Summary of financial information

Transcription

1 Summary of financial information Audited results for the 12 months ended 30 June 2013

2 MMI HOLDINGS GROUP DIRECTORS STATEMENT The directors take pleasure in presenting the audited results of MMI Holdings financial services group for the year ended 30 June The preparation of the group s results was supervised by the group finance director, Preston Speckmann, BCompt (Hons), CA(SA). Corporate events and amalgamations The transactions to acquire 55% of the Eris Property Group and the remaining 50% in Momentum Short-Term Insurance (MSTI) became unconditional during the current year. After consultation with the Financial Services Board (FSB), the group applied to the High Court of South Africa for the approval of the amalgamation of the two main long-term insurance licences. As a preparatory step for this legal amalgamation of the life insurance licences, Momentum Group Ltd changed its name to MMI Group Ltd. The court approval for the amalgamation was granted on 20 May 2013 and the assets and liabilities of Metropolitan Life Ltd were sold to MMI Group Ltd on this date. This had no impact on the group results or net asset value. MMI Holdings Ltd acquired MMI Group Ltd s preference shares from FirstRand Ltd during the current year. These shares have been eliminated at the group level, but still qualify as capital for MMI Group Ltd. Basis of presentation of financial information These results have been prepared in accordance with International Accounting Standard 34 (IAS 34) Interim financial reporting; the South African Companies Act of 2008; and the Listings Requirements of the JSE Ltd (JSE). The accounting policies of the group are in terms of International Financial Reporting Standards (IFRS) and have been applied consistently to all the years presented. The preparation of financial statements is in accordance with and contains the information required by IFRS and the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, which requires the use of certain critical accounting estimates as well as the exercise of managerial judgement in the application of the group s accounting policies. Such critical judgements and accounting estimates are disclosed in detail in the group s integrated report for the year ended 30 June 2013, including changes in estimates that are an integral part of the insurance business. The group is exposed to financial and insurance risks, details of which are also provided in the group s integrated report. Segmental information The group operates through the following divisions: Momentum Retail, Metropolitan Retail, Momentum Employee Benefits, Metropolitan International, Momentum Investments, Metropolitan Health and Shareholder Capital (which includes Momentum Short-Term Insurance, the Balance Sheet Management business unit, other support services and growth initiatives). Reclassifications The June 2012 results have been restated for the following reclassifications: The liquidity of certain items on the statement of financial position was re-assessed, which resulted in reinsurance contracts and insurance and other receivables being moved on the statement of financial position. Further classification-related alignments within financial assets have been made in the current year and as a result certain balances have been restated. These alignments did not result in a change to the statement of financial position or income statement but only to certain detailed financial asset related tables. The comparative segmental information has been restated, where appropriate, to ensure alignment with the way in which the chief operating decision-maker, being the MMI executive committee, monitors and evaluates the performance of the various segments of the business. 1

3 MMI HOLDINGS GROUP These restatements had no impact on the current or prior year reported earnings, diluted earnings or headline earnings per share, nor on the net asset value or the statement of cash flows. Standards and interpretations of published standards effective for the year ended 30 June 2013 and relevant to the group IAS 1 (amendment) Presentation of financial statements: presentation of items of other comprehensive income became effective for the first time in the current year and had no impact on the group s earnings. The following amendment to a standard is effective for years beginning on or after 1 January 2012, but was early adopted by the group for the June 2011 financial year: IAS 12 (amendment) Income taxes: deferred tax recovery of underlying assets. Corporate governance The board has satisfied itself that appropriate principles of corporate governance were applied throughout the year under review. Directorate and secretary changes and directors shareholding Mr John Newbury retired as a non-executive director on 26 November 2012 and we thank him for his invaluable input and support of the group over many years. The group s Company Secretary, Francois Jooste, sadly passed away during the year. The Nominations Committee of the MMI Holdings Board has appointed Ms M Chetty as the group Company Secretary with effect from 3 September All transactions in listed shares of the company involving directors were disclosed on SENS as required. Contingent liabilities and capital commitments As part of running a business, the group is party to legal proceedings and appropriate provisions are made when losses are expected to materialise. The group had no material capital commitments at 30 June 2013 that were not in the ordinary course of business. Events after year-end No material events occurred between the reporting date and the date of approval of these results. Dividend declaration Ordinary shares The dividend policy for ordinary listed shares, approved by the directors, is to provide shareholders with stable dividend growth, reflecting the board s long-term view on the expected underlying basic core headline earnings growth. Exceptions are made from time to time in order to account for, inter alia, volatile investment markets, capital requirements and changes in legislation. On 10 September 2013 a gross final dividend of 76 cents per ordinary share was declared, resulting in an annual dividend of 127 cents per share. The final dividend is payable out of income reserves to all holders of ordinary shares recorded in the register of the company at the close of business on Friday, 4 October 2013 and will be paid on Monday, 7 October The dividend will be subject to local dividend withholding tax at a rate of 15% unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate. The Secondary Tax on Companies (STC) credits utilised per share amount to cents per ordinary share. This will result in a net dividend, for those shareholders who are not exempt from paying dividend tax, of cents per ordinary share. 2

4 MMI HOLDINGS GROUP MMI s income tax number is and the number of ordinary shares in issue at the declaration date was The last day to trade cum dividend will be Friday, 27 September The shares will trade ex dividend from the start of business on Monday, 30 September Share certificates may not be dematerialised or rematerialised between Monday, 30 September and Friday, 4 October 2013, both days inclusive. Where applicable, dividends in respect of certificated shareholders will be transferred electronically to shareholders bank accounts on payment date. In the absence of specific mandates, dividend cheques will be posted to certificated shareholders on or about payment date. Shareholders who hold dematerialised shares will have their accounts with their CSDP or broker credited on the payment date. Preference shares Dividends of R23 million (132 cents per share per annum) were declared on the unlisted A3 MMI preference shares. The declaration rate was determined as set out in the company s Memorandum of Incorporation and the total preference dividend utilised STC credits of R Directors responsibility and integrated report These results are the responsibility of the directors. The summarised financial information is an extract from the group s 2013 annual financial statements and does not contain full or complete details. Any investment decision should be based on consideration of the information contained in the full financial results. The full integrated report for 2013 will be posted to shareholders by 30 September 2013, and will be viewable online at A printed version of the integrated report may be requested from the group company secretary, Maliga Chetty tel: External audit The summarised financial information has been extracted from the group s 2013 annual financial statements, which have been audited by PricewaterhouseCoopers Inc. and their unqualified audit report is available for inspection at the company s registered office. In addition, the summarised group embedded value information has been extracted from the 2013 group embedded value report, which has been reviewed by PricewaterhouseCoopers Inc. in accordance with the embedded value basis of MMI, and the review report is available for inspection at the company s registered office. Signed on behalf of the board JJ Njeke Nicolaas Kruger Chairman Group chief executive officer Centurion 11 September 2013 DIRECTORS: MJN Njeke (chairman), JP Burger (deputy chairman), NAS Kruger (group chief executive officer), FW van Zyl (deputy group chief executive officer), PE Speckmann (group finance director), N Motsei (executive), L Crouse, RB Gouws, F Jakoet, Prof JD Krige, PJ Moleketi, SA Muller, V Nkonyeni, SE Nxasana, KC Shubane, FJC Truter, BJ van der Ross, JC van Reenen, M Vilakazi GROUP COMPANY SECRETARY: M Chetty TRANSFER SECRETARIES: Link Market Services SA (Pty) Ltd (registration number 2000/007239/07) Rennie House, 13th Floor, 19 Ameshoff Street, Braamfontein PO Box 4844, Johannesburg 2000 Telephone: info@linkmarketservices.co.za SPONSOR: Merrill Lynch (registration number: 2000/031756/06) REGISTERED OFFICE: 268 West Avenue, Centurion 0157 JSE CODE: MMI NSX CODE: MIM ISIN NO. ZAE

5 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS Intangible assets Owner-occupied properties Property and equipment Investment properties Investment in associates Employee benefit assets Financial instrument assets (1) Reinsurance contracts Deferred income tax Properties under development 98 - Insurance and other receivables Current income tax assets Cash and cash equivalents Non-current assets held for sale Total assets EQUITY Equity attributable to owners of the parent Preference shares Non-controlling interests Total equity LIABILITIES Insurance contract liabilities Long-term insurance contracts Financial instrument liabilities Investment contracts with discretionary participation features designated at fair value through income Other financial instrument liabilities (2) Deferred income tax Employee benefit obligations Other payables Provisions Current income tax liabilities Total liabilities Total equity and liabilities Financial instrument assets consist of the following: Securities designated at fair value through income: R million (: R million) Investments in associates designated at fair value through income: R million (: R million) Derivative financial instruments: R3 173 million (: R3 579 million) Held-to-maturity assets: R69 million (: R60 million) Available-for-sale assets: R953 million (: R2 902 million) Loans and receivables: R5 001 million (: R3 880 million) 2. Other financial instrument liabilities consist of the following: Liabilities designated at fair value through income: R million (: R million) Derivative financial instruments: R2 545 million (: R2 040 million) Liabilities at amortised cost: R1 246 million (: R854 million) 4

6 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED INCOME STATEMENT Net insurance premiums received Fee income (1) Investment income Net realised and fair value gains Net income Net insurance benefits and claims Change in liabilities Change in insurance contract liabilities Change in investment contracts with DPF liabilities (694) Change in reinsurance provision (85) (229) Fair value adjustments on investment contract liabilities Fair value adjustments on collective investment scheme liabilities Depreciation, amortisation and impairment expenses Employee benefit expenses Sales remuneration Other expenses Expenses Results of operations Share of profit/(loss) of associates 12 (7) Finance costs (2) (1 684) (899) Profit before tax Income tax expenses (1 502) (1 304) Earnings Attributable to: Owners of the parent Non-controlling interests 32 5 MMI Group Ltd preference shares Basic earnings per ordinary share (cents) Diluted earnings per ordinary share (cents) Fee income consists of the following: Investment contracts: R1 901 million (: R1 455 million) Trust and fiduciary services: R1 875 million (: R1 546 million) Health administration services: R1 866 million (: R1 799 million) Other fee income: R592 million (: R448 million) 2. Finance costs consist of the following: Preference shares issued by MMI Holdings Ltd: R46 million (: R92 million) Subordinated redeemable debt: R100 million (: R114 million) Cost of carry and derivative financial instruments: R1 273 million (: R624 million) Other: R265 million (: R69 million) 5

7 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION Basic earnings Diluted earnings RECONCILIATION OF HEADLINE EARNINGS attributable to owners of the parent Earnings Finance costs convertible preference shares Dilutory effect of subsidiaries (1) (19) - Diluted earnings Realised gains on available-for-sale financial assets (2) - (2) - Intangible asset and other impairments Profit on change from associate to subsidiary (67) (207) (67) (207) Loss/(profit) on sale of business 3 (3) 3 (3) Headline earnings (2) Net realised and fair value gains on excess (340) (250) (340) (250) Basis and other changes and investment variances Amortisation of intangible assets relating to business combinations Secondary Tax on Companies (STC) BEE cost (3) Corporate restructuring expenses (4) Dilutory effect of subsidiaries (1) - (14) Investment income on treasury shares contract holders Core headline earnings (5) Metropolitan Health is consolidated at 100% and the Metropolitan Namibian group and Metropolitan Kenya are consolidated at 96% in the results. For purposes of diluted earnings, diluted non-controlling interests and investment returns are reinstated. The dilutory impact of these subsidiaries has been included in diluted earnings in the current year. 2. Headline earnings consist of operating profit, investment income, net realised and fair value gains, investment variances and basis and other changes. 3. This represents the cost of the BEE transaction in Namibia in the prior year in terms of IFRS 2 Share based payments. 4. Corporate restructuring expenses include once-off costs relating to the restructuring of the group. 5. Core headline earnings disclosed comprise operating profit and investment income on shareholder assets. It excludes net realised and fair value gains on investment assets, investment variances and basis and other changes which can be volatile, STC (prior years), certain non-recurring items, as well as the amortisation of intangible assets relating to business combinations as this is part of the cost of acquiring the business. 6

8 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION EARNINGS PER SHARE (cents) attributable to owners of the parent Basic Core headline earnings Headline earnings Earnings Weighted average number of shares (million) Diluted Core headline earnings Weighted average number of shares (million) (1) Headline earnings Earnings Weighted average number of shares (million) (2) For diluted core headline earnings per share, treasury shares held on behalf of contract holders are deemed to be issued. 2. For diluted earnings and headline earnings per share, treasury shares held on behalf of contract holders are deemed to be cancelled. DIVIDENDS Ordinary listed MMI Holdings Ltd shares (cents per share) Interim March Final September Total A special dividend of 65 cents per share was declared in September MMI Holdings convertible redeemable preference shares (issued to Kagiso Tiso Holdings (KTH)) The A1 and A2 MMI preference shares were converted into MMI ordinary shares on a one-for-one basis during June The A3 MMI preference shares are redeemable in June 2017 at a redemption value of R9.18 per share unless converted into MMI ordinary shares on a one-for-one basis prior to that date. Dividends are payable at 132 cents per annum (payable March and September). 7

9 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Earnings Other comprehensive income for the year, net of tax Items that may subsequently be reclassified to income Exchange differences on translating foreign operations Available-for-sale financial assets - (3) Items that will not be reclassified to income 2 53 Land and buildings revaluation 9 63 Change in non-distributable reserves (10) 1 Income tax relating to items that will not be reclassified 3 (11) Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent Non-controlling interests MMI Group Ltd preference shares

10 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Changes in share capital Balance at beginning Staff share scheme shares released - 3 Treasury shares held on behalf of contract holders (4) 2 Conversion of preference shares (1) Share buy-back (7) - Balance at end Changes in other reserves Balance at beginning Total comprehensive income BEE cost - 3 Transfer to retained earnings (8) (10) Balance at end (2) Changes in retained earnings Balance at beginning Total comprehensive income Dividend paid (2 886) (1 603) Transactions with non-controlling interests 87 (31) Transfer from other reserves 8 10 Profit on preference share buy-back Balance at end Equity attributable to owners of the parent MMI Group Ltd preference shares Balance at beginning Total comprehensive income Dividend paid (32) (31) Share buy-back (500) - Balance at end Changes in non-controlling interests Balance at beginning Total comprehensive income Dividends paid (97) (3) Transactions with owners 39 (27) Business combinations Balance at end Total equity The conversion of the preference shares in the year ended 30 June 2012 represents the conversion of the A1 and A2 MMI preference shares into ordinary shares on a one-for-one basis. 2. Other reserves consist of the following: Land and buildings revaluation reserve: R534 million (: R533 million) Foreign currency translation reserve: R139 million (: R74 million) Fair value adjustment for preference shares issued by MMI: R940 million (: R940 million) Fair value reserve: R11 million (: R11 million) Non-distributable reserve: R4 million (: R11 million) Equity-settled share-based payments reserve: R3 million (: R3 million) 9

11 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Net cash inflow/(outflow) from operating activities (1 142) Net cash outflow from investing activities (753) (697) Net cash outflow from financing activities (3 101) (1 875) Net cash flow (3 714) Cash resources and funds on deposit at beginning Cash resources and funds on deposit at end PRINCIPAL ASSUMPTIONS (South Africa) (1) % % Pre-tax investment return Equities Properties Government stock Other fixed interest stocks Cash Risk-free return Risk discount rate (RDR) Investment return (before tax) balanced portfolio Expense inflation base rate (2) The principal assumptions relate only to the South African life insurance business. Assumptions relating to international life insurance businesses are based on local requirements and can differ from the South African assumptions. 2. An additional 1% expense inflation is allowed for in some divisions to reflect the impact of closed books that are in run-off. NON-CONTROLLING INTERESTS % % Eris Property Group (acquired in the current year) Metropolitan Botswana Metropolitan Ghana Metropolitan Health Group Metropolitan Health Namibia Administrators Metropolitan Kenya Metropolitan Namibia Metropolitan Nigeria Metropolitan Swaziland Momentum Health Botswana Momentum Health Ghana Momentum Health Mauritius Momentum Mozambique Momentum Swaziland Momentum Tanzania Momentum Zambia

12 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION FINANCIAL INSTRUMENT ASSETS Restated Equity securities Debt securities Funds on deposit and other money market instruments Unit-linked investments Derivative financial instruments Loans and receivables Investments in associates designated at fair value Total financial instrument assets ANALYSIS OF ASSETS UNDER MANAGEMENT Restated On-balance sheet assets Managed and/or administered by Momentum Investments Investment assets Collective investment schemes Properties Momentum Wealth linked product assets under administration Managed internally or by other managers within MMI Managed by external managers Other assets Off-balance sheet assets Managed and/or administered by Momentum Investments Collective investment schemes Segregated assets and linked products Properties Managed internally or by other managers within MMI Momentum Employee Benefits segregated assets Metropolitan Health Momentum Wealth linked product assets under administration Total assets under management Total assets managed and/or administered by Momentum Investments Other assets under management Total assets under management

13 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION ANALYSIS OF ASSETS BACKING SHAREHOLDER EXCESS Restated % % Equity securities Preference shares Collective investment schemes Debt securities Properties Owner-occupied properties Investment properties Cash and cash equivalents and funds on deposit Intangible assets Other net assets Redeemable preference shares (313) (1.3) (316) (1.3) Subordinated redeemable debt (1 562) (6.7) (1 572) (6.5) Shareholder excess per reporting basis

14 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION BUSINESS COMBINATIONS JUNE 2013 Momentum Short-Term Insurance As at 30 June 2012 MMI Group Ltd (MGL) and OUTsurance Holdings Ltd (OUTsurance) each owned 50% of the ordinary share capital of Momentum Short-Term Insurance Company Ltd (MSTI). As OUTsurance controlled MSTI, MGL accounted for the investment as an associate. On 13 July 2012, MGL acquired the remaining 50% shareholding for R125 million in cash, which was based on the embedded value of MSTI. No goodwill was recognised on the transaction. Eris Property Group On 29 October 2012, MMI Holdings Ltd acquired 55% in Eris Property Group (Eris) for R329 million in cash. The group's property portfolio is currently managed by Eris and Momentum Properties. The transaction resulted in R191 million goodwill being recognised attributable to certain anticipated operating synergies. The goodwill is not deductible for tax purposes. Eris management and Kagiso Tiso Holdings (Pty) Ltd (KTH), who were existing shareholders in Eris, also acquired further shares from MMI Holdings Ltd, resulting in an effective controlling interest for MMI Holdings Ltd of 54%. The purchase price consideration, the net assets acquired and any relevant goodwill relating to the above two transactions are as follows: Total MSTI Eris Purchase consideration Fair value of net assets Intangible assets Tangible assets Financial instrument assets Cash and cash equivalents Other assets Financial instrument liabilities (85) - (85) Other liabilities (418) (104) (314) Net identifiable assets acquired Fair value step-up of associate - MSTI (recognised in net realised and fair value gains) (67) (67) - Derecognise investment in associate - MSTI (carrying value at acquisition date) (73) (73) - Non-controlling interests (115) - (115) Goodwill recognised The above two transactions contributed net income of R603 million and earnings of R33 million to the group results for the current year. Assuming the acquisitions occurred at the beginning of the year, it would have contributed additional net income of R148 million and earnings of R14 million. Common control transactions After consultation with the Financial Services Board (FSB), the group applied to the High Court of South Africa for the approval of the amalgamation of the two main long-term insurance licences. As a preparatory step for this legal amalgamation of the life insurance licences, Momentum Group Ltd changed its name to MMI Group Ltd. The court approval for the amalgamation was granted on 20 May 2013 and the assets and liabilities of Metropolitan Life Ltd were sold to MMI Group Ltd on this date. The transaction was recorded in accordance with the group's accounting policy for common control transactions. It had no impact on the group results or net asset value. 13

15 MMI HOLDINGS GROUP SEGMENTAL INFORMATION Momentum Metropolitan Other Momentum Metropolitan Employee International Investments Health Capital total items (1) IFRS total Momentum Metropolitan Shareholder Segmental reconciling Retail Retail Benefits Revenue Net insurance premiums (33 435) Recurring premiums (4 889) Single premiums (28 546) Fee income (705) Fee income Inter-segmental fee income (927) (927) Expenses Net payments to contract holders (29 063) External payments (29 031) Inter-segmental payments (32) (32) Other expenses Sales remuneration Administration expenses (2) Amortisation due to business combinations and impairments Direct property expenses Asset management and other fee expenses Holding company expenses Inter-segmental expenses (950) (950) Diluted core headline earnings Operating profit Tax on operating profit (459) (198) (118) (37) (54) (30) (58) (954) - (954) Investment income Tax on investment income (12) (4) (205) (221) - (221) Actuarial liabilities (444) The 'other reconciling items'column includes: an adjustment to reverse investment contract premiums (R million) and claims (R million); FNB Life adjustments reconciling the 10% of FNB Life included in each of the relevant lines to the accounting treatment of the reinsurance arrangement (premiums R174 million, fee income R11 million, claims R3 million, sales remuneration R65 million and expenses R130 million); grossing up of fee income and expenses relating to properties under development (R121 million); corporate restructuring expenses of R67 million; direct property and asset management fees for all segments, except non-life segments, that are set off against investment income for management reporting purposes but shown as an expense for accounting purposes; the amortisation of intangibles relating to business combinations; and other minor adjustments to expenses (R88 million), sales remuneration (R7 million) and fee income (R90 million). 2. Administration expenses for the current year include the following relating to new acquisitions: Metropolitan International - R66 million relating to Momentum Namibia; Momentum Investments R201 million relating to Eris Property Group and; Shareholder Capital R28 million relating to Momentum Short-Term Insurance. 14

16 Restated MMI HOLDINGS GROUP SEGMENTAL INFORMATION Momentum Metropolitan Other Momentum Metropolitan Employee International Investments Health Capital total items (1) IFRS total Momentum Metropolitan Shareholder Segmental reconciling Retail Retail Benefits Revenue Net insurance premiums (26 858) Recurring premiums (4 547) Single premiums (21 847) Inter-segmental premiums (464) (464) Fee income (576) Fee income (7) Inter-segmental fee income (569) (569) Expenses Net payments to contract holders (25 895) External payments (2) (25 865) Inter-segmental payments (30) (30) Other expenses Sales remuneration Administration expenses Amortisation due to business combinations and impairments Direct property expenses Asset management and other fee expenses Holding company expenses Inter-segmental expenses (569) (569) Diluted core headline earnings Operating profit Tax on operating profit (408) (171) (102) (20) (40) (51) (34) (826) - (826) Investment income Tax on investment income (8) (3) (150) (161) - (161) Actuarial liabilities (453) The 'other reconciling items'column includes: an adjustment to reverse investment contract premiums (R million) and claims (R million); FNB Life adjustments reconciling the 10% of FNB Life included in each of the relevant lines to the accounting treatment of the reinsurance arrangement (premiums R186 million; fee income R1 million, claims R3 million, sales remuneration R90 million and expenses R103 million); direct property and asset management fees for all segments, except non-life segments, that are set off against investment income for management reporting purposes but shown as an expense for accounting purposes; the amortisation of intangibles relating to business combinations; Namibian BEE cost (R3 million) and other minor adjustments to expenses (R41 million), sales remuneration (R17 million) and fee income (R8 million). 2. The R799 million payments to contract holders in shareholder capital relates to the maturity of certain corporate policies administered by Balance Sheet Management. 15

17 Analysis of reclassifications MMI HOLDINGS GROUP SEGMENTAL INFORMATION Momentum Metropolitan Momentum Employee Metropolitan Momentum Metropolitan Shareholder Segmental Other reconciling Retail Retail Benefits International Investments Health Capital total items IFRS total The comparative segmental information has been restated where appropriate to ensure alignment with the way in which the chief operating decision-maker, being the MMI executive committee, monitors and evaluates the performance of the various segments of the business. Refer to table below for detail. These restatements had no impact on core headline earnings. June 2012 Fee income Published June (576) Reclassifications (46) - (6) Restated June (576) Actuarial liabilities Published June (453) Reclassifications (471) Restated June (453)

18 MMI HOLDINGS GROUP SEGMENTAL INFORMATION CHANGE IN DILUTED CORE HEADLINE EARNINGS Change Momentum Retail % Metropolitan Retail % Momentum Employee Benefits % Metropolitan International % Momentum Investments % Metropolitan Health % Operating divisions % Shareholder Capital (11%) Total diluted core headline earnings % RECONCILIATION OF MOMENTUM INVESTMENTS Revenue Fee income Expenses and finance costs Other expenses Finance costs Share of profit of associates 5 - Less non-controlling interests Core adjustments 2 17 Impairments and amortisation of intangibles relating to business combinations 1 12 Other 1 5 Operating profit before tax RECONCILIATION OF METROPOLITAN HEALTH Revenue Net insurance premiums Fee income Expenses and finance costs Net payments to contract holders Other expenses Finance costs Core adjustments 7 27 Impairments and amortisation of intangibles relating to business combinations Adjustments for dilution (10) (17) Other 2 (9) Operating profit before tax

19 MMI HOLDINGS GROUP SEGMENTAL INFORMATION RECONCILIATION OF SHAREHOLDER CAPITAL Revenue Net insurance premiums (excluding investment business) Balance Sheet Management income including fee income Guaranteed portfolios earnings Returns in excess of benchmark Returns on working capital and other Other income Total income Expenses Net payments to contract holders (excluding investment business) Other expenses Balance Sheet Management Strategic initiatives and other (1) Holding company Total expenses Operating profit before tax Includes Momentum Short-Term Insurance (R143 million), Solvency Assessment and Management (SAM) costs, redeployment centre costs and India strategic costs. 18

20 MMI HOLDINGS GROUP SEGMENTAL INFORMATION PAYMENTS TO CONTRACT HOLDERS Momentum Retail Death and disability claims Maturity claims Annuities Withdrawal benefits Surrenders Re-insurance recoveries (779) (841) Metropolitan Retail Death and disability claims Maturity claims Annuities Withdrawal benefits Surrenders Re-insurance recoveries (95) (87) Momentum Employee Benefits Death and disability claims Maturity claims Annuities Withdrawals and surrenders Terminations Disinvestments Re-insurance recoveries (672) (569) Metropolitan International Death and disability claims Maturity claims Annuities Withdrawal benefits Surrenders Terminations Disinvestments - 5 Re-insurance recoveries (30) (21) Momentum Investments Withdrawals Metropolitan Health Claims Shareholder Capital Claims Total payments to contract holders Adjustment for payments to investment contract holders (29 181) (25 991) Transfers between insurance, investment and investment with DPF contracts FNB Life adjustment 3 3 Inter-segmental (32) (30) Net insurance benefits and claims per income statement

21 MMI HOLDINGS GROUP SEGMENTAL INFORMATION NET FUNDS RECEIVED FROM CLIENTS Gross single inflows Gross recurring inflows Gross inflow Gross outflow Net inflow/ (outflow) Restated Net inflow/ (outflow) On-balance sheet fund flows Momentum Retail (18 609) (34) Metropolitan Retail (4 509) Momentum Employee Benefits (9 240) Metropolitan International (1 340) Momentum Investments (15 241) (2 111) Metropolitan Health (182) 11 - Shareholder Capital (269) 30 (799) Long-term insurance business fund flows (49 390) Off-balance sheet fund flows Momentum Retail (11 213) Momentum Employee Benefits Metropolitan International (812) 175 (5) Momentum Investments (92 454) (7 931) Momentum Investments Eris Property acquisition Metropolitan Health (35 700) Total net funds received from clients ( ) NUMBER OF EMPLOYEES Restated Indoor staff Momentum Retail Metropolitan Retail Momentum Employee Benefits Metropolitan International Momentum Investments Metropolitan Health Shareholder Capital Balance Sheet Management Group services Short-term insurance Redeployment centre - 54 Field staff Momentum Retail Metropolitan Retail Metropolitan International Total The increase in the number of employees of Momentum Investments is mainly due to the acquisition of Eris with 280 employees. 20

22 MMI HOLDINGS GROUP STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF ASSETS AND LIABILITIES ON REPORTING BASIS Restated Total assets Actuarial value of policy liabilities ( ) ( ) Other liabilities Non-controlling interests (38 956) (33 261) (391) (281) Group excess per reporting basis Net assets other businesses (1 547) (1 334) Fair value adjustments on Metropolitan business acquisition and other consolidation adjustments (5 001) (5 901) Excess long-term insurance business, net of non-controlling interests (1) RECONCILIATION OF CHANGE IN LONG-TERM INSURANCE EXCESS TO THE INCOME STATEMENT Change in excess of long-term insurance business (1) Increase in share capital Change in other reserves (29) (345) (62) (60) Dividend paid ordinary shares Change in non-controlling interests - (53) Acquisition of Momentum Namibia - (117) Other (22) - Total surplus arising, net of non-controlling interests Operating profit Investment income on excess Net realised and fair value gains on excess Investment variances 117 (54) Basis and other changes (487) (219) Net consolidation adjustments (43) (12) Earnings after non-controlling interests of long-term insurance business Earnings after non-controlling interests of other group businesses and consolidation adjustments (94) (39) Amortisation of intangibles relating to the merger (446) (446) Earnings attributable to owners of the parent as per income statement The long-term insurance business includes both insurance and investment contract business and is the simple aggregate of all the life insurance companies in the group, including life insurance companies in Africa. It is after non-controlling interests but excludes certain items which are eliminated on consolidation. It also excludes non-insurance business. 21

23 MMI HOLDINGS GROUP STATEMENT OF ASSETS AND LIABILITIES RECONCILIATION OF REPORTING EXCESS TO STATUTORY EXCESS Reporting excess long-term insurance business (1) Disregarded assets (2) (977) (998) Difference between statutory and published valuation methods (551) (436) Write-down of subsidiaries and associates for statutory purposes (936) (1 209) Unsecured subordinated debt Consolidation adjustments (119) (56) Statutory excess long-term insurance business Capital adequacy requirement (CAR) () (3) Ratio of long-term insurance business excess to CAR (times) Discretionary margins The long-term insurance business includes both insurance and investment contract business and is the simple aggregate of all the life insurance companies in the group, including life insurance companies in Africa. It is after non-controlling interests but excludes certain items which are eliminated on consolidation. It also excludes non-insurance business. 2. Disregarded assets are those as defined in the South African Long Term Insurance Act and are only applicable to South African Long Term insurance companies. Adjustments are also made for the international insurance companies from reporting excess to statutory excess as required by their regulators. It includes Sage intangible assets of R562 million (: R590 million). 3. Aggregation of separate company CAR s, with no assumption of diversification benefits. 22

24 MMI HOLDINGS GROUP EMBEDDED VALUE INFORMATION EMBEDDED VALUE RESULTS AS AT Covered business Reporting excess long-term insurance business Reclassification to non-covered business (1 482) (1 388) Disregarded assets (1) (693) (688) Difference between statutory and published valuation methods (551) (436) Dilutory effect of subsidiaries (2) (26) (30) Consolidation adjustments (3) (36) (30) Momentum Namibia adjustment (4) - (247) Value of MMI Group Ltd preference shares issued (500) (480) Diluted adjusted net worth covered business Net value of in-force business Diluted embedded value covered business Non-covered business Net assets non-covered business within life insurance companies Net assets non-covered business outside life insurance companies Consolidation adjustments (3) (1 011) (200) Adjustments for dilution (5) Diluted adjusted net worth non-covered business Write-up to directors value Non-covered business Holding company expenses (6) (1 208) (953) International holding company expenses (6) (410) (210) Diluted embedded value non-covered business Diluted adjusted net worth Net value of in-force business Write-up to directors value Diluted embedded value Required capital covered business (adjusted for qualifying debt and preference shares) Surplus capital covered business Diluted embedded value per share (cents) Diluted adjusted net worth per share (cents) Diluted number of shares in issue (million) (7) Disregarded assets include Sage intangible assets of R562 million (: R590 million), goodwill and various other items. 2. For accounting purposes, Metropolitan Health has been consolidated at 100%, while Metropolitan Namibia and Metropolitan Kenya have been consolidated at 96% for the current year, in the statement of financial position. For embedded value purposes, disclosed on a diluted basis, the non-controlling interests and related funding have been reinstated. 3. Consolidation adjustments include mainly goodwill and intangibles in subsidiaries that are eliminated. 4. The carrying value of Momentum Namibia included in the reporting excess for the prior year was written down to the company s net asset value. For June 2013 this adjustment is already included in the reporting excess. 5. Adjustments for dilution are made up as follows: Dilutory effect of subsidiaries (note 2): R119 million (: R74 million) Treasury shares held on behalf of contract holders: R266 million (: R220 million) Liability MMI Holdings Ltd convertible preference shares issued to KTH: R313 million (: R316 million) 6. The holding company expenses reflect the present value of projected recurring head office expenses. The International holding company expenses reflect the allowance for support services to the international life assurance and health businesses. 7. The diluted number of shares in issue takes into account all issued shares, assuming conversion of the convertible redeemable preference shares, and includes the treasury shares held on behalf of contract holders. 23

25 MMI HOLDINGS GROUP EMBEDDED VALUE INFORMATION ANALYSIS OF NET VALUE OF IN-FORCE BUSINESS PER DIVISION Restated Momentum Retail (1) Gross value of in-force business Less cost of required capital (1 523) (1 558) Metropolitan Retail Gross value of in-force business Less cost of required capital (757) (645) Momentum Employee Benefits Gross value of in-force business Less cost of required capital (670) (617) Metropolitan International Gross value of in-force business Less cost of required capital (113) (53) Shareholder Capital (1) Gross value of in-force business (2) Less cost of required capital - - Net value of in-force business Notes 1. Net value of in-force of R93 million was transferred from Momentum Retail to Shareholder Capital at 30 June 2012, reflecting a change in the responsibility for managing financial options and guarantees (Advisory Practice Note (APN) 110). The comparatives have been restated to reflect this change. 2. The value of in-force in the Shareholder Capital represents discretionary margins. 24

26 MMI HOLDINGS GROUP EMBEDDED VALUE INFORMATION EMBEDDED VALUE PER DIVISION Adjusted net worth Net value of in-force Covered business MMI Group Ltd Metropolitan Odyssey Ltd Metropolitan International Metropolitan Life (Namibia) Ltd Metropolitan Life of Botswana Ltd Metropolitan Lesotho Ltd Other international businesses Total covered business Adjusted net worth Write up to directors value Restated Non-covered business Momentum Investments (1) Metropolitan Health (2) Momentum Retail (Wealth) (3) Momentum Short-Term Insurance (MSTI) Metropolitan International Holdings (4) 104 (389) (285) 78 MMI Holdings (after consolidation adjustments) (4) (1 208) (161) 377 Total non-covered business Total embedded value Diluted adjusted net worth non-covered business (2 716) Adjustments to covered business adjusted net worth Reporting excess long-term insurance business Momentum Investments subsidiaries are valued using forward Price Earnings multiples applied to the relevant sustainable earnings bases. June 2013 includes the valuation of Eris Properties Group. 2. Metropolitan Health subsidiaries have been valued using Embedded Value methodology. 3. Momentum Retail (Wealth) has been valued using Embedded Value methodology. 4. The holding company expenses reflect the present value of projected recurring head office expenses. The International holding company expenses reflect the allowance for support services to the international life assurance and health businesses. 25

27 MMI HOLDINGS GROUP EMBEDDED VALUE INFORMATION ANALYSIS OF CHANGES IN GROUP EMBEDDED VALUE Notes Covered business Adjusted Gross net worth Value of inforce (ANW) (VIF) Cost of CAR Total EV Total EV Profit from new business (1 296) (162) Embedded value from new business A (1 296) (162) Expected return to end of period B Profit from existing business (12) Expected return unwinding of RDR B (299) Release from the cost of required capital C Expected (or actual) net of tax profit transfer to net worth D (3 093) Operating experience variances E Operating assumption changes F (483) (149) 520 (290) Embedded value profit from operations (174) Investment return on adjusted net worth G Investment variances H (364) Economic assumption changes I (36) (170) (15) (221) 110 Acquisition of covered business Exchange rate movements 32 9 (2) Embedded value profit covered business (172) Transfer of business from/(to) noncovered business J 292 (7) (18) 267 (571) Changes in share capital Dividend paid (3 140) - - (3 140) (2 498) Change in reserves (22) - - (22) 28 Change in embedded value covered business (190) Non-covered business Change in directors valuation and other items Holding company expenses (455) (248) Secondary Tax on Companies allowance - 6 Embedded value profit non-covered business (324) (238) Changes in share capital (37) (365) Dividend paid Finance costs preference shares (46) (92) Transfer of business (to)/from covered business J (267) 551 Change in embedded value noncovered business (438) 745 Total change in group embedded value Total embedded value profit Return on embedded value (%) - internal rate of return 17.4% 11.3% 26