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SNT
SNT
SNT - Santam Limited and its subsidiaries - Reviewed interim report for
Santam Limited and its subsidiaries for the six months ended 30 June
2011
Santam Limited and its subsidiaries
Registration number 1918/001680/06
ISIN ZAE000093779
JSE share code: SNT
NSX share code: SNM
Reviewed interim report for Santam Limited and its subsidiaries for the
six months ended 30 June 2011
- 16% increase in headline earnings
- Exceptional underwriting returns achieved
- Strong cash flows generated
- Group solvency ratio of 45%
- Interim dividend of 200 cents per share
Financial review
The Santam group achieved excellent returns for the first half of 2011
with headline earnings of 593 cents per share showing an increase of
16% compared to the very solid results of the same period in 2010. An
outstanding underwriting return was the main driver for the favourable
results. Investment returns were under pressure as a result of weak
equity markets. The 25.2% return on weighted average shareholders`
funds compared favourably with the 24% achieved in 2010.
Growth in gross written premiums of 7% (9% excluding cell business)
improved from the 6% recorded in 2010 and was achieved despite Santam`s
resolve to maintain appropriate underwriting discipline across all
classes of business as well as increased competition in the market.
Positive growth was achieved across the largest insurance classes,
including motor and property, but the strain on growth in the portfolio
management business reflected the continued focus on positive
underwriting results for this business unit.
The net underwriting result for the first six months of the year was
very pleasing, building on the momentum from the excellent returns of
the 2010 financial year. A net underwriting margin of 8.4% compared
favourably to the 8% achieved for the corresponding period in 2010.
Most business units and insurance classes performed well when compared
to 2010, mainly due to the absence of large industrial accident and
fire-related claims in the commercial and corporate business units.
However, specialist business classes, although still favourable, did
not perform at the exceptional levels experienced for the comparative
June 2010 period. The largest underwriting classes, motor and property,
did very well with increased underwriting results of more than 90% and
50% respectively when compared to 2010. Continued focus on the
reduction of claims cost and the positive effects of the implementation
of the Insurance Services Transformation Project during 2010 and 2011
contributed in driving down the average claims cost, positively
impacting the net claims ratio and underwriting result. The net
acquisition cost ratio of 27.7% was higher than the 26.9% for the same
period in 2010, mainly due to timing differences on management expenses
as well as pressure on fee structures of outsourced business. Spend on
strategic projects driving improvements to technology and processes
across various areas of the business contributed approximately 1% to
acquisition cost.
Investment return on insurance funds of R193 million was below the R203
million for the comparable period in 2010. Despite increased float
balances, returns from interest-bearing instruments were lower due to
lower interest rates. The group`s operating activities generated
healthy cash flows of R924 million, considerably more than the R645
million generated for the same period in 2010.
The combined effect of the insurance activities resulted in a net
insurance margin of 11.2% for the past six months compared to 11.1% for
the comparable period in 2010.
Performance of the investment portfolio was under pressure due to the
weak performance of the equity markets closing below the December 2010
levels as well as from low interest rates. The company`s equity
portfolio outperformed the ALSI index as mandates are essentially
linked to the SWIX index. Dividend income was somewhat higher than for
the comparative period in 2010. Reported investment results benefited
from the derivative fence structures entered into during September and
October 2010, which generated a credit of R52 million for the six
months ended June 2011. These structures were substantially unwound
during July and August at no cost to the company.
Net earnings from associated companies were almost double when compared
to 2010, mainly due to higher earnings from two key associates, Credit
Guarantee Insurance Corporation of Africa Ltd and NICO Holdings Ltd.
At 30 June 2011 the group`s international solvency ratio of 45% was at
the upper end of the long-term target range of between 35% and 45%,
similar to the level reported at 31 December 2010. Santam`s capital
management philosophy is to maximise the return on shareholders`
capital within an appropriate risk framework. At this stage it is not
considered appropriate to declare a special dividend given the
volatility in global financial markets, but it will remain under
constant consideration.
On 1 March 2011, Santam acquired 55% of the voting equity in Mirabilis
Engineering Underwriting Managers (Pty) Ltd (Mirabilis) by merging its
construction and engineering business into Mirabilis. The new merged
entity is the leading engineering underwriter in the South African
market.
The board would like to extend its gratitude to Santam`s management,
staff, brokers and other business partners for their efforts and
contributions during the past six months.
Prospects
Although the global economy slowed down during the second quarter of
2011, it is still expected that South African gross domestic product
(GDP) growth will exceed 3% in 2011, while the inflation (CPI) is
expected to average 4.9%. Historically GDP growth and CPI provided a
good indication of gross written premium growth expectancies in the
short-term insurance market. Competition in the market will, however,
increase from both new entrants as well as from existing incumbents
entering into new product lines, putting pressure on premium rates.
Santam is positioned to manage increases selectively through our market
and risk segmentation approach.
The rand is considered to be strong. A weakening rand will impact
claims cost, specifically the motor class where the import cost of
parts is impacted by the strength of the currency. Santam will,
however, continue its efforts to optimise profitability in all aspects
of the business with a strong focus on risk management, improving
efficiencies and lowering claims cost. Underwriting margins are
expected to reduce somewhat in the second half of the year.
Interest rates are expected to remain at current levels for the rest of
2011. A lower return on insurance funds is therefore expected in 2011
when compared to 2010. The equity market is not expected to deliver
exceptional returns in 2011 and therefore investment returns are
expected to be lower in 2011 than in 2010.
Events after the reporting period
There have been no material changes in the affairs or financial
position of the company and its subsidiaries since the statement of
financial position date.
Declaration of dividend (Number 115)
Notice is hereby given that the board has declared an interim dividend
for the six months ended 30 June 2011 of 200 cents per share (2010: 185
cents). Shareholders are advised that the last day to trade "cum
dividend" will be Friday, 16 September 2011. The shares will trade "ex
dividend" from the commencement of business on Monday, 19 September
2011. The record date will be Friday, 23 September 2011, and the
payment date will be Monday, 26 September 2011. Certificated
shareholders may not dematerialise or rematerialise their shares
between Monday, 19 September 2011, and Friday, 23 September 2011, both
dates inclusive.
Auditors` report
The company`s external auditors, PricewaterhouseCoopers Inc, have
reviewed the condensed interim financial report. A copy of their
unqualified review opinion is available on request at the company`s
registered office.
On behalf of the board
VP Khanyile
Chairman
IM Kirk
Chief Executive Officer
31 August 2011
Consolidated statement of financial position
Notes Reviewed Reviewed Audited
At 30 June At 30 June At 31 Dec
2011 2010 2010
R million R million R million
Assets
Non-current assets
Property and equipment 72 53 88
Intangible assets 1 018 139 988
Deferred income tax 237 106 251
Investments in associates 241 217 211
Financial assets at fair value
through income
Equity securities 6 3 884 3 116 3 832
Debt securities 6 5 286 3 570 4 246
Financial assets at amortised
cost
Cell owners` interest 17 - 12
Reinsurance assets 302 347 315
Current assets
Financial assets - at fair value
through income
Short-term money market
instruments 6 1 848 4 065 3 685
Reinsurance assets 1 013 1 196 952
Deferred acquisition costs 243 238 251
Loans and receivables including
insurance receivables
insurance receivables 6 2 010 1 966 1 735
Income tax assets 21 6 26
Cash and cash equivalents 2 160 1 717 1 143
Total assets 18 352 16 736 17 735
Equity
Capital and reserves
attributable
to the company`s equity
holders
Share capital 107 107 107
Treasury shares (648) (652) (651)
Other reserves 1 354 1 297 1 265
Distributable reserves 4 667 3 997 4 405
5 480 4 749 5 126
Non-controlling interest 88 73 93
Total equity 5 568 4 822 5 219
Liabilities
Non-current liabilities
Deferred income tax 249 131 269
Financial liabilities - at fair
value through income
Debt securities 7 919 885 925
Derivatives 6 3 5 1
Financial liabilities - at
amortised cost
Cell owners` interest 612 598 589
Insurance liabilities 1 377 1 302 1 323
Provisions for other liabilities
and charges 2 4 3
Current liabilities
Financial liabilities - at fair
value through income
Debt securities 7 24 24 24
Investment contracts 472 345 495
Derivatives 6 21 5 74
Financial liabilities - at
amortised cost
Collateral guarantee contracts 111 104 108
Insurance liabilities 6 591 6 323 6 440
Deferred reinsurance acquisition
revenue 11 32 40
Provisions for other liabilities
and charges 29 28 33
Trade and other payables 2 136 1 606 1 890
Current income tax liabilities 227 522 302
Total liabilities 12 784 11 914 12 516
Total shareholders` equity and
liabilities 18 352 16 736 17 735
Consolidated statement of comprehensive income
Notes Reviewed Reviewed Change Audited
Six months Six months % Year
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
R million R million R million
Gross written premium 8 228 7 717 7% 15 855
Less: Reinsurance premium 1 293 1 418 2 336
Net premium 6 935 6 299 10% 13 519
Change in unearned premium
Gross amount (138) (308) (65)
Reinsurers` share 45 (39) 34
Net insurance premium
revenue 7 028 6 646 6% 13 550
Investment income 8 301 335 (10%) 633
Income from reinsurance
contracts ceded 183 134 236
Net gains/(losses) on
financial assets and
liabilities at fair
value through income 70 (15) 537
Gain on remeasuring
existing
interest in associates on
transfer to subsidiaries - - 215
Excess of interest in the
net fair value of
acquiree`s identifiable
assets, liabilities and
contingent liabilities
over cost - - 6
Net income 7 582 7 100 7% 15 177
Insurance claims and loss
adjustment expenses 5 229 4 728 9 531
Insurance claims and loss
adjustment expenses
recovered from reinsurers (742) (397) (848)
Net insurance benefits
and claims 4 487 4 331 4% 8 683
Expenses for the
acquisition
of insurance contracts 1 220 1 148 2 311
Expenses for marketing and
administration 910 768 1 648
Expenses for asset
management services
rendered 14 16 29
Amortisation of intangible
assets 33 4 27
Expenses 6 664 6 267 6% 12 698
Results of operating
activities 918 833 10% 2 479
Finance costs (48) (42) (120)
Share of profit of
associates 46 24 63
Impairment reversal on net
investment of associates - - 6
Profit before tax 916 815 12% 2 428
Income tax expense 9 (234) (229) (639)
Profit for the period 682 586 16% 1 789
Other comprehensive income
Currency translation
differences 25 (19) (72)
Total comprehensive income
for the period 707 567 1 717
Profit attributable to:
- equity holders of the
company 670 578 16% 1 762
- non-controlling interest 12 8 27
682 586 1 789
Total comprehensive income
attributable to:
- equity holders of the
company 695 559 24% 1 690
- non-controlling interest 12 8 27
707 567 1 717
Earnings attributable to
equity shareholders
Earnings per share (cents) 12
Basic earnings per share 593 512 16% 1 560
Diluted earnings per share 584 503 16% 1 532
Weighted average number of
shares - millions 113.07 112.91 112.96
Weighted average number of
ordinary shares for
diluted earnings per
share - millions 114.70 114.94 114.99
Consolidated statement of changes in equity
Attributable to equity holders of the Non- Total
company controlling
interest
Share Treasury Other Distribu- R million R
capital shares reserves table million
R million R million R million reserves
R million
Restated
balance as
at
1 January
2010 107 (660) 1 268 3 813 144 4 672
Balance as
at
1 January
2010 107 (660) 1 268 4 080 144 4 939
Restatement - - - (267) - (267)
Profit for
the period - - - 1 762 27 1 789
Other
comprehen-
sive income:
Currency
translation
differences - - (72) - - (72)
Total
comprehen
-sive income
for the
period ended
31 December - - (72) 1 762 27 1 717
2010
Purchase of
treasury
shares - (34) - - - (34)
Sale of
treasury
shares - 43 - - - 43
Loss on sale
of treasury
shares - - - (34) - (34)
Transfer to
reserves - - 69 (69) - -
Share-based
payments - - - 58 - 58
Dividends paid - - - (1 113) - (1 113)
Excess paid on
acquisition
of non-
controlling
interest - - - (12) - (12)
Interest
acquired
from non-
controlling
interest - - - - (78) (78)
Balance as at
31 December
2010 107 (651) 1 265 4 405 93 5 219
Profit for the
period - - - 670 12 682
Other
comprehen-
sive income:
Currency
translation
differences - - 25 - - 25
Total
comprehen-
sive income
for the
period ended
30 June 2011 - - 25 670 12 707
Purchase of
treasury
shares - (37) - - - (37)
Sale of
treasury
shares - 40 - - - 40
Loss on sale
of treasury
shares - - - (39) - (39)
Transfer to
reserves - - 64 (64) - -
Share-based
payments - - - 24 - 24
Dividends paid - - - (367) (24) (391)
Excess
received on
sale of non-
controlling
interest - - - 38 - 38
Interest
acquired
from non-
controlling
interest - - - - 7 7
Balance as at
30 June 2011 107 (648) 1 354 4 667 88 5 568
Restated
balance as
at 1 January
2010 107 (660) 1 268 3 813 144 4 672
Balance as
at 1 January
2010 107 (660) 1 268 4 080 144 4 939
Restatement - - - (267) - (267)
Profit for
the period - - - 578 8 586
Other
comprehen
-sive
income:
Currency
translation
differences - - (19) - - (19)
Total
comprehen-
sive income
for the
period ended
30 June 2010 - - (19) 578 8 567
Purchase of
treasury
shares - (13) - - - (13)
Sale of
treasury
shares - 21 - - - 21
Loss on sale
of treasury
shares - - - (18) - (18)
Transfer to
reserves - - 48 (48) - -
Share-based
payments - - - 23 (1) 22
Dividends paid - - - (339) - (339)
Excess paid on
acquisition
of non-
controlling
interest - - - (12) - (12)
Interest
acquired
from non-
controlling
interest - - - - (78) (78)
Balance as at
30 June 2010 107 (652) 1 297 3 997 73 4 822
Consolidated statement of cash flows
Notes Reviewed Reviewed Audited
Six months Six months Year ended
ended ended 31 Dec
30 June 30 June 2010
2011 2010 R million
R million R million
Cash generated from operations 1 289 825 2 115
Interest paid (73) (42) (95)
Income tax paid (292) (138) (755)
Net cash from operating 924 645 1 265
activities
Cash flows from investing
activities
Cash generated/(utilised) in
investment activities 790 66 (270)
Acquisition of subsidiary 10 (240) (94) (357)
Cash acquired through acquisition
of subsidiary 10 3 95 262
Purchases of equipment (12) (19) (26)
Purchases of software (18) - (1)
Proceeds from sale of equipment - 1 -
Acquisition of associated - - (17)
companies
Net cash from investing 523 49 (409)
activities
Cash flows from financing
activities
Purchase of treasury shares (37) (13) (34)
Proceeds on sale of treasury 4 4 11
shares
(Decrease)/increase in investment
contract liabilities (35) 1 129
Dividends paid to company`s
shareholders (367) (339) (1 113)
Dividends paid to non-controlling
interest (24) - -
Increase in cell owners` interest 18 62 42
Purchase of subsidiary from
non-controlling interest 11 - (90) (90)
Net cash used in financing
activities (441) (375) (1 055)
Net increase/(decrease) in cash
and cash equivalents 1 006 319 (199)
Cash and cash equivalents at
beginning of period 1 143 1 379 1 379
Exchange gains/(losses) on cash
and cash equivalents 11 19 (37)
Cash and cash equivalents at
end of period 2 160 1 717 1 143
Notes to the interim financial information
1. Basis of presentation
This abridged consolidated interim financial information for the six
months ended 30 June 2011 has been prepared in accordance with IAS 34 -
Interim Financial Reporting and in compliance with the Listing
Requirements of the JSE Limited. The abridged consolidated interim
financial information does not include all of the information required
by IFRS for full annual financial statements and should be read in
conjunction with the annual financial statements for the year ended 31
December 2010, which have been prepared in accordance with IFRSs.
2. Accounting policies
The accounting policies adopted are consistent with those of the
previous financial year.
3. Estimates
The preparation of interim financial statements requires management to
make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
In preparing these abridged consolidated interim financial statements,
the significant judgements made by management in applying the group`s
accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the consolidated financial statements
for the year ended 31 December 2010.
4. Risk management
The group`s activities expose it to a variety of financial risks:
market risk (including price risk, interest rate risk, foreign currency
risk and derivatives risk), credit risk and liquidity risk. Insurance
activities expose the group to insurance risk (including pricing risk,
reserving risk, accumulation risk and reinsurance risk). The group is
also exposed to operational risk and legal risk.
The capital risk management philosophy is to maximise the return on
shareholders` capital within an appropriate risk framework.
The interim abridged consolidated financial statements do not include
all risk management information and disclosure required in the annual
financial statements and should be read in conjunction with the group`s
annual financial statements as at 31 December 2010.
There have been no changes in the risk management policies since year-
end.
5. Segment information
The executive committee (Exco) reviews the group`s internal reporting
in order to assess performance and allocate resources. The operating
segments identified are representative of the internal structure of the
group.
Exco reviews the two core activities of the group, i.e. insurance
activities and investment activities, on a monthly basis. Insurance
activities are all insurance underwriting activities undertaken by the
group and comprise commercial insurance, personal insurance and
alternative risks. Insurance activities are also further analysed by
insurance class. Investment activities are all investment-related
activities undertaken by the group.
Exco considers the performance of insurance activities based on gross
written premium as a measure of growth as well as underwriting result
and net insurance result as a measure of profitability.
Investment activities are measured based on net investment income and
income from associated companies.
Other information provided to Exco is measured in a manner consistent
with that in the financial statements.
5.1 For the six months ended 30 June 2011
Business activity Insurance Investment Total
activities activities R million
R million R million
Revenue 8 228 172 8 400
Gross written premium 8 228 8 228
Net written premium 6 935 6 935
Net earned premium 7 028 7 028
Claims incurred 4 487 4 487
Net commission 1 037 1 037
Management expenses 904 6 910
Underwriting result 600 (6) 594
Investment return on insurance funds 193 193
Net insurance result 793 (6) 787
Investment income net of management
fee and finance costs 116 116
Income from associates net of
impairment 46 46
Amortisation of intangible assets (33) (33)
Income before taxation 760 156 916
Total assets 9 666 8 686 18 352
Total liabilities 11 816 968 12 784
Insurance class Gross Under- Total Total
written writing assets liabilities
premium result R million R million
R million R million
Accident and health 136 21 10 127
Alternative risk 817 (6) 289 1 761
Crop 67 25 26 51
Engineering 330 64 119 280
Guarantee 7 3 10 24
Liability 538 113 415 1 914
Miscellaneous 7 1 1 11
Motor 3 749 212 51 1 754
Property 2 393 115 576 1 841
Transportation 184 52 62 218
Unallocated - (6) 16 793 4 803
Total 8 228 594 18 352 12 784
Comprising:
Commercial insurance 4 010 503 1 151 4 846
Personal insurance 3 401 103 119 1 374
Alternative risk 817 (6) 289 1 761
Unallocated - (6) 16 793 4 803
Total 8 228 594 18 352 12 784
5.2 For the six months ended 30 June 2010
Business activity Insurance Investment Total
activities activities R million
R million R million
Revenue 7 717 93 7 810
Gross written premium 7 717 7 717
Net written premium 6 299 6 299
Net earned premium 6 646 6 646
Claims incurred 4 331 4 331
Net commission 1 014 1 014
Management expenses 762 6 768
Underwriting result 539 (6) 533
Investment return on insurance funds 203 203
Net insurance result 742 (6) 736
Investment income net of management
fee and finance costs 59 59
Income from associates 24 24
Amortisation of intangible assets (4) (4)
Income before taxation 738 77 815
Total assets 9 833 6 903 16 736
Total liabilities 10 995 919 11 914
Insurance class Gross Under- Total Total
written writing assets liabilities
premium result R million R million
R million R million
Accident and health 185 13 22 144
Alternative risk 1 240 11 332 1 683
Crop 57 5 9 23
Engineering 282 62 124 307
Guarantee 7 5 11 25
Liability 500 190 461 1 850
Miscellaneous 11 3 2 14
Motor 3 059 111 44 1 562
Property 2 189 81 699 1 803
Transportation 187 58 77 248
Unallocated - (6) 14 955 4 255
Total 7 717 533 16 736 11 914
Comprising:
Commercial insurance 3 535 444 1 327 4 706
Personal insurance 2 942 84 122 1 270
Alternative risk 1 240 11 332 1 683
Unallocated - (6) 14 955 4 255
Total 7 717 533 16 736 11 914
5.3 For the year ended 31 December 2010
Business activity Insurance Investment Total
activities activities R million
R million R million
Revenue 15 855 937 16 792
Gross written premium 15 855 15 855
Net written premium 13 519 13 519
Net earned premium 13 550 13 550
Claims incurred 8 683 8 683
Net commission 2 075 2 075
Management expenses 1 631 15 1 646
Underwriting result 1 161 (15) 1 146
Investment return on insurance 396 396
funds
Net insurance result 1 557 (15) 1 542
Investment income net of management
fee and finance costs 840 840
Income from associates net of
impairment 69 69
Amortisation of intangible asset (23) (23)
Income before taxation 1 534 894 2 428
Total assets 9 446 8 289 17 735
Total liabilities 11 492 1 024 12 516
Insurance class Gross Under- Total Total
written writing assets liabilities
premium result R million R million
R million R million
Accident and health 264 7 14 131
Alternative risk 1 751 13 266 1 769
Crop 429 (85) 204 379
Engineering 595 156 95 256
Guarantee 21 6 6 29
Liability 1 103 315 422 1 900
Miscellaneous 22 6 1 12
Motor 6 684 371 2 1 538
Property 4 615 269 498 1 608
Transportation 371 103 53 225
Unallocated - (15) 16 174 4 669
Total 15 855 1 146 17 735 12 516
Comprising:
Commercial insurance 8 054 886 1 158 4 817
Personal insurance 6 050 262 137 1 261
Alternative risk 1 751 13 266 1 769
Unallocated - (15) 16 174 4 669
Total 15 855 1 146 17 735 12 516
Reviewed Reviewed Audited
At 30 June At 30 June At 31 Dec
2011 2010 2010
R million R million R million
6. Financial assets
The group`s financial assets are
summarised below by measurement
category.
Financial assets at fair value
through income 10 994 10 741 11 688
Loans and receivables 2 010 1 966 1 735
Total financial assets 13 004 12 707 13 423
Financial assets at fair value
through income
Equity securities
- quoted 3 523 2 808 3 498
- unquoted 361 308 334
3 884 3 116 3 832
Derivatives (net) (24) (10) (75)
Debt securities
- quoted
government and other bonds 1 748 1 793 1 839
long-term money market
instruments 1 154 1 026 1 174
redeemable preference shares 383 - 375
- unquoted
government and other bonds 256 - 195
long-term money market
instruments 1 432 - 354
redeemable preference shares 313 751 309
5 286 3 570 4 246
Short-term money market instruments 1 848 4 065 3 685
Total financial assets at fair
value through income 10 994 10 741 11 688
7. Debt securities - at fair value
through income
At the beginning of the year 925 839 839
Fair value adjustment (6) 46 86
919 885 925
Accrued interest 24 24 24
943 909 949
During 2007 the company issued unsecured subordinated callable notes to
the value of R1 billion in two tranches. The fixed effective rate for
the R600 million issue was 8.6% and 9.6% for the second tranche of R400
million, representing the R203 companion bond plus an appropriate
credit spread at the time of the issues. The fixed coupon rate, based
on the nominal value of the issues, amounts to 8.25% and for both
tranches the optional redemption date is 15 September 2017. Between the
optional redemption date and the final maturity date of 15 September
2022, a variable interest rate (JIBAR-based) plus additional margin
will apply.
Per conditions set by the Regulator, Santam is required to maintain
liquid assets equal to the value of the callable notes until maturity.
The callable notes are therefore measured at fair value to minimise
undue income statement volatility.
Reviewed Reviewed Audited
At 30 June At 30 June At 31 Dec
2011 2010 2010
R million R million R million
8. Investment income
Dividend income 69 55 118
Interest income 228 258 535
Foreign exchange differences 4 22 (20)
301 335 633
9. Income tax
South African normal taxation
Current year 234 240 580
Charge for the year 200 206 472
STC 34 34 108
Prior year 1 (7) (10)
Foreign taxation 13 13 33
Income taxation for the year 248 246 603
Deferred taxation (14) (17) 36
Current year (13) (12) 37
STC (1) (5) (1)
234 229 639
Reconciliation of taxation rate (%)
Normal South African taxation rate 28.0 28.0 28.0
Adjust for
- Exempt income (2.1) (1.9) (1.6)
- Investment results (2.3) (1.2) (5.1)
- STC 3.6 3.6 4.4
- Other (1.7) (0.4) 0.6
Net reduction (2.5) 0.1 (1.7)
Effective rate 25.5 28.1 26.3
Reviewed Reviewed Audited
Six months Six months Year ended
ended ended 31 Dec 2010
30 June 30 June
2011 2010
10. Business combinations
Acquisition/Increase in
shareholding
On 1 March 2011, Santam Ltd
acquired 55% of the voting equity
interest in Mirabilis Engineering
Underwriting Managers (Pty) Ltd by
merging its construction and
engineering business into
Mirabilis. The new merged entity
will be the leading engineering
underwriter in the South African
market.
Details of the assets and
liabilities acquired at fair value
are as follows:
Deferred taxation (5) 3 61
Property and equipment - 4 41
Intangible assets 18 - 196
Investments 5 - 9
Reinsurance assets - 13 3
Loans and receivables 1 67 211
Short-term money market instruments - - 18
Cash and cash equivalents 3 95 262
Insurance liabilities - (32) (9)
Trade and other payables (4) (53) (478)
Taxation - (2) 2
Net asset value acquired 18 95 316
Goodwill 28 - 675
Non-controlling interest recognised
on acquisition (8) - -
Excess received on sale of
non-controlling interest (38) - -
Excess of acquirer`s interest in
the
net fair value of the acquirer`s
identifiable assets, liabilities
and contingent liabilities
over cost - (1) (6)
Investment in associated share
previously acquired - - (281)
Deferred purchase consideration
paid/(provided)* 240 - (347)
Purchase consideration paid 240 94 357
Mirabilis Engineering Underwriting
Managers (Pty) Ltd - - -
MiWay Group Holdings (Pty) Ltd 240 - -
Other - 94 357
* Amount is variable and will be impacted by returns achieved over the
next three years.
Comparative information on acquisitions relate to the transactions
below reported on in detail in prior periods.
Net asset Goodwill Purchase
value conside-
acquired ration
paid
a) Emerald Risk Transfer (Pty) Ltd
On 1 January 2010, Swanvest 120 (Pty) 100 - 94
Ltd acquired 100% of the voting equity
interest in Emerald Risk Transfer (Pty)
Ltd to obtain specialist underwriting
skills in the corporate property
environment.
b) Indwe Broker Holdings (Pty) Ltd
Effective 1 September 2010, the Santam 97 356 263
Group increased its shareholding in
Indwe Broker Holdings (Pty) Ltd from
37.8% to 100% by exercising its right
to purchase shares on offer from other
shareholders. The company is being
independently managed as an
intermediary.
c) MiWay Group Holdings Ltd
On 31 December 2010, Swanvest 120 (Pty) 119 319 -
Ltd increased its shareholding in MiWay
Group Holdings Ltd from 31.25% to 100%.
It is strategically important that
Santam makes proper inroads into the
emerging direct short-term insurance
market to retain its leadership
position in the industry. MiWay
continues to be managed independently,
servicing the direct segment of the
market.
316 675 357
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
11. Transactions with non-controlling
parties
On 1 March 2011, Santam Ltd sold
the non-controlling interest of
45% in its construction and
engineering business by merging it
into Mirabilis Engineering
Underwriting Managers (Pty) Ltd.
Non-controlling interest
acquired/(sold) - 78 78
Excess (received)/paid on
sale/acquisition of
non-controlling interest (38) 12 12
Settled through acquisition of
Mirabilis Engineering
Underwriting Managers (Pty) Ltd 38 - -
Purchase consideration paid - 90 90
Comparative information relates to the acquisition of the non-
controlling interest in Centriq Holdings (Pty) Ltd on 1 January 2010.
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
12. Earnings per share
Basic earnings per share
Profit attributable to the
company`s equity holders
(R million) 670 578 1 762
Weighted average number of
ordinary
shares in issue (million) 113.07 112.91 112.96
Earnings per share (cents) 593 512 1 560
Diluted earnings per share
Profit attributable to the
company`s equity holders
(R million) 670 578 1 762
Weighted average number of
ordinary
shares in issue (million) 113.07 112.91 112.96
Adjusted for share-options 1.63 2.03 2.03
Weighted average number of
ordinary
shares for diluted earnings
per share (million) 114.70 114.94 114.99
Diluted basic earnings
per share (cents) 584 503 1 532
Headline earnings per share
Profit attributable to the
company`s equity holders 670 578 1 762
Adjust for:
Impairment reversal on net
investment of associates - - (6)
Impairment of goodwill - - 10
Gain on remeasuring existing
interest in associates on
transfer to subsidiaries - - (215)
Excess of acquirer`s interest in
the net fair value of the
acquiree`s identifiable
assets,
liabilities and contingent
liabilities over cost - (1) (6)
Headline earnings (R million) 670 577 1 545
Weighted average number of
ordinary
shares in issue (million) 113.07 112.91 112.96
Headline earnings per share 593 511 1 367
(cents)
Diluted headline earnings per
share
Headline earnings (R million) 670 577 1 545
Weighted average number of
ordinary
shares for diluted earnings
per share (million) 114.70 114.94 114.99
Diluted headline earnings
per share (cents) 584 502 1 343
13. Dividends per share
Dividend per share (cents) 200 185 510
Special dividend per share (cents) - 500 500
Non-executive directors
B Campbell, MD Dunn, BTPKM Gamedze, VP Khanyile (Chairman,
NM Magau, JP Moller, YG Muthien, J van Zyl, BP Vundla
Executive directors
IM Kirk (Chief Executive Officer), MJ Reyneke (Chief Financial Officer)
Company secretary
Masood Allie
Santam head office and registered address
1 Sportica Crescent
Tyger Valley
Bellville 7530
PO Box 3881, Tyger Valley 7536
Tel: 021 915 7000
Fax: 021 914 0700
Transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg 2001
PO Box 61051, Marshalltown 2107
Tel: 011 370 5000
Fax: 011 688 7721
www.computershare.com
Sponsor
Investec Bank Limited
Website
www.santam.co.za
Date: 31/08/2011 14:00:07 Produced by the JSE SENS Department.
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employees and agents accept no liability for (or in respect of) any direct,
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