Santam Limited · JSE:SNT
Santam — FY2015 Earnings Presentation
70 slides from Santam's earnings presentation, March 2016
Slide 1: Presentation to Analysts 2015
PRESENTATION TO ANALYSTS 2015 i
Slide 2: Directors and registered address
NON-EXECUTIVE DIRECTORS SANTAM HEAD OFFICE AND REGISTERED ADDRESS CB Booth, B Campbell, MD Dunn, MP Fandeso, 1 Sportica Crescent BTPKM Gamedze, GG Gelink (chairman), Tyger Valley IM Kirk, MLD Marole, JP Möller, Bellville 7530 T Nyoka (née Fubu), MJ Reyneke PO Box 3881, Tyger Valley 7536 Tel: 021 915
Slide 3: Table of contents
TABLE OF CONTENTS 4 The Santam business portfolio 4 Market context 10 Financial results 34 Capital management 40 Group strategy and priorities 45 Audited Summary Financial Statements for Santam Limited and its subsidiaries for the year ended 31 December 2015 P R E S E N TAT I O N TO A N A LY S T S S
Slide 4: Financial results for the year ended 31 December 2015
CLICK TO EDIT MASTER TITLE STYLE FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015 PRESENTED CLICK BY LIZÉ LAMBRECHTS AND HENNIE NEL TO EDIT MASTER CONTENTS The Santam business portfolio Market context Financial results Capital management Group strategy and priorities 2
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Slide 6: The Santam business portfolio
THE SANTAM BUSINESS PORTFOLIO Santam S San tam Re e Santam Santam's Santam Commercial MiWay Santam Re Emerging Markets Specialist and Personal Investments Our multi-channel Our specialist Our direct Our reinsurance Investments in insurance business insurance business insurance business business in e
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Slide 8: Market context and our opportunity
MARKET CONTEXT INDUSTRY SOUTH AFRICA EMERGING MARKETS Regulatory reform Economic growth lagging Emerging markets growth Abundant capital in remains positive Social unrest international markets Negative impact of oil Municipal service delivery Impact of technology price Ratings outl
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Slide 10: Relative performance and Santam 2015 key facts
RELATIVE PERFORMANCE NET WRITTEN PREMIUM GROWTH 25 20 Percentage 15 10 Santam: 7% 5 7% 5%* - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q3 2015 FY2015 Typical insurers* GDP + CPI Santam (excl. cells & ART QS) GENE *Source: FSB – September 2015 (Industry figure adjusted to include the ART Quot
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Slide 12: Main variances 2015 vs. 2014
FINANCIAL CLICK RESULTS TO EDIT MASTER TEXT STYLES MAIN VARIANCES 2015 VS. 2014 4 000 3 372 3 000 2 327 2 348 2 072 2 000 1 779 R million 1 579 1 651 1 494 1 000 777 499 425 543 - Underwriting Investment Investment Income before Tax Earnings Headline result return on income tax earnings (1 000) insu
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Slide 14: Net insurance result
NET INSURANCE RESULT 2015 2014 2015/ 5Y 10Y % of NEP % of NEP R'm R'm 2014 ave % ave % Gross written premium 24 319 22 710 7% 8 8 Net earned premium 18 523 100.0 17 222 100.0 8% 100.0 100.0 Claims incurred 11 510 62.1 10 878 63.1 6% 65.4 66.7 Acquisition costs 5 234 28.3 4 850 28.2 8% 28.0 26.9 Unde
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Slide 16: 2015 performance: first vs. second half
2015 PERFORMANCE: FIRST VS. SECOND HALF NET UNDERWRITING RESULT 2 000 1 779 1 494 1 500 GENE R million 971 1 000 866 808 628 500 - First half Second half Full year 2015 2014 GROSS WRITTEN PREMIUM PER INSURANCE CLASS (R MILLION) Miscellaneous 62 53 2015 2014 Crop 840 1 044 Investment contract premium
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Slide 18: Net underwriting surplus per insurance class
NET UNDERWRITING SURPLUS PER INSURANCE CLASS (R MILLION) Guarantee 13 0 2015 2014 Miscellaneous 11 5 ART 20 15 Accident and Health 60 49 Transportation 91 40 Crop 131 251 Liability 234 220 Engineering 216 169 Property 330 221 Motor 673 524 - 100 200 300 400 500 600 700 800 NET UNDERWRITING SURPLUS:
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Slide 20: Segmental analysis
SEGMENTAL ANALYSIS *5266:5,77(135(0,80ʋ3(5621$/&200(5&,$/$1'$57 6.9% 14 000 13 142 12 298 12 000 5.6% 10 000 8 929 8 459 R million 8 000 6 000 12.2% 4 000 263 284 2 000 2 248 1 953 - Personal Commercial ART 2015 2014 Investment contract premium SEGMENTAL ANALYSIS 1(781'(5:5,7,1*5(68/7ʋ3(5621$/&200(5
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Slide 22: Gross written premium outside SA and acquisition cost ratio
GROSS WRITTEN PREMIUM OUTSIDE SA 1 200 2015 2014 1 056 1 055 1 000 917 782 800 R million 600 437 400 308 200 - Namibia Rest of Africa Asia ACQUISITION COST RATIO AS % OF NET EARNED PREMIUM 30 28.1 28.5 28.7 27.3 27.7 27.9 0.8 1.0 0.9 25.8 0.9 1.2 1.4 0.9 Percentage 20 11.1 13.6 10.0 13.5 13.8 15.4 1
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Slide 24: Level of reinsurance and net insurance result
LEVEL OF REINSURANCE EARNED PREMIUM AS % OF GROSS EARNED PREMIUM 20 18.0 17.8 18.1 17.4 16.0 14.8 14.9 14.8 15 13.7 11.8 Percentage 11.0 10 8.6 9.0 5.2 5 - 2009 2010 2011 2012 2013 2014 2015 excl ART QS excl ART QS Group Excl. cells NET INSURANCE RESULT AS % OF NET EARNED PREMIUM 15 11.5 11.7 10.3 1
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Slide 26: Size of insurance funds and currency mix
SIZE OF INSURANCE FUNDS 8 000 7 489 6 774 6 449 6 266 6 000 5 515 5 483 4 634 R million 4 000 2 000 - 2009 2010 2011 2012 2013 2014 2015 Group insurance funds excluding Centriq ASSETS BACKING NET INSURANCE FUNDS (EXCL. CENTRIQ GROUP) – CURRENCY MIX 8 000 7 489 315 6 774 867 311 509 6 000 R million 4
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Slide 28: Insurance funds and investment return
INSURANCE FUNDS AS % OF GROSS EARNED PREMIUM 50 40.0 40 37.1 35.6 35.9 35.4 33.5 34.3 Percentage 30 20 10 - 2009 2010 2011 2012 2013 2014 2015 INVESTMENT RETURN 1 400 1 276 1 200 968 362 1 000 71 114 42 800 174 R million 286 41 600 400 657 591 200 - ( 93) ( 200) 2015 2014 Interest and dividends MV m
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Slide 30: Asset/liability matching
ASSET/LIABILITY MATCHING GROUP CONSOLIDATED ASSETS AT 31 DECEMBER 2015 100 2.1 6.2 15.1 5.1 7.7 80 12.4 8.7 58.6 54.1 67.3 18.7 60 Percentage 97.9 50.0 20.9 40 41.4 45.9 25.0 20 32.7 22.3 7.9 - Insurance funds Centriq Cell owners Sub debt SH funds Total insurance funds interest Cash and money market
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Slide 32: Shareholder funds currency mix and SEM participation investments
SHAREHOLDER FUNDS – CURRENCY MIX 10 000 8 081 8 000 352 7 010 1 005 315 584 807 R million 6 000 468 2 186 399 4 000 5 021 2 000 3 954 - 2015 2014 Rand US Dollar Pound Sterling SEM (various currencies) Other currencies (mainly Namibian dollar) SEM PARTICIPATION INVESTMENTS* FAIR VALUE MOVEMENTS ADDIT
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Slide 34: SEM participation investments and cash generated
SEM PARTICIPATION INVESTMENTS INCORPORATED SANTAM SANTAM IN EFFECTIVE HOLDING EFFECTIVE HOLDING 2015 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 insurance Malaw
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Slide 36: MiWay
MIWAY 2015 2014 Change Gross written premium (R’m) 1 771 1 485 19% Gross underwriting result, net of CAT recoveries (R’m)* 163 159 3% Gross claims ratio, net of CAT recoveries 60.9% 57.4% Gross acquisition cost ratio 29.8% 31.7% Gross underwriting margin 9.3% 10.9% Number of clients** 242 000 206 00
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Slide 38: Return on capital and solvency
RETURN ON CAPITAL NET INCOME EXPRESSED AS % OF WEIGHTED AVERAGE SHAREHOLDERS’ FUNDS 40 37.1 32.5 30 13.8 26.6 25.0 24.7 10.8 22.6 5.1 20.0 3.9 11.1 Percentage 20 8.6 9.0 23.3 20.8 21.7 10 19.9 15.5 14.0 11.0 - 2009 2010 2011 2012 adj* 2013 2014 2015 Insurance ROC Investment ROC Required ROC increase
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Slide 40: Capital management
CAPITAL MANAGEMENT Group solvency as at 31 December 2015 of 48.1% FSB interim capital requirements as at 31 December 2015: 27.5% of NWP Economic capital coverage ratio for the Group as at December 2015: 177% Target solvency range of 35% - 45% (capital coverage ratio 135% - 170%) currently un
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Slide 42: Dividend per share
DIVIDEND PER SHARE 1 000 816 + 10% 800 742 Cents per share 600 528 480 400 200 288 262 - 2015 2014 Interim Final GROUP STRATEGY CLICK TOAND EDITPRIORITIES MASTER TEXT STYLES 40
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Slide 44: 2020 vision, focus areas and priorities for 2016
2020 VISION 5 FOCUS AREAS FOR VALUE OUR METRICS: Net insurance result and return on capital International diversification Transformation IN CONTEXT OF: Creating value for stakeholders Long-term sustainability Reducing systemic risk and fulfilling our socio-economic responsibility PRIORIT
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Slide 46: santam
santam santam
Slide 47: Audited summary consolidated financial statements
SANTAM LTD AND ITS SUBSIDIARIES AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 45
Slide 48: Table of contents
TABLE OF CONTENTS 48 FINANCIAL RE VIEW 51 INDEPENDENT AUDITOR’S REPORT 52 SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION 53 SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 54 SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUIT Y 55 SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS 56 NOTES TO
Slide 49: Audited summary report highlights
AUDITED SUMMARY REPORT Gross written premium Gross written premium growth including cell growth excluding cell captive insurance 7% captive insurance 8% Underwriting margin Group solvency ratio of 9.6% of 48.1% Return on shareholders’ Cash generation funds of 32.5% significantly improved Positive co
Slide 50: Financial review
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 FINANCIAL REVIEW The Santam group reported excellent underwriting results for the 2015 financial year with a net underwriting margin of 9.6% compared to 8.7% in 2014. The results were positively impacted by disciplined underwriting actions and a relatively be
Slide 51: Financial review
AUDITED SUMMARY REPORT FINANCIAL REVIEW The net commission ratio (excluding the impact of the ART reinsurance quota share agreement) was 12.2% (2014: 12.1%). A decrease in the commission ratio due to the growth in MiWay, where limited commission expenses are incurred, was offset by lower reinsurance
Slide 52: Financial review
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 FINANCIAL REVIEW Santam will maintain its focus on cost-efficiencies to improve the management expense ratio over the medium term. MiWay will continue focusing on growing its retail client base, its newly launched business insurance and broker-direct offering
Slide 53: Independent auditor's report
AUDITED SUMMARY REPORT INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SANTAM LTD The summary consolidated financial statements of Santam Ltd, set out on pages 52 to 66, which comprise the summary consolidated statement of financial position as at 31 December 2015, and the summary consolidated s
Slide 54: Summary consolidated statement of financial position
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited at Audited at 31 December 2015 31 December 2014 Notes R million R million ASSETS Non-current assets Property and equipment 90 117 Intangible assets 827 1 086 Deferred income tax 140 161 Investment i
Slide 55: Summary consolidated statement of comprehensive income
AUDITED SUMMARY REPORT SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Audited Audited Year ended Year ended 31 December 2015 31 December 2014 Change Notes R million R million % Gross written premium 24 319 22 710 7% Less: reinsurance written premium 5 435 5 075 Net written premium 18 884 17
Slide 56: Summary consolidated statement of changes in equity
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the company Non- Share Treasury Other Distributable controlling capital shares reserves reserves Total interest Total R million R million R million R million R million R mil
Slide 57: Summary consolidated statement of cash flows
AUDITED SUMMARY REPORT SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS Audited Audited Year ended Year ended 31 December 2015 31 December 2014 Notes R million R million Cash flows from operating activities Cash generated from operations 3 656 2 443 Interest paid (110) (93) Income tax paid (1 002) (420)
Slide 58: Notes to the summary consolidated financial statements
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of preparation The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Ltd (JSE) for summary financial statements, and the requirements of the Co
Slide 59: Notes: segment information 2015
AUDITED SUMMARY REPORT NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 5.1 For the year ended 31 December 2015 Insurance Investment Unallocated Total Business activity R million R million R million R million Revenue 24 319 1 428 – 25 747 Gross written premium 24 319 – – 24 319 Net written pre
Slide 60: Notes: segment information 2014
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 5.2 For the year ended 31 December 2014 Insurance Investment Unallocated Total Business activity R million R million R million R million Revenue 22 710 726 – 23 436 Gross written premium 22 710 – – 22 710
Slide 61: Notes: financial assets and liabilities
AUDITED SUMMARY REPORT NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS Audited at Audited at 31 December 31 December 2015 2014 R million R million 6. Financial assets and liabilities Financial assets The group's financial assets are summarised below by measurement category. Financial assets a
Slide 62: Notes: fair value hierarchy 2014
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 31 December 2014 Level 1 Level 2 Level 3 Total Financial assets at fair value through income R million R million R million R million Equity securities Quoted Listed 2 999 – – 2 999 Unitised funds – 75 – 7
Slide 63: Notes: SEM target shares fair value
AUDITED SUMMARY REPORT NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS The fair value of the SEM target shares is determined using discounted cash flow models. The most significant assumptions used in these models are the discount rate, exchange rate and net insurance margin expectations. Sho
Slide 64: Notes: insurance liabilities and reinsurance assets
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS Audited at Audited at 31 December 2015 31 December 2014 R million R million 7. Insurance liabilities and reinsurance assets Gross insurance liabilities Long-term insurance contracts – claims reported and
Slide 65: Notes: non-current assets held for sale
AUDITED SUMMARY REPORT NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 8. Non-current assets held for sale Santam Ltd initially set up the Santam International group in 2002 to facilitate the expansion into Europe. Santam International Ltd (Santam International) directly and indirectly held t
Slide 66: Notes: income tax
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS Audited Audited Year ended Year ended 31 December 2015 31 December 2014 R million R million 10. Income tax Normal taxation Current year 1 077 684 Prior year 24 – Recovered from cell owners (67) (77) Forei
Slide 67: Notes: corporate transactions
AUDITED SUMMARY REPORT NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 11. Corporate transactions 2015 Disposals Indwe Broker Holdings Group (Pty) Ltd On 31 December 2015, Santam Ltd, as well as Swanvest 120 (Pty) Ltd, Main Street 409 (Pty) Ltd and Thebe Risk Services Holdings (Pty) Ltd (all
Slide 68: Notes: earnings per share
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS Audited Audited Year ended Year ended 31 December 2015 31 December 2014 12. Earnings per share Basic earnings per share Profit attributable to the company's equity holders (R million) 2 348 1 579 Weighted
Slide 69: GREYMATTER & FINCH # 9786
GREYMATTER & FINCH # 9786
Slide 70: Insurance good and proper
PRES EN TAT ION TO A N A LY S TS 2 0 1 5 INSURANCE GOOD AND PROPER www.santam.co.za 68