JOHANNESBURG - JSE-listed financial services company MMI Holdings has elected to distribute R2billion to shareholders via a share buy-back programme instead of paying dividends, against the backdrop of reduced profits.

MMI financial director Risto Ketola said the company decided on the move after much deliberation and careful consideration of the impact it would have on shareholders.

“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,” Ketola said. “We plan to distribute R2bn to shareholders through share buy-backs during the next 12 months.”

MMI shares dropped 2.93percent on the JSE yesterday to close at R21.50.

During the six months to the end of December, the company recorded a decline of 3percent in diluted headline earnings to R1.6bn, compared with the corresponding period in 2016.

MMI attributed the reduction to weaker persistency in Metropolitan Retail, weaker profitability in 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, a health insurance co-operation with multinational conglomerate Aditya Birla.

MMI chief executive Hillie Meyer said mortality underwriting experience in the retail segments and Momentum Corporate contributed positively to the results, although the value of new business was down 1percent to R288million, compared with the half-year to December 2016.

MMI’s businesses are long- and short-term insurance, asset management, savings, investment, healthcare administration and employee benefits.

MMI’s international operations in Africa and the joint venture in India have reduced the company’s losses by 56percent to R27bn, but its international businesses experienced a 46percent decline in the value of new business to R25m.

The company boasted a capital buffer of R4.1bn at December 31, 2017. Its capital position was strong and allowed for statutory capital requirements, strategic initiatives and the share buy-back programme. Its operating businesses contributed R1.3bn to core headline earnings, a 4percent improvement compared with the same period in 2016.

In the period under review, MMI recorded an embedded value of R43.4bn (R27.05 per share) and embedded value earnings of R2.3bn, reflecting an 11.2percent return on embedded value.