| Tue 28 Feb 2006, 17:00 | | Clientele Life - Summarised Group Results: Six Mon |
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CLE
CLE
Clientele Life - Summarised Group Results: Six Months ended 31 December 2005
Clientele Life Assurance Company Limited
(Registration number 1973/016606/06)
Share code: CLE
ISIN: ZAE000013397
FSP number: 15268
Summarised Group Results for the Six Months ended 31 December 2005
Highlights
* Embedded value of new business increased by 76% to R98 million
* Annualised return on average shareholders" interests: 70%
* Headline earnings per share increased by 28%
* Significant and tangible contribution to historically disadvantaged
individuals and communities
COMMENTS
Clientele Life"s main focus continues to be the delivery of appropriate and
affordably priced life insurance, protection 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 pleasing results and
continued strong growth in new business.
Net recurring premium income for the period of R212 million represents an
increase of 28% over the comparable period last year. The group earned R33
million of other income which is comprised mainly of annuity income from its
Independent Field Advertiser distribution channel.
Policyholder"s benefits which include claims paid and encashment benefits, have
increased by 46% over the same period last year and the performance on the JSE
Limited has contributed to the 16% increase in policyholder"s net investment
returns.
Operating expenses continue to be well controlled and the average annual renewal
cost per policy remains the lowest in the industry.
Headline earnings per share rose by 28% from 98.01 cents per share to 125.47
cents per share.
The above results have translated into an annualised after-tax return on average
shareholder"s interests of 70%.
The embedded value of new business increased by 76% from R55.8 million to R98.1
million for the period and this underlines the relative growth and profitability
inherent in the business.
The continued success of the Independent Field Advertisers Opportunity ("IFA")
has enabled Clientele Life to make a significant and tangible contribution to
Broad Based Black Economic Empowerment in South Africa. IFA has empowered tens
of thousands of successful entrepreneurs amongst historically disadvantaged
communities and the resultant benefits to this sector have been considerable. In
addition to providing assistance in starting their own businesses, the IFA"s are
given product and life skills training. Our IFA professional presenters are
subject to stringent accreditation processes and are thus equipped to add
appropriate value within the communities they serve.
Prospects
The group intends to remain focused on its growth path and to grow its
operations by building on its distribution strengths. One of the keys to our
future success is working towards an "educated" and "empowered" customer base.
Initiatives have been put in place which address all aspects of consumer
training and development.
The following are the unaudited results for the company and it"s subsidiaries
for the six months ended 31 December 2005
SUMMARISED GROUP INCOME STATEMENTS
Six months ended Restated
31 December
Year
ended
Restated 30 June
(R"000"s) 2005 2004 % 2005
Net premium income from insurance 212 029 165 099 28 352 519
contracts
Service fees from insurance 606 2 805 12 322
contracts
Other income 32 979 17 393 32 482
Net investment returns* 74 709 70 845 125 400
Net policyholder benefits paid (35 952) (24 463) (58 502)
Transfer to policyholder (62 504) (46 698) (74 023)
liabilities under insurance
contracts
Transfer to policyholder (25 905) (24 693) (54 018)
liabilities under investment
contracts
Expenses (125 535) (100 046) (208 009)
- Operating expenses (11 655) (11 204) (20 042)
- New business acquisition (113 880) (88 842) (187 967)
expenses
Profit/(loss) from associate (79) (118) 179
profit before taxation 70 348 60 124 128 350
Taxation** (29 759) (28 421) (46 685)
NET PROFIT ATTRIBUTABLE TO 40 589 31 703 28 81 665
ORDINARY SHAREHOLDERS
NOTES TO SUMMARISED GROUP INCOME
STATEMENTS
Net investment returns on
financial assets allocated to*:
Insurance contract liabilities 46 243 39 848 63 135
Investment contract liabilities 25 905 24 693 53 681
Shareholders 4 067 7 749 10 275
IFRS adjustment in respect of (1 506) (1 445) (1 691)
Treasury shares
74 709 70 845 125 400
Taxation**
Normal taxation and capital gains (20 137) (16 488) (34 720)
taxation
Secondary tax on companies (9 622) (7 618) (7 618)
Underprovision for prior years - (4 315) (4 347)
taxation
(29 759) (28 421) (46 685)
SUMMARISED GROUP BALANCE SHEETS
Restated
As at As at As at
31 December 31 December 30 June
(R"000"s) 2005 2004 2005
Shareholders" equity
Share capital 3 264 3 264 3 264
Retained earnings 77 953 68 277 118 239
Shareholders" interests 81 217 71 542 121 503
Policyholder liabilities 775 762 509 798 682 183
Policyholder liabilities under 304 952 215 122 242 448
insurance contracts
Policyholder liabilities under 470 810 294 676 439 735
investment contracts
856 979 581 340 803 686
Employment of funds
Investments 862 852 615 995 811 439
Investment in associate 827 610 907
Property, plant and equipment 10 989 10 154 9 194
Current assets 29 213 32 931 41 098
Total assets 903 881 659 690 862 638
Current liabilities (46 902) (78 350) (58 952)
856 979 581 340 803 686
SUMMARISED STATEMENT OF CHANGES IN EQUITY
Share Retained
(R"000"s) capital earnings Total
Balance at 1 July 2004 4 853 101 684 106 537
IFRS adjustment (1 589) (410) (1 999)
Adjusted balances at 1 July 2004 3 264 101 274 104 538
Net profit attributable to 83 356 83 356
shareholders
IFRS adjustment to net profit
attributable
to shareholders (1 691) (1 691)
Adjusted net profit attributable 81 665 81 665
to shareholders
Ordinary dividend paid (64 700) (64 700)
Balance at 30 June 2005 3 264 118 239 121 503
Balance at 1 July 2005 3 264 118 239 121 503
Net profit attributable to 40 589 40 589
shareholders
Ordinary dividend paid (80 875) (80 875)
Balance at 31 December 2005 3 264 77 953 81 217
SUMMARISED GROUP CASH FLOW STATEMENTS
Six months ended Restated
31 December
Year
ended
Restated 30 June
2005 2004 2005
Cash generated by operations 119 684 84 243 444 704
Adjusted by:
Investment returns 48 210 47 596 73 411
Dividend paid (80 793) (64 686) (64 688)
Taxation paid (46 521) (32 257) (50 595)
Cash flow from operating 40 580 34 896 402 832
activities
Cash flow from investing (54 082) (213 545) (411 843)
activities
Cash flow from financing - 199 292 -
activities
(Decrease)/increase in cash on (13 502) 20 643 (9 011)
hand
EARNINGS PER SHARE
Six months ended Restated
31 December
Year
ended
Restated 30 June
(Cents per share) 2005 2004 % 2005
Profit from life operations 217,70 186,22 396,20
(Loss)/profit from associate (0,24) (0,36) 0,55
Profit before taxation 217,46 185,86 396,75
Taxation (91,99) (87,85) (144,31)
Headline earnings* 125,47 98,01 28 252,44
Weighted ordinary shares in issue 32 350 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.
DISTRIBUTIONS PAID TO SHAREHOLDERS DURING THE SIX MONTHS ENDED 31 DECEMBER 2005
Six months Six months
ended ended
31 December 31 December
2005 2004
Ordinary dividend (R"000"s) 80 875 64 700
Ordinary shares in issue at 31 December 32 350 32 350
("000"s)
NOTES TO THE RESULTS:
1. The investment in the associate represents a 33.3% investment in
Clientele USA LLC.
2. 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.
3. The group has entered into an agreement to purchase two contiguous
office buildings for approximately R35 million.
4. The nature of the group"s business remains unchanged.
5. Cash generated by operations includes premiums from single premium
business.
ACCOUNTING POLICIES AND ACTUARIAL BASIS
Statement of compliance
The accounting policies adopted for the purpose of the group financial
statements comply with International Financial Reporting Standards (IFRS),
specifically International Accounting Standards (IAS 34) on interim financial
reporting, and with the listing requirements of the JSE Limited and the
Companies Act of South Africa.
Adoption of IFRS
Being a first-time adopter of IFRS for the 2006 financial year, the Group"s date
of transition to IFRS is 1 July 2004. The Group"s opening balance sheet on 1
July 2004 and comparative information for 2005 have been restated to comply with
all IFRS expected to be effective as at 30 June 2006.
The results for the six months ended 31 December 2005 have been prepared in
accordance with IAS 34; guidelines issued by the Actuarial Society of South
Africa; and IFRS 1 - first time adoption of IFRS.
The disclosures required by IFRS 1 concerning the transition from South African
Statements of Generally Accepted Accounting Practice (SA GAAP) to IFRS and the
required changes in accounting policies are presented below.
The migration to IFRS for insurers will, in its full extent, take a number of
years. The interim results have been prepared in accordance with current
interpretations of IFRS. Future results may be impacted, as the development of
guidance for the long term insurance industry, both from an accounting and
actuarial perspective is an ongoing process.
The implementation of IFRS concurrently with the withdrawal of the specific
South African accounting standards applicable to insurers (AC121) required some
changes to the Group"s basis of presentation and accounting policies. The impact
on reported earnings and the shareholders" funds is summarised in the tables
below.
Consolidation of policyholders" interest in group companies
In determining the Clientele Life group results, Clientele Life shares held in
the policyholder portfolio now have to be treated as treasury shares and may no
longer be accounted for as investments at fair value, but must be accounted for
at nil value.
Net profit attributable to shareholders - Reconciliation of previous SA GAAP to
IFRS
June December
R"000 2005 2004
Reported under previous SA GAAP 83 356 33 148
Treasury shares (1 691) (1 445)
Reported under IFRS 81 665 31 703
Reconciliation of shareholders" interests
30 June 31 December 1 July
R"000 2005 2004 2004
Reported under SA GAAP 125 193 74 985 106 537
Treasury shares (3 690) (3 444) (1 999)
Reported under IFRS 121 503 71 541 104 538
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 31 December 2005.
The embedded value calculations have been certified by the company"s independent
actuaries, QED Actuaries & Consultants (Pty) Limited.
Six months ended Restated
31 December
Year
ended
Restated 30 June
(R"000s) 2005 2004 % 2005
Embedded value
Value of excess assets 81 217 71 541 121 503
attributable to shareholders
Cost of capital (4 330) (2 952) (4 116)
Value of in force business 515 580 397 878 453 741
Embedded value 592 467 466 467 571 128
Value of new business 98 058 55 758 76 129 120
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 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 31 December 2005
Embedded value at beginning of year 574 818
Cumulative IFRS adjustments (3 690)
571 128
Dividend (80 875)
Secondary tax (9 622)
480 631
Unwinding of discount rate 33 661
Embedded value - Incentive bonus scheme (3 856)
Value added by management 91 637
Value of new business 98 058
Investment experience 9 415
Loss from associate (79)
Experience and sundry adjustments (15 757)
Change in basis
Value of in-force and excess assets (9 392)
Cost of capital (214)
Embedded value at end of period 592 467
Main assumptions: % p.a. % p.a.
Long-term economic assumptions 2005 2004
Risk discount rate 14 14
Overall investment return 8,5 8,5
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 R590 million in the individual policyholder fund.
By order of the board
G Q Routledge G J Soll Johannesburg
Chairman Managing Director 23 February 2006
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: 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), I B
Hume CA(SA), ACMA*
Company secretary: BV Moore. *Executive director
Website: www.clientelelife.com
E-mail: services@clientelelife.com
Investment bank and Sponsor
Nedbank Capital
Date: 28/02/2006 05:00:23 PM Produced by the JSE SENS Department
