BONDS & GUARANTEES 1 ABOUT SANTAM Santam is the leading general insurer in South Africa with an annualised gross written premium of US$ 2,514* billion and total assets of US$ 3,134** billion. Sanlam (with a market cap of US$12 billion) has a 60% shareholding in Santam. Santam has been offering insurance for 100 years and over this time, we have made it our business to understand what is important to our clients and the risks they face. This is why over 85 of the top 100 companies listed on the Johannesburg Stock Exchange (JSE) trust us to protect their businesses. This is what insurance good and proper is about. KEY FACTS • Contribution to Sanlam Group net result from financial services 13% (2018: 10%*) • 22% market share in South Africa • 500 000 claims handled each year on average • Unmatched technical expertise and knowledge found in Specialist Business • Technically competent employees (qualified engineers, admitted attorneys, financial analysts, etc.) • 85 of the top 100 listed JSE companies are insured by Santam • 6 076 permanent employees • US$ 1,4 billion* paid out in claims in 2018 * Used the average rate of (R/US$ of 13.17) at December 2018 to convert numbers from ZAR to US$. ** Used the spot rate of (R/US$ of 14.39) at December 2018 to convert numbers from ZAR to US$. 2 ABOUT SANTAM BONDS AND GUARANTEES-A DIVISION OF SANTAM We provide the service of issuing a project bond or guarantee to the beneficiary (employer, owner or creditor) of a project to cover the financial loss arising from the contractor (principal debtor) defaulting on his contractual obligations. We issue both insurance and bank guarantees on behalf of our clients, directly or through an intermediary. Our footprint is vast; it covers most countries in Africa as well as Australia, USA and the UK. We specialise in creating feasible and more economical alternatives to traditional bank guarantees which are demanded by most employers in foreign markets. WHY SANTAM BONDS AND GUARANTEES IS THE BEST SOLUTION IN THE MARKET Credit rating: Standard & Poor’s (S&P) affirmed Santam’s rating at ‘BB+’; Outlook Stable global scale rating, at ‘zaAA+’ national scale rating and ‘bbb’ stand-alone credit profile. Large capacity: We have a large capacity which means we have the ability to provide our clients with spare capacity to use for unexpected projects and / or very large “last minute” tenders. Due to our strong balance sheet capability and ‘BB+’ rating we are the preferred Eskom and Transnet guarantor for all construction related guarantees. Bank guarantee solutions: We have established strategic partnerships with four major international banks and have the capacity to issue bank paper guarantees. A large African footprint: Our target market over the years has expanded to include emerging markets in Africa as growth rates and international investment in these markets are buoyant and growing. This footprint is made possible through our partnership with Sanlam Pan Africa. We have successfully issued guarantees into more than 30 countries in Africa. In-house legal capability: Translates into service efficiency, cost effectiveness and the capability to engage with local and international experts to facilitate the issuance of local and foreign guarantees on behalf of our clients. In-house financial consulting expertise: This is through Sanlam Capital Markets, it enables us to provide our clients with world-class financial advisory and support. 3 OUR RANGE OF PRODUCTS ARE AS FOLLOWS: PRODUCT DESCRIPTION Covers the employer during the bidding process, and guarantees that BID BOND the bidder abides by the conditions of the tender. Covers the employer for the prepayment of monies advanced to the ADVANCE PAYMENT contractor, usually to cover cost of capital materials and equipment and GUARANTEE to aid cash flow. PERFORMANCE Covers the beneficiary against the risk of the contractor not fulfilling his GUARANTEE contractual obligations in terms of the contract. Replaces monies ordinarily retained by the employer until project RETENTION completion. Also used to protect the employer against failure of the GUARANTEE contractor to rectify defects after project completion. PAYMENT Covers the supplier of goods and services against non-payment by the GUARANTEE buyer. MATERIALS Covers the employer for the value of materials stored either on or off ON-SITE / OFF-SITE site by the contractor. Enables payment of these materials before these GUARANTEE materials form part of “Work Done” Covers a bulk fuel supplier against non-payment by a fuel purchaser. Purchasers can be commercial (distributors, wholesalers, fuel station owners) or retail (airlines, mines, construction and engineering FUEL GUARANTEE companies, or logistics companies). It serves to ease the financial burden on bulk fuel purchasers to pay for fuel upfront or incur interest expenses by acquiring funding in the banking sector to purchase fuel. Utility payment bond: Covers the principal for the deposit or payment of monthly accounts on an electricity or water account that is, should a UTILITY BONDS AND company fail to pay their bill, Santam will pay the utility provider. GUARANTEES Utility performance bond: Covers a state owned utility provider against the risk of the contractor not fulfilling his contractual obligations in terms of the contract. Covers businesses involved in import, export, manufacturing, sales or distribution of goods. These bonds guarantee that either taxes or duties CUSTOMS AND or both will be paid by the principal when invoiced by the government. EXCISE BONDS These bonds also ensure that companies comply with all legal and tax acts and requirements related to their business. 4 5 OUR UNDERWRITING RISK CRITERIA In the current volatile economic climate, security for payment and risk management are important. We realise that although banks have started to lend money again, they remain cautious – and as a result they demand high levels of collateral security from their clients. With the backing of Santam’s financial strength, we offer clients Guarantee capacity of a world-class standard. In order to qualify for a Guarantee Facility of this nature, the following criteria are evaluated. Facility terms will then be offered on the basis of a successful underwriting outcome. FACILITY PARAMETERS GUARANTEE PARAMETERS • Years of trading • Experience • Revenue • Scope • Retained income • Time/programme • Order book size • Cash flow • Project references, track record, • Quantum resources • Wording • Solvency, profitability, liquidity, gearing • Max tenor: 72 months • Paper security – indemnity, suretyship • Employer • Material security – collateral • Geography, etc. 6 INDUSTRIES AND SECTORS WE SUPPORT 1. Main contractors 2. Key sub-contractors: Earthworks, roads, infrastructure services 3. Engineer Procure Construction (EPC) 4. Operate and maintain contracts 5. Oil and gas 6. Renewable energy 7. Conventional energy (including nuclear energy) 7 ABOUT THE SANLAM GROUP Established in 1918 as a life insurance company, Sanlam is a leading diversified Pan-African financial services group listed on the Johannesburg and Namibian Stock Exchanges. Today, the Group has a business presence in 33 countries in Africa as well as in the USA, Malaysia, the UK, India and Australia. Sanlam’s vision is to be a leader in client-centric wealth creation, management, and protection in South Africa; to be a a leading Pan-African financial services group with a meaningful presence in India and Malaysia and to play a role in wealth and investment in specific developed markets. Sanlam is made up of five operating clusters namely; Sanlam Personal Finance, Sanlam Pan Africa (SPA) including Saham Finances, Sanlam Investments, Sanlam Corporate, Santam Limited (Santam). Two of these clusters (SPA including Saham Finances and Santam) have the capability of issuing Bonds and Guarantees in parts of Europe, the USA, the UK, Asia and some African countries. 8 THE SANLAM GROUP AT A GLANCE The extent of our business (2018 results) • Total assets under management (Sanlam Investments) = R882 billion (US $ 67 billion*) • Operating profit before tax = R9 billion (US$ 683.4 million*) • New business volumes = R223 billion (US$ 17 billion*) • Net fund flows = R41.5 billion (US$ 3.1 billion*) • Personnel = 15 000 in Sanlam South Africa and 75 930 in associates and subsidiaries • Shareholders = 450 217 • The Sanlam group office is responsible for centralised functions that include strategic direction, financial and risk management, marketing and communications, human resources and informa- tion technology, sustainability management, corporate social investment and general services. SANLAM CLUSTERS CAPABLE OF ISSUING BONDS AND GUARANTEES SANLAM GROUP Sanlam Pan Africa Santam Limited Emerging markets excluding South Africa: Long- Leading general insurance term insurance, general insurance, investments, in South Africa credit and banking Saham Finances Largest Pan-African insurer in terms of issued premium (excluding South Africa) * Used the average rate of (R/US$ of 13.17) at December 2018 to convert numbers from ZAR to US$. 9 ABOUT SANLAM PAN AFRICA The Sanlam Pan Africa cluster is responsible for Sanlam’s financial business services (life insurance, general insurance, banking, retail credit, health, bancassurance, asset management and specialist general insurance products) in emerging markets outside South Africa with the aim of ensuring sustainable delivery and growth across the various businesses that make up this cluster. As part of the group’s vision, it strives