| Thu 31 May 2012, 9:48 | | MMI - MMI Holdings Limited - Trading update for the nine months ended |
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MMI
MMI
MMI - MMI Holdings Limited - Trading update for the nine months ended
31 March 2012
MMI HOLDINGS LIMITED
Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN Code: ZAE000149902
JSE Share Code: MMI
NSX Share Code: MIM
("MMI" or "the company")
Trading update for the nine months ended 31 March 2012
Group overview and operational highlights
* The overall economy in which the group operates continued to show signs of
recovery; however, certain areas of the market remain under pressure.
* Total new business APE for the quarter increased by 12% compared with the
same quarter in the prior year, reflecting the success of the diverse and
comprehensive product offerings across the group.
* Increased competitive forces, together with strong single premium sales
with inherently lower margins, continued to put pressure on the overall new
business margins.
* Investment markets, while still volatile, remained relatively strong for
the last quarter of the period under review.
* Expense management and merger efficiencies remain one of the top priorities
over the short to medium term.
* The integration process is progressing on schedule and the merger-related
expense-saving commitments are on track.
Momentum Retail
9 months to 9 months to Change
31-March-11 31-March-12 vs 2011
Rm Rm %
New business
Recurring premiums 939 841 (10)
Single premiums 17 392 17 070 (2)
Annual premium equivalent (APE) 2 678 2 548 (5)
Present value of premiums (PVP) 22 008 21 672 (2)
* Momentum Retail includes Odyssey but excludes new markets and FNB Life.
* The operating environment in the upper-income market remained difficult.
* New business volumes for the quarter were better than those recorded in the
comparative period; however, the year-to-date totals are still slightly
below the levels recorded in the prior year.
* Excluding the discontinued Odyssey business from the prior period
comparatives, on a like-for like basis, the APE for the nine months is in
line with 2011.
* The mix of new business continues to favour single premium investments with
lower inherent margins; therefore the overall new business margin remains
under pressure.
* New business sourced through the agency force continued to increase in line
with Momentum`s objective to grow this channel.
* Business efficiency initiatives have commenced; however, the benefits will
only emerge in later reporting periods.
Metropolitan Retail
9 months to 9 months to Change
31-March-11 31-March-12 vs 2011
Rm Rm %
New business
Recurring premiums 680 777 14
Single premiums 1 441 901 (37)
Annual premium equivalent (APE) 823 868 5
Present value of premiums (PVP) 4 247 4 057 (4)
*Metropolitan Retail includes new markets and FNB Life, but excludes Odyssey.
* Recurring premium new business exceeded that of the comparative period,
driven by good recurring premium production in the group schemes and other
traditional agency channels.
* The reduction in single premium income was the result of the transfer of
certain distribution channels to Momentum Retail; good growth has continued
in the remaining channels.
* Excluding the discontinued distribution channels, the APE for the nine
months, on a like-for-like basis, increased by 16%.
* Early duration persistency across most lines of business, while slightly
lower than the prior period, remained within the pricing basis.
* Extensive work is being done to manage any risks associated with the
regulatory exams and the pass rate has improved.
* Expenses were well managed during the period under review.
Momentum Employee Benefits
9 months to 9 months to Change
31-March-11 31-March-12 vs 2011
Rm Rm %
New business
Recurring premiums 546 591 8
Single premiums 2 062 2 898 41
Annual premium equivalent (APE) 752 881 17
Present value of premiums (PVP) 5 839 7 123 22
* Strong new business growth was achieved in the group insurance and annuity
product lines, however, investment product sales declined.
* Good single premium production was recorded during the quarter.
* Securing new business in the group insurance and investment markets remains
highly competitive.
* Client retention remains at satisfactory levels.
* Expense efficiency initiatives are continually being investigated and
implemented.
Metropolitan International
9 months to 9 months to Change
31-March-11 31-March-12 vs 2011
Rm Rm %
New business
Recurring premiums 122 161 32
Single premiums (incl EB) 103 156 51
Annual premium equivalent (APE) 132 177 34
Present value of premiums (PVP) 619 884 43
Membership (health) (`000) 125 121 (4)
* New business includes MMI`s share of life insurance new business written by
all Metropolitan International subsidiaries.
* Good growth in new business volumes was recorded during the period under
review.
* Botswana, Lesotho and Ghana increased their recurring new business premiums
while strong single premium contracts were secured in Botswana and Lesotho.
* The medical claims ratio has improved as a result of appropriate re-pricing
and improved claims controls.
* Following these changes, the total lives under administration in the health
business declined slightly during the period as some clients sought cheaper
alternatives in the market.
Momentum Investments
* In asset management, the performance of the fixed income funds, retail
equity and balanced funds continued to deliver good performance relative to
the benchmarks and peers while institutional equity and balanced funds
performed below benchmark and remain the focus area for improvement.
* Net flows for the asset management division continued to be negative.
* The collective investments business unit performed well and had strong net
inflows for the period under review.
* The managers of managers business continued to have significant successes
in both group and third party distribution with regards to new business
written.
* The long term outlook for the investment management business in general
remains positive, but the earnings will be dependent on the levels and mix
of the assets under management, as well as expense ratios.
* Building competitive third party investment management capabilities remain
core to the growth strategy.
* MMI has reached agreement with Rand Merchant Bank and Royal Bafokeng
Holdings to acquire the shares which these entities currently hold in Eris
Property Group (Pty) Ltd ("Eris"). MMI will merge the property business of
Momentum Properties (previously Metropolitan Property Services) with Eris
in exchange for further shares in Eris. This merger will be effective from
1 July 2012 or as soon as practical thereafter. Eris management and Kagiso
Tiso Holdings Proprietary Limited (RF) ("KTH"), who are existing
shareholders in Eris, have agreed to acquire further shares from MMI,
resulting in MMI holding a controlling interest of 50.1%, KTH 21.2% and
Eris Management 28.7% in Eris post implementation. The transaction is
subject to a number of conditions precedent, including approval by the
Competition authorities.
Metropolitan Health
* The number of members under administration increased by 6% to 1.3 million
principal members (3.1 million lives) at the end of March 2012.
* The new administration contract with the Government Employees Medical
Scheme was implemented successfully.
* The business continues to position itself for national health insurance
(NHI).
Changes in directors
* Mr Thys Visser passed away following a car accident on 26 April 2012.
Although Mr Visser only served on the board for a relatively short period,
from 22 November 2011, his contribution on both the board and the
remuneration committee was highly valued.
* Mr Leon Crouse was appointed as a non-executive director on the MMI board
with effect from 18 May 2012. He has also been appointed on the boards of
Momentum Group Ltd and Metropolitan Life Ltd, both subsidiary companies of
MMI.
Other corporate activity
* The group is hosting an investor open day on 5 June 2012.
* A circular was distributed to shareholders on 18 May 2012 proposing:
* an odd-lot offer to shareholders holding up to 99 MMI shares,
* a voluntary offer to shareholders holding between 100 and 500 MMI
shares; and
* an extension of the successful BEE partnership with Kagiso Tiso
Holdings.
A shareholder meeting has been scheduled for 18 June 2012 in this regard.
Opportunities and challenges
* Merger synergies will emerge as progress is made in integrating the
businesses.
* Growth in new business volumes will, however, remain dependent on the
economic environment, including a recovery in employment and stronger
disposable income levels.
* Africa, although a complex market, is still largely untapped and provides a
number of opportunities for the group throughout its footprint in 12
countries outside of South Africa.
* All business units face opportunities and threats posed by ongoing changes
in the highly regulated environments in which they operate, including the
regulatory exams, the national health insurance and national social
security reform proposals.
Comments / qualifications
* All figures are provisional and unaudited.
* All figures are for the period 1 July to 31 March as presented in the
current internal management accounts.
* All figures for 2011 have been presented on the same basis as those for
2012, taking into account the current operational structure.
* 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
Queries
NICOLAAS KRUGER PRESTON SPECKMANN TYRREL MURRAY
GROUP CHIEF GROUP FINANCE GROUP FINANCE & INVESTOR
EXECUTIVE DIRECTOR RELATIONS
MMI Holdings MMI Holdings MMI Holdings
TEL 012 673 7438 TEL 012 673 7446 TEL 021 940 5083 OR 082 889
2167
Centurion
31 May 2012
Sponsor in South Africa
Merrill Lynch South Africa (Pty) Ltd
Date: 31/05/2012 09:48:01 Produced by the JSE SENS Department.
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