investment case - sanlam · tanzania african life tanzania 65% 40% kenya pan africa life 56% 23%...

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


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


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


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 international

1%

SA Traditional 75%

SA Entry- level 7%

Namibia 5%

Botswana 5%

Rest of Africa 1%

Other international

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


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


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%


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


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%


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%


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%


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%


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

investment case - sanlam · tanzania african life tanzania 65% 40% kenya pan africa life 56% 23%...

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