved an overall ranking of 5th (out of the 188 top
empowerment companies surveyed) and 2nd out of 20 in the financial services
sector.
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 shareholders` interests.
End
DATE 30 MAY 2008
QUERIES WILHELM VAN ZYL
GROUP CHIEF EXECUTIVE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406637
PRESTON SPECKMANN
GROUP FINANCE DIRECTOR
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406634 OR 083 285 6454
TYRREL MURRAY
GENERAL MANAGER FINANCE & INVESTOR RELATIONS
METROPOLITAN HOLDINGS LIMITED
TEL 021 940 5083 OR 082 889 2167
Date: 30/05/2008 12:00:02 Produced by the JSE SENS Department.
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