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INTEGRATED RESULTS PRESENTATION
KING III APPLICATION
 
   



Escap SOC Limited

Escap SOC Limited (Escap) is a captive short-term insurance company, meaning it can only insure risks of its parent company Eskom and its subsidiaries. Escap provides cost-effective, customised short-term insurance products to the Eskom group (other than nuclear and aviation liabilities) through a combination of self-insurance and reinsurance with external insurance markets.

Operating highlights

Escap’s net assets amount to R920 million, exceeding the target solvency capital requirement in terms of the Solvency Assessment and Management (SAM) interim measures of R634 million
Net operating expenses as a percentage of net earned premiums are 4.4% (target: <10%)
Money-market investment performance measured in comparison to the short-term fixed-interest composite index (STEFI) is 5.7% (STEFI is 5.3%)

Operating challenges

Net claim expenses as a percentage of net earned premiums are 222% (shareholder’s compact target: <90%). This is largely due to the over-pressurisation incident at Duvha power station (refer to page 28)
Return on equity is negative 59.6% against a target of 6%. This is due to the impact of large claim losses on Escap’s profitability
Listed share investment performance measured in comparison to the shareholder-weighted index (SWIX) of the Johannesburg Stock Exchange is 15.8%, against a target of 20.6%

Shareholder’s compact with Eskom

Indicator and unit Target
2013/14
  Actual
2013/14
  Actual
2012/13
  Actual
2011/12
 
Equity portfolio return (1 year) > SWIX, % 20.6   15.8   4.7   2.4  
Money market portfolio return (1 year), > STEFI, % 5.3   5.7   5.8   5.8  
Expense ratio, % 10.0   4.4   5.6   6.5  
Incurred loss/claim ratio, % 90.0   222.0   100.1   89.0  
Solvency assessment measure, R million 634   920   1 702   1 4931  
Return on equity, > Eskom’s WACC, % 6.0   (59.6)   7.3   11.0  

1. Reported as R1 193 million in 2012/13, as this represented Escap’s net assets less the solvency capital requirement. The measure has been updated to show Escap’s net assets.
STEF Short-term fixed-interest composite index.
SWIX Shareholder-weighted index.

Future focus areas

Implementing appropriate processes, procedures and systems to meet the Solvency Assessment and Management (SAM) compliance requirements
Participating in regulatory quantitative impact studies and pioneering the interests and perspectives of captive insurers
Ensuring optimal capital utilisation and demonstrating consistent value-add to the Eskom group

Rotek Industries performs a substantial portion of the maintenance to major power station and transmission components