| Wed 26 May 2004, 14:49 | | Metropolitan Holdings Limited - Trading Update |
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Metropolitan Holdings Limited - Trading Update
METROPOLITAN HOLDINGS LIMITED
Formerly New Africa Capital Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN: ZAE000050456
JSE Share Code: MET
NSX Share Code: MTD
Operational performance for the three months ended 31 March 2004
New business premiums
3 months to 3 months to 3 months to % change
31-Mar-02 31-Mar-03 31-Mar-04
Rm Rm Rm
Recurring premiums
Retail business 126 125 171 37
Corporate business 16 67 54 (19)
International business 25 25 25 0
Individual life 24 24 20 (17)
Employee benefits 1 1 5 400
167 217 250 15
Single premiums
Retail business 162 217 202 (7)
Corporate business 209 133 245 84
International business 29 5 6 20
(incl EB)
400 355 453 28
Total NB premiums 567 572 703 23
APE 224 253 295 17
Comments
- These are provisional figures only, i.e. they are subject to adjustment at
the year-end valuation.
- The basis on which the 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 shown above are all net of outside shareholders`
interests.
- Metropolitan Botswana was 75% owned throughout the period.
- The ownership of Metropolitan Namibia decreased from 100% to 80.2% with
effect from 1 November 2002. On 1 July 2003 it decreased further to 76.8%.
Retail business
The recovery experienced in 2003 continued in the first quarter of 2004. The
number of new policies and the average premium per new policy increased across
most distribution channels, confirmation of sustained growth in market share
thanks to our ongoing efforts in the field.
An impressive growth percentage was achieved. Early indications are that the
uptrend will be maintained for the rest of the year, but because of the higher
base, the percentage will be lower.
The biggest improvement in both production and persistency was achieved by the
general intermediaries channel. On the recurring premium side there was a marked
drop-off in direct marketing business.
In 2002 the market was cautioned that the phenomenal growth of Metropolitan
Direct during that year was not likely to continue into 2003, given that most of
the new business being written emanated from a single retail source.
Although the full effect of this phenomenon was not felt in 2003, as
anticipated, the downside thereof is now becoming apparent. With a view to
reversing this trend, we are implementing an alternative approach, involving an
extensive restructuring that began in March this year.
As a first step, the top management team was rationalised and a boutique direct
marketing business, Directfin Solutions, established. From the beginning of
June, all direct marketing call centre and direct mail activity will be
outsourced to Directfin while we will continue to administer both existing and
new direct marketing business.
Overall, retail field staff numbers and retention rates are still rising thanks
to enhanced recruitment and training. Selected brokers who are not able to
retain their independence in the new regulatory environment are also being
brought into the fold.
Lapses at inception remain a key area of focus because although the downtrend
that began in 2003 is continuing, we are keen to see further improvement. Lapses
as a percentage of gross premiums received were down 11% quarter on quarter.
As far as expenses are concerned, the focus on reducing unit costs is continuing
and management remains committed to containing administration expenses, which
for the group as a whole are budgeted not to exceed actual expenses for 2003. At
the end of the first quarter we were on track to achieve this objective.
Corporate business
Metropolitan Employee Benefits
Total recurring premium income increased considerably compared to the equivalent
period in 2003, driven mainly by a resumption of investment cashflows on some
large smoothed bonus client funds. Although new recurring premium income was
slightly below that for the first quarter of 2003, the latter figure was
inflated by one particularly large group life contract written in January that
year. Several new risk contracts have been signed subsequent to 31 March, with
additional risk business in the pipeline, which augurs well for the remainder of
2004.
The growth in single premium income, generated by several large contracts from a
wide spread of sought-after clients, was particularly pleasing given that
conditions in this market are still extremely challenging.
Overall, we are experiencing satisfactory inflows of both investment only
(smoothed bonus) and risk business along with restored investor confidence on
the back of the recovery in the equity markets. The prospect of reduced
volatility provided by smoothed bonus funds retains its allure for risk-averse
investors, and the fact that bonus stabilisation reserves improved during the
first quarter added considerably to the appeal of these products for trustees
and fund members alike. The higher margins on investment business make it
particularly attractive from a fund manager perspective.
Our new multi-manager smoothed bonus product, launched during the first quarter,
has earned high praise from brokers, including several `best of breed`
accolades.
Outflows as a result of member investment switching and withdrawals increased.
Early retirements, retrenchments and in particular individual investment choice
played an important role. Switching is set to become a key factor with which all
fund managers will have to contend in future, making the need for member
education even more imperative than before. Switches tend to be concentrated in
the first and, to a lesser extent, the third quarter. At this stage, however,
we do not expect the full year`s experience to be significantly out of line with
assumptions.
Metropolitan Employee Benefits was awarded two PMR (Professional Management
Review) diamond awards (1st in industry) in February - for group pension and
provident fund administration, and for the provision of innovative investment
products. This, together with our unparalleled BEE credentials, considerably
enhances our ability to compete for new business.
Metropolitan Asset Managers
The global managed fund, which represents the MetAM house view, achieved an
absolute return of 3.3% for the first quarter of the year, outperforming its
internal benchmark by 1.2%. In total, shareholder funds outperformed the global
managed fund. The majority of internal funds beat their internal benchmarks for
the first three months of 2004. Asset allocation and improved stock selection
made positive contributions to relative performance.
For the same period, MetAM achieved 5th position in its peer group (the ten
companies included in the Alexander Forbes Large Manager Watch), where the
highest return was 3.8% and the lowest 2.4%. However, in the larger Alexander
Forbes Best Investment View Survey we were ranked in the top quartile.
Metropolitan Collective Investments
First quarter inflows, mostly into white label portfolios, were steady, at a
level of overall profitability consistent with that of the 2003 financial year.
Metropolitan Property Services
Once again, benchmark-beating returns were achieved, while vacancy levels
remained below the market average. The company retained its IPD (UK-based
International Property Databank) ranking amongst the top performers in the
property sector.
International business
There was a marginal slowdown in the international arena, a relatively small
part of the group, where new business volumes were down but values were of a
similar magnitude. The establishment of a new company in Lesotho continued to
ensure sharper focus on operations in that country. In Namibia, the limitations
imposed by government on insurance-related payroll deductions put a damper on
growth. As far as Botswana is concerned, the industry`s image is suffering
because maturity pay-outs under life insurance products sold in that country are
currently below projected values due to poor investment market performance.
Administration costs were well contained in all three countries.
Health business
The new full administration, franchise and managed care (Qualsa) contracts that
MHG was awarded towards the end of last year came into effect on 1 January.
Qualsa secured further managed care, HIV/AIDS management, disease risk
management, pharmaceutical benefit management and prescribed minimum benefit
management contracts during the course of the first quarter.
On the franchising front, the number of principal members under administration
was 108% up - from 37 410 to 77 973 - compared to the first quarter of 2003,
while the number of principal members under full administration increased by 8%
from 244 273 to 262 784.
MHG now provides rapid payment services, known as Financial Administration
System Techologies (FAST), to some 2 000 service providers, including
pharmacies. The company`s incentivised wellness and loyalty programme, The Good
Life (TGL), is being rolled out to non-medical aid as well as existing medical
aid clients.
Service levels were maintained throughout this expansion, while profit margins
were higher thanks to a measure of excess capacity in 2003.
Corporate developments
Repurchase of shares
Metropolitan repurchased 35 376 184 ordinary Metropolitan shares that were
previously held by New Africa Investments Limited (NAIL) at a price of R238 741
929 from Capricorn Capital Partners Holding Company (Pty) Ltd. In accordance
with JSE regulations, all of these shares were cancelled.
2004 empowerment rankings
The results of the Top Empowerment Companies survey, ranking South Africa`s top
200 listed companies in terms of their empowerment credentials, were announced
on 29 April. The research was conducted by empowerment rating agency Empowerdex
in conjunction with the Financial Mail.
Metropolitan was rated the most empowered company in the financial services
sector (2003: 1st in the insurance sector), and achieved 4th position in the all
sector rankings (2003: 8th).
End
ISSUED BY NICO OOSTHUIZEN
MANAGER: INVESTOR & FINANCIAL MEDIA RELATIONS
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406111 OR CELL 0832857092
DATE 26 MAY 2004
QUERIES TYRREL MURRAY
GENERAL MANAGER: GROUP FINANCE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405083 OR CELL 0828892167
Date: 26/05/2004 02:30:15 PM Produced by the JSE SENS Department
