Zurich Insurance Company South Africa's half-year results

Zurich Insurance Company South Africa Limited (Zurich) today announced an improved result for the six months to June 30, 2007, arising out of better underwriting and investment performance. Despite this result, the first six months were characterised by both a higher number of claims and increased claims costs on the property and motor accounts. The effects of severe flooding in Kwa-Zulu Natal in late March also had an impact on performance.
 
Premium revenue increased by 14.6%, which according to CEO Nick Beyers, reflects satisfactory growth in a competitive market.

"In spite of corrective action taken on the motor account, which included premium increases of more than 20%, the result continues to be negatively affected by market developments," said Beyers. The frequency of motor vehicle accidents has increased primarily as a result of a greater volume of vehicles on the road, poor driving standards and road conditions. Beyers added: "Motor repair costs, especially the cost of repairing imported vehicles, continue to escalate well above the official inflation rate. We will, however, continue to take the steps necessary to limit the effect on the underwriting result," he said.

Gains on disposal of available-for-sale investments were lower at R35.4 million versus R68.4 million during the same period in 2006. Headline earnings of R89.7 million were 24.5% higher, while earnings per share of 1,007 cents were 6.0% lower, mainly as a result of an increased tax charge and reduced gains on the disposal of available-for-sale financial assets.

Liquidity continued to be satisfactory while the cash flow from operations continues to be positive, although reduced as a result of a significant increase in claims payments.

The solvency margin increased marginally to 55% and, given the strong solvency position, the Directors declared an interim dividend of 260 cents per share, an increase of 18% on last year.

One should always bear in mind, however, that underwriting as well as investment performance fluctuates and, therefore, results for the first six months are not necessarily indicative of Zurichs performance for the remainder of the year.