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SNT - Santam Limited - Audited abridged financial report for the year ended 31
December 2011
Santam Limited and its subsidiaries
(Incorporated in the Republic of South Africa)
Registration number 1918/001680/06
ISIN ZAE000093779
JSE share code: SNT
NSX share code: SNM
Santam Limited and its subsidiaries
Audited abridged financial report for the year ended 31 December 2011
- Weighted average return on shareholders` funds of 25%
- Net underwriting margin of 7.7% and net insurance margin of 10.4%
- Growth of 12% in gross written premiums
- Group solvency ratio at 48%
- Headline earnings per share of 1 216 cents compared to 1 367 cents in the
prior year
- Dividend growth of 8.8% and special dividend of 850 cents per share declared
Financial review
The Santam group achieved excellent underwriting results in 2011, while also
achieving double-digit growth in gross written premiums of 12%. Underwriting
results were almost on par with the outstanding results achieved in 2010.
However, compared to 2010, investment results were negatively impacted by the
low fair value movements on listed equities. This resulted in headline
earnings decreasing by 11%. The solvency margin increased to 48% (2010: 45%).
A solid 25% return on average shareholders` funds was achieved.
The 2011 net underwriting result of R1 131 million was 1% less than the
excellent result achieved in 2010, with an overall net underwriting margin of
7.7% compared to 8.5% in 2010. Margins in most of the significant business
classes were satisfactory, with the motor book performing exceptionally well.
The underwriting profit realised by the crop business was favourable compared
to the loss-making position of 2010. The property book performed well due to a
limited impact from large industrial and fire-related claims on our net
underwriting account. Improved management practices in the portfolio
administration business continued delivering good underwriting results.
Underwriting profits of the liability class was on lower levels in 2011 than
the exceptional levels achieved in 2010 due to a few large claim estimate
increases during the year. The alternative risk transfer class suffered a loss
due to a large single loss on medical cover business that was subsequently
cancelled. In general, lower average claims cost and our continuous focus on
risk management improved the quality and diversity of the risk pool, impacting
underwriting margins positively.
The fundamentals of the insurance industry saw some improvement in 2011. This,
together with a concerted effort to drive profitable growth and the successful
implementation of strategic growth initiatives such as the diversification of
distribution channels and continued improvements to support existing channels,
resulted in the achievement of excellent growth of 12% in gross written
premium, 10% excluding cell business. Positive growth was achieved across all
significant insurance classes.
The net acquisition cost ratio of 28.1% increased from 27.4% in 2010. The
increase can be ascribed to the increase in spend on strategic initiatives,
including the ongoing investment in MiWay and re-engineering activities. The
aim is to manage the acquisition cost ratio down to 26% in the medium to long
term but taking cognisance of our business composition and structural changes
in the industry.
Investment returns on insurance funds of R388 million decreased from the R395
million earned in 2010, mainly due to lower interest rates.
The combined effect of insurance activities resulted in a net insurance income
of R1 519 million or a 10.4% margin, compared to R1 542 million and a margin
of 11.4% in 2010.
Performance of the investment portfolio was under pressure due to the
volatility of the equity markets resulting in significantly lower income from
fair value movements in 2011 compared to 2010. Dividend income was 27% higher
than for 2010, while interest income was negatively affected by reduced
interest rates. Reported investment results benefited from the fence
structures which generated a credit of R80 million for the year. These
structures were unwound during July and August at no cost to the company.
Santam`s investment portfolio performance compared favourably to the
benchmarks set in the investment mandates.
The weakening of the rand during 2011 had a positive impact of R90 million on
the valuations of the foreign currency assets held by our local operations.
Net earnings from associated companies of R85 million increased from R69
million in 2010. This was as a direct result of improved earnings of key
associates Credit Guarantee Insurance Corporation of Africa Ltd and NICO
Holdings Ltd in Malawi.
At 31 December 2011, the group`s international solvency ratio of 48% was
higher than the long-term target range of between 35% and 45%. Santam`s
capital management philosophy is to maximise the return on shareholders`
capital within an appropriate risk framework. Given our strong solvency margin
and the stabilisation of the investment markets, the board decided to declare
a special dividend of 850 cents per share. This will be the fifth special
dividend paid by Santam since 2004 and will bring the total special dividend
per share declared over this period to R52.00.
On 1 March 2011, Santam acquired 55% of the voting equity in Mirabilis
Engineering Underwriting Managers (Pty) Ltd (Mirabilis) by merging its
construction and engineering business into Mirabilis. The new merged entity is
the leading engineering underwriting manager in the South African market.
Following the increase in shareholding in MiWay Group Holdings (Pty) Ltd from
31.25% to 100% in 2010, the deferred purchase consideration on this
transaction was settled in cash during 2011.
The board would like to extend its gratitude to Santam`s management,
employees, intermediaries and other business partners for their efforts and
contributions during the past year.
Prospects
It is expected that the South African economy will grow by somewhat less than
the forecasted 3% worldwide growth in gross domestic product in 2012. Headline
inflation is expected to average around 6% for 2012 which could lead to
improved average premium levels. However, competition in the market will
continue putting pressure on premium rates and prevent across-the-board
premium increases. Santam is positioned to manage increases selectively
through our market and risk segmentation approach.
The weakening of the rand during the course of 2011 is expected to put some
upward pressure on claims cost, most notably on the cost of motor vehicle
repairs due to the increased cost of imported vehicle parts. However, we are
optimistic that our continued efforts to reduce claims cost would offset some
of the impact of the upwards cost pressure. It is expected though that the
underwriting margin in 2012 may be lower than the levels achieved in 2011.
Nominal interest rates are expected to remain on current levels during 2012 if
the rand remains around its current level. Therefore, interest received is not
expected to be higher in 2012 implying a flat return on insurance funds for
2012 compared to 2011. Uncertainty remains in the investment markets due to
the impact of the instability in Europe. On the back of the assumption that
the European economy will not deteriorate significantly but rather faces a
very slow, long-term recovery, it is expected that investment markets should
be more stable in 2012 compared to 2011.
Events after the reporting period
The Minister of Finance, in his budget speech of 22 February 2012, announced
that the capital gains tax (CGT) inclusion rate for companies will be
increased with effect from 1 March 2012 from 50% to 66.6% (effective CGT rate
from 14% to 18.6%). The increase will have an impact on the taxation of
Santam`s gains and losses on financial assets, effectively increasing the tax
rate from 1 March 2012.
Declaration of dividend (Number 116)
Notice is hereby given that the board has declared a final dividend of 355
cents per share (2010: 325 cents) and a special dividend of 850 cents per
share (2010: 500 cents). Shareholders are advised that the last day to trade
"cum dividend" will be Thursday, 15 March 2012. The shares will trade "ex
dividend" from the commencement of business on Friday, 16 March 2012. The
record date will be Friday, 23 March 2012, and the payment date will be
Monday, 26 March 2012. Certificated shareholders may not dematerialise or
rematerialise their shares between 16 March 2012 and 23 March 2012, both dates
inclusive.
Preparation and presentation of the financial statements
The preparation of the audited financial statements was supervised by the
financial director of Santam Ltd, MJ Reyneke.
Auditors` report
The company`s external auditors, PricewaterhouseCoopers Inc, have audited the
abridged financial report. A copy of their unqualified audit opinion is
available on request at the company`s registered office.
On behalf of the board
VP Khanyile IM Kirk
Chairman Chief Executive Officer
28 February 2012
Consolidated statement of financial position
Audited Audited
At At
31 December 31 December
2011 2010
Notes R million R million
Assets
Non-current assets
Property and equipment 80 88
Intangible assets 994 988
Deferred income tax 207 251
Investments in associates 274 211
Financial assets - at fair
value
through income
Equity securities 6 3 856 3 832
Debt securities 6 6 160 4 246
Derivatives 6 1 -
Financial assets - at
amortised cost
Cell owners` interest 40 12
Reinsurance assets 7 244 315
Current assets
Financial assets - at fair
value
through income
Short-term money market 6 1 775 3 685
instruments
Reinsurance assets 7 1 256 952
Deferred acquisition costs 332 251
Loans and receivables
including
insurance receivables 6 1 836 1 735
Income tax assets 36 26
Cash and cash equivalents 1 598 1 143
Total assets 18 689 17 735
Equity
Capital and reserves
attributable to the
company`s equity holders
Share capital 107 107
Treasury shares (635) (651)
Other reserves 1 492 1 265
Distributable reserves 5 072 4 405
6 036 5 126
Non-controlling interest 105 93
Total equity 6 141 5 219
Liabilities
Non-current liabilities
Deferred income tax 115 269
Financial liabilities - at
fair value
through income
Debt securities 6 964 925
Derivatives 6 - 1
Financial liabilities - at
amortised cost
Cell owners` interest 643 589
Collateral guarantee - -
contracts
Insurance liabilities 7 1 404 1 323
Provisions for other
liabilities
and charges 1 3
Current liabilities
Financial liabilities - at
fair value
through income
Debt securities 6 24 24
Investment contracts 6 104 495
Derivatives 6 - 74
Financial liabilities - at
amortised
Cost
Collateral guarantee 114 108
contracts
Insurance liabilities 7 7 071 6 440
Deferred reinsurance
acquisition
Revenue 102 40
Provisions for other
liabilities
and charges 105 33
Trade and other payables 1 828 1 890
Current income tax 73 302
liabilities
Total liabilities 12 548 12 516
Total shareholders` equity
and liabilities 18 689 17 735
Consolidated statement of comprehensive
income
Audited Audited
Year ended Year %
31 December ended 31 Change
2011 December
2010
Notes R million R
million
Gross written premium 17 707 15 855 12%
Less: Reinsurance premium 3 033 2 336
Net premium 14 674 13 519 9%
Change in unearned premium
Gross amount 241 (65)
Reinsurers` share (219) 34
Net insurance premium revenue 14 652 13 550 8%
Investment income 8 676 633 7%
Income from reinsurance
contracts ceded 321 236
Net gains on financial assets
and liabilities at fair
value
through income 8 189 537
Gain on remeasuring existing
interest in associates on
Acquisition - 215
Excess of interest in the net
fair
value of acquiree`s
identifiable
assets, liabilities and
contingent liabilities over - 6
cost
Net income 15 838 15 177 4%
Insurance claims and loss
adjustment expenses 10 788 9 531
Insurance claims and loss
adjustment expenses
recovered
from reinsurers (1 384) (848)
Net insurance benefits and 9 404 8 683 8%
claims
Expenses for the acquisition
of
insurance contracts 2 324 2 311
Expenses for marketing and
Administration 2 114 1 648
Expenses for asset management
services rendered 28 29
Amortisation of intangible 68 27
assets
Impairment of investment in
Subsidiaries - -
Expenses 13 938 12 698 10%
Results of operating 1 900 2 479 (23%)
activities
Finance costs (94) (120)
Share of profit of
associates 85 63
Impairment charge on net
investment in associate - 6
Profit before tax 1 891 2 428 (22%)
Income tax expense 9 (486) (639)
Profit for the year 1 405 1 789 (21%)
Other comprehensive income
Currency translation 108 (72)
differences
Total comprehensive income for
the year 1 513 1 717
Profit attributable to:
- equity holders of the 1 376 1 762
company
- non-controlling interest 29 27
1 405 1 789
Total comprehensive income
attributable to:
- equity holders of the 1 484 1 690
company
- non-controlling interest 29 27
1 513 1 717
Earnings attributable to
equity shareholders
Earnings per share (cents) 12
Basic earnings per share 1 216 1 560 (22%)
Diluted earnings per share 1 202 1 532 (22%)
Weighted average number of
shares - millions 113.15 112.96
Weighted average number of
ordinary shares for diluted
earnings per share - 114.47 114.99
millions
Consolidated statement of changes in
equity
Attributable to equity holders of the Non- Total
company control-
ling
interes
t
Share Treasury Other Distribu-
capita shares reserves table
l reserves
R R R R R R
millio million million million million million
n
Balance as at
1 January 2010 107 (660) 1 268 3 813 144 4 672
Profit for the year - - - 1 762 27 1 789
Other comprehensive
income:
Currency
Translation
Differences - - (72) - - (72)
Total comprehensive
income for the
year ended
31 December 2010 - - (72) 1 762 27 1 717
Purchase of treasury
Shares - (34) - - - (34)
Sale of treasury
Shares - 43 - - - 43
Loss on sale of
treasury shares - - - (34) - (34)
Transfer to reserves - - 69 (69) - -
Share-based payments - - - 58 - 58
Dividends paid - - - (1 113) - (1 113)
Excess paid on
acquisition of
non-controlling
Interest - - - (12) - (12)
Interest acquired
from non-
Controlling
Interest - - - - (78) (78)
Balance as at
31 December 2010 107 (651) 1 265 4 405 93 5 219
Profit for the year - - - 1 376 29 1 405
Other comprehensive
income: -
Currency
Translation
Differences - - 108 - - 108
Total comprehensive
income for the
year ended
31 December 2011 - - 108 1 376 29 1 513
Purchase of treasury
Shares - (37) - - - (37)
Sale of treasury
Shares - 53 - - - 53
Loss on sale of
treasury shares - - - (68) - (68)
Transfer to reserves - - 119 (119) - -
Share-based payments - - - 63 - 63
Transfer to share-
based payment
Liability - - - (30) - (30)
Dividends paid - - - (593) (25) (618)
Net excess received
on acquisition of
non-controlling
Interest - - - 38 - 38
Interest acquired
from non-
Controlling
Interest - - - - 8 8
Balance as at
31 December 2011 107 (635) 1 492 5 072 105 6 141
Consolidated statement of cash flows
Audited Audited
Year ended Year ended
31 December 31 December
2011 2010
Notes R million R million
Cash generated from operations 2 522 2 115
Interest paid (119) (95)
Income tax paid (813) (755)
Net cash from operating 1 590 1 265
activities
Cash flows from investing
activities
Cash generated/(utilised) in
investment activities 201 (270)
Acquisition of subsidiary 10 (343) (357)
Cash acquired through purchase of
Subsidiary 10 3 262
Purchases of equipment (39) (26)
Purchases of software (28) (1)
Proceeds from sale of equipment 1 -
Acquisition of associated - (17)
companies
Net cash from investing (205) (409)
activities
Cash flows from financing
activities
Purchase of treasury shares (37) (34)
Proceeds on sale of treasury 4 11
shares
(Decrease)/increase in investment
contract
Liabilities (413) 129
Dividends paid to company`s
Shareholders (593) (1 113)
Dividends paid to minorities (25) -
Increase in cell owners` interest 26 42
Purchase of subsidiary from
non-controlling interest 11 - (90)
Net cash used in financing (1 038) (1 055)
activities
Net increase/ (decrease) in cash 347 (199)
and cash equivalents
Cash and cash equivalents at
beginning of year 1 143 1 379
Exchange gains/(losses)on cash
and cash equivalents 108 (37)
Cash and cash equivalents at
end of year 1 598 1 143
Notes to the financial information
1. Basis of presentation
This abridged consolidated financial
information for the year ended 31
December 2011 has been prepared in
accordance with IAS 34 - Interim
Financial Reporting and in compliance
with the Listings Requirements of the
JSE Limited. The abridged consolidated
financial information does not include
all of the information required by IFRS
for full annual financial statements
and should be read in conjunction with
the annual financial statements for the
year ended 31 December 2011, which have
been prepared in accordance with IFRSs.
2. Accounting policies
The accounting policies applied are
consistent with those of the previous
financial year.
3. Estimates
The preparation of financial statements
requires management to make judgements,
estimates and assumptions that affect
the application of accounting policies
and the reported amounts of assets and
liabilities, income and expenses.
Actual results may differ from these
estimates.
In preparing these abridged
consolidated financial statements, the
significant judgements made by
management in applying the group`s
accounting policies and the key sources
of estimation uncertainty were the same
as those that applied to the
consolidated financial statements for
the year ended 31 December 2011.
4. Risk management
The group`s activities expose it to a
variety of financial risks: market risk
(including price risk, interest rate
risk, foreign currency risk and
derivatives risk), credit risk and
liquidity risk. Insurance activities
expose the group to insurance risk
(including pricing risk, reserving
risk, accumulation risk and reinsurance
risk). The group is also exposed to
operational risk and legal risk.
The capital risk management philosophy
is to maximise the return on
shareholders` capital within an
appropriate risk framework.
The abridged consolidated financial
statements do not include all risk
management information and disclosure
required in the annual financial
statements and should be read in
conjunction with the group`s annual
financial statements as at 31 December
2011.
There have been no changes in the risk
management policies since the previous
year-end.
During 2011 there were no significant
changes in the business circumstances
that affect the fair value of the
group`s financial assets and
liabilities. There were no
reclassifications of financial assets
and liabilities in 2011.
5. Segment information
The group`s internal reporting is
reviewed in order to assess performance
and allocate resources. The operating
segments identified are representative
of the internal structure of the group.
The two core activities of the group,
i.e. insurance activities and
investment activities, are reviewed on
a monthly basis. Insurance activities
are all insurance underwriting
activities undertaken by the group and
comprise commercial insurance, personal
insurance and alternative risks.
Insurance activities are also further
analysed by insurance class. Investment
activities are all investment-related
activities undertaken by the group.
The performance of insurance activities
is considered based on gross written
premium as a measure of growth as well
as underwriting result and net
insurance result as a measure of
profitability.
Investment activities are measured
based on net investment income and
income from associated companies.
5. For the year ended 31 Insurance Investment Total
1 December 2011
activities activities
Business activity R million R million R million
Revenue 17 707 468 18 175
Gross written premium 17 707 17 707
Net written premium 14 674 14 674
Net earned premium 14 652 14 652
Claims incurred 9 404 9 404
Net commission 2 003 2 003
Management expenses 2 103 11 2 114
Underwriting result 1 142 (11) 1 131
Investment return on
insurance funds 388 388
Net insurance result 1 530 (11) 1 519
Investment income net
of
management fee and 355 355
finance costs
Income from associates
net of impairment 85 85
Amortisation of (68) - (68)
intangible assets
Income before taxation 1 462 429 1 891
Total assets 8 398 10 291 18 689
Total liabilities 11 560 988 12 548
Gross Under- Total Total
written writing assets liabilitie
premium result s
Insurance class R million R R million R million
million
Accident and health 286 45 31 137
Alternative risk 1 924 (5) 354 1 941
Crop 575 12 234 386
Engineering 736 120 167 382
Guarantee 17 9 6 20
Liability 1 157 142 341 1 950
Miscellaneous 16 1 1 13
Motor 7 621 471 48 1 608
Property 4 981 256 612 1 930
Transportation 394 91 39 212
Unallocated - (11) 16 855 3 969
Total 17 707 1 131 18 689 12 548
Comprising:
Commercial insurance 8 844 940 1 425 5 403
Personal insurance 6 939 207 55 1 236
Alternative risk 1 924 (5) 354 1 941
Unallocated - (11) 16 855 3 969
Total 17 707 1 131 18 689 12 548
5. For the year ended 31 Insurance Investment Total
2 December 2010
activities activities
Business activity R million R million R million
Revenue 15 855 937 16 792
Gross written premium 15 855 15 855
Net written premium 13 519 13 519
Net earned premium 13 550 13 550
Claims incurred 8 683 8 683
Net commission 2 075 2 075
Management expenses 1 631 15 1 646
Underwriting result 1 161 (15) 1 146
Investment return on
insurance funds 396 396
Net insurance result 1 557 (15) 1 542
Investment income net of
management fee and 840 840
finance costs
Income from associates
net of impairment 69 69
Amortisation of intangible (23) - (23)
assets
Income before taxation 1 534 894 2 428
Total assets 9 446 8 289 17 735
Total liabilities 11 492 1 024 12 516
Gross Under- Total Total
written writing assets liabilitie
premium result s
Insurance class R million R million R R million
million
Accident and health 264 7 14 131
Alternative risk 1 751 13 266 1 769
Crop 429 (85) 204 379
Engineering 595 156 95 256
Guarantee 21 6 6 29
Liability 1 103 315 422 1 900
Miscellaneous 22 6 1 12
Motor 6 684 371 2 1 538
Property 4 615 269 498 1 608
Transportation 371 103 53 225
Unallocated - (15) 16 174 4 669
Total 15 855 1 146 17 735 12 516
Comprising:
Commercial insurance 8 054 886 1 158 4 817
Personal insurance 6 050 262 137 1 261
Alternative risk 1 751 13 266 1 769
Unallocated - (15) 16 174 4 669
Total 15 855 1 146 17 735 12 516
Audited Audited
At At
31 December 31 December
2011 2010
R million R million
6. Financial assets and liabilities
at fair
value through income
The group`s financial assets are
summarised below by measurement
category
Financial assets at fair value
through income 11 792 11 688
Loans and receivables 1 836 1 735
Total financial assets 13 628 13 423
Financial assets and liabilities at fair value through income - Fair
value estimation
The table below analyses financial instruments, carried at fair value
through income, by valuation method. The different levels have been
defined as follows:
- Level 1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities
- Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (that
is, prices) or indirectly (that is, derived from prices)
- Level 3: Inputs for the asset or liability that are not based on
observable data (that is, unobservable inputs)
Financial assets at fair value through income
2011 Level 1 Level 2 Level 3 Total
R R million R million R million
million
Equity securities
Quoted
Listed 3 360 - - 3 360
Unitised funds - 80 - 80
Irredeemable
preference shares 2 - - 2
Unquoted - - 414 414
Total equity securities 3 362 80 414 3 856
Debt securities
Quoted
Government and
public bonds 1 575 182 - 1 757
Unitised funds - 392 - 392
Money market
instruments
> 1 year - 1 371 - 1 371
Unquoted
Government and
public bonds - 167 - 167
Money market
instruments
> 1 year - 2 197 - 2 197
Redeemable
preference shares - - 276 276
Total debt securities 1 575 4 309 276 6 160
Derivatives
Interest rate swaps - - 1 1
Total derivatives - - 1 1
Short-term money
market instruments - 1 775 - 1 775
4 937 6 164 691 11 792
2010 Level 1 Level 2 Level 3 Total
R R million R million R million
million
Equity securities
Quoted
Listed 3 460 - - 3 460
Unitised funds - 36 - 36
Irredeemable
preference shares 2 - - 2
Unquoted - - 334 334
Total equity securities 3 462 36 334 3 832
Debt securities
Quoted
Government and
public bonds 1 816 - - 1 816
Unitised funds - 398 - 398
Money market
instruments
> 1 year - 1 174 - 1 174
Unquoted
Government and
public bonds - 195 - 195
Unitised funds - - - -
Money market
instruments
> 1 year - 354 - 354
Redeemable
preference shares - - 309 309
Total debt securities 1 816 2 122 309 4 246
Short-term money
market instruments - 3 685 - 3 685
5 278 5 843 643 11 764
Financial liabilities at fair value through income
2011 Level 1 Level 2 Level 3 Total
R R million R million R million
million
Debt securities 988 - - 988
Investment contracts - 104 - 104
988 104 - 1 092
2010 Level 1 Level 2 Level 3 Total
R R million R million R million
million
Debt securities 949 - - 949
Investment contracts - 495 - 495
Derivatives
Interest rate swaps - - 1 1
Fence - - 74 74
Total derivatives - - 75 75
949 495 75 1 519
During 2007 the company issued unsecured subordinated callable notes
to the value of R1 billion in two tranches. The fixed effective rate
for the R600 million issue was 8.6% and 9.6% for the second tranche of
R400 million, representing the R203 companion bond plus an appropriate
credit spread at the time of the issues. The fixed coupon rate, based
on the nominal value of the issues, amounts to 8.25% and for both
tranches the optional redemption date is 15 September 2017. Between
the optional redemption date and final maturity date of 15 September
2022, a variable interest rate (JIBAR-based) plus additional margin
will apply.
Per conditions set by the Regulator, Santam is required to maintain
liquid assets equal to the value of the callable notes until maturity.
The callable notes are therefore measured at fair value to minimise
undue volatility in net profit.
Audited Audited
At At
31 December 31 December
2011 2010
R million R million
7. Insurance liabilities and
reinsurance assets
Gross
Long-term insurance contracts
- claims incurred but not 9 9
reported
Short-term insurance
contracts
- claims reported and loss
adjustment expenses 4 191 3 777
- claims incurred but not 1 246 1 189
reported
- unearned premiums 3 029 2 788
Total insurance liabilities - 8 475 7 763
gross
Recoverable from reinsurers
Long-term insurance contracts
- claims incurred but not 1 1
reported
Short-term insurance
contracts
- claims reported and loss
adjustment expenses 920 880
- claims incurred but not 150 146
reported
- unearned premiums 429 240
Total reinsurers`share of
insurance liabilities 1 500 1 267
Net
Long-term insurance contracts
- claims incurred but not 8 8
reported
Short-term insurance - -
contracts
- claims reported and loss
adjustment expenses 3 271 2 897
- claims incurred but not 1 096 1 043
reported
- unearned premiums 2 600 2 548
Total insurance liabilities - 6 975 6 496
net
8. Investment income and net
gains/(losses)
on financial assets and
liabilities at
fair value through income
Dividend income 150 118
Interest income 436 535
Foreign exchange differences 90 (20)
Net realised gains on 140 49
financial assets
Net fair value gains on
financial assets
designated as at fair value
through income 21 517
Net fair value gains on
financial assets
held for trading 9 47
Net fair value gains on 80 42
derivatives
Net fair value gains on
financial
liabilities designated as
at
fair value through income (61) (118)
Net fair value losses on debt (39) (85)
securities
Net fair value losses on
investment
Contracts (22) (33)
865 1 170
Audited Audited
At At
31 December 31 December
2011 2010
R million R million
9. Tax
South African normal taxation
Current year 567 580
Charge for the year 531 472
STC 36 108
Prior year (4) (11)
Foreign taxation 34 32
Income taxation for the year 597 601
Deferred taxation (111) 38
Current year (111) 39
STC - (1)
486 639
Reconciliation of taxation
rate (%)
Normal South African taxation 28.0 28.0
rate
Adjusted for:
- Exempt income (2.2) (1.4)
- Investment results (1.9) (4.9)
- STC 1.9 4.4
- Other (0.1) 0.2
Net reduction (2.3) (1.7)
Effective rate (%) 25.7 26.3
10 Business combinations
.
2011
Acquisition/Increases in
shareholding
a) MiWay Group Holdings (Pty)
Ltd
During the year the deferred purchase consideration for MiWay Group
Holdings (Pty) Ltd was settled in cash. A profit of R4 million was
recognised in the statement of comprehensive income.
b) Mirabilis Engineering Underwriting Managers (Pty) Ltd
On 1 March 2011, the Santam Group acquired 55% of the voting equity
interest in Mirabilis Engineering Underwriting Managers (Pty) Ltd by
merging its construction and engineering business into Mirabilis. The
new merged entity will be the leading engineering underwriting manager
in the South African market.
Details of the assets (a) MiWay b) Mirabilis Total
and liabilities acquired Group Holdings Engineering
at fair value are as Ltd Underwriting
follows: Managers
(Pty) Ltd
Deferred taxation - (5) (5)
Intangible assets - 18 18
Investments - 5 5
Loans and receivables - 1 1
Cash and cash - 3 3
equivalents
Trade and other payables - (4) (4)
Net asset value acquired - 18 18
Goodwill - 28 28
Excess of acquirer`s - (38) (38)
interest in the net fair
value of the acquirer`s
identifiable assets,
liabilities and
contingent liabilities
over cost
Less: Investment in - (8) (8)
associated share
previously acquired
Deferred purchase 343 - 343
consideration paid
Purchase consideration 343 - 343
paid
2010
Net asset Goodwill Purchase
value acquired consideration
paid
a) Emerald Risk Transfer
(Pty) Ltd
On 1 January 2010, 100 - 94
Swanvest 120 (Pty) Ltd
acquired 100% of the
voting equity interest
in Emerald Risk Transfer
(Pty) Ltd to obtain
specialist underwriting
skills in the corporate
property environment.
b) Indwe Broker Holdings
(Pty) Ltd
Effective 1 September 97 356 263
2010, the Santam Group
increased its
shareholding in Indwe
Broker Holdings (Pty)
Ltd from 37.8% to 100%
by exercising its right
to purchase shares on
offer from other
shareholders. The
company is being
independently managed as
an intermediary.
c) MiWay Group Holdings
Ltd
On 31 December 2010, 119 319 -
Swanvest 120 (Pty) Ltd
increased its
shareholding in MiWay
Group Holdings Ltd from
31.25% to 100%. It is
strategically important
that Santam makes proper
inroads into the
emerging short-term
insurance market to
retain its leadership
position in the
industry. MiWay will
continue to be managed
independently, servicing
the direct segment of
the market.
316 675 357
Audited Audited
At At
31 December 31 December
2011 2010
R million R million
11 Transactions with non-controlling
. parties
a) Mirabilis Engineering Underwriting Managers (Pty) Ltd
On 1 March 2011, Santam Ltd sold the non-controlling interest of 45%
in its construction and engineering business by merging it into
Mirabilis Engineering Underwriting Managers (Pty) Ltd.
Non-controlling interest acquired - 78
Net excess (received/paid on
sale/acquisition of
non-controlling interest (38) 12
Settled through acquisition of Mirabilis
Engineering Underwriting
Managers (Pty) Ltd 38 -
Purchase consideration paid - 90
Comparative information relates to the acquisition of the non-
controlling interest in Centriq Holdings (Pty) Ltd on 1 January 2010.
Audited Audited
Year ended Year ended
31 December 31 December
2011 2010
12 Earnings per share
.
Basic earnings per share
Profit attributable to the
company`s
equity holders (R million) 1 376 1 762
Weighted average number of ordinary
shares in issue (million) 113.15 112.96
Earnings per share (cents) 1 216 1 560
Diluted earnings per share
Profit attributable to the
company`s
equity holders (R million) 1 376 1 762
Weighted average number of ordinary
shares in issue (million) 113.15 112.96
Adjusted for share options 1.32 2.03
Weighted average number of ordinary
shares
for diluted earnings per share 114.47 114.99
(million)
Diluted basic earnings per share 1 202 1 532
(cents)
Headline earnings per share
Profit attributable to the
company`s
equity holders (R million) 1 376 1 762
Adjusted for:
Impairment of goodwill - 10
Reversal of impairment charge on
net
investment in associates - (6)
Profit on sale of subsidiaries and
associates - (215)
Excess of acquirer`s interest in
the net
fair value of the acquiree`s
identifiable assets, liabilities
and
contingent liabilities over cost - (6)
Tax charge - -
Headline earnings (R million) 1 376 1 545
Weighted average number of ordinary
shares in issue (million) 113.15 112.96
Headline earnings per share (cents) 1 216 1 367
Diluted headline earnings per share
Headline earnings (R million) 1 376 1 545
Weighted average number of ordinary
shares
for diluted earnings per share 114.47 114.99
(million)
Diluted headline earnings per share 1 202 1 343
(cents)
13 Dividends per share
.
Ordinary dividend per share (cents) 555 510
Special dividend per share (cents) 850 500
Non-executive directors
B Campbell, MD Dunn, MP Fandeso,
BTPKM Gamedze, VP Khanyile
(Chairman), MLD Marole, JP
Moller, YG Muthien, J van Zyl, BP
Vundla (resigned effective 17
January 2012).
Executive directors
IM Kirk (Chief Executive
Officer), Y Ramiah, MJ Reyneke
(Chief Financial Officer)
Sponsor
Investec Bank Limited
Transfer secretaries
Computershare Investor Services
(Pty) Ltd
70 Marshall Street, Johannesburg
2001
PO Box 61051, Marshalltown, 2107
Tel: 011 370 5000
Fax: 011 688 7721
www.computershare.com
Company secretary
Masood Allie
Santam head office and registered address
1 Sportica Crescent
Tyger Valley
Bellville 7530
PO Box 3881, Tyger Valley 7536
Tel: 021 915 7000
Fax: 021 914 0700
www.santam.co.za
Registration number 1918/001680/06
ISIN ZAE000093779
JSE share code: SNT
NSX share code: SNM
Date: 28/02/2012 14:25:02 Supplied by www.sharenet.co.za
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