| Wed 11 Feb 2004, 10:31 | | M&F RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003 |
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Mutual & Federal Insurance Company Limited - Reviewed Financial Results For The
Release Date: 11/02/2004 08:30:01 Code(s): MAF
MUTUAL & FEDERAL INSURANCE COMPANY LIMITED - REVIEWED FINANCIAL RESULTS FOR THE
YEAR ENDED 31 DECEMBER 2003
Mutual & Federal Insurance Company Limited
Registration number: 1970/006619/06
ISIN: ZAE000010823
JSE share code: MAF
NSX share code: MTF
REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
INCOME STATEMENT
31/12/03 31/12/02 Change
R"m R"m %
Gross premiums 6 486 5 603 16
Net underwriting surplus 392 116
Net investment income/(deficit) 555 (118)
Goodwill and retrenchment costs (21) (37)
Income/(loss) before taxation 926 (39)
Taxation (253) (65)
Income/(loss) after taxation 673 (104)
Income attributable to preference
shareholders in subsidiary (note 1) (36)
Share of associated companies net
income/(loss) 33 (6)
Net income/(loss) 670 (110)
Earnings per share
(a) Headline earnings per share are
calculated on net income adjusted for goodwill.
Determination of headline earnings
Net income/(loss) 670 (110)
Goodwill 21 21
Headline earnings/(loss) 691 (89)
Headline earnings/(loss) per share (cents) 283 (37)
(b) Basic earnings per share are based on
net income after goodwill and
retrenchment costs.
Basic earnings per share
Basic earnings/(loss) per share (cents) 274 (45)
Ordinary dividend per share (cents) 73 64
Combined ratio (%) (note 3) 93,1 97,6
Net asset value per share (cents) 1 406 1 207
Number of shares in issue (million)
- at period end 245,2 243,3
- weighted average 244,1 242,8
BALANCE SHEET
As at As at
31/12/03 31/12/02
R"m R"m
Assets
Non-current assets 4 552 3 016
Fixed assets 196 157
Investments at market value 4 024 2 595
Ordinary shares 2 707 2 199
Government stock 84 130
Money market deposits and other 1 233 266
Investment in associated companies 190 96
Goodwill 142 163
Deferred taxation 5
Technical assets 1 006 884
Current assets 1 645 2 757
Trade and other receivables 708 972
Cash and cash equivalents 937 1 785
Total assets 7 203 6 657
Equity and liabilities
Capital and reserves 3 448 2 937
Interest of outside shareholders in subsidiaries 2 2
Interest of preference shareholders in subsidiary 36
Non-current liabilities 192 240
Technical provisions 3 169 2 898
Current liabilities and provisions 356 580
Total equity and liabilities 7 203 6 657
STATEMENT OF CHANGES IN EQUITY
Contin-
Share gency Retained
R"m capital reserve income Total
Balance at 1 January 2003 124 423 2 390 2 937
Restatement due to application
of Statement
AC 133 (note 4) (11) (11)
Net income for the period 670 670
Transfer to contingency reserve 100 (100)
Dividends paid (163) (163)
Issue of share capital 15 15
Balance at 31 December 2003 139 523 2 786 3 448
CASH FLOW STATEMENT
31/12/03 31/12/02
R"m R"m
Cash generated by operations 592 157
Net underwriting surplus 392 116
Retrenchment costs (16)
Increase in net technical provisions 149 84
Depreciation of fixed assets 45 45
Profit on sale of fixed assets (2) (3)
Decrease/(Increase) in other working capital 8 (69)
Investment income 339 306
Cash generated by operating activities 931 463
Taxation paid (261) (105)
Cash available from operating activities 670 358
Dividends paid (163) (140)
Cash retained from operating activities 507 218
Cash (utilised in)/generated by investing activities (1 370) 646
(Increase)/decrease in funding requirements (863) 864
Cash effects of financing activities
Proceeds from issue of shares 15 9
(Decrease)/increase in cash and cash equivalents (848) 873
Notes
1. Preference Shareholders
The group operates an insurance subsidiary which offers cell captive
facilities to clients. Underwriting surpluses which accrue in respect of
these arrangements ultimately belong to clients and are therefore excluded
from group earnings.
2. 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 2002 with the exception of item 4
below.
3. Combined Ratio
This reflects the ratio of total insurance expenditure to net earned
premiums.
4. Change In Accounting Policy
During the period the company changed its accounting policy with regard to
the recognition and measurement of certain financial instruments in terms
of AC 133. The cumulative effect of this change in policy has been adjusted
against the opening balance of retained income in 2003.
SUPPLEMENTARY INCOME STATEMENT
(Reflecting long-term rate of return adjustment)
31/12/03 31/12/02 Change
R"m R"m %
Technical account (note A)
Gross premiums 6 486 5 603 16
Net premiums 5 608 4 886 15
Earned premiums net of reinsurance 5 683 4 806
Claims incurred net of reinsurance (3 878) (3 515)
Acquisition expenses (971) (767)
Management expenses (442) (408)
Net underwriting surplus 392 116
Attributable to ordinary shareholders 340 116 193
Attributable to preference shareholders in
subsidiary (note 1) 52
Investment return on insurance funds (note B) 210 195 8
General insurance result 602 311 94
Long-term investment return on
shareholders" funds (note B) 395 387 2
Operating income based on long-term
investment return 997 698 43
Non-technical account (note A)
Short-term investment fluctuations (50) (700)
Dividends, interest and property income 339 306
Realised surplus on investments 56 313
Unrealised surplus/(deficit) on investments 160 (737)
Allocated investment return transferred to
technical account (note B) (605) (582)
Retrenchment costs (16)
Goodwill (21) (21)
Income/(loss) before taxation 926 (39)
Taxation (including secondary tax on
companies) (253) (65)
Income/(loss) after taxation 673 (104)
Income attributable to preference
shareholders in subsidiary (note 1) (36)
Share of associated companies net
income/(loss) 33 (6)
Net income/(loss) 670 (110)
Operating earnings per share
Operating earnings per share are
calculated on net income adjusted for
goodwill, retrenchment costs, short-term
investment fluctuations net
of taxation and secondary tax on companies.
Determination of operating earnings
Net income/(loss) 670 (110)
Goodwill 21 21
Retrenchment costs 16
Short-term investment fluctuations 50 700
Taxation effect of short-term investment
fluctuations 28 (96)
Secondary tax on companies 11 10
Operating earnings 780 541 44
Operating earnings per share (cents) 320 223 43
NOTES TO THE SUPPLEMENTARY INCOME STATEMENT
A. Presentation
The results for the year are shown in the income statement. To present
these in a meaningful way, a supplementary income statement is provided and
separated into:
(a) A technical account
The technical account includes a long-term investment return of 13,4%
(2002: 14,0%) 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.
B. 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.
COMMENTS
During 2003 ongoing attention was given to the correction of under-performing
portfolios and the cancellation of unprofitable business. The 16% growth in
gross premiums is accordingly satisfactory and reflects the increase in rates
during 2003.
Trading conditions during the year were favourable and the improvement in the
underwriting surplus attributable to ordinary shareholders from R116 million to
R340 million follows increased focus on premium rates, a decline in the level
of weather-related losses and increased controls over claims expenditure. Most
sectors of the business recorded satisfactory performances but fire and
engineering accounts continued to be adversely affected by an ongoing high
incidence of commercial and industrial claims.
The result on the motor account improved following more stringent
underwriting, but poor driving standards continue to cause a high level of
claims in some areas and further premium increases will be required.
Dividend income for the year was disappointing following a decline in the level
of dividends paid by listed equities, but interest income remained at a high
level following substantial levels of cash holdings. The value of listed
equities appreciated during the period and the overall investment income for
the year was accordingly satisfactory.
The General Insurance Result increased from R311 million to R602 million and
the operating earnings for the year accordingly grew from 223 cents to 320
cents per share.
The net asset value per share increased by 16% from 1 207 cents to 1 406 cents
following the improvement in the value of listed equities and the positive
trading results for the period. The solvency margin (being the ratio of net
assets to net premiums) has improved and was in excess of 60% at 31 December
2003.
The Board remains cautiously optimistic of the prospects for underwriting
surpluses in 2004. Market conditions remain conducive to underwriting
profitability, but it should be noted that a return to more normal weather
conditions will lead to an increase in claims expenditure.
OFFER BY OLD MUTUAL SOUTH AFRICA
The attention of shareholders is drawn to an announcement by directors on 20
January 2004 advising that Old Mutual South Africa intends to acquire all of
the issued shares in Mutual & Federal. Further information in this regard will
be provided to shareholders once it becomes available.
COMPLIANCE
The company complies in all material respects with the requirements of the JSE
and the King Report Code of Corporate Practices and Conduct.
REVIEW
The results announcement has been reviewed by the company"s external auditors,
KPMG Inc. A copy of their unqualified review opinion is available at the
company"s registered office.
DECLARATION OF DIVIDEND (NUMBER 67 )
A final dividend of 48 cents per share has been declared payable to
shareholders in respect of the twelve months to 31 December 2003.
In accordance with the trading requirements under the STRATE environment, the
last day to trade to participate in the final dividend will be Friday, 12 March
2004. The shares will commence trading ex-dividend on Monday, 15 March 2004,
and the record date will be Friday, 19 March 2004. Payment will be made on
Tuesday, 23 March 2004.
Share certificates may not be dematerialised or rematerialised between Monday,
15 March and Friday, 19 March 2004, 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 Limited,
70 Marshall Street,
Johannesburg, 2001
Sponsor:
Nedbank Corporate,
No.1 Newtown Avenue,
Killarney, 2193
10 February 2004
Website: www.mf.co.za
E-mail: investor@mf.co.za
Date: 11/02/2004 08:30:09 AM
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