| Thu 27 Feb 2003, 10:40 | | Santam Limited and its subsidiaries - Abridged Fin |
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Santam Limited and its subsidiaries - Abridged Financial Report For The Year
Ended 31 December 2002
Santam Limited and its subsidiaries
ABRIDGED FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
HIGHLIGHTS
32% increase in gross written premium
47% improvement in underwriting surplus
39% increase in operating income
16% increase in earnings based on long-term rate of return
Cash generated by operating and investment activities exceeds R990 million
Santam Limited and its subsidiaries
ABRIDGED FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
INCOME STATEMENT
Reviewed Audited
Year ended Year ended
31 December 31 December
Notes 2002 2001
R millions R millions
Change
Gross written premium 8,197 6,206 32%
Net written premium 5,635 4,574 23%
Net earned premium 5,548 4,760 17%
Claims incurred 3,925 3,367
Net Commission 698 635
Management expenses 783 661
Underwriting surplus 142 97 47%
Investment return on insurance funds 115 88
Operating income 257 185 39%
Investment income 2 179 538
Income from associates (1) 2
Income before taxation 435 725
Taxation 3 116 142
Minority interest 14 12
Headline earnings 4 305 571 -47%
Amortisation of goodwill 3 -
Attributable earnings to shareholders 302 571
Earnings based on long-term rate
of return 5 516 444 16%
Earnings per share Cents Cents
Headline earnings per share 274 518
Earnings per share based on the
long-term rate of return 464 404
Attributable earnings per share 271 518
Dividends per share 170 154
Santam Limited and its subsidiaries
ABRIDGED FINANCIAL REPORT AS AT 31 DECEMBER 2002
BALANCE SHEET
Reviewed Audited
As at As at
31 December 31 December
2002 2001
R millions R millions
ASSETS
Non-current assets
Fixed assets 41 36
Goodwill 33 -
Deferred taxation 14 -
Investments 3,208 3,600
Listed at market value 2,480 2,939
Unlisted at directors valuation 697 620
Investment in associated companies 31 41
Technical assets 2,073 1,647
Current assets 3,548 2,022
Amounts due by debtors, reinsurers and
outstanding premiums 1,276 935
Cash and cash equivalents 2,272 1,087
Total assets 8,917 7,305
EQUITY AND LIABILITIES
Capital and reserves 3,375 3,230
Minority shareholders` interest 39 29
Deferred taxation 34 105
Technical provisions 4,226 3,295
Current liabilities and provisions 1,243 646
Total equity and liabilities 8,917 7,305
Number of shares in issue (millions) 111.8 110.9
Weighted average number of shares in
issue (millions) 111.4 110.2
Net asset value per share (cents) 3,018 2,914
Solvency margin (%) 60 71
STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
As at As at
31 December 31 December
2002 2001
R millions R millions
Balance as at beginning of period 3,230 2,795
Shares issued 21 24
Attributable income to shareholders 302 571
Dividends paid (178) (160)
Balance as at the end of period 3,375 3,230
CASH FLOW STATEMENT
Reviewed Audited
Year ended Year ended
31 December 31 December
2002 2001
R millions R millions
Cash generated from operations 682 (89)
Income before taxation 435 725
Depreciation charge 16 25
Other non-cash adjustments (8) (7)
Investment income (294) (626)
Change in working capital 533 (206)
Investment income 309 315
Cash generated by operating and
investment activities 991 226
Taxation paid (96) (70)
Dividends paid (178) (162)
Cash retained from operating and
investment activities 717 (6)
Proceeds from ordinary share issued 21 24
Proceeds from disposal of associated companies 13 -
Investment in associated companies (5) -
Investment in subsidiaries (36) -
Cash acquired on acquisition of subsidiaries 143 -
Cash utilised in addition to fixed assets (21) (2)
Increase in investments and liquid assets 832 16
SEGMENTAL REPORTING
Gross written premiums Underwriting surplus
Reviewed Audited Reviewed Audited
Year ended Year ended Year ended Year
ended
31 December 31 December 31 December 31
December
2002 2001 2002 2001
R millions R millions R millions R
millions
Insurance class
Property 2,921 2,091 19 (5)
Transportation 277 208 40 17
Motor 3,085 2,594 53 73
Accident and health 223 204 11 23
Guarantee 210 84 (13) 21
Liability 496 297 19 34
Engineering 300 210 (7) 0
Miscellaneous 685 518 20 (66)
8,197 6,206 142 97
Note:
Due to the general nature of the balance sheet, segmental reporting is limited
to the income statement
Santam Limited and its subsidiaries
ABRIDGED FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICY
The abridged consolidated financial statements are prepared in accordance with
the South African Statements of Generally Accepted Accounting Practice and are
consistent with those used in the annual financial statements for the year ended
31 December 2001, except for the change in the accounting policy as mentioned
below.
1.1. Change in accounting policy
During the year the company changed its accounting policy with respect to the
treatment of investment income. Previously, the net unrealised surplus resulting
from the revaluation of investments, and the realised surplus resulting from the
sale of investments, were directly transferred to equity as non-distributable or
distributable reserves.
From this year, the realised and unrealised surpluses are recognised in the
income statement. The comparative amounts have been appropriately restated. As
there has been no change to the opening reserve balances, the effect of this
change on the attributable earnings is reflected in note 4 below.
1.2. Accounting policy for the long-term rate of return adjustment
The long-term rate of return adjustment represents the difference between the
actual investment return earned on shareholders` funds during the year and the
long-term investment return calculated on the basis described below. The long-
term investment return is determined by the directors and is based on historical
experience and current market conditions, taking account of inflation
expectations and consensus economic and investment forecasts.
To calculate the long-term investment return, the assumed long-term rate of
return of 13% per annum before tax per annum, is applied to the fair value of
the investments held in shareholders` funds on a monthly basis. Holdings in
associated companies are not included in shareholder funds for this purpose. The
directors are of the opinion that this rate of return is appropriate for
indicating the earnings based on returns expected to be earned over the long-
term and that the disclosure of the long-term rate of return appropriately
discloses total earnings of the company, eliminating the short-term volatility
of inter alia equity markets.
1.3. Comparative figures
Where necessary, comparative figures have been restated to conform with changes
in presentation in the current year.
NOTES TO THE FINANCIAL STATEMENTS
Reviewed Audited
Year ended Year
ended
31 December 31
December
2002 2001
R millions R
millions 2.INVESTMENT INCOME
Interest 113 102
Dividends 114 133
Foreign exchange differences (17) -
Net investment deficit (22) 311
Investment management fee (9) (8)
Investment income 179 538
3.TAXATION
Analysis of income tax
Operating profit 86 62
Investment income 30 80
Income tax 116 142
4. CHANGE IN ACCOUNTING POLICY
Reconciliation of headline earnings
Attributable earnings to shareholders 302 571
Net investment income 22 (311)
Taxation on investment income 7 50
Headline and attributable earnings as stated
in terms of previous policy 331 310
Headline earnings per share (cents) - previous policy 297 282
5. NET LONG-TERM RATE OF RETURN ADJUSTMENT
Attributable earnings to shareholders 302 571
Net long-term rate of return adjustment 214 (127)
Gross investment return 255 (140)
Tax 41 (13)
Earnings based on long-term rate of return 516 444
A comparison of the aggregate actual and calculated
long-term returns after tax since 1 January 2001
is set out below:
Actual returns 608 459
Long-term returns (695) (332)
Excess aggregate short-term fluctuations (87) 127
COMMENTS & PROSPECTS
COMMENTS
Operating income for the group increased by an impressive 39% in the year under
review. The underwriting surplus of R142 million benefited both from improved
underwriting margins and increased business volumes. Higher short term interest
rates and improved cash flow management contributed towards the increased
investment return on insurance funds.
Climatic conditions in the second half of the year were rather trying. After a
virtually storm-free first half, severe snow storms and floods in the Eastern
Cape as well as hail storms in Gauteng and the Western Cape late in the year
caused significant damage during this period. Conversely, 2002 was a good year
for the crop insurance business where far less hail damage was experienced,
particularly in the first half of the summer season.
Gross written premium increased significantly by 32% compared to an increase of
23% at net written premium level. The difference in growth is mainly due to
reinsurance arrangements to protect the group from concentration risk in certain
business areas.
The Lion of Africa, in which Santam holds 50% reported very pleasing results for
the year with earnings of R19.4 million, compared to a loss of R13.5 million in
2001. Financial guarantees amounting to R30 million were exercised in relation
to certain Africa Group companies, which adversely affected this line of
business. Santam subsequently took control of four Africa Group companies which
are involved in short term insurance activities.
The groups` investment portfolio did not escape the torrid market conditions and
compared to the exceptional performance in 2001, when the capital value
increased by R311 million, the market values decreased by R22 million. However
on a relative basis, the portfolio performed satisfactorily.
As a consequence of the poor short-term performance of the investment portfolio,
headline earnings decreased by 48% despite the favourable operating results.
Applying the long-term rate of return, which eliminates the short-term
volatility, earnings have increased by 16% from R444 million to R516 million.
The group generated R991 million in cash from its operating and investment
activities, reinforcing its healthy financial position. Favourable crop
insurance results during the last quarter as well as new businesses acquired
during the year have impacted favourably on cash flow. The solvency margin
remained a healthy 60%, down from 71% at the end of 2001, mainly as a result of
the increased premium volume.
PROSPECTS
It is expected that the short term insurance market will remain favourable for
2003. The cost of reinsurance is however expected to increase in line with
market trends and reduced capacity.
During January 2003 the group concluded the acquisition of the British niche
insurer Westminster Motor Insurance Association Ltd, which specialises in
insurance for taxis and private vehicle rental companies. The purchase of
GBP23.3 million was funded from own resources, and is seen as an important
strategic step for diversifying the groups` income base, especially in view of
its dominant position in the South African market.
The focus for 2003 will be on improved productivity and cost reduction. There
will be an increased effort to reduce the cost of reinsurance without exposing
the group to undue risks. Owing to the foreign acquisition and planned
adjustment in the reinsurance programme, it is anticipated that capital
utilisation will improve further with solvency margins reducing mildly in 2003.
We expect equity markets to remain unsettled for 2003, directly affecting
investment results.
DECLARATION OF DIVIDEND (Number 97)
Notice is hereby given that the board has declared a final dividend of 105 cents
per share (2001: 95 cents). Shareholders are advised that the last day to trade
"cum dividend" will be Thursday 20 March 2003. The shares will trade "ex
dividend" from the commencement of business on Monday 24 March 2003.The record
date will be Friday 28 March 2003 and the payment date will be Monday 31 March
2003. Share certificates may not be dematerialised or re-materialised between
Monday 24 March 2003 and Friday 28 March 2003, both dates inclusive.
REVIEW BY AUDITORS
The company`s external auditors, PricewaterhouseCoopers Inc, have reviewed the
abridged financial results. A copy of their opinion is available on request at
the company`s registered office.
On behalf of the board
DK Smith J van Zyl
Chairman Chief executive
25 February 2003
NON-EXECUTIVE DIRECTORS
JJ Geldenhuys, EM Groeneweg, JG le Roux, NM Magau, AR Martin, JE Newbury, P de V
Rademeyer, GE Rudman, DK Smith (Chairman), BP Vundla
EXECUTIVE DIRECTORS
JA van Tonder, J van Zyl (Chief executive), JW Wilken
SANTAM HEAD OFFICE AND REGISTERED ADDRESS
1 Sportica Crescent, Tyger Valley, Bellville 7530
PO Box 3881, Tyger Valley 7536
Tel (021) 915 7000
Fax (021) 914 0700
http://www.santam.co.za
Registration number 1918/001680/06
ISIN ZAE000006854 52E50865BDF5EFDC00AED1A2657FDD37
JSE share code: SNT
NSX share code: SNM
COMPANY SECRETARY
VF Malie
TRANSFER SECRETARIES
Computershare Investor Services Limited
70 Marshall Street, Jhb 2001
PO Box 61051, Marshalltown 2107
Tel: (011) 370 5000
Fax: (011) 688 7721
http://www.computershare.com
Date: 27/02/2003 07:30:00 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
