Santam "Somewhat more conviction on Lloyd's expansion" (Neutral) Christelis

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Santam "Somewhat more conviction on Lloyd's expansion" (Neutral) Christelis

loyd’s, which may limit expansion strategies (business plans require pre 12/26E 3,926 3,781 -4 3,589

approval). As such, groups with their own direct licenses (like SNT) have more flexibility 12/27E 4,629 4,428 -4 4,239

than stand alone syndicates, enabling them to respond more quickly to market 12/28E 5,220 4,995 -4 4,611

opportunities and underwriting cycles outside of these Lloyd’s constraints if the

opportunity arises i.e. the best of both worlds. Michael Christelis, FIA CFA

Analyst

michael.christelis@ubs.com

Securing authority is no mean feat and comes with some "school fees" +27-11-322 7320

We believe that securing approval for the syndicate is a significant achievement, with

SNT's success driven by its ability to bring significant (>£250m) African risk into the

marketplace (enhancing Lloyd’s geographic diversification and growth). This approval

was also likely supported by Santam’s demonstrated turnaround achieved in the

property portfolio, in our view, given the property heavy nature of business targeted by

Santam 1918. The use of a turn-key managing agent (ASTA) too, was likely critical to

this, in our view, and while costly (2-3% of GWP), it provide support for Santam to

adhere to Lloyd's unique reporting and governance requirements while assisting Santam

to build its own managing agent down the line (allowing for cost reduction as the

syndicate scales).

Valuation: Retain Neutral rating; R450/sh PT

We revise our model, marking to market and for FX rates to end June. We also

incorporate somewhat higher natural peril losses for H1 (WC floods). Overall we reduce

our forecasts c3-4% p.a. but retain our price target. This is largely due to offsetting