Nimbus Direct Insurance Business Plan › Section 14 › Financial Plan and Projections

This section presents the consolidated five-year financial
projections for Nimbus Direct Insurance Group, comprising the projected
income statement, balance sheet, and cash flow statement, along with the
underlying assumptions and sensitivity analysis. All figures are
presented in South African Rand (ZAR), millions unless otherwise stated.
The projection period runs from FY2026 (Year 1) through FY2030 (Year 5).
Financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), incorporating the requirements of
IFRS 17 “Insurance Contracts” effective from 1 January 2023, and IFRS 9
“Financial Instruments”.

14.1 Key Financial Assumptions

The financial model is built bottom-up from policy-level economics,
applying frequency-severity claims modelling, channel-specific customer
acquisition costs, and IFRS 17 measurement principles. The principal
assumptions are summarised below and detailed throughout the operational
sections of this plan.

14.1.1 Premium Assumptions

Premium-per-policy declines marginally in Years 4 and 5 reflecting
deliberate down-market expansion into entry-level motor, contents-only
home insurance, and the lower-premium device insurance product. This mix
shift is margin-accretive on a contribution-margin basis because
acquisition costs scale sub-proportionally with policy value.

14.1.2 Claims Assumptions

14.1.3 Expense Assumptions

14.1.4 Reinsurance Assumptions

Nimbus employs a layered reinsurance programme combining quota share,
excess-of-loss, and catastrophe protection. Reinsurance commission
income from quota share treaties offsets a portion of ceded premium,
while excess-of-loss and CAT layers provide tail risk protection.
Programme economics evolve as the book matures and net retention
increases.

14.1.5 Investment & Capital Assumptions

14.2 Projected Income Statement (Profit & Loss)

The five-year projected income statement reflects the trajectory from
a scaled launch in Year 1 through to a profitable, capital-generative
business by Year 5. The path to profitability follows the classic
direct-insurer J-curve: early-stage acquisition investment and sub-scale
fixed costs produce a modest underwriting loss in Year 1, which inflects
to profitability in Year 2 and accelerates thereafter.

Figure 14.1

14.2.1 Revenue Build Commentary

Gross written premium grows from ZAR 250 million in Year 1 to ZAR
4,500 million in Year 5, a compound annual growth rate of 105 percent.
This trajectory reflects (i) the acceleration of organic customer
acquisition as brand awareness compounds beyond the inflection threshold
typical of direct insurers, (ii) the launch of additional product lines
from Year 2 onwards, (iii) the Botswana market entry in Year 3, and (iv)
accelerating cross-sell within the embedded base.

Investment income grows in line with the investible asset base, which
itself is a function of accumulated technical provisions and retained
shareholder capital. The yield assumption reflects a conservative
portfolio mix of approximately 60 percent fixed income (largely
government and high-grade corporate), 25 percent money market, 10
percent listed equity, and 5 percent property and alternatives,
consistent with prudent insurer asset-liability matching principles.

14.2.2 Combined Ratio Decomposition

The combined ratio is the principal measure of underwriting
profitability. Nimbus targets a combined ratio of 95 percent in Year 1,
declining steadily to 79 percent by Year 5. The improvement is driven by
three structural forces: (i) loss ratio improvement from data maturation
and superior risk selection, (ii) expense ratio compression from
operating leverage as fixed costs are spread over a larger premium base,
and (iii) acquisition cost ratio reduction as organic and retained
business displaces paid acquisition.

Figure 14.2

14.3 Projected Balance Sheet

The projected balance sheet reflects the build-up of insurance assets
and liabilities consistent with the scale and mix of the underwriting
book, the regulatory capital requirements under the Solvency Assessment
and Management (SAM) regime, and the staged deployment of the proposed
ZAR 850 million capital raise.

14.3.1 Assets, Liabilities & Equity (ZAR millions)

14.3.2 Balance Sheet Commentary

The asset base expands from approximately ZAR 953 million at the end
of Year 1 to ZAR 5.2 billion by Year 5, driven primarily by the
accumulation of investment securities as technical provisions and
retained earnings build. The investment portfolio is constructed in
compliance with section 33 of the Insurance Act and SAM Pillar I
asset-liability matching requirements.

Technical provisions (UPR plus OCR plus IBNR) reach approximately ZAR
1.96 billion by Year 5, representing 43 percent of total liabilities.
The Nimbus Reserve liability—a contractual policyholder-rebate accrual
unique to the Nimbus value proposition—grows to ZAR 103.7 million,
equivalent to approximately 4 percent of net earned premium over the
life of the book.

Shareholders’ equity grows from the initial ZAR 850 million capital
injection to ZAR 2.17 billion by Year 5, a 2.55-times multiple of book
value, before consideration of the Year-2 ZAR 200 million Series A
follow-on round earmarked for capital efficiency optimisation.

14.4 Projected Cash Flow Statement

The cash flow statement decomposes movements in cash and cash
equivalents into operating, investing, and financing activities. As a
regulated insurer with substantial technical provisions, Nimbus
generates strong operating cash inflows from premium receipts, with
investment activities representing the deployment of those inflows into
the regulated investment portfolio.

Figure 14.3

14.4.1 Cash Flow Commentary

Operating cash flow is positive from Year 1 despite the modest
pre-tax loss, because the growth in technical provisions generates
working-capital float. This is a characteristic feature of growing
insurance businesses: premiums are received in advance of claims being
paid, creating a structural source of low-cost funding. By Year 5, net
operating cash inflows exceed ZAR 1.4 billion, of which the substantial
majority is reinvested into the regulated investment portfolio.

The Year 2 capital raise of ZAR 200 million represents a planned
Series A follow-on round, contingent on achievement of the Year 1
operational milestones (regulatory licence operationalisation, customer
acquisition targets, system stability metrics). A further ZAR 100
million tier-2 debt or hybrid instrument is anticipated in Year 3 to
optimise the capital structure ahead of the Botswana market entry.

Dividends are first declared in Year 5, reflecting the build-up of
distributable reserves while maintaining SCR coverage above the 175
percent internal target. The proposed ZAR 149 million dividend
represents a 20 percent payout of Year 5 net profit—a measured initial
distribution policy that preserves capital for ongoing growth
opportunities.

14.5 Sensitivity & Scenario Analysis

The financial projections are subject to a range of sensitivities,
both individual driver-level and integrated scenarios. The analysis
below quantifies the impact of key variable movements on Year 5 net
profit, providing investors with visibility into the dominant value
drivers and the resilience of the financial model under stress.

14.5.1 Single-Variable Sensitivity (Year 5 Net Profit Impact)

The loss ratio is the dominant single sensitivity, with each
100-basis-point movement worth approximately ZAR 37.5 million of pre-tax
profit at Year 5 scale. This emphasises the centrality of underwriting
discipline and the value of the data-driven rating engine described in
Section 9 (Underwriting & Actuarial Strategy).

14.5.2 Integrated Scenario Analysis

Three integrated scenarios stress-test the financial model under
coherent macro-operating conditions. The bear case reflects slower
customer acquisition, elevated loss costs, and constrained pricing
power; the base case is the central projection presented in this plan;
the bull case reflects faster organic acquisition, favourable claims
experience, and successful early Botswana expansion.

Figure 14.4

14.6 Key Financial Ratios

14.6.1 Comparison to Listed Comparables

Nimbus’ Year 5 financial profile is benchmarked against the principal
listed insurance comparables on the JSE and selected international
direct insurers. The Year 5 combined ratio of 79 percent compares
favourably to OUTsurance Group (88-90 percent), Discovery Insure (parent
group ~95-98 percent), and Santam (~93-95 percent at the personal-lines
segment level). The return on equity of approximately 39 percent in Year
5 reflects the disproportionate value of being a digitally-native,
capital-efficient operator that has crossed the scale threshold without
inheriting legacy cost structures.

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 Nimbus Direct Insurance Group (Pty) Ltd.