Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — H1 2015 Earnings Presentation
48 slides from Momentum's earnings presentation, Mar 4, 2015
Slide 1: Growth, Client-centricity, Excellence: 2015 interim results
Growth, Client-centricity, Excellence 2015 interim results For the six months ended 31 December 2014
Slide 2: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategy
Slide 3: External environment
External environment Volatile equity market JSE all-share index • Weak equity performance • SA credit outlook • Labour challenges • Inflation • GDP growth • Oil and petrol price • Electricity supply • Regulations
Slide 4: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategy
Slide 5: Financial results
Financial results Delivering on our strategy – investing in growth New Value of Return on Profits from Interim business new embedded operating dividend PVP business value divisions per share +15% +11% 12% +13% +11% R23 699m R420m to R1 546m 63cps 2 478cps
Slide 6: Diluted core headline earnings per division
Financial results Diluted core headline earnings per division 1 year Dec 2012 Dec 2013 Dec 2014 change Rm Rm Rm Momentum Retail 514 652 673 3% Metropolitan Retail 242 315 344 9% Momentum Employee Benefits 159 179 272 52% International 39 49 62 27% Momentum Investments 74 95 97 2% Metropolitan Health
Slide 7: Investments in new growth initiatives
Financial results Investments in new growth initiatives Dec 2013 Dec 2014 Rm Rm Additional investments in growth initiatives 61 213 Momentum short-term insurance Middle-market initiative Hello Doctor, agents International Percentage of core headline earnings 3.6% 11.5% Investments impacted overall p
Slide 8: New business per division
Financial results New business per division 1 year Dec 2012 Dec 2013 Dec 2014 change Rm Rm Rm Momentum Retail 8 459 10 499 10 656 1% Metropolitan Retail 2 640 2 635 2 699 2% Momentum Employee Benefits 4 977 6 506 9 369 44% International 874 943 975 3% Total PVP 16 950 20 583 23 699 15% Total APE 2 3
Slide 9: Value of new business per division
Financial results Value of new business per division 1 year Dec 2012 Dec 2013 Dec 2014 change Rm Rm Rm Momentum Retail 93 136 118 (13)% Metropolitan Retail 120 122 108 (11)% Momentum Employee Benefits 66 90 167 86% International 28 30 27 (10)% Total 307 378 420 11% New business margin (PVP) 1.8% 1.8
Slide 10: EV analysis (Rm)
EV analysis (Rm) 430 - 495 161 118 420 41 236 -2 148 1 315 39 675 39 753 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 11: Analysis of return on embedded value (ROEV)
Analysis of return on embedded value (ROEV) Dec Dec Dec Annualised 2012 2013 2014 ROEV Rm Rm Rm Expected return – unwind of RDR 1 006 1 138 1 315 6.8% Operating experience variances 504 378 236 1.2% Embedded value from new business 340 378 420 2.1% Investment return on adjusted net worth 507 583 430
Slide 12: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategy
Slide 13: Momentum Retail
Momentum Retail Dec Dec Dec 1 year Key aspects 2012 2013 2014 change • Sustained inflow of Rm Rm Rm funds Total funds received 15 370 17 674 18 012 2% • Good mortality profits New business PVP 8 459 10 499 10 656 1% • Increase in risk sales Recurring 539 519 524 1% • Investing in middle- Single 5 42
Slide 14: Momentum Retail
Momentum Retail XS Middle Market momentum momentum y+. momentum ; ‘e
Slide 15: Momentum Retail: Progress on strategic initiatives
Momentum Retail Progress on strategic initiatives • Acquired Imara Reid (stock broker and wealth manager) • Increased contribution from agents • Significant growth in Momentum Consult’s retail distribution • Middle-market business • Financial Wellness solution gains traction
Slide 16: Metropolitan Retail
Metropolitan Retail Dec Dec Dec 1 year Key aspects 2012 2013 2014 change • Strong single premium Rm Rm Rm new business Total funds received 3 141 3 450 3 456 - • Investing in sales force New business PVP * 2 640 2 635 2 699 2% • Good mortality Recurring * 509 558 587 5% experience Single * 389 496 5
Slide 17: Channel solutions
Channel solutions 18% of current advisers 34% of 25% of current current advisers advisers 12% of 0% of current current advisers advisers 7% of current advisers 4% of current advisers
Slide 18: Metropolitan Retail: Progress on strategic initiatives
Metropolitan Retail Progress on strategic initiatives • Revitalised distribution channel: o Increased brand visibility o High performance adviser remuneration model • Client-centric model: o Combined sales and service into a single management structure
Slide 19: Momentum Employee Benefits
Momentum Employee Benefits Dec Dec Dec 1 year Key aspects 2012 2013 2014 change • Strong new business Rm Rm Rm volumes Total funds received 7 908 9 982 11 947 20% • Positive net cash flow New business PVP 4 977 6 506 9 369 44% • Good contribution Recurring 253 532 595 12% from Guardrisk Single 3 128
Slide 20: Strategic value proposition
Strategic value proposition Purpose to enhance the lifetime financial wellness of public and private sector Businesses Employees
Slide 21: Momentum Employee Benefits: Progress on strategic initiatives
Momentum Employee Benefits Progress on strategic initiatives • Unlocking growth synergies with Guardrisk • Integrated value proposition for corporates, customers and employees • Combined offering between health and employee benefits • Implementing client-centric model • Differentiated distribution c
Slide 22: Metropolitan Health
Metropolitan Health Dec Dec Dec 1 year Key aspects 2012 2013 2014 change • Significant player Total principal members • Inclusion of (‘000) 1 179 1 183 1 259 6% CareCross • Industry Rm Rm Rm consolidation Revenue 750 761 1 029 35% continues • Operational Expenses 663 672 893 33% efficiencies driving
Slide 23: Metropolitan Health: Progress on strategic initiatives
Metropolitan Health Progress on strategic initiatives • Diversification of earnings - CareCross • Continued focus on efficiency improvements • Renewed GEMS administration contract • Implementing client-centric model
Slide 24: Momentum Investments
Momentum Investments Dec Dec Dec 1 year Key aspects 2012 2013 2014 change • Expected reduction in Rbn Rbn Rbn white-label funds Net flows 11 (9) (29) • Improved quality of Insurance - (3) - AUM Third-party funds (8) (5) (31) • Volatility of property developments (Eris) Properties 19 (1) 2 • Continue
Slide 25: Momentum Investments: Progress on strategic initiatives
Momentum Investments Progress on strategic initiatives • Restructured and aligned operations with group • Outcome-based approach rolled-out • Growing Africa (ex SA) investment capabilities • Implementing client-centric model
Slide 26: International
International Dec Dec Dec 1 year Key aspects 2012 2013 2014 change • Reduced new business Rm Rm Rm volumes and value from Total funds received 1 762 1 766 3 469 96% mature businesses Life insurance • Merged operations in Namibia New business PVP 874 943 975 3% Value of new business 28 30 27 (10)% •
Slide 27: International: Progress on strategic initiatives
International Progress on strategic initiatives • Kenya business integration – Metropolitan Cannon on track • JV in India entering licensing and pre-implementation phase • African businesses restructured for growth • Product diversification – short-term insurance roll-out • Implementing client-centr
Slide 28: Momentum Short-term Insurance
Momentum Short-term Insurance Dec Dec 1 year Key aspects 2013 2014 change • Significant growth in Rm Rm premium income Premium income 154 227 47% • Strong policy count growth Policy count 30 036 53 483 78% • Investing for scale and Combined ratio 111.6% 131.2% building capacity Solvency ratio 44.8%
Slide 29: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategy
Slide 30: 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 150 140 130 120 110 100 90 Total ordinary dividend 80
Slide 31: Capital management
Capital management Progress Credit rating Debt SAM IFS AA+ (zaf) Issue R1.5bn March 2014 All projects on Sub-debt A+ (zaf) Issue R750m Dec 2014 track Redeem R500m Dec 2014
Slide 32: Capital strength
Capital strength Economic capital Rbn Net asset value as per embedded value statement 16.1 Qualifying debt 3.3 Less: net asset value of strategic subsidiaries (1.9) Less: required capital (10.3) Capital before deployment 7.2 Deployed (3.7) Interim dividend (1.0) Debt redemption (1.0) Strategic initi
Slide 33: Utilisation of capital
Utilisation of capital Initiative Rm Cannon (Kenya) 300 CareCross 300 Acquisition of Imara Reid 120 Special dividend 800 Redemption of debt 500 New debt issued (750)
Slide 34: Utilisation of capital
Utilisation of capital namibia
Slide 35: Agenda
Agenda Economic environment Financial results Operational summary Capital management Strategy
Slide 36: Vision, Purpose and Strategic focus areas
Vision, Purpose and Strategic focus areas 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-centricity Excellence
Slide 37: Implementation
Implementation Objectives for each strategic focus area Grow through geographical diversification Growth Increase value of existing clients Increase client base Increase financial wellness Client-centricity Improve client relationships Improve efficiency Excellence Deliver a consistently excellent c
Slide 38: Implementation progress: Growth objectives
Implementation progress Growth objectives • Country segmentation • Focus on M&A Grow through geographical • Metropolitan Cannon diversification • India JV (Aditya Birla) • Hello Doctor • Group-wide segmentation model Increase value of existing clients • Client Value Propositions • Momentum Short-ter
Slide 39: Growth focus area - diversification progress
Implementation progress Growth focus area - diversification progress Value of new business split 2011 2014 4% 6% 10% 31% 45% 33% 41% 30% Momentum Retail Metropolitan Retail Momentum EB International
Slide 40: Client-centricity objectives
Implementation progress Client-centricity objectives • Financial Wellness take-up Increase financial wellness • Up-sell and cross-sell benefits • Client Engagement Solutions area Improve client relationships • Metropolitan Sales and Service combination
Slide 41: Excellence objectives
Implementation progress Excellence objectives • Operating model optimisation Improve efficiency • Legacy book optimisation • Channel productivity Deliver a consistently excellent • Client experience strategy client experience • Client Engagement Solutions area
Slide 42: Strategy implementation: Enablers
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 43: Strategy implementation: Enablers: Operating structure
Strategy implementation Enablers: Operating structure
Slide 44: Group operational focus areas
Group operational focus areas Growth • Turn-around new initiatives • Top-line volumes • Increased efficiencies • Embedded value earnings Client-centricity • Client retention • Innovation as key enabler Excellence • Increase collaboration and alignment
Slide 45: Areas of strength
Areas of strength Diversified cash-generating businesses Strong brands Extensive distribution capability Client-centric Experienced operating model management Empowerment Strong balance credentials sheet Attractive dividend
Slide 46: Shareholder structure
Shareholder structure as at 31 December 2014
Slide 47: Shareholder structure
Shareholder structure 100% 90% 80% 70% KTH 60% FirstRand Trusts 50% RMI Other local shareholders 40% Foreign 30% GEPF 20% 10% 0% % % % % % % % % % 31/12/2010 30/06/2011 31/12/2011 30/06/2012 31/12/2012 30/06/2013 31/12/2013 30/06/2014 31/12/2014
Slide 48: 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