| Tue 25 May 2010, 14:00 | | MET - Metropolitan - Operational performance for the three months ended 31 March |
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MET
MET
MET - Metropolitan - Operational performance for the three months ended 31 March
2010
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 2010
Group overview
Metropolitan/Momentum merger update
- The merger process has continued as detailed in the SENS announcements
dated 31 March and 17 May 2010.
- The due diligence is being finalised, and we anticipate posting the
circular to shareholders around the end of June, with a shareholders`
meeting scheduled for July.
Operational update
- Despite the merger deliberations, it remains business as usual on the
operational front.
- All the markets in which we operate showed unexpected signs of recovery
during the first quarter of 2010; however the sustainability of this
recovery remains uncertain.
- Recurring premium new business, excluding the discontinued direct marketing
channel, exceeded expectations in both the retail and international
businesses.
- Persistency experience remained broadly in line with the pricing basis;
however, signs of stress in certain pockets of the retail operations are
being actively managed as they appear.
- Recurring premium income increased in all three businesses, ending 6% up on
the 2009 levels.
- Single premium new business was affected by the slow-down in the broker
markets as well as the withdrawal of certain retail products sold through
third party partners.
- Total claims paid to policyholders ended 13% below the levels paid out in
2009.
- Life insurance administration expenses were well controlled, with growth
being restricted to below 1%.
- The healthcare administration business further increased the size of its
business while maintaining exceptional levels of service, highlighting the
sound underlying business model.
- The improved investment performance recorded by the asset managers
continued over a one year rolling period.
- Overall, the group maintained its positive net cashflow; recording just
over R1.4 billion in net inflows.
- Volatile local and global investment, financial and economic markets remain
challenging.
Retail business
3 months 3 months 3 months 3 months 3 months
to to to to to
31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10
Rm Rm Rm Rm Rm
New business
Recurring premiums 153 175 188 209 204
Direct marketing 27 36 29 48 -
Other 126 139 159 161 204
Single premiums 375 485 869 548 344
Annual premium 191 224 275 264 239
equivalent (APE)
PV of premiums 1 308 1 646 1 351 1 227
Cashflow
Recurring premiums 908 1 011 1 094 1 156 1 196
Single premiums 374 492 778 548 344
Claims paid 801 875 1 197 1 197 1 188
Net 481 628 675 507 353
APE = new recurring premiums plus 10% of single premiums
PV = present value
The growth in recurring premium new business, excluding the discontinued direct
marketing channel, continued its five-year trend, increasing by 27% in 2010,
mainly as a result of:
- increased recurring premiums from the personal financial adviser
distribution channel
- the entrenched and successful focus on the quality of new ordinary business
issued.
The business remains well positioned:
- Recurring premium income continues to grow.
- Administration expenses have been restricted to below the 2009 levels.
- Independent benchmarking carried out recently confirmed that Metropolitan
is a low-cost administrator.
- Claims experience has improved slightly and remains in line with
expectations.
- The number of policies under administration in the books still open to
business is growing.
- Economic pressures still constitute a threat to the ordinary business
retention rates in our target market, but active management has succeeded
in growing the business.
Looking ahead
- Single premium new business is expected to lag 2009 as a result of the
withdrawal of certain low-margin products during 2009.
- Cover2Go has been consolidated into the retail business.
- The prospects for the retail business remain directly correlated to those
of its target market.
- Food, fuel and transport inflation, together with unemployment levels, are
still the biggest challenges.
- 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
to to to to to
31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10
Rm Rm Rm Rm Rm
New business
Recurring 34 58 49 31 29
premiums
Off balance sheet 21 106
(APE basis)
Single premiums 161 1 209 295 308 59
Total APE* 50 179 79 83 141
PV of premiums 1 589 641 506 265
Cashflow
Recurring 374 442 421 417 456
premiums
Single premiums 161 1 209 295 308 59
Claims paid 1 090 670 1 043 1 261 901
Net (555) 981 (327) (536) (386)
* APE includes off balance sheet new business
The growth in new business APE continued its three-year trend, increasing by 70%
in 2010, mainly as a result of additional off balance sheet administration
contracts on the Neon platform.
The market conditions remain tough but the business is well prepared:
- The group insurance market responds positively to players with strong risk-
rating expertise and high service levels.
- The reduction in new recurring premium income relates mainly to risk
business where pricing is extremely competitive and experience is returning
to more normal levels.
- The administration platform continues to attract interest and generate new
business opportunities.
- Certain funds and commentators are again recognising the value of the
investment protection inherent in our smoothed bonus products, given the
continued market volatility.
- Recurring premium income is 9% above that recorded in 2009 while expenses
have increased by less than that.
- The reduction in claims paid was largely due to higher than expected
disinvestments during 2008 and 2009.
Looking ahead
- Ongoing efforts to reduce the business`s dependence on large transactions
are proving successful.
- We anticipate that securing new corporate business will be difficult during
the World Cup period.
- However, exciting opportunities still exist in the large fund
administration market, with a number of good prospects for Metropolitan.
- The pipeline for new business remains healthy, as evidenced by:
- Metropolitan Retirement Administrators (MRA) has secured an
administration contract of 15 000 members with effect from the 3rd
quarter of 2010, and
- MetEB has secured approximately R450m in investment and annuity
business with effect from the 2nd quarter.
International business
3 months 3 months 3 months 3 months 3 months
to to to to to
31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10
Rm Rm Rm Rm Rm
New business
Recurring 16 19 35 31 40
premiums
Individual 15 19 28 29 33
life
Employee 1 - 7 2 7
benefits
Single premiums 24 32 24 60 20
(incl EB)
APE 18 22 37 37 42
PV of premiums 173 166 175
Cashflow
Recurring 184 204 204 226 248
premiums
Single premiums 30 38 26 62 28
Claims paid 161 203 175 161 151
Net 53 39 55 127 125
* New business includes Metropolitan`s share of all operations; cashflows
include 100% of all operations
- The new business APE and recurring premium income recorded for the first
quarter were the highest for the past five years.
- Recurring premium income increased by 29% to R40 million; good growth was
recorded in both the Nigerian and Ghanain operations.
- New business premium income slowed in the established businesses.
- Single premium successes were secured in Lesotho.
- Total recurring premium income grew by 10% while life administration
expenses were held at the 2009 levels.
- Policyholder claims paid were 5% below the prior year.
- The positive net cashflow position was maintained.
Looking ahead
- Appropriate new product roll-outs in all of the operations remain a
priority.
- The in-force book is continuing to grow.
- The business case for the international division remains very strong.
Asset management business
3 months 3 months 3 months 3 months 3 months
to to to to to
31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10
Rm Rm Rm Rm Rm
Third party (298) 58 790 644 (271)
mandates - net
Collective 1 297 3 169 1 027 1 054
investments - net 923
- The one-year rolling good investment performance continued during the first
quarter.
- The MetAM Global Balanced Fund was ranked 3rd out of 11 in the Alexander
Forbes Global Large Manager Watch over one year; the Global Moderate Fund
1st out of 13; and the Global Equity Fund 3rd out of 21.
- Two Metropolitan Collective Investments funds received Raging Bull awards
in January, while two received Morningstar awards in March.
- The FSB has ruled that Metropolitan, along with some other industry
players, may not register any new white label funds; Metropolitan is
appealing this decision.
- Collective investment`s consistent positive net inflows confirm the
market`s view on their service delivery.
Health business
- The main focus is on continuing to provide existing clients with service
excellence and the smooth take-on of approximately 500 to 600 new
Government Employees Medical Scheme (GEMS) member applications every day.
- In total, principal members under administration had risen to 899 000 (809
000 in March 2009, 700 000 in 2008, 555 000 in 2007 and 440 000 in 2006) by
the end of March 2010.
- GEMS membership continues to grow in line with expectations, and at the end
of April 2010 there were over 468 000 registered principal members.
- Performance levels across the board remained in line with service level
agreements.
- The business is well placed for continued growth and ongoing sound
performance.
Group perspective
Administration expenses
- Administration expenses remained a key area of focus, especially in the
current economic environment.
- Overall, life insurance administration and other expenses were well
controlled within tight budget parameters.
Capital management
- The group`s capital management initiatives are ongoing.
Empowerment rankings and ratings
As at 31 December 2009 Metropolitan achieved an A rating in terms of the
Financial Sector Charter (FSC) scorecard, with a compliance score of 87.75%.
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 83.79 out of 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 verified by accredited ratings agency AQRate Verification
Services.
In the Financial Mail/Empowerdex Top Empowerment Companies Survey 2010, the
results of which were published on 30 April, Metropolitan was ranked 7th in the
financial services sector and 14th overall (out of 100 companies surveyed across
all sectors).
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: 25 MAY 2010
QUERIES:
WILHELM VAN ZYL
GROUP CHIEF EXECUTIVE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406637
PRESTON SPECKMANN
GROUP FINANCE DIRECTOR
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406634
TYRREL MURRAY
GENERAL MANAGER FINANCE & INVESTOR RELATIONS
METROPOLITAN HOLDINGS LIMITED
TEL 021 940 5083 OR 082 889 2167
Sponsor in South Africa
Merrill Lynch South Africa (Pty) Limited
Sponsor in Namibia
Simonis Storm Securities (Pty) Limited
Date: 25/05/2010 14:00:06 Produced by the JSE SENS Department.
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