Santam Limited · JSE:SNT
Santam — H1 2021 Earnings Presentation
57 slides from Santam's earnings presentation, June 2021
Slide 1: Analyst Presentation: Interim Financial Results six months ended 30 June 2021
2021 ANALYST PRESENTATION INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021 Presented by: Lizé Lambrechts and Hennie Nel
Slide 2: Contents
CONTENTS • The Santam business portfolio • Market context • Financial results • Capital management • Group strategy and priorities
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 and Centriq Insurance Santam’s share of the Personal Santam Structured Insurance insurance results of the SEM Santam Specialist general
Slide 4: Market Context
MARKET CONTEXT
Slide 5: Insurance Market Outlook: All Markets
INSURANCE MARKET OUTLOOK All markets • Global economy is recovering with an expected recovery in global insurance premiums • However, the future of the global economy remains uncertain due to uncertainty on how pandemic will unfold • Weather related catastrophes and cyber events increasing significa
Slide 6: Insurance Market Outlook: South Africa
INSURANCE MARKET OUTLOOK South Africa • Economic growth prospects positive • Improvements in vaccine roll-out key to supporting growth prospects • Premium growth expected to grow in line with the economy • In line with global investments in Insurtech, the local market remains a growth opportunity to
Slide 7: Contingent Business Interruption (CBI) Cover
CONTINGENT BUSINESS INTERRUPTION (CBI) COVER CURRENT STATUS • Santam’s appeal against the Ma-Afrika judgment relating to the indemnity period was heard by the Supreme Court of Appeal (SCA) on 27 August 2021 • Santam is actively processing CBI claims since January 2021 • As at end of August 2021 Sant
Slide 8: Santam June 2021 Key Facts
SANTAM JUNE 2021 KEY FACTS • Conventional insurance gross written premium growth of 5% • Underwriting margin for conventional insurance business of 6.7% (Jun 2020: 4.3%) • Alternative Risk Transfer (ART) operating result of R140 million (Jun 2020: R54 million) • Headline earnings per share increased
Slide 9: Financial Results
FINANCIAL RESULTS santam
Slide 10: Reporting Environment
REPORTING ENVIRONMENT REPORTED RESULTS AFFECTED BY: Insurance events • A more normalised claims environment compared to the hard lockdown in the comparative period • Few natural catastrophe claims positively impacted the underwriting results in the current period • Offset to some extent by several l
Slide 11: Exchange Rate Volatility
EXCHANGE RATE VOLATILITY CLOSING RATES AVERAGE RATES % YTD June YTD June % Currency Jun 2021 Dec 2020 change 2021 2020 change United States Dollar 14.28 14.69 (2.8) 14.52 16.46 (11.8) Moroccan Dirham 1.60 1.65 (2.7) 1.63 1.70 (4.1) Indian Rupee 0.19 0.20 (4.1) 0.20 0.22 (11.7) CLOSING RATES % Equity
Slide 12: Conventional Insurance
CONVENTIONAL INSURANCE santam
Slide 13: Conventional Insurance: Net Insurance Result
CONVENTIONAL INSURANCE NET INSURANCE RESULT Jun 2021 Jun 2020 5 Yr 10 Yr % of NEP % of NEP 2021/2020 R'm R'm ave % ave % Gross written premium 15 498 14 812 5% 6.7 8.2 Net earned premium 12 791 100.0 11 761 100.0 9% 6.8 6.6 Net claims incurred 8 109 63.4 7 699 65.5 5% 64.1 64.6 Net acquisition cost
Slide 14: Net Insurance Result as % of Net Earned Premium
CONVENTIONAL INSURANCE NET INSURANCE RESULT As % of net earned premium 14 12.5 12 11.6 2.6 10.1 Percentage 10 9.4 2.4 8.8 2.4 8.2 8 2.9 2.8 6.6 1.5 6 2.3 4.6 9.9 9.2 4 7.7 6.5 2.1 6.7 6.0 2 4.3 2.5 - Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Jun-20 Dec-20 Jun-21 Net underwriting result Investment return on
Slide 15: Gross Written Premium per Insurance Class
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM Per insurance class (R million) Miscellaneous (11) 20 (282%) Guarantee 37 59% 59 Crop 160 (42%) 93 Accident and Health 337(16%) 284 Transportation 386 51% 584 Liability 614 675 10% Engineering 791 17% 923 Property 5 976 (4%) 5 731 6 522 9% Motor 7 129 ( 5
Slide 16: Net Underwriting Surplus per Insurance Class
CONVENTIONAL INSURANCE NET UNDERWRITING SURPLUS Per insurance class (R million) Miscellaneous 3 (4) Guarantee (21) 25 Crop 5 75 Accident and Health 41 48 Transportation 28 24 Liability 2 83 Property (770) (109) Engineering 167 91 Motor 1 050 620 ( 900) ( 600) ( 300) - 300 600 900 1 200 Jun-20 Jun-21
Slide 17: Segmental Analysis: Personal and Commercial GWP
CONVENTIONAL INSURANCE SEGMENTAL ANALYSIS – PERSONAL AND COMMERCIAL Gross written premium 3.7% 10 000 8 809 8 491 5.8% 8 000 6 689 R million 6 321 6 000 4 000 2 000 - Personal Commercial Jun-21 Jun-20
Slide 18: Segmental Analysis: Net Underwriting Result
CONVENTIONAL INSURANCE SEGMENTAL ANALYSIS – PERSONAL AND COMMERCIAL Net underwriting result 1 200 1 004 900 R million 600 530 323 300 - (300) (600) (499) Personal Commercial Jun-21 Jun-20
Slide 19: Gross Written Premium from Outside SA
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM FROM OUTSIDE SA 1 600 24.1% 1 438 1 400 1 159 1 200 1 000 R million 18.1% 800 0.4% 634 600 537 476 474 41.6% 400 218 200 154 - Namibia Rest of Africa SE Asia, India, Middle Other East Jun-21 Jun-20
Slide 20: Net Acquisition Cost Ratio
CONVENTIONAL INSURANCE NET ACQUISITION COST RATIO As % of net earned premium 35 30.4 30.2 30.2 29.9 28.5 28.6 29.3 30 28.1 1.0 0.3 1.0 1.4 1.3 0.9 0.9 0.8 25 Percentage 17.0 16.7 16.9 15.2 20 15.8 15.4 15.2 15.2 15 10 11.8 12.3 12.1 12.4 12.5 13.0 12.7 13.4 5 - Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Jun
Slide 21: Reinsurance as % of Gross Earned Premium
CONVENTIONAL INSURANCE REINSURANCE AS % OF GROSS EARNED PREMIUM 25 20.6 20.6 20.4 20 18.6 18.5 18.6 19.2 18.2 Percentage 15 10 5 - Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Jun-20 Dec-20 Jun-21
Slide 22: Size of Net Insurance Funds
CONVENTIONAL INSURANCE SIZE OF NET INSURANCE FUNDS 12 000 9 930 9 910 9 960 10 000 7 879 8 220 R million 8 000 7 489 7 279 6 978 6 000 4 000 2 000 - Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Jun-20 Dec-20 Jun-21
Slide 23: Assets Backing Net Insurance Funds
CONVENTIONAL INSURANCE ASSETS BACKING NET INSURANCE FUNDS Currency mix 9 960 9 910 345 374 10 000 2 025 1 780 8 000 R million 6 000 4 000 7 590 7 756 2 000 - Jun-21 Dec-20 ZAR USD Other currencies (mainly Namibian Dollar)
Slide 24: MiWay
CONVENTIONAL INSURANCE MIWAY Jun 2021 Jun 2020 Change Gross written premium (R million) 1 585 1 428 11% Gross underwriting result, net of CAT recoveries (R million) 159 308 (48%) Gross claims ratio, net of CAT recoveries 58.2% 45.9% Gross acquisition cost ratio 31.7% 32.5% Gross underwriting margin
Slide 25: Alternative Risk Transfer Insurance
ALTERNATIVE RISK TRANSFER INSURANCE
Slide 26: 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 27: ART: Centriq
ALTERNATIVE RISK TRANSFER INSURANCE CENTRIQ Jun 2021 Jun 2020 Net income from clients Actual Actual 2021/2020 R’m R’m Gross written premium 3 645 2 798 30% Income from clients 153 101 51% Participation in underwriting results 32 23 39% Administration expenses (73) (67) 9% Operating result 112 57 96%
Slide 28: ART: Santam Structured Insurance
ALTERNATIVE RISK TRANSFER INSURANCE SANTAM STRUCTURED INSURANCE Jun 2021 Jun 2020 Net income from clients Actual Actual 2021/2020 R’m R’m Gross written premium 953 668 43% Income from clients 75 50 50% Participation in underwriting results 9 1 >100% Administration expenses (56) (54) 4% Operating res
Slide 29: ART: Combined Results
ALTERNATIVE RISK TRANSFER INSURANCE COMBINED RESULTS Jun 2021 Jun 2020 5 Yr 10 Yr Net income from clients Actual Actual 2021/2020 ave % ave % R’m R’m Gross written premium 4 572 3 466 32% 28.4 16.1 Income from clients 228 151 51% Participation in underwriting results 41 24 71% Administration expense
Slide 30: SEM Partner Businesses
SEM PARTNER BUSINESSES
Slide 31: 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% in Saham held through SAN JV Main Saham territories • Morocco • Ivory Coast • Mauritius • Angola Main SEM territories • SGI (India) – 35% participation • P&O (Malaysia)
Slide 32: Santam Effective Holding
SEM PARTNER BUSINESSES SANTAM EFFECTIVE HOLDING Domicile Jun 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 33: SAN JV (Saham) Additional Information
SAN JV (SAHAM) ADDITIONAL INFORMATION ON SANTAM'S SHARE OF SAHAM'S GENERAL AND REINSURANCE BUSINESS (EXCLUDING LIA) Jun 2021 Jun 2020 % of NEP % of NEP 2021/2020 R'm R'm Gross written premium 1 006 993 1.3% Net earned premium 608 100.0 622 100.0 (2%) Net claims incurred 375 61.7 370 59.5 1% Net acqu
Slide 34: SEM General Insurance Participation Investments
SEM GENERAL INSURANCE PARTICIPATION INVESTMENTS ADDITIONAL INFORMATION ON SANTAM'S SHARE OF OTHER SEM BUSINESSES Jun 2021 Jun 2020 % of NEP % of NEP 2021/2020 R'm R'm Gross written premium 557 654 (15%) Net earned premium 415 100.0 505 100.0 (18%) Net claims incurred 327 78.8 295 58.4 11% Net acquis
Slide 35: Analysis of SAN JV's Insurance Funds
ANALYSIS OF INSURANCE FUNDS ANALYSIS OF SAN JV’S INSURANCE FUNDS 100 80 45 47 Percentage 60 40 41 41 20 12 14 - Jun-21 Dec-20 Interest-bearing securities Investment properties Equities and similar securities
Slide 36: SAN JV (Saham): Reconciliation of Carrying Value
SAN JV (SAHAM) RECONCILIATION OF CARRYING VALUE AS AT 30 JUNE 2021 R’m Carrying value at 1 January 2021 1 823 Equity accounted profit 32 Operating profit after tax 49 Amortisation of other intangible assets (16) Other – consolidation adjustments (1) Statement of changes in equity (107) Foreign curre
Slide 37: Santam Group
SANTAM GROUP santam
Slide 38: Net Operating Income
SANTAM GROUP NET OPERATING INCOME R million Jun 2021 Jun 2020 2021/2020 Conventional insurance 1 050 776 35% Alternative risk transfer insurance 1531 54 >100% SEM partner businesses 211 171 23% Net operating income 1 414 1 001 41% SEM partner businesses (211) (171) 23% Net operating income 1 203 830
Slide 39: Reconciliation to Headline Earnings
SANTAM GROUP RECONCILIATION TO HEADLINE EARNINGS Jun 2021 Jun 2020 2021/2020 Net profit attributable to ordinary shareholders (R million) 952 26 >100% Per share (cents) 863 24 Impairment of joint venture - 15 Share of associates' impairment of assets - 726 Tax charge on share of associates' impairme
Slide 40: Growth Diversification
GROWTH DIVERSIFICATION INCLUDING SEM PARTNER BUSINESSES 5% 5% 2% 3% 31% 32% 21% 17% GWP GWP June June 2021 2020 41% 43% Personal Commercial ART SEM Saham
Slide 41: Geographic Diversification
GEOGRAPHIC DIVERSIFICATION INCLUDING SEM PARTNER BUSINESSES 1.0% 0.8% 8.6% 8.7% 10.4% 10.7% GWP GWP June June 2021 2020 80.0% 79.8% South Africa Rest of Africa SE Asia, India and Middle East Other
Slide 42: Asset / Liability Matching
ASSET / LIABILITY MATCHING GROUP CONSOLIDATED ASSETS AT 30 JUNE 2021 100 2 12 8 4 5 34 15 9 80 49 18 Percentage 60 73 16 56 40 66 51 20 43 24 15 - Insurance funds ART Sub debt SH funds Total Other assets SEM participation investments Investment in SAN JV Listed equities Interest-bearing instruments
Slide 43: Shareholder Funds: Asset Mix
SHAREHOLDER FUNDS ASSET MIX 100 8 9 15 16 80 18 19 Percentage 60 16 15 40 20 43 41 - Jun-21 Dec-20 Cash and money market instruments Interest-bearing instruments and preference shares Listed equities Investment in SAN JV SEM participation investments
Slide 44: Shareholder Funds: Currency Mix
SHAREHOLDER FUNDS CURRENCY MIX 100 6 7 12 14 80 18 19 Percentage 60 15 17 40 49 43 20 - Jun-21 Dec-20 Other currencies (mainly Namibian Dollar and Malaysian Ringgit) Indian Rupee (investment in SEM) Moroccan Dirham (investment in SAN JV) US Dollar Rand
Slide 45: Investment Return on Shareholders' Funds
INVESTMENT RETURN ON SHAREHOLDERS’ FUNDS 1 200 582 900 647 600 355 26 R million 77 300 373 451 - (121) (375) ( 300) ( 141) ( 600) Jun-21 Jun-20 Interest and dividends Market value movements (incl. Derivatives) SEM fair value movements and dividends Forex gains and losses (incl. SEM)
Slide 46: Analysis of 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 valuation Dec 2020 R’m rates Jun 2021 Region R’m R’m R’m R’m Africa 109 1 (6) 18 122 Southeast Asia 136 - (7) (17) 112 India 1 293 - (53) (6) 1 234
Slide 47: Capital Management
CAPITAL MANAGEMENT
Slide 48: Return on Capital
RETURN ON CAPITAL TOTAL COMPREHENSIVE INCOME EXPRESSED AS % OF WEIGHTED AVERAGE SHAREHOLDERS’ FUNDS 40 36.1 33.5 30 14.4 8.9 21.9 22.2 Percentage 20 8.2 3.4 3.1 18.1 1.3 11.6 21.7 24.6 8.0 10 17.0 18.5 19.1 16.8 11.6 8.8 - (8.8) (0.8) ( 10) Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Jun-20 Dec-20 Jun-21 Ins
Slide 49: Capital Management
CAPITAL MANAGEMENT • Group economic capital requirement based on the internal model is R7.8 billion (Dec 2020: R7.4 billion). • Current Group economic capital coverage ratio as at 30 June 2021 of 160% (Dec 2020: 161%). • Santam’s group economic capital coverage ratio of 160% lies at the mid-point of
Slide 50: Interim Dividend
INTERIM DIVIDEND 500 432 392 Cents per share 400 363 336 300 200 100 - - Jun-17 Jun-18 Jun-19 Jun-20 Jun-21
Slide 51: Group Strategy and Priorities
GROUP STRATEGY AND PRIORITIES
Slide 52: FutureFit Santam: Building Blocks for Stakeholder Value
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 53: Strategic Priorities 2021
STRATEGIC PRIORITIES 2021 DELIVERING ON FUTUREFIT SANTAM • CBI: to resolve outstanding legal matters • Continue to invest • Improving our digital E2E insurance offering • Digital capabilities such as improved self-service • New Guidewire claims module for the motor book, following successful non-mot
Slide 54: Our ESG Commitments: Sustainable and Transformed Economy
OUR ESG COMMITMENTS CONTRIBUTING TO A SUSTAINABLE AND TRANSFORMED ECONOMY Employee Safety and wellbeing • Continued to support our employees, with majority still working from home • All safety protocols adhered to with employees working in office • Driving and supporting the vaccination adoption and
Slide 55: Supporting Community Resilience and ESG Commitments
OUR ESG COMMITMENTS SUPPORTING COMMUNITY RESILIENCE AND ESG COMMITMENTS • We settled R10.4 billion in claims during the first half of 2021. • We reached over 1 million people through Consumer Financial Education (CFE) initiatives • We now support 58 Municipalities through Partnership for Risk and Re
Slide 56: Questions?
QUESTIONS? A santam
Slide 57: Thank You
THANK YOU > nN santam