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Investment Case
Incorporating 2016 Interim Results
Overview
Our vision
The Sanlam strategy
Operating environment
Financial performance – 2016 interim results
Overview
Leading financial services group in Africa, with presence in India
and SE Asia.
Established in 1918, listed in 1998 on the JSE & Namibian Stock Exchange
2 166 million issued shares, 476 000 shareholders
JSE/ALSI40 stock with > 80% free-float
Average daily trading stats
5 - 6 million shares per day
>50% of shares trade p.a.
Institutional shareholding of 87%, 37% offshore shareholding
Operational structure
100
%
60%
SA Retail: life
insurance,
investment &
other financial
services
Sanlam
Personal
Finance
Emerging
markets ex-SA:
life insurance,
general
insurance,
investments,
credit &
banking
Sanlam
Emerging
Markets
SA &
Developed
markets:
investment
management,
wealth
management,
credit &
structuring
Sanlam
Investments
General
insurance in
SA & co-
investor in
SEM general
insurance
businesses
Santam
Sanlam Group
Group Office
100% 61% 100% 100%
SA & EM
corporate:
employee
benefits, health
Sanlam
Corporate
100%
Our vision
Our vision is…
To lead in client-centric wealth creation, management and protection in South
Africa
To be a leading Pan-African financial services group with a
meaningful presence in India and South-East Asia
To play a niche role in wealth and investment management in specific
developed markets.
Our purpose…to create a world worth living in and to enable
people to live their best possible lives within it
The Sanlam Strategy
Being a leader in value creation
Strategic focus Shareholder value creation
Str
ate
gic
pilla
rs
Transformation Diversification
Optimal capital utilisation
Operational efficiencies Earnings growth
Sustainable value creation for shareholders
Maximising RoGEV
Focus on growth and value creation SA base complemented by a growing international presence
India/SE Asia Lower income
segments have similar
dynamics than SA ELM
and RoA
Developed Asset & wealth
management for
SA & RoA clients
South Africa Solid base & cash flows
Rest of Africa Demographics, low
insurance penetration,
competitive
environment, Pan-Africa
opportunity
Focus on growth and value creation International positioning focused on emerging markets
India
Malaysia
Philippines
Ghana
The Gambia
Kenya
Uganda
Rwanda
Burundi
Tanzania
Malawi Zambia
Botswana
Namibia
Swaziland
South Africa
Switzerland
United Kingdom
USA
Australia
Ireland
Mozambique
Morocco Algeria
Tunisia
Mali Senegal
Guinea
Burkina Faso
Cote D’Ivoire
Togo Benin Nigeria
Cameroon Gabon
Republic of the Congo
Angola
Zimbabwe
Madagascar
Mauritius
Lesotho
Saudi Arabia
Lebanon
Niger
Niger
Luxembourg
France
Emerging Markets - Indirect presence
Emerging Markets - Direct presence
Developed Markets
Saham Finances presence
Sanlam and Saham presence
Key strategic themes South Africa: Still delivering good growth
Realigned for agility and RDR regulatory environment
Actively addressing digital offerings and big data
Extracting value from Afrocentric investment and
refreshed Reality offerings
Driving for accelerated growth in ELM
SPF Become leader in
all retail market
segments
Eff
ec
tive
ca
pit
al a
nd
ba
lan
ce
sh
ee
t
ma
na
ge
me
nt
in S
AM
en
vir
on
me
nt
Defend leading position in private wealth
Building on success in attracting retail fund flows
Focus on corporate business and 3rd party fund flows
Improve cost efficiencies
SI / Corporate Growing 3rd party
market share
Key strategic themes South Africa: Still delivering good growth
Focus on profitable growth
Improve operational efficiencies to optimise
acquisition cost ratio
Continued focus on risk management to reduce
claims cost
Extracting value from SEM co-investments
Santam Further entrenching
leadership position
Effective capital management in SAM environment
Key strategic themes Other emerging markets: unmatched African footprint
Saham Finances acquisition finalised; good progress
in building relationship; opportunities to drive growth
identified and underway
Focus on basics: distribution, service, retention and
costs
Navigate challenges in Zambia, Kenya and Rwanda
Expanded central support capabilities
Other
Emerging
Markets Balance structural
and organic growth
Other
Emerging
Markets Balance structural
and organic growth
Rest of Africa Capitalising on
footprint
Effe
ctiv
e c
ap
ital m
an
ag
em
en
t
Solid recovery in India; excercising options
Diversify Pacific & Orient product offering
Continued focus on innovation and new business
growth at MCIS
Consolidate position in Malaysia before further
expansion
Other
Emerging
Markets Balance structural
and organic growth
Other
Emerging
Markets Balance structural
and organic growth
India / SE
Asia Accelerated organic
growth
Key strategic themes Developed markets: niche approach
Focus remains on products and services for SA and
Rest of Africa client base
UK distribution optimisation to enhance scale
Restructuring in progress to enhance profitability and
RoGEV; some internal focus
Manage uncertain environment after Brexit
Developed
Markets Enhanced returns
Effective capital management
The growth opportunity Growth markets in South Africa
46%
23%
14% 16%
22%
36%
18%
25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2006 2015
% o
f p
op
ula
tio
n
LSM 1-4 LSM 5 LSM 6-7 LSM 8-10
The growth opportunity Insurance penetration in Africa
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
World Africa SA Namibia Morocco Kenya Egypt Nigeria
Insurance penetration as % of GDP
Life Non-Life
Country – direct stake Effective interest
Life/General insurance
Life insurance
Market share/Position
General insurance
Market share/Position
South Africa 100%/61% 25%/2 >22%/1
Botswana 60%/60% 71%/1 4%/6
Namibia 59%-100%/37% 27%/2 32%/1
Zambia 70%/57% 44%/1 15%/2
Tanzania 64%/50% 59%/1 2%/19
Kenya 56%/32% 8%/4 1%/33
Malawi 57%/57% 45%/1 36%/1
Uganda 99%/82% 17%/2 3%/14
Ghana 49%/40% 27%/2 12%/2
Nigeria 35%/35% 10%/4 1%/24
Rwanda 63%/63% 52%/1 32%/1
India 20%/20% <1%/15 2%/15
Malaysia 51%/49% 3%/9 2%/20
Mozambique 56% <1%/5 -
Zimbabwe 40%/40% 5%/5 14%/3
Angola 15% - 21%/2
Ivory Coast 30% 17%/3 30%/1
Lebanon 24% 9%/4 5%/8
Morocco 16% 8%/5 18%/1
Developed markets Various <1% -
Diversification Geographic profile
Diversification Line of business profile (ex Saham Finances)
Diversification Saham Finances profile - Sanlam (22.5%) & Santam (7.5%)
SA Traditional 54%
SA Entry-level 19%
Rest of Africa 23%
Other international 4%
1H16
R702m
SA Traditional 65%
SA Entry-level 11%
Rest of Africa 13%
Other international 11%
Diversification – better balanced portfolio Geographic diversification
Net VNB Net operating profit
1H16
R4 028m
Life business 47%
General insurance 20%
Investment management
14%
Credit & structuring 11%
Admin, health & other 8%
1H16
R106 599m
Life business 58%
General insurance 14%
Investment management
10%
Credit & structuring 15%
Admin, health & other 3%
Diversification – better balanced portfolio Line of business diversification
Group Equity Value Net operating profit
1H16
R4 028m
Capital efficiency
Balance 1 January 2016 2 300
Net investments 11
South Africa 16
Other (5)
Investment return & other 69
Excess dividend cover 720
Available for investment 3 100
Discretionary capital
Available for
strategic
initiatives
Capital efficiency Optimising the capital base
Optimising capital allocated to clusters - driving increased returns
Discretionary capital invested in growth markets as preference
Return to shareholders if not utilised in reasonable timeframe
Discretionary capital earmarked mainly for Africa
Capital efficiency Capital redeployed since 2005 (R39bn)
-
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
Capital released Capital deployed
Discretionary capital
South Africa
Developed markets
Emerging markets
Share buy back/special dividend
Capital efficiency Composition of GEV transformed since 2005
-
20 000
40 000
60 000
80 000
100 000
120 000
GEV 2005 GEV Jun 2016
Discretionary capital
Other capital
Non-life operations
Value of in-force
Life Required Capital
Financial performance
2016 interim results
External operating environment Emerging market economies under pressure from global events
Commodity cycle and weak global demand suppressing
economic activity – no real growth expected in 2016
Weak business confidence and investment due to policy
uncertainty, risk of downgrade and depressed profitability
Volatile investment markets
Pressure on disposable income, in particular middle-
income market – low growth in recurring premium savings
Waning investor confidence in uncertain environment –
lower growth in discretionary single premium savings
Progress with public/private sector cooperation a welcome
development
South
Africa
External operating environment Emerging market economies under pressure from global events
Macro-economic adjustment in countries with large
deficits during weak commodity cycle
Economic growth and currencies under pressure
Oil exporters, Nigeria and Angola in particular, hard hit
Inflationary pressure in a number of countries – interest
rates remaining high/increasing
Drought conditions in Zimbabwe, Zambia and Malawi
Good overall growth prospects despite current challenging
environment, driven by low insurance penetration
Rest of
Africa
External operating environment Emerging market economies under pressure from global events
Consumption tailwinds support economic growth
Slowing inflation and declining short-term interest rates
Roll-out of infrastructure projects and anticipated private
sector investment to drive increased growth opportunity
India
Moderating economic growth in 2016
Consumption spending only partially compensating for
decline in investment spend and exports
Motorcycle sales remain under pressure
Malaysia
Performance highlights 1H16
Earnings per share
Net operating profit per share increased by 11%
Normalised headline earnings per share down 7%
Business volumes
New business volumes increased by 15% to R115bn
Net fund inflows of R22bn compared to R7bn in 2015
Net life VNB up 9% on comparable basis
Net VNB margin of 2.47% on comparable basis
Group Equity Value
Group Equity Value of R52.12 per share
RoGEV per share for 6-month period of 7.9%, above hurdle rate
Business flows
Gross Net
R million 1H16 1H15 1H16 1H15
by business
Personal Finance 31 906 29 162 9% 8 485 10 188
Emerging Markets 7 387 5 395 37% 2 757 (8 981)
Sanlam Investments 66 360 56 234 18% 7 093 2 260
Santam 9 700 9 088 7% 3 411 3 302
by licence
Life insurance 21 853 18 620 17% 6 034 5 822
Investment 82 054 71 359 15% 11 680 (2 549)
General insurance 11 446 9 900 16% 4 032 3 496
Total 115 353 99 879 15% 21 746 6 769
Operational efficiencies
Persistency – SA middle-income market
Decent persistency in difficult environment
4.8
3.9 3.9
3.6 3.4
3.8 3.9
3.0 2.9 2.9 2.8 2.9 2.9 3.0
4.2 4.0
3.8 3.7 3.6
4.2
3.4
2.9 2.8 2.7 2.9 2.8 2.8
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Lapses, surrenders & fully paid-ups as % of in-force per half year
H1 H2
Operational efficiencies
Persistency – SA lower income market
Decent persistency in difficult environment
9.6
8.7
10.6
9.8
9.1 8.5
9.6 9.2
9.9
0
2
4
6
8
10
12
2012 2013 2014 2015 2016
Lapses, surrenders & fully paid-ups as % of in-force per half year
H1 H2
Value of new covered business
Value of New Business Margin
R million 1H16 1H15 1H16 1H15
Personal Finance 499 482 4% 2,49% 2,64%
Emerging Markets 277 222 25% 4,87% 6,17%
Employee Benefits 11 16 -31% 0,39% 0,76%
Sanlam UK 11 10 10% 0,50% 0,53%
Total 798 730 9% 2,60% 2,82%
Net of minorities 702 655 7% 2,44% 2,66%
Comparable economic basis 714 655 9% 2,47% 2,66%
Value of new covered business Long-term interest rates and business mix impacting margin
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0
100
200
300
400
500
600
700
800
900
1H06 1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16
South Africa Rest of AfricaOther International Margins - rhs
Net operating profit
R million 1H16 1H15
Personal Finance 2 133 1 955 9%
Emerging Markets 788 562 40%
Sanlam Investments 721 712 1%
Santam 388 413 -6%
Corporate & other (2) (20) 90%
Total 4 028 3 622 11%
Income statement
R million 1H16 1H15
Net operating profit 4 028 3 622 11% Per share 196,8 177,0 11%
Net investment return 377 1 148 -67%
Other (149) (182) 18%
Normalised headline earnings 4 256 4 588 -7% Per share 208,0 224,2 -7%
Fund transfers 66 138
Headline earnings 4 322 4 726 -8% Per share 214,1 233,1 -8%
Group Equity Value
Equity Value RoGEV*
R million 1H16 2015# Rm %
Group operations 101 077 91 558 8 539 9,1%
Personal Finance 41 408 38 249 5 271 13,8%
Emerging Markets 22 335 18 047 296 1,5%
Investments 21 780 22 412 (90) -0,4%
Santam 15 554 12 850 3 062 23,8%
Discretionary & Other 5 522 11 948 (363) -3,8%
TOTAL 106 599 103 506 8 176 7,9%
cps 5 212 5 057 399 7,9% Return target 6,8%
* 6-month return (not annualised) # Comparative information as at 31 December 2015
Group Equity Value earnings
R million 1H16 1H15
Net value of new business 702 655
Existing business 2 339 2 256
Expected return on VIF 2 197 1 820
Operating experience variance 75 408
Operating assumption changes 67 28
3 041 2 911
Inv variances in-force (51) 117
Tax changes and goodwill 316 (14)
Economic assumption changes 764 (397)
4 070 2 617
Return on net worth 76 702
EV earnings 4 146 3 319
Non-life 4 030 2 583
GEV earnings 8 176 5 902
Experience variances Significant increase in claims experience in 1H16
110 113 137
32
223 284 289
82
231 230
471 477
408
75
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
0
200
400
600
800
1 000
1 200
1H03 1H04 1H05 1H06 1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16
R'million% of VIF annualised (rhs)
Return on Group Equity Value Out perform growth target of long-bond rate +400bp
13.4 12.4 12.2 10.8
12.2 12.1 12.2
4.8
3.3
9.8
6.2
6.3
0.7
5.2
0
5
10
15
20
25
2010 2011 2012 2013 2014 2015 Avg
Target Out performance
Sanlam Group
Cluster results – interim 2016
Sanlam Personal
Finance
Sanlam Personal Finance
R million 1H16 1H15
New business volumes 31 906 29 162 9%
Sanlam Sky 588 546 8%
Individual Life 5 975 6 048 -1%
Glacier 25 343 22 568 12%
Net flows 8 485 10 188
Sanlam Sky 1 556 1 373
Individual Life (2 576) (1 513)
Glacier 9 505 10 328
Sanlam Personal Finance
R million 1H16 1H15
Value of new life business 499 482 4%
Sanlam Sky 129 149 -13%
Individual Life 251 234 7%
Glacier 119 99 20%
Comparable economic basis 520 482 8%
New business margin 2,49% 2,64%
Sanlam Sky 6,20% 7,67%
Individual Life 2,61% 2,54%
Glacier 1,42% 1,39%
Comparable economic basis 2,58% 2,64%
Sanlam Personal Finance
R million 1H16 1H15
Gross operating profit 2 965 2 718 9%
Sanlam Sky 611 569 7%
Individual Life: life and investments 1 855 1 733 7%
Glacier 249 209 19%
Personal loans 174 176 -1%
Other 76 31 145%
Net operating profit 2 133 1 955 9%
Group Equity Value* 41 408 38 249
RoGEV (6 months) 13,8% 8,1%
* Comparative information as at 31 December 2015
Sanlam Emerging
Markets
Sanlam Emerging Markets
R million 1H16 1H15
New business volumes 7 387 5 395 37%
Namibia 1 631 1 286 27%
Botswana 2 633 2 449 8%
Rest of Africa 2 135 885 141%
India/Malaysia 988 775 27%
Net fund flows 2 757 (8 981)
Namibia 503 (41)
Botswana 599 (9 983)
Rest of Africa 1 322 799
India/Malaysia 333 244
Value of new life business 277 222 25%
Margin 4,87% 6,17%
Sanlam Emerging Markets
R million 1H16 1H15
Gross operating profit 1 404 1 117 26%
Namibia 283 257 10%
Botswana 493 411 20%
Rest of Africa 214 123 74%
India/Malaysia 426 327 30%
Corporate (12) (1) ->100%
Net operating profit 788 562 40%
Group equity value* 22 335 18 047
RoGEV (6 months) 1,5% 4,8%
* Comparative information as at 31 December 2015
Sanlam Investments
Sanlam Investments
R million 1H16 1H15
Net investment business flows 6 793 2 585
Investment management SA 8 530 4 203
Wealth management 867 4 097
International (2 572) (5 712)
Capital management (32) (3)
New life business 4 171 2 988 40%
Employee benefits 2 142 1 182 81%
Sanlam UK 2 029 1 806 12%
Net life business 300 (325)
Value of new life business 22 26 -15%
Margin 0,44% 0,65%
Sanlam Investments
R million 1H16 1H15
Gross operating profit 983 933 5%
Investment management 578 592 -2%
Employee benefits 196 206 -5%
Capital management 209 135 55%
Net operating profit 721 712 1%
Group Equity Value* 21 780 22 412
Covered business 6 777 7 210
Other 15 003 15 202
RoGEV (6 months) -0,4% 9,8%
* Comparative information as at 31 December 2015
Sanlam Investments
Percentage of SIM’s benchmark-managed funds exceeding hurdle
Investment performance
2011
2012
2013
2014
2015
1H16
Rolling 3 year Rolling 5 year
100% 80% 60% 40% 20% 0% 20% 40% 60% 80% 100%
Santam
Santam
R million 1H16 1H15
Net earned premiums 9 700 9 088 7%
Gross operating profit 983 1 055 -7%
Underwriting surplus 616 809 -24%
Working capital & other 367 246 49%
Net operating profit 388 413 -6%
Underwriting margin 6,4% 8,9%
Group Equity Value 15 554 12 850
RoGEV (6 months) 23,8% 2,5%
* Comparative information as at 31 December 2015
Sanlam ADR programme Sponsored level 1 ADR
Ticker symbol: SLLDY
CUSIP: 80104Q208
Ratio: 1 ADR : 5 Ordinary Shares
Depositary bank: Deutsche Bank Trust Company Americas
Depositary bank contact: Stanley Jones
ADR broker helpline: +1 212 250 9100 (New York)
+44 207 547 6500 (London)
e-mail: [email protected]
ADR website: www.adr.db.com
Depositary bank’s local custodian: Computershare South Africa
