CONTENTS. Page. What we stand for Our purpose 3 Our mission 3 Our vision 3 Our values 3

Transcription

1 GUARDRISK YEARS OF INNOVATION Business Report 2018

2 CONTENTS What we stand for Our purpose 3 Our mission 3 Our vision 3 Our values 3 Key performance indicators Gross premium income 4 Cell shareholders funds 4 Assets 4 Total number of cells 5 International solvency ratio 5 Capital adequacy requirement cover 5 About Guardrisk Page How and where we operate 6 What we offer clients 7 Technical skills 9 Our structure 10 Our parent group 11 Business Review Message from the Chairman 12 CEO s Review 14 Financial Review 17 Board of Directors 19 Corporate Governance and Regulatory Compliance 20 Financial Performance Abridged Annual Financial Statements Guardrisk Insurance 22 Guardrisk Life 24 Contact us 26 GUARDRISK BUSINESS REPORT 2018 PAGE 2

3 WHAT WE STAND FOR Our purpose To be the trusted insurance partner to our clients for growth and financial stability. Our mission To provide innovative, integrated and cost-effective insurance and alternative risk transfer solutions. To employ industry experts with a passionate commitment to service excellence. To network locally and internationally and establish world-class partnerships. To be an enabler for sustainable economic transformation in SA. Our vision To be clients partner of choice for unconventional risk solutions and affinity structures. Our values We are obsessed with our clients and seek to meet and exceed their expectations. We care for our staff and grow them. We treat everyone with respect and dignity by embracing our diversity. We acknowledge the demands and rewards of teamwork by celebrating each other s strengths. We value integrity, and practise good faith, fairness and honesty. We value our position as leading market innovators by constantly challenging ourselves and the industry. We hold ourselves accountable and take ownership of our actions and responsibilities. We are committed to being socially responsible and creating better communities around us. GUARDRISK BUSINESS REPORT 2018 PAGE 3

4 KEY PERFORMANCE INDICATORS GUARDRISK YEARS OF INNOVATION Gross premium income before premium refund R19,7 billion This is an important and traditional indicator of the growth opportunities in a specific market segment or group of companies Cell shareholders funds R7 billion A good indicator of the cell captive model s success is the building of capacity within clients cells Assets R22,5 billion Asset growth is aligned with premium growth and signifies the business overall financial strength Euroguard Guardrisk Life Guardrisk Insurance Total GUARDRISK BUSINESS REPORT 2018 PAGE 4

5 KEY PERFORMANCE INDICATORS Continued GUARDRISK YEARS OF INNOVATION Total number of cells 300 The growth of cells indicates clients support of a structure that allows them to manage and finance their risk and sell insurance to their own customers. Number of cells Euroguard Guardrisk Life Guardrisk Insurance Total International solvency ratio (Guardrisk Insurance) 1,6 times Solvency capital requirement (SCR) is the statutory basis of calculating a non-life insurer s financial strength. The minimum requirement or SCR cover is 1 times. Times (x) Capital adequacy requirement cover (Guardrisk Life) 2.6 times Capital adequacy requirement (CAR) cover is an indicator of the financial strength of a life insurance company. CAR cover of 1 times means that the assets held are sufficient to cover the sum of policyholder liabilities. Times (x) GUARDRISK BUSINESS REPORT 2018 PAGE 5

6 ABOUT GUARDRISK How and where we operate Guardrisk is a specialist cell captive insurance group providing tailor-made risk financing and insurance solutions, and access to a broad and diversified panel of related services and reinsurance markets. Guardrisk s head office is in Sandton, Gauteng and we have a regional office in Cape Town. Our international operations in Gibraltar and Mauritius offer clients a range of solutions for offshore risks. GIBRALTAR Guardrisk Insurance SOUTH AFRICA Insurtech Guardrisk Life Digital insurance products Branded insurance volume, underwriting managers and affinity (VUMA) Corporate risk solutions Volume and affinity Management and support Conventional underwriting: niche and specialist Underwriting manager facilities (UMA) Guardrisk Insurance Guardrisk Insurance MAURITIUS Guardrisk Life Life Corporate risk solutions GUARDRISK BUSINESS REPORT 2018 PAGE 6

7 ABOUT GUARDRISK What we offer clients Non-life Corporate risk services (CRS) CRS provides clients in the corporate and commercial markets with structured tailor-made solutions to provide cover for underwriting, timing and credit risks; and, in some cases, business risks that are not typically insurable. Branded insurance volume and affinity Using Guardrisk s insurance licence, clients can create a core insurance offering for their client base, under their own brand, that caters for the specific needs of their customers. Underwriting management agencies (UMA) UMAs offer general commercial and corporate insurance, and niche classes of insurance, to the commercial and corporate markets. General insurance Traditional non-life insurance offerings that provide midsized companies with the level of actuarial modelling normally associated with the large corporate market, at low cost. Insurtech Insurtech enables businesses to launch new digital insurance products fast and seamlessly. Fully backed by Guardrisk, Root Insurance provides insurance-as-a-service. Root is a technology platform that connects software innovators to Guardrisk insurance licences, packaging all the key regulated services along the insurance value chain behind a developer-friendly API (application programming interface). All clients need to do is think about their customers and the differentiated experiences they would like to deliver to them. There is no longer the need for the considerable expense and risks related to setting up and managing one s own insurance licence and technology stack. With Root Insurance, clients can prototype and launch compliant new insurance products in weeks, as opposed to months. Selling insurance through digital mediums is now easier than ever before. Mining rehabilitation Guardrisk provides mining houses with a solution in respect of their financial provisioning requirements for post closure rehabilitation, including furnishing guarantees to the Department of Mineral Resources. Life Corporate risk services (CRS) Servicing the corporate markets, providing cover for mortality, morbidity, funeral, health insurance, postretirement medical aid benefits and investment protection. Branded insurance volume, underwriting managers and affinity (VUMA) Clients can use Guardrisk s insurance licence to create their own branded insurance products that address their customers specific requirements. GUARDRISK BUSINESS REPORT 2018 PAGE 7

8 ABOUT GUARDRISK What we offer clients continued International Guardrisk s international footprint remains a key competitive differentiator. Mauritius Both non-life and life facilities are available to insure the foreign business risk exposures faced by our clients. The companies are licensed by the Mauritius Financial Services Commission and operate out of Cybercity, Ebene in Mauritius. The licence for Guardrisk International Limited was converted to a composite life and non-life reinsurance licence in July 2018, which means that Guardrisk can now also write life business under a protected cell company licence. Foreign risk exposures can be insured through issuing insurance policies and holding the insurance reserves in any of the major foreign currencies. Structures offered: Non-life cell captive structures governed by protected cell company legislation. Life cell captive structures governed by contractual shareholder agreements. 3rd party cell captive structures enable clients to sell customised, branded non-life insurance products to their customer base. Gibraltar Euroguard is a non-life Protected Cell Company (PCC) and was the first Gibraltar-based contractual cell to convert to PCC in The company has an open licence to write all 18 classes of business and, being based in Gibraltar, can write directly into EEA markets as long as the UK remains a member of the EU, without incurring fronting costs. Guardrisk s international footprint [in Mauritius and Gibraltar] remains a key competitive differentiator. GUARDRISK BUSINESS REPORT 2018 PAGE 8

9 ABOUT GUARDRISK GUARDRISK YEARS OF INNOVATION Technical skills Actuarial Structuring and solutions This actuarial team forms the key point of contact between the segments and the technical support areas, focusing on client service and client solution development. Structuring of new deals, pricing of new products and rate reviews of existing products fall within the ambit of structuring and solutions. Balance sheet management The number crunching is divided into two engine rooms with the actuarial teams responsible for liability balance sheet management and reporting; capital management and reporting; and asset strategy development. Business intelligence Guardrisk s Project Delta boosted its warehouse capabilities and established a world-class platform to gather and organise data across the business. This will not only enable Guardrisk to meet regulatory requirements but also to generate significant value for clients. Reinsurance Guardrisk s reinsurance team essentially deals with nonlife reinsurer relationship management. Responsibility for life reinsurance resides with the life actuarial balance sheet management team. The reinsurance team uses its strong reinsurance expertise and knowledge of the Guardrisk business to assist clients that are required to transfer some aspects of their risk. Clients benefit from close collaboration between the reinsurance team and actuarial s balance sheet management and business intelligence teams. Claims The claims team is primarily focused on setting methodologies and high-level claim procedures. It is also involved in the operational processing of claims above preset thresholds; supporting clients on claims management; and the resolution of complicated and contentious claims. Project Delta is Guardrisk s proactive response to regulatory frameworks like Protection of Personal Information Act (POPIA); Treating Customers Fairly (TCF); Conduct of Business Returns (CBR); and Solvency Assessment and Management (SAM). Underwriting The important task of assessing risk exposures and developing and maintaining policy wordings that conform to industry best practice lies with the underwriting team, which employs a strong group of underwriting subject matter experts. GUARDRISK BUSINESS REPORT 2018 PAGE 9

10 ABOUT GUARDRISK GUARDRISK YEARS OF INNOVATION Our structure Guardrisk Group (Proprietary) Limited South Africa Momentum Ability Limited Guardrisk Insurance Company Limited Guardrisk Allied Products and Services (Proprietary) Limited C & G Engineering Risk Underwriters (Pty) Ltd Momentum Structured Insurance Company Limited Guardrisk Life Limited Guardrisk Premium Finance (Proprietary) Limited C & G Guarantees (Pty) Ltd Momentum Alternative Insurance Limited Marine Underwriting Managers (Pty) Ltd Mauritius Gibraltar Guardrisk International Limited PCC Guardrisk Insurance Management Limited Euroguard Insurance Company PCC Limited Guardrisk Life International Limited Guardrisk Insurance Company Mauritius Limited PCC Euroguard Insurance Managers Limited The international businesses situated in Mauritius and Gibraltar have a fixed place of business in those countries with dedicated on-site management and independent boards. GUARDRISK BUSINESS REPORT 2018 PAGE 10

11 ABOUT GUARDRISK Our parent group MMI Holdings Limited is a South African financial services group listed on the Johannesburg Stock Exchange in South Africa and the Namibian Stock Exchange in Namibia. MMI exists to enable businesses and people from all walks of life to achieve their financial goals and life aspirations. The group uses its client-facing brands, Metropolitan and Momentum with Multiply, and its other specialist brands, to target specific customers in the markets where it operates. This ensures MMI reaches more people across a range of their life stage needs. MMI helps people grow their savings, protect what matters to them and invest for the future. The group helps companies care for and reward their employees. Through its own advisers, independent brokers and new platforms, MMI provides practical financial solutions for people, communities and companies. This is achieved by leveraging MMI s extensive financial services offer and other capabilities, to deliver value to its stakeholders through its client-facing brands Metropolitan and Momentum with Multiply, as well as specialist brands Guardrisk and Eris. GUARDRISK BUSINESS REPORT 2018 PAGE 11

12 BUSINESS REVIEW Message from the Chairman Gross written premium grew by 17% to R19,7 billion (2017: R16,6 billion) Assets rose 9% to R22,5 billion (2017: R20,7 billion) Shareholders funds increased 9% to R7 billion (2017: R6,4 billion). In 1993, Guardrisk launched the cell captive concept, forever transforming the insurance landscape. Over the past 25 years, the business has established itself as South Africa s leading alternative risk transfer insurer* and a forerunner in insurance innovation. Since its inception, Guardrisk has performed consistently, delivering particularly good results in 2018, despite generally tough trading conditions. There can be no doubt that Guardrisk was a good acquisition for MMI Holdings and that the shareholders are satisfied with the investment made in MMI primarily acquired Guardrisk to diversify the MMI business, increase the exposure to the corporate market and unlock synergies by using the strength of MMI s balance sheet to enhance Guardrisk s underwriting risk taking activities. These strategic objectives were expected to be met over five years and the business is well on its way to achieve these targets. Going forward, combining Guardrisk s cell captive model with disruptive and innovative solutions provides MMI strategic optionality in terms of new insurance business models. One of the key factors that contributes to the strength and solid performance of Guardrisk is the stability of the leadership team and the strong relationships with clients and brokers. In the corporate business-to-business world, relationship management is paramount and the Guardrisk team, across all levels of the business, strives to be easily accessible to clients and brokers at all times. In February 2018, I stepped down as CEO of MMI Holdings. I was pleased when the MMI board asked me to remain chairman of Guardrisk. It is a pleasure to be associated with a business that has such a pervasive passion for what it does. Nicolaas Kruger In the corporate business-to-business world, relationship management is paramount and the Guardrisk team, across all levels of the business, strives to be easily accessible to clients and brokers at all times.

13 Message from the Chairman continued During the past financial year, the Guardrisk board bid farewell to Mary Vilakazi and we thank her for her contribution. We also welcomed Risto Ketola as a new board member. I would like to thank my fellow board members for their support and the wisdom they share with the business. I would also like to pay tribute to the CEO, Herman Schoeman for his strong leadership of the extraordinary Guardrisk team. As Guardrisk marks the impressive milestone of a quarter of a century of innovation, we salute our clients, brokers and service providers for their significant contribution to the success of Guardrisk. Nicolaas Kruger Chairman *According to PWC survey, Ready and Willing. African insurance industry poised for growth, September Guardrisk significantly increases the resilience of MMI s corporate portfolio by diversifying our earnings base and providing an alternative source of value creation in the insurance market. Guardrisk is a global pioneer of the cell captive industry and a market leader in South Africa. Guardrisk has an entrepreneurial flair, generates attractive earnings growth on this basis and is a success story that contributes positively to MMI. Hillie Meyer, Financial Mail, 13 September 2018 GUARDRISK BUSINESS REPORT 2018 PAGE 13

14 BUSINESS REVIEW CEO s Review Guardrisk s financial performance this year is indeed a fitting tribute to the celebration of its 25th anniversary in From our humble beginnings of premium income of R56 million (from 12 clients) after the first year of operation in 1994, Guardrisk is today South Africa s largest specialist cell captive insurer with gross written premium of R19,7 billion. This business has been built on a foundation of innovation, trust and accountability and the delivery of consistently good client experience qualities that we consider fundamental to our DNA and that inform everything we do. Stellar performance During the financial period under review, Guardrisk s earnings increased by 28% year-on-year, exceeding budget by 9%. This despite the extremely challenging trading conditions prevailing across all business sectors. Underwriting results for both life and non-life business increased by 115% year-on-year. Guardrisk s net revenue for the financial year ended 30 June 2018 was 17% higher than Prudent cost management and continuous improved efficiencies resulted in further expense savings when compared to budget. During 2017, Guardrisk acquired Marine Underwriting Managers and C&G Underwriting Managers, both leaders in their respective fields of marine underwriting; and construction, engineering and guarantee underwriting. One of the cornerstones of Guardrisk s future growth plans is to add to its specialist underwriting capability, which these acquisitions have considerably strengthened. Segments In the year ended 30 June 2018, Guardrisk Insurance s gross premium income grew to R12 billion (2017: R10,2 billion), a 17% increase. The non-life business contributed 61% of revenue, up 27% on the previous year. Guardrisk Life s gross written premium increased by 19% to R7,4 billion (2017: R6,2 billion). This segment of the business celebrates its 20th anniversary next year, and now has 90 cells. Herman Schoeman Ratings confirmed In April 2017 Moody s Investor Service confirmed the ratings assigned to three companies in the Guardrisk Group. Guardrisk Insurance and Guardrisk Life are both rated Baa3 on the global scale Insurance Financial Strength (IFS) and Aaa.za on the national scale IFS. Guardrisk International is rated Baa3 on the global scale. This business has been built on a foundation of innovation, trust and accountability and the delivery of consistently good client experience qualities that we consider fundamental to our DNA and that inform everything we do. GUARDRISK BUSINESS REPORT 2018 PAGE 14

15 BUSINESS REVIEW CEO s Review continued The agency s credit opinion bases these ratings on Guardrisk s good market position as the largest cell captive insurer in the SA market; low underwriting risk due to its fee based model; diverse product mix across life insurance and short-tailed non-life insurance lines; and strong profitability. Regulatory update The fast moving regulatory environment remains a key challenge for insurers. The new Insurance Act has now finally introduced the concept of solvency asset management (SAM) an international principle applicable to insurers. SAM aims to reduce the likelihood of insurers being unable to honour claims, protect policyholders in the event that an insurer is unable to fully meet all claims, and provide early warning to regulators when capital falls below a certain level. Close interaction with the regulatory authorities and our cell client shareholders will be necessary during the implementation phase to ensure that Guardrisk is able to optimise the efficient use of capital across the business and all cells. The compliance focus for the immediate future is the conversion of the current licences into new licences to comply with the new regulatory environment. That Guardrisk continues to make significant investments in resources and capabilities to deal with the changes in the regulatory landscape and to support growth is evidenced Guardrisk s strategic plan specifically provides for sustainable and profitable growth of the business based on five pillars: transformation; diversification; clients; staff; and, efficiencies. by the fact that the staff complement in our governance, risk and compliance unit has increased materially. This as the number of client and broker contracts will expand from to about to accommodate new legislation. Despite the high cost of legislative changes, Guardrisk views it as a challenge that can be turned into an opportunity. Project Delta was launched to boost the business data warehouse capabilities and establish a world-class platform to gather and organise data across the business. This will not only enable Guardrisk to meet regulatory requirements, but also generate significant value for clients. Guardrisk continuously strives to maintain the highest governance and risk management standards, supported by the stability and integrity of the management team. Where to from here? Guardrisk s strategic plan specifically provides for sustainable and profitable growth of the business based on five pillars: transformation; diversification (of distribution channels and revenue streams); clients (organic growth with existing clients); staff (growing industry experts inspired by the business entrepreneurial culture); and, efficiencies (proficient and optimal utilisation of capital). Until now, Guardrisk has shown good and steady growth but the time has come to invest in the next growth phase. The three key new growth initiatives requiring investment are: leveraging the cell captive business model to support transformation, insurtech (the marriage of insurance and technology) and traditional non-life insurance. A recent report by Cenfri (the Centre for Financial Regulation and Inclusion) recognises that the cell captive structure is suitable for entrepreneurs or businesses wishing to enter the insurance market in a way that allows them control over the product offering and value chain, while being able to rely on the insurer to manage the compliance burden and provide technical support. This while building capacity and transferring skills. The report identifies three main benefits of cell captives as vehicles for insurance sector transformation: reducing barriers to entry, encouraging entrepreneurship and building capacity. GUARDRISK BUSINESS REPORT 2018 PAGE 15

16 CEO s Review continued Insurtech is shaking up the global insurance industry, changing the way that insurers develop and distribute their products. Guardrisk, supported by MMI, has partnered with fintech company Root on the development of an API (application programming interface) that allows developers to build and prototype insurance products at little or no cost. This platform significantly lowers the barriers to entry and will enable Guardrisk to develop products in record time, offering clients more choice and better value for money. Cell captives inherently insure very clearly defined risk, leaving clients to go elsewhere for their entire insurance risk package. In response to brokers and clients preference to deal with a single provider, Guardrisk recently increased its investment in capabilities to enhance our traditional nonlife insurance offerings. This segment will provide mid-sized companies with the kind of actuarial modelling that they would generally only find in the large corporate market. Thanks The entrepreneurial spirit that gave rise to Guardrisk has not dimmed over the past decade and we continue to serve our clients with the omnipresent ethos that they are the sole reason that we are in business. I would like to thank our clients, brokers and service providers for their support and their loyalty. I would also like to thank our chairman, Nicolaas Kruger, and the other members of the Guardrisk board for their continued guidance and support; and the Guardrisk team for their hard work and dedication. To be at the helm in this the 25th year of the business is an honour and I look forward to writing the next chapter in the Guardrisk story with the amazing Guardrisk team. Herman Schoeman CEO Guardrisk recently increased its investment in capabilities to enhance our traditional non-life insurance offerings. This segment will provide mid-sized companies with the kind of actuarial modelling that they would generally only find in the large corporate market. GUARDRISK BUSINESS REPORT 2018 PAGE 16

17 BUSINESS REVIEW Financial Review Financial performance highlights Guardrisk Insurance; Guardrisk Life; Guardrisk Allied Products and Services (GAPS); Guardrisk Premium Finance (GPF); C&G Engineering Risk Underwriting and C&G Guarantees (C&G), Marine Underwriting Managers (MUM), Guardrisk International Limited PCC (GIL), Guardrisk Life International Limited (GLIL), Guardrisk Insurance Management (GIM), Guardrisk Insurance Company Mauritius (GICM); and Euroguard, Gibraltar. Guardrisk s integration into MMI has been bedded down over the last four years and has given the business access to capital from MMI s strong balance sheet, opportunities to leverage off insurance expertise (especially in the life business), group-wide governance forums and opportunities for collaboration on various business enterprises. During November 2017, Guardrisk acquired Marine Underwriting Managers (Pty) Ltd, in line with Guardrisk s strategy of increased risk taking. This company is in the process of being integrated into Guardrisk and has contributed to Guardrisk s earnings for three months during this year Y-o-y change % Attributable to ordinary shareholders Net revenue % Expenses % Trading Results before interest and taxation % Trading margin 47.3% 44.0% Revenue contribution per capita (efficiency) Group Operational Performance Gross written premium Local % International % Assets under management Local % International % Income from operations increased by 17% to R750.8 million for the year and trading profit, before interest and tax, increased by 26% to R355 million. The group s performance was supported by strong growth in new business and good performance in underwriting experience in line with the company s strategy of increased risk taking. The acquisition of the MUM business also contributed to the company s underwriting profits. Expenses increased by 10% compared to the prior year. This was largely due to the increase in personnel costs as a result of the acquisition of MUM in November Investment in various technology platforms to enhance service delivery, efficiencies and data capabilities continued this year. This trend is expected to continue over the next several years as the group strives to improve efficiencies and enhance client service. Revenue streams remained stable with good growth shown in fees and investment income. The significant increase in underwriting profits was specifically due to Admed, MUM and the restructuring of the GAPS business resulting in GAPS facilities now being written in Guardrisk Insurance. With the backing of the strong MMI balance sheet, Guardrisk will continue to take risk in future when opportunities arise, in line with the set risk appetite. Segmental net revenue by division % Y-o-y contri change bution % Guardrisk Insurance % Guardrisk Life % GAPS % C&G * 2 8 (78%) MUM % Guardrisk Mauritius (3%) Euroguard % Total % * Less than 1% GUARDRISK BUSINESS REPORT 2018 PAGE 17

18 BUSINESS REVIEW Financial Review continued Revenue by type % Y-o-y contri change bution % Management fees % Investment fees (8%) Underwriting profits % Investment Income % Total % Financial soundness Both Guardrisk Insurance and Guardrisk Life received Aaa. za national Insurance Financial Strength (IFS) and Baa3 global IFS ratings from Moody s Investors Service during the period. Moody s also assigned a Baa3 global scale rating to Guardrisk International Limited PCC in Mauritius. The ratings confirm the financial strength and financial stability of the group s companies and provide all stakeholders, specifically clients and policyholders with an independent view of key indicators. Statutory capital Guardrisk Insurance Statutory capital SCR Cover Guardrisk Life Statutory capital SCR Cover During the period under review, both Guardrisk Insurance and Guardrisk Life maintained capital cover well in excess of the minimum requirements. The capital cover ratios ensure shareholder and policyholder protection, while optimising balance sheet management. The variances from prior year are dependent on timing of dividends declared to MMI and cell shareholders. The Solvency Assessment and Management (SAM) framework will be effective from 1 July The SCR cover going forward will be determined in accordance with SAM. In the interim, Guardrisk has reported on a parallel basis based on the Standard Formula included in the legislation. Guardrisk has been closely monitoring the capital coverage under this legislation for the statutory entities, as well as individual cells, and is currently in an favourable solvency position overall for Guardrisk Insurance and Guardrisk Life. The board of directors sets risk appetite levels and provides guidance on the capital cover to be retained with the aim of maximising sustainable growth, whilst ensuring that policyholders and clients are well protected. During the period under review, Guardrisk Insurance paid dividends of R0 (2017: R0) to its holding company and R431,3 million (2017: R606,2 million) to cell shareholders. Guardrisk Life paid R80 million (2017: R83,5 million) to its holding company and R2 127,5 million (2017: R611,5 million) to cell shareholders. R1,6 billion (2017: R1,1 billion) was paid in respect of client performance bonuses, rewarding contingency policyholders for efficient risk management and good claims experience. The table below illustrates the strong growth across all divisions over the past financial year; this was driven by strong premium growth, as well as 15 new cells being opened during the year. Assets and solvency Guardrisk Insurance Guardrisk Life Guardrisk International Guardrisk Life International Guardrisk Insurance Management 1 1 Guardrisk Insurance Company Mauritius 32 Euroguard Total Assets GUARDRISK BUSINESS REPORT 2018 PAGE 18

19 BUSINESS REVIEW Board of Directors Nicolaas Kruger Herman Schoeman Richard Eales Dr Len Konar Lourens Botha Francois Schaap Prof Stephen Jurisich Risto Ketola Malungelo Zilimbola Kevin Eales Maxwell Sibanda Nicolaas AS Kruger (50) Group chief executive officer, MMI Holdings Chairman BCom, FFA, FASSA, AMP (Oxford) Herman (SH) Schoeman (55) Chief executive officer Executive director BCom, MBA, HED Lourens J Botha (49) Financial director Executive director BCompt (Hons), CA(SA), ACMA Kevin Eales (62) Managing director, Guardrisk Allied Products and Services Richard J Eales (44) Executive director, Guardrisk Insurance BCompt (Hons) Prof Stephen Jurisich (53) Independent non-executive director BScHons Actuarial Science, FASSA, FFA Risto Ketola (43) Group finance director, MMI Holdings Non-executive director BSc, CFA Charterholder, Fellow of the Institute of Actuaries Dr Len D Konar (64) Lead independent non-executive director BCom, CA(SA), MAS (Illinois USA), DCom (SA), CRMA Francois C Schaap (46) Executive director, Guardrisk Life BEng (Ind) (Hons), MBA Maxwell Z Sibanda (40) Chief risk officer Executive director FCIS, FCIBM, CIRM Malungelo H Zilimbola (48) Independent non-executive director BSc (Hons) QS, BCom (Hons) Finance Board committee membership Audit and risk committee Investment committee GUARDRISK BUSINESS REPORT 2018 PAGE 19

20 BUSINESS REVIEW GUARDRISK YEARS OF INNOVATION Corporate Governance and Regulatory Compliance A robust legislative framework is key to Guardrisk s sustainability. This fosters stakeholder confidence and, though costly, can provide a formidable competitive advantage. Guardrisk is committed to shaping its legislative universe and actively participates in the legislative development process; and steps up, whenever required, to take part in industry committees and forums, and engage with regulators and policy makers. We observe the codes of conduct of industry bodies including the South African Insurance Association, The Insurance Institute of South Africa and the guidelines of other entities, including the various financial sector Ombud Schemes. Guardrisk provides accurate, timeous and comprehensive statutory reports to the various regulatory authorities. Corporate governance structures At Guardrisk, governance is paramount. Good governance allows us to create and preserve value for our policyholders, our clients, our employees, our business, and the broader society that we operate in. Guardrisk s governance systems define roles and accountabilities as well as mechanisms for monitoring adherence to our high standards. The principles of transparency, ethical behaviour and honesty are incorporated in all dealings, and the necessary structures and controls to support this are in place. Board of directors The board is made up of individuals with a wide range of skills and experience from the insurance and financial services environment, collectively suitable to carry out all its responsibilities. The chairman is a non-executive director and the roles of chairman and chief executive officer are separate. Composition of the Guardrisk Insurance and Guardrisk Life boards 56% of the boards of Guardrisk Insurance and Guardrisk Life comprise non-executives, including three independent non-executive directors and two non-executive directors. of the businesses with an appropriate balance of executive, non-executive and independent directors. The boards meet regularly, with planned meetings at least once a quarter. Audit and Risk committee The audit and risk committee is chaired by an independent non-executive director; this committee comprises only non-executive members, with a number of other invitees including the internal auditors, external auditors, statutory actuary and representatives of various control functions, as well as a number of senior executives. Investment committee The investment committee is chaired by an independent non-executive director; this committee comprises one independent director and two executive directors with a number of other invitees. The committee carefully reviews all investments on the basis of total asset security and minimised credit and counterparty risk to Guardrisk. Industry specialists, as well as the group s panel of investment managers, are invited to investment committee meetings. Guardrisk is committed to shaping its legislative universe and actively participates in the legislative development process; and steps up, whenever required, to take part in industry committees and forums, and engage with regulators and policy makers. The boards are considered to be effective, both in terms of size and composition, and given the nature and complexity GUARDRISK BUSINESS REPORT 2018 PAGE 20

21 BUSINESS REVIEW GUARDRISK YEARS OF INNOVATION Corporate Governance and Regulatory Compliance continued Remuneration committee The remuneration committee is a committee of the parent company. A delegated authority exists to facilitate the company s participation. The purpose of this committee is to ensure that executive directors and senior management are remunerated appropriately and to review remuneration scales, including incentives, share schemes and conditions of employment. Remuneration structures are based on independent market surveys and professional input from trusted market sources. The committee identifies and reviews the appointment of new directors and the performance of all executive directors. Risk management function The risk management function is headed by the Chief Risk Officer. A charter, approved by the audit and risk committee and the board, is in place. An enterprise risk management (ERM) framework is in place. This provides guidance to implement a consistent, efficient, and economical approach to the identification, evaluation and responses to key risks that may impact business objectives. Risk management policies are developed out of the approved framework. The risk management function maintains a level of independence from operations to ensure that a consistent approach to managing risks and challenge. Internal audit function The internal audit service is obtained through a co-source arrangement, with an independent accounting firm and the internal audit division of the parent company. A charter, approved by the audit and risk committee and the board, is in place. The internal audit function reports to the audit and risk committee and has unrestricted access to the chairman of the audit and risk committee and to the non-executive chairman of the board. The scope of the internal audit function is to review the reliability and integrity of financial and operating functions, the systems of internal control and risk management, the means of safeguarding assets, the efficient management of the company s resources and the effective conduct of its operations. Compliance function The compliance function, as an integral part of the wider ERM framework, is responsible for the compliance strategy and is accountable to the audit and risk committee and board for managing and reporting identified compliance risks in line with a compliance charter and framework. In addition to maintaining a risk based compliance plan, it also creates a compliance culture that values responsible conduct and compliance with internal and external obligations. Actuarial control function The actuarial control service is outsourced, together with the statutory actuary role, to Deloitte. A Head of Actuarial Control (HAC) is appointed for the non-life and life insurance businesses respectively. Assurance is provided to the boards by these functions regarding the accuracy of the calculations and the appropriateness of the assumptions underlying the insurance liabilities, and the capital adequacy requirements. This is achieved by conducting regular valuation and surplus analyses at a cell level, thus revealing trends that may not otherwise be noticed in pure financial reporting. The actuarial control functions also provide valuable input on premium rating, capital and reserving requirements, risk mitigating strategies and are an important part of each own risk and solvency. GUARDRISK BUSINESS REPORT 2018 PAGE 21

22 FINANCIAL PERFORMANCE Abridged Annual Financial Statements Guardrisk Insurance Company Limited Reg. No. 1992/001639/06 Consolidated Abridged Income Statement* for the period ended 30 June Group** 2017 Company Premium written Premium refund 5 (124) (27) (49) Gross premiums revenue Outward reinsurance premiums (3 648) (2 496) (3 469) (2 399) Net premium revenue Unearned premiums (354) (568) (379) (602) Net earned premium Net benefits to policyholders (2 949) (3 332) (2 410) (2 221) Net operating expenses (3 715) (2 802) (3 111) (2 564) Underwriting profit Net investment income Profit before taxation Taxation (436) (376) (412) (367) Net profit for the year * This financial information has been prepared on the statutory basis. ** Including operations in Mauritius GUARDRISK BUSINESS REPORT 2018 PAGE 22

23 FINANCIAL PERFORMANCE Abridged Annual Financial Statements Guardrisk Insurance Company Limited Reg. No. 1992/001639/06 Consolidated Abridged Balance Sheet* for the period ended 30 June Group** Company 2017 Assets Non-current assets Technical assets Current assets Total assets Equity and Liabilities Capital and reserves Interest of Cell Owner ordinary shareholders and rent a captive policyholders Technical liabilities Current liabilities Total equity and liabilities * This financial information has been prepared on the statutory basis. ** Including operations in Mauritius GUARDRISK BUSINESS REPORT 2018 PAGE 23

24 FINANCIAL PERFORMANCE Abridged Annual Financial Statements Guardrisk Life Limited Reg. No. 1999/013922/06 Abridged Income Statement* for the period ended 30 June 2018 Gross premiums revenue Outward reinsurance premiums Net premium revenue Net benefits to policyholders Net commission Administration expenses Net insurance revenue Investment income Net revenue Transfer (to)/from policyholder liabilities Profit before taxation Taxation Net profit for the year (1 659) (1 581) (668) (1 045) (186) (778) (1 315) (2 485) (437) (979) (672) * This financial information has been prepared on the statutory basis. GUARDRISK BUSINESS REPORT 2018 PAGE 24

25 FINANCIAL PERFORMANCE Abridged Annual Financial Statements Guardrisk Life Limited Reg. No. 1999/013922/06 Abridged Balance Sheet* for the period ended 30 June 2018 Assets Non-current assets Current assets Total assets Capital, reserves and liabilities Capital and reserves Interest of Cell Owner ordinary shareholders and policyholders Non-current liabilities Current liabilities Total equity and liabilities Capital Adequacy Requirement (CAR) CAR cover ratio x x * This financial information has been prepared on the statutory basis. The detailed financial statements of Guardrisk Insurance and Guardrisk Life, based on International Financial Reporting Standards (IFRS), are available from cassims@guardrisk.co.za. GUARDRISK BUSINESS REPORT 2018 PAGE 25

26 CONTACT US GUARDRISK YEARS OF INNOVATION Johannesburg Tower 2, 102 Rivonia Road, Sandton 2196 PO Box , Sandton 2146 Telephone: +27 (11) Website: Cape Town Parc du Cap, Building No 6 1 Mispel Road, Bellville 7530 Tel: Website: jisaacs@guardrisk.co.za Subsidiary Mauritius Ground Floor, Tower A, 1 Cybercity, Ebene, Mauritius Tel: Fax: Website: ramlochunv@guardrisk.co.za Affiliate Gibraltar Euroguard Insurance Company PCC Limited Suite 931 a/b Europort, Gibraltar Telephone: Fax: Website: turnert@euroguardpcc.gi GUARDRISK BUSINESS REPORT 2018 PAGE 26