| Mon 6 Nov 2006, 12:10 | | Metropolitan - Operational performance: nine month |
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MET
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Metropolitan - Operational performance: nine months ended 30 September 2006
METROPOLITAN HOLDINGS LTD
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN: ZAE000050456
JSE Share Code: MET
NSX Share Code: MTD
("Metropolitan")
Operational performance for the nine months ended 30 September 2006
Group overview
* Group annual premium equivalent (APE) increased by 45% year on year
* The 17% growth in retail APE over the nine months was boosted mainly
by telemarketing and single premium business
* The retail enhancement initiative (REI), which introduces a more cost-
effective and speedier way of capturing and issuing new business, is
in the process of being rolled out to the general intermediary channel
(GIC)
* A new risk product, FutureChoice Cover Options, was launched
* Management remains confident that growth between 3% and 8% in retail
recurring premium new business for the full year remains achievable
* The recovery in the corporate business has continued into the third
quarter, boosted by a single premium inflation-linked annuity of R2.2
billion secured in July, resulting in exceptional growth in corporate
APE of 394%
* Metropolitan International has successfully concluded a transaction
with United Bank for Africa plc (UBA) in Nigeria to form a new
company, UBA Metropolitan Life Insurance Limited. Final agreements
have been signed but the transaction is still subject to certain
suspensive conditions, including regulatory approval.
* Metropolitan Health Group (MHG) continued to secure new contracts,
with GEMS membership showing a marked upswing
* The group"s capital management projects all remain on track
Retail business
9 months 9 months Change 9 months Change
to to to
30-Sept-04 30-Sept-05 30-Sept-06
Rm Rm % Rm %
New business
Recurring 566 527 (7) 587 11
premiums
Single premiums 947 947 - 1 402 48
APE 661 622 (6) 727 17
Cashflow
Recurring 2 325 2 599 12 2 847 10
premiums
Single premiums 946 954 1 1 402 47
Claims paid 2 385 2 110 (12) 2 955 17
Net cashflow 886 1 443 63 1 294 (10)
New business
* New business that was added to the in-force book improved across most
of the distribution channels over the corresponding period for 2005.
In particular, telemarketing, credit life, group schemes and Odyssey
delivered strong contributions. There has, however, been a slow-down
in the telemarketing channel subsequent to 30 September, as this
business is mostly campaign driven
* Uncertainty around the new commission regulations will continue to
influence new business production
Cashflow
* 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 remained in line with expectations
* Retention rates remain within acceptable limits for our core block of
ordinary business, with improvements being recorded over all durations
Challenges
* The further roll-out of REI
* The changes to the commission structure and related transitional
arrangements
Changes in management
Phillip Matlakala, currently executive general manager of Metropolitan
Life, has been appointed to succeed Derek Pead as chief executive of
Metropolitan"s retail business. Derek"s expertise and experience will
continue to benefit the group as he will assume responsibility for a
significant new strategic project.
Derek has resigned as an executive director from the Metropolitan Holdings
board and Phillip has been appointed as an executive director of
Metropolitan Holdings, both with effect from 1 January 2007.
Corporate business
9 months to 9 months Change 9 months Change
to to
30-Sept-04 30-Sept-05 30-Sept-06
Rm Rm % Rm %
New business
Recurring 347 35 (90) 68 94
premiums
Single premiums 588 309 (47) 2 583 736
APE 406 66 (84) 326 394
Cashflow
Recurring 958 1 087 13 1 171 8
premiums
Single premiums 588 309 (47) 2 583 -
Off-balance 321 -
sheet
Claims paid 1 610 2 829 76 2 088 (26)
Net cashflow (64) (1 433) - 1 987 -
New business
* The employee benefits market remains a challenging one in which to
write new business; however, good progress was made during the period
under review. The major events and factors impacting on this business
during the nine months were:
* Single premium business boosted by one particularly large annuity
contract coming onto book during this quarter
* Reduction in termination of smoothed growth funds
* Highly competitive pricing in the risk and single premium markets
Cashflow
* Total premium income showed a substantial increase over 2005, boosted
mainly by single premiums
* Metropolitan Employee Benefits" ability to successfully administer big
books of business is gaining increased recognition which bodes well
for the future
* Claims experience on all risk schemes remained within pricing
parameters
International business
9 months to 9 months Change 9 months Change
to to
30-Sept-04 30-Sept- 30-Sept-06
05
Rm Rm % Rm %
New business
Recurring 66 83 26 70 (16)
premiums
Individual life 47 60 28 55 (8)
Employee 19 23 21 15 (35)
benefits
Single premiums 114 133 17 147 11
(incl EB)
APE 77 96 25 85 (11)
Cashflow
Recurring 483 575 19 585 2
premiums
Single premiums 143 160 12 185 16
Claims paid 332 394 19 452 15
Net cashflow 294 341 16 318 (7)
New business
* Conditions in the Lesotho and Botswana markets remained challenging,
whilst the Namibian business showed some improvement
* The new operations, Kenya and Ghana, are progressing according to
expectations, with a small contribution to new business
* UBA Metropolitan Life Insurance Limited commenced operations in
Nigeria on 1 October 2006
Cashflow
* Net cashflow position remained positive
Asset management business
9 months 9 months to Change
to
30-Sept-05 30-Sept-06
Rm Rm %
Cashflow
Third party mandates - net 334 3 (3 472) -
Collective investments - 3 092 3 003 (3)
net
* There was a deterioration in relative investment performance over the
quarter
* The net outflow in third party mandates resulted from a single client
withdrawal
Health business
* At 30 September the GEMS scheme had registered 32 000 members, of whom
16 766 were fee-paying members
* The rate of growth in the 3rd quarter made it the fastest growing
medical scheme in the country
* Metropolitan Health Group (MHG) has been appointed as the
administrator and managed care service provider to the National
Industries Medical Aid Scheme (Nimas) with effect from 1 January 2007,
thereby adding 17 000 principal members to its database
* MHG entered into franchise and managed care agreements with a Cape-
based open scheme, Genesis Medical Scheme, with 10 000 members with
effect from 1 January 2007
* Performance levels across the board are in line with contracted
service level agreements
* Outlook remains positive
Card operations
* The official launch of this business went smoothly
* Initial response from target markets has been positive
Group perspective
Capital management
* Work is progressing well on the entity-specific risk-based capital
model
* The possible transfer of the Odyssey book and related debt-raising
project, both still subject to regulatory and other approvals, are on-
going
* The group continues actively to monitor the capital position
throughout its operations with a view to increasing the return on
shareholder investments while keeping the capital adequacy risk at an
acceptable level
Administration expenses
Administration expenses continue to be a key area of focus. Overall life
insurance administration expenses were well contained and remain within
budget.
BEE ratings
Metropolitan underwent an official assessment of its transformation status
by independent rating agency Empowerdex. In terms of the Financial Sector
Charter, the group achieved the highest ranking possible, that of black
empowered/owned organisation.
From a procurement spend perspective, this ranking entitles clients to
claim R1.25/R1.00.
In terms of the department of trade and industry"s more stringent draft
codes of good practice, Metropolitan was deemed to be a level 3 contributor
(clients can thus account for procurement spend of R1.10 per R1.00).
Metropolitan achieves highest accountability ranking of all SA life
insurers
Metropolitan appeared in 24th position in SA"s inaugural accountability
ranking, done by the Unisa Centre for Corporate Citizenship in
collaboration with the university"s College of Economic and Management
Sciences and the Financial Mail, published in October 2006.
The fact that Metropolitan achieved the highest ranking of all the listed
life insurance companies in SA was particularly pleasing.
The rankings bear testimony to how well the management teams of the
companies evaluated are meeting stakeholder concerns in the areas of
corporate citizenship and environmental sustainability. They also indicate
to what extent the teams are being held accountable for their behaviour in
a social and environmental context, thereby ensuring the long-term economic
viability of their businesses.
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 shareholder interests
* The percentage ownership by the group in the international
subsidiaries is as follows:
* Metropolitan Botswana - 76%
* Metropolitan Namibia - 81%
* Metropolitan Kenya - 67%
* Metropolitan Ghana - 60%
End
ISSUED BY Nico Oosthuizen
Manager: investor relations
Metropolitan Holdings Limited
Tel 021 940 6111 or 083 285 7092
DATE 6 November 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: 06/11/2006 12:10:31 PM Produced by the JSE SENS Department
