Santam Limited · JSE:SNT
Santam — FY2021 Earnings Presentation
65 slides from Santam's earnings presentation, 2022
Slide 1: 2021 Analyst Presentation for the Year Ended 31 December 2021
2021 ANALYST PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 PRESENTED BY: LIZÉ LAMBRECHTS AND ASHER GREVLER
Slide 2: Content
CONTENT 1. The Santam business portfolio 2. Market context 3. Financial results 4. Capital management 5. Group strategy and priorities 6. ESG matters
Slide 3: The Santam Business Portfolio
THE SANTAM BUSINESS PORTFOLIO Santam’s Strategic Investment Partnerships inclusive of SAN Conventional Alternative Risk Transfer (ART) JV (Saham) • Santam Commercial • Centriq Insurance Santam’s share of the and Personal • Santam Structured insurance results of the • Santam Specialist Insurance SEM
Slide 4: Market Context
MARKET CONTEXT
Slide 5: Insurance Market Outlook
INSURANCE MARKET OUTLOOK • All markets – Global economy is expected to continue with recovery albeit at a slower pace – Inflation is expected to surge as supply chain disruptions and high energy prices persist – Current developments in Eastern Europe add uncertainty to the economic outlook – Insuran
Slide 6: Insurance Market Outlook: South Africa
INSURANCE MARKET OUTLOOK • South Africa – Economic growth expected to be above pre-COVID-19 levels – The short-term outlook for the insurance industry remains positive – Competition is and will remain fierce, particularly from non-traditional players and in niche segments – Digital remains a growth
Slide 7: Contingent Business Interruption Cover
CONTINGENT BUSINESS INTERRUPTION COVER CURRENT STATUS • Legal clarity obtained on length of indemnity period in October 2021 • Santam reviewed its provisions for CBI claims at 31 December 2021 and the net CBI provision was reduced by R450 million mainly due to – claims experience to date being lower
Slide 8: Key Facts
SANTAM DECEMBER 2021 KEY FACTS • Conventional insurance gross written premium growth of 5% • Underwriting margin for conventional insurance business of 8.0% (2020: 2.5%) • Revision of target net underwriting margin to 5% to 10% • Alternative Risk Transfer operating result of R276 million (2020: R165
Slide 9: Financial Results
Santam FINANCIAL RESULTS
Slide 10: Reporting Environment
REPORTING ENVIRONMENT REPORTED RESULTS AFFECTED BY: Insurance events • A more normalised claims environment and traffic patterns • Underwriting account impacted by several large fire claims, civil unrest in July and excessive rains across large parts of South Africa during the fourth quarter • Relea
Slide 11: Exchange Rate Volatility: Closing Rates
EXCHANGE RATE VOLATILITY CLOSING RATES % change % change Currency Dec 2021 Jun 2021 Dec 2020 Dec 2020 – Dec 2020 – Jun 2021 Dec 2021 United States Dollar 15.96 14.28 14.69 (2.8) 8.6 Moroccan Dirham 1.72 1.60 1.65 (2.7) 4.2 Indian Rupee 0.21 0.19 0.20 (4.1) 5.0
Slide 12: Exchange Rate Volatility: Average Rates
EXCHANGE RATE VOLATILITY AVERAGE RATES Currency Dec 2021 Jun 2021 Dec 2020 United States Dollar 14.76 14.52 16.34 Moroccan Dirham 1.64 1.63 1.73 Indian Rupee 0.20 0.20 0.22
Slide 13: Conventional Insurance
= santam CONVENTIONAL INSURANCE
Slide 14: Conventional Insurance: Net Insurance Result
CONVENTIONAL INSURANCE NET INSURANCE RESULT 2021 2020 2021/ 5 Yr 10 Yr % of NEP % of NEP R'm R'm 2020 ave % ave % Gross written premium 32 745 31 098 5% 6.9 7.8 Net earned premium 25 858 100.0 24 320 100.0 6% 6.1 6.2 Net claims incurred 16 023 62.0 16 593 68.2 (3%) 63.7 64.5 Net acquisition cost 7 7
Slide 15: Net Insurance Result (H1 vs H2)
CONVENTIONAL INSURANCE NET INSURANCE RESULT (H1 vs H2 – EXCLUDING IMPACT OF CBI RELEASE) H1 2021 H2 2021 % of NEP % of NEP R'm R'm Gross written premium 15 498 17 247 Net earned premium 12 791 100.0 13 067 100.0 Net claims incurred 8 109 63.4 8 364 64.0 Net acquisition cost 3 829 29.9 3 942 30.2 Net
Slide 16: Gross Written Premium vs CPI + GDP Growth
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM VS CPI + GDP GROWTH 13 Growth in GWP GDP growth + CPI inflation 10.0 9.9 10 9.31 7.2 7.3 6.5 6.7 6.7 7 5.4 5.3 5.6 4.3 4.6 4 Percentage 1 ( 2) (3.7) ( 5) 2016 2017 2018 2019 2020 2021 2020/2021 1Year-on-year real GDP growth for 2021 of 4.8% per SARB 2The
Slide 17: Net Underwriting Result (H1 vs H2)
CONVENTIONAL INSURANCE NET UNDERWRITING RESULT (H1 VS H2) 2 400 2 064 2 000 1 600 R million 1 211 1 200 853 800 615 505 400 110 - H1 H2 Full Year 2021 2020
Slide 18: Net Insurance Result as % of NEP
CONVENTIONAL INSURANCE NET INSURANCE RESULT As % of net earned premium 14 12.5 12 11.6 2.6 Percentage 10.1 2.4 9.5 10 9.4 8.8 2.4 1.5 8 2.9 2.8 6 9.9 4.6 9.2 4 7.7 8.0 6.5 2.1 6.0 2 2.5 - 2015 2016 2017 2018 2019 2020 2021 Net underwriting result Investment return on insurance funds
Slide 19: Gross Written Premium per Insurance Class
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM Per insurance class (R million) 38 2020 2021 Miscellaneous 39% 53 117 Guarantee 9% 127 1 262 Crop (10%) 1 130 641 Accident and Health (11%) 572 799 24% Transportation 994 1 362 14% Liability 1 550 1 651 5% Engineering 1 730 11 798 3% Property 12 177 13 43
Slide 20: Gross Written Premium (H1 vs H2)
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM (H1 VS H2) Per insurance class (R million) 20 Miscellaneous 33 H1 2021 H2 2021 59 Guarantee 68 93 Crop 1 037 284 Accident and Health 288 584 Transportation 410 675 Liability 875 923 Engineering 807 5 731 Property 6 446 7 129 Motor 7 283 - 1 500 3 000 4 50
Slide 21: Net Underwriting Surplus per Insurance Class
CONVENTIONAL INSURANCE NET UNDERWRITING SURPLUS Per insurance class (R million) (10) 2020 2021 Miscellaneous 14 (14) Guarantee (5) 147 Crop (92) 94 Accident and Health 60 126 Transportation 98 149 Liability 252 Property (2 410) 236 433 Engineering 313 Motor 2 100 1 188 (3 000) (1 800) ( 600) 600 1 8
Slide 22: Net Underwriting Surplus (H1 vs H2)
CONVENTIONAL INSURANCE NET UNDERWRITING SURPLUS (H1 VS H2) Per insurance class (R million) Miscellaneous (4) 18 H1 2021 H2 2021 Guarantee 25 (30) Crop 75 (167) Accident and Health 48 12 Transportation 24 74 Liability 83 169 Property (109) 345 Engineering 91 222 Motor 620 568 ( 200) - 200 400 600 800
Slide 23: Gross Written Premium: Personal and Commercial
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM Segmental Analysis – Personal and Commercial 5.4% 19 206 20 000 18 215 16 000 5.1% R million 13 539 12 883 12 000 8 000 4 000 - Personal Commercial 2021 2020
Slide 24: Net Underwriting Result: Personal and Commercial
CONVENTIONAL INSURANCE NET UNDERWRITING RESULT Segmental Analysis – Personal and Commercial (47.6%) 2 000 1 791 195.7% 1 500 1 126 938 1 000 R million 500 - ( 500) (1 000) (1 176) (1 500) Personal Commercial 2021 2020
Slide 25: Gross Written Premium from Outside SA
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM FROM OUTSIDE SA 4.8% 3 000 2 511 2 395 2 400 10.6% R million 1 800 1.1% 1 325 1 198 1 200 982 971 16.5% 600 466 400 - Namibia Rest of Africa SE Asia, India, Middle East Other 2021 2020
Slide 26: Geographic Diversification
GEOGRAPHIC DIVERSIFICATION CONVENTIONAL INSURANCE 1% 1% 8% 8% 7% 7% 84% 84% South Africa Rest of Africa Southeast Asia, India, Middle East Other
Slide 27: Net Acquisition Cost Ratio
CONVENTIONAL INSURANCE NET ACQUISITION COST RATIO As % of net earned premium 35 30.4 30.2 30.0 30 28.5 28.6 29.3 28.1 1.0 1.0 0.9 1.4 1.6 0.9 0.8 25 Percentage 20 17.0 16.7 15.2 15.0 15.8 15.4 15.2 15 10 11.8 12.3 12.1 12.4 12.5 12.7 13.4 5 - 2015 2016 2017 2018 2019 2020 2021 Commission Management
Slide 28: Reinsurance as % of Gross Earned Premium
CONVENTIONAL INSURANCE REINSURANCE AS % OF GROSS EARNED PREMIUM 25 20.6 20.7 20 19.2 18.2 18.6 18.5 18.6 Percentage 15 10 5 - 2015 2016 2017 2018 2019 2020 2021
Slide 29: Size of Net Insurance Funds
CONVENTIONAL INSURANCE SIZE OF NET INSURANCE FUNDS 12 000 9 910 10 000 8 606 8 220 7 879 8 000 7 489 7 279 6 978 R million 6 000 4 000 2 000 - 2015 2016 2017 2018 2019 2020 2021
Slide 30: Assets Backing Net Insurance Funds
CONVENTIONAL INSURANCE ASSETS BACKING NET INSURANCE FUNDS Currency mix 12 000 9 910 374 8 606 371 R million 1 780 8 000 2 155 4 000 7 756 6 080 - 2021 2020 ZAR USD Other currencies (mainly Namibian Dollar)
Slide 31: MiWay
CONVENTIONAL INSURANCE MIWAY Dec Dec H1 H2 Change 2021 2020 2021 2021 Gross written premium (R million) 3 203 2 949 8.6% 1 585 1 618 Gross underwriting result, net of CAT recoveries (R 285 486 (41.3%) 159 126 million) Gross claims ratio, net of CAT recoveries 60.9% 50.6% 58.2% 63.5% Gross acquisitio
Slide 32: Alternative Risk Transfer
ALTERNATIVE RISK TRANSFER
Slide 33: Alternative Risk Transfer Insurance (ART)
ALTERNATIVE RISK TRANSFER INSURANCE (ART) • Includes the results from: - Centriq Insurance - Santam Structured Insurance • Types of business: - Risk finance - Underwriting managers - Affinity business - Structured insurance
Slide 34: ART Insurance: Centriq
ALTERNATIVE RISK TRANSFER INSURANCE CENTRIQ 2021 2020 2021/2020 R’m R’m Gross written premium 7 950 5 954 Income from clients 320 263 22% Participation in underwriting results 57 24 >100% Administration expenses (151) (152) (1%) Operating result 226 135 67%
Slide 35: ART Insurance: Santam Structured Insurance
ALTERNATIVE RISK TRANSFER INSURANCE SANTAM STRUCTURED INSURANCE 2021 2020 2021/2020 R’m R’m Gross written premium 1 483 1 281 Income from clients 150 122 23% Participation in underwriting results 13 10 30% Administration expenses (113) (102) 11% Operating result after NCI 50 30 67%
Slide 36: ART Combined Results Net of Non-Controlling Interest
ALTERNATIVE RISK TRANSFER INSURANCE COMBINED RESULTS NET OF NON-CONTROLLING INTEREST 2021 2020 5 Yr Ave 10 Yr Ave 2021/2020 R’m R’m % % Gross written premium 9 385 7 175 32% 17% Income from clients 470 385 22% Participation in underwriting results 70 34 >100% Administration expenses (264) (254) 4% O
Slide 37: SEM Partner Businesses
Santam SEM PARTNER BUSINESSES
Slide 38: SEM Partner Businesses: SAN JV (Saham)
SEM PARTNER BUSINESSES SAN JV (Saham) • Operates in 26 countries in Africa and the Middle East • Santam’s effective interest of 10% held through SAN JV Main Saham territories • Morocco • Ivory Coast • Mauritius • Angola Main SEM territories • SGI (India) – 35% participation • P&O (Malaysia) – 31.5%
Slide 39: Santam Effective Holding
SEM PARTNER BUSINESSES SANTAM EFFECTIVE HOLDING Domicile Dec 2021 Dec 2020 SAN JV (Saham) Morocco 10.0 10.0 Pacific and Orient Insurance Company Berhad Malaysia 15.4 15.4 Shriram General Insurance Company Ltd India 15.0 15.0 NICO Holdings general insurance subsidiaries Malawi and Zambia 5.6 5.6 Sanl
Slide 40: SEM General Insurance Participation Investments
SEM GENERAL INSURANCE PARTICIPATION INVESTMENTS ANALYSIS OF SANTAM’S SHARE OF NET INSURANCE RESULT BEFORE TAXATION AND NON- CONTROLLING INTEREST (EXCLUDING SAHAM) 2021 2020 % of NEP % of NEP 2021/2020 R'm R'm Gross written premium 1 026 1 183 (13%) Net earned premium 822 100.0 994 100.0 (17%) Net cl
Slide 41: SAN JV (Saham) Additional Information
SAN JV (SAHAM) ADDITIONAL INFORMATION ON SANTAM'S SHARE OF SAHAM'S GENERAL AND REINSURANCE BUSINESS Dec 2021 Dec 2020 % of NEP % of NEP 2021/2020 R'm R'm Gross written premium 1 820 1 785 2% Net earned premium 1 221 100.0 1 258 100.0 (3%) Net claims incurred 763 62.5 757 60.2 1% Net acquisition cost
Slide 42: Insurance Ratios December 2021
SEM PARTNER BUSINESSES INSURANCE RATIOS 31 DECEMBER 2021 SEM % of NEP Santam SAN JV participations Net earned premium 100.0 100.0 100.0 Net claims incurred 62.0 72.1 62.5 Net acquisition cost 30.0 33.3 31.9 Net underwriting margin 8.0 (5.4) 5.6 Investment return on insurance funds 1.5 24.4 12.8 Net
Slide 43: Analysis of SAN JV Insurance Funds
ANALYSIS OF INSURANCE FUNDS ANALYSIS OF SAN JV INSURANCE FUNDS 100 80 47 47 45 Percentage 60 40 41 41 41 20 12 12 14 - Dec 2021 Jun 2021 Dec 2020 Interest-bearing securities Investment properties Equities and similar securities
Slide 44: Reconciliation of SAN JV Carrying Value
SAHAM RECONCILIATION OF SAN JV CARRYING VALUE AS AT 31 DECEMBER 2021 R’m Carrying value at 1 January 2021 1 823 Equity accounted loss 8 After tax operating profit 43 Amortisation of other intangible assets (31) Other – consolidation adjustments (4) Statement of changes in equity 18 Foreign currency
Slide 45: Santam Group
SANTAM GROUP
Slide 46: Net Operating Income
SANTAM GROUP NET OPERATING INCOME R million 2021 2020 2021/2020 Conventional insurance 2 465 1 118 >100% Alternative risk transfer insurance (before NCI) 306 165 85% SEM partner businesses 377 381 (1%) Net operating income 3 148 1 664 89% SEM partner businesses (377) (381) Net operating income 2 771
Slide 47: Reconciliation to Headline Earnings
SANTAM GROUP RECONCILIATION TO HEADLINE EARNINGS 2021 20201 2021/2020 Net profit attributable to ordinary shareholders (R million) 2 745 327 >100% Per share (cents) 2 491 296 Loss on sale of associate 4 - Impairment of associates and joint ventures - 15 Share of associates' impairment of assets - 69
Slide 48: Growth Diversification
GROWTH DIVERSIFICATION INCLUDING SEM PARTNER BUSINESSES 2% 4% 4% 3% 30% 17% 31% 21% GWP GWP 2021 2020 43% 45% Personal Commercial ART SEM Saham
Slide 49: Group Consolidated Assets at December 2021
ASSET LIABILITY MATCHING GROUP CONSOLIDATED ASSETS AT 31 DECEMBER 2021 17 253 2 552 39 843 8 606 11 432 1 100 12 7 4 5 15 9 80 36 62 16 Percentage 60 15 73 62 40 64 47 20 38 15 19 - Insurance funds ART Sub debt SH funds Total Other assets SEM participation investments Investment in SAN JV Listed equ
Slide 50: Shareholder Funds: Asset Mix
SHAREHOLDER FUNDS ASSET MIX 100 7 9 15 16 80 16 19 Percentage 60 15 15 40 47 20 41 - 2021 2020 Other assets SEM participation investments Investment in SAN JV Listed equities Interest-bearing instruments and preference shares
Slide 51: Shareholder Funds: Currency Mix
SHAREHOLDER FUNDS CURRENCY MIX 100 6 7 12 14 80 16 19 Percentage 60 16 17 40 50 20 43 - 2021 2020 Other currencies (mainly Namibian Dollar and Malaysian Ringgit) Indian Rupee (investment in SEM) Moroccan Dirham (investment in SAN JV) US Dollar Rand
Slide 52: Investment Return on Shareholders Funds
INVESTMENT RETURN ON SHAREHOLDERS FUNDS 1 493 1 400 373 1 027 60 1 000 151 219 171 R million 600 798 862 200 (200) (113) 2021 2020 Interest and dividends Market value movements (including Derivatives) SEM fair value movements and dividends Forex gains and losses (incl. SEM)
Slide 53: Net Investment in SEM Target Shares
INVESTMENT RETURN ANALYSIS OF SANTAM’S SHARE OF NET INVESTMENT IN SEM TARGET SHARES Carrying Change in Carrying Change in value Additions exchange value Region valuation 2020 R’m rates 2021 R’m R’m R’m R’m Africa 109 1 6 18 134 Southeast Asia 136 - 6 (4) 138 India 1 293 - 88 38 1 419 Total 1 538 1 1
Slide 54: Capital Management
Santam CAPITAL MANAGEMENT
Slide 55: Return on Capital
RETURN ON CAPITAL TOTAL COMPREHENSIVE INCOME EXPRESSED AS % OF WEIGHTED AVERAGE SHAREHOLDERS’ FUNDS 40 36.1 33.5 30 28.5 14.4 8.9 21.9 22.2 9.9 Percentage 20 8.2 3.4 3.1 24.6 8.0 10 21.7 19.1 17.0 18.5 18.6 8.8 - (8.8) (0.8) ( 10) 2015 2016 2017 2018 2019 2020 2021 Insurance ROC Investment ROC
Slide 56: Capital Management
CAPITAL MANAGEMENT • Group economic capital requirement based on the internal model R8.3 billion (2020: R7.4 billion) • Current Group economic capital coverage ratio of 169% • During 2021, the Prudential Authority reduced Santam’s regulatory capital add-on from 20% to 10%. • Target economic capital
Slide 57: Dividend per Share
DIVIDEND PER SHARE 2 200 2 022 2 000 1 800 1 600 800 Cents per share 1 400 1 110 1 200 1 028 952 1 000 800 790 718 616 665 600 400 - 200 336 363 392 432 - 0- 2017 2018 2019 2020 2021 Special Final Interim
Slide 58: Group Strategy and Priorities
GROUP STRATEGY AND PRIORITIES
Slide 59: FutureFit Santam
FUTUREFIT SANTAM OUR BUILDING BLOCKS FOR CREATING STAKEHOLDER VALUE • Extend leadership position in South Africa through intermediary enablement, digital innovation and partnerships • Deliver Insurance good and proper: most trusted, relevant and purpose-driven brand • Client experience: creating int
Slide 60: Strategic Priorities 2022
STRATEGIC PRIORITIES 2022 DELIVERING ON FUTUREFIT SANTAM • Executing and implement on growth initiatives - Cross-selling initiative with Sanlam - Strategic partnerships - Tactical acquisitions • Continue to strengthen our digital and data capabilities - Improving our digital E2E insurance offering -
Slide 61: Environmental Social Governance
ENVIRONMENTAL SOCIAL GOVERNANCE
Slide 62: Our ESG Commitments
OUR ESG COMMITMENTS CONTRIBUTING TO A SUSTAINABLE AND TRANSFORMED ECONOMY Employee Safety and wellbeing • We have adopted a hybrid model, with employees transitioning back to the office. • Driving and supporting the vaccination adoption and roll-out across the country in partnership with Sanlam and
Slide 63: Our ESG Commitments: Community Resilience
OUR ESG COMMITMENTS SUPPORTING COMMUNITY RESILIENCE AND ESG COMMITMENTS • We settled R24.5 billion in claims during 2021. • We now support 63 municipalities through Partnership for Risk and Resilience (P4RR) • Continued as a constituent of the FTSE 4 Good index series and FTSE/JSE Responsible Invest
Slide 64: Questions?
santam QUESTIONS?
Slide 65: Thank You
santam THANK YOU