MMI HOLDINGS SUMMARISED AND UNAUDITED GROUP RESULTS for the six months ended 31 December 2015

Transcription

1 MMI Holdings Limited Incorporated in the Republic of South Africa Registration Number: 2000/031756/06 JSE share code: MMI NSX share code: MIM ISIN: ZAE ("MMI" or "the group") MMI HOLDINGS SUMMARISED AND UNAUDITED GROUP RESULTS for the six months ended 31 December 2015 NEW BUSINESS PVP up 14% to R27 billion VALUE OF NEW BUSINESS - R361 million Annualised RETURN on EMBEDDED VALUE of 7% Total EARNINGS up 14 % to R1.5 billion CORE HEADLINE EARNINGS down by 9% to R1.7 billion Interim DIVIDEND up 3% to 65 cents per share SUMMARY OF RESULTS Group results MMI Holdings Limited (MMI) announced its interim results for the six months to 31 December 2015, delivering a satisfactory performance in a tough environment. Diluted core headline earnings decreased 9% to R1.7 billion for the period, mainly as a result of unusually low underwriting profits across the group. MMI expects underwriting profits to normalise over the medium term. Total earnings and headline earnings proved to be resilient, increasing by 14% and 5% respectively. Embedded value was maintained at R40 billion (2 505 cents per share), reflecting an annualised return on embedded value for shareholders of 7%. New business volumes increased 14% on the prior period, with strong growth from Corporate and International clients. The value of new business came in at R361 million, down 14% on the prior year. It should be noted, however, that it would have been 4% higher than the prior period had the discount rate remained unchanged. The life insurance profits in both Momentum Retail and Metropolitan Retail delivered good growth compared to the prior period. In addition, overall profit growth was once again restricted by investments into strategic initiatives that are being pursued in line with the group strategy. An interim dividend of 65 cents per share was declared, an increase of 3% on the prior period. This dividend is 1

2 within the dividend cover range of 1.5 to 1.7. Operating environment Local operating conditions remained challenging and highly competitive. The performance of the South African equity markets slowed dramatically during the reporting period and ended slightly negative for the six-month period, while inflationary pressures and higher interest rates put further pressure on disposable income. Capital management A strong capital buffer of R4 billion was reported as at 31 December 2015, after allowing for capital requirements, strategic growth initiatives and the interim dividend. Taking into account the growth focus, changing regulations including Solvency Assessment and Management and the difficult economic outlook, the group is satisfied that its present capital level is appropriate. Prospects The strategic focus areas of the MMI group are growth, client centricity and excellence. Each segment, together with the Product and Solutions Centres of Excellence and supporting functions, is advancing the implementation of MMI s client-centric strategy. Taking into account the economic outlook, the group has increased the focus on efficiencies while continuing to focus on quality top-line growth. As part of the implementation of the client-centric model, a number of areas have been identified where further efficiencies can be extracted. These savings have been quantified and MMI is targeting a further reduction in annual expenses of R750m by financial year MMI is continuing to invest in growth initiatives with the aim of enhancing shareholder value over the longer term. Growth in new business volumes and profits will, however, be impacted by many factors in the South African economy, including employment levels and disposable income. The board of MMI Holdings believes that the group has identified and is implementing innovative strategies to continue unlocking value and generating the required return on capital for shareholders over time. 2

3 MMI HOLDINGS GROUP Summary of financial information Unaudited results for the 6 months ended 31 December 2015 DIRECTORS STATEMENT The directors take pleasure in presenting the unaudited condensed interim results of MMI Holdings financial services group for the period ended 31 December The preparation of the group s results was supervised by the group finance director, Mary Vilakazi, CA(SA). Corporate events Listed debt MMI Group Ltd (MMIGL) listed new instruments to the total value of R1 250 million on the JSE Ltd on 6 August The instruments are unsecured subordinated callable notes. On 15 September 2015, R1 000 million of unsecured subordinated notes previously issued by MMIGL were redeemed. Basis of preparation of financial information These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 (IAS 34) Interim financial reporting; the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council; the JSE Listings Requirements and the South African Companies Act, 71 of The accounting policies applied in the preparation of these financial statements are in terms of International Financial Reporting Standards (IFRS) and are consistent with those adopted in the previous years except as described below. Critical judgements and accounting estimates are disclosed in detail in the group s integrated report for the year ended 30 June 2015, 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. New and revised standards effective for the period ended 31 December 2015 and relevant to the group There were no new amendments to standards and interpretations in the current period. 3

4 MMI HOLDINGS GROUP Segmental report From 1 July 2015 the MMI group embarked on a new segmental reporting view that is aligned with the client-centric goals of the group. The segmental report has been disclosed on this new internal structure and the prior periods have been restated. The new segmental reporting had no impact on the current or prior year reported earnings, diluted earnings or headline earnings per share, or on the net asset value or net cash flow. The new client-centric reporting view reflects the following segments: Momentum Retail: Momentum Retail's purpose is to enhance the lifetime financial wellness of people, their families, communities and businesses. The focus is on three main client segments the upper and middle retail segments and the small business segment in South Africa, offering innovative and appropriate wealth creation, risk and savings solutions. Metropolitan Retail: Metropolitan Retail s purpose is to enhance the lifetime financial wellness of people, their families and their communities through empowerment and education. They target the entry-level market retail segments in South Africa with a focus on client value, ease of interaction, empowering advice and a lifetime engagement, offering savings, income generation, risk and funeral products. Corporate and Public Sector: In order to enhance the lifetime financial wellness of businesses, employees, customers and their communities, the client is placed at the centre of everything the segment does. This requires deepening industry and sector insights about the institutions that MMI serves and focusing on the strategic issues that affect them and their employees. The Corporate and Public Sector focuses on medium to large corporates, affinity groups, labour unions and the public sector institutions, offering solutions that grow their profitability, protect their asset base and enhance their sustainability. International: The International segment manages MMI s global expansion holistically, in order to enhance the lifetime financial wellness of people, their communities and their businesses and to take care of client needs in the selected segments of countries where MMI is represented. Shareholder Capital: This segment is responsible for the management of the capital base of the group, and the incubation of strategic initiatives until such time as they start to interact directly with clients, in which case they are then transferred to the relevant operating segment. Embedded value restatements On 1 July 2014 Guardrisk Life Ltd was transferred to covered business (adjusted net worth of R44 million and value of in-force of R324 million). The December 2014 comparatives have been restated to reflect the transfer of Guardrisk Life Ltd to covered business. Corporate governance The board has satisfied itself that appropriate principles of corporate governance were applied throughout the period under review. Changes to the directorate, secretary and directors shareholding Sizwe Nxasana retired from the MMI board on 30 September 2015 and Leon Crouse resigned from the MMI board with effect from 31 March We thank them for their commitment and contribution to the group. On 20 November 2015, Peter Cooper, currently a non-executive director of RMH, RMI, RMB Structured Insurance, amongst others was appointed to the board. All transactions in listed shares of the company involving directors were disclosed on SENS. Changes to the group executive committee There were no changes in the current period. 4

5 MMI HOLDINGS GROUP 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 31 December 2015 that were not in the ordinary course of business. Events after the reporting period No material events occurred between the reporting date and the date of approval of these results. Interim dividend declaration Ordinary shares On 2 March 2016, a gross interim dividend of 65 cents per ordinary share was declared. The 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, 1 April 2016, and will be paid on Monday, 4 April 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. This will result in a net final dividend of cents per ordinary share for those shareholders who are not exempt from paying dividend tax. The last day to trade cum dividend will be Wednesday, 23 March The shares will trade ex dividend from the start of business on Thursday, 24 March Share certificates may not be dematerialised or rematerialised between Thursday, 24 March 2016 and Friday, 1 April 2016, both days inclusive. The number of ordinary shares at the declaration date was MMI s income tax number is Preference shares Dividends of R20.7 million (132 cents per share p.a.) were declared on the unlisted A3 MMI Holdings Ltd preference shares as determined by the company s Memorandum of Incorporation. 5

6 MMI HOLDINGS GROUP Directors responsibility These results are the responsibility of the directors. The condensed interim results have not been reviewed or audited by the external auditors. This announcement does not include the information required by paragraph 16A(j) of IAS 34. The full condensed IAS 34 compliant results are available on MMI s website and at MMI s registered offices upon request. A printed version of the SENS announcement may be requested from the group company secretary, Maliga Chetty tel: Signed on behalf of the board JJ Njeke Nicolaas Kruger Chairman Group chief executive officer Centurion 2 March 2016 DIRECTORS: MJN Njeke (chairman), JP Burger (deputy chairman), NAS Kruger (group chief executive officer), M Vilakazi (group finance director), P Cooper, L Crouse, F Jakoet, Prof JD Krige, PJ Moleketi, SA Muller, V Nkonyeni, KC Shubane, FJC Truter, BJ van der Ross, JC van Reenen, LL von Zeuner GROUP COMPANY SECRETARY: Maliga Chetty WEBSITE: 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) AUDITORS: PricewaterhouseCoopers Inc REGISTERED OFFICE: 268 West Avenue, Centurion 0157 JSE CODE: MMI NSX CODE: MIM ISIN NO: ZAE SENS ISSUE: 3 March

7 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS Intangible assets Owner-occupied properties Property and equipment Investment properties Investments in associates Employee benefit assets Financial instruments (1) Reinsurance contract assets Deferred income tax Properties under development Insurance and other receivables Current income tax assets Cash and cash equivalents Total assets EQUITY Equity attributable to owners of the parent Non-controlling interests Total equity LIABILITIES Insurance contract liabilities Long-term insurance contracts Short-term insurance contracts Financial instruments Investment contracts with discretionary participation features designated at fair value through income Other financial instruments (2) Reinsurance contract liabilities Deferred income tax Employee benefit obligations Other payables Provisions Current income tax liabilities Total liabilities Total equity and liabilities Financial instruments consist of the following: Securities designated at fair value through income: R million (: R million; : R million) Investments in associates designated at fair value through income: R million (: R million; : R million) Derivative financial instruments: R2 537 million (: R2 029 million; : R2 033 million) Available-for-sale: R142 million (: R131 million; : R208 million) Held-to-maturity: R129 million (: R88 million; : R73 million) Loans and receivables: R6 681 million (: R5 603 million; : R7 855 million) 2. Other financial instruments consist of the following: Designated at fair value through income: R million (: R million; : R million) Derivative financial instruments: R3 807 million (: R million; : R2 111 million) Amortised cost: R983 million (: R1 037 million; : R1 092 million) 7

8 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED INCOME STATEMENT mths to Net insurance premiums Fee income (1) Investment income Net realised and fair value gains Net income Net insurance benefits and claims Change in liabilities (2 395) 98 (869) Change in long-term insurance contract liabilities (1 977) (1 181) (2 069) Change in short-term insurance contract liabilities (100) 158 (139) Change in investment contracts with DPF liabilities (488) Change in reinsurance assets (81) (163) 154 Change in reinsurance liabilities 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 of associates Finance costs (2) (468) (374) (792) Profit before tax Income tax expense (1 167) (971) (2 431) Earnings for the period Attributable to: Owners of the parent Non-controlling interests Basic earnings per ordinary share (cents) Diluted earnings per ordinary share (cents) Fee income consists of the following: Investment contracts: R1 078 million (: R1 229 million; : R2 225 million) Trust and fiduciary services: R988 million (: R865 million; : R1 842 million) Health administration: R1 107 million (: R1 075 million; : R2 053 million) Other fee income: R617 million (: R599 million; : R1 235 million) 2. Finance costs consist of the following: Preference shares issued by MMI: R54 million (: R55 million; : R108 million) Subordinated debt: R169 million (: R133 million; : R271 million) Cost of carry positions: R175 million (: R109 million; : R261 million) Other: R70 million (: R77 million; : R152 million) 8

9 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME mths to Earnings for the period Other comprehensive income, net of tax Items that may subsequently be reclassified to income Exchange differences on translating foreign operations Available-for-sale financial assets 3-5 Items that will not be reclassified to income Land and building revaluation Change in non-distributable reserves Adjustments to employee benefit funds (13) 1 (20) Income tax relating to items that will not be reclassified (8) (17) (36) Total comprehensive income for the period Total comprehensive income attributable to: Owners of the parent Non-controlling interests

10 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION Basic earnings Diluted earnings RECONCILIATION OF HEADLINE EARNINGS 12 mths to 12 mths to attributable to owners of the parent Earnings Finance costs convertible preference shares Dilutory effect of subsidiaries (1) (14) (16) (31) Diluted earnings Intangible asset and other impairments Tax on intangible asset and other impairments - - (4) - - (4) Gain on sale of subsidiary (115) - - (115) - - Headline earnings (2) Net realised and fair value gains on excess (265) 73 6 (265) 73 6 Basis and other changes and investment variances Amortisation of intangible assets relating to business combinations Non-recurring items (3) Investment income on treasury shares contract holders Core headline earnings (4) Metropolitan Health is consolidated at 100% and the MMI Holdings Namibian group, Metropolitan Kenya and Cannon are consolidated at 96% in the results. For purposes of diluted earnings, diluted non-controlling interests and investment returns are reinstated. 2. Headline earnings consist of operating profit, investment income, net realised and fair value gains, investment variances and basis and other changes. 3. Non-recurring items include one-off costs relating mainly to the restructuring of the group. 4. Core headline earnings disclosed comprise operating profit and investment income on shareholder assets. It excludes net realised and fair value gains on financial assets and liabilities, investment variances and basis and other changes that can be volatile, 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. 10

11 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION EARNINGS PER SHARE (cents) attributable to owners of the parent Basic mths to 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 92 Total 155 MMI Holdings Ltd convertible redeemable preference shares (issued to Kagiso Tiso Holdings (Pty) Ltd (KTH)) The A3 MMI Holdings Ltd preference shares are redeemable in June 2017 at a redemption value of R9.18 per share unless converted into MMI Holdings Ltd ordinary shares on a one-for-one basis prior to that date. On 1 October 2015, 1 million preference shares were converted into ordinary shares. On each of 13 November 2014 and 31 March 2015, 1.1 million preference shares were converted into ordinary shares. The ordinary shares were originally issued at a price of R10.18 per share. Dividends are payable on the remaining preference shares at 132 cents per annum (payable March and September). Significant related party transactions R362 million of the ordinary dividends declared by MMI Holdings Ltd in September 2015 (R333 million of the ordinary dividends declared in September 2014) and R248 million of the ordinary dividends declared in March 2015 were attributable to RMI Holdings Ltd. 11

12 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Changes in share capital mths to Balance at beginning and end Changes in share premium Balance at beginning Conversion of preference shares Increase in treasury shares held on behalf of contract holders (87) (2) (7) Balance at end Changes in other reserves Balance at beginning Total comprehensive income BEE cost Change in non-distributable reserves (2) - - Transfer to retained earnings (3) (9) (9) Balance at end (1) Changes in retained earnings Balance at beginning Total comprehensive income Dividend paid (1 453) (2 110) (3 094) Transactions with non-controlling interests (76) - (15) Transfer from other reserves Puttable non-controlling interests (2) - (21) (21) Balance at end Equity attributable to owners of the parent Changes in non-controlling interests Balance at beginning Total comprehensive income Dividend paid (33) (16) (23) Transactions with owners (2) (92) (92) (170) Business combinations Balance at end Total equity Other reserves consist of the following: Land and building revaluation reserve: R679 million (: R606 million; : R631 million) Foreign currency translation reserve: R493 million (: R180 million; : R181 million) Revaluation of available-for-sale investments: R10 million (: R3 million; : R8 million) Non-distributable reserve: R21 million (: R18 million; : R19 million) Employee benefit revaluation reserve: R70 million (: R99 million; : R78 million) Fair value adjustment for preference shares issued by MMI Holdings Ltd: R940 million (: R940 million; : R940 million) Equity-settled share-based payment arrangements: R11 million (: R6 million; : R9 million) 2. Non-controlling interests of 25% of Metropolitan Life Kenya and Cannon have the option to sell their shares from 3 October 2016 at a price linked to embedded value. In terms of IFRS, the group has recognised a financial liability of R104 million (: R114 million; : R111 million), being the present value of the estimated purchase price, for exercising this option. The group has consolidated 96% of the subsidiaries results and in June 2015 de-recognised the non-controlling interest (R90 million) due to the financial liability recognised above, which is in line with its selected accounting policy. 12

13 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS mths to Net cash inflow/(outflow) from operating activities (53) Net cash outflow from investing activities (342) (961) (1 271) Net cash outflow from financing activities (1 486) (1 852) (2 935) Net cash flow (2 866) (2 701) 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 (2) Risk discount rate (RDR) Investment return (before tax) balanced portfolio (2) Expense inflation base rate (3) 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. The risk-free return was determined with reference to the market interest rate on South African government bonds at the valuation date. The investment return on balanced portfolio business was calculated by applying the above returns to an expected long-term asset distribution. 3. 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 % % % Cannon Assurance Eris Property Group Metropolitan Botswana Metropolitan Health Botswana Metropolitan Health Ghana Metropolitan Health Group Metropolitan Health Mauritius Metropolitan Health Namibia Administrators Metropolitan Kenya Metropolitan Life Mauritius Metropolitan Nigeria Metropolitan Swaziland Metropolitan Tanzania Metropolitan Health Zambia MMI Holdings Namibia Momentum Mozambique Momentum Swaziland

14 MMI HOLDINGS GROUP IFRS FINANCIAL INFORMATION BUSINESS COMBINATIONS DECEMBER 2015 There were no significant business combinations for the 6 months ended December BUSINESS COMBINATIONS JUNE 2015 Cannon On 2 October 2014, the group acquired an accounting ownership of 71% (legal ownership of 66%) of Cannon, a composite insurer, for R308 million. The minority shareholders of Cannon also acquired a minority stake in Metropolitan Life Kenya. This acquisition allowed for geographical as well as product diversification within the group s international operations. The purchase price allocation has been finalised and the transaction resulted in R103 million goodwill being recognised attributable to certain anticipated operating synergies. CareCross On 19 November 2014, the group acquired 100% in CareCross, a health administrator, for R300 million in cash. It includes a majority share in Occupational Care South Africa (OCSA). This acquisition allowed for revenue diversification in the Metropolitan Health segment. The transaction did not result in any goodwill being recognised. Other During the year the group also made a few smaller acquisitions. The purchase price consideration, the net assets acquired and any relevant goodwill relating to the above two transactions are as follows: June 2015 Total Cannon CareCross Purchase consideration in total Fair value of net assets Intangible assets Tangible assets Financial instrument assets Reinsurance contract assets Insurance and other receivables Other assets Cash and cash equivalents Insurance contract liabilities (195) (177) (18) Financial instrument liabilities (38) (38) - Other liabilities (268) (98) (170) Net identifiable assets acquired Non-controlling interests (fair value method) (95) (88) (7) Goodwill recognised Derecognition of Metropolitan Life Kenya shares (11) (11) - Purchase consideration in cash The goodwill relating to the above transactions is not deductible for tax purposes. The above transactions contributed net income of R437 million and earnings of R43 million to the group results for the year. RECONCILIATION OF GOODWILL Balance at beginning Business combinations Exchange differences Balance at end

15 MMI HOLDINGS GROUP SEGMENTAL INFORMATION Momentum Metropolitan Corporate and Shareholder Segmental Reconciling Retail Retail Public Sector International Capital total items (1) IFRS total Revenue Net insurance premiums (17 907) Recurring premiums (4 237) Single premiums (13 670) Fee income (523) Fee income Intergroup fee income (551) - Expenses Net payments to contract holders External payments (19 273) Other expenses Sales remuneration (3) Administration expenses (2) Amortisation due to business combinations and impairments Cell captive business Direct property expenses Asset management and other fee expenses Holding company expenses Intergroup expenses (58) 551 (551) - Diluted core headline earnings Operating profit (32) Tax on operating profit (305) (128) (142) (15) (31) (621) - (621) Investment income Tax on investment income (6) - (16) (3) (59) (84) - (84) Covered Non-covered (43) (78) Actuarial liabilities The 'Reconciling items' column includes: investment contract business; intergroup fees and expenses; grossing up of fee income and expenses relating to the Shareholder Capital segment that are set off for management reporting purposes; non-recurring items; 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; expenses relating to consolidated collective investment schemes and other minor adjustments to expenses and fee income. 2. Momentum Retail administration expenses includes R58 million relating to Momentum SP Reid. 15

16 MMI HOLDINGS GROUP SEGMENTAL INFORMATION Momentum Metropolitan Corporate and Shareholder Segmental Reconciling Retail Retail Public Sector International Capital total items (1) IFRS total Revenue Net insurance premiums (18 908) Recurring premiums (4 067) Single premiums (14 841) Fee income (705) Fee income (15) Intergroup fee income (690) - Expenses Net payments to contract holders External payments (16 607) Other expenses Sales remuneration (4) Administration expenses Amortisation due to business combinations and impairments Cell captive business Direct property expenses Asset management and other fee expenses Holding company expenses Intergroup expenses (48) 690 (690) - Diluted core headline earnings Operating profit (39) Tax on operating profit (290) (121) (147) (20) 68 (510) - (510) Investment income Tax on investment income (6) - (9) - (94) (109) - (109) Covered Non-covered (66) (11) Actuarial liabilities The 'Reconciling items' column includes: investment contract business; intergroup fees and expenses; grossing up of fee income and expenses relating to the Shareholder Capital segment that are set off for management reporting purposes; non-recurring items; 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; expenses relating to consolidated collective investment schemes and other minor adjustments to expenses and fee income. 16

17 MMI HOLDINGS GROUP SEGMENTAL INFORMATION 12 mths to Momentum Retail Metropolitan Retail Corporate and Public Sector International Shareholder Capital Segmental total Reconciling items (1) IFRS total Revenue Net insurance premiums (37 674) Recurring premiums (8 282) Single premiums (29 392) Fee income (1 383) Fee income (6) Intergroup fee income (1 377) - Expenses Net payments to contract holders External payments (33 898) Other expenses Sales remuneration (7) Administration expenses (2) Amortisation due to business combinations and impairments Cell captive business Direct property expenses Asset management and other fee expenses Holding company expenses Intergroup expenses (159) (1 377) - Diluted core headline earnings Operating profit (186) Tax on operating profit (697) (272) (344) (33) 53 (1 293) - (1 293) Investment income Tax on investment income (12) - (13) - (179) (204) - (204) Covered Non-covered (114) (87) Actuarial liabilities The 'Reconciling items' column includes: investment contract business; intergroup fees and expenses; grossing up of fee income and expenses relating to the Shareholder Capital segment that are set off for management reporting purposes; non-recurring items; 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; expenses relating to consolidated collective investment schemes and other minor adjustments to expenses and fee income. 2. Administration expenses for the 2015 year include the following relating to new acquisitions: International R54 million relating to Cannon; Corporate and Public Sector R258 million relating to CareCross. 17

18 MMI HOLDINGS GROUP SEGMENTAL INFORMATION CHANGE IN DILUTED CORE HEADLINE EARNINGS Change % mths to Momentum Retail (5) Metropolitan Retail Corporate and Public Sector International (50) Operating segments (2) Shareholder Capital (36) Total diluted core headline earnings (9) RECONCILIATION OF INVESTMENTS mths to Revenue Fee income Intergroup fees Investment income Fair value (losses)/gains (4) 9 32 Expenses and finance costs (602) (577) (1 259) Other expenses (595) (573) (1 253) Finance costs (7) (4) (6) Profit before tax Tax (20) (30) (61) Earnings attributable to ordinary shareholders Core adjustments 32 (7) 31 Goodwill and other impairments Net realised and fair value losses/(gains) on excess 4 (7) (22) Amortisation of intangible assets relating to business combinations Non-recurring items Diluted core headline earnings Operating profit before tax Tax on operating profit (28) (25) (56) Investment income Tax on investment income (3) (3) (6) Diluted core headline earnings Allocated per segment: Momentum Retail Corporate and Public Sector Shareholder Capital (10) - (8)

19 MMI HOLDINGS GROUP SEGMENTAL INFORMATION RECONCILIATION OF HEALTH mths to Revenue Net insurance premiums Fee income Intergroup fees Investment income Expenses (1 180) (1 058) (2 260) Net payments to contract holders (238) (175) (485) Other expenses (942) (883) (1 775) Profit before tax Tax (42) (43) (92) Non-controlling interests - (1) (3) Earnings attributable to ordinary shareholders Core adjustments 14 (5) (11) Dilutory effect of subsidiaries (8) (11) (23) Amortisation of intangible assets relating to business combinations Non-recurring items Diluted core headline earnings Operating profit before tax Tax on operating profit (42) (36) (80) Investment income Tax on investment income (6) (7) (11) Diluted core headline earnings Allocated per segment: Momentum Retail Corporate and Public Sector

20 MMI HOLDINGS GROUP SEGMENTAL INFORMATION RECONCILIATION OF GUARDRISK (PROMOTER CELL (1)) mths to Revenue by type Management fees Investment fees Underwriting (loss)/profit (26) Other income Investment income Expenses and finance costs (158) (142) (273) Administration expenses (152) (137) (263) Finance costs (6) (5) (10) Operating profit before tax Tax attributable to promoter operating profit (18) (29) (62) Diluted core headline earnings Covered Non-covered Corporate and Public Sector segment An insurer that enters into contractual arrangements with cell shareholders whereby the risks and rewards associated with certain insurance activities accruing to the cell shareholder, in relation to the insurer, is specified. The promoter cell will exclude all assets and liabilities and related income and expenses of the cell arrangements. RECONCILIATION OF SHORT-TERM INSURANCE mths to Revenue Net insurance premiums Fee income Investment income Expenses (401) (292) (719) Net payments to contract holders (245) (160) (441) Other expenses (156) (132) (278) Loss before tax (95) (51) (182) Tax Earnings attributable to ordinary shareholders (81) (36) (131) Operating loss before tax (107) (59) (198) Tax on operating loss Investment income Tax on investment income (3) (2) (5) Diluted core headline earnings Momentum Retail segment (81) (36) (131) 20

21 MMI HOLDINGS GROUP SEGMENTAL INFORMATION ANALYSIS OF SHAREHOLDER CAPITAL mths to Holding company costs (23) (60) (90) Balance sheet management International (11) (11) (49) Momentum short-term insurance administration (20) (23) (35) Eris Property Group Other (29) 42 (34) Finance costs (251) (207) (433) Investment income Tax on investment income (60) (99) (179) Total

22 MMI HOLDINGS GROUP SEGMENTAL INFORMATION NET PAYMENTS TO CONTRACT HOLDERS mths to Momentum Retail Death and disability claims Maturity claims Annuities Withdrawal benefits Surrenders Short-term insurance Health claims Re-insurance recoveries (675) (572) (1 004) Metropolitan Retail Death and disability claims Maturity claims Annuities Withdrawal benefits Surrenders Re-insurance recoveries (34) (30) (58) Corporate and Public Sector Death and disability claims Maturity claims Annuities Withdrawal benefits Terminations and disinvestments Short-term insurance Health claims Re-insurance recoveries (2 408) (1 788) (3 496) International Death and disability claims Maturity claims Annuities Withdrawal benefits Surrenders Terminations Short-term insurance Health claims Re-insurance recoveries (33) (70) (130) Total payments to contract holders Reconciling items (1) (19 273) (16 607) (33 898) Net insurance benefits and claims per income statement Relates mainly to payments to investment contract holders. 22

23 MMI HOLDINGS GROUP STATUTORY EXCESS STATUTORY EXCESS Group excess per reporting basis Net assets other businesses (3 413) (3 464) (3 256) Fair value adjustments on Metropolitan business acquisition and other consolidation adjustments (3 618) (4 070) (3 826) Excess long-term insurance business, net of non-controlling interests (1) Disregarded assets (2) (996) (991) (1 010) Difference between statutory and published valuation methods (846) (615) (839) Write-down of subsidiaries and associates for statutory purposes (1 352) (1 132) (1 210) Unsecured subordinated debt Consolidation adjustments (39) 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; in respect of Guardrisk only MMI s promoter exposure to the South African long-term insurance business, Guardrisk Life Ltd. It excludes the short-term insurance businesses of Guardrisk, Momentum Short-term Insurance and Cannon (Kenya) due to it being classified as non-covered, as well as the other non-life insurance entities, including African health operations. Guardrisk Life Ltd was transferred to covered business 1 July 2014, with a statutory excess of R44 million and capital adequacy requirement of R20 million. The figures are after non-controlling interests but excludes certain items which are eliminated on consolidation. 2. Disregarded assets are those as defined in the South African Long-term Insurance Act, 52 of 1998, 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 R504 million (: R532 million; : R518 million). 3. Aggregation of separate company s capital adequacy requirements (CARs), with no assumption of diversification benefits. 23

24 MMI HOLDINGS GROUP EMBEDDED VALUE INFORMATION EMBEDDED VALUE RESULTS AS AT Covered business Reporting excess long-term insurance business (1) Reclassification to non-covered business (1 479) (1 243) (1 204) Disregarded assets (2) (544) (664) (575) Difference between statutory and published valuation methods (841) (615) (839) Dilutory effect of subsidiaries (3) (39) (38) (38) Consolidation adjustments (4) (32) (62) (5) Value of MMI Group Ltd preference shares issued (500) (500) (500) 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 and transfers to covered business (4) (3 240) (2 792) (3 024) Adjustments for dilution (5) Diluted adjusted net worth non-covered business Write-up to directors value Non-covered business (1) Holding company expenses (6) (1 578) (1 430) (1 578) International holding company expenses (6) (520) (450) (490) 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) (7) Surplus capital covered business Diluted embedded value per share (cents) Diluted adjusted net worth per share (cents) Diluted number of shares in issue (million) (8) On 1 July 2014 Guardrisk Life Ltd was transferred to covered business (adjusted net worth of R44 million and value of in-force of R324 million). The December 2014 comparatives have been restated to reflect the transfer of Guardrisk Life Ltd to covered business. 2. Disregarded assets include Sage intangible assets of R504 million (: R532 million; : R518 million), goodwill and various other items. 3. For accounting purposes, Metropolitan Health has been consolidated at 100%, while MMI Holdings Namibia, Metropolitan Kenya and Cannon have been consolidated at 96% in the statement of financial position, for the current year. For embedded value purposes, disclosed on a diluted basis, the non-controlling interests and related funding have been reinstated. 4. Consolidation adjustments include mainly goodwill and intangibles in subsidiaries that are eliminated. 5. Adjustments for dilution are made up as follows: Dilutory effect of subsidiaries (note 3): R116 million (: R115 million; : R103 million) Treasury shares held on behalf of contract holders: R384 million (: R420 million; : R424 million) Liability MMI Holdings Ltd convertible preference shares issued to KTH: R283 million (: R303 million; : R292 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 required capital for covered business amounts to R million (: R million; : R million) and is adjusted for qualifying debt of R3 526 million (: R3 294 million; : R3 298 million). 8. 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. 24

25 MMI HOLDINGS GROUP EMBEDDED VALUE INFORMATION ANALYSIS OF NET VALUE OF IN-FORCE BUSINESS Momentum Retail Gross value of in-force business Less cost of required capital (1 255) (1 583) (1 488) Metropolitan Retail Gross value of in-force business Less cost of required capital (715) (750) (706) Corporate and Public Sector (1) Gross value of in-force business Less cost of required capital (761) (695) (697) International Gross value of in-force business Less cost of required capital (218) (181) (202) Shareholder Capital Gross value of in-force business Less cost of required capital Net value of in-force business Notes 1. December 2014 has been restated to include Guardrisk Life Ltd within the Corporate and Public Sector. 25

26 MMI HOLDINGS GROUP EMBEDDED VALUE INFORMATION EMBEDDED VALUE DETAIL Adjusted net worth Net value of in-force Covered business South African life licences MMI Group Ltd Guardrisk Life Ltd (1) Metropolitan Odyssey Ltd International MMI Holdings Namibia Ltd Metropolitan Life of Botswana Ltd Metropolitan Lesotho Ltd Other international businesses (2) Total covered business Non-covered business Adjusted net worth Write-up to directors value Momentum Investments (3) Health businesses (4) Momentum Retail (Wealth) (4) Guardrisk business (1,4) Momentum Short-term Insurance (MSTI) International (5,6) (244) (338) (582) (593) (805) MMI Holdings (after consolidation adjustments) (6) (11) (1 578) (1 589) (483) (1 330) Total non-covered business Total embedded value Diluted adjusted net worth non-covered business (2 435) Adjustments to covered business adjusted net worth Reporting excess long-term insurance business On 1 July 2014 Guardrisk Life Ltd was transferred to covered business (adjusted net worth of R44 million and value of in-force of R324 million). The December 2014 comparatives have been restated to reflect the transfer of Guardrisk Life Ltd to covered business. 2. African life and health businesses are included in covered business for embedded value purposes. 3. Momentum Investments subsidiaries are valued using forward price-earnings multiples applied to the relevant sustainable earnings bases. 4. The Health businesses, Momentum Retail (Wealth off-balance sheet) and Guardrisk are valued using embedded value methodology. 5. Cannon is included within International s non-covered business at 31 December 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. 26