9 Questions for Risto Ketola around resetting and reinventing Momentum Metropolitan

Following on from the success of the "Reset and Grow" strategy, Momentum has launched the "Reinvent and Grow" strategy.

In the last six months, Momentum Metropolitan Holdings has launched its new “Reinvent and Grow” strategy, following on from the successes of its “Reset and Grow” strategy, which was concluded mid-2021.

Caylynne Fourie asked Momentum Metropolitan FD Risto Ketola some questions around these two strategies.

1. Tell us about the Reset and Grow strategy?

The Reset and Grow strategy was launched internally and to investors in 2018, with a focus on efficiency and getting the basics right. This involved keeping expense growth well below inflation, growing our short-term insurance profits quite substantially, and becoming more prudent on investing capital into new ventures.

2. What were some of the successes that came from the strategy?

One of the commitments we made to investors was to achieve savings of R500 million on our cost base after tax. We ended up saving R900 million after tax. So we basically kept our cost almost flat for three years on a R10 billion cost base against inflationary increases.

The other thing we aimed to achieve was to increase our profits coming out of non-life insurance, including motor insurance and property insurance. And we did that organically through Momentum Insure and the acquisition of Alexander Forbes Insurance.

3. Is there any area of the strategy where you didn’t meet all your goals?

The only area where we maybe didn’t tick all the boxes was that we were hoping to narrow the losses of our new initiatives, including the India health insurance business, the small transactional banking initiative (Multiply Money), and the lending joint venture with African Bank. A lot of those initiatives didn’t come out of the J-curve like we had hoped.

4. What part of the strategy were you most proud of?

I would say the most fundamental change for the group was reconnecting with a lot of sales people that we had lost touch with over the years and the fact that we have hundreds of independent financial advisors who started treating us as their preferred product supplier again.

So we’ve become a product provider and employer of choice to some degree in distribution.

From an FD perspective, the fact that we were able to keep costs flat for three years, which isn’t easy when two thirds of your costs are people, was a big achievement. That required massive communication and finesse to keep people motivated while we were cutting costs. It's easy to cut costs, but it's difficult to cut costs in a way that people don’t get demoralized.

5. Tell us about the next growth step, the Reinvent and Grow strategy?

The whole purpose of the Reinvent and Grow strategy was to take forward the successes of the Reset and Grow strategy. It has moved from being an internally focused strategy, to a more externally focused in terms of consumer experience, client experience, and distribution experience. So a lot of the initiatives are more to do with how we interface with third parties and external people.

The five key inputs into the reinvent and grow strategy are:

  1. Continuous growth in our distribution channels
  2. Establish new distribution channels
  3. Accelerate digital
  4. Service leadership
  5. Transformation of the business from an employment equity perspective

We also have some very clear targets that we want to come out of the strategy. The two most high-profile financial targets we have put out are: that we are targeting normalised headline earnings of R5 billion by 2024, as well as a ROE of 20 percent at the same time. We think there’s substantial scope to improve profitability and return on capital over the coming years.

6. Has the new strategy started bearing fruits yet?

Because it was only launched recently, it is a bit soon to predict the success of the new strategy, but the two most tangible things early in the strategy are the increased activity around digital initiatives and the ongoing growth in our distribution channels. A lot of the digital initiatives we’ve implemented have had a massive impact early in the process, and we are seeing increased support from independent advisors, as well as growing more and more of our own sales people.

7. With the move to digital, do you foresee that the business model will further change because of it?

In a reasonable timeframe of five to ten years, I think the ways of working will change significantly but I don’t think our business model will change 100 percent. In insurance and financial services in general, people still lack a bit of confidence to always deal fully digitally. So a lot of our digital initiatives are actually around how to empower intermediaries or our service people in order to engage more effectively with people. It’s more around increasing the productivity and efficiency of our people rather than replacing them.

8. What other opportunities has the strategy revealed going forward?

Covid-19 has forced a lot of people who were comfortable in their way of work to dabble in other ways of working. A good example is in our Metropolitan Life sales force. Their main focus is funeral policies and simple savings products, which has historically been very paper-based. A lot of sales people didn’t see a reason to change. Then, during lockdown, they were forced to use digital tools to onboard and service their clients, and they love it.

As a company, it has taught us that it’s useful to sometimes force people outside of their comfort zones. While there is quite often resistance to change, it is not always based on good reasons and people are able to handle change surprisingly well and to stay competitive.

9. What comes next?

One of the things we have to continuously be vigilant about is to stay realistic and rational around what we do and don’t do. I talk about return on capital a lot, because it is such an important part of these two strategies. When you have big pockets, it’s easy to get distracted and invested in lots of things, and generally that is not a good way to make good returns long term. With the business performance improving, we have to remain grounded and continue to say no to a lot of things, and to focus on the things we are good at.