Is it a case of from darling to pariah back to darling again?

MMI USED TO be one of the JSE darlings, but the past five years have been horrific for the share price.

Ten years ago the share price was R10 and it steadily rose to R33 by April 20, but – ever since it has been in a downward spiral and is trading at less than half this all-time high.

MMI Holdings, the owner of Momentum and Metropolitan, released its interim results to December on Friday and it seems as though they are turning the corner. Their normalised headline earnings rose 2 percent to R1.6 billion and the embedded value per share increased by 5 percent to R26.60.

Compare this with the share price of R15.70. This improvement is due to tight control of operational expenses, strong underwriting results, and improved earnings from fixed rate and annuity products.

In September 2018, MMI chief executive Hillie Meyer announced a three-year Reset and Grow turnaround strategy to streamline MMI’s operations, maximise efficiencies and increase earnings across the group’s various businesses.

Speaking at the results announcement, Meyer said that MMI is on track with delivering on this strategy: “We are satisfied with our progress so far towards our three-year goal of increasing earnings to between R3.6bn and R4bn for the 2021 financial year.” He also announced that dividend payments are reinstated at 35 cents per ordinary share, following the successful completion of a share buy-back programme.

Amid a challenging operating environment, which included declining equity markets and sluggish economic growth, MMI improved both new business flows and the value of new business.

New business volumes increased by a staggering 19 percent to R28.8bn. This followed strong single premium inflows, especially in Momentum Corporate, during the six months.

The value of new business increased by 12 percent to R335 million, while net earned premiums from Momentum Short-term Insurance increased by 19 percent.

MMI Health showed a 2 percent increase in medical scheme membership since December 2017.

Almost all of their businesses performed very well. Momentum Life, Momentum Corporate, Momentum Short-term Insurance and Guardrisk experienced pleasing earnings growth.

Momentum Life grew normalised headline earnings by 35 percent thanks to favourable risk experience and better than expected take-up of voluntary premium increases by policyholders.

A growing agency sales force and improved agent productivity resulted in higher new business flows. Momentum Corporate grew profits by 9 percent, with both the Employee benefits and the Health business showing earnings growth. MMI’s Non-life Insurance business increased earnings by 29 percent to R135m.

Metropolitan Retail’s new business volumes and earnings declined. This was expected since the business’s focus was on stabilising the distribution channel and improving the quality of new business.

Good progress has been made with rolling out country-wide improvements to the Metropolitan branch footprint, which aims to bolster sales in the long term.

MMI is getting into much better shape, with a very competent management team at the helm.

Amelia Morgenrood is a PSG Wealth financial adviser based in Pretoria. Views are of the author and not necessarily of the entire PSG entity. MMI shares are not currently held on behalf of clients.