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INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Clientèle Limited
Registration number: 2007/023806/06
Share code: CLI
ISIN: ZAE000117438
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Headline earnings per share decreased by 35%* to 46.94 cents
Annualised Return on Average shareholders' interest of 9%
Recurring Embedded Value Earnings of R362 million
Annualised Recurring Return on Embedded Value 13.2%
Value of New Business of R125 million
* Compared to restated 31 December 2022 comparatives
INTRODUCTION
The new accounting standard IFRS 17 Insurance Contracts ("IFRS 17") became
effective on 1 July 2023 for Clientèle Limited and its subsidiaries ("the
Group") and the December 2022 financial results have been restated in accordance
with this new standard. This change in accounting standard has mainly impacted
the results reported for Clientèle Life Assurance Company Limited ("Clientèle
Life"). The introduction of IFRS 17 resulted in a R2.3 billion increase in Net
Asset Value on transition date, and lower current period profits largely as a
result of the discounted value of the cashflows being higher using the closing
yield curve and thus creating a loss on this item for the current period, as
compared to a profit in the comparative period. Clientèle General Insurance
Limited's ("Clientèle General") results remain largely unchanged. This standard
has not impacted the strategic direction, management or the underlying
fundamentals of the Group, nor has it impacted its cash generating ability.
Despite a 35% decline in net profit for the period and earnings and headline
earnings per share, mainly as a result of lower IFRS 17 profits from insurance
operations in Clientèle Life, as described below, the Group remains in a sound
solvency and liquidity position and continues to generate strong positive
cashflows.
Investment markets remained volatile during the reporting period resulting in
a decrease of R22 million in investment profits and an annualised investment
return of 10% (2022: 12%) from its investment portfolios.
Low economic growth and high consumer price inflation coupled with high interest
rates, loadshedding and unemployment continue to exert pressure on the consumer.
The Group is reporting muted results for the reporting period as a result of
the continued pressure on premium collections and the consequent increase in
policyholder withdrawals.
It is anticipated that initiatives such as the extremely well received "December
is on Us" campaign and the recently launched (February 2024) Clientèle customer
loyalty program, "Clientèle Royalty", will have a positive impact on
policyholder retention and lower withdrawals.
OPERATING RESULTS
Group Statement of Comprehensive Income
Insurance revenue is 5% lower than the previous period at R972.5 million (2022:
R1 billion) mainly as a result of a lower release of the Contractual Service
Margin ("CSM") and Risk Adjustment ("RA").
Higher than expected withdrawal experience in the 2023 financial year ending
30 June 2023 resulted in a downward adjustment to the CSM compared to the
restated prior period.
Insurance service expenses are 7% lower than the prior period mainly due to
R22.8 million lower net losses recognized for onerous contracts in the current
reporting period. This measure represents the present value of future cash
flows of onerous contracts issued.
Total insurance finance income or (expense) from insurance and reinsurance
contracts is 45% lower than the restated comparative period at R63 million
(2022: R115 million) mainly due to a R75.1 million impact as a result of the
change in the shape of the yield curve. This curve is applied in the valuation
of insurance contract assets and liabilities and is the main contributor to the
total reduction in insurance finance income or (expense) (and thus profit before
tax). The amount recognised in the insurance finance income or (expense) arises
as a result of the difference between the opening and closing yield curves for
the reporting period. For the 2022 reporting period, the yield curve changed
shape dramatically over the period. In particular, the closing curve at short
durations was higher than the opening curve, with the closing curve being lower
at intermediate durations and then the closing curve was once again higher at
long durations. For the 2023 reporting period, the closing curve starts out
lower than the opening curve, but then switches over such that the closing
curve is moderately higher at intermediate durations and much higher at the
longer durations. This results in the discounted value of the cashflows being
higher using the closing yield curve versus opening in 2023, and thus creating
a loss on this item for this reporting period, compared to a profit for 2022.
Results from other operations which represent business other than insurance
business (mainly the offering of investment products and non-insurance products
to clients) have decreased by R3.5 million to R72.3 million (2022: R75.8
million) in comparison to the prior period. This is largely driven by the growth
in the stand-alone Rewards business which has resulted in higher acquisition
expenses.
The above translated into Earnings and Headline earnings for the Group
decreasing by 35% to R157.4 million (2022: R243.4 million) which results in an
annualised return on average shareholders' interests of 9% (2022: 15%). Earnings
and Headline earnings per share of 46.94 cents (2022: 72.59 cents) were 35%
lower than the restated comparative period.
Group Embedded Value and Value of New Business
The Group Embedded Value ("EV") uses the Management Accounts basis (essentially
the previous IFRS 4 basis) for calculating the Adjusted Net Worth ("ANW") and
the Present Value of In-Force ("PVIF"). As a consequence, IFRS 17 has had no
impact on the EV and Value of New Business ("VNB") calculations.
The EV at 31 December 2023 was R6.0 billion (30 June 2023: R5.9 billion), after
the payment of the annual dividend of R420.7 million in September 2023.
Recurring EV earnings ("REVE") of R361.8 million were earned for the period
(2022: R366.1 million), a decrease of 1% over the comparative period.
The VNB for the period on a risk discount rate ("RDR") of 13.6% p.a. amounted
to R125.3 million (2022: R195.1 million on a RDR of 13.7% p.a.) a decrease of
36% over the comparative period. The prior period VNB benefited from large
volumes of single premium and Funeral Parlour business compared to the current
period. In addition, the VNB for the current period is not directly comparable
to the VNB for the comparative period as a consequence of reinstatements having
been removed from the VNB calculation (and treated as a reduction of withdrawals
as reported in the 2023 annual financial results). This has a negative impact
of R40 million to R50 million in the current period.
The Present Value of new business premiums have decreased due to a decrease in
single premium investment business written over the period. The overall profit
margin has increased to 9.6% (December 2022: 4.7%) as a result of the higher
profit margin on recurring premium business compared to single premium
investment business.
OUTLOOK
The Group remains focused on Treating its Clients Well ("TCW") and providing
products and services that meet their needs and will continue to improve on the
delivery of such products and services to the market conveniently and
efficiently.
The challenges within customer collections and persistency have continued to
negatively impact withdrawals, and remain a priority for the Group, together
with increasing production of quality business across the Group's distribution
channels. The successful launch of Clientèle Royalty, which rewards customer
loyalty, is an initiative expected to have a positive impact on these metrics.
The success of the "December is on Us" campaign, where in excess of R40 million
of clients' December premiums and fees were paid for by the Group, is an example
of the shared value principles which the Group adheres to in providing benefits
to its community in more ways than just the provision of insurance and related
products. This successful initiative now forms part of Clientèle Royalty which
is expected to have a meaningful impact going forward.
Following the required shareholder and Regulatory approvals expected later this
year, the acquisition of 1Life Insurance (RF) Limited ("1Life") will be a key
focus area for the Group and presents a considerable opportunity for growth.
EVENTS AFTER THE REPORTING PERIOD
Following the end of the reporting period, the Group announced on 6 March 2024
the appointment of Ms. Angela Colleen Pillay as its new Group Financial
Director, effective from 1 April 2024, and looks forward to her valuable
contribution to the Group.
The Board wishes to express its sincere gratitude to Ms. Tiffany-Ann Boesch,
the Group Chief Operating Officer, for having fulfilled the role of Interim
Group Chief Financial Officer from 8 November 2023 until the effective date of
Ms. Pillay's appointment as Group Financial Director and applaud her on having
successfully managed and overseen the financial affairs of the Group during
this period while still managing her critical role as Group Chief Operating
Officer.
By order of the Board
GQ Routledge BW Reekie
Chairman Managing Director
Johannesburg
25 March 2024
Six months ended Year ended
31 December 30 June
2023 2022 % 2023
Restated change Pre-IFRS17
Risk Discount Rate (%) 13.6 13.7 -0.1 14.1
Net profit for the period (R'000) 159,067 244,774 -35 490,059
Headline earnings per share for the 46.94 72.59 -35 145.44
period (cents)
Earnings per share for the period 46.94 72.59 -35 145.44
(cents)
Embedded Value at the end of the 5,953,842 5,837,646 +2 5,887,476
period (R'000)
Embedded Value per share (cents) 1,775.56 1,740.91 +2 1,755.77
Annualised Recurring return on 13.2 13.5 -0.3 12.3
Embedded Value (%)
Value of New Business for the period 125,279 195,107 -36 244,873
(R'000)
Recurring Embedded Value Earnings 361,754 366,131 -1 663,091
for the period (R'000)
SHORT-FORM ANNOUNCEMENT DATED 25 MARCH 2024
This short-form announcement is the responsibility of the Directors and is only
a summary of the information in the full announcement and does not contain the
full or complete details. The full announcement can be found through this link:
https://senspdf.jse.co.za/documents/2024/jse/isse/CLI/INT2024.pdf. Copies of
the full announcement are available for inspection at the Company's registered
office, at no charge, during office hours and may also be requested from Eben
Smit on 011 320 3015 or esmit@clientele.co.za. Any investment decisions should
be based on consideration of the full announcement accessible via the JSE link
above and published on the Company's website which can be found through this
link: https://clientele.co.za/sens-announcements/. Comprehensive commentary
including regulatory requirements is contained in the full announcement.
Sponsor: PricewaterhouseCoopers Corporate Finance Proprietary Limited
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,
First floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2106, South Africa
PO Box 61051, Marshalltown 2107, South Africa
Directors: GQ Routledge, BA LLB (Chairman); BW Reekie, BSc(Hons) FASSA*
(Managing Director); ADT Enthoven, BA Hons, PhD (Political Science); GK
Chadwick, MAgric, MBA (Alternate); H Louw, BCom(Hons) FASSA*; PG Nkadimeng, BSc
Statistics and Economics; BA Stott, CA(SA); RDT Zwane, BA, M.Phil, MBA*; RD
Williams, BBusSc(Hons) FASSA; HP Mayers, BSc(Hons) FASSA; TE Mashilwane,
CA(SA).
(*Executive Director)
Company secretary: EJ Smit LLB
Clientèle Limited is a licensed controlling company of the Clientèle Group of
Companies.
Date: 25-03-2024 04:00:00
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