DIRECTLY HELD INSURANCE INTERESTS

 

Discovery Group

Discovery's performance for the year was pleasing, despite the uncertain macro-economic environment. Given this instability and the prospect of further economic decline, Discovery focused, in both its established and emerging businesses, on ensuring that the group remains strongly positioned for continued growth and profitability.

Such approach resulted in strong financial performance during the year under review, with new business growing by 32% to a record level of R7,6 billion while operating profit increased by 36% to R2,5 billion. Headline earnings increased by 25% to R1,5 billion.

RMBH included R389 million (2009: R315 million) of Discovery's earnings in its normalised earnings.

OUTsurance

Notwithstanding the prevailing economic conditions, the South African operations of OUTsurance produced good results and grew operating profit by 18% to R1,18 billion, driven by significantly improved profitability in the Home-owners portfolio and strong growth being achieved by Business OUTsurance.

After accounting for the start up losses of some R290 million at Youi (the Australian based initiative), group operating profit between years remained static. Together with the impact of non-operational items (including the funding costs incurred at Youi), this resulted in headline earnings declining by 11% to R580 million (2009: R654 million). Notwithstanding its increased capital base and the drag of the Youi start up costs, OUTsurance generated a 29% return on equity (2009: 43%). Viewed in isolation (with the Youi start up costs and funding eliminated) OUTsurance's South African operations grew headline earnings by 17%.

Youi's launch has been successful and is running according to plan. Management remains confident regarding Youi's future prospects.

RMBH's attributable share of OUTsurance's normalised earnings for the year amounted to R341 million (2009: R384 million).

RMB Structured Insurance

At the interim reporting date, RMBSI reported a normalised loss of R3 million for the half year to December 2009. In the second half of the year it made some progress rebuilding its revenue streams and for the full year to June 2010 it reported headline earnings of R13 million. This outcome was driven by increased profitability from its portfolio of underwriting management agencies as well as new business gained. However it will take time for RMBSI to restore its income to a meaningful level.

RMBH's attributable share of RMBSI's normalised earnings for the year amounted to R11 million (2009: R60 million).