|
MMI
MMI
MMI - MMI Holdings Limited - Unaudited group results for the six months
ended 31 December 2010
MMI Holdings Limited
Incorporated in the Republic of South Africa
Registration Number: 2000/031756/06
JSE share code: MMI
NSX share code: MIM
ISIN: ZAE000149902
("MMI" or the "company" or the "group")
MMI summary of financial information
Unaudited group results for the six months ended 31 December 2010
- Merger of Metropolitan and Momentum
- Embedded value of R31.1 billion, or 1 939 cents per share
- Pro forma diluted core headline earnings of R1 228 million
- Group pro forma value of new business of R356 million
- Total interim ordinary dividend of R948 million
- Total assets under management and administration of R424 billion
OVERVIEW OF OPERATIONS AND PROSPECTS
OPERATING ENVIRONMENT
The merger of Metropolitan and Momentum introduced new energy and
opportunities for the group as a whole. The integration process is
progressing well, with Momentum and Metropolitan`s operations combined
into six business units with distinct focus areas.
Equity markets recovered strongly during the latter half of 2010. The
volatility in these markets eased, and long bond interest rates reduced.
Overall consumer confidence started returning, household disposable
income increased and employment levels stabilised, resulting in improved
operating conditions.
HIGHLIGHTS - MMI GROUP
- The embedded value of R31.1 billion (1 939 cents per share) reflects
the financial strength of the group.
- Pro forma diluted core headline earnings of R1 228 million or 77 cents
per share for the period.
- Diluted earnings and headline earnings, which include the impact of the
strong stock market performance, exceeded the one billion rand mark for
the half-year on a pro forma basis.
- A total interim ordinary dividend of R948 million, or 63 cents per
share (42 cents interim plus 21 cents special) was declared, confirming
the board`s confidence in the future of the group.
- Total assets under management and administration, at R424 billion,
indicate the scale of the group.
- Finalisation of merger between Metropolitan and Momentum.
CAPITAL MANAGEMENT ACROSS MMI
- The group actively manages its capital resources and balances the
interests of all stakeholders as part of protecting its shareholder
wealth.
- Asset allocation, capital protection and other value-enhancing
strategies were applied where deemed appropriate.
- The shareholder investment strategy is currently being reviewed and any
changes in asset allocation may impact earnings in future reporting
periods.
- Group CAR cover, at 2.5 times, confirms the financial strength and
stability of the group.
- The current estimated economic capital required by the life insurance
operations in the MMI group is approximately R10 billion.
- The actual capital held by the group of R15.4 billion, before dividend,
exceeded the economic capital requirement and the group remains
appropriately capitalised, with a particularly strong balance sheet.
- The FSB`s Solvency Assessment and Management (SAM) project will change
the way the group`s economic capital will be determined in the future.
PROSPECTS FOR MMI
- Each business unit has embarked on a detailed strategic planning and
integration process to identify and optimise structures, operations,
target markets, distribution channels and product offerings. A number of
opportunities have been identified during the integration process
currently underway.
- Merger synergies are expected to start flowing through during the
second half of the 2011 calendar year.
- The group reported satisfactory increases for both the volumes and the
value of new business written during the six months. This demonstrates
the group`s strong distribution capability and augurs well for future new
business growth prospects.
- Growth in new business volumes will, however, remain dependent on the
economic environment, including a recovery in employment and disposable
income levels.
- Africa, although a complex market, remains largely untapped and
provides a number of opportunities for the group throughout its footprint
in 12 countries outside of South Africa.
- All business units face opportunities and threats posed by ongoing
changes in the highly regulated environments in which they operate,
including the national health insurance and national social security
reform proposals.
- The board of MMI believes that the group has begun implementing the
appropriate strategies to unlock value and generate a satisfactory return
on capital for shareholders over time.
Operational overview: Momentum businesses for six months ended 31
December 2010
Retail
- New recurring business volumes increased by 7% when compared with the
prior period. This was due to an increase in sales of discretionary
savings products and retirement annuities, and a small reduction in risk
product sales. This change in new business mix reduced the overall new
business margin.
- New business sourced through the agency force increased in line with
Momentum`s objective to grow this channel.
- The recovery in economic conditions coupled with the satisfactory
results of our client retention initiatives, had a positive impact on the
lapse and surrender experience, which is approaching the longer-term
expectations.
- Operating profit increased as a result of increased asset-based fees
and satisfactory experience profits.
Employee benefits
- New business volumes increased by 69% on an APE (Annual Premium
Equivalent) basis due to strong new business growth in both the umbrella
fund and the standalone risk businesses. The increase in the
administration business was higher than the increase of the new risk
business, resulting in a change in new business mix that reduced the
overall new business margins.
- Risk experience improved compared to the prior period, mainly as a
result of a significant improvement in the claims experience of the
income disability product.
- Expense efficiencies have been extracted from the systems integration
initiatives that were completed during the early part of 2010 calendar
year.
International
- Members under administration in the health business increased by 3%
from 125 000 lives at 30 June 2010 to 129 000 lives at 31 December 2010.
- The operating loss increased as a result of the strong Rand and higher
claims ratios experienced in certain countries. Corrective measures have
been introduced to improve the claims ratios to the targeted levels.
Investments (including asset management)
- The Momentum Wealth business experienced strong new business growth,
especially in terms of discretionary flows.
- The net funds outflow, although decreasing, remains a concern.
- The relative investment performance of certain equity and balanced
mandates was below expectations. However, relative investment
performance in respect of the fixed interest, retail and alternative
asset classes were in line with expectations.
- The net outflow of funds coupled with the decline in performance fees
during the period under review had a negative impact on the operating
profit for the Investments business unit.
Health
- Members under administration declined by 2% during the period under
review. This was mainly due to the impact of the current economic
conditions on employment levels of certain employer groups.
- The rationalisation of administration systems, along with initiatives
to reduce the overall cost base in line with the loss of members, has
resulted in a reduction in direct expenses.
FNB Life
- With effect from 1 December 2010, only 10% of the earnings of FNB Life
is included in the Momentum results. The remaining 90% accrues to
FirstRand Limited in terms of the strategic relationship agreement with
FirstRand.
Operational overview: Metropolitan businesses for twelve months ended 31
December 2010
Retail
- New business flows ended 4% higher, driven by good production in the
traditional agency channels and a move to better quality lines of
business. Combined with the removal of prior year underperforming
products, good expense management and satisfactory persistency, this
contributed to an increase in the annual new business margin to a very
satisfactory 4.0%, exceeding the upper end of the targeted margin range.
- The mix of new recurring premium business sold continued to shift
towards risk policies.
- Increasing average fund levels, combined with the factors mentioned
above, resulted in an increase in operating profit.
- The difficult economic conditions experienced in the low to middle-
income market segment continued, but a continued focus on the quality of
new business and the retention of existing business ensured satisfactory
overall persistency during the year.
Employee benefits (corporate)
- Although the new business flows reduced by 24%, the new business margin
increased from 0.9% to 1.1%, supported by high margin investment
contracts concluded during the period.
- Significant volumes of off balance sheet administration business were
recorded, which also contributed to the increased margin.
- Operating profit was stronger, reflecting higher asset-based fees and
improved risk experience on both the disability and mortality books.
International
- New business premiums ended 4% stronger than in 2009 with the markets
in Lesotho and Namibia delivering good results
- Total operating profit ended slightly below the 2009 levels, reflecting
the slower growth of the established businesses and tough operating
conditions across all markets. Start-up losses in the newer West African
markets reduced.
Asset management
- The investment team continued to focus on delivering good absolute and
relative investment performance over the year.
- Operating profit declined as a result of administration margin
compression, higher expenses and lower investment assets retained.
Health
- The business experienced good growth in membership mainly reflecting
the increase in membership of the Government Employees Medical Scheme.
Total principal members under administration at the year-end were 914 000
(2009: 855 000), representing over 2.4 million lives, confirming
Metropolitan Health Group`s status as South Africa`s largest
administrator of restricted medical schemes.
- Two new schemes were secured during the latter half of 2010 and
subsequently successfully taken on at the beginning of 2011.
- Operating profit for the year ended slightly down, with increased
revenue being suppressed by higher operational and incentive-based
expenses.
Shareholder capital
- Investment income, impacted by lower yields, was boosted by interest
received on an income tax refund.
- Prior year costs relating to strategic ventures have not again been
incurred in 2010.
DIRECTORS` STATEMENT
The directors take pleasure in presenting the unaudited interim results
of the MMI Holdings Limited group for the period ended 31 December 2010.
Metropolitan / Momentum merger
MMI Holdings Limited (previously Metropolitan Holdings Limited) acquired
all the ordinary shares in Momentum Group Limited (Momentum) from
FirstRand Limited (FirstRand) during 2010 and issued 951 million shares
to FirstRand as consideration. For accounting purposes, the acquisition
is accounted for as a reverse acquisition in terms of IFRS 3 (Revised) -
Business combinations, with Momentum being treated as the acquirer and
Metropolitan Holdings Limited (Metropolitan) as the acquiree. The
relevant approvals for the transaction were received on 12 November 2010
(transaction unconditional), the consideration shares were issued on 1
December 2010 and the new MMI Holdings Limited board was reconstituted on
the latter date.
Presentation of financial information
The group has adopted a June year-end, being the year-end of the Momentum
group. The statutory results presented for the current period comprise
Momentum for the six months ended 31 December 2010 and Metropolitan for
the month ended December 2010, while the comparatives are the six months
ended 31 December 2009 and the twelve months ended 30 June 2010 for
Momentum only (restated for accounting policy adjustments noted below).
Metropolitan and Momentum operated as separate groups for most of the
current reporting period; therefore additional information regarding the
two groups` pre-merger results for twelve months and six months
respectively, as well as pro forma combined results of MMI Holdings
Limited for the six months to 31 December 2010, are set out in this
report and are also available on both SENS and the company website.
Basis of presentation of financial information
These results have been prepared in accordance with International
Accounting Standard 34 (IAS34) - Interim financial reporting; the South
African Companies Act, Act 61 of 1973, as amended; and the listings
requirements of the JSE Limited (JSE). The accounting policies of the
group are in terms of International Financial Reporting Standards (IFRS)
and have been applied consistently to all the periods presented and the
previous reporting period. The comparatives have been restated for the
changes in accounting policies. The preparation of financial statements
is in accordance with and contains the information required by IFRS and
the AC 500 standards, as issued by the Accounting Practices Board or its
successor, which 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 Momentum
financial statements at 30 June 2010 (31 December 2009 for Metropolitan)
and, with the exception of the principal economic assumptions, have
remained unchanged since then.
Change in accounting policies
Certain accounting policies have been amended to align the historic
accounting policies of Momentum and Metropolitan. Owner-occupied
properties are carried at fair value instead of cost less accumulated
depreciation; actuarial gains and losses on employee benefit assets are
recognised immediately instead of over the lives of employees; investment
contracts with discretionary participation features are accounted for as
insurance contracts with premiums and claims recorded in the income
statement instead of applying deposit accounting. None of these
amendments has had any material impact on earnings for the current
reporting period.
The group has also chosen to early adopt IAS12 - Income taxes, and now
accounts for deferred tax on investment property at the capital gains tax
rate instead of the corporate rate.
Segmental information
Metropolitan and Momentum operated as two separate groups for most of the
current reporting period and the segments for MMI Holdings Ltd group
have therefore been disclosed as Metropolitan and Momentum separately. In
addition, segmental information reflecting the pre-merger segments has
been included on SENS as well as on the company website while pro-forma
segmental information is included below.
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
Following the implementation of the merger between Momentum and
Metropolitan the board of directors was reconstituted as set out in the
circular to shareholders, and the current board members are listed below.
All transactions in listed shares of the company involving directors were
disclosed on SENS as required.
CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The group had no material capital commitments at 31 December 2010. The
group is party to legal proceedings in the normal course of business, and
appropriate provisions are made when losses are expected to materialise.
EVENTS AFTER THE REPORTING PERIOD
No material events occurred between the reporting date and the date of
approval of the interim results.
DIVIDEND AND SPECIAL DIVIDEND DECLARATION
Ordinary listed shares
The dividend policy for ordinary listed shares, approved by the
directors, is to provide shareholders with a stable dividend, reflecting
the board`s long-term view on the expected underlying basic core headline
earnings growth. Exceptions will be made from time-to-time, in order to
take account of, inter alia, volatile investment markets, capital
requirements and changes in legislation.
On 8 March 2011 a dividend of 63 cents per ordinary share was declared,
comprising an ordinary dividend of 42 cents per share plus a special
dividend of 21 cents per share, payable out of the company`s retained
earnings. This dividend is payable to the holders of ordinary shares
recorded in the register of the company at the close of business on
Friday, 1 April 2011 and will be paid on Monday, 4 April 2011. The last
day to trade "cum" dividend will be Friday, 25 March 2011.
The shares will trade "ex" dividend from the start of business on Monday,
28 March 2011. Share certificates may not be dematerialised or
rematerialised between Monday, 28 March and Friday, 1 April 2011, 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 hold dematerialised shares will have their accounts with
their CSDP or broker credited on Monday, 4 April 2011.
Staff share purchase scheme dividend
A dividend of R4 million (2009: Metropolitan declared R7 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 R11 million (7.7% p.a.), R5 million (7.7% p.a.), and R29
million (18.0% p.a.) were declared on 8 March 2011 on the unlisted A1, A2
and A3 MMI preference shares respectively, and are payable on 31 March
2011.
The declaration rate was determined as set out in the company`s articles.
MMI preference share dividends are included under finance costs in these
results.
INDEPENDENT ACTUARIAL REVIEW
The embedded value and value of new business results have been
independently reviewed by Deloitte.
Signed on behalf of the board
Laurie Dippenaar Chairman
Nicolaas Kruger Group chief executive officer
Centurion
9 March 2011
Directors: LL Dippenaar (chairman), MJN Njeke (deputy chairman), NAS
Kruger (group chief executive officer), FW van Zyl (deputy group chief
executive officer), M Mthombeni (executive), PE Speckmann (group finance
director), JP Burger, RB Gouws, PK Harris, F Jakoet, KL Matseke, PJ
Moleketi, SA Muller, JE Newbury, SE Nxasana, KC Shubane, FJC Truter, BJ
van der Ross, JC van Reenen, M Vilakazi
Secretary: ZG Rweqana (acting)
Transfer secretaries: Link Market Services SA (Pty) Ltd (Registration
number 2000/007239/07)
5th Floor, 11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000 Telephone: +27 11 834 2266
E-mail: info@linkmarketservices.co.za
Sponsor: Merrill Lynch South Africa (Pty) Limited
(Registration number: 2000/031756/06)
Registered office: 7 Parc du Cap, Mispel Road, Bellville 7535
JSE code: MMI
NSX code: MIM
ISIN NO ZAE0001149902
MMI HOLDINGS LIMITED GROUP
Corporate events
MMI Holdings Limited (previously Metropolitan Holdings Limited) acquired
all the ordinary shares in Momentum Group Limited (Momentum) from
FirstRand Limited (FirstRand) during 2010 and issued 951 million shares
to FirstRand as consideration (the "Merger"). For accounting purposes,
the acquisition is accounted for as a reverse acquisition in terms of
IFRS 3 (Revised) - Business combinations, Momentum is treated as the
acquirer and Metropolitan Holding Limited (Metropolitan) the acquiree.
The relevant approvals for the transaction were received on 12 November
2010 (transaction unconditional), the consideration shares were issued on
1 December 2010 and the MMI Holdings Limited (MMI) Board was
reconstituted on the latter date. The board of directors remain of the
opinion that this transaction will unlock significant value for all
stakeholders.
Further details relating to the merger are discussed below.
Presentation of financial information
Momentum is considered to be the acquirer for accounting purposes and
therefore:
- the unaudited results presented for the current period comprise
Momentum for the six months ended 31 December 2010 and Metropolitan for
the month of December 2010; and
- the comparatives are the six months ended 31 December 2009 and the 12
months ended 30 June 2010 for Momentum (restated for accounting policy
changes noted below).
The Momentum comparatives for the 12 months ended 30 June 2010 were
extracted from the audited Momentum Group annual financial statements
which are available, together with the independent reporting accountant`s
audit report thereon, on the MMI website after aligning the accounting
policies for the accounting policies adopted by MMI. The Momentum
embedded value and value of new business numbers for the 12 months ended
30 June 2010, is available on the MMI website.
As Metropolitan and Momentum operated as separate groups for the majority
of the current reporting period additional information regarding both
groups, immediately prior to the merger, has been included as annexures:
- Annexure A: Unaudited pro forma MMI consolidated earnings and embedded
value information, comprising Momentum and Metropolitan combined for the
six months ended 31 December 2010 (assuming the Merger was effective 1
July 2010). This has been extracted from the pro forma financial
information of MMI for the six months ended 31 December 2010, as
published on SENS on 9 March 2011, which includes the detailed build up
and assumptions supporting the pro forma financial information presented
in Annexure A.
- Annexure B: Momentum`s unaudited results for the six months ended 31
December 2010.
- Annexure C: Metropolitan`s separate reviewed results for the 12 months
ended 31 December 2010, assuming that the Merger did not take place. The
independent reporting accountant`s report on Metropolitan`s reviewed
results for the 12 months ended 31 December 2010 is available for
inspection.
Treatment of FNB Life
Effective from 1 December 2010, Momentum entered into a reinsurance
agreement whereby 90% of the FNB Life business is reinsured to a cell
owned by FirstRand. The results for the six months therefore include 100%
of FNB Life`s profit for five months to 30 November 2010, and 10% of FNB
Life`s profit for December 2010. The value of new business for the
reporting period and comparative periods is presented on a pro forma
basis as if the reinsurance agreement had already been effective for the
full term of these periods.
Basis of presentation of financial information
These results, including the information presented in Annexure B and
Annexure C, have been prepared in accordance with International
Accounting Standard 34 (IAS34) - Interim financial reporting; the South
African Companies Act, Act 61 of 1973, as amended; and the Listings
Requirements of the JSE Limited (JSE). The accounting policies of the
group are in terms of International Financial Reporting Standards (IFRS)
and have been applied consistently to all the periods presented and the
previous reporting period (except for those noted below). The
comparatives have been restated for the changes in accounting policies
noted below. The preparation of financial statements is in accordance
with and contains the information required by IFRS and the AC 500
standards, as issued by the Accounting Practices Board or its successor,
which 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 Momentum financial statements at 30 June
2010 (31 December 2009 for Metropolitan) and, with the exception of the
principal economic assumptions, have remained unchanged since then.
Change in accounting policies
Early adoption of accounting standard
The International Accounting Standards Board amended IAS12 - Income taxes
in December 2010. The amendments introduce a presumption that the
carrying value of an investment property is recovered entirely through
sale. The MMI group chose to early adopt the amendments because this new
accounting policy provides more reliable and relevant information for
users as it represents more realistic tax consequences relating to
investment property. The restatement resulted in an increase of
policyholder liabilities under insurance contracts of R126 million as at
1 July 2009 and a decrease of the deferred income tax liability of R126
million, representing the cumulative effect up to that date.
The decrease in the deferred income tax charge for the year ended 30 June
2010 was R15 million (R5 million for the six months ended 31 December
2009).
Alignment
The MMI group had the following accounting policy changes in order to
align the historic accounting policies of Momentum and Metropolitan for
consistency purposes:
- Owner-occupied properties were previously carried using the cost model.
The policy for the group has now changed to the fair value model and as a
result the value of owner-occupied properties at 1 July 2009 was
increased by R445 million and a deferred tax liability of R50 million was
raised. The owner occupied property revaluation reserve was increased by
R395 million and additional depreciation of R12 million was expensed for
the 12 months ended 30 June 2010 (R6 million for six months ended 31
December 2009). The related tax release was R2 million for the 12 months
ended 30 June 2010 (R1 million for the six months ended 31 December
2009).
- Actuarial gains and losses relating to employee benefit funds were
previously recognised using the corridor method. The corridor method
defers actuarial gains and losses and recognises it over the service
lives of employees. The policy of the group has now changed to
recognising these actuarial gains and losses immediately in the income
statement. This resulted in an increase in the employee benefit fund
asset of R45 million at 1 July 2009 and a R45 million decrease in fair
value gains (and therefore retained earnings) for the 12 months ended 30
June 2010. The related tax release was R13 million for the year ended 30
June 2010. There was no income statement effect for the six months ended
31 December 2009.
- Investment with discretionary participation features (DPF) contracts
were previously accounted for as investment business with deposit
accounting being applied. The policy for the group has changed to account
for investment with DPF contracts as insurance business with premiums and
claims being recorded in the income statement. This resulted in premiums
and claims increasing by R2 308 million and R2 849 million respectively
for the 12 months ended 30 June 2010 (R744 million and R864 million
respectively for six months ended 31 December 2009). Fair value
adjustments on investment contract liabilities reduced by R1 094 million
for the 12 months ended 30 June 2010 (R799 million for the six months
ended 31 December 2009). The change had no impact on retained earnings
and the carrying value of investment with DPF contract liabilities.
Standards and interpretations of published standards effective in 2010
and relevant to the group
- The following amendments to standards became effective for the first
time in the current year and had no significant impact on the group`s
earnings: IFRS 2 - Share based payment - group cash-settled share based
payment transactions, IAS 27 (Revised) - Consolidated and separate
financial statements, AC 504 - IAS19: The limit on a defined benefit
asset, minimum funding requirements and their interaction in the South
African pension fund environment. The conceptual framework for financial
reporting 2010 was also effective from September 2010.
- IFRS 3 (Revised) - Business combinations was applied to the merger
between Momentum and Metropolitan and the most significant impact on the
group`s current period earnings was that transaction costs of R27 million
(net of tax) which would previously have been capitalised, were expensed.
- The International Accounting Standards Board (IASB) made amendments to
various standards as part of their annual improvements project. These
amendments had no impact on the group`s earnings.
Segmental information
As Metropolitan and Momentum operated as two separate groups for the
majority of the current reporting period the segments for MMI have been
disclosed as Momentum, with its previously disclosed segments.
Metropolitan is shown as a segment on its own. The segmental information
in Annexures B and C has been disclosed as they were previously disclosed
by each group before the merger.
Momentum`s segments have previously been defined as follows:
- Retail - performs all of the distribution and administration activities
for the existing policy book and new individual life recurring premium
policies. In addition to these services this segment provides the broker
distribution and agency sales channels for all of the other segments -
comprises mostly Momentum Group Ltd.
- Investments - comprises all the businesses that provide investment
management services for fees. Subsidiaries which are included in this
segment include RMB Asset Management, RMB Unit Trusts, RMB Asset
Management International, FirstRand Alternative Investment Management,
Momentum Administration Services, RMB Investment Services and Advantage
Asset Management. It also includes Momentum Wealth, a division of
Momentum Group Limited.
- Group - performs all of the activities in relation to employee benefits
business and performs the administration for the healthcare business. The
results of Momentum Ability, AdviceAtWork, Momentum Medical Scheme
Administrators, Momentum Africa and Momentum Life Assurance Namibia are
included in this segment.
- New markets - individual life premium policies focussing on the middle
market income earners.
- FNB Life - distributes credit life, funeral, personal accident and law-
on-call products mainly to the lower income clients of FirstRand Bank
Ltd.
- Capital centre - responsible for the management of Momentum`s capital
and includes the head office accounting and corporate actuarial
functions. The investment income on shareholders` asset is also included
under this segment.
MMI HOLDINGS - GROUP RESULTS
CONSOLIDATED STATEMENT OF 31.12.2010 31.12.2009 30.06.2010
FINANCIAL POSITION Rm Rm Rm
ASSETS
Intangible assets 12 719 3 132 3 127
Owner-occupied properties 1 657 908 947
Property and equipment 254 109 108
Investment properties 5 554 2 274 2 276
Investment in associates 6 354 7 856 6 804
Employee benefit assets 334 83 113
Financial instrument assets (1) 232 670 147 669 149 765
Insurance and other receivables 2 363 489 583
Deferred income tax 994 951 932
Reinsurance contracts 1 164 635 628
Current income tax assets 52 63 36
Cash and cash equivalents 19 087 27 723 22 611
Non-current assets held for sale 5 337 - 11 434
Total assets 288 539 191 892 199 364
EQUITY
Equity attributable to owners of 22 572 8 339 8 676
the parent
Non-redeemable, non-cumulative, 500 500 500
non-participative preference
shares issued by Momentum
Non-controlling interests 262 (10) (4)
Total equity 23 334 8 829 9 172
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts (2) 83 209 41 150 41 037
Financial instrument liabilities
Investment contracts 146 057 113 471 112 141
with discretionary participation 26 010 13 880 12 459
features (2)
designated as fair value through 120 047 99 591 99 682
income
Other financial instrument 16 553 14 380 15 569
liabilities (3)
Deferred income tax 4 800 1 738 1 634
Employee benefit obligations 661 176 361
Other payables 9 651 11 915 8 805
Provisions 112 208 140
Current income tax liabilities 53 25 43
Non-current liabilities held for 4 109 - 10 462
sale
Total liabilities 265 205 183 063 190 192
Total equity and liabilities 288 539 191 892 199 364
(1) Financial instrument assets consist of the following:
Assets designated as fair value through income: R217 059 million
(31.12.2009: R133 235 million; 30.06.2010: R138 485 million)
Derivative financial instruments: R8 287 million (31.12.2009: R7 867
million; 30.06.2010: R6 521 million)
Held-to-maturity assets: R64 million (31.12.2009: R55 million;
30.06.2010: R46 million)
Available-for-sale assets: R4 763 million (31.12.2009: R3 685
million; 30.06.2010: R2 887 million)
Loans and receivables: R2 497 million (31.12.2009: R2 827 million;
30.06.2010: R1 826 million)
(2) Under IFRS4, the group continues to account for long-term insurance
contracts and investment contracts with discretionary participation
features using SA GAAP.
(3) Other financial instrument liabilities consist of the following:
Liabilities designated as fair value through income: R13 573 million
(31.12.2009: R13 111 million; 30.06.2010: R14 370 million)
Liabilities held for trading: R1 543 million (31.12.2009: R1 016
million; 30.06.2010: R956 million)
Liabilities at amortised cost: R1 437 million (31.12.2009: R253
million; 30.06.2010: R243 million)
MMI HOLDINGS - GROUP RESULTS
CONSOLIDATED INCOME STATEMENT 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Net insurance premiums received 5 265 4 028 9 722
Fee income (4) 1 537 1 296 2 690
Investment income 4 758 5 099 9 417
Net realised and fair value gains 12 822 10 612 9 730
Net income 24 382 21 035 31 559
Net insurance benefits and claims 5 793 4 217 9 386
Change in liabilities 3 573 2 433 2 046
Change in insurance contract 3 207 1 956 1 841
liabilities
Change in investment contracts 637 537 258
with DPF liabilities
Change in reinsurance provision (271) (60) (53)
Fair value adjustments on 8 743 9 440 10 695
investment contract liabilities
Fair value adjustments on 1 025 796 744
collective investment scheme
liabilities
Depreciation, amortisation and 149 86 249
impairment expenses
Employee benefit expenses 1 220 983 2 037
Sales remuneration 1 067 816 1 587
Other expenses 808 550 1 218
Expenses 22 378 19 321 27 962
Results of operations 2 004 1 714 3 597
Share of profit of associates 26 16 32
Finance costs (5) (278) (306) (1 122)
Profit before tax 1 752 1 424 2 507
Income tax expenses (651) (592) (830)
Earnings 1 101 832 1 677
Attributable to:
Owners of the parent 1 079 813 1 640
Non-controlling interests 4 (2) (1)
Momentum preference shares 18 21 38
1 101 832 1 677
Basic earnings per share (cents) 104 85 172
Diluted earnings per share (cents) 103 85 172
(4) Fee income consists of the following:
Investment contracts: R866 million (31.12.2009: R640 million;
30.06.2010: R1 120 million)
Trust and fiduciary services: R248 million (31.12.2009: R183
million; 30.06.2010: R564 million)
Health administration services: R255 million (31.12.2009: R254
million; 30.06.2010: R505 million)
Other fee income: R168 million (31.12.2009: R219 million;
30.06.2010: R501 million)
(5) Finance costs consist of the following:
Preference shares issued by MMI Holdings Ltd: R8 million
(31.12.2009: Rnil million; 30.06.2010: Rnil million)
Subordinated redeemable debt: R41 million (31.12.2009: R42 million;
30.06.2010: R84 million)
Cost of carry and interest rate swaps: R182 million (31.12.2009:
R182 million; 30.06.2010: R871 million)
Other: R47 million (31.12.2009: R82 million; 30.06.2010: R167
million)
MMI HOLDINGS - GROUP RESULTS
RECONCILIATION OF Basic earnings Diluted earnings
HEADLINE EARNINGS
attributable to owners
of the parent
6 mths 6 mths 12 mths 6 mths 6 mths 12 mths
2010 2009 2010 2010 2009 2010
Rm Rm Rm Rm Rm Rm
Earnings 1 079 813 1 640 1 079 813 1 640
Finance costs - 8 - -
convertible preference
shares
Diluted earnings 1 087 813 1 640
Goodwill and other 9 5 83 9 5 83
impairments
Headline earnings (6) 1 088 818 1 723 1 096 818 1 723
Net realised and fair (155) (13) (25) (155) (13) (25)
value gains on excess
Basis and other (77) (41) (61) (77) (41) (61)
changes and investment
variances
Dilutory effect of (1)
subsidiaries (7)
FNB Life (90%) (174) (191) (416) (174) (191) (416)
Amortisation of 63 27 55 63 27 55
intangible assets
relating to business
combinations
Merger costs 27 - - 27 - -
Core headline earnings 772 600 1 276 779 600 1 276
(8)
(6) Headline earnings consist of operating profit, investment income,
net realised and fair value gains, investment variances and basis
and other changes.
(7) Metropolitan Health and Metropolitan Kenya are consolidated at 100%
in the results. For the purposes of diluted core headline earnings,
non-controlling interests and investment returns are reinstated.
(8) Core headline earnings have been disclosed that comprise operating
profit and investment income on shareholder assets. It excludes net
realised and fair value gains on investment assets, investment
variances and basis and other changes which can be volatile, certain
once off items, as well the amortisation of intangible assets
relating to business combinations as this is part of the cost of
acquiring the business.
MMI HOLDINGS - GROUP RESULTS
EARNINGS PER SHARE (cents) 6 mths to 6 mths to 12 mths to
attributable to owners of the 31.12.2010 31.12.2009 30.06.2010
parent Rm Rm Rm
Basic
Core headline earnings 74 63 134
Headline earnings 105 86 181
Earnings 104 85 172
Weighted average number of shares 1 038 951 951
(million)
Diluted
Core headline earnings 74 63 134
Weighted average number of shares 1 058 951 951
(million)
Headline earnings 104 86 181
Earnings 103 85 172
Weighted average number of shares 1 055 951 951
(million)
- The weighted average number of shares for the comparative figures
relates to the 951 million shares issued to FirstRand in exchange for
Momentum.
- For diluted core headline earnings per share, treasury shares held on
behalf of contract holders are deemed to be issued. For diluted earnings
and headline earnings per share, these shares are deemed to be cancelled.
DIVIDENDS 2010 2009
Ordinary listed MMI shares (cents per
share)
Interim 42 40
Special 21
Final 60
Total 100
Ordinary unlisted Momentum shares
Momentum declared a total dividend of 422 cents per share to
FirstRand in respect of the 12 months ended 30 June 2010. A dividend
of 188 cents per share was declared in respect of the current period
(31.12.2009: 178 cents per share).
MMI HOLDINGS - GROUP RESULTS
ANALYSIS OF DILUTED CORE HEADLINE 6 mths to 6 mths to 12 mths to
EARNINGS 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Momentum 647 600 1 276
Retail 305 267 598
Investments 150 165 271
Group (1) - 60
New markets (21) (16) (22)
FNB Life 23 23 47
Capital centre 191 161 322
Metropolitan 132 - -
Earnings 779 600 1 276
- Certain unallocated corporate expenses are included in the Capital
centre segment.
- FNB Life represents 10% of FNB Life`s earnings
DIVIDENDS
MMI Holdings convertible redeemable A1 A2 A3
preference shares (issued to KTI)
Redemption value (per share) R 5.12 9.18 9.18
Paid - 30 September 2010 Rate 8.5% 8.5% 17.1%
Rm 12 5 27
Payable - 31 March 2011 Rate 7.7% 7.7% 18.0%
Rm 11 5 29
Redemption date Oct-2012 Dec-2011 Dec-2012
The redemption date of the MMI A3 preference shares was extended during
2010.
MMI HOLDINGS - GROUP RESULTS
CONSOLIDATED STATEMENT OF 6 mths to 6 mths to 12 mths to
COMPREHENSIVE INCOME 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Earnings 1 101 832 1 677
Other comprehensive income for the (11) 130 108
year, net of tax
Exchange differences on (37) (12) (16)
translating foreign operations
Available-for-sale financial 12 130 68
assets
Land and buildings revaluation 14 14 66
Share of other comprehensive (2) - -
income of associates
Change in non-distributable 1 1 (1)
reserves
Income tax relating to components 1 (3) (9)
of other comprehensive income
Total comprehensive income for the 1 090 962 1 785
year
Total comprehensive income
attributable to:
Owners of the parent 1 074 943 1 748
Non-controlling interests (2) (2) (1)
Momentum preference shares 18 21 38
1 090 962 1 785
MMI HOLDINGS - GROUP RESULTS
CONSOLIDATED STATEMENT OF CHANGES 6 mths to 6 mths to 12 mths to
IN EQUITY 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Changes in share capital
Balance at beginning (9) 1 041 1 041 1 041
Treasury shares held on behalf of (328) - -
contract holders
Shares issued (10) 12 582 - -
Balance at end 13 295 1 041 1 041
Changes in other reserves
Balance at beginning 1 140 648 648
Change in accounting policy - 395 395
Total comprehensive income (3) 130 108
Transfer to retained earnings 1 - (11)
Balance at end (11) 1 138 1 173 1 140
Changes in retained earnings
Balance at beginning 6 495 5 606 5 606
Change in accounting policy - 32 32
Total comprehensive income 1 077 813 1 640
Dividend paid (359) (338) (801)
Employee share scheme (13) 12 7
Transfer from other reserves (1) - 11
Balance at end 7 199 6 125 6 495
Fair value adjustment for 940 - -
preference shares issued by MMI
(12)
Equity attributable to owners of 22 572 8 339 8 676
the parent
Momentum preference shares
Balance at beginning 500 500 500
Total comprehensive income 18 21 38
Dividend paid (18) (21) (38)
Balance at end 500 500 500
Changes in non-controlling
interests
Balance at beginning (4) (9) (9)
Total comprehensive income (2) (2) (1)
Transactions with owners 46 1 6
Metropolitan merger 222 - -
Balance at end 262 (10) (4)
Total equity 23 334 8 829 9 172
(9) The opening share capital and share premium represents the issued
equity interests of Momentum Group Limited, however the number and type
of shares in issue reflects the equity structure of MMI Holdings Limited.
(10) The shares issued represent the fair value of the consideration
relating to the issue of the 951 million shares to FirstRand Limited.
(11) Other reserves consist of the following:
Land and buildings revaluation reserve: R458 million (31.12.2009:
R407 million; 30.06.2010: R441 million)
Foreign currency translation reserve: R4 million (31.12.2009: R39
million; 30.06.2010: R35 million)
Fair value reserve: R668 million (31.12.2009: R719 million;
30.06.2010: R658 million)
Non-distributable reserve : R8 million (31.12.2009 : R8 million ;
30.06.2010 : R6 million)
(12) This represents the write up of the carrying value of the preference
shares issued by MMI Holdings Limited to Kagiso Trust Investment to
fair value as part of the fair value exercise performed as a result
of the merger.
MMI HOLDINGS - GROUP RESULTS
CONSOLIDATED STATEMENT OF CASH 6 mths to 6 mths to 12 mths to
FLOWS 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Net cash outflow from operating (11 484) (3 091) (9 709)
activities
Net cash inflow/(outflow) from 52 (597) 33
investing activities
Net cash (outflow)/inflow from (245) 273 2 117
financing activities
Net cash flow (11 677) (3 415) (7 559)
Effect of foreign exchange rate 1 - -
changes
Cash and cash equivalents 8 152 - (968)
acquired/(disposed of)
Cash resources and funds on deposit 22 611 31 138 31 138
at beginning
Cash resources and funds on deposit 19 087 27 723 22 611
at end
MMI HOLDINGS - GROUP RESULTS
SEGMENT REPORT 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Revenue
Premiums received 17 929 17 393 32 199
Momentum 16 844 17 393 32 199
Retail 3 295 3 144 6 173
Investments 10 231 11 809 19 499
Group 2 890 1 916 5 471
New markets 75 53 111
FNB Life 353 471 945
Metropolitan 1 085 - -
Fee income 1 537 1 296 2 690
Momentum 1 443 1 296 2 690
Retail 463 326 857
Investments 714 580 1 172
Group 465 460 907
FNB Life - - 8
Capital centre 137 81 156
Inter-segment fee income (336) (151) (410)
Metropolitan 94 - -
Expenses
Payments to contract holders 16 449 23 180 38 899
Momentum 15 305 23 180 38 899
Retail 2 276 2 101 4 781
Investments 10 214 18 607 28 673
Group 2 591 1 627 3 763
New markets 35 24 62
FNB Life 93 104 210
Capital centre 96 717 1 410
Metropolitan 1 144 - -
Other expenses 3 522 2 741 6 213
Momentum 3 105 2 741 6 213
Retail 1 120 1 108 2 130
Investments 591 558 1 261
Group 657 634 1 279
New markets 83 47 112
FNB Life 169 75 169
Capital centre 312 198 430
Other 266 306 1 122
Inter-segment expenses (93) (185) (290)
Metropolitan 368 - -
Consolidation adjustments 49 - -
Segment assets did not change materially from 30 June 2010, except for
market-related movements and as a result of the merger.
MMI HOLDINGS - GROUP RESULTS
CAPITAL REQUIREMENTS 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Group excess as per statement of 22 572 8 339 8 676
financial position
Preference shares issued by 500 500 500
Momentum
Less net asset value of non-covered (771) - -
businesses that are not
subsidiaries of a life insurance
company
Fair value adjustments on (6 252) - -
Metropolitan acquisition
Reporting excess - long-term 16 049 8 839 9 176
insurance business (13)
Disregarded assets (14) (1 483) (1 016) (1 036)
Write down of subsidiaries and (708) (656) (625)
associates for statutory purposes
Unsecured subordinated debt 1 513 927 953
Consolidation adjustments (23) (40) (32)
Change in accounting policies (15) - (355) (364)
Statutory excess - long-term 15 348 7 699 8 072
insurance business (14)
Capital adequacy requirement (CAR) 6 111 3 856 3 830
(Rm)
Ratio of long-term insurance 2.5 2.0 2.1
business excess to CAR (times)
(13) 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 non-controlling interests
and other items, which are eliminated on consolidation. It excludes non-
insurance business.
(14) Disregarded assets are those as defined in the South African Long
Term Insurance Act and are only applicable to South African Long Term
insurance companies. Adjustments are also made for the international
insurance companies from reporting excess to statutory excess as required
by their regulators.
(15) Change in accounting policies: The statutory surplus has not been
restated as a result of the changes in the accounting policies.
MMI HOLDINGS - GROUP RESULTS
EMBEDDED VALUE 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Covered business
Reporting excess - long-term 16 049 8 839 9 176
insurance business
Reclassification to non-covered (938) (1 203) (1 180)
business
15 111 7 636 7 996
Disregarded assets (16) (1 076) (907) (922)
Dilutory effect of subsidiaries (6) - -
(17)
Consolidation adjustments (87) (95) (92)
Change in accounting policies (32)
Value of Momentum preference (500) (455) (475)
shares issued
Diluted net asset value - 13 442 6 147 6 507
covered business
Net value of in-force business 13 548 8 697 8 458
Diluted embedded value - 26 990 14 844 14 965
covered business
Non-covered business
Net assets - non-covered 938 1 203 1 180
businesses within life insurance
companies
Net assets - non-covered 771 - -
businesses outside life insurance
companies
Consolidation adjustments (44) 55 61
Adjustments for dilution 886 - -
(18)
Diluted net asset value - 2 551 1 258 1 241
non-covered business
Write up to directors` value 1 577 1 733 1 477
Non-covered businesses 2 073 1 733 1 477
Holding company expenses (19) (496) - -
Diluted embedded value - 4 128 2 991 2 718
non-covered business
Diluted adjusted net asset value 17 570 9 138 9 225
Value of in-force business 13 548 8 697 8 458
Diluted embedded value 31 118 17 835 17 683
MMI HOLDINGS - GROUP RESULTS
EMBEDDED VALUE 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Required capital - covered 8 297 4 401 4 316
business (adjusted for qualifying
debt)
Surplus capital - covered business 5 145 1 746 2 191
Diluted embedded value per share 1 939 1 875 1 859
(cents)
Diluted net asset value per share 1 095 961 970
(cents)
Diluted number of shares in issue 1 605 951 951
(million) (20)
(16) Disregarded assets as disclosed in the statement of actuarial values
of assets and liabilities are adjusted for internally developed software
and recognised employee benefit assets.
(17) For accounting purposes, Metropolitan Health and Metropolitan Kenya
have been consolidated at 100% in the statement of financial position.
For embedded value purposes, disclosed on a diluted basis, the non-
controlling interests and related funding have been reinstated.
(18) Adjustments for dilution are made up as follows:
Dilutory effect of subsidiaries (note 17): R76 million (31.12.2009: Rnil
million; 30.06.2010: Rnil million)
Staff share scheme loans: R8 million (31.12.2009: Rnil million;
30.06.2010: Rnil million)
Treasury shares held on behalf of contract holders: R91 million
(31.12.2009: Rnil million; 30.06.2010: Rnil million)
Liability - MMI convertible preference shares issued to KTI: R711 million
(31.12.2009: Rnil million; 30.06.2010: Rnil million)
(19) The holding company expenses reflect the present value of projected
recurring expenses of that company.
(20) 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. The comparatives
relate to the 951 million shares issued to FirstRand in exchange for
Momentum.
MMI HOLDINGS - GROUP RESULTS
PRINCIPAL ASSUMPTIONS (South 31.12.2010 31.12.2009 30.06.2010
Africa) (21) % % %
Pre-tax investment return
Equities 12.0 13.0 12.8
Properties 9.5 10.5 10.3
Government stock 8.5 9.5 9.3
Other fixed interest stocks 9.0 10.0 9.8
Cash 7.5 8.5 8.3
Risk free return 8.5 9.5 9.3
Risk discount rate (RDR) 10.8 11.8 11.6
Investment return (before tax) - 10.7 11.7 11.5
smoothed bonus
Expense inflation rate
Momentum 6.8 7.0 7.3
Metropolitan 6.3
(21) 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.
NON-CONTROLLING INTERESTS 31.12.2010 31.12.2009 30.06.2010
% % %
Metropolitan
Metropolitan Health Group 17.6
Metropolitan Namibia 18.0
Metropolitan Botswana 24.2
Metropolitan Kenya 33.6
Metropolitan Ghana 7.8
Metropolitan Nigeria 50.0
Metropolitan Swaziland 33.0
Momentum
Momentum Mozambique 25.0 25.0 25.0
Momentum Tanzania 33.0 33.0 33.0
Momentum Zambia 35.0 5.0 5.0
Momentum Health Ghana 20.0 10.0 10.0
Momentum Health Mauritius 5.0 5.0 5.0
Momentum Health Botswana 28.0 18.0 18.0
Advantage Asset managers 15.0 15.0 15.0
MMI HOLDINGS - GROUP RESULTS
Merger related information (as required by IFRS 3 (Revised) - Business
combinations)
The relevant approvals for the merger became unconditional on 12 November
2010, the consideration shares were issued on 1 December 2010 and the MMI
Holdings Ltd board was reconstituted on the latter date.
The merger has been accounted for as a reverse acquisition under IFRS 3
(Revised) - Business combinations. This is on the basis that the Momentum
shareholders (i.e. FirstRand shareholders) own a greater portion, being
59.3%, of MMI`s issued shares subsequent to the merger. Guidance in IFRS
3 (Revised) suggests that this is a reverse acquisition and therefore
that Momentum is the accounting acquirer and Metropolitan is the
accounting acquiree for IFRS 3 purposes. Therefore, for consolidation
purposes, a fair value exercise has been performed on Metropolitan.
The acquisition date fair value of the total consideration is R12 582
million and was based on the embedded value of Metropolitan as at 12
November 2010. As the acquisition date was so close to the reporting
date, the initial fair value exercise has been determined provisionally,
pending the completion of the final valuation of the fair value of net
assets acquired.
Provisional goodwill of R170 million arose as a result of the merger,
which can be attributed to certain anticipated operating synergies from
the merger. Goodwill is not deductible for tax purposes. The non-
controlling interest of R222 million represents their proportionate share
of the net assets recognised relating to the insurance companies in
Metropolitan that have minority shareholders.
Acquisition costs incurred by Momentum, relating to the merger, of R37
million (R27 million net of tax) have been expensed during the current
period and are included in other expenses in the income statement.
The net income and earnings of Metropolitan included in the MMI results
since the acquisition date are R2 702 million and R364 million,
respectively. The net income and earnings of MMI for the 6 months ended
31 December 2010 would have been R35 138 million and R1 505 million,
respectively, assuming the acquisition occurred at the beginning of the
period. These figures include net income and earnings of R309 million and
R174 million, respectively, representing 90% of FNB Life`s results for
the five months ended 30 November 2010.
Details of the purchase consideration, the net assets acquired and the
provisional goodwill are as follows:
30.11.201
0
Rm
Purchase consideration 12 582
Provisional fair value of net assets:
Intangible assets 9 444
Value of in-force acquired 6 060
Customer relations 1 925
Brand 1 078
Computer software 246
Broker network 135
Owner-occupied properties 717
Property and equipment 182
Investment properties 3 270
Investment in associates 710
Employee benefit assets 227
Financial instrument assets 60 051
Insurance and other receivables 1 719
Deferred income tax 23
Reinsurance contracts 276
Current income tax assets 11
Cash and cash equivalents 8 152
Insurance contract liabilities (38 921)
Financial instrument liabilities
Investment contract liabilities (23 468)
Other financial instrument liabilities (2 302)
Deferred income tax (2 959)
Employee benefit obligations (451)
Other payables (2 876)
Current income tax liabilities (231)
Net identifiable assets acquired 13 574
Fair value adjustment on preference shares issued by (940)
Metropolitan (*)
Non-controlling interest (222)
Provisional goodwill 170
12 582
This represents the fair value of the equity component of the convertible
preference shares issued by MMI Holdings Limited and is recorded in
equity in these results.
MMI HOLDINGS - GROUP RESULTS
STOCK EXCHANGE 31.12.2010 30.06.2010 31.12.2009 30.06.2009
PERFORMANCE
6 month period
Value of listed shares 6 333 2 724 2 470 2 180
traded (rand million)
Volume of listed shares 381 177 191 195
traded (million)
Shares traded (% of 107.2 64 70.5 72.9
average listed shares in
issue) (22)
Value of shares traded - 49.8 49.3 50.9 43.1
life insurance (J857 -
Rbn)
Value of shares traded - 1 187 1 211 1 152 1 045
top 40 index (J200 -
Rbn)
Trade prices
Highest (cents per 1 776 1 731 1 395 1 295
share)
Lowest (cents per 1 505 1 291 1 140 941
share)
Last sale of period 1 662 1 606 1 342 1 165
(cents per share)
Percentage (%) change 7.1 43.2 32.7 16.4
during period (23)
Percentage (%) change - 26.3 (4.7) 65.2 32.0
life insurance sector
(J857)
Percentage (%) change - 51.2 (13.2) 59.1 3.9
top 40 index (J200)
31 December/30 June
Price/diluted core 11.29 10.78 9.52 9.47
headline earnings ratio
Dividend yield % 6.14 6.35 7.45 8.15
(dividend on listed
shares)
Dividend yield % - top 40 2.02 2.17 1.96 3.80
index (J200)
MMI HOLDINGS - GROUP RESULTS
STOCK EXCHANGE 31.12.2010 30.06.2010 31.12.2009 30.06.2009
PERFORMANCE
6 month period
Total shares issued
(million)
Listed on JSE 1 504 553 553 528
Ordinary shares 1 504 549 549 524
Share incentive - 4 4 4
scheme
Unlisted - share 1 10 10 12
purchase scheme
Total ordinary shares 1 505 563 563 540
in issue
Treasury shares held on (20) (1) (1) (1)
behalf of contract
holders
Adjustment to staff (1) (12) (12) (16)
share scheme shares
(23)
Share incentive - (2) (2) (4)
scheme
Share purchase scheme (1) (10) (10) (12)
Basic number of shares 1 484 550 550 523
in issue
Adjustment to staff 1 2 12 16
share scheme shares
Treasury shares held on 20 1 1 1
behalf of contract
holders
Convertible redeemable 100 100 100 123
preference shares
Diluted number of 1 605 653 663 663
shares in issue (24)
Market capitalisation at 26.67 10.65 8.90 7.72
end (Rbn) (25)
Percentage (%) of life 14.88 7.33 6.01 6.69
insurance sector
(22) Percentages have been annualised.
(23) These are shares which have been issued since 1 January 2001, the
date on which the group adopted AC133 (now IAS39).
(24) 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.
(25) The market capitalisation is calculated on the fully diluted number
of shares in issue.
(26) Comparatives relate to the listed entity (previously Metropolitan
Holdings Limited)
Annexure A
Results for the 6 months ended 31 December 2010
MMI unaudited pro forma financial information
Basis of preparation
The MMI pro forma financial information for the six months ended 31
December 2010 has been prepared on the assumption that the Merger was
effective as at 1 July 2010 and is presented for illustrative purposes
only.
Because of its nature, the unaudited pro forma financial information may
not fairly present MMI`s financial position, changes in equity, results
of operations or cash flows going forward. The unaudited pro forma
financial information is the responsibility of the MMI Directors.
The unaudited pro forma financial information is based on the accounting
policies adopted by MMI, which are in accordance with IFRS except for
value of new business and embedded value information, which is calculated
in terms of the guidance of the Actuarial Society of South Africa.
The following points should be noted with regard to the pro forma
financial information:
- The Metropolitan results for the six months ended 31 December 2010 have
been included in the MMI pro forma financial information based on the
reviewed Metropolitan results for the 12 months ended 31 December 2010
less the previously published unaudited six months results ended 30 June
2010, unless otherwise stated.
- Value of new business for Metropolitan for the six months ended 31
December 2010 has been calculated based the reviewed current value of new
business for the 12 months ended 31 December 2010 less the previously
published six months ended 30 June 2010, adjusted for assumption changes
used in the value of new business for the 12 months ended 31 December
2010.
- The Momentum results for the six months ended 31 December 2010 have
been included in the MMI pro forma financial information based on the
published unaudited Momentum results for the six months ended 31 December
2010.
- The results of FNB Life have been accounted for as though the strategic
relationship agreement was effective from 1 July 2010 and therefore only
reflects 10% of FNB Life`s profits.
- Merger-related costs incurred by Momentum for the six months ended 31
December 2010 have been included in the pro forma financial information.
The merger-related costs incurred by Metropolitan have been added back as
these costs are pre-acquisition and would therefore not be an expense for
the MMI group.
- The integration for the newly formed group has not been completed. The
segmental information has therefore been prepared on the following basis:
- Momentum Retail: Existing Momentum Retail business including Momentum
Wealth and Metropolitan Odyssey;
- Metropolitan Retail: Existing Metropolitan Retail business and
Momentum`s middle market initiative (New Markets);
- Employee benefits: Momentum and Metropolitan employee benefits business
including Metropolitan Retirement Administrators;
- International business: Momentum African health business, Momentum
Namibia and Metropolitan African life assurance businesses - representing
businesses in Botswana, Ghana, Kenya, Lesotho, Malawi, Mauritius,
Mozambique, Namibia, Nigeria, Swaziland, Tanzania and Zambia;
- Investment business: Momentum asset management businesses including
United Kingdom operations and Metropolitan asset management businesses;
- Health business: Momentum South African health business and
Metropolitan health business;
- FNB Life - represents 10% of FNB Life`s results. For embedded value
disclosure FNB Life`s information is included in Momentum Retail; and
- Shareholder capital: Holding company related activities and the
management of MMI`s capital and investment income.
The MMI pro forma financial information presented in this annexure has
been extracted from the detailed unaudited pro forma financial
information of MMI for the six months ended 31 December 2010 as published
separately on SENS on 9 March 2011.
The independent reporting accountant`s limited assurance report on the
unaudited pro forma financial information of MMI for the six months ended
31 December 2010 is available for inspection.
MMI unaudited pro forma financial information
CONSOLIDATED PRO FORMA INCOME STATEMENT 6 mths to
31.12.2010
Rm
Net insurance premiums received 9 307
Fee income (1) 2 170
Investment income 6 358
Net realised and fair value gains 16 994
Net income 34 829
Net insurance benefits and claims 9 236
Change in liabilities 7 387
Change in insurance contract liabilities 6 220
Change in investment contracts with DPF 1 425
liabilities
Change in reinsurance provision (258)
Fair value adjustments on investment contract 9 472
liabilities
Fair value adjustments on collective investment 1 021
scheme liabilities
Depreciation, amortisation and impairment expenses 476
Employee benefit expenses 1 958
Sales remuneration 1 463
Other expenses 1 375
Expenses 32 388
Results of operations 2 441
Share of profit of associates 25
Finance costs (2) (334)
Profit before tax 2 132
Income tax expenses (783)
Earnings 1 349
Attributable to:
Owners of the parent 1 325
Non-controlling interests 6
Momentum preference shares 18
1 349
(1) Fee income consists of the following:
Investment contracts: R944 million
Trust and fiduciary services: R310 million
Health administration services: R798 million
Other fee income: R118 million
(2) Finance costs consist of the following:
Preference shares: R44 million
Subordinated redeemable debt: R60 million
Cost of carry and interest rate swaps: R182 million
Other: R48 million
MMI unaudited pro forma financial information
RECONCILIATION OF PRO FORMA HEADLINE Basic Diluted
EARNINGS earnings earnings
attributable to owners of the parent
6 mths to 6 mths to
31.12.2010 31.12.2010
Rm Rm
Earnings 1 325 1 325
Finance costs - convertible preference 44
shares
Diluted earnings 1 369
Goodwill and other impairments 19 19
Headline earnings (3) 1 344 1 388
Net realised and fair value gains on excess (587) (587)
Basis and other changes and investment 161 161
variances
Dilutory effect of subsidiaries (4) (3)
Investment income on treasury shares - 1
contract holders (5)
Merger costs 27 27
Amortisation of intangible assets relating 241 241
to business combinations
Core headline earnings (6) 1 186 1 228
(3) Headline earnings consist of operating profit, investment income,
net realised and fair value gains, investment variances and basis and
other changes.
(4) Metropolitan Health and Metropolitan Kenya are consolidated at 100%
in the results. For the purposes of diluted core headline earnings, non-
controlling interests and investment returns are reinstated.
(5) 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.
(6) Core headline earnings have been disclosed that comprise operating
profit and investment income on shareholder assets. It excludes net
realised and fair value gains on investment assets, investment variances
and basis and other changes which can be volatile as well the
amortisation of intangible assets relating to business combinations as
this is part of the cost of acquiring the business.
MMI unaudited pro forma financial information
EARNINGS PER SHARE (cents) 6 mths to
attributable to owners of the parent 31.12.2010
Rm
Basic
Core headline earnings 80
Headline earnings 91
Earnings 89
Weighted average number of shares (million) 1 482
Diluted
Core headline earnings 77
Weighted average number of shares (million) 1 605
Headline earnings 88
Earnings 86
Weighted average number of shares (million) 1 584
ANALYSIS OF DILUTED CORE HEADLINE EARNINGS 6 mths to
31.12.2010
Rm
Momentum Retail 357
Metropolitan Retail 218
Employee benefits 124
International 20
Investments 125
Health 29
FNB Life 23
Shareholder capital 332
Diluted core headline earnings 1 228
- Shareholder capital includes unallocated expenses of R312 million which
will be allocated to business units after the strategic planning sessions
and group budgeting processes have been finalised.
MMI unaudited pro forma financial information
VALUE OF NEW BUSINESS 6 mths to
31.12.2010
Rm
Momentum Retail 188
Metropolitan Retail 128
Employee benefits 26
International 14
Value of covered new business 356
- Value of new business for Metropolitan for the six months ended 31
December 2010 has been calculated based the current value of new business
for the 12 months ended 31 December 2010 less the previously published
six months ended 30 June 2010, adjusted for assumption changes used in
the value of new business for the 12 months ended 31 December 2010.
- Net of non-controlling interests.
NEW BUSINESS PREMIUMS - COVERED BUSINESS 6 mths to
31.12.2010
Rm
Recurring premiums 1 614
Momentum Retail 698
Metropolitan Retail 443
Employee benefits 394
International 79
Single premiums 13 834
Momentum Retail 11 106
Metropolitan Retail 1 040
Employee benefits 1 599
International 89
Annual premium equivalent (APE) 2 996
Momentum Retail 1 809
Metropolitan Retail 546
Employee benefits 553
International 88
Present value of premiums (PVP) 21 972
Momentum Retail 14 461
Metropolitan Retail 2 957
Employee benefits 4 132
International 422
- Net of non-controlling interests.
MMI unaudited pro forma financial information
PRO FORMA PROFITABILITY OF NEW BUSINESS - COVERED 6 mths to
BUSINESS 31.12.2010
Value of new business as % of APE 11.9
Momentum Retail 10.4
Metropolitan Retail 23.4
Employee benefits 4.7
International 15.9
Value of new business as % of PVP 1.6
Momentum Retail 1.3
Metropolitan Retail 4.3
Employee benefits 0.6
International 3.3
RETURN ON EMBEDDED VALUE 6 mths to
31.12.2010
Rm
Opening embedded value at 1 July 2010 28 972
Capital movements (458)
Embedded value profit 2 604
Closing embedded value at 31 December 2010 31 118
Annualised return on embedded value 18.9%
Annexure B
Unaudited results for the 6 months ended 31 December 2010
MOMENTUM
Basis of preparation
The Momentum results disclosed in this Annexure represent Momentum Group
Limited and its subsidiaries and associates for the six months ended 31
December 2010.
These results have been prepared in accordance with International
Accounting Standard 34 (IAS34) - Interim financial reporting; the South
African Companies Act, Act 61 of 1973, as amended; and the Listings
Requirements of the JSE Limited (JSE). The accounting policies of the
group are in terms of International Financial Reporting Standards (IFRS)
and have been applied consistently to all the periods presented. The
comparatives have been restated for the changes in accounting policies
noted below. The preparation of the financial statements is in accordance
with and contains the information required by IFRS and the AC 500
standards, as issued by the Accounting Practices Board or its successor,
which 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 at 30 June
2010 and, with the exception of the principal economic assumptions, have
remained unchanged since then.
Treatment of FNB Life
Effective from 1 December 2010, Momentum entered into a reinsurance
agreement whereby 90% of the FNB Life business is reinsured with a cell
owned by FirstRand. The results for the six months ended 31 December 2010
therefore include 100% of FNB Life`s profit for the five months to 30
November 2010, and 10% of FNB Life`s profit for December 2010. The value
of new business for the reporting period and comparative periods is
presented on a pro forma basis as if the reinsurance agreement had
already been effective for the full term of these periods.
Change in accounting policies
Early adoption of accounting standard
The International Accounting Standards Board (IASB) amended IAS12 -
Income taxes in December 2010. The amendments introduce a presumption
that the value of an investment property is recovered entirely through
sale. The Momentum group chose to early adopt the amendments because this
new accounting policy provides reliable and more relevant information for
users as it represents more realistic tax consequences relating to
investment properties. The restatement resulted in an increase of
policyholder liabilities under insurance contracts of R126 million as at
1 July 2009 and a decrease of the deferred income tax liability of R126
million, representing the cumulative effect up to that date. The decrease
in the deferred income tax charge for the year ended 30 June 2010 was R15
million (R5 million for the six months ended 31 December 2009).
Alignment
The group had the following accounting policy changes in order to align
the historic accounting policies of Momentum and Metropolitan, and for
consistency purposes:
- Owner-occupied properties were previously carried using the cost model.
The policy for the group has now changed to the fair value model and as a
result the value of owner-occupied properties at 1 July 2009 was
increased by R445 million and a deferred tax liability of R50 million was
raised. The owner-occupied property revaluation reserve was increased by
R395 million and additional depreciation of R12 million was expensed for
the 12 months ended 30 June 2010 (R6 million for the six months ended 31
December 2009). The related tax release was R2 million (R1 million for
the six months ended 31 December 2009).
- Actuarial gains and losses relating to employee benefit funds were
previously recognised using the corridor method. The corridor method
defers actuarial gains and losses and recognises it over the service
lives of employees. The policy of the group has now changed to recognise
these actuarial gains and losses immediately in the income statement.
This resulted in an increase in the employee benefit asset of R45 million
at 1 July 2009 and a R45 million decrease in fair value gains for the 12
months ended 30 June 2010. The related tax release was R13 million for
the year ended 30 June 2010. There was no income statement effect for the
six months ended 31 December 2009.
- Investment with discretionary participation features (DPF) contracts
were previously accounted for as investment business with deposit
accounting being applied. The policy for the group has changed to account
for investment with DPF contracts similar to insurance business with
premiums and claims being recorded in the income statement. This resulted
in premiums and claims increasing by R2 308 million and R2 849 million
respectively for the 12 months ended 30 June 2010 (R744 million and R864
million respectively for the six months ended 31 December 2009). Fair
value adjustments on investment contract liabilities reduced by R1 094
million for the 12 months ended 30 June 2010 (R799 million for the six
months ended 31 December 2009). The change had no impact on retained
earnings and the carrying value of investment with DPF contract
liabilities.
Standards and interpretations of published standards effective in 2010
and relevant to the group
- The following amendments to standards became effective for the first
time in the current period and had no impact on the group`s earnings:
IFRS 2 - Share based payment - group cash-settled share based payment
transactions, IAS 27 (Revised) - Consolidated and separate financial
statements, IFRS 3 (Revised) - Business combinations, AC 504 - IAS19: The
limit on a defined benefit asset, minimum funding requirements and their
interaction in the South African pension fund environment. The conceptual
framework for financial reporting 2010 was also effective from September
2010.
- The IASB made amendments to various standards as part of their annual
improvements project. These amendments had no impact on the group`s
earnings.
Segmental information
- Retail - performs all of the distribution and administration activities
for the existing policy book and new individual life recurring premium
policies. In addition to these services, this segment provides the broker
distribution and agency sales channels for all of the other segments. The
Retail segment comprises mostly the Retail division within Momentum Group
Limited.
- Investments - comprises all the businesses that provide investment
management services for fees. Subsidiaries which are included in this
segment include RMB Asset Management, RMB Unit Trusts, RMB Asset
Management International, FirstRand Alternative Investment Management,
Momentum Administration Services, RMB Investment Services and Advantage
Asset Management. It also includes Momentum Wealth, a division of
Momentum Group Limited.
- Group - performs all of the activities in relation to employee benefits
business and performs the administration for the healthcare business. The
results of Momentum Ability, AdviceAtWork, Momentum Medical Scheme
Administrators, Momentum Africa and Momentum Life Assurance Namibia are
included in this segment.
- New markets - individual life premium policies focussing on the middle
market income earners.
- FNB Life - distributes credit life, funeral and personal accident
products mainly to the lower income clients of FirstRand Bank Limited.
- Capital centre - responsible for the management of Momentum`s capital
and includes the head office accounting and corporate actuarial
functions. The investment income on shareholders` assets is also included
under this segment.
MOMENTUM
CONSOLIDATED STATEMENT OF FINANCIAL 31.12.2010 31.12.2009 30.06.2010
POSITION Rm Rm Rm
ASSETS
Intangible assets 3 158 3 132 3 127
Owner-occupied properties 947 908 947
Property and equipment 47 109 108
Investment properties 2 266 2 274 2 276
Investment in associates 5 264 7 856 6 804
Employee benefit assets 113 83 113
Financial instrument assets (1) 171 751 147 669 149 765
Insurance and other receivables 768 489 583
Deferred income tax 982 951 932
Reinsurance contracts 873 635 628
Current income tax assets 35 63 36
Cash and cash equivalents 11 959 27 723 22 611
Non-current assets held for sale 5 337 - 11 434
Total assets 203 500 191 892 199 364
EQUITY
Equity attributable to owners of the 9 074 8 339 8 676
parent
Non-redeemable, non-cumulative, non- 500 500 500
participative preference shares
Non-controlling interests (4) (10) (4)
Total equity 9 570 8 829 9 172
LIABILITIES
Insurance contract liabilities (2) 43 620 41 150 41 037
Financial instrument liabilities
Investment contracts 122 446 113 471 112 141
- with discretionary participation 13 346 13 880 12 459
features (2)
- designated as fair value through 109 100 99 591 99 682
income
Other financial instrument 14 208 14 380 15 569
liabilities (3)
Deferred income tax 1 807 1 738 1 634
Employee benefit obligations 350 176 361
Other payables 7 268 11 915 8 805
Provisions 112 208 140
Current income tax liabilities 10 25 43
Non-current liabilities held for 4 109 - 10 462
sale
Total liabilities 193 930 183 063 190 192
Total equity and liabilities 203 500 191 892 199 364
(1) Financial instrument assets consist of the following:
Assets designated as fair value through income: R158 036 million
(31.12.2009: R133 235 million; 30.06.2010: R138 485 million)
Derivative financial instruments: R7 420 million (31.12.2009: R7 867
million; 30.06.2010: R6 521 million)
Held-to-maturity assets: R64 million (31.12.2009: R55 million;
30.06.2010: R46 million)
Available-for-sale assets: R4 762 million (31.12.2009: R3 685 million;
30.06.2010: R2 887 million)
Loans and receivables: R1 469 million (31.12.2009: R2 827 million;
30.06.2010: R1 826 million)
(2) Under IFRS4, the group continues to account for long-term insurance
contracts and investment contracts with discretionary participation
features using SA GAAP.
(3) Other financial instrument liabilities consist of the following:
Liabilities designated as fair value through income: R13 223 million
(31.12.2009: R13 111 million; 30.06.2010: R14 370 million)
Derivative financial instruments: R776 million (31.12.2009: R1 016
million; 30.06.2010: R956 million)
Liabilities at amortised cost: R209 million (31.12.2009: R253 million;
30.06.2010: R243 million)
MOMENTUM
STATEMENT OF ASSETS AND LIABILITIES 31.12.2010 31.12.2009 30.06.2010
ON REPORTING BASIS Rm Rm Rm
Total assets per statement of 203 500 191 892 199 364
financial position
Actuarial value of policy (166 066) (154 621) (153 178)
liabilities per statement of
financial position
Other liabilities per statement of (27 864) (28 442) (37 014)
financial position
Non-controlling interests per 4 10 4
statement of financial position
Excess of assets over liabilities 9 574 8 839 9 176
on the published basis
Change in excess
Profit after tax 778 834 1 678
Profit before fair value losses / 778 780 1 592
gains on excess, basis changes
and investment variances
Net realised and fair value (23) 13 25
(losses)/gains on excess
Basis and other changes and 23 41 61
investment variances
Movement in share based payments (12) 12 7
reserve
Movement in revaluation reserve 24 141 125
Movement in foreign currency (17) (12) (16)
translation reserve
Movement in other reserves - 1 (1)
Ordinary dividends paid (357) (338) (801)
Preference dividends paid (18) (21) (38)
Change in excess 398 617 954
MOMENTUM
RECONCILIATION OF EXCESS OF 31.12.2010 31.12.2009 30.06.2010
ASSETS AND LIABILITIES TO Rm Rm Rm
STATUTORY BASIS
Excess of assets over liabilities 9 574 8 839 9 176
on the published basis
Difference between statutory and (254) (237) (275)
published valuation methods
Impairment of subsidiaries` and (708) (656) (625)
associates` values for
statutory
purposes
Sage intangible and other (767) (779) (761)
inadmissible assets
Unsecured subordinated debt 1 012 927 953
Consolidation adjustments (24) (40) (32)
Change in accounting policies (4) - (355) (364)
Excess of assets over liabilities 8 833 7 699 8 072
on the statutory basis
Capital adequacy requirement 3 794 3 856 3 830
(CAR)
(Rm)
Ratio of excess of assets over 2.3 2.0 2.1
liabilities to CAR (times)
Discretionary margins 8 199 7 792 7 814
(4) The excess of assets over liabilities on the statutory basis has not
been restated as a result of the changes in the accounting policies.
MOMENTUM
CONSOLIDATED INCOME STATEMENT 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Net insurance premiums received 4 267 4 028 9 722
Fee income (5) 1 443 1 296 2 690
Investment income 4 372 5 099 9 417
Net realised and fair value gains 11 599 10 612 9 730
Net income 21 681 21 035 31 559
Net insurance benefits and claims 5 006 4 217 9 386
Change in liabilities 2 636 2 433 2 046
Change in insurance contract 2 501 1 956 1 841
liabilities
Change in investment contracts 389 537 258
with DPF liabilities
Change in reinsurance provision (254) (60) (53)
Fair value adjustments on 8 601 9 440 10 695
investment contract liabilities
Fair value adjustments on 1 022 796 744
collective investment scheme
liabilities
Depreciation, amortisation and 83 86 249
impairment expenses
Employee benefit expenses 1 122 983 2 037
Sales remuneration 960 816 1 587
Other expenses 674 550 1 218
Expenses 20 104 19 321 27 962
Results of operations 1 577 1 714 3 597
Share of profit of associates 22 16 32
Finance costs (6) (266) (306) (1 122)
Profit before tax 1 333 1 424 2 507
Income tax expenses (558) (592) (830)
Earnings 775 832 1 677
Attributable to:
Owners of the parent 760 813 1 640
Non-controlling interests (3) (2) (1)
Preference shareholders 18 21 38
775 832 1 677
Basic earnings per share (cents) 401 429 865
(5) Fee income consists of the following:
Investment contracts: R892 million (31.12.2009: R640 million;
30.06.2010: R1 120 million)
Trust and fiduciary services: R235 million (31.12.2009: R183
million; 30.06.2010: R564 million)
Health administration services: R243 million (31.12.2009: R254
million; 30.06.2010: R505 million)
Other fee income: R73 million (31.12.2009: R219 million; 30.06.2010: R501
million)
(6) Finance costs consist of the following:
Subordinated redeemable debt: R37 million (31.12.2009: R42 million;
30.06.2010: R84 million)
Cost of carry and interest rate swaps: R182 million (31.12.2009: R182
million; 30.06.2010: R871 million)
Other: R47 million (31.12.2009: R82 million; 30.06.2010: R167 million)
MOMENTUM
RECONCILIATION OF HEADLINE EARNINGS Earnings
attributable to owners of the parent
6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Earnings 760 813 1 640
Impairment of intangible assets - - 12
Impairment of goodwill 7 5 71
Headline earnings (7) 767 818 1 723
Net realised and fair value 23 (13) (25)
losses/(gains) on excess
Basis and other changes and (23) (41) (61)
investment variances
Amortisation of intangible assets 27 27 55
relating to business
combinations (8)
FNB Life (90%) (174) (191) (416)
Merger costs 27 - -
Core headline earnings (9) 647 600 1 276
(7) Headline earnings comprise operating profit, investment income on
shareholder assets, net realised and fair value gains on investment
assets, investment variances and basis and other changes.
(8) The amortisation of intangible assets relate to the value of
business acquired intangible assets identified in terms of IFRS3.
(9) Core headline earnings comprise operating profit and investment
income on shareholder assets. It excludes net realised and fair value
gains on investment assets, investment variances and basis and other
changes which can be volatile, certain once off items, as well the
amortisation of intangible assets relating to business combinations as
this is part of the cost of acquiring the business.
EARNINGS PER SHARE (cents) 6 mths to 6 mths to 12 mths to
attributable to owners of the parent 31.12.2010 31.12.2009 30.06.2010
Basic
Core headline earnings 341 316 673
Headline earnings 404 431 908
Earnings 401 429 865
Weighted average number of shares 190 190 190
(million)
MOMENTUM
ANALYSIS OF CORE HEADLINE 6 mths to 6 mths to 12 mths to
EARNINGS 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Retail 305 267 598
Operating profit 414 343 826
Tax (109) (76) (228)
Investments 150 165 271
Operating profit 207 222 354
Tax (57) (57) (83)
Group (1) - 60
Operating profit 7 2 88
Tax (8) (2) (28)
New markets (21) (16) (22)
Operating profit (29) (21) (30)
Tax 8 5 8
FNB Life (10%) 23 23 47
Operating profit 32 29 64
Tax (9) (6) (17)
Capital centre (10) 191 161 322
Operating profit and investment 246 195 376
income
Tax (55) (34) (54)
Core headline earnings 647 600 1 276
(10) The capital centre includes unallocated expenses of R312 million
(31.12.2009: R198 million; 30.06.2010: R430 million) which will be
allocated to business units after the strategic planning sessions and
group budgeting processes have been finalised.
MOMENTUM
CONSOLIDATED STATEMENT OF 6 mths to 6 mths to 12 mths to
COMPREHENSIVE INCOME 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Earnings 775 832 1 677
Other comprehensive income for the 7 130 108
year, net of tax
Exchange differences on (17) (12) (16)
translating foreign operations
Available for sale financial 12 130 68
assets
Land and buildings revaluation 14 14 66
Change in non-distributable - 1 (1)
reserves
Income tax relating to components (2) (3) (9)
of other comprehensive income
Total comprehensive income for the 782 962 1 785
year
Total comprehensive income
attributable to:
Owners of the parent 767 943 1 748
Non-controlling interests (3) (2) (1)
Momentum preference shares 18 21 38
782 962 1 785
MOMENTUM
CONSOLIDATED STATEMENT OF CHANGES 6 mths to 6 mths to 12 mths to
IN EQUITY 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Changes in share capital
Balance at beginning and end of 1 041 1 041 1 041
period
Changes in other reserves
Balance at beginning of period 1 140 648 648
Changes in accounting policy - 395 395
Total comprehensive income 7 130 108
Transfer to retained earnings - - (11)
Balance at end of period (11) 1 147 1 173 1 140
Changes in retained earnings
Balance at beginning of period 6 495 5 606 5 606
Changes in accounting policy - 32 32
Total comprehensive income 760 813 1 640
Dividend paid (357) (338) (801)
Employee share schemes - value of (12) 12 7
services provided
Transfer from other reserves - - 11
Balance at end of period 6 886 6 125 6 495
Equity attributable to owners of 9 074 8 339 8 676
the parent
FirstRand preference shares
Balance at beginning of period 500 500 500
Total comprehensive income 18 21 38
Dividend paid (18) (21) (38)
Balance at end of period 500 500 500
Changes in non-controlling
interests
Balance at beginning of period (4) (9) (9)
Total comprehensive income (3) (2) (1)
Transactions with owners 3 1 6
Balance at end of period (4) (10) (4)
Total equity 9 570 8 829 9 172
(11) Other reserves consist of the following:
Land and buildings revaluation reserve: R453 million (31.12.2009: R407
million; 30.06.2010: R441 million)
Foreign currency translation reserve: R18 million (31.12.2009: R39
million; 30.06.2010: R35 million)
Fair value reserve: R670 million (31.12.2009: R719 million; 30.06.2010:
R658 million)
Non-distributable reserve: R6 million (31.12.2009: R8 million;
30.06.2010: R6 million)
CONSOLIDATED STATEMENT OF CASH 6 mths to 6 mths to 12 mths to
FLOWS 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Net cash outflow from operating (10 424) (3 091) (9 709)
activities
Net cash inflow / (outflow) from 14 (597) 33
investing activities
Net cash (outflow) / inflow from (242) 273 2 117
financing activities
Net cash outflow (10 652) (3 415) (7 559)
Cash and cash equivalents - - (968)
disposed
of
Cash and cash equivalents at 22 611 31 138 31 138
beginning of period
Cash and cash equivalents at end 11 959 27 723 22 611
of
period
MOMENTUM
SEGMENT REPORT 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Revenue
Premiums received 16 844 17 393 32 199
Retail 3 295 3 144 6 173
Investments 10 231 11 809 19 499
Group 2 890 1 916 5 471
New markets 75 53 111
FNB Life 353 471 945
Fee income 1 443 1 296 2 690
Retail 463 326 857
Investments 714 580 1 172
Group 465 460 907
FNB Life - - 8
Capital centre 137 81 156
Inter-segment fee income (336) (151) (410)
Expenses
Payments to contract holders 15 305 23 180 38 899
Retail 2 276 2 101 4 781
Investments 10 214 18 607 28 673
Group 2 591 1 627 3 763
New markets 35 24 62
FNB Life 93 104 210
Capital centre 96 717 1 410
Other expenses 3 105 2 741 6 213
Retail 1 120 1 108 2 130
Investments 591 558 1 261
Group 657 634 1 279
New markets 83 47 112
FNB Life 169 75 169
Capital centre 312 198 430
Finance costs 266 306 1 122
Inter-segment expenses (93) (185) (290)
- The operations are segregated into Retail, Investments, Group, New
markets, FNB Life and Capital centre.
- Segment assets did not change materially from 30 June 2010, except for
market-related movements.
- Other segment information used to assess the performance of the
operating segments is disclosed throughout the results and includes core
headline earnings, new business premiums, value of new business and
profitability of new business as a % of APE and PVFP.
MOMENTUM
EMBEDDED VALUE 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Covered business
Reporting excess - covered 8 685 7 636 7 996
business
Difference between statutory (254) (237) (275)
and published valuation
methods
Intangible asset relating to (633) (670) (647)
Sage
Consolidation adjustments (87) (95) (92)
Change in accounting policies - (32) -
Value of preference shares (500) (455) (475)
issued
Net asset value - covered 7 211 6 147 6 507
business
Net value of in-force business 9 013 8 697 8 458
Embedded value - covered 16 224 14 844 14 965
business
Non-covered business
Reporting excess - non-covered 889 1 203 1 180
business
Consolidation adjustments 64 55 61
Net asset value before write up 953 1 258 1 241
to directors` value - non-
covered business
Write up to directors` value 624 1 733 1 477
Asset management 528 1 487 1 196
Health 76 151 163
African operations (12) - 89 100
Short term insurance 20 6 18
Embedded value - non-covered 1 577 2 991 2 718
business
Adjusted net asset value 8 788 9 138 9 225
Value of in-force business 9 013 8 697 8 458
Embedded value 17 801 17 835 17 683
Required capital - covered 4 238 4 401 4 316
business (adjusted for
qualifying debt)
Surplus capital - covered 2 973 1 746 2 191
business
(12) African operations were previously shown as non-covered business and
have now been reclassified as covered business.
MOMENTUM
ANALYSIS OF NET VALUE OF IN-FORCE 31.12.2010 31.12.2009 30.06.2010
BUSINESS Rm Rm Rm
Wealth and Retail (13) 7 208 6 476 6 321
Gross value of in-force business 8 596 7 855 7 712
Less cost of capital (1 388) (1 379) (1 391)
New markets 136 122 126
Gross value of in-force business 156 145 145
Less cost of capital (20) (23) (19)
Employee benefits 851 844 796
Gross value of in-force business 1 120 1 105 1 104
Less cost of capital (269) (261) (308)
FNB Life (10%) 75 65 70
Gross value of in-force business 85 67 73
Less cost of capital (10) (2) (3)
African operations (14) 129 - -
Gross value of in-force business 145 - -
Less cost of capital (16) - -
Capital centre 614 608 512
Gross value of in-force business 651 639 546
Less cost of capital (37) (31) (34)
FNB Life (90%) - 582 633
Gross value of in-force business - 603 654
Less cost of capital - (21) (21)
Net value of in-force business 9 013 8 697 8 458
(13) Wealth has been included within the Investment cluster in the
analysis of core headline earnings.
(14) The African operations have been included within the Group
cluster in the analysis of core headline earnings. African operations
were previously shown as non-covered business and have now been
reclassified as covered business.
MOMENTUM
EMBEDDED VALUE Net Value of 31.12.2010 31.12.2009 30.06.2010
AT A COMPANY asset in-force
LEVEL value
Rm Rm Rm Rm Rm
Covered business 7 211 9 013 16 224 14 844 14 965
Net Directors` Directors` 31.12.2009 30.06.2010
asset value value
value adjustments
Rm Rm Rm Rm Rm
Non-covered 953 624 1 577 2 991 2 718
business
Asset management 691 528 1 219 2 167 1 893
Health 205 76 281 417 356
African - - - 357 398
operations
(15)
Short term 57 20 77 50 71
insurance
Allocation of 624 (624) - - -
directors`
value
adjustments to
net asset value
Total embedded 8 788 9 013 17 801 17 835 17 683
value
(15) African operations were previously shown as non-covered business and
have now been reclassified as covered business.
MOMENTUM
Covered business 6 mths 6 mths 12 mths
ANALYSIS OF CHANGES to 31. to 31. to 30.
IN GROUP EMBEDDED 12.2010 12.2009 06.2010
VALUE EV EV EV
Note NAV VoIF Cost
of
CAR
Rm Rm Rm Rm Rm Rm
Covered business
Profit from new (507) 755 (43) 205 226 391
business
Embedded value A (507) 736 (42) 187 203 303
from new business
Expected return to B - 19 (1) 18 23 88
end of period
Profit from 870 (325) 96 641 421 708
existing business
Expected return B - 541 (99) 442 385 801
- unwinding of RDR
Release from the C - - 136 136 157 265
cost of required
capital
Expected (or D 796 (796) - - - -
actual) net of
tax profit
transfer to net
worth
Operating E 53 (72) 38 19 (26) (161)
experience
variations
Operating F 21 2 21 44 (95) (197)
assumption
changes
Embedded value 174 (76) 4 102 296 566
earnings 90% of FNB
Life until date of
unbundling
Allowance for - 98 - 98 - -
transfer pricing
between RMBUT and
Momentum
Embedded value 537 452 57 1 046 943 1 665
profit from
operations
Covered business 6 mths 6 mths 12 mths
ANALYSIS OF CHANGES to to to
IN GROUP EMBEDDED 12.2010 12.2009 06.2010
VALUE EV EV EV
Note NAV VoIF Cost
of
CAR
Rm Rm Rm Rm Rm Rm
Investment return G 90 - - 90 283 410
on net worth
Investment H 123 360 (8) 475 756 571
variations
Economic assumption I - 138 - 138 150 43
changes
Embedded value 750 950 49 1 749 2 132 2 689
profit - covered
business
Effect of exclusion - (576) 3 (573) - -
of 90% of FNB Life
due to unbundling
at effective date
Transfer of 333 145 (16) 462 (52) (52)
business from non-
covered business
(16)
Changes in share - - - - - -
capital
Capital transferred (22) - - (22) (86) (58)
to non-covered
business
Dividend paid (357) - - (357) (338) (802)
Change in embedded 704 519 36 1 259 1 656 1 777
value - covered
business
Non-covered
business
Earnings and 24 65 75
changes in equity
Change in (453) (110) (364)
directors`
valuation
Allowance for (272) - -
transfer pricing
between RMBUT and
Momentum
Embedded value (701) (45) (289)
profit - non
covered business
Covered business 6 mths 6 mths 12 mths
ANALYSIS OF CHANGES to to to
IN GROUP EMBEDDED 12.2010 12.2009 06.2010
VALUE EV EV EV
Note NAV VoIF Cost
of
CAR
Rm Rm Rm Rm Rm Rm
Transfer of (462) 52 52
business to covered
business (16)
Capital transferred 22 86 58
from covered
business
Change in embedded (1 141) 93 (179)
value - non-
covered business
Total change in 118 1 749 1 598
embedded value
Return on embedded value (%) (annualised) 12.3 27.8 15.2
(internal rate of return)
(16) African operations were previously shown as non-covered business
and have now been reclassified as covered business.
MOMENTUM
NOTES TO THE EMBEDDED VALUE
A. VALUE OF NEW BUSINESS
VALUE OF NEW BUSINESS 6 mths to Pro forma Pro forma
(EXCLUDING 90% OF FNB LIFE ) 31.12.2010 6 mths to 12 mths to
Rm 31.12.2009 30.06.2010
Rm Rm
MOMENTUM
Wealth and Retail (17) (18) 188 210 286
Gross value of new business 219 240 340
Cost of capital (31) (30) (54)
New markets (10) (16) (40)
Gross value of new business (9) (15) (39)
Cost of capital (1) (1) (1)
Employee benefits 9 9 57
Gross value of new business 20 15 80
Cost of capital (11) (6) (23)
Total value of new business 187 203 303
(17) The Wealth value of new business shown for December 2009 and June
2010 would have been higher by R22 million and R47 million respectively
if a transfer pricing arrangement between Momentum Wealth and RMB Unit
Trusts was in place for those periods. The value of new business shown at
31 December 2010 reflects the transfer pricing arrangement agreed between
Momentum Wealth and RMB Unit Trusts at the start of the period.
(18)Included in the value of new business for Wealth and Retail is 10% of
the value of new business for FNB Life.
MOMENTUM
NEW BUSINESS PREMIUMS - 6 mths to Pro forma Pro forma
COVERED BUSINESS 31.12.2010 6 mths to 12 mths to
(EXCLUDING 90% OF FNB LIFE) Rm 31.12.2009 30.06.2010
Rm Rm
Recurring premiums 967 812 1 586
Wealth and Retail (19) 614 576 1 129
New markets 48 28 69
Employee benefits 305 208 388
Single premiums 12 121 10 187 21 337
Wealth and Retail 10 991 9 795 19 221
Employee benefits 1 130 392 2 116
Annual premium equivalent (APE) 2 179 1 831 3 720
Wealth and Retail (19) 1 713 1 556 3 051
New markets 48 28 69
Employee benefits 418 247 600
Present value of premiums (PVP) 17 253 14 485 29 702
Wealth and Retail (19) 14 167 12 739 24 985
New markets 100 62 143
Employee benefits 2 986 1 684 4 574
(19) Included in the recurring premiums, APE and PVP for Wealth and
Retail is 10% of FNB Life`s numbers.
MOMENTUM
RECONCILIATION OF LUMP SUM INFLOWS 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Total lump sum inflows 29 477 28 059 54 759
Inflows not included in value of (17 797) (18 238) (34 696)
new business
Wealth and Retail
- Policy alterations and other (57) (11) (8)
retail items
- Linked products 30 (239) (138)
- Unit trusts (7 339) (6 529) (14 827)
Employee benefits (69) (70) (42)
Asset Management
- Flows recognised on the statement (5 556) (6 924) (10 032)
of financial position
- Flows not recognised on the (4 806) (4 465) (9 649)
statement of financial position
Term extensions on maturing 441 366 735
policies
Retirement annuity proceeds - - 539
invested in living annuities
Single premiums included in value 12 121 10 187 21 337
of new business
MOMENTUM
PROFITABILITY OF NEW BUSINESS - 6 mths to Pro forma Pro forma
COVERED BUSINESS (EXCLUDING 90% OF 31.12.2010 6 mths to 12 mths to
FNB LIFE) 31.12.2009 30.06.2010
% of APE 8.6 11.1 8.1
Wealth and Retail (20) 11.0 13.5 9.4
New markets (20.8) (57.1) (58.0)
Employee benefits 2.2 3.6 9.5
% of PVP 1.1 1.4 1.0
Wealth and Retail (20) 1.3 1.6 1.1
New markets (10.0) (25.8) (28.0)
Employee benefits 0.3 0.5 1.2
(20) The new business margin of Wealth and Retail includes the margin on
10% of FNB Life`s new business.
SOURCE OF NEW BUSINESS 6 mths to 6 mths to 12 months to
PRODUCTION - COVERED 31.12.2010 31.12.2009 30.06.2010
BUSINESS
Individual life -
insurance and investment
business
APE Total APE Total APE Total
% premium % premium % premium
% % %
Personal financial 17.2 14.5 13.1 10.3 14.2 11.6
advisors
Brokers 63.1 82.0 69.7 86.7 68.8 85.4
Corporate 17.1 3.0 15.5 2.7 14.9 2.6
Direct 2.6 0.5 1.7 0.3 2.1 0.4
B. EXPECTED RETURN
The expected return is determined by applying the risk discount rate
applicable at the beginning of the reporting period to the present value
of in-force covered business at the beginning of the reporting period and
adding the expected return on new business, which is determined by
applying the current risk discount rate to the value of new business from
the point of sale to the end of the period.
C. RELEASE FROM THE COST OF REQUIRED CAPITAL
The release from the cost of required capital represents the difference
between the risk discount rate and the expected after tax investment
return on the assets backing the required capital over the year.
D. EXPECTED (OR ACTUAL) NET OF TAX PROFIT TRANSFER TO NET WORTH
The expected profit transfer from the present value of in-force covered
business to the adjusted net worth is calculated on the statutory
valuation method.
E. OPERATING EXPERIENCE VARIATIONS
6 mnths to 31.12.2010
OPERATING Adjusted Value of Embedded
EXPERIENCE net in-force value
VARIATIONS worth business Rm 6 mnths 12 mnths
Rm (net of to to
cost of 31.12.2009 30.06.2010
capital Embedded Embedded
required) value value
Rm Rm Rm
Wealth and 40 (16) 24 (25) (42)
Retail
Mortality and 74 1 75 98 228
morbidity
Terminations, 19 (23) (4) (33)
premium (108)
cessations and
policy
alterations
Benefit - - - (51) (52)
enhancement
Expense (54) - (54) (39) (110)
variation
Other 1 6 7 - -
New markets (13) (6) (19) (4) (13)
Mortality and 1 - 1 1 11
morbidity
Other (including (14) (6) (20) (5) (24)
expense and
termination
experience)
Employee (16) (51) (67) (43) (112)
benefits
Mortality and (20) 11 (9) 6 31
morbidity
Terminations - (38) (38) (3) (72)
Expenses and 4 - 4 (30) (29)
other
Reduction in - (24) (24) (16) (42)
average
management
fees
FNB Life 6 2 8 6 23
6 mnths to 31.12.2010
OPERATING Adjusted Value of Embedded
EXPERIENCE net in-force value
VARIATIONS worth business Rm 6 mnths 12 mnths
Rm (net of to to
cost of 31.12.2009 30.06.2010
capital Embedded Embedded
required) value value
Rm Rm Rm
Return on - - - 10 21
working
capital (21)
STC related 10 - 10 19 42
variation
Capital centre 26 (1) 25 45 32
(22)
Opportunity cost - 38 38 (34) (112)
of capital
Total operating 53 (34) 19 (26) (161)
experience
variations
(22) Return on working capital has been allocated to the business units
for the reporting period ended 31 December 2010.
(23) The impact of merger related costs is included in the Capital centre
for the reporting period ended 31 December 2010.
F. OPERATING ASSUMPTIONS AND MODEL CHANGES
6 mnths to 31.12.2010
OPERATING Adjusted Value of Embedded
ASSUMPTIONS AND net in-force value
MODEL CHANGES worth business Rm 6 mnths 12 mnths
Rm (net of to to
cost of 31.12.2009 30.06.2010
capital Embedded Embedded
required) value value
Rm Rm Rm
Wealth and Retail 32 68 100 (64) (201)
Mortality and - - - 97 156
morbidity
assumptions
Renewal expense - - - - (197)
assumptions
Termination - - - (81) (86)
assumptions
Discretionary - - - (11) (22)
margins
Wealth modelling - 34 34 (73) (76)
change
Other methodology 32 34 66 4 24
changes
New markets - - - - (10)
Employee benefits (11) (66) (77) - (56)
Assumed mortality - - - - -
and morbidity
profit margin
Termination - - - - (1)
assumptions
Renewal expense - - - - (113)
assumptions
Other methodology (11) (66) (77) - 58
changes
FNB Life - - - 9 6
Methodology - 21 21 (40) 64
change:
Cost of capital
required
Total operating 21 23 44 (95) (197)
assumptions and
model changes
G. INVESTMENT RETURN ON NET WORTH
Investment return on net worth of covered business comprises the
following:
INVESTMENT RETURN ON NET WORTH 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Investment income 120 164 346
Capital appreciation (2) 129 70
Change in fair value of properties 15 6 47
Preference share dividends paid and (43) (16) (53)
change in fair value of preference
shares
Investment return on adjusted net 90 283 410
worth
H. INVESTMENT VARIANCES
Investment variances represent the impact of higher/lower than assumed
investment returns on current and expected future after tax profits from
in-force business.
I. ECONOMIC ASSUMPTION CHANGES
The economic assumption changes include the effect of the change in
assumed rate of investment return, expense inflation rate and risk
discount rate in respect of local and offshore business.
COVERED BUSINESS SENSITIVITIES
COVERED Net In-force business New business written
BUSINESS: worth
SENSITIVITIES -
31.12.2010
Net Gross Cost of Net Gross Cost
value value CAR value value of CAR
(25) (25)
Rm Rm Rm Rm Rm Rm Rm
Base value 7 211 9 013 10 753 (1 740) 187 230 (43)
1% increase 7 211 8 225 10 203 (1 978) 144 192 (48)
in
risk
discount
rate
% change (8.7) (5.1) 13.7 (23.0) (16.5) 11.6
1% reduction in 7 211 9 871 11 342 (1 471) 232 268 (36)
risk discount
rate
% change 9.5 5.5 (15.5) 24.1 16.5 (16.3)
10% decrease in 7 211 9 422 11 162 (1 740) 211 253 (42)
future
expenses
% change (23) 4.5 3.8 0.0 12.8 10.0 (2.3)
10% decrease in 7 211 9 268 11 125 (1 857) 230 275 (45)
lapse, paid-
up and
surrender
rates
% change 2.8 3.5 6.7 23.0 19.6 4.7
5% decrease in 7 211 9 624 11 364 (1 740) 232 274 (42)
mortality and
morbidity for
assurance
business
% change 6.8 5.7 0.0 24.1 19.1 (2.3)
5% decrease in 7 211 8 866 10 606 (1 740) 183 225 (42)
mortality for
annuity
business
% change (1.6) (1.4) 0.0 (2.1) (2.2) (2.3)
COVERED Net In-force business New business written
BUSINESS: worth
SENSITIVITIES -
31.12.2010
Net Gross Cost of Net Gross Cost
value value CAR value value of CAR
(25) (25)
Rm Rm Rm Rm Rm Rm Rm
Base value 7 211 9 013 10 753 (1 740) 187 230 (43)
1% reduction in 7 211 8 945 10 766 (1 821) 207 251 (44)
gross
investment
return,
inflation
rate and risk
discount rate
% change (24) (0.8) 0.1 4.7 10.7 9.1 2.3
1% reduction in 7 211 9 131 10 871 (1 740) 189 231 (42)
inflation
rate
% change 1.3 1.1 0.0 1.1 0.4 (2.3)
10% fall in 7 131 8 340 10 135 (1 795) 187 230 (43)
market value
of equities
and
properties
% change (1.1) (7.5) (5.7) 3.2 0.0 0.0 0.0
10% reduction 7 211 8 861 10 601 (1 740) 174 216 (42)
in premium
indexation
take-up rate
% change (1.7) (1.4) 0.0 (7.0) (6.1) (2.3)
10% decrease in 7 211 9 013 10 753 (1 740) 217 259 (42)
non
commission
related
acquisition
expenses
% change 0.0 0.0 0.0 16.0 12.6 (2.3)
1% Equity risk 7 211 9 236 10 976 (1 740) 193 235 (42)
premium
increases by
1%
% change 2.5 2.1 0.0 3.2 2.2 (2.3)
(23) No corresponding changes in variable policy charges are assumed,
although in practice it is likely that these will be modified according
to circumstances.
(24) Bonus rates are assumed to change commensurately.
(25) 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.
MOMENTUM
NET FLOW OF 6 mths to 6 mths to 12 mths to
FUNDS 31.12.2010 31.12.2009 30.06.2010
Gross Gross Net in- Net in- Net in-
inflow outflow flow / flow / flow /
Rm Rm (outflow) (outflow) (outflow)
Rm Rm Rm
Retail and 8 398 (7 229) 1 169 984 1 439
wealth
Employee 2 890 (2 646) 244 289 1 670
benefits
Asset 5 556 (5 430) 126 (7 060) (9 809)
management
Long-term 16 844 (15 305) 1 539 (5 787) (6 700)
insurance
business cash
flows
Retail and 6 002 (2 935) 3 067 1 758 4 219
wealth
Health 3 179 (2 657) 522 504 846
Asset 12 145 (24 961) (12 816) (11 068) (15 648)
management
Total net flow 38 170 (45 858) (7 688) (14 593) (17 283)
of
funds
FUNDS RECEIVED FROM CLIENTS 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Recurring inflows 8 693 8 206 16 783
Retail and wealth 3 395 3 143 6 172
Risk 1 476 1 110 2 159
Retirement annuities 846 844 1 711
Discretionary savings 1 073 1 189 2 302
New markets 75 53 111
Employee benefits 1 691 1 454 3 275
Health 3 179 3 085 6 280
FNB Life 353 471 945
Lump sum inflows 29 477 28 059 54 759
Retail and wealth 10 577 9 679 18 093
Guaranteed annuities 337 495 920
Living annuities 1 576 1 427 3 097
Endowments 740 1 064 1 764
Linked products - local 6 866 5 467 10 311
Linked products - offshore 1 058 1 226 2 001
Employee benefits 1 199 462 2 158
Asset management 17 701 17 918 34 508
Total inflows 38 170 36 265 71 542
Adjustment for premiums received (12 577) (13 365) (22 477)
from investment contract holders
Adjustment for off-balance sheet (21 326) (18 872) (39 343)
inflows
Net insurance premiums per income 4 267 4 028 9 722
statement
MOMENTUM
PAYMENTS TO CLIENTS 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Retail 16 915 18 357 29 480
Death and disability claims 1 257 1 020 2 030
Maturity claims 1 972 2 344 4 897
Annuities 948 907 1 967
Surrenders 13 245 14 319 21 185
Re-insurance recoveries (507) (233) (599)
Employee benefits 2 646 1 627 3 763
Death and disability claims 651 580 1 168
Maturity claims 131 123 252
Annuities 164 118 258
Withdrawals and surrenders 1 733 829 2 124
Re-insurance recoveries (33) (23) (39)
Asset management
Withdrawals 23 547 28 189 49 938
Health
Claims 2 657 2 581 5 434
FNB Life
Death and disability claims 93 104 210
Total payments to clients 45 858 50 858 88 825
Adjustment for payments to (10 299) (18 963) (29 513)
investment contract holders
Adjustment for off-balance sheet (30 553) (27 678) (49 926)
outflows
Net insurance benefits and claims 5 006 4 217 9 386
per income statement
MOMENTUM
NUMBER OF EMPLOYEES 31.12.2010 31.12.2009 30.06.2010
Retail 1 988 2 011 1 989
Administration 935 867 903
Sales 1 053 1 144 1 086
Investments 691 658 691
Wealth 331 287 319
Asset management 360 371 372
Group 1 815 1 935 1 836
Employee benefits 798 845 822
Health 957 1 045 963
Africa 60 45 51
New markets 247 169 240
FNB Life 86 85 81
IT support 172 154 160
Capital centre 250 190 229
Total number of employees 5 249 5 202 5 226
ANALYSIS OF EXPENSES 6 mths to 6 mths to 12 mths to
31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Depreciation, amortisation and 83 86 249
impairment expenses
Employee benefit expenses 1 122 983 2 037
Sales remuneration 960 816 1 587
Other expenses 674 550 1 218
Finance costs 266 306 1 122
Total expenses 3 105 2 741 6 213
Long-term insurance business 2 404 2 032 4 245
Operating expenses 1 372 1 144 2 442
Sales remuneration 960 816 1 587
Asset management fees 72 72 216
Operating expenses - Asset 230 215 543
management
Operating expenses - Health 277 260 519
administration
Finance costs 266 306 1 122
Consolidation adjustments (72) (72) (216)
Total expenses 3 105 2 741 6 213
MOMENTUM
FINANCIAL INSTRUMENT ASSETS 31.12.2010 31.12.2009 30.06.2010
Rm Rm Rm
Equity securities 39 788 29 698 33 857
Debt securities 45 858 37 515 44 852
Funds on deposit and other money 8 673 9 355 8 247
market instruments
Unit-linked investments 68 543 60 407 54 462
Derivative financial instruments 7 420 7 867 6 521
Loans and receivables 1 469 2 827 1 826
Total financial instrument assets as 171 751 147 669 149 765
per statement of financial
position
ASSETS UNDER MANAGEMENT OR 31.12.2010 31.12.2009 30.06.2010
ADMINISTRATION Rm Rm Rm
Total on-balance sheet assets 203 500 191 892 199 364
Collective investments 26 724 23 138 26 580
Health 3 973 3 745 3 804
Asset management - segregated 56 246 71 954 64 175
assets
Linked product assets under 27 116 22 253 23 169
administration
Total assets under management or 317 559 312 982 317 092
administration
MOMENTUM
ANALYSIS OF ASSETS UNDER MANAGEMENT 31.12.2010 31.12.2009 30.06.2010
OR ADMINISTRATION Rm Rm Rm
On-balance sheet assets
Managed and administered by group 128 625 116 375 111 462
asset managers
Properties 2 266 2 274 2 276
Collective investment schemes 68 543 60 407 54 462
Investment assets 57 816 53 694 54 724
Linked product assets under 39 290 33 555 35 495
administration
Other assets 35 585 41 962 52 407
203 500 191 892 199 364
Off-balance sheet assets
Managed and administered by group 82 970 95 092 90 755
asset managers
Collective investment schemes 26 724 23 138 26 580
Segregated assets 56 246 71 954 64 175
Health 3 973 3 745 3 804
Linked product assets under 27 116 22 253 23 169
administration
Total assets under management or 317 559 312 982 317 092
Administration
ANALYSIS OF ASSETS 31.12.2010 31.12.2009 30.06.2010
BACKING GROUP
SHAREHOLDER EXCESS
Rm % Rm % Rm %
Preference shares 3 010 31.4 2 642 29.9 2 640 28.8
Share trust loan 11 0.1 204 2.3 185 2.0
Properties 609 6.4 509 5.8 577 6.3
Equities 43 0.4 6 0.1 41 0.5
Intangible assets 1 232 12.9 1 343 15.2 1 268 13.8
Cash and cash 5 681 59.3 5 062 57.2 5 418 59.0
equivalents and
other
10 586 110.5 9 766 110.5 10 129 110.4
Unsecured (1 012) (10.5) (927) (10.5) (953) (10.4)
subordinated debt
Excess per reporting 9 574 100.0 8 839 100.0 9 176 100.0
basis
Annexure C
Reviewed results for the 12 months ended 31 December 2010
METROPOLITAN
Basis of preparation
The Metropolitan group results disclosed in this Annexure represent the
previous Metropolitan Holdings Limited group on a carve-out basis
excluding the financial information of the Momentum Group Limited. The
following transactions are therefore not recognised in this set of
condensed carve-out financial information:
- the 951 million ordinary shares issued by Metropolitan Holdings Limited
as part of the merger with Momentum on 1 December 2010;
- the fair value exercise to recognise the fair value of all identifiable
Metropolitan group assets and liabilities and the related amortisation
charge; and
- elimination of pre-acquisition reserves of Metropolitan group on
acquisition date.
The financial results and cash flows of the Metropolitan group for the
year ended 31 December 2010 were not impacted by any other transactions,
other than merger costs, following the merger with Momentum.
The Metropolitan group carve-out financial information has been
independently reviewed by PricewaterhouseCoopers Inc and their report is
available for inspection.
The embedded value and value of new business results have been
independently reviewed by Deloitte and their report is available for
inspection.
These results have been prepared in accordance with International
Accounting Standard 34 (IAS34) - Interim financial reporting; the South
African Companies Act, Act 61 of 1973, as amended; and the Listings
Requirements of the JSE Limited (JSE). The accounting policies of the
group are in terms of International Financial Reporting Standards (IFRS)
and have been applied consistently to all the periods presented and the
previous reporting period (except for those noted below). The
comparatives have been restated for the changes in accounting policies
noted below.
The preparation of financial statements is in accordance with and
contains the information required by IFRS and the AC 500 standards, as
issued by the Accounting Practices Board or its successor, which 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 at 31 December 2009 and,
with the exception of the principal economic assumptions, have remained
unchanged since then.
Restatement of 2009 results
Early adoption of IAS 12 - Income taxes
The International Accounting Standards Board amended IAS12 - Income taxes
in December 2010. The amendment introduces a presumption that the
carrying value of an investment property is recovered entirely through
sale. The Metropolitan group chose to early adopt the amendment as this
new accounting policy provides more reliable and relevant information for
users as it represents more realistic tax consequences relating to
investment property. The restatement had no effect on the 2009 opening
retained earnings but decreased the deferred income tax expense and
liability by R111 million for 2009. This resulted in an increase of R111
million on the 2009 embedded value.
Reallocations
The following items have been reallocated for 2009 to ensure consistency
within the MMI Holdings Limited group:
- Administration fee income was previously set off against other expenses
in the income statement. This income is now disclosed under fee income as
this better reflects its nature. An amount of R75 million was reallocated
in 2009 (2010 amounts to R81 million).
- The amortisation and impairment of deferred acquisitions costs and the
change in provision of commission debtors (agents and brokers) were
previously disclosed under depreciation, amortisation and impairment
expenses in the income statement. These costs are now shown under sales
remuneration as they all relate to commission. An amount of R19 million
was reallocated in 2009 (2010 amounts to R6 million).
- Leave pay provision balances were previously disclosed under accounts
payable. This balance is now disclosed under employee benefit obligations
as it relates to employee balances. An amount of R61 million was
reallocated in 2009 (2010 amounts to R66 million).
The reallocations above had no impact on the earnings attributable to the
Metropolitan group.
Standards and interpretations of published standards effective in 2010
and relevant to the group
- The following amendments to standards became effective for the first
time in the current year and had no significant impact on the group`s
earnings: IFRS 2 - Share based payment - group cash-settled share based
payment transactions, IAS 27 (Revised) - Consolidated and separate
financial statements, IFRS 3 (Revised) - Business combinations, AC 504 -
IAS19: The limit on a defined benefit asset, minimum funding requirements
and their interaction in the South African pension fund environment. The
conceptual framework for financial reporting 2010 was also effective from
September 2010.
- The International Accounting Standards Board (IASB) made amendments to
various standards as part of their annual improvements project. These
amendments had no impact on the group`s earnings.
Embedded value
Metropolitan asset management subsidiaries (Metropolitan Asset
Management, Metropolitan Collective Investment Schemes and Metropolitan
Property Services), were valued using Embedded Value methodology prior to
31 December 2010. The valuation methodology at 31 December 2010 has
changed to using forward Price Earnings multiples applied to the relevant
sustainable earnings bases.
Segmental information
The segments in this Annexure have been grouped as follows:
- Retail (includes Metropolitan Odyssey Ltd, DirectFin Solutions (Pty)
Ltd and for 2009 it includes Union Life Ltd) - development, distribution
and administration of individual life investment and risk products;
- Corporate (includes Metropolitan Retirement Administrators (Pty) Ltd) -
all aspects of retirement fund business including investment, risk
management, actuarial consulting and administration;
- International - development, distribution and administration of
individual life investment and risk products as well as retirement fund
business in Namibia, Botswana, Lesotho, Kenya, Ghana, Nigeria and
Swaziland;
- Asset management - all aspects of active asset management, collective
investment schemes management, property management and administration, on
behalf of all businesses within the group and third parties;
- Health - provision of medical aid administration services, health risk
management strategies, managed healthcare and administration system
franchising to both corporate and retail healthcare schemes; and
- Shareholder capital - consists of the holding company, Metropolitan
Card Operations (Pty) Ltd, Metropolitan Capital group and the
shareholders excess in the life insurance companies.
METROPOLITAN
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31.12.2010 31.12.2009
Rm Rm
ASSETS
Intangible assets 420 464
Owner-occupied properties 709 690
Property and equipment 207 202
Investment properties 3 288 3 193
Investment in associates 1 090 856
Employee benefit assets 221 232
Financial instrument assets (1) 61 151 56 201
Insurance and other receivables 1 596 1 579
Deferred income tax 12 10
Reinsurance contracts 292 242
Current income tax assets 16 200
Cash and cash equivalents 7 128 7 702
Total assets 76 130 71 571
EQUITY
Equity attributable to owners of the parent 7 246 6 723
Non-controlling interests 156 167
Total equity 7 402 6 890
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts (2) 39 588 35 807
Capitation contracts 1 2
Financial instrument liabilities
Investment contracts 23 611 23 471
- with discretionary participation features 12 664 12 022
(2)
- designated as fair value through income 10 947 11 449
Other financial instrument liabilities (3) 2 336 2 308
Deferred income tax 404 283
Employee benefit obligations 312 263
Other payables 2 433 2 540
Current income tax liabilities 43 7
Total liabilities 68 728 64 681
Total equity and liabilities 76 130 71 571
Financial instrument assets consist of the following:
Assets designated as fair value through income: R59 252 million
(31.12.2009: R54 441 million)
Derivative financial instruments: R867 million (31.12.2009: R718 million)
Available-for-sale assets: R1 million (31.12.2009: R2 million)
Loans and receivables: R1 031 million (31.12.2009: R1 040 million)
(2) Under IFRS4, the group continues to account for long-term insurance
contracts and investment contracts with discretionary participation
features using SA GAAP.
(3) Other financial instrument liabilities consist of the following:
Liabilities designated as fair value through income: R352 million
(31.12.2009: R301 million)
Derivative financial instruments: R766 million (31.12.2009: R787 million)
Liabilities at amortised cost: R1 218 million (31.12.2009: R1 220
million)
METROPOLITAN
STATEMENT OF ASSETS AND LIABILITIES ON 31.12.2010 31.12.2009
REPORTING BASIS Rm Rm
Total assets per statement of financial 76 130 71 571
position
Actuarial value of policy liabilities per (63 199) (59 278)
statement of financial position
Other liabilities per statement of financial (5 529) (5 403)
position
Non-controlling interests per statement of (156) (167)
financial position
Excess per reporting basis 7 246 6 723
Net assets - other businesses (771) (726)
Excess - long-term insurance business (4) 6 475 5 997
LONG-TERM INSURANCE BUSINESS (4)
Change in excess of long-term insurance 478 1 084
business (4)
Increase in share capital (126) (25)
Sale of Union Life 83
Metropolitan Nigeria accounted for as a (74)
subsidiary
Change in other reserves 9 18
Dividend paid 733 336
Total surplus arising 1 177 1 339
Operating profit 696 634
Investment income on excess 361 313
Net realised and fair value gains on excess 485 416
Investment variances (5) (18) 279
Basis and other changes (347) (303)
Consolidation adjustments 155 125
Income tax expenses (6) 237 251
Adjustment for finance costs 47 46
Results of long-term insurance business (4) 1 616 1 761
Results of other businesses and 62 73
consolidation adjustments
Results of operations per income statement 1 678 1 834
STATEMENT OF ASSETS AND LIABILITIES ON 31.12.2010 31.12.2009
STATUTORY BASIS Rm Rm
Reporting excess - long-term insurance 6 475 5 997
business (4)
Disregarded assets in terms of statutory (462) (553)
requirements (7)
Capital adjustments 501 501
Statutory excess - long-term insurance 6 514 5 945
business (4)
Capital adequacy requirement (CAR) (Rm) 2 317 2 090
Ratio of long-term insurance business excess 2.8 2.8
to CAR (times)
Discretionary margins 2 149 1 704
(3) 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 non-controlling interests
and other items, which are eliminated on consolidation. It excludes non-
insurance business.
(5) Investment variances reflect the impact of actual investment returns
on the value of future expense recoveries and include any change in the
PGN 110 (Allowance for embedded investment derivatives) liability.
(6) Includes deferred tax on contract holder capital gains and losses.
(7) Disregarded assets are those as defined in the South African Long
Term Insurance Act and are only applicable to South African Long Term
insurance companies. Adjustments are also made for the international
insurance companies from reporting excess to statutory excess as required
by their regulators.
METROPOLITAN
CONSOLIDATED INCOME STATEMENT 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Net insurance premiums received 10 304 10 240
Fee income (8) 1 471 1 260
Investment income 3 667 3 995
Net realised and fair value gains 4 849 4 642
Net income 20 291 20 137
Net insurance benefits and claims 8 757 8 466
Change in liabilities 4 651 4 565
Change in insurance contract liabilities 4 039 3 852
Change in investment contracts with DPF 665 747
liabilities
Change in reinsurance provision (53) (34)
Fair value adjustments on investment contract 1 042 1 235
liabilities
Fair value adjustments on collective 5 7
investment scheme liabilities
Depreciation, amortisation and impairment 191 129
expenses (9)
Employee benefit expenses 1 694 1 549
Sales remuneration 982 1 006
Other expenses (9) 1 291 1 346
Expenses 18 613 18 303
Results of operations 1 678 1 834
Share of profit of associates 14 3
Finance costs (10) (134) (168)
Profit before tax 1 558 1 669
Income tax expenses (385) (412)
Earnings 1 173 1 257
Attributable to:
Owners of the parent 1 153 1 240
Non-controlling interests 20 17
1 173 1 257
Basic earnings per share 210 234
Diluted earnings per share 190 205
(8) Fee income consists of the following:
Investment contracts: R115 million (31.12.2009: R67 million)
Trust and fiduciary services: R151 million (31.12.2009: R159 million)
Health administration services: R1 107 million (31.12.2009: R944 million)
Other fee income: R98 million (31.12.2009: R90 million)
(9) A provision for a loan impairment of R72 million raised in prior
years for Metropolitan Card Operations was reversed during 2009 and
written off against other expenses.
(10) Finance costs consist of the following:
Preference shares: R86 million (31.12.2009: R118 million)
Subordinated redeemable debt: R46 million (31.12.2009: R46 million)
Other: R2 million (31.12.2009: R4 million)
METROPOLITAN
RECONCILIATION OF Basic earnings Diluted earnings
HEADLINE EARNINGS
attributable to owners
of the parent
12 mths to 12 mths to 12 mths to 12 mths to
31.12.2010 31.12.2009 31.12.2010 31.12.2009
Rm Rm Rm Rm
Earnings 1 153 1 240 1 153 1 240
Finance costs - 86 118
convertible preference
shares
Diluted earnings 1 239 1 358
Profit on sale of Union (3) (3)
Life
Impairment of associate 29 29
Goodwill impairment and 61 61
adjustments relating to
equity accounted
associates
Headline earnings (11) 1 179 1 301 1 265 1 419
Net realised and fair (601) (490) (601) (490)
value gains on excess
Basis and other changes 357 5 357 5
and investment
variances
Merger costs 42 42
Dilutory effect of (5) (1)
subsidiaries (12)
Investment income on 1 1
treasury shares -
contract holders (13)
Core headline earnings 977 816 1 059 934
(14)
(11) Headline earnings consist of operating profit, investment income,
net realised and fair value gains, investment variances and basis and
other changes.
(12) Metropolitan Health and Metropolitan Kenya are consolidated at 100%
in the results. For purposes of diluted core headline earnings, non-
controlling 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 and other changes can be volatile; therefore core
headline earnings have been disclosed that comprise operating profit and
investment income on shareholder assets.
METROPOLITAN
EARNINGS PER SHARE (cents) 12 mths to 12 mths to
attributable to owners of the parent 31.12.2010 31.12.2009
Rm Rm
Basic
Core headline earnings 178 154
Headline earnings 215 246
Earnings 210 234
Weighted average number of shares (million) 549 529
Diluted
Core headline earnings 162 141
Weighted average number of shares (million) 653 663
Headline earnings 194 214
Earnings 190 205
Weighted average number of shares (million) 652 663
ANALYSIS OF DILUTED CORE HEADLINE EARNINGS 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Retail business 432 383
Operating profit 585 506
Tax (153) (123)
Corporate business 158 140
Operating profit 218 185
Tax (60) (45)
International business 84 89
Operating profit 92 100
Tax (8) (11)
Asset management business 55 61
Operating profit 77 88
Tax (22) (27)
Health business 92 95
Operating profit 144 153
Tax (52) (58)
Shareholder capital 238 166
Holding company expenses (86) (67)
Strategic ventures - (43)
Investment income on shareholder excess 490 433
Income tax on investment income (166) (157)
Diluted core headline earnings 1 059 934
METROPOLITAN
RESULTS OF OPERATIONS Net Expenses Results of operations
FROM ADMINISTRATION income
BUSINESS
(gross of minority
interests and before
finance costs and tax)
12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm Rm Rm
Health business 1 148 (991) 157 174
Asset administration 128 (68) 60 57
Asset management 129 (112) 17 31
Metropolitan Card - - - (31)
Operations
Metropolitan Retirement 88 (89) (1) (1)
Administrators
1 493 (1 260) 233 230
CONSOLIDATED STATEMENT OF COMPREHENSIVE 12 mths to 12 mths to
INCOME 31.12.2010 31.12.2009
Rm Rm
Earnings 1 173 1 257
Other comprehensive income for the year, net (13) (10)
of tax
Exchange differences on translating foreign (34) (37)
operations
Land and buildings revaluation 28 29
Share of other comprehensive income of (3) -
associates
Change in non-distributable reserves - 2
Income tax relating to components of other (4) (4)
comprehensive income
Total comprehensive income for the year 1 160 1 247
Total comprehensive income attributable to:
Owners of the parent 1 149 1 240
Non-controlling interests 11 7
1 160 1 247
METROPOLITAN
CONSOLIDATED STATEMENT OF CHANGES IN 12 mths to 12 mths to
EQUITY 31.12.2010 31.12.2009
Rm Rm
Changes in share capital
Balance at beginning 183 51
Conversion of preference shares, net - 114
of issue costs
Staff share scheme shares released 32 17
Decrease in treasury shares held on (81) 1
behalf of contract holders
Balance at end 134 183
Changes in other reserves
Balance at beginning 528 532
Total comprehensive income (2) (1)
Employee share schemes - value of 1 1
services provided
Transfer to retained earnings (3) (4)
Balance at end (15) 524 528
Changes in retained earnings
Balance at beginning 6 011 5 264
Total comprehensive income 1 151 1 241
Dividend paid (562) (497)
Shares repurchased (12) -
Transactions with non-controlling (3) -
interest shareholders
Transfer from other reserves 3 4
Balance at end 6 588 6 012
Equity attributable to owners of the 7 246 6 723
parent
Changes in non-controlling interests
Balance at beginning 167 141
Total comprehensive income 11 7
Dividend paid (21) (17)
Sale of Union Life (47)
Metropolitan Nigeria transferred to 36
subsidiary
Transactions with owners 46 -
Balance at end 156 167
Total equity 7 402 6 890
(15) Other reserves consist of the following:
Land and buildings revaluation reserve: R224 million (31.12.2009: R203
million)
Foreign currency translation reserve: (R52 million) (31.12.2009: (R26
million))
Fair value reserve: R55 million (31.12.2009: R54 million)
Non-distributable reserve : R297 million (31.12.2009 : R297 million)
METROPOLITAN
CONSOLIDATED STATEMENT OF CASH FLOWS 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Net cash inflow/(outflow) from operating 134 (475)
activities
Net cash outflow from investing activities (123) (118)
Net cash outflow from financing activities (586) (515)
Net cash flow (575) (1 108)
Effect of foreign exchange rate changes 1 -
Cash resources and funds on deposit at 7 702 8 810
beginning
Cash resources and funds on deposit at end 7 128 7 702
METROPOLITAN
SEGMENT REPORT 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Revenue
Premiums received 11 079 11 207
Retail 6 930 6 831
Corporate 2 907 3 182
Health 24 12
International 1 218 1 182
Fee income 1 471 1 260
Retail 137 91
Corporate 133 128
Asset management 249 233
Health 1 107 944
International 21 11
Shareholder capital 2 2
Inter-segment fee income (178) (149)
Expenses
Payments to contract holders 10 958 13 073
Retail 5 558 5 108
Corporate 4 587 7 308
Health 21 14
International 792 643
Other expenses 4 292 4 198
Retail 2 176 2 317
Corporate 367 365
Asset management 180 155
Health 971 803
International 479 460
Shareholder capital 277 238
Inter-segment expenses (158) (140)
- The South African operations are segregated into retail, corporate,
asset management, health and shareholder capital. The international
companies - Botswana, Ghana, Kenya, Lesotho, Namibia, Nigeria and
Swaziland - are all managed as a single operating segment.
- Segment assets did not change materially from 31 December 2009, except
for market-related movements.
- Other segment information used to assess the performance of the
operating segments is disclosed throughout the results and includes,
diluted core headline earnings, new business premiums, value of new
business and profitability of new business as a % of APE.
METROPOLITAN
EMBEDDED VALUE 31.12.2010 31.12.2009
Rm Rm
Covered business
Reporting excess - long-term insurance 6 475 5 997
business
Disregarded assets (16) (189) (183)
Dilutory effect of subsidiaries (17) (6) (3)
Reclassification from non-covered (49) (54)
business
Diluted net asset value - covered 6 231 5 757
business
Net value of in-force business 4 535 4 114
Diluted embedded value - covered business 10 766 9 871
Non-covered business
Net assets - other businesses 771 726
Reclassification to covered business 49 54
Consolidation adjustments (108) (112)
Adjustments for dilution (18) 886 877
Diluted net asset value - non-covered 1 598 1 545
business
Write up to directors` value 953 702
Diluted embedded value - non-covered 2 551 2 247
business
Diluted adjusted net asset value 8 782 7 302
Value of in-force business - covered 4 535 4 114
business
Value of in-force business - non-covered - 702
business
Diluted embedded value 13 317 12 118
Required capital - covered business 4 059 3 616
(adjusted for qualifying debt)
Surplus capital - covered business 2 172 2 141
(16) Disregarded assets as disclosed in the statement of assets and
liabilities on reporting basis are adjusted for internally developed
software and recognised employee benefit assets.
(17) For accounting purposes, Metropolitan Health and Metropolitan Kenya
have been consolidated at 100% in the statement of financial position.
For embedded value purposes, disclosed on a diluted basis, the non-
controlling interests and related funding have been reinstated.
(18) Adjustments for dilution are made up as follows:
Dilutory effect of subsidiaries (note 16): R76 million (31.12.2009: R83
million)
Staff share scheme loans: R8 million (31.12.2009: R73 million)
Treasury shares held on behalf of contract holders: R91 million
(31.12.2009: R10 million)
Liability - MMI convertible preference shares issued to KTI: R711 million
(31.12.2009: R711 million)
ANALYSIS OF NET VALUE OF IN-FORCE 31.12.2010 31.12.2009
BUSINESS Rm Rm
Retail 3 208 2 893
Gross value of in-force business 3 576 3 233
Less cost of capital (368) (340)
Employee benefits 674 611
Gross value of in-force business 879 791
Less cost of capital (205) (180)
International 653 610
Gross value of in-force business 660 615
Less cost of capital (7) (5)
Net value of in-force business 4 535 4 114
METROPOLITAN
EMBEDDED VALUE AT A Adjusted 31.12.2010 31.12.2009
BUSINESS UNIT LEVEL net Value of
worth in-force
Rm Rm Rm Rm
Covered business
Metropolitan Life Ltd 5 469 3 883 9 352 8 587
Retail 3 208
Employee benefits 675
Metropolitan Odyssey 44 - 44 36
Union Life - - 47
International 718 652 1 370 1 201
Metropolitan Life 104 - 104 68
International
Metropolitan Namibia 185 326 511 493
Metropolitan Botswana 121 60 181 188
Metropolitan Lesotho 200 244 444 382
Metropolitan Kenya 13 1 14 8
Metropolitan Ghana 23 13 36 12
Metropolitan Swaziland 21 2 23 23
Metropolitan Nigeria 51 6 57 27
Total covered business 6 231 4 535 10 766 9 871
Adjusted Write up 31.12.2010 31.12.2009
net to
worth directors`
value
Rm Rm Rm Rm
Non-covered business
Asset management (A) 89 458 547 391
Metropolitan Health Group 239 991 1 230 961
(B)
Metropolitan Holdings 1 270 (496) 774 895
(after consolidation
adjustments) Copyright
Total non-covered 1 598 953 2 551 2 247
business
Total embedded value 7 829 5 488 13 317 12 118
Diluted net asset value - (1 598)
non-covered business
Adjustments to covered 244
business - net asset
value
Reporting excess - long- 6 475
term insurance business
(A) Metropolitan asset management subsidiaries were valued using Embedded
Value methodology prior to 2010. The valuation methodology at 31
December 2010 has changed to using forward Price Earnings multiples
applied to the relevant sustainable earnings bases.
(B) Metropolitan Health Group has been valued using Embedded Value
methodology.
(C) The holding company expenses reflect the present value of projected
recurring expenses of that company.
METROPOLITAN
ANALYSIS OF CHANGES IN GROUP Covered business 12 12
EMBEDDED VALUE mths mths
2010 2009
Notes NAV VoIF Cost EV EV
of
CAR
Rm Rm Rm Rm Rm
Covered business
Profit from new business (256) 547 (9) 282 126
Embedded value from new A (256) 532 (9) 267 119
business
Expected return to end of B - 15 - 15 7
period
Profit from existing 729 (288) (51) 390 331
business
Expected return - unwinding B - 554 (69) 485 420
of RDR
Release from the cost of C 72 72 -
required capital
Expected (or actual) net of D 710 (710) - -
tax profit transfer to net
worth
Operating experience E 227 (63) (1) 163 (20)
variances
Operating assumption F (208) (69) (53) (330) (69)
changes
Embedded value profit from 473 259 (60) 672 457
operations
Investment return on net G 855 - - 855 782
worth
Investment variances H (16) 54 - 38 433
Economic assumption changes I (143) 180 (1) 36 (376)
Change in risk margin - 2 - 2 -
Exchange rate movements (20) (7) - (27) (28)
Embedded value profit - 1 149 488 (61) 1 576 1 268
covered business
Changes in share capital 77 77 23
Dividend paid (711) (711) (317)
Sale of Union Life (41) (12) 6 (47)
Change in embedded value - 474 476 (55) 895 974
covered business
ANALYSIS OF CHANGES IN GROUP Covered business 12 12
EMBEDDED VALUE mths mths
2010 2009
Notes NAV VoIF Cost EV EV
of
CAR
Rm Rm Rm Rm Rm
Non-covered business
Earnings 68 46
Revaluation of directors` 251 104
valuation
Embedded value profit - non- 319 150
covered business
Changes in share capital (114) (23)
Dividend paid 138 (195)
Finance costs - preference (86) (118)
shares
Sale of Union Life 47
Change in embedded value - 304 (186)
non-covered business
Total change in group 1 199 788
embedded value
Total group embedded value 1 895 1 418
profit
Return on embedded value (%) (annualised) - 16.2 11.9
internal rate of return
METROPOLITAN
NOTES TO EMBEDDED VALUE
A. VALUE OF NEW BUSINESS
VALUE OF NEW BUSINESS 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Retail 223 81
Gross value of new business 225 86
Less: Cost of capital (2) (5)
Employee benefits 23 25
Gross value of new business 30 45
Less: Cost of capital (7) (20)
International 21 13
Gross value of new business 21 13
Less: Cost of capital (0) (0)
Value of covered new business 267 119
- Net of non-controlling interests.
- Due to rounding, the cost of capital for the international business is
less than R1 million.
NEW BUSINESS PREMIUMS - COVERED BUSINESS 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Recurring premiums 1 155 1 160
Retail 843 813
Corporate 158 199
International 154 148
Single premiums 3 176 3 422
Retail 2 115 1 973
Corporate 941 1 327
International 120 122
Annual premium equivalent (APE) 1 472 1 501
Retail 1 054 1 010
Corporate 252 331
International 166 160
Present value of premiums (PVP) 8 540 8 430
Retail 5 602 5 050
Corporate 2 154 2 737
International 784 643
Net of non-controlling interests.
METROPOLITAN
PROFITABILITY OF NEW BUSINESS - COVERED BUSINESS 12 mths to 12 mths to
31.12.2010 31.12.2009
% of APE 18.1 7.9
Retail 21.2 8.0
Corporate 9.1 7.6
International 12.7 8.1
% of PVP 3.1 1.4
Retail 4.0 1.6
Corporate 1.1 0.9
International 2.7 2.0
Corporate value of new business includes value generated in respect of
new administration contracts secured, where premium income is not
applicable.
SOURCE OF NEW BUSINESS PRODUCTION - 12 mths to 12 mths to
COVERED BUSINESS 31.12.2010 31.12.2009
Individual life - insurance and
investment business
APE Total APE Total
% premium % premium
% %
Personal financial advisors 59 56 50 55
Broker distribution 24 36 22 31
Wholesale distribution 1 - 11 4
Third party business - - 1 1
Union Life - - 2 1
International 16 8 14 8
B. Expected return
The expected return is determined by applying the risk discount rate
applicable at the beginning of the reporting period to the present value
of in-force covered business at the beginning of the reporting period and
adding the expected return on new business, which is determined by
applying the current risk discount rate to the value of new business from
the point of sale to the end of the period.
C. Release from the cost of required capital
The release from the cost of required capital represents the difference
between the risk discount rate and the expected after tax investment
return on the assets backing the required capital over the year.
D. Expected (or actual) net of tax profit transfer to net worth
The expected profit transfer from the present value of in-force covered
business to the adjusted net worth is calculated on the statutory
valuation method.
E. Operating experience variance
OPERATING EXPERIENCE 12 mths to 31.12.2010 12 mths to
VARIATIONS 31.12.2009
Adjusted VoIF (net Embedded Embedded
net of cost value value
worth of Rm Rm
Rm capital)
Rm
Retail 92 (69) 23 (5)
Employee benefits 72 (1) 71 (64)
International 63 6 69 49
Total operating experience 227 (64) 163 (20)
variations
- Retail adjusted net worth experience variance: Positive mortality and
morbidity experience (mainly on Grouped individual business) partly
offset by increased share based expenses and lower than expected expense
recoveries on withdrawals.
- Retail VoIF experience variance: Worse than expected impact of
withdrawals (Odyssey and Voluntary Group business) aggravated by the loss
of a significant credit life scheme.
- Employee benefits adjusted net worth experience variance: Positive
mortality and morbidity experience on risk business.
- International adjusted net worth experience variance: Positive risk
experience on Employee benefits business and credit life business partly
offset by expense overruns on start-up operations.
F. Operating assumption changes
OPERATING ASSUMPTION CHANGES 12 mths to 31.12.2010 12 mths to
31.12.2009
Adjusted VoIF (net Embedded Embedded
net of cost value value
worth of Rm Rm
Rm capital)
Rm
Retail (108) (72) (180) 8
Employee benefits (53) (26) (79) (23)
International (47) (24) (71) (54)
Total operating assumption (208) (122) (330) (69)
changes
- Retail adjusted net worth operating assumption: Negative contributions
from a strengthening of reserves due to withdrawals, a reallocation of
expenses and a methodology enhancement on Grouped individual business,
reduced by a weakening of the mortality basis on Grouped individual
business.
- Retail VoIF operating assumption: Negative contributions from model
corrections on Commercial Union and Odyssey, a methodology enhancement on
grouped individual business and a change in the calculation of the cost
of capital.
- Employee benefits adjusted net worth operating assumption: Negative
contribution due to model enhancements in respect of investment
guarantees.
- Employee benefits VoIF operating assumption: Negative contribution from
a change in the calculation of cost of capital.
- International adjusted net worth operating assumption: Negative
contribution from strengthening of reserves mainly due to renewal
expenses.
G. Investment return on net worth
INVESTMENT RETURN ON NET WORTH 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Investment income 358 309
Capital appreciation 497 473
Investment return on adjusted net worth 855 782
H. Investment variances
Investment variances represent the impact of higher/lower than assumed
investment returns on current and expected future after tax profits from
in-force business.
I. Economic assumption changes
The economic assumption changes include the effect of the change in
assumed rate of investment return, expense inflation rate and risk
discount rate in respect of local and offshore business.
COVERED BUSINESS: Net In-force business New business
SENSITIVITIES - worth written
31.12.2010
Net Gross Cost Net Gross Cost
value value of value value of
CAR CAR
Rm Rm Rm Rm Rm Rm Rm
Base value 6 231 4 535 5 115 (580) 267 276 (9)
1% increase in risk 3 949 4 787 (838) 227 242 (15)
discount rate
% change (13) (6) 44 (15) (12) 67
1% reduction in risk 5 213 5 491 (278) 310 315 (5)
discount rate
% change 15 7 (52) 16 14 (44)
10% decrease in 4 986 5 566 (580) 306 315 (9)
future expenses
% change (1) 10 9 - 15 14 -
10% decrease in 4 681 5 261 (580) 315 324 (9)
lapse, paid-up
and surrender
rates
% change 3 3 - 18 17 -
5% decrease in 4 796 5 376 (580) 308 317 (9)
mortality and
morbidity for
assurance
business
% change 6 5 - 15 15 -
5% decrease in 4 505 5 085 (580) 263 272 (9)
mortality for
annuity business
% change (1) (1) - (1) (1) -
1% reduction in 6 318 4 600 5 180 (580) 306 315 (9)
gross investment
return, inflation
rate and risk
discount rate
% change (2) 1 1 1 - 15 14 -
1% reduction in 6 164 4 021 4 901 (880) 230 244 (14)
gross investment
return only (no
change in risk
discount rate)
% change (2) (1) (11) (4) 52 (14) (12) 56
COVERED BUSINESS: Net In-force business New business
SENSITIVITIES - worth written
31.12.2010
Net Gross Cost Net Gross Cost
value value of value value of
CAR CAR
Rm Rm Rm Rm Rm Rm Rm
Base value 6 231 4 535 5 115 (580) 267 276 (9)
1% reduction in 6 467 4 438 5 018 (580) 298 307 (9)
inflation rate
% change 4 (2) (2) - 12 11 -
10% fall in market 5 870 4 283 4 863 (580)
value of equities
and properties
% change (6) (6) (5) -
10% reduction in 4 443 5 023 (580) 243 252 (9)
premium
indexation take-
up rate
% change (2) (2) - (9) (9) -
10% decrease in non 299 308 (9)
commission
related
acquisition
expenses
% change 12 12 -
Notes
(1) No corresponding changes in variable policy charges are assumed,
although in practice it is likely that these will be modified according
to circumstances.
(2) Bonus rates are assumed to change commensurately.
(3) The change in the value of cost of CAR is disclosed as nil where the
sensitivity test results in an insignificant change in the value.
METROPOLITAN
NET FUNDS RECEIVED FROM 12 mths to 12 mths to
CLIENTS Gross Gross 31.12.2010 31.12.2009
inflow outflow Net inflow Net inflow
Rm Rm Rm Rm
Retail 6 930 (5 558) 1 372 1 723
Corporate 2 907 (4 587) (1 680) (4 126)
International 1 218 (792) 426 539
Long-term insurance 11 055 (10 937) 118 (1 864)
business cash flows
Health 19 517 (17 864) 1 653 1 760
Asset administration 16 315 (16 265) 50 2 901
Asset management 76 (2 439) (2 363) (1 420)
Corporate 10 (693) (683) 118
Total net funds received 46 973 (48 198) (1 225) 1 495
from clients
PREMIUMS RECEIVED 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Recurring premiums 7 851 7 779
Retail 4 815 4 856
Corporate 1 966 1 863
International 1 070 1 060
Single premiums 3 204 3 416
Retail 2 115 1 975
Corporate 941 1 319
International 148 122
Capitation contracts - health 24 12
Segment premiums received 11 079 11 207
Adjustment for premiums received from (936) (1 071)
investment contract holders
Transfers between insurance, investment and 161 104
investment with DPF contracts
Net insurance premiums per income statement 10 304 10 240
METROPOLITAN
PAYMENTS TO CONTRACT HOLDERS 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Retail 5 558 5 108
Death and disability claims 1 035 1 099
Maturity claims 1 742 1 487
Annuities 817 768
Withdrawal benefits 54 108
Surrenders 2 012 1 752
Re-insurance recoveries (102) (106)
Employee benefits 4 587 7 308
Death and disability claims 1 239 1 159
Maturity claims 58 101
Annuities 517 696
Withdrawal benefits 121 269
Terminations 284 3 405
Disinvestments 2 595 1 879
Re-insurance recoveries (227) (201)
International 792 643
Death and disability claims 183 195
Maturity claims 130 138
Annuities 40 38
Withdrawal benefits 58 69
Surrenders 243 199
Terminations 2 3
Disinvestments 153 24
Re-insurance recoveries (17) (23)
Capitation contracts 21 14
Total payments to contract holders 10 958 13 073
Adjustment for payments to investment contract (2 362) (4 711)
holders
Transfers between insurance, investment and 161 104
investment with DPF contracts
Net insurance benefits and claims per income 8 757 8 466
statement
- Segment information is disclosed in the segment report and reconciles
to total payments to contract holders.
METROPOLITAN
NUMBER OF EMPLOYEES 31.12.20 31.12.2
10 009
Indoor staff 5 463 5 512
Insurance companies 2 617 2 780
Retail 1 209 1 274
Union Life - 98
Cover2Go - 13
Employee benefits 398 400
International 469 453
Group services 541 542
Metropolitan Health Group 2 546 2 382
Asset management 76 81
Asset administration 62 67
Metropolitan Retirement Administrators 141 138
DirectFin Solutions 6 47
Holding company 15 17
Field staff 4 538 4 210
Retail 3 366 2 822
Union Life - 304
International 1 172 1 084
Total 10 001 9 722
- Union Life was sold during 2010
ANALYSIS OF EXPENSES 12 mths to 12 mths to
31.12.2010 31.12.2009
Rm Rm
Depreciation, amortisation and impairment 191 129
expenses
Employee benefit expenses 1 694 1 549
Sales remuneration 982 1 006
Other expenses 1 291 1 346
Finance costs 134 168
Total expenses 4 292 4 198
Long-term insurance business 3 004 3 093
Administration expenses 1 649 1 761
Sales remuneration 979 1 003
Asset management fees 231 210
Direct property expenses 145 119
Administration business 1 152 996
Finance costs - preference shares and 132 164
subordinated redeemable debt
Holding company (19) 128 67
Consolidation adjustments (124) (122)
Total expenses 4 292 4 198
(19) Holding company expenses include merger costs of R42 million in
2010.
FINANCIAL INSTRUMENT ASSETS 31.12.2010 31.12.2009
Rm Rm
Equity securities 27 183 24 687
Debt securities 14 405 13 014
Funds on deposit and other money market 5 680 5 484
instruments
Unit-linked investments 11 985 11 258
Derivative financial instruments 867 718
Loans and receivables 1 031 1 040
Total financial instrument assets 61 151 56 201
ASSETS UNDER MANAGEMENT 31.12.2010 31.12.2009
Rm Rm
Total on-balance sheet assets 76 130 71 571
Collective investments 23 700 22 189
Health 5 387 5 006
Asset management - segregated assets 570 2 948
Employee benefits - segregated assets 806 1 508
Total assets under management 106 593 103 222
ANALYSIS OF ASSETS UNDER MANAGEMENT 31.12.2010 31.12.2009
Rm Rm
On-balance sheet assets
Managed and administered by group asset 56 422 51 017
managers
Properties 3 998 3 869
Collective investment schemes 2 401 1 982
Investment assets 50 023 45 166
Administered and/or managed by Metropolitan 1 170 1 320
Collective Investments (excludes managed by
group asset managers)
Managed by external managers 14 006 14 521
Other assets 4 532 4 713
76 130 71 571
Off-balance sheet assets
Managed and administered by group asset 4 297 6 629
managers
Collective investment schemes 3 071 3 004
Segregated assets 1 226 3 625
Administered and/or managed by Metropolitan 20 628 19 185
Collective Investments (includes white label
funds)
Employee benefits - segregated assets 151 831
Health 5 387 5 006
Total assets under management 106 593 103 222
ANALYSIS OF ASSETS BACKING 31.12.2010 31.12.2009
SHAREHOLDER EXCESS
Rm % Rm %
Equity securities 2 885 39.8 2 489 37.0
Collective investment schemes 1 124 15.5 1 260 18.8
Debt securities 602 8.3 723 10.8
Owner-occupied properties 665 9.2 638 9.5
Investment properties 390 5.4 223 3.3
Cash and cash equivalents 2 049 28.3 1 781 26.5
Goodwill 149 2.0 154 2.3
Other net assets 594 8.2 667 9.9
8 458 116.7 7 935 118.1
Redeemable preference shares (711) (9.8) (711) (10.6)
Subordinated redeemable debt (501) (6.9) (501) (7.5)
Shareholder excess per reporting 7 246 100.0 6 723 100.0
basis
GROUP SHAREHOLDER EXCESS - TOP 10 31.12.2010 31.12.2009
EQUITY HOLDINGS
Rm % Rm %
MTN Group Ltd 244 8.5 196 7.9
Anglo American Plc 168 5.8 113 4.5
Billiton Plc 160 5.5 139 5.6
Sasol Ltd 151 5.2 128 5.1
Standard Bank Group Ltd 143 5.0 104 4.2
Impala Platinum Holdings Ltd 124 4.3 116 4.7
SABMiller Plc 110 3.8 87 3.5
Compagnie Financiere Richemont 104 3.6 62 2.5
FirstRand Ltd 92 3.2 117 4.7
Naspers Ltd 92 3.2 87 3.5
1 388 48.1 1 149 46.2
Total equities backing shareholder 2 885 100.0 2 489 100.0
excess
Date: 09/03/2011 07:05:43 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
