RMA Annual Integrated Report 2016
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2016 2016 HIGHLIGHTS GPI Cash Collected 2500 3000 2000 2500 2000 1500 1500 1000 1000 500 500 0 0 2012 2013 2014 2015 2016 2014 2015 2016 Gross Premium Income (R’ Million) Cash Collectd (R’ Million) RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 1 ABOUT THIS REPORT This is the Rand Mutual Assurance Company Limited’s 123rd annual report which has been prepared on an integrated basis in line the reporting principles advocated in King III. While the publication of an integrated report is strictly only a requirement of listed companies, we believe that integrated reporting is appropriate for the RMA Group in light of its rapid expansion and the increasing importance of stakeholder engagement at all levels. Last year the format of the report changed somewhat to include a more visual presentation of RMA’s business and performance and this year an attempt has again been made to convey as much information as possible visually, which is easier to understand at a glance. This report comprises four main sections, beginning with an overview of RMA’s performance during the 2016 financial year, not only from a financial perspective but also from the perspective of ensuring the sustainability of the Group moving forward. The overview includes a message from the chairman, chief executive officer (CEO) and chief financial officer (CFO). The second section provides an overview of the business of the 2 RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 RMA Group. The third section comprises a detailed description of RMA’s stakeholders and relevant engagements, while the fourth provides an overview of governance within RMA, including risk management and RMA’s Remuneration Report for the 2016 financial year. Consolidated financial statements for the year under review conclude the report. A full set of financial statements, including the Directors’ Report, External Auditors’ Report and Audit Committee Report, which comply with International Financial Reporting Standards (IFRS) and the Companies Act, 71 of 2008 (the Companies Act), are available on request. All references in the report to Class IV and Class XIII refer to the mining, quarrying, sand pits and related industries and the iron, steel, artificial limbs, galvanising, garages, metal and related industries respectively. The directors confirm that they have reviewed the output of the reporting process and the content of the integrated annual report and are satisfied that the report addresses all material issues and is a fair presentation of the performance of the RMA Group. The RMA Board of Directors has released the 2016 integrated report to its stakeholders. An electronic copy of the report can be accessed on RMA’s website at www.randmutual.co.za. RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 3 TABLE OF Section 1 – Performance Overview 5 CONTENTS Performance highlights 6 Message from the Chairman 8 Message from the CEO 10 Message from the CFO 12 Section 2 – Our Business 17 Leadership 22 Operational overview 28 Strategy 32 Section 3 – Stakeholder Review 41 PERFORMANCE OVERVIEW Primary Stakeholders 43 Secondary Stakeholders 51 OUR BUSINESS Section 4 – Governance and Oversight 55 STAKEHOLDER REVIEW Corporate governance report 56 GOVERNANCE AND OVERSIGHT Risk management 65 FINANCIAL STATEMENTS Social and ethics 74 Section 5 – Abridged Financial Results 86 4 RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 SECTION 1 PERFORMANCE REVIEW RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 5 KEY STATISTICS 31 Dec 2014 31 Dec 2015 31 Dec 2016 Premium Income R1.002bn R2.284bn R2.311bn Investment Income R0.829bn R0.996bn R1.124bn Investment: Net realised gains R0.694bn R1.013bn R0.489bn Claims paid R1.044bn R1.340bn R1.598bn Operating Expenses R0.172bn R0.424bn R0.468bn Operating Surplus R1.183bn R1,296bn R1.611bn No. of lives insured 367 296 885 078 985 781 Total Assets R15.782bn R17 315bn R19 145bn No of Staff 213 282 306 6 RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 7 MESSAGE FROM THE CHAIRMAN The RMA Group has embedded the Class XIII business and reached its goal of acquiring 600 000 lives as at the end of December 2016. By any measure, this is phenomenal. The CEO and his executive team are also to be applauded for their relentless efforts to strengthen effective controls, processes and policies. They have ensured the success of this sector of our business and have also mitigated the associated risks. The Class IV business continues to shrink. The RMA Group, however retains its unwavering commitment to the provision of excellent care and service to those employees whose lives, and those of their dependants, have been altered due to serious injury or fatality in the work place. As far as the Board and management are concerned, the business model of Caring, Compassionate Compensation remains the cornerstone of all of RMA’s initiatives and expansion efforts. This is clearly demonstrated by the opening of the Rand Mutual Care Facility’s doors in March 2016. This has been a work in progress since the second half of 2014, and involved many years of dreaming and planning before that. This fully operational facility is designed to improve the health and quality of life of RMA’s beneficiaries who suffer from long-term disabilities. Both the public and private sectors alike have lauded the Care Facility as a state-of-the-art facility. DR T.V. MAPHAI 8 RMA’s collective challenge and responsibility is to sustain previously alternate directors. Corporate governance the model of Caring, Compassionate Compensation, remains a key focus area of the Board. It was central especially given the expanded nature of its business. to the implementation of RMA’s strategic agenda in Throughout this process, our stakeholders remain our 2016, as well as to its compliance with the regulatory focus. As will be discussed later in the report, RMA environment and its licence conditions. Readiness for touches the lives of different stakeholders at different the FSB’s Solvency Assessment and Management levels and stakeholder engagement is a key focus of its (SAM) regime continues to be closely monitored by the strategy. Board with the assistance of various committees which are responsible for overseeing SAM implementation. In a struggling economy where job creation is paramount, it is notable that as at 31 December 2016, The Group continues to remain financially stable largely RMA’s permanent staff complement had increased by owing to its sound investment policies. an additional 20 positions and it is anticipated that this trend will continue into 2017. I would like to thank the Minister of Labour, the Honourable Mildred Oliphant, the Board of the Compensation Fund The Board has approved a one-off long-term incentive and the Compensation Commissioner, Mr Vuyo Mafata, scheme applicable to all employees. This was done in for the continued support they have given to us. recognition of management’s impressive success in tackling the enormous task of embedding the Class XIII I would also like to thank the Board and committee business. The scheme will run from 2015 to 2017 and is members for their dedication and contribution to the payable in 2018. In addition, there is an urgent need to sustainability and success of RMA. attract key skills to drive the new business which was transferred en masse with effect from 1 March 2015. Once again, management and, in particular the Chief The take-on of Class XIII was the result of many years’ Executive Officer, Jay Singh, and his team, are to be hard work and was a considerable milestone in RMA’s congratulated on securing the sustainability and growth 122-year history. of RMA. Thank you for your commitment, determination and hard work which will no doubt unlock further potential RMA continues to pursue a growth strategy with a focus and opportunities for RMA in the future. on expanding its insurance (non-COID) business, while at the same time improving customer satisfaction and fostering customer loyalty. The composition of the Board remained mainly unchanged during 2016, with a few exceptions. Mr Abre van Vuuren and Ms Meroonisha Kerber have resigned, while Dr Mel Mentz and Mr Herman Perry Dr TV Maphai were appointed as non-executive directors. Both were Chairman RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 9 MESSAGE FROM THE CEO In 2016, we continued to focus on growth as a key strategic objective and to better position ourselves for this growth in 2017 and beyond. To this end we have set up a fully-fledged sales, marketing and servicing department. As part of this development, we are focusing on enhancing and revamping our insurance products that fill the gap not covered by COID benefits. These solutions were previously offered to our Class IV clients only, but are now available across the board. Through prudent investments, RMA continues to perform well financially ensuring that our clients and their beneficiaries can continue to have peace of mind cover. A key focus of the year was enhancing efficiencies and streamlining processes all in support of boosting service levels across the business. In 2015, RMA obtained the licence to administer COID claims for Class XIII and, as with all growth particularly one as immense as this, come teething problems. While we considered the transfer of Class XIII from the Compensation Fund to RMA as a success, this was not without its challenges. To this end, the 2016 focus of closing gaps and better aligning operational efficiencies to service delivery went a long way to ensuring that both our Class IV and Class XIII clients enjoyed an enhanced service experience. BISNATH (JAY) SINGH 10 RAND MUTUAL ASSURANCE | ANNUAL INTEGRATED REPORT | 2016 As RMA’s leader, service delivery is of the utmost RMA also continued to licence its integrated claims importance to me and RMA’s executive team and we management system to the Compensation Fund (CF), continue to strive for excellence in this area.