| Wed 10 Nov 2010, 16:34 | | MET - Metropolitan Holdings Limited - Trading update for the nine months ended |
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MET
MET
MET - Metropolitan Holdings Limited - Trading update for the nine months ended
30 September 2010
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" or "the group")
Trading update for the nine months ended 30 September 2010
* The merger between Metropolitan and Momentum is expected to be implemented
during the fourth quarter of 2010, and all future reporting will cover the
new MMI Holdings group.
Group overview and operational highlights
* Investment markets, while still volatile, have steadily recovered
throughout the year.
* Total recurring premium income for the nine-month period was slightly
greater that that recorded in the previous year.
* A decrease in the new recurring premium business over the period, when
adjusted for discontinued operations, reflects the tough trading conditions
in all the life insurance businesses.
* Despite the economic downturn, ongoing strikes and post World Cup
depression, the persistency of the group`s policyholder base has remained
resilient.
* Expense management has remained well under control, with life insurance
administration expenses being contained below the 2009 levels.
* The corporate business secured a number of profitable annuity and
administration contracts.
* Metropolitan International continued to make satisfactory progress in its
African operations.
* All service levels were maintained at above contracted levels at
Metropolitan Health Group (MHG).
* Net cash received from clients to date was R1.9 billion (June 2009: R1.2
bn) and we expect to end the year in a positive cash position.
Retail business
9 months to 9 months to 9 months to Change
30-Sept-08 30-Sept-09 30-Sept-10 vs 2009
Rm Rm Rm %
New business
Recurring premiums 669 660 575 (13)
Continuing business 556 563 574 2
Discontinued 113 97 1 (99)
business #
Single premiums 2 479 1 596 1 630 2
Annual premium equivalent 917 813 738 (9)
(APE)
Present value of premiums 5 365 3 868 3 940 2
(PVP)
Cashflow
Recurring premiums 3 396 3 567 3 536 (1)
Single premiums 2 351 1 596 1 630 2
Claims paid 3 501 3 761 4 193 11
Net cashflow 2 246 1 402 973 (31)
# Discontinued businesses include direct marketing and Union Life.
New business
* Almost all of the retail business measures showed improvements when
compared with the half-year results.
* New business sales were impacted by a number of negative factors during the
first nine months of 2010, including the economic downturn, increased
employee strike action within our target markets, changes to the commission
payment rules, the closure of certain product lines and additional FAIS
training. The last three factors, however, have laid a good foundation for
the future of this business.
* New recurring premium income for the quarter recovered well, delivering the
best quarterly performance over the past five quarters.
* Single premium income was even better, delivering the highest level since
the last quarter of 2008.
* A change in the mix of new business sold (more risk and single premiums,
less savings), together with a reduction in yields, resulted in a slight
increase in the present value of premiums (PVP).
* The personal financial advisers` channel (agents) performed very well while
year-to-date new business decreased in the broker distribution channels in
difficult operating conditions.
* Both direct marketing (closed to new business during 2009) and Union Life
(business sold) new business is included in the 2009 numbers - when
excluded, the 2010 numbers are 2% up on 2009.
* Persistency across all lines of business continued to hold up very well.
* Overall, the existing life insurance book has performed well during the
recent economic downturn, with growth in all of the active books.
Cashflow
* Recurring premium income was in line with 2009, confirming the resilience
of the target market under tough economic conditions.
* Claims paid during the year to date were 11% up, having slowed down since
June and remaining in line with expectations.
* As a result, the retail business ended the period in a net cash received
position of R973 million (June 2010: R376m).
Challenges and opportunities
* Disposable income of South African consumers, while improving, remains
under pressure.
* This business is looking forward to the benefits of increased target market
focus within the enlarged MMI group, and the necessary building blocks are
in place for long-term profitable growth.
Corporate business
9 months to 9 months to 9 months to Change
30-Sept-08 30-Sept-09 30-Sept-10 vs 2009
Rm Rm Rm %
New business (on balance
sheet)
Recurring premiums 130 151 126 (17)
Single premiums 735 608 858 41
Annual premium equivalent 204 212 212 -
(APE)
Present value of premiums 1 568 1 679 1 780 6
(PVP)
New business (off balance
sheet)
APE 8 72 108 50
Cashflow
Recurring premiums 1 421 1 358 1 456 7
Single premiums 735 608 858 41
Claims paid 3 172 4 324 3 173 (27)
Net cashflow (1 016) (2 358) (859) 64
New business
* The business performed very well during the past quarter.
* Securing new business in the current employee benefits (EB) market remains
challenging.
* New recurring premium business (on balance sheet) also had a very good
quarter, the best recorded since the second quarter of 2009.
* New administration business (off balance sheet) grew significantly, with
total new recurring annual premium income of R108 million for the period,
compared to R72 million for the same period in 2009.
* New single premium income for the nine-month period increased substantially
as a result of good annuity business secured during the second and third
quarters of 2010.
* Overall PVP ended 6% higher. This, together with the off balance sheet
business, confirms Metropolitan`s strong standing in the retirement fund
market.
* Metropolitan Retirement Administrators (MRA) has continued to grow its
members under administration, and is administering 250 000 members on the
Benchmark system.
Cashflow
* Recurring premium income is 7% above the 2009 comparative, while single
premiums have grown by 41%.
* Claims paid reduced by 27% during the period.
* A much improved net cash outflow position of R859 million was recorded
compared to R2 358 million in 2009.
Challenges and opportunities
* MetEB has continued to be a leader in the South African market, with MRA
receiving the first ISAE 3000 accreditation and also winning the risk
underwriter of the year award for the second year in a row.
* The merger with Momentum will enable the combined business to provide a
wider range of appropriately priced products and services across the entire
market.
International business
9 months to 9 months to 9 months to Change
30-Sept-08 30-Sept-09 30-Sept-10 vs 2009
Rm Rm Rm %
New business
Recurring premiums 98 105 111 6
Individual life 88 92 101 10
Employee benefits 10 13 10 (23)
Single premiums (incl EB) 86 96 59 (39)
Annual premium equivalent 107 115 117 2
(APE)
Present value of premiums 403 470 539 15
(PVP)
Cashflow
Recurring premiums 662 760 800 5
Single premiums 99 139 68 (51)
Claims paid 477 498 544 9
Net cashflow 284 401 324 (19)
New business includes Metropolitan`s share of new business written by all
international subsidiaries.
Premiums and claims include Nigeria (excluded prior to 2009), as it is no longer
accounted for as a joint venture.
New business
* Recurring new business was assisted by growth in both individual life and
employee benefits business in Lesotho and Ghana.
* Single premium growth was curtailed in the current year by a slowdown in
the Nigerian financial sector, while the 2009 total was boosted by a
transfer from the South African business to Swaziland.
* The PVP growth was assisted by a reduction in yields.
* Overall, the businesses in Lesotho and Ghana performed well during the
period.
Cashflow
* Recurring premium income increased marginally while single premiums were
lower than in 2009.
* Benefits paid to policyholders increased by 9% to R544 million.
* The net cashflow position decreased, ending 19% below the prior year
comparative figure.
Challenges and opportunities
* The impact of the global financial problems is still being felt throughout
the African operations.
* The newer operations are starting to contribute to the overall
sustainability of the business while the established enterprises continue
to deliver solid results.
* Upgrading skills within the operations remains a key focus area.
* The combined MMI group will have a significant footprint on the African
continent in largely complementary markets.
Asset management business
9 months to 9 months to 9 months to Change
30-Sept-08 30-Sept-09 30-Sept-10 vs 2009
Rm Rm Rm %
Cashflow
Third party mandates - 1 401 (811) (1 171) (44)
net
Collective investments 2 728 2 803 1 466 (48)
- net
* Year-to-date equity performance has been reasonable, while fixed interest
has maintained its longer-term track record.
* MetAm experienced outflows of third-party business during the period.
* Net inflows into collective investments continued; however, uncertainty
relating to white label funds reduced the quantum.
* While the outlook for the asset management business in general remains
positive, earnings will continue to be significantly impacted by the
reduction in assets under management as a result of past outflows.
Health business
* The business continued to grow, assisted by the highly successful
Government Employees Medical Scheme (GEMS).
* At 30 September 2010 GEMS had just over 500 000 registered, fee-paying
members, with membership continuing to increase month on month at about 500
members per day.
* MHG`s total principal members under administration stood at 905 000 (2.3
million lives)(2009: 830 000, 2.1 million lives; 2008: 760 000 members, 1.9
million lives).
* Performance levels across the board are in line with contracted service
level agreements.
* As a differentiated fee income based business, MHG is relatively isolated
from the current economic turmoil and the outlook remains good.
* A couple of new administration contracts have been secured, for take-on in
January 2011.
* The merger will create a combined Health business incorporating Momentum`s
open scheme and strong broker distribution capabilities.
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 shareholder interests.
End
Date
10 November 2010
Queries:
WILHELM VAN ZYL PRESTON SPECKMANN TYRREL MURRAY
GROUP CHIEF GROUP FINANCE GM: GROUP FINANCE & INVESTOR
EXECUTIVE DIRECTOR RELATIONS
METROPOLITAN METROPOLITAN METROPOLITAN
TEL 021 940 6637 TEL 021 940 6634 TEL 021 940 5083 OR 082 889
2167
Sponsor:
Merrill Lynch SA (Pty) Limited
Date: 10/11/2010 16:34:02 Produced by the JSE SENS Department.
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