| Wed 9 Mar 2005, 8:18 | | RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 |
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Metropolitan Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
JSE Code: MET
NSX Code: MTD
ISIN Code: ZAE000050456
("Metropolitan")
METROPOLITAN HOLDINGS FINANCIAL SERVICES GROUP
AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
Adding shareholder value
Core headline earnings per share up 49%
Embedded value of new business up 99%
Recurring premium new business up 48%
Net management expenses down 3%
Return on embedded value of 29%
Dividend per share up 21%
Kagiso partnership concluded and implemented
Total assets under management exceed R50 billion
DIRECTORS' STATEMENT
The directors take pleasure in presenting the audited, unqualified annual
financial results of the Metropolitan Holdings Financial Services Group for
the year ended 31 December 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 been changed as required by the GAAP Monitoring
Panel (GMP) and in accordance with the requirements of 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 as they do not comply with the de-recognition rules
set out in that standard. These shares have been treated as issued ordinary
shares for purposes of calculating diluted earnings, headline earnings and
core headline earnings per share. The comparative figures for December 2003
have been adjusted accordingly. These changes were disclosed in the interim
results published on 8 September 2004. No other changes have been made to the
comparative figures.
Adoption of International Financial Reporting Standards (IFRS)
The group is in the process of converting to IFRS and will be fully compliant
when reporting on the 2005 results as required by the JSE Securities Exchange
South Africa (JSE). Both IFRS 4 - Insurance contracts - and IAS 39 -
Financial instruments: recognition and measurement - were issued during 2004
and came into effect on 1 January 2005. These standards may change the way in
which results will be reported in future but will not be implemented
retrospectively. 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
Fully diluted core headline earnings, the most appropriate measure of the
group's performance, grew by 44% (undiluted increased by 49%).
All four businesses in the group continued to contribute positively to core
headline earnings as operational improvements were once again seen in all
aspects of the business.
Retail, the largest contributor to operating profits, increased pre-tax
profits by 32% while the contribution from the corporate business remained
flat.
The health business continued to improve, with a further good contribution
from Qualsa, the managed healthcare arm; health's total core headline earnings
increased by 130% to R46 million.
Metropolitan Namibia, Botswana and Lesotho all increased their operating
profits, resulting in growth in international's contribution to core headline
earnings from R3 million in 2003 to R52 million in 2004.
The investment income on shareholder assets increased by 79%, boosted by the
restructuring of the 90:10 fund.
Headline earnings and earnings were augmented by capital appreciation on the
shareholders' investment assets and the release from the previously ring-
fenced 90:10 fund.
The unbroken record of positive cashflow from clients was maintained.
The highlights of the performance of the life insurance companies in the group
are:
The 38% increase in the new business annual premium equivalent (APE), mainly
through a 48% increase in recurring premiums.
The growth in new business APE was driven by the corporate business (74% up)
and boosted by the retail business (25% up).
Total recurring premium income, the ultimate measure of sustainable success in
an insurance operation, increased by 13% to R5.2 billion.
Lapse and surrender rates continued to improve, with lapses at inception
falling below 13% during the year, the lowest level since the Persal issue in
2001.
Tight control over the net life insurance administration expenses meant that
the group exceeded its target of zero growth for 2004, reducing net expenses
by more than 3%.
These operational improvements resulted in a 99% increase in the embedded
value of life insurance new business, which grew to R205 million from R103
million.
Similarly the retail new business profit margin target of 12.5% was not only
met but surpassed, with an actual margin of 15.2% being achieved.
Strong investment markets in the latter part of 2004 contributed to improved
funding levels and a particularly sound capital position for the group.
The embedded value per share increased 24% from 1 068 cents to 1 325 cents,
before being reduced by the capital reduction of 100 cents.
Return on total embedded value was an impressive 29%.
Kagiso partnership (BEE transaction)
On 1 October 2004 Metropolitan Holdings Limited issued 75.8 million preference
shares to Kagiso Trust Investments (Proprietary) Limited, a broad-based
empowerment company.
For embedded value and fully diluted earnings purposes these shares have been
treated as ordinary shares.
A close working relationship has already been established with Kagiso, and is
expected to benefit the continued growth of the business.
Corporate activity during the year
Metropolitan bought back and cancelled 44 million ordinary shares at a cost of
R295 million.
An odd-lot offer was made to all shareholders who held less than 100
Metropolitan Holdings Limited shares at the close of business on Friday, 17
September 2004. As a result of this offer a net 73 114 shares were bought
back at a cost of R587 328 and cancelled; these shares were deducted from
shareholders' equity. The number of shareholders reduced from 27 973 to 10
699.
On 9 November 2004 the Financial Services Board approved the proposals
submitted by Metropolitan Life Limited to integrate the insurance book
previously acquired from Commercial Union Life Assurance Company of South
Africa Limited with effect from 1 January 2004. An amount of R366 million was
transferred to the policyholders' fund and the policies concerned have been
fully integrated into the Metropolitan Life book. An amount of R295 million
was distributed to shareholders, through earnings, and has been placed in a
non-distributable reserve for a period of 10 years in terms of the agreement.
Approval of the transfer of the bulk of the Lesotho business in Metropolitan
Life Limited to Metropolitan Lesotho Limited was granted by the high court on
25 November 2004, with an effective date of 1 January 2004. Metropolitan
Holdings Limited subscribed for further shares in Metropolitan Lesotho Limited
to the value of R110 million.
Metropolitan Life (Namibia) Limited purchased 100% of Channel Life Namibia
Limited with effect from 17 December 2004, as announced on SENS on 15 November
2004.
A capital reduction of R1.00 per share was declared on 2 December 2004 to all
classes of issued share capital, payable 10 January 2005. A liability was
raised and share premium reduced by R780 million with effect from 2 December
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,
remains a competitive advantage.
The outlook in our target markets is extremely positive, boosted by the
increase in disposable income as a result of reduced interest rates, lower
inflation, rising employment rates, an improved GDP outlook and growing
business confidence.
The improvement in the capital markets experienced in the second half of 2004
has been sustained during the first part of 2005.
The board is satisfied that the operational improvements achieved in 2004 are
sustainable, with a strong focus on increased productivity, enhanced
retention, ongoing cost containment, and capital management in 2005.
CORPORATE GOVERNANCE
The board has satisfied itself that appropriate principles of corporate
governance were applied throughout the year under review. Additional
governance recommendations, as set out in the second King report, are
currently being addressed and implemented.
DIRECTORATE CHANGES AND DIRECTORS' SHAREHOLDING
Eric Molobi, JJ Njeke and Andile Sangqu (alternate to Eric Molobi) were
appointed to the board of directors of Metropolitan Holdings Limited as non-
executive directors with effect from 1 July 2004. Sandile Zungu, Irene
Charnley and Gloria Tomatoe Serobe, non-executive directors, resigned from the
board with effect from 9 September 2004, 2 December 2004 and 28 February 2005
respectively due to other responsibilities. Eric Molobi was appointed
chairman with effect from 1 January 2005, replacing Gloria Tomatoe Serobe. No
further changes have been made to the directorate since 31 December 2004. All
transactions in listed shares involving directors were disclosed on SENS as
required.
CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The group had capital commitments to the value of R51 million at 31 December
2004 mostly in respect of furniture and computer equipment. The group is
party to legal proceedings in the normal course of business, and appropriate
provisions are made when losses are expected to materialise.
POST BALANCE SHEET EVENTS
No material post balance sheet events occurred between the balance sheet date
and the date of approval of the annual financial statements.
DIVIDEND DECLARATION
Ordinary listed shares
The dividend policy for the ordinary listed shares, approved by the directors
and consistent with prior years, is to provide shareholders with stable
dividend growth that reflects expected growth in underlying earnings in the
medium term, while allowing the dividend cover to fluctuate.
A final dividend of 31.50 cents per ordinary share has been declared on 8
March 2005, giving a total dividend for 2004 of 52.00 cents. This final
dividend is payable to the holders of ordinary shares recorded in the register
of the company at the close of business on Friday, 1 April 2005 and will be
paid on Monday, 4 April 2005. The last day to trade "cum" dividend will be
Wednesday, 23 March 2005. The shares will trade "ex" dividend from the start
of business on Thursday, 24 March 2005. Share certificates may not be
dematerialised or rematerialised between Thursday, 24 March and Friday, 1
April 2005, 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 April 2005.
Staff share purchase scheme dividend
A dividend of R44 million (2003: R59 million) was also declared on the
unlisted shares in the staff share purchase scheme, as provided for in the
trust deed.
Preference share dividend
A dividend of R25 million was declared on 8 March 2005, payable on 31 March
2005. The declaration rate of 9.2% was determined as set out in the company's
articles.
AUDIT OPINION
The auditors, PricewaterhouseCoopers Inc, have issued their opinion on the
group financial statements for the year ended 31 December 2004. A copy of
their unqualified report is available for inspection at the company's
registered office.
Signed on behalf of the board
Eric Molobi Group chairman
Peter Doyle Group chief executive
Cape Town
8 March 2005
Directors:
Eric Molobi (non-executive group chairman), Peter Doyle (group chief
executive), Abel Sithole (executive director), Preston Speckmann (executive
director), Ntuthukoyezwe Buthelezi, Willie Esterhuyse, Peter Lamprecht, Syd
Muller, John Newbury, JJ Njeke, Andile Sangqu (alternate), Marius Smith,
Franklin Sonn, Johan van Reenen
Secretary: Bongiwe Gobodo-Mbomvu
Registration number: 2000/031756/06
Registered office: 7 Parc du Cap, Mispel Road, Bellville 7535
JSE code: MET
NSX code: MTD
ISIN NO. ZAE000050456
Transfer secretaries
Ultra Registrars (Proprietary) Limited
(Registration number 2000/007239/07)
5th Floor, 11 Diagonal Street,
Johannesburg, 2001
P O Box 4844, Johannesburg, 2000
Telephone +27 11 834 2266
E-mail info@ultrareg.co.za
Sponsor
Merrill Lynch
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 1: CONSOLIDATED INCOME STATEMENT 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Income from insurance and investment business 1 793 1 106
(table 6; note 7)
Income from administration business (note 1) 106 65
Income from holding company (note 2) 237 171
Income from operations 2 136 1 342
Finance charge (4) -
Goodwill amortised and impaired (85) (53)
Income before tax 2 047 1 289
Shareholders' tax paid (350) (272)
Income after tax 1 697 1 017
Outside shareholders' share of earnings (20) (21)
Earnings 1 677 996
TABLE 2: RECONCILIATION OF HEADLINE EARNINGS 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Earnings 1 677 996
Goodwill amortised 85 53
Headline earnings (1) 1 762 1 049
Capital appreciation on excess (639) (471)
Basis changes and investment variances (274) (189)
Shareholders' share of 90:10 fund (295)
Core headline earnings (2) (note 3) 554 389
Core headline earnings per share (cents) 89.07 59.66
Headline earnings per share (cents) 283.28 160.89
Earnings per share (cents) 269.61 152.76
Weighted average number of shares in issue 622 652
(million)
Diluted core headline earnings per share 80.17 55.65
(cents) (3)
Diluted headline earnings per share (cents) (3) 253.74 150.07
Diluted earnings per share (cents) (3) 241.52 142.49
Diluted weighted average number of shares in 696 699
issue (million)
12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Dividend per ordinary listed shares (cents)
Interim 20.50 18.00
Final 31.50 25.00
Total 52.00 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 that comprise operating profit and
investment income on shareholders' assets only.
Diluted earnings, headline earnings and core headline earnings have been
adjusted for the finance charge relating to the liability component of the
convertible redeemable preference shares. The finance charge is disclosed
separately on the face of the income statement.
TABLE 3: CONSOLIDATED BALANCE SHEET 31.12.2004 31.12.2003
Rm Rm
ASSETS
Non-current assets 42 178 35 041
Investment assets 41 689 34 479
Goodwill 284 337
Intangible assets 69 81
Deferred tax 6 23
Tangible assets 130 121
Current assets 1 956 1 629
Total assets (note 5) 44 134 36 670
EQUITY AND LIABILITIES
Capital and reserves (table 4) 5 504 4 762
Outside shareholders' interest 75 72
Non-current liabilities 35 917 30 267
Policyholders' fund (note 7) 35 612 30 231
Borrowings 151 -
Deferred tax 154 36
Current liabilities 2 638 1 569
Total equity and liabilities 44 134 36 670
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 4: CONSOLIDATED STATEMENT OF CHANGES IN 12 mths to 12 mths to
EQUITY 31.12.2004 31.12.2003
Rm Rm
Shareholders' equity at beginning 4 762 4 329
Changes in share capital (637) (338)
Issue of share capital - -
Change in accounting policy (334)
Share premium on new issue - 79
Equity component of convertible redeemable 356
preference shares
Share issue costs (6)
Capital reduction (684)
Staff scheme shares reversed (8) (81)
Shares acquired and cancelled (295) (2)
Changes in distributable reserve 1 056 808
Change in accounting policy 29
Revaluation of owner-occupied properties (36) 33
Distribution from 90:10 fund transferred to non- (295)
distributable reserve
Earnings 1 677 996
Dividend (290) (250)
Changes in foreign currency translation reserve (8) (4)
Foreign currency translation changes (36) (16)
Transfer to policyholders' fund 28 12
Change in non-distributable reserve 331 (33)
Revaluation of owner-occupied properties 36 (33)
Distribution from 90:10 fund 295 -
Shareholders' equity at end (table 3; note 10) 5 504 4 762
TABLE 5: CONSOLIDATED CASH FLOW STATEMENT 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Net cash inflow from operating activities 1 804 1 911
Net cash outflow from investing activities (1 915) (1 401)
Net cash in/(out)flow from financing activities 236 (2)
Net cash flow 125 508
Cash resources and funds on deposit at beginning 3 903 3 395
Cash resources and funds on deposit at end 4 028 3 903
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 6: STATEMENT OF ACTUARIAL VALUES OF ASSETS 31.12.2004 31.12.2003
AND LIABILITIES Rm Rm
Total assets per balance sheet (table 3) 44 134 36 670
Current liabilities, borrowings and deferred tax (2 943) (1 605)
per balance sheet
Outside shareholders' interest per balance sheet (75) (72)
Net assets - group 41 116 34 993
Actuarial liabilities under unmatured policies (35 612) (29 570)
Excess - group (table 7 & 8; note 10) 5 504 5 423
Net assets - non-insurance (145) (728)
Excess - insurance and investment business 5 359 4 695
Change in excess of insurance and investment 664 607
business
Increase in share capital (113) (15)
Foreign currency translation changes 9 4
Release from 90:10 fund 661
Dividend paid 475 278
Total surplus arising 1 696 874
Operating profit 324 246
Investment income on excess 164 163
Basis and other changes 249 49
Investment variances 25 10
Shareholders' share of 90:10 fund 295
Capital appreciation on excess 639 406
Surplus arising (90:10 fund) 50
Shareholder earnings (90:10 fund) 33
Consolidation adjustments (257) (83)
Earnings from insurance and investment business 1 439 874
Shareholders' tax paid 274 217
Goodwill amortised and impaired 80 15
Income from insurance and investment business 1 793 1 106
(before goodwill and tax) (table 1, note 7)
Capital adequacy requirement 1 563 1 640
Capital adequacy multiple (insurance and 3.4 2.9
investment business)
Second-tier margins 1 537 1 216
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 1 - INCOME FROM 12 mths to 12 mths to
ADMINISTRATION BUSINESS (before 31.12.2004 31.12.2003
tax, goodwill and outside
shareholders)
Revenue Expenses Total Total
Rm Rm Rm Rm
Health administration 340 (273) 67 30
Asset management 78 (57) 21 23
Asset administration 40 (22) 18 12
Total income from administration 458 (352) 106 65
business (table 1)
NOTE 2 - INCOME FROM HOLDING COMPANY (before tax) 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Investment income 51 55
Realised and unrealised capital appreciation 228 150
Administration expenses (42) (34)
Net income from holding company (table 1) 237 171
NOTE 3 - ANALYSIS OF CORE HEADLINE EARNINGS 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Corporate business 107 111
Operating profit 152 154
Tax (45) (43)
Retail business 263 207
Operating profit 374 283
Tax (111) (76)
International business 52 3
Operating profit 56 8
Tax (4) (5)
Metropolitan Health Group 46 20
Operating profit 67 24
Tax (21) (4)
Shareholders' equity 86 48
Holding company expenses (46) (34)
Investment income on total shareholder assets 214 123
Income tax on investment income (82) (41)
Core headline earnings (table 2) 554 389
Total operating profit 649 469
Holding company expenses (46) (34)
Investment income on total shareholders' assets 214 123
Total tax (263) (169)
Core headline earnings (table 2) 554 389
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 4 - FUNDS RECEIVED FROM 12 mths 12 mths
CLIENTS Gross Gross Net inflow Net inflow
inflow outflow 31.12.2004 31.12.2003
Rm Rm Rm Rm
Retail business 4 482 (3 058) 1 424 1 433
Corporate business 2 379 (2 136) 243 182
International business 893 (491) 402 354
Life insurance cash flows 7 754 (5 685) 2 069 1 969
Health administration 5 639 (5 021) 618 403
Asset management 3 602 (4 142) (540) 734
Total funds received from 16 995 (14 848) 2 147 3 106
clients
NOTE 5 - ASSETS UNDER MANAGEMENT 31.12.2004 31.12.2003
Rm Rm
Investment assets 41 681 34 476
Strategic investments 8 3
Goodwill 284 337
Tangible and intangibles assets 199 202
Current assets and deferred tax 1 962 1 652
Total on-balance sheet assets (table 3) 44 134 36 670
Collective investments 3 012 1 524
Health administration 1 710 1 577
Metropolitan Asset Managers 3 941 4 729
EB segregated assets 766 783
Total assets under management 53 563 45 283
NOTE 6 - NUMBER OF EMPLOYEES 31.12.2004 31.12.2003
Indoor 3 578 3 416
Field 3 651 2 890
Total 7 229 6 306
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 7: POLICYHOLDERS' FUND 31.12.2004 31.12.2003
Rm Rm
Balance at beginning 30 231 26 600
Inflow 14 400 11 355
Premiums received (note 8) 7 754 7 084
Investment return 6 646 4 271
Investment income 1 569 1 762
Realised and unrealised capital 5 077 2 509
appreciation
Outgo (7 364) (6 606)
Payments to policyholders (note 9) (5 685) (5 115)
Sales remuneration (747) (579)
Management expenses (901) (931)
Distribution costs (161) (162)
Administration expenses (740) (769)
Policyholders' tax paid (31) 19
Income from insurance and investment (1 793) (1 106)
business (table 1 & 6)
Business combination - Channel Life 166 -
Namibia Ltd
Foreign currency translation changes (28) (12)
Balance at end 35 612 30 231
Liabilities under insurance contracts 28 722 23 948
Liabilities under investment contracts 6 890 5 622
90:10 fund surplus 661
Total (table 3) 35 612 30 231
NOTE 8 - PREMIUMS RECEIVED 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Recurring premiums 5 190 4 593
Individual life 3 858 3 558
Employee benefits 1 614 1 304
Re-insurance (282) (269)
Single premiums 2 564 2 491
Individual life 1 495 1 040
Employee benefits 1 069 1 451
Total (note 7) 7 754 7 084
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 8 - PREMIUMS RECEIVED 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Insurance contracts 6 070 5 199
Investment contracts 1 684 1 885
7 754 7 084
Metropolitan Life Ltd 5 976 6 107
Metropolitan Odyssey Ltd 885 416
Metropolitan International Ltd 71 -
Metropolitan Life (Namibia) Ltd 320 322
Metropolitan Life of Botswana Ltd 285 186
Metropolitan Lesotho Ltd 217 53
7 754 7 084
NOTE 9 - PAYMENTS TO POLICYHOLDERS 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Individual life 3 390 2 735
Death and disability claims 766 734
Maturity claims 1 063 752
Annuities 431 416
Surrenders 1 200 898
Re-insurance recoveries (70) (65)
Employee benefits 2 295 2 380
Death and disability claims 505 474
Maturity claims 181 703
Annuities 292 278
Withdrawal benefits 213 206
Terminations 1 174 829
Re-insurance recoveries (70) (110)
Total (note 7) 5 685 5 115
Insurance contracts 4 404 3 719
Investment contracts 1 281 1 396
5 685 5 115
Metropolitan Life Ltd 4 943 4 653
Metropolitan Odyssey Ltd 251 208
Metropolitan Life (Namibia) Ltd 260 176
Metropolitan Life of Botswana Ltd 75 75
Metropolitan Lesotho Ltd 156 3
5 685 5 115
METROPOLITAN HOLDINGS - GROUP RESULTS
NOTE 10 - ANALYSIS OF ASSETS 31.12.2004 31.12.2003
BACKING GROUP EXCESS
Rm % Rm %
Listed equities 3 270 54.8 2 818 54.2
Foreign investments 385 6.4 439 8.4
Properties 376 6.3 373 7.2
Fixed interest 673 11.3 676 13.0
Money market 1 316 22.1 425 8.2
Goodwill 284 4.8 337 6.5
Other assets (340) (5.7) 131 2.5
5 964 100.0 5 199 100.0
Adjustment for staff share (460) (437)
schemes
Group net asset value and 5 504 4 762
excess (table 4 & 6)
Surplus in 90:10 fund 661
Excess - group (table 6) 5 423
TABLE 7: EMBEDDED VALUE 31.12.2004 31.12.2003
Rm Rm
Excess - group (table 6) 5 504 5 423
Adjustments for:
Asset management (table 15) 140 150
Health administration (table 15) 386 265
Holding company expenses (252) (220)
Adjustments to group excess: 360 (561)
Staff share schemes loans 460 437
Liability component of convertible 184
redeemable preference shares
Goodwill (2003 includes surplus in 90:10 (284) (998)
fund) (table 8)
Adjusted net asset value 6 138 5 057
Net value of in-force business 2 915 2 493
Individual life 2 288 1 993
Gross value of in-force business 2 444 2 078
Less: Cost of capital (156) (85)
Employee benefits 627 500
Gross value of in-force business 714 564
Less: Cost of capital (87) (64)
Fully diluted embedded value (table 8) 9 053 7 550
Fully diluted embedded value per share 1 225 1 068
(cents) *
Fully diluted adjusted net asset value per 831 715
share (cents) *
Diluted number of shares in issue (million) 739 707
(table 18)
* After the capital reduction of 100 cents per share.
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 8: EMBEDDED VALUE Net Value 31.12.2004 31.12.2003
ATTRIBUTABLE TO GROUP asset of Total Total
value in-
force
Rm Rm Rm Rm
Metropolitan Life Ltd 4 638 2 475 7 113 5 850
Metropolitan Odyssey Ltd 201 151 352 240
Metropolitan International 95 - 95 94
Ltd
Metropolitan Namibia 206 148 354 274
Metropolitan Life of Botswana 70 45 115 100
Ltd
Metropolitan Lesotho Ltd 165 96 261 7
Metropolitan Health Group 122 371 493 345
Methealth Namibia 4 15 19 10
Administrators (Pty) Ltd
Asset management 62 140 202 193
Metropolitan Holdings (after 585 (252) 333 774
consolidation adjustments)
Goodwill (284) (284) (337)
Total embedded value 5 864 3 189 9 053 7 550
(table 7)
Adjustment to group excess (360)
(table 7)
Excess - group (table 6) 5 504
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 9: ANALYSIS OF Non- Insurance 31.12.2004 31.12.2003
CHANGES IN GROUP insurance operations Total Total
EMBEDDED VALUE
Rm Rm Rm Rm
Profit from new business 185 216 401 184
Point of sale 184 205 389 175
Expected return to end 1 11 12 9
of year
Profit from existing (4) 818 814 374
business
Expected return 32 268 300 353
Operating experience (10) 106 96 (50)
variance
Operating assumption (26) 219 193 71
changes
90:10 fund - 225 225
amalgamation
Embedded value profit 181 1 034 1 215 558
from operations
Investment return on net 234 540 774 540
worth
Investment variances 7 133 140 65
Economic assumption (58) 169 111 192
changes
Exchange rate movements (1) (16) (17) (6)
Total embedded value 363 1 860 2 223 1 349
profit
Changes in share capital (565) 112 (453) (4)
Dividend paid 182 (472) (290) (250)
Staff scheme shares 23 23 132
Increase in embedded 3 1 500 1 503 1 227
value
Return on embedded value 29.4 21.3
(%)
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 10: VALUE OF LIFE INSURANCE NEW BUSINESS 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Retail business 135 58
Gross value of new business 140 61
Less: Cost of capital (5) (3)
Corporate business 54 34
Gross value of new business 67 37
Less: Cost of capital (13) (3)
International business * 16 11
Gross value of new business 20 12
Less: Cost of capital (4) (1)
205 103
* Net of outside shareholders
Outside shareholders' interest
Metropolitan Namibia 19.1% 21.3%
Metropolitan Botswana 24.2% 25.0%
TABLE 11: SOURCE OF NEW BUSINESS 31.12.2004 31.12.2003
APE % Total % APE % Total %
General intermediary channel 15 9 12 10
Direct writers 36 30 32 30
Group schemes 8 5 8 5
Direct mail and telemarketing 11 6 20 12
Odyssey broker channel 19 39 16 35
International 11 11 12 8
TABLE 12: VALUE OF NON-LIFE NEW BUSINESS 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Health administration 173 36
Asset management 11 36
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 13: NEW BUSINESS PREMIUMS 12 mths to 12 mths to
31.12.2004 31.12.2003
Rm Rm
Recurring premiums
Retail business 762 608
Corporate business 448 178
International business * 101 98
Individual life 78 84
Employee benefits 23 14
1 311 884
Single premiums
Retail business 1 258 1 019
Corporate business 1 059 1 398
International business * 210 67
2 527 2 484
Annual premium equivalent (APE) 1 564 1 132
* Net of outside shareholders
TABLE 14: VALUE OF NEW BUSINESS AS A % OF Margin
ANNUAL PREMIUM EQUIVALENT (APE)
31.12.2004 31.12.2003
% %
Retail business 15.2 8.2
Corporate business 9.7 10.7
International business 13.1 10.5
Total 13.1 9.1
APE represents new recurring premiums plus 10% of single premiums.
TABLE 15: VALUATION OF NON-LIFE Value as Write-up Embedded
SUBSIDIARIES per to fair value
balance value
sheet
Rm Rm Rm
Asset management 62 140 202
(table 7 & 8)
Health administration 126 386 512
(table 7 & 8) *
* Includes the Polmed contract
awarded during 2004
METROPOLITAN HOLDINGS - GROUP RESULTS
Table 16: PRINCIPAL ASSUMPTIONS 31.12.2004 31.12.2003
% %
Pre-tax investment return
Equities 10.3 11.3
Properties 10.3 11.3
Government stock 8.3 9.3
Cash 6.3 7.3
Risk discount rate 10.8 11.8
Investment return (before tax) - smoothed bonus 9.7 10.7
Expense inflation rate 5.0 6.5
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 17: LIFE BUSINESS: In-force business New business written
SENSITIVITIES -
31.12.2004
Net Gross Cost Net Gross Cost
value value of CAR value value of CAR
Rm Rm Rm Rm Rm Rm
Base value 2 915 3 158 (243) 205 227 (22)
1% increase in risk 2 597 2 975 (378) 172 209 (37)
discount rate
% change (11) (6) 55 (16) (8) 66
1% reduction in risk 3 269 3 364 (95) 243 248 (4)
discount rate
% change 12 7 (61) 19 9 (81)
10% increase in future 2 711 2 955 (243) 184 207 (22)
expenses
% change (7) (6) - (10) (9) -
1% increase in expense 2 846 3 089 (243) 203 226 (22)
and salary inflation
% change (2) (2) - (1) (1) -
10% increase in policy 2 853 3 096 (243) 192 214 (22)
discontinuance
% change (2) (2) - (6) (6) -
10% increase in 2 344 2 588 (243) 93 116 (22)
mortality and morbidity
% change (note 1) (20) (18) - (54) (49) -
1% reduction in gross 2 435 2 837 (403) 172 211 (39)
investment return
% change (note 2) (16) (10) 65 (16) (7) 73
10% fall in market value 2 684 2 927 (243) 205 227 (22)
of assets
% change (8) (7) - - - -
10% reduction in premium 2 864 3 107 (243) 198 220 (22)
indexation take-up rate
% change (2) (2) - (3) (3) -
10% reduction in new 2 915 3 158 (243) 180 202 (22)
business volumes
% change - - - (12) (11) -
10% increase in non- 2 915 3 158 (243) 193 215 (22)
commission related
acquisition expenses
% change - - - (12) (11) -
Notes:
Mortality decreases by 10% for annuities; mortality and morbidity increase by
10% for assurance.
Bonus rates are decreased commensurate with the drop in returns.
The change in the value of cost of CAR is assumed to be nil where the
sensitivity test causes an insignificant change in the value.
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 18: STOCK EXCHANGE 12 mths to 12 mths to 12 mths to 12 mths to
PERFORMANCE 31.12.2004 31.12.2003 31.12.2002 31.12.2001
Value of listed shares 2 049 994 1 652 2 472
traded (rand million) *
Volume of listed shares 250 165 246 273
traded (million) *
Shares traded (% of 37.8 24.4 36.7 40.2
average listed shares in
issue)
Value of shares traded - 47.3 40.8 42.9 40.1
life insurance (J084 /
IX42 - rand billion)
Value of shares traded - 829.8 635.4 684.1 504.9
top 40 index (J200 / FI01
- rand billion)
Trade prices (cents per
share)
Highest 1 100 750 902 1 060
Lowest 680 470 485 650
Last sale of year (31 1 090 685 610 800
December)
Percentage change during 59.12 12.30 (23.75) (18.28)
year
Percentage change - life 36.04 0.45 (18.04) (15.69)
insurance sector (J084)
Percentage change - top 20.11 9.37 (14.13) 28.41
40 index (J200)
31 December
Price / core headline 12.24 11.03 11.59 15.24
earnings ratio
Dividend yield % (dividend 4.77 6.28 6.23 4.38
on listed shares)
Dividend yield - top 40 2.49 3.02 3.37 2.56
index (J200)
METROPOLITAN HOLDINGS - GROUP RESULTS
TABLE 18: STOCK EXCHANGE 12 mths to 12 mths to 12 mths to 12 mths to
PERFORMANCE 31.12.2004 31.12.2003 31.12.2002 31.12.2001
Total shares issued
(million)
Listed on JSE 641 678 676 667
Ordinary shares 632 668 669 661
Share incentive scheme 9 10 7 6
Unlisted 63 70 59 33
Share purchase scheme 63 70 59 33
Total shares in issue # 704 748 735 700
Treasury shares held by (41) (41) (41) -
a subsidiary company
Adjustment to staff (53) (55) (47) (18)
share scheme shares *
Share incentive scheme (5) (5) (5) (3)
Share purchase scheme (48) (50) (42) (15)
Number of shares in 610 652 647 682
issue @ (table 7)
Adjustment to staff 53 55 47 18
share scheme shares
Convertible redeemable 76 - - -
preference shares
Total shares in issue 739 707 694 700
after treasury shares ~
Market capitalisation at 8.06 4.84 4.23 5.60
year-end (rand billion) ~
Percentage of life 7.05 5.96 5.27 n/a
insurance sector
* 2004 is net of 44 million shares acquired for R293 million, 2002 is net of
33 million shares acquired for R260 million and 2001 is net of 28 million
shares acquired for R234 million; all as part of a share buy-back programme.
@ Weighted average number of shares in issue referred to in table 2 is
calculated on this number of shares in issue.
# Diluted weighted number of shares in issue referred to in table 2 is
calculated on this number of shares in issue.
~ The market capitalisation is calculated on the total shares in issue after
treasury shares.
METROPOLITAN HOLDINGS - GROUP RESULTS
* These shares have been issued since 1 January 2001, the date on which the
group adopted AC133. These shares do not comply with the derecognition rules
as set out in AC133 and are therefore reversed on consolidation.
Date: 09/03/2005 08:02:03 AM Produced by the JSE SENS Department
