Mid Cap Darlings - Momentum Metropolitan Holdings

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Mid Cap Darlings - Momentum Metropolitan Holdings

Published Date: 2019-10-02 | Source: INCE|Community | Author: Sifiso Skenjana

Mid Cap Darlings - Momentum Metropolitan Holdings

Whether it's an investment policy, funeral plan, retirement solutions or medical aid, Momentum Metropolitan Holdings are those fellas that have been providing those solutions for decades. The fear of your family losing income when you die will (or should) certainly motivate you to utilize insurance and investment products broadly... unfortunately, some people don't like thinking about death or disability... so they close their eyes and hope for the best.

Business Model: MMI Holdings is made up of various divisions that cover life insurance products and solutions, investment solutions and wealth management platforms, retail insurance products targeting lower- and middle-income segments, corporate solutions spanning risk and retirement solutions and short term insurance through its subsidiary Guardrisk. Let us of course not forget their rewards programme Momentum Multiply, which aims to keep their customers close to their chest and LOYAL.

Macro Landscape: Insurance products tend to be a grudge purchase, where people spend to manage their risks but would really rather not if they didn't need to. These products tend to be closely aligned/correlated with economic growth and the economic health of households. So when economic growth and employment expectations continue to slide downwards while inflation expectation is facing north, one would expect the insurance industry to face a considerable amount of strain.

Results (Year ended 30 June 2019): Net insurance premiums for the group grew by 22.5%, Fee Income by 12.1% and Investment Income by 10.2% in a relatively tough operating environment. The previous year had seen an earnings decline of 10%, with some market share losses of approximately 4% in the preceding four years. The group in March this year reinstated the dividend on ordinary shares after taking a beating after suspending it a year prior. They had opted for a share-buy-back instead of paying a dividend and completed that buy-back program in November 2018. Companies often buy back their shares when they feel the market has undervalued the share and they expect long term growth.

Growth Prospects: The success of this business anchors on their ability to optimize distribution, servicing products and marketing thereof. Over the last year, they were able to successfully grow the footprint of their agents, manage their costs downwards to ensure revenue growth outpaces cost growth. The group has performed better than life insurance index this year - which in September (year to date) had lost more than 16% in value compared to MMH being down roughly 3% over the same period. The management shake up at the company seems to have brought some discipline in how the company is managed and may present good prospects for growth in the medium term.

About The Analyst: The Mid Cap Darlings is brought to you by the Awkward Economist - Sifiso Skenjana. He has a breadth of experience in portfolio management, economic research and investment strategy and management consulting. He is the founder and financial economist at AFRA Consultants. He is currently pursuing his PhD.




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