Wrap Text
Unaudited interim results for the six months ended 31 December 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 Number: 1904/002186/06
Company code: MMIG
Unaudited interim results for the six months ended 31 December 2018
SUMMARY OF FINANCIAL INFORMATION
Summary of key metrics
Key Metrics 1H2019 1H2018 % Change F2018
Diluted normalised headline earnings (Rm) 1 618 1 594 2% 2 003
Diluted normalised headline earnings per share (c) 105.3 99.4 6% 125.5
New business volumes (PVNBP, Rm) 28 790 24 194 19% 50 002
Value of new business (Rm) * 335 299 12% 345
New business margin 1.2% 1.2% 0.7%
Diluted embedded value (EV) per share (R) 26.60 27.05 25.43
Return on EV (ROEV - annualised) 6.8% 11.2% (1.1)%
Return on EV per share (annualised) 9.4% 11.2% (0.6)%
Diluted number of shares in issue (m) 1 499 1 604 (7)% 1 557
Diluted weighted average number of shares (m) 1 536 1 604 (4)% 1 596
* Momentum Wealth has been reclassified as covered business, with prior period comparatives restated.
We are pleased to report that MMI Holdings (MMI) remains focused on, and is making steady progress with the three-year Reset and Grow strategy announced in
September 2018. The R1.6 billion of normalised headline earnings is in line with the Reset and Grow targets, and we believe this was a pleasing result in
the current operating environment. The satisfactory performance, combined with the impact of the share buy-back programme that was completed in November
2018, resulted in 6% growth in diluted normalised headline earnings per share (to 105.3 cents per share).
Following the successful share buy-back programme, MMI will reinstate dividend payments, with an interim ordinary dividend of 35 cents per share. We are
also proud to be the first major insurance company in South Africa to achieve a level 1 B-BBEE rating, in terms of the revised FSC codes.
The positive results were achieved through tight control of operational expenses, strong underwriting results, and by much improved earnings from our fixed
rate and annuity products. The period also included some favourable items that are not expected to recur, including fair value gains on our venture capital
investments in Exponential Ventures, partly offset by higher investments in new initiatives.
The weak equity markets in late 2018 have had a negative impact on fee income from the Momentum Life closed book and the reduction in assets under
management is likely to place pressure on asset-based fee income during the ensuing six months. Frail equity markets during the last quarter of 2018 also
dampened earnings from MMI's Africa portfolio where, unlike in South Africa, shareholder funds do carry some equity exposure.
The return on embedded value benefitted from an exceptional positive item arising from a new required capital methodology that coincided with the implementation
of the new regulatory framework, as defined in the South African Insurance Act, 18 of 2017, that became effective 1 July 2018. This positive was offset by negative
investment variances from poor equity returns and by a negative contribution from non-covered business. Operating experience contributed positively to embedded
value earnings.
The embedded value per share gained from the share buy-back programme. The annualised return on embedded value per share was 9.4%.
New business inflows improved materially from the comparative period in 2017, as did the value of new business. Single premium income from Momentum
Corporate significantly contributed to the improvement. However, there was also a pleasing uplift in recurring premium new business, especially from group
life business.
Hillie Meyer joined MMI on a three-year contract as Group CEO in February 2018. The Board of MMI believes that the Group will benefit from his leadership
if his tenure is extended. Mr Meyer has agreed to make himself available for an additional two years, until June 2023.
We are confident that MMI is on course to deliver on the three-year financial targets as communicated at its previous year-end results presentation.
Segmental performance
Earnings by segment
Normalised headline earnings
(R million) 1H2019 1H2018 % Change F2018
Momentum Life 462 343 35% 472
Momentum Investments 261 253 3% 227
Metropolitan Retail 333 364 (9)% 201
Momentum Corporate 319 293 9% 909
Non-life Insurance 135 105 29% 204
Africa 94 165 (43)% 147
Earnings from operating segments 1 604 1 523 5% 2 160
New Initiatives (248) (166) (49)% (377)
Shareholders 262 237 11% 220
Normalised headline earnings 1 618 1 594 2% 2 003
MMI has changed its primary earnings metric from core headline earnings to normalised headline earnings.
The new metric has fewer adjustments from the prescribed definition of headline earnings and is more in line with primary earnings metrics used in the
South African insurance industry. Unlike core headline earnings, normalised headline earnings include the impact of investment variances, actuarial basis
changes and other one-off items not previously reported under core earnings.
Normalised headline earnings adjust the standard JSE definition of headline earnings for the impact of treasury shares and the amortisation of intangible
assets arising from corporate activity.
A reconciliation between the previous and current primary earnings metrics has been provided in the summary of financial results.
Detailed analyses of each business unit's earnings results have been provided under the segmental discussions below.
New business
Covered New business (R million) 1H2019 1H2018 % Change F2018
Momentum Life 44 25 76% 66
Momentum Investments 43 75 (43)% 76
Metropolitan Retail 58 130 (55)% 84
Momentum Corporate 198 44 >100% 124
Africa (8) 25 <0% (5)
Value of new business 335 299 12% 345
The table above reflects covered business, which excludes entities like MMI Health and Momentum Asset Management. The year-on-year increase in the value of
new business mostly followed higher sales, although certain segments also experienced an improvement in new business margin, notably Momentum Corporate.
Embedded Value
Embedded value earnings (R million) 1H2019 1H2018 F2018
Embedded value at the start of the period 39 601 42 523 42 523
EV earnings from operations (covered business) 1 921 1 569 1 535
EV earnings attributable to investment markets (848) 1 029 662
Exceptional items 870 - -
EV profit from non-covered businesses (613) (276) (2 666)
Embedded value before capital flows 40 931 44 845 42 054
Capital flows (1 051) (1 454) (2 453)
Embedded value at the end of the period 39 880 43 391 39 601
Return on embedded value (annualised ROEV) 6.8% 11.2% (1.1)%
ROEV on covered business (annualised) 11.9% 15.4% 6.3%
ROEV on non-covered business (annualised) (19.0)% (7.2)% (35.6)%
ROEV per share (annualised) 9.4% 11.2% (0.6)%
The annualised return on embedded value from covered business has been adversely affected by declining equity markets during the last quarter of 2018, both
locally and internationally. The decline in assets under management, unless reversed, is expected to give rise to a lower future revenue stream.
The embedded value result includes a noticeable exceptional item of R870 million. This arose from the impact of a new required capital methodology that coincided
with the implementation of the new regulatory framework that became effective 1 July 2018. For MMI, restricted assets (liabilities and regulatory
capital) under the new requirements are lower than they were under the previous solvency valuation method, thus resulting in a one-off increase in embedded
value. This item is limited to the F2019 financial reporting period and is not expected to change over the second half of the financial year.
Negative investment variances and other economic impacts of R891 million and exceptional items aside, embedded value earnings on covered business was aided
by an improvement in the value of new business and by positive operating experience (persistency, expenses and underwriting).
Over the six months, the annualised return on non-covered business was negative 19%. The most significant contributor to the negative return on embedded
value was an increase in the provision for future costs from the Multiply rewards programme, reported within Momentum Life. The positive outcomes from the
programme (better persistency, claims experience etc.) are implicit in the value of new business and return on embedded value of covered business.
Under its share buy-back programme, MMI repurchased R2 billion worth of own shares between March 2018 and November 2018. The average price at which shares
were repurchased represented a c.30% discount to the embedded value per share over the period. The buy-back programme supported the annualised return on
embedded value per share of 9.4% which compares to 6.8% when ignoring the reduction in number of shares.
Momentum Life
Momentum Life provides protection, savings and traditional (closed book) products, focussed on the middle and affluent retail client segments.
Momentum Life (R million) 1H2019 1H2018 % Change
Normalised headline earnings 462 343 35%
Value of new business 44 25 76%
New business volumes (PVNBP) 4 104 3 725 10%
Earnings
Momentum Life experienced good growth in normalised headline earnings on account of favourable risk experience (mainly an improvement in income disability
claims experience) and better than expected take-up of voluntary premium increases by policyholders. A one-off reinsurance provision from the prior period
(loss of R43 million) did not recur and expenses were lower than allowed for in actuarial liabilities, following a strengthening of the expense reserve at
30 June 2018. On the downside, the unfavourable equity market performance during the last quarter of 2018 had a negative impact on the with-profits
component of the Momentum Life closed book portfolios (a loss of R50 million).
New business
New business inflows increased on the back of an expansion in the agency sales force and an increase in agent productivity with particularly strong growth
in savings volumes. The new business margins improved, mainly due to good expense management and updated product pricing.
Embedded value
On covered business, the increase in EV, arising from a new required capital methodology that coincided with the implementation of the new regulatory
framework, masked the impact of a significantly negative investment variance, which came about from adverse equity market conditions. Operating experience
(underwriting and expense variances) was positive, improving from the negative experience reported in the prior period. The return on embedded value from
Momentum Life also reduced on account of a higher allowance for future Multiply costs.
Momentum Investments
Momentum Investments represents Momentum Wealth local and offshore business, local and offshore investment management operations, retail annuities and
guaranteed investments. These product lines were previously reported under Momentum Retail and Momentum Corporate. All Momentum Wealth products are now
reported as covered business (previously only on-balance sheet contracts), and prior year value of new business and present value of new business premiums
(PVNBP) were restated accordingly. Momentum Investments also houses the UK business, which previously formed part of MMI International.
Momentum Investments (R million) 1H2019 1H2018 % Change
Normalised headline earnings 261 253 3%
Value of new business 43 75 (43)%
New business volumes (PVNBP) 11 312 11 328 0%
Earnings and Assets Under Management
Strong earnings growth was experienced from annuities and structured endowments due to improved credit experience and lower funding cost (R20 million). The
UK operation also experienced satisfactory earnings growth, from higher fee receipts and lower expenses following a business restructure. However, earnings
from investment management and Momentum Wealth business were more subdued, as a result of negative equity market returns as well as some outflows over the
period.
Assets under management (R billion) 1H2019 1H2018 % Change
On-balance sheet Momentum Wealth 98.2 102.3 (4)%
Off-balance sheet Momentum Wealth 53.7 55.3 (3)%
Non-covered business (investment management) 414.9 431.5 (4)%
Total 566.8 589.1 (4)%
New business
New business flows from covered business remained largely flat compared to the prior year. However, the new business margin declined, partly due to
repricing the Momentum Wealth offering.
Embedded value
Momentum Investments by its nature was negatively affected by investment variances experienced over the reporting period. Combined with a subdued value of
new business, EV earnings from Momentum Investments were negative over the six months ended 31 December 2018.
Metropolitan Retail
Metropolitan Retail focuses on the lower to middle income retail market in SA. Its offerings include protection, savings and annuity products. There were
no material changes to the Metropolitan Retail reporting segment.
Metropolitan Retail (R million) 1H2019 1H2018 % Change
Normalised headline earnings 333 364 (9)%
Value of new business 58 130 (55)%
New business volumes (PVNBP) 2 523 2 919 (14)%
Earnings
Revenue increased due to growth in the protection book as well as improved underwriting and credit experience. Losses from poor persistency improved by R68
million since the prior period. However, the increase in revenue was offset by above-inflationary increases in expenses, mainly from upgrading branch
infrastructure, as well as a reduction in expense capitalisation (more conservative accounting for systems development costs).
New business
New business premiums are lower than the prior period, due to lower sales of funeral policies through tele-channels and retirement savings. Protection
business (mainly funeral policies) makes up the bulk of Metropolitan Retail's value of new business.
Metropolitan Retail and African Bank agreed to dissolve the joint venture partnership, following results that failed to meet expectations.
The year-on-year reduction in the value of new business was impacted by lower sales, as well as a decline in margin, following the strengthening in
persistency and expense assumptions.
Embedded value
The negative investment variance experienced by Metropolitan Retail was less pronounced than for Momentum Life, but still significant. It was mitigated by
the one-off impact of a new required capital methodology that coincided with implementing the new regulatory framework, thus resulting in a favourable
return on embedded value for Metropolitan Retail. Operating experience was positive, following good underwriting and credit experience over the six months.
Momentum Corporate
Momentum Corporate incorporates group risk, annuities and pension savings as well as MMI Health operations. Investment management and Guardrisk have been
moved to Momentum Investments and the Non-life Insurance segment, respectively.
Momentum Corporate (R million) 1H2019 1H2018 % Change
Normalised headline earnings 319 293 9%
Value of new business 198 44 >100%
New business volumes (PVNBP) 9 784 4 855 >100%
Earnings
On corporate business, normalised headline earnings from the first half of F2019 saw a reasonable increase over the prior period. Favourable group life
underwriting experience was partly offset by higher lump sum disability claims. Revenue was also boosted by higher fee income arising from improved new
business inflows. Growth in management expenses has outstripped inflation, due to higher spend on initiatives such as Momentum Consultants and Actuaries,
new products and benefit enhancements, as well as the digitalisation of client services and conversion of corporate members into retail clients.
MMI Health business experienced solid earnings growth, following a modest increase in scheme membership, good underwriting experience from low-cost
products and good cost control (below-inflation expense growth). The earnings reported are net of minorities, and are therefore not fully reflective of the
strong operational performance over the six months. Recall that a portion of the public sector health business has been sold to our empowerment partner.
New business
Single premium inflows to Momentum Corporate were considerably higher than the prior year, mainly due to a multi-billion Rand with-profit annuity
transaction. Recurring premium inflows also improved, driven by an increase in group insurance new business from large corporates.
The value of new business also increased significantly, largely due to the increase in sales, but also because of an increase in margin from a revised
approach to pricing of group insurance business.
Embedded value
Momentum Corporate's strong value of new business, along with good operating experience over the first half of the financial year contributed positively to
the return on embedded value. The positive operating experience was mainly driven by strong persistency and good mortality experience. However, the tough
economic environment continued to negatively affect investment variance and underwriting experience on disability income products.
Non-life Insurance
This new segment includes Guardrisk (cell captive business) and Momentum Short-term Insurance (traditional insurance). Previously, these two entities were
reported under Momentum Corporate and Momentum Retail respectively.
Non-life Insurance (R million) 1H2019 1H2018 % Change
Momentum STI (8) (22) 64%
Guardrisk 143 127 13%
Normalised headline earnings 135 105 29%
Guardrisk had another satisfactory six months, with earnings up 13% on the prior period. Results from Momentum Short-term Insurance (MSTI) improved
markedly over the prior period. Core operations at MSTI were profitable, but continued to be negatively impacted by a high overhead cost base
(administration and IT systems). As the business grows, the positive impact of scale is expected to continue.
Momentum STI 1H2019 1H2018 % Change
Net earned premium (Rm) 416 350 19%
Claims ratio 61% 71%
Key performance metrics for MSTI progressed satisfactorily. Net earned premium income increased by 19% over the prior period. The claims ratio improved, partly
due to favourable weather patterns over the period from October to December 2018.
Africa
Previously called MMI International, this segment now represents only MMI's African operations (outside SA). The UK business is now reported under Momentum
Investments, while India resides under New Initiatives. aYo, which offers mobile insurance in partnership with MTN, has also been reported under New
Initiatives.
Africa (R million) 1H2019 1H2018 % Change
Normalised headline earnings 94 165 (43)%
Value of new business (8) 25 <0%
New business volumes (PVNBP) 1 067 1 367 (22)%
Earnings
Normalised headline earnings (R million) 1H2019 1H2018 % Change F2018
Namibia 110 132 (17)% 171
Botswana (5) 36 <0% 53
Lesotho 33 41 (20)% 79
Ghana 26 47 (45)% 39
Kenya 13 (36) >100% (19)
Other countries - ongoing (19) 2 <0% 19
Other countries - planned exits (27) (13) <0% (33)
Centre costs (37) (44) 16% (162)
Total 94 165 (43)% 147
For the established businesses in Namibia, Botswana and Lesotho, the biggest part of the decline in earnings since the prior period can be explained by a
reduction in investment returns on assets backing shareholder capital (a decline of R68 million before tax). Unlike local South African operations,
shareholder assets in these countries are exposed to equity markets. Losses totalling R27 million were incurred in countries that MMI plans to exit in the
foreseeable future. Earnings were supported by improvements from health and non-life lines of business, as well as a year on year decline in overall
management expenses, including a 16% reduction in centre support costs.
New business
The disappointing new business growth and negative contribution to value of new business for the half year were largely due to a weak contribution from
Namibia, where sales on a PVNBP basis were down 35% on the prior year, due to systems challenges and shrinkage of the sales force.
Embedded value
The embedded value loss for the six months was caused by negative investment variances, a negative value of new business and a write-down in the value of
non-covered businesses on account of earnings losses (sub-scale operations and countries earmarked for exit).
New Initiatives
Included under this new segment are the two international ventures aYo (MTN joint venture) and Aditya Birla Health Insurance (India joint venture), Exponential
Ventures (local and offshore venture capital with a focus on fintech and insuretech start-ups), as well as local start-up operations including
transactional money management.
Normalised headline earnings (R million) 1H2019 1H2018 F2018
India (ABHI) (150) (102) (218)
aYo (MTN JV) (36) (28) (58)
Other * (62) (36) (101)
* "Other" includes Exponential Ventures, Money Management and Momentum Consult
Aditya Birla Health Insurance (India joint venture)
Sales and local-currency earnings in Aditya Birla Health Insurance continued to progress according to the business plan. A 4% depreciation of the South
African Rand against the Indian Rupee over the six months somewhat increased the reported loss in Rands.
Satisfactory progress has been made in tilting exposure away from group business to more profitable retail business, following an expansion of retail
distribution capacity, mainly through bank channels. This has been reflected in an improvement to the claims ratio for the six months to December 2018,
compared to the prior period.
aYo
aYo has cemented its presence in Ghana and Uganda, with a customer base of 2.6 million clients as at 31 December 2018. Claims ratios were satisfactory.
However, the venture has not yet reached sufficient scale to cover the overhead cost base (IT and systems support).
Other
The Money Management initiative gained traction, with the roll out of Multiply Visa Cards progressing well, while work continues to integrate the product
offering.
Shareholders
Shareholders (R million) 1H2019 1H2018 F2018
Operating profit (36) (28) (117)
Tax on operating profit (42) 11 (58)
Investment income (net of tax) 231 219 451
Fair value gains (net of tax) 109 35 (56)
Total 262 237 220
This segment represents the shareholder capital of MMI's South African operations and the investment return earned thereon. Investment returns relating to
offshore capital (Africa and India) and non-life operations (Guardrisk and MSTI) are reported as part of earnings within the relevant segments.
Earnings
Investment income benefitted from a higher contribution from Eris properties. Fair value gains include a revaluation of one of the Exponential Ventures
funds.
Embedded value
Embedded value earnings from the shareholder segment were adversely affected by a negative allowance for future maintenance expenses on owner-occupied
properties. This was partly offset by the fair value gain from Exponential Ventures. For embedded value purposes, part of the investment return on
shareholder assets has been allocated to operating segments and part to the shareholder segment.
Solvency and Capital Management
Regulatory solvency position MMI Group Ltd
(R million)
Eligible own funds (pre dividend) 31 414
Solvency Capital Requirement (SCR) 15 326
SCR cover (times) 2.0
Regulatory solvency position
The new regulatory framework for the South African insurance industry became effective on 1 July 2018, upon the implementation of the South African
Insurance Act, 18 of 2017. The individual solvency position of MMI Group Limited is shown in the table above, prior to allowance for
foreseeable dividends. Certain methodologies applied in the solvency assessment are subject to approval from the Prudential Authority, which is currently
being sought.
A target range of 1.7 to 2.1 times the SCR has been set for the solvency position of MMI Group Limited. This allows for the capital required to support the
covered business against a range of severe but plausible scenarios, as well the wider strategic deployments of the group.
Capital distribution
The share buy-back programme was completed on 29 November 2018. Shares to the value of R2.0 billion were repurchased, at an average price of R18.94 per
share.
At the 2018 year-end results it was announced that MMI will reinstate dividend payments, at a level that is consistent with our capital deployment plans
and the need to maintain steady capital ratios under the new regulatory framework. We indicated that we would in future target a dividend cover range of
2.0 to 3.0 times normalised headline earnings. For the 6 months ended 31 December 2018, MMI Holdings declared a dividend of 35 cents per share to ordinary
shareholders which is at the upper end of the target range.
Capital deployment
The following strategic investments were made during the period:
Area of capital deployment R billion
Capital support for subsidiaries 0.4
Exponential, UK & Africa operations 0.1
Aditya Birla Joint Venture 0.1
Momentum Short Term Insurance 0.2
Total 0.8
Credit rating
On 8 November 2018, Moody's confirmed MMI Group Limited's global scale Insurer Financial Strength (IFS) rating of Baa2, with a long-term rating of Baa3.
Moody's also affirmed the national scale IFS rating of the Issuer at Aaa.za with the long-term issuer rating at Aaa.za and the unsecured subordinated notes
rating at Aa2.za. On 16 November 2018 Moody's confirmed the global scale IFS of Baa3 of Guardrisk Insurance, Guardrisk Life and Guardrisk International and
national scale rating of Aaa.za for Guardrisk Insurance and Guardrisk Life. Given the tough economic environment, the affirmation of the credit ratings can
be viewed as positive for MMI Group Limited and Guardrisk.
Outlook
The poor equity market performance during the last quarter of 2018 and muted macro-economic growth made for a challenging operating environment over the
six months. It is heartening that MMI experienced growth despite these challenges. If the negative market impact from late 2018 persists, it will put
pressure on earnings. MMI will continue to focus on financial discipline and on improving distribution and service in pursuit of its Reset and Grow
strategy, with an earnings target of between R3.6 billion and R4.0 billion by F2021.
MMI HOLDINGS GROUP
DIRECTORS' STATEMENT
The directors take pleasure in presenting the unaudited summarised interim results of MMI Holdings financial services group for the period ended
31 December 2018. The preparation of the group's results was supervised by the group finance director, Risto Ketola (FIA, FASSA, CFA).
Corporate events
As part of our plan to exit a number of African countries, we have classified three of these African entities, which we plan on exiting in the next
12 months, as held for sale.
Basis of preparation of financial information
These summarised consolidated interim 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 31 December 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 IFRS 2 Share-based payments, IFRS 4 Insurance contracts, IAS 40 Investment property, and IFRIC 22 Foreign
currency transactions and advance consideration. IFRS 9 Financial instruments and IFRS 15 Revenue from contracts with customers also became effective
for the first time in the current period. The effect of these is described below.
- IFRS 15 Revenue from contracts with customers
IFRS 15 is effective from periods beginning on or after 1 January 2018. The group has implemented IFRS 15 on 1 July 2018, retrospectively without
restating comparative figures.
IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising from contracts with clients, unless the contracts are in the
scope of the standards on leases, insurance contracts and financial instruments.
The core principle of the standard is that revenue recognised reflects the consideration to which the company expects to be entitled in exchange for the
transfer of promised goods or services to the client. The standard incorporates a five-step analysis to determine the amount and timing of revenue
recognition. The group has assessed the impact of the adoption of IFRS 15 to determine the impact on the opening balance and concluded that there was no
significant impact for the group. The opening retained earnings as at 1 July 2018 has therefore not been adjusted for any change in revenue recognition.
- IFRS 9 Financial instruments
The group has implemented IFRS 9 retrospectively without restating comparative figures. Opening retained earnings as at 1 July 2018 has been adjusted for
any differences in the carrying amounts of financial instruments.
The standard introduces an approach to the classification of financial instruments that is based on contractual cash flows characteristics and models
through which financial instruments are managed (business model). The standard amends the previous requirements in three main areas: (a) classification
and measurement of financial assets, (b) impairment of financial assets, mainly by introducing a forward-looking expected credit loss (ECL) impairment
model and (c) hedge accounting including removing some of the restrictions on applying hedge accounting in IAS 39 Financial Instruments: Recognition and
Measurement.
IFRS 9 contains three principal classification categories for financial assets:
- Measured at amortised cost
- Fair value through other comprehensive income
- Fair value through income
Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. The
standard eliminates the existing IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale.
No significant changes were introduced for the classification and measurement of financial liabilities, except for financial liabilities that are
designated at fair value where entities will need to recognise the part of the fair value change that is due to changes in their own credit risk in
other comprehensive income rather than profit or loss.
The standard has introduced a new ECL impairment model that will require more timely recognition of ECLs than under IAS 39. An impairment loss may now
be recognised prior to a loss event occurring. This will require considerable judgement about how changes in economic factors affect ECLs, which will be
determined on a probability-weighted basis.
The group has elected not to apply the general hedge accounting principles under IFRS 9 and will continue to apply IAS 39 hedge accounting, where
applicable.
Impact on adoption of IFRS 9
Prior to the implementation of IFRS 9, the group designated a significant majority of its financial assets at fair value through income in terms of IAS 39.
The application of the classification criteria resulted in the majority of the financial assets being classified mandatorily at fair value through income.
In the life companies certain policyholder assets were designated at fair value through income due to accounting mismatch. All equity securities remain
at fair value through income and assets previously disclosed as held-to-maturity will continue to be carried at amortised cost.
With majority of the group's financial assets measurement remaining at fair value through income these assets are not subjected to the new impairment
model. The significant impacts from changes in the measurement basis of impairment provisions are limited to the group's assets that were previously
classified as held-to-maturity and loans and receivables which are now classified and carried at amortised cost. The impact of applying the ECL model
resulted in a decrease in equity of R40 million on 1 July 2018 which primarily relates to loans and receivables.
For the group's financial liabilities that are designated at fair value through income, there were no significant changes in its own credit risk to
recognise in other comprehensive income.
The application of IFRS 9 impairment methodology had an insignificant impact on the group's equity accounted associates and joint ventures.
All insurance and reinsurance receivables are recognised in terms of IFRS 4 and will be included in the IFRS 17 assessment.
The effects of the adoption of IFRS 9 on the statement of financial position as at 1 July 2018 are shown in the financial instruments section.
- 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
A simplified operating model was announced in June 2018, effective 1 July 2018. The product Centre of Excellence structure was dissolved and a number of
empowered end-to-end value chain business units were created, supported by shared distribution channels and group support functions.
In order to align internal and external reporting to the new operating business unit structures, the reporting units have also changed. The prior periods
have been restated to provide meaningful comparison for these new segments.
The group's reporting view now reflects the following segments:
Momentum Life: Momentum Life includes protection, savings and life insurance products focused on the middle and affluent client segments.
Momentum Investments: Momentum Investments consists of the Momentum Wealth platform business, local and offshore asset management operations, retail
annuities and guaranteed investments, as well as Eris Properties.
Metropolitan Retail: Metropolitan Retail focusses on the lower and middle income retail market segment, with a range of protection and savings products.
Momentum Corporate: Momentum Corporate offers group risk, annuities, pension savings and umbrella fund (FundsAtWork) products and includes MMI Health.
Africa: This segment includes our African operations.
Non-life Insurance: Non-life Insurance comprises the retail general insurance offering, Momentum Short-term Insurance, and the cell captive insurer,
Guardrisk.
New Initiatives: This includes India, aYo, Money Management, Lending, Exponential Ventures and Momentum Consult.
Shareholders: The Shareholders segment reflects investment income on capital held to support local operations and some costs not allocated to operating
segments (eg certain holding company expenses).
Embedded Value information
New regulatory framework:
The new regulatory framework, as defined in the South African Insurance Act, 18 of 2017, became effective on 1 July 2018. This meant that the previous
Statutory Valuation Method (SVM) was no longer recognised as a valid basis for regulatory liabilities. MMI covered businesses elected to adopt the IFRS
liabilities as reference for determining the Value of In-force business for Embedded Value purposes. This has resulted in a reallocation of value between the
Adjusted Net Worth and Value of In-force due to the liability difference between the previous statutory and IFRS liabilities.
MMIGL Required Capital is derived as the total Restricted Assets less the IFRS liabilities as per the new required capital methodology. Restricted Assets were
defined in terms of the new regulatory balance sheet as the assets allocated to support the policyholder liabilities and internal capital requirements.
Wealth business:
With changes in the operating model of MMI, a decision was taken to group businesses into segments which are managed together. MMI has also simplified the
valuations between covered and non-covered business (eg expense allocations, etc) and, as a result, now report the off-balance sheet businesses of Momentum
Wealth together with the on-balance sheet businesses as part of Momentum Investments covered business.
Corporate governance
The board has satisfied itself that appropriate principles of corporate governance (King IV) were applied throughout the period under review.
Changes to the directorate, secretary and directors' shareholding
On 30 September 2018, the group's company secretary, Maliga Chetty, resigned. On the same date, Leon Basson was appointed as acting group company secretary.
On 26 November 2018, Sydney Muller retired from the board having reached retirement age. On 28 February 2019, Louis von Zeuner resigned from the board. On
1 March 2019, Lisa Chiume, Prof Linda de Beer, Dr Sharron McPherson and Sello Moloko were appointed to the board. Also on that date, CorpStat Governance
Services (Pty) Ltd was appointed as interim group company secretary. Leon Basson will relinquish his role as acting group company secretary on that date, to
resume his other duties in the group.
All transactions in listed shares of the company involving directors were disclosed on SENS.
Changes to the group executive committee
Resignations Role Date
Andrew le Roux Chief Business Transformation Officer 31 August 2018
Linda Mthenjane Head: MMI Human Capital 30 November 2018
Thinus Alsworth-Elvey CEO: Momentum Corporate 31 March 2019
Contingent liabilities and capital commitments
The group is party to legal proceedings and appropriate provisions are made when losses are expected to materialise. Met Collective Investments (RF) (Pty) Ltd
has been subjected to a review by the FSCA. MMI is continuing to engage the FSCA on the matter. The group had no material capital commitments at 31 December 2018
that were not in the ordinary course of business.
Events after the reporting period
No material events occurred between the reporting date and the date of approval of these results.
Interim dividend declaration
Ordinary shares
- On 8 March 2019, a gross interim dividend of 35 cents per ordinary share was declared.
- The dividend is payable out of income reserves to all holders of ordinary shares recorded in the register of the company at the close of business on
Friday, 29 March 2019, and will be paid on Monday, 1 April 2019.
- The dividend will be subject to local dividend withholding tax at a rate of 20% unless the shareholder is exempt from paying dividend tax or is entitled
to a reduced rate.
- This will result in a net final dividend of 28 cents per ordinary share for those shareholders who are not exempt from paying dividend tax.
- The last day to trade cum dividend will be Tuesday, 26 March 2019.
- The shares will trade ex dividend from the start of business on Wednesday, 27 March 2019.
- Share certificates may not be dematerialised or rematerialised between Wednesday, 27 March 2019 and Friday, 29 March 2019, both days inclusive.
- The number of ordinary shares at the declaration date was 1 497 475 356.
- MMI's income tax number is 975 2050 147.
Preference shares
- Dividends of R18.5 million (31.12.2017: R18.5 million; 30.06.2018: R18.5 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 has concluded its share buy-back programme. A total of 106 million shares (R2 billion excluding transaction costs) have been bought back.
27 million shares (R487 million) are held by a subsidiary of the group.
Directors' responsibility
The preparation of these results are the responsibility of the directors. This announcement does not include the information required by paragraph 16A(j) of
IAS 34. The summarised interim results have not been reviewed or audited by the external auditors. 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 SENS announcement is available for
inspection and may be requested from the group company secretary's office, Carien Breytenbach tel: +27 12 673 7479.
Signed on behalf of the board
JJ Njeke Chairman
Hillie Meyer Group chief executive
Centurion
7 March 2019
DIRECTORS: MJN Njeke (chairman), HP Meyer (group chief executive), JC Cilliers (Marais) (deputy chief executive), RS Ketola (group finance director),
LM Chiume, P Cooper, F Daniels (Jakoet), Prof L de Beer, Prof SC Jurisich, Prof JD Krige, Dr SL McPherson, PJ Moleketi, MS Moloko, V Nkonyeni,
KC Shubane, FJC Truter, JC van Reenen
INTERIM GROUP COMPANY SECRETARY: CorpStat Governance Services (Pty) Ltd
WEBSITE: www.mmiholdings.co.za
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: 8 March 2019
MMI HOLDINGS GROUP - IFRS FINANCIAL INFORMATION
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
ASSETS
Intangible assets 10 133 11 007 10 515
Owner-occupied properties 3 594 4 250 3 864
Property and equipment 411 365 323
Investment properties 8 930 7 346 8 614
Properties under development 388 116 136
Investments in associates and joint ventures 636 626 636
Employee benefit assets 451 421 436
Financial assets at fair value through income (1) 373 686 394 058 395 146
Investments in associates at fair value through income (1) 18 893 11 821 11 383
Derivative financial assets at fair value through income 2 367 2 935 2 910
Available-for-sale financial assets - 7 -
Held-to-maturity financial assets - 396 437
Loans and receivables - 6 453 5 629
Financial assets at amortised cost 3 795 - -
Reinsurance contract assets 5 027 5 216 4 989
Deferred income tax 286 258 290
Insurance and other receivables 6 720 4 781 4 962
Current income tax assets 307 477 283
Non-current assets held for sale 482 - -
Cash and cash equivalents 26 216 27 275 25 812
Total assets 462 322 477 808 476 365
EQUITY
Equity attributable to owners of the parent 22 400 22 763 22 328
Non-controlling interests 493 299 462
Total equity 22 893 23 062 22 790
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts 110 819 111 173 109 203
Non-life insurance contracts 8 583 8 088 8 728
Investment contracts 259 831 271 162 272 411
- with discretionary participation features (DPF) 23 100 25 086 24 550
- designated at fair value through income 236 731 246 076 247 861
Financial liabilities at fair value through income (1) 36 118 41 730 38 217
Derivative financial liabilities at fair value through income 2 177 1 854 2 255
Financial liabilities at amortised cost 1 908 1 238 2 420
Reinsurance contract liabilities 1 734 1 475 1 685
Deferred income tax 2 994 3 371 2 874
Employee benefit obligations 957 998 1 153
Other payables 13 622 13 480 14 304
Provisions 79 55 73
Current income tax liabilities 155 122 252
Non-current liabilities held for sale 452 - -
Total liabilities 439 429 454 746 453 575
Total equity and liabilities 462 322 477 808 476 365
1 For prior reporting periods, this line item was classified as designated at fair value through income in terms of IAS 39 and
has not been restated.
SUMMARISED CONSOLIDATED INCOME STATEMENT
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Net insurance premiums 20 411 14 688 29 893
Fee income (1) 4 274 3 852 7 536
Investment income 10 656 9 750 20 084
Net realised and fair value (losses)/gains (16 635) 18 689 17 786
Net income 18 706 46 979 75 299
Net insurance benefits and claims 13 134 12 268 27 232
Change in actuarial liabilities and related reinsurance (49) 4 573 1 794
Change in long-term insurance contract liabilities 1 380 4 172 1 612
Change in non-life insurance contract liabilities 32 (25) (71)
Change in investment contracts with DPF liabilities (1 449) 749 285
Change in reinsurance assets (79) (386) (322)
Change in reinsurance liabilities 67 63 290
Fair value adjustments on investment contract liabilities (6 228) 14 986 17 555
Fair value adjustments on collective investment scheme liabilities (2 141) 1 422 2 738
Depreciation, amortisation and impairment expenses 687 614 1 226
Employee benefit expenses 2 992 2 755 5 457
Sales remuneration 3 155 2 923 5 796
Other expenses 3 791 3 693 7 779
Expenses 15 341 43 234 69 577
Results of operations 3 365 3 745 5 722
Share of loss of associates and joint ventures (135) (92) (213)
Finance costs (2) (508) (539) (1 048)
Profit before tax 2 722 3 114 4 461
Income tax expense (1 398) (1 852) (3 039)
Earnings for the period 1 324 1 262 1 422
Attributable to:
Owners of the parent 1 241 1 247 1 369
Non-controlling interests 83 15 53
1 324 1 262 1 422
Basic earnings per ordinary share (cents) 83.2 80.0 88.2
Diluted earnings per ordinary share (cents) 82.2 79.4 88.1
1 Fee income consists of the following:
Investment contracts 1 437 1 266 2 384
Trust and fiduciary services 800 805 1 506
Health administration 943 892 1 780
Other fee income 1 094 889 1 866
4 274 3 852 7 536
2 Finance costs consist of the following:
Preference shares issued by MMI 53 57 110
Subordinated debt 210 190 397
Cost of carry positions 135 195 363
Other finance costs 110 97 178
508 539 1 048
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Earnings for the period 1 324 1 262 1 422
Other comprehensive (loss)/income, net of tax (90) (37) 138
Items that may subsequently be reclassified to income 44 (78) (6)
Exchange differences on translating foreign operations 60 (79) 9
Available-for-sale financial assets - (1) (7)
Share of other comprehensive (loss)/income of associates (16) 2 (8)
Items that will not be reclassified to income (134) 41 144
Land and building revaluation (174) 49 131
Remeasurements of post-employee benefit funds (9) (11) 14
Income tax relating to items that will not be reclassified 49 3 (1)
Total comprehensive income for the period 1 234 1 225 1 560
Total comprehensive income attributable to:
Owners of the parent 1 149 1 209 1 507
Non-controlling interests 85 16 53
1 234 1 225 1 560
RECONCILIATION OF HEADLINE EARNINGS
attributable to owners of the parent
Basic earnings Diluted earnings
6 mths to 6 mths to 12 mths to 6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018 31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm Rm Rm Rm
Earnings 1 241 1 247 1 369 1 241 1 247 1 369
Finance costs - convertible preference shares 19 21 40
Dilutory effect of subsidiaries (1) (10) (7) (16)
Diluted earnings 1 250 1 261 1 393
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) 24 43 97 24 43 97
Tax on intangible assets and other impairments (7) (12) (16) (7) (12) (16)
Loss on sale of business/subsidiary - - 18 - - 18
Impairments relating to held for sale entities 51 - - 51 - -
FCTR reversal on sale of foreign subsidiary - - (13) - - (13)
Impairment of owner-occupied property below cost 60 - - 60 - -
Tax on impairment of owner-occupied property below cost (13) - - (13) - -
Headline earnings (3) 1 356 1 278 1 444 1 365 1 292 1 468
Adjustments for MMI shares held by policyholder funds (7) 25 (32) (7) 25 (32)
Amortisation of intangible assets relating to business combinations 260 277 543 260 277 543
BEE cost - - 24 - - 24
Normalised headline earnings (4) 1 609 1 580 1 979 1 618 1 594 2 003
1 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.
2 Current period impairments relate to customer relationships in Africa due to a decline in the directors' valuation.
The December 2017 period impairments relate mainly to software in Metropolitan Retail as certain components are no longer used.
The June 2018 period impairments relate mainly to software in Metropolitan Retail as certain components are no longer used and goodwill in Momentum
Investments (previously International under the old operating model) due to a decline in the directors' valuation relating to a restructure of the UK
businesses.
3 Headline earnings consist of operating profit, investment income, net realised and fair value gains, investment variances and basis and other changes.
4 Normalised headline earnings excludes adjustments for MMI shares held by policyholder funds, the amortisation of intangible assets relating to business
combinations as well as BEE costs. It includes basis changes and investment variances of negative R13 million (31.12.2017: positive R41 million;
30.06.2018: negative R651 million).
EARNINGS PER SHARE (cents)
attributable to owners of the parent
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018
Basic
Normalised headline earnings 107.8 101.3 127.5
Headline earnings 90.9 82.0 93.0
Earnings 83.2 80.0 88.2
Weighted average number of shares (million) 1 492 1 559 1 552
Basic number of shares in issue (million) 1 455 1 560 1 512
Diluted
Normalised headline earnings 105.3 99.4 125.5
Weighted average number of shares (million) (1) 1 536 1 604 1 596
Headline earnings 89.8 81.4 92.9
Earnings 82.2 79.4 88.1
Weighted average number of shares (million) (2) 1 520 1 588 1 580
1 For diluted normalised 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
2019 2018
Ordinary listed MMI Holdings Ltd shares (cents per share)
Interim - March 35 -
Final - September - -
Total 35 -
Share buy-back programme
At 31 December 2018, a total of 106 million shares (R2 billion excluding transaction costs) have been bought back as part of the share buy-back programme.
The consideration paid has been adjusted for in retained earnings except for the 27 million shares (R487 million) held by a subsidiary of the group which
has been adjusted for in share premium.
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 prior period) 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. 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).
A3 MMI Holdings Ltd preference share dividends
2019 2018
Rm Rm
KTH
Interim - March 19 19
Final - September - 19
Total 19 38
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Changes in share capital
Balance at beginning and end 9 9 9
Changes in share premium
Balance at beginning 13 758 13 737 13 737
Conversion of preference shares - 7 7
Decrease in treasury shares held on behalf of contract holders 9 42 14
Increase in treasury shares held on behalf of shareholders (487) - -
Balance at end 13 280 13 786 13 758
Changes in other reserves
Balance at beginning 1 767 1 788 1 788
Total comprehensive (loss)/income (92) (38) 138
Employee share schemes - value of services provided - 3 43
Change in non-distributable reserves (6) - (6)
Transfer to retained earnings (7) (50) (196)
Balance at end (1) 1 662 1 703 1 767
Changes in retained earnings
Balance at beginning 6 794 7 422 7 422
IFRS 9 opening adjustment (40) - -
Restated opening balance 6 754 7 422 7 422
Total comprehensive income 1 241 1 247 1 369
Dividend paid - (1 435) (1 442)
Shares repurchased (544) - (974)
Transactions with non-controlling interests (9) (19) 223
Transfer from other reserves 7 50 196
Balance at end 7 449 7 265 6 794
Equity attributable to owners of the parent 22 400 22 763 22 328
Changes in non-controlling interests
Balance at beginning 462 292 292
Total comprehensive income 85 16 53
Dividend paid (55) (24) (32)
Transactions with owners 1 (1) 133
Business combinations - 16 16
Balance at end 493 299 462
Total equity 22 893 23 062 22 790
1 Other reserves consist of the following:
Land and building revaluation reserve 564 802 732
Foreign currency translation reserve (33) (175) (97)
Revaluation of available-for-sale investments - 6 -
Non-distributable reserve 67 60 57
Employee benefit revaluation reserve 93 77 102
Fair value adjustment for preference shares issued by MMI Holdings Ltd 940 940 940
Equity-settled share-based payment arrangements 31 (7) 33
1 662 1 703 1 767
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Cash flow from operating activities
Cash utilised in operations (6 418) (5 499) (12 313)
Interest and dividends received 9 951 9 194 18 936
Income tax paid (1 346) (1 672) (3 053)
Interest paid (485) (472) (920)
Net cash inflow from operating activities 1 702 1 551 2 650
Cash flow from investing activities
Net acquisition of subsidiaries - (97) (98)
Net investments in associates and joint ventures (174) (122) (264)
Net loan repayments by related parties 46 95 11
Net purchases of owner-occupied properties (25) 48 (47)
Net purchases of property and equipment (182) (55) (117)
Net purchases of intangible assets (46) (63) (81)
Dividends from associates 23 - 2
Net cash outflow from investing activities (358) (194) (594)
Cash flow from financing activities
Net repayments of borrowings 147 (753) (2 275)
Dividends paid to equity holders - (1 435) (1 442)
Dividends paid to non-controlling interest shareholders (55) (24) (32)
Decrease of treasury shares held on behalf of contract holders 9 42 14
Increase of treasury shares held on behalf of shareholders (487) - -
Transactions with minority shareholders (8) (20) 356
Other equity transactions (2) 5 6
Net issue of subordinated call notes - 750 750
Shares repurchased (544) - (974)
Net cash outflow from financing activities (940) (1 435) (3 597)
Net cash flow 404 (78) (1 541)
Cash resources and funds on deposit at beginning 25 812 27 353 27 353
Cash resources and funds on deposit at end 26 216 27 275 25 812
NON-CONTROLLING INTERESTS
31.12.2018 31.12.2017 30.06.2018
% % %
Cannon Assurance 33.7 33.7 33.7
Eris Property Group 23.9 23.9 23.9
Metropolitan Health Ghana 0.9 0.9 0.9
Metropolitan Health Namibia Administrators 49.0 49.0 49.0
Metropolitan Kenya 33.7 33.7 33.7
Metropolitan Swaziland 33.0 33.0 33.0
Metropolitan Tanzania 33.0 33.0 33.0
Metropolitan Health Zambia 35.0 35.0 35.0
MMI Holdings Namibia 9.9 9.9 9.9
Momentum Mozambique 33.0 33.0 33.0
Momentum Swaziland 33.0 33.0 33.0
Metropolitan Health Corporate 49.0 - 49.0
Momentum Short-term Insurance (Namibia) 30.0 30.0 30.0
BUSINESS COMBINATIONS - DECEMBER 2018
There were no significant business combinations for the 6 months ended December 2018.
BUSINESS COMBINATIONS - DECEMBER 2017
There were no significant business combinations for the 6 months ended December 2017. Goodwill (R27 million), customer relationships relating to non-life
business (R84 million), broker network (R71 million), and computer software (R5 million) were recognised due to small acquisitions.
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 non-life business (R84 million) and health (R23 million), broker network (R71 million), and computer software (R5 million) were recognised due
to small acquisitions.
RECONCILIATION OF GOODWILL
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Balance at beginning 1 124 1 128 1 128
Business combinations (1) - 27 27
Impairment charges (2) - - (31)
Exchange differences - (3) -
Balance at end 1 124 1 152 1 124
1 An acquisition was made in the Guardrisk group for R90 million in the December 2017 period. This resulted in the recognition of R27 million goodwill.
The entity's business is that of underwriting managers.
2 Goodwill relating to the Financial Partners (Momentum Investments segment) acquisition was impaired in the June 2018 period due to a decline in the
directors' valuation relating to a restructure of the UK businesses.
MMI HOLDINGS GROUP - SEGMENTAL INFORMATION
6 mths to 31.12.2018
Momentum Momentum Metropolitan Momentum Non-life New Share- Segmental Reconciling IFRS
Life Investments Retail Corporate Insurance Africa (1) Initiatives holders total items (2) total
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 4 447 10 257 3 575 12 074 4 759 2 353 - - 37 465 (17 054) 20 411
Recurring premiums 4 313 221 3 072 6 042 4 333 2 006 - - 19 987 (6 549) 13 438
Single premiums 134 10 036 503 6 032 426 347 - - 17 478 (10 505) 6 973
Fee income 661 1 693 73 1 418 669 155 25 54 4 748 (474) 4 274
Fee income 644 1 426 73 1 390 669 155 24 7 4 388 (114) 4 274
Intergroup fee income 17 267 - 28 - - 1 47 360 (360) -
Expenses
Net payments to contract holders
External payments 4 756 14 677 2 876 7 361 2 527 1 512 - - 33 709 (20 575) 13 134
Other expenses 1 775 1 576 1 289 1 611 1 567 913 130 161 9 022 1 603 10 625
Sales remuneration 678 433 536 55 1 110 343 - - 3 155 - 3 155
Administration expenses 836 879 736 1 315 408 477 113 375 5 139 1 386 6 525
Asset management, direct property
and other fee expenses 175 169 - 5 - 1 1 17 368 577 945
Intergroup expenses 86 95 17 236 49 92 16 (231) 360 (360) -
Diluted normalised headline earnings 462 261 333 319 135 94 (248) 262 1 618 - 1 618
Operating profit/(loss) 630 326 464 433 108 37 (256) (36) 1 706 - 1 706
Tax on operating profit/(loss) (176) (79) (131) (125) (36) (23) - (42) (612) - (612)
Investment income 11 22 - 16 91 115 10 280 545 - 545
Tax on investment income (3) (6) - (4) (26) (10) (2) (49) (100) - (100)
Fair value (losses)/gains - (1) - (1) (2) (25) - 125 96 - 96
Tax on fair value (losses)/gains - (1) - - - - - (16) (17) - (17)
Covered 496 190 333 275 - 116 - 232 1 642 - 1 642
Non-covered (34) 71 - 44 135 (22) (248) 30 (24) - (24)
462 261 333 319 135 94 (248) 262 1 618 - 1 618
Basis changes and investment variances (3) 10 8 4 - - (35) - - (13) - (13)
Actuarial liabilities 71 158 151 278 34 161 89 773 20 088 12 775 - - 379 233 - 379 233
1 The 'Africa' column includes amounts received/incurred by companies the group has decided to exit: Net insurance premiums R391 million; external payments R274 million
and administration expenses R169 million.
2 The 'Reconciling items' column includes: investment contract business premiums and claims; intergroup fee income and expenses; direct property
(R260 million) and asset management fees for all entities (R317 million), 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 (R1 004 million); the
amortisation of intangibles relating to business combinations (R368 million); expenses relating to consolidated collective investment schemes and other
minor adjustments to expenses and fee income.
3 Included in diluted normalised headline earnings.
Restated
6 mths to 31.12.2017 (1)
Momentum Momentum Metropolitan Momentum Non-life New Share- Segmental Reconciling IFRS
Life Investments Retail Corporate Insurance Africa (2) Initiatives holders total items (3) total
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 4 435 11 226 3 788 7 221 4 036 2 192 - - 32 898 (18 210) 14 688
Recurring premiums 4 288 193 3 120 5 702 3 760 1 872 - - 18 935 (6 490) 12 445
Single premiums 147 11 033 668 1 519 276 320 - - 13 963 (11 720) 2 243
Fee income 558 1 695 45 1 343 472 133 24 39 4 309 (457) 3 852
Fee income 543 1 427 45 1 312 471 133 23 - 3 954 (102) 3 852
Intergroup fee income 15 268 - 31 1 - 1 39 355 (355) -
Expenses
Net payments to contract holders
External payments 4 992 13 531 2 781 6 604 2 557 1 314 - - 31 779 (19 511) 12 268
Other expenses 1 791 1 430 1 217 1 550 1 305 913 102 100 8 408 1 577 9 985
Sales remuneration 683 400 541 78 896 355 - - 2 953 (30) 2 923
Administration expenses 897 719 646 1 256 364 455 73 287 4 697 1 418 6 115
Asset management, direct property
and other fee expenses 193 187 - - - 1 14 8 403 544 947
Intergroup expenses 18 124 30 216 45 102 15 (195) 355 (355) -
Diluted normalised headline earnings 343 253 364 293 105 165 (166) 237 1 594 - 1 594
Operating profit/(loss) 504 327 506 404 41 55 (166) (28) 1 643 - 1 643
Tax on operating profit/(loss) (172) (95) (142) (122) 9 (25) - 11 (536) - (536)
Investment income 11 28 - 17 75 80 - 303 514 - 514
Tax on investment income - (6) - (2) (19) (3) - (84) (114) - (114)
Fair value (losses)/gains - - - (4) (2) 52 - 55 101 - 101
Tax on fair value (losses)/gains - (1) - - 1 6 - (20) (14) - (14)
Covered 423 172 364 250 - 206 - 315 1 730 - 1 730
Non-covered (80) 81 - 43 105 (41) (166) (78) (136) - (136)
343 253 364 293 105 165 (166) 237 1 594 - 1 594
Basis changes and investment variances (4) 40 (70) 27 - - 44 - - 41 - 41
Actuarial liabilities 75 571 158 217 34 879 89 782 19 521 12 453 - - 390 423 - 390 423
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the old
model to normalised headline earnings under the new model.
2 The 'Africa' column includes amounts received/incurred by companies the group has decided to exit: Net insurance premiums R324 million; external payments
R183 million and administration expenses R171 million.
3 The 'Reconciling items' column includes: investment contract business premiums and claims; intergroup fee income and expenses; direct property
(R225 million) and asset management fees for all entities (R318 million), 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 (R1 010 million); the
amortisation of intangibles relating to business combinations (R357 million); expenses relating to consolidated collective investment schemes and other
minor adjustments to expenses and fee income.
4 Included in diluted normalised headline earnings.
Restated
12 mths to 30.06.2018 (1)
Momentum Momentum Metropolitan Momentum Non-life New Share- Segmental Reconciling IFRS
Life Investments Retail Corporate Insurance Africa (2) Initiatives holders total items (3) total
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
Net insurance premiums 8 938 20 894 7 368 15 244 8 609 4 251 - - 65 304 (35 411) 29 893
Recurring premiums 8 587 403 6 064 11 588 8 002 3 751 - - 38 395 (13 204) 25 191
Single premiums 351 20 491 1 304 3 656 607 500 - - 26 909 (22 207) 4 702
Fee income 967 3 531 139 2 859 1 089 372 43 85 9 085 (1 549) 7 536
Fee income 948 2 863 139 2 590 1 008 289 42 - 7 879 (343) 7 536
Intergroup fee income 19 668 - 269 81 83 1 85 1 206 (1 206) -
Expenses
Net payments to contract holders
External payments 9 494 24 337 5 660 16 329 4 915 2 686 - - 63 421 (36 189) 27 232
Other expenses 3 527 2 901 2 518 3 366 2 877 1 826 209 496 17 720 2 538 20 258
Sales remuneration 1 348 725 1 060 102 1 946 615 - - 5 796 - 5 796
Administration expenses 1 802 1 410 1 400 2 538 808 900 170 907 9 935 2 849 12 784
Asset management, direct property
and other fee expenses 363 384 - - - 3 6 27 783 895 1 678
Intergroup expenses 14 382 58 726 123 308 33 (438) 1 206 (1 206) -
Diluted normalised headline earnings 472 227 201 909 204 147 (377) 220 2 003 - 2 003
Operating profit/(loss) 716 248 281 1 247 134 33 (380) (117) 2 162 - 2 162
Tax on operating profit/(loss) (257) (70) (80) (356) (23) (40) - (58) (884) - (884)
Investment income 18 56 - 33 137 169 3 592 1 008 - 1 008
Tax on investment income (5) (14) - (9) (39) (27) - (141) (235) - (235)
Fair value gains/(losses) - 11 - (8) (6) 11 - (51) (43) - (43)
Tax on fair value gains/(losses) - (4) - 2 1 1 - (5) (5) - (5)
Covered 628 84 201 731 - 271 - 358 2 273 - 2 273
Non-covered (156) 143 - 178 204 (124) (377) (138) (270) - (270)
472 227 201 909 204 147 (377) 220 2 003 - 2 003
Basis changes and investment variances (4) (276) (250) (410) 333 - (48) - - (651) - (651)
Actuarial liabilities 75 173 159 355 34 903 88 160 19 742 13 009 - - 390 342 - 390 342
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the old
model to normalised headline earnings under the new model.
2 The 'Africa' 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.
3 The 'Reconciling items' column includes: investment contract business premiums and claims; intergroup fee income and expenses; direct property
(R460 million) and asset management fees for all entities (R436 million), 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 (R2 092 million); the
amortisation of intangibles relating to business combinations (R715 million); expenses relating to consolidated collective investment schemes and other
minor adjustments to expenses and fee income.
4 Included in diluted normalised headline earnings.
CHANGE IN DILUTED NORMALISED HEADLINE EARNINGS
Restated Restated
6 mths to 6 mths to 12 mths to
Change 31.12.2018 31.12.2017 (1) 30.06.2018 (1)
% Rm Rm Rm
Momentum Life 35 462 343 472
Momentum Investments 3 261 253 227
Metropolitan Retail (9) 333 364 201
Momentum Corporate 9 319 293 909
Non-life Insurance 29 135 105 204
Africa (43) 94 165 147
New Initiatives (49) (248) (166) (377)
Operating segments (0) 1 356 1 357 1 783
Shareholders 11 262 237 220
Total diluted normalised headline earnings 2 1 618 1 594 2 003
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the old
model to normalised headline earnings under the new model.
SEGMENTAL ANALYSIS
Momentum Momentum Metropolitan Momentum Non-life New Share-
Life Investments Retail Corporate Insurance Africa Initiatives holders Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
6 mths to 31.12.2018
Covered
Protection 221 - 149 74 - - - - 444
Long-term savings 110 66 108 125 - - - - 409
Annuities and structured products - 124 64 55 - - - - 243
Traditional 80 - 13 - - - - - 93
Other 85 - (1) 21 - 78 - 12 195
Investment income - - - - - 38 - 220 258
Total 496 190 333 275 - 116 - 232 1 642
Non-covered
Investment and savings - 71 - - - - - - 71
Life insurance - - - - - (36) - - (36)
Health - - - 62 - 35 - - 97
Multiply (34) - - - - - - - (34)
Non-life insurance - - - - (8) 19 - - 11
Cell captives - - - - 143 - - - 143
Unallocated expenses - - - - - - - (60) (60)
New initiatives India - - - - - - (150) - (150)
New initiatives aYo - - - - - - (36) - (36)
Other - - - (18) - (40) (62) 90 (30)
Total (34) 71 - 44 135 (22) (248) 30 (24)
Normalised headline earnings 462 261 333 319 135 94 (248) 262 1 618
SEGMENTAL ANALYSIS
Momentum Momentum Metropolitan Momentum Non-life New Share-
Life Investments Retail Corporate Insurance Africa Initiatives holders Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Restated
6 mths to 31.12.2017 (1)
Covered
Protection 110 - 154 84 - - - - 348
Long-term savings 53 79 139 106 - - - - 377
Annuities and structured products - 93 61 45 - - - - 199
Traditional 181 - 16 - - - - - 197
Other 79 - (6) 15 - 175 - 29 292
Investment income - - - - - 31 - 286 317
Total 423 172 364 250 - 206 - 315 1 730
Non-covered
Investment and savings - 81 - - - - - - 81
Life insurance - - - - - 10 - - 10
Health - - - 51 - 20 - - 71
Multiply (77) - - - - - - - (77)
Non-life insurance - - - - (22) (18) - - (40)
Cell captives - - - - 127 - - - 127
Unallocated expenses - - - - - - - (45) (45)
New initiatives India - - - - - - (102) - (102)
New initiatives aYo - - - - - - (28) - (28)
Other (3) - - (8) - (53) (36) (33) (133)
Total (80) 81 - 43 105 (41) (166) (78) (136)
Normalised headline earnings 343 253 364 293 105 165 (166) 237 1 594
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the old
model to normalised headline earnings under the new model.
SEGMENTAL ANALYSIS
Momentum Momentum Metropolitan Momentum Non-life New Share-
Life Investments Retail Corporate Insurance Africa Initiatives holders Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Restated
12 mths to 30.06.2018 (1)
Covered
Protection (13) - 150 293 - - - - 430
Long-term savings 135 109 (118) 196 - - - - 322
Annuities and structured products - (25) 75 212 - - - - 262
Traditional 357 - 108 - - - - - 465
Other 149 - (14) 30 - 200 - (116) 249
Investment income - - - - - 71 - 474 545
Total 628 84 201 731 - 271 - 358 2 273
Non-covered
Investment and savings - 143 - - - - - - 143
Life insurance - - - - - (32) - - (32)
Health - - - 195 - 49 - - 244
Multiply (152) - - - - - - - (152)
Non-life insurance - - - - (56) 10 - - (46)
Cell captives - - - - 260 - - - 260
Unallocated expenses - - - - - - - (97) (97)
New initiatives India - - - - - - (218) - (218)
New initiatives aYo - - - - - - (58) - (58)
Other (4) - - (17) - (151) (101) (41) (314)
Total (156) 143 - 178 204 (124) (377) (138) (270)
Normalised headline earnings 472 227 201 909 204 147 (377) 220 2 003
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the old
model to normalised headline earnings under the new model.
MOMENTUM INVESTMENTS - NON-COVERED BUSINESS
Restated Restated
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 (1) 30.06.2018 (1)
Rm Rm Rm
Revenue 742 835 1 725
Fee income 709 753 1 558
Performance fees 3 1 1
Investment income 36 52 136
Fair value (losses)/gains (6) 29 30
Expenses and finance costs (647) (696) (1 480)
Other expenses (624) (673) (1 393)
Finance costs (23) (23) (87)
Share of profit/(loss) of associates 2 (3) 5
Profit before tax 97 136 250
Income tax expense (21) (46) (81)
Non-controlling interest (5) (9) (26)
Normalised headline earnings 71 81 143
Operating profit before tax 84 89 155
Tax on operating profit (17) (36) (58)
Investment income 13 20 47
Tax on investment income (4) (5) (12)
Fair value (losses)/gains (6) 15 14
Tax on fair value (losses)/gains 1 (2) (3)
Diluted normalised headline earnings 71 81 143
Assets under management at period end 468 604 486 787 496 911
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the old
model to normalised headline earnings under the new model.
HEALTH - NON-COVERED BUSINESS
Momentum
Corporate Africa Total
Rm Rm Rm
6 mths to 31.12.2018
Revenue 1 356 460 1 816
Net insurance premiums 383 339 722
Fee income 941 102 1 043
Investment income 20 19 39
Intergroup fees 12 - 12
Expenses and finance costs (1 216) (387) (1 603)
Net payments to contract holders (266) (234) (500)
Change in actuarial liabilities (4) - (4)
Other expenses (944) (153) (1 097)
Finance costs (2) - (2)
Profit before tax 140 73 213
Income tax expense (35) (22) (57)
Non-controlling interest (43) (16) (59)
Earnings attributable to ordinary shareholders 62 35 97
Operating profit before tax 71 37 108
Tax on operating profit (19) (16) (35)
Investment income 15 19 34
Tax on investment income (4) - (4)
Fair value losses (1) (5) (6)
Diluted normalised headline earnings 62 35 97
Closed schemes 13 35 48
Open scheme 30 - 30
Other 19 - 19
62 35 97
Principal members Lives
Momentum Corporate principal members 993 753
Africa lives 416 186
HEALTH - NON-COVERED BUSINESS
Momentum
Corporate Africa Total
Rm Rm Rm
Restated
6 mths to 31.12.2017 (1)
Revenue 1 263 360 1 623
Net insurance premiums 344 255 599
Fee income 895 95 990
Investment income 16 10 26
Intergroup fees 8 - 8
Expenses and finance costs (1 186) (304) (1 490)
Net payments to contract holders (259) (182) (441)
Change in actuarial liabilities (5) - (5)
Other expenses (921) (122) (1 043)
Finance costs (1) - (1)
Profit before tax 77 56 133
Income tax expense (26) (21) (47)
Non-controlling interest - (15) (15)
Earnings attributable to ordinary shareholders 51 20 71
Operating profit before tax 62 24 86
Tax on operating profit (24) (14) (38)
Investment income 18 11 29
Tax on investment income (2) - (2)
Fair value losses (3) (1) (4)
Diluted normalised headline earnings 51 20 71
Closed schemes 42 20 62
Open scheme (3) - (3)
Other 12 - 12
51 20 71
Principal
members Lives
Momentum Corporate principal members 976 683
Africa lives 454 259
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the
old model to normalised headline earnings under the new model.
HEALTH - NON-COVERED BUSINESS
Momentum
Corporate Africa Total
Rm Rm Rm
Restated
12 mths to 30.06.2018 (1)
Revenue 2 553 774 3 327
Net insurance premiums 694 558 1 252
Fee income 1 798 186 1 984
Investment income 30 30 60
Intergroup fees 31 - 31
Expenses and finance costs (2 239) (655) (2 894)
Net payments to contract holders (476) (394) (870)
Other expenses (1 760) (261) (2 021)
Finance costs (3) - (3)
Profit before tax 314 119 433
Income tax expense (85) (37) (122)
Non-controlling interests (34) (33) (67)
Earnings attributable to ordinary shareholders 195 49 244
Operating profit before tax 249 47 296
Tax on operating profit (72) (23) (95)
Investment income 32 28 60
Tax on investment income (9) - (9)
Fair value losses (7) (3) (10)
Tax on fair value losses 2 - 2
Diluted normalised headline earnings 195 49 244
Closed schemes 102 49 151
Open scheme 37 - 37
Other 56 - 56
195 49 244
Principal
members Lives
Momentum Corporate principal members 978 555
Africa lives 440 981
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the old
model to normalised headline earnings under the new model.
NON-LIFE INSURANCE
Non-life Cell captive
business business Africa Total
Rm Rm Rm Rm
6 mths to 31.12.2018
Net insurance premiums 416 - 89 505
Fee income 2 350 21 373
Management fees - 217 - 217
Investment fees - 41 - 41
Underwriting fees - 92 - 92
Other fee income 2 - 21 23
Investment income 29 75 13 117
Total income 447 425 123 995
Expenses and finance costs (448) (228) (105) (781)
Net payments to contract holders (255) - (42) (297)
Change in actuarial liabilities - - 9 9
Acquisition costs 1 (52) - (21) (73)
Other expenses (141) (221) (51) (413)
Finance costs - (7) - (7)
(Loss)/Profit before tax (1) 197 18 214
Income tax expense (7) (54) 5 (56)
Non-controlling interest - - (4) (4)
Earnings attributable to ordinary shareholders (8) 143 19 154
Operating (loss)/profit before tax (23) 129 1 107
Tax on operating (loss)/profit (1) (35) 5 (31)
Investment income 22 69 14 105
Tax on investment income (6) (19) - (25)
Fair value losses - (1) (1) (2)
Diluted normalised headline earnings (8) 143 19 154
Ability - 2 - 2
Momentum Short-term Insurance 19 - - 19
MMI Short-term Insurance Administration (27) - - (27)
Guardrisk Group - 141 - 141
Swaziland - - 2 2
Tanzania - - (1) (1)
Momentum Short-term Insurance (Namibia) - - 7 7
Cannon Short-term - - 11 11
(8) 143 19 154
1 The acquisition costs relating to the cell captive business are included in underwriting profit.
NON-LIFE INSURANCE
Non-life Cell captive
business business Africa Total
Rm Rm Rm Rm
Restated
6 mths to 31.12.2017 (1)
Net insurance premiums 350 - 83 433
Fee income 3 321 11 335
Management fees - 233 - 233
Investment fees - 42 - 42
Underwriting fees - 46 - 46
Other fee income 3 - 11 14
Investment income 19 65 7 91
Total income 372 386 101 859
Expenses and finance costs (427) (213) (122) (762)
Net payments to contract holders (250) - (59) (309)
Change in actuarial liabilities - - 7 7
Acquisition costs 2 (50) - (18) (68)
Other expenses (127) (207) (52) (386)
Finance costs - (6) - (6)
(Loss)/Profit before tax (55) 173 (21) 97
Income tax expense 33 (46) 1 (12)
Non-controlling interest - - 2 2
Earnings attributable to ordinary shareholders (22) 127 (18) 87
Operating (loss)/profit before tax (58) 113 (26) 29
Tax on operating (loss)/profit 34 (28) 1 7
Investment income 2 61 8 71
Tax on investment income - (18) - (18)
Fair value losses - (2) (1) (3)
Tax on fair value losses - 1 - 1
Diluted normalised headline earnings (22) 127 (18) 87
Ability - 3 - 3
Momentum Short-term Insurance 9 - - 9
MMI Short-term Insurance Administration (31) - - (31)
Guardrisk Group - 124 - 124
Swaziland - - (1) (1)
Tanzania - - (1) (1)
Momentum Short-term Insurance (Namibia) - - (1) (1)
Cannon Short-term - - (15) (15)
(22) 127 (18) 87
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the
old model to normalised headline earnings under the new model.
2 The acquisition costs relating to the cell captive business are included in underwriting profit.
NON-LIFE INSURANCE
Non-life Cell captive
business business Africa Total
Rm Rm Rm Rm
Restated
12 mths to 30.06.2018 (1)
Net insurance premiums 731 - 164 895
Fee income 6 656 31 693
Management fees - 456 - 456
Investment fees - 73 - 73
Underwriting fees - 125 - 125
Other fee income 6 2 31 39
Investment income 41 117 16 174
Total income 778 773 211 1 762
Expenses and finance costs (867) (420) (201) (1 488)
Net payments to contract holders (486) - (88) (574)
Change in actuarial liabilities - - 11 11
Acquisition costs (2) (113) - (34) (147)
Other expenses (268) (409) (90) (767)
Finance costs - (11) - (11)
(Loss)/Profit before tax (89) 353 10 274
Income tax expense 33 (93) 1 (59)
Non-controlling interest - - (1) (1)
Earnings attributable to ordinary shareholders (56) 260 10 214
Operating (loss)/profit before tax (109) 236 (5) 122
Tax on operating (loss)/profit 39 (60) 1 (20)
Investment income 20 118 17 155
Tax on investment income (6) (32) - (38)
Fair value losses - (3) (3) (6)
Tax on fair value losses - 1 - 1
Diluted normalised headline earnings (56) 260 10 214
Ability - 2 - 2
Momentum Short-term Insurance 8 - - 8
MMI Short-term Insurance Administration (64) - - (64)
Guardrisk Group - 258 - 258
Swaziland - - 2 2
Tanzania - - 3 3
Momentum Short-term Insurance (Namibia) - - (3) (3)
Cannon Short-term - - 8 8
(56) 260 10 214
1 The table has been restated based on a new operating model adopted by the group. The group has also adopted normalised headline earnings as its primary
earnings measure and not core headline earnings as previously disclosed. Refer to Appendix A for reconciliations of core headline earnings under the old
model to normalised headline earnings under the new model.
2 The acquisition costs relating to the cell captive business are included in underwriting profit.
INDIA - NON-COVERED BUSINESS (1)
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Net written premiums 332 187 451
Net earned premiums 257 122 307
Fee income 7 1 4
Net incurred claims (162) (122) (268)
Total management expenses (368) (177) (425)
Net commission expenses (33) (14) (37)
Underwriting loss (299) (190) (419)
Investment income 15 10 20
Operating loss (284) (180) (399)
Investment income on excess 7 9 15
Loss before and after tax (277) (171) (384)
MMI share of results (49%) (136) (84) (188)
MMI support costs (14) (18) (30)
Normalised headline earnings (150) (102) (218)
1 The India results have been reported with a three month lag.
SEGMENT IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS (1)
Total revenue in scope of IFRS 15
Contract Trust and Health Other fee Total fee
administration fiduciary services administration income income
Rm Rm Rm Rm Rm
6 mths to 31.12.2018
Momentum Life 424 6 - 214 644
Momentum Investments 704 675 - 47 1 426
Metropolitan Retail 34 - - 39 73
Momentum Corporate 216 219 936 19 1 390
Non-life Insurance 34 - - 635 669
Africa 25 7 7 116 155
New Initiatives - - - 24 24
Shareholders - 7 - - 7
Segmental total 1 437 914 943 1 094 4 388
Reconciling items - (114) - - (114)
IFRS total 1 437 800 943 1 094 4 274
1 Comparative information not required in terms of IFRS 15.
EMBEDDED VALUE INFORMATION
EMBEDDED VALUE RESULTS
Restated Restated
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Covered business
Equity attributable to owners of the parent 22 400 22 763 22 328
Fair value adjustments on Metropolitan business
acquisition and other consolidation adjustments (3 022) (3 310) (3 170)
Difference between statutory and published valuation
methods (1) - (1 048) (1 574)
Net assets - non-covered business within life
insurance companies (2 593) (2 199) (2 269)
Net assets - non-covered business outside life
insurance companies (3 026) (3 203) (3 430)
Dilutory effect of subsidiaries (2) (81) (56) (52)
Value of MMI Group Ltd preference shares issued (500) (500) (500)
Diluted adjusted net worth - covered business 13 178 12 447 11 333
Net value of in-force business 21 140 22 694 22 133
Diluted embedded value - covered business 34 318 35 141 33 466
Non-covered business
Net assets - non-covered business within life
insurance companies 2 593 2 199 2 269
Net assets - non-covered business outside life
insurance companies 3 026 3 203 3 430
Consolidation adjustments and transfers to covered
business (3) (2 093) (2 438) (2 306)
Adjustments for dilution (4) 648 686 660
Diluted adjusted net worth - non-covered business 4 174 3 650 4 053
Write-up to directors' value 1 388 4 600 2 082
Non-covered business 3 204 5 520 3 895
Holding company expenses (5) (1 232) (333) (1 232)
International holding company expenses (5) (584) (587) (581)
Diluted embedded value - non-covered business 5 562 8 250 6 135
Diluted adjusted net worth 17 352 16 097 15 386
Net value of in-force business 21 140 22 694 22 133
Write-up to directors' value 1 388 4 600 2 082
Diluted embedded value 39 880 43 391 39 601
Required capital - covered business (adjusted for
qualifying debt) (6) 2 707 5 448 5 699
Free surplus - covered business 10 471 6 999 5 634
Diluted embedded value per share (cents) 2 660 2 705 2 543
Diluted adjusted net worth per share (cents) 1 158 1 004 988
Diluted number of shares in issue (million) (7) 1 499 1 604 1 557
1 The new regulatory framework for the South African insurance industry became effective on 1 July 2018, upon the implementation of the South African
Insurance Act, 18 of 2017. This meant that the previous Statutory Valuation Method was no longer recognised as a valid basis for regulatory liabilities.
MMI elected to adopt the IFRS liabilities as reference for determining the Value of In-force business for Embedded Value purposes. The remaining
difference between the statutory and published valuation method is no longer applicable to the embedded value statement from 1 July 2018, but remain
applicable to prior reporting periods.
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): R117 million (31.12.2017: R109 million; 30.06.2018: R114 million)
- Treasury shares held on behalf of contract holders: R277 million (31.12.2017: R323 million; 30.06.2018: R292 million)
- Liability - MMI Holdings Ltd convertible preference shares issued to KTH: R254 million (31.12.2017: R254 million; 30.06.2018: R254 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 in-force covered business amounts to R7 098 million (31.12.2017: R9 829 million; 30.06.2018: R10 073 million) and is adjusted
for qualifying debt of R4 391 million (31.12.2017: R4 381 million; 30.06.2018: R4 374 million). With the implementation of the new regulatory framework
as of 1 July 2018, MMIGL has adopted a target range for Solvency Cover of 1.7 to 2.1 times the SCR. This makes allowance for the capital required to
support the covered business as well as the wider strategic deployments of the group. The required capital allocated to the South African in-force
covered business represents the IFRS shareholder assets required to provide resilience against a range of severe but plausible scenarios, based on
stress testing of the new regulatory balance sheet. For the international covered business, required capital is determined as a multiple of the
statutory capital adequacy requirements.
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 (1)
Restated Restated
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Momentum Life 8 973 9 377 9 834
Gross value of in-force business 9 848 10 715 11 182
Less cost of required capital (875) (1 338) (1 348)
Momentum Investments (2) 1 654 3 034 1 948
Gross value of in-force business 1 844 3 222 2 111
Less cost of required capital (190) (188) (163)
Metropolitan Retail 4 295 4 003 4 023
Gross value of in-force business 4 589 4 688 4 659
Less cost of required capital (294) (685) (636)
Momentum Corporate 4 508 4 045 4 250
Gross value of in-force business 5 435 4 886 5 183
Less cost of required capital (927) (841) (933)
Africa 1 710 2 235 2 078
Gross value of in-force business 2 058 2 496 2 366
Less cost of required capital (348) (261) (288)
Net value of in-force business 21 140 22 694 22 133
1 With the adoption of the new regulatory framework for South African insurers, MMI elected to adopt the IFRS liabilities as reference for determining
the Value of In-force business for Embedded Value purposes. For purposes of determining the Cost of Required Capital, total Restricted Assets were
defined in terms of the new regulatory balance sheet by referencing the regulatory technical provisions and SCR. Required Capital is derived as the
total Restricted Assets less the IFRS liabilities.
2 Prior periods have been restated to include Wealth business in the Momentum Investments segment.
EMBEDDED VALUE DETAIL
Adjusted Net value Restated Restated
net worth of in-force 31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm Rm Rm
Covered business
Momentum Life 1 375 8 973 10 348 12 460 13 480
Momentum Investments (1, 2) 1 034 1 654 2 688 4 356 2 888
Metropolitan Retail 1 216 4 295 5 511 6 374 6 175
Momentum Corporate 2 766 4 508 7 274 6 383 6 730
Africa 2 167 1 710 3 877 4 033 3 833
Shareholders 4 620 - 4 620 1 535 360
Total covered business 13 178 21 140 34 318 35 141 33 466
Adjusted Write-up to Restated Restated
net worth directors' value 31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm Rm Rm
Non-covered business
Momentum Life 637 (1 198) (561) 33 (376)
Multiply 637 (1 198) (561) 33 (376)
Momentum Investments 917 1 011 1 928 2 110 1 744
Investment and savings (1) 749 910 1 659 2 087 1 726
Other 168 101 269 23 18
Momentum Corporate 188 1 415 1 603 1 864 1 572
Health 228 1 415 1 643 1 879 1 595
Other (40) - (40) (15) (23)
Non-life Insurance 2 225 1 658 3 883 3 845 3 553
Non-life insurance 893 (313) 580 616 470
Cell captives 1 332 1 971 3 303 3 229 3 083
Africa (155) (534) (689) (773) (530)
Life insurance 318 (221) 97 184 204
Health 114 250 364 310 358
Non-life insurance 78 - 78 115 102
Other (665) 21 (644) (795) (613)
International holding company expenses (3) - (584) (584) (587) (581)
New Initiatives 507 268 775 629 577
New initiatives India 395 226 621 528 453
New initiatives aYo 60 42 102 53 77
Other 52 - 52 48 47
Shareholders (145) (1 232) (1 377) 542 (405)
Other (145) - (145) 875 827
Holding company expenses (3) - (1 232) (1 232) (333) (1 232)
Total non-covered business 4 174 1 388 5 562 8 250 6 135
Total embedded value 17 352 22 528 39 880 43 391 39 601
1 Prior periods have been restated to reflect the transfer of Wealth to covered business.
2 Included in covered business is Wealth business not deemed to be long-term insurance business with an adjusted net worth of R436 million
(31.12.2017: R432 million; 30.06.2018: R582 million) and value of in-force of R171 million (31.12.2017: R573 million; 30.06.2018: R229 million).
3 The international holding company expenses reflect the allowance for support services to the international life assurance and health businesses. The
holding company expenses reflect the present value of projected recurring head office expenses.
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE
Covered business
Restated Restated
Adjusted Gross value Cost of 6 mths to 6 mths to 12 mths to
net worth of in-force required 31.12.2018 31.12.2017 30.06.2018
(ANW) (VIF) capital Total EV Total EV Total EV
Notes Rm Rm Rm Rm Rm Rm
Profit from new business (542) 1 042 (141) 359 318 433
Embedded value from new business A (542) 1 018 (141) 335 299 345
Expected return to end of period B - 24 - 24 19 88
Profit from existing business 1 919 (395) 38 1 562 1 251 1 102
Expected return - unwinding of RDR B - 1 221 (163) 1 058 1 096 2 198
Release from the cost of required capital C - - 196 196 200 452
Expected (or actual) net of tax profit
transfer to net worth D 1 657 (1 657) - - - -
Operating experience variances E 277 41 5 323 39 (181)
Development expenses F (15) - - (15) (13) (51)
Operating assumption changes G - - - - (71) (1 316)
Embedded value profit/(loss) from operations 1 377 647 (103) 1 921 1 569 1 535
Investment return on adjusted net worth H 43 - - 43 409 695
Investment variances I (25) (972) 95 (902) 472 (82)
Economic assumption changes J (2) - (1) (3) 160 28
Exchange rate movements K 9 7 (2) 14 (12) 21
Exceptional items L 1 534 (1 409) 745 870 - -
Embedded value profit/(loss) - covered business 2 936 (1 727) 734 1 943 2 598 2 197
Transfer of business to non-covered business M - - - - (59) (59)
Other capital transfers N (346) - - (346) (374) (455)
Dividend (paid)/received (745) - - (745) (1 979) (3 194)
Change in embedded value - covered business 1 845 (1 727) 734 852 186 (1 511)
Non-covered business
Change in directors' valuation and other items (610) (253) (1 750)
Change in holding company expenses (3) (23) (916)
Embedded value profit/(loss) - non-covered business (613) (276) (2 666)
Transfer of business from covered business M - 59 59
Other capital transfers N 346 374 455
Dividend received/(paid) 744 544 1 752
Shares repurchased (1 031) - (974)
Finance costs - preference shares (19) (19) (37)
Change in embedded value - non-covered business (573) 682 (1 411)
Total change in group embedded value 279 868 (2 922)
Total embedded value profit/(loss) 1 330 2 322 (469)
Return on embedded value (%) - internal rate of
return 6.8% 11.2% -1.1%
Return on embedded value excluding Exceptional
items (%) - internal rate of return 2.3% 11.2% -1.1%
A. VALUE OF NEW BUSINESS
VALUE OF NEW BUSINESS (1, 2)
Momentum Momentum Metropolitan Momentum
Life Investments (3, 4) Retail Corporate Africa Total
Rm Rm Rm Rm Rm Rm
6 mths to 31.12.2018
Value of new business 44 43 58 198 (8) 335
Gross 92 50 83 250 1 476
Less cost of required capital (48) (7) (25) (52) (9) (141)
New business premiums 1 493 11 007 1 187 6 377 473 20 537
Recurring premiums 509 109 653 493 176 1 940
Protection 256 - 427 299 47 1 029
Long-term savings 253 108 224 194 129 908
Annuities and structured products - 1 2 - - 3
Single premiums 984 10 898 534 5 884 297 18 597
Protection - - - - 105 105
Long-term savings 984 9 290 217 5 869 80 16 440
Annuities and structured products - 1 608 317 15 112 2 052
New business premiums (APE) 607 1 199 707 1 082 206 3 801
Protection 256 - 427 299 58 1 040
Long-term savings 351 1 037 246 781 137 2 552
Annuities and structured products - 162 34 2 11 209
New business premiums (PVP) 4 104 11 312 2 523 9 784 1 067 28 790
Profitability of new business as a
percentage of APE 7.2 3.6 8.2 18.3 (3.9) 8.8
Profitability of new business as a
percentage of PVP 1.1 0.4 2.3 2.0 (0.7) 1.2
Restated
6 mths to 31.12.2017
Value of new business 25 75 130 44 25 299
Gross 54 89 160 57 37 397
Less cost of required capital (29) (14) (30) (13) (12) (98)
New business premiums 1 383 11 028 1 391 1 750 473 16 025
Recurring premiums 491 102 675 327 232 1 827
Protection 276 - 447 68 86 877
Long-term savings 215 101 226 259 146 947
Annuities and structured products - 1 2 - - 3
Single premiums 892 10 926 716 1 423 241 14 198
Protection - - - 1 143 144
Long-term savings 892 9 803 362 1 412 80 12 549
Annuities and structured products - 1 123 354 10 18 1 505
New business premiums (APE) 580 1 194 747 469 256 3 246
Protection 276 - 447 68 100 891
Long-term savings 304 1 081 263 400 154 2 202
Annuities and structured products - 113 37 1 2 153
New business premiums (PVP) 3 725 11 328 2 919 4 855 1 367 24 194
Profitability of new business as a
percentage of APE 4.3 6.3 17.4 9.4 9.8 9.2
Profitability of new business as a
percentage of PVP 0.7 0.7 4.5 0.9 1.8 1.2
Restated
12 mths to 30.06.2018
Value of new business 66 76 84 124 (5) 345
Gross 120 105 134 160 15 534
Less cost of required capital (54) (29) (50) (36) (20) (189)
New business premiums 2 963 22 650 2 618 4 319 861 33 411
Recurring premiums 995 206 1 249 806 429 3 685
Protection 517 - 816 271 114 1 718
Long-term savings 478 205 429 533 315 1 960
Annuities and structured products - 1 4 2 - 7
Single premiums 1 968 22 444 1 369 3 513 432 29 726
Protection - - - 10 244 254
Long-term savings 1 968 19 955 631 3 482 152 26 188
Annuities and structured products - 2 489 738 21 36 3 284
New business premiums (APE) 1 192 2 451 1 386 1 157 472 6 658
Protection 517 - 816 272 138 1 743
Long-term savings 675 2 201 492 881 330 4 579
Annuities and structured products - 250 78 4 4 336
New business premiums (PVP) 8 089 23 267 5 091 11 218 2 337 50 002
Profitability of new business as a
percentage of APE 5.5 3.1 6.1 10.7 (1.1) 5.2
Profitability of new business as a
percentage of PVP 0.8 0.3 1.6 1.1 (0.2) 0.7
1 Value of new business and new business premiums are net of non-controlling interests.
2 MMI typically does not include any basis changes for interim reporting, i.e. the value of new business has been calculated on opening demographic
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. MMI does not allow for marginal diversification benefits to be allocated to the value of new
business for purposes of deriving the cost of required capital.
3 Prior periods have been restated to include Wealth that was transferred to covered business.
4 Included in covered business is Wealth business not deemed to be long-term insurance business with value of new business of R2 million
(31.12.2017: R9 million; 30.06.2018: R39 million).
RECONCILIATION OF LUMP SUM INFLOWS
Restated Restated
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Total lump sum inflows 17 564 13 966 26 942
Inflows not included in value of new business (3 174) (4 348) (6 635)
Wealth off-balance sheet business 3 318 3 777 7 674
Term extensions on maturing policies 725 262 438
Automatically Continued Policies 178 553 1 318
Non-controlling interests and other adjustments (14) (12) (11)
Single premiums included in value of new business 18 597 14 198 29 726
PRINCIPAL ASSUMPTIONS (South Africa) (1, 2) 31.12.2018 31.12.2017 30.06.2018
% % %
Pre-tax investment return
Equities 13.2 12.9 13.0
Properties 10.7 10.4 10.5
Government stock 9.7 9.4 9.5
Other fixed-interest stocks 10.2 9.9 10.0
Cash 8.7 8.4 8.5
Risk-free return (3) 9.7 9.4 9.5
Risk discount rate (RDR) 12.0 11.6 11.8
Investment return (before tax) - balanced portfolio (3) 11.9 11.5 11.7
Renewal expense inflation rate (4) 6.5 6.7 6.5
1 The principal assumptions relate only to the South African life insurance business. Assumptions relating to international life insurance businesses are
based on local requirements and can differ from the South African assumptions.
2 The assumptions quoted in the table are representative rates derived at the 10-year point of the yield curves.
3 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.
4 For the retail businesses 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 addition to the expense inflation is
allowed for in some divisions to reflect the impact of closed books that are in run-off. For Momentum Corporate a fixed real return of 2.4% is
projected. The 6.5% above represents the 10-year point of the yield curves.
B. EXPECTED RETURN
The expected return is determined by applying the risk discount rate applicable at the beginning of the reporting year to the present value of in-force
covered business at the beginning of the reporting year. The expected return on new business is determined by applying the current risk discount rate to the
value of new business from the point of sale to the end of the year.
C. RELEASE FROM THE COST OF REQUIRED CAPITAL
The release from the cost of required capital represents the difference between the risk discount rate and the expected after tax investment return on the
assets backing the required capital over the year.
D. EXPECTED (OR ACTUAL) NET OF TAX PROFIT TRANSFER TO NET WORTH
The expected profit transfer for covered business from the present value of in-force to the adjusted net worth is calculated on the statutory valuation
method.
E. OPERATING EXPERIENCE VARIANCES
OPERATING EXPERIENCE VARIANCES
Restated Restated
Cost of 6 mths to 6 mths to 12 mths to
required 31.12.2018 31.12.2017 30.06.2018
Notes ANW Gross VIF capital EV EV EV
Rm Rm Rm Rm Rm Rm
Momentum Life 100 (27) - 73 (55) 78
Mortality and morbidity 1 83 18 - 101 69 157
Terminations, premium cessations
and policy alterations 2 20 (70) - (50) 10 (33)
Expense variance 3 - - 3 (12) (15)
Other (6) 25 - 19 (122) (31)
Momentum Investments 47 (14) - 33 (19) (96)
Mortality and morbidity 3 - - 3 1 24
Terminations, premium cessations
and policy alterations 7 (19) - (12) 9 (29)
Expense variance (5) - - (5) (46) (158)
Credit risk variance 22 - - 22 14 31
Other 3 20 5 - 25 3 36
Metropolitan Retail 44 14 - 58 3 (33)
Mortality and morbidity 1 37 1 - 38 50 98
Terminations, premium cessations
and policy alterations (16) 11 - (5) (63) (141)
Expense variance (5) - - (5) (5) (18)
Credit risk variance 16 - - 16 8 17
Other 12 2 - 14 13 11
Momentum Corporate 72 70 5 147 124 (34)
Mortality and morbidity 1 32 - - 32 27 11
Terminations, premium cessations
and policy alterations 4 2 70 - 72 12 (59)
Expense variance 11 - - 11 47 51
Credit risk variance 6 - - 6 22 48
Other 5 21 - 5 26 16 (85)
Africa 28 (2) - 26 (7) 10
Mortality and morbidity 6 25 2 - 27 24 52
Terminations, premium cessations
and policy alterations 7 (23) - - (23) (4) (39)
Expense variance 14 - - 14 (7) (4)
Other 12 (4) - 8 (20) 1
Shareholders (14) - - (14) (7) (106)
Total operating experience variances 277 41 5 323 39 (181)
Notes
1. Overall, mortality and morbidity experience for the 6 months were better compared to what was allowed for in the valuation basis.
2. Positive alteration experience due to better than expected take-up of premium increases were offset by negative termination experience and larger
than expected premium discounts.
3. Lower commission payments than expected.
4. Good retention on risk business.
5. Profits earned on administration only business.
6. Mainly due to a correction relating to reinsurance premiums.
7. Mainly due to a correction relating to claw back commission.
F. DEVELOPMENT EXPENSES
Business development expenses within segments.
G. OPERATING ASSUMPTION CHANGES
Restated Restated
Cost of 6 mths to 6 mths to 12 mths to
required 31.12.2018 31.12.2017 30.06.2018
Notes ANW Gross VIF capital EV EV EV
Rm Rm Rm Rm Rm Rm
Momentum Life - - - - (14) (137)
Mortality and morbidity assumptions - - - - - (10)
Termination assumptions - - - - - (182)
Renewal expense assumptions - - - - - (256)
Modelling, methodology and other changes - - - - (14) 311
Momentum Investments - - - - 13 (1 270)
Mortality and morbidity assumptions - - - - - 5
Termination assumptions - - - - - (75)
Renewal expense assumptions - - - - - (775)
Modelling, methodology and other changes - - - - 13 (425)
Metropolitan Retail - - - - - (273)
Mortality and morbidity assumptions - - - - - 3
Termination assumptions - - - - - (55)
Renewal expense assumptions - - - - - (216)
Modelling, methodology and other changes - - - - - (5)
Momentum Corporate - - - - (70) 614
Mortality and morbidity assumptions - - - - - (143)
Termination assumptions - - - - - 9
Renewal expense assumptions - - - - (70) 526
Modelling, methodology and other changes - - - - - 222
Africa - - - - - (250)
Mortality and morbidity assumptions - - - - - 49
Termination assumptions - - - - - (2)
Renewal expense assumptions - - - - - (87)
Modelling, methodology and other changes - - - - - (210)
Total operating assumption changes - - - - (71) (1 316)
H. INVESTMENT RETURN ON ADJUSTED NET WORTH
Restated Restated
6 mths to 6 mths to 12 mths to
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Investment income 305 276 559
Capital appreciation and other (245) 151 171
Preference share dividends paid and change in fair value of preference shares (17) (18) (35)
Investment return on adjusted net worth 43 409 695
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. EXCEPTIONAL ITEMS
With the adoption of the new regulatory framework for South African insurers, MMI elected to adopt the IFRS liabilities as reference for determining the
Value of In-force business for Embedded Value purposes. This has resulted in a reallocation of value between the Adjusted Net Worth and Value of In-force
due to the liability difference between the previous statutory and IFRS liabilities. For purposes of determining the Cost of Required Capital, total
Restricted Assets were defined in terms of the new regulatory balance sheet by referencing the regulatory technical provisions and SCR. Differences in the
nature of the Required Capital between the new and the previous basis (which referenced Capital Adequacy Requirement) has resulted in a positive impact on
the embedded value.
M. TRANSFER OF BUSINESS FROM/TO NON-COVERED BUSINESS
Transfer of business between covered and non-covered business.
N. 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 - 31.12.2018
In-force business New business written
Cost of Cost of
Adjusted Net Gross required Net Gross required
net worth value value capital (3) value value capital (3)
Rm Rm Rm Rm Rm Rm Rm
Base value 13 178 21 140 23 774 (2 634) 335 476 (141)
1% increase in risk discount rate 19 495 22 402 (2 907) 259 410 (151)
% change (8) (6) 10 (23) (14) 7
1% reduction in risk discount rate 23 119 25 443 (2 324) 411 541 (130)
% change 9 7 (12) 23 14 (8)
10% decrease in future expenses 22 792 25 360 (2 568) 413 550 (137)
% change (1) 8 7 (3) 23 16 (3)
10% decrease in lapse, paid-up and
surrender rates 21 897 24 487 (2 590) 402 549 (147)
% change 4 3 (2) 20 15 4
5% decrease in mortality and morbidity
for assurance business 23 553 26 121 (2 568) 414 555 (141)
% change 11 10 (3) 24 17 -
5% decrease in mortality for annuity
business 20 677 23 410 (2 733) 315 467 (152)
% change (2) (2) 4 (6) (2) 8
1% reduction in gross investment return,
inflation rate and risk discount rate 13 178 21 446 24 482 (3 036) 367 521 (154)
% change (2) - 1 3 15 10 9 9
1% reduction in inflation rate 22 195 24 706 (2 511) 377 514 (137)
% change 5 4 (5) 13 8 (3)
10% fall in market value of equities and
properties 12 878 20 252 22 851 (2 599)
% change (2) (4) (4) (1)
10% reduction in premium indexation
take-up rate 20 779 23 380 (2 601) 309 451 (142)
% change (2) (2) (1) (8) (5) 1
10% decrease in non-commission-related
acquisition expenses 390 531 (141)
% change 16 12 -
1% increase in equity/property risk premium 21 816 24 521 (2 705) 348 489 (141)
% change 3 3 3 4 3 -
1 No corresponding changes in variable policy charges are assumed, although in practice it is likely that these will be modified according to
circumstances.
2 Bonus rates are assumed to change commensurately.
3 The change in the value of cost of required capital is disclosed as nil where the sensitivity test results in an insignificant change in the value.
ADDITIONAL INFORMATION
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE
Cost of Restated Restated
Adjusted net Gross value of required 6 mths to 6 mths to 12 mths to
worth (ANW) in-force (VIF) capital 31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm Rm Rm Rm
Momentum Life
Embedded value from new business (148) 240 (48) 44 25 66
Expected return - unwinding of RDR - 470 (43) 427 440 897
Release from the cost of required capital - - 48 48 73 198
Expected (or actual) net of tax profit transfer
to net worth 571 (571) - - - -
Operating experience variances 100 (27) - 73 (55) 78
Development expenses (8) - - (8) (3) (17)
Operating assumption changes - - - - (14) (137)
Embedded value profit/(loss) from operations 515 112 (43) 584 466 1 085
Investment return on adjusted net worth 47 - - 47 83 203
Investment variances (18) (446) 105 (359) 214 (132)
Economic assumption changes - 44 - 44 41 24
Exceptional items 1 167 (1 045) 415 537 - -
Embedded value profit/(loss) - covered business 1 711 (1 335) 477 853 804 1 180
Momentum Investments
Embedded value from new business (86) 136 (7) 43 75 76
Expected return - unwinding of RDR - 104 (11) 93 133 270
Release from the cost of required capital - - 22 22 11 26
Expected (or actual) net of tax profit transfer
to net worth 211 (211) - - - -
Operating experience variances 47 (14) - 33 (19) (96)
Development expenses (3) - - (3) (1) (3)
Operating assumption changes - - - - 13 (1 270)
Embedded value profit/(loss) from operations 169 15 4 188 212 (997)
Investment return on adjusted net worth 34 - - 34 74 84
Investment variances 9 (262) 33 (220) 32 7
Economic assumption changes - 9 - 9 (3) 8
Exceptional items 11 (27) (67) (83) - -
Embedded value profit/(loss) - covered business 223 (265) (30) (72) 315 (898)
Metropolitan Retail
Embedded value from new business (137) 220 (25) 58 130 84
Expected return - unwinding of RDR - 227 (38) 189 174 372
Release from the cost of required capital - - 55 55 53 102
Expected (or actual) net of tax profit transfer
to net worth 432 (432) - - - -
Operating experience variances 44 14 - 58 3 (33)
Development expenses (3) - - (3) (3) (24)
Operating assumption changes - - - - - (273)
Embedded value profit/(loss) from operations 336 29 (8) 357 357 228
Investment return on adjusted net worth 55 - - 55 58 115
Investment variances 2 (109) (41) (148) 139 135
Economic assumption changes - 25 11 36 89 76
Exceptional items 16 (16) 379 379 - -
Embedded value profit/(loss) - covered business 409 (71) 341 679 643 554
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE
Cost of Restated Restated
Adjusted net Gross value of required 6 mths to 6 mths to 12 mths to
worth (ANW) in-force (VIF) capital 31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm Rm Rm Rm
Momentum Corporate
Embedded value from new business (77) 327 (52) 198 44 124
Expected return - unwinding of RDR - 312 (54) 258 227 474
Release from the cost of required capital - - 71 71 63 126
Expected (or actual) net of tax profit transfer to net worth 270 (270) - - - -
Operating experience variances 72 70 5 147 124 (34)
Development expenses (1) - - (1) (6) (7)
Operating assumption changes - - - - (70) 614
Embedded value profit/(loss) from operations 264 439 (30) 673 382 1 297
Investment return on adjusted net worth 64 - - 64 64 127
Investment variances 11 (111) (2) (102) 71 (57)
Economic assumption changes - (76) - (76) (3) (103)
Exceptional items - - 37 37 - -
Embedded value profit - covered business 339 252 5 596 514 1 264
Africa
Embedded value from new business (94) 95 (9) (8) 25 (5)
Expected return - unwinding of RDR - 132 (17) 115 141 273
Expected (or actual) net of tax profit transfer to net worth 173 (173) - - - -
Operating experience variances 28 (2) - 26 (7) 10
Operating assumption changes - - - - - (250)
Embedded value profit/(loss) from operations 107 52 (26) 133 159 28
Investment return on adjusted net worth 38 - - 38 79 112
Investment variances (29) (44) - (73) 16 (35)
Economic assumption changes (2) (2) (12) (16) 36 23
Exchange rate movements 9 7 (2) 14 (12) 21
Exceptional items 340 (321) (19) - - -
Embedded value profit/(loss) - covered business 463 (308) (59) 96 278 149
Shareholders
Operating experience variances (14) - - (14) (7) (106)
Embedded value loss from operations (14) - - (14) (7) (106)
Investment return on adjusted net worth (195) - - (195) 51 54
Embedded value (loss)/profit - covered business (209) - - (209) 44 (52)
ANALYSIS OF ASSETS MANAGED AND/OR ADMINISTERED (1)
31.12.2018 31.12.2017 30.06.2018
Rm Rm Rm
Managed and/or administered by Investments
Financial assets 392 802 410 228 418 540
Momentum Manager of Managers 78 138 89 396 88 943
Momentum Investment Consultants 5 294 5 153 5 850
Momentum Collective Investments 80 058 80 296 82 157
Metropolitan Collective Investments 122 875 120
Momentum Asset Management 146 816 154 113 152 247
Momentum Global Investments 54 334 54 328 60 476
Momentum Alternative Investments 6 319 6 154 6 278
Momentum Securities 21 721 19 913 22 469
Properties - Eris Property Group 22 077 21 260 21 859
On-balance sheet 8 674 8 147 8 346
Off-balance sheet 13 403 13 113 13 513
Momentum Wealth linked product assets under administration 151 968 157 694 160 839
On-balance sheet 98 243 102 395 104 327
Off-balance sheet 53 725 55 299 56 512
Managed internally or by other managers within MMI (on-balance sheet) 78 712 72 129 71 097
Managed by external managers (on-balance sheet) 18 318 16 307 16 543
Properties managed internally or by other managers within MMI or externally 4 238 3 565 4 268
Momentum Corporate - cell captives on-balance sheet 16 834 15 745 16 575
Total assets managed and/or administered 684 949 696 928 709 721
Managed and/or administered by Investments
On-balance sheet 216 746 230 207 231 035
Off-balance sheet 176 056 180 021 187 505
392 802 410 228 418 540
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.
NET FUNDS RECEIVED FROM CLIENTS (1)
Gross
Gross single recurring Gross Gross Net inflow/
inflows inflows inflow outflow (outflow)
Rm Rm Rm Rm Rm
6 mths to 31.12.2018
Momentum Life 134 4 313 4 447 (4 756) (309)
Momentum Investments 10 036 221 10 257 (14 677) (4 420)
Metropolitan Retail 503 3 072 3 575 (2 876) 699
Momentum Corporate 6 032 6 042 12 074 (7 361) 4 713
Non-life Insurance 426 4 333 4 759 (2 527) 2 232
Africa 347 2 006 2 353 (1 512) 841
Long-term insurance business fund flows 17 478 19 987 37 465 (33 709) 3 756
Off-balance sheet fund flows
Managed and/or administered by Investments 38 233 (44 772) (6 539)
Properties - Eris Property Group 334 (444) (110)
Momentum Wealth linked product assets under administration 3 325 (4 314) (989)
Total net funds received from clients 79 357 (83 239) (3 882)
Restated
6 mths to 31.12.2017 (2)
Momentum Life 147 4 288 4 435 (4 992) (557)
Momentum Investments 11 033 193 11 226 (13 531) (2 305)
Metropolitan Retail 668 3 120 3 788 (2 781) 1 007
Momentum Corporate 1 519 5 702 7 221 (6 604) 617
Non-life Insurance 276 3 760 4 036 (2 557) 1 479
Africa 320 1 872 2 192 (1 314) 878
Long-term insurance business fund flows 13 963 18 935 32 898 (31 779) 1 119
Off-balance sheet fund flows
Managed and/or administered by Investments 40 901 (61 572) (20 671)
Properties - Eris Property Group 705 (121) 584
Momentum Wealth linked product assets under administration 3 659 (4 877) (1 218)
Total net funds received from clients 78 163 (98 349) (20 186)
Restated
12 mths to 30.06.2018 (2)
Momentum Life 351 8 587 8 938 (9 494) (556)
Momentum Investments 20 491 403 20 894 (24 337) (3 443)
Metropolitan Retail 1 304 6 064 7 368 (5 660) 1 708
Momentum Corporate 3 656 11 588 15 244 (16 329) (1 085)
Non-life Insurance 607 8 002 8 609 (4 915) 3 694
Africa 500 3 751 4 251 (2 686) 1 565
Long-term insurance business fund flows 26 909 38 395 65 304 (63 421) 1 883
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 145 529 (154 782) (9 253)
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 table has been restated based on a new operating model adopted by the group.
ANALYSIS OF ASSETS BACKING SHAREHOLDER EXCESS
31.12.2018 31.12.2017 30.06.2018
Rm % Rm % Rm %
Equity securities 374 1.7 344 1.5 411 1.8
Preference shares 1 400 6.3 1 216 5.3 1 456 6.5
Collective investment schemes 606 2.7 465 2.0 367 1.6
Debt securities 6 658 29.7 7 061 31.0 6 833 30.6
Properties 3 260 14.6 3 625 15.9 3 479 15.6
Owner-occupied properties 2 152 9.6 2 775 12.2 2 426 10.9
Investment properties 1 108 4.9 850 3.7 1 053 4.7
Cash and cash equivalents and funds on deposit 7 189 32.1 6 084 26.7 5 927 26.5
Intangible assets 6 338 28.3 7 005 30.8 6 653 29.8
Other net assets 1 497 6.7 1 921 8.4 2 122 9.5
27 322 122.0 27 721 121.8 27 248 122.0
Redeemable preference shares (254) (1.1) (254) (1.1) (254) (1.1)
Subordinated redeemable debt (4 391) (19.6) (4 381) (19.2) (4 374) (19.6)
Treasury shares held on behalf of contract holders (277) (1.2) (323) (1.4) (292) (1.3)
Shareholder excess per reporting basis 22 400 100.0 22 763 100.0 22 328 100.0
NUMBER OF EMPLOYEES 31.12.2018 31.12.2017 30.06.2018
Indoor staff 9 419 9 248 9 350
SA 8 138 7 985 8 099
International 1 281 1 263 1 251
Field staff 6 722 7 698 7 585
Momentum Retail 1 110 1 134 1 038
Metropolitan Retail 4 092 5 012 4 535
International 1 520 1 552 2 012
Total 16 141 16 946 16 935
FINANCIAL INSTRUMENTS SUMMARISED BY MEASUREMENT CATEGORY IN TERMS OF IFRS 9 (1)
Fair value through income
Other
Total Amortised measurement
Mandatorily Designated fair value cost (2) basis (2) Total
Rm Rm Rm Rm Rm Rm
31.12.2018
Equity securities 92 145 - 92 145 - - 92 145
Debt securities 30 382 89 496 119 878 20 - 119 898
Funds on deposit and other money market instruments 10 030 14 269 24 299 430 - 24 729
Unit-linked investments 137 364 - 137 364 - - 137 364
Investments in associates at fair value through income 18 893 - 18 893 - - 18 893
Derivative financial instruments 2 367 - 2 367 - - 2 367
Loans and receivables - - - 3 345 - 3 345
Insurance and other receivables (excl prepayments and accelerated rental) (3) - - - - 6 181 6 181
Cash and cash equivalents - - - 26 216 - 26 216
Total financial assets 291 181 103 765 394 946 30 011 6 181 431 138
Investment contracts with DPF (4) - - - - 23 100 23 100
Investment contracts designated at fair value through income - 236 731 236 731 - - 236 731
Derivative financial instruments 2 177 - 2 177 - - 2 177
Collective investment scheme liabilities 25 644 - 25 644 - - 25 644
Subordinated call notes - 4 391 4 391 - - 4 391
Carry positions - 4 947 4 947 - - 4 947
Preference shares 5 1 017 1 022 - - 1 022
Borrowings - - - 1 908 - 1 908
Other payables (excl premiums in advance and deferred revenue liability) - - - 6 491 5 585 12 076
Other liabilities 114 - 114 - - 114
Total financial liabilities 27 940 247 086 275 026 8 399 28 685 312 110
1 Comparative information not required in terms of IFRS 9.
2 The carrying value of financial assets carried at amortised cost and insurance and other receivables approximates fair value. The fair value of borrowings at amortised cost is R2 168 million and the
carrying value of other payables approximates fair value due to their short-term nature.
3 With the adoption of IFRS 9 policy loans have been reallocated to insurance and other receivables on the balance sheet. Policy loans are not within the scope of IFRS 9.
4 The value of investment contracts with discretionary participation features (DPF) is the retrospective accumulation of the fair value of the underlying assets, which has been used as an approximation
for the fair value of this financial liability as the fair value cannot be measured reliably. There is no intention to dispose of these financial instruments.
FINANCIAL ASSETS SUMMARISED BY MEASUREMENT CATEGORY IN TERMS OF IAS 39
31.12.2017 30.06.2018
Rm Rm
Financial assets designated at fair value through income 408 821 409 439
Securities designated at fair value through income 394 058 395 146
Investments in associates designated at fair value through income 11 821 11 383
Derivative financial instruments 2 935 2 910
Available-for-sale 7 -
Financial assets carried at amortised cost 38 314 36 392
Held-to-maturity 396 437
Loans and receivables 6 115 5 433
Insurance and other receivables 4 528 4 710
Cash and cash equivalents 27 275 25 812
Total financial assets 447 135 445 831
The carrying value of financial assets carried at amortised cost approximates fair value.
FINANCIAL LIABILITIES SUMMARISED BY MEASUREMENT CATEGORY IN TERMS OF IAS 39
31.12.2017 30.06.2018
Rm Rm
Investment contracts with DPF (1) 25 086 24 550
Financial liabilities designated at fair value through income 289 660 288 333
Investment contracts designated at fair value through income 246 076 247 861
Liabilities designated at fair value through income 41 730 38 217
Derivative financial instruments 1 854 2 255
Financial liabilities carried at amortised cost 13 244 15 242
Financial liabilities (2) 1 238 2 420
Other payables (2) 12 006 12 822
Total financial liabilities 327 990 328 125
1 The value of investment contracts with DPF is the retrospective accumulation of the fair value of the underlying assets, which has been used as an
approximation for the fair value of this financial liability as the fair value cannot be measured reliably. There is no intention to dispose of these
financial instruments.
2 The fair value of financial liabilities at amortised cost was R1 597 million as at 31.12.2017 and R2 680 million as at 30.06.2018 and the carrying
value of other payables approximated fair value due to their short-term nature.
ADOPTION OF NEW STANDARDS
IFRS 9 TRANSITIONAL ADJUSTMENTS
Statement of financial position
30.06.2018 IFRS 9 IFRS 9 01.07.2018
as per IAS 39 classification ECL adjustment as per IFRS 9
Rm Rm Rm Rm
ASSETS
Investments in associates and joint ventures 636 - - 636
Financial assets designated at fair value through income 395 146 (395 146) - -
Financial assets at fair value through income - 395 146 - 395 146
Investments in associates designated at fair value through income 11 383 (11 383) - -
Investments in associates at fair value through income - 11 383 - 11 383
Derivative financial assets 2 910 - - 2 910
Held-to-maturity financial assets 437 (437) - -
Loans and receivables 5 629 (5 629) - -
Financial assets at amortised cost - 6 066 (46) 6 020
Cash and cash equivalents 25 812 - - 25 812
Other assets 34 412 - - 34 412
Total assets 476 365 - (46) 476 319
EQUITY AND LIABILITIES
Equity attributable to owners of the parent 22 328 - (40) 22 288
Non-controlling interests 462 - - 462
Total equity 22 790 - (40) 22 750
Financial liabilities designated at fair value through income 38 217 (38 217) - -
Financial liabilities at fair value through income - 38 217 - 38 217
Other liabilities (1) 415 358 - (6) 415 352
Total liabilities 453 575 - (6) 453 569
Total equity and liabilities 476 365 - (46) 476 319
1 The liability ECL adjustment relates to tax on the impairment provision increase.
STOCK EXCHANGE PERFORMANCE
31.12.2018 30.06.2018 31.12.2017 30.06.2017
6 month period
Value of listed shares traded (rand million) 6 971 9 236 8 160 10 392
Volume of listed shares traded (million) 404 433 420 449
Shares traded (% of average listed shares in issue) (1) 55 57 54 58
Trade prices
Highest (cents per share) 1 895 2 424 2 242 2 669
Lowest (cents per share) 1 578 1 673 1 709 1 920
Last sale of period (cents per share) 1 713 1 767 2 100 2 024
Annualised percentage (%) change during period (6) (29) 8 (26)
Annualised percentage (%) change - life insurance sector (J857) 25 (22) 55 (2)
Annualised percentage (%) change - top 40 index (J200) (18) (4) 34 7
31 December/30 June
Price/diluted normalised headline earnings (segmental) ratio (2) 8.1 7.0 10.6 6.8
Dividend yield % (dividend on listed shares) (1) 2.0 - - 7.8
Dividend yield % - top 40 index (J200) (1) 3.3 2.8 2.7 2.8
Total shares issued (million)
Ordinary shares listed on JSE 1 498 1 529 1 576 1 575
Treasury shares held by subsidiary (27) - - -
Treasury shares held on behalf of contract holders (16) (17) (16) (18)
Basic number of shares in issue 1 455 1 512 1 560 1 557
Treasury shares held on behalf of contract holders 16 17 16 18
Convertible redeemable preference shares 28 28 28 29
Diluted number of shares in issue (3) 1 499 1 557 1 604 1 604
Market capitalisation at end (Rbn) (4) 26 28 34 32
1 Percentages have been annualised.
2 Comparatives have been restated for normalised headline earnings.
3 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.
4 The market capitalisation is calculated on the fully diluted number of shares in issue.
APPENDIX A
CHANGES TO PRIMARY EARNINGS METRIC AND SEGMENTAL REPORTING
As communicated at the last annual results announcement, MMI Holdings Ltd (MMI) has changed its primary earnings metric from core headline earnings to normalised
headline earnings, in order to align closer to earnings metrics used by the South African insurance industry. Furthermore, following a revision to its internal
operating structure, MMI has changed its reporting segments, to align to its current operating model.
These changes have been applied to the reporting period ended 31 December 2018. For illustrative purposes, this disclosure supplement provides segmental earnings for the
comparative reporting periods 31 December 2017 and 30 June 2018 and because of their nature, they do not fairly present MMI's financial position, changes in equity, results
of operations or cash flows. Please take note that the historical information contained in this supplementary information has not been reviewed by the auditors of MMI.
This supplementary financial information is the responsibility of the directors of MMI.
Primary earnings metric
MMI has changed its primary earnings metric from core headline earnings to normalised headline earnings. Compared to core headline earnings, normalised headline earnings
has fewer adjustments to the definition of headline earnings and is more comparable to primary earnings metrics used by the South African insurance industry.
Normalised headline earnings include the impact of investment variances, actuarial basis changes and other non-recurring items that were previously not reported as part
of core headline earnings. However, normalised headline earnings still adjust the standard definition of headline earnings for treasury shares and for the amortisation of
intangible assets from business combinations. MMI is of the opinion that these adjustments present a more realistic picture of underlying performance and remove distortions
that might arise from elimination of treasury shares (potential distortions that are peculiar to financial institutions that invest in their own securities on behalf of clients).
New reporting segments
To more meaningfully report on earnings and growth, MMI has aligned its reporting segments to its revised internal operating structure.
The historic segment of Momentum Retail has been split into Momentum Life and Momentum Investments. Momentum Life includes protection, savings and traditional products focused
on the middle and affluent client segments. Momentum Investments consists of Momentum Wealth platform business, local and offshore asset management operations, retail annuities
and guaranteed investments, as well as Eris Properties. All Momentum Wealth products are now reported as covered business, and prior year value of new business and present value
of new business premiums have been restated accordingly.
There are no material changes to the Metropolitan Retail reporting segment. Metropolitan Retail focusses on the lower to mid-income retail market segment, with a range of
protection and savings products.
Momentum Corporate offers group risk, annuities, pensions savings and umbrella funds (FundsAtWork) and includes MMI Health.
Non-life Insurance is a new reporting segment, comprising the retail general insurance offering, Momentum Short-term Insurance (MSTI) and the cell captive insurer, Guardrisk.
The former international segment has been split: Africa (excluding South Africa) will be shown separately, with India and aYo now reported under New Initiatives, alongside
Money Management and other smaller initiatives.
The Shareholder segment reflects investment income on capital held to support local operations and some costs not allocated to operating segments (eg certain holding
company expenses).
Earnings for the six months ending 31 December 2017 - New primary earnings metric with old segment reporting
SEGMENTAL ANALYSIS
Momentum Metropolitan Momentum Shareholder
Retail Retail Corporate International Capital Total
Rm Rm Rm Rm Rm Rm
Published
6 mths to 31.12.2017
Covered
Operating profit 600 337 256 97 (8) 1 282
Investment income - - - - 260 260
Total 600 337 256 97 252 1 542
Non-covered
Investment and savings 48 - 33 52 - 133
Life insurance - - - (38) - (38)
Health (2) - 50 (77) - (29)
Non-life insurance (22) - 132 (1) - 109
Client engagement (57) (20) (8) (10) 3 (92)
Unallocated expenses - - - - (41) (41)
Other operations - - (8) (50) 30 (28)
Total (33) (20) 199 (124) (8) 14
Core headline earnings 567 317 455 (27) 244 1 556
Reconciliation to normalised headline earnings
Fair value gains/(losses) 1 - (8) 64 53 110
Basis changes and investment variances (30) 27 - 44 - 41
Non-recurring items (15) - - (92) (6) (113)
Total reconciling items (44) 27 (8) 16 47 38
Normalised headline earnings 523 344 447 (11) 291 1 594
Restated
6 mths to 31.12.2017
Covered
Operating profit 556 364 254 175 (60) 1 289
Investment income - - - - 403 403
Total 556 364 254 175 343 1 692
Non-covered
Investment and savings 48 - 33 26 - 107
Life insurance - - - (27) - (27)
Health (2) - 49 (86) - (39)
Non-life insurance (22) - 127 (17) - 88
Client engagement (57) (20) (8) (10) 3 (92)
Unallocated expenses - - - (5) (46) (51)
Other operations - - (8) (67) (9) (84)
Total (33) (20) 193 (186) (52) (98)
Normalised headline earnings 523 344 447 (11) 291 1 594
Earnings for the six months ending 31 December 2017 - New primary earnings metric with new segment reporting
SEGMENTAL ANALYSIS
Momentum Momentum Metropolitan Momentum Non-life New
Life Investments Retail Corporate Insurance Africa Initiatives Shareholders Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Normalised headline earnings - old model 523 344 447 (11) 291 1 594
Items to restate into new segments
Split of annuities from Momentum Retail to Momentum Investments (118) 118 - - - - - - -
Move of investment business to Momentum Investments (48) 107 - (33) - (26) - - -
Health business allocated to Momentum Corporate only 2 - - (2) - - - - -
Non-life business, including Guardrisk, disclosed as new segment 22 - - (127) 105 - - - -
Split out new initiatives into separate segment 25 - - - - 130 (166) 11 -
Multiply (excluding money management) moved to Momentum Life (35) - 20 8 - 10 - (3) -
Wealth on-balance sheet moved to Momentum Investments (28) 28 - - - - - - -
African life insurance investment income reallocated from Shareholders - - - - - 62 - (62) -
343 253 364 293 105 165 (166) 237 1 594
Covered
Protection 110 - 154 84 - - - - 348
Long-term savings 53 79 139 106 - - - - 377
Annuities and structured products - 93 61 45 - - - - 199
Traditional 181 - 16 - - - - - 197
Other 79 - (6) 15 - 175 - 29 292
Investment income - - - - - 31 - 286 317
Total 423 172 364 250 - 206 - 315 1 730
Non-covered
Investment and savings - 81 - - - - - - 81
Life insurance - - - - - 10 - - 10
Health - - - 51 - 20 - - 71
Multiply (77) - - - - - - - (77)
Non-life insurance - - - - (22) (18) - - (40)
Cell captives - - - - 127 - - - 127
Unallocated expenses - - - - - - - (45) (45)
New initiatives India - - - - - - (102) - (102)
New initiatives aYo - - - - - - (28) - (28)
Other (3) - - (8) - (53) (36) (33) (133)
Total (80) 81 - 43 105 (41) (166) (78) (136)
Normalised headline earnings 343 253 364 293 105 165 (166) 237 1 594
Earnings for the 12 months ending 30 June 2018 - New primary earnings metric with old segment reporting
SEGMENTAL ANALYSIS
Momentum Metropolitan Momentum Shareholder
Retail Retail Corporate International Capital Total
Rm Rm Rm Rm Rm Rm
Published
12 mths to 30.06.2018
Covered
Operating profit 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
Non-life 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 headline earnings 920 570 903 (48) 464 2 809
Reconciliation to normalised headline earnings
Fair value gains/(losses) 7 - 6 14 (67) (40)
Basis changes and investment variances (526) (410) 333 (48) - (651)
Non-recurring items - - - (100) (15) (115)
Total reconciling items (519) (410) 339 (134) (82) (806)
Normalised headline earnings 401 160 1 242 (182) 382 2 003
Restated
12 mths to 30.06.2018
Covered
Operating profit 571 201 758 200 (46) 1 684
Investment income - - - - 553 553
Total 571 201 758 200 507 2 237
Non-covered
Investment and savings 9 - 100 78 - 187
Life insurance - - - (90) - (90)
Health 19 - 149 (169) - (1)
Non-life insurance (56) - 260 10 - 214
Client engagement (142) (29) (8) (19) 9 (189)
Unallocated expenses - - - (5) (116) (121)
Net investment income - - - - (4) (4)
Other operations - (12) (17) (187) (14) (230)
Total (170) (41) 484 (382) (125) (234)
Normalised headline earnings 401 160 1 242 (182) 382 2 003
Earnings for the 12 months ending 30 June 2018 - New primary earnings metric with new segment reporting
SEGMENTAL ANALYSIS
Momentum Momentum Metropolitan Momentum Non-life New
Life Investments Retail Corporate Insurance Africa Initiatives Shareholders Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Normalised headline earnings - old model 401 160 1 242 (182) 382 2 003
Items to restate into new segments
Split of annuities from Momentum Retail to Momentum Investments 4 (4) - - - - - - -
Move of investment business to Momentum Investments (9) 187 - (100) - (78) - - -
Health business allocated to Momentum Corporate only (19) - - 19 - - - - -
Non-life business, including Guardrisk, disclosed as new segment 56 - - (260) 204 - - - -
Split out new initiatives into separate segment 68 - 12 - - 278 (377) 19 -
Multiply (excluding money management) moved to Momentum Life (47) - 29 8 - 19 - (9) -
Wealth on-balance sheet moved to Momentum Investments (52) 52 - - - - - - -
African life insurance investment income reallocated from Shareholders - - - - - 110 - (110) -
Tax reallocation from Momentum Retail to shareholders and other 70 (8) - - - - - (62) -
472 227 201 909 204 147 (377) 220 2 003
Covered
Protection (13) - 150 293 - - - - 430
Long-term savings 135 109 (118) 196 - - - - 322
Annuities and structured products - (25) 75 212 - - - - 262
Traditional 357 - 108 - - - - - 465
Other 149 - (14) 30 - 200 - (116) 249
Investment income - - - - - 71 - 474 545
Total 628 84 201 731 - 271 - 358 2 273
Non-covered
Investment and savings - 143 - - - - - - 143
Life insurance - - - - - (32) - - (32)
Health - - - 195 - 49 - - 244
Multiply (152) - - - - - - - (152)
Non-life insurance - - - - (56) 10 - - (46)
Cell captives - - - - 260 - - - 260
Unallocated expenses - - - - - - - (97) (97)
New initiatives India - - - - - - (218) - (218)
New initiatives aYo - - - - - - (58) - (58)
Other (4) - - (17) - (151) (101) (41) (314)
Total (156) 143 - 178 204 (124) (377) (138) (270)
Normalised headline earnings 472 227 201 909 204 147 (377) 220 2 003
Date: 08/03/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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