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Metropolitan - Unaudited Group Results For The Six Months Ended 30 June 2004
Release Date: 08/09/2004 08:00:05 Code(s): MET
Metropolitan - Unaudited Group Results For The Six Months Ended 30 June 2004
Metropolitan Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
JSE Code: MET
NSX Code: MTD
ISIN Code: ZAE000050456
(`Metropolitan`)
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004
* Adding shareholder value
* Total new business premiums up 44%
* Embedded value of new business up 174%
* Management expenses reduced by 3%
* Kagiso partnership concluded
* Cashflow from insurance operations up 57%
* Core headline earnings per share up 32%
* Embedded value per share up 21% on June 2003
* Dividend per share up 14%
DIRECTORS` STATEMENT
The directors take pleasure in presenting the unaudited interim results of the
Metropolitan Holdings Financial Services Group for the six months ended 30 June
2004.
These results are prepared in accordance with the provisions of the South
African Companies Act and the Long-term Insurance Act and comply with South
African Statements of Generally Accepted Accounting Practice (GAAP); guidelines
issued by the Actuarial Society of South Africa; and the disclosure requirements
of the JSE Securities Exchange South Africa (JSE).
Presentation of financial statements
The consolidated financial statements are prepared on the fair value and going
concern bases. The group`s principal accounting policies are consistent with
those applied at 31 December 2003, except for the change in accounting policy
for the consolidation of the staff share schemes.
Change in accounting policy - consolidation of staff share schemes
This accounting policy has changed as required by the GAAP Monitoring Panel
(GMP) and in accordance with AC132 - Consolidated financial statements and
accounting for investments in subsidiaries. Shares issued to participants since
1 January 2001, the date on which the group adopted AC133 - Financial
instruments: recognition and measurement - have been reversed on consolidation
and as a result, diluted earnings, headline earnings and core headline earnings
per share are disclosed for the first time. The comparative figures for June and
December 2003 have been adjusted as detailed in the table below:
Published Adjust- Restated Published Adjust-ment Rest
ment ated
30.06.2003 30.06.2003 31.12.2003 31.1
2.20
03
Rm Rm Rm Rm Rm Rm
Table 2 Reconciliation of headline earnings
Earnings 132 (16) 116 1 064 (68) 996
Headline 158 (16) 142 1 117 (68) 1 049
earnings
Core 175 (22) 153 434 (45) 389
headline
earnings
Core 25.22 (1.75) 23.47 62.09 (2.43) 59.66
headline
earnings per
share
(cents)
Headline 22.77 (0.99) 21.78 159.80 1.09 160.89
earnings per
share
(cents)
Earnings per 19.02 (1.23) 17.79 152.22 0.54 152.76
share
(cents)
Weighted 694 (42) 652 699 (47) 652
average
number of
shares in
issue
(million)
Table 3 Consolidated balance sheet
Non-current 31 516 (306) 31 210 35 493 (451) 35 042
assets
Current 1 415 8 1 423 1 615 14 1 629
assets
Capital and 4 308 (298) 4 010 5 199 (437) 4 762
reserves
Published Adjust- Restated Published Adjust- Restated
ment ment
30.06.200 30.06.2003 31.12.2003 31.12.2003
3
Rm Rm Rm Rm Rm Rm
Table 7 Embedded value
Excess - 5 024 (298) 4 726 5 860 (437) 5 423
group
Adjusted net 4 106 (298) 3 808 5 057 (437) 4 620
asset value
Embedded 6 321 (298) 6 023 7 550 (437) 7 113
value
Embedded 911 13 924 1 068 23 1 091
value per
share
(cents)
Adjusted net 592 (8) 584 715 (6) 709
asset value
per share
(cents)
Number of 694 (42) 652 707 (55) 652
shares in
issue
(million)
Adoption of International Financial Reporting Standards (IFRS)
The group is in the process of converting to IFRS and will be fully compliant by
2005 as required by the JSE. Both IFRS 4 - Insurance contracts - and IAS 39 -
Financial instruments: recognition and measurement - were issued during 2004 and
are effective from 1 January 2005. These standards will change the way in which
results will be reported in future but will not be implemented retrospectively.
Therefore the interim results for 2005 may not be directly comparable with those
of 2004. The industry is working with the South African Institute of Chartered
Accountants and the Actuarial Society of South Africa to develop guidance for
the sector with a view to standardising the implementation of these standards in
order to provide the users of financial statements with more comparable
financial results.
REVIEW OF OPERATIONS AND PROSPECTS
Operational performance
All aspects of the business continued to derive material benefit from concerted
management action and an even sharper focus.
Operational improvements steadily gained ground, with this solid set of results
being underpinned by industry-leading growth in new business, improved retention
rates, ongoing cost containment and sustained positive cash flows.
The 44% increase in the flow of new business was exceptional and proves that the
group is able to grow its business despite increased competition in the lower
and middle income markets.
The unbroken record of positive cashflow from clients continued, with an
increase of 57% being recorded in the life insurance operations.
An increase of 32% in the new business annual premium equivalent (APE) for the
retail business can be attributed to robust growth in both recurring and single
premium income.
Notwithstanding the drive for new business, the retention of all business
remains a key area of focus for the group; lapse and surrender rates have
continued to show improvement.
The corporate business increased its APE by 82%, with recurring and single
premiums both contributing to this outstanding achievement.
Despite this growth in new business, management expenses remained well
controlled at 3% below the prior year. The group`s 2004 target, as previously
communicated to shareholders, to maintain 2004 expenses at the same level as for
the previous year, remains on track.
This powerful all-round performance resulted in growth of 174% in the embedded
value of life insurance new business, with strong improvements in both the
retail and the corporate new business profit margins.
Core headline earnings per share grew 32%.
All four businesses in the group continued to contribute positively to core
headline earnings, with the biggest growth coming from retail (63%) and health
(400%).
In the international business, Namibia and Botswana both increased operating
profits.
The health group`s recovery was driven primarily by increased members under
administration, and boosted by another good contribution from Qualsa, the
managed healthcare arm.
Competitive investment performance remains a challenge.
Kagiso partnership
Metropolitan concluded a transaction whereby Kagiso Trust Investments, a broad-
based empowerment consortium, would become a significant strategic shareholder
in Metropolitan with effect from 1 October 2004. All regulatory issues have been
resolved; shareholder approval was obtained on 1 September 2004 and the shares
will be issued on 1 October 2004.
Corporate activity during the period
Metropolitan bought back and cancelled 43 million ordinary shares.
An odd-lot offer was made to the 23 154 shareholders holding less than 100
Metropolitan shares. This offer is open until Friday 17 September 2004 at an
offer price of R8.02 per share.
Metropolitan is reaching the final stages of integrating the insurance book
acquired from Commercial Union. A proposal has been submitted to the Financial
Services Board (FSB), as well as the policyholders, proposing the removal of the
90:10 licence. If approved, an additional amount of R365 million will be
transferred to the policyholders` fund and these policies will be fully
integrated into the Metropolitan Life book.
As part of the project to corporatise the Lesotho operations, a new company was
established in that country during 2003. The group is currently in negotiations
with the FSB with a view to transferring the policies owned by Lesotho residents
into that company during 2004.
Prospects
Metropolitan remains the largest long-term financial services group in Southern
Africa focused on the low and middle income markets. The benefits of this
focus, enhanced by Metropolitan`s commitment to black economic empowerment as
encapsulated in its brand and reflected in these results, will remain a
competitive advantage.
The outlook in our market remains positive, boosted by the reduction in the
prime interest rate, lower inflation and increased business confidence.
The board is satisfied that the operational improvements achieved in 2003 and
continuing through the first half of 2004 will carry on for the remainder of
2004, with a strong focus on further increasing the new business profit margins,
but caution that the rate of improvement will slow down.
DIRECTORATE CHANGES AND DIRECTORS` SHAREHOLDING
Eric Molobi, JJ Njeke and Andile Sangqu (alternate) were appointed as directors
with effect from 1 July 2004. No further changes have been made to the
directorate since 31 December 2003. All transactions in listed shares involving
directors were disclosed on SENS as required.
CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The group had no material capital commitments at 30 June 2004. The group is
party to legal proceedings in the normal course of business, and appropriate
provisions are made when losses are expected to materialise.
POST BALANCE SHEET EVENTS
No material post balance sheet events, other than those detailed under corporate
activity, occurred between the balance sheet date and the date of approval of
the interim results.
DIVIDEND DECLARATION
The dividend policy approved by the directors, and consistent with prior years,
is to provide shareholders with stable dividend growth that reflects expected
growth in underlying earnings in the medium term, while allowing the dividend
cover to fluctuate.
An interim final dividend of 20.50 cents per share has been declared on 7
September 2004, resulting in a dividend cover of 1.5 times based on core
headline earnings. This dividend is payable to holders of ordinary shares
recorded in the register of the company at the close of business on Friday, 1
October 2004 and will be paid on Monday, 4 October 2004. The last day to trade
`cum` dividend will be Thursday, 23 September 2004. The shares start trading
`ex` dividend from the commencement of business on Monday, 27 September 2004.
Share certificates may not be dematerialised or rematerialised between Monday,
27 September and Friday, 1 October 2004, both days inclusive.
Where applicable, dividends in respect of certificated shareholders will be
transferred electronically to shareholders` bank accounts on payment date. In
the absence of specific mandates, dividend cheques will be posted to
certificated shareholders on or about payment date. Shareholders who have
dematerialised their shares will have their accounts with their CSDP or broker
credited on Monday, 4 October 2004.
Signed on behalf of the board
Gloria Tomatoe Serobe Group chairman
Peter Doyle Group chief executive
Cape Town
7 September 2004
Directors:
Gloria Tomatoe Serobe (non-executive group chairman), Peter Doyle (group chief
executive), Abel Sithole (executive director), Preston Speckmann (executive
director), Ntuthukoyezwe Buthelezi, Irene Charnley, Willie Esterhuyse, Peter
Lamprecht, Eric Molobi, Syd Muller, John Newbury, JJ Njeke, Andile Sangqu
(alternate), Marius Smith, Franklin Sonn, Johan van Reenen and Sandile Zungu
Secretary: Bongiwe Gobodo-Mbomvu
Registration number: 2000/031756/06
Registered office: 7 Parc du Cap, Mispel Road, Bellville 7535
Transfer secretaries: Sponsor:
Computershare Investor Services Merrill Lynch SA
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg,
2001
P O Box 61051, Marshalltown, 2107
Telephone +27 11 870 8208
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 1: CONSOLIDATED INCOME 6 mths to 6 mths to 12 mths to
STATEMENT 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Income from insurance and investment 263 187 1 106
business (table 6; note 7)
Income from administration business 50 26 65
(note 1)
Income from holding company (note 2) 10 (5) 171
Income before goodwill and tax 323 208 1 342
Goodwill amortised (25) (26) (53)
Income before tax 298 182 1 289
Shareholders` tax paid (126) (63) (272)
Income after tax 172 119 1 017
Outside shareholders` share of (10) (3) (21)
earnings
Earnings 162 116 996
TABLE 2: RECONCILIATION OF HEADLINE 6 mths to 6 mths to 12 mths to
EARNINGS 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Earnings 162 116 996
Goodwill amortised 25 26 53
Headline earnings (1) 187 142 1 049
Capital (18) 55 (471)
(appreciation)/depreciation on
excess
Basis changes and investment 24 (44) (189)
variances
Core headline earnings (2) (note 3) 193 153 389
Core headline earnings per share 31.03 23.47 59.66
(cents)
Headline earnings per share 30.06 21.78 160.89
Earnings per share (cents) 26.05 17.79 152.76
Weighted average number of shares in 622 652 652
issue (million)
Diluted core headline earnings per 28.51 22.05 55.65
share (cents)
Diluted headline earnings per share 27.62 20.46 150.07
(cents)
Diluted earnings per share (cents) 23.93 16.71 142.49
Diluted weighted average number of 677 694 699
shares in issue (million)
TABLE 2: RECONCILIATION OF HEADLINE 6 mths to 6 mths to 12 mths to
EARNINGS 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Dividend per ordinary listed shares
(cents)
Interim 20.50 18.00 18.00
Final 25.00
Total 43.00
Headline earnings consist of operating profit, investment income, capital
appreciation, investment variances and basis and other changes.
Changes in market value of investments can be volatile, therefore core headline
earnings have been disclosed which comprise operating profit and investment
income, only.
TABLE 3: CONSOLIDATED BALANCE SHEET 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
ASSETS
Non-current assets 34 943 31 210 35 042
Investment assets 34 436 30 562 34 479
Goodwill 312 361 337
Intangible assets 74 104 81
Deferred tax 7 71 24
Tangible assets 114 112 121
Current assets 1 766 1 423 1 629
Total assets (note 5) 36 709 32 633 36 671
EQUITY AND LIABILITIES
Capital and reserves (table 4) 4 448 4 010 4 762
Outside shareholders` interest 77 48 72
Non-current liabilities 30 523 27 068 30 268
Policyholders` fund (note 7) 30 478 27 059 30 231
Deferred tax 45 9 37
Current liabilities 1 661 1 507 1 569
Total equity and liabilities 36 709 32 633 36 671
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 4: CONSOLIDATED STATEMENT OF 6 mths to 6 mths to 12 mths to
CHANGES IN EQUITY 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Shareholders` equity at beginning 4 762 4 329 4 329
Changes in share capital (301) (329) (338)
Issue of share capital - - -
Change in accounting policy - (334) (334)
Share premium on new issue - - 79
Staff scheme shares reversed (7) 5 (81)
Shares acquired and cancelled (294) - (2)
Changes in distributable reserve (7) 10 808
Change in accounting policy 29 29
Revaluation of owner-occupied - - 33
properties
Earnings 162 116 996
Dividend (169) (135) (250)
Changes in foreign currency (6) - (4)
translation reserve
Foreign currency translation 14 7 (16)
changes
Transfer to policyholders` fund (20) (7) 12
Change in non-distributable reserve - - (33)
Revaluation of owner-occupied - - (33)
properties
Shareholders` equity at end (table 3; 4 448 4 010 4 762
note 10)
TABLE 5: CONSOLIDATED CASH FLOW 6 mths to 6 mths to 12 mths to
STATEMENT 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Net cash inflow from operating 720 648 1 959
activities
Net cash (out)/inflow from investing (1 026) 180 (1 557)
activities
Net cash (out)/inflow from financing (294) - 77
activities
Net cash flow (600) 828 479
Cash resources and funds on deposit 3 876 3 397 3 397
at beginning
Cash resources and funds on deposit 3 276 4 225 3 876
at end
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 6: STATEMENT OF ACTUARIAL 30.06.2004 30.06.2003 31.12.2003
VALUES OF ASSETS AND LIABILITIES Rm Rm Rm
Total assets per balance sheet (table 36 709 32 633 36 671
3)
Current liabilities and deferred tax (1 706) (1 516) (1 606)
per balance sheet
Outside shareholders` interest per (77) (48) (72)
balance sheet
Net assets - group 34 926 31 069 34 993
Actuarial liabilities under unmatured (29 780) (26 343) (29 570)
policies
Excess - group (table 7 & 8; 5 146 4 726 5 423
note 10)
Net assets - non-insurance (459) (673) (728)
Excess - insurance and investment 4 687 4 053 4 695
business
Change in excess of insurance and (8) (35) 607
investment business
Increase in share capital - (10) (15)
Foreign currency translation changes 7 3 4
Dividend paid 235 163 278
Total surplus arising 234 121 874
Operating profit 140 85 246
Investment income 73 90 163
Basis and other changes 12 45 49
Investment variances (9) (6) 10
Capital 18 (93) 406
appreciation/(depreciation)
Surplus arising (90:10 fund) (43) 30 50
Shareholder earnings (90:10 fund) 6 (4) 33
Consolidation adjustments (39) (31) (83)
Earnings from insurance and 158 116 874
investment business
Shareholders` tax paid 97 63 217
Goodwill amortised 8 8 15
Income from insurance and investment 263 187 1 106
business
(before goodwill and tax) (table 1,
note 7)
Capital adequacy requirement 1 685 1 732 1 640
Capital adequacy multiple (insurance 2.8 2.3 2.9
and investment business)
Second-tier margins 1 207 1 009 1 216
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 1 6 mths to 6 mths to 12 mths to
INCOME FROM 30.06.2004 30.06.2003 31.12.2003
ADMINISTRATION BUSINESS
(before tax, goodwill
and outside
shareholders)
Revenue Expenses Total Total Total
Rm Rm Rm Rm Rm
Health administration 181 (145) 36 8 30
Asset management 38 (28) 10 13 23
Asset administration 16 (12) 4 5 12
Total income from 235 (185) 50 26 65
administration business
(table 1)
NOTE 2 - INCOME FROM HOLDING COMPANY 6 mths to 6 mths to 12 mths to
(before tax) 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Investment income 25 29 55
Realised and unrealised capital 8 (17) 150
appreciation/(depreciation)
Administration expenses (23) (17) (34)
Net income from holding company 10 (5) 171
(table 1)
NOTE 3 - ANALYSIS OF CORE HEADLINE 6 mths to 6 mths to 12 mths to
EARNINGS 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Corporate business 45 47 111
Operating profit 63 64 154
Tax (18) (17) (43)
Retail business 106 65 207
Operating profit 151 96 283
Tax (45) (31) (76)
International business 2 4 3
Operating profit 6 7 8
Tax (4) (3) (5)
Metropolitan Health Group 20 4 20
Operating profit 29 5 24
Tax (9) (1) (4)
Shareholders` equity 20 33 48
Holding company expenses (23) (17) (34)
Investment income on total 83 87 123
shareholder assets
Income tax on investment income (40) (37) (41)
Core headline earnings (table 2) 193 153 389
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 3 - ANALYSIS OF CORE HEADLINE 6 mths to 6 mths to 12 mths to
EARNINGS 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Total operating profit 249 172 469
Holding company expenses (23) (17) (34)
Investment income on total 83 87 123
shareholders` assets
Total tax (116) (89) (169)
Core headline earnings (table 2) 193 153 389
NOTE 4 - FUNDS 6 mths 6 mths 12 mths
RECEIVED FROM Gross Gross Net inflow Net inflow Net inflow
CLIENTS inflow outflow 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Rm Rm
Retail business 2 036 (1 501) 535 624 1 433
Corporate 1 058 (933) 125 (257) 182
business
International 371 (207) 164 157 354
business
Life insurance 3 465 (2 641) 824 524 1 969
cash flows
NOTE 5 - ASSETS UNDER MANAGEMENT 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Investment assets 34 433 30 559 34 476
Strategic investments 3 3 3
Goodwill 312 361 337
Tangible and intangibles assets 188 216 202
Current assets and deferred tax 1 773 1 494 1 653
Total on-balance sheet assets 36 709 32 633 36 671
(table 3)
Collective investments 1 697 1 384 1 524
Health administration 1 692 1 355 1 577
Metropolitan Asset Managers 3 834 3 783 4 729
EB segregated assets 777 805 783
Total assets under management 44 709 39 960 45 284
NOTE 6 - NUMBER OF EMPLOYEES 30.06.2004 30.06.2003 31.12.2003
Indoor 3 370 3 462 3 416
Field 3 409 2 695 2 890
Total 6 779 6 157 6 306
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 7: POLICYHOLDERS` FUND 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Balance at beginning 30 231 26 600 26 600
Inflow 4 030 3 683 11 355
Premiums received (note 8) 3 465 2 784 7 084
Investment return 565 899 4 271
Investment income 862 830 1 762
Realised and unrealised (297) 69 2 509
capital (depreciation)/
appreciation
Outgo (3 500) (3 030) (6 606)
Payments to policyholders (2 641) (2 260) (5 115)
(note 9)
Sales remuneration (371) (272) (579)
Management expenses (459) (475) (931)
Distribution costs (80) (75) (162)
Administration expenses (379) (400) (769)
Policyholders` tax paid (29) (23) 19
Income from insurance and (263) (187) (1 106)
investment business
(table 1 & 6)
Foreign currency translation (20) (7) (12)
changes
Balance at end 30 478 27 059 30 231
Liabilities under insurance 24 264 21 647 23 948
contracts
Liabilities under investment 5 516 4 696 5 622
contracts
90:10 fund surplus 698 716 661
Total (table 3) 30 478 27 059 30 231
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 8 - PREMIUMS RECEIVED 6 mths to 6 mths to 12 mths to
30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Recurring premiums 2 481 2 113 4 593
Individual life 1 836 1 669 3 558
Employee benefits 773 574 1 304
Re-insurance (128) (130) (269)
Single premiums 984 671 2 491
Individual life 576 451 1 040
Employee benefits 408 220 1 451
Total (note 7) 3 465 2 784 7 084
Insurance contracts 3 016 2 388 5 199
Investment contracts 449 396 1 885
3 465 2 784 7 084
Metropolitan Life Ltd 2 845 2 361 6 107
Metropolitan Odyssey Ltd 332 182 416
Metropolitan International Ltd 10 - -
Metropolitan Life (Namibia) Ltd 150 149 322
Metropolitan Life of Botswana Ltd 106 90 186
Metropolitan Lesotho Ltd 22 2 53
3 465 2 784 7 084
NOTE 9 - PAYMENTS TO POLICYHOLDERS 6 mths to 6 mths to 12 mths to
30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Individual life 1 644 1 290 2 735
Death and disability claims 374 345 734
Maturity claims 568 293 752
Annuities 217 203 416
Surrenders 515 480 898
Re-insurance recoveries (30) (31) (65)
Employee benefits 997 970 2 380
Death and disability claims 235 215 474
Maturity claims 44 234 703
Annuities 143 126 278
Withdrawal benefits 122 117 206
Terminations 493 335 829
Re-insurance recoveries (40) (57) (110)
Total (note 7) 2 641 2 260 5 115
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 9 - PAYMENTS TO POLICYHOLDERS 6 mths to 6 mths to 12 mths to
30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Insurance contracts 1 969 1 760 3 719
Investment contracts 672 500 1 396
2 641 2 260 5 115
Metropolitan Life Ltd 2 366 2 048 4 653
Metropolitan Odyssey Ltd 130 101 208
Metropolitan Life (Namibia) Ltd 106 85 176
Metropolitan Life of Botswana Ltd 33 26 75
Metropolitan Lesotho Ltd 6 - 3
2 641 2 260 5 115
NOTE 10 - ANALYSIS OF ASSETS 30.06.2004 31.12.2003
BACKING GROUP EXCESS
Rm % Rm %
Listed equities 2 676 54.5 2 818 54.2
Foreign investments 359 7.3 439 8.4
Properties 432 8.8 373 7.2
Fixed interest 655 13.4 676 13.0
Money market 470 9.6 425 8.2
Goodwill 312 6.4 337 6.5
Other assets 1 0.0 131 2.5
4 905 100.0 5 199 100.0
Adjustment for staff share (457) (437)
schemes
Group net asset value 4 448 4 762
(table 4)
Surplus in 90:10 fund 698 661
Excess - group (table 6) 5 146 5 423
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 7: EMBEDDED VALUE 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Excess - group (table 6) 5 146 4 726 5 423
Adjustments for:
Asset management (table 15) 135 144 150
Health administration 98 47 74
(table 15)
Holding company expenses (258) (227) (220)
Surplus in 90:10 fund and (832) (882) (807)
goodwill (table 8)
Adjusted net asset value 4 289 3 808 4 620
Net value of in-force business 2 516 2 215 2 493
Individual life 1 976 1 831 1 993
Gross value of in-force 2 067 1 936 2 078
business
Less: Cost of capital (91) (105) (85)
Employee benefits 540 384 500
Gross value of in-force 615 498 564
business
Less: Cost of capital (75) (114) (64)
Embedded value (table 8) 6 805 6 023 7 113
Adjustment for staff share 457 298 437
schemes
Fully diluted embedded value 7 262 6 321 7 550
(including adjustment for share
schemes)
Embedded value per share (cents) 1 119 924 1 091
Fully diluted embedded value per 1 094 911 1 068
share (cents)
Adjusted net asset value per 705 584 709
share (cents)
Fully diluted adjusted net asset 715 592 715
value per share (cents)
Number of shares in issue 608 652 652
(million) (table 18)
Number of shares including share 664 694 707
schemes (million) (table 18)
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 8: EMBEDDED VALUE Net Value 30.06.2004 31.12.2003
ATTRIBUTABLE TO GROUP asset of Total Total
value in- Rm Rm
Rm force
Rm
Metropolitan Life Ltd 3 576 2 217 5 793 5 850
Metropolitan Odyssey Ltd 137 113 250 240
Metropolitan International Ltd 93 - 93 94
Metropolitan Life (Namibia) 160 129 289 274
Ltd
Metropolitan Life of Botswana 61 49 110 100
Ltd
Metropolitan Lesotho Ltd (6) 8 2 7
Metropolitan Health Group 246 83 329 345
Methealth Namibia 5 15 20 10
Administrators (Pty) Ltd
Asset management 41 135 176 193
Metropolitan Holdings (after 135 (258) (123) 146
consolidation adjustments)
Goodwill (134) (134) (146)
Total embedded value 4 314 2 491 6 805 7 113
(table 7)
Adjustment for surplus in 832
90:10 fund and goodwill (table
7)
Excess - group (table 6) 5 146
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 9: ANALYSIS OF Non- Insurance 30.06.2004 31.12.2003
CHANGES IN GROUP insurance operations Total Total
EMBEDDED VALUE Rm Rm Rm Rm
Profit from new business 29 65 94 184
Point of sale 28 63 91 175
Expected return to end 1 2 3 9
of period
Profit from existing (11) 176 165 374
business
Expected return 15 144 159 353
Operating experience (22) 24 2 (50)
variance
Operating assumption (4) 8 4 71
changes
Embedded value profit 18 241 259 558
from operations
Investment return on net (9) 82 73 540
worth
Investment variances 1 (53) (52) 65
Economic assumption (52) (54) (106) 192
changes
Exchange rate movements (1) (11) (12) (6)
Total embedded value (43) 205 162 1 349
profit
Capital raised - - - 79
Dividend paid 66 (235) (169) (250)
Shares acquired and (294) - (294) (2)
cancelled
Staff scheme shares (7) - (7) (81)
reversed
Decrease in embedded (288) (20) (308) 1 095
value
Return on embedded value 4.6 22.4
(%) (2004 annualised)
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 10: VALUE OF LIFE INSURANCE NEW 6 mths to 6 mths to 12 mths to
BUSINESS 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Retail business 39 8 58
Gross value of new business 41 13 61
Less: Cost of capital (2) (5) (3)
Corporate business 23 10 34
Gross value of new business 32 13 37
Less: Cost of capital (9) (3) (3)
International business * 1 5 11
Gross value of new business 1 6 12
Less: Cost of capital (0) (1) (1)
63 23 103
* Net of outside shareholders
Outside shareholders` interest
Metropolitan Namibia 21.3% 19.8% 21.3%
Metropolitan Botswana 25.0% 25.0% 25.0%
TABLE 11: SOURCE OF NEW BUSINESS 30.06.2004 31.12.2003
APE % Total % APE % Total %
General intermediary channel 15 10 12 10
Direct writers 44 37 40 40
Direct mail and telemarketing 9 5 20 12
Odyssey broker channel 19 37 15 29
International 13 11 13 9
TABLE 12: VALUE OF NON-LIFE NEW 6 mths to 6 mths to 12 mths to
BUSINESS 30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Health administration 18 4 36
Asset management 10 7 36
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 13: NEW BUSINESS PREMIUMS 6 mths to 6 mths to 12 mths to
30.06.2004 30.06.2003 31.12.2003
Rm Rm Rm
Recurring premiums
Retail business 351 263 608
Corporate business 170 94 178
International business * 44 47 98
Individual life 42 45 84
Employee benefits 2 2 14
565 404 884
Single premiums
Retail business 535 443 1 019
Corporate business 403 215 1 398
International business * 39 11 67
977 669 2 484
Annual premium equivalent (APE) 663 471 1 132
* Net of outside shareholders
TABLE 14: VALUE OF NEW BUSINESS AS A Margin
% OF ANNUAL PREMIUM EQUIVALENT (APE)
30.06.2004 30.06.2003 31.12.2003
% % %
Retail business 9.6 2.6 8.2
Corporate business 10.9 8.6 10.7
International business 2.1 10.4 10.5
Total 9.5 4.9 9.1
APE represents new recurring premiums plus 10% of single premiums.
TABLE 15: VALUATION OF NON-LIFE Value as Write-up to Embedded
SUBSIDIARIES per balance fair value value
sheet Rm Rm
Rm
Asset management 41 135 176
(table 7 & 8)
Health administration 251 98 349
(table 7 & 8)
METROPOLITAN HOLDINGS - GROUP RESULTS
Table 16: PRINCIPAL ASSUMPTIONS 30.06.2004 30.06.2003 31.12.2003
% % %
Pre-tax investment return
Equities 12.5 11.8 11.3
Properties 12.5 11.8 11.3
Government stock 10.5 9.8 9.3
Cash 8.5 7.8 7.3
Risk discount rate 13.0 13.3 11.8
Investment return (before tax) 11.9 11.2 10.7
- smoothed bonus
Expense inflation rate 7.8 7.0 6.5
TABLE 17: LIFE BUSINESS: In-force business New business written
SENSITIVITIES -
30.06.2004
Net Gross Cost Net Gross Cost
value value of CAR value value of CAR
Rm Rm Rm Rm Rm Rm
Base value 2 516 2 682 (166) 63 74 (11)
1% increase in risk 2 295 2 541 (246) 49 67 (18)
discount rate
% change (9) (5) 49 (21) (9) 63
1% reduction in risk 2 762 2 836 (74) 78 81 (3)
discount rate
% change 10 6 (55) 25 10 (76)
10% increase in future 2 325 2 491 (166) 54 65 (11)
expenses
% change (8) (7) - (14) (12) -
1% increase in expense 2 442 2 608 (166) 62 73 (11)
and salary inflation
% change (3) (3) - (2) (2) -
10% increase in policy 2 454 2 620 (166) 50 61 (11)
discontinuance
% change (2) (2) - (20) (17) -
10% increase in mortality 1 970 2 136 (166) 32 43 (11)
and morbidity
% change (note 1) (22) (20) - (49) (42) -
1% reduction in gross 2 174 2 420 (246) 53 72 (19)
investment return
% change (note 2) (14) (10) 48 (15) (2) 69
10% fall in market value 2 383 2 549 (166) 63 74 (11)
of assets
% change (5) (5) - - - -
10% reduction in premium 2 469 2 635 (166) 60 71 (11)
indexation take-up rate
% change (2) (2) - (4) (3) -
10% reduction in new 2 516 2 682 (166) 53 64 (11)
business volumes
% change - - - (16) (14) -
10% increase in non- 2 516 2 682 (166) 57 68 (11)
commission related
acquisition expenses
% change - - - (10) (8) -
Notes:
Mortality decreases by 10% for annuities; mortality and morbidity increase by
10% for assurance.
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