| Wed 15 Mar 2006, 8:02 | | Metropolitan Holdings Ltd - Metropolitan proves it |
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MET
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Metropolitan Holdings Ltd - Metropolitan proves its mass market appeal
METROPOLITAN HOLDINGS LTD
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
JSE Share Code: MET & ISIN: ZAE000050456
("Metropolitan")
Metropolitan proves its mass market appeal
As SA"s largest life insurer with a specific focus on the low and middle income
markets, Metropolitan today (15 March) announced financial results for the year
ended 31 December 2005 that exceeded market expectations. Last week, Markinor"s
second annual financial services loyalty benchmarking report revealed that
Metropolitan"s customers are the most loyal in the long-term insurance sector.
The excellent results bear testimony to the group"s entrenched position in the
so-called emerging market, where it is both very well liked and very well
respected. This is the first time that the group has issued full-year results
prepared in accordance with international financial reporting standards (IFRS).
Earnings, excluding the once-off release of surplus from the 90:10 fund in 2004,
were up 39%, while fully diluted core headline earnings per share increased by
35%. Embedded value per share grew by 22% to R14.99.
Thanks to its proven track record as a low-cost developer, administrator and
distributor of financial products that provide security and generate growth,
Metropolitan is prospering, while at the same time continuing to achieve its
vision of creating prosperity for the people of Africa.
"The market penetration we have achieved to date has been built largely on our
ability to successfully administer low-margin, high-volume business. As such we
are fully supportive of the concerted efforts being made at a national and
industry level to achieve a better value proposition for policyholders, " says
group chief executive Peter Doyle.
"We are looking to enhance the affordability of our products to help us retain
our competitive edge at the lower end of the market. We will continue to refine
our business models to keep expenses to the minimum."
Metropolitan was one of the signatories of the statement of intent, the
agreement reached between national treasury and the life industry in December
2005 regarding the payment of minimum values on early policy termination.
"Despite rising levels of disposable income, consumption has to date outpaced
savings in the lower and middle income markets in particular. However, with the
life industry regaining credibility thanks to the agreement, we look forward to
once more capitalising on our focused position.
"Our objective, which is to become the leading provider of affordable risk,
health, savings and investment solutions to lower income earners, is well within
our capabilities given our ongoing commitment to genuine economic empowerment,"
says Doyle.
Metropolitan is now, for example, making extensive use of telephones - both
conventional and cell phones - instead of paper when processing new business,
including doing a large percentage of its underwriting telephonically. The
customer is closely involved at all stages of the far simpler and far quicker
process.
"This efficient and highly cost-effective way of writing new business not only
makes the customer the focal point throughout the process, but also enables our
intermediaries to operate anywhere in a country, even in remote outlying areas,
as long as they have access to a telephone," points out Doyle.
"We are also extremely well positioned to extend our current range of individual
life products to meet the requirements of entry-level, or so-called CAT
compliant, products, with their emphasis on reduced costs, easier availability
and fair terms and conditions."
In view of its healthy capital position, which was boosted by robust investment
markets in 2005, Metropolitan announced that in April it will be returning
capital of R1 per share to shareholders, equal to 8% of its current share price.
This is in addition to a capital distribution of R1 per share in January last
year, a strong dividend policy and share buy-backs of R242 million during 2005.
"We review our capital levels on an ongoing basis and will, where appropriate,
continue to buy back shares through the market as opportunities present
themselves while simultaneously exploring other ways of effectively deploying
capital," says Doyle.
All the Metropolitan businesses contributed to the group"s increased prosperity
in 2005, testimony to the success of its revenue diversification strategy. The
contributions from the health and international businesses were particularly
impressive.
Metropolitan Health is now the largest administrator of closed medical schemes
in the country, with a 47% market share.
Thanks to its proven track record as a low-cost administrator and provider of
managed healthcare services, the company secured two of the highly sought-after
Government Employees Medical Scheme (GEMS) contracts awarded in December 2005 -
the administration and medicine clearing house contracts.
Metropolitan"s existing operations in neighbouring Namibia, Botswana and Lesotho
grew profits strongly in 2005. The group has a significant market share in each
of these countries.
In line with its strategy of expanding further into Africa, Metropolitan has
recently established a start-up business in Kenya and purchased an existing life
operation in Ghana. Opportunities in Nigeria are being actively investigated.
From the outset in 2005 the group emphasised that it was focusing strongly on
asset management. The board is delighted that Metropolitan Asset Managers
delivered excellent absolute and relative investment performance for the twelve
months to December 2005. Key funds ended the year in third position in the
Alexander Forbes Global Manager Watch.
Doyle points out that the asset management function is key to the group"s
overall strategy of protecting and growing people"s wealth and therefore
integral to its future success. "Without competitive investment performance,
affordability will not be sustainable as our competitive differentiator in the
long term."
Metropolitan once again stood out in its ability to increase funds received from
clients, with gross inflows for 2005 of almost R24 billion. The group"s total
assets under management now exceed R70 billion.
Summary of Metropolitan"s stakeholder value-add to December 2005
December December %
2004 2005 growth
Core headline earnings R482 m R 641 m +33
Diluted core headline earnings per 71 c 96 c +35
share
Earnings R1 653 m R 1 695 m +3
Earnings, excluding once-off release R1 217 m R1 695m +39
from 90:10 fund in 2004
Diluted earnings per share, 177 c 257 c +45
excluding once-off release from
90:10 fund in 2004
Return on embedded value (%) * 29 27
Embedded value per share 1 225 c 1 499 c +22
Final dividend per ordinary share 31.50 c 39.00 c +24
Total dividend per ordinary share 52.00 c 63.00 c +21
Total recurring premiums R5.2 bn R5.8 bn +11
Retail new business margin 15.2 11.5 -24
Assets under management R53.7bn R71.4bn +33
*2004 includes CU release
2005 includes provision for national treasury agreement
Notes
Core headline earnings are a particularly appropriate measure of the performance
of financial services groups such as Metropolitan in that they eliminate items
of both a once-off and an inherently volatile nature, such as changes to the
valuation basis and capital appreciation/depreciation. The group"s 2004 results,
for example, included a once-off release into profits from the ring-fenced 90:10
fund while its 2005 results incorporated a provision for the agreement with
national treasury on minimum early termination values, both of which are
excluded from core headline earnings.
In 2004 the FSB approved Metropolitan"s proposals to integrate the life
insurance book it had previously acquired from CU Life and to remove the
latter"s 90:10 license, with effect from I January that year. The business had
until then been held in what was known as the ring-fenced 90:10 fund.
Diluted earnings, headline earnings and core headline earnings have been
adjusted for expenses relating to all convertible redeemable preference shares
and treasury shares in issue. The preference shares were issued to
Metropolitan"s strategic empowerment partner, Kagiso Trust Investments (KTI).
end
ISSUED BY SUE SNOW
FINANCIAL MEDIA SPECIALIST
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406119 OR 0833009745
DATE 15 MARCH 2006
QUERIES PETER DOYLE
GROUP CHIEF EXECUTIVE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405681 OR 0828802690
TYRREL MURRAY
GENERAL MANAGER: GROUP FINANCE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405083 OR 0828892167
Date: 15/03/2006 08:02:23 AM Produced by the JSE SENS Department
