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RAND MERCHANT INSURANCE HLDGS LTD - Summarised, audited results announcement and cash dividend declaration for the year ended 30 June 2012

Release Date: 13/09/2012 07:05
Code(s): RMI     PDF:  
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Summarised, audited results announcement and cash dividend declaration for the year ended 30 June 2012

RMI Holdings

Summarised, audited RESULTS ANNOUNCEMENT and cash dividend declaration for the year ended 30 June 2012

RAND MERCHANT INSURANCE HOLDINGS LIMITED (RMI)

Registration number: 2010/005770/06

JSE Ordinary share code: RMI

ISIN code: ZAE000153102

Directors: GT Ferreira (Chairman), P Cooper (CEO), LL Dippenaar, JW Dreyer, JJ Durand, PM Goss, PK Harris, TV Mokgatlha, KC Shubane and (Ms) SEN Sebotsa. Mr MH Visser passed away on 26 April
2012.

Alternates: NDJ Carroll (appointed 18 October 2011), L Crouse (appointed 18 October 2011).

Secretary and registered office: JS Human (appointed 19 October 2011). AL Maher resigned on 19 October 2011.

Physical address: 3rd Floor, 2 Merchant Place, corner of Fredman Drive and Rivonia Road, Sandton, 2196
Postal address: PO Box 786273, Sandton, 2146
Telephone: +27 11 282 8166
Telefax: +27 11 282 4210

Web address: www.rminsurance.co.za

Sponsor: (in terms of JSE Limited Listings Requirements) Rand Merchant Bank (a division of FirstRand Bank Limited)

Physical address: 1 Merchant Place, corner of Fredman Drive and Rivonia Road, Sandton, 2196

Transfer secretaries: Computershare Investor Services (Pty) Limited
Physical address: Ground Floor, 70 Marshall Street, Johannesburg, 2001
Postal address: PO Box 61051, Marshalltown, 2107
Telephone: +27 11 370 5000
Telefax: +27 11 688 5221


NORMALISED EARNINGS
+21% to 159.5 cents

ORDINARY DIVIDEND
+42% to 80.0 cents

SPECIAL DIVIDEND
of 55.0 cents

INTRINSIC VALUE
+30% to 1 714 cents

GROUP RESTRUCTURING IN PRIOR YEAR

Shareholders are reminded that RMB Holdings Limited (RMBH) implemented a far reaching restructure during March 2011. In the context of Rand Merchant Insurance Holdings Limited (RMI) this
included, inter alia, the following steps:

- the separation of RMBHs insurance and banking interests through the transfer of RMBHs insurance interests to RMI (then a wholly-owned subsidiary); and
- the unbundling of RMI to RMBHs ordinary shareholders on a one-for-one basis and the separate listing of RMI on the JSE as an insurance-focused investment entity.

After the restructuring and subsequent transactions, the interests of RMI comprise an investment portfolio of South Africas premier insurance brands:
- 25% of Discovery Holdings Limited (Discovery);
- 25% of MMI Holdings Limited (MMI);
- 83% of OUTsurance Holdings Limited (OUTsurance); and
- 76% of RMB-SI Investments Proprietary Limited (RMBSI).

The effective date of the transfer of the investments from RMBH to RMI was 1 March 2011. Thus, for the prior period ended 30 June 2011, RMIs financial results only included income from the
underlying investments for the four months ended on that date.

CASH DIVIDEND DECLARATION

Notice is hereby given that on 12 September 2012 the board:
- declared a final gross dividend of 50.0 cents per ordinary share in respect of the financial year ended 30 June 2012; and in addition
- declared a special gross dividend of 55.0 cents per ordinary share.

Both dividends are paid out of income reserves.

RMI has utilised STC credits of 23.20345 cents per ordinary share on the final dividend. The balance of the final dividend and the special dividend will be subject to DWT at a rate of 15%. This will
result in a net final dividend of 45.98052 cents per ordinary share and a net special dividend of 46.75000 cents per ordinary share to those shareholders who are not exempt. RMIs income tax
reference number is 9469/826/16/9.

The number of issued ordinary shares at the declaration date is 1 485 688 346.

Shareholders attention is drawn to the following important dates:
- Last day to trade in order to participate in these dividends
Friday, 5 October 2012

- Shares commence trading
ex dividendon
Monday, 8 October 2012

- The record date for the dividend
payments will be
Friday,12 October 2012

- Dividend payment date
Monday,15 October 2012

No dematerialisation or rematerialisation of share certificates may be done between Monday, 8 October 2012 and Friday, 12 October 2012 (both days inclusive).
By order of the board

JS Human

Company secretary

12 September 2012
ECONOMIC ENVIRONMENT

The ongoing legacy of the 2008 financial crisis is one of significant macro-economic uncertainty. Such uncertainty in the major developed economies, combined with high levels of government
indebtedness, ongoing stress in the European banking system and households continuing to rebuild balance sheets, weighed on economic activity. This weakness spilled over into the major emerging
economies and growth in countries such as China, India and Brazil slowed markedly during the latter part of the financial year.

The South African economy was not immune to the global developments and, although growth picked up in the latter part of 2011, it moderated again at the start of 2012. Slowing export growth
and falling business confidence reflected muted global economic activity. Supply-side constraints, such as labour action in the mining sector and limited electricity supply, also weighed on macro-
economic performance. This contributed to subdued private sector investment spending.

While employment levels improved in some sectors, overall indebtedness remained high, causing overall consumer confidence to be fragile.

South African investment markets remained challenging. Equity market volatility continued, albeit with a positive bias, while long bond rates decreased, mainly during the last quarter of the financial
year.

OVERVIEW OF RESULTS

Notwithstanding such an uncertain background, all of the businesses in which RMI is invested produced good results, with exceptional growth in normalised earnings being recorded by OUTsurance in
particular.

                                                   For the year ended 30 June
                                                                   Restated
R million                                          2012               2011      % change
Discovery                                         2 316                 2 028          14
MMI                                               2 955                 2 648          12
OUTsurance                                        1 157                   871          33
RMBSI                                                96                    92           4

As a result, the normalised earnings derived by RMI from its investments in these companies were as follows (results for 2011 only reflect four months):

                                                                                 Restated
                                                        Year ended          Period ended
                                                       30 June 2012         30 June 2011
R million                                                   Audited              Audited
Normalised earnings from:
Discovery                                                        579                 165
MMI                                                              746                 228
OUTsurance                                                     1 010                 220
RMBSI                                                             74                  48
                                                               2 409                 661
Funding and holding company costs                                (39)                 (10)
Normalised earnings                                            2 370                 651

On a per share basis (with the prior period outcome weighted by the number of shares in issue for the four months that RMI was in existence) the following exceptional growth was realised:

                                                                    Restated
                                           Year ended          Period ended
                                          30 June 2012         30 June 2011
Cents                                          Audited              Audited     % change
Earnings per share
Attributable earnings                              151.8                119.1           27
Headline earnings                                  162.8                110.0           48
Normalised earnings                                159.5                131.5           21

RMI regards normalised earnings from continuing operations as the appropriate basis to evaluate business performance as it eliminates the impact of non-recurring items and accounting anomalies. A
reconciliation of the adjustments made to derive normalised earnings is presented in the accompanying schedules.

GROUP BORROWINGS AND CAPITAL POSITION

At the end of June 2012, RMIs net assets at holding company level amounted to some R0.2 billion (2011: net borrowings of (R0.5 billion)), in the main comprising:

- a portfolio of cash and medium term advances, totalling some R1.7 billion, used to support the OUTsurance executive group transaction and to fund Youis Australian expansion; funded by
- redeemable preference share funding of R1.5 billion.

The intrinsic value of the RMIs investments at 30 June 2012 was as follows:

                                                           As at 30 June
R million                                          2012                 2011    % change
Market value of interest in:
- Discovery                                       7 699                5 707           35
- MMI                                             7 050                6 654            6
Group valuation of interest in unlisted
subsidiaries                                     10 506                7 754           35
Total group valuation                            25 255             20 115             26
Net assets/(liabilities) of holding
company                                             214                 (536)        >100
Total intrinsic value                            25 469             19 579             30
Intrinsic value per RMI share (cents)             1 714                1 318           30

At 30 June 2012 RMIs market capitalisation amounted to R25.8 billion (2011: R18.3 billion) or 1 737c per share (2011: 1 235c), representing a 1.3% premium (2011: 6.3% discount) to the groups
underlying intrinsic value.

DIVIDEND PAYMENTS

The board is of the opinion that RMI is adequately capitalised at this stage and that the company will be able to meet its obligations in the foreseeable future after payment of the final and special
dividends as set out below. The board is also of the view that at present the level of borrowings that the group carries at the centre is appropriate.

We have continued with our stated practice of paying out to shareholders dividends received from our underlying investments, after servicing any funding commitments that we may have at the centre.

Consequently, the board resolved to declare a final dividend of 50.0 cents per share. Such final dividend, together with the interim dividend of 30.0 cents brings the total dividends for the year ended
30 June 2012 to 80.0 cents (2011: 56.5 cents). Such dividend is covered 2.0 times by the normalised earnings of 159.5 cents per share.

Consistent with its policy of not retaining surplus resources at the centre, the board has also decided to return the proceeds of the special dividends declared by MMI and OUTsurance to shareholders.
Accordingly, the board of RMI has resolved to declare a special dividend of 55.0 cents per share.

From 1 April 2012 dividend withholding tax (DWT) at a rate of 15% is levied on dividends paid to shareholders who are not exempt from DWT. RMI has accumulated prior year secondary tax on
companies (STC) credits that have been used to reduce such DWT liability. The position of a non-exempt shareholder may be illustrated as follows:
                                                                        Cents         Cents
Gross final and special dividend declared                                             105.0
DWT at 15%                                                              (15.8)
STC credit utilised                                                       3.5
Net liability for DWT                                                   (12.3)         (12.3)
Net dividend receivable                                                                92.7

Shareholders are referred to the dividend declaration forming part of this announcement regarding the applicability of dividend withholding tax to both the ordinary and special dividend.

OUTLOOK FOR THE COMING YEAR

The macro environment will remain challenging during the 2013 financial year. The global economy is likely to register below average growth and will continue to face significant downside risk.

Economic activity in South Africa will remain under pressure. GDP growth is currently expected to be 2.5% for the 2013 financial year, and although interest rates are expected to remain flat for the
rest of the year, there is downside risk if economic growth slows further.

Growth in insurance new business volumes will remain largely dependant upon the economic environment, including a recovery in employment and stronger disposable income levels.

All of the groups in which RMI is invested face both opportunities and threats posed by the highly regulated environment in which they operate, including evolving capital regimes as well as the
national health insurance and social security reform proposals.

Both OUTsurance and RMBSI foresee that the exceptionally favourable claims experience of the recent past can be expected to normalise in future. Consequently the groups earnings growth may be
muted.

Notwithstanding such uncertain and fragile environment, RMI believes that our investee companies have appropriate strategies in place to unlock superior shareholder value over time.

During April 2012, our fellow director MH Visser passed away after a tragic car accident. Our friendship and business relationship predated Thys joining the board. His wise counsel and valued input
on strategic matters will be sorely missed at board level.

For and on behalf of the board

GT Ferreira
Chairman

P Cooper
Chief executive officer

Sandton

12 September 2012

REVIEW OF INVESTMENT PERFORMANCE

Discovery Group

Discovery services the health care funding and insurance markets in South Africa, the United Kingdom, United States and China. It is a pre-eminent developer of integrated financial services products
and operates under the Discovery Health, Discovery Life, Discovery Insure, Discovery Card, Vitality, PruHealth, PruProtect and Ping An Health brand names.

The year under review to 30 June 2012 was a pleasing one for Discovery, with solid performance across all businesses. The period saw growth in:

- new business of 24% to R9.3 billion;
- operating profit of 21% to R3.4 billion;
- normalised headline earnings of 14% to R2.3 billion; and
- embedded value of 12% to R30.2 billion.

The performance of Discovery Health and the Discovery Health Medical Scheme (DHMS) saw continued strong growth, with 10% growth in new business, resulting in a 4.5% increase in total DHMS
lives under management to 2 417 369 lives.

Discovery Lifes performance is particularly pleasing given that it was achieved in a turbulent financial and economic market with operating profit growing by 14% to R1 819 million; new business
growing by 8% from R1 620 million to R1 749 million; and the value of in-force business increasing significantly from R10 592 million to R12 358 million.

Discovery Invests strategy during the year was one of continued innovation to provide optimal investment solutions for clients. From a financial results perspective the outcome was excellent, with
normalised operating profit growing by 50% to R151 million.

Discovery Insure had its first active trading year and performance was satisfactory. During this time, Discovery Insure transacted R239 million of new business despite a fairly embryonic distribution
footprint.

PruHealth and PruProtect (Discoverys United Kingdom operations) continued to focus on quality, product innovation, distribution development and customer value, translating into an excellent financial
performance across the businesses. At a combined level, new business from the UK exceeded R1 billion for the first time; earned premium approached the R5 billion level; normalised operating profit
measured R300 million; while the membership base stabilised at around 670 000 lives. PruHealth and PruProtect form the beachhead of Discoverys international operations, and focus will be applied
to the further development of the integrated model in the coming periods. Discoverys other international operations continue to make progress in building scale and capability.

RMI included R579 million of Discoverys earnings in its normalised earnings (2011: R165 million for the four month period).

For an in-depth review of Discoverys performance, RMIs shareholders are referred to www.discovery.co.za.

MMI Holdings

MMI was formed from the merger of Metropolitan and Momentum, sizeable insurance-based financial services players in South Africa to form South Africas third largest insurer. The core businesses of
MMI are long-term insurance, asset management, investment, healthcare administration and employee benefits. Product solutions are provided to all market segments. MMI operates in 12 countries
outside of South Africa. It provides for the assurance needs of individuals in the lower, middle and upper income markets, principally under the Momentum and Metropolitan brand names.

Core headline earnings for the year ended 30 June 2012 increased strongly by 12% to R3.0 billion. Except for a small reduction in earnings at Momentum Investments, all MMIs divisions increased
their earnings. The integration is progressing well and expense savings of R201 million were achieved during the year. Total targeted expense savings of R500 million remain on track to emerge by June
2014. Total new business grew by 3% to R6.0 billion while new business margins were maintained. Embedded value increased by 6% to R32.5 billion.

RMI included R746 million of MMIs earnings in its normalised earnings (2011: R228 million for the four month period).

For an in-depth review of MMIs performance, RMIs shareholders are referred to www.mmiholdings.co.za.

OUTsurance

OUTsurance is a direct personal lines and small business short-term insurer. Pioneers of the OUTbonus concept, it has grown rapidly by applying a scientific approach to risk selection, product design
and claims management. Youi, its direct personal lines initiative in Australia, and its South African direct life insurance business have gained significant traction during the year.

The OUTsurance group produced an excellent financial performance for the year to June 2012. The performance was driven by a very favourable claims environment in South Africa and a significant
improvement in the start-up loss incurred by Youi.

Operationally, new business volumes in the South African personal lines business endured significant pressure due to the tough economic climate and increased competition. Business OUTsurance
showed good premium growth which can be attributed to an investment in the in-house agency force.

Youi gained significant traction in the year under review and delivered an impressive operational performance with excellent new business volumes and a satisfactory improvement in claims experience.
In May 2012, the OUTsurance group decided to dispose of its 50% interest in Momentum Short-Term Insurance to the MMI Holdings group which owns the other 50%. The rationale behind this
decision is for the group to focus its resources on its core direct delivery channel. The completion of the transaction is subject to certain suspensive conditions.

OUTsurance reported normalised earnings of R1 157 million, a 33% improvement on the restated earnings of R871 million reported for 2011.

Outsurances normalised earnings were specifically adjusted for:

- the impact of the once-off recognition of a deferred tax asset relating to Youis assessed loss; as well as
- the change in the profit sharing arrangement with FirstRand concerning the Homeowners Cover business in 2011.

During the 2012 financial year, OUTsurance revised the accounting policy governing the accounting for non-claims bonuses. The change in the measurement basis of the non-claims bonus provision has
resulted in a significant reduction in the provision for non-claims bonuses. As a result of the change in the accounting policy, prior year earnings have been restated to reflect the new basis.

Our agreement to sell an effective interest of 6.5% in the ordinary share capital of OUTsurance to the management team of OUTsurance for a purchase consideration of R531 million was implemented
with effect from 1 April 2012. RMI facilitated the transaction by providing term funding to the management group for part of the purchase consideration.

RMI included R1 010 million of OUTsurances earnings in its normalised earnings (2011: R220 million for the four month period).

For an in-depth review of OUTsurances performance, RMIs shareholders are referred to www.outsurance.co.za.

RMB Structured Insurance

RMBSI holds both short-term and life insurance licenses. It creates bespoke insurance and financial risk solutions for South Africas large corporations by using sophisticated risk techniques and
innovative financial structures. In addition it part owns a portfolio of underwriting management agencies.

RMBSI continues to focus on a diversified business strategy to bolster its retainer base income on the back of the more traditional insurance business. This continues to bear fruit and the business mix is
trending in the right direction.

Shareholder profit after tax for the year to June 2012 amounted to R96 million (2011: R92 million).

RMI included R74 million of RMBSIs earnings in its normalised earnings (2011: R48 million for the four month period).

BASIS OF PREPARATION OF RESULTS

The accompanying summarised financial results for the year ended 30 June 2012 reflect:

- the consolidation of the operations of RMI and its subsidiaries, including OUTsurance and RMBSI; and
- RMIs proportionate interest in its associates, Discovery and MMI, which have been equity accounted.

The annual financial statements for the year ended 30 June 2012, to which this summarised results announcement relates, were prepared in accordance with:

- International Financial Reporting Standards (IFRS), including IAS 34: Interim financial reporting;
- the requirements of the South African Companies Act, Act 71 of 2008, as amended; and
- the Listings Requirements of the JSE Limited.

Peter Cooper CA(SA) supervised the preparation of the annual financial statements, which were audited by PricewaterhouseCoopers Inc. A copy of their unqualified audit opinion is available for
inspection at RMIs registered office.

The accounting policies applied in the preparation of the annual financial statements for the year ended 30 June 2012 are consistent with those applied in the previous financial reporting period ended
30 June 2011, with the exception of the change in accounting policy applied by OUTsurance in respect of the provision for non-claims bonuses. The previous accounting policy used the historic and
expected claims frequencies in deriving the best estimate for the non-claim bonus provision. Due to the fact that OUTsurance has now built up a sufficient track record of client cancellation and
behavioural data, an analysis was performed to determine the impact of client cancellations on the measurement of the non-claims bonus provision. However, it was also considered appropriate to
incorporate a risk margin into the provision estimate to allow for the inherent uncertainty of a provision of this nature. As a result of incorporating the client cancellation experience and the addition of
a risk margin, it was considered appropriate to treat this as a change of the accounting policy for non-claims bonuses.

The effective date for the transfer of RMIs investments from RMBH was 1 March 2011. Therefore the information provided for the period ended 30 June 2011 effectively includes income from the
underlying investments for the four months ended 30 June 2011, which represented the first financial reporting period of RMI.

RMIs effective interest in the group entities is different from the actual holdings as a result of the following consolidation adjustments:

- treasury shares held by the group entities;
- shares held by consolidated share incentive trusts;
- deemed treasury shares arising from BEE transactions entered into; and
- deemed treasury shares held by policyholders and mutual funds managed by them.

At 30 June 2012 the effective interest held by RMI can be compared to the actual interest in the statutory issued share capital of the companies as follows:

                                              30 June 2012                  30 June 2011
                                          Effective      Actual        Effective         Actual
                                           Audited      Audited        Audited          Audited
Discovery                                    26.7%        25.0%         26.7%            25.0%
MMI                                          25.1%        24.9%         26.3%            26.0%
OUTsurance                                   85.6%        83.4%         92.8%            90.1%
RMBSI                                        80.5%        76.4%         80.5%            76.4%



Summarised consolidated income statement


                                                                                        Restated
                                                            Year ended             Period ended
                                                           30 June 2012            30 June 2011
R million                                                       Audited                 Audited
Earned premiums net of reinsurance                                  6 661                 2 071
Fee income                                                            119                    50
Investment income                                                     569                   155
Net fair value gains/(losses) on financial assets                     209                  (213)
Income                                                              7 558                 2 063
Net claims paid                                                    (2 581)                 (306)
Investment contract benefits and insurance provisions                (677)                 (289)
Fair value adjustment to financial liabilities                       (220)                   (54)
Acquisition, marketing and administration expenses                 (1 971)                 (595)
Operating profit                                                    2 109                   819
Finance costs                                                        (138)                  (46)
Share of after tax results from associate companies                   975                   318
Profit before taxation                                              2 946                 1 091
Taxation                                                             (517)                 (352)
Profit for the year                                                 2 429                   739
Attributable to:
Equity holders of RMI                                               2 248                   587
Non-controlling interests                                             181                   152
Profit for the year                                                 2 429                   739
Computation of headline earnings


                                                                                             Restated
                                                               Year ended               Period ended
                                                              30 June 2012              30 June 2011
R million                                                          Audited                   Audited
Earnings attributable to equity holders                                2 248                     587
Adjustment for:
 Loss on dilution of shareholding in associates                          208                          -
 Profit on step-up of associate                                          (54)                         -
 Profit on sale of business                                               (1)                         -
 Goodwill and other impairments                                           17                          -
 Realised profit on sale of available-for-sale
financial assets                                                          (15)                     (1)
 Impairment of available-for-sale reserve                                   7                       -
 Realised profit on intellectual property                                   -                    (15)
 Realised profit on investment property                                     -                    (29)
Headline earnings attributable to equity holders                       2 410                     542




Sources of headline earnings


                                                                                             Restated
                                                               Year ended               Period ended
                                                              30 June 2012              30 June 2011
R million                                                          Audited                   Audited
Headline earnings from:
Discovery                                                                569                     173
MMI                                                                      550                      98
OUTsurance                                                             1 261                     224
RMBSI                                                                     76                      50
                                                                       2 456                     545
Funding and holding company costs                                        (46)                      (3)
Headline earnings                                                      2 410                     542



Computation of earnings per share


                                                                         Restated
                                                Year ended          Period ended
                                               30 June 2012         30 June 2011
R million                                           Audited              Audited           % change
Earnings attributable to equity holders                 2 248                    587           >100
Headline earnings attributable to
equity holders                                          2 410                    542           >100
Number of shares in issue (millions)                    1 486                  1 486                  -
Weighted average number of shares
in issue (millions)                                     1 481                    493           >100
Earnings per share (cents)                              151.8                  119.1              27
Diluted earnings per share (cents)*                     150.7                  117.7              28
Headline earnings per share (cents)                     162.8                  110.0              48
Diluted headline earnings per share
(cents)*                                                161.8                  108.6              49
Dividend per share (cents)
Interim                                                  30.0                    22.8            32
Final                                                   105.0                    33.7          >100
- Normal                                                  50.0                   33.7             48
- Special                                                 55.0                      -              -

Total                                                   135.0                    56.5          >100
Dividend cover (normal dividend relative
to headline earnings)                                      2.0                    1.9              5
* The diluted earnings calculations give cognisance to the adjustments made by Discovery and MMI
in similar calculations. These adjustments have no impact on RMIs diluted weighted average number
of shares.




Summarised consolidated statement of comprehensive
income


                                                                                         Restated
                                                              Year ended            Period ended
                                                             30 June 2012           30 June 2011
R million                                                         Audited                Audited
Profit for the year                                                   2 429                     739
Other comprehensive income, net of taxation
Currency translation differences                                          77                      8
Fair value movement on available-for-sale
financial assets                                                           7                      (3)
Share of other comprehensive income/(loss)
of associates                                                           134                     (31)
Other comprehensive income/(loss) for the year                          218                     (26)
Total comprehensive income for the year                               2 647                     713
Total comprehensive income attributable to:
Equity holders of RMI                                                 2 459                     559
Non-controlling interests                                               188                     154
Total comprehensive income for the year                               2 647                     713
Summarised consolidated statement of financial position


                                                                        As at 30 June
                                                                                          Restated
                                                                      2012                   2011
R million                                                           Audited               Audited
ASSETS
Property and equipment                                                   413                     211
Goodwill and other intangible assets                                      50                      32
Investments in associate companies                                     9 864                   9 274
Financial assets                                                       7 603                   6 287
Loans and receivables including insurance receivables                    998                     526
Deferred acquisition cost                                                 32                      44
Reinsurance contracts                                                    273                     239
Deferred taxation                                                        441                     180
Disposal group held for sale                                             211                       -
Cash and cash equivalents                                              2 462                   2 456
Total assets                                                          22 347                  19 249
Equity
Share capital and premium                                             13 614                  13 571
Reserves                                                                (430)                 (2 227)
Capital and reserves attributable to
equity holders of the company                                         13 184                  11 344
Non-controlling interests                                                626                     310
Total equity                                                          13 810                  11 654
LiAbiLiTiES
Insurance contracts                                                    3 710                   3 531
Financial liabilities                                                  3 730                   3 320
Payables and provisions                                                  700                     499
Deferred taxation                                                        324                     220
Taxation                                                                  14                      25
Disposal group held for sale                                              59                       -
Total liabilities                                                      8 537                   7 595
Total equity and liabilities                                          22 347                  19 249




Summarised consolidated statement of cash flows


                                                               Year ended           Period ended
                                                              30 June 2012          30 June 2011
R million                                                          Audited               Audited
Cash available from operating activities                               1 957                     829
Dividends paid                                                          (946)                   (339)
Investment activities                                                   (936)                 (4 214)
Financing activities                                                    (205)                  3 625
Net decrease in cash and cash equivalents                                (130)                   (99)
Unrealised foreign currency translation adjustments                       143                     24
Cash and cash equivalents included under
disposal group held for sale                                                (7)                    -
Cash and cash equivalents acquired*                                          -                 2 531
Cash and cash equivalents at the beginning
of the year                                                            2 456                       -
Cash and cash equivalents at the end of the year                       2 462                   2 456
* Cash and cash equivalents acquired relate to cash balances held by subsidiaries acquired.




Computation of normalised earnings

The group believes that normalised earnings more accurately reflect operational
performance. Headline earnings are adjusted to take into account non-operational items
and accounting anomalies for segmental reporting purposes.


                                                                                         Restated
                                                               Year ended           Period ended
                                                              30 June 2012          30 June 2011
R million                                                          Audited               Audited
Headline earnings attributable to equity holders                       2 410                     542
RMIs share of normalised adjustments
made by associates:                                                       230                    134
 Amortisation of intangible assets relating to
business combinations                                                     152                     50
 Basis and other changes and investment variances                          76                     52
 Finance costs raised on puttable non-controlling
interest financial liability                                               38                      8
 STC                                                                       37                     16
 Net realised and fair value (gains)/losses on excess                     (65)                    19
 Other                                                                     (8)                   (11)
Recognition of deferred tax asset on assessed losses                     (214)                     5
Earnings of subsidiary held for sale                                      (10)                    (2)
STC                                                                         7                     (7)
Change in homeowners cover profit share
arrangement                                                                 -                     (3)
Group treasury shares                                                     (53)                   (18)
Normalised earnings attributable
to equity holders                                                      2 370                     651
Computation of normalised earnings per share


                                                                       Restated
                                              Year ended          Period ended
                                             30 June 2012         30 June 2011
R million                                         Audited              Audited    % change
Weighted average number of shares
in issue (millions)                                  1 486                 495        >100
Normalised earnings per share (cents)                159.5               131.5          21
Diluted normalised earnings
per share (cents)                                    157.8               128.6          23
Dividend cover (normal dividend
relative to normalised earnings)                       2.0                  2.3         (13)



Change in accounting policy

During the year, the group changed its accounting policy in respect of non-claims bonuses on insurance contracts to include expected cancellation rates in the calculation of the provision at the
reporting date.

This change in accounting policy has been accounted for retrospectively and the comparative amounts have been restated. The effect of this change in accounting policy is as follows:

                                                                                      2011
                                                                                   R million
Statement of financial position
Assets
Decrease in deferred taxation                                                           (136)
Total restatement of assets                                                             (136)
Equity and liabilities
Increase in retained earnings                                                             17
Increase in transactions with non-controlling interests reserve                          305
Increase in non-controlling interest                                                      29
Decrease in insurance contract liabilities                                              (487)
Total restatement of equity and liabilities                                             (136)
income statement
Decrease in cash bonuses on insurance contracts expense                                   34
Increase in deferred taxation                                                            (10)
Increase in non-controlling interest                                                      (7)
increase in profit attributable to equity holders
of the company for the period                                                             17



Summarised statement of changes in equity

                                                                                                      Transactions
                                                                         Share           Equity          with non-       Other non-                                   Non-
Audited                                                            capital and       accounted          controlling     distributable         Retained          controlling             Total
R million                                                            premium           reserves           interests          reserves         earnings             interest            equity
Restated
Shares issued                                                         13 657                     -                -                 -                  -                  -           13 657
Recognition of non-controlling interest
at predecessor value                                                         -                   -              -                   -                  -             1 592              1 592
Acquisition of additional interest in subsidiaries                                                         (2 352)                                                  (1 330)            (3 682)
Total comprehensive income for the period                                   -                  (31)             -                  3               587                 154                713
Dividend paid                                                               -                    -              -                  -              (339)               (104)              (443)
Reserve movements relating to subsidiaries                                  -                    -              -                 20                (20)                 (2)                (2)
Reserve movements relating to associates                                    -                  (96)             -                  -                   -                  -                (96)
Income of associated companies retained                                     -                    9              -                  -                  (9)                 -                  -
Movement in treasury shares                                               (86)                   1              -                  -                   -                  -               (85)
balance at 30 June 2011                                               13 571              (117)            (2 352)                23               219                310             11 654
Total comprehensive income for the year                                    -               134                  -                 77             2 248                188              2 647
Dividend paid                                                              -                 -                  -                  -              (946)               (86)            (1 032)
Sale of shares in subsidiary                                               -                 -                281                  -                 -                210                491
Reserve movements relating to subsidiaries                                 -                 -                  -                (12)               20                  4                 12
Reserve movements relating to associates                                   -                (7)                 -                  -                 -                  -                 (7)
Income of associated companies retained                                    -               408                  -                  -              (408)                 -                  -
Movement in treasury shares                                               43                 2                  -                  -                 -                  -                 45
balance at 30 June 2012                                               13 614                 420           (2 071)                88             1 133                626             13 810
Segment report

The segmental analysis is based on the management accounts prepared for the group.

                                                                                                                                                                                         RMi Holdings
                                                                                   Discovery                   MMi               OUTsurance                  RMbSi           Other(1)          group
R million                                                                           Audited                  Audited                Audited                 Audited         Audited           Audited
Year ended 30 June 2012
Share of associates                                                                        571                     397                       8                    (1)               -             975
Operating profit                                                                             -                       -                   1 845                   263                1           2 109
Finance costs                                                                                -                       -                      (1)                  (44)             (93)           (138)
Profit before taxation                                                                     571                     397                   1 852                    218             (92)          2 946
Taxation                                                                                     -                       -                    (383)                  (122)            (12)           (517)
Profit for the year                                                                        571                     397                   1 469                       96         (104)           2 429
Normalised earnings                                                                        579                     746                   1 157                       96         (208)           2 370
Assets                                                                                      -                        -                   7 170                 4 369             894           12 433
Associates                                                                              3 927                    5 914                      18                     5               -            9 864
Intangible assets                                                                           -                        -                      47                     1               2               50
Total assets                                                                            3 927                    5 914                   7 235                 4 375             896           22 347
Total liabilities                                                                             -                        -                 3 078                 3 974           1 485            8 537
                                                                                                                                                                                          RMI Holdings
                                                                                    Discovery                   MMI                OUTsurance                 RMBSI           Other(1)          group
R million                                                                            Audited                  Audited                 Audited                Audited         Audited           Audited
Period ended 30 June 2011 - Restated
Share of associates                                                                        218                       98                        2                    -               -             318
Operating profit                                                                             -                        -                     559                  248               12             819
Finance costs                                                                                -                        -                       (1)                 (11)            (34)             (46)
Profit before taxation                                                                     218                       98                     560                   237             (22)          1 091
Taxation                                                                                     -                        -                    (181)                 (175)              4            (352)
Profit for the period                                                                      218                       98                     379                      62           (18)            739
Normalised earnings                                                                        165                     228                      345                      62         (149)             651
Assets                                                                                      -                        -                   5 770                 4 060             113            9 943
Associates                                                                              3 397                    5 865                      12                     -               -            9 274
Intangible assets                                                                           -                        -                       -                     -              32               32
Total assets                                                                            3 397                    5 865                   5 782                 4 060             145           19 249
Total liabilities                                                                             -                        -                 2 395                 3 727           1 473            7 595
(1) Other includes RMI Holdings Limited, Firness International Proprietary Limited, consolidation of treasury shares and other consolidation entries.




Geographical segments

                                                                                                                                                     South Africa         Australia             Total
R million                                                                                                                                                Audited           Audited            Audited
Year ended 30 June 2012
Profit before taxation                                                                                                                                      3 067              (121)             2 946
Taxation                                                                                                                                                     (789)              272               (517)
Profit for the year                                                                                                                                         2 278              151               2 429
Total assets                                                                                                                                               20 288            2 059              22 347
Total liabilities                                                                                                                                           7 382            1 155               8 537
                                                                                                                                                      South Africa         Australia             Total
R million                                                                                                                                                 Audited          Audited             Audited
Period ended 30 June 2011 - Restated
Profit before taxation                                                                                                                                      1 110               (19)             1 091
Taxation                                                                                                                                                     (352)                -               (352)
Profit for the period                                                                                                                                         758               (19)               739
Total assets                                                                                                                                               18 134            1 115              19 249
Total liabilities                                                                                                                                           7 056              539               7 595

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