Santam Limited · JSE:SNT
Santam — H1 2015 Earnings Presentation
70 slides from Santam's earnings presentation, June 2015
Slide 1: Presentation to Analysts 2015
2015 P R E S E N TAT I O N T O A N A LY S T S
Slide 2: Directors and corporate information
Non-executive directors Santam head office and registered address CB Booth, B Campbell, MD Dunn, MP Fandeso, T Fubu, 1 Sportica Crescent, Tyger Valley, Bellville 7530 BTPKM Gamedze, GG Gelink (Chairman), PO Box 3881, Tyger Valley 7536 IM Kirk, MLD Marole, JP Möller, MJ Reyneke, Tel: 021 915 7000 J v
Slide 3: Table of contents
Table of contents 4 Market context 10 Financial results 30 Capital management 36 Group strategy and priorities 43 eviewed interim report for Santam Limited and its subsidiaries R for the six months ended 30 June 2015 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 M LT D A N D I T S S U B S I D
Slide 4: Contents
CONTENTS • Market context • Financial results • Capital management • Group strategy and priorities 2
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Slide 6: Market context
• Profitable growth remains a major challenge in more developed markets • Emerging markets continue to show positive prospects • Persistently low level of trust – client-centricity is key • Regulatory advancement in here to stay • Technological advancement presents new risks and opportunities 4
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Slide 8: Market context: risks and opportunities
• Subdued outlook for economic growth, coupled with socio-economic challenges, sovereign rating challenges • Intense competition – continued competitive rates, pressure on profitability • Several fundamental changes in regulations • Real impact of increasing risks on the ground • Skills and transfor
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Slide 10: Relative performance; Santam H1 2015 key facts
RELATIVE PERFORMANCE NET WRITTEN PREMIUM GROWTH 25 20 15 GENE 10 8%* Santam: 7% 5 6% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015 Q2 2015 *Typical insurers NWP GDP + CPI Santam NWP (excl. cells & ART QS) *Source: FSB – latest report = March 2015 * Industry figure adjusted to include t
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Slide 12: Main variances 2015 vs 2014
MAIN VARIANCES 2015 vs. 2014 1 500 1 453 1 245 995 1 014 1 000 911 911 808 628 R million 500 466 413 236 222 0 Underwriting Investment Investment Income before Tax Earnings Headline result return on income tax earnings insurance ( 292) funds ( 500) ( 390) Jun-15 Jun-14 Non-headline: Impairment of in
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Slide 14: Net insurance result; gross written premium
NET INSURANCE RESULT June 2015 % of June 2014 % of 2015/ 5Y 10Y R'm NEP R'm NEP 2014 ave % ave % Gross written premium 11 270 10 525 7% 8 8 Net earned premium 9 088 100.0 8 459 100.0 7% 100.0 100.0 Claims incurred 5 786 63.7 5 448 64.4 6% 65.7 66.8 Acquisition costs 2 494 27.4 2 383 28.2 5% 27.8 26.
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Slide 16: Net underwriting surplus per class; segmental analysis
NET UNDERWRITING SURPLUS PER INSURANCE CLASS (R MILLION) Guarantee 8 2 Jun-15 Jun-14 Miscellaneous 6 1 ART 10 (13) Accident and Health 22 (3) Transportation 41 31 Crop 53 187 Liability 85 119 Engineering 123 69 Property 136 36 Motor 324 199 (50) 0 50 100 150 200 250 300 350 SEGMENTAL ANALYSIS GROSS
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Slide 18: Segmental analysis; acquisition cost ratio
SEGMENTAL ANALYSIS NET UNDERWRITING RESULT ― PERSONAL, COMMERCIAL AND ART 650 582 546 550 450 R million 350 252 250 150 59 43 50 10 17 (50) Personal Commercial ART (13) ART profit before tax Jun-15 Jun-14 ACQUISITION COST RATIO AS % OF NET EARNED PREMIUM 30 28.4 28.5 28.1 27.7 27.9 28.0 27.3 0.8 1.0
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Slide 20: Level of reinsurance; net insurance result
LEVEL OF REINSURANCE EARNED PREMIUM AS % OF GROSS EARNED PREMIUM Percentage 18.0 17.4 17.8 18.3 16.0 14.9 14.8 14.9 13.7 11.0 11.8 8.6 9.0 5.2 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 excl Jun-15 excl ART QS ART QS Group Excl. cells NET INSURANCE RESULT AS % OF NET EARNED PREMIUM 14 12 11.5 10.9 10
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Slide 22: Size of insurance funds
SIZE OF INSURANCE FUNDS 8 000 7 000 6 774 6 752 6 449 6 462 6 266 6 000 5 515 5 483 5 000 4 634 R million 4 000 3 000 2 000 1 000 0 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Jun-14 Dec-14 Jun-15 Group insurance funds excluding Centriq INSURANCE FUNDS AS % OF GROSS EARNED PREMIUM 40.0 37.1 35.6 35.9 35.4 33
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Slide 24: Investment return; asset/liability matching
INVESTMENT RETURN 1 200 968 1 000 71 114 800 702 635 15 286 62 R million 9 76 600 30 248 353 400 591 200 353 284 0 (93) (93) ( 200) Jun-15 Jun-14 Dec-14 Interest and dividends MV movements SEM Fence Forex gains and losses ASSET/LIABILITY MATCHING GROUP CONSOLIDATED ASSETS AT 30 JUNE 2015 100.0 2.2 3
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Slide 26: Asset allocation
ASSET ALLOCATION GROUP CONSOLIDATED INVESTMENTS AT 30 JUNE 2015 (IFRS VIEW) SANTAM SA CENTRIQ INTERNATIONAL GROUP TOTAL Equities ― hedged 10% - - 8% Equities ― unhedged 9% 1% 89%* 9% Strategic investments 7% - - 5% Investment in associates 3%** - - 2% Interest bearing instruments 47% 73% - 52% Cash
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Slide 28: SEM participation investments; cash generated
SEM PARTICIPATION INVESTMENTS INCORPORATED SANTAM SANTAM IN EFFECTIVE HOLDING EFFECTIVE HOLDING JUNE 2015 DECEMBER 2014 % % 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 20.4 NICO Holdings general i
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Slide 30: MiWay; Santam Re
MIWAY June 2015 June 2014 Change Gross written premium (R’m) 835 714 17% Gross underwriting result, net of CAT recoveries (R’m) 76 52 46% Gross claims ratio, net of CAT recoveries 60.8% 58.3% Gross acquisition cost ratio 30.0% 34.4% New policies added* 51 812 47 728 9% Number of clients* 223 621 194
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Slide 32: Return on capital
RETURN ON CAPITAL NET INCOME EXPRESSED AS % OF WEIGHTED AVERAGE SHAREHOLDERS’ FUNDS (ROLLING 12 MONTHS) 40 37.1 35 30 26.6 13.8 25.0 24.7 24.1 25 22.6 Percentage 5.1 20.0 3.9 3.0 20 11.1 8.6 15 9.0 23.3 21.1 10 19.9 20.8 15.5 14.0 5 11.0 0 Dec-09 Dec-10 Dec-11 Dec-12 adj* Dec-13 Dec-14 Jun-15 Insura
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Slide 34: Solvency and capital management
SOLVENCY June 2015 Dec 2014 Net asset value (NAV) R’m 6 783 7 010 Subordinated debt R’m 992 999 Regulatory equity* R’m 7 775 8 009 NAV per share cps 6 124 6 115 Net written premium** R’m 18 217 17 635 Group solvency % 43 46 * Includes fair value of subordinated debt. ** Rolling 12 months. CAPITAL MA
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Slide 36: Value created by BBBEE scheme; dividend per share
VALUE CREATED BY SANTAM’S BBBEE SCHEME CENTRAL PLAZA Total value created for scheme participants: R 1.1bn Santam and Sanlam staff Santam Business Partners Community Trust R530m R330m R275m DIVIDEND PER SHARE 800 742 700 600 Cents per share 500 480 400 300 +10% 200 288 262 262 100 0 Jun-15 Jun-14 Dec
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Slide 38: Growth through diversification, manage the risk pool, drive efficiency
GROWTH THROUGH MANAGE THE RISK DRIVE CONTINUOUS DIVERSIFICATION POOL EFFICIENCY 36
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Slide 40: Strategic focus areas 2015 through the medium term
Successfully expand to Asia and the rest of Africa through: • Our emerging markets investments and partnerships – structure, regional focus and in-country strategies • Our specialist business – target segments that require specialist skills • Our reinsurance business – pursue selective opportunities
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Slide 42: Now and future
NOW FUTURE The leading general A leading emerging market insurance group in general insurance group in South Africa Africa and selected Asian markets 40
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Slide 44: Thank you
42 SDD THANK YOU S2252555:
Slide 45: Reviewed interim report
REVIEWED INTERIM REPORT FOR THE SIX MONTHS E N D E D 3 0 J U N E 2 015 43
Slide 46: Table of contents
Table of contents 45 Salient features 46 Financial review 49 Independent auditor’s review report 50 Summary consolidated statement of financial position 51 Summary consolidated statement of comprehensive income 52 Summary consolidated statement of changes in equity 53 Summary consolidated statement
Slide 47: Audited summary report: salient features
AUDIT E D SUMMARY REPORT Gross written premium Gross written premium growth including cell captive growth excluding cell captive insurance 7% insurance 8% Underwriting margin Cash generation significantly 8.9% improved Group solvency Return on capital (rolling ratio 43% 12 months) 24.1% Headline ear
Slide 48: Financial review
PRES EN TATI O N TO A NA LYST S 2 0 1 5 FINANCIAL REVIEW The Santam group achieved strong underwriting results for the six months ended 30 June 2015, with a net underwriting margin of 8.9% (2014: 7.4%). The underwriting performance was influenced by an improved contribution from the Santam Commercia
Slide 49: Financial review
AUDIT E D SUMMARY REPORT FINANCIAL REVIEW The investment return on insurance funds of R236 million increased from the R222 million earned in 2014, in line with the growth in the business. The combined effect of insurance activities resulted in a net insurance income of R1 044 million compared to R85
Slide 50: Financial review: outlook and events after period
PRES EN TATI O N TO A NA LYST S 2 0 1 5 FINANCIAL REVIEW platform in the Santam Commercial and Personal intermediated business, which will enable improved underwriting capabilities. MiWay will continue focusing on growing its retail client base, its newly launched commercial offering and direct life
Slide 51: Independent auditor's review report
AUDIT E D SUMMARY 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
Slide 52: Consolidated statement of financial position
PRES EN TATI O N TO A NA LYST S 2 0 1 5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Reviewed at Reviewed at Audited at 30 June 2015 30 June 2014 31 Dec 2014 Notes R million R million R million ASSETS Non-current assets Property and equipment 114 88 117 Intangible assets 1 061 1 098 1 086 Deferred i
Slide 53: Consolidated statement of comprehensive income
AUDIT E D SUMMARY REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Reviewed Reviewed Audited Six months ended Six months ended Year ended 30 June 2015 30 June 2014 Change 31 Dec 2014 Notes R million R million % R million Gross written premium 11 270 10 525 7% 22 710 Less: Reinsurance premium 2
Slide 54: Consolidated statement of changes in equity
PRES EN TATI O N TO A NA LYST S 2 0 1 5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Non- controlling Attributable to equity holders of the company interest Total Distribu- Share Treasury Other table capital shares reserves reserves Total R million R million R million R million R million R million R
Slide 55: Consolidated statement of cash flows
AUDIT E D SUMMARY REPORT CONSOLIDATED STATEMENT OF CASH FLOWS Reviewed Reviewed Audited Six months ended Six months ended Year ended 30 June 2015 30 June 2014 31 Dec 2014 Notes R million R million R million Cash flows from operating activities Cash generated from operations 1 212 930 2 443 Interest
Slide 56: Notes to the interim financial statements
PRES EN TATI O N TO A NA LYST S 2 0 1 5 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 Repor
Slide 57: Notes: segment information
AUDIT E D SUMMARY REPORT NOTES TO THE INTERIM FINANCIAL STATEMENTS 5. Segment information Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Chief Executive Officer, su
Slide 58: Notes: segment information 2015
PRES EN TATI O N TO A NA LYST S 2 0 1 5 NOTES TO THE INTERIM FINANCIAL STATEMENTS 5.1 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 premium result Insurance clas
Slide 59: Notes: segment information 2014
AUDIT E D SUMMARY REPORT NOTES TO THE INTERIM FINANCIAL STATEMENTS 5.2 For the six months ended 30 June 2014 (continued) Insurance activities The group’s insurance activities are spread over various classes of general insurance. Gross written Underwriting premium result Insurance class R million R m
Slide 60: Notes: segment information, geographical analysis
PRES EN TATI O N TO A NA LYST S 2 0 1 5 NOTES TO THE INTERIM FINANCIAL STATEMENTS 5.3 For the year ended 31 December 2014 (continued) Insurance activities The group’s insurance activities are spread over various classes of general insurance. Gross written Underwriting premium result Insurance class
Slide 61: Notes: financial assets and liabilities
AUDIT E D SUMMARY REPORT NOTES TO THE INTERIM FINANCIAL STATEMENTS Reviewed at Reviewed at Audited at 30 June 2015 30 June 2014 31 Dec 2014 R million R million R million 6. Financial assets and liabilities Financial assets The group’s financial assets are summarised below by measurement category. Fi
Slide 62: Notes: financial assets and liabilities (continued)
PRES EN TATI O N TO A NA LYST S 2 0 1 5 NOTES TO THE INTERIM FINANCIAL STATEMENTS 6. Financial assets and liabilities (continued) Financial liabilities at fair value through income (continued) Level 1 Level 2 Level 3 Total R million R million R million R million Debt securities 1 016 – – 1 016 Inves
Slide 63: Notes: financial assets and liabilities (continued)
AUDIT E D SUMMARY REPORT NOTES TO THE INTERIM FINANCIAL STATEMENTS 6. Financial assets and liabilities (continued) Financial assets at fair value through income (continued) Level 1 Level 2 Level 3 Total 31 December 2014 R million R million R million R million Equity securities Quoted Listed 2 999 –
Slide 64: Notes: financial assets and liabilities (continued)
PRES EN TATI O N TO A NA LYST S 2 0 1 5 NOTES TO THE INTERIM FINANCIAL STATEMENTS 6. Financial assets and liabilities (continued) Equity Debt Short-term securities securities money market unquoted unquoted instruments Derivatives Total 30 June 2014 R million R million R million R million R million O
Slide 65: Notes to the interim financial statements
AUDIT E D SUMMARY REPORT NOTES TO THE INTERIM FINANCIAL STATEMENTS During the first half of 2013, Santam entered into three derivative fence structures between 28 March 2013 and 8 May 2013, covering equities to the value of R2 billion. All three tranches had downside protection of 10% with upside pa
Slide 66: Notes: non-current asset held for sale
PRES EN TATI O N TO A NA LYST S 2 0 1 5 NOTES TO THE INTERIM FINANCIAL STATEMENTS 8. Non-current asset held for sale (continued) Santam International Santam Ltd initially set up the Santam International group to facilitate the expansion into Europe. Santam International Ltd (Santam International) di
Slide 67: Notes: income tax
AUDIT E D SUMMARY REPORT NOTES TO THE INTERIM FINANCIAL STATEMENTS Reviewed at Reviewed at Audited at 30 June 2015 30 June 2014 31 Dec 2014 R million R million R million 10. Income tax Normal taxation Current year 376 283 684 Prior year 14 2 – Recovered from cell owners (39) (33) (77) Foreign taxati
Slide 68: Notes: earnings per share
PRES EN TATI O N TO A NA LYST S 2 0 1 5 NOTES TO THE INTERIM FINANCIAL STATEMENTS Reviewed Reviewed Audited Six months ended Six months ended Year ended 30 June 2015 30 June 2014 31 Dec 2014 12. Earnings per share Basic earnings per share Profit attributable to the company’s equity holders (R millio
Slide 69: GREYMATTER & FINCH # 9063
GREYMATTER & FINCH # 9063
Slide 70: Insurance good and proper
INSURANCE GOOD AND PROPER w w w. s a n t a m . c o . z a