| Wed 1 Sep 2010, 8:01 | | MET - Metropolitan Holdings Ltd - Metropolitan delivers while preparing for new |
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MET
MET
MET - Metropolitan Holdings Ltd - Metropolitan delivers while preparing for new
growth phase
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" or the "company" or the "group")
Metropolitan delivers while preparing for new growth phase
Diversified financial services group Metropolitan Holdings, having focused on
meeting the needs of customers predominantly in the lower income markets for the
past 112 years, announced a sterling set of financial results today (Wednesday,
1 September).
On track to merge with Momentum once all the requisite approvals have been
obtained - from shareholders, regulatory bodies and the competition authorities
- Metropolitan has once again achieved a strong financial performance in the
face of tough operating conditions and volatile investment markets.
"Key indicators - such as core headline earnings (both in total and per share),
operating profit and value of new business - all reflected double digit
increases for the six months ended 30 June 2010. The value of new business for
the group was an impressive 38% higher," says group chief executive Wilhelm van
Zyl.
"Costs were well contained right across the group, with expense control in
respect of the retail business in South Africa particularly good. Against what
were at times formidable odds, we also succeeded in maintaining our unparalleled
record of positive cash flows from clients."
The value of retail new business for the six months under review, at R54
million, was 108% higher than for the corresponding period in 2009 (R26
million). Thanks to a change in the mix of business to more profitable product
lines, this remarkable performance was achieved despite a reduction in overall
new business volumes.
Volumes declined due to the closure of the direct marketing channel, the sale of
Union Life (a separate insurance company), slower independent broker new
business and restrictions on various third party distribution channels.
Recurring premium new business, excluding the closed businesses, was more or
less on a par with 2009, while single premium income declined by13% (from R1 103
million to R 960 million).
Thanks mainly to higher average investment assets, good expense management and
the closure of the loss-making direct marketing channel, retail operating profit
before tax increased by 13% (R270 million in 2009 to R306 million in 2010).
Focused management action ensured acceptable persistency levels throughout the
period, which contributed to an improvement from 1.0% to 2.3% in the new
business margin on a present value of future premiums (PVP) basis.
In the corporate arena, an increase in annuity business was largely responsible
for the 13% rise in single premium income, which increased from R419 million in
2009 to R472 million in 2010. Lower new recurring premium income and a change in
the mix of business written resulted in a slight reduction in the new business
margin on a PVP basis from 0.8% to 0.7%.
Substantial volumes of pure administration business secured on an off balance
sheet basis via the Neon administration platform as well as by Metropolitan
Retirement Administrators (MRA) boosted the value of new business as it assisted
with the recovery of costs.
The margins on risk business remained under pressure, especially in the case of
funeral and disability products. Increased management fees in line with higher
average assets under management, plus recovering risk profits, lifted corporate
operating profit before tax by 31%, from R70 million in 2009 to R92 million in
2010.
At R75 million, new recurring premium income from all seven international
operations was 10% above the level recorded in the first half of 2009 (R68
million), while an improved new business PVP margin of 1.7% (compared to 1.3% in
2009) was recorded. Despite tough business conditions across the territories,
international operating profit after tax showed an 11% increase (from R46
million to R51 million) thanks to reduced start-up losses in the newer regions.
The Metropolitan Health Group (MHG) continued to grow its number of principal of
members under administration, reaching 912 000 (2.3 million lives) in June 2010,
compared to 829 000 members and 2.0 million lives in June the previous year, and
entrenching its position as South Africa`s largest administrator of closed
medical schemes. Improved operational efficiencies and increasing economies of
scale, plus the ongoing growth in member numbers, resulted in a 15% rise in
operating profit after tax to R47 million (2009: R41 million).
The group`s core headline earnings for the half-year were 21% up on the first
half of 2009 (from R342 million to R414 million) while core headline earnings
per share, at 75 cents, were 14% higher (2009: 66 cents). Van Zyl points out
that core headline earnings are an appropriate measure of the performance of
financial services groups such as Metropolitan as they reflect the true
performance of the operating entities. This is because items of both a once-off
and an inherently volatile nature, such as changes to the valuation basis,
investment variances and capital appreciation/depreciation, are eliminated.
Although Metropolitan paid out a dividend of 60 cents per share in April 2010,
its embedded value at 30 June 2010 remained strong at R18.09 per share (31
December 2009: R18.11). The group`s overall capital position ended the period
slightly down in line with investment markets; its capital adequacy requirement
was nevertheless covered 3.0 times. The directors` faith in the group`s ability
to continue growing its underlying earnings in the medium term is reflected in
the fact that the interim dividend per share was increased by 5% to 42 cents.
"The group will be listed as MMI Holdings once the proposed merger with Momentum
is implemented and will be transformed into a bigger and even better resourced
undertaking, with excellent growth prospects," says Van Zyl. (The new name of
the merged entity was made known when the detailed terms announcement was
published on SENS on Thursday 26 August 2010.)
"MMI Holdings will be the investor brand while the Metropolitan and Momentum
operating brands will be retained in the customer-facing businesses within the
merged entity. In line with our economic empowerment objectives, customers in
the lower income markets will benefit from Metropolitan`s extended geographic
footprint here in South Africa as well as the rest of Africa.
"Thanks to innovative development and distribution strategies, we will be in
position to offer an expanded range of products that generate financial growth
and engender financial security. This will bring us another step closer to
realising our vision of creating - and protecting - prosperity for Africa`s
people."
Summary of Metropolitan`s results to June 2010
June 2009 June % growth
2010
Diluted core headline earnings R408m R454m 11%
Diluted core headline earnings per share
62c 70c 13%
Diluted earnings R250m R260m 4%
Diluted earnings per share 38c 40c 5%
Return on embedded value 0.0% 4.1%
Embedded value per share 1 654c 1 809c 9%
Interim dividend per ordinary share 40c 42c 5%
Total recurring premium new business R628m R508m (19%)
Total premiums received R5.3bn R5.3bn -
Present value of future premium income (PVP)
R4.1bn R3.7bn (11%)
Total assets under management R98bn R101bn 3%
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).
end
ISSUED BY
SUE SNOW
FINANCIAL MEDIA SPECIALIST
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406119 OR 083 300 9745
DATE
1 SEPTEMBER 2010
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: 01/09/2010 08:01:02 Produced by the JSE SENS Department.
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