Investment Case. Incorporating 2016 Annual Results

Transcription

1 Investment Case Incorporating 2016 Annual Results

2 Overview Our vision The Sanlam strategy Strategic progress in 2016 Financial performance in 2016 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 JSE/ALSI40 stock with > 80% free-float Average daily trading stats 5-6 million shares per day >50% of shares trade p.a. Institutional shareholding of 87%, 38% offshore shareholding page 3

4 Operational structure Sanlam Group Group Office 100% Sanlam Personal Finance 100 % SA Retail: life insurance, investment & other financial services 100% Sanlam Emerging Markets Emerging markets ex-sa: life insurance, general insurance, investments, credit & banking Sanlam Investments SA & Developed markets: investment management, wealth management, credit & structuring 100% 100% 62% Sanlam Corporate SA & EM corporate: employee benefits, health 60% Santam General insurance, reinsurance & co-investor in SEM general insurance businesses page 4

5 Our vision

6 Our vision remains 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 and South-East Asia To play a niche role in wealth and investment management in specific developed markets. Our purpose to create a world worth living in and to enable people to live their best possible lives within it page 6

7 The Sanlam Strategy Being a leader in value creation

8 Strategic focus Sustainable value creation for stakeholders Maximising RoGEV Strategic pillars Earnings growth Diversification Optimal capital utilisation Operational efficiencies Transformation Sustainability themes Sound governance People development Responsible products & services Prosperous society Environmental footprint page 8

9 Focus on growth and value creation SA base complemented by a growing international presence South Africa Solid base & cash flows Developed Asset & wealth management for SA & RoA clients Rest of Africa Demographics, low insurance penetration, competitive environment, Pan-Africa opportunity India/SE Asia Lower income segments have similar dynamics than SA ELM and RoA page 9

10 Focus on growth and value creation Unmatched Pan-African footprint and opportunity United Kingdom Ireland France Switzerland Luxembourg USA Sanlam and Saham presence Saham Finances presence Emerging Markets - Indirect presence Emerging Markets - Direct presence Developed Markets Algeria Tunisia Morocco Niger Mali Senegal The Gambia Guinea Burkina Faso Cote D Ivoire Ghana Togo Benin Nigeria Cameroon Gabon Republic of the Congo Angola Namibia Botswana South Africa Lebanon Saudi Arabia Kenya India Uganda Rwanda Burundi Tanzania Malawi Zambia Mauritius Madagascar Mozambique Zimbabwe Swaziland Lesotho Malaysia Philippines Australia page 10

11 The growth opportunity Growth markets in South Africa 50% 45% 46% 40% 35% 36% % of population 30% 25% 20% 15% 14% 22% 18% 23% 16% 25% 10% 5% 0% LSM 1-4 LSM 5 LSM 6-7 LSM 8-10 page 11

12 The growth opportunity Insurance penetration in Africa 14.0% Insurance penetration as % of GDP 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% World Africa SA Namibia Botswana India Morocco Ivory Coast Kenya Ghana Nigeria Life Non-Life page 12

13 Diversification Geographic profile: Effective interest Effective interest: Life insurance 100% 59% - 100% 99% 75% 70% 64% 60% 57% 57% 56% 51% 49% 42% 40% 35% 30% 24% 16% Various Effective interest: General insurance South Africa 62% Namibia 37% Uganda 82% Rwanda 75% Zambia 57% Tanzania 50% Botswana 60% Malawi 57% Kenya 39% Mozambique - Malaysia 49% Ghana 40% India 43% Zimbabwe 40% Nigeria 35% Ivory Coast 30% Lebanon 24% Morocco 16% - Angola 15% Developed markets Various page 13

14 Diversification Geographic profile: Market share Life insurance Market share / Position General insurance Market share / Position 73% / 1 59% /1 52% / 1 42% / 2 Botswana Tanzania Rwanda Malawi 4% / 6 2% / 17 24% / 1 38% /1 35% / 1 Zambia 15% / 2 34% / 2 Namibia 32% / 1 27% / 2 Ghana 15% / 2 25% / 2 South Africa >22% / 1 18% / 3 Uganda 5% / 7 15% / 3 Ivory Coast 28% / 1 8% / 5 Lebanon 6% / 8 8% / 4 Nigeria 1% / 29 7% / 4 Kenya 1% / 33 6% / 5 Mozambique - 5% / 4 Zimbabwe 12% / 3 3% / 6 Morocco 17% / 1 2% / 11 Malaysia 2% / 21 2% / 13 India 1% / 16 <1% Developed markets - - Angola 17% / 2 page 14

15 Diversification SEM: Line of business profile (ex Saham Finances) page 15

16 Diversification SEM: Saham Finances profile page 16

17 Diversification providing stability Geographic diversification Net VNB Net operating profit Rest of Africa 20% Other international 3% Rest of Africa 13% Other international 10% SA Traditional 66% SA Entry-level 22% 2016 R1 605m SA Traditional 55% SA Entry-level 11% 2016 R7 969m page 17

18 Diversification providing stability Line of business diversification Group Equity Value Net operating profit Credit & structuring 10% Investment management 13% Admin, health & other 11% General insurance 20% 2016 R m Life business 46% Credit & structuring 14% Investment management 11% General insurance 13% 2016 R7 969m Admin, health & other 3% Life business 59% page 18

19 Capital efficiency Optimising the 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 Discretionary capital earmarked mainly for Africa page 19

20 Capital efficiency Capital redeployed since 2005 (R40bn) Discretionary capital Capital released Capital deployed South Africa Developed markets Emerging markets Share buy back/special dividend page 20

21 Capital efficiency Composition of GEV transformed since Discretionary capital Other capital Non-life operations - GEV 2005 GEV Dec 2016 Value of in-force Life Required Capital page 21

22 Strategic progress in 2016

23 Strategic progress in 2016 Consistent execution SPF Become leader in all SA retail market segments Strategic realignment successfully completed BrightRock acquisition to strengthen positioning in risk business Strong growth in new risk business; gaining market share Turnaround at Sanlam Sky Actively addressing digital offerings and big data Good progress with vesting and enhancing Reality synergies and benefits Effective capital management in SAM environment page 23

24 Strategic progress in 2016 Consistent execution Saham Finances acquisition (30%) completed; further 16.6% stake announced SEM Accelerated organic growth Shriram options (23%) completed Turnaround in Shriram Capital performance Good organic growth in most markets; Zambia, Kenya and Malaysia receiving attention General insurance did not deliver to expectations, needs more prioritised focus Successful rebranding in Kenya and Zambia Expanded central support team First-time contribution from Zimbabwe exceeding expectations Effective capital management page 24

25 Strategic progress in 2016 Consistent execution SI Grow 3 rd party market share Strategic realignment of SA asset management completed Optimised structure to drive corporate and 3 rd party fund flows Aligned to RDR environment Restructuring in UK reduced the cost base SICM refocused: Central Credit Manager successfully launched with benefits already being realised Strong retail net inflows of R16 billion Effective cost management page 25

26 Strategic progress in 2016 Consistent execution Focus on profitable growth; MiWay offering expanded Santam Further entrenching leadership position Sanlam Corporate Growing market share Enhanced capital efficiency; special dividend of R8 per share Continued focus on risk management to reduce claims cost Extracting value from SEM co-investments Corporate structure largely in place Strong performance in investment business Improvement in risk business in 2H16 First-time profit contribution by Afrocentric; above expectations Effective capital and balance sheet management in SAM environment page 26

27 Strategic progress in 2016 Consistent execution Sanlam Group Unlock maximum value Ongoing focus on optimising capital base Balance sheet management initiated in Sanlam Life Collaboration with key partners Extracting value from centres of excellence Effective capital and balance sheet management page 27

28 Capital efficiency Discretionary capital Balance 1 January Net investments (3 434) South Africa (935) Rest of Africa (2 828) SEM/Santam co-investment 333 Other (4) Santam special dividend 542 Investment return & other 422 Excess dividend cover 720 Further future releases from Sanlam Life (R500m R1bn p.a. over next 4 years), excess dividend cover Available for investment 550 page 28

29 Financial performance 2016 Annual Results

30 External operating environment Global challenges US monetary policy Slowdown in China Commodity-based economies under pressure Government & consumer debt Geopolitical risks page 30

31 External operating environment Emerging market economies under pressure from global events South Africa Commodity cycle and weak global demand suppressed economic activity no real growth in 2016 Weak business confidence and investment due to policy uncertainty, risk of downgrade Volatile investment markets and exchange rate Pressure on disposable income, in particular middleincome market Investor risk aversion in uncertain environment discretionary single premium savings under pressure Progress with public/private sector/labour cooperation page 31

32 External operating environment Emerging market economies under pressure from global events Rest of Africa Macro-economic adjustment in countries with large deficits during weak commodity cycle Economic growth, investment markets and currencies under pressure Oil exporters, Nigeria and Angola in particular, hard hit Inflationary pressure in a number of countries interest rates remaining high Good overall growth despite challenges, supported by low insurance penetration page 32

33 External operating environment Emerging market economies under pressure from global events India Robust economic growth Slowing inflation and declining short-term interest rates Roll-out of infrastructure projects and anticipated private sector investment to drive increased growth opportunity Uncertainty following de-monetisation: impact on credit businesses Malaysia Moderating economic growth in 2016 Consumption spending only partially compensating for decline in investment spend and exports Motorcycle sales remain under pressure page 33

34 Reporting environment Reported results affected by Interest rate volatility 5yr and 9yr SA bond yields down 100bps and 90bps respectively: VNB growth +8% Positive impact on December 2016 GEV valuations Exchange rate volatility Weaker average Rand in 2016 vs 2015: positive impact on foreign earnings translation (Net profit +R150m, Net VNB +R14m) Correction since Dec 2015: negative impact on Dec 2016 valuations of non-sa assets (RoGEV 6%) page 34

35 Exchange rates Severe volatility % Average depreciation UK Sterling -1.5 Indian Rupee Botswana Pula -7.6 Malaysian Ringgit -8.8 Average Rest of Africa -1.5 Appreciation since December 2015 UK Sterling 25.9 Indian Rupee 14.3 Botswana Pula 7.5 Malaysian Ringgit 15.7 Average Rest of Africa 19.6 page 35

36 Reporting environment Reported results affected by Lower investment returns Weaker investment markets in SA, major African markets, MSCI One-off negative (R192m) impact of higher CGT inclusion rate Utilisation of cash for Saham Finances acquisition and Shriram options (R75m after tax) Underwriting results Overall increase in SA and Namibia mortality / disability claims; improvement in 2H16 in SA individual life and SEB Normalisation in SA general insurance underwriting margin from 2015 high base Generally weak economic environment in SA and several African markets page 36

37 Sanlam Group

38 Performance highlights 2016 Earnings per share Net operating profit per share increased by 10% Normalised headline earnings per share down 6% Headline earnings per share up 6% Dividend per share of 268 cents, up 9.4% Business volumes New business volumes increased by 11% to R233bn Net fund inflows of R41bn compared to R19bn in 2015 Net life VNB up 18% Net VNB margin of 2.69% Group Equity Value Group Equity Value of R54.07 per share RoGEV per share of 11.8%, adjusted 17.8% - above hurdle rate page 38

39 Performance highlights 2016 continued Strong solvency position Sanlam Life Insurance Limited CAR cover of 5.8 times under current regime SCR cover of 3.1 times under SAM Sanlam Group SCR cover of 2.2 times under SAM page 39

40 Business flows Gross Net R million by business Personal Finance % Emerging Markets % (6 593) Sanlam Investments % (3 023) Santam % Sanlam Corporate % (489) by licence Life insurance % Investment % (523) General insurance % Total % page

41 Value of new covered business Value of New Business Margin R million Personal Finance % 2,80% 2,51% Emerging Markets % 5,52% 5,57% Sanlam Corporate % 0,97% 1,96% Sanlam UK % 0,21% 0,66% Total % 2,85% 2,79% Net of minorities % 2,69% 2,62% Comparable economic basis % 2,56% 2,62% page 41

42 Value of new covered business Long-term interest rates and business mix supporting margin South Africa Rest of Africa Other International Margins - rhs 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% page 42

43 Net operating profit R million Personal Finance % Emerging Markets % Sanlam Investments % Santam % Sanlam Corporate % Corporate & other (107) (109) 2% Total % page 43

44 Income statement R million Net operating profit % Per share 389,4 355,2 10% Net investment return % Other (285) (364) 22% Normalised headline earnings % Per share 408,5 432,5-6% Fund transfers Headline earnings % Per share 488,1 459,5 6% page 44

45 Group Equity Value Equity Value RoGEV R million Rm % Group operations ,1% Personal Finance ,7% Emerging Markets (491) -2,3% Investments (322) -1,9% Santam ,1% Sanlam Corporate ,6% Discretionary & Other (162) -1,8% TOTAL ,9% cps ,8% Return target 14,1% page 45

46 Group Equity Value earnings R million Net value of new business Existing business Expected return on VIF Operating experience variances Operating assumption changes Inv variances in-force (785) 320 Tax changes and goodwill 239 (62) Economic assumption changes 485 (1 608) Return on net worth (113) EV earnings Non-life GEV earnings page 46

47 Experience variances Significant improvement in claims experience in 2H % 4.3% 3.8% % % % 1.8% % 0.8% 0.3% % R'million % of VIF annualised (rhs) page 47

48 Return on Group Equity Value Out perform growth target of long-bond rate +400bp Avg Target Out performance page 48

49 Cluster results 2016 Annual Results

50 Sanlam Personal Finance

51 Sanlam Personal Finance R million New business volumes % Sanlam Sky % Individual Life % Glacier % Net flows Sanlam Sky Individual Life (4 755) (3 005) Glacier page 51

52 Sanlam Personal Finance Solid persistency in difficult environment Persistency SA middle-income market Lapses, surrenders & fully paid-ups as % of in-force per half year H1 H2 page 52

53 Sanlam Personal Finance Solid persistency in difficult environment Persistency SA lower income market Lapses, surrenders & fully paid-ups as % of in-force per half year H1 H2 page 53

54 Sanlam Personal Finance R million Value of new life business % Sanlam Sky % Individual Life % Glacier % Comparable economic basis % New business margin 2,80% 2,51% Sanlam Sky 7,56% 5,86% Individual Life 2,91% 2,59% Glacier 1,29% 1,45% Comparable economic basis 2,59% 2,51% page 54

55 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 22,7% 12,1% page 55

56 Sanlam Emerging Markets

57 Sanlam Emerging Markets R million New business volumes % Namibia % Botswana % Rest of Africa % India/Malaysia % Net fund flows (6 593) Namibia (133) Botswana (9 781) Rest of Africa India/Malaysia Value of new life business % Margin 5,52% 5,57% page 57

58 Sanlam Emerging Markets R million Gross operating profit % Namibia % Botswana % Rest of Africa % India/Malaysia % Corporate (19) (8) -138% Net operating profit % Group equity value RoGEV -2,3% 29,9% page 58

59 Sanlam Investments

60 Sanlam Investments R million Net investment business flows (3 251) Investment management SA (753) Wealth management International (4 490) (2 829) Capital management (35) (2) New life business % Net life business (252) 228 Value of new life business % Margin 0,21% 0,66% page 60

61 Sanlam Investments R million Gross operating profit % Investment management SA/Corp services % Wealth management % International % Capital management % Net operating profit % Group Equity Value Covered business Other RoGEV -1,9% 24,3% page 61

62 Sanlam Investments Investment performance Percentage of SIM s benchmark-managed funds exceeding hurdle % 80% 60% 40% 20% 0% 20% 40% 60% 80% 100% Rolling 3 year Rolling 5 year page 62

63 Santam

64 Santam R million Net earned premiums % Gross operating profit % Underwriting surplus % Working capital & other % Net operating profit % Underwriting margin 6,4% 9,6% Group Equity Value RoGEV 32,1% -8,4% page 64

65 Sanlam Corporate

66 Sanlam Corporate R million New business volumes % Recurring risk % Single risk % Investment & retirement % Net fund flows (489) Value of new life business % Comparable economic basis % New business margin 0,97% 1,96% Comparable economic basis 1,04% 1,96% page 66

67 Sanlam Corporate R million Gross operating profit % Employee Benefits % Healthcare & other >100% Net operating profit % Group Equity Value RoGEV 9,6% 14,9% page 67

68 Outlook

69 Outlook for 2017 Economic growth conditions will remain challenging in South Africa, Nigeria and Angola in particular Robust economic growth expected in India, Malaysia and East Africa Easing SA inflation supporting central bank rate outlook 2017 SA budget negative for discretionary savings Stronger rand exchange rate Stronger average exchange rate will impact on rand-based growth in non- SA key performance indicators Negative impact on RoGEV and investment return on non-sa exposure in SA capital portfolio Positive impact on Santam claims cost page 69

70 Outlook for 2017 Investment market volatility likely to persist in uncertain environment pressure on fee income and return on capital portfolio Continue to respond to industry transformation: inclusive growth, regulations, big data, digital Finalise additional Saham Finances and BrightRock acquisitions; build on partnership relationships Extracting value from key partnerships Further progress on capital and balance sheet management Fully establish and embed new Corporate cluster in SA page 70

71 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 71

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