Its investments in OUTsurance and Discovery have taken a hit on a spike in short-term insurance claims. File Photo: IOL

DURBAN – Rand Merchant Investment Holdings’ (RMI) normalised earnings declined 4 percent in the year to end June to R4.08 billion as its investments in OUTsurance and Discovery took a hit on a spike in short-term insurance claims and spend on new strategic initiatives. 

RMI, a strategic active manager of a R52bn financial services portfolio, has interests in listed companies, which include Discovery (25 percent), Momentum Metropolitan (27.3 percent), OUTsurance (89.1 percent) and Hastings (29.9 percent), a disruptive UK short-term digital insurer. 

RMI said normalised earnings from OUTsurance, including its shareholding in Hastings, decreased by 13 percent to R2.6bn, mainly due to higher claims and cost ratios across the group, coupled with a lower earnings contribution from its investment in Hastings, while Discovery’s normalised headline earnings decreased by 7 percent to R5bn, as 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.

However, Momentum Metropolitan managed to offset the disappointing performance by reporting a 53 percent increase in diluted normalised headline earnings to R3.07bn. 

The group's headline earnings declined by 7 percent to R3.80bn while headline earnings per share were down by 8 percent to 249 cents a share. 

The group declared a final dividend of 65c a share, the same compared to last year. But the total dividend for the year increased to 110c, up from 104c compared to last year. It said the past 12 months had been a very challenging time for the South African investment market and asset management industry broadly. 

“Despite the JSE All Share Index ending the period up 4.42 percent, its performance lagged cash (7.27 percent), bonds (11.5 percent) and inflation (4.5 percent),” the group said. 

It added that global equities and emerging market equities also disappointed by delivering 4.97 percent and 3.27 percent respectively in the past year.

Looking ahead the group said RMI had a high degree of confidence in its portfolio companies and expected their unique attributes to continue to deliver long-term growth.

“Economic conditions in the South African market are expected to remain challenging in the medium term as a result of the recessionary climate and the constrained fiscal position. A focus on maintaining pricing discipline and incrementally improving operations remain the best defence during market cyclicality,” the group said.

The group added that OUTsurance believed that delivering a wider insurance product range coupled with an omni-channel distribution capability would result in continuous profitable growth.

“Discovery is well positioned for growth, through a combination of robust established businesses, emerging businesses which are scaling well and new initiatives which have significant potential,” the group said. 

RMI shares closed 0.30 percent lower at R30.38 on the JSE on Tuesday.

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