Outsurance Group Limited · JSE:OUT
Outsurance — RMI Holdings — FY2021 Earnings Presentation
45 slides from Outsurance's earnings presentation, Sep 20, 2021
Slide 1: RMI Investor Presentation: Strategic Restructure and Results Announcement
RMI INVESTOR PRESENTATION STRATEGIC RESTRUCTURE AND RESULTS ANNOUNCEMENT 20 September 2021 FOCUS • COLLABORATE • GROW THIS PRESENTATION AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE
Slide 2: Topics
FOCUS C O L L A B O R AT E GROW TOPICS 1 RMI STRATEGIC RESTRUCTURE Herman Bosman Marthinus Visser 2 OUTSURANCE RESULTS FOR THE YEAR ENDED 30 JUNE 2021 Jan Hofmeyr 3 HASTINGS RESULTS FOR THE 6 MONTHS ENDED JUNE 2021 Toby van der Meer 4 RMI RESULTS FOR THE YEAR ENDED JUNE 2021 Herman Bosman 5 CONCLUSI
Slide 3: What has RMI announced today?
WHAT HAS RMI ANNOUNCED TODAY? A fundamental Restructure to align with our evolution as a P&C focused investor CURRENT RMI Current shareholders RMI (listed) 24.8% 26.8% 89.1% 30% 100% 100% 1 UNBUNDLING OF DISCOVERY AND MMH 2 RMI RIGHTS ISSUE RMI POST STRATEGIC RESTRUCTURE Current shareholders RMI (li
Slide 4: Restructure consistent with our group's history and ethos
RESTRUCTURE CONSISTENT WITH OUR GROUP’S HISTORY AND ETHOS Restructure follows several milestone corporate actions which have all added shareholder value and structured the ownership of assets more efficiently Acquired Magnum Group (Discovery) formation as RCI RMB merger ‘77 '80 ‘81 ‘82 ‘83 ‘84 ‘85 ‘
Slide 5: Proud association with MMH and Discovery
PROUD ASSOCIATION WITH MMH AND DISCOVERY Partnership from inception to todays large, established businesses; resilient operations; poised for future growth Attractive TSRs since RMI listing: Elements of success Discovery (308%), MMH (115%) RMI has acted as a stable, long-term, value-additive shareho
Slide 6: Why are we implementing the restructure? Longer-term focus
Longer-term focus WHY ARE WE IMPLEMENTING THE RESTRUCTURE? Portfolio focused on (1) unlisted P&C assets; (2) optimised capital structure; (3) value unlock through discount reduction 1 P&C premium performance since 2005 o Deliberate focus to align structure to strategy as 10 an international P&C- bia
Slide 7: Why are we implementing the restructure? Capital structure
WHY ARE WE IMPLEMENTING THE RESTRUCTURE? Portfolio focused on (1) unlisted P&C assets; (2) optimised structure; (3) value unlock through discount reduction 2 Regulatory robustness as direction of travel points to increased economic inclusivity and de-concentration of the economy Efficient and agile
Slide 8: Why are we implementing the restructure? Short-term value creation
Short-term value creation WHY ARE WE IMPLEMENTING THE RESTRUCTURE? Portfolio focused on (1) unlisted P&C assets; (2) optimised capital structure; (3) value unlock through discount reduction 3 Restructure is expected to unlock material shareholder value through a reduction in the discount at which RM
Slide 9: Other salient terms of the restructure
OTHER SALIENT TERMS OF THE RESTRUCTURE The Restructure is underpinned by support from ~65% of shareholders ○ RMI has received in-principle support from shareholders representing 65% of RMI shares: • its largest shareholders, Remgro and Royal Bafokeng Holdings Key • the founders of the RMB group of c
Slide 10: Unpacking key components of future RMI net asset value build-up
UNPACKING KEY COMPONENTS OF FUTURE RMI 1 NET ASSET VALUE BUILD-UP 2 PORTFOLIO COMPOSITION 3 STRATEGIC POSITIONING 4 FOCUS ON: 4.1 Growth 4.2 Cash generation and dividend framework 4.3 Expansion 9
Slide 11: Net asset value build-up
1 NET ASSET VALUE BUILD-UP o The indicative effects of the Restructure set out below are for illustrative purposes only and are based on 30 June 2021 market prices with internal valuations calculated for unlisted assets Indicative RMI SOTP valuation Post-Restructure (Rbn) Market value of listed stak
Slide 12: Portfolio composition
2 PORTFOLIO COMPOSITION Evolving towards an unlisted, geographically diverse P&C investor PORTFOLIO MIX(1) 3 8 1 1 2014 (%) 2021 (%) 13 POST 28 RESTRUCTURE 40 OUTsurance OUTsurance 2022E (%) 25 MMH 51 MMH Discovery Discovery OUTsurance RMBSI 16 Hastings Hastings 87 29 AC / IMG AC / IMG 1 1 2014 (%)
Slide 13: Strategic positioning
3 STRATEGIC POSITIONING Reflecting our strategic positioning Following the Restructure RMI’s portfolio will become simpler reflecting: 1 Focused P&C player 2 Portfolio of globally relevant, difficult to otherwise access, unlisted assets 3 Single entry point to portfolio of assets 4 More predictable
Slide 14: Growth: attractive outlook for OUTsurance and Hastings
4.1 GROWTH: ATTRACTIVE OUTLOOK FOR OUTSURANCE AND HASTINGS Drivers of growth in our core assets P&C focus o In South Africa, OUTsurance Business and OUTsurance Life continue their strong acceleration in new business volumes Growth through o Youi CTP product and the Youi Blue Zebra broker partnership
Slide 15: Cash generation: facilitates growth and dividends
4.2 CASH GENERATION: FACILITATES GROWTH AND DIVIDENDS KEY PORTFOLIO ASSETS HAVE STRONG TRACK RECORD OF CASH GENERATION RMI POST RESTRUCTURE Pay-out ratio 62% 67% 80% 85% 80% (% of earnings) TARGET A DIVIDEND PAY-OUT RATIO OF Dividend 50% OF FREE CASH FLOW GENERATED HISTORICAL 4.3% 5.3% 5.4% 5.2% 5.2
Slide 16: Expansion: structured approach to investing for future growth
4.3 EXPANSION: STRUCTURED APPROACH TO INVESTING FOR FUTURE GROWTH Any further expansion will be deliberate and informed by our style as a disciplined, long-term investor in appropriate assets Leveraging platform to enter new markets o RMI will continue to selectively assess investments in unlisted P
Slide 17: OUTsurance Group Financial Results June 2021
OUTsurance Group Financial Results 30 June 2021 You always get , something out. — s f
Slide 18: Contents
Contents OVERVIEW GROUP RESULTS OVERVIEW OUTSURANCE RESULTS OVERVIEW YOU! RESULTS OVERVIEW P\PAP AP OUTLOOK
Slide 19: Overview
Overview You always get something out. Ss | ©
Slide 20: 2021 in review
2021 in review > The Group delivered a pleasing financial performance with underwriting profit, operating profit and normalised earnings increasing by 5.5%, 2.6% and 15.3% respectively. > The operating result reflects the significant investment (13% of operating profit) being made in various growth
Slide 21: Group results overview
Group results overview SURANCE
Slide 22: Group results overview
Group results overview Normalised earnings and operating profit Normalised earnings drivers for 2021 (R'million) (R'million) s =m = 2017 2018 2019 2020 2021 2020 Neteammed Netclaims Net Operating Investment Associates Mincritles Taxand 2021 = Underwriting profit = Operating profit = Normalised earin
Slide 23: Group results overview continued
Group results overview continued Impact new initiative investment on operating profit (R'million) 1% 3% 6% (3) (95) (192) (68) (143) 2017 2018 2019 2020 2021 = Youi growth initiatives = OUTsurance growth initiatives mYoui established = OUTsurance established Operating loss from new initiatives as %
Slide 24: OUTsurance results overview
OUTsurance = results overview ou
Slide 25: OUTsurance results overview
OUTsurance results overview Normalised earnings and operating profit Normalised earnings drivers for 2021 (R'million) (R'million) 1435 909% Investment income positively impacted by ‘equity returns, 2021 Neteamed Netclaims Operating Investment Tax and other Premiums expenses income 2017 2018 2019 202
Slide 26: OUTsurance Personal results overview
OUTsurance Personal results overview SS OUTsurance Personal Gross written premium (R'million) Rimillion 2020. % change +48 | Gross written premium 7 694 7343 48% Net eamed premium 7 586 7238 4.8% Underwriting profit 2.269 2199 3.2% Operating profit 2329 2296 1.4% Claims ratio 48.3% 46.4% Cost-to-inc
Slide 27: OUTsurance Business results overview
OUTsurance Business results overview MS OUTsurance Business Gross written premium (R'million) +13.2% R'million | 2021 | 2020. % change Gross written premium 1713 1513 13.2% Net earned premium 1673 1485 12.7% Underwriting profit 82 12 >100% Operating profit 97 35 >100% Claims ratio 57.4% 63.1% Cost-t
Slide 28: OUTsurance Life results overview
OUTsurance Life results overview SS OUTsurance Life Headline earnings and operating profit (R'million) Rin TET se Gross written premium 650 351 78.0% Net eared premium 585 503 16,3% Operating profit / (loss) (25) 6 (100%) Cost-to-income ratio 55.1% 54,8% " 443% Embedded Value 1309 1193 9.7% _ > (100
Slide 29: Youi
la SS
Slide 30: Youi results overview
Youi results overview Normalised earnings and operating profit Normalised earnings drivers for 2021 (Youi Group) (Youi Australia) (R'million) (Rimillion) negatively Impacted by lover Yield enveonment 270% increase in the dolor cost of 202 folowing stastophe everts ‘m 2010 and 2020 2017 2018 2019 202
Slide 31: Outlook
Outlook >> The various growth initiatives will continue to drive strong top line growth over the near term. The stronger average Rand compared to FY 2021 is likely to dampen the premium growth achieved by Youi in the reported results. [> Management focus is on the translation of new initiative premi
Slide 32: Hastings H1 Results
Hastings Group Hastings H1 Results
Slide 33: Reminder of what we do
Reminder of what we do • Technology led challenger to traditional UK insurers in motor and home insurance • Experts in digital and price comparison distribution • Heavy users of large complex data to enable more refined and more rapid risk selection, pricing and claims optimisation • High digitalisa
Slide 34: H1 financial highlights
H1 financial highlights Good financial momentum in 2021… • Profit before tax of £76 million*, up 20% year on year • Calendar year loss ratio of 63.4% • Live customer policies of 3.1 million, + 4% year on year. Customer retention continues to be high and above market averages • Solvency coverage rati
Slide 35: A few H1 operational highlights
A few H1 operational highlights And good progress on operational and strategic initiatives Customer service • Focus on customers through ongoing Covid support, systems enhancements and process and supplier changes, leading to continued high customer NPS scores • High colleague engagement, including
Slide 36: Digital: one example of capabilities needed and strategic focus area
Digital: one example of capabilities needed and strategic focus area Digital capabilities • Embraced mobile app – one of the first mainstream UK insurance providers to launch one • Now highest rated app out of mainstream UK insurance providers • Significant adoption and growth – 1.7m log ins in H1 2
Slide 37: Hastings is setting out to become a market leader
Hastings is setting out to become a market leader… Hastings is setting out to become a market leader… Become the Best and Biggest Digital Insurance Provider Hastings today Market leaders Large scale 3.1m policies 6m+ policies ambition £131m UK profit £600m+ UK profit Pricing Customer Claims Digital
Slide 38: Delivering on our vision – strategic focus areas
Delivering on our vision – strategic focus areas A significant change and technology programme continues, building on 2019/20 momentum and leveraging our new technology Hastings 2021 change programme Pricing Customer Claims Digital New Home and anti-fraud retention transformation (low cost) proposit
Slide 39: Benefits from P&C ownership
Benefits from P&C ownership Strategic and financial benefits of collaboration with non-competing P&C leaders in their markets • Strong embedded relationship with RMI and OUTsurance: • Collaboration benefits realised in pricing, call centre capabilities and outsourcing • Pipeline of other collaborati
Slide 40: Regulatory reforms
Regulatory reforms Hastings is well positioned in the face of regulatory change FCA review of pricing practices • Final policy statement received in Q2 • Expected to stop practices of aggressive new business discounting • Therefore alignment of pricing likely to increase new business prices “6 milli
Slide 41: RMI
RMI FOCUS • COLLABORATE • GROW
Slide 42: RMI's FY2021 results: resilience in tough environment
RMI’s FY2021 RESULTS: RESILIENCE IN TOUGH ENVIRONMENT NORMALISED EARNINGS DIVIDEND PER SHARE +15% 22.5cps to R3.5bn FY21 total: 45cps FUNDING AND HOLDING COMPANY COSTS NET FUNDING COSTS 532 +1.2% HOLDING COMPANY EXPENSES TOTAL 65 597 % of market cap 41
Slide 43: In conclusion
IN CONCLUSION Our purpose is to add discernible value by providing our stakeholders with the opportunity to access unique, geographically diversified property & casualty insurance businesses We will achieve this through our partnerships with unlisted, dynamic, growth companies across all life phases
Slide 44: Questions
QUESTIONS FOCUS • COLLABORATE • GROW
Slide 45: Important information - disclaimer
IMPORTANT INFORMATION - DISCLAIMER Shareholders should note that the RMI Board reserves the right, in its discretion, to decide not to proceed with the Restructure and, as such, the Restructure may or may not proceed. The release, publication or distribution of this presentation in jurisdictions oth