South Africa’s insurer MMI Holdings reported a 2.6 percent fall in half-year earnings on Wednesday and said it would start buying back some of its shares instead of paying dividends.
MMI, which sells life and short term insurance, said diluted core headline earnings per share (HEPS) for the six months to end-December came in at 97 cents from 99.6 cents in 2016.
HEPS is the main profit gauge in South Africa, which strips out certain one-off items.
“This was largely due to weaker persistency in Metropolitan Retail, weaker profitability in both new generation and legacy life products at Momentum Retail, and an increase in MMI’s share of losses, in line with business plans on new initiatives such as the India joint venture,” the firm said in a statement.
Persistency refers to the volume of business that a life insurance company is able to retain.
Operating profit after new initiatives rose 4 percent to 1.31 billion rand ($110.79 million) from 1.26 billion rand.
MMI, which recently underwent a management shake-up, said it will set aside 2 billion rand for a share buy-back in the next 12 months.
“Given the current discount to embedded value, we are of the opinion that a share buy-back is the most efficient use of capital and will enhance value to shareholders,” said MMI’s Financial Director, Risto Ketola.
The group also updated its dividend policy to target a dividend cover centred at 2.5x core headline earnings from a cover range of 1.5x to 1.7x previously.
($1 = 11.8237 rand)
Reporting by Nqobile Dludla; Editing by Joe Brock (Reuters)