Slide 1: Investor Presentation: FY19 Year End Results
INVESTOR PRESENTATION FY19 Year End Results | September 2019
Slide 2: Snapshot of our external environment
Snapshot of our external environment
Slide 3: Navigating a difficult external environment
NAVIGATING A DIFFICULT EXTERNAL ENVIRONMENT Economic and political environment Attributes of the portfolio ‒ Fragile signs of growth ‒ Lack of policy reform ‒ Discipline (underwriting and pricing) ‒ Fiscal strain ‒ Business model efficiencies ‒ Rand remains under pressure ‒ Strong brands and market
Slide 4: Our strategy
Our strategy
Slide 5: Execution on strategy
EXECUTION ON STRATEGY − Defensive orientation − Follow-on investment in OUTsurance, Discovery (and Momentum Metropolitan) OPTIMISE − Acceleration of face-to-face distribution and commercial insurance at OUTsurance − Successful build of Discovery Bank − Investment in Perpetua and Visio DIVERSIFY − Re
Slide 6: Investment criteria
INVESTMENT CRITERIA Ø Business model attributes • Unique IP/leader in its market, significant barriers to entry, Ø Industry defensible position Financial services and • Capital-lite related industries, with • Digitally enabled and consumer centric a bias for P&C insurance • Attractive financials/met
Slide 7: An update on RMI's capital structure
An update on RMI’s capital structure
Slide 8: Capital management
CAPITAL MANAGEMENT Category Sub-category Update Financial leverage Target ratio 15 – 20% Current 18%1 ‒ RMI has moved away from market-linked covenants to covenants tied to gross debt-to-earnings Covenants and gross debt-to-cash flow ‒ RMI has extended the funding periods under both its ZAR and GBP
Slide 9: Our views on the holding company structure
Our views on the holding company structure
Slide 10: Relative to our peer group
RELATIVE TO OUR PEER GROUP Price / INAV (x) since 1 January 2010 Movement Average Movement Average Movement Average (last 3 (last 3 1,40x Current YTD YTD years) years) since 2010 since 2010 Kinnevik 0.82x 6.8% 0.75x (1.1%) 0.83x 23.0% 0.82x 1,30x Exor 0.66x 7.8% 0.65x (16.5%) 0.67x 31.4% 0.73x Itaus
Slide 11: OUTsurance implied valuation
OUTSURANCE IMPLIED VALUATION IMPLIED VALUE VS. MANAGEMENT AND CONSENSUS OUT value (Rm) (100%) Management and 55 000 analyst views 50 000 converge 45 000 • The implied value of R38.2bn OUTsurance is 40 000 calculated as the “rump 35 000 R36.7bn of RMI”, subtracting 30 000 observable market 25 000 val
Slide 12: OUTsurance implied valuation and Holdco discount
OUTSURANCE IMPLIED VALUATION AND HOLDCO DISCOUNT Additional Assumed P/E multiple (LTM) for OUTsurance discount/premium assuming(1) : 10.0 11.0 12.0 13.0 14.0 15.0 15.37 16 0% -0.9 3.1 6.9 10.3 13.5 16.5 17.5 19.3 Holdco discount 5% -6.2 -1.9 2.1 5.8 9.2 12.4 15.4 10% -12.2 -7.5 -3.2 0.8 4.5 7.9 11.1
Slide 13: Earnings quality
Earnings quality
Slide 14: Earnings quality
EARNINGS QUALITY Quality of earnings (% of earnings represented in cash) Discovery specific earnings quality (1) 98% 100% Cash generated from in-force 15.8 89% 88% Tax and finance costs (2.85) 65% New business costs (8.1) Business development spend (1.2) Cash before new initiative spend 3.7 Quality
Slide 15: OUTsurance | Snapshot of financial results
OUTsurance | Snapshot of financial results
Slide 16: Strong recovery in new business premium written
STRONG RECOVERY IN NEW BUSINESS PREMIUM WRITTEN 4 037 3 917 3 865 3 500 3 054 3 025 2 592 2 048 1 641 1 453 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Group annualised new business premium written (R’m) 15
Slide 17: A history of strong and stable underwriting margins
A HISTORY OF STRONG AND STABLE UNDERWRITING MARGINS 35% 30% 28% 25% 24% 23% 19% 20% 15% 15% 14% 10% 5% 0% (5%) (10%) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Group OUTsurance Youi Australia Note: Net of FirstRand homeowners profit share 16
Slide 18: Claims ratio underpinned by pricing sophistication and discipline
CLAIMS RATIO UNDERPINNED BY PRICING SOPHISTICATION AND DISCIPLINE 75,0% 70,0% 65,0% 60,0% Youi target 54,0% 55,0% 53,2% band 51,1% OUT target 49,8% band 50,0% 46,9% 49,8% 45,0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Group OUTsurance Youi Australia Youi Australia - gross claims ratio 17
Slide 19: Increased cost ratio supported by growth investments
INCREASED COST RATIO SUPPORTED BY GROWTH INVESTMENTS 50% 45% 40% 35% 31,8% 30,2% 30% 28,3% 25,6% 25% 23,8% 21,2% 20% 15% 10% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Group OUTsurance Youi Australia 18
Slide 20: Group normalised earnings and ROE
GROUP NORMALISED EARNINGS AND ROE 3 500 50,0% 43,9% 45,0% 3 000 1 835 37,9% 38,4% 38,4% 40,0% 36,9% 37,5% 33,7% 2 500 1 718 35,0% 1 898 30,9% 31,4% 2 000 30,0% 1 637 25,5% 1 500 61% 25,0% 1 498 1 217 65% 20,0% 1 256 1 206 1 000 77% 1 034 27% 15,0% 874 26% 500 23% 10,0% 12% 9% 0 5,0% ( 500) 0,0% 2010
Slide 21: Earnings and dividend history
EARNINGS AND DIVIDEND HISTORY 10 year normalised DEPS = 13.3% 76,7 10 year normalised DPS = 16.7% 68,6 63,3 55,5 54,7 53,5 40,2 40,2 38,8 36,0 35,9 34,4 30,5 27,5 25,5 24,0 22,0 19,2 10,8 16,5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Ditluted normalised EPS Ordinary DPS Dividend pay-out rat
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