Momentum Group Limited · JSE:MTM
Momentum — Momentum Metropolitan Holdings — FY2020 Earnings Presentation
54 slides from Momentum's earnings presentation, September 2020
Slide 1: Momentum Metropolitan beyond Covid-19
Momentum Metropolitan beyond Covid-19 Results for the year ended 30 June 2020
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: Overview and Update on Reset and Grow
Overview and Update on Reset and Grow 1 Covid-19 2 Highlights 3 Reset and Grow
Slide 4: Covid-19
Covid-19
Slide 5: Excess deaths in South Africa
0 1 000 2 000 3 000 4 000 6 000 7 000 5 000 3 18 20 3 25 20 Sources: NICD & SAMRC 4 1 20 Weekly reported deaths 4 8 20 4 15 20 4 22 20 4 29 20 5 6 20 5 13 20 5 20 20 5 27 20 Covid-19 deaths 6 3 20 Excess deaths in South Africa 6 10 20 6 17 20 6 24 20 Excess deaths 7 1 20 7 8 20 7 15 20 7 22 20 7 29
Slide 6: Relative infection rate and severity
Relative infection rate and severity Momentum Medical Scheme Female Male 100% 75% 50% 25% 0% 25% 50% 75% 100% Older than 60 40 to 60 20 to 40 Younger than 20 Female Female Female Female Male Male Male Male Source: Momentum Medical Scheme 100% = men older than 60 cases per capita
Slide 7: Impact on healthcare industry and patient behaviour
Impact on healthcare industry and patient behaviour % of normal expectation (per capita) 130% 124% 110% 104% 105% 102% 90% 85% 81% 88% 70% 50% 30% 10% January February March April May June July 2019 levels Pharmacy claim lines Source: Momentum Medical Scheme
Slide 8: Impact on healthcare industry and patient behaviour
Impact on healthcare industry and patient behaviour % of normal expectation (per capita) 130% 105% 110% 102% 90% 96% 70% 74% 48% 50% 63% 51% 30% 10% January February March April May June July 2019 levels GP consultations Source: Momentum Medical Scheme
Slide 9: Impact on healthcare industry and patient behaviour
Impact on healthcare industry and patient behaviour % of normal expectation (per capita) 130% 110% 100% 90% 90% 96% 70% 66% 59% 58% 50% 40% 30% 10% January February March April May June July 2019 levels Hospital admissions Source: Momentum Medical Scheme
Slide 10: Impact on healthcare industry and patient behaviour
Impact on healthcare industry and patient behaviour % of normal expectation (per capita) 130% 110% 103% 100% 90% 89% 70% 64% 51% 50% 51% 30% 16% 10% January February March April May June July 2019 levels Mammograms Source: Momentum Medical Scheme
Slide 11: Impact on healthcare industry and patient behaviour
Impact on healthcare industry and patient behaviour % of normal expectation (per capita) 130% 110% 102% 95% 90% 95% 80% 81% 70% 68% 50% 30% 25% 10% January February March April May June July 2019 levels Dental claim lines Source: Momentum Medical Scheme
Slide 12: Highlights
Highlights
Slide 13: Momentum Investments: Retail new business turnaround
Momentum Investments Retail new business turnaround R million R million R million New business 2 500 Platform net flows 3 000 Inhouse net flows 25 000 2 000 2 500 20 000 1 500 1 000 2 000 15 000 500 1 500 0 10 000 -500 1 000 5 000 -1 000 500 -1 500 0 -2 000 0 F2018 F2019 F2020 F2018 F2019 F2020 F201
Slide 14: Regaining retail broker market share
Momentum Investments Regaining retail broker market share Percentage Change in IFA Market share of Platform Gross new business 25,1% 3.3% (24.3%) (9.4%) 25.5% (1.6%) 13.7% 26.2% Gross new business (R billion) 45 42,7 42,1 41,1 40 35 32,3 30 28,3 25,8 25 21,9 21,2 19,2 20 17,7 15 13,2 13,1 14,1 11,8
Slide 15: Momentum Life: Increasing broker share
Momentum Life Upper Income segment: Increasing broker share Percentage Change in Broker Market share of Protection Net New Sales (APE) (6.7%) (12.4%) (17.5%) (6.1%) 9.3% 3.9% 6.2% 4.1% 14.0% APE (R million) Net new IFA Sales 300 277 259 250 200 192 175 144 148 139 150 126 133 141 118 123 98 100 81 8
Slide 16: Metropolitan Life: Migration to Momentum policy administration systems
Metropolitan Life Migration to Momentum policy administration systems Home Odyssey Service Metropolitan Traditional March 2013 funeral funeral insurance 250k August 2017 August 2020 August 2022 contracts 550k 1m policies 1.2m policies policies
Slide 17: Metropolitan Life: Stabilised distribution
Metropolitan Life Stabilised distribution Adviser retention Adviser tenure 4500 4 350 80% 70% 4000 1 234 3 462 60% 3 395 3500 3 210 50% 3000 40% 634 1 232 1 288 1 231 2500 30% 20% 2000 937 533 410 518 10% 1500 601 520 609 0% 201905 202004 201807 201808 201809 201810 201811 201812 201901 201902 20190
Slide 18: Metropolitan Life: Distribution progress
Metropolitan Life Distribution progress Tied agency productivity Premium persistency 4,0 100% 3,5 90% 3,0 2,5 80% 2,0 70% 1,5 60% 1,0 0,5 50% 0,0 40% Jul 20 Aug 20 May 20 Apr 20 Q1F18 Q2F18 Q3F18 Q4F18 Q1F19 Q2F19 Q3F19 Q4F19 Q1F20 Q2F20 Q3F20 Jun 20 Q4F18 Q1F18 Q2F18 Q3F18 Q1F19 Q2F19 Q3F19 Q4F19 Q
Slide 19: Momentum Corporate: Progress with PHI
Momentum Corporate Progress with PHI Income disability R million Product earnings 0 -20 -40 -60 -80 Post Covid-19 reserve -100 -120 -140 -160 F2017 F2018 F2019 F2020
Slide 20: Momentum Health: Beginning to win large schemes again
Momentum Health Beginning to win large schemes again Open Scheme • 1st large employer group in 8 years - 1 500 members Restricted Schemes • 1st new appointment in 12 years - 30 000 members
Slide 21: Momentum Short-term Insurance
Momentum Short-term Insurance Strategic acquisition living up to expectations Normalised headline earnings 250 200 191 176 150 100 R million 50 - (15) (50) (39) (44) (100) (117) (150) F2017 F2018 F2019 F2020 MSTI Momentum Insurance (AFI) Combined
Slide 22: Guardrisk: Consistently strong revenue growth
Guardrisk Consistently strong revenue growth R million Total revenue 1 200 1 000 1 065 15% CAGR 800 860 763 600 653 588 550 400 467 200 0 F2014 F2015 F2016 F2017 F2018 F2019 F2020
Slide 23: Employee Share Ownership Programme
Employee Share Ownership Programme B-BBEE ESOP • 3% of Momentum Metropolitan Holdings ordinary shares • All current and future South African-based permanent employees • 85% black shareholding Improves black ownership credentials Subject to shareholder approval
Slide 24: Reset and Grow
Reset and Grow
Slide 25: Reset and Grow
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 F2018 F2019 F2020 F2021 R million
Slide 26: Momentum Life and Momentum Investments
Momentum Life and Momentum Investments Momentum agents footprint growth Momentum Consult footprint growth F2017 F2017 F2018 F2018 F2019 F2019 F2020 F2020 F2021 F2021 0 200 400 600 800 1 000 1 200 0 50 100 150 200 250 300 350
Slide 27: Grow productive brokers
Momentum Life and Momentum Investments Grow productive brokers F2017 F2018 F2019 F2020 F2021 0 500 1 000 1 500 2 000 2 500 3 000
Slide 28: Metropolitan Life: Adviser productivity
Metropolitan Life Adviser productivity Sales and service efficiencies 54% F2017 49% 47% F2018 42% 37% 36% F2019 F2020 25% 23% F2021 F2018 F2019 F2020 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 1 - 6 months 7 - 12 months Year 2 & 3 Year 4 + Productivity Payroll deductions %
Slide 29: Health
Health Low-cost offering Corporate and Public sector Members Members 158 592 158 546 154 833 151 063 735 584 692 375 710 211 688 093 96 587 80 000 73 911 62 643 145 760 127 588 141 877 121 438 F2017 F2018 F2019 F2020 F2017 F2018 F2019 F2020 Low-cost offering Momentum Health Public sector Corporate
Slide 30: Guardrisk: Increase underwriting revenue
Guardrisk Increase underwriting revenue 23% 22% 16% 12% 12% F2016 F2017 F2018 F2019 F2020 Underwriting profit as % of net revenue
Slide 31: Momentum Short-term Insurance
Momentum Short-term Insurance Grow client base Improve claims ratio 82 MSTI loss ratio 81% 73% 67% 64% 60% 76 69 - 61 - 55 - F2017 F2018 F2019 F2020 F2016 F2017 F2018 F2019 F2020
Slide 32: Reset and Grow: Original target range
Reset and Grow Original target range 4 000 3 900 3 600 3 400 2 900 2 800 2 400 1 900 1 400 F2018 F2019 F2020 F2021 F2022 F2023 Low-road R&G High-road R&G
Slide 33: Covid-19 impact on F2020
Reset and Grow Covid-19 impact on F2020 4 000 3 900 3 600 3 400 2 900 2 800 2 400 1 900 1 500 1 400 F2018 F2019 F2020 F2021 F2022 F2023 Low-road R&G High-road R&G
Slide 34: Revised target range
Reset and Grow Revised target range 4 000 4 000 3 900 3 600 3 600 3 400 2 900 2 800 2 400 1 900 1 500 1 400 F2018 F2019 F2020 F2021 F2022 F2023 Low-road R&G High-road R&G New low-road forecast New high-road forecast
Slide 35: Preserving value for stakeholders
Preserving value for stakeholders Clients R500 million relief Advisers R70 million support Employees Safe working conditions Shareholders Resilient balance sheet Earnings impact within appetite Solid long-term prospects
Slide 36: Financial results for the year ended June 2020
Financial results for the year ended 30 June 2020
Slide 37: Key financial measures
Key financial measures Normalised headline earnings (Rm) Normalised headline earnings per share (cents) F2019 3 074 F2019 203 -51% -50% F2020 1 521 F2020 102 Present value of premiums (PVNBP, Rm) Value of new business (Rm) F2019 55 783 F2019 541 -48% -10% F2020 280 F2020 50 447 Embedded value per sh
Slide 38: Normalised headline earnings by business unit
Normalised headline earnings by business unit -53% 883 -50% -57% -41% -95% 610 601 +147% 512 +21% 534 416 405 303 302 317 260 262 164 -3% 27 R million F2019 F2020 (492) (509) Momentum Momentum Metropolitan Momentum Non-life Momentum New Shareholders Life Investments Life Corporate Insurance Metropol
Slide 39: Impact of Covid-19 on our normalised headline earnings
Impact of Covid-19 on our normalised headline earnings 3 478 983 975 1 521 Earnings from operations Covid-19 provisions Market impact Normalised headline earnings F2019 earnings R3.1 billion F2020 earnings from operations R3.5 billion • Market impact includes the investment variances on the life ins
Slide 40: Impact of Covid-19 on our normalised headline earnings
Impact of Covid-19 on our normalised headline earnings Terminations Mortality 122 Our Covid-19 provisions reduced earnings by R1 billion Morbidity 72 751 Assumptions based on best Non-life estimate basis 38 Insurance claims 30 June 2020 (Rm) Largest impact expected in F2021 and F2022 Low exposure to
Slide 41: Group results
Group results
Slide 42: Sales declined by 10% year-on-year
Sales declined by 10% year-on-year Present value of premiums (PVNBP, Rm) 17 113 Year-on-year movements 15 205 Momentum Life –14% 12 978 13 256 12 431 11 677 11 788 11 782 Momentum Investments +16% Metropolitan Life –4% Momentum Corporate –46% Africa +6% 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
Slide 43: New business margin was 0.6% for F2020
New business margin was 0.6% for F2020 +0.5% 2.3% Jun 2019 Jun 2020 1.8% -1.6% 1.6% -0.9% 1.2% -0.4% 1.0% +0.5% +0.1% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.0% Momentum Momentum Metropolitan Momentum Momentum Momentum Life Investments Life Corporate Metropolitan Metropolitan Africa
Slide 44: Embedded value per share declined to R25.70
Embedded value per share declined to R25.70 Embedded Value (R million) R3 083 million 1 335 Operational 3 408 2 945 EV profit (June 2019) 646 1 132 R25.70 19 EV per share (June 2020) 41 193 38 524 R27.48 EV per share (June 2019) Opening EV Operational Covid-19 Impact of Profit for Capital Exceptiona
Slide 45: Capital cover ratio weathers Covid-19
Capital cover ratio weathers Covid-19 Regulatory solvency position Momentum Metropolitan (R million) Life Eligible own funds (pre-dividend) 29 067 Solvency Capital Requirement (SCR) 15 737 SCR cover (times) 1.85 SCR cover (times) - 30 June 2019 2.08 Capital cover target range is 1.7 to 2.1 times the
Slide 46: Capital management — dividend decreased by 43%
Capital management — dividend decreased by 43% Dividend per share Dividend policy is to pay out 33% to 50% of normalised headline earnings 40 35 35 Loss for 2H20 implies zero dividend under dividend policy Final dividend decision reflects also desire to preserve capital and liquidity Projected balan
Slide 47: Other current topical matters
Other current topical matters
Slide 48: Other current topical matters
Other current topical matters 1 Understanding resilience of our earnings 2 Impact of investment markets 3 Metropolitan Life Covid-19 trends 4 Sales over the last six months
Slide 49: Resilience — diversified sources of earnings
Resilience — diversified sources of earnings 80 440 162 618 338 30 June 2020 (Rm) 668 30 June 2019 (Rm) 555 1 029 319 386 Investment returns Asset-based fees Administration fees Underwriting profits Spreads
Slide 50: Impact of investment markets
Impact of investment markets Analysis of investment variances (R million) By product type 1Q20 2Q20 3Q20 4Q20 F2020 Protection 5 5 23 (7) 26 Long-term savings 12 - (234) 83 (139) Annuities and structured products 14 1 (323) (226) (534) Traditional (17) 7 (337) 338 (9) Other (6) 33 (189) 92 (70) Tota
Slide 51: Metropolitan Life Covid-19 trends
Metropolitan Life Covid-19 trends Covid-19 claims July 2020 claims compared to 2020 average 350 2 500 294 2.4x 300 2 000 2.0x 250 2.2x 1 500 1.9x 200 144 150 1 000 1.9x 100 73 1.5x 500 50 1.0x 1.1x 11 - 0 <20 21 to 30 31 to 40 41 to 50 51 to 60 61 to 70 71 to 80 >80 May 2020 Jun 2020 Jul 2020 Aug 20
Slide 52: Sales trends over the last six months
Sales trends over the last six months New business volumes (PVNBP, Rm) Momentum Life Momentum Investments Metropolitan Life 500 800 3 000 450 700 Avg Avg 400 Avg 14% 2 500 600 14% Avg 350 Avg 37% 2 000 300 500 Avg 250 400 1 500 200 300 1 000 150 200 100 500 100 50 0 0 0 Jan Feb Mar Apr May Jun Jan F
Slide 53: In closing
In closing Wi
Slide 54: In closing
In closing We want to share our appreciation to all the frontline healthcare staff and emergency workers 1 who have worked tirelessly to minimise the mortality and morbidity impact of the pandemic. This was a very demanding period for our clients and we are grateful for the excellent 2 persistency d
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