Momentum Group Limited · JSE:MTM
Momentum — Momentum Metropolitan Holdings — H1 2019 Earnings Presentation
77 slides from Momentum's earnings presentation, March 2019
Slide 1: Reset & Grow
Reset & Grow Interim results for the six months ended 31 December 2018
Slide 2: Agenda
Agenda Part 1 Hillie Meyer Reset and Grow update Group CEO Part 2 Risto Ketola Group FD Financial results Part 3 Dan Moyane Q&A
Slide 3: Momentum
momentum
Slide 4: Reflections on the past year
Reflections on the past year Reality check Turnaround plan All systems go Mar 18 Jun 18 Sep 18 Focus and clarity of goals Sense of purpose
Slide 5: Reset and Grow strategy
Reset and Grow strategy Reset Grow Fix the basics Distribution Service Products Marketing Address cost base 4 100 R4 billion 3 900 3 700 R3.6 billion 3 500 3 300 3 100 2 900 R2.8 billion 2 700 R million 2018 2019 2020 2021
Slide 6: Momentum Retail
Momentum Retail Reset Grow Full value chain Reshape distribution channels Scale back UK presence Improve service Wealth platform fees
Slide 7: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum agents footprint growth 2017 Reshape distribution channels 2018 Scale back UK presence 2019 2020 Improve service 2021 0 200 400 600 800 1 000 1 200 1 400 Wealth platform fees
Slide 8: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum agents footprint growth Momentum Consult footprint growth Reshape distribution channels 2017 Scale back UK presence 2018 2019 Improve service 2020 Wealth platform fees 2021 0 50 100 150 200 250 300 350
Slide 9: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum agents footprint growth Momentum Consult footprint growth Reshape distribution channels Grow productive brokers Scale back UK presence 2017 2018 Improve service 2019 2020 Wealth platform fees 2021 0 500 1 000 1 500 2 000 2 500 3 000
Slide 10: Momentum Retail
Momentum Retail 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 % of in-house funds 37% 37% Improve service 40% 30% 33% 31% 30% 21% 21% 18% 18% 20
Slide 11: Momentum Retail
Momentum Retail 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 Product innovation Improve service • OBI score • Myriad Interactive Wealth platfor
Slide 12: Momentum Retail
Momentum Retail 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 Product innovation Improve service Enhance Multiply offering Wealth platform fees
Slide 13: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force leadership Upgrade points of sale Legacy system migration
Slide 14: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force leadership Sales and service efficiencies Average weekly APE per adviser 15 000 Upgrade points of sale 13 000 11 000 Legacy system migration 9 000 7 000 5 000 3 000 F18Q1 F18Q2 F18Q3 F18Q4 F19Q1 F19Q2 Less than 1 year service 1 to 3 years service
Slide 15: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force leadership Sales and service efficiencies % of premiums collected in first 3 months 100% Upgrade points of sale 89% 90% 90% 80% Legacy system migration 70% 70% 60% 56% 50% F16Q1 F16Q2 F16Q3 F16Q4 F17Q1 F17Q2 F17Q3 F17Q4 F18Q1 F18Q2 F18Q3 F18Q4 F19
Slide 16: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force leadership Sales and service efficiencies Adviser productivity Upgrade points of sale 2017 Legacy system migration 2018 2019 2020 2021 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Slide 17: Regional productivity distribution
Regional productivity distribution Average policies per adviser per week 1% 1% 2% 4% 100% 7% 9% 10% 13% 90% 22% 25% 80% 29% 22% 70% 40% 46% 60% 50% 38% 40% 77% 64% 68% 30% 48% 20% 41% 33% 10% 0% F2018 Q1 F2018 Q2 F2018 Q3 F2018 Q4 F2019 Q1 F2019 Q2 Productivity less than 2 Productivity between 2 and
Slide 18: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force leadership Sales and service efficiencies Adviser productivity Upgrade points of sale Improved client value proposition Legacy system migration • Dignified funeral • Discretionary savings – June 2019
Slide 19: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force leadership Sales and service efficiencies Adviser productivity Upgrade points of sale Improved client value proposition Legacy system migration Lending JV
Slide 20: Momentum Corporate
Momentum Corporate Reset Grow Full value chain Improve underwriting experience Strengthen leadership team Rebuild distribution
Slide 21: 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 Retailisation Rebuild distribution
Slide 22: Health
Health Reset Grow Systems consolidation Focused distribution BEE transactions Public sector value proposition
Slide 23: Health
Health Reset Grow Systems consolidation Public Sector 2015 Focused distribution 2016 BEE transactions 2017 2018 Public sector value proposition 2019 500 000 550 000 600 000 650 000 700 000
Slide 24: Health
Health Reset Grow Systems consolidation Public Sector Focused distribution Low-income health 2015 BEE transactions 2016 2017 Public sector value proposition 2018 2019 0 20 000 40 000 60 000 80 000
Slide 25: Africa
Africa Reset Grow In-country governance and control Exit selected countries Strengthen leadership teams Finalise operating model
Slide 26: Africa
Africa Reset Grow In-country governance and control Strengthen distribution Exit selected countries Improve product mix and margins aYo roll-out Strengthen leadership teams Finalise operating model
Slide 27: Guardrisk
Guardrisk Reset Grow Reprice loss-making schemes
Slide 28: Guardrisk
Guardrisk Reset Grow Reprice loss-making schemes Increase underwriting revenue Underwriting profit as % of total revenue 25% 22% 20% 16% 15% 12% 10% 5% 0% F18H1 F18H2 F19H1
Slide 29: Guardrisk
Guardrisk Reset Grow Reprice loss-making schemes Increase underwriting revenue Bolt-on transactions Linked investment products – June 2019 Open architecture insurance platform • Successful PoC with major client
Slide 30: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow Full value chain SA focus only Exit car dealerships Enhance pricing and underwriting capability
Slide 31: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow Full value chain Grow client base 2016 SA focus only 2017 2018 Exit car dealerships 2019 2020 Enhance pricing and underwriting 2021 capability 0 20 000 40 000 60 000 80 000 100 000
Slide 32: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow Full value chain Grow client base SA focus only Improve claims ratio 86.7% 78.3% Exit car dealerships 70.7% 61.0% Enhance pricing and underwriting capability F16H1 F17H1 F18H1 F19H1
Slide 33: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow Full value chain Grow client base SA focus only Improve claims ratio Streamline processes Exit car dealerships • Self-service functionality Enhance pricing and underwriting • Straight-through claims processing capability • Mobile claims registrations • Online
Slide 34: Group-wide
Group-wide Reset Grow Operating model Strengthen senior leadership Sandton office Cost management
Slide 35: Group-wide
Group-wide Reset Grow Operating model Align rewards to performance management Strengthen senior leadership Improve diversity Brand positioning Sandton office Unite staff behind a common purpose Cost management
Slide 36: Financial results for 6 months to 31 December 2018
Financial results for 6 months to 31 December 2018
Slide 37: Key financial measures
Key financial measures Overview Diluted normalised headline earnings (Rm) Diluted normalised headline earnings per share (cents) Dec 2017 1 594 Dec 2017 99 +2% +6% Dec 2018 1 618 Dec 2018 105 Present value of premiums (PVNBP, Rm) Value of new business (VNB, Rm) Dec 2017 24 194 299 Dec 2017 +19% +12%
Slide 38: Normalised headline earnings per segment
Normalised headline earnings per segment Key financial measures Dec 2018 Dec 2017 Change Normalised headline earnings Rm Rm % Reset and Grow priorities Momentum Life 462 343 35% Momentum Investments 261 253 3% Cost management Metropolitan Retail 333 364 -9% Momentum Corporate 319 293 9% Strong growt
Slide 39: Sales trending upwards
Sales trending upwards Key financial measures Present value of new business premiums (Rm) 28 790 Sales volumes up by 19% 23 845 24 194 20 789 21 295 Sizeable single new business premium from Momentum Corporate Strong growth in savings volumes from Momentum Life Good sales of annuities and fixed-rate
Slide 40: New business margin remains in line with prior period
New business margin remains in line with prior period Key financial measures Total new business margin 2 Good expense management across 1.8 1.8% the group 1.6 1.4 1.4% 1.4% Updated product pricing improved 1.2% 1.2% Momentum Life margin 1.2 1 Momentum Corporate’s 0.8 with-profit transaction ramped u
Slide 41: Embedded value per share up to R26.60
Embedded value per share up to R26.60 Key financial measures (Rm) +1% 39 601 39 880 9.4% Annualised ROEV per share 21 140 Covered business: 22 133 value of in-force -4% R25.43 EV per share (June 2018) 11 333 13 178 Covered business: +16% R26.60 adjusted net worth EV per share (Dec 2018) 5 558 4 787
Slide 42: Business unit detail
Business unit detail
Slide 43: Momentum Life earnings up by 35% to R462 million
Momentum Life earnings up by 35% to R462 million Key financial measures Good underwriting results Protection (Myriad) Positive alteration experience Savings Good volumes, especially Retirement Annuities (Investo) Lower markets result in fee pressure Traditional Significant negative impact on “90:10”
Slide 44: Momentum Investments earnings up by 3% to R261 million
Momentum Investments earnings up by 3% to R261 million Key financial measures Investment Direct equity market impact on earnings Management UK business doing well Revenue margins declining on new business pricing Wealth Net flows better but still modest compared to targets Annuities and Strong sales
Slide 45: Metropolitan Retail earnings declined by 9% to R333 million
Metropolitan Retail earnings declined by 9% to R333 million Key financial measures Underwriting experience remains strong Lower persistency losses Significantly higher expenses due to branch renewal project First half of 2018 included a R30 million variance from tax changes
Slide 46: Momentum Corporate earnings up by 9% to R319 million
Momentum Corporate earnings up by 9% to R319 million Key financial measures Strong new business Strong mortality experience, morbidity remains weak Investment into channel and digitalisation Strong earnings growth after adjusting for minority share Open scheme grew at lower rate
Slide 47: Non-life Insurance earnings up by 29% to R135 million
Non-life Insurance earnings up by 29% to R135 million Key financial measures 13% increase in profits from prior year Significant increase in underwriting profits Good retention led to increase in fee income 19% growth in net earned premium Strong claims experience at 61% loss ratio
Slide 48: New Initiatives losses up by 49% to R248 million
New Initiatives losses up by 49% to R248 million Key financial measures 1.3 million lives insured Retail makes up 42% of total book Claims ratio on retail at or below target; corporate claims ratio still too high Fair value gains on new funding rounds during 1H19 Returns likely to be volatile over t
Slide 49: Capital management
Capital management
Slide 50: Share repurchase programme completed as planned
Share repurchase programme completed as planned Capital management R2 000 R18.94 MILLION Cost of shares repurchased Average price of acquired shares (106 million shares) R2 625 1 499 MILLION MILLION EV acquired* Closing number of total outstanding shares *on EV as at 31 Dec 2018 (-5% since the start
Slide 51: Dividend reinstated
Dividend reinstated Capital management MMI will reinstate its ordinary dividend with a target dividend cover of 2.0x to 3.0x Normalised Headline Earnings Interim dividend of 35cps declared after completion of share buy-back programme MMI Holdings Historic Capital Distribution (cps) 92 92 92 Cents pe
Slide 52: Strong capital cover ratio
Strong capital cover ratio Capital management MMI remains adequately capitalised and is expected to maintain its capital position Within target range of 1.7x to 2.1x MMI projected balance sheet results support current dividend policy Solvency position (R million) MMI Group Ltd Eligible own funds (pr
Slide 53: Topical financial matters
Topical financial matters Impact of investment markets
Slide 54: Impact of investment markets
Impact of investment markets Africa Earnings in Botswana and Namibia negatively affected by markets Reduction in investment returns amounted to R68 million Limited impact on Lesotho after completing its de-risking process Contained impact on Ghana given low equity market exposure
Slide 55: Impact of investment markets
Impact of investment markets Assets under management (Rbn) -4% 5% Market impact on Investment Management (AUM) 4% Market impact on Momentum Wealth (AUM) 589 567 28% Momentum Wealth Insurance 67% 5% Investment Asset Management Management Dec-17 Dec-18
Slide 56: Impact of investment markets
Impact of investment markets Embedded value (Rm) Impact of markets on embedded value 848 39 880 39 601 Embedded VNB Unwinding of Operating Market New Non-covered Capital Embedded value 30 June Risk Discount experience impact capital operations movements value 31 Dec 2018 Rate variances and requireme
Slide 57: Topical financial matters
Topical financial matters Value of non-covered operations
Slide 58: Value of non-covered operations
Value of non-covered operations Overview Earnings for six Valuation PE Multiple months Rm Rm times Established businesses Momentum Investments – Asset Management 71 1 928 14 Non-life Insurance 135 3 883 14 SA Health business 62 1 643 13 Africa -22 -689 16 Multiply -34 -561 8 New initiatives Aditya B
Slide 59: Concluding remarks
Concluding remarks
Slide 60: Conclusion
Conclusion Reset Grow This is where we started; important to get Focus shifting here, although cost early runs to keep energy levels high management remains important Good delivery here on earnings, cost Delivery will become increasingly management and balance sheet strength important over the three
Slide 61: Appendix
a Appendix
Slide 62: Appendix
Appendix Section 1 Earnings analysis per segment Momentum Life Momentum Investments Metropolitan Retail Momentum Corporate Africa Non-life Insurance New Initiatives Shareholders Section 2 Value of new business Section 3 Additional embedded value disclosures
Slide 63: Normalised headline earnings analysis – Momentum Life
Key financial measures Normalised headline earnings analysis – Momentum Life Dec 2018 Dec 2017 Change Adviser Footprint Key Financial Metrics Rm Rm % New business -148 -156 5% Expected profits 568 562 1% Demographic variance 96 -1 >100% Expense variance -3 -15 80% Market impacts -17 46 <0% Assumptio
Slide 64: Normalised headline earnings analysis – Momentum Investments
Key financial measures Normalised headline earnings analysis – Momentum Investments Dec 2018 Dec 2017 Change Key Financial Metrics Rm Rm % Redesigned New business -85 -85 0% guaranteed return Expected profits 210 303 -31% option generates good sales volumes Demographic variance 52 32 63% Expense var
Slide 65: Normalised headline earnings analysis – Metropolitan Retail
Key financial measures Normalised headline earnings analysis – Metropolitan Retail Dec 2018 Dec 2017 Change Premium Collection Ratio Key Financial Metrics trends over time Rm Rm % New business -136 -92 -49% 66% 68% 65% Expected profits 426 400 6% Demographic variance 49 19 >100% Dec-16 Dec-17 Dec-18
Slide 66: Normalised headline earnings analysis – Momentum Corporate
Key financial measures Normalised headline earnings analysis – Momentum Corporate Dec 2018 Dec 2017 Change Key Financial Metrics Rm Rm % New business -76 -94 19% PHI losses over time (Rm) Expected profits 269 246 9% Dec-16 Dec-17 Dec-18 0 Demographic variance 61 78 -22% -10 -20 -31 Expense variance
Slide 67: Normalised headline earnings analysis – Africa
Key financial measures Normalised headline earnings analysis – Africa Dec 2018 Dec 2017 Change Key Financial Metrics Rm Rm % Namibia 110 132 -17% Health and Non-life earnings up by Botswana -5 36 <0% R52 MILLION Lesotho 33 41 -20% Ghana 26 47 -45% Kenya 13 -36 >100% Other countries – continued opera
Slide 68: Normalised headline earnings analysis – Non-life Insurance
Key financial measures Normalised headline earnings analysis – Non-life Insurance Dec 2018 Dec 2017 Change Guardrisk’s profitability (Rm) Key Financial Metrics Rm Rm % 1000 120 912 900 876 100 MSTI 800 107 -8 -22 64% 638 700 87 80 600 500 60 Guardrisk and Ability 143 127 13% 400 40 300 200 33 20 Nor
Slide 69: Normalised headline earnings analysis – New Initiatives
Key financial measures Normalised headline earnings analysis – New Initiatives Dec 2018 Dec 2017 Change Key Financial Metrics Rm Rm % Gross Written Premiums Aditya Birla Health Insurance -150 -102 -47% ramping up Money Management -21 -15 -40% Good progress on Multiply Visa card rollout Lending -8 -
Slide 70: Normalised headline earnings analysis – Shareholders
Key financial measures Normalised headline earnings analysis – Shareholders Dec 2018 Dec 2017 Change Key Financial Metrics Rm Rm % Operating loss -78 -17 <0% Investment income 231 219 5% R100 million from Fair value gains 109 35 >100% Exponential Ventures Normalised headline earnings 262 237 11%
Slide 71: Value of new business
Section 2 Value of new business
Slide 72: Value of new business
Value of new business Attribution (Rm) 96 96 16 49 29 299 335 VNB Dec 2017 Non-economic Volumes Mix Profitability/pricing Economic VNB Dec 2018 assumption and assumption methodology changes changes
Slide 73: Additional embedded value disclosures
Section 3 Additional embedded value disclosures
Slide 74: MMI Holdings Group - Embedded Value Information
MMI HOLDINGS GROUP - EMBEDDED VALUE INFORMATION Adjusted Net value Restated EMBEDDED VALUE DETAIL net worth of in-force 31.12.2017 Rm Rm Rm Covered business Momentum Life 3 083 9 377 12 460 1, 2 Momentum Investments 1 322 3 034 4 356 Metropolitan Retail 2 371 4 003 6 374 Momentum Corporate 2 338 4 0
Slide 75: MMI Holdings Group - Embedded Value Information
MMI HOLDINGS GROUP - EMBEDDED VALUE INFORMATION Covered business Gross Restated ANALYSIS OF CHANGES IN Adjusted value of Cost of 6 mths to GROUP EMBEDDED VALUE net worth in-force required 31.12.2017 (ANW) (VIF) capital Total EV Rm Rm Rm Rm Profit from new business (796) 1 212 (98) 318 Embedded value
Slide 76: MMI Holdings Group - Embedded Value Information
MMI HOLDINGS GROUP - EMBEDDED VALUE INFORMATION Adjusted Net value of Restated EMBEDDED VALUE DETAIL net worth in-force 30.06.2018 Rm Rm Rm Covered business Momentum Life 3 646 9 834 13 480 1, 2 Momentum Investments 940 1 948 2 888 Metropolitan Retail 2 152 4 023 6 175 Momentum Corporate 2 480 4 250
Slide 77: MMI Holdings Group - Embedded Value Information
MMI HOLDINGS GROUP - EMBEDDED VALUE INFORMATION Covered business Gross Restated ANALYSIS OF CHANGES IN Adjusted value of Cost of 12 mths to GROUP EMBEDDED VALUE net worth in-force required 30.06.2018 (ANW) (VIF) capital Total EV Rm Rm Rm Rm Profit from new business (1 683) 2 305 (189) 433 Embedded v
Momentum Metropolitan Holdings — H1 2019 Earnings Presentation on 6ix