Eleven years later, how far has the Momentum-Metropolitan merger come?

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Momentum Metropolitan CEO, Hillie Meyer says   most of the fixing and reset work that the company needed when he came in 2018 is now complete.
Momentum Metropolitan CEO, Hillie Meyer says most of the fixing and reset work that the company needed when he came in 2018 is now complete.
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  • Momentum Metropolitan Holdings presented its new strategy with an earnings target of R5 billion by 2024.
  • However, the company failed to meet the 2021 earnings targets set in its last Reset & Grow strategy because of the Covid-19 pandemic.
  • But MMH says it has fixed all the basics now, and the next three years will be all about growing its market share.


When Momentum and Metropolitan merged in 2010, there were high expectations.  

The two brands were already well-established in their markets. And when then-group CEO, Nicolaas Kruger, unveiled a new strategy to investors, he promised that MMI Holdings, as it was known then, would be "a leader" in meeting customers' financial services needs.

But by the time Kruger stepped down in January 2018, MMI was going in the opposite direction as far as its financial performance was concerned. The group's new business premiums were shrinking, and so were its headline earnings and share price.

So, came in the new CEO, Hillie Meyer Hillier, with a new strategy, promising to increase the group's headline earnings of between R3.6 billion and R4 billion by June 2021.

Having led Momentum as its MD between 1997 and 2005, Meyer and his deputy, Jeanette Marais, who both returned to the company in 2018, were brought in as the fixers. 

While the UBS data presented by Meyer on Tuesday showed that Momentum Metropolitan Holdings (MMH), which changed its name from MMI in 2019, increased its market share in the affluent retail market to 21% from 14% in 2015. Its market share in the low-income market went up from 17% to 21% over the same period.

And with a market capitalisation of roughly R26 billion, MMH has overtaken Liberty as SA's fourth-biggest life insurer.

The missed targets

However, MMH did not achieve the earnings target set for 2021. The group's headline earnings halved from R3 billion in 2019 to R1.5 billion in the year to June 2020, owing to Covid-19 provisions.

With less than a month left before the end of MMH's 2021 financial year and the pressure to convince investors that the group can deliver, despite the missed targets, Meyer and his team convened an investors' conference on Tuesday to present a new set of goals that the group aims to reach by 2024.

"It was quite a big miss in 2020 in terms of our normalised headline earnings … It's common course that we won't achieve our normalised earnings target for 2021. But I know that bad performance plus [a] bad excuse don't equal good performance," said Meyer.

Still, Meyer said MMH's management believed it did enough under the circumstances and that they've put the group in a position where it can start to focus on growth. In addition, he said most of the fixing and reset work that the company needed when he came in after Kruger's departure was now complete.

Now MMH has set its eyes on growing its headline earnings to R5 billion in just three years from the R1.5 billion reported in June 2020. Some of its operations, such as the short-term insurance business, have promised up to a 20% earnings increase per annum. MMH also expects its health insurance joint venture in India will be profitable by 2024.

Hard lessons from the merger

While Meyer said that the company had made a lot of progress, it has learnt many lessons from its merger. Some of those have made MMH more cautious about big acquisitions or expanding into markets outside of SA.

MMH exited several of its operations in the Rest of Africa, including Zambia, Mauritius, and Swaziland, after new management came in 2018. On Tuesday, he said the group's new strategy would focus on SA. MMH will only try other markets if it is confident that it will be received well by customers.

"We are not going to be in another market in Africa if we don't think we've got a very good chance of winning. We'll only return to countries where it really makes sense, and we see a reasonable chance of success," said Meyer.

MMH financial director Risto Ketola said even if there are countries that MMH might consider returning to, this was unlikely to happen in the foreseeable future because the decision to exit these operations was not just driven by one factor.

Over and above the businesses not performing according to MMH's expectations, the macroeconomic environments were also not conducive in many instances.

Selling the troublesome and loss-making businesses in other African countries helped improve MMH's return on capital to between 11% and 12%. But the firm still has operations in markets like Botswana that take a significant share of its capital, only to deliver single digit returns.

"So, in some of these markets, we have really struggled to build economic profit businesses," said Ketola.

He said MMH is currently debating internally which of the countries are big enough to build proper businesses, and which ones it should accept that it will take longer to get decent returns on capital and whether it should take a long-term view on those, hoping that they'll eventually become bigger. But He MMH's focus right now was turning around its Namibian operations, he said.

"So, Africa is receiving quite a lot of attention."

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