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2007 Annual results
CONTENT | Salient features | Executive review | Comments | Shareholders' fund information
| Embedded value | Group financial statements
 

FINANCIAL STATEMENTS

Accounting policies and actuarial basis
Balance sheet
Income statement
Statement of changes in equity
Cash flow statement

ACCOUNTING POLICIES AND ACTUARIAL BASIS

Basis of presentation

The accounting policies adopted for the purposes of the financial statements comply with International Financial Reporting Standards, and are consistent with those applied in the 2005 financial statements. The policy liabilities and profit entitlement rules are determined in accordance with prevailing legislation, generally accepted actuarial practice and the stipulations contained in the demutualisation proposal. There have been no material changes in the financial soundness valuation basis since 31 December 2005, apart from changes in the economic assumptions (refer to page 42 for the major assumptions applied). 

Application of new and revised standards

The following new or revised IFRSs and interpretation have effective dates applicable to the Group's 2006 financial year:

  • Amendment to IAS 19 Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures
  • Amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation
  • Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Cash Flow Hedge Accounting of Forecast Intragroup Transactions
  • Amendments to IAS 39 Financial Instruments: Recognition and Measurement - The Fair Value Option
  • Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts - Financial Guarantee Contracts
  • IFRIC 4 Determining whether an arrangement contains a lease

The application of these standards and interpretation did not have a significant impact on the Group's reported results and cash flows for the year ended 31 December 2006 and the financial position at 31 December 2006.  Disclosure in the notes to the financial statements has been amended in accordance with the requirements of the revised IAS 19 and IAS 39.

The following new or revised IFRSs and interpretations have effective dates applicable to the Group's 2007 financial year (unless otherwise indicated):

  • IFRS 7 Financial Instruments: Disclosures
  • Amendment to IAS 1 Presentation of Financial Statements - Capital Disclosures
  • IFRS 8 Operating Segments (effective 2009 financial year) 
  • IFRIC 8 Scope of IFRS 2
  • IFRIC 9 Reassessment of Embedded Derivatives
  • IFRIC 10 Interim Financial Reporting and Impairment
  • IFRIC 11 IFRS 2: Group and Treasury Share Transactions (effective 2008 financial year)
  • IFRIC 12 Service Concession Arrangements (effective 2008 financial year)
  • AC 503 Accounting for Black Economic Empowerment (BEE) Transactions

The Group has not early adopted any of these standards or interpretations. The application of these standards and interpretations in the 2007 financial reporting period is not expected to have a significant impact on the Group's reported results, financial position and cash flows.

GROUP BALANCE SHEET at 31 December 2006  
    2006  2005 
    R million  R million 
ASSETS       
  Property and equipment  259  249 
  Owner-occupied properties  530  492 
  Goodwill  2 163  2 174 
  Value of business acquired  977  982 
  Deferred acquisition costs  1 397  1 155 
  Long-term reinsurance assets  427  389 
  Investments  280 627  232 851 
     Properties  14 602  12 748 
     Equity-accounted investments  3 417  1 037 
     Equities and similar securities  141 456  120 763 
     Public sector stocks and loans  53 921  47 998 
     Debentures, insurance policies, preference shares and other loans  31 743  21 173 
     Cash, deposits and similar securities  35 488  29 132 
  Deferred tax  549  372 
  Short-term insurance technical assets  2 288  2 372 
Working capital assets  46 265  35 716 
   Trade and other receivables  37 103  27 427 
   Cash, deposits and similar securities  9 162  8 289 
        
Total assets  335 482 276 752
        
Equity and liabilities       
Shareholders' fund  29 121  25 020 
Minority shareholders' interest  3 934  3 443 
Total equity  33 055  28 463 
Long-term policy liabilities   237 864  198 234 
   Insurance contracts  125 517  109 591 
   Investment contracts  112 347  88 643 
Term finance  5 760  2 879 
   Interest-bearing liabilities matched by assets  3 689  2 835 
   Other interest-bearing liabilities  2 071  44 
External investors in consolidated funds  8 010  6 030 
Cell owners' interest  329  268 
Deferred tax   1 929  1 623 
Short-term insurance technical provisions  7 752  6 702 
Working capital liabilities  40 783  32 553 
   Trade and other payables  37 801  30 071 
   Provisions  996  886 
   Taxation  1 986  1 596 
        
Total equity and liabilities  335 482 276 752

GROUP INCOME STATEMENT for the year ended 31 December 2006

    2006  2005 
Notes R million  R million 
       

Net income

   69 960  63 307 

   Financial services income

   24 221  20 393 

   Reinsurance premiums paid

   (2 432) (2 339)

   Reinsurance commission received

   383  445 

   Investment income

   12 022  10 722 

   Investment surpluses

   37 903  35 282 

   Finance cost – margin business

   (223) (293)

   Change in fair value of external investors liability

  (1 914) (903)

Net insurance and investment contract benefits and claims

  (50 072) (41 440)

   Long-term insurance and investment contract benefits

   (43 272) (35 164)

   Enhanced early termination benefits

   -  (620)

   Short-term insurance claims

   (8 086) (6 904)

   Reinsurance claims received

   1 286  1 248 

Expenses

   (8 956) (7 769)

   Sales remuneration

   (3 300) (2 632)

   Administration costs

   (5 656) (5 137)

Impairment of investments and goodwill

   (30) (12)

Amortisation of value of business acquired

  (45) -
       

Net operating result

   10 857  14 086 

Equity-accounted earnings

   423  944 

Finance cost - other

   (114) (136)
       

Profit before tax

   11 166  14 894 

Taxation

 1 (3 070) (2 803)

   Shareholders' fund

   (1 894) (1 684)

   Policyholders' fund

   (1 176) (1 119)
       

Profit for the year

  8 096 12 091
       

Attributable to:

      

Shareholders' fund

   6 945  10 927 

Minority shareholders' interest

  1 151  1 164 
    8 096 12 091
       

Earnings attributable to shareholders of the company (cents):

      

Basic earnings per share

 2 315,2  439,2 

Diluted earnings per share

 2 309,6 432,0


GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2006  
  2006 2005
  R million R million
Shareholders' fund:    
Balance at beginning of year 25 020  19 685 
Total recognised income 7 263  11 008 
   Profit for the year 6 945  10 927 
   Equity-accounted movement in associated companies' reserves -  15 
   Movement in foreign currency translation reserve 318  66 
Net realised investment surpluses on treasury shares (188) 25 
Share-based payments 74  64 
Dividends paid (1) (1 467) (1 295)
Acquired through business combinations -  (31)
Shares cancelled (1 644) (4 446)
Cost of net treasury shares sold (2) 63  10 
Balance at end of year 29 121 25 020
Minority shareholders' interest:    
Balance at beginning of year 3 443  3 515 
Total recognised income 1 257  1 163 
   Profit for the year 1 151  1 164 
   Movement in foreign currency translation reserve 106  (1)
Share-based payments 9  5 
Dividends paid (668) (788)
Acquisitions, disposals and other movements in minority interests (107) (452)
Balance at end of year 3 934 3 443
     
Shareholders' fund 25 020  19 685 
Minority shareholders' interest 3 443  3 515 
Total equity at beginning of year 28 463  23 200 
     
Shareholders' fund 29 121  25 020 
Minority shareholders' interest 3 934  3 443 
Total equity at end of year 33 055 28 463
  1. Dividend of 65 cents per share paid during 2006 (2005: 50 cents per share) in respect of the 2005 financial year.
  2. Comprises movement in cost of shares held by subsidiaries and the share incentive trust.

GROUP CASH FLOW STATEMENT
for the year ended 31 December 2006  
  2006  2005 
  R million  R million 
Net cash (outflow)/inflow from operating activities (5 436) 1 938 
Net cash inflow from investment activities 11 704  13 069 
Net cash inflow/(outflow) from financing activities 971  (6 919)
Net increase in cash and cash equivalents 7 239  8 088 
Cash, deposits and similar securities at beginning of year 37 408  29 320 
Cash, deposits and similar securities at end of year 44 647  37 408 
     
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