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MMI Holdings Audtired Group Results for the year ended 30 June 2012
MMI Holdings Limited Group
Incorporated in South Africa
(Registration number 2000/031756/06)
"MMI Holdings" or "the Company"
JSE share code (primary listing): MMI
NSX share code: MIM
ISIN: ZAE0001149902
MMI Holdings audited group results for the year ended 30 June 2012
- Core headline earnings increased by 12% to R2 955 million
- Group embedded value of R32.5 billion
- Integration progressing well
- R201 million recurring expense savings achieved
- Final ordinary dividend up 10% to 69 cents per share
- Special dividend of 65 cps/R1 021 million
Overview of operations and prospects
Nature of activities
MMI Holdings is a South African based financial services group that provides
a wide range of products and services to clients locally and in selected
African countries.
Operating environment
Local operating conditions remained challenging. Equity market volatility
continued, with a slight positive bias, while long-bond interest rates
decreased, mainly in the last quarter. Employment levels improved in some
sectors; however, levels of debt are high and overall consumer confidence
remained fragile.
Group results
- The embedded value of R32.5 billion (2 023 cents per share) reflects the
underlying financial strength and sustainability of the group.
- Diluted core headline earnings, as per the segmental information,
increased by 12% to R2 955 million for the year.
Capital management
- The group actively manages its capital resources within a defined risk
appetite and balances the interests of all stakeholders to protect and
enhance shareholder wealth.
- The investment mandate for shareholder capital was finalised during the
year and a less risky mandate was implemented for Metropolitan Life
Limited. This change reduced the capital adequacy requirement (CAR) and
increased the CAR multiple. The new mandate also resulted in a once-off
increase in the cost of capital in the traditional embedded value
calculation, which reduced the embedded value by R523 million.
- The group remains committed to the FSB's solvency assessment and
management (SAM) project.
- The group has declared a special dividend in order to enhance capital
efficiencies.
- The capital buffer was R3.3 billion on 30 June 2012, after allowing for
strategic growth initiatives, the final dividend and a special dividend.
- The impact of SAM on the capital buffer will continually be assessed.
- The group is comfortable that its present level of capital is
appropriate in the current environment; this position is evaluated
on an ongoing basis.
Merger integration
- The overarching objective of the integration, overseen by a dedicated
chief integration officer, is to incorporate "the best of both".
- The integration process moved from planning to implementation
during the year.
- Systems and data migration projects are proceeding according to plan.
- The legal amalgamation of the Metropolitan and Momentum long-term
insurance licences has commenced, subject to regulatory approvals.
- Group and divisional strategies have been embedded and total targeted
merger expense savings of R500 million remain on track to emerge up to
30 June 2014:
- Targets have been set per division and firm deadlines are in
place.
- The board is measuring progress against these targets on an
ongoing basis.
- Recurring expense savings of R201 million were realised during
the year; however, additional integration costs were incurred
that reduced the immediate benefit.
Prospects
- Each division has implemented strategic plans and integration processes
to identify and optimise structures, operations, target markets,
distribution channels and product offerings.
- Growth in new business volumes will, however, be influenced by the
economic environment, including a recovery in employment and stronger
disposable income levels.
- All divisions face opportunities and threats posed by ongoing
changes in the highly regulated environments in which they operate,
including the national health insurance and national social security
reform proposals.
- Ongoing uncertainties from the Eurozone crisis could continue to have a
negative impact on business and consumer confidence.
- The board of MMI Holdings believes that the group has appropriate
strategies in place to unlock value and generate a satisfactory return
on capital for shareholders over time.
Operational review
Shareholder capital
- Shareholder capital includes investment income on shareholder funds.
The prior year included a once-off interest accrual on an income
tax refund.
- Operating profit from the balance sheet management business is
reflected in this segment.
- Staff rationalisation costs of R76 million are included in
this section.
- The investment mandate for shareholder capital was revised during the
year and a less risky mandate has been implemented for Metropolitan
Life Limited.
Momentum Retail
- Despite tough trading conditions, new business on an annual premium
equivalent (APE) basis, grew by 2%, excluding the Odyssey business.
- The new business margin, on a present value of premiums (PVP) basis,
remained under pressure as a result of a shift to lower margin single
premium products.
- The Momentum Wealth off balance sheet business was reclassified as non-
covered business with effect from the end of the financial year.
Excluding this business, the Momentum Retail new business PVP margin
would have been 1.1%.
- Positive mortality experience was recorded during the year.
- The results were materially supported by certain discretionary margins
that were released as a result of the gradual shift to more capital
efficient products.
- Operating profit increased by 40% to R1 064 million.
Metropolitan Retail
- Recurring premium new business ended 12% higher, driven by good
production in the traditional agency channels.
- The reduction in single premium income was the direct result of certain
distribution channels having been discontinued; new business from the
continuing channels was up 33%.
- The value of new business increased by 2%, at a PVP margin of 4.9%, on
the back of increased production and good expense management after
allowing for a R17 million increase in the cost of capital.
- Operating profit increased by 11% to R438 million.
Momentum Employee Benefits
- Total new business for the year increased 12% to R1 157 million on an APE
basis and a satisfactory new business pipeline remains in place.
- The new business growth was achieved in an environment where expense growth
was well contained over the year.
- The value of new business more than doubled due to improved expense
efficiencies, increased volumes and business mix, in particular for risk
business from the large corporate market.
- Client retention interventions resulted in better persistency across all
product lines.
- The combination of strong new business and better retention led to net
cash flows turning positive for the year.
- The integration of the two employee benefits businesses is materially
complete.
- Overall risk experience was very satisfactory and included a turnaround in
disability experience in comparison with the first six months.
- Operating profit increased 33% to R249 million as a result of good risk
experience and expense efficiencies.
Metropolitan International
- New business APE increased by 26% to R255 million.
- The main contributions to new business improvement came from Lesotho,
Namibia and Ghana.
- The individual life policy book grew by 8.5%, boosted primarily by the
business in Ghana.
- Capital of R500 million has been allocated for growth in Africa.
- The medical claims ratio has improved as a result of appropriate re-
pricing and improved claims controls.
- Following these changes, the total lives under administration in the
health business declined slightly during the period as some clients
sought cheaper alternatives in the market.
- Risk and claims experience improved across the division.
- Operating profit increased 78% to R57 million.
Momentum Investments
- During the period under review assets under management remained exposed
to volatile global and local markets.
- Equity performance improved during the year; however, more work is
required on the performance of institutional balanced mandates.
- Although Momentum Collective Investments recorded good inflows, new
white label regulations published by the Financial Services Board could
have a negative impact on this business in future.
- Operating profit reduced by 5% to R125 million.
Metropolitan Health
- The new business model for the Government Employees Medical Scheme was
implemented successfully during the year; however, the change had a
negative impact on revenue.
- The reduction was, however, partly mitigated by the take-on of two new
corporate schemes.
- The division currently administers 1.3 million principal members,
covering 3.2 million lives.
- The Momentum Open Scheme increased membership by 7% over the year while
solvency levels remained stable.
- Metropolitan Health Risk Management continued to deliver good
performance and expand the product offering.
- Positioning for national health insurance reforms is ongoing.
- Operating profit increased 17% to R133 million, reflecting the
improvement in operational efficiencies.
Directors' statement
The directors take pleasure in presenting the audited results of the
MMI Holdings financial services group for the year ended 30 June 2012.
The preparation of the MMI group's consolidated and audited results was
supervised by the group finance director, Preston Speckmann, BCompt (Hons),
CA(SA).
Basis of preparation of financial information
These results have been prepared in accordance with International Accounting
Standard 34 (IAS 34) Interim financial reporting; the South African
Companies Act of 2008; and the listings requirements of the JSE Limited
(JSE). The accounting policies of the group are in terms of International
Financial Reporting Standards (IFRS) and have been applied consistently to
all the periods presented and the previous reporting period. The preparation
of the financial statements is in accordance with and contains the
information required by IFRS and the AC 500 standards, as issued by the
Accounting Practices Board, which requires the use of certain critical
accounting estimates as well as the exercise of managerial judgement in the
application of the group's accounting policies. Such critical judgements and
accounting estimates are disclosed in detail in the group's integrated
report for the year ended 30 June 2012, including changes in estimates which
are an integral part of the insurance business. The group is exposed to
financial and insurance risks details are also provided in the group's
integrated report.
Segmental information
During the 2011 financial year Metropolitan merged with
Momentum to form the MMI financial services group. The group
operates through the following divisions: Momentum Retail,
Metropolitan Retail, Momentum Employee Benefits, Metropolitan
International, Momentum Investments, Metropolitan Health and
Shareholder Capital (which includes the Balance Sheet
Management business unit).
Employee Benefits, Metropolitan International, Momentum
Investments, Metropolitan Health and Shareholder Capital (which
includes the Balance Sheet Management business unit).
Management information presented to the executive committee
(chief operating decision-maker) assumes that the merger
occurred prior to 1 July 2010 and therefore all segmental
information in terms of IFRS 8 Operating segments has been
disclosed on an `as if' basis. The operational reviews are
based on this segmental information. More details are available
in the tables, on SENS and on the company's website.
Reclassifications
On analysing the equity portfolios classified as available-for-sale
financial instruments, it was noted that certain of the net cumulative
realised gains over a period before June 2010, totalling R651 million,
were not recycled from the available-for-sale reserve to the income
statement on disposal or de-recognition of these assets. The retained
earnings and available-for-sale reserve balances at 1 July 2010 have
therefore been restated from R6 495 million to R7 146 million and
R658 million to R7 million respectively, and the retained earnings
and available-for-sale reserve balances at 30 June 2011 have
been restated from R6 803 million to R7 454 million and R666 million
to R15 million respectively. These restatements had no taxation impact.
Investments in collective investment schemes where the group holds between
20% and 50% of the issued units were previously disclosed as investments in
associates. These investments have always been designated at fair value
through profit and loss using the scope exemption in IAS 28, and disclosed
as part of the investment in associates. These investments, totalling
R7 554 million as at 30 June 2011, are now disclosed as financial
instruments as this better reflects the nature thereof. The investment
in associates balance has therefore been restated from R7 797 million
to R243 million and the financial instruments investment in associates
designated at fair value through income from nil to R7 554 million
respectively.
Core headline earnings for the year ended June 2011 have increased by
R60 million while investment variances have been reduced by the
same amount in order to provide consistent disclosure.
These restatements had no impact on the 2012 or 2011 year reported earnings
or headline earnings per share or on the statement of cash flows.
Business combinations
The group acquired the remaining 51% of shares in Momentum Life Assurance
Namibia Ltd for R342.8 million cash and R28.6 million on loan account on
30 June 2012.
Corporate Governance
The board has satisfied itself that appropriate principles of corporate
governance were applied throughout the year under review.
Directorate changes and directors' shareholding
Mr LL Dippenaar and Mr PK Harris resigned with effect from 22 November 2011.
On the same date, Mr MJN Njeke was appointed chairman while Mr JP Burger
was elected deputy chairman. In addition, Prof JD Krige and Mr MH Visser
were appointed to the board. Mr K Matseke resigned with effect from
31 October 2011 and was replaced by Mr V Nkonyeni, the chief executive of
Kagiso Tiso Holdings. On 26 April 2012, Mr MH Visser passed away tragically
following a motor vehicle accident. Mr L Crouse was appointed to the board
on 18 May 2012.Mr M Mthombeni resigned as an executive director with effect
from 31 August 2012. All transactions in listed shares of the company
involving directors were disclosed on SENS as required.
Capital commitments and contingent liabilities
The group had no material capital commitments at 30 June 2012. The group is
party to legal proceedings in the normal course of business, and appropriate
provisions are made when losses are expected to materialise.
Events after the reporting period
MMI Holdings has agreed to acquire the remaining 50% of Momentum Short-term
Insurance (MSTI) as well as a controlling interest in Eris Property Group,
subject to the fulfilment of certain suspensive conditions.
No other events occurred between the reporting date and the date of approval
of the annual financial statements.
Final and special dividend declaration for the year ended 30 June 2012
Ordinary shares
The dividend policy for ordinary listed shares, approved by the directors,
is to provide shareholders with stable dividend growth, increasing to
reflect the board's long-term view on the expected underlying basic core
headline earnings growth. Exceptions will be made from time-to-time in
order to account for, inter alia, volatile investment markets, capital
requirements and changes in legislation.
On 11 September 2012 a gross final dividend of 69 cents per ordinary share
was declared, resulting in an annual dividend of 113 cents per share. In
addition, a special dividend of 65 cents per share was declared. The final
dividend and the special dividend are payable out of income reserves to
all holders of ordinary shares recorded in the register of the company at
the close of business on Friday, 5 October 2012 and will be paid on
Monday, 8 October 2012. Both dividends will be subject to local dividend
withholding tax at a rate of 15% per ordinary share unless the shareholder
is exempt from paying dividend tax or is entitled to a reduced rate.
Final dividend
The STC credits utilised per share amount to 1.89762 cents per ordinary
share on the final dividend. This will result in a net dividend, for those
shareholders who are not exempt from paying dividend tax, of 58.93464
cents per ordinary share.
Special dividend
The STC credits utilised per share amount to 1.78762 cents per ordinary
share on the special dividend. This will result in a net dividend, for
those shareholders who are not exempt from paying dividend tax, of
55.51814 cents per ordinary share.
MMI's income tax number is 975 2050 147 and the number of ordinary shares
in issue at the declaration date is 1 570 132 231. The last day to trade
"cum" dividend will be Friday, 28 September 2012. The shares will trade
"ex" dividend from the start of business on Monday, 1 October 2012. Share
certificates may not be dematerialised or rematerialised between Monday,
1 October and Friday, 5 October 2012, both days inclusive.
Where applicable, dividends in respect of certificated shareholders will
be transferred electronically to shareholders' bank accounts on payment
date. In the absence of specific mandates, dividend cheques will be posted
to certificated shareholders on or about payment date. Shareholders who
hold dematerialised shares will have their accounts with their CSDP or
broker credited on Monday, 8 October 2012.
Preference share dividend
Dividends of R5.7 million (8.4% pa), R2.2 million (8.4% pa), and
R26.5 million (19.1% pa/132 cps) were declared on the unlisted A1,
A2 and A3 MMI preference shares respectively. The declaration rate
was determined as set out in the company's articles and the
total preference dividend utilised STC credits of R946 061.
MMI preference share dividends are included under finance
costs in these results.
Annual General Meeting
The next annual general meeting will be held at 14:00 on Monday,
26 November 2012 at 268 West Street, Centurion. All shareholders
are welcome to attend.
Audit opinion
The auditors, PricewaterhouseCoopers Inc, have issued their opinion on the
group financial statements for the year ended 30 June 2012. A copy of their
unqualified report is available for inspection at the company's registered
office.
Review of embedded value
The consolidated value of in-force business and value of new business
results have been independently reviewed by PricewaterhouseCoopers Inc.
A copy of their unqualified report is available for inspection at the
company's registered office.
Signed on behalf of the board
JJ Njeke Chairman
Nicolaas Kruger Group chief executive officer
Centurion
11 September 2012
These results can also be viewed online at www.mmiholdings.com
Directors: MJN Njeke (chairman), JP Burger (deputy chairman),
NAS Kruger (group chief executive officer),
FW van Zyl (deputy group chief executive officer),
PE Speckmann (group finance director),
L Crouse, RB Gouws, F Jakoet, Prof JD Krige, PJ Moleketi,
SA Muller, JE Newbury, V Nkonyeni, SE Nxasana, KC Shubane,
FJC Truter, BJ van der Ross, JC van Reenen, M Vilakazi
Secretary: FD Jooste
www.mmiholdings.com
Transfer secretaries: Link Market Services SA (Pty) Ltd
(registration number 2000/007239/07)
Rennie House, 13th Floor, 19 Ameshoff Street, Braamfontein 2001.
PO Box 4844, Johannesburg 2000
Telephone: +27 11 713 0800, E-mail: info@linkmarketservices.co.za
Sponsor: Merrill Lynch (registration number: 2000/031756/06)
Registered office: 268 West Avenue, Centurion
JSE code: MMI, NSX CODE: MIM, ISIN NO. ZAE0001149902
MMI Holdings Limited Group
Summary of financial information
Audited results for the year ended 30 June 2012
MMI Holdings Limited Group
IFRS financial information
The MMI group was formed on 1 December 2010 following the
merger of Metropolitan and Momentum.
The audited results presented for the current period comprise Momentum and
Metropolitan results for the year ended 30 June 2012. The comparatives
for the year ended 30 June 2011 comprise the Momentum results for
the 12 months ended 30 June 2011 and Metropolitan results for the
seven months ended 30 June 2011.
Effective 1 December 2010 the group entered into a reinsurance agreement with a
cell captive owned by FirstRand whereby 90% of the FNB Life business is reinsured
to the cell captive owned by FirstRand. The IFRS results for the current and prior
periods therefore include 10% of FNB Life results for the year ended 30 June 2012;
100% for the five months ended 30 November 2010 and 10% of FNB Life's results for
the seven months ended 30 June 2011.
Segmental information
The current MMI group results disclose the segmental information
based on the way the business has been managed since the merger.
This assumes that the merger was in place for all comparative
information. Management information presented to the MMI
executive committee (chief operating decision maker) is also
presented this way and therefore all segmental information, in
terms of IFRS 8 Operating segments is disclosed on an 'as if'
basis.
The group operates through the following divisions: Momentum
Retail; Metropolitan Retail; Momentum Employee Benefits;
Metropolitan International; Momentum Investments; Metropolitan
Health and Shareholder capital (which includes the balance sheet
management business unit).
Embedded value and statement of assets and liabilities on the
reporting basis
The analysis of embedded value earnings reported for the
12 months ended 30 June 2011 reconciles embedded value at 30 June 2010
(assuming Metropolitan and Momentum were already merged then) to the
closing embedded value at 30 June 2011.
The analysis of surplus, relating to the long-term insurance
business excess on the statement of assets and liabilities
on the reporting basis, for the 12 months ended 30 June 2011
assumes that Metropolitan and Momentum were already merged
on 1 July 2010.
Basis of presentation of financial information
These results have been prepared in accordance with International
Accounting Standard 34 (IAS 34) Interim financial reporting; the
South African Companies Act of 2008; and the Listings Requirements of
the JSE Limited (JSE). The accounting policies of the group are in
terms of International Financial Reporting Standards (IFRS) and have
been applied consistently to all the periods presented. The preparation
of financial statements is in accordance with and contains the
information required by IFRS and the AC 500 standards, as issued by the
Accounting Practices Board or its successor, which requires the use of
certain critical accounting estimates as well as the exercise of
managerial judgement in the application of the group's accounting
policies. Such critical judgements and accounting estimates are
disclosed in detail in the MMI Holdings integrated report for 2012
(which will be available on the company website), including
changes in estimates which are an integral part of the insurance
business. The group is exposed to financial and insurance risks
details are also provided in the MMI Holdings group integrated report.
The preparation of the MMI Group's condensed consolidated, audited
results was supervised by the Group Finance Director, Preston Speckmann,
BCompt (Hons), CA (SA).
Reclassifications
The June 2011 results have been restated for the following
reclassifications:
- On analysing the equity portfolios classified as available-for-sale
financial instruments, it was noted that certain of the net
cumulative realised gains over a period before June 2010, totalling
R651 million, were not recycled from the available-for-sale reserve
to the income statement on disposal or derecognition of these
assets. The retained earnings and available-for-sale reserve
balances at 1 July 2010 have therefore been restated from R6 495
million to R7 146 million and R658 million to R7 million,
respectively and the retained earnings and available-for-sale
reserve balances at 30 June 2011 have been restated from R6 803
million to R7 454 million and R666 million to R15 million,
respectively. This restatement had no taxation impact.
- Investments in collective investment schemes where the group holds
between 20% and 50% of the issued units were previously disclosed as
investments in associates. These investments have always been
designated at fair value through profit and loss using the scope
exemption in IAS 28 and disclosed as part of the investment in
associates. These investments, totalling R7 554 million as at
30 June 2011, are now disclosed as financial instruments as this
better reflects the nature thereof. The investment in associates
balance has therefore been restated from R7 797 million to R243
million and financial instruments investment in associates
designated at fair value through income from Rnil to R7 554 million
respectively.
- Core headline earnings for the year ended June 2011 has increased
by R60 million, which was previously included in investment variances
and therefore excluded from core headline earnings, to ensure consistency
with the year ended June 2012. It relates to the expected release of
reserves held in respect of minimum maturity guarantees as well as
demographic experience on these reserves. It is reflected as part of
core headline earnings as these are releases that are expected at
the start of the financial year and are already allowed for in the
reserving. Treating this component as core headline earnings is
consistent with the treatment of margin releases on other reserves.
Similarly, all other demographic experience is already included
in core headline earnings. For Momentum Retail the operating profit
and tax on operating profit have been restated from R995 million to
R1 078 millionn and R296 million to R319 million respectively.
- The group reallocated preference share investments of R2 134 million
previously included in unlisted equity securities to debt securities
as they are mandatorily redeemable at a fixed or determinable amount
at a fixed or future date of which the dividends are non-
discretionary.
- The analysis of assets under management has been expanded to
separately disclose assets managed internally or by other managers
within the group that do not form part of Momentum Investments. An
amount of R29 027 million has been separately classified for the
year ended June 2011.
- Fee income and administration expenses in the June 2011 segmental
report has been restated to ensure consistency with internal
reporting for the year ended June 2012.These restatements have no
impact on core headline earnings.
- Net value of in-force of R701 million was transferred from Shareholder
capital to Momentum Retail, reflecting a refinement in the allocation
of discretionary margins to the divisions. The comparatives have been
restated to reflect this change.
Except where indicated above, these restatements had no impact on the
2012 or 2011 year reported or diluted earnings or headline earnings per
share. These restatements had no impact on the statement of cash flows.
Standards and interpretations of published standards effective for the
period ended 30 June 2012 and relevant to the group
- The following amendments to standards became effective for the first
time in the current period and had no impact on the group's
earnings: IFRS 7 (amendment) Financial instruments: disclosures, IAS
24 (amendment) Related party disclosures.
- The International Accounting Standards Board (IASB) made amendments
to various standards as part of their annual improvements project.
These amendments had no impact on the group's earnings.
MMI Holdings IFRS Financial information
Condensed consolidated statement of financial position
Restated
30.06.2012 30.06.2011
Rm Rm
Assets
Intangible assets 11 998 12 257
Owner-occupied properties 1 464 1 416
Property and equipment 321 301
Investment properties 5 415 5 982
Investment in associates 127 243
Employee benefit assets 302 381
Financial instrument assets (1) 260 883 241 621
Insurance and other receivables 2 657 2 296
Deferred income tax 107 108
Reinsurance contracts 1 439 1 148
Current income tax assets 69 174
Cash and cash equivalents 16 957 19 770
Non-current assets held for sale 865 6 854
Total assets 302 604 292 551
Equity
Equity attributable to owners of the parent 23 517 22 341
Preference shares 500 500
24 017 22 841
Non-controlling interests 281 298
Total equity 24 298 23 139
Liabilities
Insurance contract liabilities
Long-term insurance contracts 88 116 82 835
Financial instrument liabilities
Investment contracts 156 929 146 045
with discretionary participation features 23 696 24 280
designated at fair value through income 133 233 121 765
Other financial instrument liabilities (2) 18 140 16 730
Deferred income tax 3 934 4 042
Employee benefit obligations 1 206 874
Other payables 9 517 12 887
Provisions 153 109
Current income tax liabilities 311 38
Non-current liabilities held for sale - 5 852
Total liabilities 278 306 269 412
Total equity and liabilities 302 604 292 551
1. Financial instrument assets consist of the following:
Securities designated at fair value through income:
R236 129 million (30.06.2011: R223 990 million)
Investments in associates designated at fair value through
income: R14 333 million (30.06.2011: R7 554 million)
Derivative financial instruments: R3 579 million
(30.06.2011: R2 207 million)
Held-to-maturity assets: R60 million (30.06.2011: R14 million)
Available-for-sale assets: R2 902 million (30.06.2011:
R4 709 million)
Loans and receivables: R3 880 million (30.06.2011:
R3 147 million)
2. Other financial instrument liabilities consist of the following:
Liabilities designated at fair value through income:
R15 246 million (30.06.2011: R14 096 million)
Derivative financial instruments: R2 040 million (30.06.2011:
R1 235 million)
Liabilities at amortised cost: R854 million (30.06.2011:
R1 399 million)
MMI Holdings IFRS Financial information
Condensed consolidated income statement
12 mths to 12 mths to
30.06.2012 30.06.2011
Rm Rm
Net insurance premiums received 18 694 15 029
Fee income (1) 5 248 4 232
Investment income 13 100 11 711
Net realised and fair value gains 13 989 13 846
Net income 51 031 44 818
Net insurance benefits and claims 18 976 15 898
Change in liabilities 3 354 2 265
Change in insurance contract liabilities 4 277 2 899
Change in investment contracts with DPF
liabilities (694) (389)
Change in reinsurance provision (229) (245)
Fair value adjustments on investment contract
liabilities 12 092 12 106
Fair value adjustments on collective investment
scheme liabilities 619 1 506
Depreciation, amortisation and impairment
expenses 1 008 676
Employee benefit expenses 3 874 3 202
Sales remuneration 2 850 2 697
Other expenses 3 711 2 783
Expenses 46 484 41 133
Results of operations 4 547 3 685
Share of (loss)/profit of associates (7) 44
Finance costs (2) (899) (1 147)
Profit before tax 3 641 2 582
Income tax expenses (1 304) (919)
Earnings 2 337 1 663
Attributable to:
Owners of the parent 2 301 1 612
Non-controlling interests 5 18
Momentum preference shares 31 33
2 337 1 663
Basic earnings per ordinary share (cents) 154 128
Diluted earnings per ordinary share (cents) 151 126
1. Fee income consists of the following:
Investment contracts: R1 455 million (30.06.2011: R1 340 million)
Trust and fiduciary services: R1 546 million (30.06.2011: R1 386 million)
Health administration services: R1 799 million (30.06.2011: R1 239 million)
Other fee income: R448 million (30.06.2011: R267 million)
2. Finance costs consist of the following:
Preference shares issued by MMI Holdings Ltd: R92 million (30.06.2011:R52 million)
Subordinated redeemable debt: R114 million (30.06.2011: R98 million)
Cost of carry and derivative financial instruments: R624 million (30.06.2011:R891 million)
Other: R69 million (30.06.2011: R106 million)
MMI Holdings IFRS Financial information
Reconciliation of headline earnings attributable to owners of the parent
Basic earnings Diluted earnings
Restated Restated
12 mths to 12 mths to 12 mths to 12 mths to
30.06.2012 30.06.2011 30.06.2012 30.06.2011
Rm Rm Rm Rm
Earnings 2 301 1 612 2 301 1 612
Finance costs convertible
preference shares 92 52
Diluted earnings 2 393 1 664
Intangible asset impairments 67 28 67 28
(Profit)/loss on step-up of
associate (207) 18 (207) 18
Profit on sale of business (3) (27) (3) (27)
Tax effect on profit on sale of
business - 3 - 3
Headline earnings (1) 2 158 1 634 2 250 1 686
Net realised and fair value gains
on excess (250) (43) (250) (43)
Basis and other changes and
investment variances. (7) 292 253 292 253
FNB Life (90%) (2) - (174) - (174)
Amortisation of intangible assets
relating to business combinations 516 318 516 318
Secondary Tax on Companies (STC) 144 90 144 90
BEE cost (3) 3 - 3 -
Merger transaction costs - 29 - 29
Dilutory effect of subsidiaries (4) (14) (6)
Investment income on treasury
shares contract holders 14 6
Core headline earnings (5) 2 863 2 107 2 955 2 159
Metropolitan pre-merger - 489
Core headline earnings as per
segmental information (6) 2 955 2 648
1. Headline earnings consist of operating profit, investment income, net realised
and fair value gains, investment variances and basis and other changes.
2. This represents the 90% of FNB Life's results for the five months ended
30 November 2010 which has been excluded from the June 2011 figures as it is
non-recurring.
3. This represents the cost of the BEE transaction in Namibia in the current period
in terms of IFRS 2 Share based payments.
4. Metropolitan Health and Metropolitan Kenya are consolidated at 100% and 96%,
respectively, in the results. For the purposes of diluted core headline
earnings, non-controlling interests and investment returns are reinstated.
5. Core headline earnings disclosed comprise operating profit and investment income
on shareholder assets. It excludes net realised and fair value gains on
investment assets, investment variances and basis and other changes which can be
volatile, STC, certain non-recurring items, as well the amortisation of
intangible assets relating to business combinations as this is part of the cost
of acquiring the business. STC has been added back as it fell away and was
replaced by the new dividends withholding tax effective 1 April 2012.
6. Core headline earnings as per segmental information represent the core headline
earnings of the group as though the merger was effective for all reported
periods.
7. Core headline earnings for the year ended June 2011 has increased by R60 million
was previously included in investment variances and therefore excluded from
core headline earnings,to ensure consistency with the year ended June 2012.
Earnings per share (cents) attributable to owners of the parent
Restated
12 mths to 12 mths to
30.06.2012 30.06.2011
Basic
Core headline earnings 192 167
Headline earnings 145 130
Earnings 154 128
Weighted average number of shares (million) 1 491 1 259
Diluted
Core headline earnings (2) 184 162
Weighted average number of shares (million) (1) 1 605 1 329
Headline earnings 142 128
Earnings 151 126
Weighted average number of shares (million) (1) 1 590 1 317
Diluted core headline earnings as per segmental
information 184 165
Weighted average number of shares (million) for
purposes of segmental information (2) 1 605 1 605
1. For diluted core headline earnings per share, treasury shares held on behalf of
contract holders are deemed to be issued. For diluted earnings and headline
earnings per share, these shares are deemed to be cancelled.
2. The weighted average number of shares for purposes of segmental information
assumes that the merger was effective from 1 July 2010 in line with the diluted
core headline earnings as per the segmental information.
Dividends
2012 2011
Ordinary listed MMI Holdings Limited shares
(cents per share)
Interim March 44 42
Final September 69 63
Total 113 105
A special dividend of 65 cents per share was also declared in September 2012
(21 cents per share in March 2011).
Dividends
MMI Holdings convertible redeemable preference shares
(issued to Kagiso Tiso Holdings (KTH))
A1 A2 A3
Redemption value (per share) R 5.12 9.18 9.18
Paid 30 September 2010 Rate 8.5% 8.5% 17.1%
Rm 12 5 27
Paid 31 March 2011 Rate 7.7% 7.7% 18.0%
Rm 11 5 29
Paid 30 September 2011 Rate 7.7% 7.7% 19.1%
Rm 10 5 30
Paid 31 March 2012 Rate 7.7% 7.7% 19.1%
Rm 10 4 30
Payable 30 September 2012 Rate 8.4% 8.4% 19.1%
Rm 6 2 26
Redemption date Converted (1) Converted (1) June 2017(2)
1. The A1 and A2 MMI preference shares were converted into MMI ordinary shares on a
one-for-one basis with effect from 22 June 2012 and 29 June 2012 respectively.
2. The redemption date of the A3 MMI preference shares has been extended from
5 December 2011 to 29 June 2017. The preference rate payable remained unchanged
up to 29 June 2012. With effect from 30 June 2012 an annual dividend of
132 cents per share will be paid. MMI took over as a funder from 5 December 2011
for the duration of the extension.
MMI Holdings IFRS Financial information
12 mths to 12 mths to
Condensed consolidated statement of comprehensive 30.06.2012 30.06.2011
income Rm Rm
Earnings 2 337 1 663
Other comprehensive income for the year, net of
tax 121 35
Exchange differences on translating foreign
operations 71 (29)
Available-for-sale financial assets (3) 11
Land and buildings revaluation 63 105
Share of other comprehensive income of
associates - (2)
Change in non-distributable reserves 1 -
Income tax relating to components of other
comprehensive income (11) (50)
Total comprehensive income for the year 2 458 1 698
Total comprehensive income attributable to:
Owners of the parent 2 414 1 651
Non-controlling interests 13 14
Momentum preference shares 31 33
2 458 1 698
MMI Holdings IFRS Financial information
Condensed consolidated statement of changes in equity
Restated
12 mths to 12 mths to
30.06.2012 30.06.2011
Rm Rm
Changes in share capital
Balance at beginning (1) 13 421 1 041
Staff share scheme shares released 3 2
Treasury shares held on behalf of contract
holders 2 (204)
Conversion of preference shares/shares
issued net of issue costs (2) 388 12 582
Balance at end 13 814 13 421
Changes in other reserves
Balance at beginning 1 466 1 140
Reclassification (3) - (651)
Total comprehensive income 113 42
BEE cost 3 -
Fair value adjustment for preference shares
issued by MMI (4) - 940
Transfer (to)/from retained earnings (10) (5)
Balance at end (5) 1 572 1 466
Changes in retained earnings
Balance at beginning 7 454 6 495
Reclassification (3) - 651
Total comprehensive income 2 301 1 609
Dividend paid (1 603) (1 302)
Employee share scheme - (9)
Transactions with minorities (31) 5
Transfer from/(to) other reserves 10 5
Balance at end 8 131 7 454
Equity attributable to owners of the parent 23 517 22 341
Momentum preference shares
Balance at beginning 500 500
Total comprehensive income 31 33
Dividend paid (31) (33)
Balance at end 500 500
Changes in non-controlling interests
Balance at beginning 298 (4)
Total comprehensive income 13 14
Dividends paid (3) (35)
Transactions with owners (27) 69
Business combinations - 263
Other - (9)
Balance at end 281 298
Total equity 24 298 23 139
1. The opening share capital and share premium represents the issued equity
interests of Momentum Group Limited, however the number and type of shares in
issue reflects the equity structure of MMI Holdings Limited. This is due to
the reverse acquisition for accounting purposes in December 2010.
2. The conversion of the preference shares in the year ended 30 June 2012
represents the conversion of the A1 and A2 MMI preference shares into ordinary
shares on a one-for-one basis. The shares issued in the year ended 30 June
2011 represent the fair value of the consideration relating to the reverse
acquisition of Metropolitan in December 2010.
3. Certain net cumulative realised gains on available-for-sale assets relating to
prior periods, totalling R651 million, were not recycled from the available-
for-sale reserve to the income statement on disposal of these assets. These
net gains have been reclassified from the available-for-sale reserve to
retained earnings at 1 July 2010.
4. This represents the write up of the carrying value of the preference shares
issued by MMI Holdings Limited to Kagiso Tiso Holdings to fair value as part
of the fair value exercise performed as a result of the merger in December
2010.
5. Other reserves consist of the following:
Land and buildings revaluation reserve: R533 million (30.06.2011:
R491 million)
Foreign currency translation reserve: R74 million (30.06.2011:
R11 million)
Fair value adjustment for preference shares issued by MMI:
R940 million (30.06.2011: R940 million)
Fair value reserve: R11 million (30.06.2011: R15 million)
Non-distributable reserve: R11 million (30.06.2011: R9 million)
Equity-settled share-based payments reserve: R3 million (30.06.2011: Rnil)
MMI Holdings IFRS Financial information
Condensed consolidated statement of cash flows
12 mths to 12 mths to
30.06.2012 30.06.2011
Rm Rm
Net cash outflow from operating activities (1 142) (1 570)
Net cash (outflow)/inflow from investing activities (697) 7 067
Net cash outflow from financing activities (1 875) (1 316)
Net cash flow (3 714) 4 181
Cash resources and funds on deposit at beginning 20 671 16 490
Cash resources and funds on deposit at end 16 957 20 671
Made up as follows:
Cash and cash equivalents as per statement of
financial position 16 957 19 770
Cash and cash equivalents held for sale - 901
16 957 20 671
30.06.2012 30.06.2011
Principal assumptions (South Africa) (1) % %
Pre-tax investment return
Equities 11.3 12.3
Properties 8.8 9.8
Government stock 7.8 8.8
Other fixed interest stocks 8.3 9.3
Cash 6.8 7.8
Risk free return 7.8 8.8
Risk discount rate (RDR) 10.1 11.1
Investment return (before tax) smoothed bonus 10.0 11.0
Expense inflation rate
Momentum 6.8 7.2
Metropolitan 5.8 6.7
1. The principal assumptions relate only to the South African life insurance
business. Assumptions relating to international life insurance businesses are
based on local requirements and can differ from the South African assumptions.
30.06.2012 30.06.2011
Non-controlling interests % %
Metropolitan
Metropolitan Health Group 17.6 17.6
Metropolitan Namibia 4.7 18.0
Metropolitan Health Namibia Administrators 49.0 49.0
Metropolitan Botswana 24.2 24.2
Metropolitan Kenya 33.7 33.7
Metropolitan Ghana 7.8 7.8
Metropolitan Nigeria 50.0 50.0
Metropolitan Swaziland 33.0 33.0
Momentum
Momentum Mozambique 25.0 25.0
Momentum Tanzania 33.0 33.0
Momentum Zambia 35.0 35.0
Momentum Health Ghana 20.0 20.0
Momentum Health Mauritius 5.0 5.0
Momentum Health Botswana 28.0 28.0
MMI Holdings IFRS Financial information
Restated
Financial instrument assets 30.06.2012 30.06.2011
Rm Rm
Equity securities 67 506 80 730
Debt securities 79 959 73 655
Funds on deposit and other money market
instruments 13 125 10 908
Unit-linked investments 78 501 63 420
Derivative financial instruments 3 579 2 207
Loans and receivables 3 880 3 147
Investments in associates designated at fair
value 14 333 7 554
Total financial instrument assets 260 883 241 621
Restated
30.06.2012 30.06.2011
Analysis of assets under management Rm Rm
On-balance sheet assets
Managed and/or administered by
Momentum Investments 173 627 164 598
Investment assets 113 325 109 683
Collective investment schemes 53 423 47 518
Properties 6 879 7 397
Linked product assets under administration 50 412 43 309
Managed internally or by other managers
within MMI 20 195 29 027
Managed by external managers 34 990 35 518
Other assets 23 380 20 099
302 604 292 551
Off-balance sheet assets
Managed and/or administered by Momentum
Investments 123 965 109 289
Collective investment schemes 65 585 51 633
Segregated assets 58 380 57 656
Managed internally or by other managers
within MMI 4 161 -
Momentuam Employee Benefits
segregated assets 498 151
Metropolitan Health 11 624 10 166
Linked product assets under administration 37 133 30 383
Total assets under management 479 985 442 540
Analysis of assets backing shareholder excess
30.06.2012 30.06.2011
Rm % Rm %
Equity securities 1 669 6.9 2 889 12.6
Preference shares 1 492 6.2 2 155 9.4
Collective investment schemes 966 4.0 1 392 6.1
Debt securities 4 352 18.1 2 869 12.6
Properties 2 014 8.4 1 819 8.0
Owner-occupied properties 1 254 5.2 1 202 5.3
Investment properties 760 3.2 617 2.7
Cash and cash equivalents and funds
on deposit 7 608 31.7 6 070 26.6
Intangible assets 7 654 31.9 7 826 34.3
Other net assets 150 0.6 48 0.2
25 905 107.8 25 068 109.8
Redeemable preference shares (316) (1.3) (711) (3.1)
Subordinated redeemable debt (1 572) (6.5) (1 516) (6.7)
Shareholder excess per reporting
basis 24 017 100.0 22 841 100.0
MMI Holdings IFRS Financial information
Business combinations
Momentum Life Assurance Namibia Limited
On 30 June 2012 the group acquired an additional 51% in the ordinary share capital
of Momentum Life Assurance Namibia Ltd, taking the holding to 100%. The additional
shares were acquired for R343 million in cash and R29 million on loan account.
The carrying value of the investment in Momentum Life Assurance Namibia Ltd before
the 51% was acquired was R144 million. The fair value gain recognised by the group
as a result of re-measuring the 49% equity interest in Momentum Life Assurance
Namibia Ltd before the business combination was R207 million and is disclosed in
net realised and fair value gains/(losses) in the income statement. The provisional
purchase price allocation included intangible assets R365 million, tangible assets
R4 million, financial instrument assets R1 314 million, cash and cash equivalents
R191 million, other assets R44 million, insurance contract liabilities
R965 million, financial instrument liabilities R177 million and other liabilities
R58 million.
Impact of business combination
Assuming the acquisition occurred at the beginning of the period, Momentum Life
Assurance Namibia Ltd would have contributed additional net income (revenue)
of R224 million to the group for the 12 months ended 30 June 2012.
Events after the reporting period
No material events occurred between the reporting date and the date of approval of
the summary other than the following:
MMI Holdings announced that it has reached an agreement with Rand Merchant Bank and
Royal Bafokeng Holdings to acquire their shares in the Eris Property Group (Eris)
for an amount of approximately R240 million. MMI's property portfolio is currently
managed by Eris and Momentum Properties (previously Metropolitan Property Services).
MMI will also merge the property management business of Momentum Properties with
Eris in exchange for additional shares in Eris. This merger will be effective from
1 July 2012 or as soon as all suspensive conditions are met. Eris management and
Kagiso Tiso Holdings Proprietary Limited (KTH), who are existing shareholders
in Eris, have agreed to acquire further shares from MMI, resulting in MMI holding
a controlling interest of 50.1%, KTH 21.2% and Eris Management 28.7% in Eris post
implementation. This transaction is subject to a number of conditions precedent
including approval by the Competition authorities.
MMI Holdings, through its wholly-owned subsidiary Momentum Group Ltd ("Momentum")
entered into a binding sale of shares agreement with OUTsurance Holdings Ltd
("OUTsurance") a subsidiary of Rand Merchant Insurance Holdings Ltd ("RMI") in
terms of which Momentum was to, upon fulfilment of the suspensive conditions,
acquire OUTsurance's 50% shareholding in Momentum Short-term Insurance Company Ltd.
("MSTI") for approximately R123million. Momentum already owns the other 50% of
the issued share capital of MSTI.
MMI Holdings Segmental information
Metropo-
Metropo- Momentum litan
Momentum litan Employee Inter- Momentum
12 mths to 30.06.2012 Retail Retail Benefits national Investments
Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 17 148 6 042 9 712 1 960 10 661
Recurring premiums 7 376 4 760 5 990 1 639 -
Single premiums 9 772 1 282 3 722 321 10 661
Inter-segmental premiums - - - - -
Fee income 1 797 130 938 129 1 099
Fee income 1 797 130 938 129 1 099
Inter-segmental fee
income - - - - -
Expenses
Net payments to contract
holders 16 095 5 049 9 033 1 099 12 772
External payments (2) 16 095 5 049 9 033 1 099 12 772
Inter-segmental payments - - - - -
Other expenses 3 217 1 863 991 841 959
Sales remuneration 1 582 778 166 247 4
Administration expenses 1 616 1 085 819 574 730
Amortisation due to
business combinations and
impairments 19 - 6 20 12
Direct property and asset
management expenses - - - - 213
Holding company expenses - - - - -
Inter-segmental expenses - - - - -
Diluted core headline
earnings 1 064 438 249 57 125
Operating profit 1 472 609 351 77 146
Tax on operating profit (408) (171) (102) (20) (40)
Investment income - - - - 27
Tax on investment income - - - - (8)
Diluted weighted average
number of shares in issue
(millions)
Diluted core headline
earnings per share (cents)
Actuarial liabilities 131 723 31 064 43 898 6 326 30 055
MMI Holdings Segmental information continued
Metropo- Other
litan Shareholder Segmental reconciling
12 mths to 30.06.2012 Health capital total items (1) IFRS total
Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 29 - 45 552 (26 858) 18 694
Recurring premiums 29 - 19 794 (4 547) 15 247
Single premiums - - 25 758 (21 847) 3 911
Inter-segmental premiums - - - (464) (464)
Fee income 1 701 30 5 824 (576) 5 248
Fee income 1 701 30 5 824 (7) 5 817
Inter-segmental fee
income - - - (569) (569)
Expenses
Net payments to contract
holders 24 799 44 871 (25 895) 18 976
External payments (2) 24 799 44 871 (25 865) 19 006
Inter-segmental payments - - - (30) (30)
Other expenses 1 560 477 9 908 1 535 11 443
Sales remuneration - - 2 777 73 2 850
Administration expenses 1 507 236 6 567 100 6 667
Amortisation due to
business combinations and
impairments 53 40 150 594 744
Direct property and asset
management expenses - - 213 844 1 057
Holding company expenses - 201 201 - 201
Inter-segmental expenses - - - (76) (76)
Diluted core headline
earnings 133 889 2 955 - 2 955
Operating profit 170 306 3 131 - 3 131
Tax on operating profit (51) (34) (826) - (826)
Investment income 17 767 811 - 811
Tax on investment income (3) (150) (161) - (161)
Diluted weighted average
number of shares in issue
(millions) 1 605 1 605
Diluted core headline
earnings per share (cents) 184 184
Actuarial liabilities 1 2 431 245 498 (453) 245 045
1. The 'other reconciling items' column includes: an adjustment to reverse
investment contract premiums (R26 580 million) and claims (R25 868 million);
FNB Life adjustments reconciling the 10% of FNB Life included in each of the
relevant lines to the accounting treatment of the reinsurance arrangement
(premiums R186 million; fee income R1 million, claims R3 million, sales
remuneration R90 million and expenses R103 million); direct property and asset
management fees (R844 million) for all companies, except Momentum Investments,
that are set off against investment income and fee income, respectively for
management reporting purposes but shown as an expense for accounting purposes;
the amortisation of intangibles relating to the merger (R594 million);
Namibian BEE cost (R3 million) and other minor adjustments to expenses
(R6 million), sales remuneration (R17 million) and fee income (R8 million).
2. The R799 million payments to contract holders in shareholder capital relates to
the maturity of certain corporate policies administered by balance sheet
management division.
MMI Holdings Segmental information
Restated Momentum Metropolitan
12 mths to Momentum Metropolitan Employee Inter- Momentum
30.06.2011 (1) Retail (3) Retail Benefits national Investments
Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 16 595 6 393 8 171 1 637 8 846
Recurring premiums 7 133 4 489 5 300 1 383 -
Single premiums 9 462 1 904 2 871 254 8 846
Fee income (4) 1 562 117 710 85 1 016
Fee income 1 562 117 710 85 1 016
Inter-segmental fee
income - - - - -
Expenses
Net payments to
contract holders 15 277 4 440 10 886 983 8 267
Other expenses 3 445 1 774 997 777 881
Sales remuneration 1 830 725 164 231 2
Administration
Amortisation due to
business combinations
and impairments - - - 13 30
Direct property and
asset management
expenses - - - - 173
Holding company
expenses - - - - -
Inter-segmental
expenses - - - - -
Diluted core headline
earnings 759 394 187 32 131
Operating profit 1 078 517 257 37 149
Tax on operating profit (319) (123) (70) (5) (36)
Investment income - - - - 25
Tax on investment
income - - - - (7)
Diluted weighted
average number of
shares in issue
(millions)
Diluted core headline
earnings per share
(cents)
Actuarial liabilities 120 139 29 878 40 545 4 441 29 267
MMI Holdings Segmental information continued
Restated Other Metropo-
12 mths to Metropolitan Shareholder Segmental reconciling litan pre-
30.06.2011 (1) Health capital total items (2) merger IFRS total
Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 26 36 41 704 (21 936) (4 739) 15 029
Recurring premiums 26 - 18 331 (3 273) (3 186) 11 872
Single premiums - 36 23 373 (18 663) (1 553) 3 157
Fee income (4) 1 651 176 5 317 (430) (655) 4 232
Fee income 1 651 176 5 317 - (655) 4 662
Inter-segmental fee
income - - - (430) - (430)
Expenses
Net payments to
contract holders 21 214 40 088 (19 492) (4 698) 15 898
Other expenses 1 541 381 9 796 1 201 (1 639) 9 358
Sales remuneration - - 2 952 140 (395) 2 697
Administration
expenses(4) 1 516 97 6 319 237 (1 186) 5 370
Amortisation due to
business combinations
and impairments 25 92 160 352 - 512
Direct property and
asset management
expenses - - 173 753 - 926
Holding company
expenses - 192 192 - (58) 134
Inter-segmental
expenses - - - (281) - (281)
Diluted core headline
earnings 114 1 031 2 648 - (489) 2 159
Operating profit 132 326 2 496 - (380) 2 116
Tax on operating profit (40) 34 (559) - 80 (479)
Investment income 25 788 838 - (235) 603
Tax on investment income (3) (117) (127) - 46 (81)
Diluted weighted average
number of shares in issue
(millions) 1 605 - (276) 1 329
Diluted core headline
earnings per share
(cents) 165 - (3) 162
Actuarial liabilities 3 4 607 228 880 - - 228 880
1. The table above assumes that Metropolitan and Momentum were merged from
1 July 2010. The `Metropolitan pre-merger' column represents the segmental
information for Metropolitan for the five months ended 30 November 2010.
2. The 'other reconciling items' column includes: an adjustment to reverse
investment contract premiums (R22 350 million) and claims (R19 576 million);
FNB Life adjustments reconciling the 10% of FNB Life included in each of the
relevant lines to the accounting treatment of the reinsurance arrangement
(premiums R414 million; claims R84 million and expenses R233 million); direct
property and asset management fees (R753 million) for all companies, except
Momentum Investments, that are set off against investment income and fee
income, respectively for management reporting purposes but shown as an
expense for accounting purposes; the amortisation of the intangibles
(R352 million) relating to the merger; and other adjustments to expenses
(R144 million) that are not taken into account when the CODM monitors and
evaluates the performance of individual segments.
3. R60 million of earnings for the year ended June 2011, that was previously
included in investment variances and therefore excluded from core headline
earnings, is now included in core headline earnings to ensure consistency
with the year ended June 2012.
4. Fee income and administration expenses have been restated to ensure
consistency with internal reporting for the year ended June 2012.
MMI Holdings Segmental information
Analysis of reclassifications Momentum Metropo Momentum
Momentum litan Employee
Retail Retail Benefits
Rm Rm Rm
The comparative segmental information has been restated where appropriate
to ensure alignment with the way in which the chief operating decision- maker,
being the MMI executive committee, monitors and evaluates the performance
of the various segments of the business. Refer to table below for detail.
These restatements had no impact on core headline earnings.
Fee income
Published 30 June 2011 1 349 117 648
Reclassifications 213 - 62
Restated 30 June 2011 1 562 117 710
Other expenses
Published 30 June 2011 3 540 1 777 1 005
Reclassifications (95) (3) 997
Restated 30 June 2011 3 445 1 774 997
Income tax
Published 30 June 2011 412 200 125
Reclassifications - - -
Restated 30 June 2011 412 200 125
MMI Holdings Segmental Information (continued)
The comparative segmental information has been restated where appropriate
to ensure alignment with the way in which the chief operating decision- maker,
being the MMI executive committee, monitors and evaluates the performance
of the various segments of the business. Refer to table below for detail.
These restatements had no impact on core headline earnings.
Analysis of reclassifications Metropolitan Momentum Metropolitan
International Investments Health
Rm Rm Rm
Fee income
Published 30 June 2011 85 935 1 651
Reclassifications - 81 -
Restated 30 June 2011 85 1 016 1 651
Other expenses
Published 30 June 2011 777 842 1 541
Reclassifications - 39 -
Restated 30 June 2011 777 881 1 541
Income tax
Published 30 June 2011 3 97 58
Reclassifications - - -
Restated 30 June 2011 3 97 58
MMI Holdings Segmental Information (continued)
The comparative segmental information has been restated where appropriate
to ensure alignment with the way in which the chief operating decision- maker,
being the MMI executive committee, monitors and evaluates the performance
of the various segments of the business. Refer to table below for detail.
These restatements had no impact on core headline earnings.
Analysis of reclassifications
Other
Shareholder Segmental reconsiling
capital total items
Rm Rm Rm
Fee income
Published 30 June 2011 448 5 233 (346)
Reclassifications (272) 84 (84)
Restated 30 June 2011 176 5 317 (430)
Other expenses
Published 30 June 2011 402 9 884 1 113
Reclassifications (21) (88) 88
Restated 30 June 2011 381 9 796 1 201
Income tax
Published 30 June 2011 187 1 082 (32)
Reclassifications 75 75 (75)
Restated 30 June 2011 262 1 157 (107)
MMI Holdings Segmental Information (continued)
The comparative segmental information has been restated where appropriate
to ensure alignment with the way in which the chief operating decision- maker,
being the MMI executive committee, monitors and evaluates the performance
of the various segments of the business. Refer to table below for detail.
These restatements had no impact on core headline earnings.
Analysis of reclassifications Metropolitan IFRS total
pre-merger
Rm Rm
Fee income
Published 30 June 2011 (655) 4 232
Reclassifications - -
Restated 30 June 2011 (655) 4 232
Other expenses
Published 30 June 2011 (1 639) 9 358
Reclassifications - -
Restated 30 June 2011 (1 639) 9 358
Income tax
Published 30 June 2011 (131) 919
Reclassifications - -
Restated 30 June 2011 (131) 919
MMI Holdings Segmental information
Reconciliation of Momentum investments and Metropolitan health
12 mths to 30.06.2012
Momentum Investments
Asset
Asset administra- Metropolitan
management tion Total Health
Rm Rm Rm Rm
Revenue 989 110 1 099 1 730
Net insurance premiums
(excluding investment
business) - - - 29
Fee income 989 110 1 099 1 701
Expenses and finance costs 888 82 970 1 587
Net payments to contract
holders (excluding
investment business) - - - 24
Other expenses 877 82 959 1 560
Finance costs 11 - 11 3
101 28 129 143
Core adjustments 17 - 17 27
Impairments and amortisation
of intangibles relating to
business combinations 12 - 12 53
Adjustments for dilution - - - (17)
Other 5 - 5 (9)
Operating profit before tax 118 28 146 170
MMI Holdings Segmental information continued
Reconciliation of Momentum investments and Metropolitan health
12 mths to 30.06.2011
Momentum Investments Metropolitan
Health
Asset Asset
management administration Total
Rm Rm Rm Rm
Revenue 895 121 1 016 1 677
Net insurance premiums
(excluding investment
business) - - - 26
Fee income 895 121 1 016 1 651
Expenses and finance costs 814 83 897 1 565
Net payments to contract
holders (excluding
investment business) - - - 21
Other expenses 798 83 881 1 541
Finance costs 16 - 16 3
81 38 119 112
Core adjustments 30 - 30 20
Impairments and amortisation
of intangibles relating to
business combinations 30 - 30 25
Adjustments for dilution - - - (10)
Other - - - 5
Operating profit before tax 111 38 149 132
MMI Holdings Segmental information
Payments to contract holders (1) 12 mths to 12 mths to
30.06.2012 30.06.2011
Rm Rm
Momentum Retail 16 095 15 277
Death and disability claims 2 940 2 634
Maturity claims 4 844 4 059
Annuities 3 420 3 249
Withdrawal benefits 48 -
Surrenders 5 684 6 372
Re-insurance recoveries (841) (1 037)
Metropolitan Retail 5 049 4 440
Death and disability claims 1 030 1 132
Maturity claims 1 512 1 258
Annuities 761 755
Withdrawal benefits 37 45
Surrenders 1 796 1 409
Re-insurance recoveries (87) (159)
Momentum Employee Benefits 9 033 10 886
Death and disability claims 2 791 2 455
Maturity claims 471 411
Annuities 938 886
Withdrawals and surrenders 2 344 3 764
Terminations 676 879
Disinvestments 2 382 2 737
Re-insurance recoveries (569) (246)
Metropolitan International 1 099 983
Death and disability claims 455 341
Maturity claims 209 160
Annuities 51 41
Withdrawal benefits 95 67
Surrenders 266 239
Terminations 39 52
Disinvestments 5 101
Re-insurance recoveries (21) (18)
Momentum Investments
Withdrawals 12 772 8 267
Metropolitan Health
Claims 24 21
Shareholder capital
Claims 799 214
Total payments to contract holders 44 871 40 088
Adjustment for payments to investment
contract holders (25 991) (23 082)
Transfers between insurance, investment
and investment with DPF contracts 123 3 506
FNB Life adjustment 3 84
Inter-segmental (30) -
Metropolitan pre-merger (2) - (4 698)
Net insurance benefits and claims per
income statement 18 976 15 898
1. The total payments to contract holders assume that Metropolitan and Momentum
were merged from 1 July 2010.
2. The Metropolitan pre-merger line represents the segmental claims for
Metropolitan for the five months ended 30 November 2010 before the merger.
MMI Holdings Segmental information
Net funds received from clients
12 mths to 12 mths to
Gross Gross 30.06.2012 30.06.2011
single recurring Gross Gross Net inflow/ Net inflow/
inflows inflows inflow outflow (outflow) (outflow)
Rm Rm Rm Rm Rm Rm
Momentum Retail 9 772 7 376 17 148 (16 095) 1 053 1 318
Metropolitan
Retail 1 282 4 760 6 042 (5 049) 993 1 953
Momentum Employee
Benefits 3 722 5 990 9 712 (9 033) 679 (2 715)
Metropolitan
International 321 1 639 1 960 (1 099) 861 654
Momentum
Investments 10 661 - 10 661 (12 772) (2 111) 579
Shareholder
capital - - - (799) (799) (178)
Long-term
insurance business
cash flows 25 758 19 765 45 523 (44 847) 676 1 611
Momentum Retail 12 874 - 12 874 (10 332) 2 542 6 680
Momentum Employee
Benefits 6 389 395 (63) 332 (676)
Metropolitan
International 1 012 - 1 012 (1 017) (5) -
Momentum
Investments 65 440 4 670 70 110 (69 091) 1 019 (16 446)
Metropolitan
Health - 26 768 26 768 (30 923) (4 155) 3 382
Total net funds
received from
clients 105 090 51 592 156 682 (156 273) 409 (5 449)
The table above assumes that Metropolitan and Momentum were merged from 1 July 2010.
Number of emoployees 30.06.2012 30.06.2011
Indoor staff 10 005 10 058
Momentum Retail 2 067 1 932
Metropolitan Retail 1 512 1 471
Momentum Employee Benefits 1 027 1 147
Metropolitan International 784 716
Momentum Investments 542 532
Metropolitan Health 3 130 3 266
Balance sheet management 57 50
Group services 832 944
Redeployment centre 54 -
Field staff 5 694 5 586
Momentum Retail 433 494
Metropolitan Retail 4 179 3 813
Metropolitan International 1 082 1 279
Total 15 699 15 644
The table above assumes that Metropolitan and Momentum were merged from 1 July 2010.
MMI Holdings Statement of assets and liabilities
Statement of assets and liabilities on reporting basis
Restated
30.06.2012 30.06.2011(1)
Rm Rm
Total assets 302 604 292 551
Actuarial value of policy liabilities (245 045) (228 880)
Other liabilities (33 261) (40 532)
Non-controlling interests (281) (298)
Group excess per reporting basis 24 017 22 841
Net assets other businesses (1 334) (830)
Fair value adjustments on Metropolitan
acquisition and other consolidation
adjustments (5 901) (6 100)
Excess long-term insurance business,
net of non-controlling interests (1,2) 16 782 15 911
Reconciliation of change in long-term
insurance excess to the income statement
Change in excess of long-term insurance
business (2) 871 931
Increase in share capital (345) (84)
Change in other reserves (60) 6
Dividend paid ordinary shares 2 502 1 722
Change in non-controlling interests (53) -
Acquisition of Momentum Namibia (117) -
Total surplus arising, net of non-
controlling interests (including 90% of
FNB Life) 2 798 2 575
FNB Life 90% - (174)
Total surplus arising, net of non-
controlling interests (excluding 90% of
FNB Life) 2 798 2 401
Operating profit (3) 2 309 1 863
Investment income on excess 520 610
Net realised and fair value gains on
excess 242 418
Investment variances(3) (54) 91
Basis and other changes (219) (581)
Consolidation adjustments (12) (3)
Earnings after non-controlling interest
of long-term insurance business 2 786 2 398
FNB Life 90% - 174
Earnings after non-controlling interests
of other group businesses and
consolidation adjustments (485) (554)
Earnings attributable to owners of the
parent 2 301 2 018
Metropolitan pre-merger - (406)
Earnings attributable to owners of the
parent as per income statement 2 301 1 612
1. The total surplus arising in the comparatives above represents the surplus (for
the 12 months ended 30 June 2011) that would have arisen had Momentum and
Metropolitan been merged since 1 July 2010.
2. The long-term insurance business includes both insurance and investment contract
business and is the simple aggregate of all the life insurance companies in the
group, including life insurance companies in Africa. It is after non-
controlling interests but excludes other items which are eliminated on
consolidation. It also excludes non-insurance business.
3. R60 million of earnings for the year ended June 2011, that was previously
included in investment variances and therefore excluded from operating profit,
is now included in operating profit to ensure consistency with the year ended
June 2012.
MMI Holdings Statement of assets and liabilities
Reconciliation of reporting excess to statutory excess
30.06.2012 30.06.2011
Rm Rm
Reporting excess long-term insurance
business (1) 16 782 15 911
Disregarded assets (2) (998) (1 205)
Difference between statutory and
published valuation methods (436) (263)
Write down of subsidiaries and associates
for statutory purposes (1 209) (715)
Unsecured subordinated debt 1 563 1 507
Consolidation adjustments (56) (65)
Statutory excess long-term insurance
business 15 646 15 170
Capital adequacy requirement (CAR)(Rm)(3) 6 641 6 485
Ratio of long-term insurance business
excess to CAR (times) 2.4 2.3
Discretionary margins 9 974 9 999
1. The long-term insurance business includes both insurance and investment
contract business and is the simple aggregate of all the life insurance
companies in the group, including life insurance companies in Africa. It is
after non-controlling interests but excludes other items which are eliminated
on consolidation. It also excludes non-insurance business.
2. Disregarded assets are those as defined in the South African Long Term
Insurance Act and are only applicable to South African Long Term insurance
companies. Adjustments are also made for the international insurance companies
from reporting excess to statutory excess as required by their regulators. It
includes Sage intangible assets of R590 million (30.06.2011: R618 million).
3. Aggregation of separate company CAR's, with no assumption of diversification
benefits.
MMI Holdings Embedded value information
Embedded value results as at 30.06.2012 30.06.2011
Rm Rm
Covered business
Reporting excess long-term insurance
business 16 782 15 911
Reclassification to non-covered business (1 388) (918)
15 394 14 993
Disregarded assets (1) (688) (821)
Difference between statutory and
published valuation methods (436) (263)
Dilutory effect of subsidiaries (2) (30) (5)
Consolidation adjustments (3) (30) (108)
Momentum Namibia adjustment (4) (247) (42)
Value of Momentum preference shares
issued (480) (480)
Diluted adjusted net worth covered
business 13 483 13 274
Net value of in-force business 14 910 14 083
Diluted embedded value covered business 28 393 27 357
Non-covered business
Net assets non-covered subsidiaries of
life insurance companies 1 388 918
Net assets non-covered subsidiaries of
the holding company 1 334 830
Consolidation adjustments (3) (200) (303)
Adjustments for dilution (5) 610 1 009
Diluted adjusted net worth non-covered
business 3 132 2 454
Write up to directors' value 947 880
Non-covered businesses 2 110 1 944
Holding company expenses (6) (953) (797)
International holding company expenses (6) (210) (117)
Secondary Tax on Companies allowance - (150)
Diluted embedded value non-covered
business 4 079 3 334
Diluted adjusted net worth 16 615 15 728
Net value of in-force business 14 910 14 083
Write up to directors' value 947 880
Diluted embedded value 32 472 30 691
Required capital covered business
(adjusted for qualifying debt and
preference shares) 7 858 8 401
Surplus capital covered business 5 625 4 873
Diluted embedded value per share (cents) 2 023 1 912
Diluted adjusted net worth per share
(cents) 1 035 980
Diluted number of shares in issue
(million) (7) 1 605 1 605
1. Disregarded assets include Sage intangible assets of R590 million (30.06.2011:
R618 million), goodwill and various other items.
2. For accounting purposes, Metropolitan Health has been consolidated at 100%,
Metropolitan Kenya has been consolidated at 96% and Metropolitan Namibia has
been consolidated at 95% for the current period, in the statement of financial
position. For embedded value purposes, disclosed on a diluted basis, the
non-controlling interests and related funding have been reinstated.
3. Consolidation adjustments include mainly goodwill and intangibles in
subsidiaries that are eliminated.
4. The carrying value of Momentum Namibia included in the reporting excess was
written down to the company's net asset value.
5. Adjustments for dilution are made up as follows:
Dilutory effect of subsidiaries (note 2): R74 million (30.06.2011:
R70 million)Staff share scheme loans: Rnil (30.06.2011: R3 million)
Treasury shares held on behalf of contract holders: R220 million
(30.06.2011:R225 million)
Liability MMI convertible preference shares issued to KTH: R316 million
(30.06.2011: R711 million)
6. The holding company expenses reflect the present value of projected recurring
head office expenses. The International holding company expenses reflect the
allowance for support services to the international life assurance and health
businesses.
7. The diluted number of shares in issue takes into account all issued shares,
assuming conversion of the convertible redeemable preference shares and the
release of staff share scheme shares, and includes the treasury shares held on
behalf of contract holders.
MMI Holdings Embedded value information
Analysis of net value of in-force business per division
Restated
30.06.2012 30.06.2011
Rm Rm
Momentum Retail (1) 8 122 8 150
Gross value of in-force business 9 680 9 689
Less cost of required capital (2) (1 558) (1 539)
Metropolitan Retail 3 323 3 206
Gross value of in-force business 3 968 3 579
Less cost of required capital (2) (645) (373)
Momentum Employee Benefits 1 992 1 500
Gross value of in-force business 2 609 1 980
Less cost of required capital (2) (617) (480)
Metropolitan International 1 268 860
Gross value of in-force business 1 321 883
Less cost of required capital (53) (23)
Shareholder capital (1) 205 367
Gross value of in-force business (3) 205 367
Less cost of required capital - -
Net value of in-force business 14 910 14 083
Notes
1. Net value of in-force of R701 million was transferred from Shareholder capital
to Momentum Retail, reflecting a refinement in the allocation of discretionary
margins to the divisions. The comparatives have been restated to reflect this
change.
2. The strategic decision to de-risk shareholder assets resulted in an increase in
the technical calculation of the required cost of capital, impacting Momentum
Retail by negative R78 million, Metropolitan Retail by negative R135 million and
Momentum Employee Benefits by negative R310 million, respectively.
3. The value of in-force in the Shareholder capital represents discretionary margins
not allocated to specific divisions.
MMI Holdings Embedded value Adjusted Net value of
net worth in-force 30.06.2012 30.06.2011
Rm Rm Rm Rm
Covered business
Momentum Group Ltd 7 130 9 514 16 644 16 425
Metropolitan Life Ltd 5 343 4 128 9 471 9 134
Metropolitan Odyssey Ltd 48 - 48 44
Metropolitan International 962 1 268 2 230 1 754
Metropolitan Life International 89 - 89 81
Metropolitan Namibia 288 639 927 496
Metropolitan Botswana 129 86 215 186
Metropolitan Lesotho 236 303 539 439
Metropolitan Kenya 18 - 18 11
Metropolitan Ghana 11 15 26 43
Metropolitan Swaziland 20 1 21 20
Metropolitan Nigeria 59 - 59 58
Momentum international businesses (1) 112 224 336 420
Total covered business 13 483 14 910 28 393 27 357
Write up to
Adjusted directors'
net worth value 30.06.2012 30.06.2011
Rm Rm Rm Rm
Non-covered business
Momentum Investments (2) 1 059 802 1 861 1 535
Metropolitan Health (3) 356 1 247 1 603 1 416
Momentum Retail (short-term insurance) 99 61 160 83
Metropolitan International Holdings (4) 288 (210) 78 (117)
MMI Holdings (after consolidation
adjustments) (4) 1 330 (953) 377 567
Secondary Tax on Companies allowance - - - (150)
Total non-covered business 3 132 947 4 079 3 334
Total embedded value 16 615 15 857 32 472 30 691
Diluted net asset value non-covered
business (3 132)
Adjustments to covered business
adjusted net worth 3 299
Reporting excess long-term insurance
business 16 782
1. The Momentum international businesses were transferred from non-covered to
covered business at 30 June 2011.
2. Momentum Investments subsidiaries are valued using forward Price Earnings
multiples applied to the relevant sustainable earnings bases.
3. Metropolitan Health subsidiaries have been valued using Embedded Value
methodology.
4. The holding company expenses reflect the present value of projected recurring
head office expenses. The International holding company expenses reflect the
allowance for support services to the international life assurance and health
businesses.
MMI Holdings Embedded value information
Analysis of changes in group embedded value
12 mths to 12 mths to
Covered business 30.06.2012 30.06.2011
Adjusted Gross Total EV
net Value of excluding
worth in-force Cost of FNB Life
Notes (ANW) (VIF) CAR Total EV 90%
Rm Rm Rm Rm Rm
Profit from new business (1 343) 2 192 (126) 723 727
Embedded value from new
business A (1 343) 2 102 (126) 633 632
Expected return to end of
period B - 90 - 90 95
Profit from existing
business 3 587 (988) (249) 2 350 2 229
Expected return unwinding
of RDR B - 1 835 (317) 1 518 1 377
Release from the cost of
required capital C - - 411 411 366
Expected (or actual) net of
tax profit transfer to net
worth D 3 006 (3 006) - - -
Operating experience
variances E 587 10 114 711 712
Operating assumption
changes F (6) 173 (457) (290) (226)
Allowance for service level
agreement between RMBUT and
Momentum - - - - 128
Embedded value profit from
operations 2 244 1 204 (375) 3 073 3 084
Investment return on
adjusted net worth G 870 - - 870 1 057
Investment variances H (66) (259) (39) (364) 215
Economic assumption changes I (117) 248 (21) 110 (65)
Acquisition of covered
business J (215) 242 (22) 5 -
Exchange rate movements 14 4 - 18 (10)
Embedded value profit
covered business 2 730 1 439 (457) 3 712 4 281
Transfer of business
(to)/from non-covered
business K (350) (173) - (523) 420
Capital transferred to non-
covered business L (18) (30) - (48) -
Changes in share capital M 317 49 (1) 365 139
Dividend paid (2 498) - - (2 498) (1 717)
Change in reserves 28 - - 28 -
Opening restatement for FNB
Life
(EV statement shown after
restatement) - - - - 161
Change in embedded value
covered business 209 1 285 (458) 1 036 3 284
Non-covered business
Change in directors'
valuation and earnings 4 (82)
Allowance for service level
agreement between RMBUT and
Momentum - (288)
Holding company expenses (248) (574)
Secondary Tax on Companies
allowance 6 (150)
Embedded value profit
non-covered business (238) (1 094)
Changes in share capital (365) (139)
Dividend paid 889 176
Finance costs preference
shares (92) (88)
Transfer of business to
covered business K 510 (420)
Capital transferred from
covered business L 41 -
Change in embedded value
non-covered business 745 (1 565)
Total change in group
embedded value 1 781 1 719
Total embedded value profit 3 474 3 187
Return on embedded value
(%) - internal rate of return 11.3% 11.0%
The analysis of changes in embedded value above assumes that Momentum and
Metropolitan were merged for the 12 months ended 30 June 2011.
MMI Holdings Embedded value information
A. Value of new business
Metropo-
Metropo- Momentum litan
Value of new business Momentum litan Employee Internatio Segmental
Retail Retail Benefits nal total
Rm Rm Rm Rm Rm
12 mths to 30.06.2012
Value of new business (1) 207 262 130 34 633
Gross 269 284 173 34 760
Less cost of required
capital (62) (22) (43) - (127)
New business premiums 24 304 2 282 4 458 497 31 541
Recurring premiums 1 119 1 035 790 228 3 172
Single premiums 23 185 1 247 3 668 269 28 369
New business premiums (APE) 3 437 1 159 1 157 255 6 008
New business premiums (PVP) 29 249 5 371 9 421 1 332 45 373
Profitability of new business
as a % of APE 6.0 22.6 11.2 13.3 10.5
Profitability of new business
as a % of PVP 0.7 4.9 1.4 2.6 1.4
12 mths to 30.06.2011
Value of new business 288 257 62 25 632
Gross 338 262 97 25 722
Less cost of required
capital (50) (5) (35) - (90)
New business premiums 23 910 2 822 3 531 320 30 583
Recurring premiums 1 237 921 753 190 3 101
Single premiums 22 673 1 901 2 778 130 27 482
New business premiums (APE) 3 504 1 111 1 030 203 5 848
New business premiums (PVP) 28 758 5 698 8 300 967 43 723
Profitability of new business
as a % of APE 8.2 23.1 6.0 12.3 10.8
Profitability of new business
as a % of PVP 1.0 4.5 0.7 2.6 1.4
- The above table assumes that Momentum and Metropolitan merged on 1 July 2010.
- Value of new business and new business premiums are net of non-controlling
interests.
- The cost of capital for the international business is less than
R1 million.
- The value of new business has been calculated on closing assumptions.
Investment yields at the point of sale have been used for fixed annuity and
guaranteed endowment business, for other business the investment yields at the
end of the year have been used.
1. The value of new business (VNB) at 30 June 2012 still includes Momentum Wealth
off-balance sheet sales; with VNB of R34 million (30.06.2011: R35 million) and
PVP of R12 809 million (30.06.2011: R12 497 million). From financial year 2013
onwards the Wealth off-balance sheet business will be disclosed as part of non-
covered business in the embedded value analysis. Excluding the Momentum Wealth
off-balance sheet business would improve the Momentum Retail PVP margin to 1.1%
and the overall PVP margin to 1.8%.
MMI Holdings Embedded value information
Metropo-
Metropo- Momentum litan
Momentum Momentum litan Employee Internati
Retail Retail Retail Benefits onal
On- Off- On- On- On-
balance balance balance balance balance Segmental
sheet sheet sheet sheet sheet total
Rm Rm Rm Rm Rm Rm
12 mths to 30.06.2012
Value of new business 173 34 262 130 34 633
Gross 235 34 284 173 34 760
Less cost of required
capital (62) - (22) (43) - (127)
New business premiums 11 518 12 786 2 282 4 458 497 31 541
Recurring premiums 1 054 65 1 035 790 228 3 172
Risk 566 - 735 419 - 1 720
Savings/Investments 486 65 300 368 - 1 219
Annuities 2 - - 3 - 5
International - - - - 228 228
Single premiums 10 464 12 721 1 247 3 668 269 28 369
Savings/Investments 9 699 12 721 659 2 397 - 25 476
Annuities 765 - 588 1 271 - 2 624
International - - - - 269 269
New business premiums
(APE) 2 100 1 337 1 159 1 157 255 6 008
Risk 566 - 734 419 - 1 719
Savings/Investments 1 456 1 337 366 608 - 3 767
Annuities 78 - 59 130 - 267
International - - - - 255 255
New business premiums
(PVP) 16 384 12 865 5 371 9 421 1 332 45 373
Profitability of new
business as a % of APE 8.2 2.5 22.6 11.2 13.3 10.5
Profitability of new
business as a % of PVP 1.1 0.3 4.9 1.4 2.6 1.4
MMI Holdings Embedded value information
Reconciliation of lump sum inflows 12 mths to 12 mths to
30.06.2012 Rm 30.06.2011 Rm
Total lump sum inflows 105 090 73 292
Inflows not included in value of new business (77 631) (47 284)
Momentum Retail (342) (36)
Momentum Employee Benefits (66) (109)
Balance Sheet Management - (36)
Momentum Africa (1 122) (124)
Momentum Investments
On-balance sheet inflows (10 661) (8 846)
Off-balance sheet inflows (65 440) (38 133)
Term extensions on maturing policies 885 817
Retirement annuity proceeds invested in living
annuities - 715
Non-controlling interests and other adjustments 25 (58)
Single premiums included in value of new business 28 369 (27 482)
The above table assumes that Momentum and Metropolitan had merged on 1 July 2010.
B. Expected return Unwinding of RDR
The expected return is determined by applying the risk discount rate applicable at
the beginning of the reporting period to the present value of in-force covered
business at the beginning of the reporting period and adding the expected return
on new business, which is determined by applying the current risk discount rate to
the value of new business from the point of sale to the end of the period.
C. Release from the cost of required capital
The release from the cost of required capital represents the difference between
the risk discount rate and the expected after tax investment return on the assets
backing the required capital over the year.
D. Expected (or Actual) net of tax profit transfer to net worth
The expected profit transfer for covered business from the present value
of in-force to the adjusted net worth is calculated on the statutory
valuation method. While investment certain returns on explicit
discretionary margin reserves were the past, retained in expected
investment returns of R146 million on the statutory basis after tax
(R182 million on the published basis after tax) have been released to
earnings in the 12 months ended 30 June 2012 in conjunction with
management's regular review of the adequacy of these margins in line with
the accounting policy. This item is released from the value of in force as
part of the item "Expected (or actual) net of tax profit transfer to net
worth".
MMI Holdings Embedded value information
E. Operating experience variances
12 mths to 12 mths to
30.06.2012 30.06.2011
Operating experience variances ANW Net VIF EV EV
Notes Rm Rm Rm Rm
Momentum Retail 27 49 76 222
Mortality and morbidity 1 150 4 154 195
Terminations, premium cessations
and policy alterations 2 (46) 49 3 (6)
Expense variance 3 (23) - (23) 5
Other 4 (54) (4) (58) 28
Metropolitan Retail 20 (13) 7 106
Mortality and morbidity 1 98 (6) 92 132
Terminations, premium cessations
and policy alterations 5 (63) (13) (76) (56)
Expense variance 27 - 27 8
Other 6 (42) 6 (36) 22
Momentum Employee Benefits 130 17 147 (19)
Mortality and morbidity 1 53 - 53 65
Terminations 27 17 44 (80)
Expense variance 14 - 14 (15)
Other 7 36 - 36 11
Metropolitan International 51 (13) 38 66
Mortality and morbidity 1 62 - 62 94
Terminations, premium cessations and
policy alterations 8 (7) 1 11
Expense variance 8 (31) 13 (18) (59)
Other 12 (19) (7) 20
Shareholder capital 9 359 (31) 328 320
Opportunity cost of required capital 10 - 115 115 17
Total operating experience variances 587 124 711 712
The above table assumes that Momentum and Metropolitan were merged from 1 July 2010.
Notes
1. Overall, underwriting experiences during the last 12 months were better compared
to what was allowed for in the valuation basis.
2. Worse than expected termination experience on certain product lines, offset by
guarantee reserve releases on terminated business.
3. The expense variance was a result of lower than expected sales volumes.
4. Includes the financial impact of delays in certain annual premium rate
adjustments, unanticipated (in valuation basis) reward program discounts and
various other items.
5. Lower than expected expense recoveries on withdrawals of smoothed bonus
business and poor persistency on certain group scheme business written during
the last year.
6. Mainly relating to tax variances resulting from actual expense relief being
lower than assumed.
7. Due to various one-off items following the harmonisation of valuation methods
and practices.
8. Expense under-recoveries are being experienced in mainly the start-up life and
health operations.
9. The income recorded in respect of shareholder capital relates mostly to
earnings from holding company activities and the management of MMI's capital
and shareholder balance sheet risks. Other sources of earnings such as
variations in actual tax payments and corporate expenses not allocated to
underlying business units are also included here.
10. Changes in the cost of capital resulting from demographic experience on
certain products and also derisking activities.
MMI Holdings Embedded value information
F. Operating assumption changes
12 mths to 12 mths to
30.06.2012 30.06.2011
Operating assumption changes ANW Net VIF EV EV
Notes Rm Rm Rm Rm
Momentum Retail (12) (208) (220) (244)
Mortality and morbidity assumptions 5 6 11 144
Renewal expense assumptions 1 83 (66) 17 (175)
Termination assumptions (7) - (7) (79)
Methodology changes 2 (93) (148) (241) (134)
Metropolitan Retail 115 28 143 (141)
Mortality and morbidity assumptions - 15 15 19
Renewal expense assumptions (2) (1) (3) (15)
Termination assumptions 15 (12) 3 13
Discretionary margins - - - 14
Methodology changes (37) 31 (6) (120)
Other 3 139 (5) 134 (52)
Momentum Employee Benefits 11 285 296 (247)
Assumed mortality and morbidity
profit margin 4 21 61 82 -
Termination assumptions - 56 56 (8)
Renewal expense assumptions 5 (3) 112 109 (98)
Methodology changes 3 (7) 62 55 (138)
Assumption reviews - - - 7
Other - (6) (6) (10)
Metropolitan International (120) 76 (44) (64)
Mortality and morbidity assumptions 1 - 1 (10)
Renewal expense assumptions (19) 11 (8) (46)
Termination assumptions (42) 35 (7) 6
Modelling changes 6 (28) 4 (24) (26)
Methodology changes (1) (9) (10) 29
Assumed mortality and morbidity
profit margin (31) 35 4 -
Other - - - (17)
Shareholder capital - (6) (6) -
Methodology change: cost of
required capital 7 - (459) (459) (85)
Secondary Tax on Companies - - - 555
Total operating assumption changes (6) (284) (290) (226)
The above table assumes that Momentum and Metropolitan were merged from 1 July 2010.
Notes
1. Mainly due to expense reallocations between product lines.
2. Various basis and methodology changes including the implementation of new
economic scenario generator to calculate maturity guarantee reserves, a
correction of fees on the Retail Wealth and closed books, allowance for the
revised capital gains and dividend withholding taxes and changes relating to the
modelling of fund build-ups on certain linked products.
3. Mainly a result of the 50 basis points relative reduction in the expense
inflation assumption.
4. Allowance for improved risk margins on Group Life business.
5. Allowance for merger related savings taken out of the cost base.
6. Includes an allowance for expense under-recoveries in start-up African life
companies.
7. Various changes to the technical calculation of the cost of capital, including
the impact of the change in the investment strategy of the Metropolitan Life
shareholder assets that increased the cost of capital by R523 million.
MMI Holdings Embedded value information
G. Investment return on adjusted net worth
Investment return on adjusted net worth 12 mths to 12 mths to
30.06.2012 30.06.2011
Rm Rm
Investment income 611 614
Capital appreciation 290 475
Change in fair value of properties - (38)
Preference share dividends paid and change in
fair value of preference shares (31) 6
Investment return on adjusted net worth 870 1 057
The above table assumes that Momentum and Metropolitan were merged from 1 July 2010.
H. Investment variances
Investment variances represent the impact of higher/lower than assumed investment
returns on current and expected future after tax profits from in-force business.
I. Economic assumption changes
The economic assumption changes include the effect of the change in assumed rate
of investment return, expense inflation rate and risk discount rate in respect of
local and offshore business.
J. Acquisition of covered business
The acquisition of 51% of Momentum Life Assurance Namibia Limited is brought onto the
embedded value statement effective 30 June 2012. No embedded value earnings numbers
are therefore included for this item.
K. Transfer (to)/from non-covered business
Momentum Wealth off-balance sheet business is reclassified as non-covered business
effective 30 June 2012. For the current financial period the embedded value
earnings and value of new business is still shown as part of the covered business
disclosures and analysis. The net difference in the transfers (ie negative
R13 million) represents the change in the allowance for cost of required capital.
L. Capital transferred to non-covered business
Represents the alignment of net assets and value of in-force of mainly
international subsidiaries between covered and non-covered business.
M. Changes in share capital
Changes in share capital include the capitalisation of Metropolitan Life
Namibia, relating to the purchase of the 51% share of Momentum Life Namibia.
MMI Holdings Embedded value information
Covered business: sensitivities Adjusted In-force business
30.06.2012 net worth Net value Gross value Cost of CAR
Rm Rm Rm Rm
Base value 13 483 14 910 17 783 (2 873)
1% increase in risk discount
rate 13 581 16 784 (3 203)
% change (9) (6) 11
1% reduction in risk
discount rate 16 299 18 798 (2 499)
% change 9 6 (13)
10% decrease in future
expenses 15 767 18 638 (2 871)
% change (1) 6 5 -
10% decrease in lapse, paid-
up and surrender rates 15 370 18 357 (2 987)
% change 3 3 4
5% decrease in mortality and
morbidity for assurance
business 16 025 18 898 (2 873)
% change 7 6 -
5% decrease in mortality for
annuity business 14 694 17 559 (2 865)
% change (1) (1) -
1% reduction in gross
investment return,
inflation rate and risk
discount rate 13 360 14 953 17 933 (2 980)
% change (2) (1) - 1 4
1% reduction in inflation
rate 13 609 15 152 18 026 (2 874)
% change 1 2 1 -
10% fall in market value of
equities and properties 13 268 13 929 16 977 (3 048)
% change (2) (7) (5) 6
10% reduction in premium
indexation take-up rate 14 614 17 487 (2 873)
% change (2) (2) -
10% decrease in non-
commission related
acquisition expenses
% change
1% increase in
equity/property risk
premium 15 190 18 063 (2 873)
% change 2 2 -
MMI Holdings Embedded value information continued
New business written
Covered business: sensitivities
30.06.2012 Net value Gross value Cost of CAR
Rm Rm Rm
Base value 633 760 (127)
1% increase in risk discount
rate 498 640 (142)
% change (21) (16) 12
1% reduction in risk discount
rate 775 882 (107)
% change 22 16 (16)
10% decrease in future expenses 759 885 (126)
% change (1) 20 16 (1)
10% decrease in lapse, paid-up
and surrender rates 783 916 (133)
% change 24 21 5
5% decrease in mortality and
morbidity for assurance
business 779 905 (126)
% change 23 19 (1)
5% decrease in mortality for
annuity business 622 748 (126)
% change (2) (2) (1)
1% reduction in gross
investment return, inflation
rate and risk discount rate 700 828 (128)
% change (2) 11 9 1
1% reduction in inflation rate 672 798 (126)
% change 6 5 (1)
10% fall in market value of
equities and properties
% change
10% reduction in premium
indexation take-up rate 584 710 (126)
% change (8) (7) (1)
10% decrease in non-commission
related acquisition
expenses 722 848 (126)
% change 14 12 (1)
1% increase in equity/property
risk premium 648 774 (126)
% change 2 2 (1)
1. No corresponding changes in variable policy charges are assumed, although in
practice it is likely that these will be modified according to circumstances.
2. Bonus rates are assumed to change commensurately.
3. The change in the value of cost of required capital is disclosed as nil where
the sensitivity test results in an insignificant change in the value.
MMI Holdings Stock exchange performance
Stock exchange performance 30.06.2012 30.06.2011
12 month period
Value of listed shares traded (rand million) 11 420 12 269
Volume of listed shares traded (million) 655 736
Shares traded (% of average listed shares in issue) 43 66
Value of shares traded life insurance
(J857 Rbn) 119 103
Value of shares traded top 40 index (J200 Rbn) 2 791 2 475
Trade prices
Highest (cents per share) 1 976 1 776
Lowest (cents per share) 1 505 1 505
Last sale of period (cents per share) 1 800 1 699
Percentage (%) change during period 6 6
Percentage (%) change life insurance sector (J857) 29 17
Percentage (%) change top 40 index (J200) 4 23
30 June
Price/diluted core headline earnings (segmental)
ratio 9.8 10.6
Dividend yield % (dividend on listed shares) 6.3 6.2
Dividend yield % top 40 index (J200) 3.0 2.4
Total shares issued (million)
Listed on JSE 1 571 1 504
Ordinary shares 1 571 1 504
Share incentive scheme - -
Unlisted share purchase scheme - 1
Total ordinary shares in issue 1 571 1 505
Treasury shares held on behalf of contract holders (13) (14)
Adjustment to staff share scheme shares (1) - (1)
Share incentive scheme - -
Share purchase scheme - (1)
Basic number of shares in issue 1 558 1 490
Adjustment to staff share scheme shares - 1
Treasury shares held on behalf of contract holders 13 14
Convertible redeemable preference shares 34 100
Diluted number of shares in issue (2) 1 605 1 605
Market capitalisation at end (Rbn) (3) 29 27
Percentage (%) of life insurance sector 13 15
1. These are shares which have been issued since 1 January 2001, the date on which
the group adopted AC133 (now IAS 39).
2. The diluted number of shares in issue takes into account all issued shares,
assuming conversion of the convertible redeemable preference shares and the
release of staff share scheme shares, and includes the treasury shares held on
behalf of contract holders.
3. The market capitalisation is calculated on the fully diluted number of shares
in issue.
Date: 12/09/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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