MONY Group plc (MONY) Earnings Call Transcript & Summary

Well, thank you, and welcome, everybody, and thank you for making the time to join us this morning. I'm also joined by Scilla Grimble, our Chief Financial Officer. So you have seen this morning that we've reported a strong trading performance, but also importantly, momentum in our strategic delivery. Revenue in '22 was GBP 388 million, that was up 22% or 8% if we exclude cashback. And profit return-to-growth EBITDA up 15% to nearly GBP 116 million. But in that -- within that trading, money has clearly been to standout performer. It was up 37%, really driven by strong banking product availability, but also our travel channels also had a good year, and that was helped certainly by the recovery in the travel market. Gross margin was down 2.7 points to 57.7%, mainly due to quicker consolidation, and we flagged that with you last year. Confirm 23% EBITDA guidance in line with market expectations. And we've also maintained the full year dividend at 11.71p. Based on our strategy, we've made good progress across the course of the year in becoming the scalable tech-led savings platform that we've been speaking about over recent months. We've centralized our data on the Google Cloud Platform, which alongside our market-leading PPC, CRM and SEO platforms will lay the foundations for future growth. We've continued to platformize our tech by that we mean building features once and then deploying them across our multiple brands, and we're making good progress there. And our 3 acquisitions of 2021, Quidco, CYTI and ITG are on track. So all of this sets us up for the next phase of our strategy, where we can use data to drive greater cross-sell product innovation and enhanced offers to users as well as customers as well as providers. So with that summary, I'm going to open it up for questions. Can we take the first question, please.

Sure. [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Andrew Ross from Barclays.

Great. I've got 2 to get us started. The first one is for in that pre-recorded message on the presentation. There's a lot of good things to come across in terms of what's going on internally around kind of data tech, consumer experience. I guess the question is how much of this is baked into your expectations for 2023? Or put another way, as you start to release on the bet, what kind of tangible benefits could we start to see in terms of earnings? And then the second question is about your market share in home and motor insurance. I think you talked about getting your business back to growth in Q4 in motor in a market that was down a bit, so you're starting to gain share. Hoping that you could talk a bit about what's driving that sustainability of it? And then also could that start to follow in home insurance.

Yes. Great. Thanks, Andrew. So firstly, the progress that we're making on data, tech and consumer experience. If I kind of step back to what we're trying to do on disposals. So firstly, we have to begin to communicate to customers that they can make savings across a broader portfolio of opportunities that perhaps they had historically done, particularly with Moneysupermarket. And so you've seen that come through, firstly, in our brand work. Secondly, we have to get our data in the right place to be able to understand what consumers do and then do with us, so we can begin to deploy next best product suggestions in the way that you would see in other categories and expect to work in this sector as well, but perhaps in a way that it hasn't done previously. The next phase of that will then be to change for customer propositions to begin to enable customers to save more money rather than go through relatively singular journeys in terms of exists today. The first part of that is the question set. We've talked about progress being made on that. We're making good progress there, but there is more way to go. And then that will be essentially aggregated in terms of the revised proposition later in the year. So your question in terms of tangible benefits for '23. I think the way that will first begin to manifest itself is probably in terms of pound notes, people beginning to -- just in customers do more with us. It's going to take time for consumers to begin to relearn that they want to come directly, which is effectively what is at the heart of this strategy, and that will take a couple of cycles of renewal to begin to wash through. So I think what we're saying is stable margins across '23 and pushing any progress on that out to years beyond as consumers begin to relearn how the proposition works. That's number one. Number two, so market share in terms of home and motor, I think I said very clearly, we needed to do more there, and we've got a lot more happening. So we ended up with a strong market -- we can't talk about market shares, as you know, but we did end up with a stronger market share in motor at the end of the year to where we began. Lots of things happening there, and the leaders really for motor are quite similar to where they are for home, but we've been able to turn a lot of the smart funds from our PPC bidding system, SA360 to optimize PPC. The MoneySuperSeven campaign, which is resonating well, talked about car insurance. We got better CRM coming on the way. We're able to support providers in new and different ways in terms of sorting their pricing out -- we've got B2B up and running now. And I'm including Quidco in that. So one of the benefits of platformization is that we can then deploy something like car aggregation to multiple different areas of the group. So you saw 60-plus going live on money-saving experts in the middle of the year. We actually put it live on Quidco last week, and we've got 2 B2B partners signed up on motor as well. So there's a similar strategy we'll be rolling out on home, but I'm confident that we've got a lot happening to begin to move things in the way that we described.

Very helpful. Just to clarify one of the answers to your first question. You talked about stable margins across '23. Did you mean stable gross margin to then clearly, the EBITDA margin will be a function of how much the top line growth you've given kind of SG&A guidance. Okay. Cool.

That's the clarification. We're ready for the next question.

We're now going to proceed with our next question. And the questions come from the line of Jo Barnet-Lamb from Credit Suisse.

Three from me. Firstly, with regards to improving performance in insurance and specifically car & home, you stated to that 1/3 of car insurance providers have launched new products through the year. Can you comment on home? Are those products coming and it's just lagging? Some comment around that would be great. Secondly, when we think about travel insurance dynamics, you stated travel insurance is 20% ahead of pre-pandemic levels. And you mentioned one driver of this was the pandemic trend towards higher-priced travel insurance products. How much of the boost was that? I guess one way of answering the question maybe would be what the travel insurance volumes do and where are they versus pre-pandemic? And then the third question, with regards to the weakening conversion in loans, is that sort of a consumer-led problem with consumers sort of misjudging the macro and what they can get? Or is it in some way a product or provider-led problem? Just any color you can give around that to help us how we think about that into '23.

Thanks, Jo. I'll take the first. Scilla, do you want to pick up the second and maybe we'll go kind of go a third as well. So yes, I think obviously, car is a more profitable product for insurers. And so it would be natural for them to perhaps focus their attention to their first before kind of moving on to home. And what we have seen, particularly with providers who have big back books is they have to think about new go-to-market strategies in the light of a regulation, which started some 12 months plus ago now. So yes, I think we have seen quite a dynamic marketplace for motor. We've seen new products, new brands beginning to launch. And we gave a flavor of that in the overall presentation. We have seen less of that in home, but I'm fully expecting that, that will start to come down the line as well. Scilla, do you want to pick up the question about travel?

Sure. So travel revenue last year was 20% above 2019 or pre-pandemic levels. So you'll remember this is one of the few channels where what we're paid is linked to the value of the insurance policy. So it sort of commission-based rather than fixed fee. We saw last year, volumes were running at about 85% or so of 2019 levels. So I think really, what we're expecting as we go through this year is that volume recovery to continue to come through, but maybe some slight shift in terms of the type of policy people are taking out as that confidence in travel, rebalance with fewer restrictions and so on.

And then thirdly, on money. I think, Jo, you have seen everyone on the call, have seen in the Bank of England data that shows that consumer credit is backing in growth overall after COVID. And I think one of the things we would observe is that banks are better capitalized there. So we wouldn't be expecting perhaps the issues that we saw in the last recession. I don't think that about 2008, 2009 recession, I don't think there's going to be a read over there. So at the moment, we are not seeing any significant issues coming through on eligibility. So there's something really was related to the many budgets that we saw essentially products were pulled and then were repriced, and particularly on consumer loans over credit cards where that repricing was more significant. So it does feel more about the numbers and the prices that the consumers being now versus what they were seeing previously? And why whilst it does apply to both credit cards and loans, I think it does apply to loans more than it does to credit cards.

Yes. The slide on that, Jo, as we see in our data and I think we shared this during the pandemic. We can see how many visitors get pre-approval for loans or credit cards, those who get their results and those in the middle, they get results with no pre-approval and we're not seeing any significant change really in terms of the ratios in that is exactly as Peter is saying, when it comes to the results table, they're seeing higher prices than they expected and therefore not converting. Then the final point, I think some people might say, well, why was loans running ahead of cards. Partly pricing and loans moved faster. And also, I think when you think about our type of user, often they're using the personal loan for something which is slightly more discretionary in nature, so it can be for improving their home or a new car or something. And obviously, price factors into that a little bit more.

I think we're ready for the next question.

So we are now going to proceed with our next question. And the questions come from the line of Giles Thorne from Jefferies.

First question is on the competitive landscape. We've seen some major movements from us over the past 6 months or a year to compare on a rebrand. And then RVU is sold at European assets and into on the U.K. So it'd be interesting to see or more over to here, what you're seeing in terms of competitive landscape? And in particular, RVU build like or more of it, you switch Confused.com are the more serious threat here, but any color would be helpful. Second question is on taking control of Podium. Just be interesting to know the logic and whether we can expect to see that accelerate your portion of the mortgage segment. And then finally, back on the question of money and the interstate between rising cost of credit and positive living crisis. We've spoken in this call and in the materials about the drop in conversion. I'm wondering if this is just going to be a temporary thing. Essentially, as consumers come out of promotional periods, especially in credit cards and force them to achieve price product that's going to be available to them. So I guess the question is how long do you think you'll see a compression and conversion around credit.

Okay. Thanks, Giles. I'll perhaps take 1 and 2. Scilla, do you want to pick up 3. So in terms of the competitive landscape, I think that somebody will be still as competitive as ever, and we're not seeing yet any significant changes. So yes compared to a rebrand, and I think there was some advantage given to them in terms of SEO certainly for a period of time. But I think the go-to-market strategy with PPC and TV advertising feels pretty consistent with what we have seen in the recent past as well. And I would observe that, that is the case for competitor market and Confused. Obviously, we had Amazon coming into the market. That isn't important to say that isn't price comparison. So the offering one product to consumers. They've got 3 people, 3 providers on the panel versus our 60-plus providers. When I set a standardized product, you kind of get a certain amount of contents cover and buildings rebuild cover. We have something that obviously meets demands and needs of the various consumers which come on to our website in an appropriate way. So I would observe that, that hasn't had much of an impact, certainly in the first 3 months that it has been operating, and we haven't seen much change in any of our key competitors in terms of their go-to-market strategy. So in terms of Podium just to flag that for others on the call in terms of what's happened there. So in December 22, we increased our interest in products from 50% to 52%, essentially giving us control. Fair value of that consideration was GBP 1.6 million. We've got a call option to acquire the remaining 48% of Podium in 3 years' time. I guess I'm again cell by stepping back and saying, look, mortgages is still a very big opportunity. It's a high-value market. Commission -- breaker commission is about GBP 500 million that we estimate. I think what's important here is that as we begin to bring our data together, we have a more sort of user-centric view of our customers, controller Podium is going to enable us to control those journeys in the way that it has been with our CYTI acquisitions for pet life and travel insurance, we can begin to use that data in a much more integrated way. We're making good progress with Podium. So we've got physical connections with 3 of the big lenders for remortgages that nationwide in that Western Santander. We've got home purchase, the efficient principle now live on NatWest, product transfer integrations with nationwide NatWest, Skipton and LEADs Building Society. We have built locked-in customer user experiences so they can retrieve out searches. We've got live chat going now. We've got a market-leading affordability tool on MSC. So I think we're doing all the right things, and we can see the strong commercials coming through from these deeper lender integrations. But it's just a slower burn in terms of what that means in terms of overall revenue. And I think that hasn't probably changed from the last time we have the conversation. So I hope that answers the question. Scilla, do you want to pick up on that point.

Sure. Thanks, Giles. So really, just in terms of that conversion, I think your question was how long do we think that compression will be low. I mean, firstly, just to sort of put it a little bit in context, obviously, I'm not giving any guidance that, that's going to significantly impact gross margin going forward. So just the utmost clarity, I'm not flagging anything like what we saw during the pandemic, and you can take a view, and therefore, on how much compression conversion there is given borrowing 75% of the revenue of the Money vertical. But then specifically to again, carve it into cards and loans and obviously, card is a much larger proportion of that borrowing channel than loans. I think -- I mean you're right in your -- I think your hypothesis, the cars, particularly for our type of user, it's often the balance transfer period that will cause an improvement in conversion and wide growth of compression, conversion, obviously, given what's been happening to rates and to some extent, expectations in terms of delinquency, those BT periods have been brought in, but that could change as rates move or expectations of further rate changes move on the go forward in '23. On the loan side, I think I sort of gave some of the -- what we've seen in my response to Jo. I think in terms of that conversion, compression, part of it will also be linked to their own sort of personal confidence. So to the extent to which their own back pocket is being squeezed, I think those rates being slightly higher obviously leads them to their own affordability in terms of the user. So I think part of it will depend on what we're seeing on wage inflation this year versus CPI.

Thanks, Giles. Can we take the next question, please?

We are now going to proceed our next question. The questions come from Ciaran Donnelly from Liberum.

Kind of one following on from Andrew's questions earlier. Just in terms of move to SA360 and Braze, et cetera, you guys have pointed to kind of the benefits around increased marketing efficiency. I guess just in terms of taking a step back, how should we think about marketing margins going forward and the potential kind of over the medium and longer term? And then also just kind of tangent for that in terms of cross-channel inquiry, what should we think kind of a sensible level that you think you can achieve with respect to that? And then secondly, I guess, it wouldn't be a conversation without talking about AI at the moment. So in terms of kind of the, I guess, notions around search dying and what AI is going to do to that in terms of consumer interaction with that going forward. I'd be interested to hear your thoughts around that and how any change to kind of consumer search will affect your business?

Thanks, Ciaran. Maybe I can sort of blend those 2 answers -- those to 2 questions in a way. So benefits to with benefits of SA360 and Braze. And I think you should see this in terms of -- for the applications that sit on top of our now centralized data. So the more we know about a customer, the more we can then deploy that data real time and actually using AI in the case of SA360 to identify opportunities to bid more effectively in a more targeted way, in a more real-time way, in a more accurate way in terms of the revenue we're getting off the back of it. So those marks are rolling out now, essentially, the platform went in, in the first half of last year. Really, the second half of last year, we were able to tendon more and more of the smart. There's still some way to go on that in '23 as well. But I think that all gets wrapped up in the comments that we've made about margins now. In terms of cross-channel inquiry, I think the point I was trying to make earlier when I was anteing Andrew's question was that we've got to get the proposition working in a different way in price comparison and we've gone through a series of foundational changes to how our technology works to enable that to happen. So essentially, what we're wanting to be able to do is to dynamically offer customers additional savings opportunities when they're with us on site, and we're then wanting to begin to attract them directly. So that doesn't really happen to mid-sector in the way that it happens in other sectors. Clearly, we want that to be a greater number than it is today, but we're not going to put any specific guidance in terms of what we're targeting there because we have to begin to prove that out. In terms of AI and search dying, I just don't think that's probably a short-term issue for this business. I think the application of AI within the existing way that we do things, provides an opportunity rather than something that we should be more immediately concerned about. We keep on top of all this as things go better. Can we take the next question, please?

[Operator Instructions] We're now going to proceed with our next question. And is from the line of Rahul Chopra from HSBC.

Yes. I have 3 questions, if I may. The first is around the money price guarantee. Could you just give us any implications on volumes and gross margin? If you could please quantify any tailwinds to volumes and et cetera, on price category seen and margins as well? That's the first one. The second, in terms of insurance switching volumes obviously has helped by strong pricing tailwinds. Basically, I just wanted to understand your thoughts on where do you expect this switching volumes to stabilize as the price converge between existing and new insurance policies? And the third point, in terms of FT addition of 170 head count, could you give us more sense of color in terms of where -- which areas too? Or is it probably the marketing audits in tech? And just probably what's driving that?

Okay. Thank you. I struggled to catch the third question there. We couldn't just -- on someone is putting it in front of me now, headcount reduction. Okay. So let me start on the price guarantee, which is on our general insurance products, just to say it has a negligible impact on margins. So we know we're pretty price competitive across most categories where we operate in these insurance areas, the customer can and gets the best deal with us. This is a really nice way to begin to communicate that to them. But if they could find a better deal somewhere else, but they can begin to get some conversation from us for that. But the reality is that it has a negligible impact on margins overall. The second question was about...

Switching volumes in insurance.

So switching volumes in insurance. So forgive me if I'm repeating myself, but if we look at what happened across H2 -- sorry, H1 and H2, '22, I think that's really interesting. Car and home was down 10% or 5% as we've said across the course of the year. But I think what was really interesting was the shape of that double digits in H1, single digits in H2, a Q4 exit of minus 4%. And we've seen that trend continuing, that improving trend continuing into '23. Premium inflation picked up across the course of the year. Car premiums rose 24% home insurance by just under 8.5%. That essentially is as insurers began to catch up with the rising cost of claims. We see there's more premium inflation coming through in '23 as well. And I think that then means that, that consumers are going to clearly look around to get a better deal. So that should be good news for us finding opportunities for them to get better value with somebody else essentially. We're seeing providers adopting their acquisition strategies, as we've already said, particularly in H2. So there's plenty of new products, new brands out there, which are going to be able to offer a consumer that value if they're not finding that with their existing provider. So combine that with the fact that 1 million for people every year, change the risk profile, they're buying a new house, new car, we have an accident, I don't have a driver all those sorts of things. The competition will always exist. But the consumers had price comparison is the place to actually come to. I think we're optimistic that this is going to be a stronger year than '23. And we're going to get into our sort of new normal, I think across the next few months in terms of what the industry looks like post the regulation. I think the final question was in terms of headcount reductions. So we're operating on 170 heads in the core business, less than we did at the start of 2020, even with the 3 acquisitions, I think that's 50-plus heads less if we kind of look at that in total. Effectively, we're always looking to begin to automate to begin to optimize, begin to take out duplication. I think we've made some very good savings in terms of how the organization works as a result of efficiency. But if there are smart things to do going forward, new opportunities, we'll always look to do those in the right sort of way.

We have no further questions at this time. I'll now hand back the conference to Mr. Peter Duffy for closing remarks.

Well, thank you very much for taking the time to join us, everybody, this morning. I think many of the people on the call we will be meeting face to face over the coming days and weeks. So we look forward to continuing the conversation with you then. Of course, we're here if you have any further questions in the interim. So thanks again for joining this morning. Look forward to seeing you soon. Bye-bye.