| Mon 11 Jun 2001, 0:00 | | African Life - Press Release |
|
African Life year-end results
African Life, the listed assurance group focused on the emerging
market, recorded mixed results for the 12 months to 31 March 2001.
Recurring premium income of R1,3 billion increased 11% from the
previous year, which the directors believe is a commendable
achievement in exceptionally challenging trading conditions. In
the volatile single premium market, the emphasis was on
maintaining profit margins rather than growing premiums. The total
surplus before tax and exceptional items was R336,3 million, and
headline earnings were R127,4 million or 114 cents per share. The
dividend for the full year of 57,5 cents per share reflects the
difficult trading conditions of the past year.
Selling expenses for the period were down from the previous year
as a result of lower new business volumes in South Africa.
Administrative expenses of R216,2 million were in line with
expectations, given the high level of once-off costs incurred.
Policy benefits of R985,1 million increased in line with
expectations.
Exceptional items relating to shareholders of R178,8 million for
the year comprise:
* The write-down to zero of investments in LeisureNet promissory
notes and NRB cash deposits, totalling R24,8m
* The creation of a Persal rationalisation reserve in light of
restrictions placed by government on existing deductions,
totalling R82,4m.
* The alignment of the valuation and administrative procedures
relating to the timing and treatment of policy lapses amounting to
R67,1m
* Costs of R4,5m relating to the closure and sale of asset
management and employee benefit operations respectively.
Taxation of R62,1 million included normal tax payable of R8,2
million, secondary tax on companies of R7,4 million and foreign
taxes of R46,5million.
Embedded value was R1 788,8 million at 31 March 2001, compared
with R2 020,2m at 31 March 2000. Embedded value calculations were
reviewed and approved by leading independent actuarial
consultancy, Tillinghast-Towers Perrin.
Chief executive, Jeremy Rowse, says, "The review period truly
tested the character of African Life's people. It was a period of
tremendous challenge, both internally and externally. Externally,
consumer wallets remained under pressure, and the government's
decision to halt non-statutory payroll deductions (Persal) was
announced. This unified our industry, which successfully
negotiated to amend the decision. Internally, we managed the Real
Africa unbundling of its stake in African Life, FirstRand
increased its holding and management structures were further
strengthened."
Rowse says, despite difficult market conditions, African Life
recorded several achievements during the year. "New business
levels in South Africa were maintained, resulting in satisfactory
embedded value of new business. Importantly, the Persal challenge
was successfully weathered and rationalisation effects provided
for. We made excellent progress in our international expansion
strategy, with our entry into Kenya. Domestically, the Ingwe
healthcare model further entrenched itself as the preferred choice
in affordable healthcare."
African Life announced changes to accounting policies, actuarial
bases and presentation at the interim stage, which have been
consistently applied for the full year. Comparative figures,
including embedded value figures, have been restated to reflect
the changes in accounting policies and reclassifications.
Commenting on South African operations, Rowse says the Persal
issue was the major focus area during the past financial year.
"Our prompt response in developing alternative collection methods,
notably through innovative debit order solutions with leading
banks, ensured that new business levels were maintained. Our
customer base was maintained in the review period, a commendable
achievement in the face of extreme challenges."
During the year, African Life merged the management of its
distribution channels for independent and tied intermediaries.
Rowse says, "We took the best of both systems to create a new
distribution network that will offer greater productivity, better
control of costs and further improvements to our quality of
service."
"With new business levels similar to last year and a static
customer base, unit costs suffered. However, with our stringent
and ongoing focus on improved processes and the benefits of a
common technology platform for the group, we are confident that a
drop in unit costs will be sustainable in the long term."
Rowse says operations in Botswana continued to contribute strongly
to overall results, recording another good performance for the
year, despite an expected mortality deterioration. Results from
Namibian operations were satisfactory and new business growth
levels necessitated additional capital. A new management team in
Kenya is expected to deliver significantly improved results in the
next financial year.
Ingwe HPO, the group's healthcare division, met its target of 100
000 lives and achieved cash flow break even early in the year.
"Ingwe is now the acknowledged leader in fourth-generation medical
aid products and is the only organisation in its industry with the
capability to manage more than one primary care network on a
capitation basis. During the period, Ingwe outsourced its
distribution to African Life and initial results of using this
proven network are excellent."
Commenting on prospects, Rowse says, "African Life has weathered a
very difficult year, but the experience has reinforced our
resolve. We have emerged stronger and more focused on our core
operations."
"African Life has many competitive advantages, some of them
unique. We will continue to build on these strengths in developing
our strategy to be the dominant provider of risk financial and
healthcare products in our chosen markets, which have considerable
growth potential. We are confident that African Life will resume
its aggressive growth track in the near future."(ends)
Released by : Hayley Kuhn
083 308 0200
Contact : Jeremy Rowse
Chief Executive
(011) 359-7702
Andre van Heerden
Financial Director
(011) 359-7704
