| Wed 27 Feb 2013, 14:00 | | SANTAM LIMITED - Audited Abridged Results for the year ended 31 December 2012 |
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SNT 201302270031A
Audited Abridged Results for the year ended 31 December 2012
Santam Limited and its subsidiaries
Registration number 1918/001680/06
ISIN ZAE000093779
JSE share code: SNT
NSX share code: SNM
AUDITED ABRIDGED REPORT
SANTAM LIMITED AND ITS SUBSIDIARIES
AUDITED ABRIDGED REPORT FOR THE YEAR ENDED 31 DECEMBER 2012
- Gross written premium growth of 9.5%
- Underwriting margin of 4% significantly impacted by catastrophic events
- 55% increase in investment returns
- Group solvency ratio of 41%
- Strong cash generation
- Tax charge significantly impacted by STC on special dividend and CGT inclusion rate change
- Final dividend of 410 cents per share, up 15.5%
FINANCIAL REVIEW
The Santam group achieved positive underwriting results in a financial year characterised by a number
of catastrophe events in the final quarter, while also achieving 9.5% growth in gross written premium,
significantly above industry growth. The negative financial impact of the tough underwriting conditions
was partially offset by the excellent investment market returns in 2012. Income before tax of
R1 700 million was 10% below the 2011 level achieved. The income tax charge increased by 28%, mainly due
to a secondary tax on companies charge of R96 million on the special dividend paid in the first half
of the year and an increase of R80 million in the deferred tax provision on fair value movements of
equities due to the increase in the capital gains tax inclusion rate effective from 2013.
Headline earnings decreased by 18% compared to 2011. Net cash generated from operating activities increased
to R1.7 billion (2011: R1.6 billion) while the solvency margin of 41% remains within our long-term target
range of 35% to 45%, following the payment of the special dividend in March 2012. Return on capital was
impacted by the adverse underwriting conditions and the increased taxation charge and reduced to 19.3%
(2011: 25.0%). Excluding the impact of the taxation charges noted above, Santam achieved a 22.6% return on
capital.
The South African insurance industry was significantly impacted by a number of catastrophe events during
2012, most notably the floods in Mpumalanga in January, a number of significant hail storms in Gauteng
during October and November and a devastating fire at St Francis Bay, also in November. These events
resulted in losses to Santam in excess of R400 million net of catastrophe reinsurance, more than three times
the average annual catastrophe claims registered by the group over the past 12 years (restated to 2012 rand
values and exposure). Despite the high claims volumes experienced following these events we comfortably
met our obligations to our clients.
Our net claims margin was 68.3%, compared to 64.2% reported in 2011. The 2012 underwriting result of
R623 million (2011: R1 186 million) and net underwriting margin of 4.0% (2011: 8.1%) was significantly
impacted by these events and an increase in claims frequency and severity, most notably fire claims,
resulting in the net underwriting margin dropping to below the medium-term target of 5% to 7%.
The benefits of our diversified business model were evident again this year. While our traditional intermediated
and direct businesses were under bottom-line pressure in the final quarter, our specialist and reinsurance
businesses were able to use their market position and expertise to protect margins and continue growing premiums.
Premium growth continued the solid performance of 2011, with gross written premium for the group increasing by
9.5% (2011:11.7%), gaining market share with industry premiums reflecting marginal growth. Positive growth was
achieved across all significant insurance classes, with MiWay reaching gross written premiums of R1 billion, an
increase of 38% compared to 2011.
The group's net acquisition cost ratio of 27.7% was in line with 2011. The increase in management expenses
ascribed to the significant growth in MiWay which currently has a higher level of management expenses, as well
as increased external management fees, was offset by a lower performance bonus provision and commission
expenses. We have continued to invest 1% of net earned premium in strategic initiatives in the traditional
Santam intermediated business to ensure the group achieves its long-term goals. Spending on current projects
will continue for the next two years and we anticipate that the full benefits will start to accrue from 2016.
These initiatives will ensure the group remains agile and competitive.
Investment returns on insurance funds of R415 million increased from the R388 million earned in 2011, resulting
mainly from higher float levels despite lower interest rates in 2012.
The combined effect of insurance activities resulted in a net insurance income of R1 038 million or a 6.6%
margin, compared to R1 574 million and a margin of 10.7% in 2011.
Following the strong equity markets, investment income, including dividends, interest received and management
fees paid, increased to R787 million in 2012 compared to the R355 million generated in 2011. The weakening of
the rand during 2012 had a positive impact on the valuations of our foreign currency assets held by our local
operations of R14 million (2011: R90 million). Santam's investment portfolio performance compared favourably
to the benchmarks set.
Net earnings from associated companies decreased from R85 million in 2011 to R40 million in 2012. Credit
Guarantee Insurance Corporation of Africa Ltd delivered a positive contribution to associated earnings. The
26% investment in NICO Holdings Ltd in Malawi was impaired by R43 million following the devaluation of the
Malawian currency which had an adverse effect on the banking and other financial services businesses of NICO
Holdings.
Since the acquisition of Santam's controlling stake in Indwe during 2010, the market conditions have weakened
due to increased competition and low premium increases resulting in a slowdown in Indwe's growth rate. An
impairment of R35 million of the goodwill acquired and R25 million relating to software developed by Indwe was
therefore deemed necessary.
The board would like to extend its gratitude to Santam's management, employees, intermediaries and other
business partners for their efforts and contributions during the past year.
Prospects
It is expected that South Africa's GDP growth will be less than 3% and headline inflation will average below 6%
for the 2013 financial year. Short-term insurance industry growth for the 2012 year was very subdued, mainly due
to soft premium rates in the market. Following these soft market conditions and the increase in claims frequency
and cost during 2012, a hardening of insurance rates is expected in 2013. This should improve average premium
levels. Santam is positioned to manage increases selectively through our market and risk segmentation approach
across the group. In addition, our growth through diversification strategy positions the group well to leverage
for growth in high-growth segments and territories.
The weakening of the rand during 2012 and the early part of 2013 will put further upwards pressure on claims
cost, most notably on the cost of motor vehicle repairs due to the increased cost of imported vehicle parts. We
are optimistic that our continued efforts to drive efficiency in the value chain and our overall focus on cost
efficiency in the group will offset some of the impact of the upwards cost pressure.
Nominal interest rates are expected to remain at current levels during 2013. This will put continued pressure
on the return on insurance funds in 2013.
Uncertainty remains in the investment markets due to the slow global recovery and a number of economic
challenges in South Africa.
Declaration of dividend (Number 118)
Notice is hereby given that the board has declared a final gross dividend of 410 cents per share (2011:
355 cents). Shareholders are advised that the last day to trade cum dividend will be Thursday, 14 March 2013.
The shares will trade ex dividend from the commencement of business on Friday, 15 March 2013. The record date
will be Friday, 22 March 2013, and the payment date will be Monday, 25 March 2013. Certificated shareholders may
not dematerialise or rematerialise their shares between 15 March 2013 and 22 March 2013, both dates inclusive.
The dividend has been declared from income reserves and will be subject to dividends tax that was introduced
with effect from 1 April 2012. There are R10 221 368 STC credits available for utilisation. Accordingly, the
secondary tax on companies (STC) credit available is 8.56445 cents per share. The amount per share subject to
the withholding of dividends tax at a maximum rate of 15% is therefore 401.43555 cents per share. A net dividend
of 349.78467 cents per share will apply to shareholders liable for dividends tax at a rate of 15% and 410 cents
per share for shareholders that qualify for complete exemption therefrom. The issued ordinary share capital as
at 27 February 2013 is 119 346 417 shares. The company's income tax reference number is 9475/144/71/4.
In terms of the dividends tax legislation, the dividends tax amount due will be withheld and paid over to the
South African Revenue Service (SARS) by a nominee company, stockbroker or Central Security Depository
Participant (CSDP) (collectively "Regulated Intermediary") on behalf of shareholders. However, all shareholders
should declare their status to their Regulated Intermediary, as they may qualify for a reduced dividends tax
rate or they may even be exempt from dividends tax. The increase in the dividend per share includes a once-off
adjustment of approximately 7% to the dividend per share declared to account for the STC saving for the company
resulting from the introduction of dividends tax.
Preparation and presentation of the financial statements
The preparation of the audited financial statements was supervised by the Chief financial officer of
Santam Ltd, HD Nel. The full set of annual financial results is published on our website at www.santam.co.za
or can be requested from the company secretary.
Auditors' report
The company's external auditors, PricewaterhouseCoopers Inc, have audited the abridged financial report. A copy
of their unqualified audit opinion is available on request at the company's registered offices.
On behalf of the board
VP Khanyile IM Kirk
Chairman Chief Executive Officer
27 February 2013
Consolidated statement of financial position
Audited Audited
At At
31 Dec 2012 31 Dec 2011
Notes R million R million
ASSETS
Non-current assets
Property and equipment 99 80
Intangible assets 990 994
Deferred income tax 221 207
Investments in associates 261 274
Financial assets - at fair value through income
Equity securities 6 3 551 3 856
Debt securities 6 6 957 6 160
Derivatives 6 6 1
Financial assets - at amortised cost
Cell owners' interest 24 40
Reinsurance assets 7 137 244
Current assets
Financial assets - at fair value through income
Short-term money market instruments 6 917 1 775
Reinsurance assets 7 1 618 1 256
Deferred acquisition costs 340 332
Loans and receivables including insurance receivables 6 2 088 1 836
Income tax assets 57 36
Cash and cash equivalents 2 471 1 598
Total assets 19 737 18 689
EQUITY
Capital and reserves attributable to the company's equity holders
Share capital 107 107
Treasury shares (579) (635)
Other reserves 77 1 492
Distributable reserves 5 904 5 072
5 509 6 036
Non-controlling interest 108 105
Total equity 5 617 6 141
LIABILITIES
Non-current liabilities
Deferred income tax 284 115
Financial liabilities - at fair value through income
Debt securities 6 1 034 964
Investment contracts 6 83 48
Financial liabilities - at amortised cost
Cell owners' interest 712 643
Insurance liabilities 7 1 340 1 404
Provisions for other liabilities and charges - 1
Current liabilities
Financial liabilities - at fair value through income
Debt securities 6 24 24
Investment contracts 6 12 56
Financial liabilities - at amortised cost
Collateral guarantee contracts 75 114
Insurance liabilities 7 8 318 7 071
Deferred reinsurance acquisition revenue 147 102
Provisions for other liabilities and charges 161 105
Trade and other payables 1 886 1 828
Income tax liabilities 44 73
Total liabilities 14 120 12 548
Total shareholders' equity and liabilities 19 737 18 689
Consolidated statement of comprehensive income
Audited Audited
Year ended Year ended
31 Dec 2012 31 Dec 2011 Change
Notes R million R million %
Gross written premium 19 386 17 707 9.5%
Less: Reinsurance written premium 3 564 3 033
Net written premium 15 822 14 674 7.8%
Change in unearned premium
Gross amount 323 241
Reinsurers' share (127) (219)
Net insurance premium revenue 15 626 14 652 6.6%
Investment income 8 859 676
Income from reinsurance contracts ceded 516 321
Net gain on financial assets and liabilities
at fair value through income 8 480 189
Net income 17 481 15 838 10.4%
Insurance claims and loss adjustment expenses 12 167 10 788
Insurance claims and loss adjustment expenses
recovered from reinsurers (1 488) (1 384)
Net insurance benefits and claims 10 679 9 404 13.6%
Expenses for the acquisition of insurance contracts 2 540 2 324
Expenses for marketing and administration 2 349 2 114
Expenses for asset management services 31 28
Amortisation and impairment of intangible assets 116 68
Expenses 15 715 13 938 12.7%
Results of operating activities 1 766 1 900 (7.1%)
Finance costs (106) (94)
Net income from associates 83 85
Impairment on investment in associate (43) -
Profit before tax 1 700 1 891 (10.1%)
Income tax expense 9 (624) (486)
Profit for the year 1 076 1 405 (23.4%)
Other comprehensive income
Currency translation differences 23 108
Total comprehensive income for the year 1 099 1 513
Profit attributable to:
- equity holders of the company 1 027 1 376
- non-controlling interest 49 29
1 076 1 405
Total comprehensive income attributable to:
- equity holders of the company 1 050 1 484
- non-controlling interest 49 29
1 099 1 513
Earnings attributable to equity shareholders 12
Basic earnings per share (cents) 904 1 216 (25.7%)
Diluted earnings per share (cents) 895 1 202 (25.5%)
Weighted average number of shares - millions 113.56 113.15
Weighted average number of ordinary shares for diluted
earnings per share - millions 114.81 114.47
Consolidated statement of changes in equity
Attributable to equity holders of
the company
Distribu Non-
Share Treasury Other -table controlling
capital shares reserves reserves interest Total
R million R million R million R million R million R million
Balance as at 1 January 2011 107 (651) 1 265 4 405 93 5 219
Profit for the year - - - 1 376 29 1 405
Other comprehensive income:
Currency translation differences - - 108 - - 108
Total comprehensive income for the year
ended 31 December 2011 - - 108 1 376 29 1 513
Purchase of treasury shares - (37) - - - (37)
Sale of treasury shares - 53 - - - 53
Loss on sale of treasury shares - - - (68) - (68)
Transfer to reserves - - 119 (119) - -
Share-based payments - - - 63 - 63
Transfer to share-based payment liability - - - (30) - (30)
Dividends paid - - - (593) (25) (618)
Net excess received on acquisition of
non-controlling interest - - - 38 - 38
Interest acquired from non-controlling
interest - - - - 8 8
Balance as at 31 December 2011 107 (635) 1 492 5 072 105 6 141
Profit for the year - - - 1 027 49 1 076
Other comprehensive income:
Currency translation differences - - 23 - - 23
Total comprehensive income for the year
ended 31 December 2012 - - 23 1 027 49 1 099
Sale of treasury shares - 56 - - - 56
Loss on sale of treasury shares - - - (57) - (57)
Transfer to reserves - - (1 438) 1 438 - -
Share-based payments - - - 50 - 50
Dividends paid - - - (1 626) (48) (1 674)
Interest acquired from non-controlling
interest - - - - 2 2
Balance as at 31 December 2012 107 (579) 77 5 904 108 5 617
Consolidated statement of cash flows
Audited Audited
Year ended Year ended
31 Dec 2012 31 Dec 2011
Notes R million R million
Cash generated from operations 2 362 2 522
Interest paid (106) (119)
Income tax paid (521) (813)
Net cash from operating activities 1 735 1 590
Cash flows from investing activities
Cash generated by investment activities 935 201
Acquisition of subsidiary 10 - (343)
Cash acquired through acquisition of subsidiary 10 - 3
Purchases of equipment (63) (39)
Purchases of software (31) (28)
Proceeds from sale of equipment 1 1
Acquisition of associated companies (6) -
Acquisition of book of business (81) -
Net cash from/(used in) investing activities 755 (205)
Cash flows from financing activities
Purchase of treasury shares - (37)
Proceeds on sale of treasury shares - 4
Decrease in collateral guarantee contracts (39) -
Decrease in investment contract liabilities (17) (413)
Dividends paid to company's shareholders (1 626) (593)
Dividends paid to non-controlling interest (48) (25)
Increase in cell owners' interest 90 26
Net cash used in financing activities (1 640) (1 038)
Net increase in cash and cash equivalents 850 347
Cash and cash equivalents at beginning of year 1 598 1 143
Exchange gains on cash and cash equivalents 23 108
Cash and cash equivalents at end of year 2 471 1 598
Notes to the financial information
1. BASIS OF PRESENTATION
This abridged consolidated financial information for the year ended 31 December 2012 has been prepared in
accordance with IAS 34 - Interim Financial Reporting and in compliance with the Listings Requirements of
the JSE Limited. The abridged consolidated 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 2012, which have been prepared in accordance with IFRSs.
2. ACCOUNTING POLICIES
The accounting policies applied are consistent with those of the previous and current financial year.
3. ESTIMATES
The preparation of 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 expenses. Actual results may differ from these estimates.
In preparing these abridged consolidated 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 2012.
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 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 2012.
There have been no changes in the risk management policies since the previous year-end.
During 2012 there were no significant changes in the business circumstances that affect the fair value of the
group's financial assets and liabilities. There were no reclassifications of financial assets and liabilities
in 2012.
5. SEGMENT INFORMATION
Segments have been identified by business activity, i.e. insurance activities and investment activities, as
these activities mainly affect the group's risk and returns. No geographical segmentation is disclosed as
southern Africa is regarded as one reportable segment for management purposes.
Segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker has been identified as the Chief Executive Officer,
supported by the group executive committee (Exco).
The group's internal reporting is reviewed in order to assess performance and allocate resources. The operating
segments identified are representative of the internal structure of the group.
Two core activities of the group, i.e. insurance activities and investment activities, are reviewed 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.
The performance of insurance activities is considered based on gross written premium as a measure of growth;
with 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.
In the past, group underwriting results included the MiWay deferred bonus plan expense (DBP) and the Santam
BEE transaction costs. The MiWay DBP was introduced in 2011 to compensate management for the 10% stake they
previously held in MiWay. An additional share incentive scheme was subsequently introduced representing a
standard long-term incentive scheme. The BEE transaction costs relate to the Santam BEE transaction in 2007
in terms of which Santam shares are allocated to black staff and business partners.
The MiWay DBP, relating to the compensation of the 10% interest previously held by management in MiWay and the
Santam BEE transaction costs are unrelated to the core underwriting performance of the group. Therefore, the
underwriting results are shown excluding these expenses and the comparative segmental numbers have been
restated as follows:
2011
2011 % of net earned
Rm premiums
Net underwriting results as previously reported 1 131 7.7
MiWay DBP and Santam BEE transaction costs 55 0.4
Restated underwriting result 1 186 8.1
In previous financial years technical assets and liabilities per insurance class were disclosed. The disclosure
has been discontinued given that the chief operating decision-maker does not review this information.
5.1 For the year ended 31 December 2012
Insurance Investment
activities activities Unallocated Total
Business activity R million R million R million R million
2012
Revenue 19 386 858 20 244
Gross written premium 19 386 19 386
Net written premium 15 822 15 822
Net earned premium 15 626 15 626
Claims incurred 10 679 10 679
Net commission 2 024 2 024
Management expenses 2 300 2 300
Underwriting result 623 623
Investment return on insurance funds 415 415
Net insurance result 1 038 1 038
Investment income net of management fee* 787 787
Income from associates net of impairment 40 40
MiWay DBP and Santam BEE transaction costs (57) (57)
Amortisation and impairment of intangible assets (108) (108)
Income before taxation 930 827 (57) 1 700
* Interest income of R88 million and finance cost of R106 million are included.
Gross written Underwriting
premium result
Insurance class R million R million
2012
Accident and health 286 10
Alternative risk 2 103 (7)
Crop 687 38
Engineering 860 158
Guarantee 40 8
Liability 1 227 206
Miscellaneous 23 6
Motor 8 361 89
Property 5 291 32
Transportation 508 83
Total 19 386 623
Comprising:
Commercial insurance 9 660 767
Personal insurance 7 623 (137)
Alternative risk 2 103 (7)
Total 19 386 623
5.2 For the year ended 31 December 2011
Insurance Investment
activities activities Unallocated Total
Business activity - Restated R million R million R million R million
2011
Revenue 17 707 468 18 175
Gross written premium 17 707 17 707
Net written premium 14 674 14 674
Net earned premium 14 652 14 652
Claims incurred 9 404 9 404
Net commission 2 003 2 003
Management expenses 2 059 2 059
Underwriting result 1 186 1 186
Investment return on insurance funds 388 388
Net insurance result 1 574 1 574
Investment income net of management fee* 355 355
Income from associates net of impairment 85 85
MiWay DBP and Santam BEE transaction costs (55) (55)
Amortisation of intangible assets (68) (68)
Income before taxation 1 506 440 (55) 1 891
* Interest income of R48 million and finance cost of R94 million are included.
Gross written Underwriting
premium result
Insurance class R million R million
2011
Accident and health 286 45
Alternative risk 1 924 (5)
Crop 575 12
Engineering 736 121
Guarantee 17 9
Liability 1 157 143
Miscellaneous 16 1
Motor 7 621 511
Property 4 981 258
Transportation 394 91
Total 17 707 1 186
Comprising:
Commercial insurance 8 844 941
Personal insurance 6 939 250
Alternative risk 1 924 (5)
Total 17 707 1 186
Audited Audited
At At
31 Dec 2012 31 Dec 2011
R million R million
6. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH INCOME
The group's financial assets are summarised below by
measurement category.
Financial assets at fair value through income 11 431 11 792
Loans and receivables 2 088 1 836
Total financial assets 13 519 13 628
Financial assets and liabilities at fair value through income - Fair value estimation
The table below analyses financial instruments, carried at fair value through income, by valuation method.
The different levels have been defined as follows:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
- Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (that is, prices) or indirectly (that is, derived from prices)
- Level 3: Inputs for the asset or liability that are not based on observable data (that is, unobservable
inputs)
Financial assets at fair value through income
2012 Level 1 Level 2 Level 3 Total
R million R million R million R million
Equity securities
Quoted
Listed 3 183 - - 3 183
Unitised funds - 94 - 94
Irredeemable preference shares 2 - - 2
Unquoted - - 272 272
Total equity securities 3 185 94 272 3 551
Debt securities
Quoted
Government and other bonds 1 644 87 - 1 731
Redeemable preference shares - 275 - 275
Money market instruments
(long-term instruments) - 1 513 - 1 513
Unquoted
Government and other bonds - 31 - 31
Money market instruments
(long-term instruments) - 3 378 - 3 378
Redeemable preference shares - - 29 29
Total debt securities 1 644 5 284 29 6 957
Derivatives
Interest rate swaps - - 6 6
Total derivatives - - 6 6
Short-term money market instruments - 917 - 917
4 829 6 295 307 11 431
2011 Level 1 Level 2 Level 3 Total
R million R million R million R million
Equity securities
Quoted
Listed 3 360 - - 3 360
Unitised funds - 80 - 80
Irredeemable preference shares 2 - - 2
Unquoted - - 414 414
Total equity securities 3 362 80 414 3 856
Debt securities
Quoted
Government and other bonds 1 575 182 - 1 757
Redeemable preference shares - 392 - 392
Money market instruments
(long-term instruments) - 1 371 - 1 371
Unquoted
Government and other bonds - 167 - 167
Money market instruments
(long-term instruments) - 2 197 - 2 197
Redeemable preference shares - - 276 276
Total debt securities 1 575 4 309 276 6 160
Derivatives
Interest rate swaps - - 1 1
Total derivatives - - 1 1
Short-term money market instruments - 1 775 - 1 775
4 937 6 164 691 11 792
Financial liabilities at fair value through income
2012 Level 1 Level 2 Level 3 Total
R million R million R million R million
Debt securities 1 058 - - 1 058
Investment contracts - 95 - 95
1 058 95 - 1 153
2011 Level 1 Level 2 Level 3 Total
R million R million R million R million
Debt securities 988 - - 988
Investment contracts - 104 - 104
988 104 - 1 092
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 final maturity date of 15 September 2022, a variable interest rate (JIBAR-based plus additional
margin) will apply.
Per the conditions set by the Regulator, Santam is required to maintain liquid assets equal to the value
of the callable notes until their maturity. The callable notes are therefore measured at fair value to
minimise undue volatility in the statement of comprehensive income.
Audited Audited
At At
31 Dec 2012 31 Dec 2011
R million R million
7. INSURANCE LIABILITIES AND REINSURANCE ASSETS
Gross
Long-term insurance contracts
- claims incurred but not reported 14 9
Short-term insurance contracts
- claims reported and loss adjustment expenses 4 948 4 191
- claims incurred but not reported 1 311 1 246
- unearned premiums 3 385 3 029
Total insurance liabilities - gross 9 658 8 475
Non-current liabilities 1 340 1 404
Current liabilities 8 318 7 071
Recoverable from reinsurers
Long-term insurance contracts
- claims incurred but not reported 2 1
Short-term insurance contracts
- claims reported and loss adjustment expenses 977 920
- claims incurred but not reported 192 150
- unearned premiums 584 429
Total reinsurers' share of insurance assets 1 755 1 500
Non-current assets 137 244
Current assets 1 618 1 256
Net
Long-term insurance contracts
- claims incurred but not reported 12 8
Short-term insurance contracts
- claims reported and loss adjustment expenses 3 971 3 271
- claims incurred but not reported 1 119 1 096
- unearned premiums 2 801 2 600
Total insurance liabilities - net 7 903 6 975
8. INVESTMENT INCOME AND NET GAINS/(LOSSES) ON FINANCIAL
ASSETS AND LIABILITIES AT FAIR VALUE THROUGH INCOME
Investment income 859 676
Dividend income* 342 150
Interest income 503 436
Foreign exchange differences 14 90
Net realised gains on financial assets 358 140
Net fair value gains on financial assets designated as at
fair value through income 360 21
Net fair value (losses)/gains on financial assets held
for trading (166) 9
Net realised gains on derivatives 5 80
Net fair value losses on financial liabilities designated
as at fair value through income (77) (61)
Net fair value losses on debt securities (70) (39)
Net fair value losses on investment contracts (7) (22)
1 339 865
* Dividend income for the group includes a dividend of R181 million from Santam's run-off
international business.
Audited Audited
At At
31 Dec 2012 31 Dec 2011
R million R million
9. TAX
South African normal taxation
Current year 433 567
Charge for the year 294 531
STC 139 36
Prior year 10 (4)
Foreign taxation - current year 38 34
Income taxation for the year 481 597
Deferred taxation 143 (111)
Current year 139 (111)
STC 4 -
Total taxation 624 486
Reconciliation of taxation rate (%)
Normal South African taxation rate 28.0 28.0
Adjust for
- Exempt income (2.6) (2.2)
- Investment results (3.2) (1.9)
- Change in CGT inclusion rate 4.7 -
- STC 8.4 1.9
- Other 1.4 (0.1)
Net increase/(reduction) 8.7 (2.3)
Effective rate (%) 36.7 25.7
10. BUSINESS COMBINATIONS
2012
Additions
Riscor Underwriting Managers (Pty) Ltd
The group acquired 100% of Riscor Underwriting Managers (Pty) Ltd (Riscor) on 1 September 2012
for a nominal amount. Riscor acquired from Topexec Management Bureau (Pty) Ltd and Combined
Administration Management Services (Pty) Ltd their broker administration businesses, comprising
fixed assets and intangible assets on 1 September 2012 and 1 November 2012 respectively. The
merged Riscor entity will operate as an independent administration business.
The total purchase price amounted to R29 million. Intangible assets of R39 million and deferred
taxation of R11 million were recognised. Net operating assets amounted to approximately R1 million.
Disposals
Stilus Underwriting Managers (Pty) Ltd
On 1 January 2012, the Santam Group sold its 60% interest in Stilus Underwriting Managers (Pty) Ltd.
Audited Audited
At At
31 Dec 2012 31 Dec 2011
R million R million
Details of assets and liabilities sold are as follows:
Deferred taxation (2) -
Trade and other payables 4 -
Net asset value sold 2 -
Plus: Non-controlling interest (2) -
Purchase consideration received - -
2011
Additions
a) MiWay Group Holdings (Pty) Ltd
During the year the deferred purchase consideration for MiWay Group Holdings (Pty) Ltd was settled in
cash. A profit of R4 million was recognised in the statement of comprehensive income.
b) Mirabilis Engineering Underwriting Managers (Pty) Ltd
On 1 March 2011, the Santam Group acquired 55% of the voting equity interest in Mirabilis Engineering
Underwriting Managers (Pty) Ltd by merging its construction and engineering business into Mirabilis.
b) Mirabilis
Engineering
a) MiWay Underwriting
Group Managers
Holdings Ltd (Pty) Ltd Total
Details of the assets and liabilities acquired
at fair value are as follows:
Deferred taxation - (5) (5)
Intangible assets - 18 18
Financial assets at fair value through income - 5 5
Loans and receivables - 1 1
Cash and cash equivalents - 3 3
Trade and other payables - (4) (4)
Net asset value acquired - 18 18
Goodwill - 28 28
Excess of acquirer's interest in the net fair value of the
acquirer's identifiable assets, liabilities and contingent
liabilities over cost - (38) (38)
Less: Investment in associated share previously acquired - (8) (8)
Deferred purchase consideration paid 343 - 343
Purchase consideration paid 343 - 343
Audited Audited
At At
31 Dec 2012 31 Dec 2011
R million R million
11. TRANSACTIONS WITH NON-CONTROLLING PARTIES
a) Mirabilis Engineering Underwriting Managers (Pty) Ltd
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.
Net excess received on sale/acquisition of non-controlling interest - (38)
Settled through acquisition of Mirabilis Engineering Underwriting
Managers (Pty) Ltd - 38
Purchase consideration paid - -
12. EARNINGS PER SHARE
Basic earnings per share
Profit attributable to the company's equity holders (R million) 1 027 1 376
Weighted average number of ordinary shares in issue (million) 113.56 113.15
Earnings per share (cents) 904 1 216
Diluted earnings per share
Profit attributable to the company's equity holders (R million) 1 027 1 376
Weighted average number of ordinary shares in issue (million) 113.56 113.15
Adjusted for share options 1.25 1.32
Weighted average number of ordinary shares for diluted earnings
per share (million) 114.81 114.47
Diluted basic earnings per share (cents) 895 1 202
Headline earnings per share
Profit attributable to the company's equity holders (R million) 1 027 1 376
Impairment of goodwill 35 -
Impairment of software 25 -
Impairment of investment and associate 43 -
Tax charge and non-controlling interest - -
Headline earnings (R million) 1 130 1 376
Weighted average number of ordinary shares in issue (million) 113.56 113.15
Headline earnings per share (cents) 995 1 216
Diluted headline earnings per share
Headline earnings (R million) 1 130 1 376
Weighted average number of ordinary shares for diluted earnings
per share (million) 114.81 114.47
Diluted headline earnings per share (cents) 984 1 202
13. DIVIDENDS PER SHARE
Ordinary dividend per share (cents) 640 555
Special dividend per share (cents) - 850
(I) Analysis of shareholders
Number of % of total Number %
Analysis of shareholders shareholders shareholders of shares Interest
1 - 100 shares 928 16.66% 67 791 0.06%
101 - 1 000 shares 2 829 50.85% 1 247 405 1.05%
1 001 - 50 000 shares 1 732 31.12% 9 640 750 8.08%
50 001 - 100 000 shares 34 0.61% 2 350 135 1.97%
100 001 - 10 000 000 shares 40 0.72% 26 742 737 22.41%
More than 10 000 000 shares 2 0.04% 79 297 599 66.43%
Total 5 565 100.00% 119 346 417 100.00%
Type of shareholder
Individuals 3 871 69.57% 4 624 484 3.89%
Companies 347 6.23% 79 595 419 66.68%
Growth funds/unit trusts 142 2.55% 20 804 109 17.43%
Nominee companies or trusts 1 107 19.89% 4 116 457 3.45%
Pension and retirement funds 98 1.76% 10 205 948 8.55%
Total 5 565 100.00% 119 346 417 100.00%
Shareholders other
Shareholders in SA than in SA Total shareholders
Nominal % Nominal % Nominal %
Shareholder spread number Interest number Interest number Interest
Public shareholders 5 411 26.27% 140 100.00% 5 551 28.77%
Directors 10 0.14% - - 10 0.14%
Trustees of employees' share scheme 1 0.00% - - 1 0.00%
Holdings of 5% or more 3 73.59% - - 3 71.09%
Sanlam Ltd 1 59.10% - - 1 57.09%
Central Plaza Investments
112 (Pty) Ltd* 1 9.68% - - 1 9.35%
Guardian National Insurance Ltd** 1 4.81% - - 1 4.65%
Total 5 425 100.00% 140 100.00% 5 565 100.00%
The analysis includes the shares held as treasury shares.
* BEE special-purpose company
** Owner of treasury shares
(II) Analysis of debt security holders
Number of % of total
debt debt
security security Number %
holders holders of units Interest
Analysis of debt security holders
1 - 50 000 units 1 1.09% 31 700 -
50 001 - 100 000 units 2 2.17% 185 600 0.02%
100 001 - 1 000 000 units 31 33.70% 18 467 000 1.85%
1 000 001 - 10 000 000 units 42 45.65% 176 822 000 17.68%
More than 10 000 000 units 16 17.39% 804 493 700 80.45%
Total 92 100.00% 1 000 000 000 100.00%
Type of debt security holder
Brokers 2 2.17% 53 531 700 5.35%
Endowment funds 5 5.43% 13 458 600 1.35%
Insurance companies 9 9.78% 213 792 800 21.38%
Investment companies 1 1.09% 125 000 000 12.50%
Medical aid schemes 2 2.17% 1 150 000 0.12%
Mutual funds 35 38.04% 209 120 900 20.91%
Nominees and trusts 2 2.17% 1 490 000 0.15%
Pension funds 33 35.89% 356 546 000 35.65%
Private companies 3 3.26% 25 910 000 2.59%
Total 92 100.00% 1 000 000 000 100.00%
Debt security holders in SA
Nominal %
Debt security holder spread number Interest
Government Employees Pension Fund 214 767 500 21.48%
Old Mutual Life Assurance Company (South Africa) Ltd 145 051 400 14.51%
Momentum Group Ltd 125 000 000 12.50%
RMB Capital Markets 53 500 000 5.35%
Other 461 681 100 46.16%
Total 1 000 000 000 100.00%
Directors
Executive directors
IM Kirk (Chief Executive Officer), HD Nel (Chief Financial Officer), Y Ramiah
Non-executive directors
VP Khanyile (Chairman), B Campbell, MD Dunn, MP Fandeso, BTPKM Gamedze, GG Gelink, VP Khanyile (Chairman),
MLD Marole, JP Moller, MJ Reyneke, J van Zyl, YG Muthien
Sponsor
Investec Bank Ltd
Company secretary
Masood Allie
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
Registered office
1 Sportica Crescent
Tyger Valley
Bellville 7530
PO Box 3881, Tyger Valley 7536
Tel: 021 915 7000
Fax: 021 914 0700
www.santam.co.za
Date: 27/02/2013 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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