|
CLI
CLI
CLI - Clientele Limited - Summarised group results for the year ended 30 June
2010
Clientele Limited
(Registration number 2007/023806/06)
Share code: CLI ISIN: ZAE000117438
SUMMARISED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2010
Highlights
- Embedded Value in excess of R2 billion for the first time
- Embedded Value Earnings of R478 million
- Return on Embedded Value of 31%
- Value of New Business of R353 million
- Insurance premium revenue over R1 billion for the first time
- Return on average shareholders interest of 54%
- Headline earnings per share increased by 11% from 44.52 cents to 49.31 cents
- Dividends declared per share increased by 12% from 42 cents to 47 cents
COMMENTS
INTRODUCTION
The Clientele Group ("the Group") has recorded results for the year which are
pleasing given the tough external environment. Whilst production volumes and
persistency of Clientele Life have been negatively affected, the Group has
been successful in introducing higher premium products by leveraging off its
various distribution channels and the strength of its brand. As a result, the
Group has broadened and differentiated its target market and has a basis to
further improve Value of New Business ("VNB") which now places the Group in an
even stronger position moving forward.
The successes achieved, combined with the ongoing focus on our existing
products and market, tight control over operating expenses and improved
investment returns overall, have enabled the Group to report an increase in
profit before tax of 22% from R203.0 million last year to R247.4 million this
year. This translates into an increase in headline earnings of 11% (*refer to
comments on taxation below) from R144.0 million last year to R159.5 million
this year and an increase of 12% in dividends declared per share from 42 cents
last year to 47 cents this year. Embedded Value ("EV") earnings of R478.3
million for the year have resulted in a return on EV of 31%. Whilst this
return was lower than expectations, mainly due to the lower production
volumes, the Group`s high rate of EV growth remains intact.
OPERATING RESULTS
Group Statement of Comprehensive Income
Diluted headline earnings per share has increased by 10% from 44.5 cents for
last year to 49.1 cents this year which translates into a return on average
shareholders` interests of 54% (June 2009: 57%).
Insurance premium revenue is up by 7% on last year to over R1 billion for the
first time.
Other income of R160.0 million is marginally lower than last year`s other
income of R161.4 million and mainly comprises annuity fees from Clientele
Life`s Independent Field Advertisers ("IFA").
Operating expenses for the year have been well controlled resulting in an
increase of 4% on last year which compares favourably with the 13% increase in
total revenue for the year.
Investment returns on insurance assets have improved when compared to last
year and the Group has achieved a 13.5% return (2009: negative 2%) from its
conservative investment portfolios.
The fair value adjustment to financial assets at fair value through profit and
loss is partly attributable to the growth in new business in respect of
investment contracts (56%) and partly to improved returns this year in respect
of long-term insurance business (43%).
The increase in policyholder liabilities under insurance contracts of R109.7
million is R64.2 million higher than last year. The majority of the increase
relates to the movement in the value of the policyholders` unitised market
related investment portfolio which is correlated to investment returns for the
year.
* The increase in taxation is mainly attributable to the reversal of the
deferred tax asset of R7.8 million, previously raised in respect of IFA
Nigeria`s net loss since inception. The deferred tax asset was reversed, as
profits, in the foreseeable future, are difficult to forecast with certainty.
In the prior year there was a R10.3 million deferred tax credit recognised in
the statement of comprehensive income in respect of IFA Nigeria. The reversal
of R7.8 million is R2.5 million lower than the R10.3 million raised in the
prior year due to foreign exchange translation losses as a result of the
depreciation of the Naira against the Rand. The effective tax rate for the
Group (excluding STC) after reversing these effects amounts to 28% (2009:
27%), after permanent differences.
Cash generated from operations, after working capital changes, has increased
by 25% from R237.6 million last year to R298.1 million this year.
Group Embedded Value
The Group has continued to grow satisfactorily during the year under review
although production volumes have been impacted by the state of the economy.
The Group has nevertheless created VNB of R353.1 million for the year which
contributed to the EV earnings of R478.3 million.
EV has increased from R1 548.4 million (restated, in respect of IFA Nigeria,
and after adjusting for dividends and related STC) to R2 026.8 million at 30
June 2010.
EV results for Nigeria are no longer reflected in the Group EV results as it
has become evident that the key assumptions underlying the actuarial
calculations need to be proven and established over time. As a result, the EV
for IFA Nigeria has been set equal to Net Asset Value and the prior year`s
figures have been restated on this basis.
The risk discount rate of 12.60% (2009: 13.25%) has been set in terms of
current actuarial guidance and includes a conservative adjusted beta of 1, an
equity risk premium of 3.5% and an additional risk margin of 1% to allow for
some conservatism, given the current economic climate. The calculation is
comprehensively explained and a sensitivity analysis is provided under the
Group EV section of the results.
SEGMENT RESULTS
Clientele Life - Long Term Insurance
Clientele Life remains the major contributor to the Group`s revenue and
profits, contributing 85% of the Group`s revenue and more than 100% of the
Group`s net profits. Clientele Life`s net profit for the year of R188.8
million has increased by 14% over last year`s net profit of R165.1 million.
Premium collections have remained almost in line with assumptions, however the
withdrawal experience of two tranches of business worsened during the first
six months of the financial year. This was identified by mid-year and
mitigating action was taken and the withdrawal assumptions were changed as
reported on in our interim results. As the measurement of experience for
reporting purposes at year end is done relative to the actuarial assumptions
used as at the previous year end the withdrawal loss grew from R23.8 million
at December 2009 to R56.2 million at 30 June 2010, as was to be expected. At
this time, the mitigating actions taken appear to have worked and further
withdrawal losses are not anticipated on these classes of business relative to
the new assumptions.
Whilst persistency experience has been less favourable than assumption,
positive claims and underwriting experience has resulted in EV profits.
Clientele Life`s share of the Group`s VNB amounts to R300.7 million or 93% of
the total VNB. Its share of Group EV amounts to R1 830.6 million which
represents 90% of Group EV.
Clientele General Insurance (Clientele Legal)
The personal lines legal insurance business has recorded a R6.2 million net
profit for the year after just two and a half years of operation which
reflects a R10.4 million increase in comparison to the R4.2 million net loss
for the previous year. Lapse and claims experience has been better than
expected and profit margins have, as a result, improved. The company now has
an EV of R204.5 million (2009: R73.6 million) and VNB of R72.4 million (2009:
R31.3 million) was created during the year.
Clientele Life - Investment Contracts
In terms of IFRS, expenses in respect of the Group`s Investment Contracts
(Single Premium business) are expensed as and when incurred. The related
revenue is however amortised over the term of the contract (usually 60
months).
The result is that with our growing book this operating segment reported a net
loss for the year. This should be viewed in conjunction with the R24.0 million
(2009: R12.4 million) of deferred profits included in the Statement of
Financial Position.
IFA Nigeria
The Group launched IFA Nigeria, its life insurance brokerage business, of
which it effectively owns 75%, in July 2008 and commenced policy sales from
August 2008.
The consolidated loss before tax of R23.3 million for the year has increased
by R2.3 million in comparison to last year. In order to ensure that the
business model is developed on a more sustainable basis, without placing undue
strain on the Group`s resources, both production and expenses were curtailed
during the year. The Group still believes that its proven IFA distribution
model is well suited to Nigeria based on experience gained to date, although
local challenges, particularly in the area of premium collections, require
ongoing focus.
Clientele Loans Direct
The personal loans business, of which the Group owns 70%, operated in
partnership with Direct Axis (SA) (Pty) Ltd., is progressing in accordance
with its conservative credit assessment and lending approach. The gross
advances book at 30 June 2010 amounted to R43.3 million and experience from
the book is as expected.
Operating results are improving in line with forecasts and the net loss for
the year of R3.6 million (after minorities` share of losses) has reduced by
R0.3 million or 8% in comparison to last year.
PROSPECTS
The Group has continued its successful transformation from a life insurance
company to a financial services group over the last year and has been
successful in broadening and differentiating its current life insurance
market. The Group intends to continue to add value to its existing customers
and further leverage its distribution strengths to extended local markets and
new international markets on a very selective and controlled basis, whilst
remaining a highly focused organisation.
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared the following dividend per
ordinary share:
Ordinary dividend (cents per share) 47
Ordinary shares in issue at record date (000`s)323 527
The dividend will be paid on Monday, 13 September 2010.
To comply with the procedures of Strate Limited the last day to trade in the
shares for purposes of entitlement to the dividend is Friday, 3 September
2010. The shares will commence trading ex dividend on Monday, 6 September 2010
and the record date will be Friday, 10 September 2010.
Share certificates may not be dematerialised or rematerialised between Monday,
6 September 2010 and Friday, 10 September 2010 both days inclusive.
By order of the Board
G Q RoutledgeG J Soll
ChairmanManaging Director
Johannesburg
16 August 2010
CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME
Year ended30 June
(R`000`s) 2010 2009 %
Change
Revenue
Insurance premium revenue 1 005 660 938 226 7
Reinsurance premiums (42 755) (36 096)
Net insurance premiums 962 905 902 130 7
Other income 160 025 161 432
Interest income 15 141 14 283
Fair value adjustment to 185 064 88 465
financial assets at fair
value through profit and
loss
Total revenue 1 323 135 1 166 310 13
Net insurance benefits and (169 434) (153 063)
claims
Increase in policyholder (109 697) (45 519)
liabilities under
insurance contracts
Decrease in reinsurance (15 568) (1 648)
assets
Fair value adjustment to (98 705) (112 010)
financial liabilities at
fair value through profit
and loss - investment
contracts
Interest expense (2 326) (389)
Impairment of advances (5 608) (1 830)
Operating expenses (674 438) (649 005) 4
Results from operating 247 359 202 846 22
activities
Equity accounted earnings 23 165
Profit before tax 247 382 203 011 22
Tax * (98 923) (65 051)
Net profit for the year 148 459 137 960 8
Attributable to:
Minorities - ordinary (11 280) (6 327)
shareholders
Equity holders of the 159 739 144 287 11
Group - ordinary
shareholders
Net profit for the year 148 459 137 960
Other comprehensive
income:
Exchange differences on (2 691) (7 050)
translating foreign
operation
Gains on property 5 509 50
revaluation
Income tax relating to (1 345) 70
gains on property
revaluation
Other comprehensive income 1 473 (6 930)
for the year - net of tax
Total comprehensive income 149 932 131 030
for the year
Total comprehensive income
attributable to:
Minorities - ordinary (11 953) (5 949)
shareholders
Equity holders of the 161 885 136 979
Group - ordinary
shareholders
CONDENSED GROUP STATEMENTS OF FINANCIAL POSITION
Year ended30 June
(R`000`s) 2010 2009
Assets
Intangible assets 37 036 31 367
Property and equipment 50 893 41 452
Owner-occupied properties 134 300 129 600
Investment in associates 372 349
Deferred tax 22 367 24 201
Inventories 1 412 2 653
Reinsurance assets 6 579 22 147
Financial assets held at fair 1 607 713 1 404 549
value through profit and loss
Loans and receivables including 65 814 50 559
insurance receivables
Cash and cash equivalents 77 983 112 633
Total assets 2 004 469 1 819 510
Total equity and reserves 304 903 287 958
Liabilities
Policyholder liabilities under 693 725 584 027
insurance contracts
Financial liabilities 811 979 717 561
- At fair value through profit and 781 513 717 561
loss
- At amortised cost 30 466 -
Loans at amortised cost 14 790 15 505
Finance leases 778 1 303
Employee benefits 64 676 73 724
Accruals and payables including 92 429 88 511
insurance payables
Deferred tax 16 483 11 682
Current tax 4 706 39 239
Total liabilities 1 699 566 1 531 552
Total equity and liabilities 2 004 469 1 819 510
TAX *
Year ended30 June
(R`000`s) 2010 2009
SA Operations:
Current and deferred tax (80 315) (63 749)
Secondary tax on companies ("STC") (11 996) (11 952)
Capital gains tax (76) (662)
Overprovision in prior years 1 244 998
IFA Nigeria * (7 780) 10 314
Tax (98 923) (65 051)
The Individual Policyholder Fund has an estimated tax loss of R1.42 billion
(2009: R1.20 billion).
RECONCILIATION OF NET PROFIT TO HEADLINE EARNINGS
Year ended 30 June
(R`000`s) 2010 2009
Net profit for the year attributable 159 739 144 287
to equity holders of the Group
Less: Profit on disposal of fixed (234) (254)
assets
Headline earnings 159 505 144 033
RATIOS PER SHARE
Year ended30 June
2010 2009
Headline earnings per share (cents) 49.31 44.52
Diluted headline earnings per share 49.10 44.52
(cents)
Earnings per share (cents) 49.38 44.60
Diluted earnings per share (cents) 49.17 44.60
Net asset value per share (cents) 94.25 89.01
Diluted net asset value per share 93.86 89.01
(cents)
Dividends per share (cents) 47.00 42.00
Weighted average ordinary shares 323 505 323 500
(`000)
Diluted average ordinary shares (`000) 324 857 323 500
NOTES TO THE RESULTS
The results have been reviewed by the Group`s auditors, PricewaterhouseCoopers
Inc., in terms of International Standards on Review Engagements 2410. The
scope of the review was to enable the auditors to report that nothing came to
their attention that caused them to believe that the accompanying condensed
preliminary consolidated financial information is not presented in all
material respects, in accordance with the South African Companies Act 1973
(Act 61 of 1973), as amended, and section 8.57 of the JSE Limited Listings
Requirements. A copy of the review opinion is available on request at the
Company`s registered offices.
ACCOUNTING POLICIES
Statement of compliance
The accounting policies adopted for the purpose of the Group Financial
statements comply with International Financial Reporting Standards ("IFRS"),
the JSE Limited Listings Requirements and the Companies Act 1973 (Act 61 of
1973), as amended, and are consistent with those used in the Annual Financial
statements for the year ended 30 June 2009. The results have been prepared in
terms of IAS 34 (Interim Financial Reporting).
The preparation of financial statements in accordance with IFRS requires the
use of certain critical accounting estimates and judgement. The reported
amounts in respect of the Group`s insurance contracts, employee benefits and
unquoted financial instruments are affected by accounting estimates and
judgement.
There was no significant impact due to changes in previous assumptions used in
deriving the amounts referred to above.
CONDENSED GROUP STATEMENTS OF CASH FLOWS
Year ended30 June
(R`000`s) 2010 2009
Cash flows from operating 4 060 (98 846)
activities
Profit from operations adjusted 346 689 337 814
for non cash items
Working capital changes (48 562) (100 240)
Cash generated from operations 298 127 237 574
after working capital changes
Separately disclosable items 1 (43 263) (68 883)
(Decrease)/Increase in financial (5 916) 115 080
liabilities 2
Net acquisition of investments 3 (25 459) (250 087)
Interest received 1 32 992 45 136
Dividends received 1 10 271 23 747
Dividends paid (135 870) (126 095)
Tax paid 4 (126 822) (75 318)
Cash flows from investing (37 427) (65 122)
activities
Cash flows from financing (1 283) 79 211
activities
Net decrease in cash and cash (34 650) (84 757)
equivalents
Cash and cash equivalents at 112 633 197 390
beginning of the year
Cash and cash equivalents at end 77 983 112 633
of the year
1. Interest and dividends
2. Investment contracts
3. Investments in respect of insurance operations and investment contracts
4. The increase relates to the timing of provisional tax payments
SEGMENT INFORMATION
The Group`s results are analysed across two geographical segments which are
South Africa ("SA") and Nigeria.
The Group`s main operating segments are long term insurance, short term
insurance, investment contracts, loans business, mobile business and long term
brokerage segments. Policies written are in respect of individuals.
SEGMENT ASSETS & LIABILITIES
Year ended30 June
(R`000`s) 2010 2009
Assets
SA - Long term insurance 1 119 300 1 013 149
SA - Short term insurance 54 166 21 310
SA - Investment contracts 817 627 721 836
SA - Loans 45 999 30 034
SA - Mobile 574 358
Nigeria - Long term brokerage 23 672 70 827
Inter segment (56 869) (38 004)
Total Group Assets 2 004 469 1 819 510
Liabilities
SA - Long term insurance 843 590 768 454
SA - Short term insurance 19 584 17 928
SA - Investment contracts 811 979 717 561
SA - Loans 56 725 35 577
SA - Mobile 577 491
Nigeria - Long term brokerage 23 980 29 545
Inter segment (56 869) (38 004)
Total Group Liabilities 1 699 566 1 531 552
SEGMENT STATEMENTS OF COMPREHENSIVE INCOME
SA SA SA
Long term Short term Investment SA
(R`000`s) insurance insurance contracts Loans
30 June 2010
Net insurance 887 291 75 614
premiums
Other income 145 723 - 2 852
Interest 7 629 345 10 749
income
Fair value 79 762 1 496 103 806 -
adjustment to
financial
assets at
fair value
through
profit and
loss
Segment 1 120 405 77 455 103 806 13 601
revenue
Segment (839 921) (68 883) (107 363) (20 801)
expenses and
claims
Net insurance (161 687) (7 746) -
benefits and
claims
Increase in (101 744) (7 953) -
policyholder
liabilities
under
insurance
contracts
Decrease in (15 568) - -
reinsurance
assets
Fair value - - (98 705)
adjustment to
financial
liabilities
at fair value
through
profit and
loss
Interest - (1 630) (4 591)
expense
Impairment of - (5 608)
advances
Operating (560 922) (53 184) (7 028) (10 602)
expenses
Results from 280 484 8 572 (3 557) (7 200)
operating
activities
Equity 23 - -
accounted
earnings
Profit/(loss) 280 507 8 572 (3 557) (7 200)
before tax
Tax (91 734) (2 371) 996 2 016
Net 188 773 6 201 (2 561) (5 184)
profit/(loss)
for the year
Attributable
to:
Minorities - - - (1 555)
ordinary
shareholders
Equity 188 773 6 201 (2 561) (3 629)
holders of
the Group -
ordinary
shareholders
30 June 2009
Net insurance 866 232 35 898
premiums
Other income 143 065 7 554
Interest 9 134 1 303 2 391
income
Fair value (25 160) 114 111
adjustment to
financial
assets at
fair value
through
profit and
loss
Segment 993 271 37 208 114 111 2 945
revenue
Segment (750 358) (41 934) (113 596) (10 644)
expenses and
claims
Net insurance (152 781) (282)
benefits and
claims
Increase in (41 676) (3 843)
policyholder
liabilities
under
insurance
contracts
Decrease in (1 648)
reinsurance
assets
Fair value (112 010)
adjustment to
financial
liabilities
at fair value
through
profit and
loss
Interest
expense
Impairment of (1 830)
advances
Operating (554 253) (37 809) (1 586) (8 814)
expenses
Results from 242 913 (4 726) 515 (7 699)
operating
activities
Equity 165
accounted
earnings
Profit/(loss) 243 078 (4 726) 515 (7 699)
before tax
Tax (77 963) 534 (144) 2 156
Net 165 115 (4 192) 371 (5 543)
profit/(loss)
for the year
Attributable
to:
Minorities - (1 663)
ordinary
shareholders
Equity 165 115 (4 192) 371 (3 880)
holders of
the Group -
ordinary
shareholders
SEGMENT STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)
Nigeria Inter
SA Long term segment Total
(R`000`s) Mobile brokerage (revenue)/ Group
expense
30 June 2010
Net 962 905
insurance
premiums
Other income 2 722 9 848 (1 120) 160 025
Interest 97 460 (4 139) 15 141
income
Fair value - - - 185 064
adjustment
to financial
assets at
fair value
through
profit and
loss
Segment 2 819 10 308 (5 259) 1 323 135
revenue
Segment (2 640) (41 427) 5 259 (1 075 776)
expenses and
claims
Net - (1) (169 434)
insurance
benefits and
claims
Increase in - - (109 697)
policyholder
liabilities
under
insurance
contracts
Decrease in - - (15 568)
reinsurance
assets
Fair value - - (98 705)
adjustment to
financial
liabilities
at fair value
through
profit and
loss
Interest (244) 4 139 (2 326)
expense
Impairment of - (5 608)
advances
Operating (2 640) (41 182) 1 120 (674 438)
expenses
Results from 179 (31 119) - 247 359
operating
activities
Equity - - 23
accounted
earnings
Profit/(loss) 179 (31 119) - 247 382
before tax
Tax (50) (7 780) (98 923)
Net 129 (38 899) - 148 459
profit/(loss)
for the year
Attributable
to:
Minorities - - (9 725) - (11 280)
ordinary
shareholders
Equity 129 (29 174) - 159 739
holders of
the Group -
ordinary
shareholders
30 June 2009
Net insurance 902 130
premiums
Other income 75 18 211 (480) 161 432
Interest 1 968 486 14 283
income
Fair value (486) 88 465
adjustment to
financial
assets at
fair value
through
profit and
loss
Segment 76 19 179 (480) 1 166 310
revenue
Segment (260) (47 152) 480 (963 464)
expenses and
claims
Net insurance (153 063)
benefits and
claims
Increase in (45 519)
policyholder
liabilities
under
insurance
contracts
Decrease in (1 648)
reinsurance
assets
Fair value (112 010)
adjustment to
financial
liabilities
at fair value
through
profit and
loss
Interest (389) (389)
expense
Impairment of (1 830)
advances
Operating (260) (46 763) 480 (649 005)
expenses
Results from (184) (27 973) - 202 846
operating
activities
Equity 165
accounted
earnings
Profit/(loss) (184) (27 973) - 203 011
before tax
Tax 52 10 314 (65 051)
Net (132) (17 659) - 137 960
profit/(loss)
for the year
Attributable
to:
Minorities - (4 664) (6 327)
ordinary
shareholders
Equity (132) (12 995) 144 287
holders of
the Group -
ordinary
shareholders
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Common
Share Share control
(R`000`s) capital premium deficit Sub-total
Balance as at 1 6 470 218 656 (220 273) 4 853
July 2008
Ordinary
dividend paid
Total
comprehensive
income
Net
profit/(loss)
for the year
Other
comprehensive
income/(expense)
Transfer to
contingency
reserve
Shares issued by
subsidiary
SAR scheme
allocated
Balance as at 30 6 470 218 656 (220 273) 4 853
June 2009
Balance as at 1 6 470 218 656 (220 273) 4 853
July 2009
Ordinary
dividend paid
Total
comprehensive
income
Net
profit/(loss)
for the year
Other
comprehensive
income/(expense)
Transfer to
contingency
reserve
Shares issued 1 201 202
SAR scheme
allocated
Transfer from
shares issued
Balance as at 30 6 471 218 857 (220 273) 5 055
June 2010
** SAR scheme - the Clientele Limited Group Share Appreciation Rights Scheme
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY (CONTINUED)
NDR:
NDR: Foreign
SAR Contingency currency
Retained scheme Short term translation
(R`000`s) earnings reserve** insurance reserve
Balance as at 183 403 6 744 246
1 July 2008
Ordinary (126 165)
dividend paid
Total 144 287 (7 428)
comprehensive
income
- Net 144 287
profit/(loss)
for the year
- Other (7 428)
comprehensive
income/(expens
e)
Transfer to (910) 910
contingency
reserve
Shares issued
by subsidiary
SAR scheme 5 371
allocated
Balance as at 200 615 12 115 1 156 (7 428)
30 June 2009
Balance as at 200 615 12 115 1 156 (7 428)
1 July 2009
Ordinary (135 870)
dividend paid
Total 159 739 (2 018)
comprehensive
income
- Net 159 739
profit/(loss)
for the year
- Other (2 018)
comprehensive
income/
(expense)
Transfer to (6 454) 6 454
contingency
reserve
Shares issued
SAR scheme 2 883
allocated
Transfer from (202)
shares issued
Balance as at 218 030 14 796 7 610 (9 446)
30 June 2010
** SAR scheme - the Clientele Limited Group Share Appreciation Rights Scheme
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY (CONTINUED)
NDR: Non-
Changes NDR: Control-
in ling
(R`000`s) ownership Revaluation Sub-total interest Total
Balance as 22 543 217 789 217 789
at 1 July
2008
Ordinary (126 165) (126 165)
dividend
paid
Total 120 136 979 (5 949) 131 030
comprehens
ive income
- Net 144 287 (6 327) 137 960
profit/
(loss) for
the year
- Other 120 (7 308) 378 (6 930)
comprehens
ive
income/
(expense)
Transfer - -
to
contingenc
y reserve
Shares 45 326 45 326 14 607 59 933
issued by
subsidiary
SAR scheme 5 371 5 371
allocated
Balance as 45 326 22 663 279 300 8 658 287 958
at 30 June
2009
Balance as 45 326 22 663 279 300 8 658 287 958
at 1 July
2009
Ordinary (135 870) (135 870)
dividend
paid
Total 4 164 161 885 (11 953) 149 932
comprehens
ive income
- Net 159 739 (11 280) 148 459
profit/(lo
ss) for
the year
- Other 4 164 2 146 (673) 1 473
compre-
hensive
income/(ex
pense)
Transfer - -
to
contingenc
y reserve
Shares 202 202
issued
SAR scheme 2 883 2 883
allocated
Transfer (202) (202)
from
shares
issued
Balance as 45 326 26 827 308 198 (3 295) 304 903
at 30 June
2010
** SAR scheme - the Clientele Limited Group Share Appreciation Rights Scheme
GROUP EMBEDDED VALUE
EMBEDDED VALUE
The EV represents an estimate of the value of the Group exclusive of goodwill
attributable to future new business. The EV comprises:
- the Free Surplus plus
- the Required Capital identified to support the in-force business plus
- the Present Value of In-force business ("PVIF") less
- the Cost of Required Capital ("CoC")
The Present Value of In-force business is the present value of future after
tax profits arising from covered business in force as at 30 June 2010.
All material business written by the Group has been covered by EV Methodology
as outlined in Professional Guidance Note, PGN 107 of the Actuarial Society of
South Africa, including:
- all long-term insurance business regulated in terms of the Long-Term
Insurance Act, 1998;
- annuity income arising from non-insurance contracts where EV Methodology has
been used to determine future shareholder entitlements;
- Legal insurance business where EV Methodology has been used to determine
future shareholder entitlements; and
- Loans business where EV Methodology has been used to determine future
shareholder entitlements.
As our Nigerian operation is relatively new and we have limited experience
investigations, the underlying assumptions that would be used for the Value of
In-force and Value of New Business ("VNB") numbers are not yet reliable. The
Board has decided to follow a conservative approach by setting the EV for the
Nigerian operation equal to the Net Asset Value. The 30 June 2009 numbers
have been re-stated(*) to follow a similar approach.
The EV calculations have been certified by the Group`s independent actuaries,
QED Actuaries & Consultants (Pty) Ltd. The EV can be summarised as follows:
Year ended 30 June
2010 2009 2009
(R`000`s) Restated* Reported
Free surplus 179 637 186 554 186 554
Required capital 116 429 91 021 91 021
Adjusted Net Worth 296 066 277 575 277 575
("ANW") of covered
business
Cost of Required (38 166) (30 938) (30 938)
Capital
PVIF 1 768 859 1 449 656 1 474 414
EV of covered business 2 026 760 1 696 293 1 721 051
The ANW of covered business is defined as the excess value of all assets
attributed to the covered business, but not required to back the liabilities
of covered business. Free Surplus is the ANW less the Required Capital
attributed to covered business.
Reconciliation of Total Equity to ANW
Year ended 30 June
2010 2009 2009
(R`000`s) Restated* Reported
Total equity and reserves 304 903 287 958 287 958
per balance sheet
Removal of Deferred 12 377 4 603 4 603
Profits and impact of
compulsory margins on
investment business (net
impact after tax)
Removing minority 3 295 (8 658) (8 658)
interests
Adjusting subsidiaries to (6 266) (1 157) (1 157)
Net Asset Value
SAR Scheme adjustment (18 243) (5 171) (5 171)
ANW 296 066 277 575 277 575
The CoC is the opportunity cost of having to hold the Required Capital of
R116.4 million as at 30 June 2010. The Required Capital has been set at the
greater of the Statutory Termination Capital Adequacy Requirement and 1.25
times the Statutory Ordinary Capital Adequacy Requirement for the Life company
plus the Required Capital for the short term company.
The SAR scheme adjustment recognises the future dilution in EV, on a mark to
market basis, as a result of the SAR scheme.
Clientele Life`s Statutory CAR cover ratio at 30 June 2010 was 3.03 times (30
June 2009: 2.98 times) on the statutory valuation basis.
Year ended 30 June
2010 2009 2009
(R`000`s) Restated* Reported
EV per share (cents) 626,46 524,36 532,01
Diluted EV per share 623,91 524,36 532,01
(cents)
VALUE OF NEW BUSINESS
Year ended 30 June
2010 2009 2009
(R`000`s) Restated* Reported
Total VNB 353 127 399 736 420 018
Present Value of New 1 503 558 1 569 570 1 728 887
Business premiums
New Business profit 23,5% 25,5% 24,3%
margin
The VNB (excluding any allowance for the Management Incentive scheme)
represents the present value of projected after tax profits at the point of
sale on new covered business commencing during the year ended 30 June 2010
less the CoC pertaining to this business.
The New Business profit margin is the VNB expressed as a percentage of the
present value of future premiums (and other annuity fee income) pertaining to
the same business.
LONG-TERM ECONOMIC ASSUMPTIONS (SOUTH AFRICA)
Year ended 30 June
2010 2009 2009
Restated* Reported
Risk discount rate % 12.60 13.25 13.25
Overall investment 8.10 8.75 8.75
return %
Expense inflation % 6.10 6.75 6.75
Corporate tax % 28.00 28.00 28.00
The risk discount rate has been determined using a top-down weighted average
cost of capital approach, with the equity return calculated using Capital
Asset Pricing Model ("CAPM") theory. In terms of current actuarial guidance,
the risk discount rate has been set as the risk free rate plus a beta
multiplied by the assumed equity risk premium. It has been assumed that the
equity risk premium (i.e. the long term expected difference between equity
returns and the risk free rate) is 3.5%. In addition, 18 months ago, the Board
decided it prudent, in light of the current economic conditions and the global
financial crisis, to add some additional conservatism to the EV calculation.
This was achieved via the addition of an explicit 1% margin to the risk
discount rate. This margin has been retained at this stage. The beta
pertaining to the Clientele share price is relatively low, which is partially
a consequence of the relatively small free-float of shares. After careful
consideration, the Board has opted, at this stage, to use a more conservative
beta of 1 in the calculation of the risk discount rate.
The resulting risk discount rate utilised for the South African business as at
30 June 2010 was 12.60%.
RISK DISCOUNT RATE SENSITIVITIES
(R`000`s) EV VNB
Risk discount rate 2 211 220 406 527
10.60%
Risk discount rate 2 113 098 379 148
11.60%
Risk discount rate 2 026 760 353 127
12.60%
Risk discount rate 1 945 937 333 646
13.60%
Risk discount rate 1 874 285 313 215
14.60%
SEGMENT INFORMATION
The EV can be split between segments as follows:
(R`000`s) ANW PVIF CoC EV
30 June
2010
SA - Long 276 907 1 584 474 (34 892) 1 826 489
term
insurance
SA - Short 26 973 180 816 (3 274) 204 513
term
insurance
SA - - 4 133 - 4 133
Investment
contracts
SA - Loans (7 527) (564) - (8 091)
Nigeria - (286) - - (286)
Long-term
brokerage
Total 296 066 1 768 859 (38 166) 2 026 760
Reported
30 June
2009
SA - Long 249 933 1 375 204 (29 498) 1 595 639
term
insurance
SA - Short 2 224 72 781 (1 440) 73 565
term
insurance
SA - - 1 440 1 440
Investment
contracts
SA - Loans (5 543) 230 (5 313)
Nigeria - 30 961 24 759 55 720
Long-term
brokerage
Total 277 575 1 474 414 (30 938) 1 721 051
Restated*
30 June
2009
SA - Long 249 933 1 375 204 (29 498) 1 595 639
term
insurance
SA - Short 2 224 72 781 (1 440) 73 565
term
insurance
SA - - 1 440 - 1 440
Investment
contracts
SA - Loans (5 543) 230 - (5 313)
Nigeria - 30 961 30 961
Long-term
brokerage
Total 277 575 1 449 656 (30 938) 1 696 293
The VNB can be split between segments as follows:
Year ended 30 June
2010 2009 2009
(R`000`s) Restated* Reported
Reported 30
June 2009
SA - Long 295 349 383 799 383 799
term
insurance
SA - Short 72 408 31 275 31 275
term
insurance
SA - 5 381 5 621 5 621
Investment
contracts
SA - Loans (1 247) (364) (364)
Nigeria - 20 282
Long-term
brokerage
SA - New (18 764) (20 595) (20 595)
venture costs
Total 353 127 399 736 420 018
EMBEDDED VALUE EARNINGS
EV earnings (per PGN 107) comprises the change in EV for the year after
adjusting for capital movements and dividends paid as they pertain to
Clientele Limited.
Year ended to 30 June 2010
ANW PVIF CoC Total
A : EV at the end of 296 066 1 768 859 (38 166) 2 026 760
the year (R`000`s)
Restated* EV at the 277 575 1 449 656 (30 938) 1 696 293
beginning of the
year
Dividends and STC (147 866) - - (147 866)
accrued or paid
A : Adjusted EV at 129 709 1 449 656 (30 938) 1 548 426
the beginning of the
year
EV earnings (A - B) 166 358 319 204 (7 228) 478 333
Impact of once-off 1 310 49 415 (786) 49 939
economic assumption
changes
EV earnings before 165 048 269 789 (6 443) 428 394
once-off items
Return on EV 27,7%
excluding once-off
items
Return on EV 30,9%
Components of EV
earnings (R`000`s)
Value of New (110 412) 466 690 (3 151) 353 127
Business
Expected return on - 186 006 (4 099) 181 907
covered business
(unwinding of risk
discount rate)
Expected profit 334 728 (334 728) - -
transfer
Withdrawal (3 334) (54 515) 1 623 (56 227)
experience variance
Claims and 8 558 - - 8 558
reinsurance
experience variance
Sundry experience (5 570) 1 091 1 343 (3 136)
variance
Operating assumption (6 844) (5 869) (2 157) (14 869)
and model changes
Expected return on 16 994 - - 16 994
ANW
SAR Scheme dilution (13 072) - - (13 072)
Goodwill and Medium (31 064) 25 351 - (5 713)
Term incentive
schemes
Increase/(reduction) (31 248) (31 248)
in Net Asset Value
on Nigerian
operation
EV operating return 158 735 284 027 (6 442) 436 320
Investment return 6 158 - - 6 158
variances on ANW
Effect of foreign - - - -
currency movements
Effect of economic 1 464 35 177 (786) 35 855
assumption changes
EV earnings 166 357 319 204 (7 228) 478 333
Registered office:
Clientele Office Park,
Cnr Rivonia and Alon Roads, Morningside,
PO Box 1316, Rivonia 2128, South Africa
Transfer secretaries: Computershare Investor Services (Pty) Ltd,
70 Marshall Street, Johannesburg 2001, South Africa
PO Box 61051, Marshalltown 2107, South Africa
Directors: G Q Routledge BA LLB (Chairman),
G J Soll CA(SA) (Managing Director)*,
B A Stott CA(SA), P R Gwangwa LLM, A D T Enthoven BA,
PhD (Political Science), I B Hume CA(SA), ACMA*,
B Frodsham BCom*, B W Reekie BSc(Hons), FASSA*
Company secretary:W Van Zyl CA(SA)
*Executive director
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Registration number 1970/003711/07)
Date: 16/08/2010 17:00:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
