Santam Limited · JSE:SNT
Santam — FY2016 Earnings Presentation
76 slides from Santam's earnings presentation, December 2016
Slide 1: Presentation to Analysts 2016
PRESENTATION TO ANALYSTS 2016
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Slide 3: Table of Contents
TABLE OF CONTENTS 4 The Santam business portfolio 4 Market context 8 Financial results 38 Capital management 42 Group strategy and priorities 47 Audited summary consolidated financial statements for Santam Limited and its subsidiaries for the year ended 31 December 2016 P R E S E N TAT I O N TO A N
Slide 4: Financial Results for the Year Ended 31 December 2016
CLICK TO EDIT MASTER TITLE STYLE FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016 PRESENTED CLICK TO EDITBY LIZÉ LAMBRECHTS AND HENNIE NEL MASTER CONTENTS The Santam business portfolio Market context Financial results Capital management Group strategy and priorities 2
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Slide 6: The Santam Business Portfolio
THE SANTAM BUSINESS PORTFOLIO Santam Re Santam Santam's Santam Commercial MiWay Santam re Emerging Markets Specialist and Personal Investments Our multi-channel Our specialist Our direct Our reinsurance Investments in insurance business insurance business insurance business business in emerging mark
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Slide 8: Market Context
MARKET CONTEXT INDUSTRY SOUTH AFRICA EMERGING MARKETS • Abundant capital in international • Economic growth subdued • Emerging markets growth markets • Social unrest and increased prospects a mixed bag • Reinsurers under strain political risk • Commodity prices recovery • Impact of technology • Muni
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Slide 10: Santam 2016: Key Facts
SANTAM 2016: KEY FACTS • Gross written premium growth: • 7% including cell captive insurance • 6% excluding cell captive insurance • Underwriting margin of 6.4% • Headline earnings per share decreased by 41%; decreased by 14% excluding the impact of foreign exchange rate movements • Return on capita
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Slide 12: Main Variances
MAIN VARIANCES 2016 VS. 2015 4 000 3 372 3 000 2 348 2 072 2 000 1 779 1 855 1 268 1 212 1 197 777 R million 1 000 619 499 - Underwriting Investment Investment Income before Tax¹ Earnings Headline result return on income tax ( 524) earnings² (1 000) insurance funds ( 69) ( 908) (2 000) 2016 2015 1)
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Slide 14: Net Insurance Result
NET INSURANCE RESULT 2016 % of 2015 % of 2016/ 5Yr 10Yr R'm NEP R'm NEP 2015 ave % ave % Gross written premium 25 909 24 319 7% 8 8 Net earned premium 19 826 100.0 18 523 100.0 7% 100.0 100.0 Claims incurred 12 911 65.1 11 510 62.1 12% 65.6 66.3 Acquisition cost 5 647 28.5 5 234 28.3 8% 28.1 27.3 Un
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Slide 16: 2016 Performance: First vs. Second Half
2016 PERFORMANCE: FIRST VS. SECOND HALF NET UNDERWRITING RESULT 2 000 1 779 1 500 1 268 GENE R million 971 1 000 808 618 650 500 - First half Second half Full year 2016 2015 GROSS WRITTEN PREMIUM PER INSURANCE CLASS (R MILLION) Miscellaneous 9 2016 62 86 2015 Guarantee 149 Investment contract premiu
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Slide 18: Net Underwriting Surplus
NET UNDERWRITING SURPLUS PER INSURANCE CLASS (R MILLION) ( 31) Guarantee 13 2016 2015 Accident and Health 49 60 ( 3) Miscellaneous 11 Crop 69 131 ART 16 20 Property 22 330 27 Transportation 91 196 Engineering 216 Liability 301 234 Motor 622 673 ( 100) - 100 200 300 400 500 600 700 800 NET UNDERWRITI
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Slide 20: Segmental Analysis
SEGMENTAL ANALYSIS GROSS WRITTEN PREMIUM ― PERSONAL, COMMERCIAL AND ART 5.3% 14 000 13 330 12 665 12 000 8.2% 10 173 10 000 9 406 5.7% 8 072 8 000 7 635 R million 6 000 10.0% 4 000 2 762 2 511 2 000 - *Personal *Personal (excl. *Commercial ART MiWay) 2016 2015 Investment contract premium * Comparati
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Slide 22: Gross Written Premium Outside SA; Acquisition Cost Ratio
GROSS WRITTEN PREMIUM OUTSIDE SA 5.9% 1 200 1 118 1 056 1.9% 1 000 934 917 800 13.7% R million 600 497 437 400 200 - Namibia Rest of Africa Asia 2016 2015 Excludes Santam’s share of the gross written premium derived from its investments in the SEM GI and Saham Finances businesses. ACQUISITION COST R
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Slide 24: Level of Reinsurance; Net Insurance Result
LEVEL OF REINSURANCE EARNED PREMIUM AS % OF GROSS EARNED PREMIUM 25 23.1 22.2 22.1 19.8 20 19.0 18.0 18.3 17.4 16.0 14.9 Percentage 15 11.8 11.0 10 8.6 9.0 5 - 2010 2011 2012 2013 2014 2015 2016 Group Excl. cells NET INSURANCE RESULT AS % OF NET EARNED PREMIUM 15 12.3 11.5 11.2 10.3 2.7 10 2.9 2.5 9
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Slide 26: Size of Insurance Funds
SIZE OF INSURANCE FUNDS 8 000 7 489 7 279 6 774 6 266 6 449 6 000 5 515 5 483 R million 4 000 2 000 - 2010 2011 2012 2013 2014 2015 2016 Group insurance funds excluding Centriq ASSETS BACKING NET INSURANCE FUNDS (EXCL. CENTRIQ) CURRENCY MIX 8 000 7 489 7 279 315 324 867 996 6 000 R million 4 000 5 9
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Slide 28: Insurance Funds as % of Gross Earned Premium
INSURANCE FUNDS AS % OF GROSS EARNED PREMIUM 50 40.0 40 37.1 35.9 35.4 33.5 34.3 30.9 Percentage 30 20 10 - 2010 2011 2012 2013 2014 2015 2016 INVESTMENT RETURN 1 300 1 276 1 100 550 467 900 75 180 42 700 69 41 500 R million 728 657 300 100 ( 59) ( 100) ( 374) ( 300) ( 500) 2016 2015 Interest and di
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Slide 30: Asset / Liability Matching
ASSET / LIABILITY MATCHING GROUP CONSOLIDATED ASSETS AT 31 DECEMBER 2016 100 4.2 3.5 12.4 5.7 6.1 80 37.4 16.4 7.4 65.3 76.7 17.5 Percentage 60 96.5 54.9 20.5 40 62.6 20 25.8 34.7 23.3 21.7 7.4 - Insurance funds Centriq insurance Cell owners Sub debt SH funds Total funds interest Cash and money mark
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Slide 32: Shareholder Funds; SEM Participation Investments
SHAREHOLDER FUNDS CURRENCY MIX1 100 5.0 6.6 16.4 12.4 80 7.2 6.4 60 17.5 27.1 Percentage 12.9 40 20 41.8 46.7 - 2016 2015 Rand US Dollar² Dirham (investment in Saham Finances, via SAN JV) Pound Sterling SEM (various currencies) Other currencies (mainly Namibian dollar) 1) Includes foreign denominate
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Slide 34: SEM Participation Investments
SEM PARTICIPATION INVESTMENTS INCORPORATED SANTAM SANTAM IN EFFECTIVE HOLDING EFFECTIVE HOLDING 2016 2015 % % Pacific and Orient Insurance Company Berhad Malaysia 15.4 15.4 Shriram General Insurance Company Ltd India 15.0 7.0 BIHL Insurance Company Ltd Botswana 21.2 20.5 NICO Holdings general insura
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Slide 36: Strategic Diversification – Saham Finances
STRATEGIC DIVERSIFICATION – SAHAM FINANCES ANALYSIS OF SANTAM’S SHARE OF THE UNDERWRITING PERFORMANCE FOR THE 10 MONTHS TO 31 DECEMBER 2016 R’m KEY RATIOS (%) Gross written premium 977 Net earned premium 749 100.0 Claims incurred 498 66.5 Net commission 89 11.9 Management expenses 185 24.7 Underwrit
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Slide 38: MiWay; Centriq
MIWAY 2016 2015 CHANGE Gross written premium (R’m) 2 101 1 771 +19% Gross underwriting result, net of CAT recoveries (R’m) 160 163 -2% Gross claims ratio, net of CAT recoveries 63.6% 60.9% Gross acquisition cost ratio 28.7% 29.8% Gross underwriting margin 7.7% 9.3% Number of clients* 278 000 242 000
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Slide 40: Return on Capital
CLICK TO EDIT MASTER TEXT STYLES RETURN ON CAPITAL NET INCOME EXPRESSED AS % OF WEIGHTED AVERAGE SHAREHOLDERS’ FUNDS 40 37.1 32.5 30 13.8 25.0 24.7 10.8 22.6 5.1 3.9 Percentage 20.0 20 15.9 8.6 9.0 23.3 21.7 10 19.9 20.8 17.0 14.0 11.0 - (1.1) 2010 2011 2012 adj¹ 2013 2014 2015 2016² ( 10) Insurance
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Slide 42: Return on Capital; Capital Management
RETURN ON CAPITAL NET INCOME EXPRESSED AS % OF WEIGHTED AVERAGE SHAREHOLDERS’ FUNDS 40 37.1 30 13.8 28.4 25.0 24.7 22.6 6.7 5.1 3.9 Percentage 20.0 18.8 20 8.6 1.8 9.0 23.3 21.7 10 19.9 20.8 17.0 14.0 11.0 - 2010 2011 2012 adj¹ 2013 2014 2015² 2016² ( 10) Insurance ROC Investment ROC 1) Tax adjusted
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Slide 44: Dividend per Share
DIVIDEND PER SHARE 1 000 881 + 8% 816 800 Cents per share 600 570 528 400 200 311 288 - 2016 2015 Interim Final 42
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Slide 46: 2020 Vision; Priorities for 2017
2020 VISION 5 FOCUS AREAS FOR VALUE Our Metrics: • Net insurance result and return on capital Insurance good and proper • International diversification • Transformation The right people Growth through In Context of: innovation & diversification • The Santam Way Continuously • Stakeholder value incre
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Slide 48: More Than South Africa's Leading Short-Term Insurer
MORE THAN SOUTH AFRICA’S LEADING SHORT-TERM INSURER We provide our clients with insurance that We’ve contributed R2.2 million to drought adds value, paying more than R16.1 billion relief and crime prevention within farming in claims in the past year. Keeping them safe communities across South Africa
Slide 49: Santam Ltd and Its Subsidiaries Audited Summary Consolidated Financial Statements
SANTAM LTD AND ITS SUBSIDIARIES AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 47
Slide 50: Table of Contents
TABLE OF CONTENTS 49 SALIENT FEATURES 50 FINANCIAL REVIEW 53 INDEPENDENT AUDITOR’S REPORT 54 SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION 55 SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 56 SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUIT Y 57 SUMMARY CONSOLIDATED STATEMENT OF CAS
Slide 51: Salient Features
Gross written premium Gross written premium growth including cell growth excluding cell captive insurance 7% captive insurance 6% Underwriting Capital coverage margin 6.4% ratio 155% Return on shareholders’ Earnings per share funds 15.9% decreased by 47% (Normalised 18.5%) Headline earnings per Fina
Slide 52: Financial Review
FINANCIAL REVIEW The Santam group reported underwriting results for the 2016 financial year well within the target range of 4% to 8% with a net underwriting margin of 6.4% compared to the exceptional 9.6% in 2015. Acceptable gross written premium growth of 7% was achieved (6% excluding the impact of
Slide 53: Financial Review
FINANCIAL REVIEW The project is progressing according to plan with the majority of personal lines policies now migrated to the new system. The development phase of the commercial business product was completed in June 2016 and the migration processes has commenced. Development costs of R17 million w
Slide 54: Financial Review
FINANCIAL REVIEW As a result of this downgrade, Santam’s international counterparty credit and insurer financial strength rating was also lowered to BBB from BBB+ as it is limited to the level of the S&P local currency sovereign credit rating. The revised rating was a reflection of S&P’s view on Sou
Slide 55: Independent Auditor's Report
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SANTAM LTD OPINION The summary consolidated financial statements of Santam Ltd, set out on pages 54 to 72, which comprise the summary consolidated statement of financial position as at 31 December 2016, the summary consolidated statements of compre
Slide 56: Summary Consolidated Statement of Financial Position
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited at Audited at 31 December 2016 31 December 2015 Notes R million R million ASSETS Non-current assets Property and equipment 106 90 Intangible assets 885 827 Deferred income tax 105 140 Investment in associates and joint ventures 1 536 252 F
Slide 57: Summary Consolidated Statement of Comprehensive Income
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Audited Audited Year ended Year ended 31 December 2016 31 December 2015 Notes R million R million Change Gross written premium 25 909 24 319 7% Less: reinsurance written premium 6 137 5 435 Net written premium 19 772 18 884 5% Less: change in un
Slide 58: Summary Consolidated Statement of Changes in Equity
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the company Non- Share Treasury Other Distributable controlling capital shares reserves reserves Total interest Total R million R million R million R million R million R million R million Balance as at 1 January 20
Slide 59: Summary Consolidated Statement of Cash Flows
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS Audited Audited Year ended Year ended 31 December 2016 31 December 2015 Notes R million R million Cash flows from operating activities Cash generated from operations 2 171 3 656 Interest paid (161) (110) Income tax paid (681) (1 002) Net cash from operati
Slide 60: Notes to the Summary Consolidated Financial Statements
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of preparation The summary consolidated financial statements are prepared in accordance with the requirements of the JSE for summary financial statements, and the requirements of the Companies Act applicable to summary financial stateme
Slide 61: Notes: Segment Information
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 5. Segment information Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessi
Slide 62: Notes: Segment Information 2016
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 5. Segment information (continued) 5.1 For the year ended 31 December 2016 Strategic Reconciling and Insurance Investment diversification Total unallocated IFRS total Business activity R million R million R million R million R million R million
Slide 63: Notes: Investment and Strategic Diversification Activities
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS R million Additional information Investment activities The group’s return on investment-related activities can be analysed as follows: Investment income 150 Net gains on financial assets and liabilities at fair value through income 268 Investmen
Slide 64: Notes: Segment Information 2015
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 5. Segment information (continued) 5.2 For the year ended 31 December 2015 (restated) Strategic Reconciling and Insurance Investment diversification Total unallocated IFRS total Business activity R million R million R million R million R million
Slide 65: Notes: Investment and Strategic Diversification Activities 2015
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS R million Additional information Investment activities The group’s return on investment-related activities can be analysed as follows: Investment income 689 Net gains on financial assets and liabilities at fair value through income 83 Investment
Slide 66: Notes: Segment Information, Geographical Analysis
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS Net income from Net fair Net foreign associates and Dividend income value gains exchange gains joint ventures Total R million R million R million R million R million 5. Segment information (continued) 5.2 For the year ended 31 December 2015 (res
Slide 67: Notes: Financial Assets and Liabilities
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 31 December 2016 Level 1 Level 2 Level 3 Total Financial assets at fair value through income R million R million R million R million Equity securities Quoted Listed 1 321 – – 1 321 Unitised funds – 77 – 77 Irredeemable preference shares 2 – – 2
Slide 68: Notes: Financial Assets and Liabilities (continued)
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS Level 1 Level 2 Level 3 Total R million R million R million R million 6. Financial assets and liabilities (continued) 31 December 2015 Financial liabilities at fair value through income Debt securities 998 – – 998 Investment contracts – 70 – 70
Slide 69: Notes: Subordinated Callable Notes
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS During 2007, the company issued unsecured subordinated callable notes to the value of R1 billion in two tranches. The fixed effective rate for the R600 million issue was 8.6% and 9.6% for the second tranche of R400 million, representing the R203
Slide 70: Notes: Non-current Assets Held for Sale
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 8. Non-current assets held for sale Santam Ltd initially set up the Santam International group in 2002 to facilitate the expansion into Europe. Santam International Ltd (Santam International) directly and indirectly held three subsidiaries calle
Slide 71: Notes: Income Tax
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS Audited Audited Year ended Year ended 31 December 2016 31 December 2015 R million R million 10. Income tax Normal taxation Current year 553 1 077 Prior year (8) 24 Recovered from cell owners (89) (67) Foreign taxation – current year 56 57 Total
Slide 72: Notes: Corporate Transactions 2016
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 11. Corporate transactions 2016 Acquisitions SAN JV (RF) (Pty) Ltd (Saham Finances) The transaction to acquire a 25% shareholding in SAN JV (with SEM acquiring 75%), announced in November 2015, was finalised during the first quarter of 2016. The
Slide 73: Notes: Corporate Transactions 2015
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 2015 Disposals Indwe Broker Holdings Group (Pty) Ltd On 31 December 2015, Santam Ltd, as well as Swanvest 120 (Pty) Ltd, Main Street 409 (Pty) Ltd and Thebe Risk Services Holdings (Pty) Ltd (all wholly-owned subsidiaries of Santam Ltd) sold 26.3
Slide 74: Notes: Earnings per Share
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS Audited Audited Year ended Year ended 31 December 2016 31 December 2015 12. Earnings per share Basic earnings per share Profit attributable to the company’s equity holders (R million) 1 212 2 348 Weighted average number of ordinary shares in iss
Slide 75: Administration
ADMINISTRATION NON-EXECUTIVE DIRECTORS SANTAM HEAD OFFICE AND REGISTERED ADDRESS B Campbell, MP Fandeso, BTPKM Gamedze, GG Gelink (chairman), 1 Sportica Crescent IM Kirk, MLD Marole, NV Mtetwa, T Nyoka (née Fubu), Y Ramiah, Tyger Valley MJ Reyneke, PE Speckmann, HC Werth Bellville 7530 PO Box 3881,
Slide 76: Insurance Good and Proper
INSURANCE GOOD AND PROPER www.santam.co.za