| Wed 2 Aug 2006, 8:00 | | Mutual & Federal - Unaudited financial results: Si |
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MAF
MAF
Mutual & Federal - Unaudited financial results: Six months ended 30 June 2006
Mutual & Federal Insurance Company Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1970/006619/06)
JSE Share code: MAF
ISIN: ZAE000010823
NSX share code: MTF
UNAUDITED FINANCIAL RESULTS
for the six months ended 30 June 2006
* Return to more normal claims pattern
* Underwriting surplus in competitive market
* Special dividend of R8,00 per share
* Interim dividend maintained
Through profitability, growth and service we deliver value to our shareholders,
stakeholders and customers
INCOME STATEMENT
Restated
30 June 30 June 31 December
2006 2005 Change 2005
R"m R"m % R"m
Gross premiums 4 260 3 962 8 8 005
Less: Reinsurance premiums (550) (556) (1 131)
Net premiums 3 710 3 406 6 874
Change in provision for unearned
premiums net of reinsurance (76) (83) 8
Earned premiums net of reinsurance 3 634 3 323 6 882
Commission income 91 91 233
Net investment income 639 540 1 572
Other operating income - 4 6
Net income 4 364 3 958 8 693
Claims incurred net of reinsurance (2 312) (2 127) (4 239)
Acquisition costs (937) (714) (1 639)
Administration expenses (343) (306) (812)
Impairment of goodwill (21) (19) (58)
Profit before taxation 751 792 (5) 1 945
Taxation (201) (172) (430)
Profit after taxation 550 620 (11) 1 515
Profit attributable to minority (57) (48) (123)
shareholders
Share of associated companies" 2 2 3
operating profit
Profit for the period 495 574 (14) 1 395
Earnings per share
(a) Headline earnings per share are
calculated on profit for the
period, adjusted for the impairment
of goodwill and intangible assets
and the profit on sale of property
and equipment.
Determination of headline earnings
Profit for the period 495 574 1 395
Impairment of goodwill 21 19 58
Impairment of intangible assets 14 - 26
Profit on sale of property and - (3) (4)
equipment
Headline earnings 530 590 1 475
Headline earnings per share (cents) 211 238 (11) 592
Diluted headline earnings per share 203 236 572
(cents) (note 2)
(b) Basic earnings per share are
based on profit after tax
attributable to ordinary
shareholders.
Basic earnings per share
Basic earnings per share (cents) 197 232 (15) 560
Diluted basic earnings per share 190 230 541
(cents) (note 2)
Ordinary dividend per share 40 40 - 155
declared in respect of the period
(cents)
Dividend per share paid in the 115 80 120
period (cents)
Special dividend per share (cents) 800 - -
Net asset value per share (cents) 2 028 1 611 26 1 941
Number of shares in issue (million)
- at period end - excluding 252,2 248,1 251,0
treasury shares
- weighted average 251,6 247,8 249,0
- diluted weighted average (note 2) 260,9 249,8 257,8
BALANCE SHEET
Restated
As at As at As at
30 June 30 June 31 December
2006 2005 2005
R"m R"m R"m
Assets
Property and equipment 204 200 202
Investment in associated companies 2 42 -
Goodwill 61 121 82
Intangible assets 101 119 107
Investment properties 5 8 7
Investments at fair value through profit and 5 932 4 488 5 742
loss
Ordinary shares 3 015 3 417 4 060
Government stock 33 63 50
Money market deposits and other 2 884 1 008 1 632
Reinsurers" share of insurance contract 830 896 798
provisions
Deferred acquisition costs 159 144 150
Deferred taxation 5 - 18
Trade and other receivables 941 1 014 790
Cash and cash equivalents 2 307 2 055 1 974
Total assets 10 547 9 087 9 870
Equity and liabilities
Post retirement medical aid provision 135 118 131
Deferred taxation 124 150 262
Interest bearing loans 7 8 10
Insurance contract provisions 3 956 3 946 3 639
Agents" balances, accounts payable and 961 673 759
provisions
Total shareholders" equity 5 364 4 192 5 069
Ordinary shareholders" capital and reserves 5 115 3 998 4 872
Interest of minority shareholders in 249 194 197
subsidiary
Total equity and liabilities 10 547 9 087 9 870
STATEMENT OF CHANGES IN EQUITY
Attributable to ordinary shareholders
Foreign
currency Share
Con- transla- based
Share tingency tion payment
R"m capital reserve reserve reserve
Balance at 31 December 2004 153 657 (15) 4
Arising on consolidation of CGIC
Buy back of shares by subsidiary
Profit for the period
Transfer to contingency reserve 40
Current period movements (2)
Share based payments charge 1
Dividends paid
Issue of shares 7
Balance at 30 June 2005 160 697 (17) 5
Buy back of shares by subsidiary
Profit for the period
Transfer to contingency reserve 11
Current period movements (1)
Share based payments charge 127
Dividends paid
Issue of shares 26
Balance at 31 December 2005 186 708 (18) 132
Profit for the period
Transfer to contingency reserve 44
Current period movements 3
Share based payments charge 10
Dividends paid
Issue of shares 25
Balance at 30 June 2006 211 752 (15) 142
Attributable to ordinary shareholders
Property
revalua-
tion Retained Minority
R"m reserve income interest Total
Balance at 31 December 2004 17 2 800 - 3 616
Arising on consolidation of CGIC 211 211
Buy back of shares by subsidiary (11) (11)
Profit for the period 574 48 622
Transfer to contingency reserve (40) -
Current period movements (2)
Share based payments charge 1
Dividends paid (198) (54) (252)
Issue of shares 7
Balance at 30 June 2005 17 3 136 194 4 192
Buy back of shares by subsidiary (3) (3)
Profit for the period 821 75 896
Transfer to contingency reserve (11) -
Current period movements (2) 5 2
Share based payments charge 127
Dividends paid (102) (69) (171)
Issue of shares 26
Balance at 31 December 2005 15 3 849 197 5 069
Profit for the period 495 57 552
Transfer to contingency reserve (44) -
Current period movements 3
Share based payments charge 10
Dividends paid (290) (5) (295)
Issue of shares 25
Balance at 30 June 2006 15 4 010 249 5 364
CASH FLOW STATEMENT
Restated
30 June 30 June 31 December
2006 2005 2005
R"m R"m R"m
Cash generated by operating activities 598 502 1 205
Taxation paid (183) (180) (391)
Cash available from operating activities 415 322 814
Dividends paid (276) (252) (416)
Cash generated by operating activities 139 70 398
Cash generated by/(utilised in) investing 185 376 (38)
activities
Decrease in funding requirements 324 446 360
Cash effects of financing activities 6 7 15
Share buy back by subsidiary - - (11)
Proceeds from issue of shares 6 7 26
Increase in cash and cash equivalents 330 453 375
Cash and cash equivalents at beginning of 1 974 1 428 1 428
year
Cash and cash equivalents of subsidiary - 174 174
consolidated
Effect of exchange rate movements on cash 3 - (3)
and cash equivalents
Cash and cash equivalents at end of the 2 307 2 055 1 974
period
NOTES
1. Statement of compliance
The condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs) for interim
financial statements (IAS 34). The condensed interim financial statements do not
include all of the information required for full annual financial statements.
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 2005.
2. Diluted earnings per share
Diluted earnings per share are determined by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares.
3. Restatement of comparative numbers
Comparatives at 30 June 2005 have been amended to take account of all
presentation, IFRS and other adjustments as detailed in note 3 of the annual
financial statements for the year ended 31 December 2005. The restatement of
equity at 30 June 2005 predominately relates to the revaluation of owner-
occupied property and the treatment of cell captive business.
4. Segmental analysis
Divisional segments
Risk Un-
Commercial Finance Personal allocated Total
R"m R"m R"m R"m R"m
June 2005
Gross premiums 1 918 484 1 560 3 962
Profit before 246 6 19 521 792
taxation
Total assets 1 653 193 435 6 806 9 087
Total liabilities 2 884 444 1 211 356 4 895
December 2005
Gross premiums 3 772 1 175 3 058 8 005
Profit before 513 13 51 1 368 1 945
taxation
Total assets 1 475 298 445 7 652 9 870
Total liabilities 3 040 345 1 268 148 4 801
June 2006
Gross premiums 1 965 650 1 645 4 260
Profit/(loss) 176 9 (45) 611 751
before taxation
Total assets 1 374 373 511 8 289 10 547
Total liabilities 3 097 390 1 424 272 5 183
SUPPLEMENTARY INCOME STATEMENT
(Reflecting long-term rate of return adjustment)
Restated
30 June 30 June 31 December
2006 2005 Change 2005
R"m R"m % R"m
Technical account (note A)
Gross premiums 4 260 3 962 8 8 005
Net premiums 3 710 3 406 9 6 874
Earned premiums net of 3 634 3 323 6 882
reinsurance
Claims incurred net of (2 310) (2 126) (4 239)
reinsurance
Acquisition expenses (846) (623) (1 406)
Management expenses (338) (303) (660)
Net underwriting surplus 140 271 577
Investment return on insurance 141 116 22 255
funds (note B)
General insurance result 281 387 (27) 832
Long-term investment return on 209 159 31 368
shareholders" funds (note B)
Operating income based on long- 490 546 (10) 1 200
term investment return
Non-technical account (note A)
Short-term investment 289 265 949
fluctuations
Dividends, interest and 211 188 369
rentals
Realised surplus on 1 663 441 581
investments
Unrealised (deficit)/surplus (1 235) (89) 622
on investments
Allocated investment return (350) (275) (623)
transferred to technical
account (note B)
Impairment of goodwill (21) (19) (58)
Non-operational items (7) - (146)
Profit before taxation 751 792 1 945
Taxation (including secondary (201) (172) (430)
tax on companies)
Profit after taxation 550 620 1 515
Income attributable to (57) (48) (123)
minority shareholders
Share of associated companies" 2 2 3
retained income
Profit for the period 495 574 1 395
Operating earnings per share
Operating earnings per share
are calculated on profit for
the period adjusted for
impairment of goodwill, non-
operational items, share of
associated companies" profits,
short-term investment
fluctuations net of taxation
adjusted for minority
shareholders" share, and
secondary tax on companies.
Determination of operating
earnings
Profit for the period 495 574 1 395
mpairment of goodwill 21 19 58
Non-operational items 7 - 146
Share of associated companies" (2) (2) (3)
profits
Short-term investment (289) (265) (949)
fluctuations
Minority shareholders" short- 23 14 38
term investment fluctuations
Taxation effect of short-term 80 24 138
investment fluctuations
Secondary tax on companies 29 30 35
Operating earnings 364 394 (8) 858
Operating earnings per share 145 159 (9) 345
(cents)
Diluted operating earnings per 140 158 333
share (cents) (note 2)
Combined ratio (%) (note C) 96,1 91,8 91,6
NOTES TO THE SUPPLEMENTARY INCOME STATEMENT
A. Presentation
The results for the year are shown in the income statement. The supplementary
income statement is presented to provide a clear understanding of the
underwriting and investment activities of the group. In addition a smoothed
investment return is shown to provide an indication of the long-term sustainable
investment result.
The supplementary income statement is separated into:
(a) A technical account
The technical account includes a long-term investment return of 11,1% (2005:
11,1%) 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
profit 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.
C. Combined ratio
This reflects the ratio of total insurance expenditure to net earned premiums.
COMMENTS
Trading conditions within the short-term insurance industry deteriorated during
the period following a severe escalation in average claims costs and an increase
in the incidence of commercial and industrial fires.
Premium growth proved difficult and there was intensive competition following
the highly profitable market conditions in 2004 and 2005. Certain insurers
attempted to gain market share using reduced pricing structures and this
resulted in uneconomic premium levels in a number of portfolios. The group
however maintained responsible underwriting practices and will seek growth in
profitable areas of the market.
The protracted rains in Gauteng during January and February and severe
hailstorms in KwaZulu-Natal in May negatively impacted claim levels. There was
also a substantial increase in motor vehicle repair costs, particularly in
respect of imported vehicles where repair costs are significantly higher.
Following the recent decline in the value of the rand, there are furthermore
concerns that the cost of imported goods will negatively impact claims costs in
other portfolios.
Premium increases and other corrective measures are being implemented to achieve
acceptable levels of profitability in all portfolios.
Investment income for the period remained at a high level following continued
growth in the value of listed equities whilst interest income increased
following higher levels of cash on hand.
The Board remains optimistic regarding prospects for underwriting profits but it
should be noted that the underwriting performance fluctuates and the results for
the first six months are not necessarily indicative of the outturn for the
remainder of the year.
Following a comprehensive review of optimal capital levels within the group, the
directors have decided to return R2,3 billion to shareholders by way of a
special dividend award. 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.
COMPLIANCE
The company complies in all material respects with the JSE Listings Requirements
and the King Report Code of Corporate Practices and Conduct.
CAPITALISATION AWARD WITH A CASH DIVIDEND ALTERNATIVE (NUMBER 73) AND
SPECIAL CAPITALISATION AWARD WITH A CASH DIVIDEND ALTERNATIVE
Notice is hereby given that the directors of the company have resolved to issue
fully paid ordinary shares in the company as a capitalisation award to ordinary
shareholders and ordinary shares as a special capitalisation award to ordinary
shareholders. Ordinary shareholders will be entitled, in respect of all or part
of their shareholding for each award, to elect to receive new fully paid
ordinary shares which shares will be issued only to those ordinary shareholders
who elect in respect of all or part of their shareholding, on or before 12h00,
Friday, 8 September 2006, to receive the capitalisation award shares in respect
of the two separate awards. Shareholders not electing to receive new fully paid
ordinary shares in respect of all or part of their shareholding will be entitled
to receive cash dividend alternatives of 40 cents in respect of the interim
dividend and 800 cents in respect of the special dividend per ordinary share
respectively ("the cash dividend alternative") in each case.
SALIENT DATES
In accordance with the provisions of STRATE, the electronic settlement and
custody system used by JSE Limited, the relevant dates for both of the
capitalisation award elections and cash dividend alternatives are as follows:
2006
Last day to trade to receive the cash dividends or
participate in either of the capitalisation awards Friday, 1 September
Shares trade ex the cash dividends and the
capitalisation awards Monday, 4 September
Listing of the maximum number of new ordinary shares
to be taken up in terms of each capitalisation award Monday, 4 September
Last day to elect to receive capitalisation award
shares by no later than 12h00 on Friday, 8 September
Record date to participate in each capitalisation
award or receive the cash dividend alternative on Friday, 8 September
Payment of the cash dividend alternative to
shareholders who have elected to not participate in
one or both of the capitalisation awards or have
participated in the capitalisation award in respect
of only part of their shareholding Monday, 11 September
New shares issued and posted or Central Securities
Depository Participant ("CSDP") or broker accounts
credited regarding the shares to be issued to
shareholders participating in one or both of the
capitalisation awards in respect of all or part of
their shareholding on Monday, 11 September
The maximum number of new shares listed in terms of
the capitalisation awards adjusted to reflect the
actual number of shares issued in terms of the
capitalisation awards on or about Thursday, 14 September
Note:
1. Shares may not be dematerialised or rematerialised between Monday, 4
September 2006 and Friday, 8 September 2006, both days inclusive.
2. The above dates and times are subject to change. Any changes will be
published on the Securities Exchange News Service ("SENS") and in the press.
The number of capitalisation shares to which shareholders are entitled in
respect of the capitalisation award and the special capitalisation award will be
determined in the ratio that 40 cents per ordinary share and 800 cents per
ordinary share, respectively, bear to the 30 day volume weighted average price
for the company"s share, to be determined by no later than Thursday, 24 August
2006. Details of the ratio will be published on SENS not later than Friday, 25
August 2006 and in the financial press the following business day. Trading in
the STRATE environment does not permit fractions and fractional entitlements.
Accordingly, where a shareholder"s entitlement to new ordinary shares calculated
in accordance with the above formula gives rise to a fraction of a new ordinary
share, such fraction will be rounded up to the nearest whole number where the
fraction is greater than or equal to 0,5 and rounded down to the nearest whole
number where the fraction is less than 0,5. A circular relating to the
capitalisation awards and the cash dividend alternatives will be posted to
shareholders on or about Friday, 18 August 2006.
Note:
Dematerialised shareholders are required to notify their duly appointed CSDP or
broker of his/her election in terms of the capitalisation award in the manner
and at the time stipulated in the agreement governing the relationship between
the shareholder and his/her CSDP or broker.
On behalf of the Board
J B Magwaza (Chairman) B Campbell (Managing Director)
1 August 2006
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, 135 Rivonia Road, Sandown, 2196
Website: www.mf.co.za
E-mail: investor@mf.co.za.co.za
E-mail: investor@mf.co.za
Date: 02/08/2006 08:00:35 AM Produced by the JSE SENS Department
