Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — FY2014 Earnings Presentation
60 slides from Momentum's earnings presentation, Sep 10, 2014
Slide 1: Delivering on our promise: 2014 year-end results
Delivering on our promise 2014 year-end results 10 September 2014
Slide 2: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric operating model Strategic focus areas
Slide 3: External environment
External environment Strong equity market Volatile, rising interest rates FY 2013 FY 2014 2013 2014 JSE All Share +17% +29% Risk discount rate +10bps +60bps
Slide 4: Challenging operating environment
Challenging operating environment SA economy Industry under Consumers facing challenges pressure under pressure • Lower growth • Regulatory • Inflation increasing expectations pressure and interest rate • Credit rating • EY Life Insurance hikes expected • Unemployment confidence Index • Weak rand an
Slide 5: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric operating model Strategic focus areas
Slide 6: Financial results
Financial results Delivering on our promise New Value of Return on Profits from Total business new embedded operating dividend PVP * business * value divisions (including special) +18% +14% +19% +22% +51% R42bn R779m to R2 965m R3 014m 2 474cps * Excludes FNB Life
Slide 7: Diluted core headline earnings per division
Financial results Diluted core headline earnings per division June June June 1 year Comp 2012 2013 2014 change growth Rm Rm Rm Momentum Retail 1 064 1 158 1 372 18% 14% Metropolitan Retail 438 509 587 15% 16% Momentum Employee Benefits 249 341 516 51% 44% Metropolitan International 57 108 122 13% 46
Slide 8: Core headline earnings
Financial results Rm Core headline earnings 4000 3500 3000 2500 Operating divisions 2000 Shareholder capital 1500 Total core headline earnings 1000 500 0 2011 2012 2013 2014 Positive trend in operating profit
Slide 9: Total earnings (diluted)
Financial results Total earnings (diluted) June June 2013 2014 Change Rm Rm Core headline earnings 3 241 3 621 12% Amortisation of intangibles (587) (575) 2% Fair value gains 340 544 60% Basis changes and investment variances (367) (160) 54% Other adjustments (76) (185) Headline earnings 2 551 3 245
Slide 10: New business per division
Financial results New business per division June 2013 June 2014 Change Rm Rm Momentum Retail 17 421 20 434 17% Metropolitan Retail * 5 042 5 372 7% Momentum Employee Benefits 11 627 14 491 25% Metropolitan International 1 635 1 866 14% Total PVP * 35 725 42 163 18% Total APE * 4 900 5 664 16% * Excl
Slide 11: Value of new business per division
Financial results Value of new business per division June 2013 June 2014 Change Rm Rm Momentum Retail 203 240 18% Metropolitan Retail * 209 236 13% Momentum Employee Benefits 213 254 19% Metropolitan International 56 49 (13)% Total * 681 779 14% New business margin (PVP) 1.9% 1.8% * Excludes FNB Lif
Slide 12: Value of new business attribution
Financial results Value of new business attribution Rm 25% increase 800 780 760 740 720 700 680 660 640 620 600 580 560 Jun-13 Economic Revised opening Methodology & Expenses Mortality Mix & volumes Jun-14 assumption changes other * Excludes FNB Life Quality + efficiencies = growth
Slide 13: EV analysis (Rm)
EV analysis (Rm) ROEV ROEV ROEV 11.7% 5.7% 1.6% R4 103m R2 018m R543m -323 543 1 278 -2 137 1 063 779 491 544 39 675 2 289 35 148 Opening EV Expected Operating Operating Value of new Investment Investment Economic EV profit from Change in Closing EV return experience assumption business return on ne
Slide 14: Analysis of return on embedded value (ROEV)
Analysis of return on embedded value (ROEV) 2013 2014 Rm ROEV Rm ROEV Expected return – unwind of RDR 1 992 6.1% 2 289 6.5% Operating experience variances 912 2.8% 544 1.5% Embedded value from new business 711 2.2% 779 2.2% Investment return on adjusted net worth 919 2.8% 1 063 3.0% Investment varia
Slide 15: Merger-related savings
Merger-related savings Total committed annual savings R500m To be achieved roughly evenly over a three year period (F2012-F2014) 2012 2013 2014 Total Rm Rm Rm Rm Momentum Retail 25 30 20 75 Metropolitan Retail 26 11 22 59 Momentum Employee Benefits 71 21 39 131 Metropolitan International - 9 15 24 M
Slide 16: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric operating model Strategic focus areas
Slide 17: Momentum Retail
Momentum Retail June June Key aspects 2013 2014 Change • Strong inflow of funds Rm Rm • Good mortality profits Total funds received 33 210 33 849 2% • Increase in asset- New business PVP 17 421 20 434 17% based fees Recurring 1 057 1 022 (3)% • Expenses well controlled Single 11 376 14 926 31% • Str
Slide 18: Momentum Retail
Momentum Retail momentum for your financial wellness Global Growth Why is this guy looking so pleased? ~ th Mamenturn’s Global Growth ate will retrofi Only at Momentum. Invest today. rat A Wikaabesrobahes : Phone your financial adviser or visit momentum.co.za.
Slide 19: Momentum Retail focus areas
Momentum Retail Focus areas • Value of new business • Quality of business • Business mix • Grow recurring premiums • Increase distribution • New distribution initiatives • Grow agency force • Financial Wellness and Rewards • Increase penetration in the middle-income market
Slide 20: Metropolitan Retail
Metropolitan Retail June June Key aspects 2013 2014 Change • Good growth in value Rm Rm of new business Total funds received 6 246 6 820 9% • Strong mortality New business PVP* 5 042 5 372 7% experience Recurring 990 1 083 9% • Good expense management Single 1 230 1 501 22% • Reduced FNB Life Value
Slide 21: Metropolitan Retail Funeral Cover
Metropolitan Retail Funeral Cover • A dignified funeral is one of the most pervasive needs in the entry level market • Products are distributed by both traditional insurers and other “retail” providers – competitive environment • Three differentiators: Augmented reality advice in Minimal waiting per
Slide 22: Metropolitan Retail focus areas
Metropolitan Retail Focus areas • Process and systems renewal • Diversify and grow distribution • Remuneration of agents • Increase sales productivity • Embed segmentation insights • Persistency management • Expense efficiencies • Customer value proposition delivery
Slide 23: Momentum Employee Benefits
Momentum Employee Benefits June June Key aspects 2013 2014 Change • Positive net cash flow Rm Rm • Strong new business volumes Total funds received 14 826 19 914 34% • Excellent value of new New business PVP 11 627 14 491 25% business Recurring 769 1 033 34% • Strong contribution Single 5 067 5 351
Slide 24: Momentum Employee Benefits
Momentum Employee Benefits Enabling financial wellness for employers & their employees S 2} wise Group Insurance SS Administration FundsAtWork GUARDRISK & momentum health Up yw MMI HOLDINGS Investments
Slide 25: Momentum Employee Benefits focus areas
Momentum Employee Benefits Focus areas • Further strengthen and diversify distribution channels • Entrench position as leading incapacity insurer • Guardrisk – enhance corporate value proposition • Enhance SMME value proposition • Focus on employee financial wellness
Slide 26: Metropolitan Health
Metropolitan Health June June Key aspects 2013 2014 Change • Significant player - three million lives Total principal members 1 144 171 1 169 045 2% • Acquisition of Providence Health Rm Rm • Operational Revenue 1 489 1 560 5% efficiencies driving Expenses (1 331) (1 357) 2% profits Operating profit
Slide 27: Metropolitan Health
Metropolitan Health • Largest closed schemes administrator in the market • Over three million beneficiaries • Amalgamation of best-of-breed and innovative product range “Ensuring access to healthcare according to the needs of individuals and employers.”
Slide 28: Metropolitan Health focus areas
Metropolitan Health Focus areas • Continued focus on scale and efficiencies • Diversify healthcare capabilities and income streams (CareCross) • Finalise and integrate CareCross acquisition • Build public private partnerships • Improve access to healthcare (Hello Doctor; Alpha Pharm) • Leverage loca
Slide 29: Momentum Investments
Momentum Investments June June Key aspects 2013 2014 Change • Good market growth Rbn Rbn • Improved investment performance Net flows 20 (7) • New mandates Assets under management 356 395 11% • Performance fees Rm Rm • Improved expense Operating profit after tax 175 197 13% ratios Progress in buildin
Slide 30: Momentum Investments focus areas
Momentum Investments Focus areas • Strengthen alignment with the Group • Superior investment capabilities • Outcomes-based client value proposition • Improve customer value
Slide 31: Metropolitan International
Metropolitan International June June Key aspects 2013 2014 Change • Difficult operating Rm Rm environment Total funds received 3 471 3 740 8% • New business growth Life insurance • Positive mortality New business PVP 1 635 1 866 14% experience Value of new business 56 49 (13)% • Good medical claims
Slide 32: MTN / Hello Doctor Partnership
Metropolitan International MTN / Hello Doctor Partnership • Provide affordable and accessible healthcare across the MTN platform • Offering access to: 1) Health Education; 2) Doctors; 3) Health Insurance. • Launched in South Africa, expanding further into Africa • Providing Health & Insurance access
Slide 33: Metropolitan International focus areas
Metropolitan International Focus areas • Acquisitions complementary to growth initiatives • Africa • Integration of Cannon Assurance (Kenya) • Top line growth in all lines of business • Support centre efficiencies • International • Leverage group capabilities • UK / India / Southeast Asia
Slide 34: Momentum Short-Term Insurance
Momentum Short-Term Insurance June June Key aspects 2013 2014 Change • Good growth in premium Rm Rm income • Strong policy count Premium income 287 332 16% growth Policy count 29 114 37 812 30% • Claims experience within acceptable range Claims ratio 55.2% 61.5% • Building capacity in Combined ratio
Slide 35: Momentum Short-Term Insurance Personal Cover
Momentum Short-Term Insurance Personal Cover
Slide 36: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric operating model Strategic focus areas
Slide 37: Earnings and ordinary dividends
Financial results Ordinary dividend Earnings and ordinary dividends 250 1.6 1.7 1.6 1.6 Dividend cover 200 150 Cents Basic core per share 100 Dividend per share 50 0 2011 2012 2013 2014 Good dividend track record
Slide 38: 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 Dividend per share (cents) 2011 2012 2013 2014 1 yr chan
Slide 39: Capital management
Capital management Progress Credit rating upgrade New debt issue IFS AA+ (zaf) R1.5bn SAM Sub-debt A+ (zaf) March 2014
Slide 40: Capital strength
Capital strength Economic capital Rbn Net asset value as per embedded value statement 17.0 Qualifying debt 3.0 Less: net asset value of strategic subsidiaries (2.1) Less: required capital (10.1) Capital buffer before deployment 7.8 Deployed (4.6) Final & special dividend (2.2) Debt redemption (0.5)
Slide 41: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric operating model Strategic focus areas
Slide 42: Group strategic focus
Group strategic focus Client-centricity
Slide 43: Client-centric operating model
Client-centric operating model effective 1 July 2014
Slide 44: Group executive
Group executive OPERATING BUSINESSES Nicolaas Kruger Chief Executive Officer GROUP-WIDE FUNCTIONS Etienne de Waal Blum Khan CEO: Products and Solutions LM CEO: International Khanyi Nzukuma Mark van der Watt LX CEO: Momentum Retail CEO: Metropolitan Retail Herman Schoeman CEO: Corporate and Public Se
Slide 45: MMI Leading the Future CEO Roadshow
MMI Leading the Future Nicolaas Kruger and the MMI Exco invite you to the CEO Roadshow. jy” MMI HOLDINGS Polokwane ®- ~~ = Thursday 7 August Rustenburg Wednesday 6 August Nelspruit e Tuesday 12 August _ Z Centurion Namibia e - -@ : Monday 2 June qhursday2s.uly Johannesburg Tuesday 3 June Monday 4 Au
Slide 46: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric operating model Strategic focus areas
Slide 47: Group strategic focus
Group strategic focus Client-centricity
Slide 48: Financial Wellness
Financial Wellness Online client solutions
Slide 49: Financial wellness & rewards
Financial wellness & rewards
Slide 50: Growth initiatives
Growth initiatives Acquisitive progress
Slide 51: Segment diversification
Segment diversification Middle-income focus
Slide 52: Balanced scorecard
Balanced scorecard Weighted for growth Key performance indicator (KPI) 2013 2014 2015 Return on embedded value (ROEV) - 20% 20% Core earnings 30% 25% 25% Embedded value of new business (VNB) 20% 20% 20% Integration expense savings 15% - - Transformation 15% 15% 15% Strategic initiatives 20% 20% 20%
Slide 53: Performance management
Performance management Short-term incentive - balanced scorecard 2014 Weight F2014 target Actual Achieved Return on embedded value 20% 11% 16% Core headline earnings 25% 11% growth 12% Value of new business 20% R756m R779m Transformation 15% FSC score of 75 79 Strategic initiatives 20%
Slide 54: Performance management
Performance management Long-term performance targets – rolling three-year return on embedded value Threshold (GDP+3%) 11% Actual 2012 11% Actual 2013 17% Actual 2014 19% Three-year average 16% Delivering value
Slide 55: Transformation and sustainability
Transformation and sustainability Listed on the JSE’s Level 2 B-BBEE status Socially Responsible Investment index (SRI) since 2006
Slide 56: Group operational focus
Group operational focus Growth • New business volumes • Grow embedded value • Utilisation of capital • Diversification Client-centricity • Implement client-centric operating model • Client retention through the cycle • Innovation as key enabler Excellence • Increase collaboration and alignment acros
Slide 57: Areas of strength
Areas of strength Diversified cash-generating businesses Strong brands Extensive distribution capability Client-centric Experienced operating model management Empowerment Strong balance credentials sheet Attractive dividend
Slide 58: Shareholder structure
Shareholder structure as at 30 June 2014
Slide 59: Thank you
a yy” MMI HOLDINGS Thank you
Slide 60: Visit our website
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