REVIEW OF OPERATIONS // BANKING GROUP // MOMENTUM

NICOLAAS KRUGER
CEO, MOMENTUM

MOMENTUM

     
  Year ended 30 June   %  
R million   2009   2008   change  
Normalised earnings   1 649   2 004   (18) 
Return on equity based on normalised earnings (%)  23   30    
Annualised new business   8 078   8 405   (4) 
Value of new business (restated)  544   596   (9) 


INTRODUCTION

Momentum’s results for the year ended 30 June 2009 were characterised by the following:

  • the negative impact of the significant decline and increased volatility in equity markets, particularly in the first half of the financial year;
  • despite the tough economic environment, the return on equity remained very satisfactory;
  • the strengthening of the level of capitalisation and the protection provided by the conservative capital investment strategy;
  • solid growth in investment income on shareholders’ funds resulting from the capital preservation strategy;
  • excellent results from FNB Insurance;
  • new business volumes held up well in the retail and employee benefits businesses, however inflows into the asset manage - ment operations have reduced. Overall new business margins remained satisfactory; and
  • the solid operational performance reflected in the embedded value exceeded the negative impact of the investment markets, resulting in a positive embedded value profit.

Summarised results  

       
  Year ended 30 June   %    
R million   2009   2008   change    
Normalised earnings1   1 649   2 004   (18)   
– Group operating profit   1 328   1 741   (24)   
– Investment income on shareholders’    321   263   22    
Group headline earnings   1 658   1 979   (16)   
Return on equity (%)  22.6   30.3      
New business volumes   60 470   65 338   (7)   
– Retail   33 493   34 270   (2)   
– Employee benefits   2 591   2 287   13    
– Asset management   24 386   28 781   (15)   
Value of new business2   544   596   (9)   
New business margins (%)2,3   2.0   2.1      
Embedded value2   16 086   16 039   –    
Return on embedded value (%)4   3.3   15.2      
CAR cover (times)5   1.8   1.6      
1 Normalised earnings represent Group headline earnings adjusted for the impact of non operational items and accounting anomalies.
2 The comparatives are pro forma in line with changes required by the revised Actuarial Guidance Note PGN107.
3 Calculated as the value of new business as % of present value of future premiums.
4 Represents the embedded value profit as % of opening embedded value.
5 The comparative is pro forma in line with the revised CAR formula that became effective during the current year.