Wrap Text
Condensed Preliminary Group Results for the year ended 30 June 2016
Clientèle Limited
(Registration number 2007/023806/06)
Share code: CLI ISIN: ZAE000117438
Condensed Preliminary Group results for the year ended 30 June 2016
Net insurance premium increased by 13% to R1.7 billion
Diluted headline earnings per share increased by 14% to 122.99 cents
Return on average shareholders' interest of 55%
Dividend declared per share increased by 11% to 100 cents
Recurring Embedded Value Earnings of R1 billion
Value of New Business of R660 million
Recurring Return on Embedded Value of 23%
Comments
Introduction
The current challenging economic environment, with flat GDP growth in 2016, continues to negatively affect Clientèle's target market. Marginally lower
new business volumes for the year and higher withdrawals than expected in the second half of the year, have impacted the Clientèle Group ("The
Group") results for the year. At the same time investment markets have been, and continue to be, characterised by volatility and poor returns. The
increase in the risk discount rate ("RDR") since June 2015 has also negatively impacted the Group Embedded Value ("EV") results. Taking into account
these factors, the Board is satisfied with the results that the Group has managed to achieve this year.
Operating Results
Group Statement of Comprehensive Income
Net insurance premiums increased by 13% to R1.7 billion, on the back of the production of good quality business in recent years and higher average
premiums on new business, with a consequent diluted headline earnings per share increase of 14% on last year.
Net insurance benefits and claims of R325.8 million (2015: R300.5 million) were 8% higher than the previous year.
Investment returns of R120.9 million (2015: R154.9 million) were 22% down on last year but were nevertheless better than the return on the ALSI.
Headline earnings for the Group increased by 14% to R410.6 million (2015: R360.6 million) which has resulted in a return on average shareholders'
interest of 55% (2015: 56%).
The dividend declared per share increased by 11% to 100.00 cents (2015: 90.00 cents).
Group Embedded Value and Value of New Business
The higher withdrawals and an increase in reinsurance rates together with an increase in the RDR negatively impacted our increase in Group EV which
nevertheless increased from R4.6 billion to R5.2 billion. Recurring Embedded Value Earnings ("REVE") were also impacted and reduced by 9% to
R1 billion (2015: R1.1 billion).
The Value of New Business ("VNB") has been negatively impacted by the increase in the RDR to 12.1% (2015:11.8%) and this, together with the
factors referred to above have resulted in a decrease in VNB of 8% to R660.3 million (2015: a record R717.6 million).
New business profit margins have declined to 26.5% (2015: 28.9%).
The Group follows a conservative accounting practice of eliminating negative reserves. As acquisition costs are expensed upfront, the recovery of these
costs and the profits are deferred over the policy life. The present value of this discretionary margin amounts to R2.8 billion (2015: R2.5 billion).
The RDR calculation is comprehensively explained in the Group EV results section of the results and a sensitivity analysis is also provided.
Segment Results
Clientèle Life - Long-term insurance
Clientèle Life's Long-term insurance segment remains the major contributor to the Group's performance. It accounts for 78% (2015: 84%) or R517.0
million (2015: R602.3 million) of the Group's R660.3 million (2015: R717.6 million) VNB and recorded REVE of R763.3 million (2015: R911.4 million) for
the year. The segment generated R342.5 million (2015: R303.6 million) net profit for the year, an increase of 13%.
Clientèle General Insurance (Clientèle Legal) - Short-term insurance
Clientèle Legal's VNB of R138.5 million (2015: R111.4 million) increased by 24% due to good quality new business volumes for most of the year.
Clientèle Legal recorded REVE of R232.4 million (2015: R184.4 million), a commendable increase of 26%, and generated an 18% increase in net profit
for the year to R55.6 million (2015: R47.0 million).
Clientèle Loans Direct
The entire Clientèle Loans Direct (Pty) Ltd ("CLD") book consisting of all advances written up to 15 February 2013 has been sold and has resulted in a
reversal of previous impairments.
Advances subsequent to 16 February 2013 were concluded by way of a Profit Sharing Arrangement ("PSA") with WesBank (a division of FirstRand
Bank Limited) and Direct Axis (SA) (Pty) Ltd. These unsecured personal loans are on WesBank's statement of financial position and Clientèle will share
in profits when the PSA is in a cumulative net profit position.
Outlook
Management's immediate focus is on managing the recent increase in withdrawals with the aim of returning these to expected levels. The Board is
solidly behind Management in this endeavour and will continue to focus on a deeper understanding of customer needs and behaviour, customer
service and the production of quality and sustainable business.
The Group is committed to providing products that are relevant and meet policyholder's needs and delivering these to the market conveniently and
efficiently as well as creating and nurturing mutually beneficial partnerships with all its stakeholders that add value on a sustainable basis. The Board
remains convinced that there are attractive opportunities for growth and value creation in the Group's target market.
Dividend Declared
Notice is hereby given that the Directors have declared a final gross dividend of 100.00 cents (2015: 90.00 cents) per share on 11 August 2016 for the
year ended 30 June 2016.
The Board confirms that the Group will satisfy the solvency and liquidity tests immediately after completion of the dividend distribution. The dividend will
be subject to dividends tax. In accordance with the JSE Listings Requirements, the following additional information is disclosed:
- The dividend has been declared out of income reserves;
- The local dividends tax rate is 15% (fifteen percent);
- The gross local dividend amount is 100.00 cents (2015: 90.00 cents) per ordinary share for shareholders exempt from the dividends tax;
- The net local dividend amount is 85.00 cents (2015: 76.50 cents) per ordinary share for shareholders liable to pay the dividends tax;
- The local dividends tax amount is 15.00 cents (2015: 13.50 cents) per ordinary share for shareholders liable to pay the dividend withholding tax;
Clientèle Limited currently has 331,805,999 (2015: 330,629,599) ordinary shares in issue.
Clientèle Limited's income tax reference number is 9465071166.
In compliance with the requirements of Strate Limited, the electronic settlement and custody system used by the JSE Limited, the following salient
dates for the payment of the dividend are applicable:
Last day to trade Tuesday, 13 September 2016
Shares commence trading "ex" dividend Wednesday, 14 September 2016
Record date Friday, 16 September 2016
Payment date Monday, 19 September 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 14 September 2016 and Friday, 16 September 2016, both days
inclusive.
By order of the Board
G Q Routledge B W Reekie
Chairman Managing Director
Johannesburg
15 August 2016
Reviewed
Condensed Group Statement of Comprehensive Income
Year ended 30 June %
(R'000's) 2016 2015 Change
Revenue
Insurance premium revenue 1,852,516 1,641,189 13
Reinsurance premiums (126,525) (114,001)
Net insurance premiums 1,725,991 1,527,188 13
Other income 157,495 170,652
Interest income 21,209 22,759
Fair value adjustment to financial assets at fair value through profit or loss 120,916 154,889
Net income 2,025,611 1,875,488
Net insurance benefits and claims (325,777) (300,499)
Decrease in policyholder liabilities under insurance contracts 8,780 5,042
Decrease in reinsurance assets (226) (227)
Fair value adjustment to financial liabilities at fair value through profit or loss - investment
contracts (90,401) (72,275)
Interest expense (4,135) (2,752)
Reversal of impairment/(impairment of advances) 12,349 (12,380)
Operating expenses (1,061,901) (990,505) 7
Profit before tax 564,300 501,892 12
Tax (149,579) (137,501) 9
Net profit for the year 414,721 364,391 14
Attributable to:
- Non-controlling interest - ordinary shareholders 4,235 2,748
Equity holders of the Group - ordinary shareholders 410,486 361,643 14
Net profit for the year 414,721 364,391 14
Other comprehensive income:
Gains on property revaluation# 8,727 6,711
Income tax relating to gains on property revaluation# (9,544)* (1,742)
Other comprehensive income for the year - net of tax (817) 4,969
Total comprehensive income for the year 413,904 369,360 12
Attributable to:
- Non-controlling interest - ordinary shareholders 4,235 2,748
Equity holders of the Group - ordinary shareholders 409,669 366,612 12
# Items that cannot be recycled to profit or loss
* The increase is primarily in respect of the difference in accounting and tax treatment of the new office development
Condensed Group Statement of Financial Position
Year ended 30 June
(R'000's) 2016 2015
Assets
Intangible assets 36,435 27,088
Property and equipment 47,509 26,487
Owner-occupied properties^ 408,651 308,715
Deferred tax 45,666 31,395
Inventories 1,148 1,484
Reinsurance assets 2,789 3,015
Financial assets at fair value through profit or loss 1,854,928 2,051,487
Financial assets at amortised cost+ 264,023
Loans and receivables including insurance receivables 44,396 76,138
Current tax 1,459 5,258
Cash and cash equivalents 209,848 223,939
Total assets 2,916,852 2,755,006
Total equity and reserves 865,548 740,195
Liabilities
Policyholder liabilities under insurance contracts 690,102 698,882
Financial liabilities at fair value through profit or loss - investment contracts 909,819 942,336
Financial liabilities - loans at amortised cost ~ 98,932 35,177
Employee benefits 139,586 122,308
Deferred tax 38,977 30,071
Accruals and payables including insurance payables 168,469 181,620
Current tax 5,419 4,417
Total liabilities 2,051,304 2,014,811
Total equity and liabilities 2,916,852 2,755,006
^ Owner-occupied properties are disclosed at level 3 in the fair value measurement hierarchy
+ Zero coupon fixed deposits held in African Bank Limited ("Old Bank") were exchanged for new fixed deposits in new ABL ("Good Bank") on 04 April
2016 (restructuring date). These have been classified as financial assets at amortised cost. The fair value approximates amortised cost. In the prior year
the assets were held at fair value through profit or loss and disclosed at level 3 in the fair value measurement hierarchy
~ The increase in loans at amortised cost relates to financing of owner-occupied property
Tax
Year ended 30 June
2016 2015
(R'000's)
Current and deferred tax (146,708) (129,301)
Capital gains tax (2,400) (5,811)
Underprovision in prior years (471) (2,389)
Tax (149,579) (137,501)
The Individual Policyholder Fund has an estimated tax loss of R2.8 billion (2015: R2.7 billion)
Reconciliation of Net Profit to Headline Earnings
Year ended 30 June %
(R'000's) 2016 2015 Change
Net profit for the year attributable to equity holders of the Group 410,486 361,643 14
Add/(Less): Loss/(Profit) of disposal of property and equipment 81 (282)
Add: Impairment of intangible assets 1,234
Less: Taxation effects on loan write-off (2,037)
Headline earnings for the year 410,567 360,558 14
Ratios per Share
Year ended 30 June %
(Cents) 2016 2015 Change
Headline earnings per share 124.00 109.33 13
Diluted headline earnings per share 122.99 107.67 14
Earnings per share 123.98 109.66 13
Diluted earnings per share 122.97 107.99 14
Net asset value per share 260.86 223.87 17
Diluted net asset value per share 259.29 221.04 17
Dividends per share - paid 90.00 78.00 15
Dividends per share - declared 100.00 90.00 11
Ordinary shares in issue ('000) 331,806 330,630
Weighted average ordinary shares ('000) 331,093 329,799
Diluted average ordinary shares ('000) 333,809 334,877
Condensed Group Statement of Cash Flows
Year ended 30 June
(R'000's) 2016 2015
Cash flows from operating activities 73,061 128,721
Profit from operations adjusted for non-cash items 645,910 553,120
Working capital changes (51,906) 9,350
Separately disclosable items1 (99,959) (61,082)
Decrease in financial liabilities2 (122,918) (178,930)
Net disposal of investments3 59,375 146,796
Interest received 63,421 44,435
Dividends received 36,538 16,647
Dividends paid (297,713) (257,081)
Tax paid (159,687) (144,534)
Cash flows from investing activities4 (146,854) (113,205)
Cash flows from financing activities5 59,702 25,177
Net (decrease)/increase in cash and cash equivalents (14,091) 40,693
Cash and cash equivalents at beginning of the year 223,939 183,246
Cash and cash equivalents at end of the year 209,848 223,939
1. Interest and dividends received
2. Financial liabilities - investment contracts
3. Investments in respect of insurance operations and investment contracts
4. Mainly relates to the acquisition of intangible assets, property and equipment
5. External funding for new office building development
Segment Assets and Liabilities
Year ended 30 June
(R'000's) 2016 2015
Long-term insurance 1,791,430 1,653,027
Investment contracts 910,647 942,702
Short-term insurance 216,278 173,805
Other* 6,749 24,146
Inter segment (8,252) (38,674)
Total Group Assets 2,916,852 2,755,006
Long-term insurance 1,085,912 1,026,336
Investment contracts 909,819 942,336
Short-term insurance 60,852 50,328
Other* 2,973 34,485
Inter segment (8,252) (38,674)
Total Group Liabilities 2,051,304 2,014,811
* The decrease in other segment assets and liabilities is as a result of the disposal of the CLD advances book
Notes to the Results
These condensed consolidated financial results for the year ended 30 June 2016 have been reviewed, in terms of International Standards on Review
Engagements, (ISRE 2410), by PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion. A copy of the auditor's review report is
available for inspection at the company's registered office together with the financial results identified in the auditor's report.
The condensed consolidated preliminary Financial Statements were prepared under the supervision of Mr I B Hume (CA(SA), ACMA), the Group
Financial Director.
Accounting Policies
Statement of compliance
The condensed consolidated preliminary Financial Statements are prepared in accordance with the JSE Limited Listings Requirements for preliminary
reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in
accordance with the framework concepts, the measurement and recognition requirements of International Financial Reporting Standards ("IFRS"), the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council and must also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the condensed consolidated preliminary Financial Statements are in terms of IFRS and are
consistent with those applied in the previous consolidated Annual Financial Statements.
The preparation of the condensed consolidated preliminary Financial Statements in accordance with IFRS requires the use of certain critical accounting
estimates and judgments. The reported amounts in respect of the Group's insurance contracts, employee benefits and unquoted financial instruments
are affected by accounting estimates and judgments.
There was no major impact due to changes in previous assumptions and estimates used in deriving the amounts referred to above.
Changes to the Board
Messrs B Y Mkhondo and D Molefe were appointed as Non-Executive Directors on 01 January 2016 and 01 March 2016 respectively.
Mr G J Soll retired as a Non-Executive Director and Vice Chairman with effect 31 August 2016.
Capital and Other Commitments
The Group's wholly owned subsidiaries, Clientèle Properties East and Clientèle Properties North completed the new office building and parking
structure development within the Clientèle Office Park. The capitalised costs since inception amounted to R213 million of which R114 million was
guaranteed by Clientèle Limited.
Clientèle Limited has provided financial assistance by means of a net exposure through guarantees of R45 million for the purchase of approximately
3.92% of Clientèle's issued shares ("Ordinary Shares") by Yellowwoods Trust Investments (Pty) Ltd ("YTI") a wholly owned subsidiary of the Hollard
Foundation Trust, a BBBEE Trust.
Events After the Reporting Date
Clientèle Limited intends to provide further financial assistance through the issuance of a guarantee in the amount of R223 million (with a net unhedged
exposure of R155 million) in respect of additional Ordinary Shares which YTI has purchased or will purchase, the majority of which have already been
purchased. This will be voted on by shareholders at the next Annual General Meeting. Full details will be provided in the Integrated Annual Report.
Financial Assets and Liabilities held at Fair Value through Profit or Loss - Fair Value Hierarchy Disclosure
The following table presents the Group's financial assets and liabilities that are measured at fair value through profit or loss at 30 June 2016.
(R'000's) Level 1 Level 2 Level 3 Total
Assets
Listed equity securities 505,416 505,416
Unlisted equity securities 3,850 3,850
Promissory notes and fixed deposits 575,128 147,895 723,023
Funds on deposit 532,141 532,141
Fixed interest securities 47,256 3,893 51,149
Government and public authority bonds 39,349 39,349
Total assets 505,416 1,197,724 151,788 1,854,928
Liabilities
Financial liabilities at fair value through profit or loss 761,924 147,895 909,819
Total liabilities - 761,924 147,895 909,819
Policyholders' linked exposure to ABL through investments in zero coupon fixed deposits of R147.9 million as at 30 June 2016 are disclosed at level 3
on the fair value hierarchy as values are estimated indirectly using valuation techniques or models. Key inputs include the zero coupon risk free yield
curve.
Related Party Transactions
Transactions between Clientèle Limited and its subsidiaries have been eliminated on consolidation. There were no major related party transactions during
the period except for financial assistance provided to the Group's wholly-owned subsidiary, Clientèle Properties East in respect of the new office building
development.
Segment Information
The Group's results are analysed across South Africa ("SA") - geographical segment.
The Group's main operating segments are Long-term insurance, Investment contracts, Short-term insurance and Other (which is predominantly Clientèle Loans Direct).
The vast majority of policies written are in respect of individuals.
Segment Statements of Comprehensive Income
Inter segment
Long-term Investment Short-term (revenue)/
(R'000's) insurance contracts insurance Other expense Total
30 June 2016
Insurance premium revenue 1,550,567 301,949 1,852,516
Reinsurance premiums (126,525) (126,525)
Net insurance premiums 1,424,042 - 301,949 - - 1,725,991
Other income 150,012 9,351 498 3,968 (6,334) 157,495
Interest income 19,284 1,394 2,184 (1,653) 21,209
Fair value adjustment to financial assets at fair value through profit or loss 22,160 90,401 8,355 120,916
Segment revenue 1,615,498 99,752 312,196 6,152 (7,987) 2,025,611
Segment expenses and claims (1,147,067) (96,335) (235,300) 9,404 7,987 (1,461,311)
Net insurance benefits and claims (292,741) (33,036) (325,777)
Decrease/(increase) in policyholder liabilities under insurance contracts 10,314 (1,534) 8,780
Decrease in reinsurance assets (226) (226)
Fair value adjustment to financial liabilities at fair value through profit or loss (90,401) (90,401)
Interest expense (4,052) (1,736) 1,653 (4,135)
Reversal of impairment of advances 12,349 12,349
Operating expenses (860,362) (5,934) (200,730) (1,209) 6,334 (1,061,901)
Profit before tax 468,431 3,417 76,896 15,556 - 564,300
Tax (125,933) (957) (21,252) (1,437) (149,579)
Net profit for the year 342,498 2,460 55,644 14,119 - 414,721
Attributable to:
Non-controlling interest - ordinary shareholders 4,235 4,235
Equity holders of the Group - ordinary shareholders 342,498 2,460 55,644 9,884 - 410,486
30 June 2015
Insurance premium revenue 1,397,393 243,796 1,641,189
Reinsurance premiums (114,001) (114,001)
Net insurance premiums 1,283,392 - 243,796 - - 1,527,188
Other income 145,170 12,750 363 17,647 (5,278) 170,652
Interest income 13,777 1,018 14,088 (6,124) 22,759
Fair value adjustment to financial assets at fair value through profit or loss 71,428 73,497 9,964 154,889
Segment revenue 1,513,767 86,247 255,141 31,735 (11,402) 1,875,488
Segment expenses and claims (1,091,975) (79,774) (190,799) (22,450) 11,402 (1,373,596)
Net insurance benefits and claims (275,677) (24,822) (300,499)
Decrease/(increase) in policyholder liabilities under insurance contracts 5,877 (835) 5,042
Decrease in reinsurance assets (227) (227)
Fair value adjustment to financial liabilities at fair value through profit or loss (72,275) (72,275)
Interest expense (2,270) (6,606) 6,124 (2,752)
Impairment of advances (12,380) (12,380)
Operating expenses (821,948) (5,229) (165,142) (3,464) 5,278 (990,505)
Profit before tax 421,792 6,473 64,342 9,285 - 501,892
Tax (118,172) (1,812) (17,367) (150) (137,501)
Net profit for the year 303,620 4,661 46,975 9,135 - 364,391
Attributable to:
Non-controlling interest - ordinary shareholders 2,748 2,748
Equity holders of the Group - ordinary shareholders 303,620 4,661 46,975 6,387 - 361,643
Condensed Group Statement of Changes in Equity
SAR
and Bonus
Common Rights NDR: Non-
Share Share control Sub- Retained Schemes Reva- Sub- controlling
(R'000's) capital premium deficit total earnings reserve* luation total interest Total
Balance as at 1 July 2014 6,584 285,618 (220,273) 71,929 468,364 23,181 61,222 624,696 (5,850) 618,846
Ordinary dividends (257,031) (257,031) (257,031)
Total comprehensive income 361,643 4,969 366,612 2,748 369,360
- Net profit for the year 361,643 361,643 2,748 364,391
- Other comprehensive income 4,969 4,969 4,969
Shares issued 29 24,567 24,596 24,596 24,596
SAR and Bonus Rights Schemes allocated 9,020 9,020 9,020
Transfer from shares issued (20,094) (4,502) (24,596) (24,596)
Balance as at 30 June 2015 6,613 310,185 (220,273) 96,525 552,882 27,699 66,191 743,297 (3,102) 740,195
Balance as at 1 July 2015 6,613 310,185 (220,273) 96,525 552,882 27,699 66,191 743,297 (3,102) 740,195
Ordinary dividends (297,759) (297,759) (297,759)
Total comprehensive income 410,486 (817) 409,669 4,235 413,904
- Net profit for the year 410,486 410,486 4,235 414,721
- Other comprehensive income (817) (817) (817)
Shares issued 23 18,690 18,713 18,713 18,713
SAR and Bonus Rights Schemes allocated 9,208 9,208 9,208
Transfer from shares issued (10,330) (8,383) (18,713) (18,713)
Balance as at 30 June 2016 6,636 328,875 (220,273) 115,238 655,279 28,524 65,374 864,415 1,133 865,548
* SAR Scheme - the Clientèle Limited Share Appreciation Rights Scheme
* Bonus Rights Scheme - the Clientèle Limited Bonus Rights Scheme
* 1.2 million (2015: 1.4 million) shares were issued in terms of the SAR and Bonus Rights Schemes
Unaudited Group Embedded Value Results
Group Embedded Value
The Embedded Value ("EV") represents an estimate of the value of the Group, exclusive of goodwill attributable to future new business. The EV
comprises:
- the Free Surplus; plus,
- the Required Capital identified to support the in-force business; plus,
- the Present Value of In-force ("PVIF") business; less,
- the Cost of Required Capital ("CoC").
The PVIF business is the present value of future after tax profits arising from covered business in force as at 30 June 2016.
All material business written by the Group has been covered by EV Methodology as outlined in Advisory Practice Notice, APN 107 of the Actuarial
Society of South Africa, including:
- All long-term insurance business regulated in terms of the Long-term Insurance Act, 1998;
- Legal insurance business where EV Methodology has been used to determine future shareholder entitlements;
- Annuity income arising from non-insurance contracts where EV Methodology has been used to determine future shareholder entitlements; and
- Loans business where EV Methodology has been used to determine future shareholder entitlements.
The EV calculations have been certified by the Group's independent actuaries, QED Actuaries & Consultants (Pty) Ltd. The EV can be summarised as
follows:
Year ended 30 June
(R'000's) 2016 2015
Required capital 377,076 335,208
Free surplus 495,969 387,605
Adjusted Net Worth ("ANW") of covered business 873,045 722,813
CoC (83,190) (74,170)
PVIF 4,440,788 3,952,657
EV of covered business 5,230,643 4,601,300
The ANW of covered business is defined as the excess value of all assets attributed to the covered business, but not required to back the liabilities of
covered business. Free Surplus is the ANW less the Required Capital attributed to covered business.
Reconciliation of Total Equity to ANW
Year ended 30 June
(R'000's) 2016 2015
Total equity and reserves per the Statement of Financial Position 865,548 740,195
Adjusted for deferred profits and impact of compulsory margins on
investment business 11,820 11,327
Adjusted for minority interests (1,133) 3,102
Adjusting subsidiaries to Net Asset Value 31,427 21,884
SAR and Bonus Rights Schemes adjustment (34,617) (53,695)
ANW 873,045 722,813
The CoC is the opportunity cost of having to hold the Required Capital of R377.1 million as at 30 June 2016 (30 June 2015: R335.2 million). The
Required Capital has been set at the greater of the Statutory Termination Capital Adequacy Requirement (TCAR) and 1.25 times the Statutory Ordinary
Capital Adequacy Requirement (OCAR) for the Life company plus the Statutory Capital Requirement for the Short-term company.
The SAR and Bonus Rights Scheme adjustment recognises the future dilution in EV, on a mark to market basis, as a result of the SAR and Bonus
Rights Schemes.
Clientèle Life's Statutory Capital Adequacy Requirement (CAR) was calculated as the maximum of TCAR, OCAR and MCAR, with TCAR being the
highest of the three.
Clientèle Life's Statutory CAR cover ratio at 30 June 2016 was 2.35 times (30 June 2015: 2.32 times) on the statutory valuation basis.
Clientèle General Insurance's Statutory Capital Adequacy Requirement cover ratio at 30 June 2016 was 1.35 times (30 June 2015: 1.33 times) on the
statutory valuation basis.
Value of New Business ("VNB")
Year ended 30 June
(R'000's) 2016 2015
Total VNB 660,328 717,574
Present Value of New Business premiums 2,488,674 2,482,780
New Business profit margin 26.5% 28.9%
The VNB (excluding any allowance for the Management incentive schemes, which is shown as a separate component of EV Earnings), represents the
present value of projected after tax profits at the point of sale on new covered business commencing during the year ended 30 June 2016 less the
CoC pertaining to this business.
The New Business profit margin is the VNB expressed as a percentage of the present value of future premiums (and other annuity fee income)
pertaining to the same business.
Long-term Economic Assumptions
Year ended 30 June
(%) 2016 2015
Risk discount rate 12.1 11.8
Non-unit investment return 8.6 8.3
Unit investment return 9.8 9.3
Expense inflation 7.1 6.8
Corporate tax 28.0 28.0
The risk discount rate ("RDR") has been determined using a top-down weighted average cost of capital approach, with the equity return calculated
using Capital Asset Pricing Model ("CAPM") theory. In terms of current actuarial guidance, the RDR has been set as the risk free rate plus a beta
multiplied by the assumed equity risk premium. It has been assumed that the equity risk premium (i.e. the long-term expected difference between
equity returns and the risk free rate) is 3.5%. The beta pertaining to the Clientèle share price is relatively low, which is partially a consequence of the
relatively small free-float of shares. After consideration, the Board has decided to continue to use a more conservative beta of 1, as opposed to its
actual beta of 0.0812 in the calculation of the RDR.
The Board draws the reader's attention to the RDR sensitivity analysis in the table below which allows for sensitivity comparisons using various
alternative RDR's.
The resulting RDR utilised for the South African business as at 30 June 2016 was 12.1% (30 June 2015: 11.8%).
RDR Sensitivities
(R'000's) EV VNB
RDR 10.1% 6,021,044 836,915
RDR 11.1% 5,596,384 740,258
RDR 11.8% (as at June 2015) 5,341,679 682,357
RDR 12.1% 5,230,643 660,328
RDR 13.1% 4,940,989 591,335
RDR 14.1% 4,683,275 532,802
EV per Share
Year ended 30 June
(Cents) 2016 2015
EV per share 1,576.42 1,391.68
Diluted EV per share 1,563.62 1,370.63
Segment Information
The EV can be split between segments as follows:
(R'000's) ANW PVIF CoC EV
30 June 2016
SA - Long-term insurance 717,911 3,626,886 (54,990) 4,289,807
SA - Short-term insurance 152,490 810,689 (28,200) 934,979
SA - Investment contracts - 3,213 - 3,213
Other 2,644 - - 2,644
Total 873,045 4,440,788 (83,190) 5,230,643
30 June 2015
SA - Long-term insurance 609,521 3,306,547 (53,314) 3,862,754
SA - Short-term insurance 120,532 639,592 (20,856) 739,268
SA - Investment contracts - 2,629 - 2,629
Other (7,240) 3,889 - (3,351)
Total 722,813 3,952,657 (74,170) 4,601,300
The VNB can be split between segments as follows:
Year ended 30 June
(R'000's) 2016 2015
SA - Long-term insurance 517,003 602,313
SA - Short-term insurance 138,545 111,360
SA - Investment contracts 3,090 3,037
Other 1,690 864
Total 660,328 717,574
Embedded Value Earnings Analysis
EV earnings (per APN 107) comprises the change in EV for the year after adjusting for capital movements and dividends paid.
Year ended 30 June 2016 Year ended
30 June 2015
(R'000's) ANW PVIF CoC EV EV
A: EV at the end of the year 873,045 4,440,788 (83,190) 5,230,643 4,601,300
EV at the beginning of the year 722,813 3,952,657 (74,170) 4,601,300 3,938,694
Ordinary dividends (297,759) - - (297,759) (257,031)
B: Adjusted EV at the beginning of the year 425,054 3,952,657 (74,170) 4,303,541 3,681,663
EV earnings (A - B) 447,991 488,131 (9,020) 927,102 919,637
Impact of once-off economic assumption changes (6,474) 77,208 4,650 75,384 178,005
Recurring EV earnings 441,517 565,339 (4,370) 1,002,486 1,097,642
Recurring Return on EV 23.3% 29.8%
Return on EV 21.5% 25.0%
Components of EV earnings
VNB (290,897) 963,021 (11,796) 660,328 717,574
Expected return on covered business - 489,057 9,076 498,133 411 292
Expected profit transfer 735,344 (735,344) - - -
Withdrawal and unpaid premium experience variance (2,604) (46,038) (1,751) (50,393) 19,017
Claims and reinsurance experience variance (5,499) - - (5,499) (3,416)
Sundry experience variance 5,699 (623) - 5,076 4,167
Changes in modelling/basis and non-economic assumptions 1,768 (134,235) 101 (132,366) (31,951)
Expected return on ANW 47,899 - - 47,899 34,987
SAR and Bonus Rights Schemes 28,286 - - 28,286 13,221
Goodwill and Medium-term incentive schemes (50,231) 29,501 - (20,730) (68,498)
EV operating return 469,765 565,339 (4,370) 1,030,734 1,096,394
Investment return variances on ANW (28,248) - - (28,248) 1,248
Recurring EV earnings 441,517 565,339 (4,370) 1,002,486 1,097,642
Effect of economic assumption changes 6,474 (77,208) (4,650) (75,384) (178,005)
EV earnings 447,991 488,131 (9,020) 927,102 919,637
Registered office: Clientèle Office Park, Cnr Rivonia and Alon Roads, Morningside, Johannesburg 2196, South Africa PO Box 1316, Rivonia 2128,
South Africa
Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001, South Africa PO Box 61051,
Marshalltown 2107, South Africa
Sponsor: PricewaterhouseCoopers Corporate Finance Proprietary Limited
Directors: G Q Routledge BA LLB (Chairman); G J Soll CA(SA) (Vice Chairman); B W Reekie BSc(Hons), FASSA* (Managing Director); A D T Enthoven
BA, PhD (Political Science); B Frodsham BCom*; P R Gwangwa BProc LLB, LLM; I B Hume CA(SA), ACMA*; B Y Mkhondo BCom, MBA; D Molefe
MCom, CA(SA); B A Stott CA(SA); R D Williams BSc(Hons), FASSA
Company secretary: W van Zyl CA(SA) * Executive Director
website: www.clientele.co.za - e-mail: results@clientele.co.za
Date: 15/08/2016 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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