Sanlam to acquire African Life Sanlam to acquire African Life - - PDF document

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A Compelling Deal

10 August 2005 Johannesburg

Sanlam to acquire African Life Sanlam to acquire African Life Sanlam to acquire African Life

A COMPELLING DEAL

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A Compelling Deal

10 August 2005 Johannesburg

Agenda Agenda Agenda

The Sanlam offer and rationale

Johan van Zyl

CEO, Sanlam

The African Life perspective

Jeremy Rowse

CE, African Life

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A Compelling Deal

10 August 2005 Johannesburg

The Sanlam offer and rationale The Sanlam offer and rationale The Sanlam offer and rationale

Johan van Zyl

CEO, Sanlam Limited

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A Compelling Deal

10 August 2005 Johannesburg

Sanlam strategy Sanlam strategy Sanlam strategy

ROEV remains primary value driver, with focus on:

Capital efficiency

Capital returned to shareholders

• R4bn share buy-back in process

Strategic application to achieve structural growth

• Supports strategy & enhance Earnings and ROEV

Growth

Distribution Product diversification Markets and market segments New sources of revenue

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A Compelling Deal

10 August 2005 Johannesburg

Sanlam strategic focus Sanlam strategic focus Sanlam strategic focus

Entry-level life insurance market - an important component in growth strategy

Fastest growing market in SA Opportunity:

Insurance penetration low (<10%) Requires product innovation & effective distribution

Sanlam Group Solutions established Oct 2003

Strong growth but off low base, 250+ advisers

Thebe / Safrican JV established, operational early 2005 But needs more bulk — African Life a real opportunity

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A Compelling Deal

10 August 2005 Johannesburg

African Life : Some Facts African Life : African Life : Some Facts

Some Facts

Total assets: R13bn * Recurring premium income: R1,5bn * Headline earnings: R259m* Embedded Value: R2,4bn (2276 cents per share) * Embedded Value of new business: R85m* Operations in SA, Botswana, Lesotho, Namibia, Zambia,

Kenya, Tanzania, Ghana

Target market: LSM 4-7 (SA) and similar markets

elsewhere

* As at 31/3/2005

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A Compelling Deal

10 August 2005 Johannesburg

African Life : Some Facts African Life : African Life : Some Facts

Some Facts

Average monthly recurring premium: R145pm

Total annual recurring business sales: ±400,000 Total recurring business filesize: ±1 million Volumes of claims: No1 in SA Average claim size: ±R6,000 Funds under management (BIFM): R7,9bn *

* As at 31/3/2005

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A Compelling Deal

10 August 2005 Johannesburg

African Life : Benefits to Sanlam African Life : African Life : Benefits to Sanlam

Benefits to Sanlam

Access to new markets via client base and sales force

Strength in entry level market Provides Sanlam with a meaningful presence and a

sound base to grow from

Management experience & expertise Improves footprint in Africa

Provides Sanlam with a diversification opportunity Reduces time to market & risk

Potential revenue & capital synergies

Investment expected to exceed Sanlam’s required

return hurdles

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A Compelling Deal

10 August 2005 Johannesburg

Key terms of the Offer Key terms of the Offer Key terms of the Offer

Scheme of arrangement (S311) offer for 100% of the

African Life ordinary shares

Momentum made an offer for African Life Health (‘ALH’) Terms of Offer:

Sanlam offer is R22.05 per share, including all assets If Momentum acquires ALH, the price will increase to

R22.50 per share

If a third party acquires ALH, the price will increase

with 85.5% of the net proceeds > R130 million;

BEE shareholders:

Agreed to accept the offer Business support to continue

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A Compelling Deal

10 August 2005 Johannesburg

Support for the offer Support for the offer Support for the offer

Sanlam currently holds 20,5% of African Life African Life Board BEE partners Ordinary shareholders’ support :

Approximately 70% of eligible votes Irrevocable support from

• Momentum
• Share scheme

Institutional support

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A Compelling Deal

10 August 2005 Johannesburg

Financial effects on Sanlam Financial effects on Sanlam Financial effects on Sanlam

Earnings accretive Potential capital synergies >R300m Meets ROEV target Added value through new products, markets and

co-operation with Ubuntu-Botho

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A Compelling Deal

10 August 2005 Johannesburg

The African Life perspective The African Life perspective The African Life perspective

Jeremy Rowse

CE, African Life

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A Compelling Deal

10 August 2005 Johannesburg

Strategic Focus : Current Strategic Focus : Strategic Focus : Current

Current

AFRICAN LIFE ASSURANCE AFRICAN LIFE ASSURANCE LIFE LIFE

South Africa South Africa Botswana Botswana Kenya Kenya Ghana Ghana Zambia Zambia Tanzania Tanzania Namibia Namibia Lesotho Lesotho Life and funeral cover, savings & investment policies for low and middle- income individuals and families

HEALTH HEALTH

South Africa South Africa Botswana Botswana Kenya Kenya Lesotho Lesotho Health cover & Administration for the emerging market – Those employed but without Private medical insurance

FUND MANAGEMENT FUND MANAGEMENT

Botswana Botswana Zambia Zambia Investment & fund management

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A Compelling Deal

10 August 2005 Johannesburg

Strategic Focus : Future Strategic Focus : Strategic Focus : Future

Future

Life will remain primary area of focus Continue to explore mutual opportunities within fund

management

Will look to Sanlam’s evolving health strategy to

explore mutual opportunities

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A Compelling Deal

10 August 2005 Johannesburg

Strategic Focus : Life Strategic Focus : Strategic Focus : Life

Life

High volumes Low transaction value Low cost Risk dominant products Benefit delivery focus Effective distribution Product innovation

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A Compelling Deal

10 August 2005 Johannesburg

Strategic Focus : Africa Strategic Focus : Strategic Focus : Africa

Africa

South Africa 18.2% Botswana 3.0% Namibia 9.0% Ghana 1.0% Kenya 3.5% Zambia 4.8% Lesotho 2.0% Tanzania 2.9%

Insurance spend as % of GDP (Life and General)

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A Compelling Deal

10 August 2005 Johannesburg

Transaction Rationale Setting the Scene Transaction Rationale Transaction Rationale Setting the Scene Setting the Scene

Industry consolidation Emergence of Africa opportunities Growth markets Pressures on costs Momentum’s desire to exit Share price trading at a large discount to EV Growth requires capital Bancassurance emergence

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A Compelling Deal

10 August 2005 Johannesburg

Transaction Rationale : Options Transaction Rationale : Transaction Rationale : Options

Options

Option 1

Status Quo and let Momentum sell to whom they wish

Option 2

Pro-actively seek a value-add shareholder

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A Compelling Deal

10 August 2005 Johannesburg

Transaction Rationale Outcome Transaction Rationale Outcome Transaction Rationale Outcome

Strategic Filter: Does the transaction:

Resolve the Momentum overhang

• Unlock value for shareholders
• Meet a specific need of the acquiror
• Remains a separate strategic business entity
• Leverage the brand of the Company
• Add value to the existing vision
• Keep business Johannesburg based

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A Compelling Deal

10 August 2005 Johannesburg

Transaction Rationale Outcome Transaction Rationale Outcome Transaction Rationale Outcome

Avoid the need for retrenchments

• Retain Health and Fund Management

as strategic legs

• Facilitate a bancassurance strategy

for the Company

• Facilitate and build on BEE relationships

already in place

• Focus on the revenue line rather than

the cost line

• Have meaningful impact

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A Compelling Deal

10 August 2005 Johannesburg

Appeal of the Transaction Appeal of the Transaction Appeal of the Transaction

Aflife remains a separate strategic business entity Unlocks shareholder value

(share price 4 August 2004 = R12,60)

Continued relationship with Fund Management Continued Africa Strategy Shareholder certainty Strategically important to Sanlam Access to Sanlam’s capital and other resources Continued relationship with BEE business supporters

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A Compelling Deal

10 August 2005 Johannesburg

A compelling deal A compelling deal A compelling deal

Good for Sanlam Good for African Life Good for employees and management Good for the industry

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A Compelling Deal

10 August 2005 Johannesburg