Risk Summit 2015

Unlocking the opportunities in risk

Mark van Der Watt

• MMI’s client strategy

• Some distribution trends

• What the UNISA study tells us

• Gaps in the market

• Opportunities for advisers

Agenda

Factors leading to new strategy

Technology

advances

Fairness

Regulations

Lack of trust

Google

Clients are more…

• Demanding

• Diverse

• Indifferent

• Selfish

• Sophisticated

The new MMI strategy

OUR PURPOSE

OUR STRATEGIC FOCUS AREAS

Why we existTo enhance the lifetime financial wellness

of people their communities and businesses.

GrowthClient-

centricity Excellence

The way we will compete

OUR VISIONWhere we are headed

To be the preferred lifetime financial wellness partner, with a

reputation for innovation and trustworthiness

OUR VALUES

A culture that is grounded in the values of accountability, excellence,

integrity, diversity, innovation and teamwork

What we stand for

Momentum’s purpose “To enhance the

lifetime Financial Wellness of people, their

families, communities and businesses”

• Momentum’s success in the past

– Service excellence

– Distribution excellence

– Product innovation

Role of advice

• Now – client centricity

• Role of advice

– Critical

– TCF outcome 4 – “suitable advice taking account of client

circumstances”

Role of advice

Role of advice

Product

Product

Product

Product

Financial

adviceClient

Financial

Wellness

TRENDS

NMG study

Class of adviserChange in market share

(2012 to 2013)

Independent financial advisers -13%

Aligned advisers +6%

Tied agents +16%

Bank brokerages -11%

Swiss Re survey

0

1,500

3,000

4,500

2008

200

9

201

0

201

1

201

2

201

3

200

8

200

9

201

0

201

1

201

2

201

3

200

8

2009

201

0

201

1

201

2

201

3

200

8

200

9

201

0

201

1

201

2

201

3

Brokers Tied agents/own sales-force Banks Direct marketing

Rm

Distribution channel

Excluding new participants and corrections New participants and corrections

WHAT THE UNISA STUDY TELLS US

Movement per 1 000 households

DUDrifting Unwell

AUAnchored

Unwell

11

12

122

From DU

To DU

2012 t

o 2

01

3 2

01

1 t

o 2

01

2

11 to AU

1 to DU

2 from AU

14 to DW

2012 t

o 2

013 2

011 t

o 2

012

AWAnchored Well

DWDrifting Well

9

8

46

60

To DW

To DW

2012 t

o 2

013 2

011 t

o 2

012

11 from

AU

1 to DU

14 from

DU

46 to AW

2012 t

o 2

013 2

011 t

o 2

012

AgendaGAPS IN THE MARKETGAPS IN THE MARKET

True South (2013)

Death Disability

Number of earners 13.0m 13.0m

Death/ disability events expected per year 130 050 43 065

Death /disability events expected per day 356 118

Source: True South

• Insurance gap increased from R18,4 trillion in

2010 to R24,0 trillion in 2013

• R9,3 trillion death

• R14,7 trillion disability

True South

Source: True South

True South survey

2013 Gap (R'trillion)

Death Disability

Insurance need 15,1 24,4

Actual cover -5,9 -7,3

Disability grant -2,4

Insurance gap 9,2 14,7

Gap as % of need 61% 60%

Source: True South

True South (income groups)

Number of

earners (million)

Average ageAverage gross

income p.a.

(R'000)

20% poorest 2.6 37 9

2nd Quintile 2.6 36 26

3rd Quintile 2.6 37 52

4th Quintile 2.6 38 111

20% richest 2.6 42 401

All 13 38 120

Source: True South

True South (gap per income group)

Death cover

Average gap

per earner (R'm)

Total gap

(R'bn)Proportion of

income

20% poorest 0.1 131 11

2nd Quintile 0.3 663 12

3rd Quintile 0.5 1 299 10

4th Quintile 0.9 2 287 8

20% richest 1.9 4 899 5

All 0.7 9 279

Source: True South

True South (gap per income group)

Disability cover

Average gap

per earner

(R'm)

Total gap

(R'bn)Proportion of

income

20% poorest -0.2 -425 -22

2nd Quintile 0.2 409 8

3rd Quintile 0.6 1 497 12

4th Quintile 1.3 3 459 12

20% richest 3.8 9 801 9

All 1.1 14 741

Source: True South

True South (gap by age)

-200%

-150%

-100%

-50%

0%

50%

100%

<30 30 - 40 40 - 50 50 - 55 55+Death

Disability

Source: True South

True South (gap by education level)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

PS or lower Some HS Matric Diploma Degree

Gap as % of cover needed

Death

Disability

Source: True South

• Basket

– Temporary disability (income until permanent

disability pays)

– Lump sum disability (once-off expenses)

– Permanent disability (income until retirement)

True South survey (disability)

• Disability gap greater

• 38% of permanent disability need covered

• 7% to 25% of temporary disability need covered

True South survey (disability)

Benefit mix

2007 2008 2009 2010 2011

Life Cover 60% 58% 59% 60% 61%

Disability Cover 31% 33% 31% 31% 30%

Critical illness Cover 9% 9% 10% 9% 9%

True South (disability sales)

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011

Income beneift

Lump sum benefits

Source: True South

True South (income disability)

2007 2008 2009 2010 2011

Permanent cover 99.4% 99.7% 99.5% 99.3% 99.2%

Tempory cover 0.6% 0.3% 0.5% 0.7% 0.8%

Source: True South

True South (disability sales)

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011

Accelerated cover

Standalone cover

Source: True South

• Sales skewed to death benefits

– Expect 43% more disability than life cover

• Disability sales skewed to lump sum

• Lump sum disability risky for individuals

– Market risk (need 32% to 41% more)

– Consumer understanding

– Behavioural (sudden access to lump sum)

True South survey (trends)

Source: True South

• Accelerated disability cover

– Ratio up life cover

– E.g. expose the estate

• Income protection sales skewed to permanent

True South survey (trends)

Source: True South

Remedies

Death Disability

Purchase additional

insurance Insurance (% of earnings) 2,90% 1,80%

Increase in cover 1,6% 1,5%

Reduce household

expenditureRequired reduction 33% 37%

WHAT OUR MYRIAD DATA TELLS US

Benefit mix

29%

21%26%

7%

2% 7%

1%1% 1%

5%

Death only

Death & Disability

Death; Disability & Critical IIlness

Death; Disability Critical Illness; Income Protection

Income Protection Only

Death & Critical Illness

Death & Iincome Protection

Critical Illness only

Disability only

Other

Myriad (disability)

0%

10%

20%

30%

40%

50%

60%

70%

80%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Standalone

Accelerated

Myriad (disability)

0%

20%

40%

60%

80%

100%

120%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Lump sum

Income

Myriad (disability)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Income Protector

Temporary IncomeProtector

FOR ADVISERS

RISK VS SAVINGS

R39 BILLION INANNUAL PREMIUMS

DISABILITY COVER

INCOME PROTECTION

LONGEVITY BENEFITS

Longevity Protectors take-up

10%

15%

20%

25%

30%

35%

40%

45%

50%

Ju

l-1

2

Aug

-12

Sep

-12

Oct-

12

Nov-1

2

Dec-1

2

Ja

n-1

3

Fe

b-1

3

Ma

r-13

Apr-

13

Ma

y-1

3

Ju

n-1

3

Ju

l-1

3

Aug

-13

Sep

-13

Oct-

13

Nov-1

3

Dec-1

3

Ja

n-1

4

Fe

b-1

4

Ma

r-14

Apr-

14

Ma

y-1

4

Ju

n-1

4

Ju

l-1

4

Aug

-14

Sep

-14

Oct-

14

Nov-1

4

Dec-1

4

YOUNGER AGES

BUSINESS ASSURANCE

TWO OUT OF THREE

BUSINESSES

ARE NOT COVERED

WHAT WE PROVIDE

FLEXIBLEBEST-OF-BREED

PRODUCT

EXCELLENCE IN DISTRIBUTION AND SERVICE

`

MULTIPLY –REWARDS FOR WELLNESS

FINANCIAL WELLNESS SOLUTIONS

`EXPERT ADVICEIS CRUCIAL

Risk Summit 2015

Unlocking the opportunities in risk

Mark van Der Watt