| Tue 14 Aug 2001, 0:00 | | Clientele Life Assurance Company Limited - Financi |
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Clientele Life Assurance Company Limited
(Registration number 1973/016606/06)
Final Report to Shareholders for the year ended 30 June 2001
- Net recurring premium income increased by 50%
- Surplus from life operations increased by 50%
- Headline return on average shareholders' interests: 50%
- Headline earnings per share increased by 33%
- Embedded value of new business: R65 million
- Cash generated by operations: R43 million
- Total dividends and cash distributions to shareholders during the period
increased by 185%
The following are the audited results for the company for the year ended 30
June 2001.
Summarised Income Statements
Year ended Year ended
30 June 30 June % Increase/
(R'000's) 2001 2000 (decrease)
Net premium income
- Recurring 124 598 83 340 50
Investment income 6 540 3 421 91
Policyholders' benefits (8 624) (6 846) 26
Transfer to life fund (16 835) (11 422) 47
Expenses (73 461) (46 962)
- Operating expenses (10 457) (9 595) 9
- New business
acquisition expenses (63 004) (37 367) 69
SURPLUS FROM LIFE
OPERATIONS 32 218 21 531 50
Investment return based on
long term rate of return 9 638 9 975 (3)
HEADLINE EARNINGS 41 856 31 506 33
(based on LTRR)
Reconciliation of headline
earnings to total earnings
Headline earnings 41 856 31 506
Short term fluctuations on
investment return* 59 5 575
Taxation (STC) (2 151) (2 180)
Total attributable earnings
including short term
fluctuations* 39 764 34 901
Headline earnings includes an expected Long Term Rate of Return on
shareholders' funds of 12%, which is consistent with the actuaries' long
term economic assumptions for embedded value.
The total investment return on shareholders' funds was affected by the R30
million special cash distribution to shareholders during the year. This had
the effect of reducing the investment return based on the long term rate of
return by R2,2 million; had the special distribution not been paid Headline
Earnings would have increased by 40% for the year.
*A one hundred percent write down of R3,1 million has been made against a
preference share investment in Regal Treasury Private Bank Limited as
sufficient information to ascertain its recoverability is at present not
available. This is reflected in the short term fluctuations on investment
return.
Summarised Balance Sheets
As at As at
30 June 30 June
(R'000's) 2001 2000
Funds employed
Share capital 4 770 4 770
Share premium 9 642 39 690
Retained surplus 58 607 38 652
Shareholders' interests 73 019 83 112
Life fund 53 452 36 617
126 471 119 729
Employment of funds
Investments 117 959 113 652
Fixed assets 8 656 5 937
Current assets 28 077 25 134
Total assets 154 692 144 723
Current liabilities (28 221) (24 994)
126 471 119 729
STATEMENTS OF CHANGES IN EQUITY
Share Share Retained
(R'000's) capital premium earnings Total
30 June 2000
Balance at the
beginning of year 4 770 39 690 21 202 65 662
Net surplus
attributable
to shareholders 34 901 34 901
Dividend declared (17 451) (17 451)
Balance at the
end of year 4 770 39 690 38 652 83 112
30 June 2001
Balance at the
beginning of period 4 770 39 690 38 652 83 112
Net surplus attributable
to shareholders 39 764 39 764
Cash distribution (30 000) (30 000)
Expenses related to
cash distribution (48) (48)
Dividend declared (19 809) (19 809)
Balance at the
end of period 4 770 9 642 58 607 73 019
SUMMARISED CASH FLOW STATEMENTS
Year ended Year ended
30 June 30 June
R'000's) 2001 2000
Cash generated by operations 43 172 32 606
Adjusted by:
Returns on investments 6 137 11 399
Dividends paid (17 425) (12 456)
Taxation paid (STC) (2 031) (1 555)
Cash flow from
operating activities 29 853 29 994
Cash flow from
investing activities* 849 (21 239)
Cash flow from
financing activities* (32 255) (4 977)
(Decrease)/Increase in
cash on hand (1 553) 3 778
*Cash flow from financing activities and cash flow from investing activities
include a cash distribution of R30 million (2000: Nil) paid to shareholders
out of the share premium account.
Earnings per share
Year ended Year ended
30 June 30 June % Increase/
(R'000's) 2001 2000 (decrease)
Surplus from life operations
per share (cents) 101.31 67.71 50
Long term return on shareholders'
funds per share (cents) 30.31 31.37 (3)
Headline earnings
per share (LTRR) (cents) 131.62 99.08 33
Short term fluctuations
per share (cents) 0.18 17.53 (99)
Taxation per share (cents) (6.76) (6.86)
Total attributable earnings
including short term
fluctuations (cents) 125.04 109.75 14
Weighted ordinary shares
in issue ('000's) 31 800 31 800
DISTRIBUTIONS TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2001
Year ended Year ended
30 June 30 June
(R'000's) 2001 2000 % Increase
Dividend 19 809 17 451 14
Special cash distribution
of share premium 30 000 - -
Total distributions 49 809 17 451 185
Notes:
Headline earnings are determined on a Long-Term Rate of Return (LTRR) and
are based on the Statement of Recommended Practice (SORP) in the United
Kingdom. These earnings include an expected long-term investment return of
12% on the investments held in the shareholders' fund. Short-term
fluctuations in the investment return, which represent the differences
between the actual return and the long-term investment return, are included
in total earnings.
The principal accounting policies and valuation bases adopted by the company
remain consistent with those applied last year.
The transfer to the life fund has been based on best estimates after
providing for first and second tier margins, which basis is consistent with
that used in previous reporting periods. The transfer to the life fund has
been actuarially certified.
The company has no major capital commitments for the
foreseeable future.
The nature of the company's business remains unchanged.
Embedded value
The embedded value represents an estimate of the value of the company
exclusive of goodwill attributable to future new business.
The embedded value comprises:
- the value of excess assets attributable to shareholders
- the value of in force business.
The value of in force business is the present value of future after tax
profits arising from business in force at the calculation date.
The embedded value calculations have been certified by the company's
independent actuaries, Hymans Robertson & Co. (Pty) Limited.
June June
(R'000's) 2001 2000
Embedded value
Value of excess assets
attributable to shareholders 79 281 87 881
Value of in force business 222 111 171 544
Embedded value 301 392 259 425
Year ended Year ended
30 June 30 June
(R'000's) 2001 2000
Value of new business 65 239 58 048
The value of new business represents the present value of projected after
tax profits at the point of sale on new policies sold during the year ended
30 June 2001. The net increase for the year has been affected by the reduced
lead time for paying tax in the corporate fund.
Analysis of change in embedded value
Embedded value at 30 June 2000 259 425
Unwinding of discount rate 28 815
Change in assumptions 4 706
Reduced lead time for tax (14 958)
Special cash distribution out of share premium (30 000)
Dividend (19 809)
Taxation (STC) (2 151)
Value added by management 75 364
- Value of new business 65 239
- Investment return on shareholders' funds 12 767
- Write down of preference share
investment - Regal Treasury Private Bank Limited (3 070)
- Experience and sundry adjustments 428
Embedded value at 30 June 2001 301 392
Main assumptions:
Long term economic assumptions % p.a.
Risk discount rate 18
Overall investment return 12
Expense inflation 8
Other assumptions
The assumptions for future mortality, persistency and premium escalations
were based on recent experience adjusted for anticipated future trends and
are consistent with those used at 30 June 2000. Allowance has been made for
future taxation on the new taxation basis for life assurers which came into
force on 1 January 2000. The company expects to start paying normal tax in
the corporate fund in the 2002 financial year. No allowance has been made
for secondary tax on companies in the embedded value calculations. The
experience adjustment includes an offset of the lead time on tax, profits on
renewal expenses, commission and investment return on policyholder reserves,
and a loss on the withdrawal experience. The withdrawal assumptions were not
changed, due to the improving trend in withdrawal experience over the year,
which is anticipated to continue. No future benefit has been anticipated in
the embedded value calculation for the estimated tax loss of R235 million in
the individual policyholder fund.
Comments
Operating results for the year ended 30 June 2001 continue to reflect solid
growth and profitability due to Clientele Life's distribution strengths, low
cost structure, focused approach and understanding of its target market.
Net recurring premium income for the year of R124,6 million represents an
increase of 50% over the comparable period last year. Profits from life
assurance business attained an increase of 50% rising from R21,5 million to
R32,2 million. Headline earnings rose by 33% from 99,08 cents per share to
131,62 cents per share and are determined on a Long Term Rate of Return
(LTRR) for Investments. These earnings include an expected long-term
investment return of 12% on the investments held in the shareholders' fund.
New business acquisition costs increased, largely due to commissions paid on
increased new business introduced by our independent field advertisers.
These commissions are only paid as and when premiums are received resulting
in no new business strain. Growth in operating expenses was well contained
at 9% and the average cost per policy continues to decline.
On 21 November 2000, R30 million of share premium was returned to
shareholders. This has already improved the company's return on
shareholders' interests. Despite this special distribution Clientele Life's
free assets currently stand at 173% of actuarial liabilities.
The embedded value of new business written during the year amounted to R65,2
million. A distinguishing feature of Clientele Life's embedded value is that
the value of new business is significant relative to the value of total in-
force business, this ratio currently stands at 29%. Clientele Life's current
rate of new business growth, the profitability of this new business and
future favourable operating expense ratios point to good growth in embedded
value in future.
Prospects
The company remains well positioned to continue its steady rate of growth
and to benefit from the resultant economies of scale, while maintaining its
strategy of providing low cost life assurance products to its target market
through low cost distribution channels.
Clientele Life does not place any reliance on acquisitions for growth.
Focused organic growth, the use of technology, careful cost control and
effective distribution channels will remain the driving force of its
operations in the future.
Clientele Life has an option to acquire, on favourable terms, 33,3% of an
international holding company associated with the Hollard Group, which sell
life assurance products in Australia and the USA. The option expires on 28
February 2002; Clientele Life continues to monitor this opportunity and
examine alternative strategies in this regard.
Declaration of dividend
Notice is hereby given that the board has declared a final dividend of 62,29
cents per ordinary share in respect of the year ended 30 June 2001. The
dividend will be paid on Wednesday 19 September 2001.
To comply with the procedures of STRATE the last day to trade in the shares
for purposes of entitlement to the final dividend is Friday 7 September
2001. The shares will commence trading ex dividend on Monday 10 September
2001 and the record date will be Friday 14 September 2001.
The last date to register for purposes of certificated shareholders will be
Friday 14 September 2001. Certificated shareholders may not dematerialize
their shares between Friday 31 August 2001 and Friday 14 September 2001.
By order of the board
G Q Routledge G J Soll Johannesburg
Chairman Managing Director 14 August 2001
Registered office: Clientele House, Morning View Office Park, Cnr, Rivonia
and Alon Roads, Morningside, PO Box 1316, Rivonia 2128
Transfer secretaries: Mercantile Registrars Limited, 10th Floor, 11 Diagonal
Street, Johannesburg 2001, PO Box 1053, Johannesburg 2000
Directors: G Q Routledge (Chairman), B D Howard (Deputy Chairman), G J Soll
(Managing Director), P J A Cunningham, P R Enthoven, P W Felton.
Company secretary: B V Moore.
Website: www.clientelelife.com
E-mail: services@clientelelife.com
