Momentum Group Limited · JSE:MTM
Momentum — Momentum Metropolitan Holdings — H1 2020 Earnings Presentation
49 slides from Momentum's earnings presentation, Mar 5, 2020
Slide 1: Focus pays off for Momentum Metropolitan
Focus pays off for Momentum Metropolitan Results for the six months ended 31 December 2019
Slide 2: Update on Reset and Grow; Financial results
Part Hillie Meyer Group CEO 01 Update on Reset and Grow Part Risto Ketola Group FD 02 Financial results
Slide 3: Reset and Grow
2019 2021 Reset and Grow
Slide 4: Update on Reset and Grow
Update on Reset and Grow RESET GROW Fix the basics Distribution Service Address cost base Products Marketing 4 100 R4 billion 3 900 3 700 R3.6 billion 3 500 3 300 3 100 R3.1 billion 2 900 R2.8 billion 2 700 R million F2018 F2019 F2020 F2021 No progress Limited progress Meaningful progress Completed
Slide 5: Improving IFA support
Improving IFA support Retail broker sales (MDS APE, Rm) +17% +13% 81 +4% 120 122 Investments: Annuities and structured 834 Investments: Savings 647 662 Life: Savings Life: Protection 188 195 201 128 146 150 1H2019 2H2019 1H2020
Slide 6: Solid retail new business result
Solid retail new business result Retail PVP (Rm) Retail VNB (Rm) +22% +19% 69 13 766 +30% +25% 58 11 312 56 55 43 44 -1% +0% 4 103 4 058 2 524 2 526 Momentum Momentum Life Momentum Metropolitan Momentum Momentum MomentumLife Metropolitan Investments Life Retail Investments Life Retail 1H2019 1H2020
Slide 7: Challenging period for Corporate
Challenging period for Corporate PVP (Rm) VNB (Rm) -51% 9 784 198 4 811 -12 1H2019 1H2020 1H2019 1H2020
Slide 8: Consistent service delivery
Consistent service delivery Lost call rates Momentum Life and Multiply Metropolitan Retail 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020 1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020 Momentum Life Multiply Momentum Investments Momentum Corporate and Momentum Healt
Slide 9: Penny saved is penny earned (Rm)
Penny saved is penny earned (Rm) 10 000 1 772 1 800 1 618 1 456 4 942 4 581 4 540 4 588 409 0 0 2H2018 1H2019 2H2019 1H2020 Controllable costs Normalised Headline Earnings
Slide 10: Momentum Life and Momentum Investments
Momentum Life and Momentum Investments RESET GROW Full value chain Momentum agents footprint growth F2017 Reshape distribution channels F2018 Scale back UK presence F2019 F2020 Improve service F2021 0 200 400 600 800 1 000 1 200 Wealth platform fees
Slide 11: Momentum Life and Momentum Investments
Momentum Life and Momentum Investments RESET GROW Full value chain Momentum agents footprint growth Momentum Consult footprint growth Reshape distribution channels F2017 Scale back UK presence F2018 F2019 Improve service F2020 F2021 Wealth platform fees 0 50 100 150 200 250 300 350
Slide 12: Momentum Life and Momentum Investments
Momentum Life and Momentum Investments RESET GROW Full value chain Momentum agents footprint growth Momentum Consult footprint growth Reshape distribution channels Grow productive brokers Scale back UK presence F2017 F2018 Improve service F2019 F2020 Wealth platform fees F2021 0 500 1 000 1 500 2 00
Slide 13: Momentum Life and Momentum Investments
Momentum Life and Momentum Investments RESET GROW Full value chain Momentum agents footprint growth Momentum Consult footprint growth Reshape distribution channels Grow productive brokers Scale back UK presence Increase flows into own funds Improve service Product innovation Enhance Multiply offerin
Slide 14: Metropolitan Retail
Metropolitan Retail RESET GROW Stabilise sales force leadership Improve client value proposition Adviser productivity Upgrade points of sale F2017 +8% Legacy system migration F2018 77% F2019 73% F2020 69% F2021 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 1H2019 2H2019 1H2020 Productivity Persistency (PCR)
Slide 15: Metropolitan Retail
Metropolitan Retail RESET GROW Stabilise sales force leadership Improve client value proposition Adviser productivity Upgrade points of sale Sales and service efficiencies 55% Legacy system migration 51% 48% 42% 40% Payroll deductions % 37% 26% 24% 1H2018 2H2018 1H2019 2H2019 1H2020 Adviser tenure 1
Slide 16: Momentum Corporate
Momentum Corporate RESET GROW Full value chain Diversify distribution channels Improve underwriting experience Increase underwriting margins Strengthen leadership team Organised Labour and Public Sector Rebuild distribution Retailisation
Slide 17: Health
Health RESET GROW Systems consolidation Open scheme distribution Focused distribution Low-cost offering BEE transactions Members Public sector value proposition 1H2017 2H2017 1H2018 2H2018 1H2019 2H2019 1H2020 Low-cost offering Momentum Health
Slide 18: Health
Health RESET GROW Systems consolidation Open scheme distribution Focused distribution Low-cost offering BEE transactions Corporate and Public sector Public sector value proposition Members 1H2017 2H2017 1H2018 2H2018 1H2019 2H2019 1H2020 Public sector Corporate
Slide 19: Africa
Africa RESET GROW In-country governance and control Strengthen distribution Exit selected countries Improve product mix and margins Strengthen leadership teams aYo roll-out (MTN JV) Finalise operating model
Slide 20: Guardrisk
Guardrisk RESET GROW Reprice loss-making schemes Increase underwriting revenue 22% 20% 16% 12% 12% F2016 F2017 F2018 F2019 1H2020 Underwriting profit as % of net revenue
Slide 21: Guardrisk
Guardrisk RESET GROW Reprice loss-making schemes Increase underwriting revenue Bolt-on transactions Linked investment products Open architecture insurance platform
Slide 22: Momentum Short-term Insurance
Momentum Short-term Insurance RESET GROW Full value chain Grow client base 19% 20% 18% 18% SA focus only 16% 14% 14% 15% Exit unprofitable portfolios 12% 10% 6% 79 8% Enhance pricing and underwriting 69 61 6% capability 50 55 4% 2% - 0% F2016 F2017 F2018 F2019 1H2020 In-force policies (thousands) GW
Slide 23: Momentum Short-term Insurance
Momentum Short-term Insurance RESET GROW Full value chain Grow client base SA focus only Improve claims ratio 81% 72% Exit unprofitable portfolios 66% 64% 64% Enhance pricing and underwriting capability F2016 F2017 F2018 F2019 1H2020
Slide 24: Momentum Short-term Insurance
Momentum Short-term Insurance RESET GROW Full value chain Grow client base SA focus only Improve claims ratio Exit unprofitable portfolios Enhance CVP Enhance pricing and underwriting AFI transaction capability
Slide 25: Group-wide
Group-wide RESET GROW Operating model Align rewards to performance Strengthen senior leadership Improve diversity Sandton office Brand positioning Cost management Unite staff behind a common purpose
Slide 26: Financial results for six months to December 2019
Financial results for six months to 31 December 2019
Slide 27: Key financial measures
Key financial measures Diluted normalised headline earnings (Rm) Diluted normalised headline earnings per share (cents) 1H2019 1 618 1H2019 105 +10% +12% 1H2020 1 772 1H2020 118 New business volumes (PVNBP, Rm) Value of new business (Rm) 1H2019 28 790 1H2019 335 -9% -52% 1H2020 26 234 1H2020 160 Dil
Slide 28: Diluted normalised headline earnings up by 10%
Diluted normalised headline earnings up by 10% +5% 483 462 +5% +5% +3% 333 349 335 -15% 319 270 +121% 261 262 +6% 224 208 135 143 94 +3% 1H2019 1H2020 (248) (240) Momentum Momentum Metropolitan Momentum Non-life Momentum New Initiatives Shareholders Life Investments Retail Corporate Insurance Metrop
Slide 29: Review of Reset and Grow financial targets
Review of Reset and Grow financial targets
Slide 30: Review on Reset and Grow financial targets
Review on Reset and Grow financial targets Efficiency improvements We promised a R700 million expense saving by F2021 Grow Non-life Insurance We plan to make R500 million diluted normalised headline earnings by F2021 Well-managed spending on New Initiatives We promised roughly R100 million reduction
Slide 31: Already delivered R700 million in savings
Already delivered R700 million in savings Direct expense analysis (Rbn) Planned saving by F2021 of R700 million has been achieved rowth Inflationary g R700 million saving versus inflationary growth in expenses 9.2 9.2 9.1 9.2 F2018 1H2019 2H2019 1H2020 F2021 Annualised Annualised Annualised
Slide 32: On track to R500 million in earnings from Non-life Insurance
On track to R500 million in earnings from Non-life Insurance Momentum Alexander 6 months to December 2019 Short-term Guardrisk Total Forbes Insurance Insurance¹ Rm Gross written premium 488 1 262² 1 750 ±900 Underwriting profit (60) 104 44 Diluted normalised headline earnings (22) 165 143 Annualised
Slide 33: New Initiatives — losses have reduced
New Initiatives — losses have reduced Losses on New Initiatives (Rm) Contribution to New Initiatives losses +3% Other 17% India aYo 20% 63% (166) (240) (248) 1H2018 1H2019 1H2020
Slide 34: Group financial results
Group financial results
Slide 35: New business volumes declined by 9% year-on-year
New business volumes declined by 9% year-on-year Present value of premiums (PVNBP, Rm) -9% 28 790 26 234 23 845 24 194 Momentum Corporate explains 9 784 4 811 the decline in new business 21 295 4 855 20 789 volumes Exceptional results on Investments Wealth platform Strong growth in life annuity 21 4
Slide 36: New business margin declined to 0.6%
New business margin declined to 0.6% 2.7% 2.3% 2.0% 1.4% 1.2% 1.1% 0.6% 0.4% 0.4% (0.2%) (0.7%) (0.7%) Momentum Momentum Metropolitan Momentum Momentum Momentum 1H2019 Life Investments Retail Corporate Metropolitan Metropolitan 1H2020 and Health Africa
Slide 37: Embedded value per share up to R28.56
Embedded value per share up to R28.56 +4% 42 808 41 193 1 225 Non-covered: New Initiatives 1 014 6 703 Non-covered: established businesses ROEV per share 6 645 (Dec 2019) 10.6% 11 758 12 710 Covered business: adjusted net worth R28.56 EV per share (Dec 2019) R27.48 EV per share (Jun 2019) 21 776 22
Slide 38: Capital coverage ratio strong
Capital coverage ratio strong Regulatory solvency position Momentum Metropolitan (R million) Life Eligible own funds (pre-dividend) 34 463 Solvency Capital Requirement (SCR) 15 674 SCR cover (times) 2.20 SCR cover (times) - 30 June 2019 2.08 Capital cover target range is 1.7 to 2.1 times the SCR
Slide 39: Dividend increased to 40 cps
Dividend increased to 40 cps Dividend per share (cents) Interim dividend increased by 14% year-on-year +14% 40 Dividend cover supports steady solvency ratios in medium term 35 35 Dividend cover target range remains at 2.0 to 3.0 times diluted normalised headline earnings 1H2019 2H2019 1H2020 Dividen
Slide 40: Other current topical matters
Other current topical matters
Slide 41: Other current topical matters
Other current topical matters 1 IFRS 17 project update 2 Understanding resilience of our earnings 3 India
Slide 42: IFRS 17 project update
IFRS 17 project update Incremental approach is containing costs – but more internal 1 resources getting tied up in the project Some key assumptions are settling – financial impact 2 assessments somewhat delayed Accelerated involvement from our auditors – assessing design 3 decisions and standard int
Slide 43: Resilience — doing more with less
Resilience — doing more with less Momentum Metropolitan Group (Rm) Momentum Life and Investments (Rm) +3% +5% 19 987 20 094 20 541 4 795 4 765 4 534 +5% 0% 1 715 1 752 1 796 5 139 5 341 5 154 1H2019 2H2019 1H2020 1H2019 2H2019 1H2020 Metropolitan Retail (Rm) Momentum Corporate (Rm) Recurring +9% pre
Slide 44: Resilience — diversified sources of earnings
Resilience — diversified sources of earnings 30 June 2019 31 December 2019 16% 18% 14% 20% 22% 26% 27% 34% 10% 13% Investment returns Asset based fees Administration fees Underwriting profits Spreads
Slide 45: India JV — we have built a large business in 4 years
India JV — we have built a large business in 4 years One of the largest third party distribution capabilities in India Dec 2018 Dec 2019 10 Bank tie-ups including HDFC Bank and Axis Bank Cities 650+ 1 200+ More than 10 000 bank branches through Agents 18 100+ 22 500+ Banca channel Sales force 1 400+
Slide 46: India JV financials are tracking plans
India JV financials are tracking plans Gross written premiums (Rm) Expenses (Rm) 1 305 R 958 % CAG 65 R CAG 672 105% 637 354 310 2017 2018 2019 2017 2018 2019 Claims ratio (%) Our share of losses (Rm)¹ 287 110% 215 218 70% 62% 2017 2018 2019 2017 2018 2019 All figures are rolling 12 months up to Dec
Slide 47: In closing
In closing OS
Slide 48: In closing
In closing Halfway into Reset and Grow; underlying profitability has taken a step forward 1 – despite external environment 2 Relative to inflation, we have reduced our expense base by R700 million, adding around R500 million to earnings 3 At the same time we continue to accelerate delivery – we are
Slide 49: Q&A
Q&A
Momentum Metropolitan Holdings — H1 2020 Earnings Presentation on 6ix