Wrap Text
Audited results for the 12 months ended 30 June 2018
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 GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 1904/002186/06)
Company code: MMIG
SUMMARY OF FINANCIAL INFORMATION
Audited results for the 12 months ended 30 June 2018
Reset and grow
Summary of key metrics
During the year MMI Holdings has made good progress on implementing our plan to increase focus on execution. This reset in priorities is done to enable
improved performance and future growth. Key activities include encouraging a more entrepreneurial culture, increased focus on successfully growing our core
businesses in South Africa, and exiting marginal operations outside South Africa. To this end, we have also simplified our operating model and empowered
our businesses with end-to-end accountability from sales to service. Although the continued challenging macro-economic environment negatively impacted
MMI's financial results for the year ended 30 June 2018, operational shortcomings also played a part in the disappointing set of results.
MMI's diluted core headline earnings of R2 809m (176 cents per share) were down 12% year-on-year. This was despite strong mortality and disability results
across the group (risk experience improved by R201m), as well as improved International results for remaining core operations (improvement of R118m). These
positive factors were more than offset by increased investment in client engagement activities and specific technology investments to improve intermediary
and client experience (increase of R92m), the impact of a reinsurance correction and a reinsurance loss including an allowance for higher future reinsurance
premiums on Momentum Retail risk products (R181m aggregate negative impact), lower profits from the Momentum Retail legacy life products (R120m decline) and
weaker early duration lapse experience in Metropolitan Retail (R44m reduction in IFRS persistency variance). MMI's share of losses from our new initiative
investments in India and aYo increased by R90m, in line with business plans.
Diluted headline earnings were R1 341m lower than diluted core headline earnings in F2018. Of this difference, R685m arises from changes to actuarial
assumptions. The positive investment variances seen during the first half of the year reversed due to the low investment market returns and a downward move
in the yield curve between 31 December 2017 and 30 June 2018. Material actuarial assumption changes include a strengthening of the expense basis for retail
operations, strengthened early duration lapse rates in Metropolitan Retail, and a lower assumed exposure to equities for the long-term portfolio supporting
some of our large product lines. Another R115m of the difference is attributable to non-recurring items, including R77m arising from our decision to reduce
our footprint in Africa and the UK.
At the interim results announcement, we communicated that we have revised our dividend policy and that we would repurchase R2bn worth of shares in lieu of
paying dividends during the current calendar year as long as the share price remained at discount to embedded value (EV). At 30 June 2018, 47 million shares
(R971 million, excluding trading costs) have been bought back. In doing this, we acquired R1.2bn EV.
New business volumes are up 1% year-on-year to R42.2bn on a present value of new business premiums (PVNBP) basis. This included year-on-year growth of 3%
for Momentum Retail and 1% growth for Momentum Corporate. PVNBP for Metropolitan Retail was down 1% for the year and International's PVNBP was down 8%,
driven by a 13% decline in Namibia.
Overall value of new business (VNB) was disappointing and declined to R301m. This resulted in new business margins declining from 1.3% to 0.7% of premiums.
Although overall sales volumes remained flat over the period, the margins were driven down by expenses increasing at a faster rate, significant assumption
changes which partly resulted from more realistic treatment of expenses that were previously classified as unallocated, and re-pricing of some products. The
increase in expenses includes investment into initiatives aimed at improving client and intermediary experience during the new business process. We believe
that the main drivers of margin improvement in the future will be to improve the productivity and scale of our various distribution capabilities, as well as
reducing operational and infrastructure costs. This will require ongoing product development and improvements in client service experience.
Group embedded value declined to R39.6bn (June 2017 EV was R42.5bn). This equates to EV per share of R25.43 at 30 June 2018. The return on embedded value
(ROEV) for the year was -1.1% with the ROEV on covered business (mature life insurance operations) increasing by 7.3% during the period. The actuarial
assumption changes mentioned above had a negative impact on covered EV earnings. The ROEV on non-covered business was significantly negative. This was
mainly due to the implementation of a new methodology to determine non-covered valuations, which resulted in downward adjustments in the valuation of most
businesses. The businesses mostly affected include asset management subsidiaries, Client Engagement Solutions and the holding company.
Key metrics F2018 F2017 Change %
Diluted core headline earnings (Rm) 2 809 3 208 (12)
Diluted core headline earnings per share (cents) 176 200 (12)
Diluted headline earnings per share (cents) 93 118 (21)
Operating profit after new initiatives (Rm) 2 345 2 600 (10)
Operating profit before new initiatives (Rm) 2 667 2 795 (5)
New business volumes (PVNBP, Rm) 42 177 41 595 1
Value of new business (Rm) 301 547 (45)
New business margin (%) 0.7 1.3 (0.6)
Embedded value per share (cents) 2 543 2 651 (4)
Return on Embedded Value (%) (1.1) 4.7 (5.8)
Analysis of group earnings
Diluted core headline earnings of R2 809m for the period declined by 12% year-on-year. Operating profits declined by 10% year-on-year, however, if we
exclude the impact of our four large strategic investments (India, aYo, MMI Lending and Money Management) the operating profit on the established businesses
declined by 5%.
Momentum Retail
Momentum Retail's core headline earnings declined by 28% to R920m. Earnings from covered operations (life insurance) were down 25% to R1 096m while losses
from non-covered operations narrowed by 10% to R176m.
Life Insurance demographic experience was strong with mortality, morbidity and persistency experience all better than expected. This was however offset by
an allowance to correct a historic underpayment of reinsurance premiums (R43m), higher reinsurance premiums in the current year (R138m), and generally
higher operating expenses relative to F2017. Covered core headline earnings for Momentum Investments declined R145m year-on-year. This was mainly due to
modest growth in funds under management. Core headline earnings from the Legacy book declined by R120m year-on-year, largely as a result of a lower opening
asset base. The corrected reserving for Investo Loyalty Bonus also continues to put pressure on the Legacy earnings.
Non-covered business in Momentum Retail showed an improvement of 10% to a loss of R176m. Notably, MSTI's core earnings improved by R91m year-on-year to a
profit of R8m due to good growth in earned premiums, lower claims ratios, good expense management and the full recognition of the deferred tax asset in line
with continued improvement in results. Momentum Health (the open scheme) also showed improved results due to increased membership and good expense
management. These improvements were partly offset by the lower earnings from the non-covered Investments business and increased investment in our client
engagement capabilities.
Metropolitan Retail
Metropolitan Retail's core headline earnings declined by 14% to R570m, mainly due to the weaker early duration lapse experience on funeral products, as well
as investments in the African Bank joint venture, in our own branch network, and to improved technology available to our senior advisers. The decision to
adopt a more conservative approach to capitalising IT development costs also affected earnings negatively. This was partly offset by positive mortality
experience and investment returns.
Momentum Corporate
Momentum Corporate's core headline earnings increased by 8% to R903m. This increase was partly driven by an improvement in group risk underwriting
experience. This includes a strong improvement of roughly R100m year-on-year on PHI disability experience. This was partly offset by a decline in risk
experience on group life insurance and lump sum disability business. Management initiatives around the underwriting experience such as premium re-ratings,
increased focus on client servicing and the revised risk-pricing strategy have all contributed to the improved underwriting earnings performance. An
emphasis on expense management also had a positive impact on earnings.
Guardrisk performed exceptionally well again, increasing its core headline earnings by 29% year-on-year to R258m. One of the main drivers of the performance
is a significant improvement in underwriting experience for the year. In the Health business (corporate and public sector schemes), expense savings were a
notable contributor of the 11% earnings improvement to R150m. This includes the impact of introducing a 49% BEE shareholding into our public sector business
which reduced our share of earnings by R25m.
International
Core headline earnings have improved significantly from a loss of R166m for the previous period to a loss of R48m for F2018. This includes the impact of
R88m higher losses from our mobile insurance start up initiative (aYo) and the health insurance joint venture in India (Aditya Birla). These losses are in
line with our business plans. The overall improvement was mainly due to a R57m reduction in central support costs as we start our exit from some African
countries, improved PHI experience in Namibia, as well as strong profit growth from our UK asset management business. Growth in the Ghana, Nigeria, and
Lesotho life businesses also contributed to the improved result.
Shareholder Capital
The Shareholder Capital segment reflects investment income on capital held to support operations, earnings from start-up ventures not yet incorporated into
other segments, and costs not allocated to operating segments (mainly holding company expenses).
The core headline earnings contribution from Shareholder Capital is down 24% to R464m for F2018, partially due to the sale of a high-yielding property that
was held in the shareholder portfolio during F2017, the proceeds of which are now utilised for ongoing property developments that are not yet in rental
generating stage. A decrease in average money market yields also impacted the Shareholder Capital earnings. Finance costs on subordinated debt also
increased due to R750m of new debt being issued during the period. It should also be noted that the ongoing investments into new initiatives have a negative
impact on the size of the investment income earning asset base.
Core headline earnings (Rm) F2018 F2017 Change %
Momentum Retail 920 1 271 (28)
Metropolitan Retail 570 660 (14)
Momentum Corporate 903 835 8
International (48) (166) 71
Operating segments 2 345 2 600 (10)
Shareholder Capital 464 608 (24)
Diluted core headline earnings 2 809 3 208 (12)
New business commentary
New business volumes for the year increased 1% to R42.2bn when measured as PVNBP. The largest contributor to new business is Momentum Retail where volumes
ended 3% higher for the period. Overall the new business margin was disappointing and declined to 0.7%.
Momentum Retail
Momentum Retail sales were 3% up over the year on a PVNBP basis. Single premium business increased by 2% while recurring premium business increased by 1%.
We have seen good growth in our offshore Wealth business, in the new Guaranteed Return Option product, and in recurring savings products. The increase in
volumes did not translate into growth in value of new business, which decreased to R98m (0.4% margin on premiums). This was mainly driven by initial
expenses increasing at a faster rate than volume growth. In addition, more competitive pricing introduced on our Momentum Wealth platform in April 2017 also
negatively affected value of new business.
Metropolitan Retail
Metropolitan Retail sales volumes on a PVNBP basis were down 1% year-on-year. Metropolitan grew recurring premiums by 2%, including risk business up 1% and
savings business up 4%. PVNBP was negatively affected by strengthening of the early duration lapse assumptions. Value of new business declined to R84m
mainly due to the new lapse assumptions, higher renewal expense assumptions and a change in mix towards lower margin products. New business margin decreased
to 1.6%.
Momentum Corporate
Momentum Corporate new business on PVNBP basis increased 1% for the year. Recurring premiums were up 7% while single premiums were 10% down year-on-year.
Improved recurring premiums were driven by our FundsAtWork umbrella fund. Large corporate risk inflows remained under pressure in line with the competitive
underwriting cycle as well as the stricter pricing. With significant effort and resources having been dedicated to re-building the sales and distribution
environment, it was pleasing to see increasingly improved new business performance as the financial year progressed. Value of new business in Corporate
increased by 82% to R124m, while new business margin increased from 0.6% to 1.1%.
International
International new business volumes were down 8% year-on-year, which resulted in value of new business declining to a negative R5m. The decline can be
ascribed to the combination of lower volumes and modelling changes on sales related expenses as well as an increase in initial expenses.
Present Value of New Business Premiums (Rm) F2018 F2017 Change %
Momentum Retail 23 531 22 774 3
Metropolitan Retail 5 091 5 164 (1)
Momentum Corporate 11 218 11 121 1
International 2 337 2 536 (8)
MMI total PVNBP 42 177 41 595 1
Embedded Value
Our total EV was R25.43 per share on 30 June 2018, representing an ROEV of negative 1.1% for the year. Our covered business produced reasonable EV growth
given the significant negative impact of assumption changes and generated ROEV of 7.3%. The ROEV on non-covered operations was -35%, mainly resulting from a
new valuation approach, which resulted in significant downward adjustments in the valuation of most businesses.
Embedded value profits (Rm) EV total ANW Net VIF
New business 301 (1 658) 1 959
Unwind of RDR 2 691 - 2 691
Expected profit - 3 766 (3 766)
Experience variance (177) (22) (155)
Operating assumptions (975) (966) (9)
Investment return on ANW 636 636 -
Investment variance (46) (81) 35
Economic assumption changes 29 18 11
FX translation effect 21 13 8
EV profit on non-covered (2 949) (2 949) -
EV Earnings (469) (1 243) 774
Experience variance
Our overall experience variance, including development expenses, for the period was negative R177m.
Demographic risk experience variances were strong in aggregate (R359m) following the recovery in Momentum Corporate. Retail mortality and disability
generated R279m of positive variances while Corporate generated a positive variance of R28m, compared to the R152m negative variance in the previous period.
International generated a positive variance of R52m.
Our credit risk variance of R96m is down on the prior year number of R117m.
Persistency variance was negative R301m across the group, with the largest impact from the deterioration of persistency experience in Metropolitan Retail of
R141m. This relates to the early duration lapses as discussed under new business commentary. We also saw R59m higher than expected terminations in group
risk products as a result of highly competitive pricing observed across that market segment. Persistency experience on risk business in Momentum Retail was
also negative due to a lower than expected termination experience on level-premium type products.
The negative expense variance for this period reflects the significant investment in our core business.
Operating assumption changes
We made significant operating assumption changes with a net negative impact on EV of R975m. The impact of the expense basis change for the retail businesses
was negative R974m and was introduced following significant overall negative expense variances during F2018. This was partly offset by a positive expense
basis change of R526m for Momentum Corporate.
The termination basis for Momentum Retail was strengthened again for the better than expected persistency on some of our Myriad products and Metropolitan
Retail was strengthened in line with observed early lapse experience. Overall the termination basis changes had an impact of negative R315m.
Another major basis change includes a change in the assumed asset allocation (to a lower risk portfolio) for the long-term portfolio supporting the Myriad
business, thereby reducing the consequential mismatch exposure for shareholders. We have also allowed for the impact of integrating Multiply into the
valuation. Total modelling and other basis changes had a negative impact of R54m on EV.
Non-covered EV earnings
Non-covered EV earnings amounted to nearly negative R3bn for the period. This was mainly due to the reduced valuations of our asset management businesses,
health operations, rewards programme and holding company expenses. Non-covered operations with positive ROEV contributions included Guardrisk, Eris, and our
various health operations.
In reviewing the approach to modelling the non-covered operations, we have adopted a valuation approach that aims to achieve five outcomes:
- Valuations should be based on prudently realistic cash flows
- Valuations should result in valuation metrics that are aligned to those found for listed entities of similar nature
- Valuations should be expected to progress broadly in line with emergence of earnings from the business
- Valuation methodologies should be as consistent as possible across the group
- Generally simplicity is preferred to complexity in the valuation methodology
Capital, capital distribution and outlook
Our capital position remains strong on the current statutory basis and we had a buffer of R2.4bn on 30 June 2018 on our internal basis. The CAR cover ratio
was 2.6x as of 30 June 2018 compared to 2.7x as of 30 June 2017. On a Solvency Assessment and Management (SAM) basis MMI is also well capitalised after
taking into account all capital deployment initiatives and planned capital distributions. In March 2018, Moody's Investors Service confirmed MMIGL's Insurer
Financial Strength (IFS) international scale rating of Baa2 (national rating of http://Aaa.za) and Guardrisk's IFS rating of Baa3 (national scale rating of http://Aaa.za)
with a stable outlook.
The capital buffer decreased by R1.3bn compared to 30 June 2017. This is the net impact from the following movements:
- R0.9bn decrease in the NAV as per the EV statement, driven by the low level of retained earnings
- R1.4bn increase in the NAV of strategic subsidiaries, the NAV is deemed ineligible for loss absorption purposes and therefore removed from the excess
capital position
- An increase in subordinated debt of R750m that was raised during the financial year
Movement in capital buffer R'billion
Opening capital buffer 30 June 2017 3.7
Profit from covered business 1.7
Profit from non-covered business (0.2)
Dividends and new capital (1.9)
Net subordinated debt raised 0.8
Increase in required capital (1.2)
Change in strategic commitments (0.4)
Closing capital buffer 30 June 2018 2.4
Actual capital investments during the period are generally budgeted for at the start of the year and thus do not tie up to 'Change in strategic commitments'
in the table above. The following strategic investments were actually made during the period:
Area of capital distribution R'billion
Capital support for subsidiaries 1.0
UK & Africa operations 0.5
Aditya Birla Joint Venture 0.2
Momentum Short Term Insurance 0.1
Other 0.2
Total 2.0
Capital distribution
At the interim results announcement it was announced that we have reviewed our dividend policy to ensure that it remains consistent with our capital
deployment plans and the need to maintain steady capital ratios under the SAM regime. We indicated that we would in future target a dividend cover range
centred on 2.5x core headline earnings.
Given that our shares are valued at a discount to EV, we also communicated at the interim results announcement that we opted to buy back shares of up to
R2bn in 2018 in lieu of paying out dividends. We commenced our share repurchase programme on 7 March 2018. At 30 June 2018, 47 million shares, valued at
R971m (excluding trading costs) have been bought back. In doing this, we acquired R1.2bn of EV in exchange for the R1.0bn of cash deployed.
The current buy-back programme will almost certainly be fully utilised by end of the current calendar year. We will review the decision between continuing
with the buy-back programme versus paying a cash dividend for our F2019 interim results. The decision will be a function of our price-to-EV rating, our
capital position, and shareholder requirements at such time.
Strategy update
MMI's vision to be the preferred lifetime Financial Wellness partner with a reputation for innovation and trustworthiness remains appropriate. It will
however be brought to life in simpler terms: We exist to enable people from all walks of life and businesses to achieve their financial and life
aspirations. The MMI Group strategy which focuses on client centricity, growth and excellence therefore remains intact. The specific strategic objectives
will, however, be set in more practical and meaningful terms, with an increased focus on execution and delivery. As a group, MMI will refocus to be more
entrepreneurial and commercial in its thinking and decision-making.
To execute on this strategy in a more efficient manner, we have introduced refinements to MMI's operating model. The new operating model design aims to
encourage growth by empowering businesses with end-to-end accountability, which includes a practical client focus. Centralised functions need to
demonstrate clear efficiency or standardisation benefits. We will also be increasingly vigilant on not attempting too many new initiatives at any given
time.
Outlook
It is not easy to turn around a comprehensive financial services company like MMI. The maturity of the South African insurance markets and modest short-term
macro-economic growth prospects continues to put pressure on our revenue growth expectations. Given these factors, combined with increased losses expected
in F2019 from our new initiatives, we expect only a modest increase in earnings for F2019. We will continue to focus on financial discipline, cost
efficiencies and streamlining infrastructure to restore annual earnings to a level of R3.6bn - R4.0bn by F2021. Leading up to F2021, we will be working hard
to build the foundation for longer-term prosperity, which will depend on a strong distribution and service culture, and relevant digital enablement.
5 September 2018
CENTURION
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 2018. The
preparation of the group's results was supervised by the group finance director, Risto Ketola (FIA, FASSA, CFA).
Corporate events
BEE transactions
In March, Metropolitan Health Holdings Ltd entered into a transaction with Workerslife SPV and Thebe SPV whereby they purchased 30% and 19% "A" ordinary
shares in Metropolitan Health Corporate (Pty) Ltd (MHC) respectively. The "A" ordinary shares will automatically convert into ordinary shares after
six months.
Providence Risk Managers (Pty) Ltd entered into a transaction with Thebe Ya Bophelo Administrators (Pty) Ltd whereby they purchased 48% ordinary shares in
Providence Healthcare Risk Managers (Pty) Ltd.
Listed debt
MMI Group Ltd listed new instruments to the total value of R750 million on the JSE Ltd on 4 December 2017. The instruments are unsecured subordinated
callable notes.
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 2018, 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 2018 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 IAS 7 Cash flow statements and IAS 12 Income taxes.
- 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
The group's 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. Multiply encourages clients to be more healthy and active.
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 products to African Bank's client base and lending products to the existing Metropolitan client base.
Momentum Corporate: Momentum Corporate 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. We have announced
our plan to exit a number of African countries to improve focus on remaining operations.
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 product
houses supporting the segments, namely: Momentum Investments, Life Insurance, Health, Short-term Insurance and Client Engagement Solutions. Each of the
product houses design solutions that meet unique Financial Wellness needs of clients as identified by our segment business.
Corporate governance
The board has satisfied itself that appropriate principles of corporate governance (King IV) were applied throughout the year under review.
Changes to the directorate, secretary and directors' shareholding
On 9 October 2017, Voyt Krzychylkiewicz resigned from the board. On 24 November 2017, Ben van der Ross retired from the board having reached retirement age.
On 16 January 2018, Risto Ketola was appointed to the board as group finance director. On 15 February 2018, Nicolaas Kruger stepped down from the board and
as CEO. On the same date, Hillie Meyer was appointed to the board as CEO. On 1 March 2018, Jeanette Cilliers (Marais) was appointed to the board and as
deputy CEO. On 31 March 2018, Mary Vilakazi resigned from the board and as deputy CEO. The group's company secretary, Maliga Chetty, resigned with effect
from 30 September 2018.
All transactions in listed shares of the company involving directors were disclosed on SENS.
Changes to the group executive committee
Appointments/resignations Role Appointments Resignations
Innocent Dutiro CEO International 30 September 2017
Nontokoza Madonsela Group Chief Marketing Officer 9 October 2017
Khanyi Nzukuma CEO Momentum Retail and acting CEO Metropolitan Retail 31 December 2017
Andrew Le Roux Chief Business Transformation Officer 1 January 2018 31 August 2018
Nicolaas Kruger Group CEO 15 February 2018
Hillie Meyer Group CEO 15 February 2018
Peter Tshiguvho CEO Metropolitan Retail 26 February 2018
Jeanette Cilliers (Marais) Deputy CEO and CEO Momentum Investments 1 March 2018
Mary Vilakazi Deputy CEO and CEO Momentum Retail and Metropolitan Retail 31 March 2018
Johann Le Roux CEO Momentum Life 1 April 2018
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 2018 that were not in the ordinary course of business other than those disclosed in the 2018 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
- No interim or final dividend has been declared.
Preference shares
- Dividends of R18.5 million (2017: R19.0 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.
Share buy-back programme
- The group will continue to distribute capital to shareholders by means of repurchasing shares, in lieu of paying a dividend. Up to R2 billion will be used
to buy back shares. At 30 June 2018, 47 million shares (R971 million excluding transaction costs) have been bought back.
Integrated information
The integrated report for 2018 will be posted to shareholders on or about 30 September 2018, and can be viewed online on 7 September 2018 at http://www.mmiholdings.com
following the results announcement.
Directors' responsibility
The preparation of these results, and the correct extraction thereof from the group's audited 2018 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 2018 annual financial statements, which have been audited by
PricewaterhouseCoopers Inc. and their unqualified audit report, together with the group's audited 2018 annual financial statements, are available for
inspection at the company's registered office and on MMI's website. In addition, the summarised group embedded value information has been extracted from the
2018 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
Hillie Meyer Group chief executive officer
Centurion
4 September 2018
DIRECTORS: MJN Njeke (chairman), LL von Zeuner (deputy chairman), HP Meyer (group chief executive officer), JC Cilliers (Marais) (deputy chief executive officer),
RS Ketola (group finance director), P Cooper, F Daniels (Jakoet), Prof SC Jurisich, Prof JD Krige, PJ Moleketi, SA Muller, V Nkonyeni, KC Shubane,
FJC Truter, JC van Reenen
GROUP COMPANY SECRETARY: Maliga Chetty
WEBSITE: http://www.mmiholdings.com
TRANSFER SECRETARIES - SOUTH AFRICA: 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
TRANSFER SECRETARIES - NAMIBIA: Transfer Secretaries (Pty) Ltd (registration number 93/713) 4 Robert Mugabe Avenue, Windhoek. PO Box 2401, Windhoek
Telephone: +264 61 22 7647 E-mail: info@nsx.com.na
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
REGISTRATION NUMBER: 2000/031756/06
JSE CODE: MMI NSX CODE: MIM ISIN NO: ZAE000149902
SENS ISSUE DATE: 5 September 2018
MMI HOLDINGS GROUP - IFRS FINANCIAL INFORMATION
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30.06.2018 30.06.2017
Rm Rm
ASSETS
Intangible assets 10 515 11 260
Owner-occupied properties 3 864 4 105
Property and equipment 323 389
Investment properties 8 614 7 340
Properties under development 136 111
Investments in associates and joint ventures 636 595
Employee benefit assets 436 410
Financial assets designated at fair value through income 395 146 369 205
Investments in associates designated at fair value through income 11 383 15 039
Derivative financial assets 2 910 2 439
Available-for-sale financial assets - 18
Held-to-maturity financial assets 437 397
Loans and receivables 5 629 7 293
Reinsurance contract assets 4 989 4 495
Deferred income tax 290 249
Insurance and other receivables 4 962 4 621
Current income tax assets 283 581
Cash and cash equivalents 25 812 27 353
Total assets 476 365 455 900
EQUITY
Equity attributable to owners of the parent 22 328 22 956
Non-controlling interests 462 292
Total equity 22 790 23 248
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts 109 203 106 581
Short-term insurance contracts 8 728 7 661
Investment contracts 272 411 257 772
- with discretionary participation features (DPF) 24 550 24 338
- designated at fair value through income 247 861 233 434
Financial liabilities designated at fair value through income 38 217 37 331
Derivative financial liabilities 2 255 1 827
Financial liabilities at amortised cost 2 420 1 229
Reinsurance contract liabilities 1 685 1 368
Deferred income tax 2 874 3 198
Employee benefit obligations 1 153 1 334
Other payables 14 304 14 128
Provisions 73 57
Current income tax liabilities 252 166
Total liabilities 453 575 432 652
Total equity and liabilities 476 365 455 900
SUMMARISED CONSOLIDATED INCOME STATEMENT
12 mths to 12 mths to
30.06.2018 30.06.2017
Rm Rm
Net insurance premiums 29 893 28 191
Fee income (1) 7 536 7 411
Investment income 20 084 18 958
Net realised and fair value gains 17 786 183
Net income 75 299 54 743
Net insurance benefits and claims 27 232 24 441
Change in actuarial liabilities and related reinsurance 1 794 (2 267)
Change in long-term insurance contract liabilities 1 612 (1 437)
Change in short-term insurance contract liabilities (71) (86)
Change in investment contracts with DPF liabilities 285 (855)
Change in reinsurance assets (322) (278)
Change in reinsurance liabilities 290 389
Fair value adjustments on investment contract liabilities 17 555 6 650
Fair value adjustments on collective investment scheme liabilities 2 738 688
Depreciation, amortisation and impairment expenses 1 226 1 665
Employee benefit expenses 5 457 5 249
Sales remuneration 5 796 5 283
Other expenses 7 779 7 367
Expenses 69 577 49 076
Results of operations 5 722 5 667
Share of loss of associates and joint ventures (213) (126)
Finance costs (2) (1 048) (1 023)
Profit before tax 4 461 4 518
Income tax expense (3 039) (2 937)
Earnings for year 1 422 1 581
Attributable to:
Owners of the parent 1 369 1 536
Non-controlling interests 53 45
1 422 1 581
Basic earnings per ordinary share (cents) 88.2 98.4
Diluted earnings per ordinary share (cents) 88.1 98.1
1. Fee income consists of the following:
- Investment contracts: R2 384 million (2017: R2 477 million)
- Trust and fiduciary services: R1 506 million (2017: R1 608 million)
- Health administration: R1 780 million (2017: R1 764 million)
- Other fee income: R1 866 million (2017: R1 562 million)
2. Finance costs consist of the following:
- Preference shares issued by MMI: R110 million (2017: R113 million)
- Subordinated debt: R397 million (2017: R351 million)
- Cost of carry positions: R363 million (2017: R408 million)
- Other: R178 million (2017: R151 million)
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
12 mths to 12 mths to
30.06.2018 30.06.2017
Rm Rm
Earnings for year 1 422 1 581
Other comprehensive income/(loss), net of tax 138 (103)
Items that may subsequently be reclassified to income (6) (224)
Exchange differences on translating foreign operations 9 (218)
Available-for-sale financial assets (7) (4)
Share of other comprehensive loss of associates (8) (2)
Items that will not be reclassified to income 144 121
Land and building revaluation 131 142
Remeasurements of post-employee benefit funds 14 11
Income tax relating to items that will not be reclassified (1) (32)
Total comprehensive income for year 1 560 1 478
Total comprehensive income attributable to:
Owners of the parent 1 507 1 434
Non-controlling interests 53 44
1 560 1 478
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
30.06.2018 30.06.2017 30.06.2018 30.06.2017
Rm Rm Rm Rm
Earnings 1 369 1 536 1 369 1 536
Finance costs - convertible preference shares 40 39
Dilutory effect of subsidiaries (1) (16) (14)
Diluted earnings 1 393 1 561
Realised gains on available-for-sale financial assets (13) - (13) -
Tax on realised gains on available-for-sale financial assets 2 - 2 -
Intangible assets and other impairments (2) 97 417 97 417
Tax on intangible assets and other impairments (16) (61) (16) (61)
Loss/(Gain) on sale of business/subsidiary 18 (94) 18 (94)
Tax on loss/(gain) on sale of business/subsidiary - 21 - 21
FCTR reversal on sale of foreign subsidiary (13) - (13) -
Impairment of owner-occupied property below cost - 28 - 28
Headline earnings (3) 1 444 1 847 1 468 1 872
Net realised and fair value losses on excess 40 94 40 94
Basis and other changes and investment variances 651 458 651 458
Adjustments for MMI shares held by policyholder funds (32) (42) (32) (42)
Amortisation of intangible assets relating to business combinations 543 577 543 577
Non-recurring items (4) 115 249 115 249
BEE cost 24 - 24 -
Core headline earnings (5) 2 785 3 183 2 809 3 208
1. MHC is consolidated at 51% (2017: 100%) and the MMI Holdings Namibian group, Metropolitan Kenya and Cannon are consolidated at 96% in earnings. For
purposes of diluted earnings, diluted non-controlling interests and investment returns are reinstated. From June 2017, there is no longer a dilutory
effect for MHC as all the shares which were held by Kagiso Tiso Holdings (Pty) Ltd (KTH) were purchased by the group in June 2017. The subsequent
sale of the 49% shareholding in MHC in the current year does not have a dilutory effect.
2. Current year impairments relate mainly to software in Metropolitan Retail as certain components are no longer used and goodwill in International due to
a decline in the directors' valuation relating to a restructure of the UK businesses. The June 2017 period includes impairments relating to:
- Goodwill, customer relations and internally developed software (R213 million) in the International segment that were recognised on acquisition of
subsidiaries as the companies are making losses. A risk discount rate of 18.2% 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.
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. It 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, BEE costs, 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
30.06.2018 30.06.2017
Basic
Core headline earnings 179.4 203.9
Headline earnings 93.0 118.3
Earnings 88.2 98.4
Weighted average number of shares (million) 1 552 1 561
Basic number of shares in issue (million) 1 512 1 557
Diluted
Core headline earnings 176.0 200.0
Weighted average number of shares (million) (1) 1 596 1 604
Headline earnings 92.9 117.7
Earnings 88.1 98.1
Weighted average number of shares (million) (2) 1 580 1 591
1. For diluted core headline earnings per share, treasury shares held on behalf of contract holders are deemed to be issued.
2. For diluted earnings and headline earnings per share, treasury shares held on behalf of contract holders are deemed to be cancelled.
DIVIDENDS 2018 2017
Ordinary listed MMI Holdings Ltd shares (cents per share)
Interim - March - 65
Final - September - 92
Total - 157
Share buy-back programme
At 30 June 2018, 47 million shares (R971 million excluding transaction costs) have been bought back as part of the R2 billion share buy-back programme.
MMI Holdings Ltd convertible redeemable preference shares (issued to KTH)
The A3 MMI Holdings Ltd preference shares are redeemable in June 2019 (after extending it under the same terms by 18 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 2 October 2017,
1 million preference shares were converted into ordinary shares. The ordinary shares were originally issued at a price of R10.18 per share. Dividends are
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 2017 (R369 million of the ordinary dividends declared in September 2016)
and R261 million of the ordinary dividends declared in March 2017 were attributed to RMI Holdings Ltd.
A3 MMI Holdings Ltd preference share dividends 2018 2017
Rm Rm
KTH
Interim - March 19 20
Final - September 19 19
Total 38 39
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
12 mths to 12 mths to
30.06.2018 30.06.2017
Rm Rm
Changes in share capital
Balance at beginning and end 9 9
Changes in share premium
Balance at beginning 13 737 13 847
Conversion of preference shares 7 14
Decrease/(Increase) in treasury shares held on behalf of contract holders 14 (124)
Balance at end 13 758 13 737
Changes in other reserves
Balance at beginning 1 788 1 955
Total comprehensive income/(loss) 138 (102)
Employee share schemes - value of services provided 43 (22)
Change in non-distributable reserves (6) (3)
Transfer to retained earnings (196) (40)
Balance at end (1) 1 767 1 788
Changes in retained earnings
Balance at beginning 7 422 8 298
Total comprehensive income 1 369 1 536
Dividend paid (1 442) (2 456)
Shares repurchased (974) -
Transactions with non-controlling interests 223 4
Transfer from other reserves 196 40
Balance at end 6 794 7 422
Equity attributable to owners of the parent 22 328 22 956
Changes in non-controlling interests
Balance at beginning 292 290
Total comprehensive income 53 44
Dividend paid (32) (53)
Transactions with owners 133 11
Business combinations 16 -
Balance at end 462 292
Total equity 22 790 23 248
1. Other reserves consist of the following:
- Land and building revaluation reserve: R732 million (2017: R807 million)
- Foreign currency translation reserve: -R97 million (2017: -R98 million)
- Revaluation of available-for-sale investments: Rnil (2017: R7 million)
- Non-distributable reserve: R57 million (2017: R54 million)
- Employee benefit revaluation reserve: R102 million (2017: R88 million)
- Fair value adjustment for preference shares issued by MMI Holdings Ltd: R940 million (2017: R940 million)
- Equity-settled share-based payment arrangements: R33 million (2017: -R10 million)
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
12 mths to 12 mths to
30.06.2018 30.06.2017
Rm Rm
Cash flow from operating activities
Cash utilised in operations (12 313) (12 702)
Interest and dividends received 18 936 17 742
Income tax paid (3 053) (3 463)
Interest paid (920) (991)
Net cash inflow from operating activities 2 650 586
Cash flow from investing activities
Net (acquisition)/disposal of subsidiaries (98) 74
Net acquisition of associates and joint ventures (264) (55)
Net loan repayments by related parties 11 33
Net purchases of owner-occupied properties (47) (544)
Net purchases of property and equipment (117) (119)
Net purchases of intangible assets (81) (163)
Disposal of non-current assets held for sale - 470
Dividends from associates 2 16
Net cash outflow from investing activities (594) (288)
Cash flow from financing activities
Net (repayments)/proceeds of borrowings (2 275) 547
Dividends paid to equity holders (1 442) (2 456)
Dividends paid to non-controlling interest shareholders (32) (53)
Increase/(Decrease) in treasury shares held on behalf of contract holders 14 (124)
Transactions with minority shareholders 356 15
Other equity transactions 6 (22)
Net issue of subordinated call notes 750 -
Shares repurchased (974) -
Net cash outflow from financing activities (3 597) (2 093)
Net cash flow (1 541) (1 795)
Cash resources and funds on deposit at beginning 27 353 29 148
Cash resources and funds on deposit at end 25 812 27 353
NON-CONTROLLING INTERESTS
30.06.2018 30.06.2017
% %
Cannon Assurance 33.7 33.7
Eris Property Group 23.9 23.7
Metropolitan Health Ghana 0.9 0.9
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 9.9
Momentum Mozambique 33.0 33.0
Momentum Swaziland 33.0 33.0
Metropolitan Health Corporate 49.0 -
Quanta Insurance (Namibia) 30.0 -
BUSINESS COMBINATIONS - JUNE 2018
There were no significant business combinations for the 12 months ended June 2018. Intangibles relating to goodwill (R27 million), customer relationships
relating to short-term business (R84 million) and health (R23 million), broker network (R71 million), and computer software (R5 million) were recognised
due to small acquisitions.
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.
RECONCILIATION OF GOODWILL
30.06.2018 30.06.2017
Rm Rm
Balance at beginning 1 128 1 237
Business combinations (1) 27 11
Impairment charges (2) (31) (100)
Exchange differences - (20)
Balance at end 1 124 1 128
1. An acquisition was made in the Guardrisk group for R90 million. This resulted in the recognition of R27 million goodwill in the current year. The
entity's business is that of underwriting managers.
2. Goodwill relating to the Financial Partners (International segment) acquisition was impaired in the current year due to a decline in the directors'
valuation relating to a restucture of the UK businesses. In the prior year, goodwill relating to the Cannon (International segment) and Momentum
Financial Technology (International segment) acquisitions were fully impaired by R62 million and R38 million respectively due to these companies making
losses.
MMI HOLDINGS GROUP - SEGMENTAL INFORMATION
Momentum Metropolitan Momentum Shareholder Segmental Reconciling IFRS
Retail Retail Corporate International (1) Capital total Items (2) total
12 mths to 30.06.2018 Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 25 012 7 368 28 562 4 363 - 65 305 (35 412) 29 893
Recurring premiums 9 938 6 064 18 642 3 751 - 38 395 (13 152) 25 243
Single premiums 15 074 1 304 9 920 612 - 26 910 (22 260) 4 650
Fee income 3 330 178 4 654 839 85 9 086 (1 550) 7 536
Fee income 2 965 174 4 001 740 - 7 880 (344) 7 536
Intergroup fee income 365 4 653 99 85 1 206 (1 206) -
Expenses
Net payments to contract holders
External payments 25 045 5 660 30 002 2 714 - 63 421 (36 189) 27 232
Other expenses 6 137 2 652 6 212 2 344 280 17 625 2 633 20 258
Sales remuneration 2 065 1 066 2 024 623 - 5 778 18 5 796
Administration expenses 3 064 1 392 2 995 1 284 731 9 466 65 9 531
Amortisation due to business
combinations and impairments - 58 22 31 46 157 715 872
Cell captive business - - 153 - - 153 2 092 2 245
Direct property expenses - - - - - - 460 460
Asset management and other
fee expenses 365 87 258 46 27 783 489 1 272
Holding company expenses - - - - 82 82 - 82
Intergroup expenses 643 49 760 360 (606) 1 206 (1 206) -
Diluted core headline earnings 920 570 903 (48) 464 2 809 - 2 809
Operating profit/(loss) 1 387 809 1 099 (26) (162) 3 107 - 3 107
Tax on operating profit/(loss) (525) (239) (308) (48) 6 (1 114) - (1 114)
Investment income 77 - 155 32 787 1 051 - 1 051
Tax on investment income (19) - (43) (6) (167) (235) - (235)
Covered 1 096 611 425 191 538 2 861 - 2 861
Non-covered (176) (41) 478 (239) (74) (52) - (52)
920 570 903 (48) 464 2 809 - 2 809
Actuarial liabilities 205 817 34 903 135 394 14 228 - 390 342 - 390 342
1. The 'International' column includes amounts received/incurred by companies the group has decided to exit: Net insurance premiums R682 million; external
payments R481 million and administration expenses R103 million.
2. The 'Reconciling items' column includes: investment contract business premiums and claims; intergroup fee income and expenses; direct property and asset
management fees for all entities, except non-life entities, that are set off against investment income for management reporting purposes but shown as an
expense for accounting purposes; 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.
Momentum Metropolitan Momentum Shareholder Segmental Reconciling IFRS
Retail Retail Corporate International (1) Capital total Items (2) total
12 mths to 30.06.2017 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/(loss) (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 'International' column includes amounts received/incurred by companies the group has decided to exit: Net insurance premiums R524 million; external
payments R359 million and administration expenses R113 million.
2. The 'Reconciling items' column includes: investment contract business premiums and claims; intergroup fee income and expenses; direct property and asset
management fees for all entities, except non-life entities, that are set off against investment income for management reporting purposes but shown as an
expense for accounting purposes; 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
12 mths to 12 mths to
Change 30.06.2018 30.06.2017
% Rm Rm
Momentum Retail (28) 920 1 271
Metropolitan Retail (14) 570 660
Momentum Corporate 8 903 835
International 71 (48) (166)
Operating segments (1) (10) 2 345 2 600
Shareholder Capital (24) 464 608
Total diluted core headline earnings (12) 2 809 3 208
1. Includes investments in four main new initiatives being India, aYo, Money Management and MMI Lending of R322 million (2017: R195 million).
SEGMENT BY CENTRE OF EXCELLENCE
Momentum Metropolitan Momentum Shareholder
Retail Retail Corporate International Capital Total
Rm Rm Rm Rm Rm Rm
12 mths to 30.06.2018
Covered
Operating profit/(loss) 1 096 611 425 191 (8) 2 315
Investment income - - - - 546 546
Total 1 096 611 425 191 538 2 861
Non-covered
Investment and savings 1 - 91 99 - 191
Life insurance - - - (69) - (69)
Health 19 - 151 (156) - 14
Short-term insurance (56) - 260 (3) - 201
Client engagement (140) (29) (8) (19) 9 (187)
Unallocated expenses - - - - (104) (104)
Other operations - (12) (16) (91) 21 (98)
Total (176) (41) 478 (239) (74) (52)
Core earnings 920 570 903 (48) 464 2 809
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
MOMENTUM INVESTMENTS CENTRE OF EXCELLENCE - NON-COVERED BUSINESS
Momentum Momentum
Retail Corporate International Total
Rm Rm Rm Rm
12 mths to 30.06.2018
Revenue 940 764 479 2 183
Fee income 872 713 413 1 998
Performance fees 1 - - 1
Investment income 66 52 2 120
Fair value gains/(losses) 1 (1) 64 64
Expenses and finance costs (905) (630) (378) (1 913)
Fair value adjustments on investment contracts - - (64) (64)
Other expenses (879) (595) (314) (1 788)
Finance costs (26) (35) - (61)
Share of profit of associates - 1 - 1
Profit before tax 35 135 101 271
Income tax expense (34) (23) (2) (59)
Non-controlling interest - (21) - (21)
Core earnings 1 91 99 191
Operating (loss)/profit before tax (7) 109 98 200
Tax on operating (loss)/profit (22) (28) (1) (51)
Investment income 40 14 2 56
Tax on investment income (10) (4) - (14)
Diluted core headline earnings 1 91 99 191
Assets under management at year-end 304 880 117 080 74 951 496 911
Restated
12 mths to 30.06.2017 (1)
Revenue 1 105 802 490 2 397
Fee income 1 041 656 386 2 083
Performance fees 3 13 - 16
Investment income 61 121 1 183
Fair value gains - 12 103 115
Expenses and finance costs (1 001) (626) (405) (2 032)
Fair value adjustments on investment contracts - - (103) (103)
Other expenses (992) (577) (302) (1 871)
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
Assets under management at year-end 306 359 114 454 68 685 489 498
1. The fee income and other expenses line items were being disclosed gross of intersegmental intercompanies. This is now being eliminated within the
segment. The prior year has been restated.
HEALTH CENTRE OF EXCELLENCE - NON-COVERED BUSINESS
Momentum Momentum
Retail Corporate International Total
Rm Rm Rm Rm
12 mths to 30.06.2018
Revenue 605 1 861 477 2 943
Net insurance premiums 217 382 274 873
Fee income 370 1 428 181 1 979
Investment income 13 24 22 59
Intergroup fees 5 27 - 32
Expenses and finance costs (579) (1 608) (389) (2 576)
Net payments to contract holders (164) (260) (186) (610)
Other expenses (413) (1 347) (203) (1 963)
Finance costs (2) (1) - (3)
Share of loss of associates - - (188) (188)
Profit/(Loss) before tax 26 253 (100) 179
Income tax expense (7) (68) (31) (106)
Non-controlling interest - (34) (25) (59)
Earnings attributable to ordinary shareholders 19 151 (156) 14
Operating profit/(loss) before tax 15 192 (154) 53
Tax on operating profit/(loss) (4) (56) (19) (79)
Investment income 11 21 18 50
Tax on investment income (3) (6) (1) (10)
Diluted core headline earnings 19 151 (156) 14
Closed schemes - 104 61 165
Open scheme 26 12 (217) (179)
Other (7) 35 - 28
19 151 (156) 14
Open schemes Closed schemes Total
Momentum Retail principal members 114 018 - 114 018
Momentum Corporate principal members 52 130 818 296 870 426
International lives 1 049 726 399 590 1 449 316
1 215 874 1 217 886 2 433 760
HEALTH CENTRE OF EXCELLENCE - NON-COVERED BUSINESS
Momentum Momentum
Retail Corporate International Total
Rm Rm Rm Rm
Restated
12 mths to 30.06.2017 (1)
Revenue 560 1 884 468 2 912
Net insurance premiums 209 390 259 858
Fee income 340 1 419 191 1 950
Investment income 11 27 18 56
Intergroup fees - 48 - 48
Expenses and finance costs (603) (1 691) (384) (2 678)
Net payments to contract holders (151) (279) (168) (598)
Other expenses (450) (1 411) (216) (2 077)
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 (loss)/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
Open schemes Closed schemes Total
Momentum Retail principal members 108 244 - 108 244
Momentum Corporate principal members 50 380 834 061 884 441
International lives 207 882 404 756 612 638
366 506 1 238 817 1 605 323
1. The other expenses line item was being disclosed gross of intersegmental intercompanies. This is now being eliminated within the segment.
The prior year has been restated.
SHORT-TERM INSURANCE CENTRE OF EXCELLENCE
Momentum Momentum
Retail Corporate International Total
Rm Rm Rm Rm
12 mths to 30.06.2018
Net insurance premiums 731 - 4 735
Fee income 6 656 15 677
Management fees - 456 - 456
Investment fees - 73 - 73
Underwriting fees - 125 - 125
Other fee income 6 2 15 23
Investment income 41 117 1 159
Total income 778 773 20 1 571
Expenses and finance costs (867) (420) (24) (1 311)
Net payments to contract holders (486) - (2) (488)
Acquisition costs (1) (113) - (8) (121)
Other expenses (268) (409) (14) (691)
Finance costs - (11) - (11)
(Loss)/Profit before tax (89) 353 (4) 260
Income tax expense 33 (93) - (60)
Non-controlling interest - - 1 1
Earnings attributable to ordinary shareholders (56) 260 (3) 201
Operating (loss)/profit before tax (109) 236 (4) 123
Tax on operating (loss)/profit 39 (60) - (21)
Investment income 20 116 1 137
Tax on investment income (6) (32) - (38)
Diluted core headline earnings (56) 260 (3) 201
Ability - 2 - 2
Momentum Short-term Insurance 8 - - 8
MMI Short-term Insurance Administration (64) - - (64)
Guardrisk Group - 258 - 258
Quanta Insurance (Namibia) - - (3) (3)
(56) 260 (3) 201
1. The acquisition costs relating to the Momentum Corporate segment are included in underwriting profit.
SHORT-TERM INSURANCE CENTRE OF EXCELLENCE
Momentum Metropolitan Momentum
Retail Retail Corporate 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
Acquisition costs (1) (122) - - (34) (156)
Other expenses (213) (9) (367) (81) (670)
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 (loss)/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)
1. The acquisition costs relating to the Momentum Corporate segment are included in underwriting profit.
MMI HOLDINGS GROUP - STATUTORY EXCESS
STATUTORY EXCESS
30.06.2018 30.06.2017
Rm Rm
Group excess per reporting basis 22 328 22 956
Net assets - other businesses (3 430) (2 849)
Fair value adjustments on Metropolitan business acquisition and other consolidation adjustments (2 684) (2 946)
Excess - long-term insurance business, net of non-controlling interests (1) 16 214 17 161
Disregarded assets (2) (1 111) (847)
Difference between statutory and published valuation methods (1 574) (942)
Write-down of subsidiaries and associates for statutory purposes (1 262) (1 328)
Unsecured subordinated debt 4 374 3 602
Consolidation adjustments (32) (33)
Statutory excess - long-term insurance business 16 609 17 613
Capital adequacy requirement (CAR) (Rm) (3) 6 398 6 577
Ratio of long-term insurance business excess to CAR (times) 2.6 2.7
Discretionary margins 12 892 12 407
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 R431 million (2017: R464 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
30.06.2018 30.06.2017
EMBEDDED VALUE RESULTS Rm Rm
Covered business
Reporting excess - long-term insurance business 16 214 17 161
Reclassification to non-covered business (2 766) (2 206)
13 448 14 955
Disregarded assets (1) (471) (504)
Difference between statutory and published valuation methods (1 574) (942)
Dilutory effect of subsidiaries (2) (52) (53)
Consolidation adjustments (3) (15) (21)
Value of MMI Group Ltd preference shares issued (500) (500)
Diluted adjusted net worth - covered business 10 836 12 935
Net value of in-force business 21 904 21 130
Diluted embedded value - covered business 32 740 34 065
Non-covered business
Net assets - non-covered business within life insurance companies 2 766 2 206
Net assets - non-covered business outside life insurance companies 3 430 2 849
Consolidation adjustments and transfers to covered business (3) (2 306) (2 415)
Adjustments for dilution (4) 660 720
Diluted adjusted net worth - non-covered business 4 550 3 360
Write-up to directors' value 2 311 5 098
Non-covered business 4 124 5 995
Holding company expenses (5) (1 232) (322)
International holding company expenses (5) (581) (575)
Diluted embedded value - non-covered business 6 861 8 458
Diluted adjusted net worth 15 386 16 295
Net value of in-force business 21 904 21 130
Write-up to directors' value 2 311 5 098
Diluted embedded value 39 601 42 523
Required capital - covered business (adjusted for qualifying debt) (6) 5 480 6 449
Surplus capital - covered business 5 356 6 486
Diluted embedded value per share (cents) 2 543 2 651
Diluted adjusted net worth per share (cents) 988 1 016
Diluted number of shares in issue (million) (7) 1 557 1 604
1. Disregarded assets include Sage intangible assets of R431 million (2017: R464 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.
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 2): R114 million (2017: R106 million)
- Treasury shares held on behalf of contract holders: R292 million (2017: R353 million)
- Liability - MMI Holdings Ltd convertible preference shares issued to KTH: R254 million (2017: R261 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 R9 854 million (2017: R10 051 million) and is adjusted for qualifying debt of
R4 374 million (2017: R3 602 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
30.06.2018 30.06.2017
Rm Rm
Momentum Retail 11 553 11 379
Gross value of in-force business 13 037 12 865
Less cost of required capital (1 484) (1 486)
Metropolitan Retail 4 023 3 758
Gross value of in-force business 4 659 4 396
Less cost of required capital (636) (638)
Momentum Corporate 4 250 3 846
Gross value of in-force business 5 183 4 743
Less cost of required capital (933) (897)
International 2 078 2 147
Gross value of in-force business 2 366 2 403
Less cost of required capital (288) (256)
Net value of in-force business 21 904 21 130
EMBEDDED VALUE DETAIL
Adjusted Net value of
net worth in-force 30.06.2018 30.06.2017
Rm Rm Rm Rm
Covered business
Momentum Retail 3 977 11 553 15 530 15 716
Metropolitan Retail 2 152 4 023 6 175 6 007
Momentum Corporate 2 524 4 250 6 774 6 409
International 1 755 2 078 3 833 3 913
Shareholder Capital 428 - 428 2 020
Total covered business 10 836 21 904 32 740 34 065
Write-up to
Adjusted directors'
net worth value 30.06.2018 30.06.2017
Rm Rm Rm Rm
Non-covered business
Momentum Retail 1 285 (322) 963 2 107
Investment and savings 686 162 848 1 402
Health (30) 439 409 379
Short-term insurance 629 (159) 470 514
Client engagement - (764) (764) (188)
Metropolitan Retail - - - (78)
Client engagement - - - (78)
Momentum Corporate 1 690 3 716 5 406 5 747
Investment and savings 405 797 1 202 1 370
Health 171 1 016 1 187 1 515
Short-term insurance 1 137 1 903 3 040 2 853
Client engagement - - - 9
Other (23) - (23) -
International 601 149 750 60
Investment and savings (1) 345 431 776 712
Life insurance 358 (77) 281 279
Health 488 339 827 800
Short-term insurance 60 37 97 139
Client engagement - - - (92)
Other (shared services) (2) (650) (581) (1 231) (1 778)
Shareholder Capital 974 (1 232) (258) 622
Short-term insurance - - - 101
Client engagement 388 - 388 368
Other (head office expenses) (2) 586 (1 232) (646) 153
Total non-covered business 4 550 2 311 6 861 8 458
Total embedded value 15 386 24 215 39 601 42 523
Diluted net asset value - non-covered business (4 550)
Adjustments to covered business - net asset value 5 378
Reporting excess - long-term insurance business 16 214
1. This includes MMI non-covered subsidiaries domiciled in the United Kingdom and related territories.
2. 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 Covered Appraisal Covered Appraisal
VALUATION METHOD methodology value 30.06.2018 methodology value 30.06.2017
Rm Rm Rm Rm Rm Rm
Non-covered business
Momentum Retail 444 519 963 955 1 152 2 107
Investment and savings 444 404 848 576 826 1 402
Health - 409 409 379 - 379
Short-term insurance - 470 470 - 514 514
Client engagement - (764) (764) - (188) (188)
Metropolitan Retail - - - - (78) (78)
Client engagement - - - - (78) (78)
Momentum Corporate 3 040 2 366 5 406 4 388 1 359 5 747
Investment and savings - 1 202 1 202 - 1 370 1 370
Health - 1 187 1 187 1 535 (20) 1 515
Short-term insurance 3 040 - 3 040 2 853 - 2 853
Client engagement - - - - 9 9
Other - (23) (23) - - -
International 1 064 (314) 750 1 143 (1 083) 60
Investment and savings 393 383 776 458 254 712
Life insurance 204 77 281 242 37 279
Health 438 389 827 417 383 800
Short-term insurance 29 68 97 26 113 139
Client engagement - - - - (92) (92)
Other (shared services) - (1 231) (1 231) - (1 778) (1 778)
Shareholder Capital - (258) (258) - 622 622
Short-term insurance - - - - 101 101
Client engagement - 388 388 - 368 368
Other (head office expenses) - (646) (646) - 153 153
Total non-covered business 4 548 2 313 6 861 6 486 1 972 8 458
- Covered methodology refers to APN107 (embedded value methodology) and the risk discount rate of covered business. Momentum Wealth, Guardrisk and selected
International entities are valued using embedded value methodology.
- 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.
- Appraisal value approach is followed for all remaining businesses. The key assumption used in the model is the distributable cash flow. Other assumptions
include the risk discount rate (based on the risk free rate plus an assumed equity risk premium) and a calculated perpetuity factor.
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE
Covered business 12 mths to 12 mths to
30.06.2018 30.06.2017
Gross value
Adjusted net of in-force Cost of
worth (ANW) (VIF) CAR Total EV Total EV
Notes Rm Rm Rm Rm Rm
Profit from new business (1 658) 2 233 (189) 386 643
Embedded value from new business A (1 658) 2 148 (189) 301 547
Expected return to end of period B - 85 - 85 96
Profit from existing business 2 778 (1 471) 147 1 454 3 123
Expected return - unwinding of RDR B - 2 503 (343) 2 160 2 327
Release from the cost of required capital C - - 446 446 442
Expected (or actual) net of tax profit transfer to net worth D 3 766 (3 766) - - -
Operating experience variances E 29 (173) 18 (126) 18
Development expenses F (51) - - (51) (67)
Operating assumption changes G (966) (35) 26 (975) 403
Embedded value profit from operations 1 120 762 (42) 1 840 3 766
Investment return on adjusted net worth H 636 - - 636 652
Investment variances I (81) 75 (40) (46) (1 354)
Economic assumption changes J 18 (9) 20 29 (164)
Exchange rate movements K 13 10 (2) 21 (36)
Embedded value profit - covered business 1 706 838 (64) 2 480 2 864
Transfer of business to non-covered business L (59) - - (59) -
Other capital transfers M (552) - - (552) (700)
Dividend paid (3 194) - - (3 194) (3 066)
Change in embedded value - covered business (2 099) 838 (64) (1 325) (902)
Non-covered business
Change in directors' valuation and other items (2 033) (749)
Change in holding company expenses (916) (86)
Embedded value loss - non-covered business (2 949) (835)
Transfer of business from covered business L 59 -
Other capital transfers M 552 700
Dividend paid 1 752 610
Shares repurchased (974) -
Finance costs - preference shares (37) (39)
Change in embedded value - non-covered business (1 597) 436
Total change in group embedded value (2 922) (466)
Total embedded value (loss)/profit (469) 2 029
Return on embedded value (%) - internal rate of return (1.1%) 4.7%
ANALYSIS OF CHANGES IN ADJUSTED NET WORTH
Covered business 12 months to
30.06.2018
Momentum Metropolitan Momentum Shareholder
Retail Retail Corporate International Capital Total
Rm Rm Rm Rm Rm Rm
Embedded value from new business (941) (294) (182) (241) - (1 658)
Expected (or actual) net of tax profit
transfer to net worth 1 987 822 493 464 - 3 766
Operating experience variances (37) (20) 105 14 (33) 29
Development expenses (20) (24) (7) - - (51)
Operating assumption changes (823) (356) 335 (122) - (966)
Embedded value profit/(loss) from operations 166 128 744 115 (33) 1 120
Investment return on adjusted net worth 226 115 129 112 54 636
Investment variances (103) 21 19 (18) - (81)
Economic assumption changes (3) 25 - (4) - 18
Exchange rate movements - - - 13 - 13
Embedded value profit - covered business 286 289 892 218 21 1 706
ANALYSIS OF CHANGES IN GROSS VALUE OF IN-FORCE
Covered business 12 months to
30.06.2018
Momentum Metropolitan Momentum
Retail Retail Corporate International Total
Rm Rm Rm Rm Rm
Embedded value from new business 1 122 428 342 256 2 148
Expected return - unwinding of RDR 1 269 434 580 305 2 588
Expected (or actual) net of tax profit
transfer to net worth (1 987) (822) (493) (464) (3 766)
Operating experience variances (19) (13) (137) (4) (173)
Operating assumption changes (277) 83 289 (130) (35)
Embedded value profit/(loss) from operations 108 110 581 (37) 762
Investment variances 28 102 (38) (17) 75
Economic assumption changes 36 51 (103) 7 (9)
Exchange rate movements - - - 10 10
Embedded value profit/(loss) - covered business 172 263 440 (37) 838
ANALYSIS OF CHANGES IN COST OF CAR
Covered business 12 months to
30.06.2018
Momentum Metropolitan Momentum
Retail Retail Corporate International Total
Rm Rm Rm Rm Rm
Embedded value from new business (83) (50) (36) (20) (189)
Expected return - unwinding of RDR (143) (62) (106) (32) (343)
Release from the cost of required capital 218 102 126 - 446
Operating experience variances - - 18 - 18
Operating assumption changes 24 - - 2 26
Embedded value profit/(loss) from operations 16 (10) 2 (50) (42)
Investment variances (14) 12 (38) - (40)
Economic assumption changes - - - 20 20
Exchange rate movements - - - (2) (2)
Embedded value profit/(loss) - covered business 2 2 (36) (32) (64)
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE
Covered business
Momentum Metropolitan Momentum Shareholder
Retail Retail Corporate International Capital Total
Rm Rm Rm Rm Rm Rm
12 mths to 30.06.2018
Embedded value from new business 98 84 124 (5) - 301
Expected return - unwinding of RDR 1 126 372 474 273 - 2 245
Release from the cost of required capital 218 102 126 - - 446
Operating experience variances (56) (33) (14) 10 (33) (126)
Development expenses (20) (24) (7) - - (51)
Operating assumption changes (1 076) (273) 624 (250) - (975)
Embedded value profit/(loss) from operations 290 228 1 327 28 (33) 1 840
Investment return on adjusted net worth 226 115 129 112 54 636
Investment variances (89) 135 (57) (35) - (46)
Economic assumption changes 33 76 (103) 23 - 29
Exchange rate movements - - - 21 - 21
Embedded value profit - covered business 460 554 1 296 149 21 2 480
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
A. VALUE OF NEW BUSINESS
VALUE OF NEW BUSINESS (1, 2)
Momentum Metropolitan Momentum
Retail Retail Corporate International Total
Rm Rm Rm Rm Rm
12 mths to 30.06.2018
Value of new business 98 84 124 (5) 301
Gross 181 134 160 15 490
Less cost of required capital (83) (50) (36) (20) (189)
New business premiums 17 890 2 616 4 319 861 25 686
Recurring premiums 1 152 1 248 806 429 3 635
Single premiums 16 738 1 368 3 513 432 22 051
New business premiums (APE) 2 826 1 385 1 157 472 5 840
New business premiums (PVP) 23 531 5 091 11 218 2 337 42 177
Profitability of new business as a percentage of APE 3.5 6.1 10.7 (1.1) 5.2
Profitability of new business as a percentage of PVP 0.4 1.6 1.1 (0.2) 0.7
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
1. Value of new business and new business premiums are net of non-controlling interests.
2. 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.
ANALYSIS OF NEW BUSINESS PREMIUMS
Momentum Metropolitan Momentum
Retail Retail Corporate International Total
12 mths to 30.06.2018 Rm Rm Rm Rm Rm
New business premiums 17 890 2 616 4 319 861 25 686
Recurring premiums 1 152 1 248 806 429 3 635
Risk 517 822 271 - 1 610
Savings/Investments 635 426 533 - 1 594
Annuities - - 2 - 2
International - - - 429 429
Single premiums 16 738 1 368 3 513 432 22 051
Risk - - 10 - 10
Savings/Investments 15 841 631 2 700 - 19 172
Annuities 897 737 803 - 2 437
International - - - 432 432
New business premiums (APE) 2 826 1 385 1 157 472 5 840
Risk 517 822 272 - 1 611
Savings/Investments 2 219 489 803 - 3 511
Annuities 90 74 82 - 246
International - - - 472 472
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 15 455 439 2 917 - 18 811
Annuities 1 034 666 969 - 2 669
International - - - 385 385
New business premiums (APE) 2 784 1 331 1 140 478 5 733
Risk 532 811 306 - 1 649
Savings/Investments 2 149 453 734 - 3 336
Annuities 103 67 100 - 270
International - - - 478 478
RECONCILIATION OF LUMP SUM INFLOWS 12 mths to 12 mths to
30.06.2018 30.06.2017
Rm Rm
Total lump sum inflows 26 910 26 968
Inflows not included in value of new business (6 603) (6 518)
Term extensions on maturing policies 438 345
Automatically Continued Policies 1 318 1 107
Non-controlling interests and other adjustments (12) (37)
Single premiums included in value of new business 22 051 21 865
PRINCIPAL ASSUMPTIONS (South Africa) (1, 4) 30.06.2018 30.06.2017
% %
Pre-tax investment return
Equities 13.0 12.9
Properties 10.5 10.4
Government stock 9.5 9.4
Other fixed-interest stocks 10.0 9.9
Cash 8.5 8.4
Risk-free return (2) 9.5 9.4
Risk discount rate (RDR) 11.8 11.7
Investment return (before tax) - balanced portfolio (2) 11.7 11.6
Renewal expense inflation rate (3) 6.5 6.8
1. The principal assumptions relate only to the South African life insurance business. Assumptions relating to international life insurance businesses are
based on local requirements and can differ from the South African assumptions.
2. 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
12 mths to
12 mths to 30.06.2018 30.06.2017
OPERATING EXPERIENCE VARIANCES ANW Net VIF EV EV
Notes Rm Rm Rm Rm
Momentum Retail (37) (19) (56) 36
Mortality and morbidity 1 161 20 181 165
Terminations, premium cessations and policy alterations 2 (18) (44) (62) 58
Expense variance 3 (115) - (115) 40
Credit risk variance 31 - 31 39
Other 4 (96) 5 (91) (266)
Metropolitan Retail (20) (13) (33) 20
Mortality and morbidity 1 85 13 98 83
Terminations, premium cessations and policy alterations 5 (105) (36) (141) (69)
Expense variance (18) - (18) (23)
Credit risk variance 17 - 17 21
Other 1 10 11 8
Momentum Corporate 105 (137) (32) (135)
Mortality and morbidity 1 28 - 28 (152)
Terminations 6 (2) (57) (59) (191)
Expense variance 7 51 - 51 36
Credit risk variance 48 - 48 57
Other 8 (20) (80) (100) 115
International 14 (4) 10 65
Mortality and morbidity 1 44 8 52 44
Terminations, premium cessations and policy alterations 9 (18) (21) (39) 4
Expense variance (4) - (4) (3)
Other (8) 9 1 20
Shareholder Capital (33) - (33) 44
Opportunity cost of required capital - 18 18 (12)
Total operating experience variances 29 (155) (126) 18
Notes
1. Overall, mortality and morbidity experience for the 12 months was better compared to what was allowed for in the valuation basis.
2. Mainly due to a change in the classification of business as alterations versus new business.
3. Due to additional investment in order to improve Momentum Retail's capabilities available to clients and intermediaries.
4. Includes one-off impact arising from reinsurance premium as well as larger than expected premium discounts.
5. Higher than expected terminations at early durations.
6. Terminations in respect of group risk business.
7. The impact of efficiencies achieved in the segment.
8. Mainly due to a reduction in the investment fees of Smooth Bonus business.
9. A bulk lapse was done in Namibia due to correction of a system error.
F. DEVELOPMENT EXPENSES
Business development expenses within segments.
G. OPERATING ASSUMPTION CHANGES
OPERATING ASSUMPTION CHANGES
12 mths to
12 mths to 30.06.2018 30.06.2017
ANW Net VIF EV EV
Notes Rm Rm Rm Rm
Momentum Retail (823) (277) (1 100) 587
Mortality and morbidity assumptions (98) 92 (6) 410
Termination assumptions 1 (369) 102 (267) (60)
Renewal expense assumptions 2 (388) (370) (758) (56)
Modelling, methodology and other changes 3 32 (101) (69) 293
Metropolitan Retail (356) 83 (273) 184
Mortality and morbidity assumptions (7) 10 3 (15)
Termination assumptions 4 (39) (16) (55) (15)
Renewal expense assumptions 2 (224) 8 (216) (55)
Modelling, methodology and other changes (86) 81 (5) 269
Momentum Corporate 335 289 624 (295)
Mortality and morbidity assumptions 5 42 (185) (143) (358)
Termination assumptions (6) 15 9 105
Renewal expense assumptions 2 86 440 526 (46)
Modelling, methodology and other changes 6 213 19 232 4
International (122) (130) (252) 3
Mortality and morbidity assumptions 7 35 14 49 102
Termination assumptions (5) 3 (2) (56)
Renewal expense assumptions 2 (86) (1) (87) 19
Modelling, methodology and other changes 8 (66) (146) (212) (62)
Methodology change: cost of required capital - 26 26 (76)
Total operating assumption changes (966) (9) (975) 403
Notes
1. Strengthening of the basis in line with experience observed in certain product lines.
2. Expense assumptions have been revised based on management's budgeted expenses for the new financial year.
3. Various modelling and methodology changes including refinements in the valuation of risk products offset by allowance for expected pricing reviews
of Wealth products.
4. Strengthening of the lapse basis as well as splitting the bases by method of payment for certain funeral products.
5. Mainly due to lower expected experience profits from group risk business.
6. Updating of IBNR reserves.
7. Allowance for better than assumed mortality experience on risk business.
8. Various modelling and methodology changes made mainly in Namibia.
H. INVESTMENT RETURN ON ADJUSTED NET WORTH
INVESTMENT RETURN ON ADJUSTED NET WORTH 12 mths to 12 mths to
30.06.2018 30.06.2017
Rm Rm
Investment income 557 620
Capital appreciation and other 114 68
Preference share dividends paid and change in fair value of preference shares (35) (36)
Investment return on adjusted net worth 636 652
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
Transfer of business between covered and non-covered business.
M. OTHER CAPITAL TRANSFERS
Capital transfers include the alignment of the net asset value of subsidiaries between covered and non-covered business and the recapitalisation of some
International subsidiaries.
COVERED BUSINESS: SENSITIVITIES - 30.06.2018
In-force business New business written
Adjusted net Gross Cost of Net Gross Cost of
worth Net value value CAR (3) value value CAR (3)
Rm Rm Rm Rm Rm Rm Rm
Base value 10 836 21 904 25 245 (3 341) 301 490 (189)
1% increase in risk discount rate 20 080 23 724 (3 644) 159 361 (202)
% change (8) (6) 9 (47) (26) 7
1% reduction in risk discount rate 23 986 26 977 (2 991) 467 634 (167)
% change 10 7 (10) 55 29 (12)
10% decrease in future expenses 23 292 26 633 (3 341) 431 620 (189)
% change (1) 6 5 - 43 27 -
10% decrease in lapse, paid-up and surrender rates 22 529 25 870 (3 341) 438 635 (197)
% change 3 2 - 46 30 4
5% decrease in mortality and morbidity for assurance business 24 025 27 397 (3 372) 450 639 (189)
% change 10 9 1 50 30 -
5% decrease in mortality for annuity business 21 570 24 883 (3 313) 292 481 (189)
% change (2) (1) (1) (3) (2) -
1% reduction in gross investment return, inflation rate
and risk discount rate 10 836 22 532 25 794 (3 262) 370 556 (186)
% change (2) - 3 2 (2) 23 13 (2)
1% reduction in inflation rate 22 713 26 029 (3 316) 376 564 (188)
% change 4 3 (1) 25 15 (1)
10% fall in market value of equities and properties 10 523 21 159 24 442 (3 283)
% change (3) (3) (3) (2)
10% reduction in premium indexation take-up rate 21 410 24 751 (3 341) 261 450 (189)
% change (2) (2) - (13) (8) -
10% decrease in non-commission related acquisition expenses 427 616 (189)
% change 42 26 -
1% increase in equity/property risk premium 22 617 25 958 (3 341) 343 532 (189)
% change 3 3 - 14 9 -
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
30.06.2018 30.06.2017
Rm Rm
Managed and/or administered by Investments
Financial assets 418 540 414 070
Momentum Manager of Managers (2) 88 943 86 757
Momentum Investment Consultants (2) 5 850 4 956
Momentum Collective Investments 82 157 72 667
Metropolitan Collective Investments 120 19 860
Momentum Asset Management 152 247 151 241
Momentum Global Investments 60 476 55 724
Momentum Alternative Investments 6 278 6 390
Momentum Securities (2) 22 469 16 475
Properties - Eris Property Group 21 859 21 307
On-balance sheet 8 346 8 778
Off-balance sheet 13 513 12 529
Momentum Wealth linked product assets under administration 160 839 151 203
On-balance sheet 104 327 97 082
Off-balance sheet 56 512 54 121
Managed internally or by other managers within MMI (on-balance sheet) 71 097 67 399
Managed by external managers (on-balance sheet) 16 543 15 144
Properties managed internally or by other managers within MMI or externally 4 268 2 778
Momentum Corporate - cell captives on-balance sheet 16 575 15 508
Total assets managed and/or administered 709 721 687 409
Managed and/or administered by Investments
On-balance sheet 231 035 223 792
Off-balance sheet 187 505 190 278
418 540 414 070
1. Assets managed and/or administered, other than CIS assets, are included where an entity earns a fee on the assets. The total CIS assets are included
in Momentum Collective Investments only as this is where the funds are housed. Non-financial assets (except properties) have been excluded.
2. Restatements relate primarily to the inclusion of Momentum Securities, as well as the removal of double-counted CIS assets.
NET FUNDS RECEIVED FROM CLIENTS (1)
Gross Gross
single recurring Gross Gross Net inflow/
inflows inflows inflow outflow (outflow)
12 mths to 30.06.2018 Rm Rm Rm Rm Rm
Momentum Retail 15 074 9 938 25 012 (25 045) (33)
Metropolitan Retail 1 304 6 064 7 368 (5 660) 1 708
Momentum Corporate 9 920 18 642 28 562 (30 002) (1 440)
International 612 3 751 4 363 (2 714) 1 649
Long-term insurance business fund flows 26 910 38 395 65 305 (63 421) 1 884
Off-balance sheet fund flows
Managed and/or administered by Investments 70 861 (81 246) (10 385)
Properties - Eris Property Group 1 819 (835) 984
Momentum Wealth linked product assets under administration 7 545 (9 280) (1 735)
Total net funds received from clients 145 530 (154 782) (9 252)
Restated
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
Momentum Corporate 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 (2,3) 66 343 (102 076) (35 733)
Properties - Eris Property Group 2 067 (8 350) (6 283)
Momentum Wealth linked product assets under administration 7 368 (10 081) (2 713)
Momentum Corporate- segregated assets - (216) (216)
Total net funds received from clients 138 713 (179 602) (40 889)
1. Assets managed and/or administered, other than CIS assets, are included where an entity earns a fee on the assets. The total CIS assets are included
in Momentum Collective Investments only as this is where the funds are housed. Non-financial assets (except properties) have been excluded.
2. The Aluwani assets were transferred to Aluwani in the prior year.
3. Restatements relate primarily to the inclusion of Momentum Securities, as well as the removal of double-counted CIS assets.
ANALYSIS OF ASSETS BACKING SHAREHOLDER EXCESS
30.06.2018 30.06.2017
Rm % Rm %
Equity securities 411 1.8 441 1.9
Preference shares 1 456 6.5 1 325 5.8
Collective investment schemes 367 1.6 330 1.4
Debt securities 6 833 30.6 6 762 29.5
Properties 3 479 15.6 3 630 15.8
Owner-occupied properties 2 426 10.9 2 374 10.3
Investment properties 1 053 4.7 1 256 5.5
Cash and cash equivalents and funds on deposit 5 927 26.5 6 003 26.2
Intangible assets 6 653 29.8 7 144 31.1
Other net assets 2 122 9.5 1 537 6.7
27 248 122.0 27 172 118.4
Redeemable preference shares (254) (1.1) (261) (1.1)
Subordinated redeemable debt (4 374) (19.6) (3 602) (15.7)
Treasury shares (292) (1.3) (353) (1.5)
Shareholder excess per reporting basis 22 328 100.0 22 956 100.0
NUMBER OF EMPLOYEES
30.06.2018 30.06.2017
Indoor staff 9 350 9 199
SA 8 099 7 984
International 1 251 1 215
Field staff 7 585 8 031
Momentum Retail 1 038 1 130
Metropolitan Retail 4 535 5 395
International 2 012 1 506
Total 16 935 17 230
MMI HOLDINGS GROUP - STOCK EXCHANGE PERFORMANCE
STOCK EXCHANGE PERFORMANCE 30.06.2018 30.06.2017
12 months
Value of listed shares traded (rand million) 17 396 20 072
Volume of listed shares traded (million) 853 863
Shares traded (% of average listed shares in issue) 56 55
Trade prices
Highest (cents per share) 2 424 2 669
Lowest (cents per share) 1 673 1 920
Last sale of year (cents per share) 1 767 2 024
Percentage (%) change during year (13) (11)
Percentage (%) change - life insurance sector (J857) 10 (6)
Percentage (%) change - top 40 index (J200) 13 (1)
30 June
Price/diluted core headline earnings (segmental) ratio 10.0 10.1
Dividend yield % (dividend on listed shares) - 7.8
Dividend yield % - top 40 index (J200) 2.8 2.8
Total shares issued (million)
Ordinary shares listed on JSE 1 529 1 575
Treasury shares held on behalf of contract holders (17) (18)
Basic number of shares in issue 1 512 1 557
Treasury shares held on behalf of contract holders 17 18
Convertible redeemable preference shares 28 29
Diluted number of shares in issue (1) 1 557 1 604
Market capitalisation at end (Rbn) (2) 28 32
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: 05/09/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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