Annual Who we We cultivate Our value How we Our value financial are value custodians protect value outcomes statements 2020 ANNUAL REPORT 2020 INSURE DO GREAT THINGS EVERY DAY OLD MUTUAL INSURE LIMITED Annual Report 2020 1 Contents ABOUT OUR ANNUAL REPORT 1 Our results at a glance 2 WHO WE ARE 3 Our foundations 4 Old Mutual Insure today 5 Old Mutual Insure Group structure 7 WE CULTIVATE VALUE 8 Old Mutual Insure’s response to COVID-19 9 Chairman’s report 11 Managing Director’s report 13 Strategic outcomes 15 OUR VALUE CUSTODIANS 16 Executive leadership 17 Board of Directors 19 HOW WE PROTECT VALUE 21 Corporate governance 23 Board committees 24 OUR VALUE OUTCOMES 26 Financial Director’s report 27 Divisional performance 30 Retail 30 Specialty 32 iWYZE 34 Credit Guarantee Insurance Corporation of Africa Limited (CGIC) 35 People 37 Information technology 39 ANNUAL FINANCIAL STATEMENTS 41 ANNUAL REPORT 2020 INSURE DO GREAT THINGS EVERY DAY 2 About our annual report Introduction This annual report to our stakeholders covers the core activities of the business for the period 1 January 2020 to 31 December 2020. It focuses on our strategy and how our material operating segments and key enabling functions create value over the short-, medium- and long-term. Forward-looking statements performance and results may differ materially from the plans, goals and expectations set forth in the forward- This report may contain forward-looking statements with looking statements. Old Mutual Insure undertakes no respect to some of Old Mutual Insure’s plans or current obligation to update the forward-looking statements goals and expectations relating to its future financial contained in this report or any other forward-looking condition, performance and results, and in particular, statements it may make. estimates of future cash flows and costs. By their nature, all forward-looking statements involve risk and uncertainty Reporting frameworks because they relate to future events and circumstances This annual report has been compiled in accordance which are beyond Old Mutual Insure’s control. These with International Financial Reporting Standards, include economic and business conditions; market- and International Financial Reporting Interpretations related risks such as fluctuations in interest rates and Committee interpretations issued and effective at the exchange rates; the risk of higher than expected claims; time of preparing these financial statements, and the the subsequent impact of the pandemic; the impact Companies Act of South Africa. of adverse weather conditions; the policies and actions of regulatory authorities; the impact of competition, The annual report complies with the requirements inflation and deflation; the timing and impact of other of the South African Institute of Chartered Accountants uncertainties of future acquisitions or combinations within Financial Reporting Guides and the Financial Reporting relevant industries; as well as the impact of tax and other Pronouncements as issued by the Financial Reporting legislation and regulations in the jurisdictions in which Standards Council, and the JSE requirements for Old Mutual Insure and its subsidiaries operate. As a result, financial statements. Old Mutual Insure’s actual future financial condition, DEFINING CONCEPTS Materiality The principle of materiality was applied in assessing what information to include in the report, which focuses particularly on those issues, opportunities and challenges that impact materially on Old Mutual Insure and its ability to be a business that consistently delivers value to its stakeholders in a sustainable manner. Value Value creation is the consequence of how Old Mutual Insure applies and leverages its resources and strategy in delivering financial performance and value for all stakeholders. Its focus is on improving both the quantum of value delivered for each of its stakeholders and the quality of their experience. OLD MUTUAL INSURE LIMITED Annual Report 2020 1 Financial highlights The below table indicates the Group results including the impact of COVID-19 R’million 2020 2019 2018 2017 2016 GWP 14,811 14,656 13,218 12,481 12,082 NEP 9,507 9,922 9,048 8,409 8,610 % NEP:GWP 64% 68% 68% 67% 71% Net claims ratio 66% 65% 61% 61% 67% Expenses 1,960 2,261 1,933* 1,581 1,275 Expense margin (as % of NEP) 21% 23% 21% 19% 15% Underwriting profit (loss) (250) 35 480 312 80 Underwriting margin (2.6%) 0.4% 5.3% 3.7% 0.9% Profit (loss) after tax (130) 323 705 736 264 *2018 expenses exclude the impact of restructuring Business interruption and rescue claims reserves The net impact of COVID-19 on the insurance reserves included in the results is as follows: R’million Net Old Mutual Insure Company 460 CGIC 254 Old Mutual Insure Group 714 Other COVID-19 impacts Other impacts of COVID-19 are as follows: R’million Net Improved Personal lines underwriting result (328) COVID-19 related expenses 31 Old Mutual Insure Group (297) Gross written premium Underwriting profit Underwriting margin (GWP) (including COVID-19 impact) (including COVID-19 impact) (Rm) (%) 1% <-100% -3% 15 000 50 0,5 35 0.4 14,811 0 0,0 14,656 -50 -0,5 14 000 -100 -1,0 -150 -1,5 -200 -2,0 -250 -2.6 13 000 -250 -2,5 2020 2019 2020 2019 2020 2019 Profit after taxation Underwriting profit Underwriting margin (Rm) (excluding COVID-19 impact) (excluding COVID-19 impact) (Rm) (Rm) <-100% 100% 1.4% 350 200 2,0 300 323 1.8 250 150 167 1,5 200 150 100 100 1,0 50 0 50 0,5 -50 0.4 -100 -130 35 -150 0 0,0 2020 2019 2020 2019 2020 2019 2 OLD MUTUAL INSURE LIMITED Annual Report 2020 Annual Who we We cultivate Our value How we Our value financial are value custodians protect value outcomes statements SECTION 1 WHO WE ARE OLD MUTUAL INSURE LIMITED Annual Report 2020 3 Our foundations The Old MutualDiamond Insure storySavings originatesTax free Bonusin 1831 Business Home Education Vehicle Retirement and forms part of the fabric of the South African economy. It reflects the determination and passion of various entrepreneurs, who skillfully negotiated many mergers and acquisitions. Calendar Credit Card House Pin Safe Trash File Upload Graph Up Family The golden thread, still visible today, is their thoughtful management of resources that played a vital role in the development of our local economy. More than 18 companies have contributed to Old Mutual Insure’s DNA. Each evolution brought with it a new set of skills that helped the business grow in an increasingly competitive environment. Adaptability will remain part of who we are, as we enter a new era where diversity, openness and agility are essential for our success. Diamond Savings Tax free Bonus Business Home Education Vehicle Retirement Touch Pin Seo Funnel Calculator Dashboard Death Cover Disabled Calendar Credit Card House Pin Safe Trash File Upload Graph Up Family Goals Growth Help Rewards Agreement Speed MISSION VISION VALUES Old Mutual’s core We will be our Customer role is to sustain customers first and grow the choice to sustain Diversity Touch Pin Seo Funnel Calculator Dashboard Death Cover prosperityDisabled of and grow their Innovation the customers, prosperity families and Integrity communities we serve Respect Goals Growth Help Rewards Agreement Speed Trust and Accountability 4 OLD MUTUAL INSURE LIMITED Annual Report 2020 Annual Who we We cultivate Our value How we Our value financial are value custodians protect value outcomes statements Old Mutual Insure today Today, as one of the leading role players in South Africa’s short-term insurance landscape, we are proud of our tradition of service and quality, as well as our range of products, which remain among the best in South Africa. As part of Old Mutual Limited, the Old Mutual Insure purpose is to champion mutually positive futures, every day. Highlights • Financial Sector Charter Level 1 Broad-Based • Highest net promoter score of 47.6% in the short- Black Economic Empowerment (B-BBEE) term insurance intermediary market as reported contributor. by the South African Customer Satisfaction Index rating (SA-csi). • Employer of more than 2 500 employees – of which over 79% are black and over 57% • Rated no.1 by SA-csi in customer loyalty and are women. complaints handling. Our comprehensive short-term insurance offerings Old Mutual Insure partners with brokers and advisers to offer an extensive range of short-term insurance products and solutions designed to meet personal, commercial and corporate insurance needs. These include the agricultural, engineering and marine sectors. Since 2010, our direct sales channels have opened and tapped into new markets with great success. This alternative distribution channel complements the intermediary channel by offering customers more options to access insurance products and services. Personal Lines Specialty Lines • • GWP R3.1bn. GWP R1.5bn. • • Intermediated business delivering consistent results through Partnerships with specialist Underwriting Management tailored rating structures. Agencies (UMAs), have provided growth and portfolio expansion opportunities. • Innovations during the year related to the development of • user-based insurance. In the corporate property segment we are committed to leading the market back to sustainable profitability whilst • Elite Risk Acceptances was launched in 2018, targeting high supporting clients with loss prevention measures and risk net worth individuals and leveraging the Old Mutual Insure engineered surveys. rating models and policy administration systems. • Muted economic growth has impacted growth of our engineering and marine segments. Careful risk selection has Commercial and Agriculture Lines ensured continued profitability in these areas. • GWP R4.5bn. Mutual and Federal Risk Financing (MFRF) • Severe business interruption losses and muted new business growth on the back of a general reduction in • GWP R3.3bn. SME performance in the market. • A targeted effort to improve management fees earned resulted • Increased digitisation and automation of our front office in a meaningful increase in fees compared to 2019.