Santam Limited · JSE:SNT
Santam — H1 2014 Earnings Presentation
74 slides from Santam's earnings presentation, Aug 28, 2014
Slide 1: Presentation to Analysts 2014
PRESENTATION TO ANALYSTS 2014
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Slide 3: Table of Contents
Table of Contents 4 Industry conditions 10 Financial results 32 Dividend 36 Strategy and focus 45 Reviewed Interim Report for Santam Ltd and its subsidiaries for the six months ended 30 June 2014 P resentation to A nalysts S anta m L t d an d its s u b si d iaries Reviewed Interim Report for the six
Slide 4: Financial Results for the Six Months Ended June 2014
FINANCIAL RESULTS: FOR THE SIX MONTHS ENDED 30 JUNE 2014 PRESENTED BY: IAN KIRK AND LIZET MURRAY 28 and 29 August 2014 CONTENT • Industry conditions • Financial results • Dividend • Strategy and focus 2
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Slide 6: The General Insurance Landscape
INDUSTRY CONDITIONS THE GENERAL INSURANCE LANDSCAPE Non-life GWP growth forecasts* 2013 real Non-life premium growth (general insurance) Africa 2014: 9.5% South Africa 3.3% 2015: 10.6% Advanced markets 1.1% SE Asia 2014: 10.0% Emerging markets 8.3% 2015: 9.2% World 2.3% India 2014: 15.5% 2015: 14.9%
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Slide 8: The General Insurance Landscape: South African Economic Context
THE GENERAL INSURANCE LANDSCAPE Asia 2013 non-life • Demand for insurance: growing GWP growth: 12.6% (incl. China & India) • World’s largest and most populous continent • The ‘rich’ middle class phenomenon Penetration: 1.6% • Insurance is among the fastest growing sectors Average GDP* • Emerging Asi
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Slide 10: Santam vs. SA Short-Term Insurance Industry
SANTAM VS. SA SHORT-TERM INSURANCE INDUSTRY NET UNDERWRITING MARGIN % 20 Santam Industry 15 Santam: 7.4% Industry: 4% Percentage 10 GENE 4% 5 4% 0 2.8% -5 Santam Southern Africa excluding cells. Industry (typical insurers); includes direct and bancassurance. Source: Santam and FSB INDUSTRY CHALLENGE
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Slide 12: Santam H1 2014: Key Facts
SANTAM H1 2014: KEY FACTS • Gross written premium growth: 7%; excluding cells 10% - very acceptable. • Underwriting margin of 7.4% - an outlier for the intermediated insurers. • Underwriting result significantly impacted by crop insurance turnaround - margin excluding crop of 5.0% (2013: 2.7%), but
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Slide 14: Main Variances 2014 vs. 2013; Return on Capital
MAIN VARIANCES 2014 VS. 2013 Jun-14 Jun-13 1 400 1 245 1 200 1 000 911 GENE 911 800 R million 628 600 515 413 405 416 400 292 222 244 200 195 102 93 0 U/Writing Float income Investment Income Tax Earnings Headline income before tax RETURN ON CAPITAL NET INCOME EXPRESSED AS % OF WEIGHTED AVERAGE SHAR
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Slide 16: Solvency; Net Insurance Result
SOLVENCY June Dec 2014 2013 Net asset value (NAV) R’m 6,569 6,132 Subordinated debt R’m 989 997 Regulatory equity* R’m 7,558 7,129 NAV per share GENE cps 5,729 5,373 Net written premium** R’m 17,191 16,899 Group solvency % 44 42 *Includes fair value of subordinated debt. **Rolling 12 months. NET INS
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Slide 18: Gross Written Premium; Net Underwriting Surplus
GROSS WRITTEN PREMIUM PER INSURANCE CLASS (R MILLION) Jun-14 Jun-13 Transportation 363 272 Property 3 103 2 776 Motor 4 715 4 329 26 GENE Miscellaneous 15 544 Liability 552 Guarantee 14 26 Engineering 538 529 Crop 70 55 Alternative risk 992 1 153 Accident and health 160 151 0 1 000 2 000 3 000 4 000
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Slide 20: Segmental Analysis
SEGMENTAL ANALYSIS GROSS WRITTEN PREMIUM ― PERSONAL, COMMERCIAL AND ART 6 000 11.9% 5 319 5 000 6.7% 4 754 4 214 3 951 GENE 4 000 R million 3 000 2 000 -13.9% 1 153 992 1 000 0 Personal Commercial ART Jun-14 Jun-13 SEGMENTAL ANALYSIS NET UNDERWRITING RESULT ― PERSONAL, COMMERCIAL AND ART 700 582 600
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Slide 22: Net Insurance Result; Investment Return
NET INSURANCE RESULT AS % OF NET EARNED PREMIUM 20 18 16 14 Percentage GENE 12 11.5 10.9 10.7 10.0 10 9.0 2.9 2.6 4.6 2.6 8 2.9 6.9 6.6 6 5.0 3.3 2.6 4 8.6 8.1 2.2 6.3 7.4 6.1 2 3.6 4.0 2.8 0 2007 2008 2009 2010 2011 2012 2013 Jun-14 Underwriting Float income INVESTMENT RETURN 1 400 1,036 1 200 92 5
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Slide 24: Strategic Diversification; Asset/Liability Matching
STRATEGIC DIVERSIFICATION GROUP INVESTMENT TO DATE Investment Dividend Income Effective As at 30 June 2014 % Holding R million R million Pacific & Orient Insurance Co. 15% 319 13 GENE Shriram General Insurance Co. 7% 245 BIHL Sure 20% 7 NICO subsidiaries 22% 43 Oasis Insurance 9% 22 Total 635 13 ASS
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Slide 26: Asset Allocation; Cash Generated from Operations
ASSET ALLOCATION GROUP CONSOLIDATED INVESTMENTS AT 30 JUNE 2014 (IFRS VIEW) Santam SA Centriq International Group total Equities 23% - 88%* 21% Strategic investments 8% 1% 6% GENE Preference shares 3% 1% - 3% Fixed interest-bearing 42% 68% - 45% Cash and money market 24% 30% 12% 25% Total 100% 100%
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Slide 28: Size of Float
SIZE OF FLOAT 7 000 6 000 5 000 R million 4 000 GENE 6 266 6 449 6 462 3 000 5 515 5 483 4 634 2 000 3 994 1 000 0 Dec '08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Jun-14 FLOAT AS % OF GEP 40.0 35.9 37.1 35.6 35.4 32.7 33.6 Percentage GENE Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Jun-14 26
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Slide 30: S&P International Credit Rating
S&P INTERNATIONAL CREDIT RATING • Santam's long-term counterparty credit and insurer financial strength rating adjusted from A- to BBB+, maintaining a rating of two notches above the sovereign rating. • A credit-wrap facility was entered into with an AA- rated international reinsurer towards the end
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Slide 32: Acquisition Cost Ratio; MiWay
ACQUISITION COST RATIO AS % OF NET EARNED PREMIUM 28.2 28.2 28.4 30 1.8 1.0 1.0 25 GENE 20 15.5 Percentage 13.7 16.4 15 10 12.7 10.8 11.9 5 0 Jun-13 Jun-14 Jun-14 (excl. ART QS) Commission Management expenses Strategic projects MIWAY June 2014 June 2013 Change Gross written premium (R’m) 714 628 +14
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Slide 34: Santam Re
SANTAM RE • Countries where Santam Re secured business include, but are not limited to China, South Korea, South East Asia, India and the Indian subcontinent. Programmes in Africa include Botswana, Kenya and Nigeria. • Gross written premium from third parties of R326 million was on par with June 201
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Slide 36: Dividend per Share; Capital Management
DIVIDEND PER SHARE 800 700 675 600 GENE 500 Cents per share 433 400 300 +8.3% 200 262 242 242 100 0 Jun-14 Jun-13 2013 Interim Final CAPITAL MANAGEMENT • Capital efficiency remains a priority for Santam. • Target solvency range of 35% - 45%: no change; equivalent to a capital coverage ratio of 135%
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Slide 38: Our 3-Pillar Strategy Continues to Deliver
STRATEGY AND FOCUS OUR 3-PILLAR STRATEGY CONTINUES TO DELIVER GENE NOW The leading general insurance group in South Africa. FUTURE A leading emerging market general insurance group in Africa and selected Asian markets. 36
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Slide 40: Our 3-Pillar Strategy Continues to Deliver
OUR 3-PILLAR STRATEGY CONTINUES TO DELIVER GENE IMPLEMENTATION: FIVE BUSINESSES IN GROUP PORTFOLIO Increased emphasis on quality of the risk pool and profitable opportunities for growth LONG-TERM CURRENT STATE AVERAGE TARGETS (1H 2014) REMAIN RELEVANT Claims ratio: 64.4% Underwriting Manage the marg
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Slide 42: Group's Strategic Priorities
GROUP’S STRATEGIC PRIORITIES MANAGE THE RISK POOL • Maintain risk assessment capability • Focus on risk management • Continue focus on real exposure as we globalise • Build on our systemic risk management influence and benefits GENE CLIENT CENTRIC DIVERSIFIED GROWTH • Increase focus on our clients a
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Slide 44: Business Units' Strategic Priorities
BUSINESS UNITS’ STRATEGIC PRIORITIES MIWAY SANLAM EMERGING MARKETS • Acquire volume for personal business • Maximise general insurance in SA – new segments investment opportunity with Sanlam – high-growth low-penetration countries • Launch SMME offering • Gear up and deliver on technical • Launch Li
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Slide 46: Thank You
THANK YOU
Slide 47: Reviewed Interim Report
Santam ltd and its subsidiaries Reviewed Interim Report FOR THE six months ENDED 30 june 2014
Slide 48: Table of Contents
Table of Contents 47 Salient features 48 Financial review 50 Independent auditor’s review report 51 Consolidated statement of financial position 52 Consolidated statement of comprehensive income 53 Consolidated statement of changes in equity 54 Consolidated statement of cash flows 55 Notes to the in
Slide 49: Salient Features
Gross written premium growth: Underwriting margin of 7.4% – including cell captive insurance 7% – excluding cell captive insurance 10% Positive contribution from Group solvency ratio international strategic of 44% diversification Significantly improved cash Return on shareholders' funds generation o
Slide 50: Financial Review
Financial re v ie w The Santam group reported considerably improved underwriting results for the six months ended June 2014 compared to the corresponding period in 2013, influenced by a substantial turnaround in the crop insurance business and an improved contribution from all major business units.
Slide 51: Financial Review
Financial re v ie w Net earnings from associated companies of R17 million decreased from R34 million in 2013, mainly due to the key contributor, Credit Guarantee Insurance Corporation of Africa Ltd, reporting lower earnings compared to 2013. Cash generated from operations of R930 million increased f
Slide 52: Independent Auditor's Review Report
I N D E P E N D E N T A UD I T O R ’ S R E V I E W R E P O R T TO THE SHAREHOLDERS OF SANTAM LTD We have reviewed the condensed consolidated interim financial statements of Santam Ltd, set out on pages 51 to 69, in the accompanying interim report, which comprise the condensed consolidated statement
Slide 53: Consolidated Statement of Financial Position
C onsoli d ate d state m ent o f f inancial position Reviewed Reviewed Audited At At At 30 June 2014 30 June 2013 31 Dec 2013 Notes R million R million R million ASSETS Non-current assets Property and equipment 88 97 95 Intangible assets 1 098 1 082 1 072 Deferred income tax 181 227 188 Investment i
Slide 54: Consolidated Statement of Comprehensive Income
C onsoli d ate d state m ent o f co m pre h ensi v e inco m e Reviewed Reviewed Six months Six months Audited ended ended Year ended 30 June 2014 30 June 2013 Change 31 Dec 2013 Notes R million R million % R million Gross written premium 10 525 9 858 7% 20 631 Less: Reinsurance premium 2 465 2 089 3
Slide 55: Consolidated Statement of Changes in Equity
C onsoli d ate d state m ent o f c h an g es in e q u ity Non- controlling Attributable to equity holders of the company interest Total Distribut- Share Treasury Other able capital shares reserves reserves R million R million R million R million R million R million Balance as at 1 January 2013 107 (
Slide 56: Consolidated Statement of Cash Flows
C onsoli d ate d state m ent o f cas h f lo w s Reviewed Reviewed Six months Six months Audited ended ended Year ended 30 June 2014 30 June 2013 31 Dec 2013 Notes R million R million R million Cash generated from operations 930 516 1 616 Interest paid (48) (34) (118) Income tax paid (101) (88) (221)
Slide 57: Notes to the Interim Financial Information
N otes to t h e interi m f inancial in f or m ation 1. Basis of preparation The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standard (IFRS), IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by
Slide 58: Notes: Segment Information
N otes to t h e interi m f inancial in f or m ation 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, supported by the
Slide 59: Notes: Segment Information, Six Months to June 2014
N otes to t h e interi m f inancial in f or m ation 5.1 For the six months ended 30 June 2014 Insurance Investment Unallocated Total Business activity R million R million R million R million Revenue 10 525 495 11 020 Gross written premium 10 525 10 525 Net written premium 8 060 8 060 Net earned prem
Slide 60: Notes: Investment Activities and Geographical Analysis
N otes to t h e interi m f inancial in f or m ation 5.2 Investment activities For detailed analysis of investment activities refer to notes 6 and 8. 5.3 Geographical analysis Gross written Non-current Gross written Non-current premium assets premium assets June 2014 June 2014 Dec 2013 Dec 2013 R mil
Slide 61: Notes: Segments, Six Months to June 2013
N otes to t h e interi m f inancial in f or m ation 5.4 For the six months ended 30 June 2013 Insurance Investment activities activities Unallocated Total Business activity R million R million R million R million Revenue 9 858 282 10 140 Gross written premium 9 858 9 858 Net written premium 7 769 7
Slide 62: Notes: Segments, Year Ended December 2013
N otes to t h e interi m f inancial in f or m ation 5.5 For the year ended 31 December 2013 Insurance Investment activities activities Unallocated Total Business activity R million R million R million R million Revenue 20 631 942 21 573 Gross written premium 20 631 20 631 Net written premium 16 900
Slide 63: Notes: Financial Assets and Liabilities at Fair Value
N otes to t h e interi m f inancial in f or m ation Reviewed Reviewed Audited At 30 June At 30 June At 31 Dec 2014 2013 2013 R million R million R million 6. Financial assets and liabilities at fair value through income Financial assets at fair value through income The group's financial assets are s
Slide 64: Notes: Fair Value Hierarchy
N otes to t h e interi m f inancial in f or m ation Level 1 Level 2 Level 3 Total June 2013 R million R million R million R million Equity securities Quoted Listed 2 830 – – 2 830 Unitised funds – 118 – 118 Irredeemable preference shares 2 – – 2 Unquoted – – 324 324 Total equity securities 2 832 118
Slide 65: Notes: Level 3 Instruments
N otes to t h e interi m f inancial in f or m ation The following table presents the changes in level 3 instruments Debt securities unquoted Equity redeemable securities preference unquoted shares Derivatives Total June 2014 R million R million R million R million Opening balance 529 23 (203) 349 Ac
Slide 66: Notes: Financial Liabilities at Fair Value
N otes to t h e interi m f inancial in f or m ation Financial liabilities at fair value through income Level 1 Level 2 Level 3 Total June 2014 R million R million R million R million Debt securities 1 013 – – 1 013 Investment contracts – 26 – 26 1 013 26 – 1 039 June 2013 Debt securities 1 022 – – 1
Slide 67: Notes: Insurance Liabilities and Reinsurance Assets
N otes to t h e interi m f inancial in f or m ation Reviewed Reviewed Audited At At At 30 June 2014 30 June 2013 31 Dec 2013 R million R million R million 7. Insurance liabilities and reinsurance assets Gross Long-term insurance contracts – claims reported and loss adjustment expenses 12 7 3 – claim
Slide 68: Notes: Non-Current Assets Held for Sale
N otes to t h e interi m f inancial in f or m ation 8. Non-current assets held for sale Santam Ltd initially set up the Santam International Group to facilitate the expansion into Europe. Santam International Ltd (Santam International) directly and indirectly held three subsidiaries called Santam UK
Slide 69: Notes: Investment Income and Net Gains
N otes to t h e interi m f inancial in f or m ation Reviewed Reviewed Audited At At At 30 June 2014 30 June 2013 31 Dec 2013 R million R million R million 9. Investment income and net gains/(losses) on financial assets and liabilities at fair value through income Investment income 377 363 782 Divide
Slide 70: Notes: Business Combinations
N otes to t h e interi m f inancial in f or m ation 11. Business combinations 2014 There were no material business combinations during the six months ended 30 June 2014. 2013 Additions Travel Insurance Consultants (Pty) Ltd Santam Ltd acquired 100% of the shareholding in Travel Insurance Consultants
Slide 71: Notes: Earnings per Share
N otes to t h e interi m f inancial in f or m ation Reviewed Reviewed Six months Six months Audited ended ended Year ended 30 June 2014 30 June 2013 31 Dec 2013 12. Earnings per share Basic earnings per share Profit attributable to the company’s equity holders (R million) 911 405 1 120 Weighted aver
Slide 72: Directors and Santam Head Office Details
NON-EXECUTIVE DIRECTORS SANTAM HEAD OFFICE AND REGISTERED ADDRESS B Campbell, MD Dunn, MP Fandeso, 1 Sportica Crescent BTPKM Gamedze, GG Gelink (Chairman), Tyger Valley, Bellville 7530 MLD Marole, MJ Reyneke, JP Möller, J van Zyl PO Box 3881, Tyger Valley 7536 Tel: 021 915 7000 Fax: 021 914 0700 EXE
Slide 73: GREYMATTER & FINCH # 8035
GREYMATTER & FINCH # 8035
Slide 74: Insurance Good and Proper
INSURANCE GOOD AND PROPER WWW.SANTAM.CO.ZA