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ZURICH INSURANCE COMPANY S A LTD - Announcement of the audited group results for the year ended 31 December 2014

Release Date: 20/02/2015 11:00
Code(s): ZSA     PDF:  
Wrap Text
Announcement of the audited group results for the year ended 31 December 2014

Zurich Insurance Company South Africa Limited (Incorporated in the Republic of South Africa)
(Registration number: 1965/006764/06) Income tax number: 9325210715 Share code: ZSA ISIN: ZAE000094496 
("Zurich South Africa" or "the Group" or "the Company")

ANNOUNCEMENT OF THE AUDITED GROUP RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2014

Earnings per share UP 125%
International solvency margin UP 4%
Underwriting result UP 2%

COMMENTS
Zurich reports a consolidated profit of R42 million for the year ended 31 December 2014

Zurich Insurance Company South Africa (JSE: ZSA) reported a consolidated profit after tax of R42 million for the year ended 31
December 2014 compared to the consolidated loss of R164 million the prior year.

"We have made measurable progress in implementing the turnaround strategy that was initiated at the end of 2013. Premium volumes reduced by 9% to R3.7 billion
compared to the prior year of R4.1 billion, as a result of corrective action taken on unprofitable books of business in line with the Group's strategy. 
Growth and retention strategies are beginning to take hold on selected books of business. Net earned premium reduced by 5% to R3.1 billion from
R3.2 billion in 2013," says Edwyn O'Neill, Chief Executive Zurich Insurance Company South Africa.

The Company reported an underwriting deficit of R351 million compared to the deficit of R455 million in 2013. The general insurance result, inclusive
of attributable investment income, also shows improvement to a deficit of R266 million compared to a deficit of R372 million the prior year.

Claims expenses decreased by 12% from R2.6 billion in 2013 to R2.3 billion in the period under review. O'Neill commented: "The attritional loss ratio
improvement was offset by a series of large losses in the second half of the year within the property portfolio."

Net commissions decreased slightly by 1%. Operating expenses during 2014 were well managed and contained with an increase of 4% to R597 million (2013:
R573 million), being below inflationary as well as contractual increases.

Attributable investment income increased by 3% to R86 million (2013: R83 million) due mainly to an increase in interest rates. Net realised gains
increased by 84% to R194 million (2013: R106 million) due to the disposal of listed shares to finance strategic projects together with the re-balancing
of portfolios.

International solvency improved from 58% to 60% due to lower premium volumes and is in excess of the targeted solvency levels of 45% to 50%. The net
asset value per share of the Company dropped by 4% as a result of the underwriting loss experienced for 2014. The surplus asset ratio is still high at
2.0 (2013: 1.9).

O'Neill concludes: "Since embarking on our turnaround strategy at the end of 2013 we have started to see positive developments in the core initiatives
aimed at improving long-term profitability. Our balance sheet remains strong, and our international solvency margin at 60% continues to exceed the
targeted solvency levels. We hold capital in excess of the minimum threshold to allow for more stringent requirements that are expected under the
Solvency Assessment Management (SAM) regime as well as planned capital expenditure on our new systems and other areas of growth. We are on track for our
2015-16 targets."

Changes in Directorate
S Mered resigned as Non-executive Director with effect from 31 December 2013. P Bezuidenhout resigned as Executive Director with effect from 31 August
2014. P Manley was appointed as Non-executive Director with effect from 14 February 2014. Y van Dyk was appointed as Executive Director with effect from
1 September 2014. C Molepe was appointed as Executive Director with effect from 8 October 2014.

Audit
These financial statements are considered preliminary based on the JSE Listings Requirements and are a summary of the complete set of the Group
financial statements on which the Independent Auditors, PricewaterhouseCoopers Inc., have expressed an unqualified audit opinion, which is available for
inspection at the Company's registered office.

This report is extracted from audited information, but is not itself audited. The Auditor's Report does not necessarily report on all of the information
contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement
they should obtain a copy of the Auditor's Report together with the accompanying financial information from the Company's registered office.
The Directors of Zurich Insurance Company South Africa Limited take full responsibility for the preparation of this report and that the financial
information has been correctly extracted from the underlying Annual Financial Statements. A copy of the Annual Financial Statements that have been
summarised in this report can be obtained from the Company's registered office.

Compliance
The Group complies in all material respects with the King Report Code of Corporate Practices and Conduct and the Listings Requirements of the JSE
Limited.

Dividend
Considering pending legislation relating to SAM, coupled with expected future capital outlays, the Directors have decided not to declare a final cash
dividend for the year ended December 2014.

By order of the Board

Johannesburg 19 February 2015

Board of Directors
DD Mokgatle (Independent Non-executive Chairman), JE O'Neill (Chief Executive Officer), Y van Dyk (Chief Financial Officer), C Molepe (Chief Operations
Officer), JPM Deiss (Non-executive), P Manley (Non-executive), JM Vice (Independent Non-executive), MN Mbekeni (Independent Non-executive),
SG Morris (Independent Non-executive)

Transfer Secretaries
Computershare Investor Services (Proprietary) Limited 70 Marshall Street, Johannesburg, 2001 Group Company Secretary and Registered Office
T Heydenrych Zurich Insurance Company South Africa Limited Registration number 1965/006764/06 15 Marshall Street, Ferreirasdorp, Johannesburg, 2001 
(PO Box 61489, Marshalltown, 2107)

Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited) 1 Merchant Place, Cnr Fredman Drive and Rivonia Road, Sandton, 2196

SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
for the year ended 31 December 2014
Rand thousands                                                         Year ended   Year ended  % change
                                                                      31 Dec 2014  31 Dec 2013
                                                                          Audited      Audited
Gross written insurance premium                                         3,697,871    4,084,625       (9%)
Insurance premium ceded to reinsurers                                    (723,503)    (856,203)
Net written insurance premium                                           2,974,368    3,228,422       (8%)
Net insurance premium earned                                            3,056,228    3,230,185
Reinsurance commission earned                                              99,724      132,244
Investment income                                                         221,444      217,682
Other income                                                               21,085        4,417
Net realised gains on available-for-sale financial assets                 194,213      105,609
Net income                                                              3,592,694    3,690,137       (3%)
Net insurance claims                                                   (2,257,670)  (2,553,317)
Acquisition costs                                                        (652,197)    (691,666)
Administrative and other operating expenses                              (617,929)    (662,122)
Investment expenses                                                        (6,094)      (5,923)
Impairment of available-for-sale financial assets                         (16,791)      (4,989)
Loss on sale of associate                                                  (3,426)           -
Expenses                                                               (3,554,107)  (3,918,017)      (9%)
Profit/(loss) from operating activities                                    38,587     (227,880)
Finance costs                                                             (17,374)     (20,469)
Share in associates                                                           263       (3,832)
Profit/(loss) before tax                                                   21,476     (252,181)
Income taxation                                                            20,045       88,057
Profit/(loss) for the year                                                 41,521     (164,124)     125%
Earnings per share basic and diluted (cents)                                  341       (1,348)

SUMMARISED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2014
Rand thousands                                                         Year ended   Year ended  % change
                                                                      31 Dec 2014  31 Dec 2013
                                                                          Audited      Audited
Profit/(loss) for the year                                                 41,521     (164,124)
Other comprehensive income
Exchange differences on translating foreign operations                        214        7,945
Realised gains on available-for-sale financial assets
recycled to the statement  of financial performance                      (194,213)    (105,609)
Impairment losses transferred to statement of financial performance        16,791        4,989
Net unrealised gains on available-for-sale financial assets                54,449      141,085
Income taxation relating to components of other comprehensive income       27,976       11,015
Total comprehensive loss for the year                                     (53,262)    (104,699)     (49%)

SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2014
Rand thousands                                                         Year ended   Year ended  % change
                                                                      31 Dec 2014  31 Dec 2013
                                                                          Audited      Audited
Cash effect from operating activities                                    (123,594)     118,527
- Cash flows from operations                                             (331,238)     (64,503)
- Dividend and interest income                                            204,071      197,213
- Taxation refunded/(paid)                                                  3,573      (14,183)
Cash effect from investing activities                                      (3,268)        (591)
Cash effect from financing activities                                     (24,359)     (36,539)
Net movement in cash and cash equivalents                                (151,221)      81,397     (286%)
Translation losses on cash and cash equivalents                               (45)         (63)
Cash and cash equivalents at beginning of the year                        693,279      611,945
Cash and cash equivalents at end of the year                              542,013      693,279      (22%)

SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2014
Rand thousands                                                         Year ended   Year ended  % change
                                                                      31 Dec 2014  31 Dec 2013
                                                                          Audited      Audited
Assets
Land, buildings and equipment                                              43,282       56,217
Intangible assets                                                          85,740       55,191
Investments in associates                                                       -        5,637
Financial instruments                                                   3,127,451    3,261,914
Prepayment of defined-contribution fund                                   109,573      127,694
Deferred acquisition costs                                                 75,229       85,596
Reinsurance assets                                                        617,634      657,987
Deferred taxation asset                                                   150,344      102,463
Income taxation asset                                                       3,496       11,610
Property classified as held for sale                                        2,920            -
Cash and cash equivalents                                                 542,013      693,279
Total assets                                                            4,757,682    5,057,588
Equity and liabilities                                                                               (4%)
Total equity                                                            1,792,536    1,869,252
Employee benefit obligation                                                68,795       56,869
Reinsurance liability under cell management                                24,048       68,292
Insurance liabilities                                                   1,985,184    2,096,873
Deferred reinsurance commission                                            29,348       24,959
Income tax liability                                                            -        1,874
Trade and other payables                                                  848,735      893,646
Provisions                                                                  9,036       45,823
Total equity and liabilities                                            4,757,682    5,057,588

SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 31 December 2014
Rand thousands                                                         Year ended   Year ended  % change
                                                                      31 Dec 2014  31 Dec 2013
                                                                          Audited      Audited
Share capital and premium                                                   4,650        4,650
Translation reserve                                                       (31,476)     (31,690)
Revaluation reserve                                                       311,134      406,131
Share based payment reserve                                                (8,338)      (9,243)
Statutory contingency reserve                                              38,761       37,610
Retained income                                                         1,477,805    1,461,794
Balance at end of the year                                              1,792,536    1,869,252       (4%)

NOTES
The Annual Financial Statements used as a basis for this report have been prepared under the supervision of the Chief Financial Officer, Yulandi van Dyk,
CA(SA), and have been audited by PricewaterhouseCoopers Inc. in compliance with the requirements of the Companies Act.
1.  Accounting policies and basis of preparation
    The financial results have been prepared in accordance with International Financial Reporting Standards. The principal policies used in the
    presentation of the audited results for the year ended 31 December 2014 are consistent with those applied in the Annual Financial Statements for the year
    ended 31 December 2013.
2.  Financial highlights
    Rand thousands                                                Year ended   Year ended  % change
                                                                 31 Dec 2014  31 Dec 2013
                                                                     Audited      Audited
    Profit/(loss) for the year                                        41,521     (164,124)     125%
    Adjusted for:
    Losses/(gains) on disposal of property, plant and equipment           13         (611)
    Gains on disposal of available-for-sale financial assets        (194,213)    (105,609)
    Loss on sale of associate                                          3,426            -
    Impairment of available-for-sale financial assets                 16,791        4,989
    Impairment of associate                                                -        5,124
    Restructuring provision                                                -       38,470
    Tax effect                                                        31,750        7,169
    Headline loss                                                   (100,712)    (214,592)      53%
    Headline loss per share (cents)                                     (827)      (1,762)
    Earnings per share (cents)                                           341       (1,348)
    Ordinary dividends declared per share (cents)                          -          200
    Dividends paid per share (cents)                                     200          300
    Number of shares in issue                                     12,179,500   12,179,500
    Net asset value per share (cents)                                 14,718       15,348       (4%)
    Surplus asset ratio                                                  2.0          1.9
    International solvency margin (%)                                   60.3         57.9        4%
    Combined ratio (%)                                                 111.5        114.1       (2%)

3.  Segmental information
    Rand thousands                                                Year ended   Year ended  % change
                                                                 31 Dec 2014  31 Dec 2013
                                                                     Audited      Audited
    Gross written insurance premium
    Property                                                       1,345,337    1,535,451
    Transport                                                        131,090      140,669
    Motor                                                          1,579,920    1,777,580
    Engineering                                                      316,879      334,396
    Guarantee                                                         30,568       23,947
    Liability                                                        174,839      138,496
    Accident and health                                              119,238      134,086
    Total insurance premium income                                 3,697,871    4,084,625       (9%)
    Net income
    Property                                                         988,098    1,056,990
    Transport                                                         95,367      105,449
    Motor                                                          1,617,758    1,763,907
    Engineering                                                      262,503      261,641
    Guarantee                                                         27,026       15,899
    Liability                                                         74,907       80,855
    Accident and health                                               90,293       77,688
    Investment income and other                                      436,742      327,708
    Net income                                                     3,592,694    3,690,137       (3%)
    General insurance result
    Property                                                        (153,932)    (208,999)
    Transport                                                        (32,989)     (19,084)
    Motor                                                           (163,897)    (262,532)
    Engineering                                                        8,430       (1,758)
    Guarantee                                                         (1,691)     (26,731)
    Liability                                                         (4,400)      28,580
    Accident and health                                               (2,901)      35,197
    Net underwriting results                                        (351,380)    (455,327)     (23%)
    Attributable investment income                                    85,823       83,372
    General insurance result                                        (265,557)    (371,955)     (29%)
4.  Gross written premium by company
    Zurich Insurance Company SA Limited                            3,484,869    3,805,906
    Zurich Insurance Company Botswana Limited                        177,326      237,265
    Zurich Risk Financing SA Limited                                  29,878       41,268
    Zurich Life SA Limited                                             5,798          186
    Total insurance premium income                                 3,697,871    4,084,625       (9%)
5.  Supplementary income statement
    Gross written insurance premium                                3,697,871    4,084,625
    Insurance premium ceded to reinsurers                           (723,503)    (856,203)
    Net written insurance premium                                  2,974,368    3,228,422       (8%)
    Net insurance premium earned                                   3,056,228    3,230,185
    Net insurance claims                                          (2,257,670)  (2,553,317)
    Net commission incurred                                         (552,472)    (559,422)
    Other operating expenses                                        (597,466)    (572,773)
    Net underwriting result                                         (351,380)    (455,327)     (23%)
    Attributable investment income                                    85,823       83,372
    General insurance result                                        (265,557)    (371,955)     (29%)
    Impairments                                                      (16,791)      (4,989)
    Non-technical expenses                                                 -      (84,932)
    Other investment income                                          115,705      110,009
    Investment expenses                                               (6,094)      (5,923)
    Net realised gains on disposal of investments                    194,213      105,609
    Profit/(loss) before tax                                          21,476     (252,181)
    Income tax                                                        20,045       88,057
    Profit/(loss) for the year                                        41,521     (164,124)

Web address
www.zurich.co.za

20 February 2015

Date: 20/02/2015 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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