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Unaudited interim results for the six months ended 31 December 2024
Clientèle Limited
Registration number: 2007/023806/06
Share code: CLI
ISIN: ZAE000117438
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2024
Recurring Embedded Value Earnings of R537.8 million
Embedded value per share of 1,844.61 cents
Recurring Return on Embedded Value of 14.3%
Value of New Business of R187.4 million
INTRODUCTION
Over the past six months, South Africa's macroeconomic environment has been
characterised by modest economic growth, fiscal challenges, labour issues,
water supply constraints, currency depreciation and political uncertainty both
locally and globally. These factors were tempered by the renewed sense of
optimism, fuelled by a reduction in load shedding, declining inflation and the
formation of the Government of National Unity ("GNU").
Despite the optimism, it will take time to see an improvement in the high
unemployment rate and for positive change to reflect in the lives of our target
market. Currently, our market continues to experience difficult economic
circumstances, negatively affecting affordability and financial resilience. As
a result, Clientèle continues to experience high levels of withdrawals,
suspension of debit order mandates, and disputes. As a consequence, the Group
has strengthened the withdrawal assumptions underpinning the reported results.
Internally, the Group's acquisition of 1Life Insurance Limited ("1Life") was
approved by the Regulatory Authorities effective 14 July 2024. 1Life
successfully moved and transitioned operations to the Clientèle Campus during
the first half of the financial year. As with any merger, it is expected to
take some time to fully integrate the people, systems, and processes to ensure
optimal value is realised from this transaction, nonetheless the move went well
and initial signs are positive. The acquisition has also resulted in some
complex technical accounting treatments. The commercial terms of the acquisition
were based on the Embedded Value ("EV") of 1Life relative to that of Clientèle
and the purchase consideration was settled by the issue of Clientèle shares.
The accounting standards require that the transaction be measured at the "fair
value" of the purchase consideration. The difference between the share price
on the Johannesburg Stock Exchange, as adjusted, and the Clientèle EV per share,
at the time of the acquisition resulted in the once-off recognition of a bargain
purchase gain of R469 million, as well as fair value adjustments at the time
of the prospective consolidation, impacting both the Statement of Comprehensive
Income and the Statement of Financial Position. By contrast, Clientèle paid a
premium to EV of R69 million as shown in the Analysis of Embedded Value.
While the results paint a complex picture, the Group remains in a sound solvency
and liquidity position and continues to generate strong positive cashflows.
OPERATING RESULTS
In the reporting period ending 30 June 2024, post the release of the 31 December
2023 interim financial results, the Group adopted certain changes to the
implementation of IFRS 17 as set out in note 2 which resulted in the restatement
of the 31 December 2023 interim financial results. All commentary is based on
the restated interim financial results.
The headline earnings attributable to equity holders increased by 37.3% to
R227.7 million (2023 restated: R165.9 million). The growth on prior period
reported headlines earnings is an increase of 44.6% to R227.7 million (2023
reported: R157.4 million). This performance includes the first time reported
earnings of 1Life of R42.1 million (before Group adjustments) as well as
positive earnings contributions from Clientèle Life, Clientèle General and CBC
Rewards. The key drivers of the Group's performance are:
- A decrease of 55% in the net insurance service result;
- An increase of more than 100% in the net insurance finance income;
- An increase of 22% in operating expenses; and,
- A decrease in taxation of 38%.
These drivers are explained in the sections that follow.
The total insurance service result
R'000
Restated Dec'23 158 358
Clientèle movement (70 879)
Addition of 1Life 1 461
Group consolidation (18 188)
Dec'24 70 752
The total insurance service result decreased by 55.3% to R70.8 million (2023
restated: R158.4 million) impacted by:
- The negative Clientèle movement of R70.9 million which is as a result of a
decrease in the insurance revenue coupled with an increase in the insurance
service expense. The primary driver of this reduction is the once off impact
of a change in withdrawal assumptions to align with recent experience;
- The consolidation of 1Life which had a small positive impact driven by strong
production performance offset by an increase in withdrawal assumptions to
align to recent experience; and,
- The Group consolidation charge which recognises the unwind of the Group
Contract Service Margin ("CSM") on the 1Life business, recognised at the date
of acquisition.
The total net investment result
R'000
Restated Dec'23 91 711
Clientèle movement 4 239
Addition of 1Life (2 666)
Dec'24 93 284
The total net investment result of R93.3 million is 1.7% above the prior
period (2023 restated: R91.7 million) impacted by:
- The increase in Clientèle which is due to higher net returns on both the
recurring Premium Savings business and the shareholder portfolio, offset by
the increase in the liability for IPF tax on the Single Premium business as
a result of the corresponding increase in the deferred tax asset relating to
the IPF; and,
- Finance costs of R2.7 million from 1Life which reduced the investment result.
The total net insurance finance expense/ income
R'000
Restated Dec'23 83 499
Clientèle movement 50 089
Addition of 1Life 80 256
Group consolidation (5 485)
Dec'24 208 360
The net insurance finance income is more than 100% higher than the prior period
at R208.4 million (2023 restated: R83.5 million) mainly due to:
- The positive Clientèle movement which arises from a reduction in long term
inflation assumptions, as well as the increase in the interest accreted on
insurance contracts;
- The consolidation of 1Life which is primarily the interest accreted on
insurance contracts; and,
- The Group consolidation charge which recognises the change in assumptions
recognised at the date of acquisition.
Revenue from contracts with customers
R'000
Restated Dec'23 174 372
Clientèle movement (7 382)
Addition of 1Life 11 244
Dec'24 178 234
Revenue from contracts with customers increased marginally by 2.2% to R178.2
million (2023 restated: R174.4 million). This is largely driven by:
- The small negative Clientèle movement which arises from the lower deferred
revenue recognised on Clientèle's Single Premium business, due to investment
products maturing during the prior year offset by new investment products,
the bulk of which were only written towards the end of the interim period, as
well as the decrease in the business fee income in IFA. This was partly offset
by an increase in revenue earned from the stand- alone Rewards business on
the back of a growing book; and,
- The 1Life revenue from contracts with customers which arises from the deferred
income earned on Single Premium business.
Operating expenses
R'000
Restated Dec'23 (218 228)
Clientèle movement 22 158
Addition of 1Life (70 273)
Dec'24 (266 343)
The Group's operating expenses increased by 22.3% to R266.3 million (2023
restated: R218.2 million) driven by the net impact of:
- Cost savings within Clientèle (particularly support costs) of around
R22.2 million; and,
- The addition of 1Life operating costs.
The Group incurred certain once off costs as part of the integration of 1Life
into the Group.
Taxation
The taxation charge for the period decreased by 38.2% to R61.4 million (restated
2023: R99.4 million) primarily due to a credit of R30 million arising from the
recognition of a deferred tax asset in the period. Due to the volume of co-
branded Single Premium business written, the likelihood of the utilisation of
the existing assessed loss was reassessed and a further deferred tax asset was
raised increasing this to R138.1 million (June 2024: R107.1 million). There is
a corresponding charge in the change in investment contract liabilities within
the net investment result, resulting in a small net impact on the overall
financial performance.
Total comprehensive income ("TCI")
The following adjustments were made to the headline earnings in order to arrive
at the total comprehensive income:
- The addition of the bargain purchase gain of R469.1 million (once off) being
the difference between the adjusted share price and the EV per share used
to determine the consideration for the transaction, as described above;
- The addition of other comprehensive income ("OCI") which is the movement
in the insurance finance reserve of R355.2 million net of tax (2023
restated: R88.9 million net of tax) as a result of the change in the closing
balances of the insurance liabilities and assets arising from the change in
the yield curve, used to discount all cashflows. The Group has opted to
disaggregate the other comprehensive income from net profits, as allowed for
by the International Financial Reporting Standard on Insurance Contracts
("IFRS 17"), as this number is expected to be volatile; and,
- The small impact of eliminating the non-controlling interest in Direct
Rewards.
R'000
Restated Dec'23 256 468
Clientèle movement 207 489
Addition of 1Life 133 291
Bargain purchase gain 469 069
Group consolidation (12 714)
Dec'24 1 053 603
The total comprehensive income increased by more than 100% to R1,053.6 million
(2023 restated R256.5 million) driven by:
- The increase in Clientèle's comprehensive income for reasons outlined above;
- The first consolidation of 1Life in the Groups results;
- The bargain purchase gain, as described above; and,
- The Group consolidation charge that arises from adjustments made at the
date of acquisition of 1Life, as described above.
The above has resulted in the earnings per share of 156.85 cents being more
than 100% higher than both the restated and reported prior period (restated
2023: 49.46 cents, reported 2023: 46.94 cents). The headline earnings per share
of 51.25 cents is 3.62% higher than the restated comparative period (restated
2023: 49.46) and 9.18% higher than the reported prior period (2023: 46.94
cents).
The Group EV and Value of New Business ("VNB")
The Group EV as at 31 December 2024 increased to R8.4 billion (June 2024:
R6.0 billion). The increase is largely driven by the consolidation of 1Life in
the results which increased the EV by around R2.1 billion at the date of
acquisition. A dividend of R566.4 million was paid in October 2024. The various
other movements which grew the EV to R8.4 billion are detailed in the Group
Embedded Value Results section of the condensed unaudited group results report.
Recurring Embedded Value Earnings ("REVE") of R537.8 million were earned
for the period (31 December 2023: R361.8 million), an increase of 49% which
includes the consolidation of 1Life which contributed R249 million to this
number.
The VNB for the period of R187.4 million increased by 50 % year-on-
year (2023: R125.3 million) again including 1Life's VNB of R49.3 million.
By order of the Board
GQ Routledge BW Reekie
Chairman Managing Director
Johannesburg
11 March 2025
Six months ended 31 December Year
ended
2024 2023 30-Jun-24
Excluding Group %
1Life 1Life including Restated change
1Life
Risk Discount Rate (%) 13.5% 14.1% 13.6% 14.3%
Net profit for the period
(R'000) 698,361 167,539 316.8% 333,909
Headline earnings per
share for the period (cents) 51.25 49.46 3.6% 98.39
Earnings per share for the
period (cents) 156.85 49.46 217.1% 98.39
Embedded Value at the end
of the period (R'000) 8,360,419 5,953,842 40.4% 6,046,026
Embedded Value per share
(cents) 1,844.61 1,775.56 3.9% 1,802.99
Annualised Recurring
return on Embedded Value
(%) 14.3% 13.2% 12.0%
Value of New Business for
the period (R'000) 187,446 125,279 49.6% 220,336
Recurring Embedded Value
Earnings for the period
(R'000) 537,785 361,754 48.7% 654,565
SHORT-FORM ANNOUNCEMENT
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/2025/jse/isse/CLI/INT2025.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 the
Company Secretary on 011 320 3000 or companysecretary@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) (Managing Director); GK
Chadwick MBA MAg; H Louw* BCom(Hons); PG Nkadimeng BSc Statistics and Economics;
BA Stott CA(SA);TJ Creamer Cert. Leadership for Senior Executives; AC Pillay*
CA(SA), MCom; RDT Zwane* BA,M.Phil, MBA; RD Williams BBusSc(Hons), FASSA; HP
Mayers BCom(Hons), FASSA; TE Mashilwane CA(SA), RA,MBA; MA Raisbeck BSc(Hons)
Agricultural Economics, CA(England and Wales).
* Executive Director
Company secretary: EJ Smit LLB
Clientèle Limited is a licensed controlling company of the Clientèle
Insurance Group.
Date: 11-03-2025 10:30:00
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