Hillie Meyer. Picture: FREDDY MAVUNDA
Hillie Meyer. Picture: FREDDY MAVUNDA

Insurance group MMI’s decision to repurchase shares rather than pay dividends during its 2018 financial year has not been well received by investors, who have sent its share price down 15% over the past year.

MMI reported on Tuesday morning it had reduced its shares in issue by nearly 3% to 1.5-billion during its 2018 financial year.

The insurer said in its interim results it would repurchase shares rather than pay dividends as long as the JSE price of its shares is below their embedded value.

Wednesday’s full-year results indicated shareholders will not receive dividends in its 2019 financial year either, since its embedded value per share was R25.43 at June 30, a 47% premium to the R17.28 it last traded at.

The group, created by merging life insurers Metropolitan and Momentum, reported net earnings declined by 10% to R1.4bn during the year to end-June.

Its top line, which it calls net insurance premiums, grew 6% to R29.9bn.

"It is not easy to turn around a comprehensive financial services company like MMI," CEO Hillie Meyer said in the results statement.

"The maturity of the South African insurance markets and modest short-term macroeconomic growth prospects continue to put pressure on our revenue growth expectations."

MMI uses "diluted core" headline earnings as its yardstick, which declined 12% to R2.8bn.

The decline in diluted headline earnings per share (HEPS) was even worse, falling 21% to 93c from 118c.

The group segments itself into four divisions. The largest is Momentum Retail, which suffered a 28% decline in core headline earnings to R920m from R1.3bn.

Metropolitan Retail’s core headline earnings declined 14% to R570m.

Momentum Corporate managed to grow core headline earnings by 8% to R903m.

The loss contributed by the international division was narrowed to R48m from R166m.

"These losses are in line with our business plans. The overall improvement was mainly due to a R57m reduction in central support costs as we start our exit from some African countries, improved permanent health insurance experience in Namibia, as well as strong profit growth from our UK asset management business," the results statement said.

"Growth in the Ghana, Nigeria, and Lesotho life businesses also contributed to the improved result."