investment case sustainable value creation Insurance Financial Planning Retirement Investments Wealth

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Aubrie Dixon
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1 investment case sustainable value creation Insurance Financial Planning Retirement Investments Wealth

2 agenda Overview Strategic positioning Strategic delivery Financial performance 2014 interim results Page 2

3 overview Leading financial services group in Africa, with presence in India and SE Asia. Established in 1918, listed in 1998 on the JSE & Namibian Stock Exchange million issued shares, shareholders Market Cap of > R100bn JSE/ALSI40 stock with > 80% free-float Average daily trading stats 4-5 million shares per day >50% of shares trade p.a. Institutional shareholding of 86%, 32% offshore shareholding Page 3

4 operational structure Sanlam Group Group Office 100% 100% 100% 60% Sanlam 100 Personal % Finance Sanlam 100 Emerging % Markets Sanlam 100 % Investments 60% Santam SA Retail: long-term insurance, investment & other financial services Emerging markets ex- SA: long-term insurance, general insurance, investments, credit & banking SA & Developed markets: investment management, wealth management, employee benefits General insurance in SA & co-investor in SEM general insurance businesses Page 4

5 strategic positioning focus on growth markets

shareholder return Net Business Flows Diversification

6 Capital Efficiency Returns (ROGEV) Growth / Operational Efficiency strategic focus remains unchanged maximise shareholder return Net Business Flows Diversification Operational Efficiency Optimal Application Strategic Investments Return of Excess Page 6

Maximising return on Investment in existing business Efficient and effective management Sourcing

7 core strategic objectives progress in all areas during 2014, particularly growth markets South Africa Delivery of sustainable growth International Creating a platform for future growth Maximising return on Investment in existing business Efficient and effective management Sourcing new growth opportunities Identification of core markets for growth & expansion Effective capital management Page 7

8 five strategic pillars underpinning the Sanlam Group business model Improving performance through top-line growth Increasing market share in key segments Diversifying the base (including geographical presence, products, market segments and distribution platforms) Improved operating and cost efficiencies (including quality) Prioritising Sanlam s international positioning (diversification) Improving capital-efficiency on an on-going basis Embracing and accelerating transformation of the Group Page 8

9 % of population the growth opportunity growth markets in South Africa 50% 47% 45% 40% 35% 36% 30% 25% 22% 22% 25% 20% 15% 16% 15% 17% 10% 5% 0% LSM 1-4 LSM 5 LSM 6-7 LSM 8-10 Page 9

10 % of GDP the growth opportunity life insurance penetration in Africa 11.4% 5.4% Global average: 3.7% 1.9% 0.9% 1.1% 0.5% 0.4% BRIC average: 1.9% 0.1% 0.2% 0.1% South Africa Namibia Botswana Malawi Kenya Ghana Zambia Tanzania Nigeria Uganda Source: Swiss Re and AXCO Page 10

11 strategic delivery consistency and prudence

12 top-line earnings growth financial performance in 1H2014 Earnings per share Net operating profit per share increased by 43% Normalised headline earnings per share up 27% Business volumes New business volumes increased by 8% to R82bn (excl white label) Net fund inflows of R19bn (excl white label), up 40% Net life VNB up 7% to R626m Net VNB margin of 2,68% maintained on per product basis Group Equity Value of cents per share Annualised RoGEV per share of 18% (15,3% adjusted) Page 12

1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 South Africa Africa Other

13 operational efficiencies profitable volume growth Gross VNB grew by 9%; 13% on comparable economic basis H06 1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 South Africa Africa Other International Margins - rhs 3.2% 2.7% 2.2% 1.7% 1.2% 0.7% 0.2% -0.3% Page 13

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.

14 operational efficiencies focus on quality Persistency SA middle-income market Lapses, surrenders & fully paid-ups as % of in-force per half year 5% 4% 3% 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% 2.8% 2.9% 2.8% 2.9% 2.9% 2.7% 2% 1% 0% H1 H2 Page 14

6% 25% 20% 15% 10% 15.2% 17.5% 16.8% 14.1% 14.5% 12.7% 12.7% 11.4% 11.1% 11.

15 operational efficiencies focus on quality Persistency SA lower income market Number of NTUs, lapses and surrenders as % of in-force 30% 27.6% 25% 20% 15% 10% 15.2% 17.5% 16.8% 14.1% 14.5% 12.7% 12.7% 11.4% 11.1% 11.1% 10.4% 11.0% 10.0% 11.3% 5% 0% H1 H2 Page 15

0% 600 555 2.5% 468 477 2.0% 400 200 241 142 138 277 288 278 1.5% 1.0% 0.

16 operational efficiencies experience variances Focus on quality, costs + prudence = consistent positive experience % % 4.0% % % % % % 1.0% 0.5% H14 0.0% R'million % of VIF (rhs) Page 16

80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0%

17 investment performance focus on long-term performance track record Percentage of SIM s AUM to exceed benchmark 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% Rolling 3 Yr 0% Rolling 5 Yr H H14 Page 17

18 capital efficiency optimising capital base Optimising capital allocated to clusters - driving increased returns Discretionary capital invested in growth markets as preference Return to shareholders if not utilised in reasonable timeframe Prudent approach while awaiting final SAM specifications Discretionary capital earmarked mainly for Africa, India and SE Asia Page 18

19 capital efficiency capital redeployed since Discretionary capital South Africa Developed markets Emerging markets - Capital released Capital deployed Share buy back/special dividend Page 19

20 capital efficiency composition of GEV transformed since GEV 2005 GEV Jun 2014 Discretionary capital Other capital Non-life operations Value of in-force Life Required Capital Page 20

diversification international positioning RSA based Rest of Africa Botswana Ghana Kenya Lesotho Malawi Mozambique Namibia Nigeria Rwanda South Sudan Swaziland Tanzania The Gambia Uganda Zambia

21 diversification international positioning RSA based Rest of Africa Botswana Ghana Kenya Lesotho Malawi Mozambique Namibia Nigeria Rwanda South Sudan Swaziland Tanzania The Gambia Uganda Zambia South-East Asia India Malaysia Philippines Developed markets UK / Ireland Switzerland Australia USA Developed Markets Emerging Markets - Direct presence Emerging Markets - Indirect presence Page 21

22 diversification geographic profile Country direct stake Main brand Effective interest Life insurance market share General insurance market share South Africa Sanlam/Santam 100%/60% 23% >22% Botswana Botswana Insurance Holdings 60% 82% 3% Namibia Sanlam Namibia 58% - 100% 17% 28% Zambia African Life Zambia 70% 33% 12% Tanzania African Life Tanzania 64% 48% 4% Kenya Pan Africa Life 56% 13% - Malawi NICO Holdings 25% 48% 38% Uganda Sanlam Uganda 100% 13% 2% Ghana Enterprise Life Assurance 49% 23% - Nigeria FBN Life 35% 2% 1% Rwanda Soras Group 63% 35% 37% India Shriram Capital 20% - 26% 0.2% 2% Malaysia Pacific & Orient 49% - 4% Malaysia MCIS Insurance 51% 3% - Developed markets Various 33% - 100% <1% - Page 22

23 diversification product mix COUNTRY LIFE ASSURANCE SHORT-TERM INSURANCE ASSET MANAGEMENT CREDIT BANKING OTHER Botswana Botswana Life BIHL SURE Botswana Insurance Fund Management Letshego Bank Gaborone Ghana Enterprise Life India Shriram Life Shriram General STFC, SCUF Kenya Pan Africa Life Pan Africa Asset Management Letshego Lesotho Letshego Malawi NICO Life NICO General Insurance NICO Asset Management NBS Bank Malaysia MCIS Insurance Pacific & Orient Mozambique NICO Vida Letshego Namibia Sanlam Life Santam Sanlam Investment Management Letshego Bank Windhoek Nigeria FBN Life Oasis Insurance Philippines Monarch Rwanda Soras VIE Soras AG Letshego Tanzania African Life Assurance NIKO Insurance Letshego The Gambia Enterprise Life Uganda Sanlam Life NIKO Insurance Letshego Zambia African Life Assurance NICO Insurance African Life Financial Services Letshego Cavmont Direct presence Indirect presence via associated company Holding Co., Properties, Employee Benefits, Funeral Page 23

24 diversification diversified earnings base Group Equity Value Net operating profit Credit & banking 8% Admin, health & other 8% Credit & banking 14% Admin, health & other 3% Investment management 14% Investment management 13% Short-term insurance* 17% Life business 53% Short-term insurance* 13% Life business 57% * General insurance Page 24

25 diversification growth markets delivering value Net VNB 1H03 (R100m) Net VNB 1H14 (R626m) Namibia 2% Botswana 8% Rest of Africa 8% Other international 3% Namibia 4% SA Traditional 98% SA Entry-level 22% SA Traditional 55% Page 25

26 diversification increasing contribution from growth markets Contribution to group net operating profit 1H03 R756 million 1H13 R2 409 million 1H14 R3 461 million Namibia 1% Other international 1% India/Malaysia 7% Rest of Africa 2% Botswana 4% Namibia 5% Other International 6% India/Malaysia 7% Rest of Africa 1% Botswana 5% Namibia 5% Other international 6% SA Traditional 98% SA Entry-level 11% SA Traditional 65% SA Entry-level 11% SA Traditional 65% Page 26

27 diversification contribution from businesses outside of South Africa Net operating profit Net VNB Group Equity Value 76% 76% 77% 82% 77% 81% 18% 18% 6% 6% 20% 14% 3% 4% 16% 13% 7% 6% 1H14 1H13 1H14 1H13 1H14 1H13 South Africa Other emerging markets Developed markets Page 27

28 diversification competitive advantage Largest exposure to ex-sa emerging markets of South African insurers Diversified operations shield Group earnings from difficult operating environment in specific countries Expanding SA entry-level footprint Strengthening relationships in Africa Shriram Capital unique business model in India Expansion into South-East Asia synergies and organic growth Page 28

29 sanlam group financial performance 2014 interim results

30 operating environment Challenging operating conditions Slow growth in global demand Weak economic growth in SA Industrial action, in particular platinum mines SA consumer under pressure SA economy Growth Interest rates Equity markets Currencies Africa/India/Malaysia Page 30

31 rest of africa/india/malaysia Botswana Resilient economy and consumer base Rest of Africa GDP growth prospects exceed SA, despite slow growth in global demand Ghana economy struggling; devaluation of currency India Below-trend economic growth Buoyant equity market Positive environment post elections Malaysia Growth prospects remain in place Page 31

32 salient features Page Group Equity Value* cps % Annualised RoGEV per share % 18,0 14,3 Annualised RoGEV per share (adjusted) % 15,3 15,1 CAR cover (Sanlam Life)* 4,4 4,5 Net operating profit R mil % cps 169,2 118,1 43% Normalised Headline earnings R mil % cps 214,8 169,1 27% New business volumes + R mil % Net fund flows + R mil % New Life business EV (net) R mil % New Life EV margin % 2,68 2,83 * Comparative information as at 31 December Excludes white label

33 business flows Gross Net R million by business Personal Finance % Emerging Markets % Sanlam Investments % Santam % by licence Life insurance % Investment % Short-term % Total % * Excludes white label Page 33

34 value of new covered business Value of New Business Margin R million Personal Finance % 2,73% 3,07% Emerging Markets % 7,30% 6,52% Employee Benefits % 2,30% 1,45% Sanlam UK % 0,59% 0,87% Total % 2,88% 2,98% Net of minorities % 2,68% 2,83% Comparable economic basis % 2,77% 2,83% Page 34

35 net operating profit R million Personal Finance % Emerging Markets % Sanlam Investments % Santam % Corporate & other (6) (42) 86% Total % Page 35

36 income statement R million Net operating profit % Per share 169,2 118,1 43% Net investment return % Other (190) (110) -73% Normalised headline earnings % Per share 214,8 169,1 27% Fund transfers Headline earnings % Per share 220,2 171,4 28% Page 36

37 group equity value Equity Value* RoGEV + R million Rm % Group operations ,5% Personal Finance ,7% Emerging Markets ,3% Investments ,2% Santam ,0% Discretionary & Other ,1% TOTAL ,6% cps ,6% Adjusted return 7,4% Return target 5,9% * Comparative information as at 31 December Return for six months Page 37

38 group equity value earnings R million Actual Adjusted Net value of new business Existing business Expected return on VIF Operating experience variance Operating assumption changes Inv variances in-force 497 (497) - Tax changes (3) 3 - Economic assumption changes (200) (294) Return on net worth 765 (189) 576 EV earnings (483) Non-life (578) GEV earnings (1 061) Page 38

group equity value out perform growth target of long-bond rate + 400bp 25 20 15 3.1 4.8 3.3 9.8 6.2 5.8 5.

39 group equity value out perform growth target of long-bond rate + 400bp Avg Target Outperformance Page 39

group equity value (adjusted return) out perform growth target of long-bond rate + 400bp 25 20 15 2.6 2.4 2.8 3.

40 group equity value (adjusted return) out perform growth target of long-bond rate + 400bp Avg Target Outperformance Page 40

41 rogev versus target Out perform cumulative growth target of long-bond rate + 400bps since listing Target Cost of Capital (RFR + 300bps) Actual Page 41

42 Sanlam group cluster results for 1H2014

43 sanlam personal finance R million New business flows % Sanlam Sky % Individual Life % Glacier % Net flows Sanlam Sky Individual Life (859) (701) Glacier Page 43

44 sanlam personal finance R million Value of new life business % Sanlam Sky % Individual Life % Glacier % Comparable economic basis % New business margin 2,73% 3,07% Sanlam Sky 7,62% 7,46% Individual Life 2,59% 2,89% Glacier 1,37% 1,45% Comparable economic basis 2,89% 3,07% Page 44

45 sanlam personal finance R million Gross operating profit % Sanlam Sky % Individual Life life and investments % Glacier % Personal loans % Other % Net operating profit % Group Equity Value* RoGEV (six months) 8,7% 6,8% * Comparative information as at 31 December 2013ite label Page 45

46 sanlam emerging markets R million New business flows % Namibia % Botswana % Rest of Africa % India/Malaysia % Net fund flows Namibia 343 (419) Botswana Rest of Africa India/Malaysia Value of new life business % Margin 7,30% 6,52% Page 46

47 sanlam emerging markets R million Gross operating profit % Namibia % Botswana % Rest of Africa % India/Malaysia % Corporate (13) (11) -18% Net operating profit % Group equity value* RoGEV (six months) 12,3% 22,0% * Comparative information as at 31 December 2013 Page 47

48 sanlam investments R million Net investment business flows Investment management SA (810) Wealth management (457) International Capital management 99 - New life business % Employee benefits % Sanlam UK % Net life business Value of new life business % Margin 1,16% 1,13% Page 48

49 sanlam investments R million Gross operating profit % Investment management % Employee benefits % Capital management % Net operating profit % Group Equity Value* Covered business Other RoGEV (six months) 11,2% 9,2% * Comparative information as at 31 December 2013 Page 49

50 santam R million Net earned premiums % Gross operating profit % Underwriting surplus % Working capital & other % Net operating profit % Underwriting margin 7,4% 1,3% Group Equity Value* RoGEV (six months) 7,0% 2,9% * Comparative information as at 31 December 2013 Page 50

51 Sanlam ADR programme Sponsored level 1 ADR Ticker symbol: CUSIP: Ratio: Depositary bank: Depositary bank contact: ADR broker helpline: ADR website: SLLDY 80104Q208 1 ADR : 5 Ordinary Shares Deutsche Bank Trust Company Americas Stanley Jones (New York) (London) adr@db.com Depositary bank s local custodian: Computershare South Africa Page 51

the sanlam group impact of data on strategy: the sanlam emerging markets africa growth story august 2014

the sanlam group impact of data on strategy: the sanlam emerging markets africa growth story august 2014 impact of data on strategy: the sanlam emerging markets africa growth story august 2014 Insurance Financial Planning Retirement Investments Wealth agenda Brief overview of strategy and strategic positioning