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INVESTMENT CASE Sustainable performance
2
Agenda
Overview
Strategic positioning
Strategic delivery
Latest financial results – 2013 Interim
3
Overview
Leading financial services group in Africa, with presence in India and SE
Asia. Based in South Africa.
Established in 1918, listed in 1998 on the JSE & Namibian Stock
Exchange
2 100 million issued shares, 507 000 shareholders
Market Cap of +/- R100bn
JSE/ALSI40 stock with > 80% free-float
Average daily trading stats
4 million shares per day
55% of shares trade p.a.
Institutional shareholding of 85%, 30% offshore shareholding
Strategic positioning Geared for sustainable growth
5
Strategic focus on value creation
Maximise shareholder return
Returns
(ROGEV)
Focus Areas Themes Target
Growth/
Operational
Efficiency
Operational Efficiency
Diversification
Net Business Flows
Capital
Efficiency
Optimal Application
Return of Excess
Strategic Investments
6
Core strategic objectives
Focused on two key areas
Effective
capital
manage-
ment
Sourcing new growth
opportunities
Identification of core
markets for growth
and expansion
SOUTH AFRICA: Delivery of sustainable growth
Maximising return on
investment in existing
businesses
Efficient & effective
management
INTERNATIONAL: Creating a platform for future growth
7
Five Strategic Pillars
Improving performance through top-line growth
Increasing market share in key segments
Diversifying the base (including geographical presence, products,
market segments and distribution platforms)
Improved operating and cost efficiencies (including quality)
Prioritising Sanlam’s international positioning (diversification)
Improving capital-efficiency on an on-going basis
Embracing and accelerating transformation of the Group
Underpinning the Sanlam Group business model
8
The Growth Opportunity
Growth markets in South Africa
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2006 2012
% o
f p
op
ula
tio
n
LSM 1-4 LSM 5 LSM 6-7 LSM 8-10
9
The Growth Opportunity
Life insurance penetration in Africa
10.2%
5.2%
1.9%
0.9% 0.9%
0.3% 0.4% 0.1% 0.2% 0.1%
South AfricaNamibia Botswana Malawi Kenya Ghana Zambia Tanzania Nigeria Uganda
BRIC average: 1.75%
Global average: 3.8%
Source: Swiss Re and
AXCO
Strategic delivery Consistency and Prudence
11
Top-line earnings growth
Earnings per share
Net operating profit per share increased by 23%
Normalised headline earnings per share up 35%
Business volumes
New business volumes increased by 37% to R83bn
Net fund inflows of R13bn
Net life VNB up 20% to R587m
Net VNB margin of 2,83% – in line with 2012
Group Equity Value of 3 747 cents per share
Annualised RoGEV per share of 14,3%
Financial performance in 1H13
12
Operational efficiencies
Gross VNB grew by 20%, at sustained average margins
Profitable volume growth
-0.30%
0.20%
0.70%
1.20%
1.70%
2.20%
2.70%
3.20%
0
100
200
300
400
500
600
700
1H06 1H07 1H08 1H09 1H10 1H11 1H12 1H13
South Africa Africa Other International Margins - rhs
13
Operational efficiencies
Focus on quality
Persistency – SA middle-income market
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
4.8%
3.9% 3.9%
3.6% 3.4%
3.8% 3.9%
3.0% 2.9% 2.9% 2.8%
4.2% 4.0%
3.8% 3.7% 3.6%
4.2%
3.4%
2.9% 2.8% 2.7%
Lapses, surrenders & fully paid-ups as % of in-force per half year
H1 H2
14
Operational efficiencies
Focus on quality
2007 2008 2009 2010 2011 2012 2013
15.2%
17.5%
14.1% 12.7%
11.4% 11.1% 10.0%
27.6%
16.8%
14.5% 12.7%
11.1% 10.4%
Number of NTUs, lapses and surrenders as % of in-force
H1 H2
Persistency – SA lower income market
15
Operational efficiencies
Experience variances
45 32
96
241
142 138
277 288 278
636
468
681
555
471
0
100
200
300
400
500
600
700
800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1H13
R'million Average
298
Focus on quality, costs + prudence = consistent positive experience
16
Diversification
International positioning
South-East Asia
India
Malaysia
RSA based
Rest of Africa
Botswana
Namibia
Swaziland
Zambia
Tanzania
Kenya
Malawi
Uganda
Ghana
Nigeria
Developed markets
UK / Ireland
Switzerland
Australia
USA
17
Diversification
Geographic profile
Country Brand Effective interest Insurance market share
South Africa Sanlam 100% 23%
Botswana Botswana Insurance Holdings 54% 80%
Namibia Sanlam Namibia 54% - 100% 25%
Swaziland SIM Swaziland 65% <1%
Zambia African Life Zambia 70% 38%
Tanzania African Life Tanzania 65% 40%
Kenya Pan Africa Life 56% 23%
Malawi NICO Malawi 49% 49%
Uganda Sanlam Uganda 100% 6%
Ghana Enterprise Life Assurance 49% 22%
Nigeria FBN Life 35% 4%
India Shriram Capital 26% 0.4%/1.6%
Malaysia Pacific & Orient 49% 4%
Developed markets Various 33% - 100% <1%
18
Diversification
Product mix
Country Individual life
insurance
Group life
insurance
General
insurance Savings Credit
Investment
management
South Africa x x x x x x
Botswana x x x x x x
Namibia x x x x x x
Swaziland x x x x
Zambia x x x x x
Tanzania x x x x x
Kenya x x x x x
Malawi x x x x x x
Uganda x x x x x
Ghana x x x
Nigeria x x x x
India x x x x x
Malaysia x
Developed markets x x
19
Life business 66%
Short-term insurance*
6%
Investment management
13%
Credit & banking
13%
Admin, health &
other 2%
Group Equity Value Net operating profit
Diversification
Diversified earnings base
Life business 52%
Short-term insurance*
19%
Investment management
13%
Credit & banking
8%
Admin, health &
other 8%
* General insurance
20
SA Traditional
65%
SA Entry-level 11%
Namibia 5%
Botswana 4%
Rest of Africa 2%
India/ Malaysia
7%
Other inter-
national 6%
SA Traditional 98%
Namibia 1%
Other inter- national
1%
SA Traditional 75%
SA Entry- level 7%
Namibia 5%
Botswana 5%
Rest of Africa 1%
Other inter- national
7%
1H03 – R756m 1H12 – R1 946m 1H13 – R2 409m
Diversification
Increasing contribution from growth markets
Contribution to group net operating profit
21
Diversification
Growth markets delivering value
SA Traditional 57%
SA Entry-level 25%
Namibia 4%
Botswana 3%
Rest of Africa 7%
Other inter-national
4%
SA Traditional 98%
Namibia 2%
Net VNB – 1H03 (R100m) Net VNB – 1H13 (R587m)
22
Diversification
Largest relative exposure to ex-SA emerging markets of South African
insurers
Diversified operations shield Group earnings from difficult operating
environment in specific countries
Expanding SA entry-level footprint
Shriram Capital – unique business model in India
Strengthening relationships in Africa
Expansion into South-East Asia – Pacific & Orient first point of entry
Competitive advantage
23
Capital efficiency
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
Prudent approach while awaiting final SAM specifications
R2 billion invested in growth markets during 1H13
Discretionary capital earmarked mainly for Africa, India and SE Asia
Optimising capital base
24
Capital efficiency
Balance 1 January 2013 4 200
Investments (1 172)
India & SE Asia (1 135)
Developed markets (24)
South Africa (13)
Capital released 590
Non-core operations 412
Excess return on life capital 178
Investment return & other 647
Special dividend (1 077)
Balance 30 June 2013 3 188
Discretionary capital
SANLAM GROUP Financial Results – 1H2013
26
Operating environment
Conditions remain challenging
Depressed demand for resources
Volatility emanating from QE uncertainty
Low interest rate environment
Short-term insurance claims cycle
Impact on SA economy
Slow recovery in GDP growth
Low short-term interest rates
Volatile equity market
Sharp depreciation in rand
27
Rest of Africa/India environment
Botswana
Consumer remains under pressure – evident in new business sales
Rest of Africa
Low demand for resources
India
Lower economic growth
Regulatory changes
Currency volatility
28
Salient features
* Comparative information as at 31 December 2012 + Excluding white label
29
Business Flows
Gross Net
R million 2013 2012 2013 2012
by business
Personal Finance 19 239 15 192 27% 6 564 3 615
Emerging Markets 5 933 6 483 -8% 607 2 296
Sanlam Investments 42 528 27 396 55% 4 194 1 027
Santam 8 096 7 703 5% 2 381 2 614
by license
Life insurance 14 956 12 159 23% 5 159 4 433
Investment 52 436 36 759 43% 6 160 2 459
Short-term 8 404 7 856 7% 2 427 2 660
Total 75 796 56 774 34% 13 746 9 552
30
Value of New Covered Business
Value of New Business Margin
R million 2013 2012 2013 2012
Personal Finance 450 390 15% 3.07% 3.08%
Emerging Markets 136 108 26% 6.52% 4.91%
Employee Benefits 30 27 11% 1.45% 1.34%
Sanlam UK 23 8 188% 0.87% 0.77%
Total 639 533 20% 2.98% 2.97%
Net of minorities 587 491 20% 2.83% 2.86%
31
Net operating profit
R million 2013 2012
Personal Finance 1 409 1 077 31%
Emerging Markets 391 183 114%
Sanlam Investments 523 471 11%
Santam 128 274 -53%
Corporate & other (42) (59) 29%
Total 2 409 1 946 24%
32
Income Statement
R million 2013 2012
Net operating profit 2 409 1 946 24% Per share 118.1 96.2 23%
Net investment return 1 150 891 29%
STC - (229) 100%
Other (110) (69) -59%
Normalised headline earnings 3 449 2 539 36% Per share 169.1 125.5 35%
Fund transfers 25 (131)
Headline earnings 3 474 2 408 44% Per share 171.4 120.1 43%
33
Group Equity Value
Equity Value RoGEV
R million 2013 2012 Rm %
Group operations 71 808 68 166 5 665 8.2%
Personal Finance 33 155 32 762 2 241 6.8%
Emerging Markets 9 356 6 105 1 548 22.0%
Investments 16 328 16 424 1 504 9.2%
Santam 12 969 12 875 372 2.9%
Discretionary & Other 4 801 7 186 (160) -2.5%
TOTAL 76 609 75 352 5 505 7.3%
cps 3 747 3 707 255 6.9%
Adjusted return 7.3%
Return target 5.3%
* Comparative information as at 31 December 2012
34
Group Equity Value Earnings
R million Actual Adjusted
Net value of new business 587 587
Existing business 2 029 2 029 Expected return on VIF 1 269 1 269 Operating experience variance 471 471 Operating assumption changes 289 289
2 616 2 616
Inv variances in-force 460 (460) - Tax changes 3 (3) - Economic assumption changes (888) 888 -
2 191 425 2 616
Return on net worth 847 (385) 462
EV earnings 3 038 40 3 078
Non-life 2 467 262 2 729
GEV earnings 5 505 302 5 807
35
Summary
Delivery on strategy:
Shareholder value
Adjusted RoGEV per share of 15% exceeds hurdle
Profitable growth
Strong growth in Rest of Africa
Net VNB +20%
Net operating profit up 27% excluding Santam and acquisitions
Diversification
Increasing contribution from growth markets
Capital management
Investments in growth markets; immediate profit contribution of
R160m for 1H13
Number of initiatives under investigation
36
RoGEV versus Target
0
100
200
300
400
500
600
700
800
900
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Target Cost of Capital (RFR + 300bps) Actual
Out perform cumulative growth target of long-bond rate + 400bp
since listing
Annexure: Cluster results
38
Sanlam Personal Finance
R million 2013 2012
New business flows 19 239 15 192 27%
Entry-level 503 430 17%
Middle-income 5 368 4 600 17%
Affluent 13 368 10 162 32%
Net flows 6 564 3 615
Entry-level 1 410 867
Middle-income (701) (52)
Affluent 5 855 2 800
39
Sanlam Personal Finance
R million 2013 2012
Value of new life business 450 390 15%
Entry-level 146 150 -3%
Middle-income 240 186 29%
Affluent 64 54 19%
New business margin 3.07% 3.08%
Entry-level 7.46% 8.16%
Middle-income 2.89% 2.66%
Affluent 1.45% 1.41%
40
Sanlam Personal Finance
R million 2013 2012
Gross operating profit 1 941 1 499 29%
Entry-level 360 199 81%
Middle-income life and investments 1 267 1 043 21%
Glacier 122 91 34%
Personal loans 157 133 18%
Other 35 33 6%
Net operating profit 1 409 1 077 31%
Group Equity Value* 33 155 32 762 1%
RoGEV 6.8% 8.9%
* Comparative information as at 31 December 2012
41
Sanlam Emerging Markets
R million 2013 2012
New business flows 5 933 6 483 -8%
Namibia 4 263 4 599 -7%
Botswana 871 1 200 -27%
Rest of Africa 436 465 -6%
India/Malaysia 363 219 66%
Net fund flows 607 2 296
Namibia (419) 648
Botswana 460 1 012
Rest of Africa 530 554
India/Malaysia 36 82
Value of new life business 136 108 26%
Margin 6.52% 4.91%
42
Sanlam Emerging Markets
R million 2013 2012
Gross operating profit 697 381 83%
Namibia 112 97 15%
Botswana 276 247 12%
Rest of Africa 76 38 100%
India/Malaysia 244 7 >100%
Corporate (11) (8) -38%
Net operating profit 391 183 114%
Group equity value* 9 356 6 105 53%
RoGEV 22.0% 6.3%
* Comparative information as at 31 December 2012
43
Sanlam Investments
R million 2013 2012
Net investment business flows 2 959 683
Asset management (2 828) 1 751
Wealth management 2 457 (328)
Investment services 2 018 (744)
International 1 312 4
New life business 3 644 1 933 89%
Employee benefits 1 157 943 23%
Sanlam UK 2 487 990 151%
Net life business 1 235 344 259%
Value of new life business 53 35 51%
Margin 1.13% 1.15%
44
Sanlam Investments
R million 2013 2012
Gross operating profit 687 631 9%
Investment management 451 369 22%
Employee benefits 174 189 -8%
Capital management 62 73 -15%
Net operating profit 523 471 11%
Group Equity Value* 16 328 16 424 -1%
Covered business 6 421 6 205 3%
Other 9 907 10 219 -3%
RoGEV 9.2% 6.3%
* Comparative information as at 31 December 2012
45
Santam
R million 2013 2012
Net earned premiums 8 096 7 703 5%
Gross operating profit 296 672 -56%
Underwriting surplus 101 468 -78%
Working capital income 195 204 -4%
Net operating profit 128 274 -53%
Underwriting margin 1.3% 6.1%
Group Equity Value* 12 969 12 875 1%
RoGEV 2.9% 24.3%
* Comparative information as at 31 December 2012
46
Sanlam ADR programme
Ticker symbol: SLLDY
CUSIP: 80104Q208
Ratio: 1 ADR : 5 Ordinary Shares
Depositary bank: Deutsche Bank Trust Company Americas
Depositary bank contact: Stanley Jones
ADR broker helpline: +1 212 250 9100 (New York)
+44 207 547 6500 (London)
e-mail: [email protected]
ADR website: www.adr.db.com
Depositary bank’s local custodian: Computershare South Africa
Sponsored level 1 ADR