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ZSA
ZSA
ZSA - Zurich Insurance Company South Africa Limited - Announcement of the
unaudited group results for the six months ended 30 June 2010
Zurich Insurance Company South Africa Limited
(Incorporated in the Republic of South Africa)
(Registration number 1965/006764/06)
Share code: ZSA ISIN: ZAE000094496
("Zurich" or "the Group" or "the Company")
ANNOUNCEMENT OF THE UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE
2010
* Underwriting profitability restored
* Business transformation programme on track
* Combined ratio improves from 113.2% to 99.4% in six months
Condensed statement of financial performance for the six months ended 30 June
2010
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2010 2009 % 2009
Change
Rand thousands Unaudited Unaudited Audited
Gross written insurance
premium 2,426,538 2,872,055 (16%) 5,404,362
Insurance premium ceded
to reinsurers (535,480) (672,143) (1,139,621)
Net written insurance
premium 1,891,058 2,199,912 (14%) 4,264,741
Net insurance premium
earned 1,876,009 2,221,796 (16%) 4,265,262
Reinsurance commission
earned 77,897 62,381 137,380
Other income 12,823 3,711 28,007
Net investment income 96,206 161,262 329,163
Net income 2,062,935 2,449,150 (16%) 4,759,812
Net insurance claims 1,321,192 1,683,944 (22%) 3,670,143
Gross commission 377,646 407,678 (7%) 809,691
Administrative and other
operating expenses 422,710 227,245 86% 565,052
Expenses 2,121,548 2,318,867 (9%) 5,044,886
(Loss)/profit before tax (58,613) 130,283 (285,074)
Income tax
credit/(expense) 15,958 (23,854) 100,509
(Loss)/profit after tax (42,655) 106,429 (140%) (184,565)
Earnings per share
(cents) (350.2) 873.8 (140%) (1,515.4)
Condensed statement of comprehensive income
for the six months ended 30 June 2010
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2010 2009 % 2009
Change
Rand thousands Unaudited Unaudited Audited
(Loss)/profit for the
period (42,655) 106,429 (184,565)
Other comprehensive
income
Foreign currency
translation difference 336 (1,170) -
Gains/(losses) on
valuations - - 116,978
Realised gains on
available-for-sale
financial assets - (16,082) (108,631)
Unrealised gains on
available-for-sale
financial assets 23,705 - -
Impairment losses - - 1,539
Statutory contingency
reserve - (20,136) -
Taxation (3,334) 1,975 (2,321)
Total comprehensive
(loss)/income for the
period (21,948) 71,016 (131%) (177,000)
Condensed statement of financial position
as at 30 June 2010
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2010 2009 % 2009
Change
Rand thousands Unaudited Unaudited Audited
Assets
Other assets 133,728 335,580 147,500
Investments 1,798,315 1,779,283 1,912,749
Reinsurance assets 966,472 876,872 716,568
Current assets 1,076,564 1,110,951 1,150,629
Deferred taxation asset 93,581 - 75,199
Cash and cash
equivalents 1,384,705 1,310,456 1,032,696
Total assets 5,453,365 5,413,142 0.7% 5,035,341
Equity and liabilities
Total equity 1,632,285 1,880,226 1,662,179
Deferred taxation
liability - 22,124 -
Employee benefits
obligation 40,365 18,574 31,272
Insurance liabilities 2,551,951 2,449,094 2,298,714
Other liabilities 1,228,764 1,043,124 1,043,176
Total equity and
liabilities 5,453,365 5,413,142 0.7% 5,035,341
Condensed statement of changes in equity
as at 30 June 2010
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Rand thousands Unaudited Unaudited Audited
Share capital 3,045 3,045 3,045
Share premium 1,605 1,605 1,605
Revaluation reserve 228,975 163,165 208,605
Share-based payment reserve - 145,227 -
Translation reserve (31,326) (23,933) (31,662)
Statutory contingency reserve 449,291 445,195 414,174
Retained profit 980,695 1,143,063 1,063,553
Non-controlling interests - 2,859 2,859
Balance at end of the period 1,632,285 1,880,226 1,662,179
Condensed cash flow statement
for the six months ended 30 June 2010
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Rand thousands Unaudited Unaudited Audited
Cash retained from operating
activities 223,802 322,423 61,637
- Cash flows from operations 41,041 194,960 (117,151)
- Dividend and interest income 102,091 140,603 226,895
- Taxation paid 80,670 (13,140) (48,107)
Dividends paid - (17,051) (17,051)
Cash effect of investing
activities 128,207 (118,726) (135,700)
Net movement in cash and cash
equivalents 352,009 186,646 (91,114)
Cash and cash equivalents at
beginning of the period 1,032,696 1,123,810 1,123,810
Cash and cash equivalents at
end of the period 1,384,705 1,310,456 1,032,696
Notes
1. Accounting policies and basis of preparation
The financial results have been prepared in accordance with International
Financial Reporting Standards (IFRS), in particular IAS34 - Interim Financial
Reporting. The principal policies used in the presentation of the unaudited
results for the period ended 30 June 2010 are consistent with those applied in
the Annual Financial Statements for the year ended 31 December 2009.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 % 2009
Change
Rand thousands Unaudited Unaudited Audited
2. Financial highlights
(Loss)/profit for
the period (42,655) 106,429 (140%) (184,565)
Adjusted for:
Loss/(gains) on
disposal of plant
and equipment 700 - 1,466
Gains on disposal of
available-for-sale
financial assets - (23,053) (107,091)
Impairment of
available-for-sale
financial assets 3,595 - -
Add tax effect (602) 3,228 16,730
Headline earnings (38,962) 86,604 (145%) (273,460)
Headline earnings
per share (cents) (319.9) 711.1 (2,245.2)
Earnings per share
(cents) (350.2) 873.8 (1,515.4)
Dividends paid per
share (cents) - 140.0 140.0
Number of shares in
issue 12,179,500 12,179,500 12,179,500
Net asset value per
share (cents) 13,402 15,438 (13%) 13,647
International
solvency margin (%) 41.3 43.1 (4%) 39.0
Combined ratio (%) 99.4 101.1 2% 113.2
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Rand thousands Unaudited Unaudited Audited
3. Segmental information
Gross written insurance
premium
Property 872,492 945,531 1,784,433
Transport 95,964 96,800 195,025
Motor 1,110,152 1,341,827 2,593,873
Engineering 198,815 350,055 557,137
Guarantee (582) (4,032) (12,942)
Liability 55,837 50,470 111,313
Accident & Health 93,856 91,226 175,295
Miscellaneous 4 178 228
Total insurance premium
income 2,426,538 2,872,055 5,404,362
Net income
Property 569,857 596,515 1,221,757
Transport 76,650 84,219 162,297
Motor 1,060,768 1,315,845 2,490,270
Engineering 167,872 174,708 365,411
Guarantee 48 36,750 (26,054)
Liability 54,467 56,939 104,053
Accident & Health 50,841 12,714 82,658
Miscellaneous (26,597) 6,487 2,250
Other 109,029 164,973 357,170
Total net income 2,062,935 2,449,150 4,759,812
General insurance result
Property (17,061) (6,352) (153,595)
Transport 13,528 3,688 4,269
Motor 23,812 (7,054) (284,809)
Engineering 23,449 (9,264) (40,002)
Guarantee (21,248) (67) (97,236)
Liability (3,911) 1,905 6,880
Accident & Health (744) (2,380) 346
Miscellaneous (7,070) (4,992) (2)
Net underwriting result 10,755 (24,516) (564,149)
Attributable investment
income 43,911 55,263 105,821
General insurance result 54,666 30,747 (458,328)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 % 2009
Change
Rand thousands Unaudited Unaudited Audited
4. Supplementary
income statement
Gross written
insurance premium 2,426,538 2,872,055 (16%) 5,404,362
Insurance premium
ceded to
reinsurers (535,480) (672,143) (1,139,621)
Net written
insurance premium 1,891,058 2,199,912 (14%) 4,264,741
Net insurance
premium earned 1,876,009 2,221,796 (16%) 4,265,262
Net insurance
claims (1,321,192) (1,683,944) (3,670,143)
Net commission
incurred (299,749) (345,297) (672,310)
Administrative
and other
operating
expenses (244,313) (217,071) (486,958)
Net underwriting
result 10,755 (24,516) 144% (564,149)
Attributable
investment income 43,911 55,263 (21%) 105,821
General insurance
result 54,666 30,747 78% (458,328)
Impairments on
available-for-
sale
financial assets (3,595) (1,539) (1,539)
Non-technical
expenses (168,033) (5,833) (50,087)
Investment income 60,639 85,339 121,073
Investment
expenses (2,290) (1,484) (4,824)
Net realised
gains on disposal
of investments - 23,053 108,631
(Loss)/profit
before tax (58,613) 130,283 (285,074)
Income tax
credit/(expense) 15,958 (23,854) 100,509
(Loss)/profit
after tax (42,655) 106,429 (184,565)
Comments
The underwriting result reflects a surplus of R10.8 million compared to a
deficit of R24.5 million in the comparative period last year and the general
insurance result (which includes attributable investment income) improved from
R30.7 million to R54.7 million.
Gross premium income declined by 16% from R2.9 billion to
R2.4 billion. This is in line with the Company`s stated strategy to focus on
profitability and combined ratio improvement. Claims at R1.3 billion are down
22% on 2009 (R1.7 billion) and the initiatives currently underway to reshape the
claims and underwriting environment are contributing to the positive
underwriting result.
Investment income attributable to insurance operations declined by 21% and was
mainly impacted by changes in interest rates. Non-technical expenses increased
sharply to R168 million (2009: R5.8 million) but include a provision of R127
million, in terms of IFRS, for the full cost of the business transformation
programme that was embarked on in February 2010. This programme, which will
create a strong platform for future profitable growth, is already having a
positive impact on underwriting results. In addition, non-technical expenses
include a management fee of R32.7 million which came into effect in January 2010
and is payable to the majority shareholder.
Other investment income was influenced by market movements and declined by 29%
to R60.6 million.
The Group`s cash flows remain sound and the balance sheet reflects cash and cash
equivalents of R1.4 billion. At 41.3%, the solvency ratio remains within the
target range as set by the Board. Net asset value decreased by 13% to R134.02
per share at the end of the period.
Having regard to the decrease in earnings per share, the Directors have decided
not to declare an interim dividend.
Changes in directorate
Steve Phiri, who represented Royal Bafokeng Finance, resigned as a Director on 5
May 2010 and Pieter Rorich was appointed to replace him on 1 September 2010. The
Board thanked Steve for the very significant contribution he made to the
Company.
Ivan Perez resigned as Acting Group Company Secretary on
31 May 2010 and George Kostopoulos was appointed as Group Company Secretary on
17 June 2010.
Audit
The information set out in the announcement has not been audited or reviewed.
Compliance
The Group complies in all material respects with the Listings Requirements of
the JSE Limited and the King Report Code of Corporate Practices and Conduct.
By order of the Board
Johannesburg
2 September 2010
Board of Directors
JPG de Rauville (Independent Non-Executive Chairman)
GRC Munnoch (Chief Executive Officer)
P Bezuidenhout (Chief Financial Officer)
JPM Deiss (Non-Executive)
S Mader (Non-Executive)
MN Mbekeni (Independent Non-Executive)
DD Mokgatle (Independent Non-Executive)
SG Morris (Independent Non-Executive)
PC Rorich (Non-Executive) (appointed 1 September 2010)
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg
2001
Group Company Secretary and registered office
George Kostopoulos
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
Date: 02/09/2010 12:00:01 Produced by the JSE SENS Department.
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