| 2010 | 2009 | 2008 | ||
| Notes | $'000 | $'000 | $'000 | |
| Premium revenue | 5 | 901,370 | 829,486 | 758,238 |
| Claims expense | (635,929) | (599,297) | (553,910) | |
| HBRTF/RETF Levy | (109,898) | (86,978) | (73,128) | |
| State levies | (22,045) | (21,177) | (19,922) | |
| Claims handling expenses | 6 | (14,407) | (18,384) | (17,683) |
| Net claims incurred | 119,091 | 103,650 | 93,595 | |
| Acquisition costs | 6 | (32,512) | (26,642) | (25,625) |
| Other underwriting expenses - ongoing | 6 | (39,514) | (36,847) | (34,916) |
| Other underwriting expenses - demutualisation and listing costs | 6 | 0 | 0 | (10,858) |
| Underwriting expenses | (72,026) | (63,489) | (71,399) | |
| Underwriting result | 47,065 | 40,161 | 22,196 | |
| Investment income | 5 | 45,794 | (1,167) | 8,783 |
| Other income | 5 | 1,291 | 1,183 | 1,463 |
| Investment expenses | 6 | (1,344) | (651) | (1,325) |
| Other expenses - ongoing | 6 | (5,840) | (7,931) | (3,548) |
| Other expenses - donation to nib foundation | 6 | 0 | 0 | (25,000) |
| Other expenses - demutualisation and listing costs | 0 | 0 | (7,640) | |
| Profit/(loss) before income tax | 86,966 | 31,595 | (5,071) | |
| Income tax expense/(benefit) | 7 | (25,441) | (7,809) | 5,421 |
| Profit/(loss) from continuing operations | 61,525 | 23,786 | 350 | |
| Profit/(Loss) from discontinued operations | 0 | 54 | ||
| Revaluation of land and buildings | (3,156) | |||
| Available for sale financial assets | (88) | |||
| Income tax related to components of other comprehensive income | 26 | |||
| Profit/(Loss) for the year attributable to equity holders | 61,525 | 20,568 | 404 |
This table sets out the Profit and Loss statements for the years 2008 to 2010 as they appear in the financial statements. I've added it here because I re-read my last two posts and I couldn't understand them. I figured if I, being the one who wrote them, couldn't understand them then what hope does anyone else have. So here is a summary of the two posts with tables, which hopefully will make things much easier to understand.
So, we use the historical P&L to work out the "indicated earning power" or in other words, how much money we think the company can make.
Step One is to remove the non-recurrent items, that means anything that is a one off. The presence of zeros is a good indicator of this, ie the items "Other underwriting expenses - demutualisation and listing costs", "Other expenses - demutualisation and listing costs" and "Other expenses - donation to nib foundation" only appear in 2008, so we can take them out. There are also a few items listed below the line "Profit/(loss) from continuing operations" which are once-offs, so we can also take them out. If we do that, we get to here:
| 2010 | 2009 | 2008 | ||
| Notes | $'000 | $'000 | $'000 | |
| Premium revenue | 5 | 901,370 | 829,486 | 758,238 |
| Claims expense | -635,929 | -599,297 | -553,910 | |
| HBRTF/RETF Levy | -109,898 | -86,978 | -73,128 | |
| State levies | -22,045 | -21,177 | -19,922 | |
| Claims handling expenses | 6 | -14,407 | -18,384 | -17,683 |
| Net claims incurred | 119,091 | 103,650 | 93,595 | |
| Acquisition costs | 6 | -32,512 | -26,642 | -25,625 |
| Other underwriting expenses - ongoing | 6 | -39,514 | -36,847 | -34,916 |
| Underwriting expenses | -72,026 | -63,489 | -60,541 | |
| Underwriting result | 47,065 | 40,161 | 33,054 | |
| Investment income | 5 | 45,794 | -1,167 | 8,783 |
| Other income | 5 | 1,291 | 1,183 | 1,463 |
| Investment expenses | 6 | -1,344 | -651 | -1,325 |
| Other expenses - ongoing | 6 | -5,840 | -7,931 | -3,548 |
| Profit/(loss) before income tax | 86,966 | 31,595 | 38,427 | |
| Income tax expense/(benefit) | 7 | -25,441 | -7,809 | 5,421 |
| Profit/(loss) from continuing operations | 61,525 | 23,786 | 43,848 |
So can I identify a figure for indicated earnings from this? I might be able to conclude that the underwriting result will increase next year, but the investment result is anyone's guess.
So was there any point in doing this exercise? Yes, because:
1. I now have a better understanding of the risks the business is subjected to - low on the insurance side, high on the investment side.
2. I also have to question the capability of management when they can spend a entire report only talking about one part of the business (insurance) and completing ignorning the other (investment).
2. I have a base for comparision with other companies, which may prove more or less volatile in their earnings.
