| Wed 14 Mar 2007, 8:09 | | MET - Metropolitan Holdings Ltd - Metropolitan`s u |
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MET
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MET - Metropolitan Holdings Ltd - Metropolitan`s unique strategy delivers
outstanding shareholder value
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")
Press Release
Metropolitan`s unique strategy delivers outstanding shareholder value
Today (14 March) Metropolitan announced financial results for the year
ended 31 December 2006 underlining the fact that the group is making its
presence strongly felt amongst the bigger players in the financial services
sector.
Headline earnings and core headline earnings per share showed healthy
increases of 28% and 20% respectively while the return on the embedded
value, at 26%, was amongst the highest in the industry.
Metropolitan once again stood out in its ability to increase the inflow of
funds from clients, with net funds received from policyholders in 2006 of
R4 billion compared to R769 million in 2005. The group has maintained a
robust positive cashflow position throughout its 110 year history, in sharp
contrast to strained industry cashflows in recent times. Total assets under
management reached the R86 billion mark.
In view of its healthy capital position, which was given a further boost by
strong investment markets in 2006, Metropolitan announced that, over and
above the capital reduction of 100 cents per ordinary share paid in April
last year, it would be returning additional capital to shareholders via a
once-off special dividend of 77 cents per ordinary share, payable in April
this year. Its share buy-back programme would also be continued.
This special dividend, declared to trim excess capital back to closer to
the optimal level, is equal to the total dividend per ordinary share for
2006 (interim dividend of 29 cents plus final dividend of 48 cents), which
is 22% up on the total dividend of 63 cents for 2005.
"Taking into account share buy-backs to the value of R538 million in 2006
(7% of our listed shares), we effectively gave back R1.8 billion to
shareholders during the course of the year, 20% of our opening market
capitalisation. Had the dividend base been adjusted for the 100 cent per
share capital reduction, the dividend increase would have been an
impressive 33%," says group chief executive Peter Doyle.
"Our strong dividend policy and our capital reductions, plus our ongoing
share buy-back programme, are integral to our capital management process.
We constantly review our capital levels and continue to deploy capital as
advantageously as possible when growth opportunities present themselves."
Metropolitan also declared 2006 bonus rates on its various classes of
smoothed bonus business that are of the most competitive in the industry,
ranging from 28% for employee benefits to 25% for individual life.
All the Metropolitan businesses were significant contributors to the
group`s profits in 2006, testimony to the success of its revenue
diversification strategy. Although the increase in the contributions from
the employee benefits and health businesses, up 33% and 155% respectively,
were impressive, Metropolitan Retail remains the core operating entity.
Last year 57% of the group`s operating profits were generated by retail,
compared to 53% the previous year.
"That retail were able to write new business to the value of R114 million
in the 12 months to 31 December 2006, 14% higher than in the equivalent
period in 2005, and at a slightly higher margin (on the annual premium
equivalent basis), is largely attributable to Metropolitan`s entrenched
position in the low and middle income markets as well as retail`s ability
to adapt existing and adopt new business processes. With retail having one
of the largest life books in the industry - individual policies totalling
some four million - the drive to enhance efficiencies and reduce costs is
relentless.
"Despite the negative publicity with which the life industry has had to
contend in recent times, we are continuing to demonstrate to our customers
the efficacy of our ongoing efforts to enhance the value proposition that
we offer them," says Doyle.
Metropolitan Employee Benefits (MetEB) has long been respected for its
unique ability to add value for retirement fund clients through a highly
innovative, individualised approach to asset management. In July 2006, the
company concluded its largest ever single premium contract at a
consideration of over R2.2 billion, a deal that has re-inforced the new
dimensions to its business from both a size and a scope perspective.
In December 2006 MetEB forged a historic parastatal alliance when it was
appointed to provide administration services to Transnet`s three existing
pension funds, amongst the largest and most prestigious funds in South
Africa. The Transnet tender was won in a tough, industry-wide race and the
fact that MetEB emerged the victor speaks to the high esteem in which it is
held in the market.
At the same time, MetEB purchased the assets of Transnet Pension Fund
Administrators, formerly a division of Transnet Limited, which together
with its staff have been housed in a newly established group subsidiary
known as Metropolitan Retirement Fund Administrators.
"With the pooled resources of this new administration business at our
disposal, we have the capacity and capabilities, including the governance
structures, needed to administer the superfunds likely to emerge as a
result of ongoing industry consolidation. We are also ideally positioned to
assist government in achieving its dual aim, being a more affordable and a
better regulated retirement fund industry," says Doyle.
"The proposed creation of a compulsory state pension plan for all formally
employed South Africans is the feature of this year`s budget that is likely
to have a profound effect on each and every citizen of this country. As one
of the leading players in the retirement fund industry, we are supportive
of the concept. We particularly welcome the fact that it actively promotes
savings, an issue that is an economic priority for South Africa as a whole
as well as an imperative for individual South Africans.
"However, given the far-reaching transition implications for both
government and the industry, we believe that execution may have to be
delayed beyond 2010, the deadline as initially indicated. We hope to play
an active part in future planning and implementation, especially when it
comes to the provision of administration and asset management services as
well as the potential outsourcing thereof, " says Doyle.
Thanks to its proven track record as low-cost administrator and provider of
managed healthcare services, Metropolitan Health secured two of the highly
sought-after Government Employees Medical Scheme Contracts (GEMS) awarded
in 2005 - the administration and medicine clearing house contracts.
"From our perspective, the awarding of these crucial public sector
commissions constituted additional acknowledgment of the company`s
capacity and capabilities," says Doyle.
Despite GEMS enrolment being delayed at the outset, membership had reached
the 100 000 mark by the first week of March this year, with between 700 and
1 000 applications now being processed daily.
"We are confident that government`s twin objectives of improved
affordability and accessibility of healthcare for all South Africans are
being achieved incrementally via GEMS, and we are particularly proud of our
ongoing association with this groundbreaking initiative," says Doyle.
With a 50% market share, Metropolitan Health dominates the restricted
medical aid scheme market in South Africa and is now the second largest
healthcare administrator in the country, open schemes included.
Metropolitan is delighted to announce that Prof Wiseman Nkuhlu was
appointed a non executive director at yesterday`s board meeting. Amongst
his many achievements in both the academic and business arenas, Prof Nkuhlu
has been actively involved in the advancement of black accountants and
other black professionals for over twenty years as well as serving as
economic adviser to President Mbeki for five years.
Summary of Metropolitan`s stakeholder value-add to December 2006
December December %
2005 2006 growth
Diluted core headline earnings R708 m R847 m +20
Diluted core headline earnings per 96 c 113c +18
share
Earnings R1 600 m R1 947 m +22
Diluted earnings per share 244 c 281 c +15
Return on embedded value (%) 28.9 25.5
Embedded value per share 1 499 c 1 702 c
Final dividend per ordinary share 39.00 c 48.00 c +23
Total dividend per ordinary share 63.00 c 77.00 c +22
Special dividend per ordinary share N/A 77.00 c
Total premiums received R7.9 bn R11.0 bn +40
Retail new business APE* margin 11.5 12.1 +8
Total assets under management R71 bn R86 bn +21
* APE = annual premium equivalent (recurring premiums plus 10% of single
premiums)
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.
* Diluted core headline earnings have been adjusted for the convertible
redeemable preference shares, the staff share scheme shares and the
treasury shares in issue - all dilutory in nature. The preference
shares were issued to a consortium controlled by Metropolitan`s
strategic empowerment partner, Kagiso Trust Investments (KTI).
End
ISSUED BY SUE SNOW
FINANCIAL MEDIA SPECIALIST
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406119 OR 083 300 9745
DATE 14 MARCH 2007
QUERIES PETER DOYLE
GROUP CHIEF EXECUTIVE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405681 OR 082 880 2690
PRESTON SPECKMANN
GROUP FINANCE DIRECTOR
METROPOLITAN HOLDINGS LIMITED
TEL 021 9406634 OR 083 285 6454
TYRREL MURRAY
GENERAL MANAGER: GROUP FINANCE
METROPOLITAN HOLDINGS LIMITED
TEL 021 9405083 OR 082 889 2167
Date: 14/03/2007 08:09:42 Produced by the JSE SENS Department.
