Nostalgia for the good times
Will MMI get its groove back?
New CEO’s assertive and creative approach is expected to help the group regain some of the ground it has lost
Last year’s MMI results certainly indicated that change was urgently required at the group. Headline earnings were unchanged and remain below 2013 levels, in contrast to the early 2000s, when 20% growth was considered quite ordinary. And the value of new business, a key indicator in life insurance, was down by almost a quarter.
Outgoing CEO Nicolaas Kruger explained his vision with all the charisma you would expect from an actuary. He did himself no favours with his complex presentations about centres of excellence rather than straightforward presentations about profit centres.
Herman Bosman, CEO of Rand Merchant Investment Holdings (RMIH), which is MMI’s largest shareholder, says it has been clear from its market performance that MMI has lagged its competitors over the past number of years.
After nine years at the top it was time for Kruger to move on.
Whether he was pushed or not is still the subject of speculation. He is maintaining ties with the group, staying on the actuarial committee of the board (though not the main board itself), the Guardrisk board and the Indian business’s board.
He has been at Momentum for 26 years, and at a little over 50 at least has the prospect of a second career. Sadly, Momentum’s status as a premium brand declined during his tenure.
He did some good deals. Guardrisk, the cell captive insurer he bought from Alexander Forbes, is one, though R1.6bn was a high price to pay. The joint venture to distribute through African Bank branches may have been a good move. But the acquisitions in Africa were mediocre and many have been discontinued, though the health insurance joint venture with Aditya Birla — a giant Indian conglomerate — looks promising.
The acquisition of Metropolitan was Kruger’s boldest act, adding diversity to earnings: it now has about half the earnings of Momentum Retail. Yet Kruger could do nothing when FNB moved the bulk of its insurance business in-house. And MMI is beginning to regret its decision to run Momentum and Metropolitan separately, with their own infrastructures.
Deputy CEO Mary Vilakazi, a former PwC partner, has been given responsibility for both retail businesses, with the intention of bringing the back and front office functions closer together. Vilakazi was widely expected to be appointed CEO when Kruger left.
But in what could be seen as a step backwards for black economic empowerment she has been passed over in favour of former MD Hillie Meyer. Meyer left in 2005, so it would be similar to Anglo American bringing back Tony Trahar or Sappi bringing back Eugene van As. But there is nostalgia for the golden Meyer years when assets grew from R25bn to R250bn over 10 years.
Of course it was a different era, when marketing to brokers was all about Caribbean cruises and buckets full of gin and tonic. But Meyer has kept in touch with the new life insurance regime as a director of Alexander Forbes, Gen Re Africa and insurer Natsure.
All the fun and games are now prohibited by the Financial Services Board. Bosman says RMI knows Meyer well and believes his assertive and creative approach will assist the group to regain some of MMI’s lost ground and develop an exciting group of future leaders.
Former colleagues say Meyer understands sales intimately, which will be a critical skill for a turnaround. With hindsight Kruger perhaps should have remained chief actuary.
Vilakazi will certainly be among the group of future leaders. Meyer’s contract runs for just three years, so Vilakazi, who is 41, could start a long run as CEO in 2021. Provided, of course, that she makes a success of the integration of the retail arms of Metropolitan and Momentum — not so easy, given that Metropolitan still operates from Tyger Valley and Momentum from Centurion.
It might be time to bite the bullet and operate under one brand — much like Sanlam when it discontinued the African Life brand.
Meyer’s experience of Momentum’s takeover of Southern Life back in 1998 will be invaluable. Southern, too, was based in the Cape. Meyer’s takeover of midsized Sage was also quite seamless. Similar bulking-up initiatives could be on the way.
Meyer has managed to attract Jeanette Marais back to Momentum as deputy CEO. No doubt he looked enviously at the R250bn in unit trusts she has gathered at Allan Gray (which is neck-and-neck with Coronation).
Marais is one of SA’s leading experts on broker distribution. She will run the Momentum Investments centre of excellence (Meyer will have to find a less pompous name) and marketing and distribution functions where
she can add value. She has been appointed executive director.
Joining her in the boardroom is Risto Ketola, who has been promoted from chief financial officer under Vilakazi’s watchful eyes to financial director. Not your average bean counter, Ketola was a top life insurance analyst who understands the business models of MMI’s competitors intimately.
MMI has shaken off the denial — it seemed complacent and to be treading water.
Under Meyer’s new leadership the group at least has a chance.