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ZSA
ZSA
ZSA - Zurich - Announcement of the reviewed group results for the year ended 31
December 2010
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 2010
Transformation programme has created a strong platform for profitable growth
Underwriting profitability restored with a significant improvement in combined
ratio
International solvency at 51.6%
Condensed consolidated statement of financial performance
for the year ended 31 December 2010
Year ended Year ended
31 December 31 December
2010 2009
Rand thousands Reviewed Audited % Change
Gross written insurance
premium 4,632,362 5,404,362 (14%)
Insurance premium ceded to (978,900) (1,139,621)
reinsurers
Net written insurance premium 3,653,462 4,264,741 (14%)
Net insurance premium earned 3,713,765 4,265,262 (13%)
Reinsurance commission earned 168,526 137,380
Other income 5,747 28,007
Employee benefits surplus 105,552 -
Net investment income 215,349 329,163
Net income 4,208,939 4,759,812 (12%)
Net insurance claims 2,576,852 3,670,143 (30%)
Gross commission 747,659 809,691 (8%)
Administrative and other
operating expenses 692,029 565,052 22%
Expenses 4,016,540 5,044,886 (20%)
Profit/(loss) before tax 192,399 (285,074)
Income tax (expense)/credit (47,982) 100,509
Profit/(loss) after tax 144,417 (184,565) 178%
Earnings per share (cents) 1,185.7 (1,515.4) 178%
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2010
Year ended Year ended
31 December 31 December
2010 2009
Rand thousands Reviewed Audited % Change
Profit/(loss) for the period 144,417 (184,565)
Other comprehensive income
Foreign currency translation
difference (5,246) -
Unrealised gains on available-94,060 116,978
for-sale financial assets
Realised gains on available-
for-sale financial assets (6,809) (108,631)
Impairment losses 11,998 1,539
Taxation (13,913) (2,321)
Total comprehensive
income/(expense) for the
period 224,507 (177,000) 227%
Condensed consolidated statement of financial position
as at 31 December 2010
Year ended Year ended
31 December 31 December
2010 2009
Rand thousands Reviewed Audited % Change
Assets
Buildings, property and
equipment 112,690 127,719
Intangibles 53,519 19,781
Investments 2,075,996 1,912,749
Loans and receivables 965,423 867,468
Pre-payments 134,544 47,703
Reinsurance assets 970,283 716,568
Deferred taxation asset 18,468 75,199
Deferred acquisition costs 102,192 121,408
Income tax asset 26,355 114,050
Cash and cash equivalents 1,072,454 1,032,696
Total assets 5,531,924 5,035,341 10%
Equity and liabilities
Total equity 1,883,827 1,662,179
Financial liabilities held at 281,597 320,375
amortised cost
Employee benefits obligation 41,494 31,272
Insurance liabilities 2,447,738 2,298,714
Deferred reinsurance
commission 17,264 26,496
Income tax liability - 8,386
Trade and other payables 860,004 687,919
Total equity and liabilities 5,531,924 5,035,341 10%
Condensed consolidated statement of changes in equity
for the year ended 31 December 2010
Year ended Year ended
31 December 31 December
2010 2009
Rand thousands Reviewed Audited % Change
Share capital 3,045 3,045
Share premium 1,605 1,605
Revaluation reserve 293,941 208,605
Translation reserve (36,908) (31,662)
Statutory contingency reserve 375,365 414,174
Retained profit 1,246,779 1,063,553
Non-controlling interests - 2,859
Balance at end of the period 1,883,827 1,662,179 13%
Condensed consolidated cash flow statement
for the year ended 31 December 2010
Year ended Year ended
31 December 31 December
2010 2009
Rand thousands Reviewed Audited % Change
Cash retained from operating
activities 175,623 61,637
- Cash flows from operations (125,972) (117,151)
- Dividend and interest
income 227,185 226,895
- Taxation paid 74,410 (48,107)
Dividends paid - (17,051)
Cash effect of investing
activities (135,865) (135,700)
Net increase/(decrease) in
cash and cash equivalents 39,758 (91,114)
Cash and cash equivalents at
beginning of the period 1,032,696 1,123,810
Cash and cash equivalents at
end of the period 1,072,454 1,032,696 4%
Notes
1. Accounting policies and basis of preparation
The financial results have been prepared in accordance with International
Financial Reporting Standards (IFRS), in particular IAS34 - Interim Financial
Reporting. The
principal policies used in the presentation of the reviewed results for the year
ended 31 December 2010 are consistent with those applied in the Annual Financial
Statements for the year ended 31 December 2009.
2. Financial highlights Year ended Year ended
31 December 31 December
2010 2009 %
Rand thousands Reviewed Audited Change
Profit/(loss) for the
period 144,417 (184,565) 178%
Adjusted for:
Loss on disposal of plant
and equipment 2,668 1,466
Gains on disposal of
available-for-sale
financial assets (6,809) (107,091)
Impairment of available-for-
sale financial assets 11,998 -
Tax effect (1,100) 16,730
Headline earnings 151,174 (273,460) 155%
Headline earnings per share
(cents) 1,241.2 (2,245.2)
Earnings per share (cents) 1,185.7 (1,515.4)
Ordinary dividends declared
per share (cents) - -
Dividends paid per share
(cents) - 140.0
Number of shares in issue 12,179,500 12,179,500
Net asset value per share
(cents) 15,467 13,647 13%
International solvency
margin (%) 51.6 39.0 13%
Combined ratio (%) 97.5 113.2 16%
3. Segmental information Year ended Year ended
31 December 31 December
2010 2009 %
Rand thousands Reviewed Audited Change
Gross written insurance
premium
Property 1,634,330 1,784,433
Transport 170,825 195,025
Motor 2,152,051 2,593,873
Engineering 384,088 557,137
Guarantee 513 (12,714)
Liability 113,322 111,313
Accident & Health 177,233 175,295
Total insurance premium
income 4,632,362 5,404,362 (14%)
Net income
Property 1,131,118 1,221,757
Transport 145,796 162,297
Motor 2,105,553 2,490,270
Engineering 335,527 365,411
Guarantee (28,006) (23,804)
Liability 99,456 104,053
Accident & Health 92,846 82,658
Other 326,648 357,170
Total net income 4,208,938 4,759,812 (12%)
General insurance result
Property (64,244) (153,595)
Transport 14,722 4,269
Motor 112,364 (284,809)
Engineering 61,945 (40,002)
Guarantee (67,524) (97,238)
Liability (8,308) 6,880
Accident & Health 45,868 346
Net underwriting result 94,823 (564,149) 117%
Attributable investment
income 95,418 105,821
General insurance result 190,241 (458,328) 142%
4. Supplementary income statement Year ended
Year ended 31 December
31 December 2009
Rand thousands 2010 Normalised
Gross written insurance premium 4,632,362 5,463,662
Insurance premium ceded to
reinsurers (978,900) (1,136,621)
Net written insurance premium 3,653,462 4,327,041
Net insurance premium earned 3,713,765 4,324,562
Net insurance claims (2,576,852) (3,390,043)
Net commission incurred (579,134) (672,310)
Administrative and other
operating expenses (462,956) (452,758)
Net underwriting result 94,823 (190,549)
Attributable investment income 95,418 105,821
General insurance result 190,241 (84,728)
Impairments on available-for-sale
financial assets (11,998) (1,539)
Employee benefits surplus 105,552 -
Non-technical expenses (223,325) (20,987)
Other investment income 130,059 121,073
Investment expenses (4,939) (4,824)
Net realised gains on disposal of
investments 6,809 108,631
Profit/(loss) before tax 192,399 117,626
Income tax (expense)/credit (47,982) (12,247)
Profit/(loss) after tax 144,417 105,379
Rand thousands
Year ended
31 December
4. Supplementary income statement 2009 % Change
Gross written insurance premium 5,404,362 (14%)
Insurance premium ceded to
reinsurers (1,139,621)
Net written insurance premium 4,264,741 (14%)
Net insurance premium earned 4,265,262 (13%)
Net insurance claims (3,670,143)
Net commission incurred (672,310)
Administrative and other
operating expenses (486,958)
Net underwriting result (564,149) 117%
Attributable investment income 105,821 (10%)
General insurance result (458,328) 142%
Impairments on available-for-sale
financial assets (1,539)
Employee benefits surplus -
Non-technical expenses (50,087)
Other investment income 121,073 7%
Investment expenses (4,824)
Net realised gains on disposal of
investments 108,631
Profit/(loss) before tax (285,074)
Income tax (expense)/credit 100,509
Profit/(loss) after tax (184,565) 178%
Comments
The results for the year reflect an improvement in all aspects of the business.
In 2009 the Company incurred a number of significant non-recurring losses
unrelated to its normal underwriting activity. To better reflect core business
operations, the 2009 "normalised" result is separately highlighted in Note 4.
The underwriting result is a surplus of R95 million compared to a deficit of
R191 million last year and the general insurance result (which includes
attributable investment income) improved from a deficit of R85 million to a
surplus of R190 million.
The business transformation programme embarked upon in February 2010 has
contributed significantly to the turnaround in the underwriting results. The
programme has reshaped the entire business, creating a strong platform for
profitable growth.
Whilst gross premium income declined by 15% from R5.5 billion to R4.6 billion,
this was impacted by deliberate action to transform the business and focus on
profitability improvement. Claims at R2.6 billion reflect a 24% improvement from
R3.4 billion in the prior year, following the implementation of key initiatives
to reshape the claims and underwriting environment. The most significant
turnaround has been in the motor book following an increased focus on claims
cost containment.
Attributable investment income declined by 10% and was mainly impacted by
changes in interest rates. Other investment income was up 7%, largely influenced
by market movements. Non-technical expenses were up sharply to R223 million
(2009: R21 million) and includes a cost of R127 million for the business
transformation programme and a management fee of R65 million, which came into
effect in January 2010 and is payable to the majority shareholder.
Realised gains of R7 million were down from R109 million in the prior period as
the rebalancing of the equity portfolio, which commenced three years ago, was
largely completed by 2009. This sharp reduction in realised gains was
ameliorated by a surplus of R106 million that arose from a restructure of
pension fund obligations.
The Group`s financial position and cash flows remain sound. At 51.6%, the
international solvency ratio remains within the target range as set by the
Board.
Having regard to the growth plans for 2011 and beyond, the Directors have
decided to further strengthen the solvency of the Company by not declaring a
dividend.
Changes in Directorate
S Mader resigned as a Director on 27 October 2010 and S Mered was appointed to
replace him on 27 October 2010.
Audit
The Company`s auditors, PricewaterhouseCoopers Inc., have reviewed the
information set out in this 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
26 January 2011
Johannesburg
Board of Directors
JPG de Rauville (Independent Non-Executive Chairman)
GRC Munnoch (Chief Executive Officer)
P Bezuidenhout (Chief Financial Officer)
JPM Deiss (Non-Executive)
S Mader (Non-Executive) - resigned 27 October 2010
S Mered (Non-Executive) - appointed 27 October 2010
PC Rorich (Non-Executive)
MN Mbekeni (Independent Non-Executive)
DD Mokgatle (Independent Non-Executive)
SG Morris (Independent Non-Executive)
Transfer Secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg
2001
Group Company Secretary and Registered Office
G Kostopoulos
Zurich Insurance Company South Africa Limited
Registration number 1965/006764/06
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: 27/01/2011 10:32:01 Produced by the JSE SENS Department.
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