MMI targets profit growth from Africa operations

WITH its merger bedded down, financial services group MMI is focusing on growth — and the rest of Africa is earmarked as a future source of earnings.

The third-largest life insurer by market capitalisation has been struggling to find suitable African companies to buy, though it has “done a lot of work” on a potential acquisition in East Africa, CEO Nicolaas Kruger said yesterday.

The financial group announced in March that it had set aside R500m for acquisitions on the rest of the continent.

Speaking on the sidelines of the full-year results announcement in Sandton yesterday, Mr Kruger said that some of this money had been spent on reinvesting in existing African businesses including insurer Mauritian Eagle.

MMI was also entering into strategic partnerships to grow its exposure in Africa.

This includes a distribution deal announced in the rest of Africa between MMI and Bharti Airtel yesterday which will see the insurer sell products through Airtel’s telecommunications networks in Ghana, Kenya, Nigeria, Tanzania and Zambia.

“We bring to the table product expertise and financial savvy. They bring a client base and the technology,” said Mr Kruger.

Details are still sketchy as the partnership will only officially be announced in SA within the next few days.

MMI wants its rest of Africa operations to generate 10%-15% of group profit over the next five years. However, the continent only contributed 4% to the group’s operating profit in the full-year results ended June 30. South African businesses Momentum Retail and Metropolitan Retail still contributed the bulk — 69% — of the group’s profit.

Mr Kruger said potential acquisitions on the continent involve long lead times as “we really want to be comfortable that we add value strategically”.

The potential tie-up in East Africa is far from finalised, he said. “I will be very disappointed if we don’t find suitable investments in addition to investments in our current businesses.”

MMI has a presence in 12 African countries. These are Kenya, Tanzania, Zambia, Mozambique, Lesotho, Swaziland, Botswana, Ghana, Namibia, Malawi, Mauritius and Nigeria.

MMI is also eyeing India where it is talking to potential partners about introducing a single product to the subcontinent.

Mr Kruger emphasised that it was “still early days”.

The merger of Metropolitan and Momentum to form MMI Holdings in December 2010 was now “bedded down”, Mr Kruger said, and this was the last time that he wanted to speak about the merger at a results presentation.

The group has so far saved R346m as a result of the merger and is well within reach of its targeted savings of R500m from streamlining operations, eliminating duplication and cutting out indirect costs such as rentals.

Mr Kruger said MMI’s “strong” performance in difficult economic conditions showed the merger is starting to pay off.

The financial services group grew pretax profit to R4.2bn in the year under review — up from R3.6bn in the previous year.

Diluted earnings per share increased from 151c in the previous reporting period to 164c in the year to June.

MMI’s share price rose 1.35% to close at R23.22.