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MET
MET
MTD / MET / - Metropolitan Holdings - Unaudited Group Results For The Six Months
Ended 30 June 2007
METROPOLITAN HOLDINGS LTD
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN: ZAE000050456
JSE Share Code: MET
NSX Share Code: MTD
("Metropolitan")
This is the complete results announcement replacing the incomplete and
disseminated erroneously earlier on SENS
METROPOLITAN HOLDINGS FINANCIAL SERVICES GROUP
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
ADDING SHAREHOLDER VALUE
Net funds received from clients - R6.7 billion
Value of new business - up 76%
Diluted core headline earnings per share - up 35%
Interim dividend per share - up 24%
Total premium income - up 40%
Total assets under management - R95 billion+
Return on embedded value - 20%
REVIEW OF OPERATIONS AND PROSPECTS
Financial highlights
Diluted core headline earnings per share increased by 35% (basic 32% up),
augmented by the reduction in the number of shares over the past few years.
Headline earnings and earnings, boosted by the performance of the investment
markets, were 30% higher.
All the businesses in the group increased their operating profit, with the
strongest growth coming from the newer businesses, highlighting once again the
benefits of our diversification strategy.
The unbroken record of positive cashflow from clients continued, with an
unprecedented net inflow of R6.7 billion being recorded for the period under
review, more than 2.5 times up on the previous period.
The total value of new business concluded during the six-month period increased
76% from R84 million to R148 million.
Investment income on shareholder assets was 16% higher, despite the special
dividend of 77 cents per share paid during April 2007.
Over the six month period the embedded value per share rose 22% (annualised)
from 1 585 cents (after the special dividend) to 1 761 cents.
Operational overview
Retail recurring premium income was 11% higher, corporate was 16% up and
international increased by 5%, highlighting the continued growth in all of the
life businesses.
The value of retail new business grew by 29%, corporate 130%, international 29%,
asset management 23% and health 190%.
The retail new business margin increased from 1.5% to 1.6% (percentage of
present value of future premiums (PVP) basis).
Corporate new business showed an impressive 267% increase.
International recorded a strong new business margin of 3.5% (PVP).
Asset management new business grew by 23%, mainly driven by collective
investments.
New business from the health operations increased almost three times, mostly as
a result of the tremendous growth in membership of the Government Employees
Medical Scheme (GEMS).
The agreement to establish a life insurance business in Nigeria was finalised
and the company has started operating, increasing our non South African life
companies to six.
Once again positive operating experience variances emerged in the embedded
value, highlighting the continued successes achieved from ongoing management
actions.
The economic capital model was further enhanced during the period and the output
proved to be consistent during the recent turbulent market.
Prospects
Metropolitan continues to capitalise on its focused market positioning, in line
with its strategy to create prosperity for Africa`s people by providing
accessible, affordable and appropriate products.
All businesses in the group are well prepared for the threats and opportunities
posed by ongoing changes in the highly regulated environments in which they
operate.
Food and transport inflation remains the biggest challenge to our core target
market. Any increase in this factor will curtail new business prospects.
The retail business is currently reviewing its business model with a view to
curtailing future expense growth. This project is still in the planning phase,
and as a result no account has been taken in these results of any future project
costs or related expense savings.
The board process of finding a successor for Peter Doyle has made good progress,
and an announcement will be made in due course.
The group remains well capitalised and will continue to buy back shares up to
fair value.
The board is satisfied that the business is sustainable, thanks to its strong
focus on client service, product innovation, business retention, cost
containment and capital management.
DIRECTORS` STATEMENT
The directors take pleasure in presenting the unaudited interim results of the
Metropolitan Holdings financial services group for the six months ended 30 June
2007.
These results have been prepared in accordance with International Accounting
Standard 34 (IAS34) - Interim financial reporting; guidelines issued by the
Actuarial Society of South Africa; and the disclosure requirements of the JSE
Limited (JSE).
The accounting policies of the group have been applied consistently to all the
periods presented. The preparation of financial statements in accordance with
IFRS requires the use of certain critical accounting estimates as well as the
exercise of managerial judgement in the application of the group`s accounting
policies. Such critical judgements and accounting estimates are disclosed in
detail in the annual financial statements for the year ended 31 December 2006
and, with the exception of the principal economic assumptions, have remained
unchanged since then.
Restatement of June 2006 results
The accounting treatment of certain items has been changed from that disclosed
in June 2006. In finalising the December 2006 annual financial statements, some
refinements were made to the application of IFRS, as disclosed in the 2006
annual report.
The trustees of the group`s retirement and pension fund schemes have submitted
their surplus apportionment arrangements in terms of the Pension Funds Second
Amendment Act 39 of 2001. The Metropolitan Staff Pension Fund submission was
the only arrangement noted by the Financial Services Board. Approval of the
other arrangements is still outstanding. As a result of this process, a net
asset of R126 million in respect of pension funds and a post-retirement medical
benefit obligation of R59 million were recognised in the 2006 group results.
IFRIC 8 - Scope of IFRS 2 - Share-based payments - was early adopted by the
group on 1 January 2006 and retrospectively applied, decreasing total assets by
R130 million and equity by R96 million, increasing liabilities by R18 million
and decreasing earnings to equity holders of the group by R4 million.
Management fees in Metropolitan Collective Investments Limited have been
accounted for against service fees charged. This reallocation has had no impact
on earnings.
Deferred tax on owner-occupied properties was increased to the normal income tax
rate, increasing liabilities by R18 million and decreasing equity by R18
million.
Cash and cash equivalents have been reclassified between cash with a maturity
date of less than 90 days and greater than 90 days.
Standards and interpretations to published standards effective in 2007 and
relevant to the group
IFRS 7 - Financial instruments: Disclosure; and complementary amendment to IAS 1
- Presentation of financial statements - capital disclosure.
IFRS 7 introduces new disclosure relating to financial instruments while the
complementary amendment to IAS 1 introduces new disclosure relating to capital
management.
IFRIC 10 - Interim financial reporting and impairment
IFRIC 10 prohibits the reversal at a subsequent balance sheet date of the
impairment losses recognised in an interim period on goodwill and investments in
equity instruments and in financial assets carried at cost.
Standards not yet effective but early adopted by the group
IFRS 8 - Operating segments (effective from annual periods beginning on or after
1 January 2009)
IFRS 8 specifies how an entity should report information about its operating
segments in annual financial statements. The requirements of IFRS 8 are based
on the information about the components of the entity that management uses to
make operating decisions. The group has applied IFRS 8 from 1 January 2007.
Corporate activity during the year
Metropolitan Holdings Limited bought back a further 24 million ordinary shares,
cancelled 44 million listed ordinary shares and is holding 6 million as treasury
shares.
Related parties
There have been no significant changes to the nature of the related party
transactions as described in note 37 of the 2006 annual financial statements.
Corporate governance
The board has satisfied itself that appropriate principles of corporate
governance were applied throughout the period under review.
Directorate changes and directors` shareholding
Prof Wiseman Nkuhlu was appointed group chairman on 31 May 2007. No further
changes have been made to the directorate. All transactions in listed shares
involving directors were disclosed on SENS as required.
Capital commitments and contingent liabilities
The group had no material capital commitments or contingent liabilities at 30
June 2007. The group is party to legal proceedings in the normal course of
business, including one relating to the curatorship of Ovation as set out in the
2006 directors` report (page 84 of the annual report). Appropriate provisions
are made when losses are expected to materialise.
Post balance sheet events
No material post balance sheet events occurred between the balance sheet date
and the date of approval of the interim results.
DIVIDEND DECLARATION
Ordinary listed shares
The dividend policy for ordinary listed shares, approved by the directors and
consistent with prior years, is to provide shareholders with stable dividend
growth that reflects expected growth in underlying earnings in the medium term,
while allowing the dividend cover to fluctuate.
An interim dividend of 36.00 cents per ordinary share was declared on
11 September 2007. This dividend is payable to the holders of ordinary shares
recorded in the register of the company at the close of business on Friday, 5
October 2007 and will be paid on Monday, 8 October 2007. The last day to trade
"cum" dividend will be Friday, 28 September 2007. The shares will trade "ex"
dividend from the start of business on Monday, 1 October 2007. Share
certificates may not be dematerialised or rematerialised between Monday, 1
October 2007 and Friday, 5 October 2007, both days inclusive.
Where applicable, dividends in respect of certificated shareholders will be
transferred electronically to shareholders` bank accounts on payment date. In
the absence of specific mandates, dividend cheques will be posted to
certificated shareholders on or about payment date. Shareholders who have
dematerialised their shares will have their accounts with their CSDP or broker
credited on Monday, 8 October 2007.
Preference shares (unlisted shares)
Dividends of R27.2 million (14.4%), R4.6 million (36.00 cents per share) and
R24.1 million (15.6%) were declared on 11 September 2007 on the A1, A2 and A3
Metropolitan preference shares respectively, payable on 30 September 2007. The
declaration rates were determined as set out in the company`s articles. These
amounts are included under finance costs in these results.
Signed on behalf of the board
Prof Wiseman Nkuhlu Group chairman
Peter Doyle Group chief executive
Cape Town
11 September 2007
Directors:
Prof Wiseman Nkuhlu (non-executive group chairman), Peter Doyle (group chief
executive), Phillip Matlakala (executive director), Abel Sithole (executive
director), Preston Speckmann (executive director), Fatima Jakoet, Peter
Lamprecht, Syd Muller, Bulelwa Ndamase, John Newbury, JJ Njeke, Andile Sangqu,
Marius Smith, Franklin Sonn, Johan van Reenen
Secretary: Bongiwe Gobodo-Mbomvu
Registration number: 2000/031756/06
Registered office: 7 Parc du Cap, Mispel Road, Bellville 7535
JSE code: MET
NSX code: MTD
ISIN NO: ZAE000050456
Transfer secretaries Sponsor
Link Market Services SA (Proprietary) Limited Merrill Lynch
(Registration number 2000/007239/07)
5th Floor, 11 Diagonal Street,
Johannesburg 2001
P O Box 4844, Johannesburg 2000
Telephone: +27 11 834 2266
E-mail: info@linkmarketservices.co.za
METROPOLITAN HOLDINGS - GROUP RESULTS
CONSOLIDATED BALANCE SHEET 30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
ASSETS
Property, plant and equipment 596 559 541
Investment property 2 478 2 322 2 492
Intangible assets 433 404 413
Investment in associates 6 3 4
Financial assets (1) 57 390 45 557 54 090
Employee benefit assets 131 126 126
Deferred income tax 4 3 11
Reinsurance contracts 237 181 217
Cash and cash equivalents 10 265 6 554 8 516
Total assets 71 540 55 709 66 410
EQUITY
Capital and reserves attributable 6 542 5 886 6 694
to equity holders
Minority interests 274 441 561
Total equity 6 816 6 327 7 255
LIABILITIES
Insurance contract liabilities
Long-term insurance (2) 32 579 26 986 30 790
Capitation contracts 3 2 2
Financial liabilities
Investment contracts
- designated as at fair value 13 243 7 893 11 137
through income
- with discretionary 13 849 10 604 12 695
participation features (2)
Other financial liabilities 2 189 1 328 1 849
Employee benefit obligations 237 243 223
Deferred income tax 267 287 300
Other payables 2 133 1 896 1 957
Current income tax 224 143 202
Total liabilities 64 724 49 382 59 155
Total equity and liabilities 71 540 55 709 66 410
Financial instruments include equity and debt securities as well as loans and
receivables.
Under IFRS4, the group continues to account for long-term insurance contracts
and investment contracts with discretionary participation features using SA
GAAP.
METROPOLITAN HOLDINGS - GROUP RESULTS
STATEMENT OF ACTUARIAL VALUES OF
ASSETS AND LIABILITIES ON REPORTING 30.06.2007 30.06.2006 31.12.2006
BASIS Rm Rm Rm
Total assets per balance sheet 71 540 55 709 66 410
Actuarial value of policy (59 671) (45 483) (54 622)
liabilities per balance sheet
Other liabilities per balance sheet (5 053) (3 900) (4 533)
Minority interests (274) (441) (561)
Excess - group per reporting basis 6 542 5 885 6 694
Net assets - other businesses (1 492) (552) (858)
Excess - long-term insurance 5 050 5 333 5 836
business (3)
LONG-TERM INSURANCE BUSINESS (3)
Change in excess of long-term (786) (811) (308)
insurance business (3)
Increase in share capital (4) (25) (35)
Metropolitan Kenya included in - (8) (8)
insurance
Exchange differences 4 (4) -
Change in other reserves 33 269 232
Dividend paid 1 432 1 578 2 187
Total surplus arising 679 999 2 068
Operating profit 322 274 660
Investment income on excess 147 117 211
Net realised and fair value gains 274 624 1 245
on excess
Investment variances (4) 20 18 70
Basis changes and other changes (89) (101) (166)
Employee benefit asset/obligation 5 67 67
LOA statement of intent - - (19)
Consolidation adjustments 127 (278) (186)
Income tax expenses 210 158 364
Adjustment for finance costs 23 (1) -
Results of long-term insurance 1 039 878 2 246
business (3)
Results of other group businesses 236 66 324
Results of operations per income 1 275 944 2 570
statement
METROPOLITAN HOLDINGS - GROUP RESULTS
STATEMENT OF ACTUARIAL VALUES OF
ASSETS AND LIABILITIES ON STATUTORY 30.06.2007 30.06.2006 31.12.2006
BASIS Rm Rm Rm
Reporting excess - long-term 5 050 5 333 5 836
insurance business (3)
Disallowed assets in terms of (211) (150) (194)
statutory requirements (5)
Capital adjustments 402 (200) 101
Statutory excess - long-term 5 241 4 983 5 743
insurance business (3)
Capital adequacy requirement (CAR) 1 580 1 559 1 592
(Rm)
Ratio of long-term insurance 3.3 3.2 3.6
business excess to CAR (times)
Discretionary margins 2 341 1 903 2 058
The long-term insurance business includes both insurance and investment contract
business and is the simple aggregate of all the life insurance companies in the
group. It includes minority interests and other items, which are eliminated on
consolidation. It excludes non-insurance business.
Investment variances reflect the impact of actual investment returns on the
value of future expense recoveries.
Disallowed assets include goodwill, deferred acquisition costs, deferred revenue
liabilities and employee benefit asset/obligation.
METROPOLITAN HOLDINGS - GROUP RESULTS
CONSOLIDATED INCOME STATEMENT 6 mths to 6 mths to 12 mths to
30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Net insurance premiums received 4 101 3 452 7 423
Fee income 407 334 698
Investment income 1 453 1 228 2 578
Net realised and fair value gains 3 693 2 801 9 831
Net income 9 654 7 815 20 530
Net insurance benefits and claims 3 069 2 867 5 634
Change in provisions 2 940 2 137 8 009
Change in insurance contract 1 807 1 437 5 233
provision
LOA statement of intent - - 19
Change in investment contract 1 155 698 2 792
with DPF provision
Change in reinsurance provision (22) 2 (35)
Fair value adjustments on 848 607 1 687
investment contracts
Depreciation, amortisation and 65 64 127
impairment expense
Employee benefit expense 597 452 924
Sales remuneration and distribution 538 486 1 034
cost
Other expenses 322 258 545
Expenses 8 379 6 871 17 960
Results of operations 1 275 944 2 570
Share of profit of associates 2 1 3
Finance costs (92) (47) (99)
Profit before tax 1 185 898 2 474
Income tax expenses (362) (226) (491)
Earnings 823 672 1 983
Attributable to:
Equity holders of group 818 663 1 947
Minority interests 5 9 36
823 672 1 983
METROPOLITAN HOLDINGS - GROUP RESULTS
RECONCILIATION OF Basic earnings Diluted earnings
HEADLINE EARNINGS
attributable to
equity holders of
group
6 mths 6 mths 12 mths 6 mths 6 mths 12 mths
2007 2006 2006 2007 2006 2006
Rm Rm Rm Rm Rm Rm
Earnings 818 663 1 947 818 663 1 947
Finance costs - 61 41 93
preference shares
Diluted earnings 879 704 2 040
Goodwill impaired 4 4 - 4 4
Headline earnings 818 667 1 951 879 708 2 044
(6)
Net realised and (573) (392) (1 265) (573) (392) (1 265)
fair value gains
on excess
Basis changes, LOA 66 83 111 66 83 111
statement of
intent and
investment
variances
Employee benefit (5) (67) (67) (5) (67) (67)
asset/obligation
IFRIC 8 - 1 4 9
adjustment (7)
Investment income 12 8 15
on treasury shares
- contract holders
(8)
STC on special 60 60
dividend
Core headline 366 291 730 440 344 847
earnings (9)
Headline earnings consist of operating profit, investment income, net realised
and fair value gains, investment variances and basis and other changes.
Adjustments to headline earnings, as required by SAICA Circular 7/2002, relate
to returns on shareholder assets only.
In terms of IFRIC 8, Metropolitan Health and Metropolitan Kenya are consolidated
at 100% in the results. For the purposes of diluted core headline earnings,
minority interests and investment returns are reinstated.
For diluted core headline earnings, treasury shares held on behalf of contract
holders are deemed to be issued. For diluted earnings and headline earnings,
these shares are deemed to be cancelled.
METROPOLITAN HOLDINGS - GROUP RESULTS
Net realised and fair value gains on investment assets, investment variances and
basis and other changes can be volatile; therefore core headline earnings have
been disclosed that comprise operating profit and investment income on
shareholder assets.
EARNINGS PER SHARE (cents)
attributable to equity holders of 6 mths to 6 mths to 12 mths to
group 30.06.2007 30.06.2006 31.12.2006
Basic
Core headline earnings 67.65 51.23 130.36
Headline earnings 151.20 117.43 348.39
Earnings 151.20 116.73 347.68
Weighted average number of shares 541 568 560
(million)
Diluted
Core headline earnings 61.28 45.26 112.93
Weighted average number of shares 718 760 750
(million) (7)
Headline earnings 124.15 95.81 280.00
Earnings 124.15 95.26 279.45
Weighted average number of shares 708 739 730
(million) (7)
DIVIDENDS 2007 2006
Ordinary listed shares (cents per share)
Interim 36.00 29.00
Final 48.00
Total 77.00
Special dividend 77.00
DIVIDENDS
Convertible redeemable preference shares A1 A2 A3
Paid - 31 March 2006 Rate 10.4% 39.00 cps 9.2%
Rm 24 5 10
Paid - 30 September 2006 Rate 11.7% 29.00 cps 11.6%
Rm 22 4 18
Paid - 31 March 2007 Rate 13.5% 125.00 cps 13.3%
Rm 26 16 21
Payable - 30 September 2007 Rate 14.4% 36.00 cps 15.6%
Rm 27 5 24
Redemption value (per share) R 5.12 9.18 9.18
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF DILUTED CORE HEADLINE 6 mths to 6 mths to 12 mths to
EARNINGS 30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Retail business 217 199 436
Operating profit 307 281 627
Tax (90) (82) (191)
Corporate business 70 59 145
Operating profit 98 85 204
Tax (28) (26) (59)
International business 41 21 61
Operating profit 46 23 67
Tax (5) (2) (6)
Asset management business 35 16 69
Operating profit 51 20 94
Tax (16) (4) (25)
Health business 32 - 51
Operating profit 53 17 72
Tax (21) (17) (21)
Shareholder capital 45 49 85
Holding company expenses (26) (28) (44)
Strategic ventures (20) (1) (21)
Investment income on shareholder 176 152 310
excess
Income tax on investment income (85) (74) (160)
Diluted core headline earnings 440 344 847
RESULTS OF OPERATIONS Net Expenses Results of operations
FROM ADMINISTRATION income
BUSINESS
(gross of minority
interests and before
tax)
6 mths 6 mths 12 mths
2007 2006 2006
Rm Rm Rm Rm Rm
Health business 346 (293) 53 17 72
Asset administration 68 (31) 37 20 58
Asset management 55 (41) 14 - 36
Strategic ventures 16 (36) (20) (1) (21)
485 (401) 84 36 145
METROPOLITAN HOLDINGS - GROUP RESULTS
CONSOLIDATED STATEMENT OF CHANGES 6 mths to 6 mths to 12 mths to
IN EQUITY 30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Changes in share capital
Balance at beginning (136) 559 559
Staff share scheme shares released 72 67 86
Shares repurchased and cancelled - (200) (200)
Treasury shares held on behalf of 53 29 61
contract holders
Capital reduction - (642) (642)
Balance at end (11) (187) (136)
Changes in other reserves
Balance at beginning 413 428 428
Total recognised income - (17) (30)
Earnings directly accounted for 5 (18) (29)
in equity
Foreign currency translation (5) 1 (1)
differences
Employee share schemes - value of 1 6 10
services provided
Fair value gains - available-for- - - 1
sale financial assets
Transfer from retained income (2) - 4
Balance at end (10) 412 417 413
Changes in retained income
Balance at beginning 6 417 5 219 5 219
Earnings for period 818 663 1 947
Dividend paid (716) (224) (386)
Shares repurchased (380) - (358)
Transfer to other reserves 2 (2) (5)
Balance at end 6 141 5 656 6 417
Capital and reserves attributable 6 542 5 886 6 694
to equity holders
Changes in minority interests
Balance at beginning 561 417 417
Total recognised income 4 9 36
Earnings for period 5 9 36
Foreign currency translation (1) - -
differences
Employee share schemes - value of - (1) -
services provided
Dividend paid (49) (35) (34)
Net change in minority interests (242) 51 142
Balance at end 274 441 561
Total equity 6 816 6 327 7 255
METROPOLITAN HOLDINGS - GROUP RESULTS
Other reserves consist of the following:
- Land and buildings revaluation reserve: R102 million (30.06.2006: R103
million; 31.12.2006: R96 million)
- Foreign currency translation reserve: (R21 million) (30.06.2006: (R14
million); 31.12.2006: (R16 million))
- Fair value reserve: R36 million (30.06.2006: R33 million; 31.12.2006: R38
million)
- Non-distributable reserve: R295m (30.06.2006: R295 million; 31.12.2006:
R295 million)
CONSOLIDATED CASH FLOW STATEMENT 6 mths to 6 mths to 12 mths to
30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Net cash inflow from operating 1 660 1 303 2 013
activities
Net cash in/(out)flow from 48 (1 062) (78)
investing activities
Net cash outflow from financing (1 047) (1 179) (1 198)
activities
Net cash flow 661 (938) 737
Exchange (losses)/gains on cash (58) 9 10
resources
Cash resources and funds on deposit 7 273 6 526 6 526
at beginning
Cash resources and funds on deposit 7 876 5 597 7 273
at end
SEGMENT REPORT (11) 6 mths to 6 mths to 12 mths to
30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Retail business 4 721 3 878 10 404
Corporate business (12) 3 015 2 386 6 175
Health business 346 267 560
Asset management business 123 87 216
Shareholder capital (13) 815 580 1 636
International business (14) 691 662 1 653
Inter-segment fee income (57) (45) (114)
Net income per income statement 9 654 7 815 20 530
METROPOLITAN HOLDINGS - GROUP RESULTS
SEGMENT REPORT (11) 6 mths to 6 mths to 12 mths to
30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Retail business 307 281 627
Corporate business (12) 98 85 204
Health business 53 17 72
Asset management business 51 20 94
Shareholder capital (13) 739 465 1 375
International business (14) 27 76 198
Results from operations per income 1 275 944 2 570
statement
The segment report is compiled on the basis of Metropolitan`s primary segments.
The corporate business includes Metropolitan Retirement Administrators
(Proprietary) Limited, a newly acquired subsidiary.
Shareholder capital consists of holding company, Metropolitan Card Operations
(Proprietary) Limited and shareholder return. Metropolitan Card Operations
(Proprietary) Limited has net income of R16 million (30.06.2006: R3 million;
31.12.2006: R2 million) and negative results from operations of R12 million
(30.06.2006 R1 million; 31.12.2006: R21 million).
International, with secondary segments in Botswana, Ghana, Kenya, Lesotho,
Mauritius and Namibia, includes investment return.
Segment assets did not change materially from 31 December 2006, except for
market related movements.
METROPOLITAN HOLDINGS - GROUP RESULTS
EMBEDDED VALUE 30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Reporting excess - long-term 5 050 5 333 5 836
insurance business
Disallowed assets (16) (85) (29) (73)
Adjustments to reporting excess 2 470 1 861 2 085
Net assets - other businesses 1 492 552 858
Dilutory effect of subsidiaries 91 97 80
(17)
Staff share scheme loans 155 246 227
Liability - convertible 832 824 832
redeemable preference shares
Treasury shares held on behalf 9 251 197
of contract holders
Goodwill (109) (109) (109)
Adjustments for 470 447 405
Asset management business 249 221 210
Health business (18) 515 479 481
Holding company expenses (294) (253) (286)
Adjusted net asset value 7 905 7 612 8 253
Net value of in-force business 4 403 3 516 4 096
Individual life 3 554 2 833 3 338
Gross value of in-force 3 695 2 978 3 475
business
Less: Cost of capital (141) (145) (137)
Employee benefits 849 683 758
Gross value of in-force 924 781 830
business
Less: Cost of capital (75) (98) (72)
Diluted embedded value 12 308 11 128 12 349
Diluted embedded value per share 1 761 1 486 1 710
(cents)
Diluted adjusted net asset value 1 131 1 016 1 143
per share (cents)
Diluted number of shares in issue 699 749 722
(million) (19)
Disallowed assets include goodwill, deferred acquisition costs and deferred
revenue liabilities.
For accounting purposes and in terms of IFRIC 8, Metropolitan Health and
Metropolitan Kenya have been consolidated at 100% (2006: 100%) in the balance
sheet. For embedded value purposes, disclosed on a diluted basis, the minority
interests and related funding have been reinstated.
METROPOLITAN HOLDINGS - GROUP RESULTS
The value of the health business is net of R38 million, being the total
liability in respect of the option held by MHG management (30.06.2006:
R54 million; 31.12.2006: R53 million).
The diluted number of shares in issue takes into account all issued shares,
assuming conversion of the convertible redeemable preference shares and the
release of staff share scheme shares, and includes the treasury shares held on
behalf of contract holders.
EMBEDDED VALUE Net Value 6 mths 6 mths 12 mths
ATTRIBUTABLE TO GROUP asset of in- 2007 2006 2006
value force
Rm Rm Rm Rm Rm
Metropolitan Life Ltd 4 544 3 919 8 463 7 883 8 781
Metropolitan Odyssey Ltd 34 - 34 34 34
Metropolitan Life 48 - 48 47 48
International Ltd
Metropolitan Life 115 254 369 423 479
(Namibia) Ltd
Metropolitan Life of 92 57 149 140 160
Botswana Ltd
Metropolitan Lesotho Ltd 118 167 285 255 295
Metropolitan Life 6 3 9 3 7
Insurance Kenya Ltd
Metropolitan Life 8 3 11 15 13
Insurance Ghana Ltd
Asset management business 114 249 363 299 320
Metropolitan Health Group 177 515 692 575 622
Metropolitan Holdings 2 288 (294) 1 994 1 563 1 699
(after consolidation
adjustments)
Goodwill (109) (109) (109) (109)
Total embedded value 7 435 4 873 12 308 11 128 12 349
Adjustments to reporting (2 470)
excess
Disallowed assets 85
Reporting excess - long- 5 050
term insurance business
METROPOLITAN HOLDINGS - GROUP RESULTS
VALUE OF NEW BUSINESS 6 mths to 6 mths to 12 mths to
30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Retail business 45 35 114
Gross value of new business 46 38 116
Less: Cost of capital (1) (3) (2)
Corporate business 23 10 30
Gross value of new business 26 15 37
Less: Cost of capital (3) (5) (7)
International business 9 7 7
Gross value of new business 9 7 9
Less: Cost of capital (0) (0) (2)
Value of long-term insurance new 77 52 151
business
Asset management business 16 13 25
Health business 55 19 78
Total value of new business 148 84 254
Due to rounding the cost of capital for the international business is less than
R1 million.
2007 and 2006 results exclude Metropolitan Ghana, Metropolitan Kenya and
Cover-2-
Go as these businesses were in start-up phase.
Net of minority interests.
METROPOLITAN HOLDINGS - GROUP RESULTS
NEW BUSINESS PREMIUMS 6 mths to 6 mths to 12 mths to
30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Recurring premiums
Retail business 361 337 753
Corporate business 116 50 141
International business 42 44 89
519 431 983
Single premiums
Retail business 1 060 905 1 872
Corporate business 1 487 283 2 661
International business 58 74 157
2 605 1 262 4 690
Annual premium equivalent (APE) 780 557 1 452
Retail business 467 428 940
Corporate business 265 78 407
International business 48 51 105
Present value premiums (PVP) 5 283 3 141 9 502
Retail business 2 808 2 284 5 410
Corporate business 2 241 612 3 563
International business 234 245 529
2007 and 2006 exclude Metropolitan Ghana (06.07: R4 million; 12.06: R4 million
APE), Metropolitan Kenya (06.07: R4 million; 12.06: R4 million APE) and Cover-2-
Go as these businesses were in start-up phase.
Net of minority interests.
PROFITABILITY OF NEW BUSINESS 6 mths to 6 mths to 12 mths to
30.06.2007 30.06.2006 31.12.2006
% of APE 9.9 9.3 10.4
Retail business 9.6 8.2 12.1
Corporate business 8.7 12.8 7.4
International business 18.8 13.6 6.7
% of PVP 1.5 1.7 1.6
Retail business 1.6 1.5 2.1
Corporate business 1.0 1.6 0.8
International business 3.8 2.9 1.3
METROPOLITAN HOLDINGS - GROUP RESULTS
SOURCE OF NEW BUSINESS 30.06.2007 30.06.2006 31.12.2006
PRODUCTION - GROUP
Individual life - insurance
and investment business
Total Total Total
APE % % APE % % APE % %
General intermediary channel 7 6 9 6 8 6
Direct writers 24 23 22 23 23 25
Group schemes 9 5 9 5 9 6
Direct mail and telemarketing 23 12 24 14 24 14
Odyssey broker channel 29 47 27 43 28 43
3rd party business - 1 - 2 - 1
International 8 6 9 7 8 5
PRINCIPAL ASSUMPTIONS (South 30.06.2007 30.06.2006 31.12.2006
Africa) (20) % % %
Pre-tax investment return
Equities 10.5 10.8 10.0
Properties 10.5 10.8 10.0
Government stock 8.5 8.8 8.0
Cash 6.5 6.8 6.0
Risk discount rate (RDR) 11.0 11.3 10.5
Investment return (before tax) - 9.9 10.2 9.4
smoothed bonus
Expense inflation rate 5.3 5.5 4.8
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.
MINORITY INTERESTS 30.06.2007 30.06.2006 31.12.2006
% % %
Metropolitan Life (Namibia) Ltd 19.0 19.0 19.0
Metropolitan Life of Botswana 24.2 24.2 24.2
Ltd
Metropolitan Health Group 17.6 17.6 17.6
Metropolitan Life Insurance 33.3 33.3 40.0
Kenya Ltd
Metropolitan Life Insurance 40.0 40.0 40.0
Ghana Ltd
METROPOLITAN HOLDINGS - GROUP RESULTS
LONG-TERM INSURANCE Net In-force business New business
BUSINESS: worth written
SENSITIVITIES -
30.06.2007
Net Gross Cost Net Gross Cost
value value of value value of
CAR CAR
Rm Rm Rm Rm Rm Rm Rm
Base value 5 050 4 403 4 619 (216) 77 81 (4)
1% increase in 4 018 4 346 (328) 63 69 (6)
risk discount
rate
% change (9) (6) 52 (18) (14) 45
1% reduction in 4 834 4 920 (86) 92 94 (2)
risk discount
rate
% change 10 7 (60) 21 16 (62)
10% increase in 4 135 4 351 (216) 58 62 (4)
future
expenses
% change (6) (6) - (24) (23) -
(note 1)
10% increase in 4 288 4 504 (216) 56 60 (4)
policy
discontinuance
% change (3) (2) - (26) (25) -
10% increase in 4 080 4 296 (216) 50 54 (4)
mortality and
morbidity
% change (7) (7) - (34) (32) -
(note 2)
1% reduction in 5 095 4 397 4 613 (216) 88 92 (4)
gross
investment
return,
inflation rate
and risk
discount rate
% change 1 - - - 16 15 -
(note 3)
METROPOLITAN HOLDINGS - GROUP RESULTS
LONG-TERM INSURANCE Net In-force business New business
BUSINESS: worth written
SENSITIVITIES -
30.06.2007
Net Gross Cost Net Gross Cost
value value of value value of
CAR CAR
Rm Rm Rm Rm Rm Rm Rm
Base value 5 050 4 403 4 619 (216) 77 81 (4)
1% reduction in 4 950 4 102 4 446 (344) 68 74 (6)
gross
investment
return only
(no change in
risk discount
rate)
% change (2) (7) (4) 59 (11) (7) 48
(note 3)
1% reduction in 5 189 4 339 4 555 (216) 86 90 (4)
inflation rate
% change 3 (1) (1) - 12 12 -
10% fall in market 4 813 4 263 4 479 (216)
value of
equities
% change (5) (3) (3) -
10% reduction in 4 317 4 533 (216) 73 77 (4)
premium
indexation
take-up rate
% change (2) (2) - (4) (4) -
10% increase in 55 59 (4)
non commission
related
acquisition
expenses
% change (29) (27) -
Notes
No corresponding changes in variable policy charges are assumed, although in
practice it is likely that these will be modified according to circumstances.
Mortality decreases by 10% for annuities; mortality and morbidity increase by
10% for assurance.
Bonus rates are assumed to change commensurately.
The change in the value of cost of CAR is disclosed as nil where the sensitivity
test results in an insignificant change in the value.
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF Other Long-term 6 mths 6 mths 12 mths
CHANGES IN GROUP busi- insurance 2007 2006 2006
EMBEDDED VALUE nesses business Total Total Total
NAV VoIF Rm Rm Rm
Rm Rm Rm
Profit from new 72 (64) 143 151 86 267
business
Embedded value
from new
business 70 (64) 141 147 84 254
Expected return
To end of year 2 - 2 4 2 13
Profit from 67 302 93 462 256 604
existing
business
Expected 32 - 230 262 198 440
return -
unwinding of
RDR
Expected (or - 313 (313) - - -
actual) net of
tax profit
transfer to
net worth
Operating 22 77 42 141 117 381
experience
variances
Operating 13 (88) 134 59 (59) (166)
assumption
changes
LOA statement (51)
of intent
Embedded value 139 238 236 613 342 871
profit from
operations
Investment return 73 380 - 453 512 1 387
on net worth
Investment 8 37 88 133 146 480
variances
Economic - (31) (17) (48) (74) (12)
assumption changes
Exchange rate - - - - - -
movements
Total embedded 220 624 307 1 151 926 2 726
value profit
Changes in share (384) 4 - (380) (842) (1 200)
capital
Dividend paid 632 (1 383) - (751) (261) (429)
Redeemable - - - - (122) (123)
preference shares
Finance costs - (61) - - (61) (41) (93)
preference shares
Change in embedded 407 (755) 307 (41) (340) 881
value
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE 6 mths 6 mths 12 mths
2007 2006 2006
Total Total Total
Time weighted return on embedded value (%) 20.3 17.7 26.1
(June results annualised)
ANALYSIS OF VARIANCES AND OPERATING ASSUMPTION CHANGES - 30.06.2007
Operating
experience
variances
Other A higher than expected net fee income from asset
businesses management.
Long-term
insurance
business
NAV Positive variances from mortality profits across most
product lines, unexpected tax profits and the impact
of better than expected investment performance,
including a higher than expected investment return on
working capital.
Negative variances from worse than expected
withdrawal experience on direct marketing and
smoothed bonus business as well as expenses,
including start-up costs of strategic ventures.
VoIF Mainly due to better than expected retention of
employee benefits business as well as positive
contributions from mortality.
Operating
assumption
changes
Other business A reduction in the assumed future STC rate, partially
offset by an increase to future expected expenses in
the holding company.
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF VARIANCES AND OPERATING ASSUMPTION CHANGES - 30.06.2007
Long-term
insurance
business
NAV A positive change in respect of the assumed
mortality of individual funeral business was more
than offset by a strengthening of the valuation
basis in respect of worsening partial surrender
rates on smoothed bonus business as well as lapse
rates on direct marketing business and voluntary
group schemes. An increase in the allowance for
future renewal expenses on Namibian funeral business
also had a negative impact.
VoIF A better than expected mortality experience on
direct marketing schemes was recognised through an
increase in discretionary margins. A reduction in
the assumed future STC rate had a further positive
impact.
PREMIUMS RECEIVED (pre-IFRS4; 6 mths to 6 mths to 12 mths to
excluding MHG capitation contracts) 30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Recurring premiums 3 319 2 977 6 301
Retail business 2 018 1 822 3 918
Corporate business 910 782 1 592
International business 391 373 791
Single premiums 2 608 1 271 4 729
Retail business 1 060 905 1 872
Corporate business 1 487 283 2 661
International business 61 83 196
Total premiums received 5 927 4 248 11 030
METROPOLITAN HOLDINGS - GROUP RESULTS
PAYMENTS TO POLICYHOLDERS 6 mths to 6 mths to 12 mths to
(pre-IFRS4; excluding MHG capitation 30.06.2007 30.06.2006 31.12.2006
contracts) Rm Rm Rm
Individual life 2 179 2 108 4 377
Death and disability claims 435 436 934
Maturity claims 677 609 1 307
Annuities 285 436 519
Surrenders 824 665 1 697
Re-insurance recoveries (42) (38) (80)
Employee benefits 1 442 1 685 2 775
Death and disability claims 426 344 726
Maturity claims 53 61 136
Annuities 300 141 387
Withdrawal benefits 212 166 358
Terminations 123 618 631
Disinvestments 397 427 676
Re-insurance recoveries (69) (72) (139)
Total payments to policyholders 3 621 3 793 7 152
FUNDS RECEIVED 6 mths to 6 mths to 12 mths to
FROM CLIENTS 30.06.2007 30.06.2006 31.12.2006
Gross Gross Net inflow Net inflow Net inflow
inflow outflow Rm Rm Rm
Rm Rm
Retail business 3 078 (1 928) 1 150 822 1 845
Corporate 2 397 (1 362) 1 035 (535) 1 623
business
International 452 (331) 121 168 410
business
Long-term 5 927 (3 621) 2 306 455 3 878
insurance
business cash
flows
Health business 4 964 (4 717) 247 (392) 373
Asset management 7 847 (3 666) 4 181 2 215 (1 863)
business
Corporate - - - 231 371
business
Total funds 18 738 (12 004) 6 734 2 509 2 759
received from
clients
METROPOLITAN HOLDINGS - GROUP RESULTS
NUMBER OF EMPLOYEES 6 mths 6 mths 12 mths
2007 2006 2006
Indoor staff 4 651 3 988 4 321
Insurance companies 2 560 2 412 2 506
Retail 1 343 1 289 1 325
Employee benefits 349 325 332
International 354 305 346
Group services 514 493 503
Metropolitan Health Group 1 765 1 425 1 638
Asset management 74 74 70
Asset administration 61 57 58
Metropolitan Card Operations 41 - 28
Metropolitan Retirement Administrators 132 - -
Holding company 18 20 21
Field staff 3 216 3 506 3 316
Retail 2 445 2 895 2 551
International 771 611 765
Total 7 867 7 494 7 637
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF EXPENSES 6 mths to 6 mths to 12 mths to
30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Depreciation, amortisation and 65 64 127
impairment expense
Employee benefit expense 597 452 924
Sales remuneration and 538 486 1 034
distribution cost
Other expenses 322 258 545
Finance costs 92 47 99
Total expenses 1 614 1 307 2 729
Long-term insurance business 1 087 979 2 019
Management expenses 609 556 1 115
Administration expenses 552 494 988
Distribution costs 57 62 127
Sales remuneration 478 423 904
Administration business 355 313 594
Health 283 247 472
Asset management 41 43 77
Asset administration 31 23 45
Finance costs - preference shares 85 41 93
and subordinated redeemable debt
Holding company 25 29 24
Metropolitan Card Operations 28 4 44
Metropolitan Retirement 21 - -
Administrators
Consolidation adjustments 18 8 22
Employee benefit asset/obligation (5) (67) (67)
Total expenses 1 614 1 307 2 729
METROPOLITAN HOLDINGS - GROUP RESULTS
ASSETS UNDER MANAGEMENT 30.06.2007 30.06.2006 31.12.2006
Rm Rm Rm
Property, plant and equipment 596 559 541
Investment property 2 478 2 322 2 492
Intangible assets 433 404 413
Investment in associates 6 3 4
Financial assets 57 390 45 557 54 090
Employee benefit assets 131 126 126
Deferred income tax 4 3 11
Reinsurance contracts 237 181 217
Cash and cash equivalents 10 265 6 554 8 516
Total on-balance sheet assets 71 540 55 709 66 410
Collective investments 15 700 10 202 12 241
Health 3 723 2 364 2 669
Asset management - segregated assets 2 801 5 935 3 368
Employee benefits - segregated 1 246 1 014 1 170
assets
Total assets under management 95 010 75 224 85 858
ANALYSIS OF ASSETS 30.06.2007 30.06.2006 31.12.2006
BACKING GROUP EXCESS
Rm % Rm % Rm %
Listed equities and 3 913 59.8 4 061 69.0 4 851 72.5
unit linked - local
Foreign investments - 711 10.9 481 8.2 428 6.4
unit linked
Owner-occupied 388 5.9 323 5.5 343 5.1
properties
Investment properties - - 21 0.4 21 0.3
Debt securities - 519 7.9 739 12.6 697 10.4
fixed interest
Cash and cash 1 279 19.6 972 16.5 1 059 15.8
equivalents
Goodwill 148 2.3 148 2.5 148 2.2
Other net assets 571 8.7 210 3.5 206 3.1
Adjustment for staff (155) (2.4) (246) (4.2) (227) (3.4)
share schemes
Redeemable preference (832) (12.7) (824) (14.0) (832) (12.4)
shares
Excess - group per 6 542 100.0 5 885 100.0 6 694 100.0
reporting basis
METROPOLITAN HOLDINGS - GROUP RESULTS
GROUP EXCESS - TOP 10 30.06.2007 30.06.2006 31.12.2006
EQUITY HOLDINGS
Rm % Rm % Rm %
MTN Group Ltd 256 6.5 120 3.0 177 3.6
Standard Bank Group 195 5.0 140 3.5 137 2.8
Ltd
Billiton Plc 144 3.7 150 3.7 110 2.3
Anglo American Plc 144 3.7 162 4.0 128 2.6
Impala Platinum 138 3.5 76 1.9 75 1.6
Holdings Ltd
Sasol Ltd 130 3.3 117 2.9 88 1.8
FirstRand Ltd 111 2.8 82 2.0 86 1.8
Imperial Holdings Ltd 101 2.6 74 1.8 78 1.6
Nedbank Group Ltd 97 2.5 - - 76 1.6
Barloworld Ltd 88 2.2 - - - -
SABMiller Plc - - 96 2.4 83 1.7
Remgro Plc - - 79 2.0 - -
Naspers N-ord Ltd - - - - - -
1 404 35.8 1 096 27.0 1 038 21.4
Collective investments 703 18.0 1 612 39.7 1 781 36.7
2 107 53.8 2 708 66.7 2 819 58.1
Total equities backing 3 913 100.0 4 061 100.0 4 851 100.0
excess
METROPOLITAN HOLDINGS - GROUP RESULTS
STOCK EXCHANGE 30.06.2007 31.12.2006 30.06.2006 31.12.2005
PERFORMANCE
6 month period
Value of listed shares 4 454 2 945 2 669 1 678
traded (rand million)
(22)
Volume of listed shares 286 233 209 154
traded (million) (22)
Shares traded (% of 100.6 78.8 70.2 50.0
average listed shares
in issue) (21, 22)
Value of shares traded 53.6 35.4 46.6 36.1
- life insurance (J857
- Rbn)
Value of shares traded 1 051.1 824.5 910.5 573.6
- top 40 index (J200 -
Rbn)
Trade prices
Highest (cents per 1 691 1 581 1 459 1 220
share)
Lowest (cents per 1 421 1 105 1 020 980
share)
Last sale of period 1 486 1 500 1 180 1 185
(cents per share)
Percentage (%) change 9.1 61.6 18.3 37.1
during period (21, 23)
Percentage (%) change - 10.8 32.1 24.4 53.3
life insurance sector
(J857) (21)
Percentage (%) change - 27.9 33.9 41.3 63.4
top 40 index (J200)
(21)
30 June / 31 December
Price/diluted core 12.12 13.12 13.04 12.35
headline earnings ratio
Dividend yield % 5.65 5.13 5.76 5.32
(dividend on listed
shares) (21)
Dividend yield % - top 2.12 2.06 2.05 2.24
40 index (J200) (21)
METROPOLITAN HOLDINGS - GROUP RESULTS
STOCK EXCHANGE 30.06.2007 31.12.2006 30.06.2006 31.12.2005
PERFORMANCE
Total shares issued
(million)
Listed on JSE 550 585 598 594
Ordinary shares 543 578 591 587
Share incentive 7 7 7 7
scheme
Unlisted - share 32 41 44 48
purchase scheme
Total ordinary shares 582 626 642 642
in issue
Treasury shares held (6) (27) (16) -
Treasury shares held (1) (13) (21) (22)
on behalf of contract
holders
Adjustment to staff (37) (47) (47) (50)
share scheme shares
(24)
Share incentive (6) (7) (5) (5)
scheme
Share purchase (31) (40) (42) (45)
scheme
Basic number of 538 539 558 570
shares in issue
Adjustment to staff 37 47 47 50
share scheme shares
Treasury shares held 1 13 21 22
on behalf of contract
holders
Convertible 123 123 123 123
redeemable preference
shares
Diluted number of 699 722 749 765
shares in issue
Market capitalisation 10.39 10.83 8.84 9.07
at end (Rbn) (25)
Percentage (%) of life 5.03 5.45 5.07 6.83
insurance sector (21)
Percentages have been annualised.
30.06.2007 is net of 24 million shares acquired for R380 million as part of a
share buy-back programme (31.12.2006: 27 million shares acquired for R358
million; 30.06.2006: 16 million shares acquired for R200 million; 31.12.2005: 22
million shares acquired for R242 million).
METROPOLITAN HOLDINGS - GROUP RESULTS
30.06.2007 has been adjusted for a special dividend of 77 cents per share
(30.06.2006: capital reduction of 100 cents per share).
These shares have been issued since 1 January 2001, the date on which the group
adopted AC133 (now IAS39).
The market capitalisation is calculated on the fully diluted number of shares in
issue.
Date: 12/09/2007 10:29:13 Produced by the JSE SENS Department.
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