LEW
LEW
LEW - Lewis Financial Reporting
Lewis Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2004/009817/06)
JSE share code; LEW
ISIN: ZAE000058236
("Lewis" or "the group")
LEWIS FINANCIAL REPORTING
The Board is of the opinion that the article on Lewis published in the Financial
Mail of 22 August 2008 gives a misleading impression of the facts. We again wish
to clearly state our position on insurance income recognition.
- The group has consistently applied its accounting policies relating to
insurance and reinsurance revenue.
- Monarch reinsures 40% of its insurance book with an independent third party
reinsurer with a genuine and substansive transfer of risk to the reinsurer.
- Monarch retains a premium reserve of 40% of ceded premiums which has the
effect of deferring reinsurance revenue.
- Reinsurance is an internationally accepted means of risk transfer and
capital optimization.
- The group accounts for insurance revenue in terms of its contractual
relationship with the parties. Over a 24 month contract, the application of
this policy results in 55% of the gross insurance revenue being recognized
in the first 12 months and 45% in the second 12 months.
- As a consequence of the above the group earned Insurance Revenue of R564.2
mil in the year to March 2008 (55%) (refer pg. 71 of the annual report) and
has deferred insurance revenue as balance sheet reserves of R466.3 mil
(45%) (refer pg. 19 of the annual report).
- In the event that the group cease all insurance business with immediate
effect, the R466.3 mil would be released as insurance revenue in future
periods, a clear indication of our insurance and reinsurance revenue
recognition policies recognizing income over the period of the contract.
- Our Auditors PricewaterhouseCoopers Inc have issued an unqualified audit
report in respect of the year ended March 2008.
UBS South Africa (Pty) Ltd
Sponsor
22 August 2008
Date: 22/08/2008 12:53:01 Produced by the JSE SENS Department.
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