Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — FY2015 Earnings Presentation
54 slides from Momentum's earnings presentation, Sep 9, 2015
Slide 1: Towards client centricity: 2015 year-end results
Towards client centricity 2015 year-end results 9 September 2015
Slide 2: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric strategy Management incentivisation Strategic focus areas
Slide 3: External environment
External environment Slow-down in equity market - slower GDP growth +17% +29% +2% 2013 2014 2015 JSE All Share +17% +29% +2% Risk discount rate +10bps +60bps +10bps
Slide 4: Challenging operating environment
Challenging operating environment SA economy facing Consumers under Regulatory changes challenges pressure • GDP growth • Solvency Assessment • Inflation and interest • Credit rating and Management rates • Unemployment and • Retail Distribution • Weakening rand labour unrest Review • High indebtedne
Slide 5: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric strategy Management incentivisation Strategic focus areas
Slide 6: Financial results
Financial results Delivering on our strategy – investing in growth New Value of Return on Profits from Total business new embedded operating dividend PVP business value divisions +21% +22% +10% +17% +9% R50bn R954m to R3 471m R2 435m 2 514cps
Slide 7: Diluted core headline earnings per division
Financial results Diluted core headline earnings per division June June June June 1 year Comp 2012 2013 2014 2015 change growth Rm Rm Rm Rm Momentum Retail 1 064 1 158 1 372 1 531 12% 13% Metropolitan Retail 438 509 587 738 26% 19% Momentum Employee Benefits 249 341 516 660 28% 38% International 57
Slide 8: Shareholder capital
Financial results Shareholder capital June June 2014 2015 Change Rm Rm Holding Company (253) (227) 10% Strategic initiatives (net) (196) (382) (95)% Balance Sheet Management 411 588 43% Investment income 864 549 (36)% Tax (170) (163) 4% Total 656 365 (44)% Investing capital in growth
Slide 9: Investments in strategic growth initiatives
Financial results Investments in strategic growth initiatives June 2014 June 2015 Rm Rm Core headline earnings as reported 3 621 3 836 Additional investments in growth initiatives 246 548 Momentum short-term insurance Middle-market initiative Client-engagement solutions Distribution International Pe
Slide 10: Covered new business
Financial results Covered new business June 2014 June 2015 Change Rm Rm Present value of premiums 41 739 50 396 21% Annual premium equivalent 5 622 6 643 18% Value of new business 779 954 22% Diversification strategy delivering
Slide 11: New business per division
Financial results New business per division June 2014 June 2015 Change Rm Rm Momentum Retail 20 434 22 924 12% Metropolitan Retail 4 948 5 117 3% Momentum Employee Benefits 14 491 20 191 39% International 1 866 2 164 16% Total PVP 41 739 50 396 21% Total APE 5 622 6 643 18% Volumes increased strongl
Slide 12: Value of new business per division
Financial results Value of new business per division June 2014 June 2015 Change Rm Rm Momentum Retail 240 246 3% Metropolitan Retail 236 186 (21)% Momentum Employee Benefits 254 456 80% International 49 66 35% Total 779 954 22% New business margin (PVP) 1.9% 1.9% Excellent growth, margin maintained
Slide 13: New business margin per division
Financial results New business margin per division June 2014 June 2015 Momentum Retail 1.2% 1.1% Metropolitan Retail 4.8% 3.6% Momentum Employee Benefits 1.8% 2.3% International 2.6% 3.0% Total 1.9% 1.9% Diversification protecting margin
Slide 14: EV analysis (Rm)
EV analysis (Rm) -406 51 664 -832 954 -17 622 -3 139 2 758 40 330 39 675 Opening EV Expected Operating Operating Value of new Investment Investment Economic EV profit from Change in Closing EV return experience assumption business return on net variances assumption non-covered share capital & varian
Slide 15: Analysis of return on embedded value (ROEV)
Analysis of return on embedded value (ROEV) 2014 2015 Rm ROEV Rm ROEV Expected return – unwind of RDR 2 289 6.5% 2 758 7.0% Operating experience variances 544 1.5% 622 1.6% Embedded value from new business 779 2.2% 954 2.4% Investment return on adjusted net worth 1 063 3.0% 664 1.7% Investment varia
Slide 16: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric strategy Management incentivisation Strategic focus areas
Slide 17: Momentum Retail
Momentum Retail June June Key aspects Change 2014 2015 • Good mortality and Rm Rm morbidity profits Total funds received 33 849 34 185 1% • Increase in single New business PVP 20 434 22 924 12% premium sales Recurring 1 022 1 077 5% • Investing in middle- market and Single 14 926 17 061 14% distribu
Slide 18: Momentum Retail
Momentum Retail Momentum peaticiaim JouRNEY “tt ey
Slide 19: Momentum Retail: Strategic initiatives
Momentum Retail Strategic initiatives • Entrench middle-market offering • Build and diversify distribution capability • Enhance wealth management philosophy and solutions • Implement strategic channel and client interaction capabilities
Slide 20: Metropolitan Retail
Metropolitan Retail June June Change Key aspects 2014 2015 • New remuneration Rm Rm model impacted sales Total funds received 6 820 6 910 1% • Sales mix and volumes New business PVP 4 948 5 117 3% reduced VNB Recurring 1 083 1 045 (4)% • Strong single premium Single 1 077 1 415 31% sales growth Valu
Slide 21: Fixing the Adviser Productivity issue
Metropolitan Retail Fixing the Adviser Productivity issue Start with a model that balances the interests of all stakeholders
Slide 22: Personal Financial Advisers productivity
Metropolitan Retail Personal Financial Advisers Q4 2014 Q4 2015 Change Average number of advisers 5 544 3 840 (31)% APE per adviser 3 947 5 189 31% Focus on agent productivity
Slide 23: Metropolitan Retail: Strategic initiatives
Metropolitan Retail Strategic initiatives • New generation client value proposition • Channel productivity • Migration to new generation technology platforms • Integrated sales and service architecture • Channel diversification
Slide 24: Momentum Employee Benefits
Momentum Employee Benefits June June Change Key aspects 2014 2015 • Positive net cash flow Rm Rm • Strong new business Total funds received 19 914 24 208 22% • Strong contribution New business PVP 14 491 20 191 39% from Guardrisk Recurring 1 033 1 564 51% • Healthy underwriting margins Single 5 351
Slide 25: Momentum Employee Benefits
Momentum Employee Benefits Life insurance Investments _ ge & savings | a \ : , = ETA | procurement Development DA Employer a Insurance
Slide 26: Momentum Employee Benefits: Strategic initiatives
Momentum Employee Benefits Strategic initiatives • Integrated health and risk solutions • Ongoing unlocking of Guardrisk synergies • Affinity related distribution channels • Combined value proposition for corporate clients • Focused public sector strategy
Slide 27: International
International June June Key aspects Change 2014 2015 • Good business growth Rm Rm • Positive mortality Total funds received 3 740 4 843 29% experience Life insurance New business PVP 1 866 2 164 16% • Satisfactory medical claims ratios Value of new business 49 66 35% • Growth in profit Health contin
Slide 28: International: Strategic initiatives
International Strategic initiatives • Successfully implement India joint venture • Scale East Africa operations • Restructure Nigerian operations • Grow telco insurance strategy • Accelerate product diversification • Drive regional hub autonomy and foster collaboration • Restructure the centre cost
Slide 29: Metropolitan Health
Metropolitan Health June June Key aspects Change 2014 2015 • Inclusion of CareCross assisted profit growth Total principal members 1 169 045 1 103 126 (6)% • Industry consolidation continues Rm Rm • Lost clients / contracts Revenue 1 560 2 061 32% – pressure on revenue Expenses (1 357) (1 782) (31)%
Slide 30: Momentum Short-term Insurance
Momentum Short-term Insurance June June Key aspects Change 2014 2015 • Brand awareness gaining Rm Rm traction Premium income 332 506 52% • Significant growth in premium income and Claims paid 204 442 117% policy count Policy count 37 812 56 425 49% • Aggressive focus on claims experience Combined ra
Slide 31: Momentum Investments
Momentum Investments June June Key aspects Change 2014 2015 • Business model Rbn Rbn clarified Net flows (7) (25) • Reduced performance fees Insurance (5) (3) • R31bn outflow of Third-party funds (2) 8 white-label funds White-label CI funds (31) • Reduced property Properties - 1 development profits
Slide 32: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric strategy Management incentivisation Strategic focus areas
Slide 33: Earnings and dividends
Dividend Earnings and dividends 300 250 1.6 1.7 1.6 1.6 1.6 Dividend cover 200 Basic core per share 150 Dividend per share 100 50 0 2011 2012 2013 2014 2015 Consistent dividend track record
Slide 34: Dividend policy
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) 2014 2015 Change Interim ordi
Slide 35: Capital management progress
Capital management Progress Credit rating Debt SAM IFS AA+ (zaf) Issue R1.5bn March 2014 All projects on track Sub-debt A+ (zaf) Issue R750m Dec 2014 for SAM Redeem R500m Dec 2014 implementation Issue R1.25bn Aug 2015 Redeem R1.0bn Sep 2015
Slide 36: Issued debt
Issued debt June 2015 MMI Group Limited is a 100% owned subsidiary of MMI Holdings Limited. This entity is a registered insurance company that underwrites the long- term insurance policies of MMI Group Limited - Issuer Metropolitan and (Long-term insurance license) Subordinated notes in issue: Momen
Slide 37: Capital strength
Capital strength Economic capital – 30 June 2015 Rbn Net asset value as per embedded value statement 16.5 Qualifying debt 3.3 Less: net asset value of strategic subsidiaries (2.0) Less: required capital (10.6) Capital before deployment 7.2 Deployed (2.9) Final dividend (1.5) Debt issue and redemptio
Slide 38: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric strategy Management incentivisation Strategic focus areas
Slide 39: Strategy implementation
Strategy implementation Enablers: Foundation for effective implementation Vision Preferred lifetime financial wellness partner, with a reputation for innovation and trustworthiness Purpose Enhance the lifetime financial wellness of people, their communities and their businesses Growth Client centric
Slide 40: MMI operating model
MMI operating model xropolitan we! Retail Products and solutions centres O of excellence To enhance the lifetime financial wellness of people, their communities and their businesses Client engagement solutions Segments O MMI’s purpose Group-wide functions
Slide 41: Investment model objectives
Investment model objectives Alignment • Outcome-based investment philosophy across all segments and products • Access to a comprehensive range of asset strategies Optimisation • Eliminate fragmentation • Improved client experience • Improved fee retention and margin Stability • Business model that w
Slide 42: Aluwani Capital Partners
Aluwani Capital Partners The future of empowered investing A leading independent BEE empowered asset manager • Core black executive and portfolio management team of MAM • Focus on the strategies required in the BEE market (equity, multi-asset, fixed income and frontier markets) • Asset book mostly t
Slide 43: Strategic focus areas
Strategic focus areas Restructuring the Investment Centre of Excellence to fulfil on our client- centric business strategy, through a market leading outcome-based investment philosophy Build internal investment management expertise (eg absolute return and passive strategies) Reposition in-house inve
Slide 44: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric operating model Management incentivisation Strategic focus areas
Slide 45: Balanced scorecard
Balanced scorecard Weighted for growth Key performance indicator (KPI) 2013 2014 2015 Return on embedded value (ROEV) - 20% 20% Core headline earnings 30% 25% 25% Embedded value of new business (VNB) 20% 20% 20% Integration expense savings 15% - - Transformation 15% 15% 15% Strategic initiatives 20%
Slide 46: Performance management: short-term incentive
Performance management Short-term incentive - balanced scorecard 2015 Weight F2015 target Actual Achieved Return on embedded value* 20% 11% 11% ↔ Core headline earnings growth 25% 11% 6% Value of new business 20% R880m R954m Transformation 15% FSC score of 75 91 Strategic initiatives 20%
Slide 47: Performance management: long-term targets
Performance management Long-term performance targets – rolling three-year return on embedded value Threshold (GDP+3%) 11% Actual 2013 17% Actual 2014 19% Actual 2015 10% Three-year average 15% 2016: new threshold Risk-free + 3% Outperformed target
Slide 48: Agenda
Agenda Economic environment Financial results Operational summary Capital management Client-centric strategy Management incentivisation Strategic focus areas
Slide 49: 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 Excellence • Improve efficiency
Slide 50: MMI's Transformation Journey
MMI’s Transformation Journey – Level 2 since 2012 to date (≥85 points = Level 2) Level 2 91 points Level 2 Level 2 88 points Pre-Merger 90 points 2014 Level 3 MMI celebrates 10 77 points 2013 year strategic Oct 2015 partnership with Deadline for FSC 2012 KTH re-alignment May 2015 KTH acquires shares
Slide 51: Areas of strength
Areas of strength Diversified cash-generating businesses Strong brands Extensive distribution capability Client-centric Experienced strategy management Empowerment Strong balance credentials sheet Attractive dividend
Slide 52: Shareholder structure
Shareholder structure as at 30 June 2015
Slide 53: Thank you
MI HOLDINGS Thank you
Slide 54: Investor relations
Investor relations Visit our website www.mmiholdings.co.za Tyrrel Murray +2721 940 5083 / 082 889 2167 tmurray@mmiholdings.co.za Natalie Amos +2721 940 6112 / 083 605 8339 namos@mmiholdings.co.za