Turnaround at insurer gains momentum

53% jump in headline earnings to R3.03bn puts MMH within reach of its earnings target of R3.6bnR4bn by 2021

Three years into its turnaround strategy, SA’s fifth-largest life insurer, Momentum Metropolitan Holdings (MMH), finally tracked closer to its mediumterm earnings target after putting a lid on costs and taking back some market share it lost over the years.

MMH, previously called the MMI Group, has lagged behind its peers, losing about 4% of its combined market share in the four years to the end of its 2018 financial year, while its profits fell year after year, reaching a low of R2bn that year. The company’s earnings had fallen from a high of more than R3bn in 2014.

“It’s the first time in probably five years that we’ve delivered on our promises to the market, and I would say the first year in the last five where we can confidently say that we’ve ended in a stronger position than where we started,” CEO Hillie Meyer said.

MMH, which reported a 53% jump in headline earnings to R3.03bn for the year ended in June, has set a target to grow its earnings to R3.6bn-R4bn by 2021. It will come partly from growing its market share but also from cost-cutting.

In the 2018 financial year the insurer managed to grow its revenues to exceed costs, reversing the situation under former CEO Nicolaas Kruger in which expenses were ahead of revenues.

The board appointed Meyer on a short-term basis after Kruger stepped down in February 2018. On Wednesday, the company said the board has extended Meyer’s tenure, keeping him in place until 2023.

Meyer will remain in place to ensure that the insurer, whose share price is outperforming the life insurers’ index, delivers on its promises.

The changes MMH has introduced since the 2018 leadership change will ensure that the company performs, even in a low-growth environment, Meyer said.

“A lot of the things we needed to fix were internal: cost containment, our client servicing, and changing the organisation’s structure. And we’ve fixed them,” he said.

MMH’s financial director, Risto Ketola, said the company will be able to reach the upper end of its earnings target — R4bn

— if the industry grows 2%-3% a year.

But even if it remains flat or shrinks as unemployment rises, R3.6bn will still be attainable.

“In some ways a weak economy forces us to really sharpen our own thinking and offering,” Ketola said.

The life insurers’ index has lost 16.16% year to date, while MMH is down only 2.94%.

‘A LOT OF THE THINGS WE NEEDED TO FIX WERE INTERNAL ... AND WE’VE FIXED THEM’