| Mon 15 Aug 2005, 17:04 | | Clientele Life Assurance Company Limited - Audited |
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Clientele Life Assurance Company Limited - Audited Group results for the year
ended 30 June 2005
Clientele Life Assurance Company Limited
(Registration number 1973/016606/06)
Share code: CLE ISIN: ZAE000013397
Audited Summarised Group Results for the year ended 30 June 2005
Financial Highlights
* Profit from life operations increased by 46%
* Headline earnings per share increased by 35%
* Embedded value of new business increased by 65% to R129 million
* Return on average shareholders` interests: 81%
* Market share increased to 10% of the South African recurring premium policy
market
* Dividend declared of 250 cents per share
Empowerment Highlights
* Payments made to previously disenfranchised individuals exceed profit from
life operations
* More than 50 000 training exposures provided on a `face to face` basis in
basic financial life skills to previously disenfranchised individuals
* 87% of new policies written, issued to previously disenfranchised individuals
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. In terms of the most recent statistics issued by
the Life Offices Association of South Africa, Clientele Life has increased its
market share of recurring premium policies to 10% of the South African market
(excluding Retirement Annuities), this predominantly in the previously
disenfranchised sectors of our population.
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 having achieved a compound growth in excess of 50% per annum
since becoming listed on the JSE eight years ago.
Net recurring premium income for the period of R352.5 million represents an
increase of 20% over last year. Other income which comprises mainly annuity fees
from the Independent Field Advertisers (`IFA`) distribution channel increased
from R19.2 million to R32.5 million. It is pleasing to note that the growth in
this other income has resulted in the widening of operating margins to 34%
compared to 28% last year.
Policyholders` net benefits, which include claims paid and encashment benefits,
have increased by 72% over the same period last year and the much improved
investment performance on the JSE has contributed to the 197% 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 46% rising from R82.1
million to R119.6 million. Profit before taxation increased by 47% to R130.0
million. Headline earnings per share rose by 35% from 190.15 cents per share to
257.67 cents per share.
The above results have translated into an after-tax return on average
shareholders` interests of 81%.
The embedded value of new business increased by 65% from R78.1 million to R129.1
million for the period and once again reinforces the relative growth and
profitability inherent in the business.
A significant proportion of the increase in investments reflected in the balance
sheets relate to premiums from single premium policies.
Clientele Life`s financial soundness is reflected in its capital adequacy ratio
which stands at over eight times the statutory requirement.
Clientele Life is proud of the Independent Field Advertisers Opportunity which
it introduced seven years ago. IFA has enabled Clientele Life to make a
significant and tangible contribution to Broad Based Black Economic Empowerment
in South Africa. Thousands of worthwhile and sustainable businesses have been
created for South Africans particularly for previously disenfranchised
individuals. The success of the IFA distribution channel, has enabled Clientele
Life to make payments to previously disenfranchised individuals which in total
exceed profit from life operations. Clientele Life continues to provide
marketing and administration 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.
Prospects
Clientele Life believes that there is a great need to supply appropriate life
insurance and savings products to the growing and underserviced lower to middle
income markets. The company will continue to service its 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 11 August 2005
AUDITED SUMMARISED GROUP INCOME STATEMENTS
Year ended 30 June
2005 2004 %
Net premium income from insurance 352 519 293 883 20
contracts
Service fees from investment 12 322 5 020 145
contracts
Other income 32 482 19 209 69
Policyholders net investment return 63 136 21 290 197
Investment returns on financial 53 680 14 250
assets**
Net policyholder benefits paid (58 502) (34 066) 72
Transfer to policyholder liabilities (74 023) (63 981) 16
under insurance contracts
Transfer to policyholder (54 018) (14 250)
liabilities under investment
contracts
Expenses (208 009) (159 255) 31
- Operating expenses (20 042) (18 333) 9
- New business acquisition expenses (187 967) (140 922) 33
profit FROM LIFE OPERATIONS 119 587 82 100 46
Profit/(loss) from associate 179 (801) 122
Shareholders net investment returns 10 275 7 190 43
profit before taxation 130 041 88 489 47
Taxation* (46 685) (26 970) 73
Net PROFIT attributable TO ORDINARY 83 356 61 519 35
SHAREHOLDERS
* Taxation of R46.7 million (2004: R27,0 million) is comprised of South African
normal taxation of R34.8 million (2004: R24.9 million), Secondary Tax on
Companies (STC) of R7.6 million (2004: R2.7 million) and an underprovision in
respect of 2002 and 2003 of R4.3 million (2004: overprovision of R0.6 million).
** Investment returns on financial assets allocated to investment conctracts
include interest and fair value adjustments.
AUDITED SUMMARISED GROUP BALANCE SHEETS
As at As at
30 June 31 June
(R`000`s) 2005 2004
Shareholders` equity
Share capital 4 853 4 853
Retained earnings 120 339 101 684
Shareholders` interests 125 191 106 537
Policyholder liabilities 682 183 310 507
Policyholder liabilities under insurance 242 448 168 425
contracts
Policyholder liabilities under
investment contracts 439 735 142 082
807 375 417 044
Employment of funds
Investments 815 128 410 864
Investment in associate 907 728
Property, plant and equipment 9 194 7 621
Current assets 41 098 45 735
Total assets 866 327 464 948
Current liabilities (58 952) (47 904)
807 375 417 044
AUDITED SUMMARISED 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 profit attributable
to shareholders 61 519 61 519
Share premium (15 602) - (15 602)
distribution
Dividend declared (24 398) (24 398)
Balance at 30 June 2004 4 853 - 101 684 106 537
Balance at 1 July 2004 4 853 - 101 684 106 537
Net profit attributable
to shareholders 83 356 83 356
Dividend declared (64 700) (64 700)
Balance at 30 June 2005 4 853 - 120 339 125 191
AUDITED SUMMARISED GROUP CASH FLOW STATEMENTS
Year ended 30 June
2005 2004
Cash generated by operations 444 704 210 418
Adjusted by:
Investment returns 73 411 28 480
Dividend paid (64 688) (24 398)
Taxation paid (50 595) (20 001)
Cash flow from operating activities 402 832 194 499
Cash flow from investing activities (411 843) (153 402)
Cash flow from financing activities - (15 602)
(Decrease)/increase in cash on hand (9 011) 25 495
Notes:
The investment in the associate represents a 33.3% investment in Clientele USA
LLC.
The principal accounting policies and valuation bases adopted by the group
remain consistent with South African Statements of GAAP and those applied last
year.
These results have been audited by PriceWaterhouse Coopers Inc. and the audit
report is available for inspection at the companys registered office.
The transfer to policyholder liabilities 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 entered into an agreement to purchase two office buildings for
approximately R35 million.
The nature of the group`s business remains unchanged.
Cash generated by operations includes premiums from single premium business.
AUDITED EARNINGS PER SHARE
Year ended 30 June
(Cents per share) 2005 2004 %
Profit from life operations 369,67 253,79 46
Profit/(loss) from associate 0,55 (2,48)
Net investment return on shareholders 31,76 22,23
funds
Profit before taxation 401,98 273,54 47
Taxation expense (144,31) (83,39) 73
Headline earnings* 257,67 190,15 35
Weighted ordinary shares in issue 32 350 32 350
(`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 profit attributable to ordinary shareholders.
DIVIDEND TO SHAREHOLDERS AFTER THE YEAR ENDED 30 JUNE 2005
After year After year
ended ended
30 June 30 June
(R`000`s) 2005 2004
Ordinary dividend 80 625 64 700
Ordinary shares in issue at 30 June 32 350 32 350
GROUP EMBEDDED VALUE
The embedded value represents an estimate of the value of the group 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.
June June
(R`000`s) 2005 2004
Embedded value
Value of excess assets attributable to 125 191 106 537
shareholders
Value of in force business 453 741 355 422
Cost of capital (4 113) (3 944)
Embedded value 574 819 458 015
Value of new business 129 120 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 30 June 2005.
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 30 June 2005
Embedded value at beginning of year 458 015
Dividend (64 700)
Secondary tax (7 618)
385 697
Unwinding of discount rate 65 224
Embedded value incentive bonus scheme (10 923)
Underprovision for prior years tax (2002/2003) (4 347)
Value added by management 167 274
Value of new business 129 120
Investment experience 17 575
Profit from associate 179
Experience and sundry adjustments 20 400
Change in basis
Value of in-force and excess assets (27 938)
Cost of capital (168)
Embedded value at end of period 574 819
Main assumptions: % p.a. % p.a.
Long-term economic assumptions 2005 2004
Risk discount rate 14.0 16.0
Overall investment return 8.5 10.0
Expense inflation 6.0 6.0
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 R572 million in the individual policyholder fund.
DIVIDEND DECLARATION
Notice is hereby given that the board has declared the following dividend per
ordinary share:
Ordinary dividend (cents per share) 250
Ordinary shares in issue at record date (000`s) 32 350
The dividend will be paid on Monday, 12 September 2005.
To comply with the procedures of STRATE the last day to trade in the shares for
purposes of entitlement to the dividend is Friday, 2 September 2005. The shares
will commence trading ex dividend on Monday, 5 September 2005 and the record
date will be Friday, 9 September 2005.
Share certificates may not be dematerialised or rematerialised between Monday, 5
September 2005 and Friday, 9 September 2005 both days inclusive.
By order of the board
G Q Routledge G J Soll Johannesburg
Chairman Managing Director 11 August 2005
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
Website: www.clientelelife.com
E-mail: services@clientelelife.com
