business report 2018 -...

GU

ARDRISK 1993 – 201

8

25 Y

E

ARS OF INNOVAT

ION

Business Report2018

GUARDRISK BUSINESS REPORT 2018 | PAGE 2

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 ¤ 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

CONTENTS

Page


WHAT WE STAND FOR

To be the trusted insurance partner to our clients for growth and financial stability.

Our purpose

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.

¤ 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.

Our values

Our visionTo be clients’ partner of choice for unconventional risk solutions and affinity structures.


GU

ARDRISK 1993 – 201

8

25 Y

E

ARS OF INNOVAT

ION

2 376 2 124 2 400

5 120 5 244 5 467

14 989

13 343 13 140

22 485

20 711 21 007

-

5 000

10 000

15 000

20 000

25 000

2018 2017 2016

Rm

KEYPERFORMANCEINDICATORS

Gross premium income before premium refundR19,7 billion

Cell shareholders’ fundsR7 billion

AssetsR22,5 billion

This is an important and traditional indicator of the growth opportunities in a specific market segment or group of companies.

A good indicator of the cell captive model’s success is the building of capacity within clients’ cells.

Asset growth is aligned with premium growth and signifies the business’ overall financial strength.

181 306 299

7 422 6 223

3 823

12 067

10 289 9 348

19 670

16 818

13 470

-

5 000

10 000

15 000

20 000

25 000

2018 2017 2016

Rm

181 306 299

7 422 6 223

3 823

12 067

10 289 9 348

19 670

16 818

13 470

-

5 000

10 000

15 000

20 000

25 000

2018 2017 2016

Rm

0

1105 1035 11201 506 1 682

674

4 405

3 705 3 395

7 016

6 422

5 189

0

1000

2000

3000

4000

5000

6000

7000

8000

2018 2017 2016

Rm

181 306 299

7 422 6 223

3 823

12 067

10 289 9 348

19 670

16 818

13 470

-

5 000

10 000

15 000

20 000

25 000

2018 2017 2016

Rm

0

Euroguard Guardrisk Life

Guardrisk Insurance Total


GU

ARDRISK 1993 – 201

8

25 Y

E

ARS OF INNOVAT

ION

KEYPERFORMANCEINDICATORS Continued

7 7 9

90 87 88

203 201 202

300 295 299

0

50

100

150

200

250

300

350

2018 2017 2016

Numberof cells

Total number of cells300

International solvency ratio (Guardrisk Insurance)

1,6 times

Capital adequacy requirement cover(Guardrisk Life)

2.6 times

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.

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.

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.

2.6

2.8

1.9

0

0.5

1

1.5

2

2.5

3

2018 2017 2016

Times(x)

Euroguard Guardrisk Life

Guardrisk Insurance Total

1.6

1.71

1.35

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2018 2017 2016

Times (x)


ABOUT GUARDRISK

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.

Conventional underwriting:

niche and specialist

Guardrisk Life

Guardrisk Insurance

Guardrisk Insurance

Guardrisk Insurance

Management and support Underwriting m

anager facilities

(UMA)

Corporate risk solutionsVolume and affinity

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rdris

k Li

feIn

surte

ch

Bran

ded

insu

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e –

volu

me,

unde

rwrit

ing

man

ager

s an

d

affin

ity (V

UMA)

MAURITIUS

SOUTH AFRICA

How and where we operate

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.

Guardrisk Insurance

Corporate risk solutions

Guardrisk LifeDi

gita

l insu

ranc

e pr

oduc

ts


ABOUTGUARDRISK

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 affinityUsing 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 insuranceTraditional non-life insurance offerings that provide mid-sized companies with the level of actuarial modelling normally associated with the large corporate market, at low cost.

Mining rehabilitationGuardrisk 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, post-retirement 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.

InsurtechInsurtech 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.

What we offer clients


ABOUTGUARDRISK

What we offer clients continued

International

Guardrisk’s international footprint remains a key competitive differentiator.

MauritiusBoth 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.

GibraltarEuroguard is a non-life Protected Cell Company (PCC) and was the first Gibraltar-based contractual cell to convert to PCC in 2007.

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.


GU

ARDRISK 1993 – 201

8

25 Y

E

ARS OF INNOVAT

ION

ActuarialStructuring and solutionsThis 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 managementThe “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 intelligenceGuardrisk’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.

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).

UnderwritingThe 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.

ABOUT GUARDRISK

ReinsuranceGuardrisk’s reinsurance team essentially deals with non-life 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.

ClaimsThe 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.

Technical skills


GU

ARDRISK 1993 – 201

8

25 Y

E

ARS OF INNOVAT

ION

ABOUT GUARDRISK

Our structure

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 Group (Proprietary) Limited

Guardrisk Life Limited

Guardrisk International Limited PCC

Guardrisk Life International Limited

Euroguard Insurance Company PCC Limited

Momentum Ability Limited

Momentum Structured Insurance Company Limited

Momentum Alternative Insurance Limited

Guardrisk Insurance Company Mauritius Limited PCC

Euroguard Insurance Managers Limited

MauritiusGibraltar

South Africa

Guardrisk Allied Products and Services (Proprietary) Limited

Guardrisk Premium Finance (Proprietary) Limited

C & G Engineering Risk Underwriters (Pty) Ltd

C & G Guarantees (Pty) Ltd

Marine Underwriting Managers (Pty) Ltd

Guardrisk Insurance Company Limited

Guardrisk Insurance Management Limited


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.

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.

BUSINESS REVIEW

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 2014.

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.

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).

Nicolaas Kruger

Message from the Chairman

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.


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 KrugerChairman

*According to PWC survey, Ready and Willing. African insurance industry poised for growth, September 2018.

Message from the Chairman continued

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


BUSINESSREVIEW

Guardrisk’s financial performance this year is indeed a fitting tribute to the celebration of its 25th anniversary in 2018. 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 performanceDuring 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 2017. 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.

SegmentsIn 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.

Ratings confirmedIn 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.

Herman Schoeman

CEO’s Review

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.


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 updateThe 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

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 3 000 to about 19 000 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.

BUSINESS REVIEW

CEO’s Review continued

Guardrisk’s strategic plan specifically provides for sustainable and profitable growth of the business based on five pillars: transformation; diversification; clients; staff; and, efficiencies.


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 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.

ThanksThe 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.

CEO’s Review continued

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 SchoemanCEO

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.


BUSINESS REVIEW

Financial Review

Financial performance highlightsGuardrisk 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.

2018 2017 Y-o-y Rm Rm change % Attributable to ordinary shareholders Net revenue 750.8 642.9 16.8%Expenses 395.8 360.2 9.9%Trading Results before interest and taxation 355.0 282.7 25.5%Trading margin 47.3% 44.0% Revenue contribution per capita (efficiency) 1.099 1.013 Group Operational Performance Gross written premium Local 17 552 14 649 20% International 2 123 2 045 4%

Assets under management Local 18 138 16 818 8% International 4 347 3 893 12%

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 2017.

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.

% Y-o-y contri- 2018 2017 change bution Rm Rm %

Guardrisk Insurance 61 455 358 27%Guardrisk Life 25 184 174 6%GAPS 9 71 69 3%C&G * 2 8 (78%)MUM 1 4 – 100%Guardrisk Mauritius 3 26 27 (3%)Euroguard 1 9 8 3%Total 100 751 643 17%

* Less than 1%

Segmental net revenue by division


BUSINESS REVIEW

Financial Review continued

Revenue by type

% Y-o-y contri- 2018 2017 change bution Rm Rm %

Management fees 62 465 422 10%Investment fees 10 74 80 (8%)Underwriting profits 17 125 81 53%Investment Income 11 87 59 47%Total 100 751 643 17%

Financial soundnessBoth 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.

2018 2017 Rm Rm

Guardrisk Insurance Statutory capital – SCR Cover 1.6 1.7 Guardrisk Life Statutory capital – SCR Cover 2.6 2.8

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 2018. The SCR cover going forward will be determined in accordance with SAM.

Statutory capital

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.

2018 2017 Rm Rm

Assets and solvency

Guardrisk Insurance 13 018 11 574 Guardrisk Life 5 120 5 244 Guardrisk International 1 873 1 720 Guardrisk Life International 65 48Guardrisk Insurance Management 1 1 Guardrisk Insurance Company Mauritius 32 –Euroguard 2 376 2 124 Total Assets 22 485 20 711


Nicolaas AS Kruger (50)Group chief executive officer, MMI Holdings ChairmanBCom, FFA, FASSA, AMP (Oxford)

Herman (SH) Schoeman (55)Chief executive officerExecutive directorBCom, MBA, HED

Lourens J Botha (49)Financial directorExecutive directorBCompt (Hons), CA(SA), ACMA

Kevin Eales (62)Managing director, Guardrisk Allied Products and Services

Richard J Eales (44)Executive director, Guardrisk InsuranceBCompt (Hons)

Prof Stephen Jurisich (53)Independent non-executive directorBScHons Actuarial Science, FASSA, FFA

Risto Ketola (43)Group finance director, MMI HoldingsNon-executive directorBSc, CFA Charterholder, Fellow of the Institute of Actuaries

Dr Len D Konar (64)Lead independent non-executive directorBCom, CA(SA), MAS (Illinois USA), DCom (SA), CRMA

Francois C Schaap (46)Executive director, Guardrisk LifeBEng (Ind) (Hons), MBA

Maxwell Z Sibanda (40)Chief risk officerExecutive directorFCIS, FCIBM, CIRM

Malungelo H Zilimbola (48)Independent non-executive directorBSc (Hons) QS, BCom (Hons) Finance

Audit and risk committee Investment committee

Board committee membership

BUSINESS REVIEW

Board of Directors

Herman Schoeman

Richard Eales

NicolaasKruger

LourensBotha

FrancoisSchaap

Kevin Eales

Maxwell Sibanda

Risto Ketola

MalungeloZilimbola

Dr Len Konar

Prof Stephen Jurisich


GU

ARDRISK 1993 – 201

8

25 Y

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BUSINESS REVIEW

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 structuresAt 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 directorsThe 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 GuardriskLife boards56% of the boards of Guardrisk Insurance and Guardrisk Life comprise non-executives, including three independent non-executive directors and two non-executive directors.

The boards are considered to be effective, both in terms of size and composition, and given the nature and complexity

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 committeeThe 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 committeeThe 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.


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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 functionThe 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 functionThe 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 functionThe 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 functionThe 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.

Corporate Governance and Regulatory Compliance continued

BUSINESS REVIEW


Consolidated Abridged Income Statement* for the period ended 30 June 2018

Abridged Annual Financial Statements

FINANCIALPERFORMANCE

Guardrisk Insurance Company LimitedReg. No. 1992/001639/06

Premium written

Premium refund

Gross premiums revenue

Outward reinsurance premiums

Net premium revenue

Unearned premiums

Net earned premium

Net benefits to policyholders

Net operating expenses

Underwriting profit

Net investment income

Profit before taxation

Taxation

Net profit for the year

2017Rm

12 067

5

12 072

(3 648)

8 424

(354)

8 070

(2 949)

(3 715)

1 406

724

2 130

(436)

1 694

10 289

(124)

10 165

(2 496)

7 669

(568)

7 101

(3 332)

(2 802)

967

667

1 634

(376)

1 258

10 157

(27)

10 130

(3 469)

6 661

(379)

6 282

(2 410)

(3 111)

761

708

1 469

(412)

1 057

8 475

(49)

8 426

(2 399)

6 027

(602)

5 425

(2 221)

(2 564)

640

662

1 302

(367)

935

2018Rm

Group**2017

Rm2018

Rm

Company

* This financial information has been prepared on the statutory basis.** Including operations in Mauritius


FINANCIAL PERFORMANCE

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

2017Rm

8 891

1 853

4 245

14 989

764

4 405

8 104

1 716

14 989

8 362

1 784

3 197

13 343

606

3 705

7 656

1 376

13 343

8 809

1 849

2 360

13 018

600

3 242

7 648

1 528

13 018

8 325

1 776

1 473

11 574

480

2 751

7 145

1 198

11 574

2018Rm

Group**2017Rm

2018Rm

Company

Consolidated Abridged Balance Sheet*for the period ended 30 June 2018


Guardrisk Insurance Company LimitedReg. No. 1992/001639/06

* This financial information has been prepared on the statutory basis.** Including operations in Mauritius



Abridged Income Statement* for the period ended 30 June 2018


Guardrisk Life LimitedReg. No. 1999/013922/06

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

7 422

(1 659)

5 763

(1 581)

(668)

(1 045)

2 469

512

2 981

(186)

2 795

(778)

2 017

6 223

(1 315)

4 908

(2 485)

(437)

(979)

1 007

459

1 466

946

2 412

(672)

1 740

2017Rm

2018Rm

* This financial information has been prepared on the statutory basis.



Abridged Balance Sheet*for the period ended 30 June 2018


Guardrisk Life LimitedReg. No. 1999/013922/06

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

4 080

1 040

5 120

203

1 506

3 061

350

5 120

641

2.6x

4 397

847

5 244

179

1 682

3 067

316

5 244

672

2.8x

2017Rm

2018Rm

* 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 [email protected].


GU

ARDRISK 1993 – 201

8

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ARS OF INNOVAT

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JohannesburgTower 2, 102 Rivonia Road, Sandton 2196

PO Box 786015, Sandton 2146

Telephone: +27 (11) 669-1000

Website: www.guardrisk.co.za

E-mail: [email protected]

Cape TownParc du Cap, Building No 6

1 Mispel Road, Bellville 7530

Tel: 0877427045

Website: www.guardrisk.co.za


SubsidiaryMauritiusGround Floor, Tower A, 1 Cybercity, Ebene, Mauritius

Tel: +230 454 0030 | Fax: +230 468 1733

Website: www.guardrisk.com


AffiliateGibraltarEuroguard Insurance Company PCC Limited

Suite 931 a/b Europort, Gibraltar

Telephone: +350 20052699 | Fax: +350 20076092

Website: www.euroguardpcc.gi


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