Review of investment performance


Discovery

Discovery’s performance over the six months to 31 December 2011 was excellent and reflected a continuation of the strategy laid out previously. The organisation’s strategy is predicated on a core purpose that aims to make a profound impact on the people it serves and a commitment to positive societal change.

Discovery’s businesses can be characterised into three distinct groupings:

It is within this context that the results should be considered. Operating profit before tax from established businesses grew by 11% to R1 544 million, that of developing businesses by 523% to R243 million while the investment in emerging businesses consumed R158 million of earnings (prior period R95 million).

This translated into a financial performance that exceeded expectation, with:

RMI Holdings included R281 million of Discovery’s earnings in its normalised earnings for the six month period.

For an in-depth review of Discovery’s performance, RMI Holdings’ shareholders are referred to www.discovery.co.za.

MMI

MMI’s operating environment for the period under review remained difficult. Although significant progress has been made to restructure the group and to start the integration of people, processes and systems, the financial benefits of the merger are not yet reflected to any material extent in the results. Certain restructuring costs are incurred as part of the integration process, whereas the savings will only accrue over time as the synergies are being realised over the next two to three years.

Group merger savings of approximately R90 million were achieved to 31 December 2011, but were largely neutralised by merger related costs. The largest single cost in this regard related to the Redeployment Centre that houses employees who may not be retrenched as a consequence of the Competition Tribunal condition in respect of the merger approval.

The key features of the MMI Holdings results for the six months ended 31 December 2011 compared to the results for the six months ended 31 December 2010 for segmental reporting purposes are as follows:

RMI Holdings included R323 million of MMI’s earnings in its normalised earnings for the six month period.

For an in-depth review of MMI’s performance, RMI Holdings’ shareholders are referred to www.mmiholdings.co.za.

OUTsurance

OUTsurance delivered an exceptional performance for the half year by growing headline and normalised earnings by 36% and 54% respectively. Normalised earnings attributable to ordinary shareholders amounted to R490 million for the six months.

The key drivers behind the growth were a continuing favourable claims environment in South Africa and a significant decrease in the start-up loss of Youi, the Australian personal lines initiative launched in August 2008.

A significant contributor to the earnings performance was the continued favourable claims environment in South Africa, characterised by benign weather conditions, a decrease in crime related claims and a strong Rand translating into lower replacement car part prices. These resulted in a claims ratio of 49% (prior period: 55%). The South African short-term insurance operation continued to expand market share. Premium growth came under pressure due to weak economic activity, low levels of premium inflation and an increasing competitive landscape.

OUTsurance Life’s fully underwritten product for the South African market, which was launched during August 2010, continues to gain traction.

Youi continued to entrench its brand and its personal lines product offering and showed impressive new growth during the six months under review. The business continues to track expectations and is expected to achieve breakeven during the 2013 financial year.

RMI Holdings included R441 million of OUTsurances’s earnings in its normalised earnings for the six month period.

For an in-depth review of OUTsurance’s performance, RMI Holdings’ shareholders are referred to www.outsurance.co.za.

RMBSI

RMBSI continues to focus on a diversified business strategy to bolster its retainer base income on the back of the more traditional insurance business. This is beginning to bear fruit and the business mix is trending in the right direction.

RMI Holdings included R4 million of RMBSI’s earnings in its normalised earnings for the six month period.