Investor Presentation 2015 Interim Results 3 September 2015 The - - PowerPoint PPT Presentation

Investor Presentation

2015 Interim Results

3 September 2015

The Sanlam strategy Operating environment Strategic delivery Financial review Priorities Outlook

2015 interim results agenda

the sanlam strategy

maximising shareholder value

Strategic focus central to what we do

Optimising value creation

2015 interim results sanlam strategy

Strategic pillars

Transformation Diversification Optimal capital utilisation Operational efficiencies Earnings growth

Strategic enablers

Environmental footprint Prosperous society Responsible products and services People development Sound governance Maximising RoGEV

Sustainable value creation for shareholders

A strategy focused on growth

Driving geographic, product and services presence

2015 interim results sanlam strategy

South Africa

Solid base & cash flows

Rest of Africa

Demographics, low insurance penetration, competitive environment, Pan-Africa

• pportunity

India/SE Asia

Lower income segments have similar dynamics than SA ELM and RoA

Developed

Niche, solutions for SA & RoA clients

Core regional focus areas

Balance structural and organic growth

2015 interim results sanlam strategy

Operational and capital efficiencies key in current environment Further diversifying distribution capability Reviewing optimal capital structure under SAM South Africa

Delivery of sustainable growth

Effective capital management

Core regional focus areas

Balance structural and organic growth

2015 interim results sanlam strategy

Operational and capital efficiencies key in current environment Further diversifying distribution capability Reviewing optimal capital structure under SAM South Africa

Delivery of sustainable growth

Increased emphasis on accelerated

• rganic growth

Extracting maximum value from existing relationships Geographic expansion in line with client and intermediary needs Other Emerging Markets

Platform for future growth

Effective capital management

Core regional focus areas

Balance structural and organic growth

2015 interim results sanlam strategy

Products and services for SA and Rest of Africa client base Expand distribution post Intrinsic sale Wealth and investment management focus Developed Markets

Niche approach

Increased emphasis on accelerated

• rganic growth

Extracting maximum value from existing relationships Geographic expansion in line with client and intermediary needs Other Emerging Markets

Platform for future growth

Effective capital management

• perating environment

economic and internal pressures

External operating environment

Commodity-based economies under pressure

2015 interim results

• perating environment

Macro environment and electricity supply constraining capital investment and economic activity Modest growth in employment and disposable income Highly competitive market across all products South Africa Commodity prices impacting on growth and currencies Increase in competition, including large internationals Longer term growth potential remains intact, but challenges in the short term Rest of Africa Slower than expected improvement in Indian economic growth Delays in roll out of infrastructure projects in India Good GDP growth in Malaysia despite low oil prices India / SE Asia

SA economy

Growth in real retail sales, GDP and PDI

Modest growth in all key metrics

2015 interim results

• perating environment
• 10%
• 5%

0% 5% 10% 15% Growth y-o-y in real retail sales Growth y-o-y in real GDP Growth y-o-y in real PDI

SA interest rates

SA bond yields and short-term interest rates

LT rates increased marginally

2015 interim results

• perating environment

4% 5% 6% 7% 8% 9% 10% 9-year 5-year Short-term Avg Short-term

+40bps +40bps

Impact on growth Sanlam Sky VNB -3% Higher float income

SA equity and bond markets

Higher average AuM

Supporting fee income and new business

2015 interim results

• perating environment

95 100 105 110 115 120 125 130 135 140 145 All Share rebased All Bond rebased

11,8% 6,7% 3,4% 1,6%

Average Alsi up 9% Average Albi up 13%

Average exchange rate

Marginal net impact on non-SA results

2015 interim results

• perating environment
• 9.4%

1.6% 11.3% 0.9% 7.6%

• 5.9%
• 15%
• 10%
• 5%

0% 5% 10% 15% Europe United Kingdom USA Botswana India Rest of Africa

Contribution to growth

Net result from financial services +R20m New business +R80m Net VNB –R3m

Internal operating environment

6-months results impacted by internal challenges

2015 interim results

• perating environment

Loss of PIC funds in 2014 impacting on SI performance fees; additional R10bn outflow in 2H15 SI admin costs elevated by projects and capacity building in Retail and Institutional units South Africa System implementation issues More focus required on bedding down acquisitions Improve balance sheet management Rest of Africa Credit granted in anticipation of infrastructure roll out Delays in releasing state funding causing significant bad debts in equipment finance subsidiary Book closely managed by STFC to limit further losses India

strategic delivery

exceeding overall targets

Top-line earnings growth

Earnings per share Net operating profit per share increased by 5% (11% excl one-offs) Normalised headline earnings per share up 4% Business volumes New business volumes increased by 22% to R100bn Net fund inflows of R7bn Net life VNB up 5% to R655m Net VNB margin of 2.66% – maintained on per product basis Group Equity Value Group Equity Value of R47.53 per share Annualised RoGEV per share of 13%

Financial performance in 1H15

2015 interim results strategic delivery

Operational efficiencies

SEB, Sanlam UK, Kenya and Zambia offsetting strong performance by

• ther businesses

Under performance in some key markets

2015 interim results strategic delivery

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 100 200 300 400 500 600 700 800 1H06 1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 South Africa Rest of Africa Other International Margins - rhs

Operational efficiencies

Persistency – SA middle-income market

Focus on quality

2015 interim results strategic delivery

4.8 3.9 3.9 3.6 3.4 3.8 3.9 3.0 2.9 2.9 2.8 2.9 2.9 4.2 4.0 3.8 3.7 3.6 4.2 3.4 2.9 2.8 2.7 2.9 2.8 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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

H1 H2

Operational efficiencies

Persistency – SA lower income market

Focus on quality

2015 interim results strategic delivery

9.6 8.7 10.6 9.8 8.5 9.6 9.2 2 4 6 8 10 12 2012 2013 2014 2015

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

H1 H2

Operational efficiencies

Positive experience continuing

Experience variances

2015 interim results strategic delivery

241 142 138 277 288 278 636 468 681 555 1 021 991 408 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 200 400 600 800 1 000 1 200 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1H15 R'million % of VIF (rhs)

Investment performance

Percentage of SIM’s AUM to exceed benchmark

Focus on long-term performance track record

2015 interim results strategic delivery

2011 2012 2013 2014 1H15 Rolling 3 year Rolling 5 year 100% 80% 60% 40% 20% 0% 20% 40% 60% 80% 100%

Diversification

Group Equity Value Net Operating Profit

Life insurance 50% 61% General insurance 17% 13% Investment management 15% 12% Credit & structuring 9% 12% Admin, health & other 9% 2%

Building a balanced portfolio

2015 interim results strategic delivery

Diversification

International positioning focused on emerging markets

2015 interim results strategic delivery Emerging Markets - Direct presence Emerging Markets - Indirect presence Developed Markets

India Malaysia Philippines Nigeria Ghana The Gambia Kenya Uganda Rwanda Burundi Tanzania Malawi Zambia Botswana Namibia Lesotho

South Africa

Switzerland United Kingdom USA Australia Ireland Mozambique

SA Traditional 54% SA Entry-level 23% Namibia 4% Botswana 9% Rest of Africa 7% Other international 3%

1H03 R100m

1H15 R655m SA Traditional 98% Namibia 2% SA Traditional 98% Namibia 1% Other international 1% SA Traditional 68% SA Entry-level 11% Namibia 4% Botswana 5% Rest of Africa 2% Other international 10%

Diversification – better balanced portfolio

Focus on accelerated organic as apposed to structural growth

2015 interim results strategic delivery

Net VNB Net operating profit

17% average growth rate p.a. 16% average growth rate per share p.a.

1H03 R756m

1H15 R3 622m

Diversification

Contribution from businesses outside of South Africa

2015 interim results strategic delivery

South Africa Other emerging markets 76% 18% 6% 79% 16% 5%

Net operating profit

77% 20% 3% 76% 22% 2%

Net VNB

77% 16% 7% 76% 16% 8%

Group Equity Value

2014 2015 2014 2015 2014 2015

Other international

Capital efficiency

Balance 1 January 2015 3 300 Net investments (285) SI seeding capital (169) Rest of Africa (73) SEM/Santam co-investment 46 Developed markets (19) South Africa (70) Investment return & excess cover 661 Illiquid and other capital released 924 Balance 30 June 2015 4 600 Earmarked for acquisitions (2 100) Available for investment 2 500

Discretionary capital

2015 interim results strategic delivery

Discretionary capital earmarked for new growth

• pportunities

financial review

Changes in presentation / key assumptions

Accounting policies & basis of presentation No change from 2014 Changes in RDR: Sanlam Life (8.5%): 40 bps up from December 2014 Sanlam Sky (8.0%): 40 bps up from December 2014 Net negative impact on RoGEV and Sanlam Sky VNB

2015 interim results financial review

Salient features

2015 2014 

Group Equity Value* cps 4 753 4 684 1% Annualised RoGEV per share % 13,0 18,5 CAR cover (Sanlam Life)* 4,8 4,5 Net operating profit R mil 3 622 3 461 5% cps 177,0 169,2 5% Normalised Headline earnings R mil 4 588 4 393 4% cps 224,2 214,8 4% New business volumes R mil 99 879 81 833 22% Net fund flows R mil 6 769 19 222

• 65%

New Life business EV (net) R mil 655 626 5% New Life EV margin % 2,66 2,68

2015 interim results financial review

* Comparative information as at 31 December 2014

sanlam personal finance

Sanlam Personal Finance

R million 2015 2014 

New business volumes 29 162 23 662 23% Sanlam Sky 546 474 15% Individual Life 6 048 5 821 4% Glacier 22 568 17 367 30% Net flows 10 188 8 087 Sanlam Sky 1 373 1 307 Individual Life (1 513) (859) Glacier 10 328 7 639

2015 interim results financial review

Sanlam Personal Finance

R million 2015 2014 

Value of new life business 482 437 10% Sanlam Sky 149 135 10% Individual Life 234 228 3% Glacier 99 74 34% Comparable economic basis 486 437 11% New business margin 2,64% 2,73% Sanlam Sky 7,67% 7,62% Individual Life 2,54% 2,59% Glacier 1,39% 1,37% Comparable economic basis 2,66% 2,73%

2015 interim results financial review

Sanlam Personal Finance

R million 2015 2014 

Gross operating profit 2 718 2 439 11% Sanlam Sky 569 518 10% Individual Life life and investments 1 733 1 571 10% Glacier 209 171 22% Personal loans 176 148 19% Other 31 31

• Net operating profit

1 955 1 763 11% Group Equity Value* 39 312 38 453 RoGEV (6 months) 8,1% 8,7%

2015 interim results financial review

label * Comparative information as at 31 December 2014

sanlam emerging markets

Sanlam Emerging Markets

R million 2015 2014 

New business volumes 5 395 4 030 34% Namibia 1 286 1 541

• 17%

Botswana 2 449 1 137 115% Rest of Africa 885 827 7% India/Malaysia 775 525 48% Net fund flows (8 981) 1 762 Namibia (41) 343 Botswana (9 983) 478 Rest of Africa 799 814 India/Malaysia 244 127 Value of new life business 222 196 13% Margin 6,17% 7,30%

2015 interim results financial review

Sanlam Emerging Markets

R million 2015 2014 

Gross operating profit 1 117 1 129

• 1%

Namibia 257 254 1% Botswana 411 348 18% Rest of Africa 123 108 14% India/Malaysia 327 432

• 24%

Corporate (1) (13) 92% Net operating profit 562 624

• 10%

Group equity value* 14 859 14 571 RoGEV (6 months) 4,8% 12,3%

2015 interim results financial review

* Comparative information as at 31 December 2014

sanlam investments

Sanlam Investments

R million 2015 2014 

Net investment business flows 2 585 4 871 Investment management SA 4 203 3 883 Wealth management 2 446 (457) International (4 061) 1 346 Capital management (3) 99 New insurance business 2 988 4 389

• 32%

Employee benefits 1 182 952 24% Sanlam UK 1 806 3 437

• 47%

Net life business (325) 1 491 Value of new life business 26 64

• 59%

Margin 0,65% 1,16%

2015 interim results financial review

Sanlam Investments

R million 2015 2014 

Gross operating profit 933 982

• 5%

Investment management 592 612

• 3%

Employee benefits 206 216

• 5%

Capital management 135 154

• 12%

Net operating profit 712 727

• 2%

Group Equity Value* 22 135 20 122 Covered business 7 841 7 833 Other 14 294 12 289 RoGEV (6 months) 9,8% 11,2%

2015 interim results financial review

* Comparative information as at 31 December 2014

santam

Santam

R million 2015 2014 

Net earned premiums 9 088 8 459 7% Gross operating profit 1 055 871 21% Underwriting surplus 808 626 29% Working capital & other 247 245 1% Net operating profit 413 353 17% Underwriting margin 8,9% 7,4% Group Equity Value* 14 626 14 593 RoGEV (6 months) 2,5% 7,0%

2015 interim results financial review

* Comparative information as at 31 December 2014

sanlam group

Business flows

Gross Net R million 2015 2014  2015 2014

by business Personal Finance 29 162 23 662 23% 10 188 8 087 Emerging Markets 5 395 4 030 34% (8 981) 1 762 Sanlam Investments 56 234 45 682 23% 2 260 6 362 Santam 9 088 8 459 7% 3 302 3 011 by licence Life insurance 18 620 17 536 6% 5 822 6 137 Investment 71 359 55 251 29% (2 549) 9 926 General insurance 9 900 9 046 9% 3 496 3 159 Total 99 879 81 833 22% 6 769 19 222

2015 interim results financial review

Value of new covered business

Value of New Business Margin R million 2015 2014  2015 2014

Personal Finance 482 437 10% 2,64% 2,73% Emerging Markets 222 196 13% 6,17% 7,30% Employee Benefits 16 42

• 62%

0,76% 2,30% Sanlam UK 10 22

• 55%

0,53% 0,59% Total 730 697 5% 2,82% 2,88% Net of minorities 655 626 5% 2,66% 2,68% Comparable economic basis 660 626 5% 2,68% 2,68%

2015 interim results financial review

Net operating profit

R million 2015 2014 

Personal Finance 1 955 1 763 11% Emerging Markets 562 624

• 10%

Sanlam Investments 712 727

• 2%

Santam 413 353 17% Corporate & other (20) (6) ->100% Total 3 622 3 461 5%

2015 interim results financial review

Income statement

R million 2015 2014 

Net operating profit 3 622 3 461 5%

Per share 177,0 169,2 5%

Net investment return 1 148 1 122 2% Other (182) (190) 4% Normalised headline earnings 4 588 4 393 4%

Per share 224,2 214,8 4%

Fund transfers 138 54 Headline earnings 4 726 4 447 6%

Per share 233,1 220,2 6%

2015 interim results financial review

Group Equity Value

Equity Value RoGEV R million 2015 2014* Rm %

Group operations 90 932 87 739 6 165 7,0% Personal Finance 39 312 38 453 3 129 8,1% Emerging Markets 14 859 14 571 702 4,8% Investments 22 135 20 122 1 975 9,8% Santam 14 626 14 593 359 2,5% Discretionary & Other 6 331 8 197 (263)

• 3,2%

TOTAL 97 263 95 936 5 902 6,2% cps 4 753 4 684 294 6,3% Adjusted return 7,5%

Return target 5,9%

2015 interim results financial review

* Comparative information as at 31 December 2014

Group Equity Value earnings

2015 interim results financial review

1 820 608 655 408 28 3 629 211

• 1 443
• 14

2 428 3 519 7 148 5 902 1000 2000 3000 4000 5000 6000 7000 8000

Expected return

• n VIF

Expected return

• n ANW

Expected Life earnings VNB Operating experience variances Operating assumption changes Adjusted Life earnings Adjusted Non-life return Adjusted RoGEV Inv variances Economic assumptions Goodwill RoGEV

15.8% 13%

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 0.9 5.2 5 10 15 20 25 2010 2011 2012 2013 2014 1H15 Avg Target Out performance

2.4% from markets

2015 interim results financial review

priorities

for 2015/2016

Sanlam Personal Finance

Ensure all business units are agile, cost efficient and market orientated Focus on profitable sales growth New focus on risk business in middle and affluent markets Expand Sanlam Sky distribution footprint and product range Enhance Glacier product set Vesting of MiWay Life Focus on operational efficiencies in distribution and operations Transforming with the high levels of regulatory change

2015 interim results priorities

Sanlam Emerging Markets

Shift in focus to accelerate organic growth through enhancing partnerships, expanding product range and building capacity Increasing visibility of Sanlam brand as partnership brand for markets and employees Focus for structural growth remains on Africa, India and South-East Asia Continue to explore opportunities in Francophone and Lusophone countries in Africa in line with client and broker service needs Increased collaboration on human resource development across the cluster

2015 interim results priorities

Sanlam Investments

Maintain consistent superior investment performance Leverage restructured business model in SA and refreshed Sanlam brand to grow net inflows in retail and institutional segments Focus on implemented solutions for both retail and institutional clients Continue focus on passive (Satrix) Grow Alternative Investments including Africa Investments proposition Focus on operational efficiencies in low growth environment Transformation and people development

2015 interim results priorities

Santam

Continue focus on balancing growth and underwriting profit Focus on optimising return on capital pending SAM implementation in 2016 Technical support to SEM general insurance partners to unlock value Improve operational efficiencies to reduce acquisition cost ratio Implementation of new underwriting platform for intermediated business Work with local municipalities to reduce risk on the ground

2015 interim results priorities

• utlook

Outlook for remainder of 2015

Growth in most markets to remain below longer term potential Investment market volatility to persist with low to negative returns expected for the full year, which will adversely affect fund-based fee income and return on capital portfolio High base in 2H14 likely to further dampen earnings growth for the full year Focus on fixing SEM operational challenges experienced in 1H15 Conclude AfroCentric and Shriram Insurance transactions Investment opportunities will remain under consideration Implementation of regulatory changes in SA and UK will continue to be a challenge

2015 interim results

• utlook

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