INTERIM RESULTS 2017 INVESTOR PRESENTATION

Transcription

1 INTERIM RESULTS 2017 INVESTOR PRESENTATION

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3 Investor Presentation 2017 Interim Results 7 September 2017 Sanlam interim results for the six months ended 30 June

4 Sanlam Group Strategy Operating environment Strategic progress Financial Review Strategic priorities for remainder of 2017 Outlook 2 Sanlam interim results for the six months ended 30 June 2017

5 Sanlam Group Strategy Sanlam interim results for the six months ended 30 June

6 An Integrated Approach to Sustainable Performance Strategy reviewed and refined Integrated strategic and operational management Our Purpose Our Vision Our Strategic Intent Our Strategic Pillars 4 Sanlam interim results for the six months ended 30 June 2017

7 Our Purpose The foundation of Sanlam s long-term sustainability Resilient Individuals Resilient Organisations Resilient Society Sustainable Sanlam To build a world of Wealthsmiths, supporting people in living their best possible lives through financial resilience at the individual, organisational and societal level Sanlam interim results for the six months ended 30 June

8 A sustainable strategy Vision and strategic intent pursued through a four pillar strategy Our vision To lead in client-centric wealth creation, management and protection in South Africa To be a leading Pan-African financial services group with a meaningful presence in India & South-East Asia To play a niche role in wealth and investment management in specific developed markets Our strategic intent Sustainable value creation for all our stakeholders Strategic pillars Profitable top-line growth through a culture of client-centricity Extracting value through innovation and improved efficiencies Transformation Enhancing resilience and earnings growth through diversification Responsible capital allocation and management 6 Sanlam interim results for the six months ended 30 June 2017

9 Focus remains on high-growth markets Additional stake in Saham Finances enhances diversification Sanlam and Saham presence Saham Finances presence Emerging Markets - Indirect presence Emerging Markets - Direct presence Developed Markets USA Luxembourg United Kingdom Ireland France Switzerland Algeria Tunisia Niger Lebanon Morocco Niger Mali Senegal The Gambia Guinea Burkina Faso Cote D Ivoire Ghana Togo Nigeria Benin Cameroon Gabon Republic of the Congo Angola Namibia Botswana South Africa Saudi Arabia Kenya India Uganda Rwanda Burundi Tanzania Malawi Zambia Mauritius Madagascar Mozambique Zimbabwe Swaziland Lesotho Malaysia Philippines Australia Sanlam interim results for the six months ended 30 June

10 Operating Environment Challenging SA environment persists 8 Sanlam interim results for the six months ended 30 June 2017

11 Global environment More supportive of emerging markets Rebound in investor sentiment and risk appetite Sanlam interim results for the six months ended 30 June

12 South Africa Political environment not conducive to economic growth Business and investor confidence under pressure Economy in technical recession Pedestrian growth outlook for 2017 and 2018 Risk of further sovereign credit rating downgrades Investment market and currency volatility Economic Environment Political Environment Regulatory Environment Social Environment Financial sector regulation bill passed, establishing twin peaks model Prudential regulator by end-2017 Market conduct regulator by 2018 Solvency Assessment and Management planned to be effective 1 July 2018 Retail Distribution Review being phased in International Insurance Capital Standards field testing Sustainable Sanlam Political and policy uncertainty Allegations of state capture ANC elective conference in December Historic high levels of unemployment Widening wealth inequality Technical skills development a priority Need traction on inclusive growth initiatives 10 Sanlam interim results for the six months ended 30 June 2017

13 Rest of Africa General improvement in growth prospects Improved terms of trade for commoditybased economies Oil-based economies adapting to structurally lower oil price (Nigeria & Angola) Much higher growth prospects than SA in medium to long term Namibia liquidity constraints Competitive pressures in Botswana in unsecured lending and life annuities Economic Environment Political Environment Regulatory Environment Social Environment Risk-based capital regimes on the agenda of a few countries TCF and RDR following international trends Elections in a few countries Political and policy uncertainty arising from time to time Technical skills shortage Favourable demographic profile over long term Increased need for insurance and investments Sanlam interim results for the six months ended 30 June

14 India and Malaysia Economic growth gaining traction Economic growth in India affected by demonetisation, but gaining traction Growth of 7% expected for 2017 Malaysian economy accelerating on back of competitive Ringgit Manufacturing output improving Exports Economic Environment Political Environment Regulatory Environment Social Environment Demonetisation in India during 2016 impacted economy and credit providers Temporary setback for Shriram Capital Goods and Services Tax in India may impact transport sector over short-term De-tariffing of insurance sector in Malaysia Opportunity to price more efficiently Market response uncertain Sustainable Sanlam Stable relative to 2016 Favourable demographic profile over long term Increased need for insurance and investments in lower segments 12 Sanlam interim results for the six months ended 30 June 2017

15 Strategic progress Sustainable strategy supported resilient results Sanlam interim results for the six months ended 30 June

16 Strategic progress in 1H17 Execution remains a key differentiator Strong growth in recurring premium risk business in SA Sanlam SKY business mix continued to improve Double-digit growth in middle and mass affluent segments Solid growth at SEM in constant currency despite pressures in Namibia and Botswana 17% growth in VNB in constant currency; overall increase in VNB margin Persistency holding up well under difficult conditions Positive experience variances of more than 3% of VIF on annualised basis Strategic pillars Profitable top-line growth through a culture of client-centricity Extracting value through innovation and improved efficiencies Transformation Enhancing resilience and earnings growth through diversification Responsible capital allocation and management 14 Sanlam interim results for the six months ended 30 June 2017

17 Strategic progress in 1H17 Execution remains a key differentiator Resilient overall performance in 1H17 confirms benefits of diversification strategy Additional 16.6% stake in Saham Finances further enhanced Group profile Expansion in higher-growth markets Increased exposure to general insurance Larger participation in synergies Acquisition of PineBridge s Kenyan asset management operations East-African asset manager of scale Good progress with Central Credit Manager initiative Strategic pillars Profitable top-line growth through a culture of client-centricity Extracting value through innovation and improved efficiencies Transformation Enhancing resilience and earnings growth through diversification Responsible capital allocation and management Sanlam interim results for the six months ended 30 June

18 Strategic progress in 1H17 Execution remains a key differentiator Cost efficiencies key in low-growth environment Savings extracted at Sanlam Investments Good progress with technological and product innovation, raising the base constantly BrightRock acquisition finalised in SPF innovative risk product platform EasyEquities acquisition in SI award-winning fintech disrupter in investments sector Business Intelligence project at Group level advanced analytics Award-winning Sanlam Design Studio Strategic pillars Profitable top-line growth through a culture of client-centricity Extracting value through innovation and improved efficiencies Transformation Enhancing resilience and earnings growth through diversification Responsible capital allocation and management 16 Sanlam interim results for the six months ended 30 June 2017

19 Strategic progress in 1H17 Execution remains a key differentiator Strategic investments of R4.8 billion finalised (Saham Finances; PineBridge East Africa) R2.7 billion of discretionary capital extracted; further opportunities under consideration Lower capital allocation to Sanlam Personal Finance Central Credit Manager initiative released capital from SCM Disposal of stakes in Enterprise Group in Ghana Excess dividend cover added R805 million to available discretionary capital Proposed acquisition of ABSA Consultants and Actuaries Strategic pillars Profitable top-line growth through a culture of client-centricity Extracting value through innovation and improved efficiencies Transformation Enhancing resilience and earnings growth through diversification Responsible capital allocation and management Sanlam interim results for the six months ended 30 June

20 Financial Review 18 Sanlam interim results for the six months ended 30 June 2017

21 Overview of 1H17 performance Resilient overall performance HIGHLIGHTS Adjusted RoGEV of 8.1% exceeded the target of 6.4% Strong growth in new recurring premium risk business and VNB at Sanlam Personal Finance Strong overall new business growth at Sanlam Emerging Markets in constant currency Improvement in Sanlam Investments institutional net inflows Strong VNB and operational earnings performance at Sanlam Corporate Progress with capital and balance sheet management LOWLIGHTS Significantly lower single premium inflows at Glacier and Sanlam Private Wealth Increased claims experience at Santam Lower annuity new business volumes and VNB in Botswana Adverse change in life insurance new business mix in Namibia, resulting in lower VNB Higher life claims experience in Namibia Under performance in Kenya and Malaysia Discretionary capital back to R2 billion Sanlam interim results for the six months ended 30 June

22 Key Performance Indicators Sanlam shareholders Earnings per share Net operating profit per share increased by 1% (5% constant currency) Normalised headline earnings per share up 5% Business volumes New business volumes declined by 4% to R110bn Net fund inflows of R19bn compared to R22bn in 2016 Net life VNB up 11% (17% constant currency) Net VNB margin of 2.61%, up from 2.44% in 2016 Group Equity Value Group Equity Value of R54.69 per share Annualised RoGEV per share of 11.7%, adjusted 16.2% - above hurdle rate 20 Sanlam interim results for the six months ended 30 June 2017

23 Reporting environment Significant impact from stronger Rand, demonetisation and catastrophe claims SA bond yields & short-term interest rates 11,0% 10,0% 9,0% 8,0% 7,0% 6,0% 5,0% Dec-15 Jun-16 Dec-16 Jun-17 9 year Avg ST Santam underwriting result (Rm) EV economic assumption changes: +R150m Santam net catastrophe claims: -R102m India demonetisation: -R110m Net profit: -R168m Net VNB: -R40m ROGEV: -0.7% EV investment variances: -R271m Pressure on fee income -24,8% All Share Average Rand exchange rates United Kingdom USA Botswana Morocco India Malaysia -14,3% -8,6% Sustainable JSE Indices Sanlam -14,8% -12,4% -20,0% -20,0% Dec-15 Jun-16 Dec-16 Jun-17 All Share Swix Avg Swix Rest of Africa Swix Sanlam interim results for the six months ended 30 June

24 Financial Review Sanlam Personal Finance 22 Sanlam interim results for the six months ended 30 June 2017

25 Sanlam Personal Finance R million New business volumes % Sanlam Sky % Risk % Savings % Individual Life % Glacier % Life % Non-life % Net flows Sanlam Sky Individual Life (2 674) (2 576) Glacier Sanlam interim results for the six months ended 30 June

26 Sanlam Personal Finance R million Value of new life business % Sanlam Sky % Individual Life % Glacier % New business margin 2,76% 2,49% Sanlam Sky 7,79% 6,20% Individual Life 2,88% 2,61% Glacier 1,05% 1,42% 24 Sanlam interim results for the six months ended 30 June 2017

27 Sanlam Personal Finance R million Gross operating profit % Sanlam Sky % Middle-income segment: life and investments % Glacier % Personal loans % Other (2) 15 >-100% Net operating profit % Constant new business strain % Group Equity Value* RoGEV (6 months) 8,5% 13,9% * Comparative information as at 31 December 2016 Sanlam interim results for the six months ended 30 June

28 Financial Review Sanlam Emerging Markets 26 Sanlam interim results for the six months ended 30 June 2017

29 Sanlam Emerging Markets R million CCY New business volumes % 32% Excluding structural growth % 17% Namibia % -4% Botswana % 35% Rest of Africa % 61% Excluding structural growth % 38% India % 124% Excluding structural growth % 4% Malaysia % -18% Net fund flows Namibia (1 486) 308 Botswana Rest of Africa India/Malaysia Sanlam interim results for the six months ended 30 June

30 Sanlam Emerging Markets R million CCY Value of new life business % 1% Excluding structural growth % -7% Namibia % -38% Botswana % -28% Rest of Africa % 78% India % 675% Excluding structural growth % 250% Malaysia % -39% New business margin 4,88% 4,87% Namibia 4,29% 4,30% Botswana 5,30% 7,12% Rest of Africa 6,13% 4,81% India 4,41% 1,12% Malaysia 2,65% 3,66% 28 Sanlam interim results for the six months ended 30 June 2017

31 Sanlam Emerging Markets R million CCY Gross operating profit % 17% Namibia % -10% Botswana % -12% Rest of Africa % 119% Excluding structural growth % 245% India/Malaysia % 16% Excluding demonetisation and structural growth % 23% Corporate expenses (16) (12) -33% -33% Net operating profit % 14% Excluding demonetisation and structural growth % 18% Group equity value* RoGEV (6 months) 6,6% 1,5% 7.7% * Comparative information as at 31 December 2016 Sanlam interim results for the six months ended 30 June

32 Financial Review Sanlam Investments 30 Sanlam interim results for the six months ended 30 June 2017

33 Sanlam Investments R million Net investment business flows Investment management SA Wealth management (2 464) International 942 (2 973) Capital management (32) New life business % Constant currency % Net life business (334) 121 Value of new life business % Margin 0,50% Sanlam interim results for the six months ended 30 June

34 Sanlam Investments R million CCY Gross operating profit % 1% Investment management SA % -12% Wealth management % -4% International % 56% Capital management % -16% Net operating profit % 6% Group Equity Value* Covered business Other RoGEV (6 months) 4,0% -0,1% * Comparative information as at 31 December Sanlam interim results for the six months ended 30 June 2017

35 Sanlam Investments Investment performance Percentage of SIM s benchmark-managed funds exceeding hurdle Jun % 80% 60% 40% 20% 0% 20% 40% 60% 80% 100% Rolling 3 year Rolling 5 year Sanlam interim results for the six months ended 30 June

36 Financial Review Santam 34 Sanlam interim results for the six months ended 30 June 2017

37 Santam R million Net earned premiums % Gross operating profit % Underwriting surplus % Working capital & other % Net operating profit % Excluding June catastrophe claims and forex % Underwriting margin 4,0% 6,4% Excluding June catastrophe claims 6,2% 6,4% Group Equity Value* RoGEV (6 months) 4,7% 23,8% * Comparative information as at 31 December 2016 Sanlam interim results for the six months ended 30 June

38 Financial Review Sanlam Corporate 36 Sanlam interim results for the six months ended 30 June 2017

39 Sanlam Corporate R million New business volumes % Recurring risk % Single risk 4 Investment & retirement % Net fund flows Value of new life business % New business margin 0,69% 0,39% Sanlam interim results for the six months ended 30 June

40 Sanlam Corporate R million Gross operating profit % Employee Benefits % Healthcare & other % Net operating profit % Group Equity Value* RoGEV (6 months) 9,2% -0,3% * Comparative information as at 31 December Sanlam interim results for the six months ended 30 June 2017

41 Financial Review Sanlam Group Sanlam interim results for the six months ended 30 June

42 Business flows Gross Net R million by business Personal Finance % Emerging Markets % Sanlam Investments % Santam % Sanlam Corporate % by licence Life insurance % Investment % General insurance % Total % Sanlam interim results for the six months ended 30 June 2017

43 Business flows New business volumes CAGR = 14.2% Life insurance Investments General insurance Total Sanlam interim results for the six months ended 30 June

44 Operational efficiencies Solid persistency in difficult environment Persistency SA middle-income market 5 4,5 4 3,5 3 2,5 2 1,5 1 0,5 0 Lapses, surrenders & fully paid-ups as % of in-force per half year 4,8 4,2 4,2 3,9 4,0 3,9 3,8 3,9 3,8 3,6 3,7 3,6 3,4 3,4 3,0 2,9 2,9 2,9 2,8 2,9 2,9 3,0 2,8 2,9 2,9 2,7 2,8 2,8 2, H17 H1 H2 42 Sanlam interim results for the six months ended 30 June 2017

45 Operational efficiencies Solid persistency in difficult environment Persistency SA lower income market ,6 8,5 Lapses, surrenders & fully paid-ups as % of in-force per half year 10,6 9,6 9,8 9,9 9,6 9,2 9,1 9,2 8, H17 H1 H2 Sanlam interim results for the six months ended 30 June

46 Value of new covered business Value of New Business Margin R million CCY Personal Finance % 17% 2,76% 2,49% Emerging Markets % 1% 4,88% 4,87% Sanlam Corporate % 136% 0,69% 0,39% Sanlam Investments % -100% - 0,50% Total % 12% 2,71% 2,60% Net of minorities % 17% 2,61% 2,44% Excluding structural growth % 14% 2,57% 2,42% 44 Sanlam interim results for the six months ended 30 June 2017

47 Value of new covered business Long-term interest rates and business mix supporting margin ,5% 3,0% 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% South Africa Rest of Africa Other International Margins - rhs Sanlam interim results for the six months ended 30 June

48 Net operating profit R million CCY Personal Finance % 2% Emerging Markets % 14% Sanlam Investments % 6% Santam % -9% Sanlam Corporate % 31% Corporate & other (2) (2) Total % 5% 46 Sanlam interim results for the six months ended 30 June 2017

49 Income statement R million Net operating profit %* Per share 197,9 196,8 1% Net investment return % Other (161) (149) -9% Normalised headline earnings % Per share 218,7 208,0 5% Fund transfers Headline earnings % Per share 225,3 277,2-19% * 5% in constant currency Sanlam interim results for the six months ended 30 June

50 Group Equity Value Equity Value RoGEV R million * Rm % Group operations ,8% Personal Finance ,5% Emerging Markets ,6% Investments ,0% Santam ,7% Sanlam Corporate ,2% Discretionary & Other (100) -1,4% TOTAL ,3% cps ,1% Adjusted RoGEV cps 8,1% Return target 6,4% * Comparative information as at 31 December Sanlam interim results for the six months ended 30 June 2017

51 Group Equity Value earnings ,1% ,1% Sanlam interim results for the six months ended 30 June

52 Experience variances Risk, working capital, credit spreads major contributors R million H17 4,8% 4,3% 3,8% 3,3% 2,8% 2,3% 1,8% 1,3% 0,8% 0,3% -0,2% % of VIF annualised R million FY15 FY16 1H16 1H17 1H 2H Risk experience Persistency Working capital Credit spreads Other 50 Sanlam interim results for the six months ended 30 June 2017

53 Return on Group Equity Value Out perform growth target of long-bond rate +400bp ,8 3,3 9, ,3 0,7 3, ,4 12,4 12,2 10,8 12,2 12,1 14,1 13,2 12,6 0-2,3-1, Avg Target Out performance Sanlam interim results for the six months ended 30 June

54 Geographic diversification Rest of Africa 18% Net VNB Other international 4% 1H17 R782m SA Traditional 52% Net operating profit Other international 12% Rest of Africa 13% 1H17 R4.1bn SA Entry-level 26% SA Entry-level 11% SA Traditional 64% Other international 15% Group Equity Value Rest of Africa 17% 1H17 R112.1bn SA Entry-level 7% SA Traditional 61% 52 Sanlam interim results for the six months ended 30 June 2017

55 Line of business diversification Credit & structuring 10% Group Equity Value Admin, health & other 5% Credit & structuring 11% Net operating profit Admin, health & other 4% Investment management 13% 1H17 R m Investment management 11% 1H17 R4 056m General insurance 23% Life business 48% General insurance 12% Life business 63% Sanlam interim results for the six months ended 30 June

56 Financial Review Capital management 54 Sanlam interim results for the six months ended 30 June 2017

57 Capital efficiency Discretionary capital Available 1/1/2017 Excess dividend cover Enterprise Group Saham Finances Other transactions Investment income & other Available before capital releases Released from Sanlam Life Released from SCM Available 30/6/2017 Sanlam interim results for the six months ended 30 June

58 Solvency position Solvency cover at upper end of target range SAM solvency cover x 3.0x Target: x 2.1x x 2.2x Sanlam Life 31/12/2016 Sanlam Life 30/6/2017 Sanlam Life Sanlam Life covered 31/12/2016 covered 30/6/2017 Sanlam Group 31/12/2016 Sanlam Group 30/6/2017 Own funds SCR 56 Sanlam interim results for the six months ended 30 June 2017

59 Strategic progress Good progress on all pillars Profitable top-line growth through a culture of clientcentricity R million CAGR = 16.1% Net result from financial services R million CAGR = 9.8% CAGR = 14.3% Net VNB RoGEV (Indexed: 2012 = 500) 1H12 1H13 1H14 1H15 1H16 1H17 Enhancing resilience and earnings growth through diversification Other international 15% Rest of Africa 17% SA Entry-level 7% GEV SA Traditional 61% Credit & structuring 10% Investment management 13% General insurance 23% GEV Admin, health & other 5% Life business 48% Sanlam interim results for the six months ended 30 June

60 Strategic progress Good progress on all pillars Extracting value through innovation and improved efficiencies Sanlam Design Studio BI & Big Data Responsible capital allocation and management Composition of GEV GEV 2005 GEV Jun 2017 Discretionary capital Other capital Non-life operations Value of in-force Life Required Capital Capital redeployed since Capital released Capital deployed Discretionary capital South Africa Developed markets Emerging markets Share buy back/special dividend 58 Sanlam interim results for the six months ended 30 June 2017

61 Strategic Priorities for 2017 Sanlam interim results for the six months ended 30 June

62 Sanlam Personal Finance Continue to adapt to regulatory changes, evolving consumer demands and technology trends Focus on profitable sales growth through Product innovation aimed at greater simplicity and outcomes-driven design Adopting digital to improve customer experience and advanced analytics capability Improving speed to market of new offerings Expanding distribution footprint through range of intermediary models Strong drive on operational efficiencies and delivering value for money Bedding down BrightRock acquisition 60 Sanlam interim results for the six months ended 30 June 2017

63 Sanlam Emerging Markets Shift in focus from acquisitive to accelerated organic growth through superior execution, enhanced strategic alliances and improved distribution Increased visibility of Sanlam brand as partnership brand for markets and our employees Drive synergies with Saham Finances Deliver on corporate opportunities in Africa in support of retail and commercial business growth Increased collaboration on human resource development across the cluster Continued focus on governance, compliance and ethics Industry consolidation/increasing shareholding/strategic partnerships where it makes sense Sanlam interim results for the six months ended 30 June

64 Sanlam Investments Maintain consistent superior investment performance Enhance competitiveness in third party market to grow net inflows Focus on operational efficiencies to address fee income pressures Leverage capabilities across businesses to provide solutions for both Retail and Institutional clients Growth in non traditional asset classes, e.g. Passive and Alternatives Leverage Credit capabilities in Credit Manager across Sanlam Investments and Sanlam Group Continued focus on transformation and people development Further align UK businesses to enhance competitiveness in international market 62 Sanlam interim results for the six months ended 30 June 2017

65 Santam Underwriting actions focused on commercial and corporate property Optimisation of the non-motor claims channel Development of full multichannel capability in South Africa Balancing profitable growth with continued efficiency drive to optimise cost ratio Together with SEM unlock value in general insurance partners Continue with Internal Model Approval Process (IMAP) application Work with local municipalities to reduce risk and improve resilience Innovate for long-term sustainability across the business portfolio and the value chain Work with industry on wider economic transformation Sanlam interim results for the six months ended 30 June

66 Sanlam Corporate Provide a coordinated One Sanlam solution to targeted corporates by addressing Employee, Employer Income Statement and Balance Sheet levers Implement strategy, bed down operations and leadership Build best of breed EB and Health businesses Drive growth in EB and Health to achieve fairer market share Drive collaboration opportunities (EB + Health) to increase clients employee value propositions Profitable growth: balance cross-cluster pricing to win and retain business while maintaining adequate margins Progress acquisition of ABSA Consultants and Actuaries 64 Sanlam interim results for the six months ended 30 June 2017

67 Outlook Sanlam interim results for the six months ended 30 June

68 Outlook for 2017 Challenging SA business environment will persist No real improvement in economic growth prospects for remainder of year Risk of further downgrades in sovereign rating Business and investor confidence likely to remain under pressure in uncertain environment More promising growth prospects outside of SA Risk of currency, interest rate and investment market volatility Growth in all key performance indicators expected to be muted for full year 66 Sanlam interim results for the six months ended 30 June 2017

69 Sanlam interim results for the six months ended 30 June

70 68 Sanlam interim results for the six months ended 30 June 2017