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Over the past year, our strategic objective to transform Momentum from a successful to a significant insurance-based financial services company gained further impetus.
At the end of March 2010, we announced our intention to merge with Metropolitan, based on the compelling business case emanating from the complementary nature of our operations. The merger will be one of the largest transactions in the South African financial services industry in 2010. The response of analysts and commentators to the transaction was been overwhelmingly positive from the outset.
During the extensive due diligence investigations, the fi lings for regulatory approval and the process of finalising the terms of the merger, Momentum's employees continued to focus on "business as usual". This was not only to comply with the stringent requirements of competition law as it pertains to mergers, but to ensure our clients enjoyed uninterrupted and high quality service.
The process of merging distinct entities such as Momentum and Metropolitan is long and complex. It has been important to keep our employees positively engaged in light of the significant changes implied by the merger, and informed of progress in the merger process on a regular basis. Throughout the process, it was vital that our people remained committed to living our values of Innovation, Awesome Service, Accountability, Integrity, Teamwork and Growing People. Employee communication over this period required a careful balance between these important objectives and the strict confidentiality limits of competition law.
The merger announcement and subsequent planning process dominated the fi nal quarter of the financial year. However, the significant events that took place in South Africa, and Momentum's contribution in relation to these, are important to note.
The FIFA 2010 Soccer World Cup™ was an incredible opportunity for our country as well as for positive employee engagement. Momentum created a fan zone at our head office in Centurion to ensure our employees were able to enjoy this once in a lifetime experience to the full. Momentum also took the opportunity to host our employees and clients at various matches around the country. These were truly special occasions and I would like to congratulate the organisers and volunteers that made the 2010 FIFA World Cup such a success.
Most of all, I congratulate the people of South Africa for standing proud and united, and for being such gracious and enthusiastic hosts to the world. I believe the spirit of togetherness we showed as a nation, and the reputational benefits of successfully hosting the greatest sporting event on Earth, will continue to be evident for a long time to come.
South Africa's emergence from the economic recession has been slow but steady. Our country remains exposed to the developments in the global economy and the risk of a slow-down in the global economic recovery remains very real. In this uncertain economic environment, Momentum posted solid financial results despite slower new business growth. While the disposable income of South African consumers has recovered to an extent, debt levels remain high. Further strengthening of consumers' balance sheets is required before new business growth will recover.
Momentum continues to engage with our stakeholders regularly to anticipate and manage the issues that are most material to them. During the past year, we again conducted customer satisfaction surveys to measure our service levels. Our primary goal here is to ensure we meet our clients' expectations in their interactions with Momentum. This is in line with our value to provide Awesome Service and to retain clients in the current economic climate. The survey confirmed that we are meeting, and in some areas, exceeding their expectations in the service we provide.
In relation to our employees, the implementation of the Standard Integrated People Practices (SIPPTM) and the People Expedition projects are significant initiatives that underpin our value of Growing People. Our people are our greatest asset and the roll out of these projects will go a long way to ensure our people are empowered to take control of their careers, and we are able to attract, develop and retain the top talent in the industry.
Corporate Social Investment (CSI) continues to be one of the primary ways in which we interact with the communities where we operate. Momentum allocates one percent of our post tax operating profit to CSI (the Financial Sector Charter Target is 0.5%). Due to the impact of the economic downturn, our CSI spending was reduced. However, our commitment to get involved in our communities has not diminished. Momentum's volunteers continue to give of their time and skills to social projects in various communities. I am very proud that they were finalists in the 2009 Mail and Guardian CSI awards.
As a financial services company, Momentum is considered to be a medium contributor to carbon emissions with an average of 4 CO2e per employee per year. Our largest source of emissions comes from electricity usage. Given the problems South Africa faces in its electricity demand and supply balance in the next few years, and the need for greater energy efficiency, Momentum has implemented measures to reduce electricity consumption, while at the same time ensuring continuous supply so we can guarantee our service commitments to our clients.
There have been a number of significant regulatory developments in the year, most of which focus on consumer protection. Our primary regulator, the Financial Services Board (FSB), finalised new legislation and engaged the industry in relation to further regulatory interventions in the industry. We expect the implementation of the FAIS Code on Conflict of Interest to be completed in April 2011. We support the objectives of the Code to establish arm's length relationships between life insurers and intermediaries, which will help to ensure that customers receive unbiased advice.
The FSB issued a discussion paper on Treating Customers Fairly at all levels within financial services companies. Momentum welcomes the discussion paper as we have already created structures at board level to instil this important objective. Momentum's Fair Practices board committee is mandated to consider the fair treatment of Momentum's customers, which includes evaluating our progress in embedding the principles of fair treatment in Momentum's culture, strategy and day-to-day operations. We look forward to engaging further with the FSB and industry bodies in this regard.
Momentum is a business that has been built on organic growth as well as strategic acquisitions and mergers. The planned merger with Metropolitan is therefore a natural rogression in our strategic journey from successful to significant in the financial services landscape in South Africa and elsewhere in Africa. I am confident the next year will be an exciting one for the company and our stakeholders as we identify and realise the combined opportunities for sustainable growth with Metropolitan in the new combined group MMI Holdings. We remain positive that all the regulatory and shareholder approvals for the transaction will be obtained by October/November 2010.
Nicolaas Kruger
CEO, Momentum