Investor relations international to Merrill Lynch

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Slide1: 

One-on-One Investor Conference Merrill Lynch March 2002

Who we are: 

Who we are NAC is the listed holding company of the Metropolitan group, previously listed as Metlife Metlife has a history of more than 100 years in operation 1986 Metlife lists on JSE (South Africa) 1993 Metlife in the first real black empowerment transaction in South Africa with NAIL 1995 Metropolitan Health is launched 1995 Metropolitan Employee Benefits is launched 1996 Metropolitan Namibia is launched 1996 Metropolitan Botswana is launched 1998 Metropolitan acquires the CU Life group of companies 1999 Metropolitan acquires the healthcare administration businesses of Bankmed 2001 New Africa Capital financial services group is listed and unbundled from NAIL

Slide3: 

Legal structure

Business concept: 

Business concept “World-class Africa-based business providing aspirational individuals with customised financial services that protect and grow their assets”

Market segmentation: FSMs (financial sophistication measures): 

Market segmentation: FSMs (financial sophistication measures)

Market position: 

Market position Aim to dominate the low income sector (FSM 2,3,4) Aim to be significant player (no 2) in the middle income market (FSM 4 + 5) Distribute niche commodity products in the middle/upper income sector (FSM 6 + 7) Note: FSMs 2 - 5 represent over 80% of the economically active people in Southern Africa

The Metropolitan brand: 

The Metropolitan brand Third strongest insurance brand in SA in terms of awareness nationally “Financial sophistication measures” market segmentation Identified current financial behaviour, financial aspirations, channel and service requirements at each FSM level Alignment of products, distribution channels and service models to FSMs

Market share: 

Market share 9% of the SA individual life recurring premium market 3% of the SA individual life single premium market 3% of the SA employee benefits market - with significant potential for growth 15 % of the SA medical scheme market 15% of the Namibian life insurance market 25% of the Botswana life insurance market

Strategic projects : 

Strategic projects Re-modelling of life business Established a new broker distribution channel - MARS Established an empowerment barometer Capital management continued ...

Re-modelling of life business: 

Re-modelling of life business 16 offices closed, 130 positions redundant Call centres in Cape Town and Johannesburg expanded Joint ventures with Post Office and retail outlets Direct sales staff reduced from 2 800 to 1 300 Distribution channels aligned to FSM market segments Single client data base established for over 3 million clients, linked to call centre Geared up for new market regulations PPR and FAIS New business focus on Gauteng province Strategic projects continued ...

New broker distribution channel - MARS: 

New broker distribution channel - MARS Metropolitan Advisory and Retail Services Strategic plan determined July 2001 Operational infrastructure established August 2001 118 broker consultants appointed Products selected from group & training given Established 1500 broker contracts Target break-even within 12 months Strategic projects continued ...

Empowerment barometer: 

Empowerment barometer Comprehensive measure of empowerment Wide consultation and support User-friendly computer based analysis Pillars of measurement: ownership employment equity skills development procurement social involvement Strategic projects continued ...

Capital management: 

Capital management Total assets R31bn Total liabilities R25bn Total surplus R6bn New structure allows for easier and more transparent capital management and disclosure Actual capital available for expansion ±R2bn (held mainly in large listed equities) R280m already used for a share buy-back CAR cover of 3.8 times 30 June 2001 Strategic projects continued ...

Main drivers of headline earnings: 

Main drivers of headline earnings 6 mths to 15 mths to June 2001 Dec 2000 % % Metropolitan Life 45 42 Metropolitan Employee Benefits 19 14 Metropolitan Health Group 11 2 Metropolitan Asset Managers 3 2 Metropolitan Odyssey 3 1 Commercial Union Life 7 9 Shareholders’ funds 18 28

Strengths: 

Strengths Strong brand and business in core markets Established asset management team Market segmentation and distribution Profitably managing smoothed bonus business Strong corporate governance Leaders in AIDS research & risk management Diversified sources of income Strong positive revenue inflow

Smoothed bonus business: 

Smoothed bonus business High demand for this product set Tight asset / liability management Asset portfolios backing reserves are: clearly ring-fenced and allocated balanced and diversified not containing any group strategic investments No shareholder subsidisation of bonus rates Clearly documented internal governance

Threats: 

Threats Persal HIV/AIDS Cost management Pressure on disposable income in low to middle income market

Persal update: 

Persal update Persal is government’s employee payroll deduction system Metropolitan has approximately 400 000 Persal customers with 605 000 policies Persal traditionally provided 40% of new business From October 2000 to end June 2001 no new business was allowed to be submitted to Persal From July 2001, new Persal insurance deductions limited to 15% of an employee’s basic salary 140 000 clients were over new limits - of these clients about 40% of portfolios have been rationalised to date

HIV/AIDS: 

HIV/AIDS Metropolitan/Doyle-model widely used to forecast impact of HIV/AIDS on business and in the workplace Metropolitan Employee Benefits consults to companies with regard to impact on structuring of EB benefits Mortality experience is worsening due to AIDS, but claims experience is in line with our pricing/forecasts Rate of new HIV infections in South Africa has probably peaked, but prevalence is still increasing Estimated 20% of all economically active people in SA are HIV infected - large regional variations

Expense management initiatives: 

Expense management initiatives Balanced approach - focus on costs and growth Target is to match actual costs to available cost loadings within 12 months Targeted actions to achieve required reduction in cost levels Continue re-modelling and alignment of retail businesses Significant focus on improving persistency Manage product portfolio and margins

Opportunities: 

Opportunities Middle income market is THE growth market Tax cuts in new budget year Target growth in the Gauteng market Expand further into Africa Continue to grow EB, health and asset management businesses based on our successful track record and empowerment credentials

Targets: 

Targets Target share price at a premium to embedded value by: Increasing individual life new business profit margins to 15% on a monthly basis by end of 2002 Increasing market share of recurring premium business from 9% to 12% by end 2003 Growing embedded value per share Continuing share buy-back to enhance shareholder value Generating ROEV that exceeds cost of capital Increasing contact with institutional shareholders, both local and international

Additional information: 

Additional information

How do we operate: 

How do we operate * Distribution channels # Product houses

Distribution channels and target markets: 

Distribution channels and target markets FSMs Metropolitan Life Direct Writers - middle and lower income markets 3 & 4 Metropolitan Life General Intermediary Channel - middle income market 3 & 4 MARS - middle and upper income markets 5,6 & 7 Metropolitan Group Schemes - lower income market 2,3,4 & 5 Metropolitan Direct - middle income market 4 Metropolitan Employee Benefits - corporate business in private, government and semi-government institutions n/a Metropolitan Namibia - all markets in region Metropolitan Botswana - all markets in region

Volume of shares traded: 

Volume of shares traded

People: 

People Empowerment Creating a NAC empowerment index Establish balanced scorecard-based reward systems share incentive schemes profit sharing

Business process objectives: 

Business process objectives Improve market research and segmentation Improve service levels and quality Align products, distribution and marketing with target users Applied FSM research to segment the market Client service remodelling

Customer objectives: 

Customer objectives Increase market share in middle income Gauteng market Increase share of government business Increase business from alternative channels Increase assets under management Proactively engage government Establish a CRM strategy Establish a PRM strategy Project Goldrush Brand and communications strategy Establish broker channel & e-business function

Financial objectives: 

Financial objectives Grow shareholder value shareholders’ operational profit embedded value growth Achieve target returns on capital employed Produce top quartile investment returns Achieve continuous improvement in expense productivity Balanced scorecard measurement Capital management strategy

Financial highlights : 

Financial highlights Growth in embedded value Continued increase in assets under management Growth in total premium income Positive net cash flows Sustained growth in EB & Health As at 30 June 2001

Slide33: 

Funds received from clients

Management diversity: 

Management diversity * The designated group includes blacks, coloureds, Indians, white females and the disabled 31 December 2001

Shareholder profile: 

Shareholder profile * Net of 28 million treasury shares acquired for R234 million