| Tue 30 May 2006, 14:30 | | Metropolitan - Operational performance: three mont |
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MET
MET
Metropolitan - Operational performance: three months ended 31 March 2006
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")
Operational performance for the three months ended 31 March 2006
Group overview
Group annual premium equivalent (APE) increased by 4%
The retail enhancement initiative (REI), which introduces a more cost-
effective and speedier way of capturing and issuing new business, has been
rolled out to all direct writers, with the other distribution channels to
follow (GIC, brokers)
60% of Metropolitan Life"s products are being sold on REI
Although REI and the restructuring of the sales management levels of direct
writers and GIC continued to have a dampening effect on new business volumes
in 1H06, REI remains the most important intervention in terms of enhancing
the affordability and accessibility of retail"s products. In order to
maintain our dominance as a provider of "value for money products" at the
lower end of the market, the entire sales process had to be revised and
short to medium term pressure on new business volumes is therefore not
unexpected, as reported at year-end.
However, management remains confident that growth between 3% and 8% for the
full year is still achievable
The recovery in the corporate business has resulted in a 101% growth in its
APE
We are continuing with our strategy of exploring at least one new
international market per annum to counter saturation of existing non South
African markets
Metropolitan Health continues its growth path
Retail business
3 months to 3 months to 3 months to
31-Mar-04 31-Mar-05 31-Mar-06
Rm Rm Rm
New business
Recurring premiums 171 168 153
Single premiums 202 266 375
APE 191 195 191
Cashflow
Recurring premiums 747 829 908
Single premiums 209 276 374
Claims paid 705 650 801
Net 251 455 481
As expected, total new business was broadly in line with 1Q05. The factors
impacting the operation were:
Continued focus on the quality of new business being issued
The roll out of the retail enhancement initiative (REI) (aimed at reducing
new business issue time period and costs)
Internal sales management restructuring
Improved new business flows from direct and group schemes channels
Increased single premiums from third party distribution channels
Retail continues to face key challenges through:
Full operationalisation of REI
Industry changes brought about by FAIS, the pension funds adjudicator and
agreement with National Treasury and the anticipated adjustments to the
commission structure
Both recurring and single premium income increased well in excess of
inflation and continued contributing to the growth of the in-force book
Claims experience was in line with expectations
Retention rates remain within acceptable limits for our core block of
ordinary business. However, uncertainty surrounding the changes to the
commission structures, if protracted, could negatively impact new business
production in the short to medium term.
Corporate business
3 months to 3 months to 3 months to
31-Mar-04 31-Mar-05 31-Mar-06
Rm Rm Rm
New business
Recurring premiums 54 17 34
Single premiums 245 79 161
APE 79 25 50
Cashflow
Recurring premiums 317 358 374
Single premiums 244 79 161
Claims paid 420 791 1 090
Net 141 (354) (555)
1Q06 has returned to more normal market conditions. The major factors
experienced during the quarter were:
Continued high levels of smoothed bonus terminations. While we firmly
believe in the appropriateness of smoothed bonus business as an asset class
in portfolio construction for retirement vehicles, it has been viewed
negatively by some consultants in the light of the recent strong market
performance
Increased interest in our Absolute Return Fund investment product
An increase in compliance-related activity around the submission of surplus
apportionment schemes, and new retirement fund financial statement formats
On the positive side:
Total premium income showed a substantial increase over 2005, boosted mainly
by single premiums
While the marketplace remains challenging, there are undoubtedly still
considerable growth opportunities for innovative products; options for risk-
averse clients in particular are actively being explored
MetEB"s ability to tailor solutions for individual retirement funds is
gaining increased recognition
Claims experience on all risk schemes remained within pricing parameters
Independently, and together with KTI, MetEB continues to explore new
business opportunities
The improved market conditions have continued through April 2006
International business
3 months to 3 months to 3 months to
31-Mar-04 31-Mar-05 31-Mar-06
Rm Rm Rm
New business
Recurring premiums 25 23 16
Individual life 20 19 15
Employee benefits 5 4 1
Single premiums (incl EB) 6 67 24
APE 26 30 18
Cashflow
Recurring premiums 164 190 184
Single premiums 22 74 30
Claims paid 104 12 161
Net 82 141 53
Conditions remain challenging in all the markets in which we operate
New operations were started in Kenya and Ghana during the quarter
Net cashflow position remained positive, but reduced
Asset management business
Cashflow
Third party mandates - net (51) (298)
Collective investments - 968 1 297
net
Improved performance over the longer term continues
Ranked 3/11 over one year to 31 March 2006 in the Alexander Forbes Global
Large Manager Watch
Overall net cashflow remained positive
All funds exceeded their performance benchmarks in 1Q06
Health business
Main focus is on providing service excellence to existing clients and the
smooth take-on of government employees joining the GEMS scheme
Qualsa continued to increase the size of its managed healthcare business by
being awarded new contracts
440 000 principal members under administration
Performance levels across the board are in line with service level
agreements
During the period Metropolitan bought half of the shares management owned in
MHG, thereby reducing the future dilutory impact on MHG"s contribution to
group earnings
Outlook remains positive
Group perspective
Administration expenses
Administration expenses continue to be a key area of focus. Overall life
insurance administration expenses were well contained and remain on target.
Corporate developments
2006 empowerment rankings
Metropolitan"s leading empowerment credentials were once again confirmed by
the group being awarded the "Top BEE Market Performer of the Year" at the
annual BusinessMap Foundation Empowerment Awards 2006 (March 2006)
Share liquidity
2006 has again seen higher trading volumes on the JSE in general, with
growing interest by foreign fund managers. The number of Metropolitan shares
traded in the first quarter of 2006 was 9% higher than that recorded in the
first quarter of 2005, while our foreign direct shareholding has continued
to increase.
JSE SRI index
Metropolitan has been admitted to the JSE"s Socially Responsible Investment
(SRI) index with effect from
3 May 2006
Forbes Global 2000
The group was honoured to be included in the Forbes Global 2000, a list of
the top 2000 companies in the world according to market value, turnover,
profit and assets. Metropolitan was listed as the 14th South African
company.
Comments / qualifications
All figures are provisional and unaudited
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 shareholders" interests
Metropolitan Botswana was 75.8% owned throughout the period
Metropolitan Namibia was 80.9% owned throughout the period
End
ISSUED BY Nico Oosthuizen
Manager: investor relations
Metropolitan Holdings Limited
Tel 021 940 6111 or 083 285 7092
DATE 30 May 2006
QUERIES Peter Doyle
Group chief executive
Metropolitan Holdings Limited
Tel 021 940 5681 or 082 880 2690
Preston Speckmann
Group finance director
Metropolitan Holdings Limited
Tel 021 940 6634 or 083 285 6454
Tyrrel Murray
General manager: group finance
Metropolitan Holdings Limited
Tel 021 940 5083 or 082 889 2167
Date: 30/05/2006 02:30:31 PM Produced by the JSE SENS Department
