Morning. Morning.
Good morning.
When you say good morning, you get a response. I mean, if you don't say good morning, then there's silence. You worry what is going on. Very, very warm welcome to this presentation of the interim financial results of Momentum Group for the period ended 31st December 2024. My name is Dan Moyane. Jeanette, I promised myself when I stand here today I won't make the same mistake I've made twice in the past when I presented the results. I know exactly in which office I'm standing. I'm standing in Risto's office. If I make a reference to that, I said to myself, don't make the same mistake today. Okay, we are, of course, live to you from the company's offices in Centurion in Tshwane.
Welcome to everybody who's joining us today, the analysts, the investors, shareholders, journalists, and employees, of course, most importantly, of the company who can watch us and follow us right now live. We are live on BDTV channel 412. That is on DSTV if you prefer to watch that. You have got access to the platform, or you can follow the results and the presentation live on webcast via copcam.com. It is simply MG, that is copcam.com/mg. It is today's date. That is the 20th, which is 20, the month 03, and the year 2025. Simply 20032025. The full results are also made available as usual on the group's website, which, of course, you know if you can just find us there, the Momentum Group's website.
By the way, we should thank all the Momentum Group investor relations team and the group marketing teams for all the work they've done in preparation for today. It's looking lovely, and we're all set to go, especially because by all accounts, it's an excellent set of results that we are indeed very proud of. Now I'm going to hand over without much ado to Jeanette. That's the Group CEO, Jeanette Marais, who will be followed by the Group Finance Director, Risto Ketola, to take us through the highlights. Good morning, Jeanette. Over to you.
Good morning.
Thank you.
Good morning, everyone, and a real warm welcome to the announcement of our interim financial results for the 2025 financial year. If you'll indulge me, I'd like to say a very special welcome to my mum and dad, who are also watching for the first time today on Business Day TV. I didn't plan tears, but you know I'm used to tears, so I'm sure that's okay. Today they can see what they spent all that education money on. Mum and dad, you're very welcome. Now for the joyful stuff. It really is a good day for the Momentum Group today with what we could call, you know, we were looking for words: excellent, brilliant, fantastic. I'll stick to excellent set of results, which we delivered in spite of a tough operating environment.
I will start, like always, with some of the key takeouts from the interim results. Of course, the highlight for us, we delivered normalized headline earnings of ZAR 3.4 billion for the six months, which is up 44% on the previous year. It is the result this time around of every single business in our group doing really, really well. That really does not happen often, but something that we are very proud of. I think maybe just one or two things that are interesting to note is that in the last six months, we delivered the same level of earnings that we delivered for the full 2023 financial year. Even if you adjust for the once-off items such as market variances, we still delivered earnings of ZAR 2.9 billion in the first half of F2025, which is a remarkable performance.
We achieved solid VNB growth of 40% to ZAR 279 million. This was driven by strong VNB performance in Momentum Retail. Thank you, Johan. Turning around from a loss in the previous period to a pleasing contribution of ZAR 50 million this year. Metropolitan's VNB also improved notably, although it is still negative. Peter, still some way to go for you. Momentum Investments decreased their contribution slightly, but this business still remains by far the biggest contributor to VNB in the group. Overall, the group's new business margin has now improved to 0.7%. Our new business sales remained flat at ZAR 38.9 billion, but the trend is a consistent upward trend in sales over time. I think just also noteworthy that in the second half of financial 2024, it included some large deals in Momentum Corporate, which were not repeated this time around.
We continue to create value for our shareholders. The graph on the left shows the steady pattern of our upward pattern of our dividend payouts, with a strong boost, of course, generated by our performance in the last six months. We are very happy to declare a dividend of ZAR 85 for the half year. Risto will unpack this in a bit more detail, but in total, we have completed ZAR 3.2 billion in share buybacks since the first half of 2023. We have also now announced a further ZAR 1 billion in share buyback, which was approved by our board earlier this week. That will, of course, commence immediately. Overall, the share buybacks have created approximately ZAR 2 billion in shareholder value. In this section of my presentation, I always choose a few businesses to put some focus on. I will start with Momentum Insure.
I'm really happy to report that the turnaround of Momentum Insure is definitely on track. We've experienced the best six-month period ever, with earnings of ZAR 230 million, and Insure contributed ZAR 315 million to our group's dividends. Brand is smiling very, very widely this morning. For Insure, our operating results are also very strong. The combined ratio improved by 16 percentage points from 106% to 90%, which is below our long-term target and at its lowest since F2021. Operating profit improved by more than ZAR 250 million, which is up 300% year-on-year. We believe that these results point to a sustainable improvement in the underlying quality of the book. We remain disciplined in our growth strategy. Insurance revenue growth was muted due to corrective underwriting and pricing actions in the last two years, which impacted lapse rates, but portfolio profitability improved as expected.
New business grew by 20% year-on-year, with a strong recovery in our direct business of 36% and a recovery of 29% in our tied agency. You know, these numbers look fantastic. Also on the left, you can see our claims ratio. The corrective actions led to the lowest half-year claims ratio since 2020. We also benefited from the lower-than-expected weather-related claims like the rest of the industry. However, we do know that industry-wide, there is an expectation of some volatility in the second half of the year. Even after adjusting for the benign weather, the half-year and rolling 12-month claims ratio still remain within our 57%-62% target range, and it is closely aligned with our industry peers. This encouraging outcome highlights the significant progress that we have made in enhancing risk selection, pricing, and underwriting capabilities.
Lastly, I could not help but put this graph on. The graph on the right shows the pleasing upward trend in normalized headline earnings for this business. Momentum Insure is now a sustainable and a substantial contributor to earnings and to dividends for the group. We have also been providing feedback on Metropolitan's five-point turnaround plan over the last 18 months. I am very happy to see that or to show you that there is a lot of green on this slide. Peter, you and the team, well done. We improved product commerciality by implementing various initiatives that led to a lot better profitability across all of the products in Metropolitan. We have reduced our cost base by ZAR 40 million year to date, and there is a further ZAR 20 million in savings that we expect from switching off some of the legacy systems.
Migration and automation efforts have also focused on revitalizing and modernizing our product administration systems on a new digital chassis. We improved business quality, particularly the lapse experience on protection business due to writing much better quality new business. The only area that needs a little bit more attention and where we kind of, I would say, halfway through the implementation of a very solid plan is our sales workforce management. We are not entirely there yet, but we have prioritized distribution, rationalization, and optimization, and we have a solid plan which is being implemented by Peter and the team at the moment. I think given the good progress on the five-point plan, Metropolitan can now increase its focus on the impact strategy objectives for F2027, and it is probably, hopefully, the last time that I will talk to you about Metropolitan's five-point plan. Momentum Corporate.
Momentum Corporate has again shown resilient and profitable organic growth across all of their core product lines, with normalized headline earnings exceeding ZAR 850 million for the half year, which makes it our star performer. Looking at Momentum Corporate's underwriting margin delivery, margins remain strong, but market and pricing pressures have led to a slight decline compared to the first half of 2024. The performance from 2023 to the first half of 2025 has been above target and expectation, but we do believe this is not sustainable. Dumo keep on telling us to tell you it's not sustainable, and then they outperform themselves. I won't be, yeah, commenting on that. Our focus remains on profitable growth and disciplined risk management position, or our focus on profitable growth and disciplined risk management positions as well to achieve our target margin of between 5% to 7% net of tax over time.
The turnaround in permanent health insurance has been sustained, reinforcing our confidence that we will achieve our target margin. Lastly, volatility remains a reality, but our strategy ensures our resilience in this space. Good luck on that, Dumo and team. Oh, sorry, funds at work. Funds at work, asset under management grew organically by 49% from ZAR 63 billion in 2021 to ZAR 94 billion in 2024, and that was coupled by excellent growth of 14% in the umbrella book active membership over the three and a half year period. Given the stagnant economy, I am particularly pleased with the 14% growth in membership numbers for this business. Through disciplined execution, collaboration, and a relentless focus on scale, we are strengthening our competitive position and unlocking new opportunities such as SME markets for funds at work. Again, some great progress there.
Myriad's massive improvement in VNB deserves a mention. They improved their VNB from ZAR 4 million to ZAR 71 million. Their new business margin of 3.6%, this is not a number that we've really shared with anyone before, compares very favorably to our peer group. This was driven by improved profitability of new business, 9% higher sales volumes, channel optimization, expense savings, and lower cost of capital. One of the reasons why VNB has started to improve is because of the digital and technology innovation in Myriad, which brings down the cost of doing business. I did think that I'd want to spend a minute or two on exactly the progress this business has made in the area of technology and digital over the last time, because it's really a fantastic story. Johan called it the highlight of his career. So far. So far. So far.
We're not done yet, Johan. LifeReturns is our new leaner, more accurate digital risk selection mechanism post the transition from Momentum Multiply Premier, which was our previous wellness approach. Now, clients can get a free digital fitness and health check on their mobile phones and earn their discounts without having to go to BioConnect Assist or pharmacies. This is a world-class innovation, and it's still a world first as far as we can determine. It provides a better client engagement mechanism with immediate feedback and benefits. It's giving more discounts for more clients for less effort. This enables us to proactively engage with clients who have undiagnosed blood pressure problems or ineffective treatments. It bodes well for the future of proactive health management to prevent or manage future claims. With the LifeReturns digital health and fitness screening, we are also transforming how traditional onboarding and underwriting is done.
We are attracting healthier lives who want to be rewarded for their lifestyle, but without having to actively engage and compete on wellness platforms. Many of these clients also experience our digital fast-track underwriting solution, by which we issue cover without the need for traditional medical tests. This makes onboarding simpler, faster, and cheaper for clients and advisors. Really, for us, the result has been higher market share with advisors and better VNB, as we've just seen, as these efficiencies and better risk selection are starting to pay off. Outside of traditional face-to-face intermediary sales, we have also been successful with growing sales using leads from momentum.co.za and other digital marketing initiatives. We have witnessed sales growth of approximately 30% over the reporting period. Sorry, I just thought I didn't change the slide.
It now makes up about 25% of our new policy applications and 10% of our new business sales for Myriad. Lastly, we have also implemented major technology upgrades in our advisor and client digital engagement platforms, which we call AdviserConnect. The Myriad team is setting the example of how all our product businesses should integrate into our group-wide engagement digital platforms. We have successfully exited all the older quote systems and transitioned to a modern onboarding platform, which we have integrated into the bigger Momentum digital ecosystem. This delivers a new combined platform for quotes, new business submission, and alterations, which has shown high adoption by advisors that used to be a bit of a problem in the past. Another spin-off of this technology architecture is that Myriad business can now easily integrate into the external advice platforms of any of the networks in South Africa.
In a nutshell, if we look at market share, winning market share is not a sprint, it is a marathon. We do not claim victory yet, but our digital strategy is moving us consistently forward and is setting us up for success, which really is great. Now I am going to just give you some feedback on our impact strategy and how we are doing with that. I think by now, the six strategic objectives of our impact strategy are quite well known to you. Over the next slides, I will give you an indication of the group-wide performance for each. I am not going to go into the detail. We will keep that for our Investor Day or Investor Markets Day on the 3rd of June, where we will go through our impact strategy in quite a lot more detail.
You will see that there's some color indicators on these slides, and that really just indicates our confidence in reaching our end target after three years. It is early days, but we already have a feeling of how we will be able to deliver after three years. You can see that that would range from fully confident to reasonably confident, where we know that it will already require some extra effort from us. To start, unlocking the full potential of our business units means that we boost our successful businesses with more capital, and we fix our underperforming businesses through turnaround strategies. We are highly confident that we will reach the targets that we set for ourselves for F2027. Progress includes the strides we've made with our turnaround strategies for Momentum Insure and for Metropolitan that I've just shared with you.
The Africa operating model is currently under review, and we'll share more information on this as we make progress. I think on a positive note, deserving a quick mention, Momentum Health has shown good open market membership growth, and we know the medical schemes market is a very tough one at the moment. Health for me continued strong membership growth of 14% on the previous year. Just hot off the press, just last week, Momentum Medical Scheme was awarded the Medical Scheme of the Year by News24, that we're very proud of. Harnessing synergies of collaboration in our group refers, in our words, to hunting together to seize opportunities and unlock new growth opportunities through vertical integration. We are highly confident that we will also reach our targets for this objective.
In terms of collaboration, across our group, there's great collaboration between many different business units, which is starting to really show results. I'm not going to go into the detail of that. Our focus on vertical integration is also showing off or starting to pay off, not as much show off. The highlight for me that I have to mention is Momentum Wealth's net inflows, which more than doubled when compared to last year due to the vertical integration with MDS. They achieved net flows of ZAR 3.9 billion compared to only ZAR 1.3 billion last year. Last year, we thought ZAR 1.3 billion net flows was great, Fadi. In MFP, our agency force, we still have some work to do on vertical integration, but we've developed an integrated wealth solutions framework to better drive vertical integration with Curate and Equilibrium. This shows the strong partnership between Momentum Investments and MFP.
The advisors in MFP also capture all Myriad new business themselves, showing the improved digital partnership that we have between Myriad and MFP. Optimizing our cost base is about getting leaner and operating more efficiently. It is essential for sustainable growth and to improve our VNB. We are highly confident that we are making the progress needed to achieve our targets. Risto will actually give you quite a bit more detail on this. We have launched a group-wide performance optimization project, which identified optimization opportunities of around ZAR 1 billion. We are looking at duplication across the group, but also targeting key streams such as procurement, technology, and business unit efficiencies that we can unlock. We have completed the diagnostic phase now, and we have started with implementation.
We are actively tracking progress on this project across all of the identified pockets of savings to ensure that these are permanently removed from our cost base. You know by now that we believe that face-to-face advice is here to stay and that it offers great growth opportunities. We drive advice as a key differentiator for us as a group. For Momentum Retail, in the MFP space, our new executive team is in place, and we have changed our entire operating model to enable sales. MFP is now really ready and set up for success. Momentum Investments successfully completed the acquisition of minority stakes in two international advisor and wealth management groups, one in South America and one in Ireland. This really is to help with vertical integration into our investment products.
These investments in IFI Networks are already paying off with good inflows into our portfolios and an increase in assets under management that is already well ahead of target. Momentum Health saw a pleasing 15% growth in Momentum Medical Scheme sales from independent advisors through MDS. I have already touched on Metropolitan. Selectively expanding our addressable market means that we will focus on four key areas of possible expansion: channel, segment, product, and geography. We rate ourselves reasonably confident given that most of the current initiatives are quite exploratory and quite early stage assessments, but there are some early wins, and we are aiming to move this indicator to green pretty soon. Momentum Investments hold a sizable lead in IFI guaranteed annuity market share at about 38% and has gained significant market share in the overall market to 22% in post-retirement products, which include living, hybrid, and guaranteed annuities.
Curate, the newest baby in the group, has been generating significant buzz with the introduction of key local and global fund managers, and their fund performance has been remarkable, consistently placed in first and second quartile. Sorry, Guardrisk. Did I not talk about you, Lawrence? By participating in alternative distribution channels, Guardrisk expands into markets where up to recently only Metropolitan played. Guardrisk have also shown significant growth in their underwriting profits. Their GapCover business continues to grow, and microinsurance is growing and gaining traction in the low-income market. In Momentum Retail, we concluded the FIN Global transaction, which extends our existing holistic financial planning suite to include financial immigration capabilities. This transaction is still waiting or subject to Competition Commission approval. Momentum Corporate's Grow platform, I've spoken about that before, digitally enables advisors to sell and service benefits to SMEs.
Sales for Momentum Grow are increasing steadily and are ahead of target. The great news here is that all sales are with first-time employee benefit buyers, which really is opening up another new market for us. In this strategic objective, we focus on simplicity and client insights to enhance client experience and drive efficiency. We are highly confident that we will achieve our targets for this. As you know, I have a personal obsession with how we make our clients feel and being unreasonable about achieving excellent client experiences in line with our purpose. We initiated a group-wide process to assess and improve client experience across all of our businesses, with some of the progress mentioned on this page. In closing, our purpose is to build and protect our clients' financial dreams. That's our why.
Our what is our impact strategy, what we need to focus on to achieve our purpose. Our how is our culture behaviors that enable us to live our purpose and deliver on our strategy. It is how we show up every day at work, doing what's right for our clients, really caring about how we make them feel, and driving excellence in every single thing we do. This is what motivates us. It's what gets me out of bed in the morning, and it enables us to deliver on our financial goals and targets. We have made excellent progress in the first six months, and our impact strategy positions us well for the remainder of the year. We remain steadfast in improving our VNB and driving sales volume growth. Advice will be a key differentiator for us.
It carves out a unique space in the market and provides great value to our clients. Our leading market share in the IFI segment positions us well to deliver value. By leveraging technology to enhance the client experience and empower our advisors, we will ensure that our solutions remain relevant, accessible, and tailored to evolving client needs. We continue to focus on delivering on the impact strategy, and I still believe that the financial ambitions for F2027 remain achievable. Personally, I'm grateful for the unbelievable energy amongst our employees, your drive, your tenacity, and your passion for really making a positive impact on people's lives. To every single employee, my executive team are all here today, our board, thank you very much for all your support, all your hard work. To our financial advisors and clients, thank you for trusting us with your financial dreams.
I'll hand over to Risto to take us through the finances. Thank you.
Yeah, thanks, Jeanette. It is really a pleasure to present these results for the 15th time. Not the first rodeo, but these are comfortably, I think, the best results in absolute terms and some of the underlying trends we've seen. I think the word we used initially was exceptional. There are good results, but even if you dig deep into them, I think you'll be pleased with some of the things you find. Okay, let's talk about key financial measures. Earnings up 44%, ZAR 3.4 billion. As Jeanette said earlier, if you remove the market variances, so that's like investment variances, yield curve changes, credit spread income above expectations, earnings are probably about ZAR 2.9 billion. We mustn't forget that last year was also a favorable market.
The growth rate remains in the mid to high 30% if you adjust both the years for the market variances. That gives you an idea of the strong underlying operational performance coming through in all the operations. Earnings per share, ZAR 2.45, up 4% more, reflecting the reduction in shares in issue through the buyback program. Our shares in issue used to be nearly 15% higher a few years ago. There has been quite a big impact on the per share metrics through the buyback program. Dividend up 42%, ZAR 0.85 per share. Our dividend policy is to pay out between a third and half of our earnings, ZAR 0.33-ZAR 0.50. In this period, it is at ZAR 0.34 towards the lower end. As Jeanette said, we are doing a ZAR 1 billion buyback, which equates to ZAR 0.70 per share.
The total distribution to shareholders is ZAR 1.55, which is up quite nicely from the ZAR 0.95, including buybacks last period. The actual capital distribution to shareholders is up approximately 60% year-on-year. If anything, our cash generation to shareholders is increasing faster than the earnings, which is always pleasing if you're a shareholder. Return on equity, this number we're very proud of. I was pleased to see that some of the analyst comments this morning highlighted this 25%. It is the highest in the industry. You know, we take quite, well, we take a lot of pride in the fact that our return on capital is higher than the other insurers we know about, at least the life insurers. Now, there's been a lot of questions asked, why is our return on capital so high? There's a number of dimensions here.
I would like to claim it's all because of good capital management. I think it's also important to remember that we haven't done any major M&A in the last few years. We are certainly sitting with a lot less goodwill and intangibles than some of our peers. The reality is, if you're making big deals, you're going to get a return on investment of maybe 10% if you're lucky in the early years. Lack of M&A has definitely helped our ROE. A little bit more structurally, it's also important to remember that we tend to be overweight in certain products like life annuities, where ROEs are very good. I did some work two years ago looking at ROEs by product, and annuities actually have the best payback period and the best ROE of our current product range.
You know, so we tend to be overweight annuities, effluent, risk products, things with good ROEs, and underweight some of the product ranges where the ROEs are lower. I do think we can maintain market-leading ROEs for the time being. It might come back from ZAR 25 to ZAR 20, but I think a 20% ROE will be a strong achievement from a mature life company. Embedded value per share, ZAR 39.29. Subsequently, it's probably closer to ZAR 40 as we speak. Share price is about ZAR 30, so we're trading about a 25% discount to EV. That's narrowed a lot. It was at 50% two years ago, 18 months ago. If you think of the strong share price performance over the last, let's say, 18 months, probably 25% comes from EV growth, another sort of 30%-40% from just re-rating of our share to more reasonable levels, I would argue.
The 12% EV growth, if you're adding the dividends, it becomes a 16% return on embedded value. That 16% is probably a bit higher again than I would think is sustainable through the cycle. Again, because of the improvement in VNB and the increased confidence in the sustainability of the variances and also growth in areas like Guardrisk, which have naturally quite good return on embedded value, my view of the sustainable ROE EV has increased by half a percent, 1% over the last year or two. I think the discount to EV narrowing is very justified. Sales volumes, Jeanette mentioned that they're flat year-on-year. I'll show you later that on retail side, they're actually up year-on-year. Corporate volumes are down from the prior period.
We had very good six months in the prior six prior first half, but on retail, we're up up year-on-year. Value of new business, up 40% on flat sales. It is obviously a margin expansion story here. Again, Jeanette sort of mentioned that the big drivers of the improved margin is Momentum Retail. Their margins are now positive and expect to remain so forever. Metropolitan Life margins, they're still significantly lower than we would want them to be in the medium term, but they have improved a lot over the last 12 months. Okay, just quickly running through the business units. You'll see in the light in the light shades there, we have the market variances, and they are slightly higher this year in aggregate than last year. I'll just make some comments on the dark bars, which is the operational performance underlying these businesses.
Excuse me. I'll start with Momentum Retail, flat year-on-year, but I would say the ZAR 594 million is still a very strong result. Things like mortality variance are still positive, just not as positive as last year. Alterations experience, which I'll talk about later a bit more, positive, but not as positive as last year. Our ALM results are reasonable. In fact, we're actually close to match now, so closer to a zero result on ALM. Last year, there were big positives. There is nothing that has like weakened in this business, but last year was actually quite an exceptional comparative. We are very pleased with the ZAR 594 million. Momentum Investments, this is where the big annuity book sits, the retail annuity book. The sales volume growth has been, volume growth until this year was extremely high.
This year, it's a bit more level, but still high volumes in absolute terms. The annuity book keeps growing, and because of the growth in the book, the CSM keeps growing. I think the CSM has grown by like 30% again. That CSM release, and I'm getting a bit technical here, but the release of the CSM is really what's driving the higher level of earnings on the annuity book. Things like credit variances, no defaults in this period again, so those were good. Mortality remains better than expected on the annuity book, but it's really the structural growth of the AUM, the book size of annuities that's driving that. Something we don't talk about as often as annuities is the wealth platforms. Those earnings are up significantly year-on-year as well. Our offshore platform has always been profitable and continues to be so.
The local platform profitability improved quite a bit year-on-year. Many of you know we're busy with a replatforming project in that business. The amount of expenses coming through the income statement in the current period is quite a bit lower than the prior period on that project. Moving on to Metropolitan. Metropolitan's earnings are quite sensitive to the level of onerous business. Last year, we spoke a lot about the fact that Metropolitan sells, you know, some profitable business, but there are big pockets of loss-making business sold. That has reduced now with all the actions taken. The focus on premium rates, product benefits, product rules, when we pay commissions, when you know, when do we claw back commissions, all those things have a positive impact on the profitability of new business, which reduces onerous contract, which comes through income statement immediately.
A big benefit in the Metropolitan there. Also pleased to note that the persistency has improved materially year-on-year. It's been interesting looking at the results from the industry. There's been a bit mixed of commentary around persistency. We can confirm that our actual collection experience is getting better in the entry-level market. Combining that with the more conservative actuarial assumptions, we actually see a material rebound in what we call the persistency variance within the results. Going into Momentum Corporate, as Jeanette said, now our biggest business, we probably need to change the order here, start with corporate next year. Mortality profits remain slightly above long-term norms. At the same time, we don't think that they are out of line with the current and expected mortality experience. In other words, we don't plan to give back profitability on group risk.
What is less spoken about recently is the biggest structural change in the last eight years is the disability book. When I joined here eight years ago, we were losing, I don't want to say the exact number, but we were losing noticeable amounts of money every year. Now we're making steady profits there. It's literally a ZAR 400 million annualized swing from where we were to where we are today. You know, I think the mortality book, sorry, the disability book is where you had a structural change in the level of profitability. I don't see that going backwards anytime soon. Maybe the one or the primary reason why the operational profit is a bit higher this year is there was approximately ZAR 100 million released from the IBNR reserve. That stands for incurred but not reported reserve.
Those are claims we expect to come through in January, February that were not reported by 31 December. Those estimates are based a lot on the level of claims we see late in the year, November, December. We actually saw claims reduce quite a bit in those two months. We are expecting less latent claims to come through. The reserve reduced by just over ZAR 100 million on that. This business is scheduled to be a unicorn in two years. Dumo, you are at ZAR 1.4 billion annualized now that I can just tick the box on the billion for 2027. He is not nodding. He is acting like he did not hear me. Yeah. Okay. Just moving on to the other business units. Health earnings are basically flat year-on-year. Now, 80%-85% of the health revenue is admin fees.
You can just imagine the current environment, economic environment. You're not going to get anything more than inflation on fees per member, if that. At the same time, the total membership growth was quite muted. Jeanette mentioned that our open scheme is doing okay, our public sector business is doing okay, but we're actually seeing a reduction in the membership in some of the corporate schemes. So our admin fee income overall was only up 4% year-on-year. Now, some of the underwriting profits, like on health, for me and capitation contracts, they lift total revenues to 5%. At the same time, it's also quite a people-heavy business. Your cost growth was approximately 6%. That 1% growth is sort of roughly inflationary growth in both revenues and expenses for the period. Guardrisk, no longer surprising, but always good 33% growth.
It's worth noting that we spend a lot of time, Jeanette spent a lot of time talking about the turnaround in Insure. As Guardrisk has become more active in underwriting activities, the same trends play out in Guardrisk. As an example, we actually do quite a bit of motor business in Guardrisk. We provide the sale captive insurance for some of the manufacturers if you buy their insurance. We have some UMAs that write motor business. I think we have some deals with associations of motor dealers. You know, we have a reasonably sized motor book in Guardrisk, which obviously did a lot better, like in Momentum Insure. We do not insure many private homes in Guardrisk, but we insure corporate and commercial property. The better weather also had a benefit on that.
A lot of the underwriting trends are similar in Guardrisk to Momentum Insure. In that 33% growth in profits, underwriting profits were up 52% year-on-year in Guardrisk. Jeanette's slide quickly mentioned GapCover is a product line we're quite big in. We own ADMET. Overall, GapCover margins, I think, are pretty steady. What's pleasing is the business we bought a year ago, Zest life. The profitability in the first year has been higher than we expected in the business case. Overall level of GapCover profitability is pleasing. Behind that 52% underwriting profit growth, the more traditional, let's call it the admin fee business, also grew in the mid-teens. Good growth in the core business and exceptional growth in the underwriting activities. Momentum Insure, we've spoken a lot about the improvement in the loss ratio. Very pleasing results.
Now, I don't expect ZAR 315 million of dividends every six months, but we do expect ongoing dividends. You know, I think the business is in very good shape now. Obviously, there's a market that can be cyclical, but from what we know today, we expect the profitability to remain decent here. Africa, I have a slide later that shows that Africa is actually the biggest user of capital in our group. There's about ZAR 4 billion of capital, predominantly in Namibia and lesser degree Lesotho and Botswana. Just that ZAR 4 billion of capital generates almost ZAR 200 million of investment returns. It's mainly invested in local government bonds. The operating profitability in Africa remains quite modest. I think the positive parts of the operating profitability in this period was the health businesses did quite well in Africa. Also, Namibia had a reasonable operating profit on the life business.
We did see both Lesotho and Botswana life operating profits go backwards, whereas short-term insurance, it's quite small, but it was steady in Africa. India, we've seen a substantial reduction in losses in our India business. India, the growth story is always good. Growth is always astronomical when you compare it to South African experience. You add 100,000 clients and it's an average month, you know, net clients. Okay, obviously the loss ratio, the claims ratio is a lot more hard to get the bed down. The improvement we've seen in our India results is a bit better than you'll see in the India accounts. When Aditya Birla Capital reports, they report under Indian accounting standards, whereas we report under IFRS 17. Because IFRS 17 is more forward-looking, some of the premium rate adjustments and things they have done actually come through better in our results.
We still expect this business to be break-even for the next financial year. Shareholders, there's quite a few moving parts here, but as I'll show you later, there's ZAR 7 billion of capital sitting in shareholders. Investment returns on that capital play a big role. Last year, we had quite large fair value losses on some of our venture capital, private equity, direct property investments. This period, they were only a small negative. The delta of ZAR 160 million is really a better fair value outcome on unlisted investments. Sales volumes, I'm not going to label this point, except if you look in the green, mom retail up ZAR 4 million, mom investment ZAR 6 million, mid up ZAR 2 million. Those are all retail-focused businesses. Also in Africa, that ZAR 19 million includes a retail and a corporate component.
Our retail sales are up probably around 5% year-on-year across the group, whereas then corporate sales are down 26%. If we look at the movements in margins, and obviously the VNB movements will just be a similar trend. Momentum Retail's margin improvement is a dramatic, too strong a word maybe, but it is substantial. And a lot of that is driven by the Myriad product, where I must say that Momentum Life, Momentum Retail team has been doing a lot of work for a number of years. Johan often refers to the fact that maybe I do not fully appreciate all the complexity of the spaghetti he has been dealing with to get the business into better shape going forward. It is nice to see it is all starting to come together now. The results of this business is improving.
Not only the results, I think the client experience, advisor experience, it's improving at the same time as the financials are. We have Metropolitan, a big recovery. We do think that in four-five years, this margin should be ZAR 4%-5%. I think there's a lot more to go here. In fact, I was doing a little bit of analysis now for the board meeting. I think in every other product area in South Africa, our margins are very comparable to our peers. It is really in the Metropolitan space that we got a bit of a gap to what we would consider to be a competitive new business margin. Momentum Investments, margin came down a little bit because annuities fell a little bit year-on-year, whereas the platform sales, which are thinner margin, grew quite rapidly. It's a mixed effect.
Momentum Corporate, the business we did get a lot of it was savings business, which got lower margins than annuities or risk. In Africa, like always, there's a bit of movements here, but the disappointment for the period was Namibia, where new business profitability and margin went backwards. In simple terms, the sales expenses grew faster than sales. I would not quite say back to the drawing board, but obviously it's getting a lot of focus in terms of sales remuneration in that country. Onerous contracts. This is basically the pre-tax loss we recognize upfront. IFRS 17 has a, what I think is a good accounting rule, that if you sell profitable business, you need to spread those profits over the contract term. If you sell loss-making business, you take the hit upfront. When you sell loss-making business, it comes through income statement immediately.
Number of ZAR 488 million last year, you annualize is nearly ZAR 1 billion. It's a big number. I do believe that we sell more onerous business proportionately than most of our peers. It's been a big focus for us. We're already seeing good trends in most of these. It's similar trends to the VNB, actually, if you think of it. They're very interlinked because a big part of your VNB movement is getting rid of profitable business. Momentum Retail has improved. Momentum Investments a little bit, mid-life quite a bit. Africa, like I mentioned earlier, it was really the Namibia story that caused that to go in the wrong direction.
I'll show you a bit more on the next page in terms of why it's important, but I'm also quite pleased to say that just in the last few weeks, I've seen quite a few proposals around product pricing, product structure that I think we're going to shave off a lot of that ZAR 430 in the next 12 months. I'm quite confident this number will come down. A common question we get from investors is, you've got nice CSM growth. CSM is now this future profit number. How come you're adding a lot of new business to your CSM, but you're not doing much of a VNB? The answer is quite simple. I don't know if we like the answer, but the simple answer is we sell a lot of very profitable business and we sell a lot of loss-making business.
Half the value created by the profitable business is eaten up by onerous contracts, which is by definition a loss-making business. I mean, other big adjustment is obviously tax. One is a balance sheet number, one is an earnings number. I quite like showing this picture as well, is that we believe we can probably halve that ZAR 430 in a reasonable time frame. You halve that and you grow the ZAR 764 at, let's say, mid-teens, it's going to double your VNB. Okay, I think we've got two quite nice levers. Keep growing the profitable business at a reasonable clip, market share gains, and start eliminating some of the contracts that create perennial losses upfront. Now that I started on CSM, let's stick to it. That ZAR 20.2 billion, you can think of it as the present value of future profits we expect from our inforce book.
Basically what we used to call the VIF in the embedded value world, it's grown by 4% in the last six months. I'm actually quite excited about 4%. Now, if you annualize it, it's 8%. You know, it's comfortably above inflation. Now, remember, we are a mature large life business. If we can grow our core business as measured by CSM by 8%, we eliminate some onerous contracts. That's going to add one or two more percent. You know, we gain a little bit of market share, maybe 1%-2%. We shave some of the renewal costs, 1%-2%. If we can grow CSM at 8, we can grow life earnings at 10-12. If we can grow life at 10-12, contributions from Guardrisk, India, and time, we can grow group earnings in mid-teens. I mean, this is, I think this is a good enough outcome for the core business.
What is also worth noting here is change in estimates. This is the impact of our CSM estimate because of what happened in the last six months. We continuously surprise ourselves on the upside. Okay, for the five times we've shown this, every time we move our CSM estimate upwards based on actual outcomes in the period, it reflects two things that are probably both equally important. Now, the first one's actually more important is I think we manage our inforce book well, actively. And then secondly, maybe on the finance side, we're a bit conservative in our assumptions. Okay, breaking the CSM into business units and products. I'm sure the analysts will love spending some time looking at the details here, but I'll just talk about one or two things. The first thing that sticks out here is that big red bar in Momentum Retail.
That's Myriad. Myriad accounts for about 45% of all our future profits embedded in the CSM. Now, obviously, there are sources of profit like group risk, Guardrisk that are not included in the CSM measure, but I would say Myriad probably accounts for 20%-25% of group profits on a sort of a medium-term view. Important block of business. Very nice to see it growing at nearly 10%. Okay, I'll expand a little bit later. I think the most, not unique maybe, but a very important thing on Myriad that a lot of people don't know. The existing customers buy up benefits significantly. Okay, that might not come through as new business, but it comes through as very good premium income and CSM growth. Yeah, I mean, this sort of 8%-10% growth in Myriad CSM, I think it's sustainable.
The second thing that is fairly obvious is the big growth in annuities over the last 12 months. You'll see Momentum Investments. That is approximately 25% growth. You know, it will slow down a little bit, but I think this year we'll still grow it at 15%. Next year, maybe another 12%. Even though sales are flattening, I think the CSM will keep growing on the annuities. A smaller number, but important, is Metropolitan, that red bar, that's funeral. It's grown by 20%, ZAR 1.1 billion to ZAR 1.3 billion. A lot of these product actions taken to change benefits, change escalation patterns, increase premium rates on some things, eliminate some products. Immediate beneficial thing here as well. It's the first time in a while we've seen that funeral CSM grow quite nicely year-on-year.
The last thing I'll mention for lack of time, because I'm going to go terribly over here, is the dark blue bars. That is your traditional business, our closed business. In total, it adds up to ZAR 0.6 billion. 3% of our CSM is legacy business. Now, 15 years ago, a very common investment thesis on Momentum was you got too much closed books. You bought Southern, you bought Sage, you bought this. I mean, passage of time means that there's very little of our earnings coming from those closed books today. I do not think we have any more exposure to legacy than any other large insurer. You know, I think it's quite important for investment theses that it's not like we're somehow hamstrung by this legacy book. We're just glad it's there to cover some of the overhead still. Yeah.
Okay, again, I'm not going to go into too much detail here. We can do so in the one-on-ones with analysts. If you look at total earnings under IFRS 17, 20% growth, that is the growth in your traditional life profits. What I wanted to show here is that present value of future cash flows, up 29%. That is the actuarial best estimate of future profits. Okay, accounting rules say you have to defer some of it. So out of the ZAR 2.7 billion of future profit, we can only show ZAR 1.9 billion today, and the remainder gets deferred to be released over the contract term. The fact that the economic profit is growing faster than accounting profit, to me, is important because that will be a catch-up in later years. Okay, so we're adding more into the CSM bucket to release through earnings in the future.
I'm glad we're adding to it rather than drawing from that bucket. Okay, capital management. This should be a very short and quick section. It's great. Okay, so solvency cover ZAR 2.15 above our upper target of ZAR 2. That ZAR 0.15 excess, that couple of billion rand, that's like ZAR 3 billion rand. You could almost say surplus capital in the life business is ZAR 3 billion rand. Jeanette mentioned the buyback. We bought back ZAR 3.2 billion of shares. In the last six months, we actually did ZAR 934 million. We didn't do the full billion. We have a structured buyback program where we limit the activity based on market volumes in any given day. We actually couldn't complete the full billion. We will try to do ZAR 1.66 billion in the next six months. We will try to catch up.
It is obviously dependent on the volumes traded in the market and also what is our appetite to make up the percentage of that market. Anyway, we will try to definitely catch up. Also interesting, if I add the billion we're going to do now, it's going to be ZAR 4.2 billion bought back. At the beginning of the 2023 financial year, our market cap was about ZAR 20 billion. We would have bought back about 20% of the company over the last three years. It's an interesting thought. This is a slide that a lot of the analysts like. It's a very nice summary of, on the horizontal, where do we have our capital? Then on the vertical, what return it creates? Most of our life insurance operations create fantastic ROE. Now, obviously, we have very strong ALM capabilities.
You know, we try to manage capital to the minimum required while still keeping everybody happy. It is also a structural thing that life insurance actually doesn't require that much ongoing capital. A lot of the money capital is required, almost working capital upfront to pay the commissions. If you have got a mature life company like we are, where the current level of commission paid is quite low compared to the current level of the book, you structurally have quite good ROEs in those businesses. If I think of what's changed in the last 12 months, Guardrisk has continued to improve. Momentum Insure obviously made a big jump from the yellow to the green. I think it might be quite hard for Brunt to stay in the green next 12 months, but definitely in 2027, we would want it to be in the green.
Africa, I mentioned earlier, that ZAR 4 billion is earning maybe a 10% return. We need operating profitability to improve substantially to get into the green. That is the plan. I mean, we're not just going to sit with this. Maybe the last thing to mention here is we've got ZAR 7 billion sitting in shareholders earning cash type returns most of the time. You know, the key thing on that ZAR 7 billion, I mean, we could invest in something exotic. I don't know, but we won't do that. The reality is we need to minimize that ZAR 7 billion. I think a normal level of cash and capital at the center will be about ZAR 4 billion for us. Maybe probably holding double the amount of capital at the center than we would normally want to. Cash generation.
The South African life businesses, Momentum Retail, Metropolitan Life, Momentum Corporate, their annuity book, they're all set on the same license, same legal entity. That's the SA Life Business, paid ZAR 2 billion dividend to the group. Every period, the life company is the main source of cash coming into the holding company bank account. Insure paid a good dividend. Thank you. ZAR 350 million. Guardrisk, Investments, and Health are steady dividend payers. You'll notice that Africa doesn't feature this year. We took our big special dividends a few years ago out of Africa, but at the current level of operating profitability, we actually don't really have dividends coming through from the African countries. Overall, we're still set on dividend income for six months of ZAR 2.6 billion. That is about 75% of earnings. I think in a normal period, that's not a bad ratio.
If somebody asked me how much of your NHE is cash available at the head office, I would say ZAR 2.3 billion to 75% is the right number most periods. It is quite representative. In this six months, we did not spend much money, so we did very little M&A. We did inject capital into India. There were certain rule changes in terms of how premiums are recognized over the contract term. Also fast growth. It still left us with ZAR 2.3 billion of cash at the center, which we are planning on spending ZAR 1.2 billion in the dividends and ZAR 1 billion in the buybacks. There will be a small amount added to the center, which at some stage we are going to have to go back to the negative ZAR 873 million, because like I said, we are starting to hold a bit too much capital at the center. Other topical matters.
I got 14 seconds. I'm joking. I'm going to go over a little bit here, but okay, performance optimization project. This is a very, very critical project. When we gave you that ZAR 7 billion target a year ago, we knew behind the scenes, if we do not deliver this, we are not going to deliver the ZAR 7 billion. This is getting significant attention. What I am showing there is in blue. Those are the savings we have or the optimization we have banked to date. ZAR 42 million looks quite small, but I wanted to show it here because there is a reality that these things take time to put into play. What is quite nice, we have ZAR 841 million of like 100 different workstreams we are working on, where we think we can save another ZAR 840 million. We still need to find about ZAR 120 million of ideas to get to the billion.
Over time, I'm hoping in June, you're going to see that ZAR 42 jump a lot. Hopefully that ZAR 841 gets topped up a bit by new ideas. Just to give you also a sense of what we're doing, I mean, a lot of these are productivity ideas more than just cost-cutting ideas. We'll talk about the bank, the three banked savings here. Each of them are just over ZAR 10 million. Firstly, we decommissioned the remaining GetUp activities in Metropolitan, which is the direct-to-consumer business. Cloud infrastructure, I don't know if right-sizing is the right term, but the way I like to explain this is because cloud is a bit new in some areas, different business areas were buying computing, networking, storage separately.
You know, all the areas where like paying retail, we now centralize it where we buy our cloud services as a group, and we then allocate it out. Maybe sometimes guys need to top it up with some 5% retail fees, but at least we're paying wholesale for 85%-90% and retail for the remainder. I mean, that alone is, I think, a ZAR 14 million saving annualized. Also, we had a variety of learning platforms in the business units. Now we're moving to what we think is the best of them. If you look at the stuff we're working on now, the guy who runs this program, Randila, who became a father yesterday, congrats. Yeah, he's given me the most imminent ones rather than the biggest ones. We'll start there.
We basically, this week, next week, we're signing new agreements with like cleaning services, courier, marketing, background checks. That adds up to ZAR 40 million. Immediately that blue doubles through those new contracts. We are pushing back hard on some software providers, and we're also pushing back internal some software users. If you do one PDF a year, we're not paying Adobe Pro license for you, okay? New global operating model, that's actually also happened. That is going to go into the blue. There are going to be some savings with the new way investments are structured. The last one here, also about just over ZAR 10 million saving. Service model in Metropolitan sounds very generic. I'm going to add to it. What's happening here is we're using RPA, Robotic Process Automation, to pay through render climbs. We're using another RPA tool to actually check the payments.
I was joking at the audit committee that historically in accounting, you always had this four eyes principle, like the payer and the checker. Now we've got one robot paying, another robot checking. Okay, hopefully they're two honest robots. Anyway, there's a lot of interesting things going on here. This is a mega project. The last two slides. I always like to add something a bit new here and educational. I was paging through the quarterly returns, which I told the Prudential Authority yesterday, at least they know I read them. I was paging through the quarterly returns, and we got a lot of good data in terms of our business. We often don't share it. I thought, let me take something out here.
It will give you a feel of size of our activities, and it will actually tie to some of the financial numbers just now. In our retail South African life business, we have got ZAR 3.3 million policyholders. There are ZAR 440,000 Myriad policyholders paying about ZAR 2,000 a month on average in premiums. We have got ZAR 840,000 funeral policyholders in Metropolitan paying about ZAR 400 on average. ZAR 400 sounds a bit high, but it also reflects the fact that I think Metropolitan operates a little bit higher in the income range than some of the other competitors in this market. Endowments, ZAR 1.2 million of them. My first job was at Norwich Life in 1994 in Claymont. Actually, our workforce told me endowments would not be around in 20 years. Unit trust would do it all. Now we have got ZAR 1.2 million contracts 31 years later.
Average premiums are actually quite low here because a lot of these are paid up. That is the one sad reality. A lot of these endowments, a lot of the contracts got paid up. RA business quite steady, probably about ZAR 800 a month average contribution. Universal life shrinking at 4% in six months. I mean, this is the closed book. Also note, the ZAR 100,000 contracts is 3% of the ZAR 3.3 million. The number of contracts is the same as the CSM 3%. It is quite nice how these operational metrics tie up to some of the financials. Annuities with ZAR 170,000 in newtons, they average more than ZAR 1,000,000 each. We only sell 1,000 annuities a month, whereas we sell 1,000 other policies a day. The average size illustrates how important each annuity is.
If we start selling ZAR 100 or ZAR 200 less annuities a month, we'll notice. We sell ZAR 100 or ZAR 200 less funeral a month. Even Peter won't notice, I don't think. Okay, now if the policy count is flat, why is our business growing? Okay, it's because the average policyholder is paying us more. Okay, so the premium income is growing while the policy count is flat. I think Myriad is a beautiful example. Might be the only example because I'm five minutes over. In this six months, the inforced premiums in Myriad went from ZAR 9.6 billion to just sort of ZAR 9.95 billion. Again, annualized growth of 8%. Okay, on a flat book, why is that? It's because of the very good alterations experience. I mentioned, we often mention, we say things like alteration experience positive, good alterations. This is a good example.
That's annualized ZAR 900 million of new benefits bought, okay, in a six-month period. Now that growth rate of 8% is equal to the 8% CSM growth earlier. Okay, so it ties up nicely here. On a flat policy count, we're seeing CSM growth. Funeral, what you're seeing here then on funeral, even though the policy count is slightly down, inforced premiums are slightly up. It's because the new business is coming at higher average premiums and the old business going out. Also, as the quality improvements kick in, the exits will drop from ZAR 450 to ZAR 350 over time. This book will start growing decently. Maybe the only other one to mention here is Universal Life. Funny enough, we do have one product open still that's Universal Life. If anybody's really interested, I'll tell them in one-on-ones.
Because a lot of this business is so old that the exits seem to be maturities, it tends to be planned exits, the persistency is actually good on this book. The premiums are not growing, falling off at the same rate as the policy count. I do not think I will ever show this again, but this was just a fun little run through our landscape. I just wanted to also make the point that the CSM growth rates are not just random. They actually very well tie up to the premium and asset growth in the different product lines. In conclusion, these are excellent financial results. Operating conditions were favorable, but the phrase I used a lot lately is we make our own luck. We had lots of different businesses here. Nobody dropped the ball. Nobody had an own goal.
Nobody shot themselves in the foot. You know, everybody took advantage of the cards that were dealt to them. Okay, and that's why we achieved the growth we got. You know, had we had one or two own goals, maybe the 42% would have been 22%. Who knows? Okay, excellent performance from all the business units. Very happy with the MOM retail VNB improvement. Johan knows, but it was like one of the most common questions always was, why is the VNB negative in MOM retail? You know, I'm glad that's been now dealt with. There are other areas where VNB requires work. Excellent cash generation, very strong balance sheet. Something we have to do for the board is we have to do reverse stress testing. We have to think of scenarios where business goes insolvent. You know, you need a good imagination.
I think we can stand something like an 80% decline in markets. It's like getting very difficult to figure a scenario where we can bankrupt this business, both insolvency and liquidity. Very importantly, congratulations to our employees. I used the words a lot today about positive market variances, favorable weather, good mortality claims, equity markets are like, and so on. Mustn't forget that the main reason for the earnings growth is there's 15,000 people here who work very hard and pull in the same direction. Let's just remember that. The main reason the results are good is because of the employees doing what they should do. Okay, obviously a big thank you to all our other stakeholders like clients and advisors. Okay, thank you, and I'll hand over to Dan.
Thank you, Risto. Thank you very much. As usual, it's time now for some questions and answers from the analysts that have come through our streaming service. A couple of them are, I think we're going to be getting you, Risto, to answer them. There's also some that I'll get to Jeanette. Let's start with those that are for you, Risto, and then take them one by one. From Rozendal Partners , we've got a question by Wilhelm Hertzog . He says, can you provide some color on the improvement in business quality in Metropolitan? Persistence experience in this market seems to have varied quite widely between different players in the industry in recent months. What has driven the good result in Metropolitan and why are some of the others struggling on this front?
I mean, Peter's here as well. I don't know if Peter, do you want to answer that because...
Do we have a mic?
Yeah, you can stand here.
Okay, thank you, Dan. Okay, I wasn't hearing myself. When we started with the five-point plan, the one key thing which we needed to make sure that we address was the quality of business. There were a number of things which we said, these are the stuff that are going to improve. One, at that time, our NTU, they were very high. On the other hand, we had to go back and say, can we make sure that when someone has written a policy, we do not go ahead and pay them the commission if we haven't received the first premium? Just by doing that, you reduce your own NTU, and in the end, the persistency also moved into the direction where we wanted.
Secondly, the biggest challenge we were having was the open plan, open funeral schemes, wherein the persistency has been very bad. We reduced the amount of commission we pay you if you write there, which then forces you to go back to the website. Where we have website, because of the relationship that we have with those people, we always have much better persistency. Now people were directed to go to the website. We were also managing them in the website, and the reduction of the NTU ensured that we can be able to see a far much better quality of business.
Thank you very much, Peter. Wilhelm, you can't get more color than that. The next question is from JP Morgan. Actually, there's two questions that are linked I'm going to ask Risto. It's JP Morgan and All Weather Capital.
One is Baron and Gormo, and the other one is Jarred Houston . A lot of capital is being used for share buybacks, which hopefully will continue helping the share price discount to embedded value. Why not invest some of the capital in new growth vectors, like building your own bank or through M&A and giving the structurally high return, what level of discount to EV are you prepared to buy back shares? It's two in one.
Yeah, funny enough, we would like our businesses to consume more capital. The one challenge Jeanette has made to all the business units is to maybe look harder for organic growth opportunities rather than always M&A. On the M&A side, we actually continue to do quite a few small deals behind the scenes. I am looking at Lawrence. He is coming with two small deals now as well.
They're deals that are so small, we don't tend to shout to the world about it, but I'd much rather do five deals of ZAR 200 million at 40% IRRs than one big deal you hear about every two years on a 10% IRR. I think we're actually getting a very good return on the small-scale M&A we're doing continuously. I think we're getting an average IRR well over 20% on that. We're doing a little bit of that. In terms of a bank, I think we generally have a view that building a bank to protect your insurance business is not the right strategy. I mean, obviously, most of our peers disagree with that. I think building a competitive bank is not easy, and the capital amounts are very large.
Yeah, committing ZAR 5 billion to a 12% ROE to protect the life business is just not going to, doesn't make sense. We continue to look at bigger M&A as well. We have basically every asset you've seen our competitors buy. We've been in the process, but we have very strict guidelines for ourselves in terms of what is an acceptable return on capital. At this stage, it looks like most of our competitors are prepared to accept slightly lower IRRs than we are, or maybe they have more optimism about the future. Who knows? We will continue to look out for opportunities. We will continue to encourage business units to ask for money rather than give back to us. If they ask us money to build a bank, we'll probably say no. Yeah, yeah.
Okay.
Yeah, discount to EV. Now, the answer obviously depends a little bit on what do we think the sustainable return on embedded value is. You know, so at the moment, let's say I assume the sustainable discount on EV is, let's say, 13.5%, and the discount is 25%. It means that we're earning about 16%-16.5% on buybacks, which I still think is a reasonable return in light of the quality of the earnings stream we're buying. We know what we're buying, and it's cash generative and things like that. We will ask shareholders' opinions as well. At this stage, I would guess we'll buy back to close to 90% of EV. Last time we sort of canvassed our shareholders on buybacks, they were very supportive of continuing buybacks rather than special dividends. I think the one promise we have made, we'll never hold the cash for very long.
If we do not do buybacks and we have excess capital, we will do special dividends. It is really a question of when we switch over from one to the other.
There is a question about Africa, the operating model review that you mentioned. The question is from Jarred Houston , All Weather Capital. If this review results in a decision to exit, what is the quantum of capital that would be freed up?
I think I will answer it shortly by saying exit is unlikely, highly unlikely. I think it is more about reinvigorating the business. Now, obviously, if we think the return on capital forever is 10%, we will start working on an exit. Our latest plans aim to improve the ROE quite a bit. Ask that question in five years if the ROE is still 10%, but for now, we are staying in Africa.
Okay, staying in Africa. Marius Strydom from Austin Lawrence Gidon says, well done with an excellent set of results. Your insightful IFRS 17 granular and key metrics disclosure, Risto. He says you're carrying India at only ZAR 2.6 billion with break-even imminent. How much valuation upside is there, including with reference to listed peers?
Yeah.
Yeah, I tell him not to move.
Yeah, Marius, thank you. That's a very kind question. Yeah, I mean, we all know that India is like the most exciting place for capital right now globally. The valuations are very high. I'm glad you asked me the question compared to listed peers because at least we got some metrics. I mean, in India, the insurance companies tend to trade on multiples of premiums, you know, not multiples of profits. We get feedback from our India team every six months or so comparing our valuation to the listed companies.
On that basis, that two-odd billion becomes closer to ZA R 5 billion- ZA R 6 billion. The current view is that if we were to list a business, we will probably get back two to three times the capital invested. That will be, yeah, obviously welcome. I think an IPO is not imminent. Obviously, we would like to do an IPO in due course. Let's hope the India multiples are where they are now when we do the IPO. Good question from Marius. It's true. If you apply India valuation to that business, it's substantially more than the historic cost that we're carrying it.
Okay, two last questions for you, Risto. Metropolitan, again, what level of NHE could you achieve if you get the VNB margin above 4%? That's from Warwick Bam.
Warwick, that's actually a question. It also depends when you get to the 4%. Yeah, probably ZA R 800 million. I mean, it depends like if I think in two years from now. Yeah, it could be there.
Okay.
Yeah.
T hen we've got Obsidian Capital, Royce Long wants to know that their commentary notes yield curve shifts contributed to earnings in this period. Are you able to give a value of these gains? It looks like the yield curve has shifted in the opposite direction post the reporting period.
Yeah, so we mentioned market variances of about, let's say, just under ZA R 600 million. Probably ZA R 100 million odd is credit outcomes were better than expected. Maybe another ZA R 100 million is from equity markets. Maybe another ZA R 100 million from higher working capital interest. Yield curve shifts is probably half of that. So ZA R 250 million- ZA R 300 million. The curves have moved back a little bit since year-end.
What I noticed when I looked at the data is the yields actually continued falling in January. When the issues with the U.S. started, they sold out. They are up a lot from the bottom in January. They are not up as much in the year-on-year. We do get a monthly report from the ALM team. The ALM result is not that poor for the first two months of the year. Royce, I would say worst-case outcome, we go from + 250 to maybe - 150. Also, what is maybe important to note here is we are running a lower ALM mismatch across our book than we were under IFRS 4 results. That means our hedging activities tend to be a little bit more, what I say, we tend to hedge out more to volatility.
Okay, thank you, Risto. You can have a seat. I think the squeeze is enough out of your thing. The next question, the last two questions are going to go to Jeanette. Jeanette, the question comes from RMB Morgan Stanley's Warwick Balm. Where are you experiencing the most competitive pressure? And do you think this competitive pressure could have a meaningful impact on sales volumes in the next six months?
My whole team's here. I'm waiting for someone to jump up. Because I mean, that's what they say every day. You know, like everyone's always moaning and saying we're not winning and then we are. I think in Dumo's world, for sure, we see actually not as much activity in terms of new business, but actually a lot of re-quoting and the margin pressure there is definitely. Now, you know, Dumo did start telling us this two years ago. It hasn't yet come through.
Between me and Risto, we keep on telling him and hold on as much as you can. I think in Dumo's world, certainly, probably the area that we see most of that pressure coming through. You only asked me to answer it for one, so I think I'll stick to that one. You know, Fadi, I think in the investments world, the investments world is always competitive. It always has been. Again, our business seemed to be doing really, really well and holding up in terms of that very well.
Okay, last question from an employee as we close. Risto did thank the employees for their role as well in contributing to the set of results. One of our call centers as an employee wants to know, and this is what, and I'm quoting, we have worked hard over the two pot. Are we worried about all the money going out?
Of course, we are always worried about the money going out. I think from, you know, my heart that's with clients, we're probably more worried about the impact on clients' ability to retire in the long run than what we are worried about our bottom line. The outflows for us have actually been quite a bit less. Rowan is here. He quoted a number yesterday that I've forgotten. Probably about 30%-40% lower than what we modeled way back when we were still anticipating and building. It has been lower. I think the great concern for us is the number of clients. What is it? Over 400,000 clients who actually came and made withdrawals. We've also seen a pickup in activity now from the 1st of March. By far not as much as it was in September.
What is concerning is that it is actually clients returning for the second time. If you then think about the fact that that average age is, you know, 45 +, it does not leave those clients with a lot of time to actually then make up again for the money that they've withdrawn. At the moment, I can honestly say we've not felt, you can see it in the results, that it had a massive impact on us as a business and our profitability. We certainly are worried about the well-being of clients.
Thank you very much, Jeanette. Let's give you a round of applause and thank you to Risto as well. Thank you very much.
I mean, we've come to the end of the presentation and the question and answers and thanks to the investor analysts and everybody who's asked the question and the employee as well. It is a long weekend with Human Rights Day tomorrow. I'm sure many of you have got plans. Be safe, enjoy. Once again, Jeanette and your team, well done on this excellent set of results. I'm using the word exceptional. Thank you very much.