Momentum Group Limited · JSE:MTM
Momentum — Momentum Metropolitan Holdings — FY2019 Earnings Presentation
55 slides from Momentum's earnings presentation, Sep 4, 2019
Slide 1: Delivering on our promises
Delivering on our promises Results for the year ended 30 June 2019
Slide 2: Agenda
Agenda Part 1 Hillie Meyer Introduction Group CEO Part 2 Hillie Meyer Reset and Grow update Group CEO Part 3 Risto Ketola Financial results Group FD Part 4 Dan Moyane Q&A
Slide 3: Introduction
Introduction Staff engagement and commitment
Slide 4: Introduction: Salient features
Introduction Salient features Financial Sales Service Product
Slide 5: Salient features: earnings growth
Introduction Salient features R million Earnings growth Financial 3 500 +21% +53% +10% 3 000 Sales 2 500 2 000 1 500 Service 1 000 500 Product - Normalised Operating earnings Core Headline Headline Earnings Earnings 2018 2019
Slide 6: Financial discipline: controllable costs
Introduction Salient features Financial discipline: Controllable costs (R billion) Financial 9.2 9.1 Sales 3.5 3.5 3.5 3.6 Service 2.2 2.0 Product 2018 2019 Head office functions Product and Service Distribution and sales
Slide 7: Salient features: new sales
Introduction Salient features R million New sales (PVP) Financial 25 000 -1% 20 000 Sales +51% 15 000 Service 10 000 +2% -4% 5 000 +7% Product - Momentum Metropolitan Momentum Africa Momentum Life Retail Corporate Investments 2018 2019
Slide 8: Improvement in lost call rates
Introduction Salient features Improvement in lost call rates Improvement in lost call rates Momentum Retail Metropolitan Retail 30% 20% 25% Financial 20% 15% 15% 10% 10% 5% 5% 0% 0% Sales Nov18 Dec18 Aug 18 Sep 18 Jan 19 May 19 Jun 19 Jul 18 Feb 19 Mar 19 Oct 18 Apr 19 Nov18 Dec18 Aug 18 Sep 18 Jan
Slide 9: Salient features
Introduction Salient features Financial Good Strong Positive short-term retail mortality group risk insurance underwriting Sales profits experience results Service Positive Better Improved persistency credit experience experience in experience in Africa Product Metropolitan Retail
Slide 10: Reset and Grow update
Reset and Grow update Reset Grow Fix the basics Distribution Service Address cost base Products Marketing 4 100 R4 billion 3 900 R3.6 billion 3 700 3 500 3 300 3 100 R3.1 billion 2 900 R2.8 billion 2 700 R million 2018 2019 2020 2021
Slide 11: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum agents footprint growth 2017 Reshape distribution channels 2018 Scale back UK presence 2019 2020 Improve service 2021 0 200 400 600 800 1 000 1 200 Wealth platform fees
Slide 12: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum agents footprint growth Momentum Consult footprint growth Reshape distribution channels 2017 Scale back UK presence 2018 2019 Improve service 2020 2021 Wealth platform fees 0 100 200 300 400
Slide 13: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum agents footprint growth Momentum Consult footprint growth Reshape distribution channels Grow productive brokers Scale back UK presence 2017 2018 Improve service 2019 2020 Wealth platform fees 2021 0 1 000 2 000 3 000
Slide 14: Momentum Retail
Momentum Retail Reset Grow Full value chain Momentum agents footprint growth Momentum Consult footprint growth Reshape distribution channels Grow productive brokers Scale back UK presence Increase flows into own funds Improve service Product innovation Enhance Multiply offering Wealth platform fees
Slide 15: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force leadership Improve client value proposition Adviser productivity Upgrade points of sale 2017 Legacy system migration 2018 2019 2020 2021 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Slide 16: Metropolitan Retail
Metropolitan Retail Reset Grow Stabilise sales force leadership Improve client value proposition Adviser productivity Upgrade points of sale Sales and service efficiencies 60% Stop Order Collection: Adviser tenure Legacy system migration 56% 50% 49% 49% 44% 40% 34% 30% 32% 25% 20% 21% 10% F18Q4 F19Q
Slide 17: Momentum Corporate
Momentum Corporate Reset Grow Full value chain Diversify distribution channels Improve underwriting experience Increase underwriting margins Strengthen leadership team Organised Labour and Public Sector Rebuild distribution Retailisation
Slide 18: Health
Health Reset Grow Systems consolidation Public sector Low income Focused distribution +3% +8% BEE transactions Restricted Thebemed Momentum schemes Health Public sector value proposition -7% +72% 0%
Slide 19: Africa
Africa Reset Grow In-country governance and control Strengthen distribution Exit selected countries Improve product mix and margins Strengthen leadership teams aYo roll-out (MTN JV) Finalise operating model
Slide 20: Guardrisk
Guardrisk Reset Grow Reprice loss-making schemes Increase underwriting revenue Underwriting profit as % of net revenue 25% 22% 20% 16% 15% 12% 12% 10% 5% 0% 2016 2017 2018 2019
Slide 21: Guardrisk
Guardrisk Reset Grow Reprice loss-making schemes Increase underwriting revenue Bolt-on transactions Linked investment products Open architecture insurance platform
Slide 22: Momentum Short-term Insurance: in-force policies
Momentum Short-term Insurance Reset Grow Full value chain Grow client base Client and premium growth SA focus only 100 000 25% GEP growth % In-force policies 80 000 20% Exit unprofitable portfolios 60 000 15% Enhance pricing and underwriting 40 000 10% capability 20 000 5% - 0% 2016 2017 2018 2019 2
Slide 23: Momentum Short-term Insurance: loss ratio
Momentum Short-term Insurance Reset Grow Full value chain Grow client base SA focus only Improve claims ratio Loss ratio Exit unprofitable portfolios 100% 80.9% 80% 72.1% 65.9% 63.7% Enhance pricing and underwriting capability 60% 40% 20% 0% 2016 2017 2018 2019
Slide 24: Momentum Short-term Insurance
Momentum Short-term Insurance Reset Grow Full value chain Grow client base SA focus only Improve claims ratio Enhance CVP Exit unprofitable portfolios AFI transaction Enhance pricing and underwriting capability
Slide 25: Alexander Forbes Insurance acquisition: strategic rationale
Momentum Short-term Insurance Alexander Forbes Insurance acquisition Strategic rationale 1. 2. 3. 4. Improving Specialised Expanded Enhanced scale tied distribution CVP growth
Slide 26: Alexander Forbes Insurance acquisition targeted end-state
Momentum Short-term Insurance Alexander Forbes Insurance acquisition targeted end-state Enhanced CVP Momentum One Insurance and integrated brand license operations
Slide 27: Group-wide
Group-wide Reset Grow Operating model Align rewards to performance Strengthen senior leadership Improve diversity Sandton office Brand positioning Cost management Unite staff behind a common purpose
Slide 28: Reset and Grow
momentum SX. METROPOLITAN Reset and Grow 2019 G& VAUWVAY) YAUA ‘momentum momentum multiply A. METROPOLITAN GUARDRISK®@
Slide 29: Financial results for twelve months to 30 June 2019
Financial results for twelve months to 30 June 2019
Slide 30: Key financial measures
Key financial measures Diluted normalised headline earnings (Rm) Diluted normalised headline earnings per share (cents) F2018 2 003 F2018 126 +53% +61% F2019 3 074 F2019 203 Present value of premiums (PVNBP, Rm) Value of new business (VNB, Rm) F2018 50 002 F2018 345 +12% +57% F2019 541 F2019 55 783
Slide 31: Like-for-like growth was 21%
Like-for-like growth was 21% NHE before basis changes and investment variances (Rm) +29% 963 +7% 747 +2% +8% 658 615 553 566 580 513 +51% +338% 276 183 206 47 2018 Momentum Life Momentum Metropolitan Retail Momentum Momentum Other (Non-life, 2019 Investments Corporate and Health Metropolitan Africa
Slide 32: Review of Reset and Grow financial targets
Review of Reset and Grow financial targets
Slide 33: Review on Reset and Grow – efficiency improvements
Review on Reset and Grow – efficiency improvements Jun 2019 Jun 2018 Change Reset and Grow priorities Rm Rm % Momentum Life 883 472 87 Momentum Investments 512 227 >100 Efficiency improvements Metropolitan Retail 610 201 >100 - We promised a R700m saving Momentum Corporate 601 909 (34) Earnings from
Slide 34: Review of controllable costs
Review of controllable costs Direct expenses analysis Achieved Planned 12 saving saving F2018 costs R9.2bn F2019 costs R9.1bn F2021 costs R10.2bn in F2019 by F2021 10 4.1 0.2 0.0 8 3.5 3.5 6 4 3.9 0.1 0.3 3.5 3.6 2 2.2 2.0 2.2 0.2 0.4 F2018 F2019 F2021 0.5* 0.7* Distribution & sales Product & servic
Slide 35: Grow non-life insurance aggressively
Grow non-life insurance aggressively Jun 2019 Jun 2018 Change Reset and Grow priorities Rm Rm % Momentum Life 883 472 87 Momentum Investments 512 227 >100 Efficiency improvements Metropolitan Retail 610 201 >100 Momentum Corporate 601 909 (34) Non-life Insurance 164 204 (20) Grow non-life insurance
Slide 36: Guardrisk is on track for its F2021 contribution
Guardrisk is on track for its F2021 contribution 600 25% 543 547 504 +22% 500 466 20% 400 +16% 15% 300 +12% +12% 185 10% 200 125 100 69 81 5% - 0% 2016 2017 2018 2019 Management Fee Underwriting Profit UW Profit as % of Net Revenue Guardrisk is the clear #1 player in cell captive industry
Slide 37: Momentum Short-term Insurance also on track
Momentum Short-term Insurance also on track In-force policies Gross written premium growth (%) 80 000 20% 19% 19% 69 426 70 000 18% 61 411 60 000 54 608 16% 14% 49 683 14% 50 000 12% 40 000 10% 10% 30 000 8% 6% 20 000 4% 10 000 2% - 0% 2016 2017 2018 2019 2016 2017 2018 2019 Strong premium growth in
Slide 38: Additional investment into the non-life growth strategy
Additional investment into the non-life growth strategy Alexander Forbes Insurance acquisition R1.8bn Loyal client 84 000 Well diversified Gross written In-force policies base <64% Loss ratio premium <20% annualised F2018 and F2019 F2019 lapse rate Strong tied c.500 staff Profitable 94% distribution
Slide 39: Well managed spending on new initiatives
Well managed spending on new initiatives Jun 2019 Jun 2018 Change Reset and Grow priorities Rm Rm % Momentum Life 883 472 87 Momentum Investments 512 227 >100 Efficiency improvements Metropolitan Retail 610 201 >100 Momentum Corporate 601 909 (34) Non-life Insurance 164 204 (20) Growth non-life insu
Slide 40: India health JV remains in line with business plan
India health JV remains in line with business plan Gross written premium 3.8 million in-force lives* (GWP, Rm) Retail lives contribute 64% to gross written premium 996 Claims ratios improving as per plan Weaker rand has had a small negative impact on our P&L share 483 *Published lives as at 1Q20 111
Slide 41: Group financial results
Group financial results
Slide 42: Sales up 12% year-on-year
Sales up 12% year-on-year Present value of premiums (PVNBP, Rm) 55 783 Sales volumes up by 12% 50 396 50 002 Momentum Corporate had 44 090 a great year winning 41 595 numerous large deals Solid retirement annuity sales from Momentum Life Strong recovery in Momentum Metropolitan Africa during 2H19 Ju
Slide 43: New business margin up from 0.7% to 1.0%
New business margin up from 0.7% to 1.0% 1.8% 1.6% 1.6% 2018 2019 1.2% 1.1% 1.0% 0.8% 0.7% 0.4% 0.3% 0.2% -0.2% Momentum Life Momentum Metropolitan Retail Momentum Momentum Momentum Metropolitan Investments Corporate Metropolitan Africa
Slide 44: Embedded value up by 4%
Embedded value up by 4% +4% 41 193 39 601 1 014 Non-covered: new initiatives 577 6 645 Non-covered: ROEV per share 5 558 established businesses 9.4% 11 333 Covered business: 11 758 R27.48 adjusted net worth EV per share (June 2019) R25.43 Covered business: EV per share 22 133 21 776 value of in-forc
Slide 45: Capital management – capital cover ratio
Capital management – capital cover ratio Regulatory solvency position Momentum Metropolitan (R million) Life Eligible own funds (pre dividend) 32 948 Solvency Capital Requirement (SCR) 15 869 SCR cover (times) 2.08 SCR cover (times) - 30 June 2018 1.93 Capital cover ratio remains within the target r
Slide 46: Capital management - dividend to 70 cents per ordinary share
Capital management - dividend to 70 cents per ordinary share Dividend per share Dividend cover is 2.9 times for the year – towards upper end of target range 35 35 Dividend reflects ongoing desire to build up liquidity and capital coverage 2019 Dividend policy takes into account the capital requireme
Slide 47: Other current topical matters
Other current topical matters
Slide 48: Other current topical matters
Other current topical matters 1 IFRS 17 project update 2 Improving capital and cash generation 3 Momentum Metropolitan Africa earnings 4 Diversified sources of earnings
Slide 49: IFRS progress
IFRS 17 progress 1 Comfortable with project progress to date Uncertainty reducing – engaging consultants 2 & industry forums 3 Have first results view on key products 4 Project costs remain well controlled
Slide 50: Cash generation supports AFI acquisition
Cash generation supports AFI acquisition Require support Self-funding Cash generative Momentum India Metropolitan Met MET Guardrisk Guardrisk Guardrisk Corporate MSTI MSTI Multiply Health Health Africa Africa Africa
Slide 51: Africa earnings +78% to R262m
Africa earnings +78% to R262m Jun 2019 Jun 2018 Change Rm Rm % Namibia 201 171 18 Lesotho 89 79 13 Botswana 59 53 11 Ghana 40 39 3 Kenya 24 (19) >100 Other countries – ongoing (3) 19 <(100) Other countries – planned exits (42) (33) (27) Centre costs (106) (162) 35 Normalised headline earnings 262 14
Slide 52: Group has diverse sources of earnings
Group has diverse sources of earnings Earnings sub-divided by primary driver Asset based fees (market related) constitutes a third of group earnings 10% Underwriting profits account for a Asset-based fees 20% quarter of earnings – plan to grow Underwriting profits over time 14% Spreads Administratio
Slide 53: In closing
In closing
Slide 54: In closing
In closing 1 Coming towards the end of Reset phase – excellent progress and impact visible in earnings Focus shifting to Grow phase – key item to deliver 2 on is improvement in distribution channel metrics Our staff have really taken to the Reset & Grow 3 strategy and have delivered against challeng
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Momentum Metropolitan Holdings — FY2019 Earnings Presentation on 6ix