Wrap Text
Summarised Group Results for the year ended 30 June 2015
MMI Holdings Limited
Incorporated in the Republic of South Africa
Registration Number: 2000/031756/06
JSE share code: MMI
NSX share code: MIM
ISIN: ZAE000149902
("MMI" or "the company")
MMI HOLDINGS SUMMARISED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2015
Financial highlights
New business PVP up 21% to R50 billion
VALUE of NEW BUSINESS up 22% to R954 million
RETURN on EMBEDDED VALUE of 10%
PROFITS from OPERATING DIVISIONS up 17% to R3.5 billion
CORE HEADLINE EARNINGS up 6% to R3.8 billion
Total DIVIDEND up 9% to 155 CENTS PER SHARE
SUMMARY OF RESULTS
Group results
MMI delivered another solid set of financial results for the year under review.
- The group recorded a 10% return on embedded value (R3.8 billion embedded value profit) for the year.
- The year-end embedded value, of R40.3 billion (2 514 cents per share), was calculated taking into account dividend payments to ordinary shareholders during the year of
R3.1 billion (198 cents per share).
- The contribution from operating divisions increased 17% to R3.5 billion for the year, while total diluted core headline earnings increased by 6% to R3.8 billion.
- Overall, the established businesses continued to grow profits. The increase was impacted by significant investments into growth initiatives
that are being pursued in line with the group's client-centric strategy to enhance financial wellness.
- Good expense management contributed positively to value creation.
- Positive experience variances were recorded in total, supported mainly by better than expected mortality and morbidity experience.
- Strong new business flows resulted in a 22% increase in the value of new business to R954 million.
- A final ordinary dividend of 92 cents per share was declared, resulting in a total dividend of 155 cents per share, an increase of 9% on the prior year.
Operating environment
Local operating conditions remained economically challenging and highly competitive. The strong performance of the South African equity markets over recent years was
not repeated and was replaced by increased volatility and only a small positive growth over the year. Inflationary pressures and interest rate increases continued.
The need for investment and protection solutions, however, remains an integral part of enhancing financial wellness.
Capital strength
- MMI successfully issued R750 million of new subordinated debt and redeemed R500 million of expiring debt in December 2014.
- Another R1 billion of debt, due in September 2015, has similarly been replaced with a fresh issue of R1.25 billion during August 2015.
- A strong capital buffer of R4.3 billion was reported as at 30 June 2015, after allowing for capital requirements, strategic growth initiatives and the final dividend.
- Taking into account the many growth initiatives and the imminent change to a new capital regime (Solvency Assessment and Management), the group is satisfied that its
present capital level is appropriate.
Transformation
- MMI is proud to have remained a level two broad-based black economic empowerment (B-BBEE) contributor.
Prospects
- The strategic focus areas of the MMI group are growth, client centricity and excellence.
- Each segment, together with the Product and Solutions Centres of Excellence and supporting functions, is advancing the implementation of MMI's client-centric strategy.
- Plans and processes are being executed to optimise structures, distribution channels and solutions, focusing on innovation and collaboration.
- Taking into account the current environment, the group has increased the focus on efficiencies, having identified specific cost-saving initiatives, whilst continuing
to pursue top-line growth.
- Growth in new business volumes and profits will, however, be impacted by many factors in the South African economy, including employment levels and disposable income.
- The board of MMI Holdings believes that the group has identified and is implementing innovative strategies to continue unlocking value and generating the required
return on capital for shareholders over time.
MMI HOLDINGS GROUP
SUMMARY OF FINANCIAL INFORMATION
AUDITED RESULTS FOR THE 12 MONTHS ENDED 30 JUNE 2015
DIRECTORS' STATEMENT
The directors take pleasure in presenting the audited results of MMI Holdings financial services group for the year ended 30 June 2015. The preparation of the group's results was supervised by the group finance
director, Mary Vilakazi, CA(SA).
Corporate events
Acquisitions
On 2 October 2014, the group acquired an accounting ownership of 71% (legal ownership of 66%) of Cannon Assurance Ltd (Cannon), a composite insurer, for R308 million. The minority shareholders of Cannon also acquired a
minority stake in Metropolitan Life Kenya.
On 19 November 2014, the group acquired 100% of the shares in the CareCross Health Group (CareCross), a health administrator, for R300 million in cash. It includes a majority share in Occupational Care South Africa
(OCSA).
Listed debt
MMI Group Ltd (MMIGL) listed new instruments to the total value of R750 million on the JSE Limited on 1 December 2014. The instruments are unsecured subordinated callable notes.
On 15 December 2014, R500 million of unsecured subordinated notes previously issued by MMIGL were redeemed.
Basis of preparation of financial information
These condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 (IAS 34) - Interim financial reporting; the SAICA Financial Reporting Guide as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council; the JSE Listings Requirements and the South African Companies Act, 71 of 2008. The accounting
policies applied in the preparation of these financial statements are in terms of International Financial Reporting Standards (IFRS) and are consistent with those adopted in the previous years except as described
below. Critical judgements and accounting estimates are disclosed in detail in the group's integrated report for the year ended 30 June 2015, including changes in estimates that are an integral part of the insurance
business. The group is exposed to financial and insurance risks, details of which are also provided in the group's integrated report.
The current year includes Guardrisk Group (Pty) Ltd and its subsidiaries' (collectively Guardrisk's) results for 12 months, while the prior year includes four months (3 March 2014 to 30 June 2014). Certain aspects of
the group results are therefore not directly comparable.
New and revised standards effective for the period ended 30 June 2015 and relevant to the group
- The following amendments to standards and interpretations became effective for the first time in the current year and had no impact on the group's earnings or net asset value: Amendments to IFRS 10 Consolidated
financial statements, IFRS 12 Disclosure of interests in other entities, IAS 19 Employee benefits, IAS 27 Separate financial statements, IAS 32 Financial instruments: presentation, IAS 36 Impairment of assets and
IAS 39 Financial instruments: recognition and measurement; IFRIC 21 Levies.
- 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.
Reclassifications
The group's June 2014 results have been restated for the following reclassifications:
- Certain income and expenses of R334 million in the Shareholder Capital segment have been set off to better reflect the information used by management.
- The classification of certain financial assets has been refined in the current period, and where considered necessary, the prior year was restated. This had no change to the statement of financial position and only
impacted information required by paragraph 16A(j) of IAS 34.
- As reported with the December 2014 results, reinsurance contract liabilities of R202 million, previously shown with reinsurance contract assets, have been grossed up and disclosed separately. This restatement was
deemed necessary in order to improve comparability between periods.
- As reported with the December 2014 results, promoter cell administration expenses of R88 million, previously included in cell captive business expenses in the segment report, was reallocated to administration expenses
in line with the way in which the chief operating decision-maker, being the MMI executive committee, monitors and evaluates the performance of the Momentum Employee Benefits segment.
These restatements had no impact on the current or prior year reported earnings, diluted earnings or headline earnings per share, or on the net asset value or net cash flow.
Corporate governance
The board has satisfied itself that appropriate principles of corporate governance were applied throughout the year under review.
Changes to the directorate, secretary and directors' shareholding
On 30 June 2015, Ngao Motsei, group executive for strategic human resources and transformation, resigned. We thank her for her contribution to the development and growth of the group. On the same day, Preston
Speckmann, the group finance director, retired from the board and on 1 July 2015, Mary Vilakazi, was appointed in the same position. We thank Preston for his invaluable input over the years and wish him well in his
future endeavours. On 8 July 2015 MMI announced the impending retirement of Sizwe Nxasana from the MMI board with effect from 30 September 2015. We thank Sizwe for his commitment and contribution to the group.
All transactions in listed shares of the company involving directors were disclosed on SENS.
Changes to the group executive committee
Herman Schoeman, managing director of Guardrisk, was appointed to the group executive committee from 1 July 2014. On the same day, Khanyi Nzukuma was appointed to the group executive committee as chief executive
officer of Metropolitan Retail. On 30 June 2015, Ngao Motsei resigned and Preston Speckmann retired from the group executive committee.
Contingent liabilities and capital commitments
As part of running a business, the group is party to legal proceedings and appropriate provisions are made when losses are expected to materialise. The group had no material capital commitments at 30 June 2015 that
were not in the ordinary course of business other than those disclosed in the 2015 integrated report.
Events after year-end
Announcements
On 8 July 2015 the group announced that it entered into an agreement with a group of key individuals from Momentum Asset Management for a management buy-out of a portion of the asset management business. This marks one
of the initial steps in the implementation of MMI's client-centric outcomes-based investment model.
This buy-out will enable these individuals to establish a new majority black-owned and controlled asset management business, in which MMI will be a shareholder. The transaction will be financed by both MMI and the key
individuals.
On 12 August 2015, MMIGL issued listed instruments to the value of R1.25 billion on the JSE Limited and will be redeeming R1 billion of the existing issued subordinated debt that becomes callable during September 2015.
The newly issued instruments are unsecured subordinated callable notes.
Subsequent to the financial year-end, Metropolitan Health, which was party to a competitive tender process regarding the administration contracts of two existing clients, was informed that these two clients had decided not
to renew these contracts. The contracts will terminate effective 1 January 2016. Management is in the process of assessing the financial impact of the loss of these contracts on the business.
No other material events occurred between the reporting date and the date of approval of these results.
Final dividend declaration
Ordinary shares
- On 8 September 2015, a gross final dividend of 92 cents per ordinary share was declared, resulting in a total dividend of 155 cents per share.
- The dividend is 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, 2 October 2015, and will be paid on Monday, 5 October 2015.
- The dividend will be subject to local dividend withholding tax at a rate of 15% unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate.
- This will result in a net final dividend of 78.2 cents per ordinary share for those shareholders who are not exempt from paying dividend tax.
- The last day to trade cum dividend will be Friday, 25 September 2015.
- The shares will trade ex dividend from the start of business on Monday, 28 September 2015.
- Share certificates may not be dematerialised or rematerialised between Monday, 28 September 2015 and Friday, 2 October 2015, both days inclusive.
- The number of ordinary shares at the declaration date was 1 571 950 755.
- MMI's income tax number is 975 2050 147.
Preference shares
- Dividends of R21.3 million (132 cents per share p.a.) were declared on the unlisted A3 MMI Holdings Ltd preference shares as determined by the company's Memorandum of Incorporation.
Integrated information
The full integrated report for 2015 will be posted to shareholders, and can be viewed online at www.mmiholdings.com, on or about 30 September 2015.
Directors' responsibility
The preparation of these results, and the correct extraction thereof from the group’s audited 2015 annual financial statements, are the responsibility of the directors. This announcement does not include the information
required by paragraph 16A(j) of IAS 34. The full condensed IAS 34 compliant results are available on MMI’s website and at MMI’s registered offices upon request. A printed version of the SENS announcement may be requested
from the group company secretary, Maliga Chetty tel: 012 684 4255.
External audit
These condensed results have not been audited, but have been extracted from the group's 2015 annual financial statements, which have been audited by PricewaterhouseCoopers Inc. and their unqualified audit report, together
with the group's audited 2015 annual financial statements, are available for inspection at the company's registered office. In addition, the summarised group embedded value information has been extracted from the 2015 group
embedded value report, which has been reviewed by PricewaterhouseCoopers Inc. in accordance with the embedded value basis of MMI, and the review 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
8 September 2015
DIRECTORS:
MJN Njeke (chairman), JP Burger (deputy chairman), NAS Kruger (group chief executive officer), M Vilakazi (group finance director), L Crouse, F Jakoet, Prof JD Krige, PJ Moleketi, SA Muller, V Nkonyeni, SE Nxasana,
KC Shubane, FJC Truter, BJ van der Ross, JC van Reenen, LL von Zeuner
GROUP COMPANY SECRETARY: Maliga Chetty
WEBSITE: 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)
AUDITORS: PricewaterhouseCoopers Inc
REGISTERED OFFICE: 268 West Avenue, Centurion 0157
JSE CODE: MMI NSX CODE: MIM ISIN NO: ZAE000149902
SENS ISSUE: 9 September 2015
MMI HOLDINGS GROUP - IFRS FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Restated
30.06.2015 30.06.2014
Rm Rm
ASSETS
Intangible assets 13 153 12 819
Owner-occupied properties 3 030 1 714
Property and equipment 353 315
Investment properties 7 212 7 675
Investments in associates 145 179
Employee benefit assets 408 405
Financial instruments (1) 388 258 355 073
Reinsurance contract assets 3 046 2 778
Deferred income tax 287 263
Properties under development 330 252
Insurance and other receivables 4 080 3 813
Current income tax assets 365 330
Cash and cash equivalents 26 174 28 875
Non-current assets held for sale - 17
Total assets 446 841 414 508
EQUITY
Equity attributable to owners of the parent 24 547 24 734
Non-controlling interests 501 480
Total equity 25 048 25 214
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts 104 776 106 047
Short-term insurance contracts 6 553 5 496
Financial instruments
Investment contracts 246 490 227 056
- with discretionary participation features 26 134 25 405
- designated at fair value through income 220 356 201 651
Other financial instruments (2) 42 923 34 117
Reinsurance contract liabilities 659 202
Deferred income tax 4 351 4 281
Employee benefit obligations 1 735 1 246
Other payables 14 062 10 437
Provisions 78 157
Current income tax liabilities 166 255
Total liabilities 421 793 389 294
Total equity and liabilities 446 841 414 508
1. Financial instruments consist of the following:
- Securities designated at fair value through income: R365 727 million (30.06.2014: R334 996 million)
- Investments in associates designated at fair value through income: R12 362 million (30.06.2014: R11 900 million)
- Derivative financial instruments: R2 033 million (30.06.2014: R2 362 million)
- Available-for-sale: R208 million (30.06.2014: R129 million)
- Held-to-maturity: R73 million (30.06.2014: R100 million)
- Loans and receivables: R7 855 million (30.06.2014: R5 586 million)
2. Other financial instruments consist of the following:
- Designated at fair value through income: R39 720 million (30.06.2014: R30 801 million)
- Derivative financial instruments: R2 111 million (30.06.2014: R1 853 million)
- Amortised cost: R1 092 million (30.06.2014: R1 463 million)
CONDENSED CONSOLIDATED INCOME STATEMENT 12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Net insurance premiums 27 396 23 138
Fee income (1) 7 355 6 567
Investment income 15 559 14 043
Net realised and fair value gains 16 248 43 906
Net income 66 558 87 654
Net insurance benefits and claims 24 610 22 321
Change in liabilities (869) 7 850
Change in long-term insurance contract liabilities (2 069) 7 786
Change in short-term insurance contract liabilities (139) (72)
Change in investment contracts with DPF liabilities 728 468
Change in reinsurance assets 154 (534)
Change in reinsurance liabilities 457 202
Fair value adjustments on investment contract liabilities 16 039 32 959
Fair value adjustments on collective investment scheme liabilities 2 457 3 061
Depreciation, amortisation and impairment expenses 1 326 1 159
Employee benefit expenses 5 922 5 132
Sales remuneration 5 071 3 899
Other expenses 5 806 5 035
Expenses 60 362 81 416
Results of operations 6 196 6 238
Share of profit of associates 4 2
Finance costs (2) (792) (482)
Profit before tax 5 408 5 758
Income tax expense (2 431) (2 458)
Earnings for the year 2 977 3 300
Attributable to:
Owners of the parent 2 857 3 197
Non-controlling interests 120 103
2 977 3 300
Basic earnings per ordinary share (cents) 183.5 205.5
Diluted earnings per ordinary share (cents) 180.5 202.4
1. Fee income consists of the following:
- Investment contracts: R2 225 million (30.06.2014: R1 772 million)
- Trust and fiduciary services: R1 842 million (30.06.2014: R2 014 million)
- Health administration: R2 053 million (30.06.2014: R1 978 million)
- Other fee income: R1 235 million (30.06.2014: R803 million)
2. Finance costs consist of the following:
- Preference shares issued by MMI: R108 million (30.06.2014: R46 million)
- Subordinated redeemable debt: R271 million (30.06.2014: R149 million)
- Cost of carry positions: R261 million (30.06.2014: R156 million)
- Other: R152 million (30.06.2014: R131 million)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Earnings for the year 2 977 3 300
Other comprehensive income, net of tax 68 165
Items that may subsequently be reclassified to income 6 32
Exchange differences on translating foreign operations 1 40
Available-for-sale financial assets 5 (8)
Items that will not be reclassified to income 62 133
Land and building revaluation 118 41
Change in non-distributable reserves - 6
Adjustments to employee benefit funds
Metropolitan Staff Pension Fund - 107
Other (20) (9)
Income tax relating to items that will not be reclassified (36) (12)
Total comprehensive income for the year 3 045 3 465
Total comprehensive income attributable to:
Owners of the parent 2 926 3 363
Non-controlling interests 119 102
3 045 3 465
RECONCILIATION OF HEADLINE EARNINGS Basic earnings Diluted earnings
attributable to owners of the parent
12 mths to 12 mths to 12 mths to 12 mths to
30.06.2015 30.06.2014 30.06.2015 30.06.2014
Rm Rm Rm Rm
Earnings 2 857 3 197 2 857 3 197
Finance costs - convertible preference shares 44 45
Dilutory effect of subsidiaries (1) (31) (22)
Diluted earnings 2 870 3 220
Intangible asset and other impairments 19 25 19 25
Tax on intangible asset and other impairments (4) - (4) -
Headline earnings (2) 2 872 3 222 2 885 3 245
Net realised and fair value gains on excess 6 (544) 6 (544)
Basis and other changes and investment variances 148 160 148 160
Amortisation of intangible assets relating to business combinations 720 575 720 575
Non-recurring items (3) 53 171 53 171
Investment income on treasury shares - contract holders 24 14
Core headline earnings (4) 3 799 3 584 3 836 3 621
1. Metropolitan Health is consolidated at 100% and the MMI Holdings Namibian group, Metropolitan Kenya and Cannon are consolidated at 96% in the results. For purposes of diluted earnings, diluted non-controlling interests
and investment returns are reinstated.
2. Headline earnings consist of operating profit, investment income, net realised and fair value gains, investment variances and basis and other changes.
3. Non-recurring items include one-off costs relating to the restructuring of the group. For June 2014 it also includes a one-off enhancement of benefits relating to the outsourcing of the Metropolitan Staff Pension Fund
liabilities, amounting to R107 million. The previously unrecognised net surplus asset exceeding the employer surplus account was used to fund the enhancement and released in other comprehensive income, resulting in an
accounting mismatch. The net asset value of the group has therefore not been impacted.
4. Core headline earnings disclosed comprise operating profit and investment income on shareholder assets. It excludes net realised and fair value gains on financial assets and liabilities, investment variances and basis
and other changes that can be volatile, certain non-recurring items, as well as the amortisation of intangible assets relating to business combinations as this is part of the cost of acquiring the business.
EARNINGS PER SHARE (cents)
attributable to owners of the parent 12 mths to 12 mths to
30.06.2015 30.06.2014
Basic
Core headline earnings 244.0 230.3
Headline earnings 184.5 207.1
Earnings 183.5 205.5
Weighted average number of shares (million) 1 557 1 556
Diluted
Core headline earnings 239.2 225.7
Weighted average number of shares (million) (1) 1 604 1 604
Headline earnings 181.4 204.0
Earnings 180.5 202.4
Weighted average number of shares (million) (2) 1 590 1 591
1. For diluted core headline earnings per share, treasury shares held on behalf of contract holders are deemed to be issued.
2. For diluted earnings and headline earnings per share, treasury shares held on behalf of contract holders are deemed to be cancelled.
DIVIDENDS 2015 2014
Ordinary listed MMI Holdings Ltd shares (cents per share)
Interim - March 63 57
Final - September 92 85
Total 155 142
Special dividend - September 50
MMI Holdings Ltd convertible redeemable preference shares (issued to Kagiso Tiso Holdings (Pty) Ltd (KTH))
The A3 MMI Holdings Ltd preference shares are redeemable in June 2017 at a redemption value of R9.18 per share unless converted into MMI Holdings Ltd ordinary shares on a one-for-one basis prior to that date. On each
of 13 November 2014 and 31 March 2015, 1.1 million preference shares were converted into ordinary shares. The ordinary shares were originally issued at a price of R10.18 per share. Dividends are still payable on the
remaining preference shares at 132 cents per annum (payable March and September).
Significant related party transactions
R333 million of the ordinary dividends declared by MMI Holdings Ltd in September 2014 (R298 million of the ordinary dividends declared in September 2013) and R248 million of the ordinary dividends declared in March
2015 (R223 million of the ordinary dividends declared in March 2014) were attributable to RMI Holdings Ltd. In September 2014, R196 million of the special dividends declared by MMI Holdings Ltd were attributable to RMI
Holdings Ltd.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Changes in share capital
Balance at beginning and end 9 9
Changes in share premium
Balance at beginning 13 782 13 794
Conversion of preference shares 20 -
Increase in treasury shares held on behalf of contract holders (7) (12)
Balance at end 13 795 13 782
Changes in other reserves
Balance at beginning 1 802 1 631
Total comprehensive income 69 166
BEE cost 4 2
Transfer (to)/from retained earnings (9) 3
Balance at end (1) 1 866 1 802
Changes in retained earnings
Balance at beginning 9 141 8 039
Total comprehensive income 2 857 3 197
Dividend paid (3 094) (2 092)
Transactions with non-controlling interests (15) -
Transfer from/(to) other reserves 9 (3)
Puttable non-controlling interests (2) (21) -
Balance at end 8 877 9 141
Equity attributable to owners of the parent 24 547 24 734
Changes in non-controlling interests
Balance at beginning 480 391
Total comprehensive income 119 102
Dividend paid (23) (18)
Transactions with owners (2) (170) -
Business combinations 95 5
Balance at end 501 480
Total equity 25 048 25 214
1. Other reserves consist of the following:
- Land and building revaluation reserve: R631 million (30.06.2014: R561 million)
- Foreign currency translation reserve: R181 million (30.06.2014: R179 million)
- Revaluation of available-for-sale investments: R8 million (30.06.2014: R3 million)
- Non-distributable reserve: R19 million (30.06.2014: R16 million)
- Employee benefit revaluation reserve: R78 million (30.06.2014: R98 million)
- Fair value adjustment for preference shares issued by MMI Holdings Ltd: R940 million (30.06.2014: R940 million)
- Equity-settled share-based payment arrangements: R9 million (30.06.2014: R5 million)
2. Non-controlling interests of 25% of Metropolitan Life Kenya and Cannon have the option to sell their shares from 3 October 2016 at a price linked to embedded value. In terms of IFRS, the group has recognised a
financial liability (R111 million), being the present value of the estimated purchase price, for exercising this option. The group has consolidated 96% of the subsidiaries' results and de-recognised the non-controlling
interest (R90 million) due to the financial liability recognised above, which is in line with its selected accounting policy.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Net cash inflow from operating activities 1 505 5 201
Net cash (outflow)/inflow from investing activities (1 271) 793
Net cash (outflow)/inflow from financing activities (2 935) 606
Net cash flow (2 701) 6 600
Cash resources and funds on deposit at beginning 28 875 22 275
Cash resources and funds on deposit at end 26 174 28 875
PRINCIPAL ASSUMPTIONS (South Africa) (1) 30.06.2015 30.06.2014
% %
Pre-tax investment return
Equities 12.1 12.0
Properties 9.6 9.5
Government stock 8.6 8.5
Other fixed-interest stocks 9.1 9.0
Cash 7.6 7.5
Risk-free return (2) 8.6 8.5
Risk discount rate (RDR) 10.9 10.8
Investment return (before tax) - balanced portfolio (2) 10.8 10.7
Expense inflation base rate (3) 6.8 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.
2. The risk-free return was determined with reference to the market interest rate on South African government bonds at the valuation date. The investment return on balanced portfolio business was calculated by applying
the above returns to an expected long-term asset distribution.
3. An additional 1% expense inflation is allowed for in some divisions to reflect the impact of closed books that are in run-off.
NON-CONTROLLING INTERESTS 30.06.2015 30.06.2014
% %
Cannon Assurance 33.7 -
Eris Property Group 45.7 45.7
Metropolitan Botswana - 24.2
Metropolitan Ghana - 3.8
Metropolitan Health Botswana 28.0 28.0
Metropolitan Health Ghana 1.8 1.8
Metropolitan Health Group 17.6 17.6
Metropolitan Health Mauritius 5.0 5.0
Metropolitan Health Namibia Administrators 49.0 49.0
Metropolitan Kenya 33.7 33.7
Metropolitan Life Mauritius 30.0 30.0
Metropolitan Nigeria 50.0 50.0
Metropolitan Swaziland 33.0 33.0
Metropolitan Tanzania 33.0 33.0
Metropolitan Zambia 35.0 35.0
MMI Holdings Namibia 10.3 10.3
Momentum Mozambique 33.0 33.0
Momentum Swaziland 33.0 33.0
ANALYSIS OF ASSETS MANAGED AND/OR ADMINISTERED (1)
30.06.2015 30.06.2014
Rm Rm
Managed and/or administered by Momentum Investments (net)
Financial assets 333 545 370 073
Momentum Manager of Managers 83 044 72 846
Momentum Collective Investments 54 977 51 215
Metropolitan Collective Investments 25 546 55 538
Momentum Asset Management 125 920 141 874
Momentum Global Investments 40 126 36 076
Momentum Alternative Investments 3 932 12 524
Properties - Eris Property Group 26 133 24 448
On-balance sheet 8 066 7 406
Off-balance sheet 18 067 17 042
359 678 394 521
Momentum Wealth linked product assets under administration 138 854 130 845
On-balance sheet 85 433 80 484
Off-balance sheet 53 421 50 361
Managed internally or by other managers within MMI 70 450 26 712
On-balance sheet 64 872 21 600
Off-balance sheet 5 578 5 112
Managed by external managers (on-balance sheet) 16 789 32 507
Properties managed internally or by other managers within MMI or externally 2 506 2 252
Momentum Employee Benefits - segregated assets 1 517 1 380
Momentum Employee Benefits - cell captives on-balance sheet 16 381 12 058
Total assets managed and/or administered 606 175 600 275
Managed and/or administered by Momentum Investments (net)
On-balance sheet 181 042 181 915
Off-balance sheet 178 636 212 606
359 678 394 521
1. Assets managed and/or administered are reported net of double counted assets except where one entity manages assets on behalf of another in the division, and both entities earn a fee on the same assets.
Non-financial assets (except properties) have been excluded.
NET FUNDS RECEIVED FROM CLIENTS (1)
Gross Gross
single recurring Gross Gross Net inflow/
inflows inflows inflow outflow (outflow)
12 mths to 30.06.2015 Rm Rm Rm Rm Rm
Momentum Retail 15 684 8 333 24 017 (23 636) 381
Metropolitan Retail 1 415 5 495 6 910 (4 967) 1 943
Momentum Employee Benefits 7 271 13 860 21 131 (15 933) 5 198
International 348 3 215 3 563 (1 953) 1 610
Momentum Investments 8 305 - 8 305 (11 277) (2 972)
Metropolitan Health - 387 387 (301) 86
Shareholder Capital - 506 506 (442) 64
Long-term insurance business fund flows 33 023 31 796 64 819 (58 509) 6 310
Off-balance sheet fund flows
Managed and/or administered by Momentum Investments (net)
Financial assets (2) 65 329 (88 354) (23 025)
Properties - Eris Property Group 2 912 (1 886) 1 026
Momentum Wealth linked product assets under administration 10 168 (10 582) (414)
Managed internally or by other managers within MMI 1 280 (1 117) 163
Momentum Employee Benefits - segregated assets 3 077 (2 396) 681
Total net funds received from clients 147 585 (162 844) (15 259)
NET FUNDS RECEIVED FROM CLIENTS (1)
Gross Gross
single recurring Gross Gross Net inflow/
inflows inflows inflow outflow (outflow)
12 mths to 30.06.2014 Rm Rm Rm Rm Rm
Momentum Retail 14 661 7 856 22 517 (21 215) 1 302
Metropolitan Retail 1 507 5 313 6 820 (5 523) 1 297
Momentum Employee Benefits 7 060 10 283 17 343 (12 907) 4 436
International 277 2 621 2 898 (1 602) 1 296
Momentum Investments 6 262 - 6 262 (10 823) (4 561)
Metropolitan Health - 47 47 (46) 1
Shareholder Capital 23 332 355 (313) 42
Long-term insurance business fund flows 29 790 26 452 56 242 (52 429) 3 813
Off-balance sheet fund flows
Managed and/or administered by Momentum Investments (net)
Financial assets 70 048 (72 444) (2 396)
Properties - Eris Property Group 2 114 (2 379) (265)
Momentum Wealth linked product assets under administration 11 332 (11 163) 169
Managed internally or by other managers within MMI 842 (775) 67
Momentum Employee Benefits - segregated assets 2 571 (2 108) 463
Total net funds received from clients 143 149 (141 298) 1 851
1. Assets managed and/or administered and the related fund flows are reported net of double counted assets except where one entity manages assets on behalf of another in the division, and both entities earn a fee on
the same assets. Non-financial assets (except properties) have been excluded.
2. Includes outflows of R31 billion relating to Metropolitan Collective Investments.
Restated
ANALYSIS OF ASSETS BACKING SHAREHOLDER EXCESS 30.06.2015 30.06.2014
Rm % Rm %
Equity securities 346 1.4 1 533 6.2
Preference shares 1 497 6.1 1 354 5.5
Collective investment schemes 523 2.1 710 2.9
Debt securities 4 761 19.4 6 699 27.1
Properties 2 241 9.1 2 459 9.9
Owner-occupied properties 1 509 6.1 1 270 5.1
Investment properties 732 3.0 1 189 4.8
Cash and cash equivalents and funds on deposit 9 368 38.2 6 980 28.2
Intangible assets 8 503 34.6 8 129 32.9
Other net assets 1 322 5.4 563 2.3
28 561 116.4 28 427 114.9
Redeemable preference shares (292) (1.2) (313) (1.3)
Subordinated redeemable debt (3 298) (13.4) (3 075) (12.4)
Treasury shares (1) (424) (1.7) (305) (1.2)
Shareholder excess per reporting basis 24 547 100.0 24 734 100.0
1. The elimination of treasury shares was previously included in equity securities. This is now disclosed as a separate line item to enhance comparability between periods.
BUSINESS COMBINATIONS - JUNE 2015
Cannon
On 2 October 2014, the group acquired an accounting ownership of 71% (legal ownership of 66%) of Cannon, a composite insurer, for R308 million. The minority shareholders of Cannon also acquired a minority stake in
Metropolitan Life Kenya. This acquisition allowed for geographical as well as product diversification within the group's international operations. The purchase price allocation has been finalised and the transaction
resulted in R103 million goodwill being recognised attributable to certain anticipated operating synergies.
CareCross
On 19 November 2014, the group acquired 100% in CareCross, a health administrator, for R300 million in cash. It includes a majority share in Occupational Care South Africa (OCSA). This acquisition allowed for revenue
diversification in the Metropolitan Health segment. The transaction did not result in any goodwill being recognised.
Other
During the year the group also made a few smaller acquisitions.
The purchase price consideration, the net assets acquired and any relevant goodwill relating to the above two transactions are as follows:
June 2015 Total Cannon CareCross
Rm Rm Rm
Purchase consideration in total 608 308 300
Fair value of net assets
Intangible assets 566 174 392
Tangible assets 145 138 7
Financial instrument assets 241 228 13
Reinsurance contract assets 6 6 -
Insurance and other receivables 36 36 -
Other assets 39 19 20
Cash and cash equivalents 79 16 63
Insurance contract liabilities (195) (177) (18)
Financial instrument liabilities (38) (38) -
Other liabilities (268) (98) (170)
Net identifiable assets acquired 611 304 307
Non-controlling interests (fair value method) (95) (88) (7)
Goodwill recognised 103 103 -
Derecognition of Metropolitan Life Kenya shares (11) (11) -
Purchase consideration in cash 608 308 300
The goodwill relating to the above transactions is not deductible for tax purposes. The above transactions contributed net income of R437 million and earnings of R43 million to the group results for the year.
BUSINESS COMBINATIONS - JUNE 2014
Guardrisk
On 3 March 2014, MMI Holdings Ltd acquired 100% of Guardrisk for R1.6 billion in cash. The transaction resulted in R567 million goodwill being recognised attributable to certain anticipated operating synergies.
Providence
On 11 November 2013, the group acquired 100% of Providence, a health administrator, for R51 million in cash with an additional R57 million contingent consideration. The transaction resulted in R19 million goodwill
being recognised attributable to certain anticipated operating synergies.
Other
During the June 2014 year the group also had a few smaller acquisitions, relating mostly to life books being acquired.
The purchase price consideration, the net assets acquired and any relevant goodwill relating to the above transactions are as follows:
June 2014 Total Guardrisk Providence Other
Rm Rm Rm Rm
Purchase consideration in total 1 760 1 607 108 45
Fair value of net assets
Intangible assets 1 095 940 112 43
Tangible assets 5 1 2 2
Financial instrument assets 10 837 10 630 11 196
Reinsurance contracts 762 762 - -
Insurance and other receivables 686 686 - -
Other assets 176 176 - -
Cash and cash equivalents 2 330 2 284 4 42
Insurance contract liabilities (6 061) (5 836) - (225)
Financial instrument liabilities (7 305) (7 298) - (7)
Other liabilities (1 346) (1 305) (40) (1)
Net identifiable assets acquired 1 179 1 040 89 50
Non-controlling interests (fair value method) (5) - - (5)
Goodwill recognised 586 567 19 -
Contingent liability payments (57) - (57) -
Purchase consideration in cash 1 703 1 607 51 45
The goodwill relating to the above transactions is not deductible for tax purposes. The above transactions contributed net income of R2 255 million and earnings of R83 million to the group results for the June 2014
year.
RECONCILIATION OF GOODWILL 30.06.2015 30.06.2014
Rm Rm
Carrying amount at beginning 1 088 502
Business combinations 234 586
Exchange differences 11 -
Carrying amount at end 1 333 1 088
MMI HOLDINGS GROUP - SEGMENTAL INFORMATION
12 mths to 30.06.2015 Momentum Retail Metropolitan Retail Momentum Employee Benefits (3) International Momentum Investments Metropolitan Health Shareholder Capital Segmental total Reconciling items (1) IFRS total
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 24 017 6 910 21 131 3 563 8 305 387 506 64 819 (37 423) 27 396
Recurring premiums 8 333 5 495 13 860 3 215 - 387 506 31 796 (8 031) 23 765
Single premiums 15 684 1 415 7 271 348 8 305 - - 33 023 (29 392) 3 631
Fee income 2 374 95 2 054 256 1 367 1 674 74 7 894 (539) 7 355
Fee income 2 374 95 2 054 256 1 367 1 674 74 7 894 439 8 333
Inter-segmental fee income - - - - - - - - (978) (978)
Expenses
Net payments to contract holders
External payments 23 636 4 967 15 933 1 953 11 277 301 442 58 509 (33 899) 24 610
Other expenses 3 916 1 982 4 120 1 431 1 189 1 481 1 043 15 162 2 963 18 125
Sales remuneration 2 072 893 1 391 544 - 7 87 4 994 77 5 071
Administration expenses (2) 1 844 1 089 1 532 887 1 028 1 462 437 8 279 1 079 9 358
Amortisation due to business
combinations and impairments - - - - 58 12 40 110 891 1 001
Cell captive business - - 1 197 - - - - 1 197 - 1 197
Direct property expenses - - - - - - - - 120 120
Asset management and other
fee expenses - - - - 103 - 252 355 1 774 2 129
Holding company expenses - - - - - - 227 227 - 227
Inter-segmental expenses - - - - - - - - (978) (978)
Diluted core headline earnings 1 531 738 660 152 181 209 365 3 836 - 3 836
Operating profit 2 129 1 026 918 185 206 272 (21) 4 715 - 4 715
Tax on operating profit (598) (288) (258) (33) (61) (76) (48) (1 362) - (1 362)
Investment income - - - - 50 19 549 618 - 618
Tax on investment income - - - - (14) (6) (115) (135) - (135)
Actuarial liabilities 184 048 33 226 91 912 10 095 34 420 30 4 203 357 934 (115) 357 819
1. The 'Reconciling items' column includes: an adjustment to reverse investment contract premiums (R37 673 million) and claims (R33 899 million); FNB Life excluded from Metropolitan Retail (premiums R250 million, fee
income R10 million, sales remuneration R84 million and expenses R184 million); grossing up of fee income and expenses relating to the Shareholder Capital segment that are set off for management reporting purposes
(R355 million); non-recurring items of R378 million; direct property and asset management fees for all segments, except non-life segments, that are set off against investment income for management reporting purposes but
shown as an expense for accounting purposes; the amortisation of intangibles relating to business combinations; expenses relating to consolidated collective investment schemes (R17 million); other minor adjustments to
expenses (R145 million), sales remuneration (R7 million) and fee income (R74 million); and adjustments to actuarial liabilities representing inter-segmental liabilities.
2. Administration expenses for the current year include the following relating to new acquisitions: International - R54 million relating to Cannon; Metropolitan Health - R258 million relating to CareCross.
3. Momentum Employee Benefits includes net insurance premiums (R5 484 million), fee income (R577 million), net payments to contract holders (R3 502 million), sales remuneration (R1 293 million), administration expenses
(R272 million), cell captive business expenses (R1 197 million) and actuarial liabilities (R17 460 million) relating to Guardrisk (now including Momentum Ability).
Restated
12 mths to 30.06.2014 Momentum Retail Metropolitan Retail Momentum Employee Benefits (2) International Momentum Investments Metropolitan Health Shareholder Capital Segmental total Reconciling items (1) IFRS total
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 22 517 6 820 17 343 2 898 6 262 47 355 56 242 (33 104) 23 138
Recurring premiums 7 856 5 313 10 283 2 621 - 47 332 26 452 (6 713) 19 739
Single premiums 14 661 1 507 7 060 277 6 262 - 23 29 790 (26 391) 3 399
Fee income 2 034 112 1 479 184 1 442 1 513 168 6 932 (365) 6 567
Fee income 2 034 112 1 479 184 1 442 1 513 168 6 932 444 7 376
Inter-segmental fee income - - - - - - - - (809) (809)
Expenses
Net payments to contract holders
External payments 21 215 5 523 12 907 1 602 10 823 46 313 52 429 (30 108) 22 321
Other expenses 3 474 2 100 2 316 1 168 1 195 1 311 830 12 394 2 831 15 225
Sales remuneration 1 892 937 519 424 - - 71 3 843 56 3 899
Administration expenses 1 582 1 163 1 426 729 954 1 288 197 7 339 852 8 191
Amortisation due to business
combinations and impairments - - - 15 9 14 39 77 776 853
Cell captive business - - 371 - - - - 371 - 371
Direct property expenses - - - - - - - - 159 159
Asset management and other
fee expenses - - - - 232 9 270 511 1 819 2 330
Holding company expenses - - - - - - 253 253 - 253
Inter-segmental expenses - - - - - - - - (831) (831)
Diluted core headline earnings 1 372 587 516 122 197 171 656 3 621 - 3 621
Operating profit 1 908 814 704 155 219 205 (38) 3 967 - 3 967
Tax on operating profit (536) (227) (188) (33) (59) (44) 12 (1 075) - (1 075)
Investment income - - - - 51 14 864 929 - 929
Tax on investment income - - - - (14) (4) (182) (200) - (200)
Actuarial liabilities 175 869 32 296 82 902 9 152 34 942 8 3 528 338 697 (98) 338 599
1. The 'Reconciling items' column includes an adjustment to reverse investment contract premiums (R33 305 million) and claims (R30 108 million); FNB Life excluded from Metropolitan Retail (premiums R201 million, fee
income R20 million, sales remuneration R64 million and expenses R159 million); grossing up of fee income and expenses relating to the Shareholder Capital segment that are set off for management reporting purposes
(R334 million); non-recurring items of R192 million; direct property and asset management fees for all segments, except non-life segments, that are set off against investment income for management reporting purposes but
shown as an expense for accounting purposes; the amortisation of intangibles relating to business combinations; expenses relating to consolidated collective investment schemes (R6 million); other minor adjustments to
expenses (R161 million), sales remuneration (R8 million) and fee income (R90 million); and adjustments to actuarial liabilities representing inter-segmental liabilities.
2. Momentum Employee Benefits includes net insurance premiums (R1 927 million), fee income (R192 million), net payments to contract holders (R1 642 million), sales remuneration (R415 million), administration expenses
(R88 million), cell captive business expenses (R371 million) and actuarial liabilities (R15 869 million) relating to Guardrisk (now including Momentum Ability).
CHANGE IN DILUTED CORE HEADLINE EARNINGS 12 mths to 12 mths to
Change 30.06.2015 30.06.2014
% Rm Rm
Momentum Retail 12 1 531 1 372
Metropolitan Retail 26 738 587
Momentum Employee Benefits 28 660 516
International 25 152 122
Momentum Investments (8) 181 197
Metropolitan Health 22 209 171
Operating divisions 17 3 471 2 965
Shareholder Capital (44) 365 656
Total diluted core headline earnings 6 3 836 3 621
RECONCILIATION OF MOMENTUM INVESTMENTS 12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Revenue 1 410 1 463
Fee income 1 367 1 442
Other income 43 21
Expenses and finance costs (1 237) (1 239)
Other expenses (1 189) (1 195)
Finance costs (48) (44)
Share of profit of associates 6 9
Non-controlling interests (36) (23)
143 210
Core adjustments 63 9
Operating profit before tax 206 219
Tax on operating profit (61) (59)
Investment income 50 51
Tax on investment income (14) (14)
Diluted core headline earnings 181 197
RECONCILIATION OF METROPOLITAN HEALTH 12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Revenue 2 061 1 560
Net insurance premiums 387 47
Fee income 1 674 1 513
Expenses (1 782) (1 357)
Net payments to contract holders (301) (46)
Other expenses (1 481) (1 311)
Non-controlling interests (3) -
276 203
Core adjustments (4) 2
Impairments and amortisation of intangibles relating to business combinations 12 14
Adjustments for dilution (19) (13)
Other 3 1
Operating profit before tax 272 205
Tax on operating profit (76) (44)
Investment income 19 14
Tax on investment income (6) (4)
Diluted core headline earnings 209 171
Additional off-balance sheet information
Assets under administration at reporting date 10 776 10 686
Gross recurring inflow of funds 42 162 41 137
Gross outflow of funds (37 582) (36 791)
RECONCILIATION OF GUARDRISK (PROMOTER CELL (1)) 12 mths to 4 mths to
30.06.2015 30.06.2014
Rm Rm
Revenue by type 495 165
Management fees 353 121
Investment fees 51 22
Underwriting profit 23 2
Other income 3 1
Investment income 65 19
Expenses and finance costs (273) (81)
Administration expenses (263) (80)
Finance costs (10) (1)
Operating profit before tax 222 84
Tax attributable to promoter operating profit (62) (10)
Diluted core headline earnings 160 74
1. An insurer that enters into contractual arrangements with cell shareholders whereby the risks and rewards associated with certain insurance activities accruing to the cell shareholder, in relation to the insurer, is
specified. The promoter cell will exclude all assets and liabilities and related income and expenses of the cell arrangements.
Restated
RECONCILIATION OF SHAREHOLDER CAPITAL 12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Revenue
Net insurance premiums (excluding investment business) 506 332
Balance Sheet Management income including fee income 791 607
Guaranteed portfolios earnings 354 299
Returns in excess of benchmark 234 160
Returns on working capital and other 203 148
Other income 127 18
Total income 1 424 957
Expenses
Net payments to contract holders (excluding investment business) (442) (204)
Other expenses (1 003) (791)
Balance Sheet Management (203) (196)
Strategic initiatives and other (1) (573) (342)
Holding company (227) (253)
Total expenses (1 445) (995)
Operating loss before tax (21) (38)
Tax on operating loss (48) 12
Investment income 549 864
Tax on investment income (115) (182)
Diluted core headline earnings 365 656
1. Includes Momentum Short-term Insurance, Solvency Assessment and Management (SAM) costs, India joint venture costs and other strategic initiatives.
PAYMENTS TO CONTRACT HOLDERS
12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Momentum Retail 23 636 21 215
Death and disability claims 3 730 3 412
Maturity claims 7 546 6 444
Annuities 4 763 4 505
Withdrawal benefits 80 46
Surrenders 8 523 7 569
Re-insurance recoveries (1 006) (761)
Metropolitan Retail 4 967 5 523
Death and disability claims 1 093 1 049
Maturity claims 1 668 2 373
Annuities 620 558
Withdrawal benefits 84 97
Surrenders 1 560 1 542
Re-insurance recoveries (58) (96)
Momentum Employee Benefits (1) 15 933 12 907
Death and disability claims 4 589 3 635
Maturity claims 948 667
Annuities 1 554 765
Withdrawals and surrenders 4 020 3 358
Terminations and disinvestments 3 109 3 802
Short-term insurance 4 745 1 880
Re-insurance recoveries (3 032) (1 200)
International 1 953 1 602
Death and disability claims 813 701
Maturity claims 371 284
Annuities 99 97
Withdrawal benefits 108 90
Surrenders 498 395
Terminations and disinvestments 194 80
Re-insurance recoveries (130) (45)
Momentum Investments
Withdrawals 11 277 10 823
Metropolitan Health
Claims - capitation agreements 301 46
Shareholder Capital
Claims 442 313
Total payments to contract holders 58 509 52 429
Reconciling items (2) (33 899) (30 108)
Net insurance benefits and claims per income statement 24 610 22 321
1. Included in Momentum Employee Benefits above is R6 119 million claims (30.06.2014: R2 556 million) and R2 617 million re-insurance recoveries (30.06.2014: R914 million) relating to Guardrisk (now including Momentum Ability).
2. Relates mainly to payments to investment contract holders.
NUMBER OF EMPLOYEES 30.06.2015 30.06.2014
Indoor staff 10 438 9 877
Momentum Retail 1 841 1 711
Metropolitan Retail 1 052 1 174
Momentum Employee Benefits (1) 1 668 1 650
International (2) 1 010 1 037
Momentum Investments 651 667
Metropolitan Health (3) 2 902 2 553
Shareholder Capital
Balance Sheet Management 78 68
Group services (4) 925 781
Short-term insurance 311 236
Field staff 6 801 6 815
Momentum Retail 1 327 1 041
Metropolitan Retail 3 840 4 424
International (2) 1 634 1 350
Total 17 239 16 692
1. Momentum Employee Benefits in the current year includes 220 (30.06.2014: 218) employees relating to Guardrisk (now including Momentum Ability).
2. International in the current year includes 87 employees relating to Cannon indoor staff and 201 employees relating to Cannon field staff.
3. Metropolitan Health in the current year includes 467 employees relating to CareCross.
4. Group services in the current year includes 83 employees transferred from operating divisions.
MMI HOLDINGS GROUP - STATUTORY EXCESS
STATUTORY EXCESS
30.06.2015 30.06.2014
Rm Rm
Group excess per reporting basis 24 547 24 734
Net assets - other businesses (3 256) (2 999)
Fair value adjustments on Metropolitan business acquisition and other consolidation adjustments (3 826) (4 343)
Excess - long-term insurance business, net of non-controlling interests (1) 17 465 17 392
Disregarded assets (2) (1 010) (966)
Difference between statutory and published valuation methods (839) (571)
Write-down of subsidiaries and associates for statutory purposes (1 210) (1 387)
Unsecured subordinated debt 3 320 3 075
Consolidation adjustments 141 (23)
Statutory excess - long-term insurance business 17 867 17 520
Capital adequacy requirement (CAR) (Rm) (3) 6 639 6 221
Ratio of long-term insurance business excess to CAR (times) 2.7 2.8
Discretionary margins 13 620 14 161
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; in
respect of Guardrisk only including MMI's promoter exposure to the South African long-term insurance business, Guardrisk Life Ltd. It excludes the short-term insurance businesses of Guardrisk, Momentum Short-term
Insurance and Cannon (Kenya) due to it being classified as non-covered, as well as the other non-life insurance entities. Guardrisk Life Ltd was transferred to covered business 1 July 2014, with a statutory excess of
R44 million and capital adequacy requirement of R20 million. The figures are after non-controlling interests but excludes certain items which are eliminated on consolidation.
2. Disregarded assets are those as defined in the South African Long-term Insurance Act, 52 of 1998, 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 R518 million (30.06.2014: R546 million).
3. Aggregation of separate company's capital adequacy requirements (CARs), with no assumption of diversification benefits.
MMI HOLDINGS GROUP - EMBEDDED VALUE INFORMATION
30.06.2015 30.06.2014
EMBEDDED VALUE RESULTS AS AT Rm Rm
Covered business
Reporting excess - long-term insurance business (1) 17 465 17 392
Reclassification to non-covered business (1 204) (1 459)
16 261 15 933
Disregarded assets (2) (575) (682)
Difference between statutory and published valuation methods (839) (571)
Dilutory effect of subsidiaries (3) (38) (34)
Consolidation adjustments (4) (5) (77)
Value of MMI Group Ltd preference shares issued (500) (500)
Diluted adjusted net worth - covered business 14 304 14 069
Net value of in-force business 21 696 20 324
Diluted embedded value - covered business 36 000 34 393
Non-covered business
Net assets - non-covered business within life insurance companies 1 204 1 459
Net assets - non-covered business outside life insurance companies 3 256 2 999
Consolidation adjustments and transfers to covered business (4) (3 024) (2 291)
Adjustments for dilution (5) 819 720
Diluted adjusted net worth - non-covered business 2 255 2 887
Write-up to directors' value 2 075 2 395
Non-covered business (1) 4 143 4 188
Holding company expenses (6) (1 578) (1 383)
International holding company expenses (6) (490) (410)
Diluted embedded value - non-covered business 4 330 5 282
Diluted adjusted net worth 16 559 16 956
Net value of in-force business 21 696 20 324
Write-up to directors' value 2 075 2 395
Diluted embedded value 40 330 39 675
Required capital - covered business (adjusted for qualifying debt) (7) 7 306 7 039
Surplus capital - covered business 6 998 7 030
Diluted embedded value per share (cents) 2 514 2 474
Diluted adjusted net worth per share (cents) 1 032 1 057
Diluted number of shares in issue (million) (8) 1 604 1 604
1. Guardrisk Life Ltd was included as part of non-covered business at 30 June 2014 at a directors' valuation of R368 million. On 1 July 2014 Guardrisk Life Ltd was transferred to covered business (adjusted net worth of
R44 million and value of in-force of R324 million).
2. Disregarded assets include Sage intangible assets of R518 million (30.06.2014: R546 million), goodwill and various other items.
3. For accounting purposes, Metropolitan Health has been consolidated at 100%, while MMI Holdings Namibia, Metropolitan Kenya and Cannon have been consolidated at 96% in the statement of financial position, for the
current year. For embedded value purposes, disclosed on a diluted basis, the non-controlling interests and related funding have been reinstated.
4. Consolidation adjustments include mainly goodwill and intangibles in subsidiaries that are eliminated.
5. Adjustments for dilution are made up as follows:
- Dilutory effect of subsidiaries (note 3): R103 million (30.06.2014: R102 million)
- Treasury shares held on behalf of contract holders: R424 million (30.06.2014: R305 million)
- Liability - MMI Holdings Ltd convertible preference shares issued to KTH: R292 million (30.06.2014: R313 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 required capital for covered business amounts to R10 604 million (30.06.2014: R10 114 million) and is adjusted for qualifying debt of R3 298 million (30.06.2014: R3 075 million).
8. The diluted number of shares in issue takes into account all issued shares, assuming conversion of the convertible redeemable preference shares, and includes the treasury shares held on behalf of contract holders.
ANALYSIS OF NET VALUE OF IN-FORCE BUSINESS PER DIVISION 30.06.2015 30.06.2014
Rm Rm
Momentum Retail 10 062 9 674
Gross value of in-force business 11 486 11 212
Less cost of required capital (1 424) (1 538)
Metropolitan Retail 3 661 3 738
Gross value of in-force business 4 374 4 445
Less cost of required capital (713) (707)
Momentum Employee Benefits (1) 5 200 4 242
Gross value of in-force business 5 954 4 892
Less cost of required capital (754) (650)
International 2 108 1 832
Gross value of in-force business 2 310 2 006
Less cost of required capital (202) (174)
Shareholder Capital 665 838
Gross value of in-force business (2) 665 838
Less cost of required capital - -
Net value of in-force business 21 696 20 324
Notes
1. Guardrisk Life Ltd is included within Momentum Employee Benefits at 30 June 2015. The business was transferred effective 1 July 2014 with gross value of in-force of R348 million less cost of capital of R24 million at
that date.
2. The value of in-force in the Shareholder Capital represents discretionary margins managed centrally by Balance Sheet Management.
EMBEDDED VALUE PER DIVISION Adjusted Net value of
net worth in-force 30.06.2015 30.06.2014
Rm Rm Rm Rm
Covered business
South African life licences 12 452 19 588 32 040 31 053
MMI Group Ltd 12 280 19 052 31 332 30 994
Guardrisk Life Ltd (1) 113 536 649 -
Metropolitan Odyssey Ltd 59 - 59 59
International 1 852 2 108 3 960 3 340
MMI Holdings Namibia Ltd 677 1 295 1 972 1 793
Metropolitan Life of Botswana Ltd 354 217 571 341
Metropolitan Lesotho Ltd 370 477 847 783
Other international businesses 451 119 570 423
Total covered business 14 304 21 696 36 000 34 393
Adjusted Write-up to
net worth directors' value 30.06.2015 30.06.2014
Rm Rm Rm Rm
Non-covered business
Momentum Investments (2) 1 007 1 158 2 165 1 928
Health businesses (3) 445 1 215 1 660 1 761
Momentum Retail (Wealth) (3) 344 473 817 655
Guardrisk business (1,3) 448 998 1 446 1 607
Momentum Short-term Insurance (MSTI) 295 82 377 319
International (4,5) (532) (273) (805) (386)
MMI Holdings (after consolidation adjustments) (5) 248 (1 578) (1 330) (602)
Total non-covered business 2 255 2 075 4 330 5 282
Total embedded value 16 559 23 771 40 330 39 675
Diluted adjusted net worth - non-covered business (2 255)
Adjustments to covered business - adjusted net worth 3 161
Reporting excess - long-term insurance business 17 465
1. Guardrisk Life Ltd was included as part of non-covered business at 30 June 2014 at a directors' valuation of R368 million. On 1 July 2014 Guardrisk Life Ltd was transferred to covered business (adjusted net worth of
R44 million and value of in-force of R324 million).
2. Momentum Investments subsidiaries are valued using forward price-earnings multiples applied to the relevant sustainable earnings bases.
3. The Health businesses, Momentum Retail (Wealth off-balance sheet) and Guardrisk are valued using embedded value methodology.
4. Cannon is included within International's non-covered business at 30 June 2015.
5. 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.
12 mths to 12 mths to
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE Covered business 30.06.2015 30.06.2014
Notes Gross
Adjusted net Value of Cost of
worth (ANW) in-force (VIF) CAR Total EV Total EV
Rm Rm Rm Rm Rm
Profit from new business (1 345) 2 615 (216) 1 054 875
Embedded value from new business A (1 345) 2 513 (214) 954 779
Expected return to end of period B - 102 (2) 100 96
Profit from existing business 4 289 (1 162) 136 3 263 3 228
Expected return - unwinding of RDR B - 2 551 (338) 2 213 1 786
Release from the cost of required capital C - - 445 445 407
Expected (or actual) net of tax profit transfer to net worth D 4 128 (4 128) - - -
Operating experience variances E 474 261 (34) 701 544
Development expenses F (79) - - (79) -
Operating assumption changes G (234) 154 63 (17) 491
Embedded value profit from operations 2 944 1 453 (80) 4 317 4 103
Investment return on adjusted net worth H 664 - - 664 1 063
Investment variances I 61 (494) 27 (406) 1 278
Economic assumption changes J (23) 12 69 58 (321)
Exchange rate movements (12) 4 1 (7) (2)
Embedded value profit - covered business 3 634 975 17 4 626 6 121
Transfer of business from/(to) non-covered business K 202 348 (27) 523 (6)
Changes in share capital L 143 73 (14) 202 42
Dividend paid (3 744) - - (3 744) (3 271)
Change in embedded value - covered business 235 1 396 (24) 1 607 2 886
Non-covered business
Change in directors' valuation and other items (557) 718
Holding company expenses (275) (175)
Embedded value profit - non-covered business (832) 543
Changes in share capital L (202) (42)
Dividend paid 649 1 179
Finance costs - preference shares (44) (45)
Transfer of business (to)/from covered business K (523) 6
Change in embedded value - non-covered business (952) 1 641
Total change in group embedded value 655 4 527
Total embedded value profit 3 794 6 664
Return on embedded value (%) - internal rate of return 9.6% 19.0%
A. VALUE OF NEW BUSINESS
VALUE OF NEW BUSINESS Momentum Retail Metropolitan Retail (1) Momentum Employee Benefits International Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2015
Value of new business 246 186 456 66 954
Gross 305 233 552 78 1 168
Less cost of required capital (59) (47) (96) (12) (214)
New business premiums 18 138 2 460 8 351 686 29 635
Recurring premiums 1 077 1 045 1 564 402 4 088
Single premiums 17 061 1 415 6 787 284 25 547
New business premiums (APE) 2 783 1 187 2 243 430 6 643
New business premiums (PVP) 22 924 5 117 20 191 2 164 50 396
Profitability of new business as a percentage of APE 8.8 15.7 20.3 15.3 14.4
Profitability of new business as a percentage of PVP 1.1 3.6 2.3 3.0 1.9
Restated
12 mths to 30.06.2014
Value of new business 240 236 254 49 779
Gross 312 276 299 61 948
Less cost of required capital (72) (40) (45) (12) (169)
New business premiums 15 948 2 160 6 384 541 25 033
Recurring premiums 1 022 1 083 1 033 327 3 465
Single premiums 14 926 1 077 5 351 214 21 568
New business premiums (APE) 2 515 1 191 1 568 348 5 622
New business premiums (PVP) 20 434 4 948 14 491 1 866 41 739
Profitability of new business as a percentage of APE 9.5 19.8 16.2 14.1 13.9
Profitability of new business as a percentage of PVP 1.2 4.8 1.8 2.6 1.9
1. The Metropolitan Retail APE and PVP have been changed to only reflect the initial inflows on certain early retirement annuity business (comparatives have been restated). This reduced APE by R64 million
(30.06.2014: R42 million) and PVP by R635 million (30.06.2014: R424 million). This had no impact on value of new business.
2. Value of new business and new business premiums are net of non-controlling interests.
3. 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.
ANALYSIS OF NEW BUSINESS PREMIUMS Metropolitan Momentum Employee
Momentum Retail Retail (1) Benefits International Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2015
New business premiums 18 138 2 460 8 351 686 29 635
Recurring premiums 1 077 1 045 1 564 402 4 088
Risk 509 668 843 - 2 020
Savings/Investments 568 377 721 - 1 666
International - - - 402 402
Single premiums 17 061 1 415 6 787 284 25 547
Savings/Investments 16 418 277 4 652 - 21 347
Annuities 643 1 138 2 135 - 3 916
International - - - 284 284
New business premiums (APE) 2 783 1 187 2 243 430 6 643
Risk 509 668 843 - 2 020
Savings/Investments 2 210 405 1 186 - 3 801
Annuities 64 114 214 - 392
International - - - 430 430
Restated
12 mths to 30.06.2014
New business premiums 15 948 2 160 6 384 541 25 033
Recurring premiums 1 022 1 083 1 033 327 3 465
Risk 501 713 408 - 1 622
Savings/Investments 521 370 625 - 1 516
International - - - 327 327
Single premiums 14 926 1 077 5 351 214 21 568
Savings/Investments 14 130 201 4 198 - 18 529
Annuities 796 876 1 153 - 2 825
International - - - 214 214
New business premiums (APE) 2 515 1 191 1 568 348 5 622
Risk 501 713 408 - 1 622
Savings/Investments 1 934 390 1 045 - 3 369
Annuities 80 88 115 - 283
International - - - 348 348
1. The Metropolitan Retail APE and PVP have been changed to only reflect the initial inflows on certain early retirement annuity business (comparatives have been restated). This reduced APE by R64 million
(30.06.2014: R42 million) and PVP by R635 million (30.06.2014: R424 million). This had no impact on value of new business.
RECONCILIATION OF LUMP SUM INFLOWS Restated
12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Total lump sum inflows 33 023 29 790
Inflows not included in value of new business (8 966) (8 670)
Term extensions on maturing policies 558 465
Retirement annuity proceeds invested in living annuities 822 -
Non-controlling interests and other adjustments 110 (17)
Single premiums included in value of new business 25 547 21 568
1. The Metropolitan Retail APE and PVP have been changed to only reflect the initial inflows on certain early retirement annuity business (comparatives have been restated). This reduced APE by R64 million
(30.06.2014: R42 million) and PVP by R635 million (30.06.2014: R424 million). This had no impact on value of new business.
B. EXPECTED RETURN
The expected return is determined by applying the risk discount rate applicable at the beginning of the reporting year to the present value of in-force covered business at the beginning of the reporting year 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 year.
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.
E. OPERATING EXPERIENCE VARIANCES
12 mths to
12 mths to 30.06.2015 30.06.2014
OPERATING EXPERIENCE VARIANCES Notes ANW Net VIF EV EV
Rm Rm Rm Rm
Momentum Retail 76 153 229 170
Mortality and morbidity 1 296 12 308 235
Terminations, premium cessations and policy alterations 2 (211) 129 (82) 5
Expense variance (35) - (35) 43
Other 26 12 38 (113)
Metropolitan Retail 144 3 147 39
Mortality and morbidity 1 82 10 92 108
Terminations, premium cessations and policy alterations 2 (24) (22) (60)
Expense variance 28 - 28 45
FNB Life - share of profits 38 - 38 30
Other (6) 17 11 (84)
Momentum Employee Benefits 65 7 72 218
Mortality and morbidity 1 69 6 75 60
Terminations 4 14 18 138
Expense variance (2) - (2) 21
Other (6) (13) (19) (1)
International 58 61 119 102
Mortality and morbidity 1 88 21 109 86
Terminations, premium cessations and policy alterations (14) 3 (11) 17
Expense variance (30) 2 (28) 6
Other 3 14 35 49 (7)
Shareholder Capital 4 131 24 155 86
Opportunity cost of required capital - (21) (21) (71)
Total operating experience variances 474 227 701 544
Notes
1. Overall, mortality and morbidity experience for the 12 months were better compared to what was allowed for in the valuation basis.
2. Better than expected termination experience on whole life insurance contracts as well as negative persistency on investment contracts contributed to the negative termination experience.
3. Mainly contributions from Health operations.
4. Shareholder Capital includes mainly earnings from activities in respect of 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.
F. DEVELOPMENT EXPENSES
Business development expenses, comprising mainly middle market and other initiatives within Momentum Retail.
G. OPERATING ASSUMPTION CHANGES
12 mths to
12 mths to 30.06.2015 30.06.2014
OPERATING ASSUMPTION CHANGES Notes ANW Net VIF EV EV
Rm Rm Rm Rm
Momentum Retail (164) 147 (17) 12
Mortality and morbidity assumptions 1 169 57 226 80
Termination assumptions - (37) (37) (51)
Renewal expense assumptions 2 (138) 59 (79) (30)
Modelling, methodology and other changes 3 (195) 68 (127) 13
Metropolitan Retail 97 (37) 60 (129)
Mortality and morbidity assumptions 1 75 23 98 101
Termination assumptions 43 (64) (21) (85)
Renewal expense assumptions 2 34 (7) 27 87
FNB Life - - - (91)
Modelling, methodology and other changes 3 (55) 11 (44) (141)
Momentum Employee Benefits (63) 37 (26) 461
Mortality and morbidity assumptions 4 (3) (72) (75) (23)
Termination assumptions 5 - 81 81 144
Renewal expense assumptions 2 - (101) (101) 366
Modelling, methodology and other changes 3 (60) 129 69 (26)
International 91 (5) 86 15
Mortality and morbidity assumptions 1 26 22 48 (7)
Termination assumptions 5 (9) (4) 10
Renewal expense assumptions 28 (6) 22 17
Modelling, methodology and other changes 3 32 (12) 20 (5)
Shareholder Capital 6 (195) 86 (109) (7)
Methodology change: cost of required capital - (11) (11) 139
Total operating assumption changes (234) 217 (17) 491
Notes
1. Allowance for better than assumed mortality experience on risk business.
2. Allowance for unit costs in line with budgeted renewal expenses and expected business volumes.
3. Various modelling and methodology changes, including more explicit allowances for reinsurance modelling at Momentum Retail.
4. Allowance for lower future profitability on income disability and group life business.
5. Allowance for better than assumed termination experience on FundsAtWork business.
6. More explicit allowance for Balance Sheet Management future expenses and enhancements to shareholder investment assets in the cost of required capital.
H. INVESTMENT RETURN ON ADJUSTED NET WORTH
INVESTMENT RETURN ON ADJUSTED NET WORTH 12 mths to 12 mths to
30.06.2015 30.06.2014
Rm Rm
Investment income 618 722
Capital appreciation and other 77 368
Preference share dividends paid and change in fair value of preference shares (31) (27)
Investment return on adjusted net worth 664 1 063
I. 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.
J. 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.
K. TRANSFER OF BUSINESS (TO)/FROM NON-COVERED BUSINESS
This transfer includes the transfer of Guardrisk Life Ltd to covered business (ie adjusted net asset value of R44 million and net value of in-force of R324 million at 1 July 2014) as well as the alignment of net assets
and value of in-force of mainly international subsidiaries between covered and non-covered business.
L. CHANGES IN SHARE CAPITAL
Changes in share capital include the purchase of the non-controlling interest shareholding in Metropolitan Botswana and recapitalisation of some of the health entities.
COVERED BUSINESS: SENSITIVITIES - 30.06.2015 In-force business New business written
Adjusted net
worth Net value Gross value Cost of CAR (3) Net value Gross value Cost of CAR (3)
Rm Rm Rm Rm Rm Rm Rm
Base value 14 304 21 696 24 789 (3 093) 954 1 168 (214)
1% increase in risk discount rate 19 891 23 399 (3 508) 796 1 031 (235)
% change (8) (6) 13 (17) (12) 10
1% reduction in risk discount rate 23 737 26 365 (2 628) 1 141 1 331 (190)
% change 9 6 (15) 20 14 (11)
10% decrease in future expenses 22 805 25 898 (3 093) 1 066 1 280 (214)
% change (1) 5 4 - 12 10 -
10% decrease in lapse, paid-up and surrender rates 22 505 25 622 (3 117) 1 107 1 337 (230)
% change 4 3 1 16 14 7
5% decrease in mortality and morbidity for assurance business 23 217 26 310 (3 093) 1 124 1 338 (214)
% change 7 6 - 18 15 -
5% decrease in mortality for annuity business 21 310 24 438 (3 128) 945 1 159 (214)
% change (2) (1) 1 (1) (1) -
1% reduction in gross investment return, inflation rate and risk discount rate 14 247 22 260 25 349 (3 089) 1 023 1 237 (214)
% change (2) - 3 2 - 7 6 -
1% reduction in inflation rate 22 421 25 514 (3 093) 1 043 1 257 (214)
% change 3 3 - 9 8 -
10% fall in market value of equities and properties 13 987 20 626 23 624 (2 998)
% change (2) (5) (5) (3)
10% reduction in premium indexation take-up rate 21 423 24 480 (3 057) 924 1 139 (215)
% change (1) (1) (1) (3) (2) -
10% decrease in non-commission related acquisition expenses 1 056 1 270 (214)
% change 11 9 -
1% increase in equity/property risk premium 22 135 25 206 (3 071) 991 1 205 (214)
% change 2 2 (1) 4 3 -
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 GROUP - STOCK EXCHANGE PERFORMANCE
STOCK EXCHANGE PERFORMANCE 30.06.2015 30.06.2014
12 months
Value of listed shares traded (rand million) 19 153 15 362
Volume of listed shares traded (million) 642 637
Shares traded (% of average listed shares in issue) 41 41
Value of shares traded - life insurance (J857 - Rbn) 230 165
Value of shares traded - top 40 index (J200 - Rbn) 3 464 3 069
Trade prices
Highest (cents per share) 3 475 2 783
Lowest (cents per share) 2 502 2 039
Last sale of period (cents per share) 3 015 2 625
Annualised percentage (%) change during year 15 18
Annualised percentage (%) change - life insurance sector (J857) 11 28
Annualised percentage (%) change - top 40 index (J200) - 31
30 June
Price/diluted core headline earnings (segmental) ratio 12.6 11.6
Dividend yield % (dividend on listed shares) 5.1 5.4
Dividend yield % - top 40 index (J200) 3.0 2.6
Total shares issued (million)
Ordinary shares listed on JSE 1 572 1 570
Treasury shares held on behalf of contract holders (14) (14)
Basic number of shares in issue 1 558 1 556
Treasury shares held on behalf of contract holders 14 14
Convertible redeemable preference shares 32 34
Diluted number of shares in issue (1) 1 604 1 604
Market capitalisation at end (Rbn) (2) 48 42
Percentage (%) of life insurance sector 13 12
1. The diluted number of shares in issue takes into account all issued shares, assuming conversion of the convertible redeemable preference shares, and includes the treasury shares held on behalf of contract holders.
2. The market capitalisation is calculated on the fully diluted number of shares in issue.
Date: 09/09/2015 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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