| Thu 15 Aug 2002, 0:00 | | Clientele Life Assurance Company - Audited Results |
|
Clientele Life Assurance Company - Audited Results
Clientele Life Assurance Company Limited
(Registration number 1973/016606/06)
Share code: CLE ISIN: ZAE000013397
Final Report to Shareholders for the year ended 30 June 2002
Net recurring premium income increased by 46%
Surplus from life operations increased by 51%
After tax return on average shareholders` interests: 47%
Pre-tax headline earnings per share (LTRR) increased by 44%
Cash generated by operations increased by 50%
Total dividends to shareholders of R90 million up by 354%
The following are the audited results for the company for the year ended
30 June 2002.
Summarised Income Statements
*Year ended
Year ended (pro-forma) Year ended
(R`000`s) 30 June 30 June % 30 June
2002 2001 Increase 2001
Net premium income - 181 899 124 598 46 124 598
Recurring
Investment income - 6 619 6 540 1 6 540
policyholders
Benefits - (16 472) (8 624) 91 (8 624)
policyholders
Transfer to life fund (19 152) (16 835) 14 (16 835)
Expenses (104 187) (73 461) 42 (73 461)
- Operating expenses (13 196) (10 457) 26 (10 457)
- New business (90 991) (63 004) 44 (63 004)
acquisition expenses
SURPLUS FROM LIFE 48 707 32 218 51 32 218
OPERATIONS
Share of results from (381) - - -
associate
Long-term return on 9 821 8 237 19 9 638
free assets (LTRR)
PRE-TAX HEADLINE 58 147 40 455 44 41 856
EARNINGS (based on
LTRR)
Reconciliation of
headline earnings to
total earnings
Pre-tax headline 58 147 40 455 44 41 856
earnings based on LTRR
Short-term 927 59 59
fluctuations on long-
term return on free
assets
Taxation (14 564) (2 180) (2 180)
Total attributable 44 510 38 334 39 735
earnings including
short-term
fluctuations
* Pro-forma results for the year ended 30 June 2001 have been presented
to ensure the results are comparable as R30 million of share premium was
returned to shareholders on 21 November 2000.
Headline earnings include 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 company is now in a tax paying position and the R14,6 million tax
charge for the period represents Normal company tax, Capital Gains tax
and STC. The charge for the 2001 year represents STC only.
During the year ended 30 June 2001 the investment of R3,1 million in
Regal Treasury Private Bank Limited was written down to nil. R1,9
million has been recovered in the current financial year and is
reflected in investment returns.
Summarised Balance Sheets
As at As at
30 June 30 June
(R`000`s) 2002 2001
Funds employed
Share capital 4 770 4 770
Share premium 9 642 9 642
Retained surplus 105 268 80 567
Shareholders` interests 119 680 94 979
Life fund 72 604 53 452
192 284 148 431
Employment of funds
Investments 176 203 117 959
Investment in associate 2 880 -
Fixed assets 9 366 8 656
Current assets 23 526 28 077
Total assets 211 975 154 692
Liabilities (19 691) (6 261)
192 284 148 431
SUMMARISED STATEMENTS OF CHANGES IN EQUITY
Share Share Retained
(R`000`s) capital premium earnings Total
30 June 2001
Balance at the beginning 4 770 39 690 58 283 102 743
of year
Net surplus attributable 39 735 39 735
to shareholders
Cash distribution (30 000) (30 000)
Expenses relating to (48) (48)
cash distribution
Dividend declared (17 451) (17 451)
Balance at the end of 4 770 9 642 80 567 94 979
year
30 June 2002
Balance at the beginning 4 770 9 642 80 567 94 979
of year
Net surplus attributable 44 510 44 510
to shareholders
Dividend declared (19 809) (19 809)
Balance at the end of 4 770 9 642 105 268 119 680
year
SUMMARISED CASH FLOW STATEMENTS
Year ended Year ended
30 June % 30 June
(R`000`s) 2002 Increase 2001
Cash generated by operations 64 754 50 43 172
Adjusted by:
Returns on investments 16 956 6 137
Dividends paid (19 801) (17 425)
Taxation paid (STC) (2 258) (2 031)
Cash flow from operating 59 651 29 853
activities
Cash flow from investing (65 467) 849
activities*
Cash flow from financing (383) (32 255)
activities*
Decrease in cash on hand (5 433) (1 553)
* Cash flow from financing activities and investing activities for the
year ended 30 June 2001 have been impacted by the R30 million return of
share premium.
EARNINGS PER SHARE
Year ended
Year ended (pro-forma) % Year ended
30 June 2002 30 June 2001 Increase 30 June 2001
Surplus from 153.17 101.31 51 101.31
life
operations per
share (cents)
Share of (1.20) - - -
results from
associate
Long-term 30.89 25.90 19 30.31
return on free
assets per
share (cents)
Pre-tax 182.86 127.21 44 131.62
headline
earnings per
share (LTRR)
(cents)
Short-term 2.91 0.18 0.18
fluctuations
per share
(cents)
Taxation per (45.80) (6.86) (6.86)
share (cents)
Total 139.97 120.53 16 124.94
attributable
earnings
including
short-term
fluctuations
(cents)
Weighted 31 800 31 800 31 800
ordinary
shares in
issue (`000`s)
DIVIDENDS TO SHAREHOLDERS AFTER THE YEAR ENDED 30 JUNE 2002
After After
Year ended Year ended
30 June % 30 June
(R`000`s) 2002 Increase 2001
Ordinary dividend 22 255 19 809
Special dividend 67 745 -
Total dividends 90 000 354 19 809
Cash distribution out of share - 30 000
premium
ORDINARY SHARES IN ISSUE
000`s
Ordinary shares in issue at 30 31 800
June 2002
Ordinary shares to be issued in
terms of share option
scheme at 16 August 2002 1 075
Ordinary shares in issue for
determination of dividends
per share at entitlement date 32 875
Notes:
Headline earnings are determined on a Long-Term Rate of Return (LTRR)
and are based on the Statement of Recommended Practice 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 investment in associate represents a 33,3% investment in Clientele
USA LLC.
The principal accounting policies and valuation bases adopted by the
company remain consistent with GAAP and those applied last year except
for the change in the treatment of dividends with the adoption of AC 107
(revised). Comparative figures have been restated appropriately.
These results have been audited by the company`s auditors,
PricewaterhouseCoopers Inc., and the audit opinion is available for
inspection at the company`s registered office.
The transfer to the life fund has been based on best estimates after
providing for first and second tier margins and has been actuarially
certified by QED Actuaries & Consultants (Pty) Limited.
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 less
- the cost of capital.
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).
June June
(R`000`s) 2002 2001
Embedded value
Value of excess assets attributable to 121 797 79 281
shareholders
Cost of capital (941) -
Value of in force business 243 910 222 111
Embedded value 364 766 301 392
Value of new business 73 493 65 239
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 2002.
The cost of capital is the opportunity of having to hold assets to cover
the capital adequacy requirement.
Embedded Value (Continued)
(R`000`s)
Analysis of change in embedded value
Embedded value at 30 June 2001 301 392
Unwinding of discount rate 43 469
Taxation adjustments (25 871)
Value added by management 65 380
- Value of new business 73 493
- Investment return on shareholders` funds 10 735
- Experience and sundry adjustments (18 848)
Change in basis (28 684)
Change in risk discount rate 9 080
Embedded value at 30 June 2002 364 766
The change in basis is due to the change in the
withdrawal, tax, expense and surrender value factor
assumptions. The change in the risk discount rate is due
to reducing the risk discount rate from 18% to 16%.
Main assumptions: % p.a.
Long-term economic assumptions
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. Allowance has been made for future taxation. The company
is liable for normal tax in the corporate fund for the first time 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 and commission and
losses on the withdrawal experience.
No future benefit has been anticipated in the embedded value calculation
for the estimated tax losses of R318 million in the individual
policyholder fund.
COMMENTS
Operating results for the year ended 30 June 2002 continue to reflect
strong new business growth, cash flows 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 R181,9 million represents
an increase of 46% over last year. Profits from life assurance business
attained an increase of 51% rising from R32,2 million to R48,7 million.
Pre-tax headline earnings rose by 44% from 127,21 cents per share to
182,86 cents per share and are determined on a Long-Term Rate of Return
(LTRR) for Investments. 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 increased by 26%, well below the growth in
premium income, and the average annual cost per policy of less than R50
is the lowest in the insurance industry.
This has translated into an after tax return on average shareholders`
interest of 47%.
The embedded value of new business written during the year amounted to
R73 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 30%, which
further emphasises the ongoing growth of the Company.
Clientele Life`s free assets exceeded the year end capital adequacy
requirement (CAR) by twenty one times and this coupled with strong cash
flows has generated the capacity for total dividends to shareholders of
R90 million. The CAR ratio after the dividend will remain well in excess
of industry norms.
PROSPECTS
Clientele Life intends to continue on its focused growth path and the
use of technology, careful cost control and effective distribution
channels will remain the driving force of Clientele Life`s operations in
the future.
The Company will continue to provide low cost life assurance products to
its target market through low cost distribution channels.
Clientele Life has identified the opportunities available in
diversifying its income streams and leveraging off its distribution,
cost and customer base and its management, technology and administration
expertise and is currently pursuing these potential revenue growth
areas.
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 (R3,3 million) and in addition advanced the
associate R2,1 million. Clientele Life has the option to acquire the
remaining 66,7% on or before 31 December 2002. The entity, named
Clientele USA LLC markets insurance products through direct marketing
channels. 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. Clientele Life
has elected not to pursue that portion of the option relating to
operations in Australia.
Declaration of dividends
Notice is hereby given that the board has declared the following
dividends per ordinary share:
Ordinary dividend (cents per share) 67,69
Special dividend (cents per share) 206,07
Total dividends (cents per share) 273,76
Ordinary shares in issue at entitlement date (000`s) 32 875
The dividends will be paid on 9 September 2002.
To comply with the procedures of STRATE the last day to trade in the
shares for purposes of entitlement to dividends is Friday 30 August
2002. The shares will commence trading ex dividends on Monday 2
September 2002 and the record date will be Friday 6 September 2002.
Share certificates may not be dematerialised or rematerialised between
Monday 2 September 2002 and Friday 6 September 2002, both days
inclusive.
By order of the board
G Q Routledge G J Soll Johannesburg
Chairman Managing Director 16 August 2002
Registered office: Clientele House, Morning View Office Park, Cnr
Rivonia and Alon Roads, Morningside, PO Box 1316, Rivonia 2128
Transfer secretaries: Computershare Investor Services 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, I B Hume. Company secretary: B V Moore.
Website: www.clientelelife.com
E-mail: services@clientelelife.com
Date: 15/08/2002 05:10:00 PM Produced by the JSE SENS Department
