MMI resumes dividends as it makes progress


MMI resumes dividends as it makes progress

Published Date: 2019-03-11 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

MMI resumes dividends as it makes progress

The life assurer is paying an interim dividend of 35c per share after completing a R2 billion share buy-back programme.

MMI has reinstated dividend payments after halting them a year ago so it could buy back its undervalued shares.

The life insurance group says it's making steady progress with its three-year 'Reset and Growth' strategy, with first-half earnings meeting targets set out in the recovery plan. It introduced the 'back to basics' plan last year in a bid to achieve sustainable, profitable growth under Hillie Meyer, who replaced Nicolaas Kruger as CEO in February 2018. The group switched dividend payments with R2 billion of share buy-backs due to the discount the stock traded at relative to its embedded value (EV). It said the average price at which shares were repurchased represented a 20% discount to EV over the period.

Since then, the group said it had benefited from a combination of tight control of operational expenses, strong underwriting results, and better earnings from its fixed rate and annuity products. The six months to end-December also included some once-off favourable items, including fair value gains on its venture capital investments in Exponential Ventures, partly offset by higher investment in new initiatives.

On the downside, it said the weak equity markets of last year had a negative impact on fee income from the Momentum Life closed book and the reduction in assets under management is likely to place pressure on asset-based fee income in the current six months. Frail equity markets during the last quarter of 2018 also dampened earnings from its Africa portfolio where, unlike in SA, shareholder funds carry some equity exposure.

The value of new business rose 12% to R335 million over the period, with strong growth at Momentum Life and Momentum Corporate offsetting declines at Momentum Investments, Metropolitan Retail and its Africa operations outside SA.

The group reported a 2% improvement in normalised headline earnings to R1.62 billion. Combined with the impact of a share buy-back programme completed in November, diluted normalised headline earnings per share grew 6% to 105.3c. It's paying an interim dividend of 35c per share.

It said its embedded value per share benefitted from the share buy-back programme. The annualised return on EV per share was 9.4%, flattered by a once-off R870 million increase in EV due to a new required capital methodology and the implementation of a new regulatory framework for the industry. The return would have been 6.8% without the reduction of shares through the buy-back programme.

MMI said Meyer had agreed to extend his three-year contract by a further two years, until June 2023.

Its shares closed 0.6% up at R15.70 on Friday.

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