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Integrated Annual Report 2013

scope and boundary

We welcome feedback on this report which is available on our website at www.zurich.co.za. printed copies can be requested from the Group company secretary, Tammy Heydenrych by calling 011 370 9750 or by sending an email to [email protected].

ContextThis is the third integrated report for Zurich Insurance Company South Africa Limited (“Zurich South Africa”) and covers its strategic, stakeholder, operational and financial overview of the short-term insurance activities of the Company for the financial year 1 January 2013 to 31 December 2013. This report aims to provide a transparent, balanced and succinct view of Zurich South Africa’s financial and non-financial information, and is focused on material issues and developments during the period under review.

Zurich South Africa is a subsidiary of the Zurich Insurance Group Limited (“ZIG”) incorporated in Switzerland. This report covers activities in South Africa as well as those related to its subsidiary based in Botswana and aims to provide stakeholders with more information on the challenges and opportunities that will create and sustain value for Zurich South Africa and ZIG, over the long term. There were no changes to the business structure during the year.

Frameworks and assuranceIn compiling this integrated report, we have considered feedback on the previous report from a variety of stakeholders. The information included in this report is based on the following:

• The International Integrated Reporting Committee’s (“IIRC”) prototype of the international IR framework.

• The Global Reporting Initiative’s G3.1 guidelines on reporting of non-financial information (“GRI G3.1”).

• The King Report on Governance for South Africa and the King Code of Governance Principles (“King III”).

• The South African Companies Act, 71 of 2008 (“Companies Act”).

• The JSE Limited (“JSE”) Listings Requirements.• The International Financial Reporting Standards (“IFRS”).

Changes to the reportThis integrated report has been compiled, designed and structured to assist a range of stakeholders to make informed decisions and evaluate Zurich South Africa’s long-term performance. The report structure has been adapted to include a group stakeholder matrix. In addition, this report includes a separate stakeholder reports section including the Chairman and Chief Executive Officer’s joint

Forward looking statementsThis integrated report contains forward looking statements that, unless otherwise indicated, reflect the Company’s expectations as at 31 December 2013. Actual results may differ from the Company’s expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate.

Therefore, the Company cannot guarantee that any forward looking statement will materialise. As such, readers are cautioned not to place undue reliance on these forward looking statements and the Company disclaims any intention and assumes no obligation to update or revise any forward looking statement.

InTeGraTed annuaL reporT 2013 1

conTenTs

InTeGraTed reporT 2013

2 At a glance2 Company profile

4 Organisational structure

5 Geographic footprint

6 Vision, mission, values

7 Strategy 2014 – 2016

14 Group material issues

16 Group stakeholder matrix

17 Group risks and opportunities

22 Group review22 Group five-year review of financial highlights from

consolidated results

24 Shareholder analysis information

25 Group consolidated value added statement

26 Group supplementary income statement

27 Group gross and reinsurance underwriting results

30 Key management30 Board of Directors

34 Executive Committee

40 Stakeholder reports40 Joint Chairman and Chief Executive Officer’s Report

44 Chief Financial Officer’s report

48 Group business review

52 Employee and broker report

56 Suppliers report

57 Community report

59 Environmental report

60 Transformation report

64 Corporate governance

80 Summarised financial statements

report, and the commentary in the Chief Financial Officer’s report provides context to the 2013 annual financial results. The employee and broker, supplier, community and environmental reports cover Zurich South Africa’s sustainability progress.

The business review in this section has been structured to deal with external-facing activities by market segment and product type. Administration and support services are dealt with under the headings “Claims” and “Underwriting and Risk Services”.

The condensed financial information included in this report has been extracted from the audited annual financial statements and has been prepared in accordance with International Financial Reporting Standards.

Assurance statementThe annual financial statements have been audited by PricewaterhouseCoopers Inc., and approved by Zurich South Africa’s Audit Committee and Board. The annual financial statements are available on the Company website at www.zurich.co.za. While non-financial information has not been independently assured, certain sections, including the BBBEE rating, have been verified by relevant external parties.

The necessary internal controls and processes have been observed to ensure data accuracy.

dolly Mokgatle edwyn o’neillchairman chief executive officer

2 ZURICH Insurance coMpany souTH aFrIca LIMITed

at a glance

North America

Latin America

Europe

Middle East & Africa

Asia-Pacific

North AmericaIn North America, ZIG is a leading commercial property-casualty insurance provider serving the global corporate, large corporate, middle market, specialties and programs sectors.

Zurich South Africa is a short-term insurance company headquartered in Johannesburg and listed on the JSE. The Company was founded in 1965 and offers short-term insurance solutions targeting corporate, commercial and personal lines customers.

Zurich South Africa is a subsidiary of the Swiss-based global Zurich Insurance Group Limited (“ZIG”). ZIG is a leading insurance provider with a network of subsidiaries and offices in global and local markets (as depicted in the map alongside). ZIG is the largest shareholder in Zurich South Africa with a shareholding of 84.05%.

Zurich South Africa derives significant benefit from its relationship with ZIG. It provides the Company with access to a global network of specialists ranging from risk management to claims experts and presents opportunities to share knowledge and best practice processes. The strength and stability of the global brand, with a heritage that spans in excess of 140 years, combined with local insight and footprint, makes Zurich South Africa uniquely positioned to capitalise on opportunities in the South African and sub-Saharan African markets.

coMpany proFILe

AT A GLANCE


Latin AmericaZIG operates in Argentina, Brazil, Chile, Mexico, Uruguay and Venezuela.

EuropeZIG has major operations in Germany, Italy, Spain, Switzerland, and the UK and a significant presence in other countries.

Middle East & AfricaZIG’s key operations are based in the Middle East, South Africa, Morocco and Turkey.

Asia-PacificZIG has operations in Australia, China, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Singapore and Taiwan.


AT A GLANCE

orGanIsaTIonaL sTrucTure

SA Fire House84.05%

Public15.95%

Zurich South Africa

Zurich Risk Financing

100%

Zurich Botswana

100%

Zurich Life

100%

Dormants and associates*25 – 50%

Zurich Insurance

Group100%

* See note 7 in the annual financial statements on the Company’s website – www.zurich.co.za


Empangeni

Port Elizabeth

Francistown

BoTSwANA

SouTH AFRICA

Bloemfontein

Kimberley

welkom

Klerksdorp

Bethlehem

Pietermaritzburg

Ermelo

East London

Cape Town

Durban

Newcastle

Nelspruit

Gaborone

Polokwane

George

upington

Queenstown

PretoriaRustenburg

Johannesburg

Port Shepstone

Middelburg

Head office

Regional offices

Sales outlets

Botswana

Zurich South Africa employs over 850 people and has a network of offices throughout the country, with subsidiaries based locally in Johannesburg and in Botswana.

GeographyContribution to gross

written premiumNumber ofemployees

2013R’000

2012R’000 2013

South Africa 3,847,361 3,518,101 822Botswana 237,264 248,433 34

Total 4,084,625 3,766,534 856

GeoGrapHIc FooTprInT


at a glance

VIsIon, MIssIon, VaLues

VISIoN

To be the best global insurer in sub-saharan africa for our customers, shareholders, employees and society.

MISSIoN

To help our customers understand and protect themselves from risk.

VALuES

our values will form the foundation of our strategy by informing our decisions and guiding us along our journey of delivering on our business priority.

Integrity

Teamwork

ExcellenceSustainable

value creation

Customer centricity


MIGHT need a pIc, Lebs To LooK aT

Zurich south africa’s strategy for 2014 – 2016 mirrors that of ZIG and is designed to deliver sustainable, profitable growth in a changing and more competitive business environment. It builds on our strengths. It places customers and their needs at the centre of our business.

To take the company to the next level, we are focusing more closely on the fundamentals of the business and customer segments where we have a competitive edge: those where we can offer a superior value proposition to our customers.

Working together as one Zurich, we aim to offer corporate, commercial and personal customers a superior service and products tailored to their requirements. We are doing this by striving to understand their needs, investing in the capabilities required, increasing our visibility through advertising, measuring our success and using the knowledge we have gained across the business.

We are investing in our people and making Zurich south africa a great place to build a career. We are investing in the systems and processes we need to understand our customers, serve them in the way they prefer, increase collaboration and improve efficiency.

The Zurich brand is bringing us closer to our individual and business customers, positioning the company as the intelligent choice for those who wish to protect the people and things they truly love. and, in line with our strategy, we are doing business responsibly.

The way to success will be the flawless and relentless execution of our strategic plan to build a more competitive, more successful Zurich – a business that will be recognised as the best in sub-saharan africa.

We summarise our strategy under the headings ‘who we are, what we do and how we do it’. ‘Who we are’ is about our purpose and identity. ‘What we do’ describes the markets and customers we serve. ‘How we do it’ defines the enablers of success.

sTraTeGy 2014 – 2016


at a glance

who we areWe are in business to help our customers understand and protect themselves from risk. Risk is part of everyone’s life. Individuals, families, businesses and communities can prosper only when they are protected against critical risks. We help our customers to manage the risks they face, making their lives more secure and helping them to grow their businesses.

We care about our customers, employees, shareholders and the communities in which we live and work. We need the trust and support of these stakeholders to achieve our goals. We want them to see Zurich as the best insurer so that we can grow profitably, attract talented people, retain the support of our investors and build our reputation as a responsible company. We believe that our values make us a stronger business. That is why we emphasise integrity, customer centricity, excellence, sustainable value creation and teamwork in all that we do.

Zurich’s culture keeps us focused on the execution of our strategy while upholding our values and the commitment we have made to our stakeholders.

sTraTeGy 2014 – 2016 conTInued

what we doAt Zurich, we have set clear priorities that will enable us to build on our distinctive market positions in corporate, commercial and personal lines segments. We take a focused approach to customers. That means understanding the needs of the customer segments we can serve profitably with superior propositions. We are investing in the capabilities needed to serve them and ensure we are visible through targeted advertising. We measure our success and use the knowledge we have gained right across our business.

Working together as One Zurich, we aim to offer our customers a superior service and products tailored to their requirements. We have a comprehensive business model in place to address the needs of our three major customer segments:

Corporate

Personal

Commercial

Small business

Mid-market

Size of customer segment

Del

iver

y an

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rod

uct

co

mp

lexi

ty


Short-term insurance solutions per segment

Corporate Insurance segment

Commercial Insurance segment

Personal Insurance segment

Corporate InsuranceAt Zurich we provide a global insurance solution flexible enough to protect your worldwide assets and operations in compliance with local insurance regulations. Our international underwriting capability in more than 170 countries means we work hard to provide consistently reliable risk transfer, risk engineering and claims service, packaged with insights and knowledge that can have a significant impact on a customer’s total cost of risk.

We provide tailored short-term insurance solutions to large corporate and multinational enterprises. Our corporate solutions include cover for:

• property damage;• business interruption;• general liability;• professional indemnity; and• directors’ and officers’ liability.

✓

Commercial InsuranceInsurance that provides the breadth of commercial cover that medium to large enterprises need. Commercial insurance cover from Zurich matches the needs of customers, providing bespoke solutions that bring a superior level of expertise and experience to even the most complex of risks.

We provide cover for small, medium and large enterprises in the retail, services, wholesale and manufacturing industries. Our comprehensive solutions include cover for:

• property;• business interruption;• motor;• liability; • goods in transit; • electronic equipment;• fidelity guarantee; and • accidental bodily injury.

✓


at a glance





Small and Medium Enterprises (“SMEs”) InsuranceInsurance for businesses with a turnover of less than R10 million, we offer a combination of traditional and specialist cover that is meaningful and relevant. This cover is suitable to all SMEs but with particular emphasis on those in:

• manufacturing;• retail;• food and beverage; and • professional services.

✓

BnB SureZurich’s hospitality insurance is a combination of business and personal insurance which can be tailored to perfectly meet customers’ individual requirements. The product is suited to those who run Bed-and-Breakfast establishments, guesthouses, lodges or boutique hotels.

✓

Collectibles InsuranceAt Zurich we provide cover that addresses the risks that customers in this sector may be most concerned about. Collectibles is a specially designed policy for retail, wholesale and manufacturing jewellers, diamond and art dealers and collectors of rare and valuable objects.

✓ ✓

Engineering InsuranceInsurance that provides the breadth of commercial cover that medium to large enterprises need. Commercial Insurance cover from Zurich matches the needs of customers, providing bespoke solutions that bring a superior level of expertise and experience to even the most complex risks.

✓ ✓





Farmers InsuranceWith our insurance track record and capability of identifying insurance needs in the market, you can be assured of our ability to match customer needs to a product that offers maximum cover. Our proposition is designed to suit:

• commercial;• emerging commercial; and• subsistence farmers.

✓ ✓

Flexiflite InsuranceThis insurance policy has been developed specifically for those people who operate as sole proprietors in trade, retail or professional fields such as doctors, lawyers, veterinarians and architects. As its name suggests, Flexiflite means total flexibility for customers to decide on the exact cover they need. It’s original, it’s progressive, and it’s been developed to meet the needs of customers that have requirements that are beyond the ordinary.

✓ ✓

Marine InsuranceAs one of the leading Marine Insurance specialists in South Africa, we offer distinct solutions to meet customers’ needs. With our specialist global expertise, we focus on companies involved in both domestic and international trade, importing and exporting goods including:

• manufacturers;• retailers;• wholesalers;• selling and buying agents;• service companies;• transport companies; • couriers; and • freight forwarders.

✓ ✓


at a glance




Home and Motor InsuranceAs one of the world’s largest insurers for homes and vehicles, we offer customers unparalleled experience and expertise, such as:

• a customer-centric solution that combines home and motor insurance;• a fast-track claims service for non-motor claims under R20,000;• a dedicated claims team with the authority to make decisions that will

fast-track claims; and• no excesses charged to pensioners.

In addition, Zurich Assist offers fast and efficient assistance in case of an emergency – 24 hours a day, seven days a week, providing peace of mind when in need of a helping hand. The service includes: roadside assist, accident management, location-based service and emergency medical evacuation.

✓

Body Corporate InsuranceThis product provides insurance cover for building and common property, legal liability, trustees’ liability, accidental damage to public supply connections and loss of rent receivable from property as a result of damage to property rendered uninhabitable including owners, alternative accommodation. In addition to the cover offered by the product, the families represented will also be able to access our Body Corporate Assist service. This 24-hour helpline service includes home assist, guards on call, emergency medical services, legal assist and trauma counselling.

✓

Travel InsuranceThe Travel Insurance offering covers eventualities such as emergency medical and related expenses, baggage theft, flight delay and cancellation cover, natural disaster and identity fraud. Additional benefits include visa rejection cover, reimbursements for tickets to entertainment or sporting events. Emergency services are managed through World Travel Protection, a wholly owned subsidiary of the Zurich Insurance Group, who specialise in emergency medical, travel safety and travel assistance services to business or leisure travellers.

✓ ✓ ✓






Refine underwriting ManagersRefine is a specialist guarantee solutions underwriter focusing on the construction and fuel retail industries.

The construction guarantee product suite includes performance, retention, advance payment and tender guarantees. The fuel retail guarantee is an innovative guarantee solution for the fuel retail industry and acts as an acceptable alternative to the traditional collateral-backed bank guarantee.

Refine has been the leading insurance guarantee provider into this industry for many years.

✓ ✓

New wheels underwriting AgencyNew Wheels is a specialist underwriting manager which provides unique tailor-made insurance products for commercial transport, passenger transport, motorcycle and classic car industries.

New Wheels has a track record of providing outstanding service, with daily claims payments and professional and ethical standards of the highest quality.

✓

Our global capability is a differentiator in:

• addressing large and complex risks;• scale and reinsurance capabilities;• re-use and deployment of technology platforms;• deployment of skills and resources in underwriting

and claims.

How we do itWe will continue to invest in our people and build a culture that’s focused on the execution of our strategy.

Zurich needs to be lean, efficient and profitable. That means reducing complexity and improving operating margins. Our IT strategy will enable us to deliver specific solutions and to serve our customers in the way they prefer. The Zurich Way programme aids efficiency by creating a common way of working, based on global capabilities.

As we drive for profitable growth, we will act responsibly in all we do, to build our reputation. It also enables us to take advantage of growth opportunities as they arise.

We continue to take economic, risk-based decisions. The business is protected by maintaining strict financial controls and discipline, attracting the best talent in the industry, an exclusive focus on insurance and preserving organisational agility so that we can respond quickly to emerging risks and opportunities.

Zurich Basics and The Zurich Commitment will continue to guide our actions with respect to our four key stakeholders groups: our customers, our people, our shareholders and the communities in which we live and work.


at a glance

Zurich South Africa considers various issues that affect its business from an economic, social and environmental perspective and how an issue impacts the Group’s strategy. These issues are prioritised, discussed and approved by the Executive Committee on an annual basis. The Board and its committees provide oversight on these issues.

An issue is considered material when it impacts on the long-term sustainability of Zurich South Africa, including factors that could affect the financial stability of the Group. The Group’s material issues are detailed below.

what were the major issues for 2013?

which strategic pillar addresses the issue?

what are we doing?

which Board committees provide oversight?

Key performance indicators

Page reference

Improve profitability

Profitable growth

• Growing segments through new products and lines of business

• Ongoing development of the broker channel

• Investing in alternative distribution channels

• Audit Committee• Asset/Liability

Management Investment Committee

• Growth 8% (2012: 3%)

• Combined ratio 114% (2012: 109%)

Page 8

Retain and grow our customer base

Customers • Improving our understanding of customers’ needs and treating them fairly

• Developing innovative, technological product and service solutions

• Investing in our brand through targeted marketing initiatives

• Audit Committee• Social, Ethics and

Transformation Committee

• R18 million invested in IT (2012: R15 million)

• Growth 8% (2012: 3%)

Page 7

Attract, retain and develop appropriate skills

People • Implementing programmes to attract, retain and develop people in line with our transformation strategy

• Remuneration Committee

• Social, Ethics and Transformation Committee

• Nominations Committee

• 822 full-time employees (2012: 771 full-time employees)

Page 76

Support economic and social transformation

People • Embedding broad-based black economic empowerment (“BBBEE”) as an integral part of the decision-making process in the business


• Achieved a Level 3 rating for BBBEE (2012: Level 3)

• R4.2 million spent on corporate social investment (2012: R7.7 million)

Page 57

Group MaTerIaL Issues


what were the major issues for 2013?

which strategic pillar addresses the issue?

what are we doing?

which Board committees provide oversight?

Key performance indicators

Page reference

Improve process and system efficiencies

Operational excellence

• Investing in operational and technological requirements to support growth and customer service

• Ongoing refinement of processes to deliver efficient and effective solutions in underwriting and claims

• Leveraging off global best practice to realise efficiencies

• Managing costs

• Audit Committee • Increase in operating expenses 4% (2012: 10%)

Page 13

Maintain sound financial controls and good governance

Financial discipline and governance

• Actively managing risks • Applying sound

underwriting practices • Ensuring that

appropriate reinsurance structures are in place

• Audit Committee• Nominations

Committee• Social, Ethics and


• Continued to embed King III principles

Investment strategyA robust capital management programme supplements our underwriting strategy and allows the Company to optimise shareholders’ total return and meet capital needs. It also enables the Company to take advantage of growth opportunities as they arise.

The organisation continues to take economic, risk-based decisions. The business is protected by maintaining strict financial controls and discipline, attracting the best talent in the industry, an exclusive focus on insurance and preserving organisational agility so that we can respond quickly to emerging risks and opportunities.


at a glance

Stakeholder relationsEffective stakeholder management is an important aspect of good governance that can assist in mitigating business risks, particularly those related to reputation, operations and a changing regulatory and business environment. In addition, effective engagement with stakeholders can highlight business opportunities.

The Companies Act and the King Code on Corporate Governance emphasise the importance of the Company’s engagement with its stakeholders.

Zurich South Africa’s strategy remains focused on caring for customers, employees, shareholders and the communities in which it operates globally. The Company distinguishes itself as an insurer of choice for customers and business partners who value its knowledge, expertise and financial stability. These core competencies inform and shape the local strategy in the following key pillars:

• People: we invest in our people and build a culture that’s focused on the execution of our strategy. The Zurich Way programme supports this efficiency through creating a way of working based on global capabilities and shared expertise.

• Profitability: we strive to be efficient and profitable by reducing complexity in our insurance value offering, creating value for customers and business partners, and by improving operating margins to create value for shareholders.

• Progress in technology: we will invest in technology to enable us to deliver specific solutions and to serve our customers in the way they prefer.

• Responsibility: we will act responsibly in all we do, to build our reputation and safeguard our freedom to operate.

• Shared values and commitment: we emphasise integrity, customer centricity, excellence, sustainable value creation and teamwork.

Zurich South Africa builds and maintains relationships with various stakeholders to proactively engage on critical issues, manage its reputational risk and inform business decisions. A range of channels are utilised to engage with stakeholders and the frequency of engagement depends on the issue at hand. Zurich South Africa’s key stakeholders have been identified as those stakeholders that have a material impact on the Group’s strategic direction. These stakeholders include: brokers, communities, customers, employees, government, media, industry and regulatory bodies, shareholders and suppliers.

Group sTaKeHoLder MaTrIx


The aim of Zurich South Africa’s group risk management function is to evaluate, create and protect value for shareholders and other stakeholders by guarding against possible risk exposure and loss. Group risk management also assists in improving strategic decision-making and in building Zurich South Africa’s position regarding financial performance, reputation and market share. Through this robust risk management approach, Zurich South Africa is able to identify opportunities that can further enhance its sustainability.

Risk oversight is an ongoing process; there are a number of steps in place to ensure all aspects and categories of risks are covered, assessed and monitored. Zurich South Africa’s Board is accountable for the risk management process and internal controls.

The table below shows Zurich South Africa’s material business risks, the risk rating, mitigating actions and opportunities related to each risk. They are monitored regularly as part of the risk management process which is embedded within business processes and overseen by the Board of Directors.

Material Business Risks

DescriptionRisk rating Risk mitigation opportunities

Board committee providing oversight

Data security and privacy

Minor • Information Governance Council to oversee data security and privacy

• Ongoing educational initiatives and communication to increase awareness among employees

• Increase in market share

• Audit Committee

Availability of adequate competencies, skills and capabilities to grow and embed a high performance culture

Moderate • 12-month leadership development programme, ongoing graduate programmes and training

• Focused training of claims technicians and members of the sales force

• Participation in ZIG’s technical training initiative to facilitate knowledge transfer

• Attract and retain high-calibre employees and brokers to ensure the provision of excellent service to customers

• Increase in sales volumes

• Remuneration Committee

Maintain BBBEE rating Minor • Regular meetings held with business stakeholders to monitor progress against set targets

• Participate in government’s national economic development plan


Sustainable growth over the short and long term

Major • Clear strategy development and implementation to focus on key growth areas, drive lower loss ratio, enhance operational efficiencies and increase our market share

• Increase in market share

• Audit Committee• Social, Ethics and


Group rIsKs and opporTunITIes


at a glance



operational effectiveness and ability to implement strategy through structure

Moderate • Efficiency improvements launched

• New training programmes developed

• New project oversight and governance process to prioritise key strategic projects and focus on delivery

• Increase in agility to adapt in an ever-changing environment

• Improve customer service

• Audit Committee

Data access and quality Major • Programme initiated to acquire and protect policy data

• Increase in agility to adapt in an ever-changing environment

• Audit Committee

Regulatory change, complexity and market impact

Moderate • Ongoing engagement with the FSB to discuss progress made toward adoption of legislative requirements

• Proactively inform and shape regulatory developments

• Asset/Liability Management Investment Committee

• Audit Committee

Risk of strain on capital, solvency margins and liquidity

Moderate • Regular stress tests conducted as part of the Group’s investment strategy

• Improve capital allocation to increase return on investment

• Asset/Liability Management Investment Committee

• Audit Committee

Group rIsKs and opporTunITIes conTInued

Material Business Risks continued




Critical IT systems Moderate • Ongoing review and rigorous management of key outsource partners

• Programme initiated to refresh aging technology and solutions sets

• Investigation and planning phase of technology refresh journey commenced

• Improve customer service

• Improve product pricing

• Improve competitive-ness within an ever-changing environment

• Audit Committee

outsourcing risk Minor • Review of outsourcing arrangements

• Group Outsourcing Policy in place

• Outsourcing Committee established to oversee compliance with the FSB’s Outsourcing Directive 159 and internal Group Outsourcing Policy

• Training of relevant stakeholders

• Improve operational efficiencies

• Audit Committee

Material Business Risks continued


at a glance


meetIng tHe needs of oUR CUstomeR

GROUP REVIEW


Group FIVe-year reVIeW oF FInancIaL HIGHLIGHTs FroM consoLIdaTed resuLTs

2013R’000

2012R’000

2011R’000

2010R’000

2009R’000

Financial performanceGross written insurance premium 4,084,625 3,766,534 3,890,028 4,632,362 5,404,362Insurance premium ceded to reinsurers (856,203) (828,304) (912,495) (978,900) (1,139,621)

Net written insurance premium 3,228,422 2,938,230 2,977,533 3,653,462 4,264,741Change in unearned premium 1,763 (3,785) 24,076 60,303 521

Net insurance premium earned 3,230,185 2,934,445 3,001,609 3,713,765 4,265,262Net insurance claims (2,553,317) (2,202,655) (1,977,622) (2,576,852) (3,670,143)Net commission incurred (559,422) (439,645) (460,319) (579,134) (672,310)Operating expenses (572,773) (550,458) (501,374) (462,956) (486,958)

Net underwriting result (455,327) (258,313) 62,294 94,823 (564,149)Net investment income (including realised gains) 288,078 294,317 208,736 215,349 329,162Other expenses (84,932) (57,638) (77,234) (117,773) (50,087)Income tax 88,057 23,710 (69,231) (47,982) 100,509

(Loss)/profit for the year (164,124) 2,076 124,565 144,417 (184,565)

Dividends paid (cents) 300 300 300 – –other comprehensive incomeNet unrealised gains on available-for-sale financial assets 40,465 63,965 18,909 99,249 9,886

2013R‘000

2012R’000

2011R’000

2010R’000

2009R’000

Financial positionFixed assets 111,407 123,482 150,555 166,209 147,500Investments 2,369,054 2,268,792 2,146,588 2,075,996 1,912,749Cash and short-term deposits 693,279 611,945 981,803 1,072,454 1,032,696Insurance assets 743,582 1,003,870 680,414 1,072,475 837,976Other assets 1,140,266 1,043,593 940,413 1,144,790 1,104,420

Total assets 5,057,588 5,051,682 4,899,773 5,531,924 5,035,341

Shareholders’ interest 1,869,252 2,019,733 2,014,945 1,883,827 1,662,179Insurance liabilities 2,121,832 2,222,549 1,835,007 2,465,002 2,325,210Other liabilities 1,066,504 809,400 1,049,821 1,183,095 1,047,952

Total equity and liabilities 5,057,588 5,051,682 4,899,773 5,531,924 5,035,341


Key ratios2013

%2012

%2011

%2010

%2009

%

Insurance activities Net claims ratio# 79.1% 75.0% 65.9% 69.4% 86.0%Net acquisition ratio# 17.3% 15.0% 15.3% 15.6% 15.8%Expense ratio# 17.7% 18.8% 16.7% 12.5% 11.4%Combined ratio# 114.1% 108.8% 97.9% 97.4% 113.3%Premiums reinsured/GPI 21.0% 22.0% 23.5% 21.1% 21.1%

Performance per share (cents)Earnings (1.348) 17.2 1,023.0 1,185.6 (823.5)Headline (losses)/earnings (1.762) (506.0) 982.0 1,241.0 (2,245.0)Net asset value per share 15,347.5 16,582.8 16,543.4 15,467.0 13,647.5Dividend 300 300 300 – – Dividend cover (EPS/DPS) (4.5) 0.1 3.4 – –

Investing activitiesROaE* (before unrealised gains/losses) (Net income/shareholder equity) (8.8%) 0.1% 6.2% 7.7% (11.1%)ROaE (after unrealised gains/losses) (5.4%) 2.0% 7.4% 4.5% 0.4%Investment yield (including unrealised gains/losses) 8.8% 12.4% 7.3% 10.0% 11.5%

SolvencyInternational solvency margin 57.9% 68.7% 67.7% 51.6% 39.0%Capital adequacy ratio 1.9% 2.3% 2.3% – –

# As a percentage of net earned premium

* Return on average equity

GROUP REVIEW


sHareHoLder anaLysIs InForMaTIon

Shareholder spread Number of

shareholdings %Number of

shares %

1 – 1,000 shares 406 93.33 67,036 0.551,001 – 10,000 shares 13 2.98 41,168 0.3410,001 – 100,000 shares 8 1.84 192,787 1.58100,001 – 1,000,000 shares 7 1.62 1,641,624 13.481,000,001 shares and over 1 0.23 10,236,885 84.05

Total 435 100 12,179,500 100

Distribution of shareholdersBanks/Brokers 3 0.69 355,793 2.92Close corporations 3 0.69 1,301 0.01Holding company 1 0.23 10,236,885 84.05Individuals 338 77.70 121,345 1.00Insurance companies 3 0.69 698,730 5.74Medical schemes 1 0.23 20,630 0.17Mutual funds 5 1.15 524,532 4.31Nominees and trusts 45 10.34 14,367 0.11Private companies 32 7.36 15,504 0.13Retirement funds 4 0.92 190,413 1.56

Total 435 100 12,179,500 100

Shareholder spread Number of

shareholdings %Number of

shares %

Non-public shareholders 9 2.07 10,237,885 84.06

Directors of the Company 8 1.84 1,000 0.01Strategic holdings (more than 10%) 1 0.23 10,236,885 84.05

Public shareholders 426 97.93 1,941,615 15.94

Total 435 100 12,179,500 100

Beneficial shareholders holding 3% or more Number of

shares %SA Fire House Limited 10,236,885 84.05Old Mutual 1,019,819 8.37JP Morgan (custodian) 355,673 2.92Nedbank Group 164,027 1.35

Total 11,776,404 96.69

Institutional holdings of 1% or more(own holdings and third-party managed funds)

Old Mutual Investment Group 1,361,695 11.18JP Morgan (custodian) 355,673 2.92

Total 1,717,368 14.10

The non-public shareholders disclosed in this note have been analysed in accordance with the categories set out in paragraph 4.25 of the JSE Listings Requirements.


Value added is a measure of the wealth the Group has been able to create. The following statement shows how this wealth has been created and distributed.

2013R’000

2012R’000

Value createdGross written insurance premium 4,084,625 3,766,534Insurance premium ceded to reinsurers (856,203) (828,304)Claims paid, reserve movement and costs of other services (3,278,676) (2,794,836)

(50,254) 143,394Investment income, including associates 213,851 225,055

Total value created 163,597 368,449

Value distributedEmployees 350,433 333,053 Communities 4,249 7,733 Black business partners – 6,114 Providers of finance 57,008 41,742 Government 12,294 9,695

– Current taxation 12,294 9,695 – Foreign taxation/withholding tax – –

Value reinvested (59,725) 4,575

– Depreciation and amortisation 34,829 31,740 – Impairment losses 4,989 6,240 – Deferred taxation (99,543) (33,405)

Value retained for investment and future support of business (200,662) (34,463)

Total value distributed and retained 163,597 368,449

Group consoLIdaTed VaLue added sTaTeMenTFor the year ended 31 December 2013

GROUP REVIEW


% of netearned

premium2013

R’000

% of netearned

premium2012

R’000

Technical accountGross written insurance premium 4,084,625 3,766,534 Insurance premium ceded to reinsurers (856,203) (828,304)

Net written insurance premium 3,228,422 2,938,230

Net insurance premium earned 3,230,185 2,934,445 Net insurance claims 79.1% (2,553,317) 75.0% (2,202,655)Net commission incurred 17.3% (559,422) 15.0% (439,645)Other operating expenses 17.7% (572,773) 18.8% (550,458)

Net underwriting result 114.1% (455,327) 108.8% (258,313)

Attributable investment income 2.6% 83,372 3.1% 89,770

General insurance result 111.5% (371,955) 105.7% (168,543)

Non-technical accountImpairments (4,989) (6,240)Non-technical expenses (84,932) (57,638)Other investment income 110,009 134,418 Investment expenses (5,923) (5,527)Net realised gains on disposal of investments 105,609 81,896

(Loss)/profit before tax (252,181) (21,634)Income tax expense 88,057 23,710

(Loss)/profit for the year (164,124) 2,076

Group suppLeMenTary IncoMe sTaTeMenT


% of netearned

premium2013

R’000

% of netearned

premium2012

R’000

Gross accountGross written insurance premium 4,084,625 3,766,534 Change in unearned premium (62,848) 7,401

Earned premium 4,021,777 3,773,935

Claims incurred 73.1% (2,941,166) 77.6% (2,927,811)Acquisition costs 17.2% (691,666) 15.5% (586,011)Other operating expenses 14.2% (572,773) 14.6% (550,458)

Gross underwriting deficit 104.5% (183,828) 107.7% (290,345)

Reinsurance accountInsurance premium ceded to reinsurers (856,203) (828,304)Change in unearned premium 64,611 (11,186)

Earned premium (791,592) (839,490)

Claims recovered 49.0% 387,849 86.4% 725,156 Commission earned 16.7% 132,244 17.4% 146,366

underwriting (deficit)/surplus from reinsurance activities 65.7% (271,499) 103.8% 32,032

Net underwriting deficit 114.1% (455,327) 108.8% (258,313)

Group Gross and reInsurance underWrITInG resuLTs

we Help oUR CUstomeRs to manage tHe RIsks tHey faCe

KEY MANAGEMENT


board oF dIrecTors

1 2

3 4


1. Dolly Mokgatle, Independent Non-executive Director and Chairman

BProc, LLB, HDip (Tax Law)

Independent Non-executive Director since 2007 and appointed Chairman of the Board in November 2012 (Chairman of the Nominations Committee; member of the Audit Committee and the Remuneration Committee)

Other directorships: Peotona Group; Kumba Iron Ore Limited; Sasfin Holdings Limited; The IQ Business Group; Unisa; Afrika Tikkun; Lafarge Industries South Africa Proprietary Limited; Sinako Holdings Proprietary Limited; De Beers Consolidated Mines Limited; Fenner Conveyor Belting South Africa Proprietary Limited; Pearson Marang Proprietary Limited; Pearson Education Achievement Solutions Proprietary Limited; Rabatona Investment Holdings Proprietary Limited; Bargenel Investment Proprietary Limited; Reunert Limited; Macsteel Services Centres SA Proprietary Limited; Total South Africa Proprietary Limited

2. Edwyn o’Neill Chief Executive officer

BCom (Hons), CA(SA)

Executive Committee member and Chief Executive Officer since 2012 (member of the Asset/Liability Management Investment Committee and the Social, Ethics and Transformation Committee)

Other directorships: Zurich Insurance Company Botswana Limited (Chairman); Zurich Life SA Limited; Zurich Risk Financing SA Limited; Zurich Properties Botswana Proprietary Limited; Mauritian Eagle Insurance Company; South African Insurance Association

4. Joseph Deiss Non-executive Director

LicRer Pol Dr Rer Pol Habilitation Dr HC

Non-executive Director since 2007 (Chairman of the Asset/Liability Management Investment Committee)

Other directorships: SA Fire House Limited; Zurich Insurance Plc (“ZIP”) Ireland; Alstom (Switzerland) SA; Emmi AG; Clinique General Garcia-Ste-Anne SA; Kudelski SA; Turck Duotec SA; Alstom Renewable (Switzerland) SA; Foundation Adolphe Merkle

3. Pieter Bezuidenhout Chief Financial officer

BCompt (Hons), CA(SA), CISA, HCiL

Executive Committee member and Chief Financial Officer since 2009 (member of the Asset/Liability Management Investment Committee; Social, Ethics and Transformation Committee and the Service Level Agreement Review Committee)

Other directorships: Zurich Insurance Company Botswana Limited; Zurich Life SA Limited; Zurich Risk Financing SA Limited (Chairman)

KEY MANAGEMENT


board oF dIrecTors conTInued

5

7

6

8


7. Stuart Morris Independent Non-executive Director

BCom, CA(SA)

Independent Non-executive Director since 2005 (Chairman of the Audit Committee, the Service Level Agreement Review Committee and the Remuneration Committee; member of the Nominations Committee)

Other directorships: Group Five Limited; Sasol Pension Fund; Mwana Africa Plc; City Lodge Hotels Limited; Hudaco Industries Limited; Nedberg Chalets Proprietary Limited; Wits University Donald Gordon Medical Centre

8. John Vice Independent Non-executive Director

BCom, CA(SA)

Independent Non-executive Director since January 2013 (member of the Asset/Liability Management Investment Committee; Audit Committee; Social, Ethics and Transformation Committee and the Service Level Agreement Review Committee)

Other directorships: Zurich Life SA Limited (Chairman), Ingwelala Share Block Limited; Anglo American Platinum Limited

5. Patrick Manley Non-executive Director

Marketing Degree, Business Strategy Post Graduate Diploma

Non-executive Director since February 2014 (member of the Remuneration Committee and the Nominations Committee)

Other directorships: Zurich Financial Services Ireland; Zurich Russia; Zurich Sigorta; ZIP Ireland; Irish Business & Employers’ Confederation (IBEC) National Council; Irish Financial Services Centre, Clearing House Group (IFSC CHG)

6. Mandiza Mbekeni Independent Non-executive Director

BA (Law), LLB

Independent Non-executive Director since 2007 (Chairman of the Social, Ethics and Transformation Committee; member of the Audit Committee and the Asset/Liability Management Investment Committee)

Other directorships: Smollan Holdings; Smollan Group

KEY MANAGEMENT


execuTIVe coMMITTee

1 2

3 4


3. Jacob Pieter (JP) Blignaut Chief underwriting officer

Fellow of the Institute and Faculty of Actuaries, BCom (Hons) Cum Laude

JP has over 18 years’ insurance experience in South Africa, UK, India and Asia. Prior to joining Zurich during 2012, JP was the Chief Actuary for RSA Insurance Group Plc for the Asia and Middle-East region where he was responsible for building actuarial and pricing capabilities across eight countries. Prior to that, he worked for the Sanlam Group in a number of roles in South Africa and London.

4. Elvin de Kock Chief Risk officer

MBA, Fellow of the Chartered Institute of Management Accountants, Chartered Global Management Accountant

Elvin has over 25 years’ extensive executive management experience in prominent organisations in South Africa. He was appointed Africa Financial Manager at Reuters Limited in 1986 and remained such until 1996 when he joined De Meyer & Associates as a Management Consultant. In 1998, he joined Motorola SA as Finance Director before moving to Fujitsu a year later as Finance Director. He held this position for two years and was then promoted to the role of Managing Director until 2009. Elvin also held the role of Chief Operating Officer in the Absa Group Technology division for two years.

1. Edwyn o’Neill Chief Executive officer

BCom (Hons), CA(SA)

Edwyn has over 16 years’ extensive auditing experience within the financial services sector with specialised knowledge in retail and stockbroking, treasury, corporate and investment banking and securities trading. Before leaving KPMG in 2006 to assume the role of Chief Financial Officer – Barclays Africa, Edwyn was the partner in charge of the Bank Audit Division of Financial Services. Prior to joining Absa Insurance in 2009 as Managing Director, Edwyn was the Chief Financial Officer for Absa Financial Services during 2007 and assumed further responsibility as the Chief Operating Officer from July 2008.

2. Pieter Bezuidenhout Chief Financial officer

BCompt (Hons), CA(SA), CISA, HCiL

Pieter was Chief Financial Officer at Mutual & Federal for 10 years before joining Zurich in 2009. Prior to that he worked for Deloitte for 10 years, and for the Spar Group for seven years in various financial, auditing and assurance roles.

KEY MANAGEMENT


execuTIVe coMMITTee conTInued

5 6

7 8

9 10


7. Christoph Leuzinger Head of Global Corporate

During his studies, which focused on law at the universities of Zurich and St. Gallen, both in Switzerland, Christoph worked at a major Swiss life insurance company where, among others, he acted as strategic assistant to the General Counsel on the U.S. Holocaust class action against major European insurance companies. After his studies, Christoph joined a start-up IT company and, after two years, entered the Zurich fold. Christoph has over 13 years’ experience in technical and leadership underwriting roles within Zurich’s Financial Lines in Europe and, more recently, globally, as Head of Management Liability. Christoph brings a wide range of technical, managerial and people skills to the Global Corporate function in South Africa.

8. Collin Molepe Chief operations officer

Lean Six Sigma – Blackbelt

Collin joined from Absa Insurance Company where he was Chief Operations Officer and was responsible for the delivery of business change, procurement, business performance, operational systems and client services. Prior to joining Absa Insurance Company as the General Manager: Claims Cost Control, Collin was Divisional Manager at Discovery Health where he was responsible for developing and implementing the strategic direction for the Health claims processing unit.

5. Nicholas Francis Chief Marketing officer

BCom

Nicholas joined the AIG Graduate Programme in 2003 and was appointed as a Travel Insurance Underwriter in AIG South Africa’s Accident & Health Division in 2004. In 2006, he joined Absa Insurance Services as Product Consultant GPA (Group Personal Accident) & Travel Insurance, assumed the role of Product Manager: Travel Insurance in 2008 and was subsequently promoted to the position of Executive Assistant to the Managing Director of Absa Insurance Company and Absa iDirect Limited. Nicholas joined Zurich South Africa as Executive Assistant to the CEO in 2012 and assumed his current role in 2013.

6. Chris Grieve, Executive Head of Sales and Market underwriting

National Certificate in Financial Services

Chris started his career in insurance at Mutual & Federal in 1980 where he worked for 28 years, rising to the position of Executive General Manager for Group Business Development and Sales. During this time, Chris worked across Personal Lines, Mid-Market, Small Business, Corporate Business, Marine, Engineering and Group Reinsurance.

In 2008 he joined Willis Reinsurance Broking SA as Managing Director. During this period he attended several Baden Baden reinsurance sessions in Germany with international reinsurers.

He then joined Zurich South Africa in November 2010 as Head of Market Underwriting and in February 2011 he took over Sales as Executive Head of Sales and Market Underwriting, responsible for all lines of business excluding Global Corporate. Chris attended the Zurich SLP Programme in July 2012 and attends the Head of Broker Management sessions held in Zurich every year.

9. Cloud Saungweme Chief Claims officer

MBA, Fellow of the Insurance Institute of South Africa

Cloud has over 20 years’ experience in the short-term insurance industry. Cloud’s previous roles include Claims Operations Superintendent at AIG South Africa, Claims Operations Supervisor at Protea Insurance, Assistant Claims Operations Manager at Rand Mutual Assurance and General Manager Operations at Hollard Insurance.

10. Marissa Schwan Head of People Management

BCom

Marissa started her professional career at ABSA Bank (Vehicle Finance Division) and progressed in different divisions within the Bank. Marissa was with Absa Bank until December 2002. Prior to joining Zurich South Africa as Head of People Management in 2011, she was HR Account Executive at FNB Homeloans, Senior HR Business Partner and Senior Project Manager at Standard Bank (IT Division), and Head: HR Centres of Excellence – sub-Saharan Africa at Standard Bank (Africa). In September 2009 she moved to Quintiles Transnational Plc as HR Director: sub-Saharan Africa.

oUR CUstomeRs RemaIn at tHe HeaRt of oUR bUsIness

STAKEHOLDER REPORTS


It gives us pleasure to present Zurich South Africa’s third integrated report which continues to demonstrate our journey of integrating how we conduct and report on our business.

JOINT CHAIRMAN AND CHIEF ExECuTIVE oFFICER’S REPORT


dolly Mokgatle edwyn o’neill

In the spirit of good corporate governance, we seek to communicate in a balanced and transparent manner with each of our key stakeholder groups, namely shareholders, investors, employees, customers, brokers, suppliers, government, industry and regulatory bodies, the community and media.

overview The 2013 financial year was once again characterised by challenging market conditions from a global and local economic perspective. Although there were signs of growth in the global economy, high debt levels and large fiscal deficits remain an ongoing concern. These global markets continue to negatively impact on South Africa’s economy, with estimated GDP growth expected to decline to 27% in 2014. The inflation rate is being managed in the target 6% range and the lower interest rates adversely impacted investment income. Furthermore, the rand’s depreciation by more that 20% had a significant negative impact on the cost of imported goods.

South African insurance market overviewKey challenges impacting on the local insurance industry as a whole included fraudulent claims, the increased frequency in vehicle accident rates, the increase of uninsured motor vehicles to above 60%, severe weather conditions and the instability of electricity supplies.

Zurich South Africa’s underwriting performance and overall bottom line was directly impacted by the above-mentioned factors. Our underwriting performance resulted in a loss of R455 million compared to a loss of R258 million in the

prior year and we realised an overall operating loss of R164 million as compared to an operating profit in 2012 of R2.1 million. The combination of adverse weather conditions, including floods in the Western Cape and hailstorms in Gauteng, an increase in the frequency of motor and property claims in the personal and commercial portfolios, the deterioration of the rand, and an increase in binder fees have all contributed to our disappointing results.

It was pleasing to note that in these tough market conditions gross written premium increased by 8%, of which 2% was attributable to rate increases and the balance to new business. This increase demonstrates that our commitment to investing in systems and people in high potential growth business segments and channels, over the past 18 months, has begun to show improvements but we acknowledge that we still have a way to go. Furthermore, our retention rates increased from 60% to approximately 75% in a highly competitive insurance market, which is indicative of good portfolio management.

Zurich’s balance sheet remains strong and the business is well capitalised, with our solvency ratio of 58% (2012: 69%) still in excess of targeted solvency levels of 45% to 50%.

A key highlight during 2013 was the performance of our Botswana operation which ran at a combined ratio of 88.3% (2012: 93%).

We are well positioned to leverage the considerable strength of our leading global insurance brand to drive competitive advantage in our chosen markets. Being part of the global

STAKEHOLDER REPORTS


JoInT cHaIrMan and cHIeF execuTIVe oFFIcer’s reporT conTInued

Zurich community also offers the opportunity to expand our footprint by leveraging off the Zurich Insurance Group’s experience and expertise. In addition, our employees are afforded the opportunity to gain international experience through various employee development programmes on offer.

Strategy 2014 – 2016Against the backdrop of these tough market conditions and a highly competitive operating environment, the Board and Executive Management had lengthy debates and discussions on how to return the business to profitability and create value for our shareholders and other key stakeholders. These debates and discussions culminated in a revised strategy that will be embedded within the organisation over the next three years, with the aim of focusing on our strengths, identifying opportunities, mitigating threats against future profitability of the business, and keeping customers at the centre of our business.

Focus areas for restoring the business to profitability include: revenue optimisation and underwriting actions to optimise profitability of portfolios; efficiency in claims and procurement; cost savings initiatives focused on replacing legacy IT systems; and maintaining operational cost savings initiatives.

IT infrastructure and data generated from IT systems are critical enablers. Two strategic IT projects have been earmarked for implementation over a three-year period to bolster our IT infrastructure. The total IT investment over three years is estimated at R300 million.

This turnaround strategy necessitated a thorough review of our workforce, to ensure that we had the right people in the correct positions throughout the organisation. This resulted in a revision of our Executive and Senior Management structure. We are confident that the reconstituted Executive and Senior Management teams are well positioned to implement the turnaround strategy.

Further details on our strategy and Executive Management are shown on pages 7 to 13.

Regulatory environmentThe changing regulatory environment and legislative controls continue to have an impact on our business. We estimate that costs for legislative compliance is approximately 1% (R41 million) of gross written premiums. Key regulatory focus areas during 2013 included: Binder Agreements, Treating Customers Fairly (“TCF”), the Protection of Personal Information (“PoPI”) Act and the Solvency Assessment and Management (“SAM”) Bill. The Board is kept apprised of

regulatory developments through our robust governance framework on a regular basis.

With the Binder Regulations now in force, there was a focus on ongoing audits relating to the binder fees and building more robust governance structures and controls around this function. Given the cost impact of the Binder Regulations, a solution to determine a fee range based on the type of intermediary and the services performed by the intermediary will be rolled out in 2014.

TCF is embedded in our customer-centric ethos. We prepared the business for a smooth transition when this regulation was implemented on 1 January 2014, and are geared for ongoing improvements. One such improvement during 2013 was the introduction of a customer satisfaction tool that monitors our customer satisfaction and identifies areas for improvement. Furthermore, TCF forms part of all employees’ key performance indicators against which they are remunerated.

The PoPI Act was legislated on 26 November 2013 and the commencement date is anticipated to be in 2014. Our systems, where relevant, have been updated to ensure that customers’ personal information is secure and in accordance with this Act.

We welcomed the Financial Services Board’s (“FSB”) decision to delay the date of full implementation of the SAM regime to 1 January 2016 therefore facilitating a smooth transition to the new requirements. Being a subsidiary of the Zurich Insurance Group affords Zurich South Africa the benefit of having a well-established economic and risk-based capital regime as envisaged under European Solvency II guidelines. With the FSB’s phased SAM implementation approach, we continue to meet their key milestones. In 2013, following the release of the Quantitative Reporting Templates for Pillar III of SAM, a gap analysis was conducted and gaps identified continue

to be addressed.

TransformationZurich South Africa and its Board of Directors are and remain committed to transformation and views this as a business imperative, which is endorsed by the Board. Not only do transformation targets form part of all employees’ key performance indicators, they are embedded within the DNA of Zurich South Africa. Oversight of our transformation progress is monitored by the Social, Ethics and

Transformation Committee.


We maintained a Level 3 broad-based black economic empowerment (“BBBEE”) rating for 2013. Our BEE status for the 2013 financial year has been externally verified by EmpowerLogic, an accredited verification agency. We are pleased that despite the introduction of the Access to Financial Service element comprising 14 points, we have maintained our Level 3 rating.

Our people are instrumental in assisting Zurich South Africa to become the best global insurer in sub-Saharan Africa. We encourage our employees to take responsibility for their own development and provide the necessary tools to assist them in achieving their personal and business goals. Leadership sessions were conducted for the senior leadership group and executive management, with a view to embedding our code of conduct within the business and focusing on the role of culture as a key enabler.

Transformation remains a key strategic pillar going forward and the executive is committed to developing talent within the organisation to attract, retain and develop people in line with the transformation strategy.

Governance The Board remains committed to operating in a transparent and ethical environment and is regularly kept abreast of both local and international governance developments. Executive remuneration continues to be a focus both locally and internationally and, being a subsidiary of the Swiss-based Zurich Insurance Group, we also comply with the Swiss Financial Market Supervisory Authority’s remuneration rules and regulations which are more rigorous than South African legislation.

Our unitary Board comprised eight Directors as at 31 December 2013, with six Non-executive Directors and two Executive Directors. Four of the Non-executive Directors, including the Chairman, are independent. On 9 December 2013, the Chief Financial Officer, Pieter Bezuidenhout, announced his retirement, effective 31 May 2014. He will also step down from the Board and relevant committees he currently serves and presides on. We are further pleased to announce that Pieter will consult to Zurich South Africa and continue to chair certain subsidiaries, strategic investments and projects. John Vice joined the Board on 23 January 2013 as an Independent Non-executive Director and is a member of the Asset/Liability Management Investment Committee, Audit

Committee, Social, Ethics and Transformation Committee and the Service Level Agreement Review Committee. He also serves on the Board of Zurich Life SA Limited.

Further changes to the Board after our year-end included the resignation of Non-executive Director Saad Mered, effective 1 January 2014, and the appointment of Patrick Manley as a Non-executive Director effective 14 February 2014, subject to regulatory approvals. Patrick represents our holding company in Switzerland and is a member of the Remuneration and Nominations committees in South Africa. He brings a wealth of knowledge and experience to the business and the Board.

outlookThe Board has a positive outlook for the year ahead and is confident that the business is well positioned to return to profitability with the revised strategy. Key focus areas for 2014 include:

• implementing strategic IT projects;• exploring alternative distribution channels;• integrating the broker model;• continuing to implement our transformation

strategy; and• expanding our local geographic representation.

That said, we still anticipate a challenging year ahead from an economic view point as the effects of the global economy, soft markets and climate change continue to impact our local economy and business.

AppreciationWe would like to extend our gratitude to our fellow Board members for their unfailing support and insight during 2013. The Board’s contribution in terms of skill, experience and diversity has been of great value to the organisation. We also wish to thank our executive and employees for their commitment during this challenging year. We remain confident that, with their support, we will be able to deliver on our strategy.

dolly Mokgatle edwyn o’neillchairman chief executive officer


Trading conditions in 2013 for the short-term insurance industry deteriorated further from those experienced in 2012 and may well be one of the most challenging to date.

STAKEHoLDER REPoRTS

CHIEF FINANCIAL oFFICER’S REPORT


pieter bezuidenhout

Underwriting profits came under severe pressure from soft market conditions, the introduction of binder fees, rand weakness leading to escalating claims costs, and extreme weather events.

The investment environment, in spite of continued volatility, was satisfactory.

Economic overviewThere are signs of improvement in the world economy with growth for 2013 at 3.5%. Regrettably, a number of challenges remain such as high levels of public and private debt together with large fiscal deficits, making many economies reliant on continuing monetary stimulus. Adding rising joblessness, higher poverty and worsening income inequality suggests that real recovery will remain elusive for a few more years.

The impact on the South African economy has been significant, the most obvious being the volatile capital flows, commodity price swings and large-scale currency adjustments as witnessed in increased exchange rate volatility. The next obvious impact has been a much slower rate of growth (2013: 2.7%), most of which is now from public sector capital investment such as the addition of electricity-generating capacity.

The lower growth rate clearly impacts corporate, commercial and personal customers, leading to overall soft market conditions, rate reductions and in extreme circumstances reductions in cover or the cancellation of insurance policies.

Industry performanceTrading conditions continued to be challenging in 2013.

As alluded to above, the general economic environment made it difficult to retain and grow portfolios and to achieve real premium rate increases.

A sharp reduction in the value of the rand added to escalating claims costs and a number of significant losses from extreme weather-related events resulted in a dramatic decline in profitability for insurers. The weather events have been well publicised and included floods in Limpopo in January 2013, and floods in the Western Cape and two significant hailstorms in Gauteng, all in November.

Further, the introduction of binder fees late in 2012 added to the expense base in 2013 of most intermediated insurers in the local market and insurance companies are now being forced to re-examine premium rating levels to ensure that these are adequate to cover accepted risks.

Zurich South Africa will continue to actively seek premium growth while remaining committed to responsible underwriting standards.

Financial reportingThe volatile nature of financial markets and the unpredictability of the insurance industry emphasise the importance of prompt, meaningful and accurate financial reporting to enable users of financial information to make timely and informed decisions.

The statutory financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and the policies adopted remain unchanged from those applied in 2012. A summarised set of financial statements in accordance with IAS 34 has been sent to all beneficial shareholders in compliance with the Companies Act, 71 of 2008, as amended. The full annual financial statements are available on the Company’s website at www.zurich.co.za or in printed format on request from the Group Company Secretary, Tammy Heydenrych (telephone: 011 370 9750).

These financial statements provide comprehensive information regarding the assets, liabilities, income and expenditure of Zurich South Africa. Detailed information regarding the recognition and measurement of insurance and financial risk, and quantitative information regarding insurance contract provisions and the processes used to determine significant assumptions, is provided.

STAKEHOLDER REPORTS


We have included a supplementary income statement to provide a more functional explanation and analysis of the annual financial results. This displays the operating activities in a more meaningful manner.

The supplementary income statement also shows the investment income generated on the funds made available by the timing difference between the receipt of premiums and the ultimate payment of the claims. The underwriting activity generates an attributable investment income which is then added to the underwriting surplus to produce the general insurance result. The supplementary income statement is shown on page 26.

Financial performanceZurich South Africa remains in a healthy financial position and the total equity at 31 December 2013 was R1,869 million (2012: R2,020 million). The net asset value per share was R153 (2012: R165) and the solvency margin (being the

ratio of net assets to net premiums) was strong at 57.9% (2012: 68.7%). The surplus capital on a risk-based approach per the FSB was 1.9 (2012: 2.3).

This financial strength remains a comfort to customers, brokers and investors. The Company’s credit rating was reaffirmed at AA by Global Credit Rating Company during 2013.

The value added statement shown on page 25 confirms the contribution which the Company makes to various stakeholders.

The statement of financial performance illustrates the performance of the Company and shows a loss before tax of R252 million in 2013 (2012: loss of R22 million). This was in spite of a satisfactory 9% increase in net income from R3.4 billion to R3.7 billion, and substantially attributable to a sharp increase in expenses from R3.4 billion by 15% to R3.9 billion.

cHIeF FInancIaL oFFIcer’s reporT conTInued

Financial results2013

R’0002012

R’000%

Change

Gross written insurance premiums 4,084,625 3,766,534 8%Net written insurance premiums 3,228,422 2,938,230 10%Underwriting deficit (455,327) (258,313)General insurance result (371,955) (168,543)

Key ratios (%) 2013 2012

Claims ratio 79.1% 75.0%Expense ratio 17.7% 18.8%Net acquisition ratio 17.3% 15.0%Combined ratio 114.1% 108.8%

Key financial performance factors (%) Target 2013 2012

Combined ratio to earned premiums 95.0% 114.1% 108.8%Return on shareholders’ funds 18.6% (5.4%) 2.0%

Income tax is a net recovery for the year. The after-tax result was a loss of R164.1 million (2012: R2.1 million profit), and basic earnings per share deteriorated from 17 cents in 2012 to a loss per share of R13.48.

An interim dividend of 100 cents per share was paid in 2013 (2012: 100 cents) and a final dividend of 200 cents per share was declared for 2013 (2012: 200 cents). This brings the full-year dividend to 300 cents per share.

Premium volumes grew from R3.8 billion to R4.1 billion, an increase of 8%, of which 2% is attributed to rate increases and the balance to new business, indicating the Company’s strategy of investing in systems and people in high-potential growth areas is paying off and premium growth and retention strategies are taking hold. Net earned premium has improved by 10% to R3.2 billion from R2.9 billion in 2012 as a result of a change in mix in the portfolio and a more aggressive risk appetite by the Company.


Further analysis of our underwriting activities is provided in the report on page 27 that reflects the gross and net account separately.

Investment income decreased marginally from R224 million in 2012 to R218 million. Interest income, which forms 80% of the total, decreased by 4% due to interest rates being lower in 2013 than 2012 and dividends received were sharply down by 15% in 2013 due to lower distributions by quoted companies.

Net realised gains increased by 29% to R106 million (2012: R82 million) due to the disposal of listed and unlisted investments during 2013. Unrealised gains were in line with the prior year following significant improvements in the value of equities on the JSE.

In conclusion, due to cost containments and ongoing improvements in process and systems, our financial systems and processes proved to be robust and performed consistently well during 2013.

pieter bezuidenhoutchief Financial officer

Claims expenses have increased by 16% to R2.5 billion (2012: R2.2 billion) due to an increase in frequency and severity of attritional losses in both the property and motor portfolios. The impact of a deteriorating rand on the cost of specifically motor claims in 2013 has been significant and there is an expectation that cost pressures from rand weakness will remain into 2014. The commercial portfolio suffered from worse-than-expected large property fires, and three significant weather events in November 2013 exacerbated the overall portfolio performance.

Commissions increased by 27% to R559 million as a result of the introduction of binder fees payable to intermediaries. Operating expenses during 2013 were well managed and contained with a small increase of 4% to R573 million (2012: R550 million), despite the investment in people and systems in support of the growth strategy.

The significant decline in the profitability of the Property and Motor lines of business follows downward pressure on premium ratings and the substantial increase in the volume and severity of claims during the year. A number of corrective measures have been implemented to remedy the shortfalls in profitability.

Zurich South Africa has launched a number of remedial underwriting, claims and procurement measures, and has commenced the realignment of processes and investment in improved systems, all aimed at providing greater efficiency and improved profitability.

Combined ratio by line of business

GWP (Rm)

Property

Transport

Motor

Engineering

Accident and Health

Liability

Total YTD(R455.3 million)

Property(R209.0 million)

Transport(R19.1 million)

Motor(R262.5 million)

Engineering(R1.7 million)

Liability(R1.8 million)

Accident and Health(R35.2 million)

17.3%

17.8%

79.0%

22.8%

21.6%

77.3%

21.0%

18.5%

79.0%

14.0%

15.3%

85.6%

18.6%

20.8%

61.3%

13.8%

23.8%

60.2%

19.7%

6.7%

25.4%1,778

141

1,535

334

162135

STAKEHOLDER REPORTS


Zurich South Africa provides short-term insurance products and services focusing on corporate, commercial and personal lines customers. An overview of the short-term insurance solutions and business segments are shown on page 8.

operational business risks that the Group managesRisk our response

Availability of skilled people • Committing to developing talent and transformation• Tapping into the resources of ZIG to support the learning and development

of Zurich South Africa’s people• Making use of the Zurich Academy to upskill employees

Successfully implementing the underwriting strategy

• Underwriting strategy drives activities and decisions in terms of business development and retention

Competitive market conditions • Focusing on product development and innovation• Ensuring a distinguishable service offering• Continuously evaluating risk management policies and products• Optimising the pricing of products• Ensuring underwriting discipline

Profitability of the Motor segment • Optimised pricing of products• Ensuring underwriting discipline• Proactive management of claims spend• Implementing optimised procurement initiatives• Rollout of a new automated rating engine

Corporate insurance segmentFinancial performance

2013 2012%

Change

Contribution to premium 9% 4.1% 4.9%Gross written premium (R’000) 358,850 155,158 131.3%Net earned premium (R’000) 8,277 12,728 (35%)

Highlights• Launched Financial Lines and Casualty

Challenges• Soft rate environment and surplus capacity that is available in the market

outlook• Expect rates to harden to more reasonable and sustainable levels

Group busIness reVIeW


Commercial insurance segmentFinancial performance

2013 2012%

Change

Contribution to premium 65.5% 71.1% (5.6%)Gross written premium (R’000) 2,675,982 2,678,717 (0.1%)Net earned premium (R’000) 2,190,854 2,030,126 7.9%Combined ratio 112.2% 107.4% 4.8%

Highlights• Launched Body Corporate and Wineries

Challenges• Subdued market activity and soft rate environment• Adverse weather conditions such as hailstorms and floods

outlook• Expect rates to harden at more reasonable and sustainable levels• In addition to rate increases to counter the inflationary effect of claims costs, more focus and attention will be applied to

risk selection as well as further improving and enhancing the underwriting process and associated controls

Personal insurance segmentFinancial performance

2013 2012%

Change

Contribution to premium 25.7% 24.8% 0.9%Gross written premium (R’000) 1,049,793 932,659 13.0%Net earned premium (R’000) 1,031,054 891,591 15.6%Combined ratio 115.4% 107.2% 8.2%

Highlights• Refreshed Personal Lines Policy• Launched Travel Insurance

Challenges• Soft market and pricing pressure• Adverse weather conditions such as hailstorms and floods

outlook• Expect rates to harden at more reasonable and sustainable levels• In addition to rate increases to counter the inflationary effect of claims costs, more focus and attention will be applied to

risk selection as well as further improving and enhancing the underwriting process and associated controls• Grow the underwriting managing agents channel by on-boarding a number of new UMAs• Expand on the Tied Agent distribution channel by 50%• Develop alternative distribution channels such as a Bancassurance offering and affinity partners

STAKEHOLDER REPORTS


ClaimsThe Claims Division employs 177 people and services all customer segments.

Focus areas• Cost management• Skills development• Customer satisfaction

Key indicators

2013 2012 % Change

Value of gross claims (R’000) 3,127,432 2,927,811 23%Total number of claims 96,954 100,521 (3.6%)

Risks managed

Risk our response

Environmental disasters • Internal catastrophe plans are in place to handle events that may occur

Fraudulent claims • Member of the South African Insurance Crime Bureau• Use of fraud indicators on our system

Rand/$ fluctuations in terms of costs of repair

• Member of the South African Insurance Association Motor Committee that is lobbying manufacturers to look at pricing of spare parts

• Factored-in pricing and actuarial projections

Highlights• Absorbed the recoveries function into the Zurich South Africa operation• Technical training for claims team

Challenges• The depreciation of the rand by more than 20% resulted in higher claims costs due to imported parts, in particular on

motor vehicles• Extreme weather conditions during November 2013 – hailstorms in Gauteng and floods in the Western Cape increased

the frequency and severity of claims• Impact of regulatory changes• Cost of compliance with various statutory requirements

outlook• Implementation and utilisation of the preferred panel will improve the cost of claims• Enhanced fraud management activities

Group busIness reVIeW conTInued


underwriting and risk servicesUnderwriting and risk services are responsible for developing and pricing the products that meet the needs of our brokers and customers. This process involves the following:

• Design, development and pricing of all product lines• Ensuring optimal underwriting processes and margins• Risk and capital management• Reinsurance• Developing and ensuring the adequacy and relevance of measurement tools

Risks managed

Risk our response

Availability of insurance skills • Ongoing training and development of employees• Involvement in educational initiatives such as bursaries for actuarial students

Ability to improve margins and grow top line

• Ensuring the correct pricing of new products• Ensuring acceptable risk exposures on existing business

Soft market and the impact thereof • Optimise the reinsurance programme• Accurately developing and pricing competitive, relevant products

Effective change management and ability to execute strategic plans to enable business growth

• Investment in relevant and up-to-date technology to support risk services and effect operational change

Appropriate IT systems and structure • Core insurance systems reviewed and alternatives considered

Regulatory environment • Actionable projects under way to ensure full compliance with Solvency Assessment and Management, Binder Agreements, Treating Customers Fairly and outsourcing

Highlights• Engineering capability• Introduction of the personal lines rating engine

Challenges• Continued soft market conditions• Property losses due to large fire claims• Motor losses adversely impacted by imported vehicle parts and severe weather conditions

outlook• Implementation of the rating engine for Personal Lines will improve ability and speed to react to external market factors• Enhancement and improvement to the underwriting process will result in quicker turnaround time and risk selection

STAKEHOLDER REPORTS


EmployeesZurich South Africa appreciates that its greatest asset is its people and the Company looks for prospective employees that will continue to build the organisation. Furthermore, Zurich South Africa seeks employees that will act with integrity, perform as a team to deliver excellence, ensuring that the organisation continues to add value to its customers by placing them at the centre of everything undertaken.

Over the past two years there was a focus in the Zurich Learning Academy on technical skills, which assisted in defining specific sales, underwriting and claims development. Going forward the aim is to enhance collaboration and knowledge sharing with Zurich globally and internally between the different functional areas.

Key indicators2013 2012

Total number of permanent employees 822 771Employee turnover (%) 11 9%Black employees as a proportion of total headcount 59.1% 62.5%Black female employees as a proportion of total headcount 31.2% 32.3%Training spend (Rm) 10.2 12Learnership Programme participants 39 40

eMpLoyee and broKer reporT

Diversity and inclusionZurich South Africa’s aim is to have the right person in the right job at the right time, and it embraces diversity of thought, skills and experiences among its people. The Company takes pride in the diversity of its workforce as it helps to better understand the needs of our diverse range of customers and contributes to making Zurich the employer of choice.

Employment equityZurich South Africa aims to employ a workforce that is representative of South Africa’s demographics. Employee equity targets are set on an annual basis and monitored by executive management on a monthly basis and quarterly by the Social, Ethics and Transformation Committee.

As at 31 December 2013, Zurich South Africa had met its employment equity targets at most employment levels. The Company’s Learnership Programmes focuses on recruiting black employees and as at 31 December 2013, 100% of participants were black, with 50% being black female.

Employee growth and developmentWith employee growth and development at the centre of Zurich South Africa’s employment philosophy, we recruit, retain and develop employees with the necessary levels of

knowledge, capability and commitment. The Company adopts a holistic growth and development approach incorporating mentoring, coaching, on-the-job training, experiential learning and any other methodologies identified as being appropriate.

Zurich South Africa believes in the fundamental concept of empowerment at all levels. As such, employees are responsible for their own development, with management playing a supporting role in ensuring that employees are equipped with the necessary tools and resources to achieve both professional and personal development. This approach inspires leadership qualities among employees and ensures that employees deliver excellent customer service. The Company ensures that employees get their skills enhanced through practical and technical training in alignment with our focus on developing our leaders. Zurich South Africa also complies with relevant learning requirements and expectations for the insurance industry as articulated by the Financial Services Board.

In conjunction with our Swiss holding company, the focus going forward will continue to be on developing and rolling out training and development opportunities for all employees, as part of the global “Learn and Improve” objective.


Zurich Learnership Programme

Programme description Programme outcome Key indicators in 2013

This programme is offered in partnership with INSETA (Insurance Sector Education and Training Authority) and primarily focuses on previously disadvantaged young South Africans.

Learners are rotated through the various operating functions creating the opportunity to gain work-related experience in the short-term insurance industry for 12 months and simultaneously work towards obtaining a Further Education and Training Certificate (FETC) Short-Term Insurance Qualification.

As part of the learning component, candidates also have the opportunity to enhance their knowledge and skills around technical insurance, insurance systems and attend sessions which focus on behavioural and leadership competencies. As support, learners are also guided, coached and mentored by Zurich managers.

Zurich regards the Learnership Programme as a key economic and social enabler as it benefits the candidate, society and the insurance industry as a whole.

Successful candidates receive full accreditation of the FETC Short-Term Insurance Qualification at level 4 and are Financial and Advisory and Intermediary Services (“FAIS”) compliant.

• 40 participants • 100% black

participants

encourages and celebrates innovation and assists with retaining high-performing individuals.

Further information on Zurich South Africa’s Remuneration Policy is shown on page 76.

Health and safetyHighlights of initiatives during 2013:

• Conducting regular business continuity tests• Training of Health and Safety Representatives, First Aid

and Fire Marshalls• Deploying additional security for employees outside the

Head Office building and key points during peak times

Ethical behaviourSights and Sounds of ZurichZurich South Africa’s “Sights and Sounds of Zurich”

employee engagement initiative focuses on the importance

of the Group’s values and demonstrates that only by living

these values each day, will the Company be able to achieve

its business goals, strategic objectives and vision.

During 2013, Zurich South Africa participated in the Deloitte

Best Company to Work for Survey and improved its ranking

from 13th to 11th place. Furthermore it retained its sixth

place ranking in the medium-size company category.

Remuneration and performance managementZurich South Africa’s remuneration philosophy is to provide

for competitive remuneration that attracts, retains and

motivates employees to deliver outstanding performance.

Performance management is critical to ensure that

employees’ performance relates to their remuneration. Key

performance indicators are agreed between individual

employees and line management at the beginning of the

year and bi-annual performance reviews are conducted

during the year to ensure employees are on track to meet

their respective deliverables. Where employees are at risk of

non-delivery on key performance indicators, a detailed

consequence management programme is implemented.

Employee retentionThe insurance industry benchmark for staff turnover is 11%

with Zurich South Africa in line with the benchmark with a

focus on targeted skills and talent. Management embarked

on an initiative to track and analyse data pertaining to

termination of employment to identify and analyse trends

that would support strategies to retain key resources.

During 2013, a framework for the Zurich Recognition

Programme was developed and will be rolled out in 2014.

The aim of the programme is to create an environment that

STAKEHOLDER REPORTS


eMpLoyee and broKer reporT conTInued

Early in October 2013, employees from across ZIG were invited to participate in the Global Employee Engagement Survey which is conducted every two years. The results of the survey are due to be released early in 2014. Plans that address the matters that were raised by employees will be developed and executed during the course of the year.

Zurich BasicsZurich Basics is the way in which the Group describes its code of conduct. It defines the Group’s values and links the more than 55,000 members of the Zurich family around the world in a collective commitment to excellence and integrity. It guides employees in protecting the Group’s reputation and brand. In 2013 more than 97% of staff members completed the assigned Zurich Basics online awareness training and assessment programme.

Prevention of bribery and corruption Zurich South Africa is committed to fair and responsible business and prohibits all forms of bribery or corruption and any business conduct that could create the appearance of improper influence.

There is an increased global focus on the need for responsible corporations to act proactively to prevent all forms of bribery and corruption. Bribery and corruption present fundamental global risks for companies, like Zurich, who operate internationally. Moreover, bribery and corruption undermine fair competition and the rule of law.

These risks are mitigated by rigorous global enforcement actions to combat bribery and corruption. Most notably, the United States Foreign Corrupt Practices Act and the United Kingdom’s U.K. Bribery Act (2010) recognise the extraterritorial implications of these risks in addition to establishing local enforcement practices.

Zurich South Africa addresses the above-mentioned risks through the implementation of the Zurich Anti-Bribery and Corruption (ABC) Framework as prescribed by the Group Anti-Bribery/Anti-Corruption Policy.

As a result, during 2013, Zurich South Africa embedded the following control activities:

• ABC Risk assessments.• Handling of gifts, entertainment and other advantages

(GEOA).

• ABC awareness and training.• Due diligence on associated persons.• Due diligence on payments.

Conflicts of interestZurich South Africa expects that all employees act without

conflicts of interest. Where potential or perceived conflicts

of interest arise, adequate and effective disclosure and

mitigating actions are initiated.

Employees are expected to:

• refrain from any activity if a conflict of interest arises;

• disclose any conflicts of interest and ensure they are

satisfactorily managed and/or eliminated; and

• obtain the applicable approvals before accepting any

mandates such as a director, officer or significant

investor/owner of a non-Zurich entity.

All Directors and employees are required to annually

confirm that all declarations have been made, in line with

the above principles. During 2013, Zurich South Africa

developed an electronic Conflict of Interest Declaration

management tool to assist with the compliance process.

Zurich South Africa’s Ethics LineZurich South Africa is a strong proponent of ethical behaviour. In support of this, we have instituted the Zurich Ethics Line which is available through phone, fax, post, email and web. The line is a channel through which employees, intermediaries, Tied Agents and customers can report conduct that they, in good faith, believe constitutes fraud, corruption, theft or a violation of any laws and regulations.

Zurich encourages all employees to take unethical behaviour seriously by contacting Zurich Ethics Line – Deloitte Tip-Offs Anonymous through any of these channels:

• 0800 16 74 64 (free call)• 0800 00 77 88 (free fax) • [email protected] (email)• www.tip-offs.com (web submission)

These reporting channels have also been communicated to

our partners.


BrokersAt Zurich South Africa we have shaped our business around partnering with a network of brokers that share our vision of providing insurance excellence to our customers. Accordingly, we aim to provide the same level of service to our broker partners, thereby making their journey with us as seamless as possible. We have provided easy access to each form a broker may need to service their customers in our Brokers pages on the Company website, as well as a link to the Zurich BrokerZone.

Our broker engagement programme during the year included the following:

Broker training/product launches Industry events Hospitality Exhibitions

• Broker roadshows• Farmers Wineries launch• Global Corporate launch• Personal Lines launch

• ABSA Gauteng Regional Meeting

• Aon Commercial Golf Day• FIA Golf Days• FIA Awards Evening• FIA Highveld Brand

Member Meeting • Innovation Maven (Ikholwa

Golf Day)• Insurance Institute of

Gauteng (“IIG”) Birding Weekend

• IIG Sponsors Function• IIG Annual Dinner• Insurance Institute of

KwaZulu-Natal Annual Dinner

• Insurance Institute of Western Cape Annual Dinner

• Presidential Inaugural Dinner• PSG Business Presentation • SAUMA Conference• SAUMA Breakfast• The Insurance Conference

• Golf Days• Horse Racing Charity Event• Pentravel Franschoek

Celebration Dinner• Night at the Theatre• Risk SA Regatta 2013• The Insurance Conference• Tied Agent Breakaway• Marine Cocktail Function• Top Women Awards• UMA Getaway

• CRA Convention Tourism Indaba

• Agri Mega Week 2013

STAKEHOLDER REPORTS


Due to the nature of Zurich South Africa’s business, relationships with our suppliers are an important extension of the services provided to customers, mainly through the claims settlement process. As part of our strategic focus, we continually review our panel of preferred suppliers to ensure adequacy and “fit for purpose”. It is also our aim to only use suppliers that are supportive of the Zurich Service Standards.

Preferential procurementZurich South Africa is committed to procuring goods and services in an equitable manner. Of our total spend for 2013, 75.47% was paid to suppliers on Level 1 to 4. Of this, 4.22% was paid to Level 1, 20.57% to Level 2,

suppLIers reporT

24.61% to Level 3 and 26.07% was paid to suppliers on Level 4. It is our intention in 2014 to strengthen our relationships with industry bodies that represent suppliers who have not previously enjoyed a sizeable amount of our total claims spend. Equally so, we will continue to prioritise selection of suppliers who are black women-owned.

The Company achieved a preferential procurement score of 11.40 points out of a possible 16 points for 2013. During 2014 we will implement a supplier appointment system that will increase governance and controls over the appointment of suppliers while providing improved access to information and documentation required to monitor our preferential procurement score.


Zurich South Africa strives to demonstrate where it makes a positive impact and difference to the lives of people in the communities in which we operate. Our strategy focuses on socio economic development (“SED”) initiatives that meet the following criteria:

• Integration with the structured Zurich Cares programme, which centres on employee engagement.• Provision of the opportunity to give back to the community and invest in programmes that develop individuals within

families, and families within communities.• Sustainability and knowing that the initiatives we become involved in are making a difference.

Our primary SED initiatives in 2013 are shown in the table below.

Programme Programme description The Company’s involvement

Investment in programme to date

Literacy programme Royal Bafokeng Institute (“RBI”)

The aim of the RBI is to improve the standards of teaching and learning in the 39 schools situated in the Royal Bafokeng region.

Zurich South Africa was involved in the development and implementation of a mobile library facility, which had an added component of a teacher upskilling programme. This programme aims to holistically support the children and adults of the Royal Bafokeng nation.

Zurich South Africa was also involved in the creation and establishment of adult book clubs in the 29 villages of the Royal Bafokeng and ensured that dedicated reading corners were established in all foundation phase classrooms.

Additional funding was allocated to the project in 2013 to purchase educational aids in the form of books and DVDs, and it was also used to cover administrative costs

R13,898,263

After-school education programme, Afrika Tikkun

The aim of Afrika Tikkun is to promote and organise projects with community leadership that strive to uplift, build and ultimately transform the disadvantaged communities of South Africa. These communities have been affected for decades by poverty, disease and the psychological effects resulting from these living conditions.

Zurich South Africa was involved in the development and rollout of an after-school education programme for children with learning disabilities. Besides providing financial assistance, we donated materials and classroom aids. This programme ensures that children receive the extra support and tuition they need to continue to learn and develop successfully.

During 2013, a further proposal was received in support of a feeding scheme

R1,300,000

coMMunITy reporT

STAKEHOLDER REPORTS


coMMunITy reporT conTInued

Programme Programme description The Company’s involvement

Investment in programme to date

Zwakala Family The home of the Zwakala Family, a family of four, who reside in Delft South, Nanabessie Street, Western Cape, was devastated by fire.

Zurich provided the family with the following:

• Six months’ grocery supply• Electrical appliances• Clothing vouchers from Ackermans

and Jet Stores

R20,000

Breast Cancer Breakfast

Breast Cancer Breakfast was hosted by BnB Sure in Johannesburg in October.

We participated by sponsoring funds in support of South Africa’s Breast Cancer Community Carer, Pink Drive, an indispensable, tangible breast cancer Public Benefit Organisation (“PBO”) powering South Africa’s first mobile Pink Drive Mammography Unit and Pink Drive Educational Unit through our country, driving home the fact that ‘Early Detection Saves Lives’.

R10,000

Zurich Global Community week (employee volunteerism)

Zurich Global Community Week is a Zurich Insurance Group (“Zurich Group”) initiative where employees are encouraged to share our business and life skills. At the same time it provides us with the opportunity to make a real difference to the community.

The 2013 focus of Zurich South Africa is on ‘Early childhood development’. We were HANDS-ON and set the goal of helping bridge the gap between private and township Day Care Centres. Teams throughout the business adopted a Day Care Centre and raised funds, providing in-kind donations and investing time to benefit the little ones. Our corridors buzzed with activity, negotiations, bartering, sales, you name it!

This culminated in centre visits where employees played games with the children, read with them and had some fun – early childhood development was what it was all about in South Africa

R500,000


Zurich South Africa acknowledges that it must be responsible

when conducting its business operations and providing

services and products to its customers, to ensure minimal

negative impact on the environment.

Environmental considerations and certain underwriting

prerequisites are contained in the Zurich General Insurance

Global Underwriting Policy. Zurich Basics requires environmental

matters to be considered when engaging in Zurich business

activities. This is broadly in line with the United Nations

Global Compact Principles.

A quarterly environmental management report is tabled at

the Social, Ethics and Transformation Committee (“SETCO”)

to ensure the Company adheres to its environmental

responsibilities. An Environmental Champion is responsible

for preparing the Company’s environmental plan and

overseeing compliance with the Board approved

Environmental Policy.

enVIronMenTaL reporT

The following environmental initiatives were implemented during 2013:

• The rollout of a waste recycling initiative at Head Office.• The enforcement of green cleaning products with

cleaning service providers.• The replacement of paper with electronic mail in

Botswana.• Return Digital Addressable Lighting Interface system to

optimal functionality.

Initiatives planned for 2014:

• A Gautrain shuttle service for staff, to reduce carbon emissions and contain costs.

• The replacement of electronic geysers with solar or heat pump geysers.

• Replacement of all down lights in 15 Marshall Street with LED technology.

• Carbon footprint evaluation.

STAKEHOLDER REPORTS


Zurich South Africa achieved a Level 3 BBBEE rating in terms of the Financial Sector Codes, gazetted on 26 November 2012 (applicable from April 2013 to April 2014). The Company’s BEE status for the 2013 financial year has been externally verified by EmpowerLogic, an accredited verification agency. The Company has retained a Level 3 rating despite the introduction of the Access to Financial Service element comprising 14 points of the scorecard which was introduced retrospectively last year.

Zurich South Africa’s scorecard is shown below with a brief overview of the strategic objectives for the pillars. The access scorecard and measurement criteria that were published towards the end of 2013 will be included and measured in Zurich’s scorecard from 2014.

BEE ScorecardAvailable

points2013

points

Equity ownership 20 16.05Management control 10 3.46Employment equity 15 4.82Skills development 15 8.39Preferential procurement 20 10.64Enterprise development 15 15Socio economic development 5 3

Total 100 61.35

ownership • To promote the effective participation and empowerment of black people through direct ownership in the Company.

Management control• Accelerate and improve the effectiveness of acquiring and retention of talent within the designated group for top

Management and Board positions.• Embed an organisational culture conducive to diversity and inclusivity, driven by a Leadership promise from the Executive team.

TransForMaTIon reporT


Employment equity• Accelerate and improve the effectiveness of acquiring and retaining talent within the designated group. • Embed an organisational culture conducive to diversity and inclusivity.

Skills development • Bring about transformation through focused capability building around technical, systems and behavioural skills.• Development of a strong talent pipeline to support transformation.

Preferential procurement• Increase spend through black-owned service providers, especially SMME.• Ensure our approved procurement panel supports black service providers.

Enterprise development• Assist with sustainable transformation of the insurance industry through quantifiable financial and operational assistance

to qualifying BBBEE entities in the insurance supply change.• Maximise sustainable enterprise development impact, while minimising risk to shareholder capital through optimum

governance and balance sheet protection.

Socio economic development• Targeted entrepreneurship initiatives focusing on educating, growing and sustaining small businesses through monetary

and non-monetary investments. • Focused educational initiatives with the youth in accordance with the national youth enterprise strategy, to ensure that

entrepreneurial skills, talent and experience are nurtured among young women and men to enhance their capacity to participate in all aspects of South African social, economic and community life.

we CommIt to seRvIng oUR CUstomeRs wHen It matteRs most


Corporate governanCe

Good corporate governance is a key element of our business operations and can only be achieved through collective responsibility and shared accountability. Zurich South Africa subscribes and is committed to adherence to the JSE Limited (“JSE”) Listings Requirements, the Companies Act and the King Code on Corporate Governance (“King III”). Our commitment and approach to this provides assurance to stakeholders that the Company is being managed ethically and is in compliance with legislation and best practice.

We are pleased to report that we have applied all the principles of King III during 2013, with the exception of the requirement to disclose the remuneration of the three highest paid employees. Disclosure of personal information of some of our employees would render such employees vulnerable to risks.

However, in compliance with IFRS and the Companies Act, the remuneration of the Company’s prescribed officers, namely our Chief Executive Officer and Chief Financial Officer, has been disclosed in the annual financial statements which are available on the Company’s website www.zurich.co.za.

Zurich South Africa operates within a robust corporate governance framework as shown below. Management is responsible for day-to-day corporate governance and reports regularly to the Board of Directors and Board committees. The Board Chairman, the Chairman of the Audit Committee and other Independent Non-executive Directors play an active role in corporate governance issues and regularly interact with Executive Directors, Executive Management assurance providers and other interested

parties where necessary.

corporaTe GoVernance

Governance framework

Audit Committee

Remuneration Committee (“REMCo”)

Nominations Committee (“NoMCo”)

Social, Ethics and

Transformation Committee (“SETCo”)

Service Level Agreement

Review Committee

(“SLA”)

Executive Committee

(“Exco”)

Asset/Liability Management Investment Committee (“ALMIC”)

Risk Control Committee

(“RCC”)

Zurich Insurance Company

South Africa Limited Board Committees

Zurich Insurance Company

South Africa Limited Board

Bo

ard

an

d c

om

mit

tees


Board of DirectorsBoard compositionZurich South Africa had a unitary Board comprising eight Directors as at 31 December 2013, with six Non-executive and two Executive Directors. The Board’s collective experience provides a balanced mix of experts that ensure robust Board discussions. Executive Directors, with their experience, knowledge and skills, add to the successful operation of the Company. Four of the Non-executive Directors, including the Chairman, are independent.

New Board appointments are governed by Company policy that is reviewed each year by the Nominations Committee. Appointments are formal, transparent and subject to Board and shareholder approval. There is a clear division of responsibility to ensure a balance of power so that no one individual has unfettered powers of decision-making.

Board Directors’ qualifications and brief curricula vitae are provided on pages 30 to 33.

JM Vice was appointed as an Independent Non-executive Director on 23 January 2013 and, following the resignation of S Mered on 1 January 2014, P Manley was appointed to the Board as a Non-executive Director.

Chairman and Chief Executive officer (“CEo”)The roles of the Chairman and CEO are separate. The Chairman provides firm, strategic and objective leadership to the Board. The Chairman presides over Directors’ and shareholders’ meetings and ensures the smooth functioning of the Board in the interests of good governance.

In compliance with King III, the Company has a Board-approved, documented Succession Planning Policy for the Chairman and the CEO, as well as a documented role description for the Chairman of the Board.

Functions and roleThe Board is ultimately accountable and responsible for the Company’s strategic direction and for the control of the Company. As such, it is the responsibility of the Board to approve the strategic plans, monitor operational performance and management, ensure that an effective risk management strategy, corporate and IT governance are in place, and ensure that the Company complies with applicable legislation. The Board has delegated responsibility for delivery of the strategy and the day-to-day running of the business to the CEO, who in turn has delegated authority to the Executive Committee (“Exco”).

The roles and responsibilities of the Board and other committees are recorded in their respective charters and terms of reference, which are reviewed on an annual basis.

Appointment, induction and educationNominations of new Non-executive Directors are discussed between the Non-executive Directors and the CEO. The appointment of Directors is governed by a documented Board-approved Director Appointment Policy which is reviewed by the Board and Nominations Committee annually. Following a due diligence and interview process, and subject to regulatory approvals, the candidate is put forward to the Nominations Committee and then to the Board for consideration and approval. Newly appointed Directors resign at the first annual general meeting (“AGM”) following their appointment but are available for re-election by the shareholders at the same meeting. Non-executive Directors are required to resign every three years by rotation but may stand for re-election at the AGM. Non-executive Directors do not hold service contracts with the Company.

New Directors are inducted and undergo an orientation programme with a focus on the Company’s operations and the business environment within which it operates.



corporaTe GoVernance conTInued

Individual Directors are responsible for ensuring the

fulfilment of their fiduciary and other duties. However,

relevant changes in legislation or regulations are brought to

the Directors’ attention by the Group Company Secretary

and General Counsel on a regular basis. Directors are

encouraged to attend relevant seminars and events during

the year to contribute to their professional development

and a formal Board Development Programme managed by

the Group Company Secretary has been established. Directors

also receive quarterly training on relevant insurance, regulatory

and governance matters such as the JSE Listings Requirements,

SAM and TCF.

Directors are encouraged to become members of professional

bodies to gain knowledge and interact with their peers.

The majority of Zurich South Africa’s Directors are members

of the Institute of Directors.

Succession planningSuccession planning is reviewed by the Nominations

Committee on an annual basis in terms of the Company’s

Succession Planning Policy and is informed by the outcome

of the annual Board and Directors’ assessments. The review

also considers whether the Board and committees’

composition are adequate to provide the leadership required

to ensure the future sustainability of the Company.

The Board is satisfied that the current Board leadership has

adequate depth and experience to lead the Company to

fulfil its strategic direction into the future.

Meetings and attendanceThe Board meets quarterly to deal with the ordinary business of the Company and on an ad hoc basis when

necessary. Please refer to the attendance register on page 69 for further information.

Board appraisal reportAn internal Board and Peer evaluation on the effectiveness of the Board was facilitated by the Group Company Secretary, in consultation with the Chairman. The assessment was based on individual Board members’ opinions about the role of Directors, its committees and individual roles, the strategic requirements and balance of skills and expertise of Board members. Following a review of the general results by the Board, the Chairman discussed the results of the peer review with each Director on an individual basis. The results of the assessment were positive and evidenced the Board Members’ views that there are appropriate governance and controls across all areas of the Board and its committees.

Insider tradingZurich South Africa has a Board-approved, documented Insider Trading Policy in place and complies with the JSE Listings Requirements’ prescribed practices regarding access to information, insider trading, dealing in securities and closed periods.

The Group Company Secretary retains a record of share dealings. Employees and Board members that are exposed to unpublished, price-sensitive information regarding the Company’s shares are prohibited from trading in Zurich South Africa’s securities during closed periods, which correspond with the preparation and publication of its interim and final financial results. Directors’ dealings in securities are disclosed to the JSE via the Company’s sponsor and released to the public on the Stock Exchange News Service.


Group Company SecretaryThe Group Company Secretary is responsible for keeping the Board apprised of relevant changes to legislation and to ensure the Company is in compliance with best practice corporate governance. In addition the Group Company Secretary oversees the induction of new Board members and ongoing Board training.

George Kostopoulos was the Group Company Secretary from June 2010 until his resignation effective 30 June 2013. Tammy Heydenrych was appointed Group Company Secretary effective 1 July 2013, having held the position of Assistant Group Company Secretary since 2012 as well as Company Secretary for Zurich Life SA Limited and Zurich Risk Financing SA Limited. In terms of the JSE Listings Requirements, and having considered the qualifications, experience and performance of both George Kostopoulos and Tammy Heydenrych, the Group Company Secretaries during the period under review, the Board considered and was satisfied that both Group Company Secretaries had appropriate expertise and experience to fulfil their responsibilities in this position. Brief curricula vitae appear below. The Group Company Secretaries were not members of the Board and there were no known conflicts of interest which may have impacted their ability to provide independent advice and guidance to the Board and the Company. Therefore, the Board believes there was an arm’s length relationship between the Board and the Group Company Secretaries during the period under review.

George KostopoulosGeorge started his professional career at Routledge’s Incorporated while completing his studies and commenced with his articles at Bezuidenhout van Zyl Incorporated. He then joined Nowitz Incorporated where he practised general

law specialising in High Court Litigation. In 1999, he joined African Oxygen Limited and Afrox Healthcare Limited as Corporate Counsel in order to gain experience operating in a listed entity environment. After six years he moved to American International Group as the General Counsel and Company Secretary in 2005. In 2010, George was employed by Zurich South Africa in the capacity of General Counsel and Company Secretary with oversight of the Legal, Compliance, Cosec and Forensics functions.

He completed his degrees at the Rand Afrikaans University in 1993 and is a qualified attorney.

Tammy HeydenrychTammy started her career at Larson Falconer Incorporated where she completed her articles, after which she was admitted as an Attorney of the High Court of South Africa and appointed as Professional Assistant (Commercial and Litigation Department). She continued to practice until 2010 when she was employed by Zurich South Africa as Group Legal Advisor. Tammy thereafter assumed responsibility as the Interim Head of the Executive Office and Strategy in December 2010, and in 2011 was appointed as Senior Group Legal Advisor and Assistant Group Company Secretary as well as the Company Secretary of Zurich Life and Zurich Risk Financing. In July 2013, Tammy was appointed to the role of Group Company Secretary.

She completed an LLB at the University of Durban; holds a Certificate in Corporate Governance from the University of Johannesburg; and a CIS board qualification from the Institute of Chartered Secretaries and Administrators (“ICSA”) South Africa. She is a graduate member of ICSA and a member of the IoD.




Composition of Board and Board committeesCommittee membership

Director Status Board Audit

Asset/ Liability Mana- gement Investment

Remu- neration

Nomi- nations

Social, Ethics and Trans- formation

Service Level Agreement Review

DD Mokgatle+ Independent

Non-executive

Director (Chairman) ✓ ✓ (Chairman) ✓

JE O’Neill Chief Executive

Officer ✓ ✓ ✓

P Bezuidenhout Chief Financial

Officer ✓ ✓ ✓ ✓

JPM Deiss^ Non-executive

Director (Zurich

Insurance Group

Representative) ✓ (Chairman)

MN Mbekeni Independent

Non-executive

Director ✓ ✓ ✓ (Chairman)

S Mered^^ Non-executive

Director (Zurich

Insurance Group

Representative) ✓ ✓ ✓

SG Morris Independent

Non-executive

Director ✓ (Chairman) (Chairman) ✓ (Chairman)

JM Vice* Independent

Non-executive

Director ✓ ✓ ✓ ✓ ✓

+ Resigned from the SLA Committee on 5 December 2013

* Appointment: JM Vice on 23 January 2013

^ Swiss

^^ American


Consolidated committee membership and attendance register 2013

Director Board Audit

Asset/Liability

Mana-gement

Investment Remu-

nerationNomi-

nations

Social, Ethics and

Trans-formation

Service Level

Agreement

Number of meetings 5 4 4 5 5 4 2DD Mokgatle 100% 100% – 100% 100% – 50%**JE O’Neill 100% – 100% – – 100% –P Bezuidenhout 100% – 100% – – 100% 100%JPM Deiss 100% – 100% – – – –MN Mbekeni 100% 100% – – – 100% –S Mered 100% – – 100% 100% – –SG Morris 100% 75% – 80% 80% – 100%JM Vice* 100% – 75% – – 100% 100%

* Appointment: JM Vice on 23 January 2013

** Resigned on 5 December 2013

Audit CommitteeThe Audit Committee (“the committee”) is constituted as a statutory committee of the Company in terms of its statutory duties per section 94 (7) of the Companies Act, 2008 and a committee of the Board in respect of all other duties assigned to it.

The committee currently consists of four Independent Non-executive Directors. Four audit meetings were held during 2013, and until the date of the approval of the annual financial statements the committee discharged its functions and responsibilities in terms of the Audit Charter, the Companies Act, King III and the JSE Listings Requirements.

In particular, the committee:

• reviewed the interim and annual financial statements and recommended them for adoption by the Board;

• approved the risk management, forensic services and internal and external audit plans;

• received and reviewed reports from the internal and external auditors which included commentary on the effectiveness of the internal control environment, systems and processes and, where appropriate, made recommendations to the Board;

• reviewed the independence of the external auditors, PricewaterhouseCoopers Inc., and recommended them for reappointment at the AGM as auditors for the 2013 financial year, with AG Taylor as the designated auditor;

• determined the fees to be paid to the external auditors and their terms of engagement;

• determined the nature and extent of non-audit services which may be provided by the external auditors and pre-approved the contract terms for the provision of non-audit services by the external auditors;

• exercised oversight over risk, financial and audit matters in respect of the Group;

• ensured that a robust IT governance framework was in place to oversee and monitor all significant IT investments and that the IT function was adequately funded and aligned with the performance and objectives of the Company; and

• dealt appropriately with any complaints from within or outside the Group relating to the accounting practices and internal audit of the Group, including the content or auditing of its financial statements or any other related matter.

The members were appointed by the Board of Directors and approved by the shareholders to hold office in respect of the financial year. Committee meetings are attended by the internal and external auditors, the CEO and Chief Financial Officer, the Chief Risk Officer, the General Counsel, other Board members and invitees considered appropriate by the committee’s Chairman.

The Audit Committee Charter provides for confidential meetings between the committee members and the external auditors as well as other assurance providers. The internal and external auditors have unrestricted access to the committee.




In terms of the JSE Listings Requirements, the committee considered and was satisfied that the Chief Financial Officer, Pieter Bezuidenhout, has appropriate expertise and experience to fulfil his responsibilities in this position. The Committee also satisfied itself, through discussion with internal and external auditors, of the expertise and experience of the Group’s finance function.

The committee has evaluated the annual financial statements for the year ended 31 December 2013 and considers that they comply in all material respects with the requirements of the South African Companies Act of South Africa, 2008, the JSE Listings Requirements and International Financial Reporting Standards.

Details of membership and a record of 2013 meetings can be found on pages 68 and 69.

Asset/Liability Management Investment Committee (“ALMIC”)The objective of the ALMIC is to ensure that appropriate and timely decisions are taken regarding the investment of Company funds, and that the risk arising from asset and liability mismatch is managed. The committee sets the guidelines and principles for the Group and takes advice, where appropriate, from outside investment professionals.

Details of 2013 membership and a record of meeting attendance can be found on pages 68 and 69.

Remuneration Committee (“REMCo”)REMCO assists the Board in ensuring that a competitive remuneration policy is in place that aligns with the Company’s strategy and performance goals. REMCO has approved and adopted Zurich South Africa’s Remuneration Policy, see page 76 for details. The key objectives of the policy, which are aligned with the committee’s terms of reference, include:

• ensuring that the Remuneration Policy promotes the achievement of the Company’s strategic objectives and encourages individual performance;

• ensuring the combination of fixed and variable pay, in cash, share appreciation rights and other benefits, meets the Company’s needs and strategic objectives;

• ensuring all benefits, including retirement benefits and other financial arrangements, are justified and correctly valued;

• considering the results of the evaluation of the performance of the CEO and other Executive Directors, both as Directors and as executives in determining remuneration;

• selecting an appropriate comparative group when comparing remuneration levels;

• reviewing incentive schemes to ensure continued contribution to shareholder value and that these are administered in terms of the rules; and

• advising on the remuneration of Non-executive Directors.

The Committee comprises two Independent Non-executive Directors and one Non-executive Director. The Chairman of the committee is an Independent Non-executive Director.

The CEO, Group Company Secretary, as well as the Head of People Management and the Head of Remuneration and Benefits attend meetings by invitation; however, they are excused when their own remuneration and ratings are discussed by the committee.


Nominations Committee (“NoMCo”)NOMCO meetings are held as the committee deems appropriate but at least twice per year. The committee, which comprises only Non-executive Directors, met five times during 2013. The Chairman of the committee is the Chairman of the Board and is an Independent Non-executive Director. The committee makes recommendations to the Board on the:

• appointment of Executive and Non-executive Directors;• composition of the Board;• development and training of the Board; and• balance between Executive and Non-executive Directors

appointed to the Board. The expertise, skills, experience and past performance of Directors who retire by rotation are also assessed prior to making recommendations in respect of their re-election.

NOMCO also exercises oversight over matters pertaining to the appointment of senior management, hence the attendance of the CEO at the committee meeting, although the CEO is not a member.

During 2013, NOMCO reviewed the role description and responsibilities of the Chairman and the succession policies for the appointment of the CEO, the Chairman and other Directors. The committee ensured that the Board received regular training and facilitated the Board evaluation process. NOMCO further considered and recommended the composition of all the Board committees, the reappointment of members of the Audit Committee and those Directors retiring by rotation, for approval at the AGM.


The committee evaluated the independence of the following Independent Non-executive Directors for Board approval namely, DD Mokgatle, SG Morris, MN Mbekeni and JPM Diess. Independence is assessed annually according to the requirements in King III, the Companies Act and the JSE Listings Requirements. All Directors assessed were confirmed to be independent.


Social, Ethics and Transformation Committee (“SETCo”)SETCO was established in 2012 as a statutory committee in terms of section 72 (4) of the Companies Act, 2008. The committee meets on a quarterly basis and its functions include oversight over the following:

• Social corporate responsibility matters.• Stakeholder relations.• Environmental matters.• Health and safety matters.• Labour and employment issues.• Prevention of corruption and fraud, as prescribed by the

Companies Act, 2008.• BBBEE, employment equity and transformation matters.


Service Level Agreement Review Committee (“SLA”)The Company regularly transacts – on commercial and arm’s length terms – with its majority shareholder, ZIG. The Company acknowledges its reliance and dependency on these benefits, their commercial imperative and the competitive advantage that they provide, and has therefore entered into a service level agreement with ZIG to regularise the entitlement to and remuneration of the services.

The SLA was constituted as a committee of the Board with the aim of ensuring that the Company:

• complies with best practice corporate governance relating to the approval and transparency of these transactions;

• ensures that minority shareholders’ rights are protected; and

• ensures that the motivation and commercial rationale as well as the benefit to the Company is clear, defensible and understood by all stakeholders.

The role and purpose of the committee is to review the terms of the transactions referred to above and to report and make recommendations to the Board with regard to the review process and the findings thereof. This review takes place on an annual basis.

The committee comprises Independent Non-executive Directors and one Executive Director and meets as it deems appropriate, but at least once a year. The committee met twice during 2013 to consider the terms of the SLA and associated fees for 2013 and 2014. It is chaired by an Independent Non-executive Director.


Management CommitteesRisk and Control Committee (“RCC”)The RCC, which is chaired by the CEO, comprises members of the Executive Committee, Internal Audit, External Audit, Risk Management and Legal and Compliance. The committee meets quarterly and reports to the Audit Committee.

The role of the RCC is to provide assurance to the Audit Committee that the Risk Management Policy, Enterprise Risk Management Framework and methodology are in place and are operating effectively. The committee ensures that a risk policy, framework and methodology are in place. The Group Enterprise Risk Management Framework is underpinned by the three lines of defence model. Co-ordinating the governance and control functions across these three lines ensures that objectives are being achieved, risks are identified and appropriately managed, mitigation actions are implemented and internal controls are in place and operating effectively. This co-ordination is referred to as “integrated assessment and assurance”. This enables the Company to identify, analyse and manage risks, protect policyholders, ensure that management acts on any suspected fraudulent or criminal behaviour and complies with statutory laws and regulations. The committee also focuses on managing risks to the Company’s business continuity plans and ensures that is a priority and is proactively managed.




During 2013, a wide range of risks that could affect the Company’s risk profile were reviewed by the committee.

These included:

• risks associated with the global economic slowdown that is affecting South Africa, the Company’s ability to sustain profitable growth in a challenging trading environment, especially in view of the current soft insurance market;

• regulatory risk: while changes in regulation are welcome, the amount, complexity and pace of these changes will continue to weigh on insurers and put a strain on resources. Certain regulations may skew the competitive landscape and will require adequate enforcement mechanisms to ensure a level playing field; and

• the identification, quantification, monitoring and remediation of strategic and operational risks and their impacts on the Company.

Executive Committee (“Exco”)Exco assists the CEO to efficiently and effectively manage

and implement the strategic plans approved by the Board.

Exco meets weekly and has a monthly full-day strategy

meeting. Exco consists of two Executive Directors and seven

executive members who represent the main business and

operational units. The objectives of the committee are to:

• assist the CEO to guide and control the overall direction

of the business; and

• act as a medium of communication and co-ordination

between the various business units.

As all Exco members regularly meet with Board members

and attend the Board meetings, direct reporting and

feedback is given by them to the Board of Directors.

Fees for Board and Board committee membership and/or attendanceZurich

2014Zurich

2013

Board or Board Committee Member Type Per Annum Per Annum

BoardChairman R600,000 R575,000Member R146,000 R140,000

AuditChairman R290,000 R280,000Member R147,000 R140,000

ALMICChairman R240,000 R232,000Member R125,000 R120,000

NOMCOChairman R146,000 R140,000Member R74,000 R70,000

REMCOChairman R147,000 R140,000Member R74,000 R70,000

SETCO Chairman R147,000 R140,000Member R74,000 R70,000

SLA and ad hoc: Members will be remunerated at an hourly rate of R2,650


IT governanceThe Board has overall responsibility for ensuring that the Company has a robust IT governance framework in place to manage and oversee IT risks. The Audit Committee and the Risk and Control Committee assist the Board in discharging its duties in this respect in line with King III recommendations for IT Governance. Zurich South Africa’s Head of IT was appointed during 2013 to further bolster the IT management. The Head of IT reports directly to the Chief Operations Officer, who in turn provides quarterly IT governance updates to the Audit Committee on all key IT projects, expenditure and IT governance-related matters.

To ensure dedicated focus to the technology refresh journey, a Programme Director was appointed in H2 2013. The key responsibilities of the Programme Director will be the design and delivery of the new technology and business operating model, within budget.

The Board is satisfied that the Company’s IT governance and IT risks were adequately addressed through its risk management and monitoring processes.

Sustainability Zurich South Africa has laid the foundation for sustainable practices over the years. As such it continues to focus on driving sustainability in its activities. Our core values – integrity, customer centricity, sustainable value creation, excellence and teamwork – are based on the clear analysis of the risks, challenges and opportunities the Company faces in creating resilient day-to-day business in a time of increasing uncertainty.

The Company recognises that the only effective approach to sustainability is one in which sustainable practices and philosophies are at the core of every aspect of the organisation – impacting positively on people, philosophies, economics, the environment and the country as a whole.

For this reason, the Company’s approach to sustainability is a holistic and integrated one that brings together economic, environmental, social and cultural elements. This ensures that sustainability is inextricably woven into the DNA of the organisation and enables it to realise its aim of becoming a leader in sustainability.

This report contains information on Zurich South Africa’s stakeholder engagement on page 16. Furthermore, stakeholder reports on employees and brokers, suppliers, the community and the environment elaborate on the Company’s sustainability initiatives and developments in 2013, on pages 52 to 61.

Accounting and auditingExternal auditThe external auditors, PricewaterhouseCoopers Inc., are responsible for reporting on whether the financial statements are fairly presented in conformity with IFRS. The external auditors offer reasonable assurance on the accuracy of financial disclosures. The preparation of the financial statements is the responsibility of management. The external audit report based on the annual financial statements appears on the Company’s website www.zurich.co.za.

Consultation occurs between external and internal auditors to ensure an efficient audit process. The Audit Committee sets the principles for recommending the use of the external auditors for non-audit services.

VAT consulting was the only non-auditing service provided by the Group’s external audit firm during the year under review.

Internal auditThe function of internal audit (“Group Audit”), as an integral part of the three lines of defence model, is to provide independent, objective assurance and consulting services designed to add value and improve Zurich South Africa’s operations. It helps Zurich South Africa to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

Group Audit is outsourced to KPMG and they are independent from management. The head of the department reports directly to ZIG’s Global Head of Audit and the local Audit Committee. Group Audit submits reports and attends the Audit Committee meetings.

Group Audit liaises closely with the external auditors in the planning, execution and communication of the results of their work.

Directors’ responsibilityThe Directors acknowledge their responsibility for the preparation of the summarised annual financial statements and the annual financial statements, adherence to applicable accounting policies and standards and the presentation of related information that fairly presents the state of affairs and the results of the Company, and for the effectiveness of risk management and the internal control environment.

The Directors’ responsibility and approval of summarised annual financial statements is shown on page 81.




Going concernBased on the annual financial statements, the Directors have every reason to believe that the Company has adequate resources in place to continue operations for the foreseeable future.

Code of Business ConductThe Board provides effective leadership that embraces ethical conduct, ensuring that its conduct and that of management is aligned with the Company’s values and Code of Conduct. The Company has a formal Code of Business Conduct, which incorporates a Code of Ethics (“the Code”). The Code applies throughout ZIG and ensures that best business practices are applied on a constant basis. The Code is distributed to all employees of the Company and its subsidiaries and prescribes the ethical standards required of employees in their interaction with one another and all stakeholders.

Stakeholder communicationTransparent communication to the public and to shareholders embodies the principles of balanced reporting, clarity and openness. Positive and negative aspects of both financial and non-financial information are provided through various mediums including: Zurich South Africa’s corporate website, its integrated annual report, annual general meetings and the Stock Exchange News Service.

The Board encourages shareholders to attend its AGM. The forthcoming AGM will take place on Tuesday, 13 May 2014, at 09:00.

DisclosureThe integrated report deals adequately with disclosures pertaining to financial statements, auditors’ responsibility, accounting records, internal control, risk management, accounting policies, adherence to accounting standards, going-concern issues and adherence to codes of governance and the JSE Listings Requirements.

Regulatory environmentCodes, regulation and complianceZurich South Africa seeks to bring the highest standards of compliance and best practice to all its operations. This includes a robust internal and external audit programme, supported by a well-established compliance function, which ensures that the governance and compliance framework is fully implemented and monitored. Zurich South Africa’s compliance risks are managed through internal policies and processes which include legal, regulatory and other technical requirements relevant to the business.

Oversight of codes, regulation and compliance forms part of the Audit Committee’s Charter, supported by the review and advices provided by the Risk & Control Committee. In discharging its responsibilities, the Audit Committee reviews and approves the Company’s annual compliance plan, ensures that the compliance function is adequately resourced and monitors compliance with applicable legislation and governance codes and regulation by reviewing reports tabled at quarterly Audit Committee meetings.

The diagram below outlines key regulation currently impacting on Zurich South Africa.

TCF Treating Customers Fairly

Binder Regulations

PoPI1 – 2 yrs

KING IIIVAT Binding Rules

SAM II Solvency Assessment and Management

other regulation Taxatio

n

Mar

ket c

on

duct regulation Prudential regulation

2 – 3 yrs


Companies Act (Memorandum of Incorporation): Following the JSE’s approval of Zurich South Africa’s Memorandum of Incorporation (“MOI”), the shareholders approved the MOI at the AGM held in May 2013. Following such approval, the Financial Services Board reviewed the MOI and requested certain amendments thereto to ensure compliance with a Guidance Paper published by the Regulator pursuant to Section (9) of the Short-term Insurance Act. The MOI has been duly amended and the Board, the JSE and the Regulator have approved the further amendments. The adoption of the amended MOI has been tabled for approval by shareholders at the AGM.

Companies Act (Prescribed Officers): JE O’Neill and P Bezuidenhout remain as the only Prescribed Officers of Zurich South Africa due to the nature of their responsibilities and control over major business lines and participation in strategic decisions of the Company.

Treating Customers Fairly (“TCF”): TCF is due to be implemented on 1 January 2014. For the insurance industry, TCF heralds a paradigm shift in how the financial services industry operates. The principles cover and impact a wide scope of business activities, and organisations have started revisiting their approach to areas such as employee training, complaints handling and product awareness and understanding. From an internal perspective, Zurich South Africa embarked on various initiatives to prepare the business to embed the TCF, principles and objectives. The Company has reviewed governance and processes with regards to TCF readying it to plot the roadmap to embed the principles. In addition, the Company embarked on first-line implementation mechanisms focusing on culture, customer feedback and business processes to ensure that it is compliant with the outcomes.

Binder Regulations and Directive 159: The Binder Regulations were published in terms of the Short-term Insurance Act, following which Directive 159, that promotes responsible outsourcing of services by insurers, was published. This necessitated that Zurich South Africa consider the impact on its day-to-day business activities. In addition, these two regulatory changes necessitated the negotiation and redrafting of more than 500 third-party and binder agreements. Zurich South Africa revised all its agreements and was fully compliant by the deadline of 31 March 2013. New regulation published in mid-2013

required an additional review of Binder Agreements with binder holders, which exercise is expected to be finalised by the end of April 2014. Notwithstanding Zurich’s commitment to unconditionally comply with the ever-changing regulatory landscape, compliance and the financial impact thereof on the business remains a challenge.

Solvency Assessment and Management (“SAM”): The FSB plans to introduce SAM, a risk-based regulatory regime based on three pillars: capital adequacy, governance and risk management, and reporting and disclosure. The implementation date was extended by the Regulator from 1 January 2015 to 1 January 2016.

This regulation will require insurers to either use an internal model or the FSB’s standard model to calculate the required solvency capital ratio. It will also look at the quality of risk management practices, including control, and will require additional risk disclosure to shareholders and the regulator. For a number of years, Zurich South Africa has been using an internal model to manage its insurance operations and have already embedded most of the requirements. In addition, as a subsidiary of the global Zurich Insurance Group, we are working with our European peers to implement relevant aspects of Solvency II in South Africa.

Protection of Personal Information: The PoPI Act was legislated on 26 November 2013 and the commencement date of this Act is anticipated to be in 2014. Zurich South Africa’s systems are in place to secure customers’ personal information in line with the requirement of this Act. Significant work has been undertaken to ensure that Zurich will be well placed to comply with the regulatory requirements of PoPI.

VAT Binding Rules: The South African Revenue Service (“SARS”) issued a new VAT Binding General Ruling No 14 (“VAT BGR”) which became effective from 1 March 2014. The VAT BGR directs the VAT treatment to be adopted in respect of specific short-term insurance transactions and replaces all previous VAT rulings issued by SARS in respect of these. The specific categories affected include international transport policies; VAT treatment of excess payments; indemnity payments; and reinsurance. Zurich South Africa is fully committed to ensuring compliance and welcomes the spirit of the ruling in its intention to provide guidance and standardisation in respect of the VAT treatment of the specified transactions.




Summarised Remuneration Policy1. Remuneration philosophyThe Board is responsible for the design, implementation and monitoring of the remuneration structure and, as such, established a Remuneration Committee. The committee is, among other things, responsible for proposing Directors’ fees and Executive and employee remuneration to the Board on an annual basis.

Zurich operates a balanced and effectively managed remuneration system that provides for competitive total remuneration opportunities that attract, retain, motivate and reward the employees to deliver outstanding performance. Total remuneration for an individual employee is influenced by factors including the scope and complexity of the role, business performance and affordability, individual performance, internal relativities, external competitiveness, geographic location and legal requirements.

2. Guiding principles of the remuneration philosophyZurich’s guiding principles:

• use a simple, transparent and implementable remuneration architecture;

• promote a high-performance culture by differentiating total remuneration based on the relative performance of businesses and individuals;

• clearly define the expected performance through a structured system of performance management and use this as the basis for remuneration decisions;

• link variable remuneration awards to key performance factors which include the performance of the Group, the business segments, business divisions, business units, functions as well as individual achievements;

• align the structure and level of total remuneration with the Company’s risk policies and risk-taking capacity;

• link short-term and long-term incentive plans used for variable remuneration to appropriate performance measures, and the overall expenditure on variable pay is considered in connection with the Group’s long-term economic performance;

• link remuneration with the future development of performance and risk by including features for deferred remuneration with regard to the structure of the long-term incentive plans; and

• provide employees with a range of benefits based on local market practices.

3. Remuneration overview Total remuneration includes cost-to-company salaries, short-term and long-term incentives and employee benefits. The short-term and long-term incentive plans used for variable remuneration are linked to appropriate performance measures and the overall expenditure on variable pay is considered in connection with the Group’s long-term economic performance.

Variable remuneration is structured such that, on average, there is a higher weighting towards the longer-term sustainable performance for the most senior employees, including the individuals considered to be key risk takers.

3.1 Cost-to-company (“CTC”) salary CTC salary is the fixed pay for the role performed, determined by the scope and complexity of the role, and is reviewed regularly. Overall CTC salary structures are positioned to manage salaries around the relevant market medians. Key factors to be taken into account are the individual’s overall experience and performance, and salaries typically fall within a range of 80% to 120% of the median market level.

3.2 Employee benefits (part of CTC package) Zurich provides a range of employee benefits. Employees contribute to the cost of these benefits and the overall benefits offering is positioned towards the relevant market median.

3.3 Variable remuneration Incentive plans are designed to provide a range of award opportunities linked to levels of performance. Business and individual performance may result in superior remuneration levels above target for superior performance, and reduced levels below target for performance below expectations. Variable pay opportunities are designed to motivate employees to achieve key short-term and long-term business goals to increase shareholder value.

Selected employees participate in the ZIG Group Long-Term Incentive Plan (“LTIP”) and all employees participate in the Short-Term Incentive Plan (“STIP”).


How the Group Long-Term Incentive Plan (“LTIP”) worksPurpose The purpose of the LTIP is to provide equity-related rewards to the Group’s most senior executives for the accomplishment of key Group performance measures in order to align incentives and behaviours of these executives with the interests of shareholders.

Participants are granted performance-based target shares (“Target Shares”) in ZIG under the LTIP, with a potential vesting of these target shares subject to specific performance achievements over a three-year period. Performance is measured each year through a combination of ZIG’s actual return on equity (“ROE”) performance measured by the three-year average of the annual ROE results, and the actual relative total shareholder return (“TSR”) compared to a global industry peer group over the complete three-year period. Under special circumstances, individual adjustment may apply.

ParticipationThe participants in the LTIP are members of the Executive. The Plan is reviewed annually as to its content and participation, and ongoing participation is not guaranteed.

Participants joining during the yearParticipants who are employed on or before 30 September each year will be eligible to participate in this LTIP on a pro rata basis. The pro rata number of Target Shares granted will be calculated on the basis of a total of 36 months’ participation. Eligibility for pro rata purposes will begin in the month in which employment commences.

Grant of Target Shares and vestingThe size of the target grant is based on the overall percentage of salary allocated to long-term remuneration within the total remuneration programme i.e. the LTI target is calculated as a percentage of base salary. The salary (excluding incentives and allowances) as of 1 April each

year, or as of the date when joining the LTIP, is used to determine the grant.

The number of target shares granted for the full 36 months is divided into three tranches, which allows the target grant to vest on a pro rated basis over the three years following the grant. The first tranche vests one year after the grant, the next tranche vests the following year and the third tranche vests the third year after the grant, provided that the employee continues to participate in the LTIP.

Each tranche is assessed and only vests if certain performance conditions are met in terms of the ROE and the TSR compared with an international peer group of insurance companies based on the companies included in the Dow Jones Insurance Titan Index. The performance conditions are assessed and measured over a three-year calendar period prior to the vesting date. The vesting percentage, based on the actual ROE and TSR achievements, can vary between 0% and 175% of the Target Shares granted.

Within each tranche, 50% of the vested shares are subject to a three-year sales restriction.

Participant GrantsTarget Shares are granted on 4 April each year and the pricing is based on the closing price of Zurich Insurance Group Limited shares on the preceding day.

How the Group Short-Term Incentive Plan (“STIP”) worksThe Group links variable remuneration awards to key performance factors which include the performance of the Group, the business segments and functions as well as individual achievements. The STIP used for variable remuneration is linked to appropriate performance measures.

Performance indicators of the STIPThe STIP reinforces the Performance Management philosophy which links business performance with individual performance.

Indicators

Business performance

Reward

Empl

oyee

Com

pany

Individual STIP award

Individual performance




Business performanceThe overall business performance is assessed against the business plan. The business plan for the year is defined by the Group and approved by the Board prior to the year commencing. At year-end, the Board ascertains and assesses business and financial performance on a quantitative and qualitative basis.

The financial measures used to determine STIP Awards typically include the net income attributable (after taxes) to shareholders and relevant business operating profit or other financial measures for the business segments. In assessing the business results, the financial performance of the area as well as a review of risk considerations from the Chief Risk Officer is taken into account.

The STIP performance grid below indicates the possible aggregate STIP Funding percentages, given defined levels of business performance. Based on approved funding levels, STIP Awards will be determined and communicated.

Business performance achieved against business target Potential available STIP funding

=> 120% > 130% – 175%

> 110% – < 120% > 120% – <= 130%

> 90% – <= 110% > 90% – <=120%

=> 80% – <= 90% > 60% – <= 90%

< 80% 0% – <= 60%

STIP Awards are determined at the end of the performance year. The Board of Directors approves the STIP Awards, which link business performance to award size, considering factors such as actual business performance achieved versus plan, unusual or one-off items affecting results, market conditions and the financial performance of the area, as well as a review of risk considerations from the Chief Risk Officer.

Individual performanceThe individual performance achievements are assessed through the performance management system and process. The performance management process utilises an individual rating scale between 1 and 5, with 5 being the highest rating.

The STIP is designed to motivate and reward our people for successfully achieving specific organisational and individual performance objectives.

An individual award is calculated by multiplying the STIP Award percentage above by the applicable Performance Management rating multiplier shown below.

Performance rating 1 2 3 4 5

% of Target 0% 20% 100% 120% 150%

The base salary used for calculation is, unless otherwise notified, the gross annual salary excluding incentive awards, commissions and/or expenses in effect on 31 December of the performance year. Other allowances are not part of the base salary calculation unless there are special agreements under local terms and conditions.

3.4 Directors’ emolumentsExecutive Directors have standard employment contracts with the Company or its subsidiaries, with standard notice periods in line with the Basic Conditions of Employment Act. There are no additional costs to the Group.

oUR CUltURe Is foCUsed on pRovIdIng pRofessIonal seRvICe to oUR CUstomeRs

SummariSed aNNuaL FiNaNCiaL STaTemeNTS

81 Directors’ responsibility and approval of the summarised annual financial statements

81 Preparation and presentation of summarised financial statements

81 Secretarial certification

82 Summarised consolidated statement of financial position

83 Summarised consolidated statement of financial performance

84 Summarised consolidated statement of comprehensive income

85 Summarised consolidated statement of changes in equity

86 Summarised consolidated statement of cash flows

87 Notes to the summarised annual financial statements

Contents

InteGRAteD AnnuAl RePoRt 2013 81

To The SharehoLderS oF ZuriCh iNSuraNCe CompaNy SouTh aFriCa LimiTedThese summarised financial statements are extracted from audited information, but are not themselves audited. The annual financial statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited annual financial statements and the auditor’s report thereon are available for inspection at the Company’s registered office.

The Directors take full responsibility for the preparation of the summarised financial statements and the financial information has been correctly extracted from the underlying annual financial statements.

The Group’s internal controls and systems are designed to provide reasonable assurance as to the integrity and reliability of the financial statements, so as to be free from material misstatements, whether owing to fraud or error, and to adequately safeguard, verify and maintain accountability for the Group’s assets.

The Board of Directors is satisfied that the summarised financial statements fairly present the financial position and the results of the operations and cash flows in accordance with IAS 34 – Interim Financial Reporting.

In light of the current financial position, the Directors are satisfied that the Group is a going concern and have continued to adopt the going-concern basis in preparing the financial statements.

The Group’s summarised financial statements were, in accordance with their responsibilities, approved by the Board of Directors on 14 February 2014 and are signed on its behalf by:

dd mokgatle Je o’NeillChairman Chief Executive Officer

Johannesburg14 February 2014

DIReCtoRs’ ResPonsIbIlIty AnD APPRovAl of the summARIseD fInAnCIAl stAtements

PRePARAtIon AnD PResentAtIon of summARIseD fInAnCIAl stAtements

The preparation of the summarised financial statements was supervised by the Chief Financial Officer, Pieter Bezuidenhout CA(SA). The full set of annual financial statements is published on the Company’s website at www.zurich.co.za or can be requested from the Group Company Secretary.

seCRetARIAl CeRtIfICAtIon

In terms of section 88 (2)(e) of the Companies Act, 71 of 2008, it is hereby certified that the Company has lodged with the Registrar of Companies, all such returns as are required of a public company in terms of the Companies Act; and all such returns are true, correct and up to date.

T heydenrychGroup Company Secretary

Johannesburg14 February 2014

82 ZURICH InsuRAnCe ComPAny south AfRICA lImIteD


summARIseD ConsolIDAteD stAtement of fInAnCIAl PosItIonas at 31 December 2013

Group CompaNy

Note2013

r’0002012

R’0002013

r’0002012

R’000

aSSeTSLand, buildings and equipment 56,217 73,049 51,855 68,620 Intangible assets 55,191 50,433 55,191 50,433 Investment in subsidiaries – – 53,859 49,359 Investment in associates 5,637 5,036 5,637 5,036 Deferred taxation asset 102,463 – 102,463 – Financial instruments 8 3,261,914 3,161,000 3,002,758 2,932,081

– Available-for-sale 1,885,858 1,808,875 1,702,362 1,636,233 – Fair value through income 477,558 454,881 477,558 454,881 – Loans and receivables 898,498 897,244 822,838 840,967

Prepayment to defined-contribution fund 127,694 141,065 127,694 141,065 Deferred acquisition costs 85,596 95,308 68,018 77,260 Reinsurance assets 9 657,987 908,562 606,100 823,532

– Reinsurance outstanding claims 445,983 763,307 421,172 712,880 – Reinsurance unearned premiums 212,004 145,255 184,928 110,652

Income tax asset 11,610 5,284 5,026 4,078 Cash and cash equivalents 693,279 611,945 578,372 469,032

Total assets 5,057,588 5,051,682 4,656,973 4,620,496

eQuiTy aNd LiaBiLiTieSequityStated capital 4,650 4,650 4,650 4,650 Translation reserve (31,690) (39,635) – – Revaluation reserve 406,131 354,651 406,131 354,651 Share-based payments reserve (9,243) – (9,243) – Statutory contingency reserve 37,610 34,656 – – Retained income 1,461,794 1,665,411 1,351,354 1,577,763

Total equity 1,869,252 2,019,733 1,752,892 1,937,064

LiabilitiesDeferred taxation liability – 8,094 – 8,094 Employee benefit obligation 56,869 60,224 56,033 60,224 Liability under cell management 68,292 109,292 – – Insurance liabilities 9 2,096,873 2,206,203 1,909,510 1,976,056

– Gross outstanding claims 1,351,745 1,533,216 1,280,519 1,425,303 – Gross unearned premiums 745,128 672,987 628,991 550,753

Deferred reinsurance commission 24,959 16,346 23,461 11,814 Income tax liability 1,874 – – –Trade and other payables 893,646 620,801 869,254 616,255 Provisions 45,823 10,989 45,823 10,989

Total liabilities 3,188,336 3,031,949 2,904,081 2,683,432

Total equity and liabilities 5,057,588 5,051,682 4,656,973 4,620,496


summARIseD ConsolIDAteD stAtement of fInAnCIAl PeRfoRmAnCefor the year ended 31 December 2013

Group CompaNy

Note2013

r’0002012

R’0002013

r’0002012

R’000

Gross written insurance premium 9 4,084,625 3,766,534 3,805,906 3,403,040 Insurance premium ceded to reinsurers 9 (856,203) (828,304) (747,063) (647,528)

Net written insurance premium 3,228,422 2,938,230 3,058,843 2,755,512

Change in unearned premium – Gross amount 9 (62,848) 7,401 (78,238) 18,326 – Reinsurers’ share 9 64,611 (11,186) 74,276 (21,021)

Net insurance premium earned 3,230,185 2,934,445 3,054,881 2,752,817

Reinsurance commission earned 132,244 146,366 117,943 125,021 Investment income 10 217,682 223,965 197,409 213,454 Other income 4,417 7,163 3,176 4,445 Gain on sale of business – 1,684 – 25,328 Gain on sale of associate – 1,602 – 1,602 Net realised gains on available-for-sale financial assets 10 105,609 81,896 105,609 81,896

Net income 3,690,137 3,397,121 3,479,018 3,204,563

Net insurance claims (2,553,317) (2,202,655) (2,443,890) (2,075,641)

Gross insurance amount paid 9 (3,127,432) (2,533,967) (2,972,254) (2,365,254)Reinsurers’ share paid 9 707,864 391,475 675,288 349,463 Gross amount change in provision 9 186,266 (393,844) 144,784 (394,122)Reinsurers’ share of change in provision 9 (320,015) 333,681 (291,708) 334,272

expenses (1,364,700) (1,205,873) (1,303,303) (1,145,392)

Acquisition costs (691,666) (586,011) (646,343) (535,996)Impairment of available-for-sale financial assets (4,989) (6,240) (4,989) (6,240)Administrative and other operating expenses (662,122) (608,095) (646,048) (597,629)Investment expenses (5,923) (5,527) (5,923) (5,527)

Loss from operating activities (227,880) (11,407) (268,175) (16,470)

Finance costs (20,469) (11,317) (15,540) (11,317)Share of income of associates (3,832) 1,090 (3,832) 1,090

Loss before tax (252,181) (21,634) (287,547) (26,697)

Income taxation 11 88,057 23,710 97,677 37,354

(Loss)/profit for the year – attributable to the owner of the parent (164,124) 2,076 (189,870) 10,657

earnings per shareBasic and diluted (cents) 12 (1,348) 17



summARIseD ConsolIDAteD stAtement of ComPRehensIve InComefor the year ended 31 December 2013

Group CompaNy

2013 r’000

2012 R’000

2013 r’000

2012 R’000

(Loss)/profit for the year (164,124) 2,076 (189,870) 10,657

other comprehensive income net of tax* 59,425 39,251 51,480 43,833

Exchange differences on translating foreign operations 7,945 (4,582) – – Realised gain on available-for-sale financial assets recycled through the statement of financial performance (105,609) (81,896) (105,609) (81,896)Impairment losses transferred to statement of financial performance 4,989 6,240 4,989 6,240 Net unrealised gains on available-for-sale assets 141,085 139,621 141,085 139,621 Income taxation relating to components of other comprehensive income 11,015 (20,132) 11,015 (20,132)

Total comprehensive (loss)/profit for the year (104,699) 41,327 (138,390) 54,490

* All other comprehensive income will be subsequently classified to profit/(loss) when specific conditions are met


summARIseD ConsolIDAteD stAtement of ChAnGes In equItyfor the year ended 31 December 2013

Group

Stated capital r’000

Translation reserve

r’000

re-valuation

reserver’000

Share-based payment

reserver’000

Statutory contingency

reserver’000

retained income

r’000

Total equityr’000

Balance at 31 december 2011 4,650 (35,053) 310,818 – 314,095 1,420,435 2,014,945 Profit for the year – – – – – 2,076 2,076 Other comprehensive income – (4,582) 43,833 – – – 39,251 Transfer (from)/to statutory contingency reserve – – – – (279,439) 279,439 – Dividends paid – – – – – (36,539) (36,539)

Balance at 31 december 2012 4,650 (39,635) 354,651 – 34,656 1,665,411 2,019,733 Loss for the year – – – – – (164,124) (164,124)Other comprehensive income – 7,945 51,480 – – – 59,425Transfer (from)/to statutory contingency reserve – – – – 2,954 (2,954) – Transfer to share-based payment reserve – – – (9,243) – – (9,243) Dividends paid – – – – – (36,539) (36,539)

Balance at 31 december 2013 4,650 (31,690) 406,131 (9,243) 37,610 1,461,794 1,869,252

CompaNy

Stated capital r’000

re-valuation

reserver’000

Share-based payment

reserver’000

Statutory contingency

reserver’000

retained income

r’000

Total equityr’000

Balance at 31 december 2011 4,650 310,818 – 282,075 1,321,570 1,919,113 Profit for the year – – – – 10,657 10,657 Other comprehensive income – 43,833 – – – 43,833 Transfer (from)/to statutory contingency reserve – – – (282,075) 282,075 – Dividends paid – – – – (36,539) (36,539)

Balance at 31 december 2012 4,650 354,651 – – 1,577,763 1,937,064 Loss for the year – – – – (189,870) (189,870)Other comprehensive income – 51,480 – – – 51,480 Transfer to share-based payment reserve – – (9,243) – – (9,243)Dividends paid – – – – (36,539) (36,539)

Balance at 31 december 2013 4,650 406,131 (9,243) – 1,351,354 1,752,892



summARIseD ConsolIDAteD stAtement of CAsh flowsfor the year ended 31 December 2013

Group CompaNy

2013 r’000

2012 R’000

2013 r’000

2012 R’000

Cash flows from operating activities 118,527 (141,573) 140,760 49,224

Cash utilised in operations (64,503) (358,894) (40,051) (164,525)Interest income 179,292 178,461 159,169 164,362 Dividends received 38,390 45,504 38,240 49,092 Finance costs (20,469) (11,317) (15,540) (11,317)Taxation (paid)/received (14,183) 4,673 (1,058) 11,612

Cash flows from investing activities (591) (191,707) 5,119 (150,419)Acquisitions– Subsidiaries and associates (4,434) – (8,933) – – Financial assets at fair value

through income (24,890) (25,856) (24,890) (24,756)– Available-for-sale financial assets (155,466) (278,696) (105,143) (214,073)– Land, buildings, equipment and

intangible assets (27,437) (24,403) (27,242) (24,289)Proceeds on disposal– Subsidiaries and associates – (67,173) – 33,193 – Financial assets at fair value

through income 2,213 1,101 2,213 – – Available-for-sale financial assets 204,987 198,502 165,110 74,688 – Land, buildings, equipment and

intangible assets 4,436 4,818 4,004 4,818

Cash flows from financing activities (36,539) (36,539) (36,539) (36,539)

Dividends paid (36,539) (36,539) (36,539) (36,539)

Total cash movement 81,397 (369,819) 109,340 (137,734)

Exchange losses on cash and cash equivalents (63) (39) – – Cash and cash equivalents at beginning of year 611,945 981,803 469,032 606,766

Cash and cash equivalents at end of year 693,279 611,945 578,372 469,032


notes to the summARIseD AnnuAl fInAnCIAl stAtementsfor the year ended 31 December 2013

1. BaSiS oF preSeNTaTioN The summarised consolidated financial statements are prepared in accordance with the JSE Limited’s (“JSE”) Listings

Requirements for summary financial statements, and the requirements of the Companies Act 71 of 2008, as amended, applicable to summary financial statements. The JSE requires summary financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 – Interim Financial Reporting.

2. aCCouNTiNG poLiCieS The accounting policies applied in the preparation of the consolidated financial statements from which the

summarised consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements.

There has been no material impact on the summarised annual financial statements identified based on management’s assessment of these standards.

The following new IFRSs and/or IFRICs were effective for the first time from 1 January 2013: • IFRS10–Consolidated Financial Statements • IFRS12–Disclose of Interests in Other Entities • IFRS13–Fair Value Measurement • IFRS7–Disclosures Offsetting Financial Assets and Financial Liabilities • IAS1–Presentation of Items of Other Comprehensive Income • IAS27–Separate Financial Statements • IAS28–Investments in Associates and Joint Ventures

3. CriTiCaL JudGemeNTS aNd eSTimaTeS Critical judgements and assumptions are used in the setting of estimates forming an integral part of financial

reporting.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The resulting accounting estimates will, by definition, seldom exactly equal the related actual results.

In preparing these summarised consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2013.

4. riSk maNaGemeNT The Group’s capital risk management strategy is to maximise long-term shareholder value by optimising capital

allocation while managing the statement of financial position in accordance with regulatory, solvency and rating agency requirements.

The Group’s activities expose it to a variety of financial risks: • Liquidityrisk • Marketrisk(currencyrisk,interestraterisk,pricerisk) • Creditrisk

Insurance activities expose the Group to insurance risk.

The summarised consolidated financial statements do not include and disclose all risk management information required in the annual financial statements. The summarised consolidated financial statements should be read in conjunction with the Group’s annual financial statements as at 31 December 2013.

There have been no changes to risk policies since the previous year-end. During 2013 there were no significant changes to the business that have an impact on the fair value of the Group’s financial assets and liabilities. No reclassifications have been made to financial assets and liabilities in 2013.



7. SeGmeNTaL NoTeS

7.1 Group statement of financial performance by lines of business

propertyr’000

Transportr’000

motorr’000

engineeringr’000

Guaranteer’000

Liabilityr’000

accident and health

r’000Total

r’000

year ended 31 december 2013Gross written insurance premium 1,535,451 140,669 1,777,580 334,396 23,947 138,496 134,086 4,084,625 Insurance premium ceded to reinsurers (576,130) (41,727) (14,312) (88,209) (3,123) (72,578) (60,124) (856,203)Net change in unearned premium 3,953 4,736 (962) (1,514) (5,500) 2,040 (990) 1,763

Net insurance premium earned 963,274 103,678 1,762,306 244,673 15,324 67,958 72,792 3,230,185

Reinsurance commission earned 93,717 1,771 1,530 16,968 646 12,897 4,715 132,244

Segmental income 1,056,991 105,449 1,763,836 261,641 15,970 80,855 77,687 3,362,429

Net insurance claims 744,733 81,867 1,508,023 149,994 34,165 15,981 18,554 2,553,317 Acquisition costs 312,916 23,500 248,587 62,558 3,738 21,312 19,055 691,666 Technical expenses* 208,341 19,166 269,758 50,847 4,798 14,982 4,881 572,773

Segmental expenses 1,265,990 124,533 2,026,368 263,399 42,701 52,275 42,490 3,817,756

Segmental underwriting results (208,999) (19,084) (262,532) (1,758) (26,731) 28,580 35,197 (455,327)

Investment income 217,682 Other income 4,417 Realised gains on available-for-sale financial assets 105,609 Impairment of available-for-sale financial assets (4,989)Administrative and other expenses (excluding underwriting expenses) (89,349)Investment expenses (5,923)Finance costs (20,469)Share of income in associates (3,832)

Loss before tax per statement of financial performance (252,181)

Income taxation 88,057

Loss for the year per statement of financial performance (164,124)

* Technical expenses are all expenses relating directly to insurance business

notes to the summARIseD AnnuAl fInAnCIAl stAtements ContInueDfor the year ended 31 December 2013

5. SeGmeNT iNFormaTioN The Group’s insurance activities are organised by market segment (corporate, commercial and personal) and then

within market segment into lines of business, based on the types of policies underwritten. The underwriting results of the Group, by line of business, are reviewed by management and the Board of Directors on a regular basis, and hence form the basis for the determination of reportable segments.

The measurement of the profits or losses of the reportable segments is done in the same manner, and in a manner consistent with those of the Group as a whole, as presented in the consolidated annual financial statements. Each reporting segment’s profit or loss is determined on the basis of directly attributable income and expenses at a policy level. This is consistent with the measurement of the reportable segments’ profits or losses, assets and liabilities in the prior accounting period.

The amounts provided to the chief decision-makers with respect to total assets and liabilities are measured in a manner consistent with that of the annual financial statements. These are allocated based on the operations of the segment.

6. eveNTS aFTer BaLaNCe SheeT daTe There have been no material changes in the affairs or financial position of the Company and its subsidiaries since the

statement of financial position date.


7. SeGmeNTaL NoTeS

7.1 Group statement of financial performance by lines of business

propertyr’000

Transportr’000

motorr’000

engineeringr’000

Guaranteer’000

Liabilityr’000

accident and health

r’000Total

r’000

year ended 31 december 2013Gross written insurance premium 1,535,451 140,669 1,777,580 334,396 23,947 138,496 134,086 4,084,625 Insurance premium ceded to reinsurers (576,130) (41,727) (14,312) (88,209) (3,123) (72,578) (60,124) (856,203)Net change in unearned premium 3,953 4,736 (962) (1,514) (5,500) 2,040 (990) 1,763

Net insurance premium earned 963,274 103,678 1,762,306 244,673 15,324 67,958 72,792 3,230,185


Segmental income 1,056,991 105,449 1,763,836 261,641 15,970 80,855 77,687 3,362,429

Net insurance claims 744,733 81,867 1,508,023 149,994 34,165 15,981 18,554 2,553,317 Acquisition costs 312,916 23,500 248,587 62,558 3,738 21,312 19,055 691,666 Technical expenses* 208,341 19,166 269,758 50,847 4,798 14,982 4,881 572,773

Segmental expenses 1,265,990 124,533 2,026,368 263,399 42,701 52,275 42,490 3,817,756

Segmental underwriting results (208,999) (19,084) (262,532) (1,758) (26,731) 28,580 35,197 (455,327)

Investment income 217,682 Other income 4,417 Realised gains on available-for-sale financial assets 105,609 Impairment of available-for-sale financial assets (4,989)Administrative and other expenses (excluding underwriting expenses) (89,349)Investment expenses (5,923)Finance costs (20,469)Share of income in associates (3,832)



Loss for the year per statement of financial performance (164,124)

* Technical expenses are all expenses relating directly to insurance business



7. SeGmeNTaL NoTeS CONTINuED

7.1 Group statement of financial performance by lines of business continued

propertyr’000

Transportr’000

motorr’000

engineeringr’000

Guaranteer’000

Liabilityr’000

accident and health

r’000Total

r’000

year ended 31 december 2012Gross written insurance premium 1,404,988 114,951 1,667,837 323,154 84 110,701 144,819 3,766,534 Insurance premium ceded to reinsurers (549,827) (28,831) (53,878) (75,664) (48) (41,083) (78,973) (828,304)Net change in unearned premium (294) (5,507) 7,674 (2,863) 632 (4,901) 1,474 (3,785)

Net insurance premium earned 854,867 80,613 1,621,633 244,627 668 64,717 67,320 2,934,445


Segmental income 953,845 83,982 1,623,315 265,390 679 75,169 78,431 3,080,811

Net insurance claims 636,469 41,629 1,325,566 129,487 553 37,692 31,259 2,202,655 Acquisition costs 263,544 18,692 199,957 62,374 4 17,586 23,854 586,011 Technical expenses* 214,947 16,907 249,711 51,241 14 15,413 2,225 550,458

Segmental expenses 1,114,960 77,228 1,775,234 243,102 571 70,691 57,338 3,339,124

Segmental underwriting results (161,115) 6,754 (151,919) 22,288 108 4,478 21,093 (258,313)

Investment income 223,965Other income 7,163Gains on sale of business 1,684Gain on sale of associate 1,602Realised gains on available-for-sale financial assets 81,896Impairment of available-for-sale financial assets (6,240)Administrative and other expenses (excluding underwriting expenses) (57,637)Investment expenses (5,527)Finance costs (11,317)Share of income in associates 1,090



profit for the year per statement of financial performance 2,076

* Technical expenses are all expenses relating directly to insurance business.

7.2 Group statement of financial performance by market segment

2013 2012

Gross written insurancepremium

r’000

underwriting resultr’000


R’000

underwriting resultR’000

market segment

Corporate 358,850 (28,670) 155,158 (44,430) Commercial 2,675,982 (267,796) 2,678,717 (149,509) Personal 1,049,793 (158,861) 932,659 (64,374)

Total 4,084,625 (455,327) 3,766,534 (258,313)



7. SeGmeNTaL NoTeS CONTINuED

7.1 Group statement of financial performance by lines of business continued

propertyr’000

Transportr’000

motorr’000

engineeringr’000

Guaranteer’000

Liabilityr’000

accident and health

r’000Total

r’000

year ended 31 december 2012Gross written insurance premium 1,404,988 114,951 1,667,837 323,154 84 110,701 144,819 3,766,534 Insurance premium ceded to reinsurers (549,827) (28,831) (53,878) (75,664) (48) (41,083) (78,973) (828,304)Net change in unearned premium (294) (5,507) 7,674 (2,863) 632 (4,901) 1,474 (3,785)

Net insurance premium earned 854,867 80,613 1,621,633 244,627 668 64,717 67,320 2,934,445


Segmental income 953,845 83,982 1,623,315 265,390 679 75,169 78,431 3,080,811

Net insurance claims 636,469 41,629 1,325,566 129,487 553 37,692 31,259 2,202,655 Acquisition costs 263,544 18,692 199,957 62,374 4 17,586 23,854 586,011 Technical expenses* 214,947 16,907 249,711 51,241 14 15,413 2,225 550,458

Segmental expenses 1,114,960 77,228 1,775,234 243,102 571 70,691 57,338 3,339,124

Segmental underwriting results (161,115) 6,754 (151,919) 22,288 108 4,478 21,093 (258,313)

Investment income 223,965Other income 7,163Gains on sale of business 1,684Gain on sale of associate 1,602Realised gains on available-for-sale financial assets 81,896Impairment of available-for-sale financial assets (6,240)Administrative and other expenses (excluding underwriting expenses) (57,637)Investment expenses (5,527)Finance costs (11,317)Share of income in associates 1,090



profit for the year per statement of financial performance 2,076

* Technical expenses are all expenses relating directly to insurance business.

7.2 Group statement of financial performance by market segment

2013 2012


r’000

underwriting resultr’000


R’000

underwriting resultR’000

market segment

Corporate 358,850 (28,670) 155,158 (44,430) Commercial 2,675,982 (267,796) 2,678,717 (149,509) Personal 1,049,793 (158,861) 932,659 (64,374)

Total 4,084,625 (455,327) 3,766,534 (258,313)



7. SeGmeNTaL NoTeS CONTINuED 7.3 Group statement of financial position by lines of business

property r’000

Transport r’000

motorr’000

engineering r’000

Guaranteer’000

Liabilityr’000

accident and health

r’000 unallocated

r’000 Totalr’000

as at 31 december 2013 assets Land, buildings and equipment – – – – – – – 56,217 56,217 Intangible assets – – – – – – – 55,191 55,191 Investment in associates – – – – – – – 5,637 5,637 Deferred taxation asset – – – – – – – 102,463 102,463 Available-for-sale – – – – – – – 1,885,858 1,885,858 Fair value through income – – – – – – – 477,558 477,558 Loans and receivables 243,748 25,139 483,552 64,067 (19,709) 16,748 18,792 66,161 898,498 Prepayment to defined-contribution fund – – – – – – – 127,694 127,694 Deferred acquisition costs 30,200 6,407 22,395 18,302 1,185 5,957 1,150 – 85,596 Reinsurance assets 448,196 57,149 29,219 43,105 (20,045) 90,845 9,518 – 657,987 Income tax asset – – – – – – – 11,610 11,610 Cash and cash equivalents – – – – – – – 693,279 693,279

Total segment assets 722,144 88,695 535,166 125,474 (38,569) 113,550 29,460 3,481,668 5,057,588

Liabilities Employee benefit obligation – – – – – – – 56,869 56,869 Liability under cell management – – – – – – – 68,292 68,292 Insurance liabilities 793,322 118,131 668,335 256,636 6,767 199,159 54,523 – 2,096,873 Deferred reinsurance commission 37,877 (4,982) (244) (12,395) 370 7,473 (3,140) – 24,959 Income tax liability – – – – – – – 1,874 1,874 Trade and other payables 188,702 19,462 346,841 49,599 (14,941) 12,966 14,549 281,468 898,646 Provisions – – – – – – – 45,823 45,823

Total segment liabilities 1,019,901 132,611 1,014,932 293,840 (7,804) 219,598 65,932 454,326 3,193,336



7. SeGmeNTaL NoTeS CONTINuED 7.3 Group statement of financial position by lines of business

property r’000

Transport r’000

motorr’000

engineering r’000

Guaranteer’000

Liabilityr’000

accident and health

r’000 unallocated


as at 31 december 2013 assets Land, buildings and equipment – – – – – – – 56,217 56,217 Intangible assets – – – – – – – 55,191 55,191 Investment in associates – – – – – – – 5,637 5,637 Deferred taxation asset – – – – – – – 102,463 102,463 Available-for-sale – – – – – – – 1,885,858 1,885,858 Fair value through income – – – – – – – 477,558 477,558 Loans and receivables 243,748 25,139 483,552 64,067 (19,709) 16,748 18,792 66,161 898,498 Prepayment to defined-contribution fund – – – – – – – 127,694 127,694 Deferred acquisition costs 30,200 6,407 22,395 18,302 1,185 5,957 1,150 – 85,596 Reinsurance assets 448,196 57,149 29,219 43,105 (20,045) 90,845 9,518 – 657,987 Income tax asset – – – – – – – 11,610 11,610 Cash and cash equivalents – – – – – – – 693,279 693,279


Liabilities Employee benefit obligation – – – – – – – 56,869 56,869 Liability under cell management – – – – – – – 68,292 68,292 Insurance liabilities 793,322 118,131 668,335 256,636 6,767 199,159 54,523 – 2,096,873 Deferred reinsurance commission 37,877 (4,982) (244) (12,395) 370 7,473 (3,140) – 24,959 Income tax liability – – – – – – – 1,874 1,874 Trade and other payables 188,702 19,462 346,841 49,599 (14,941) 12,966 14,549 281,468 898,646 Provisions – – – – – – – 45,823 45,823

Total segment liabilities 1,019,901 132,611 1,014,932 293,840 (7,804) 219,598 65,932 454,326 3,193,336



7. SeGmeNTaL NoTeS CONTINuED 7.3 Group statement of financial position by lines of business continued

property r’000

Transport r’000

motorr’000

engineering r’000

Guaranteer’000

Liabilityr’000

accident and health

r’000 unallocated


as at 31 december 2012 assets Land, buildings and equipment – – – – – – – 73,049 73,049 Intangible assets – – – – – – – 50,433 50,433 Investment in associates – – – – – – – 5,036 5,036 Available-for-sale – – – – – – – 1,808,875 1,808,875 Fair value through income – – – – – – – 454,881 454,881 Loans and receivables 236,001 23,767 485,254 68,300 10 19,213 18,172 46,527 897,244 Prepayment to defined-contribution fund – – – – – – – 141,065 141,065 Deferred acquisition costs 37,208 5,777 27,846 19,290 2 4,299 886 – 95,308 Reinsurance assets 647,731 44,711 41,229 111,645 (2,857) 48,339 17,764 – 908,562 Income tax asset – – – – – – – 5,284 5,284 Cash and cash equivalents – – – – – – – 611,945 611,945


Liabilities Deferred taxation liability – – – – – – – 8,094 8,094 Employee benefit obligation – – – – – – – 60,224 60,224 Liability under cell management – – – – – – – 109,292 109,292 Insurance liabilities 940,668 85,347 619,847 303,763 22,022 178,209 56,347 – 2,206,203 Deferred reinsurance commission 35,731 (8,837) (182) (12,158) (35) 5,010 (3,183) – 16,346 Trade and other payables 117,247 11,808 221,282 33,932 5 9,545 9,028 217,954 620,801 Provisions – – – – – – – 10,989 10,989

Total segment liabilities 1,093,646 88,318 840,947 325,537 21,992 192,764 62,192 406,553 3,031,949

2013 2012

assets r’000

Liabilitiesr’000

AssetsR’000

LiabilitiesR’000

market segmentCorporate 141,834 246,510 113,952 145,704 Commercial 1,040,107 1,792,871 1,291,106 1,839,297 Personal 399,815 703,956 449,529 640,395 unallocated 3,475,832 449,999 3,197,095 406,553

Total 5,057,588 3,193,336 5,051,682 3,031,949




8. FiNaNCiaL iNSTrumeNTS8.1 Fair value hierarchy The fair value hierarchy reflects how the fair value investments were determined.

The different levels have been defined as follows: • Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(Level1). • InputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly

(that is, as prices) or indirectly (that is, derived from prices) (Level 2). • Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs)

(Level 3).

Fair value measurements classified as Level 1 comprise equity securities listed on actively traded registered stock exchanges. The majority of listed equities (93% of fair value) are listed on the Johannesburg Stock Exchange, while the remainderislistedontheMauritiusStockExchange.Thesearevaluedusingthequotedmarketpriceatyear-end.

At December 2013, investments classified as Level 1 in the Group comprised approximately 24% (2012: 24%) of financial assets measured at fair value. Company Level 1 comprises approximately 27% (2012: 26%). Level 1 investments are fair valued on a recurring basis.

Fair value measurements classified as Level 2 comprise government securities and bonds, certain corporate debt securities (such as fixed maturities), unlisted preference shares and short-term debt instruments. As market quotes are readily available or accessible for the majority of the instruments, the fair value of these instruments were determined by obtaining quoted market prices or executable dealer quotes for identical or similar instruments in inactive markets and utilising relevant data generated by market transactions involving comparable instruments.

Where quoted market prices are not available, other inputs that are observable or can be corroborated by observable market data are used to calculate the fair value. These are often based on model pricing techniques that effectively discount prospective cash flows to present value using appropriate sector-adjusted credit spreads commensurate with the security duration, also taking into consideration issuer-specific credit quality and liquidity. Observable inputs generally used to measure the fair value of securities classified as Level 2 include interest rates, yield curves, benchmark securities, bids, offers and reference data. These valuation methodologies have been agreed upon by the Board of Directors.

The fair value of properties classified as Level 2 was determined based on formal valuations performed by property surveyors. Observable inputs generally used by the surveyors to measure the fair value of properties classified as Level 2 include offers for similar properties.

At December 2013, investments classified as Level 2 in the Group comprise approximately 74% (2012: 73%) of financial assets measured at fair value on a recurring basis. Company Level 2 comprises approximately 72% (2012: 71%).

Fair value measurements classified as Level 3 comprise unlisted equity shares. Determinations to classify fair value measures in Level 3 of the valuation hierarchy are generally based on the significant unobservable factors to the overall fair value measurements based on the understanding of the market, including use of internally generated assumptions about input a market participant would use to price the security.

The Company used the following techniques to determine the fair value measurements categorised in Level 3:

Equity securities The Company’s equity investment in a foreign unlisted insurance company consists of a 9.0% holding of the entity’s

common shares. During the year under review the fair value of the common shares held was derived using the dividend yield valuation approach. In applying this approach the Company reviewed the historical dividend payments, expected future dividend flows and the general future profitability of the Company and industry. The Company also adjusted the indicated fair value (risk-free rate) to give effect to the lack of liquidity compared to the publicly traded peer group, as well as adjusting the fair value to give effect to political and business risk associated with the foreign exposure. The valuation as determined was further compared to the net asset value of the Company to determine the reasonability thereof.



8. FiNaNCiaL iNSTrumeNTS CONTINuEDThe significant unobservable inputs used in the fair value measurement of equity securities are as follows:

2013r’000

Next expected dividend from Company (undeclared at year-end) 5,500

Expected dividend growth 0.0%Required risk-free rate 8.0%

Valuation at required risk-free rate (valuation multiple) 68,750

Risk adjustments for liquidity, political risk and business risk 8.0%

Risk-adjusted valuation multiple 16.0%

directors’ valuation based on risk-adjusted valuation multiple 35,000

The net asset value of the investment was calculated as R39 million

If the valuation multiple would be changed to 17% or 15%, the fair value of the investment and the comprehensive income would decrease or increase by R550,000 respectively.

In addition to the above, additional unlisted investments to the value of R2.1 million were carried at cost as their fair value was either determined to approximate cost, based on the net asset value of the entity, or due to insufficient information available to calculate the fair value.

At December 2013, investments classified as Level 3 in the Group and Company comprise 2% (2012: 3%) of financial assets. The valuation of all Level 3 instruments is performed on a recurring basis and reviewed by the Asset/Liability ManagementInvestmentCommittee.

The following table presents the Company’s and Group’s assets and liabilities at 31 December 2013:

Total financial

assetsr’000

Level 1 r’000

Level 2r’000

Level 3r’000

Group 2013HierarchyLand and buildings 3,538 – 3,538 – Financial instruments– Available-for-saleDebt 1,177,258 – 1,177,258 – Equity 708,600 578,153 93,300 37,147 – Fair value through income 477,558 – 477,558 –

Total 2,366,954 578,153 1,751,654 37,147

opening balance

r’000

Gain/(loss) comp income

r’000

Sales & settlements

r’000

Closing balance

r’000

Level 3 reconciliation – assetsFinancial instruments– Available-for-saleEquity 17,208 34,865 (14,926) 37,147 – Fair value through income – – – –

Total classified at Level 3 17,208 34,865 (14,926) 37,147



8. FiNaNCiaL iNSTrumeNTS CONTINuED

Total financial

assetsR’000

Level 1 R’000

Level 2R’000

Level 3R’000

Group 2012HierarchyLand and buildings 3,418 – 3,418 – Financial instruments– Available-for-saleDebt 1,146,895 – 1,146,895 – Equity 661,980 552,072 92,700 17,208 – Fair value through income 454,881 – 454,881 –

Total 2,267,174 552,072 1,697,894 17,208

Opening balance

R’000

Purchaseand issues

R’000 Transfers in

R’000

Closing balance

R’000

Level 3 reconciliation – assetsFinancial instruments– Available-for-saleEquity – 2,000 15,208 17,208 – Fair value through income – – – –

Total classified at Level 3 – 2,000 15,208 17,208

Total financial

assetsr’000

Level 1 r’000

Level 2r’000

Level 3r’000

Company 2013HierarchyFinancial instruments– Available-for-saleDebt 997,062 – 997,062 – Equity 705,300 578,153 90,000 37,147 – Fair value through income 477,558 – 477,558 –

Total 2,179,920 578,153 1,564,620 37,147

opening balance

r’000

Gain/(loss) comp income

r’000

Sales and settlements

r’000

Closing balance

r’000

Level 3 reconciliation – assetsFinancial instruments– Available-for-saleEquity 17,016 34,865 (14,734) 37,147 – Fair value through income – – – –

Total classified at Level 3 17,016 34,865 (14,734) 37,147



8. FiNaNCiaL iNSTrumeNTS CONTINuED

Total financial

assetsR’000

Level 1 R’000

Level 2R’000

Level 3R’000

Company 2012 Hierarchy Financial instruments– Available-for-saleDebt 977,145 – 977,145 – Equity 659,088 552,072 90,000 17,016 – Fair value through income 454,881 – 454,881 –

Total 2,091,114 552,072 1,522,026 17,016

Opening balance

R’000

Purchase and issues

R’000 Transfers in

R’000

Closing balance

R’000

Level 3 reconciliation – assetsFinancial instruments– Available-for-saleEquity – 2,000 15,016 17,016 – Fair value through income – – – –

Total classified at Level 3 – 2,000 15,016 17,016

9. iNSuraNCe LiaBiLiTieS aNd reiNSuraNCe aSSeTSGroup CompaNy

2013r’000

2012R’000

2013r’000

2012R’000

Technical provisionsLiabilities arising from insurance contractsOutstanding claims 858,772 1,177,298 818,371 1,110,657Claims incurred but not reported 492,973 355,918 462,148 314,646

Outstanding claims, including claims incurred but not reported 1,351,745 1,533,216 1,280,519 1,425,303

unearned premiums 745,128 672,987 628,991 550,753

Liabilities arising from insurance contracts 2,096,873 2,206,203 1,909,510 1,976,056

Technical assetsAssets arising from reinsurance contractsOutstanding claims 358,026 674,003 344,831 641,034Claims incurred but not reported 87,957 89,304 76,341 71,846

Outstanding claims, including claims incurred but not reported 445,983 763,307 421,172 712,880

unearned premiums 212,004 145,255 184,928 110,652

Assets arising from insurance contracts 657,987 908,562 606,100 823,532

Comprises:Current 1,438,886 1,297,641 1,303,410 1,152,524 Non-current – – – –

Balance at the end of the year 1,438,886 1,297,641 1,303,410 1,152,524



9. iNSuraNCe LiaBiLiTieS aNd reiNSuraNCe aSSeTS CONTINuED2013 2012

Gross r’000

reinsurance r’000

Netr’000

GrossR’000

ReinsuranceR’000

NetR’000

Outstanding claims, including claims incurred but not reportedGroupBeginning of the year 1,533,216 (763,307) 769,909 1,139,419 (429,459) 709,960 Change in provision for outstanding claims (186,266) 320,015 133,749 393,844 (333,681) 60,163

Net insurance claims expensed during the year 2,941,166 (387,849) 2,553,317 2,927,811 (725,156) 2,202,655 Claims paid during the year (3,127,432) 707,864 (2,419,568) (2,533,967) 391,475 (2,142,492)

Exchange rate movement 4,795 (2,691) 2,104 (47) (167) (214)

Balance at the end of the year 1,351,745 (445,983) 905,762 1,533,216 (763,307) 769,909

CompanyBeginning of the year 1,425,303 (712,880) 712,423 1,031,181 (378,608) 652,573 Change in provision for outstanding claims (144,784) 291,708 146,924 394,122 (334,272) 59,850

Net insurance claims expensed during the year 2,827,470 (383,580) 2,443,890 2,759,376 (683,735) 2,075,641 Claims paid during the year (2,972,254) 675,288 (2,296,966) (2,365,254) 349,463 (2,015,791)

Balance at the end of the year 1,280,519 (421,172) 859,347 1,425,303 (712,880) 712,423

Unearned premiumGroupBeginning of the year 672,987 (145,255) 527,732 680,978 (156,451) 524,527 Change in provision for unearned premium 62,848 (64,611) (1,763) (7,401) 11,186 3,785

Premiums written during the year 4,084,625 (856,203) 3,228,422 3,766,534 (828,304) 2,938,230 Premiums earned during the year (4,021,777) 791,592 (3,230,185) (3,773,935) 839,490 (2,934,445)

Exchange rate movement 9,293 (2,138) 7,155 (590) 10 (580)

Balance at the end of the year 745,128 (212,004) 533,124 672,987 (145,255) 527,732

CompanyBeginning of the year 550,753 (110,652) 440,101 569,079 (131,673) 437,406 Change in provision for unearned premium 78,238 (74,276) 3,962 (18,326) 21,021 2,695

Premiums written during the year 3,805,906 (747,063) 3,058,843 3,403,040 (647,528) 2,755,512 Premiums earned during the year (3,727,668) 672,787 (3,054,881) (3,421,366) 668,549 (2,752,817)

Balance at the end of the year 628,991 (184,928) 444,063 550,753 (110,652) 440,101



10. iNveSTmeNT iNCome 2013 2012

Quoted r‘000

unquoted r‘000

Total r‘000

Quoted R‘000

unquoted R‘000

Total R‘000

Group Financial assets at fair value through income Debt instruments – interest received – 25,580 25,580 – 27,438 27,438 available-for-sale financial assets Equity instruments – dividends received 18,354 20,037 38,391 23,090 22,414 45,504 Fixed-interest investments – interest received – 65,755 65,755 – 60,179 60,179 reinsurance liability under cell management – interest received – 4,930 4,930 – – – Loans and receivables – interest received – 60,090 60,090 – 55,630 55,630 Cash and cash equivalents – interest received – 22,936 22,936 – 35,214 35,214

Total for the year 18,354 199,328 217,682 23,090 200,875 223,965

Company Financial assets at fair value through income Debt instruments – interest received – 25,580 25,580 – 27,438 27,438 available-for-sale financial assets Equity instruments – dividends received 18,354 19,886 38,240 23,090 22,205 45,295 Fixed interest investments – interest received – 58,348 58,348 – 54,118 54,118 Loans and receivables – interest received – 56,721 56,721 – 52,656 52,656 Cash and cash equivalents – interest received – 18,520 18,520 – 30,150 30,150 dividends from subsidiaries – – – – 3,797 3,797

Total for the year 18,354 179,055 197,409 23,090 190,364 213,454



11. iNCome Tax expeNSeGroup CompaNy

2013r’000

2012R’000

2013r’000

2012R’000

South african and foreign taxationCurrent taxation– Current year normal tax (12,294) (5,344) – – – Prior year normal tax 2,564 (4,351) (110) 3,949 Deferred taxation – Current year normal tax 99,542 33,405 99,542 33,405 Withholding tax (1,755) – (1,755) –

Total for the year 88,057 23,710 97,677 37,354

Tax reconciliation Loss before tax 252,181 21,634 287,547 26,697 South African normal taxation at statutory tax rate of 28%

70,611 6,058 80,513 7,475

Adjusted for tax on:– Permanent differences (7,066) (8,021) (5,270) (649)– Exempt income 38,498 41,699 38,442 41,699 – Capital gains tax (17,553) (16,018) (17,553) (16,018)– Disallowed expenses (2,407) (6,803) (2,407) (6,803)Prior year adjustments 3,952 5,424 3,952 11,650 Foreign subsidiary tax rate difference 2,022 1,371 – –

Total for the year 88,057 23,710 97,677 37,354

12. earNiNGS per ShareGroup

2013r’000

2012R’000

Basic and diluted earnings per share:(Loss)/profit for the year – attributable to owner of the parent (164,124) 2,076

earnings per share (cents) (1,348) 17

headline (loss)/earnings reconciliation from continuing operations:(Loss)/profit for the year – attributable to owners of the parents (164,124) 2,076 Adjusted for:Restructuring provision 38,470 – Loss on disposal of land, buildings and equipment – 673Gain on disposal of land, buildings and equipment (611) (9)Gain on disposal of available-for-sale financial assets (105,609) (81,896)Impairment of available-for-sale financial assets 4,989 6,240 Impairment of associate 5,124 –Gain on sale of business – (1,684)Gain on sale of associate – (1,602)Tax effect 7,169 14,612 Headline loss (214,592) (61,590)

Basic headline loss per share (cents) (1,762) (506)

The calculation of earnings per share and headline earnings per share are based on 12,179,500 (2012: 12,179,500) fully paid shares in issue.

There were no potentially dilutive instruments in issue at current and comparative year-ends. There were no ordinary share transactions or potential ordinary share transactions occurring after the reporting date.



13. divideNdS per Share2013cents

2012cents

dividends paid per shareFinal cash dividend 200 200 Interim cash dividend 100 100

dividends paid per share 300 300


NoN-exeCuTive direCTorSDDMokgatle(Independent Non-executive Chairman)JPMDeiss(Non-executive)PManley (Non-executive) – appointed 14 February 2014SMered(Non-executive) – resigned 1 January 2014MNMbekeni(Independent Non-executive)SGMorris(Independent Non-executive)JMVice(Independent Non-executive) – appointed 23 January 2013

exeCuTive direCTorSJE O’Neill (Chief Executive Officer)P Bezuidenhout (Chief Financial Officer)

SpoNSorRANDMERCHANTBANK(AdivisionofFirstRandBankLimited)1MerchantPlace,CnrFredmanDriveandRivoniaRoad,Sandton,2196

TraNSFer SeCreTarieSComputershare Investor Services Proprietary Limited70MarshallStreet,Johannesburg,2001

audiTorSPricewaterhouseCoopers Inc.Chartered Accountants (SA)2 Elgin Road, Sunninghill, 2157

Group CompaNy SeCreTaryT Heydenrych

ZuriCh head oFFiCe aNd reGiSTered addreSS15MarshallStreet,Ferreirasdorp,Johannesburg,2001POBox61489,Marshalltown,2107

registration number: 1965/006764/06

authorised Financial Services provider number: 17703

Website: www.zurich.co.za

ADmInIstRAtIon

GREYMATTER & FINCH # 7413

www.zurich.co.za

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