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Mutual & Federal Insurance Company Limited
ISIN: ZAE000010823
JSE share code: MAF
NSX share code: MTF
MUTUAL & FEDERAL INSURANCE COMPANY LIMITED
Financial results for the year ended 31 December 2002
Reviewed Reviewed
INCOME STATEMENT
31/12/02 31/12/01 Change Change
R`m R`m % %
Gross premiums 5,603 4,820 16
Net underwriting 116 85
surplus/(loss) (note 1)
Net investment income (118) 853
Goodwill and retrenchment (37) (18)
costs
(Loss)/income before taxation (39) 920
Taxation (55) (205)
(Loss)/income after taxation (94) 715
Minority shareholders/share of (6) 26
associates
Net (loss)/income (100) 741
Earnings per share
(a) Operating earnings per
share are calculated on net
income
adjusted for goodwill,
retrenchment costs and
short-term investment
fluctuations net of taxation.
Determination of operating
earnings
Net (loss)/income (100) 741
Goodwill 21 18
Retrenchment costs 16 -
Short-term investment 700 (299)
fluctuations
Taxation effect of short-term (96) 68
investment fluctuations
Operating earnings 541 528 2
Operating earnings per share 223 219 2
(cents)
(b) Headline earnings per
share are calculated on net
income
adjusted for goodwill.
Determination of headline
earnings
Net (loss)/income (100) 741
Goodwill 21 18
Headline (loss)/earnings (79) 759
Headline (loss)/earnings per (33) 314
share (cents)
(c) Basic earnings per share
are based on net income after
goodwill and retrenchment
costs.
Basic earnings per share
Basic (loss)/earnings per share (41) 307
(cents)
Ordinary dividend per share 64 58
(cents)
Special dividend per share - 350
(cents)
Combined ratio (%) (note 4) 97.6 98.0
Net asset value per share 1,207 1,312
(cents)
Number of shares in issue
(million)
- at period end 243.3 242.2
- weighted average 242.8 241.6
MUTUAL & FEDERAL INSURANCE
COMPANY LIMITED
Financial results for the year
ended 31 December 2002
BALANCE SHEET Reviewed Reviewed
As at As at
31/12/02 31/12/01
R`m R`m
Assets
Non-current assets 3,016 4,151
Fixed assets 157 143
Investments at market value 2,595 3,728
Ordinary shares 2,199 3,100
Government stock 130 221
Other 266 407
Investment in associated 96 101
companies
Goodwill 163 179
Deferred taxation 5 -
Reinsurers` share of technical 733 500
assets
Deferred acquisition costs 151 127
Current assets 2,757 1,856
Debtors / other 972 944
Cash and cash equivalents 1,785 912
Total assets 6,657 6,634
Equity and liabilities
Capital and reserves 2,937 3,178
Interest of outside 2 3
shareholders in subsidiaries
Non-current liabilities 240 415
Technical provisions 2,844 2,525
Deferred reinsurance 54 32
commission revenue
Current liabilities and 580 481
provisions
Total equity and liabilities 6,657 6,634
STATEMENT OF CHANGES IN Share Contingency Retained
EQUITY
R`m capital Reserve income Total
Balance at 1 January 2002 115 331 2,732 3,178
Net loss for the period (100) (100)
Transfer to contingency 92 (92) -
reserve
Dividends paid (140) (140)
Secondary tax on companies (10) (10)
Issue of share capital 9 9
Balance at 31 December 2002 124 423 2,390 2,937
CASH FLOW STATEMENT 31/12/02 31/12/01
R`m R`m
Cash generated by operations 157 208
Investment income 304 341
Cash generated by operating 461 549
activities
Taxation paid ( 95) ( 108)
Cash available from operating 366 441
activities
Dividends paid ( 140) ( 988)
Secondary tax on companies ( 10) ( 179)
paid
Cash retained from / (utilised 216 ( 726)
by) operating activities
Cash generated by investing 648 884
activities
Decrease in funding 864 864 158
requirements
Cash effects of financing
activities
Proceeds from issue of shares 9 12
Increase in cash and cash 873 170
equivalents
MUTUAL & FEDERAL INSURANCE COMPANY LIMITED
Financial results for the year ended 31 December 2002
Reviewed Reviewed
SUPPLEMENTARY REPORT Change
31/12/02 31/12/01
R`m R`m %
Technical account (note 1)
Gross premiums 5,603 4,820 16
Net premiums 4,886 4,306 13
Earned premiums net of 4,806 4,293
reinsurance
Claims incurred net of (3,515) (3,154)
reinsurance
Acquisition expenses (767) (663)
Management expenses (408) (391)
Net underwriting surplus 116 85
Investment return on insurance 195 161 21
funds (note 2)
General insurance result 311 246 26
Long-term investment return on 387 393
shareholders` funds (note 2)
Operating income based on long-698 639 9
term investment return
Non-technical account (note 1)
Short-term investment (700) 299
fluctuations
Dividends, interest and 306 341
property income
Realised surplus on 313 553
investments
Unrealised deficit on (737) (41)
investments
Allocated investment
return transferred to
technical account (note 2) (582) (554)
Retrenchment costs (16) -
Goodwill (21) (18)
(Loss)/income before taxation (39) 920
Taxation (55) (205)
(Loss)/income after taxation (94) 715
Minority shareholders/share (6) 26
of associates
Net (loss)/income (100) 741
NOTES
1. Presentation
The results for the year are shown in the income statement. To present these
in a meaningful way, a supplementary report is provided and separated into :
(a) A technical account
The technical account includes a long-term investment return of 14% on both:
(1) funds generated by the insurance activities;
(2) shareholders` funds
(b) A non-technical account
The non-technical account includes all non-insurance related activities
including investments, and above mentioned allocated investment returns
transferred to the technical account.
2. Allocation
The investment return on investments supporting insurance activities is
allocated to the technical account in determining the General Insurance
Result. In addition the long- term investment return on investments
supporting shareholders` funds is allocated from the non-technical account
to the technical account in determining an operating income based on the
long- term investment return.
The allocations accordingly negate one another in the determination of
income before tax.
The long-term investment return on shareholders` funds is an estimate of
the long-term trend investment return for the relevant
category of
investments having regard to past performance, current trends and
future
expectations.
3. Accounting policies
These financial results for the year have been prepared in accordance with
South African Statements of Generally Accepted Accounting Practice. The
accounting policies applied in the preparation of these financial statements
are consistent with those used in the annual financial statements for the
year ended 31 December 2001 with the exception of item 5 below. Certain
comparative figures at 31 December 2001 have been regrouped.
4. Combined ratio
This reflects the ratio of total insurance expenditure to net earned
premiums.
5. Change in accounting policy
During the year the company changed its accounting policy with regard to
buildings owned and occupied by the company. Owner occupied buildings which
were previously treated as investments are now classified as fixed assets
and depreciated over their expected useful lives. Prior year figures
been adjusted to recognise the effect of this change.
COMMENTS
The improvement in the General Insurance Result follows an increased focus on
appropriate pricing, more cautious risk selection and withdrawal from certain
unprofitable portfolios.
The growth of 16% in gross premiums reflects the impact of increased volumes and
increases in rates, which have been necessitated by the sharp escalation in
reinsurance costs and rising claims costs. Whilst the improvements in product
pricing were encouraging, further action is required to achieve the desired
level of underwriting surplus.
The substantial increase in claims costs following the deterioration in the
value of the rand was anticipated. The situation was, however, exacerbated by
significant weather-related claims in July and August following storms in the
Eastern and Western Cape. The underwriting results were also adversely impacted
by the ongoing incidence of large commercial fire and marine claims, and
inadequate ratings on certain motor portfolios.
The reduced level of investment income reflects lower levels of investments
following the special dividend of 350 cents per share paid in December 2001.
Despite this dividend, the operating earnings per share have nevertheless
increased by 2%.
The net asset value per share has declined by 7% following a reduction in the
value of listed equities during the year. The solvency margin (being the ratio
of net assets to net premiums) nevertheless remains strong and was in excess of
60% at 31 December 2002.
The immediate prospects for the equity market remain uncertain due to
international socio-political problems. The Board is cautiously optimistic of
prospects for underwriting profitability in 2003 as it is expected that the
positive trend in the insurance cycle will continue throughout 2003.
REVIEW
The results announcement has been reviewed by the company`s external auditors,
KPMG Inc. A copy of their review opinion is available at the company`s
registered office.
DECLARATION OF DIVIDEND (NUMBER 66)
A final dividend of 42 cents per share has been declared payable to shareholders
in respect of the twelve months to 31 December 2002.
In accordance with the trading requirements under the STRATE environment, the
last day to trade to participate in the final dividend will be Thursday, 13
March 2003. The shares will commence trading ex-dividend on Friday, 14 March
2003, and the record date will be Thursday, 20 March 2003. Payment will be made
on Monday, 24 March 2003.
Share certificates may not be dematerialised or rematerialised between Friday 14
March and Thursday 20 March 2003, both days inclusive.
On behalf of the Board
K T M Saggers (Chairman)
B Campbell (Managing Director)
Registered Office:
19th Floor, Mutual & Federal Centre, 75 President Street, Johannesburg 2001
Transfer Secretaries:
Computershare Investor Services Limited, 70 Marshall Street, Johannesburg 2001
11 February 2003.
ISIN: ZAE000010823
JSE share code: MAF
NSX share code: MTF
Website: www.mf.co.za
E-mail: investor @mf.co.za
Date: 12/02/2003 12:26:11 PM Produced by the JSE SENS Department
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