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MMI
MMI
MMI - MMI Holdings Limited - Holdings unaudited group results for the six months
ended 31 December 2011
MMI HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN Code: ZAE000149902
JSE Share Code: MMI
NSX Share Code: MIM
("MMI" or the "company" or the "group")
Holdings unaudited group results for the six months ended 31 December 2011
- Merger integration progressing well
- R500 million merger savings on track
- Strong capital structure
- Group embedded value of R30.8 billion
- Core headline earnings up 5% to 81 cents per share
- Interim dividend up 5% to 44 cents per share
OVERVIEW OF OPERATIONS AND PROSPECTS
NATURE OF ACTIVITIES
MMI Holdings is a South African based financial services group that provides a
wide range of products and services to clients locally and in selected African
countries.
OPERATING ENVIRONMENT
Equity markets remained volatile during the reporting period while long bond
interest rates closed slightly lower. Overall consumer confidence stabilised,
household disposable income increased marginally in some market segments and
employment levels showed pockets of improvement. Despite positive signs, local
operating conditions remained challenging.
GROUP RESULTS
The process of merging the operations of Metropolitan and Momentum continues to
be a very challenging and complex exercise; however, good progress is being made
in this regard and the integration projects are on schedule.
- The embedded value of R30.8 billion (1 920 cents per share) reflects the
underlying financial strength and sustainability of the group.
- Diluted core headline earnings, as per the segmental information, increased
by 4% to R1 294 million for the period.
- Positive net cash flow from clients was recorded for the period.
CAPITAL MANAGEMENT
- The group actively manages its capital resources within a defined risk
appetite and balances the interests of all stakeholders to protect and
enhance shareholder wealth.
- Capital is regarded as a scarce resource and a significant driver of
shareholder returns.
- Capital management focuses on the investment, level and allocation of
capital.
- The investment mandate for shareholder capital was finalised during the
period and a less risky mandate has been implemented in Metropolitan, which
reduced the capital adequacy requirement (CAR) and increased the CAR
multiple from 2.3 times at year-end to 2.7 times. The new mandate also
resulted in a once-off increase in the cost of capital in the traditional
embedded value calculation, which reduced the embedded value by R523
million.
- The FSB`s solvency assessment and management (SAM) project SA QIS1
submissions were completed during the period.
- The group held a capital buffer of R4.0 billion at 31 December 2011.
- The group is comfortable that its present level of capital is appropriate
in the current environment; this position is evaluated on an ongoing basis.
MERGER INTEGRATION
- The overarching objective of the integration, overseen by a dedicated chief
integration officer, is to incorporate "the best of both".
- The integration has moved from planning to implementation.
- Systems and data migration projects are proceeding according to plan.
- The legal amalgamation of the Metropolitan and Momentum long-term insurance
licences has commenced, subject to regulatory approvals.
- Group and divisional strategies have been embedded and merger savings of
R500 million have been identified and should emerge over the next three
years:
- Targets have been set per division and firm deadlines are in place.
- The board is measuring progress against these targets on an ongoing basis.
PROSPECTS
- Each division has implemented strategic plans and integration processes to
identify and optimise structures, operations, target markets, distribution
channels and product offerings.
- Growth in new business volumes will, however, remain dependent on the
economic environment, including a recovery in employment and stronger
disposable income levels.
- All divisions 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.
- Ongoing uncertainties from the eurozone crisis could continue to have a
negative impact on business confidence in the markets where we operate.
- The board of MMI Holdings believes that the group has appropriate
strategies to unlock value and generate a satisfactory return on capital
for shareholders over time.
OPERATIONAL REVIEW
MOMENTUM RETAIL
- Trading conditions remained tough, resulting in an 11% decline in new
business on an annual premium equivalent (APE) basis.
- The value of new business margin, on a present value of premiums (PVP)
basis, came under pressure as a result of decreased production in most
lines of business, a change in the business mix as well as further
investment into the agency channel.
- The integration of the Odyssey business remains on track.
- Operating profit for the period reduced by 2% to R377 million, largely due
to experience profit being below the long-term expectations.
METROPOLITAN RETAIL
- Recurring premium new business ended 18% higher, driven by good production
in the traditional agency channels.
- Further investment in the group scheme business resulted in a gratifying
36% improvement in new business from this distribution channel.
- Significant improvements were delivered through the new markets
distribution channel.
- The reduction in single premium income was the result of the transfer of
certain distribution channels to Momentum Retail.
- The value of new business increased by 4% to R151 million, at a PVP margin
of 5.3%, on the back of increased production and good expense management,
after allowing for an increase of R11 million in the cost of capital and a
R14 million reduction resulting from the narrowing of real yields.
- The size of the in-force book increased to 2.9 million policies through
satisfactory retention and good new business volumes.
- At R204 million, operating profit for the period was 23% higher, reflecting
the strong operational performance of the division.
MOMENTUM EMPLOYEE BENEFITS
- Total new business for the half-year increased 8% to R599 million on an APE
basis.
- Value of risk new business was significantly higher due to improved
business mix and increased volumes, in particular risk business from the
large corporate market.
- New business flows for investment products were lower than recorded for the
corresponding period of the previous year.
- Client retention interventions resulted in better persistency across all
product lines.
- Efforts to reduce the division`s expense to income ratio through the merger
integration are ongoing.
- A satisfactory new business pipeline is in place.
- Disability experience reduced as a result of the impact of the prevailing
economic conditions.
- Operating profit for the period reduced by 3% to R99 million.
METROPOLITAN INTERNATIONAL
- New business revenue was very satisfactory and increased by 47% to R129
million on an APE basis.
- Botswana and Lesotho recorded significant increases in single premium
business.
- The individual life policy book grew by 4.4%, boosted primarily by the
business in Ghana.
- Lives under administration in the health business increased by 7% and
claims ratios improved as a result of successful re-pricing.
- The employee benefits environment in Namibia remained highly competitive.
- An operating loss of R3 million was recorded, as risk profits decreased and
new business strain increased.
MOMENTUM INVESTMENTS
- During the period under review assets under management remained
exposed to volatility in global and local markets.
- Equity performance improved during the period; however, further
work is required on the performance of balanced mandates.
- Five Raging Bull awards reflect the improved investment performance of the
division.
- The multi-manager business recorded satisfactory investment performance
across most product lines.
- The net funds outflow from third parties decreased significantly over the
reporting period.
- Although Momentum Collective Investments recorded inflows, the new white
label regulations published by the FSB could have a negative impact on this
business in future.
- Operating profit for the period reduced by 30% to R62 million.
METROPOLITAN HEALTH
- The new business model of the Government Employees Medical Scheme was
implemented successfully and the scheme continued to grow by 350 - 400
principal members per day.
- Revenue was increased by the take-on of two new corporate schemes.
- Metropolitan Health Risk Management continued to deliver good performance.
- Merger savings continued to improve the operational efficiencies.
- The business continued to position itself for national health insurance
(NHI) reforms.
- Operating profit increased substantially to R58 million, reflecting the
improvement in operational efficiencies.
SHAREHOLDER CAPITAL
- Shareholder capital includes investment income on shareholder funds. The
prior reporting period included a once-off interest accrual on an income
tax refund.
- Operating profit from the balance sheet management business is included in
this segment.
- The investment mandate for shareholder capital was revised during the
period and a less risky mandate has been implemented.
DIRECTORS` STATEMENT
The directors take pleasure in presenting the unaudited interim results of MMI
Holdings financial services group for the period ended 31 December 2011. The
preparation of the group`s condensed consolidated results was supervised by the
group finance director, Preston Speckmann, BCompt (Hons), CA(SA).
During the 2011 financial year Metropolitan merged with Momentum to form the MMI
financial services group.
Basis of preparation of financial information
These results have been prepared in accordance with International Accounting
Standard 34 (IAS34) - Interim financial reporting; the South African Companies
Act of 2008; 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 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, 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 group`s integrated report for the year ended 30 June 2011,
including changes in estimates which are an integral part of the insurance
business. The group is exposed to financial and insurance risks - details are
also provided in the group`s integrated report.
Segmental information
The group operates through the following divisions: Momentum Retail,
Metropolitan Retail, Momentum Employee Benefits, Metropolitan International,
Momentum Investments, Metropolitan Health and shareholder capital (which
includes the balance sheet management business unit).
Management information presented to the executive committee (chief operating
decision-maker) assumes that the merger occurred on 1 July 2009 and therefore
all segmental information, in terms of IFRS 8 - Operating segments - has been
disclosed on an `as if` basis. The operational reviews are based on this
segmental information. More details are available in the tables and on the
company`s website.
The comparative information has been restated to be consistent with the current
structure of the group.
Reclassifications
Subsequent to the release of the MMI group interim results for December 2010 the
group aligned the presentation of financial statement line items of Momentum and
Metropolitan for consistency purposes, resulting in certain reclassifications as
noted in the group`s integrated report for the year ended 30 June 2011. The MMI
group results for December 2010 have therefore been restated, on a consistent
basis, for the following:
- Direct property expenses of R88 million were previously set off against
investment income while asset management fee expenses of R205 million and
customer loyalty fee expenses of R60 million were set off against fee
income. These expenses have now been separately disclosed under other
expenses for the six months ended 31 December 2010.
- The classification of certain equity, credit, index and commodity linked
notes was aligned, resulting in a reclassification from derivative
financial instruments to assets designated at fair value through income of
R5 904 million as at 31 December 2010.
- The classification between cash and cash equivalents and financial
instrument assets was aligned, resulting in a reclassification from cash
and cash equivalents of R312 million as at 31 December 2010.
- The group aligned its treatment of deferred tax assets and liabilities,
resulting in a deferred tax asset of R908 million being set off against the
deferred tax liability at 31 December 2010.
On analysing the equity portfolios classified as available-for-sale financial
instruments, it was noted that certain of the net cumulative realised gains over
a period before June 2010, totalling R651 million, were not recycled from the
available-for-sale reserve to the income statement on disposal or de-recognition
of these assets. The retained earnings and available-for-sale reserve balances
at 1 July 2010 have therefore been restated from R6 495 million to R7 146
million and R658 million to R7 million respectively. This restatement had no
impact on the 2012 or 2011 year reported earnings or headline earnings per
share.
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
Mr LL Dippenaar and Mr PK Harris resigned with effect from 22 November 2011. On
the same date, Mr MJN Njeke was appointed chairman while Mr JP Burger was
elected deputy chairman. In addition, Prof JD Krige and Mr MH Visser were
appointed to the board. Mr K Matseke resigned with effect from 31 October 2011
and was replaced by Mr V Nkonyeni, the chief executive of Kagiso Tiso Holdings.
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 2011. 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 DECLARATION
Ordinary shares
The dividend policy for ordinary listed shares, approved by the directors, is to
provide shareholders with a stable dividend, increasing to reflect 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 account for, inter alia,
volatile investment markets, capital requirements and changes in legislation.
On 5 March 2012 a dividend of 44 cents per ordinary share was declared. This
dividend is payable to the holders of ordinary shares recorded in the register
of the company at the close of business on Friday, 30 March 2012 and will be
paid on Monday, 2 April 2012. The last day to trade "cum" dividend will be
Friday, 23 March 2012. The shares will trade "ex" dividend from the start of
business on Monday, 26 March 2012. Share certificates may not be dematerialised
or rematerialised between Monday, 26 March and Friday, 30 March 2012, 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, 2 April 2012.
Preference share dividend
Dividends of R10.4 million (7.7% p.a.), R4.5 million (7.7% p.a.) and R30.3
million (19.1% p.a.) were declared on 2 March 2012 on the unlisted A1, A2 and A3
MMI preference shares respectively, and are payable on 31 March 2012. 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.
Signed on behalf of the board
JJ Njeke: Chairman
Nicolaas Kruger: Group chief executive officer
Centurion
6 March 2012
Directors: MJN Njeke (chairman), JP Burger (deputy chairman), NAS Kruger (group
chief executive officer), FW van Zyl (deputy group chief executive officer), M
Mthombeni (executive), PE Speckmann (group finance director), RB Gouws, F
Jakoet, Prof JD Krige, PJ Moleketi, SA Muller, JE Newbury, V Nkonyeni, SE
Nxasana, KC Shubane, FJC Truter, BJ van der Ross, JC van Reenen, M Vilakazi, MH
Visser
Secretary: FD Jooste
Transfer secretaries: Link Market Services SA (Pty) Ltd (registration number
2000/007239/07)
Rennie House, 13th floor, 19 Ameshoff Street, Braamfontein 2001. PO Box 4844,
Johannesburg 2000
Telephone: +27 11 713 0800 E-mail: info@linkmarketservices.co.za
Sponsor: Merrill Lynch (registration number: 2000/031756/06)
Registered office: 268 West Avenue, Centurion
JSE code: MMI NSX code: MIM ISIN NO: ZAE0001149902
Summary of financial information
Unaudited results for the 6 months ended 31 December 2011
MMI HOLDINGS LIMITED GROUP
IFRS financial information
The MMI group was formed on 1 December 2010 following the merger of Metropolitan
and Momentum.
The unaudited results presented for the current period comprise Momentum and
Metropolitan results for the six months ended 31 December 2011. The comparatives
for the following periods, comprise:
- six months to 31 December 2010: the Momentum results for the six months
ended 31 December 2010 and Metropolitan results for the month of December
2010 (restated for reclassifications noted below)
- 12 months to 30 June 2011: the Momentum results for the 12 months ended 30
June 2011 and Metropolitan results for the seven months ended 30 June 2011.
Effective 1 December 2010 the group entered into a reinsurance agreement with a
cell captive owned by FirstRand whereby 90% of the FNB Life business is
reinsured to the cell captive owned by FirstRand. The IFRS results for the
current period therefore include 10% of FNB Life results for the six months
ended 31 December 2011; 100% for the five months ended 30 November 2010 and 10%
of FNB Life`s results for the month of December 2010 and for the seven months
ended 30 June 2011.
Segmental information
The current MMI group results disclose the segmental information based on the
way the business has been managed since the merger. This assumes that the merger
was in place for all comparative information. Management information presented
to the MMI executive committee (chief operating decision maker) is also
presented this way and therefore all segmental information, in terms of IFRS 8 -
Operating segments - is disclosed on an `as if` basis.
The group operates through the following divisions: Momentum Retail;
Metropolitan Retail; Momentum Employee Benefits; Metropolitan International;
Momentum Investments; Metropolitan Health and Shareholder capital (which
includes the balance sheet management business unit).
Embedded value and statement of assets and liabilities on the reporting basis
The analysis of embedded value earnings reported for the 12 months ended 30 June
2011 and the six months ended 31 December 2010 reconciles embedded value at 30
June 2010 (assuming Metropolitan and Momentum were already merged then) to the
closing embedded value at 30 June 2011 and 31 December 2010 respectively.
The analysis of surplus, relating to the long-term insurance business excess on
the statement of assets and liabilities on the reporting basis, for the 12
months ended 30 June 2011 and for the six months ended 31 December 2010 assumes
that Metropolitan and Momentum were already merged on 1 July 2010.
MMI HOLDINGS LIMITED GROUP
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 of 2008; 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 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 MMI Holdings integrated report for 2011 (available on
the company website: www.mmiholdings.com), including changes in estimates which
are an integral part of the insurance business. The group is exposed to
financial and insurance risks - details are also provided in the MMI Holdings
group integrated report.
The preparation of the MMI Group`s condensed consolidated, unaudited results was
supervised by the Group Finance Director, Preston Speckmann, BCompt (Hons), CA
(SA).
Reclassifications
Subsequent to the release of the MMI group interim results for December 2010 the
group aligned the presentation of financial statement line items of Momentum and
Metropolitan for consistency purposes, resulting in certain reclassifications as
noted in the MMI Integrated Report for the year ended 30 June 2011. The MMI
group results for December 2010 have therefore been restated, on a consistent
basis, for the following:
- Direct property expenses of R88 million were previously set off against
investment income; asset management fee expenses of R205 million and
customer loyalty fee expenses of R60 million were previously set off
against fee income. These expenses have now been separately disclosed under
other expenses for the six months ended 31 December 2010.
- The classification of certain equity, credit, index and commodity linked
notes was aligned, resulting in a reclassification from derivative
financial instruments to assets designated at fair value through income of
R5 904 million as at 31 December 2010.
- The classification between cash and cash equivalents and financial
instrument assets was aligned, resulting in a reclassification from cash
and cash equivalents of R312 million as at 31 December 2010.
- The group aligned its treatment of deferred tax assets and liabilities,
resulting in a deferred tax asset of R908 million being set off against the
deferred tax liability at 31 December 2010.
On analysing the equity portfolios classified as available-for-sale financial
instruments, it was noted that certain of the net cumulative realised gains over
a period before June 2010, totalling R651 million, were not recycled from the
available-for-sale reserve to the income statement on disposal or derecognition
of these assets. The retained earnings and available-for-sale reserve balances
at 1 July 2010 have therefore been restated from R6 495 million to R7 146
million and R658 million to R7 million, respectively. This restatement had no
impact on the 2012 or 2011 year reported earnings or headline earnings per
share.
Standards and interpretations of published standards effective for the period
ended 31 December 2011 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 7
(amendment) Financial instruments: disclosures, IAS 24 (amendment) -
Related party disclosures, IFRIC 14 (amendment) - Prepayments of a minimum
funding requirement, AC 504 - IAS 19 - The limit on a defined benefit
asset, minimum funding requirements and their interaction in the South
African pension fund environment.
- 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.
MMI HOLDINGS - IFRS FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENT OF 31.12.2011 Restated
FINANCIAL POSITION Rm 31.12.2010 30.06.2011
Rm Rm
ASSETS
Intangible assets 11 935 12 719 12 257
Owner-occupied properties 1 446 1 657 1 416
Property and equipment 321 254 301
Investment properties 6 140 5 554 5 982
Investment in associates 8 663 6 354 7 797
Employee benefit assets 387 334 381
Financial instrument assets (1) 239 921 232 982 234 067
Insurance and other receivables 2 427 2 363 2 296
Deferred income tax 106 86 108
Reinsurance contracts 1 337 1 164 1 148
Current income tax assets 309 52 174
Cash and cash equivalents 16 527 18 775 19 770
Non-current assets held for sale 53 5 337 6 854
Total assets 289 572 287 631 292 551
EQUITY
Equity attributable to owners of the 22 311 22 572 22 341
parent
Preference shares 500 500 500
22 811 23 072 22 841
Non-controlling interests 250 262 298
Total equity 23 061 23 334 23 139
LIABILITIES
Insurance contract liabilities
Long-term insurance contracts 84 710 83 209 82 835
Financial instrument liabilities
Investment contracts 149 723 146 057 146 045
- with discretionary participation 24 257 26 010 24 280
features
- designated at fair value through 125 466 120 047 121 765
income
Other financial instrument 16 148 16 553 16 730
liabilities (2)
Deferred income tax 4 049 3 892 4 042
Employee benefit obligations 736 661 874
Other payables 10 977 9 651 12 887
Provisions 104 112 109
Current income tax liabilities 64 53 38
Non-current liabilities held for - 4 109 5 852
sale
Total liabilities 266 511 264 297 269 412
Total equity and liabilities 289 572 287 631 292 551
1. Financial instrument assets consist of the following:
Assets designated at fair value through income: R230 315 million
(31.12.2010: R223 275 million; 30.06.2011: R223 990 million)
Derivative financial instruments: R2 865 million (31.12.2010: R2 383
million; 30.06.2011: R2 207 million)
Held-to-maturity assets: R51 million (31.12.2010: R64 million; 30.06.2011:
R14 million)
Available-for-sale assets: R3 472 million (31.12.2010: R4 763 million;
30.06.2011: R4 709 million)
Loans and receivables: R3 218 million (31.12.2010: R2 497 million;
30.06.2011: R3 147 million)
2. Other financial instrument liabilities consist of the following:
Liabilities designated at fair value through income: R13 085 million
(31.12.2010: R13 573 million; 30.06.2011: R14 096 million)
Derivative financial instruments: R1 776 million (31.12.2010: R1 543
million; 30.06.2011: R1 235 million)
Liabilities at amortised cost: R1 287 million (31.12.2010: R1 437 million;
30.06.2011: R1 399 million)
MMI HOLDINGS - IFRS FINANCIAL INFORMATION
CONDENSED CONSOLIDATED INCOME 6 mths to Restated
STATEMENT 31.12.2011 6 mths to 12 mths to
Rm 31.12.2010 30.06.2011
Rm Rm
Net insurance premiums received 9 625 5 265 15 029
Fee income (1) 2 612 1 802 4 232
Investment income 6 925 4 846 11 711
Net realised and fair value gains 4 720 12 822 13 846
Net income 23 882 24 735 44 818
Net insurance benefits and claims 9 345 5 793 15 898
Change in liabilities 1 606 3 573 2 265
Change in insurance contract 1 779 3 207 2 899
liabilities
Change in investment contracts with (23) 637 (389)
DPF liabilities
Change in reinsurance provision (150) (271) (245)
Fair value adjustments on investment 5 258 8 743 12 106
contract liabilities
Fair value adjustments on collective 63 1 025 1 506
investment scheme liabilities
Depreciation, amortisation and 489 149 676
impairment expenses
Employee benefit expenses 1 948 1 220 3 202
Sales remuneration 1 508 1 067 2 697
Other expenses 1 834 1 161 2 783
Expenses 22 051 22 731 41 133
Results of operations 1 831 2 004 3 685
Share of profit of associates 22 26 44
Finance costs (2) (584) (278) (1 147)
Profit before tax 1 269 1 752 2 582
Income tax expenses (454) (651) (919)
Earnings 815 1 101 1 663
Attributable to:
Owners of the parent 805 1 079 1 612
Non-controlling interests (5) 4 18
Momentum preference shares 15 18 33
815 1 101 1 663
Basic earnings per share (cents) 54 104 128
Diluted earnings per share (cents) 53 103 126
1. Fee income consists of the following:
Investment contracts: R699 million (31.12.2010: R866 million; 30.06.2011:
R1 340 million)
Trust and fiduciary services: R882 million (31.12.2010: R453 million;
30.06.2011: R1 386 million)
Health administration services: R878 million (31.12.2010: R228 million;
30.06.2011: R1 239 million)
Other fee income: R153 million (31.12.2010: R255 million; 30.06.2011: R267
million)
2. Finance costs consist of the following:
Preference shares issued by MMI Holdings Ltd: R46 million (31.12.2010: R8
million; 30.06.2011: R52 million)
Subordinated redeemable debt: R57 million (31.12.2010: R41 million;
30.06.2011: R98 million)
Cost of carry and derivative financial instruments: R465 million
(31.12.2010: R182 million; 30.06.2011: R891 million)
Other: R16 million (31.12.2010: R47 million; 30.06.2011: R106 million)
MMI HOLDINGS - IFRS FINANCIAL INFORMATION
RECONCILIATION OF Basic earnings Diluted earnings
HEADLINE EARNINGS
attributable to owners of
the parent
6 mths 6 mths 12 6 mths 6 mths 12
to to mths to to mths
31.12. 31.12. to 31.12. 31.12.2 to
2011 2010 30.06. 2011 010 30.06.
Rm Rm 2011 Rm Rm 2011
Rm Rm
Earnings 805 1 079 1 612 805 1 079 1 612
Finance costs - 46 8 52
convertible preference
shares
Diluted earnings 851 1 087 1 664
Realised gains on (12) - - (12) - -
available-for-sale
financial assets
Intangible asset 19 7 28 19 7 28
impairments
Impairment/loss on step- - 2 18 - 2 18
up of associate
Profit on sale of - - (27) - - (27)
business
Tax effect on profit on - - 3 - - 3
sale of business
Headline earnings (1) 812 1 088 1 634 858 1 096 1 686
Net realised and fair (93) (155) (43) (93) (155) (43)
value gains on excess
Basis and other changes 153 (102) 193 153 (102) 193
and investment variances
FNB Life (90%) (2) - (174) (174) - (174) (174)
Amortisation of 257 63 318 257 63 318
intangible assets
relating to business
combinations
Secondary Tax on 88 - 90 88 - 90
Companies (STC)
BEE cost (3) 25 - - 25 - -
Merger transaction costs - 27 29 - 27 29
Dilutory effect of - - - (3) (1) (6)
subsidiaries (4)
Investment income on - - - 9 - 6
treasury shares -
contract holders
Core headline earnings 1 242 747 2 047 1 294 754 2 099
(5)
Metropolitan pre-merger - 489 489
Core headline earnings as 1 294 1 243 2 588
per segmental information
(6)
1. Headline earnings consist of operating profit, investment income, net
realised and fair value gains, investment variances and basis and other
changes.
2. This represents the 90% of FNB Life`s results for the five months ended 30
November 2010 which has been excluded from the December 2010 and June 2011
figures as it is non-recurring.
3. This represents the cost of the BEE transaction in Namibia in the current
period in terms of IFRS 2 - Share based payments.
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. Core headline earnings disclosed 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, STC, certain non-recurring items, as well the
amortisation of intangible assets relating to business combinations as this
is part of the cost of acquiring the business. STC has been added back as
it will fall away and be replaced by the new dividends withholding tax
effective 1 April 2012.
6. Core headline earnings as per segmental information represent the core
headline earnings of the group as though the merger was effective for all
reported periods.
MMI HOLDINGS - IFRS FINANCIAL INFORMATION
EARNINGS PER SHARE (cents) 6 mths to 6 mths to 12 mths to
attributable to owners of the parent 31.12.2011 31.12.2010 30.06.2011
Basic
Core headline earnings 83 74 163
Headline earnings 54 105 130
Earnings 54 104 128
Weighted average number of shares 1 489 1 038 1 259
(million)
Diluted
Core headline earnings (2) 81 74 158
Weighted average number of shares 1 605 1 058 1 329
(million) (1)
Headline earnings 54 104 128
Earnings 53 103 126
Weighted average number of shares 1 590 1 055 1 317
(million) (1)
Diluted core headline earnings as per 81 77 161
segmental information
Weighted average number of shares 1 605 1 605 1 605
(million) for purposes of segmental
information (2)
1. 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.
2. The weighted average number of shares for purposes of segmental information
assumes that the merger was effective from 1 July 2010 in line with the
diluted core headline earnings as per the segmental information.
DIVIDENDS 2012 2011
Ordinary listed MMI Holdings Limited shares
(cents per share)
Interim - March 44 42
Final - September 63
Total 105
A special dividend of 21 cents per share
was also declared in March 2011.
DIVIDENDS
MMI Holdings convertible A1 A2 A3
redeemable preference shares
(issued to Kagiso Tiso Holdings
(KTH))
Redemption value (per R 5.12 9.18 9.18
share)
Paid - 30 September 2010 Rate 8.5% 8.5% 17.1%
Rm 12 5 27
Paid - 31 March 2011 Rate 7.7% 7.7% 18.0%
Rm 11 5 29
Paid - 30 September 2011 Rate 7.7% 7.7% 19.1%
Rm 10 5 30
Payable - 31 March 2012 Rate 7.7% 7.7% 19.1%
Rm 10 4 30
Redemption date Oct - 2012 Dec - 2012 Apr - 2012
(1)
1. The redemption date of the A3 MMI preference shares has been extended from
5 December 2011 to 30 April 2012. The preference rate payable remained
unchanged and MMI took over as a funder for the duration of this extension.
MMI HOLDINGS - IFRS FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENT OF 6 mths to 6 mths to 12 mths to
COMPREHENSIVE INCOME 31.12.2011 31.12.2010 30.06.2011
Rm Rm Rm
Earnings 815 1 101 1 663
Other comprehensive income for the 80 (11) 35
year, net of tax
Exchange differences on 55 (37) (29)
translating foreign operations
Available-for-sale financial (7) 12 11
assets
Land and buildings revaluation 34 14 105
Share of other comprehensive - (2) (2)
income of associates
Change in non-distributable 1 1 -
reserves
Income tax relating to components (3) 1 (50)
of other comprehensive income
Total comprehensive income for the 895 1 090 1 698
year
Total comprehensive income
attributable to:
Owners of the parent 877 1 074 1 651
Non-controlling interests 3 (2) 14
Momentum preference shares 15 18 33
895 1 090 1 698
MMI HOLDINGS - IFRS FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENT OF 6 mths to Restated Restated
CHANGES IN EQUITY 31.12.2011 6 mths to 12 mths to
Rm 31.12.2010 30.06.2011
Rm Rm
Changes in share capital
Balance at beginning (1) 13 421 1 041 1 041
Staff share scheme shares released 1 - 2
Treasury shares held on behalf of 21 (328) (204)
contract holders
Shares issued (2) - 12 582 12 582
Balance at end 13 443 13 295 13 421
Changes in other reserves
Balance at beginning 1 466 1 140 1 140
Reclassification (3) - (651) (651)
Total comprehensive income 71 (3) 42
BEE cost 25 - -
Fair value adjustment for preference - 940 940
shares issued by MMI (4)
Transfer (to)/from retained earnings (8) 1 (5)
Balance at end (5) 1 554 1 427 1 466
Changes in retained earnings
Balance at beginning 7 454 6 495 6 495
Reclassification (3) - 651 651
Total comprehensive income 806 1 077 1 609
Dividend paid (942) (359) (1 302)
Employee share scheme - (13) (9)
Transactions with minorities (12) - 5
Transfer from/(to) other reserves 8 (1) 5
Balance at end 7 314 7 850 7 454
Equity attributable to owners of the 22 311 22 572 22 341
parent
Momentum preference shares
Balance at beginning 500 500 500
Total comprehensive income 15 18 33
Dividend paid (15) (18) (33)
Balance at end 500 500 500
Changes in non-controlling interests
Balance at beginning 298 (4) (4)
Total comprehensive income 3 (2) 14
Dividends paid (5) - (35)
Transactions with owners (46) 46 69
Business combinations - 222 263
Other - - (9)
Balance at end 250 262 298
Total equity 23 061 23 334 23 139
1. 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. This is due
to the reverse acquisition for accounting purposes in December 2010.
2. The shares issued represent the fair value of the consideration relating to
the reverse acquisition of Metropolitan in December 2010.
3. Certain net cumulative realised gains on available-for-sale assets relating
to prior periods, totalling R651 million, were not recycled from the
available-for-sale reserve to the income statement on disposal of these
assets. These net gains have been reclassified from the available-for-sale
reserve to retained earnings at 1 July 2010.
4. This represents the write up of the carrying value of the preference shares
issued by MMI Holdings Limited to Kagiso Tiso Holdings to fair value as
part of the fair value exercise performed as a result of the merger in
December 2010.
5. Other reserves consist of the following:
Land and buildings revaluation reserve: R513 million (31.12.2010: R458
million; 30.06.2011: R491 million)
Foreign currency translation reserve: R58 million (31.12.2010: R4 million;
30.06.2011: R11 million)
Fair value adjustment for preference shares issued by MMI: R940 million
(31.12.2010: R940 million; 30.06.2011: R940 million)
Fair value reserve: R7 million (31.12.2010: R17 million; 30.06.2011: R15
million)
Non-distributable reserve: R11 million (31.12.2010: R8 million; 30.06.2011:
R9 million)
Equity-settled share-based payments reserve: R25 million (31.12.2010: Rnil;
30.06.2011: Rnil)
MMI HOLDINGS - IFRS FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENT OF 6 mths to Restated
CASH FLOWS 31.12.2011 6 mths to 12 mths to
Rm 31.12.2010 30.06.2011
Rm Rm
Net cash outflow from operating (2 534) (3 118) (1 570)
activities
Net cash (outflow)/inflow from (474) 7 184 7 067
investing activities
Net cash outflow from financing (1 136) (620) (1 316)
activities
Net cash flow (4 144) 3 446 4 181
Cash resources and funds on deposit 20 671 16 490 16 490
at beginning
Cash resources and funds on deposit 16 527 19 936 20 671
at end
Made up as follows:
Cash and cash equivalents as per 16 527 18 775 19 770
statement of financial position
Cash and cash equivalents held for - 1 161 901
sale
16 527 19 936 20 671
PRINCIPAL ASSUMPTIONS (South Africa) 31.12.2011 31.12.2010 30.06.2011
(1) % % %
Pre-tax investment return
Equities 11.8 12.0 12.3
Properties 9.3 9.5 9.8
Government stock 8.3 8.5 8.8
Other fixed interest stocks 8.8 9.0 9.3
Cash 7.3 7.5 7.8
Risk free return 8.3 8.5 8.8
Risk discount rate (RDR) 10.6 10.8 11.1
Investment return (before tax) - 10.5 10.7 11.0
smoothed bonus
Expense inflation rate
Momentum 7.3 6.8 7.2
Metropolitan 6.8 6.3 6.7
1. The principal assumptions relate only to the South African life insurance
business. Assumptions relating to international life insurance businesses
are based on local requirements and can differ from the South African
assumptions.
MMI HOLDINGS - IFRS FINANCIAL INFORMATION
NON-CONTROLLING INTERESTS 31.12.2011 31.12.2010 30.06.2011
% % %
Metropolitan
Metropolitan Health Group 17.6 17.6 17.6
Metropolitan Namibia 20.8 18.0 18.0
Metropolitan Health Namibia 49.0 * 49.0
Administrators
Metropolitan Botswana 24.2 24.2 24.2
Metropolitan Kenya 33.7 33.6 33.7
Metropolitan Ghana 7.8 7.8 7.8
Metropolitan Nigeria 50.0 50.0 50.0
Metropolitan Swaziland 33.0 33.0 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 35.0
Momentum Health Ghana 20.0 20.0 20.0
Momentum Health Mauritius 5.0 5.0 5.0
Momentum Health Botswana 28.0 28.0 28.0
Advantage Asset managers - 15.0 -
* Associate as at 31 December 2010
FINANCIAL INSTRUMENT ASSETS 31.12.2011 31.12.2010 30.06.2011
Rm Rm Rm
Equity securities 76 404 66 871 82 864
Debt securities 75 856 65 800 71 521
Funds on deposit and other money 13 488 15 617 10 908
market instruments
Unit-linked investments 68 090 79 814 63 420
Derivative financial instruments 2 865 2 383 2 207
Loans and receivables 3 218 2 497 3 147
Total financial instrument assets 239 921 232 982 234 067
ANALYSIS OF ASSETS UNDER MANAGEMENT 31.12.2011 31.12.2010 30.06.2011
Rm Rm Rm
On-balance sheet assets
Managed and/or administered by 169 848 164 304 165 910
Momentum Investments
Investment assets 125 693 114 320 117 090
Collective investment schemes 36 570 42 773 41 423
Properties 7 585 7 211 7 397
Linked product assets under 44 660 39 290 41 824
administration
Managed by external managers 35 451 35 769 35 518
Other assets 39 613 48 268 49 299
289 572 287 631 292 551
Off-balance sheet assets
Managed and/or administered by 102 067 107 895 109 289
Momentum Investments
Collective investment schemes 52 379 50 423 51 633
Segregated assets 49 688 57 472 57 656
Momentum Employee Benefits - 170 151 151
segregated assets
Metropolitan Health 11 830 9 360 10 166
Linked product assets under 33 415 27 116 30 383
administration
Total assets under management 437 054 432 153 442 540
ANALYSIS OF ASSETS 31.12.2011 31.12.2010 30.06.2011
BACKING SHAREHOLDER
EXCESS
Rm % Rm % Rm %
Equity securities 1 559 6.8 2 687 11.7 2 889 12.6
Preference shares 1 479 6.5 3 010 13.0 2 155 9.4
Collective 1 232 5.4 1 786 7.7 1 392 6.1
investment schemes
Debt securities 3 599 15.8 1 628 7.1 2 869 12.6
Properties 1 889 8.3 1 833 7.9 1 819 8.0
Owner-occupied 1 241 5.5 1 443 6.3 1 202 5.3
properties
Investment 648 2.8 390 1.7 617 2.7
properties
Cash and cash 7 125 31.2 6 041 26.2 6 070 26.6
equivalents
Intangible assets 7 577 33.2 8 045 34.9 7 826 34.3
Other net assets 610 2.7 266 1.2 48 0.2
25 070 109.9 25 296 109.7 25 068 109.8
Redeemable (712) (3.1) (711) (3.1) (711) (3.1)
preference shares
Subordinated (1 547) (6.8) (1 513) (6.6) (1 516) (6.7)
redeemable debt
Shareholder excess 22 811 100.0 23 072 100.0 22 841 100.0
per reporting basis
MMI HOLDINGS - SEGMENTAL INFORMATION
6 mths to 31.12.2011 (1) Momentum Metropolitan Momentum
Retail Retail Employee
Benefits
Rm Rm Rm
Revenue
Net insurance premiums 7 649 3 009 4 731
Recurring premiums 3 633 2 423 2 907
Single premiums 4 016 586 1 824
Fee income 840 73 294
Fee income 840 73 294
Inter-segment fee income - - -
Expenses
Net payments to contract 7 719 2 386 4 557
holders
Other expenses 1 610 958 515
Sales remuneration 813 435 80
Administration expenses 797 523 435
Direct property and asset - - -
management expenses
Holding company expenses - - -
Inter-segment expenses - - -
Diluted core headline earnings 377 204 99
Operating profit 520 282 124
Tax on operating profit (143) (78) (25)
Investment income - - -
Tax on investment income - - -
Diluted weighted average
number of shares in issue
(millions)
Diluted core headline earnings
per share (cents)
6 mths to 31.12.2011 (1) Metropolitan Momentum Metropolita
Inter- Investments n Health
national
Rm Rm Rm
Revenue
Net insurance premiums 945 4 755 14
Recurring premiums 796 - 14
Single premiums 149 4 755 -
Fee income 20 480 847
Fee income 20 480 847
Inter-segment fee income - - -
Expenses
Net payments to contract 580 5 794 11
holders
Other expenses 422 416 775
Sales remuneration 127 1 -
Administration expenses 295 415 775
Direct property and asset - - -
management expenses
Holding company expenses - - -
Inter-segment expenses - - -
Diluted core headline earnings (3) 62 58
Operating profit (2) 71 74
Tax on operating profit (1) (22) (24)
Investment income - 18 9
Tax on investment income - (5) (1)
Diluted weighted average
number of shares in issue
(millions)
Diluted core headline earnings
per share (cents)
6 mths to 31.12.2011 (1) Shareholde Segmental Other IFRS
r capital total reconcilin total
g items
(1)
Rm Rm Rm Rm
Revenue
Net insurance premiums - 21 103 (11 478) 9 625
Recurring premiums - 9 773 (2 081) 7 692
Single premiums - 11 330 (9 397) 1 933
Fee income 219 2 773 (161) 2 612
Fee income 219 2 773 (5) 2 768
Inter-segment fee income - - (156) (156)
Expenses
Net payments to contract 804 21 851 (12 506) 9 345
holders
Other expenses 245 4 941 838 5 779
Sales remuneration - 1 456 52 1 508
Administration expenses 122 3 362 395 3 757
Direct property and asset - - 475 475
management expenses
Holding company expenses 123 123 - 123
Inter-segment expenses - - (84) (84)
Diluted core headline 497 1 294 - 1 294
earnings
Operating profit 164 1 233 - 1 233
Tax on operating profit 60 (233) - (233)
Investment income 343 370 - 370
Tax on investment income (70) (76) - (76)
Diluted weighted average 1 605 - 1 605
number of shares in issue
(millions)
Diluted core headline 81 - 81
earnings per share
(cents)
1. The `other reconciling items` column includes: an adjustment to reverse
investment contract premiums (R11 582 million) and claims (R12 508
million); FNB Life adjustments reconciling the 10% of FNB Life included in
each of the relevant lines to the accounting treatment of the reinsurance
arrangement (premiums R104 million; fee income R1 million, claims R2
million, sales remuneration R57 million and expenses R55 million); direct
property and asset management fees (R475 million) for the life companies
that are set off against investment income and fee income, respectively for
management reporting purposes but shown as an expense for accounting
purposes; the amortisation of intangibles relating to the merger (R306
million); Namibian BEE cost (R30 million) and other minor adjustments to
expenses (R4 million), sales remuneration (R5 million) and fee income (R6
million).
MMI HOLDINGS - SEGMENTAL INFORMATION
Restated Momentum Metropolitan Momentum
6 mths to 31.12.2010 (1) Retail Retail Employee
Benefits
Rm Rm Rm
Revenue
Net insurance premiums 8 447 3 303 4 201
Recurring premiums 3 758 2 261 2 572
Single premiums 4 689 1 042 1 629
Fee income 835 63 292
Fee income 835 63 292
Inter-segment fee income - - -
Expenses
Net payments to contract 7 154 2 104 5 296
holders
Other expenses 1 609 891 541
Sales remuneration 819 363 81
Administration expenses 790 528 460
Direct property and asset - - -
management expenses
Holding company expenses (3) - - -
Inter-segment expenses - - -
Diluted core headline earnings 386 166 102
Operating profit 521 212 127
Tax on operating profit (135) (46) (25)
Investment income - - -
Tax on investment income - - -
Diluted weighted average
number of shares in issue
(millions)
Diluted core headline earnings
per share (cents)
Restated Metropolita Momentum Metropolita Shareholde
6 mths to 31.12.2010 n Inter- Investment n Health r capital
(1) national s
Rm Rm Rm Rm
Revenue
Net insurance premiums 830 5 556 12 -
Recurring premiums 677 - 12 -
Single premiums 153 5 556 - -
Fee income 16 511 834 159
Fee income 16 511 834 159
Inter-segment fee - - - -
income
Expenses
Net payments to 510 5 990 8 -
contract holders
Other expenses 376 412 744 200
Sales remuneration 106 1 - -
Administration expenses 270 411 744 116
Direct property and - - - -
asset management
expenses
Holding company - - - 84
expenses (3)
Inter-segment expenses - - - -
Diluted core headline 10 88 18 473
earnings
Operating profit 13 110 26 175
Tax on operating profit (3) (31) (14) (34)
Investment income - 13 8 426
Tax on investment - (4) (2) (94)
income
Diluted weighted
average number of
shares in issue
(millions)
Diluted core headline
earnings per share
(cents)
Restated Segmental Other Metropolita IFRS
6 mths to 31.12.2010 (1) total reconciling n pre- total
items (2) merger
Rm Rm Rm Rm
Revenue
Net insurance premiums 22 349 (12 345) (4 739) 5 265
Recurring premiums 9 280 (2 284) (3 186) 3 810
Single premiums 13 069 (10 061) (1 553) 1 455
Fee income 2 710 (253) (655) 1 802
Fee income 2 710 - (655) 2 055
Inter-segment fee income - (253) - (253)
Expenses
Net payments to contract 21 062 (10 571) (4 698) 5 793
holders
Other expenses 4 773 463 (1 639) 3 597
Sales remuneration 1 370 92 (395) 1 067
Administration expenses 3 319 86 (1 186) 2 219
Direct property and - 332 - 332
asset management
expenses
Holding company expenses 84 - (58) 26
(3)
Inter-segment expenses - (47) - (47)
Diluted core headline 1 243 - (489) 754
earnings
Operating profit 1 184 - (380) 804
Tax on operating profit (288) - 80 (208)
Investment income 447 - (235) 212
Tax on investment income (100) - 46 (54)
Diluted weighted average 1 605 - (547) 1 058
number of shares in
issue (millions)
Diluted core headline 77 - (3) 74
earnings per share
(cents)
1. The table above assumes that Metropolitan and Momentum were merged from 1
July 2010. The `Metropolitan pre-merger` column represents the segmental
information for Metropolitan for the five months ended 30 November 2010.
2. The `other reconciling items` column includes: an adjustment to reverse
investment contract premiums (R14 484 million) and claims (R13 255
million); FNB Life adjustments reconciling the 10% of FNB Life included in
each of the relevant lines to the accounting treatment of the reinsurance
arrangement (premiums R318 million; claims R84 million; sales remuneration
R92 million, administration expenses R39 million); direct property and
asset management fees (R332 million) for the life companies that are set
off against investment income and fee income, respectively for management
reporting purposes but shown as an administration expense for accounting
purposes; the amortisation of the intangibles (R50 million) relating to the
merger; and other minor adjustments to expenses (R3 million).
MMI HOLDINGS - SEGMENTAL INFORMATION
12 mths to 30.06.2011 (1) Momentum Metropolita Momentum
Retail n Retail Employee
Benefits
Rm Rm Rm
Revenue
Net insurance premiums 16 595 6 393 8 171
Recurring premiums 7 133 4 489 5 300
Single premiums 9 462 1 904 2 871
Fee income 1 349 117 648
Fee income 1 349 117 648
Inter-segment fee income - - -
Expenses
Net payments to contract 15 277 4 440 10 886
holders
Other expenses 3 540 1 777 1 005
Sales remuneration 1 830 725 164
Administration expenses 1 710 1 052 841
Direct property and asset - - -
management expenses
Holding company expenses - - -
Inter-segment expenses - - -
Diluted core headline earnings 699 394 187
Operating profit 995 517 257
Tax on operating profit (296) (123) (70)
Investment income - - -
Tax on investment income - - -
Diluted weighted average
number of shares in issue
(millions)
Diluted core headline earnings
per share (cents)
12 mths to Metropolitan Momentum Metropolita Shareholde
30.06.2011 (1) Internationa Investment n Health r capital
l s
Rm Rm Rm Rm
Revenue
Net insurance 1 637 8 846 26 36
premiums
Recurring premiums 1 383 - 26 -
Single premiums 254 8 846 - 36
Fee income 85 935 1 651 448
Fee income 85 935 1 651 448
Inter-segment fee - - - -
income
Expenses
Net payments to 983 8 267 21 214
contract holders
Other expenses 777 842 1 541 402
Sales remuneration 231 2 - -
Administration 546 840 1 541 210
expenses
Direct property and - - - -
asset management
expenses
Holding company - - - 192
expenses
Inter-segment - - - -
expenses
Diluted core 32 131 114 1 031
headline earnings
Operating profit 37 149 132 326
Tax on operating (5) (36) (40) 34
profit
Investment income - 25 25 788
Tax on investment - (7) (3) (117)
income
Diluted weighted
average number of
shares in issue
(millions)
Diluted core
headline earnings
per share (cents)
12 mths to 30.06.2011 (1) Segmenta Other Metropolita IFRS
l total reconcilin n pre- total
g items merger
(2)
Rm Rm Rm Rm
Revenue
Net insurance premiums 41 704 (21 936) (4 739) 15 029
Recurring premiums 18 331 (3 273) (3 186) 11 872
Single premiums 23 373 (18 663) (1 553) 3 157
Fee income 5 233 (346) (655) 4 232
Fee income 5 233 - (655) 4 578
Inter-segment fee income - (346) - (346)
Expenses
Net payments to contract 40 088 (19 492) (4 698) 15 898
holders
Other expenses 9 884 1 113 (1 639) 9 358
Sales remuneration 2 952 140 (395) 2 697
Administration expenses 6 740 462 (1 186) 6 016
Direct property and asset - 792 - 792
management expenses
Holding company expenses 192 - (58) 134
Inter-segment expenses - (281) - (281)
Diluted core headline 2 588 - (489) 2 099
earnings
Operating profit 2 413 - (380) 2 033
Tax on operating profit (536) - 80 (456)
Investment income 838 - (235) 603
Tax on investment income (127) - 46 (81)
Diluted weighted average 1 605 - (276) 1 329
number of shares in issue
(millions)
Diluted core headline 161 - (3) 158
earnings per share (cents)
1. The table above assumes that Metropolitan and Momentum were merged from 1
July 2010. The `Metropolitan pre-merger` column represents the segmental
information for Metropolitan for the five months ended 30 November 2010.
2. The `other reconciling items` column includes: an adjustment to reverse
investment contract premiums (R22 350 million) and claims (R19 576
million); FNB Life adjustments reconciling the 10% of FNB Life included in
each of the relevant lines to the accounting treatment of the reinsurance
arrangement (premiums R414 million; claims R84 million and expenses R233
million); direct property and asset management fees (R792 million) for the
life companies that are set off against investment income and fee income,
respectively for management reporting purposes but shown as an expense for
accounting purposes; the amortisation of the intangibles (R352 million)
relating to the merger; and other minor adjustments to expenses (R17
million).
MMI HOLDINGS - SEGMENTAL INFORMATION
PAYMENTS TO CONTRACT HOLDERS (1) Restated
6 mths to 6 mths to 12 mths to
31.12.2011 31.12.2010 30.06.2011
Rm Rm Rm
Momentum Retail 7 719 7 154 15 277
Death and disability claims 1 291 1 353 2 634
Maturity claims 2 204 2 114 4 059
Annuities 1 687 1 000 3 249
Withdrawal benefits 19 - -
Surrenders 2 802 3 234 6 372
Re-insurance recoveries (284) (547) (1 037)
Metropolitan Retail 2 386 2 104 4 440
Death and disability claims 644 468 1 132
Maturity claims 682 641 1 258
Annuities 375 371 755
Withdrawal benefits 19 19 45
Surrenders 829 628 1 409
Re-insurance recoveries (163) (23) (159)
Momentum Employee Benefits 4 557 5 296 10 886
Death and disability claims 1 350 1 197 2 455
Maturity claims 204 158 411
Annuities 478 424 886
Withdrawals and surrenders 1 272 1 776 3 764
Terminations 293 153 879
Disinvestments 1 236 1 729 2 737
Re-insurance recoveries (276) (141) (246)
Metropolitan International 580 510 983
Death and disability claims 218 160 341
Maturity claims 123 72 160
Annuities 26 20 41
Withdrawal benefits 54 32 67
Surrenders 140 138 239
Terminations 24 1 52
Disinvestments 4 96 101
Re-insurance recoveries (9) (9) (18)
Momentum Investments
Withdrawals 5 794 5 990 8 267
Metropolitan Health
Claims 11 8 21
Shareholder capital
Claims 804 - 214
Total payments to contract holders 21 851 21 062 40 088
Adjustment for payments to investment (12 575) (10 718) (23 082)
contract holders
Transfers between insurance, 67 63 3 506
investment and investment with DPF
contracts
FNB Life adjustment 2 84 84
Metropolitan pre-merger (2) - (4 698) (4 698)
Net insurance benefits and claims per 9 345 5 793 15 898
income statement
1. The total payments to contract holders assume that Metropolitan and
Momentum were merged from 1 July 2010.
2. The Metropolitan pre-merger line represents the segmental claims for
Metropolitan for the five months ended 30 November 2010 before the merger.
MMI HOLDINGS - SEGMENTAL INFORMATION
NET FUNDS RECEIVED Gross Gross 6 mths to
FROM CLIENTS single recurring Gross 31.12.2011
inflows inflows inflow Gross Net inflow/
Rm Rm Rm outflow (outflow)
Rm Rm
Momentum Retail 4 016 3 633 7 649 (7 719) (70)
Metropolitan 586 2 423 3 009 (2 386) 623
Retail
Momentum Employee 1 824 2 907 4 731 (4 557) 174
Benefits
Metropolitan 149 796 945 (580) 365
International
Momentum 4 755 - 4 755 (5 794) (1 039)
Investments
Shareholder - - - (804) (804)
capital
Long-term 11 330 9 759 21 089 (21 840) (751)
insurance business
cash flows
Momentum Retail 5 679 - 5 679 (4 386) 1 293
Momentum Employee 5 - 5 - 5
Benefits
Metropolitan 46 - 46 (103) (57)
International
Momentum 19 846 - 19 846 (18 999) 847
Investments
Metropolitan - 17 426 17 426 (13 909) 3 517
Health
Total net funds 36 906 27 185 64 091 (59 237) 4 854
received from
clients
NET FUNDS RECEIVED FROM CLIENTS 6 mths to 12 mths to
31.12.2010 30.06.2011
Net inflow/ Net inflow/
(outflow) (outflow)
Rm Rm
Momentum Retail 1 293 1 318
Metropolitan Retail 1 199 1 953
Momentum Employee Benefits (1 095) (2 715)
Metropolitan International 320 654
Momentum Investments (434) 579
Shareholder capital - (178)
Long-term insurance business cash flows 1 283 1 611
Momentum Retail 3 067 6 680
Momentum Employee Benefits (688) (676)
Metropolitan International - -
Momentum Investments (14 773) (16 446)
Metropolitan Health 1 637 3 382
Total net funds received from clients (9 474) (5 449)
- The table above assumes that Metropolitan and Momentum were merged from 1
July 2010.
NUMBER OF EMPLOYEES 31.12.2011 31.12.2010 30.06.2011
Indoor staff 9 631 10 350 10 058
Momentum Retail 1 954 1 899 1 932
Metropolitan Retail 1 397 1 453 1 471
Momentum Employee Benefits 995 1 333 1 147
Metropolitan International 716 672 716
Momentum Investments 509 498 532
Metropolitan Health 3 091 3 529 3 266
Balance sheet management 50 40 50
Group services 793 926 944
Redeployment centre 126 - -
Field staff 5 585 5 043 5 586
Momentum Retail 489 505 494
Metropolitan Retail 3 899 3 366 3 813
Metropolitan International 1 197 1 172 1 279
Total 15 216 15 393 15 644
- The table above assumes that Metropolitan and Momentum were merged from 1
July 2010.
MMI HOLDINGS - STATEMENT OF ASSETS AND LIABILITIES
STATEMENT OF ASSETS AND 31.12.2011 31.12.2010(1) 30.06.2011(1)
LIABILITIES ON REPORTING BASIS Rm Rm Rm
Total assets 289 572 287 631 292 551
Actuarial value of policy (234 433) (229 266) (228 880)
liabilities
Other liabilities (32 078) (35 031) (40 532)
Non-controlling interests (250) (262) (298)
Group excess per reporting 22 811 23 072 22 841
basis
Net assets - other businesses (1 143) (819) (830)
Fair value adjustments on (5 901) (6 252) (6 100)
Metropolitan acquisition and
other consolidation
adjustments
Excess - long-term insurance 15 767 16 001 15 911
business, net of non-
controlling interests (1,2)
RECONCILIATION OF CHANGE IN
LONG-TERM INSURANCE EXCESS TO
THE INCOME STATEMENT
Change in excess of long-term (144) 1 021 931
insurance business (2)
Increase in share capital (65) (32) (84)
Change in other reserves (39) 13 6
Dividend paid - ordinary 1 495 558 1 722
shares
Change in non-controlling (66) - -
interests
Total surplus arising, net of 1 181 1 560 2 575
non-controlling interests
(including 90% of FNB Life)
FNB Life 90% - (174) (174)
Total surplus arising, net of 1 181 1 386 2 401
non-controlling interests
(excluding 90% of FNB Life)
Operating profit 997 876 1 803
Investment income on excess 238 273 610
Net realised and fair value 124 418 418
gains on excess
Investment variances 6 35 151
Basis and other changes (184) (216) (581)
Consolidation adjustments 1 2 (3)
Earnings after non-controlling 1 182 1 388 2 398
interest of long-term
insurance business
RECONCILIATION OF CHANGE IN 31.12.2011 31.12.2010(1) 30.06.2011(1)
LONG-TERM INSURANCE EXCESS TO Rm Rm Rm
THE INCOME STATEMENT
FNB Life 90% - 174 174
Earnings after non- (377) (77) (554)
controlling interests of
other group businesses and
consolidation adjustments
Earnings attributable to 805 1 485 2 018
owners of the parent
Metropolitan pre-merger - (406) (406)
Earnings attributable to 805 1 079 1 612
owners of the parent as per
income statement
1. The total surplus arising in the comparatives above represents the surplus
(for the six months ended 31 December 2010 and the 12 months ended 30 June
2011) that would have arisen had Momentum and Metropolitan been merged for
both periods.
2. 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, including life insurance companies in Africa. It
is after non-controlling interests but excludes other items which are
eliminated on consolidation. It also excludes non-insurance business.
MMI HOLDINGS - STATEMENT OF ASSETS AND LIABILITIES
RECONCILIATION OF REPORTING EXCESS 31.12.2011 31.12.2010 30.06.2011
TO STATUTORY EXCESS Rm Rm Rm
Reporting excess - long-term 15 767 16 001 15 911
insurance business (1)
Disregarded assets (2) (1 106) (1 229) (1 205)
Difference between statutory and (270) (254) (263)
published valuation methods
Write down of subsidiaries and (772) (708) (715)
associates for statutory purposes
Unsecured subordinated debt 1 538 1 513 1 507
Consolidation adjustments (69) (23) (65)
Statutory excess - long-term 15 088 15 300 15 170
insurance business
Capital adequacy requirement (CAR) 6 521 6 111 6 485
(Rm) (3)
Ratio of long-term insurance 2.3 2.5 2.3
business excess to CAR (times)
Discretionary margins 9 785 10 348 9 999
1. 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, including life insurance companies in Africa. It
is after non-controlling interests but excludes other items which are
eliminated on consolidation. It also excludes non-insurance business.
2. 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. It includes Sage intangible assets of R604 million (31.12.2010:
R624 million; 30.06.2011: R618 million).
3. Aggregation of separate company CAR`s, with no assumption of
diversification benefits.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
EMBEDDED VALUE RESULTS AS AT 31.12.2011 31.12.2010 30.06.2011
Rm Rm Rm
Covered business
Reporting excess - long-term 15 767 16 001 15 911
insurance business
Reclassification to non- (943) (890) (918)
covered business
14 824 15 111 14 993
Disregarded assets (1) (850) (822) (821)
Difference between statutory (270) (254) (263)
and published valuation
methods
Dilutory effect of (52) (6) (5)
subsidiaries (2,5)
Consolidation adjustments (3) (133) (87) (108)
Momentum Namibia adjustment (38) - (42)
(4)
Value of Momentum preference (500) (500) (480)
shares issued
Diluted adjusted net worth - 12 981 13 442 13 274
covered business
Net value of in-force 13 843 13 548 14 083
business
Diluted embedded value - 26 824 26 990 27 357
covered business
Non-covered business
Net assets - non-covered 943 890 918
subsidiaries of life
insurance companies
Net assets - non-covered 1 143 819 830
subsidiaries of the holding
company
Consolidation adjustments (3) (175) (285) (303)
Adjustments for dilution (5) 1 077 1 127 1 009
Diluted adjusted net worth - 2 988 2 551 2 454
non-covered business
Write up to directors` value 999 1 577 880
Non-covered businesses 1 929 2 073 1 944
Holding company expenses (813) (496) (797)
(6)
International holding (117) - (117)
company expenses (6)
Secondary Tax on Companies - - (150)
allowance
Diluted embedded value - non- 3 987 4 128 3 334
covered business
Diluted adjusted net worth 15 969 15 993 15 728
Net value of in-force 13 843 13 548 14 083
business
Write up to directors` value 999 1 577 880
Diluted embedded value 30 811 31 118 30 691
EMBEDDED VALUE RESULTS AS AT 31.12.2011 31.12.2010 30.06.2011
Rm Rm Rm
Required capital - covered 8 107 8 297 8 401
business (adjusted for qualifying
debt and preference shares)
Surplus capital - covered 4 874 5 145 4 873
business
Diluted embedded value per 1 920 1 939 1 912
share (cents)
Diluted net asset value per 995 996 980
share (cents)
Diluted number of shares in 1 605 1 605 1 605
issue (million) (7)
1. Disregarded assets include Sage intangible assets of R604 million
(31.12.2010: R624 million; 30.06.2011: R618 million), goodwill and various
other items.
2. For accounting purposes, Metropolitan Health and Metropolitan Kenya have
been consolidated at 100%, while Metropolitan Namibia has been consolidated
at 99% for the current period, in the statement of financial position. For
diluted embedded value purposes the non-controlling interests and related
funding have been reinstated.
3. Consolidation adjustments include mainly goodwill and intangibles in
subsidiaries that are eliminated.
4. The carrying value of Momentum Namibia included in the reporting excess was
written down to 49% of the company`s net asset value.
5. Adjustments for dilution are made up as follows:
Dilutory effect of subsidiaries (note 2): R165 million (31.12.2010: R76
million; 30.06.2011: R70 million)
Staff share scheme loans: R2 million (31.12.2010: R8 million; 30.06.2011:
R3 million)
Treasury shares held on behalf of contract holders: R198 million
(31.12.2010: R332 million; 30.06.2011: R225 million)
Liability - MMI convertible preference shares issued to KTH: R712 million
(31.12.2010: R711 million; 30.06.2011: R711 million)
6. The holding company expenses reflect the present value of projected
recurring head office expenses. The International holding company expenses
reflect the allowance for support to the international life assurance and
health businesses.
7. 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.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
ANALYSIS OF NET VALUE OF IN- 31.12.2011 31.12.2010 30.06.2011
FORCE BUSINESS PER DIVISION Rm Rm Rm
Momentum Retail 7 973 7 136 7 449
Gross value of in-force business 9 529 8 556 8 960
(1)
Less cost of required capital (2) (1 556) (1 420) (1 511)
Metropolitan Retail 3 278 3 016 3 206
Gross value of in-force business 3 804 3 382 3 579
Less cost of required capital (2) (526) (366) (373)
Momentum Employee Benefits 1 365 1 486 1 500
Gross value of in-force business 2 145 1 960 1 980
Less cost of required capital (2) (780) (474) (480)
Metropolitan International 922 782 860
Gross value of in-force business 950 805 883
Less cost of required capital (28) (23) (23)
Shareholder capital (3) 305 1 128 1 068
Gross value of in-force business 315 1 165 1 096
(1)
Less cost of required capital (10) (37) (28)
Net value of in-force business 13 843 13 548 14 083
Notes
1. Value of in-force of R729 million was transferred from Shareholder capital
to Momentum Retail, reflecting a refinement in the allocation of
discretionary margins to the divisions.
2. The strategic decision to de-risk shareholder assets resulted in an
increase in the technical calculation of the required cost of capital,
impacting Momentum Retail by negative R78 million, Metropolitan Retail by
negative R135 million and Momentum Employee Benefits by negative R310
million, respectively.
3. The value of in-force in the Shareholder capital represents discretionary
margins not allocated to specific divisions.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
EMBEDDED VALUE Adjusted Net value 31.12.2011 31.12.2010 30.06.2011
net of Rm Rm Rm
worth in-force
Rm Rm
Covered
business
Momentum Group 6 980 9 259 16 239 16 095 16 425
Ltd
Metropolitan 5 020 3 662 8 682 9 352 9 134
Life Ltd
Metropolitan 47 - 47 44 44
Odyssey
Metropolitan 934 922 1 856 1 499 1 754
International
Metropolitan 85 - 85 104 81
Life
Internatio-
nal
Metropolitan 177 336 513 511 496
Namibia
Metropolitan 121 81 202 181 186
Botswana
Metropolitan 203 284 487 444 439
Lesotho
Metropolitan 19 - 19 14 11
Kenya
Metropolitan 22 20 42 36 43
Ghana
Metropolitan 19 - 19 23 20
Swaziland
Metropolitan 53 1 54 57 58
Nigeria
Momentum 235 200 435 129 420
Internatio-
nal
businesses
(1)
Total covered 12 981 13 843 26 824 26 990 27 357
business
Write up 31.12.2011
Adjusted to Rm
net directors` 31.12.2010 30.06.2011
worth value Rm Rm
Rm Rm
Non-covered
business
Momentum 710 804 1 514 1 766 1 535
Investments
(2)
Metropolitan 363 1 072 1 435 1 511 1 416
Health (3)
Momentum 83 53 136 77 83
Retail (short-
term
insurance)
Metropolitan - (117) (117) - (117)
International
Holdings (4)
MMI Holdings 1 832 (813) 1 019 774 567
(after
consolidation
adjustments)
(4)
Secondary Tax - - - - (150)
on Companies
allowance
Total non- 2 988 999 3 987 4 128 3 334
covered
business
Total embedded 15 969 14 842 30 811 31 118 30 691
value
Diluted net (2 988)
asset value -
non-covered
business
Adjustments to 2 786
covered
business -
adjusted net
worth
Reporting 15 767
excess - long-
term insurance
business
1. The Momentum International businesses were transferred from non-covered to
covered business at 30 June 2011.
2. Momentum Investments subsidiaries are valued using forward Price Earnings
multiples applied to the relevant sustainable earnings bases.
3. Metropolitan Health subsidiaries have been valued using Embedded Value
methodology.
4. The holding company expenses reflect the present value of projected
recurring head office expenses. The International holding company expenses
reflect the allowance for support to the international life assurance and
health businesses.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
ANALYSIS OF CHANGES IN Covered business 6 mths 6 mths 12 mths
GROUP EMBEDDED VALUE to to to
31.12. 31.12. 30.06.2
2011 2010 011
N Adjuste Gross Cost Total Total Total
o d net Value of EV EV EV
t worth of in- CAR exclud excludi
e (ANW) force ing ng FNB
s (VIF) FNB Life
Life 90%
90%
Rm Rm Rm Rm Rm Rm
Profit from new business (726) 1 114 (55) 333 387 727
Embedded value from new A (726) 1 092 (55) 311 356 632
business
Expected return to end of B - 22 - 22 31 95
period
Profit from existing 1 651 (777) (472) 402 822 2 229
business
Expected return - B - 891 (155) 736 674 1 377
unwinding of RDR
Release from the cost of C - - 200 200 208 366
required capital
Expected (or actual) net D 1 472 (1 472) - - - -
of tax profit transfer to
net worth
Operating experience E 215 (67) (25) 123 133 712
variances
Operating assumption F (36) (129) (492) (657) (193) (226)
changes
Allowance for service - - - - 98 128
level agreement between
RMBUT and Momentum
Embedded value profit 925 337 (527) 735 1 307 3 084
from operations
Investment return on G 369 - - 369 713 1 057
adjusted net worth
Investment variances H (5) (192) 28 (169) 734 215
Economic assumption I (155) 104 14 (37) 91 (65)
changes
Change in risk margin - - - - 2 -
Exchange rate movements 20 6 - 26 (16) (10)
Embedded value profit - 1 154 255 (485) 924 2 831 4 281
covered business
ANALYSIS OF CHANGES IN Covered business 6 mths 6 mths 12 mths
GROUP EMBEDDED VALUE to to to
31.12. 31.12. 30.06.2
2011 2010 011
N Adjuste Gross Cost Total Total Total
o d net Value of EV EV EV
t worth of in- CAR exclud excludi
e (ANW) force ing ng FNB
s (VIF) FNB Life
Life 90%
90%
Rm Rm Rm Rm Rm Rm
Transfer of business from (5) - - (5) 462 420
non-covered business
Capital transferred to 3 (10) - (7) (22) -
non-covered business
Changes in share capital 13 - - 13 41 139
Dividend paid (1 495) - - (1 (556) (1 717)
495)
Change in reserves 37 - - 37 - -
Opening restatement for - - - - 161 161
FNB Life (EV statement
shown after restatement)
Change in embedded value (293) 245 (485) (533) 2 917 3 284
- covered business
Non-covered business
Change in directors` 106 45 (82)
valuation and earnings
Allowance for service - (272) (288)
level agreement between
RMBUT and Momentum
Holding company expenses (16) - (574)
Secondary Tax on 62 - (150)
Companies allowance
Embedded value profit - 152 (227) (1 094)
non-covered business
Changes in share capital (13) (28) (139)
Dividend paid 548 (32) 176
Finance costs - (46) (44) (88)
preference shares
Transfer of business to 5 (462) (420)
covered business
Capital transferred from 7 22 -
covered business
Change in embedded value 653 (771) (1 565)
- non-covered business
Total change in group 120 2 146 1 719
embedded value
ANALYSIS OF CHANGES IN Covered business 6 mths 6 mths 12 mths
GROUP EMBEDDED VALUE to to to
31.12. 31.12. 30.06.2
2011 2010 011
N Adjuste Gross Cost Total Total Total
o d net Value of EV EV EV
t worth of in- CAR exclud excludi
e (ANW) force ing ng FNB
s (VIF) FNB Life
Life 90%
90%
Rm Rm Rm Rm Rm Rm
Total embedded value 1 076 2 604 3 187
profit
Return on embedded value (%) - internal rate of 7.1% 18.9% 11.0%
return
- The analysis of changes in embedded value above assumes that Momentum and
Metropolitan were merged for the 12 months ended 30 June 2011 and the six
months ended 31 December 2010.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
A. VALUE OF NEW BUSINESS
VALUE OF NEW BUSINESS Momentu Metropo- Momentu Metropo- Segmenta
m litan m litan l total
Retail Retail Employe Interna-
e tional
Benefit
s
Rm Rm Rm Rm Rm
6 mths to 31.12.2011
Value of new business 95 151 52 13 311
Gross 119 163 70 13 365
Less cost of required (24) (12) (18) - (54)
capital
New business premiums 10 827 1 113 2 083 212 14 235
Recurring premiums 547 562 433 105 1 647
Single premiums 10 280 551 1 650 107 12 588
New business premiums 1 575 617 599 129 2 920
(APE)
New business premiums 13 234 2 826 4 503 707 21 270
(PVP)
Profitability of new 6.0 24.5 8.7 10.1 10.7
business as a % of APE
Profitability of new 0.7 5.3 1.2 1.8 1.5
business as a % of PVP
6 mths to 31.12.2010
Value of new business 171 145 26 14 356
Gross 202 146 41 14 403
Less cost of required (31) (1) (15) - (47)
capital
New business premiums 11 772 1 515 1 993 168 15 448
Recurring premiums 666 475 394 79 1 614
Single premiums 11 106 1 040 1 599 89 13 834
New business premiums 1 777 578 553 88 2 996
(APE)
New business premiums 14 400 3 018 4 132 422 21 972
(PVP)
Profitability of new 9.6 25.1 4.7 15.9 11.9
business as a % of APE
Profitability of new 1.2 4.8 0.6 3.3 1.6
business as a % of PVP
VALUE OF NEW BUSINESS Momentu Metropo- Momentu Metropo- Segmenta
m litan m litan l total
Retail Retail Employe Interna-
e tional
Benefit
s
Rm Rm Rm Rm Rm
12 mths to 30.06.2011
Value of new business 288 257 62 25 632
Gross 338 262 97 25 722
Less cost of required (50) (5) (35) - (90)
capital
New business premiums 23 910 2 822 3 531 320 30 583
Recurring premiums 1 237 921 753 190 3 101
Single premiums 22 673 1 901 2 778 130 27 482
New business premiums 3 504 1 111 1 030 203 5 848
(APE)
New business premiums 28 758 5 698 8 300 967 43 723
(PVP)
Profitability of new 8.2 23.1 6.0 12.3 10.8
business as a % of APE
Profitability of new 1.0 4.5 0.7 2.6 1.4
business as a % of PVP
- The above table forms part of the IFRS segmental information and assumes
that Momentum and Metropolitan merged on 1 July 2010.
- Value of new business and new business premiums are net of non-controlling
interests.
- Due to rounding, the cost of capital for the international business is less
than R1 million.
- The value of new business has been calculated on closing assumptions.
Investment yields at the point of sale have been used for fixed annuity and
guaranteed endowment business, for other business the investment yields at
the end of the year have been used.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
RECONCILIATION OF LUMP SUM INFLOWS 6 mths to 12 mths
6 mths to 31.12.2010 to
31.12.2011 Rm 30.06.2011
Rm Rm
Total lump sum inflows 36 906 38 498 73 292
Inflows not included in value of new (24 821) (25 079) (47 284)
business
Momentum Retail 7 (27) (36)
Momentum Employee Benefits (180) (35) (109)
Balance Sheet Management - - (36)
Momentum Africa (47) (39) (124)
Momentum Investments
On-balance sheet inflows (4 755) (5 556) (8 846)
Off-balance sheet inflows (19 846) (19 422) (38 133)
Term extensions on maturing policies 427 441 817
Retirement annuity proceeds invested in 151 - 715
living annuities
Non-controlling interests and other (75) (26) (58)
adjustments
Single premiums included in value of 12 588 13 834 27 482
new business
- The above table assumes that Momentum and Metropolitan had merged on 1 July
2010.
B. EXPECTED RETURN - UNWINDING OF RDR
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.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
E. OPERATING EXPERIENCE VARIANCES
6 mths to 6 mths to 12 mths to
31.12.2011 31.12.2010 30.06.2011
OPERATING EXPERIENCE Notes ANW Net EV
VARIANCES Rm VIF Rm EV EV
Rm Rm Rm
Momentum Retail (58) (53) (111) (22) 222
Mortality and morbidity 1 29 4 33 85 195
Terminations, premium 2 (66) (1) (67) (50) (6)
cessations and policy
alterations
Wealth International 3 - (39) (39) - -
restructuring
Expense variance 4 (38) - (38) (64) 5
Other 17 (17) - 7 28
Metropolitan Retail 24 (6) 18 80 106
Mortality and morbidity 1 60 12 72 59 132
Terminations, premium 5 (28) (24) (52) 20 (56)
cessations and policy
alterations
Expense variance 21 - 21 (23) 8
Other (29) 6 (23) 24 22
Momentum Employee 32 (11) 21 (22) (19)
Benefits
Mortality and morbidity 1 (15) 4 (11) 8 65
Terminations (4) 10 6 (34) (80)
Expense variance 3 - 3 (1) (15)
Other 6 48 (25) 23 5 11
Metropolitan (25) 13 (12) 24 66
International
Mortality and morbidity 1 27 1 28 68 94
Terminations, premium 7 (53) 19 (34) (34) (48)
cessations, policy
alterations and expense
variances
Other 1 (7) (6) (10) 20
Shareholder capital 8 242 (10) 232 35 320
Opportunity cost of - (25) (25) 38 17
required capital
Total operating 215 (92) 123 133 712
experience variances
- The above table assumes that Momentum and Metropolitan were merged from 1
July 2010.
Notes
1. Overall, underwriting experiences over the six months were better compared
to what was allowed for in the valuation basis. The negative variance at
Metropolitan Employee Benefits is a result of unfavourable disability
experience.
2. Worse than expected termination experience on both risk and investment
business over the year impacted negatively on the embedded value.
3. The restructuring of certain Wealth International products resulted in a
loss of covered business value of in-force, partly offset by an increase in
the valuation of Momentum Investments.
4. The expense variance was a result of lower than expected sales volumes.
5. Lower than expected expense recoveries on withdrawals.
6. The positive variance on the ANW is due to one-off experience profits due
to the exit strategy from selected product lines. The negative variance on
the VIF is due to the impact of clients switching to lower margin
investment options.
7. Expense under-recoveries are being experienced in mainly the start-up life
and health operations.
8. The income recorded in respect of shareholder capital relates mostly to
earnings from holding company activities and the management of MMI`s
capital and shareholder balance sheet risks. Other sources of earnings such
as variations in actual tax payments and corporate expenses not allocated
to underlying business units are also included here.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
F. OPERATING ASSUMPTION CHANGES
6 mths to 6 mths to 12 mths to
31.12.2011 31.12.2010 30.06.2011
OPERATING ASSUMPTION ANW Net EV EV EV
CHANGES Rm VIF Rm Rm Rm
Rm
Momentum Retail (44) 592 548 51 (244)
Mortality and morbidity - - - - 144
assumptions
Renewal expense (10) 1 (9) (16) (175)
assumptions
Termination assumptions - - - (39) (79)
Modelling changes 1 (6) (82) (88) - -
Methodology changes 2 (28) (56) (84) 106 (134)
Reallocation of margins 3 - 729 729 - -
from Shareholder capital
Metropolitan Retail 16 (26) (10) (54) (141)
Mortality and morbidity - - - (20) 19
assumptions
Renewal expense 7 - 7 (28) (15)
assumptions
Termination assumptions 4 (2) 2 26 13
Discretionary margins - - - (31) 14
Modelling changes 3 - 3 - -
Methodology changes 11 (14) (3) 23 (120)
Other (9) (10) (19) (24) (52)
Momentum Employee 7 18 25 (160) (247)
Benefits
Termination assumptions - - - - (8)
Renewal expense (2) 15 13 (23) (98)
assumptions
Methodology changes 9 (1) 8 (50) (138)
Assumption reviews - - - (15) 7
Other - 4 4 (72) (10)
Metropolitan (34) 14 (20) (43) (64)
International
Mortality and morbidity - - - 2 (10)
assumptions
Renewal expense 15 8 23 (39) (46)
assumptions
Termination assumptions - - - 7 6
Modelling changes (1) - (1) - (26)
Methodology changes (2) (2) (4) 12 29
Other 4 (46) 8 (38) (25) (17)
6 mths to 6 mths to 12 mths to
31.12.2011 31.12.2010 30.06.2011
OPERATING ASSUMPTION ANW Net EV EV EV
CHANGES Rm VIF Rm Rm Rm
Rm
Shareholder capital 19 (727) (708) - -
Reallocation of margins 3 - (729) (729) - -
to Momentum Retail
Other 19 2 21 - -
Methodology change: cost 5 - (492) (492) 13 (85)
of required capital
Secondary Tax on - - - - 555
Companies
Total operating (36) (621) (657) (193) (226)
assumption changes
- The above table assumes that Momentum and Metropolitan were merged from 1
July 2010.
Notes
1. This mainly relates to the implementation of new economic scenario
generator to calculate maturity guarantee reserves.
2. There was a correction of fees on the Retail Wealth and Closed Books.
3. This change reflects a refinement in the allocation of discretionary
margins to the divisions.
4. This includes the allowance for the BEE transaction in Metropolitan Life
Namibia in terms of IFRS 2 - Share based payments.
5. Changes to the technical calculation of the cost of capital due to the
change in the investment strategy of the Metropolitan Life shareholder
assets increased the cost of capital by R523 million.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
G. INVESTMENT RETURN ON ADJUSTED NET WORTH
INVESTMENT RETURN ON ADJUSTED NET 6 mths to 6 mths to 12 mths to
WORTH 31.12.2011 31.12.2010 30.06.2011
Rm Rm Rm
Investment income 310 309 614
Capital appreciation 94 432 475
Change in fair value of properties - 15 (38)
Preference share dividends paid and (35) (43) 6
change in fair value of preference
shares
Investment return on adjusted net 369 713 1 057
worth
- The above table assumes that Momentum and Metropolitan were merged from 1
July 2010.
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.
MMI HOLDINGS - EMBEDDED VALUE INFORMATION
COVERED Net In-force business New business
BUSINESS: worth written
SENSITIVITIES -
31.12.2011
Net Gross Cost of Net Gross Cost
value value CAR value value of
CAR
Rm Rm Rm Rm Rm Rm Rm
Base value 12 981 13 843 16 743 (2 900) 311 365 (54)
1% increase 12 512 15 807 (3 295) 243 305 (62)
in risk
discount
rate
% change (10) (6) 14 (22) (16) 15
1% reduction 15 343 17 756 (2 413) 386 432 (46)
in risk
discount
rate
% change 11 6 (17) 24 18 (15)
10% decrease 14 811 17 692 (2 881) 377 429 (52)
in future
expenses
% change 7 6 (1) 21 18 (4)
(1)
10% decrease 14 229 17 223 (2 994) 376 432 (56)
in lapse,
paid-up
and surren-
der rates
% change 3 3 3 21 18 4
5% decrease 14 839 17 716 (2 877) 378 430 (52)
in mortali-
ty and
morbidi-ty
for assu-
rance
business
% change 7 6 (1) 22 18 (4)
5% decrease 13 650 16 531 (2 881) 302 359 (57)
in mortali-
ty for
annuity
business
% change (1) (1) (1) (3) (2) 6
COVERED Net In-force business New business
BUSINESS: worth written
SENSITIVITIES -
31.12.2011
Net Gross Cost of Net Gross Cost
value value CAR value value of
CAR
Rm Rm Rm Rm Rm Rm Rm
1% reduction 12 661 13 909 16 865 (2 956) 353 407 (54)
in gross
invest-
ment
return,
infla-tion
rate and
risk
discount
rate
% change (2) - 1 2 14 12 -
(2)
1% reduction 12 961 13 866 16 747 (2 881) 345 400 (55)
in infla-
tion rate
% change - - - (1) 11 10 2
10% fall in 12 669 12 917 15 935 (3 018)
market
value of
equities
and proper-
ties
% change (2) (7) (5) 4
10% reduction 13 569 16 451 (2 882) 286 341 (55)
in premium
indexa-
tion take-
up rate
% change (2) (2) (1) (8) (7) 2
10% decrease 363 417 (54)
in non-
commis-
sion
related
acquisi-
tion
expenses
% change 17 14 -
COVERED Net In-force business New business
BUSINESS: worth written
SENSITIVITIES -
31.12.2011
Net Gross Cost of Net Gross Cost
value value CAR value value of
CAR
Rm Rm Rm Rm Rm Rm Rm
1% Increase 14 206 17 087 (2 881) 319 373 (54)
in equity/
property
risk
premium
% change 3 2 (1) 3 2 -
1. No corresponding changes in variable policy charges are assumed, although
in practice it is likely that these will be modified according to
circumstances.
2. Bonus rates are assumed to change commensurately.
3. The change in the value of cost of required capital is disclosed as nil
where the sensitivity test results in an insignificant change in the value.
MMI HOLDINGS - STOCK EXCHANGE PERFORMANCE
STOCK EXCHANGE 31.12.2011 30.06.2011 31.12.2010 30.06.2010
PERFORMANCE
6 month period
Value of listed shares 3 474 5 936 6 333 2 724
traded (rand million)
Volume of listed shares 209 355 381 177
traded (million)
Shares traded (% of 28 47 107 64
average listed shares in
issue) (1)
Value of shares traded - 54 53 50 49
life insurance (J857 -
Rbn)
Value of shares traded - 1 368 1 288 1 187 1 211
top 40 index (J200 -
Rbn)
Trade prices
Highest (cents per 1 876 1 775 1 776 1 731
share)
Lowest (cents per share) 1 505 1 527 1 505 1 291
Last sale of period 1 710 1 699 1 662 1 606
(cents per share)
Percentage (%) change 1 5 7 43
during period (1)
Percentage (%) change - 23 9 26 (5)
life insurance sector
(J857) (1)
Percentage (%) change - (1) (1) 51 (13)
top 40 index (J200) (1)
31 December/30 June
Price/diluted core 10.6 10.6 10.8 10.8
headline earnings
(segmental) ratio
Dividend yield % 6.3 6.2 6.1 6.4
(dividend on listed
shares) (1)
Dividend yield % - top 2.8 2.4 2.0 2.2
40 index (J200) (1)
STOCK EXCHANGE 31.12.2011 30.06.2011 31.12.2010 30.06.2010
PERFORMANCE
Total shares issued
(million)
Listed on JSE 1 504 1 504 1 504 553
Ordinary shares 1 504 1 504 1 504 549
Share incentive - - - 4
scheme
Unlisted - share 1 1 1 10
purchase scheme
Total ordinary shares 1 505 1 505 1 505 563
in issue
Treasury shares held (15) (14) (20) (1)
on behalf of contract
holders
Adjustment to staff (1) (1) (1) (12)
share scheme shares
(2)
Share incentive - - - (2)
scheme
Share purchase (1) (1) (1) (10)
scheme
Basic number of shares 1 489 1 490 1 484 550
in issue
Adjustment to staff 1 1 1 2
share scheme shares
Treasury shares held 15 14 20 1
on behalf of contract
holders
Convertible redeemable 100 100 100 100
preference shares
Diluted number of 1 605 1 605 1 605 653
shares in issue (3)
Market capitalisation at 27 27 27 11
end (Rbn) (4)
Percentage (%) of life 13 15 15 7
insurance sector (1)
1. Percentages have been annualised.
2. These are shares which have been issued since 1 January 2001, the date on
which the group adopted AC133 (now IAS39).
3. 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.
4. The market capitalisation is calculated on the fully diluted number of
shares in issue.
5. Comparatives relate to the listed entity, MMI Holdings Ltd (previously
Metropolitan Holdings Ltd).
Date: 06/03/2012 07:05:01 Produced by the JSE SENS Department.
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