Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — FY2016 Earnings Presentation
54 slides from Momentum's earnings presentation, Sep 7, 2016
Slide 1: Advancing MMI's Strategy
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Slide 2: Key financial metrics
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Slide 3: Key financial metrics
Key financial metrics 2015 2016 % Actual Actual change Rm Rm Diluted core headline earnings 3 836 3 206 (16%) Ordinary dividend per share (cents) 155 157 1% New business PVP 50 396 68 164 35% Value of new business 954 850 (11%) Value of new business (like-for-like) 755 850 13% Return on em
Slide 4: Agenda
Agenda ] ‘Some metrics 2 MMI strategy 3 Strategic delivery =~ =e eBusiness perform 2 fe. Capital manana ° ye @ e “ Gritical focus are |
Slide 5: MMI strategy
MMI strategy PURPOSE To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Financial aspirations Client aspirations Flexible and modul systems
Slide 6: Financial aspirations
Financial aspirations Maximise shareholder value Return on embedded value % 18 Supported by 16 14 stent _@ 10 Risk-free rate 8 Growth in value of new business 6 4 2 Aspirational
Slide 7: Agenda - Strategic delivery
Agenda 2 = strategy 3 \ Strategic delivery 1) a MMI HOLDINGS multiply
Slide 8: Strategic focus areas: Client centricity: Multiply
Strategic focus areas: Client centricity: Multiply ‘ {a Client centricity &
Slide 9: Life, Multiplied.
Life, Multiplied. momentum
Slide 10: Creating value for clients
multiply Creating value for clients Momentum Health Up to R5 400 in health returns P.A Momentum uct rew, Short-t x08 arg, SESS Up to 20% cash back’ FundsAtWork Up to 25% paid back in health returns Physical Wellness WS Pionetiiness Financial BicknBay Wellness ~~~"y7777777 > \ / Pr »_ Edcon
Slide 11: Creating value for shareholders across products
Creating value for shareholders across products
Slide 12: Improvement in Myriad persistency
Improvement in Myriad persistency
Slide 13: Increased product holding
Increased product holding Before Joining one product bougt = additional proc result of in conjunction with buy Mul
Slide 14: Reduction in Myriad, Health and short-term insurance claims
Reduction in Myriad, Health and short-term insurance claims
Slide 15: Fast growth in membership
Fast growth in membership Growth in Multiply sales 500 450 400 Consult >100% per year 350 Digital > 100% per year 300 250 200 150 100 50 - 2011 2012 2013 2014 2015 2016 IFA (32% p.a.) Financial Planning (36% p.a.)
Slide 16: Client satisfaction score
Score 90 81 80 79 78 75 75 74 70 60 50 Metropolitan Momentum Old Mutual Discovery Sanlam Liberty Source: SACSI South African Client Satisfaction Index
Slide 17: Strategic focus areas: Channel growth
Strategic focus areas: Channel growth a | |
Slide 18: Channel growth: Metropolitan Retail channel transformation
Growth strategic focus area: Channel growth: Metropolitan Retail channel transformation
Slide 19: Channel growth: Metropolitan Retail agency headcount
Growth strategic focus area: Channel growth: Metropolitan Retail agency headcount 5000 4 832 4 804 4 455 4 448 4500 4 268 4000 3 843 3 507 3 397 3500 3000 2500 2000 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16
Slide 20: Impact of Metropolitan Retail channel changes
Growth strategic focus area: Channel growth: Impact of Metropolitan Retail channel changes Quarterly % growth in APE F2016 v F2015 Manpower replenishment in F2016 6000 40% 30% 5000 20% 10% 4000 0% -10% 3000 -20% 2000 -30% PFA (tied agency Tele-channel Total channel) Metropolitan 1000 Retail F2016 qu
Slide 21: Channel growth: Corporate and Public sector
Growth strategic focus area Channel growth: Corporate and Public sector Multiple channels • Intermediaries, affinity groups, direct engagement Digital portals • Customised client experiences • Integrated across physical and digital channels Affinity capabilities • Capitec, African Bank, Bayport, Hom
Slide 22: Channel growth: Guardrisk total embedded value
Growth strategic focus area Channel growth: Guardrisk total embedded value Embedded value (Rm) EV growth ≈ 26% pa 3000 2 570 2 313 2 095 2000 1 849 1 607 1000 0 Jun 2014 Dec 2014 Jun 2015 Dec 2015 Jun 2016
Slide 23: Channel growth: Mobile
Growth strategic focus area: Channel growth: Mobile
Slide 24: Strategic focus areas: Excellence
Strategic focus areas: Excellence
Slide 25: Excellence: Optimisation project
Excellence strategic focus area Optimisation project • Merger savings track record – R522 million • New operating model enables optimisation • Accumulative savings target of R750 million • 14% of target realised in F2016
Slide 26: Track record: MMI merger savings of R522 million
Excellence strategic focus area Track record: MMI merger savings of R522 million R million 140 120 39 100 25 80 21 20 38 60 22 41 14 40 30 71 11 20 20 16 45 26 15 25 19 9 15 0 Momentum Metropolitan Employee International Investments Health Group services Retail Retail Benefits 2012 2013 2014
Slide 27: Good early progress: R104 million of R750 million target
Excellence strategic focus area Good early progress: Achieved R104 million of R750 million target R million 186 750 175 646 124 131 110 149 85 113 60 104 49 55 10 12 26 11 Finance Health HR Operations Investments Legacy Insurance Total 2016 Remaining
Slide 28: Strategic focus areas: Excellence
Strategic focus areas: Excellence
Slide 29: Health: Diversified business
Excellence strategic focus area Health: Diversified business 1. Momentum Health Open scheme Momentum Health membership growth • Fastest growing open market health value proposition 137 000 128 681 • Financially sustainable with required 116 147 108 108 100 936 93 096 reserves and Global credit ratin
Slide 30: Health: Diversified business
Excellence strategic focus area Health: Diversified business 2. Wellness and Occupational Health • Corporate and employee wellness solution gaining market share • Large contract with SAPS • Occupational Health growing 3. Low cost value proposition • Highest market share • Fastest growing 4. Signific
Slide 31: Short-term insurance: Key ratios improving
Excellence strategic focus area Short-term insurance: Key ratios improving 180% 160% 140% 38% 27% 120% 25% 30% 42% 20% 37% 20% 23% 24% 100% 20% 20% 20% 18% 17% 80% 23% 60% 99% 102% 90% 84% 40% 75% 78% 76% 66% 20% 0% 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 Loss ratio Acquisiti
Slide 32: Enablers: Four key enablers
Enablers: Four key enablers LErablers erty eben —— =< — = = = Flexible and modular systems Innovation Culture Data analytics
Slide 33: Enablers: Innovation: Exponential Ventures
Enablers: Innovation: Exponential Ventures Leverage global Insurtech (Anthemis partnership)
Slide 34: Strategic delivery
\gStrategicGdlivery GUARDRISK&e —
Slide 35: Business performance: Financial aspirations progress
Business performance: Financial aspirations progress R’m Core earnings 3 621 3 836 4000 3 241 3 206 2 955 3000 2000 1000 0 2012 2013 2014 2015 2016 R’m % Value of new business Return on embedded value 954 20% 19.0% 1000 850 17.4% 779 800 681 15% 12.8% 536 11.3% 600 9.6% 10% 400 5% 200 0 0% 2012 2013
Slide 36: Business performance: 2016 Financial aspirations
Business performance: 2016 Financial aspirations
Slide 37: Business performance: 2016 Financial aspirations
Business performance: 2016 Financial aspirations
Slide 38: Growth in earnings: Core headline earnings per segment
Financial Aspirations Growth in earnings Diluted core headline earnings per segment 1 year June 2015 June 2016 change Rm Rm Momentum Retail 1 756 1 600 (9%) Metropolitan Retail 604 667 10% Corporate and Public Sector 861 617 (28%) International 152 28 (82%) Segment results 3 373 2 912 (14%) Sharehol
Slide 39: Factors impacting the decline in core headline earnings
Financial Aspirations Growth in earnings Significant factors impacting on the decline in core headline earnings -16% 3 836 379 -10% 154 -4% 147 -4% 3 206 75 125 -2% +4% CHE F2015 Life Non-life Markets New Expense CHE F2016 underwriting underwriting business savings strain & other
Slide 40: External environment: Underwriting experience variance
External environment Underwriting experience variance Total life insurance mortality and morbidity experience variance R million 600 535 500 465 444 399 400 363 300 200 125 100 0 2011 2012 2013 2014 2015 2016
Slide 41: External environment: Momentum Retail experience variance
External environment Underwriting experience variance Momentum Retail mortality and morbidity experience variance R million 180 160 150 152 153 144 140 120 100 80 73 61 60 40 20 0 1H14 2H14 1H15 2H15 1H16 2H16
Slide 42: External environment: Corporate and Public Sector experience variance
External environment Underwriting experience variance Corporate and Public Sector mortality and morbidity experience variance R million 100 47 50 33 12 0 -15 -50 -100 -91 -150 -167 -200 1H14 2H14 1H15 2H15 1H16 2H16
Slide 43: Group disability underwriting experience
Group disability underwriting experience Actions taken • Targeted pricing strategies to improve margin • Focused interventions with top loss making schemes • Improvements to income disability claims process • Continuous upskilling of assessors • Investigate impact of potential changes in reinsurance
Slide 44: Africa earnings sharply lower in tough conditions
Growth in earnings Africa earnings sharply lower in tough conditions June June 2015 2016 Change Rm Rm Namibia 150 128 (15%) South 149 119 (20%) East (12) (98) n/m West (7) (9) n/m Central expenses (127) (112) n/m Core headline earnings as reported 152 28 (82%) Looking to focus on most promising busi
Slide 45: Investments in strategic growth initiatives
Financial aspirations Growth in earnings Investments in strategic growth initiatives June 2015 June 2016 Change Rm Rm Core headline earnings as reported 3 836 3 206 (16%) Additional investments in growth initiatives 525 572 9% International 113 181 Momentum Short-term Insurance 169 147 Client Engage
Slide 46: New business per segment
Financial aspirations Growth in value of new business New business per segment 1 year June 2015 June 2016 change Rm Rm Momentum Retail 25 458 25 950 2% Metropolitan Retail 5 091 4 936 (3%) Corporate and Public Sector 17 683 34 699 96% International 2 164 2 579 19% Total PVP 50 396 68 164 35% Total A
Slide 47: Value of new business adjusted for new basis
Financial aspirations Growth in value of new business Value of new business adjusted for new basis 1,000 13% increase -44 900 -155 38 -52 11 800 66 18 700 600 954 500 850 755 400 300 200 Jun 2015 Economic Corporate Revised Jun Methodology Sales volumes Mortality & Jun 2016 Assumption expense 2015 ch
Slide 48: Value of new business per segment
Financial aspirations Growth in value of new business Value of new business per segment June June June 1 year 2015 2015 2016 change Rebased Rm Rm Rm Momentum Retail 276 226 290 28% Metropolitan Retail 185 106 191 80% Corporate and Public Sector 427 360 298 (17%) International 66 63 71 13% Total 954
Slide 49: Return on embedded value
Return on embedded value EV analysis R2 527m R622m 2 026 -2 516 893 -126 -132 2 910 -13 -229 -1 004 42 989 850 40 330 Opening EV Expected Operating Operating Value of new Investment Investment Economic Exchange EV profit Change in Closing EV return experience assumption business return on net varian
Slide 50: Capital management
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Slide 51: Capital management: Economic capital
Capital management Economic capital Rand billion June June 2015 2016 Net asset value as per embedded value statement 16.5 16.9 Qualifying debt 3.3 3.5 Less: net asset value of strategic subsidiaries (2.0) (2.7) Less: required capital (10.6) (10.0) Capital before deployment 7.2 7.7 Deployed (2.9) (3.
Slide 52: Capital management: Dividend
Capital management Dividend Dividend policy • Stable dividend growth • Long-term view • Growth in core headline earnings • Allowance for volatile investment markets, capital requirements and changes in legislation Separate dividend policy from capital management Dividend per share (cents) 2014 2015
Slide 53: Key financial metrics
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Slide 54: Critical Focus Areas
Critical Focus Areas e xy ence wn ® Multiply ® Financial Wellness mt ti ° =aYo @ Africa portfolio