Investment case - 2015 interim 20150830 final save [Read-Only]

Investment Case

Sustainable delivery

Overview

Strategic positioning

Strategic delivery

Financial performance – 2015 interim results

Leading financial services group in Africa, with presence in India and SE Asia.

Established in 1918, listed in 1998 on the JSE & Namibian Stock Exchange

2 166 million issued shares, 486 000 shareholders

Market Cap of > US$10bn

JSE/ALSI40 stock with > 80% free-float

Average daily trading stats

4 - 5 million shares per day

>50% of shares trade p.a.

Institutional shareholding of 87%, 35% offshore shareholding

Overview

Operational structure

100%

100%

100%

60%

SA Retail: life insurance, investment

& other financial services

Sanlam Personal

Finance

Emerging markets ex-SA: life insurance, general insurance,

investments, credit & banking

Sanlam Emerging

Markets

SA & Developed markets: investment management, wealth

management, employee benefits

Sanlam

Investments

General insurance in SA & co-investor in

SEM general insurance businesses

Santam

Sanlam Group

Group Office

100% 61%100%100%

the sanlam strategy

maximising shareholder value

Strategic focus central to what we doOptimising value creation

Strategic pillars

Transformation

Diversification

Optimal capital utilisation

Operational efficiencies

Earnings growth

Strategic enablers

Environmental footprint

Prosperous society

Responsible products and services

People development

Sound governanceM

axim

isin

gR

oG

EV

Sustainable

value

creation for

shareholders

A strategy focused on growthDriving geographic, product and services presence

South AfricaSolid base & cash flows

Rest of AfricaDemographics, low

insurance penetration, competitive

environment, Pan-Africa opportunity

India/SE AsiaLower income

segments have similar dynamics than SA ELM

and RoA

DevelopedNiche, solutions

for SA & RoAclients

Core regional focus areasBalance structural and organic growth

Operational and capital efficiencies key in current environment

Further diversifying distribution capability

Reviewing optimal capital structure under SAM

South AfricaDelivery of

sustainable growth

Effe

ctiv

e c

ap

ital m

an

ag

em

en

t


Operational and capital efficiencies key in current environment

Further diversifying distribution capability

Reviewing optimal capital structure under SAM

South AfricaDelivery of

sustainable growth

Increased emphasis on accelerated organic growth

Extracting maximum value from existing relationships

Geographic expansion in line with client and intermediary needs

Other Emerging Markets

Platform for future growth

Effe

ctiv

e c

ap

ital m

an

ag

em

en

t


Products and services for SA and Rest of Africa client base

Expand distribution post Intrinsic sale

Wealth and investment management focus

Developed Markets

Niche approach

Increased emphasis on accelerated organic growth

Extracting maximum value from existing relationships

Geographic expansion in line with client and intermediary needs

Other Emerging Markets

Platform for future growth

Effe

ctiv

e c

ap

ital m

an

ag

em

en

t

The growth opportunityGrowth markets in South Africa

47%

22%

16%17%

22%

36%

15%

25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2006 2013

% o

f popula

tion

LSM 1-4 LSM 5 LSM 6-7 LSM 8-10

The growth opportunityLife insurance penetration in Africa

11.4%

5.4%

1.9%

0.9% 1.1%0.5% 0.4%

0.1% 0.2% 0.1%

South Africa Namibia Botswana Malawi Kenya Ghana Zambia Tanzania Nigeria Uganda

% o

f G

DP

BRIC average: 1.9%

Global average: 3.7%

Source: Swiss Re and AXCO

strategic delivery

exceeding overall targets

Top-line earnings growth

Earnings per share

Net operating profit per share increased by 5% (11% excl one-offs)

Normalised headline earnings per share up 4%

Business volumes

New business volumes increased by 22% to R100bn

Net fund inflows of R7bn

Net life VNB up 5% to R655m

Net VNB margin of 2.66% – maintained on per product basis

Group Equity Value

Group Equity Value of R47.53 per share

Annualised RoGEV per share of 13%

Financial performance in 1H15

Operational efficienciesProfitable volume growth

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

100

200

300

400

500

600

700

800

1H06 1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15

South Africa Rest of AfricaOther International Margins - rhs


Persistency – SA middle-income market

Focus on quality

4.8

3.9 3.9 3.6

3.4

3.8 3.9

3.0 2.9 2.9 2.8 2.9 2.9

4.2 4.0

3.8 3.7 3.6

4.2

3.4

2.9 2.8 2.7 2.9 2.8

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Lapses, surrenders & fully paid-ups as % of in-force per half year

H1 H2


Persistency – SA lower income market

Focus on quality

9.6

8.7

10.6

9.8

8.5

9.6 9.2

0

2

4

6

8

10

12

2012 2013 2014 2015

Lapses, surrenders & fully paid-ups as % of in-force per half year

H1 H2


Positive experience continuing

Experience variances

241

142 138

277 288 278

636

468

681

555

1 021 991

408

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0

200

400

600

800

1 000

1 200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1H15

R'million % of VIF (rhs)

Investment performance

Percentage of SIM’s AUM to exceed benchmark

Focus on long-term performance track record

2011

2012

2013

2014

1H15

Rolling 3 year Rolling 5 year

100% 80% 60% 40% 20% 0% 20% 40% 60% 80% 100%

Optimising capital allocated to clusters - driving increased returns

Discretionary capital invested in growth markets as preference

Return to shareholders if not utilised in reasonable timeframe

Discretionary capital earmarked mainly for Africa, India and SE Asia

Optimising capital base

Capital efficiency

Capital efficiencyCapital redeployed since 2005 (R34bn)

-

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

Capital released Capital deployed

Discretionary capital

South Africa

Developed markets

Emerging markets

Share buy back/special dividend

Capital efficiencyComposition of GEV transformed since 2005

-

20 000

40 000

60 000

80 000

100 000

120 000

GEV 2005 GEV Jun 2015

Discretionary capital

Other capital

Non-life operations

Value of in-force

Life Required Capital

Diversification

Group Equity Value Net Operating Profit

Life insurance 50% 61%

General insurance 17% 13%

Investment management 15% 12%

Credit & structuring 9% 12%

Admin, health & other 9% 2%

Building a balanced portfolio

DiversificationInternational positioning focused on emerging markets

Emerging Markets - Direct presence

Emerging Markets - Indirect presence

Developed Markets

India

Malaysia

Philippines

NigeriaGhana

The Gambia

Kenya

Uganda

Rwanda

Burundi

Tanzania

Malawi

Zambia

Botswana

Namibia

Lesotho

South Africa

Switzerland

United Kingdom

USA

Australia

Ireland

Mozambique

DiversificationGeographic profile

Country – direct stakeEffective interest

Life/General insuranceLife insurance

Market share/PositionGeneral insurance

Market share/Position

South Africa 100%/61% 25%/2 23%/1

Botswana 60%/60% 76%/1 3%/5

Namibia 59%-100%/37% 17%/2 28%/1

Zambia 70%/62% 33%/1 12%/4

Tanzania 64%/52% 53%/1 2%/18

Kenya 56%/31% 13%/4 1%/32

Malawi 62%/62% 48%/1 38%/1

Uganda 100%/84% 15%/4 2%/13

Ghana 49%/40% 23%/2 10%/3

Nigeria 35%/35% 5%/7 1%/32

Rwanda 63%/63% 38%/2 32%/1

India 20%/20% <1%/20 2%/14

Malaysia 51%/49% 3%/8 3%/14

Mozambique 60% <1%/5 -

Developed markets Various <1% -

DiversificationProduct mix

page 26

DiversificationA better balanced portfolio

SA Traditional98%

Namibia2%

SA Traditional98%

Namibia1%

Other international1%

SA Traditional54%

SA Entry-level23%

Namibia4%

Botswana9%

Rest of Africa7%


1H03R100m

1H15R655m

SA Traditional68%

SA Entry-level11%

Namibia4%

Botswana5%

Rest of Africa2%


Net VNB Net operating profit

17% average

growth rate p.a.

16% average

growth rate per

share p.a.

1H03R756m

1H15R3 622m

DiversificationContribution from businesses outside of South Africa

South Africa Other emerging markets

76%

18%

6%

79%

16%

5%

Net operating profit

77%

20%3%

76%

22%

2%

Net VNB

77%

16%

7%

76%

16%

8%

Group Equity Value

2014

2015

2014

2015

2014

2015

Other international

Largest exposure to ex-SA emerging markets of South African insurers

Diversified operations shield Group earnings from difficult operating environment in specific countries

Expanding SA entry-level footprint

Strengthening relationships in Africa

Shriram Capital – unique business model in India

Expansion into South-East Asia – synergies and organic growth

Competitive advantage

Diversification

sanlam group

financial performance – 1H2015

External operating environmentCommodity-based economies under pressure

Macro environment and electricity supply constraining capital investment and economic activity

Modest growth in employment and disposable income

Highly competitive market across all products

South Africa

Commodity prices impacting on growth and currencies

Increase in competition, including large internationals

Longer term growth potential remains intact, but challenges in the short term

Rest of Africa

Slower than expected improvement in Indian economic growth

Delays in roll out of infrastructure projects in India

Good GDP growth in Malaysia despite low oil prices

India / SE Asia

Internal operating environment6-months results impacted by internal challenges

Loss of PIC funds in 2014 impacting on SI performance fees; additional R10bn outflow in 2H15

SI admin costs elevated by projects and capacity building in Retail and Institutional units

South Africa

System implementation issues

More focus required on bedding down acquisitions

Improve balance sheet management

Rest of Africa

Credit granted in anticipation of infrastructure roll out

Delays in releasing state funding causing significant bad debts in equipment finance subsidiary

Book closely managed by STFC to limit further losses

India

Salient features

2015 2014 �

Group Equity Value* cps 4 753 4 684 1%

Annualised RoGEV per share % 13,0 18,5

CAR cover (Sanlam Life)* 4,8 4,5

Net operating profit R mil 3 622 3 461 5%

cps 177,0 169,2 5%

Normalised Headline earnings R mil 4 588 4 393 4%

cps 224,2 214,8 4%

New business volumes R mil 99 879 81 833 22%

Net fund flows R mil 6 769 19 222 -65%

New Life business EV (net) R mil 655 626 5%

New Life EV margin % 2,66 2,68

* Comparative information as at 31 December 2014

Business flows

Gross Net

R million 2015 2014 � 2015 2014

by business

Personal Finance 29 162 23 662 23% 10 188 8 087

Emerging Markets 5 395 4 030 34% (8 981) 1 762

Sanlam Investments 56 234 45 682 23% 2 260 6 362

Santam 9 088 8 459 7% 3 302 3 011

by licence

Life insurance 18 620 17 536 6% 5 822 6 137

Investment 71 359 55 251 29% (2 549) 9 926

General insurance 9 900 9 046 9% 3 496 3 159

Total 99 879 81 833 22% 6 769 19 222

Value of new covered business

Value of New Business Margin

R million 2015 2014 � 2015 2014

Personal Finance 482 437 10% 2,64% 2,73%

Emerging Markets 222 196 13% 6,17% 7,30%

Employee Benefits 16 42 -62% 0,76% 2,30%

Sanlam UK 10 22 -55% 0,53% 0,59%

Total 730 697 5% 2,82% 2,88%

Net of minorities 655 626 5% 2,66% 2,68%

Comparable economic basis 660 626 5% 2,68% 2,68%

Net operating profit

R million 2015 2014 �

Personal Finance 1 955 1 763 11%

Emerging Markets 562 624 -10%

Sanlam Investments 712 727 -2%

Santam 413 353 17%

Corporate & other (20) (6) ->100%

Total 3 622 3 461 5%

Income statement

R million 2015 2014 �

Net operating profit 3 622 3 461 5% Per share 177,0 169,2 5%

Net investment return 1 148 1 122 2%

Other (182) (190) 4%

Normalised headline earnings 4 588 4 393 4% Per share 224,2 214,8 4%

Fund transfers 138 54

Headline earnings 4 726 4 447 6% Per share 233,1 220,2 6%

Group Equity Value

Equity Value RoGEV

R million 2015 2014* Rm %

Group operations 90 932 87 739 6 165 7,0%

Personal Finance 39 312 38 453 3 129 8,1%

Emerging Markets 14 859 14 571 702 4,8%

Investments 22 135 20 122 1 975 9,8%

Santam 14 626 14 593 359 2,5%

Discretionary & Other 6 331 8 197 (263) -3,2%

TOTAL 97 263 95 936 5 902 6,2%

cps 4 753 4 684 294 6,3%

Adjusted return 7,5% Return target 5,9% * Comparative information as at 31 December 2014

Group Equity Value earnings

1 820

608

655

408 28

3 629 211

-1 443 -14

2 428

3 519

7 148

5 902

0

1000

2000

3000

4000

5000

6000

7000

8000

Expe

cte

d r

etu

rno

n V

IF

Expe

cte

d r

etu

rno

n A

NW

Expe

cte

d L

ife

ea

rnin

gs VN

B

Op

era

tin

ge

xp

eri

en

ce

va

ria

nce

s

Op

era

tin

ga

ssu

mp

tio

nch

an

ges

Ad

juste

d L

ife

ea

rnin

gs

Ad

juste

d N

on

-life

retu

rn

Ad

juste

d R

oG

EV

Inv v

aria

nce

s

Econ

om

ica

ssu

mp

tio

ns

Go

od

will

RoG

EV

15.8%13%

Return on Group Equity ValueOut perform growth target of long-bond rate + 400bp

13.4 12.4 12.210.8

12.2 12.1 12.2

4.8

3.3

9.8

6.2

6.3

0.9

5.2

0

5

10

15

20

25

2010 2011 2012 2013 2014 1H15 Avg

Target Out performance

2.4% from markets

sanlam group

cluster results – 1H2015

sanlam personal

finance

Sanlam Personal Finance

R million 2015 2014 �

New business volumes 29 162 23 662 23%

Sanlam Sky 546 474 15%

Individual Life 6 048 5 821 4%

Glacier 22 568 17 367 30%

Net flows 10 188 8 087

Sanlam Sky 1 373 1 307

Individual Life (1 513) (859)

Glacier 10 328 7 639


R million 2015 2014 �

Value of new life business 482 437 10%


Individual Life 234 228 3%

Glacier 99 74 34%

Comparable economic basis 486 437 11%

New business margin 2,64% 2,73%

Sanlam Sky 7,67% 7,62%

Individual Life 2,54% 2,59%

Glacier 1,39% 1,37%

Comparable economic basis 2,66% 2,73%


R million 2015 2014 �

Gross operating profit 2 718 2 439 11%


Individual Life life and investments 1 733 1 571 10%

Glacier 209 171 22%

Personal loans 176 148 19%

Other 31 31 -

Net operating profit 1 955 1 763 11%

Group Equity Value* 39 312 38 453

RoGEV (6 months) 8,1% 8,7%

label* Comparative information as at 31 December 2014

sanlam emerging

markets

Sanlam Emerging Markets

R million 2015 2014 �

New business volumes 5 395 4 030 34%

Namibia 1 286 1 541 -17%

Botswana 2 449 1 137 115%

Rest of Africa 885 827 7%

India/Malaysia 775 525 48%

Net fund flows (8 981) 1 762

Namibia (41) 343

Botswana (9 983) 478

Rest of Africa 799 814

India/Malaysia 244 127

Value of new life business 222 196 13%

Margin 6,17% 7,30%

Sanlam Emerging Markets

R million 2015 2014 �

Gross operating profit 1 117 1 129 -1%

Namibia 257 254 1%

Botswana 411 348 18%

Rest of Africa 123 108 14%

India/Malaysia 327 432 -24%

Corporate (1) (13) 92%

Net operating profit 562 624 -10%

Group equity value* 14 859 14 571



sanlam investments

Sanlam Investments

R million 2015 2014 �

Net investment business flows 2 585 4 871

Investment management SA 4 203 3 883

Wealth management 2 446 (457)

International (4 061) 1 346

Capital management (3) 99

New insurance business 2 988 4 389 -32%

Employee benefits 1 182 952 24%

Sanlam UK 1 806 3 437 -47%

Net life business (325) 1 491

Value of new life business 26 64 -59%

Margin 0,65% 1,16%

Sanlam Investments

R million 2015 2014 �

Gross operating profit 933 982 -5%

Investment management 592 612 -3%

Employee benefits 206 216 -5%

Capital management 135 154 -12%

Net operating profit 712 727 -2%


Covered business 7 841 7 833

Other 14 294 12 289



santam

Santam

R million 2015 2014 �

Net earned premiums 9 088 8 459 7%

Gross operating profit 1 055 871 21%

Underwriting surplus 808 626 29%

Working capital & other 247 245 1%

Net operating profit 413 353 17%

Underwriting margin 8,9% 7,4%




Ticker symbol: SLLDY

CUSIP: 80104Q208

Ratio: 1 ADR : 5 Ordinary Shares

Depositary bank: Deutsche Bank Trust Company Americas

Depositary bank contact: Stanley Jones

ADR broker helpline: +1 212 250 9100 (New York)+44 207 547 6500 (London)

e-mail: [email protected]

ADR website: www.adr.db.com

Depositary bank’s local custodian: Computershare South Africa

Sponsored level 1 ADR

Sanlam ADR programme

Investment case - 2015 interim 20150830 final save [Read-Only]

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