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MET
MET
MET/MTD - Metropolitan - Audited group results for the year ended 31 December
2007
Metropolitan Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
JSE Code: MET
NSX Code: MTD
ISIN Code: ZAE000050456
("Metropolitan")
METROPOLITAN HOLDINGS FINANCIAL SERVICES GROUP
AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
ADDING SHAREHOLDER VALUE
* Total assets under management exceed R100 billion
* Diluted core headline earnings exceed R1 billion
* Dividend per share of 95 cents
* Net funds received from clients - up 353%
* Value of new business - up 32%
* Total dividend per share - up 23%
* Diluted core headline earnings per share - up 26%
REVIEW OF OPERATIONS AND PROSPECTS
Financial highlights
* Diluted core headline earnings per share, at 142 cents, increased by 26%.
* The reduction in the number of shares in issue, as a result of the share
buy back activities, enhanced the growth of all the per-share numbers.
* Headline earnings and earnings, both at 280 cent per share; include
investment market performance and actuarial basis changes.
* All of the operating businesses increased their contributions to group
profits, with higher growth from the smaller businesses once again
highlighting the benefits of the diversification strategy.
* Retail, the largest contributor to group profits, grew its operating profit
by 6%; the corporate business by 21%; the health business by 25%; and
international by 80%, while asset management profits were up 1%.
* The unbroken record of positive net cash flow not only continued, but set a
new record at R12.5 billion.
* Investment income on shareholder assets was 24% higher despite another R1
651 million capital having been returned to shareholders during 2007 (15%
of the opening market capitalisation).
* Good investment market performance contributed to sustained positive
funding levels and the continued strong capital position of the group.
* The return on embedded value of 18% was driven by further operational
improvements and the increased value of new business added.
Operational overview
* Gross funds received from clients grew by 26% to almost R40 billion.
* Group recurring premium income increased by 10% to R7 billion.
* Retail single premium income was 30% higher, confirming once again the
progressive extension of the brand.
* Retail new business APE (recurring premium income plus 10% of single
premiums) was 12% higher than in 2006, enhanced by the growth in single
premium business. The APE new business margin, at 11.3%, and the PVP
margin, at 2.0%, fell marginally below the targeted ranges and are
receiving continued attention.
* In the international arena, new business margins were boosted from 6.7% to
14.6% (APE), and from 1.3% to 3.6% (PVP).
* An impressive 47% increase in corporate recurring new business premium
income boosted the value of new business by 53% to R46 million.
* Metropolitan Retirement Administrators was successfully launched and
integrated into the Metropolitan group.
* The health business continued to grow its principal members under
administration, from 500 000 to over 660 000, with more than 200 000
members signed up with the Government Employees Medical Scheme (GEMS) by
year-end.
* Once again positive operating experience variances emerged in the embedded
value, mainly resulting from higher asset values driven by both better than
expected investment performance and better than expected client inflows and
retention in certain parts of the business (asset levels).
* Negative operating assumption changes dampened the embedded value profit,
mainly driven by a strengthening of the valuation basis in respect of
investment guarantees (R37 million - PGN 110).
* Good mortality experience across the group and non-recurring tax profit
enhanced operating profits while the deterioration in persistency in
certain parts of the business reduced the value of in-force.
CEO succession
* After ten years as group ceo, and almost thirty years with the group, Peter
Doyle will be stepping down on 31 March 2008.
* The board embarked on a comprehensive selection process, considering both
internal and external candidates, and Wilhelm van Zyl will succeed Peter
Doyle as the group ceo.
Prospects
* Metropolitan continues to capitalise on its focused market positioning, in
line with its strategy of creating prosperity for Africa`s people by
providing accessible, affordable and appropriate products.
* All the businesses within the group are well prepared for the threats and
opportunities posed by ongoing changes in the highly regulated environments
in which they operate.
* Food prices and transport inflation as well as credit extension remain the
biggest challenge to our core target market. Any further increases are
likely to curtail new business prospects and threaten the persistency of
the in-force book.
* The retail business is currently reviewing its business model with a view
to managing future expense growth in order to enhance the value proposition
for all stakeholders. 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 is satisfied that the business is sustainable, thanks to its
strong focus on client service, product innovation, business retention,
cost containment, diversification and capital management.
DIRECTORS` STATEMENT
The directors take pleasure in presenting the audited results of the
Metropolitan Holdings financial services group for the year ended 31 December
2007.
International Financial Reporting Standards (IFRS)
The annual financial statements have been prepared in accordance with the
provisions of the South African Companies Act, 1973 as amended (but excluding
the amendments made to the Companies Act in terms of the Corporate Laws
Amendment Act no 24 of 2006) and the Long-term Insurance Act, 1998 as amended
and also comply with guidelines issued by the Actuarial Society of South Africa.
The consolidated balance sheet and income statement, statement of changes in
equity and cash flow statement have been prepared in accordance with
International Financial Reporting Standards (IFRS) issued and effective at the
time of preparing these statements. The accounting policies of the group have
been applied consistently to all the years 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 judgement,
assumptions, estimates and accounting policies are disclosed in detail in the
annual financial statements at 31 December 2007.
Changes to presentation and restatement of 2006 results
The group early adopted the amendment to SAICA circular 8/2007 - Headline
earnings - from 1 January 2007. There was no impact on the group`s headline
earnings. The actuarial liabilities were calculated taking into account the
requirements of the new PGN 110 - Allowance for embedded investment derivatives.
With the implementation of IFRS 7 the presentation of the balance sheet was
changed and certain items reclassified. There were also reclassifications in
the income statement, without any adjustment to earnings. The details are
disclosed in detail in the annual financial statements at 31 December 2007.
CAPITAL MANAGEMENT
* In April 2007 Metropolitan paid out an additional 77 cents per share to
shareholders by way of an extra dividend.
* During the year Metropolitan bought back 44 million listed ordinary shares
(R690 million).
* Metropolitan Life Limited received a AA national insurer financial strength
rating from Fitch Ratings.
* The economic capital model has been further refined, updated and used in
product pricing and business expansion.
* The economic capital required by Metropolitan Life Limited, at 31 December
2007, is R3.9 billion, which is currently 2.7 times the statutory
requirement.
* The group remains well capitalised and will continue to buy back shares up
to fair value.
* The group acquired a 50% holding in HTG Life Ltd, an 80% holding in
Metropolitan Retirement Administrators and a 70% holding in DFS (Pty) Ltd
during 2007. These acquisitions were not material to the group and
resulted in a net cash outflow of R62 million.
CORPORATE GOVERNANCE
The board has satisfied itself that appropriate principles of corporate
governance were applied throughout the year under review.
DIRECTORATE CHANGES AND DIRECTORS` SHAREHOLDING
Prof Wiseman Nkuhlu was appointed group chairman on 31 May 2007. Sir Sam Jonah
(non-executive) and Wilhelm van Zyl (executive) were appointed as directors with
effect from 1 January 2008. Sir Sam Jonah resigned with effect from 23 January
2008 due to a conflict of interest. No further changes have been made to the
directorate during the past year. Transactions in listed shares involving
directors were disclosed on SENS as required.
CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The group had no material capital commitments at 31 December 2007. The group is
party to legal proceedings in the normal course of business, and 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 annual financial statements.
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 in September
and paid in October 2007. On 11 March 2008 a final divided of 59.00 cents per
ordinary share was declared. This dividend is payable to the holders of ordinary
shares recorded in the register of the company at the close of business on
Friday, 4 April 2008 and will be paid on Monday, 7 April 2008. The last day to
trade "cum" dividend will be Friday, 28 March 2008. The shares will trade "ex"
dividend from the start of business on Monday, 31 March 2008. Share
certificates may not be dematerialised or rematerialised between Monday, 31
March and Friday, 4 April 2008, 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, 7 April 2008.
Staff share purchase scheme dividend
A dividend of R16 million (2006: R20 million) was declared on the unlisted
shares in the staff share purchase scheme, as provided for in the trust deed.
Preference share dividend
Dividends of R31 million (16.1%), R8 million (59.00 cents per share) and R28
million (18.0%) were declared on 11 March 2008 on the A1, A2 and A3 Metropolitan
preference shares respectively, and are payable on 31 March 2008.
Dividends of R27 million (14.4%), R5 million (36.00 cents per share) and R24
million (15.6%) were declared in September 2007 on the A1, A2 and A3
Metropolitan preference shares respectively, and paid on 30 September 2007. The
declaration rate was determined as set out in the company`s articles.
Preference share dividends are included under finance costs in these results.
AUDIT OPINION
The auditors, PricewaterhouseCoopers Inc, have issued their opinion on the group
financial statements for the year ended 31 December 2007. A copy of their
unqualified report is available for inspection at the company`s registered
office.
Signed on behalf of the board
Prof Wiseman Nkuhlu Group chairman
Peter Doyle Group chief executive
Cape Town
11 March 2008
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) Merrill Lynch
Limited
(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 31.12.2007 31.12.2006
Rm Rm
ASSETS
Intangible assets 562 413
Owner-occupied property 592 375
Property and equipment 233 166
Investment property 2 710 2 492
Investment in associates (2) 405 314
Investment in joint ventures 61 -
Employee benefit asset 177 126
Financial assets (1, 2) 60 489 54 033
Insurance and other receivables (2) 1 476 1 376
Deferred income tax 15 11
Reinsurance contracts 179 217
Cash and cash equivalents (2) 8 274 6 887
Non-current assets held for sale 185 -
Total assets 75 358 66 410
EQUITY
Capital and reserves attributable to equity 6 817 6 694
holders (2)
Minority interests (2) 124 109
Total equity 6 941 6 803
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts (3) 33 531 30 790
Capitation contracts 1 2
Financial liabilities
Investment contracts - designated as at fair 14 153 11 137
value through income
Investment contracts - with discretionary 14 273 12 695
participation features (3)
Other financial liabilities (4) 2 863 2 301
Deferred income tax 492 300
Employee benefit obligations 252 223
Other payables 2 545 1 957
Current income tax 307 202
Total liabilities 68 417 59 607
Total equity and liabilities 75 358 66 410
1 Financial assets consist of the following:
Assets designated as at fair value through income: R58 264 million (2006:
R52 304 million)
Assets held for trading (derivative financial assets): R850 million (2006:
R599 million)
Available-for-sale assets: R7 million (2006: R10 million)
Loans and receivables: R1 368 million (2006: R1 120 million).
2 Refer 2006 restated information under basis of presentation of financial
information.
3 Under IFRS4, the group continues to account for long-term insurance
contracts and investment contracts with discretionary participation
features using SA GAAP.
4 Other financial liabilities consist of the following:
Liabilities designated as at fair value through income: R635 million (2006:
R452 million)
Liabilities held for trading (derivative financial liabilities): R858
million (2006: R512 million)
Liabilities at amortised cost: R1 370 million (2006: R1 337million)
METROPOLITAN HOLDINGS - GROUP RESULTS
STATEMENT OF ACTUARIAL VALUES OF ASSETS AND 31.12.2007 31.12.2006
LIABILITIES ON Rm Rm
REPORTING BASIS
Total assets per balance sheet 75 358 66 410
Actuarial value of policy liabilities per (61 957) (54 622)
balance sheet
Other liabilities per balance sheet (6 460) (4 985)
Minority interests (124) (109)
Excess - group per reporting basis 6 817 6 694
Net assets - other businesses (1 102) (858)
Excess - long-term insurance business (5) 5 715 5 836
LONG-TERM INSURANCE BUSINESS (5)
Change in excess of long-term insurance (121) (308)
business (5)
Increase in share capital (12) (35)
Metropolitan Kenya included in insurance (8)
Acquisition of HTG Life Ltd (54)
Exchange differences - -
Change in other reserves (36) 232
Dividend paid 1 606 2 187
Total surplus arising 1 383 2 068
Operating profit 754 660
Investment income on excess 289 211
Net realised and fair value gains on excess 364 1 245
Investment variances (6) 29 70
Basis and other changes (180) (166)
Employee benefit asset/obligation 48 67
Deferred tax (8) 79 -
LOA statement of intent - (19)
Consolidation adjustments 217 (186)
Income tax expenses (9) 549 364
Adjustment for finance costs 47 -
Results of long-term insurance business (5) 2 196 2 246
Results of other group businesses 289 316
Results of operations per income statement 2 485 2 562
STATEMENT OF ACTUARIAL VALUES OF ASSETS AND 31.12.2007 31.12.2006
LIABILITIES ON Rm Rm
STATUTORY BASIS
Reporting excess - long-term insurance 5 715 5 836
business (5)
Disallowed assets in terms of statutory (293) (194)
requirements (7)
Capital adjustments 91 101
Statutory excess - long-term insurance 5 513 5 743
business (5)
Capital adequacy requirement 1 609 1 592
Capital adequacy multiple 3.4 3.6
Discretionary margins 2 205 2 058
5 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.
6 Investment variances reflect the impact of actual investment returns on the
value of future expense recoveries.
7 Disallowed assets include goodwill, deferred acquisition costs, deferred
revenue liabilities and employee benefit asset. 2006 was restated for the
employee benefit liability.
8 Deferred tax asset created in respect of accumulated tax losses.
9 Includes deferred tax on contract holder capital gains.
METROPOLITAN HOLDINGS - GROUP RESULTS
CONSOLIDATED INCOME STATEMENT 12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm
Net insurance premiums received 8 792 7 423
Fee income 807 665
Investment income (10) 3 632 2 685
Net realised and fair value gains (10) 4 407 9 848
Net income 17 638 20 621
Net insurance benefits and claims 6 192 5 634
Change in provisions 4 215 8 009
Change in insurance contract liability 2 617 5 233
LOA statement of intent - 19
Change in investment contracts with DPF 1 562 2 792
liability
Change in reinsurance provisions 36 (35)
Fair value adjustments on investment contracts 1 518 1 687
liability
Fair value adjustments on collective 13 8
investment scheme liability (10)
Depreciation, amortisation and impairment 169 183
expenses
Employee benefit expenses 1 145 924
Sales remuneration and distribution costs (10) 1 127 995
Other expenses (8) 774 619
Expenses 15 153 18 059
Results of operations 2 485 2 562
Finance costs (174) (99)
Share of profit of associates 5 3
Profit before tax 2 316 2 466
Income tax expenses (788) (491)
Earnings 1 528 1 975
Attributable to:
Equity holders of group 1 503 1 947
Minority interests (10) 25 28
1 528 1 975
10 Refer 2006 restated information under basis of presentation of financial
information.
METROPOLITAN HOLDINGS - GROUP RESULTS
RECONCILIATION OF Basic earnings Diluted earnings
HEADLINE EARNINGS
attributable to equity
holders of the group
12 mths to 12 mths to 12 mths to 12 mths to
31.12.2007 31.12.2006 31.12.2007 31.12.2006
Rm Rm Rm Rm
Earnings 1 503 1 947 1 503 1 947
Finance costs - 124 93
preference shares
Diluted earnings 1 627 2 040
Goodwill impaired - 4 - 4
Headline earnings (11) 1 503 1 951 1 627 2 044
Net realised and fair (719) (1 265) (719) (1 265)
value gains on excess
Basis changes, LOA 64 111 64 111
statement of intent and
investment variances
Employee benefit (48) (67) (48) (67)
asset/obligation
IFRIC 8 - adjustment 6 9
(12)
Investment income on 13 15
treasury shares -
contract holders (13)
STC on special dividend 60 60
Core headline earnings 860 730 1 003 847
(14)
11 Headline earnings consist of operating profit, investment income, net
realised and fair value gains, investment variances and basis changes.
Adjustments to headline earnings, as required by SAICA Circular 8/2007,
relate to returns on shareholder assets only.
12 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.
13 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.
14 Net realised and fair value gains on investment assets, investment
variances and basis changes can be volatile; therefore core headline
earnings have been disclosed that comprise operating profit and investment
income on shareholder assets.
METROPOLITAN HOLDINGS - GROUP RESULTS
EARNINGS PER SHARE (cents) 12 mths to 12 mths to
attributable to equity holders of the group 31.12.2007 31.12.2006
Basic
Core headline earnings 160.15 130.36
Headline earnings 279.89 348.39
Earnings 279.89 347.68
Weighted average number of shares (million) 537 560
Diluted
Core headline earnings 142.27 112.93
Diluted weighted average number of shares 705 750
(million) (13)
Headline earnings 232.43 280.00
Earnings 232.43 279.45
Diluted weighted average number of shares 700 730
(million) (13)
DIVIDENDS 2007 2006
Ordinary listed shares (cents per share)
Interim 36.00 29.00
Final 59.00 48.00
Total 95.00 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 11.7% 29.00 cps 11.6%
2006 Rate
Rm 22 4 18
Paid - 31 March 2007 Rate 13.5% 125.00 cps 13.3%
Rm 26 16 21
Paid - 30 September 14.4% 36.00 cps 15.6%
2007 Rate
Rm 27 5 24
Payable - 31 March 16.1% 59.00 cps 18.0%
2008 Rate
Rm 31 8 28
Redemption value (per R 5.12 9.18 9.18
share)
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF DILUTED CORE HEADLINE EARNINGS 12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm
Retail business 460 436
Operating profit 622 627
Tax (162) (191)
Corporate business 176 145
Operating profit 248 204
Tax (72) (59)
International business 110 61
Operating profit 116 67
Tax (6) (6)
Asset management business 70 69
Operating profit 96 94
Tax (26) (25)
Health business 64 51
Operating profit 116 78
Tax (52) (27)
Shareholder capital 123 85
Holding company expenses (58) (44)
Strategic ventures (44) (21)
Investment income on shareholder excess 384 310
Income tax on investment income (159) (160)
Diluted core headline earnings 1 003 847
RESULTS OF OPERATIONS FROM Net Expenses Results of operations
ADMINISTRATION BUSINESS income
(gross of minority
interests, before finance
costs and tax)
12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm Rm Rm
Health business 714 (603) 111 72
Asset administration 102 (40) 62 58
Asset management (15) 128 (93) 35 36
Metropolitan Card 44 (66) (22) (21)
Operations
988 (802) 186 145
15 Included are Inter-segment income and expenses of R160 million
(2006: R114 million) and R17 million (2006: R12 million) respectively.
METROPOLITAN HOLDINGS - GROUP RESULTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm
Changes in share capital
Balance at beginning (136) 559
Staff scheme shares released 105 86
Shares repurchased and cancelled - (200)
Treasury shares held on behalf of contract 50 61
holders
Capital reduction - (642)
Balance at end 19 (136)
Changes in other reserves
Balance at beginning 413 428
Total recognised income 70 (30)
Earnings directly accounted in equity 65 (29)
Foreign currency translation differences 5 (1)
Employee share schemes - value of services 12 10
provided
Fair value gains - available-for-sale financial - 1
assets
Transfer from retained income - 4
Balance at end (16) 495 413
Changes in retained income
Balance at beginning 6 417 5 219
Earnings for period 1 503 1 947
Dividends paid (926) (386)
Shares repurchased (691) (358)
Transfer to other reserves - (5)
Balance at end 6 303 6 417
Capital and reserves attributable to equity 6 817 6 694
holders
Changes in minority interests
Balance at beginning 109 112
Total recognised income 26 28
Earnings for period 25 28
Foreign currency translation differences 1 -
Dividend paid (49) (34)
Net change in minority interests 38 3
Balance at end 124 109
Total equity 6 941 6 803
16 Other reserves consist of the following:
Land and buildings revaluation reserve: R161 million (31.12.2006: R96
million)
METROPOLITAN HOLDINGS - GROUP RESULTS
Foreign currency translation reserve: (R11 million) (31.12.2006: (R16 million))
Fair value reserve: R50 million (31.12.2006: R38 million)
Non-distributable reserve: R295 million (31.12.2006: R295 million)
CONSOLIDATED CASH FLOW STATEMENT 12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm
Net cash inflow from operating activities 3 277 2 024
Net cash outflow from investing activities (112) (232)
Net cash outflow from financing activities (1 666) (1 198)
Net cash flow 1 499 594
Net realised and fair value gains/(losses) on (112) 10
cash resources
Cash resources and funds on deposit at 6 887 6 283
beginning
Cash resources and funds on deposit at end (17) 8 274 6 887
17 Refer 2006 restated information under basis of presentation of financial
information.
SEGMENT ASSETS AND LIABILITIES 31.12.2007 31.12.2006
Rm Rm
Segment assets
Retail business 37 403 32 513
Corporate business 28 171 24 749
Health business 322 293
Asset management business 241 187
Shareholder capital 4 241 4 145
International business 4 980 4 523
Total assets per balance sheet 75 358 66 410
Segment liabilities
Retail business 34 680 30 303
Actuarial value of policy liabilities 32 400 28 905
Other liabilities 2 280 1 398
Corporate business 26 931 23 010
Actuarial value of policy liabilities 25 650 22 140
Other liabilities 1 281 870
Health business 141 97
Asset management business 71 51
Shareholder capital 2 187 2 332
International business 4 407 3 814
Actuarial value of policy liabilities 3 907 3 577
Other liabilities 500 237
Total liabilities per balance sheet 68 417 59 607
METROPOLITAN HOLDINGS - GROUP RESULTS
* The South African operations are segregated into retail, corporate, asset
management, health and shareholders capital. The international companies,
Botswana, Ghana, Kenya, Lesotho, Mauritius, Namibia and Nigeria, are all
managed as a single operating segment.
* The assets for both the retail and corporate segments are set equal to the
contract holder liabilities, as these liabilities are equally matched with
assets, plus the allocated economic capital.
* Other segment information used to assess the performance of the operating
segments is disclosed throughout the results and include, diluted core
headline earnings, premiums received, fee and other income, payments to
contract holders, total expenses, new business premiums, value of new
business and profitability of new business as a % of APE.
EMBEDDED VALUE 31.12.2007 31.12.2006
Rm Rm
Reporting excess - long-term insurance 5 715 5 836
business
Disallowed assets (18) (124) (73)
Adjustments to reporting excess 2 057 2 085
Net assets - other businesses 1 102 858
Dilutory effect of subsidiaries (19) 73 80
Staff share scheme loans 141 227
Liability - convertible redeemable 837 832
preference shares
Treasury shares held on behalf of contract 13 197
holders
Goodwill (109) (109)
Adjustments for 540 405
Asset management business 257 210
Health business (20) 666 481
Holding company expenses (383) (286)
Adjusted net asset value 8 188 8 253
Net value of in-force business 4 420 4 096
Individual life 3 566 3 338
Gross value of in-force business 3 696 3 475
Less: Cost of capital (130) (137)
Employee benefits 854 758
Gross value of in-force business 911 830
Less: Cost of capital (57) (72)
Diluted embedded value 12 608 12 349
METROPOLITAN HOLDINGS - GROUP RESULTS
EMBEDDED VALUE 31.12.2007 31.12.2006
Rm Rm
Diluted embedded value per share (cents) 1 857 1 710
Diluted adjusted net asset value per share 1 206 1 143
(cents)
Diluted number of shares in issue (million) 679 722
(21)
18 Disallowed assets include goodwill, deferred acquisition costs and deferred
revenue liabilities.
19 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,
minority interests and related funding have been reinstated.
20 The value of the health business is net of R54 million, being the total
liability of the option held by MHG management (31.12.2006: R53 million).
21 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.
METROPOLITAN HOLDINGS - GROUP RESULTS
EMBEDDED VALUE ATTRIBUTABLE TO Net Value 31.12.2007 31.12.2006
GROUP asset of in-
value force
Rm Rm Rm Rm
Metropolitan Life Ltd 5 029 3 911 8 940 8 781
Metropolitan Odyssey Ltd 34 - 34 34
HTG Life Ltd 41 - 41 -
Metropolitan Life 50 - 50 48
International Ltd
Metropolitan Life (Namibia) 149 268 417 479
Ltd
Metropolitan Life of Botswana 109 69 178 160
Ltd
Metropolitan Lesotho Ltd 141 166 307 295
Metropolitan Life Insurance 15 2 17 7
Kenya Ltd
Metropolitan Life Insurance 8 4 12 13
Ghana Ltd
Asset management business 137 257 394 320
Metropolitan Health Group 165 666 831 622
Metropolitan Holdings (after 1 879 (383) 1 496 1 699
consolidation adjustments)
Goodwill (109) (109) (109)
Total embedded value 7 648 4 960 12 608 12 349
Adjustments to reporting (2 057)
excess
Disallowed assets 124
Reporting excess - long-term 5 715
insurance business
VALUE OF LONG-TERM INSURANCE NEW BUSINESS 12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm
Retail business 119 114
Gross value of new business 122 116
Less: Cost of capital (3) (2)
Corporate business 46 30
Gross value of new business 53 37
Less: Cost of capital (7) (7)
International business 15 7
Gross value of new business 15 9
Less: Cost of capital (0) (2)
Value of long-term insurance new business 180 151
Asset management business 35 25
Health business 121 78
Total value of new business 336 254
METROPOLITAN HOLDINGS - GROUP RESULTS
* 2007 and 2006 results exclude Metropolitan Ghana, Metropolitan Kenya and
Cover2Go as these businesses were in start-up phase.
* Net of minority interests.
* Due to rounding, the cost of capital for the international business is less
than R1 million.
* No value of new business is included for HTG Life Ltd as the company was
acquired late in 2007.
NEW BUSINESS PREMIUMS 12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm
Recurring premiums
Retail business 804 753
Corporate business 207 141
International business 91 89
1 102 983
Single premiums
Retail business 2 519 1 872
Corporate business 2 154 2 661
International business 121 157
4 794 4 690
Annual premium equivalent (APE) 1 581 1 452
Retail business 1 056 940
Corporate business 422 407
International business 103 105
Present value premiums (PVP) 10 068 9 502
Retail business 6 033 5 410
Corporate business 3 613 3 563
International business 422 529
* 2007 and 2006 exclude Metropolitan Ghana (2007: R9 million and 2006: R4
million APE), Metropolitan Kenya (2007: R4 million and 2006: R4 million
APE) and Cover2Go as these businesses were in start-up phase.
* Net of minority interests.
METROPOLITAN HOLDINGS - GROUP RESULTS
PROFITABILITY OF NEW BUSINESS 12 mths to 12 mths to
31.12.2007 31.12.2006
% of APE 11.4 10.4
Retail business 11.3 12.1
Corporate business 10.9 7.4
International business 14.6 6.7
% of PVP 1.8 1.6
Retail business (23) 2.0 2.1
Corporate business 1.3 0.8
International business 3.6 1.3
SOURCE OF NEW BUSINESS PRODUCTION - 31.12.2007 31.12.2006
GROUP
Individual life - insurance and
investment business
APE % Total APE % Total
% %
Tied agents & personal financial 36 26 36 26
advisors
Brokers 25 25 27 25
Wholesale & credit life 21 8 21 9
3rd party business 9 34 8 34
International 9 7 8 6
PRINCIPAL ASSUMPTIONS (South Africa) (22) 31.12.2007 31.12.2006
% %
Pre-tax investment return
Equities 10.5 10.0
Properties 10.5 10.0
Government stock 8.5 8.0
Cash 6.5 6.0
Risk discount rate 11.0 10.5
Investment return (before tax) - smoothed bonus 9.9 9.4
Expense inflation rate 5.3 4.8
22 The principal assumptions relate to the South African life insurance
business only. Assumptions relating to the international life insurance
businesses are based on local requirements and can differ from the South
African assumptions.
METROPOLITAN HOLDINGS - GROUP RESULTS
MINORITY INTERESTS 31.12.2007 31.12.2006
% %
HTG Life Ltd 50.0 -
Metropolitan Life (Namibia) Ltd 19.0 19.0
Metropolitan Life of Botswana Ltd 24.2 24.2
Metropolitan Life Insurance Kenya Ltd (19) 33.3 40.0
Metropolitan Life Insurance Ghana Ltd (19) 40.0 40.0
Metropolitan Health Group 17.6 17.6
* The group acquired 50% joint control of UBA Metropolitan Life Insurance
Nigeria Ltd in December 2007, which is treated as a joint venture.
LONG-TERM Net In-force business New business
INSURANCE worth written
BUSINESS:
SENSITIVITIES -
31.12.2007
Net Gross Cost Net Gross Cost
value value of CAR value value of
CAR
Rm Rm Rm Rm Rm Rm Rm
Base value 5 715 4 420 4 607 (187) 180 190 (10)
1% increase in 4 032 4 331 (299) 151 168 (17)
risk
discount
rate
% change (9) (6) 61 (16) (12) 62
1% reduction in 4 852 4 907 (55) 212 215 (3)
risk
discount
rate
% change 10 7 (70) 18 13 (72)
10% increase in 4 135 4 322 (187) 149 159 (10)
future
expenses
% change (6) (6) - (17) (16) -
(note 1)
10% increase in 4 282 4 468 (186) 136 146 (10)
policy
discontinuan
ce
% change (3) (3) - (24) (23) -
10% increase in 4 050 4 237 (187) 120 130 (10)
mortality
and
morbidity
% change (8) (8) - (33) (31) -
(note 2)
METROPOLITAN HOLDINGS - GROUP RESULTS
LONG-TERM Net In-force business New business
INSURANCE worth written
BUSINESS:
SENSITIVITIES -
31.12.2007
Net Gross Cost Net Gross Cost
value value of CAR value value of
CAR
Rm Rm Rm Rm Rm Rm Rm
Base value 5 715 4 420 4 607 (187) 180 190 (10)
1% reduction in 5 728 4 373 4 559 (186) 190 203 (13)
gross
investment
return,
inflation
rate and
risk
discount
rate
% change - (1) (1) - 6 7 17
(note 3)
1% reduction in 5 589 4 063 4 379 (316) 147 166 (19)
gross
investment
return only
(no change
in risk
discount
rate)
% change (2) (8) (5) 69 (18) (13) 80
(note 3)
1% reduction in 5 810 4 376 4 563 (187) 199 209 (10)
inflation
rate
% change 2 (1) (1) - 11 10 -
10% fall in 5 453 4 180 4 380 (200)
market value
of equities
% change (5) (5) (5) 7
10% reduction in 4 322 4 509 (187) 172 182 (10)
premium
indexation
take-up rate
% change (2) (2) - (4) (4) -
10% increase in 147 157 (10)
non
commission
related
acquisition
expenses
% change (18) (17) -
METROPOLITAN HOLDINGS - GROUP RESULTS
Notes
1 No corresponding changes in variable policy charges are assumed, although
in practice it is likely that these charges will be modified according to
circumstances.
2 Mortality decreases by 10% for annuities; mortality and morbidity increase
by 10% for assurance.
3 Bonus rates are assumed to change commensurately.
4 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 CHANGES Other Long-term 12 mths to 12 mths to
IN bus- insurance 31.12.2007 31.12.2006
GROUP EMBEDDED VALUE inesses business Total Total
NAV VoIF Rm Rm
Rm Rm Rm
Profit from new 164 (78) 266 352 267
business
Embedded value from 156 (78) 258 336 254
new business
Expected return to 8 - 8 16 13
end of year
Profit from existing 83 718 (20) 781 604
business
Expected return - 67 - 473 540 440
unwinding of risk
discount rate
Expected (or - 632 (632) - -
actual) net of tax
profit transfer to
net worth
Operating 139 165 110 414 381
experience
variances
Operating (123) (79) 29 (173) (166)
assumption changes
LOA statement of - - - (51)
intent
Embedded value profit 247 640 246 1 133 871
from operations
Investment return on 92 676 - 768 1 387
net worth
Investment variances 8 76 54 138 480
Economic assumption 3 (30) 26 (1) (12)
changes
Exchange rate - (3) (1) (4) -
movements
Total embedded value 350 1 359 325 2 034 2 726
profit
Changes in share (702) 11 (691) (1 200)
capital
Dividend paid 596 (1 556) (960) (429)
Acquisition of HTG (41) 41 -
Life Ltd
Redeemable preference - - (123)
shares
Finance costs - (124) (124) (93)
preference shares
Increase in embedded 79 (145) 325 259 881
value
Time weighted return on embedded value (%) 17.8 26.1
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF VARIANCES AND OPERATING ASSUMPTION CHANGES - 31.12.2007
Operating
experience
variances
Other Positive variances from a significant increase in
businesses membership of administered medical schemes as well
as higher than expected net fee income from asset
management resulted in an increase in embedded
value.
Long-term
insurance
business
NAV Positive variances from mortality profits across
most product lines and geographic markets,
unexpected tax profits and the impact of better than
expected investment performance, including a higher
than expected 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 Positive variances from better than expected
retention of employee benefits business as well as
positive contributions from mortality.
Operating
assumption
changes
Other Negative change from an increase in future expected
businesses expenses in the holding company, partly offset by a
reduction in the assumed future STC rate.
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF VARIANCES AND OPERATING ASSUMPTION CHANGES - 31.12.2007
Long-term
insurance
business
NAV Positive changes from the assumed mortality of most
lines of business as well as the creation of a
deferred tax asset in respect of contract holder
funds.
Negative changes from a strengthening of the
valuation basis in respect of worsening lapse rates
on direct marketing business as well as methodology
changes in the valuation of investment guarantees in
contract holder funds.
VoIF Positive change from better than expected mortality
experience on direct marketing schemes, recognised
through an increase in discretionary margins. A
reduction in the assumed future STC rate had a
further positive impact.
Negative change from a changed approach to providing
for future tax on contract holder funds. The
reduction in the VoIF was offset by a corresponding
increase in the NAV by creating a deferred tax
asset.
FUNDS RECEIVED FROM CLIENTS 12 mths to 12 mths to
31.12.2007 31.12.2006
Gross Gross Net inflow Net inflow
inflow outflow Rm Rm
Rm Rm
Retail business 6 726 (4 140) 2 586 1 845
Corporate business 3 947 (2 712) 1 235 1 623
International business 975 (670) 305 410
Long-term insurance 11 648 (7 522) 4 126 3 878
business cash flows
Health business 10 701 (9 337) 1 364 373
Asset management business 16 511 (9 581) 6 930 (1 863)
Corporate business 78 - 78 371
Total funds received from 38 938 (26 440) 12 498 2 759
clients
METROPOLITAN HOLDINGS - GROUP RESULTS
PREMIUMS RECEIVED 12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm
Recurring premiums 6 913 6 301
Retail business 4 288 3 918
Corporate business 1 793 1 592
International business 832 791
Single premiums 4 735 4 729
Retail business 2 438 1 872
Corporate business 2 154 2 661
International business 143 196
Health business - capitation contracts 19 17
Segment premiums received 11 667 11 047
Adjustment for premiums received from (2 875) (3 624)
investment contract holders
Net insurance premiums per income statement 8 792 7 423
PAYMENTS TO CONTRACT HOLDERS 12 mths to 12 mths to
31.12.2007 31.12.2006
Rm Rm
Individual life 4 623 4 377
Death and disability claims 952 934
Maturity claims 1 417 1 307
Annuities 581 519
Withdrawal benefits 7 -
Surrenders 1 759 1 697
Re-insurance recoveries (93) (80)
Employee benefits 2 899 2 775
Death and disability claims 886 726
Maturity claims 136 136
Annuities 614 387
Withdrawal benefits 469 358
Terminations 106 631
Disinvestments 837 676
Re-insurance recoveries (149) (139)
Capitation contracts 17 16
Total payments to contract holders 7 539 7 168
Retail business 4 140 3 945
Corporate business 2 712 2 630
International business 670 577
Health business 17 16
Segment payments to contract holders 7 539 7 168
Adjustment for payments to investment contract (1 347) (2 077)
holders
Net insurance benefits and claims per income 6 192 5 091
statement
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF EXPENSES 12 mths to 12 mths to
31.122007 31.12.2006
Rm Rm
Depreciation, amortisation and impairment 169 183
expenses
Employee benefit expenses 1 145 924
Sales remuneration and distribution costs 1 127 995
Other expenses 774 619
Finance costs 174 99
Total expenses 3 389 2 820
Long-term insurance business 2 547 2 263
Management expenses 1 237 1 115
Administration expenses 1 114 988
Distribution costs 123 127
Sales remuneration 1 001 904
Asset management fees 242 163
Direct property operating expenses 67 81
Administration business 771 594
Finance costs - preference shares and 170 93
subordinated redeemable debt
Holding company 65 59
Metropolitan Card Operations 67 29
Retirement asset/obligation (51) (67)
Consolidation adjustments (180) (151)
Total expenses 3 389 2 820
Retail business 1 987 1 808
Corporate business 312 224
Health business 587 483
Asset management business 133 121
Shareholder capital 256 61
International business 305 296
Segment expenses 3 580 2 993
Inter-segment expenses (191) (173)
Total expenses 3 389 2 820
METROPOLITAN HOLDINGS - GROUP RESULTS
NUMBER OF EMPLOYEES 31.12.2007 31.12.2006
Indoor staff 4 866 4 321
Insurance companies 2 566 2 506
Retail business (23) 1 305 1 325
Employee benefits business 359 332
International business 381 346
Group services 521 503
Metropolitan Health Group 1 956 1 638
Asset management 75 70
Asset administration 69 58
Metropolitan Card Operations 42 28
Metropolitan Retirement Administrators 132 -
Cover2Go 7 -
Holding company 19 21
Field staff 3 409 3 316
Retail business 2 554 2 551
International business 855 765
Total 8 275 7 637
23 Staff numbers for HTG Life Ltd and DirectFin Solutions (Pty) Ltd are
excluded.
ASSETS UNDER MANAGEMENT 31.12.2007 31.12.2006
Rm Rm
Intangible assets 562 413
Owner-occupied property 592 375
Property and equipment 233 166
Investment property 2 710 2 492
Investment in associates 405 314
Investment in joint ventures 61 -
Employee benefit asset 177 126
Financial assets 60 489 54 033
Equity securities 31 990 29 984
Debt securities 14 268 13 141
Funds on deposit and other money market 2 150 1 351
instruments
Unit linked investments 9 863 7 838
Derivative financial instruments 850 599
Loans and receivables 1 368 1 120
Insurance and other receivables 1 476 1 376
Deferred income tax 15 11
Reinsurance contracts 179 217
Cash and cash equivalents 8 274 6 887
Non-current assets held for sale 185 -
Total on-balance sheet assets 75 358 66 410
Collective investments 18 403 12 241
Health 4 091 2 669
Asset management - segregated assets 2 950 3 368
Employee benefits - segregated assets 1 392 1 170
Total assets under management 102 194 85 858
METROPOLITAN HOLDINGS - GROUP RESULTS
ANALYSIS OF ASSETS BACKING GROUP 31.12.2007 31.12.2006
EXCESS
Rm % Rm %
Equity securities 3 575 52.4 2 451 36.6
Collective investment schemes 1 325 19.4 2 088 31.2
Debt securities 523 7.7 597 8.9
Owner-occupied properties 592 8.7 344 5.1
Investment properties 103 1.5 18 0.3
Cash and cash equivalents 1 490 21.9 1 478 22.1
Goodwill 244 3.6 148 2.2
Other net assets 303 4.4 903 13.5
Redeemable preference shares (837) (12.3) (832) (12.4)
Subordinated redeemable debt (501) (7.3) (501) (7.5)
Excess - group per reporting basis 6 817 100.0 6 694 100.0
GROUP EXCESS - TOP 10 EQUITY 31.12.2007 31.12.2006
HOLDINGS
Rm % Rm %
MTN Group Ltd 293 8.2 177 7.2
Standard Bank Group Ltd 211 5.9 137 5.6
Billiton Plc 182 5.0 110 4.5
Sasol Ltd 167 4.7 88 3.6
Impala Platinum Holdings Ltd 157 4.4 75 3.1
Anglo American Plc 133 3.7 128 5.2
FirstRand Ltd 130 3.7 86 3.5
Nedbank Group Ltd 111 3.1 76 3.1
Remgro Plc 90 2.5 - -
Naspers N-ord Ltd 70 2.0 - -
SABMiller Plc - - 83 3.4
Imperial Holdings Ltd - - 78 3.2
1 544 43.2 1 038 42.4
Total equity securities backing 3 575 100.0 2 451 100.0
group excess
METROPOLITAN HOLDINGS - GROUP RESULTS
STOCK EXCHANGE PERFORMANCE 2007 2006 2005 2004
12 month period
Value of listed shares traded 7 024 5 614 3 347 2 049
(rand million) (24)
Volume of listed shares 456 442 315 250
traded (million) (24)
Shares traded (% of average 79.7 75.0 51.1 37.9
listed shares in issue) (24)
Value of shares traded - life 108.0 81.9 70.0 47.3
insurance (J857 - Rbn)
Value of shares traded - top 2 328.0 1 735.0 1 028.2 829.8
40 index (J200 - Rbn)
Trade prices
Highest (cents per share) 1 691 1 581 1 220 1 100
Lowest (cents per share) 1 314 1 020 950 680
Last sale of period (cents 1 509 1 500 1 185 1 090
per share)
Percentage (%) change during 6.04 38.25 19.70 59.12
period (25)
Percentage (%) change - life 3.11 28.18 21.18 36.04
insurance sector (J857)
Percentage (%) change - top 16.11 37.53 44.12 20.11
40 index (J200)
31 December
Price/core headline earnings 10.61 13.28 12.35 12.24
ratio (diluted)
Dividend yield % (dividend on 6.30 5.13 5.32 4.77
listed shares)
Dividend yield % - top 40 2.39 2.06 2.24 2.49
index (J200)
METROPOLITAN HOLDINGS - GROUP RESULTS
STOCK EXCHANGE PERFORMANCE 2007 2006 2005 2004
Total shares issued (million)
Listed on JSE 559 585 594 641
Ordinary shares 553 578 587 632
Share incentive scheme 6 7 7 9
Unlisted - share purchase 23 41 48 63
scheme
Total ordinary shares in 582 626 642 704
issue
Treasury shares held in (26) (27) - (41)
subsidiary company
Treasury shares held on (1) (13) (22)
behalf of contract holders
Adjustment to staff share (26) (47) (50) (53)
scheme shares (26)
Share incentive scheme (4) (7) (5) (5)
Share purchase scheme (22) (40) (45) (48)
Basic number of shares in 529 539 570 610
issue
Adjustment to staff share 26 47 50 53
scheme shares
Treasury shares held on 1 13 22
behalf of contract holders
Convertible redeemable 123 123 123 -
preference shares
Diluted number of shares in 679 722 765 663
issue (27)
Market capitalisation at 10.25 10.83 9.07 8.06
period-end (Rbn) (28)
Percentage (%) of life 4.93 5.45 6.83 7.04
insurance sector
24 31.12.2007 is net of 44 million shares acquired for R690 million as part
of a share buy-back programme (31.12.2006: 42 million shares acquired for
R558 million; 31.12.2005: 22 million shares acquired for R242 million).
25 2007 has been adjusted for the special dividend of 77 cents per share
paid in April, while both 2006 and 2005 have been adjusted for a capital
reduction of 100 cents.
26 These shares were issued after 1 January 2001, the date on which the
group adopted AC133 (now IAS39).
27 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.
28 The market capitalisation is calculated on the diluted number of shares
in issue.
Date: 12/03/2008 08:00:04 Produced by the JSE SENS Department.
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