Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — H1 FY2018 Earnings Presentation
67 slides from Momentum's earnings presentation, Mar 7, 2018
Slide 1: Achieving Focus
ACHIEVING FOCUS Results for the six months ended 31 December 2017
Slide 2: MMI strategy, business updates, financial performance, capital management
MMI strategy Retail business update Corporate business update Financial performance Capital management MMI strategy Q&A
Slide 3: MMI strategy
MMI strategy PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus area Financial aspirations Growth in earnings Client centricity Growth in value of new business Growth Return on embedded value Client aspirations Excellence “My Financi
Slide 4: Retail business update
MMI strategy Retail business update Corporate business update Financial performance Capital management Retail business update Q&A
Slide 5: What we set out to achieve in the long term
Momentum • Increasing market share at improved margins • Winning back IFA support • Increase tied agency workforce – 1 500 by 2022 What we set out • Product diversification Increased product holding per client to achieve in the • • Invest in technology long term Metropolitan • Increasing market shar
Slide 6: Progress to date: Client centricity
Progress to date Client centricity Strategic focus area Client centricity Growth Enabling Financial Wellness Excellence
Slide 7: Protect my family, protect my stuff, building my future
Protect my family Protect my stuff Building my future Protect me
Slide 8: Enabling financial wellness by protecting my family
ENABLING FINANCIAL WELLNESS BY PROTECTING MY FAMILY Industry norm is to settle a funeral claim within 48 hours of notification of death… our goal is same day settlement. 90% of funeral claims are paid within 24 hours of notification. 83 79 9 10 7 8 2 1 2 1 Same day Next day 2 Days 3 Days >3 Days
Slide 9: Enabling financial wellness by protecting my stuff
ENABLING FINANCIAL WELLNESS BY PROTECTING MY STUFF TMTM Safe SafeDayz Dayz
Slide 10: Enabling financial wellness by building my future
ENABLING FINANCIAL WELLNESS BY BUILDING MY FUTURE Momentum Guaranteed Return Option Since launch – 1 November 2017 596 Number one market 429 share since launch
Slide 11: Progress to date: Growth
Progress to date Growth Strategic focus area Client centricity Product expansion Growth Channel expansion Excellence
Slide 12: Increasing the sales force
INCREASING THE SALES FORCE Momentum agents Momentum Consult Supporting IFAs 13% 11% 26% 1 606 1 425 745 673 179 142 Dec-16 Dec-17 Dec-16 Dec-17 Dec-16 Dec-17
Slide 13: New business: Momentum short-term insurance
NEW BUSINESS: MOMENTUM SHORT-TERM INSURANCE New policy count by sales channel (12 months) Momentum agents IFA +37% Direct +20% +160% 5 387 5 607 3 921 4 690 1 633 629 Dec-16 Dec-17 Dec-16 Dec-17 Dec-16 Dec-17
Slide 14: Footprint growth: growing alternative channels
FOOTPRINT GROWTH: GROWING ALTERNATIVE CHANNELS
Slide 15: Footprint growth: growing alternative channels
FOOTPRINT GROWTH: GROWING ALTERNATIVE CHANNELS African Bank branches with Metropolitan presence Joint venture with African Bank through MMI Lending 179 310 263 R23m NUMBER OF LOANS VALUE OF LOANS Branches to date Planned branches 5 998 NUMBER OF R17,7m ANNUAL PREMIUM VERY FAVOURABLE EARLY RISK EXPER
Slide 16: Progress to date: Excellence
Progress to date Excellence Strategic focus area Client centricity Agent productivity Growth Efficiency Excellence
Slide 17: Agent productivity
AGENT PRODUCTIVITY Metropolitan agent productivity improving Number of regions achieving productivity standard ≥ 2 policies per week 19 17 12 11 8 9 8 10 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Number of branches achieving productivity standard ≥ 2 policies per week 180 190 138 149 1
Slide 18: Efficiency: Technology
EFFICIENCY: TE! Momentum app wellness IS fa yourhands —
Slide 19: Short-term insurance: loss ratio improving
SHORT-TERM INSURANCE: LOSS RATIO IMPROVING 120.00% -150 100.00% -125 80.00% -100 60.00% -75 40.00% -50 20.00% -25 0.00% 0 2H 2015 1H 2016 2H 2016 1H 2017 2H 2017 1H 2018 Claims ratio % Loss before tax (Rm)
Slide 20: What have we achieved and focus going forward
WHAT • • Increase in Metropolitan agent productivity Momentum footprint expansion HAVE WE • Good traction on African Bank partnership ACHIEVED • Solid performance by Momentum Short-term Insurance • Product and solution innovation FOCUS • Continued focus on channel productivity and expansion • Invest
Slide 21: Corporate business update
MMI strategy Retail business update Corporate business update Financial performance Capital management Corporate business update Q&A
Slide 22: What we set out to achieve
WHAT WE SET OUT TO ACHIEVE Momentum Corporate Momentum Health • Improve client experience • Single integrated health business • Strengthen distribution • From transactional to focusing on • Focus on quality of new business “health outcomes” • Fix earnings Momentum Investments • One outcome-based inv
Slide 23: Products, client centric, business financial wellness
Business Products Client centric Financial Wellness 2014 2017 2020 Focus Focus Focus • Best products • Product margins • Client partnership and • Appropriate rates • Start client engagement value proposition • Broker distribution • Multi-channel growth • Business (and employee) Financial Wellness •
Slide 24: Progress to date: Client experience
Progress to date Client centricity Client experience Client centricity Outcome-based investing Growth Health Excellence
Slide 25: Client service and experience excellence
Client service and experience excellence Client Obsession • Cultural change Multiply • Individual focus – Starter aligned to enable productivity Client Value Proposition • Corporate focus – Engagement solution launched February 2018 Effective Employer Index • Engagement tool to enable Financial Well
Slide 26: Outcome-based investing
Outcome-based investing Our history of innovation and thought leadership Momentum Investments Momentum Global Investment Management Momentum Momentum Asset Outcome-based Solutions Management Metropolitan Asset Advantage Asset Managers Management FirstRand Alternative Investments PSG Escher Investmen
Slide 27: How our South African health offering enables financial wellness
HOW OUR SOUTH AFRICAN HEALTH OFFERING ENABLES FINANCIAL WELLNESS OF CLIENTS
Slide 28: Progress to date: Growth
Progress to date Growth FundsAtWork Client centricity Health Growth Improved margin and channels Excellence
Slide 29: FundsAtWork
FUNDSATWORK AUM Growth R60.0bn 3rd Largest player in the market 19% R50.0bn R40.0bn Competitor 1 Competitor 2 R30.0bn 35% 26% R20.0bn R10.0bn 13% R0.0bn 10% 16% 1H 2015 1H 2016 1H 2017 1H 2018 Competitor 3 Member growth 5% Competitor 4 350 000 Momentum 300 000 350 000 300 000 150 000 100 000 1H 2015
Slide 30: Health: open scheme growth
HEALTH : OPEN SCHEME GROWTH Momentum Health showed best in industry member growth. 93 096 100 936 108 108 116 147 +7.6% PA 128 681 OVERALL 135 726 GROWTH 143 462 155 624
Slide 31: Growth through improved margin and channels
Earnings recovery: Growth • Material growth in earnings across all product lines through • Underwriting profitability recovery • Health right-sized in F2017 Improved margin and New business: channels • Re-built distribution channels in large corporate market • Launched Momentum Consultants and Actua
Slide 32: Progress to date: Excellence
Progress to date Excellence Client centricity Recognition and awards Growth Investment performance through an outcome-based Excellence lens
Slide 33: Recognition and awards
NITION pees NARDS boa Ho: OVINE A \A ing Oe AWARDS
Slide 34: Investment performance through an outcome-based lens
INVESTMENT PERFORMANCE THROUGH AN OUTCOME-BASED LENS Risk-adjusted returns Dec 2007 – Dec 2017 Competitor 11 Momentum Enhanced Factor 6 Depth of expertise in Competitor 10 multi-asset solutions construction. Momentum Enhanced Factor 7 Competitor 9 Competitor 8 Single unified investment process and p
Slide 35: Summary: what we have achieved
• Excellent earnings recovery SUMMARY: • Improved underwriting results WHAT WE • Stronger distribution channels HAVE • Better quality of new business ACHIEVED • Sustained good investment performance • Health business repositioned and strong empowerment partners
Slide 36: Focus going forward: Corporate
• Culture of client obsession FOCUS • Strengthen distribution GOING even further FORWARD: • Underwriting margins can CORPORATE improve further • Retailisation initiatives • Holistic solutions
Slide 37: Focus going forward: Health
• Organic and acquisitive growth FOCUS opportunities for Health GOING • Geographic growth through India FORWARD: • Scale Momentum Health (open HEALTH schemes) • Conclusion of BBBEE partnership and shareholding
Slide 38: Main focus for 2018: outcome-based investing
Main focus for 2018 Grow the Momentum Investments brand outcome-based investing your goal is our benchmark
Slide 39: Financial performance
MMI strategy Retail business update Corporate business update Financial performance Capital management Financial performance Q&A
Slide 40: Progress to date: Financial aspirations
Progress to date Financial aspirations Core earnings Financial aspirations 2 000 1 852 1 690 1 679 1 598 1 556 1 500 Growth in earnings 1 000 Growth in value of new business 500 - Return on embedded value H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 Value of new business % Return on embedded value 500 42
Slide 41: Capital distribution: what are we doing and why
Lower payout ratio 1 • R2bn vs R2.5bn in F2017 • 2.5 x dividend cover in future 2 We will use share repurchases CAPITAL • 15% - 20% discount to EV DISTRIBUTION: • EV per share uplift WHAT ARE WE 3 Why now? DOING AND WHY • Completed a large-scale capital optimisation and modelling exercise • SAM spec
Slide 42: Capital distribution: projected balance sheet results
CAPITAL DISTRIBUTION: PROJECTED BALANCE SHEET RESULTS MMI Holdings Limited: SCR coverage history and projection Regulatory specification Benefit of capital changes optimisation programme
Slide 43: Capital distribution: credit ratings
CAPITAL DISTRIBUTION: CREDIT RATINGS • On 4 December 2017 Moody’s affirmed MMI’s top tier credit rating National Entity Type Global scale scale MMI Group Ltd Insurer Financial Strength Aaa.za Baa2 MMI Group Ltd Subordinated Debt Rating Aa2.za Ba1 Guardrisk Insurance Company Ltd Insurer Financial Str
Slide 44: Capital distribution: additional info on the buyback programme
CAPITAL R2bn approved to be utilised over the next 10 to 11 months vs the R2.5bn dividend in F2017 DISTRIBUTION: Effectively a 20% cut vs F2017 ADDITIONAL INFO ON THE Open market repurchase BUYBACK Maximum price per share set at EV per share PROGRAMME MMI will repurchase 5% to 6% of shares in issue
Slide 45: Capital distribution: share impact
CAPITAL DISTRIBUTION: SHARE IMPACT
Slide 46: Financial aspirations: growth in earnings
FINANCIAL ASPIRATIONS GROWTH IN EARNINGS Significant factors impacting core headline earnings (CHE) 108 86 79 33 228 1 598 155 1 556 37
Slide 47: Financial aspirations: growth in earnings
FINANCIAL ASPIRATIONS GROWTH IN EARNINGS Diluted core headline earnings Restated Dec 2017 Dec 2016 Change Rm Rm % Momentum Retail 582 634 (8) Metropolitan Retail 317 373 (15) Momentum Corporate 455 320 42 International 103 (16) >100 Operating divisions 1 457 1 311 11 Initiatives India (102) (39) >-1
Slide 48: Financial aspirations: growth in value of new business
FINANCIAL ASPIRATIONS GROWTH IN VALUE OF NEW BUSINESS New business volumes per segment Restated Dec 2017 Dec 2016 Change Rm Rm % Momentum Retail 11 182 10 842 3 Metropolitan Retail 2 919 2 673 9 Momentum Corporate 4 855 6 366 (24) International 1 367 1 414 (3) Total PVP 20 324 21 295 (5) Total APE 2
Slide 49: Financial aspirations: growth in value of new business
FINANCIAL ASPIRATIONS GROWTH IN VALUE OF NEW BUSINESS Value of new business per segment Restated Dec 2017 Dec 2016 Change Rm Rm % Momentum Retail 89 106 (16) Metropolitan Retail 130 94 38 Momentum Corporate 44 46 (4) International 25 46 (46) Total 288 292 (1) New business margin (PVP) 1.4% 1.4% -
Slide 50: Return on embedded value: EV per share split
RETURN ON EMBEDDED VALUE EV PER SHARE SPLIT Embedded value per share (cents) ROEV (%) 2 134 2 705 11.2 15.5 572 -5.4
Slide 51: Embedded value profit
Embedded value profit Dec 2017 Dec 2016 Change Rm Rm % New business profit 288 292 (1) Unwind of discount rate 1 292 1 362 (5) Experience variance and assumption changes (57) 16 >(100%) Operating EV Profit 1 523 1 670 (9) Investment income on net worth 365 310 18 Market impacts 664 (793) >100% Cover
Slide 52: Capital management
MMI strategy Retail business update Corporate business update Financial performance Capital management Capital management Q&A
Slide 53: Capital management: change in capital buffer
CAPITAL MANAGEMENT CHANGE IN CAPITAL BUFFER Change in excess capital position – June 2017 to December 2017 R’bn 0.3 0.5 1.6 0.2 0.8 0.3 3.7 4.1 Opening capital Profit from Profit from Net new Covered Non-covered Change in Closing buffer covered non-covered capital required capital required capital s
Slide 54: Capital management: planned capital deployment
CAPITAL MANAGEMENT PLANNED CAPITAL DEPLOYMENT 1 000 800 600 400 200 H2 F2018 F2019 F2020 F2021
Slide 55: ABHI and ABW (India)
ABHI and ABW (India) Progress to 31 December 2017 Number of lives Gross written Number of agents premium (Rm) • 800 000+ lives • 5 bancassurance tie ups (HDFC, DCB, RBL, Deutsche • R300m+ in Gross Written Premium and AU Small Finance Bank) • 13 000+ agents in 59 branches in 36 cities • 65% of retail
Slide 56: ABHI and ABW (India)
ABHI and ABW (India) Progress to 31 December 2017 RETAIL FIXED BENEFITS PRODUCT – ACTIVE SECURE OFFERING: “Best Health Insurance Product” by FICCI Healthcare Excellence Awards 2017 Personal Cancer Secure • Complete product suite with 2 more products launched in accident November 2017 • Fixed benefit
Slide 57: Portfolio optimisation
PORTFOLIO OPTIMISATION • Momentum Financial Technologies (UK) has been sold • Offers received for 5 African operations • Due diligence and regulatory items take long • Expect this project to last the remainder of 2018
Slide 58: Q&A
MMI strategy Retail business update Corporate business update Financial performance Capital management Q&A Q&A
Slide 59: MMI Holdings
y>” MMI HOLDINGS ‘momentum BK werrovo.ran GUARDRISK® multiQly Momentum, Metropolitan, Guardrisk and Multiply form part of s Group, an authorised financial services provider.
Slide 60: New leadership: MMI executive committee
NEW LEADERSHIP: MMI EXECUTIVE COMMITTEE Hillie Meyer - Group Chief Executive Officer Jeanette Marais Ashlene van der Colff Herman Schoeman Jan Lubbe Nontokozo Madonsela Deputy Chief Executive Officer Group Chief Chief Executive: Short-term Chief Risk Officer Group Chief Marketing Officer Operating O
Slide 61: Capital distribution: EV per share impact
CAPITAL DISTRIBUTION: EV PER SHARE IMPACT
Slide 62: Expense optimisation project
EXPENSE 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 • R104 million of target achieved in H1 F2018 • R323 million remaining
Slide 63: Excellence strategic focus area: good early progress
EXCELLENCE STRATEGIC FOCUS AREA GOOD EARLY PROGRESS: Achieved R427m of R750 target 180 156 1H2018 2017 2016 64 125 40 88 27 11 95 38 58 20 87 50 64 10 13 35 27 65 8 8 55 33 4 40 3 12 26 11 5 5
Slide 64: Momentum Retail
MOMENTUM RETAIL Key metrics Restated 1 year Dec 2017 Dec 2016 change Rm Rm % Diluted core headline earnings 567 632 (10) New business PVP 11 182 10 842 3 Value of new business 89 106 (16) New business margin 0.8 1.0 (0.2) • Reduction in discretionary margin releases, reinsurance correction and Multi
Slide 65: Metropolitan Retail
METROPOLITAN RETAIL Key metrics Restated 1 year Dec 2017 Dec 2016 change Rm Rm % Diluted core headline earnings 317 373 (15) New business PVP 2 919 2 673 9 Value of new business 130 94 38 New business margin 4.5 3.5 1 • Weaker persistency and increased spending on new initiatives impacted earnings •
Slide 66: Momentum Corporate
MOMENTUM CORPORATE Key metrics Restated 1 year Dec 2017 Dec 2016 change Rm Rm % Diluted core headline earnings 455 320 42 New business PVP 4 855 6 366 (24) Value of new business 44 46 (4) New business margin 0.9 0.7 0.2 • Significant improvement in covered underwriting performance. Group disability
Slide 67: International
INTERNATIONAL Key metrics Restated 1 year Dec 2017 Dec 2016 change Rm Rm % Diluted core headline earnings (27) (61) 56 New business PVP 1 367 1 414 (3) Value of new business 25 46 (46) New business margin 1.8 3.3 (1.5) • Earnings aided by better Namibia PHI experience and reduced support costs in SA