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.
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
16.4 Revenue Decomposition
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.