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 reviewed Group results and cash dividend declaration for the year ended 31 December 2011 Transformation programme complete Net asset value per share up 7% International solvency margin strengthens to 68% Full year dividend of 300 cents per share CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE for the year ended 31 December 2011 Gross written insurance premium 3,890,028 4,632,362 (16%) Insurance premium ceded to reinsurers (912,495) (978,900) Net written insurance premium 2,977,533 3,653,462 (19%) Net insurance premium earned 3,001,609 3,713,765 (19%) Reinsurance commission earned 163,249 168,526 Investment income 219,983 240,696 Employee benefits surplus - 105,552 Other income 16,181 5,747 Realised gains on available-for-sale financial assets 14,210 6,809 Net income 3,415,232 4,241,095 (19%) Net insurance claims 1,977,622 2,576,852 (23%) Acquisition costs 623,568 747,659 Impairment of available-for-sale financial assets 7,395 11,998 Administrative and other operating expenses 578,608 692,029 (16%) Investment expenses 6,376 4,939 Expenses 3,193,569 4,033,477 (21%) Profit from operating activities 221,663 207,618 7% Finance costs (28,200) (13,511) Share of profit/(loss) in associates 333 (1,708) Profit before tax 193,796 192,399 1% Income tax expense (69,231) (47,982) Profit for the year 124,565 144,417 (14%) Earnings per share (cents) 1,022.7 1,185.7
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME for the year ended 31 December 2011 Profit for the year 124,565 144,417 Other comprehensive income Exchange differences on translating foreign operations 1,855 (5,246) Realised gains on available-for-sale financial assets transferred from/recycled to the statement of financial performance (14,210) (6,809) Impairment losses transferred to statement of financial performance 7,395 11,998 Net unrealised gains on available-for-sale financial assets 25,724 94,060 Income taxation relating to components of other comprehensive income (2,032) (13,913) Total other comprehensive income for the year 143,297 224,507 (36%) CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2011 Assets Land, buildings and equipment 94,131 112,690 Intangible assets 56,424 53,519 Investments in associates 4,902 4,560 Financial assets 2,920,147 3,036,859 Deferred taxation asset - 18,468 Pre-payment of defined contribution fund 142,300 134,544 Deferred acquisition costs 94,504 102,192 Reinsurance assets 585,910 970,283 Income taxation asset 19,652 26,355 Cash and cash equivalents 981,803 1,072,454 Total assets 4,899,773 5,531,924 (11%) Equity and liabilities Total equity 2,014,945 1,883,827 Deferred taxation liability 19,451 - Employee benefit obligation 64,551 41,494 Financial liabilities held at amortised cost 183,831 281,597 Insurance liabilities 1,820,397 2,447,738 Deferred reinsurance commission 14,610 17,264 Trade and other payables 767,265 838,848 Provisions 14,723 21,156 Total equity and liabilities 4,899,773 5,531,924 (11%)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY as at 31 December 2011 Share capital and premium 4,650 4,650 Translation reserve (35,053) (36,908) Revaluation reserve 310,818 293,941 Statutory contingency reserve 314,095 375,365 Retained income 1,420,435 1,246,779 Balance at end of the period 2,014,945 1,883,827 7% CONDENSED CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2011 Cash effect from operating activities (13,543) 175,623 - Cash flows from operations (193,551) (125,972) - Dividend and interest income 206,783 227,185 - Taxation (paid)/refunded (26,775) 74,410 Cash effect from investing activities (64,928) (135,865) Cash effect from financing activities (12,180) - Net movement in cash and cash equivalents (90,651) 39,758 (328%) Cash and cash equivalents at beginning of the period 1,072,454 1,032,696 Cash and cash equivalents at end of the period 981,803 1,072,454 (8%) NOTES The Annual Financial Statements have been prepared under the supervision of the Chief Financial Officer (CFO), Pieter Bezuidenhout, Chartered Accountant (SA), and have been reviewed by PricewaterhouseCoopers Inc. in compliance with the requirements of the Companies Act of South Africa. 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 reviewed results for the year ended 31 December 2011 are consistent with those applied in the Annual Financial Statements for the year ended 31 December 2010.
2. Financial highlights Profit for the year 124,565 144,417 (14%) Adjusted for: Loss on disposal of plant and equipment 683 2,668 Gains on disposal of available-for-sale financial assets (14,210) (6,809) Impairment of available-for-sale financial assets 7,395 11,998 Tax effect 1,207 (1,100) Headline earnings 119,640 151,174 (21%) Headline earnings per share (cents) 982.3 1,241.2 Earnings per share (cents) 1,022.7 1,185.7 Ordinary dividends declared per share (cents) 200 - Dividends paid per share (cents) 100 - Number of shares in issue 12,179,500 12,179,500 Net asset value per share (cents) 16,544 15,467 7% International solvency margin (%) 67.7 51.6 31% Combined ratio (%) 97.9 97.5 3. Segmental information Gross written insurance premium Property 1,391,949 1,634,330 Transport 134,608 170,825 Motor 1,733,932 2,152,051 Engineering 355,940 384,088 Guarantee (2,250) 513 Liability 106,411 113,322 Accident & Health 169,438 177,233 Gross written insurance premium 3,890,028 4,632,362 (16%) Net income Property 948,487 1,131,118 Transport 122,468 145,796 Motor 1,682,462 2,105,553 Engineering 257,706 335,527 Guarantee (1,467) (28,006) Liability 73,917 99,456 Accident & Health 81,285 92,846 Other 250,374 358,805 Net income 3,415,232 4,241,095 (19%)
General insurance result Property (54,868) (64,244) Transport 54,401 14,722 Motor (7,202) 112,364 Engineering 22,115 61,945 Guarantee 20,695 (67,524) Liability (3,444) (8,308) Accident & Health 30,597 45,868 Net underwriting result 62,294 94,823 (34%) Attributable investment income 80,549 95,418 General insurance result 142,843 190,241 (25%) 4. Supplementary income statement Gross written insurance premium 3,890,028 4,632,362 Insurance premium ceded to reinsurers (912,495) (978,900) Net written insurance premium 2,977,533 3,653,462 (19%) Net insurance premium earned 3,001,609 3,713,765 Net insurance claims (1,977,622) (2,576,852) Net commission incurred (460,319) (579,134) Administrative and other operating expenses (501,374) (462,956) Net underwriting result 62,294 94,823 (34%) Attributable investment income 80,549 95,418 General insurance result 142,843 190,241 (25%) Impairment of available-for-sale financial assets (7,395) (11,998) Employee benefits surplus - 105,552 Non-technical expenses (77,234) (223,325) Other investment income 127,748 130,059 Investment expenses (6,376) (4,939) Net realised gains on disposal of investments 14,210 6,809 Profit before tax 193,796 192,399 1% Income tax expense (69,231) (47,982) Profit for the year 124,565 144,417 (14%) Comments The results for the year have been impacted by a decline in business volumes of 16% to R3.9 billion (2010: R4.6 billion), offset by improved loss ratios and operational efficiencies. Ongoing management actions continue to further improve profitability and growth.
Despite major weather-related losses in the first quarter of the year, the implementation of a number of claims initiatives has positively influenced the cost of claims which, at R2 billion, reflect a 23% improvement from R2.6 billion in the prior period. Expenses have been well controlled and reflect the benefits from the business transformation programme embarked on in 2010 together with additional initiatives undertaken in the current year. The general insurance result is a surplus of R142.8 million (2010: R190.2 million) and the underwriting result, which reflects a surplus of R62.3 million (2010: R94.8 million), is expected to be strengthened through the delivery of a focused growth strategy flowing through 2012. Attributable investment income at R80.5 million (2010: R95.4 million) is down on prior year due to lower premium volumes and a declining interest rate environment. Despite this, profit before tax at R194 million is up by 1% on prior year. Net asset value per share is up 7% from R155 to R165 and this improvement reflects in the strengthening of the international solvency margin from 51.6% to 67.7%. In addition, the Company has maintained its AA credit rating. Having considered the successful completion of the business transformation programme and the underlying profitability and financial position of the Company, the Directors have declared a final dividend for the year of 200 cents per share, bringing the full year dividend to 300 cents (2010: Nil). Changes in Directorate No changes have been made to the Directorate in 2011. Audit The information set out in the announcement has been reviewed by the Company s auditors, PricewaterhouseCoopers Inc. and their unqualified review opinion is available for inspection at 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. Cash Dividend Declaration No. 77 The Directors have declared a final cash dividend for 2011 of 200 cents per share bringing the total cash dividend for 2011 to 300 cents per share. The cash dividend is payable in accordance with the following timetable: Last day to trade in order to participate in the dividend: Friday, 24 February 2012 Shares commence trading ex the dividend from the commencement of business on: Monday, 27 February 2012 Record date: Friday, 2 March 2012 Payment date: Monday, 5 March 2012 Shareholders may not dematerialise or materialise their holdings of shares in the Company between Monday, 27 February 2012 and Friday, 2 March 2012, both days inclusive. Johannesburg 6 February 2012 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 Mered (Non-Executive) PC Rörich (Non-Executive) MN Mbekeni (Independent Non-Executive) DD Mokgatle (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 G 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