INTEGRATED REPORT 2016 - Santam

1 INTEGRATEDREPORT2016 OUR STORY IN 2016 Our promise to deliver Insurance good and proper was tested by the worsening claims environment this year, compounded by financial market volatility, low domestic growth, limited consumer disposable income, growing competition, soft premium rates, higher auto repair and related costs, and increasing claims associated with systemic emerged, was the confirmation that what matters most to you, our stakeholders, matters most to us. This was endorsed by business conversations about the future, wide engagement through partnerships and feedback from our clients. We share some of these real experiences with you in this REPORT . Seven stories highlight what mattered most to you:1. Subsistence farmers struggle to become financially astute commercial farmers, who can manage their risks and access markets and funding. We have found ways to help. 2. A 10-year old has her first experience of theft, the insurance claims process and the relief of being able to replace her phone.

2 3. Collaboration is taking city infrastructure development in Africa to the next level where insurance partners and city officials create proactive solutions together. 4. Fires are devastating for shack owners: smoke alarms offer a solution for vulnerable communities that form part of Santam s Risk and Resilience programme. 5. When a client is in a dangerous situation, we are sometimes in a position to offer more than just telephone support. 6. Many low-income households are battling with debt, but find help and learn to manage with the assistance of agencies that are supported by the Santam Resilience Investment (SRI) Fund. 7. We tackle cyber and safety issues creatively through a new campaign and a blockchain hackathon. These examples illustrate how we operate in an ever-changing world and how client needs evolve over time. For Santam , this means that we have to provide protection and the opportunity for people to access the cover that they need for the things that matter to them, wherever they are.

3 It is also what Insurance good and proper means: we make it our business to understand what clients value, and know that different things are important to different people. Please share your experience of reading this REPORT via one of the following channels: A FEW TIPS FOR READERS OF THIS REPORT There is a glossary of insurance and financial terms on page 132. The assurance process and elements are explained on page 5. The disclaimer related to forward-looking statements is on page 5. Santam s full set of reporting elements can be found on page 5. Santam s performance over the long term (seven years), according to key performance indicators, is set out on page 130. For more information, please visit US ON: Santam INTEGRATED REPORT 20161 CONTENTS4 ABOUT THIS REPORT5 SCOPE AND BOUNDARY8 THE ROLE OF INSURANCE IN SOCIETY14 MATERIAL MATTERS AND KEY FUTURE DRIVERS22 GROUP AT A GLANCE40 LEADERSHIP REPORT58 CHIEF FINANCIAL OFFICER S REPORT68 CORPORATE GOVERNANCE REPORT76 MESSAGE FROM THE CHAIRMAN77 CORPORATE GOVERNANCE REPORT88 RISK MANAGEMENT REPORT92 REMUNERATION REPORT98 TRANSFORMATION REPORT101 VALUE-ADDED STATEMENT104 SUMMARY CONSOLIDATED FINANCIAL STATEMENTS130 APPENDICES130 SEVEN-YEAR REVIEW132 GLOSSARY134 ADMINISTRATIONCONTENTSINSURANCE GOOD AND PROPER IS ABOUT trust us to protect what is important to them and to put them at the centre of what we do.

4 The qualities we value most within our business are humanity and integrity. We strive to see beyond the facts in front of us and care about the human behind them. Our employees are our most valuable human capital assets. It s with their skills, resourcefulness and hard work that we can live up to our promise of insurance good and proper. We make it our business to help drive the economy, growth and development in Africa and internationally, as well as create jobs and develop infrastructure. This is insurance that invests in people and the environments they work and live in. It is one of the reasons why we are South Africa s leading general insurer and have also been certified a Top Employer in South Africa in 2017. Santam INTEGRATED REPORT 20164 ABOUT THIS REPORTTARGET AUDIENCE AND CONTENTS antam Ltd ( Santam or the group) is a South African company listed on the JSE since 1964 under the insurance (non-life) sector.

5 The company was founded in 1918 and its headquarters are in Cape Town, South Africa. This INTEGRATED REPORT reviews the financial year for the 12 months ended 31 December 2016 and covers general insurance and investment operations in South Africa and Namibia, as well as investments in emerging market insurance companies through Sanlam Emerging Markets in the rest of Africa, India and Southeast REPORT provides information targeted at Santam s providers of financial capital. The interest of other stakeholders was also considered in determining what is material and appropriate to include. The development of content was further informed by the scenario process and outcomes described from page 14. The process provided a robust view of what matters most those elements that are material for the creation of value. Accordingly, the structure of this REPORT was adapted, with the further inclusion of real-life stories that highlight how the six capitals of value creation (as described by the International INTEGRATED Reporting Council s <IR> Framework), the group s strategy and risk management efforts created value in specific circumstances.

6 Refer to page 11 for information about the six capitals. The content remains comparable to the 2015 REPORT in terms of the entities covered, the measurement methods applied and time frames used for financial and non-financial following events can impact comparability and should be kept in mind when reading the REPORT :The acquisition of a 30% interest by SAN JV (Pty) Ltd (SAN JV) in Saham Finances SA (Saham Finances) was completed during the first quarter of 2016 . Saham Finances is the insurance arm of the Saham Group. Santam and Sanlam Emerging Markets (SEM) hold 25% and 75% of the shareholding in SAN JV, respectively. Santam s effective interest in Saham Finances is further economic interest of 8% in Shriram General Insurance Co Ltd (SGI) was acquired during the second half of THIS REPORTIn this REPORT , all references to Santam refer to the group. The Santam branded business units ( Santam Commercial and Personal, Santam Specialist, MiWay and Santam re) and subsidiaries are mentioned by name when discussed.

7 This REPORT includes summary consolidated financial statements. Cross-references to notes in this REPORT refer to the full set of the annual financial statements, available on Santam broad-based black economic empowerment (BBBEE) certificate is available on the website. APPROVAL OF THIS REPORTThe 2016 INTEGRATED REPORT was reviewed by the audit and the social, ethics and sustainability committees. The reviewed REPORT was recommended to the board and final approval was granted on 1 March 2017. On this basis, the board is satisfied that the REPORT offers the necessary substance for the providers of financial capital to make considered evaluations about the performance and sustainable value creation ability of the following icons are applied throughout the REPORT to improve usability and show the integration between the relevant elements of the ICON IS USED TO REFER TO THE Santam WEBSITE: ICON IS USED FOR CROSS-REFERENCES IN THE INTEGRATED REPORT 20165 ABOUT THIS REPORTREPORTING FRAMEWORKS, GUIDELINES AND STANDARDS This REPORT was developed with due consideration of the following reporting requirements and principles.

8 King III REPORT on Governance for South Africa, 2009 (King III) International Financial Reporting Standards (IFRS) The Companies Act, 71 of 2008, as amended JSE Listings Requirements International INTEGRATED Reporting Council s (IIRC) INTEGRATED Reporting <IR> FrameworkCONTENT ASSURANCES antam s 2016 INTEGRATED REPORT is the result of combined material input from all the different business units reporting on their activities and achievements for the year. PricewaterhouseCoopers Inc provided assurance of the summary consolidated financial statements included in this REPORT . Data relating to BBBEE was verified by indicators were reviewed by an internal process that includes approval by the executive STATEMENTSIn this REPORT , certain statements are made that are not historical facts and relate to analyses and other information based on forecasts of future results not yet determinable, relating, among others, to gross premium growth levels, underwriting margins and investment returns.

9 These are forward-looking statements, as defined in the United States Private Securities Litigation Reform Act of 1995. Words such as believe , anticipate , intend , seek , will , plan , could , may , endeavour , project and similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements involve inherent risks and uncertainties and, if one or more of these risks materialise, or should the underlying assumptions prove incorrect, actual results may differ from those that were anticipated. Forward-looking statements apply only as of the date on which they are made, and Santam does not undertake any obligation to update or revise any of them, whether as a result of new information, future events or ELEMENTSThe elements of Santam s full reporting suite can be accessed through the following channels:SCOPE AND BOUNDARYR eporting elementPrinted documentsSantam websiteTarget audience2016 INTEGRATED REPORT with summar y consolidated financial statements Providers of financial capitalFull annual financial statements Providers of financial capitalNotice and proxy of the annual general meeting ShareholdersSustainability-related information and downloads All stakeholdersWe have been offering personal insurance for almost 100 years.

10 Over this time, we made it our business to understand what is most important to our clients and the risks they face. That is how, whatever our clients value most, we give them the peace of mind that they are covered by South Africa s largest general insurer. An insurer that is there for them 24/7 and able to put them back in the same position they were before any loss occurred, while also paying out more claims than any other WHAT MATTERS MOST TO OUR CLIENTS COMES WITH EXPERIENCE. Santam INTEGRATED REPORT 20168 THE ROLE OF INSURANCE IN SOCIETYTHE ROLE OF INSURANCE IN SOCIETYT hese headlines can mean financial ruin for businesses, families or individuals. If any one of them had to absorb the cost and trauma on their own, even a small incident could set them back for years. Most of these real examples also have a systemic impact beyond the primary incident, placing a drain on national and local governments, small businesses in the area or vulnerable communities.