Still potential in MMI
At various times most of the components that make up the MMI group have been market leaders. At least one, Guardrisk, is still there, though unfortunately in a sector known as cell captives, which few understand.
But MMI became an also-ran in what used to be its core businesses, its linked investment platform and its investment manager. It must have been a shock for new CEO Hillie Meyer and his deputy Jeanette Marais, veterans of the group in its heyday, to see how much it had been allowed to rot. It was up to Risto Ketola, the flying Finn, to deliver the year-end results. It was a Nordic noir scarier than anything on Netflix. Don’t make the mistake of calling him Bisto as there isn’t much gravy to give away.
Core earnings were down 28% for Momentum Retail, though R920m profit looks quite good compared with Liberty. MMI’S Metropolitan is in the highgrowth end of the market, where Old Mutual Mass and Sanlam Sky have shown real profit growth.
Yet Metropolitan’s profit fell 14%. It is perhaps no surprise that Metropolitan can’t compete as almost all its business is stored on a mainframe: many readers probably don’t even know what that is.
At least the Metropolitan one is eco-friendly as it is driven by pedals, and the peddlers also enjoy a discount on their life insurance. The MMI corporate business is at least respectable, even without Guardrisk.
It seems to be coming to grips with the losses on its group disability book, which fell from R135m to R25m.
It has the only open medical aid scheme that offers Discovery anything like serious competition — even Sanlam invests in health through a convoluted structure via Afrocentric and doesn’t add any brand equity to the funds.
Funds@work is a credible competitor in the umbrella fund market and it is rebuilding its consultants and actuaries business at a time when the two global giants Mercer (through its 34% holding in Alexander Forbes) and Willis Towers Watson dominate. MMI took quite a brave step when it disbanded what used to be RMB Asset Management and changed its approach from a peer group competition to a goals-based model.
These models are built on a multimanager basis with a few capabilities such as domestic property and bonds in-house but active equities outsourced. Some of these products have done well, but probably won’t get much traction until the Momentum brand is recognised as premium-quality.
Birthplace of Discovery
Many financial advisers will know that Meyer and Marais were instrumental in building Momentum into the most admired brand among independent brokers. Discovery was originally Momentum Health and built much of its initial success on the Momentum distribution network.
It was a different world, in the early years of linked products, when brokers got to go on world cruises and Alpine skiing trips — provided they sold enough products.
Meyer was co-presenting the results on his 60th birthday and must have been wondering if it was worth signing up for three years’ service to save the company he loved. I don’t think he needed the money, as he became a private equity vulture when he left the group in 2005. He has sensibly not held a firesale of assets to cut costs. Some of its international assets have potential. MMI still has a health joint venture in India which has a million members so far. The ayo app-based JV with MTN could also bring new growth.
Meyer and Marais were instrumental in building Momentum into the most admired brand among independent brokers