Santam Limited · JSE:SNT
Santam — FY2020 Earnings Presentation
64 slides from Santam's earnings presentation, March 2021
Slide 1: Analyst Presentation: Financial Results for the Year Ended 31 December 2020
2020 ANALYST PRESENTATION FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020 Presented by: Lizé Lambrechts and Hennie Nel a santam
Slide 2: Contents
CONTENTS 1. The Santam business portfolio 2. Market context 3. Financial results 4. Capital management 5. Group strategy and priorities
Slide 3: The Santam Business Portfolio
THE SANTAM BUSINESS PORTFOLIO Santam’s Santam Santam Strategic Investment Commercial Santam Alternative Risk Partnerships inclusive of and Personal Specialist Santam Re MiWay Transfer Saham Our multi-channel Our specialist Our reinsurance Our direct Our alternative risk Our investments insurance bus
Slide 4: Santam Group Insurance Activities
SANTAM GROUP INSURANCE ACTIVITIES Insurance operating segments What is included? Conventional insurance Conventional insurance business written on insurance licences controlled by the group, consisting of: • Santam Commercial and Personal • Santam Specialist • Santam Re • MiWay Alternative risk tran
Slide 5: Market Context
MARKET CONTEXT
Slide 6: Insurance Market Outlook: All Markets
INSURANCE MARKET OUTLOOK • All markets • COVID-19 pandemic and the emergence of new variants remain a key downside risk to economic recovery and insurance demand • Global premium growth is expected to recover this year, largely driven by rate hardening and the emerging markets, in particular China •
Slide 7: Insurance Market Outlook: South Africa
INSURANCE MARKET OUTLOOK • South Africa • Economic growth to be muted but positive for 2021 • Updates on vaccines are promising; however, uncertainty remains around access and the roll-out performance • Some form of social distancing measures likely to remain until population immunity is reached • P
Slide 8: Contingent Business Interruption Cover
CONTINGENT BUSINESS INTERRUPTION COVER CURRENT STATUS • Recent judgments in SA and the UK provided legal certainty • At 31 December 2020 Santam raised R2 billion net CBI claims provisions in addition to R1 billion interim relief payments during August 2020 • Santam was granted leave to appeal agains
Slide 9: Santam December 2020 Key Facts
SANTAM DECEMBER 2020 KEY FACTS • Gross written premium growth of 7% • Conventional insurance gross written premium growth of 5% • Underwriting margin for conventional insurance business of 2.5% (2019: 7.7%) • Headline earnings per share decreased by 47% • Return on capital of 8% • Economic capital c
Slide 10: Financial Results
FINANCIAL RESULTS santam
Slide 11: Reporting Environment
REPORTING ENVIRONMENT REPORTED RESULTS AFFECTED BY: • Insurance events • COVID-19 lockdown impacted positively on the motor book • Net exposure to Contingent business interruption claims of R3 billion, including R1 billion already settled in August 2020 • Market volatility • Rand strengthening towar
Slide 12: Exchange Rate Volatility: Closing Rates
EXCHANGE RATE VOLATILITY CLOSING RATES % change % change Currency Dec 2020 Jun 2020 Dec 2019 Dec 2019 – Dec 2019 – Jun 2020 Dec 2020 United States Dollar 14.69 17.37 13.98 24.3 5.0 Moroccan Dirham 1.65 1.78 1.47 21.1 12.2 Malaysian Ringgit 3.64 4.05 3.44 17.7 5.8 Indian Rupee 0.20 0.23 0.20 16.6 -
Slide 13: Exchange Rate Volatility: Average Rates
EXCHANGE RATE VOLATILITY AVERAGE RATES Currency Dec 2020 Jun 2020 Dec 2019 United States Dollar 16.34 16.46 14.43 Moroccan Dirham 1.73 1.70 1.52 Malaysian Ringgit 3.91 3.90 3.49 Indian Rupee 0.22 0.22 0.21
Slide 14: Conventional Insurance
CONVENTIONAL INSURANCE
Slide 15: Conventional Insurance: Net Insurance Result
CONVENTIONAL INSURANCE NET INSURANCE RESULT 2020 2019 5 Yr 10 Yr % of NEP % of NEP 2020/2019 R'm R'm ave % ave % Gross written premium 31 098 29 725 5% 7.1 8.6 Net earned premium 24 320 100.0 23 673 100.0 3% 6.4 6.4 Net claims incurred 16 593 68.2 14 711 62.1 13% 64.3 64.7 Net acquisition cost 7 112
Slide 16: Gross Written Premium vs CPI + GDP Growth
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM VS CPI + GDP GROWTH 13 10.0 10 7.2 7.3 6.3 5.8 6.5 6.7 6.7 7 5.4 4.3 4.6 Percentage 4 1 (2) (5) (3.7)* 2015 2016 2017 2018 2019 2020 Growth in GWP GDP growth + CPI inflation *Year-on-year real GDP forecasted growth for Q4 2020 of -7% used
Slide 17: Net Insurance Result (H1 vs H2)
CONVENTIONAL INSURANCE NET INSURANCE RESULT (H1 VS H2) Full Year % of NEP H1 H2 2020 Net earned premium 100.0 100.0 100.0 Net claims incurred 65.5 70.8 68.2 Net acquisition cost 30.2 28.3 29.3 Net underwriting margin 4.3 0.9 2.5 Investment return on insurance funds 2.3 1.8 2.1 Net insurance margin 6
Slide 18: Net Underwriting Result (H1 vs H2)
CONVENTIONAL INSURANCE NET UNDERWRITING RESULT (H1 VS H2) 2 000 1 820 1 600 1 218 1 200 R million 800 602 615 505 400 110 - H1 H2 Full Year 2020 2019
Slide 19: Net Underwriting Result with CBI Impact Shown
CONVENTIONAL INSURANCE NET UNDERWRITING RESULT (H1 VS H2) WITH CBI IMPACT SHOWN 505 110 1 800 1 218 1 200 1 805 1 810 Percentage 602 600 1 218 602 - ( 600) (1 300) (1 700) (1 200) (1 800) 2020 H1 2019 H1 2020 H2 2019 H2 UW performance without CBI impact CBI impact
Slide 20: Net Insurance Result as % of Net Earned Premium
CONVENTIONAL INSURANCE NET INSURANCE RESULT As % of net earned premium 14 12.5 12 11.4 11.6 2.6 10.1 2.4 9.4 2.4 Percentage 10 8.8 2.4 8 2.9 2.8 6 4.6 9.0 9.9 9.2 4 7.7 6.5 2.1 6.0 2 2.5 - 2014 2015 2016 2017 2018 2019 2020 Net underwriting result Investment return on insurance funds
Slide 21: Gross Written Premium per Insurance Class
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM Per insurance class (R million) 21 Miscellaneous 38 81% 246 (52%) Guarantee 117 886 42% Crop 1 262 585 Accident and Health 641 10% 762 Transportation 799 5% 1 310 4% Liability 1 362 1 601 3% Engineering 1 651 10 974 8% Property 11 798 13 340 1% Motor 13 4
Slide 22: Gross Written Premium (H1 vs H2)
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM (H1 VS H2) Per insurance class (R million) Miscellaneous 49 Guarantee 37 80 Crop 160 1 102 Accident and Health 337 304 Transportation 386 413 Liability 614 748 Engineering 791 860 Property 5 976 5 822 Motor 6 522 6 908 - 1 500 3 000 4 500 6 000 7 500 H1 2
Slide 23: Net Underwriting Surplus per Insurance Class
CONVENTIONAL INSURANCE NET UNDERWRITING SURPLUS Per insurance class (R million) (87) Crop 147 (58) Guarantee ( 14) Miscellaneous 7 ( 10) Accident and Health 24 94 Transportation 50 126 159 Liability 149 Property 212 (2 410) Engineering 312 433 Motor 1 201 2 100 (3 000) (2 500) (2 000) (1 500) (1 000
Slide 24: Net Underwriting Surplus (H1 vs H2)
CONVENTIONAL INSURANCE NET UNDERWRITING SURPLUS (H1 VS H2) Per insurance class (R million) Crop 5 142 ( 21) Guarantee 7 Miscellaneous 3 ( 13) Accident and Health 41 53 Transportation 28 98 Liability 2 147 Property ( 770) (1 640) Engineering 167 266 Motor 1 050 1 050 (2 000) (1 600) (1 200) ( 800) (
Slide 25: Segmental Analysis: Personal and Commercial GWP
CONVENTIONAL INSURANCE SEGMENTAL ANALYSIS – PERSONAL AND COMMERCIAL Gross written premium 6.4% 20 000 18 215 17 117 16 000 2.2% 12 883 12 608 R million 12 000 8 000 4 000 - Personal Commercial 2020 2019
Slide 26: Segmental Analysis: Net Underwriting Result
CONVENTIONAL INSURANCE SEGMENTAL ANALYSIS – PERSONAL AND COMMERCIAL Net underwriting result 2 200 1 791 1 600 892 928 1 000 R million 400 ( 200) ( 800) (1 400) (1 176) Personal Commercial 2020 2019
Slide 27: Gross Written Premium from Outside SA
CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM FROM OUTSIDE SA 45.3% 2 395 2 400 1 800 1 648 (7.0%) 37.5% R million 1 198 1 200 971 1 044 871 32.0% 600 400 303 - Namibia Rest of Africa SE Asia, India & Middle Other East 2020 2019
Slide 28: Net Acquisition Cost Ratio
CONVENTIONAL INSURANCE NET ACQUISITION COST RATIO As % of net earned premium 35 30.4 30.2 28.3 28.5 28.6 29.3 30 28.1 1.0 1.0 1.0 0.9 0.9 0.8 1.4 25 Percentage 20 15.4 17.0 16.7 15.2 16.4 15.8 15.2 15 10 10.9 11.8 12.3 12.1 12.4 12.5 12.7 5 - 2014 2015 2016 2017 2018 2019 2020 Commission Management
Slide 29: Reinsurance as % of Gross Earned Premium
CONVENTIONAL INSURANCE REINSURANCE AS % OF GROSS EARNED PREMIUM 25 20.6 20 18.6 18.5 18.6 19.2 18.3 18.2 Percentage 15 10 5 - 2014 2015 2016 2017 2018 2019 2020
Slide 30: Size of Net Insurance Funds
CONVENTIONAL INSURANCE SIZE OF NET INSURANCE FUNDS 12 000 9 910 10 000 7 879 8 220 R million 8 000 7 489 7 279 6 774 6 978 6 000 4 000 2 000 - 2014 2015 2016 2017 2018 2019 2020
Slide 31: Assets Backing Net Insurance Funds
CONVENTIONAL INSURANCE ASSETS BACKING NET INSURANCE FUNDS Currency mix 12 000 9 910 331 10 000 8 220 284 1 780 43 8 000 193 1 435 R million 6 000 4 000 7 756 6 308 2 000 - 2020 2019 ZAR USD EUR Other currencies (mainly Namibian Dollar)
Slide 32: MiWay
CONVENTIONAL INSURANCE MIWAY Dec Dec H1 H2 Change 2020 2019 2020 2020 Gross written premium (R million) 2 949 2 751 7% 1 428 1 521 Gross underwriting result, net of CAT recoveries (R 486 393 24% 308 178 million) Gross claims ratio, net of CAT recoveries 50.6% 54.2% 45.9% 55.1% Gross acquisition cost
Slide 33: Alternative Risk Transfer
AMR Le» ALTERNATIVE RISK TRANSFER santam
Slide 34: Alternative Risk Transfer Insurance (ART)
ALTERNATIVE RISK TRANSFER INSURANCE (ART) Includes the results from: • Centriq Insurance • Santam Structured Insurance, excluding credit insurance business Types of business: • Risk finance • Underwriting managers • Affinity business • Structured insurance
Slide 35: Alternative Risk Transfer Insurance: Centriq
ALTERNATIVE RISK TRANSFER INSURANCE CENTRIQ 2020 2019 2020/2019 R'm R'm Gross written premium 5 954 4 846 23% Income from clients 263 209 26% Participation in underwriting results 24 40 (40%) Administration expenses (152) (114) 33% Operating result 135 135 -
Slide 36: Santam Structured Insurance
ALTERNATIVE RISK TRANSFER INSURANCE SANTAM STRUCTURED INSURANCE 2020 2019 2020/2019 R'm R'm Gross written premium 1 281 1 326 (3%) Income from clients 122 122 - Participation in underwriting results 10 19 (47%) Administration expenses (102) (105) (3%) Operating result 30 36 (17%)
Slide 37: ART Combined Results
ALTERNATIVE RISK TRANSFER INSURANCE COMBINED RESULTS 2020 2019 5 Yr 10 Yr 2020/2019 R'm R'm ave % ave % Gross written premium 7 175 6 127 17% 15% 28% Income from clients 385 331 16% Participation in underwriting results 34 59 (42%) Administration expenses (254) (219) 16% Operating result 165 171 (4%
Slide 38: SEM Partner Businesses
SEM PARTNER BUSINESSES
Slide 39: SEM Partner Businesses: Saham
SEM PARTNER BUSINESSES Saham • Operates in 26 countries in Africa and the Middle East • Santam’s effective interest of 10% held through SAN JV Main Saham territories • Morocco • Ivory Coast • Mauritius • Angola Main SEM territories • SGI (India) – 35% participation • P&O (Malaysia) – 31.5% participa
Slide 40: Santam Effective Holding
SEM PARTNER BUSINESSES SANTAM EFFECTIVE HOLDING Domicile Dec 2020 Dec 2019 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 41: SEM General Insurance Participation Investments
SEM GENERAL INSURANCE PARTICIPATION INVESTMENTS ANALYSIS OF SANTAM’S SHARE OF NET INSURANCE RESULT BEFORE TAXATION AND NON-CONTROLLING INTERESTS (EXCLUDING SAHAM) 2020 2019 % of NEP % of NEP 2020/2019 R'm R'm Gross written premium 1 183 1 140 4% Net earned premium 994 100.0 879 100.0 13% Net claims
Slide 42: Saham Net Insurance Result
SAHAM ANALYSIS OF SAHAM GENERAL INSURANCE’S NET INSURANCE RESULT BEFORE TAXATION AND NON- CONTROLLING INTERESTS (100% VIEW) 2020 2019 % of NEP % of NEP 2020/2019 R'm R'm Gross written premium 17 853 16 310 9% Net earned premium 12 577 100.0 12 248 100.0 3% Net claims incurred 7 570 60.2 7 757 63.3 (
Slide 43: Insurance Ratios December 2020
SEM PARTNER BUSINESSES INSURANCE RATIOS 31 DECEMBER 2020 SEM % of NEP Santam Saham participations Net earned premium 100.0 100.0 100.0 Net claims incurred 68.2 64.8 60.2 Net acquisition cost 29.3 30.3 32.5 Net underwriting margin 2.5 4.9 7.3 Investment return on insurance funds 2.1 20.8 3.0 Net insu
Slide 44: SEM and Saham Insurance Funds at 31 December 2020
ANALYSIS OF INSURANCE FUNDS SEM AND SAHAM INSURANCE FUNDS AT 31 DECEMBER 2020 100 8 5 80 45 52 Percentage 60 80 40 41 48 20 14 7 - Santam SEM Saham Cash, deposits and similar securities Interest-bearing securities Investment properties Equities and similar securities Working capital assets
Slide 45: Reconciliation of SAN JV Carrying Value
SAHAM RECONCILIATION OF SAN JV CARRYING VALUE AS AT 31 DECEMBER 2020 R’m Carrying value at 1 January 2020 2 323 Dividend - restructure (46) Equity accounted loss (658) After tax Operating profit 50 Amortisation of other intangible assets (28) Impairment of goodwill (656) Other – consolidation adjust
Slide 46: Santam Group
SANTAM GROUP santam
Slide 47: Net Operating Income
SANTAM GROUP NET OPERATING INCOME R million 2020 2019 2020/2019 Conventional insurance 1 118 2 400 (53%) Alternative risk transfer insurance 165 171 (4%) SEM partner businesses 381 495 (23%) Net operating income 1 664 3 066 (46%) SEM partner businesses (381) (495) (23%) Net operating income 1 283 2
Slide 48: Reconciliation to Headline Earnings
SANTAM GROUP RECONCILIATION TO HEADLINE EARNINGS 2020 2019 2020/2019 Net profit attributable to ordinary shareholders (R million) 542 2 199 (75%) Per share (cents) 491 1 990 Impairment of goodwill and other intangible assets - 3 Impairment of associates and joint ventures 15 4 Share of associates' i
Slide 49: Growth Diversification
GROWTH DIVERSIFICATION INCLUDING SEM PARTNER BUSINESSES 4% 3% 3% 4% 17% 31% 16% 33% GWP GWP 2020 2019 45% 44% Personal Commercial ART SEM Saham
Slide 50: Geographic Diversification
GEOGRAPHIC DIVERSIFICATION INCLUDING SEM PARTNER BUSINESSES 1% 1% 8% 7% 9% 10% GWP GWP 2020 2019 81% 83% South Africa Rest of Africa SE Asia, India and Middle East Other
Slide 51: Asset / Liability Matching
ASSET / LIABILITY MATCHING GROUP CONSOLIDATED ASSETS AT 31 DECEMBER 2020 2 2 100 7 4 5 16 4 80 34 48 20 Percentage 60 83 59 15 40 66 52 20 41 26 15 1 - Insurance funds ART Sub debt SH funds Total Other assets SEM participation investments Investment in Saham, via SAN JV Listed equities Interest-bear
Slide 52: Shareholder Funds Asset Mix
SHAREHOLDER FUNDS ASSET MIX 100 7.1 10.6 16.4 15.5 80 19.5 Percentage 60 24.4 15.2 40 14.6 20 41.3 34.8 0.5 0.1 - 2020 2019 Cash and money market instruments Interest-bearing instruments and preference shares Listed equities Investment in Saham SEM participation investments Other assets
Slide 53: Shareholder Funds Currency Mix
SHAREHOLDER FUNDS CURRENCY MIX 100 5.7 6.7 13.8 12.9 80 19.5 24.4 Percentage 60 17.3 13.8 40 20 42.7 43.2 - 2020 2019 Other currencies (mainly Namibian Dollar and Malaysian Ringgit) Indian Rupee (investment in SEM) Moroccan Dirham (investment in SAN JV) US Dollar Rand
Slide 54: Investment Return on Shareholders' Funds
INVESTMENT RETURN ON SHAREHOLDERS’ FUNDS 1 396 1 400 1 027 60 575 1 000 219 R million 45 600 862 855 200 (113) (79) ( 200) 2020 2019 Interest and dividends Market value movements (including Derivatives) SEM fair value movements and dividends Derivatives Forex gains and losses (incl. SEM)
Slide 55: 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 2019 R’m rates 2020 Region R’m R’m R’m R’m Africa 91 30 (9) (3) 109 Southeast Asia 157 - 10 (31) 136 India 1 226 - 16 51 1 293 Total 1 47
Slide 56: Capital Management
CAPITAL MANAGEMENT
Slide 57: Return on Capital
RETURN ON CAPITAL TOTAL COMPREHENSIVE INCOME EXPRESSED AS % OF WEIGHTED AVERAGE SHAREHOLDERS’ FUNDS 40 36.1 33.5 30 24.8 14.4 8.9 21.9 22.2 Percentage 4.0 20 8.2 3.4 3.1 21.7 24.6 8.0 10 20.8 18.5 19.1 17.0 8.8 - (8.8) (0.8) ( 10) 2014 2015 2016 2017 2018 2019 2020 Insurance ROC Investment ROC
Slide 58: Capital Management
CAPITAL MANAGEMENT • Group economic capital requirement based on the internal model R7.4 billion (2019: R7.3 billion) • Current Group economic capital coverage ratio as at 31 December 2020 of 161% • During 2019, the Prudential Authority granted Santam approval to use its partial internal model • Ini
Slide 59: Group Strategy and Priorities
GROUP STRATEGY AND PRIORITIES
Slide 60: FutureFit Santam
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 61: Strategic Priorities 2021
STRATEGIC PRIORITIES 2021 DELIVERING ON FUTUREFIT SANTAM • Effectively manage CBI claim payments and resolve outstanding legal matters • Deliver on Santam experience • Invest in innovation and digital channels e.g. Digital E2E insurance • Continue to balance profitable growth with an optimal underwr
Slide 62: More Than Just Short-Term Insurance
MORE THAN JUST SHORT-TERM INSURANCE Certified Top Employer for the fifth Continued with the Black Broker Creating employment for consecutive year Development programme more than 5 900 people Continued as the constituent of the FTSE 4 Good index series We settled R21 billion in claims in 2020. and FT
Slide 63: Questions?
QUESTIONS? I santam
Slide 64: Thank You
THANK YOU > nx santam