MMI Holdings leads insurance shares sell-off
Fears that pressure on consumer incomes is starting to hit sector
THE stock of one of SA’s leading life insurance groups, MMI Holdings, plunged 9.16% yesterday, leading a sell-off of insurance sector shares on the JSE. MMI’s share price ended the day at R24.01 after it released a nine-month trading update that disappointed some shareholders. Insurance heavyweight Old Mutual dipped 3.38%. Sanlam’s share price fell 3.35%, Discovery’s 4.71% and RMI Holdings’ 5.88%.
THE stock of one of SA’s leading life insurance groups, MMI Holdings, plunged 9.16% yesterday, leading a sell-off of insurance sector shares on the JSE yesterday.
MMI’s share price ended the day at R24.01 after it released a nine-month trading update that disappointed some shareholders.
Other shares in the sector followed suit, with insurance heavyweight Old Mutual dipping 3.38%. Sanlam’s share price fell 3.35%, Discovery’s 4.71% and RMI Holdings 5.88%.
MMI said in the trading update yesterday that its new business in terms of the present value of premiums (PVP) rose 11% in the nine months to March 31 this year.
Two insurance analysts, who asked not to be named in line with their companies’ policies, told Business Day the slow growth in MMI’s premiums had caught the market by surprise. This was particularly in view of the strong growth Liberty Life reported earlier this month.
But there was also profit taking in the sector, as insurance shares had been among the top performers on the JSE recently, the analysts said.
One analyst said the MMI update had raised jitters among investors about the prospects of the sector. “It is almost as if the pressure on consumer disposable incomes is starting to show in the insurance market.” Another possible reason for the decline in MMI could be index share buyers might have bought the counter in anticipation of it joining the top 40 stocks on the JSE on Friday, but had to sell again when it went into a tailspin.
MMI CEO Nicolaas Kruger said the main growth drivers for the company’s 11% overall premium growth in the nine months to March 31 were PVPs rising. Momentum Employee Benefits’ increased 18% and Metropolitan International’s 45%.
Momentum Retail’s PVP rose 7% to R12.6bn as a result of strong single-premium income growth.
We’ve acquired a small life insurer in Mauritius and we’re developing two new ones in Zambia and Tanzania
“Our employee benefits business has had an excellent performance and the international business, including our operation in Namibia, is delivering very good growth,” Mr Kruger said.
MMI said in the trading update that the operating environment was challenging, highly competitive and pressure on disposable incomes was rising.
Investment markets, although volatile, remained relatively strong.
Mr Kruger said the integration process of the group was progressing well. The completion of the amalgamation of the two main long-term insurance licences of Metropolitan and Momentum into MMI Group, as well as the transfer of the Metropolitan Odyssey book to Momentum Retail, had supported the process.
“The amalgamation of the two long-term insurance licences will help simplify our group structure and can enhance the efficiencies that we originally envisaged when we merged,” Mr Kruger said.
The migration of the Odyssey business — Metropolitan Retail’s business aimed at the higher income market — involved transferring 180,000 policies onto the Momentum Retail administration platform. The insurance group planned to take advantage of cross-selling opportunities.
MMI believed the South African middle market had a strong potential for growth. But the group planned tapping into international markets.
“We have finalised the acquisition of a small life insurance company in Mauritius and we are in the process of developing two new life insurance operations in Zambia and Tanzania,” Mr Kruger said.