Business / Companies
Improved underwriting profits boosts TA Holding's performance
09 Apr 2013 at 12:19hrs | Views
TA Holdings' operating income grew 234% to $5.5 million due to improved underwriting profits from the insurance company, CEO Gavin Sainsbury told an analysts briefing yesterday.
This resulted in cash generated from operations increasing by 112% to $4.3 million.
"This was mainly due to a significant improvement in underwriting profits in the Zimbabwe and Uganda operations and also improved RevPARs at all hotels in the group," he said.
He added that the improvement was also due to reduced corporate costs which came as a result of a restructuring exercise in the prior year.
"There was a decline in investment income, from $5.7 million last year to $2.2 million this year. This was largely due to that the 2011 investment income included an unrealised fair value gain on the revaluation of a commercial building of $3.8 million," said Sainsbury.
Agro-chemicals associate companies weighed down the operating performance of TA Holdings with Sable Chemicals and ZFC losing $2.7 million versus a breakeven position recorded for the year to December 31 2011.
Turnover posted by Sable decreased to 34.4million from $42.2 million while EBIT went down to $445 000 from $2.1 million.
"Ammonium Nitrate (AN) production was 28% less than what was produced during the prior year largely due to suspension of electricity supply in the first half of the year, which together with the consequential mechanical breakdowns, severely impacted on ammonia production," said Sainsbury.
He pointed out that the company lost 124 days of production due to this event and liquidity constraints meant that there was not sufficient working capital to import the required volumes of ammonia.
Sainsbury disclosed that given the fact that full importation is not feasible they "have engaged with government to secure a viable tariff for the medium term and discussions are currently at an advanced stage."
ZFC turnover decreased to $52.2 million from $71.9 million and EBIT went down to a negative $4.4 million in 2012 from $2.6 million in 2011.
Total sales volumes recorded by the company tumbled to 78 619mt from 116 311mt with local sales volumes at 76 519mt versus 109 541mt and export sales volumes at 2 100mt against 6 770mt from the prior year.
"This investment (ZFC) will continue to be marginal because of low demand for fertilizers due to the lack of liquidity in the agricultural sector," he said.
He further noted that the company is moving towards a cash sales/limited credit model which will improve credit control and reduce bad debt write offs which should ensure that the losses at this company are reduced considerably.
In the insurance cluster, Zimnat Lion Zimbabwe recorded a GWP of $14.1 million, Botswana Insurance Company (BIC) $35.3 million and Lion Assurance Uganda $6.4 million.
The total GWP by all insurance companies remained stable at $55.8 million.
Zimnat recorded an improved underwriting performance principally due to a healthy growth in premiums and improved retention and claims ratio. The claims ratio improved to 34% from 43% and reinsurance ratio to 58% from 66%.
Meanwhile BIC underwriting profits dropped to $3.2 million during the year under review from $4.1 million last year largely due to the depreciation of the Pula against the US$ by an average rate of 11% thereby negatively affecting the reported numbers for 2012.
There was an increase in BIC claims ratio to 47% from 43% for the same period last year which was a result of an increase in fire claims and reduction in premium rates.
Under the hotel cluster in Zimbabwe total RevPAR increased by 16% to $49 from $42 and the RevPARs for 2013 are forecast at $57.
Sainsbury noted that in Botswana RevPAR improved by 14% to 494Pula from 435Pula.
Presenting on the financial highlights, Head of group reporting Courage Shoniwa said revenue went up by 4% to $65 million from $62 million "due to improved retention from insurance company."
Cresta Hotels in Zimbabwe contributed $12.7 million in revenue from $11.7 million in 2011.
Profit before associates, interest and tax increased by 5% to $7.7 million from $7.3 million posted in the prior year.
Shoniwa indicated that the firm's results were also diluted by the PG Industries share price which had dropped to below 1c on the ZSE, thus the group wrote off its investment to zero (a $1.2 million loss).
As a result the group's PBT declined by 23% to $5.5 million from $7.1 million. In Zimbabwe PBT went down to $885 000 from $2.2 million while outside Zimbabwe it improved to $4.9 million from $3.8 million.
Total investment income for the group decreased from $5.7 million in 2011 to $2.2 million in the period under review with realised investment income and unrealised investment income at $1.6 million and $573 000 respectively.
The group's total assets increased to $153.9 million from $142.7 million.
Giving the outlook, Sainsbury said the recovery in the Zimbabwe insurance industry is expected to continue.
"However, we are expecting that there will be continued pressures on rates as all players seek to increase market share. We will continue to focus on quality underwriting business so as to keep our claims ratios to a minimum. This should more than compensate for any loss of premium rate," he said.
Sainsbury added that costs will continue to be monitored closely so as any increase in premium (less direct cost and claims) drops directly to the underwriting result.
He noted that "against this background all units are anticipated double digit growth in core underwriting profits."
Regionally, he said in Botswana intense competition is expected to continue putting pressure on rates and underwriting margins which will consequently constrain growth.
In Uganda, Sainsbury pointed out that the positive growth in underwriting profits is expected to be maintained and focus will be centered on cash-flow management as liquidity is key to growth in this market.
In the hotel cluster, he noted that the refurbishment of Cresta Lodge is due for completion in Q3 of 2013.
"This will have an impact on revenues as rooms are decommissioned for renovation. However, the increase in RevPAR experienced throughout the industry in 2012 is expected to continue.
This resulted in cash generated from operations increasing by 112% to $4.3 million.
"This was mainly due to a significant improvement in underwriting profits in the Zimbabwe and Uganda operations and also improved RevPARs at all hotels in the group," he said.
He added that the improvement was also due to reduced corporate costs which came as a result of a restructuring exercise in the prior year.
"There was a decline in investment income, from $5.7 million last year to $2.2 million this year. This was largely due to that the 2011 investment income included an unrealised fair value gain on the revaluation of a commercial building of $3.8 million," said Sainsbury.
Agro-chemicals associate companies weighed down the operating performance of TA Holdings with Sable Chemicals and ZFC losing $2.7 million versus a breakeven position recorded for the year to December 31 2011.
Turnover posted by Sable decreased to 34.4million from $42.2 million while EBIT went down to $445 000 from $2.1 million.
"Ammonium Nitrate (AN) production was 28% less than what was produced during the prior year largely due to suspension of electricity supply in the first half of the year, which together with the consequential mechanical breakdowns, severely impacted on ammonia production," said Sainsbury.
He pointed out that the company lost 124 days of production due to this event and liquidity constraints meant that there was not sufficient working capital to import the required volumes of ammonia.
Sainsbury disclosed that given the fact that full importation is not feasible they "have engaged with government to secure a viable tariff for the medium term and discussions are currently at an advanced stage."
ZFC turnover decreased to $52.2 million from $71.9 million and EBIT went down to a negative $4.4 million in 2012 from $2.6 million in 2011.
Total sales volumes recorded by the company tumbled to 78 619mt from 116 311mt with local sales volumes at 76 519mt versus 109 541mt and export sales volumes at 2 100mt against 6 770mt from the prior year.
"This investment (ZFC) will continue to be marginal because of low demand for fertilizers due to the lack of liquidity in the agricultural sector," he said.
He further noted that the company is moving towards a cash sales/limited credit model which will improve credit control and reduce bad debt write offs which should ensure that the losses at this company are reduced considerably.
In the insurance cluster, Zimnat Lion Zimbabwe recorded a GWP of $14.1 million, Botswana Insurance Company (BIC) $35.3 million and Lion Assurance Uganda $6.4 million.
The total GWP by all insurance companies remained stable at $55.8 million.
Zimnat recorded an improved underwriting performance principally due to a healthy growth in premiums and improved retention and claims ratio. The claims ratio improved to 34% from 43% and reinsurance ratio to 58% from 66%.
Meanwhile BIC underwriting profits dropped to $3.2 million during the year under review from $4.1 million last year largely due to the depreciation of the Pula against the US$ by an average rate of 11% thereby negatively affecting the reported numbers for 2012.
There was an increase in BIC claims ratio to 47% from 43% for the same period last year which was a result of an increase in fire claims and reduction in premium rates.
Under the hotel cluster in Zimbabwe total RevPAR increased by 16% to $49 from $42 and the RevPARs for 2013 are forecast at $57.
Sainsbury noted that in Botswana RevPAR improved by 14% to 494Pula from 435Pula.
Presenting on the financial highlights, Head of group reporting Courage Shoniwa said revenue went up by 4% to $65 million from $62 million "due to improved retention from insurance company."
Cresta Hotels in Zimbabwe contributed $12.7 million in revenue from $11.7 million in 2011.
Profit before associates, interest and tax increased by 5% to $7.7 million from $7.3 million posted in the prior year.
Shoniwa indicated that the firm's results were also diluted by the PG Industries share price which had dropped to below 1c on the ZSE, thus the group wrote off its investment to zero (a $1.2 million loss).
As a result the group's PBT declined by 23% to $5.5 million from $7.1 million. In Zimbabwe PBT went down to $885 000 from $2.2 million while outside Zimbabwe it improved to $4.9 million from $3.8 million.
Total investment income for the group decreased from $5.7 million in 2011 to $2.2 million in the period under review with realised investment income and unrealised investment income at $1.6 million and $573 000 respectively.
The group's total assets increased to $153.9 million from $142.7 million.
Giving the outlook, Sainsbury said the recovery in the Zimbabwe insurance industry is expected to continue.
"However, we are expecting that there will be continued pressures on rates as all players seek to increase market share. We will continue to focus on quality underwriting business so as to keep our claims ratios to a minimum. This should more than compensate for any loss of premium rate," he said.
Sainsbury added that costs will continue to be monitored closely so as any increase in premium (less direct cost and claims) drops directly to the underwriting result.
He noted that "against this background all units are anticipated double digit growth in core underwriting profits."
Regionally, he said in Botswana intense competition is expected to continue putting pressure on rates and underwriting margins which will consequently constrain growth.
In Uganda, Sainsbury pointed out that the positive growth in underwriting profits is expected to be maintained and focus will be centered on cash-flow management as liquidity is key to growth in this market.
In the hotel cluster, he noted that the refurbishment of Cresta Lodge is due for completion in Q3 of 2013.
"This will have an impact on revenues as rooms are decommissioned for renovation. However, the increase in RevPAR experienced throughout the industry in 2012 is expected to continue.
Source - zfn
