UBS 2005 financial services conf

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UBS 2005 financial services conf Powered By Docstoc
					      UBS
Financial Services
   Conference



      Peter Doyle
  Group chief executive
Presentation overview

1. Timeline of important Metropolitan events
2. External influences
3. Performance highlights
4. Group strategic summary
Timeline of group structure

 1898   Started business in the low income market
 1979   Merger of Homes Trust and Metlife
 1986   Metlife is listed on the JSE
 1993   1st BEE ownership transaction in SA
 2001   Nail unbundling of NAC
 2003   Established Metropolitan Holdings Ltd
 2004   Kagiso became strategic BEE partner
Timeline of business growth
 1995 Health business established
 1995 Employee Benefits business established
 1996 Botswana business established
 1998 Asset management business established
 1998 Acquired CU & Protea
 2001 Acquired Bankmed health administration
 2003 Acquired Qualsa managed care business
 2004 Acquired Channel Life in Namibia
 2004 Lesotho company established
 2005 Kenya & Ghana business ventures announced
External influences
  Although all of these external
 influences have their roots in the
     past, their impact and our
response to them will continue into
             the future
 External influence # 1

Fundamental shifts in financial
     services businesses
Fundamental market shifts

 Lack of growth in developing markets driving
  consolidation worldwide
 The only companies showing real growth are
    focussed on emerging markets or

    pioneering new business concepts

 Metropolitan has both of these attributes


          … Metropolitan’s focus is on pioneering solutions in
                    lower & middle income emerging markets
Consolidation in SA market
 Life assurers’ league 1986
 1.     Old Mutual                         11.    Colonial Mutual
 2.     Sanlam                             12.    Ned-Equity
 3.     Liberty Life                       13.    National Mutual
 4.     Southern Life                      14.    Allianz
 5.     Lifegro                            15.    AA Mutual
 6.     Prudential                         16.    Standard General
 7.     Federated                          17.    Momentum
 8.     Metropolitan                       18.    Protea
 9.     Commercial Union                   19.    Guardian National
 10.    Norwich Union                      20.    IGI

 Financial Mail Top Companies survey - May 1986
Consolidation in SA market
Life assurers’ league 1986 – the winners
 1.   Old Mutual
 2.   Sanlam
 3.   Liberty Life




                          17.   Momentum
 8.   Metropolitan
Metropolitan’s strategic position

 We are the only life assurer focusing exclusively on the
  lower & middle income market
 Opportunities for growth as competitors are being
  integrated & adopt an inward focus
 Discount to embedded value has narrowed markedly
    2002 ±40%

    2005 ±20%

 Our brand value recognises we were there first


                       … capitalising on unique positioning
 External influence # 2

Black Economic Empowerment
Black economic empowerment

 Metropolitan’s first groundbreaking empowerment
  shareholding transaction was concluded in 1993
 Financial Sector Charter (FSC) – major turning point
  for industry – concluded in October 2003
 Our brand value recognises we were there first
    Most progressive company in SA – BMF 2003

    Impumelelo Top Empowerment Award 2004/05

    FM/Empowerdex ranked 1st life insurer in 2005


                              … recognised as leaders in BEE
Our strategic BEE partners
Kagiso Trust Investments (KTI)

 KTI acquired 10% stake in 2004
 KTI subsequently increased direct holding to 12%
 First major empowerment transaction to be fully funded
 Black staff to acquire direct holding of 4%
 KTI to increase its holding to 13%
 Indirect black equity ownership estimated at 6%
  (policyholders 2.6%, staff members 3.4%)



                         … an effective partnership in place
Black economic empowerment
Financial Sector Charter scorecard - 2004
           Core Component                          FSC target                 Metropolitan’s      FSC maximum      Metropolitan’s
                                                  (2008/2010)                     status           points (2008)   points (2005)

     Employment equity                           Various targets            Exceed 2008 targets         15               15
     HR development                                1.5% spend                    3.7% spend             3                3
     Learnerships                                  4.5% of staff                 <1% of staff           2                0

     Procurement                                       50%                             35%              15               9

     Consumer education                                0.2%                            0.5%             2                2

     Empowerment financing                             TBF*                            18%              22               22

     Board composition                                 33%                             58%              3                3
     Executive composition                             25%                             40%              5                4
     Direct black ownership                            10%                             14%              12              12.5
     Indirect black ownership                          15%                             11.5%            2                2

     Corporate social investment                       0.5%                            2.9%             3                3

     Total points                                                                                      84**             75.5
     (compared to 2008 targets)                                                                                        (90%)




*      Measurement criteria still to be determined by Charter Council
**     Basis for access to life insurance products still to be finalised – 16 points
BEE opportunities
for Metropolitan


 Very well developed understanding of how a BEE
  strategic partner can really “add value”
 Dominant provider of products & services LSMs 1- 5
 R5.6 bn (18%) invested in empowerment financing can
  be leveraged
 Demonstrated success in procuring BEE business
 Our brand value recognises we were there first


                        … remains a competitive advantage
External influence # 3

  HIV / AIDS epidemic
HIV / AIDS epidemic

 Doyle-model of the HIV epidemic published in 1990
 Experience has proved the model results credible
 Considered a turning point for the industry & the
  company in management of HIV / AIDS
 Comprehensive strategy for combating HIV / AIDS




                   … key element of risk management in SA
HIV / AIDS experience & forecast
                                       New infections infections p.a.
                               More than ½ million newp.a. peaks in 1998
                               •         • HIV in 1995 : in 1998
                                   HIV infectionsinfections505 525 : 676 138
                               •         • AIDS 1995 : in 1998
                                   AIDS deaths in deaths19 193 : 79 445
800 000                        •         • Metropolitan launches "AIDS Analysis
                                   Metropolitan offers first insurance policy to HIV Africa"
                                   positive individuals                                       Mature stable HIV/AIDS epidemic
                                                                          Half of total deaths• in HIV infections in 2015 : 421 related
                                                                                                   SA assumed to be AIDS 706
700 000                                                                   •                   • AIDS deaths
                                                                            HIV infections in 2005 : 478 055 in 2015 : 395 238
                                                                          •                   • : 355 796
                                                                            AIDS deaths in 2005 Stable numbers of infections & deaths continue
                                                            AIDS deaths & infections starting to converge
                                                                                                 into
                                                                         • Current state of epidemicfuture
600 000                                                     • HIV infections in 2002 : 552 846
                                                            • AIDS deaths in 2002 : 246 652
                                                            •   'Metropolitan hosts Southern African AIDS conference in
500 000                                 AIDS         p.a. growing exponentially
            AIDS models in insurance business deaths Botswana
                                             •
          New infections grow exponentially HIV infections in 1999 : 652 391
            • HIV infections in 1992 : 151 732
400 000        AIDS deaths in 1992 45 642 • AIDS deaths in 1999 : 113 763
          • •HIV infections in 1990 : : 2 353
                                              • Metropolitan launches redribbon.co.za
          • •AIDS deaths in 1990 : 525 outlining impact of AIDS on
               Letter to Trevor Manuel
               SA
          • The Doyle model presented to Actuarial Society
300 000      of South Africa


200 000

100 000

    -
    19 5
    19 6
    19 7
    19 8
    19 9
    1990
    19 1
    19 2
    19 3
    19 4
    19 5
    19 6
    19 7
    19 8
    20 9
    20 0
    20 1
    2002
    20 3
    20 4
    20 5
    20 6
    20 7
    20 8
    20 9
    20 0
    20 1
    20 2
    20 3
    2014
    20 5
    20 6
    20 7
    20 8
    20 9
       20
       8
       8
       8
       8
       8

       9
       9
       9
       9
       9
       9
       9
       9
       9
       0
       0

       0
       0
       0
       0
       0
       0
       0
       1
       1
       1
       1

       1
       1
       1
       1
       1
    19




                                                                          Source : ASSA2002 AIDS & Demographic Model
HIV / AIDS projections

8 000 000
6 000 000
7 000 000
5 000 000
6 000 000

54 000 000
  000 000

                                                   2005
43 000 000
  000 000
                                                  2020 million HIV positive
                                                   • 5.2
                                                  • • 5.4 million accumulated AIDS deaths
                                                        1.5 million HIV positive
3 000 000
2 000 000                                         • • 7.3 million accumulated AIDS deaths
                                                        590 000 AIDS sick
                                                  •   740 000 AIDS sick
2 000 000
1 000 000
1 000 000

            0
       0
      1987 5
           86

      1990 7

      19 2 8

         94 9
      1995 0

      19 7 1

         99 2
      2000 3

      2002 4
           95

      2005 6

      2007 7
           98

      2010 9

      2012 0
           01

      2015 2

      2017 3
           04

           05
       9 98



           8

       99 8

           8

           9
       99 9

           9

           9
       0 9



           9
       0 9



           9
       0 0



           0

           0


         00
      1985
      11 8 6

      1988
      11 8 9

      11 9 1

      1993


      11 9 6

      1998


         01


      2003
      21 0 4

         06


      2008
      21 0 9

         11


      2013
      22 1 4

       21 6

      2018
      22 1 9
       19

       99

         9



       99

         9
       19

       09

      21 9

       19

       09

      21 9
       19

       09

      22 0

       20

       00

      20 0

       20

       02
       1
      11




      21
      19




                     HI V positive      Accumula ted AI DS dea ths              AI DS sick
                HIV positive         Accumula ted AIDS dea ths                  AIDS sick


                                       Source : ASSA2002 AIDS and Demographic Model
HIV / AIDS management

 Deteriorating risk experience being managed
 Client resistance to HIV testing needs other solutions
 Expertise to consult to corporate clients
 Expertise to enter any risk market in Africa
 AIDS scenario project . . . watch this space!
 Our brand value recognises we were there first



            … recognised as leaders in the field of HIV & AIDS
    External influence # 4


Consumerism: A fundamental shift in
     financial services markets
Government’s policy signals
Increased intervention by government
 Persal payroll deductions
 Medical scheme regulations
 Pension Fund Surplus distributions, etc
 Access to financial services in FSC
 Policyholder Protection Rules (PPR)
 Financial Advisory & Intermediary Services Act (FAIS)
 Rulings by Pension Funds Adjudicator (PFA)
 Proposed national savings fund

                              … an industry under pressure?
Consumer expectations

Increased consumerism
 Lower inflation & lower interest rates
 Changing consumer demographics
 Changing consumer expectations
    Role of the media

    Consumer perceptions of insurance industry

    PFA and other rulings

    Consumer experience as a result of technology


                             … an industry under pressure?
Metropolitan’s response


  Metropolitan believes that government's
    proactive approach towards current industry
     issues, largely as a result of an increase in
  consumerism, are both healthy and necessary for
   the industry to survive and prosper in the long
                        term.
What do Clients & Gov want?

           Simpler products

                  +

           Better disclosure

                  +

            Better service

                  +

              Lower cost
Metropolitan’s response
Focus on client service excellence at lower cost
 Straight Through Processing (STP)
 Customer Service Immediacy (CSI)
 Retail Enhancement Initiative (REI)
 Call centres provide service in all official languages
 New products launched
 Restructure of distribution management
 Alternative distribution partnerships explored
 Focus on serving LSM 1-5

                           … turning threats into opportunities
External influence # 5

     Excess capital
No shortage of capital!

 Shrinking growth in developed markets and global
  cost efficiencies have created excess capital
 Shareholder demands are clearly:
    “Improve it”

    “Use it”

       or

    “Lose it!”



                    … our goal is to optimise return on capital
Capital management projects
at Metropolitan this year

 Capital reduction of R780m in January
 Share buy-back of R145m to date
 Capital allocation & return on capital (ROC)
   measured at business level
 Move all excess capital to holding company
 Review further capital distributions after completing
   last phase of BEE deal


                            … optimising return on capital
Capital management projects
at Metropolitan this year (cont)

 Scenario planning relating to ROC targeting
    Organic capital growth needs

    New business ventures

    ROC sensitivity to profit improvements / capital
      reductions
    CAR cover levels

 Identification of strategic new business opportunities
 ROC is primary driver of planning

                                   … ongoing strategic focus
Performance highlights


 Turning strategic advantages
         into results
Retail growth

               N umber a nd va lue of life policies
 1 250 000                                                             2 700
                                                                       2 500
 1 200 000
                                                                       2 300




                                                                                  R'million
 1 150 000                                                             2 100
                                                                       1 900
 1 100 000
                                                                       1 700
 1 050 000                                                             1 500
                  2002            2003   2004             1H05

             Number of policies                 12 month value of life policies
Retail business quality improves

   %                         Lapse rate
  25.0


  20.0


  15.0


  10.0


   5.0


  -
         M J   J A   S O N D J   F M A M J   J A   S O N D   J    F M A M


           2003                     2004                         2005
Health - growth in membership

  Number of principal members under administration

  500 000
  450 000
  400 000
  350 000
  300 000
  250 000
  200 000
  150 000
  100 000
   50 000
        0
              2003           2004            2005
Core headline earnings

 Rm
 600
 500
 400
 300
 200
 100
   0
        2002     2003    2004
Assets under management

 Rm
 60

 50

 40

 30

 20

 10

  0
      2002     2003       2004
Premium income
International business

  Rm
  1000

   800

   600

   400

   200

     0
            2002         2003   2004
Life business revenue and
admin costs
  Rm
  8000

  7000

  6000

  5000
  4000

  3000
  2000

  1000

     0
         2002           2003         2004
                Admin costs    Revenue
Improved investment
performance




    Metropolitan General Equity Fund
Group strategic summary
Group strategy
 Focus on existing core businesses:
    Growing health business membership

    Growing asset management business

    Re-design Retail products & processes

    Complimentary product offerings to core market

 Focus on new markets in Africa – strong regional player
 Focus on capital management



                              … no reason to alter strategy
Discussion?


 Thank you

				
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