Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — H1 2016 Earnings Presentation
56 slides from Momentum's earnings presentation, 2016
Slide 1: Advancing Client Centricity
Advancing Client Centricity 2016 interim results For the six months ended 31 December 2015
Slide 2: Agenda
Agenda External environment Group strategy Financial results Capital management Critical focus areas
Slide 3: External environment - International
External environment - International Growth-negative • Slower global economic growth • Chinese shift to services economy • Reduced attractiveness of emerging markets • Fragile global trade activity Growth-negative for commodity-based economies
Slide 4: External environment - South Africa
External environment - South Africa Growth factors • Sovereign downgrade threat • Policy uncertainty • Low business, insurance and consumer confidence • Low new fixed investment • Drought Disposable income factors • Rising interest rates • Rising fiscal pressures • Rising inflation • Dip in real wag
Slide 5: External environment
External environment Volatile equity market -2.1% 1H2015 2H2015 1H2016 JSE All Share Index -2.3% +4.1% -2.1%
Slide 6: External environment
External environment Increasing bond yields – increased risk discount rate +140bps 1H2015 2H2015 1H2016 Risk discount rate -30bps +40bps +140bps
Slide 7: Trends
Trends • Trust deficit • Internet of Things (constant and pervasive connectivity) • Platform economy • Big Data • Mobile commerce • Client expectations • Consumer power • Disruption and lower barriers to entry
Slide 8: Agenda
Agenda External environment Group strategy Financial results Capital management Critical focus areas
Slide 9: MMI strategy map
MMI strategy map PURPOSE To enhance the lifetime financial wellness of people, their communities and their businesses Financial Aspirations Strategic focus areas and objectives Growth - Grow through geographical diversification - Increase value of existing clients - Increase client base Client centr
Slide 10: External environment - South Africa
External environment - South Africa Financial wellness challenges for SA Households
Slide 11: MMI strategy
MMI strategy MMI Purpose To enhance the lifetime financial wellness of people, their communities and their businesses
Slide 12: MMI strategy
MMI strategy Financial wellness A person or household is financially well when they can cover planned and unplanned expenses, now and in the future
Slide 13: Financial aspiration
Financial aspiration Maximise shareholder value Return on embedded value 18.0% Aspirational +6% 16.0% 14.0% Supported by Growth in Threshold +3% Growth in value of 12.0% earnings new Risk-free rate 10.0% business 8.0% 6.0% Improve efficiencies 4.0% 2.0% 0.0% 100.0% 200.0% 300.0%
Slide 14: Strategic focus areas
Strategic focus areas Growth Client centricity Excellence
Slide 15: Strategic focus areas
Strategic focus areas Growth • Growth through geographical diversification • Increase value of existing clients • Increase client base Client centricity • Increase financial wellness • Improve client relationships and client experience Excellence • Improve efficiencies
Slide 16: Strategic focus areas - Growth
Strategic focus areas - Growth Growth through geographical diversification • India • Africa • UK Increase value of existing clients • Multiply Wellness & Rewards • Cross-product holdings • Short-term insurance Increase client base • Middle market • Channel growth • Corporate transactions (M&A) • Aff
Slide 17: Strategic focus areas - Growth
Strategic focus areas - Growth Metropolitan Agent Productivity – per week
Slide 18: Strategic focus areas - Growth
Strategic focus areas - Growth Momentum APE contribution per channel 100% 90% 23% 29% 28% 33% 37% 36% 80% 70% 60% 34% 30% 33% 25% 16% 19% 50% 40% 30% 47% 45% 20% 43% 42% 42% 38% 10% 0% F2011 F2012 F2013 F2014 F2015 F2016 Independent Brokers Corporate Brokers MMI Channels
Slide 19: Strategic focus areas - Client centricity
Strategic focus areas - Client centricity Increase Financial Wellness • UNISA Financial Wellness score • Multiply Wellness & Rewards sales up 95% • Multiply Private Club cross-sell of 5.6 Improve client relationships and client experience • Client satisfaction scores • Client aspirations measurement
Slide 20: Strategic focus areas - Client centricity
Strategic focus areas - Client centricity Improve client relationships Client experience, wellness and rewards
Slide 21: Strategic focus areas - Excellence
Strategic focus areas - Excellence Improve efficiencies • Client-centric operating model enhancing efficiencies • Annual savings target of R750m by FY2019
Slide 22: Strategic focus areas - Excellence
Strategic focus areas - Excellence Group-wide optimisation projects
Slide 23: MMI strategic enablers
MMI strategic enablers MMI Way Incremental innovation Disruptive innovation
Slide 24: Agenda
Agenda External environment Group strategy Financial results Operational results Critical focus areas
Slide 25: Financial results - Key financial metrics
Financial results Key financial metrics Return on New business Value of new Value of new embedded value PVP business business on consistent discount rate +7% +14% -14% R40bn R27bn R361m +4%
Slide 26: Financial results - Key financial metrics
Financial results Key financial metrics Diluted earnings Diluted core Interim dividend headline earnings +14% -9% +3% R1.5bn R1.7bn 65cps
Slide 27: Diluted core headline earnings per segment
Financial results Diluted core headline earnings per segment 1 year Dec 2014 Dec 2015 change Rm Rm Momentum Retail 745 705 (5)% Metropolitan Retail 273 311 14% Corporate and Public Sector 377 379 1% International 62 31 (50)% Segment results 1 457 1 426 (2)% Shareholder capital 395 253 (36)% Total 1
Slide 28: Total earnings (diluted)
Financial results Total earnings (diluted) 1 year Dec 2014 Dec 2015 change Rm Rm Core headline earnings 1 852 1 679 (9)% Amortisation of intangibles (330) (373) Fair value gains (73) 265 Basis changes and investment variances (25) (68) Other adjustments (61) (74) Headline earnings 1 363 1 429 5% Oth
Slide 29: Investments in strategic growth initiatives
Financial results Investments in strategic growth initiatives Dec 2014 Dec 2015 Rm Rm Core headline earnings as reported 1 852 1 679 Additional investments in growth initiatives 254 283 Momentum Retail Metropolitan Retail Corporate and Public Sector International Shareholder capital Percentage of co
Slide 30: Impact of underwriting experience
Financial results Impact of underwriting experience Dec Dec 1 year 2014 2015 change Rm Rm Core headline earnings as reported 1 852 1 679 (9)% Less: Life insurance underwriting experience 267 21 Adjusted core headline earnings 1 585 1 658 5% Less: Non-life underwriting profit 87 41 Core headline earn
Slide 31: Total life insurance mortality and morbidity experience
Financial results Total life insurance Mortality and Morbidity experience – full year 600 500 400 300 200 100 0 FY2011 FY2012 FY2013 FY2014 FY2015 1H2016 Significant reduction in underwriting profits
Slide 32: MMI Retail insurance mortality and morbidity experience
Financial results MMI Retail insurance Mortality and Morbidity experience 400 350 300 250 200 150 100 50 0 FY2011 FY2012 FY2013 FY2014 FY2015 1H2016 Significant reduction in underwriting profits
Slide 33: Life underwriting profits - Momentum Retail
Financial results Life underwriting profits Momentum Retail • Increase in number of claims below reinsurance threshold • Higher average claim size • No undue concentration risk • No indication of fraud
Slide 34: Life underwriting profits - Corporate and Public Sector
Financial results Life underwriting profits Corporate and Public Sector • Impact of economic environment and cyclicality • Increased number of Income Disability entrants in higher income level • Greater proportion of claims due to stress-related illnesses • Higher Group Life scheme terminations due
Slide 35: New business per segment
Financial results New business per segment 1 year Dec 2014 Dec 2015 change Rm Rm Momentum Retail 11 817 12 673 7% Metropolitan Retail 2 684 2 411 (10)% Corporate and Public Sector 8 369 10 921 30% International 975 1 265 30% Total PVP 23 845 27 270 14% Total APE 3 126 3 473 11% Strong growth in a di
Slide 36: Value of new business attribution
Financial results Value of new business attribution Rm 450 +4% 400 -75 19 -12 350 28 -20 421 300 361 346 250 200 Dec-14 Economic Revised Dec-14 Other Expenses Mix & Volumes Mortality & Dec-15 persistency Growth on a consistent economic basis
Slide 37: Value of new business per segment
Financial results Value of new business per segment Dec Dec Dec 1 year 2014 2014 2015 change Rebased Rm Rm Rm Momentum Retail 127 104 126 21% Metropolitan Retail 107 67 68 1% Corporate and Public Sector 160 159 137 (14)% International 27 16 30 88% Total 421 346 361 4% New business margin (PVP) 1.77%
Slide 38: EV analysis (Rm)
EV analysis (Rm) R1 604m R75m 207 -575 315 128 -16 -362 -124 361 1 383 -1 471 40 330 40 176 Opening EV Expected Operating Operating Value of Investment Investment Economic Exchange EV profit Change in Closing EV return experience assumption new return on variances assumption rate from non- share cap
Slide 39: Analysis of return on embedded value (ROEV)
Analysis of return on embedded value (ROEV) Dec ROEV Dec ROEV 2014 2014 2015 2015 Rm Rm Expected return – unwind of RDR 1 331 6.9% 1 383 7.0% Operating experience variances 215 1.1% (16) (0.1)% Embedded value from new business 421 2.2% 361 1.8% Investment return on adjusted net worth 431 2.2% 315 1.
Slide 40: Agenda
Agenda External environment Group strategy Financial results Capital management Critical focus areas
Slide 41: Capital strength
Capital strength Economic capital Rbn Net asset value as per embedded value statement 16.8 Qualifying debt 3.5 Less: net asset value of strategic subsidiaries (2.5) Less: required capital (10.1) Capital before deployment 7.7 Deployed (3.7) Interim dividend (1.0) Strategic initiatives (2.7) Capital b
Slide 42: Dividend
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 170 160 150 140 130 120 110 Total ordinary dividend 10
Slide 43: Agenda
Agenda External environment Group strategy Financial results Capital management Critical focus areas
Slide 44: MMI strategy map
MMI strategy map PURPOSE To enhance the lifetime financial wellness of people, their communities and their businesses Financial Aspirations Strategic focus areas and objectives Growth - Grow through geographical diversification - Increase value of existing clients - Increase client base Client centr
Slide 45: Critical focus areas
Critical focus areas Growth Client centricity Excellence Channel Growth Client Engagement Solutions Expense optimisation • Metropolitan Retail Health • Momentum Retail • Corporate and Public Sector Investments and Savings Short-term insurance Geographic Diversification Underwriting experience • Unit
Slide 46: Areas of strength
Areas of strength Leading Excellent Extensive Diversified cash- client-centric empowerment distribution generating strategy credentials capability businesses Experienced Strong Strong Attractive management brands balance dividend sheet
Slide 47: Additional information
MI HOLDINGS Additional information
Slide 48: Shareholder structure
Shareholder structure as at 31 December 2015
Slide 49: Shareholder structure
Shareholder structure 100% KTH 90% 80% FirstRand Trusts 70% RMI 60% Other local 50% shareholders 40% Foreign 30% GEPF 20% 10% 0% % % % % % % % 31-12-2010 30-06-2011 30-06-2012 30-06-2013 30-06-2014 30-06-2015 31-12-2015
Slide 50: Momentum Retail
Momentum Retail Key aspects Dec Dec 1 year • Good single premium 2014 2015 change new business Rm Rm • Investment markets Total funds received 18 271 16 570 (9)% reduced fee growth New business PVP 11 817 12 673 7% • Significantly reduced mortality profits Recurring 630 627 - • Reduced contribution
Slide 51: Metropolitan Retail
Metropolitan Retail Dec Dec 1 year Key aspects 2014 2015 change • Increasing agent Rm Rm numbers and productivity Total funds received 3 456 3 645 5% • Improving persistency New business PVP 2 684 2 411 (10)% • Strong expense management Recurring 581 530 (9)% • Increased RdR reduced Single 590 641 9
Slide 52: Corporate and Public Sector
Corporate and Public Sector Dec Dec 1 year Key aspects 2014 2015 change • Strong recurring Rm Rm premium growth • Appropriate client Total funds received 15 783 13 670 (13)% retention New business PVP 8 369 10 921 30% • Lower underwriting experience impacted by Recurring 509 862 69% economic factors
Slide 53: International
International Key aspects Dec Dec 1 year 2014 2015 change • Strong new business Rm Rm volumes and value • Life insurance profit Life insurance maintained New business PVP 975 1 265 30% • Deterioration in claims Value of new business 27 30 11% ratios Health • Increased investment Membership (‘000) 43
Slide 54: Momentum Short-term Insurance
Momentum Short-term Insurance Key aspects 1H2015 2H2015 1H2016 Rm Rm Rm • Terminated unprofitable Premium income 227 279 286 channels Claims paid 160 281 245 • Improvement in premium quality Operating loss before tax (51) (131) (95) • Improving claims Policy count 53 483 56 425 52 634 and expense ra
Slide 55: Momentum Short-term Insurance
Momentum Short-term Insurance Financial Indicators* F2015-Q4 F2016-Q2 F2015-Q4 F2016-Q2 35.3% 31.6% 102.2% 82.7% Management Loss ratio expense ratio Acquisition cost ratio F2015-Q4 F2016-Q2 20.3% 20.1% *compares quarterly movements of F2015-Q4 to F2016-Q2
Slide 56: MMI Investor relations
MMI Investor relations Visit our website www.mmiholdings.com Tyrrel Murray +2721 940 5083 / 082 889 2167 tmurray@mmiholdings.co.za Natalie Amos +2721 940 6112 / 083 605 8339 namos@mmiholdings.co.za