ZURICH INSURANCE COMPANY S A LTD - Announcement of the unaudited Group results for the six months ended 30 June 2015

Release Date: 26/08/2015 17:31
Code(s): ZSA
 
Wrap Text
Announcement of the unaudited Group results 
for the six months ended 30 June 2015

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

Announcement of the unaudited Group results 
FOR THE SIX MONTHS ENDED 30 JUNE 2015

ZURICH REPORTS A CONSOLIDATED PROFIT OF R0.1 MILLION FOR THE PERIOD ENDED JUNE 30, 2015
The Company's turnaround strategy is progressing as planned and is reflected in the positive movement of the results when compared to the prior year.
The improvement in the loss ratio of 11% over the prior year is attributable to focused attention to claims cost control and underwriting initiatives that
were implemented in 2014.

The deliberate corrective underwriting action taken on unprofitable portfolios within the Personal and Commercial segments has impacted premium volumes
which increased by 1% to R1.97 billion compared to the prior year of R1.96 billion. Growth and retention strategies are beginning to take hold on selected
books of business. Net earned premium reduced by 12% to R1.4 billion from R1.6 billion in June 2014.

The underwriting result is a deficit of R108 million compared to a deficit of R199 million in June 2014. The general insurance result, inclusive of
attributable investment income, shows a loss of R58 million compared to a loss of R172 million in June 2014.

Claims expenses have decreased by 25% from R1.2 billion in June 2014 to R0.9 billion.

Net commission decreased by 4% as a result of a change in the business mix. Operating expenses during the period were well managed and contained, with an
increase of 6% to R329 million (June 2014: R310 million).

Attributable investment income increased by 9% to R50 million (June 2014: R46 million) due mainly to an increase in interest rates. The investment
portfolio remained stable with limited realised gains recorded.

International solvency improved from 55% to 65% due to lower premium volumes and is in excess of the targeted solvency levels of 45% to 50%. The net asset
value of the Company dropped by 1% from 149 cents to 147 cents. The surplus asset ratio increased to 1.8 (2014:1.7).

Shareholders are reminded of the notice convening The Scheme Meeting which will be held at the Company’s Registered Office at 10:00 on Friday, 4 September 2015 
to consider and, if deemed fit, pass the resolutions required to authorise and effect the implementation of the scheme of arrangement as set out in the circular 
posted to shareholders on Friday, 7 August 2015.


Changes in Directorate

JPM Deiss retired and accordingly resigned as a Non-executive Director with effect from 27 May 2015.

Dolly Mokgatle, Chairman of the Board said: "I would like to thank Joseph for his commitment, wisdom and unfailing support. The global insight he brought
to the Company during his tenure was of great value to each one of us."

Audit

The information set out in this announcement has not been audited or reviewed by the Company's auditors, PricewaterhouseCoopers Inc.

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

The Directors have decided not to declare an interim cash dividend for the six months ended 30 June 2015.

By order of the Board

Johannesburg
26 August 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 Operating Officer), P Manley (Non-executive), JM Vice (Independent Non-executive), 
MN Mbekeni (Independent Non-executive), SG Morris (Independent Non-executive)

Transfer Secretaries
Computershare Investor Services (Pty) 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

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
for the six months ended 30 June 2015

                                                           Six months ended  Six months ended  % change   Year ended
                                                               30 June 2015      30 June 2014            31 Dec 2014
Rand thousands                                                    Unaudited         Unaudited                Audited
Gross written insurance premium                                   1,967,902         1,957,483        1%    3,697,871
Insurance premium ceded to reinsurers                              (556,293)         (350,219)              (723,503)
Net written insurance premium                                     1,411,609         1,607,264      (12%)   2,974,368
Net insurance premium earned                                      1,422,972         1,609,048      (12%)   3,056,228
Reinsurance commission earned                                        38,759            51,823                 99,724
Investment income                                                   118,688           117,168                221,444
Other income                                                          1,609             2,742                 21,085
Net realised gains on available-for-sale financial assets             1,715            43,149                194,213
Profit on sale of subsidiary                                          4,530                 -                      -
Net income                                                        1,588,273         1,823,930      (13%)   3,592,694
Net insurance claims                                               (932,111)       (1,236,335)            (2,257,670)
Acquisition costs                                                  (308,196)         (332,215)              (652,197)
Administrative and other operating expenses                        (331,097)         (312,613)              (617,929)
Investment expenses                                                  (2,700)           (2,333)                (6,094)
Impairment of available-for-sale financial assets                    (5,513)                -                (16,791)
Loss on sale of associate                                                 -                 -                 (3,426)
Expenses                                                         (1,579,617)       (1,883,496)     (16%)  (3,554,107)
Profit/(loss) from operating activities                               8,656           (59,566)                38,587
Finance costs                                                       (10,540)           (7,944)               (17,374)
Share in associates                                                       -               (83)                   263
Profit/(loss) before tax                                             (1,884)          (67,593)                21,476
Income taxation                                                       1,998            27,564                 20,045
Profit/(loss) for the year                                              114           (40,029)                41,521
Earnings per share basic and diluted (cents)                              1              (329)                   341

CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME 
for the six months ended 30 June 2015

                                                              Six months ended  Six months ended  % change   Year ended
                                                                  30 June 2015      30 June 2014            31 Dec 2014
Rand thousands                                                       Unaudited         Unaudited                Audited
Profit/(loss) for the year                                                 114           (40,029)                41,521
Other comprehensive income
Exchange differences on translating foreign operations                   2,942                 -                    214
Realised gains on available-for-sale financial assets 
recycled to the statement of financial performance                      (1,715)          (43,149)              (194,213)
Impairment losses transferred to statement of financial performance      5,513                 -                 16,791
Net unrealised gains on available-for-sale financial assets              3,669            78,000                 54,449
Income taxation relating to components of other comprehensive income    (4,353)          (19,138)                27,976
Total comprehensive income/(loss) for the year                           6,170           (24,316)    (125%)     (53,262)

CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2015
                                                    Six months ended  Six months ended  % change   Year ended
                                                        30 June 2015      30 June 2014            31 Dec 2014
Rand thousands                                             Unaudited         Unaudited                Audited
Cash effect from operating activities                         33,983          (154,422)              (123,594)
- Cash flows from operations                                 (71,393)         (270,372)              (331,238)
- Dividend and interest income                               108,146           109,224                204,071
- Taxation refunded/(paid)                                    (2,770)            6,726                  3,573
Cash effect from investing activities                       (114,839)           (6,981)                (3,268)
Cash effect from financing activities                              -           (24,359)               (24,359)
Net movement in cash and cash equivalents                    (80,856)         (185,762)     (56%)    (151,221)
Translation losses on cash and cash equivalents                  786               114                    (45)
Cash and cash equivalents at beginning of the year           542,013           693,279                693,279
Cash and cash equivalents at end of the year                 461,943           507,631       (9%)     542,013

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2015
                                                    Six months ended  Six months ended  % change   Year ended
                                                        30 June 2015      30 June 2014            31 Dec 2014
Rand thousands                                             Unaudited         Unaudited                Audited
Assets
Land, buildings and equipment                                 37,148            45,694                 43,282
Intangible assets                                            100,957            57,054                 85,740
Investments in associates                                          -             5,555                      -
Financial instruments                                      3,533,333         3,466,870              3,127,451
Prepayment of defined-contribution fund                       92,861           112,155                109,573
Deferred acquisition costs                                    81,373            91,767                 75,229
Reinsurance assets                                           894,716           584,438                617,634
Deferred taxation asset                                      154,818           113,155                150,344
Income taxation asset                                            184             1,157                  3,496
Property classified as held for sale                               -                 -                  2,920
Cash and cash equivalents                                    461,943           507,631                542,013
Total assets                                               5,357,333         4,985,476              4,757,682
Equity and liabilities
Total equity                                               1,794,861         1,813,709              1,792,536
Employee benefit obligation                                   44,493            42,919                 68,795
Reinsurance liability under cell management                   24,134            72,911                 24,048
Insurance liabilities                                      2,198,460         2,122,982              1,985,184
Deferred reinsurance commission                               32,616            27,919                 29,348
Income tax liability                                             787               413                      -
Trade and other payables                                   1,255,601           888,542                848,735
Provisions                                                     6,381            16,081                  9,036
Total equity and liabilities                               5,357,333         4,985,476              4,757,682

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 30 June 2015
                                                    Six months ended  Six months ended  % change   Year ended
                                                        30 June 2015      30 June 2014            31 Dec 2014
Rand thousands                                             Unaudited         Unaudited                Audited
Share capital and premium                                      4,650             4,650                  4,650
Translation reserve                                          (28,534)          (31,690)               (31,476)
Revaluation reserve                                          314,248           421,844                311,134
Share based payment reserve                                  (12,183)          (16,111)                (8,338)
Statutory contingency reserve                                 41,617            38,854                 38,761
Retained income                                            1,475,063         1,396,162              1,477,805
Balance at end of the year                                 1,794,861         1,813,709       (1%)   1,792,536

NOTES 
These Group results have been prepared under the supervision of the Chief Financial Officer, Yulandi van Dyk, CA (SA), in compliance with the requirements
of the Companies Act. 

1.  Accounting policies and basis of preparation 
    The condensed interim financial results for the six months ended 30 June 2015 have been prepared in accordance with International Financial Reporting
    Standards, the preparation and disclosure requirements of IAS 34 - Interim Financial Reporting, the Listings Requirements of the JSE Limited and the
    requirements of the South African Companies Act, 71 of 2008, as amended. The principal policies used in the presentation of the unaudited results for the
    period ended 30 June 2015 are consistent with those applied in the Annual Financial Statements for the year ended 31 December 2014. 

                                                                 Six months ended  Six months ended  % change   Year ended
                                                                     30 June 2015      30 June 2014            31 Dec 2014
    Rand thousands                                                      Unaudited         Unaudited                Audited
2.  Financial highlights
    Profit/(loss) for the year                                                114           (40,029)    (100%)      41,521
    Adjusted for:
    (Gains)/losses on disposal of property, plant and equipment            (4,541)              459                     13
    Gains on disposal of available-for-sale financial assets               (1,715)          (43,149)              (194,213)
    Loss on sale of associate                                                   -                 -                  3,426
    Impairment of available-for-sale financial assets                       5,513                 -                 16,791
    Tax effect                                                                199             7,166                 31,750
    Headline loss                                                            (429)          (75,553)     (99%)    (100,712)
    Headline loss per share (cents)                                            (4)             (620)                  (827)
    Earnings per share (cents)                                                  1              (329)                   341
    Ordinary dividends declared per share (cents)                               -                 -                      -
    Dividends paid per share (cents)                                            -               200                    200
    Number of shares in issue                                          12,179,500        12,179,500             12,179,500
    Net asset value per share (cents)                                      14,737            14,891       (1%)      14,718
    Surplus asset ratio                                                       1.8               1.7                    2.0
    International solvency margin (%) - annualised                           64.6              55.4       17%         60.3
    Combined ratio (%)                                                      107.6             112.4       (4%)       111.5

3.  Segmental information
    Gross written insurance premium
    Property                                                              749,912           687,253              1,345,337
    Transport                                                              66,598            73,444                131,090
    Motor                                                                 738,901           870,087              1,579,920
    Engineering                                                           210,713           151,508                316,879
    Guarantee                                                              10,431            16,907                 30,568
    Liability                                                             100,238            91,119                174,839
    Accident & Health                                                      91,109            67,165                119,238
    Total insurance premium income                                      1,967,902         1,957,483        1%    3,697,871
    Net income
    Property                                                              453,025           522,510                988,098
    Transport                                                              42,275            50,300                 95,367
    Motor                                                                 713,130           860,155              1,617,758
    Engineering                                                           135,503           127,313                262,503
    Guarantee                                                              12,037            15,452                 27,026
    Liability                                                              29,692            37,347                 74,907
    Accident & Health                                                      76,069            47,795                 90,293
    Investment income & other                                             126,541           163,058                436,742
    Net income                                                          1,588,273         1,823,930      (13%)   3,592,694
    General insurance result
    Property                                                              (34,378)          (83,696)              (153,932)
    Transport                                                               9,588           (11,351)               (32,989)
    Motor                                                                 (56,872)         (100,526)              (163,897)
    Engineering                                                             4,020           (16,313)                 8,430
    Guarantee                                                             (24,389)              862                 (1,691)
    Liability                                                               6,280            (3,017)                (4,400)
    Accident & Health                                                     (12,312)           (3,509)                 (2,901)
    Net underwriting results                                             (108,063)         (217,550)     (50%)    (351,380)
    Attributable investment income                                         49,849            45,839                 85,823
    General insurance result                                              (58,214)         (171,711)     (66%)    (265,557)

4.  Gross written premium by Company
    Gross written insurance premium by Company
    Zurich Insurance Company SA Limited                                 1,874,393         1,837,397              3,484,869
    Zurich Insurance Company Botswana Limited                              82,187            99,380                177,326
    Zurich Risk Financing SA Limited                                        8,468            17,707                 29,878
    Zurich Life SA Limited                                                  2,854             2,999                  5,798
    Total insurance premium income                                      1,967,902         1,957,483        1%    3,697,871

5.  Supplementary income statement
    Gross written insurance premium                                     1,967,902         1,957,483              3,697,871
    Insurance premium ceded to reinsurers                                (556,293)         (350,219)              (723,503)
    Net written insurance premium                                       1,411,609         1,607,264      (12%)   2,974,368
    Net insurance premium earned                                        1,422,972         1,609,048              3,056,228
    Net insurance claims                                                 (932,111)       (1,236,335)            (2,257,670)
    Net commission incurred                                              (269,437)         (280,392)              (552,472)
    Other operating expenses                                             (329,487)         (309,871)              (597,466)
    Net underwriting result                                              (108,063)         (217,550)     (50%)    (351,380)
    Attributable investment income                                         49,849            45,839                 85,823
    General insurance result                                              (58,214)         (171,711)     (66%)    (265,557)
    Impairments                                                            (5,513)                -                (16,791)
    Other investment income                                                62,828            63,302                115,705
    Investment expenses                                                    (2,700)           (2,333)                (6,094)
    Net realised gains on disposal of investments                           1,715            43,149                194,213
    Profit/(loss) before tax                                               (1,884)          (67,593)                21,476
    Income tax                                                              1,998            27,564                 20,045
    Profit/(loss) for the year                                                114           (40,029)                41,521

Web address
www.zurich.co.za

28 August 2015


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