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Disappointed MMI to revisit dividends next year


The life assurer has a three-year plan to achieve sustainable, profitable growth - the duration of new CEO Hillie Meyer's contract

MMI Holdings is the latest life assurer to adopt a 'back to basics' approach to its business after reporting what it admits were disappointing financial results. And it's given itself three years to get it right.

The group will also revisit March's decision to replace dividends with a R2 billion share buyback programme next year. By the end of June, it had repurchased shares worth R971 million, adding 12c to its embedded value per share. It will continue the buybacks, provided its stock trades at a discount to embedded value.

Headline earnings declined by 12% to R2.8 billion in the year to end-June as it increased its investment in strategic initiatives, spent more on distributing its products and after there was an increase in lapsed policies at its Metropolitan Retail division. It aims to increase earnings to R4 billion in the medium term. Although the continued challenging macroeconomic environment negatively impacted its performance, it said operational shortcomings also played a role.

Hillie Meyer replaced Nicolaas Kruger as CEO in February, rejoining the company on a three-year contract. Since then, a number of changes have been introduced to turn the business around and improve its performance. Meyer said these included a strategy to "reset and grow the business" by focusing on the basics and addressing structural shortcomings. He said other basic improvements include a change to its operating model to empower end-to-end business units to run their businesses efficiently and effectively, an increased focus on growing the core SA business and exciting other markets on the continent that don't deliver shareholder value.

We know that we are reporting disappointing financial results," Meyer 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."

Over the year, new business volumes increased by 1% to R42.2 billion but the value of new business declined by 45% to R301 million, with new business margins declining to 0.7% from 1.3% of premiums. Its Momentum Corporate division compensated for the weak business elsewhere, increasing its value of new business by 82% to R124 million. It said its South African Health unit continued to show progress in terms of earnings and membership growth. Group embedded value fell by 6.8% to R39.6 billion, equal to R25.43 per share.

It's shares declined 2.5% to R16.85 yesterday.



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