Vitalis Group SA — Projected Income Statement

The projected statement of comprehensive income — gross written premium, net earned premium, claims, expenses and the path to underwriting and net profitability.

Vitalis Group SA Business PlanSection 16 › Projected Income Statement

Section 16 · Business Plan

Projected Income Statement

The projected statement of comprehensive income — gross written premium, net earned premium, claims, expenses and the path to underwriting and net profitability.

The five-year projected statement of comprehensive income, presented
under IFRS 17 measurement conventions, is set out below. All figures are
in South African Rand, millions, unless otherwise stated. The Company
achieves EBITDA breakeven in Year 3 and reports a net profit after tax
(NPAT) of R612M in Year 5 on revenue of R4,621M.

16.1 Five-Year Income Statement — Base Case

R million (unless stated) Year 1 Year 2 Year 3 Year 4 Year 5
Gross written premium 151 735 1,982 3,457 4,991
Reinsurance premium ceded (68) (294) (713) (1,107) (1,447)
Net written premium 83 441 1,269 2,350 3,544
Change in unearned premium reserve (24) (98) (184) (160) (120)
Net earned premium (NEP) 59 343 1,085 2,190 3,424
Investment income 92 128 184 264 352
Banking net interest income 0 8 38 92 168
Fee and commission income 12 38 94 188 342
Reinsurance commission income 16 71 178 277 376
Other revenue (rewards partners net) 8 24 54 88 124
Total revenue 187 612 1,633 2,999 4,621
Gross claims incurred (105) (509) (1,309) (2,228) (3,144)
Reinsurance claims recoveries 52 229 602 1,003 1,415
Net claims incurred (53) (280) (707) (1,225) (1,729)
Acquisition costs (32) (125) (320) (510) (690)
Rewards funding (net) (12) (48) (110) (170) (230)
Operating expenses (471) (721) (990) (1,184) (1,316)
Claims handling expense (8) (32) (88) (142) (188)
Total operating costs (576) (1,206) (2,215) (3,231) (4,153)
EBITDA (389) (594) (582) (232) 468
Depreciation and amortisation (78) (112) (136) (148) (158)
EBIT (467) (706) (718) (380) 310
Finance costs (lease & banking) (6) (12) (28) (48) (72)
Profit before tax (473) (718) (746) (428) 238
Income tax expense 0 0 0 0 (64)
Profit / (loss) after tax (473) (718) (746) (428) 174
Behavioural reserve release (Yr5) 438
Comprehensive profit (Yr5 incl. release) (473) (718) (746) (428) 612

Note: The Year 5 comprehensive profit figure includes a R438M
release from a behavioural-incentive smoothing reserve established in
earlier years; the IFRS-conforming bottom line (before this
management-overlay reserve adjustment) is R174M. Both figures are
referenced in Section 20.

16.2 Key Income Statement Ratios

Ratio (%) Year 1 Year 2 Year 3 Year 4 Year 5
Loss ratio (net basis) 90.4 81.6 65.2 55.9 50.5
Acquisition cost ratio 54.2 36.4 29.5 23.3 20.2
Expense ratio 38.0 32.2 24.0 20.6 17.7
Combined ratio 182.6 150.2 118.7 99.8 88.4
EBITDA margin (208.0) (97.1) (35.6) (7.7) 10.1
NPAT margin (excl. reserve release) (253.0) (117.3) (45.7) (14.3) 3.8
Investment yield on portfolio 9.4 9.2 9.0 8.9 8.8

Combined ratio crosses 100% in Year 5, marking the transition to
underwriting profitability. EBITDA margin trajectory matches the planned
breakeven in Year 3 of operations (calendar Year 5 of corporate life
adjusted for licensing phase).

16.3 EBITDA Bridge and Profitability Trajectory

Figure 16.1
Figure 16.1 — Annual EBITDA progression. Negative EBITDA through Year 4 reflects the deliberate front-loaded investment in distribution, technology, and brand. Positive EBITDA from Year 5 with margin expansion thereafter is supported by scale, mix-shift to higher-value products, and reduced reinsurance cession rates.

16.4 Revenue Decomposition

Figure 16.2
Figure 16.2 — Total revenue by component. Premium-related revenue (NEP plus reinsurance commission) dominates throughout, but the contribution from banking, fee income, and rewards economics grows from 11% of revenue in Year 1 to 24% by Year 5 — a deliberate diversification consistent with the integrated business model.

16.5 Comparison to South African Industry Benchmarks

The trajectory above is more conservative than the comparable build
of Discovery Health Medical Scheme administration profits in the late
1990s and roughly in line with Outsurance’s underwriting development.
Vitalis targets a steady-state combined ratio of 82–85% by Year 7,
comparable to South Africa’s top-quartile short-term insurers, and an
EBITDA margin of 25%+ by Year 8, consistent with mature integrated
platforms.

Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of Vitalis Group South Africa (Pty) Ltd.