Directors' Report
Nature of business
The Company conducts all classes of short term insurance business in the Republic of South Africa, and through
its subsidiaries in Botswana and Zimbabwe. Details of investments in subsidiaries and associated companies are
set out within this website.
Operations in 2007
The Group, after a concerted effort across all areas of the business, maintained profit before tax at a similar
level to that achieved in the previous year.
Gross premium income rose by an expected 12.5%. This increase was achieved despite a reduction in the
contribution received from our Zimbabwean subsidiary due to currency devaluation and the effects of hyperinflation.
The growth in premium, although slightly lower than in the period to June 2007, is still satisfactory in
a challenging market.
In 2007, the Group benefited from a net pension fund surplus of R43 million including related investment
income (2006: R97 million, after accounting for a R133 million expense of conversion from a defined benefit to
a defined contribution pension fund).
Expenses increased by 11% during the year after allowing the effects of the offering in respect of the Pension
Fund conversion to employees, discussed above. The expense ratio improved to 9.6% (2006: 10%).
The increase in both the number and the quantum of claims continued into the second half of the year.
This resulted in an increase in claims of some 15%. The main area of concern remains the motor portfolio.
Corrective action continues to be taken and our focus for 2008 will be on the implementation of a revised
procurement policy, an actuarial rating structure, disciplined underwriting and the cancellation of poor
performing business.
A new corporate business unit that is focused on providing brokers and corporate customers with structured
solutions was introduced during the year. A notable success was the acquisition of the Gautrain account, which
clearly demonstrates our ability to take advantage of the global expertise and reinsurance capacity of the Zurich
Group.
Personal lines, another focal point, has resulted in a strategy that incorporates performance improvement,
organic growth and new distribution channel initiatives. This strategy will be introduced in 2008 and will
result in the development of a product set that will offer quality, innovation and value-add to policyholders
and brokers. Our market focus will include broader consumer markets such as the mass and micro-insurance
markets.
Investment income grew to R236.2 million (2006: R202.2 million) which reflected the enhanced interest rates
received by the Group on funds deposited at institutions. The fair value through income adjustment on our
bond portfolio continued to show a loss. This was however offset by the increase in realised gains on the
disposal of equities held as available-for-sale. Investment related income therefore increased over 2006 levels
by 16.4%.
Taxation increased by R24 million due to an under-provision for the prior years. Excluding this, the tax rate is
comparable to 2006.
The Group’s balance sheet remains strong with an increase in net asset value of 8%. Solvency is satisfactory at
53.2% and continues
to remain within the Group’s policy range.
During 2008 we will continue our focus on customer, product and distribution excellence. Profitable growth
alongside operational transformation and underwriting discipline will be the main drivers of our business
strategy. Coupled with the fact that the Company’s claims paying ability rating has been reaffirmed at AA+ we
feel strongly positioned to establish and embed the presence of Zurich in South Africa.
Dividend
The Directors have declared a final dividend of 440 cents per share (2006: 430 cents per share) making a total
of 700 cents per share for the year (2006: 650 cents per share).
Directors and management
The following resignations were noted in the period under review: PT Martin resigned on February 21, 2007;
A Paas resigned on
August 1, 2007; and the following Directors were welcomed to the Board during the same
period: CJ Cron and MN Mbekeni on
August 1, 2007; DD Mokgatle on October 1, 2007 and JPM Deiss on
October 24, 2007. The Directors who remained unchanged were:
NV Beyers; DM Burton; JPG de Rauville;
SG Morris; DS Phiri; and CN Zungu. Full details of the Directors and Executive Management are
set out onwithin this website.
Directors’ shareholding
The aggregate shareholding of Directors in the Company is as follows:
| Fully paid shares | 2007 |
2006 |
| Indirect Beneficial | ||
| Indirect Non-Beneficial | 1,000 |
1,000 |
| Breakdown | ||
| Indirect Non-Beneficial: | ||
| Shareholder | 2007 |
2006 |
| NV Beyers | 200 |
200 |
| DM Burton | 100 |
100 |
| JPG de Rauville | 100 |
100 |
| PT Martin | 100 |
100 |
| SG Morris | 100 |
100 |
| A Paas | 100 |
100 |
| DS Phiri | 100 |
100 |
| MC South | 100 |
100 |
| CN Zungu | 100 |
100 |
There have been no changes in the above interests between the end of the financial year and the date of posting this Annual Report.
The qualification shares for all the Directors who resigned during the year under review will be transferred to the new appointees and
NV Beyers will subsequently have a balance of 100 shares after the transfer as follows:
| Transferor | Transferee |
No of Shares |
| NV Beyers | CJ Cron |
100 |
| PT Martin | MN Mbekeni |
100 |
| A Paas | JPM Deiss |
100 |
| MC South | DD Mokgatle |
100 |
Group Company Secretary
The Group Company Secretary is Ms TA Pitman. Her business and postal addresses are:
Zurich House, The Braes, 193 Bryanston Drive, Bryanston, 2021
PO Box 61489, Marshalltown, 2107
Holding and ultimate holding company
The immediate holding company is SA Fire House Limited, incorporated in South Africa, which directly and indirectly owns 73.6% (2006: 73.6%) of the issued and fully paid share capital. The ultimate holding company is Zurich Financial Services, incorporated in Switzerland.
Code of corporate practices and conduct
The Board considers that the Company complies with the recommendations of the code of corporate practices and conduct included in the King Committee’s Report on Corporate Governance.
