Wrap Text
Summarised, audited results announcement and cash dividend declaration for the year ended 30 June 2015
RAND MERCHANT INSURANCE HOLDINGS LIMITED
(RMI)
Registration number: 2010/005770/06
JSE ordinary share code: RMI
ISIN code: ZAE000153102
Summarised, audited results announcement and cash dividend declaration for the year ended 30 June 2015
Key highlights
Normalised earnings +5% to 212.7 cents
Ordinary dividend +7% to 116.0 cents
Headline earnings +13% to 219.8 cents
Share price +30% to 4 247 cents
Overview of results
Introduction
Rand Merchant Insurance Holdings Limited (RMI) is an investment holding company with an investment team of experienced, alternative
thinking, financial services specialists who actively partner smart and industry-changing people by being a shareholder of influence.
RMI's investments include Discovery Limited (Discovery), MMI Holdings Limited (MMI), OUTsurance Holdings Limited (OUTsurance) and RMB-SI
Investments Proprietary Limited (RMBSI). During the year under review, the existing portfolio of traditional financial services assets was expanded
to include an asset management initiative, which will only have an impact on the group's results from the 2016 financial year. Subsequent to
year-end, RMI also made its first investment in an early-stage next generation financial services business, Merchant Capital.
This results announcement should be read together with the 2015 results presentation, which is available on RMI's website at
www.rmih.co.za.
Economic environment
The economic environment for the financial year under review remained challenging and was characterised by:
- equity market performance that was significantly lower than the long-term expected return;
- a subdued domestic growth outlook amid continued electricity supply constraints, weak foreign demand and low business and
consumer confidence;
- an increase in debt service costs, high unemployment levels and moderating levels of income growth;
- heightened uncertainty relating to the debt crisis in Greece and a decline in the economic growth prospects of China; and
- a gradual economic recovery in the United States with the prospect of rising interest rates, which resulted in a decline in capital inflows
and currency weakness in economies with current account deficits like South Africa's.
The South African central bank increased the repo rate by 25 basis points to 6.0% in July 2015 due to the upside risk to inflation. The South
African economy remains vulnerable to a more aggressive hiking cycle should there be a further slowdown or reversal of capital inflows.
Commodity prices are expected to remain well below levels that prevailed in the previous decade and economic performance needs to be
driven by structural reform.
Summary of results
Notwithstanding the challenging economic environment, the group delivered a pleasing operational, yet mixed financial performance for the
year under review.
In what has been an active year across acquisitions and new partnerships/initiatives, Discovery delivered excellent growth in normalised
earnings. The mature businesses showed strong cash generation and its new initiatives are experiencing exciting growth prospects.
MMI's earnings growth was restricted by significant investments into growth initiatives. The Momentum Employee Benefits business continued its
growth trajectory and Metropolitan Retail delivered strong results. The group is well capitalised and the strategic repositioning is progressing well.
Australia experienced the worst weather conditions in terms of the frequency of natural catastrophe events in the past decade, which resulted
in a significant increase in the claims ratio and a reduction in profit from OUTsurance's Australian operation, Youi. However, Youi Australia
continued to grow its market share, with a 33% increase in gross premium income. Although the South African operations performed well, the
reduction in profit from Australia, together with the start-up losses incurred by Youi New Zealand, contributed to a 4% decline in normalised
earnings from OUTsurance.
RMBSI invested in two new initiatives and established risk finance and credit insurance businesses which should contribute to earnings in the
next financial year. In the year under review, however, RMBSI experienced a reduction in investment income earned from a large corporate
policy.
The total normalised earnings of RMI's investee companies for the year under review are listed in the table below, with further information on
each company's performance provided below.
Audited %
R million 2015 2014 change
Discovery 4 027 3 457 16
MMI 3 836 3 621 6
OUTsurance 1 388 1 448 (4)
RMBSI 82 101 (19)
The consolidated group normalised earnings for the year ended 30 June 2015 amounted to R3.16 billion, an increase of 5% on the comparative
year. The table below provides a breakdown of this number:
Audited %
R million 2015 2014 change
Discovery 1 012 866 17
MMI 956 899 6
OUTsurance 1 166 1 219 (4)
RMBSI 64 78 (18)
Total normalised earnings from investee companies 3 198 3 062 4
Funding and holding company costs (38) (40) 5
NORMALISED EARNINGS 3 160 3 022 5
NORMALISED EARNINGS PER SHARE (CENTS) 212.7 203.4 5
The funding and holding company costs include the funding and operational expenses carried at the RMI centre. This number also includes the
underwriting income of R44 million after tax that RMI earned on the Discovery rights issue offer in April 2015. Funding costs increased due to the
additional R1.25 billion in cumulative, redeemable preference shares issued to fund the additional shares taken up in Discovery as part of its
rights issue offer.
RMI regards normalised earnings 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.
Market value of investments
During the 2015 financial year, RMI's share price increased by 30%. RMI has delivered a total annual compounded return to shareholders of 43%
over the past four years.
The individual investment performances during the year under review are outlined below:
- Discovery's share price increased by 30%. This, together with RMI's additional investment of R1.25 billion in Discovery shares as part
of the rights issue offer, resulted in a total increase of 42% in the market value of RMI's investment in Discovery;
- MMI's market capitalisation increased by 15%, with a dividend yield of 5.2% (based on an assumed share price of R30);
- On a "look-through" basis, the market value attributed to RMI's interests in OUTsurance (83.4% held) and RMBSI (76.4% held) increased by 32%
to R31.9 billion; and
- RMI has not attributed a value to the asset management initiative as at 30 June 2015, as the business is in its infancy.
The market values of RMI's investments are summarised in the table below:
%
R million 2015 2014 change
Market value of interest in:
- Discovery 20 481 14 383 42
- MMI 11 849 10 302 15
Market value of listed investments 32 330 24 685 31
Implied market value of unlisted investments 31 875 24 075 32
Gross market value of portfolio 64 205 48 760 32
Net liabilities of holding company (1 108) (59) >(100)
RMI MARKET CAPITALISATION 63 097 48 701 30
RMI CLOSING SHARE PRICE (CENTS) 4 247 3 278 30
The movement in the net liabilities of the holding company is a combination of raising R1.25 billion additional debt and retaining the R196
million special dividend received from MMI in October 2014.
Final dividend payment
The policy of paying out all dividends received from underlying investments, after servicing any funding commitments at holding company level
and considering RMI's debt capacity and investment pipeline, remains in place.
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 dividend declared below.
The board resolved to declare a final dividend of 64.0 cents per ordinary share. The total dividend for the year of 116.0 cents (2014: 108.0 cents)
per ordinary share is covered 1.8 times (2014: 1.9 times) by the normalised earnings of 212.7 cents (2014: 203.4 cents) per share.
Shareholders are referred to the dividend declaration forming part of this announcement regarding the applicability of Dividend Withholding
Tax to the ordinary dividend.
Strategy and outlook
Existing portfolio
Growth in new business volumes and profit at RMI's existing investments will be impacted by several factors in the South African economy,
including GDP growth, disposable income and employment levels. The 2016 financial year is anticipated to be challenging, with GDP growth
expected to remain low due to both demand weakness and supply side constraints, particularly in respect of electricity. If the US recovery
emerges as expected, interest rates in South Africa may increase, which will place further pressure on the consumer. Unemployment is trending
upwards, with retrenchments already announced in the mining and construction sectors.
However, RMI believes that its investee companies have appropriate strategies in place to produce resilient operational performances against
the increasingly difficult economic backdrop.
Discovery is expected to continue on its growth path through a number of exciting local initiatives and global momentum through Vitality and
the Discovery Partner Markets.
MMI has increased its focus on efficiencies by identifying specific cost-saving initiatives, while continuing to pursue topline growth. Plans and
processes are being executed to optimise structures, distribution channels and solutions, focusing on innovation and collaboration.
OUTsurance believes that the growth opportunities available in the Australasian market present the group with good growth potential over the
medium term. In the mature South African personal lines business, OUTsurance will continue to focus on its key strategic imperatives to protect
its share of the profitability of the market. Premium inflation is forecast to normalise to general inflationary levels, but remains vulnerable to
material currency movements. The main strategic growth driver in the South African market is the expansion of the commercial insurance sales
footprint. The incremental roll-out of this strategy will commence in the next financial year. OUTsurance also recognises the potential disruptive
impact which the broader use of telematics devices may have on the global vehicle insurance market and is in the process of refining its
strategy to respond and be prepared for structural changes in the vehicle insurance market.
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.
New investments
As previously outlined to the market, in addition to its active involvement in the existing portfolio, RMI plans to expand its investment portfolio
through opportunities across a wide spectrum of scale and life cycles of financial services businesses.
Traditional financial services
RMI is evaluating the potential of adding a significant "traditional" financial services business, which can create a fifth pillar in the portfolio.
Although the investment team has evaluated a number of local and international opportunities, there is no imminent activity in this area of
focus.
Asset management
RMI's asset management business is successfully gaining traction. RMI Investment Managers will establish, grow and partner with world-class
asset managers and investment teams.
RMI Investment Managers will be a strategic, minority investor in independent asset management businesses and is pleased to announce that
heads of agreement are in place to be a strategic partner of, and shareholder in, active managers NorthStar, Perpetua and Tantalum and
passive manager CoreShares. The team will continue to partner with other outstanding independent managers.
Subsequent to year-end, the fixed income team from Cadiz Asset Management was also brought on board. They will focus on building the
team's multi-asset fixed income capabilities. RMI Investment Managers will continue to partner with specialist teams in other asset class
capabilities, providing an autonomous and entrepreneurial environment in which to work.
Finally, the team also secured important distribution strength through an agreement with its distribution partner, MMI, who will invest alongside
RMI Investment Managers and assist the team to raise the market profile and asset gathering capabilities of its partner managers and specialist
teams.
Next generation financial services
RMI has recognised that the core business of its underlying portfolio companies is now, more than ever, being influenced by new, disruptive
ventures given the rise of shaping forces such as technology, social media and the millennial generation. As a result, RMI is actively seeking to
fund and scale new and disruptive business models.
In order to facilitate this, RMI launched its next generation business platform, AlphaCode, to help identify and enable investments that could
change the landscape of the financial services industry. AlphaCode is a development hub, supported by a physical workspace and virtual
platform, which seeks to create a next generation financial services ecosystem by bringing together entrepreneurs, intrapreneurs, industry
experts and thought leaders to connect, share knowledge and shape the industry.
Subsequent to year-end, RMI made its first investment in a disruptive, next generation financial services business by taking a 25.1% stake in
Merchant Capital, a provider of alternative sources of working capital for small and medium enterprises (SMEs) in South Africa. Merchant
Capital was founded in 2012 in response to the lack of funding options available to SMEs. Using innovative technology, Merchant Capital's
model allows its clients to repay their loans based on the cyclical nature of their businesses.
For and on behalf of the board.
GT Ferreira HL Bosman
Chairman Chief executive officer
Sandton
11 September 2015
Cash dividend declaration
Final cash dividend
Notice is hereby given that a gross final dividend of 64.0 cents per ordinary share, payable out of income reserves, was declared
on 11 September 2015 in respect of the year ended 30 June 2015.
The dividend will be subject to Dividend Withholding Tax at a rate of 15%, which will result in a net dividend of 54.4 cents per ordinary share for
those shareholders who are not exempt.
The company's tax reference number is 9469/826/16/9. Its issued share capital at the declaration date comprises 1 485 688 346 ordinary shares,
648 001 cumulative, redeemable par value preference shares and 1 250 000 cumulative, redeemable no par value preference shares.
Shareholders' attention is drawn to the following important dates:
- Last day to trade in order to participate in the dividend Friday, 2 October 2015
- Shares commence trading "ex dividend" on Monday, 5 October 2015
- The record date for the dividend payment will be Friday, 9 October 2015
- Dividend payment date Monday, 12 October 2015
No de-materialisation or re-materialisation of share certificates may be done between Monday, 5 October 2015 and Friday, 9 October 2015
(both days inclusive).
By order of the board.
JS Human
Company secretary
Sandton
11 September 2015
Review of investment performance
Discovery
Discovery services the healthcare funding and insurance markets in South Africa, the United Kingdom, China, Singapore, Australia and the
United States. It is a pre-eminent developer of integrated financial services products and operates under the Discovery Health, Discovery Life,
Discovery Insure, Discovery Invest, Discovery Vitality, VitalityHealth, VitalityLife and Ping An Health brand names.
In November 2014, Discovery acquired the remaining 25% shareholding in Prudential Health Holdings Limited from Prudential Assurance
Company (Prudential) for GBP155 million (R2 790 million). Following this acquisition, PruHealth and PruProtect have been rebranded as
VitalityHealth and VitalityLife respectively. Discovery also paid USD5 million (R54 million) to acquire Humana's 25% shareholding in The Vitality
Group LLC.
Both of these acquisitions were concluded based on put options granted to Prudential and Humana during the 2011 financial year, which
entitled them to sell their remaining interests in these entities at fair value to Discovery at contracted dates. Since 2011, Discovery carried the
present value of the estimated purchase price as a financial liability in its statement of financial position. The difference between the carrying
value of this financial liability and the purchase price paid by Discovery resulted in a fair value profit of R1 661 million, which was included in
Discovery's earnings attributable to ordinary shareholders and headline earnings for the year ended 30 June 2015, but was excluded from
normalised headline earnings.
Discovery produced strong results for the year to 30 June 2015 and some of the financial highlights include:
- Normalised headline earnings increased by 16% to R4 billion, with diluted normalised headline earnings per share increasing by 14%;
- New business grew by 51% to R17.5 billion, which includes R4.2 billion in respect of the Bankmed Medical Scheme;
- Gross inflows under management increased by 15% to R89.5 billion;
- Discovery achieved growth in embedded value of 21% to R52.3 billion, with a return on embedded value of 12.4%; and
- The total dividend for the year increased by 16% to 174.5 cents per share.
Discovery Health's operating profit before tax increased by 10% to R2 billion after continued efficiencies were passed on to the medical
scheme through a planned, scale-related discount, which assisted the medical scheme to reach a solvency ratio of 25.8% as at 30 June 2015.
New business grew by 92% to R9.6 billion including Bankmed and by 8% to R5.4 billion excluding Bankmed.
Discovery Life achieved growth in operating profit before tax of 15% to R3 billion over the year, driven by new business growth of 11% to R2.2
billion and better than expected claims and lapse experience.
Operating profit before tax at Discovery Invest increased by 39% to R460 million, driven by 18% growth in new business volumes to R1.6 billion
and an annual growth rate of 26% in assets under management over the past three years, which amounted to R50 billion as at 30 June 2015.
The combined VitalityHealth and VitalityLife businesses grew earnings before tax by 22% to R765 million. The rebranding of these businesses,
following the acquisition of the remaining 25% shareholding, was successful and well received in the UK, with lower than expected claims and
lapses.
Discovery Insure continued to grow with new business annualised premium income increasing by 25% to R789 million and thereby attracting
between 12% to 15% of new business volumes in South Africa.
RMI included R1 012 million of Discovery's earnings in its normalised earnings (2014: R866 million).
For an in-depth review of Discovery's performance, RMI's shareholders are referred to www.discovery.co.za.
MMI Holdings
MMI is a South African financial services group that provides life insurance, employee benefits, investment and savings, healthcare solutions and
short-term insurance to individual clients, small and medium businesses, large companies, organisations and public enterprises in South Africa,
the rest of Africa and selected international countries. It covers the lower, middle and upper income markets, principally under the Momentum
and Metropolitan brand names.
In the year under review, the net realised and fair value losses on shareholders' assets amounted to R6 million, compared to net realised and fair
value gains of R544 million in the prior year. This significant movement resulted in earnings attributable to ordinary shareholders and headline
earnings decreasing by 11%. However, it had no impact on the growth in core headline earnings as these net realised and fair value losses and
gains were excluded from core headline earnings.
MMI delivered a satisfactory financial performance for the year under review:
- New business premiums increased by 21% to R50.4 billion;
- The value of new business grew by 22% to R954 million, with the new business margin retained at 1.9%;
- The embedded value amounted to R40.3 billion, reflecting a return on embedded value of 9.6%;
- Diluted core headline earnings increased by 6% to R3.8 billion;
- The operating divisions achieved growth in core headline earnings of 17% to R3.5 billion. All the existing businesses, with the exception of
Momentum Investments, increased their profits with Momentum Employee benefits (up 28% to R660 million), Metropolitan Retail
(up 26% to R738 million) and International (up 25% to R152 million) recording the highest growth;
- Overall earnings growth was restricted by investments into new initiatives that are being pursued in line with the group's strategy of growth,
client-centricity and excellence;
- Positive experience variations were recorded in total, driven mainly by better than expected mortality and morbidity experience;
- Good expense management contributed positively to value creation; and
- The total dividend for the year increased by 9% to 155 cents per share.
MMI reported a strong capital buffer of R4.3 billion as at 30 June 2015 after allowing for capital requirements, strategic growth initiatives and the
final dividend. MMI is satisfied that this capital level is appropriate, taking into account the many growth initiatives and the imminent change to
a new capital regime (Solvency Assessment and Management (SAM)). MMI also successfully raised R750 million of subordinated debt and
redeemed R500 million of maturing subordinated debt in December 2014. Another R1 billion of debt due in September 2015 has been replaced
with a new issue of R1.25 billion in August 2015.
RMI included R956 million of MMI's earnings in its normalised earnings (2014: R899 million).
For an in-depth review of MMI's performance, RMI's shareholders are referred to www.mmiholdings.co.za.
OUTsurance
OUTsurance provides short and long-term insurance products in South Africa, and short-term insurance products in Australia, New Zealand and
Namibia, with a client centric ethos of providing value for money insurance solutions, backed by awesome client service.
Youi New Zealand was launched in August 2014 as an extension of Youi's Australian operation. It provides personal lines insurance cover directly
to the New Zealand public.
The OUTsurance group delivered a satisfactory operational but mixed financial performance during the year under review:
- The South African short-term insurance operations recorded an increase in normalised earnings of 19%, but the impact of the natural
catastrophes in Australia and start-up losses in New Zealand resulted in group normalised earnings decreasing by 4% to R1 388 million;
- Gross premium revenue grew by 20% to R12.5 billion, of which Youi Australia contributed 44% or R5.4 billion. Youi New Zealand recorded gross
premium revenue of R163 million in the period since its launch;
- The OUTsurance group recorded growth in annualised new business volumes of 12% to R3.9 billion, with Youi Australia being the largest
contributor to the growth;
- The claims ratio increased from 51.9% to 55.5% as a result of the significant increase in claims at Youi Australia following multiple natural
catastrophe events;
- The cost to income ratio increased from 27.1% to 28.2%, largely attributable to the new business strain incurred with the launch of the New
Zealand business, an increase in marketing expenses and the non-recurrence of administration fees earned in respect of the group's former
subsidiary, Momentum Short-term Insurance; and
- The total dividend for the year increased by 11% to 30.5 cents per share.
The claims ratio in OUTsurance's South African short-term operations decreased from 52.8% to 50.5% as a result of lower weather-related claims.
This claims ratio is below the long-term target range and is expected to trend upward going forward.
OUTsurance Life generated normalised earnings of R38 million for the year under review, compared to R2 million in the prior year. Premium
income increased by 33% and the underwriting experience remained satisfactory.
Youi Australia generated normalised earnings of R51 million for the year under review, compared to R255 million in the comparative year. The
claims ratio increased from a record low of 52.2% in the prior year to 64.6% as a result of the severe weather events. Youi Australia incurred total
claims of R963 million in respect of these catastrophes. After accounting for reinsurance recoveries and premiums to reinstate reinsurance
cover, the net impact of the catastrophe events was R405 million. This compares to the prior year, which experienced limited severe weather
events, with claims amounting to R90 million.
The performance of Youi New Zealand to date is satisfactory and in line with expectations. The start-up loss amounted to R130 million for the
year under review, compared to a R22 million loss in the prior year.
Based on the current calibration and interpretation of the standard formula, the introduction of the new SAM regulatory regime with effect
from 1 April 2016 (previously 1 January 2016) is expected to improve the capital adequacy ratios of OUTsurance and OUTsurance Life.
RMI included R1 166 million of OUTsurance's earnings in its normalised earnings (2014: R1 219 million).
For an in-depth review of OUTsurance's performance, RMI's 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 Africa's large
corporations by using sophisticated risk techniques and innovative financial structures. In addition, it partly owns a portfolio of underwriting
management agencies.
Normalised earnings for the year to 30 June 2015 amounted to R82 million (2014: R101 million). The decrease in earnings relates to lower
investment income on a large corporate policy. The total dividend for the year amounted to R67 million, compared to R50 million
in the prior year.
RMI included R64 million of RMBSI's earnings in its normalised earnings (2014: R78 million).
Basis of preparation of results
These summarised, audited financial results for the year ended 30 June 2015 have been 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;
- the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee;
- the Financial Reporting Pronouncements as issued by Financial Reporting Standards Council; and
- the Listings Requirements of the JSE Limited.
The accounting policies applied are consistent with those applied in the previous financial year, except for changes required by the mandatory
adoption of new and revised IFRS. None of the new accounting standards becoming effective in the current financial year had a significant
impact on the group's results.
Schalk Human (MCom(Acc), CA(SA)) prepared these consolidated financial results under the supervision of Herman Bosman (LLM, CFA). The
board of directors takes full responsibility for the preparation of this announcement and for correctly extracting the financial information for
inclusion in the announcement.
The entire announcement is not audited, but is extracted from the audited group financial statements. The independent auditor's report does not
necessarily encompass all the information contained in this announcement. Unless the information is specifically stated as audited, it should be
assumed that it is unaudited. The auditor has issued a separate opinion on this announcement in terms of ISA 810.
The auditor expressed an unmodified opinion dated 11 September 2015 on the group financial statements from which this announcement was
derived. A copy of the auditor's report on the group financial statements and the ISA 810 report are available at RMI's registered office.
The forward-looking information provided in this announcement is not an earnings forecast and has not been reviewed and reported on by the
company's external auditor.
Effective interest
RMI's effective interest in the group entities is different from the actual holdings as a result of the following consolidation adjustments:
- treasury shares held by 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.
As at 30 June 2015, 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 2015 30 June 2014
Audited Effective Actual Effective Actual
Discovery 25.7% 25.0% 25.8% 25.0%
MMI 25.2% 25.0% 25.2% 25.0%
OUTsurance 84.2% 83.4% 84.7% 83.4%
RMBSI 78.3% 76.4% 78.6% 76.4%
Summarised consolidated income statement
Audited for the year ended
30 June
%
R million 2015 2014 change
Earned premiums net of reinsurance 11 738 10 020 17
Fee income 312 138 >100
Investment income 563 625 (10)
Net fair value gains on financial assets 128 804 (84)
Income 12 741 11 587 10
Net claims paid (6 109) (4 938) 24
Fair value adjustment to investment contracts and insurance contract
provisions (438) (880) (50)
Fair value adjustment to financial liabilities (201) (191) 5
Acquisition, marketing and administration expenses (3 840) (3 096) 24
Profit before finance costs, share of after-tax results of associates and taxation 2 153 2 482 (13)
Net finance costs (162) (79) >100
Share of after-tax results of associates 2 146 1 776 21
Profit before taxation 4 137 4 179 (1)
Taxation (624) (870) (28)
PROFIT FOR THE YEAR 3 513 3 309 6
Attributable to:
Equity holders of RMI 3 292 3 053 8
Non-controlling interests 221 256 (14)
PROFIT FOR THE YEAR 3 513 3 309 6
Computation of headline earnings
Audited for the year ended
30 June
%
R million 2015 2014 change
Earnings attributable to equity holders 3 292 3 053 8
Adjustment for:
Realised profit on sale of available-for-sale financial assets (40) (49)
Impairment of available-for-sale financial assets 35 -
Profit on dilution of shareholding (22) (135)
Profit on sale of associate (11) -
Intangible asset impairments 4 8
Loss on disposal of property and equipment - 2
HEADLINE EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 3 258 2 879 13
Sources of headline earnings
Audited for the year ended
30 June
%
R million 2015 2014 change
Headline earnings from:
Discovery 1 362 802 70
MMI 699 807 (13)
OUTsurance 1 171 1 229 (5)
RMBSI 64 81 (21)
3 296 2 919 13
Funding and holding company costs (38) (40) 5
HEADLINE EARNINGS 3 258 2 879 13
Computation of normalised earnings
Audited for the year ended
30 June
%
R million 2015 2014 change
Headline earnings attributable to equity holders 3 258 2 879 13
RMI's share of normalised adjustments made by associates: (87) 189
Fair value adjustment to puttable non-controlling interest financial liability (415) 50
Amortisation of intangible assets relating to business combinations 218 173
Rebranding and business acquisition expenses 105 -
Deferred tax raised on assessed losses (74) -
Basis and other changes and investment variances 37 40
Non-recurring and restructuring expenses 35 43
Finance costs raised on puttable non-controlling interest financial liability 16 39
Non-controlling interest adjustment if no put options (11) (20)
Net realised and fair value losses/(gains) on shareholders' assets 2 (136)
Group treasury shares (11) (46)
NORMALISED EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 3 160 3 022 5
Computation of earnings per share
Audited for the year ended
30 June
%
R million 2015 2014 change
Earnings attributable to equity holders 3 292 3 053 8
Headline earnings attributable to equity holders 3 258 2 879 13
Normalised earnings attributable to equity holders 3 160 3 022 5
Number of shares in issue (millions) 1 486 1 486 -
Weighted average number of shares in issue (millions) 1 483 1 484 -
Earnings per share (cents) 222.0 205.8 8
Diluted earnings per share (cents) 220.0 203.6 8
Headline earnings per share (cents) 219.8 194.0 13
Diluted headline earnings per share (cents) 217.8 191.9 13
Normalised earnings per share (cents) 212.7 203.4 5
Diluted normalised earnings per share (cents) 211.1 201.3 5
Dividend per share (cents)
Interim dividend 52.0 46.0 13
Final dividend 64.0 62.0 3
TOTAL DIVIDEND 116.0 108.0 7
Summarised consolidated statement of comprehensive income
Audited for the year ended
30 June
%
R million 2015 2014 change
Profit for the year 3 513 3 309 6
Other comprehensive income for the year
Items that may subsequently be reclassified to income
Currency translation differences (142) 125 >(100)
Fair value movement on available-for-sale financial assets 17 41 (59)
Deferred taxation relating to fair value movement on available-for-sale
financial assets (3) (16) (81)
Share of other comprehensive income of associates 152 108 41
Items that may subsequently be reclassified to income, after taxation 136 74 84
Items that will not be reclassified to income, after taxation 16 34 (53)
OTHER COMPREHENSIVE INCOME FOR THE YEAR 24 258 (91)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3 537 3 567 (1)
Total comprehensive income attributable to:
Equity holders of RMI 3 336 3 288 1
Non-controlling interests 201 279 (28)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3 537 3 567 (1)
Summarised consolidated statement of financial position
Audited as at
30 June
R million 2015 2014
ASSETS
Property and equipment 546 520
Goodwill and other intangible assets 68 110
Investments in associates 14 063 11 582
Financial assets 8 288 6 861
Loans and receivables including insurance receivables 2 318 3 078
Deferred acquisition cost 362 357
Reinsurance contracts 832 301
Taxation 3 -
Deferred taxation 216 232
Cash and cash equivalents 5 633 4 725
TOTAL ASSETS 32 329 27 766
EQUITY
Share capital and premium 13 526 13 592
Reserves 3 579 1 886
Capital and reserves attributable to equity holders of the company 17 105 15 478
Non-controlling interests 978 899
TOTAL EQUITY 18 083 16 377
LIABILITIES
Insurance contracts 7 469 5 948
Share-based payment liability 182 145
Financial liabilities 5 140 3 704
Payables and provisions 1 329 1 189
Deferred taxation 80 379
Taxation 46 24
TOTAL LIABILITIES 14 246 11 389
TOTAL EQUITY AND LIABILITIES 32 329 27 766
Statement of changes in equity
Audited Trans-
Share actions
capital Equity with non- Non-
and accounted controlling Other Retained controlling Total
R million premium reserves interests reserves earnings interests equity
Balance as at 1 July 2013 13 632 935 (2 071) 172 1 059 614 14 341
Income statement - - - - 3 053 256 3 309
Other comprehensive income - 108 - 127 - 23 258
Dividend paid - - - - (1 500) (149) (1 649)
Income of associates retained - 1 043 - - (1 043) - -
BEE cost - 1 - - - - 1
Movement in treasury shares (40) 7 - - - - (33)
Transactions with non-controlling interests - - (5) - - (2) (7)
Issue of share capital to non-controlling interests by a subsidiary - - - - - 122 122
Change in reserves due to a change in holding - - - 44 (44) 35 35
Balance as at 30 June 2014 13 592 2 094 (2 076) 343 1 525 899 16 377
Income statement - - - - 3 292 221 3 513
Other comprehensive income - 152 - (108) - (20) 24
Dividend paid - - - - (1 694) (178) (1 872)
Income of associates retained - 1 119 - - (1 119) - -
BEE cost - 1 - - - - 1
Puttable non-controlling interests - (5) - - - - (5)
Movement in treasury shares (66) 11 - - - - (55)
Transactions with non-controlling interests - (4) 59 (55) 45 38 83
Issue of share capital to non-controlling interests by a subsidiary - - - - - 18 18
Share-based payment reserve - - - 2 (3) - (1)
BALANCE AS AT 30 JUNE 2015 13 526 3 368 (2 017) 182 2 046 978 18 083
Summarised consolidated statement of cash flows
Audited for the year ended
30 June
R million 2015 2014
Cash available from operating activities 4 505 2 214
Dividends paid (1 694) (1 500)
Investment activities (2 703) 1 471
Financing activities 981 (307)
Net increase in cash and cash equivalents 1 089 1 878
Unrealised foreign currency translation adjustments (181) 183
Cash and cash equivalents at the beginning of the year 4 725 2 664
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 5 633 4 725
Segmental report
The segmental analysis is based on the management accounts prepared for the group.
Audited RMI
R million Discovery MMI OUTsurance RMBSI Other1 group
Year ended 30 June 2015
Operating profit - - 1 956 135 62 2 153
Finance costs - - - (88) (74) (162)
Share of after-tax results of associates 1 434 695 15 2 - 2 146
Profit/(loss) before taxation 1 434 695 1 971 49 (12) 4 137
Taxation - - (632) 33 (25) (624)
PROFIT/(LOSS) FOR THE YEAR 1 434 695 1 339 82 (37) 3 513
NORMALISED EARNINGS 1 012 956 1 388 82 (278) 3 160
Assets - - 11 750 5 544 904 18 198
Associates 7 869 6 107 33 54 - 14 063
Intangible assets - - 64 2 2 68
TOTAL ASSETS 7 869 6 107 11 847 5 600 906 32 329
TOTAL LIABILITIES - - 7 136 5 084 2 026 14 246
Year ended 30 June 2014
Operating profit - - 2 080 358 44 2 482
Finance costs - - (1) (15) (63) (79)
Share of after-tax results of associates 971 793 10 2 - 1 776
Profit/(loss) before taxation 971 793 2 089 345 (19) 4 179
Taxation - - (623) (244) (3) (870)
PROFIT/(LOSS) FOR THE YEAR 971 793 1 466 101 (22) 3 309
NORMALISED EARNINGS 866 899 1 448 101 (292) 3 022
Assets - - 9 765 5 667 642 16 074
Associates 5 291 6 212 26 53 - 11 582
Intangible assets - - 107 1 2 110
TOTAL ASSETS 5 291 6 212 9 898 5 721 644 27 766
TOTAL LIABILITIES - - 5 445 5 239 705 11 389
1 "Other" includes RMI and consolidation entries.
Geographical segments
Audited South New
R million Africa Australia Zealand UK Total
Year ended 30 June 2015
Profit/(loss) 2 046 75 (130) - 1 991
Share of after-tax results of associates 2 018 - - 128 2 146
Profit/(loss) before taxation 4 064 75 (130) 128 4 137
Taxation (600) (24) - - (624)
PROFIT/(LOSS) FOR THE YEAR 3 464 51 (130) 128 3 513
TOTAL ASSETS 25 550 6 186 593 - 32 329
TOTAL LIABILITIES 9 200 4 834 212 - 14 246
Year ended 30 June 2014
Profit/(loss) 2 068 357 (22) - 2 403
Share of after-tax results of associates 1 656 - - 120 1 776
Profit/(loss) before taxation 3 724 357 (22) 120 4 179
Taxation (766) (104) - - (870)
PROFIT/(LOSS) FOR THE YEAR 2 958 253 (22) 120 3 309
TOTAL ASSETS 22 509 4 672 585 - 27 766
TOTAL LIABILITIES 7 760 3 608 21 - 11 389
Financial instruments measured at fair value
The group's activities expose it to a variety of financial risks. The table below analyses financial instruments carried at fair value by level in the
fair value hierarchy. The different levels are based on the extent to which quoted prices are used in the calculation of the fair value of the
financial instruments. These levels are defined as follows:
Level 1 - fair value is based on quoted market prices (unadjusted) in active markets for identical instruments as measured on the reporting
date.
Level 2 - fair value is determined from inputs other than quoted prices that are observable for the asset or liability, either directly (for example
prices) or indirectly (for example derived from prices).
Level 3 - fair value is determined from inputs for the asset or liability that are not based on observable market data.
Audited Total
carrying
R million Level 1 Level 2 Level 3 amount
30 June 2015
Financial assets
Equity securities
- available-for-sale 746 - - 746
- at fair value through profit or loss 2 143 29 - 2 172
Debt securities
- available-for-sale - 560 - 560
- at fair value through profit or loss 1 084 3 216 386 4 686
Derivative asset - 46 - 46
TOTAL FINANCIAL ASSETS RECOGNISED AT FAIR VALUE 3 973 3 851 386 8 210
Financial liabilities
Convertible debentures - 15 - 15
Financial liabilities at fair value through profit or loss - - 107 107
Derivative liability - 36 - 36
Investment contracts1 - 1 417 - 1 417
TOTAL FINANCIAL LIABILITIES RECOGNISED AT FAIR VALUE - 1 468 107 1 575
1. During the year under review, a portion of the investment contract liability was transferred from level 1 to level 2.
This liability is calculated with reference to the value of financial assets which trade in active markets with quoted
market prices.
Audited for the year ended
30 June
R million 2015 2014
Reconciliation of movement in level 3 assets
Balance at the beginning of the year 415 441
Redemptions in the current year - (5)
Investment income accrued 32 33
Dividends received from the OUTsurance Investment Trust (61) (54)
BALANCE AT THE END OF THE YEAR 386 415
Reconciliation of movement in level 3 liabilities
Balance at the beginning of the year 105 110
Preference dividends charged to the income statement 201 191
Preference dividends paid (199) (196)
BALANCE AT THE END OF THE YEAR 107 105
Audited Total
carrying
R million Level 1 Level 2 Level 3 amount
30 June 2014
Equity securities
- available-for-sale 725 - - 725
- at fair value through profit or loss 2 070 34 - 2 104
Debt securities
- available-for-sale - 540 - 540
- at fair value through profit or loss 126 2 855 415 3 396
Derivative asset - 17 - 17
TOTAL FINANCIAL ASSETS RECOGNISED AT FAIR VALUE 2 921 3 446 415 6 782
Financial liabilities
Convertible debentures - 15 - 15
Financial liabilities at fair value through profit or loss - - 105 105
Derivative liability - 20 - 20
Investment contracts 979 402 - 1 381
TOTAL FINANCIAL LIABILITIES RECOGNISED AT FAIR VALUE 979 437 105 1 521
Administration
Directors
GT Ferreira (Chairman), HL Bosman (CEO & FD), JP Burger, P Cooper (appointed as non-executive director on 11 September 2014),
(Ms) SEN De Bruyn Sebotsa, LL Dippenaar, JW Dreyer, JJ Durand, PM Goss, PK Harris, P Lagerström, MM Morobe (appointed 1 August 2014),
O Phetwe and KC Shubane.
Alternates: L Crouse and (Ms) A Kekana
Secretary and registered office
JS Human
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.rmih.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 Proprietary 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
Date: 11/09/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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