Wrap Text
Reviewed Summarised group results for the year ended 30 June 2012
Clientèle Limited
(Registration number 2007/023806/06)
Share code: CLI ISIN: ZAE000117438
Reviewed Summarised group results for the year ended 30 June 2012
Highlights
Diluted headline earnings per share increased by 27% from 61,25 cents to 77,76 cents
Diluted headline earnings per share from continuing operations increased by 15% from 68,61 cents to 78,88 cents
Dividend declared per share increased by 25% from 53,50 cents to 67,00 cents
Return on average shareholders interest of 65%
Recurring Embedded Value Earnings increased from R552,9 million to R602,4 million
Value of New Business decreased by 20% from R457,6 million to R365,5 million
Drive for business sustainability through client centricity and quality
Comments
Introduction
the Clientèle group (“the group”) increased diluted headline earnings per share for the year by 27% and its diluted headline earnings from continuing operations by 15%. this is driven
by a 7% increase in insurance premium revenue, a 1% increase in operating expenses and good investment returns.
As a result the return on average shareholders’ interests for the year amounted to 65% and the dividend declared per share increased by 25% from 53,50 cents to 67,00 cents.
A recurring Return on Embedded value (“RoEv”) of 26% has been achieved on the back of Recurring Embedded value Earnings of R602,4 million (2011: R552,9 million) which
contributed to group Embedded value (“Ev”) increasing from R2 520,3 million to R3 259,0 million, however, the value of New Business (“vNB”) has decreased by 20% in comparison to
last year from R457,6 million to R365,5 million.
It has been a difficult year for the group and our target market. the group experienced increased withdrawals and a decrease in the number of policies sold in comparison to last year as
a result of a number of external factors. In addition, the acceleration of the group’s initiatives to improve the quality of new business written has, by design, also slowed production. we
believe that these initiatives, aimed at embedding business sustainability principles and practices into the group’s operations, will further improve the quality of products and services
offered to our clients and provide enduring long-term benefits to all stakeholders.
Operating Results
Group Embedded Value
The increase in group Ev reflects Ev Earnings of R928,7 million (2011: R661,2 million) for the year, including once-off economic and other adjustments (refer to the Ev Earnings
analysis) and translates into a RoEv of 40% (2011: 36%) and a recurring RoEv of 26% (2011: 30%). the reduction in the recurring RoEv is due to a worsening withdrawal experience
variance of R115,0 million and the decrease in vNB. the withdrawal experience has necessitated a change in withdrawal assumptions with a resulting impact of R62,7 million on Ev and
R46,4 million on vNB. the quality of business written has received significant management attention this year and the on-going refinement in internal processes, referred to above, is
expected to result in sustained improvements in the quality of production into the future. the changes implemented will however take time to reflect in the future withdrawal experience, at
which time the withdrawal assumptions would be revisited with a consequential positive effect on Ev and vNB.
the Board has adopted current actuarial guidance in respect of the risk discount rate, now set at 9.8% (2011: 11.3%). the calculation is comprehensively explained in the group Ev
section of the results and a sensitivity analysis is also provided.
group Statement of Comprehensive Income
headline earnings for the group of R256,0 million are 28% higher than the headline earnings of R199,5 million for last year. As a result, diluted headline earnings per share have
increased by 27% to 77.76 cents, up from 61.25 cents and the return on average shareholders’ interests amounted to 65% compared to 64% for last year.
Insurance premium revenue for the year is up by 7% from R1 115,0 million to R1 194,9 million and other income of R164,2 million, which mainly comprises annuity fees from Clientèle
Life’s Independent field Advertisers, is 12% up in comparison to last year’s figure of R147,3 million.
the group adopts the conservative accounting practice of eliminating negative reserves and thus expensing acquisition costs upfront and deferring profit release over the life of the
policy. the total value of negative reserves eliminated now amounts to R1,8 billion in comparison to R1,6 billion at 30 June 2011.
Net insurance benefits and claims of R291,0 million have increased by 39% from R209,3 million year on year. the majority of the increase is in respect of policyholders’ benefit payments
for unitised endowment policies, many of which have now been held for 10 years or more.
the increase in policyholder liabilities under insurance contracts is, for the first time, net of cash back payments amounting to R44,8 million in respect of insurance policies.
egment Results
SA Long-term Insurance – Clientèle Life
Clientèle Life’s Long-term insurance segment remains the major contributor to overall group performance. It accounts for 84% or R305,9 million of the group’s R365,5 million of vNB and
generated R235,8 million net operating profit for the year. It should be noted that Clientèle Life fully impaired its R19,3 million loan to IfA Nigeria as at 30 June 2012, as disclosed in the
Segment Statements of Comprehensive Income.
on a continuing basis, the net operating profit for the year of R235,8 million was up by 16% from R204,1 million last year.
SA Investment Contracts – Clientèle Life
In terms of International financial Reporting Standards, expenses in respect of the group’s Investment contracts (Single premium business) are expensed as and when incurred. the
related revenue is, however, recognised over the term of the contract (usually 60 months).
this operating segment reported a R2,7 million net profit for the year. this should be viewed in conjunction with the R34,4 million (2011: R32,3 million) of deferred profits included in the
Statement of financial position.
SA Short-term Insurance – Clientèle general Insurance (Clientèle Legal)
vNB for the year of R58,2 million now comprises 16% of the group’s vNB for the year.
Clientèle Legal now has an Ev of R394,5 million (2011: R241,0 million) and has recorded R20,9 million net profit for the year, an 18% increase on the R17,7 million net profit last year.
SA Loans – Clientèle Loans
the personal loans business, of which the group owns 70%, is progressing in line with expectations and in accordance with its conservative credit assessment and lending approach.
the loans business produced net profit for the year of R1,0 million, in comparison to a net loss of R6,1 million last year. the gross advances book at 30 June 2012 amounted to R194,4
million (2011: R122,1 million) and impairment experienced from the book is close to expectations. Clientèle Loans currently has, in addition to group funding of R55,2 million, a funding
facility of R210,0 million from one of South Africa’s largest financial institutions.
Nigeria – Long-term Brokerage (IfA Nigeria) – discontinued operation
As previously reported, the Clientèle Limited Board, together with the Board of KC2008, our minority partner, decided to close the IfA Nigeria business and placed it into voluntary
liquidation with effect from 29 July 2011. the closure of the business is now complete and only administrative procedures remain and as a result the foreign Currency translation
Reserve of R 11,8 million has been released to the Statement of Comprehensive Income.
It should be noted that the write-off of the loan from IfA Nigeria’s minority shareholders of R14,9 million had a positive effect on the results of the discontinued operation for the year.
Prospects
The Group has accelerated its process of ingraining sustainability principles and practices into its operations, which includes a special focus on addressing the quality of business written,
as well as consolidating its role as a responsible corporate citizen. this is expected to add additional long-term value to the group and its stakeholders, including specifically the group’s
policyholders, although the implementation may impact short-term performance.
the group expects the business environment to remain challenging in the year ahead, however, the group has in the past demonstrated its ability to react promptly and positively to new
challenges and this remains a core strength of the group. the group will remain focused on creating sustainable value through its proven business models and will continue to evaluate
new opportunities on a prudent basis going forward.
Dividend Declared
Notice is hereby given that the directors have declared a final gross dividend of 67,00 cents per share on 15 August 2012 for the year ended 30 June 2012.
the directors of Clientèle Limited confirm that the group will satisfy the solvency and liquidity test immediately after completion of the dividend distribution.
the dividend will be subject to the new dividends tax that was introduced with effect from 1 April 2012. In accordance with paragraphs 11.17 (a) (i) to (x) and 11.17 (c) of the JSE Listings
Requirements, the following additional information is disclosed:
– the dividend has been declared out of income reserves;
– the local dividends tax rate is 15% (fifteen percent);
– the gross local dividend amount is 67,00 cents per ordinary share for shareholders exempt from the dividends tax;
– the net local dividend amount is 57,15913 cents per ordinary share for shareholders liable to pay the dividends tax;
– the local dividend withholding tax amount is 9,84087 cents per ordinary share for shareholders liable to pay the dividend withholding tax;
– StC credits to the value of 1,39418 cents per share are utilised;
– Clientèle Limited currently has 326 716 221 ordinary shares in issue;
– Clientèle Limited’s income tax reference number is 9465071166.
In compliance with the requirements of Strate, the electronic settlement and custody system used by the JSE Limited, the following salient dates for the payment of the dividend are
applicable:
Last day to trade friday, 31 August 2012
Shares commence trading “ex” dividend monday, 3 September 2012
Record date friday, 7 September 2012
payment date monday, 10 September 2012
Share certificates may not be dematerialised or rematerialised between monday, 3 September 2012 and friday, 7 September 2012, both days inclusive.
By order of the Board
GQ Routledge
Chairman
G J Soll
managing director
Johannesburg
15 August 2012
REVIEWED
Condensed Group Statement of Comprehensive Income
Year ended %
30 June Change
(R’000’s) 2012 2011#
Revenue
Insurance premium revenue 1 194 852 1 114 995 7
Reinsurance premiums (68 916) (56 673)
Net insurance premiums 1 125 936 1 058 322 6
other income 164 222 147 254 12
Interest income 56 046 25 334
fair value adjustment to financial assets at fair
value through profit or loss 252 189 224 686 12
Net income 1 598 393 1 455 596 10
Net insurance benefits and claims (291 024) (209 319) 39
Increase in policyholder liabilities under insurance
contracts (13 746) (84 032) (84)
decrease in reinsurance assets (333) (2 401)
fair value adjustment to financial liabilities at fair
value through profit or loss – investment contracts (139 415) (99 960)
Interest expense (14 565) (5 956)
Impairment of advances (21 642) (11 558)
operating expenses (739 165) (728 779) 1
profit from operations 378 503 313 591 21
Equity accounted earnings – (81)
profit before tax 378 503 313 510 21
tax (118 434) (96 417)
profit from continuing operations 260 069 217 093 20
Loss from discontinued operation (21 694) (26 867)
– Loss from discontinued operating activities (9 916) (26 867)
– foreign currency translation reserve realised (11 778) –
profit for the year 238 375 190 226 25
Attributable to:
– Non-controlling interest – ordinary shareholders (57) (4 731)
– Equity holders of the group – ordinary
shareholders 238 432 194 957 22
profit for the year 238 375 190 226 25
other comprehensive income:
Exchange differences on translating foreign
operation (796) 261
gains on property revaluation 9 081 5 937
Income tax relating to gains on property
revaluation (2 056) (1 230)
other comprehensive income for the year net of
tax 6 229 4 968
total comprehensive income for the year 244 604 195 194 25
Attributable to:
– Non-controlling interest – ordinary shareholders (173) (4 586)
– Equity holders of the group – ordinary
shareholders 244 777 199 780 23
# the comparatives are reclassified to disclose the results of the discontinued
operation separately
Condensed Group Statement of Financial Position
Year ended
30 June
(R’000’s) 2012 2011
Assets
Intangible assets 20 865 24 762
property and equipment 37 198 47 822
owner-occupied properties 176 873 150 329
Investment in associate 291 291
deferred tax 20 801 30 270
Inventories 1 371 839
Reinsurance assets 3 845 4 178
financial assets at fair value through profit or loss 2 303 907 1 940 210
Loans and receivables including insurance receivables 209 591 154 255
Current tax 3 885 –
Cash and cash equivalents 168 513 145 681
total assets 2 947 140 2 498 637
total equity and reserves 440 004 353 220
Liabilities
policyholder liabilities under insurance contracts 790 725 776 979
financial liabilities – investment contracts 1 351 303 1 049 988
– at fair value through profit or loss 1 312 904 1 015 790
– at amortised cost 38 399 34 198
financial liabilities – loans at amortised cost 138 219 93 488
finance leases – 319
Employee benefits 60 178 86 293
Accruals and payables including insurance payables 141 112 113 456
deferred tax 25 400 23 083
Current tax 199 1 811
total liabilities 2 507 136 2 498 637
Tax
Year ended
30 June
(R’000’s) 2012 2011
Continuing operations:
Current and deferred tax (95 641) (80 211)
Secondary Tax on Companies (“STC”) (16 686) (15 538)
Capital gains tax (1 594) (1 108)
(underprovision)/overprovision in prior years (4 513) 440
(118 434) (96 417)
Discontinued operation – –
Tax
(118 434) (96 417)
The individual Policyholder Fund has an estimated tax loss of R1,9 billion (2011: R1,8 billion)
Reconciliation of Results from Continuing Operations and the Discontinued operation
Year ended %
30 June Change
(R’000’s) 2012 2011
Continuing operations
Net profit for the year attributable to equity holders
of the Group 238 432 194 957 22
Add: Attributable loss from the discontinued
operation 2 077 6 454
Add: Loan written off – IFA Nigeria* 19 250 17 519
Net profit related to continuing operations
attributable to equity holders of the group 259 759 218 930 19
Discontinued operation
Net profit/(loss) for the year 9 334 (9 348)
Foreign currency translation reserve realised (11 778)
Less: Loan written off by Clientèle Life* (19 250) (17 519)
Loss for the year related to the discontinued
operation (21 694) (26 867)
Add: Net loss attributable to non-controlling
interest 367 2 894
Net loss related to the discontinued operation
attributable to equity holders of the group (21 327) (23 973)
* The loan written off by Clientèle Life was in respect of the discontinued operation (IFA Nigeria)
Reconciliation of Net profit to headline Earnings
Year ended %
30 June Change
(R’000’s) 2012 2011#
Continuing operations
Net profit for the year attributable to equity holders
of the group 259 759 218 930 19
Less: profit on disposal of property and equipment (78) (250)
Add: Impairment of intangible assets 4 790
Headline earnings from continuing operations 259 681 223 470 16
Discontinued operation
Net loss for the year attributable to equity holders
of the group (21 327) (23 973)
Add: Impairment of property and equipment 4 045
Add: Impairment of intangible assets 3 596
Add: foreign currency translation reserve realised 10 010
Headline earnings from discontinued operation (3 676) (23 973)
Headline earnings for the year 256 005 199 497 28
# The comparatives are reclassified to disclose the results of the discontinued operation separately
Ratios per Share
Year ended %
30 June Change
(Cents) 2012 2011#
Headline earnings per share 78.89 61.65 28
– Continuing operations 80.02 69.05 16
– Discontinued operation (1.13) (7.40)
Diluted headline earnings per share 77.76 61.25 27
– Continuing operations 78.88 68.61 15
– Discontinued operation (1.12) (7.36)
Earnings per share 73.47 60.24 22
– Continuing operations 80.04 67.65 18
– Discontinued operation (6.57) (7.41)
Diluted earnings per share 72.43 59.86 21
– Continuing operations 78.91 67.22 17
– Discontinued operation (6.48) (7.36)
Net asset value per share 135.58 109.15 24
Diluted net asset value per share 133.66 108.45 23
Dividends per share – paid 53.50 47.00 14
Dividends per share – declared 67.00 53.50 25
Weighted average ordinary shares (’000) 324 540 323 616
Diluted average ordinary shares (’000) 329 201 325 698
# The comparatives are reclassified to disclose the results of the discontinued operation separately
Condensed Group Statement of Cash flows
Year ended 30 June
(R’000’s) 2012 2011#
Profit from operations adjusted for non-cash items 372 809 360 742
Working capital changes (45 258) (37 295)
Separately disclosable items1 (49 625) (44 737)
Increase in financial liabilities2 157 699 134 317
Net acquisition of investments3 (111 508) (107 811)
Interest received1 32 579 30 437
Dividends received1 17 046 14 300
Dividends paid (173 261) (152 009)
Tax paid (114 201) (100 614)
Cash flows from operating activities – Continuing
operations 86 280 97 330
Cash flows from operating activities – discontinued
operation (13 314) (6 833)
Cash flows from operating activities 72 966 90 497
Cash flows from investing activities4
Continuing operations (40 944) (34 320)
Discontinued operation – (810)
Cash flows from investing activities (40 944) (35 130)
Cash flows from financing activities
Continuing operations – 4 321
Discontinued operation (9 190) 8 010
Cash flows from financing activities (9 190) 12 331
Net increase in cash and cash equivalents 22 832 67 698
Cash and cash equivalents at beginning of the year 145 681 77 983
Cash and cash equivalents at end of the year 168 513 145 681
# The comparatives are reclassified to disclose the results of the discontinued operation separately
1. Interest and dividends
2. Investment contracts
3. Investments in respect of insurance operations and investment contracts
4. mainly relates to the acquisition of intangible assets, property and equipment
Notes to the Results
The results have been reviewed by the group’s external auditors, pricewaterhouseCoopers Incorporated, in terms of International Standards on Review Engagements 2410. the scope
of the review was to enable the auditors to report that nothing came to their attention to cause them to believe that the accompanying condensed preliminary consolidated financial
information is not presented in all material respects, in accordance with the South African Companies Act 71 of 2008, as amended and section 8.57 of the JSE Limited Listings
Requirements. A copy of the unqualified review opinion is available on request at the Company’s registered offices.The Summarised Group Results were prepared under the supervision of Mr IB Hume (CA(SA), ACMA),
the group financial director.
Accounting Policies
Statement of compliance
The accounting policies adopted for the purpose of the Group Financial Statements comply with International Financial Reporting Standards (IFRS), the JSE Limited Listings
Requirements, the AC 500 Standards as issued by the Accounting practices Board and the Companies Act 2008 (Act 71 of 2008), as amended, and are consistent with those used in the
Annual financial Statements for the year ended 30 June 2011 except for the treatment of the discontinued operation. where the group has inter-company transactions and balances
between continued and discontinued operations, those transactions are eliminated or disclosed as part of the discontinued operation. the results have been prepared in terms of IAS 34
(Interim financial Reporting).
The preparation of Financial Statements in accordance with IFRS requires the use of certain critical accounting estimates and judgement. The reported amounts in respect of the Group’s
insurance contracts, employee benefits and unquoted financial instruments are affected by accounting estimates and judgement.
there was no significant impact due to changes in previous assumptions used in deriving the amounts referred to above.
Related party transactions
Transactions between Clientèle Limited and its subsidiaries have been eliminated on consolidation. there were no significant related party transactions during the year.
Segment Information
The Group’s results are analysed across two geographical segments which are South Africa (“SA”) and Nigeria.
The Group’s main operating segments are Long-term insurance, Investment contracts, Short-term insurance, Loans business, mobile business and Long-term brokerage (discontinued
operation) segments. policies written are in respect of individuals.
Segment Assets & Liabilities
Year ended 30 June
(R’000’s) 2012 2011#
SA – Long-term insurance 1 367 002 1 297 286
SA – Investment contracts 1 351 741 1 050 131
SA – Short-term insurance 95 412 72 773
SA – Loans 197 668 123 494
SA – Mobile 1 282 1 369
Continuing operations 3 013 105 2 545 053
Discontinued operation
Nigeria – Long-term brokerage – 18 416
Inter segment (65 965) (64 832)
Total Group Assets 2 947 140 2 498 637
SA – Long-term insurance 985 037 970 756
SA – Investment contracts 1 351 303 1 049 988
SA – Short-term insurance 22 226 20 453
SA – Loans 213 485 140 344
SA – Mobile 1 050 875
Continuing operations 2 573 101 2 182 416
Discontinued operation
Nigeria – Long-term brokerage – 27 833
Inter segment (65 965) (64 832)
Total Group Liabilities 2 507 136 2 145 417
# The comparatives are reclassified to disclose the results of the discontinued operation separately
Segment Statements of Comprehensive Income
IFA Inter
SA SA SA Nigeria – segment
Long-term Investment Short-term SA – SA – discontinued (revenue)/
(R’000’s) insurance contracts insurance Loans mobile operation expense Total
30 June 2012
Insurance premium revenue 1 059 006 135 846 1 194 852
Reinsurance premiums (68 765) (151) (68 916)
Net insurance premiums 990 241 135 695 1 125 936
Other income 140 735 11 046 12 845 3 944 460 (4 348) 164 682
Interest income 10 634 580 49 964 75 2 (5 207) 56 048
Fair value adjustment to financial assets at fair value through profit or
loss 101 800 143 616 6 773 252 189
Segment revenue 1 243 410 154 662 143 048 62 809 4 019 462 (9 555) 1 598 855
Segment expenses and claims (897 795) (150 953) (114 939) (61 375) (4 383) (25 257) 9 555 (1 245 147)
Net insurance benefits and claims (274 400) (16 624) (291 024)
Increase in policyholder liabilities under insurance contracts (12 430) (1 316) (13 746)
Decrease in reinsurance assets (333) (333)
Fair value adjustment to financial liabilities at fair value through profit or loss (139 415) (139 415)
Interest expense (4 201) (15 571) (41) 5 207 (14 606)
Impairment of advances (21 642) (21 642)
Operating expenses (610 632) (7 337) (96 999) (24 162) (4 383) (25 216) 4 348 (764 381)
Profit/(loss) before tax 345 615 3 709 28 109 1 434 (364) (24 795) – 353 708
Tax (109 854) (1 038) (7 242) (402) 102 (118 434)
Net operating profit/(loss) for the year 235 761 2 671 20 867 1 032 (262) (24 795) – 235 274
Loans waived – discontinued operation (19 250)* 34 129 14 879
Foreign currency translation reserve realised (11 778) (11 778)
Net profit/(loss) for the year 216 511 2 671 20 867 1 032 (262) (2 444) – 238 375
Attributable to:
Non-controlling interest – ordinary shareholders 310 (367) (57)
Equity holders of the group – ordinary shareholders 216 511 2 671 20 867 722 (262) (2 077) 238 432
30 June 2011#
Insurance premium revenue 1 004 877 110 118 1 114 995
Reinsurance premiums (56 673) (56 673)
Net insurance premiums 948 204 110 118 1 058 322
Other income 130 622 8 234 5 6 911 3 498 10 718 (2 016) 157 972
Interest income 16 929 260 14 753 137 23 (6 745) 25 357
Fair value adjustment to financial assets held at fair value through profit
or loss 115 030 103 692 5 964 224 686
Segment revenue 1 210 785 111 926 116 347 21 664 3 635 10 741 (8 761) 1 466 337
Segment expenses and claims (914 529) (110 704) (92 583) (30 007) (2 943) (37 608) 8 761 (1 179 613)
Net insurance benefits and claims (199 595) (9 724) (209 319)
(Increase)/decrease in policyholder liabilities under insurance contracts (86 347) 2 315 (84 032)
Decrease in reinsurance assets (2 401) (2 401)
Fair value adjustment to financial assets held at fair value through profit
or loss (99 960) (99 960)
Interest expense (3 732) (8 969) (129) 6 745 (6 085)
Impairment of advances (11 558) (11 558)
Operating expenses (626 186) (7 012) (85 174) (9 480) (2 943) (37 479) 2 016 (766 258)
Results from operating activities 296 256 1 222 23 764 (8 343) 692 (26 867) – 286 724
Equity accounted loss (81) (81)
Profit/(loss) before tax 296 175 1 222 23 764 (8 343) 692 (26 867) – 286 643
Tax (92 075) (342) (6 026) 2 220 (194) (96 417)
Net operating profit/(loss) for the year 204 100 880 17 738 (6 123) 498 (26 867) - 190 226
Loan waived – discontinued operation (17 519)* 17 519 –
Net profit/(loss) for the year 186 581 880 17 738 (6 123) 498 (9 348) 190 226
Attributable to:
Non controlling interest – ordinary shareholders (1 837) (2 894) (4 731)
Equity-holders of the group – ordinary shareholders 186 581 880 17 738 (4 286) 498 (6 454) 94 957
* The loan written off by Clientèle Life was in respect of the discontinued operation (IFA Nigeria)
GROUP EMBEDDED VALUE RESULTS
Condensed group Statement of Changes in Equity
NDR: NDR:
Contin- foreign
Common SAR gency currency NDR: NDR: Non-
Share Share control Sub- Retained scheme Short-term translation Changes in Reva- Sub- controlling
(R’000’s) capital premium deficit total earnings reserve † insurance? reserve ownership luation total interest Total
Balance as at 1 July 2010 6 471 218 857 (220 273) 5 055 218 030 14 796 7 610 (9 446) 45 326 26 827 308 198 (3 295) 304 903
Ordinary dividends (152 058) (152 058) (152 058)
Total comprehensive income – – – – 194 957 – – 116 – 4 707 199 780 (4 586) 195 194
– Net profit/(loss) for the year – 194 957 194 957 (4 731) 190 226
– Other comprehensive income – 116 4 707 4 823 145 4 968
Transfer to contingency reserve – (3 401) 3 401 – –
Shares issued 8 4 313 4 321 4 321 4 321
SAR scheme allocated – 5 181 5 181 5 181
Transfer from shares issued – (4 321) (4 321) (4 321)
Shares issued by subsidiary – (1 420) (1 420) 1 420 –
Balance as at 30 June 2011 6 479 223 170 (220 273) 9 376 257 528 15 656 11 011 (9 330) 43 906 31 534 359 681 (6 461) 353 220
Balance as at 1 July 2011 6 479 223 170 (220 273) 9 376 257 528 15 656 11 011 (9 330) 43 906 31 534 359 681 (6 461) 353 220
Ordinary dividends – (173 329) (173 329) 173 329)
Total comprehensive income – – – – 238 432 – – (680) – 7 025 244 777 (173) 244 604
– Net profit/(loss) for the year – 238 432 238 432 (57) 238 375
– Other comprehensive income/(expense) – (680) 7 025 6 345 (116) 6 229
Transfer of contingency reserve – 11 011 (11 011) – –
Shares issued 55 30 508 30 563 30 563 30 563
SAR scheme allocated – 3 731 3 731 3 731
Transfer from shares issued – (21 133) (9 430) (30 563) (30 563)
Transfer to Statement of Comprehensive Income – 10 010 10 010 1 768 11 778
Transfer of NDR to Retained earnings – 43 906 (43 906) – –
Balance as at 30 June 2012 6 534 253 678 (220 273) 39 939 356 415 9 957 – – – 38 559 444 870 (4 866) 440 004
† SAR scheme – the Clientèle Limited Share Appreciation Rights Scheme
? The contingency reserve is no longer a Statutory Capital Adequacy Requirement
Group Embedded Value
The Embedded value (“Ev”) represents an estimate of the value of the group, exclusive of the goodwill attributable to future new business. the Ev comprises:
– the free Surplus; plus
– the Required Capital identified to support the in-force business; plus
– the present value of in-force business (“PVIF”); less
– the Cost of Required Capital (“CoC”)
The PVIF business is the present value of the future after tax profits arising from covered business in force as at 30 June 2012.
All material business written by the Group has been covered by EV Methodology as outlined in the Professional Guidance Note, PGN 107 of the Actuarial Society of South Africa, including:
– all Long-term insurance business regulated in terms of the Long-term Insurance Act, 1998;
– annuity income arising from the non-insurance contracts where Ev methodology has been used to determine future shareholder entitlements;
– Legal insurance business where Ev methodology has been used to determine future shareholder entitlements; and
– Loans and mobile business where Ev methodology has been used to determine future shareholder entitlements.
The IFA Nigeria Board of directors, the Clientèle Limited Board of directors and the KC2008 Board of directors resolved to terminate the IfA Nigeria operations with effect from 29 July 2011.
The EV calculations have been certified by the group’s independent actuaries, QED Actuaries & Consultants Proprietary Limited. the EV can be summarised as follows:
Year ended 30 June
(R’000’s) 2012 2011
Free surplus 271 252 199 505
Required capital 182 633 139 565
Adjusted Net Worth (ANW) of covered business 453 885 339 070
CoC (42 391) (36 747)
PVIF 2 847 550 2 218 010
EV of covered business 3 259 044 2 520 332
The ANW of the covered business is defined as the excess value of assets attributed to the covered business, but not required to back the liabilities of the covered business. free
Surplus is the ANw less the Required Capital attributed to covered business.
Reconciliation of total Equity to ANW
Year ended 30 June
(R’000’s) 2012 2011
Total equity and reserves per the
Statement of financial position 440 004 353 220
Removal of deferred profits and impact of
compulsory margins on investment business (net
impact after tax) 18 647 17 095
Removing minority interests 4 868 6 462
Adjusting subsidiaries to Net Asset value 11 911 2 422
SAR scheme adjustment (21 545) (40 129)
ANW 453 885 339 070
The CoC is the opportunity cost of having to hold the Required Capital of R182,6 million as at 30 June 2012. the Required Capital has been set as the greater of the Statutory
Termination Capital Adequacy Requirement and 1.25 times the Statutory ordinary Capital Adequacy Requirement for the Long-term Company plus the Required Statutory Capital for the
Short-term company.
The SAR scheme adjustment recognises the future dilution in EV, on a mark to market basis, as a result of the SAR scheme.
Clientèle Life’s Statutory CAR cover ratio at 30 June 2012 was 2.95 times (30 June 2011: 2.94 times) on the statutory valuation basis.
value of New Business (“VNB”)
year ended 30 June
(R’000’s) 2012 2011
total vNB 365 496 457 587
present value of New Business premiums 1 749 447 1 859 123
New Business profit margin 20.9% 24.6%
the vNB (excluding any allowance for the management Incentive Scheme) represents the present value of the projected after tax profits at the point of sale on new covered business
commencing during the period ended 30 June 2012 less the CoC pertaining to this business.
the New Business profit margin is the vNB expressed as a percentage of the present value of future premiums (and other annuity fee income) pertaining to the same business.
Long-term Economic Assumptions
Year ended 30 June
(%) 2012 2011
Risk discount rate 9.80 11.30
Overall investment return 6.30 7.80
Expense inflation 4.30 5.80
Corporate tax 28.00 28.00
the Risk discount rate (“RDR") has been determined using a top-down weighted average cost of capital approach, with the equity return calculated using Capital Asset pricing model
(“CAPM”) theory. In terms of the actuarial guidance, the RDR has been set as the risk free rate plus a beta multiplied by the assumed equity risk premium. It has been assumed that the
equity risk premium (i.e. the long-term expected difference between the equity returns and the risk free rate) is 3.5%. the Board draws the reader’s attention to the RdR sensitivity
analysis in the table below which allows for sensitivity comparisons using alternative RDRs. the beta pertaining to the Clientèle share price is relatively low, which is partially a
consequence of the relatively small free-float of shares. After careful consideration, the Board has decided to continue to use a more conservative beta of 1, as opposed to its actual beta
of 0.47, in the calculation of the RDR.
The resulting risk discount rate utilised for the South African business as at 30 June 2012 was 9.8%.
Prior period results include an allowance for STC on an assumed dividend policy. however, with the change to dividend tax, the EV and VNB for the current period are shown before any
allowance for the tax on dividend payments. this increased the EV by R130,0 million and the VNB by R23,3 million.
Demographic Assumption Changes
A large withdrawal loss was experienced during the period under review. As a result, the withdrawal assumptions used to calculate the EV and VNB were changed to reflect the current
withdrawal experience. the impact of this change has been disclosed separately in the analysis of the change in EV. this reduced the EV by R62,7 million and the VNB by R46,4 million.
In addition, the modelling term for Short-term business as well as annuity income from non-insurance business, used to be limited to a modelling term of 10 years from the date of
calculation. the Short-term company was established about 5 years ago, and due to it now being an established business the modelling term for the Short-term business was extended
to a term of 27 years from policy commencement. Similarly, the modelling term for annuity income from non-insurance business was extended to be in line with the modelling term for the
underlying product. this increased the EV by R81,9 million and the vNB by R14,0 million. the impact of this change has also been disclosed separately in the analysis of the change in
EV.
RDR Sensitivities
(R’000’s) EV VNB
RDR 7.8% 3 788 137 481 659
RDR 8.8% 3 498 815 417 778
RDR 9.8% 3 259 044 365 496
RDR 10.8% 3 057 838 321 965
RDR 11.3% 2 970 729 302 800
RDR 11.8% 2 887 279 285 065
EV per Share
year ended 30 June
(Cents) 2012 2011
EV per share 1 004.20 778.80
Diluted EV per share 989.99 773.82
Segment Information
The EV can be split between segments as follows:
(R’000’s) ANW PVIF CoC EV
30 June 2012
SA – Long-term insurance 392 274 2 506 381 (31 126) 2 867 528
SA – Short-term insurance 73 187 332 587 (11 265) 394 508
SA – Investment contracts 5 383 5 383
SA – Loans (11 078) 2 105 (8 973)
SA – mobile 232 1 094 1 326
Nigeria – Long-term
brokerage (729) (729)
total 453 885 2 847 550 (42 391) 3 259 044
30 June 2011
SA – Long-term insurance 314 186 2 010 230 (32 582) 2 291 835
SA – Short-term insurance 44 252 200 875 (4 166) 240 962
SA – Investment contracts 4 663 4 663
SA – Loans (11 809) 805 (11 004)
SA – mobile 495 1 437 1 931
Nigeria – Long-term
brokerage (8 054) (8 054)
Total 339 070 2 218 010 (36 747) 2 520 332
The VNB can be split between segments as follows:
Year ended 30 June
(R’000’s) 2012 2011
SA – Long-term insurance 305 878 432 425
SA – Short-term insurance 58 190 43 084
SA – Investment contracts 4 110 6 777
SA – Loans (2 154) (3 293)
SA – mobile (528) 778
SA – New venture costs – (22 185)
Total 365 496 457 587
Embedded Value Earnings Analysis
EV earnings (per PGN 107) comprises the change in EV for the year after adjusting for capital movements and dividends paid as they pertain to the Group.
Year ended Year ended
Year ended 30 June 2012 30 June 2012 30 June 2011
(R’000’s) ANW PVIF CoC EV EV
A: EV at the end of the year 453 885 2 847 550 (42 391) 3 259 044 2 520 332
EV at the beginning of the year 339 070 2 218 011 (36 747) 2 520 332 2 026 760
Dividends and StC paid (190 015) – – (190 015) (167 596)
B: Adjusted EV at the beginning of the year 149 055 2 218 011 (36 747) 2 330 318 1 859 164
EV earnings (A – B) 304 831 629 539 (5 644) 928 726 661 168
Impact of once-off economic assumption changes (excluding StC
tax) (4 129) (213 417) 1 852 (215 694) (136 532)
Impact of once-off StC tax change – (129 981) – (129 981) –
Impact of other once-off items 9 016 6 222 4 081 19 318 28 277
Recurring EV earnings (before once-off items) 309 718 292 363 288 602 369 552 912
Recurring Return on EV (before once-off items) 25.8% 29.7%
Return on EV 39.9% 35.6%
Components of EV earnings (R’000’s)
VNB (214 874) 587 874 (7 504) 365 496 457 587
Expected return on covered business (unwinding of RDR) – 257 840 (4 402) 253 438 211 957
Expected profit transfer 440 251 (440 251) – – –
Withdrawal experience variance 8 206 (133 505) 10 257 (115 042) (29 486)
Claims and reinsurance experience variance (4 148) – – (4 148) 317
Sundry experience variance 23 680 18 088 4 000 45 767 11 290
Change in withdrawals and unpaid premium assumptions (1 568) (63 872) 2 789 (62 650) –
Change in Short-term and annuity income from non-insurance
business modelling term (1) 82 934 (998) 81 934 –
Change in Short-term business reserving and capital requirements
basis 7 433 (6 222) (4 081) (2 869) –
Other Changes in modelling/basis? (732) (10 304) 227 (10 808) (18 135)
Extraordinary non-recurring expenses/development costs – – – – (4 790)
Expected return on ANW 23 465 – – 23 465 19 865
SAR scheme dilution 23 108 – – 23 108 (16 705)
Goodwill and Medium-term incentive schemes (5 930) (220) – (6 150) (39 313)
Reduction in Net Asset Value on Nigerian operation – – – – (22 659)
EV operating return 298 889 292 363 288 591 540 569 928
Investment return variances on ANW 10 829 – – 10 829 18 540
Effect of economic assumption changes (excluding STC tax change) 4 129 213 417 (1 852) 215 694 103 642
Impact of once-off STC tax change – 129 981 – 129 981 –
Impact of other once-off items (9 016) (6 222) (4 081) (19 318) (28 277)
Net impact of writing off a loan in respect of the Nigerian operation – – – – (2 665)
EV Earnings 304 831 629 539 (5 644) 928 726 661 168
? The basis changes for the year ended 2011 were not split into as much detail as has been done for the year ended 2012
Registered office: Clientèle office park, Cnr Rivonia and Alon Roads, morningside, PO Box 1316, Rivonia 2128, South Africa
Transfer secretaries: Computershare Investor Services proprietary Limited, 70 marshall Street, Johannesburg 2001, South Africa po Box 61051, marshalltown 2107, South Africa
Directors: G Q Routledge BA LLB (Chairman), G J Soll CA(SA) (managing director)‡, ADTPEnthoven BA, PhD (political Science), P R Gwangwa Bproc LLB, LLm, B A Stott CA(SA), I B
Hume CA(SA), ACMA‡, B Frodsham BCom‡, B W Reekie BSc(hons), FASSA‡
Company secretary: W van Zyl CA(SA) ‡ Executive director
Sponsor:
PricewaterhouseCoopers Corporate Finance Proprietary Limited
Date: 17/08/2012 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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