| Wed 9 Feb 2005, 10:12 | | Mutual & Federal -Reviewed financial results for t |
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Mutual & Federal -Reviewed financial results for the year ended 31 December 2004
MUTUAL & FEDERAL INSURANCE COMPANY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1970/006619/06)
ISIN: ZAE000010823
JSE share code: MAF
NSX share code: MTF
REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
Income Statement
for the year ended 31 December 2004
31/12/04 31/12/03 Change
R`m R`m %
Gross premiums 7 360 6 486 13
Net underwriting surplus 663 392 69
Net investment income 1 008 555
Goodwill (21) (21)
Abnormal costs (note 2) (30) -
Income before taxation 1 620 926 75
Taxation (including secondary tax on
companies) (460) (250)
Income after taxation 1 160 676
Income attributable to preference
shareholders in subsidiary (note 3) (42) (36)
Share of associated companies retained
income 30 33
Net income 1 148 673
Earnings per share
(a) Headline earnings per share are
calculated on net income adjusted for
goodwill.
Determination of headline earnings
Net income 1 148 673
Goodwill 21 21
Headline earnings 1 169 694
Headline earnings per share (cents) 475 284 67
Diluted headline earnings per share
(cents) (note 5) 471 283 66
(b) Basic earnings per share are based on
net income.
Basic earnings per share
Basic earnings per share (cents) 467 276 69
Diluted basic earnings per share (cents)
(note 5) 463 275 68
Ordinary dividend per share (cents) 105 73
Combined ratio (%) (note 4) 90,2 93,1
Net asset value per share (cents) 1 447 1 410 3
Number of shares in issue (million)
- at period end 247,4 245,2
- weighted average 245,9 244,1
- diluted weighted average (note 5) 248,1 245,0
Balance Sheet
at 31 December 2004
As at As at
31/12/04 31/12/03
R`m R`m
Assets
Non-current assets 4 621 4 347
Property and equipment 177 159
Intangible assets 52 37
Investment property 7 6
Available-for-sale investments 4 015 3 771
Ordinary shares 3 227 2 707
Government stock 48 65
Money market deposits and other 740 999
Loans advanced 36 42
Interest in associated companies 213 190
Goodwill 121 142
Technical assets 898 1 006
Current assets 2 053 1 850
Trade and other receivables 625 654
Cash and cash equivalents 1 428 1 196
Total assets 7 572 7 203
Equity and liabilities
Capital and reserves 3 579 3 458
Interest of outside shareholders in subsidiaries - 2
Interest of preference shareholders in subsidiary 78 36
Non-current liabilities 227 182
Technical provisions 3 288 3 169
Current liabilities and provisions 400 356
Total equity and liabilities 7 572 7 203
Statement of Changes in Equity
for the year ended 31 December 2004
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 6) 7 7
Net income for the year 673 673
Transfer to contingency
reserve 100 (100) -
Dividends paid (163) (163)
Issue of shares 15 15
Balance at 31 December 2003 139 523 2 796 3 458
Net income for the year 1 148 1 148
Transfer to contingency
reserve 134 (134) -
Dividends paid (1 041) (1 041)
Issue of shares 14 14
Balance at 31 December 2004 153 657 2 769 3 579
Cash Flow Statement
for the year ended 31 December 2004
31/12/04 31/12/03
R`m R`m
Cash generated by operations 1 002 555
Net underwriting surplus 663 392
Abnormal costs 5 -
Increase in net technical provisions 235 149
Depreciation of fixed assets 55 45
Profit on sale of fixed assets (4) (2)
Decrease/(increase) in other working capital 48 (29)
Investment income 327 339
Cash generated by operating activities 1 329 894
Taxation paid (412) (261)
Cash available from operating activities 917 633
Dividends paid (1 041) (163)
Cash (utilised by)/retained from operating activities (124) 470
Cash generated by/(utilised in) investing activities 342 (1 359)
Decrease/(increase) in funding requirements 218 (889)
Cash effects of financing activities
Proceeds from issue of shares 14 15
Increase/(decrease) in cash and cash equivalents 232 (874)
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 6 below.
2. Abnormal costs
Abnormal costs comprise the write-off of a previously anticipated pension
surplus of R35 million, following a valuation of the fund; costs of R21 million
following a voluntary separation exercise in 2004; a recovery of R26 million in
respect of a contingent asset not previously recognised.
3. Preference shareholders
The group operates an insurance subsidiary which offers cell captive facilities
to clients. Income which accrues in respect of these arrangements ultimately
belong to clients and are therefore excluded from group earnings.
4. Combined ratio
This reflects the ratio of total insurance expenditure to net earned premiums.
5. Diluted earnings per share
Diluted earnings per share are calculated using unadjusted earnings and the
diluted weighted average number of ordinary shares in issue, calculated on the
assumption that all outstanding share options will be exercised.
6. 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
for the year ended 31 December 2004
(Reflecting long-term rate of return adjustment)
31/12/04 31/12/03 Change
R`m R`m %
Technical account (note A)
Gross premiums 7 360 6 486 13
Net premiums 6 691 5 608 19
Earned premiums net of reinsurance 6 736 5 683
Claims incurred net of reinsurance (4 197) (3 878)
Acquisition expenses (1 316) (971)
Management expenses (560) (442)
Net underwriting surplus 663 392 69
Attributable to ordinary shareholders 609 340 79
Attributable to preference shareholders in
subsidiary (note 3) 54 52
Investment return on insurance funds (note B) 201 210 (4)
General insurance result 864 602 44
Long-term investment return on
shareholders` funds (note B) 348 395 (12)
Operating income based on long-term
investment return 1 212 997 22
Non-technical account (note A)
Short-term investment fluctuations 459 (50)
Dividends, interest and property income 327 339
Realised surplus on investments 99 56
Unrealised surplus on investments 582 160
Allocated investment return transferred to
technical account (note B) (549) (605)
Goodwill (21) (21)
Abnormal costs (note 2) (30) -
Income before taxation 1 620 926
Taxation (including secondary tax on
companies) (460) (250)
Income after taxation 1 160 676
Income attributable to preference
shareholders in subsidiary (note 3) (42) (36)
Share of associated companies retained
income 30 33
Net income 1 148 673
Supplementary Income Statement (continued)
for the year ended 31 December 2004
(Reflecting long-term rate of return adjustment)
31/12/04 31/12/03 Change
R`m R`m %
Operating earnings per share
Operating earnings per share are
calculated on net income adjusted for
goodwill, abnormal costs, associated
company earnings, short-term investment
fluctuations net of taxation, amounts due
to preference shareholders, and
secondary tax on companies.
Determination of operating earnings
Net income 1 148 673
Goodwill 21 21
Abnormal costs 30 -
Share of associated companies retained
income (30) (33)
Short-term investment fluctuations (459) 50
Preference shareholders share of
short-term investment fluctuations (4) -
Taxation effect of short-term investment
fluctuations 62 34
Secondary tax on companies 117 8
Operating earnings 885 753
Operating earnings per share (cents) 360 308 17
Diluted operating earnings per share
(cents) (note 5) 357 307 16
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 12,5%
(2003: 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
The underwriting results for the year are most pleasing. The underwriting
surplus has increased by 69% to R663 million reflecting higher premium levels.
There has been a reduction in the incidence of claims despite an increase in
weather-related losses. Increases in average cost per claim remained low due to
management control and a reduction in the price of imported goods following an
improvement in the value of the Rand.
The motor results continue to be negatively impacted by an escalation in the
incidence of motor vehicle accidents and increasing repair costs.
Premium income grew by 13% during the year. Excluding Alternate Risk Transfer
arrangements the increase was 8%, which reflects ongoing adjustments in termsand
satisfactory growth in new business.
Despite strong cash flows generated by the operations, interest income reduced
by 21% during the year following a general decline in interest rates and the
payment of a special dividend of approximately R860 million in September. This
was partly offset by a 41% increase in the level of dividends received.
Realised and unrealised gains on investments increased substantially following
an improvement in the values of listed equities in the second half of the year.
The net asset value per share has accordingly increased from 1 410 cents to 1
447 cents during the year notwithstanding the payment of the special dividend
of 350 cents. The solvency margin (being the ratio of net assets to net
premiums) remains strong and was in excess of 50% at 31 December 2004. The final
dividend has been increased from 48 cents to 80 cents per share, making the
dividend for the year 105 cents per share, an increase of 44% for the year. The
board intends to continue with its progressive dividend policy.
The underwriting environment for 2005 remains positive despite downward
pressure on rates and an expected return to more normal claims patterns. We
accordingly remain cautiously optimistic of prospects for 2005.
COMPLIANCE
The company complies in all material respects with the JSE Listings
Requirements and the Code of Corporate Practices and Conduct in the King Report.
REVIEW
KPMG Inc. has reviewed the statutory financial information set out in this
results announcement. The unqualified audit opinion is available for inspection
at the company`s registered office.
DECLARATION OF DIVIDEND (NUMBER 70)
A final dividend of 80 cents per share has been declared payable to
shareholders in respect of the twelve months to 31 December 2004.
In accordance with the trading requirements under the STRATE environment, the
last day to trade to participate in the final dividend will be Friday 11 March
2005. The shares will commence trading ex-dividend on Monday 14 March 2005, and
the record date will be Friday 18 March 2005. Payment will be made on Tuesday
22 March 2005.
Share certificates may not be dematerialised or rematerialised between Monday
14 March and Friday 18 March 2005, both days inclusive.
On behalf of the Board
K T M Saggers (Chairman) B Campbell (Managing Director)
8 February 2005
Registered Office: 19th Floor, Mutual & Federal Centre,
75 President Street,
Johannesburg, 2001
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street,
Johannesburg, 2001
Sponsor: Nedbank Capital,
A division of Nedbank Limited,
135 Rivonia Road,
Sandown, 2196
Website: www.mf.co.za
E-mail: investor@mf.co.za
Date: 09/02/2005 08:00:39 AM
Produced by the JSE SENS Department
