| Wed 13 Sep 2006, 8:03 | | Strong first-half performance from Metropolitan |
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MET
MET
Strong first-half performance from Metropolitan
METROPOLITAN HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN: ZAE000050456
JSE Share Code: MET
NSX Share Code: MTD
("Metropolitan" or "the company")
Strong first-half performance from Metropolitan
Adding shareholder value
* Interim dividend per share up 21%
* Net funds received from clients of R2.5 billion
* Core headline earnings per share up 21%
* Retail business operating profit up 34%
* Total premium income up 17%
* Total assets under management exceed R75 billion
As SA"s largest financial services group with a specific focus on the low and
middle income markets, Metropolitan today (13 September) announced results for
the six months ended 30 June 2006 largely in line with market expectations.
Metropolitan Retail"s new business, the core of the group"s operations,
strengthened throughout the reporting period, with recurring premium income
increasing from R153 million for the first three months to R184 million for
second three months (an increase of 20%). Subsequent production has continued to
show positive growth, with Metropolitan"s multi-channel approach to distribution
paying handsome dividends. Direct marketing campaigns, for example, have been
responsible for generating large volumes of business.
Progress in Metropolitan Employee Benefits, another of the group"s flagship
businesses, was even more dramatic. New business was a noteworthy 81% up on
2005. In addition, the company secured a R2.2 billion single premium inflation-
linked annuity contract in July, one of the industry"s largest single premium
deals of the year.
Metropolitan Retail, as the largest contributor to group operating profit,
increased its after-tax contribution to R199 million, 34% above the June 2005
equivalent of R148 million, a sterling achievement in the current environment.
Metropolitan Employee Benefits succeeded in maintaining its excellent
profitability track record with an increase of 9% over June 2005. The group"s
asset management businesses also upped their contribution significantly half-
year on half-year.
Metropolitan once again stood out in its ability to increase funds received from
clients, with net inflows for the six-month period of R2.5 billion compared to
R2.2 billion for the six months to June 2005. The group"s total assets under
management now exceed R75 billion.
With a 47% market share, Metropolitan Health is already the largest
administrator of closed medical schemes in South Africa. Take-on in the
Government Employees Medical Scheme (GEMS) - under which Metropolitan Health has
been awarded the administration and medicine clearing house contracts - was
slower than anticipated to June. The pace has, however, been picking up steadily
and looks set to accelerate now that the government health subsidy issue has
been resolved.
Although Metropolitan International"s operations in neighbouring Namibia,
Botswana and Lesotho have retained their substantial shares of the local
markets, there was a drop-off in new business production during the period under
review. The start-up business established in Kenya and the existing life
operation purchased in Ghana in the first quarter of 2006 are still in the
development phase.
"The market penetration Metropolitan has achieved to date has in all instances
been built on our ability to successfully administer low-margin, high-volume
business. While managing expenses remains a high priority, our focus is not
exclusively on costs. We are constantly searching for ways to enhance the value
proposition we offer our policyholders, with improved disclosure currently
another primary area of concern for us, " says Doyle.
"The current industry turmoil has reinforced the need for constant refinements
to our business model, enabling us to keep pace with or preferably a step ahead
of changing consumer requirements."
Metropolitan was, for example, the first of the major life insurers to make
extensive use of telephone technology - conventional and cell phones as well as
call centres - 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 quicker enrolment process,
resulting in greater customer commitment.
Apart from being an efficient and highly cost-effective way of writing new
business that makes the customer the focal point throughout the process, it also
enables intermediaries to operate anywhere in a country, even in remote outlying
areas, as long as they have access to a telephone.
Doyle stresses that changes will remain ongoing as the industry and the group
continue to transform themselves, and will involve other equally fundamental
shifts in the traditional ways of doing business.
Asset management remains a key area of focus for the group, with Metropolitan
Asset Managers attaining fourth position overall in the Alexander Forbes Global
Manager Watch for the twelve months to 30 June 2006, the highest ranking of all
the life insurance asset management companies. Perceptions of MetAM"s investment
capacity and capabilities are starting to change thanks to sustained performance
improvements, and the company is successfully repositioning itself as an African
wealth creator.
After a successful pilot in late 2005, Metropolitan is in the process of
launching a separate banking business unit, Metropolitan Card Operations, with a
view to providing clients with a more comprehensive service offering. Instead of
a branch network, the business relies on a call centre driven distribution and
service delivery model.
Metropolitan"s interims are clearly indicative of the group"s sustained
popularity in the emerging market. "Our strong emphasis on the affordability and
accessibility of products and services strikes a responsive chord with consumers
seeking financial security as well as those aspiring to achieve financial
prosperity," says Doyle.
NB
See over for summary of shareholder value add
Summary of Metropolitan"s shareholder value-add to June 2006
June 2005 June % growth
2006
Diluted core headline earnings R288 m R344 m +19
Diluted core headline earnings per 38.97c 45.26c +16
share
Diluted earnings R633 m R 672 m +6
Diluted earnings per share 85.66c 88.42c +3
Return on embedded value (% 16.6 15.8
annualised) *
Diluted embedded value per share 1 296c 1 479c +24#
Interim dividend per ordinary 24.00c 29.00c +21
share
Total premium income R3 634 m R4 248 +17
m
Retail operating profit R148 m R199 m +34
Total assets under management R58 bn R75 bn +29
* Reduced by provision for national treasury agreement
# Adjusted for capital reduction of 100 cents per share paid out in April 2006
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 2005 results, for example, incorporated a provision for the agreement
with national treasury on minimum early termination values, which was excluded
from core headline earnings.
* 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).
ISSUED BY SUE SNOW
FINANCIAL MEDIA SPECIALIST
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406119 OR 0833009745
DATE 13 SEPTEMBER 2006
QUERIES PETER DOYLE
GROUP CHIEF EXECUTIVE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405681 OR 0828802690
PRESTON SPECKMANN
GROUP FINANCE DIRECTOR
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406634 OR 0832856454
TYRREL MURRAY
GENERAL MANAGER: GROUP FINANCE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405083 OR 0828892167
Date: 13/09/2006 08:03:11 AM Produced by the JSE SENS Department
