Financial Services

PROFILE: RMI is an investment holding company with an investment team of experienced, alternative-thinking financial services specialists. RMI actively partners smart and industry-changing management teams by being a shareholder of influence.

RAND MERCHANT INVESTMENT HOLDINGSLIMITED (RMI)

RMI’s contribution to Remgro’s headline earnings decreased by 48.4% to R599 million (2019: R1 161 million).

The underlying investments of RMI (with percentage interest in brackets) include Discovery (25.0%), Momentum Metropolitan (27.3%), OUTsurance (89.1%), Hastings (29.7%), RMI Investment Managers (100%) and AlphaCode (100%).

Discovery is a pioneering market leader with uniquely positioned businesses in the healthcare, long- and short-term insurance, wellness and banking industries in South Africa, the United Kingdom (UK) and China, amongst others. Hastings is a UKlisted, fast-growing, agile, digitally-focused general short-term insurance provider to the UK car, van, bike and home insurance market. Momentum Metropolitan is an insurance-based financial services group whose core businesses offer long- and short-term insurance, asset management, savings, investment, healthcare administration and employee benefits. OUTsurance provides short- and long-term insurance products in South Africa and short-term insurance products in Australia and Namibia. RMI Investment Managers’ affiliate model enables the company to access a differentiated part of the investment management industry by investing in and partnering with independent investment managers, as well as specialist investment teams.

RMI believes that normalised earnings more accurately reflect operational performance, and therefore headline earnings are adjusted to take into account non-recurring items and accounting anomalies. RMI’s normalised earnings for the year under review decreased by 24.4% to R3 086 million (2019: R4 081 million) mainly due to lower earnings by Discovery (down by 25.6%) and Momentum Metropolitan (down by 50.5%).

Discovery’s normalised earnings decreased by 26% for the year ended 30 June 2020. A provision of R3.4 billion (R2.3 billion net of discretionary margin offset) was made for future claims and lapses as a result of the Covid-19 pandemic.

RMI included normalised earnings of R486 million from Hastings for the year ended 30 June 2020, representing a decrease of 12%. Hastings’ gross written premiums for its six months ended 30 June 2020 increased by 3% to £514.9 million (2019: £499.2 million), while adjusted operating profit after tax increased by 31% to £78.3 million (2019: £59.7 million). This was predominantly driven by policy growth and the improvement in the loss ratio, offset to an extent by customer actions in light of Covid-19, including the waiving of fees, reduced policy adjustments and increased operating expenditure for IT enhancements to support employees working from home.

Momentum Metropolitan recorded a 51% decrease in diluted normalised earnings to R1.5 billion for the year under review. This was largely attributable to additional provisions raised, with a net negative impact of R983 million for potential adverse Covid-19 related claims experience and policyholder lapses and withdrawals. Furthermore, the partial recovery of investment markets during the last quarter of the financial year did not fully offset the impact of severe market-related losses reported in the third quarter of the financial year.

OUTsurance’s normalised earnings, including its stake in Hastings, decreased by 8% to R2.4 billion. Excluding its share in Hastings, OUTsurance’s normalised earnings decreased by 7% to R2.2 billion, mainly attributable to the unrealised investment losses on the group’s equity portfolio, the impact of the bushfires and natural catastrophes in Australia and business interruption claims of R198 million paid and provided for in OUTsurance Business. OUTsurance’s operating profit increased by 2% for the year under review, driven by improved operational profitability in the South African short-term insurance operation on account of premium growth over the last year.