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SNT
SNT
SNT - Santam Limited - Abridged financial report for the year ended 31 December
2007
SANTAM LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 1918 / 001680 / 06
ISIN: ZAE000096854 & SHARE CODE: SNT
Abridged Financial Report for the year ended 31 December 2007
ANNUAL RESULTS
SANTAM LIMITED AND ITS SUBSIDIARIES
for the year ended 31 December 2007
HIGHLIGHTS
- Core SA underwriting business performing well
- Strong cash flows generated
- Special dividend of 2 200 cents per share paid in December
- Capital restructuring completed
- BBBEE transaction progressing as planned
CONSOLIDATED BALANCE SHEETS
Audited Audited
Notes At 31 Dec At 31 Dec
07 06
R million R million
ASSETS
Non-Current assets
Property and equipment 38 59
Intangible assets 135 108
Deferred income tax 40 27
Investments in associates 175 215
Financial assets - at fair value
through income
Equity securities 3 4 454 5 435
Debt securities 3 2 901 2 106
Current assets
Reinsurance assets 2 026 2 080
Deferred acquisition costs 239 211
Loans and receivables including
insurance receivables 3 1 947 1 394
Income tax assets 27 39
Cash and cash equivalents 3 445 5 142
Non-current assets classified as
held for sale 2 060 -
Total assets 17 487 16 816
EQUITY
Capital and reserves attributable to
the company`s equity holders
Share capital 105 71
Treasury shares 5 (726) -
Other reserves 1 147 1 119
Distributable reserves 3 448 5 437
Amounts recognised directly in 71
equity relating to non-current
assets classified as held for sale -
4 045 6 627
Minority interest 133 123
Total equity 4 178 6 750
LIABILITIES
Non-Current liabilities
Deferred income tax 91 297
Financial liabilities - at fair
value through income
Debt securities 6 908 -
Investments contracts 525 276
Derivative 3 47 -
Financial liabilities - at amortised
cost
Cell-owners interest 336 329
Current liabilities
Insurance liabilities 7 630 7 694
Deferred reinsurance acquisition
revenue 99 74
Provisions for other liabilities and
charges 87 148
Trade and other payables 1 492 1 213
Current income tax liabilities 488 35
Liabilities directly associated with
non-current assets classified as
held for sale 1 606 -
Total liabilities 13 309 10 066
Total shareholders` equity and
liabilities 17 487 16 816
In the 2007 balance sheet the European insurance operations are presented in
term of IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations.
CONSOLIDATED INCOME STATEMENTS
Audited Change
Year ended Audited %
Notes 31 Dec 07 Year ended
R million 31 Dec 06
R million
CONTINUING OPERATIONS
Gross written premium 13 173 12 115 9%
Less: reinsurance premium 2 254 2 011
Net premium 10 919 10 104 8%
Less: change in unearned
premium
Gross amount 330 390
Reinsurers` share (127) 62
Net insurance premium revenue 10 716 9 652 11%
Investment income 7 666 508 31%
Income from reinsurance 306 342
contracts ceded
Net gains on financial assets 1 205
and liabilities at fair value 454 (62%)
through income
Net income 12 142 11 707 4%
Insurance claims and loss 8 552 7 619
adjustment expenses
Insurance claims and loss (999)
adjustment expenses recovered
from reinsurers (1 250)
Net insurance benefits and
claims 7 302 6 620 10%
Expenses for the acquisition 1 794 1 701
of insurance contracts
Expenses for marketing and
administration 1 262 1 046
Expenses for asset management 27
services rendered 46
Amortisation of intangible
assets 2 2
Expenses 10 387 9 415 10%
Results of operating 1 755 2 292 (23%)
activities
Finance costs (45) (7)
Share of profit of associates 76 105
Profit before tax 1 786 2 390 (25%)
Income tax expense 8 (542) (593)
Profit for the year from
continuing operations 1 244 1 797 (31%)
DISCONTINUED OPERATIONS
(Loss)/Profit for the year
from discontinued operations 4 (168) 70 (338%)
Profit for the year 1 076 1 867 (42%)
Attributable to:
- equity holders of the (43%)
company 1 050 1 844
- minority interest 26 23
1 076 1 867
Earnings attributable to
equity shareholders
Earnings per share (cents) 11
Basic earnings per share 924 1 574 (41%)
Diluted earnings per share 914 1 553 (41%)
Headline earnings per share 906 1 555 (42%)
Diluted headline earnings per 897 1 535 (42%)
share
Weighted average number of 113.67 117.13
shares - millions
Weighted average number of 114.81 118.71
ordinary shares for diluted
earnings per share - millions
Dividend per share (cents) 410 380
Special dividend per share (cents) 2 200 -
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the company
Share Treasury Other Distributable
Capital shares reserves reserves
R million R million R million R million
Balance as at 42 - 763 4 922
1 January 2006
Share issue 29 - - -
Profit for the year - - - 1 844
Transfer to reserves - - 177 (177)
Share-based payments - - - 13
Currency translation - - 179 -
differences
Dividends paid - - - (1 165)
Additional interest - - - -
acquired by
minorities
Balance as at 71 - 1 119 5 437
31 December 2006
Share issue 34 - - -
Net purchase of - (726) - -
treasury shares
Profit for the year - - - 1 050
Transfer to reserves - - 93 (93)
Share-based payments - - - 14
Currency translation - - 6 -
differences
Dividends paid - - - (2 960)
Interest acquired by - - - -
minorities
Amounts recognised - - (71) -
directly in equity
relating to non-
current assets
classified as held
for sale
Balance as at 105 (726) 1 147 3 448
31 December 2007
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Minority Total
interest
Amounts
recognised
directly
in equity
relating to
non-current
assets
held for sale
R million R million R million
Balance as at - 125 5 852
1 January 2006
Share issue - - 29
Profit for the year - 23 1 867
Transfer to reserves - - -
Share-based payments - - 13
Currency translation - - 179
differences
Dividends paid - (20) (1 185)
Additional interest - (5) (5)
acquired by minorities
Balance as at - 123 6 750
31 December 2006
Share issue - - 34
Net purchase of treasury - - (726)
shares
Profit for the year - 26 1 076
Transfer to reserves - - -
Share-based payments - - 14
Currency translation - - 6
differences
Dividends paid - (17) (2 977)
Interest acquired by - 1 1
minorities
Amounts recognised 71 - -
directly in equity
relating to non-current
assets classified as
held for sale
Balance as at 71 133 4 178
31 December 2007
CONSOLIDATED CASH FLOW STATEMENTS
Audited
Year ended Audited
Notes 31 Dec 07 Year ended
R million 31 Dec 06
R million
Cash generated from operations 2 139 2 203
Interest paid (45) (7)
Income tax paid (288) (606)
Net cash from operating activities 1 806 1 590
Cash flows from investing activities
Cash utilised in investment activities (197) (390)
Acquisition of subsidiary, net of cash 9 (61) (30)
acquired
Proceeds from sale of subsidiary, net of - 183
cash sold
Cash acquired/(sold) through the (188)
acquisition/ sale of subsidiary 52
Purchases of equipment (32) (18)
Proceeds from sale of equipment 3 1
Capital refund from associated companies - 1
Proceeds from sale of associated companies 21 23
Acquisition of book of business (2) (2)
Net cash from investing activities (216) (420)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 34 29
Purchase of treasury shares (726) -
Increase in debt securities 964 -
Increase in investment contract 230 -
liabilities
Dividends paid to company`s shareholders (2 960) (1 165)
Dividends paid to minorities (17) (20)
Increase in cell-owners` interest 8 61
Net cash used in financing activities (2 467) (1 095)
Net (decrease)/increase in cash and cash (877) 75
equivalents
Cash and cash equivalents at beginning of 5 142 4 927
year
Exchange (losses)/gains on cash and cash (8) 140
equivalents
Cash and cash equivalents at end of year 4 257 5 142
Non-current assets classified as held for (812) -
sale
Cash and cash equivalents at end of year - 3 445 5 142
Continuing operations
Cash flows relating to discontinued
operations
Included in the above are the following
cash flows from discontinued operations
Operating cash flows 233 197
Investing cash flows (25) (15)
Financing cash flows (197) -
Net increase in cash and cash equivalents 11 182
Cash and cash equivalents at beginning of 808 515
year
Translation (losses)/gains on cash and (7) 111
cash equivalents
Cash and cash equivalents at end of year 812 808
NOTES TO THE ABRIDGED FINANCIAL REPORT
1. Basis of presentation and accounting policies
The consolidated financial statements for the year ended
31 December 2007 are prepared in accordance with International
Financial Reporting Standards (IFRS), IAS34 - Interim Financial
Reporting and in compliance with the Listing Requirements of the
JSE Limited. These are the group`s abridged consolidated
financial statements for the period for which annual financial
statements are prepared in terms of IFRS. The abridged
consolidated financial statements do not include all of the
information required by IFRS for full annual financial
statements.
The principal accounting policies used in preparing the audited
results for the year ended 31 December 2007 are consistent with
those applied in the annual financial statements for the year
ended 31 December 2006 in terms of IFRS.
In the 2007 balance sheet and income statement, the European
insurance operations are presented in terms of IFRS 5 -
Non-current Assets Held for Sale and Discontinued Operations.
The comparatives for 2006 have been restated on the income
statement.
2. Segment report
To ensure more meaningful disclosure, only the continuing
activities are reported on a segmented basis below.
2.1 For the year ended 31 December 2007
Business activity Insurance Investment Total
Activities Activities R million
R million R million
Gross written premium 13 173 13 173
Net written premium 10 919 10 919
Net earned premium 10 716 10 716
Claims incurred 7 302 7 302
Net commission 1 488 1 488
Management expenses 1 262 1 262
Underwriting result 664 - 664
Investment return on 319 319
insurance funds
Net insurance result 983 - 983
Investment income net 729 729
of management fee and
finance costs
Income from associates 76 76
Amortisation of (2) - (2)
intangible asset
Income before taxation 981 805 1 786
Total assets 7 897 7 530 15 427
Total liabilities 10 724 979 11 703
Insurance class Gross Under- Total Total
written writing Assets Liabili-
premium result R million ties
R million R million R million
Accident and health 331 12 33 138
Alternative risk 1 780 50 456 1 880
Crop 436 (87) 114 254
Engineering 508 201 64 240
Guarantee 20 30 22 37
Liability 1 068 301 891 1 994
Miscellaneous 27 (1) 9 26
Motor 4 941 164 60 1 135
Property 3 719 (10) 542 1 769
Transportation 343 4 74 258
Unallocated - - 13 162 3 972
Total 13 173 664 15 427 11 703
Comprising:
Commercial insurance 6 600 558 1 798 4 978
Personal insurance 4 793 56 11 873
Alternative risk 1 780 50 456 1 880
Unallocated - - 13 162 3 972
Total 13 173 664 15 427 11 703
2.2 For the year ended 31 December 2006
Business activity Insurance Investment Total
Activities Activities R million
R million R million
Gross written premium 12 115 12 115
Net written premium 10 104 10 104
Net earned premium 9 652 9 652
Claims incurred 6 620 6 620
Net commission 1 359 1 359
Management expenses 1 046 1 046
Underwriting result 627 - 627
Investment return on 250 250
insurance funds
Net insurance result 877 - 877
Investment income net - 1 410 1 410
of management fee and
finance costs
Income from associates - 105 105
Amortisation of (2) - (2)
intangible asset
Income before taxation 875 1 515 2 390
Total assets 7 975 7 046 15 021
Total liabilities 8 995 22 9 017
Gross Under- Total Total
written writing Assets Liabili-
R million R million R million ties
R million
Insurance class
Accident and health 316 20 31 123
Alternative risk 1 416 18 244 1 591
Crop 360 40 98 194
Engineering 476 77 325 538
Guarantee 26 32 48 64
Liability 809 58 700 1 494
Miscellaneous 124 65 40 107
Motor 4 574 248 64 956
Property 3 724 5 555 1 525
Transportation 290 64 46 178
Unallocated - - 12 870 2 247
Total 12 115 627 15 021 9 017
Comprising:
Commercial insurance 6 194 552 1 880 4 447
Personal insurance 4 505 57 27 752
Alternative risk 1 416 18 244 1 591
Unallocated - - 12 870 2 247
Total 12 115 627 15 021 9 017
Audited
At 31 Dec 07 Audited
R million At 31 Dec 06
R million
3. Financial assets at fair value
through income
The group`s financial assets are
summarised below by measurement
category.
Fair value through income 7 308 7 541
Loans and receivables 1 947 1 394
Total financial assets 9 255 8 935
Financial assets at fair value
through income
Equity securities
- quoted 4 434 5 415
- unquoted 20 20
4 454 5 435
Derivative
- Interest rate swaps (47) -
Debt securities
- quoted
government and other bonds 1 322 1 339
money market instruments 851 -
(long-term instruments)
- unquoted
bonds 1 1
redeemable preference shares 727 766
2 901 2 106
Financial assets at fair value 7 308 7 541
through income
4. Non-current assets held for sale and discontinued operations
The assets and liabilities relating to Santam Europe Limited and
Westminster Motor Insurance Association have been presented as
"held for sale" following approval by the Santam board to
dispose of both these operations within the next 12 months.
Analysis of the result of
discontinued operations
Gross written premium 932 622
Net premium 872 580
Net insurance premium revenue 641 551
Net investment and reinsurance 82 92
income
Net insurance benefits and 725 417
claims
Expenses 188 134
(Loss)/Profit before tax (190) 92
Income tax 22 (22)
(Loss)/Profit for the year from (168) 70
discontinued operations
5. Treasury shares
A subsidiary in the group acquired 6 972 940 Santam shares
through a voluntary share buy-back offer on 20 April 2007 at R102
per share. A further 174 346 shares were bought in the market at
an average price of R110 per share. 60 118 shares were reissued
in terms of the executive share purchase plan at R110 per share.
The shares are held as treasury shares and are measured at cost.
The company has the right to reissue these shares at a later date
subject to approval by the JSE and the Regulator.
6. Debt securities - at fair value
through income
Debentures issued 955 -
Fair value adjustment (47) -
908 -
During May 2007, the company issued unsecured subordinated
callable notes to the value of R600 million under its R1.2
billion note programme as alternative capital in terms of its
capital optimisation strategy. A further issue of R400 million
was placed on open tender in the market during November 2007.
The fixed effective rate for the R600 million issue was 8.6% and
9.6% for the second tranche of R400 million, representing the
R203 companion bond plus an appropriate credit spread at the time
of the issues. The fixed coupon rate, based on the nominal value
of the issues, amounts to 8.25% and for both tranches the
optional redemption date is 15 September 2017. Between the
optional redemption date and final maturity date of 15 September
2022, a variable interest rate (JIBAR-based) plus additional
margin will apply.
Per the conditions set by the Regulator, Santam is required to
maintain liquid assets equal to the value of the callable notes
until maturity. The callable notes are therefore measured at fair
value to minimise undue income statement volatility. The
valuation is based on the R203 companion bond.
7. Investment income
Dividend income 262 192
Interest income 402 308
Foreign exchange differences 2 8
666 508
8. Income tax expense
South African normal taxation
Current year 716 578
Charge for the year 464 465
STC 252 113
Prior year 30 (42)
Foreign taxation 18 8
Income taxation for the year 764 544
Deferred taxation (222) 49
Current year (206) 41
STC (16) -
Prior year - 8
Total taxation as per the income 542 593
statement
9. Business combinations
On 9 April 2007 the group increased its investment in Admiral
Professional Underwriting Agency (Pty) Ltd from 28.9% to 70% and
on 8 November 2007 to 100%.
Purchase consideration paid 61 -
Less: Net asset value acquired (16) -
Investment in associated share 7 -
previously acquired
Goodwill 52 -
10. Broad-based Black Economic Empowerment (BBBEE)
In February 2007, Santam formally announced its intention to
facilitate the acquisition, by a special purpose company ("BEE
SPV Co"), of an effective 10% ownership in Santam. In terms of
this scheme, Santam shareholders sold 10% of their Santam
shares, held by them as at 21 May 2007, to BEE SPV Co for a cash
consideration of R82 per share. Following the implementation of
the scheme, the BEE SPV Co is now the registered holder of
approximately 10% of the issued shares of Santam (excluding
treasury shares). In turn, the shares of BEE SPV Co are held by
three trusts:
- 26% by the Santam Black Economic Empowerment Staff Trust
("Staff Trust")
- 25% by the Santam Broad-based Black Economic Empowerment
Community Trust ("Community Trust")
- 49% by the Santam Black Economic Empowerment Business
Partners Trust ("Business Partners Trust")
The acquisition of the shares by BEE SPV Co was funded by a R430
million preference share facility from Sanlam Capital Markets
Limited and a bridging loan of R490 million from Sanlam Life
Insurance Ltd. The BEE SPV Co will refinance the bridging loan
with permanent funding when it becomes due in March 2008.
Dividends received by BEE SPV Co from the Santam scheme shares
are used to service the debt.
The Santam scheme shares held by BEE SPV Co will be "locked-in"
to the SPV until 28 February 2015. Post the "lock-in" period:
- A major portion of the Santam shares will be sold to settle
all outstanding debt.
- All remaining Santam shares will be distributed by BEE SPV Co
as dividends in specie to the three trusts.
- The three trusts will distribute the remaining Santam shares
to participants in accordance with the rules of each trust.
The Staff Trust successfully made the first allocations to
Santam staff during the first week of December 2007. Allocations
were made in the form of units in the Staff Trust. A share-
based payment cost of R1 million was recognised as an expense in
the 2007 annual financial statements. This represents the
proportionate charge for the allocation made to staff under the
Staff Trust in December 2007. No share-based payment cost are
recognised in respect of the Community or Business Partners
Trust in the 2007 financial year as no allocations were made by
31 December 2007.
As the newly-created BEE SPV Co is not controlled by Santam in
terms of the requirements as defined by SIC 12- special purpose
entities, the entity is not consolidated into Santam`s results.
Audited Audited
Year ended Year ended
31 Dec 07 31 Dec 06
11. Earnings per share
Basic earnings per share
Profit attributable to the 1 050 1 844
company`s equity holders
(R million)
Weighted average number of 113.67 117.13
ordinary shares in issue
(million)
Earnings per share (cents) 924 1 574
Earnings per share - Continuing 1 071 1 514
operations (cents)
Earnings per share - Discontinued (147) 60
operations (cents)
Diluted earnings per share
Profit attributable to the 1 050 1 844
company`s equity holders (R
million)
Weighted average number of 113.67 117.13
ordinary shares in issue
(million)
Adjusted for share-options 1.14 1.58
Weighted average number of
ordinary shares for
diluted earnings per share 114.81 118.71
(million)
Diluted basic earnings per share 914 1 553
(cents)
Diluted basic earnings per share 1 061 1 494
- Continuing operations (cents)
Diluted basic earnings per share (147) 59
- Discontinued operations (cents)
Headline earnings per share
Profit attributable to the 1 050 1 844
company`s equity holders
Adjusted for:
Profit on sale of subsidiaries (20) (22)
and associates
Headline earnings (R million) 1 030 1 822
Weighted average number of 113.67 117.13
ordinary shares in issue
(million)
Headline earnings per share 906 1 555
(cents)
Headline earnings per share - 1 054 1 495
Continuing operations (cents)
Headline earnings per share - (148) 60
Discontinued operations (cents)
Diluted headline earnings per
share
Headline earnings (R million) 1 030 1 822
Weighted average number of 114.81 118.71
ordinary shares for diluted
earnings per share (million)
Diluted headline earnings per 897 1 535
share (cents)
Diluted headline earnings per 1 043 1 476
share - Continuing operations
(cents)
Diluted headline earnings per (146) 59
share - Discontinued operations
(cents)
COMMENTS
The year under review has been challenging, marked by varying degrees of
success. From an underwriting perspective the group did very well in its core
Southern African operations, showing an increase in both underwriting profit and
net insurance result against 2006. The performance of the international business
was however disappointing. Because of the group`s exposure to equity
instruments, its investment results were negatively affected by the recent
turmoil in financial markets. Although investment income for the year exceeded
expectations, it ended well below the exceptional levels of 2006. The company
successfully concluded its capital restructuring programme during 2007. The STC
charge on the special dividend amounted to R245 million, impacting on earnings.
Headline earnings of R1 030 million were 42% lower than the previous year,
equating to headline earnings per share of 906 cents compared to 1 555 cents in
2006.
In the Southern African operations, excluding cells, Santam achieved an 8%
increase in gross written premiums. Given the soft market and the corrective
action taken by Santam to retain and procure quality business this is a pleasing
result. Growth was achieved across most business classes.
Underwriting margins for the year were in line with 2006, although the second
half of the year proved to be more difficult than the first, due to several
catastrophic events, the largest being the floods in the Southern Cape. A number
of very large corporate industrial claims adversely affected the property and
engineering business classes. Fortunately the timely corrective action taken in
personal lines yielded significantly improved results. Underwriting results
amongst the specialist business classes varied. Liability business was very
profitable whilst our marine business incurred some large losses in the earlier
part of the year. Crop insurance resulted in large losses due to severe drought
conditions and high incidences of hail in the summer rainfall areas. As part of
Santam`s ongoing assessment of insurance liabilities in terms of claims
experience, the level of the incurred, but not reported (IBNR) reserve, was
reduced by a further R30 million in the second half of the year, totalling a
reduction of R65 million for the full year. The net acquisition cost ratio of
25.7% increased slightly due to initial expenditure on the large strategic
projects.
The net underwriting result of R664 million (2006: R627 million) of the
continuing operations exceeded expectations and the overall net underwriting
margin was 6.2% against the 6.5% for 2006. Having reached optimum retention
levels at an acceptable risk profile, the level of reinsurance earned premium
was 16.5% of gross earned premium compared to 17.6% for 2006. If the impact of
cell business is excluded, the ratio for the year decreased to 8.2% from 11.5%
in 2006.
The underwriting performance of the international operations suffered an after-
tax loss of R168 million for the year compared to a R70 million profit in 2006.
As reported in our operational update issued in November 2007, the Dublin-based
operation had not performed according to expectations and was consequently put
into formal runoff. Westminster Motor Insurance Association (WMIA) continued to
operate in an increasingly competitive UK motor market with resultant pressure
on premium rates and incurred substantial underwriting losses. After careful
consideration of Santam`s long-term strategic objectives it was decided to
divest from its European operations. The process is well advanced and the
operations of WMIA and Santam Europe are accordingly now treated as
"Discontinued operations" as defined by IFRS 5 - Non-current Assets Held for
Sale and Discontinued Operations, and reported as such in the group financial
statements.
The investment return on insurance funds exceeded that of the previous year by
27%, mainly due to higher interest rates and average float levels (funds
generated by insurance activities). The company`s operating activities generated
R2.1 billion in cash during the year, which was slightly less than the R2.2
billion generated in the comparable period.
The continuing operations achieved a net insurance margin of 9.2% for the year
compared to 9.1% for 2006.
For the first ten months of the year Santam`s investment performance benefited
significantly from the strong local equity market, well ahead of 2006. However,
in the last two months the value of local equities sharply declined, inter alia
influenced by the negative sentiment on global equity markets due to the crisis
in the US sub-prime debt market. As a result Santam incurred significant
unrealised fair value losses during that period, reducing investment income
against the exceptional levels of 2006.
Earnings from associated companies were 28% lower for the year. Contributions
from Credit Guarantee Insurance Company continued to be healthy, but returns
from Lion of Africa were below expectations.
Santam successfully concluded its capital restructuring programme during 2007. A
voluntary share buy-back offer was made and the company bought 5.88% of its
issued ordinary shares at R102 per share in April. This resulted in a reduction
in share capital of R713 million, effectively lowering the solvency ratio by 6%
at the time. As alternative capital in terms of its strategy to optimise its
capital structure, the company issued unsecured subordinated callable notes to
the value of R600 million on open tender in May, which was followed by a further
issue of R400 million in November. In terms of regulatory approval, the
subordinated debt of R1 billion is regarded as part of capital for solvency
purposes and has the benefit of substantially reducing the group`s weighted
average cost of capital. The final phase of the optimisation process was the
payment of a special dividend of 2 200 cents per share in December. The overall
impact of these actions was to reduce the group`s solvency from the 62% at the
end of 2006 to 42% at the end of 2007. Net asset value per share decreased from
5 634 cents at the end of 2006 to 3 610 cents at the end of 2007, positioning
the group to deliver increased returns on shareholders capital.
During 2007 Santam distributed R3.67 billion to shareholders in the form of
normal dividends of R495.6 million, a special dividend of R2.46 billion, and a
voluntary share buy-back of R713 million.
Significant progress was made during the year in finalising the Santam Broad
Based Black Economic Empowerment (BBBEE) structures following the compulsory 10%
share buy-back at R82 per share during May 2007. As Santam, in terms of SIC 12 -
Special Purpose Entities, does not control the newly created BEE entity, the
entity is not consolidated into Santam`s results. The first share unit
allocations to beneficiaries, being to black staff as members of the Staff
Trust, were made during December 2007, resulting in a notional IFRS 2 charge of
R1 million for the year.
The board would like to extend its gratitude to Santam`s management, staff,
brokers and other business partners for their efforts and contributions during
the past year.
PROSPECTS
Underwriting margins are expected to remain under pressure due to the softer
market, both in commercial and personal lines, and could be especially
challenging considering the anticipated deterioration in global and domestic
economic conditions. Of particular concern is the reduction in the disposable
income of individuals, uncertainty in electricity power supply and deteriorating
public infrastructure. Having the benefit of diversification, Santam is well
positioned to face these challenges.
In light of the volatility of local financial markets, capital growth on our
investment portfolio could be under pressure during 2008. However, as a long-
term value investor we need to maintain sufficient exposure to equities in order
to deliver acceptable long-term returns on shareholder funds. In line with
general consensus we expect interest rates to remain at current levels for the
foreseeable future, which will have a positive impact on our cash-related
investment returns.
With regard to our BBBEE transaction, the focus in 2008 is set on identifying
and making allocations to the participants of the Business Partners Trust and
the Community Trust, the first of which are expected during the first half of
2008.
DECLARATION OF DIVIDEND (Number 108)
Notice is hereby given that the board has declared a final dividend of 244 cents
per share (2006: 262 cents) bringing the total dividend for the year to 410
cents per share (2006: 380 cents), an increase of 8%. Shareholders are advised
that the last day to trade "cum dividend" will be Thursday, 13 March 2008. The
shares will trade "ex dividend" from the commencement of business on Friday, 14
March 2008. The record date will be Thursday, 20 March 2008, and the payment
date will be Tuesday, 25 March 2008. Certified shareholders may not
dematerialise or rematerialise their shares between Friday,14 March 2008, and
Thursday, 20 March 2008, both dates inclusive.
AUDITORS` REPORT
PricewaterhouseCoopers Inc have audited the results for the year and their
unqualified audit reports on the 31 December 2007 annual financial statements
and the abridged financial statements are available on request at the company`s
registered office.
On behalf of the board
DK Smith IM Kirk
Chairman Chief Executive Officer
26 February 2008
Santam Head Office and registered office
1 Sportica Crescent, Tyger Valley, Bellville 7530
PO Box 3881, Tyger Valley 7536
Tel: 021 915 700, Fax: 021 914 0700
Registration number 1918/001680/06
ISIN ZAE000093779
JSE share code: SNT
NSX share code: SNM
EXECUTIVE DIRECTORS
IM Kirk (Chief Executive Officer),
MJ Reyneke (Chief Financial Officer)
COMPANY SECRETARY Sana-Ullah Bray
SPONSOR Investec Securities Limited
NON-EXECUTIVE DIRECTORS
BTPKM Gamedze, JG le Roux, H Lorgat, NM Magau, AR Martin,
JP Moller, RK Morathi, P de V Rademeyer, JP Rowse, GE Rudman,
DK Smith (Chairman), J van Zyl, BP Vundla
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Ltd, 70 Marshall Street,
Johannesburg 2001, PO Box 61051, Marshalltown, 2107,
Tel: 011 370 5000 Fax: 011 688 7721, www.computershare.com
Website: www.santam.co.za
Sponsor: Investec Bank
Date: 26/02/2008 14:00:03 Produced by the JSE SENS Department.
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