Overview of results

Notwithstanding this fragile economic backdrop, all of the significant businesses in which RMI Holdings is invested, produced good results for the half year, with strong positive to exceptional growth being recorded in (unaudited) normalised earnings by Discovery and OUTsurance:

  Six months ended 31 December    


        30 June  
  2011   2010   %   2011  
R million   Unaudited   Unaudited   change   Unaudited  
Discovery   1 125   941   20   2 028  
MMI   1 294   1 243   4   2 588  
OUTsurance   490   318   54   746*
RMBSI   5   15   (67)  92  

* The normalised earnings of OUTsurance for the year ended 30 June 2011 have been restated to take into account the effect of a change in a profit sharing    arrangement with FNB.

RMI Holdings’ attributable share of the outcome for the six months ended 31 December 2011 was as follows:

   Six months ended 31 December    
  2011   Unaudited  
  Unaudited   Cents per  
  R million   share  
Attributable earnings   934   63,0  
Headline earnings   917   61,9  
Normalised earnings   1 027   69,1  

RMI Holdings considers normalised earnings per share to most accurately represent operational performance as this removes the impact of non-recurring items and financial reporting anomalies. The commentary below focuses on normalised earnings as its main measurement. A reconciliation of the adjustments made to derive normalised earnings is presented in the accompanying schedules. The computation of normalised earnings has not been audited.

RMI Holdings already held its interest in the underlying investments at the stage that the dividends for the six months ended 31 December 2010 were paid by the underlying entities. The interim dividend declared by RMI Holdings for the six months ended 31 December 2011 may thus be compared to the prior period as follows:

   Interim        Year  
  31 December   March   % change   30 June  
Cents   2011   2011     2011  
RMI Holdings   30,0   22,8   32   56,5  

The interim dividend is covered 2.3 times by the normalised earnings of 69,1 cents per share.

Sources of income

Predominantly sourced from Southern Africa, RMI Holdings’ well-diversified income stream is drawn from the full spectrum of insurance business:

Intrinsic value

The Group’s intrinsic value reflected the recovery in financial sector equity values experienced over the period:

  as at  
  31 December   30 June    
R million   2011   2011   % change  
Market value of interest in:        
– Discovery   6 440   5 707   13  
– MMI   6 697   6 654   1  
Directors’ valuation of interests        
 in unlisted subsidiaries   8 736   7 754   13  
Total market and directors’ valuation   21 873   20 115   9  
Net borrowings   (353)  (536)  34  
Total intrinsic value   21 520   19 579   10  
Market capitalisation   19 908   18 348   9  
Discount (%)   (7,5)  (6,3)   
Intrinsic value per RMI Holdings share (cents)   1 448   1 318   10  
Market price per RMI Holdings share (cents)   1 340   1 235   9  

The gross preference share liability carried at the centre amounted to R1,45 billion at 31 December 2011 while the funding cost incurred thereon during the half year amounted to R55 million, giving rise to an extrapolated annualised funding cost of 7,5% p.a.

Interim dividend payment

RMI Holdings follows a stated intention of returning net dividends (after providing for funding and operational costs incurred at the centre) received by it in the ordinary course of business to shareholders.

The board is of the opinion that RMI Holdings is adequately capitalised at this stage and that the company will be able to meet its obligations in the foreseeable future after payment of the interim dividend.

Having due regard to the interim dividend receivable from our underlying investments and applying the dividend practice outlined above, the board of RMI Holdings has resolved to declare an interim dividend of 30,0 cents per share (2010: 22,8 cents). Such dividend is covered 2,3 times by the normalised earnings per share.

This interim dividend accrues to shareholders before the advent of Dividend Withholding Tax on 1 April 2012. The liability for Secondary Tax on Companies resides with RMI Holdings.

Outlook for the coming year

We expect that domestic economic conditions will remain subdued for the remainder of the current financial year.

Of our core investments:

The quality of RMI Holdings’ investments and their respective strategies should underpin the group’s ability to provide us, as shareholders, with sustainable superior returns.

The restructuring of the RMI Holdings group has been well received by both shareholders and market participants. We are extremely pleased that Royal Bafokeng Holdings saw fit to increase their shareholding in RMI Holdings to 15%. We trust that their vote of confidence will in due course be amply rewarded.

For and on behalf of the board

GT Ferreira P Cooper
Chairman Chief executive officer

7 March 2012