Given the poor state of JSE-listed shares, it is pleasant and heart-warming when a blue-chip company delivers on its promises.
Three years into its “Reset and Grow” turnaround strategy, Momentum Metropolitan Holdings (MMH), finally came closer to its targeted earnings after putting a lid on costs and taking back some market share it lost over the past years. Last week they reported full-year earnings to June, almost two thirds higher than the previous year.
Awe-inspiring results, diluted normalised headline earnings grew by 53 percent to R3.1 billion, albeit from a low base. The last year it was impacted by a once-off charges, and if these are excluded, growth is still an impressive 21 percent. Due to the share buyback programme, the per-share headline earnings increased by 61 percent. According to chief executive Hillie Meyer, the improvement in their earnings is the result of financial discipline, a focus on their core activities and working smarter with their money without negatively impacting their market presence.
They are moving into the next phase of their strategy and will continue to focus on growing revenue through advancing distribution capabilities and visibility of their brands, as well as through continuous improvement of product solutions and the client experience. The figures are quite impressive; pre-tax profit rose 23 percent to R5.5bn, and investment income rose 10 percent to R22bn.
Growth in new business volumes in specific areas boosted their performance. Momentum Corporate saw strong flows of new business from a range of clients, including a proper increase in recurring premium inflows for group insurance, as well as several large annuity deals in the first and fourth quarters.
Momentum Investment's guaranteed products and the new Investo retirement annuity in Momentum Retail created safe havens for clients in an uncertain economy. These solutions enabled positive sales growth in a harsh environment - confirming that product innovation can convert into growth in a stagnant market. Momentum Metropolitan Africa recovered from negative to positive growth in the second half of the year.
MMH is one of South Africa's larger life insurers and integrated financial services company and conducts its business through operating brands Metropolitan, Momentum, Guardrisk and Eris Properties.
Investors are likely to benefit as the share price returns towards its longer-term average due to initiatives to control costs, combined with repriced or enhanced product offerings which may support a re-rating. Strong growth was seen in Momentum Life, which constitutes a third of the total earnings, as management tightened the grip on expenses, improved productivity and enhanced the product offering.
The group is on track to meet their goals of the “Reset and Grow” strategy. With this strategy, the group aims to streamline operations, maximise efficiencies and increase earnings to between R3.6bn and R4bn in the full year 2021. The operating environment, which, in no small extent, remains dictated by macro-economic forces, and the lacklustre equity market returns that proved to be headwinds in recent times. This, in turn, impacts changes in assets under management which influences fee income and the embedded value of the group.
Amelia Morgenrood is a PSG Wealth financial adviser based in Pretoria. Views are of the author and not necessarily the general view of the entire PSG entity. MMI shares are currently held on behalf of clients.
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