Insurance group Momentum Metropolitan Holdings [JSE:MTM] says it’s finally taking back lost market share from competitors, after increasing new business volumes in its South African retail operations by 13% in the six months to December.
The insurer, born out of the Merger of Momentum and Metropolitan in 2011 and renamed MMI at the time, lost a great deal of market share after that. At some point, its retail life insurance market share shrank to about 12%.
It embarked on a "reset" strategy 18 months ago.
In the six months to end December 2019, the insurer said its market share in retail life insurance, when compared only to the big five insurers, had increased to roughly 15% from 12% in 2017 in the middle to high-income market.
In the low-income market, however, it's market share fell to 17% from roughly 19% in 2018, as Metropolitan’s broker force reduced by 15% over the past year.
'We took it from competitors'
"The market didn’t really grow. When the economy is not growing, for the industry, there’s no premium growth. So, for any growth that we gain, we took it from competitors. And we know the banks are also taking business away, so it would be interesting to see how some companies did," said MMH CEO, Hillie Meyer.
When including the corporate business that services employee schemes, business volumes at a group level shrank 9% and the value of new business tanked 52%. The corporate cluster was the sole contributor to this decline, as the value of premiums shrank from R9.8 billion in December 2018 to R4.8 billion.
Momentum Corporate secured a big deal in the first six months of its 2019 financial year. But it also suffered from the reduction in group scheme clients as companies continue to retrench.
"The corporate market is affected more by the gloomy economy than others. You can still win business here and there, but clients are not really growing. But interestingly, our FundsAtWork has a lot of small and medium enterprises where employment growth is a bit better. They tend to be more resilient," said MMH’s financial director, Risto Ketola.
Meaningful growth
The short-term insurance business, which will include the newly acquired Alexander Forbes’ short-term operations in the future, is starting to deliver meaningful growth, said Ketola.
Guardrisk, a specialist short-term insurer, recorded R1.26 billion in gross written premiums, while Momentum Short-Term Insurance (MSTI) wrote R488 million.
MSTI is still loss making, but Ketola said it’s expected to break even in the next financial year. With Alexander Forbes’ inclusion in future, MMH said it anticipates that it will easily grow its short-term insurance market share to between 3% and 3.5%. MSTI’s current market share is roughly 1%.
"With the Forbes deal, we have now become a mid-sized short-term insurer. And these businesses are growing fast, much faster than our life operations. So withing a couple of years, these will be a substantial part of our business," said Ketola.
Apart from the corporate cluster, and Metropolitan where business volumes were flat, the group other divisions grew value of new business by double digits. All clusters increased their headline earnings by between 3% and 6%, except for the Africa business whose earnings grew by 121%.
At a group level, diluted normalised headline earnings rose 10% to R1.8 billion, while normalised headline earnings per share increased by 12% to 118 cents.
The group declared an ordinary dividend of 40 cents per ordinary share, an increase of 14% on the prior year. MMH’s share price jumped as much as 7.9% around 9am on Thursday after the announcement but that reduced to around 3% by 10:30am.
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