| Tue 16 Nov 2004, 10:20 | | OPERATIONAL PERFORMANCE FOR THE NINE MONTHS ENDED |
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METROPOLITAN - OPERATIONAL PERFORMANCE FOR THE NINE MONTHS ENDED
30 SEPTEMBER 2004
METROPOLITAN HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
JSE Code: MET
NSX Code: MTD
ISIN Code: ZAE000050456
(`Metropolitan`)
3RD QUARTER HIGHLIGHTS
* New business APE up 89%
* All-round growth in new business continues to surprise on the
upside
* Further improvements in persistency
* Cost containment remains on track
* Investment performance receiving focussed attention
OPERATIONAL PERFORMANCE FOR THE NINE MONTHS ENDED 30 SEPTEMBER
2004
New business premiums
Third quarter Year to date
2004 2003 % 2004 2003 %
change change
Rm Rm Rm Rm
Recurring premiums
Retail business 228 167 37 579 430 35
Corporate business 177 49 261 347 143 143
International
business 49 25 96 93 72 29
Individual life 32 24 33 74 69 7
Employee
benefits 17 1 19 3
454 241 88 1 019 645 58
Single premiums
Retail business 412 179 130 947 622 52
Corporate business 185 155 19 588 370 59
International
business 48 5 87 16
645 339 90 1 622 1 008 61
Annual premium
equivalent (APE) 519 275 89 1 181 746 58
Comments
* These are provisional figures only, ie 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% and Metropolitan Namibia 78.7% owned
throughout the period.
Retail
* Retail continued to deliver good all-round growth compared to
the third quarter of 2003, with recurring premium new
business up 37% and single premium business 130% higher.
* Direct writers maintained their excellent performance,
growing both volume of new business and average premium size.
* Metropolitan Odyssey sustained its strong showing in the
recurring premium market, reflecting increased penetration of
the upper emergent market.
* Metropolitan Odyssey grew its single premium business even
more substantially, but it should be noted that this
business, while profitable for the group, is sold at below
our average margins.
* The direct mail distribution channel is recovering steadily,
and new business production was up quarter on quarter.
* Group schemes were not operating at full capacity as the
benefits of their recent restructuring have not begun flowing
through as yet.
* 40% of new policies were sold in the aspirant ( 45% in the lower emergent
* (of retail.
* Maturity claims were significantly higher than in the same
period in 2003 as five and ten year endowments continued to
mature.
* There was an increase in individual life policy surrenders.
* Overall persistency continued to improve, with lapses at
inception dropping below 14%, the lowest level since before
the Persal issue; the improved persistency of debit order
business was particularly pleasing.
* Retail remains on track to achieve the challenging 12.5% new
business profit margin target set for 2004, with recurring
premium business as always the main driver.
Corporate
* Corporate recorded a surge of 261% in new recurring premium
business, once again compared to the third quarter of 2003.
* A risk-only scheme, worth R240 million in annual recurring
premium income, was the main contributor to this growth; the
scheme has been 50% reinsured.
* At 19% the increase in single premium business was pleasing,
particularly under difficult market conditions.
* Genuine broad-based empowerment is playing an increasingly
important role in securing new employee benefits business in
view of the growing number of companies claiming empowerment
credentials.
* Recurring premium prospects look good but the single premium
outlook remains depressed.
* There was a further increase in terminations driven by
individual member investment choice.
* Abel Sithole, head of corporate business, was adjudged the
top employee benefits practitioner of the year by the
Association of Black Securities and Investment Professionals
at their annual awards evening in October 2004.
International
* Overall, there was good growth in both individual life and
employee benefits recurring premium new business.
* The percentage increases are inflated because not all of
Metropolitan Lesotho`s new business was reflected under
international in 2003.
* Metropolitan Lesotho recorded strong recurring premium income
growth in 2004.
* Recurring premium new business in Metropolitan Botswana,
however, slowed down significantly while Metropolitan
Namibia`s growth was flat.
* Single premium business increased significantly quarter on
quarter, with Metropolitan Botswana and Metropolitan Lesotho
recording particularly strong performances; the launch of a
new immediate annuity was largely responsible for the
former`s success.
* Metropolitan Namibia recently concluded negotiations to
acquire 100% of Channel Life Namibia; outstanding approvals
are due by 3 December 2004; the combined entity is expected
to be the biggest writer of new business in that country,
outstripping its larger rivals.
* Metropolitan Botswana has launched a concerted drive to
enhance its client service levels, with particular emphasis
on the administrative back-up that is provided locally.
* The transfer of the bulk of the Lesotho business currently on
the books of Metropolitan Life will be implemented as soon as
the necessary approvals have been obtained, and should have
been completed by the end of the year provided all goes
according to plan.
* The mortality experience of both Metropolitan Namibia and
Metropolitan Lesotho has shown an improvement during the
quarter.
Health
* MHG has been awarded the contract to provide administration
services and QUALSA, our health risk management subsidiary,
managed care services to POLMED with effect from 1 January
2005. POLMED is the medical aid scheme of the SA Police
Services and is the largest restricted medical aid scheme in
South Africa with a membership of some 126 000 principal
members. As part of this contract, MHG will establish a full
office infrastructure in Pretoria, including a walk-in
customer service centre for POLMED members. MHG now has a
client base across the public sector, public enterprises and
the private sector in South Africa.
* The MHG Kenyan operation has not performed as well as
anticipated and the long-term outlook for this business is
under review.
* All other client schemes are operating successfully.
Investment markets
* The South African equity markets have improved since the end
of June; this will have a positive impact on group results
for the full financial year.
* It would appear that financial services companies are being
seen in a more favourable light.
* The gap between the investment performance of Metropolitan
Asset Managers and that of its competitors has narrowed in
the most recent short-term ratings.
CU amalgamation
* Approval of the CU amalgamation proposals, as published in a
SENS announcement on 30 August 2004, was granted by the
Financial Services Board on 9 November 2004.
* We estimate that the group embedded value will be some R140
million higher as a direct result of the amalgamation of the
ring-fenced 90:10 fund. Shareholders are, however, reminded
that R40 million of this amount has already been recognised
in the disclosed group embedded value.
* The group has also gained via operational benefits resulting
from further integration of the ex CU Life policies with
Metropolitan Life as well as from a less conservative
approach to valuing the 90:10 fund. This has resulted in an
additional estimated group embedded value increase of R100
million.
* The effective date of the amalgamation is 1 January 2004.
Costs
* Cost containment initiatives remain on track, with the target
of 0% growth still attainable in spite of the exceptionally
strong new business growth.
Business partnership with Kagiso
* The purchase price of R540 million was received and the 76
million shares were issued on 1 October.
* The KTI appointed directors are already making a meaningful
contribution to board deliberations.
Prospects
* New business production in the fourth quarter of 2003 was
unusually good and it is unlikely that the same rate of
growth will be achieved in the fourth quarter of 2004, or
that the exceptional increase in year-to-date production will
be maintained.
* The economic environment in which the group operates, namely
the lower end of the market, is still experiencing growth in
disposable income.
* We remain optimistic that the strategies we have adopted and
are implementing on an ongoing basis will continue to pay
dividends, leading to overall improvements in group
profitability and growth.
End
ISSUED BY SUE SNOW
FINANCIAL MEDIA SPECIALIST
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406119 OR 0833009745
DATE 16 NOVEMBER 2004
QUERIES TYRREL MURRAY
GENERAL MANAGER: GROUP FINANCE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405083 OR 0828892167
Date: 16/11/2004 09:00:13 AM
Produced by the JSE SENS Department
