MMI merger settled, growth the challenge

It is hard to imagine the regulator saying Sanlam and Liberty or Old Mutual and Discovery can merge.

Life assurance is a sector in which there has been limited foreign involvement other than through reinsurers such as Hannover Re and Munich Re. But even the companies they have funded, such as New National and Instant Life, barely register in terms of market share.

The merger into MMI, a focused listed life group, was certainly a change for Momentum, which had not concerned itself with investor relations so long as it was a footnote in FirstRand's results. But Metropolitan enjoyed considerable success in its investor days.

These not only showcase the chief executive but also the most favoured line managers. In the MMI investor day this month, only one division, Momentum Investments, was not given any dedicated airtime and no wonder as its investment performance has been poor and it has barely R7bn of third-party assets left.

But MMI's chief executive Nicolaas Kruger is pleased that the group is strong in at least three of its four strategic pillars. Momentum is best known for its distribution business, which it runs with military precision.

In the days when it was allowed to take brokers on exotic overseas holidays nobody could beat its well-choreographed cruising or skiing spectaculars.

Creating different segments

The group is innovative and entrepreneurial, at least in comparison with the life offices other than its former stablemate, Discovery.

One area it needs to do some work on is in-depth market knowledge. Kruger says that until recently Momentum regarded the brokers as its clients, not its customers. It has been trying to increase brand awareness through sponsorship of the Momentum 94.7 cycle challenge, one-day cricket, as well the Momentum Unisa financial wellness index.

Metropolitan has been segmenting its market for many years. The biggest cohort is traditionalists, at 29%, who have a monthly household income of R2,600 and are young, not formally employed and largely unbanked. The smallest cohort is the strivers, who make up 8%, but are more attractive to intermediaries as they have a household income of R18,000/month and are formally employed and fully banked.

Momentum has tried its own segmentation, which is based more on attitudes than on income. They include the "savvy suburban", the "concerned achievers" and the "content conservatives".

All these are firmly in the upper end of the market. MMI wants to grow in the middle market, where it has been weak. It will have to find a whole new range of descriptors for that market.

Solidly profitable

MMI is already a solidly profitable business - since the creation of MMI R5,5bn has been paid in ordinary or special dividends.

It has also largely completed its merger. Systems consolidation of three divisions, Investments, International (Africa) and Health is the final hurdle.

Mark van der Watt, the recently appointed head of Momentum Retail, says the company would like to be known for ease of doing business.

This is quite a contrast to the old Momentum, which never encouraged clients to contact it directly. It now offers a useful budget planning tool, myMoney, which is similar to Old Mutual's 227.

At the very high end of the market Momentum is competing against private banks and stockbrokers with its new wealth portfolios product. Headed by former RMB strategist Wayne McCurrie, it will be available by the end of the year.

Momentum might like to be an innovator but it also follows others who have good ideas. Its retail broker model is similar to Old Mutual's Acsis product and franchises are borrowed from Liberty and Discovery. And Momentum is certainly making life easier for clients through innovations such as its Myriad risk products e-app and its wealth investment tool designed for tablets.

Source: Financial Mail via I-Net Bridge