Slide 1: Investor presentation 2013 annual results
Trust, responsibility and the connectivity of solid performance and expertise Investor presentation 2013 annual results
Slide 2: Slide 2
Slide 3: Investor Presentation Annual Results
INVESTOR PRESENTATION 2013 Annual Results Notes Sanlam investor presentation 2013 annual results 1
Slide 4: Agenda
AGENDA X Operating environment X Strategic overview X Financial review X Outlook and priorities Notes 2 Sanlam investor presentation 2013 annual results
Slide 5: Operating Environment
OPERATING ENVIRONMENT Fundamentals remain uncertain Notes Sanlam investor presentation 2013 annual results 3
Slide 6: Operating Environment
OPERATING ENVIRONMENT X Conditions remain challenging • Slow global recovery, but signs of improvement • Tapering of Quantitative Easing impacting negatively on emerging markets • Low short-term interest rate environment in 2013 • Weak short-term insurance claims cycle X SA economy • Growth • Intere
Slide 7: SA economy: low growth expected to continue into 2014
SA ECONOMY Low level of growth expected to continue into 2014 14 11 8 5 2 -1 -4 -7 12-05 06-06 12-06 06-07 12-07 06-08 12-08 06-09 12-09 06-10 12-10 06-11 12-11 06-12 12-12 06-13 Growth y-o-y in real retail sales Growth y-o-y in real GDP Growth y-o-y in real PDI Notes Sanlam investor presentation 20
Slide 8: SA interest rates
SA INTEREST RATES Higher LT rates had negative impact on RoGEV and VNB growth 10.0% 9.5% 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 9-year Short term Avg Short term Notes 6 Sanlam investor presentation 2013 annual results
Slide 9: SA equity & bond markets
SA EQUITY & BOND MARKETS X Equity market recovered strongly in 2H13 X Partly offset by weak bond market performance 145 17,8% 140 135 130 125 120 22,7% 115 110 105 0,6% 100 16,1% 95 All Share rebased All Bond rebased Alsi avg Notes Sanlam investor presentation 2013 annual results 7
Slide 10: Exchange rate
EXCHANGE RATE Weakening in average rand exchange rate benefited non-SA earnings 25% 21.3% 20% 17.3% 15.5% 15% 10% 7.5% 6.9% 6.2% 5% 0% Europe United Kingdom USA Botswana India Rest of Africa Notes 8 Sanlam investor presentation 2013 annual results
Slide 11: Rest of Africa/India environment
REST OF AFRICA/INDIA ENVIRONMENT X Botswana • Consumer remains under pressure X Rest of Africa • Low demand for resources, but overall growth remains higher than SA X India • Below-trend economic growth during FY13 • Relatively high inflation, rising interest rates • Currency volatility similar to S
Slide 12: Strategic Delivery
STRATEGIC DELIVERY Track record remains intact Notes 10 Sanlam investor presentation 2013 annual results
Slide 13: Strategic focus remains unchanged
STRATEGIC FOCUS REMAINS UNCHANGED Maximise shareholder return Net Business Flows Operational Efficiency Growth / Diversification Operational Efficiency (ROGEV) Returns Optimal Application Efficiency Capital Strategic Investments Return of Excess Notes Sanlam investor presentation 2013 annual results
Slide 14: Core strategic objectives
CORE STRATEGIC OBJECTIVES Progress in all areas during 2013, particularly international Effective capital management South Africa Maximising return on Investment in existing business Delivery of sustainable growth Efficient and effective management International Sourcing new growth opportunities Cre
Slide 15: Top-line earnings growth: financial performance in 2013
TOP-LINE EARNINGS GROWTH Financial performance in 2013 X Earnings per share • Net operating profit per share increased by 34% • Normalised headline earnings per share up 35% X Business volumes • New business volumes increased by 36% to R185bn • Net fund inflows of R32bn • Net life VNB up 12% to R1 3
Slide 16: Operational efficiencies: profitable volume growth
OPERATIONAL EFFICIENCIES Profitable volume growth X Gross VNB grew by 13%, at sustained average margins despite higher interest rates 1 600 3.5% 1 400 3.0% 1 200 2.5% 1 000 2.0% 800 1.5% 600 1.0% 400 200 0.5% 0 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 South Africa Africa Other International
Slide 17: Operational efficiencies: focus on quality
OPERATIONAL EFFICIENCIES Focus on quality Lapses, surrenders & fully paid-ups as % of in-force per half year 5% 4.8% 4.2% 4.2% 3.9%4.0% 3.9%3.8% 3.8% 3.9% 4% 3.6%3.7% 3.6% 3.4% 3.4% 3.0%2.9% 2.9% 3% 2.8% 2.9%2.7% 2.8%2.9% 2% 1% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 H2 Notes Sa
Slide 18: Operational efficiencies: focus on quality
OPERATIONAL EFFICIENCIES Focus on quality Number of NTUs, lapses and surrenders as % of in-force 30% 27.6% 25% 20% 17.5% 16.8% 15.2% 15% 14.1% 14.5% 12.7% 12.7% 11.4% 11.1% 11.1% 10.4% 11.0% 10.0% 10% 5% 0% 2007 2008 2009 2010 2011 2012 2013 H1 H2 Notes 16 Sanlam investor presentation 2013 annual re
Slide 19: Investment performance
INVESTMENT PERFORMANCE Focus on long-term performance track record 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Rolling 3 Yr Rolling 5 Yr 2010 2011 2012 2013 2010 2011 2012 2013 Notes Sanlam investor presentation 2013 annual results 17
Slide 20: Operational efficiencies: experience variances
OPERATIONAL EFFICIENCIES Experience variances 1 200 1 021 1 000 800 636 681 600 555 468 400 350 277 288 278 241 200 142 138 96 45 32 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 R'million Average Notes 18 Sanlam investor presentation 2013 annual results
Slide 21: Diversification: diversified earnings base
DIVERSIFICATION Diversified earnings base Group Equity Value Net operating profit Admin, health & other Admin, health & other 11% Credit & banking 1% 15% Credit & banking 8% Investment Investment management management 14% 13% Short-term Life business insurance* Life business 51% 7% 63% Short-term in
Slide 22: Diversification: international positioning
DIVERSIFICATION International positioning RSA based Rest of Africa Botswana Ghana Kenya Lesotho Malawi South-East Asia Mozambique Namibia India Nigeria Malaysia Rwanda Philippines South Sudan Swaziland Developed markets Tanzania UK / Ireland The Gambia Switzerland Developed Markets Uganda Australia
Slide 23: Increasing contribution from growth markets
DIVERSIFICATION Increasing contribution from growth markets 2003 – R1 968 million 2012 – R4 030 million 2013 – R5 429 million India/ Other international Malaysia 6% Rest of Africa Other international 7% 2% 5% Rest of Africa Namibia Other international Botswana 5% 3% 1% 1% Namibia Botswana 4% 4% SA E
Slide 24: Growth markets delivering value
DIVERSIFICATION Growth markets delivering value Net VNB – 2003 (R232m) Net VNB – 2013 (R1 320m) Other international Rest of Africa 3% 9% Namibia 1% Botswana 5% Namibia 4% SA Traditional 99% SA Entry-level 28% SA Traditional 51% Notes 22 Sanlam investor presentation 2013 annual results
Slide 25: Capital efficiency: optimising capital base
CAPITAL EFFICIENCY Optimising capital base X Prudent approach while awaiting final SAM specifications X R2,5 billion of investments in growth markets finalised during 2013 X Discretionary capital earmarked mainly for Africa, India and SE Asia Notes Sanlam investor presentation 2013 annual results 23
Slide 26: Capital efficiency: discretionary capital
CAPITAL EFFICIENCY Discretionary capital Balance 1 January 2013 4 200 Investments (1 763) India & SE Asia (1 334) Rest of Africa (551) Santam co-investment 181 Developed markets (46) South Africa (13) Capital released 1 906 Non-core operations 412 Excess return on life capital 1 494 Investment retur
Slide 27: Capital redeployed since 2005
CAPITAL EFFICIENCY Capital redeployed since 2005 35 000 30 000 25 000 20 000 15 000 Discretionary capital 10 000 South Africa Developed markets 5 000 Emerging markets Share buy back/special dividend - Capital released Capital deployed Notes Sanlam investor presentation 2013 annual results 25
Slide 28: Composition of GEV transformed since 2005
CAPITAL EFFICIENCY Composition of GEV transformed since 2005 90 000 80 000 70 000 60 000 50 000 40 000 30 000 Discretionary capital Other capital 20 000 Non-life operations 10 000 Value of in-force Life Required Capital - GEV 2005 GEV 2013 Notes 26 Sanlam investor presentation 2013 annual results
Slide 29: Financial Review
SANLAM GROUP Financial Review Notes Sanlam investor presentation 2013 annual results 27
Slide 30: Changes in presentation / key assumptions
CHANGES IN PRESENTATION / KEY ASSUMPTIONS X Accounting policies & basis of presentation (no change from 1H13) • IFRS 10 restatements – no impact on shareholders’ fund balance sheet • Investment classifications aligned with SAM • STC replacement with withholding tax • Presentation of non-life operati
Slide 31: Salient features
SALIENT FEATURES + Excludes white label + Excluding white label Notes Sanlam investor presentation 2013 annual results 29
Slide 32: Sanlam Personal Finance
SANLAM PERSONAL FINANCE R million 2013 2012 Ì New business flows 42 507 32 355 31% Entry-level 1 155 984 17% Middle-income 11 328 9 972 14% Affluent 30 024 21 399 40% Net flows 14 993 8 974 Entry-level 2 880 1 342 Middle-income (1 826) 233 Affluent 13 939 7 399 Notes 30 Sanlam investor presentation
Slide 33: Sanlam Personal Finance
SANLAM PERSONAL FINANCE R million 2013 2012 Ì Value of new life business 986 939 5% Entry-level 366 382 -4% Middle-income 485 449 8% Affluent 135 108 25% Comparable economic basis 1 113 939 19% New business margin 3,20% 3,44% Entry-level 8,63% 8,59% Middle-income 2,82% 2,95% Affluent 1,45% 1,41% Com
Slide 34: Sanlam Personal Finance
SANLAM PERSONAL FINANCE R million 2013 2012 Ì Gross operating profit 4 055 3 272 24% Entry-level 761 375 103% Middle-income life and investments 2 659 2 363 13% Glacier 260 187 39% Personal loans 296 279 6% Other 79 68 16% Net operating profit 2 920 2 351 24% Group Equity Value 35 666 32 762 RoGEV 2
Slide 35: Sanlam Emerging Markets
SANLAM EMERGING MARKETS R million 2013 2012 Ì New business flows 9 749 12 952 -25% Namibia 5 401 9 532 -43% Botswana 2 281 2 067 10% Rest of Africa 1 139 895 27% India/Malaysia 928 458 103% Net fund flows 1 794 3 977 Namibia (807) 1 629 Botswana 1 303 1 228 Rest of Africa 1 195 1 024 India/Malaysia
Slide 36: Sanlam Emerging Markets
SANLAM EMERGING MARKETS R million 2013 2012 Ì Gross operating profit 1 736 850 104% Namibia 387 225 72% Botswana 579 499 16% Rest of Africa 217 117 85% India/Malaysia 584 34 >100% Corporate (31) (25) -24% Net operating profit 1 011 428 136% Group equity value 10 189 6 105 RoGEV 29,8% 16,9% Notes 34
Slide 37: Sanlam Investments
SANLAM INVESTMENTS R million 2013 2012 Ì Net investment business flows 1 702 6 542 Asset management (9 934) 4 418 Wealth management 5 299 1 743 Investment services 1 932 (863) International 4 203 1 244 Capital management 202 - New life business 7 327 4 163 76% Employee benefits 2 075 2 084 0% Sanlam
Slide 38: Sanlam Investments
SANLAM INVESTMENTS R million 2013 2012 Ì Gross operating profit 1 718 1 322 30% Investment management 1 078 692 56% Employee benefits 385 359 7% Capital management 255 271 -6% Net operating profit 1 301 975 33% Group Equity Value 17 971 16 424 Covered business 6 901 6 205 Other 11 070 10 219 RoGEV 2
Slide 39: Santam
SANTAM R million 2013 2012 Ì Net earned premiums 16 750 15 626 7% Gross operating profit 835 1 008 -17% Underwriting surplus 461 593 -22% Working capital income 374 415 -10% Net operating profit 333 405 -18% Underwriting margin 2,8% 3,8% Group Equity Value 12 644 12 875 RoGEV 1,5% 44,0% Notes Sanlam
Slide 40: Business flows
BUSINESS FLOWS Gross Net R million 2013 2012 Ì 2013 2012 by business Personal Finance 42 507 32 355 31% 14 993 8 974 Emerging Markets 9 749 12 952 -25% 1 794 3 977 Sanlam Investments 85 970 62 139 38% 4 184 7 103 Santam 16 750 15 626 7% 5 142 4 946 by licence Life insurance 31 687 25 436 25% 10 561
Slide 41: Value of new covered business
VALUE OF NEW COVERED BUSINESS Value of New Business Margin R million 2013 2012 Ì 2013 2012 Personal Finance 986 939 5% 3,20% 3,44% Emerging Markets 364 267 36% 7,46% 5,88% Employee Benefits 61 58 5% 1,66% 1,43% Sanlam UK 39 14 179% 0,7% 0,63% Total 1 450 1 278 13% 3,23% 3,35% Net of minorities 1 320
Slide 42: Net operating profit
NET OPERATING PROFIT R million 2013 2012 Ì Personal Finance 2 920 2 351 24% Emerging Markets 1 011 428 136% Sanlam Investments 1 301 975 33% Santam 333 405 -18% Corporate & other (136) (129) -5% Total 5 429 4 030 35% Notes 40 Sanlam investor presentation 2013 annual results
Slide 43: Income statement
INCOME STATEMENT R million 2013 2012 Ì Net operating profit 5 429 4 030 35% Per share 266,0 198,9 34% Net investment return 3 019 2 356 28% STC - (233) 100% Other (388) (234) -66% Normalised headline earnings 8 060 5 919 36% Per share 395,0 292,1 35% Fund transfers 2 (156) Headline earnings 8 062 5
Slide 44: Group Equity Value
GROUP EQUITY VALUE Equity Value RoGEV R million 2013 2012 Rm % Group operations 76 470 68 166 13 367 19,3% Personal Finance 35 666 32 762 6 721 20,5% Emerging Markets 10 189 6 105 2 246 29,8% Investments 17 971 16 424 4 204 25,9% Santam 12 644 12 875 196 1,5% Discretionary & Other 7 939 7 186 (20) -
Slide 45: Group Equity Value earnings
GROUP EQUITY VALUE EARNINGS R million Actual Adjusted Net value of new business 1 320 1 320 Existing business 3 991 3 991 Expected return on VIF 2 585 2 585 Operating experience variance 1 021 1 021 Operating assumption changes 385 385 5 311 5 311 Inv variances in-force 2 624 (2 624) - Tax changes 8
Slide 46: Summary
SUMMARY Delivery on strategy: X Shareholder value • Cumulative RoGEV per share exceeds hurdle X Profitable growth • Strong growth in all markets and segments • Net VNB +23% on comparable basis • Net operating profit up 25% excluding acquisitions X Diversification • Increasing contribution from growt
Slide 47: RoGEV versus target
ROGEV VERSUS TARGET 900 800 700 600 500 400 300 200 100 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Target Cost of Capital (RFR + 300bps) Actual Notes Sanlam investor presentation 2013 annual results 45
Slide 48: Priorities for 2014
PRIORITIES FOR 2014 Notes 46 Sanlam investor presentation 2013 annual results
Slide 49: Sanlam Personal Finance
SANLAM PERSONAL FINANCE X Focus on sales growth and maintain margins on same discount rate • Grow adviser force in all market segments • Product innovation, particularly recurring premiums • Improve Sanlam Sky broker channel performance X Continue focus on persistency X Continue focus on operational
Slide 50: Sanlam Emerging Markets
SANLAM EMERGING MARKETS X Focus remains on Africa, India and South-East Asia X Continue focus on top-line growth, efficiencies and capital optimisation in current operations • Review Botswana cost models and efficiencies given lower growth • Unlock Shriram Capital synergies • Bed down IT implementat
Slide 51: Sanlam Investments
SANLAM INVESTMENTS X Maintain consistent upper quartile investment performance X Improve Institutional fund flows X Improve Retail presence and increase flows X Expand African Funds proposition X Optimise service to clients (leveraging off client-centric structure) X Provide innovative and cost effe
Slide 52: Santam
SANTAM X Deliver on diversified growth • Market diversification (specialist business, Santam Re, investment in SEM partners) • Continued growth at MiWay X Maintain size and quality of risk pool • Ongoing segmented premium rate increases • Addressing multi-claimants and reviewing the existing portfol
Slide 53: Outlook
OUTLOOK Notes Sanlam investor presentation 2013 annual results 51
Slide 54: Outlook for 2014
OUTLOOK FOR 2014 X Improved traction in developed economies likely to have twofold impact: • Supportive of economic activity in emerging markets • Tapering of QE likely to result in volatile SA currency and investment market performance X Focus on bedding down new acquisitions X Progress on regulato
Slide 55: Thank you
THANK YOU Notes Sanlam investor presentation 2013 annual results 53
Slide 56: Notes
Notes 54 Sanlam investor presentation 2013 annual results
Slide 57: www.sanlam.co.za
> www.sanlam.co.za