Earnings call transcript: Momentum Group Q1 2023 sees 44% earnings rise

Momentum Group (MNT.JO) announced robust financial results for Q1 2023, showcasing a 44% increase in normalized headline earnings to 3.4 billion rand. The company’s earnings per share rose by 4% to 2.45 rand, while dividends increased by 42% to 85 cents per share. The stock, however, saw a decline of 3.33% to close at 0.15, reflecting investor caution despite strong earnings. According to InvestingPro data, the company maintains a FAIR Financial Health Score of 2.33, though it faces profitability challenges in the last twelve months.

Key Takeaways

• Normalized headline earnings surged by 44% to 3.4 billion rand.
• Earnings per share grew by 4% to 2.45 rand.
• Dividend payout increased by 42% to 85 cents per share.
• Stock price dropped by 3.33% post-earnings announcement.
• Momentum Health reported a 14% increase in membership.

Company Performance

Momentum Group delivered a strong performance in Q1 2023, driven by significant gains in its normalized headline earnings and a notable increase in dividends. The company’s return on equity reached 25%, the highest in the industry, underscoring its financial strength. InvestingPro analysis reveals the company holds more cash than debt and maintains a strong current ratio of 6.94, indicating robust liquidity. Despite these positive results, the stock price faced pressure, possibly due to broader market conditions or investor expectations.

Financial Highlights

• Revenue: Not specified in the call.
• Earnings per share: 2.45 rand, up 4% year-on-year.
• Dividend: 85 cents per share, up 42%.
• Return on Equity (ROE): 25%.

Market Reaction

Despite the positive earnings report, Momentum Group’s stock price decreased by 3.33% to 0.15, suggesting that investors may have had higher expectations or concerns about future market conditions. The stock’s movement contrasts with its 52-week high of 0.305 and low of 0.024, indicating a cautious market sentiment. InvestingPro data shows the stock’s beta of 0.72 suggests lower volatility than the market, while delivering an impressive 102.7% return over the past year.

Outlook & Guidance

Momentum Group remains confident in achieving its financial ambitions for 2027, with a focus on mid-teens earnings growth. The company plans to continue optimizing its cost base and enhancing business quality while navigating competitive pressures in the corporate segment.

Executive Commentary

Group Finance Director Risto Kittola emphasized, "We make our own luck," highlighting the company’s proactive approach to financial management. Group CEO Jeanette Mare reiterated the company’s commitment to building and protecting clients’ financial dreams and identified advice as a key differentiator in the market.

Risks and Challenges

• Competitive pressures in the corporate segment could impact market share.
• Challenging conditions in the medical schemes market may affect growth.
• Economic uncertainties and potential regulatory changes could pose risks to earnings.

Momentum Group’s strong financial performance in Q1 2023 demonstrates its resilience and strategic focus. However, the decline in stock price post-earnings suggests that investors remain cautious, potentially due to external market factors and competitive challenges. For deeper insights into Momentum Group’s valuation and growth prospects, including exclusive ProTips and comprehensive financial metrics, explore InvestingPro’s detailed analysis and research reports, available with your subscription.

Full transcript - MTM Critical Metals Ltd (MTM) Q2 2025:

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Morning. Morning.

Good morning. When you say good morning, you get a response. I mean, you only can say good morning, then there’s silence. You worry what is going on. Very, very warm welcome to this presentation of the interim financial results of Momentum Group for the period ended thirty first December twenty twenty four.

My name is Dan Moyane. Jeanette, I promised myself when I stand here today, I won’t make the same mistake I’ve made twice in the past when I presented the results. I know exactly in which office I’m standing. I’m still I’m standing in Risto’s in Risto’s office. So if I make a reference to that, I said to myself, don’t make the same mistake today.

Okay. We are, of course, live to you, on from the company’s offices in Centurion, in Swane. And welcome to everybody who’s joining us today, the analysts, the investors, shareholders, journalists, and employees, of course, most importantly, of the company who can watch us and follow us right now live. We are live on BDTV channel four one two. That’s on DSTV if you prefer to watch that and you’ve got access to the platform or you can follow the results and the presentation live on webcast via copcam.com.

And then it’s simply m g, this is copcam.com/mg. And it’s today’s date, that’s the twentieth, which is 02/00, the month o ’3, and the year 2025. Simply 02/2025. Now the full results are also made available as usual on the group’s website, which, you you, of course, you know, if you can just find us there, the Momentum Group’s website. And by the way, we should thank all the Momentum Group investor relations team and the group marketing teams for all the work they’ve done in preparation for today.

It’s looking lovely, and we’re all set to go, especially because by all accounts, it’s an excellent set of results that we are indeed very proud of. So now I’m gonna hand over without much ado to Jeanette. That’s a group CEO, Jeanette Mare, will be followed by the group finance director, Risto Kittola, to take us through the highlights. Good morning, Gillette. Over to you.

Jeanette Mare, Group CEO, Momentum Group: Good morning. Good morning, everyone, and a real warm welcome to the announcement of our interim financial results for the 2025 financial year. If you’ll indulge me, I’d like to say a very special welcome to my mom and dad, who’s also watching for the first time today on Business Day TV. I didn’t plan tears, but, you know, I used to tears. I’m sure that’s okay.

So today, they can see what they spent all that education money on. So mom and dad, you’re very welcome. And now for the joyful stuff. It really is a good day for the Momentum Group today with what we could call you know, we were we were, looking for words, excellent, brilliant, fantastic, I’ll stick to excellent set of results, which we delivered in spite of a tough operating environment. So I will start, like always, with some of the key takeouts from the interim results.

And, of course, the highlights for us, we delivered normalized headline earnings of R3,400,000,000 for the six months, which is up 44% on the previous year. It is the result, this time around, of every single business in our group doing really, really well. And that really doesn’t happen often, but something that we’re very proud of. I think maybe just one or two things that’s interesting to note is that in the last six months, we delivered the same level of earnings that we delivered for the full 2023 financial year. And even if you adjust for the once off items such as market variances, we still delivered earnings of ZAR2.9 billion in the first half of F25, which is a remarkable performance.

Then we achieved solid VNB growth of 40% to $2.70 2 70 9 million. This was driven by strong VNB performance to Momentum Retail, thank you, Johan, turning around from a loss in the previous period to a pleasing contribution of 50,000,000 this year. Metropolitan’s VNB also improved notably, although it’s still negative, Peter. Still still some way to go for you. And their momentum investments decreased their contribution slightly, but this business still remains by far the biggest contributor to VNB in the group.

And overall, the group’s new business margin have now improved 2.7%. Our new business sales, remained flat at 38,900,000,000.0, but the trend is a consistent upward trend in sales over time. And I think just also noteworthy that in the second half of F24, it included some large deals in Momentum corporate, which were not repeated this time around. We continue to create value for our shareholders. The graph on the left shows the steady pattern of our upward pattern of our dividend payouts, with a strong boost, of course, generated by our performance in the last six months.

And we’re very happy to declare a dividend of 85¢ for the the the half year. Rista will unpack this in a bit more detail, but in total, we’ve completed 3,200,000,000.0 in share buybacks since the first half of f twenty three, and we’ve also now announced a further R1,000,000,000 in share buyback, which was approved by our board earlier this week. And that will, of course, commence immediately. Overall, the share buybacks have created approximately ZAR2 billion in shareholder value. So in this section of my presentation, I always choose a few businesses to put some focus on.

And I will start with Momentum Insure. I’m really happy to report that the turnaround of Momentum Insure is definitely on track. We’ve experienced the best six months period ever with earnings of $230,000,000 and Insure contributed $315,000,000 to our group’s dividend. So Brandt’s here. Brandt is smiling very, very widely this morning.

For Insure, operating results are also very strong. The combined ratio improved by 16 percentage points from 106% to 90%, which is below our long term target and at its lowest since f twenty one. Operating profit improved by more than $250,000,000, which is up 300% year on year. We believe that these results point to a sustainable improvement in the underlying quality of the book. We remain disciplined in our growth strategy.

Insurance revenue growth was muted due to corrective underwriting and pricing actions in the last two years, which impacted lapse rates, but portfolio profitability improved as expected. New business grew by 20 year on year with a strong recovery in our direct business of 36% and a recovery of 29% in our tight agency. So really, you know, these numbers look fantastic. Then also on the left, you can see our claims ratio. The corrective actions led to the lowest half year claims ratio since f twenty.

We also benefited from the lower than expected weather related claims like the rest of the industry. However, we do know that industry wide, there is an expectation of some volatility in the second half of the year. And even after adjusting for the benign weather, the half year and rolling twelve month claims ratio still remain within our 57% to 60% a 62% target range, and it’s closely aligned with our industry peers. This encouraging outcome highlights a significant progress that we’ve made in enhancing risk selection, pricing, and underwriting capabilities. Lastly, I couldn’t help but put this graph on.

The graph on the right shows the pleasing upward trend in normalized headline earnings for this business. Momentum Insure is now a sustainable and a substantial contributor to earnings and to dividends for the group. We’ve also been providing feedback on Metropolitan’s five point turnaround plan over the last eighteen months. And again, I’m very happy to see that or to show you that there’s a lot of green on this slide. So, Peter, you and the team, well done.

We improved product commerciality by implementing various initiatives that led to a lot better profitability across all of the products in Metropolitan. We’ve reduced our cost base by 40,000,000, year to date, and there’s a further 20,000,000 in savings that we expect from switching of some of the legacy systems. Migration and automation efforts have also focused on revitalizing and modernizing our product administration systems on a new digital chassis. We improved business quality, particularly the lapsed experience on protection business due to writing much better quality new business. The only area that needs a little bit more attention and where we kind of, I would say, halfway through the implementation of a very solid plan is our sales workforce management.

So we’re not entirely there yet, but we have prioritized distribution, rationalization, and optimization, and we have a solid plan which is being implemented by Peter and the team at the moment. So I think given the good progress on the five point plan, Metropolitan can now increase its focus on the impact strategy objectives for f twenty seven, and it’s probably, hopefully, the last time that I will talk to you about Metropolitan’s five point plan. Then Momentum corporate. Momentum corporate has again shown resilient and profitable organic growth across all of their core product lines with normalized headline earnings exceeding $850,000,000 for the half year, which makes it our star performer. Looking at Momentum corporate’s underwriting margin delivery, margins remain strong, but market and pricing pressures have led to a slight decline compared to the first half of F24.

The performance from F23 to the first half of F25 has been above target and expectation, but we do believe this is not sustainable. DuMo keep on telling us to tell you it’s not sustainable, and then they outperform themselves. So I won’t be, yeah, commenting on that. Our focus remains on profitable growth and disciplined risk management position or our our focus on profitable growth and disciplined risk management positions as well to achieve our target margin of between 5% to 7% net of tax over time. The turnaround in permanent health insurance has been sustained, reinforcing our confidence that we will achieve our target margin.

And then lastly, volatility remains a reality, but our strategy ensures our resilience in this space. So good luck on that, Dumont and team. Then oh, sorry. Funds at work. Funds at work’s asset under management grew organically by 49% from, 63,000,000,000 in f twenty one to 94,000,000,000 in f twenty four, and that was coupled by excellent growth of 14% in the umbrella book active membership over the three and a half year period.

And I think given the stagnant economy, I am particularly pleased with the 14% growth in membership numbers, for this business. Through disciplined execution, collaboration, and a relentless focus on scale, we are strengthening our competitive position and unlocking new opportunities such as SME markets for funds at work. So again, some great progress there. Then Myriad’s massive improvement in VNB deserves a mention. They improved their VNB from 4,000,000 to 71,000,000.

Their new business margin of 3.6%, this is not a number that we’ve really shared with anyone before, compares very favorably to our peer group. And this was driven by improved profitability of new business, 9% higher sales volumes, channel optimization, expense savings, and lower cost of capital. And one of the reasons why VNB has started to improve is because of the digital and technology innovation in Myriad, which brings down the cost of doing business. And I did think that I’d want to spend a minute or two on exactly the progress this business has made in the area of technology and digital over the last time because it’s really a fantastic story. Johan called it the highlight of his career.

Risto Kittola, Group Finance Director, Momentum Group: So far.

Jeanette Mare, Group CEO, Momentum Group: So far. So far. We’re not done yet, Johan. Life returns is our new leaner, more accurate digital risk selection mechanism post the transition from momentum from Multiply Premier, which was our previous wellness approach. Now clients can get a free digital fitness and health check on their mobile phones and earn their discounts without having to go to Biokineticist or pharmacies.

This is a world class innovation, and it’s still a world first as far as we can as we can determine. It provides a better client engagement mechanism with immediate feedback and benefits. It’s giving more discounts for more clients for less effort. This enables us to proactively engage with clients who have undiagnosed blood pressure problems or ineffective treatments. It bodes well for the future of proactive health management to prevent or manage future claims.

With a life returns digital health and fitness screening, we are also transforming how traditional onboarding and underwriting is done. We are attracting healthier lives who want to be rewarded for their lifestyle, but without having to actively engage and compete on wellness platforms. Many of these clients also experience our digital fast track underwriting solution by which we issue cover without the need for traditional medical tests. This is onboarding simpler, faster, and cheaper for clients and advisers. And really for us, the result has been higher market share with advisers and better VNB as we’ve just seen as these efficiencies and better risk selection is starting to pay off.

Outside of traditional face to face intermediary sales, we have also been successful with growing sales using leads from momentum.coza and other digital marketing initiatives. We have witnessed sales growth of approximately 30 over the reporting period. Sorry. I just thought I didn’t change the slide. It now makes up about 25% of our new policy applications and 10%, of our new business sales for Marriott.

And then lastly, we have also implement mentored major technology upgrades in our adviser and client digital engagement platforms, which we call Advisor Connect. The Marriott team setting the example of how all our product businesses should integrate into our group wide engagement digital platforms. We have successfully exited all the older quote systems and transitioned to a modern onboarding platform, which we’ve integrated into the the bigger Momentum digital ecosystem. This delivers a new combined platform for quotes, new business submission, and alterations, which has shown high adoption by advisers that used to be a bit of a problem in the past. Another spin off of this technology architecture is that Myriad Business can now easily integrate into the external advice platforms of any of the networks in South Africa.

So in a nutshell, if we look at market share, winning market share isn’t a sprint, it’s a marathon. We don’t claim victory yet, but our digital strategy is moving us consistently forward and is setting us up for success, which really is great. Now I’m gonna just give you some feedback on our impact strategy and where how we’re doing with that. So I think by now, the six strategic objectives of our impact strategy is quite well known to you. And over the next slides, I will give you an indication of the group wide performance for each.

I’m not I’m not gonna go into the detail. We will keep that for our investor day or investor markets day on the June 3 where we will go through our impact strategy in in quite a lot more detail. You’ll see that there’s some color indicators on these slides, and that really just indicates our confidence in reaching our end target after three years. So it’s early days, but we already have a feeling of how we will be able to deliver after three years. And you can see that that would range from fully confident to reasonably confident where we know that it will already require some extra effort from us.

So to start, unlocking the full potential of our business units mean that we boost our successful businesses with more capital and we fix our underperforming businesses through turnaround strategies. And we are highly confident that we will reach the targets that we set for ourselves for f twenty seven. Progress includes the strides we’ve made with our turnaround strategies for Momentum Insure and for for Metropolitan that I’ve just shared with you. The Africa operating model is currently under review, and we’ll share more information on this as we make progress. But I think on a positive note, deserving a quick mention, Momentum Health has shown good open market membership growth, and we know the medical schemes market is a very tough one at the moment.

And health for me continued strong membership growth of 14% on the previous year. And just hot off the press, just last week, Momentum Medical Scheme was awarded the medical scheme of the year by News twenty four that we’re very proud of. Minising synergies of collaboration in our group refers, in our words, to hunting together to seize opportunities and unlock new growth opportunities through vertical integration. We are highly confident that we will also reach our targets for this objective. In terms of collaboration, across our group, there’s great collaboration between many different business units, which is starting to really show, results.

I’m not gonna go into the detail of that. Our focus on vertical integration is also showing off or starting to pay off, not as much show off. The highlight for me that I have to mention is Momentum Wealth’s net inflows, which more than doubled when compared to last year due to the vertical integration with MDS. They achieved net flows of R3,900,000,000 compared to only 1,300,000,000.0 last year. And last year, we thought 1,300,000,000.0 net flows was great, Fadi.

In MFP, our agency force, we still have some work to do on vertical integration, but we’ve developed an integrated wealth solutions framework and to better drive vertical integration with Qurate and Equilibrium. And this shows the strong partnership between Momentum Investments and MFP. The advisers in MFP also capture all Marriott new business themselves showing the the improved digital partnership that we have between Marriott and MFP. Optimizing our cost base is about getting leaner and operating more efficiently, and it is essential for sustainable growth and to improve our VNB. We are highly confident that we are making the progress needed to achieve our targets.

Risto will actually give you quite a bit more detail on this. We’ve launched a group wide performance optimization project, which identified optimization opportunities of around a billion rand. We are looking at duplication across the group, but also targeting key streams such as procurement, technology, and business unit efficiencies that we can unlock. We’ve completed the diagnostic phase now, and we’ve started with implementation. We are actively tracking progress on this project across all of the identified pockets of savings to ensure that these are permanently removed from our cost base.

You know by now that we believe that face to face advice is here to stay and that it offers great growth opportunities. We drive advice as a key differentiator for us as a group. For Momentum Retail, in the MFP space, our new executive team is in place, and we have changed our entire operating model to enable sales. So MFP is now really ready and set up for success. Momentum Investments successfully completed the acquisition of minority stakes in two international adviser and wealth management groups, one in South America and one in Ireland.

And this really is to to help with vertical integration into our investment products. These investments in iPhone networks are already paying off with good inflows into our portfolios and an increase in assets under management that is already well ahead of target. And the Momentum Health saw a pleasing 15% growth in Momentum medical scheme sales from independent advisers through MDS, and I’ve already touched on Metropolitan. Selectively expanding our addressable market means that we will focus on four key areas of possible expansion, channel, segment, product, and geography. We rate ourselves reasonably confident given that most of the current initiatives are quite exploratory and quite early stage assessments, but there are some early wins, and we’re aiming to move this indicator to green pretty soon.

Momentum Investments hold a sizable lead in IFA guaranteed annuity market share at about 38% and has gained significant market share in the overall market to 22% in post retirement products, which include living, hybrid, and guaranteed annuities. And NQ rate, the newest baby in the group, has been generating significant buzz with the introduction of key local and global fund managers, and their fund performance has been remarkable consistently placed in first and second quartile. Sorry, Godresk. Did I not talk about you, Lawrence? By participating in alternative distribution channels, GuardDress expands into markets where up to recently only Metropolitan played.

GuardDress have also shown significant growth in the underwriting profits. Their gap cover business continues to grow, and microinsurance is growing and and gaining traction in the low income market. In Momentum retail, we conduct concluded the FinGlobal transaction, which extends our existing holistic financial planning suite to include financial immigration capabilities. This transaction is still, waiting or subject to competition commission approval. Momentum corporate grow platform, I’ve spoken about that before, digitally enables advisers to sell and service benefits to SMEs.

Sales for momentum grow are increasing steadily and are ahead of target. And the great news here is that all sales are with first time employee benefit buyers, which really is opening up another new market for us. In this strategic objective, we focus on simplicity and client insights to enhance client experience and drive efficiency. We are highly confident that we will achieve our targets for this. As you know, I have a personal obsession with how we make our clients feel and being unreasonable about achieving excellent client experiences in line with our purpose.

We initiated a group wide process to assess and improve client experience across all of our businesses with some of the progress mentioned on this page. And then in closing, our purpose is to build and protect our clients’ financial dreams. That’s our why. Our what is our impact strategy, what we need to focus on to achieve our purpose, and our how is our culture behaviors that enable us to live our purpose and deliver on our strategy. It is how we show up every day at work, doing what’s right for our clients, really caring about how we make them feel, and driving excellence in every single thing we do.

This is what motivates us. It’s what gets me out of bed in the morning, and it enables us to deliver on our financial goals and targets. We have made excellent progress in the first six months, and our impact strategy positions us well for the remainder of the year. We remain steadfast in improving our VNB and driving sales volume growth. Advice will be a key differentiator for us.

It carves out a unique space in the market and provides great value to our clients. Our leading market share in the IFA segment positions us well to deliver value By leveraging technology to enhance the client experience and empower our advisers, we will ensure that our solutions remain relevant, accessible, and tailored to evolving client needs. We continue to focus on delivering on the impact strategy, and I still believe that the financial ambitions for f twenty twenty seven remain achievable. Firstly, I’m grateful for the unbelievable energy amongst our employees, your drive, your tenacity, and your passion for really making a positive impact on people’s lives. So to every single employee, my executive team are all here today.

Our board, thank you very much for all your support, all your hard work. And to our financial advisers and clients, thank you for trusting us with your financial dreams. I’ll hand over to Rysso to take us through the finances. Thank you.

Risto Kittola, Group Finance Director, Momentum Group: Yes. Thanks, Jeanette. It is really a pleasure to present these results. Fifteenth time, so not the first rodeo, but these are comfortably, I think, the best results in absolute terms and some of the underlying trends we’ve seen. So, yes, I think the word we used initially was exceptional.

There are good results, but even if you dig deep into them, I think you’ll be pleased with some of the things you find. Okay. Let’s talk about key financial measures. Earnings up 44%, DKK three point four billion. As Jeanette said earlier, if you remove the market variances, so that’s like investment variances, yield curve changes, credit spread income above expectations.

Earnings are probably about $2,900,000,000 but we mustn’t forget that last year was also a favorable market. So the growth rate remains in the mid to high 30s if you adjust both the years for the market variances. So it gives you an idea of the strong underlying operational performance coming through in all the operations. Earnings per share, R2.45, up 4% more reflecting the reduction in shares in issue through the buyback program. Our shares in issue used to be nearly 15% higher a few years ago.

So there’s been quite a big impact on the per share metrics through the buyback program. Dividend up 42%, zero point eight five dollars per share. Our dividend policy is to pay out between a third and a half of our earnings, 33% to 50%. In this period, it’s at 34% towards the lower end. But as Jeanette said, we are doing ZAR1 billion buyback, which equates to ZAR0.70 per share.

So the total distribution to shareholders is ZAR1.55, which is up quite nicely from the ZAR0.95 including buybacks last period. So the actual capital distribution to shareholders is up approximately 60% year on year. So if anything, our cash generation to shareholders is increasing faster than the earnings, which always pleasing if you’re a shareholder. Then return on equity, this number we’re very proud of and I was pleased to see that some of the analysts’ comments this morning highlighted this 25%. It is the highest in the industry.

We take quite well, we take a lot of pride in the fact that our return on capital is higher than the other insurers we know about, at least the life insurers. Now there’s been a lot of questions asked why is our return on capital so high. And there’s a number of dimensions here. And I would like to claim it’s all because of good capital management. But I think it’s also important to remember that we haven’t done any major M and A in the last few years.

So we’re certainly sitting with a lot less goodwill and intangibles than some of our peers. The reality is if you’re making big deals, you’re going to get a return on investment of maybe 10% if you’re lucky in the early years. So lack of M and A has definitely helped our ROE. A little bit more structurally, it’s also important to remember that we tend to be overweight in certain products like life annuities where ROEs are very good. I did some work two years ago looking at ROEs by product.

And annuities actually have the best payback period and the best ROE of our current product range. So we tend to be overweight annuities, affluent risk products, things with good ROEs and underweight some of the product ranges where the ROEs are lower. So I do think we can maintain market leading ROEs for the time being. It might come back from 25% to 20%, but I think a 20% ROE will be a strong achievement from a mature life company. Embedded value per share, ZAR39.2nine.

Subsequently, it’s probably closer to ZAR40 as we speak. Share price is about ZAR30, so we’re trading about a 25% discount to EV. That’s narrowed a lot. It was at fifty percent two years ago, eighteen months ago. So if you think of the strong share price performance over the last, let’s say, eighteen months, probably 25% comes from EV growth, another sort of 30%, forty % from just rerating of our share to more reasonable levels, I would argue.

The 12% EV growth, if you add in the dividends, it becomes a 16% return on embedded value. 16% is probably a bit higher again than I would think is sustainable through the cycle. But again, because of the improvement in VNB and the increased confidence in the sustainability of the variances and also growth in areas like Carders, which have naturally quite good return on embedded value. My view of the sustainable ROEV has increased by 0.5%, one % over the last year or two. So I think the discount to EV narrowing is very justified.

Sales volumes, Jeanette mentioned that they’re flat year on year. I’ll show you later that on retail side, they’re actually up year on year. Corporate volumes are down from the prior period. We had very good six months in the prior six prior first half, but on retail, we’re up year on year. Value of new business, up 40% on flat sales.

So it’s obviously a margin expansion story here. Again, Jeanette sort of mentioned that the big drivers of the improved margin is momentum retail where margins are now positive and expect to remain so forever. And then Metropolitan Life margins, they’re still significantly lower than we would want them to be in the medium term, but they have improved a lot over the last twelve months. Okay. Just quickly running through the business units.

You’ll see in the light shades there, we have the market variances and they are slightly higher this year in aggregate than last year. I’ll just make some comments on the dark bars, which is operational performance underlying these businesses. I’ll start with Momentum Retail. Flat year on year, but I would say the $5.94 is still a very strong result. Things like mortality variance are still positive, just not as positive as last year.

Alterations experience, which I’ll talk about later a bit more, positive but not as positive as last year. Our ALM results are reasonable. In fact, we’re actually close to match now, so closer to zero result in ALM. Lastly, there are big positives. So there’s nothing that has weakened in this business, but last year was actually quite an exceptional comparative.

So I’ll be very pleased with the $5.94. Momentum investments, this is where the big annuity book sits, the retail annuity book. The sales volume growth has been well, volume growth until this year was extremely high. This year, it’s a bit more level, but still high volumes in absolute terms. The annuity book keeps growing.

And because of the growth in the book, the CSM keeps growing. I think the CSM has grown by like 30% again. And that CSM release, and I’m getting a bit technical here, but the release of the CSM is really what’s driving the higher level of earnings on the annuity book. Things like credit variances, no defaults in this period again, so those were good. Mortality remains better than expected on the annuity book.

But it’s really the structural growth of the AUM, the book size of annuities that’s driving that. Something we don’t talk about as often as annuities is the wealth platforms. Those earnings are up significantly year on year as well. Our offshore platform has always been profitable and continues to be so. The local platform profitability improved quite a bit year on year.

And many of you know we’re busy with a replatforming project in that business. The amount of expenses coming through the income statement in the current period is quite a bit lower than the prior period on that project. Moving on to Metropolitan. Now Metropolitan’s earnings are quite sensitive to the level of onerous business. So last year, we spoke a lot about the fact that Metropolitan sells some profitable business, but there are big pockets of loss making business sold.

That has reduced now with all the actions taken. So the focus on premium rates, product benefits, product rules, when we pay commissions, when do we call back commissions, all those things have a positive impact on the profitability of new business, which reduces onerous contract, which comes through income statement immediately. So a big benefit in the Metropolitan there. Also pleased to note that the persistency has improved materially year on year. It’s been interesting looking at the results from the industry.

There’s been a bit mixed, the commentary on persistency. We can confirm that our actual collection experience is getting better in the interlevel market. So combining that with the more conservative actuarial assumptions, we actually seen a material rebound in the what we call the persistency variance within the results. Then going into Momentum corporate. As Jeanette said, now our biggest business, we probably need to change the order here, start with corporate next year.

Mortality profits remain slightly above long term norms. But at the same time, we don’t think that they are out of line with the current and expected mortality experience. In other words, we don’t plan to give back profitability on group risk. What is less spoken about recently is the biggest structural change in the last eight years is the disability book. When I joined here eight years ago, we were losing I don’t want to say the exact number, but we were losing lots of amounts of money every year.

And now we’re making steady profits there. It’s literally a DKK 400,000,000 annualized swing from where we were to where we are today. So I think the mortality book sorry, the disability book is where you had a structural change in the level of profitability, and I don’t see that going backwards anytime soon. Maybe the one or the primary reason why the operational profit is a bit higher this year is there was approximately $100,000,000 released from the IBNR reserve. That stands for incurred but not reported reserve.

So those are claims we expect to come through in January, February that weren’t reported by thirty one December. Those estimates are based a lot on the level of claims we see late in the year, November, December and we actually saw claims reduced quite a bit in those two months. So we’re expecting less latent claims to come through. So the reserve reduced by just over SEK 100,000,000 on that. Now this business is scheduled to be a unicorn in two years.

So Duma you had SEK 1,400,000,000.0 annualized now that I can just tick the box on the SEK 1,000,000,000 for SEK $27 He’s not nodding. He’s acting like he didn’t hear me. Okay. Just moving on to the other business units. So health, earnings are basically flat year on year.

Now 80% to 85% of the health revenue is admin fees. You can just imagine the current environment, economic environment. You’re not going to get anything more than inflation on fees per member if that. At the same time, the total membership growth was quite muted. Jeanette mentioned that our open scheme is doing okay, our public sector business is doing okay, but we’re actually seeing reduction in the membership in some of the corporate schemes.

So our admin fee income overall was only up 4% year on year. Now some of the underwriting profits like on Health4Me and Capitation contracts, they lift total revenues to 5%. But at the same time, it’s also quite a people heavy business, so your cost growth was approximately 6%. So that 1% growth is sort of roughly inflationary growth in both revenues and expenses for that period. Guard risk, no longer surprising but always good, 33 growth.

It’s worth noting that we spent a lot of time well, Jeanette spent a lot of time talking about the turnaround in insurer, But as guard risk has become more active in underwriting activities, the same trends play out in guard risk. As an example, we actually do quite a bit of motor business in guard risk. We provide the sell captive insurance for some of the manufacturers if you buy the insurance. We have some UMA’s that drive motor business. I think we have some deals with like associations of motor dealers.

So we have a reasonably sized motor book in guard risk, which obviously did a lot better like in Momentum Insure. We don’t insure not many we don’t insure many private homes in guard risk but we insure corporate and commercial property, so the better weather also had a benefit on that. So a lot of the underwriting trends are similar in guard risk to Momentum Insurer And in that 33% growth in profits, underwriting profits were up 52% year on year in guard risk. Janette Slott quickly mentioned, Gap Cover is a product line we’re quite big in, so we own Admit. Overall, GAAP cover margins, I think, are pretty steady, but what’s pleasing is the business we bought a year ago, Zest Life.

The profitability in the first year has been higher than we expected in the business case. So overall level of GAAP cover profitability is pleasing. And behind that 52% underwriting profit growth, the more traditional, let’s call it the admin fee business, also grew in the mid teens. So, good growth in the core business and exceptional growth in the underwriting activities. We’ll make them sure we’ve spoken a lot about the improvement in the loss ratio, very pleasing results.

Now I don’t expect DKK $315,000,000 of dividends every six months, but we do expect ongoing dividends. I think the business is in very good shape now. Obviously, there’s a market that can be cyclical, but from what we know today, we expect the profitability to remain decent here. Africa, I have a slide later that shows that Africa is actually the biggest user of capital in our group. There’s about DKK 4,000,000,000 of capital predominantly in Namibia and less a degree Lesotho and Botswana.

So just that DKK 4,000,000,000 of capital generates almost DKK 200,000,000 of investment returns. It’s mainly invested in local government bonds. So the operating profitability in Africa remains quite modest. I think the positive parts of the operating profitability in this period was the health businesses did quite well in Africa and also Namibia had a reasonable operating profit in the life business. We did see both Lesotho and Botswana Life operating profits go backwards, whereas then short term insurance, it’s quite small but it was steady in Africa.

India, we’ve seen a substantial reduction in losses in our India business. India, the growth story is always good. Growth is always astronomical when you compare it to South African experience. You add 100,000 clients, that’s the average month, you know, net clients. Okay.

But obviously, the loss ratio, the claims ratio is a lot more hard to get down. The improvement we’ve seen in our India results is a bit better than you’ll see in the India accounts. So when Aditya Birla Capital reports, they report under Indian accounting standards whereas we report under IFRS 17. And because IFRS 17 is more forward looking, some of the premium rate adjustments and things they have done actually come through better in our results. We still expect this business to be breakeven for the next financial year.

Shareholders, there’s quite a few moving parts here, but as I’ll show you later, there’s SEK7 billion of capital sitting in shareholders. So investment returns on that capital play a big role. Last year, we had quite large fair value losses on some of our venture capital private equity property investments. This period, they were only a small negative. So the delta of $160,000,000 is really a better fair value outcome on unlisted investments.

Sales volumes, I’m not going to labor at this point except if you look in the green, mom retail up 4%, mom investment 6%, met up 2%. Those are all retail focused businesses. Also in Africa that 2019 includes a retail and a corporate component. Our retail sales are up probably around 5% year on year across the group, whereas then corporate sales are down 26%. If we look at the movements in margins, obviously, the VNB movements will just be similar trend.

Momentum’s retails margin improvement is dramatic too strong a word maybe, but it is substantial And a lot of that is driven by the Myriad product where I must say that Momentum Live, Momentum Retail team has been doing a lot of work for a number of years. Johan often refers to the fact that maybe I don’t fully appreciate all the complexity of the spaghetti he’s been dealing with to get the business into better shape going forward. It’s nice to see it’s all starting to come together now. So the results of this business is improving. And not only the results, I think the client experience, advisor experience, it’s improving at the same time as the financials are.

Then we have Metropolitan, a big recovery. We do think that in four, five years, this margin should be 4%, five %. So I think there’s a lot more to go here. In fact, I was doing a little bit of analysis now for the board meeting. I think in every other product area in South Africa, our margins are very comparable to our peers.

It is really in the metropolitan space that we got a bit of a gap to what we would consider to be a competitive new business margin. Momentum Investments margin came down a little bit because annuities fell a little bit year on year whereas the platform sales, which are thinner margin, grew quite rapidly. So it’s a mix effect. Momentum corporate, the business we did get, a lot of it was savings business, which got lower margins than annuities or risk. In Africa, like always, there’s a bit of movements here, but disappointing for the period was Namibia where new business profitability and margin went backwards.

In simple terms, the sales expenses grew faster than sales. So, I wouldn’t quite say back to the drawing board, but obviously, it’s getting a lot of focus in terms of sales remuneration in that country. Onerous contracts, this is basically the pretax loss we recognize upfront. So IFRS 17 has what I think is a good accounting rule that if you sell profitable business, you need to spread those profits over the contract term. If you sell loss making business, you take the hit upfront.

So when you sell loss making business, it comes through income statement immediately. A number of four eighty eight last year, annualized is nearly a billion. It’s a big number. I do believe that we sell more on a risk business proportionately than most of our peers. So it’s been a big focus for us.

We’re already seeing good trends in most of these. So, it’s similar trends to the VNB actually if you think of it. They’re very interlinked because a big part of your VNB movement is getting rid of profitable business. So, momentum retail has improved, momentum investments a little bit, met life quite a bit. Africa, like I mentioned earlier, it was really an Namibia story that caused that going in the wrong direction.

I’ll show you a bit more on the next page in terms of why it’s important, but I’m also quite pleased to say that just in the last few weeks, I’ve seen quite a few proposals around product pricing, product structure that I think we’re going to shave off a lot of that for 30 in the next twelve months. So I’m quite confident this number will come down. Yes. So a common question we get from investors is you’ve got nice CSM growth, so CSM is now this future profit number. How come you’re adding a lot of new business to your CSM but you’re not that much of a BNB?

The answer is quite simple. I don’t think we like the answer but the simple answer is we sell a lot of very profitable business and we sell a lot of loss making business. So half the value created by the profitable business is eaten up by onerous contracts which is, by definition, a loss making business. I mean, other big adjustment is obviously tax. One is a balance sheet number, one is an earnings number.

But I quite like showing this picture as well is that we believe we can probably halve that $4.30 in a reasonable timeframe. You halve that and you grow the $7.64 at, let’s say, mid teens, it’s going to double your BNB. So I think we’ve got two quite nice levers. Keep growing the profitable business at a reasonable clip, market share gains, and start eliminating some of the contracts that create perennial losses upfront. Now that I started on CSM, let’s stick to it.

So that DKK20.2 billion, you can think of it as the present value of future profits we expect from our in force book. So basically what we used to call the BIFF in the embedded value world, it’s growing by 4% in the last six months. I’m actually quite excited about 4%. Now if you annualize it, it’s 8%. It comes to be above inflation.

Now remember, we are a mature large life business. If we can grow our core business as measured by CSM by 8%, we eliminate some in onerous contracts that’s going to add 1% or 2% more. We gain a little bit of market share, maybe 12%. We shave some of the renewal costs 1% or 2%. If we can grow CSM at 8%, we can grow life earnings at 10% to 12%.

If we can grow life at 10% to 12%, contributions from GuardRisk, India and Time, we can grow group earnings in mid teens. And I mean, I think this is a good enough outcome for the core business. What is also worth noting here is change in estimates. This is the impact of our CSM estimate because of what happened in the last six months. We continuously surprise ourselves on the upside.

Okay. So over the five times we’ve shown this, every time we move our CSM estimate upwards based on actual outcomes in the period, it reflects two things that are probably both equally important. First one is actually more important is I think we manage our in force book well actively. And then secondly, maybe on the finance side, we’re a bit conservative in our assumptions. Okay.

Then breaking the CSM into business units and products, I’m sure the analysts will love spending some time looking at the details here, but I’ll just talk about one or two things. So the first thing that sticks out here is that big red bar in mom retail, that’s Myriad. Myriad accounts for about 45% of all our future profits embedded in the CSM. Now obviously, there’s sources of profit like group risk, guard risk that are not included in the CSM measure. But I would say Myriad probably accounts for 20%, twenty five % of group profits on a sort of a medium term view.

Important block of business, very nice to see it growing at nearly 10%, okay? And I’ll expand a little bit later. I think the most not unique maybe, but a very important thing on Myriad that a lot of people don’t know, the existing customers buy up benefits significantly. Okay. So that might not come through as new business, but it comes through as very good premium income and CSM growth.

And yes, I mean, this sort of 8% to 10% growth in Marriott CSM, I think, is sustainable. The second thing that is fairly obvious is the big growth in annuities over the last twelve months. You’ll see momentum investments that is approximately 25 growth. It will slow down a little bit, but I think this year we’ll still grow it at 15%, next year, maybe another 12%. So even though sales are flattening, I think the CSM will keep growing on the annuities.

A smaller number but important is Metropolitan, that red bar, that’s funeral. It’s grown by 20%, one point one billion dollars to $1,300,000,000 So a lot of these product actions taken to change benefits, change escalation patterns, increase premium rates on some things, eliminate some products. Immediate beneficial thing here as well. So first time in a while we’ve seen that funeral CSM grow quite nicely year on year. And then the last thing I’ll mention for lack of time because I’m going to go terribly over here is the dark blue bars, that is your traditional business, our closed business.

So in total, it adds up to ZAR0.6 billion. 3 percent of our CSM is legacy business. Now fifteen years ago, a very common investment thesis on momentum was you got too much closed books. You bought Southern, you bought Sage, you bought this. I mean, passage of time means that there’s very little of our earnings coming from those closed books today.

I don’t think we have any more exposure to legacy than any other large insurer. So I think it’s one important for investment thesis that it’s not like we’re somehow hamstrung by this legacy book. We’re just glad it’s there to cover some of the overhead still. Okay. Again, I’m not going to go into too much detail here.

We can do so in the one on ones with analysts. If you look at total earnings on the IFRS 20% growth. That is the growth in your traditional life profits. What I wanted to show here is that present value of future cash flows up 29%. That is the actuarial best estimate of future profits.

Okay, accounting rules say you have to defer some of it. So out of the $2,700,000,000 of future profit, we can only show $1,900,000,000 today and the remainder gets deferred to be released over the contract term. The fact that the economic profit is growing faster than accounting profit to me is important because there will be a catch up in later years. Okay. So we’re adding more into the CSM bucket to release through earnings in the future.

So I’m glad we’re adding to it rather than drawing from that bucket. Okay, capital management. This should be a very short and quick section. It’s great. Okay, So solvency cover, ZAR2.15 above our upper target of ZAR2.

That ZAR0.15 excess, that couple of billion, that’s like ZAR3 billion. So you could almost say surplus capital in the Life business is ZAR3 billion. Janet mentioned the buyback. So we bought back ZAR3.2 billion of shares. In the last six months, we actually did ZAR934 million.

We didn’t do the ZAR4 billion. We have a structured buyback program where we limit activity based on market volumes in any given day. So we actually couldn’t complete the full $1,000,000,000 We will try to do $1,660,000,000 in the next six months, so we will try to catch up. It is obviously dependent on the volumes traded in the market and also what is our appetite to make up the percentage of that market. But anyway, we will try to definitely catch up.

Also interesting, if I add the ZAR 1,000,000,000 when I do now, it’s going to be ZAR 4,200,000,000.0 bought back. At the beginning of 2023 financial year, our market cap was about ZAR 20,000,000,000. So we would have bought back about 20% of the company over the last three years. It’s an interesting thought. Okay.

This is a slide that a lot of the analysts like. It’s a very nice summary of on the horizontal where do we have our capital and then on the vertical what return it creates. Most of our life insurance operations create fantastic ROE. Now obviously, we have very strong ALA capabilities. We try to manage capital to the minimum required while still keeping everybody happy.

But it’s also a structural thing that life insurance actually doesn’t require that much ongoing capital. A lot of the money capital is required almost working capital upfront to pay the commissions. So if you haven’t got a mature life company like we are, where the current level of commission paid is quite low compared to the current level of the book, you structurally have quite good ROEs in those businesses. If I think of what’s changed in the last twelve months, GuardRIS has continued to improve. Momentum Insurance obviously made a big jump from the yellow to the green.

I think it might be quite hard for Brent to stay in the green next twelve months, but definitely in 2027, we would want it to be in the green. Africa, I mentioned earlier, that ZAR4 billion is earning maybe a 10% return. We need operating profitability to improve substantially to get into the green and that’s the plan. I mean, we’re not just going to sit with this. Maybe the last thing to mention here is because $7,000,000,000 sitting in shareholders earning cash type returns most of the time.

So the key thing on that $7,000,000,000 dollars I mean, we could invest in something exotic, I don’t know, but we won’t do that. So the reality is we need to minimize that $7,000,000,000 I think a normal level of cash and capital at the center will be about $4,000,000,000 for us. So we’re probably holding double the amount of capital at the center than we normally want to. Cash generation. So the South African Life businesses, Momentum Retail, MetLife, Momentum Corporate, they’re new to book, they’re all set in the same license, same legal entity, that’s the SA Life business, paid $2,000,000,000 dividend to the group.

Every period, the Life company is the main source of cash coming into the holding company bank account. Insure paid a good dividend, thank you, $350,000,000 Hard risk investments and health are steady dividend payers. You’ll notice that Africa doesn’t feature this year. We took out big special dividends few years ago out of Africa, but at the current level of operating profitability, we actually don’t really have dividends coming through from the African countries. But overall, we still sit on dividend income for six months of ZAR2.6 billion.

That is about 75% of earnings. I think in a normal period, that’s not a bad ratio. If somebody asked me how much of your NHE is cash available to the head office? I would say 2%, three % to 75% is the right number most periods, so it’s quite representative. In the six months, we did not spend much money so we did very little M and A.

We did inject capital into India, so there were certain rule changes in terms of how premiums are recognized over the contract term, also fast growth. It still left us with $2,300,000,000 of cash at the center, which we’re planning on spending $1,200,000,000 in the dividends and $1,000,000,000 in the buybacks. And then there will be a small amount added to the center, which at some stage, we’re going to have to go back to the negative $8,730,000,000 because like I said, we signed a little bit too much capital at the center. Other topical matters, I’ve got fourteen seconds, I’m joking. I’m going to go over a little bit here.

But, again, performance optimization project, this is a very, very critical project. When we gave you that $7,000,000,000 target a year ago, we knew behind the scenes, if we don’t deliver this, we’re not going to deliver the $7,000,000,000 So this is getting significant attention. What I’m showing there is in blue, those are the savings we have or the optimization we have banked to date. Way 2,000,000 looks quite small, but I wanted to show it here because there’s a reality that these things take time to put into play. What is quite nice, we’ve got $841,000,000 of like 100 different work streams we’re working on where we think we can save another $840,000,000 We still need to find about $120,000,000 of ideas to get to the $1,000,000,000 But over time, I’m hoping in June, you’re going to see that $42,000,000 jump a lot and hopefully that $841,000,000 gets topped up a bit by new ideas.

Just to give you also a sense of what we’re doing, I mean, a lot of these are productivity ideas more than just cost cutting ideas. So we’ll talk about the bank, the three bank savings here. Each of them are just over ZAR10 million. So firstly, we decommissioned the remaining get up activities in Metropolitan, which is the direct to consumer business. Cloud infrastructure, I don’t know if rightsizing is the right term, but the way I like to explain this is because cloud is a bit new in some areas, different business areas were buying computing, networking, storage separately and all the areas were like paying retail.

We now centralized it where we buy our cloud services as a group and we then allocate it out. So maybe sometimes guys need to top it up with some 5% retail fees, but at least we’re paying wholesale for 85%, ninety % and retail for the remainder. I mean, that alone is, I think, a ZAR14 million saving annualized. Also, we had a variety of learning platforms in the business units. Now we’re moving to the what we think is the best of them.

Then if you look at the stuff we’re working on, now the guy runs this program, Vandila, who became a father yesterday, congrats. Yes, he’s given me the most imminent ones rather than the biggest ones. So we’ll start there. We basically this week, next week, we’re signing new agreements with like cleaning services, courier, marketing, background checks. That adds up to $40,000,000 So immediately that blue doubles through those new contracts.

We are pushing back hard on some software providers and we’re also pushing back internally on some software users. If you do one PDF a year, we’re not paying Adobe Pro license for you, okay? New global operating model, that’s actually also happened. So that’s going to go into the blue. So there’s going to be some savings with the new way investments are structured.

And the last one here also about $10,000,000 saving. Service model in Metropolitan sounds very generic, so I’m going to add to it. So what’s happening here is we’re using RPA, robotic process automation to pay surrender claims and we’re using another RPA tool to actually check the payments. So as I was joking at the audit committee that historically in accounting, you always had this four eyes principle like the payer and the checker. Now we’ve got one robot paying, another robot checking.

Hopefully, they’re two honest robots. Anyway, okay. So there’s a lot of interesting things going on here and this is a mega project. Okay. The last two slides, I always like to add something a bit new here and educational.

So I was paging through the quarterly returns, which I told the prudential authority yesterday, at least I know I read them. I was paging through the quarterly returns and we got a lot of good data in terms of our business and we often don’t share it. So I thought, let me take something out here. It will give you a feel of size of activities and it will actually type us on the financial numbers just now. So in our retail South African Life business, we got 3,300,000 policyholders.

There’s 440,000 Marriott policyholders paying about ZAR 2,000 a month on average in premiums. We got 840,000 funeral policyholders in Metropolitan paying about 400,000 on average. 400 sounds a bit high, but it also reflects the fact that I think MET operates a little bit higher in the income range than some of the other competitors in this market. Endowments, 1,200,000.0 of them. My first job was at Norwich Life in ’94 in Claremont.

And the actuary I worked for told me endowments won’t be around in twenty years. Unit trust will do it all. And now we’ve got 1,200,000 contracts thirty one years later. Average premium is actually quite low here because a lot of these are paid off. So that’s the one sad reality of the endowments.

A lot of the contracts got paid off. RA business quite steady, probably about 800 a month average contribution. Universal Life shrinking at 4% in six months. I mean, this is the close book. Also note, the 100,000 contracts is 3% of the $3,300,000 The number of contracts is the same as the CSM 3%.

So it’s quite nice how these operational metrics tie up with some of the financials. And then annuities with 170 thousand newtons, they average more than a R1,000,000 each. Okay. So we only sell 1,000 annuities a month whereas we sell 1,000 other policies a day. Okay.

But the average size illustrates how important each annuity is. If we start selling 100 or 200 less annuities a month, we’ll notice. We sell 100 or 200 less funeral a month, even Peter won’t notice, I don’t think. Okay. Now if the policy count is flat, why is our business growing?

It’s because the average policyholder is paying us more. So the premium income is growing while the policy count is flat. And I think Myriad is a beautiful example, might be the only example because I’m five minutes over, is in this six months, the in force premiums in Myriad went from ZAR 9,600,000,000.0 to just sort of ZAR 9,950,000,000.00. Again, annualized growth of 8%. On a flat book.

Why is that? It’s because of the very good alterations experience. We often mention, we say things like alteration experience positive, good alterations. This is a good example. That’s annualized $900,000,000 of new benefits bought in six month period.

Now that growth rate of 8% is equal to the 8% CSM growth earlier. So it ties up nicely. And on the flat policy count, we’re seeing CSM growth. Funeral, what you’re seeing here that on Funeral, even though the policy count is slightly down, in force premiums are slightly up. It’s because the new business is coming at higher average premiums and the op business is going out.

Also as the quality improvement kick in, the exits will drop from four fifty to like three fifty over time and this book will start growing decently. Maybe the only other one to mention here is Universal Life. Funny enough, we do have one product open still that’s Universal Life. If anybody is really interested, I’ll tell them in one on ones. But because a lot of this business is so old that the exits tend to be maturities, it tends to be planned exits.

The persistence is actually good on this book. So the premiums are not growing, falling off at the same rate as the policy count. Okay. So I don’t think I’ll ever show this again, but this was just a fun little run through our landscape. And I just wanted to also make the point that the CSM growth rates are not just random.

They’re actually very well tied up to the premium and asset growth in the different product lines. Okay. Then just in conclusion, these are excellent financial results. Operating conditions were favorable, but the phrase I used a lot lately is we make our own luck. We had lots of different businesses here.

Nobody dropped the ball. Nobody had their own goal. Nobody shot themselves in the foot. Everybody took advantage of the karts as we dealt to them, okay? And that’s why we achieved the growth we got.

Had we had one or two own goals, maybe the 42% would have been 22%. Who knows? Okay. So excellent performance from all the business units. Very happy with the mom retail VNB improvement.

Johann knows, but it was like one of the most common questions always was why isn’t VNB negative in mom retail? So I’m glad that’s been now dealt with. But there are other areas where VNB requires work. Excellent cash generation, very strong balance sheet. Something we have to do for the board is we have to do reverse stress testing.

We have to think of scenarios where business goes insolvent. You need a good imagination. I think we can stand something like 80% decline in markets. It’s like getting very difficult to figure a scenario where we can bankrupt this business, both insolvency and liquidity. And then very importantly, congratulations to employees.

I used the words a lot today about positive market variances, variable weather, good mortality claims, equity markets are like and so on. I also forget that the main reason for the earnings growth is there’s 15,000 people here who work very hard and pull in the same direction. So let’s just remember that, that the main reason the results are good is because the employee is doing what they should do. Okay. And then obviously a big thank you to all our other stakeholders like clients and advisors.

Okay. Thank you. And I’ll hand over to Dan.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Thank you, Mr. Stu. Thank you very much. As usual, it’s time now for some questions and answers from the analysts that have come through our streaming service. A couple of them, I think, we’re going to be getting you, Risto, to answer them.

There’s also some that I’ll get to Jeanette. But let’s start with those that are for you, Risto, and then take them one by one. From Rosendale Partners, we’ve got a question by Whelan Hertzog. He says, can you provide some color on the improvement in business quality in Metropolitan? Persistence experience in this market seems to have varied quite widely between different players in the industry in recent months.

What has driven the good result in Metropolitan? And why are some of the others struggling on this front?

Risto Kittola, Group Finance Director, Momentum Group: Yes. I mean, Peter is here as well. I don’t know if Peter, do you want to answer that because

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Do we have a mic? You can stand, yes.

Peter, Metropolitan Business Leader, Momentum Group: Okay. Thank you, Dan. Okay. I wasn’t hearing myself. So when we started with the five point plan, the one key thing which we needed to make sure that we address was the quality of business.

And there were a number of things which we said, these are the stuff that are going to improve. One, at that time, our NTU, they were very high. But on the other hand, we had to go back and say, can we make sure that when someone has written a policy, we do we do not go ahead and pay them the commission if we haven’t received the first premium? Just by doing that, you reduce your own NTU. And in the end, the persistency also moved into the direction where we wanted.

Secondly, the biggest challenge we were having was the open plan, open funeral schemes, wherein the persistency has been very bad. We reduced the amount of commission we pay you if you’re right there, which then forces you to go back to the worksite. And where we have worksite, because of the relationship that we have with those people. And then we always have much better persistency. Now people were directed to go to the worksite.

We are also managing them in the worksite, and the reduction of the N2 ensured that we can be able to see a far much better quality of business.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Thank you very much, Peter. Willem, you can’t get more color than that. And the next question is from JPMorgan. Actually, there’s two questions that are linked, I’m going to ask Risto. It’s JPMorgan and All Weather Capital.

One is Baron Nkomo and the other one is Jared Houston. A lot of capital is being used for share buybacks, which hopefully will continue helping the share price discount to embedded value. Why not invest some of the capital in new growth vectors like building your own bank or through M and A and giving the structurally high return, what level of discount to EV are you prepared to buy back shares? It’s two in one.

Risto Kittola, Group Finance Director, Momentum Group: Yes. So funny enough, we would like our businesses to consume more capital. So the one challenge Jeanette has made to all the business units is to maybe look harder for organic growth opportunities rather than always M and A. On the M and A side, we actually continue to do quite a few small deals behind the scenes. And I’m looking at Lawrence.

He’s coming with two small deals now as well. But they’re deals that are so small, we don’t tend to shout to the world about it, but I’d much rather do five deals of $200,000,000 at 40% IRRs than one big deal you hear about every two years on a 10 IRR. So I think we’re actually getting a very good return on the small scale M and A we’re doing continuously. I think we’re getting an average IRR well over 20% on that. So, we’re doing a little bit of that.

In terms of a bank, I think we generally have a view that building a bank to protect your insurance business is not the right strategy. I mean, obviously, most of our peers disagree with that. But I think building a competitive bank is not easy and the capital amounts are very large. And yes, committing SEK 5,000,000,000 to a 12% ROE to protect the life business is just not going to doesn’t make sense. We continue to look at bigger M and A as well.

We have basically every asset you’ve seen our competitors buy, we’ve been in the process, but we have very strict guidelines for ourselves in terms of what is an acceptable return on capital. At this stage, it looks like most of our competitors are prepared to accept slightly lower IRRs than we are or maybe they have more optimism about the future, who knows? But we will continue to look out for opportunities. We will continue to encourage business units to ask for money rather than give back to us. But if they ask us money to build a bank, we’ll probably say no.

Yeah. Yeah. Okay. Yes. Yes.

A discount to EV, now the answer obviously depends a little bit on what do we think the sustainable return on embedded value is. So at the moment, let’s say I assume there’s sustainable discount on EVs, let’s say 13.5% and the discount is 25%. It means it’d be earning about 16%, sixteen point five % on buybacks, which I still think is a reasonable return in light of the quality of the earnings stream we’re buying. We know what we’re buying and it’s cash generative and things like that. We will ask shareholders’ opinions as well.

At this stage, I would guess we’ll buy back to close to 90% of EV. Last time we sort of canvassed our shareholders on buybacks, they’ve been very supportive of continuing buybacks rather than special dividends. I think the one promise we have made, we’ll never hold the cash for very long. So if we don’t do buybacks and we have excess capital, we’ll do special dividends. So it’s really a question of when do we switch over from one to the other.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: There’s a question about Africa, the operating model review that you mentioned. Will if it the question is from Jared Houston, All Weather Capital. If this review results in a decision to exit, what is the quantum of capital that would be freed up?

Risto Kittola, Group Finance Director, Momentum Group: Yes. I think I’ll answer it shortly by saying is exit’s unlikely, highly unlikely. I think it’s more about reinvigorating the business. Now obviously, if we think the return on capital forever is 10%, we will start working on the exit. But our latest plans aim to improve the ROE quite a bit.

Yes, I’ll ask that question in five years if the ROE is still 10%, but for now, we’re staying in Africa.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Okay. Staying in Africa. And Maria Stradom from Austin Lawrence Giddens says, well done with an excellent set of results. And your insightful IFRS 17 granular and key metrics disclosure, Aristo. He says you’re carrying India at only ZAR2.6 billion with breakeven imminent, how much valuation upside is there, including with reference to listed peers?

Yes. I tried to tell him not to move.

Risto Kittola, Group Finance Director, Momentum Group: Marius, thank you. That’s a very kind question. Yes. I mean, we all know that India is like the most exciting place for capital right now globally. So the valuations are very high.

I’m glad you asked me the question compared to listed peers because at least we got some metrics. I mean, in India, the insurance companies tend to trade on multiples of premiums, not multiples of profits. We get feedback from our India team every six months or so comparing our valuation to the listed companies. On that basis that $2 odd billion becomes closer to $5 to $6,000,000,000 So the current view is that if we were to list a business, we will probably get back two to three times the capital invested. So that will be, yes, obviously welcome.

I think the IPO is not imminent. Obviously, we would like to do an IPO in due course, but let’s hope the India multiples are where they are now when we do the IPO. But good question for Mario. It’s true. If you apply India valuation to that business, it’s substantially more than the historic cost than we’re carrying it.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Okay. Two last questions for you, Aristo. Metropolitan, again, what level of NHE could you achieve if you get the VNB margin above 4%? That’s from Warwick BAM. Warwick,

Risto Kittola, Group Finance Director, Momentum Group: it also depends when you get the 4%. Yes, probably SEK800 million. I mean, it depends like if I think in two years from now, yes, it could be there. Okay. Yes.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: And then we’ve got Obsidian Capital’s Royce Long wants to know that the commentary notes yield cap shifts contributed to earnings in this period. Are you able to give a value of these gains? It looks like the yield curve has shifted in the opposite direction post the reporting period.

Risto Kittola, Group Finance Director, Momentum Group: Yes. So we mentioned market variances of about, let’s say, just under 600. Probably SEK 100,000,000 odd is credit outcomes being better than expected. Maybe another SEK 100,000,000 from equity markets, maybe another SEK 100,000,000 from higher working capital interest. Yield curve shows us probably half of that, so SEK $250,000,000 to SEK $300,000,000 The curves have moved back a little bit since year end.

What I noticed when I looked at the data is the yields actually continued falling in January and then when the issues with U. S. Started, they sold out. So they’re up a lot from the bottom in January, but they’re not up as much year on year. We do get a monthly report from the ALM team and the ALM result is not that poor for the first two months of the year.

So, Royce, I would say worst case outcome, we go from positive two fifty to maybe minus one fifty. Also, what’s maybe important to note here is we are running a lower ALM mismatch across our book than we were under IFRS four results. So that means our hedging activities tend to be a little bit more, what I say, we tend to hedge out more volatility.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Okay. Thank you, Risto. You can have a seat. I think it is enough out of your thing. The next question, the last two questions are going to go to Jeanette.

Jeanette, the question comes from RMB Morgan Stanley’s Warwick Bum. Where are you experiencing the most competitive pressure? And do you think this competitive pressure could have a meaningful impact on sales volumes in the next six months?

Jeanette Mare, Group CEO, Momentum Group: My whole team’s here. I’m waiting for someone to jump up. They’re all because, I mean, that’s what they say every day, you know. Like, everyone’s always moaning and saying we’re not winning and then we are. I think in Dumas’ world, for sure, we we see actually not as much activity, in terms of new business, but actually a lot of of of requoting and, the margin pressure there is is definitely now.

You know, Dumas did start telling us this two years ago. It hasn’t yet come through. And between me and Rista, we keep on telling him, hold on as much as you can. But I think in in Dumas world, certainly, probably the area that that that we see most of that pressure coming through. You only asked me to answer it for one, so I think I’ll stick to that one.

You know, Fadi, I think in in the investments world, the investments world is always competitive. It always has been. But again, our business seem to be doing really, really well and holding up in terms of that very well.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Okay. Last question from an employee as we close. Risto did thank the employees for their role as well in contributing to the set of results. One of our call centers as an employee wants to know, and this is what, and I’m quoting, we have worked hard over the two pot. Are we worried about all the money going out?

Jeanette Mare, Group CEO, Momentum Group: Of course, we are always worried about the money going out. But I think from, you know, my heart that’s with clients, we’re probably more worried about the impact on clients’ ability to retire in the long run than what we are worried about our bottom line. So the outflows for us has actually been quite a bit less. Rowan is here. He quoted a number yesterday, I’ve forgotten, probably about 40% lower than what we modelled way back when we when we were still anticipating and building.

So it has been lower. But I think the great concern for us is the number of clients. What is it, over 400,000 clients who actually came and and made withdrawals. We’ve also seen a pickup in activity now from the March 1, by far not as much as it it was in September, but what is concerning is that it is actually clients returning for the second time. And if you then think about the fact that that average age is, you know, 45 plus, it does not leave those clients with a lot of time to actually then make up again for the money that they’ve withdrawn.

So at the moment, I can honestly say we’ve not felt, you can see it in the results, that it had a massive impact on us as a business and our profitability. But we certainly are worried about the well-being of clients.

Dan Moyane, Master of Ceremonies/Moderator, Momentum Group: Thank you very much, Jeanette. Let’s give you a round of applause, and thank you to Risto as well. Thank you very much. Well, I mean, we’ve come to the end of the presentation and the question and answers. And thanks to the investor analysts and everybody who’s asked the question and the employee as well.

Well, it is a long weekend with Human Rights Day tomorrow. I’m sure many of you have got plans. Be safe. Enjoy. And once again, Jeanette and your team, well done on this excellent set of results.

I’m using the word exceptional. Thank you very much.

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