Assupol Holdings Limited reports resilient performance in the 2019/2020 financial year. The Group delivered a net profit attributable to ordinary shareholders of R564 million (R907 million: 2019) on a gross insurance premium revenue of R4 billion (R3,4 billion: 2019) and a 12.8% return on equity (23%: 2019), despite the severe impact of the Covid-19 pandemic on the Group’s operations and the South African economy.
The core business of the Assupol Group, namely long-term insurance, was classified by the government as an essential service during the lockdown, however, restrictions impacted significantly on new business volumes generated through face-to-face sales, resulting in a 25.2% decrease in new business units in the individual risk and savings business, while the Group continued to incur fixed expenses and exposure to negative effects of the pandemic on local and global investment markets.
“Although Covid-19 impacted the latter months of our financial year, it fundamentally changed an already complex environment and financially strained market in a short period of time. Our focus, as a Group, was to ensure successful and sustainable operations in spite of the pressures exerted by the pandemic. The outcomes of the existing Own Risk and Solvency Assessment (ORSA) and the resilience of business within the Covid-19 environment were tested. The Group maintained a Solvency Capital Requirement (SCR) ratio of 185% as at 30 June 2020, improved from 173% in 2019,” said Niël de Klerk, Assupol Group CFO.
The Assupol Holdings Board of Directors declared an ordinary dividend of 55 cents per share.
Serving our staff and managing cost and risk appropriately
A decision was taken to delay staff salary increases and not pay any bonuses to senior management to ensure capital and cash preservation during uncertain times. No retrenchments were necessary. An additional spend of R9.9 million was incurred to enable employees to work remotely, with a minimum impact on the effectiveness of operations, as well as to provide for the necessary health and safety requirements in the Group’s offices to protect employees, the sales force, and clients. The Group supported its tied salesforce by paying R23.9 million during the lockdown period when face-to-face sales were prohibited.
During the initial lockdown period, the Group experienced an improvement in mortality experience, which subsequently decreased as Covid-19 mortality rates increased. Based on the Group’s own mortality experience, and supported by the South African Medical Research Council (SAMRC) statistics and the Covid-19 considerations for assurance actuaries issued by the Actuarial Society of South Africa, explicit Covid-19 mortality reserves for the Group related business and individual business of R77.9 million after-tax, were provided for.
The impact of returns on investment markets, taking into account the pandemic and South Africa’s downgrade by Moody’s to sub-investment grade, was significant with an underperformance of after-tax returns on excess assets against the long-term investment return assumption by R68 million (2019: overperformance of R32 million). The investment return achieved on excess assets was 1.22% (2019: 10.73%).
“Various scenarios were also considered in the 5-year budget and forecast that were approved by the Assupol Holdings Board of Directors in June 2020. In all of these scenarios the Group will be able to continue as a going concern with sufficient liquidity in place and with a solvency ratio being maintained well above the minimum margin,” concludes de Klerk.
Diversification and sustainability
Other developments within the Assupol Group during the financial year include; the Prudential Authority converted the life license of Assupol Life Ltd to conduct insurance business under the Long-term Insurance Act, 2017; Assupol Investment Holdings (Pty) Ltd acquired a 51% share in Assupol Wealth (Pty) Ltd, a registered financial services provider co-owned with Citadel, ensuring the Group expands its financial service offerings in an effort to diversify its income stream; and Assupol achieved a Level 1 B-BBEE score following revisions to the Codes of Good Practice implemented in 2019.
The Group also maintained its commitment to contribute to South Africa’s social development agenda by contributing R10 million to the construction of new ablution facilities of rural schools in South Africa, as part of the government’s Sanitation Appropriate for Education (Safe) schools initiative.
Assupol looks forward to delivering another resilient performance during the new financial year.