Mutual & Federal (M&F) is the second-largest short-term
insurer in South Africa, with operations in Namibia, Botswana and
Zimbabwe. It provides a full range of short-term insurance products
to commercial and domestic customers in five principal portfolios:
Commercial including Agriculture, Corporate, Personal, Risk
Finance, and Credit.
Key facts
- Adjusted operating profit
(pre-tax) £103m 2009: £70m
- Number of
employees 2,222 2009: 2,115
- Combined
ratio 92.4% 2009: 98.0%
- Our
brands
Overview
In 2009, Old Mutual plc announced its intention to buy out the
minority stake in M&F, making it a wholly-owned subsidiary. On
completion of the transaction in 2010, M&F delisted from the
Johannesburg Stock Exchange and developed a three-to-five-year
strategic programme to deliver a real step change for the company.
To drive delivery of the programme, Peter Todd was appointed as
Managing Director in December 2010, following Keith Kennedy's
decision to retire in 2011.
Strategy
M&F's new vision and strategic objectives are aligned with
Old Mutual Group's theme of customer-centricity. The strategy aims
to deliver the desired shareholder outcomes by identifying key
market segments and providing them with relevant and suitably
priced product solutions and efficient services through appropriate
channels. The new vision, strategy and five strategic thrusts will
be delivered through the Step Change Programme.
Our vision is to become the short-term insurer of choice,
trusted by our customers to provide innovative solutions to protect
them financially in the event of a loss.
Our strategy is to deliver strong underwriting profit and
revenue growth by building a multi-channel business focused on
delivering value for the customer and fostering close relationships
with our strategic business partners.
The five strategic thrusts are:
- Embed profitable and sound underwriting
processes
- Develop compelling and innovative offerings for targeted
customer and broker segments
- Grow our customer base by servicing them through their
channel of choice
- Deliver value through efficient and customercentric
processes
- Transform our business to benefit our people and other
stakeholders.
Over the next three years, M&F will continue focusing on
implementation of the Step Change Programme to build a leadership
position in the South African short-term insurance market.
Business profile
| Commercial |
The Commercial portfolio is the largest, with a broad spectrum
of customers ranging from small businesses to large corporations.
It covers primarily property, accident, motor, engineering, marine
and crop insurance risks.
|
| Corporate |
The Corporate portfolio focuses on corporate clients, from
mid-size companies to large multi-nationals. Corporate offerings
include protection, fire policies, accident policies and motor
fleet insurance. This portfolio is staffed with specialists in
corporate insurance, supporting the major brokers in this sphere,
with expertise in mining, engineering, chemical production, motor
vehicle manufacture and other major sectors.
|
| Personal |
The Personal portfolio provides domestic household, motor and
all-risk short-term insurance products to domestic customers of all
ages and various financial groups. It offers white-labelled
intermediary-branded products and an inhouse branded product,
Allsure, which provides comprehensive cover. It also includes a
hospital cash plan and personal accident policies as well as
low-cost products covering livestock and informal dwellings.
|
| Risk Finance |
The Risk Finance portfolio, comprising alternative risk transfer
products, is provided by a highly capable team which is well
regarded in the industry as one of South Africa's largest suppliers
of risk financing solutions, primarily to medium-sized commercial
customers.
|
| Credit |
The Credit portfolio is underwritten by a subsidiary of M&F
and is offered within a market segment where it dominates the
market.
|
Strong performance following renewed focus
| Highlights (Rm) |
2010 |
2009 |
% Change |
| Strong performance following
renewed focus |
|
|
|
| Underwriting result |
519 |
140 |
271% |
| Long-term investment return
(LTIR) |
639 |
791 |
(19%) |
| Restructuring costs |
(8) |
(13) |
38% |
| Income from associates |
12 |
- |
- |
| Adjusted operating profit (IFRS
basis, pre-tax) |
1,162 |
918 |
27% |
| Gross premiums |
8,442 |
8,456 |
- |
| Earned premiums |
6,859 |
6,874 |
- |
| Claims ratio |
63.8% |
68.7% |
|
| Combined ratio |
92.4% |
98.0% |
|
| Solvency ratio |
73% |
56% |
|
| Return on equity |
19.0% |
21.2% |
|
| Adjusted operating profit (IFRS
basis, pre-tax) (£m) |
103 |
70 |
47% |
Market context
In 2010, although market conditions had improved compared to
2009, tough economic conditions prevailed for consumers, and
spending was constrained.
The improvement in market conditions resulted from several
factors - including successive interest rate cuts during the year,
which reduced the cost of debt; consumer inflation declining and
remaining within the target range, and improved customer
confidence. GDP grew at the expected rate of 3.0% by the end of
2010, a turnaround from the 1.7% decline in 2009. Car sales
increased as a result of car rental company purchases for the 2010
Soccer World Cup, and consumers bought motor vehicles in
anticipation of the new CO2 emissions tax. Lastly, there
was growth in the short-term industry market - particularly in the
mass market area, where penetration is still low.
On the other hand, challenges were presented by debt-income
ratios and unemployment that remained high, constraining spending,
particularly retail expenditure. Market competition has intensified
with the entry and growth of direct businesses, aggregators and
banks in the shortterm insurance space. In addition, the short-term
insurance industry has had to face increased legislation such as
the Financial Advisory and Intermediary Services Act (FAIS)
Amendment to the General Code of Conduct enacted in October
2010.
Boosting financial literacy
692,000
Over the last three years we have reached over 692,000
children
"By investing in financial literacy, we're not only benefiting
the communities we operate in but also increasing the potential for
new customers in the future."
Michael McCann, Regional Sales Manager, Mutual &
Federal
Managing Your Money is one of our financial literacy programmes
run by Mutual & Federal. It helps teachers in South Africa to
prepare effective and relevant mathematics literacy lessons by
providing free training workshops and printed and multimedia
resources that are fully aligned with the school curriculum.
The programme is helping hundreds of thousands of young people
to set out on the path to financial independence, and demonstrating
our commitment to membership of the South African Insurance
Association and the Financial Sector Charter.
