Momentum Group Limited (MTM) Earnings Call Transcript & Summary

Good morning. I'm Dan Moyane. Welcome to the presentation of the Interim Financial Results of Momentum Metropolitan Holdings for the period ended 31 December 2021. Now we are making this live presentation from the company's offices in Sandton, Johannesburg on a very wet morning. Rain for the most part is about abundance and prosperity as there is a suit to saying goes [Foreign Language]. Therefore, this morning, today, we are grateful. Welcome to everybody who is joining us today, the analysts, the investors, shareholders, journalists and employees, of course, of the company who can watch this live broadcast that is being streamed on the company's new intranet, but we're also live on BDTV, that's channel 412 on DStv or of course, you can follow us live on the webcast, that's via copcam.com/MM09032022. Now the full results are also made available on the group's website, that's www.momentummetropolitan.co.za. We wish to thank the Momenta Metropolitan Group Investor Relations team for having put together today's presentation as well as the Momentum Metropolitan Group Marketing PR and events team for a job well done for today. Now our gratitude today is largely due to the fact that there are strong half year results that are being presented and they've been achieved despite the very challenging limitations of the pandemic that is still with us globally. Now operationally, the group has succeeded as well to tend its reinvent and grow strategy into action. As you will hear shortly from the group CEO, Hillie Meyer, and the Group Finance Director, Risto Ketola, several divisions have made strong positive contributions that have led the group to achieve, wait for it, double-digit sales growth during this period under review. Now as usual, we've made time or we've created the capability for you to be able to ask some questions. We have the available virtual platform for you to do so. So you can post your questions during the presentations there. We'll try and address as many of the relevant ones as possible after the presentations have been made by Hillie and Risto. And please don't worry, if we don't get to answer all your questions, they will be addressed through the usual channels that the Investor Relations team in the group has made available for you later on. But also this afternoon, there are one-on-one media engagements that have been arranged for Hillie, the Group CEO, Risto, the Group Finance Director as well as the Deputy CEO of the group Jeanette Marais, who is also the CEO of the Momentum Investments business. They will be handling those one-on-one meeting engagements later on. So at the end of the presentation, I'll be back here to deal with any of the questions that would have come up. Let's enjoy the presentation, and let's welcome Hillie Meyer to the podium.

Thank you, Dan, for the introduction, and good morning, ladies and gentlemen. It's nice to be here and we appreciate your interest. As we normally do, I'll start off with an overview. I'm going to focus on highlights and then I'm going to touch on just digging a little bit deeper into 3 businesses, just pointing out, I think, some interesting features behind the numbers that I think you might find of interest. And then after that, I'll hand over to Risto Ketola. Okay. As far as the highlights are concerned, I think, first of all, what we're most pleased about is the new business numbers. As you will see there, the present value of new business premiums is really, I think, at the new level, the investment business feature very, very strongly, our Africa business did well as did Metropolitan. I think it's worth pointing out that the one concerning area that we do have is our Myriad business in Momentum Life. On a present value of new business premium basis, Myriad's volumes is actually 25% down on the pre-COVID numbers. I think on an APE basis, it will be less down, but I think all indications are there that we've lost probably 10% or so market share. It's difficult to gauge at this point and also exactly why there has been some restructuring of our distribution channel that we'll talk about. We also have seen that a lot of the more general practitioners in the independent adviser market have sort of shifted to an easier sale, which is currently investments. But Myriad is the one thing that I think as a group is something that we will pay a lot of attention to. I mean I think we're happy that we are on the right track. I'm not concerned about the longer term because there are some exciting things in the pipeline. But in the meantime, we can really celebrate our new business volumes. I think we're also very happy with the normalized headline earnings. I think when it gets a bit unpacked, which Risto will do, clearly, there are some positive elements in there that will not necessarily repeat every 6 months. But there are also one-offs sort of on the negative front. So all-in-all, I think it's a fair reflection of where we are and we're very happy that it's about 80% of the desired trend line and I think in the current circumstances, we've covered around, it's actually a very credible result. A few more highlights. We recently had another BEE rating done and very pleased that for the fourth consecutive year, we actually achieved a Level 1 rating. I think you will see there that we actually do well on basically all the points. I think that's the hallmark of our rating for the last 4 years. The one area where we need to improve and we have plans to improve on a steady basis is management control, which is really about diversity of our senior management throughout the group. Another, I think, positive as we were certified as a top employer. It's a global rating. It's a global organization. Look, I think, I mean, also to be fair, we won of 113 South African companies that were certified top employers. So we're not alone. We're not the top, we are one of them. But I think the value for us is in benchmarking our human capital practices. So we also identify areas where we can improve. And it's nice to see which areas we have, in fact, improved significantly. I think another important feature, and it won't be obvious, and it's actually -- I think it's difficult for external people maybe to understand how important this delivery of what we call the VIA system is for the group, especially on the Momentum retail side of the business. We basically implemented a single adviser platform. Just one platform on which all our products. Also remember, we've got this federal structure with different product houses, the teams work on their products, but they will all present their products and the product functionality and product information on this single platform, which was designed on a sort of an open source approach, which will make improving things and launching new products or changing products or adding service components and service aspects, which will make it a lot easier. I think what we had to do behind the scenes, I think it's actually quite -- it was a mammoth task. I mean we had to, for example, redesign our new database completely. We had to do that. We had to do a massive data cleanup because remember, we're giving advisers access to client information now, their clients and so forth. And we had to deal with duplicate addresses and other sort of great data elements and you just build up if you've got a huge legacy plus we implemented new technology. So I didn't want to rush over this too quickly because I think this is really the platform on which a lot of our digital transformation will actually happen. And also the groundwork that we've done here puts us in a good position with a whole number of other digital initiatives that are underway. And then finally, we launched the Reinvent and Grow strategy. I said that mastering digitalization is probably the biggest challenge because from that reset to the reinvent mindset was something that we -- sort of a big mindset change that we have to do. Well, we couldn't have asked for a better start because I'm very, very happy that right through the group, I think everybody bought into the digital transformation strategy and it's just very nice to see how strongly it features in budgets, in planning processes. So I think we've really managed to unlock the door to digital transformation, which is so important in our Reinvent and Grow strategy. I think it's probably maybe an opportune time to very briefly, just to remind everybody of our Reinvent and Grow strategy and what it entails. And this is our signature slide that sort of summarizes all on one page. On the left in blue, first of all, we're going to continue to focus and grow some of our existing channels. That's the MFP channel, for example. There's still room to improve broker support. There's our Momentum Consult as a channel. There's Momentum Corporate growing our distribution. Momentum Insure plans to grow their distribution. So we're not going to neglect and reduce the focus on the very, very strong existing channels that have delivered a very, very good new business growth numbers that you've seen. But we will start focusing more and more on establishing new channels. This is more direct to translate our number of initiatives, but this is really, I think, where we'll have to show our metal and it's early days, but it's an important focus area for us. Accelerate Digital, I've talked about a lot. I mean, that features strongly. And then also, I think just if we want to really, I think, fulfill our full potential, then we'll have to demonstrate product and service leadership and that will continue throughout the period. And then just finally, transformation is very, very important. We believe in doing transformation authentically. And in that sense, for us, almost more of something that we do internally than trying to showcase it externally. Yes, the scorecard is important. But for us, it's almost like the change in the hearts and the minds and the diversity of our people internally and really working on inclusivity a lot. So again, I think we're in a process, but it's an exciting one, and we are looking forward to transforming the business also in that sense. If all these plans come together and we deliver -- and maybe we can put COVID behind us at some point, we hope to deliver a normalized headline earnings number of ZAR 5 billion. Baked into the numbers, it's not a cost-cutting exercise, but baked into the numbers is basically a ZAR 500 million improvement in cost efficiencies. It's in fact more than that, but I think it's comfortably ZAR 500 million. We foresee that non-life insurance that Guardrisk and Momentum Insure will by 2024, contribute 20% of our normalized headline earnings, that's up from about 15% now. We just foresee that they will grow their earnings a little bit faster. Momentum Insure will, obviously, in that sense, be assisted by the acquisition and the synergies that will come through as a result of that. Different business units have got sort of different market share growth targets, but there's a whole set of targets right through the organization. And then finally, we're working towards a return on equity of 20%. In fact, if we achieve the ZAR 5 billion normalized headline earnings, then I think we'll comfortably achieve that return on equity target. I will now move to the business view, and I'm going to -- as I mentioned earlier, I'll talk about 3 businesses. The first one is going to be Momentum Investments, and it's mostly the retail part of Momentum Investments. And if you ask me what is almost like the summary of this a little behind the scenes look that I'm going to give you, I think it's almost -- I'm going to try and explain how we won back adviser support. That's really the story behind the success in Momentum Retail. There's the numbers. They speak for themselves, guaranteed annuity sales. Clearly, it's, I don't know, close to 3 times, 2.5 times, what's it 3 times, 2.5 times what we normally -- or used to write in new business volumes. I don't think it will last forever, but we're making hay while the sun shines and then platform new business is approaching almost like doubling compared to what it was 3 years ago. So those are the numbers, how did it come about? I think, first of all, 3 years ago, when we changed the leadership and we changed the organization structure, the purpose was really to get the competitive spirit going again and to focus externally on clients and advisers. It was very important for us to show to -- especially the IFAs out there that we're back on the field, we are here to play and we want to score. Hand-in-hand with that was some service improvements that we had to implement, which we did very well and also a very deliberate distribution enablement. I mean we focused on our own staff, our own investment advisers, consultants, the training, marketing material, recruitment, management of that. So that was sort of just knowing and understanding that retail investment business is actually quite a specialized business, and we need to basically show-up in a way that we can add value. So we had to sort of up our game on that. And then also, we changed our sort of pricing approach, especially on annuities, it's very dynamic. Now it's really a very sophisticated sort of approach that we follow there. And also as part of the pricing process, we repriced a lot of our platform business, where existing clients had IFU fees and the new clients, which was not really, I think, the way to do business. So we phased way we phase that sort of out, and I think that's now more or less done. Clearly, the industry benefited from excellent flows, and we took advantage of that. But I think it was just a lot of the action that we took in the 2 or 3 years before the flows really started kicking off, taking off that I think we were in a position to take advantage. Another thing where our timing was excellent was our discretionary fund management unit, where we assist IFAs and advisers like MFP and Momentum Consult in structuring portfolios, unique portfolios for their clients and so forth. Really, the target was excellent, and this is a huge contributor to especially our platform business. And then just finally, the support from Momentum Financial Planning and Momentum Consult, really very, very, very encouraging support. So that's I think that in a nutshell explains the very, very good investment retail sales over the last few years. Just maybe to also assure you that we're keeping our eyes on the future, in Momentum Investments, I'm just going to highlight the 3 key sort of reinvent and grow initiatives. The first one is the specialized distribution. This is something that investment is doing with MDS, our broker channel. But with the specialization sort of now happening in MDS, we have 50 specialist investment consulting calling on investment IFAs and I think we've probably got the biggest specialist investment force in the market by doing that. And that will be followed up obviously by a lot of action. And I think the specialization will hopefully stand us in good stead. It puts us in a better position to compete against other asset management, outputs and platforms and so forth. Service initiatives, important, some tactical things that we need to do there. I think it's worth mentioning that because of COVID and the impact of COVID and [indiscernible] service standards are not what it should be. Not in investments. In fact, in most of our businesses, service has actually gone backwards compared to 2 years ago. And that's something that we're really focusing on. We've seen some positive signs already, but it's clearly not where we want it to be. And then the big one for Momentum Investments is replatforming. That's basically just a new platform that we will be on more contemporary technology that we will use. We're doing it on an outsourced basis. The functionality will be at a completely different level and we believe it's something that's also going to assist us just in client experience and advisory experience going forward. Right. Next one, Momentum Life. Now we've talked about Momentum Life and you're aware of what Momentum Life has done and been doing and continue to do. If you ask me what I would call this little story is what you measure is what you get. Now yes, just on a present value of new business premium basis, the results. I mean, I think it's clear for everybody to see. If you go back a little bit, we don't have the numbers here, it dropped a little bit. But I mean, even when it was flat in the first sort of 2 years, 2018, 2019, quality already started improving significantly. And now quality is still there, and we can see the sort of improvement in volumes. Now we've talked about the changes that we made and Peter and the team, I think, did a marvelous job in changing, I think, just the efficiency and the quality in that sales force. One of the key things that we identified when we looked at this 3 years ago, as we realized that if we're going to get our metropolitan agency force to sing to produce better results on a consistent basis, we'll have to get our branch management sorted out. And at the time, I remember I have meetings with the team and so forth around what's the right number of branches? Should we have because at the time, we had 350 branches. Is that the right number? Are all these branches viable, et cetera. And then I think we brought some signs into the sales process and the team at Metropolitan actually developed a branch management index and it contains sort of 4 elements, and I'm going to run through it quickly. But the first one is just for a branch to be viable, it needs a minimum number of agents. And that number happens to be 12. I think then you're really getting to the -- then you can afford to pay the -- like the salary of the branch manager and the regional manager and the offices you require and the support and all of that, but it need to be viable advisers. So that was the first important thing that we sort of realized in the structuring. And you'll see now that we've got less branches than we had 3 years ago. And that was because we restructured a little bit to make sure all the branches can be viable. And then turnover of advisers. That's a key element because we know adviser tenure and adviser retention are key to productivity and quality. Then productivity itself, that's case count and product mix. We want advisers to support not all the products, especially the products with better margins. And then quality, as measured in percentage of payroll collection at stop orders and the lapse rate. I think the value of this branch index was it was something that we could give branch managers and branch managers then actually understood exactly what's expected for them. But also, it put us in a position to look at all our branches, and we demonstrate that on the next slide. We could see, for example, in 2018, and we had 4 categories that more than 50% of our branches were actually poor and another 40% was average and only 10% were good or exceptional. You'll see there were only 4 branches at that point, and they were 350 in total. 4 branches were exceptional. You'll see that initially, it was not that easy to make the shift, but you can see to the latter part and I must also just stress this is in spite of COVID. Keep in mind, COVID was -- they are in those numbers. Even in the last 6 months, the impact of COVID was there. And now we sit with, I think, 14 is about 12% of branches are poor. We've actually got exactly the same number of average branches. But we've got very close to 50% of our branches now being good or exceptional. And I think that's the Metropolitan story in a nutshell. What are the things that the Metropolitan will focus on going forward, the big Reinvent and Grow initiatives. Well, first of all, we need to almost like build a moat around the sales force that we have improved and we can improve further. We basically need to just almost like protect what we have and make sure that these things are institutionalized, these good practices, the training, a lot of good things that we're doing there now. We just need to make sure that nothing touches some of the signs and some we just sustain this competitive position of ours. Metropolitan GetUp was really an initiative that look at a different way of distribution, direct distribution is also a different target market. We're learning a lot there. It's relatively early stages, but I think you'll hear more and more of Metropolitan GetUp. And then finally, there's definitely an opportunity to improve the Metropolitan client value proposition, making products a bit more interesting and broadening the base and so forth. All right. I've got one more story, always a highlight, that's Guardrisk. How will I summarize this? Now I mean, I need to say that Guardrisk is probably more than a 50% market share in the space. So they're clearly a market leader, and it's difficult sometimes to sustain that position, but that's the story here. The other is by basically just going from strength to strength. Yes, the results, this is normalized headline earnings. You'll see the dip there in June 2019 when there was a write-off in one of the quite big cells that basically couldn't maintain capital and Guardrisk had to step in. So that's the only negative. But for the rest, you can see the trend line look over the last 6 months also exceptional and probably won't be easy to repeat this in the past 6 months, but you can see the trend there. One of the big contributors is the fact that Guardrisk actually started doing direct underwriting of short-term business, basically taking underwriting risk. You'll see there that the revenue growth is significant in Guardrisk, that's a total revenue growth. But the underwriting contribution increased from when it was zero, not long before 2016, but it increased to 30% in the sort of latest period. And yes, it's just another example. I mean I think if you're a market leader and you do it well, then you make sure that you pay attention to all the things that are important. And when we started focusing on the return on equity, Guardrisk was out of the blocks immediately and already on the 20% level, and you'll see that they've actually got ambitions to improve that further. Why would I sort of from where I sit, what do I see? What makes Guardrisk successful? I think it's a very, very deep client relationships that they form. I think it's important to understand that a company that actually -- especially with some of the bigger clients, retail clients so forth, that's got a Guardrisk, whether it's life or short-term products, it's a very deep relationship. The value add that Guardrisk will do right from the day that they start and so that it's a business -- a deep business-to-business relationship and it's always built on commercial grounds. I mean the Guardrisk guys are very commercial. They will not miss an opportunity, but they will always make sure that it works with their clients as well. Also because of those deep relationships, the clients are very sticky. The business is very sticky. In fact, where clients leave Guardrisk it's probably because they've outgrown almost like the cell type business. They became big enough to do something else. And in fact, if that's the case, then Guardrisk would assist the client in whatever is more appropriate for them. I think the nice thing about the traditional cell business, it's fee income. It's based on premium, but it's a steady annuity income. And as long as clients grow and as long as Guardrisk actually add the odd new cell captive client every now and again, there's actually a little bit of a kicker in that annuity income. I think Guardrisk did well in identifying new revenue opportunities. We've showed you in GGI. That's the underwriting, Guardrisk General Insurance. That's the underwriting that we talked about. We made a number of very successful bolt-on acquisitions. And the latest new opportunity is micro-insurance. I mean that's still got to almost like deliver, but I think there's some exciting plans. And also, just in conclusion, I think the Guardrisk guys, there's definitely support leadership in the cell captive arena in the engagement with the legislators, the authorities, I think, industry bodies and so forth. And finally, just the entrepreneurial culture which I think is very, very important. Looking forward, I think Guardrisk has got some capital efficiency targets, 22%. I think they're well on their way to get there. They have got IT modernization project. In fact, it predates our Reinvent and Grow strategy. So they're well on their way there, but it's really, I mean, it's quite an important project that will make a huge difference in how Guardrisk engages with their clients, the compliance will be automated a lot better and so forth. And then finally, I think it talks to the deep relationship type topic, but Guardrisk will look beyond cell captives. They are sort of a solutionist approach and there might be opportunities to look wider than cell captives like they've done with the general insurance already. Okay. I'll conclude. I'm quoting one of my colleagues here, Johann Le Roux, CEO of Momentum Life. Johann always remind us, is your strategy is not what you talk about, that's what you do. So I'm not going to talk a lot. I will just say that we are in strategy execution mode. We realize how important it is. We've just been through the first 6 months of our new 3-year strategy and we know that there's a lot of work that we need to do. Thank you very much.

Thanks, Hillie. Good morning, everyone. Always a pleasure to come and present results. Well, not always, but when the results are good, it's a pleasure. Sometimes, it's a duty. Okay. Hillie had a slightly new format this time, but I'll stick to my proven formula. So I'll talk about group financial results. Then I'll have a deep dive into a handful of areas, and I'll just do a brief conclusion before handing back to Dan to do Q&A. Okay. So in terms of earnings, as Hillie said, we're actually quite happy with ZAR 1.5 billion of earnings for the 6 months. You must recall that the third wave was actually the first quarter of this financial year. So if you offered me ZAR 1.5 billion of earnings in August-September, I think I would have grabbed it with both hands. So I think the results ended up being a bit better than we thought most of the time period. And ZAR 1.5 billion is still net of ZAR 300 million of mortality losses. So we entered this year with much stronger provisions, in fact, double the provisions of previous year, and they still weren't quite enough to absorb all the losses in the third wave. So there's a ZAR 300 million negative mortality impact. That said, we're not that far beyond the December 2019 number, which was the last 6 months pre-COVID. So we're sort of getting earnings close back on where they were pre-lockdowns and everything else. I think the area where you see the progress we have made as an organization despite all the complications over the last 2 years is sales numbers. So you will see that in the current period, sales were at ZAR 37 billion, which is a 23% increase and roughly correspondingly value of new business increased 20% to ZAR 400 million. Both of those numbers are well ahead of the last 6 months before COVID hit. And it reflects all the good work that Hillie mentioned around distribution, IFAs and investments, agency force productivity in MET. Yes. So it really has been a success story. New business margins, 1.1%, they're flat on last year. I should probably mention that the early stage and now before I forget, is already a couple of questions have come from investors. Why did the new business margin not expand with increasing volumes. And I think there's a lot of answers, but the short version is that a lot of the IT related, technology-related digitalization-related projects are actually in the new business area. So we are actually investing quite a bit in making our new business, probably more efficient and higher margin in the year or 2 once those projects pay-off. A few other key measures. So embedded value per share, ZAR 28.39. It's up about ZAR 1 since December last year, but it's up nearly ZAR 1.50 since June. So we had a good 6-month period in terms of embedded value growth and it results in a return on embedded value of 11%. That is despite us reducing the carrying value of Momentum Insure quite a bit. I'll discuss it later. But without that adjustment, the ROE would have been in the low to mid-teens, which is probably quite reflective of our long-term ROE ambitions. Dividend, ZAR 0.35 dividend, up 40%. We have been paying dividends in line with our dividend policy consistently and we maintained it that way. The ZAR 0.35 is probably close to the minimum dividend we could have paid under dividend policy and the decision to pay that rather than closer to midpoint reflects a high level of uncertainty that still exists. So obviously, we are really relieved that the fourth wave was modest or less severe. But who knows, I mean we've been proven wrong number of times in terms of modeling future waves and then we more recently obviously had issues in Ukraine-Russia causing well, political instability in that part of the world, but also a market volatility that impacts us. So we've taken a bit of a conservative stance on the dividend in the 6 months, but still within policy. ROE, 16%, despite the earnings still being a bit below par. Hillie says 80%, probably I agree. I think Hillie hinted at it, but I'll make it clear here that when we announced a strategy a year ago, we said we were targeting earnings of ZAR 5 billion and ROE of 20% and those were quite interlinked. But we've done a lot of work on the capital management side. So I think we can probably get to the 20% ROE with earnings even a little bit less than ZAR 5 billion. So I think we're quite confident on meeting that 20% ROE target. Instead of talking through each division slide by slide, I lumped a few them together here, and I'll give you a 30-second overview on each of them. So I will start with Momentum Life. This is a business that we would normally expect to be the biggest contributor to profit. Probably it is about 80% of par. I think here, we would expect this business to make ZAR 450 million in the normal 6-month period. So there's a ZAR 400 million gap here and ZAR 300 million of that gap is really mortality claims. This was the business when it was hardest hit by COVID-19. So despite releasing significant provisions, I think the gross excess claims was close to ZAR 1 billion. And after releasing provisions, it was about ZAR 300 million loss. Also, this business was negatively impacted by the increase in market implied inflation and fortunately, for a life company, you can never not get away of all the technicalities and results. But the gap between a nominal and the real curve has widened, signaling that the market expects higher inflation, and we thus increase the inflation assumption we used for actual reserving. So now you've got this 40-year cash flow projection of higher expenses, which is hurting the earnings in the current period. We can obviously take that off-line for the guys that want to get to that detail. Then Momentum Investments, this is a bit different. Here, we're probably running about ZAR 100 million ahead of normal. This business is doing really well. Obviously, the rising equity markets have helped different parts of this operation. Also, net flows are strong. So it's not all markets. It's a combination of markets and flows. And then finally, our retail annuity business sits in here, and they had strong results again for the 6 months, both in terms of investment returns and longevity profits. Metropolitan Life is maybe a bit of a curious one here. Hillie spoke about the great sales growth and the VNB is quite strong, but the earnings are down 18% year-on-year. There's probably 2 things to note here. First of all is that we did have persistency losses during the period. Now, persistency often people associated with premium collections. In this case, our premium collections are actually tracking expectations. So if you look at the bank debit order experience, it's fine. What happened is that we implemented a new line of business system for some of the products in Metropolitan. And in that process, we picked up a couple of operational items. Good example is that we do credit checks on our clients when we issue policies to check for affordability. That process didn't work right for a couple of months on implementation. So there were some business that fell off the books a couple of months afterwards. And another example is on one of the products, policy should lapse after 3 months premiums. In this case, it wasn't lapse, and so we had a catch-up of 2 months of lapses once we realized that there was that teething. So we're quite confident that we have picked up all the little teething issues on migrating to the new system. And we have the data to prove that the actual bank debit on the collections are fine for now. The other item here is that one of the bigger projects in Hillie's slide of exciting things happening is the GetUp initiative, which has been fully funded from the Metropolitan Life income statement. Then we look at Momentum Corporate. There's a massive swing here. Dumo Mbethe is in the room here. He would have grabbed this with 3 hands if we offered this in September. So a couple of things that happened here is that the third wave claims in Corporate was high, but it wasn't maybe as bad as in Mom Life. So our provisions at the start of the year were actually able to offset largely the mortality experience. So mortality results year-on-year improved from a very weak 6 months to a, let's say, call it, a neutral 6-month period. Then also the people who have been following us for longer will know that we took heavy losses in this ability business for an extended period of time, maybe a 5-year cycle. Now for the last few years, we've been repricing and sort of trying to manage that business back to profitability and we actually got to a level now where we're actually satisfied that our margins are sort of market related and that's about ZAR 100 million swing from a difficult 6 months to, let's call it, a good 6 months in terms of disability profit. And the last item helping those results is that Momentum Corporate does have its own with profit bonus book and with profit annuity book. So rising markets would have helped this business as well. Momentum Metropolitan Health, a steady performer. It is a health administration business. So bringing us much needed stability to our earnings and up 9% year-on-year. They were up more pre-minorities. But in this business, the profit growth was actually better in the public sector business where there's a higher minority interest, and we also introduced some new minorities during the time period. Okay. The remaining business units, non-life insurance. This combines Guiderisk and Momentum Insurer. 2 very different stories within that ZAR 300 million number as [indiscernible] had probably the best 6 months ever. So they accounted for almost all of the ZAR 300 million. The business continues to be a market leader, phenomenal business. On the other hand, Momentum Insure, which would normally make about ZAR 100 million, had I think a ZAR 8 million profit for the 6 months. That business was heavily impacted by weather-related claims. And I think what adds insult to injury in a way that it was this continuous rain rubber than single large flooding events. So we also got limited reinsurance relief on that ongoing attritional claims experience. I think it is early point, I can also point out that the impairment on this business is not to do with the current results. The current results are a high claims environment that we expect to normalize in due course. The impairment that I'll talk about later relates more to the medium and long-term growth prospects in terms of premium volumes, nothing to do with the claims of the current earnings. Momentum Metropolitan Africa, a disappointing 6-month period. Now this business, if I think what it should normally make about ZAR 200 million in a 6-month period, about ZAR 100 million of the missing profit is COVID-19 again. Our neighboring countries were not as affected as South Africa in the first 2 waves of the pandemic. In the third wave, Namibia and Botswana had higher the capita death experience than we did. So as heavy as I experienced was our neighboring countries actually got worse out of it. So there's ZAR 100 million net loss, about ZAR 100 million net loss after provision releases. We also strengthened expense reserves in Lesotho and Ghana just to reflect the current size of the book and expenses. And then there was odds and ends. As an example, an interesting one is in Lesotho our health profits and Mosambi declined quite a bit. And then the suit, it relates to the border opening. So in the suit of other people come to South Africa to get medical care and then we sort of reimbursed them through the health insurance product. So with the border opening, those claims went up. That was a bit of a catch-up in claims. Then we've got new initiatives. India is the major component of that. In India, we estimate that the excess COVID claims impacted our earnings by about ZAR 100 million. So this line would have actually been coming out of the J curve had COVID claims been -- well, if COVID claims weren't there. India had a severe second wave while we had a severe third wave. The recent third wave has been a little bit more briefer and less severe on our business. And then lastly, shareholders, this is quite a volatile item because it includes all our investment returns on our own investments. So we have about ZAR 15 billion, ZAR 16 billion of shareholder investments and the big swing factor year-on-year was our venture capital funds. There was about a ZAR 300 million gain in the current period, and I will expand a little bit on that. Venture capital has actually become a very big component of our shareholder funds, not because we wanted to invest all in, in venture capital. This is the fund done as well. So the fund has grown quite dramatically in the last 18 months. So a nice problem to have. Okay. Hillie already spoke about the some of the sales performance. I think if you look at 1Q '20, 2Q '20 on the left-hand side there, those are the last 2 quarters before the lockdown started. We had a steady flow of ZAR 12 billion, ZAR 13 billion of sales every quarter, then the lockdown egged into that a bit. But we now sort of emerged the last, let's say, 12 months, the last 4 quarters. We're steadily setting like ZAR 17 billion, ZAR 81 billion, ZAR 19 billion. We're in a very different level of, let's say, ongoing run rate of sales. Ourselves, let's say, quantity is probably like 50% higher than it was before all the work we've done in the last 2 years as part of the reset and growth strategy. On top of that, the VM has effectively doubled in some way. So going back 2, 3 years, ZAR 100 million would have been a good quarter. Nowadays, good quarter is probably ZAR 200 million. And here, besides the volumes, we're actually seeing the benefits of a lot of the cost cutting that took place in the previous 3 years. So remember, in Reset and Grow, there was a big focus on cost cutting. We kept costs flat for 3 years in a row basically as a group, and that helped margins a lot. In the current period, the operational gearing wasn't quite as high because we're not starting to spend a bit of money on the distribution side. Okay. But I think I'm quite happy to leave behind those old numbers and focus on the new run rate. New business margins. Our overall group margin is flat, but there's various trends within here. I mean we have a diversified group, which obviously in the last 2 years has worked in our favor. I'll start from the left again, Momentum Life, obviously, the margin of just over zero is disappointing. Now there's a couple of reasons explaining this. But I would say, by far the biggest reason is the sales volumes in Myriad declined in the period. And I showed you in the previous slide, our sales up 23%. Every single area, every single product pretty much grew sales, except Myriad sales, which were down 8% to 9% for the 6 months. And it's a high-margin product. Also Momentum Life has got quite a high operational gearing because it's a retail business. There's a lot of broker consultants, there's agents, there's agency managers, there's underwriters, there's new business people. So there's a big machine to feed, so 8%, 9% drop in your high-margin product has a massive impact on your VNB. So we really need to get the Myriad sales back up to, let's say, another 20% or 30% to really get VNB going. Momentum Investments, by nature, it's a low-margin business because of the market it plays in, sort of affluent single premium business. 1% is actually quite a good margin for this market segment. So that's not a concern. Metropolitan Life, again, if you go back a few years, we were stuck in sort of less than 3% margins. And now we're sort of getting closer to the 5% we desire longer term or medium term. A little bit of a dip in this period. It relates to that expenditure I mentioned earlier on some of the initiatives like GetUp. But also in the last 18 months, this business has also given a bit of value back to consumers. So they introduced a cash back benefit in the funeral plan, and they're also looking at sort of lower fees on some of the savings products. So some of that decline you could almost say is a bit of a relooking at the value for money equation as well. Momentum Corporate, margin of 0% despite very high volumes of sales, while high volumes of sales. Well, what's key here is that one single big client probably accounted for about a third of the sales in the 6 months. And as is not that unusual in these large businesses, the margins can be quite tight because there's quite a fierce negotiation when you're talking about sort of hundreds of millions of premiums coming in. So that one large deal sort of anchored the margin on the low side. And then Africa, again, close to 0 margin. The underlying trends are very similar to the past where the suite to margins are fine, actually good. And Botswana margins are positive. And then maybe we have been having negative VNB margins now for a number of years. It continues to receive significant attention. We need to actually redesign a lot of the distribution efforts there also over the next few years. Embedded value for a life insurance company, we don't talk too much about this, but that's how one slide, just to make everybody happy. As I mentioned at the beginning, the return on embedded value of 11%, okay result. Some of the key features; operational profits are strong despite mortality losses, our expense variances, persistency variances, the other demographic variances, alterations, all of them sort of added to positive. Markets were actually favorable for once. So that they have quite a nice little boost. The one detractor was the profit from non-covered business, the ZAR 126 million equates to only a 2% return, and I'll return to that a bit later. But again, if I forget to say that then, we actually did very well in most of our non-covered operations. Once I explain the momentum in sure adjustment, that will explain a lot of that low return. Dividends. We have paid dividends in line with our dividend policy through the whole pandemic. The exception was June 2020 where there was actually a regulatory request or a suggestion to shore-up balance sheet and not pay dividends. But subsequently, we've been sticking to our dividend policy. I think in the current environment, ZAR 0.35 dividend is probably a good outcome for shareholders. And then lastly, our capital position remains strong. I used to call it super strong. I think I'll now call it just very strong. Now we have migrated from a 2.2 cover 2 years ago to a 1.8% cover now. 2 things that really happened here. One is that when we had a 2.2% cover in the life business in 2019, we started a project to look at capital efficiency because that balance sheet was actually a little bit bloated and we cut that target cover to 1.6 times to 2 times, and we're now operating in the midpoint of that range. So we're very comfortable where we are. Also, if you look at the movement from December '19 to June '20, that's when you get the market volatility and the pandemic starting to come through. So there was also a bit of external shock. So if you have to ask me what accounts for the reduction from 2.2% to 1.8%, probably 0.2% is planned and 0.2% was the real life stress test we've been through. In fact, we met with the regulator yesterday, and I joked with them saying that considering we've been through a one in hundred year pandemic and the most volatile markets in March last year in history, we probably don't need to distress testing for the next 10 years. I don't think they quite brought my argument, but okay. So very happy with the balance sheet, resilient. Some of the smaller business units, Guardrisk Insurer capital ratios have actually improved quite a bit. Capital is a big focus in Guardrisk, as Hillie said earlier. So in some ways, the 1.28 times is actually almost -- let's call it, it's quite high for Guardrisk insurance compared to its own history. Guardrisk Life, a little bit more closer to its sort of normal range and Momentum Insurer also well within its target range. So there's no subsidiaries really where we have any concerns on solvency. Okay. Let's move on to the other current topical matters, only 3 this time. Essentially, shorter list when results are good and longer list when I need more excuses, but okay. We'll start with mortality claims, pretty obvious topic in the current environment. A lot of people find this fascinating. This is actual claims we paid month by month over the last year or so. So the first thing to point out is July, August, September, which is exactly our first quarter of the financial year. Those are the worst 3 months that I think we could have ever expected. We normally expect to pay ZAR 600 a month, just to give you some idea. So we were actually paying ZAR 1 billion more claims month after month than we thought. And that is for a company with annual earnings of ZAR 3.5 billion. In fact, I've done some calculations that since the pandemic started, in that 18 months, 19 months, COVID-19 claims have eaten up one year of good year's profits. Okay. Yet we remain profitable, sometimes close to breakeven, and our balance sheet has remained strong. So I think it says a lot that you can still make a few hundred million even in a bad quarter, in the middle of a pandemic, so our business is resilient. The other thing to point out here is that December and January obviously a lot better, reflecting the fact that Omicron didn't result in significant debt claims and that's continued the early part of February. Only a little caveat is ZAR 700 is still a lot more than ZAR 600. So we are relieved that things are a little bit more normal, but it's not as if we're not still losing a little bit of money because of the pandemic going around and other factors there. I think the message of the business units is let's not get too carried away with one good wave and remain very diligent to make sure we price and underwrite correctly because we're definitely not back to long-term mortality experience yet. Okay. This is similar data but in a more tabular format. The first line now is not claims, but it is a normalized headline earning impact. So this is the earnings impact after reinsurance tax reserve releases, things like that. So in the first line, it just reflects that had we had no provisions for the 6 months, we would have incurred ZAR 1.6 billion reduction in NHE. I mean, NHE would have been pretty close to zero for the group. So we are relieved but the claims were high and the only reason earnings are okay is because we have put provisions, and that's on the fourth line there. We released ZAR 1.1 billion of provisions against the ZAR 1.6 billion of debt claims. We also had quite good profits in the annuity book, where higher mortality actually works in our favor. All-in-all, about a ZAR 300 million impact on earnings. This again highlights that Momentum Life was the one business really hard hit. The other business were able to absorb almost all of the mortality experience in its provisions. The last line in blue, a bit technical, but it shows the remaining provisions as a percentage of the claims in the last 6 months. So somebody like Momentum Life, the provisions are quite small compared to the claims in the last 6 months, but Metropolitan Life is actually very well provided for. At group level, we think our remaining provisions of ZAR 800 million-odd after tax is sufficient to cover at least the next 6 months of COVID related claims. So we're quite comfortable not to need to add to COVID-19 provisions this time around. Okay. This is a -- marketing people hate this slide, and I can sort of see why, but table, a group finance slide. Here, I want to talk about non-covered business as the good and the bad. So if you look under a column called valuation 1HF 2022, ZAR 11.6 billion, that is a total value that we attribute to our non-covered businesses. So it's short-term insurance, asset management, health administration and so on. That's actually quite a big chunk of our EV now compared to the past, okay? So that's maybe the first thing to note. The second thing to note is that the 2% return I spoke about, you can see under the column ROEV 1HF 2022, 2% return is not fantastic. Then in Italics, uncles and aunts, but anyway in Italics we say, if we took momentum in throughout, ROE would have been 20%. I mean this basically reflects that outside of Momentum Insure, our non-covered business is, they're pretty much hired on alternatives. Momentum Investments, rising markets, good flows, good profits from the recent acquired asset manager, Seneca, 18% return on EV. Guardrisk continues to sort of be a juggernaut, 17% ROEV. Momentum Metropolitan Health also doing well, 19% growth in ROEV. Okay. So the first message is, besides Momentum Insure, we're very happy with our non-life operations. I also have mentioned in the last 2 sets of results and I'll confirm it again. I actually think our non-covered businesses will generate better ROEVs going forward in our life business. It's a massive turnaround from, let's say, 5 years ago, 6 years ago where we're struggling to bed down some of these things. Okay. So momentum Insure, what happened there. The valuation was ZAR 3 billion end of last financial year. And you could think of the ZAR 3 billion largely as a combination of the ZAR 2 billion we paid for Forbes and ZAR 1 billion attached to the Momentum Insure, the old MSTI business and that valuation has been cut to ZAR 2.3 billion. Why did we cut it? I mean, when we acquired Forbes and we integrated the 2 businesses, we had a certain set of business plans that included certain assumptions for volume growth, expense ratios, things like that. I think 2 things have changed since then. COVID-19 happened. So most remember, we bought the business literally just before COVID-19. Some of the sales projections we had in our original business plans, we have not met. And part of it, we can probably blame on external forces. We don't want to blame everything in external forces because even though the integration of the business has been done well, the reality is it always disrupt something. So you lose a month here, you lose 2 months here. A good example is we migrate -- we're selling all the new business on the premier system, which is the old Momentum system. That requires quite a bit of training to the staff who actually joined us. Maybe we thought it will take a month or 2 less to get everybody up to speed. So if I have to look at the ZAR 2.3 billion, ZAR 700 million write-down, you could probably say half of it is external, half of it is internal items. But also very importantly, we think the ZAR 2.3 billion is very defendable with the new business plan, and we have faith in the current plans management has to get that business back on track. And I'll sort of make a thing I shouldn't do in these forums, but sales have actually been quite good just in the last month or 2. So early signs are that there's some recovery taking place there. Okay. Then my favorite section. I always like having good stories, venture capital funds. About 7 years ago, might have been 8 years ago, the management team at the time, so I wasn't here, Hillie wasn't here, [indiscernible] was here. I think, anyway, a few of us were here. About 8 years ago, somebody had a very clever idea and they said, how do we innovate in such a mature traditional life insurance company. And one of the ideas was let's become a limited partner in some really good fintech funds because we can actually spend time with these companies, sit on the investment committee, see what's cutting edge out there and we might even get a good return. Okay. So the strategic idea was let's actually have an ongoing dialogue and engagement with fintech companies as a shareholder and hopefully make money in the site. And I can tell you now both the boxes have been ticked. So in terms of learnings, we have some of our people sitting in the investment committees, as I mentioned. We have already taken some of these partners and implemented their product or service in my businesses, so they actually supplied to us. And yes, I mean, I think we have learned a lot. For example, 2 weeks ago, Dieter, who's our Head of Strategy. He hosted a full day in Cape Town where our business units could meet with a lot of these fintech companies to learn a bit about their thinking and so on. So that back box has been ticked. But as a FD, I'm probably even more impressed that invested ZAR 700 million, and it's now worth ZAR 2 billion. And that valuation is actually a little bit below the fund manager evaluation. And there's a list of -- okay, list of winners. So it's a bit of a selective list. But some of these names will be familiar to you. It's a happy money as an example. That's a unicoin, so that's over $1 billion valuation. [indiscernible], they had a recent fundraising round. It's a cryptocurrency exchange was in the news, I think, last week. [indiscernible] had a very successful fundraising in the UK. [indiscernible] they provide the firmware and sort of the wellness tracking capability to a lot of well-known brands of watches and so on. And I mean, so a lot of these companies are doing exceptionally well. So yes, with venture capital, you never quite know. I know [indiscernible] when are we going to get the cash. But I'd rather have this picture now than having lots of failures in this fund. There's a number of winners that look like winners at this stage. Okay. So venture capital. And in the current period, the reason why I had the slide here is in the current period with the ZAR 300 million gain. So of that gain of ZAR 1.3 billion, ZAR 300 million was just in the last 6 months. Okay. That is the end of the financial section of the presentation. So I'll just conclude on a couple of things, maybe just sort of personal observations. I think the one thing is it was quite nice coming back to work this year. Also the fourth way was a bit more modest than we initially feared. If I think of January, February a year ago, came back to the office, claims were massive. We had debts in the business, which is very dramatic actually. It's almost like you're responding and you're chasing things just to get claims paid and everybody is e-mailing me how bad are the results, how big are the provisions. This year, it's more about e-mails are about plans for 2 years in the future and stuff. It's quite nice that people are starting to be a bit more forward-looking again, and they feel comfortable enough that there is a good future out there, and we can make things work. So the energy levels in the spirit is much better than a year ago. Also, I mean, we've always been a very flexible company, and we believe the business units need to decide their own rules in terms of who works from home, who works in a hybrid, who works on the office. Head office knows we don't know much, okay. So we leave it up to the business units to decide on those plans. But we do send out consistent messaging where we encourage people to make sure they spend time together that they innovate, they get to know other teams and so on. So you could say that our view on work from home is we are relaxed, but we encourage people to get together to make sure we have stronger business as possible. And part of the reason we feel that way is that our culture is something that we think is actually one of our stronger points. We had a very interesting exercise recently where we interviewed hundreds of people who left the organization and the most common reason where people said they would come back is our group culture, okay? So that's a nice external type of validation that our culture is highly regarded by our staff. Yes. So those people -- they didn't go to greener parts, they went to their current employer. They welcomed back. Okay. And then similar to what Hillie said, last year, we spent a lot of time in the first 6 months talking about Reinvent and Grow, so basically planning the transition from reset to reinvent. And we also had to respond a lot to external events like COVID and market volatility. This year, everything is a bit more settled. So the business units can really focus on delivery. And the delivery is important because I'm quite fascinated at the buy-in. And I'm yet to come across a staff member who sort of opened the channel some of the tenants of our Reinvent and Grow strategy. There's a very high level of buying into the strategy. And I think if we can get some runs on the board continuously every quarter after every quarter, we'll maintain this nearly 100% belief that we're doing the right things as an organization. And then my top 3 priority list. I do think, like Hillie said, Myriad sales is probably the biggest gap in our group at the moment. You cannot be a profitable high ROE life insurance business without a good protection market share and profit pot. Then Insure, I mean, we say we have confidence in the new plans. But after this impairment, clearly, we are very interested to make sure that it is followed through and the premium income grows there. And then lastly, Africa. The Africa results have been quite volatile and somewhat disappointing. So we need to make sure that Africa does it -- that's a fair contribution to group results in the future. Then last, but most importantly, I think we need to thank our employees once again, the resilience the productivity, the commitment all continues to be phenomenal. I mentioned earlier, our business is very resilient. Our income statement is resilient, our balance sheet is resilient. I think it's because our people are resilient, okay. So those 2 things are definitely not totally independent. So a massive thank you to all the staff who are listening. Well done again in the last 6 months. Yes, we're winning the war, doesn't always we feel like it, but I think we definitely are. Thank you. Dan?

Thank you very much, Risto. Let's give Risto and Hillie another one of applause for the presentation here today. Well done indeed. I'm just looking around who from the group, Dumo is here, Corporate; Guardrisk is here, Herman; Jeanette is here, Momentum; [indiscernible] and Risto here. You have about 4,500 employees have been watching this presentation today. Let's give them a round of applause and thank them for being with us because I'm told it's the first in terms of the online engagement and visual. You are just thanking employees for the resilience and the hard working staff, and they are so keen as well to find out how the company is performing. So they've also been following this. We did say we're going to have a couple of time for a couple of questions. And of course, there are many others that will be addressed in the one-on-one engagements that the executive team has got planned with analysts in the next week or so, but also the media this afternoon is waiting for Hillie, for Risto and Jeanette. But there's a couple I just want to focus on with the time that we have left for us in this hour that have come through on the virtual platform. And I'm going to start with this one first, because you just touched on the Momentum Insure now as we are finishing, Risto. This is from UBS, Michael Christelis. Please explain the timing of the Momentum Insure valuation cut, namely what figure now rather than last year. What triggered it now rather than last year. Do you want to take that, Risto?

Yes. Mike, there's not too much science behind the exact timing. I suppose that the business -- they submitted a new set of business plans that deviated quite a bit from the previous set. So I think if you go back like 12 months, we went that far behind in some of our targets, okay? So it's really this annual cycle of business plan submissions that led to some questions being raised. So there's nothing planned about it. It's just the annual cycle of business planning, strategic planning and stuff, and the latest set of projections is not consistent with the ZAR 3 billion.

Okay. Thank you, Risto. The last question that has come through is from Business Day, [Andrew]. To what degree does the Russia-Ukraine war situation concern you, given its impact on market volatility? And to what extent is it a threat to your Reinvent and Grow strategy. Hillie, do you want to take that?

Thank you, Dan. Thank you for the question. Look, I mean there's luckily no direct impact. We don't really have any exposure to Eastern Europe in terms of any business initiatives or products or clients and so forth. And also, we've looked at all our investment portfolios. There's very, very, very little exposure to companies in Russia and Ukraine and so forth. So I think the direct impact is negligible. But like all other companies, the indirect impact will obviously be a feature. That will impact us in market volatility, maybe it will impact investment returns going forward. Once again, I mean, I think we will continue -- a lot of our plans, if you talk Reinvent and Grow, a lot of our plans are things that we're building, things that we are developing. It's got to do with our market share. So I think we all play in the same field. So I don't think we'll have any excuses coming from the issues in Ukraine or not achieving, let's say, Reinvent or Growth. But clearly, if it impacts the country's economy and the country's markets, then like all the other businesses in South Africa, we will be impacted. And I think the reality is, I mean, unfortunately, I don't think it's going to be over very quickly because -- so it's gone to almost -- I don't know. We don't know how it will pan out, but limited direct impact, Risto mentioned, our balance sheet is strong, our reserving is solid. So we're not overly concerned, but it's clearly not ideal. Thank you.

Thank you very much, Hillie. Okay, and that will wrap up this presentation of the Momentum Metropolitan Holdings interim results to 31st December 2022. Thank you to everybody for joining us live, either on television or on the webcast or live stream, and we're really grateful to those 4,500-odd employees of the group who are participating here today. Now we're going to have to release Hillie, Risto, Jeanette and the rest of the team to go and attend to media one-on-one media engagements. They need a breather because I am told about less than half an hour from now in about 20 minutes, they have to get going. Thank you very much. Please do take care of yourself. Stay safe. Thank you.