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SANTAM LIMITED - Audited Abridged Results for the year ended 31 December 2012

Release Date: 27/02/2013 14:00
Code(s): SNT     PDF:  
Wrap Text
Santam Limited and its subsidiaries
Registration number 1918/001680/06
ISIN ZAE000093779
JSE share code: SNT
NSX share code: SNM

AUDITED ABRIDGED REPORT
SANTAM LIMITED AND ITS SUBSIDIARIES

AUDITED ABRIDGED REPORT FOR THE YEAR ENDED 31 DECEMBER 2012 - Gross written premium growth of 9.5%
- Underwriting margin of 4% significantly impacted by catastrophic events - 55% increase in investment returns - Group solvency ratio of 41% - Strong cash generation
- Tax charge significantly impacted by STC on special dividend and CGT inclusion rate change - Final dividend of 410 cents per share, up 15.5% FINANCIAL REVIEW
The Santam group achieved positive underwriting results in a financial year characterised by a number of catastrophe events in the final quarter, while also achieving 9.5% growth in gross written premium, significantly above industry growth. The negative financial impact of the tough underwriting conditions was partially offset by the excellent investment market returns in 2012. Income before tax of R1 700 million was 10% below the 2011 level achieved. The income tax charge increased by 28%, mainly due to a secondary tax on companies charge of R96 million on the special dividend paid in the first half of the year and an increase of R80 million in the deferred tax provision on fair value movements of equities due to the increase in the capital gains tax inclusion rate effective from 2013.
Headline earnings decreased by 18% compared to 2011. Net cash generated from operating activities increased to R1.7 billion (2011: R1.6 billion) while the solvency margin of 41% remains within our long-term target range of 35% to 45%, following the payment of the special dividend in March 2012. Return on capital was impacted by the adverse underwriting conditions and the increased taxation charge and reduced to 19.3% (2011: 25.0%). Excluding the impact of the taxation charges noted above, Santam achieved a 22.6% return on capital.
The South African insurance industry was significantly impacted by a number of catastrophe events during 2012, most notably the floods in Mpumalanga in January, a number of significant hail storms in Gauteng during October and November and a devastating fire at St Francis Bay, also in November. These events resulted in losses to Santam in excess of R400 million net of catastrophe reinsurance, more than three times the average annual catastrophe claims registered by the group over the past 12 years (restated to 2012 rand values and exposure). Despite the high claims volumes experienced following these events we comfortably met our obligations to our clients.
Our net claims margin was 68.3%, compared to 64.2% reported in 2011. The 2012 underwriting result of R623 million (2011: R1 186 million) and net underwriting margin of 4.0% (2011: 8.1%) was significantly impacted by these events and an increase in claims frequency and severity, most notably fire claims, resulting in the net underwriting margin dropping to below the medium-term target of 5% to 7%.
The benefits of our diversified business model were evident again this year. While our traditional intermediated and direct businesses were under bottom-line pressure in the final quarter, our specialist and reinsurance businesses were able to use their market position and expertise to protect margins and continue growing premiums.
Premium growth continued the solid performance of 2011, with gross written premium for the group increasing by 9.5% (2011:11.7%), gaining market share with industry premiums reflecting marginal growth. Positive growth was achieved across all significant insurance classes, with MiWay reaching gross written premiums of R1 billion, an increase of 38% compared to 2011.
The group's net acquisition cost ratio of 27.7% was in line with 2011. The increase in management expenses ascribed to the significant growth in MiWay which currently has a higher level of management expenses, as well as increased external management fees, was offset by a lower performance bonus provision and commission expenses. We have continued to invest 1% of net earned premium in strategic initiatives in the traditional Santam intermediated business to ensure the group achieves its long-term goals. Spending on current projects will continue for the next two years and we anticipate that the full benefits will start to accrue from 2016. These initiatives will ensure the group remains agile and competitive.
Investment returns on insurance funds of R415 million increased from the R388 million earned in 2011, resulting mainly from higher float levels despite lower interest rates in 2012.
The combined effect of insurance activities resulted in a net insurance income of R1 038 million or a 6.6% margin, compared to R1 574 million and a margin of 10.7% in 2011.
Following the strong equity markets, investment income, including dividends, interest received and management fees paid, increased to R787 million in 2012 compared to the R355 million generated in 2011. The weakening of the rand during 2012 had a positive impact on the valuations of our foreign currency assets held by our local operations of R14 million (2011: R90 million). Santam's investment portfolio performance compared favourably to the benchmarks set.
Net earnings from associated companies decreased from R85 million in 2011 to R40 million in 2012. Credit Guarantee Insurance Corporation of Africa Ltd delivered a positive contribution to associated earnings. The 26% investment in NICO Holdings Ltd in Malawi was impaired by R43 million following the devaluation of the Malawian currency which had an adverse effect on the banking and other financial services businesses of NICO Holdings.
Since the acquisition of Santam's controlling stake in Indwe during 2010, the market conditions have weakened due to increased competition and low premium increases resulting in a slowdown in Indwe's growth rate. An impairment of R35 million of the goodwill acquired and R25 million relating to software developed by Indwe was therefore deemed necessary.
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 South Africa's GDP growth will be less than 3% and headline inflation will average below 6% for the 2013 financial year. Short-term insurance industry growth for the 2012 year was very subdued, mainly due to soft premium rates in the market. Following these soft market conditions and the increase in claims frequency and cost during 2012, a hardening of insurance rates is expected in 2013. This should improve average premium levels. Santam is positioned to manage increases selectively through our market and risk segmentation approach across the group. In addition, our growth through diversification strategy positions the group well to leverage for growth in high-growth segments and territories.
The weakening of the rand during 2012 and the early part of 2013 will put further upwards pressure on claims cost, most notably on the cost of motor vehicle repairs due to the increased cost of imported vehicle parts. We are optimistic that our continued efforts to drive efficiency in the value chain and our overall focus on cost efficiency in the group will offset some of the impact of the upwards cost pressure.
Nominal interest rates are expected to remain at current levels during 2013. This will put continued pressure on the return on insurance funds in 2013.
Uncertainty remains in the investment markets due to the slow global recovery and a number of economic challenges in South Africa. Declaration of dividend (Number 118)
Notice is hereby given that the board has declared a final gross dividend of 410 cents per share (2011: 355 cents). Shareholders are advised that the last day to trade cum dividend will be Thursday, 14 March 2013. The shares will trade ex dividend from the commencement of business on Friday, 15 March 2013. The record date will be Friday, 22 March 2013, and the payment date will be Monday, 25 March 2013. Certificated shareholders may not dematerialise or rematerialise their shares between 15 March 2013 and 22 March 2013, both dates inclusive.
The dividend has been declared from income reserves and will be subject to dividends tax that was introduced with effect from 1 April 2012. There are R10 221 368 STC credits available for utilisation. Accordingly, the secondary tax on companies (STC) credit available is 8.56445 cents per share. The amount per share subject to the withholding of dividends tax at a maximum rate of 15% is therefore 401.43555 cents per share. A net dividend of 349.78467 cents per share will apply to shareholders liable for dividends tax at a rate of 15% and 410 cents per share for shareholders that qualify for complete exemption therefrom. The issued ordinary share capital as at 27 February 2013 is 119 346 417 shares. The company's income tax reference number is 9475/144/71/4.
In terms of the dividends tax legislation, the dividends tax amount due will be withheld and paid over to the South African Revenue Service (SARS) by a nominee company, stockbroker or Central Security Depository Participant (CSDP) (collectively "Regulated Intermediary") on behalf of shareholders. However, all shareholders should declare their status to their Regulated Intermediary, as they may qualify for a reduced dividends tax rate or they may even be exempt from dividends tax. The increase in the dividend per share includes a once-off adjustment of approximately 7% to the dividend per share declared to account for the STC saving for the company resulting from the introduction of dividends tax.
Preparation and presentation of the financial statements
The preparation of the audited financial statements was supervised by the Chief financial officer of Santam Ltd, HD Nel. The full set of annual financial results is published on our website at www.santam.co.za or can be requested from the company secretary. 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 offices. On behalf of the board
VP Khanyile IM Kirk
Chairman Chief Executive Officer 27 February 2013 Consolidated statement of financial position
Audited Audited At At 31 Dec 2012 31 Dec 2011 Notes R million R million ASSETS Non-current assets
Property and equipment 99 80 Intangible assets 990 994 Deferred income tax 221 207 Investments in associates 261 274 Financial assets - at fair value through income
Equity securities 6 3 551 3 856 Debt securities 6 6 957 6 160 Derivatives 6 6 1 Financial assets - at amortised cost
Cell owners' interest 24 40 Reinsurance assets 7 137 244 Current assets Financial assets - at fair value through income
Short-term money market instruments 6 917 1 775 Reinsurance assets 7 1 618 1 256 Deferred acquisition costs 340 332 Loans and receivables including insurance receivables 6 2 088 1 836 Income tax assets 57 36 Cash and cash equivalents 2 471 1 598 Total assets 19 737 18 689 EQUITY
Capital and reserves attributable to the company's equity holders
Share capital 107 107 Treasury shares (579) (635) Other reserves 77 1 492 Distributable reserves 5 904 5 072 5 509 6 036
Non-controlling interest 108 105 Total equity 5 617 6 141 LIABILITIES Non-current liabilities
Deferred income tax 284 115 Financial liabilities - at fair value through income
Debt securities 6 1 034 964 Investment contracts 6 83 48 Financial liabilities - at amortised cost
Cell owners' interest 712 643 Insurance liabilities 7 1 340 1 404 Provisions for other liabilities and charges - 1 Current liabilities
Financial liabilities - at fair value through income
Debt securities 6 24 24 Investment contracts 6 12 56 Financial liabilities - at amortised cost
Collateral guarantee contracts 75 114 Insurance liabilities 7 8 318 7 071 Deferred reinsurance acquisition revenue 147 102 Provisions for other liabilities and charges 161 105 Trade and other payables 1 886 1 828 Income tax liabilities 44 73 Total liabilities 14 120 12 548
Total shareholders' equity and liabilities 19 737 18 689 Consolidated statement of comprehensive income
Audited Audited Year ended Year ended 31 Dec 2012 31 Dec 2011 Change Notes R million R million %
Gross written premium 19 386 17 707 9.5% Less: Reinsurance written premium 3 564 3 033 Net written premium 15 822 14 674 7.8% Change in unearned premium
Gross amount 323 241 Reinsurers' share (127) (219) Net insurance premium revenue 15 626 14 652 6.6%
Investment income 8 859 676 Income from reinsurance contracts ceded 516 321 Net gain on financial assets and liabilities
at fair value through income 8 480 189 Net income 17 481 15 838 10.4%
Insurance claims and loss adjustment expenses 12 167 10 788 Insurance claims and loss adjustment expenses
recovered from reinsurers (1 488) (1 384) Net insurance benefits and claims 10 679 9 404 13.6%
Expenses for the acquisition of insurance contracts 2 540 2 324 Expenses for marketing and administration 2 349 2 114 Expenses for asset management services 31 28 Amortisation and impairment of intangible assets 116 68 Expenses 15 715 13 938 12.7%
Results of operating activities 1 766 1 900 (7.1%) Finance costs (106) (94) Net income from associates 83 85 Impairment on investment in associate (43) - Profit before tax 1 700 1 891 (10.1%) Income tax expense 9 (624) (486) Profit for the year 1 076 1 405 (23.4%) Other comprehensive income
Currency translation differences 23 108 Total comprehensive income for the year 1 099 1 513 Profit attributable to:
- equity holders of the company 1 027 1 376 - non-controlling interest 49 29 1 076 1 405 Total comprehensive income attributable to:
- equity holders of the company 1 050 1 484 - non-controlling interest 49 29 1 099 1 513
Earnings attributable to equity shareholders 12
Basic earnings per share (cents) 904 1 216 (25.7%) Diluted earnings per share (cents) 895 1 202 (25.5%)
Weighted average number of shares - millions 113.56 113.15 Weighted average number of ordinary shares for diluted
earnings per share - millions 114.81 114.47 Consolidated statement of changes in equity
Attributable to equity holders of the company
Distribu Non- Share Treasury Other -table controlling capital shares reserves reserves interest Total R million R million R million R million R million R million
Balance as at 1 January 2011 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 Profit for the year - - - 1 027 49 1 076 Other comprehensive income:
Currency translation differences - - 23 - - 23 Total comprehensive income for the year
ended 31 December 2012 - - 23 1 027 49 1 099 Sale of treasury shares - 56 - - - 56 Loss on sale of treasury shares - - - (57) - (57) Transfer to reserves - - (1 438) 1 438 - - Share-based payments - - - 50 - 50 Dividends paid - - - (1 626) (48) (1 674) Interest acquired from non-controlling
interest - - - - 2 2 Balance as at 31 December 2012 107 (579) 77 5 904 108 5 617 Consolidated statement of cash flows
Audited Audited Year ended Year ended 31 Dec 2012 31 Dec 2011 Notes R million R million
Cash generated from operations 2 362 2 522 Interest paid (106) (119) Income tax paid (521) (813) Net cash from operating activities 1 735 1 590 Cash flows from investing activities
Cash generated by investment activities 935 201 Acquisition of subsidiary 10 - (343) Cash acquired through acquisition of subsidiary 10 - 3 Purchases of equipment (63) (39) Purchases of software (31) (28) Proceeds from sale of equipment 1 1 Acquisition of associated companies (6) - Acquisition of book of business (81) - Net cash from/(used in) investing activities 755 (205) Cash flows from financing activities
Purchase of treasury shares - (37) Proceeds on sale of treasury shares - 4 Decrease in collateral guarantee contracts (39) - Decrease in investment contract liabilities (17) (413) Dividends paid to company's shareholders (1 626) (593) Dividends paid to non-controlling interest (48) (25) Increase in cell owners' interest 90 26 Net cash used in financing activities (1 640) (1 038)
Net increase in cash and cash equivalents 850 347 Cash and cash equivalents at beginning of year 1 598 1 143 Exchange gains on cash and cash equivalents 23 108 Cash and cash equivalents at end of year 2 471 1 598 Notes to the financial information 1. BASIS OF PRESENTATION
This abridged consolidated financial information for the year ended 31 December 2012 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 2012, which have been prepared in accordance with IFRSs. 2. ACCOUNTING POLICIES
The accounting policies applied are consistent with those of the previous and current 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 2012. 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 2012.
There have been no changes in the risk management policies since the previous year-end.
During 2012 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 2012. 5. SEGMENT INFORMATION
Segments have been identified by business activity, i.e. insurance activities and investment activities, as these activities mainly affect the group's risk and returns. No geographical segmentation is disclosed as southern Africa is regarded as one reportable segment for management purposes.
Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Chief Executive Officer, supported by the group executive committee (Exco).
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.
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; with 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.
In the past, group underwriting results included the MiWay deferred bonus plan expense (DBP) and the Santam BEE transaction costs. The MiWay DBP was introduced in 2011 to compensate management for the 10% stake they previously held in MiWay. An additional share incentive scheme was subsequently introduced representing a standard long-term incentive scheme. The BEE transaction costs relate to the Santam BEE transaction in 2007 in terms of which Santam shares are allocated to black staff and business partners.
The MiWay DBP, relating to the compensation of the 10% interest previously held by management in MiWay and the Santam BEE transaction costs are unrelated to the core underwriting performance of the group. Therefore, the underwriting results are shown excluding these expenses and the comparative segmental numbers have been restated as follows:
2011 2011 % of net earned Rm premiums
Net underwriting results as previously reported 1 131 7.7 MiWay DBP and Santam BEE transaction costs 55 0.4 Restated underwriting result 1 186 8.1
In previous financial years technical assets and liabilities per insurance class were disclosed. The disclosure has been discontinued given that the chief operating decision-maker does not review this information. 5.1 For the year ended 31 December 2012
Insurance Investment activities activities Unallocated Total Business activity R million R million R million R million 2012
Revenue 19 386 858 20 244 Gross written premium 19 386 19 386 Net written premium 15 822 15 822 Net earned premium 15 626 15 626 Claims incurred 10 679 10 679 Net commission 2 024 2 024 Management expenses 2 300 2 300 Underwriting result 623 623 Investment return on insurance funds 415 415 Net insurance result 1 038 1 038 Investment income net of management fee* 787 787 Income from associates net of impairment 40 40 MiWay DBP and Santam BEE transaction costs (57) (57) Amortisation and impairment of intangible assets (108) (108) Income before taxation 930 827 (57) 1 700
* Interest income of R88 million and finance cost of R106 million are included.
Gross written Underwriting premium result Insurance class R million R million 2012
Accident and health 286 10 Alternative risk 2 103 (7) Crop 687 38 Engineering 860 158 Guarantee 40 8 Liability 1 227 206 Miscellaneous 23 6 Motor 8 361 89 Property 5 291 32 Transportation 508 83 Total 19 386 623 Comprising:
Commercial insurance 9 660 767 Personal insurance 7 623 (137) Alternative risk 2 103 (7) Total 19 386 623 5.2 For the year ended 31 December 2011
Insurance Investment activities activities Unallocated Total Business activity - Restated R million R million R million R million 2011
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 2 059 2 059 Underwriting result 1 186 1 186 Investment return on insurance funds 388 388 Net insurance result 1 574 1 574 Investment income net of management fee* 355 355 Income from associates net of impairment 85 85 MiWay DBP and Santam BEE transaction costs (55) (55) Amortisation of intangible assets (68) (68) Income before taxation 1 506 440 (55) 1 891
* Interest income of R48 million and finance cost of R94 million are included.
Gross written Underwriting premium result Insurance class R million R million 2011
Accident and health 286 45 Alternative risk 1 924 (5) Crop 575 12 Engineering 736 121 Guarantee 17 9 Liability 1 157 143 Miscellaneous 16 1 Motor 7 621 511 Property 4 981 258 Transportation 394 91 Total 17 707 1 186 Comprising:
Commercial insurance 8 844 941 Personal insurance 6 939 250 Alternative risk 1 924 (5) Total 17 707 1 186
Audited Audited At At 31 Dec 2012 31 Dec 2011 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 11 431 11 792 Loans and receivables 2 088 1 836 Total financial assets 13 519 13 628
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
2012 Level 1 Level 2 Level 3 Total R million R million R million R million Equity securities Quoted
Listed 3 183 - - 3 183 Unitised funds - 94 - 94 Irredeemable preference shares 2 - - 2 Unquoted - - 272 272 Total equity securities 3 185 94 272 3 551 Debt securities Quoted
Government and other bonds 1 644 87 - 1 731 Redeemable preference shares - 275 - 275 Money market instruments
(long-term instruments) - 1 513 - 1 513 Unquoted
Government and other bonds - 31 - 31 Money market instruments
(long-term instruments) - 3 378 - 3 378 Redeemable preference shares - - 29 29 Total debt securities 1 644 5 284 29 6 957 Derivatives
Interest rate swaps - - 6 6 Total derivatives - - 6 6 Short-term money market instruments - 917 - 917 4 829 6 295 307 11 431
2011 Level 1 Level 2 Level 3 Total R million R million R million R 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 other bonds 1 575 182 - 1 757 Redeemable preference shares - 392 - 392 Money market instruments
(long-term instruments) - 1 371 - 1 371 Unquoted
Government and other bonds - 167 - 167 Money market instruments
(long-term instruments) - 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
Financial liabilities at fair value through income
2012 Level 1 Level 2 Level 3 Total R million R million R million R million
Debt securities 1 058 - - 1 058 Investment contracts - 95 - 95 1 058 95 - 1 153
2011 Level 1 Level 2 Level 3 Total R million R million R million R million
Debt securities 988 - - 988 Investment contracts - 104 - 104 988 104 - 1 092
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 the conditions set by the Regulator, Santam is required to maintain liquid assets equal to the value of the callable notes until their maturity. The callable notes are therefore measured at fair value to minimise undue volatility in the statement of comprehensive income.
Audited Audited At At 31 Dec 2012 31 Dec 2011 R million R million 7. INSURANCE LIABILITIES AND REINSURANCE ASSETS Gross Long-term insurance contracts
- claims incurred but not reported 14 9 Short-term insurance contracts
- claims reported and loss adjustment expenses 4 948 4 191 - claims incurred but not reported 1 311 1 246 - unearned premiums 3 385 3 029 Total insurance liabilities - gross 9 658 8 475 Non-current liabilities 1 340 1 404 Current liabilities 8 318 7 071 Recoverable from reinsurers Long-term insurance contracts
- claims incurred but not reported 2 1 Short-term insurance contracts
- claims reported and loss adjustment expenses 977 920 - claims incurred but not reported 192 150 - unearned premiums 584 429 Total reinsurers' share of insurance assets 1 755 1 500 Non-current assets 137 244 Current assets 1 618 1 256 Net Long-term insurance contracts
- claims incurred but not reported 12 8 Short-term insurance contracts
- claims reported and loss adjustment expenses 3 971 3 271 - claims incurred but not reported 1 119 1 096 - unearned premiums 2 801 2 600 Total insurance liabilities - net 7 903 6 975
8. INVESTMENT INCOME AND NET GAINS/(LOSSES) ON FINANCIAL
ASSETS AND LIABILITIES AT FAIR VALUE THROUGH INCOME
Investment income 859 676 Dividend income* 342 150 Interest income 503 436 Foreign exchange differences 14 90 Net realised gains on financial assets 358 140 Net fair value gains on financial assets designated as at
fair value through income 360 21 Net fair value (losses)/gains on financial assets held
for trading (166) 9 Net realised gains on derivatives 5 80 Net fair value losses on financial liabilities designated
as at fair value through income (77) (61) Net fair value losses on debt securities (70) (39) Net fair value losses on investment contracts (7) (22) 1 339 865
* Dividend income for the group includes a dividend of R181 million from Santam's run-off international business.
Audited Audited At At 31 Dec 2012 31 Dec 2011 R million R million 9. TAX South African normal taxation
Current year 433 567 Charge for the year 294 531 STC 139 36 Prior year 10 (4) Foreign taxation - current year 38 34 Income taxation for the year 481 597 Deferred taxation 143 (111) Current year 139 (111) STC 4 -
Total taxation 624 486 Reconciliation of taxation rate (%)
Normal South African taxation rate 28.0 28.0 Adjust for
- Exempt income (2.6) (2.2) - Investment results (3.2) (1.9) - Change in CGT inclusion rate 4.7 - - STC 8.4 1.9 - Other 1.4 (0.1) Net increase/(reduction) 8.7 (2.3) Effective rate (%) 36.7 25.7 10. BUSINESS COMBINATIONS 2012 Additions Riscor Underwriting Managers (Pty) Ltd
The group acquired 100% of Riscor Underwriting Managers (Pty) Ltd (Riscor) on 1 September 2012 for a nominal amount. Riscor acquired from Topexec Management Bureau (Pty) Ltd and Combined Administration Management Services (Pty) Ltd their broker administration businesses, comprising fixed assets and intangible assets on 1 September 2012 and 1 November 2012 respectively. The merged Riscor entity will operate as an independent administration business.
The total purchase price amounted to R29 million. Intangible assets of R39 million and deferred taxation of R11 million were recognised. Net operating assets amounted to approximately R1 million. Disposals Stilus Underwriting Managers (Pty) Ltd
On 1 January 2012, the Santam Group sold its 60% interest in Stilus Underwriting Managers (Pty) Ltd.
Audited Audited At At 31 Dec 2012 31 Dec 2011 R million R million
Details of assets and liabilities sold are as follows:
Deferred taxation (2) - Trade and other payables 4 - Net asset value sold 2 - Plus: Non-controlling interest (2) - Purchase consideration received - - 2011 Additions 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.
b) Mirabilis Engineering a) MiWay Underwriting Group Managers Holdings Ltd (Pty) Ltd Total Details of the assets and liabilities acquired at fair value are as follows:
Deferred taxation - (5) (5) Intangible assets - 18 18 Financial assets at fair value through income - 5 5 Loans and receivables - 1 1 Cash and cash equivalents - 3 3 Trade and other payables - (4) (4) Net asset value acquired - 18 18 Goodwill - 28 28 Excess of acquirer's interest in the net fair value of the
acquirer's identifiable assets, liabilities and contingent
liabilities over cost - (38) (38) Less: Investment in associated share previously acquired - (8) (8) Deferred purchase consideration paid 343 - 343 Purchase consideration paid 343 - 343
Audited Audited At At 31 Dec 2012 31 Dec 2011 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.
Net excess received on sale/acquisition of non-controlling interest - (38) Settled through acquisition of Mirabilis Engineering Underwriting Managers (Pty) Ltd - 38 Purchase consideration paid - - 12. EARNINGS PER SHARE Basic earnings per share
Profit attributable to the company's equity holders (R million) 1 027 1 376 Weighted average number of ordinary shares in issue (million) 113.56 113.15 Earnings per share (cents) 904 1 216 Diluted earnings per share
Profit attributable to the company's equity holders (R million) 1 027 1 376 Weighted average number of ordinary shares in issue (million) 113.56 113.15 Adjusted for share options 1.25 1.32 Weighted average number of ordinary shares for diluted earnings
per share (million) 114.81 114.47
Diluted basic earnings per share (cents) 895 1 202 Headline earnings per share
Profit attributable to the company's equity holders (R million) 1 027 1 376 Impairment of goodwill 35 - Impairment of software 25 - Impairment of investment and associate 43 - Tax charge and non-controlling interest - - Headline earnings (R million) 1 130 1 376
Weighted average number of ordinary shares in issue (million) 113.56 113.15 Headline earnings per share (cents) 995 1 216 Diluted headline earnings per share
Headline earnings (R million) 1 130 1 376 Weighted average number of ordinary shares for diluted earnings
per share (million) 114.81 114.47 Diluted headline earnings per share (cents) 984 1 202 13. DIVIDENDS PER SHARE
Ordinary dividend per share (cents) 640 555 Special dividend per share (cents) - 850 (I) Analysis of shareholders
Number of % of total Number % Analysis of shareholders shareholders shareholders of shares Interest
1 - 100 shares 928 16.66% 67 791 0.06% 101 - 1 000 shares 2 829 50.85% 1 247 405 1.05% 1 001 - 50 000 shares 1 732 31.12% 9 640 750 8.08% 50 001 - 100 000 shares 34 0.61% 2 350 135 1.97% 100 001 - 10 000 000 shares 40 0.72% 26 742 737 22.41% More than 10 000 000 shares 2 0.04% 79 297 599 66.43% Total 5 565 100.00% 119 346 417 100.00% Type of shareholder
Individuals 3 871 69.57% 4 624 484 3.89% Companies 347 6.23% 79 595 419 66.68% Growth funds/unit trusts 142 2.55% 20 804 109 17.43% Nominee companies or trusts 1 107 19.89% 4 116 457 3.45% Pension and retirement funds 98 1.76% 10 205 948 8.55% Total 5 565 100.00% 119 346 417 100.00%
Shareholders other Shareholders in SA than in SA Total shareholders
Nominal % Nominal % Nominal % Shareholder spread number Interest number Interest number Interest
Public shareholders 5 411 26.27% 140 100.00% 5 551 28.77% Directors 10 0.14% - - 10 0.14% Trustees of employees' share scheme 1 0.00% - - 1 0.00% Holdings of 5% or more 3 73.59% - - 3 71.09% Sanlam Ltd 1 59.10% - - 1 57.09% Central Plaza Investments
112 (Pty) Ltd* 1 9.68% - - 1 9.35% Guardian National Insurance Ltd** 1 4.81% - - 1 4.65%
Total 5 425 100.00% 140 100.00% 5 565 100.00%
The analysis includes the shares held as treasury shares. * BEE special-purpose company ** Owner of treasury shares (II) Analysis of debt security holders
Number of % of total debt debt security security Number % holders holders of units Interest Analysis of debt security holders
1 - 50 000 units 1 1.09% 31 700 - 50 001 - 100 000 units 2 2.17% 185 600 0.02% 100 001 - 1 000 000 units 31 33.70% 18 467 000 1.85% 1 000 001 - 10 000 000 units 42 45.65% 176 822 000 17.68% More than 10 000 000 units 16 17.39% 804 493 700 80.45%
Total 92 100.00% 1 000 000 000 100.00% Type of debt security holder
Brokers 2 2.17% 53 531 700 5.35% Endowment funds 5 5.43% 13 458 600 1.35% Insurance companies 9 9.78% 213 792 800 21.38% Investment companies 1 1.09% 125 000 000 12.50% Medical aid schemes 2 2.17% 1 150 000 0.12% Mutual funds 35 38.04% 209 120 900 20.91% Nominees and trusts 2 2.17% 1 490 000 0.15% Pension funds 33 35.89% 356 546 000 35.65% Private companies 3 3.26% 25 910 000 2.59%
Total 92 100.00% 1 000 000 000 100.00%
Debt security holders in SA
Nominal % Debt security holder spread number Interest
Government Employees Pension Fund 214 767 500 21.48% Old Mutual Life Assurance Company (South Africa) Ltd 145 051 400 14.51% Momentum Group Ltd 125 000 000 12.50% RMB Capital Markets 53 500 000 5.35% Other 461 681 100 46.16% Total 1 000 000 000 100.00% Directors Executive directors
IM Kirk (Chief Executive Officer), HD Nel (Chief Financial Officer), Y Ramiah Non-executive directors
VP Khanyile (Chairman), B Campbell, MD Dunn, MP Fandeso, BTPKM Gamedze, GG Gelink, VP Khanyile (Chairman), MLD Marole, JP Moller, MJ Reyneke, J van Zyl, YG Muthien Sponsor Investec Bank Ltd Company secretary Masood Allie 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 Registered office 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
Date: 27/02/2013 02:00:00 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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