| Clientèle Limited: Condensed financial results and dividend announcement for the year ended 30 June 2024 |
| Commentary |
| Introduction |
| This year has presented new and diverse challenges for Clientèle and its subsidiaries (“the Group”), in addition to the now more familiar challenges of a depressed economy, high unemployment, crime, loadshedding and failing infrastructure. |
| The financial year presented anxiety and pessimism over the political environment and further decline in the economy leading up to the elections in May 2024. The year closed with greater optimism on the back of a reduction in loadshedding in the final quarter and the formation of the Government of National Unity (“GNU”). |
| Overlaid on this background was the pending approval by the Prudential Authority (“PA”), of the Group’s acquisition of 1Life Insurance (RF) Limited and the implementation of the new accounting standard for Insurance Contracts (“IFRS 17”). The latter posed an enormous challenge to the entire Insurance sector in South Africa. |
| IFRS 17 became effective on 1 July 2023 for the Group with the comparative restatement of the preceding year ended 30 June 2023, including a restatement of the opening Group Statement of Financial Position as of 1 July 2022. |
| IFRS 17 is intended to standardise global accounting for Insurance companies and thus allow for better understandability of Insurance companies’ businesses regardless of geography. While the Group’s annual financial statements appear significantly different from the past, this has not impacted the strategic direction, management or underlying fundamentals of the Group nor has it affected its cash-generating and dividend-paying ability. |
| During the year, there was a planned maturity on one of the portfolios which accounts for the decrease of R4.1 billion in financial assets year-on-year. |
| Despite the 4% decline in the net profit for the year, and a 4% decline in earnings and headline earnings per share as a result of the lower IFRS 17 profits from Insurance operations in Clientèle Life, as described below, there has been a meaningful increase of 46% in the total comprehensive income. The Group remains in a sound solvency and liquidity position and continues to generate strong positive cashflows. |
| The Board has declared a final ordinary share cash dividend of 125 cents per share, for the year ended 30 June 2024 (2023: 125 cents). |
| OPERATING RESULTS |
| Group Statement of Comprehensive Income |
| The total net insurance service result increased by 4% to R171.6 million (2023 restated: R165.2 million) impacted by a decrease in the insurance revenue, from the lower Contractual Service Margin (“CSM”) as a consequence of a reduction in the Clientèle Life policy book, offset by a greater reduction in the insurance service expense on the back of better claims experience. |
| The total net investment result of R254.9 million is double the prior year's figure (2023 restated: R124.8 million). The higher single premium income as well as higher investment returns on shareholder assets, together with the decline in the change in investment contract liabilities, contributed to this result. |
| Net insurance finance income is 19% higher than the prior year at R207.3 million (2023 restated: R174.5 million) mainly due to an increase of R60.8 million in the impact of interest accreted on the present value of future cash flows from insurance contracts. This is driven by the higher present value of expected cash flows on the policies accounted for by the General Measurement Model (“GMM”). This is; however, partially offset by the impact of the change in interest accreted on the CSM and the Risk Adjustment (RA). |
| Revenue from contracts with customers increased by 11% to R380.4 million (2023 restated: R342.0 million) and is partly offset by higher cost of sales. This is largely driven by the growth in the stand-alone Rewards business which resulted in higher acquisition costs. |
| Operating expenses were very well controlled and remained flat year-on year at R420.7 million (2023 restated: R418.8 million). In particular, support costs were well controlled. |
| The above resulted in the net profit before tax increasing by 47% year-on-year. |
| The tax for the year has increased to R216.1 million (2023: R28.1 million). Due to the volume of co-branded single premium business written, a portion of the assessed loss in the Individual Policyholders’ Fund has been utilised. In terms of IAS12 Income Taxes, a deferred tax asset of R107.1 million (2023: R181.5 million) has accordingly been established. In addition, in the prior year, there was a revision of the underlying input estimates to quantify the deferred tax asset, resulting in a decrease in the tax charge of R120 million in terms of IAS12. This positively impacted the taxation charge in the prior year's Group Statement of Comprehensive Income, which will reverse over time. |
| The above translated into earnings and headline earnings attributable to equity holders of the Group decreasing by 4% to R329.9 million (2023 restated: R344.0 million) which resulted in an annualised return on average shareholders’ interests of 10.0% (2023 restated: 10.5%). Earnings and headline earnings per share of 98.39 cents were 4% lower than the restated comparative year (2023 restated: 102.60 cents). |
| Included in other comprehensive income is the movement in insurance finance reserve of R150.8 million (2023 restated: R14.7 million loss) as a result of the change in the closing balances of the insurance liabilities arising from the change in the yield curve, used to discount all cashflows. The Group has opted to disaggregate other comprehensive income from net profits, as allowed by IFRS 17, as this number is expected to be volatile. |
| All of the above has resulted in the total comprehensive income for year growth of 46% to R492.4 million (2023: restated: R336.9 million). |
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Clientèle Limited |
