Momentum Group Limited · JSE:MTM
Momentum — MMI Holdings — H1 2017 Earnings Presentation
57 slides from Momentum's earnings presentation, Mar 2, 2017
Slide 1: Advancing MMI's Strategy: Interim results 2017
ADVANCING MMI’S STRATEGY Interim results 2017
Slide 2: Key financial metrics
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Slide 3: Key financial metrics
Key financial metrics Dec 2015 Dec 2016 % Actual Actual change Rm Rm Diluted core headline earnings 1 679 1 598 (5%) Ordinary dividend per share (cents) 65 65 - New business PVP 20 789 21 295 2% Value of new business 301 292 (3%) Value of new business (like-for-like) 280 292 4% Return on emb
Slide 4: MMI strategy
MMI strategy
Slide 5: MMI Strategy
MMI Strategy PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Financial aspirations Growth in earnings Client centricity Growth in value of new business Growth Return on embedded value Client aspirations Excellence “My Financ
Slide 6: Financial aspirations
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Slide 7: Strategic delivery
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Slide 8: Strategic focus areas: Client centricity
Strategic focus areas: Client centricity PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Growth Excellence Enablers Flexible and modular systems Innovation Culture Data analytics
Slide 9: Creating value for clients
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Slide 10: Rewards Framework - Myriad
Rewards Framework - Myriad & Healthy Heart Active Dayz or Score Fitness Assessment 16+ Level 5 12+ Level 4 8+ Level 3 O+ Level 1 & 2 - Bronze 20% 15% 10% 5% 25% 20% 15% 10% 25% 20% 15% seneouag mS Platinum Private Club 40% 60% j 30% 40% j 25% 30% j 20% 25% | $$$ rainy
Slide 11: Rewards Framework – Health Returns
Rewards Framework – Health Returns
Slide 12: Rewards Framework - Partners
Rewards Framework - Partners
Slide 13: Rewards – Client example
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Slide 14: Rewards – Client example
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Slide 15: Strategic focus areas: Growth
Strategic focus areas: Growth PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Geographical Diversification Growth Aditya Birla aYo Excellence Health (MTN JV) (India JV) Enablers Flexible and modular systems
Slide 16: Growth focus area: aYo (MTN JV)
Growth focus area Geographical diversification: aYo (MTN JV) • JV agreement is now unconditional • Regulatory approvals received in other African countries • Send with Care and Recharge with Care successfully launched in Uganda • Rollout of Send with Care in the next African country – Q4 F2017
Slide 17: Growth focus area: ABHI and ABW (India)
Growth focus area Geographical diversification: ABHI and ABW (India) Product approvals Incentivised wellness and chronic - Retail and group health indemnity management programme - Group fixed benefits launched with a large network Launched 26 Nov 2016 Gross written premium - Positive market receptio
Slide 18: Strategic focus areas: Excellence
Strategic focus areas: Excellence PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Optimisation project Geographical diversification Excellence Centres of Excellence Enablers Flexible and modular systems Inn
Slide 19: Excellence: Optimisation project
Excellence strategic focus area Optimisation project • New operating model enables optimisation • Cumulative savings target of R750 million • 14% (R104m) of target realised in F2016 • 8% (R63m) more of target realised in H1 2017 • 22% (R167m) of cumulative target realised in 18 months
Slide 20: Good early progress against R750 million target
Excellence strategic focus area Good early progress: Achieved R167 million of R750 million target R million 750 178 583 158 78 110 104 152 89 78 60 60 55 49 41 49 63 17 12 26 25 29 15 7 11 2 Finance Health HR Operations Investments Legacy Insurance Segments Total Remaining 2016 H1 2017
Slide 21: Strategic focus areas: Excellence
Strategic focus areas: Excellence PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Client centricity Optimisation project Geographical diversification Excellence Centres of Excellence Enablers Flexible and modular systems Inn
Slide 22: Health: Diversified business
Excellence strategic focus area Health: Diversified business 1. Momentum Health Open scheme Momentum Health membership growth 145 632 136 263 • Market leading growth 128 681 116 147 108 108 • Expecting > 150 000 members by 100 936 93 096 88 861 81 645 Dec 2017 80 780 73 690 64 452 • Unique value pro
Slide 23: Short-term insurance: Sales volumes increasing
Excellence strategic focus area Short-term insurance: Sales volumes increasing YoY Sales comparison – number of policies 1 900 1 700 1 500 1 300 1 100 900 700 500 July August September October November December January F2016 F2017
Slide 24: Short-term insurance: Key ratios improving
Excellence strategic focus area Short-term insurance: Key ratios improving 180% 160% 140% 38% 27% 120% 25% 30% 42% 20% 33% 37% 20% 23% 24% 26% 100% 20% 20% 18% 20% 18% 17% 19% 80% 23% 60% 99% 102% 90% 84% 40% 75% 78% 76% 81% 77% 66% 20% 0% 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016
Slide 25: Investments: Outcome-based Investing
Excellence strategic focus area Investments: Outcome-based Investing Performance relative to goal 30% 20% Factor 6 Factor 7 Factor 4 Factor 3 Factor 5 10% 0% -10% Investment horizon Investment horizon Investment horizon Investment horizon Investment horizon -20% -30% 0 3 6 9 12 15 18 21 24 27 30 33
Slide 26: Investments: Performance delivery
Excellence strategic focus area Investments: Performance delivery Skill in investment construction – focus on risk & performance delivery Risk adjusted returns - December 2006 – December 2016 Competitor 1 Momentum Enhanced Factor 6 Momentum Enhanced Factor 7 Competitor 2 Competitor 3 Competitor 4 Co
Slide 27: Strategic focus areas: Enablers
Strategic focus areas: Enablers PURPOSE: To enhance the lifetime Financial Wellness of people, their communities and their businesses Strategic focus areas Financial aspirations Growth in earnings Client centricity Growth in value of new business Geographical diversification Return on embedded value
Slide 28: Enablers: Innovation: Exponential Ventures
Enablers: Innovation: Exponential Ventures Expect to earn market related venture capital returns. Use insights to introduce cutting edge financial technology to MMI operations. Provide fintech prospects with access to scale via MMI client base.
Slide 29: Business performance
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Slide 30: Business performance: Financial aspirations
Business performance: Financial aspirations R'm Core earnings 2 000 1 852 1 690 1 679 1 598 1 501 1 500 1 000 500 - H1 2013 H1 2014 H1 2015 H1 2016 H1 2017 R'm % Return on embedded value Value of new business 400 25.0% 20.0% 20.4% 296 280 292 20.0% 300 274 243 15.0% 11.5% 200 10.0% 6.6% 100 4.5% 5.0
Slide 31: Business performance: H1 2017 Financial aspirations
Business performance: H12017 Financial aspirations Financial aspirations +2% +4% 4.5% R21bn R292m
Slide 32: Business performance: H1 2017 Financial aspirations
Business performance: H12017 Financial aspirations Financial aspirations -5% Maintained at R3.0bn R1.6bn 65cps
Slide 33: Growth in earnings: core headline earnings per segment
Financial Aspirations Growth in earnings Diluted core headline earnings per segment 1 year Dec 2015 Dec 2016 change Rm Rm % Momentum Retail 644 649 1% Metropolitan Retail 316 373 18% Corporate and Public Sector 396 280 (29%) International (39) (61) (56%) Segment results 1 317 1 241 (6%) Shareholder
Slide 34: Factors impacting decline in core headline earnings
Financial Aspirations Growth in earnings Significant factors impacting on the decline in core headline earnings 63 57 1 679 56 1 598 70 39 H12016 Mortality Disability Reduction Loss of Health Expense H12017 underwriting underwriting in reserve schemes savings releases and other
Slide 35: Retail underwriting experience variance
External environment Underwriting experience variance Retail mortality and morbidity experience variance R’m 250 209 200 192 186 150 137 100 85 50 0 1H15 2H15 1H16 2H16 1H17
Slide 36: Corporate and Public Sector underwriting experience variance
External environment Underwriting experience variance Corporate and Public Sector mortality and morbidity experience variance R’m 50 33 36 0 1H15 2H15 1H16 2H16 1H17 -50 -100 -91 -150 -139 -152 -200
Slide 37: Group disability underwriting experience
Group disability underwriting experience Current dynamics and industry experience • PHI experience remains problematic • Tough operating environment - industry experience looks similar • Main driver of the PHI experience - weak economy • Less claimants are returning to work • Employees claim in lieu
Slide 38: Group disability: Steps to minimise losses
Group disability underwriting experience Steps to minimise losses • Increased overall value proposition – reduce clients’ price sensitivity • Selective price increases • Additional rating factors and predictive modelling in progress • Pro-active fraud management activities
Slide 39: Expense management
Expense management Expense experience variance Segment expense experience variance R’m 50 42 40 35 30 20 10 6 - Momentum Retail Metropolitan Retail Corporate and International -10 Public Sector -20 -21 -30
Slide 40: International earnings lower in tough conditions
Growth in earnings International earnings lower in tough conditions Dec 2015 Dec 2016 Change Rm Rm Namibia 71 44 (38%) Africa - South 74 72 (3%) Africa - East (47) (59) (26%) Cannon (26) (38) (46%) aYo (7) (6) 14% Other (14) (15) (7%) Africa - West (13) (2) 85% India (43) (51) (19%) UK 8 19 138% Cen
Slide 41: Investment in strategic initiatives
Growth in earnings Investment in strategic initiatives Core Headline Earnings Dec 2015 Dec 2016 Change Rm Rm Rm Momentum Short-term Insurance (97) (69) 28 India - JV (21) (39) (18) Exponential ventures (5) (13) (8) aYo (7) (6) 1 Investment in strategic initiatives (130) (127) 3 Operations reclassifi
Slide 42: New business per segment
Financial aspirations Growth in value of new business New business per segment Dec 2015 Dec 2016 Change Rm Rm Momentum Retail 12 673 12 114 (4%) Metropolitan Retail 2 411 2 673 11% Corporate and Public Sector 4 530 5 094 12% International 1 175 1 414 20% Total PVP 20 789 21 295 2% Total APE 2 800 2
Slide 43: Value of new business adjusted for new basis
Financial aspirations Growth in value of new business Value of new business adjusted for new basis 30 301 51 +4% 38 292 -52 280 19 18 11 1H2016 Economic Corporate Revised Methodology Sales volume Mortality and 1H2017 assumption expense 1H2016 changes and and mix persistency changes allocations other
Slide 44: Value of new business per segment
Financial aspirations Growth in value of new business Value of new business per segment Dec Dec Dec 1 year 2015 2015 2016 change Rebased Rm Rm Rm Momentum Retail 126 120 110 (8%) Metropolitan Retail 68 68 94 38% Corporate and Public Sector 76 63 42 (33%) International 31 29 46 59% Total 301 280 292
Slide 45: Return on embedded value
Return on embedded value EV analysis R2 527m R62m 81 310 33 97 292 731 29 238 1 362 42 989 1 463 42 475 Opening EV Expected Operating Operating Value of new Investment Investment Economic FX EV profit from Change in Closing EV return experience assumption business return on Variances assumption move
Slide 46: Segment performance
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Slide 47: Momentum Retail
Momentum Retail 1 year Dec 2015 Dec 2016 change Rm Rm Core Headline Earnings 644 649 1% Value of new business (restated) 120 110 (8%) New business margin 0.9% 0.9% - Key aspects • Core Headline Earnings impacted by the following: – Reserve releases in prior period offset by good expense control in c
Slide 48: Metropolitan Retail
Metropolitan Retail 1 year Dec 2015 Dec 2016 change Rm Rm Core Headline Earnings 316 373 18% Value of new business (restated) 68 94 38% New business margin 2.8% 3.5% 0.7% Key aspects • Strong Core Headline Earnings growth - new business strain constant despite increased volumes; underwriting profits
Slide 49: Corporate and Public sector
Corporate and Public sector 1 year Dec 2015 Dec 2016 change Rm Rm Core Headline Earnings 396 280 (29%) Value of new business (restated) 63 42 (33%) New business margin 1.4% 0.8% (0.6%) Key aspects • PHI underwriting results and loss of the two large Health clients drives the reduction in Core Headli
Slide 50: International
International 1 year Dec 2015 Dec 2016 change Rm Rm Core Headline Earnings (39) (61) (56%) Value of new business (restated) 29 46 59% New business margin 2.5% 3.2% 0.7% Key aspects • Core Headline Earnings reduction - losses in the short-term insurance business and weaker Namibia PHI experience • In
Slide 51: Capital management
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Slide 52: Economic capital
Capital management Economic capital R’bn Jun Dec 2016 2016 Net asset value as per embedded value statement 16.9 16.7 Qualifying debt 3.6 3.5 Less: net asset value of strategic subsidiaries (3.5) (3.6) Less: required capital (9.7) (9.9) Capital before deployment 7.3 6.7 Deployed (3.7) (3.7) Dividend
Slide 53: Change in the capital buffer
Capital management Change in the capital buffer R’bn Capital buffer at 30 June 2016 3.6 Profit from covered business 1.5 Profit from non-covered business (0.2) Dividends, new equity and sub-ordinated capital (1.1) Increase in required capital (0.3) Strategic commitments (0.5) Capital buffer at 31 De
Slide 54: Dividend
Capital management 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) 2015 2016
Slide 55: Critical focus areas
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Slide 56: Critical Focus Areas
Critical Focus Areas Client centricity Growth Excellence O Multiply O Channel growth O Health O Financial Wellness O Geographic O Investment and Savings diversification (Outcome-Based model) - India O Short-term insurance - Ayo O Life underwriting O Africa portfolio O Expense optimisation
Slide 57: Financially-well people have two things in common
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