| Thu 8 Nov 2007, 9:35 | | MAF / MTF - Mutual & Federal - Operational update, |
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MAF / MTF - Mutual & Federal - Operational update, special capitalisation
award and further cautionary announcement
Mutual & Federal Insurance Company Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1970/006619/06)
("Mutual & Federal" or "the Company")
Share code JSE: MAF & ISIN: ZAE000010823
Share code NSX: MTF
OPERATIONAL UPDATE, SPECIAL CAPITALISATION AWARD AND FURTHER CAUTIONARY
ANNOUNCEMENT
1. OPERATIONAL UPDATE
Trading conditions within the short-term insurance industry remain highly
competitive. In spite of this, satisfactory growth in premiums and
improved risk selection combined with generally lower levels of claims,
resulted in a significant improvement in the underwriting result for the
Company in the third quarter from the results reported at half year.
The year to date underwriting surplus is accordingly satisfactory despite
the sharp increase in the frequency of commercial fire claims in the
second quarter, and the underperformance of the motor account due to high
levels of accidents and escalating repair costs. The underwriting surplus
was influenced positively by a release of R72 million (September 2006:
R62 million) from technical reserves following further refinements of
estimation methods. The consistently strong performance of shares listed
on the JSE Limited ("JSE") has caused the Company to change its internal
long term rate of return for attributing investment income from 11,1% to
15,6% and this added R189 million to operating profits.
The Board of Directors of Mutual & Federal ("the Board") advises that
short-term insurance results fluctuate and the results for the first nine
months are not necessarily indicative of expectations for the full year.
Results for the full year will be published in the second week of
February 2008.
RESULTS SUMMARY AT 30 SEPTEMBER 2007
Rm 2007 2006
(9 months) (9 months)
Gross premium income 7,018 6,426
Net earned premiums 5,816 5,463
Underwriting surplus 298 238
Underwriting ratio 5,1% 4,4%
Adjusted operating profit 928 696
Solvency ratio 49% 44%
Return on capital 33,5% 23,4%
2. POTENTIAL OFFER FOR THE SHARES OF THE COMPANY
Shareholders are referred to the cautionary announcement issued by the
Company on 5 November 2007.
The Board has been informed that the Company`s controlling shareholder,
Old Mutual plc ("Old Mutual"), is in discussions with a community
investment company, Royal Bafokeng Holdings (Proprietary) Limited
("RBH"), which may result in an offer being extended to all shareholders
("the potential offer") as a result of which RBH would acquire a majority
interest in the Company.
Subject to the satisfaction of certain conditions, it is expected that
these discussions will result in RBH submitting to the Company a "Firm
Intention to Make an Offer" to all shareholders in mid-December 2007. The
offer documents are expected to be posted to shareholders by mid-January
2008. If this offer is successful, RBH would become the majority
shareholder. The potential offer will be in the form of a tender offer
extended by RBH to all shareholders to acquire their shares in the
Company. Shareholders will not be obliged to dispose of their shares in
the Company. It is anticipated that the Company will, subject to the
listing requirements of the JSE and the Namibian Stock Exchange, remain
listed on the respective stock exchanges.
Based on the indicative terms presented by RBH to Old Mutual in the
potential offer, the indicative cash offer for this transaction is:
- R27,50 per share ("the base offer price"); less
any distributions paid to shareholders (including the distribution
referred to in paragraph [4] below) and resultant tax charges; plus
- a price escalation calculated at a rate of 7% per annum from 8
November 2007 until the settlement date of the offer consideration.
The base offer price is approximately 5% above the 30 day volume weighted
average market price ("VWAP") to 2 November 2007 (being the last trading
day immediately preceding the issue of the first cautionary
announcement).
3. BACKGROUND TO RBH
RBH is the primary investment vehicle of the Royal Bafokeng Nation, a
community of approximately 300 000 Tswana-speaking people with
substantial holdings of mineral rich land in the North West province.
RBH has significant capital derived from the leasing of mining rights to
the largest platinum mining companies in South Africa. RBH intends to
diversify its income stream by investing in assets such as property,
industrial and financial services companies.
The intended acquisition of a majority stake in Mutual & Federal
represents an opportunity to develop this strategy.
4. CAPITALISATION AWARD AND SPECIAL DIVIDEND
The solvency level in the Company has increased to 49% due to positive
trading results and strong investment markets. In order to enhance the
efficiency of its capital structure, the Board has resolved to return
excess capital to its shareholders by way of a special capitalisation
award with a special cash dividend alternative. This will accrue to
shareholders on the record date irrespective of whether or not the
potential offer is successfully implemented.
The value in aggregate of the award is R580 million, which translates to
200 cents per share.
After this award the solvency ratio on an international basis will be
approximately 44%, which in the opinion of the Board more than adequate
to fund expansion and growth.
Ordinary shareholders will be entitled, in respect of all or part of
their shareholding, to elect to receive new fully paid ordinary shares
which shares will be issued only to those ordinary shareholders who elect
in respect of all or part of their shareholding, on or before 12h00 on
Friday, 14 December 2007 to receive the capitalisation award shares
("capitalisation award election"). The number of capitalisation shares to
which shareholders are entitled will be determined in the ratio that 200
cents per ordinary share bears to the 30 day VWAP for the Company`s
share, calculated up to and including 29 November 2007. Shareholders not
electing to receive new fully paid ordinary shares in respect of all or
part of their shareholding will be entitled to receive a special cash
dividend alternative of 200 cents per ordinary share ("cash dividend
alternative").
5. SALIENT DATES
In accordance with the provisions of Strate, the electronic settlement
and custody system used by JSE Limited, the relevant dates for the
capitalisation award election and the cash dividend alternative are as
follows:
Activity Date
Last day to trade to participate Friday 7 December 2007
in the capitalisation award
election or the cash dividend
alternative on
Shares trade ex the capitalisation Monday 10 December 2007
award election and the cash
dividend alternative on
Listing of the maximum number of Monday 10 December 2007
new ordinary shares to be taken up
in terms of the capitalisation
award election on
Last day to elect to receive Friday 14 December 2007
capitalisation award shares,
failing which you will receive the
cash dividend alternative by 12:00
on
Record date to participate in the Friday 14 December 2007
capitalisation award election or
receive the cash dividend
alternative on
Cheque mailed or cash Tuesday 18 December 2007
electronically transferred to
certificated shareholders
participating in the cash dividend
alternative in respect of all or
part of their shareholding, on or
about
Dematerialised shareholders Tuesday 18 December 2007
participating in the cash dividend
alternative in respect of all or
part of their shareholding, will
have their accounts at their
central securities depository
participant ("CSDP") or broker
credited with the cash dividend on
New share certificates issued and Tuesday 18 December 2007
posted to certificated
shareholders participating in
the capitalisation award election
in respect of all or part of their
shareholding, on or about
Dematerialised shareholders Tuesday 18 December 2007
participating in the
capitalisation award election in
respect of all or part of their
shareholding, will have their
accounts at their CSDPs or broker
updated with the new shares on
The maximum number of new shares Friday 21 December 2007
listed in terms of the
capitalisation award election
adjusted to reflect the actual
number of shares issued in terms
of the capitalisation award
election on
Note:
5.1 Share certificates may not be dematerialised or rematerialised between
Monday, 10 December 2007 and Friday, 14 December 2007, both days
inclusive.
5.2 The above dates are subject to change. Any such changes will be
published on the Securities Exchange News Service of the JSE ("SENS") and
in the press.
5.3 Details of the ratio will be published on SENS not later than 11:00 on 30
November 2007 and in the press the following business day.
5.4 Trading in the Strate environment does not permit fractions and
fractional entitlements. Accordingly, where a shareholder`s entitlement
to new ordinary shares calculated in accordance with the above formula
gives rise to a fraction of a new ordinary share, such fraction will be
rounded up to the nearest whole number where the fraction is greater than
or equal to 0,5 and rounded down to the nearest whole number where the
fraction is less than 0,5.
A circular relating to the capitalisation award election and the cash
dividend alternative will be posted to shareholders on or about 23
November 2007.
6. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue to exercise caution when dealing in
the Company`s shares until further announcements have been made in regard
to the potential offer.
Johannesburg
8 November 2007
Co-sponsors
Merrill Lynch South Africa (Proprietary) Limited
Nedbank Capital
Merchant Bank and transaction sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 08/11/2007 09:00:02 Supplied by www.sharenet.co.za
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