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MAF
MAF
MAF - Mutual & Federal Insurance Company - Reviewed interim financial results
for the six months ended 30 June 2009
REVIEWED INTERIM FINANCIAL RESULTS
for the six months ended 30 June 2009
Mutual & Federal Insurance Company Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1970/006619/06)
JSE share code: MAF
ISIN: ZAE000010823
NSX share code: MTF
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2009
30 June 30 June 31 December
2009 2008 Change 2008
R`m R`m % R`m
Gross premiums 4 358 4 689 (7) 9 159
Less: Reinsurance (752) (663) (1 478)
premiums
Net premiums 3 606 4 026 (10) 7 681
Change in provision for
unearned premiums
net of reinsurance (56) (112) (12)
Earned premiums net of 3 550 3 914 (9) 7 669
reinsurance
Commission income on 129 117 244
reinsurance
Net investment 231 278 (146)
income/(loss)
Other operating income 3 - 14
Net income 3 913 4 309 (9) 7 781
Claims incurred net of (2 623) (2 827) (5 220)
reinsurance
Acquisition costs (730) (813) (1 620)
Administration expenses (425) (416) (990)
Impairment of goodwill - (3) (6)
Profit/(loss) before 135 250 (46) (55)
taxation
Taxation (17) (78) (60)
Profit/(loss) for the 118 172 (31) (115)
period
OTHER COMPREHENSIVE
INCOME
Items net of tax
Property revaluation (1) - 21
Foreign currency (5) 6 9
movements
Other comprehensive (6) 6 30
income for the period net
of tax
TOTAL COMPREHENSIVE 112 178 (85)
INCOME FOR THE PERIOD
Profit/(loss)
attributable to:
Equity holders of the 137 147 (128)
company
Minority shareholders (19) 25 13
Profit/(loss) for the 118 172 (31) (115)
period
Total comprehensive
income attributable to:
Equity holders of the 131 153 (109)
company
Minority shareholders (19) 25 24
Total comprehensive 112 178 (37) (85)
income for the period
Earnings per share
(a) Headline earnings per
share are calculated on
profit/(loss)
attributable to equity
holders of the company
adjusted for the
impairment of goodwill,
intangible assets and the
profit on sale of
property and equipment.
Determination of headline
earnings
Profit/(loss) for the 137 147 (128)
period attributable to
equity holders of the
company
Impairment of goodwill - 3 6
Impairment of intangible - - 21
assets
Profit on sale of (3) (1) (3)
property and equipment
Total tax effect of 1 - (5)
adjustments
Headline earnings 135 149 (109)
Headline earnings/(loss) 48 58 (17) (41)
per share (cents)
Diluted headline 48 55 (41)
earnings/(loss) per share
(cents) (note 2)
(b) Basic earnings per
share are based on
profit/(loss)
attributable to equity
holders of the company.
Basic earnings per share
Basic earnings/(loss) per 49 57 (14) (48)
share (cents)
Diluted basic 49 55 (48)
earnings/(loss) per share
(cents) (note 2)
Ordinary dividend per
share declared in respect
of the period (cents) - 45 45
Dividend per share paid - 135 180
in the period (cents)
Net asset value per share 1 144 1 223 (6) 1 092
(cents)
Number of shares in issue
(million)
- at period end - 279,7 273,5 279,3
excluding treasury shares
- weighted average 279,4 257,6 267,5
- diluted weighted 279,6 269,2 268,5
average (note 2)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2009
As at As at As at
30 June 30 June 31 December
2009 2008 2008
R`m R`m R`m
Assets
Goodwill - 3 -
Intangible assets 269 226 266
Property and equipment 284 256 313
Deferred taxation 106 14 103
Investment in associate company 4 4 4
Deferred acquisition costs 214 202 204
Reinsurers` share of insurance 1 420 1 130 1 361
contract provisions
Loans and advances 33 49 32
Investments and securities 4 727 5 166 4 423
Ordinary shares 1 106 2 465 1 206
Money market instruments and 3 621 2 701 3 217
other
Trade and other receivables 1 387 1 163 1 188
Cash and cash equivalents 1 593 1 115 1 416
Total assets 10 037 9 328 9 310
Equity and liabilities
Insurance contract provisions 5 243 4 751 4 832
Finance lease liabilities 4 6 5
Post retirement medical aid 161 155 159
provision
Deferred taxation 22 35 25
Agents` balances, accounts 1 303 904 1 116
payable and provisions
Total shareholders` equity 3 304 3 477 3 173
Equity holders of the company`s 3 200 3 344 3 050
capital and reserves
Interest of minority 104 133 123
shareholders in subsidiary
Total equity and liabilities 10 037 9 328 9 310
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED
30 JUNE 2009
Attributable to equity holders of the
company
Foreign Share-
currency based
Contin- trans- pay-
Share gency lation ment
R`m capital reserve reserve reserve
Balance at 31 December 460 840 (23) 178
2007
Profit for the period
Transfer to contingency 2
reserve
Current period 6 12
movements
Dividends paid
Issue of shares 371
Balance at
30 June 2008 831 842 (17) 190
Loss for the period
Transfer from (24)
contingency reserve
Current period 3 19
movements
Dividends paid
Issue of shares 81
Balance at 31 December 912 818 (14) 209
2008
Profit for the period
Transfer from (31)
contingency reserve
Current period (5) 11
movements
Issue of shares 8
Balance at 30 June 2009 920 787 (19) 220
Attributable
to equity
holders of
the company
Property Minority
revalua- share-
tion Retained holders`
R`m reserve income interest Total
Balance at 31 December 18 1 742 130 3 345
2007
Profit for the period 147 25 172
Transfer to contingency (2) -
reserve
Current period 18
movements
Dividends paid (407) (22) (429)
Issue of shares 371
Balance at
30 June 2008 18 1 480 133 3 477
Loss for the period (275) (12) (287)
Transfer from 24 -
contingency reserve
Current period 11 1 11 45
movements
Dividends paid (134) (9) (143)
Issue of shares 81
Balance at 31 December 29 1 096 123 3 173
2008
Profit for the period 137 (19) 118
Transfer from 31 -
contingency reserve
Current period (1) 5
movements
Issue of shares 8
Balance at 30 June 2009 28 1 264 104 3 304
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2009
30 June 30 June 31 December
2009 2008 2008
R`m R`m R`m
Cash generated from operating 334 307 500
activities
Investment income 227 229 458
Taxation paid (60) (253) (301)
Cash inflow from operations 501 283 657
Cash utilised in investing (332) (252) (275)
activities
Decrease in funding requirements 169 31 382
Cash effects of financing 8 (58) (108)
activities
Dividends paid - (68) (158)
Proceeds from issue of shares 8 10 50
Increase/(decrease) in cash and 177 (27) 274
cash equivalents
Cash and cash equivalents at 1 416 1 142 1 142
beginning of the year
Cash and cash equivalents at end 1 593 1 115 1 416
of the period
Notes
1. Statement of compliance
The condensed consolidated interim financial statements have been prepared in
accordance with the recognition and measurement International Financial
Reporting Standards ("IFRSs") and the disclosure requirements of IAS34, and its
interpretations issued by the International Accounting Standards Board ("IASB"),
and are in compliance with the Listings Requirements of the JSE Limited. The
accounting policies applied in the preparation of these financial statements are
consistent with those used in the annual financial statements for the year ended
31 December 2008.
2. Diluted basic and headline earnings per share
Diluted basic and headline earnings per share are determined by adjusting the
weighted average number of ordinary shares outstanding to assume conversion of
all dilutive potential ordinary shares.
3. Segmental analysis
Risk
Commercial finance Personal
Divisional segments R`m R`m R`m
June 2008
Gross premiums 2 426 572 1 691
Profit/(loss) before taxation 15 5 (43)
Total assets 2 062 304 797
Total liabilities 3 688 502 1 536
December 2008
Gross premiums 4 867 1 137 3 155
(Loss)/profit before taxation 262 11 26
Total assets 2 265 360 820
Total liabilities 3 931 571 1 415
June 2009
Gross premiums 2 440 506 1 412
Profit/(loss) before taxation (29) 4 (71)
Total assets 2 404 378 841
Total liabilities 4 389 601 1 628
Investment
activities Unallocated Total
Divisional segments R`m R`m R`m
June 2008
Gross premiums 4 689
Profit/(loss) before taxation 278 (5) 250
Total assets 5 166 999 9 328
Total liabilities 125 5 851
December 2008
Gross premiums 9 159
(Loss)/profit before taxation (146) (208) (55)
Total assets 4 423 1 442 9 310
Total liabilities 220 6 137
June 2009
Gross premiums 4 358
Profit/(loss) before taxation 231 - 135
Total assets 4 727 1 687 10 037
Total liabilities 115 6 733
SUPPLEMENTARY INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2009
30 June 30 June 31 December
2009 2008 Change 2008
(Reflecting long-term rate R`m R`m % R`m
of return adjustment)
Technical account (note A)
Gross premiums 4 358 4 689 (7) 9 159
Net premiums 3 606 4 026 (10) 7 681
Earned premiums net of 3 550 3 914 7 669
reinsurance
Claims incurred net of (2 595) (2 793) (5 148)
reinsurance
Acquisition expenses (641) (745) (1 376)
Management expenses (410) (399) (846)
Net underwriting (96) (23) 317 299
(deficit)/surplus
Investment return on 189 233 (19) 468
insurance funds (note B)
General insurance result 93 210 (56) 767
Long-term investment return 207 228 (9) 476
on shareholders` funds
(note B)
Operating income based on 300 438 (32) 1 243
long-term investment return
Non-technical account (note
A)
Short-term investment (165) (183) (1 090)
fluctuations
Dividends, interest and 228 229 458
rentals
Realised surplus on 1 104 1
investments
Unrealised 2 (55) (605)
surplus/(deficit) on
investments
Allocated investment return (396) (461) (944)
transferred to technical
account (note B)
Impairment of goodwill - (3) (6)
Non-recurring items - (2) (202)
Profit/(loss) before 135 250 (55)
taxation
Taxation (including (17) (78) (60)
dividend tax)
Profit/(loss) after 118 172 (115)
taxation
Loss/(profit) attributable 19 (25) (13)
to minority shareholders
Profit/(loss) attributable 137 147 (128)
to equity holders of the
company
Operating earnings per
share
Operating earnings per
share are calculated on
profit attributable to
equity holders of the
company adjusted for
impairment of goodwill, non-
recurring items net of
taxation, share of
associate company`s
profits, short-term
investment fluctuations net
of taxation adjusted for
minority shareholders`
share and dividend tax.
Determination of operating
earnings
Profit/(loss) attributable 137 147 (128)
to equity holders of the
company
Impairment of goodwill - 3 6
Non-recurring items (net of - 2 145
taxation)
Short-term investment 165 183 1 090
fluctuations
Minority shareholders` (15) (11) (69)
short-term investment
fluctuations
Taxation effect of short- (51) (10) (150)
term investment
fluctuations
Dividend tax 15 11 13
Operating earnings 251 325 (23) 907
Operating earnings per 90 126 (29) 339
share (cents)
Diluted operating earnings 90 121 338
per share (cents) (note 2)
Combined ratio (%) (note C) 102,7 100,6 96,1
Notes to the supplementary income statement
A. Presentation
The results for the period, in accordance with IFRS, are shown in the income
statement. To illustrate the results of the insurance and investment operations,
the above supplementary income statement is provided and separated into:
(a) A technical account
The technical account includes a long-term investment return which is applied to
both:
(1) funds generated by the insurance activities;
(2) shareholders` funds.
This rate of return was decreased from 16,6% in 2008 to 13,3% in 2009 in
accordance with the approach adopted by the holding company, Old Mutual plc.
This change in rate decreased operating income by R98 million in 2009. The long-
term investment rate is not an annual guaranteed rate of return and might not
always be achieved on the group`s investments.
(b) A non-technical account
The non-technical account includes all non-insurance related activities
including investments, and above mentioned allocated investment returns
transferred to the technical account.
B. Allocation
The investment return on investments supporting insurance activities is
allocated to the technical account in determining the general insurance result.
In addition the long-term investment return on investments supporting
shareholders` funds is allocated from the non-technical account to the technical
account in determining an operating income based on the long-term investment
return. The allocations accordingly negate one another in the determination of
profit/(loss) before taxation.
The long-term investment return on shareholders` funds is an estimate of the
long-term trend investment return for the relevant category of investments
having regard to past performance, current trends and future expectations.
C. Combined ratio
This reflects the ratio of total insurance expenditure to net earned premiums.
COMMENTS
The underwriting result declined sharply during the first quarter of 2009
following a number of large commercial and industrial claims. There were also
substantial personal lines claims following the widespread rains, whilst the
difficult economic environment resulted in significant underwriting losses for
Credit Guarantee. The overall situation did however improve subsequently and
acceptable levels of underwriting profits were achieved in the second quarter.
Gross premium income declined by 7% following the cancellation of certain
unprofitable business in 2008 and growth proved challenging in the light of
depressed financial conditions.
Investment income declined during the period following a reduction in investment
gains and dividends, due to lower levels of equity holdings, but interest income
increased as a result of higher levels of cash on deposit.
In light of the difficult circumstances earnings per share declined by 14%.
Despite these difficulties however, the net asset value per share increased to
R11,44 at 30 June 2009 from R10,92 at 31 December 2008. The solvency margin
(being the ratio of net assets to net premiums) accordingly increased from 41%
to 46% over the same period with a commensurate improvement in the regulatory
solvency. In light of the need to build solvency levels and conserve capital, an
interim dividend has not been declared.
Despite difficult trading conditions in the first half, the company has begun to
benefit from the reorganisation to a regionalised business model which is
expected to deliver improved service levels to clients and intermediaries.
COMPLIANCE
The company complies in all material respects with the JSE Listings Requirements
and the King Report Code of Corporate Practices and Conduct.
REVIEW
KPMG Inc. has reviewed the financial information set out in this results
announcement with the exception of the supplementary income statement.
The unqualified review opinion is available for inspection at the company`s
registered office.
On behalf of the Board
JB Magwaza KN Kennedy
(Chairman) (Managing Director)
28 July 2009
Registered office:
19th Floor, Mutual & Federal Centre
75 President Street, Johannesburg, 2001
Transfer secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Sponsor:
Nedbank Capital, 135 Rivonia Road, Sandown, 2196
Website: www.mf.co.za
E-mail: investor@mf.co.za
Authorised Financial Services Provider
A Member of the Old Mutual Group
Website: www.mf.co.za
Date: 28/07/2009 17:49:02 Produced by the JSE SENS Department.
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