| Wed 2 Sep 2009, 7:06 | | MET / MTD - Metropolitan`s Performance Consistent Despite Economic Downturn |
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MET
MET
MET / MTD - Metropolitan`s Performance Consistent Despite Economic Downturn
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 performance consistent despite economic downturn
Metropolitan`s interim financial results for the six months to 30 June 2009,
announced today (Wednesday 2 September), demonstrate that the group`s ability to
generate good cash returns has been sustained during these turbulent times.
"However, in certain respects we have fared better than expected, given the
severity and extended duration of the recession and its impact on the financial
position of our clients - both their ability to pay and their inclination to
buy," says group chief executive Wilhelm van Zyl.
A salient feature of Metropolitan`s results was the fact that neither the
quantity nor the quality of new business production was as adversely affected as
anticipated. Total new recurring premium income was 11% higher than in the
equivalent six months of 2008, with all the life businesses achieving steady
growth in this all-important area. Single premium income of R1.6 billion was
collected despite the economic conditions. Very importantly, lapses at inception
did not deteriorate as much as it had been envisaged they would.
"Although we are undoubtedly seeing the effects of the recession on the
persistency of our in-force book of business, concerted retention efforts have
meant that, overall, our persistency rates did not drop as much as we feared
they might," says Van Zyl.
The value of the group`s new life business did, however, fall by 5% as increases
in retail business were negated by reductions in corporate (mainly due to
reduced risk margins) and international (as a result of expense increases)
business.
As Van Zyl points out, Metropolitan`s performance on both the capital and
cashflow fronts was also noteworthy.
"Thanks to focused management action we have strengthened our capital position
at all levels. Our group capital adequacy requirement (CAR) cover of 3.2 times
is generous in the present economic climate. The life companies` CAR cover of
2.4 times is also entirely appropriate. In addition, with net funds received
from clients of R2 billion, we have succeeded in maintaining our positive
cashflow status."
Many factors were responsible for three of the businesses within the group -
retail, corporate and asset management - contributing less to group operating
profit and core headline earnings of R408 million than they did in the
equivalent period in 2008. Chief amongst these was the sharp decline in average
investment asset levels, lower absolute investment performance thanks to
continued market turbulence, lower risk profits and increased new business
strain.
The international cluster and the Metropolitan Health Group (MHG) were the
exceptions, with operating profit before tax up 4% and 26% respectively.
MHG`s sterling achievement can largely be ascribed to continued growth in scheme
membership, particularly of the Government Employees Medical Scheme (GEMS), as
well as improved operational efficiencies due to increasing economies of scale.
MHG`s status as the largest administrator of closed medical schemes in the
country remained uncontested.
International`s contribution to operating profit was boosted by performances in
the group`s established markets of Namibia and Botswana. The so-called new
markets contributed to an increase in new business for the cluster, with Nigeria
playing the most significant part.
New recurring premium income in the retail cluster was 8% up, boosted by good
sales through the personal financial adviser channel (tied agents). Both the
independent (brokers) and wholesale distribution channels experienced a slowdown
in new business. Retail single premium income fell 25% primarily because of
restrictions that came into effect with respect to third party and other
distribution agreements.
As far as the corporate cluster was concerned, a higher volume of risk business
was the main driver of the 28% increase in new recurring premium income. In
addition, significant quantities of new off balance sheet administration
business were written on the new Neon product.
Good asset allocation decisions and an improvement in equity investment
performance in the short term point to the fact that the investment process at
Metropolitan Asset Managers (MetAM) is being successfully turned around. Further
evidence of this is expected by year-end.
According to an independent report published earlier this month (August 2009) by
Ketola Research, Metropolitan, of all the major life assurers in South Africa,
has produced the best total return to shareholders over the past five years,
thanks in part to "generous dividends and capital reductions".
For the period under review, shareholders will receive an interim dividend that
has been maintained at 40 cents per share despite the severity of the downturn,
a reflection of the board`s confidence in both the group`s current stability and
its future prospects taking the current market volatility into account.
"Although all of our businesses are facing threats posed by the ongoing changes
to the highly regulated environments in which they operate, we believe we are
well positioned to turn these into opportunities thanks to our customer-centric
approach in conjunction with our proven adaptability, track record of innovation
and large-scale administration capabilities," concludes Van Zyl.
On 26 August shareholders approved the refinancing of Metropolitan`s empowerment
partnership with Kagiso Trust Investments (KTI). This will allow the group to
further entrench its position as a leading driver of transformation in the
financial services sector.
See over for a results summary
Summary of Metropolitan`s results to June 2009
June June % growth
2008 2009
Diluted core headline earnings R472m R408m (14)
Diluted core headline earnings 70.03c 61.54c (12)
per share
Diluted earnings R275m R250m (9)
Diluted earnings per share 40.80c 37.71c (8)
Return on embedded value 2.9% 0.0%
Embedded value per share 1 819c 1 654c
Interim dividend per ordinary 40.00c 40.00c -
share
Total recurring premium new R565m R628m 11
business
Total premiums received R5.6bn R5.3bn (5)
Present value of future premium R4.6bn R4.1bn (10)
income (PVP)
Total assets under management R106bn R98bn (7)
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, investment variances and capital
appreciation/depreciation.
- Diluted core headline earnings have been adjusted for the convertible
redeemable preference shares, the staff share scheme shares and the
treasury shares in issue - all dilutory in nature. The preference shares
were issued to Metropolitan`s strategic empowerment partner, Kagiso Trust
Investments (KTI).
Cape Town
02 September 2009
Sponsor
Merrill Lynch South Africa (Pty) Limited
ISSUED BY SUE SNOW
FINANCIAL MEDIA SPECIALIST
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406119 OR 083 300 9745
DATE 2 SEPTEMBER 2009
QUERIES WILHELM VAN ZYL
GROUP CHIEF EXECUTIVE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406637 OR 082 515 3841
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
Date: 02/09/2009 07:06:01 Produced by the JSE SENS Department.
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