Santam Limited · JSE:SNT
Santam — H1 2016 Earnings Presentation
72 slides from Santam's earnings presentation, June 2016
Slide 1: Presentation to Analysts 2016
P R E S E N TAT I O N T O A N A LY S T S 2 016 i
Slide 2: Directors and corporate information
Non-executive directors Santam head office and registered address B Campbell, MP Fandeso, BTPKM Gamedze, 1 Sportica Crescent GG Gelink (chairman), IM Kirk, MLD Marole, Tyger Valley, Bellville 7530 JP Möller, T Nyoka, Y Ramiah, MJ Reyneke PO Box 3881, Tyger Valley 7536 Tel: 021 915 7000 Executive dir
Slide 3: Table of contents
Table of contents 4 The Santam business portfolio 4 Market context 8 Financial results 30 Capital management 38 Group strategy and priorities 43 eviewed interim report for Santam Limited and its subsidiaries R for the six months ended 30 June 2016 P R E S E N T A T I O N T O A N A LY S T S S A N T A
Slide 4: Contents
CLICK TO EDIT MASTER TITLE STYLE FINANCIAL RESULTS FOR THE PERIOD ENDED 30 JUNE 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 • Regulatory reform • Economic growth lagging • Emerging markets growth • Abundant capital in remains positive • Social unrest international markets • Negative outlook for Sub- • Municipal service delivery • Impact of technology Saharan Africa •
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Slide 10: Santam H1 2016 key facts
SANTAM H1 2016 KEY FACTS • Gross written premium growth: • 8% including cell captive insurance • 8% excluding cell captive insurance • Underwriting margin of 6.4% • Headline earnings per share decreased by 29% • Return on capital (annualised) of 17.4% • Solvency ratio of 51% • Interim dividend of 31
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Slide 12: Main variances 2016 vs 2015
MAIN VARIANCES 2016 VS. 2015 2 000 1 453 1 500 1 098 995 1 014 1 000 808 697 698 R million 618 466 500 291 236 161 - Underwriting Investment Investment Income before *Tax Earnings Headline result return on income tax earnings# ( 500) insurance ( 336)( 390) funds Jun-16 Jun-15 # Non-headline: Impairm
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Slide 14: Gross written premium and net underwriting surplus
GROSS WRITTEN PREMIUM PER INSURANCE CLASS (R MILLION) Miscellaneous 22 Jun-16 29 32 Jun-15 Guarantee 91 Investment contract premium Crop 108 67 Accident and Health 164 169 Transportation 333 325 Liability 489 588 Engineering 579 539 ART 1 334 1 450 1 094 1 199 Property *Property 3 772 3 380 Motor *M
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Slide 16: Segmental analysis
SEGMENTAL ANALYSIS GROSS WRITTEN PREMIUM ― PERSONAL, COMMERCIAL AND ART 7 000 4.4% 6 000 5 853 8.5% 5 605 4 961 5 000 4 571 R million 4 000 3 000 20.9% 2 000 116 105 1 000 1 334 1 094 - *Personal *Commercial ART Jun-16 Jun-15 Investment contract premium * Comparative restated for a reclassification
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Slide 18: Gross written premium outside SA; acquisition cost ratio
GROSS WRITTEN PREMIUM OUTSIDE SA 600 565 512 500 421 400 R million 300 263 277 200 187 100 - Namibia Rest of Africa Asia Jun-16 Jun-15 ACQUISITION COST RATIO AS % OF NET EARNED PREMIUM 30 28.5 28.7 29.0 27.3 28.1 27.7 27.9 28.0 1.0 0.9 0.6 0.8 1.2 1.4 0.7 0.9 11.1 13.6 14.9 20 13.5 13.8 15.4 15.2 15
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Slide 20: Level of reinsurance; net insurance result
LEVEL OF REINSURANCE EARNED PREMIUM AS % OF GROSS EARNED PREMIUM 19.7 20 18.0 17.8 18.3 18.1 17.4 16.6 16.0 14.9 14.9 14.8 15 13.7 Percentage 11.8 11.0 10 9.0 8.6 5 - Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 excl Jun-15 excl Dec-15 excl Jun-16 excl ART QS ART QS ART QS ART QS Group Excl. cells NET INSURAN
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Slide 22: Size of insurance funds
SIZE OF INSURANCE FUNDS 8 000 7 489 6 774 6 752 6 809 6 266 6 449 6 000 5 515 5 483 R million 4 000 2 000 - Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Jun-15 Dec-15 Jun-16 Group insurance funds excluding Centriq ASSETS BACKING NET INSURANCE FUNDS (EXCL. CENTRIQ) CURRENCY MIX 8 000 7 489 315 6 809 6 752 285
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Slide 24: Insurance funds and investment return
INSURANCE FUNDS AS % OF GROSS EARNED PREMIUM 50 40.0 40 37.1 35.9 35.4 33.5 34.3 30.5 30.2 Percentage 30 20 10 - Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Jun-15 Dec-15 Jun-16 INVESTMENT RETURN 1 300 1 276 1 100 362 900 42 702 174 700 452 62 41 30 9 6 R million 500 205 248 300 657 391 353 100 ( 104) ( 100)
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Slide 26: Asset / liability matching
ASSET / LIABILITY MATCHING GROUP CONSOLIDATED ASSETS AT 30 JUNE 2016 100 3.3 3.7 9.6 4.7 6.9 12.0 80 9.1 46.9 57.7 17.6 60 74.9 96.7 22.8 54.7 Percentage 40 53.1 20 42.3 32.1 25.1 20.9 - 5.9 Insurance funds Centriq Cell owners Sub debt SH funds Total insurance funds interest Cash and money market In
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Slide 28: Shareholder funds currency mix; SEM participation investments
SHAREHOLDER FUNDS CURRENCY MIX 100 4.7 4.4 4.6 12.8 12.4 12.0 80 7.3 7.2 6.5 10.2 17.6 60 27.1 Percentage 8.4 40 65.0 48.9 50.9 20 - Jun-15 Dec-15 Jun-16 Rand US Dollar Dirham (investment in Saham Finances) Pound Sterling SEM (various currencies) Other currencies (mainly Namibian dollar) SEM PARTICI
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Slide 30: SEM participation investments
SEM PARTICIPATION INVESTMENTS Incorporated Santam Santam in Effective Holding Effective Holding June 2016 December 2015 % % Pacific and Orient Insurance Co. Berhad Malaysia 15.4 15.4 Shriram General Insurance Co. Ltd India 7.0 7.0 BIHL Insurance Company Ltd Botswana 20.5 20.5 NICO Holdings general i
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Slide 32: MiWay
MIWAY June 2016 June 2015 Change Gross written premium (R’m) 1 003 835 +20% Gross underwriting result, net of CAT recoveries (R’m) 72 76 -5% Gross claims ratio, net of CAT recoveries 63.1% 60.8% Gross acquisition cost ratio 29.6% 30.0% Gross underwriting margin 7.3% 9.2% Number of clients* 260 000 2
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Slide 34: Return on capital and solvency
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 Percentage 5.1 20.0 3.9 20 17.4 18.4 8.6 2.0 3.0 9.0 23.3 20.8 21.7 10 19.9 14.0 15.4 15.4 11.0 - Dec-10 Dec-11 Dec-12 adj¹ Dec-13 Dec-14 Dec-15 Jun-16 Jun-16 (normalised)² In
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Slide 36: Capital management
CAPITAL MANAGEMENT • Target solvency range of 35% - 45% of net written premium (NWP) • Group solvency as at 30 June 2016 of 50.5% • FSB interim capital requirements as at 30 June 2016: 27.3% of NWP CAPITAL MANAGEMENT • SAM group economic capital coverage ratio target of 130% - 170% • Economic capita
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Slide 38: Special dividend; interim dividend per share
SPECIAL DIVIDEND Considerations in assessing special dividend of 800 cents per share • Group solvency and capital coverage ratio at 30 June 2016 • Current and future regulatory solvency requirements • Impact of further potential acquisition transactions INTERIM DIVIDEND PER SHARE 1 000 816 800 Cents
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Slide 40: Group strategy: 2020 vision
GROUP STRATEGY ANDTEXT CLICK TO EDIT MASTER RESULTS PRIORITIES STYLES 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 & d
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Slide 42: Priorities for H2 2016
PRIORITIES FOR H2 2016 • Focus on profitable growth – both in South Africa and emerging markets • New business diversification in South Africa through Santam Direct, Sanlam Agency model, MiWay Business Insurance and MiWay Broker-direct • Increase focus on technical support to SEM general insurance p
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Slide 45: Reviewed interim report
RE VIE WED INTERIM REPORT for the six months ended 30 June 2016 43
Slide 46: Table of contents
Table of contents 45 Salient features 46 Financial review 49 Independent auditor’s review report 50 Consolidated statement of financial position 51 Consolidated statement of comprehensive income 52 Consolidated statement of changes in equity 53 Consolidated statement of cash flows 54 Notes to the in
Slide 47: Salient features
Gross written premium growth both including and excluding cell captive insurance 8% Underwriting margin 6.4% Group solvency ratio 51% Return on shareholders’ Positive growth contribution funds 17.4% (annualised) from international diversification Acquisition of effective interest Headline earnings p
Slide 48: Financial review
FINANCIAL REVIEW The Santam group reported strong underwriting results and acceptable growth for the six months ended June 2016 in the context of the current low-growth economic environment. The group achieved gross written premium growth of 8% and a net underwriting margin of 6.4% (2015: 8.9%), wel
Slide 49: Financial review
FINANCIAL REVIEW for the Santam intermediated business. 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. The net commission ratio (excluding t
Slide 50: Financial review
FINANCIAL REVIEW developing Santam’s full multichannel capability and MiWay’s business insurance and broker-direct offerings, as well as the MiWay Life insurance initiative in conjunction with Sanlam Life. Santam will maintain its focus on cost-efficiencies to improve the management expense ratio ov
Slide 51: Independent auditor's review report
INDEPENDENT AUDITOR’S REVIEW REPORT TO THE SHAREHOLDERS OF SANTAM LTD We have reviewed the condensed consolidated interim financial statements of Santam Ltd in the accompanying interim report, which comprise the condensed consolidated statement of financial position as at 30 June 2016 and the relate
Slide 52: Consolidated statement of financial position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION Reviewed at Reviewed at Audited at 30 June 2016 30 June 2015 31 Dec 2015 Notes R million R million R million ASSETS Non-current assets Property and equipment 96 114 90 Intangible assets 837 1 061 827 Deferred income tax 124 146 140 Investment in associate
Slide 53: Consolidated statement of comprehensive income
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Reviewed Reviewed Audited Six months ended Six months ended Year ended 30 June 2016 30 June 2015 Change 31 Dec 2015 Notes R million R million % R million Gross written premium 12 148 11 270 8% 24 319 Less: reinsurance written premium 2 914 2 628 5 435 N
Slide 54: Consolidated statement of changes in equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the company Distribu- Non- Share Treasury Other table 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 2015 107
Slide 55: Consolidated statement of cash flows
CONSOLIDATED STATEMENT OF CASH FLOWS Reviewed Reviewed Audited Six months ended Six months ended Year ended 30 June 2016 30 June 2015 31 Dec 2015 Notes R million R million R million Cash flows from operating activities Cash generated from operations 844 1 212 3 656 Interest paid (50) (47) (110) Inco
Slide 56: Notes to the interim financial statements
NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Basis of preparation The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standards, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Slide 57: Notes to the interim financial statements
NOTES TO THE INTERIM FINANCIAL STATEMENTS Investment activities are all investment-related activities undertaken by the group, including strategic diversification activities. Due to the nature of the activities conducted, investment activities are considered to be one operating segment. Investment a
Slide 58: Notes to the interim financial statements
NOTES TO THE INTERIM FINANCIAL STATEMENTS 5.1 For the six months ended 30 June 2016 (continued) Insurance activities The group’s insurance activities are spread over various classes of general insurance. Gross written Underwriting premium result R million R million Accident and health 164 2 Alternat
Slide 59: Notes to the interim financial statements
NOTES TO THE INTERIM FINANCIAL STATEMENTS 5.2 For the six months ended 30 June 2015 (continued) Insurance activities The group’s insurance activities are spread over various classes of general insurance. Gross written Underwriting premium1 result1 R million R million Accident and health 169 22 Alter
Slide 60: Notes to the interim financial statements
NOTES TO THE INTERIM FINANCIAL STATEMENTS 5.3 For the year ended 31 December 2015 (continued) Insurance activities The group’s insurance activities are spread over various classes of general insurance. Gross written Underwriting premium1 result1 R million R million Accident and health 371 60 Alterna
Slide 61: Notes: financial assets and liabilities
NOTES TO THE INTERIM FINANCIAL STATEMENTS Reviewed at Reviewed at Audited at 30 June 2016 30 June 2015 31 Dec 2015 R million R million R million 6. Financial assets and liabilities Financial assets The group’s financial assets are summarised below by measurement category. Financial assets at fair va
Slide 62: Notes: financial assets and liabilities
NOTES TO THE INTERIM FINANCIAL STATEMENTS 6. Financial assets and liabilities (continued) Level 1 Level 2 Level 3 Total Financial liabilities at fair value through income R million R million R million R million Debt securities 2 053 – – 2 053 Investment contracts – 84 – 84 Derivative instruments Int
Slide 63: Notes: financial assets and liabilities
NOTES TO THE INTERIM FINANCIAL STATEMENTS 6. Financial assets and liabilities (continued) 31 December 2015 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 1 643 – – 1 643 Unitised funds – 66 – 66 Irre
Slide 64: Notes: financial assets and liabilities
NOTES TO THE INTERIM FINANCIAL STATEMENTS 6. Financial assets and liabilities (continued) Short-term Equity Debt money market securities securities instruments Derivatives Total 30 June 2015 R million R million R million R million R million Opening balance 820 56 38 – 914 Acquisitions 51 35 1 – 87 D
Slide 65: Notes to the interim financial statements
NOTES TO THE INTERIM FINANCIAL STATEMENTS The debt securities and short-term money market instruments classified as level 3 predominantly consist of African Bank Investments Ltd and African Bank Ltd instruments. These instruments are valued at the closing market price as listed on the JSE. The inter
Slide 66: Notes: insurance liabilities and reinsurance assets
NOTES TO THE INTERIM FINANCIAL STATEMENTS Reviewed at Reviewed at Audited at 30 June 2016 30 June 2015 31 Dec 2015 R million R million R million 7. Insurance liabilities and reinsurance assets (continued) Recoverable from reinsurers Long-term insurance contracts – claims reported and loss adjustment
Slide 67: Notes: investment income
NOTES TO THE INTERIM FINANCIAL STATEMENTS Reviewed Reviewed Audited Six months ended Six months ended Year ended 30 June 2016 30 June 2015 31 Dec 2015 R million R million R million 9. Investment income and net (losses)/gains on financial assets and liabilities Investment income 441 502 1 210 Dividen
Slide 68: Notes: corporate transactions
NOTES TO THE INTERIM FINANCIAL STATEMENTS 11. Corporate transactions 2016 Acquisitions Saham Finances The transaction to acquire a 30% shareholding in Saham Finances, together with SEM, announced in November 2015, was finalised during the first quarter of 2016. The acquisition was structured through
Slide 69: Goodwill reconciliation; earnings per share
NOTES TO THE INTERIM FINANCIAL STATEMENTS Reviewed at Reviewed at Audited at 30 June 2016 30 June 2015 31 Dec 2015 R million R million R million Goodwill reconciliation Opening balance 598 833 833 Impairment (1) (30) (47) Disposal of subsidiary – – (188) Closing balance 597 803 598 Reviewed Reviewed
Slide 70: Notes: BBBEE
NOTES TO THE INTERIM FINANCIAL STATEMENTS 14. Broad-based black economic empowerment (BBBEE) In May 2007, Central Plaza Investments 112 (Pty) Ltd acquired 10% of Santam’s shares with the following beneficiaries: – Emthunzini Black Economic Empowerment Staff Trust – Emthunzini Black Economic Empowerm
Slide 71: GREYMATTER & FINCH #9992
GREYMATTER & FINCH #9992
Slide 72: Insurance good and proper
INSURANCE GOOD AND PROPER www.santam.co.za