Indequity Interim Results for the six months ended 31 March 2014 Indequity Group Limited Registration number: 1998/015883/06 Incorporated in the Republic of South Africa “Indequity” or “the Group” or “the Company” Share code: IDQ ISIN: ZAE000016606 INDEQUITY INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2014 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION 31 March 31 March 30 September 2014 2013 2013 Unaudited Unaudited Audited R'000 R'000 R'000 ASSETS Property and equipment 745 656 707 Intangible assets 530 532 530 Subrogation and salvage recoveries 1 310 1 946 1 552 Reinsurance portion of insurance contract provisions 36 32 26 Deferred tax asset 34 15 40 Loans and receivables 35 88 43 Cash and cash equivalents 23 810 23 246 24 938 Total Assets 26 500 26 515 27 836 EQUITY Capital and reserve attributed to the company's equity holders Share capital 23 24 23 Share premium 11 835 13 702 12 129 Accumulated profit 7 905 5 481 8 160 Equity attributed to equity holders of the parent 19 763 19 207 20 312 Non - controlling interest - - - Total Equity 19 763 19 207 20 312 LIABILITIES Insurance contract provisions 5 055 4 953 4 869 Tax payable 8 47 199 Dividends payable 86 3 3 Trade and other payables 1 588 2 305 2 453 Total Liabilities 6 737 7 308 7 524 Total shareholders' equity and liabilities 26 500 26 515 27 836 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME 6 Months 6 Months Ended Ended Year Ended 31 March 31 March 30 September 2014 2013 2013 Unaudited Unaudited Audited R'000 R'000 R'000 Gross written premium 20 236 18 651 38 282 Less: reinsurance premium (717) (683) (1 365) Net premium written 19 519 17 968 36 917 Change in provision for gross unearned premiums 122 (45) (54) Net insurance premium earned 19 641 17 923 36 863 Other income 39 39 74 Investment income 548 499 1 049 Total income 20 228 18 461 37 986 Claims incurred, net of reinsurance (9 768) (8 344) (17 478) Administration Expenses (5 922) (5 627) (10 900) Acquisition costs (1 469) (1 351) (2 767) Total Expenses (17 159) (15 322) (31 145) Profit before taxation 3 069 3 139 6 841 Taxation (861) (878) (1 901) Total comprehensive income for the period 2 208 2 261 4 940 Profit attributable to: - Equity holders of the parent 2 208 2 261 4 940 - Minority interest - - - 2 208 2 261 4 940 Earnings attributable to the equity holders Basic earnings per share (cents) 19.11 19.02 41.70 Diluted earnings per share (cents) 19.11 19.02 41.70 Dividends per share (cents) - Ordinary shares 17.50 - - - "A" class preference shares 3.33 - - CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY Non- Share capital Accumulated controlling Total and premium Profit interest R'000 R'000 R'000 R'000 Balance as at 1 October 2012 13 726 3 220 - 16 946 Changes in Equity for the year ended 30 September 2013 Total comprehensive income for the year ended 30 September 2013 4 940 4 940 Treasury shares purchased by subsidiary (1 574) (1 574) Balance at 30 September 2013 12 152 8 160 - 20 312 Changes in Equity for the 6 months ended 31 March 2014 Total comprehensive income for the 6 months ended 31 March 2014 2 208 2 208 Dividends Paid (2 463) (2 463) Treasury shares purchased by subsidiary (294) (294) Balance at 31 March 2014 11 858 7 905 - 19 763 Balance as at 1 October 2012 13 726 3 220 - 16 946 Changes in Equity for the 6 months ended 31 March 2013 Total comprehensive income for the 6 months ended 31 March 2013 2 261 2 261 Balance as at 31 March 2013 13 726 5 481 - 19 207 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS 6 Months 6 Months ended ended Year ended 31 March 31 March 30 September 2014 2013 2013 Unaudited Unaudited Audited R'000 R'000 R'000 Net cash from operating activities 1 684 3 329 6 738 Net cash used in investing activities (137) (225) (368) Net cash used in financing activities (2 675) - (1 574) Net movement in cash and cash equivalents (1 128) 3 104 4 796 Cash and cash equivalents at beginning of the period 24 938 20 142 20 142 Cash and cash equivalents at end of the period 23 810 23 246 24 938 EARNINGS PER SHARE 6 Months 6 Months ended ended Year ended 31 March 31 March 30 September 2014 2013 2013 Unaudited Unaudited Audited Basic earnings per share (cents) 19.11 19.02 41.70 Diluted earnings per share (cents) 19.11 19.02 41.70 Headline earnings per share (cents) 19.29 19.02 41.84 Fully diluted headline earnings per share (cents) 19.29 19.02 41.84 Number of shares - in issue 12 515 000 13 170 000 12 515 000 - weighted average 11 552 989 11 886 817 11 843 134 - diluted 11 552 989 11 886 817 11 843 134 The number of shares has been used in the calculations of earnings per share, diluted earnings per share, headline earnings per share and fully diluted headline earnings per share. Reconciliation of net profit attributable to shareholders of the parent to headline earnings Net profit attributable to shareholders of the parent (R'000) 2 208 2 261 4 940 Loss/Profit on sale of property and equipment (R'000) 21 - 16 - Before tax 29 - 22 - tax (8) - (6) Headline earnings (R'000) 2 229 2 261 4 956 REVIEW OF RESULTS Indequity is pleased to announce that it managed to sustain its excellent basic earnings per share reported in the previous six month period during one of the most difficult periods ever experienced by the short-term insurance industry in South Africa, with a number of our competitors reporting significant losses. Basic earnings per share increased from 19.02 cents for the six months ended 31 March 2013 to 19.11 cents for the six months ended 31 March 2014. Indequity managed to achieve a net claims ratio of 50%, significantly outperforming its industry peers. Indequity achieved this result despite severe weather catastrophes during the period. The most notable catastrophic events include floods in the Western Cape and two significant hailstorms in Gauteng in October and November 2013. The industry has already described the 28 November hailstorms in Gauteng as one of the most severe catastrophic events experienced in South Africa to date. It is estimated that local insurers and their reinsurers will suffer more than two billion Rand in damages. In order to trade profitably in the short term insurance market one needs to strike a sensible balance between premium collections on the one hand and claims pay-outs on the other. We attribute our underwriting success to our disciplined underwriting practices and effective control over claims expenses. Indequity’s main objective has always been to create shareholder wealth through the generation of superior returns on capital compared to its peers. We are pleased to announce that we have again managed to generate an excellent annualised pre-tax return on capital of 31%. PROSPECTS Management remains optimistic about the prospects for the second half of the year, but is cautious given the inherent uncertainty of any insurance business. The Company will continue its efforts to optimise profitability with a focus on building a superior quality business, building on successes of the past and improving efficiencies. ACCOUNTING POLICIES AND PREPARATIONS The principal accounting policies applied in preparing the condensed interim financial statements for the six months ended 31 March 2014 are in terms of International Financial Reporting Standards (“IFRS”) and are consistent with those of the annual financial statements for the year ended 30 September 2013. The interim financial statements were prepared in accordance with and containing information required by the recognition, measurement, presentation and disclosure requirements of IFRS, IAS 34 – Interim Financial Reporting as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and in compliance with the Listing Requirements of the JSE Limited and the Companies Act (No.71 of 2008), as amended. The financial information has been prepared in accordance with standards of IFRS that are currently effective. This may differ from interpretive guidance from the International Financial Reporting Interpretation Committee of International Accounting Standards Board. The condensed interim financial statements have not been audited, or reviewed by the Company’s auditors. SEGMENT INFORMATION No segment analysis has been prepared for the six months as the Group’s operations are focused only on short-term insurance activities. DIVIDENDS In accordance with the Group’s insurance operations’ current cash requirements, no interim dividends have been declared to ordinary shareholders. ON BEHALF OF BOARD LJ van Rensburg JF Zwarts Johannesburg Chief Executive Officer Chairman 22 May 2014 Directors: LJ van Rensburg, TE Vorster, JF Zwarts*, G Williamson*, AV van Jaarsveldt* (British), (*non-executive) Company secretary: R Fourie Transfer secretary: Link Market Services South Africa (Pty) Ltd Sponsor: KPMG Services (Pty) Ltd Registered address: First Floor, Cascade House, Constantia Office Park CNR 14th Avenue and Hendrik Potgieter Road Constantia Kloof 1709 Postal address: PO Box 5433 Weltevredenpark 1715 Telephone: (+27 11) 475 0816 Fax: (+27 11) 475 0877 Prepared by: R Fourie (Financial Accountant) under the supervision of TE Vorster (Financial Director) 7 Date: 22/05/2014 03:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 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