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Clientele Life Assurance Company Limited - Group Results For The Six Months
Release Date: 01/03/2004 17:00:00 Code(s): CLE
CLIENTELE LIFE ASSURANCE COMPANY LIMITED - GROUP RESULTS FOR THE SIX MONTHS
ENDED 31 DECEMBER 2003 AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Clientele Life Assurance Company Limited
(Incorporated in the Republic of South Africa)
(Registration number 1973/016606/06)
Share code: CLE ISIN: ZAE000013397
Surplus from life operations increased by 40%
Headline earnings per share increased by 60%
Headline return on average shareholders interest: 69%
Cash generated by operations increased by 40%
GROUP RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2003
The following are the unaudited results for the company and its subsidiaries for
the six months ended 31 December 2003
SUMMARISED GROUP INCOME STATEMENTS
Six months ended 31 Year
December
ended
2003 2002 % 30 June
(R"000"s) 2003
Net recurring premium income 140 155 112 875 24 238 353
Other income 13 699 4 352 9 411
Policyholders" investment 15 913 708 5 731
income
Benefits - policyholders (14 107) (8 219) 72 (18 841)
Transfer to life fund (39 195) (17 565) 123 (31 840)
Expenses (80 063) (66 200) 21 (136 423)
- Operating expenses (10 050) (8 020) 25 (15 989)
- New business acquisition (70 013) (58 180) 20 (120 434)
expenses
SURPLUS FROM LIFE OPERATIONS 36 403 25 951 40 66 391
Share of results from (285) (138) (1 576)
associate
Shareholders" investment 5 373 19 3 240
income
PRE-TAX HEADLINE EARNINGS 41 491 25 832 68 055
Taxation (14 103) (8 689) (18 760)
income attributable to 27 388 17 143 60 49 295
shareholders
The increase in the transfer to the life fund is largely attributable to the
significant increase in policyholders" investment income.
Taxation of R14.1 million includes secondary tax on companies (STC) of R2.7
million.
SUMMARISED GROUP BALANCE SHEETS
As at As at As at
31 Dec. 31 Dec. 30 June
(R"000"s) 2003 2002 2003
Funds employed
Share capital 4 853 4 853 4 853
Share premium - 15 602 15 602
Retained surplus 67 553 32 411 64 563
Shareholders" interests 72 406 52 866 85 018
Life fund 143 639 90 169 104 444
Other policyholder liabilities 78 051 - 62 672
294 096 143 035 252 134
Employment of funds
Investments 297 280 144 905 260 900
Investment in associate 1 019 2 742 1 304
Fixed assets 8 061 9 020 7 865
Current assets 13 120 7 154 17 720
Total assets 319 480 163 821 287 789
Liabilities (25 384) (20 786) (35 655)
294 096 143 035 252 134
SUMMARISED STATEMENTS OF CHANGES IN EQUITY
Share Share Retained
(R"000"s) capital premium earnings Total
Balance at 1 July 2002 4 770 9 642 105 268 119 680
Shares issued 162 12 739 12 901
Shares repurchased (79) (6 746) (6 825)
Share issue and repurchase (33) (33)
expenses
Net surplus attributable 49 295 49 295
to shareholders
Ordinary dividend declared (22 255) (22 255)
Special dividend declared (67 745) (67 745)
Balance at 30 June 2003 4 853 15 602 64 563 85 018
Balance at 1 July 2003 4 853 15 602 64 563 85 018
Net surplus attributable 27 388 27 388
to shareholders
Ordinary dividend (24 398) (24 398)
Share premium cash (15 602) (15 602)
distribution
Balance at 31 December 4 853 - 67 553 72 406
2003
SUMMARISED GROUP CASH FLOW STATEMENTS
Six months ended 31 Year ended
December
(R"000"s) 2003 2002 % 30 June 2003
Cash generated by 52 241 37 386 40 104 677
operations
Adjusted by:
Returns on investments 21 286 727 8 971
Dividends paid (24 398) (90 000) (89 980)
Taxation paid (20 644) (12 962) (13 082)
Cash flow from operating 28 485 (64 849) 10 586
activities
Cash flow from investing (36 411) 31 507 (88 971)
activities
Cash flow from financing 1 046 20 242 80 757
activities*
(Decrease) increase in 533 (8 672) 2 372
cash on hand
* Included in cash flow from financing activities is a return of share premium
to shareholders of R15.6 million.
EARNINGS PER SHARE
Six months ended Year ended
31 December
2003 2002 % 30 June
(Cents per share) 2003
Surplus from life operations 112,53 80.24 40 205.26
Share of results from associate (0,88) (0.42) (4.87)
Shareholders" investment income 16,61 0.06 10.02
Pre-tax headline earnings 128,26 79.88 61 210.41
Taxation (43,60) (26.87) 62 (58.00)
Earnings per share* 84,66 53.01 60 152.41
Weighted ordinary shares in issue 32 350 32 341 32 345
("000"s)
It should be noted that there are no reconciling items between earnings per
share and headline earnings per share.
* Headline earnings is net income attributable to ordinary shareholders.
DISTRIBUTIONS PAID TO SHAREHOLDERS DURING THE SIX MONTHS ENDED 31 DECEMBER 2003
Six months Six months
ended ended
31 December 31 December
(R"000"s) 2003 2002
Ordinary dividend 24 398 22 255
Share premium returned 15 602 -
Special dividend - 67 745
Total distributions 40 000 90 000
The distributions were paid to shareholders on 15 September 2003.
ORDINARY SHARES IN ISSUE
000"s
Ordinary shares in issue at 30 June 2003 32 350
Ordinary shares in issue at 31 December 2003 32 350
Notes:
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 South African Statements of GAAP and those applied last
period.
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 group has no major capital commitments for the foreseeable future.
The nature of the company"s business remains unchanged.
GROUP 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 plus
- 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.
December December June
(R"000"s) 2003 2002 2003
Embedded value
Value of excess assets attributable 72 405 55 785 85 018
to shareholders
Cost of capital (3 020) (1 213) (1 119)
Value of in force business 342 055 298 023 286 259
Embedded value 411 440 352 595 370 158
Value of new business 34 925 65 894 96 369
The value of new business represents the present value of projected after tax
profits at the point of sale on new policies sold and annuity fee income during
the period ended 31 December 2003.
The cost of capital is the opportunity cost of having to hold assets to cover
the capital adequacy requirement.
Analysis of change in embedded value R"000"s
Embedded value at beginning of period 370 157
Dividend (24 398)
Secondary tax on companies (2 725)
Return of share premium (15 602)
327 432
Unwinding of discount rate 25 132
Value added by management 56 547
Value of new business 34 925
Investment return 9 065
Experience and sundry adjustments 12 557
Change in basis at 31 December 2003 4 230
Change in cost of capital (1 901)
Embedded value at end of period 411 440
Main assumptions: % p.a.
Long-term economic assumptions
Risk discount rate 16
Overall investment return 10
Expense inflation 6
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 and STC in the embedded value calculations.
No future benefit has been anticipated in the embedded value calculation for the
estimated tax loss of R474 million in the individual policyholder fund.
COMMENTS
Operating results for the six months ended 31 December 2003 again reflect solid
new business growth, sustained profitability and healthy cash flows.
Net recurring premium income for the period of R140 million represents an
increase of 24% over last year. Other income which comprises mainly net single
premium income and annuity fees from the Independent Field Advertisers
distribution channel increased from R4.4 million to R13.7 million. The surplus
from life operations attained an increase of 40% rising from R26 million to
R36.4 million. Headline earnings rose by 60% from 53 cents per share to 85 cents
per share.
Investment returns during the period exceeded expectations and both
policyholders and shareholders investment income increased significantly over
the comparative six months.
The above results have translated into a headline return on average
shareholders" interest of 69%.
The total increase in embedded value before the return of share premium,
dividends and related STC amounts to R84 million and re-inforces the relative
growth and profitability inherent in the business. Annuity fees from the
Independent Field Advertisers distribution channel were introduced in the
previous reporting period.
As previously reported Clientele Life holds 33.3% of the equity of Clientele USA
LLC which markets insurance products through direct marketing channels in the
United States of America. The option which Clientele Life holds to acquire the
remaining 67.7% of Clientele USA LLC has been extended to 31 December 2004 on
favourable terms. Although Clientele USA LLC is making progress, it is not
anticipated that this investment will have any meaningful impact on Clientele
Life"s results in the short-term.
PROSPECTS
Clientele Life intends to continue to grow its operations by building on its
distribution strengths of providing affordable life insurance products to its
target market through appropriate direct distribution channels.
CAUTIONARY ANNOUNCEMENT
Shareholders are advised that the cautionary announcement relating to the
trading update on 11 February 2004 has now been lifted.
By order of the board
GQ Routledge
Chairman
G J Soll
Managing Director
Johannesburg
2 March 2004
Registered office: Clientele House, Morning View Office Park, Cnr Rivonia and
Alon Roads, Morningside, PO Box 1316, Rivonia 2128
Transfer secretaries: Computershare Limited, Ground Floor, 70 Marshall Street,
Johannesburg 2001, PO Box 1053, Johannesburg 2000
Directors: GQ Routledge BA LLB (Chairman), GJ Soll CA(SA) (Managing Director),
PJA Cunningham CA(SA), CA(Z), PR Enthoven BA, PW Felton B.Sc.Hdip.Tax (Law), IB
Hume CA(SA), ACMA.
Company secretary: BV Moore.
Website: www.clientelelife.com
E-mail: services@clientelelife.com
Sponsor
Nedbank Corporate
