| Tue 26 May 2009, 14:00 | | MET - Metropolitan - Operational Performance for the Three Months Ended 31 |
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MET
MET
MET - Metropolitan - Operational Performance for the Three Months Ended 31
March 2009
METROPOLITAN HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN Code: ZAE000050456
JSE Share Code: MET
NSX Share Code: MTD
("Metropolitan" or "the group")
Operational performance for the three months ended 31 March 2009
Group overview
- The major factor continuing to affect the operations of the group
remains the potential fallout from a sustained global financial crisis
and any resultant reduction in local employment levels combined with
reduced disposable income in our client base
- Retail recurring new business grew by 11%, boosted by successes in the
personal financial adviser markets
- Persistency experience on ordinary retail business remained good,
resulting from pro-active management activity
- Direct marketing production during the period has been good; however,
persistency remains an area of concern in the current economic
environment
- Diversification within the corporate business continued, with good
progress in increasing the administration business
- The higher level of benefit payments in the corporate business, as
experienced in 2008, is continuing in 2009
- International businesses grew their single premiums by 150% to R60
million
- Metropolitan Health (MHG) further increased the size of its business
while maintaining exceptional levels of service, highlighting the sound
underlying business model
- The total lives under administration at MHG reached 2 million in early
May 2009
- The asset management team gained positive net inflows despite the
investment conditions
- Overall, the group maintained its positive net cashflow at an impressive
R3.3 billion
- Capital management and related activities remain a priority
- The global investment, financial and economic markets continue to
challenge
Retail business
3 months 3 months 3 months 3 months 3 months Increase
to to to to to (compound
31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- since
05 06 07 08 09 2005)
Rm Rm Rm Rm Rm %
New business
Recurring 168 153 175 188 209 6
premiums
Single premiums 266 375 485 869 548 20
Annual premium 195 191 224 275 264 8
equivalent (APE)
PV of premiums 1 308 1 646 1 351 -
Cashflow
Recurring 829 908 1 011 1 094 1 156 9
premiums
Single premiums 276 374 492 778 548 19
Claims paid 650 801 875 1 197 1 197 16
Net 455 481 628 675 507 3
APE = new recurring premiums plus 10% of single premiums
PV = present value
The growth in recurring premium new business continued its five-year trend,
increasing by 11% in 2009, mainly as a result of:
- Increased recurring premiums from the wholesale and personal financial
adviser distribution channels
- The entrenched and successful focus on the quality of new ordinary
business issued
- The new commission regulations are being applied; initial indications
seem to reflect a possible swing from savings to risk business.
The business remains well-positioned:
- Claims experience is in line with expectations
- The number of policies under administration continues to grow
- Despite the economic pressures being experienced in our target markets,
ordinary business retention rates remain within acceptable limits, with
lapses at inception below the group target of 15%
- Deteriorating persistency and increasing distribution costs within the
direct marketing channel remain areas of concern: Retail management are,
however, paying very close attention to these operations
- Both recurring and single premium income are continuing their healthy
increase over time, confirming the overall growth of the brand and the
in-force book
Looking ahead
- Single premium new business is expected to lag 2008 as a result of the
closure of certain low-margin third-party distribution initiatives
during 2008
- Metropolitan launched RiskPlan, a new innovative risk product aimed at
the achiever market, in the first quarter of 2009
- The prospects for Retail remain directly correlated to those of its
target market
- Food, fuel and transport inflation, together with unemployment levels
and 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 affect
the persistency of the in-force book
- The target market has, however, remained resilient and Metropolitan is
confident that continued growth can be achieved within this segment
Corporate business
3 months 3 months 3 months 3 months 3 months Increase
to to to to to (compound
31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- since
05 06 07 08 09 2005)
Rm Rm Rm Rm Rm %
New business
Recurring 17 34 58 49 31
premiums 16
Off balance 21
sheet (APE*
basis)
Single premiums 79 161 1 209 295 308 41
Total APE* 25 50 179 79 83 35
PV of premiums 1 589 641 506 -
Cashflow
Recurring 358 374 442 421 417
premiums 4
Single premiums 79 161 1 209 295 308 41
Claims paid 791 1 090 670 1 043 1 261 12
Net (354) (555) 981 (327) (536) 11
* APE includes off balance sheet new business
The market conditions remain tough and new business continues to be lumpy;
however:
- Within that context, the stability of the premium income is very
comforting
- The group insurance business market responds positively to players with
strong risk rating expertise and high service levels
- The reduction in new recurring premiums relates mainly to risk business
where pricing remains extremely competitive and experience has dropped
back to more normal levels
- The off balance sheet new business comprises administration contracts on
the recently launched Neon platform
- Unique opportunities still exist for solutions-driven suppliers
- Metropolitan Retirement Administrators has secured their second client
since the establishment of the business, comprising about 20 000 active
members, with effect from 1 June 2009
- Certain funds and commentators are again recognising the value of the
investment protection that is inherent in our smoothed bonus products,
given current market volatility
- The increase in benefits paid was largely due to higher than expected
disinvestments, driven by increased benefit levels paid out of funds
invested with Metropolitan
- The growth in the risk book of business over the last few years
contributed to the growth in benefit payments
Looking ahead
- Ongoing efforts to reduce the business`s dependence on large
transactions are proving to be successful
- As mentioned with our year-end results, some of our smoothed bonus funds
have negative bonus stabilisation reserves. These funds are being
managed very actively using various asset protection strategies.
- The growth in the retirement administration business remains on track,
with a number of successes being achieved by the Neon platform
- In addition, exciting opportunities exist in the large fund
administration market, with a number of good prospects for Metropolitan
International business
3 months 3 months 3 months 3 months 3 months Increase
to to to to to (compound
31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- since
05 06 07 08 09 2005)
Rm Rm Rm Rm Rm %
New business
Recurring 23 16 19 35 31 8
premiums
Individual 19 15 19 28 29 11
life
Employee 4 1 - 7 2 (16)
benefits
Single 67 24 32 24 60
premiums (incl (3)
EB)
APE 30 18 22 37 37 6
PV of premiums 173 166 -
Cashflow
Recurring 190 184 204 204 226 4
premiums
Single 74 30 38 26 62 (4)
premiums
Claims paid 123 161 203 175 161 7
Net 141 53 39 55 127 (3)
- The operating conditions remain challenging across all the African
markets in which we operate
- New business growth was achieved in the Nigerian and Swaziland
operations
Single premium successes in Swaziland and Botswana resulted in an
increase of 150% when compared with 2008
- As expected, new business and premium income has slowed down in the
established businesses
- Appropriate new product roll-out in all of the operations remains a
priority
- The positive net cashflow position increased on the back of increased
single premium flows
Looking ahead
- The chief executive of International, Justin van den Hoven, has retired
from the group after 33 years` service
- The appointment of the new chief executive is nearing finality
- The business case for the International division remains very strong
- The new business APE for the first quarter is the highest recorded for
the past five years
Asset management business
3 months 3 months 3 months 3 months 3 months Increase
to to to to to (compound
31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- since
05 06 07 08 09 2005)
Rm Rm Rm Rm Rm %
Third party (51) (298) 58 790 644
mandates - net -
Collective 968 1 297 3 169 1 027 1 054
investments - 2
net
- The continued positive flows into MetAm reflect the improved investment
performances
- Equity performances mirrored the volatile global market environment, but
have recovered strongly since February 2009 on a relative basis
- At the 2008 Raging Bull Awards, presented in February 2009, MetAM`s Deon
van Zyl, who manages the Metropolitan Gilt Fund on behalf of
Metropolitan Collective Investments, was the recipient of the overall
Raging Bull Award for the top fund performance over three years to 31
December 2008 in the best domestic fixed interest category, as well as
the certificate for the best fixed interest bond fund for the top
performance in that sub-category.
- The Metropolitan Income Fund, also managed by Van Zyl, was the winner of
a category award (domestic fixed interest-income category) in the 2009
Morningstar Research SA Fund Awards, the only internationally recognised
awards for unit trust funds in this country, announced in April 2009.
Category awards are presented to the funds with the best performance on
a risk-adjusted basis in their respective ASISA categories, subject to
qualitative review by Morningstar analysts.
- Collective investment`s consistent positive net inflows confirm the
markets view on their service delivery
- The net cashflows of the business remained positive
- Business operating margins are under severe pressure due to the erosion
of asset levels under the current global market conditions
Health business
- The main focus is on managing existing clients and the smooth take-on of
members joining the Government Employees Medical Scheme (GEMS).
- In total, principal members under administration had risen to 770 000
(1.9 million lives) vs 700 000 in March 2008 (555 000 in 2007 and 440
000 in 2006) by the end of March 2009
- In early May 2009 the total lives under administration at MHG reached
the 2 million mark
- GEMS membership continues to grow, in line with expectations
- Performance levels across the board remain in line with service level
agreements
- With more than 50% of the restricted schemes in South Africa 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 continue to be accorded high
priority during the current market uncertainty
- The group`s 31 March 2009 capital positions were all at levels similar
to those disclosed at the 2008 year-end
Metropolitan Card Operations
- Operations have been discontinued
- Winding down has commenced, with final closure anticipated by 30 June
2009
Resignation of board chairman
- On 17 March 2009 the chairman, Professor Wiseman Nkuhlu, resigned as a
director of Metropolitan
- JJ Njeke has been appointed acting chairman until the board has had the
opportunity to consider a permanent appointment
Empowerment rankings and ratings
As at 31 December 2008 Metropolitan achieved an A rating in terms of the
Financial Sector Charter (FSC) scorecard, with a compliance score of 103.65%.
Assessed on the basis of the department of trade and industry`s codes of good
practice for broad-based black economic empowerment, Metropolitan was rated a
level 3 contributor, with a score of 76.75 out of a 100 points. A level 3
contributor means that clients can claim 110 cents for every 100 cents spent
with Metropolitan in terms of preferential procurement reporting.
Both scores were audited by accredited ratings agency NERA (National
Empowerment Ratings Agency).
HIV and AIDS education
B the Future, which was recently released by Metropolitan, is a revolutionary
new weapon in the fight against HIV and AIDS - an information booklet that
can be downloaded directly to a cellphone - developed and launched by
Metropolitan in April 2009. This innovative cellbook is designed specifically
to encourage South Africans to know their HIV status and take responsibility
for managing their health, ie to live the future so that they can b the
future. SMS HIV to 32907 to download the cellbook, or visit the
www.livethefuture.co.za website for more information.
Updated credit rating
On 31 March 2009 international rating agency Fitch Ratings downgraded the
Metropolitan ratings by one notch. These single-notch downgrades can be
attributed mainly to the global and South African investment market
conditions.
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.
Cape Town
26 May 2009
Sponsor
Merrill Lynch South Africa (Pty) Ltd
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: 26/05/2009 14:00:02 Produced by the JSE SENS Department.
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