Picture: ISTOCK
Picture: ISTOCK

On Tuesday, Rand Merchant Investment (RMI) reported a 14% increase in its normalised earnings from continuing operations to R4.47bn in the year to June, boosted by its underlying investments.

RMI holds 25% of Discovery’s shares, along with 26% of MMI Holdings, both finanicial services companies. It also owns 88.6% of unlisted short-term insurer OUTsurance.

Normalised earnings from Discovery were up 16% to R5.4bn, while those from OUTsurance — including its shareholding in UK-based Hastings — increased 22% to R3bn.

Excluding Hastings, normalised earnings from OUTsurance rose a modest 7% to R2.6bn. But MMI recorded a 12% decrease in normalised earnings to R2.8bn.

RMI’s market value of listed investments rose 2% to R39.54bn, while its market value of unlisted investments fell 9% to R27.2bn. The company kept its final dividend steady at 65c per share, leaving the total at R1.04, down 12% on the matching period a year ago.

In its outlook statement, the company said there were several factors that could strain its earnings growth in the 2019 financial year:

• Exceptionally low claims experience in the 2018 financial year, especially in the South African and Australasian operations of OUTsurance, which also contributes to lower premium inflation

• Cyclical movements, regulatory reform and the effect of Brexit on the environment in which Hastings operates

• Investments into new initiatives such as Discovery Bank, which are expected to result in significant additional expenses for Discovery in the following financial year.