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MMI
MMI
MMI - MMI Holdings Limited - Detailed MMI unaudited pro forma financial
information - Results for the 6 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 "group")
Detailed MMI unaudited pro forma financial information
Results for the 6 months ended 31 December 2010
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF MMI HOLDINGS LIMITED GROUP ("MMI")
The unaudited pro forma income statement, analysis of diluted core headline
earnings, value of new business, new business premiums and return on embedded
value of MMI for the 6 months ended 31 December 2010 ("unaudited pro forma
financial information") are provided below and have been prepared for
illustrative purposes only to reflect the pro forma results of MMI as though
the merger of Metropolitan and Momentum as set out in the Revised Listing
Particulars dated 6 September 2010 ("the Merger") was effective from 1 July
2010.
Because of their 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 independent reporting accountants` limited assurance report on the unaudited
pro forma financial information of MMI for the six months ended 31 December 2010
is available for inspection.
UNAUDITED PRO FORMA INCOME STATEMENT
The unaudited pro forma income statement for the six months ended 31 December
2010 has been prepared on the assumption that the Merger was effective from 1
July 2010.
All figures are in R million unless otherwise stated
Metropoli-tan Metropoli-tan Metropoli- Momentum
12 months 6 months tan 6 months 6 months
ended 31 ended 30 June ended 31 ended 31
December 2010 2010 December December
(A) 2010 2010
(B) (A-B)
(1)
Notes (2)
Net insurance 10 304 4 964 5 340 4 267
premiums received
Fee income 1 471 700 771 1 443
Investment income 3 667 1 672 1 995 4 372
Net realised and 4 849 (546) 5 395 11 599
fair value gains
Net income 20 291 6 790 13 501 21 681
Net insurance 8 757 4 444 4 313 5 006
benefits and claims
Change in 4 651 (85) 4 736 2 636
liabilities
Change in insurance 4 039 320 3 719 2 501
contract
liabilities
Change in 665 (371) 1 036 389
investment
contracts with DPF
liabilities
Change in (53) (34) (19) (254)
reinsurance
provision
Fair value 1 042 171 871 8 601
adjustments on
investment contract
liabilities
Fair value 5 6 (1) 1 022
adjustments on
collective
investment scheme
liabilities
Depreciation, 191 100 91 83
amortisation and
impairment expenses
Employee benefit 1 694 858 836 1 122
expenses
Sales remuneration 982 476 506 960
Other expenses 1 291 528 763 674
Expenses 18 613 6 498 12 115 20 104
Metropoli-tan Metropoli- Metropoli- Momentum
12 months tan 6 months tan 6 months 6 months
ended 31 ended 30 ended 31 ended 31
December 2010 June 2010 December December
(A) 2010 2010
(B) (A-B)
(1)
Notes (2)
Results of 1 678 292 1 386 1 577
operations
Share of profit of 14 11 3 22
associates
Finance costs (134) (66) (68) (266)
Profit/(loss) 1 558 237 1 321 1 333
before tax
Income tax (385) (16) (369) (558)
credits/(expenses)
Earnings 1 173 221 952 775
Attributable to:
Owners of the 1 153 218 935 760
parent
Non-controlling 20 3 17 (3)
interests
Preference 18
shareholders
1 173 221 952 775
Metro- FNB Life Amorti- Other MMI
politan sation of pro
re- merger- forma
classi- related
fica- intan-
tions gible
assets
(4) (5)
Notes (3) (6)
Net insurance premiums (300) 9 307
received
Fee income (44) 2 170
Investment income (9) 6 358
Net realised and fair 16 994
value gains
Net income (44) (309) 34 829
Net insurance benefits (83) 9 236
and claims
Change in liabilities 15 7 387
Change in insurance 6 220
contract
liabilities
Change in investment 1 425
contracts with DPF
liabilities
Change in reinsurance 15 (258)
provision
Fair value adjustments 9 472
on investment contract
liabilities
Fair value adjustments 1 021
on collective
investment scheme
liabilities
Depreciation, 3 299 476
amortisation and
impairment expenses
Employee benefit 1 958
expenses
Sales remuneration (3) 1 463
Other expenses (44) (18) 1 375
Expenses (44) (68) 299 (18) 32 388
Metro- FNB Amorti- Other MMI
politan Life sation pro forma
re-classi- of
fica- merger-
tions related
intan-
gible
(3) assets
Notes (4) (5) (6)
Results of operations - (241) (299) 18 2 441
Share of profit of 25
associates
Finance costs (334)
Profit/(loss) before (241) (299) 18 2 132
tax
Income tax 67 77 (783)
credits/(expenses)
Earnings - (174) (222) 18 1 349
Attributable to:
Owners of the parent - (174) (214) 18 1325
Non-controlling (8) 6
interests
Preference shareholders 18
- (174) (222) 18 1 349
RECONCILIATION OF PRO Metropoli- Metropoli-tan Metropoli- Momentum
FORMA HEADLINE EARNINGS tan 12 6 months tan 6 6 months
attributable to owners of months ended 30 June months ended 31
the parent ended 31 2010 ended 31 December
December December 2010
2010 (B) 2010
(A) (A-B)
Notes (1) (2)
BASIC
Earnings 1 153 218 935 760
Goodwill and other 29 17 12 7
impairments
Sale of Union Life (3) (3) -
Headline earnings 1 179 232 947 767
Net realised and fair (601) 9 (610) 23
value losses/ (gains) on
excess
Basis and other changes 357 173 184 (23)
and investment variances
FNB Life (174)
Merger costs 42 - 42 27
Amortisation of intangible 27
assets relating to
business combinations
Core headline earnings(7) 977 414 563 647
DILUTED
Earnings 1 153 218 935 760
Finance costs - preference 86 42 44 -
shares
Diluted earnings 1 239 260 979 760
Goodwill and other 29 17 12 7
impairments
Sale of Union Life (3) (3) -
Headline earnings 1 265 274 991 767
Net realised and fair (601) 9 (610) 23
value losses/ (gains) on
excess
Basis and other changes 357 173 184 (23)
and investment variances
Dilutory effect of (5) (2) (3) -
subsidiaries (8)
FNB Life (174)
Investment income on 1 - 1
treasury shares - contract
holders
Merger costs 42 - 42 27
Amortisation of intangible 27
assets relating to
business combinations
Core headline earnings(7) 1 059 454 605 647
RECONCILIATION OF PRO Metropoli-tan Metropoli- Metropoli- Momentum
FORMA HEADLINE EARNINGS 12 months tan 6 months tan 6 6 months
attributable to owners of ended 31 ended 30 months ended 31
the parent December 2010 June 2010 ended 31 December
(A) December 2010
(B) 2010
(A-B)
Notes (1) (2)
Earnings per share (cents)
Basic
Core headline earnings
Headline earnings
Earnings
Weighted average number of 551 951
shares (million) (9)
Diluted
Core headline earnings
Weighted average number of 654 951
shares (million) (10),
(11)
Headline earnings
Earnings
Weighted average number of 653 951
shares (million) (10),
(11)
RECONCILIATION OF PRO Metropoli FNB Amortisa- Other MMI
FORMA HEADLINE EARNINGS tan Life tion of pro
attributable to owners of reclassif merger- forma
the parent ica-tions related
intangible
assets
Notes (3) (4) (5) (6)
BASIC
Earnings - (174) (214) 18 1 325
Goodwill and other 19
impairments
Sale of Union Life -
Headline earnings - (174) (214) 18 1 344
Net realised and fair (587)
value losses/ (gains) on
excess
Basis and other changes 161
and investment variances
FNB Life 174 -
Merger costs (42) 27
Amortisation of 214 241
intangible assets
relating to business
combinations
Core headline earnings(7) - - - (24) 1 186
RECONCILIATION OF PRO Metropoli- FNB Amortisa- Other MMI
FORMA HEADLINE EARNINGS tan Life tion of pro
attributable to owners of reclassi- merger- forma
the parent fications related
intangible
assets
Notes (3) (4) (5) (6)
DILUTED
Earnings - (174) (214) 18 1 325
Finance costs - 44
preference shares
Diluted earnings - (174) (214) 18 1 369
Goodwill and other 19
impairments
Sale of Union Life -
Headline earnings - (174) (214) 18 1 388
Net realised and fair (587)
value losses/ (gains) on
excess
Basis and other changes 161
and investment variances
Dilutory effect of (3)
subsidiaries (8)
FNB Life 174 -
Investment income on 1
treasury shares -
contract holders
Merger costs (42) 27
Amortisation of 214 241
intangible assets
relating to business
combinations
Core headline earnings(7) - - - (24) 1 228
Earnings per share
(cents)
Basic
Core headline earnings 80
Headline earnings 91
Earnings 89
Weighted average number (20) 1 482
of shares (million) (9)
Diluted
Core headline earnings 77
Weighted average number 1 605
of shares (million) (10),
(11)
Headline earnings 88
Earnings 86
Weighted average number 1 584
of shares (million) (10), (20)
(11)
Notes to the income statement and reconciliation of pro forma headline earnings:
1. The "Metropolitan 6 months ended 31 December 2010" column represents
Metropolitan`s derived financial information for the six months ended 31
December 2010. The derived results of Metropolitan for the six months are
based on the Metropolitan published reviewed financial information for the
12 months ended 31 December 2010 (column A) less the previously published
unaudited financial information for the six months ended 30 June 2010
(column B). The independent reporting accountant`s review opinion on the
Metropolitan financial information for the 12 months ended 31 December 2010
is available for inspection. The weighted average number of shares
represents the actual weighted number of shares of Metropolitan for the six
months ended 31 December 2010 prior to the Merger.
2. The "Momentum 6 months ended 31 December 2010" column represents Momentum`s
published unaudited financial information for the six months ended 31
December 2010 and has been extracted, without adjustment, from the
published results for the six months ended 31 December 2010.
3. The "Metropolitan reclassifications" column represents certain
reclassifications made to the results for the six months ended 30 June 2010
to align the accounting policies with the accounting policies used by MMI
for the six months ended 31 December 2010. The following reclassifications
were made:
a. Administration fee income was set off against other expenses in the
income statement for the six months ended 30 June 2010. This income is
now disclosed under fee income (R44 million).
b. The amortisation and impairment of deferred acquisition 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 R3
million was reallocated.
4. The "FNB Life" column represents an adjustment relating to specific terms
included in the agreement entered into between FirstRand Limited and
Momentum governing their future relationship, dated 25 August 2010 (the FNB
Strategic Relationship Agreement). In terms of this agreement FirstRand
receives 90% of the earnings of FNB Life, a division of Momentum, through a
reinsurance arrangement which became effective from 1 December 2010. The
published Momentum results for the six months ended 31 December 2010
includes 100% of FNB Life earnings for five months and 10% for one month.
The pro forma financial information assumes that the FNB Relationship
Agreement was effective from 1July 2010 and therefore this column adjusts
for 90% of the FNB Life earnings for five months, being R174 million (net
of tax).
5. The "Amortisation of merger-related intangible assets" column represents an
adjustment relating to intangible assets recognised in terms of the fair
value adjustments to Metropolitan assets and liabilities in terms of the
Merger and the reverse acquisition of Metropolitan by Momentum and the
preliminary fair value exercise. Intangible assets were fair valued and
additional intangible assets were identified as part of the preliminary
fair value exercise performed. This adjustment represents the effect of
amortisation for the 6 months ended 31 December 2010. The material
amortisation periods and amounts are as follows:
Intangible asset Additional fair Additional amortisation net
recognised value recognised of tax and minorities
Value of business 6 060 123
acquired
Customer relations 1 925 66
Software 36 3
Brand 1 078 20
Broker network 135 10
Total 9 234 222
Deferred tax of R77 million has been released in line with the above.
The R8 million impact of non-controlling interests relates to adjustments in
entities where outside shareholders share in the adjustments above.
6. The "Other" column represents the following:
a. An adjustment relating to non-recurring transaction costs directly
associated with the Merger. Total non-recurring transaction costs of
R27 million (net of tax) of the accounting acquirer, Momentum, have
been expensed in terms of IFRS 3 (Revised) - Business combinations and
are already included in the historical financial information of
Momentum for the six months ended 31 December 2010. The merger costs
incurred by Metropolitan in the six months ended 31 December 2010 (R18
million) and included in the historical financial information of
Metropolitan for the six months ended 31 December 2010 have been
adjusted for in this column, as Metropolitan`s merger costs are
considered pre-acquisition and are therefore added back for the MMI
pro forma financial information. For core headline earnings purposes,
the R42 million merger costs for the 12 months ended 31 December 2010
were reversed in the reported results. This original core earnings
adjustment is reversed for the pro forma MMI position as a transaction
costs adjustment is made as discussed above.
b. An adjustment to the weighted average number of shares for the 20
million treasury shares held within the MMI group.
7. Core headline earnings are a measure of the performance of MMI in addition
to earnings and headline earnings as it is seen by the directors of MMI as
an appropriate measure. Core headline earnings eliminate items of both a
once-off and an inherently volatile nature, such as changes to the
valuation basis, investment variances, capital appreciation/depreciation
and the amortisation of any intangible assets recognised due to business
combinations.
8. 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.
9. The weighted average number of ordinary shares assumes that the 951 million
shares issued to FirstRand in exchange for Momentum were issued on 1 July
2010. At 31 December 2010, there were 20 million internally held MMI
shares. These shares all back policyholder assets and are now treated as
treasury shares. These shares have also been adjusted for in the weighted
average number of shares.
10. The diluted weighted average number of ordinary shares for core headline
earnings per share purposes represents the diluted weighted average number
of shares for the 6 months ended 31 December 2010 and assumes that the
treasury shares held on behalf of contract holders are issued. For diluted
earnings and headline earnings per share, these shares are deemed to be
cancelled.
11. It was assumed that all the convertible preference shares issued to a
subsidiary of Kagiso Trust Investments (Pty) Ltd would convert into
ordinary shares on a one-for-one basis. This represents the fully diluted
effect of these preference shares.
12. The effect of the reversal of dividend income, any realised and unrealised
gains on the 20 million treasury shares discussed above was considered
immaterial and therefore no adjustment has been made for the pro forma
financial information.
UNAUDITED PRO FORMA ANALYSIS OF DILUTED CORE HEADLINE EARNINGS
The unaudited pro forma analysis of diluted core headline earnings for the six
months ended 31 December 2010 has been prepared on the assumption that the
Merger was effective from 1 July 2010.
All figures are in R million unless otherwise stated
ANALYSIS OF Metro- Metro- Met- Momen- Momen- Reallo- Mer- MMI
PRO FORMA poli-tan poli-tan ropo- tum 6 tum re- cate ger pro
DILUTED 12 months 6 months litan months allo- Metro- costs forma
CORE ended 31 ended 30 6 ended ca- poli-
HEADLINE Decem-ber June months 31 tions tan
EARNINGS 2010 2010 ended Decem- Ody-
(A) 31 ber ssey
(B) Decem- 2010
ber
2010
Notes (A-B) (3)
(1) (2) (4) (5)
Momentum 305 70 (18) 357
retail
Metropoli- 432 211 221 (21) 18 218
tan retail
New markets (21) 21 -
Employee 158 62 96 28 124
benefits/
Corporate
business
Momentum (1) 1 -
group
Interna- 84 51 33 (13) 20
tional
Invest- 55 10 45 150 (70) 125
ments/
Asset
Manage-ment
Health 92 47 45 (16) 29
FNB Life 23 23
Share- 238 73 165 191 (24) 332
holder
capital/
Capital
centre (6)
1 059 454 605 647 - - (24) 1 228
Notes to the pro forma analysis of diluted core headline earnings:
1. The "Metropolitan 6 months ended 31 December 2010" column represents
Metropolitan`s derived financial information for the six months ended 31
December 2010. The derived results of Metropolitan for the six months are
based on the Metropolitan published reviewed financial information for the
12 months ended 31 December 2010 (column A) less the previously published
unaudited financial information for the six months ended 30 June 2010
(column B). The independent Reporting Accountant`s review opinion on the
Metropolitan financial information for the 12 months ended 31 December 2010
is available for inspection.
2. The "Momentum 6 months ended 31 December 2010" column represents Momentum`s
published unaudited financial information for the six months ended 31
December 2010 and has been extracted, without adjustment, from the
published results for the six months ended 31 December 2010.
3. The "Momentum reallocations" column represents the following reallocations:
a. reallocation of the core headline earnings of the historical Momentum
`group` segment (negative R1 million) into the equivalent current MMI
segments, being Employee benefits (R28 million), Health (negative R16
million) and International (negative R13 million).
b. reallocation of Momentum`s middle market initiative (New markets) to
Metropolitan retail as under MMI it will now report under Metropolitan
retail (negative R21 million).
c. reallocation of Momentum wealth as it was previously disclosed under
the `investments segment` and is now included under Momentum retail
(R70 million).
4. The "Reallocate Metropolitan Odyssey" column represents the reallocation of
Metropolitan Odyssey from Metropolitan retail to Momentum retail as its
target market is similar to that of Momentum (negative R18 million).
5. The "Merger costs" column represents non-recurring transaction costs
directly associated with the merger. Total merger costs of R27 million (net
of tax) of the accounting acquirer, Momentum, have been expensed in terms
of IFRS 3 (Revised) - Business combinations and are already included in the
historical financial information of Momentum for the six months ended 31
December 2010. The merger costs incurred by Metropolitan in the six months
ended 31 December 2010 have been adjusted for in this column as
Metropolitan`s merger costs are considered pre-acquisition and are
therefore added back for the MMI pro forma financial information. The R24
million represents the R24 million merger costs incurred for the six months
ended 30 June 2010 which were previously not added back for diluted core
headline earnings.
6. Shareholder capital/Capital centre 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.
UNAUDITED PRO FORMA VALUE OF NEW BUSINESS AND NEW BUSINESS PREMIUMS
The unaudited pro forma value of new business and new business premiums for the
six months ended 31 December 2010 has been prepared on the assumption that the
Merger was effective from 1 July 2010.
All figures are in R million unless otherwise stated
PRO FORMA Metro- Metro- Metro- Momen- Mo- Re- Me- MMI
VALUE OF NEW poli- poli- poli-tan tum 6 men- allo- tro- pro
BUSINESS tan 12 tan 6 6 months months tum cate poli- forma
months months ended 31 ended re- Metro- tan
ended ended Decem-ber 31 allo- poli- basis
31 30 2010 Decem- ca- tan chan-
Decem- June (A-B) ber tions Ody- ges
ber 2010 (1) 2010 ssey
2010
Notes (A) (B)
(2) (3) (4) (5)
Momentum 188 188
retail
Metropoli- 223 54 169 (10) (31) 128
tan retail
New markets (10) 10 -
Employee 23 7 16 9 1 26
benefits
Interna- 21 6 15 (1) 14
tional
267 67 200 187 - - (31) 356
PRO FORMA Metro- Metro- Metro- Momen- Mo- Re- Me- MMI
NEW poli-tan poli-tan poli- tum 6 men- allo- tro- pro
BUSINESS 12 6 months tan 6 months tum cate poli- forma
PREMIUMS months ended 30 months ended re- Metro- tan
ended 31 June ended 31 allo- poli- basis
Decem- 2010 31 Decem- ca- tan chan-
ber 2010 Decem- ber tions Ody- ges
(A) (B) ber 2010 ssey
2010
(A-B) (4)
Notes (1) (2) (3) (5)
Recurring 1 155 508 647 967 - - 1 614
premiums
Momentum 614 84 698
retail
Metropoli- 843 364 479 48 (84) 443
tan retail
New markets 48 (48) -
Employee 158 69 89 305 394
benefits
Interna- 154 75 79 79
tional
Single 3 176 1 463 1 713 12 121 - 13 834
premiums
Momentum 10 991 115 11 106
retail
Metropoli- 2 115 960 1 155 (115) 1 040
tan retail
New markets - -
Employee 941 472 469 1 130 1 599
benefits
Interna- 120 31 89 89
tional
PRO FORMA Metro- Metro- Metro- Momen- Mo- Re- Me- MMI
NEW poli-tan poli- poli- tum 6 men- allo- tro- pro
BUSINESS 12 months tan 6 tan 6 months tum cate poli- forma
PREMIUMS ended 31 months months ended re- Metro-tan
Decem-ber ended ended 31 allo- poli- basis
2010 30 31 Decem- ca- tan chan-
(A) June Decem- ber tions Ody- ges
2010 ber 2010 ssey
2010
(B) (A-B) (4)
Notes (1) (2) (3) (5)
Annual 1 472 655 817 2 179 - - 2 996
premium
equivalent
(APE)
Momentum 1 713 96 1 809
retail
Metropoli- 1 054 460 594 48 (96) 546
tan retail
New markets 48 (48) -
Employee 252 117 135 418 553
benefits
Interna- 166 78 88 88
tional
Present 8 540 3 674 4 866 17 253 - - (147) 21 972
value of
premiums
(PVP)
Momentum 14 167 294 14 461
retail
Metropoli- 5 602 2 358 3 244 100 (294) (93) 2 957
tan retail
New markets 100 (100) -
Employee 2 154 964 1 190 2 986 (44) 4 132
benefits
Interna- 784 352 432 (10) 422
tional
PRO FORMA Me-tro- Mo-men- Mo-men- Re-allo-Me- MMI
PROFITABI- poli-tan tum for tum re- cate Me-tro- pro
LITY OF NEW for the the 6 allo-ca- tro- poli- forma
BUSINESS - 6 months months tions poli- tan
COVERED ended 31 ended tan Ody-basis
BUSINESS Decem- 31 ssey chan-
ber 2010 Decem- ges
(A-B) ber
(1) 2010
(3) (4)
Notes (2)
(5)
Pro forma 11.9
value of new
business as
% of APE
Momentum 10.4
retail
Metropolitan 23.4
retail
Employee 4.7
benefits
Interna- 15.9
tional
Pro forma 1.6
value of new
business as
% of PVP
Momentum 1.3
retail
Metropolitan 4.3
retail
Corporate 0.6
business
Interna- 3.3
tional
Notes to the pro forma value of new business and new business premiums:
1. The "Metropolitan 6 months ended 31 December 2010" column represents
Metropolitan`s derived financial information for the six months ended 31
December 2010. The derived results of Metropolitan for the six months are
based on the Metropolitan published financial information for the 12 months
ended 31 December 2010 as reviewed by the consulting actuaries (column A)
less the previously published unaudited financial information for the six
months ended 30 June 2010 (column B). The consulting actuaries` review
opinion on the Metropolitan financial information for the 12 months ended
31 December 2010 is available for inspection.
2. The "Momentum 6 months ended 31 December 2010" column represents Momentum`s
published unaudited financial information for the six months ended 31
December 2010 and has been extracted, without adjustment, from the
published results for the six months ended 31 December 2010.
3. The "Momentum reallocations" column represents the following reallocations:
a. reallocation of Momentum`s middle market initiative (New markets) to
Metropolitan retail as under MMI it will now report under Metropolitan
retail;
b. the Momentum `group` segment was already disclosed separately into
Employee benefits, Health and International in the published Momentum
results for the 6 months ended 31 December 2010 and therefore a
reallocation was not necessary; and
c. Momentum wealth was already disclosed with Momentum retail in the
published Momentum results for the 6 months ended 31 December 2010 and
therefore a reallocation was not necessary.
4. The "Reallocate Metropolitan Odyssey" column represents the reallocation of
Metropolitan Odyssey from Metropolitan retail to Momentum retail as its
target market is similar to that of Momentum. The value of new business
amount was considered immaterial and therefore no reallocation was made for
value of new business.
5. The "Metropolitan basis changes" column represents the effect of the change
in assumptions to put the 30 June 2010 value of new business of
Metropolitan on a consistent basis as the 31 December 2010 value of new
business calculation.
UNAUDITED PRO FORMA RETURN ON EMBEDDED VALUE
The unaudited pro forma annualised return on embedded value for the six months
ended 31 December 2010 has been prepared on the assumption that the Merger was
effective on 1 July 2010.
All figures are in R million unless otherwise stated
Metro- Metro- Metro- Momen- FNB MMI pro
poli-tan poli-tan poli-tan tum for Life forma
for the for the for the 6 the 6
12 months 6 months months months
ended 31 ended 30 ended 31 ended
Decem-ber June Decem-ber 31
2010 2010 2010 Decem-
(A) (B) (A-B) ber
(1) 2010
Notes (2) (3)
Opening embedded 12 118 12 007 11 811 17 683 (633) 28 861
value
Metropolitan 111 111
restatements (4)
Capital (696) (433) (263) (930) 735 (458)
movements
Embedded value 1 895 237 1 658 1 048 (102) 2 604
profit
Closing embedded 13 317 11 811 13 317 17 801 - 31 118
value
Annualised 18.9
return on
embedded value
(%)
Notes to the pro forma annualised return on embedded value:
1. The "Metropolitan 6 months ended 31 December 2010" column represents
Metropolitan`s derived reconciliation of embedded value for the six months
ended 31 December 2010. The derived results of Metropolitan for the six
months are based on the Metropolitan published, reconciliation of embedded
value for the 12 months ended 31 December 2010 as reviewed by the
consulting actuaries (column A) less the published, unaudited financial
information for the six months ended 30 June 2010 (column B). The
consulting actuaries` review opinion on the Metropolitan financial
information for the 12 months ended 31 December 2010 is available for
inspection.
2. The "Momentum for the 6 months ended 31 December 2010" column represents
Momentum`s reconciliation of embedded value as extracted, without
adjustment, from the unaudited published results of Momentum for the 6
months ended 31 December 2010.
3. The "FNB Life" column represents an adjustment relating to specific terms
included in the FNB Relationship Agreement. In terms of this agreement
FirstRand receives 90% of the earnings of FNB Life, a division of Momentum.
This adjustment represents 90% of the embedded value of FNB Life as at 1
July 2010 together with the movements in embedded value for the 6 months
ended 31 December 2010.
4. The "Metropolitan restatements" line represents the early adoption of IAS
12 - Income taxes amendments. The amendment introduces a presumption that
the carrying value of an investment property is recovered through sale. The
Metropolitan group has elected to early adopt the amendment and this
results in an increase in opening embedded value as at 1 July 2010 of R111
million. As the amendment was published in December 2010, it was not
applied to the Metropolitan previously published results for the six months
ended 30 June 2010.
9 March 2011
Sponsor:
Merrill Lynch South Africa (Pty) Limited
Date: 09/03/2011 07:08:12 Produced by the JSE SENS Department.
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