CONTENTS
1. The Santam business portfolio 2. Market context 3. Financial results 4. Capital management 5. Group strategy and priorities 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 business insurance business business in insurance business transfer insurance in emerging markets in South Africa portfolio in Africa and South Africa and in South Africa business held with Sanlam and Namibia emerging markets international markets 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 transfer insurance Alternative risk transfer insurance business written on insurance licences of Centriq and SSI
Sanlam Emerging Markets (SEM) general Santam’s share of the insurance results of the SEM general insurance insurance businesses businesses, including Saham held through SAN JV MARKET CONTEXT 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 • Contingent business interruption claims to impact the sector beyond 2020, as legal disputes reach finality • Shift towards digital and remote channels continues along with increased investments in new business models and strategic investments e.g. Telematics, affinity partnerships, embedded insurance • Low interest rates continue to put pressure on insurers to focus on optimal business models • Growing significance of ESG factors, in particular climate risk disclosures 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 • Premium growth expected to grow in line with the economy • Increased competition • Protection gap remains a significant challenge • CBI claims processing and settlements 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 against the Ma-Afrika judgment relating to the indemnity period • Santam is actively processing CBI claims since January 2021 • Net CBI provision could still be significantly impacted by: • the outcome of SCA case relating to indemnity period • the extent of reinsurance recoveries • CBI claims assumptions vs actual claim settlements 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 coverage ratio of 161% • No Final dividend declared due to CBI uncertainty FINANCIAL RESULTS 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 towards end of 2020 largely reversed H1 foreign currency gains • The lower interest rate environment negatively impacted investment return on insurance funds and investment income 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 - 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 CONVENTIONAL INSURANCE 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 29.3 7 142 30.2 - 29.3 28.7
Net underwriting result 615 2.5 1 820 7.7 (66%) 6.4 6.6 Investment return on insurance funds 501 2.1 579 2.4 (13%) 2.5 2.5 Net insurance result 1 116 4.6 2 399 10.1 (53%) 8.9 9.1
Combined ratio 97.5 92.3 93.6 93.4 CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM VS CPI + GDP GROWTH
13 10.0 10 7.3 6.7 7.2 7 6.3 6.5 6.7 5.8 5.4 4.3 4.6 4
1 Percentage (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 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 6.6 2.7 4.6
Combined ratio 95.7 99.1 97.5 CONVENTIONAL INSURANCE NET UNDERWRITING RESULT (H1 VS H2)
2 000 1 820
1 600
1 218 1 200
800
R million R 602 615 505 400 110 - H1 H2 Full Year 2020 2019 CONVENTIONAL INSURANCE NET UNDERWRITING RESULT (H1 VS H2) WITH CBI IMPACT SHOWN
505 110 1 800 1 218 1 200 1 805 602 1 810 600 1 218 602 - Percentage ( 600) (1 300) (1 700) (1 200)
(1 800) 2020 H1 2019 H1 2020 H2 2019 H2
UW performance without CBI impact CBI impact 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 10 8.8 2.4 8 2.9 2.8 6 Percentage 4.6 9.9 9.2 4 9.0 7.7 2.1 6.5 6.0 2 2.5 - 2014 2015 2016 2017 2018 2019 2020
Net underwriting result Investment return on insurance funds 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% 13 430 Motor 3% 13 740 - 2 000 4 000 6 000 8 000 10 000 12 000 14 000 Dec-19 Dec-20 Dec-20 Excl premium relief 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 2020 H2 2020 CONVENTIONAL INSURANCE NET UNDERWRITING SURPLUS Per insurance class (R million)
(87) Crop 147 (58) Guarantee ( 14) 7 Miscellaneous ( 10) 24 Accident and Health 94 50 Transportation 126 159 Liability 149 212 Property (2 410) 312 Engineering 433 1 201 Motor 2 100 (3 000) (2 500) (2 000) (1 500) (1 000) ( 500) - 500 1 000 1 500 2 000 2 500
Dec-19 Dec-20 CONVENTIONAL INSURANCE NET UNDERWRITING SURPLUS (H1 VS H2) Per insurance class (R million)
5 Crop 142 ( 21) Guarantee 7 3 Miscellaneous ( 13) 41 Accident and Health 53 28 Transportation 98 2 Liability 147 ( 770) Property (1 640) 167 Engineering 266 1 050 Motor 1 050 (2 000) (1 600) (1 200) ( 800) ( 400) - 400 800 1 200
H1 2020 H2 2020 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 12 000
R million R 8 000
4 000
- Personal Commercial
2020 2019 CONVENTIONAL INSURANCE SEGMENTAL ANALYSIS – PERSONAL AND COMMERCIAL Net underwriting result
2 200 1 791 1 600
928 1 000 892
400 R million R ( 200)
( 800)
(1 400) (1 176) Personal Commercial
2020 2019 CONVENTIONAL INSURANCE GROSS WRITTEN PREMIUM FROM OUTSIDE SA
45.3% 2 395 2 400
1 800 1 648
(7.0%) 37.5% 1 198 1 200 9711 044 871
R million R 32.0% 600 400 303
- Namibia Rest of Africa SE Asia, India & Middle Other East 2020 2019 CONVENTIONAL INSURANCE NET ACQUISITION COST RATIO As % of net earned premium
35 30.4 30.2 29.3 30 28.3 28.5 28.6 28.1 1.0 1.0 1.0 0.9 0.9 0.8 1.4 25
17.0 16.7 15.2 20 16.4 15.8 15.4 15.2 15 Percentage 10 12.5 12.7 5 10.9 11.8 12.3 12.1 12.4
- 2014 2015 2016 2017 2018 2019 2020
Commission Management expenses Strategic projects CONVENTIONAL INSURANCE REINSURANCE AS % OF GROSS EARNED PREMIUM
25 20.6 19.2 20 18.3 18.2 18.6 18.5 18.6
15
Percentage 10
5
- 2014 2015 2016 2017 2018 2019 2020 CONVENTIONAL INSURANCE SIZE OF NET INSURANCE FUNDS
12 000 9 910 10 000 7 879 8 220 8 000 7 489 7 279 6 774 6 978 6 000 R million R
4 000
2 000
- 2014 2015 2016 2017 2018 2019 2020 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 6 000
4 000 R million R 7 756 6 308 2 000
- 2020 2019
ZAR USD EUR Other currencies (mainly Namibian Dollar) 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 ratio 32.8% 31.5% 32.5% 33.1%
Gross underwriting margin 16.5% 14.3% 21.6% 11.7%
Number of clients1 346 000 331 000 5%
1 Excluding value-added products ALTERNATIVE RISK TRANSFER 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 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 - 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%) 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%) SEM PARTNER BUSINESSES 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% participation • 11 investments in African partner businesses – 10% participation 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 Sanlam General Insurance (Uganda) Ltd Uganda 9.5 9.5 Sanlam General Insurance (Tanzania) Ltd Tanzania 5.0 5.0 SORAS Assurances Générales Ltd Rwanda 9.0 9.0 SOCAR s.a. Burundi Burundi 3.1 3.1 FBN General Insurance Ltd Nigeria 10.0 3.5 Sanlam General Insurance Ltd Kenya 3.9 3.9 Botswana Insurance Company Ltd Botswana 2.9 2.9 Zimnat Lion Insurance Company Ltd Zimbabwe 4.0 4.0 Grand Reinsurance Company (Private) Ltd Zimbabwe 4.0 4.0 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 incurred 644 64.8 510 58.0 26%
Net acquisition cost1 301 30.3 254 28.9 19%
Net underwriting result 49 4.9 115 13.1 (57%)
Investment return on insurance funds 207 20.8 204 23.2 1%
Net insurance result 256 25.7 319 36.3 (20%)
1 Santam’s share of the costs to manage the SEM portfolio of R6 million (2019: R12 million) has been included in net acquisition cost. 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 (2%)
Net acquisition cost 4 088 32.5 4 251 34.7 (4%)
Net underwriting result 919 7.3 240 2.0 283%
Investment return on insurance funds 372 3.0 1 454 11.8 (74%) Net insurance result 1 291 10.3 1 694 13.8 (24%) 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 insurance margin 4.6 25.7 10.3
Target investment return on insurance funds 2.5 6 to 9 ANALYSIS OF INSURANCE FUNDS SEM AND SAHAM INSURANCE FUNDS AT 31 DECEMBER 2020
100 8 5 80 45 52
60
80 40 Percentage 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 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 adjustments (24)
Statement of changes in Equity 204 Foreign currency translation differences 209 Other reserve movements (5)
Carrying value at 31 December 2020 1 823
Fair value at 31 December 2020 2 034
* There was no additional impairment since June 2020 in local currency terms. SANTAM GROUP 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 2 571 (50%) 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' impairment of assets 692 80
Tax charge on share of associates' impairment of assets (36) -
Headline earnings (R million) 1 213 2 286 (47%)
Per share (cents) 1 100 2 069 GROWTH DIVERSIFICATION INCLUDING SEM PARTNER BUSINESSES
4% 3% 3%4%
16% 17% 31% 33%
GWP GWP 2020 2019
45% 44%
Personal Commercial ART SEM Saham 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 ASSET / LIABILITY MATCHING GROUP CONSOLIDATED ASSETS AT 31 DECEMBER 2020 2 2 100 7 4 5 16 4 80 34 48 20 60 83 59 15 40 Percentage 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-bearing instruments and preference shares Cash and money market instruments SHAREHOLDER FUNDS ASSET MIX
100 7.1 10.6 16.4 80 15.5
19.5 60 24.4 15.2 40 14.6 Percentage
41.3 20 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 SHAREHOLDER FUNDS CURRENCY MIX
100 6.7 5.7 13.8 12.9 80 19.5 24.4 60 17.3 13.8 40 Percentage
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 INVESTMENT RETURN ON SHAREHOLDERS’ FUNDS
1 396 1 400 1 027 60 575 1 000 219 45
600 R million R 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) 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 1 474 30 17 17 1 538 CAPITAL MANAGEMENT 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 4.0 20 8.2 3.4 3.1
20.8 21.7 24.6 8.0 10 17.0 18.5 19.1 Percentage 8.8 - (8.8) (0.8) ( 10) 2014 2015 2016 2017 2018 2019 2020 Insurance ROC Investment ROC 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
• Initial capital add-on of 20% of the benefit of the partial internal model. Santam aims to reduce the 20% capital add-on over time
• Regulatory internal model capital requirement is R1.5 billion lower than the standard formula capital requirement
• Santam’s Group economic coverage ratio of 161% lies at the mid-point of the 150% - 170% target band
• Issued unsecured subordinated callable floating rate notes to the value of R1 billion in November 2020
• The coverage ratio already includes the anticipated redemption of R500 million subordinated debt in April 2021
• No final dividend declared GROUP STRATEGY AND PRIORITIES 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 intuitive client journeys enabled by technology • Help build resilient societies: through transformation, financial inclusion and P4RR • International and African diversification: building the Pan-African specialist business and selectively building other international business through Santam Re and Santam Specialist • Talent and culture: empowering our people and evolve our culture to be competitive in rapidly changing world • Build technology as an enabler and driver of innovation, efficiency and optimal decision-making • Optimise our financial performance: deliver sound results, stewardship and diversification 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 underwriting margin and operational efficiency > Be the best broker enabler > Partner with Sanlam to pursue growth opportunities > Grow Pan-African specialist business with Saham > Invest in other international growth • Increased cross selling initiatives with Sanlam
• Develop and launch solutions / products for new markets
• Invest in partnerships 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 FTSE/JSE Responsible Investment Top 30 index
Rated by clients Santam has increased its investment to R125 Top business insurer in South Africa: 2020 million in the Resilient Investment Fund Sunday Times Top Brands Survey Santam together with Emthunzini Trust donated R10 million to the Solidarity Fund
Building Risk and Resilience in Municipalities Building a Sustainable Insurance Environment 54 Municipalities supported through Partnership We continue to support the UN Environment’s for Risk and Resilience (P4RR) Principles for Sustainable Insurance (PSI) with a particular focus on Africa
We are a signatory to ClimateWise