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Clientele Life - Group Results For The Six Months Ended 31 December 2004
Release Date: 28/02/2005 17:30:02 Code(s): CLE
Clientele Life - Group Results for the six months ended 31 December 2004
Clientele Life Assurance Company Limited
(Registration number 1973/016606/06)
Share code: CLE ISIN: ZAE000013397
* Profit from life operations increased by 48%
* Profit before taxation increased by 48%
* Policyholders` benefits increased by 73%
* Embedded value of new business increased by 60%
* Return on average shareholders` interests: 71%
Group Results for the six months ended 31 December 2004
Comments
Clientele Life`s main focus continues to be the delivery of appropriate and
affordable life insurance and savings` products to the under-served and growing
lower to middle income markets.
Clientele Life`s proven methods of distributing simple and easy to understand
products directly to its customers continues to deliver consistent strong growth
in life operations.
Net recurring premium income for the period of R165 million represents an
increase of 18% over the comparable period last year. Other income which
comprises mainly net single premium income and annuity fees from the Independent
Field Advertisers distribution channel increased from R13.7 million to R20.2
million. It is pleasing to note that the growth in this other income has
resulted in the widening of operating margins to 32,67% compared to 25,97% for
the corresponding period last year.
Policyholders` benefits, which include claims paid and encashment benefits, have
increased by 73% over the same period last year and the much improved
performance on the JSE securities exchange has contributed to the 150% increase
in policyholders` net investment returns.
Operating expenses remain among the lowest in the insurance industry.
The profit from life operations attained an increase of 48% rising from R36.4
million to R53.9 million. Profit before taxation increased by 48% to R61.6
million. Headline earnings per share rose by 21% from 84,66 cents per share to
102.47 cents per share.
In order to ensure comparability with the prior period it should be noted that
taxation includes STC paid of R7,6 million on the R64,7 million dividend in
September and an underprovision in respect of the 2002 and 2003 years of
assessment totalling R4.3 million.
The above results have translated into an after-tax return on average
shareholders` interests of 71%.
The embedded value of new business increased by 60% from R34.9 million to R55.8
million for the period and once again reinforces the relative growth and
profitability inherent in the business.
It is again pleasing to note Clientele Life`s financial soundness reflects in
its`s capital adequacy ratio which stands at 5.5 times the statutory
requirement; this in spite of the payment of the R64.7 million dividend in
September.
Clientele Life is proud of the Independent Field Advertisers (`IFA`) Opportunity
which it introduced six and a half years ago. It has enabled it to make a
significant and tangible contribution to broad based Economic Empowerment in
South Africa. Thousands of worthwhile and sustainable businesses have been
created for South Africans particularly for members of the previously
disenfranchised sectors of our population. Clientele Life continues to provide
administration and marketing support to these successful businesses which in
turn create further opportunities for many thousands more.
The IFA Academy, a specialised training wing for the IFA`s, provides product
training and education on basic life skills. This training, coupled with
Clientele Life`s highly successful video based INSETA training programme,
enables IFA`s to gain vital knowledge of basic financial skills and insurance
products. Furthermore it provides the essential skills needed for the IFA`s to
manage their own businesses.
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 30 June 2005. It is
not anticipated that this investment will have any meaningful impact on
Clientele Life`s results in the short-term.
Prospects
Clientele Life believes that there is a great need for appropriate investment
and life insurance products to the growing and underserviced lower to middle
income markets. The company will continue to service it`s customers in the most
appropriate and cost effective way to ensure that their needs are fulfilled.
By order of the board
G Q Routledge G J Soll Johannesburg
Chairman Managing Director 23 February 2005
The following are the unaudited results for the company and it`s subsidairies
for the six months ended 31 December 2004
Summarised Group Income Statements
Six months ended Year
31 December
ended
30 June
(R`000`s) 2004 2003 % 2004
Premium income from
insurance contracts 165 099 140 155 18 293 883
Other income and service 20 198 13 699 47 24 229
fees from investment
contracts
Policyholders` net
investment returns 39 848 15 913 150 21 290
Policyholders` benefits (24 463) (14 107) 73 (34 066)
Transfer to
policyholders
liabilities (46 698) (39 195) 19 (63 981)
Expenses (100 046) (80 063) 25 (159 255)
- Operating expenses (11 204) (10 050) 11 (18 333)
- New business
acquisition expenses (88 842) (70 013) 27 (140 922)
PROFIT FROM LIFE
OPERATIONS 53 938 36 403 48 82 100
Share of loss from
associate (118) (285) (801)
Net investment return on
shareholders` funds 7 749 5 373 44 7 190
PROFIT BEFORE TAXATION 61 569 41 491 48 88 489
Taxation expense (24 106) (14 103) 71 (26 970)
Under provision for
prior years
(2002/2003) (4 315) - -
NET PROFIT
ATTRIBUTABLE
TO ORDINARY
SHAREHOLDERS 33 148 27 388 21 61 519
* Taxation of R28.4 million (2003: R14.1 million) is comprised of South African
normal taxation of R15.0 million (R2003: R11.4 million), Secondary Tax on
Companies (STC) of R7.6 million (2003: R2.7 million) capital gains tax of R1.5
million (2003: Nil), and an underprovision in respect of the prior years of R4.3
million due to a difference of opinion with the South African Revenue Services.
The underprovision for taxation relates to the 2002 (R1.7 million) and 2003
(R2.6 million) years of assessment. The 2004 tax return has been prepared on the
accepted basis and the 2004 results reflect this.
Summarised Group Balance Sheets
As at As at As at
31 Dec. 31 Dec. 30 June
(R`000`s) 2004 2003 2004
Shareholders` equity
Share capital 4 853 4 853 4 853
Retained earnings 70 132 67 553 101 684
Shareholders` interests 74 985 72 406 106 537
Policyholder
liabilities under
insurance
contracts 215 122 143 639 168 425
Policyholder
liabilities under
investment
contracts 294 676 78 051 142 082
584 783 294 096 417 044
Employment of funds
Investments 619 439 297 280 404 638
Investment in associate 610 1 019 728
Property, plant and 10 154 8 061 8 506
equipment
Current assets 32 930 13 120 51 076
Total assets 663 133 319 480 464 948
Current liabilities (78 350) (25 384) (47 904)
584 783 294 096 417 044
SUMMARISED GROUP STATEMENTS OF CHANGES IN EQUITY
Share Share Retained
(R`000`s) capital premium earnings Total
Balance at 1 July 2003 4 853 15 602 64 563 85 018
Net surplus
attributable
to shareholders 61 519 61 519
Ordinary dividend (24 398) (24 398)
declared
Share premium (15 602) - (15 602)
distribution
Balance at 30 June 4 853 - 101 684 106 537
2004
Balance at 1 July 2004 4 853 - 101 684 106 537
Net profit
attributable
to shareholders 33 148 33 148
Ordinary dividend (64 700) (64 700)
declared
Balance at 31 December 4 853 - 70 132 74 985
2004
SUMMARISED GROUP CASH FLOW STATEMENTS
Six months ended 31 Year
December
ended
30 June
(R`000`s) 2004 2003 % 2004
Cash generated by
operations 84 243 52 241 61 131 584
Adjusted by:
Investment returns 47 596 21 286 28 480
Dividend paid (64 686) (24 398) (24 398)
Taxation paid (32 257) (20 644) (20 001)
Cash flow from
operating activities 34 896 28 485 115 665
Cash flow from
investing activities (213 545) (36 411) (153 978)
Cash flow from
financing activities 199 292 1 046 63 808
Decrease in cash on hand 20 643 533 25 495
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.
Dec. Dec. June
(R`000`s) 2004 2003 2004
Embedded value
Value of excess assets
?? attributable to shareholders 74 985 72 405 106 536
Cost of capital (2 952) (3 020) (3 944)
Value of in force business 397 878 342 055 355 423
Embedded value 469 911 411 440 458 015
Value of new business 55 758 34 925 78 071
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 2004.
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 458 015
Dividend (64 700)
Secondary tax (5 882)
Unwinding of discount rate 29 216
Value added by management 58 505
Value of new business 55 758
Investment experience 11 231
Loss from associate (118)
Experience and sundry adjustments (8 366)
Change in basis (6 236)
Change in cost of capital 993
Embedded value at end of period 469 911
% p.a. % p.a.
2004 2003
Main assumptions:
Long-term economic assumptions
Risk discount rate 14 16
Overall investment return 8.5 10
Expense inflation 6 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 R450 million in the individual policyholder fund.
EARNINGS PER SHARE
Six months Year
ended 31 December ended
2004 2003 % 30 June
(Cents per share) 2004
Profit from life 166.73 112.53 48 253.79
operations
Share of loss from
associate (0.36) (0.88) (2.48)
Net investment return on
shareholders` funds 23.95 16.61 44 22.23
Profit before taxation 190.32 128.26 48 273.54
Taxation expense (87.85) (43.60) 101 (83.39)
Headline earnings* 102.47 84.66 21 190.15
Weighted ordinary
shares in issue (`000`s) 32 350 32 350 32 350
It should be noted that there are no reconciling items between earnings per
share and headline earnings per share.
*Headline earnings is net profit attributable to ordinary shareholders.
DISTRIBUTIONS PAID TO SHAREHOLDERS DURING THE SIX MONTHS ENDED
31 DECEMBER 2004
Six months Six months
ended ended
31 December 31 December
(R`000`s) 2004 % 2003
Ordinary dividend 64 700 165 24 398
Share premium returned - 15 602
Total distribution 64 700 62 40 000
Ordinary shares in issue at 30 32 350 32 350
June
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.
Registered office:
Clientele House, Morning View Office Park, Cnr Rivonia and Alon Roads,
Morningside, PO Box 1316, Rivonia 2128
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street,
Johannesburg 2001, South Africa.
PO Box 61051, Marshalltown 2107, South Africa
Directors: G Q Routledge BA LLB (Chairman), G J Soll CA(SA) (Managing Director),
P J A Cunningham CA(SA), CA(Z), P R Enthoven BA, P W Felton B.Sc.Hdip.Tax (Law),
I B Hume CA(SA), ACMA.
Company secretary: B V Moore.
Investment Bank and sponsor
Nedbank Capital
