GROUP CHIEF EXECUTIVE OFFICER S OVERVIEW

Transcription

1 GROUP CHIEF EXECUTIVE OFFICER S OVERVIEW During the past year, MMI implemented the new operating model required to support our client-centric strategy. The focus of the 2016 World Economic Forum Annual Meeting at Davos was on the Fourth Industrial Revolution. This revolution is defined as the era of cyber-physical systems, where technology advances in the physical, digital and biological spheres are increasingly becoming more connected, fuelling exponential change on a scale we have never seen before, and disrupting entire industries in its wake. I already referred to this phenomenon in my 2015 CEO Overview and MMI s strategy has been aligned to these major global trends long before they became mainstream mega-trends. We continue to invest in the capabilities we need to succeed in the world envisioned by the fourth industrial revolution. Most importantly, our client-centric purpose to enhance the lifetime Financial Wellness of people, their communities and their businesses compels us to capitalise on the opportunities created through digital advances, big data and data analytics. These capabilities enable MMI to have an in-depth understanding of our clients, build relevant Financial Wellness solutions and ensure superior client relationships in a costeffective manner. In this way we create shared value for clients, shareholders and all our other stakeholders. During 2016 the hard work of MMI s people to advance our client-centric strategy by improving clients experience has started to pay dividends. I am very proud of the achievement of our two main client brands, Metropolitan and Momentum, who were placed first and second respectively in the annual South African Customer Satisfaction Index. OVERVIEW OF 2016 ENVIRONMENT AND INDUSTRY There is no doubt that 2016 has been a very challenging year. Political events in South Africa and globally impacted negatively on already weak local and global economies, and investment markets were mostly flat. In South Africa, all key economic indicators painted a picture of a consumer that experiences even more pressure on disposable income than Business and consumer confidence indices remain at very low levels. The negative environment inevitably had a commensurate impact on the South African insurance industry and MMI. STRATEGIC FOCUS AREAS MMI leverages three strategic focus areas to realise our vision to be the preferred lifetime Financial Wellness partner, with a reputation for innovation and trustworthiness. We define Financial Wellness to be a continuous process to assist people with planning and managing their money so that they can afford their expenses and reach their goals over their lifetime. All strategic activities throughout the entire MMI organisation are aligned to the focus areas of Client-centricity, Growth and Excellence. During 2016, we have made good progress to achieve the strategic objectives in respect of all three our strategic focus areas. MMI HOLDINGS INTEGRATED REPORT

2 GROUP CHIEF EXECUTIVE OFFICER S OVERVIEW CONTINUED Client centricity In respect of client centricity we have completed the development of Financial Wellness value propositions for all our South African client segments. We continue to measure the financial wellness of South African citizens through the Momentum Financial Wellness Index (in partnership with UNISA) and our Corporate and Public Sector segment has developed a range of indices to measure the Financial Wellness of their corporate clients. Multiply is our Wellness and Rewards program that we use to unlock Financial Wellness by educating, empowering, engaging and encouraging clients to better plan and manage their money, and increase their Financial Wellness in this way. In addition to the inherent benefit of enhanced Financial Wellness, MMI s clients saved more than R400 million through Multiply partner rewards and internal MMI product discounts in the 2016 financial year. By influencing clients behaviours and enhancing their Financial Wellness, shareholders benefit through a reduction in claims, improved persistency and higher cross-sell ratios. For example, Momentum Retail s overall cross-sell ratio is currently about 1.8, while the average cross-sell ratio for Multiply clients is 3.2 and the top Multiply category (Private Club) has a cross-sell ratio of 5.3. Growth Africa, India and the United Kingdom remain the focus of our objective to grow through geographical diversification. We are in the process of focusing our growth efforts in Africa on a smaller number of countries and product lines that have the highest growth potential, and have also strengthened the executive management team of the International segment. In line with global trends in the digital space, we have partnered with MTN in Africa to form a joint venture (JV) that will offer innovative insurance solutions through MTN s significant telco distribution network on the continent. The JV is called ayo, which means Joy. In India we have received all the requisite regulatory approvals for our Health and Wellness JV with the Aditya Birla Group. We plan to launch this offering towards the end of the 2016 calendar year and are excited about the longterm prospects of this business. A next important growth objective is to increase the value of our existing clients, primarily by increasing the number of MMI solutions per client, and enhancing clients Financial Wellness in the process. In this regard we have made good progress to strengthen our Short-term Insurance and Health Centres of Excellence. Our Multiply Wellness and Rewards program plays an important role to achieve this objective. MMI s client-centric strategy requires us to follow an omnichannel distribution and client interaction approach. We achieved a number of milestones to strengthen and align all our distribution channels, from face-to-face to digital, and our strong sales growth for 2016 is evidence of our progress towards the strategic objective to increase the number of MMI clients. Excellence In my previous CEO overview I referred to the optimisation opportunities created by MMI s new client-centric operating model. During 2016 we made excellent progress towards achieving our objective to improve efficiency. We set ourselves a target to save R750 million in our annual cost base by 2019 and achieved cost savings of R104 million during 2016, slightly ahead of the target for the year. STRATEGIC ENABLERS Earlier in this CEO overview I referred to our investment in the critical capabilities that will enable MMI to be successful in the new world of the fourth industrial revolution. During 2016 significant headway has been made in respect of strengthening our four strategic enablers, to build flexible and modular systems, increase data analytics skills, vest a client-centric culture and increase innovation. In respect of innovation MMI launched its Exponential Ventures business during the year. This business invests in innovative young businesses globally, where it is believed they will enhance MMI s competitive position. The specific focus is around connecting with technologically driven start-ups that have the potential to significantly enhance MMI s existing business in win-win partnerships, or hold the potential to transform the life insurance industry by profitably reaching new markets, meeting new needs or leveraging new technologies and business models. The external innovation strategy has been implemented in a two-pronged fashion, leveraging key strategic partnerships in the London FinTech market and in the domestic South African venture capital scene. Strategic partnerships have been entered into with the highly respected Anthemis Group and 4Di Capital venture capital firms in London and Cape Town, respectively. 36 MMI HOLDINGS INTEGRATED REPORT 2016

3 FINANCIAL PERFORMANCE The results of MMI for the financial year ended 30 June 2016 were characterised by weak earnings, but solid performance in the rest of the key financial metrics. The following key themes were observed: Strong overall new business volumes, supported by solid retail new business sales and excellent sales growth by Guardrisk. Significantly lower than expected underwriting profits, especially in the Corporate and Public Sector, and International segments. Muted equity market growth impacting negatively on assetbased fees and discretionary margin releases. Continued investment in a number of strategic initiatives that do not yet contribute positively to earnings. Very good expense management across the group. A good recovery in the return on embedded value (ROEV), most notably through the impact of cost efficiencies and an improved outlook for non-covered businesses. For further details on the financial performance, refer to the finance director's report on page 39. TRANSFORMATION We remain committed to creating sustainable transformation in the South African economy and have maintained our Level 2 Contributor status. Transformation remains a critical building block to achieve our objective of enhancing Financial Wellness for all. MMI achieved a full score for Enterprise Development (ED) in the 31 December 2015 BEE scorecard. This was achieved via the Aluwani Capital Partners transaction, whereby MMI provided vendor financing for the management buy-out (MBO) by a few key individuals from the old Momentum Asset Management. MMI facilitated this MBO in the spirit of transformation and to complement our new Outcomes-Based Investment philosophy. We are proud to be an industry first in this regard. LOOKING AHEAD The current challenging environment for both consumers and businesses is likely to prevail for some time, and the advance of cyber-physical systems will accelerate. In these circumstances, more than ever, I believe MMI s client-centric strategy and investment in capabilities to succeed in the new world are completely appropriate. Together with our industry peers we will be subject to a tough and uncertain environment. I am convinced that our strategy and MMI s people will ensure that we navigate through this cycle successfully. THANKS I would like to thank everyone involved with MMI for their contributions during the year. The past year required on-going commitment and resilience, and our board, management team and employees rose to the occasion. I would also like to thank our shareholders for their support and especially all MMI s clients for partnering with us to enhance their Financial Wellness. We look forward to journey together with all MMI s stakeholders towards a new and exciting world. NICOLAAS KRUGER Group chief executive officer MMI HOLDINGS INTEGRATED REPORT

4 EXECUTIVE COMMITTEE Nicolaas Kruger (48) Group chief executive officer BCom, FFA, FASSA, AMP (Oxford) 25 years Mary Vilakazi (38) Group finance director BCom (Hons), HDip Auditing, CA(SA) Financial Services industry experience: 16 years Etienne de Waal (48) Chief executive: Momentum Retail BCom (Hons), FFA, FASSA 25 years Khanyi Nzukuma (45) Chief executive: Metropolitan Retail BA, MBA, PhD 18 years Herman Schoeman (53) Chief executive: Corporate and Public Sector and Guardrisk BCom, MBA 26 years Innocent Dutiro (52) Chief executive: Africa and India BSc Honours, MSc, MBA 17 years Thinus Alsworth-Elvey (42) Chief executive: Investments and Savings. Segment Head: UK Market BCom, LLB, LLM, H Dip Tax, CFP 20 years Zureida Ebrahim (39) Chief executive: Client engagement solutions BCom, MAP 17 years Jan Lubbe (45) Chief risk officer CA(SA), MBA, MCom 22 years Danie Botes (52) Chief operating officer BCompt (Hons) 31 years Vuyo Lee (38) Group executive: Brand, Corporate Affairs and Transformation BCom (Hons), MAP, MBA 12 years Group executive ages as at 30 June MMI HOLDINGS INTEGRATED REPORT 2016

5 GROUP FINANCE DIRECTOR S REPORT MMI s established businesses were resilient in a market where consumer confidence and spending across the board was negatively impacted by low economic growth and difficult economic conditions. INTRODUCTION This review provides a high-level overview of the group results. Additional financial disclosure and segmental details can be found in the group financial statements. The results of MMI for the financial year ended 30 June 2016 are characterised by weak earnings and strong performance in the rest of the main financial metrics, with the following being the key themes of these results: Significantly lower than expected underwriting profits, especially in the Corporate and International businesses. Muted equity market growth in the prior year impacting negatively on asset based fees and discretionary margin releases. The group s investment in a number of strategic initiatives that do not yet contribute positively to group earnings. Actions taken to address the above challenges starting to impact positively on the return on embedded value (ROEV), most notably through the impact of cost efficiencies and an improved outlook for non-covered businesses. Good new business volumes overall, with the retail and International businesses generating solid new business growth, and excellent growth in the Corporate business due to Guardrisk securing new sources of business. GROUP PERFORMANCE SCORECARD MMI assesses its operational performance against a set of key performance indicators that are approved and annually reviewed by the group s Remuneration Committee. The set of indicators includes both short-term and long-term objectives. Short-term deliverables are measured over a period of 12 months and are reviewed on an annual basis. For the financial year ended 30 June 2016, the following set of shortterm deliverables applied to the group as a whole: MMI HOLDINGS INTEGRATED REPORT

6 GROUP FINANCE DIRECTOR S REPORT CONTINUED PERFORMANCE SCORECARD 2016 Weight F2015 target Actual Achieved Return on embedded value 20% 11.6% 12.8% Core headline earnings 20% 10% growth (16%) Value of new business 15% R905m R850m Optimisation and expense savings programme 10% R100m R104m Strategic initiatives 35% on target The above relates to group-wide targets and deliverables. In addition specific targets are set for individual business units. This report only discusses the financial metrics of the group performance scorecard. The progress on key strategic initiatives is discussed in the group CEO s overview. The group delivered an excellent ROEV of 12.8% well ahead of the group s targeted growth of Risk Free + 3% (10-year government bond yield at the start of the reporting period plus 3% ie 11.6%). Investment variances are included in the ROEV for the Long-Term Incentive Plan to achieve alignment between shareholders and management. The group secured strong overall new business growth of 35% on a present value of premiums (PVP) basis and 22% on an annual premium equivalent (APE) basis. The value of new business (VNB) declined due to higher interest rates and the allocation of expenses that were previously treated as part of the shareholder segment. On a consistent basis VNB increased by 13% against a target of 15%. The core headline earnings decline of 16% was disappointing with the main reasons for this being the significantly lower than expected underwriting profits, especially in the Corporate and International businesses as well as the impact of flat equity markets on our asset based fees. Expense control was very good with the group achieving R104 million against a target of R100 million for the 2016 financial year as part of the cost efficiency programme to take out R750 million of operating expenses by the 2019 financial year. The group also delivered on a number other optimisation initiatives which are not part of the R750 million cost programme. The group s performance in terms of each of the key financial metrics in the scorecard is discussed below: RETURN ON EMBEDDED VALUE ROEV EV earnings EV earnings non-covered business Changes in share capital and dividends Closing EV The diluted embedded value of the MMI Group amounts to R million (R26.80 per share) as at 30 June Adding back the payment of dividends and other capital movements (R2 516 million) the overall return on embedded value (ROEV) amounts to R5 175 million, an annualised return of 12.8% on the opening embedded value. This is 1.2% above the targeted return on embedded value of Risk Free plus 3%, being 11.6% for the year to 30 June Significant items impacting positively on the ROEV include strong operational contributions from Momentum Wealth and Guardrisk as well as taking a less conservative approach to valuing our investment businesses. These items were offset to some extent by poor underwriting results in the Corporate and Public Sector and International Segments as well as the loss of the Polmed health scheme. 40 MMI HOLDINGS INTEGRATED REPORT 2016

7 VALUE OF NEW BUSINESS VNB The graph below shows an attribution between the VNB of the current and previous financial year: 954 (44) June 2015 (155) Expense basis Revised June % and mix Risk and June 2016 The overall VNB for the 12 months to June 2016 amounts to R850 million at a PVP margin of 1.2%, compared with a margin of 1.9% for the comparative period. The decline in VNB from the prior year comparative is largely attributed to the negative impact of the increase in interest rates of 60 basis points (R44 million) and the inclusion of additional Holding Company expense allocations to the operating segments (R155 million) in the current year. On a consistent basis compared with the prior year, VNB increased by 13% from R755 million to R850 million, and the PVP margin would have decreased from approximately 1.5% to 1.2%, mainly due to a change in mix. Value of new business per segment Restated 30 June 2015 Rm On a consistent basis 30 June 2015 Rm 30 June 2016 Rm 1 year change PVP margin Momentum Retail % 1.1% Metropolitan Retail % 3.9% Corporate and Public Sector (17%) 0.9% International % 2.8% Total % New business margin (PVP) 1.9% 1.5% 1.2% The group had pleasing growth in VNB to R850 million in total. The Metropolitan Retail VNB improved significantly on a consistent basis, largely due to the impact of benefit and pricing changes relating to the new sales remuneration model. The Momentum Retail VNB also improved on a consistent basis due to higher volumes of more profitable business sold during the current financial year. Highly competitive market conditions in the current financial year resulted in significant pressure on sales volumes for traditional large corporate business in Corporate and Public Sector. This had an adverse impact on VNB for the segment, but was partly offset by a significant increase in sales volumes for Guardrisk covered business. The International VNB was positively impacted by increased sales in Namibia and Botswana. MMI HOLDINGS INTEGRATED REPORT

8 GROUP FINANCE DIRECTOR S REPORT CONTINUED CONTRIBUTION TO DILUTED CORE HEADLINE EARNINGS The graph below highlights the significant factors impacting on the decline on core headline earnings. (16%) (379) (10%) (154) (4%) (147) (4%) (75) (2%) 4% CHE F2015 Life Non-life Markets New business strain Expense savings and other CHE F2016 The core headline earnings for the group for the current year was impacted by weaker underwriting results in the life business in South Africa, poor results from the International Health and Short-term businesses, lacklustre investment market growth and new business strain due to good new business growth in certain businesses. Excellent expense management contributed positively to core earnings over the year. Higher interest rates and subdued equity markets had an adverse impact on discretionary margin balances and consequently lower releases from these reserves, in line with the approved release profile. The table below sets out the segmental split of the core earnings. MMI Group core headline earnings 12 months to 30 June 2016 Rm 12 months to 30 June 2015 Rm Change Momentum Retail (9%) Metropolitan Retail % Corporate and Public Sector (28%) International (82%) Operating Divisions (14%) Shareholder Capital (37%) Total MMI (16%) Momentum Retail s core headline earnings declined by 9% compared with the prior year largely due to significantly lower mortality experience compared to the prior year which showed excellent experience. It should be noted that mortality experience, largely driven by Myriad, has however recovered from the low levels reported in the first half of the financial year. Metropolitan Retail s core headline earnings increased by 10%. This is partly attributed to good experience on risk business in the current financial year as well as excellent expense management. The change in the mix of business from savings to more profitable risk also had a positive impact on new business strain relative to the prior year comparative. The Corporate and Public Sector core headline earnings, which declined by 28% compared to the prior year, was adversely impacted by the significant decline in group risk experience profits in the current financial year. Disability underwriting profits were 42 MMI HOLDINGS INTEGRATED REPORT 2016

9 particularly disappointing but not unexpected given the poor economic climate and a very competitive market. An increase in disability claims due to stress, strokes and heart attacks, especially among high earners in the Financial Services and IT sectors has been observed in the current financial year. Competition in the market remains fierce especially for large group risk schemes. Consequently an increase in scheme terminations has been observed in the current year. The segment is monitoring this closely, increasing rates where appropriate and premiums are expected to harden over the next 12 months, all which will support more normalised earnings going forward. International s decrease in core headline earnings is largely due to the worse than expected short-term and health insurance experience in a number of countries. The group has made a decision to focus on a few regional growth areas which will result in the exit of certain business lines and a disposal of some small subscale operations. The Shareholder Capital core headline earnings declined by 37%, mainly as a result of the impact of continued investment in start-up strategic initiatives and an increase in the effective tax rate. The group has taken a decision to narrow its focus on a few growth initiatives going forward, with the key initiatives being Momentum Short-term Insurance, the India joint venture with Aditya Birla, the ayo joint venture with MTN and the MMI Exponential disruptive innovation initiative. CAPITAL MANAGEMENT The table below sets out the group s capital position at 30 June 2016: Rbn Net asset value as per embedded value statement 16.9 Qualifying debt 3.5 Less: net asset value of strategic subsidiaries (2.7) Less: required capital (10.0) Capital before deployment 7.7 Deployed (3.7) Final dividend (1.5) Strategic initiatives (2.2) Capital buffer after deployment 4.0 Group Balance Sheet Management continued with the focus on capital sources, capital efficiency and the validation of the target capital range under SAM during F2016. The results of the investigations indicated that a targeted range of 1.3 to 1.6 times the Solvency Capital Ratio (SCR) for MMI Holdings would be appropriate and in line with the stated capital at risk appetite. At 30 June 2016, the solvency position of MMI Holdings remained very strong with a capital buffer of R4 billion after allowing for deployment for strategic initiatives. DIVIDEND Despite the reduction in earnings during the year, the strong capital position of the group, in addition to management s confidence in MMI s longer-term earnings generating capacity, supports MMI s ability to declare a dividend that is marginally higher than the prior year. The total dividend for the year amounts to 157 cents per share, an increase of 1% over the prior year dividend of 155 cents per share. The group remains committed to maintaining a good dividend pay-out ratio in light of the strong capital position and future growth prospects, evidenced by the willingness to drop the current year dividend cover to below the targeted dividend cover ratio of between 1.5 and 1.7 times. The table below shows the group's dividend declarations over the last few years. Dividend per share (cents) Change Interim ordinary dividend % Final ordinary dividend % Total ordinary dividend % Special dividend 50 CONCLUSION The group experienced very tough operating conditions over the past year that manifested in lower than expected earnings. Despite the challenging conditions the group was able to secure strong new business flows while keeping a strong control over expense growth. The group has done well in showing progress on a number of key growth initiatives that will strengthen our traditional core business, which is important for the future sustainability of the group. However, tough operating conditions are likely to persist and revenue is likely to remain under pressure for the foreseeable future. MARY VILAKAZI Group finance director MMI HOLDINGS INTEGRATED REPORT

10 RISK MANAGEMENT REPORT INTRODUCTION MMI s risk philosophy recognises that managing risk is an integral part of generating shareholder value and enhancing stakeholder interests. It also recognises that an appropriate balance should be struck between entrepreneurial endeavour and sound risk management practice. RISK MANAGEMENT STRATEGY MMI s key risk management strategies are to: Understand the nature of the risks MMI is exposed to, the range of outcomes under different scenarios, and the capital required for assuming these risks. Manage shareholder value by generating a long-term sustainable return on the capital required to back the risks assumed. Ensure the protection of client interests by maintaining adequate solvency levels. Ensure that capital and resources are strategically focused on activities that generate the greatest value on a risk-adjusted basis. Create a competitive long-term advantage in the management of the business with greater responsibility to all stakeholders. MANAGEMENT AND THE BOARD Risk management enables management to deal with uncertainty and its associated risks and opportunities effectively, enhancing the capacity to build value. The MMI board is ultimately responsible for the end-to-end process of risk management, and for assessing its effectiveness. Management is accountable to the board for designing, implementing and monitoring the process and for integrating it into the day-to-day activities of the group. The board discharges these responsibilities by means of frameworks and policies approved and adopted by the board and its designated committees that direct the implementation and maintenance of adequate processes for corporate governance, compliance, and risk management. The risk management framework applies to all segments, centres of excellence and group-wide functions. The chief risk officer (CRO) of MMI is the head of the risk function in the business and is supported by individual risk type heads, segmental risk management teams and their CROs. The head of the actuarial function provides assurance to the board on the accuracy of calculations and appropriateness, of the assumptions underlying the technical provisions and capital requirements, both from a regulatory and economic balance sheet perspective. RISK APPETITE MMI s risk appetite is formulated by the group executive committee and approved by the Board Risk, Capital and Compliance Committee, and expresses the level and type of risk which MMI is prepared to seek, accept or tolerate in pursuit of its strategic objectives. The risk appetite includes quantitative boundaries on risk exposure and the group s economic capital requirements, supported by a detailed risk strategy. The risk strategy, which is also approved by the Board Risk, Capital and Compliance Committee, provides a qualitative specification of MMI s appetite for exposure to the different types and sources of risk. The setting of risk appetite is fundamentally driven by the dual, and at times conflicting, objectives of creating shareholder value through risk taking, while providing financial security for customers through appropriate maintenance of the group s ongoing solvency. MMI s appetite for exposure to the different types and sources of risk is aligned with the strategic vision of MMI to be the preferred lifetime Financial Wellness partner of our clients, with a reputation for innovation and trustworthiness. 44 MMI HOLDINGS INTEGRATED REPORT 2016

11 RISK TAXONOMY BUSINESS AND STRATEGIC RISK Business and strategic risks for MMI are risks that can adversely affect the fulfilment of business and strategic objectives to the extent that the viability of a business is compromised. This includes reputational risks and the impact of the macroeconomic and business operating environment. LIFE INSURANCE RISK Life insurance risk for MMI is the risk that future claims and expenses will cause an adverse change in the value of long-term life insurance contracts. This can be through the realisation of a loss, or the change in insurance liabilities. The value of life insurance contracts is the expectation in the pricing and/or liability of the underlying contract where insurance liabilities are determined using an economic boundary. It therefore relates to the following risk exposures: mortality, morbidity/disability, retrenchment, longevity, life catastrophes, lapse and persistency, expenses and business volumes. NON LIFE INSURANCE RISK For short-term insurance, it is defined as the risk of unexpected underwriting losses in respect of existing business as well as new business expected to be written over the following twelve months. Underwriting losses could result from adverse claims, expenses, insufficient pricing, inadequate reserving, or through inefficient mitigation strategies like inadequate or non-adherence to underwriting guidelines. It covers premium, reserve, lapse and catastrophe risk exposures. CREDIT RISK Credit risk for MMI is the risk of losses arising from the potential that a counterparty will fail to meet its obligations in accordance with agreed terms. It arises from investment activities but also non-investment activities, for example reinsurance credit risk, amounts due from intermediaries, policy loans and script lending. MMI accepts credit risk on behalf of its policyholders and shareholders. MARKET RISK Market risk for MMI is defined as the risk of losses arising from adverse movements in the level and/or volatility of financial market prices and rates. This includes exposure to equities, interest rates, credit spreads, property, price inflation and currencies. LIQUIDITY RISK Liquidity risk for MMI is the risk that, though solvent, the organisation has inadequate cash resources to meet its financial obligations when due, or MMI can only secure these resources at excessive cost. MMI differentiates between funding liquidity risk (the risk of losses arising from difficulty in raising funding to meet obligations when they become due) and market liquidity risk (the risk of losses arising when engaging in financial instrument transactions due to inadequate market depth or market disruptions). OPERATIONAL RISK Operational risk for MMI is the risk of losses resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk but excludes strategic and reputational risk. COMPLIANCE RISK Compliance risk for MMI is the risk of legal or regulatory sanctions, material financial loss or loss to reputation that the entity may suffer as a result of its failure to comply with legislation, regulation, rules, related self-regulatory organisation standards or codes of conduct applicable to the activities of the entity. For further detail on MMI s risk management, refer to page 173 and the MMI website MMI HOLDINGS INTEGRATED REPORT