S A N L A M I N V E S T O R P R E S E N T A T I O N 2 0 0 4 | I n t - - PDF document

S A N L A M I N V E S T O R P R E S E N T A T I O N 2 0 0 4 | I n t e r i m R e s u l t s

sanlam group | 2004 interim results | 1

Index |

Page

Sanlam Group Results Presentation

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Issues Addressed and Delivered

• Sanlam Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
• Strategy & Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
• Status on Ubuntu-Botho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
• Life Cluster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
• Investment Cluster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
• Santam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
• Independent Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
• Sanlam Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Econonic Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Financial & Actuarial Review

• Salient Features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
• New Funds Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
• Net Funds Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
• Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
• Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
• Embedded Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
• Investment Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

Strategic Focus

• Life Cluster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
• Investment Cluster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
• Santam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
• Independent Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
• Sanlam Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
• Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Appendices

Sanlam Group

• Basis of presentation & Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
• Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
• Segmental Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
• Analysis of Gross Funds Received from Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
• Analysis of Gross Funds Paid to Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
• Analysis of Net Inflow of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
• Shareholders’ Funds Balance Sheet at Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
• Shareholders’ Funds Balance Sheet at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
• Embedded Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
• Balance Sheet : Sanlam Life - Life fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
• Illustrative Analysis of Potential Return on Embedded Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68

Sanlam Group Businesses

• Life Cluster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
• Investment Cluster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
• Santam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
• Independent Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74

Economic Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Contact Details & Sanlam Limited Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76

Notes |

2

| sanlam group | 2004 interim results

2004 Interim Results | 2004 Interim Results |

Notes |

sanlam group | 2004 interim results | 3

Agenda Agenda

Highlights Issues Addressed & Delivered Economic Review Financial & Actuarial Review Strategic Focus

Notes |

4

| sanlam group | 2004 interim results

Highlights Highlights

Headline earnings cents per share 29%

Core earnings cents per share 15%

Operating profit 39%

Solid performance by all operations Significant growth from Santam

Net cash inflow of R8,3bn

Life new business inflows 10% Investment Cluster new inflows 59%

Embedded value of new business R138m, 29%

Notes |

sanlam group | 2004 interim results | 5

Issues Addressed & Delivered Issues Addressed & Delivered

Notes |

6

| sanlam group | 2004 interim results

Issues addressed and delivered |

Sanlam Group

Issues addressed and delivered |

Sanlam Group

Recovery phase completed

Businesses stabilised Focus on “Back to Basics”

Delivery phase by businesses initialised

Notes |

sanlam group | 2004 interim results | 7

Issues addressed and delivered |

Sanlam Group

Issues addressed and delivered |

Sanlam Group

Issues impacting on Sanlam Share Price - 2003

Leadership

• Strategic Direction
• Banking Strategy
• ABSA co-operation - on track
• /s

Gensec / Sanlam Capital Markets

• Internationalisation
• Investment Performance
• Cost Efficiency

Notes |

8

| sanlam group | 2004 interim results

Issues addressed and delivered |

Sanlam Group

Issues addressed and delivered |

Sanlam Group

Issues impacting on Sanlam Share Price - 2003

Growth in Core Life business

• /s

NUB EV and margin, market share

• /s

Capital efficiency, management and returns

• /s

Empowerment credentials : Ubuntu-Botho

• Delivering value
• /s

Board composition

Notes |

sanlam group | 2004 interim results | 9

Issues addressed and delivered |

Strategy & Structure

Issues addressed and delivered |

Strategy & Structure

Further strengthening of Board

New Chairman Three Ubuntu-Botho appointments Other key appointments

Marketing, brand and communications centralised at Group level Employee Benefits & Individual Life separated Gensec Banking license returned; Sanlam Capital Markets

restructuring completed

Absa relationship bearing fruit

Notes |

10

| sanlam group | 2004 interim results

Issues addressed and delivered |

Status on Ubuntu-Botho

Issues addressed and delivered |

Status on Ubuntu-Botho

Transaction approved, representatives on Sanlam Board Corporate structures in place, CEO appointed Leaders from specialist interest groups approached, in process Leaders for provincial groups identified, discussions in process Sanlam key management appointed

Notes |

sanlam group | 2004 interim results | 11

Issues addressed and delivered |

Life Cluster

Issues addressed and delivered |

Life Cluster

Cost savings delivered (achieved R121m; full year >R250m) Improved new business volumes

Non life single premiums +35% Life single premiums +7% Employee benefits single premiums +10%

Much improved net cash-flows

Both on individual life and non life side Employee benefits still a concern Improved retention levels

Notes |

12

| sanlam group | 2004 interim results

Issues addressed and delivered |

Life Cluster : Individual Life

Issues addressed and delivered |

Life Cluster : Individual Life

New initiatives

Increased sales via ABSA MIA performance in line with expectations Sanlam Home Loans launched Sanlam Group Solutions –established and expanding Innovative products (eg ALSI40 locker)

Focus on our staff –Project @hand Asset/liability management more focussed Prepared for new FAIS environment

Notes |

sanlam group | 2004 interim results | 13

Issues addressed and delivered |

Life Cluster : Employee Benefits

Issues addressed and delivered |

Life Cluster : Employee Benefits

Management structure in place Base established in Johannesburg Minimise back office duplication Investment business

Improved co-operation and demarcation Entrenched client-centric approach, team strengthened

Risk benefits

Maintained profitability

Asset/liability management more focussed

Notes |

14

| sanlam group | 2004 interim results

Issues addressed and delivered |

Investment Cluster

Issues addressed and delivered |

Investment Cluster

Turn-around in funds flow gathered momentum Steady improvement in long term track record Successful property listing Mandate & restructuring of MIA funds on global multi-manager

platform ($2bn)

Octane fully integrated into Group Launch of sim.sense to retail distribution

Notes |

sanlam group | 2004 interim results | 15 0.95 0.96 0.97 0.98 0.99 1.00 1.01 1.02 1.03 12 '99 06 '00 12 '00 06 '01 12 '01 06 '02 12 '02 06 '03 12 '03 06 '04 Median SIM Unique

Issues addressed and delivered |

Investment Cluster

Issues addressed and delivered |

Investment Cluster

12m rolling SIM Domestic vs AF Domestic BIV

1.012910131

Notes |

16

| sanlam group | 2004 interim results

Issues addressed and delivered |

Investment Cluster

Issues addressed and delivered |

Investment Cluster

3/13 Income Fund 2/18 Bond Fund 3/25 Balanced Fund 1/6 Namibian Managed Prudential 1/7 Inflation Linked Fund 1/8 Small Cap Fund Collective Investments’ Rolling 24 months Performance to 30.06.2004

Notes |

sanlam group | 2004 interim results | 17

Issues addressed and delivered |

Santam

Issues addressed and delivered |

Santam

Focus on :

Underwriting and re-insurance Operational efficiency Cash and working capital management

Delivered :

Net written premium increased by 11% Net insurance result of R667 million 181% increase in headline earnings per share R940 million in cash generated by operating activities

Notes |

18

| sanlam group | 2004 interim results

Issues addressed and delivered |

Independent Financial Services

Issues addressed and delivered |

Independent Financial Services

Sanlam Financial Services (UK) restructured

£2,2m profit before tax, 102% increase in AUM to £465m

65% of Gensec Property Services sold to a consortium, including

BEE & management

New investments

Octogen Green Capital Bull & Bear Financial Service

Notes |

sanlam group | 2004 interim results | 19

Issues addressed and delivered |

Sanlam Capital Markets

Issues addressed and delivered |

Sanlam Capital Markets

Sanlam Capital Markets (SCM) bedded down

Achieved ROE target of 20% Staff compliment stabilised; expertise retained

Realising Group Synergy

Provides solutions & structures to the Group Sanlam Brand adding value in target market Strong demand for Asset / Liability solution for pension market

Notes |

20

| sanlam group | 2004 interim results

Economic Review Economic Review

Notes |

sanlam group | 2004 interim results | 21

Economic Review Economic Review

Equities once again performed weaker than fixed interest, sapping

confidence

Rand appreciated by further 10% against US dollar

Limited interest in offshore investments in spite of strong rand

Inflation rose by less than expected

greater emphasis on managing costs

SARB repo rate remained steady

After-tax return on money-market investments hardly beats

inflation

Limited shift from money-market to equity investments as risk

aversion abates

Notes |

22

| sanlam group | 2004 interim results

After-tax 3-months NCD rate vs. CPIX-Inflation After-tax 3-months NCD rate vs. CPIX-Inflation

3 5 7 9 11 13 15 1998 1999 2000 2001 2002 2003 2004 NCD 3 Month CPIX

Notes |

sanlam group | 2004 interim results | 23

Economic Review Economic Review

Growth in real disposable income of households accelerated Consumer confidence at all time high Black middle class expanding rapidly

But …

Consumers prefer to spend and not save Life products still not favoured savings vehicle

Notes |

24

| sanlam group | 2004 interim results

Growth in Retail Sales vs. Prime Rate Growth in Retail Sales vs. Prime Rate

• 4
• 2

2 4 6 8 10 12 01.00 05.00 09.00 01.01 05.01 09.01 01.02 05.02 09.02 01.03 05.03 09.03 01.04 05.04 10 11 12 13 14 15 16 17 18 Retail Sales Prime Rate

Notes |

sanlam group | 2004 interim results | 25

Economic Review |

Outlook for remainder of 2004

Economic Review |

Outlook for remainder of 2004

Economic conditions still improving, but momentum to level off Short-term interest rates to maintain current levels for extended

period

Bond yields at fair value Equity prices to rise modestly, depending on international trend Rand to depreciate moderately: commodity prices hold the key Growth in household disposable income to slow down

Notes |

26

| sanlam group | 2004 interim results

Financial & Actuarial Review Financial & Actuarial Review

Notes |

sanlam group | 2004 interim results | 27

Salient Features Salient Features

Rand Million 6 months 6 months 12 months June 2004 June 2003 Dec 2003

New funds received 27 143 18 234 38 786 Net inflow of funds 8 263 558 4 956 Operating Profit before tax 1 694 1 222 2 405 Core Earnings 1 599 1 373 2 641 Headline Earnings JSE 1 669 1 283 2 351 LTRR 1 916 1 681 3 291

Notes |

28

| sanlam group | 2004 interim results

Salient Features Salient Features

Rand Million 6 months 6 months 12months June 2004 June 2003 Dec 2003

Life new business APE 917 882 1 832 New business EV 138 107 232 New business EV Margin % 15,0 12,1 12,7

Individual life (SA)

16,3 12,7 12,4

Employee benefits (SA)

10,6 8,7 13,4

Rest of the world

8,5 22,2 15,8 Embedded Value cps 1 129 1 023 1 147 Growth from Life business % 16,6 13,9 24,7 ROEV (EV in cps) % 7,4 5,4 14,6

Notes |

sanlam group | 2004 interim results | 29

New Funds Received New Funds Received

Rand Million 6 months 6 months 12 months June 2004 June 2003 Dec 2003

Life business 5 367 4 884 10 012 Investment 18 192 10 272 22 019 Short term 3 584 3 078 6 755 TOTAL 27 143 18 234 38 786

Notes |

30

| sanlam group | 2004 interim results

Net Funds Flow Net Funds Flow

Rand Million 6 months 6 months 12 months June 2004 June 2003 Dec 2003

Life business (1 747) (4 024) (5 027) Investment 8 488 3 662 7 603 Short term 1 522 920 2 380 TOTAL 8 263 558 4 956 Total Inflows 32 415 23 134 48 883 Total Outflows 24 149 22 576 43 927

Notes |

sanlam group | 2004 interim results | 31

Operating Profit Operating Profit

Rand Million 6 months 6 months 12 months June 2004 June 2003 Dec 2003

Life Cluster 847 750 1 467 Santam 667 281 735 Investment Cluster 212 114 270 Independent Financial Services 33 15 (1) Sanlam Capital Markets 50 50 55 Corporate income 41 42 73 Corporate expenses (79) (62) (120) Total continuing operations 1 771 1 190 2 479 Discontinuing operations (77) 32 (74) 1 694 1 222 2 405

Notes |

32

| sanlam group | 2004 interim results

Income Statement Income Statement

Rand Million 6 months 6 months 12 months June 2004 June 2003 Dec 2003

Net operating profit 925 756 1 402 Equity accounted earnings 448 375 781 Investment income 226 242 458 Core Earnings 1 599 1 373 2 641 Fin assistance to p/holder funds – (290) (290) Net gains on derivatives 70 200 – HEADLINE EARNINGS 1 669 1 283 2 351 Net operating profit 925 756 1 402 LTRR Investment return 991 925 1 889 LTRR EARNINGS 1 916 1 681 3 291

Notes |

sanlam group | 2004 interim results | 33

Embedded Value Embedded Value

Rand Million June 2004 June 2003 Dec 2003

Shareholders’ funds at fair value 23 958 20 658 22 819 Adjustment to fair value (883) (472) (950) Shareholders’ adjusted assets 23 075 20 186 21 869 Net Value of in-force business 7 830 6 655 7 793 Sanlam Group EV 30 905 26 841 29 662 Embedded Value cps 1 129 1 023 1 147 Number of Shares million 2 737 2 625 2 585

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

Net value of in-force business 7 830 6 655 7 793

• Value of in-force business

9 237 8 010 9 143

• Cost of capital at risk

(1 407) (1 355) (1 350)

Notes |

34

| sanlam group | 2004 interim results

Embedded Value Earnings Embedded Value Earnings

Rand Million June 2004 June 2003 Dec 2003

Embedded value from new business 138 100 218 Expected return from existing business 582 527 1 153 Operating variances & assumption changes 154 52 251 Embedded value earnings from life operations 874 679 1 622 Economic assumption changes (48) 137 93 Investment variances (204) (363) (50) Growth from life business 622 453 1 665 Growth from life business % 16,6* 13,9* 24,7

* annualised

Notes |

sanlam group | 2004 interim results | 35

Embedded Value Earnings

(…/continued)

Embedded Value Earnings

(…/continued)

Rand Million June 2004 June 2003 Dec 2003

Growth from life insurance business 622 453 1 665 Investment return on shareholders’ adjusted net assets 1 031 268 2 226 Embedded value earnings 1 653 721 3 891 Dividends paid (1 082) (972) (972) Net Capital raised & treasury shares 672 5 (344) Change in Sanlam Group embedded value 1 243 (246) 2 575 ROEV % 11,5* 5,4* 14,4

* annualised

June 2004 June 2003 December 2003

% % %

Return on Embedded Value 11,5 5,4 14,4

• Growth in Net Asset Value

7,2 2,0 8,2

• Growth in Value of In-force

4,3 3,4 6,2

Notes |

36

| sanlam group | 2004 interim results

Investment Profile |

June 2004

Investment Profile |

June 2004

Strategic Investments :

R’m %

Santam

47,3% 2 613 10,9

Investment Cluster

2 079 8,7

Sanlam Capital Markets

441 1,8

Independent Financial Services

386 1,6 5 519 23,0 ABSA 18,8% 6 254 26,1 11 773 49,1 Net Corporate Assets & Other Investments 12 185 50,9 23 958 100,0

Notes |

sanlam group | 2004 interim results | 37

Strategic Focus Strategic Focus

Notes |

38

| sanlam group | 2004 interim results

Strategic Focus |

Life Cluster : Individual Life

Strategic Focus |

Life Cluster : Individual Life

Increasing NUB EV by improving distribution

General

Align incentives with Sanlam Life goals Strategy to better utilise Sanlam Direct Retain focus on distribution costs vs volumes Focus on Gauteng market More client facing units/personnel

Notes |

sanlam group | 2004 interim results | 39

Strategic Focus |

Life Cluster : Individual Life

Strategic Focus |

Life Cluster : Individual Life

Increasing NUB EV by improving distribution

• General

General General

Brokers

Continued focus on ABSA Black broker networks i-compli to simplify process for brokers (loyalty) Leverage off Innofin relationship with investment brokers

Notes |

40

| sanlam group | 2004 interim results

Strategic Focus |

Life Cluster : Individual Life

Strategic Focus |

Life Cluster : Individual Life

Increasing NUB EV by improving distribution

• General

General General

• Brokers

Brokers Brokers

Sanlam Financial Advisers

Grow “new market” agency force Segmented market focus Position as “trusted adviser”

Notes |

sanlam group | 2004 interim results | 41

Strategic Focus |

Life Cluster : Individual Life

Strategic Focus |

Life Cluster : Individual Life

Increasing NUB EV by improving distribution

• General

General General

• Brokers

Brokers Brokers

• Sanlam Financial Advisers

Sanlam Financial Advisers Sanlam Financial Advisers

Sanlam Group Solutions/Entry level focus

Double capacity to 250 advisers Acquisitions / alliances in entry level Multiple distribution channels to be established Particular focus on lapse containment

Notes |

42

| sanlam group | 2004 interim results

Strategic Focus |

Life Cluster : Employee Benefits

Strategic Focus |

Life Cluster : Employee Benefits

Deeper evidence of transformation Distribution

Position to tackle Gauteng market

Broker/direct conflict

Emphasise broker channel for middle market Reposition Sanlam Consulting Actuaries outside the solution

factory

Mega fund market

Establish targeted institutional sales force Diversify skill set to leverage off BEE credentials

Extracting flows and value from JVs

Union relationship Independent Financial Services investments

Notes |

sanlam group | 2004 interim results | 43

Strategic Focus |

Investment Cluster

Strategic Focus |

Investment Cluster

Improve long term performance track record Integrate global multi-manager platform Finalise private equity product strategy Successfully address re-alignment of LISP companies Align distribution support

Notes |

44

| sanlam group | 2004 interim results

Strategic Focus |

Santam

Strategic Focus |

Santam

Growth of existing business

Profitable growth of RSA market share Further optimise reinsurance program Expand Santam’s international operations Make selected strategic investments

Increase client focus

Focused product solutions for target market Cost competitive products and delivery Client service and support Broker relations

Enhance Capital management and investment philosophy

Notes |

sanlam group | 2004 interim results | 45

Strategic focus |

Independent Financial Services

Strategic focus |

Independent Financial Services

Identify deals with potential large business flows Develop investment/consolidation strategy for the fragmented

broker environment

Continued focus on improved business flows to the Group

Notes |

46

| sanlam group | 2004 interim results

Strategic Focus |

Sanlam Capital Markets

Strategic Focus |

Sanlam Capital Markets

Operational excellence

ROE target of 20% for 2004 Operating profit growth

Strengthen Group synergies further

Leverage off Group institutional client-base Credit as an asset class seen as an opportunity for Sanlam

Outward focus

Establish SCM Brand in the market Market solutions offering to institutions

Notes |

sanlam group | 2004 interim results | 47

Strategic Focus | Strategic Focus |

Sanlam Group

Notes |

48

| sanlam group | 2004 interim results

Driving increased ROE/ROEV Driving increased ROE/ROEV

Santam SIM/SCM ABSA Gearing Structural Growth Return to Shareholders Acquisition Maintenance / Admin ABSA Co-operation Ubuntu-Botho Distrib Efficiencies, JV’s Investment Performance Top Top-

• Line Growth

Line Growth Costs Costs Investment Returns Investment Returns Application of Excess Capital Application of Excess Capital Balanced Portfolio Balanced Portfolio Strategic Investments Strategic Investments Earnings Earnings Capital Capital Efficiency Efficiency ROE/ ROE/ ROEV ROEV

Notes |

sanlam group | 2004 interim results | 49

Conclusion |

Capital Efficiency

Conclusion |

Capital Efficiency

Achieving required ROE/ROEV implies :

Superior operating performance including new business growth Optimal strategic capital management

Priorities for strategic capital management

Analysis of structural growth opportunities Potential introduction of gearing to enhance Life ROEV and

fund structural growth

In absence of investments into growth, reduce capital through

share buy back

Capital investment decision driven by ROE at Group level

Definitive plans on improving capital efficiency at 2004 results

announcement

Notes |

50

| sanlam group | 2004 interim results

sanlam group | 2004 interim results | 51

Notes |

Notes |

52

| sanlam group | 2004 interim results

S A N L A M G R O U P | A P P E N D I C E S

54 | sanlam group | 2004 interim results BASIS OF PRESENTATION AND ACCOUNTING POLICIES Accounting Policies

The accounting policies adopted for the purposes of the financial statements comply with South African Statements of Generally Accepted Accounting Practice, specifically AC127 on interim financial reporting, and with applicable legislation. Except for the change in the presentation of deferred tax relating to the policyholder funds detailed below, these accounting policies are consistent with those of the previous year. 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 were no material changes in the financial soundness valuation basis or embedded value calculation methodology since 31 December 2003.

Changes in Reporting Structures and Accounting Policies

The results of Innofin have been transferred from the Investment Cluster to the Life Cluster. Results from operations of prior periods have been restated

• accordingly. For June 2003 R10 million and for December 2003 R22 million of profit is transferred from the Investment Cluster to the Life Cluster. The

embedded value calculation now also includes the value of in-force life insurance business written by Innofin on Sanlam Life's license. The non-insurance business is still valued on a fair value approach. As the regulatory requirements for Sanlam's acquisition of Merchant Investors Assurance were only satisfied late in December 2003 the results of the company were not consolidated into the Sanlam Group at year-end. The full investment was included at the cost of R383 million in equity investments. From June 2004, only the net asset value of MIA will be included in the consolidated results with an accompanying adjustment to goodwill. In the embedded value calculation the goodwill is reversed and replaced by the value of MIA's in-force business. Following the restructuring of the Group's international advisory and asset management business, Sanlam has, with effect from 1 July 2003, reduced its holding in the advisory and related businesses (Sanlam Financial Services UK) to about 60%. Sanlam's Investment Cluster regained a 100% holding in the asset and multi manager components. The results of the investment manager are included with the Investment Cluster for the 2004 year. For 2003 the results are included in the Independent Financial Services Cluster for the first six months and in the Investment Cluster for the second half of the year. The accounting policy for deferred tax in respect of the policyholder funds has been amended to comply with a directive issued by the Financial Services

• Board. In terms of the directive deferred tax assets and liabilities should be recognised and separately disclosed for all temporary differences of the

policyholder funds. Deferred tax was previously included in and disclosed as part of long-term policy liabilities. Comparative figures have been restated to transfer the applicable deferred tax balances from long-term policy liabilities to a deferred tax liability. The migration to new International Financial Reporting Standards (IFRS) for insurers will, in its full extent, last a number of years. IFRS4, the standard for the first phase of IFRS on insurance contracts was only recently issued with an effective date of 1 January 2005. Future results may be impacted, as the development of guidance for the long-term insurance industry, both from an accounting and actuarial perspective, is an ongoing process. As was the case in the 2003 results, the Gensec results are split between continuing (Sanlam Capital Markets) and discontinuing operations. The results of all the operations are included in headline earnings and only the expenses directly attributable to termination of operations are excluded from headline earnings. In the 2003 year-end results the group introduced the concept of core earnings. Core earnings comprise the Group's results from operations, equity- accounted income and investment income, and as such it represents the headline earnings previously published for June 2003. To maintain comparability we will continue to report core earnings in 2004. Due to the distorted result achieved by including the value adjustment of derivatives in headline earnings, whilst the value adjustment of the underlying hedged portfolio of shares is taken directly to equity, this amount has also been excluded from core earnings.

sanlam group | 2004 interim results | 55

Sanlam Group Income Statement |

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

FUNDS RECEIVED FROM CLIENTS 32 415 23 134 48 883

Result from operations before tax 1 694 1 222 2 405 Tax on result from operations (517) (354) (724) Result from operations after tax 1 177 868 1 681 Minority shareholders' interest (252) (112) (279) NET RESULT FROM OPERATIONS 925 756 1 402 Net investment income 226 242 458

• Investment income

335 370 699

• Tax on investment income

(52) (77) (131)

• Minority shareholders' interest

(57) (51) (110) Net equity-accounted earnings 448 375 781

• Equity-accounted earnings

611 467 1 025

• Tax on equity-accounted earnings

(163) (92) (244) CORE EARNINGS 1 599 1 373 2 641 Financial assistance provided to policyholders' funds – (290) (290) Net investment surpluses on derivative instruments 70 200 –

• Investment surpluses on derivative instruments

77 242 –

• Tax on investment surpluses on derivative instruments

(7) (42) – HEADLINE EARNINGS 1 669 1 283 2 351 Net realised investment surpluses 43 (83) 134

• Investment surpluses

93 (96) 215

• Tax on investment surpluses

(20) 10 (56)

• Minority shareholders' interest

(30) 3 (25) Net discontinuance costs (13) – (77)

• Discontinuance costs

(13) – (108)

• Tax on discontinuance costs

– – 31 Impairment of investments and goodwill (57) (231) (248) Amortisation of goodwill (179) (150) (277) ATTRIBUTABLE EARNINGS 1 463 819 1 883 Diluted earnings per share (cents):

• Net result from operations

34,8 28,7 53,2

• Core earnings

60,2 52,1 100,2

• Headline earnings

62,8 48,7 89,2

• Attributable earnings

55,1 31,1 71,5 Basic attributable earnings per share 55,5 31,2 72,1 Adjusted weighted average number of shares (million) 2 657,2 2 633,9 2 634,5 ADJUSTED HEADLINE EARNINGS based on the LTRR (R million) 1 916 1 681 3 291 Adjusted headline earnings based on the LTRR (cents per share) 72,1 63,8 124,9

56 | sanlam group | 2004 interim results Sanlam Life Santam Sanlam Investments

Rand Million 2004 2003 2004 2003 2004 2003

Financial services income (1) 3 556 3 422 3 689 3 287 459 314 Sales remuneration ( 479) ( 541) ( 435) ( 418) – – Income after sales remuneration 3 077 2 881 3 254 2 869 459 314 Underwriting policy benefits (1 294) (1 183) (1 997) (2 171) – – Administration costs ( 936) ( 948) ( 590) ( 417) ( 247) ( 200) Operating profit before tax 847 750 667 281 212 114 Tax on operating profit ( 223) ( 201) ( 217) ( 99) ( 57) ( 35) Operating profit after tax 624 549 450 182 155 79 Minority shareholders' interest – (3) ( 243) ( 111) ( 1) – NET OPERATING PROFIT 624 546 207 71 154 79 Net investment income 434 452 50 42 – 1 Investment income 466 494 118 102 – 1 Tax on investment income ( 32) ( 42) ( 11) ( 9) – – Minority shareholders' interest – – ( 57) ( 51) – – Net equity accounted earnings – – 2 ( 4) – – Equity accounted earnings – – 2 ( 4) – – Tax on equity accounted earnings – – – – – – CORE EARNINGS 1 058 998 259 109 154 80 Financial assistance to policyholders – ( 290) – – – – Net gains on derivatives 77 242 – – – – Tax on derivatives ( 7) ( 42) – – – – HEADLINE EARNINGS 1 128 908 259 109 154 80 Net investment surpluses 16 ( 81) 26 ( 2) – ( 1) Investment surpluses realised 16 ( 91) 76 ( 5) – ( 1) Tax on investment surpluses – 10 ( 20) – – – Minority shareholders' interest – – ( 30) 3 – – Net discontinuance costs – – – – – – Impairment of investments and goodwill – – – – – – Amortisation of goodwill ( 24) – ( 16) ( 6) ( 7) ( 12) ATTRIBUTABLE EARNINGS 1 120 827 269 101 147 67 Ratios Admin ratio (2) 30,4% 32,9% 18,1% 14,5% 53,8% 63,7% Net operating margin (3) 27,5% 26,0% 20,5% 9,8% 46,2% 36,3% Net operating profit eps Adjusted weighted average number of shares (million) Net operating profit 23,5 20,8 7,8 2,7 5,8 2,9

(1) Financial services income for 2003 has been restated to exclude investment fees payable, which was previously netted against income, but is now included in administration costs. (2) Administration costs (excluding Sanlam Life restructuring cost) as a percentage of income earned by the shareholders' funds less sales remuneration. (3) Operating profit (excluding Sanlam Life restructuring cost) as a percentage of income earned by the shareholders' funds less sales remuneration.

sanlam group | 2004 interim results | 57

Sanlam Group Shareholders’ Funds |

Segmental Income Statement for the six months ended 30 June 2004

Sanlam Capital Discontinuing Independent Financial Corporate & other TOTAL Markets Operations Services

2004 2003 2004 2003 2004 2003 2004 2003 2004 2003

115 142 ( 42) 152 336 348 41 42 8 154 7 707 – – – – – – – – ( 914) ( 959) 115 142 ( 42) 152 336 348 41 42 7 240 6 748 – – – – – – – – (3 291) (3 354) ( 65) ( 92) ( 35) ( 120) ( 303) ( 333) ( 79) ( 62) (2 255) (2 172) 50 50 ( 77) 32 33 15 ( 38) ( 20) 1 694 1 222 ( 10) ( 10) (10) 9 ( 9) ( 9) 9 ( 9) ( 517) ( 354) 40 40 ( 87) 41 24 6 ( 29) ( 29) 1 177 868 – – – – ( 8) 2 – – ( 252) ( 112) 40 40 ( 87) 41 16 8 ( 29) ( 29) 925 756 – – – – – – ( 258) ( 253) 226 242 – – – – – – ( 249) ( 227) 335 370 – – – – – – ( 9) ( 26) ( 52) ( 77) – – – – – – – – ( 57) ( 51) – – – – – – 446 379 448 375 – – – – – – 609 471 611 467 – – – – – – ( 163) ( 92) ( 163) ( 92) 40 40 ( 87) 41 16 8 159 97 1 599 1 373 – – – – – – – – – ( 290) – – – – – – – 77 242 – – – – – – – ( 7) ( 42) 40 40 ( 87) 41 16 8 159 97 1 669 1 283 – – – – – – 1 1 43 ( 83) – – – – – – 1 1 93 ( 96) – – – – – – – – ( 20) 10 – – – – – – – – ( 30) 3 – – – – – – ( 13) – ( 13) – – – ( 57) ( 231) – – – – ( 57) ( 231) – – – ( 3) ( 41) ( 43) ( 91) ( 86) ( 179) ( 150) 40 40 ( 144) ( 193) ( 25) ( 35) 56 12 1 463 819 56,5% 64,8% n/a 78,9% 90,2% 95,7% 192,7% 147,6% 31,1% 32,2% 43,5% 35,2% n/a 21,1% 9,8% 4,3% (92,7%) (47,6%) 23,4% 18,1% 2 657,2 2 633,9 1,5 1,5 (3,3) 1,6 0,6 0,3 (1,1) (1,1) 34,8 28,7

Analysis of Gross Funds Received from Clients |

Total Life Insurance* Life Licence* Other

30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2004 2003 2003 2004 2003 2003 2004 2003 2003 2004 2003 2003

NEW BUSINESS : Life Cluster 8 777 7 324 15 361 5 355 4 751 9 698 – 37 165 3 422 2 536 5 498 Individual Life 3 102 3 245 6 297 3 102 3 245 6 297 – – – – – – Recurring 671 717 1 478 671 717 1 478 – – – – – – Single 1 568 1 752 3 263 1 568 1 752 3 263 – – – – – – Continuations 863 776 1 556 863 776 1 556 – – – – – – Employee Benefits 1 059 970 2 291 1 059 970 2 291 – – – – – – Recurring 38 45 127 38 45 127 – – – – – – Single 1 021 925 2 164 1 021 925 2 164 – – – – – – Sanlam Namibia Ltd 359 248 475 85 36 80 – – – 274 212 395 Life 85 36 80 85 36 80 – – – – – – Unit Trusts 274 212 395 – – – – – – 274 212 395 MIA 305 – – 305 – – – – – – – – Innofin 3 952 2 861 6 298 804 500 1 030 – 37 165 3 148 2 324 5 103 Investment Cluster 12 052 7 650 15 170 – – – 12 96 149 12 040 7 554 15 021 Life 12 96 149 – – – 12 96 149 – – – Recurring – – – – – – – – – – – – Single 117 116 214 – – – 117 116 214 – – – Less: Inter group switches (105) (20) (65) – – – (105) (20) (65) – – – Unit Trust 4 717 3 783 7 848 – – – – – – 4 717 3 783 7 848 Cash funds 2 053 1 363 3 092 – – – – – – 2 053 1 363 3 092 Equity funds 219 376 883 – – – – – – 219 376 883 Wholesale business 891 739 1 363 – – – – – – 891 739 1 363 White Label 1 554 1 305 2 510 – – – – – – 1 554 1 305 2 510 Segregated 7 311 2 917 7 046 – – – – – – 7 311 2 917 7 046 SIM Wholesale 5 036 2 334 5 040 – – – – – – 5 036 2 334 5 040 Sanlam Private Investment 949 188 974 – – – – – – 949 188 974 Multi-Manager 1 326 395 1 032 – – – – – – 1 326 395 1 032 Sanlam International 12 854 127 – – – – – – 12 854 127 SFS UK 2 730 182 1 500 – – – – – – 2 730 182 1 500 Santam 3 584 3 078 6 755 – – – – – – 3 584 3 078 6 755 Total new business 27 143 18 234 38 786 5 355 4 751 9 698 12 133 314 21 776 13 350 28 774 RECURRING PREMIUMS ON EXISTING FUNDS: Life Cluster 5 109 4 765 9 885 5 109 4 765 9 885 – – – – – – Individual 3 444 3 388 7 065 3 444 3 427 7 065 – – – – – – Group 1 306 1 312 2 493 1 306 1 338 2 493 – – – – – – Namibia 163 65 327 163 – 327 – – – – – – Individual 97 39 203 97 – 203 – – – – – – Group 66 26 124 66 – 124 – – – – – – MIA 196 – – 196 – – – – – – – – Investment Cluster 160 135 212 – – – 160 135 212 – – – Total Funds Received 32 412 23 134 48 883 10 464 9 516 19 583 172 268 526 21 776 13 350 28 774

* Life licence business relates to investment products provided by Sanlam Investment Management by means of a life insurance policy where there is very little or no insurance risk.

58 | sanlam group | 2004 interim results

Analysed per type of business or license

30 June 30 June 31 Dec Rand Million 2004 2003 2003

Life business 5 367 4 884 10 012 Investment 18 192 10 272 22 019 Short term 3 584 3 078 6 755 Total new business 27 143 18 234 38 786 Recurring premiums on existing business 5 269 4 900 10 097 Total funds received 32 412 23 134 48 883 New business premiums used in the calculation of APE:

30 June 30 June 31 Dec Rand Million 2004 2003 2003

Recurring premiums 454 484 1 026 Individual Life 671 717 1 478 MIA 3 – – Sanlam Namibia 13 10 26 Less: Index Growth (289) (305) (643) Add: Optional Reductions 18 17 38 Employee Benefits 38 45 127 Single Premiums 4 630 3 979 8 067 Individual Life 2 431 2 528 4 819 MIA 302 – – Sanlam Namibia 72 26 54 Employee Benefits 1 021 925 2 164 Innofin (Illa’s) 804 500 1 030 Total premiums used to calculate APE 5 084 4 463 9 093 APE 917 882 1 832 sanlam group | 2004 interim results | 59

60 | sanlam group | 2004 interim results

Analysis of Gross Funds Paid to Clients |

Total Life Insurance* Life Licence* Other

30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2004 2003 2003 2004 2003 2003 2004 2003 2003 2004 2003 2003

Life Cluster 13 434 13 669 25 322 1 1 421 12 279 22 581 – – – 2 013 1 390 2 741 Individual Life 6 818 8 913 15 773 6 818 8 913 15 773 – – – – – – Surrenders 1 367 1 723 3 081 1 367 1 723 3 081 – – – – – – Other 5 451 7 190 12 692 5 451 7 190 12 692 – – – – – – Employee Benefits 3 511 2 897 5 387 3 511 2 897 5 387 – – – – – – Terminations & tax

• n retirem. Funds

1 288 867 1 256 1 288 867 1 256 – – – – – – Other benefits 2 223 2 030 4 131 2 223 2 030 4 131 – – – – – – Sanlam Namibia Ltd 362 418 984 223 280 677 – – – 139 138 307 Life 223 280 677 223 280 677 – – – – – – Unit Trusts 139 138 307 – – – – – – 139 138 307 MIA 506 – – 506 – – – – – – – – Innofin 2 237 1 441 3 178 363 189 744 – – – 1 874 1 252 2 434 Investment Cluster 8 645 6 749 14 160 – – – 962 1 529 2 623 7 683 5 220 1 1 537 Life 962 1 529 2 623 – – – 962 1 529 2 623 – – – Terminations & tax

• n retirem. Funds

665 1 451 3 909 – – – 665 1 451 3 909 – – – Other benefits 330 296 529 – – – 330 296 529 – – – Less: Inter group switches (33) (218) (1 815) – – – (33) (218) (1 815) – – – Unit Trust 4 333 3 107 6 634 – – – – – – 4 333 3 107 6 634 Cash funds 1 907 1 045 2 235 – – – – – – 1 907 1 045 2 235 Equity funds 420 362 1 228 – – – – – – 420 362 1 228 Wholesale business 804 930 1 563 – – – – – – 804 930 1 563 White label 1 202 770 1 608 – – – – – – 1 202 770 1 608 Segregated 3 286 1 982 4 721 – – – – – – 3 286 1 982 4 721 Sanlam International 64 131 182 – – – – – – 64 131 182 SFS UK 8 – 138 – – – – – – 8 – 138 Santam 2 062 2 158 4 375 – – – – – – 2 062 2 158 4 375 Consolidation – – (68) – – – – – (68) – – – 24 149 22 576 43 927 1 1 421 12 279 22 581 962 1 529 2 623 1 1 766 8 768 18 791

* Life licence business relates to investment products provided by Sanlam Investment Management by means of a life insurance policy where there is very little or no insurance risk.

Analysed per type of business or license

30 June 30 June 31 Dec Rand Million 2004 2003 2003

Life business 12 383 13 808 25 136 Investment 9 704 6 610 14 416 Short term 2 062 2 158 4 375 Total payments to clients 24 149 22 576 43 927

sanlam group | 2004 interim results | 61

Analysis of Net Inflow of Funds |

Total Life Insurance* Life Licence* Other

30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2004 2003 2003 2004 2003 2003 2004 2003 2003 2004 2003 2003

Life Cluster 452 (1 580) (76) (957) (2 763) (2 998) – 37 165 1 409 1 146 2 757 Individual Life (272) (2 280) (2 411) (272) (2 280) (2 411) – – – – – – Employee Benefits (1 146) (615) (603) (1 146) (615) (603) – – – – – – Sanlam Namibia Ltd 160 (105) (182) 25 (179) (270) – – – 135 74 88 MIA (5) – – (5) – – – – – – – – Innofin 1 715 1 420 3 120 441 311 286 – 37 165 1 274 1 072 2 669 Investment Cluster 3 567 1 036 1 222 – – – (790) (1 298) (2 262) 4 357 2 334 3 484 Life (Employee Benefit Life licence) (790) (1 298) (2 262) – – – (790) (1 298) (2 262) – – – Total (718) (1 496) (4 012) – – – (718) (1 496) (4 012) – – – Less: Inter group switches (72) 198 1 750 – – – (72) 198 1 750 – – – Unit Trust 384 676 1 214 – – – – – – 384 676 1 214 Cash funds 146 318 857 – – – – – – 146 318 857 Equity funds (201) 14 (345) – – – – – – (201) 14 (345) Wholesale business 87 (191) (200) – – – – – – 87 (191) (200) White label 352 535 902 – – – – – – 352 535 902 Segregated 4 025 935 2 325 – – – – – – 4 025 935 2 325 Sanlam International (52) 723 (55) – – – – – – (52) 723 (55) SFS UK 2 722 182 1 362 – – – – – – 2 722 182 1 362 Santam 1 522 920 2 380 – – – – – – 1 522 920 2 380 Consolidation – – 68 – – – – – 68 – – – 8 263 558 4 956 (957) (2 763) (2 998) (790) (1 261) (2 029) 10 010 4 582 9 983

* Life licence business relates to investment products provided by Sanlam Investment Management by means of a life insurance policy where there is very little or no insurance risk.

Analysed per type of business or license

30 June 30 June 31 Dec Rand Million 2004 2003 2003

Life business (1 747) (4 024) (5 027) Investment 8 488 3 662 7 603 Short term 1 522 920 2 380 Total net outflows 8 263 558 4 956

Shareholders’ Funds Balance Sheet at Net Asset Value |

All businesses consolidated at Net Asset Value

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

ASSETS

Non-current assets Fixed assets 203 288 220 Owner-occupied properties 386 353 390 Goodwill 2 093 1 840 1 855 Investments 26 539 24 390 26 010

• Investment properties

559 611 662

• Equities

15 907 12 575 14 762

• Public sector stocks and loans

2 388 1 546 1 916

• Other interest-bearing investments

7 685 9 658 8 706 Deferred tax 294 187 256 General insurance provisions 1 939 1 945 2 302 Current assets 24 658 28 974 30 081 Total assets 56 112 57 977 61 114

EQUITY AND LIABILITIES

Capital and reserves: Shareholders’ funds 22 930 20 208 21 687 Minority shareholders’ and policyholders’ interest 2 406 1 932 2 217 Term finance 4 508 4 951 4 290 Deferred tax 333 38 289 General insurance provisions 4 963 4 580 5 156 Current liabilities 20 972 26 268 27 565 Total equity and liabilities 56 112 57 977 61 114

GROUP STATEMENT OF CHANGES IN EQUITY

Shareholders’ Funds at beginning of the period 21 687 20 651 20 651 Attributable earnings 1 463 819 1 883 Dividends paid (1 082) (972) (972) Net unrealised investment surpluses (1) 316 (260) 693 Movement in foreign currency translation reserve (70) (29) (211) Movement in cost of treasury shares held (2) 138 5 (344) Net realised investment surplus on treasury shares (370) – – New shares issued (3) 866 – – Cost relating to share issuance (18) – – Adoption of AC133 – (6) (13) Shareholders’ Funds at end of the period 22 930 20 208 21 687

(1) Upon the introduction of AC133, investments were classified as available-for-sale and Sanlam elected to take unrealised investment surpluses directly to equity. (2) Comprises movement in cost of shares held by subsidiaries and the share incentive trust. (3) Comprises 113 million new ordinary shares at R7,65 per share, 56,5 million “A” deferred shares at R0,01 per share and 52 million “A” preference shares at R0,01 per share.

62 | sanlam group | 2004 interim results

sanlam group | 2004 interim results | 63

Shareholders’ Funds Balance Sheet at Fair Value |

Group businesses listed below not consolidated, but reflected as investments at fair value

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

ASSETS

Fixed assets 103 134 113 Owner-occupied properties 369 333 370 Goodwill 353 – – Investments Sanlam businesses 5 664 5 471 6 237 Investment Management 2 079 1 603 1 904 Sanlam Financial Services 356 741 378 Sanlam Capital Markets 441 1 177 1 001 Gensec Properties 30 71 52 Innofin 145 62 214 Santam 2 613 1 817 2 688 Associated company - Absa 6 254 4 545 5 181 Joint venture - Safair Lease Finance 298 – – Other Investments Other equities 6 815 5 164 6 670 Public sector stocks and loans 2 388 1 534 1 916 Investment properties 505 611 607 Other interest-bearing investments 6 142 7 287 6 033 Deferred tax 150 – 3 Current and other assets 6 413 4 714 5 296 Total assets 35 454 29 793 32 426

EQUITY AND LIABILITIES

Shareholders’ funds 23 958 20 658 22 819 Term finance 4 819 4 696 4 501 Deferred tax 391 5 298 Current liabilities 6 286 4 434 4 808 Total equity and liabilities 35 454 29 793 32 426

SANLAM BUSINESSES

Excess of Fair Value over Net Asset Value

The shareholders' funds balance sheet at fair value includes the value of the companies below based on directors' valuation, apart from Santam, which is valued according to ruling share prices June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

Net asset value of business 3 413 3 738 3 772 Investment Management (1) 367 311 368 Sanlam Financial Services 378 415 402 Sanlam Capital Markets 441 1 376 1 001 Gensec Properties 34 51 28 Innofin 136 43 152 Santam 2 057 1 542 1 821 Goodwill recognised in respect of above businesses 1 112 1 283 1 198 Deferred capital gains tax on investments at fair value 111 – 135 Revaluation of interest in businesses to fair value 1 028 450 1 132 Fair value of businesses 5 664 5 471 6 237

(1) Included in Investment Management are Sanlam Investment Management, Sanlam Collective Investments, Tasc and the Investment Cluster's international businesses.

Embedded Value |

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

1. EMBEDDED VALUE

Sanlam Group shareholders' funds at fair value 23 958 20 658 22 819 Adjustment for discounting capital gains tax (1) 111 – 91 Adjustment to include business under value of in-force (2) (353) – (449) Present value of strategic corporate expenses (3) (641) (472) (592) Sanlam Group shareholders' adjusted net assets 23 075 20 186 21 869 Net value of life insurance business in force (2) 7 830 6 655 7 793

• Value of life insurance business in force

9 237 8 010 9 143

• Cost of capital at risk

(1 407) (1 355) (1 350) Sanlam Group embedded value 30 905 26 841 29 662

• Embedded value per share (cents)

1 129 1 023 1 147

• Number of shares (million)

2 737 2 625 2 585

2. EMBEDDED VALUE EARNINGS

Embedded value from new life insurance business (4) 138 100 218 Earnings from existing life insurance business 736 579 1 404

• Expected return

582 527 1 153

• Operating experience variations (5)

113 110 241

• Operating assumption changes (5)

41 (58) 10 Embedded value earnings from life operations 874 679 1 622 Economic assumption changes (48) 114 99 Tax changes – 23 (6) Investment variances (including change in long-term asset mix) (183) (363) (50) Exchange rate movements (21) – – Growth from life insurance business 622 453 1 665 Investment return on shareholders' adjusted net assets (6) 1 031 268 2 226

Total embedded value earnings before dividends are paid or capital raised

1 653 721 3 891 Dividends paid (1 082) (972) (972) Capital raised 848 – – Cost of treasury shares acquired (176) 5 (344) Change in Sanlam Group embedded value 1 243 (246) 2 575 Growth from life insurance business as a % of beginning value of in-force 16,6%* 13,9%* 24,7% Return on embedded value (7) 11,5%* 5,4%* 14,4% Return on embedded value (per share) (7) 7,4%* 5,4%* 14,6%

* annualised

64 | sanlam group | 2004 interim results

… / embedded value

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

3. NEW BUSINESS EMBEDDED VALUE

Value of new business 149 120 260 Individual business - RSA 124 103 200 Group business - RSA 19 15 57 Rest of the world (8) 6 2 3 Cost of Capital at risk (11) (13) (28) Individual business - RSA (5) (10) (17) Group business - RSA (4) (3) (11) Rest of the world (8) (2) – – Net value of new business (4) 138 107 232 Net value of new business as a percentage

• f the annual premium equivalent

Annual Premium Equivalent (APE) (9) 917 882 1 832 Individual business - RSA 729 735 1 470 Group business - RSA 141 138 343 Rest of the world (8) 47 9 19 Net value of new business 138 107 232 Individual business - RSA 119 93 183 Group business - RSA 15 12 46 Rest of the world (8) 4 2 3 APE margin % 15,0 12,1 12,7 Individual business - RSA % 16,3 12,7 12,4 Group business - RSA % 10,6 8,7 13,4 Rest of the world (8) % 8,5 22,2 15,8

4. SENSITIVITY

% Change

Rand Million

from base

Value of in-force business less cost of capital at risk Base value 7 830

• Risk discount rate increases by 1,0% to 13,9%

7 084 (10%)

• Risk discount rate decreases by 1,0% to 11,9%

8 665 11% Value of new business less cost of capital at risk Base value 138

• Risk discount rate increases by 1,0% to 13,9%

123 (11%)

• Risk discount rate decreases by 1,0% to 11,9%

155 12%

5. METHODOLOGY

There were no material changes in the embedded value methodology applied since 31 December 2003.

sanlam group | 2004 interim results | 65

… / embedded value

June 2004 June 2003 December 2003

% p.a. % p.a. % p.a.

6. PRINCIPAL ASSUMPTIONS

Gross investment return and inflation Fixed-interest securities 10,4 9,4 9,4 Equities and offshore investments 12,4 11,4 11,4 Hedged equities (10) 9,4 8,4 8,4 Property 11,4 10,4 10,4 Cash 8,4 7,4 7,4 Risk discount rate 12,9 11,9 11,9 Return on capital at risk (11) 11,0 10,0 10,0 Unit cost and salary inflation 6,4 4,9 5,4 Consumer price index inflation 4,9 3,4 3,9 Decrements, expenses and bonuses Future mortality, morbidity and discontinuance rates and future expense levels were based on recent experience where appropriate. Future rates of bonuses for traditional participating business, stable bonus business and participating annuities were set at levels that are supportable by the assets backing the respective product asset funds at the respective valuation dates. Sanlam Life's current surrender and paid-up bases were assumed to be maintained in the future. HIV/Aids Allowance was made, where appropriate, for the impact of expected HIV/Aids-related claims, consistent with the recommendations of the Actuarial Society of South Africa as set out in its latest proposed Professional Guidance Note (PGN) 105. Premiums were assumed to be rerated, where applicable, in line with deterioration in mortality, with a three-year delay from the point where mortality losses would be experienced. Taxation Projected corporate tax was allowed for at a rate of 30%. Allowance was made for capital gains tax. The assumed rollover period for realisation of investments is five years for property and equity assets supporting capital at risk and policy reserves. For strategic equity assets the assumed rollover period is ten years. Allowance for secondary tax on companies was made by placing a present value on the tax liability generated by the net cash dividends paid that are attributable to the life company. It was assumed that over the long-term the proportion of cash dividends paid would fall to a level of 50% from the current 100% level. Long-term asset mix for assets supporting the capital at risk

June 2004 June 2003 December 2003

% % %

Equities 42 42 42 Hedged equities 26 26 26 Property 8 8 8 Fixed-interest securities 20 20 20 Cash 4 4 4 100 100 100

66 | sanlam group | 2004 interim results

… / embedded value

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

7. NEW BUSINESS PREMIUMS Financial statement New business premiums (per page 59) 5 367 4 884 10 012 Less: Premium increases (index growth) (289) (305) (643) Plus: Optional reduction in premiums 18 17 38 Less: Other life business (12) (12) (133) (314) Premiums used in the calculation of annual premium equivalent 5 084 4 463 9 093 New business embedded value premiums Recurring premiums 454 484 1 026 Single premiums 4 630 3 979 8 067 Premiums used in the calculation of annual premium equivalent 5 084 4 463 9 093

(1) Adjustment to allow for the delay before incurring the capital gains tax liability included in the fair value. (2) Reverse goodwill relating to Merchant Investors Assurance (MIA), as its value of in-force business is included in the total value of life insurance business in force. (The December 2003 adjustment also includes the transfer of Innofin's life insurance business from net assets to the value of in-force.) (3) The June 2004 value was calculated by multiplying half the projected full year corporate expenses not related to life business (after tax) of R52,5 million by the share price

• f 880 cents and dividing by the headline earnings per share based on the long-term rate of return of 72,1 cents.

(4) The net value of new business for prior periods has been restated to include MIA and Innofin to enhance comparability. The embedded value earnings for these periods have however not been restated. (5) The main contributor to the operating experience variation was positive risk experience of R92 million. Expense savings contributed R20 million the operating experience variation and R57 million to the operating assumption changes. It also gave rise to an improved new business embedded value margin. (6) The investment return on shareholders' adjusted net assets excludes the cost of treasury shares transferred to Ubuntu-Botho. (7) Total embedded value earnings before dividends paid, capital raised and cost of treasury shares acquired, as a percentage of embedded value at beginning of year. The return per share is net of the dilution resulting from the Ubuntu-Botho transaction. (8) The rest of the world includes Sanlam Namibia and MIA. (9) APE (annual premium equivalent) is equivalent to new recurring premiums plus 10% of single premiums. (10) The assumed future return for these assets is lower than that of equities, which are not hedged, reflecting the cost of derivative instruments. (11) The investment return on assets supporting the capital at risk is based on the long-term asset mix for these funds. (12) The majority of profits in respect of these premiums accrue to Sanlam Investment Management.

sanlam group | 2004 interim results | 67

Balance Sheet Analysis |

Sanlam Life : Life Fund

June 2004 June 2003 December 2003

Shareholders’ funds R’m 20 064 17 484 19 736 Capital Adequacy Requirements R’m 7 775 9 050 7 250 CAR Cover times 2,6 1,9 2,7 Long-term policy liabilities R’m 131 161 125 864 134 079

• Insurance contracts

92 064 88 332 94 556

• Investment contracts

39 097 37 532 39 523 Shareholders’ funds/policy liabilities % 15 14 15 Shareholders’ funds/non-market-related liabilities % 23 20 22

Illustrative Analysis of Potential Return on Embedded Value |

68 | sanlam group | 2004 interim results

ABSA / Santam (70%) Other (30%)

• Eg. R400m = ~5%

= Discount Rate Balanced (50%)

7 -9 %

Strategic (50%)

13 - 15 %

NUB EV “Expected Profit” Experience Variance Assumption Changes NAV (75%) 11% VIF (25%) 20% EV 13%

S A N L A M G R O U P | B U S I N E S S E S

Life Cluster |

Profitability : Analysis per category

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

Admin income 112 (29) (19) Risk income 312 308 624 Market related income 423 472 923 Operating profit before tax & restructuring 847 750 1 528 Restructuring – – (61) Operating profit before tax 847 750 1 467 Admin Ratio (excluding restructuring) 30,4% 32,9% 33,0%

Life Cluster |

Admin Costs excluding restructuring

Life Cluster |

Operating profit excluding restructuring

• 70

| sanlam group | 2004 interim results

Life Cluster : Individual Life |

Profitability : Analysis per category

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

Admin income 141 (3) 21 Risk income 210 213 421 Market related income 410 458 904 Operating profit before tax & restructuring 762 668 1 345 Restructuring – – (61) Operating profit before tax 762 668 1 284 Admin Ratio (excluding restructuring) 36,1% 39,2% 39,6%

Life Cluster : Individual Life |

Surrenders including Namibia

Life Cluster : Employee Benefits |

Profitability : Analysis per category

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

Admin income (29) (26) (40) Risk income 102 94 203 Market related income 13 14 19 Operating profit before tax & restructuring 85 82 183 Restructuring – – – Operating profit before tax 85 82 183 Admin Ratio (excluding restructuring) 16,1% 16,2% 15,8%

• sanlam group | 2004 interim results | 71

Investment Cluster |

Income per division

Total Total Total (Investment Cluster) (SA operation) (International operation) June June June June June June Rand Million 2004 2003 2004 2003 2004 2003 Income 459 314 402 314 57 – Administration costs (247) (200) (222) (200) (25) – Profit before tax 212 114 180 114 32 – Tax and minorities (58) (35) (55) (35) (3) – Operating profit after tax 154 79 125 79 29 – Total Asset Management * Sanlam Collective Sanlam (SA operation) Investments Properties June June June June June June June June Rand Million 2004 2003 2004 2003 2004 2003 2004 2003 Income 402 314 229 183 98 102 75 29 Administration costs (222) (200) (138) (123) (73) (68) (11) (9) Profit before tax 180 114 91 60 25 34 64 20 Tax and minorities (55) (35) (27) (19) (7) (10) (21) (6) Operating profit after tax 125 79 64 41 18 24 43 14

* Consist of SIM Wholesale, Sanlam Private Investments, Property Asset Management, SIM Namibia, TASC and Sanlam Multi-Manager.

Split in Assets under Management |

June 2004 June 2003 December 2003

Rand Billion Rand Billion Rand Billion

Wholesale 185,1 168,1 185,3

• Sanlam

121,4 116,5 125,6

• Segregated

44,5 34,2 41,9

• International

19,2 17,4 17,8 Retail 44,5 35,0 42,0

• Sanlam Private Investments

14,2 9,6 13,2

• Sanlam Collective Investments

26,4 23,5 25,9

• SP² assets

3,9 1,9 2,9 Total AUM 229,6 203,1 227,3

72 | sanlam group | 2004 interim results

Santam |

Income Statement

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

Gross written premium 4 414 4 387 9 513 Net written premium 3 690 3 325 7 022 Net earned premium 3 596 3 210 6 755 Claims incurred (1 997) (2 173) (4 375) Net commission (435) (418) (789) Management expenses (586) (445) (1 061) Underwriting result 578 174 530 Investment return on insurance funds 89 107 205 Net insurance result 667 281 735 Investment income 159 53 498 Income from associates 2 (4) (12) Goodwill (32) (12) (37) Income before taxation 796 318 1 184 Taxation (230) (113) (356) Income after taxation 566 205 828 Minority shareholders interest (5) (11) (22) NET INCOME 561 194 806 Pro forma earnings based on long-term rate of return 635 333 777 Earnings per share

Cents Cents Cents

Earnings per share 490 173 718 Headline earnings per share 518 184 751 Pro forma earnings per share based on long-term rate of return 554 297 692 Dividend per share 95 72 220 Ratios

% % %

Net claims ratio 55,5 67,7 64,8 Net acquisition cost ratio 28,5 26,9 27,4 Net underwriting margin 16,1 5,4 7,8 Operating margin on net earned premiums 18,5 8,7 10,9

sanlam group | 2004 interim results | 73

Independent Financial Services Cluster Net Operating Profit |

June 2004 June 2003 December 2003

Rand Million Rand Million Rand Million

Sanlam Financial Services (UK) (1) 25 7 (20) Gensec Property Services 9 8 19 Octogen (1) – – Operating profit before tax 33 15 (1) Tax on operating profit (9) (9) (11 24 6 (12) Minorities (SFS) (8) 2 9 Net operating profit 16 8 (3)

(1) Up to 30 June 2003, this includes the total Sanlam International before restructuring, which implies that io asset management and OT Group are still included, as well as the centralised management expenses. Cluster overhead expenses are also included for all the disclosed periods

Group

74 | sanlam group | 2004 interim results

The business environment during the first half of 2004 |

The economic environment during the first half of 2004 was characterised inter alia by a significant acceleration in the rate

• f increase in household real disposable income. This was evident in sharp increases in retail and car sales, and a

concomitant increase in private credit extension. The fact that consumer optimism, as measured by the FNB/BER Consumer Confidence Index, reached a record high in the second quarter of 2004 is an indication that households are expecting these favourable conditions to continue. The interest rate cut in August will undoubtedly give further impetus to these expectations. The reasons for this state of affairs are obvious and include, amongst others, the following: the reduction in interest rates in the second half of 2003, wage and salary increases in excess of inflation, low inflation, and the strength in the rand exchange rate, which is favourable for household buying power, and the wealth effect of continued sharp rises in house prices. Yet it is clear that the increase in consumer spending is not due only to the cyclical upturn in the economy, but also to the rapid expansion of the black middle class. However, it is regrettable that employment is still growing at a slow pace. The increase in long-term interest rates for most of the first half of 2004 was favourable for life annuity and annuity yields, which could consequently compete better with short-term fixed-interest investments. However, it is not clear yet what impact the government's retail bonds, which were launched in May 2004, will have on this market. The business climate therefore appeared to be favourable for the financial services industry, yet conditions in the market remained tight for life assurance products. This can be attributed partly to households' clear preference for spending rather than saving, but trends in financial markets probably also played a role. Notwithstanding the fact that the after-tax returns on short-term fixed-interest investments could barely keep pace with inflation, there was little sign that investors were willing to accept more risk by switching from fixed-interest investments to

• equities. The fact that equities, after an initially good start, once again underperformed cash and bonds also undermined

investor confidence. The strong R/$ exchange rate obviously had a lot to do with this owing to the negative effect thereof

• n the prices of resource shares, which more than negated the increases in the prices of industrial and financial shares.

The strong exchange rate resulted in the value of offshore investments declining further, and investors avoided such investment instead of regarding the strength of the rand as an opportunity to increase their foreign exposure. Although inflation bottomed in 2004, prices increased more slowly than expected. It increasingly seems as if South Africa has permanently entered a low inflation environment, which means that all businesses should focus strongly on cost control in order to protect profit margins. In the case of the financial services industry, matters are complicated further in that interest rates and wage and salary increases react to CPIX inflation, whereas costs in the industry rise at a rate closer to service inflation. The latter is exceeding goods inflation by about three percentage points. The authorities' efforts to curb increases in administered prices, which play a decisive role in service inflation, will therefore be watched with great interest. It is unlikely that business conditions in the second half of the year will differ much from those in the first half.

• Although economic conditions, including household disposable income, are expected to improve further, the growth

momentum will start slowing down.

• Inflation could continue to surprise on the downside and display less of an upward trend.
• Interest rates could maintain their current levels.
• The yield on long-term bonds is likely to move in a narrow band.
• The rand is expected to remain fairly strong against the backdrop of a down-trending dollar and commodity prices

maintaining relatively high levels.

• Equity prices should increase moderately, depending on international movements.
• Foreign equities and bonds will probably show little change in reaction to the decline in momentum in the US economic

cycle. The environment in which the financial services industry operates will therefore continue to be challenging.

sanlam group | 2004 interim results | 75

Contact Details

Registered Office

Sanlam 2 Strand Road Bellville 7530 South Africa Tel: +27 21 947-9111 Fax: +27 21 947-3670

Investor Relations Website:

www.sanlamltd.co.za

Corporate Office Businesses

Group Chief Executive CEO : Individual Life

Johan van Zyl Lizé Lambrechts Tel. : +27 21 947-4448 Tel : +27 21 947-3439 Fax : +27 21 947-5551 Fax : +27 21 957-1840 E-mail : johan.vanzyl@sanlam.co.za E-mail : lize.lambrechts@sanlam.co.za

Financial Director CEO : Employee Benefits

Flip Rademeyer Themba Gamedze Tel. : +27 21 947-6801 Tel. : +27 11 778-6511 Mobile : +27 82 554-5573 Fax : +27 11 339-1352 Fax : +27 21 947-3670 E-mail : themba.gamedze@sanlam.co.za E-mail : flip.rademeyer@sanlam.co.za

Chief Executive : Finance CEO : Investment Cluster

Kobus Möller Johan van der Merwe Tel. : +27 21 947-9201 Tel. : +27 21 950-2945 Fax : +27 21 947-3670 Fax : +27 21 950-2850 E-mail : kobus.moller@sanlam.co.za E-mail : johanvdm@sim.sanlam.com

Chief Actuary CEO : Santam

Chris Swanepoel Steffen Gilbert Tel. : +27 21 947-2375 Tel. : +27 21 915-7193 Fax : +27 21 947-3670 Fax : +27 21 915-7570 E-mail : chris.swanepoel@sanlam.co.za E-mail : steffen.gilbert@santam.co.za

Investor Relations CEO : Independent Financial Services

Helet Malherbe Nick Christodoulou Tel. : +27 21 947-4092 Tel : +27 21 947 6779 Fax : +27 21 957-1331 Fax : +27 21 947 3670 E-mail : helet.malherbe@sanlam.co.za E-mail : nick.christodoulou@sanlam.co.za

CEO : Sanlam Capital Markets

Mark Murning Tel : +27 11 778-6155 Fax : +27 11 778-6912 E-mail : markm@scm.sanlam.co.za Non-Executive Directors

RC (Roy) Andersen (Board Chairman); MMM (Manana) Bakane-Tuoane; DC (Dave) Brink; AS (Attie) du Plessis; FA (Fran) du Plessis; W (Wilmot) James; VP (Vusi) Khanyile; CE (Carmen) Maymanrd; V (Vali) Moosa; P (Patrice) Motsepe; M (Maria) Ramos; GE (George) Rudman; ZB (Bernard) Swanepoel; RV (Rejoice) Simelane; E (Eugene) van As; JJM (Boetie) van Zyl

Executive Directors

J (Johan) van Zyl (Group Chief Executive) and PdeVR (Flip) Rademeyer (Financial Director)

Alternate Directors

NT (Nick) Christodoulou (CEO: Independent Financial Services); L (Lizé) Lambrechts (CEO: Individual Life); JHN (Johan) van der Merwe (CEO: Investment Cluster); SC (Steffen) Gilbert (CEO : Santam)

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sanlam group | 2004 interim results | 77