MMI Holdings CEO talks new strategy after big drop in earnings

Listed financial services group MMI Holdings on Wednesday reported disappointing results for the twelve months ending 30 June 2018.

MMI said that diluted core headline earnings declined by 12% to R2.8 billion after being affected by various factors such as increased investment in strategic initiatives, higher expenditure on distribution, and weaker persistency in Metropolitan Retail, while diluted headline earnings per share declined 21% to 93 cents per share.

Operating profit after new initiatives declined 10% to R2.35 billlion. MMI’s investment in new growth initiatives increased by R127 million. If the impact of new investments is excluded, operating profit shows a decline of 5%

Brands under MMI’s stable include Momentum, Metropolitan and the Multiply wellness and rewards programme.

New business volumes increased by 1% year-on-year to R42.2 billion on a present value of new business premiums (PVNBP) basis. This included year-on-year growth of 3% for Momentum Retail and 1% growth for Momentum Corporate.

Momentum Short-term Insurance (MSTI) performed well, mainly due to the continuous improvement in the claims ratio as well as good expense management. The claims ratio reduced from 72.9% to 66.5% year-on-year.

This set of results follows a financial year in which the MMI Holdings Board initiated turnaround changes, including appointing new executive leaders and tasking them with positioning the business for improved performance and future growth.

“The new MMI leadership team has started the process of implementing a new strategy to reset and grow the business by focusing on the basics and addressing structural shortcomings,” MMI said.

“We know that we are reporting disappointing financial results. In spite of the strategic reset and the senior management changes, we now have a more stable environment and I have no doubt that we can turn MMI around,” said CEO, Hillie Meyer.

To achieve this, the leadership team is focusing on a strategy comprising two components, which they termed RESET and GROW, he said.

“To reset the business we are focusing on fixing what is wrong and getting the basics right, such as aligning the business’s cost base with its revenue,” said Meyer.

Other basic improvements include that MMI changed its operating model to empower end-to-end business units to run their businesses efficiently and effectively, an increased focus on successfully growing the core businesses in South Africa and exiting markets on the African continent that do not deliver shareholder value.

The GROW part of the company’s strategy includes increasing the size of its distribution channels and improving productivity, regaining its reputation for developing innovative products, connecting with business partners and clients through excellent service and revitalising the Momentum and Metropolitan client-facing brands.

“Through our turnaround strategy, we are targeting to increase earnings from the current R2.8 billion, to R4.0 billion. It takes time to turn around an insurance company, but I have absolute confidence in the commitment and ability of our management team and employees to not only turn the business around, but to also set MMI up to achieve sustainable, profitable growth within three years,” said Meyer.

Read: MMI CEO steps down

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MMI Holdings CEO talks new strategy after big drop in earnings