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Momentum’s Indian health JV growing at an ‘incredible pace’

Momentum Metropolitan produces sparkling FY earnings despite ‘new initiatives’ losses.

CHRIS GILMOUR: I’m joined on the line this evening by Hillie Meyer, the CEO of Momentum, which is the country’s fifth-largest insurer, which has come out with some really sparkling results. Good evening, Hillie.

HILLIE MEYER: Good evening, Chris, and good evening to your listeners.

CHRIS GILMOUR: I went not to this set of results, but the previous set of results, and I picked up that you were certainly on your way to doing something pretty spectacular. Admittedly, it’s coming off a low basis of comparison from the previous year, but you’ve obviously achieved all the targets that you wanted to do in this first year of your three-year programme. Is that a fair way of putting it?

HILLIE MEYER: Yes, I think that’s an accurate summary, Chris. When you start on  journey like this, it requires a sort of turnaround. A big target of your preparation is just getting staff aligned and preparing staff for the changes and the challenges. So, our staff responded, and obviously also the results.

CHRIS GILMOUR: And, just to make a mention of some of those results, earnings at R3.1 billion – that’s up 53%. If you exclude the one-offs, that comes in the order of about 21% up. That’s still very, very good indeed.

And, from what I can see, you had good underwriting results – also, I think complemented by efficiencies. Costs, for example, seemed to be pretty flat for the year.

HILLIE MEYER: Yes, with total comparable costs, our total management expenses for the group came to about R9 billion. And this year it came in at the same number as it came in at last year. I think that was quite an achievement. With whatever the inflation was, five or whatever percent, that’s a significant saving in real terms of about R500 million, which made quite a big contribution to the good results.

CHRIS GILMOUR: It is huge, yes. And you sales volumes up, what, 12%. But you are operating off better margins and you are the market leader in quite a few segments, from what I can see.

HILLIE MEYER: Yes, we are the market leader, certainly, in self-captive business, that’s the Guardrisk business. I wouldn’t call us a market leader in any of the others, although we are probably two or three leaders in those categories, including life insurance, pensions, corporate health and so forth. I think all those businesses had very good experiences in terms of risk underwriting, whether it short term, or whether it was life-insurance sales. Some very good mortality and insurance profits.

CHRIS GILMOUR: And your balance sheet looks pretty healthy. You were able to pay a 70 cents dividend for the year. That’s no mean achievement.

HILLIE MEYER: We reinstated the dividend. There was no dividend last year. We did the share buy-back, so we used some of the free capital for that, but we really had room  to reinstate the dividend. I think it’s a dividend that we are comfortable with, given our capital requirements, because we do invest quite a fair bit of money still in new initiatives. The total amount that we will invest in new initiatives is R500 million.

CHRIS GILMOUR: Okay. And outside of South Africa, you’ve got a small business in India. How is that performing?

HILLIE MEYER: Very well. That business has been in existence for about two-and-a-bit years, and they are growing at an incredible pace. I think we have round about three million health clients now. It’s a JV, joint venture, with a group by the name of Aditya Birla, which is a formidable entity in India, and a lot of the credit must go to them. So, we are very, very happy with this JV. It’s actually not a small business anymore.

CHRIS GILMOUR: Apologies for calling it a small business! This year has obviously been very, very good. But I think you do talk in the commentary about the fact that next year is probably going to be an awful lot tougher, and you are not going to have the benefit of coming from such a low base. You are going to have to focus on growth, and you are probably going to take market share away from some competitors. In other words, if I glean from that that it’s going to be quite a tough year, and as a result you are probably looking at only single-digit growth next year, would that be fair?

HILLIE MEYER: I think what we say is if the economy and the markets remain relatively subdued, then I think it will be quite an ask to achieve much better than single-digits, even though maybe high single-digit growth numbers. However, if we can get back to economic growth like the 3.1% for the previous quarter, if only 2 or 3% growth comes back – in other words, if our industry grows by 2 or 3% – then I think certainly we will have to achieve more than single-digit growth. I think we just want be cautious about market expectations.

CHRIS GILMOUR: I think we are all looking for a return to some sort of decent growth in South Africa, and hopefully you are going to participate in that. Hillie Meyer, thank you very much for joining us this evening.

HILLIE MEYER: And you, Chris.

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