Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — FY2017 Earnings Presentation
68 slides from Momentum's earnings presentation, Sep 6, 2017
Slide 1: Advancing MMI's Strategy
ADVANCING MMI’S STRATEGY Results for the year ended 30 June 2017
Slide 2: Key financial metrics
Key financial metrics
Slide 3: Key financial metrics
Key financial metrics Weaker new business volumes, stable earnings Financial aspirations Growth in earnings Growth in value of new business Return on embedded value Key financial metrics June June % 2017 2016 change Actual Actual Rm Rm Diluted core headline earnings 3 208 3 206 - Ordinary dividend p
Slide 4: MMI strategy
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Slide 5: MMI Strategy
MMI Strategy PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Financial aspirations Growth in earnings Client centricity Growth in value of new business Growth Return on embedded value Client aspirations Excellence “My Financ
Slide 6: Financial aspirations
Financial aspirations Maximise shareholder value Return on embedded value % 18 16 14 12 10 Nn BF DD Cw Aspirational +64) ——. 2 Risk-free rate Growth in value of new business Improve efficiencies
Slide 7: Strategic delivery
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Slide 8: Strategic focus areas: Client centricity
Strategic focus areas: Client centricity PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Growth Excellence Enablers Flexible and modular systems Innovation Culture Data analytics
Slide 9: The purpose of our Financial Wellness offering
The purpose of our Financial Wellness offering
Slide 10: Creating value for our clients
Creating value for our clients Active Dayz users Multiply clients live 18 years longer • Burned enough calories to power 100 households for a year • Took enough steps for 70 000 trips from Jhb to Cape Town Multiply clients are rated 20% safer Multiply creates enough money for Multiply clients cover
Slide 11: Creating value for advisers
Creating value for advisers 20% more Multiply clients have a financial plan compared to South Africans Clients with financial advice are in the top 5% of credit scores 1% increase in financial plans in South Africa translates into 13% increase in household Financial Wellness Even after discounts, Mu
Slide 12: Creating value for shareholders
Creating value for shareholders Multiply clients stay 15% longer Multiply clients claim 40% less with Momentum with Momentum Multiply penetration across Multiply clients have up to three Momentum products are up times more benefits with 15% from last year Momentum Multiply penetration on new busines
Slide 13: Increased benefit holding of Multiply clients
Increased benefit holding of Multiply clients Benefits by status
Slide 14: Developments to enhance value
Developments to enhance value Multiply Online Shop Multiply Visa® Card Giving clients more bang for HealthSaver integration – instant access their buck to your Momentum HealthSaver account * More integration to follow
Slide 15: Client satisfaction
Client satisfaction South African Customer Satisfaction Index survey • Metropolitan took 1st place for the second consecutive year with a score of 82.6 • Metropolitan showed consistent improvement in service quality, customer loyalty and complaints management • Momentum was 5th with a score of 77.5
Slide 16: Strategic focus areas: Growth
Strategic focus areas: Growth PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Geographical Diversification Growth Aditya Birla Health Excellence (India JV) Enablers Flexible and modular systems Innovation C
Slide 17: Growth focus area: Geographic diversification: ABHI and ABW (India)
Growth focus area Geographic diversification: ABHI and ABW (India) Partner strength • Well-respected brand in India • 3rd largest private sector conglomerate in India • Aditya Birla Capital listed on the BSE and the NSE on 1 September 2017 Segments Group Retail Wellness Distribution Product offering
Slide 18: Growth focus area: Wellness and Mobile App
Growth focus area Geographic diversification: ABHI and ABW (India) Wellness • Free access to fitness centres • Earn Multiply points on wearable devices • Healthy Heart scores & Active Dayz ™ • Partner brands: Uber, Amazon, Samsung, Fitbit, Garmin, Big Basket (Groceries), ABOF (Fashion), travel, movi
Slide 19: Growth focus area: Progress at 31 March 2017
Growth focus area Geographic diversification: ABHI and ABW (India) Progress at 31 March 2017 Future plans • 200 000 + lives • Increase sales and distribution • 2 000 + agents capacities • R100 m + in gross written premium • Create more brand awareness • Well established provider network • Embed Well
Slide 20: Strategic focus areas: Growth
Strategic focus areas: Growth PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Increase client base Growth Momentum African Excellence Retail Bank JV Distribution Enablers Flexible and modular systems Innova
Slide 21: Increasing client base: The African Bank Joint Venture
Growth focus area Increasing client base: The African Bank Joint Venture A mutually beneficial relationship on three fronts: Insurance Insurance: Expanded distribution network Lending and Banking: Expanded solution set Banking Lending • Insurance venture – fully functional since July 2017 • Lending
Slide 22: Metropolitan @ African Bank
Growth focus area Increasing client base: The African Bank Joint Venture Insurance – “Metropolitan @ African Bank” • Good progress with roll-out • 98 agents in 48 branches in 3 provinces • All 48 branches are dual branded • Annual Premium Income in excess of R1million reached • Productivity exceedin
Slide 23: African Bank JV financial prospects and considerations
Growth focus area Increasing client base: The African Bank Joint Venture Financial prospects and considerations Insurance Lending • Limited capital injections required • MMI budgeting for up to R2bn of • Material effort to recruit and train capital injections agents for African Bank branches • Expec
Slide 24: Momentum Retail sales force expansion
Growth focus area Increasing client base: Momentum Retail sales force expansion Momentum Financial Planning Momentum Consult 250% 250% 200% 200% 150% 150% 100% 100% 50% 50% 0% 0% F16 F17 F18 F19 F20 F21 F16 F17 F18 F19 F20 F21 Practice Expansion (Health & MSTI) Face to face busisness As Usual face-t
Slide 25: Strategic focus areas: Growth
Strategic focus areas: Growth PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Increase value of existing clients Growth Excellence Funds at Work Enablers Flexible and modular systems Innovation Culture Data
Slide 26: Funds at Work – MMI's umbrella fund
Growth focus area Increasing value of existing clients: Funds at Work – MMI’s umbrella fund
Slide 27: Strategic focus areas: Excellence
Strategic focus areas: Excellence PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Optimisation project Geographical diversification Excellence Centres of Excellence Enablers Flexible and modular systems Inn
Slide 28: Excellence: Optimisation project
Excellence strategic focus area Optimisation project • Operating model enables optimisation • Accumulative savings target of R750 million by F2019 • R104 million of the target achieved in F2016 • R219 million of the target achieved in F2017 • R323 million of target realised to date
Slide 29: Good early progress: Achieved R323m of R750m target
Excellence strategic focus area Good early progress: Achieved R323m of R750m target R million 750 427 219 180 156 75 66 89 95 100 50 30 50 56 64 40 104 30 41 65 27 55 26 5 25 12 11 4 5 Finance Health HR Operations Investments Legacy Insurance Other Segment Total Remaining 2017 2016
Slide 30: Portfolio optimisation
Excellence strategic focus area Portfolio optimisation
Slide 31: Strategic focus areas: Excellence
Strategic focus areas: Excellence PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Optimisation project Geographical diversification Excellence Centres of Excellence Enablers Flexible and modular systems Inn
Slide 32: Momentum Health: Open scheme growth
Excellence strategic focus area Momentum Health: Open scheme growth Open scheme membership growth 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 • Market leading growth • Rated in top 2 health value propositions by consumers and advisers • Took first place in “Product Supplier of t
Slide 33: Short-term Insurance: Sales volumes increasing
Excellence strategic focus area Short-term Insurance: Sales volumes increasing New Policies 7 000 6 000 5 000 4 000 3 000 2 000 1 000 - 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4
Slide 34: Short-term Insurance: Key ratios improving
Excellence strategic focus area Short-term Insurance: Key ratios improving 160.0% 140.0% 38% 26% 120.0% 28% 33% 42% 20% 32% 37% 20% 26% 26% 26% 100.0% 20% 26% 19% 29% 20% 17% 17% 16% 17% 80.0% 14% 23% 16% 60.0% 99% 102% 90% 84% 40.0% 75% 78% 76% 79% 78% 74% 66% 62% 20.0% 0.0% 2015 Q1 2015 Q2 2015 Q3
Slide 35: Short-term Insurance: Lowest overturn rate in SA industry
Excellence strategic focus area Short-term Insurance: Lowest overturn rate of any insurer in the SA industry • Only 3.41 complaints out of every 1 000 claims submitted • Overturn rate: 4.29% significantly below the industry average of 27% Complaints overturned per 10 000 claims Momentum STI 1.04% 6.
Slide 36: Investments: Outcome-based Investing
Excellence strategic focus area Investments: Outcome-based Investing Momentum Mom Enhanced Factor portfolio range returns as at 30 June 2017 TIME
Slide 37: Strategic focus areas: Enablers
Strategic focus areas: Enablers PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Financial aspirations Growth in earnings Client centricity Growth in value of new business Geographical diversification Return on embedded value
Slide 38: Innovation: LifeQ Health and Wellness
Enablers Innovation: LifeQ Health and Wellness – the LifeQ solution • LifeQ and MMI in close partnership for the last year • Pilot of 1 000 people to test and validate the value of a wearable based solution • Positive outcome and commercial launch planned for early 2018 Initial underwriting Effectiv
Slide 39: Innovation: Workplace living services
Enablers Innovation: Workplace living services THE SMART EXIT SERVICE HAS RECEIVED INDUSTRY RECOGNITION FOR ITS INNOVATION AND BRILLIANT CUSTOMER EXEPRIENCE
Slide 40: Re-imagining key client journeys in C&PS
WITHIN MMI’S C&PS BUSINESS WE HAVE STARTED A JOURNEY TO RE-IMAGINE OUR KEY CLIENT JOURNEYS
Slide 41: We followed an innovative approach to deliver the solution
WE FOLLOWED AN INNOVATIVE APPROACH TO DELIVER THE SOLUTION Discover Describe Design Develop Release Architect and integrate
Slide 42: We recognised that our current experience needed to improve
WE RECOGNISED THAT OUR CURRENT EXPERIENCE NEEDED TO IMPROVE Tedious manual process No holistic view Uninformed decision making Complex language Lacking the right information
Slide 43: We have delivered a client-centric service
WE HAVE DELIVERED WHAT WE BELIEVE IS A CLIENT-CENTRIC SERVICE The right information Thought provoking questions Simple language At the right time Interactive scenario analysis Powerful visuals
Slide 44: Our goal with the next journeys
OUR GOAL WITH THE NEXT JOURNEYS – MEMBER RETIREMENTS & THEN ONBOARDING – IS NOT TO MATCH WHAT WE DID WITH SMART EXIT, BUT TO TAKE IT TO THE NEXT LEVEL “We don’t get a chance to do that many things, and every one should be really excellent. Because this is our life. Life is brief, and then you die, y
Slide 45: Business performance
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Slide 46: Business performance: Financial aspirations
Business performance: Financial aspirations R'm Core earnings 5000 3621 3836 4000 3241 3206 3208 3000 2000 1000 0 F2013 F2014 F2015 F2016 F2017 R'm R'm Return on embedded value Value of new business 20.0% 19.0% 1200 17.4% 954 1000 16.0% 779 12.8% 800 681 712 12.0% 9.6% 547 600 8.0% 400 4.7% 4.0% 200
Slide 47: Business performance: F2017 Financial aspirations
Business performance: F2017 Financial aspirations Financial aspirations -6% -23% 4.7% R42bn R547m
Slide 48: Business performance: Financial aspirations
Business performance: Financial aspirations Financial aspirations Maintained at Maintained at R3.7bn R3.2bn 157cps
Slide 49: Diluted core headline earnings per segment
Financial aspirations: Growth in earnings Diluted core headline earnings per segment 1 year June 2017 June 2016 change Rm Rm % Momentum Retail 1 271 1 493 (15) Metropolitan Retail 660 700 (6) Corporate and Public Sector 835 680 23 International (166) (156) (6) Segment results 2 600 2 717 (4) Shareho
Slide 50: Significant factors impacting core headline earnings
Financial aspirations: Growth in earnings Significant factors impacting core headline earnings (CHE) R’m 44 176 90 179 153 3 206 3 208 14 CHE F2016 Mortality Disability Reduction in Expense Growth Other CHE F2017 underwriting underwriting reserve savings initiatives releases
Slide 51: Growth in earnings: Momentum Retail down 15%
Financial aspirations: Growth in earnings: Momentum Retail down 15% Momentum Retail core headline earnings key factors: • More conservative reserving on certain benefits, Investo loyalty bonuses and Myriad booster benefit • F2016 margin releases not recurring in F2017 • Persistency and alteration ex
Slide 52: Growth in earnings: Metropolitan Retail down 6%
Financial aspirations: Growth in earnings: Metropolitan Retail down 6% Metropolitan Retail core headline earnings key factors: • Lapse experience on new business weakened over the year • High number of new intermediaries with lower collection ratios • Strong annuity profits and positive mortality an
Slide 53: Growth in earnings: Corporate and Public Sector 23%
Financial aspirations: Growth in earnings: Corporate and Public Sector 23% Corporate and Public sector core headline earnings key factors: • Improved mortality underwriting profits • Still offset by losses on disability business • Minimal expense growth • The Health administration business performed
Slide 54: Growth in earnings: International down 6%
Financial aspirations: Growth in earnings: International down 6% International core headline earnings key factors: • Earnings slightly up in developed southern African countries • Losses in the smaller life insurance operations and short-term insurance businesses • Investments in new initiatives (In
Slide 55: Mortality and morbidity experience variance
Financial aspirations: Mortality and morbidity experience variance R’m 300 200 219 156 100 78 80 35 42 0 -100 -152 -200 -235 -300 Momentum Retail Metropolitan Retail Corporate and Public International Sector 2017 2016
Slide 56: New business per segment
Financial aspirations: Growth in value of new business New business per segment June 2017 June 2016 Change Rm Rm % Momentum Retail 22 774 23 468 (3) Metropolitan Retail 5 164 4 936 5 Corporate and Public Sector 11 121 13 232 (16) International 2 536 2 454 3 Total PVP 41 595 44 090 (6) Total APE 5 73
Slide 57: Growth in value of new business
Financial aspirations: Growth in value of new business -23% 133 712 199 595 25 26 48 547 Jun 2016 Non-economic Volumes Mix Profitability/ VNB before Economic Jun 2017 assumption and pricing economic assumption methodology assumption changes changes changes
Slide 58: Value of new business per segment
Financial aspirations: Growth in value of new business Value of new business per segment June 2017 June 2016 Change Rm Rm % Momentum Retail 228 251 (9) Metropolitan Retail 178 191 (7) Corporate and Public Sector 68 199 (66) International 73 71 3 Total 547 712 (23) New business margin (PVP) 1.3% 1.6%
Slide 59: Return on embedded value: EV analysis
Return on embedded value: EV analysis R’m 902 835 45 018 3 766 2 495 42 989 42 523 EV profit = 2 029 Embedded EV earnings from EV earnings EV profit from Embedded Dividends Closing value at start operations attributable to non-covered value before Embedded of the period investment businesses dividen
Slide 60: Capital management
Capital management
Slide 61: Capital management: Economic capital
Capital management: Economic capital R’bn June June 2017 2016 Net asset value as per embedded value statement 16.3 16.9 Qualifying debt 3.6 3.6 Less: net asset value of strategic subsidiaries (3.6) (3.5) Less: required capital (10.1) (9.7) Capital before deployment 6.2 7.3 Deployed (2.5) (3.7) Divid
Slide 62: Change in the capital buffer
Capital management: Change in the capital buffer R’bn 0.7 2.6 2.4 3.6 3.7 1.2 0.6 Capital buffer Profit from Profit from Dividends Increase in Change in Capital buffer at 30 June covered non-covered and new required strategic at 30 June 2016 business business capital capital commitments 2017
Slide 63: Capital management: Dividend
Capital management: Dividend Factors considered • Stable dividend growth over the long term • Allowance for volatile investment markets, capital requirements and changes in legislation • Earnings generation capacity and forecasts • External factors • Current dividend cover of 1.3x Separate dividend
Slide 64: Planned capital deployment
Capital management: Planned capital deployment Rm 1 200 1 000 800 600 400 200 0 F2018 F2019 F2020 F2021 -200 Other
Slide 65: Focus on execution
Focus on execution
Slide 66: Focus on execution
Focus on execution: • Data analytics • Channel growth • Capital optimisation • Client obsession • Geographic • Life Insurance diversification • Short-term Insurance - Aditya Birla • Investment management • African Bank • Expense management
Slide 67: MMI Executive committee
Focus on execution: MMI Executive committee
Slide 68: MMI Holdings
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