Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — H1 2014 Earnings Presentation
36 slides from Momentum's earnings presentation, 2014
Slide 1: Pursuing Growth: 2014 interim results
Pursuing Growth 2014 interim results For the six months ended 31 December 2013
Slide 2: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
Slide 3: External environment
External environment Strong equity market JSE all-share index • Continued strong market performance • SA credit outlook • Labour challenges • Consumers under pressure • SA GDP growth uncertainty • African GDP growth strong
Slide 4: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
Slide 5: Financial results
Financial results Delivering on our strategy – investing in the future New Value of Return on Profits from Interim business new embedded operating dividend PVP * business * value divisions per share +22% +23% +20% +24% +12% R20 779m R378m to R1 365m 57cps 2 331cps * Excludes FNB Life
Slide 6: Diluted core headline earnings per division
Financial results Diluted core headline earnings per division 1 year Dec 2012 Dec 2013 change Rm Rm Momentum Retail 514 652 27% Metropolitan Retail 242 315 30% Momentum Employee Benefits 159 179 13% Metropolitan International 39 49 26% Momentum Investments 74 95 28% Metropolitan Health 70 75 7% Oper
Slide 7: Total earnings (diluted)
Financial results Total earnings (diluted) Dec 2012 Dec 2013 Change Rm Rm Core headline earnings 1 501 1 690 13% Amortisation of intangibles (302) (277) 8% Fair value gains 232 398 72% Basis changes and investment variances 10 64 >100% Other adjustments (3) (48) >(100)% Headline earnings 1 438 1 827
Slide 8: New business per division
Financial results New business per division Dec 2012 Dec 2013 Change Rm Rm Momentum Retail 8 459 10 499 24% Metropolitan Retail * 2 783 2 831 2% Momentum Employee Benefits 4 977 6 506 31% Metropolitan International 874 943 8% Total PVP * 17 093 20 779 22% Total APE * 2 381 2 787 17% * Excludes FNB L
Slide 9: Value of new business per division
Financial results Value of new business per division Dec 2012 Dec 2013 Change Rm Rm Momentum Retail 93 136 46% Metropolitan Retail * 120 122 2% Momentum Employee Benefits 66 90 36% Metropolitan International 28 30 7% Total * 307 378 23% New business margin (PVP) 1.8% 1.8% * Excludes FNB Life Excelle
Slide 10: Value of new business attribution
Financial results Value of new business attribution Rm 400 380 360 340 320 300 280 260 240 220 200 Dec-12 FNB Life Revised opening Methodology & Expenses Mortality Mix & volumes Dec-13 other
Slide 11: EV analysis (Rm)
EV analysis (Rm) -213 -36 1 178 -1 178 583 378 12 378 1 138 37 388 35 148 Opening EV Expected Operating Operating Value of new Investment Investment Economic EV profit Change in Closing EV return experience assumption business return on net variances assumption from non- share capital variances chan
Slide 12: Analysis of return on embedded value (ROEV)
Analysis of return on embedded value (ROEV) Dec Dec 2012 2013 Annualised Rm Rm ROEV Expected return – unwind of RDR 1 006 1 138 6.8% Operating experience variances 504 378 2.2% Embedded value from new business 340 378 2.2% Investment return on adjusted net worth 507 583 3.5% Investment variances 989
Slide 13: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
Slide 14: Momentum Retail
Momentum Retail Dec Dec Key aspects 2012 2013 Change • Strong inflow of funds Rm Rm • Good mortality profits Total funds received 15 370 17 676 15% • Increase in asset- New business PVP 8 459 10 499 24% based fees Recurring 539 519 (4)% • Expenses well Single 5 426 7 609 40% controlled Value of new
Slide 15: 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 • Emphasis on innovation • Increase penetration in the middle-income market
Slide 16: Metropolitan Retail
Metropolitan Retail Dec Dec Key aspects 2012 2013 Change • New business margin Rm Rm remains strong Total funds received 3 141 3 450 10% • Investing in sales force New business PVP * 2 783 2 831 2% • Strong mortality Recurring * 509 558 10% experience Single * 533 692 30% • Reduced FNB Life Value of
Slide 17: Metropolitan Retail: Focus areas
Metropolitan Retail Focus areas • Process and systems renewal • Diversify and grow distribution • Partnership strategies • Mastering distribution initiative • Embed segmentation insights • Expense and persistency management • Existing customer optimisation • Leadership succession
Slide 18: Momentum Employee Benefits
Momentum Employee Benefits Dec Dec Key aspects 2012 2013 Change • Positive net cash flow Rm Rm Total funds received 7 908 11 219 42% • Strong new business volumes New business PVP 4 977 6 506 31% • Excellent value of new Recurring 253 532 >100% business Single 3 128 1 704 (46)% • Continued growth in
Slide 19: Momentum Employee Benefits: Focus areas
Momentum Employee Benefits Focus areas • Optimise distribution • Align Guardrisk with the group • Entrench position as leading incapacity insurer • Close collaboration with health operations • Strengthen brand presence in target markets • Product innovation
Slide 20: Metropolitan International
Metropolitan International Dec Dec 2012 2013 Change Key aspects Rm Rm • Difficult operating environment Total funds received 1 762 1 766 - Life insurance • Slower new business growth New business PVP 874 943 8% Value of new business 28 30 7% • Medical claims ratios improved PVP margin 3.2% 3.2% Heal
Slide 21: Metropolitan International: Focus areas
Metropolitan International Focus areas • Acquisition of Cannon Assurance (Kenya) • Acquisitions complementary to growth initiatives • Namibian integration • Top line growth in all lines of business • Implement mass-market initiatives • Product innovation and diversification • Support centre efficien
Slide 22: Momentum Investments
Momentum Investments Dec Dec Key aspects 2012 2013 Change • New focused Rbn Rbn operating model Net flows 11 (3) • Improved investment Assets under management 340 371 9% performance • Lower expense ratio Rm Rm • Good recovery in Operating profit after tax 74 95 28% profits Progress in building excel
Slide 23: Momentum Investments: Focus areas
Momentum Investments Focus areas • Superior investment performance • Developing solutions-based client value propositions • Develop strong client relationships • Invest in growth initiatives and expand capabilities • Optimising efficiencies and systems integration
Slide 24: Metropolitan Health
Metropolitan Health Dec Dec Key aspects 2012 2013 Change • Slow-down in GEMS membership growth Total principal members 1 179 043 1 182 746 - • Acquisition of GEMS 662 469 681 218 3% Providence Health Other schemes 516 574 501 528 (3)% • Consolidation continues Rm Rm • Operational Operating profit af
Slide 25: Metropolitan Health: Focus areas
Metropolitan Health Focus areas • Diversify income streams • Retain and expand current business • Improve margin conversion and service delivery • Corporate market collaboration to leverage health expertise • Build a public private partnership framework
Slide 26: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
Slide 27: 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 140 130 120 110 100 90 Total ordinary dividend cents 8
Slide 28: Capital management: Progress
Capital management Progress Credit rating upgrade New debt issue IFS AA+ (zaf) R1.5bn SAM Sub-debt A+ (zaf) March 2014
Slide 29: Capital strength
Capital strength Economic capital Rbn Net asset value as per embedded value statement 17.1 Qualifying debt 1.5 Less: net asset value of strategic subsidiaries (1.6) Less: required capital (10.0) Capital before deployment 7.0 Deployed (3.5) Interim dividend (0.9) Acquisition of Guardrisk (1.6) Other
Slide 30: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
Slide 31: Group strategic focus
Group strategic focus Pursuing growth Product Geographical diversification diversification Short-term Africa insurance India Health solutions South-East Asia Segment Channel diversification diversification Middle income Alternative segment distribution Client-centricity Financial Wellness Cross-sell
Slide 32: Growth initiatives
Growth initiatives Acquisitive progress
Slide 33: Transformation and sustainability
Transformation and sustainability Listed on the JSE’s Level 2 B-BBEE status Socially Responsible Investment index (SRI) since 2006
Slide 34: Areas of strength
Areas of strength Diversified portfolio of large scale cash- generating financial services businesses Client centricity Broad distribution through trusted capability across and respected Africa brands Empowerment Diversified and credentials experienced team Merger-related Strong and efficient enhanc
Slide 35: Shareholder structure
Shareholder structure as at 31 December 2013
Slide 36: MMI Investor relations
MMI 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