RMI’s contribution to Remgro’s headline earnings for the year under review decreased to R1 161 million
(2018: R1 228 million).

The underlying investments of RMI (with percentage interest in brackets) include Discovery (25.0%), Momentum Metropolitan (26.2%), OUTsurance (89.1%), Hastings (29.9%), RMI Investment Managers (100%), AlphaCode (100%).

Discovery is a pioneering market leader with uniquely positioned businesses in the healthcare, long- and short-term insurance, wellness and financial services industries in South Africa, the United Kingdom (UK) and China, amongst others. Hastings is a UK-listed, 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, New Zealand 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’s headline earnings for the year ended 30 June 2019 decreased by 6.9% to R3 801 million (2018: R4 081 million). However, 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 4% to R4 081 million (2018: R4 266 million) due to the significant increase in spend on new strategic initiatives, an increase in the claims ratio of the short-term insurance operations and the substantial investment in new business growth activities at OUTsurance.

Discovery’s normalised earnings decreased by 7% to R5 billion, a consequence of a significant planned increased investment in new strategic initiatives and an unexpected spike in large Discovery Life claims in the first half of the year. New business annualised premium income increased by 13% to R18.3 billion.

RMI included normalised earnings of R552 million from Hastings for the year ended 30 June 2019. Gross written premiums for Hastings’ six months ended 30 June 2019 increased by 3% to £499.2 million compared to the six months ended 30 June 2018 of £485.6 million. The adjusted operating profit after tax decreased by 43% to £59.7 million (2018: £105.1 million) as a result of market rate reductions, claims inflation continuing ahead of earned premium inflation, combined with legislative changes which increased underwriting levies.

Momentum Metropolitan reported steady progress with the three-year reset and grow strategy announced a year ago. It delivered diluted normalised headline earnings of R3.1 billion for the year. This represents an increase of 53% on the prior year.

Normalised earnings from OUTsurance, including its shareholding in Hastings, decreased by 13% to R2.6 billion, mainly due to higher claims and cost ratios across the group, coupled with a lower earnings contribution from its investment in Hastings. Excluding Hastings, normalised earnings decreased by 9% to R2.4 billion. The cost-to-income ratio increased from 25.6% to 28.3%. During 2019, the management team made significant investments in marketing and acquisition capability to drive profitable top line growth and build the necessary capacity to support the face-to-face distribution strategy of OUTsurance Business. As a result, annualised new business premium written increased by 27%.