Wrap Text
Summarised Group Results for the year ended 30 June 2016
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" or “group”)
SUMMARISED GROUP RESULTS for the year ended 30 June 2016
Our purpose: To enhance the lifetime financial wellness of people, their communities and their businesses
RETURN on EMBEDDED value 13%
VALUE of NEW BUSINESS R850 million +13% on consistent basis
New business PVP increased by 35% to R68 billion
Diluted CORE HEADLINE EARNINGS decreased by 16% to R3.2 billion
EXPENSE OPTIMISATION PROJECT on track
Total DIVIDEND increased to 157 CENTS PER SHARE
SUMMARY OF RESULTS
Group results
MMI delivered the following performance in an extremely tough environment.
- A strong embedded value of R43.0 billion (2 680 cents per share) was recorded, reflecting a 13% return on embedded value or R5.2 billion embedded value earnings for shareholders.
- New business volumes on the present value of premiums basis (PVP) increased 35% on the prior year, with strong growth in both the Corporate and Public Sector and the International segments.
The turnaround in productivity of Metropolitan Retail’s distribution channels has also continued, delivering recurring premium growth of 31% in the last quarter of the year.
- Value of new business of R850 million was 11% lower than the exceptionally strong previous year. It should be noted, however, that the value would have been 13% higher than the 2015 total
had the discount rate and expense allocation basis remained unchanged.
- Good expense management once again contributed positively to value creation. MMI is targeting a reduction in annual expenses of R750 million by financial year 2019. During 2016 total expense
savings of R104 million were achieved, slightly ahead of the planned savings.
- Diluted core headline earnings decreased by 16% to R3.2 billion, mainly driven by lower underwriting profits across the group and subdued investment markets.
- Total diluted earnings and headline earnings ended the year 25% and 27% lower respectively as negative actuarial basis changes, due to increased allowance for group expenses in actuarial
reserves, and increased impairments of intangibles further reduced the results.
- Underwriting experience in the retail segments improved compared with the first half of the year, but overall remained below the strong 2015 performance.
- Disability claims in the corporate business, largely linked to the current unfavourable economic conditions, remained above the targeted range, putting downward pressure on group earnings.
- Momentum Short-Term Insurance increased premium income 13% compared with the prior year, while improving the annual claims ratio from 87% to 82%.
- Client retention across the group remained satisfactory. Positive results from recent client-satisfaction surveys confirm progress made with the group’s client-centric strategy.
- Significant investments are being made in the development of initiatives that in due course will improve the competitiveness of MMI.
- A final ordinary dividend of 92 cents per share was declared resulting in a total dividend of 157 cents per share, a slight increase on the prior year.
Capital strength
- A strong capital buffer of R4 billion was recorded as at 30 June 2016, after allowing for economic capital requirements, strategic growth initiatives and the final dividend.
- During the year Moody’s assigned an Aaa.za national scale insurance financial strength (IFS) rating to MMI Group Limited (MMIGL). They also assigned an Aa2.za rating to MMIGL’s unsecured
subordinated notes on the national scale.
- Taking into account the focus on growth, changing regulations including Solvency Assessment and Management and the difficult economic outlook, 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 client centricity, growth and excellence.
- Taking into account the economic outlook, the group has increased the focus on efficiencies, whilst continuing to pursue top-line growth.
- MMI continues to invest in growth initiatives with the aim of enhancing shareholder value over the longer term.
- 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 appropriate and focused 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 2016
DIRECTORS' STATEMENT
The directors take pleasure in presenting the audited summarised results of MMI Holdings financial services group for the year ended 30 June 2016. The preparation of the
group's results was supervised by the group finance director, Mary Vilakazi, CA(SA).
Corporate events
Listed debt
MMI Group Ltd (MMIGL) listed new unsecured subordinated callable notes to the total value of R1 250 million on the JSE on 6 August 2015.
On 15 September 2015, R1 000 million of unsecured subordinated notes previously issued by MMIGL were redeemed.
Minority buy-out
In May 2016, MMI acquired the remaining stake in UBA Metropolitan (50%) for R248 million. From an IFRS perspective the 50% acquired is carried at R144 million which excludes
any goodwill or value of intangibles, and therefore resulted in a loss of R104 million, which was recorded in equity. This had no impact on earnings.
Sale of business
The group has signed a sale agreement to sell the FNB Life business to FirstRand Life Assurance Ltd. The transaction is awaiting FSB approval for the S37 transfer.
Basis of preparation of financial information
These summarised consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS); International Accounting Standard 34
(IAS 34) - Interim financial reporting (with the exception of disclosures required in terms of paragraph 16A(j)); 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 for preliminary reports and the South African
Companies Act, 71 of 2008. The accounting policies applied in the preparation of these financial statements are in terms of 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 2016,
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.
New and revised standards effective for the period ended 30 June 2016 and relevant to the group
There were no new standards or new amendments to standards and interpretations effective in the current period.
Segmental report
From 1 July 2015 the MMI group embarked on a new segmental reporting view that is aligned with the client-centric goals of the group. The segmental report and analysis of
changes in embedded value have been disclosed on this new internal structure and the prior year has been restated. The new segmental reporting 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.
The new client-centric reporting view reflects the following segments:
Momentum Retail: Momentum Retail's purpose is to enhance the lifetime financial wellness of people, their families, communities and businesses. The focus is on the upper
retail segment and the small business segment in South Africa, offering innovative and appropriate wealth creation, risk and savings solutions. The group's short-term
insurance and open medical scheme solutions are also marketed under the Momentum Retail brand.
Metropolitan Retail: Metropolitan Retail's purpose is to enhance the lifetime financial wellness of people, their families and their communities through empowerment and
education. The focus is on the entry-level market in South Africa, offering savings, income generation, risk and funeral products and solutions.
Corporate and Public Sector: This segment's purpose is to enhance the lifetime financial wellness of businesses, employees, customers and their communities. The segment
focuses on the strategic issues that affect institutions and their employees. The Corporate and Public Sector focuses on medium to large corporates, affinity groups, labour
unions and the public sector institutions, offering solutions that grow their profitability, protect their asset base and enhance their sustainability.
International: The International segment manages MMI's global expansion holistically in order to enhance the lifetime financial wellness of people, their communities and their
businesses in selected segments of countries where MMI is represented. The results of any strategic initiatives are reported under Shareholder Capital.
Shareholder Capital: This segment is responsible for the management of the capital base of the group. It also includes the incubation of strategic initiatives until they are
transferred to the relevant operating segment.
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
Sizwe Nxasana retired from the MMI board on 30 September 2015 and Leon Crouse retired from the MMI board with effect from 31 March 2016. On 1 July 2015, Mary Vilakazi was
appointed as the group finance director. On 20 November 2015, Peter Cooper was appointed to the board. On 21 July 2016, Voyt Krzychylkiewicz was appointed as an alternative
director to Peter Cooper.
All transactions in listed shares of the company involving directors were disclosed on SENS.
Changes to the group executive committee
Mark van der Watt resigned from his role of chief executive officer of the Life Insurance Centre of Excellence on 30 April 2016. Thinus Alsworth-Elvey was appointed to the
group executive committee as chief executive officer of the Investments and Savings Centre of Excellence from 1 May 2016. Zureida Ebrahim was appointed to the group executive
committee as chief executive officer of Client Engagement Solutions from 1 May 2016. Blum Khan retired from his role as chief executive officer of MMI's Africa and Southeast
Asia business on 30 June 2016. Innocent Dutiro was appointed in this role from 1 July 2016.
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 2016 that were not in the ordinary course of business other than those disclosed in the 2016 integrated report.
Events after year-end
No material events occurred between the reporting date and the date of approval of these results.
Final dividend declaration
Ordinary shares
- On 6 September 2016, a gross final dividend of 92 cents per ordinary share was declared, resulting in a total dividend of 157 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, 30 September 2016,
and will be paid on Monday, 3 October 2016.
- 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 Tuesday, 27 September 2016.
- The shares will trade ex dividend from the start of business on Wednesday, 28 September 2016.
- Share certificates may not be dematerialised or rematerialised between Wednesday, 28 September 2016 and Friday, 30 September 2016, both days inclusive.
- The number of ordinary shares in issue at the declaration date was 1 573 834 190.
- MMI's income tax number is 975 2050 147.
Preference shares
- Dividends of R20.1 million (2015: 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 integrated report for 2016 will be posted to shareholders, and can be viewed online at www.mmiholdings.com, on or about 30 September 2016.
Directors' responsibility
The preparation of these results, and the correct extraction thereof from the group's audited 2016 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 summarised 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 summarised results have not been audited, but have been extracted from the group's 2016 annual financial statements, which have been audited by PricewaterhouseCoopers Inc.
and their unqualified audit report, together with the group's audited 2016 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 2016 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
6 September 2016
DIRECTORS:
MJN Njeke (chairman), JP Burger (deputy chairman), NAS Kruger (group chief executive officer), M Vilakazi (group finance director), P Cooper, F Jakoet, Prof JD Krige, PJ Moleketi,
SA Muller, V Nkonyeni, KC Shubane, FJC Truter, BJ van der Ross, JC van Reenen, LL von Zeuner, W Krzychylkiewicz (alternate to P Cooper)
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 – SOUTH AFRICA: Merrill Lynch South Africa (Pty) Ltd (registration number: 2000/031756/06) SPONSOR – NAMIBIA: Simonis Storm Securities (Pty) Ltd
AUDITORS: PricewaterhouseCoopers Inc.
REGISTERED OFFICE: 268 West Avenue, Centurion 0157
JSE CODE: MMI NSX CODE: MIM ISIN NO: ZAE000149902
SENS ISSUE: 7 September 2016
MMI HOLDINGS GROUP - IFRS FINANCIAL INFORMATION
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30.06.2016 30.06.2015
Rm Rm
ASSETS
Intangible assets 12 433 13 153
Owner-occupied properties 3 112 3 030
Property and equipment 432 353
Investment properties 7 422 7 212
Investments in associates 680 145
Employee benefit assets 445 408
Financial instruments (1) 393 968 388 258
Reinsurance contract assets 5 092 3 046
Deferred income tax 279 287
Properties under development 187 330
Insurance and other receivables 4 497 4 080
Current income tax assets 537 365
Cash and cash equivalents 29 148 26 174
Non-current assets held for sale 470 -
Total assets 458 702 446 841
EQUITY
Equity attributable to owners of the parent 24 109 24 547
Non-controlling interests 290 501
Total equity 24 399 25 048
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts 107 115 104 776
Short-term insurance contracts 6 978 6 553
Financial instruments
Investment contracts 257 985 246 490
- with discretionary participation features (DPF) 25 195 26 134
- designated at fair value through income 232 790 220 356
Other financial instruments (2) 41 529 42 923
Reinsurance contract liabilities 973 659
Deferred income tax 3 812 4 351
Employee benefit obligations 1 452 1 735
Other payables 14 384 14 062
Provisions 43 78
Current income tax liabilities 32 166
Total liabilities 434 303 421 793
Total equity and liabilities 458 702 446 841
1. Financial instruments consist of the following:
- Securities designated at fair value through income: R373 630 million (30.06.2015: R365 727 million)
- Investments in associates designated at fair value through income: R10 499 million (30.06.2015: R12 362 million)
- Derivative financial instruments: R1 977 million (30.06.2015: R2 033 million)
- Available-for-sale: R125 million (30.06.2015: R208 million)
- Held-to-maturity: R122 million (30.06.2015: R73 million)
- Loans and receivables: R7 615 million (30.06.2015: R7 855 million)
2. Other financial instruments consist of the following:
- Designated at fair value through income: R38 374 million (30.06.2015: R39 720 million)
- Derivative financial instruments: R2 097 million (30.06.2015: R2 111 million)
- Amortised cost: R1 058 million (30.06.2015: R1 092 million)
SUMMARISED CONSOLIDATED INCOME STATEMENT 12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Net insurance premiums 28 971 27 396
Fee income (1) 7 679 7 355
Investment income 17 522 15 559
Net realised and fair value gains 11 824 16 248
Net income 65 996 66 558
Net insurance benefits and claims 26 609 24 610
Change in liabilities (674) (869)
Change in long-term insurance contract liabilities 354 (2 069)
Change in short-term insurance contract liabilities (71) (139)
Change in investment contracts with DPF liabilities (940) 728
Change in reinsurance assets (331) 154
Change in reinsurance liabilities 314 457
Fair value adjustments on investment contract liabilities 16 205 16 039
Fair value adjustments on collective investment scheme liabilities (153) 2 457
Depreciation, amortisation and impairment expenses 1 408 1 326
Employee benefit expenses 5 341 5 922
Sales remuneration 5 304 5 071
Other expenses 6 695 5 806
Expenses 60 735 60 362
Results of operations 5 261 6 196
Share of profit of associates 18 4
Finance costs (2) (937) (792)
Profit before tax 4 342 5 408
Income tax expense (2 164) (2 431)
Earnings for the year 2 178 2 977
Attributable to:
Owners of the parent 2 142 2 857
Non-controlling interests 36 120
2 178 2 977
Basic earnings per ordinary share (cents) 137.6 183.5
Diluted earnings per ordinary share (cents) 135.9 180.5
1. Fee income consists of the following:
- Investment contracts: R2 471 million (30.06.2015: R2 225 million)
- Trust and fiduciary services: R1 892 million (30.06.2015: R1 842 million)
- Health administration: R1 945 million (30.06.2015: R2 053 million)
- Other fee income: R1 371 million (30.06.2015: R1 235 million)
2. Finance costs consist of the following:
- Preference shares issued by MMI: R110 million (30.06.2015: R108 million)
- Subordinated debt: R341 million (30.06.2015: R271 million)
- Cost of carry positions: R346 million (30.06.2015: R261 million)
- Other: R140 million (30.06.2015: R152 million)
SUMMARISED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME 12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Earnings for the year 2 178 2 977
Other comprehensive income, net of tax 83 68
Items that may subsequently be reclassified to income (24) 6
Exchange differences on translating foreign operations (27) 1
Available-for-sale financial assets 3 5
Items that will not be reclassified to income 107 62
Land and building revaluation 124 118
Remeasurements of post-employee benefit funds (1) (20)
Income tax relating to items that will not be reclassified (16) (36)
Total comprehensive income for the year 2 261 3 045
Total comprehensive income attributable to:
Owners of the parent 2 193 2 926
Non-controlling interests 68 119
2 261 3 045
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
30.06.2016 30.06.2015 30.06.2016 30.06.2015
Rm Rm Rm Rm
Earnings 2 142 2 857 2 142 2 857
Finance costs - convertible preference shares 41 44
Dilutory effect of subsidiaries (1) (23) (31)
Diluted earnings 2 160 2 870
Intangible asset and other impairments (2) 158 19 158 19
Tax on intangible asset and other impairments (10) (4) (10) (4)
Release of foreign currency translation reserve (92) - (92) -
Gain on sale of subsidiary (115) - (115) -
Headline earnings (3) 2 083 2 872 2 101 2 885
Net realised and fair value gains on excess (210) 6 (210) 6
Basis and other changes and investment variances 517 148 517 148
Amortisation of intangible assets relating to business combinations 618 720 618 720
Non-recurring items (4) 155 53 155 53
Investment income on treasury shares - contract holders 25 24
Core headline earnings (5) 3 163 3 799 3 206 3 836
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. Relates to the impairment of Hello Doctor and Cannon goodwill as well as the impairment of software in Health and International businesses.
3. Headline earnings consist of operating profit, investment income, net realised and fair value gains, investment variances and basis and other changes.
4. Non-recurring items include one-off costs relating mainly to the restructuring of the group.
5. 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) 12 mths to 12 mths to
attributable to owners of the parent 30.06.2016 30.06.2015
Basic
Core headline earnings 203.1 244.0
Headline earnings 133.8 184.5
Earnings 137.6 183.5
Weighted average number of shares (million) 1 557 1 557
Diluted
Core headline earnings 199.9 239.2
Weighted average number of shares (million) (1) 1 604 1 604
Headline earnings 132.2 181.4
Earnings 135.9 180.5
Weighted average number of shares (million) (2) 1 589 1 590
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 2016 2015
Ordinary listed MMI Holdings Ltd shares (cents per share)
Interim - March 65 63
Final - September 92 92
Total 157 155
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 1 October 2015 and 5 April 2016, 1 million preference shares were converted into ordinary shares, on each date. In the prior year, on
13 November 2014 and 31 March 2015, 1.1 million preference shares were converted into ordinary shares, on each date. The shares were originally issued at a price of R10.18 per
share. Dividends are payable on the remaining preference shares at 132 cents per annum (payable March and September).
Significant related party transactions
R362 million of the ordinary dividends declared by MMI Holdings Ltd in September 2015 (R333 million of the ordinary dividends declared in September 2014) and R261 million of
the ordinary dividends declared in March 2016 (R248 million of the ordinary dividends declared in March 2015) were attributable to RMI Holdings Ltd. Dividends of R20.1 million
(2015: R21.3 million) were paid to KTH on the A3 MMI Holdings Ltd preference shares. Dividends of R5 million (2015: R13 million) were paid to KTH on the MHC A ordinary shares.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Changes in share capital
Balance at beginning and end 9 9
Changes in share premium
Balance at beginning 13 795 13 782
Conversion of preference shares 17 20
Decrease/(increase) in treasury shares held on behalf of contract holders 35 (7)
Balance at end 13 847 13 795
Changes in other reserves
Balance at beginning 1 866 1 802
Total comprehensive income 51 69
BEE cost 4 4
Change in non-distributable reserves 2 -
Transfer from/(to) retained earnings 32 (9)
Balance at end (1) 1 955 1 866
Changes in retained earnings
Balance at beginning 8 877 9 141
Total comprehensive income 2 142 2 857
Dividend paid (2 475) (3 094)
Transactions with non-controlling interests (214) (15)
Transfer (to)/from other reserves (32) 9
Puttable non-controlling interests (2) - (21)
Balance at end 8 298 8 877
Equity attributable to owners of the parent 24 109 24 547
Changes in non-controlling interests
Balance at beginning 501 480
Total comprehensive income 68 119
Dividend paid (60) (23)
Transactions with owners (2) (219) (170)
Business combinations - 95
Balance at end 290 501
Total equity 24 399 25 048
1. Other reserves consist of the following:
- Land and building revaluation reserve: R742 million (30.06.2015: R631 million)
- Foreign currency translation reserve: R122 million (30.06.2015: R181 million)
- Revaluation of available-for-sale investments: R11 million (30.06.2015: R8 million)
- Non-distributable reserve: R50 million (30.06.2015: R19 million)
- Employee benefit revaluation reserve: R77 million (30.06.2015: R78 million)
- Fair value adjustment for preference shares issued by MMI Holdings Ltd: R940 million (30.06.2015: R940 million)
- Equity-settled share-based payment arrangements: R13 million (30.06.2015: R9 million)
2. June 2015: 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 recognised a financial liability of R111 million in the prior year, being the present value of the estimated purchase price, for exercising this
option. The group has consolidated 96% of the subsidiaries' results and in June 2015 de-recognised the non-controlling interest (R90 million) due to the financial liability
recognised above, which is in line with its selected accounting policy. The value of the liability is R104 million at 30 June 2016.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS 12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Net cash inflow from operating activities 8 842 1 505
Net cash outflow from investing activities (1 051) (1 271)
Net cash outflow from financing activities (4 817) (2 935)
Net cash flow 2 974 (2 701)
Cash resources and funds on deposit at beginning 26 174 28 875
Cash resources and funds on deposit at end 29 148 26 174
PRINCIPAL ASSUMPTIONS (South Africa) (1) 30.06.2016 30.06.2015
% %
Pre-tax investment return
Equities 12.7 12.1
Properties 10.2 9.6
Government stock 9.2 8.6
Other fixed-interest stocks 9.7 9.1
Cash 8.2 7.6
Risk-free return (2) 9.2 8.6
Risk discount rate (RDR) 11.4 10.9
Investment return (before tax) - balanced portfolio (2) 11.4 10.8
Expense inflation base rate (3) 7.4 6.8
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 30.06.2016 30.06.2015
% %
Cannon Assurance 33.7 33.7
Eris Property Group 23.7 45.7
Metropolitan Health Ghana 0.9 1.8
Metropolitan Health Group 17.6 17.6
Metropolitan Health Mauritius - 5.0
Metropolitan Health Namibia Administrators 49.0 49.0
Metropolitan Kenya 33.7 33.7
Metropolitan Life Mauritius - 30.0
Metropolitan Nigeria - 50.0
Metropolitan Swaziland 33.0 33.0
Metropolitan Tanzania 33.0 33.0
Metropolitan Health Zambia 35.0 35.0
MMI Holdings Namibia 10.3 10.3
Momentum Mozambique 33.0 33.0
Momentum Swaziland 33.0 33.0
BUSINESS COMBINATIONS - JUNE 2016
There were no significant business combinations for the 12 months ended June 2016.
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 2015 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 2015 year.
RECONCILIATION OF GOODWILL 30.06.2016 30.06.2015
Rm Rm
Balance at beginning 1 333 1 088
Business combinations - 234
Impairment charges (1) (104) -
Exchange differences 8 11
Balance at end 1 237 1 333
1. Goodwill relating to the Cannon (International segment) and Hello Doctor (Shareholder Capital segment) acquisitions were impaired by R41 million and R63 million respectively
during the current year due to losses incurred by these companies.
MMI HOLDINGS GROUP - SEGMENTAL INFORMATION
12 mths to 30.06.2016 Momentum Metropolitan Corporate and Shareholder Segmental Reconciling IFRS
Retail Retail Public Sector International Capital total items (1) total
Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 25 767 6 816 26 608 3 921 - 63 112 (34 141) 28 971
Recurring premiums 9 278 5 558 15 170 3 322 - 33 328 (8 720) 24 608
Single premiums 16 489 1 258 11 438 599 - 29 784 (25 421) 4 363
Fee income 3 599 209 4 641 365 759 9 573 (1 894) 7 679
External fee income 3 068 179 3 986 280 544 8 057 (378) 7 679
Intergroup fee income 531 30 655 85 215 1 516 (1 516) -
Expenses
Net payments to contract holders
External payments 25 067 6 037 30 568 2 292 - 63 964 (37 355) 26 609
Other expenses 5 792 2 325 6 063 1 741 1 342 17 263 1 485 18 748
Sales remuneration 2 156 967 1 537 647 4 5 311 (7) 5 304
Administration expenses (2) 2 757 1 191 3 152 824 1 356 9 280 157 9 437
Amortisation due to business
combinations and impairments - - 12 - 72 84 823 907
Cell captive business - - 203 - - 203 1 178 1 381
Direct property expenses - - - - - - 317 317
Asset management and other fee expenses 182 103 437 13 80 815 533 1 348
Holding company expenses - - - - 54 54 - 54
Intergroup expenses 697 64 722 257 (224) 1 516 (1 516) -
Diluted core headline earnings 1 600 667 617 28 294 3 206 - 3 206
Operating profit 2 172 940 771 45 (358) 3 570 - 3 570
Tax on operating profit (628) (273) (233) (42) (10) (1 186) - (1 186)
Investment income 72 - 108 29 849 1 058 - 1 058
Tax on investment income (16) - (29) (4) (187) (236) - (236)
Covered 1 563 694 345 206 403 3 211 - 3 211
Non-covered 37 (27) 272 (178) (109) (5) - (5)
1 600 667 617 28 294 3 206 - 3 206
Actuarial liabilities 195 346 32 942 129 856 11 367 2 567 372 078 - 372 078
1. The 'Reconciling items' column includes: investment contract business premiums and claims; intergroup fee income and expenses; non-recurring items included in administration
expenses; direct property and asset management fees for all entities, except non-life entities, 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 and other minor adjustments to expenses and fee income.
2. Momentum Retail administration expenses includes R79 million relating to Momentum SP Reid.
Restated Momentum Metropolitan Corporate and Shareholder Segmental Reconciling IFRS
12 mths to 30.06.2015 Retail Retail Public Sector International Capital total items (1) total
Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 24 676 6 910 29 921 3 563 - 65 070 (37 674) 27 396
Recurring premiums 8 992 5 495 14 345 3 215 - 32 047 (8 282) 23 765
Single premiums 15 684 1 415 15 576 348 - 33 023 (29 392) 3 631
Fee income 3 452 95 4 068 362 1 120 9 097 (1 742) 7 355
External fee income 2 962 95 3 644 257 762 7 720 (365) 7 355
Intergroup fee income 490 - 424 105 358 1 377 (1 377) -
Expenses
Net payments to contract holders
External payments 24 088 4 967 27 500 1 953 - 58 508 (33 898) 24 610
Other expenses 5 650 2 070 5 522 1 586 1 563 16 391 1 734 18 125
Sales remuneration 2 200 893 1 426 544 15 5 078 (7) 5 071
Administration expenses 2 483 1 135 3 172 837 1 316 8 943 724 9 667
Amortisation due to business
combinations and impairments 17 - 12 - 81 110 891 1 001
Cell captive business - - 236 - - 236 961 1 197
Direct property expenses - - - - - - 105 105
Asset management and other fee expenses 129 - 201 7 243 580 437 1 017
Holding company expenses - - - - 67 67 - 67
Intergroup expenses 821 42 475 198 (159) 1 377 (1 377) -
Diluted core headline earnings 1 756 604 861 152 463 3 836 - 3 836
Operating profit 2 423 876 1 170 179 (186) 4 462 - 4 462
Tax on operating profit (697) (272) (344) (33) 53 (1 293) - (1 293)
Investment income 42 - 48 6 775 871 - 871
Tax on investment income (12) - (13) - (179) (204) - (204)
Covered 1 725 604 487 266 550 3 632 - 3 632
Non-covered 31 - 374 (114) (87) 204 - 204
1 756 604 861 152 463 3 836 - 3 836
Actuarial liabilities 186 493 32 937 125 177 10 095 3 117 357 819 - 357 819
1. The 'Reconciling items' column includes: investment contract business premiums and claims; intergroup fee income and expenses; non-recurring items included in administration
expenses; direct property and asset management fees for all entities, except non-life entities, 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 and other minor adjustments to expenses and fee income.
CHANGE IN DILUTED CORE HEADLINE EARNINGS Restated
12 mths to 12 mths to
Change 30.06.2016 30.06.2015
% Rm Rm
Momentum Retail (9) 1 600 1 756
Metropolitan Retail 10 667 604
Corporate and Public Sector (28) 617 861
International (82) 28 152
Operating segments (14) 2 912 3 373
Shareholder Capital (37) 294 463
Total diluted core headline earnings (16) 3 206 3 836
RECONCILIATION OF INVESTMENTS Restated
12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Revenue 1 360 1 429
Fee income 805 797
Intergroup fees 535 574
Investment income 42 26
Fair value (losses)/gains (22) 32
Expenses and finance costs (1 234) (1 259)
Other expenses (1 218) (1 253)
Finance costs (16) (6)
Share of loss of associates (8) -
Profit before tax 118 170
Tax (42) (61)
Earnings attributable to ordinary shareholders 76 109
Core adjustments 66 31
Goodwill and other impairments - 12
Net realised and fair value losses/(gains) on excess 17 (22)
Amortisation of intangible assets relating to business combinations - 41
Non-recurring items 49 -
Diluted core headline earnings 142 140
Operating profit before tax 182 182
Tax on operating profit (59) (56)
Investment income 26 20
Tax on investment income (7) (6)
Diluted core headline earnings 142 140
Allocated per segment:
Momentum Retail 107 120
Corporate and Public Sector 46 28
Shareholder Capital (11) (8)
142 140
RECONCILIATION OF HEALTH Restated
12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Revenue 2 503 2 593
Net insurance premiums 566 623
Fee income 1 883 1 930
Intergroup fees 24 11
Investment income 35 29
Fair value losses (5) -
Expenses (2 439) (2 301)
Net payments to contract holders (427) (485)
Other expenses (2 010) (1 816)
Finance costs (2) -
Profit before tax 64 292
Tax (31) (92)
Non-controlling interests - (3)
Earnings attributable to ordinary shareholders 33 197
Core adjustments 56 (11)
Dilutory effect of subsidiaries (9) (23)
Goodwill and other impairments 16 -
Net realised and fair value losses on excess 5 -
Amortisation of intangible assets relating to business combinations 12 12
Non-recurring items 32 -
Diluted core headline earnings 89 186
Operating profit before tax 100 242
Tax on operating profit (36) (80)
Investment income 33 35
Tax on investment income (8) (11)
Diluted core headline earnings 89 186
Allocated per segment:
Momentum Retail (56) (23)
Corporate and Public Sector 145 209
89 186
Principal number of members:
Open schemes 143 462 135 726
Closed schemes 830 548 1 098 643
974 010 1 234 369
Allocated per segment:
Momentum Retail 95 888 88 668
Corporate and Public Sector 878 122 1 145 701
974 010 1 234 369
RECONCILIATION OF GUARDRISK (PROMOTER CELL (1)) 12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Revenue by type 527 495
Management fees 405 353
Investment fees 62 51
Underwriting (loss)/profit (6) 23
Other income 2 3
Investment income 64 65
Expenses and finance costs (334) (273)
Administration expenses (323) (263)
Finance costs (11) (10)
Operating profit before tax 193 222
Tax attributable to promoter operating profit (50) (62)
Diluted core headline earnings 143 160
Covered 34 33
Non-covered 109 127
Corporate and Public Sector segment 143 160
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.
RECONCILIATION OF SHORT-TERM INSURANCE 12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Revenue 617 537
Net insurance premiums 571 506
Fee income 21 15
Investment income 25 16
Expenses (743) (719)
Net payments to contract holders (467) (441)
Other expenses (276) (278)
Loss before tax (126) (182)
Tax 18 51
Earnings attributable to ordinary shareholders (108) (131)
Operating loss before tax (144) (198)
Tax on operating loss 23 56
Investment income 18 16
Tax on investment income (5) (5)
Diluted core headline earnings - Momentum Retail segment (108) (131)
ANALYSIS OF SHAREHOLDER CAPITAL Restated
12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
International (189) (102)
Momentum short-term insurance administration (42) (35)
Eris Property Group 60 41
Other net operational expenses (196) (37)
Finance costs (460) (389)
Investment income 1 308 1 164
Tax on investment income (187) (179)
Total 294 463
RECONCILIATION OF NON-COVERED CORE EARNINGS Momentum Metropolitan Corporate and Shareholder
Retail Retail Public Sector International Capital Total
Rm Rm Rm Rm Rm Rm
12 mths to 30.06.2016
Investments 107 - 46 - (11) 142
Wealth 82 - - - - 82
Health (56) - 145 - - 89
Guardrisk - - 109 - - 109
Short-term insurance (108) - - (68) (42) (218)
Other 12 (27) (28) (110) (56) (209)
37 (27) 272 (178) (109) (5)
12 mths to 30.06.2015
Investments 120 - 28 - (8) 140
Wealth 72 - - - - 72
Health (23) - 209 - - 186
Guardrisk - - 127 - - 127
Short-term insurance (131) - - 16 (35) (150)
Other (7) - 10 (130) (44) (171)
31 - 374 (114) (87) 204
NET PAYMENTS TO CONTRACT HOLDERS Restated
12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Momentum Retail 25 067 24 088
Death and disability claims 4 338 3 694
Maturity claims 6 964 7 547
Annuities 4 945 4 692
Withdrawal benefits 221 80
Surrenders 9 341 8 523
Short-term insurance 469 440
Health claims 133 116
Reinsurance recoveries (1 344) (1 004)
Metropolitan Retail 6 037 4 967
Death and disability claims 1 076 1 093
Maturity claims 2 540 1 668
Annuities 677 620
Withdrawal benefits - 84
Surrenders 1 800 1 560
Reinsurance recoveries (56) (58)
Corporate and Public Sector 30 568 27 500
Death and disability claims 6 938 5 084
Maturity claims 1 939 948
Annuities 1 795 1 625
Withdrawal benefits 4 850 3 796
Terminations and disinvestments 15 335 14 613
Short-term insurance 7 112 4 745
Health claims 294 185
Reinsurance recoveries (7 695) (3 496)
International 2 292 1 953
Death and disability claims 481 420
Maturity claims 458 371
Annuities 96 99
Withdrawal benefits 225 108
Surrenders 458 498
Terminations 109 90
Short-term insurance 158 104
Health claims 438 393
Reinsurance recoveries (131) (130)
Total payments to contract holders 63 964 58 508
Reconciling items (1) (37 355) (33 898)
Net insurance benefits and claims per income statement 26 609 24 610
1. Relates mainly to payments to investment contract holders.
MMI HOLDINGS GROUP - STATUTORY EXCESS
STATUTORY EXCESS
30.06.2016 30.06.2015
Rm Rm
Group excess per reporting basis 24 109 24 547
Net assets - other businesses (2 939) (3 256)
Fair value adjustments on Metropolitan business acquisition and other consolidation adjustments (3 471) (3 826)
Excess - long-term insurance business, net of non-controlling interests (1) 17 699 17 465
Disregarded assets (2) (983) (1 010)
Difference between statutory and published valuation methods (582) (839)
Write-down of subsidiaries and associates for statutory purposes (1 246) (1 210)
Unsecured subordinated debt 3 557 3 320
Consolidation adjustments (53) 141
Statutory excess - long-term insurance business 18 392 17 867
Capital adequacy requirement (CAR) (Rm) (3) 6 238 6 639
Ratio of long-term insurance business excess to CAR (times) 2.9 2.7
Discretionary margins 12 702 13 620
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 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 them being classified as non-covered, as well as the other
non-life insurance entities, including African health operations. 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 R491 million (30.06.2015: R518 million).
3. Aggregation of separate companies' capital adequacy requirements (CARs), with no assumption of diversification benefits.
MMI HOLDINGS GROUP - EMBEDDED VALUE INFORMATION
30.06.2016 30.06.2015
EMBEDDED VALUE RESULTS AS AT Rm Rm
Covered business
Reporting excess - long-term insurance business 17 699 17 465
Reclassification to non-covered business (1 262) (1 204)
16 437 16 261
Disregarded assets (1) (531) (575)
Difference between statutory and published valuation methods (575) (839)
Dilutory effect of subsidiaries (2) (51) (38)
Consolidation adjustments (3) (40) (5)
Value of MMI Group Ltd preference shares issued (500) (500)
Diluted adjusted net worth - covered business 14 740 14 304
Net value of in-force business 21 668 21 696
Diluted embedded value - covered business 36 408 36 000
Non-covered business
Net assets - non-covered business within life insurance companies 1 262 1 204
Net assets - non-covered business outside life insurance companies 2 939 3 256
Consolidation adjustments and transfers to covered business (3) (2 776) (3 024)
Adjustments for dilution (4) 690 819
Diluted adjusted net worth - non-covered business 2 115 2 255
Write-up to directors' value 4 466 2 075
Non-covered business 5 573 4 143
Holding company expenses (5,6) (557) (1 578)
International holding company expenses (5) (550) (490)
Diluted embedded value - non-covered business 6 581 4 330
Diluted adjusted net worth 16 855 16 559
Net value of in-force business 21 668 21 696
Write-up to directors' value 4 466 2 075
Diluted embedded value 42 989 40 330
Required capital - covered business (adjusted for qualifying debt) (7) 6 484 7 306
Surplus capital - covered business 8 256 6 998
Diluted embedded value per share (cents) 2 680 2 514
Diluted adjusted net worth per share (cents) 1 051 1 032
Diluted number of shares in issue (million) (8) 1 604 1 604
1. Disregarded assets include Sage intangible assets of R491 million (30.06.2015: R518 million), goodwill and various other items.
2. 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.
3. Consolidation adjustments include mainly goodwill and intangibles in subsidiaries that are eliminated.
4. Adjustments for dilution are made up as follows:
- Dilutory effect of subsidiaries (note 3): R123 million (30.06.2015: R103 million)
- Treasury shares held on behalf of contract holders: R292 million (30.06.2015: R424 million)
- Liability - MMI Holdings Ltd convertible preference shares issued to KTH: R275 million (30.06.2015: R292 million)
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.
6. The holding company expense adjustment reduced in the current year due to a reallocation of expenses to the operating life company covered business as part of the
implementation of the client centricity model. For further detail refer to note N of the Analysis of Changes in the Group Embedded Value.
7. The required capital for covered business amounts to R10 041 million (30.06.2015: R10 604 million) and is adjusted for qualifying debt of
R3 557 million (30.06.2015: R3 298 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 Restated
30.06.2016 30.06.2015
Rm Rm
Momentum Retail 11 409 11 331
Gross value of in-force business 12 803 12 818
Less cost of required capital (1 394) (1 487)
Metropolitan Retail 3 692 3 582
Gross value of in-force business 4 376 4 288
Less cost of required capital (684) (706)
Corporate and Public Sector 4 341 4 657
Gross value of in-force business 5 120 5 354
Less cost of required capital (779) (697)
International 2 157 2 108
Gross value of in-force business 2 444 2 310
Less cost of required capital (287) (202)
Shareholder Capital 69 18
Gross value of in-force business 69 18
Less cost of required capital - -
Net value of in-force business 21 668 21 696
EMBEDDED VALUE DETAIL Adjusted Net value of
net worth in-force 30.06.2016 30.06.2015
Rm Rm Rm Rm
Covered business
South African life licences 12 517 19 511 32 028 32 040
MMI Group Ltd 12 348 18 851 31 199 31 391
Guardrisk Life Ltd 169 660 829 649
International 2 223 2 157 4 380 3 960
MMI Holdings Namibia Ltd 800 1 358 2 158 1 972
Metropolitan Life of Botswana Ltd 452 224 676 571
Metropolitan Lesotho Ltd 372 386 758 847
Other international businesses (1) 599 189 788 570
Total covered business 14 740 21 668 36 408 36 000
Adjusted Write-up to
net worth directors' value 30.06.2016 30.06.2015
Rm Rm Rm Rm
Non-covered business
Momentum Investments (2) 734 2 087 2 821 2 165
Health businesses (3,4) 62 1 364 1 426 1 660
Momentum Retail (Wealth) (3) 391 578 969 817
Guardrisk business (3,5) 597 1 144 1 741 1 446
Momentum Short-term Insurance (MSTI) 299 81 380 377
International (4,6,7) (752) (407) (1 159) (805)
MMI Holdings (after consolidation adjustments) (4,7,8) 784 (381) 403 (1 330)
Total non-covered business 2 115 4 466 6 581 4 330
Total embedded value 16 855 26 134 42 989 40 330
Diluted adjusted net worth - non-covered business (2 115)
Adjustments to covered business - adjusted net worth 2 959
Reporting excess - long-term insurance business 17 699
1. African life and health businesses are included in covered business for embedded value purposes.
2. The material Momentum Investments subsidiaries are valued using a discounted cash flow methodology applied to projections of future earnings.
3. The Health businesses, Momentum Retail (Wealth off-balance sheet) and Guardrisk are valued using embedded value methodology.
4. The increase in the adjusted net worth for the holding company is offset by the decrease in the International and Health adjusted net worth.
These movements were due to intergroup transactions and alignment in the treatment of intercompany loans.
5. This excludes Guardrisk Life Ltd which is included under covered business.
6. Cannon is included within International's non-covered business.
7. 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.
8. The holding company expense adjustment reduced in the current year due to a reallocation of expenses to the operating life company covered business as part of the
implementation of the client centricity model. For further detail refer to note N of the Analysis of Changes in the Group Embedded Value.
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE Restated
12 mths to 12 mths to
Covered business 30.06.2016 30.06.2015
Adjusted net Gross value Cost of
worth (ANW) of in-force (VIF) CAR Total EV Total EV
Notes Rm Rm Rm Rm Rm
Profit from new business (1 438) 2 569 (180) 951 1 054
Embedded value from new business A (1 438) 2 468 (180) 850 954
Expected return to end of period B - 101 - 101 100
Profit from existing business 3 766 (2 166) (24) 1 576 3 063
Expected return - unwinding of RDR B - 2 697 (345) 2 352 2 213
Release from the cost of required capital C - - 457 457 445
Expected (or actual) net of tax profit transfer to net worth D 4 310 (4 310) - - -
Operating experience variances E (236) 148 (42) (130) 501
Development expenses F (99) - - (99) (79)
Operating assumption changes G (209) (701) (94) (1 004) (17)
Embedded value profit from operations 2 328 403 (204) 2 527 4 117
Investment return on adjusted net worth H 893 - - 893 664
Investment variances I 33 (306) 147 (126) (406)
Economic assumption changes J (39) (112) 19 (132) 58
Exchange rate movements K (31) 16 2 (13) (7)
Embedded value profit - covered business 3 184 1 (36) 3 149 4 426
Transfer of business (to)/from non-covered business L 30 23 (16) 37 723
Changes in share capital M 117 - - 117 202
Dividend paid (2 895) - - (2 895) (3 744)
Change in embedded value - covered business 436 24 (52) 408 1 607
Non-covered business
Change in directors' valuation and other items N 1 065 (357)
Holding company expenses N 961 (275)
Embedded value profit - non-covered business 2 026 (632)
Changes in share capital M (117) (202)
Dividend paid 420 649
Finance costs - preference shares (41) (44)
Transfer of business to covered business L (37) (723)
Change in embedded value - non-covered business 2 251 (952)
Total change in group embedded value 2 659 655
Total embedded value profit 5 175 3 794
Return on embedded value (%) - internal rate of return 12.8% 9.6%
A. VALUE OF NEW BUSINESS
VALUE OF NEW BUSINESS Momentum Metropolitan Corporate and
Retail Retail Public Sector (1) International Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2016
Value of new business 290 191 298 71 850
Gross 362 244 341 83 1 030
Less cost of required capital (72) (53) (43) (12) (180)
New business premiums 19 365 2 343 7 665 906 30 279
Recurring premiums 1 292 1 087 2 790 458 5 627
Single premiums 18 073 1 256 4 875 448 24 652
New business premiums (APE) 3 099 1 213 3 278 503 8 093
New business premiums (PVP) 25 950 4 936 34 699 2 579 68 164
Profitability of new business as a percentage of APE 9.4 15.7 9.1 14.1 10.5
Profitability of new business as a percentage of PVP 1.1 3.9 0.9 2.8 1.2
Restated
12 mths to 30.06.2015
Value of new business 276 185 427 66 954
Gross 340 232 518 78 1 168
Less cost of required capital (64) (47) (91) (12) (214)
New business premiums 18 726 2 450 7 773 686 29 635
Recurring premiums 1 283 1 035 1 368 402 4 088
Single premiums 17 443 1 415 6 405 284 25 547
New business premiums (APE) 3 027 1 177 2 009 430 6 643
New business premiums (PVP) 25 458 5 091 17 683 2 164 50 396
Profitability of new business as a percentage of APE 9.1 15.7 21.3 15.3 14.4
Profitability of new business as a percentage of PVP 1.1 3.6 2.4 3.0 1.9
1. The Corporate and Public Sector recognises cell captive business as new business at the point where all shareholder and other contractual arrangements have been
finalised and signed, even though the first premium may only be received after the end of the current reporting period.
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 Momentum Metropolitan Corporate and
Retail Retail Public Sector (1) International Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2016
New business premiums 19 365 2 343 7 665 906 30 279
Recurring premiums 1 292 1 087 2 790 458 5 627
Risk 560 703 390 - 1 653
Savings/Investments 732 384 315 - 1 431
Annuities - - 1 - 1
Cell captives - - 2 084 - 2 084
International - - - 458 458
Single premiums 18 073 1 256 4 875 448 24 652
Savings/Investments 17 091 312 3 499 - 20 902
Annuities 982 944 1 162 - 3 088
Cell captives - - 214 - 214
International - - - 448 448
New business premiums (APE) 3 099 1 213 3 278 503 8 093
Risk 560 704 391 - 1 655
Savings/Investments 2 441 415 665 - 3 521
Annuities 98 94 117 - 309
Cell captives - - 2 105 - 2 105
International - - - 503 503
Restated
12 mths to 30.06.2015
New business premiums 18 726 2 450 7 773 686 29 635
Recurring premiums 1 283 1 035 1 368 402 4 088
Risk 550 658 575 - 1 783
Savings/Investments 733 377 556 - 1 666
Cell captives - - 237 - 237
International - - - 402 402
Single premiums 17 443 1 415 6 405 284 25 547
Savings/Investments 16 787 277 4 283 - 21 347
Annuities 656 1 138 2 122 - 3 916
International - - - 284 284
New business premiums (APE) 3 027 1 177 2 009 430 6 643
Risk 550 658 575 - 1 783
Savings/Investments 2 412 405 984 - 3 801
Annuities 65 114 213 - 392
Cell captives - - 237 - 237
International - - - 430 430
1. The Corporate and Public Sector recognises cell captive business as new business at the point where all shareholder and other contractual arrangements have been
finalised and signed, even though the first premium may only be received after the end of the current reporting year.
RECONCILIATION OF LUMP SUM INFLOWS
12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Total lump sum inflows 29 784 33 023
Inflows not included in value of new business (6 632) (8 966)
Term extensions on maturing policies 342 558
Retirement annuity proceeds invested in living annuities 1 008 822
Non-controlling interests and other adjustments 150 110
Single premiums included in value of new business 24 652 25 547
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. The expected return on new business 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
Restated
12 mths to
12 mths to 30.06.2016 30.06.2015
OPERATING EXPERIENCE VARIANCES Notes ANW Net VIF EV EV
Rm Rm Rm Rm
Momentum Retail 103 130 233 381
Mortality and morbidity 1 214 16 230 365
Terminations, premium cessations and policy alterations 2 (109) 120 11 (75)
Expense variance 3 (52) - (52) (101)
Other 4 50 (6) 44 192
Metropolitan Retail 97 26 123 6
Mortality and morbidity 1 80 8 88 85
Terminations, premium cessations and policy alterations 3 7 10 (20)
Expense variance 3 (9) - (9) (61)
Other 4 23 11 34 2
Corporate and Public Sector (178) (62) (240) 27
Mortality and morbidity 5 (258) - (258) 24
Terminations 6 13 (66) (53) 9
Expense variance 3 (94) (4) (98) (67)
FNB Life - share of profits 37 - 37 38
Other 4,7 124 8 132 23
International (26) 54 28 119
Mortality and morbidity 1,8 89 50 139 202
Terminations, premium cessations and policy alterations (13) (5) (18) (11)
Expense variance 8 (100) 1 (99) (86)
Other (2) 8 6 14
Shareholder Capital 3 (232) - (232) (11)
Opportunity cost of required capital - (42) (42) (21)
Total operating experience variances (236) 106 (130) 501
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 clients choosing lower fee products.
3. Overall experience was worse than expected due to proportionally higher internal cost allocations to covered segments in line with the new client centric model. This is
offset by lower non-covered expenses. Refer to note N for further detail.
4. Various smaller items including credit enhancing activities.
5. The negative variance is a result of disability-in-payment experience.
6. Higher than expected terminations on risk business.
7. Includes a release of discretionary liabilities held in respect of data and systems no longer deemed necessary following completion of investigations.
8. Higher expenses than assumed partly offset by morbidity profits on health businesses.
F. DEVELOPMENT EXPENSES
Business development expenses within Momentum Retail and Metropolitan Retail.
G. OPERATING ASSUMPTION CHANGES
Restated
12 mths to
12 mths to 30.06.2016 30.06.2015
OPERATING ASSUMPTION CHANGES ANW Net VIF EV EV
Notes Rm Rm Rm Rm
Momentum Retail (104) (22) (126) 63
Mortality and morbidity assumptions 1 198 (174) 24 235
Termination assumptions 2 (124) 156 32 (19)
Renewal expense assumptions 77 17 94 (28)
Holding company expenses 3 (228) (97) (325) -
Modelling, methodology and other changes (27) 76 49 (125)
Metropolitan Retail 68 14 82 60
Mortality and morbidity assumptions 4 265 6 271 95
Termination assumptions 7 (37) (30) (21)
Renewal expense assumptions (45) (1) (46) 30
Holding company expenses 3 (397) 52 (345) -
Modelling, methodology and other changes 5 238 (6) 232 (44)
Corporate and Public Sector (124) (609) (733) (104)
Mortality and morbidity assumptions 6 66 (129) (63) (81)
Termination assumptions - 6 6 63
Renewal expense assumptions 7 (99) (36) (135) (155)
Holding company expenses 3 56 (281) (225) -
Modelling, methodology and other changes 8 (147) (169) (316) 69
International (20) (95) (115) 86
Mortality and morbidity assumptions 10 33 43 48
Termination assumptions (2) (20) (22) (4)
Renewal expense assumptions 3 (34) 1 (33) 22
Modelling, methodology and other changes 9 6 (109) (103) 20
Shareholder Capital (29) (18) (47) (111)
Methodology change: cost of required capital - (65) (65) (11)
Total operating assumption changes (209) (795) (1 004) (17)
Notes
1. Refinement of the mortality valuation and reinsurance basis.
2. Strengthening of the persistency assumptions mainly on risk business.
3. Allowance for increased cost allocation to covered business. Refer to note N.
4. Allowance for better than assumed mortality on risk business.
5. Introduction of the risk product tax fund partially offset by modelling and methodology changes.
6. Strengthening of the mortality and morbidity basis.
7. Impact of lower than expected sales volumes on expense recoveries.
8. Various modelling and methodology changes, including refinements to disability-in-payment, annuity business as well as Guardrisk Life assumptions.
9. Valuation modelling and methodology changes including updating for the expected new taxation basis in Lesotho.
H. INVESTMENT RETURN ON ADJUSTED NET WORTH
INVESTMENT RETURN ON ADJUSTED NET WORTH 12 mths to 12 mths to
30.06.2016 30.06.2015
Rm Rm
Investment income 680 618
Capital appreciation and other 246 77
Preference share dividends paid and change in fair value of preference shares (33) (31)
Investment return on adjusted net worth 893 664
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. EXCHANGE RATE MOVEMENTS
The impact of foreign currency movements on International covered businesses.
L. TRANSFER OF BUSINESS (TO)/FROM NON-COVERED BUSINESS
The transfer represents the alignment of net assets and value of in-force of subsidiaries between covered and non-covered business.
M. CHANGES IN SHARE CAPITAL
Changes in share capital include the recapitalisation of some of the International subsidiaries.
N. HOLDING COMPANY EXPENSES
Certain expenses previously accounted for as recurring shareholder expenses (disclosed as a negative write-up to the directors' value for MMI Holdings) have been charged to
expenses within the SA covered business. These two changes mostly offset resulting in a slight increase in Embedded Value. The new expense methodology was not implemented as
an opening basis change resulting in the expense variance for covered business being worse than expected and the non-covered experience being better than expected.
COVERED BUSINESS: SENSITIVITIES - 30.06.2016 In-force business New business written
Adjusted Net Gross Cost of Net Gross Cost of
net worth value value CAR (3) value value CAR (3)
Rm Rm Rm Rm Rm Rm Rm
Base value 14 740 21 668 24 812 (3 144) 850 1 030 (180)
1% increase in risk discount rate 19 959 23 493 (3 534) 698 891 (193)
% change (8) (5) 12 (18) (13) 7
1% reduction in risk discount rate 23 621 26 329 (2 708) 1 023 1 187 (164)
% change 9 6 (14) 20 15 (9)
10% decrease in future expenses 22 947 26 091 (3 144) 975 1 155 (180)
% change (1) 6 5 - 15 12 -
10% decrease in lapse, paid-up and surrender rates 22 468 25 613 (3 145) 1 013 1 207 (194)
% change 4 3 - 19 17 8
5% decrease in mortality and morbidity for assurance business 23 194 26 366 (3 172) 1 010 1 190 (180)
% change 7 6 1 19 16 -
5% decrease in mortality for annuity business 21 368 24 483 (3 115) 841 1 021 (180)
% change (1) (1) (1) (1) (1) -
1% reduction in gross investment return, inflation rate and risk discount rate 14 760 22 275 25 369 (3 094) 924 1 104 (180)
% change (2) - 3 2 (2) 9 7 -
1% reduction in inflation rate 22 457 25 601 (3 144) 928 1 108 (180)
% change 4 3 - 9 8 -
10% fall in market value of equities and properties 14 368 20 560 23 640 (3 080)
% change (3) (5) (5) (2)
10% reduction in premium indexation take-up rate 21 357 24 492 (3 135) 811 991 (180)
% change (1) (1) - (5) (4) -
10% decrease in non-commission related acquisition expenses 949 1 129 (180)
% change 12 10 -
1% increase in equity/property risk premium 22 021 25 160 (3 139) 889 1 069 (180)
% change 2 1 - 5 4 -
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 - ADDITIONAL INFORMATION
ANALYSIS OF ASSETS MANAGED AND/OR ADMINISTERED (1) Restated
30.06.2016 30.06.2015
Rm Rm
Managed and/or administered by Investments
Financial assets 472 839 456 663
Momentum Manager of Managers 113 960 117 416
Momentum Investment Consultants 10 327 11 715
Momentum Collective Investments 62 201 63 817
Metropolitan Collective Investments 39 847 24 775
Momentum Asset Management (2) 184 389 183 198
Momentum Global Investments 55 228 48 639
Momentum Alternative Investments 6 887 7 103
Properties - Eris Property Group 27 346 26 133
On-balance sheet 8 534 8 066
Off-balance sheet 18 812 18 067
Momentum Wealth linked product assets under administration 153 730 138 854
On-balance sheet 96 858 85 433
Off-balance sheet 56 872 53 421
Managed internally or by other managers within MMI (on-balance sheet) 64 597 64 872
Managed by external managers (on-balance sheet) 16 605 16 789
Properties managed internally or by other managers within MMI or externally 2 657 2 506
Corporate and Public Sector - segregated assets 216 200
Corporate and Public Sector - cell captives on-balance sheet 17 834 16 381
Total assets managed and/or administered 755 824 722 398
Managed and/or administered by Investments
On-balance sheet 255 653 259 594
Off-balance sheet 217 186 197 069
472 839 456 663
1. Assets managed and/or administered are included where an entity earns a fee on the assets. Non-financial assets (except properties) have been excluded.
2. MMI performs certain administrative functions for Aluwani Capital Partners (Aluwani) on an arms-length basis. Included in Momentum Asset Management in
the current year is R36 billion managed by Aluwani.
Gross Gross
single recurring Gross Gross Net inflow/
inflows inflows inflow outflow (outflow)
NET FUNDS RECEIVED FROM CLIENTS (1) Rm Rm Rm Rm Rm
12 mths to 30.06.2016
Momentum Retail 16 489 9 278 25 767 (25 067) 700
Metropolitan Retail 1 258 5 558 6 816 (6 037) 779
Corporate and Public Sector 11 438 15 170 26 608 (30 568) (3 960)
International 599 3 322 3 921 (2 292) 1 629
Long-term insurance business fund flows 29 784 33 328 63 112 (63 964) (852)
Off-balance sheet fund flows
Managed and/or administered by Investments 84 243 (80 887) 3 356
Properties - Eris Property Group 2 972 (2 227) 745
Momentum Wealth linked product assets under administration 10 450 (10 837) (387)
Corporate and Public Sector - segregated assets 16 - 16
Total net funds received from clients 160 793 (157 915) 2 878
Restated
12 mths to 30.06.2015
Momentum Retail 15 684 8 992 24 676 (24 088) 588
Metropolitan Retail 1 415 5 495 6 910 (4 967) 1 943
Corporate and Public Sector 15 576 14 345 29 921 (27 500) 2 421
International 348 3 215 3 563 (1 953) 1 610
Long-term insurance business fund flows 33 023 32 047 65 070 (58 508) 6 562
Off-balance sheet fund flows
Managed and/or administered by Investments (2) 72 017 (95 906) (23 889)
Properties - Eris Property Group 2 912 (1 886) 1 026
Momentum Wealth linked product assets under administration 10 168 (10 582) (414)
Corporate and Public Sector - segregated assets 9 - 9
Total net funds received from clients 150 176 (166 882) (16 706)
1. Assets managed and/or administered are included where an entity earns a fee on the assets. Non-financial assets (except properties) have been excluded.
2. Includes outflows of R31 billion relating to Metropolitan Collective Investments.
ANALYSIS OF ASSETS BACKING SHAREHOLDER EXCESS 30.06.2016 30.06.2015
Rm % Rm %
Equity securities 372 1.5 346 1.4
Preference shares 1 457 6.0 1 497 6.1
Collective investment schemes 264 1.1 523 2.1
Debt securities 4 831 20.0 4 761 19.4
Properties 3 436 14.3 2 241 9.1
Owner-occupied properties 1 662 6.9 1 509 6.1
Investment properties 1 774 7.4 732 3.0
Cash and cash equivalents and funds on deposit 8 488 35.2 9 368 38.2
Intangible assets 8 035 33.3 8 503 34.6
Other net assets 1 350 5.6 1 322 5.4
28 233 117.1 28 561 116.4
Redeemable preference shares (275) (1.1) (292) (1.2)
Subordinated redeemable debt (3 557) (14.8) (3 298) (13.4)
Treasury shares (292) (1.2) (424) (1.7)
Shareholder excess per reporting basis 24 109 100.0 24 547 100.0
NUMBER OF EMPLOYEES 30.06.2016
Indoor staff 10 077
Segments
Momentum Retail 1 360
Metropolitan Retail 1 215
Corporate and Public Sector 1 019
International 1 295
Centres of Excellence
Investments and Savings Solutions 511
Legacy Solutions 211
Life Insurance Solutions 487
Health Solutions 2 591
Products and Solutions 2
Short-term Insurance Solutions 283
Multiply 149
Group services divisions 954
Field staff 7 483
Momentum Retail 1 111
Metropolitan Retail 4 804
International 1 568
Total 17 560
NUMBER OF EMPLOYEES (pre-restructure) 30.06.2015
Indoor staff 10 438
Momentum Retail 1 841
Metropolitan Retail 1 052
Momentum Employee Benefits 1 668
International 1 010
Momentum Investments 651
Metropolitan Health 2 902
Shareholder Capital
Balance Sheet Management 78
Group services 925
Short-term Insurance 311
Field staff 6 801
Momentum Retail 1 327
Metropolitan Retail 3 840
International 1 634
Total 17 239
MMI HOLDINGS GROUP - STOCK EXCHANGE PERFORMANCE
STOCK EXCHANGE PERFORMANCE 30.06.2016 30.06.2015
12 months
Value of listed shares traded (rand million) 25 614 19 153
Volume of listed shares traded (million) 1 057 642
Shares traded (% of average listed shares in issue) 67 41
Trade prices
Highest (cents per share) 3 149 3 475
Lowest (cents per share) 1 900 2 502
Last sale of period (cents per share) 2 264 3 015
Annualised percentage (%) change during year (25) 15
Annualised percentage (%) change - life insurance sector (J857) (6) 11
Annualised percentage (%) change - top 40 index (J200) - -
30 June
Price/diluted core headline earnings (segmental) ratio 11.3 12.6
Dividend yield % (dividend on listed shares) 6.9 5.1
Dividend yield % - top 40 index (J200) 2.9 3.0
Total shares issued (million)
Ordinary shares listed on JSE 1 574 1 572
Treasury shares held on behalf of contract holders (13) (14)
Basic number of shares in issue 1 561 1 558
Treasury shares held on behalf of contract holders 13 14
Convertible redeemable preference shares 30 32
Diluted number of shares in issue (1) 1 604 1 604
Market capitalisation at end (Rbn) (2) 36 48
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: 07/09/2016 07:05:00 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
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