[PPT] - Sanlams Investment Case AR2010 Sanlams Investment Case AR2010 PowerPoint Presentation

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Sanlam’s Investment Case – AR2010 Slide # 1 Sanlam’s Investment Case – AR2010 Slide # 1

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Sanlam’s Investment Case – AR2010 Slide # 2

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Clear strategy (firm commitment to deliver on promises)

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Profitable growth opportunities

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Diversification (reducing risk of overall portfolio)

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Cost efficiency focus

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Capital efficiencies

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Prudence underpins quality and sustainability of base

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Creation of shareholder value (share price performance)

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Solid operational track-record (enhancing profitability and returns)

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Sanlam’s Investment Case – AR2010 Slide # 3

 Maximise profitable growth  Maximise capital efficiencies

Returns (ROGEV) Growth / Earnings Operational Efficiencies Diversification Net Business Flows Capital Efficiency Optimal Application Strategic Investments Return of Excess

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Sanlam’s Investment Case – AR2010 Slide # 4

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Under penetrated lower income market in South Africa

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Sanlam’s customer mix is best aligned with growth segments in South Africa

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SA attractive demographics represent an opportunity for insurers

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Africa is an emerging insurance market and offers an attractive growth story

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Sanlam has the widest Pan-African presence and offers an excellent platform for expansion

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Growth in high net worth / mass affluent segments within SA

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Resulting in profitable growth for Sanlam

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Sanlam’s Investment Case – AR2010 Slide # 5

8% CAGR 10% CAGR 8% CAGR 9% CAGR

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A rising middle class Black population represents a sizable market for insurance products

Access to life insurance products by customer segments Access to life insurance products by population group

Source: AMPS 2010 Note: Affluent (R30k+), High income (R12k-R30k)n, Middle income (R6k-R12k), ELM (<R6k). Source: AMPS 2010 Note: Data based on survey results of South African financial habits. Note: Living Standard Measure (“LSM”) is a categorization ranging from 1 to 10 used extensively by marketers and advertisers as a means to segment the population. It is crude proxy for wealth, with the lower LSM groups comprising the most impoverished end of the spectrum.

Personal incomes by population group (Rbn) Living standards improvement

Source: Unisa (Bureau of market research) Source: AMPS 2010

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Sanlam’s Investment Case – AR2010 Slide # 6

Sanlam Developing Markets, Sanlam‟s entry level proposition, has experienced strong growth and profitability

Source: Credit Suisse research.

Customer breakdown by company

Source: Company filings and analyst presentation. Note: Sanlam Personal Finance caters towards middle, affluent and self employed markets while Sanlam Developing Markets caters entry-level markets in South Africa through Sanlam Sky and Channel Life.

Sanlam individual life APE development in South Africa

06 – 10 Personal Finance CAGR : 7,0% 06 – 10 Developing Market CAGR: 14,4% (ZAR in millions)

Source: Company filings and analyst presentation. Note: Sanlam Personal Finance caters towards middle, affluent and self employed markets while Sanlam Developing Markets caters entry-level markets in South Africa through Sanlam Sky and Channel Life.

Sanlam FY10 PVNBP margins in South Africa by segment

Entry Level Group Mid-affluent Income

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Sanlam’s Investment Case – AR2010 Slide # 7

National Population (mm) Population growth Working age population (mm) Median age (years) Literacy rate Urbanization rate GDP per capita (US$) Income per capita (US$)

South Africa

48.8 0.8% 17.8 24.2 82.4% 60.7% 10 100 3 633

China

1 328.0 0.5% 807.3 37.6 90.9% 43.1% 6 140 1 804

India

1 148.0 1.6% 458.0 24.4 61.0% 29.5% 2 930 838

United States

304.1 0.9% 154.3 36.8 NA 81.7% 47 496 42 858

Indonesia

237.5 1.2% 112.0 27.5 61.0% 51.4% 3 820 1 774

Brazil

191.9 1.3% 93.7 27.6 88.6% 85.6% 10 320 6 285

Nigeria

146.3 2.1% 46.3 18.3 69.1% 50.6% 2 170 841

Russia

141.8 (0.4%) 75.8 37.6 99.4% 72.8% 15 940 7 863

Egypt

81.5 1.8% 24.7 23.4 91.0% 43.3% 5 440 1 920

United Kingdom

61.4 0.7% 31.2 39.2 99.0% 89.9% 35 760 41 341

Australia

21.0 1.2% 11.3 36.9 99.0% 88.7% 37 840 32 535

Source: Euromonitor (Data as of December 2008)

Demographics comparison

Source: EIU.

GDP per capita in South Africa (ZAR)

Source: EIU.

Income per capita in South Africa (ZAR)

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Sanlam’s Investment Case – AR2010 Slide # 8 Population in South Africa (in Millions) Ratio of working age to population above 60

Source: US Census Bureau.

Demand for savings and protection products is expected to increase as the number of working people supporting an aging population decreases

2010 – 2020 CAGR #1 (3.7%) China (3.3%) Russia #2 (2.9%) Indonesia #3 (2.8%) Brazil #4 (2.7%) South Africa #5 2000A 2005A 2010E 2015E 2020E

South Africa India Indonesia Brazil China Russia

2000 – 2010 CAGR (2.0%) Brazil #1 (1.5%) China #2 (1.3%) India #3 (1.2%) Indonesia #4 (1.2%) South Africa #5 0.6% #6 Russia (1.9%) India #6 2.6 3.8 4.9 5.4 5.7 6.2 3.4 6.4 8.0 8.3 8.5 8.6

Source: US Census Bureau.a

45.1% 47.5% 49.1% 48.3% 48.3%

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Sanlam’s Investment Case – AR2010 Slide # 9

South Africa 90.0% Rest

f

Africa 10.0%

Life insurance penetration of Sub-Saharan African countries (2009) South Africa‟s contribution to premium in Africa (2009) Projected size of life insurance market in Africa in 2010

Source: Swiss Re and AXCO. Note: Potential market size calculated assuming that those countries above the targeted penetration rate will maintain its current penetration rate. Source: Swiss Re.

(US$ in billions)

2009A total premiums: US$ 34bn

2009A 2010E

32.6 32.6 35.5 37.9

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Sanlam’s Investment Case – AR2010 Slide # 10

06 – 10 Overall CAGR : 15,1% 06 – 10 Africa CAGR: 27,8% (ZAR in millions)

Sanlam has achieved strong growth and profitability from its Sub-Saharan operations

Source: Company filings, analyst presentation. South Africa includes SPF, Sky, Channel Life and Employee Benefits. UK based on Sanlam UK. Source: Company filings. Note: Excluding South Africa.

06 – 10 Africa CAGR : 15,3% 06 – 10 Overall CAGR : 5,6% (ZAR in millions)

Source: Company filings. * Note : excluding white Label Source: Company filings.

689 698 567 434

Number of markets present in Sub-Saharan Africa New business volumes* 1H10 PVNBP margins Value of new business

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Sanlam’s Investment Case – AR2010 Slide # 11

Source: EIU, AXCO and Swiss Re.

Markets of potential interest Population and real GDP growth Insurance penetration Countries with Sanlam operations Tanzania Namibia Kenya Ghana Nigeria Zambia Malawi Uganda Botswana

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Sanlam’s Investment Case – AR2010 Slide # 12 EV Breakdown (FY2010) – R57,4bn Cross-sell opportunities

Source: Company filings. Source: Company presentation

EV : ZAR 50,2 billion

Source: Company presentation as of June 2009

Clients with a single provider (% untapped) Traditional life assurance Short-term insurance Investment management Other financial services

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Sanlam’s Investment Case – AR2010 Slide # 13

 Amidst a difficult business environment, gross VNB grew by 11% yoy,

while average margins continued to rise

Slide # 13

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Sanlam’s Investment Case – AR2010 Slide # 14

Accelerated success towards providing a wide range of client-centric solutions (reducing risk of portfolio) 2003 – R1 541m 2010 – R3 415m

Contribution to group net operating profit (Rm)

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Sanlam’s Investment Case – AR2010 Slide # 15

 Intensified focus on costs in light of Sanlam’s expansionary mode

Group administration ratio (%)

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Sanlam’s Investment Case – AR2010 Slide # 16

Over R21bn of capital earmarked for redeployment since 2005

22.5 5.3 1.2 3.3 2.3 7.1 3.3

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Sanlam’s Investment Case – AR2010 Slide # 17

 Continue to improve capital efficiency / optimisation :

 Capital allocated to business units in a manner which will achieve

ptimal ROGEV targets

 Improve our understanding of implications of SAM (Solvency II)

framework

 Pursue profitable growth opportunities, and value-adding strategic

initiatives, to efficiently redeploy discretionary capital

 Pipeline of potential transactions (mainly India and Africa)  Consider capital redistribution options (prefer share buy-backs in

times of share price weakness)

 Optimisation of capital remains a key priority for the Group

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Sanlam’s Investment Case – AR2010 Slide # 18

“De-risking” at Sanlam – shifting the „Efficient Frontier‟

 Based on principles of optimal asset allocation  Obtaining similar returns, but at a lower level of risk  Long-term decision (not based on weaker equities)

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Sanlam’s Investment Case – AR2010 Slide # 19 Note : Returns based on 5-year averages - Special dividends (All-in returns for the SA Financial Index), Share buy-back (Sanlam’s all-in returns), Return on new business (5 yr average IRR of new business strain)

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Sanlam’s Investment Case – AR2010 Slide # 20

SPF – Value of Lapses, Surrenders & Fully Paid-Ups (quarterly average - Rm)

R80m

2007 2008 2009 2010

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Sanlam’s Investment Case – AR2010 Slide # 21

 Level of retention of maturing policies improved over 2009 Retention as percentage of maturities (SPF)

43,9% 45,9%

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Sanlam’s Investment Case – AR2010 Slide # 22

Sky - Number of NTUs, lapses and surrenders as % of in-force

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Sanlam’s Investment Case – AR2010 Slide # 23

 Ongoing improvement in net life cash flows : Positive retail net life

cash flows & lower institutional net outflows

Net life cash flows (Rbn)

* Note : Annualised

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Sanlam’s Investment Case – AR2010 Slide # 24

 VNB, positive experience variances and assumption changes has

generated R5.0bn of value (29% of VIF) over the past 5 years

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Sanlam’s Investment Case – AR2010 Slide # 25

17.6% pa 5.5% pa

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Sanlam’s Investment Case – AR2010 Slide # 26

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Sanlam’s Investment Case – AR2010 Slide # 27

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