| Wed 14 Sep 2022, 7:05 | | MOMENTUM METROPOLITAN HOLDINGS LIMITED - Audited financial results for the 12 months ended 30 June 2022 |
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Audited financial results for the 12 months ended 30 June 2022
MOMENTUM METROPOLITAN HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 2000/031756/06
JSE share code: MTM
A2X share code: MTM
NSX share code: MMT
ISIN code: ZAE000269890
(Momentum Metropolitan or the Group)
MOMENTUM METROPOLITAN LIFE LIMITED
Incorporated in the Republic of South Africa
Registration number: 1904/002186/06
LEI: 378900E0A78B7549C212
Company code: MMIG
(Momentum Metropolitan Life)
Audited financial results for the 12 months ended 30 June 2022
Short form announcement
Basic Diluted
F2022 F2021 Change % F2022 F2021 Change %
Earnings (R million) 3 711 451 >100% 3 748 451 >100%
Headline earnings (R million) 4 233 445 >100% 4 270 445 >100%
Normalised headline earnings (R million)1 4 383 1 007 >100%
Operating profit (R million)2 3 363 73 >100%
Investment return (R million) 1 020 934 9%
Earnings per share (cents) 260.6 31.3 >100% 256.9 31.3 >100%
Headline earnings per share (cents) 297.3 30.9 >100% 292.7 30.9 >100%
Normalised headline earnings per share (cents)1 287.2 67.1 >100%
Total dividend per share (cents) 100 40 >100%
Present value of new business premiums 72 673 65 898 10%
Value of new business 626 725 (14)%
Value of new business margin 0.9% 1.1%
Diluted embedded value per share (R) 29.77 27.08 10%
Return on embedded value per share 11.7% 6.3%
Return on equity 22.7% 4.9%
1 Normalised headline earnings adjust the JSE definition of headline earnings for the dilutive impact of finance costs related to preference shares
that can be converted into ordinary shares of the Group, the impact of treasury shares held by policyholder funds and the iSabelo Trust,
the amortisation of intangible assets arising from business combinations, B-BBEE costs and the amortisation of the discount at which the iSabelo Trust
acquired the Momentum Metropolitan treasury shares. The adjustment for the impact of treasury shares removes mismatches that are unique to financial
institutions that invest in their own securities on behalf of clients.
2 Operating profit represents the profits (net of tax) that are generated from the Group’s operational activities and reflects normalised headline
earnings excluding the investment return on shareholder funds.
3 Return on equity expresses normalised headline earnings as a percentage of start of year net asset value, adjusted for the items outlined in footnote 1,
as well as the adjusting items to determine headline earnings.
Net asset value
R million F2022 F2021 Change %
Total assets 574 017 554 725 3%
Total liabilities (549 031) (532 802) 3%
Total equity 24 986 21 923 14%
Momentum Metropolitan earnings soar
Declares strong dividend and solidifies competitive position
Introduction
We are pleased with Momentum Metropolitan's financial results for the past year, and we are also encouraged by the progress made with a wide range of
strategic initiatives - the impact of which is not yet fully reflected in this set of results.
There was no single factor that caused the good outcome, but it is the result of almost all our businesses performing at, or close to potential. The results
were positively impacted by improved mortality rates, releases of Covid-19 reserves and positive investment variances and returns.
Group consolidated earnings
The Group delivered normalised headline earnings of R4 383 million for the twelve months ended 30 June 2022, significantly higher than the prior year. It is
noted that the prior year's results are not directly comparable to the current year as the prior year results were severely impacted by the Covid-19
pandemic and included a net mortality loss of R2 823 million. The Group's solid performance during F2022 follows the less severe impacts of Covid-19 on
earnings, with mortality starting to improve over the third and fourth quarters. With the positive earnings impact from the partial release of opening
Covid-19 provisions, mortality contributed positively to the normalised headline earnings of the Group, by R105 million.
The current year's results suggest that Momentum Metropolitan is on track to deliver the results targeted in our Reinvent and Grow strategic roadmap. The
operating environment, however, continues to present multiple challenges. Having started to recover from the effects of the Covid-19 pandemic, South Africa
has been hit by further shocks in the form of destructive protests and riots, severe flooding in KwaZulu-Natal, frequent electricity loadshedding, high fuel
prices, and rising food inflation. As Momentum Metropolitan we will continue to make every effort to look after the financial needs of our policyholders and
to generate value to shareholders despite this difficult backdrop.
Operating profit improved significantly to R3 363 million, from R73 million in the prior year. This improvement was supported by the improved mortality
results, as well as a strong improvement in investment variances. All the South African life insurance business units grew operating earnings. Momentum
Insure and Momentum Metropolitan Africa reported significantly lower operating earnings. Momentum Insure was negatively affected by severe weather-related
claims. Momentum Metropolitan Africa experienced large mortality losses in the first half of F2022.
The Group's investment return improved by 9% to R1 020 million, aided by the general recovery of investment markets, fair value gains from the revaluation
of the Group's investment in venture capital funds, and foreign exchange gains on foreign currency-based assets.
Normalised headline earnings per share increased from 67.1 cents to 287.2 cents. Headline earnings per share increased from 30.9 cents to 297.3 cents and
earnings per share improved from 31.3 cents to 260.6 cents.
The following table outlines the contribution from operating profit and investment return to normalised headline earnings per business unit:
F2022 F2021 Change %
R million Operating Investment Normalised Operating Investment Normalised Operating Investment Normalised
profit return headline profit return headline profit return headline
earnings earnings earnings
Momentum Life 976 134 1 110 (991) 132 (859) >100% 2% >100%
Momentum Investments 870 68 938 1 103 (8) 1 095 (21)% >100% (14)%
Metropolitan Life 606 66 672 367 68 435 65% (3)% 54%
Momentum Corporate 1 049 125 1 174 (607) 55 (552) >100% >100% >100%
Momentum Metropolitan Health 212 (3) 209 214 (1) 213 (1)% <(100)% (2)%
Non-life Insurance 399 62 461 508 36 544 (21)% 72% (15)%
Momentum Metropolitan Africa 8 110 118 62 194 256 (87)% (43)% (54)%
Normalised headline earnings from operating business units 4 120 562 4 682 656 476 1 132 >100% 18% >100%
New Initiatives (468) 2 (466) (360) 2 (358) (30)% 0% (30)%
Shareholders segment (289) 456 167 (223) 456 233 (29)% 0% (28)%
Normalised headline earnings 3 363 1 020 4 383 73 934 1 007 >100% 9% >100%
More details on the Group's earnings performance, including a detailed analysis of the impact of Covid-19 on the Group and segmental information on the
performance of the Group's businesses, can be found in the Group's full results announcement and summarised audited annual financial statements for the
12 months ended 30 June 2022, available on the Group's website at https://www.momentummetropolitan.co.za/en/investor-relations/financial-results.
Group new business performance
The excellent new business performance in Momentum Corporate was a highlight for the Group.
Key metrics F2022 F2021 Change %
Recurring premiums (R million) 4 607 3 783 22%
Single premiums (R million) 51 885 47 497 9%
PVNBP (R million) 72 673 65 898 10%
Value of new business (R million) 626 725 (14)%
New business margin 0.9% 1.1%
The Group increased PVNBP to R72.7 billion, 10% higher than the prior year. Momentum Corporate delivered pleasing new business growth in both recurring
premium group risk products, as well as single premium investment PVNBP, which almost doubled. Metropolitan Life achieved strong growth in protection new
business, as well as annuities and structured single premiums. Momentum Metropolitan Africa also saw pleasing new business volume growth, driven by
corporate new business in Namibia, Lesotho and Botswana, together with strong retail savings and annuity new business in Namibia and Botswana. Momentum
Investments delivered solid growth in guaranteed annuities and Momentum Wealth's local investment platform business while Momentum Life's new business
declined mainly due to a decline in PVNBP on protection products, partly offset by improved new business on long-term savings business.
The Group's VNB declined by 14% to R626 million, driven by the negative impact of yield-curve related economic assumption changes, which are effected at the
point of sale, in all business units, and a general change in new business mix to lower margin products.
Return on equity and embedded value
Return on equity for F2022 was 22.7%, up from 4.9% in the prior year. This increase follows the Group's earnings improvement together with an ongoing focus
on capital efficiency.
Group embedded value per share was R29.77 on 30 June 2022. The return on embedded value per share was 11.7% for F2022 up from 7.3% in the prior year. This
reflects a return more closely aligned with our long-term expectations, compared to the results observed over the last two years.
Solvency
The Group remains well capitalised. The regulatory solvency positions of all the Group's entities remain within the target ranges. For Momentum Metropolitan
Life, the Group's main life insurance entity, the Solvency Capital Requirement (SCR) cover improved from 1.73 times SCR at 30 June 2021 to 2.03 times SCR at
30 June 2022. The group SCR cover for Momentum Metropolitan Holdings improved from 1.5 times SCR at 30 June 2021 to 1.6 times SCR at 30 June 2022.
Share repurchase programme
Momentum Metropolitan continually assesses its surplus capital position, taking into consideration expected dividends and other planned capital deployments
across the corporate portfolio. Based on the assessment of the Group's capital position, the Board approved in late F2022 a repurchase programme of the
Group's ordinary shares up to a maximum amount of R750 million. The programme is in accordance with the general authority received by way of a shareholder
resolution passed at the Annual General Meeting, held on 25 November 2021.
Following approval from the Prudential Authority, Momentum Metropolitan commenced with the programme on 10 August 2022. The Group remains committed to
following a disciplined trading approach under the programme and will only repurchase shares to the extent that market conditions are favourable.
Repurchased shares will be cancelled. Between 10 August 2022 and 12 September 2022, the Group had bought back 23 million shares, for a total consideration
of R382 million. When these shares are cancelled, the gain on the 30 June 2022 embedded value will be approximately 20 cents per share.
In line with Momentum Metropolitan's capital distribution philosophy, the share repurchase programme will not be in lieu of a dividend and the Group's
dividend policy to declare dividends within a dividend cover range of 2.0 to 3.0 times normalised headline earnings, remains unchanged.
The Board believes that the repurchase programme demonstrates our dynamic approach to capital management in line with the Group's Reinvent and Grow
strategy. Subject to the capital and liquidity requirements of the Group, and provided ordinary shares can be bought back at an attractive discount to
embedded value per share, it is anticipated that the share repurchase programme of R750 million would be increased over the next two years.
Dividends
Momentum Metropolitan declared a final dividend of 65 cents per ordinary share. Together with the interim dividend of 35 cents per ordinary share, the total
dividend for the 12 months ended 30 June 2022 is 100 cents per ordinary share, an increase of 150% from the 40 cents per ordinary share declared in the
prior year. The F2022 total dividend represents a dividend cover of 2.9 times normalised headline earnings. This payout is at the upper end of the target
dividend cover range of 2.0 to 3.0 times normalised headline earnings.
The dividend is payable out of income reserves to all holders of ordinary shares recorded in the register of the company on Record Date. The dividend will
be subject to local dividend withholding tax at a rate of 20% unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate.
This will result in a net final dividend of 52 cents per ordinary share for those shareholders who are not exempt from paying dividend tax. The number of
ordinary shares at the declaration date was 1 497 475 356.
The income tax number of Momentum Metropolitan is 975 2050 147
Publication of declaration data Wednesday, 14 September 2022
Last date to trade cum-dividend Tuesday, 4 October 2022
Trading ex-dividend Wednesday, 5 October 2022
Record date Friday, 7 October 2022
Payment date Monday, 10 October 2022
Share certificates may not be dematerialised or rematerialised between Wednesday, 5 October 2022 and Friday, 7 October 2022, both days inclusive.
Outlook
We are encouraged by these good results achieved by the Group during a period of challenging economic and social conditions. The normalised headline
earnings of R4 383 million for the year suggests that we have largely recovered from the impact of Covid-19 on earnings. During the year, the Group achieved
solid growth in new business, apart from Momentum Life protection business, which has started to show improvement in recent months. The Group's strong
results in the first year of the three-year Reinvent and Grow strategy is encouraging and confirms our solid competitive position.
Looking ahead, we remain cautious about the pace of economic recovery across our operations, as disposable income remains under pressure because of
depressed economic activity. The timing and magnitude of future Covid-19 waves remain uncertain and could still impact our earnings in future, however, it
appears that the disease has now become endemic.
We are encouraged by the recovery in normalised headline earnings. Although some of the positive contributions to the current year's earnings are not
expected to repeat in F2023, our underlying operating earnings are solid and we will continue to focus on achieving the Reinvent and Grow financial targets
for F2024, namely normalised headline earnings of R4.6 billion to R5.0 billion and ROE of 18% to 20%.
Short form statement
This announcement is the responsibility of the directors. The information in this short form announcement, including the financial information on which the
outlook is based, has not been reviewed and reported on by Momentum Metropolitan's external auditors. Financial figures in this announcement have been
correctly extracted from the summarised audited annual financial statements. It is only a summary of the information contained in the full announcement and
does not contain full or complete details. Any investment decision should be based on the full SENS announcement accessible from Wednesday, 14 September
2022, via the JSE link and also available on the Company's website at https://www.momentummetropolitan.co.za/en/investor-relations/financial-results.
The annual financial statements have been audited by the Group's auditors, Ernst & Young Inc, who expressed an unqualified opinion thereon. The annual
financial statements, including the audit opinion and key audit matters can be found on the Group's website at
https://www.momentummetropolitan.co.za/en/investor-relations/financial-results. A printed copy of the full SENS announcement may also be requested from the
Group Company Secretary's Office, Gcobisa Tyusha, Tel: +27 12 673 1931 or gcobisa.tyusha@mmltd.co.za and is available for inspection by appointment, at the
Company's registered office, weekdays Monday to Friday during office hours from 09:00 - 16:00.
The JSE link is as follows: https://senspdf.jse.co.za/documents/2022/jse/isse/MTME/FY22Result.pdf
SENS issue: 14 September 2022
Equity sponsor
Merrill Lynch SA (Pty) Ltd t/a BofA Securities
Debt sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 14-09-2022 07:05:00
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