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SAE
SAE
SAE - SA Eagle - Reviewed Group results and dividend declaration for the year
ended 31 December 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")
Announcement of the reviewed Group results and dividend declaration
for the year ended 31 December 2006
Rand thousands 2006 2005 % Change
CONDENSED INCOME STATEMENT
Insurance premium revenue 3,910,639 3,509,671 11.4%
Insurance premium ceded to reinsurers 735,513 646,274
---------------------
Net insurance premium 3,175,126 2,863,397
---------------------
Net insurance premium revenue 3,115,547 2,812,112 10.8%
Reinsurance commission earned 138,032 116,617 18.4%
Pension fund surplus 230,764 -
Investment income 202,224 136,033 48.7%
Net fair value (loss)/gain on assets
held at fair value through income (18,962) 53,297
Net realised gains on financial assets -
available-for-sale 71,334 164,152 (56.5%)
---------------------
Income 3,738,939 3,282,211 13.9%
---------------------
Net insurance claims 2,256,842 1,902,370 18.6%
Gross acquisition costs 609,307 542,299 12.4%
Administrative and other operating
expenses 435,152 318,275 36.7%
Investment expenses 3,594 5,368
Primary policyholders` interest - 5,287
---------------------
Expenses 3,304,895 2,773,599 19.2%
---------------------
Profit before tax 434,044 508,612 (14.7%)
Income tax expense 107,162 118,388 (9.5%)
---------------------
Profit after tax 326,882 390,224 (16.2%)
Minority interest 6,302 1,094
---------------------
Net profit attributable to members of
the Company 320,580 389,130 (17.6%)
--------------------
CONDENSED BALANCE SHEET
Assets
Property and equipment 68,476 55,104
Investments 1,071,347 1,001,136 7.0%
Intangible insurance assets - deferred
acquisition costs 98,736 134,200
Retirement benefit fund surplus 230,764 -
Technical assets 605,614 529,013 14.5%
Current assets 1,048,678 1,120,220 (6.4%)
Cash and cash equivalents 1,482,314 1,017,528 45.7%
---------------------
Total assets 4,605,929 3,857,201 19.4%
---------------------
Equity and liabilities
Shareholders` equity 1,758,933 1,511,949 16.3%
Minority shareholders` interest in
subsidiaries 13,043 3,147
Employee benefit costs 179,924 43,069
Reinsurers` share of deferred acquisition
costs 34,270 46,738
Deferred tax liabilities 99,451 12,963
Technical provisions 1,910,234 1,724,832 10.7%
Other liabilities 610,074 514,503 18.6%
---------------------
Total equity and liabilities 4,605,929 3,857,201
---------------------
CONDENSED STATEMENT OF CHANGES IN EQUITY
Balance at beginning of year 1,511,949 1,492,277
Net gains on available-for-sale financial
assets transferred to income on disposal (66,473) (179,711)
Revaluation of investments 131,231 188,377
Translation of foreign subsidiaries (38,481) (16,392)
Net profit for the year 320,580 389,130
Dividends paid (99,873) (361,732)
---------------------
Balance at end of year 1,758,933 1,511,949
---------------------
CONDENSED CASH FLOW STATEMENT
Cash flows from operating activities 498,275 143,312
---------------------
- Cash generated from operations 230,214 187,269
- Net increase/(decrease) in working capital 146,711 (71,658)
- Dividends, interest and rental received 193,552 164,737
- Taxation paid (72,202) (137,036)
---------------------
Dividends paid (99,873) (361,732)
Cash flows from investing activities 66,384 87,736
---------------------
Net increase/(decrease) in cash and
cash equivalents 464,786 (130,684)
Cash and cash equivalents at beginning
of year 1,017,528 1,148,212
---------------------
Cash and cash equivalents at end of year 1,482,314 1,017,528
---------------------
NOTES
1. Accounting policies
The condensed financial statements have been prepared in accordance with
International Financial Reporting Standards and the accounting policies are
consistent with those applied in the previous financial period.
Rand thousands 2006 2005 % Change
2. Financial highlights
Net profit attributable to members of the
Company 320,580 389,130 (17.6%)
After-tax adjustment for:
Net realised surplus on disposal of
investments and property and equipment (58,539) (153,654)
-----------------------
Headline earnings 262,041 235,476 11.3%
-----------------------
Headline earnings per share (cents) 2,151.5 1,933.4 11.3%
Earnings per share (cents) 2,632.1 3,195.0 (17.6%)
Ordinary dividends declared per share (cents) 650 800 (18.8%)
Dividends paid per share (cents) 820 2,970 (72.4%)
Number of shares in issue 12,179,500 12,179,500
Net asset value per share (cents) 14,441.8 12,413.9 16.3%
Solvency margin (%) 55.8% 52.9% 5.5%
Combined ratio (%) * 97.3% 94.3% 3.2%
Return on average equity (%) 19.6% 25.9% (24.3%)
* The Group offered the members of the Group Pension Fund the option to convert
from a defined benefit fund to a defined contribution fund. The Group has
proposed an incentive to the members of the pension fund to take up this option.
The actuarial estimate of the incentive costs is R132.5 million. For 2006, the
combined ratio excludes these estimated costs. If these costs were to be
included in the combined ratio, the ratio would be 101.5%.
3. Segmental analysis
3.1 Business segments
The segment results for the year ended 31 December 2006 are as follows:
Rand thousands Fire Motor Engineering Total
c/fwd
2006
Insurance premium revenue 711,392 1,835,352 349,214 2,895,958
Insurance premium ceded to
reinsurers (399,066) (94,051) (71,226) (564,343)
---------------------------------------------------
Net insurance premium 312,326 1,741,301 277,988 2,331,615
---------------------------------------------------
Net insurance premium
revenue 307,849 1,714,694 267,982 2,290,525
Reinsurance commission
earned 70,178 14,877 22,304 107,359
Pension fund surplus - - - -
Investment income - - - -
Net fair value loss on assets
held at fair value through income - - - -
Net realised gains on financial
assets - available-for-sale - - - -
---------------------------------------------------
Income 378,027 1,729,571 290,286 2,397,884
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2006 continued
Insurance premium revenue 2,895,958 143,715 870,966 3,910,639
Insurance premium ceded
to reinsurers (564,343) (60,131) (111,039) (735,513)
---------------------------------------------------
Net insurance premium 2,331,615 83,584 759,927 3,175,126
---------------------------------------------------
Net insurance premium
revenue 2,290,525 83,211 741,811 3,115,547
Reinsurance commission
earned 107,359 9,334 21,339 138,032
Pension fund surplus - - - -
Investment income - - - -
Net fair value loss on assets
held at fair value through income - - - -
Net realised gains on financial
assets - available-for-sale - - - -
---------------------------------------------------
Income 2,397,884 92,545 763,150 3,253,579
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2006 continued
Insurance premium revenue 3,910,639 - 3,910,639
Insurance premium ceded
to reinsurers (735,513) - (735,513)
-------------------------------------
Net insurance premium 3,175,126 - 3,175,126
-------------------------------------
Net insurance premium
revenue 3,115,547 - 3,115,547
Reinsurance commission
earned 138,032 - 138,032
Pension fund surplus - 230,764 230,764
Investment income - 202,224 202,224
Net fair value loss on assets
held at fair value through income - (18,962) (18,962)
Net realised gains on financial
assets - available-for-sale - 71,334 71,334
-------------------------------------
Income 3,253,579 485,360 3,738,939
-------------------------------------
Rand thousands Fire Motor Engineering Total
c/fwd
2006 continued
Net insurance claims 221,944 1,398,781 147,239 1,767,964
Gross acquisition costs 127,316 230,692 63,367
421,375
Administrative and other
operating expenses 51,111 150,840 28,048 229,999
Investment expenses - - - -
---------------------------------------------------
Expenses 400,371 1,780,313 238,654 2,419,338
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2006 continued
Net insurance claims 1,767,964 40,369 448,509 2,256,842
Gross acquisition costs 421,375 24,893 163,039 609,307
Administrative and other
operating expenses 229,999 8,802 63,830 302,631
Investment expenses - - - -
---------------------------------------------------
Expenses 2,419,338 74,064 675,378 3,168,780
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2006 continued
Net insurance claims 2,256,842 - 2,256,842
Gross acquisition costs 609,307 - 609,307
Administrative and other
operating expenses 302,631 132,521 435,152
Investment expenses - 3,594 3,594
-------------------------------------
Expenses 3,168,780 136,115 3,304,895
-------------------------------------
Rand thousands Fire Motor Engineering Total
c/fwd
2006 continued
---------------------------------------------------
Results from operating
activities (22,344) (50,742) 51,632 (21,454)
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2006 continued
---------------------------------------------------
Results from operating
activities (21,454) 18,481 87,772 84,799
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2006 continued
-------------------------------------
Results from operating
activities 84,799 349,245 434,044
-------------------------------------
The segment results for the year ended 31 December 2005 are as follows:
Rand thousands Fire Motor Engineering Total
c/fwd
2005
Insurance premium revenue 643,310 1,645,041 290,619 2,578,970
Insurance premium ceded to
reinsurers (350,619) (87,152) (51,009) (488,780)
---------------------------------------------------
Net insurance premium 292,691 1,557,889 239,610 2,090,190
---------------------------------------------------
Net insurance premium
revenue 285,123 1,539,237 237,492 2,061,852
Reinsurance commission earned 61,075 11,825 11,937 84,837
Investment income - - - -
Net fair value gains on assets
at fair value through income - - - -
Net realised gains on financial
assets - available-for-sale - - - -
---------------------------------------------------
Income 346,198 1,551,062 249,429 2,146,689
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2005
Insurance premium revenue 2,578,970 123,628 807,073 3,509,671
Insurance premium ceded to
reinsurers (488,780) (46,746) (110,748) (646,274)
---------------------------------------------------
Net insurance premium 2,090,190 76,882 696,325 2,863,397
---------------------------------------------------
Net insurance premium
revenue 2,061,852 72,135 678,125 2,812,112
Reinsurance commission
earned 84,837 7,537 24,243 116,617
Investment income - - - -
Net fair value gains on
assets at fair value
through income - - - -
Net realised gains on
financial assets -
available-for-sale - - - -
---------------------------------------------------
Income 2,146,689 79,672 702,368 2,928,729
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2005 continued
Insurance premium revenue 3,509,671 - 3,509,671
Insurance premium ceded to
reinsurers (646,274) - (646,274)
-------------------------------------
Net insurance premium 2,863,397 - 2,863,397
-------------------------------------
Net insurance premium
revenue 2,812,112 - 2,812,112
Reinsurance commission
earned 116,617 - 116,617
Investment income - 136,033 136,033
Net fair value gains on
assets at fair value
through income - 53,297 53,297
Net realised gains on
financial assets -
available-for-sale - 164,152 164,152
-------------------------------------
Income 2,928,729 353,482 3,282,211
-------------------------------------
Rand thousands Fire Motor Engineering Total
c/fwd
2005 continued
Net insurance claims 209,200 1,167,473 109,789 1,486,462
Gross acquisition costs 115,886 205,171 52,841 373,898
Administrative and other
operating expenses 55,625 159,577 28,393 243,595
Investment expenses - - - -
---------------------------------------------------
Expenses 380,711 1,532,221 191,023 2,103,955
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2005 continued
Net insurance claims 1,486,462 33,676 382,232 1,902,370
Gross acquisition costs 373,898 19,878 148,523 542,299
Administrative and other
operating expenses 243,595 8,888 71,079 323,562
Investment expenses - - - -
---------------------------------------------------
Expenses 2,103,955 62,442 601,834 2,768,231
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2005 continued
Net insurance claims 1,902,370 - 1,902,370
Gross acquisition costs 542,299 - 542,299
Administrative and other
operating expenses 323,562 - 323,562
Investment expenses - 5,368 5,368
-------------------------------------
Expenses 2,768,231 5,368 2,773,599
-------------------------------------
Rand thousands Fire Motor Engineering Total
c/fwd
2005 continued
---------------------------------------------------
Results from operating
activities (34,513) 18,841 58,406 42,734
---------------------------------------------------
Rand thousands Total Marine Accident Total
c/fwd and Aviation c/fwd
2005 continued
---------------------------------------------------
Results from operating
activities 42,734 17,230 100,534 160,498
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2005 continued
-------------------------------------
Results from operating
activities 160,498 348,114 508,612
-------------------------------------
The segment assets, equity and liabilities at 31 December 2006 are as follows:
Rand thousands Fire Motor Engineering Total
c/fwd
2006
Assets
Technical assets 437,877 33,132 65,511 536,520
Intangible insurance assets -
deferred acquisition costs 17,961 46,339 8,817 73,117
Current assets 163,003 420,538 80,016 663,557
Non-current assets - - - -
Investments - - - -
Cash and cash equivalents - - - -
---------------------------------------------------
Total assets 618,841 500,009 154,344 1,273,194
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2006 continued
Assets
Technical assets 536,520 22,206 46,888 605,614
Intangible insurance assets -
deferred acquisition costs 73,117 3,629 21,990 98,736
Current assets 663,557 32,930 199,566 896,053
Non-current assets - - - -
Investments - - - -
Cash and cash equivalents - - - -
---------------------------------------------------
Total assets 1,273,194 58,765 268,444 1,600,403
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2006 continued
Assets
Technical assets 605,614 - 605,614
Intangible insurance assets -
deferred acquisition costs 98,736 - 98,736
Current assets 896,053 152,625 1,048,678
Non-current assets - 299,240 299,240
Investments - 1,071,347 1,071,347
Cash and cash equivalents - 1,482,314 1,482,314
-------------------------------------
Total assets 1,600,403 3,005,526 4,605,929
-------------------------------------
Rand thousands Fire Motor Engineering Total
c/fwd
2006 continued
Equity and liabilities
Shareholders` equity - - - -
Minority shareholders` interest
in subsidiaries - - - -
Technical provisions 577,076 672,130 187,930 1,437,136
Reinsurers` share of deferred
acquisition costs 18,594 4,382 3,319 26,295
Other liabilities 22,045 56,876 10,822 89,743
Non-current liabilities - - - -
---------------------------------------------------
Total equity and liabilities 617,715 733,388 202,071 1,553,174
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2006 continued
Equity and liabilities
Shareholders` equity - - - -
Minority sharehodlers` - - - -
interest in subsidiaries
Technical provisions 1,437,136 93,734 379,364 1,910,234
Reinsurers` share of
deferred acquisition costs 26,295 2,802 5,173 34,270
Other liabilities 89,743 4,454 26,990 121,187
Non-current liabilities - - - -
---------------------------------------------------
Total equity and liabilities 1,553,174 100,990 411,527 2,065,691
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2006 continued
Equity and liabilities
Shareholders` equity - 1,758,933 1,758,933
Minority sharehodlers`
interest in subsidiaries - 13,043 13,043
Technical provisions 1,910,234 - 1,910,234
Reinsurers` share of
deferred acquisition costs 34,270 - 34,270
Other liabilities 121,187 488,887 610,074
Non-current liabilities - 279,375 279,375
-------------------------------------
Total equity and liabilities 2,065,691 2,540,238 4,605,929
-------------------------------------
The segment assets and liabilities at 31 December 2005 are as follows:
Rand thousands Fire Motor Engineering Total
c/fwd
2005
Assets
Technical assets 398,152 28,863 43,135 470,150
Intangible insurance assets -
deferred acquisition costs 24,598 62,902 11,112 98,612
Current assets 159,754 408,515 72,170 640,439
Non-current assets - - - -
Investments - - - -
Cash and cash equivalents - - - -
---------------------------------------------------
Total assets 582,504 500,280 126,417 1,209,201
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2005
Assets
Technical assets 470,150 16,365 42,498 529,013
Intangible insurance assets -
deferred acquisition costs 98,612 4,727 30,861 134,200
Current assets 640,439 30,701 200,421 871,561
Non-current assets - - - -
Investments - - - -
Cash and cash equivalents - - - -
---------------------------------------------------
Total assets 1,209,201 51,793 273,780 1,534,774
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2005
Assets
Technical assets 529,013 - 529,013
Intangible insurance assets -
deferred acquisition costs 134,200 - 134,200
Current assets 871,561 248,659 1,120,220
Non-current assets - 55,104 55,104
Investments - 1,001,136 1,001,136
Cash and cash equivalents - 1,017,528 1,017,528
------------------------------------
Total assets 1,534,774 2,322,427 3,857,201
------------------------------------
Rand thousands Fire Motor Engineering Total
c/fwd
2005
Equity and liabilities
Shareholders` equity - - - -
Minority shareholders`
interest in subsidiaries - - - -
Technical provisions 491,073 637,322 162,753 1,291,148
Reinsurers` share of deferred
acquisition cost 25,356 6,303 3,689 35,348
Other liabilities 21,419 54,771 9,676 85,866
Non-current liabilities - - - -
---------------------------------------------------
Total equity and liabilities 537,848 698,396 176,118 1,412,362
---------------------------------------------------
Rand thousands Total Marine Accident Total
b/fwd and Aviation c/fwd
2005 continued
Equity and liabilities
Shareholders` equity - - - -
Minority shareholders`
interest in subsidiaries - - - -
Technical provisions 1,291,148 82,205 351,479 1,724,832
Reinsurers` share of deferred
acquisition cost 35,348 3,381 8,009 46,738
Other liabilities 85,866 4,116 26,871 116,853
Non-current liabilities - - - -
---------------------------------------------------
Total equity and liabilities 1,412,362 89,702 386,359 1,888,423
---------------------------------------------------
Rand thousands Total Other Total
b/fwd
2005 continued
Equity and liabilities
Shareholders` equity - 1,511,949 1,511,949
Minority shareholders`
interest in subsidiaries - 3,147 3,147
Technical provisions 1,724,832 - 1,724,832
Reinsurers` share of deferred
acquisition cost 46,738 - 46,738
Other liabilities 116,853 397,650 514,503
Non-current liabilities - 56,032 56,032
-------------------------------------
Total equity and liabilities 1,888,423 1,968,778 3,857,201
-------------------------------------
3.2 Geographical segments
The foreign subsidiaries relate to the operations in Botswana and Zimbabwe.
Rand thousands South Africa Foreign Total
subsidiaries
2006
Insurance premium revenue 3,701,583 209,056 3,910,639
Total assets 4,296,070 309,859 4,605,929
Total liabilities 2,653,636 180,317 2,833,953
Total capital expenditure 29,785 1,165 30,950
Profit before tax 389,253 44,791 434,044
Rand thousands South Africa Foreign Total
subsidiaries
2005
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
Total capital expenditure 21,901 444 22,345
Profit before tax 477,302 31,310 508,612
COMMENTARY
The financial results declined in line with market expectations, mainly as a
result of weakened underwriting performance. Earnings per share decreased by
17.6% and headline earnings per share (which excludes realised gains on
investments and property and equipment) increased by 11.3%. The headline
earnings per share includes the income on the net pension fund surplus of R98
million and the tax effect thereon of R28 million. If these amounts were
excluded the headline earnings per share would decrease by 18.3%.
The underwriting result has been significantly influenced by an increase in the
number of claims and the escalation in the claims value across all classes of
business. The result has been further influenced by adverse weather conditions,
especially in the Eastern and Western Cape.
The motor account, in particular, has been negatively impacted by an increase in
the incidence of vehicle accidents and hijackings. Motor repair costs continue
to escalate largely as a result of the increasing number of imported vehicles.
Continuous corrective action is being taken to address the profitability of this
account, including the implementation of a new rating formula resulting in
better risk selection and more appropriate pricing.
Insurance premium revenue grew by 11.4% despite a competitive market. The
Group continues to focus on selective growth whilst managing overall
profitability.
Investment returns for the year were highly satisfactory. Dividend income
increased as a result of special dividends from listed equities. Investment
income also increased in line with higher interest rates and improved cash flow.
The solvency margin improved to 55.8% (2005: 52.9%), which is above the Group
stated policy of between 40% and 50%.
The net asset value per share increased by 16.3% to 14,441.8 cents per share
(2005: 12,413.9 cents per share).
The Directors have declared a final dividend of 430 cents per share bringing the
total normal dividend for the year to 650 cents per share.
Given the current difficult underwriting climate, the Group will continue to
implement corrective actions such as strict underwriting principles and strong
claims management in order to deliver a satisfactory result going forward.
DIVIDEND DECLARATION NO. 71
1. The Directors have declared a final dividend for 2006 of 430 cents per share
(2005: 600 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,
29 March 2007
Shares commence trading ex the dividend from the commencement of business
on: Friday, 30 March 2007
Record date: Thursday, 5 April 2007
Payment date: Tuesday, 10 April 2007
Shareholders may not dematerialise or rematerialise their holdings of shares
in the Company between Friday, 30 March 2007 and Thursday 5 April 2007, both
days inclusive.
23 February 2007
By order of the Board.
Bryanston
Board of Directors
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
Auditors
The Company`s external auditors, PricewaterhouseCoopers Inc, have reviewed the
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
Group Company Secretary and Registered Office
TA Pitman
South African Eagle Insurance Company Limited
Registration number 1965/006764/06
SA Eagle House
The Braes
193 Bryanston Drive
Bryanston, 2021
(PO Box 61489, Marshalltown, 2107)
Sponsor
RAND MERCHANT BANK,
(A division of FirstRand Bank Limited)
Date: 26/02/2007 17:42:57 Produced by the JSE SENS Department.
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