MMI Holdings | Semi-Annual December 2013 Interim Report
Pursuing Growth
Pursuing Growth 2014 interim results For the six months ended 31 December 2013
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
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
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
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
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% Operating divisions 1 098 1 365 24% Shareholder capital 403 325 (19)% Total 1 501 1 690 13% Operational growth continues
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 27% Other adjustments 53 (18) >(100)% Total earnings 1 491 1 809 21%
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 Life Strong new business volumes
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 Excellent growth, margins maintained
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
EV analysis (Rm) -213 -36 1 178 -1 178 583 378 378 12 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 changes worth changes covered & dividends business |.................Operational impact…................| |............Market impact............| |.............Other..............|
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 1 178 7.1% Non-covered (excl basis changes) (38) 44 0.2% Total (excl assumption changes) 3 308 3 699 22.0% Operating assumption changes (398) (68) (0.3)% Economic assumption changes 185 (213) (1.3)% Total return on embedded value 3 095 3 418 20.4%
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
Momentum Retail Dec Dec Key aspects 2012 2013 Change • Strong inflow of funds Rm Rm Total funds received 15 370 17 676 15% • Good mortality profits New business PVP 8 459 10 499 24% • Increase in asset- based fees Recurring 539 519 (4)% • Expenses well Single 5 426 7 609 40% controlled Value of new business 93 136 46% • Strong increase in value of new business PVP margin 1.1% 1.3% and profit Operating profit after tax 514 652 27% Focus on quality paying off
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
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 new business * 120 122 2% participation PVP margin * 4.3% 4.3% • Strong growth in profit Operating profit after tax 242 315 30% * Excludes FNB Life Good growth in core market
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
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 New business PVP 4 977 6 506 31% volumes Recurring 253 532 >100% • Excellent value of new business Single 3 128 1 704 (46)% • Continued growth in Value of new business 66 90 36% Health membership PVP margin 1.3% 1.4% • Mixed risk experience Momentum Open Scheme membership (‘000) 101 112 11% • Increased operational Operating profit after tax 159 179 13% efficiencies Strong operating performance
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
Metropolitan International Dec Dec Key aspects 2012 2013 Change Rm Rm • Difficult operating Total funds received 1 762 1 766 - environment Life insurance • Slower new business New business PVP 874 943 8% growth Value of new business 28 30 7% • Medical claims ratios PVP margin 3.2% 3.2% improved Health • Good mortality Membership (‘000) 381 408 7% experience Claims ratio 72% 69% • Delivering growth in profits Operating profit after tax 39 49 26% Steady progress
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 efficiencies
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 Rm Rm • Lower expense ratio Operating profit after tax 74 95 28% • Good recovery in profits Progress in building excellence
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
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 after tax 70 75 7% efficiencies Focus on operational efficiencies
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
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
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 ts90 Total ordinary dividend cen80 Final ordinary dividend 70 60 Interim ordinary dividend 50 40 30 20 2011 2012 2013 2014
Capital management Progress Credit rating New debt issue upgrade SAM IFS AA+ (zaf) R1.5bn Sub-debt A+ (zaf) March 2014
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 strategic initiatives (1.0) Capital buffer 3.5
Agenda Economic environment Financial results Operational summary Capital management Strategic focus areas
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-selling MMI Rewards Operating model
Growth initiatives Acquisitive progress
Transformation and sustainability Listed on the JSE’s Level 2 B-BBEE status Socially Responsible Investment index (SRI) since 2006
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 enhancements balance sheet
Shareholder structure as at 31 December 2013
MMI Investor relations Visit our website www.mmiholdings.com Tyrrel Murray +2721 940 5083 / 082 889 2167 [email protected] Natalie Amos +2721 940 6112 / 083 605 8339 [email protected]
