Momentum Group Limited · JSE:MTM
Momentum — Momentum Metropolitan Holdings — FY2018 Earnings Presentation
73 slides from Momentum's earnings presentation, Sep 5, 2018
Slide 1: Reset & Grow
Reset & Grow Results for the year ended 30 June 2018 1
Slide 2: Agenda
Agenda Part 1 Strategy Hillie Meyer Part 2 Financials Risto Ketola
Slide 3: Reset and grow
Reset and grow Reset Grow
Slide 4: Reset and grow
Reset and grow Reset Grow Fix the basics Address cost base
Slide 5: Reset and grow
Reset and grow Reset Grow Fix the basics Address cost base
Slide 6: Reset and grow
Reset and grow Reset Grow Fix the basics Distribution Products Address cost base Service Marketing
Slide 7: Earnings reset and grow
Earnings reset and grow 4 100 3 900 3 700 R3.6 billion 3 500 3 300 3 100 R2.8 billion 2 900 2 700 R million 2018 2019 2020 2021
Slide 8: Earnings reset and grow
Earnings reset and grow R4 billion 4 100 3 900 3 700 R3.6 billion 3 500 3 300 3 100 R2.8 billion 2 900 2 700 R million 2018 2019 2020 2021
Slide 9: Momentum Retail
Momentum Retail Reset Grow
Slide 10: Momentum Retail
Momentum Retail Reset Grow Full value chain Reshape distribution channels Improve client service Scale back UK presence Wealth platform fees
Slide 11: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum advisers footprint growth 2015 Reshape distribution channels 2016 2017 Improve client service 2018 2019 Scale back UK presence 2020 2021 Wealth platform fees 0 200 400 600 800 1 000 1 200 1 400
Slide 12: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum advisers footprint growth Momentum Consult footprint growth Reshape distribution channels 2015 Improve client service 2016 2017 Scale back UK presence 2018 2019 2020 Wealth platform fees 2021 0 50 100 150 200 250 300 350
Slide 13: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum advisers footprint growth Momentum Consult footprint growth Reshape distribution channels Grow productive brokers Improve client service 2015 2016 2017 Scale back UK presence 2018 2019 Wealth platform fees 2020 2021 0 1,000 2,000 3,000 4,000
Slide 14: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum advisers footprint growth Momentum Consult footprint growth Reshape distribution channels Grow productive brokers Improve client service Product innovation Increase flows into own funds Scale back UK presence Enhance Multiply offering Wealth platf
Slide 15: Metropolitan Retail
Metropolitan Retail Reset Grow
Slide 16: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force System migration Upgrade points of sale
Slide 17: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force Adviser productivity System migration 2016 Upgrade points of sale 2017 2018 2019 2020 2021 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Slide 18: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force Adviser productivity System migration Improved client value proposition Dignified funeral Upgrade points of sale Children education Special events Breadwinner protection
Slide 19: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force Adviser productivity System migration Improved client value proposition Upgrade points of sale Sales and service efficiencies African Bank JV
Slide 20: Momentum Corporate
Momentum Corporate Reset Grow
Slide 21: Momentum Corporate
Momentum Corporate Reset Grow Full value chain responsibility Strengthen leadership team Rebuild distribution Improve underwriting experience
Slide 22: Momentum Corporate
Momentum Corporate Reset Grow Full value chain responsibility Diversify distribution channels Increase underwriting margins Strengthen leadership team Organised Labour and Public Sector Rebuild distribution Retailisation Improve underwriting experience
Slide 23: Health
Health Reset Grow
Slide 24: Health
Health Reset Grow Systems consolidation Public sector value proposition BEE transactions
Slide 25: Health
Health Reset Grow Systems consolidation Public Sector Public sector value proposition BEE transactions
Slide 26: Health
Health Reset Grow Systems consolidation Public Sector Low-income health Public sector value proposition 2015 BEE transactions 2016 2017 2018 20 000 40 000 60 000 80 000
Slide 27: Health
Health Reset Grow Systems consolidation Public Sector Low-income health Public sector value proposition Focused distribution BEE transactions
Slide 28: Africa
Africa Reset Grow
Slide 29: Africa
Africa Reset Grow Exit selected countries In-country governance and control Strengthen leadership teams Finalise operating model
Slide 30: Africa
Africa Reset Grow Exit selected countries Strengthen distribution Improve product margins In-country governance and control aYo roll-out Strengthen leadership teams Finalise operating model
Slide 31: Guardrisk
Guardrisk Reset Grow
Slide 32: Guardrisk
Guardrisk Reset Grow Reprice loss-making schemes
Slide 33: Guardrisk
Guardrisk Reset Grow Reprice loss-making schemes Increase underwriting revenue Bolt-on transactions Underwritten investment products Open architecture insurance platform
Slide 34: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow
Slide 35: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow Full value chain responsibility SA focus only Exit car dealerships Enhance pricing and underwriting capability
Slide 36: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow Full value chain responsibility Grow client base 2018 SA focus only 2019 Exit car dealerships 2020 Enhance pricing and underwriting capability 2021 0 20 000 40 000 60 000 80 000 100 000
Slide 37: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow Full value chain responsibility Grow client base SA focus only Improve claims ratio Streamline processes Exit car dealerships Enhance pricing and underwriting capability
Slide 38: Group-wide
Group-wide Reset Grow
Slide 39: Group-wide
Group-wide Reset Grow Strengthen senior leadership Revisit Sandton head office
Slide 40: Group-wide
Group-wide Reset Grow Strengthen senior leadership Better performance measurement Revisit Sandton head office Improve diversity Brand positioning Unite staff behind a common purpose
Slide 41: Concluding remarks
Concluding remarks Reset Grow
Slide 42: Concluding remarks
Concluding remarks Reset Grow Fix the basics Distribution Service Products Marketing Address cost base
Slide 43: Concluding remarks
Concluding remarks Reset Grow Fix the basics Distribution Service Products Marketing Address cost base
Slide 44: Agenda
Agenda Part 1 Strategy Hillie Meyer Part 2 Financials Risto Ketola
Slide 45: Key financial measures
Key financial measures
Slide 46: Overview
Overview Disappointing F2018 results
Slide 47: Earnings commentary
Earnings commentary
Slide 48: Core headline earnings by segment
Core headline earnings by segment Total core headline earnings down 12% -12% 3 208 F2017 F2018 -28% 2 809 1 271 920 -14% 2% -24% 660 635 645 608 570 29% 464 258 200 71% -166 -48 (R’m) Momentum Metropolitan Momentum Guardrisk International Shareholder Total Retail Retail Corporate capital
Slide 49: Momentum Retail
Momentum Retail Core headline earnings deteriorated despite strong demographic experience Strong demographic experience 1 400 1271 -28% Reinsurance correction 1 200 Investment in initiatives to improve 1 000 920 client and intermediary experience 800 Run down of corporate reserves 600 Corporate rese
Slide 50: Metropolitan Retail
Metropolitan Retail Core headline earnings declined despite positive mortality and morbidity experience Early duration lapse experience outweighed -14% positive mortality and morbidity experience 700 660 Investment in technology to support advisers 600 570 500 Lending set up costs 400 Premium collec
Slide 51: Momentum Corporate
Momentum Corporate Core headline earnings improved following a recovery in group disability Improvement in group disability experience +2% Emphasis on expense management 700 635 645 600 Minority share on Health profits 500 Group disability loss (R’m) (R’m) F2016 F2017 F2018 400 0 -25 -20 300 -40 +81
Slide 52: Guardrisk
Guardrisk Core headline earnings showing strong growth Improvement in underwriting performance +29% 300 258 Excellent expense management 250 Repricing of some business lines 200 200 Underwriting profit >100% 150 140 120 100 100 >100% 80 60 50 40 20 (R’m) 0 (R’m) 0 F2017 F2018 F2016 F2017 F2018
Slide 53: International - Africa
International - Africa Core headline earnings improving significantly as a result of Africa exits Reduction in central support costs 200 +93% Ghana significant improvement 150 145 Namibia weaker (lapses) 100 11% 75 24% 50 46% 19% 0 F2017 F2018 Lesotho Botswana Namibia Ghana
Slide 54: International - Other
International - Other Other International losses narrowing (R’m) 0 R69m increase in our share of India JV losses F2017 F2018 -50 Reduction in losses due to exit from non-core countries -100 Significant improvement in UK asset management profits -150 31% 49% -200 -193 -250 +20% -241 20% -300
Slide 55: Shareholder capital
Shareholder capital Core headline earnings deteriorated considerably Sale of high-yielding property 700 608 Finance costs on subordinated debt -24% 600 Investments in new initiatives 500 464 Consulting fees 400 300 200 100 (R’m) 0 F2017 F2018
Slide 56: Analysis of new business
Analysis of new business
Slide 57: Present value of new business premiums (PVNBP)
Present value of new business premiums (PVNBP) Total new business volumes increased 1% for the year Total PVNBP PVNBP by business unit 30 000 60 000 50 396 1% 3% 25 000 50 000 44 090 41 739 41 595 42 177 40 000 20 000 15 000 1% 30 000 10 000 -1% 20 000 -8% 5 000 10 000 F2014 F2015 F2016 F2017 F2018
Slide 58: New business margin
New business margin Pressure on new business margins Total new business margin Value of new business (R’m) 1.9% 1.9% 250 228 2.0% 1.6% 1.8% 200 1.6% 178 1.3% 1.4% 150 1.2% 124 1.0% 98 0.7% 100 0.8% 84 73 68 0.6% 50 0.4% 0.2% -5 0.0% 0 F2014 F2015 F2016 F2017 F2018 Momentum Metropolitan Momentum Inte
Slide 59: New business margin detail
New business margin detail Momentum Retail Metropolitan Retail Momentum Corporate International (Africa) • Expense basis change • Termination basis change • Expense basis change • Modelling changes • Wealth re-price • Expense basis changes • Increased volumes • Lower volumes • Product management • N
Slide 60: Update on capital
Update on capital
Slide 61: Share repurchase programme progress at 30 June 2018
Share repurchase programme progress at 30 June 2018 * On closing EV
Slide 62: CAR capital ratio
CAR capital ratio Capital position remains strong CAR = 2.7x CAR = 2.6x 17 613 16 609 6 577 6 398 F2017 F2018 Statutory excess Capital requirement SAM solvency position also at upper end of target range
Slide 63: Capital management
Capital management Future capital commitments peak in F2019 1 600 F2019 to F2021 key capital deployment initiatives 1 400 1 200 1 000 800 600 400 200 0 - 200 F2019 F2020 F2021 Aditya Birla (India) Exponential (fintech funds) African Bank JV Guardrisk (solvency support) MMI International MSTI/A Other
Slide 64: Embedded value
Ll Embedded value
Slide 65: Embedded value
Embedded value Additional prudence introduced to published EV -7% 42 523 39 601 8 458 -19% 6 878 Non-covered embedded value 21 130 21 904 +4% Covered value in-force Covered net asset value 12 935 10 836 -16% F2017 F2018 Embedded value per share R26.51 R25.43 ROEV per share = 0.6%
Slide 66: Value of non-life operations
Value of non-life operations Three categories of directors valuations Earnings Valuation PE Multiple Mature operations Guardrisk 258 3 019 12 Investments 191 2 827 15 SA Health business 170 1 595 9 Other international businesses 47 673 14 Total mature operations 668 8 135 12 Emerging operations MSTI
Slide 67: Basis changes
Basis changes Reset of our basis to introduce more prudence in the embedded value (R’m) BASIS CHANGES Type IFRS impact EV impact Terminations -480 -314 Expenses -692 -536 Product management -654 -1 024 Methodology 787 1 164 Other 493 -265 Total -546 -975
Slide 68: Financial priorities
= Financial priorities
Slide 69: Financial priorities
Financial priorities 1 Successful insurers need to have a ‘fortress balance sheet’ 2 Clear financial targets and plans for the next three years 3 Increase financial discipline 4 Shareholder capital needs to be treated with respect 5 Can’t have group-wide J-curves
Slide 70: #countusin
#countusin
Slide 71: Turnaround
Turnaround Reset Grow 4,000 3,836 3,500 3,206 3,208 3,000 2,809 2,500 2,000 1,500 2015 2016 2017 2018 2019 2020 2021 R million
Slide 72: Turnaround
Turnaround Reset Grow 4,000 3,836 3,600 3,500 3,206 3,208 3,000 2,809 2,500 2,000 1,500 2015 2016 2017 2018 2019 2020 2021 R million
Slide 73: Turnaround
Turnaround Reset Grow 4 000 4,000 3,836 3,600 3,500 3,206 3,208 3,000 2,809 2,500 2,000 1,500 2015 2016 2017 2018 2019 2020 2021 R million
Momentum Metropolitan Holdings — FY2018 Earnings Presentation on 6ix