| Wed 3 Sep 2008, 7:30 | | MET - Metropolitan - Metropolitan`s Operational Performance Bests Economic |
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MET
MET
MET - Metropolitan - Metropolitan`s Operational Performance Bests Economic
Circumstances During Reporting Period
Metropolitan Holdings Limited
Incorporated in the Republic of South Africa
Registration Number: 2000/031756/06
JSE share code: MET
NSX share code: MTD
ISIN: ZAE000050456
("Metropolitan" or "the company")
Metropolitan`s operational performance bests economic circumstances during
reporting period
Today (3 September) Metropolitan announced financial results for the six
months to 30 June 2008 that reflect a noteworthy operational performance in
tough economic times.
The group`s diluted core headline earnings per share, the best measure of
operating profit because items of both a once-off and an inherently volatile
nature - such as changes to the valuation basis and capital
appreciation/depreciation - have been stripped out, increased by 14% from
61.28 cents to 70.03 cents.
Most group businesses increased their contribution to operating profit. The
34% growth year-on-year in the contribution from the health cluster is
highly commendable in these testing times.
"It is strategically significant," says group chief executive Wilhelm van
Zyl, "that our core profits came from different areas across the group. The
fact that retail managed to maintain persistency levels despite increasing
pressure on personal disposable income due to higher food and fuel prices
was also a first-rate achievement."
Van Zyl attributes this success to proactive management interventions,
including concerted efforts aimed at enhancing the value proposition for
clients together with an even sharper focus on intermediary training.
Net funds received from clients amounted to a creditable R5.6 billion, with
most group businesses recording net inflows. In view of the difficult market
conditions, the 19% increase in inflows into the retail business was
remarkable.
The group`s ability to maintain positive cashflows has been, and continues
to be, in striking contrast to industry norms of recent years, reflecting
well on the resilience of the Metropolitan brand.
Metropolitan`s total new recurring premium income, the lifeblood of any life
insurance company, was 6% up on the corresponding period in 2007.
In addition to a robust 39% increase in single premium income, the retail
cluster recorded growth in new recurring premium income of 15%, resulting in
a 21% increase in annual premium equivalent (APE). (APE is a measure
representing 100% of recurring premium income but only 10% of single premium
income, given that the latter is far more volatile by nature.)
Another pleasing aspect of group performance was the 17% rise in the APE of
the established businesses in the international cluster.
From a corporate business perspective, the absolute performance of
Metropolitan Employee Benefits was admirable in most respects, but not
comparable to the corresponding period in 2007 when operating performance
was supported by very good risk experience and new business boosted by a
single exceptionally large annuity deal.
Thanks to its proven large-scale retirement fund administration expertise,
Metropolitan Retirement Administrators has secured the administration of a
10 000 member retirement fund as from October.
New business secured by the health operations continued to add significant
value, boosted by substantial growth in membership of the Government
Employees Medical Scheme (GEMS). The fact that MHG has recently been awarded
the GEMS administration contract for a second three-year term from 2009 is
further evidence of their, and the greater group`s, ability to set the
standard in large-scale administration efficiency and cost-effectiveness.
This should prove to be an attractive attribute given the impending social
security reforms, with their strong focus on retirement and health.
While Van Zyl is pleased with the way Metropolitan has continued to lift its
operational performance "irrespective of the uncertain times", he
acknowledges that there is scope for further improvement in terms of
efficiencies and even tighter expense controls.
"In line with our stated intention, we have begun securing new third party
investment mandates. Sustained growth in this area will help to boost our
performance materially. The value of new asset management business has
already shown a 38% improvement year-on-year, and our improving investment
performance record should also start assisting in this regard."
Although market conditions meant that absolute investment returns were
lower, the asset management cluster achieved superior investment performance
relative to its peers in several instances. For example, in the Alexander
Forbes Large Manager Watch rankings to 30 June 2008 Metropolitan`s local
managed fund was a first quartile performer for both the quarter and the
year.
With total assets under management passing the R106 billion mark,
Metropolitan remains firmly positioned as a player of substance in the
financial services sector.
Overall, investment market turbulence, with sharply dropping equity and bond
values leading the way, impacted negatively on Metropolitan`s diluted
earnings and diluted headline earnings per share, which fell from 124.15
cents in both instances to 40.80 cents (67% down) and 45.25 cents (64% down)
respectively.
Spiralling interest and inflation rates brought with them a 2.5% increase in
the discount rate used by the group to value its actuarial liabilities,
which had a further dampening effect on its earnings and also negatively
affected the value added by new life insurance business. However, as Van Zyl
points out, these interest rates have reduced by 1.5% subsequent to the
reporting date, which means that the value of new business written in the
first half of the year is already considerably higher.
Turning to embedded value - a key life industry measure - the fact that the
group`s embedded value per share showed only a slight reduction from 1 857
cents to 1 838 cents over the interim period (aided by share buy-backs and
despite a final dividend payout of 59 cents per share in April) was a
laudable achievement in the current volatile economic environment, bearing
testimony to Metropolitan`s ability to withstand market turbulence.
An interim dividend of 40 cents per share was declared for 2008, 11% higher
than in 2007, indicative of the directors continuing confidence in the
group`s medium-term growth potential. "Although our dividend policy remains
unchanged, we have adjusted the declaration rate to take into account
current economic conditions," says Van Zyl.
Looking to the future, Van Zyl comments that "Metropolitan`s entrenched
position in the low and middle income markets continues to give us a
competitive edge.
"Our efforts to enhance our stakeholder value proposition are ongoing,
regardless of the tough times that both the company and its clients are
experiencing at present, and our interim results for the most part
demonstrate continuing success in this respect."
Cape Town
3 September 2008
Sponsor
Merrill Lynch South Africa (Pty) Limited
Summary of Metropolitan`s stakeholder value-add to June 2008
June June % growth
2007 2008
Diluted core headline earnings R440m R472m 7.27
Diluted core headline earnings per 61.28c 70.03c 14.28
share
Diluted earnings R879m R275m (68.71)
Diluted earnings per share 124.15c 40.80c (67.14)
Return on embedded value 20.3% 2.9%
Embedded value per share 1 761c 1 838c
Interim dividend per ordinary share 36.00c 40.00c 11.11
Total premiums received R5.9bn R5.6bn (5.09)
Present value of new premium income R5 283m R4 528m (14.29)
(PVP)
Total assets under management R95bn R106bn 11.58
Notes
- Core headline earnings are a particularly appropriate measure of the
performance of financial services groups such as Metropolitan in that
they eliminate items of both a once-off and an inherently volatile
nature, such as changes to the valuation basis and capital
appreciation/depreciation.
- Diluted core headline earnings have been adjusted for the convertible
redeemable preference shares, the staff share scheme shares and
treasury shares in issue - all dilutory in nature. The preference
shares were issued to a consortium controlled by Metropolitan`s
strategic empowerment partner, Kagiso Trust Investments (KTI).
end
ISSUED BY SUE SNOW
FINANCIAL MEDIA SPECIALIST
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406119 OR 083 300 9745
DATE 3 SEPTEMBER 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: GROUP FINANCE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405083 OR 082 889 2167
Cape Town
3 September 2008
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 03/09/2008 07:30:02 Produced by the JSE SENS Department.
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