| Wed 30 Aug 2006, 16:30 | | SA Eagle - Reviewed interim report for the six mon |
|
SAE
SAE
SA Eagle - Reviewed interim report for the six months ended 30 June 2006
SOUTH AFRICAN EAGLE INSURANCE COMPANY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1965/006764/06)
Share code: SAE & ISIN: ZAE000006243
("the Company")
Highlights
* Increase in net asset value per share 25%
* Return on shareholders" funds 18%
* Growth in gross written premium 11.2%
* Underwriting surplus in a challenging market
* Decrease in earnings per share 7.1%
* Increase in interim dividend 10%
Reviewed interim report for the six months ended 30 June 2006
Rand thousands Note Reviewed Reviewed % Change Audited
at at at
30/06/06 30/06/05 31/12/05
Restated
CONSOLIDATED INCOME STATEMENT
Insurance premium revenue 1,905,852 1,714,718 11.2% 3,509,671
Insurance premium ceded to
reinsurers 374,217 331,486 646,274
--------------------- ---------
Net insurance premium revenue 1,531,635 1,383,232 2,863,397
--------------------- ---------
Net insurance premium earned 1,495,576 1,371,918 9.0% 2,806,825
Investment income 2 95,197 86,386 10.2% 175,412
Fair value adjustment on
trading investments (28,680) (928) 5,138
Net realised gains on disposal
of investments 68,425 40,875 172,932
--------------------- ---------
Net income 1,630,518 1,498,251 8.8% 3,160,307
--------------------- ---------
Net insurance claims 1,074,935 928,894 15.7% 1,902,370
Acquisition expenses 226,458 208,106 8.8% 425,682
Administrative and other
operating expenses 160,872 157,206 2.3% 318,275
Investment expenses 2,250 1,914 5,368
--------------------- ---------
Expenses 1,464,515 1,296,120 13.0% 2,651,695
--------------------- ---------
Profit before tax 3 166,003 202,131 (17.9%) 508,612
Income tax expense 33,941 59,954 (43.4%) 118,388
--------------------- ---------
Profit after tax 132,062 142,177 (7.1%) 390,224
Minority interest 1,498 2,491 1,094
--------------------- ---------
Net profit attributable to
members of the Company 130,564 139,686 (6.5%) 389,130
--------------------- ---------
Financial highlights
After-tax adjustment for:
Net realised surplus on
disposal of investments,
property and equipment, after
tax (58,503) (38,598) 51.6% (153,654)
--------------------- ---------
Headline earnings 72,061 101,088 (28.6%) 235,476
--------------------- ---------
Headline earnings per share
(cents) 592.0 830.0 (28.6%) 1,933.4
Earnings per share (cents) 1,084.0 1,167.0 (7.1%) 3,195.0
Ordinary dividends declared
per share (cents) 220.0 200.0 10.0% 800.0
Dividends paid per share
(cents) 600.0 480.0 2,970.0
Number of shares in issue 12,179,500 12,179,500 12,179,500
Net asset value per share
(cents) 13,362 10,686 25.0% 12,414
Solvency margin (%) 54.0% 48.3% 52.9%
Combined ratio (%) 97.9% 94.4% 94.3%
Return on equity (%) 17.8% 21.7% 28.3%
CONSOLIDATED BALANCE SHEET
Assets
Property and equipment 61,827 60,005 55,104
Investments 4 982,662 961,067 2.2% 1,008,223
Deferred acquisition cost 92,504 90,238 134,200
Technical assets 445,977 467,944 (4.7%) 529,013
Current assets 968,244 1,005,462 (3.7%) 1,113,133
Cash and cash equivalents 1,431,247 938,007 52.6% 1,017,528
--------------------- ---------
Total assets 3,982,461 3,522,723 13.0% 3,857,201
--------------------- ---------
Equity and liabilities
Shareholders" equity 1,627,485 1,301,469 25.0% 1,511,949
Minority shareholders"
interest in subsidiaries 78,830 58,991 3,147
Retirement benefit obligation 41,695 37,105 43,069
Reinsurers" share of deferred
acquisition cost 33,397 32,208 46,738
Deferred tax liabilities 5,754 5,233 12,963
Technical provisions 1,753,829 1,698,809 3.2% 1,724,832
Other liabilities 441,471 388,908 13.5% 514,503
--------------------- ---------
Total equity and liabilities 3,982,461 3,522,723 3,857,201
--------------------- ---------
COMMENTARY
The softening insurance cycle and a return to more normal claims patterns placed
pressure on underwriting performance during the period. The Group generated an
annualised weighted average return on shareholders" funds of 17.8% compared to
21.7% in 2005.
Headline earnings, which excludes realised investment surpluses, of R72.1
million
for the six months were 28.6% lower compared to the same period in 2005.
Earnings
per share of R130.6 million for the six months were 7.1% lower compared to the
same period in 2005, mainly as a result of the higher realised gains and
investment income compared to last year.
The net underwriting result for the period was R57.3 million (2005: R92.3
million).
The Company experienced an increase in claims as a result of fire incidents and
adverse weather conditions including hailstorms in KwaZulu-Natal and heavy
rains in Gauteng.
The motor account was negatively impacted by an increase in the incidence of
accidents and vehicle hijackings. While the Company has noted some increase in
the cost of repairs for imported vehicles, overall it has largely been able to
contain motor repair costs. Pricing appropriately for this risk will continue to
be a focus. Corrective action will be taken to address profitability in all
affected classes of business.
An 11.2% increase in premium revenue during the first six months of the year
compared to 10% in 2005, reflected satisfactory growth in highly competitive
market conditions.
Investment income for the period improved by 10.2% as a result of increased
interest and dividend income.
The solvency margin increased by 6% to 54.0% (2005: 48.3%) and remains above
the stated policy of maintaining solvency within the 40% to 50% range.
Given the strong solvency position, the Directors have declared an interim
dividend of 220 cents per share (2005: 200 cents per share).
While the Directors are confident regarding the Group"s prospects for the
remainder of the year, it should be noted that underwriting as well as
investment
performance fluctuates and, therefore, results for the first six months are not
necessarily indicative of the year-end result.
DIVIDEND DECLARATION NO. 69
1. The Directors have declared an interim dividend for 2006 of 220 cents
per share (2005: 200 cents per share).
2. The dividend is payable in accordance with the following timetable:
Last day to trade in order to participate in the dividend: Thursday,
21 September 2006
Shares commence trading ex the dividend from the commencement of business
on: Friday, 22 September 2006
Record date: Friday, 29 September 2006
Payment date: Monday, 2 October 2006
Shareholders may not dematerialise or rematerialise their holdings of shares in
the Company between Friday, 22 September 2006 and Friday, 29 September 2006,
both days inclusive.
29 August 2006
By order of the Board.
Bryanston
Board of Directors
MC South Chairman (Non-Executive)
NV Beyers Managing Director
DM Burton Executive
JPG de Rauville Independent Non-Executive
PT Martin Independent Non-Executive
SG Morris Independent Non-Executive
A Paas Non-Executive
DS Phiri Non-Executive
CN Zungu Executive
There have been no changes to the Board for the past six months.
Rand thousands Note Reviewed at Reviewed at Audited at
30/06/06 30/06/05 31/12/05
Restated
CONDENSED STATEMENT OF CHANGES
IN EQUITY
Balance at beginning of year 1,515,096 1,494,503 1,494,503
Adoption of International
Financial Reporting Standards
and changes in accounting policies - 18,700 -
Net changes in available-for-sale
financial assets on disposal (11,720) (22,753) (162,863)
Revaluation of investments 83,729 17,805 171,529
Translation of foreign subsidiaries (17,107) (9,100) (16,565)
Net profit for the year 130,564 139,686 390,224
Dividends paid (73,077) (337,372) (361,732)
---------------------------------------
Balance at end of year 1,627,485 1,301,469 1,515,096
---------------------------------------
CONDENSED CASH FLOW STATEMENT
Cash retained from operating
activities 269,354 209,786 141,571
---------------------------------------
Cash generated from underwriting
activities 67,150 183,818 197,269
Net increase in working capital 152,174 (52,229) (81,658)
Dividends, interest and rental
received 95,197 86,386 164,737
Taxation paid (45,167) (8,189) (138,777)
---------------------------------------
Dividends paid (73,077) (337,372) (361,731)
Cash effect of investing activities 58,733 (82,619) 89,476
---------------------------------------
Net increase/(decrease) in cash and
cash equivalents 255,010 (210,205) (130,684)
---------------------------------------
NOTES
1. Accounting policies and basis of preparation
The consolidated condensed financial statements have been prepared for the six
months ended 30 June 2006 in accordance with International Financial Reporting
Standards (IFRS), IAS 34 - Interim Financial Reporting and in compliance with
the Listing Requirements of the JSE Limited. The consolidated condensed interim
financial statements do not include all of the information required by IFRS for
full annual financial statements.
The results of insurance contracts underwritten in cells where the risks and
rewards accrue to the cell owner are no longer included in Group profit.
Property and equipment have been accounted for in accordance with IAS 16. The
depreciable amount of property and equipment is now cost less residual value. In
addition, the useful lives of assets have been reviewed at the balance sheet
date. Operating lease expenses are now spread evenly over the lease period in
accordance with IAS 17 and are no longer expensed as paid.
Except for the change in terms of IFRS, the principal policies used in the
preparation of the reviewed results for the period ended 30 June 2006 are
consistent with those applied in the annual financial statements for the year
ended 31 December 2005 and for the results for the six months ended 30 June
2005.
Comparatives for the six months ended 30 June 2005 have been restated in respect
of the accounting of cell activity, property and equipment and operating lease
costs.
Rand thousands Reviewed at Reviewed at Audited at
30/06/06 30/06/05 31/12/05
Restated
2. Investment income
Interest and rental income 74,774 76,458 146,778
Dividends 20,423 9,928 28,634
---------------------------------------
Total investment income 95,197 86,386 175,412
---------------------------------------
3. Profit before tax after
(crediting)/charging
Depreciation 13,203 12,846 14,302
Loss on disposal of property and equipment 29 28 636
4. Investments
Investment properties 9,811 16,938 10,946
Investment in associates 3,294 9,710 20,560
Originated loans 6,711 8,206 7,087
Available-for-sale investments 559,064 519,830 536,958
---------------------------------------
Ordinary shares
Listed 449,112 479,925 447,198
Unlisted 55,260 36,742 36,168
Preference shares
Listed 2,767 3,163 1,804
Unlisted 51,925 - 51,788
---------------------------------------
Trading investments 403,782 406,383 432,672
---------------------------------------
Total investments 982,662 961,067 1,008,223
---------------------------------------
Rand thousands Commercial Risk Personal Investments Total
Financing
5. Segmental analysis
5.1 Business segments
30/06/06
Gross insurance premium
revenue 1,452,746 125,706 327,400 -
1,905,852
Insurance premium ceded
to reinsurers 275,884 88,514 9,819 - 374,217
------------------------------------------------------
Net insurance premium
revenue 1,176,862 37,192 317,581 - 1,531,635
Change in provision for
unearned premium (26,531) (6,463) (3,065) - (36,059)
------------------------------------------------------
Net insurance premium
earned 1,150,331 30,729 314,516 - 1,495,576
Investment income - - - 95,197 95,197
Fair value adjustment on
trading investments - - - (28,680) (28,680)
Net realised gains on
disposal of investments - - - 68,425 68,425
------------------------------------------------------
Income 1,150,331 30,729 314,516 134,942 1,630,518
------------------------------------------------------
Net insurance claims 801,430 27,326 246,179 - 1,074,935
Acquisition expenses 178,161 2 48,295 - 226,458
Administrative and other
operating expenses 136,966 2,464 21,442 - 160,872
Investment expenses - - - 2,250 2,250
------------------------------------------------------
Expenses 1,116,557 29,792 315,916 2,250 1,464,515
------------------------------------------------------
------------------------------------------------------
Profit before tax 33,774 937 (1,400) 132,692 166,003
------------------------------------------------------
Rand thousands Commercial Risk Personal Investments Total
Restated Financing Restated Restated Restated
Restated
30/06/05
Gross insurance premium
revenue 1,248,448 79,556 386,714 - 1,714,718
Insurance premium ceded
to reinsurers 264,162 58,809 8,515 - 331,486
------------------------------------------------------
Net insurance premium
revenue 984,286 20,747 378,199 - 1,383,232
Change in provision for
unearned premium (14,966) 4,314 (662) - (11,314)
------------------------------------------------------
Net insurance premium
earned 969,320 25,061 377,537 - 1,371,918
Investment income - - - 86,386 86,386
Fair value adjustment on
trading investments - - - (928) (928)
Net realised gains on
disposal of investments - - - 40,875 40,875
------------------------------------------------------
Income 969,320 25,061 377,537 126,333 1,498,251
------------------------------------------------------
Net insurance claims 625,650 23,130 280,114 - 928,894
Acquisition expenses 150,138 (1,018) 58,986 - 208,106
Administrative and other
operating expenses 128,517 2,262 26,427 - 157,206
Investment expenses - - - 1,914 1,914
------------------------------------------------------
Expenses 904,305 24,374 365,527 1,914 1,296,120
------------------------------------------------------
------------------------------------------------------
Profit before tax 65,015 687 12,010 124,419 202,131
------------------------------------------------------
Rand thousands Commercial Risk Personal Investments Total
Financing
31/12/05
Gross insurance premium
revenue 2,433,181 230,596 845,894 - 3,509,671
Insurance premium ceded
to reinsurers 481,923 144,320 20,031 - 646,274
------------------------------------------------------
Net insurance premium
revenue 1,951,258 86,276 825,863 - 2,863,397
Change in provision for
unearned premium (34,709) (22,258) 395 - (56,572)
------------------------------------------------------
Net insurance premium
earned 1,916,549 64,018 826,258 - 2,806,825
Investment income - 6,087 - 169,325 175,412
Fair value adjustment on
trading investments - - - 5,138 5,138
Net realised gains on
disposal of investments - - - 172,932 172,932
------------------------------------------------------
Income 1,916,549 70,105 826,258 347,395 3,160,307
------------------------------------------------------
Net insurance claims 1,244,003 56,300 602,067 - 1,902,370
Acquisition expenses 295,512 1,140 129,030 - 425,682
Administrative and other
operating expenses 257,245 2,491 58,539 - 318,275
Investment expenses - - - 5,368 5,368
------------------------------------------------------
Expenses 1,796,760 59,931 789,636 5,368 2,651,695
------------------------------------------------------
------------------------------------------------------
Profit before tax 119,789 10,174 36,622 342,027 508,612
------------------------------------------------------
The segment assets and liabilities at 30 June 2006 are as follows:
Rand thousands Commercial Risk Personal Investments Total
Financing
Reinsurers" share of
provision for outstanding
claims 173,159 16,055 63,071 - 252,285
Reinsurers" share of
provision for unearned
premium 177,730 10,880 5,082 - 193,692
------------------------------------------------------
Technical assets 350,889 26,935 68,153 - 445,977
Deferred acquisition cost 65,383 3,995 23,126 - 92,504
Non-current assets - - - 640,857 640,857
Current assets, including
cash and cash equivalents - 407,515 - 2,395,608 2,803,123
------------------------------------------------------
Total assets 416,272 438,445 91,279 3,036,465 3,982,461
------------------------------------------------------
Provision for outstanding
claims 603,238 101,923 210,632 - 915,793
Provision for unearned
premium 640,846 26,635 111,448 - 778,929
------------------------------------------------------
Technical provisions 1,244,084 128,558 322,080 - 1,694,722
Reinsurers" share of
deferred acquisition cost 25,932 1,632 6,083 - 33,647
Non-current liabilities - - - 47,449 47,449
Other liabilities - 205,229 - 236,242 441,471
------------------------------------------------------
Total liabilities 1,270,016 335,419 328,163 283,691 2,217,289
------------------------------------------------------
The segment assets and liabilities at 30 June 2005 are as follows:
Rand thousands Commercial Risk Personal Investments Total
Restated Financing Restated Restated Restated
Restated
Reinsurers" share of
provision for outstanding
claims 183,334 11,720 83,594 - 278,648
Reinsurers" share of
provision for unearned
premium 159,007 25,427 4,862 - 189,296
------------------------------------------------------
Technical assets 342,341 37,147 88,456 - 467,944
Deferred acquisition cost 60,095 9,792 20,351 - 90,238
Non-current assets - - - 621,186 621,186
Current assets, including
cash and cash equivalents - 297,005 - 2,046,350 2,343,355
------------------------------------------------------
Total assets 402,436 343,944 108,807 2,667,536 3,522,723
------------------------------------------------------
Provision for outstanding
claims 586,617 25,253 264,178 - 876,048
Provision for unearned
premium 590,023 65,283 109,425 - 764,731
------------------------------------------------------
Technical provisions 1,176,640 90,536 373,603 - 1,640,779
Reinsurers" share of
deferred acquisition cost 27,665 3,814 729 - 32,208
Non-current liabilities - - - 42,338 42,338
Other liabilities - 130,155 - 258,753 388,908
------------------------------------------------------
Total liabilities 1,204,305 224,505 374,332 301,091 2,104,233
------------------------------------------------------
The segment assets and liabilities at 31 December 2005 are as follows:
Rand thousands Commercial Risk Personal Investments Total
Financing
Reinsurers" share of
provision for outstanding
claims 189,758 45,080 44,318 - 279,156
Reinsurers" share of
provision for unearned
premium 139,926 79,265 30,666 - 249,857
------------------------------------------------------
Technical assets 329,684 124,345 74,984 - 529,013
Deferred acquisition cost 85,676 28,427 20,097 - 134,200
Non-current assets - - - 633,669 633,669
Current assets, including
cash and cash equivalents - 210,496 - 2,349,823 2,560,319
------------------------------------------------------
Total assets 415,360 363,268 95,081 2,983,492 3,857,201
------------------------------------------------------
Provision for outstanding
claims 644,824 61,588 148,556 - 854,968
Provision for unearned
premium 579,168 175,574 115,122 -
869,864
------------------------------------------------------
Technical provisions 1,223,992 237,162 263,678 - 1,724,832
Reinsurers" share of
deferred acquisition cost 25,932 14,723 6,083 - 46,738
Non-current liabilities - - - 56,032 56,032
Other liabilities - 5,535 - 508,968 514,503
------------------------------------------------------
Total liabilities 1,249,924 257,420 269,761 565,000 2,342,105
------------------------------------------------------
5.2 Geographical segments
Rand thousands South Africa Foreign Total
subsidiaries
30/06/06
Gross insurance premium revenue 1,780,100 125,752 1,905,852
Total assets 3,470,138 512,323 3,982,461
Total liabilities 1,943,577 332,569 2,276,146
Profit before tax 138,251 27,752 166,003
Rand thousands South Africa Foreign Total
Restated subsidiaries Restated
30/06/05
Gross insurance premium revenue 1,563,464 151,254 1,714,718
Total assets 3,215,938 306,785 3,522,723
Total liabilities 1,837,230 325,033 2,162,263
Profit before tax 177,055 25,076 202,131
Rand thousands South Africa Foreign Total
subsidiaries
31/12/05
Gross insurance premium revenue 3,293,113 216,558
3,509,671
Total assets 3,695,791 161,410 3,857,201
Total liabilities 2,263,465 78,640 2,342,105
Profit before tax 477,302 31,310 508,612
Auditors
The Company"s external auditors, PricewaterhouseCoopers Inc, have reviewed the
interim financial announcement. A copy of their review opinion is available on
request at the Company"s registered office.
Transfer Secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
Johannesburg, 2001
Registered office
South African Eagle Insurance Company Limited
Registration number 1965/006764/06
SA Eagle House
The Braes
193 Bryanston Drive
Bryanston, 2021
Sponsor
RAND MERCHANT BANK,
(A division of FirstRand Bank Limited)
Date: 30/08/2006 04:30:25 PM Produced by the JSE SENS Department
