| Mon 11 Mar 2002, 0:00 | | Clientele Life Assurance Company Limited - Interim |
|
The Six Months Ended 31 December 2001
Clientele Life Assurance Company Limited
(Registration number 1973/016606/06)
Share code: CLE
ISIN: ZAE000013397
INTERIM REPORT TO SHAREHOLDER FOR THE SIX MONTHS ENDED 31 DECEMBER 2001
* Net recurring premium income increased by 49%
* Surplus from life operations increased by 41%
* Annualised after tax return on average shareholders' interests: 49%
* Pre-tax headline earnings per share increased by 36%
* Embedded value of new business: R43,7 million
The following are the unaudited results for the company for the six months
ended 31 December 2001.
SUMMARISED INCOME SATEMENT
Year ended
Six months ended
31 December 30 June
2001 2000 % 2000 2001
(R'000's) *(Pro forma) Increase
Net premium income
- Recurring 86 861 58 142 49 58 142 124 598
Investment income 4 436 2 340 90 2 340 6 540
Policyholders' benefits (7 717) (4 265) 81 (4 265) (8 624)
Transfer to life fund (12 676) (8 617) 47 (8 617) (16 835)
Expenses (51 624) (33 938) 52 (33 938) (73 461)
- Operating expenses (6 102) (5 113) 19 (5 113) (10 457)
- New business
acquisition expenses (45 522) (28 825) 58 (28 825) (63 004)
SURPLUS FROM LIFE
OPERATIONS 19 280 13 662 41 13 662 32 218
Long-term return
on free assets 4 445 3 758 18 5 159 9 638
PRE-TAX HEADLINE
EARNINGS BASED
ON LTRR 23 725 17 420 36 18 821 41 856
Reconciliation of
headline earnings to
total earnings
Pre-tax headline
earnings based
on LTRR 23 725 17 420 36 18 821 41 856
Short-term fluctuations
on long-term return on
free assets 2 198 1 461 50 2 005 59
Total pre-tax attributable
earnings including
short-term fluctuations 25 923 18 881 37 20 826 41 915
Taxation (5 753) - - (2 151)
Total attributable
earnings including
short-term fluctuations 20 170 18 881 7 20 826 39 764
Headline earnings includes an expected Long-Term Rate of Return (LTRR) on
free assets of 12%, which is consistent with the actuaries long term
economic assumptions for embedded value. The total rate of return on free
assets for the six month period to 31 December 2001 amounted to 17,93%.
The company is now in an estimated tax paying position and the R5,8 million
tax charge for the period represents estimated normal company tax and
estimated Capital Gains tax. The year-end charge for the 2001 year
represents Secondary Tax on Companies on the annual dividend payment.
*Pro-forma results for the six months to December 2000 have been presented
in order to ensure the results are comparable as R30 million of share
premium was returned to shareholders on 21 November 2000.
Summarised Balance Sheets
As at As at As at
31 Dec. 31 Dec. 30-Jun
(R'000's) 2001 2000 2001
Funds employed
Share capital 4 770 4 770 4 770
Share premium 9 640 9 690 9 642
Retained surplus 78 777 59 448 58 607
Shareholders' interests 93 187 73 908 73 019
Life fund 66 129 45 169 53 452
159 316 119 077 126 471
Employment of funds
Investments 154 180 95 116 117 959
Fixed assets 9 610 8 414 8 656
Current assets 8 675 19 669 28 077
Total assets 172 465 123 199 154 692
Current liabilities (13 149) (4 122) (28 221)
159 316 119 077 126 471
STATEMENTS OF CHANGES IN EQUITY
Share Share Retained
(R'000's) capital premium earnings Total
30 June 2001
Balance at the beginning
of year 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 year 4 770 9 642 58 607 73 019
31 December 2001
Balance at the beginning
of period 4 770 9 642 58 607 73 019
Net surplus attributable
to shareholders 20 170 20 170
Expenses related to cash
distribution (2) (2)
Balance at the end of period 4 770 9 640 78 777 93 187
SUMMARISED CASH FLOW STATEMENTS
Six months ended Year ended
31 December 30 June
(R'000's) 2001 2000 2001
Cash generated by operations 30 448 17 235 43 172
Adjusted by:
Returns on investments 2 392 1 825 6 137
Dividends paid (19 803) (17 425) (17 425)
Secondary tax on companies paid (2 261) (2 031) (2 031)
Cash flow from
operating activities 10 776 (396) 29 853
Cash flow from
investing activities* (17 323) 22 533 849
Cash flow from
financing activities* (59) (30 370) (32 255)
Decrease in cash on hand (6 606) (8 233) (1 553)
*Cash flow from financing activities and cash flow from investing activities
for the six months ended 31 December 2000 and the year ended 30 June 2001
include a cash distribution of R30 million paid to shareholders out of the
share premium account.
EARNINGS PER SHARE
Six months ended Year ended
31 December 30 June
2001 2000 % 2000 2001
*(Pro forma) Increase
Surplus from life
operations
per share (cents) 60,63 42,96 41 42 101,31
Long-term return on
shareholders' funds
per share (cents) 13,98 11,82 18 16,22 30,31
Pre-tax headline
earnings per
share (LTRR) (cents) 74,61 54,78 36 59,18 132,62
Short-term fluctuations
per share (cents) 6,91 4,59 50 6,31 0,18
Taxation per
share (cents) (18,10) - - (6,76)
Total attributable
earnings including
short-term
fluctuations (cents) 63,42 59,37 7 65,49 125,04
Weighted ordinary
shares in issue
('000's) 31 800 31 800 31 800 31 800
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 in previous reporting periods.
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 and is actuarially certified.
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, QED Actuaries & Consultants (Pty) Limited (formerly
named Hymans Robertson Co. (Pty) Limited).
December June
2001 2001
R'000 R'000
Embedded value
Value of excess assets
attributable to shareholders 99 448 79 281
Value of in force business 233 708 222 111
Embedded value 333 156 301 392
Six months Six months
ended ended
31 December 31 December
2001 2000
R'000 R'000
Value of new business 43 687 33 182
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 six
month period ended 31 December 2001.
Analysis of change in embedded value
Embedded value at 30 June 2001 301 392
Unwinding of discount rate 34 946
Change in assumptions (7 308)
Taxation adjustments (34 545)
Value added by management 36 671
- Value of new business 43 687
- Investment return on shareholders' funds 6 643
- Experience and sundry adjustments (11 659)
Embedded value at 31 December 2001 333 156
Main assumptions:
Long-term economic assumptions % p.a.
Risk discount rate 16
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 2001. Allowance has been made for
future taxation. The company will start paying normal tax in the corporate
fund in the current financial year. Allowance has been made for secondary
tax on companies in the embedded value calculations. Experience and sundry
adjustments include profits on renewal expenses, commission and investment
return on policyholder reserves, and a loss on the withdrawal experience.
No future benefit has been anticipated in the embedded value calculation for
the estimated tax loss of R260 million in the individual policyholder fund.
COMMENTS
Operating results for the six months ended 31 December 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 period of R86,86 million represents an
increase of 49% over the comparable period last year. Surplus from life
operations attained an increase of 41% from R13,66 million to R19,28
million. Pre-tax headline earnings rose by 36% from 54,78 cents per share to
74,61 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 at 19,34% was well
contained relative to the growth in net recurring premium income and the
average cost per policy continues to decline.
The annualised after tax return on average shareholders' interests amounts
to 49%.
The embedded value of new business written during the period amounted to
R43,7 million.
Clientele Life's free assets are currently 13,25 times the capital adequacy
requirement which is well in excess of the industry average and emphasises
Clientele Life's balance sheet strength.
Clientele Life's current rate of new business growth, the profitability of
this new business and future favourable operating expense ratios point to
continued 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.
Focused growth, the use of technology, careful cost control and effective
distribution channels will remain the driving force of Clientele Life's
operations in the future.
As reported in previous announcements, Clientele Life had an option to
acquire 33,3% of an international holding company associated with the
Hollard Group, which sells life assurance products in Australia and the USA.
After an extensive investigation into the prospects presented by this
option, Clientele Life has purchased directly from third parties independent
of the Hollard group, 33,3% of the equity in the USA venture, for US$305,000
(R3,5 million) and has the option to acquire the remaining 66,7% on or
before 31 December 2002. It is not anticipated that this transaction will
have any meaningful impact on Clientele Life's results in the short-term but
is expected to be in the long-term interests of the company. Initial test
advertising, through the use of television advertising, will commence in the
second quarter of 2002. Clientele Life has elected not to pursue that
portion of the option relating to operations in Australia.
CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement issued by Clientele
Life on 1 March 2002 wherein they were advised to exercise caution when
dealing in Clientele Life shares until a further announcement is made as
negotiations are in progress, which, if successful, could have an effect on
the price of Clientele Life shares.
By order of the board
G Q Routledge G J Soll Johannesburg
Chairman Managing Director 12 March 2002
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
Date: 11/03/2002 05:03:00 PM Produced by the JSE SENS Department
