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Mutual & Federal - Unaudited Financial Results For The Six Months Ended 30 June
2004 And Special Dividend Announcement
Mutual & Federal Insurance Company Limited
(Registration number 1970/006619/06)
(Incorporated in the Republic of South Africa)
ISIN: ZAE000010823
JSE share code: MAF
NSX share code: MTF
UNAUDITED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2004
AND SPECIAL DIVIDEND ANNOUNCEMENT
FINANCIAL REVIEW
for the six months ended
2003 2004
Gross Premium (R million) 3 010 3 592
General Insurance Result (R million) 213 445
INCOME STATEMENT
30/6/04 30/6/03 Change 31/12/03
R`m R`m % R`m
Gross premiums 3 592 3 010 19 6 486
Net underwriting surplus 336 111 392
Net investment income/(deficit) 103 (24) 555
Goodwill (11) (11) (21)
Income before taxation 428 76 926
Taxation (135) (67) (250)
Income after taxation 293 9 676
Income attributable to
preference shareholders
in subsidiary (note 2) (19) - (36)
Share of associated companies
retained income/(loss) 9 (5) 33
Net income 283 4 673
Earnings per share
(a) Headline earnings per share
are calculated on net income
adjusted for goodwill.
Determination of headline earnings
Net income 283 4 673
Goodwill 11 11 21
Headline earnings 294 15 694
Headline earnings per share
(cents) 120 6 284
(b) Basic earnings per share
are based on net income.
Basic earnings per share
Basic earnings per share (cents) 115 2 276
Ordinary dividend per share
(cents) 25 25 73
Special dividend per share
(cents) 350 - -
Combined ratio (%) (note 3) 89,3 95,9 93,1
Net asset value per share
(cents) 1 477 1 163 1 410
Number of shares in issue
(million)
- at period end 245,6 244,1 245,2
- weighted average 245,3 243,6 244,1
BALANCE SHEET
As at As at As at
30/6/04 30/6/03 31/12/03
R`m R`m R`m
Assets
Non-current assets 4 468 2 837 4 552
Fixed assets 215 170 196
Investments at fair value 3 941 2 378 4 024
Ordinary shares 2 688 1 985 2 707
Government stock 66 84 84
Money market deposits and other 1 187 309 1 233
Investment in associated companies 180 118 190
Goodwill 132 152 142
Deferred taxation - 19 -
Technical assets 1 048 1 013 1 006
Current assets 2 065 2 759 1 645
Trade and other receivables 621 596 708
Cash and cash equivalents 1 444 2 163 937
Total assets 7 581 6 609 7 203
Equity and liabilities
Capital and reserves 3 627 2 840 3 458
Interest of outside shareholders in
subsidiaries 2 2 2
Interest of preference shareholders in
subsidiary 55 - 36
Non-current liabilities 150 163 182
Technical provisions 3 391 3 156 3 169
Current liabilities and provisions 356 448 356
Total equity and liabilities 7 581 6 609 7 203
STATEMENT OF CHANGES IN EQUITY
Share Contingency Retained
R`m capital reserve income Total
Balance at 31 December 2002 124 423 2 379 2 926
Change in accounting policy
(note 4) 7 7
Net income for the period 4 4
Transfer to contingency
reserve 12 (12) -
Dividends paid (102) (102)
Issue of shares 5 5
Balance at 30 June 2003 129 435 2 276 2 840
Net income for the period 669 669
Transfer to contingency
reserve 88 (88) -
Dividends paid (61) (61)
Issue of shares 10 10
Balance at 31 December 2003 139 523 2 796 3 458
Net income for the period 283 283
Transfer to contingency
reserve 77 (77) -
Dividends paid (118) (118)
Issue of shares 4 4
Balance at 30 June 2004 143 600 2 884 3 627
CASH FLOW STATEMENT
30/6/04 30/6/03 31/12/03
R`m R`m R`m
Cash generated by operations 589 420 592
Net underwriting surplus 336 111 392
Increase in net technical provisions 180 129 149
Depreciation of fixed assets 37 21 45
Loss/(profit) on sale of fixed assets - 3 (2)
Decrease in other working capital 36 156 8
Investment income 162 184 339
Cash generated by operating activities 751 604 931
Taxation paid (115) (84) (261)
Cash available from operating activities 636 520 670
Dividends paid (118) (102) (163)
Cash retained from operating activities 518 418 507
Cash utilised in investing activities (15) (45) (1 370)
Decrease/(increase) in funding requirements 503 373 (863)
Cash effects of financing activities
Proceeds from issue of shares 4 5 15
Increase/(decrease) in cash and cash
equivalents 507 378 (848)
Notes
1. Accounting policies
These financial results for the period 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 2003 with the exception of item 4 below.
2. 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.
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
deferred tax on STC credits in terms of AC 501. The cumulative effect of this
change amounting to R7 million has been made against the opening balance of
retained income in 2003.
SUPPLEMENTARY INCOME STATEMENT
(Reflecting long-term rate of return adjustment)
30/6/04 30/6/03 Change 31/12/03
R`m R`m % R`m
Technical account (note A)
Gross premiums 3 592 3 010 19 6 486
Net premiums 3 198 2 666 20 5 608
Earned premiums net of
reinsurance 3 138 2 678 5 683
Claims incurred net of
reinsurance (1 966) (1 932) (3 878)
Acquisition expenses (561) (416) (971)
Management expenses (275) (219) (442)
Net underwriting surplus 336 111 392
Attributable to ordinary
shareholders 309 111 178 340
Attributable to preference
shareholders in subsidiary
(note 2) 27 - 52
Investment return on insurance
funds (note B) 109 102 7 210
General insurance result 445 213 109 602
Long-term investment return on
shareholders` funds
(note B) 206 190 8 395
Operating income based on
long-term investment
return 651 403 62 997
Non-technical account (note A)
Short-term investment
fluctuations (212) (316) (50)
Dividends, interest and
property income 163 184 339
Realised surplus on investments 20 1 56
Unrealised (deficit)/surplus on
investments (80) (209) 160
Allocated investment return
transferred to technical
account (note B) (315) (292) (605)
Goodwill (11) (11) (21)
Income before taxation 428 76 926
Taxation (including secondary
tax on companies) (135) (67) (250)
Income after taxation 293 9 676
Income attributable to
preference shareholders in
subsidiary (note 2) (19) - (36)
Share of associated companies
retained income/(loss) 9 (5) 33
Net income 283 4 673
Operating earnings per share
Operating earnings per share
are calculated on net income
adjusted for goodwill,
associated company earnings,
short-term investment
fluctuations net of taxation
and secondary tax on companies.
Determination of operating earnings
Net income 283 4 673
Goodwill 11 11 21
Share of associated companies
retained (income)/loss (9) 5 (33)
Short-term investment
fluctuations 212 316 50
Taxation effect of short-term
investment fluctuations (19) (16) 34
Secondary tax on companies 6 6 8
Operating earnings 484 326 48 753
Operating earnings per share
(cents) 197 134 47 308
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% 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
Growth in premium income was satisfactory and reflected new business acquired
as well as corrective action and rating adjustments in unprofitable segments of
the business. The favourable trading conditions experienced in 2003 continued
during the first half of 2004. Results were strongly influenced by low levels
of claims following benign weather patterns and the absence of large commercial
and industrial fires. It must be recognised that these abnormal claims patterns
cannot be expected to continue and changes to more normal claim patterns must
be anticipated.
The company has progressed certain strategic initiatives to manage supplier
costs, particularly in the field of building, household goods and automotive
services resulting in an improvement in the control of claims costs and
ultimately the containment of the level of future premium increases.
Interest income declined during the period following the reduction in rates
whilst dividend income from listed equities has increased. The value of listed
shares declined marginally during the period in line with movements on the JSE
Securities Exchange South Africa (`JSE`).
The net asset value per share increased by 5% during the period and the
solvency margin (being the ratio of net assets to net premiums), after payment
of the special dividend mentioned below, remains satisfactory at 43%.
The large corporate market is showing signs of rate reductions which threaten
to undermine profitability in this sector. The group will nevertheless continue
to adhere to prudent underwriting standards. It is accordingly anticipated that
market conditions will remain conducive to achieving profitable underwriting
results and the Board is therefore cautiously optimistic regarding prospects
for the balance of the year. It must be noted however that short-term insurance
results fluctuate and the results for the first six months are not necessarily
indicative of the outturn for the remainder of the year.
COMPLIANCE
The company complies in all material respects with the JSE Listings
Requirements and the King Report Code of Corporate Practices and Conduct.
DECLARATION OF INTERIM DIVIDEND AND SPECIAL DIVIDEND ANNOUNCEMENT
DECLARATION OF DIVIDEND (NUMBER 69)
An interim dividend of 25 cents per share has been declared payable to
shareholders in respect of the six months to 30 June 2004.
SPECIAL DIVIDEND ANNOUNCEMENT
The Board of directors has declared a special dividend of 350 cents per share
which will have the effect of returning R860 million to shareholders. The Board
is satisfied that the capital remaining after this dividend will be sufficient
to support the current operations and facilitate future development of the
business.
SALIENT DATES
In accordance with the trading requirements under the STRATE environment, the
last day to trade to participate in both of the above dividends will be Friday,
27 August 2004. The shares will commence trading ex-dividend on Monday, 30
August 2004, and the record date will be Friday, 3 September 2004. Payments
will be made on Monday, 6 September 2004.
Share certificates may not be dematerialised or rematerialised between Monday,
30 August and Friday, 3 September 2004, both days inclusive.
On behalf of the Board
K T M Saggers (Chairman) B Campbell (Managing Director)
23 July 2004
Registered Office:
19th Floor, Mutual & Federal Centre, 75 President Street, Johannesburg, 2001
Transfer Secretaries:
Computershare Investor Services 2004 (Pty) Ltd, 70 Marshall Street,
Johannesburg, 2001
Sponsor: Nedbank Capital, 135 Rivonia Road, Sandown, 2196
Mutual & Federal Insurance Company Limited
(Registration number 1970/006619/06)
(Incorporated in the Republic of South Africa)
ISIN: ZAE000010823 JSE share code: MAF NSX share code: MTF
Website: www.mf.co.za E-mail: investor@mf.co.za
Date: 26/07/2004 08:11:26 AM Produced by the JSE SENS Department
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