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MMI Holdings Summarised Group Results for the 12 Months ended 30 June 2017
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 group")
MMI HOLDINGS SUMMARISED GROUP RESULTS FOR THE 12 MONTHS ENDED 30 JUNE 2017
SUMMARY OF KEY METRICS
MMI's diluted core headline earnings of R3 208m (200 cents per share) were effectively flat year-on-year. The largest positive driver of earnings was mortality
experience which was R176m stronger in F2017, mainly as a result of much improved mortality profits in our Corporate & Public Sector (C&PS) segment. Core earnings
were also aided by our decision to exit certain countries to improve focus on remaining operations. The largest headwind to earnings was the R179m reduction in
discretionary margin releases relative to the prior year. F2017 also represents the first full year of start-up losses incurred in respect of our India health
insurance joint venture (JV) and aYo, the MTN JV.
Diluted headline earnings were R1 336m lower than diluted core headline earnings in F2017. R577m of the difference relates to amortisation of acquisition related
intangibles. Another R458m of the difference arises from changes to actuarial assumptions and as a result of investment variances. Investment returns for the year
were significantly lower than those assumed in the actuarial basis. Material actuarial assumption changes include a reduction in lapse assumptions on level premium
risk policies and on joint life risk policies. Furthermore, R249m of the difference between core and headline earnings is attributable to non-recurring items.
R175m of the R249m arises from our decision to reduce our footprint in Africa and the UK.
Our dividend policy references core headline earnings and targets a coverage range of 1.5x to 1.7x over time. We have declared a 92 cent per share final dividend
which results in a full year dividend of 157 cents per share in respect of F2017. This equates to a 1.3x dividend cover.
New business volumes are down 6% year-on-year to R41.6bn when measured on the present value of new business premiums (PVNBP) basis. Volumes were up on prior year for
Metropolitan Retail (+5%) and for International (+3%). Momentum Retail is the largest business in the group and accounts for more than half of the new business
volumes. PVNBP for Momentum Retail was down 3% for the year; mainly due to weaker sales of guaranteed endowments. C&PS volumes were down 16% versus F2016 due to weak
inflows on investment products.
New business margins declined from 1.6% to 1.3%. Volume growth was modest across all four segments and as such we have seen new business margins under pressure
across all of the segments. Overall value of new business (VNB) has declined by 23% to R547m. We believe that the main driver of margin improvement in the future
will be to improve the productivity and scale of our various sales channels.
Group embedded value is slightly down over the year to R42.5bn (June 2016 was R43.0bn). This equates to embedded value per share of R26.51 on 30 June 2017. The
return on embedded value (ROEV) for the year was 4.7%. ROEV on covered business was 8.3% during the period (12.6% excluding investment variances, interest rate
changes, and forex movements). The ROEV on non-covered business was, however, disappointing at -10.4%. The biggest contributors to the weak non-covered ROEV were
reduced valuations of our International operations and our SA asset management operations.
Operating experience variation on the embedded value (EV) basis was modestly positive in F2017. Mortality and morbidity variances added R140m to positive variances
(vs R161m in prior year). Credit experience also remains supportive and our credit risk variance was R117m in F2017 versus R70m in F2016.
Key metrics F2017 F2016 Change (%)
Diluted core headline earnings per share (cents) 200.0 199.9 0
Diluted headline earnings per share (cents) 117.7 132.2 (11)
Dividend per share (cents) 157.0 157.0 0
New business volumes (PVNBP, Rm) 41 595 44 090 (6)
Value of new business (Rm) 547 712 (23)
New business margin (%) 1.3 1.6 (0.3)
Embedded value (Rm) 42 523 42 989 (1)
Return on Embedded Value (%) 4.7 12.8 (8.1)
ANALYSIS OF GROUP EARNINGS
Diluted core headline earnings for the period were R3 208m which represents marginal growth on the comparative period. The main positive contributor to core
earnings growth was C&PS where mortality profits improved significantly in the latter part of the financial year. Earnings from the Shareholder Capital segment
are also up on the back of increasing investment income (in line with growth in investible assets).
Momentum Retail
Momentum Retail's earnings declined by 15% to R1 271m. Earnings from covered operations (life insurance) are down 9% to R1 467m whereas losses from non-covered
operations increased to R196m.
The main reason for the reduced life insurance earnings is discretionary margin releases that were R179m lower in F2017. While we expect the level of discretionary
margin releases to steadily decline over time, the decline in F2017 was exceptional due to a combination of certain discretionary margins being fully depleted by the
end of F2016 and due to the interaction between investment returns and the release profile of the discretionary margins.
Experience variances were also weaker year-on-year (approximately R100m lower on an IFRS basis) although mortality and morbidity variance remained strong. New
business strain was significantly lower than in the prior period due to lower sales of products with high initial reserving strain (ie lower guaranteed endowment
sales).
Losses from non-covered operations reported within Momentum Retail increased from R111m to R196m. Profits on our Momentum Wealth platform declined due to higher
investment in platform functionality and modest growth in assets under management. The improved operating performance in our short-term insurance operation is also
somewhat hidden by the more conservative treatment of deferred tax assets in the current period.
Metropolitan Retail
Metropolitan Retail's earnings declined by 6% to R660m. Earnings declined due to weakening persistency, higher new business strain, and increased spending on new
initiatives. Mortality and morbidity experience remains strong. Persistency experience was negative overall in F2017. We are taking management action to improve
collection rates and have seen positive results in recent months.
Corporate and Public Sector
C&PS earnings increased by 23% to R835m with improved underwriting experience, excluding disability experience, explaining more than R150m of the year-on-year
increase. Unfortunately disability experience remains problematic and our experience variation deteriorated slightly during the past year. We continue to put
through substantial price increases on disability risks and expect underwriting results to improve over time.
Our property business, ERIS, contributed R99m (+46%) to core headline earnings and Guardrisk made another solid contribution of R200m (+40%). Health contributed
R136m to C&PS in F2017.
International
Losses from International increased during the period to R166m. F2017 is the first year where India and aYo are included in the numbers for the full twelve months.
These two entities incurred R90m higher start-up losses in F2017 than in F2016. The scaling back in Africa also had a positive impact on F2017 core headline earnings.
Shareholder Capital
Investment income is up slightly for the period to R668m (net of tax). The level central costs that are not allocated to operating segments is sharply down. This is
consistent with the large basis change we made at the end of F2016.
F2017 F2016 Change (%)
Rm
Momentum Retail 1 271 1 493 (15)
Metropolitan Retail 660 700 (6)
Corporate & Public Sector 835 680 23
International (166) (156) (6)
Operating profit 2 600 2 717 (4)
Shareholder Capital 608 489 24
Diluted core headline earnings 3 208 3 206 0
NEW BUSINESS COMMENTARY
New business volumes are down 6% to R41.6bn for the year when measured as PVNBP. Volume growth was dragged down by 16% decline in sales from the C&PS segment. The
largest contributor to new business is Momentum Retail where volumes ended down 3% for the year. New business margin declined from 1.6% of premiums to 1.3%. Lower
volumes resulted in negative operational gearing relative to distribution expenses.
Momentum Retail
Momentum Retail's sales were 3% lower over the year. Single premium new business was under pressure due to limited balance sheet capacity constraining guaranteed
endowment sales. Life annuities was the one single premium product area that experienced decent growth over the year. Our core risk offering, Myriad, had similar
sales volumes in F2017 as in F2016. Our recurring premium savings volumes picked up in F2017 aided by good demand for retirement annuities.
New business margins are down slightly from 1.1% of premiums to 1.0%. The margin has been negatively affected by the operational gearing between the 3% decline in
new business volumes and the distribution channel overheads.
Metropolitan Retail
Metropolitan grew recurring premium volumes by 12% in line with the increase in the agent headcount. Metropolitan Retail's agent headcount increased by 12% during
the year. Risk sales were up 15% while recurring premium savings business was up 7% year-on-year. Single premium new business was down 12% following the change to
de minimis rules allowing pension pots below R247,500 to be cashed out at retirement. While being a small component of new business, it is worthwhile noting that
single premium new business excluding annuities was up 20% for Metropolitan Retail.
Value of new business is down 7% to R178m. This represents a new business margin of 3.4% on premiums. The new business margin has declined due to three primary
causes; changes to how group schemes business is structured, higher effective acquisition costs due to a high proportion of new agents in the sales force, and
lower-than-expected persistency from the telesales channel.
New business profits have increased by 38% over the period. This margin expansion from 2.8% of premiums to 3.5% of premiums was achieved despite an additional
allowance being made for early duration lapses in our VNB basis. The margin improvement reflects benefits of operational gearing from rising volumes, lower interest
rates, shift in mix towards risk business, and the reduction in sales of unprofitable smaller life annuities.
Corporate and Public Sector
C&PS new business was down 16% for the year. New business volumes were materially lower in group risk business where the competitive market pricing is putting
conversion rates under pressure. On-balance sheet investment flows were also weak during the year. Recurring premium savings business was aided by ongoing demand
for our FundsAtWork umbrella fund solution.
New business margins declined from 1.5% of premiums to 0.6% of premiums. The decline mainly reflects the negative interaction between the lower volumes and
relatively high fixed distribution costs. The assumed future risk margins have also been moderated in light of current market dynamics.
International
International new business was up 3% year-on-year. The strongest growth was achieved in Namibia where growth was 9%. Botswana was the only large market where sales
were somewhat disappointing and declined by 6%. Overall new business margin for International was 2.9% of premiums (unchanged year-on-year).
Present Value of New Business Premiums (Rm) F2017 F2016 Change (%)
Momentum Retail 22 774 23 468 (3)
Metropolitan Retail 5 164 4 936 5
Corporate & Public Sector 11 121 13 232 (16)
International 2 536 2 454 3
MMI total PVNBP 41 595 44 090 (6)
EMBEDDED VALUE
Our embedded value was R26.51 per share on 30 June 2017. Together with the dividend paid during the period (R1.57 per share) this represents an ROEV of 4.7% over
the year. ROEV excluding investment variances, forex movements, and economic assumption changes was 8.3%.
Our covered business continues to produce steady EV growth despite the tough operating environment and generated ROEV of 8.3% (excluding market items this equates
to 12.6%). Our non-covered operations, which include many of our International operations earmarked for exit, had a difficult year and generated ROEV of -10.4%.
Experience variation
Our overall experience variation (including development expenses) for the period was negative R49m. Persistency variance was negative R198m across the group. We are
seeing higher terminations in the group risk space in light of the highly competitive pricing observed across that market segment. We have also seen persistency
deteriorate in the lower-income market segments. Persistency in higher-income market segments remains in line with expectations.
Risk variances remain strong in aggregate despite ongoing weakness in the group disability space. Overall mortality and disability variance was positive R140m with
retail operations generating nearly R300m of positive variances on this front.
Expense management continues to be well implemented across MMI and our expense variance was R50m before allowing for specific development expenses (R67m). Our
credit risk variance of R117m is well up on that achieved in the prior year.
Assumption changes
The current period included a number of relatively large assumption changes. Many of the changes are offsetting and as such the net impact on embedded value is a
positive R403m.
Adjustment of mortality and disability assumptions to reflect recent experience has an overall positive impact of R139m on EV. However, this includes a significant
positive adjustment in Momentum Retail (R410m) offset by a large negative adjustment in C&PS on the group disability business.
The overall change to persistency assumptions is negative R26m in F2017, but the impact in adjusted net worth (and thus capital) was substantial (>R700m decline).
This reflects an assumption of lower lapses on level premium and joint life policies which require us to hold a larger reserve for these policies on our balance
sheet. This is, however, countered by offsetting benefits of longer persistency in the value of in-force (VIF) component of the EV calculation.
During the year we have also moved our valuation approach from using a single point in the yield curve to using the full term structure when valuing prospective
liabilities. This has had an overall positive impact on EV at 30 June 2017.
Non-covered EV earnings
Non-covered EV earnings were negative R835m for the period. The valuation of our International operations, increased allowance for Multiply expenses, and reduction
in the carry value of our domestic asset management subsidiaries explains the vast majority of the reduction in EV. Non-covered operations with positive ROEV
contributions included Guardrisk, Eris, and our various health operations.
EV total ANW Net VIF
Rm
New business 547 (1 495) 2 042
Unwind of RDR 2 865 0 2 865
Expected profit 0 4 091 (4 091)
Experience variance (49) 140 (189)
Operating assumptions 403 (628) 1 031
Investment return on ANW 652 652 0
Investment variance (1 354) (144) (1 210)
Economic assumption changes (164) (1) (163)
FX translation effect (36) (24) (12)
EV profit on non-covered (835) (835) 0
EV profit 2 029 1 756 273
CAPITAL, DIVIDEND, AND OUTLOOK
Our capital position remains satisfactory and we had a capital buffer of R3.7bn on 30 June 2017 on the current statutory basis. Our available capital resources at
the end of the period stood at R19.9bn, where as we are currently utilising R13.7bn of capital in our existing businesses. Outside of the existing operations we
have also set aside R1.5bn for the next dividend payment and R1.0bn to fund strategic initiatives.
Jun 17 Jun 16
Rbn
NAV as per EV statement 16.3 16.9
Qualifying debt capital 3.6 3.6
Less: NAV in strategic subsidiaries (3.6) (3.5)
Less: Required capital (10.1) (9.7)
Capital buffer before deployment 6.2 7.3
Deployed for dividend payable (1.5) (1.5)
Deployed for strategic initiatives (1.0) (2.2)
Capital buffer 3.7 3.6
The capital buffer increased by roughly R100m over the period. The primary reasons for the increase is that we no longer hold R1bn for uncommitted initiatives in
light of our increased focus on our core initiatives and on existing initiaves. This benefit is offset by the low level of retained earnings and by an increase in
required capital. Required capital has increased mainly due to low investment market returns increasing the stress arising in the investment resilience test
component of the CAR calculation. Change in our yield curve sensitivity and increase in credit risk capital requirement also played a part in the increase to
required capital.
Movement in capital buffer Rbn
Capital buffer on 30 June 2016 3.6
Profit from covered business 2.6
Profit from non-covered business (0.7)
Dividends and new capital (2.4)
Increase in required capital (0.6)
Change in strategic commitments 1.2
Capital buffer 3.7
Investors should note that actual capital investments during the period do not affect the capital buffer as they are usually fully provided for in the 'deployed for
strategic initiatives' item. For information we can point out that we invested around R900m during the year:
- Approximately R400m was invested into shareholder backed property developments
- Approximately R200m was invested into venture capital investments via Exponential
- Approximately R100m was invested into our International operations
- Approximately R100m was invested into Momentum Short-term Insurance
- Approximately R100m was invested into various smaller investments.
These injections were offset by proceeds from sales of property assets (c. R500m) and sale of a subsidiary (c. R100m).
Dividends
Our dividend policy is to maintain a dividend cover between 1.5 and 1.7 times core headline earnings, but with provision to go below the lower range to maintain
stable dividends if there is a temporary decline in earnings. This is subject to our capital position making the dividend payment feasible.
We remain adequately capitalised and have thus declared a final dividend of 92 cents per share. This results in a dividend cover of 1.3x for F2017. We plan to
return to our targeted dividend cover range in due course.
Strategy update
We remain committed to our client-centric strategy that is purposefully focused on providing for our clients' needs in order to enhance their lifetime Financial
Wellness. At the same time we continue to refine the actions and decisions to optimise delivery on our strategy aspirations. Investors should be aware that:
- The business is increasingly focused on execution, with strategy now well ingrained in the various business areas;
- We have announced our plan to exit a number of African countries to improve focus on remaining operations.
- We continue to invest in our Multiply programme and see it as a key component of our client engagement strategy;
- We continue to invest in our distribution channels and the recent launch of our insurance products in selected African Bank branches is one manifestation of
this focus.
SUMMARY OF FINANCIAL INFORMATION
Audited results for the 12 months ended 30 June 2017
MMI HOLDINGS GROUP
DIRECTORS' STATEMENT
The directors take pleasure in presenting the audited summarised results of MMI Holdings financial services group for the year ended 30 June 2017. The preparation of
the group's results was supervised by the group chief financial officer, Risto Ketola (FIA, FASSA, CFA).
Corporate events
During the current year, the FSB approved the transfer of the FNB Life book of business from MMI Group Ltd to FirstRand Life Assurance Ltd. MMI Group Ltd recognised a
profit of R73 million relating to the sale which was effective from 1 October 2016.
During June 2017, MMI Holdings and African Bank announced a partnership that will allow each other exclusive rights to sell their products to the combined client base.
The value sharing partnership comprises lending and insurance business ventures.
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 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 2017, 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 2017 and relevant to the group
- The following amendments to standards and interpretations became effective for the first time in the current period and had no impact on the group's earnings or net
asset value: Amendments to IFRS 10 Consolidated financial statements, IAS 28 Investments in associates and joint ventures, IFRS 11 Joint arrangements, IAS 1
Presentation of financial statements, IAS 16 Property, plant and equipment, IAS 38 Intangible assets and IAS 27 Separate financial statements.
- The International Accounting Standards Board (IASB) made amendments to various standards as part of their annual improvements project. These amendments had no impact
on the group's earnings.
Segmental report
To align segmental reporting to change in management responsibilities, we have made numerous movements across the five segments. The changes can be categorised into two
main themes: (1) transfer of smaller operations previously shown as part of the Shareholder Capital segment into the client-facing segment where management responsibility
actually rests and (2) transfer of UK operations previously residing in Momentum Retail or in Shareholder Capital to the International segment. The group has also refined
the manner in which costs related to our Rewards programme are allocated. This has resulted in Momentum Retail carrying more of these costs than under the previous allocation
methodology. 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 client-centric reporting view reflects the following segments:
Momentum Retail: Momentum Retail offers a wide range of financial solutions to middle and affluent market segments. Our product range spans all major insurance lines (life,
disability, health, motor, property, and all-risks) and a wide range of savings and investment products. We differentiate our business through the quality of our advice
channels and our commitment to high levels of client engagement to encourage our clients to make choices that optimise their financial and physical wellness. Our most popular
product solutions are retirement savings and life insurance. Momentum Retail is closely associated with Multiply, our client engagement programme. Clients who have Multiply
active on their policies enjoy premium discounts, partner rewards and access to personal financial management tools.
Metropolitan Retail: Metropolitan Retail is a long-established life insurance provider in the lower- and middle-income segments. Metropolitan Retail's most popular products
include funeral plans, savings policies, underwritten life cover policies, and annuities. Our funeral plans are low sum insured whole life policies designed to pay for funeral
costs. To extend our distribution channels and expand our solutions basket, Metropolitan recently partnered with African Bank to offer insurance and lending products to the
existing Metropolitan client base.
Corporate and Public Sector: Corporate and Public Sector provides insurance, administration and investment services to employee groups in the private and public sectors. The
business is one of the largest underwriters of death and disability insurance in the corporate market. We also have a strong market share in umbrella funds (multi-employer
retirement schemes) and annuity solutions.
International: MMI International operates in the rest of Africa, India and the United Kingdom. We offer a wide range of solutions in these areas, with a focus on life,
health and short-term insurance products. In Africa, life insurance is offered in nine countries and health insurance offered in seven as well as in India. Our Multiply wellness
programme is only active in India at present, where it complements the health insurance offering.
Shareholder Capital: The Shareholder Capital segment reflects investment income on capital held to support operations, earnings from start-up ventures not yet allocated to other
segments, and some costs not allocated to operating segments (eg certain holding company expenses).
The product houses support the segments to deliver best of breed product solutions that segments can distribute to clients. There are five of these centres of excellence supporting
the segments, namely: Investments and savings, Life Insurance, Health, Short-term Insurance and Client Engagement Solutions. Each of the centres of excellence design solutions that
meet unique Financial Wellness needs of clients as identified by our segment business.
Embedded value information
In addition to the segmental reporting changes, the methodology for classifying business as covered or non-covered has been reviewed and the following changes have been implemented:
- Guardrisk Life business has been reclassified as non-covered as the business being written is mainly fee income in nature rather than underwriting exposure.
- An entity will only be classified as covered business once it has reached sufficient operational scale to support all operational expenses attributable to that entity.
As a result, with effect from 1 July 2015, Guardrisk Life Ltd and a number of International life and health entities were transferred to non-covered business. The prior year has been
restated to reflect these transfers to non-covered business.
Corporate governance
The board has satisfied itself that appropriate principles of corporate governance (King IV) were applied, where possible, throughout the year under review.
Changes to the directorate, secretary and directors' shareholding
On 21 July 2016, Voyt Krzychylkiewicz was appointed as an alternative director to Peter Cooper. On 1 October 2016, Professor Stephen Jurisich was appointed to the board. On 22 November 2016,
Johan Burger retired from the board and as deputy chairman. On 1 December 2016, Louis von Zeuner was elected as deputy chairman of the board.
All transactions in listed shares of the company involving directors were disclosed on SENS.
Changes to the group executive committee
Change in roles
Mary Vilakazi Deputy CEO and Group Finance Director
Khanyi Nzukuma CEO Momentum Retail and acting CEO Metropolitan Retail
Thinus Alsworth-Elvey CEO Corporate and Public Sector, UK and Momentum Investments
Herman Schoeman CEO MMI Short-term Insurance Centre of Excellence (previously CEO Corporate and Public Sector)
Appointments/resignations Role Appointments Resignations
Innocent Dutiro CEO International 1 July 2016
Linda Mthenjane Group executive of human capital 10 October 2016
Vuyo Lee Group executive officer of brand 28 February 2017
Danie Botes Chief Operating Officer 13 June 2017
Etienne de Waal CEO Momentum Retail 13 June 2017
Risto Ketola Group Chief Financial Officer 22 June 2017
Ashlene van der Colff Group Head of Operations 22 June 2017
Contingent liabilities and capital commitments
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 2017 that were not
in the ordinary course of business other than those disclosed in the 2017 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 5 September 2017, a gross final dividend of 92 cents per ordinary share was declared by the board, 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, 29 September 2017, and will be paid
on Monday, 2 October 2017.
- The dividend will be subject to local dividend withholding tax at a rate of 20% (as announced in the 2017 Budget) 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 73.60 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, 26 September 2017.
- The shares will trade ex dividend from the start of business on Wednesday, 27 September 2017.
- Share certificates may not be dematerialised or rematerialised between Wednesday, 27 September 2017 and Friday, 29 September 2017, both days inclusive.
- The number of ordinary shares at the declaration date was 1 575 371 221.
- MMI's income tax number is 975 2050 147.
Preference shares
- Dividends of R19.0 million (2016: R20.1 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 2017 will be posted to shareholders before 30 September 2017.
Directors' responsibility
The preparation of these results, and the correct extraction thereof from the group's audited 2017 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 (including paragraph 16A(j)) are available on MMI's website and at MMI's registered
offices upon request. A printed version of the full financial statements and 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 2017 annual financial statements, which have been audited by PricewaterhouseCoopers Inc. and their unqualified
audit report, together with the group's audited 2017 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 2017 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
5 September 2017
DIRECTORS: MJN Njeke (chairman), LL von Zeuner (deputy chairman), NAS Kruger (group chief executive officer), M Vilakazi (deputy chief executive and group finance director),
P Cooper, F Jakoet, Prof SC Jurisich, Prof JD Krige, PJ Moleketi, SA Muller, V Nkonyeni, KC Shubane, FJC Truter, BJ van der Ross, JC van Reenen, W Krzychylkiewicz (alternate to P Cooper)
GROUP COMPANY SECRETARY: Maliga Chetty
WEBSITE: http://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
SPONSOR - NAMIBIA: Simonis Storm Securities (Pty) Ltd
AUDITORS: PricewaterhouseCoopers Inc
REGISTERED OFFICE: 268 West Avenue, Centurion 0157
SENS ISSUE: 6 September 2017
MMI HOLDINGS GROUP - IFRS FINANCIAL INFORMATION
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30.06.2017 30.06.2016
Rm Rm
ASSETS
Intangible assets 11 260 12 433
Owner-occupied properties 4 105 3 112
Property and equipment 389 432
Investment properties 7 340 7 422
Investments in associates and joint ventures 595 680
Employee benefit assets 410 445
Financial assets designated at fair value through income 369 205 373 630
Investments in associates designated at fair value through income 15 039 10 499
Derivative financial assets 2 439 1 977
Available-for-sale financial assets 18 125
Held-to-maturity financial assets 397 122
Loans and receivables 7 293 7 615
Reinsurance contract assets 4 495 5 092
Deferred income tax 249 279
Properties under development 111 187
Insurance and other receivables 4 621 4 497
Current income tax assets 581 537
Non-current assets held for sale - 470
Cash and cash equivalents 27 353 29 148
Total assets 455 900 458 702
EQUITY
Equity attributable to owners of the parent 22 956 24 109
Non-controlling interests 292 290
Total equity 23 248 24 399
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts 106 581 107 115
Short-term insurance contracts 7 661 6 978
Investment contracts 257 772 257 985
- with discretionary participation features (DPF) 24 338 25 195
- designated at fair value through income 233 434 232 790
Financial liabilities designated at fair value through income 37 331 38 374
Derivative financial liabilities 1 827 2 097
Financial liabilities at amortised cost 1 229 1 058
Reinsurance contract liabilities 1 368 973
Deferred income tax 3 198 3 812
Employee benefit obligations 1 334 1 452
Other payables 14 128 14 384
Provisions 57 43
Current income tax liabilities 166 32
Total liabilities 432 652 434 303
Total equity and liabilities 455 900 458 702
SUMMARISED CONSOLIDATED INCOME STATEMENT
12 mths to 12 mths to
30.06.2017 30.06.2016
Rm Rm
Net insurance premiums 28 191 28 971
Fee income (1) 7 411 7 679
Investment income 18 958 17 522
Net realised and fair value gains 183 11 824
Net income 54 743 65 996
Net insurance benefits and claims 24 441 26 609
Change in actuarial liabilities and related reinsurance (2 267) (674)
Change in long-term insurance contract liabilities (1 437) 354
Change in short-term insurance contract liabilities (86) (71)
Change in investment contracts with DPF liabilities (855) (940)
Change in reinsurance assets (278) (331)
Change in reinsurance liabilities 389 314
Fair value adjustments on investment contract liabilities 6 650 16 205
Fair value adjustments on collective investment scheme liabilities 688 (153)
Depreciation, amortisation and impairment expenses 1 665 1 408
Employee benefit expenses 5 249 5 341
Sales remuneration 5 283 5 304
Other expenses 7 367 6 695
Expenses 49 076 60 735
Results of operations 5 667 5 261
Share of (loss)/profit of associates and joint ventures (126) 18
Finance costs (2) (1 023) (937)
Profit before tax 4 518 4 342
Income tax expense (2 937) (2 164)
Earnings for year 1 581 2 178
Attributable to:
Owners of the parent 1 536 2 142
Non-controlling interests 45 36
1 581 2 178
Basic earnings per ordinary share (cents) 98.4 137.6
Diluted earnings per ordinary share (cents) 98.1 135.9
1. Fee income consists of the following:
- Investment contracts: R2 477 million (30.06.2016: R2 471 million)
- Trust and fiduciary services: R1 608 million (30.06.2016: R1 892 million)
- Health administration: R1 764 million (30.06.2016: R1 945 million)
- Other fee income: R1 562 million (30.06.2016: R1 371 million)
2. Finance costs consist of the following:
- Preference shares issued by MMI: R113 million (30.06.2016: R110 million)
- Subordinated debt: R351 million (30.06.2016: R341 million)
- Cost of carry positions: R408 million (30.06.2016: R346 million)
- Other: R151 million (30.06.2016: R140 million)
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
12 mths to 12 mths to
30.06.2017 30.06.2016
Rm Rm
Earnings for year 1 581 2 178
Other comprehensive (loss)/income, net of tax (103) 83
Items that may subsequently be reclassified to income (224) (24)
Exchange differences on translating foreign operations (218) (27)
Available-for-sale financial assets (4) 3
Share of other comprehensive loss of associates (2) -
Items that will not be reclassified to income 121 107
Land and building revaluation 142 124
Remeasurements of post-employee benefit funds 11 (1)
Income tax relating to items that will not be reclassified (32) (16)
Total comprehensive income for year 1 478 2 261
Total comprehensive income attributable to:
Owners of the parent 1 434 2 193
Non-controlling interests 44 68
1 478 2 261
RECONCILIATION OF HEADLINE EARNINGS
attributable to owners of the parent
Basic earnings Diluted earnings
12 mths to 12 mths to 12 mths to 12 mths to
30.06.2017 30.06.2016 30.06.2017 30.06.2016
Rm Rm Rm Rm
Earnings 1 536 2 142 1 536 2 142
Finance costs - convertible preference shares 39 41
Dilutory effect of subsidiaries (1) (14) (23)
Diluted earnings 1 561 2 160
Intangible assets and other impairments (2) 417 158 417 158
Tax on intangible assets and other impairments (61) (10) (61) (10)
Release of foreign currency translation reserve - (92) - (92)
Gain on sale of business/subsidiary (94) (115) (94) (115)
Tax on gain on sale of business/subsidiary 21 - 21 -
Impairment of owner-occupied property below cost 28 - 28 -
Headline earnings (3) 1 847 2 083 1 872 2 101
Net realised and fair value losses/(gains) on excess 94 (112) 94 (112)
Basis and other changes and investment variances 458 517 458 517
Adjustments for MMI shares held by policyholder funds (42) (98) (42) (73)
Amortisation of intangible assets relating to business combinations 577 618 577 618
Non-recurring items (4) 249 155 249 155
Core headline earnings (5) 3 183 3 163 3 208 3 206
1. In the current year, the MMI Holdings Namibian group, Metropolitan Kenya and Cannon are consolidated at 96% in the results. In the prior year, Metropolitan Health was also consolidated at 100%.
For purposes of diluted earnings, diluted non-controlling interests and investment returns are reinstated. For Metropolitan Health, this is no longer the case as all the shares in Metropolitan
Health Corporate (Pty) Ltd which were held by Kagiso Tiso Holdings (Pty) Ltd have been purchased by the group in June 2017.
2. The current year includes impairments relating to:
- Goodwill, customer relations and internally developed software (R213 million) in the International segment that are recognised on acquisition of subsidiaries as the companies are making losses.
A risk discount rate of 18.2% (2016: 19.0%) has been used in the impairment calculation.
- Internally developed software in International (R88 million) and Metropolitan Retail (R76 million) whereby certain components will no longer be used and/or the costs to maintain the system exceed
the economic benefits. A risk discount rate of 11.6% has been used in the impairment calculation.
The prior year includes the impairment of Cannon goodwill, software in International and Health and Hello Doctor goodwill.
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 costs relating mainly to the restructuring of the group. The current year also includes the core earnings/loss relating to companies in countries that the group has or
will be exiting in the near future.
5. Core headline earnings 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.
EARNINGS PER SHARE (cents)
attributable to owners of the parent
12 mths to 12 mths to
30.06.2017 30.06.2016
Basic
Core headline earnings 203.9 203.1
Headline earnings 118.3 133.8
Earnings 98.4 137.6
Weighted average number of shares (million) 1 561 1 557
Diluted
Core headline earnings 200.0 199.9
Weighted average number of shares (million) (1) 1 604 1 604
Headline earnings 117.7 132.2
Earnings 98.1 135.9
Weighted average number of shares (million) (2) 1 591 1 589
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 2017 2016
Ordinary listed MMI Holdings Ltd shares (cents per share)
Interim - March 65 65
Final - September 92 92
Total 157 157
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 December 2017 (after extending it under the same terms by six months in the current year) 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 3 October 2016 and 3 April 2017, 1 million preference shares were converted into ordinary shares, on
each date. The ordinary 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
R369 million of the ordinary dividends declared by MMI Holdings Ltd in September 2016 (R362 million of the ordinary dividends declared in September 2015) and R261 million of the ordinary dividends
declared in March 2017 (R261 million of the ordinary dividends declared in March 2016) were attributable to RMI Holdings Ltd. Dividends of R39.5 million (2016: R41.9 million) were paid to KTH on
the A3 MMI Holdings Ltd preference shares in the current year. Dividends of R8 million (2016: R5 million) were paid to KTH on the MHC A ordinary shares.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
12 mths to 12 mths to
30.06.2017 30.06.2016
Rm Rm
Changes in share capital
Balance at beginning and end 9 9
Changes in share premium
Balance at beginning 13 847 13 795
Conversion of preference shares 14 17
(Increase)/decrease in treasury shares held on behalf of contract holders (124) 35
Balance at end 13 737 13 847
Changes in other reserves
Balance at beginning 1 955 1 866
Total comprehensive (loss)/income (102) 51
Employee share schemes - value of services provided (26) -
BEE cost 4 4
Change in non-distributable reserves (3) 2
Transfer (to)/from retained earnings (40) 32
Balance at end (1) 1 788 1 955
Changes in retained earnings
Balance at beginning 8 298 8 877
Total comprehensive income 1 536 2 142
Dividend paid (2 456) (2 475)
Transactions with non-controlling interests 4 (214)
Transfer from/(to) other reserves 40 (32)
Balance at end 7 422 8 298
Equity attributable to owners of the parent 22 956 24 109
Changes in non-controlling interests
Balance at beginning 290 501
Total comprehensive income 44 68
Dividend paid (53) (60)
Transactions with owners 11 (219)
Balance at end 292 290
Total equity 23 248 24 399
1. Other reserves consist of the following:
- Land and building revaluation reserve: R807 million (30.06.2016: R742 million)
- Foreign currency translation reserve: -R98 million (30.06.2016: R122 million)
- Revaluation of available-for-sale investments: R7 million (30.06.2016: R11 million)
- Non-distributable reserve: R54 million (30.06.2016: R50 million)
- Employee benefit revaluation reserve: R88 million (30.06.2016: R77 million)
- Fair value adjustment for preference shares issued by MMI Holdings Ltd: R940 million (30.06.2016: R940 million)
- Equity-settled share-based payment arrangements: -R10 million (30.06.2016: R13 million)
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
12 mths to 12 mths to
30.06.2017 30.06.2016
Rm Rm
Net cash inflow from operating activities 586 8 842
Net cash outflow from investing activities (288) (1 051)
Net cash outflow from financing activities (2 093) (4 817)
Net cash flow (1 795) 2 974
Cash resources and funds on deposit at beginning 29 148 26 174
Cash resources and funds on deposit at end 27 353 29 148
NON-CONTROLLING INTERESTS
30.06.2017 30.06.2016
% %
Cannon Assurance 33.7 33.7
Eris Property Group 23.7 23.7
Metropolitan Health Ghana 0.9 0.9
Metropolitan Health Group - 17.6
Metropolitan Health Namibia Administrators 49.0 49.0
Metropolitan Kenya 33.7 33.7
Metropolitan Swaziland 33.0 33.0
Metropolitan Tanzania 33.0 33.0
Metropolitan Health Zambia 35.0 35.0
MMI Holdings Namibia 9.9 10.3
Momentum Mozambique 33.0 33.0
Momentum Swaziland 33.0 33.0
BUSINESS COMBINATIONS - JUNE 2017
There were no significant business combinations for the 12 months ended June 2017. Goodwill and customer relationships to the value of R11 million each were recognised due to a small acquisition.
BUSINESS COMBINATIONS - JUNE 2016
There were no significant business combinations for the 12 months ended June 2016.
RECONCILIATION OF GOODWILL
30.06.2017 30.06.2016
Rm Rm
Balance at beginning 1 237 1 333
Business combinations 11 -
Impairment charges (1) (100) (104)
Exchange differences (20) 8
Balance at end 1 128 1 237
1. Goodwill relating to the Cannon (International segment) and Momentum Financial Technology (International segment) acquisitions were impaired by R62 million (30.06.2016: R41 million) and R38 million
(30.06.2016: Rnil) respectively during the current year due to these companies making losses. Goodwill of R63 million relating to Hello Doctor (International and Corporate and Public Sector segments)
was also impaired in the prior year.
MMI HOLDINGS GROUP - SEGMENTAL INFORMATION
12 mths to 30.06.2017 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 24 740 6 898 27 167 4 130 - 62 935 (34 744) 28 191
Recurring premiums 9 663 5 877 16 951 3 476 - 35 967 (9 291) 26 676
Single premiums 15 077 1 021 10 216 654 - 26 968 (25 453) 1 515
Fee income 3 496 146 4 270 835 73 8 820 (1 409) 7 411
Fee income 3 011 143 3 708 794 2 7 658 (247) 7 411
Intergroup fee income 485 3 562 41 71 1 162 (1 162) -
Expenses
Net payments to contract holders
External payments 25 360 5 321 25 574 2 624 - 58 879 (34 438) 24 441
Other expenses 5 994 2 448 5 681 2 419 201 16 743 2 821 19 564
Sales remuneration 2 184 1 029 1 462 615 - 5 290 (7) 5 283
Administration expenses 2 631 1 280 3 125 1 346 589 8 971 121 9 092
Amortisation due to business
combinations and impairments - 73 31 88 37 229 977 1 206
Cell captive business - - 186 - - 186 1 800 1 986
Direct property expenses - - - - - - 443 443
Asset management and other
fee expenses 379 60 309 84 10 842 649 1 491
Holding company expenses - - - - 63 63 - 63
Intergroup expenses 800 6 568 286 (498) 1 162 (1 162) -
Diluted core headline earnings 1 271 660 835 (166) 608 3 208 - 3 208
Operating profit/(loss) 1 861 926 969 (102) (48) 3 606 - 3 606
Tax on operating profit (631) (267) (270) (87) (12) (1 267) - (1 267)
Investment income 57 2 187 27 822 1 095 - 1 095
Tax on investment income (16) (1) (51) (4) (154) (226) - (226)
Covered 1 467 685 387 203 648 3 390 - 3 390
Non-covered (196) (25) 448 (369) (40) (182) - (182)
1 271 660 835 (166) 608 3 208 - 3 208
Actuarial liabilities 195 283 32 417 131 420 12 894 - 372 014 - 372 014
1. The 'Reconciling items' column includes: investment contract business premiums and claims; intergroup fee income and expenses; non-recurring items included in
administration expenses (R263 million); 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; asset management fees from cell captive business; the amortisation
of intangibles relating to business combinations; expenses relating to consolidated collective investment schemes and other minor adjustments to expenses and fee income.
Restated Momentum Metropolitan Corporate and Shareholder Segmental Reconciling IFRS
12 mths to 30.06.2016 Retail Retail Public Sector International Capital total items (1) total
Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 25 634 6 816 26 608 4 054 - 63 112 (34 141) 28 971
Recurring premiums 9 278 5 558 15 170 3 322 - 33 328 (8 720) 24 608
Single premiums 16 356 1 258 11 438 732 - 29 784 (25 421) 4 363
Fee income 3 555 209 4 940 773 96 9 573 (1 894) 7 679
Fee income 2 992 179 4 203 664 19 8 057 (378) 7 679
Intergroup fee income 563 30 737 109 77 1 516 (1 516) -
Expenses
Net payments to contract holders
External payments 24 846 6 037 30 568 2 513 - 63 964 (37 355) 26 609
Other expenses 5 907 2 293 6 309 2 348 121 16 978 1 770 18 748
Sales remuneration 2 154 967 1 537 653 - 5 311 (7) 5 304
Administration expenses 2 804 1 158 3 385 1 391 256 8 994 443 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 248 103 437 26 2 816 532 1 348
Holding company expenses - - - - 54 54 - 54
Intergroup expenses 701 65 735 278 (263) 1 516 (1 516) -
Diluted core headline earnings 1 493 700 680 (156) 489 3 206 - 3 206
Operating profit/(loss) 2 066 972 841 (151) (158) 3 570 - 3 570
Tax on operating profit (629) (272) (242) (26) (17) (1 186) - (1 186)
Investment income 72 - 111 25 850 1 058 - 1 058
Tax on investment income (16) - (30) (4) (186) (236) - (236)
Covered 1 604 723 279 185 616 3 407 - 3 407
Non-covered (111) (23) 401 (341) (127) (201) - (201)
1 493 700 680 (156) 489 3 206 - 3 206
Actuarial liabilities 202 368 32 942 124 330 12 438 - 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 (R190 million); 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; asset management fees from cell captive business; 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
Change 12 mths to 12 mths to
% 30.06.2017 30.06.2016
Rm Rm
Momentum Retail (15) 1 271 1 493
Metropolitan Retail (6) 660 700
Corporate and Public Sector 23 835 680
International (6) (166) (156)
Operating segments (4) 2 600 2 717
Shareholder Capital 24 608 489
Total diluted core headline earnings - 3 208 3 206
SEGMENT BY CENTRE OF EXCELLENCE
Momentum Metropolitan Corporate and Shareholder
Retail Retail Public Sector International Capital Total
Rm Rm Rm Rm Rm Rm
12 mths to 30.06.2017
Covered
Operating profit 1 467 685 387 203 37 2 779
Investment income - - - - 611 611
Total 1 467 685 387 203 648 3 390
Non-covered
Investment and savings 61 - 119 82 - 262
Life insurance - - - (111) - (111)
Health (29) - 136 (82) - 25
Short-term insurance (162) (7) 200 (80) - (49)
Client engagement (66) (18) (25) (24) 12 (121)
Unallocated expenses - - - - (60) (60)
Other operations - - 18 (154) 8 (128)
Total (196) (25) 448 (369) (40) (182)
Core earnings 1 271 660 835 (166) 608 3 208
Restated
12 mths to 30.06.2016 (1)
Covered
Operating profit/(loss) 1 604 723 275 185 (43) 2 744
Investment income - - 4 - 659 663
Total 1 604 723 279 185 616 3 407
Non-covered
Investment and savings 136 - 108 (19) - 225
Life insurance - - - (84) - (84)
Health (43) - 157 (68) - 46
Short-term insurance (151) (6) 143 (54) - (68)
Client engagement (53) (17) (22) (23) 17 (98)
Unallocated expenses - - - - (102) (102)
Other operations - - 15 (93) (42) (120)
Total (111) (23) 401 (341) (127) (201)
Core earnings 1 493 700 680 (156) 489 3 206
1. Refer to segmental report paragraph in the Directors' statement for more information on the restatements.
INVESTMENTS AND SAVINGS CENTRE OF EXCELLENCE - NON-COVERED BUSINESS
Momentum Corporate and
Retail Public Sector International Total
Rm Rm Rm Rm
12 mths to 30.06.2017
Revenue 1 118 865 490 2 473
Fee income 710 379 373 1 462
Performance fees 3 13 - 16
Intergroup fees 344 340 13 697
Investment income 61 121 1 183
Fair value gains - 12 103 115
Expenses and finance costs (1 014) (689) (405) (2 108)
Fair value adjustments on investment contracts - - (103) (103)
Other expenses (1 005) (640) (302) (1 947)
Finance costs (9) (49) - (58)
Share of profit of associates - 1 - 1
Profit before tax 104 177 85 366
Income tax expense (43) (32) (3) (78)
Non-controlling interest - (26) - (26)
Core earnings 61 119 82 262
Operating profit before tax 61 90 84 235
Tax on operating profit (30) (11) (3) (44)
Investment income 43 55 1 99
Tax on investment income (13) (15) - (28)
Diluted core headline earnings 61 119 82 262
Restated
12 mths to 30.06.2016
Revenue 1 161 746 362 2 269
Fee income 771 329 379 1 479
Performance fees 12 - - 12
Intergroup fees 325 333 15 673
Investment income 53 45 12 110
Fair value gains/(losses) - 39 (44) (5)
Expenses and finance costs (970) (595) (397) (1 962)
Fair value adjustments on investment contracts - - 41 41
Other expenses (962) (560) (423) (1 945)
Finance costs (8) (35) (15) (58)
Share of profit of associates - 13 - 13
Profit/(Loss) before tax 191 164 (35) 320
Income tax expense (55) (38) 16 (77)
Non-controlling interest - (18) - (18)
Core earnings 136 108 (19) 225
Operating profit/(loss) before tax 146 134 (29) 251
Tax on operating profit (48) (32) 14 (66)
Investment income 46 8 (2) 52
Tax on investment income (8) (2) (2) (12)
Diluted core headline earnings 136 108 (19) 225
HEALTH CENTRE OF EXCELLENCE - NON-COVERED BUSINESS
Momentum Corporate and
Retail Public Sector International Total
Rm Rm Rm Rm
12 mths to 30.06.2017
Revenue 560 2 049 468 3 077
Net insurance premiums 209 390 259 858
Fee income 340 1 419 191 1 950
Investment income 11 27 18 56
Intergroup fees - 213 - 213
Expenses and finance costs (603) (1 856) (384) (2 843)
Net payments to contract holders (151) (279) (168) (598)
Other expenses (450) (1 576) (216) (2 242)
Finance costs (2) (1) - (3)
Share of loss of associates - - (105) (105)
(Loss)/Profit before tax (43) 193 (21) 129
Income tax expense 14 (57) (36) (79)
Non-controlling interest - - (25) (25)
Earnings attributable to ordinary shareholders (29) 136 (82) 25
Operating (loss)/profit before tax (53) 167 (72) 42
Tax on operating profit 17 (49) (24) (56)
Investment income 10 26 15 51
Tax on investment income (3) (8) (1) (12)
Diluted core headline earnings (29) 136 (82) 25
Closed schemes - 106 66 172
Open scheme (23) (6) (148) (177)
Other (6) 36 - 30
(29) 136 (82) 25
Principal Principal
members members Lives
Closed schemes - 834 061 404 756
Open schemes 108 244 50 380 207 882
108 244 884 441 612 638
HEALTH CENTRE OF EXCELLENCE - NON-COVERED BUSINESS
Momentum Corporate and
Retail Public Sector International Total
Rm Rm Rm Rm
Restated
12 mths to 30.06.2016
Revenue 433 2 089 823 3 345
Net insurance premiums 176 390 623 1 189
Fee income 249 1 640 192 2 081
Investment income 8 27 8 43
Intergroup fees - 32 - 32
Expenses and finance costs (493) (1 862) (844) (3 199)
Net payments to contract holders (133) (294) (476) (903)
Other expenses (358) (1 568) (368) (2 294)
Finance costs (2) - - (2)
(Loss)/Profit before tax (60) 227 (21) 146
Income tax expense 17 (61) (30) (74)
Non-controlling interest - - (17) (17)
Earnings attributable to ordinary shareholders (43) 166 (68) 55
Dilutory effect of subsidiaries - (9) - (9)
Diluted core headline earnings (43) 157 (68) 46
Operating (loss)/profit before tax (66) 191 (65) 60
Tax on operating profit 19 (55) (18) (54)
Investment income 6 27 16 49
Tax on investment income (2) (6) (1) (9)
Diluted core headline earnings (43) 157 (68) 46
Closed schemes - 113 (68) 45
Open scheme (43) 9 - (34)
Other - 35 - 35
(43) 157 (68) 46
Principal Principal
members members Lives
Closed schemes - 830 548 459 688
Open schemes 95 888 47 574 -
95 888 878 122 459 688
SHORT-TERM INSURANCE CENTRE OF EXCELLENCE
Momentum Metropolitan Corporate and
Retail Retail Public Sector International Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2017
Net insurance premiums 616 - - 148 764
Fee income 13 3 566 17 599
Management fees - - 435 - 435
Investment fees - - 73 - 73
Underwriting fees - - 58 - 58
Other fee income 13 3 - 17 33
Investment income 30 - 93 12 135
Fair value losses - - - (9) (9)
Total income 659 3 659 168 1 489
Expenses and finance costs (784) (9) (379) (241) (1 413)
Net payments to contract holders (449) - - (133) (582)
Change in actuarial liabilities - - - 7 7
Other expenses (335) (9) (367) (115) (826)
Finance costs - - (12) - (12)
(Loss)/Profit before tax (125) (6) 280 (73) 76
Income tax expense (37) (1) (80) (9) (127)
Non-controlling interest - - - 2 2
Earnings attributable to ordinary shareholders (162) (7) 200 (80) (49)
Operating (loss)/profit before tax (130) (6) 187 (71) (20)
Tax on operating profit (34) (1) (54) (9) (98)
Investment income 3 - 93 - 96
Tax on investment income (1) - (26) - (27)
Diluted core headline earnings (162) (7) 200 (80) (49)
Momentum Short-term Insurance (83) - - - (83)
MMI Short-term Insurance Administration (79) (7) - (25) (111)
Guardrisk Group - - 200 - 200
Cannon Short-term - - - (55) (55)
(162) (7) 200 (80) (49)
SHORT-TERM INSURANCE CENTRE OF EXCELLENCE
Momentum Metropolitan Corporate and
Retail Retail Public Sector International Total
Rm Rm Rm Rm Rm
Restated
12 mths to 30.06.2016
Net insurance premiums 570 - - 208 778
Fee income 21 - 463 15 499
Management fees - - 405 - 405
Investment fees - - 62 - 62
Underwriting fees - - (6) - (6)
Other fee income 21 - 2 15 38
Investment income 25 - 64 21 110
Fair value losses - - - (4) (4)
Total income 616 - 527 240 1 383
Expenses and finance costs (793) (8) (334) (305) (1 440)
Net payments to contract holders (467) - - (126) (593)
Change in actuarial liabilities - - - (26) (26)
Other expenses (326) (8) (323) (153) (810)
Finance costs - - (11) - (11)
(Loss)/Profit before tax (177) (8) 193 (65) (57)
Income tax expense 26 2 (50) 8 (14)
Non-controlling interest - - - 3 3
Earnings attributable to ordinary shareholders (151) (6) 143 (54) (68)
Operating (loss)/profit before tax (195) (8) 130 (65) (138)
Tax on operating profit 31 2 (33) 8 8
Investment income 18 - 64 3 85
Tax on investment income (5) - (18) - (23)
Diluted core headline earnings (151) (6) 143 (54) (68)
Momentum Short-term Insurance (124) - - - (124)
MMI Short-term Insurance Administration (27) (6) - (9) (42)
Guardrisk Group - - 143 - 143
Swaziland - - - (2) (2)
Tanzania - - - 1 1
Cannon Short-term - - - (44) (44)
(151) (6) 143 (54) (68)
MMI HOLDINGS GROUP - STATUTORY EXCESS
STATUTORY EXCESS
30.06.2017 30.06.2016
Rm Rm
Group excess per reporting basis 22 956 24 109
Net assets - other businesses (2 849) (2 939)
Fair value adjustments on Metropolitan business acquisition and other consolidation adjustments (2 946) (3 471)
Excess - long-term insurance business, net of non-controlling interests (1) 17 161 17 699
Disregarded assets (2) (847) (983)
Difference between statutory and published valuation methods (942) (582)
Write-down of subsidiaries and associates for statutory purposes (1 328) (1 246)
Unsecured subordinated debt 3 602 3 557
Consolidation adjustments (33) (53)
Statutory excess - long-term insurance business 17 613 18 392
Capital adequacy requirement (CAR) (Rm) (3) 6 577 6 238
Ratio of long-term insurance business excess to CAR (times) 2.7 2.9
Discretionary margins 12 407 12 702
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, is included. It excludes the short-term insurance businesses of Guardrisk, Momentum Short-term Insurance and Cannon (Kenya), 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 R464 million (30.06.2016: R491 million).
3. The CAR is an aggregation of the separate CAR's, with no assumption of diversification benefits. MMI elected to adopt the revised actuarial guidance note SAP 104
(version 9) which was published in August 2017 but permitted adoption for reporting dates on or after 30 June 2017.
MMI HOLDINGS GROUP - EMBEDDED VALUE INFORMATION
EMBEDDED VALUE RESULTS
Restated
30.06.2017 30.06.2016
Rm Rm
Covered business
Reporting excess - long-term insurance business 17 161 17 699
Reclassification to non-covered business (2 206) (1 897)
14 955 15 802
Disregarded assets (1) (504) (531)
Difference between statutory and published valuation methods (942) (575)
Dilutory effect of subsidiaries (2) (53) (51)
Consolidation adjustments (3) (21) (40)
Value of MMI Group Ltd preference shares issued (500) (500)
Diluted adjusted net worth - covered business 12 935 14 105
Net value of in-force business 21 130 20 862
Diluted embedded value - covered business 34 065 34 967
Non-covered business
Net assets - non-covered business within life insurance companies 2 206 1 897
Net assets - non-covered business outside life insurance companies 2 849 2 939
Consolidation adjustments and transfers to covered business (3) (2 415) (2 776)
Adjustments for dilution (4) 720 690
Diluted adjusted net worth - non-covered business 3 360 2 750
Write-up to directors' value 5 098 5 272
Non-covered business 6 344 6 379
Holding company expenses (5) (671) (557)
International holding company expenses (5) (575) (550)
Diluted embedded value - non-covered business 8 458 8 022
Diluted adjusted net worth 16 295 16 855
Net value of in-force business 21 130 20 862
Write-up to directors' value 5 098 5 272
Diluted embedded value 42 523 42 989
Required capital - covered business (adjusted for qualifying debt) (6) 6 449 6 098
Surplus capital - covered business 6 486 8 007
Diluted embedded value per share (cents) 2 651 2 680
Diluted adjusted net worth per share (cents) 1 016 1 051
Diluted number of shares in issue (million) (7) 1 604 1 604
1. Disregarded assets include Sage intangible assets of R464 million (30.06.2016: R491 million), goodwill and various other items.
2. For accounting purposes, MMI Holdings Namibia, Metropolitan Kenya and Cannon have been consolidated at 96% in the statement of financial position (in the prior
year, Metropolitan Health was consolidated at 100%). 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): R106 million (30.06.2016: R123 million)
- Treasury shares held on behalf of contract holders: R353 million (30.06.2016: R292 million)
- Liability - MMI Holdings Ltd convertible preference shares issued to KTH: R261 million (30.06.2016: R275 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 required capital for covered business amounts to R10 051 million (restated 30.06.2016: R9 655 million) and is adjusted for qualifying debt of R3 602 million
(30.06.2016: R3 557 million).
7. 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
30.06.2017 30.06.2016
Rm Rm
Momentum Retail 11 379 10 936
Gross value of in-force business 12 865 12 274
Less cost of required capital (1 486) (1 338)
Metropolitan Retail 3 758 3 692
Gross value of in-force business 4 396 4 376
Less cost of required capital (638) (684)
Corporate and Public Sector (1) 3 846 4 223
Gross value of in-force business 4 743 4 988
Less cost of required capital (897) (765)
International (2) 2 147 2 011
Gross value of in-force business 2 403 2 226
Less cost of required capital (256) (215)
Net value of in-force business 21 130 20 862
1. Prior year has been restated to exclude Guardrisk Life Ltd from the Corporate and Public Sector.
2. Prior year has been restated to exclude International life and health entities not yet at operating scale.
EMBEDDED VALUE DETAIL
Adjusted Net value of Restated
net worth in-force 30.06.2017 30.06.2016
Rm Rm Rm Rm
Covered business
Momentum Retail 4 337 11 379 15 716 15 388
Metropolitan Retail 2 249 3 758 6 007 6 200
Corporate and Public Sector 2 563 3 846 6 409 6 535
International (1) 1 766 2 147 3 913 3 768
Shareholder Capital 2 020 - 2 020 3 076
Total covered business 12 935 21 130 34 065 34 967
Adjusted Write-up to Restated
net worth directors' value 30.06.2017 30.06.2016
Rm Rm Rm Rm
Non-covered business
Momentum Retail 979 1 128 2 107 2 271
Investment and savings 596 806 1 402 1 776
Health 6 373 379 128
Short-term insurance 377 137 514 380
Client engagement - (188) (188) (13)
Metropolitan Retail - (78) (78) (84)
Client engagement - (78) (78) (84)
Corporate and Public Sector 1 652 4 095 5 747 5 018
Investment and savings 304 1 066 1 370 1 255
Health 399 1 116 1 515 1 278
Short-term insurance (2) 949 1 904 2 853 2 570
Client engagement - 9 9 (85)
International (1) (215) 275 60 822
Investment and savings (3) 190 522 712 877
Life insurance 319 (40) 279 418
Health 366 434 800 725
Short-term insurance 113 26 139 249
Client engagement - (92) (92) -
Other (shared services) (4) (1 203) (575) (1 778) (1 447)
Shareholder Capital 944 (322) 622 (5)
Short-term insurance 101 - 101 147
Client engagement 368 - 368 179
Other (head office expenses) (4) 475 (322) 153 (331)
Total non-covered business 3 360 5 098 8 458 8 022
Total embedded value 16 295 26 228 42 523 42 989
Diluted net asset value - non-covered business (3 360)
Adjustments to covered business - net asset value 4 226
Reporting excess - long-term insurance business 17 161
1. On 1 July 2015, African life and health entities not yet at operating scale were transferred to non-covered business (30.06.2016: adjusted net worth of
R466 million and value of in-force of R146 million). The prior year has been restated to reflect the transfer.
2. On 1 July 2015, Guardrisk Life Ltd was transferred to non-covered business (30.06.2016: adjusted net worth of R169 million and value of in-force of R660 million).
The prior year has been restated to reflect the transfer.
3. This includes MMI non-covered subsidiaries domiciled in the United Kingdom and related territories.
4. The International shared services impact reflects the allowance for support services to the International life assurance and health businesses. The Shareholder
head office expenses impact reflects the present value of projected recurring head office expenses.
DIRECTORS' VALUE PER VALUATION METHOD
Covered Appraisal Covered Appraisal Restated
methodology value 30.06.2017 methodology value 30.06.2016
Rm Rm Rm Rm Rm Rm
Non-covered business
Momentum Retail 955 1 152 2 107 630 1 641 2 271
Investment and savings 576 826 1 402 502 1 274 1 776
Health 379 - 379 128 - 128
Short-term insurance - 514 514 - 380 380
Client engagement - (188) (188) - (13) (13)
Metropolitan Retail - (78) (78) - (84) (84)
Client engagement - (78) (78) - (84) (84)
Corporate and Public Sector 4 388 1 359 5 747 3 868 1 150 5 018
Investment and savings - 1 370 1 370 - 1 255 1 255
Health 1 535 (20) 1 515 1 298 (20) 1 278
Short-term insurance 2 853 - 2 853 2 570 - 2 570
Client engagement - 9 9 - (85) (85)
International 1 143 (1 083) 60 1 130 (308) 822
Investment and savings 458 254 712 504 373 877
Life insurance 242 37 279 291 127 418
Health 417 383 800 323 402 725
Short-term insurance 26 113 139 12 237 249
Client engagement - (92) (92) - - -
Other (shared services) - (1 778) (1 778) - (1 447) (1 447)
Shareholder Capital - 622 622 - (5) (5)
Short-term insurance - 101 101 - 147 147
Client engagement - 368 368 - 179 179
Other (head office expenses) - 153 153 - (331) (331)
Total non-covered business 6 486 1 972 8 458 5 628 2 394 8 022
- Covered methodology refers to APN107 (embedded value methodology) and the risk discount rate of covered business. The Health businesses, Momentum Wealth and
Guardrisk are valued using embedded value methodology.
- For Health business, explicit assumptions are made around large scheme terminations. The key assumption is the long-term profit as a percentage of revenue.
- Discounted cash flow models for Investment and savings, as well as Short-term insurance business, include assumptions around future new business. To reflect the
additional uncertainty introduced, the risk discount rates for these businesses are approximately 2.8% and 1.8% higher than covered business risk discount rates.
- For Eris, we approximate discounted cash flows using a Price/Earnings multiple.
- The International shared services impact reflects the allowance for support services to the International life and health businesses. The Shareholder head office
expenses impact reflects the present value of projected recurring head office expenses.
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE Restated
Covered business 12 mths to 12 mths to
30.06.2017 30.06.2016
Adjusted net Gross value of Cost of
worth (ANW) in-force (VIF) CAR Total EV Total EV
Notes Rm Rm Rm Rm Rm
Profit from new business (1 495) 2 343 (205) 643 805
Embedded value from new business A (1 495) 2 247 (205) 547 712
Expected return to end of period B - 96 - 96 93
Profit from existing business 3 603 (486) 6 3 123 1 703
Expected return - unwinding of RDR B - 2 675 (348) 2 327 2 260
Release from the cost of required capital C - - 442 442 450
Expected (or actual) net of tax profit transfer to net worth D 4 091 (4 091) - - -
Operating experience variances E 207 (177) (12) 18 73
Development expenses F (67) - - (67) (99)
Operating assumption changes G (628) 1 107 (76) 403 (981)
Embedded value profit from operations 2 108 1 857 (199) 3 766 2 508
Investment return on adjusted net worth H 652 - - 652 823
Investment variances I (144) (1 116) (94) (1 354) (126)
Economic assumption changes J (1) (177) 14 (164) (124)
Exchange rate movements K (24) (16) 4 (36) 53
Embedded value profit - covered business 2 591 548 (275) 2 864 3 134
Transfer of business to non-covered business L (675) - - (675) (1 333)
Changes in share capital M (20) (5) - (25) 4
Dividend paid (3 066) - - (3 066) (2 838)
Change in embedded value - covered business (1 170) 543 (275) (902) (1 033)
Non-covered business
Change in directors' valuation and other items (696) 1 080
Change in holding company expenses (139) 961
Embedded value (loss)/profit - non-covered business (835) 2 041
Changes in share capital M 25 (4)
Dividend paid 610 363
Finance costs - preference shares (39) (41)
Transfer of business from covered business L 675 1 333
Change in embedded value - non-covered business 436 3 692
Total change in group embedded value (466) 2 659
Total embedded value profit 2 029 5 175
Return on embedded value (%) - internal rate of return 4.7% 12.8%
ANALYSIS OF CHANGES IN ADJUSTED NET WORTH
Covered business
Momentum Metropolitan Corporate and Shareholder
Retail Retail Public Sector International Capital Total
Rm Rm Rm Rm Rm Rm
12 mths to 30.06.2017
Embedded value from new business (827) (201) (213) (254) - (1 495)
Expected (or actual) net of tax profit
transfer to net worth 2 257 810 604 420 - 4 091
Operating experience variances 86 22 8 47 44 207
Development expenses (36) - (31) - - (67)
Operating assumption changes (503) 50 (122) (53) - (628)
Embedded value profit from operations 977 681 246 160 44 2 108
Investment return on adjusted net worth 269 157 145 63 18 652
Investment variances (178) 5 21 13 (5) (144)
Economic assumption changes (3) - - 2 - (1)
Exchange rate movements - - - (24) - (24)
Embedded value profit - covered business 1 065 843 412 214 57 2 591
ANALYSIS OF CHANGES IN GROSS VALUE OF IN-FORCE
Covered business
Momentum Metropolitan Corporate and
Retail Retail Public Sector International Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2017
Embedded value from new business 1 141 431 326 349 2 247
Expected return - unwinding of RDR 1 411 529 579 252 2 771
Expected (or actual) net of tax profit
transfer to net worth (2 257) (810) (604) (420) (4 091)
Operating experience variances (50) (2) (143) 18 (177)
Operating assumption changes 1 090 134 (173) 56 1 107
Embedded value profit/(loss) from operations 1 335 282 (15) 255 1 857
Investment variances (701) (251) (130) (34) (1 116)
Economic assumption changes (44) (11) (99) (23) (177)
Exchange rate movements - - - (16) (16)
Embedded value profit/(loss) - covered business 590 20 (244) 182 548
ANALYSIS OF CHANGES IN COST OF CAR
Covered business
Momentum Metropolitan Corporate and
Retail Retail Public Sector International Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2017
Embedded value from new business (86) (52) (45) (22) (205)
Expected return - unwinding of RDR (156) (78) (89) (25) (348)
Release from the cost of required capital 210 127 105 - 442
Operating experience variances - - (12) - (12)
Operating assumption changes (50) - - (26) (76)
Embedded value loss from operations (82) (3) (41) (73) (199)
Investment variances (53) 53 (94) - (94)
Economic assumption changes (7) (3) (4) 28 14
Exchange rate movements - - - 4 4
Embedded value (loss)/profit - covered business (142) 47 (139) (41) (275)
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE
Covered business
Momentum Metropolitan Corporate and Shareholder
Retail Retail Public Sector International Capital Total
Rm Rm Rm Rm Rm Rm
12 mths to 30.06.2017
Embedded value from new business 228 178 68 73 - 547
Expected return - unwinding of RDR 1 255 451 490 227 - 2 423
Release from the cost of required capital 210 127 105 - - 442
Operating experience variances 36 20 (147) 65 44 18
Development expenses (36) - (31) - - (67)
Operating assumption changes 537 184 (295) (23) - 403
Embedded value profit from operations 2 230 960 190 342 44 3 766
Investment return on adjusted net worth 269 157 145 63 18 652
Investment variances (932) (193) (203) (21) (5) (1 354)
Economic assumption changes (54) (14) (103) 7 - (164)
Exchange rate movements - - - (36) - (36)
Embedded value profit - covered business 1 513 910 29 355 57 2 864
Restated
12 mths to 30.06.2016
Embedded value from new business 251 191 199 71 - 712
Expected return - unwinding of RDR 1 201 406 513 231 2 2 353
Release from the cost of required capital 222 129 99 - - 450
Operating experience variances 341 123 (364) 59 (86) 73
Development expenses (57) (42) - - - (99)
Operating assumption changes (140) 82 (729) (147) (47) (981)
Embedded value profit/(loss) from operations 1 818 889 (282) 214 (131) 2 508
Investment return on adjusted net worth 269 155 115 100 184 823
Investment variances (91) 41 (88) 12 - (126)
Economic assumption changes (87) (85) 98 (50) - (124)
Exchange rate movements - - - 53 - 53
Embedded value profit/(loss) - covered business 1 909 1 000 (157) 329 53 3 134
A. VALUE OF NEW BUSINESS
VALUE OF NEW BUSINESS (3,4)
Corporate and
Momentum Retail (5) Metropolitan Retail Public Sector (1) International (2) Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2017
Value of new business 228 178 68 73 547
Gross 314 230 113 95 752
Less cost of required capital (86) (52) (45) (22) (205)
New business premiums 17 624 2 325 4 637 824 25 410
Recurring premiums 1 135 1 220 751 439 3 545
Single premiums 16 489 1 105 3 886 385 21 865
New business premiums (APE) 2 784 1 331 1 140 478 5 733
New business premiums (PVP) 22 774 5 164 11 121 2 536 41 595
Profitability of new business as a percentage of APE 8.2 13.4 6.0 15.3 9.5
Profitability of new business as a percentage of PVP 1.0 3.4 0.6 2.9 1.3
Restated
12 mths to 30.06.2016
Value of new business 251 191 199 71 712
Gross 314 244 244 83 885
Less cost of required capital (63) (53) (45) (12) (173)
New business premiums 18 713 2 343 6 019 841 27 916
Recurring premiums 1 103 1 087 895 400 3 485
Single premiums 17 610 1 256 5 124 441 24 431
New business premiums (APE) 2 864 1 213 1 407 444 5 928
New business premiums (PVP) 23 468 4 936 13 232 2 454 44 090
Profitability of new business as a percentage of APE 8.8 15.7 14.1 16.0 12.0
Profitability of new business as a percentage of PVP 1.1 3.9 1.5 2.9 1.6
1. Value of new business has been restated to exclude Guardrisk Life Ltd that was transferred to non-covered business.
2. Value of new business has been restated to exclude the African entities not yet at operating scale that was transferred to non-covered business.
3. Value of new business and new business premiums are net of non-controlling interests.
4. 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 reporting date have been used.
5. For Momentum Retail, the definition of new business has been amended to exclude negative alterations after the commission clawback period. This change aligns
with the definition used internally by Momentum Sales.
ANALYSIS OF NEW BUSINESS PREMIUMS
Corporate and
Momentum Retail (3) Metropolitan Retail Public Sector (1) International (2) Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2017
New business premiums 17 624 2 325 4 637 824 25 410
Recurring premiums 1 135 1 220 751 439 3 545
Risk 532 811 306 - 1 649
Savings/Investments 603 409 442 - 1 454
Annuities - - 3 - 3
International - - - 439 439
Single premiums 16 489 1 105 3 886 385 21 865
Savings/Investments 15 455 374 2 917 - 18 746
Annuities 1 034 731 969 - 2 734
International - - - 385 385
New business premiums (APE) 2 784 1 331 1 140 478 5 733
Risk 532 811 306 - 1 649
Savings/Investments 2 149 447 734 - 3 330
Annuities 103 73 100 - 276
International - - - 478 478
Restated
12 mths to 30.06.2016
New business premiums 18 713 2 343 6 019 841 27 916
Recurring premiums 1 103 1 087 895 400 3 485
Risk 534 703 417 - 1 654
Savings/Investments 569 384 477 - 1 430
Annuities - - 1 - 1
International - - - 400 400
Single premiums 17 610 1 256 5 124 441 24 431
Savings/Investments 16 631 312 3 959 - 20 902
Annuities 979 944 1 165 - 3 088
International - - - 441 441
New business premiums (APE) 2 864 1 213 1 407 444 5 928
Risk 534 704 417 - 1 655
Savings/Investments 2 232 415 873 - 3 520
Annuities 98 94 117 - 309
International - - - 444 444
1. Value of new business has been restated to exclude Guardrisk Life Ltd that was transferred to non-covered business.
2. Value of new business has been restated to exclude the African entities not yet at operating scale that was transferred to non-covered business.
3. For Momentum Retail, the definition of new business has been amended to exclude negative alterations after the commission clawback period. This
change aligns with the definition used internally by Momentum Sales.
RECONCILIATION OF LUMP SUM INFLOWS
Restated
12 mths to 12 mths to
30.06.2017 30.06.2016
Rm Rm
Total lump sum inflows 26 968 29 784
Inflows not included in value of new business (6 518) (6 853)
Term extensions on maturing policies 345 342
Retirement annuity proceeds invested in living annuities 1 107 1 008
Non-controlling interests and other adjustments (37) 150
Single premiums included in value of new business 21 865 24 431
PRINCIPAL ASSUMPTIONS (South Africa) (1,4) 30.06.2017 30.06.2016
% %
Pre-tax investment return
Equities 12.9 12.7
Properties 10.4 10.2
Government stock 9.4 9.2
Other fixed-interest stocks 9.9 9.7
Cash 8.4 8.2
Risk-free return (2) 9.4 9.2
Risk discount rate (RDR) 11.7 11.4
Investment return (before tax) - balanced portfolio (2) 11.6 11.4
Renewal expense inflation rate (3) 6.8 7.4
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. Risk-free returns are taken from an appropriate market-related, risk-free yield curve as at the valuation date. Appropriate risk premia are added to the risk-free
yields in order to derive yields on other asset classes. Expected cash flows at each duration are discounted using yields appropriate to that duration. The
investment return on balanced portfolio business was calculated by applying the above returns to an expected long-term asset distribution.
3. An inflation rate of 6.0% p.a. is used over the planning horizon (three years) where after the inflation rate is derived from market inputs as the difference
between nominal and real yields across the term structure of these curves. An additional 1% expense inflation is allowed for in some divisions to reflect the
impact of closed books that are in run-off.
4. The assumptions quoted in the table are representative rates derived at the 10-year point of the yield curves.
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
OPERATING EXPERIENCE VARIANCES
Restated
12 mths to 30.06.2017 12 mths to
30.06.2016
Notes ANW Net VIF EV EV
Rm Rm Rm Rm
Momentum Retail 86 (50) 36 341
Mortality and morbidity 1 156 9 165 235
Terminations, premium cessations and policy alterations 2 (111) 169 58 65
Expense variance 40 - 40 (24)
Credit risk variance 39 - 39 20
Other 3 (38) (228) (266) 45
Metropolitan Retail 22 (2) 20 123
Mortality and morbidity 1 78 5 83 88
Terminations, premium cessations and policy alterations 4 (61) (8) (69) 10
Expense variance (23) - (23) (9)
Credit risk variance 21 - 21 10
Other 7 1 8 24
Corporate and Public Sector 8 (143) (135) (321)
Mortality and morbidity 5 (152) - (152) (235)
Terminations 6 20 (211) (191) (113)
Expense variance 36 - 36 (122)
Credit risk variance 57 - 57 40
FNB Life - share of profits - - - 37
Other 7 47 68 115 72
International 47 18 65 59
Mortality and morbidity 1 35 9 44 73
Terminations, premium cessations and policy alterations 3 1 4 (22)
Expense variance (3) - (3) 5
Other 12 8 20 3
Shareholder Capital 44 - 44 (86)
Opportunity cost of required capital - (12) (12) (43)
Total operating experience variances 207 (189) 18 73
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 experience, especially on voluntary premium increases.
3. Includes one off impact arising from improved modelling of rider benefits as well as increased premium discounts.
4. Unfavourable experience on mainly risk products written by new intermediaries.
5. Worse than expected income disability underwriting 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.
F. DEVELOPMENT EXPENSES
Business development expenses within segments.
G. OPERATING ASSUMPTION CHANGES
OPERATING ASSUMPTION CHANGES
Restated
12 mths to 30.06.2017 12 mths to
30.06.2016
Notes ANW Net VIF EV EV
Rm Rm Rm Rm
Momentum Retail (503) 1 090 587 (71)
Mortality and morbidity assumptions 1 296 114 410 18
Termination assumptions 2 (680) 620 (60) 24
Renewal expense assumptions (1) (55) (56) 164
Holding company expenses - - - (325)
Modelling, methodology and other changes 3 (118) 411 293 48
Metropolitan Retail 50 134 184 82
Mortality and morbidity assumptions (12) (3) (15) 271
Termination assumptions 5 (20) (15) (30)
Renewal expense assumptions (59) 4 (55) (46)
Holding company expenses - - - (345)
Modelling, methodology and other changes 3 116 153 269 232
Corporate and Public Sector (122) (173) (295) (733)
Mortality and morbidity assumptions 4 (138) (220) (358) (35)
Termination assumptions 5 - 105 105 7
Renewal expense assumptions 43 (89) (46) (260)
Holding company expenses - - - (225)
Modelling, methodology and other changes (27) 31 4 (220)
International (53) 56 3 (147)
Mortality and morbidity assumptions 1 19 83 102 52
Termination assumptions 2 (63) 7 (56) (25)
Renewal expense assumptions 4 15 19 (21)
Modelling, methodology and other changes (13) (49) (62) (153)
Shareholder Capital - - - (47)
Methodology change: cost of required capital - (76) (76) (65)
Total operating assumption changes (628) 1 031 403 (981)
Notes
1. Allowance for better than assumed mortality and morbidity experience on risk business.
2. Strengthening of the long-term persistency assumptions.
3. Various modelling and methodology changes including the adoption of the yield curve for valuation purposes and changes in the allowance for future premium
reviews on Momentum Retail risk products.
4. Allowance for lower future profitability on income disability business.
5. Allowance made for improved persistency experience, mainly on FundsAtWork.
H. INVESTMENT RETURN ON ADJUSTED NET WORTH
INVESTMENT RETURN ON ADJUSTED NET WORTH
Restated
12 mths to 12 mths to
30.06.2017 30.06.2016
Rm Rm
Investment income 620 614
Capital appreciation and other 68 242
Preference share dividends paid and change in fair value of preference shares (36) (33)
Investment return on adjusted net worth 652 823
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 NON-COVERED BUSINESS
This transfer represents the alignment of the 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.
COVERED BUSINESS: SENSITIVITIES - 30.06.2017
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 12 935 21 130 24 407 (3 277) 547 752 (205)
1% increase in risk discount rate 19 262 22 943 (3 681) 405 627 (222)
% change (9) (6) 12 (26) (17) 8
1% reduction in risk discount rate 23 198 26 041 (2 843) 708 893 (185)
% change 10 7 (13) 29 19 (10)
10% decrease in future expenses 22 497 25 774 (3 277) 666 871 (205)
% change (1) 6 6 - 22 16 -
10% decrease in lapse, paid-up and surrender rates 21 800 25 077 (3 277) 705 927 (222)
% change 3 3 - 29 23 8
5% decrease in mortality and morbidity for assurance business 23 036 26 343 (3 307) 686 891 (205)
% change 9 8 1 25 18 -
5% decrease in mortality for annuity business 20 777 24 027 (3 250) 535 740 (205)
% change (2) (2) (1) (2) (2) -
1% reduction in gross investment return, inflation rate and risk discount rate 12 935 21 858 25 063 (3 205) 634 839 (205)
% change (2) - 3 3 (2) 16 12 -
1% reduction in inflation rate 21 912 25 189 (3 277) 622 827 (205)
% change 4 3 - 14 10 -
10% fall in market value of equities and properties 12 618 20 091 23 306 (3 215)
% change (2) (5) (5) (2)
10% reduction in premium indexation take-up rate 20 694 23 971 (3 277) 507 712 (205)
% change (2) (2) - (7) (5) -
10% decrease in non-commission related acquisition expenses 658 863 (205)
% change 20 15 -
1% increase in equity/property risk premium 21 978 25 255 (3 277) 587 792 (205)
% change 4 3 - 7 5 -
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
30.06.2017 30.06.2016 (2)
Rm Rm
Managed and/or administered by Investments
Financial assets 406 175 442 582
Momentum Manager of Managers 90 220 83 703
Momentum Investment Consultants 10 073 10 327
Momentum Collective Investments 72 667 62 201
Metropolitan Collective Investments 19 860 39 847
Momentum Asset Management (3) 151 241 184 389
Momentum Global Investments 55 724 55 228
Momentum Alternative Investments 6 390 6 887
Properties - Eris Property Group 21 307 27 346
On-balance sheet 8 778 8 534
Off-balance sheet 12 529 18 812
Momentum Wealth linked product assets under administration 151 203 153 730
On-balance sheet 97 082 96 858
Off-balance sheet 54 121 56 872
Managed internally or by other managers within MMI (on-balance sheet) 67 399 64 597
Managed by external managers (on-balance sheet) 15 144 16 605
Properties managed internally or by other managers within MMI or externally 2 778 2 657
Corporate and Public Sector - segregated assets - 216
Corporate and Public Sector - cell captives on-balance sheet 15 508 17 834
Total assets managed and/or administered 679 514 725 567
Managed and/or administered by Investments
On-balance sheet 227 255 225 396
Off-balance sheet 178 920 217 186
406 175 442 582
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. Momentum Manager of Managers restatement: Recent operating model changes in the Investment business has resulted in the consolidation of asset administration
agreements between entities resulting in a decrease in assets under administration with no impact on earnings.
3. In the prior year, MMI performed certain administrative functions for Aluwani Capital Partners (Aluwani) on an arms-length basis. This resulted in R36 billion
being included in Momentum Asset Management which was managed by Aluwani. These assets were transferred to Aluwani in the current year.
NET FUNDS RECEIVED FROM CLIENTS (1)
Gross
Gross single recurring Gross Gross Net inflow/
inflows inflows inflow outflow (outflow)
Rm Rm Rm Rm Rm
12 mths to 30.06.2017
Momentum Retail 15 077 9 663 24 740 (25 360) (620)
Metropolitan Retail 1 021 5 877 6 898 (5 321) 1 577
Corporate and Public Sector 10 216 16 951 27 167 (25 574) 1 593
International 654 3 476 4 130 (2 624) 1 506
Long-term insurance business fund flows 26 968 35 967 62 935 (58 879) 4 056
Off-balance sheet fund flows
Managed and/or administered by Investments (2) 64 548 (101 884) (37 336)
Properties - Eris Property Group 2 067 (8 350) (6 283)
Momentum Wealth linked product assets under administration 7 368 (10 081) (2 713)
Corporate and Public Sector - segregated assets - (216) (216)
Total net funds received from clients 136 918 (179 410) (42 492)
Restated
12 mths to 30.06.2016
Momentum Retail 16 356 9 278 25 634 (24 846) 788
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 732 3 322 4 054 (2 513) 1 541
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
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. The Aluwani assets were transferred to Aluwani in the current year.
ANALYSIS OF ASSETS BACKING SHAREHOLDER EXCESS
Restated
30.06.2017 30.06.2016
Rm % Rm %
Equity securities 441 1.9 372 1.5
Preference shares 1 325 5.8 1 457 6.0
Collective investment schemes 330 1.4 264 1.1
Debt securities 6 762 29.5 5 767 23.9
Properties 3 630 15.8 3 436 14.3
Owner-occupied properties 2 374 10.3 1 662 6.9
Investment properties 1 256 5.5 1 774 7.4
Cash and cash equivalents and funds on deposit 6 003 26.2 8 488 35.2
Intangible assets 7 144 31.1 8 035 33.3
Other net assets 1 537 6.7 414 1.7
27 172 118.4 28 233 117.1
Redeemable preference shares (261) (1.1) (275) (1.1)
Subordinated redeemable debt (3 602) (15.7) (3 557) (14.8)
Treasury shares (353) (1.5) (292) (1.2)
Shareholder excess per reporting basis 22 956 100.0 24 109 100.0
NUMBER OF EMPLOYEES
Restated
30.06.2017 30.06.2016
Indoor staff 9 199 10 077
Segments
Momentum Retail 1 233 1 360
Metropolitan Retail 923 1 215
Corporate and Public Sector 987 1 021
International 1 215 1 295
Centres of Excellence
Investments and Savings Solutions 520 511
Legacy Solutions 224 211
Life Insurance Solutions 473 487
Health Solutions 2 333 2 591
Short-term Insurance Solutions 283 283
Multiply 128 149
Group services divisions 880 954
Field staff 8 031 7 483
Momentum Retail 1 130 1 111
Metropolitan Retail 5 395 4 804
International 1 506 1 568
Total 17 230 17 560
1. The prior year has been restated to align to the group's client centric model.
STOCK EXCHANGE PERFORMANCE 30.06.2017 30.06.2016
12 months
Value of listed shares traded (rand million) 20 072 25 614
Volume of listed shares traded (million) 863 1 057
Shares traded (% of average listed shares in issue) 55 67
Trade prices
Highest (cents per share) 2 669 3 149
Lowest (cents per share) 1 920 1 900
Last sale of year (cents per share) 2 024 2 264
Annualised percentage (%) change during year (11) (25)
Annualised percentage (%) change - life insurance sector (J857) (6) (6)
Annualised percentage (%) change - top 40 index (J200) (1) -
30 June
Price/diluted core headline earnings (segmental) ratio 10.1 11.3
Dividend yield % (dividend on listed shares) 7.8 6.9
Dividend yield % - top 40 index (J200) 2.8 2.9
Total shares issued (million)
Ordinary shares listed on JSE 1 575 1 574
Treasury shares held on behalf of contract holders (18) (13)
Basic number of shares in issue 1 557 1 561
Treasury shares held on behalf of contract holders 18 13
Convertible redeemable preference shares 29 30
Diluted number of shares in issue (1) 1 604 1 604
Market capitalisation at end (Rbn) (2) 32 36
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: 06/09/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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