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MET
MET
Metropolitan - Unaudited Group Results For The Six Months Ended
30 June 2006 and dividend declaration
METROPOLITAN HOLDINGS LTD
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN: ZAE000050456
JSE Share Code: MET
NSX Share Code: MTD
("Metropolitan")
METROPOLITAN HOLDINGS FINANCIAL SERVICES GROUP
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006
ADDING SHAREHOLDER VALUE
* Interim dividend per share up 25%
* Net funds received from clients of R2.5 billion
* Core headline earnings per share up 21%
* Retail business operating profit up 34%
* Total premium income up 17%
* Total assets under management exceed R75 billion
REVIEW OF OPERATIONS AND PROSPECTS
Financial highlights
* Fully diluted core headline earnings per share increased by 16% (basic
increased by 21%).
* Headline earnings and earnings were boosted by the performance of the
investment markets, but curtailed by basis changes relating to economic
assumptions.
* Retail, the largest contributor to group profits, increased its
operating profit by 34%; the asset management business grew its profits by
33% and the corporate business by 9%.
* The unbroken record of positive cashflow from clients continued, with
a net inflow of R2.5 billion being recorded for the period under review.
* Investment income on shareholder assets increased by 28% despite the
capital reduction of 100 cents per share paid out during April 2006.
* Over the six month period the embedded value per share increased by
11% (annualised) from 1 399 cents (after capital reduction) to 1 479 cents.
Operational overview
* Recurring premium income, a significant measure of success in an
insurance operation, increased by 8% to R3 billion.
* Retail recurring premium income was 9% higher, highlighting
policyholders" improved economic conditions and the quality of business
written.
* Retail single premium income was up 50%.
* Retail new business premiums (APE) were 8% higher than the levels
recorded in 2005 despite significant changes in the business environment.
The new business margin reduced from 11.2% to 8.2% (APE) as a result of the
anticipated implementation of the statement of intent, changes in the
economic assumptions and a change in business mix.
* An impressive 81% increase in corporate new business APE resulted in a
reasonable 12.8% margin.
* Both the health and international businesses posted reduced profits
over the period under review.
* Despite the decrease in new business in the international arena, the
new business margin improved from 13.4% to 13.6% (APE).
* Retail lapse and surrender rates remained within expected parameters.
* Once again positive operating experience variances emerged in the
embedded value; however, the growth in the expense base, mainly aimed at
promoting business expansion, resulted in a negative operating assumption
change.
* The new retail business enrolment system (REI) was successfully rolled
out to all direct writers.
* The corporate business successfully implemented a new administration
system.
* The initial take-on of GEMS members was slower than anticipated, with
22 000 new members having joined the scheme by the end of August (June - 8
000).
* The new operations in Ghana and Kenya commenced during the period.
Transformation
* During the review period, Metropolitan underwent an official
assessment of its transformation status by independent rating agency
Empowerdex. In terms of the Financial Sector Charter, the group achieved
the highest ranking possible, that of black empowered/owned organisation.
From a procurement spend perspective, this ranking entitles clients to
claim R1.25/R1.00. In terms of the department of trade and industry"s more
stringent draft codes of good practice, Metropolitan was deemed to be a
level 3 contributor (clients can thus account for procurement spend of
R1.10 per R1.00).
* Ongoing highly focused skills development, procurement (reporting
infrastructure in particular), enterprise and social development
initiatives, aimed at accelerating the pace of transformation in the
Metropolitan workplace and the communities within which the group operates,
should ensure that Metropolitan gains recognition as a level 1 contributor
in the foreseeable future.
Prospects
* Metropolitan continues to capitalise on its focused market status, in
line with its strategy to create prosperity for Africa"s people by
providing accessible, affordable and appropriate products.
* During July Metropolitan Employee Benefits secured a R2.2 billion
single premium inflation-linked annuity contract.
* As part of Metropolitan"s expansion into Africa the international
business is currently finalising agreements with a view to starting a new
operation in Nigeria.
* It is the group"s intention to transfer the Odyssey life book to
Metropolitan Life Limited during the second half of the year in support of
its capital management programme. This transfer is subject to regulatory
and other approvals.
* With a view to raising working capital, Metropolitan Life Limited is
considering the option of issuing subordinated debt, again subject to the
required regulatory approvals.
* Metropolitan Card Operations, which has been running as a pilot since
September 2005, will become fully operational during September 2006 with a
view to providing a wider range of financial services to people in the
lower income groups.
* 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, together with Metropolitan"s commitment to black economic
empowerment and its brand, will continue to give the group a competitive
advantage.
* The outlook in the group"s target markets remains positive. The
increased interest rates and debt levels are mitigated by lower inflation,
rising employment rates, an improved GDP outlook and growing business
confidence.
* The board is satisfied that the business is sustainable, with a strong
focus on product innovation, business retention, cost containment, client
service levels and capital management.
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 2006.
Basis of presentation of financial information
These results have been prepared in accordance with International
Accounting Standards 34 (IAS34) - interim financial reporting; guidelines
issued by the Actuarial Society of South Africa; and the disclosure
requirements of the JSE Limited (JSE).
The accounting policies of the group have been applied consistently to all
the periods presented. The preparation of financial statements in
accordance with International Financial Reporting Standards (IFRS) 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 judgement, assumptions, estimates and accounting policies are
disclosed in detail in the annual financial statements at 31 December 2005.
The accounting treatment of certain items was changed from that disclosed
in June 2005. Due to a better interpretation of IFRS and the implications
and application thereof, some refinements were made in finalising the
December 2005 annual financial statements, as disclosed in the 2005 annual
report.
1. The reclassification of the equity component of the first tranche of
the black economic empowerment transactions as a liability;
2. The reclassification of the Metropolitan Health Group staff share
scheme from an equity-settled share-based payment to an employee benefit
liability;
3. The consolidation of collective investment schemes;
4. The transfer of deferred acquisition costs to insurance contract
liabilities;
5. The reclassification of re-insurance from a liability to an asset;
6. The reclassification of the implementation effects of IFRS4 from the
income statement to equity; and
7. The recognition of rental income for operating leases on a straight-
line basis over the lease term, with the lease accrual being set off
against the fair value movement of the investment property.
These changes are set out in the table below.
Reconciliation of Assets Liabilities Shareholder Minority
equity equity interest
Rm Rm Rm Rm
Published balance at 30 45 935 (40 049) (5 759) (127)
June 2005
1. Reclassification of (304) 304
equity component of
redeemable
convertible
preference shares
2. Metropolitan Health (5) (99) 90 14
staff share scheme
liability
3. Consolidation of 260 (5) (255)
collective
investment schemes
4. Reclassification of (118) 118
deferred
acquisition costs
5. Reinsurance (7) 7
liability
transferred to the
reinsurance asset
Restated balance at 30 46 065 (40 332) (5 365) (368)
June 2005
Reconciliation of earnings attributable to equity holders Rm
Published for the period ended 30 June 2005 537
1. Additional interest expense on reclassification of (20)
redeemable convertible preference shares
2. Employee benefits - value of service provided (14)
6. Implementation effects of IFRS4 transferred to equity 29
Restated for the period ended 30 June 2005 532
Reclassifications between line items in the income statement were made for
the year ended 31 December 2005. These reclassifications had no effect on
earnings.
Corporate activity during the year
* Metropolitan Holdings Limited bought back and cancelled 16 million
listed ordinary shares.
* The company also bought back approximately half of the shares
management owned in MHG, thereby reducing the future dilutory impact on
MHG"s contribution to group earnings
Related parties
There have been no significant changes to the nature of the related party
transactions as described in note 35 of the 2005 annual financial
statements.
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
Sadly Eric Molobi, chairman of Metropolitan, passed away on 4 June 2006.
His leadership, insight and guidance will be sorely missed, not only at
Metropolitan and KTI, but also at a national level. JJ Njeke was appointed
as acting chairman on 30 May 2006. Willie Esterhuyse, having reached
statutory retirement age, retired with effect from 30 May 2006 after
fifteen years on the board. We thank him for his contribution over the
years. Andile Sangqu, previously an alternate to Eric Molobi, was appointed
to the board on 3 July 2006. No further changes have been made to the
directorate. 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 2006. 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
Apart from the new business mentioned under prospects above, no material
post balance sheet events occurred between the balance sheet date and the
date of approval of the interim results.
DIVIDEND DECLARATION
Ordinary listed shares
The dividend policy for 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.
An interim dividend of 29.00 cents per ordinary share has been declared on
12 September 2006. This dividend is payable to the holders of ordinary
shares recorded in the register of the company at the close of business on
Friday, 6 October 2006 and will be paid on Monday, 9 October 2006. The
last day to trade "cum" dividend will be Friday, 29 September 2006. The
shares will trade "ex" dividend from the start of business on Monday, 2
October 2006. Share certificates may not be dematerialised or
rematerialised between Monday, 2 October and Friday, 6 October 2006, 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, 9 October 2006.
Preference share dividend
Dividends of R22 million (11.7%), R3.7 million (29.00 cents per share) and
R18 million (11.6%) were declared on 12 September 2006 on the A1, A2 and A3
Metropolitan preference shares respectively, payable on 30 September 2006.
The declaration rate was determined as set out in the company"s articles.
These amounts are included under finance costs in these results.
Signed on behalf of the board
JJ Njeke Acting group chairman
Peter Doyle Group chief executive
Cape Town
12 September 2006
Directors:
JJ Njeke (non-executive group chairman (acting)), Peter Doyle (group chief
executive), Derek Pead (executive director), Abel Sithole (executive
director), Preston Speckmann (executive director), Fatima Jakoet, Peter
Lamprecht, Syd Muller, Bulelwa Ndamase, John Newbury, Andile Sangqu, 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 Sponsor
Link Market Services SA (Proprietary) Merrill Lynch
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@linkmarketservices.co.za
CONSOLIDATED BALANCE SHEET 30.06.2006 30.06.2005 31.12.2005
Rm Rm (1) Rm
ASSETS
Property, plant and equipment 559 445 549
Investment property 2 322 1 977 2 255
Intangible assets 404 423 404
Investment in associates 3 10 7
Financial assets (2) 45 687 39 003 43 465
Deferred income tax 3 5 4
Reinsurance contracts 181 210 181
Cash and cash equivalents 6 554 3 992 6 526
Total assets 55 713 46 065 53 391
EQUITY
Capital and reserves 5 933 5 365 6 301
attributable to equity holders
Minority interests 492 368 465
Total equity 6 425 5 733 6 766
LIABILITIES
Insurance contract liabilities
Long-term insurance (3) 26 986 21 187 25 496
Medical insurance 2
Financial liabilities
Investment contracts - fair 7 893 6 633 7 454
value through income
Investment contracts - with 10 604 9 552 9 905
discretionary participation
features (3)
Other financial liabilities 1 328 605 1 264
Employee benefit obligations 184 226 225
Deferred income tax 270 163 296
Other payables 1 878 1 804 1 703
Current income tax 143 162 282
Total liabilities 49 288 40 332 46 625
Total equity and liabilities 55 713 46 065 53 391
(1) The June 2005 balances have been adjusted as disclosed in the
reconciliation of equity table under the heading Basis of presentation of
financial information.
(2) Financial instruments include equity and debt securities, loans and
receivables and derivatives.
(3) Under IFRS4, the group continues to account for long-term insurance
contracts and investment contracts with discretionary participation
features using SA GAAP.
STATEMENT OF ACTUARIAL VALUES 30.06.2006 30.06.2005 31.12.2005
OF ASSETS AND LIABILITIES ON Rm Rm (4) Rm
REPORTING BASIS
Total assets per balance sheet 55 713 46 065 53 391
Actuarial value of policy (45 483) (37 372) (42 855)
liabilities per balance sheet
Other liabilities per balance (3 805) (2 960) (3 770)
sheet
Minority interests (492) (368) (465)
Excess - group per reporting 5 933 5 365 6 301
basis
Net assets - other businesses (649) 353 (157)
Excess - long-term insurance 5 284 5 718 6 144
business (5)
LONG-TERM INSURANCE BUSINESS
(5)
Change in excess of long-term (860) 351 777
insurance business (5)
Increase in share capital (25) (5) (5)
Metropolitan Kenya included in (8)
insurance
Exchange differences (4) 8 17
Change in other reserves (6) (6) (63)
Dividend paid 1 578 281 932
Total surplus arising 675 629 1 658
Operating profit 274 236 589
Investment income on excess 117 101 179
Net realised and fair value 367 270 836
gains on excess
Investment variances (6) 18 9 66
Basis changes (101) 18 102
Other adjustments - (5) (13)
LOA statement of intent (101)
Consolidation adjustments (57) (86) (128)
Income tax expense 158 173 413
Adjustment for other expenses (1) 2 (6)
and share of profit of
associates
Results of long-term insurance 775 718 1 937
business (5)
Results of other group 109 86 427
businesses
Results of operations per 884 804 2 364
income statement
STATEMENT OF ACTUARIAL VALUES 30.06.2006 30.06.2005 31.12.2005
OF ASSETS AND LIABILITIES ON Rm Rm Rm
STATUTORY BASIS
Excess - group per reporting 5 933 5 365 6 301
basis
Disallowed assets in terms of (29) (27) (35)
statutory requirements
Net assets - other businesses (649) 353 (157)
Statutory excess - long-term 5 255 5 691 6 109
insurance business (5)
Capital adequacy requirement 1 559 1 620 1 426
Capital adequacy multiple 3.4 3.5 4.3
Discretionary margins 1 903 1 503 1 886
(4) The June 2005 balances have been adjusted as disclosed in the
reconciliation of equity table under the heading Basis of presentation of
financial information.
(5) The long-term insurance business includes both insurance and
investment contract business and is the simple aggregate of all the life
insurance companies in the group. It includes minority interests and other
items, which are eliminated on consolidation. It excludes non-insurance
business.
(6) Investment variances reflect the impact of actual investment returns
on the value of future expense recoveries.
6 mths to 6 mths to 12 mths to
CONSOLIDATED INCOME STATEMENT 30.06.2006 30.06.2005 31.12.2005
(7) Rm Rm Rm
Net insurance premiums received 3 452 3 047 6 656
Fee income (9) 357 337 647
Investment income (8) 1 233 1 020 2 175
Net realised and fair value 2 801 2 383 8 579
gains (8)
Net income 7 843 6 787 18 057
Net insurance benefits and 2 867 3 477 6 411
claims
Change in provisions 2 137 882 5 547
Change in insurance contract 2 135 893 5 459
provisions
LOA statement of intent 101
Change in reinsurance 2 (11) (13)
provisions
Fair value adjustments on 607 402 1 218
investment contracts (8)
Depreciation, amortisation and 64 55 109
impairment expense
Employee benefit expense 517 486 903
Sales remuneration and 486 461 990
distribution cost
Other expenses (9) 281 220 515
Expenses 6 959 5 983 15 693
Results of operations 884 804 2 364
Share of profit of associates 1 3 6
Finance costs (47) (29) (54)
Profit before tax 838 778 2 316
Income tax expenses (226) (225) (573)
Earnings 612 553 1 743
Attributable to:
Equity holders of group 600 532 1 695
Minority interests 12 21 48
612 553 1 743
(7) The layout of the income statement has been changed to reflect
expenses by function; sales remuneration and distribution costs are shown
on the face of the income statement and net realised and fair value gains
have been aggregated. The June 2005 results have been changed as disclosed
in the reconciliation of earnings attributable to equity holders table
under the heading Basis of presentation of financial information.
(8) In June 2005 investment income and net realised gains on investment
contracts were accounted for directly to the liability; these items have
been restated through the income statement. In December 2005 only
investment income on investment contracts was accounted for directly to the
liability; this item has been restated through the income statement.
(9) In both June and December 2005, management fees in Metropolitan
Collective Investments Limited were accounted for against service fees
charged. The management fees are now shown as other expenses, increasing
the fee income of this company. The comparative figures have been restated
accordingly.
RECONCILIAT Basic earnings Diluted earnings
ION OF
HEADLINE
EARNINGS
attributabl
e to equity
holders of
the company
6 mths 6 mths to 12 mths to 6 mths 6 mths 12 mths
to 30.06.2005 31.12.2005 to to to
30.06.2 Rm (10) Rm 30.06.2 30.06.2 31.12.200
006 006 005 5
Rm Rm Rm (10) Rm
Earnings 600 532 1 695 600 532 1 695
Investment 31 74 149
return on
treasury
shares
Finance 41 27 53
costs -
preference
shares
Diluted 672 633 1 897
earnings
Goodwill 4 4
impaired
Headline 604 532 1 695 676 633 1 897
earnings
(11)
Net (392) (251) (999) (392) (251) (999)
realised
and fair
value gains
on excess
Basis 83 (28) (55) 83 (28) (55)
changes,
LOA
statement
of intent
and
investment
variances
Fair value (23) (66) (135)
gains on
treasury
shares
Core 295 253 641 344 288 708
headline
earnings
(12)
(10) The June 2005 results have been changed as disclosed in the
reconciliation of earnings attributable to equity holders table under the
heading Basis of presentation of financial information.
(11) Headline earnings consist of operating profit, investment income, net
realised and fair value gains, investment variances and basis and other
changes.
(12) Net realised and fair value gains on investment assets, investment
variances and basis and other changes can be volatile; therefore core
headline earnings have been disclosed that comprise operating profit and
investment income on shareholder assets.
EARNINGS PER SHARE (cents) 6 mths to 6 mths to 12 mths to
attributable to equity holders 30.06.2006 30.06.2005 31.12.2005
of the company
Basic
Core headline earnings 51.94 43.10 109.39
Headline earnings 106.34 90.63 289.25
Earnings 105.63 90.63 289.25
Weighted average number of 568 587 586
shares (million)
Diluted
Core headline earnings 45.26 38.97 95.93
Headline earnings 88.95 85.66 257.05
Earnings 88.42 85.66 257.05
Diluted weighted average number 760 739 738
of shares (million) (13)
(13) Diluted weighted average number of shares 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.
DIVIDENDS 2006 2005
Ordinary listed shares (cents per share)
Interim 29.00 24.00
Final 39.00
Total 63.00
Convertible redeemable preference shares A1 A2 A3
Paid - 31 March 2005 Rate 9.2%
Rm 25
Paid - 30 September Rate 9.9%
2005
Rm 23
Paid - 31 March 2006 Rate 10.4% 39.00 9.2%
cps
Rm 24 5 10
Payable - 30 Rate 11.7% 29.00 11.6%
September 2006 cps
Rm 22 4 18
ANALYSIS OF CORE HEADLINE 6 mths to 6 mths to 12 mths to
EARNINGS 30.06.2006 30.06.2005 31.12.2005
Rm Rm (14) Rm
Corporate business 59 54 115
Operating profit 85 77 161
Tax (26) (23) (46)
Retail business 199 148 369
Operating profit 281 205 523
Tax (82) (57) (154)
International business 21 28 86
Operating profit 23 32 92
Tax (2) (4) (6)
Health business (5) 4 9
Operating profit 12 17 38
Tax (17) (13) (29)
Asset management business 16 12 52
Operating profit 20 16 72
Tax (4) (4) (20)
Shareholder capital 5 7 10
Holding company expenses (29) (21) (40)
Finance costs - preference (41) (27) (53)
shares
Investment income on shareholder 149 116 208
excess
Income tax on investment income (74) (61) (105)
Core headline earnings 295 253 641
(14) The June 2005 results have been changed as disclosed in the
reconciliation of earnings attributable to equity holders table under the
heading Basis of presentation of financial information.
RESULTS OF OPERATIONS FROM Net Expens Results of operations
ADMINISTRATION BUSINESS income es
(gross of minority interest
and before tax)
6 mths 6 mths 12
to to mths
Rm Rm 30.06. 30.06. to
2006 2005 31.12.
Rm Rm 2005
(14) Rm
Health business 267 (252) 15 27 49
Asset administration 67 (47) 20 10 34
Asset management 43 (43) - 6 38
377 (342) 35 43 121
CONSOLIDATED STATEMENT OF 6 mths to 6 mths to 12 mths to
CHANGES IN EQUITY 30.06.2006 30.06.2005 31.12.2005
Rm Rm (15) Rm
Changes in share capital
Balance before implementation 870 870
of IFRS4 and IAS39 (revised)
Treasury shares held on (198) (198)
behalf of contract holders
Balance at beginning 559 672 672
Staff scheme shares released 67 16 53
Shares repurchased and (200) (1) (242)
cancelled
Treasury shares held on behalf 29 42 76
of contract holders
Capital reduction (642)
Balance at end (187) 729 559
Changes in other reserves
Balance at beginning 428 367 367
Total recognised income 1 7 51
Earnings directly accounted - 12 61
in equity
Foreign currency translation 1 (5) (10)
differences
Employee share schemes - value 3 5 10
of services provided
Balance at end (16) 432 379 428
Changes in retained income
Balance before implementation 3 945 3 945
of IFRS4 and IAS39 (revised)
Opening deferred acquisition (11) (11)
costs and deferred revenue
liabilities
Treasury shares held on (19) (19)
behalf of contract holders
Balance at beginning 5 314 3 915 3 915
Earnings for period 600 532 1 695
Dividends paid (224) (190) (296)
Transfer to other reserves (2) - -
Balance at end 5 688 4 257 5 314
Capital and reserves 5 933 5 365 6 301
attributable to equity holders
Changes in minority interest
Balance at beginning 465 359 359
Total recognised income 12 19 44
Earnings for period 12 21 48
Foreign currency translation - (2) (4)
differences
Employee share schemes - value (1) - 1
of services provided
Dividend paid (35) (1) (1)
Net change in minority interest 51 (9) 62
Balance at end 492 368 465
Total equity 6 425 5 733 6 766
(15) The June 2005 balances have been adjusted as disclosed in the
reconciliation of equity table under the heading Basis of presentation of
financial information.
(16) Other reserves consist of the following:
Land and buildings revaluation reserve: R121 million (30.06.2005: R72
million; 31.12.2005: R121 million)
Foreign currency translation reserve: (R14 million) (30.06.2005: (R10
million); 31.12.2005: (R15 million))
Fair value reserve: R30 million (30.06.2005: R22 million; 31.12.2005: R27
million)
Non-distributable reserve: R295 million (30.06.2005: R295 million;
31.12.2005: R295 million)
CONSOLIDATED CASH FLOW 6 mths to 6 mths to 12 mths to
STATEMENT 30.06.2006 30.06.2005 31.12.2005
Rm Rm (18) Rm
Net cash inflow from 1 303 790 3 280
operating activities
Net cash outflow from (105) (51) (90)
investing activities
Net cash outflow from (1 179) (876) (756)
financing activities
Net cash flow 19 (137) 2 434
Exchange gains/(losses) on 9 36 (1)
cash resources
Cash resources and funds on 6 526 4 093 4 093
deposit at beginning
Cash resources and funds on 6 554 3 992 6 526
deposit at end
SEGMENTAL REPORT (17) 6 mths to 6 mths to 12 mths to
30.06.2006 30.06.2005 31.12.2005
Rm Rm (18) Rm
Segmental revenue
Retail business 3 878 3 411 8 412
Corporate business 2 386 2 043 5 811
Health business 267 260 519
Asset management business 110 87 215
(9)
Shareholder capital (19) 540 338 1 569
International business (20) 662 648 1 531
Net income per income 7 843 6 787 18 057
statement
Segmental results
Retail business 281 205 525
Corporate business 85 77 161
Health business 15 27 49
Asset management business 20 16 72
Shareholder capital (19) 407 399 1 303
International business (20) 76 80 254
Results from operations per 884 804 2 364
income statement
(17) The segmental report is compiled on the basis of Metropolitan"s
primary segments. In all instances with the exception of international,
the secondary segments are in South Africa. The asset management business,
previously part of the corporate business, is managed as a new primary
segment and disclosed as such. The comparative information has been
adjusted accordingly.
(18) The June 2005 results have been changed as disclosed in the
reconciliation of earnings attributable to equity holders table under the
heading Basis of presentation of financial information.
(19) Shareholder capital consists of holding company and shareholder
return; in South Africa this is not split between retail and corporate.
(20) International, with secondary segments in Botswana, Ghana, Kenya,
Lesotho, Mauritius and Namibia, includes investment return.
EMBEDDED VALUE 30.06.2006 30.06.2005 31.12.2005
Rm Rm Rm
Statutory excess - long-term 5 255 5 691 6 109
insurance business
Adjustments to statutory 1 861 618 1 563
excess
Net assets - other 649 (353) 157
businesses
Staff share scheme 246 365 313
loans
Liability - 824 473 945
convertible
redeemable preference
shares
Treasury shares held 251 242 258
on behalf of contract
holders
Goodwill (109) (109) (110)
Adjustments for 447 263 349
Asset management 221 159 191
business
Health business (21) 479 356 405
Holding company (253) (252) (247)
expenses
Adjusted net asset value 7 563 6 572 8 021
Net value of in-force 3 516 3 003 3 447
business
Individual life 2 833 2 387 2 776
Gross value of in- 2 978 2 542 2 913
force business
Less: Cost of (145) (155) (137)
capital
Employee benefits 683 616 671
Gross value of in- 781 701 736
force business
Less: Cost of (98) (85) (65)
capital
Fully diluted embedded value 11 079 9 575 11 468
Fully diluted embedded value 1 479 1 296 1 499
per share (cents)
Fully diluted adjusted net 1 010 889 1 048
asset value per share
(cents)
Diluted number of shares in 749 739 765
issue (million)
(21) The value of the health business is net of R54 million, being the
total liability of the option held by MHG management (30.06.2005:
R104 million; 31.12.2005: R129 million).
EMBEDDED VALUE Net Value 30.06.2006 30.06.2005 31.12.2005
ATTRIBUTABLE TO asset of in-
GROUP value force Rm Rm Rm
Rm Rm
Metropolitan 4 457 2 927 7 384 7 399 8 052
Life Ltd
Metropolitan 273 216 489 388 441
Odyssey Ltd
Metropolitan 47 - 47 97 47
International
Ltd
Metropolitan 240 178 418 408 496
Namibia
Metropolitan 88 52 140 124 145
Life of Botswana
Metropolitan 112 143 255 243 319
Lesotho Ltd
Metropolitan 3 - 3 - -
Kenya Ltd
Metropolitan 15 - 15 - -
Ghana Ltd
Asset management 78 221 299 227 256
business
Metropolitan 96 479 575 432 487
Health Group
Metropolitan 1 816 (253) 1 563 366 1 334
Holdings
(after
consolidation
adjustments)
Goodwill (109) (109) (109) (109)
Total embedded 7 116 3 963 11 079 9 575 11 468
value
Adjustments to (1
group excess 861)
Statutory excess 5 255
- long-term
insurance
business
VALUE OF LONG-TERM INSURANCE NEW 6 mths to 6 mths to 12 mths to
BUSINESS 30.06.2006 30.06.2005 31.12.2005
Rm Rm Rm
Retail business (22) 35 44 100
Gross value of new business 38 47 107
Less: Cost of capital (3) (3) (7)
Corporate business 10 (11) 6
Gross value of new business 15 (10) 7
Less: Cost of capital (5) (1) (1)
International business * 7 9 28
Gross value of new business 7 13 33
Less: Cost of capital (0) (4) (5)
Total value of long-term 52 42 134
insurance new business
* Net of outside shareholders
(22) The value of retail new business has been reduced by R5 million
(31.12.2005: R12 million) as a result of the statement of intent (SOI)
signed by the life industry in 2005. At 30 June 2005 the SOI had not yet
been signed, and the figures have therefore not been restated.
NEW BUSINESS PREMIUMS 6 mths to 6 mths to 12 mths to
30.06.2006 30.06.2005 31.12.2005
Rm Rm Rm
Recurring premiums
Retail business 337 338 732
Corporate business 50 28 80
International business * 44 57 105
431 423 917
Single premiums
Retail business 905 604 1 369
Corporate business (23) 283 147 545
International business * 74 101 174
1 262 852 2 088
Annual premium equivalent (APE) 557 508 1 126
Retail business 428 398 869
Corporate business 78 43 135
International business 51 67 122
Present value premiums (PVP) 3 141 6 144
Retail business 2 284 4 444
Corporate business 612 1 056
International business 245 644
* Net of outside shareholders
(23) In addition, corporate business secured an off-balance sheet inflow of
R231 million during the first half of 2006.
PROFITABILITY OF NEW BUSINESS 6 mths to 6 mths to 12 mths to
30.06.2006 30.06.2005 31.12.2005
% of APE 9.3 8.3 11.9
Retail business (24) 8.2 11.2 11.5
Corporate business 12.8 (25.6) 4.3
International business 13.6 13.4 22.5
% of PVP 1.7 2.2
Retail business (24) 1.5 2.3
Corporate business 1.6 0.5
International business 2.9 4.3
(24) The retail new business margin was reduced by 0.2% (PVP) and 1.1%
(APE) (31.12.2005: 0.3% and 1.4%) as a result of the statement of intent
signed by the life industry during 2005. At 30 June 2005 the SOI had not
yet been signed, and the figures have therefore not been restated.
SOURCE OF NEW 30.06.2006 30.06.2005 31.12.2005
BUSINESS
Individual life -
insurance and
investment business
APE % Total APE % Total APE % Total
% % %
General intermediary 9 6 13 9 12 8
channel
Direct writers 22 23 35 29 32 28
Group schemes 9 5 7 4 8 5
Direct mail and 24 14 14 8 14 9
telemarketing
Odyssey broker 27 43 20 39 22 41
channel
3rd party business - 2 - - - -
International 9 7 11 11 12 9
VALUE OF NEW BUSINESS - 6 mths to 6 mths to 12 mths to
OTHER BUSINESSES 30.06.2006 30.06.2005 31.12.2005
Rm Rm Rm
Asset management business 13 10 22
Health business 19 20 76
PRINCIPAL ASSUMPTIONS 30.06.2006 30.06.2005 31.12.2005
(South Africa) (25) % % %
Pre-tax investment return
Equities 10.8 10.3 9.5
Properties 10.8 10.3 9.5
Government stock 8.8 8.3 7.5
Cash 6.8 6.3 5.5
Risk discount rate 11.3 10.8 10.0
Investment return (before 10.2 9.7 8.9
tax) - smoothed bonus
Expense inflation rate 5.5 5.0 4.3
(25) The principal assumptions relate to the South African life insurance
business only. Assumptions relating to the international life insurance
businesses are based on local requirements and can be different to the
South African assumptions.
OUTSIDE SHAREHOLDER INTEREST 30.06.2006 30.06.2005 31.12.2005
% % %
Metropolitan Namibia 19.0 19.1 19.0
Metropolitan Botswana 24.2 24.2 24.2
Metropolitan Health Group 17.6 18.8 18.8
Metropolitan Kenya 33.3
Metropolitan Ghana 40.0
LONG-TERM Net In-force business New business
INSURANCE worth written
BUSINESS:
SENSITIVITIES -
30.06.2006
Net Gross Cost Net Gross Cost
value value of CAR value value of
CAR
Rm Rm Rm Rm Rm Rm Rm
Base value 5 255 3 516 3 759 (243) 52 60 (8)
1% increase in 3 196 3 551 (355) 42 53 (11)
risk
discount
rate
% change (9) (6) 46 (19) (12) 37
1% reduction 3 881 3 993 (112) 64 68 (4)
in risk
discount
rate
% change 10 6 (54) 23 13 (47)
10% increase in 3 292 3 534 (243) 43 51 (8)
future
expenses
% change (6) (6) - (17) (15) -
(note 1)
10% increase in 3 451 3 694 (243) 37 45 (8)
policy
discontinua
nce
% change (2) (2) - (30) (26) -
10% increase in 3 195 3 437 19 28 (8)
mortality
and
morbidity
(243)
% change (9) (9) - (63) (54) -
(note 2)
1% reduction 5 267 3 534 3 777 (243) 59 67 (8)
in gross
investment
return,
inflation
rate and
risk
discount
rate
% change - 1 - - 13 11 -
(note 3)
1% reduction 5 175 3 231 3 605 (375) 44 55 (12)
in gross
investment
return only
(no change
in risk
discount
rate)
% change (2) (8) (4) 54 (15) (8) 40
(note 3)
1% reduction 5 343 3 467 3 710 (243) 57 65 (8)
in
inflation
% change 2 (1) (1) - 9 8 -
10% fall in 4 929 3 344 3 587 (243)
market
value of
equities
% change (6) (5) (5) -
10% reduction 3 463 3 706 (243) 49 58 (8)
in premium
indexation
take-up
rate
% change (2) (1) - (5) (4) -
10% increase in 37 45 (8)
non-
commission
related
acquisition
expenses
% change (28) (25) -
Notes
(1) No corresponding changes in variable policy charges are assumed,
although in practice it is likely that they will be modified according to
circumstances.
(2) Mortality decreases by 10% for annuities; mortality and morbidity
increase by 10% for assurance.
(3) Bonus rates are assumed to change commensurately.
(4) The change in the value of cost of CAR is disclosed as nil where the
sensitivity test results in an insignificant change in the value.
ANALYSIS OF Other Long-term 6 mths 6 mths 12 mths
CHANGES IN business insurance to to to
GROUP EMBEDDED es business 30.06.2 30.06.20 31.12.2
VALUE 006 05 005
Total Total Total
NAV VoIF Rm Rm Rm
Rm Rm Rm
Profit from 33 53 86 74 243
new business
Embedded 32 52 84 72 232
value from
new business
Expected 1 1 2 2 11
return to end
of year
Profit from 38 214 (63) 189 269 655
existing
business
Expected 23 - 175 198 180 356
return -
unwinding of
risk discount
rate
Expected (or - 186 (186) - - -
actual) net
of tax profit
transfer to
net worth
Operating - 78 39 117 35 140
experience
variance
Operating 15 (50) (91) (126) 54 283
assumption
changes
LOA statement (124)
of intent
Embedded value 71 214 (10) 275 343 898
profit from
operations
Investment 51 475 - 526 306 1 113
return on net
worth
Investment 10 26 110 146 74 456
variances
Economic (3) (42) (29) (74) 15 37
assumption
changes
Exchange rate - - - - (14) (13)
movements
Total embedded 129 673 71 873 724 2 491
value profit
Changes in (857) 15 (842) - (242)
share capital
Dividend paid 1 283 (1 (261) (190) (326)
544)
Redeemable (122) (122) - 481
preference
shares
Finance costs (41) (41) (27) (53)
- preference
shares
Movements in 2 2 4 12 61
other reserves
Increase in 394 (854) 71 (389) 519 2 412
embedded value
Return on embedded value (%) (June 15.8 16.6 27.5
results have been annualised)
PREMIUMS RECEIVED (pre-IFRS4) 6 mths to 6 mths to 12 mths to
30.06.2006 30.06.2005 31.12.2005
Rm Rm Rm
Recurring premiums 2 977 2 764 5 770
Retail business 1 822 1 672 3 575
Corporate business 782 727 1 437
International business 373 365 758
Single premiums 1 271 870 2 116
Retail business 906 602 1 353
Corporate business 283 147 544
International business 82 121 219
Total premiums received 4 248 3 634 7 886
PAYMENTS TO POLICYHOLDERS (pre- 6 mths to 6 mths to 12 mths to
IFRS4) 30.06.2006 30.06.2005 31.12.2005
Rm Rm Rm
Individual life 2 108 1 547 3 142
Death and disability claims 436 432 833
Maturity claims 609 365 752
Annuities 436 231 452
Surrenders 665 555 1 178
Re-insurance recoveries (38) (36) (73)
Employee benefits 1 685 2 111 3 975
Death and disability claims 344 334 668
Maturity claims 61 45 131
Annuities 141 146 293
Withdrawal benefits 166 138 293
Terminations 1 045 1 524 2 746
Re-insurance recoveries (72) (76) (156)
Total payments to policyholders 3 793 3 658 7 117
FUNDS RECEIVED 6 mths to 6 mths to 12 mths to
FROM CLIENTS 30.06.2006 30.06.2005 31.12.2005
Gross Gross Net inflow Net inflow Net inflow
inflow outflow Rm Rm Rm
Rm Rm
Retail business 2 728 (1 906) 822 834 2 182
Corporate 1 065 (1 600) (535) (1 094) (1 842)
business
International 455 (287) 168 236 429
business
Long-term 4 248 (3 793) 455 (24) 769
insurance
business cash
flows
Health business 3 686 (4 078) (392) 122 529
Asset management 5 598 (3 383) 2 215 2 082 4 502
business
Corporate 231 - 231 - -
business
Total funds 13 (11 2 509 2 180 5 800
received from 763 254)
clients
NUMBER OF EMPLOYEES 30.06.2006 30.06.2005 31.12.2005
Indoor staff 3 988 3 689 3 899
Insurance companies 2 412 2 297 2 396
Retail business 1 289 1 315 1 324
Employee benefits business 325 303 315
International business 305 214 274
Group services 493 465 483
Metropolitan Health Group 1 425 1 245 1 359
Asset management 74 74 70
Asset administration 57 52 53
Holding company 20 21 21
Field staff 3 506 3 686 3 426
Retail business 2 895 3 222 2 977
International business 611 464 449
Total 7 494 7 375 7 325
ANALYSIS OF EXPENSES 6 mths to 6 mths to 12 mths to
30.06.2006 30.06.2005 31.12.2005
Rm Rm Rm
Depreciation, amortisation 64 55 109
and impairment expense
Employee benefit expense 517 486 903
Sales remuneration and 486 461 990
distribution cost
Other expenses 281 220 515
Finance costs 47 29 54
Total expenses 1 395 1 251 2 571
Long-term insurance business 968 886 1 824
Management expenses 545 490 962
Administration expenses 483 426 834
Distribution costs 62 64 128
Sales remuneration 423 396 862
Administration business 332 294 609
Health business 242 230 467
Asset management 43 33 67
Asset administration 47 31 75
Finance costs - preference 41 28 53
shares
Holding company 33 21 40
Employee share schemes - 13 7 12
value of services provided
(group expense)
Consolidation adjustments 8 2 20
Implementation of IFRS4 and 13 13
IAS39 adjustment
Total expenses 1 395 1 251 2 571
ASSETS UNDER MANAGEMENT 30.06.2006 30.06.2005 31.12.2005
Rm Rm Rm
Property, plant and equipment 559 445 549
Investment property 2 322 1 977 2 255
Intangible assets 404 423 404
Investment in associates 3 10 7
Financial assets 45 687 39 003 43 465
Deferred income tax 3 5 4
Reinsurance contracts 181 210 181
Cash and cash equivalents 6 554 3 992 6 526
Total on-balance sheet assets 55 713 46 065 53 391
Collective investments 10 202 4 484 9 019
Health 2 364 2 273 2 490
Asset Managers 5 935 4 491 5 694
EB segregated assets 1 014 790 798
Total assets under management 75 228 58 103 71 392
ANALYSIS OF 30.06.2006 30.06.2005 31.12.2005
ASSETS BACKING
GROUP EXCESS
Rm % Rm % Rm %
Listed equities 4 061 65.7 3 506 61.2 3 864 58.5
Foreign 481 7.8 581 10.1 649 9.8
investments
Properties 344 5.6 324 5.7 392 5.9
Fixed interest 739 12.0 415 7.2 822 12.4
Money market 972 15.7 936 16.3 1 291 19.5
Goodwill 148 2.4 149 2.6 148 2.2
Redeemable (824) (13.3) (473) (8.2) (945) (14.3)
preference
shares
Other assets 258 4.1 292 5.1 393 6.0
6 179 100.0 5 730 100.0 6 614 100.0
Adjustment for (246) (365) (313)
staff share
schemes
Excess - group 5 933 5 365 6 301
per reporting
basis
GROUP EXCESS - TOP 10 30.06.2006 30.06.2005 31.12.2005
EQUITY HOLDINGS
Rm % Rm % Rm %
Anglo American Plc 162 4.0 112 3.2 125 3.2
Billiton Plc 150 3.7 96 2.7 106 2.7
Standard Bank Group 140 3.5 134 3.8 166 4.3
Ltd
MTN Group Ltd 120 3.0 154 4.4 220 5.7
Sasol Ltd 117 2.9 96 2.7 103 2.7
SABMiller Plc 96 2.4 88 2.5 97 2.5
FirstRand Ltd 82 2.0 84 2.4 106 2.7
Remgro Plc 79 2.0 85 2.4 91 2.4
Impala Platinum 76 1.9 - - - -
Holdings Ltd
Imperial Holdings Ltd 74 1.8 42 1.3 71 1.8
Naspers N-ord Ltd - - 59 1.7 64 1.7
1 096 27.0 950 27.1 1 149 29.7
Collective investments 1 612 39.7 1 093 31.2 1 379 35.7
2 708 66.7 2 043 58.3 2 528 65.4
Total equities backing 4 061 3 506 3 864
excess 100.0 100.0 100.0
STOCK EXCHANGE 30.06.2006 31.12.2005 30.06.2005 31.12.2004
PERFORMANCE
6 month period
Value of listed 2 669 1 678 1 670 1 212
shares traded
(rand million)
(27)
Volume of listed 209 154 161 137
shares traded
(million) (27)
Shares traded (% 67.0 51.4 51.5 43.1
of average listed
shares in issue)
(26, 27)
Value of shares 46.6 36.1 33.9 25.0
traded - life
insurance (J857 -
Rbn)
Value of shares 910.5 573.6 454.6 428.2
traded - top 40
index (J200 -
Rbn)
Trade prices
Highest (cents 1 459 1 220 1 160 1 100
per share)
Lowest (cents per 1 020 980 950 720
share)
Last sale of 1 180 1 185 1 012 1 090
period (cents per
share)
Percentage (%) 18.3 37.1 4.5 122.9
change during
period (26, 28)
Percentage (%) 24.4 53.3 (4.2) 76.9
change - life
insurance sector
(J857) (26)
Percentage (%) 41.3 63.4 27.1 53.7
change - top 40
index (J200) (26)
30 June / 31
December
Price/core 13.04 12.35 13.60 14.00
headline earnings
ratio (diluted)
Dividend yield % 5.76 5.32 4.74 4.77
(dividend on
listed shares)
(26)
Dividend yield % - 2.05 2.24 2.56 2.49
top 40 index
(J200) (26)
Total shares
issued (million)
Listed on JSE 598 594 641 641
Ordinary shares 591 587 599 632
Share incentive 7 7 9 9
scheme
Unlisted - share 44 48 63 63
purchase scheme
Total ordinary 642 642 704 704
shares in issue
Treasury shares (16) - (41) (41)
held
Treasury shares (21) (22) (27)
held on behalf of
contract holders
Adjustment to (47) (50) (53) (53)
staff share
scheme shares
(29)
Share incentive (5) (5) (5) (5)
scheme
Share purchase (42) (45) (47) (48)
scheme
Basic number of 558 570 610 610
shares in issue
Adjustment to 47 50 53 53
staff share
scheme shares
Treasury shares 21 22
held on behalf of
contract holders
Convertible 123 123 76 76
redeemable
preference shares
Fully diluted 749 765 739 739
number of shares
in issue
Market 8.84 9.07 7.48 8.06
capitalisation at
period-end (rand
billion) (30)
Percentage (%) of 5.07 6.83 6.87 7.04
life insurance
sector (26)
(26) Percentages have been annualised.
(27) 30.06.2005 is net of 16 million shares acquired for R200 million as
part of a share buy-back programme (31.12.2005: 22 million shares acquired
for R242 million).
(28) 30.06.2006 and 30.06.2005 have been adjusted for a capital reduction
of 100 cents each.
(29) These shares were issued after 1 January 2001, the date on which the
group adopted AC133 (now IAS39).
(30) The market capitalisation is calculated on the fully diluted number of
shares in issue.
Date: 13/09/2006 08:00:57 AM Produced by the JSE SENS Department
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