MMI Holdings loses its momentum
SHARES of MMI Holdings, a company created after the amalgamation of Momentum and Metropolitan, tanked 6.2 percent yesterday after the group released an underwhelming trading update for the nine months ending March.
The group reported a slight improvement in core headline earnings in the period under review, from -5 percent in the six months ending December to -3 percent in the quarter ending March.
It attributed the modest improvement to better underwriting experience in the last three months. The company said that while it expects the difficult operating environment to persist in the short term, it would continue to deploy its resources prudently.
It will continue applying strong discipline in capital allocation decisions.
“The group expects to achieve its targeted R750 million annual cost savings by the 2019 financial year, with the client-centric operating model enabling efficiency gains across the group.” the company said.
It said that Momentum short-term insurance averaged 2 000 policy contract sales a month for the last three months.
The group’s diluted embedded value per share was recorded at R26.24 at the end of March. The company’s recurring premium new business across its Metropolitan Retail, Momentum Retail, International and Corporate and Public Sector increased 8 percent in the period, while single premium new business fell 14 percent. The group’s overall new business volumes slipped 6 percent on a present value of new business premium basis, while new business margin for the nine months was 1.1 percent and overall covered value of new business was R320m.
The company said that in addition to the difficult economic environment having weighed negatively on the operational performance of the business, stock market performance was flat in the period
“The JSE all-share index remained practically unchanged from July 2016 to March 2017. This put significant pressure on revenue growth for the MMI Holdings…”
The group also said its Indian joint venture, Aditya Birla Health Insurance showed strong early growth with families covered by Momentum Health having increased to nearly 150 000. Last year, MMI announced it had concluded a joint venture agreement with Aditya Birla Nuvo to enter the health insurance and wellness business in India. As per the terms of the agreement, Aditya holds a 51 percent stake in Aditya Birla Health Insurance while MMI holds a 49 percent stake in the venture.
The group earlier this year reported a 5 percent fall in diluted core headline earnings to R1.6bn for the six months ended December. It said that was due to it losing two major healthcare administration contracts and losses on its group disability book. The company lost about R70m in earnings after the loss of the Bankmed and Polmed administration licences.
It said it enjoyed good growth from its rest of Africa operations. “New business growth in rest of Africa and domestically through Metropolitan Retail remained strong, but was offset by lower growth in Momentum Retail, and the corporate and public sector.”
MMI Holdings’s new growth in the rest of Africa has been offset by poor performance domestically, and the corporate and public sector.