MMI pulls through despite bad year
But the share price is down
MMI Holdings had to knuckle down in the year to June and face the impact of the loss of two lucrative contracts, retrenchment of staff, which sapped years of experience and higher-than-expected claim ratios.
The group, forged five years ago from the merger of Metropolitan and Momentum, reported a 17 percent increase in profits from operating divisions to R3.5 billion, while the value of new business rose by 22 percent to R954 million.
New business expressed as the present value of premiums rose by 21 percent to R50bn, on the back of fourth-quarter sales. A final dividend per share of 92c was declared, bringing the total dividend for the year to 155c, up 9 percent on last year.
MMI shares, which were earlier this year included in the Top40 index, fell as much as 3.7 percent to R25.36, which was the stock’s lowest level since October 16, 2014, before ending down 2.24 percent at R25.76.
MMI Holdings full-year core headline earnings were up 6 percent to R3.8bn.
MMI‚ whose core businesses include long- and short-term insurance‚ asset management‚ savings‚ investment and healthcare administration, saw the value of new business rise 22 percent to R954m.
Operationally the group had a tough time with the loss of two major unnamed contracts in the Metropolitan Health division which chief executive Nicholas Kruger admitted would have an impact that would be seen at the end of the 2016 year.
Global business
Kruger said that the effective date of changes was January 1 with a phase-out period but that the profit impact in the current year to June 2016 would not be that significant in this business.
“The Metropolitan Health contribution to overall business is 5 percent of group profit, so there will be an impact in a business that is 5 percent of group profit, we cannot be too definitive about the impact but we can say categorically that the business will still be profitable,” he said.
The group’s international business saw a 35 percent increase in new business driven significantly by the southern countries including a good performance by the Namibia division – and Kruger said that he hoped over time the eastern and western countries would also start to make a big contribution.
The health claims ratio in the Africa division was at 68 percent, which he said was solid. Profits from the Africa business include the contribu- tion of Canon Assurance, the business acquired in Kenya.
MMI Holdings has an R1.7bn war chest to spend in Africa, R700m of which has already been committed, leaving R1bn to spend on growth opportunities locally and the rest of Africa, particularly to build scale in existing businesses.
MMI is looking to increase scale in Kenya which Kruger said was a very strategic re- gion. He said though the market was overcrowded with many players and that even after acquiring its Cannon Assurance stake, MMI was still a relatively small player.
Kruger said though it was early days, the group had just concluded negotiating an interesting joint venture in telecommunications space with a large player with good footprint in Africa, and would be rolling out solutions over time. “We initially targeted six different countries in Africa to look at alternative ways of distributing products.
Kruger said agreements had been finalised with Aditya Birla Group in India for a partnership in that country and would be “increasing our stake to 49 percent cox of relaxation of FDI (foreign direct investment) limits,” he said.
17% A rise in the group’s profits from operating divisions