Insurer MMI released a better-than-expected
trading update as the market closed on Friday, warning that its diluted
core headline earnings per share are expected to drop as much as 5% for
its 2017 financial year.
On the upside, earnings could increase 5%, translating into earnings of 190c to 210c
per share when the group reports its results on September 6. Consensus analyst estimates placed the core earnings decline at 10%, or 179.9c, as the insurer battles to recover from its first half-year decline in core headline earnings since the 2010 Metropolitan and Momentum merger.
"The core headline earnings result was impacted negatively by ongoing pressure on revenue growth due to weak returns from investment markets over the past two years," said MMI.
"Core headline earnings also continue to be affected by weak underwriting experience on group disability business."
More policies lapsed than expected in the Metropolitan Retail business during MMI’s fourth quarter, while Momentum’s experience in this regard remained positive.
Adrian Cloete, portfolio manager at PSG Wealth, said the all share index return was only about 1.7% — unchanged from the previous year – which placed pressure on revenue growth at many of MMI’s units.
MMI’s profit fell 5% to R1.6bn during the half-year to December, the result of losing two big healthcare administration contracts and losses on its group disability book. In a nine-month operating period, it appeared to be recovering, with core headline earnings down 3% compared with the previous comparable period, mainly due to improved results.
This led Cloete to conclude consensus estimates could be too harsh. "Considering that the nine months operating update saw core earnings down 3%, the I-Net consensus estimates for 2017 of a 10% decline might be a bit pessimistic in my view."
maakem@bdfm.co.za
On the upside, earnings could increase 5%, translating into earnings of 190c to 210c
per share when the group reports its results on September 6. Consensus analyst estimates placed the core earnings decline at 10%, or 179.9c, as the insurer battles to recover from its first half-year decline in core headline earnings since the 2010 Metropolitan and Momentum merger.
"The core headline earnings result was impacted negatively by ongoing pressure on revenue growth due to weak returns from investment markets over the past two years," said MMI.
"Core headline earnings also continue to be affected by weak underwriting experience on group disability business."
More policies lapsed than expected in the Metropolitan Retail business during MMI’s fourth quarter, while Momentum’s experience in this regard remained positive.
Adrian Cloete, portfolio manager at PSG Wealth, said the all share index return was only about 1.7% — unchanged from the previous year – which placed pressure on revenue growth at many of MMI’s units.
MMI’s profit fell 5% to R1.6bn during the half-year to December, the result of losing two big healthcare administration contracts and losses on its group disability book. In a nine-month operating period, it appeared to be recovering, with core headline earnings down 3% compared with the previous comparable period, mainly due to improved results.
This led Cloete to conclude consensus estimates could be too harsh. "Considering that the nine months operating update saw core earnings down 3%, the I-Net consensus estimates for 2017 of a 10% decline might be a bit pessimistic in my view."
maakem@bdfm.co.za
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