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Contents
Sanlam at a Glance
Key features, Sanlam in a nutshell, Investment case and Salient Results 1
Analysis of Return on Group Equity Value 15
Analysis of Shareholders 19
Economic Review 23
Results Presentation
Key Observations in 1H09 2
Financial & Actuarial Review 10
Review of Clusters 19
Strategic Focus 27
Outlook 29
Group Financial Review
Overview 2
Accounting Policies and Basis of Preparation 20
Group Equity Value 24
Shareholders’ Fund Financial Statements 30
Embedded Value of Covered Business 46
Group Financial Statements 55
Cluster Reviews
Sanlam Personal Finance 3
Sanlam Developing Markets 11
Sanlam UK 15
Sanlam Investments 21
Sanlam Employee Benefits 25
Sanlam Capital Markets 27
Santam 31
Key features
Earnings
Net result from financial services per share decreased by 4%
Core earnings per share down 2%
Normalised headline earnings per share up 34%
Business volumes
New business volumes up 1% to R51 billion
Net value of new covered business down 3% to R243 million
Net new covered business margin of 2,23%, up from 2,17%
Net fund inflows of R7,7 billion, up 40%
Group Equity Value
Group Equity Value per share of R21,72
Annualised return on Group Equity Value per share of 5,2%
Capital management
Discretionary capital of R2,8 billion at 30 June 2009
Sanlam Life CAR cover of 2,5 times
Sanlam at a glance 2SANLAM INTERIM RESULTS 2009
In a nutshell
Welcome
In this, our 11th year since listing on the JSE Limited and the Namibian Stock
Exchange in 1998, we again have the pleasure of reporting back on a company
that continues to strive for sustainable performance with the aim of providing all
our stakeholders with a journey for life.
The next few pages highlight the Sanlam Investment Case and summarise our
performance for the six months ended 30 June 2009.
We trust that this report on our performance, will further strengthen your
conviction in respect of the Sanlam Investment Case.
The journey for life is everyone’s journey
Sanlam acknowledges that people are individuals and that each person is on his
or her own, unique journey.
At Sanlam we are at your side for that journey.
The Sanlam Group
Who we are
We are a leading financial services group in South Africa. Our head office is in
Bellville near Cape Town.
We celebrated our 90th birthday in 2008. In nine decades Sanlam has set
benchmarks for wealth creation, innovation and empowerment in South Africa and
we expand on our latest achievements in these fields throughout this Report.
We have offices throughout South Africa and also have business interests
elsewhere in Africa, UK, Europe, India and Australia.
Thinking ahead for 2009 and beyond
“I expect that the challenging business environment of the first six months of
2009 will persist for the remainder of the year. We are nevertheless confident
that our businesses are well set to continue weathering the challenges and that
our strategy, underpinned by the pillars of optimal capital utilisation, earnings
growth, a focus on costs and efficiencies and increased diversification and
transformation, will continue to reward our stakeholders.”
(Dr Johan van Zyl – Group Chief Executive)
Sanlam at a glance 3SANLAM INTERIM RESULTS 2009
Our vision
Our vision is to be the leader in wealth creation and protection in South
Africa, leading that process in the emerging markets and playing a niche
role in the developed markets.
What we do
We provide financial solutions to individual and institutional clients.
These solutions include individual, group and short-term insurance, personal
financial services such as estate planning, trusts, home and personal loans,
savings and linked products, investment, asset management, property asset
management, stockbroking, risk management and capital market activities.
We provide these solutions to various segments of the markets where we
operate and offer the solutions from a number of mutually dependent
business entities in our Group.
From a life insurance company with our establishment in 1918, we have,
in short, grown into a diversified one-stop financial services group,
offering our clients a journey for life for their financial needs.
Our values
Our shared business philosophy has its roots in an entrepreneurial culture
with its essence captured in traditional values of honesty, diligence,
superior ethical behaviour, innovation, stakeholder values and strong ties
with business partners. Our business model is focused on client-centricity
and on being solution orientated.
Our strategy
Our steadfast strategy has five pillars:
To apply our resources to optimise our capital structure;
To implement growth opportunities through acquisitions and
collaboration and increase market share through client-centric
solutions and service;
To continue with our tight grip on costs;
To persist with our transformation initiatives to build a world-class
financial services group; and
To explore opportunities for diversification through a wider range of
financial solutions and geographic expansion.
The Sanlam Groupcontinued
4 Sanlam at a glance SANLAM INTERIM RESULTS 2009
2 - Institutional cluster
The Institutional cluster includes Sanlam
Investments, Sanlam Employee Benefits and
Sanlam Capital Markets.
› Sanlam Investments: incorporates Sanlam’s
investment-related businesses in South Africa,
Europe, Rest of Africa, India and Australasia.
Sanlam Investments’ areas of service and
solutions include traditional asset
management, alternative investment solutions,
property asset management, collective
investments (unit trusts), private client
investment management and stockbroking,
multi-manager management and investment
administration.
› Sanlam Employee Benefits: provides life
insurance, investment and annuity solutions
for group schemes and retirement funds and
fund administration for retirement and
umbrella funds.
› Sanlam Capital Markets: provides risk
management, structured product solutions
and associated capital market activities.
Group structure
Scope of business The Retail cluster includes Sanlam Personal
Finance, Sanlam Developing Markets and
Sanlam UK.
› Sanlam Personal Finance: is a major
provider of a wide range of individual life
insurance and personal financial services and
solutions, including estate planning and trusts,
home loans, personal loans, linked products,
money transfer and financial services in South
Africa, Namibia and the UK.
› Sanlam Developing Markets: provides
affordable financial services solutions primarily
to the entry-level market in South Africa and
to the wider financial services segments in
other developing markets in which Sanlam
operates (five other African countries as well
as India).
› Sanlam UK: provides life, specialist
pension, investment management and
financial advice services in the United
Kingdom market.
1 - Retail cluster
Contribution to net Group operating result
(six months ended 30 June 2009)
Contribution to Group Equity Value
(as at 30 June 2009)
R789 million
R24 887 million
R388 million
R10 887 million
R28 335 million
Sanlam Limited
South Africa, Botswana, Namibia, United Kingdom, Kenya, Ghana, India, Tanzania, Zambia
R16 971 million
Operational areas
Contribution to Group new business volumes
(six months ended 30 June 2009)
South Africa, Switzerland, Australia, Ireland, United Kingdom, Namibia, Botswana, Nigeria, Kenya, Zambia, India
Sanlam at a glance 5SANLAM INTERIM RESULTS 2009
4 - Corporate3 - Short-term Insurance cluster
The Short-term Insurance cluster is comprised
of a 57% shareholding in Santam, the leading
short-term insurer in South Africa, and a
direct 55% interest in MiWay, the Group’s
newly established direct financial services
business.
› Santam: focuses on the corporate,
commercial and personal markets. It has a
market share in excess of 20% and a
countrywide infrastructure and broker
network. Santam has related business
interests in Africa.
› MiWay: focuses on short-term insurance
through a direct sales channel, with the
intention of adding other financial services
over time.
The corporate head office is responsible for
the Group’s centralised functions, which
include strategic direction, financial and risk
management, group marketing and
communications, group human resources and
information technology, corporate social
investment and general group services.
R82 million
R5 636 million
(R25) million
R3 080 million
South AfricaSouth Africa, Namibia, India
R6 179 million
6 Sanlam at a glance SANLAM INTERIM RESULTS 2009
Sanlam – a leader in wealth creation and protection
Presence
Sanlam
Delivery
ClearStrategy
CoreExpertise
Driving increased returns
Growing profitability through (product and geographic)
diversification
Solid risk management
Innovation resulting in market-leading solutions
HR talent providing stability and proven track record
Vast agency networks offering scale, flexibility and efficiency in South Africa
Leading in emerging markets
Niche presence in developed markets, servicing existing clients
Successfully implementing the growth strategy
Good operational performance over the long term
Creating shareholder value – outperforming competitors
Investment Case
Clear strategy
Sanlam’s strategy is two-pronged. Firstly, it aims to drive
increased returns through a continual focus on optimising
capital, cutting costs and maximising efficiencies. Since
2005, more than R19 billion of existing capital (over 40%
of the current Group Equity Value) has been redeployed.
The second part of the strategy is growing profitably
through diversification by providing the full spectrum of
financial services and diversifying revenue streams into
new income markets and geographies, thus spreading the
risk and underpinning a resilient performance in all
market conditions. With a large stable life business at its
core, Sanlam provides stability and consistency during
difficult times, while its investment and capital market
businesses capitalise on more favourable equity market
conditions.
Our vision is to be a diversified financial services group
that is unrivalled in wealth creation and protection in
South Africa, leading in emerging markets, and
specialised in developed markets.
(See diagram 1 below)
Returns(ROGEV)
growth/earnings
capital efficiency
Entry-level market
Diversification and costs
Profitable growth
Application of capital
Balanced portfolio
Strategic investments
›
›
›
Diagram 1: Sanlam strategic focus
Sanlam at a glance 7SANLAM INTERIM RESULTS 2009
Presence
Retail
A vast internal distribution network of 1 917 tied financial advisers in
South Africa servicing the middle and upper-income markets, and 1 786
agents deployed for the lower-income market in SA, provides scale,
flexibility and efficiency in servicing our broad range of clients. In addition,
there are more than 10 000 independent financial advisers (IFAs) who
support our various businesses. There are approximately 3 million
policyholders in Sanlam’s SA core life businesses, Sanlam Personal
Finance and Sanlam Sky Solutions, which equals about a quarter of the
economically active population in the country.
Sanlam also has a strong corps of financial advisers and agents in the
emerging markets with 1 821 in the rest of Africa and more than 19 500
in India. It has a niche presence in developed markets, following its SA
client’s money abroad, with Merchant Investors and Principal providing
life, fund management and private client solutions in the UK.
In addition, Sanlam is not only increasing the breadth of its service
solution offering by its entry into “non-life” financial services-related
products, but is also expanding its breadth of distribution, by moving into
the direct market, thereby entrenching the Group’s leadership position in
the future.
Institutional
Sanlam has a vast footprint in the corporate market in South Africa with
almost every large SA corporation being a client of one of our businesses.
Sanlam Investments is predominantly entrenched in South Africa, and has
a presence in Europe, Australia, Rest of Africa and India. This presence
includes traditional asset management, alternative investment solutions,
property asset management, collective investment (unit trusts), private
client investment management and stockbroking, multi-manager
management and investment administration.
Sanlam Employee Benefits provides life insurance, investment and annuity
solutions to group schemes and retirement funds. The Group’s capital
markets business, Sanlam Capital Markets, provides risk management,
structured product solutions and associated capital market activities.
8 Sanlam at a glance SANLAM INTERIM RESULTS 2009
Core expertise
Solid risk management expertise is a core attribute
required in running the Sanlam life and investment
businesses, ensuring solid safety barriers in the
operations. Sanlam centrally adopts conservative risk/
return measures in all its pursuits, with a minimum hurdle
rate being a prerequisite for all acquisitions and new
capital allocations. Capital in existing businesses is also
rigorously evaluated against these return hurdles. Not only
is the Group planting the seeds for future growth through
a disciplined and methodical approach to ventures, it also
ensures that overall returns of the Group are enhanced
over the long term.
Innovation has allowed the Group to pre-empt changes in
an uncertain regulatory environment through market-
leading solutions such as the SanlamConnect and Sanlam
Life Power ranges, as well as to increase the breadth of
solution and distribution offering through the solutions of
Sanlam Liquid and MiWay.
Sanlam has the human resources talent to boast a stable,
proven track record, operating for more than 90 years in
life insurance. In addition, a relatively stable executive
management team has more than 150 years of combined
experience in life insurance and investments.
Jun-05Jun-04 Jun-06 Jun-07 Jun-08 Jun-090
50
100
150
200
250
300
350 25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
19.8% pa
8.7% pa
SLM Life Fini SLM (CAGR) Life (CAGR)
Not only is the Group planting the seeds for future growth through a disciplined and methodical approach to ventures, it also ensures that overall returns of the Group are enhanced over the long term
The Group’s employment standards have earned most of
its businesses full accreditation from the international
Investors in People Standards. In working to attract,
motivate and retain top talent, Sanlam encourages
employees to make a difference at every level within the
organisation through incentives which are directly aligned
with the performance of the businesses.
Sanlam pioneered black economic empowerment in South
Africa in 1993 and since then has been at the forefront,
implementing its own empowerment and transformation
strategies to ensure its long-term sustainability.
Delivery
Management has built solid foundations from which to grow
the business by successfully implementing growth strategies
in emerging markets in SA, the rest of Africa and India.
Good and improving operational performance over the
long term is evident in new business flows and a change
in the mix of offerings.
In creating shareholder value, Sanlam has outperformed
its competitors since listing and, on average, has
generated 11% higher share price returns per annum
over the past five years.
Investment casecontinued
Creating shareholder value
Sanlam at a glance 9SANLAM INTERIM RESULTS 2009
How we measure ourselves
The Sanlam Group’s performance measurement and financial
communication philosophy is based on its values which include
transparency, honesty and integrity. We are therefore passionate about
providing useful, clear and value-added information in our financial
statements to our shareholders and other stakeholders. This is why the
Sanlam Annual Report contains significant additional information than
prescribed by International Financial Reporting Standards (IFRS). We view
the requirements of IFRS and other relevant regulations and legislation as
the minimum compliance standards. Our disclosures are further aligned
with the Group’s internal reporting structure to ensure that external users
of the financial statements have the same insight into the Group’s financial
results as Sanlam’s management.
Optimising shareholder value through maximising Return on Group Equity
Value is the primary goal of the Group. Sanlam’s strategic focus areas of
capital efficiency, earnings growth, costs and efficiencies, diversification
and transformation are aimed at achieving this objective.
The interaction of these strategies can be illustrated as follows:
Cost vs income ratio
Distribution alternatives
Growing alternative
revenue sources
Diversification of undeveloped
markets
ROGEV
Earnings
Capital efficiency
Investment returns
Cost management
Net top-line growth
Application of capital
Strategic acquisitions
Regulatory capital
›
›Investment
profile optimised
Appropriate reward for capital/risk
Sustained top investment
performance
Grow assets under
management
Return to shareholders
Appropriate risk-adjusted
return
10 Sanlam at a glance SANLAM INTERIM RESULTS 2009
The performance indicators used by the Group to measure the success of the main components of its strategy are classified into
the following categories:
Shareholder value (all strategic focus areas)
Business volumes (future earnings growth)
Earnings (earnings growth and costs and efficiencies)
Diversification
Transformation
Capital efficiency
Shareholder value
Group Equity Value
Group Equity Value (GEV) is a measure of the value of the Group’s operations, and is the aggregate of the following:
The embedded value of the Group’s life insurance operations (referred to as covered business), which comprises the capital
supporting these operations and the net present value of the shareholder profits to be earned from these operations’ book of
in-force business;
The fair value of other Group operations based on longer-term assumptions, which includes the investment management,
capital markets, short-term insurance and the non-covered wealth management operations of the Group; and
The fair value of discretionary and other capital.
Growth in GEV per share is the most appropriate performance indicator to measure value creation for shareholders as it indicates
the value that has been created in the Group during a reporting period.
Given the exposure of the Group’s capital base to financial instruments, investment market performance has a significant impact
on the growth in GEV per share. An adjusted return on GEV is therefore also disclosed to eliminate this impact of investment
markets and to more accurately reflect management’s impact on value creation.
Business volumes
Business volumes have a direct impact on the Group’s assets under management and administration and commensurately on
the future earnings growth. In addition to business volume indicators, the Value of New Business indicator measures the
profitability of new life insurance business written during the year.
New business volumes
New business volumes measure the total new life insurance, short-term insurance and investment business written by the
Group’s operations during the year. New business contributes to the Group’s assets under management and administration and
thus increases the asset base from which the Group earns financial services income.
How we measure ourselvescontinued
Sanlam at a glance 11SANLAM INTERIM RESULTS 2009
Net fund flows
Net fund flows are the aggregate of the following:
New business volumes written during the year;
Premiums earned from existing business in force at the beginning of
the year; and
Payments to clients.
Net fund flows are a measure of the net business retained within the
Group and have a direct impact on the Group’s assets under management
and administration and commensurately the asset base on which the
Group earns financial services income.
Value of new business and new business margin
The value of new business measures the net present value of future
shareholder profits that the Group expects to earn from the new life
insurance business written during the year. The new business margin is an
indicator of the profitability of the new life insurance business written
during the year.
Earnings
Sanlam uses four key indicators to assess earnings performance and
operational efficiencies. These indicators are also presented on a per share
basis (as applicable), to reflect the earnings attributable to shareholders.
Net result from financial services
This is the earnings from the Group’s operating activities, net of minorities
and tax.
Core earnings
Core earnings is the aggregate of the net result from financial services
(refer above) and net investment income earned on the Group’s capital. It
is an indication of ‘stable’ earnings as it incorporates the relatively stable
portion of the investment return earned on the capital, being investment
income (interest, dividends and rental), but excludes investment surpluses
which are volatile in nature owing to fluctuations in investment markets.
Normalised headline earnings
Headline earnings is a JSE disclosure requirement, equating to total earnings
excluding items of a capital nature. Headline earnings is therefore equal to
core earnings plus net investment surpluses (which are volatile in nature),
equity-accounted earnings and other appropriate costs/amortisations.
12 Sanlam at a glance SANLAM INTERIM RESULTS 2009
Headline earnings includes what Sanlam refers to as ‘fund transfers’. Sanlam invests policyholder funds in the shares of Group
companies, but is required in terms of IFRS to show these assets only at the consolidated Group interest (in respect of shares in
subsidiaries), and at zero (in respect of Sanlam shares), instead of at fair value. This results in a non-economical mismatch
between policyholder assets and liabilities, for which a ‘fund transfer’ to/from the shareholders’ fund is made.
Owing to this inconsistency within headline earnings, Sanlam discloses a normalised headline earnings figure, which excludes
the effect of fund transfers, and therefore more accurately reflects the actual economic performance of the Group.
Administration cost ratio
The administration cost ratio measures the administration costs incurred by the Group as a percentage of financial services
income after sales remuneration. This ratio is an indicator of the cost and operational efficiency of the Group.
Diversification
Diversification is measured through an analysis of the net result from financial services and new business volumes based on:
Geographical exposure;
Market segmentation; and
Type of business
Transformation
Transformation is inextricably linked to the long-term sustainability of the Group. The Annual Report includes an abridged
Sustainability and Corporate Citizenship Report which measures the Group’s performance on the triple bottom-line basis
(economic, social and environmental performance) as well as against the targets of the Financial Sector Charter in South Africa.
The full version of the Sustainability and Corporate Citizenship Report is published on the Sanlam website (www.sanlam.co.za).
Capital efficiency
The Group’s actions in respect of capital management are covered in detail in the financial review.
How we measure ourselvescontinued
Sanlam at a glance 13SANLAM INTERIM RESULTS 2009
Executive Review
The Sanlam Group has shown pleasing resilience in challenging markets to record a solid operational performance for the six months
ended 30 June 2009. The strategic diversification into different market segments and solution offerings, as well as the effect of prudent
practices and assumptions followed in the past, shielded the Group from the most severe impact of the economic downturn.
2009 2008 Δ
SANLAM GROUP
Earnings:
Net result from financial services per share cents 60,4 62,6 (4%)
Core earnings per share (1) cents 87,5 89,7 (2%)
Normalised headline earnings per share (2) cents 78,5 58,8 34%
Diluted headline earnings per share cents 82,6 94,5 (13%)
Net result from financial services R million 1 234 1 334 (7%)
Core earnings (1) R million 1 789 1 913 (6%)
Normalised headline earnings (2) R million 1 605 1 254 28%
Headline earnings R million 1 664 1 955 (15%)
Group administration cost ratio (3) % 26,8 28,0
Group operating margin (4) % 15,1 17,8
Gross business volumes:
New business volumes R million 51 485 50 985 1%
Net fund flows R million 7 677 5 470 40%
Net new covered business
Value of new covered business R million 243 250 (3%)
Covered business PVNBP (5) R million 10 906 11 501 (5%)
New covered business margin (6) % 2,23 2,17
Group Equity Value:
Group Equity Value (7) R million 44 490 45 238 (2%)
Group Equity Value per share (7) cents 2 172 2 213 (2%)
Annualised return on Group Equity Value per share (7),(8) % 5,2 (1,7)
Adjusted annualised return on Group Equity Value per share (7) % 12,2 12,4
SANLAM LIFE INSURANCE LIMITED
Shareholders’ fund (7) R million 31 620 34 419
Capital Adequacy Requirements (CAR) (7) R million 8 200 8 075
CAR covered by prudential capital (7) times 2,5 2,7
Notes(1) Core earnings = net result from financial services and net investment income (including dividends received from non-operating associates).(2) Normalised headline earnings = core earnings, net investment surpluses, secondary tax on companies and equity-accounted headline earnings
less dividends received from non-operating associates, but excluding fund transfers. Headline earnings include fund transfers.(3) Administration costs as a percentage of income after sales remuneration.(4) Result from financial services as a percentage of income after sales remuneration.(5) PVNBP = present value of new business premiums and is equal to the present value of new recurring premiums plus single premiums.(6) New covered business margin = value of new covered business as a percentage of PVNBP.(7) Comparative figures are as at 31 December 2008. (8) Growth in Group Equity Value per share (with dividends paid, capital movements and cost of treasury shares acquired reversed) as a percentage
of Group Equity Value per share at the beginning of the period.
Salient Resultsfor the six months ended 30 June 2009
Sanlam at a glance 15SANLAM INTERIM RESULTS 2009
Analysis of Return on Group Equity Value
16 Sanlam at a glance SANLAM INTERIM RESULTS 2009
Analysis of Return on Group Equity Value: 1H09
Component of Group Equity Value (weighting) Actual Return Weighted ROGEV
SANLAM PERSONAL FINANCE
45,8%(R20,4bn)
5,6% 2,6%(5,6% x 0,464*)
Dec 2008: 46,4%
SANLAM DEVELOPING MARKETS
6,9%(R3,1bn)
6,4% 0,4%(6,4% x 0,062*)
Dec 2008: 6,2%
SANLAM UK
3,3%(R1,5bn)
(14,3%) (0,5%)(-14,3% x 0,034*)
Dec 2008: 3,4%
INSTITUTIONAL CLUSTER
24,5%(R10,9bn)
8,4% 2,1%(8,4% x 0,255*)
Dec 2008: 25,5%
SHORT-TERM INSURANCE
12,7%(R5,6bn)
21,2% 2,5%(21,2% x 0,117*)
Dec 2008: 11,7%
OTHER 6,8%(R3,0bn)
(28,4%) (2,2%)(-28,4% x 0,068*)
Dec 2008: 6,8%
*Weighting of GEV at beginning of year 1H09 ANNUALISED ACTUAL ROGEV: 2,6% + 0,4% – 0,5% + 2,1% + 2,5% - 2,2% = 4,9% 1H09 ANNUALISED ROGEV PER SHARE: = 5,2%
Analysis of Adjusted Return on Group Equity Value: 1H09
Component of Group Equity Value (weighting) Adjusted Return Weighted ROGEV
SANLAM PERSONAL FINANCE
45,8%(R20,4bn)
13,7% 6,4%(13,7% x 0,464*)
Dec 2008: 46,4%
SANLAM DEVELOPING MARKETS
6,9%(R3,1bn)
21,8% 1,4%(21,8% x 0,062*)
Dec 2008: 6,2%
SANLAM UK
3,3%(R1,5bn)
(8,7%) (0,3%)(-8,7% x 0,034*)
Dec 2008: 3,4%
INSTITUTIONAL CLUSTER
24,5%(R10,9bn)
15,5% 4,0%(15,5% x 0,255*)
Dec 2008: 25,5%
SHORT-TERM INSURANCE
12,7%(R5,6bn)
9,4% 1,1%(9,4% x 0,117*)
Dec 2008: 11,7%
OTHER 6,8%(R3,0bn)
(8,5%) (0,8%)(-8,5% x 0,068*)
Dec 2008: 6,8%
*Weighting of GEV at beginning of year 1H09 ANNUALISED ADJUSTED ROGEV: 6,4% + 1,4% – 0,3% + 4,0% + 1,1% - 0,8% = 11,8% 1H09 ANNUALISED ADJUSTED ROGEV PER SHARE: = 12,2%
Analysis of Return
Sanlam at a glance 17SANLAM INTERIM RESULTS 2009
Analysis of Return continued
GEV Earnings (Rm)
ROEGEV vs Target
Cumulative ROGEV exceed cost of capital rate since listing, but recently falling short against target (market impact).
0
500
1000
1500
2000
2500
3000
VNB
Exp
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F
Exp
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LIFE
EA
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GEV
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Eco
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Inv
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243
839
289 17
546
1 934
792
(134)
2 592
(1 020)
(15) (129)
(2)(341)
1 085
11.8%
4.9%
0
50
100
150
200
250
300
350
450
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1H09*
Target return (RFR + 400bps) Cost of Capital (RFR + 300bps) Actual
400
2008
*Annualised
18 Sanlam at a glance SANLAM INTERIM RESULTS 2009
Calculation of Annual Return on Equity (ROE)
2005 2006 2007 2008 2009
IFRS NAV (Opening balance) 19 685 25 020 29 121 29 334 27 651
Add: Consolidation reserve 2 820 1 931 1 859 1 843 539
Equity base 22 505 26 951 30 980 31 177 28 190
IFRS profit for the year attributable to shareholders
10 927 6 945 5 494 2 494 1 606
Less: Fund transfers (730) (205) 366 (736) (59)
Add: Items recognised directly in equity:
Share based payments 64 74 74 134 45
Foreign currency translation differences 81 318 (99) 60 (303)
Net realised investment surpluses on treasury shares
25 (188) (288) (307) (146)
Equity earnings 10 367 6 944 5 547 1 645 1 143
ROE (annualised) 46.1% 25.8% 17.9% 5.3% 8.3%
Calculation of Cumulative Internal Rate of Return (IRR)
2005 2006 2007 2008 2009
Movement in shareholders’ fund
Opening balance 22 505 26 951 30 980 31 177 28 190
Equity earnings 10 367 6 944 5 547 1 645 1 143
Dividends paid (1 363) (1 533) (1 768) (1 968) (1 978)
Net shares bought back (4 558) (1 382) (3 582) (2 664) 168
Closing balance 26 951 30 980 31 177 28 190 27 523
(22 505)
5 921 (26 951)
2 915 2 915 (30 980)
5 350 5 350 5 350 (31 177)
32 822 32 822 32 822 32 822
IRR up to December 2008 25.5% 16.9% 11.9% 5.3%
Analysis of Return continued
Sanlam at a glance 19SANLAM INTERIM RESULTS 2009
Shareholder Analysis
20 Sanlam at a glance SANLAM INTERIM RESULTS 2009
Geographic split of shareholders
Geographic split of investment managers & company related holdings – June 2009
Region Total shareholding % of issued capital
South Africa 1 633 589 322 75.63
United States of America & Canada 350 804 125 16.24
United Kingdom 33 097 785 1.53
Rest of Europe 35 350 164 1.64
Rest of the World¹ 107 158 604 4.96
Total 2 160 000 000 100.00
¹ Represents all shareholdings except those in the above regions
Geographic split of beneficial shareholders – June 2009
Region Total shareholding % of issued capital
South Africa 1 616 635 021 74.84
United States of America & Canada 334 383 886 15.48
United Kingdom 19 793 986 0.92
Rest of Europe 68 016 748 3.15
Rest of the World¹ 121 170 359 5.61
Total 2 160 000 000 100.00
¹ Represents all shareholdings except those in the above regions
Geographic split of beneficial shareholders – June 2009
TOTALAFRICANHOLDING
SPLIT OFBENEFICIAL
SHARES
Africa76.2%
Rest ofthe World23.8%
Swaziland0.3%
South Africa98.2%
Namibia1.4%
Asia/Pacific2.7%
Rest of the World97.3%
UAE34.9%
Australia22.5%
Singapore15.2%
Remainder27.5%
TOTALASIA/PACIFIC
HOLDING
SPLIT OFBENEFICIAL
SHARES
TOTALEUROPEANHOLDING
SPLIT OFBENEFICIAL
SHARES
UK/Europe4.1%
Rest of the World95.9%
Netherlands32.1%
UK22.5%Ireland
11.5%
Remainder33.9%
NorthAmerica15.7%
Rest of the World84.3%
Bermuda1.0%
USA96.3%
Canada2.5%
Remainder0.2%
TOTAL NORTHAMERICANHOLDING
SPLIT OFBENEFICIAL
SHARES
Sanlam at a glance 21SANLAM INTERIM RESULTS 2009
Shareholder categories
An analysis of beneficial shareholdings supported by the Section 140a enquiry process confirmed the following beneficial
shareholder types:
Beneficial shareholder categories – June 2009
Category Total shareholding % of issued capital
Pension Fund 604 453 289 27.98
Unit Trusts/Mutual Funds 503 236 175 23.30
Private Investors 464 625 094 21.51
Black Economic Empowerment 226 000 000 10.46
Insurance Companies 183 573 950 8.50
Other Managed Funds 92 499 010 4.28
Foreign Government 26 749 358 1.24
Custodians 16 307 324 0.75
Investment Trust 7 399 931 0.34
Delivery by Value (Colateral) 3 469 477 0.16
American Depository Receipts 2 906 620 0.13
Local Authority 2 267 330 0.10
Charity 1 745 482 0.08
University 1 554 629 0.07
Remainder 23 212 331 1.10
Total 2 160 000 000 100.00
Beneficial shareholders split by category¹ – June 2009
Pension Fund28.0%
Unit Trusts/Mutual Funds
23.3%
Private Investors21.5%
Black EconomicEmpowerment
10.5%
InsuranceCompanies
8.5%
OtherManaged
Funds4.3%
Remainder3.9%
¹ Includes categories above 1% only
22 Sanlam at a glance SANLAM INTERIM RESULTS 2009
Analysis into institutional attributes broadly indicates the following split of investment approach within the shareholder base:
Analysis of investment styles¹ – June 2009
Growth14.34%
BEE10.46%Value
34.26%
Retail19.59%
Index6.79%
Remainder12.39%
GARP2.17%
Analysis of investment styles
¹ Includes categories above 1% only
Sanlam at a glance 23SANLAM INTERIM RESULTS 2009
Economic Review
24 Sanlam at a glance SANLAM INTERIM RESULTS 2009
Economic and Financial Markets Review
Global and domestic economic and financial conditions
during the first half of 2009 should be viewed in the light
of the after effects of the financial crisis that overwhelmed
the world economy towards the end of 2008. The
unprecedented nature of the developing crisis since the
demise of Lehman Brothers in the USA in September
2008 made it extremely difficult for both policy makers
and financial markets to assess the possible future course
of events, and both groups defaulted to assuming the
worst and acting accordingly.
Concern regarding the impact of the financial crisis on
real economic activity increased as the evidence of a
severe downturn continued to pour in. International trade
and the global manufacturing sector were hit especially
hard, and it gradually became clear that the world
economy was heading for its first recession in the post
World War II era. However, policy makers quickly signaled
their determination to stabilize and turn around the
situation by taking extraordinary steps.
Central banks injected vast amounts of liquidity into the
financial system and lowered their policy interest rates
sharply to approach zero in some instances. They also
took the unusual step of embarking on so-called
quantitative easing, purchasing large amounts of
government and other bonds without sterilizing its impact
on the supply of money.
Apart from injecting large amounts of capital into ailing
banks and providing a range of guarantees, governments
adopted large fiscal stimulus packages to boost domestic
demand through increased spending, especially on
infrastructure development, as well as some tax relief. In
most countries the effect of the fiscal stimulus will be felt
well into 2010 and it is therefore premature to speculate
on the necessity or not of a further stimulus package.
These steps eventually paid off and volatility in financial
markets declined steadily as confidence returned. As a
growing conviction that the economy was over the worst took
hold in the second quarter, equity markets in particular
bounced back strongly. The Morgan Stanley World Index
increased by 57% from its low in March and by 17% from
31 December 2008. The JP Morgan Emerging Market Free
Index rose by an astonishing 78% from its March-low and by
49% since the beginning of the year
South Africa followed the global trend quite closely, with
the economy contracting by 6,4% quarter-on-quarter in
the first quarter of 2009 and by 3% in the second quarter
at a seasonally adjusted and annualized rate. It therefore
finds itself in the category of countries that are lagging in
recovering from the impact of the financial crisis, with the
second quarter reflecting a slower rate of decline rather
than an outright return to positive growth.
The loosening in monetary policy, with the repo rate
having been reduced by 450 basis points since December
2008, and fiscal policy turning more expansionary, is
therefore apparently slow in taking effect. This could be
due to the fact that unlike many other emerging
economies, the South African economy was already in a
down turn that started late in 2006 and that was still
gaining momentum when global conditions turned
negative late in 2008. The economy hardly achieved
positive growth in the third quarter of last year and in fact
contracted if the agricultural sector is excluded.
Although export dependent sectors such as mining and
manufacturing were hardest hit, it is the deterioration in
household finances and spending that stands out. Having
started to decline in the third quarter of 2008, the rate of
decline in the real disposable income of households
accelerated to -4,5% (seasonally adjusted and
annualised) in the first quarter of 2009 on the back of
rising unemployment. Job losses amounted to 475 000 in
the first half of 2009, and the dire straits in which
consumers find themselves are well illustrated by the
decline of 4,4% in real retail sales in the first half of 2009
compared with the corresponding period in 2008.
Households are finding it difficult to reduce their debt
burden, with the ratio of debt to disposable income still at
76,7% compared with its peak of 78,2% a year ago. The
cost of servicing this debt has therefore likewise been slow
in falling in spite of lower interest rates, with the benefit of
Sanlam at a glance 25SANLAM INTERIM RESULTS 2009
Economic and Financial Markets Review continued
the latter being curbed by commercial banks tightening
their lending standards. The result has been continued
pressure on the discretionary income of households.
However, as in much of the global economy the first signs
of economic conditions stabilizing have become evident,
as reflected in the turn around in the Reserve Bank’s
leading indicator. A return to positive growth late in 2009
or early in 2010 seems possible. The upturn is
nevertheless likely to be slow in gaining traction in view of
the starting conditions being rather unfavourable – unlike
with the previous upturn the South African economy will
be burdened from the start with a sizeable current
account deficit, and as already mentioned the capacity of
households to respond to lower interest rates by
increasing debt and spending is limited.
Domestic financial markets have generally followed global
trends, with the notable exception of the bond market.
Equity prices on the JSE have recovered along with world
markets, although less buoyantly than emerging markets,
being 39% up from their low in early March, but as at a
global level further increases are likely to be constrained
by the uninspiring outlook for company earnings.
However, long term bond yields rose sharply from the start
of the year, with the 10-year generic government bond yield
increasing from approximately 7,25% to 9,25% at its peak.
The increase was mainly the result of inflation expectations
being adjusted upwards and the rapid deterioration in
government revenue and the concomitantly higher public
sector borrowing requirement.
In summary, although business conditions can be
expected to be relatively more benign in the second half
of 2009 compared with the first half of the year, they still
require more caution than usual, and the recovery will in
all likelihood only become visible in 2010.
Results Presentation 1SANLAM INTERIM RESULTS 2009
SANLAM INVESTOR PRESENTATION2009 Interim Results
Agenda
Key Observations in 1H09
Financial Review
Review of Clusters
Strategic Focus
Outlook
2 Results Presentation SANLAM INTERIM RESULTS 2009
KEY OBSERVATIONS IN 1H09
Headlines for 1H09
HighlightsStable Profits
Stable New Bus Volumes
Continued Net Inflows
Stable New Bus Margins
Macro ThemesEconomic Recession
Pressure on PDI
Volatile Equity
Markets
Bond Yields, Currency &
Commodities
Business Specific
Pressure on Retail Market
PersistencyCost
Containment
Lower Average
Asset Levels
Results Presentation 3SANLAM INTERIM RESULTS 2009
Headlines for 1H09 – Highlights
HighlightsSatisfactory and resilient operational performance
in light of challenging conditions
What Sanlam Delivered in 1H09
Earnings per share:
Core earnings -2%
Normalised headline earnings +34%
Business Volumes:
New business volumes (ex-White label) +3%
Covered business -12%; VNB -3%; margin of 2,23%
Investment flows +6%
Net inflows of R8bn (ex-White label), net life inflows of R1bn
Group Equity Value of 2 172 cps:
Adjusted ROGEV of 12,2% (annualised)
4 Results Presentation SANLAM INTERIM RESULTS 2009
Headlines for 1H09 – Macro Themes
Weakening Economy
Retail customer under strain
Macro ThemesTough economic and financial conditions
adversely impacting operating environment
Growth in retail sales, real GDP andpersonal disposable income
-10
-5
0
5
10
15
20
Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09
Growth y-o-y in real retail sales Growth y-o-y in real GDP Growth y-o-y in real personal disposable income
%
Results Presentation 5SANLAM INTERIM RESULTS 2009
Bond Yields & Interest Rates
LT rates up 190bps : Negative impact on GEV
Prime rate down 400bps : Relief still to manifest in higher PDI
Lower Relative Equity Levels
Impact on investment values
Pressure on asset-based earnings
Major SA indices (re-based = 100)
50
70
80
90
100
110
120
Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Dec-08
Fini Swix Alsi
60
Feb-09 Apr-09Oct-08
SA Govt 10-year bond yield, interest rates and CPI (%)
6
8
9
13
14
15
16
Jun-08 Aug-08 Dec-08
SA Government 10-year yield (lhs) Prime interest rate (lhs) CPI (rhs)
7
Feb-09 Apr-09Oct-08
10
11
12
Jun-090
8
10
12
14
2
4
6
6 Results Presentation SANLAM INTERIM RESULTS 2009
Stronger Rand
Negative impact on the GEV and operating results reported in respect of Group’s international businesses
Declining Commodity Prices
Negative impact on resource-driven African economies where Sanlam operates
Basket of currencies relative to SA Rand (re-based = 100)
60
100
110
120
130
Jun-08 Aug-08 Dec-08
Pound Sterling / ZAR Botswana Pula / ZAR Indian Rupee / ZAR
Feb-09 Apr-09Oct-08
70
80
90
Jun-09
All Commodities Index – US$ (2000 = 100)
100
200
220
240
260
280
300
Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Dec-08
180
Feb-09 Apr-09Oct-08
160
140
120
Results Presentation 7SANLAM INTERIM RESULTS 2009
Headlines for 1H09 – Business Specific
New Business Growth Pressure on Middle-Income Market
SPF’s SA sales down by 12% from 1H08
Business Specific
Retail customer under pressure (deteriorating persistency), but operational resilience supported by diversified nature
of business and prudent practices
4.5
5.7
5.2
4.4
5.8
5.1
SPF New business flows (SA only) : Life vs Non-life (Rbn)
1H07 1H08 1H09
Life Non-Life
8 Results Presentation SANLAM INTERIM RESULTS 2009
Persistency Marginal deterioration in SPF
PersistencySustained Quality of New Business
Sanlam’s share of total industry lapses have declined over the past year (new business market share broadly static)
Sanlam’s market share of total retail lapses(SPF and SDM)
Lapses within first year Total Lapses
Jun-08 Sep-08 Dec-08 Mar-09
16,3%
5,9%
16,0%
7,6%
Lapses, Surrenders & Fully Paid-Ups (Rm)
Jan Feb JunMar Apr May
1H09 - actual month-by-month 1H07 monthly average 1H08 monthly average
Results Presentation 9SANLAM INTERIM RESULTS 2009
PersistencyPositive Net Life Flows
Ongoing improvement in net life cash flows : Positive retail net life cash flows & lower institutional net outflows
-5
1
4
Net life cash flows (Rbn)
0
2
3
-1
-2
Net Flows - Life (lhs) Life net flows as % of ph liabilities (rhs)
1H09*2005 2006 2007 2008
-3
-4
1%
4%
0%
2%
3%
-1%
-2%
-3%
-4%
-2,7% -2,0% -1,3%
-0,1%
1,2%
PersistencySuccessful Retention of Business
Level of retention of maturing policies maintained
Retention as percentage of maturities (SPF)
1H091H07 FY07 1H08 FY08
7,4% 6,3% 3,5% 3,4% 4,3%
Life - Retention Non-life - Retention
38,4% 39,6% 41,0% 40,5% 41,5%
45,8% 45,9% 44,5% 43,9% 45,8%
* Annualised
10 Results Presentation SANLAM INTERIM RESULTS 2009
Focus on Cost Efficiencies
Intensified focus on costs in light of financial market crises and recessionary environment
SANLAM GROUPFinancial Review
Group administration ratio (%)
1H092003 2004 2005 2006 2007 2008
33,6%
26,8%
28,4%27,8%
27,1%
29,1%
31,4%
Results Presentation 11SANLAM INTERIM RESULTS 2009
Changes in Key Assumptions
Change in asset mix (10% reduction in equity exposure)
– Release R900m in excess capital
– Increase CoC, R313m reduction in VIF
RDR down from Jun-08 (impact on relative VNB & margins)
– 150 bps (SPF)
– 230 bps (Sky)
RDR up from Dec-08 (impact on ROGEV)
– 190 bps (SPF)
– 140 bps (Sky)
Salient features
1H09 1H08 ∆
Group Equity Value* cps 2 172 2 213 (2%)
Annualised ROGEV per share* % 5,2 (1,7)
Annualised Adjusted ROGEV per share* % 12,2 12,4
Net operating profit R mil 1 234 1 334 (7%)
Core earnings R mil 1 789 1 913 (6%)
cps 87,5 89,7 (2%)
Normalised headline earnings R mil 1 605 1 254 28%
cps 78,5 58,8 34%
Headline earnings R mil 1 664 1 955 (15%)
cps 82,6 94,5 (13%)
New business volumes R mil 51 485 50 985 1%
Net fund flows R mil 7 677 5 470 40%
SIM AUM* R bn 403 409 (1%)
Net value of new covered business R mil 243 250 (3%)
Net new covered business margin % 2,23 2,17
* Comparative figures are as at 31 December 2008
12 Results Presentation SANLAM INTERIM RESULTS 2009
Key Financial DriverGrowth in value per share
Long term target :
Cumulative Return on Group Equity Value to exceed cost of capital (RF + 300bp) by >100bp
Annual target :
Adjusted Return on Group Equity Value to exceed cost of capital (RF + 300bp) by >100bp
Adjusted for the effect of economic changes and market volatility on shareholder funds
Management Focus on ROGEV
Returns (ROGEV)
Optimal Application
Strategic Investments
Return of Excess
Capital Efficiency
Growth/Earnings
Net Business flows
Diversification
Operational Efficiencies
Maximise profitable growth
Maximise capital efficiencies
Results Presentation 13SANLAM INTERIM RESULTS 2009
Business Flows
Rand Million 1H09 1H08 ∆ Net Flows 1H09
By business
Personal Finance 14 700 15 824 (7%) 3 411
Developing Markets 1 316 1 214 8% 610
Sanlam UK 955 807 18% (111)
Institutional Cluster 25 550 23 305 10% 2 571
Santam 6 179 6 085 2% 1 676
By license
Covered business 7 342 8 305 (12%) 1 032
Life License 991 686 44% 292
Investment 34 188 32 159 6% 5 157
Short-term insurance 6 179 6 085 2% 1 676
48 700 47 235 3% 8 157
White label 2 785 3 750 (26%) (480)
Total 51 485 50 985 1% 7 677
Business FlowsCovered business
Rand Million 1H09 1H08 ∆Net Flows
1H09
Personal Finance 5 433 6 014 (10%) 929
SA recurring premiums 452 505 (10%)
SA single premiums 4 609 5 315 (13%)
Non-SA operations 372 194 92%
Developing Markets 1 316 1 214 8% 610
SA recurring premiums 370 352 5%
Non-SA operations 681 549 24%
1 051 901 17%
SA single premiums 265 313 (15%)
Sanlam UK 451 807 (44%) (8)
Employee Benefits 142 270 (47%) (499)
Total (ex-White label) 7 342 8 305 (12%) 1 032
14 Results Presentation SANLAM INTERIM RESULTS 2009
Value of New Covered Business
Rand Million 1H09 1H08 ∆
Value of New Business 276 290 (5%)
Personal Finance 135 160 (16%)
Developing Markets 136 113 20%
Sanlam UK - 3 (100%)
Employee Benefits 5 14 (64%)
Net of minorities 243 250 (3%)
New Business Margin 2,41% 2,39%
Personal Finance 1,80% 1,98%
Developing Markets 4,83% 4,85%
Sanlam UK 0,00% 0,36%
Employee Benefits 0,71% 1,58%
Net of minorities 2,23% 2,17%
Business FlowsInvestments
Rand Million 1H09 1H08 ∆Net Flows
1H09
Retail Cluster 9 771 9 810 0% 2 379
SA Operations 5 153 5 739 (10%)
Non-SA Operations 4 618 4 071 13%
Institutional Cluster 24 417 22 349 9% 2 778
Segregated funds 7 920 6 379 24%
Multi-Manager 1 768 2 099 (16%)
Private Investments 3 133 4 016 (22%)
Collective Investment 10 269 8 839 16%
SA Operations 23 090 21 333 8%
Non-SA Operations 1 327 1 016 31%
Total (ex-White label) 34 188 32 159 6% 5 157
Results Presentation 15SANLAM INTERIM RESULTS 2009
Net Operating Profit
Rand Million 1H09 1H08 ∆
Retail cluster 789 793 (1%)
Personal Finance 691 678 2%
Developing Markets 85 78 9%
Sanlam UK 13 37 (65%)
Institutional cluster 388 404 (4%)
Investment Management 264 287 (8%)
Employee Benefits 65 83 (22%)
Capital Markets 59 34 74%
Santam 118 188 (37%)
MiWay (36) (23) (57%)
Corporate and other (25) (28) 11%
Total 1 234 1 334 (7%)
Net Operating Profit (continued)
Rand Million 1H09 1H08 ∆
Net result from financial services 1 234 1 334 (7%)
Add back : New business strain 602 491 23%
Add back : Start-up costs (MiWay) 36 23 57%
Net profit on comparable basis 1 872 1 848 1%
Cents per share 91,6 86,7 6%
Retail Cluster 1 364 1 265 8%
Institutional Cluster 415 423 (2%)
Santam 118 188 (37%)
Corporate and other (25) (28) 11%
16 Results Presentation SANLAM INTERIM RESULTS 2009
Income Statement
Rand Million 1H09 1H08 ∆
Net operating profit 1 234 1 334 (7%)
Investment income 555 579 (4%)
Core earnings 1 789 1 913 (6%)
Cents per share 87,5 89,7 (2%)
Net investment surpluses 23 (447)
Net equity accounted headline earnings 10 (4)
Project expenses (15) (40)
Discontinued operations - (35)
STC, amortisation & BEE costs (202) (133)
Normalised headline earnings 1 605 1 254 28%
Cents per share 78,5 58,8 34%
Group Equity Value
Rand Million Jun 2009 Dec 2008
Covered business 27 773 62% 28 591 63%
Personal Finance 18 939 19 574
Developing Markets 3 040 2 796
Sanlam UK 685 680
Employee Benefits 5 109 5 541
Other operations 13 637 31% 13 560 30%
Retail Cluster 2 223 2 287
Institutional Cluster 5 778 6 000
Short-term insurance 5 636 5 273
Discretionary capital 2 785 6% 2 100 5%
Other 295 1% 987 2%
Total 44 490 100% 45 238 100%
GEV (cps) 2 172 2 213
Results Presentation 17SANLAM INTERIM RESULTS 2009
Composition of Group Equity ValueR21,72 per share
SPF46%
SDM7%
SUK3%
SI12%
Short-terminsurance
13%
Discretionarycapital & Other
7%
Value ofin-force
30%
FV of CoveredBusinesses
32%
Other GroupOperations
31%
DiscretionaryCapital & Other
7%
SEB11%
SCM1%
Discretionary CapitalAnalysis of Change
Rand Billion
Balance – Dec 2008 2,1
Change in required capital 0,9
Corporate activity (0,4)
- Channel minorities (0,2)
- Other (0,2)
Investment return & other adjustments 0,2
Balance – June 2009 2,8
18 Results Presentation SANLAM INTERIM RESULTS 2009
Group Solvency
Jun 2009 Dec 2008
Sanlam Life
Life CAR (Rm) 8 200 8 075
Statutory capital (Rm) 20 712 21 422
CAR cover (x) 2,5 2,7
Required capital (Rm) 16 228 16 863
- Capital 14 264 14 779
- Debt 1 964 2 084
CAR cover (x) 2,0 2,1
Santam
Solvency level (% of premiums) 42% 44%
Sanlam Capital Markets
Capital (Rm) 450 400
Capital at risk (% utilised) 59% 77%
Return on Group Equity Value
Rand Million Jun 2009 Jun 2008
Covered business 770 5,5% 998 7,1%
Personal Finance 446 4,6% 490 4,9%
Developing Markets 86 6,2% 180 17,4%
Sanlam UK 4 1,2% 139 32,5%
Employee Benefits 234 8,6% 189 7,3%
Other operations 790 12,0% (1 692) (20,7%)
Retail Cluster 18 1,6% 31 3,4%
Institutional Cluster 241 8,1% (301) (8,1%)
Short-term insurance 531 21,2% (1 422) (39,6%)
Discretionary capital & other capital (475) 119
Total 1 085 4,9% (575) (2,2%)
(cps) 5,2% 0,0%
cps (adjusted basis) 12,2% 13,6%
Results Presentation 19SANLAM INTERIM RESULTS 2009
Summary
Strategic objectives are being achieved:
Business volumes:
– Satisfactory new business volumes (+3%), net cash inflows
– Maintained value of new business & improved margins (+6bps)
Profitability: Commendable operating profit result
Operational efficiencies: Improved admin ratio
Capital management: Value adding initiatives
– De-risking balance sheet unlocked further R900m
– Utilised R400m on ventures to further grow & diversify Group
Focus areas:
Capital efficiency & optimal application of discretionary capital
Bedding down new ventures
BUSINESS CLUSTERSOperational Review
20 Results Presentation SANLAM INTERIM RESULTS 2009
A Portfolio of Diversified Assets
SPF46%
SDM7%
SI12%
SEB11%
SCM1%
Short-term13%
Discretionarycapital & Other
7%
SUK3%
1. Retail Cluster (SPF, SDM & SUK)
SPF46%
SDM7%
SUK3%
Stability & Growth (Optimise Capital)
Results Presentation 21SANLAM INTERIM RESULTS 2009
Sanlam Personal Finance (SPF)“Satisfactory performance in difficult business conditions”
Overall Profits marginally up Admin costs contained Total sales down 7%, risk up 7% VNB 16% lower, margins 1,80% Deliberate slowdown in Retail Credit Net cash inflow up 54%
Key Challenges Business environment Manage persistency / retention Margin pressure
Snapshot
1H09 %∆
Net Operating Profit ▲ R691m +2%
New business flows ▼ R14 700m -7%
- SA Recurring ▼ R487m -13%
- SA Single ▼ R9 727m -12%
- Non SA ▲ R4 486m +5%
PVNB Premiums* ▼ R7 488m -7%
VNB* ▼ R135m -16%
Margin* ▼ 1,80% vs 1,98%
Annualised ROGEV 5,6%
Annualised Adj ROGEV 13,7%* Covered business only
Sanlam Developing Markets (SDM)“Another strong performance”
Overall Both VNB and profits up Deliberate reduction in lower margin
direct business in SA Bancassurance partnerships in Africa Successful launch of NEW Indian
distribution initiative
Key Challenges Economic conditions Consolidation of Sky and Channel Retention Maintaining RoA VNB margins Productivity / volumes in India
Snapshot
1H09 %∆
Net Operating Profit ▲ R85m +9%
New business flows* ▲ R1 051m +17%
- SA Recurring ▲ R370m +5%
- Non-SA ▲ R681m +24%
PVNB Premiums ▲ R2 814m +21%
VNB ▲ R136m +20%
Margin ▼ 4,83% vs 4,85%
Annualised ROGEV 6,4%
Annualised Adj ROGEV 21,8%* Excludes White Labels and Non-core businesses
22 Results Presentation SANLAM INTERIM RESULTS 2009
Sanlam UK“Performance impacted by challenging environment”
Overall Economic conditions impact
volumes and AUM MI – satisfactory performance in
difficult environment Continued execution of start-up
business plans, despite strong headwinds
Key Challenges Execution risk of ‘growth phase’
businesses in face of economic and regulatory pressures
Continued investment aversion
Snapshot
1H09 %∆
Net Operating Profit ▼ R13m -65%
New business flows ▲ R955m +18%
- Life: Mainly SP ▼ R451m -44%
- Non-Life ▲ R504m n/a
PVNB Premiums ▼ R463m -45%
VNB ▼ - n/a
Margin ▼ - vs 0,36%
Annualised ROGEV (14,3%)
Annualised Adj ROGEV (8,7%)
2. Institutional Cluster (SI, SEB and SCM)
SI12%
SEB11%
SCM1%
Growth (Optimise Capital)
Results Presentation 23SANLAM INTERIM RESULTS 2009
Sanlam Investments (SI)“Resilient performance, notwithstanding lower asset levels”
Overall Lower average asset levels feeding
into lower profits Businesses remain sound Improving investment performance
Key Challenges Cost containment Sustained investment returns Client retention / net flows Focus on international expansion
Snapshot
1H09 %∆
Net Operating Profit ▼ R264m -8%
Gross business flows ▲ R25 408m +10%
- SA: Segregated ▲ R7 920m +24%
- SA: Other ▲ R15 580m +3%
- Non-SA ▲ R1 908m +28%
Net flows ▲ R2 590m
- Institutional & retail ▲ R3 070m
- White label ▲ (R480m)
FUM ▼ R403bn -1%
Annualised ROGEV 8,3%
Annualised Adj ROGEV 18,7%
Focus on Investment Performance
0%
70%
100%
Percentage of SIM’s AUM exceeding benchmark -Jun 09 (R241bn)
60%
80%
90%
50%
40%
Rolling 1 Yr Rolling 3 Yrs Rolling 5 Yrs
30%
20%
10%
30/06/08 31/12/08 30/06/09
24 Results Presentation SANLAM INTERIM RESULTS 2009
Sanlam Employee Benefits (SEB)“Steady progress in challenging conditions”
Overall Group Risk remains the SEB anchor Lower market values impacted SSS’s
fee income Admin migration on track (97% of
funds already off Wizard platform)
Key Challenges Deteriorating claims experience Administration transition from
“migration mode” to “business as usual mode”
Low returns on participating annuity business
Snapshot
1H09 %∆
Net Operating Profit ▼ R65m -22%
New business flows ▼ R142m -47%
- SA: Recurring ▼ R76m -7%
- SA: Single ▼ R66m -65%
PVNB Premiums ▼ R704m -21%
VNB ▼ R5m -64%
Margin ▼ 0,71% vs 1,58%
Annualised ROGEV 6,8%
Annualised Adj ROGEV 11,3%
Sanlam Capital Markets (SCM)“Return to profitability”
Overall A pleasing return on capital of
28,4% Well positioned to benefit from
market movements Allowance made for default risk
in the credit business
Key Challenges SCM remains susceptible to credit
and market events – retains a prudent approach
New deal flow limited in volatile markets – affects clients’ appetite
Snapshot
1H09 %∆
Net Operating Profit ▲ R59m +74%
Total Revenue ▲ R162m +67%
Cost to income ratio ▼ 62% vs 100%
Capital R450m +13%
Annualised ROGEV 28,4%
Annualised Adj ROGEV 28,4%
Results Presentation 25SANLAM INTERIM RESULTS 2009
Short-term13%
Growth (Optimise Capital)
3. Short-term Insurance (Santam)
Santam“Pressure on underwriting results”
Overall Slow premium growth in line with
industry Underwriting margins under pressure Significant increase in return on
insurance funds Solvency at upper end of 35%-45%
target range
Key Challenges Improve risk management on
corporate property business Profitability of motor book Portfolio management profitability Client retention
Snapshot
1H09 %∆
Net Operating Profit* ▼ R118m -37%
Gross written premium ▲ R7 291m +7%
Net earned premiums ▲ R6 179m +9%
- Net claims ratio ▲ 72,9%
- Net acquisition ratio ▲ 25,6%
- Underwriting ratio ▼ 1,5%
International solvency 42%
Annualised ROGEV 22,1%
Annualised Adj ROGEV 9,9%*Sanlam’s share of profit less tax & minorities
26 Results Presentation SANLAM INTERIM RESULTS 2009
4. Capital Optimisation
Discretionarycapital & Other
7%
Utilise
Discretionary Capital
Ongoing focus on efficient utilisation of capital in 2009 …
Improve capital efficiency / optimisation:
– Capital allocated to business units in a manner which will achieve optimal ROGEV targets
Application of current discretionary capital of R2,8bn:
– Value-adding strategic initiatives (maximise return on GEV)
– Capital buffer remains prudent in prevailing market conditions, therefore buy back of Sanlam shares still on hold
Timeframe:
– Strategic projects assessed on an ongoing basis
Further optimisation of capital remains a priority
Results Presentation 27SANLAM INTERIM RESULTS 2009
Summary of 1H09 performance
Strategic diversification and the effect of prudent practices and assumptions shielded the Group in the severe economic downturn
Life insurance businesses show their resilience:
– Value of new business and margins broadly stable
– Net life flows improve
– Some deterioration in persistency, but still broadly in line with assumptions
Lower asset base & increased volatility in investment business
Confirmation of capital management approach – remains on track
A sound platform and strategic base
STRATEGIC FOCUS FOR 2009 AND BEYOND
28 Results Presentation SANLAM INTERIM RESULTS 2009
GoalDelivering sustainable growth
Specific Focus Areas
South Africa: Fully optimise and expand our diversified financial services presence:
Improve operational efficiency and performance
Optimise the capital structure
Pursue selective add-on or diversification opportunities
Transformation
International:
Africa / India : Position ourselves to have a leading position in the financial sector in these markets over time
UK : A differentiated strategy / niche approach, aimed at providing specialist HNW financial services
Operational efficiencies:
Cost containment
Harness further synergies between the Group’s existing businesses
Distribution initiatives:
Target 5% pa growth in SPF agency channel
Strengthen relationships and positioning in Gauteng IFA market
NEW distribution channel in India
Capital efficiencies and application
Stringent evaluation of capital investment opportunities – retain prudence
Growth initiatives:
Continued diversification of product set and markets
Exploring potential of new countries (Nigeria, etc)
Results Presentation 29SANLAM INTERIM RESULTS 2009
OUTLOOK
Outlook for Remainder of 2009
Business Environment :
Uncertainty and volatility in global financial markets likely to continue, although there are some early signs of recovery / stability
Tough economic climate reflecting in consumer demand will take some time to subside
Regulatory change
Challenges:
Lower asset base
Persistency
Cost control
Profitable growth opportunities
Group’s portfolio is adequately diversified to spread the risks & creates a sound platform from which to operate
30 Results Presentation SANLAM INTERIM RESULTS 2009
Notes
Group Financial Review 1SANLAM INTERIM RESULTS 2009
Contents
Overview 2
Key features 2
Salient results 3
Executive review 4
Comments on the results 8
Interim financial statements 19
Accounting policies and basis of presentation 20
External audit reports 21
Shareholders’ information 23
– Group Equity Value 24
– Change in Group Equity Value 26
– Return on Group Equity Value 27
– Adjusted return on Group Equity Value 28
– Shareholders’ fund at fair value 30
– Shareholders’ fund income statement 34
– Notes to the shareholders’ fund information 38
– Embedded value of covered business 46
Group financial statements 55
– Statement of financial position 56
– Statement of comprehensive income 57
– Statement of changes in equity 58
– Cash flow statement 59
– Notes to the financial statements 60
Administration 62
Sanlam GroupInterim Resultsfor the six months ended 30 June 2009
2 Group Financial Review SANLAM INTERIM RESULTS 2009
Key features
Earnings
Net result from financial services per share decreased by 4%
Core earnings per share down 2%
Normalised headline earnings per share up 34%
Business volumes
New business volumes up 1% to R51 billion
Net value of new covered business down 3% to R243 million
Net new covered business margin of 2,23%, up from 2,17%
Net fund inflows of R7,7 billion, up 40%
Group Equity Value
Group Equity Value per share of R21,72
Annualised return on Group Equity Value per share of 5,2%
Capital management
Discretionary capital of R2,8 billion at 30 June 2009
Sanlam Life CAR cover of 2,5 times
3 Group Financial Review SANLAM INTERIM RESULTS 2009
2009 2008 ∆
Sanlam Group
Earnings
Net result from financial services per share cents 60,4 62,6 -4%
Core earnings per share (1) cents 87,5 89,7 -2%
Normalised headline earnings per share (2) cents 78,5 58,8 34%
Diluted headline earnings per share cents 82,6 94,5 -13%
Net result from financial services R million 1 234 1 334 -7%
Core earnings (1) R million 1 789 1 913 -6%
Normalised headline earnings (2) R million 1 605 1 254 28%
Headline earnings R million 1 664 1 955 -15%
Group administration cost ratio (3) % 26,8 28,0
Group operating margin (4) % 15,1 17,8
Business volumes
New business volumes R million 51 485 50 985 1%
Net fund flows R million 7 677 5 470 40%
Net new covered business
Value of new covered business R million 243 250 -3%
Covered business PVNBP (5) R million 10 906 11 501 -5%
New covered business margin (6) % 2,23 2,17
Group Equity Value
Group Equity Value (7) R million 44 490 45 238 -2%
Group Equity Value per share (7) cents 2 172 2 213 -2%
Annualised return on Group Equity Value per share (7) (8) % 5,2 (1,7)
Adjusted annualised return on Group Equity Value per share (7) % 12,2 12,4
Sanlam Life Insurance Limited
Shareholders’ fund (7) R million 31 620 34 419
Capital adequacy requirements (CAR) (7) R million 8 200 8 075
CAR covered by prudential capital (7) times 2,5 2,7
(1) Core earnings = net result from financial services and net investment income (including dividends received from non-operating associates).(2) Normalised headline earnings = core earnings, net investment surpluses, secondary tax on companies and equity-accounted headline earnings less
dividends received from non-operating associates, but excluding fund transfers. Headline earnings include fund transfers.(3) Administration costs as a percentage of income after sales remuneration.(4) Result from financial services as a percentage of income after sales remuneration.(5) PVNBP = present value of new business premiums and is equal to the present value of new recurring premiums plus single premiums.(6) New covered business margin = value of new covered business as a percentage of PVNBP.(7) Comparative figures are as at 31 December 2008. (8) Growth in Group Equity Value per share (with dividends paid, capital movements and cost of treasury shares acquired reversed) as a percentage of Group
Equity Value per share at the beginning of the period.
Salient Results for the six months ended 30 June 2009
4 Group Financial Review SANLAM INTERIM RESULTS 2009
the Swix Index 21% lower. Average funds under
management were commensurately significantly lower
during the first half of 2009 compared to the same period
in 2008, which impacted negatively on fund-based fee
income of the Group.
Executive Review
The Sanlam Group has shown pleasing resilience in
challenging markets to record a solid operational
performance for the six months ended 30 June 2009. The
strategic diversification into different market segments
and solution offerings, as well as the effect of prudent
practices and assumptions followed in the past, shielded
the Group from the most severe impact of the economic
downturn.
Business environment
The depressing financial and economic impact of the
global financial market crisis continued unabated during
the first half of 2009, although there were signs of some
recovery in global equity markets towards the end of the
reporting period.
A lower demand for resources following the slowdown in
the world’s largest economies had a negative impact on
the wealth creation and growth achieved in the African
commodity based economies in which the Group
operates. The Group’s key exposure remains to the
performance of the South African economy, which, as no
exception, followed the developed world into a recession.
This is reflected in major pressure on consumers’
disposable income, in addition to the effects of the high
interest rate and inflation conditions of the past two years.
The result has been contracting consumer spending, in
particular in the middle-income market. The interest rate
cuts announced by the South African Reserve Bank over
the past few months should provide some relief to
consumers, but it is likely to take some time before this
will be evident in increased consumer demand.
The South African equity market recorded marginally
positive returns for the six months ended 30 June 2009
on the back of stronger international markets and
expectations that the worst of the financial market crisis
may be over. Overall market levels, however, remain
significantly lower than the comparative period in 2008
and continue to display high levels of volatility.
JSE Indices
The JSE All Share and Swix indices increased by 2,5%
and 2,8% respectively during the first half of 2009,
recovering only slightly from the dismal performance in
the second half of 2008. The All Share Index remains
28% lower than the closing level at 30 June 2008, with
15 000
21 000
23 000
25 000
27 000
29 000
31 000
33 000 7 000
6 500
6 000
5 500
5 000
2 000
5.0%
-22.9%
19 000
17 000
Jan
08
Dec
07
Feb
08
Mar
08
Apr
08
Jun-
09
May
08
Jun
08
Jul 0
8
Aug
08
Sep
08
Oct
08
Nov
08
Dec
08
Jan
09
Feb
09
Mar
09
Apr
09
May
09
2 500
3 000
3 500
4 000
4 500
All
Sha
re
Sw
ix
-1.9%
-29.3%
2.8%
2.5%
SwixAll Share
Performance review
In the context of the challenging environment, the Group
achieved a pleasing operational performance for the first six
months of the 2009 financial year. This has been aided by
the diversified nature of the Group’s operations, in respect of
market segmentation, solutions offering and geographical
presence, which provided a platform for ongoing growth in
new business volumes and a sound level of profitability. The
pressure on the middle-income retail market in South Africa
is however evident in declining new business volumes at
Sanlam Personal Finance and Sanlam Private Investments,
but this was offset by strong performances in the institutional
and entry-level markets. Operating profit also reflects a
varied performance, with a solid contribution from the retail
life insurance and capital markets businesses, almost
offsetting the negative impact of the prevailing market
conditions on the reported earnings of the short-term
insurance and investment management operations.
Notwithstanding the pressure on earnings, the core
operations of all the major Group businesses remain sound.
The primary performance target of the Group is to
optimise shareholder value through maximising the return
on Group Equity Value (GEV). A target has been set for
the growth in GEV to exceed the Group’s cost of capital on
a sustainable basis. Cost of capital is set at the government
long bond yield plus 3%. The target is to exceed this
return by at least 1%. The annualised return on GEV per
share of 5% for the six months ended 30 June 2009 fell
short of this target, but still represents a strong
performance given the relatively weak investment markets
Group Financial Review 5SANLAM INTERIM RESULTS 2009
and an increase of some 2% in long-term interest rates
(and commensurately risk discount rates applied) during
the period. The increase in risk discount rates in
particular reduced the valuation and GEV earnings of the
life insurance and wealth management operations. On a
normalised basis, i.e. assuming a normalised investment
market performance and excluding any once-off items,
the annualised return of 12,2% for the six months
exceeded the target of 11,3%.
Total new business volumes, excluding the volatile and low
margin white label business, grew by 3%, a particularly
pleasing result in the current environment. Retail business
sales declined by 8%, with Sanlam Personal Finance and
Sanlam Private Investments reporting declines of 7% and
22% respectively. This was to an extent offset by strong
growth of 8% achieved by Sanlam Developing Markets.
Institutional business sales recorded a sterling performance,
increasing by 27% on 2008. Most of the institutional
business units contributed to this growth. The value of new
covered business (after minorities) decreased by 3% from
R250 million in the first half of 2008 to R243 million in
2009, reflecting the impact of lower new life business
volumes in the middle-income market. The profitability of
new covered business has been maintained through
continued focus on cost management and the quality of
new business written, with overall margins increasing from
2,17% in 2008 to 2,23% in 2009.
Core earnings of R1 789 million are 6% lower than in
2008, the combined effect of a 7% decrease in the net
result from financial services and a 4% decline in net
investment income earned on the capital portfolio. The
relatively lower base of assets under management
impacted on the growth in fee income and the profitability
of especially the investment management businesses. This
was further aggravated by a number of large commercial
property claims at Santam. Core earnings per share
decreased by only 2%, supported by the effect of the share
buy-back programme during 2008, which resulted in a 4%
reduction in the weighted average number of shares in
issue compared to the first half of 2008.
The investment return earned on the Group’s capital
portfolio was marginally positive during the first six months
of 2009, with positive local equity market return
somewhat offset by a reduction in the valuation of
interest-bearing instruments and offshore investments.
The investment return, however, improved significantly
compared to the negative performance in the first half of
2008. Normalised headline earnings per share benefited
from the turnaround in investment return and increased
by 34% on 2008. Diluted headline earnings per share,
which include the International Financial Reporting
Standards (IFRS) impact of Sanlam and Santam shares
held by the policyholders’ fund, are 13% down on 2008.
Delivering on strategy
The Group’s focussed strategy continued to serve it well
during the first six months of 2009, which was
characterised by the prolonged impact of the most
challenging environment faced by the Group in many
years. The Board and management remain committed to
the Group’s key objective of maximising shareholder
value. This is underpinned by the five pillars of optimal
capital utilisation, earnings growth, cost control and
efficiencies, diversification and transformation.
As indicated in the Group’s 2008 annual report, a more
prudent approach is required in the application of
discretionary capital in the current financial and economic
environment. The focus has accordingly been on further
optimising the capital base of the Group, while only a few
selected investments have been made in existing
operations and future growth markets. No share
buy-backs occurred during the first six months of 2009.
A major portion of the Group’s capital is utilised by the
covered business operations. Capital management and
modelling within these operations receive continuous
attention to achieve an optimal capital level, taking
cognisance of the impact of changes in the capital
management structure on expected return on GEV. This
process indicated that shareholder value can be further
enhanced by implementing a more conservative asset mix
for the capital backing the covered business operations,
thereby reducing the level of required capital. The Sanlam
Board approved as a target a 10% reduction in the capital
portfolio’s exposure to both equities and fixed-interest
instruments and a consequential 20% increase in the
cash exposure. This will result in less volatility in the
capital base and released some R900 million of capital to
the Group’s discretionary capital portfolio. The change in
asset mix caused an increase in the cost of capital and
consequently a once-off R313 million reduction in the
value of in-force covered business (refer results
commentary below). This negative impact will be more
Executive Reviewcontinued
6 Group Financial Review SANLAM INTERIM RESULTS 2009
than offset through a value enhancing application of the
additional discretionary capital.
A total of R375 million was utilised for corporate activity during
the period. The largest transactions concluded are as follows:
Some R200 million was utilised to acquire minority
shareholders’ interest in Channel Life, increasing the
Group’s interest to just under 100%. This acquisition
will enable the Group to further enhance synergies
between the life businesses operating in the
entry-level market segment in South Africa and to
more effectively manage the capital requirements of
the growth achieved in this market.
MiWay required additional financing of R30 million to
fund the start-up losses of this business. A further
R17 million has been utilised since the end of June
2009 to acquire a proportionate share of the PSG
Group’s interest in MiWay. The remainder of PSG’s
interest was acquired by existing shareholders.
Sanlam UK has been further capitalised by R30
million, which includes an increase in the Group’s
interest in Principal from 86% to 89%.
The Shriram Life Insurance acquisition agreement
allowed for three performance payments based on the
achievement of new business growth and expense
targets. The third payment of R39 million became
due during the six months.
The release of R900 million of capital from covered
business, investment return and the application of capital
for corporate activity contributed to a net increase in the
level of discretionary capital in the Group to R2,8 billion at
the end of June 2009. The Board remains committed to
the utilisation of the discretionary capital in the most
efficient manner, with a preference for new value-
enhancing initiatives. The buy-back of Sanlam shares is
not a priority but will be considered in periods of share
price weakness.
Despite pressure from the economic downturn, the Group
continues with initiatives to enhance its growth platform.
To this end, Sanlam Developing Markets is expanding its
distribution reach across all territories, with the following
important milestones reached during the six months:
Advisor numbers in South Africa increased by 29% to
1 786, unprofitable business has been discontinued
and the integration of the back office and
administration functions of the South African
businesses has been initiated;
A new distribution channel has been launched by
Shriram Life Insurance to cover the northern Indian
territories, augmenting the focus to date on the south
of India; and
Bancassurance joint venture arrangements have been
strengthened in Africa.
Sanlam Investments’ international expansion is also
progressing according to plan. The establishment of the
SMC wealth and investment management joint ventures
will provide Sanlam Investments with a strong entry point
into the fast growing Indian market. Sanlam International
Investment Partners’ operational structure has been
embedded and a number of international niche
acquisition opportunities are being evaluated.
Cost efficiency has been a strategic focus for the past five
years, but received even more intensified focus in light of
the financial market crisis and subsequent recessionary
environment. The investment management operations
and Sanlam Personal Finance, which have been impacted
most by lower assets under management and new
business volumes respectively, made a concerted effort to
reduce costs even further. Sanlam Investments reported a
9% reduction in expenditure, excluding the impact of a
release of excess provisions. Sanlam Personal Finance
initiated plans to reduce its cost base by some R100
million. Containment of cost in all other business units is
also receiving appropriate attention, although not to the
detriment of future growth opportunities.
Efforts to increase the representation of previously
disadvantaged individuals at middle and senior
management level is a priority for the Group’s
transformation. It remains a challenge given Sanlam’s
traditional low staff turnover, the freezing of vacancies in
the current environment and a shortage of individuals
with the required specialised financial services expertise.
We will, however, continue to use all available
opportunities to meet our targets in the years to come.
Looking ahead
International sentiment has improved over the last few
months, with many analysts of the opinion that the world
economy is at or past its lowest point of the current
Executive Reviewcontinued
Group Financial Review 7SANLAM INTERIM RESULTS 2009
recession. Risk aversion has also started to subside with
a renewed interest from international investors in
developing markets. This bodes well for the South African
equity market, which has seen a major improvement in
performance since the end of June. A continuation of
positive equity market returns will support improved
profitability in the Group’s investment management
operations in particular and should be positive for fund
flows into equity-based solutions. Investment market
volatility has, however, not fully subsided and downside
risk remains high.
The improved sentiment has also provided some support
for commodity prices, which should underpin an
improvement in the real economy of many of the African
countries in which the Group operates. The negative trend
in the South African economy is expected to stabilise and
show gradual recovery on the back of higher commodity
prices and improving consumer confidence and spending
power as the benefits of the recent interest rate cuts start
to emerge over the next few months. Any material impact
of the improvement in economic conditions is however
only expected to reflect in the Group’s operating results
from 2010 onwards.
Challenging trading conditions are therefore expected to
persist for the remainder of the 2009 financial year, but
we remain confident that our businesses are well set to
continue weathering the challenges. Relative market
movements during the second half of the year will impact
on the level of earnings growth to be reported for the full
2009 financial year.
Executive Reviewcontinued
Forward-looking statements
In this report we make certain statements that are not historical facts and relate to analyses and
other information based on forecasts of future results not yet determinable, relating, amongst
others, to new business volumes, investment returns (including exchange rate fluctuations) and
actuarial assumptions. These are forward-looking statements as defined in the United States
Private Securities Litigation Reform Act of 1995. Words such as “believe”, “anticipate”,
“intend”, “seek”, “will”, “plan”, “could”, “may”, “endeavour” and “project” and similar
expressions are intended to identify such forward-looking statements, but are not the exclusive
means of identifying such statements. Forward-looking statements involve inherent risks and
uncertainties and, if one or more of these risks materialise, or should underlying assumptions
prove incorrect, actual results may be very different from those anticipated. Forward-looking
statements apply only as of the date on which they are made, and Sanlam does not undertake
any obligation to update or revise any of them, whether as a result of new information, future
events or otherwise.
8 Group Financial Review SANLAM INTERIM RESULTS 2009
Group Equity Value at 30 June 2009
30 June 2009 31 December 2008
R million Total
Fair valueof assets
Value ofin-force Total
Fair valueof assets
Value of in-force
Embedded value of covered business 27 773 14 502 13 271 28 591 15 013 13 578
Sanlam Personal Finance 18 939 8 032 10 907 19 574 8 275 11 299
Sanlam Developing Markets 3 040 1 215 1 825 2 796 1 032 1 764
Sanlam UK 685 238 447 680 234 446
Sanlam Employee Benefits 5 109 5 017 92 5 541 5 472 69
Other group operations 13 637 13 637 – 13 560 13 560 –
Retail cluster 2 223 2 223 – 2 287 2 287 –
Institutional cluster 5 778 5 778 – 6 000 6 000 –
Short-term insurance 5 636 5 636 – 5 273 5 273 –
Capital diversification (1 137) (1 137) – (1 429) (1 429) –
Other capital and net worth adjustments 1 432 1 432 – 2 416 2 416 –
41 705 28 434 13 271 43 138 29 560 13 578
Discretionary capital 2 785 2 785 – 2 100 2 100 –
Group Equity Value 44 490 31 219 13 271 45 238 31 660 13 578
Issued shares for value per share (million)
2 048,2 2 044,2
Group Equity Value per share (cents) 2 172 2 213
Share price (cents) 1 728 1 700
Discount -20% -23%
The GEV as at 30 June 2009 amounted to R44,5 billion, down 2% on the R45,2 billion at the end of 2008. On a per share basis
GEV decreased by 2% from 2 213 cents to 2 172 cents at 30 June 2009, including the effect of the 98 cents per share dividend
paid during 2009. The Sanlam share price traded at a 20% discount to GEV by close of trading on 30 June 2009.
Comments on the Results
Group Equity Value (GEV)
GEV is the aggregate of the following components:
The embedded value of covered business, being the life insurance businesses of the Group, which comprises the
required capital supporting these operations and the net present value of their in-force books of business (VIF);
The fair value of other Group operations based on longer term assumptions, which includes the investment
management, capital markets, credit, short-term insurance and the non-covered wealth management operations of the
Group; and
The fair value of discretionary and other capital.
GEV provides an indication of the value of the Group’s operations, but without placing any value on future new covered
business to be written by the Group’s life insurance businesses. Sustainable return on GEV is the primary performance
benchmark used by the Group in evaluating the success of its strategy to maximise shareholder value.
Introduction
The Sanlam Group results for the six months ended 30 June 2009 are presented based on and in compliance with International
Financial Reporting Standards (IFRS), as applicable.
Group Financial Review 9SANLAM INTERIM RESULTS 2009
As a financial services organisation, the Group has a major exposure to financial markets in that the shareholder capital portfolio is
invested in financial instruments, a portion of the fee income base is linked to the level of assets under management, while the
valuation of the in force book of covered business is impacted by changes in long-term interest rates and investment return
assumptions. In addition to the subdued investment market performance in the first half of 2009, an increase of some 2% in
long-term interest rates required a commensurate increase in the risk-adjusted discount rate used for the valuation of the Group’s
covered and wealth management businesses. Given these conditions, the annualised return on GEV (ROGEV) per share of 5% for
the first six months of 2009 is an overall satisfactory performance. This is testimony to the defensive qualities of the Group’s
diversified portfolio of businesses. The return on the Group’s international operations was negatively impacted by a stronger rand
and the impact on the Sanlam UK operations of the recession in the United Kingdom. This was, however, compensated for by a
satisfactory return achieved on the other Group operations.
Return on Group Equity Value for the six months ended 30 June 2009
June 2009 June 2008
EarningsR million
Return*%
EarningsR million
Return* %
Covered business 770 5,5 998 7,1
Sanlam Personal Finance 446 4,6 490 4,9
Sanlam Developing Markets 86 6,2 180 17,4
Sanlam UK 4 1,2 139 32,5
Sanlam Employee Benefits 234 8,6 189 7,3
Other operations 790 12,0 (1 692) -20,7
Sanlam Personal Finance 133 19,6 13 2,2
Sanlam Developing Markets 2 24,9 (7) -43,8
Sanlam UK (117) -25,7 25 8,5
Institutional cluster 241 8,1 (301) -8,1
Short-term insurance 531 21,2 (1 422) -39,6
Discretionary and other capital (475) 119
Balance of portfolio (180) 240
Shares delivered to Sanlam Demutualisation Trust – (26)
Shriram goodwill less value of in-force acquired (39) (43)
Treasury shares and other (128) (130)
Change in net worth adjustments (128) 78
Return on Group Equity Value 1 085 4,9 (575) -2,2
Return on Group Equity Value per share 5,2 0,0
* Annualised
Covered business achieved a return of 6% compared to 7% in the first half of 2008. This lower level of return is mainly attributable to
an increase in the cost associated with the capital required to back these operations. As indicated above, the Sanlam Board approved
a more conservative asset mix for the required capital, which reduced the overall capital to be held in respect of covered business by
R900 million. A consequence of the more conservative asset mix is a reduction in the expected investment return to be earned on the
required capital in future. This increased the opportunity cost of holding the capital, referred to as the cost of capital, by R313 million.
Excluding this once-off net increase in the cost of capital, the annualised return on covered business amounted to 8%. The return on
covered business includes positive operating experience variances of R289 million, of which the majority relates to underwriting
experience that was better than the assumptions used in the actuarial basis. The focus on quality of business written also contributed
to positive persistency experience, a particularly satisfactory result given the overall negative market experience. This was offset by
negative economic assumption changes following the increase in risk discount rates.
Comments on the Resultscontinued
10 Group Financial Review SANLAM INTERIM RESULTS 2009
The other Group operations yielded an overall annualised return of 12%, compared to a negative return of 21% for the comparable
period in 2008. Sanlam Personal Finance and Santam delivered a marked improvement on their 2008 performances. This was
however offset by negative earnings of R117 million recorded by Sanlam UK. Most of Sanlam Personal Finance’s other operations
had a strong first six months of 2009, with future earnings prospects remaining positive. This supported the valuations, despite the
2% increase in the risk discount rate during the period. The return was also positively impacted by the release of some R40 million
of capital from Glacier. The investment in Santam also performed well, with the Santam share price increasing by 7% after allowing
for the payment of its final dividend. The Sanlam UK businesses are experiencing the aftermath of the financial market crisis more
severely than the South African based operations. The level of assets under management and profitability of Principal and Buckles
were in particular negatively impacted by the UK economic and financial market conditions. Under these conditions, a prudent
approach was followed in valuing these businesses, which required a further write-down of R77 million in their carrying values. The
stronger rand against the pound also aggravated the negative earnings. The valuation of the businesses in the Institutional cluster
remained on an overall basis broadly in line with the end of 2008, with the GEV earnings for the first six months to 30 June 2009
comprising mostly of the net operating profit earned during the period.
The return on discretionary and other capital was impacted by the following:
Negative investment return of R180 million on the balance of the capital portfolio. This can mostly be ascribed to negative
return on the offshore exposure in the portfolio due to the strengthening of the rand exchange rate, marked-to-market losses
on the interest-bearing instruments held, in line with the All Bond return, as well as negative investment return on the
discretionary capital invested in the Botswana equity markets;
The write-off for GEV purposes of the R39 million goodwill recognised in respect of the last remaining performance payment to
Shriram in terms of the acquisition agreement of Shriram Life Insurance in India;
A negative change of R128 million in the net worth adjustments. This is largely due to an increase in the allowance for
corporate costs in line with the expected inflationary increase in the annual corporate expenses; and
A loss of R128 million recognised in respect of treasury shares. This loss is substantially attributable to losses recognised on the
delivery of share incentive scheme shares to participants at the applicable strike prices.
Earnings
Summarised shareholders’ fund income statement for the six months ended 30 June 2009
R million 2009 2008 ∆
Net result from financial services 1 234 1 334 -7%
Net investment income 555 579 -4%
Core earnings 1 789 1 913 -6%
Project expenses (15) (40) 63%
Net equity-accounted headline earnings 10 (4) >100%
BEE transaction costs (3) (3) –
Net investment surpluses 23 (447) >100%
Secondary Tax on Companies (STC) (162) (99) -64%
Discontinued operations – (35) –
Amortisation of value of business acquired (37) (31) -19%
Normalised headline earnings 1 605 1 254 28%
Other non-headline earnings and impairments (58) (103) 44%
Normalised attributable earnings 1 547 1 151 34%
Comments on the Resultscontinued
Group Financial Review 11SANLAM INTERIM RESULTS 2009
Core earnings for the six months of R1 789 million are 6% down on 2008, the combined effect of a 7% reduction in the net
result from financial services for the period and a 4% decline in net investment income. On a per share basis, core earnings
decreased by 2%, reflecting the impact of the 4% reduction in the weighted average number of shares in issue due to the share
buy-backs during 2008.
The net result from financial services of R1 234 million for the first six months of 2009 is 7% lower than in 2008. As indicated
before, the following items have an impact on this result:
In terms of IFRS only variable costs incurred in writing new investment management policy contracts can be capitalised and
expensed over the lifetime of the contract in line with fees earned. All fixed acquisition costs must be expensed at inception
of investment management policies. Similarly, the Group’s actuarial valuation basis for most insurance contracts does not
allow for the capitalisation of certain upfront acquisition costs, which commensurately results in accounting losses at
inception of these contracts. These losses, referred to as new business strain, have a particularly pronounced impact on
earnings in strong new business growth scenarios (as reported by Sanlam Developing Markets), as well as in instances of a
change in business mix (as experienced by Sanlam Personal Finance) in the first half of 2009.
The impact of MiWay only becoming operational during February 2008.
On a comparable basis the net result from financial services increased by 1% on 2008, a very pleasing result in the current
environment.
Net result from financial services for the six months ended 30 June 2009
R million 2009 2008 ∆
Net result from financial services on comparable basis 1 872 1 848 1%
Retail cluster 1 364 1 265 8%
Institutional cluster 415 423 -2%
Santam 118 188 -37%
Corporate and other (25) (28) 11%
MiWay (launched in February 2008) (36) (23) -57%
New business strain (602) (491) -23%
Net result from financial services 1 234 1 334 -7%
Comments on the Resultscontinued
Core earnings
Core earnings comprise the net result from financial services (operating profit) and net investment income earned on the
shareholders’ fund, but exclude abnormal and non-recurring items as well as investment surpluses. Net investment income
includes dividends received from non-operating associated companies and joint ventures, but excludes the equity-
accounted retained earnings.
12 Group Financial Review SANLAM INTERIM RESULTS 2009
The table below provides an analysis of the net result from financial services per individual business.
Net result from financial services for the six months ended 30 June 2009
R million 2009 2008 ∆
Retail cluster 789 793 -1%
Sanlam Personal Finance 691 678 2%
Sanlam Developing Markets 85 78 9%
Sanlam UK 13 37 -65%
Institutional cluster 388 404 -4%
Sanlam Investments 264 287 -8%
Sanlam Employee Benefits 65 83 -22%
Sanlam Capital Markets 59 34 74%
Short-term insurance cluster 82 165 -50%
Santam 118 188 -37%
MiWay (36) (23) -57%
Corporate and other (25) (28) 11%
Net result from financial services 1 234 1 334 -7%
Sanlam Personal Finance’s net result from financial services for the six months of R691 million is 2% up on 2008. Before
tax and minority interests, the gross result from financial services is marginally down on 2008. Risk underwriting profit
increased by 28% to R248 million, underpinned by an improved underwriting experience. The relatively lower level of assets
under management during the first half of 2009 reduced fund-based fee income, with a commensurate negative impact on
administration fee income. Containment of costs, however, assisted in limiting the decline in overall administration profit to 11%.
Market related profit of R514 million is also 7% lower than 2008, largely attributable to lower interest earned on working
capital and a lower release of profit from the asset mismatch provision. The balance of the asset mismatch provision was
some R500 million lower at the end of 2008 compared to 2007, resulting in a relatively lower base from which profit is released.
The Sanlam Developing Markets net result from financial services of R85 million is 9% up on 2008 (up 13% before tax and
minority shareholders’ interest).
– The South African operations more than doubled their contribution to the gross result from financial services. Sanlam
Sky Solutions reported an increase in earnings, but the main contributor to the growth was Channel Life, whose 2008
earnings were impacted by expenses relating to the closure of its call centre.
– Botswana Life managed to increase its gross result from financial services by 8%, with positive mortality experience on
the annuity book and a reduction in the credit default provision being partially offset by the negative impacts of the weak
equity markets and some mismatch losses in the annuity portfolio.
– The rest of Africa operations reported lower earnings on an overall basis. Most territories experienced lower new
business volumes in the current economic environment, which resulted in an under recovery of fixed costs. Also
contributing to the lower earnings are additional bad debt provisions, a strengthening of persistency bases, as well as
lower credit life business following a general reduction in lending activities of banks in the current environment.
As indicated before, the retail market in the United Kingdom (UK) has been more severely impacted by the financial crisis
than South Africa. Despite some recent improvement in sentiment and economic statistics, the first six months of 2009 has
been characterised by continued economic uncertainty, rising unemployment, poor consumer confidence and depressed
financial and housing markets. This had a particularly negative impact on the Punter Southall Group, Principal and Buckles,
whose results are directly affected by investment market performance and business volumes. Both these indicators
underperformed in the first half of the 2009 financial year, impacting negatively on the earnings reported by these
operations. Merchant Investors provided some resilience and reported an improved performance. The growth in rand-based
Comments on the Resultscontinued
Group Financial Review 13SANLAM INTERIM RESULTS 2009
earnings was further negatively impacted by an average 9% strengthening of the rand against the British pound, which
contributed to an overall 65% decline in Sanlam UK’s net result from financial services.
The Institutional cluster operations were in particular affected by a lower average level of assets under management,
following the under performance in investment markets since June 2008.
– Sanlam Investments’ net result from financial services of R264 million is down 8% on the comparable period in 2008
(down 12% to R370 million before tax and minorities). Excluding the impact of a release of over provisions of some
R40 million (after tax), the net result from financial services decreased by 22%, which is mainly attributable to a decline
in the average level of assets under management in 2009 compared to the same period in 2008, as well as a
R14 million decrease in performance fees earned. A positive development has been that both SIM Global and Octane
have reached the high water mark for a number of their portfolios and have started earning performance fees again.
Costs were also well managed and are 9% lower than 2008, excluding the positive impact of the release of provisions.
– Sanlam Employee Benefits’ net result from financial services decreased by 22% from R83 million in 2008 to R65 million
for the first half of 2009. Good growth in risk underwriting profit was more than offset by an under recovery of fixed cost
at Sanlam Structured Solutions, following low new business volumes and a reduction in interest earned on working capital.
– Sanlam Capital Markets made a welcome return to profitability and recorded a gross result from financial services of R61
million compared to a breakeven position in the first half of 2008. After taxation, the net result from financial services
increased by 74% from R34 million in 2008 to R59 million. The equities division had a very strong six months, driven by
equity-backed finance transactions. The debt division also recorded satisfactory results, despite continued pressure from
credit valuations. Deal flow at the market activity division, however, remained subdued, which contributed to an under -
performance by this division. Capital allocated to Sanlam Capital Markets was increased by R50 million during the period,
translating into a return of 26% on the R450 million capital base, a very satis-factory result in the prevailing conditions.
The underwriting results of the short-term insurance cluster were hard hit by a number of large fire-related corporate claims, in
line with a general increase in these claims across the industry. This contributed to a 50% decline in the cluster’s net result
from financial services. Santam still managed to achieve an underwriting margin of 1,5%, a satisfactory result compared to the
industry average. Income earned on Santam’s float was significantly higher as a result of a higher level of float.
Corporate administration expenses are 11% lower than 2008, the combined effect of timing differences in the recognition of
expenses and focussed cost management.
Net investment income declined by 4%. This is mainly attributable to a lower absolute level of capital following the utilisation of
discretionary capital for share buy-backs and corporate activity during 2008 and 2009.
Normalised headline earnings
Normalised headline earnings of R1 605 million are 28% higher than the comparable period in 2008. The increase in
normalised headline earnings is in the main attributable to the following:
A reduction of 6% in core earnings as discussed above.
Investment markets performed relatively better in the first six months of 2009 than the comparable period in 2008 (refer
discussion of business environment above). The performance of the capital portfolio compared to mandate also improved.
This resulted in a turnaround of the negative investment surpluses of R447 million recorded in 2008 to a net positive return
of R23 million in 2009.
The 64% increase in the secondary tax on companies (STC) charge is mainly attributable to the utilisation of available STC credits
for the dividend paid in May 2009. STC credits generated in the first half of 2009 are lower than in 2008 due to the utilisation
of discretionary capital during 2008 and 2009 for share buy-backs and other corporate activity (thereby reducing the absolute
level of capital on which investment income is earned), as well as a decrease in the capital portfolio’s exposure to equities.
Comments on the Resultscontinued
14 Group Financial Review SANLAM INTERIM RESULTS 2009
Business volumes
New business flows
New business volumes, excluding white label, increased by 3% on the first six months of 2008.
New business volumes for the six months ended 30 June 2009
R million 2009 2008 ∆
Sanlam Personal Finance 14 700 15 824 -7%
South Africa 10 214 11 559 -12%
Africa 4 486 4 265 5%
Sanlam Developing Markets 1 316 1 214 8%
South Africa 635 665 -5%
Africa 605 449 35%
Other international 76 100 -24%
Sanlam UK 955 807 18%
Institutional cluster 25 550 23 305 10%
Sanlam Investments 25 408 23 035 10%
Sanlam Employee Benefits 142 270 -47%
Santam 6 179 6 085 2%
New business excluding white label 48 700 47 235 3%
White label 2 785 3 750 -26%
Total new business 51 485 50 985 1%
Sanlam Personal Finance new business sales slowed down as the challenging economic and business environment impacted
on Topaz middle market sales in particular. The Topaz market is more sensitive to the current economic environment and
investment market volatility. The combined life and non-life sales are 7% lower than the comparable period in 2008.
Total South African new business volumes decreased by 12% compared to 2008.
– Recurring premium life sales are 10% lower than the same period in 2008. The high interest rate and inflation
environment of 2007 and 2008 continues to negatively impact disposable income, with a commensurate negative
impact on recurring premium savings and retirement solutions. Recurring risk business is less sensitive to these
conditions and are 7% higher than 2008.
– Single premium life sales are down 13% on 2008. The market conditions are now also impacting on Glacier’s volumes,
which are 8% lower than the comparable period in 2008. Part of the lower demand can be attributed to clients’
preference to reduce their personal debt, but alternative investment classes, for example property, has also become
more attractive as an investment choice after decreasing valuations over the past two years. Single premium sales of
Topaz life solutions decreased by 17% on 2008. Guaranteed plans performed strongly in 2008, but demand slowed
down in the first six months of 2009 as the recent interest rate cuts reduced the attractiveness of guaranteed rates.
– Investment business is also struggling with lower demand for Glacier investment solutions. The same drivers affecting
Glacier life sales are also impacting on the investment solution sales. This contributed to a 10% reduction in new
investment business volumes.
The Namibian operations recorded a 5% increase in volumes, which is attributable to demand for both life insurance
solutions and unit trusts. The same factors impacting on the South African operations are also affecting Namibia.
Sanlam Developing Markets inflows are 8% higher than 2008. Excluding the discontinued South African single premium
business, new business volumes grew by 17% – a commendable result.
Comments on the Resultscontinued
Group Financial Review 15SANLAM INTERIM RESULTS 2009
South African inflows are 5% lower than the comparable period in 2008, but this includes the impact of discontinued single
premium business. Single premiums recorded comprise of continuations of existing business reaching maturity date and are
expected to decline over time as the in-force book winds down. The core recurring premiums business is up 5% on 2008.
Sanlam Sky Solutions increased its new recurring premium sales by 8%, with a strong underlying performance masked by
an intentional decision to scale back on low margin broker direct business. This decision has resulted in a marked
improvement in the quality and profitability (as measured by the value of new business margin) of business written. Channel
Life individual life sales underperformed during the first six months of 2009, offsetting an otherwise healthy growth
contribution from Safrican and group benefits business.
African inflows are 35% up on 2008, supported by a sterling performance from Botswana, the largest African operation.
Recurring premiums increased by 30%, with single premiums exceeding 2008 by 37%. Both individual life and annuity
sales performed strongly in Botswana with bancassurance volumes also well up on the comparable period in 2008. A weaker
rand exchange rate also had a positive impact on the rand-based growth recorded by Botswana Life. Apart from Ghana, the
other African operations are in general struggling to record growth on the prior year, being affected by the economic
downturn caused by low commodity prices and the closure of mines.
Shriram’s new business volumes of R76 million is 24% lower than 2008, in part due to a marked switch from single to
recurring business. The latter increased by 57% on 2008. Single premiums are well down as the Indian market did not
escape the impact of the tougher economic environment. The outlook for the rest of the year has improved, with the new
distribution channel expected to start contributing to new business volumes.
Sanlam UK started to experience a slowdown in new business volumes towards the end of 2008 as the UK economy continued
to deteriorate. This trend continued into the first six months of 2009, with new life business volumes decreasing by 44% on the
first half of 2008. Principal contributed new business of R504 million for the six months. The combined life and investment new
business volumes are 18% up on 2008. New business volumes are only expected to improve in 2010, as the UK economy
emerges from its deepest recession in years.
The Institutional cluster recorded an overall 10% increase in new business volumes. Retail business volumes are reflecting a
similar result to Sanlam Personal Finance, as the client bases are affected similarly by the pressure on consumer spending
power and risk aversion caused by market volatility. In contrast, institutional business flows were particularly strong.
Sanlam Investments new business volumes increased by 10% compared to 2008.
– The South African businesses performed strongly in the current environment, exceeding the 2008 new business sales
by 9%. The biggest contributor is RSA segregated business, recording growth of 24%. Segregated business include an
increase of R2,7 billion in the mandate awarded by the Public Investment Corporation (PIC). The pressure on the retail
middle market is reflected in the new retail business recorded by Sanlam Collective Investments, which is 10% down on
2008. This was however offset by strong wholesale business inflows, which contributed to an overall 16% increase in
Sanlam Collective Investments’ new business sales compared to 2008. Sanlam Private Investments is also experiencing
the effect of the pressures on the retail market, with its volumes decreasing by 22% on the high base in 2008.
– New inflows in the Rest of Africa increased by 35%, with especially segregated business performing exceptionally well.
– International (non-Africa) investment business flows are 23% lower than the first six months of 2008. The volatile
international investment markets continued to impact on Octane and SIM Global, with both businesses lagging the
comparable period. Recent outperformance of investment mandates, combined with a reduction in investor risk
aversion, should be positive for future net inflows into these businesses.
Sanlam Employee Benefits’ new business volumes are 47% lower than the comparable 2008 inflows, an overall disappointing
result. This is largely attributable to lower single premium volumes (65% lower than 2008), with new recurring premiums
decreasing by 7%. The competitiveness of Sanlam Employee Benefits’ pricing is being investigated as part of the process to regain
market share. The Group however continues to be driven by profitability and not by pure market share.
Comments on the Resultscontinued
16 Group Financial Review SANLAM INTERIM RESULTS 2009
Comments on the Resultscontinued
Santam recorded a 2% increase in net premium inflows over the first six months of 2009. Net written premiums of continued
operations increased by 7%, a very satisfactory result in the difficult industry conditions. The relatively low level of growth is in
part attributable to reinsurance reinstatement premiums paid following the large corporate claims.
Net fund flows
The Group has been very successful in retaining funds under management and achieved net inflows (excluding white label
business) for the six months of R8,2 billion, 12% up on the R7,3 billion in the corresponding period in 2008. Excluding a low
margin outflow at Sanlam Private Investments (refer below), net fund inflows increased by 74% to R12,7 billion, a particularly
satisfactory result in the current environment. Total inflows increased by 2% to R59,4 billion while outflows in respect of fund
withdrawals and policy benefits of R51,7 billion were down by 2%.
Net fund flows for the six months ended 30 June 2009
R million 2009 2008
Sanlam Personal Finance 3 411 2 221
Life business 929 861
Investment business 2 482 1 360
Sanlam Developing Markets 610 673
Sanlam UK (111) 91
Institutional cluster 2 571 2 538
Sanlam Employee Benefits (499) (517)
Sanlam Investments 3 070 3 055
Santam 1 676 1 768
Net fund flows excluding white label 8 157 7 291
White label (480) (1 821)
Total net fund flows 7 677 5 470
The main contributors to the increase in net inflows are Sanlam Personal Finance and Sanlam Investment Management.
Net inflows of investment business at Sanlam Personal Finance were supported by good retention of Namibian unit trusts.
Despite lower life new business volumes, Sanlam Personal Finance managed to increase its net inflow of life business. This
is the combined result of improved retention as well as lower equity markets reducing the value of benefit payments. The
persistency levels of life business during the six months, measured in terms of the aggregate of lapses, surrenders and
paid-ups, deteriorated only marginally relative to that of the first six months in 2008.
Sanlam Investments’ net inflows of R3,1 billion include a withdrawal of low margin custody business of R4,5 billion at
Sanlam Private Investments, which will have a negligible impact on earnings. Excluding this flow, Sanlam Investments
increased its net inflows by R4,5 billion, of which R2,7 billion is attributable to the new PIC mandate.
Value of new covered business
Despite an overall 7% decline in new life insurance business volumes, the Group retained the profitability of new business. The
total value of new life business (VNB) of R276 million is 5% lower than that reported in 2008. Net of minority interests VNB
decreased by 3% to R243 million. The overall average new life business margin (after minorities) increased from 2,17% to 2,23%.
Group Financial Review 17SANLAM INTERIM RESULTS 2009
Value of new covered business for the six months ended 30 June 2009
R million 2009 2008 ∆
Value of new covered business 276 290 -5%
Sanlam Personal Finance 135 160 -16%
Sanlam Developing Markets 136 113 20%
Sanlam UK – 3 -100%
Sanlam Employee Benefits 5 14 -64%
Net of minorities 243 250 -3%
Present value of new business premiums 11 469 12 141 -6%
Sanlam Personal Finance 7 488 8 089 -7%
Sanlam Developing Markets 2 814 2 330 21%
Sanlam UK 463 836 -45%
Sanlam Employee Benefits 704 886 -21%
Net of minorities 10 906 11 501 -5%
New covered business margin 2,41% 2,39%
Sanlam Personal Finance 1,80% 1,98%
Sanlam Developing Markets 4,83% 4,85%
Sanlam UK – 0,36%
Sanlam Employee Benefits 0,71% 1,58%
Net of minorities 2,23% 2,17%
Sanlam Personal Finance’s VNB decreased by 16% to R135 million. This is attributable to the lower new business volumes,
partially compensated for by the change in business mix towards risk underwriting and a strong focus on containment of costs.
The average VNB margin declined from 1,98% in 2008 to 1,80%, which still represents a satisfactory performance.
The Sanlam Developing Markets operations reported a commendable 20% increase in gross VNB to R136 million, continuing its
growth trend. The average VNB margin decreased marginally from 4,85% to 4,83%. The South African operations’ margins
improved, principally due to the intentional change in business mix away from the low margin broker direct business. Botswana
Life’s VNB margin decreased slightly compared to the first six months of 2008, the result of a strengthening of the persistency
basis and a reduction in annuity margins following a decline in interest rates. The VNB and margins of the other African
operations were negatively impacted by lower sales volumes and a general strengthening of the persistency bases.
Both Sanlam UK and Sanlam Employee Benefits reported a significant reduction in VNB in line with their new business
performance.
Solvency
All of the life insurance businesses within the Group were sufficiently capitalised at the end of June 2009. The total capital of
Sanlam Life Insurance Limited, the holding company of the Group’s major life insurance subsidiaries, amounted to R31,6 billion
on 30 June 2009. Its admissible regulatory capital at the end of June 2009 amounted to R20,7 billion, which covered its
regulatory Capital Adequacy Requirements (CAR) 2,5 times, compared to 2,7 times on 31 December 2008. No policyholder
portfolio held a negative bonus stabilisation reserve in excess of 7,5% of policyholder liabilities at the end of June 2009.
Santam’s capital (shareholders’ funds including bonds) constituted 42% of net earned premiums on 30 June 2009, which is at
the higher end of the target range of 35% to 45% set by Santam.
Comments on the Resultscontinued
18 Group Financial Review SANLAM INTERIM RESULTS 2009
FitchRatings has affirmed the following ratings of the Group in 2009:
Sanlam Limited:
National Long-term: AA-(zaf)
Sanlam Life Insurance Limited:
National Insurer Financial Strength: AA+(zaf)
National Long-term: AA(zaf)
National Short-term: F1+(zaf)
Subordinated debt: AA-(zaf)
Santam Limited:
National Insurer Financial Strength: AA+(zaf)
National Long-term: AA(zaf)
Dividend
No interim dividend has been declared. It is Sanlam’s practice to pay only an annual dividend, given the cost associated with the
distribution of a dividend to our large shareholder base.
Roy Andersen Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Cape Town
2 September 2009
Comments on the Resultscontinued
19 Group Financial Review SANLAM INTERIM RESULTS 2009
SANLAM GROUP INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2009
20 Group Financial Review SANLAM INTERIM RESULTS 2009
The accounting policies adopted for purposes of the
financial statements comply with International Financial
Reporting Standards (IFRS), specifically IAS 34 on interim
financial reporting, and with applicable legislation. The
condensed financial statements are presented in terms of
IAS 34, with additional disclosure where applicable, using
accounting policies consistent with those applied in the
2008 financial statements, apart from the changes
resulting from new and revised standards (refer below).
The policy liabilities and profit entitlement rules are
determined in accordance with prevailing legislation,
generally accepted actuarial practice and the stipulations
contained in the demutualisation proposal. There have
been no material changes in the financial soundness
valuation basis since 31 December 2008, apart from
changes in the economic assumptions.
The basis of preparation and presentation of the
shareholders’ information is also consistent with that
applied in the 2008 financial statements.
Application of new and revised IFRSs and interpretations
The following new or revised IFRSs and interpretations are
applied in the Group’s 2009 financial year:
IAS 1 Revised Presentation of Financial Statements
IAS 1 Amended Presentation of Financial Statements
– Puttable Financial Instruments and Obligations
Arising on Liquidation
IAS 32 Amended Financial Instruments: Presentation
– Puttable Financial Instruments and Obligations
Arising on Liquidation
IFRS 2 Amended Share-based Payment – Vesting
Conditions and Cancellations
May 2008 Improvements to IFRS
Amendments to IFRIC 9 – Reassessment of Embedded
Derivatives and IAS 39 Financial Instruments:
Recognition and Measurement – Embedded Derivatives
Amendment to IFRS 7 Financial Instruments:
Disclosure – Improving Disclosures about Financial
Instruments
AC 503: Amendment to AC 503 – Accounting for
Black Economic Empowerment (BEE) Transactions
The application of these standards and interpretations did
not have a significant impact on the Group’s reported
results and cash flows for the six months ended 30 June
2009 and the financial position at 30 June 2009. The
following presentational changes were introduced upon
adoption of the revised IAS 1:
The Group income statement has been replaced with
a Group statement of comprehensive income,
presenting all items of recognised income and
expense in one statement;
The Group statement of changes in equity only
includes details of transactions with owners – non-
owner changes in equity are presented in a single
line; and
The Group balance sheet has been renamed to a
Group statement of financial position.
The following new or revised IFRSs and interpretations
have effective dates applicable to future financial years
and have not been early adopted:
IAS 27 Amended Consolidated and Separate
Financial Statements (effective 1 July 2009)
IAS 39 Amended Financial Instruments: Recognition
and Measurement – Eligible Hedged Items (effective
1 July 2009)
IFRS 3 Revised Business Combinations (effective 1
July 2009)
IFRS 5 Amended Non-current Assets Held for Sale
and Discontinued Operations (effective 1 July 2009)
IFRIC 17 Distribution of Non-cash Assets to Owners
(effective 1 July 2009)
April 2009 Improvements to IFRS (mostly effective 1
January 2010)
Amendments to IFRS 2: Group Cash-settled
Share-based Payment Transactions (effective 1
January 2010)
AC 504: IAS 19 – The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their
Interaction in a South African Pension Fund
Environment (effective 1 April 2009)
The application of these revised standards and
interpretations in future financial reporting periods is not
expected to have a significant impact on the Group’s
reported results, financial position and cash flows, except
for IFRS 3 Revised and IAS 27 Amended for which the
impact cannot be quantified as it will depend on the
nature and structure of a specific business combination.
Accounting policies and basis of presentation
Group Financial Review 21SANLAM INTERIM RESULTS 2009
Report on review of interim condensed financial statements
To the directors of Sanlam Limited
Introduction
We have reviewed the accompanying consolidated
condensed statement of financial position of Sanlam
Limited as of 30 June 2009 and the related statements of
comprehensive income, changes in equity and cash flow
for the six-month period then ended and other
explanatory notes set out on pages 20 and 56 to 61.
Directors’ responsibility
The Group’s directors are responsible for the preparation
and fair presentation of these interim condensed financial
statements in accordance with International Financial
Reporting Standard IAS 34 – “Interim Financial Reporting”.
Auditor’s responsibility
Our responsibility is to express a conclusion on these interim
condensed financial statements based on our review.
Scope of review
We conducted our review in accordance with International
Standard of Review Engagements 2410, “Review of Interim
Financial Information Performed by the Independent Auditor
of the Entity”. A review of interim financial information
consists of making inquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical
and other review procedures. A review is substantially less in
scope than an audit conducted in accordance with
International Standards on Auditing and consequently does
not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention
that causes us to believe that the accompanying interim
condensed financial statements of Sanlam Limited were
not prepared, in all material respects, in accordance with
International Financial Reporting Standard IAS 34,
“Interim Financial Reporting”.
Ernst & Young Inc.
Director: MP Rapson
Registered Auditor
Cape Town
2 September 2009
Limited assurance report of the independent auditors on the Sanlam Limited financial information for the Shareholders’ Fund
To the directors of Sanlam Limited
Introduction
We have carried out a limited assurance engagement on
the Sanlam Limited financial information for the
Shareholders’ Fund (Sanlam Limited Shareholders’
Information) for the six months ended 30 June 2009 on
pages 24 to 54, which has been prepared in accordance
with the basis of preparation and presentation set out on
page 20. This report should be read in conjunction with
the reviewed interim condensed financial statements
where the policy liabilities are calculated on the financial
soundness valuation basis.
Respective responsibilities of directors and
independent auditors
The directors are responsible for the interim Group
financial statements, and the Sanlam Limited
Shareholders’ Information. Our responsibilities in relation
to the interim Group financial statements are to review the
interim financial information as set out on page 21.
Our responsibilities, as independent assurance providers,
in relation to the Sanlam Limited Shareholders’
Information are to express a limited assurance conclusion
to the board of directors to confirm that nothing has come
to our attention during our limited assurance engagement
that causes us to believe that the Sanlam Limited
Shareholders’ Information at 30 June 2009 was not
prepared in accordance with the basis of preparation and
presentation set out on page 20.
Scope of engagement
We conducted our limited assurance engagement in
accordance with the International Standards on
Assurance Engagements: ISAE 3000, “Assurance
Engagements other than Audits or Reviews of Historical
Financial Information”. A limited assurance engagement
consists of making inquiries, primarily of persons
responsible for financial, accounting and actuarial
matters, and applying analytical and other review
procedures. A limited assurance engagement is
substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that
External Audit Reports
22 Group Financial Review SANLAM INTERIM RESULTS 2009
we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not
express an audit opinion.
Limited assurance conclusion
Based on our review, nothing has come to our attention
that causes us to believe that the accompanying
Shareholders’ Information at 30 June 2009 has not been
properly prepared, in all material respects, in accordance
with the basis of preparation and presentation set out on
page 20.
Ernst & Young Inc.
Director: MP Rapson
Registered Auditor
Cape Town
2 September 2009
External Audit Reportscontinued
Group Financial Review 23SANLAM INTERIM RESULTS 2009
Contents
Group Equity Value 24
Change in Group Equity Value 26
Return on Group Equity Value 27
Adjusted return on Group Equity Value 28
Shareholders’ fund at fair value 30
Shareholders’ fund income statement 34
Notes to the shareholders’ fund information 38
Embedded value of covered business 46
Shareholders’ Informationfor the six months ended 30 June 2009
24 Group Financial Review SANLAM INTERIM RESULTS 2009
Sanlam GroupGroup Equity Valueat 30 June 2009
June Reviewed 2009 June Reviewed 2009 December Audited 2008
R million Note TotalFair value of
assetsValue of in-force Total
Fair value of assets
Value of in-force Total
Fair value of assets
Value of in-force
Sanlam Personal Finance 20 364 9 457 10 907 21 099 9 425 11 674 20 997 9 698 11 299 Covered business (1) 18 939 8 032 10 907 19 974 8 300 11 674 19 574 8 275 11 299 Glacier 695 695 – 584 584 – 696 696 –Sanlam Personal Loans 73 73 – 73 73 – 71 71 –Multi-Data 172 172 – 172 172 – 190 190 – Sanlam Trust 149 149 – 111 111 – 144 144 –Sanlam Home Loans 120 120 – 61 61 – 133 133 –Anglo African Finance 40 40 – 54 54 – 33 33 –Sanlam Healthcare Management 93 93 – – – – 78 78 –Sanlam Namibia Holdings 83 83 – 70 70 – 78 78 –
Sanlam Developing Markets 3 062 1 237 1 825 2 302 946 1 356 2 813 1 049 1 764 Covered business (1) 3 040 1 215 1 825 2 281 925 1 356 2 796 1 032 1 764 Alfinanz 22 22 – 21 21 – 17 17 –
Sanlam UK 1 461 1 014 447 2 335 1 815 520 1 527 1 081 446 Covered business (1) 685 238 447 1 030 510 520 680 234 446 Principal 253 253 – 584 584 – 299 299 –Buckles 38 38 – 78 78 – 69 69 –Punter Southall Group 236 236 – 318 318 – 219 219 – Other UK operations – – – 56 56 – 18 18 –Preference shares and interest-bearing instruments 249 249 – 269 269 – 242 242 –
Institutional cluster 10 887 10 795 92 11 582 11 369 213 11 541 11 472 69 Covered business (1) 5 109 5 017 92 5 333 5 120 213 5 541 5 472 69 Sanlam Investments 5 244 5 244 – 5 769 5 769 – 5 581 5 581 – Coris Administration 24 24 – 46 46 – 54 54 – Capital Markets 510 510 – 434 434 – 365 365 –
Short-term insurance 5 636 5 636 – 5 235 5 235 – 5 273 5 273 –MiWay 110 110 – 110 110 – 110 110 –Shriram General Insurance 115 115 – 115 115 – 115 115 –Santam 5 411 5 411 – 5 010 5 010 – 5 048 5 048 –
Group operations 41 410 28 139 13 271 42 553 28 790 13 763 42 151 28 573 13 578 Capital diversification (1 137) (1 137) – (1 057) (1 057) – (1 429) (1 429) – Discretionary capital 2 785 2 785 – 3 000 3 000 – 2 100 2 100 – Balanced portfolio – other 2 643 2 643 – 2 852 2 852 – 3 499 3 499 – Group Equity Value before adjustments to net worth 45 701 32 430 13 271 47 348 33 585 13 763 46 321 32 743 13 578 Net worth adjustments (1 211) (1 211) – (809) (809) – (1 083) (1 083) –
Present value of holding company expenses (1 194) (1 194) – (763) (763) – (1 052) (1 052) –Fair value of outstanding equity compensation shares granted by subsidiaries on own shares (17) (17) – (46) (46) – (31) (31) –
Group Equity Value 44 490 31 219 13 271 46 539 32 776 13 763 45 238 31 660 13 578
Value per share (cents) 6 2 172 1 524 648 2 254 1 587 667 2 213 1 549 664
Analysis per type of businessCovered business (1) 27 773 14 502 13 271 28 618 14 855 13 763 28 591 15 013 13 578
Sanlam Personal Finance 18 939 8 032 10 907 19 974 8 300 11 674 19 574 8 275 11 299 Sanlam Developing Markets 3 040 1 215 1 825 2 281 925 1 356 2 796 1 032 1 764 Sanlam UK 685 238 447 1 030 510 520 680 234 446 Institutional cluster 5 109 5 017 92 5 333 5 120 213 5 541 5 472 69
Other Group operations 5 13 637 13 637 – 13 935 13 935 – 13 560 13 560 –Discretionary and other capital 3 080 3 080 – 3 986 3 986 – 3 087 3 087 –Group Equity Value 44 490 31 219 13 271 46 539 32 776 13 763 45 238 31 660 13 578
(1) Refer embedded value of covered business on page 46.
Group Financial Review 25SANLAM INTERIM RESULTS 2009
June Reviewed 2009 June Reviewed 2009 December Audited 2008
R million Note TotalFair value of
assetsValue of in-force Total
Fair value of assets
Value of in-force Total
Fair value of assets
Value of in-force
Sanlam Personal Finance 20 364 9 457 10 907 21 099 9 425 11 674 20 997 9 698 11 299 Covered business (1) 18 939 8 032 10 907 19 974 8 300 11 674 19 574 8 275 11 299 Glacier 695 695 – 584 584 – 696 696 –Sanlam Personal Loans 73 73 – 73 73 – 71 71 –Multi-Data 172 172 – 172 172 – 190 190 – Sanlam Trust 149 149 – 111 111 – 144 144 –Sanlam Home Loans 120 120 – 61 61 – 133 133 –Anglo African Finance 40 40 – 54 54 – 33 33 –Sanlam Healthcare Management 93 93 – – – – 78 78 –Sanlam Namibia Holdings 83 83 – 70 70 – 78 78 –
Sanlam Developing Markets 3 062 1 237 1 825 2 302 946 1 356 2 813 1 049 1 764 Covered business (1) 3 040 1 215 1 825 2 281 925 1 356 2 796 1 032 1 764 Alfinanz 22 22 – 21 21 – 17 17 –
Sanlam UK 1 461 1 014 447 2 335 1 815 520 1 527 1 081 446 Covered business (1) 685 238 447 1 030 510 520 680 234 446 Principal 253 253 – 584 584 – 299 299 –Buckles 38 38 – 78 78 – 69 69 –Punter Southall Group 236 236 – 318 318 – 219 219 – Other UK operations – – – 56 56 – 18 18 –Preference shares and interest-bearing instruments 249 249 – 269 269 – 242 242 –
Institutional cluster 10 887 10 795 92 11 582 11 369 213 11 541 11 472 69 Covered business (1) 5 109 5 017 92 5 333 5 120 213 5 541 5 472 69 Sanlam Investments 5 244 5 244 – 5 769 5 769 – 5 581 5 581 – Coris Administration 24 24 – 46 46 – 54 54 – Capital Markets 510 510 – 434 434 – 365 365 –
Short-term insurance 5 636 5 636 – 5 235 5 235 – 5 273 5 273 –MiWay 110 110 – 110 110 – 110 110 –Shriram General Insurance 115 115 – 115 115 – 115 115 –Santam 5 411 5 411 – 5 010 5 010 – 5 048 5 048 –
Group operations 41 410 28 139 13 271 42 553 28 790 13 763 42 151 28 573 13 578 Capital diversification (1 137) (1 137) – (1 057) (1 057) – (1 429) (1 429) – Discretionary capital 2 785 2 785 – 3 000 3 000 – 2 100 2 100 – Balanced portfolio – other 2 643 2 643 – 2 852 2 852 – 3 499 3 499 – Group Equity Value before adjustments to net worth 45 701 32 430 13 271 47 348 33 585 13 763 46 321 32 743 13 578 Net worth adjustments (1 211) (1 211) – (809) (809) – (1 083) (1 083) –
Present value of holding company expenses (1 194) (1 194) – (763) (763) – (1 052) (1 052) –Fair value of outstanding equity compensation shares granted by subsidiaries on own shares (17) (17) – (46) (46) – (31) (31) –
Group Equity Value 44 490 31 219 13 271 46 539 32 776 13 763 45 238 31 660 13 578
Value per share (cents) 6 2 172 1 524 648 2 254 1 587 667 2 213 1 549 664
Analysis per type of businessCovered business (1) 27 773 14 502 13 271 28 618 14 855 13 763 28 591 15 013 13 578
Sanlam Personal Finance 18 939 8 032 10 907 19 974 8 300 11 674 19 574 8 275 11 299 Sanlam Developing Markets 3 040 1 215 1 825 2 281 925 1 356 2 796 1 032 1 764 Sanlam UK 685 238 447 1 030 510 520 680 234 446 Institutional cluster 5 109 5 017 92 5 333 5 120 213 5 541 5 472 69
Other Group operations 5 13 637 13 637 – 13 935 13 935 – 13 560 13 560 –Discretionary and other capital 3 080 3 080 – 3 986 3 986 – 3 087 3 087 –Group Equity Value 44 490 31 219 13 271 46 539 32 776 13 763 45 238 31 660 13 578
(1) Refer embedded value of covered business on page 46.
26 Group Financial Review SANLAM INTERIM RESULTS 2009
Sanlam GroupChange in Group Equity Valuefor the six months ended 30 June 2009
Six months Reviewed
Full yearAudited
R million 2009 2008 2008
Earnings from covered business (1) 770 998 919 Earnings from other Group operations 790 (1 692) (1 885)
Operations valued based on ratio of price to assets under management
187 ( 335) (715)
Assumption changes (30) 10 ( 99) Change in assets under management 119 (430) (1 005) Earnings for the period and changes in capital requirements 323 ( 103) 188 Foreign currency translation differences and other (225) 188 201
Operations valued based on discounted cash flows 12 31 144 Expected return 156 132 275 Operating experience variances and other 44 12 (6) Assumption changes (160) (194) (104) Foreign currency translation differences (28) 81 (21)
Operations valued at net asset value – earnings for the period 60 34 (35) Listed operations – investment return 531 (1 422) (1 279)
Earnings from discretionary and other capital (475) 119 (440) Investment return (180) 214 68
Shriram Life Insurance goodwill less value of in-force acquired
(39) (43) (43)
Treasury shares and other (128) (130) (269) Change in adjustments to net worth (128) 78 (196)
Group Equity Value earnings 1 085 (575) (1 406) Dividends paid (1 978) (1 968) (1 968) Shares cancelled ( 615) (1 439) (2 481) Cost of treasury shares acquired 760 (772) (200)
Sanlam share buy back – (1 616) (2 238) Transfer to shares cancelled 615 1 439 2 481 Share incentive scheme and other 145 (595) (443)
Group Equity Value at beginning of the period 45 238 51 293 51 293 Group Equity Value at end of the period 44 490 46 539 45 238
(1) Refer embedded value of covered business on page 46.
Group Financial Review 27SANLAM INTERIM RESULTS 2009
Sanlam GroupReturn on Group Equity Valuefor the six months ended 30 June 2009
Six months Reviewed 2009
Six months Reviewed 2008
Full year Audited 2008
EarningsR million
Return%
EarningsR million
Return%
EarningsR million
Return%
Sanlam Personal Finance 579 5,6 503 4,8 744 3,5Covered business (1) 446 4,6 490 4,9 453 2,3Other operations 133 19,6 13 2,2 291 24,4
Sanlam Developing Markets 88 6,4 173 16,4 648 29,6Covered business (1) 86 6,2 180 17,4 659 30,5Other operations 2 24,9 (7) (43,8) (11) (39,3)
Sanlam UK (113) (14,3) 164 22,7 ( 356) (23,4)Covered business (1) 4 1,2 139 32,5 (36) (3,9)Other operations (117) (25,7) 25 8,5 (320) (53,3)
Institutional cluster 475 8,4 (112) (1,8) (723) (5,8)Covered business (1) 234 8,6 189 7,3 (157) (3,0)Sanlam Investments 227 8,3 (343) (10,0) (547) (8,2)Coris Administration (46) (97,8) 8 46,5 16 42,1Capital markets 60 28,4 34 17,7 (35) (8,8)
Short-term insurance 531 21,2 (1 422) (39,6) (1 279) (20,1)Discretionary and other capital (475) 119 (440)
Balance of portfolio (180) 240 114 Shares delivered to Sanlam Demutualisation Trust – (26) (46)
Shriram Life Insurance goodwill less value of in-force acquired (39) (43) (43)
Treasury shares (128) (130) (269) Change in net worth adjustments (128) 78 (196)
Return on Group Equity Value 1 085 4,9 (575) (2,2) (1 406) (2,7)Return on Group Equity Value per share 5,2 0,0 (1,7)
(1) Refer embedded value of covered business on page 46
Six months Reviewed Full yearAudited
R million 2009 2008 2008
Reconciliation of return on Group Equity Value:
The return on Group Equity Value reconciles as follows to normalised attributable earnings:
Normalised attributable earnings per shareholders’ fund income statement on page 34
1 547
1 151
1 758
Earnings recognised directly in equity (263) 481 175 Net foreign currency translation gains (303) 461 60Dilution from Santam treasury share transactions (5) (29) (19)Share-based payments 45 49 134
Movement in fair value adjustment – shareholders’ fund at fair value 444 (2 168) (2 724) Movement in adjustments to net worth (171) 50 (200)
Present value of holding company expenses (142) 30 (259)
Fair value of outstanding equity compensation shares granted by subsidiaries on own shares
14
48
63
Change in intangible assets less value of in-force acquired (43) (28) (4) Treasury shares and other (121) (130) (271) Growth from covered business: value of in-force (1) (351) 41 (144) Return on Group Equity Value 1 085 (575) (1 406)
(1) Refer embedded value of covered business on page 46.
28 Group Financial Review SANLAM INTERIM RESULTS 2009
Six months Reviewed 2009
Six months Reviewed 2008
Full year Audited 2008
EarningsR million
Return%
EarningsR million
Return%
EarningsR million
Return%
Sanlam Personal Finance 1 392 13,7 1 441 14,0 2 697 12,7Covered business 1 259 13,3 1 428 14,7 2 406 12,0Other operations 133 19,6 13 2,2 291 24,4
Sanlam Developing Markets 292 21,8 221 21,2 561 25,6Covered business 290 21,8 228 22,2 572 26,5Other operations 2 24,9 (7) (43,8) (11) (39,3)
Sanlam UK (68) (8,7) 74 10,0 (52) (3,4)Covered business 32 9,6 49 10,9 141 15,3Other operations (100) (22,2) 25 8,5 (193) (32,2)
Institutional cluster 867 15,5 318 5,2 980 7,9Covered business 353 13,1 333 13,1 558 10,6Other operations 514 17,6 (15) (0,4) 422 5,9
Short-term insurance 243 9,4 335 10,8 669 10,5Discretionary and other capital (134) 285 549 Adjusted return on Group Equity Value 2 592 11,8 2 674 10,7 5 404 10,5
Adjusted return on Group Equity Value per share 12,2 13,6 12,4
Sanlam GroupAdjusted return on Group Equity Valuefor the six months ended 30 June 2009
Group Financial Review 29SANLAM INTERIM RESULTS 2009
30 Group Financial Review SANLAM INTERIM RESULTS 2009
Sanlam GroupShareholders’ fund at fair valueat 30 June 2009
June Reviewed 2009 June Reviewed 2008 December Audited 2008
R million Fair valueFair value
adjustmentNet asset
value Fair valueFair value
adjustmentNet asset
value Fair valueFair value
adjustmentNet asset
value
Covered business, discretionary and other capital 20 277 120 20 157 21 068 169 20 899 20 577 120 20 457 Property and equipment 209 – 209 204 – 204 228 – 228 Owner-occupied properties 613 – 613 610 – 610 613 – 613 Goodwill (2) 497 – 497 475 – 475 473 – 473 Value of business acquired (2) 774 – 774 826 – 826 802 – 802 Other intangible assets 48 – 48 – – – – – –Deferred acquisition costs 1 348 – 1 348 1 177 – 1 177 1 260 – 1 260 Investments 18 422 120 18 302 19 990 169 19 821 18 247 120 18 127
Equities and similar securities 8 472 112 8 360 11 346 112 11 234 9 036 112 8 924 Associated companies 225 8 217 336 15 321 234 8 226 Joint ventures
Safair Lease Finance – – – 254 48 206 – – – Shriram Life Insurance and other (3) 247 – 247 211 – 211 208 – 208
Public sector stocks and loans 550 – 550 1 171 – 1 171 1 411 – 1 411 Investment properties 491 – 491 360 – 360 491 – 491 Other interest-bearing and preference share investments 8 437 – 8 437 6 312 (6) 6 318 6 867 – 6 867
Net term finance – – – – – – – – –Term finance (4 790) – (4 790) (4 933) – (4 933) (5 101) – (5 101) Assets held in respect of term finance 4 790 – 4 790 4 933 – 4 933 5 101 – 5 101
Net deferred tax 279 – 279 – – – 352 – 352 Net working capital (1 165) – (1 165) (1 273) – (1 273) (451) – (451) Minority shareholders' interest (748) – (748) (941) – (941) (947) – (947)
Other Group operations 13 637 6 271 7 366 13 935 6 334 7 601 13 560 5 827 7 733 Sanlam Investments 5 244 3 973 1 271 5 769 4 417 1 352 5 581 3 949 1 632
SIM Wholesale 3 603 2 793 810 3 778 3 010 768 3 903 2 844 1 059 International 1 314 912 402 1 682 1 174 508 1 358 854 504 Sanlam Collective Investments 327 268 59 309 233 76 320 251 69
Sanlam Personal Finance 1 425 895 530 1 125 656 469 1 423 837 586 Glacier 695 414 281 584 317 267 696 387 309 Sanlam Personal Loans (4) 73 33 40 73 (18) 91 71 27 44 Multi-Data 172 160 12 172 159 13 190 164 26 Sanlam Trust 149 142 7 111 105 6 144 127 17 Sanlam Home Loans 120 – 120 61 – 61 133 – 133 Anglo African Finance 40 18 22 54 40 14 33 19 14 Sanlam Healthcare Management 93 68 25 – – – 78 58 20 Sanlam Namibia Holdings 83 60 23 70 53 17 78 55 23
Sanlam UK 776 28 748 1 305 141 1 164 847 28 819 Principal 253 1 252 584 24 560 299 2 297 Buckles 38 (5) 43 78 (1) 79 69 8 61 Punter Southall Group 236 19 217 318 62 256 219 – 219 Other UK operations – 13 (13) 56 56 – 18 18 – Preference shares and interest-bearing instruments 249 – 249 269 – 269 242 – 242
Alfinanz 22 18 4 21 21 – 17 13 4 Coris Administration 24 – 24 46 20 26 54 28 26 Sanlam Capital Markets 510 – 510 434 – 434 365 – 365 MiWay 110 84 26 110 34 76 110 58 52 Shriram General Insurance 115 – 115 115 – 115 115 – 115 Santam 5 411 2 520 2 891 5 010 2 292 2 718 5 048 2 161 2 887 Goodwill held on Group level in respect of the above businesses – (1 247) 1 247 – (1 247) 1 247 – (1 247) 1 247 Shareholders’ fund at fair value 33 914 6 391 27 523 35 003 6 503 28 500 34 137 5 947 28 190 Value per share (cents) 1 656 312 1 344 1 696 315 1 381 1 670 291 1 379
Group Financial Review 31SANLAM INTERIM RESULTS 2009
June Reviewed 2009 June Reviewed 2008 December Audited 2008
R million Fair valueFair value
adjustmentNet asset
value Fair valueFair value
adjustmentNet asset
value Fair valueFair value
adjustmentNet asset
value
Covered business, discretionary and other capital 20 277 120 20 157 21 068 169 20 899 20 577 120 20 457 Property and equipment 209 – 209 204 – 204 228 – 228 Owner-occupied properties 613 – 613 610 – 610 613 – 613 Goodwill (2) 497 – 497 475 – 475 473 – 473 Value of business acquired (2) 774 – 774 826 – 826 802 – 802 Other intangible assets 48 – 48 – – – – – –Deferred acquisition costs 1 348 – 1 348 1 177 – 1 177 1 260 – 1 260 Investments 18 422 120 18 302 19 990 169 19 821 18 247 120 18 127
Equities and similar securities 8 472 112 8 360 11 346 112 11 234 9 036 112 8 924 Associated companies 225 8 217 336 15 321 234 8 226 Joint ventures
Safair Lease Finance – – – 254 48 206 – – – Shriram Life Insurance and other (3) 247 – 247 211 – 211 208 – 208
Public sector stocks and loans 550 – 550 1 171 – 1 171 1 411 – 1 411 Investment properties 491 – 491 360 – 360 491 – 491 Other interest-bearing and preference share investments 8 437 – 8 437 6 312 (6) 6 318 6 867 – 6 867
Net term finance – – – – – – – – –Term finance (4 790) – (4 790) (4 933) – (4 933) (5 101) – (5 101) Assets held in respect of term finance 4 790 – 4 790 4 933 – 4 933 5 101 – 5 101
Net deferred tax 279 – 279 – – – 352 – 352 Net working capital (1 165) – (1 165) (1 273) – (1 273) (451) – (451) Minority shareholders' interest (748) – (748) (941) – (941) (947) – (947)
Other Group operations 13 637 6 271 7 366 13 935 6 334 7 601 13 560 5 827 7 733 Sanlam Investments 5 244 3 973 1 271 5 769 4 417 1 352 5 581 3 949 1 632
SIM Wholesale 3 603 2 793 810 3 778 3 010 768 3 903 2 844 1 059 International 1 314 912 402 1 682 1 174 508 1 358 854 504 Sanlam Collective Investments 327 268 59 309 233 76 320 251 69
Sanlam Personal Finance 1 425 895 530 1 125 656 469 1 423 837 586 Glacier 695 414 281 584 317 267 696 387 309 Sanlam Personal Loans (4) 73 33 40 73 (18) 91 71 27 44 Multi-Data 172 160 12 172 159 13 190 164 26 Sanlam Trust 149 142 7 111 105 6 144 127 17 Sanlam Home Loans 120 – 120 61 – 61 133 – 133 Anglo African Finance 40 18 22 54 40 14 33 19 14 Sanlam Healthcare Management 93 68 25 – – – 78 58 20 Sanlam Namibia Holdings 83 60 23 70 53 17 78 55 23
Sanlam UK 776 28 748 1 305 141 1 164 847 28 819 Principal 253 1 252 584 24 560 299 2 297 Buckles 38 (5) 43 78 (1) 79 69 8 61 Punter Southall Group 236 19 217 318 62 256 219 – 219 Other UK operations – 13 (13) 56 56 – 18 18 – Preference shares and interest-bearing instruments 249 – 249 269 – 269 242 – 242
Alfinanz 22 18 4 21 21 – 17 13 4 Coris Administration 24 – 24 46 20 26 54 28 26 Sanlam Capital Markets 510 – 510 434 – 434 365 – 365 MiWay 110 84 26 110 34 76 110 58 52 Shriram General Insurance 115 – 115 115 – 115 115 – 115 Santam 5 411 2 520 2 891 5 010 2 292 2 718 5 048 2 161 2 887 Goodwill held on Group level in respect of the above businesses – (1 247) 1 247 – (1 247) 1 247 – (1 247) 1 247 Shareholders’ fund at fair value 33 914 6 391 27 523 35 003 6 503 28 500 34 137 5 947 28 190 Value per share (cents) 1 656 312 1 344 1 696 315 1 381 1 670 291 1 379
32 Group Financial Review SANLAM INTERIM RESULTS 2009
Sanlam GroupShareholders’ fund at fair valueat 30 June 2009 continued
June Reviewed 2009 June Reviewed 2008 December Audited 2008
R million Fair valueFair value
adjustmentNet asset
value Fair valueFair value
adjustmentNet asset
value Fair valueFair value
adjustmentNet asset
value
Reconciliation to Group Equity ValueGroup Equity Value before adjustments to net worth 45 701 32 430 13 271 47 348 33 585 13 763 46 321 32 743 13 578
Add: Goodwill and value of business acquired replaced by value of in-force
1 484 1 484 – 1 418 1 418 – 1 394 1 394 –
Merchant Investors 356 356 – 356 356 – 356 356 –Sanlam Sky Solutions 786 786 – 778 778 – 760 760 – Channel Life 136 136 – 115 115 – 110 110 – Shriram Life Insurance (3) 190 190 – 151 151 – 151 151 – Other 16 16 – 18 18 – 17 17 –
Less: Value of in-force (13 271) – (13 271) (13 763) – (13 763) (13 578) – (13 578) Shareholders' fund at fair value 33 914 33 914 – 35 003 35 003 – 34 137 34 137 –
R million
JuneReviewed
2009
JuneReviewed
2008
DecemberAudited
2008
Reconciliation to Group statement of financial positionShareholders' fund at net asset value 27 523 28 500 28 190 Consolidation reserve (460) (834) (539) Shareholders’ fund per Group statement of financial position 27 063 27 666 27 651
(1) Group businesses listed above are not consolidated, but reflected as investments at fair value.(2) The value of business acquired and goodwill relate mainly to the consolidation of Sanlam Sky Solutions, Channel Life and Merchant Investors and are
excluded in the build-up of the Group Equity Value, as the current value of in-force business for these life insurance companies are included in the embedded value of covered business.
(3) The carrying value of Shriram Life Insurance includes goodwill of R190 million that is excluded in the build-up of the Group Equity Value, as the current value of in-force business for Shriram Life Insurance is included in the embedded value of covered business.
(4) The life insurance component of Sanlam Personal Loans’ operations is included in the value of in-force business and therefore excluded from the Sanlam Personal Loans fair value.
Group Financial Review 33SANLAM INTERIM RESULTS 2009
June Reviewed 2009 June Reviewed 2008 December Audited 2008
R million Fair valueFair value
adjustmentNet asset
value Fair valueFair value
adjustmentNet asset
value Fair valueFair value
adjustmentNet asset
value
Reconciliation to Group Equity ValueGroup Equity Value before adjustments to net worth 45 701 32 430 13 271 47 348 33 585 13 763 46 321 32 743 13 578
Add: Goodwill and value of business acquired replaced by value of in-force
1 484 1 484 – 1 418 1 418 – 1 394 1 394 –
Merchant Investors 356 356 – 356 356 – 356 356 –Sanlam Sky Solutions 786 786 – 778 778 – 760 760 – Channel Life 136 136 – 115 115 – 110 110 – Shriram Life Insurance (3) 190 190 – 151 151 – 151 151 – Other 16 16 – 18 18 – 17 17 –
Less: Value of in-force (13 271) – (13 271) (13 763) – (13 763) (13 578) – (13 578) Shareholders' fund at fair value 33 914 33 914 – 35 003 35 003 – 34 137 34 137 –
34 Group Financial Review SANLAM INTERIM RESULTS 2009
Sanlam Group Shareholders’ fund income statementfor the six months ended 30 June 2009
Sanlam Personal Finance
Sanlam Developing Markets Sanlam UK Sanlam
Employee BenefitsShort-term Insurance
SanlamInvestments
SanlamCapital Markets
Subtotal: Operating businesses
R million 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008
Financial services income 3 184 3 090 1 794 1 504 182 182 1 056 1 006 6 415 5 829 928 1 097 162 97 13 721 12 805 Sales remuneration (532) (508) (462) (419) (28) (23) (19) (18) (969) (837) – – – – (2 010) (1 805) Income after sales remuneration 2 652 2 582 1 332 1 085 154 159 1 037 988 5 446 4 992 928 1 097 162 97 11 711 11 000 Underwriting policy benefits (808) (782) (736) (559) – – (815) (726) (4 503) (3 937) – – – – (6 862) (6 004) Administration costs (952) (905) (454) (400) (141) (113) (130) (145) (699) (652) (558) (676) (101) (97) (3 035) (2 988) Result from financial services before tax 892 895 142 126 13 46 92 117 244 403 370 421 61 – 1 814 2 008 Tax on financial services income (189) (203) (20) (12) (3) (8) (27) (34) (71) (92) (91) (96) (2) 34 ( 403) (411) Result from financial services after tax 703 692 122 114 10 38 65 83 173 311 279 325 59 34 1 411 1 597 Minority shareholders’ interest (12) (14) (37) (36) 3 (1) – – (91) (146) (15) (38) – – (152) (235) Net result from financial services 691 678 85 78 13 37 65 83 82 165 264 287 59 34 1 259 1 362 Net investment income 343 401 34 38 1 11 122 95 54 53 3 19 – – 557 617
Dividends received – Group companies 110 86 – – – – – – – – – – – – 110 86 Other investment income 270 391 66 78 1 12 142 117 85 103 9 29 – – 573 730 Tax on investment income (37) (76) (16) (14) – (1) (20) (22) 15 (4) (2) (4) – – (60) (121) Minority shareholders’ interest – – (16) (26) – – – – (46) (46) (4) (6) – – (66) (78)
Core earnings 1 034 1 079 119 116 14 48 187 178 136 218 267 306 59 34 1 816 1 979 Project expenses (13) (32) (2) – – – – – – (3) – – – – (15) (35) Amortisation of value of business aquired – – (23) (21) (12) (10) – – (2) – – – – – (37) (31) BEE transaction cost – – – – – – – – (3) (3) – – – – (3) (3) Net equity-accounted headline earnings – – – 3 – – – – 10 6 – (19) – – 10 (10)
Equity-accounted headline earnings – – (1) 6 – – – – 17 11 – (16) – – 16 1 Minority shareholders’ interest – – 1 (3) – – – – (7) (5) – (3) – – (6) (11)
Net investment surpluses (44) (998) (48) (37) – – 15 (56) 20 (137) (4) (36) – – (61) (1 264) Investment surpluses – Group companies (63) (945) – – – – – – – – – – – – (63) (945) Other investment surpluses 28 (72) (97) (71) – – 21 (65) 56 (396) (2) (35) – – 6 (639) Tax on investment surpluses (9) 19 30 4 – – (6) 9 (18) 138 1 – – – (2) 170 Minority shareholders’ interest – – 19 30 – – – – (18) 121 (3) (1) – – (2) 150
Secondary tax on companies – after minorities (119) (136) – (14) – – – – (5) (10) – – – – (124) (160) Net loss from discontinued operations – – – – – – – – – (35) – – – – – (35)
Loss from discontinued operations – – – – – – – – – (63) – – – – – (63) Minority shareholders’ interest – – – – – – – – – 28 – – – – – 28
Normalised headline earnings 858 (87) 46 47 2 38 202 122 156 36 263 251 59 34 1 586 441 Other equity-accounted earnings – – – – – 32 – – – – – – – – – 32 Profit on disposal of subsidiaries – – – – – – – – – – – – – – – – Impairment (3) (120) – (1) (43) – (8) – (3) (3) (1) (2) – – (58) (126) Normalised attributable earnings 855 (207) 46 46 (41) 70 194 122 153 33 262 249 59 34 1 528 347 Fund transfers – – – – – – – – – – – – – – – –
Attributable profit per Group statement of comprehensive income 855 (207) 46 46 (41) 70 194 122 153 33 262 249 59 34 1 528 347
RatiosAdmin ratio (1) 35,9% 35,1% 34,1% 36,9% 91,6% 71,1% 12,5% 14,7% 12,8% 13,1% 60,1% 61,6% 62,3% 100,0% 25,9% 27,2%Operating margin (2) 33,6% 34,7% 10,7% 11,6% 8,4% 28,9% 8,9% 11,8% 4,5% 8,1% 39,9% 38,4% 37,7% 0,0% 15,5% 18,3%
Diluted earnings per share
Adjusted weighted average number of shares (million)
Net result from financial services (cents) 33,8 31,8 4,2 3,7 0,6 1,7 3,2 3,9 4,0 7,7 12,9 13,5 2,9 1,6 61,6 63,9Core earnings (cents)
(1) Administration costs as a percentage of income earned by the shareholders’ fund less sales remuneration.(2) Result from financial services before tax as a percentage of income earned by the shareholders’ fund less sales remuneration.(3) Comparative information for Sanlam UK and Sanlam Investments have been restated for the reallocation of Sanlam Multi-Manager International from
Sanlam UK to Sanlam Investments.
Group Financial Review 35SANLAM INTERIM RESULTS 2009
Sanlam Personal Finance
Sanlam Developing Markets Sanlam UK Sanlam
Employee BenefitsShort-term Insurance
SanlamInvestments
SanlamCapital Markets
Subtotal: Operating businesses
R million 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008
Financial services income 3 184 3 090 1 794 1 504 182 182 1 056 1 006 6 415 5 829 928 1 097 162 97 13 721 12 805 Sales remuneration (532) (508) (462) (419) (28) (23) (19) (18) (969) (837) – – – – (2 010) (1 805) Income after sales remuneration 2 652 2 582 1 332 1 085 154 159 1 037 988 5 446 4 992 928 1 097 162 97 11 711 11 000 Underwriting policy benefits (808) (782) (736) (559) – – (815) (726) (4 503) (3 937) – – – – (6 862) (6 004) Administration costs (952) (905) (454) (400) (141) (113) (130) (145) (699) (652) (558) (676) (101) (97) (3 035) (2 988) Result from financial services before tax 892 895 142 126 13 46 92 117 244 403 370 421 61 – 1 814 2 008 Tax on financial services income (189) (203) (20) (12) (3) (8) (27) (34) (71) (92) (91) (96) (2) 34 ( 403) (411) Result from financial services after tax 703 692 122 114 10 38 65 83 173 311 279 325 59 34 1 411 1 597 Minority shareholders’ interest (12) (14) (37) (36) 3 (1) – – (91) (146) (15) (38) – – (152) (235) Net result from financial services 691 678 85 78 13 37 65 83 82 165 264 287 59 34 1 259 1 362 Net investment income 343 401 34 38 1 11 122 95 54 53 3 19 – – 557 617
Dividends received – Group companies 110 86 – – – – – – – – – – – – 110 86 Other investment income 270 391 66 78 1 12 142 117 85 103 9 29 – – 573 730 Tax on investment income (37) (76) (16) (14) – (1) (20) (22) 15 (4) (2) (4) – – (60) (121) Minority shareholders’ interest – – (16) (26) – – – – (46) (46) (4) (6) – – (66) (78)
Core earnings 1 034 1 079 119 116 14 48 187 178 136 218 267 306 59 34 1 816 1 979 Project expenses (13) (32) (2) – – – – – – (3) – – – – (15) (35) Amortisation of value of business aquired – – (23) (21) (12) (10) – – (2) – – – – – (37) (31) BEE transaction cost – – – – – – – – (3) (3) – – – – (3) (3) Net equity-accounted headline earnings – – – 3 – – – – 10 6 – (19) – – 10 (10)
Equity-accounted headline earnings – – (1) 6 – – – – 17 11 – (16) – – 16 1 Minority shareholders’ interest – – 1 (3) – – – – (7) (5) – (3) – – (6) (11)
Net investment surpluses (44) (998) (48) (37) – – 15 (56) 20 (137) (4) (36) – – (61) (1 264) Investment surpluses – Group companies (63) (945) – – – – – – – – – – – – (63) (945) Other investment surpluses 28 (72) (97) (71) – – 21 (65) 56 (396) (2) (35) – – 6 (639) Tax on investment surpluses (9) 19 30 4 – – (6) 9 (18) 138 1 – – – (2) 170 Minority shareholders’ interest – – 19 30 – – – – (18) 121 (3) (1) – – (2) 150
Secondary tax on companies – after minorities (119) (136) – (14) – – – – (5) (10) – – – – (124) (160) Net loss from discontinued operations – – – – – – – – – (35) – – – – – (35)
Loss from discontinued operations – – – – – – – – – (63) – – – – – (63) Minority shareholders’ interest – – – – – – – – – 28 – – – – – 28
Normalised headline earnings 858 (87) 46 47 2 38 202 122 156 36 263 251 59 34 1 586 441 Other equity-accounted earnings – – – – – 32 – – – – – – – – – 32 Profit on disposal of subsidiaries – – – – – – – – – – – – – – – – Impairment (3) (120) – (1) (43) – (8) – (3) (3) (1) (2) – – (58) (126) Normalised attributable earnings 855 (207) 46 46 (41) 70 194 122 153 33 262 249 59 34 1 528 347 Fund transfers – – – – – – – – – – – – – – – –
Attributable profit per Group statement of comprehensive income 855 (207) 46 46 (41) 70 194 122 153 33 262 249 59 34 1 528 347
RatiosAdmin ratio (1) 35,9% 35,1% 34,1% 36,9% 91,6% 71,1% 12,5% 14,7% 12,8% 13,1% 60,1% 61,6% 62,3% 100,0% 25,9% 27,2%Operating margin (2) 33,6% 34,7% 10,7% 11,6% 8,4% 28,9% 8,9% 11,8% 4,5% 8,1% 39,9% 38,4% 37,7% 0,0% 15,5% 18,3%
Diluted earnings per share
Adjusted weighted average number of shares (million)
Net result from financial services (cents) 33,8 31,8 4,2 3,7 0,6 1,7 3,2 3,9 4,0 7,7 12,9 13,5 2,9 1,6 61,6 63,9Core earnings (cents)
(1) Administration costs as a percentage of income earned by the shareholders’ fund less sales remuneration.(2) Result from financial services before tax as a percentage of income earned by the shareholders’ fund less sales remuneration.(3) Comparative information for Sanlam UK and Sanlam Investments have been restated for the reallocation of Sanlam Multi-Manager International from
Sanlam UK to Sanlam Investments.
36 Group Financial Review SANLAM INTERIM RESULTS 2009
Sanlam Group Shareholders’ fund income statementfor the six months ended 30 June 2009 continued
Subtotal: Operating Business
Corporate & Other
Consolidation entries
Total Six months Reviewed
Total Full year Audited
R million 2009 2008 2009 2008 2009 2008 2009 2008 2008
Financial services income 13 721 12 805 87 75 – – 13 808 12 880 26 969 Sales remuneration (2 010) (1 805) – – – – (2 010) (1 805) (3 861) Income after sales remuneration 11 711 11 000 87 75 – – 11 798 11 075 23 108 Underwriting policy benefits (6 862) (6 004) – – – – (6 862) (6 004) (12 287) Administration costs (3 035) (2 988) (123) (117) – – (3 158) (3 105) (6 561) Result from financial services before tax 1 814 2 008 (36) (42) – – 1 778 1 966 4 260 Tax on financial services income (403) (411) 11 14 – – (392) (397) ( 966) Result from financial services after tax 1 411 1 597 (25) (28) – – 1 386 1 569 3 294 Minority shareholders’ interest (152) (235) – – – – (152) (235) (492) Net result from financial services 1 259 1 362 (25) (28) – – 1 234 1 334 2 802 Net investment income 557 617 108 48 (110) (86) 555 579 1 068
Dividends received – Group companies 110 86 – – (110) (86) – – – Other investment income 573 730 118 32 – – 691 762 1 432 Tax on investment income (60) (121) (10) 16 – – (70) (105) (221) Minority shareholders’ interest (66) (78) – – – – (66) (78) (143)
Core earnings 1 816 1 979 83 20 (110) (86) 1 789 1 913 3 870 Project expenses (15) (35) – ( 5) – – (15) (40) (56) Amortisation of value of business aquired (37) (31) – – – – (37) (31) (77) BEE transaction cost (3) (3) – – – – (3) (3) (7) Net equity-accounted headline earnings 10 (10) – 6 – – 10 (4) 16
Equity-accounted headline earnings 16 1 – 6 – – 16 7 24 Minority shareholders’ interest (6) (11) – – – – (6) (11) (8)
Net investment surpluses (61) (1 264) 21 (128) 63 945 23 (447) (1 699)Investment surpluses – Group companies (63) (945) – – 63 945 – – –Other investment surpluses 6 (639) 21 (128) – – 27 (767) (2 515) Tax on investment surpluses (2) 170 – – – – (2) 170 625 Minority shareholders’ interest (2) 150 – – – – (2) 150 191
Secondary tax on companies – after minorities (124) (160) (38) 61 – – (162) (99) (59) Net loss from discontinued operations – (35) – – – – – (35) (22)
Loss from discontinued operations – (63) – – – – – (63) (41) Minority shareholders’ interest – 28 – – – – – 28 19
Normalised headline earnings 1 586 441 66 (46) (47) 859 1 605 1 254 1 966 Other equity-accounted earnings – 32 – – – – – 32 33 Profit on disposal of subsidiaries – – – – – – – – 3 Impairment (58) (126) – (9) – – (58) (135) (244) Normalised attributable earnings 1 528 347 66 (55) (47) 859 1 547 1 151 1 758 Fund transfers – – – – 59 701 59 701 736 Attributable profit per Group statement of comprehensive income 1 528 347 66 (55) 12 1 560 1 606 1 852 2 494
RatiosAdmin ratio (1) 25,9% 27,2% 26,8% 28,0% 28,4%Operating margin (2) 15,5% 18,3% 15,1% 17,8% 18,4%
Diluted earnings per share
Adjusted weighted average number of shares (million) 2 044,4 2 132,6 2 094,0 Net result from financial services (cents) 61,6 63,9 (1,2) (1,3) – – 60,4 62,6 133,8 Core earnings (cents) 87,5 89,7 184,8
(1) Administration costs as a percentage of income earned by the shareholders’ fund less sales remuneration.(2) Result from financial services before tax as a percentage of income earned by the shareholders’ fund less sales remuneration.(3) Comparative information for Sanlam UK and Sanlam Investments have been restated for the reallocation of Sanlam Multi-Manager International from
Sanlam UK to Sanlam Investments.
Group Financial Review 37SANLAM INTERIM RESULTS 2009
Subtotal: Operating Business
Corporate & Other
Consolidation entries
Total Six months Reviewed
Total Full year Audited
R million 2009 2008 2009 2008 2009 2008 2009 2008 2008
Financial services income 13 721 12 805 87 75 – – 13 808 12 880 26 969 Sales remuneration (2 010) (1 805) – – – – (2 010) (1 805) (3 861) Income after sales remuneration 11 711 11 000 87 75 – – 11 798 11 075 23 108 Underwriting policy benefits (6 862) (6 004) – – – – (6 862) (6 004) (12 287) Administration costs (3 035) (2 988) (123) (117) – – (3 158) (3 105) (6 561) Result from financial services before tax 1 814 2 008 (36) (42) – – 1 778 1 966 4 260 Tax on financial services income (403) (411) 11 14 – – (392) (397) ( 966) Result from financial services after tax 1 411 1 597 (25) (28) – – 1 386 1 569 3 294 Minority shareholders’ interest (152) (235) – – – – (152) (235) (492) Net result from financial services 1 259 1 362 (25) (28) – – 1 234 1 334 2 802 Net investment income 557 617 108 48 (110) (86) 555 579 1 068
Dividends received – Group companies 110 86 – – (110) (86) – – – Other investment income 573 730 118 32 – – 691 762 1 432 Tax on investment income (60) (121) (10) 16 – – (70) (105) (221) Minority shareholders’ interest (66) (78) – – – – (66) (78) (143)
Core earnings 1 816 1 979 83 20 (110) (86) 1 789 1 913 3 870 Project expenses (15) (35) – ( 5) – – (15) (40) (56) Amortisation of value of business aquired (37) (31) – – – – (37) (31) (77) BEE transaction cost (3) (3) – – – – (3) (3) (7) Net equity-accounted headline earnings 10 (10) – 6 – – 10 (4) 16
Equity-accounted headline earnings 16 1 – 6 – – 16 7 24 Minority shareholders’ interest (6) (11) – – – – (6) (11) (8)
Net investment surpluses (61) (1 264) 21 (128) 63 945 23 (447) (1 699)Investment surpluses – Group companies (63) (945) – – 63 945 – – –Other investment surpluses 6 (639) 21 (128) – – 27 (767) (2 515) Tax on investment surpluses (2) 170 – – – – (2) 170 625 Minority shareholders’ interest (2) 150 – – – – (2) 150 191
Secondary tax on companies – after minorities (124) (160) (38) 61 – – (162) (99) (59) Net loss from discontinued operations – (35) – – – – – (35) (22)
Loss from discontinued operations – (63) – – – – – (63) (41) Minority shareholders’ interest – 28 – – – – – 28 19
Normalised headline earnings 1 586 441 66 (46) (47) 859 1 605 1 254 1 966 Other equity-accounted earnings – 32 – – – – – 32 33 Profit on disposal of subsidiaries – – – – – – – – 3 Impairment (58) (126) – (9) – – (58) (135) (244) Normalised attributable earnings 1 528 347 66 (55) (47) 859 1 547 1 151 1 758 Fund transfers – – – – 59 701 59 701 736 Attributable profit per Group statement of comprehensive income 1 528 347 66 (55) 12 1 560 1 606 1 852 2 494
RatiosAdmin ratio (1) 25,9% 27,2% 26,8% 28,0% 28,4%Operating margin (2) 15,5% 18,3% 15,1% 17,8% 18,4%
Diluted earnings per share
Adjusted weighted average number of shares (million) 2 044,4 2 132,6 2 094,0 Net result from financial services (cents) 61,6 63,9 (1,2) (1,3) – – 60,4 62,6 133,8 Core earnings (cents) 87,5 89,7 184,8
(1) Administration costs as a percentage of income earned by the shareholders’ fund less sales remuneration.(2) Result from financial services before tax as a percentage of income earned by the shareholders’ fund less sales remuneration.(3) Comparative information for Sanlam UK and Sanlam Investments have been restated for the reallocation of Sanlam Multi-Manager International from
Sanlam UK to Sanlam Investments.
38 Group Financial Review SANLAM INTERIM RESULTS 2009
Notes to the shareholders’ fund informationfor the six months ended 30 June 2009
1. Analysis of new business and total funds receivedAnalysed per business, reflecting the split between life and non-life business
Total Life Insurance (1) Life Licence (2) OtherR million 2009 2008 2009 2008 2009 2008 2009 2008
Sanlam Personal Finance 14 700 15 824 5 433 6 014 – – 9 267 9 810 South Africa 10 214 11 559 5 061 5 820 – – 5 153 5 739
Recurring 487 558 452 505 – – 35 53 Single 8 995 10 164 3 877 4 478 – – 5 118 5 686 Continuations 732 837 732 837 – – – –
Africa 4 486 4 265 372 194 – – 4 114 4 071 Recurring 38 32 38 32 – – – – Single 4 448 4 233 334 162 – – 4 114 4 071
Sanlam Developing Markets 1 316 1 214 1 316 1 214 – – – – South Africa 635 665 635 665 – – – –
Recurring 370 352 370 352 – – – – Single 265 313 265 313 – – – –
Africa 605 449 605 449 – – – – Recurring 195 150 195 150 – – – – Single 410 299 410 299 – – – –
Other international 76 100 76 100 – – – – Recurring 58 37 58 37 – – – – Single 18 63 18 63 – – – –
Sanlam UK 955 807 451 807 – – 504 – Other international 955 807 451 807 – – 504 –
Recurring 5 10 5 10 – – – – Single 950 797 446 797 – – 504 –
Sanlam Employee Benefits 142 270 142 270 – – – – South Africa 142 270 142 270 – – – –
Recurring 76 82 76 82 – – – – Single 66 188 66 188 – – – –
Sanlam Investment 25 408 23 035 – – 991 686 24 417 22 349 Employee benefits 410 207 – – 410 207 – –
Recurring 6 – – – 6 – – – Single 404 207 – – 404 207 – –
Collective investment schemes 10 269 8 839 – – – – 10 269 8 839 Retail funds 5 031 5 603 – – – – 5 031 5 603 Wholesale business 5 238 3 236 – – – – 5 238 3 236
Segregated funds 12 821 12 494 – – – – 12 821 12 494 Wholesale business 9 688 8 478 – – – – 9 688 8 478 Private Investments 3 133 4 016 – – – – 3 133 4 016
Non-South African 1 908 1 495 – – 581 479 1 327 1 016 Short-term insurance 6 179 6 085 – – – – 6 179 6 085New business excluding white label 48 700 47 235 7 342 8 305 991 686 40 367 38 244 White label 2 785 3 750 – – – – 2 785 3 750
Sanlam Collective Investments 2 785 3 750 – – – – 2 785 3 750 Sanlam Developing Markets – – – – – – – –
Total new business 51 485 50 985 7 342 8 305 991 686 43 152 41 994
Recurring premiums on existing funds:Sanlam Personal Finance 4 763 4 525 Sanlam Developing Markets 1 337 1 106 Sanlam UK 300 286 Institutional cluster 1 484 1 462 Total funds received 59 369 58 364
(1) Life insurance business relates to business written under a life licence that is included in the calculation of embedded value of covered business.(2) Life licence business relates to investment products provided by means of a life insurance policy where there is very little or no insurance risk. Life
licence business is excluded from the calculation of embedded value of covered business.
Group Financial Review 39SANLAM INTERIM RESULTS 2009
1. Analysis of new business and total funds received (continued)
R million 2009 2008
Analysed per market
RetailLife business 5 696 6 485
Sanlam Personal Finance 5 061 5 820 Sanlam Developing Markets 635 665
Non-life business 13 317 15 358 Sanlam Personal Finance 5 153 5 739 Sanlam Private Investments 3 133 4 016 Sanlam Collective Investments 5 031 5 603
South African 19 013 21 843 Non-South African 6 122 5 621
Sanlam Personal Finance 4 486 4 265 Sanlam Developing Markets 681 549 Sanlam UK 955 807
Total retail 25 135 27 464
InstitutionalGroup life business 552 477
Sanlam Employee Benefits 142 270 Investment Management 410 207
Non-life business 14 926 11 714 Segregated 7 920 6 379 Sanlam Multi-Manager 1 768 2 099 Sanlam Collective Investments 5 238 3 236
South African 15 478 12 191 Investment Management Non-South African 1 908 1 495
Total institutional 17 386 13 686
White label 2 785 3 750 Sanlam Collective Investments 2 785 3 750 Sanlam Developing Markets – –
Short-term insurance 6 179 6 085 Total new business 51 485 50 985
40 Group Financial Review SANLAM INTERIM RESULTS 2009
Notes to the shareholders’ fund informationfor the six months ended 30 June 2009 continued
2. Analysis of payments to clients
Total Life Insurance (1) Life Licence (2) OtherR million 2009 2008 2009 2008 2009 2008 2009 2008
Sanlam Personal Finance 16 052 18 128 9 221 9 677 – – 6 831 8 451 South Africa 12 755 13 791 8 804 9 351 – – 3 951 4 440
Surrenders 1 777 1 962 1 777 1 962 – – – – Other 10 978 11 829 7 027 7 389 – – 3 951 4 440
Africa 3 297 4 337 417 326 – – 2 880 4 011 Surrenders 130 62 130 62 – – – – Other 3 167 4 275 287 264 – – 2 880 4 011
Sanlam Developing Markets 2 043 1 647 2 043 1 647 – – – – South Africa 1 664 1 326 1 664 1 326 – – – –
Surrenders 162 202 162 202 – – – – Other 1 502 1 124 1 502 1 124 – – – –
Africa 374 321 374 321 – – – – Surrenders 75 91 75 91 – – – – Other 299 230 299 230 – – – –
Other international 5 – 5 – – – – – Surrenders 5 – 5 – – – – – Other – – – – – – – –
Sanlam UK 1 366 1 002 759 1 002 – – 607 – Other international 1 366 1 002 759 1 002 – – 607 –
Surrenders 1 224 740 617 740 – – 607 – Other 142 262 142 262 – – – –
Sanlam Employee Benefits 1 852 1 993 1 852 1 993 – – – – South Africa 1 852 1 993 1 852 1 993 – – – –
Terminations 134 195 134 195 – – – – Other 1 718 1 798 1 718 1 798 – – – –
Sanlam Investments 22 611 20 236 – – 972 1 411 21 639 18 825 Employee benefits 957 1 164 – – 957 1 164 – –
Terminations 422 687 – – 422 687 – – Other 535 477 – – 535 477 – –
Collective investment schemes 7 587 7 873 – – – – 7 587 7 873 Retail funds 4 265 5 564 – – – – 4 265 5 564 Wholesale business 3 322 2 309 – – – – 3 322 2 309
Segregated funds 12 570 9 286 – – – – 12 570 9 286 Wholesale business 6 866 7 853 – – – – 6 866 7 853 Private Investments 5 704 1 433 – – – – 5 704 1 433
Non-South African 1 497 1 913 – – 15 247 1 482 1 666 Short-term insurance 4 503 4 317 – – – – 4 503 4 317
Payments to clients excluding white label 48 427 47 323 13 875 14 319 972 1 411 33 580 31 593
White label 3 265 5 571 – – – – 3 265 5 571 Sanlam Collective Investments 3 265 5 571 – – – – 3 265 5 571 Sanlam Developing Markets – – – – – – – –
Total payments to clients 51 692 52 894 13 875 14 319 972 1 411 36 845 37 164
(1) Life insurance business relates to business written under a life licence that is included in the calculation of embedded value of covered business.(2) Life licence business relates to investment products provided by means of a life insurance policy where there is very little or no insurance risk. Life
licence business is excluded from the calculation of embedded value of covered business.
Group Financial Review 41SANLAM INTERIM RESULTS 2009
3. Analysis of net inflow/(outflow) of funds
Total Life Insurance (1) Life Licence (2) Other R million 2009 2008 2009 2008 2009 2008 2009 2008
Sanlam Personal Finance 3 411 2 221 929 861 – – 2 482 1 360 South Africa 1 989 2 068 741 768 – – 1 248 1 300 Africa 1 422 153 188 93 – – 1 234 60
Sanlam Developing Markets 610 673 610 673 – – – – South Africa (132) 83 (132) 83 – – – – Africa 636 471 636 471 – – – – Other international 106 119 106 119 – – – –
Sanlam UK (111) 91 (8) 91 – – (103) – Sanlam Employee Benefits (499) (517) (499) (517) – – – – Sanlam Investments 3 070 3 055 – – 292 (469) 2 778 3 524 Employee benefits (274) (701) – – (274) (701) – – Collective investment schemes 2 682 966 – – – – 2 682 966
Retail funds 766 39 – – – – 766 39 Wholesale business 1 916 927 – – – – 1 916 927
Segregated funds 251 3 208 – – – – 251 3 208 Wholesale business 2 822 625 – – – – 2 822 625 Private Investments (2 571) 2 583 – – – – (2 571) 2 583
Non-South African 411 (418) – – 566 232 (155) (650) Santam 1 676 1 768 – – – – 1 676 1 768
Net inflow/(outflow) excluding white label 8 157 7 291 1 032 1 108 292 (469) 6 833 6 652
White label (480) (1 821) – – – – (480) (1 821) Sanlam Collective Investments (480) (1 821) – – – – (480) (1 821) Sanlam Developing Markets – – – – – – – –
Total net inflow/(outflow) 7 677 5 470 1 032 1 108 292 (469) 6 353 4 831
(1) Life insurance business relates to business written under a life licence that is included in the calculation of embedded value of covered business.(2) Life licence business relates to investment products provided by means of a life insurance policy where there is very little or no insurance risk. Life
licence business is excluded from the calculation of embedded value of covered business.
42 Group Financial Review SANLAM INTERIM RESULTS 2009
Notes to the shareholders’ fund informationfor the six months ended 30 June 2009 continued
3. Analysis of net inflow/(outflow) of funds (continued)
R million 2009 2008
Analysed per market
RetailLife business 609 851
Sanlam Personal Finance 741 768 Sanlam Developing Markets (132) 83
Non-life business (557) 3 922 Sanlam Personal Finance 1 248 1 300 Sanlam Private Investments (2 571) 2 583 Sanlam Collective Investments 766 39
South African 52 4 773 Non-South African 2 053 834
Sanlam Personal Finance 1 422 153 Sanlam Developing Markets 742 590 Sanlam UK (111) 91
Total retail 2 105 5 607 Institutional
Group life business (773) (1 218)Sanlam Employee Benefits (499) (517)Investment Management (274) (701)
Non-life business 4 738 1 552 Segregated 3 032 2 974 Sanlam Multi-Manager (210) (2 349)Sanlam Collective Investments 1 916 927
South African 3 965 334 Investment Management Non-South African 411 (418)
Total institutional 4 376 (84)White label (480) (1 821)
Sanlam Collective Investments (480) (1 821)Sanlam Developing Markets – –
Short-term insurance 1 676 1 768 Total net inflow 7 677 5 470
Group Financial Review 43SANLAM INTERIM RESULTS 2009
4. Normalised diluted earnings per shareIn terms of IFRS, the policyholders’ fund’s investments in Sanlam shares and Group subsidiaries are not reflected as equity
investments in the Sanlam balance sheet, but deducted in full from equity on consolidation (in respect of Sanlam shares) or
reflected at net asset value (in respect of subsidiaries). The valuation of the related policy liabilities however includes the fair
value of these shares, resulting in a mismatch between policy liabilities and policyholder investments, with a consequential
impact on the Group’s earnings. The number of shares in issue must also be reduced with the treasury shares held by the
policyholders’ fund for the calculation of IFRS basic and diluted earnings per share. This is, in management’s view, not a
true representation of the earnings attributable to the Group’s shareholders, specifically in instances where the share prices
and/or the number of shares held by the policyholders’ fund varies significantly. The Group therefore calculates normalised
diluted earnings per share to eliminate the impact of investments in Sanlam shares and Group subsidiaries held by the
policyholders’ fund.
Six months Reviewed
Full yearAudited
2009cents
2008cents
2008cents
Normalised diluted earnings per share:Net result from financial services 60,4 62,6 133,8 Core earnings 87,5 89,7 184,8 Headline earnings 78,5 58,8 93,9 Profit attributable to shareholders’ fund 75,7 54,0 84,0
R million R million R million
Analysis of normalised earnings (refer shareholders’ fund income statement on page 34):
Net result from financial services 1 234 1 334 2 802 Core earnings 1 789 1 913 3 870 Headline earnings 1 605 1 254 1 966 Profit attributable to shareholders’ fund 1 547 1 151 1 758 Reconciliation of normalised headline earnings:Headline earnings per note 1 on page 60 1 664 1 955 2 702 Less: Fund transfers (59) (701) (736) Normalised headline earnings 1 605 1 254 1 966
million million million
Adjusted number of shares:
Weighted average number of shares for diluted earnings per share (refer to note 1 on page 60)
2 015,1 2 068,1 2 043,5
Add: Weighted average Sanlam shares held by policyholders 29,3 64,5 50,5
Adjusted weighted average number of shares for normalised diluted earnings per share 2 044,4 2 132,6 2 094,0
44 Group Financial Review SANLAM INTERIM RESULTS 2009
Notes to the shareholders’ fund informationfor the six months ended 30 June 2009 continued
5. Fair value of other Group operationsThe shareholders’ fund at fair value includes the value of the Sanlam businesses based on directors’ valuation, apart from
Santam, which is valued according to ruling share prices.
Valuation methodologyThe fair value of the unlisted Sanlam businesses has been determined by the application of the following valuation
methodologies:
Fair value of Sanlam business
Valuation method
June Reviewed
DecemberAudited
R million 2009 2008 2008
Ratio of price to assets under management 5 580 5 839 5 958 SIM Wholesale 3 603 3 778 3 903 SIM International 1 314 1 682 1 358 Sanlam Collective Investments 327 309 320 Principal 253 – 299 Sanlam Namibia Holdings 83 70 78
Discounted cash flows 1 911 1 765 1 964 Glacier 695 584 696 Sanlam Personal Loans 73 73 71 Multi-Data 172 172 190 Sanlam Trust 149 111 144 Sanlam Home Loans 120 61 133 Punter Southall Group 236 318 219 Other 466 446 511
Net asset value 735 1 321 590 Principal – 584 – Buckles – 78 – MiWay 110 110 110 Shriram General Insurance 115 115 115 Sanlam Capital Markets 510 434 365
Fair value of unlisted businesses 8 226 8 925 8 512
The main assumptions applied in the primary valuation for the unlisted businesses are presented below.
The sensitivity analysis is based on the following changes in assumptions:
Assumption Change in assumption
Ratio of price to assets under management (P/AuM) 0,1%Risk discount rate (RDR) 1,0%Perpetuity growth rate (PGR) 1,0%
Fair value of Sanlam business
R million
Weighted average assumption
Basevalue
Decrease inassumption
Increase inassumption
Ratio of price to assets under management
P/AuM = 1,46% (Dec 2008: 1,44%) 5 580 5 096 6 064
Discounted cash flows RDR = 18,3% (Dec 2008: 17,9%) 1 911 2 032 1 809 PGR = 2,5% – 5% (Dec 2008: 2,5% – 5%) 1 911 1 869 1 959
Group Financial Review 45SANLAM INTERIM RESULTS 2009
6. Value per share
June Reviewed DecemberAudited
2009million
2008million
2008million
Number of shares for value per share:Number of ordinary shares in issue at beginning of the period 2 190,1 2 303,6 2 303,6Shares cancelled (30,1) (63,5) (113,5)Number of ordinary shares in issue 2 160,0 2 240,1 2 190,1Shares held by subsidiaries in shareholders’ fund (159,8) (218,5) (197,3)
Outstanding shares and share options in respect of Sanlam Limited long-term incentive schemes
37,6 43,2 45,5
Number of shares under option that would have been issued at fair value (10,5) (14,4) (12,7)Convertible deferred shares held by Ubuntu-Botho 20,9 13,9 18,6Adjusted number of shares for value per share 2 048,2 2 064,3 2 044,2
7. Share repurchasesThe Sanlam shareholders granted general authorities to the Group at the 2009 and 2008 annual general meetings to repurchase
Sanlam shares in the market. The Group did not acquire any shares during 2009 in terms of the general authorities.
46 Group Financial Review SANLAM INTERIM RESULTS 2009
June Reviewed DecemberAudited
R million Note 2009 2008 2008
Sanlam Personal Finance 18 939 19 974 19 574 Adjusted net worth 8 032 8 300 8 275 Net value of in-force covered business 10 907 11 674 11 299
Value of in-force covered business 12 649 13 309 12 809 Cost of capital (1 613) (1 528) (1 378)Minority shareholders’ interest (129) (107) (132)
Sanlam Developing Markets 3 040 2 281 2 796 Adjusted net worth 1 215 925 1 032 Net value of in-force covered business 1 825 1 356 1 764
Value of in-force covered business 2 428 1 956 2 432 Cost of capital (273) (280) (284)Minority shareholders’ interest (330) (320) (384)
Sanlam UK 685 1 030 680 Adjusted net worth 238 510 234 Net value of in-force covered business 447 520 446
Value of in-force covered business 479 560 481 Cost of capital (32) (40) (35)Minority shareholders’ interest – – –
Sanlam Employee Benefits 5 109 5 333 5 541 Adjusted net worth 5 017 5 120 5 472 Net value of in-force covered business 92 213 69
Value of in-force covered business 1 014 1 075 824 Cost of capital (922) (862) (755)Minority shareholders’ interest – – –
Embedded value of covered business 27 773 28 618 28 591
Adjusted net worth (1) 14 502 14 855 15 013 Net value of in-force covered business 1 13 271 13 763 13 578 Embedded value of covered business 27 773 28 618 28 591
(1) Excludes subordinated debt funding of Sanlam Life.
Sanlam Group Embedded value of covered businessat 30 June 2009
Group Financial Review 47SANLAM INTERIM RESULTS 2009
48 Group Financial Review SANLAM INTERIM RESULTS 2009
Sanlam Group Change in embedded value of covered businessfor the six months ended 30 June 2009
Six months Reviewed
Six months Reviewed
Full yearAudited
2009 2008 2008
R million Note TotalValue ofin-force
Cost of capital
Adjustednet worth Total
Value ofin-force
Cost of capital
Adjustednet worth Total
Embedded value of covered business at beginning of the period
28 591
15 939
(2 361)
15 013
28 432
16 316
(2 594)
14 710
28 432
Value of new business 2 243 882 (37) (602) 250 777 (36) (491) 612Net earnings from existing covered business 1 145 (307) 83 1 369 1 200 (188) 112 1 276 1 885
Expected return on value of in-force business 839 771 68 – 886 857 29 – 1 838
Expected transfer of profit to adjusted net worth – (1 155) – 1 155 – (1 070) – 1 070 –Operating experience variances 3 289 102 (1) 188 250 71 6 173 278Operating assumption changes 4 17 (25) 16 26 64 (46) 77 33 (231)
Expected investment return on adjusted net worth 546 – – 546 588 – – 588 1 180
Embedded value earnings from operations 1 934 575 46 1 313 2 038 589 76 1 373 3 677Economic assumption changes 5 (1 020) (526) (487) (7) (705) (532) (157) (16) 356Tax changes – change in corporate tax rates – – – – 196 191 5 – 215Investment variances – value of in-force 176 88 41 47 (234) (288) 54 – (1 435)
Investment variances – investment return on adjusted net worth (209) – – (209) (368) – – (368) (1 864)
Exchange rate movements (96) (95) 7 (8) 103 113 (10) – 23Net project expenses 6 (15) – – (15) (32) – – (32) (53)
Embedded value earnings from covered business 770 42 (393) 1 121 998 73 (32) 957 919Acquired value of in-force 228 72 (28) 184 – – – – –Change in utilisation of capital diversification (292) – – (292) (175) – – (175) 197Transfers from covered business (1 524) – – (1 524) (637) – – (637) (957)
Embedded value of covered business at end of the period 27 773 16 053 (2 782) 14 502 28 618 16 389 (2 626) 14 855 28 591
Analysis of earnings from covered businessSanlam Personal Finance 446 (157) (235) 838 490 (158) 28 620 453Sanlam Developing Markets 86 11 6 69 180 63 (7) 124 659Sanlam UK 4 (2) 3 3 139 54 (8) 93 (36)Sanlam Employee Benefits 234 190 (167) 211 189 114 (45) 120 (157)
Embedded value earnings from covered business 770 42 (393) 1 121 998 73 (32) 957 919
(1) June 2008 comparative information has been restated to allocate the change in minority shareholders’ interest to the individual line items. All line items are accordingly presented net of minority shareholders’ interest.
Group Financial Review 49SANLAM INTERIM RESULTS 2009
Six months Reviewed
Six months Reviewed
Full yearAudited
2009 2008 2008
R million Note TotalValue ofin-force
Cost of capital
Adjustednet worth Total
Value ofin-force
Cost of capital
Adjustednet worth Total
Embedded value of covered business at beginning of the period
28 591
15 939
(2 361)
15 013
28 432
16 316
(2 594)
14 710
28 432
Value of new business 2 243 882 (37) (602) 250 777 (36) (491) 612Net earnings from existing covered business 1 145 (307) 83 1 369 1 200 (188) 112 1 276 1 885
Expected return on value of in-force business 839 771 68 – 886 857 29 – 1 838
Expected transfer of profit to adjusted net worth – (1 155) – 1 155 – (1 070) – 1 070 –Operating experience variances 3 289 102 (1) 188 250 71 6 173 278Operating assumption changes 4 17 (25) 16 26 64 (46) 77 33 (231)
Expected investment return on adjusted net worth 546 – – 546 588 – – 588 1 180
Embedded value earnings from operations 1 934 575 46 1 313 2 038 589 76 1 373 3 677Economic assumption changes 5 (1 020) (526) (487) (7) (705) (532) (157) (16) 356Tax changes – change in corporate tax rates – – – – 196 191 5 – 215Investment variances – value of in-force 176 88 41 47 (234) (288) 54 – (1 435)
Investment variances – investment return on adjusted net worth (209) – – (209) (368) – – (368) (1 864)
Exchange rate movements (96) (95) 7 (8) 103 113 (10) – 23Net project expenses 6 (15) – – (15) (32) – – (32) (53)
Embedded value earnings from covered business 770 42 (393) 1 121 998 73 (32) 957 919Acquired value of in-force 228 72 (28) 184 – – – – –Change in utilisation of capital diversification (292) – – (292) (175) – – (175) 197Transfers from covered business (1 524) – – (1 524) (637) – – (637) (957)
Embedded value of covered business at end of the period 27 773 16 053 (2 782) 14 502 28 618 16 389 (2 626) 14 855 28 591
Analysis of earnings from covered businessSanlam Personal Finance 446 (157) (235) 838 490 (158) 28 620 453Sanlam Developing Markets 86 11 6 69 180 63 (7) 124 659Sanlam UK 4 (2) 3 3 139 54 (8) 93 (36)Sanlam Employee Benefits 234 190 (167) 211 189 114 (45) 120 (157)
Embedded value earnings from covered business 770 42 (393) 1 121 998 73 (32) 957 919
(1) June 2008 comparative information has been restated to allocate the change in minority shareholders’ interest to the individual line items. All line items are accordingly presented net of minority shareholders’ interest.
50 Group Financial Review SANLAM INTERIM RESULTS 2009
Sanlam GroupValue of new businessfor the six months ended 30 June 2009
Six months Reviewed
Full yearAudited
R million Note 2009 2008 2008
Value of new business (at point of sale):
Gross value of new business 321 332 787Sanlam Personal Finance 154 178 419Sanlam Developing Markets 156 128 343Sanlam UK 1 6 6Sanlam Employee Benefits 10 20 19
Cost of capital (45) (42) (89)Sanlam Personal Finance (19) (18) (33)Sanlam Developing Markets (20) (15) (41)Sanlam UK (1) (3) (5)Sanlam Employee Benefits (5) (6) (10)
Value of new business 276 290 698Sanlam Personal Finance 135 160 386Sanlam Developing Markets 136 113 302Sanlam UK – 3 1Sanlam Employee Benefits 5 14 9
Value of new business attributable to:Shareholders’ fund 2 243 250 612
Sanlam Personal Finance 133 157 377Sanlam Developing Markets 105 76 225Sanlam UK – 3 1Sanlam Employee Benefits 5 14 9
Minority shareholders’ interest 33 40 86Sanlam Personal Finance 2 3 9Sanlam Developing Markets 31 37 77Sanlam UK – – – Sanlam Employee Benefits – – –
Value of new business 276 290 698
Geographical analysis:South Africa 196 198 507Africa 77 85 181Other international 3 7 10
Value of new business 276 290 698
Group Financial Review 51SANLAM INTERIM RESULTS 2009
Six months Reviewed
Full yearAudited
R million 2009 2008 2008
Analysis of new business profitability:
Before minorities:Present value of new business premiums 11 469 12 141 26 033
Sanlam Personal Finance 7 488 8 089 17 371Sanlam Developing Markets 2 814 2 330 5 332Sanlam UK 463 836 1 484Sanlam Employee Benefits 704 886 1 846
New business margin 2,41% 2,39% 2,68%Sanlam Personal Finance 1,80% 1,98% 2,22%Sanlam Developing Markets 4,83% 4,85% 5,66%Sanlam UK 0,00% 0,36% 0,07%Sanlam Employee Benefits 0,71% 1,58% 0,49%
After minorities:Present value of new business premiums 10 906 11 501 24 459
Sanlam Personal Finance 7 395 8 020 17 080Sanlam Developing Markets 2 344 1 759 4 049Sanlam UK 463 836 1 484Sanlam Employee Benefits 704 886 1 846
New business margin 2,23% 2,17% 2,50%Sanlam Personal Finance 1,80% 1,96% 2,21%Sanlam Developing Markets 4,48% 4,32% 5,56%Sanlam UK 0,00% 0,36% 0,07%Sanlam Employee Benefits 0,71% 1,58% 0,49%
52 Group Financial Review SANLAM INTERIM RESULTS 2009
1. Value of in-force sensitivity analysis
Gross valueof in-force
businessCost ofcapital
Net valueof in-force
businessChange from
base value
R million R million R million %
Base value 16 053 (2 782) 13 271
• Risk discount rate increase by 1% 15 108 (3 382) 11 726 (12)
2. Value of new business sensitivity analysis
Gross valueof new
businessCost ofcapital
Value ofnew business
Change frombase value
R million R million R million %
Base value 280 (37) 243
• Risk discount rate increase by 1% 241 (43) 198 (19)
3. Operating experience variances
Six months ReviewedFull yearAudited
R million 2009 2008 2008
Risk experience 167 90 307Investment guarantee reserve 64 24 (117)Working capital and other 58 136 88Total operating experience variances 289 250 278
4. Operating assumption changes
Six months ReviewedFull yearAudited
R million 2009 2008 2008
Mortality and morbidity 34 (13) (196)Persistency (6) (34) (31)Modelling improvements and other (11) 111 (4)Total operating assumption changes 17 64 (231)
5. Economic assumption changes
Six months ReviewedFull yearAudited
R million 2009 2008 2008
Investment yields and risk premiums (707) (710) 363Long-term asset mix assumptions (313) 5 (7)Total economic assumption changes (1 020) (705) 356
6. Net project expensesNet project expenses relate to once-off expenditure on the Group’s distribution platform that has not been allowed for in the
embedded value assumptions.
Notes to the embedded value of covered businessfor the six months ended 30 June 2009
Group Financial Review 53SANLAM INTERIM RESULTS 2009
7. Economic assumptions
June Reviewed
DecemberAudited
% 2009 2008 2008
Gross investment return, risk discount rate and inflation
Sanlam lifePoint used on the relevant yield curve 9 year 9 year 9 yearFixed-interest securities 9,2 10,7 7,3Equities and offshore investments 12,7 14,2 10,8Hedged equities 9,7 11,2 7,8Property 10,2 11,7 8,3Cash 8,2 9,7 6,3Return on required capital 10,0 12,2 8,8Inflation rate 6,2 7,7 4,3Risk discount rate 11,7 13,2 9,8
SDM LimitedPoint used on the relevant yield curve 6 year 6 year 6 year Fixed-interest securities 8,7 11,0 7,3Equities and offshore investments 12,2 14,5 10,8Hedged equities n/a n/a n/aProperty 9,7 12,0 8,3Cash 7,7 10,0 6,3Return on required capital 10,0 12,3 8,6Inflation rate 5,7 8,0 4,3Risk discount rate 11,2 13,5 9,8
Merchant investorsPoint used on the relevant yield curve 15 year 15 year 15 year Fixed-interest securities 4,1 5,2 3,7Equities and offshore investments 7,3 8,4 7,0Hedged equities 7,3 8,4 7,0Property 7,3 8,4 7,0Cash 4,1 5,2 3,7Return on required capital 4,1 5,2 3,7Inflation rate 3,3 4,5 2,9Risk discount rate 7,8 8,9 7,5
Botswana Life InsuranceFixed-interest securities 10,5 10,5 10,5Equities and offshore investments 14,0 14,0 14,0Hedged equities n/a n/a n/aProperty 11,5 11,5 11,5Cash 9,5 9,5 9,5Return on required capital 10,6 10,6 10,6Inflation rate 7,5 7,5 7,5Risk discount rate 14,0 14,0 14,0
54 Group Financial Review SANLAM INTERIM RESULTS 2009
Notes to the embedded value of covered businessfor the six months ended 30 June 2009 continued
7. Economic assumptions (continued)
June Reviewed
DecemberAudited
% 2009 2008 2008
Asset mix for assets supporting required capital
Sanlam lifeEquities 34 44 44Hedged equities 13 13 13Property 3 3 3Fixed-interest securities 15 25 25Cash 35 15 15
100 100 100
SDM LimitedEquities 50 50 50Hedged equities – – – Property – – – Fixed-interest securities – – – Cash 50 50 50
100 100 100
Merchant investorsEquities – – – Hedged equities – – – Property – – – Fixed-interest securities – – – Cash 100 100 100
100 100 100
Botswana Life InsuranceEquities 15 15 15Hedged equities – – –Property 10 10 10Fixed-interest securities 25 25 25Cash 50 50 50
100 100 100
Group Financial Review 55SANLAM INTERIM RESULTS 2009
Contents
Statement of financial position 56
Statement of comprehensive income 57
Statement of changes in equity 58
Cash flow statement 59
Notes to the financial statements 60
Group Financial Statementsfor the six months ended 30 June 2009
56 Group Financial Review SANLAM INTERIM RESULTS 2009
Statement of financial positionat 30 June 2009
R millionReviewed
June 2009December
Audited 2008
AssetsProperty and equipment 376 382 Owner-occupied properties 651 652 Goodwill 2 668 2 623 Other intangible assets 50 – Value of business acquired 1 205 1 309 Deferred acquisition costs 2 047 1 970 Long-term reinsurance assets 493 506 Investments 262 316 268 530
Properties 15 490 15 981 Equity-accounted investments 1 314 1 317 Equities and similar securities 119 926 120 284 Public sector stocks and loans 46 460 50 531 Debentures, insurance policies, preference shares and other loans 34 763 35 309 Cash, deposits and similar securities 44 363 45 108
Deferred tax 572 712 Short-term insurance technical assets 2 665 2 250 Working capital assets 34 981 38 974
Trade and other receivables 26 396 28 908 Cash, deposits and similar securities 8 585 10 066
Total assets 308 024 317 908
Equity and liabilitiesCapital and reserves
Share capital and premium 23 23 Treasury shares (3 359) (4 142) Other reserves 9 100 9 312 Retained earnings 21 299 22 458
Shareholders’ fund 27 063 27 651 Minority shareholders’ interest 2 370 2 596
Total equity 29 433 30 247 Long-term policy liabilities 225 111 229 268
Insurance contracts 116 101 120 879 Investment contracts 109 010 108 389
Term finance 6 471 6 763 Margin business 2 882 2 830 Other interest-bearing liabilities 3 589 3 933
External investors in consolidated funds 9 273 9 822 Cell owners’ interest 475 447 Deferred tax 303 440 Short-term insurance technical provisions 8 700 8 229 Working capital liabilities 28 258 32 692
Trade and other payables 25 428 29 325 Provisions 1 541 1 453 Taxation 1 289 1 914
Total equity and liabilities 308 024 317 908
Group Financial Review 57SANLAM INTERIM RESULTS 2009
R million NoteReviewed
2009Reviewed
2008
Net income 15 854 6 572 Financial services income 15 034 13 816 Reinsurance premiums paid (1 765) (1 624) Reinsurance commission received 147 195 Investment income 8 863 8 250 Investment surpluses (6 519) (14 212) Finance cost – margin business (114) (126) Change in fair value of external investors’ liability 208 273
Net insurance and investment contract benefits and claims (7 513) 1 446Long-term insurance and investment contract benefits (3 219) 5 205 Short-term insurance claims (5 776) (5 107) Reinsurance claims received 1 482 1 348
Expenses (5 383) (5 173) Sales remuneration (2 127) (1 987) Administration costs (3 256) (3 186)
Impairments (62) (135) Amortisation of value of business acquired (37) (31) Net operating result 2 859 2 679 Equity-accounted earnings (5) 63 Finance cost – other (164) (160) Profit before tax 2 690 2 582 Taxation (853) (528)
Shareholders’ fund (613) (419) Policyholders’ fund (240) (109)
Profit from continuing operations 1 837 2 054 Discontinued operations – (63) Profit for the period 1 837 1 991 Other comprehensive income
Movement in foreign currency translation reserve (383) 587Comprehensive income for the period 1 454 2 578
Allocation of comprehensive incomeProfit for the period 1 837 1 991Shareholders’ fund 1 606 1 852 Minority shareholders’ interest 231 139 Comprehensive income for the period 1 454 2 578Shareholders’ fund 1 303 2 313 Minority shareholders’ interest 151 265
Earnings attributable to shareholders of the company (cents)Profit for the year
Basic earnings per share 1 81,6 91,4Diluted earnings per share 1 79,7 89,5
Earnings attributable to shareholders of the company from continuing operations (cents):
Profit for the yearBasic earnings per share 1 81,6 93,1 Diluted earnings per share 1 79,7 91,2
Statement of comprehensive incomefor the six months ended 30 June 2009
58 Group Financial Review SANLAM INTERIM RESULTS 2009
R millionReviewed
2009Reviewed
2008
Shareholders’ fundBalance at beginning of the period 27 651 29 334 Comprehensive income 1 303 2 313
Profit for the period 1 606 1 852 Other comprehensive income: movement in foreign currency translation reserve (303) 461
Net movement in treasury shares 633 ( 684) Net realised investment surpluses on treasury shares (146) (159) Cost of net treasury shares disposed/(acquired) (1) 779 (525)
Share-based payments 45 49 Dividends paid (2) (1 954) (1 907) Shares cancelled (615) (1 439) Balance at end of the period 27 063 27 666
Minority shareholders’ interestBalance at beginning of the period 2 596 2 220 Comprehensive income 151 265
Profit for the period 231 139 Other comprehensive income: movement in foreign currency translation reserve (80) 126
Net movement in treasury shares 9 69 Net realised investment surpluses on treasury shares (13) 47 Cost of net treasury shares disposed (1) 22 22
Share-based payments 9 7 Dividends paid (279) (245) Acquisitions, disposals and other movements in minority interests (116) 168 Balance at end of the period 2 370 2 484
Shareholders’ fund 27 651 29 334 Minority shareholders’ interest 2 596 2 220 Total equity at beginning of the period 30 247 31 554
Shareholders’ fund 27 063 27 666 Minority shareholders’ interest 2 370 2 484 Total equity at end of the period 29 433 30 150
(1) Comprises movement in cost of shares held by subsidiaries and the share incentive trust.(2) Dividend of 98 cents per share paid during 2009 (2008: 93 cents per share) in respect of the 2008 financial year.
Statement of changes in equityfor the six months ended 30 June 2009
Group Financial Review 59SANLAM INTERIM RESULTS 2009
Cash flow statementfor the six months ended 30 June 2009
R millionReviewed
2009Reviewed
2008
Cash flow from operating activities 357 5 746 Cash flow from investment activities (2 411) 4 679 Cash flow from financing activities (147) (1 881)
Net (decrease)/increase in cash and cash equivalents (2 201) 8 544 Cash, deposits and similar securities at beginning of the period 55 145 51 309
Cash, deposits and similar securities at end of the period 52 944 59 853 Non-current assets classified as held for sale – (915)
Cash, deposits and similar securities at end of the period – continuing operations 52 944 58 938
Cash flows relating to discontinued operationsIncluded in the above are the following cash flows from discontinued operations:Cash flow from operating activities – (215) Cash flow from investment activities – 318 Cash flow from financing activities – – Net increase in cash and cash equivalents – 103
Cash, deposits and similar securities at beginning of the period – discontinued operations
– 812
Cash, deposits and similar securities at end of the period – discontinued operations – 915
60 Group Financial Review SANLAM INTERIM RESULTS 2009
1. Earnings per share
For basic earnings per share the weighted average number of ordinary shares is adjusted for the treasury shares held by
subsidiaries. Basic earnings per share is calculated by dividing earnings by the adjusted weighted average number of shares
in issue. For diluted earnings per share the weighted average number of ordinary shares is adjusted for the shares not yet
issued under the Sanlam Share Incentive Scheme, treasury shares held by subsidiaries and the conversion of deferred
shares. Diluted earnings per share is calculated by dividing earnings by the adjusted diluted weighted average number of
shares in issue. Refer to page 43 for normalised earnings per share, which is based on the economic earnings attributable to
the shareholders’ fund, and should be used when evaluating the Group’s economic performance.
Reviewed 2009
Reviewed 2008
cents cents
Basic earnings per share:Headline earnings 84,6 96,5 Profit attributable to shareholders’ fund 81,6 91,4 Diluted earnings per share:Headline earnings 82,6 94,5 Profit attributable to shareholders’ fund 79,7 89,5 Basic earnings per share for continuing operations:Profit attributable to shareholders’ fund 81,6 93,1 Diluted earnings per share for continuing operations:Profit attributable to shareholders’ fund 79,7 91,2
R million R millionAnalysis of earnings:Profit attributable to shareholders’ fund 1 606 1 852 Less: Equity-accounted non-headline earnings – (32) Plus: Impairments 58 135 Impairments 60 135 Minority shareholders’ interest (2) –
Headline earnings 1 664 1 955
Headline earnings include re-measurements of investment properties, which are largely attributable to policyholder funds.
Analysis of earnings from continuing operations:Profit attributable to shareholders’ fund 1 606 1 852 Discontinued operations – 35
Loss from discontinued operations – 74 Tax on loss from discontinued operations – (11) Minority shareholders’ interest – (28)
Profit attributable to shareholders’ fund from continuing operations 1 606 1 887
million millionNumber of shares:Number of ordinary shares in issue at beginning of period 2 190,1 2 303,6 Less: Weighted number of shares cancelled (20,1) (31,8) Less: Weighted Sanlam shares held by subsidiaries (including policyholders) (202,0) (245,6)Adjusted weighted average number of shares for basic earnings per share 1 968,0 2 026,2 Add: Weighted conversion of deferred shares 20,0 13,1 Add: Total number of shares and options 37,6 43,2 Less: Number of shares (under option) that would have been issued at fair value (10,5) (14,4)Adjusted weighted average number of shares for diluted earnings per share 2 015,1 2 068,1
Notes to the financial statements for the six months ended 30 June 2009
Group Financial Review 61SANLAM INTERIM RESULTS 2009
2. Reconciliation of segmental information
R millionReviewed
2009Reviewed
2008
Segment financial services income (per shareholders’ fund information) 13 808 12 880 Sanlam Personal Finance 3 184 3 090 Sanlam Developing Markets 1 794 1 504 Sanlam UK 182 182 Sanlam Employee Benefits 1 056 1 006 Short-term Insurance 6 415 5 829 Sanlam Investments 928 1 097 Sanlam Capital Markets 162 97 Corporate, consolidation and other 87 75
IFRS adjustments 1 226 936 Total financial services income 15 034 13 816
Segment result (per shareholders’ fund information after tax and minorities) 1 547 1 151 Sanlam Personal Finance 855 (207) Sanlam Developing Markets 46 46 Sanlam UK (41) 70 Sanlam Employee Benefits 194 122 Short-term Insurance 153 33 Sanlam Investments 262 249 Sanlam Capital Markets 59 34 Corporate, consolidation and other 19 804
Reverse minority shareholders’ interest included in segment result 231 139 Fund transfers 59 701 Total profit for the period 1 837 1 991
Additional segmental information is provided in the Shareholders’ fund information (refer pages 30 to 37).
3. Pension and Retirement Fund Investigation
Shareholders are referred to the ongoing investigations by the Financial Services Board (FSB) and the National Prosecuting
Authorities into alleged fraud within a number of pension and retirement funds. The events in question took place in the mid
to late 1990’s. Sanlam acted as administrator for three of these funds at the time and has been supporting the authorities
since their investigation started in 2004.
Sanlam in 2006 made a payment in good faith to the funds, representing the benefit, plus interest, that Sanlam indirectly
received through the sale of a company that previously formed part of the Sanlam group, which was the controlling
shareholder of the participating employers of three of the funds.
The curator of the funds subsequently issued civil claims against a number of parties, including Sanlam, for the alleged
losses suffered by the funds. Sanlam and the curator of the funds are involved in litigation in respect of the merits of his
claims against Sanlam. Sanlam was not involved in fraudulent or illegal activities relating to these cases.
We are confident that, inter alia through the involvement of the FSB, an amicable resolution to this matter will be reached in
due course.
4. Contingent Liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2008 annual report. The circumstances surrounding
these contingent liabilities remained materially unchanged.
5. Subsequent Events
No material facts or circumstances have arisen between the dates of the balance sheet and this report that affect the
financial position of the Sanlam Group at 30 June 2009 as reflected in these financial statements.
62 Group Financial Review SANLAM INTERIM RESULTS 2009
Group secretary
Johan Bester
Registered office
2 Strand Road, Bellville 7530, South Africa
Telephone +27 21 947-9111
Fax +27 21 947-3670
Postal address
PO Box 1, Sanlamhof 7532, South Africa
Registered name: Sanlam Limited
(Registration number 1959/001562/06)
JSE share code: SLM
NSX share code: SLA
ISIN number: ZAE000070660
Incorporated in South Africa
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg 2001,
South Africa
PO Box 61051, Marshalltown 2107, South Africa
Tel +27 (0)11 373-0000
Fax +27 (0)11 688-5200
www.sanlam.co.za
Directors
RC Andersen (Chairman), PT Motsepe (Deputy Chairman), J van Zyl (1) (Group Chief Executive), MMM Bakane-Tuoane,
AD Botha, AS du Plessis, FA du Plessis, MV Moosa, JP Möller (1), SA Nkosi, I Plenderleith (2), GE Rudman, RV Simelane,
DK Smith, ZB Swanepoel, PL Zim
(1) Executive(2) British
Administration
Cluster Reviews 1SANLAM INTERIM RESULTS 2009
RETAIL CLUSTER
Cluster Reviews 3SANLAM INTERIM RESULTS 2009
Who we are
We provide clients in the middle, affluent and self-
employed markets in South Africa and Namibia with a
comprehensive range of appropriate and competitive
financial services solutions designed to facilitate their
long-term wealth creation, protection and niche financing
needs.
Engineering these solutions around client needs and
delivering the solutions through credible financial advice
enables us to grow SPF on a sustainable basis, thereby
maximising shareholder value while building long-term
relationships with our clients.
We achieve this through our people – we foster a culture of
passion for our clients and place great emphasis on
diversity and innovation. At SPF we strive to be an
employer of choice.
SPF provides the following financial services and advice to
clients in the middle, affluent, and self-employed and
professional markets:
Client protection
– Life insurance, short-term insurance and medical
cover
Providing for retirement
Providing for non-retirement savings needs
– Endowments, savings accounts and fixed deposits
Protecting and growing wealth
– Linked investment solutions
Managing assets in retirement
– Flexible investment-linked annuities
– Guaranteed annuities
Ensuring transfer of wealth between generations
– Estate and trust services
Transactional requirements
– Debit card
Financing and credit needs
– Home solutions
– Personal loans
Our competitive advantage is our established client centric
strategy, which is driven by focused market segmentation
and diversification of our financial services solutions, as
well as our extensive distribution footprint.
Sanlam Personal Finance
4 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam Personal Finance
R million 1H09 %∆
Net operating profit 691 2
New business flows
– SA recurring 487 (13)
– SA single 9 727 (12)
– Non-SA 4 486 5
PVNB premiums* 7 488 (7)
VNB* 135 (16)
Margin* 1,80% vs 1,98%
Annualised ROGEV 5,6%
* Excludes non-life business
Group Profile and Shareholding Structure
South African operations %
Middle market and self-employed focus
Sanlam Individual Life division 100 Life insurance
Sanlam Home Loans 50 Home loan joint venture with Absa
Multi Data 100 Electronic money transfer
Sanlam Trust 100 Estate and trust services
Sanlam Liquid(1) 100 Debit card and savings facility
Anglo African Finance 65 Niche trade and bridge finance
Sanlam Health Management 100 Medical scheme services
Sanlam Linked Investments 100 Linked product provider
Affluent market focus
Glacier(2) 100 Financial services for affluent market
(1) Previously a joint venture with Sanlam Collective Investments. From 2009 it is wholly-owned.(2) Glacier will also source solutions from the middle market and self-employed operations above.
Non-South African operations %
Sanlam Namibia Holdings (SNH) 54 Financial services in Namibia
Sanlam Life Namibia 100 Closed fund business in Namibia
Sanlam Personal Finance continued
Cluster Reviews 5SANLAM INTERIM RESULTS 2009
Sanlam Personal Finance continued
Analysis of Operating Profit (per Profit Source)
June 2009 R million
June 2008 R million
Admin income 131 147
Risk income 248 194
Market Related income 514 554
Net interest income (working capital & loan business) 216 238
Other 298 316
Operating profit before tax & minorities 892 895
Tax & minorities (201) (217)
Operating profit after tax & minorities 691 678
Admin Ratio 35,9% 35,1%
Analysis of Operating Profit (per Business Unit)
June 2009 R million
June 2008 R million
SA Life 736 736
SA Non-life 107 106
Glacier 60 61
Other 47 45
Non-SA 49 53
Operating profit before tax & minorities 892 895
6 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam Personal Finance continued
Administration Costs (Rm)
Second HalfFirst Half
500
600
700
800
900
1 000
1 100
2002 2003 2004 2005 2006 2007 2008 2009*
961
906
846
882
937
1023
1062
787818
757779
808
859
905 897
* Excludes the costs associated with new ventures of R55m (Sanlam Healthcare Management and Sanlam Home Solutions)
Administration Cost Ratio (%)
30%
35%
40%
45%
50%
44,1
42,1
38,4 38,136,8
35,6 35,334,6
2002 2003 2004 2005 2006 2007 1H2009*2008
*Admin ratio excludes new ventures (Sanlam Healthcare Management and Sanlam Home Solutions)
Cluster Reviews 7SANLAM INTERIM RESULTS 2009
Persistency: Number of Lapses, Surrenders & Fully Paid-Up Policies as % of In Force
Second HalfFirst Half
0,0
1,0
2,0
3,0
4,0
5,0
4,24,0
3,8 3,7 3,6
4,2
4,8
3,9 3,93,6
3,4
3,8 3,9
2003 2004 2005 2006 2007 2008 2009
Second HalfFirst Half
SA Surrender Benefits Paid (Rm)
Second HalfFirst Half
500
1 400
1 600
1 800
2 000
2 200
2 400
2 6002 419
1 374
1 823
1 668
2 104
1 963
2 213
2 378
1 707
1 367
1 535
1 678
1 790
1 962
1 777
1 200
1 000
2002 2003 2004 2005 2006 2007 20092008
Total Benefits Paid (SA)
June 2009 R million
June 2008 R million
Total life benefits 8 804 9 351
Death & disability benefits 1 015 985
Maturity benefits 4 166 4 757
Life & term annuities 1 762 1 625
Surrenders 1 777 1 962
Other 84 22
Non-life benefits (linked) 3 951 4 440
Total benefits paid 12 755 13 791
Sanlam Personal Finance continued
8 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam Personal Finance continued
SA Single Premiums (life & non-life) (%)
SA Total Premiums (life & non-life) (%)
ABSA BrokersDirect and otherOther BrokersAdvisor
2004 2005 2006 2007 1H20090%
10%
20%
30%
40%
50%
70%
60%
2008
8,011,5
8,56,0
9,8
3,8
9,4 8,7 9,06,9 6,9 6,2
40,0 38,541,5
45,442,5
51,3
42,6 41,3 41,0 41,7 40,838,7
ABSA BrokersDirect and otherOther BrokersAdvisor
2004 2005 2006 2007 1H20090%
10%
20%
30%
40%
50%
70%
60%
2008
8,011,6
9,06,6
9,6
4,2
8,8 8,2 8,56,6 6,6 5,9
39,6 38,040,4
44,142,0
49,9
43,6 42,2 42,1 42,7 41,840,0
SA New Recurring Premiums (%)
ABSA BrokersDirect and otherOther BrokersAdvisor
0%
10%
20%
30%
40%
50%
70%
2004 2005 2006 2007 1H2009
60%
7.5
11.7 11.9 13.3
7.2 8.6
2.8 3.5 3.6 3.0 3.25.3
36.132.9
30.5 31.5
36.6
31.2
53.651.9
54.052.2 53.0
54.9
2008
Cluster Reviews 9SANLAM INTERIM RESULTS 2009
SA New Business Recurring Premiums (Rm)
SA Single Premiums (life vs non-life) (Rm)
0
200
300
700
2004 2005 2006 2007 20092003
600
500
400
2008
430 413458
523
613 609
417388 375
422
544 556
487
Second HalfFirst Half
0
2 000
6 000Life Non-Life
1 000
3 000
5 000
4 000
1608
27352572
3823
4449
5686
5118
30293186
2903
35633871
5315
4609
1H2004 1H2005 1H2006 1H2007 1H20091H2003 1H2008
Sanlam Personal Finance continued
Cluster Reviews 11SANLAM INTERIM RESULTS 2009
Who we are
Sanlam Developing Markets (SDM) provides affordable
financial services solutions to the entry-level market in
South Africa and all market segments in other developing
markets where Sanlam has established a presence,
namely Botswana, Kenya, Tanzania, Zambia, Ghana and
India.
In the three years since our launch, the emphasis has
been on establishing a diverse mix of operations across the
African continent and in India with the aim of ensuring
sustainable delivery and growth across the various
businesses that make up SDM.
Our client-centric approach is aimed at protecting and
growing the financial interests of our clients across all our
markets by providing superior financial solutions.
The success of SDM can largely be ascribed to our
approach of partnering with reputable and established
operations in developing markets where potential for
growth has been identified. Our preference for
partnerships rather than outright acquisitions has enabled
us to allocate our capital resources and expertise to
support these partnerships by strengthening their
operational base and distribution channels to enable
further growth.
Our competitive advantage remains a team that is
committed to implement and deliver simple but focused
strategies and plans, underpinned by a strong Sanlam
brand, distribution network and claims management skills.
Sanlam Developing Markets
12 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam Developing Markets
R million 1H09 %∆
Net operating profit 85 9
New business flows*
– SA recurring370 5
– Non-SA 681 24
PVNB premiums 2 814 21
VNB 136 20
Margin 4,83% vs 4,85%
Annualised ROGEV 6,4%
*Excludes white labels and non-core businesses
Group Profile and Shareholding Structure
South Africa Rest of Africa Other international
Sanlam Sky(100%)
Botswana Life(54%)
Shriram Life India(26%)
Channel Life(100%)(i)
Pan Africa Life Kenya(50%)
Safrican(85%)
ELAC Ghana(49%)
African Life Tanzania(65%)
African Life Zambia(70%)
Alfinanz (100%) – Application Service Provider(i) Actual holding of 99.98% (still a small component of minority interests)
Sanlam Developing Markets continued
Cluster Reviews 13SANLAM INTERIM RESULTS 2009
Operating Profit for the Six Months Ended 30 June 2009
Operating profit
before tax R million
Tax R million
Operating profit
after tax R million
Minorities R million
June 2009 Operating
profit after tax & minorities
R million
June 2008 Operating
profit after tax & minorities
R million
RSA 50 (1) 49 (1) 48 34
Africa 97 (19) 78 (36) 42 46
Other International * (5) - (5) - (5) (2)
Total 142 (20) 122 (37) 85 78
* Sanlam’s share only
New Business Recurring Premiums for the Six Months Ended 30 June 2009
RSA R million
Africa R million
* Other International
R million
June 2009 Total
R million
June 2008 Total
R million
Brokers 147 42 - 189 185
Agents 115 123 58 296 229
Bancassurance - 18 - 18 1
Direct 5 12 - 17 45
Other** 103 - - 103 79
Total New business 370 195 58 623 539
* Sanlam’s share only** Group risk & Group benefits
New Business Single Premiums for the Six Months Ended 30 June 2009
RSA R million
Africa R million
* Other International
R million
June 2009 Total
R million
June 2008 Total
R million
Brokers 258 33 - 291 162
Agents - 7 18 25 101
Bancassurance - 124 - 124 84
Direct - - - - -
Other** 7 246 - 253 328
Total New business 265 410 18 693 675
* Sanlam’s share only** Brokers-Annuity (BIHL) & Group benefits
Sanlam Developing Markets continued
Cluster Reviews 15SANLAM INTERIM RESULTS 2009
Who we are
In June last year, Sanlam announced the reorganisation of
its interests in the United Kingdom, to be consolidated
within a single holding company, Sanlam UK Limited, in
2009
The Sanlam UK cluster therefore consists of subsidiary
companies Merchant Investors (100% owned), Principal
(90% owned) and Buckles (60% owned). The portfolio is
further complemented by Sanlam’s minority holdings in
Intrinsic, Nucleus and the Punter Southall Group. The
minority interests were previously part of Sanlam
Independent Financial Services, which has been phased
out as a business unit of the Sanlam Group.
The aim of consolidating our interests in the UK is to
ensure the co-ordinated development of our growing
portfolio of financial services businesses operating in
distribution, product packaging, administration and asset
management services. In addition, this initiative will
position Sanlam to further develop quality intermediary
relationships in a changing retail financial services
landscape in the UK.
Sanlam UK is about creating a framework that will enable
each of our businesses to thrive through the linking of
business opportunities, sharing of knowledge and
experience, and having access to the necessary capital for
growth, as opposed to being an additional operating entity
with centralised costs.
Our competitive advantage lies in our “newcomer” status
– there is no historical conduct that prohibits us from
taking a fresh partnering approach to the Independent
Financial Adviser (IFA) market in the UK and no material
legacy business that could lead to conflicts or vested
interests.
We also have the potential to move faster than other
players to capture and benefit from current and emerging
opportunities, since we are backed by the Sanlam Group
and its resources and because the basic building blocks
are already in place.
Sanlam UK
16 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam UKcontinued
Sanlam UK
R million 1H09 %∆
Net operating profit 13 (65)
New business flows
– Life insurance 451 (44)
– Investment 504 –
PVNB premiums 463 (45)
VNB – –
Margin 0,00 % vs 0,36%
Annualised ROGEV (14,3%)
Group profile and shareholding structure
Investment Shareholding Description
Merchant Investors 100% Bristol-based niche player in the affluent life and specialist pension markets
Principal 89% Leading independent investment management company specialising in discretionary portfolio management
Buckles 60% Largest independent financial adviser practice based in Wales
Nucleus 42,5% Linked investment product platform controlled by independent financial advisers
Intrinsic 28% Multi-tied financial intermediary business consisting of financial planning and mortgage advisory divisions
Punter Southall Group 26% UK-based financial services advisory group
Cluster Reviews 17SANLAM INTERIM RESULTS 2009
Key performance measurements – 30 June 2009
Total controlled entities1
Total - associates2 Sanlam UK Total
Funds under Management (£bn) 2009 2,3 1,6 3,9
2008 1,6 1,4 3,0
Funds under Administration (£bn) 2009 0,0 0,3 0,3
2008 0,0 0,1 0,1
Number of Advisers 2009 48 1 654 1 702
2008 42 1 502 1 544
Flows
- New business (£m) 2009 70 250 320
2008 54 262 316
- Total (£m) 2009 92 250 342
2008 75 262 337
- Net flows (£m) 2009 (8) 79 71
2008 8 93 101
- VNB (Life Insurance) (£m) 2009 0,0 0,0 0,0
2008 0,3 0,0 0,3
Operating Profit (£m) 2009 1,5 (0,1) (0,4) 1,0
2008 1,7 0,7 0 2,4
(1) Total controlled entities comprise of Merchant Investors (100%), Principal (89%) and Buckles (60%)(2) Total associates comprise of Punter Southall Group (26%), Intrinsic (28%) and Nucleus (42.5%)
Sanlam UKcontinued
19 Cluster Reviews SANLAM INTERIM RESULTS 2009
INSTITUTIONAL CLUSTER
Cluster Reviews 21SANLAM INTERIM RESULTS 2009
Who we are
Sanlam Investments is one of the core clusters within the
Sanlam Group and consists of 15 businesses working
collaboratively to offer individual and institutional clients
access to a comprehensive range of specialised investment
and risk management expertise spanning local and
international asset management, private equity, hedge
funds, employee benefits, property investments and more.
Each business within the Sanlam Investments cluster
functions as an entrepreneurial entity with a shared focus
on delivering leading performance and exceptional client
service. We achieve this by instilling passionate ownership
as an intrinsic value among our employees.
We are based in South Africa, with a strong presence in
sub-Saharan Africa and footprints in the United Kingdom,
Europe, Australia and India. Our diverse client base
includes retirement funds, corporations, financial
institutions, individual investors, trade unions, non-
governmental organisations, governments and their
agencies.
Sanlam Investments’ competitive advantage lies in its
ability to cultivate a unique entrepreneurial culture within
the stability and structures of a big group. For this reason,
we are able to attract talented and innovative individuals to
establish investment-related businesses within the cluster.
Our core value of passionate ownership encourages people
to run their business as if it is their own, while we offer
support in the form of essential shared services such as
finance, HR, IT, marketing, compliance and legal services.
Moreover, being within the cluster gives the business
access to capital for innovative ideas as well as a ready
support network and the advantages of cross-selling.
Sanlam Investments
22 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam Investments
R million 1H09 %∆
Net operating profit 264 (8)
New business flows
– SA: Segregated 7 920 24
– SA: Other 15 580 3
– Non-SA 1 908 28
Net flows 2 590 —
FUM (R billion) 403 (1)
Annualised ROGEV 8,3 —
Profile of Sanlam Investments
Sanlam Investment Management (SIM)
One of the largest investment managers in South Africa as measured by assets under management, SIM manages financial assets for individual, institutional, retail and corporate clients and offers investment strategies in vehicles ranging from collective investments to institutional portfolios.
SIM is grouped into six boutiques that share a common research platform. The boutiques are Equities, Fixed Interest, Absolute Return, Liability Driven, Active Quants and Balanced Mandates. Our structure ensures focus, a small-team culture and speedy decision-making so our clients get access to our best thinking at all times.
Sanlam Collective Investments (SCI)
The third largest manager of collective investment portfolios in South Africa, SCI offers a wide range of retail, multi-managed, institutional and third-party collective investment funds.
Sanlam Employee Benefits (SEB)
Sanlam Employee Benefits specialises in the provision of risk, investment and fund administration services to institutions and retirement funds.
Sanlam Multi Manager International (SMMI)
An investment management advisory business, SMMI is dedicated to active multi-management.
Sanlam Private Investments (SPI)
SPI is a private client portfolio management and stockbroking business, serving high net worth individuals, charitable trusts and smaller institutions.
Sanlam Capital Markets (SCM) SCM is a provider of risk management and structured product solutions.
SIM Emerging Markets (SIM-EM)
A fund and investment management business, SIM-EM focuses on emerging markets, particularly in Africa and Asia. SIM-EM has offices in Namibia, Botswana, Nigeria, Kenya, Zambia and India.
Sanlam International Investment Partners (SIIP)
SIIP actively seeks to form partnerships with investment teams in developed markets such as the US, UK, Europe and Australasia and to work with them to build businesses which can capably service their unique markets.
Sanlam Properties (SP) Sanlam Properties specialises in strategic property services, including portfolio management, development, sales and listings.
Sanlam Asset Management – Ireland (SAMI)
SAMI is an international investment management business based in Dublin, and manages funds domiciled in Ireland for the Sanlam Group.
Sanlam Private Equity (SPE)
One of the largest private equity fund managers in South Africa, SPE offers both a direct and fund-of-funds investment programme. SPE also drives the Group’s BEE investment programme.
SIM Global SIM Global actively manages long-only international funds from South Africa for local and international clients.
Octane A specialist alternative investment provider, focusing on hedge fund-of-funds, Octane is based in Switzerland with offices in South Africa. Octane also incorporates Blue Ink, which specialises in alternative investment strategies.
Sanlam Structured Solutions (SSS)
SSS offers derivative-based skills to the Investments cluster to enhance returns on portfolios and to improve the product offering to clients, such as derivative, tax and legal-based structured products.
Simeka Wholly owned by Sanlam Investments, Simeka is an employee benefits consulting company operating independently within the larger Investments cluster.
Sanlam Investmentscontinued
Cluster Reviews 23SANLAM INTERIM RESULTS 2009
Income Statement per Division
Total Investment
Cluster
Total South African
operation
Total Rest of Africa
operation
Total International
operationR million Jun
2009Jun
2008Jun
2009Jun
2008Jun
2009Jun
2008Jun
2009Jun
2008
Income 915 1 071 704 782 61 81 150 208
Operating expenses (422) (517) (313) (371) (42) (42) (67) (104)
Asset Management and distribution fees paid
(134) (159) (130) (152) - - (4) (7)
Profit before tax & performance fees
359 395 261 259 19 39 79 97
Net performance fees 11 26 3 23 - - 8 3
Profit before tax 370 421 264 282 19 39 87 100
Tax and minorities (106) (134) (73) (79) (16) (26) (17) (29)
Operating profit after tax 264 287 191 203 3 13 70 71
Assets under management (R’ billion)
403 437 343 354 25 27 35 56
Split in Assets Under Management (Rbn)
June 2009
June 2008
December 2008
Wholesale 321,3 345,3 324,7
- Sanlam (SA assets) 165,6 168,8 161,1
- Sanlam (International assets) 31,6 49,1 37,3
- Segregated * 108,0 112,0 111,4
- Sanlam Properties 4,5 4,1 4,0
- Sanlam Collective Investments 11,6 11,3 10,9
Retail 81,5 92,2 84,0
- Sanlam Private Investments 34,4 44,3 37,6
- Sanlam Collective Investments 39,7 39,6 38,5
- Sanlam Multi Manager (Glacier) ** 7,4 8,3 7,9
Total AUM (Consolidated) 402,8 437,5 408,7`
* The assets of SIM Emerging Markets are included in this number. ** The rest of Sanlam Multi Manager assets are included in Sanlam and Segregated assets.
Sanlam Investmentscontinued
24 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam Investments continued
Split of Operating Profit before Tax (South Africa and International) – 6 month periods ending 30 June
Net Fund Flows (Rbn) – excluding White Labels
0%
20%
40%
60%
80%
100%
1H2003 1H2005 1H2006 1H2007International
SA
1H2004 1H2009
16 27 32 47 33 28
100
84
7368
53
6772
1H2008
0
4
6
8
2
0,3
5,4
6,6 6,7
4,5
5,3
3,1 3,1
2003 2004 2005 2006 2007 H12009H120082008
Note: 2005 excludes PIC outflows of R6.0bn 2006 excludes PIC outflows of R21.6bn
Cluster Reviews 25SANLAM INTERIM RESULTS 2009
Who we are
Sanlam Employee Benefits (SEB) forms part of the Sanlam
Investments cluster and specialises in the provision of risk
and investment solutions as well as administration services
to institutions and retirement funds.
As a result of significant restructuring in 2007, SEB now
consists of four entrepreneurial divisions: Sanlam Group
Risk, Sanlam Structured Solutions, Sanlam Umbrella
Solutions and Coris Capital, our retirement fund
administration platform.
Our underlying philosophy is to be driven by the needs of
our clients. We therefore dedicate our time and resources
to creating employee benefit solutions that respond to our
clients’ needs on all levels. As such we are also a leading
provider of retirement fund membership information via
state-of-the-art systems.
Our vision is to be the leader in client-centric wealth
creation and protection by ensuring that retirement fund
members realise their life-long goal: having sufficient
resources enabling them to enjoy their retirement.
We offer our clients institutional investment products
(market-linked investments and smoothed bonus
portfolios), group life benefits, group disability benefits, cell
insurance schemes, retirement fund administration,
annuity solutions and an umbrella fund offering.
The SEB brand is associated with well-established and
highly rated retirement fund research. Our research
findings are presented annually at the SEB Benchmark
Symposium and are sought after by pension fund trustees,
principal officers, consultants as well as competitors.
This market research enables us to identify key trends in
the retirement fund industry, making it possible for us to
link our solutions closely to client needs.
Sanlam Employee Benefits
26 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam Employee Benefitscontinued
Sanlam Employee Benefits
R million 1H09 %∆
Net operating profit 65 (22)
New business flows
– SA recurring 76 (7)
– SA single 66 (65)
PVNB premiums 704 (21)
VNB 5 (64)
Margin 0,71% vs 1,58%
Annualised ROGEV 6,8%
Group profile and shareholding structure
Investment Shareholding Description
Sanlam Employee Benefits (SEB) 100 Retirement fund business
Sanlam Umbrella Fund Administrators (SUFA) 100 Umbrella fund administration (SME focus)
Sanlam Customised Insurance Limited (SCIL) 100 Cell captive insurer
Infinit Group Solutions 50,1 Distribution of diversified Group risk products
Coris Capital 62 Retirement fund administration on outsourced basis
Analysis of Operating Profit
June 2009 R million
June 2008 R million
Underwriting risk 75 68
Investment & other 57 74
Administration (40) (25)
Operating profit 92 117
Cluster Reviews 27SANLAM INTERIM RESULTS 2009
Who we are
Sanlam Capital Markets (SCM) forms part of the Sanlam
Institutional Cluster and is a financial engineering business
that provides solutions for its clients through the use of
debt, equity and derivative instruments, and exploits
specific synergies within other businesses in the Sanlam
Group.
Sanlam Capital Markets consists of the following business
units:
Debt Structuring – debt origination, structuring and
portfolio management.
Equities – structured equity transactions, equity
trading, underwriting and stockbroking.
Market Activity – trading and structuring of equity and
interest rate derivative products and funding of SCM.
At SCM, people are the driving force of the business,
applying their skill and experience to design optimal
solutions for SCM’s clients while appropriately managing
the financial risks resulting from these transactions.
Sanlam Capital Markets
28 Cluster Reviews SANLAM INTERIM RESULTS 2009
Sanlam Capital Markets
R million 1H09 %∆
Net operating profit 59 74
Total revenue 162 67
Cost to income ratio 62% vs 100%
Capital 450 13
Annualised ROGEV 28,4%
Analysis of Operating Profit
June 2009
R million
June 2008
R million
Total revenue 162 97
Capital 16 20
Equities 104 84
Debt 46 28
Market Activity (4) (35)
Total expenses (101) (97)
Income before taxation 61 0
Taxation (2) 34
Attributable income 59 34
Capital 450 400
Return on Equity 28,4% 17,7%
Sanlam Capital Marketscontinued
29 Cluster Reviews SANLAM INTERIM RESULTS 2009
SHORT-TERM INSURANCE CLUSTER
Cluster Reviews 31SANLAM INTERIM RESULTS 2009
Who we are
Santam is the largest short-term insurer in South Africa
with a market share exceeding 20% and a client list that
includes the majority of the top 100 companies listed on
the JSE Limited.
Santam is a well diversified group, providing insurance
cover on all classes of short-term insurance. On a
segmented basis, Santam’s business is made up of the
following segments:
Personal Lines 39%
Commercial Lines 47%
Alternative risk 14%
Following a successful 2008, Santam’s operational
excellence was again recognized by being voted the “Best
Personal, Commercial and Corporate Insurer of 2009” by
the Financial Intermediaries’ Association (FIA).
Santam Limited
32 Cluster Reviews SANLAM INTERIM RESULTS 2009
Santam Limitedcontinued
Santam
R million 1H09 %∆
Net operating profit* 118 (37)
Gross written premium 7 291 7
New earned premiums 6 179 9
– Net claims ratio 72,9%
– Net acquisition ratio 25,6%
– Underwriting ratio 1,5%
Regulatory solvency 42%
Annualised ROGEV 22,1%
*Contribution to Sanlam’s net operating profit
Business Profile
Insurance classes % contribution to gross
written premium
Motor 40
Property 28
Alternative risk 14
Liability 7
Engineering 4
Transportation 3
Accident and health 3
Crop 1
Miscellaneous <1
Guarantee <1
Key Results
R million June 2009 June 2008 %∆
Gross written premium* 7 291 6 801 7
Underwriting result* 88 326 (73)
Investment return on insurance funds* 217 129 68
Net insurance result* 311 462 (33)
*Continuing operations only
Cluster Reviews 33SANLAM INTERIM RESULTS 2009
Net operating profit for the six months ended 30 June 2009
2009 2008 %∆
Net earned premiums 6 179 5 694 9
Interest on working capital 217 129 68
Financial services income 6 396 5 823 10
Sales remuneration (940) (818) 15
Income after sales remuneration 5 456 5 005 9
Underwriting policy benefits (4 503) (3 936) 14
Administration costs (642) (607) 6
Result from financial services before tax 311 462 (33)
Tax on result from financial services (90) (109) (17)
Result from financial services after tax 221 353 (37)
Minority shareholders’ interest (103) (165) (38)
Net result from financial services 118 188 (37)
Key Ratios
June 2009
June 2008
Ratios % %
Net claims ratio 72,9 69,2
Net acquisition cost ratio 25,6 25,1
Net underwriting ratio 1,5 5,7
Net insurance result margin on net earned premium 5,0 8,1
Solvency
Net asset value (NAV) Rm 4 266 3 970
NAV per share cps 3 525 3 525
Net written premium** Rm 12 229 11 307
Regulatory solvency % 42 40
Santam Limitedcontinued
34 Cluster Reviews SANLAM INTERIM RESULTS 2009
Motor
Property
Alternative Risk
Liability
Engineering
Crop
Transportation
Accident and health
Miscellaneous
Guarantee
(400)
(200)
(100)
0
100
200
300
Guarantee Miscellaneous Crop Transportation Accident& health
Engineering Liability Motor
(300)
ART Property
June 2008June 2009
Santam Limited continued
GWP per Insurance Class (%) – Continuing activities only
Underwriting Surplus per Insurance Class (Rm) – Continuing activities only