| Thu 25 Feb 2010, 11:00 | | ZSA - Zurich Insurance Company South Africa Limited - Announcement of the |
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ZSA
ZSA
ZSA - Zurich Insurance Company South Africa Limited - Announcement of the
Reviewed Group Results for the Year Ended 31 December 2009
Zurich Insurance Company South Africa Limited
(Incorporated in the Republic of South Africa)
(Registration number 1965/006764/06)
Share code: ZSA & ISIN: ZAE000094496
("Zurich" or "the Group" or "the Company")
ANNOUNCEMENT OF THE REVIEWED GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
- Premium increased by 1.7% in difficult times
- Tough underwriting conditions impact earnings
- Business transformation plan for 2010
- Sound balance sheet and solvency
Condensed consolidated statement of financial performance
for the year ended 31 December 2009
Year ended Year ended
31 December 31 December
2009 2008
Rand thousands Reviewed Audited %
Change
Gross written insurance premium 5,404,362 5,316,490 1.7
Insurance premium ceded to (1,139,621) (1,127,520)
reinsurers
Net written insurance premium 4,264,741 4,188,970 1.8
Net insurance premium earned 4,265,262 4,116,395 3.6
Reinsurance commission earned 137,380 123,486
Other income 28,007 14,147
Net investment income 329,163 327,100
Net income 4,759,812 4,581,128 3.9
Net insurance claims 3,670,143 3,086,303 18.9
Gross commission 809,691 765,963 5.7
Administrative and other 565,052 461,567 22.4
operating expenses
Expenses 5,044,886 4,313,833 16.9
(Loss)/profit before tax (285,074) 267,295
Income tax credit/(expense) 100,509 (56,838)
(Loss)/profit after tax (184,565) 210,457 (187.7)
Earnings per share (cents) (1,515.4) 1,728.0 (187.7)
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2009
(Loss)/profit for the year (184,565) 210,457
Other comprehensive income
Net realised gain on available-for- (108,631) (98,342)
sale financial assets
Impairment losses 1,539 21,050
Gains/(losses) on revaluation 116,978 (135,900)
Taxation (2,321) 36,760
Total comprehensive income for the (177,000) 34,025 (620.2)
year
Condensed consolidated statement of financial position
as at 31 December 2009
Assets
Buildings, property and equipment 127,719 85,696
Intangibles 19,781 8,749
Investments 1,912,749 1,732,018
Loans and receivables 867,468 1,704,062
Employee benefit surplus 47,703 72,040
Reinsurance assets 716,568 540,847
Deferred taxation asset 75,199 -
Deferred acquisition costs 121,408 122,407
Income tax asset 114,050 77,381
Cash and cash equivalents 1,032,696 1,123,810
Total assets 5,035,341 5,467,010 (7.9)
Equity and liabilities
Total equity 1,662,179 1,856,824
Deferred taxation liability - 24,910
Financial liabilities held at 320,375 258,107
amortised cost
Employee benefit obligation 31,272 34,519
Insurance liabilities 2,298,714 2,191,087
Deferred reinsurance commission 26,496 26,106
Income tax liability 8,386 10,586
Trade and other payables 687,919 1,064,871
Total equity and liabilities 5,035,341 5,467,010 (7.9)
Condensed consolidated statement of changes in equity
as at 31 December 2009
Year Year
ended ended
31 31
December December
2009 2008
Rand thousands Reviewed Audited
Share capital 3,045 3,045
Share premium 1,605 1,605
Revaluation reserve 208,605 201,040
Share-based payment reserve - 145,227
Translation reserve (31,662) (22,763)
Statutory contingency reserve 414,174 425,059
Retained profit 1,063,553 1,100,249
Non-controlling interests 2,859 3,362
Balance at end of the year 1,662,179 1,856,824
Condensed consolidated cash flow statement
for the year ended 31 December 2009
Cash retained from operating activities 61,637 449,417
- Cash flows from operations (117,151) 255,029
- Dividend and interest income 226,895 274,154
- Taxation paid (48,107) (79,766)
Dividends paid (17,051) (85,257)
Cash flows of investing activities (135,700) (341,988)
Net (decrease)/increase in cash and cash (91,114) 22,172
equivalents
Cash and cash equivalents at beginning of 1,123,810 1,101,638
the period
Cash and cash equivalents at end of the 1,032,696 1,123,810
period
Notes
1. Accounting policies and basis of preparation
The principal policies used in the presentation of the reviewed results for the
year ended 31 December 2009 are consistent with those applied in the Annual
Financial Statements for the year ended 31 December 2008 and comply with
International Financial Reporting Standards (IFRS), including IAS 34 Interim
Financial Reporting.
Rand thousands Year ended Year ended
31 31
December December
2009 2008
2. Financial highlights Reviewed Audited %
Change
(Loss)/profit after tax (184,565) 210,457 (187.7)
Adjusted for:
Less gains/(losses) on disposal
of plant and equipment 1,466 (2,542)
Less losses on disposal of
available-for-sale
financial assets (107,091) (77,292)
Add tax effect 16,730 10,778
Headline earnings (273,460) 141,401 (293.4)
Headline earnings per share (2,245.2) 1,161.0 (293.4)
(cents)
Earnings per share (cents) (1,515.4) 1,728.0
Ordinary dividends declared per - 400.0
share (cents)
Dividends paid per share (cents) 140.0 700.0
Number of shares in issue 12,179,500 12,179,500
Net asset value per share (cents) 13,647 15,245 (10.5)
International solvency margin (%) 39.0 44.3 (12.0)
Combined ratio (%) 113.2 100.9 12.2
Rand thousands Year Year
ended ended
31 31
December December
2009 2008
3. Segmental information Reviewed Audited
Gross written insurance premium
Property 1,784,433 1,628,430
Transport 195,025 218,129
Motor 2,593,873 2,560,937
Engineering 557,137 549,609
Guarantee (12,942) 32,403
Liability 111,313 158,469
Accident & Health 175,295 168,047
Miscellaneous 228 466
Total insurance premium income 5,404,362 5,316,490
Net income
Property 1,221,757 1,091,428
Transport 162,297 167,059
Motor 2,490,270 2,497,491
Engineering 365,411 330,524
Guarantee (26,054) (8,653)
Liability 104,053 82,035
Accident & Health 82,658 79,893
Miscellaneous 2,250 104
Other 357,170 341,247
Total net income 4,759,812 4,581,128
General insurance result
Property (153,595) (3,848)
Transport 4,269 10
Motor (284,809) (18,911)
Engineering (40,002) 102
Guarantee (97,236) 20
Liability 6,880 861
Accident & Health 346 2,552
Miscellaneous (2) (18,869)
Net underwriting result (564,149) (38,083)
Attributable investment income 105,821 70,075
General insurance result (458,328) 31,992
Rand thousands Year ended
Year ended 31 December Year ended
31 December 2009 31 December
2009 Normalised 2008
4. Supplementary income Reviewed Unaudited Audited %
statement Change
Gross written insurance 5,404,362 5,463,662 5,316,490 2.8
premium
Insurance premium ceded
to reinsurers (1,139,621) (1,139,621) (1,127,520)
Net written insurance 4,264,741 4,324,041 4,188,970 3.2
premium
Net insurance premium 4,265,262 4,324,562 4,116,395 5.1
earned
Net insurance claims (3,670,143) (3,390,043) (3,086,303)
Net commission incurred (672,310) (672,310) (642,477)
Administrative and other (486,958) (452,758) (425,698)
operating expenses
Net underwriting result (564,149) (190,549) (38,083) (400.4)
Attributable investment 105,821 105,821 70,075 51.0
income
General insurance result (458,328) (84,728) 31,992 (364.8)
Impairments on available-
for-sale
financial assets (1,539) (1,539) (21,050)
Non-technical expenses (50,087) (20,987) (21,722)
Investment income 121,073 121,073 203,734
Investment expenses (4,824) (4,824) (3,960)
Net realised gains on
disposal of investments 108,631 108,631 78,301
(Loss)/profit before tax (285,074) 117,626 267,295
Income tax 100,509 (12,247) (56,838)
credit/(expense)
(Loss)/profit after tax (184,565) 105,379 210,457
Comments
The results for the year ended 31 December 2009 reflect a continuation of the
tough underwriting conditions that have impacted the insurance industry. In
addition, the Company incurred a number of significant non-recurring losses
unrelated to its normal underwriting activity. To better reflect core business
operations the "normalised" result is separately highlighted in Note 4.
Gross premium income grew by 1.7% to R5.4 billion (2008: R5.3 billion). This
follows the cancellation of underperforming blocks of business amounting to R500
million, mainly in the Personal Lines Group Schemes portfolio, which no longer
met the Group`s stricter underwriting criteria. Premiums in the Risk Finance
division declined sharply for the same reason. These actions are already
yielding the desired result in strengthening the underlying profitability of the
business.
Claims at R3.7 billion (2008: R3.0 billion) have risen 18.9% (2008: 18.8%)
impacted by an increase in the frequency and severity of fire losses in the
commercial property account. The largest increase in claims cost however was in
the motor account that saw a sharp rise in the frequency of losses arising from
motor vehicle accidents.
Non-recurring items cost the Group R403 million before tax (R290 million after
tax) and include, amongst others, the cost of the data loss incident previously
reported on, the write-off of irrecoverable reinsurance and other balances, and
large losses arising from the breach of underwriting mandates by a third party
underwriting manager.
The underwriting result declined to a deficit of R564 million from a deficit of
R38 million in 2008. The combined ratio for the year was 113.2% (2008: 100.9%).
The general insurance result, inclusive of attributable investment income,
declined from R31.9 million to a deficit of R458 million.
Investment income was maintained despite a reduction in interest rates in the
current year. The sale of equities realised gains of R108 million (2008: R98
million).
The Group`s balance sheet and cash flows remain sound. At 39.0%, the solvency
ratio is broadly within the target range as set by the Board. Net asset value
decreased by 10.5% to R136.47 per share at the end of the year.
Having regard to the headline loss, the Directors have decided to strengthen the
statutory solvency of the Company by not declaring a dividend.
Prospects
The Company is taking swift and decisive action to strengthen its financial and
business performance, restore profitability and ensure that the organisation
develops a platform for sustainable growth. A business transformation programme
was announced on 8 February 2010, and on 16 February 2010 an increase to 25.1%
of the Royal Bafokeng shareholding was confirmed. These are expected to assist
in achieving the longer term aim of positioning the Company as "the leading
empowered insurer in its chosen markets". In order to achieve this goal,
immediate action is being taken to reshape the Company, improving operational
capability and significantly enhancing the focus around the broker and customer.
Audit
The Company`s auditors, PricewaterhouseCoopers Inc., have reviewed this
information set out in the announcement and their unqualified review opinion is
available for inspection at the Company`s registered office.
Compliance
The Group complies in all material respects with the Listings Requirements of
the JSE Limited and the King Report Code of Corporate Practices and Conduct.
By order of the Board
25 February 2010
Johannesburg
Board of Directors
JPG de Rauville (Independent Non-Executive Chairman)
NV Beyers (Chief Executive Officer) - retired 30 September 2009
GRC Munnoch (Chief Executive Officer) - appointed 1 October 2009
P Bezuidenhout (Chief Financial Officer) - appointed 17 June 2009
CJ Cron (Non-Executive) - resigned 24 February 2010
JPM Deiss (Non-Executive)
C Dill (Non-Executive) - resigned 19 August 2009
S Mader (Non-Executive) - appointed 19 August 2009
MN Mbekeni (Independent Non-Executive)
DD Mokgatle (Independent Non-Executive)
SG Morris (Independent Non-Executive)
DS Phiri (Non-Executive)
Transfer Secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg
2001
Group Company Secretary and Registered Office
TA Pitman - resigned 31 December 2009
IJ Perez (Acting) - appointed 1 January 2010
15 Marshall Street, Ferreirasdorp, Johannesburg, 2001
(PO Box 61489, Marshalltown, 2107)
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
1 Merchant Place
Cnr Fredman Drive and Rivonia Road
Sandton
2196
Date: 25/02/2010 11:00:02 Produced by the JSE SENS Department.
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