Wrap Text
SLM - Sanlam - Reviewed Interim Results For The Six Months Ended 30 June 2008
SANLAM LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 1959/001562/06)
JSE SHARE CODE: SLM
NSX share code: SLA
ISIN number: ZAE000070660
("Sanlam", "Sanlam Group" or "the Group")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Interim financial statements
Accounting policies and actuarial basis
External audit review
Financial information for the shareholders` fund
Group Equity Value
Shareholders` fund at fair value
Shareholders` fund income statement
Notes to the shareholders` fund information
Embedded value of covered business
Group financial statements
Group balance sheet
Group income statement
Group statement of changes in equity
Group cash flow statement
Notes to the financial statements
Administration
Sanlam Group Interim Results June 2008
Key features
Earnings
- Net result from financial services per share down 3%
- Core earnings per share up 4%
- Normalised headline earnings per share decreased by 57%
- Diluted headline earnings per share decreased by 24%
Business volumes
- Total new business volumes up 2% to R51 billion
- Value of new covered business up 12% to R290 million
- New covered business margin of 2,39%
- Net fund inflows of R5,5 billion
Group Equity Value
- Group Equity Value per share of R22,54
- Annualised return on Group Equity Value per share of zero%
Capital management
- 81 million shares bought back during 2008 for R1,6 billion
- Discretionary capital of R3 billion at 30 June 2008
SALIENT RESULTS
for the six months ended 30 June 2008
SANLAM GROUP 2008 2007 Change
Earnings:
Net result from financial services cents 62,6 64,7 -3%
per share
Core earnings per share (1) cents 89,7 86,2 4%
Normalised headline earnings per cents 58,8 135,9 -57%
share (2)
Diluted headline earnings per share cents 94,5 124,2 -24%
Net result from financial services R million 1 334 1 488 -10%
Core earnings (1) R million 1 913 1 983 -4%
Normalised headline earnings (2) R million 1 254 3 126 -60%
Headline earnings R million 1 955 2 745 -29%
Group administration cost ratio (3) % 28,0 26,7
Group operating margin (4) % 17,8 22,5
Gross business volumes:
New business volumes R million 50 985 49 820 2%
Net fund flows R million 5 470 1 250
New covered business
Value of new covered business R million 290 260 12%
Covered business PVNBP (5) R million 12 141 11 214 8%
New covered business margin (6) % 2,39 2,32
GROUP EQUITY VALUE:
Group Equity Value (7) R million 46 539 51 293 -9%
Group Equity Value per share (7) cents 2 254 2 350 -4%
Return on Group Equity Value per % 0,0 18,8
share (7) (8)
SANLAM LIFE INSURANCE LIMITED
Shareholders` fund (7) R million 33 638 37 933
Capital Adequacy Requirements (CAR) R million 8 100 7 525
(7)
CAR covered by prudential capital times 2,8 3,5
(7)
Notes
(1) Core earnings = net result from financial services and net investment
income (including dividends received from non-operating associates).
(2) Normalised headline earnings = core earnings, net investment surpluses,
secondary tax on companies and equity-accounted headline earnings less
dividends received from non-operating associates, but excluding fund
transfers. Headline earnings include fund transfers.
(3) Administration costs as a percentage of income after sales remuneration.
(4) Result from financial services as a percentage of income after sales
remuneration.
(5) PVNBP = present value of new business premiums and is equal to the
present value of new recurring premiums plus single premiums.
(6) New covered business margin = value of new covered business as a
percentage of PVNBP.
(7) Comparative figures are as at 31 December 2007.
(8) Growth in Group Equity Value per share (with dividends paid, capital
movements and cost of treasury shares acquired reversed) as a percentage of
Group Equity Value per share at the beginning of the period.
Executive Review
Business environment
The turmoil in international financial markets, that started to emerge in the
second half of 2007, intensified during the first six months of 2008. The
world-wide confidence crisis caused by major capital write-offs in the
financial services sector was aggravated by a significant increase in the
cost of energy and high food price inflation. These trends spilled over into
South Africa and the other countries in which the Sanlam group operates. In
South Africa in particular, rising interest rates added to these global
factors and exacerbated the impact on consumer confidence and discretionary
spending.
Global equity and debt markets remained under pressure during the period. As
for most international markets, the South African equity market fell well
short of the performance achieved in 2007. The JSE All Share Index gained 5%
(excluding dividends) in the first six months in 2008 versus a gain of 14% in
the comparable period in 2007. The period under review was, however, also
characterised by an unprecedented level of divergence in the performance of
resources shares compared to the other South African equity sectors. Buoyant
resources shares materially cushioned the under performance of financial and
industrial shares with these indices being 27% and 18% down respectively for
the first six months of 2008.
Performance review
In the context of this challenging business environment, the Group achieved
satisfactory trading results for the six months to 30 June 2008. The
diversified nature of the Group`s operations provided resilience in the
turbulent market conditions, with the retail investment and life businesses
recording a strong six-month performance that largely offset some
deterioration in the operating results of the institutional and short-term
insurance operations. The lower performance level of these operations
reflects the impact of the prevailing market volatility but should also be
measured against the positive impact that the strong investment markets and
favourable underwriting conditions of the past few financial years had on the
operating profit and business flows reported by the investment management,
capital markets and short-term insurance businesses. Notwithstanding the
lower earnings level, the core operations of all the major Group businesses
remained sound.
In pursuit of the target to maximise growth in the Group`s Equity Value per
share, Sanlam continued with its share buy-back programme. The value created
by the buy-back strategy is evident in the incremental return and earnings
growth achieved on a per share basis. The diluted number of shares in issue
at the end of June 2008 is down 5% from December 2007, while the weighted
average number of shares in issue for the first six months reduced by 7,3%
relative to the comparable period in 2007.
Core earnings per share increased by 4%, which reflects the success of the
Group`s diversification strategy to provide resilience in the current market
conditions. Core earnings for the first six months of 2008 of R1 913 million
are 4% lower than the comparable period in 2007, the combined result of a 10%
decrease in the net result from financial services (net operating profit) and
a 17% increase in net investment income. The operating profit is reported
after allowing for a 33% increase in the cost of writing new life business,
the effect of a substantial increase in new life business volumes.
Significantly lower investment return on the Group`s capital portfolio, due
to the volatile investment markets, combined with an overweight position in
financial and industrial shares, contributed to a 57% decrease in normalised
headline earnings per share. Diluted headline earnings per share, which
include the International Financial Reporting Standards (IFRS) impact of
Sanlam and Santam shares held by the policyholders` fund, decreased by 24%.
Total new business volumes are 2% up on the comparable period in 2007.
Excluding the volatile white label flows, new business volumes increased by
4%. New life business volumes from both Sanlam Personal Finance and Sanlam
Developing Markets increased by 24%, a particularly satisfactory result
against the background of the prevailing economic environment. The value of
new covered business of R290 million is 12% up on 2007, with new business
margins improving from 2,32% in the first half of 2007 to 2,39% in 2008.
Sanlam Personal Finance`s new investment business also recorded exceptional
growth of 33% compared to the first six months of 2007, supported by
continued healthy growth in the affluent market. This was however offset by a
12% decline from a relatively high base in new investment business attracted
by the Institutional cluster. The Group recorded strong net fund inflows of
R7,3 billion, excluding white label business, compared to R1,1 billion in the
first half of 2007.
Group Equity Value (GEV) per share amounted to R22,54 at 30 June 2008. Taking
into account the payment of a 93 cents per share dividend in May 2008, this
represents a 0% annualised return per share on the R23,50 GEV at the end of
December 2007. The biggest negative contributor to the return was a 24%
decrease in the Santam share price during the six months, while the
annualised return recorded by covered business (7,1%) as well as the other
non-listed businesses (-6,0%) was negatively impacted by low investment
returns for the period. This is an acceptable overall result given the
adverse market conditions. The Group`s cumulative performance since Sanlam`s
demutualisation in 1998 is only marginally below the long-term target of the
10-year bond yield plus 3% to 4%, which confirms the sustained value creation
within the Group. The Sanlam share price traded at a 26% discount to GEV at
close of trading on 30 June 2008, in line with the historic low levels at
which financial services companies are currently trading internationally.
Delivering on strategy
Despite the challenges facing the Group in the current business environment,
the Board and management remain committed to the Group`s key objective of
maximising shareholder value. The Group has a sound platform and strategic
base from which to continue to grow. The focus during 2008 remains on optimal
capital utilisation, growth and diversification, operational efficiency, and
transformation.
A competitive business environment necessitates optimal operational
efficiencies. The Group successfully implemented a number of programmes over
the past few years to improve efficiencies and to reduce its cost base and
will continue to do so. A joint back office integration project between
Sanlam and Santam is receiving particular attention with significant benefits
expected for both entities.
Sanlam UK has now been established as a separate business unit and
incorporates all of the Group`s interests in the United Kingdom market. This
restructuring will ensure improved focus on the Group`s niche presence in
this market and will ensure that distribution and other synergies between the
businesses are optimised.
Capital management is an ongoing theme in the Group. Discretionary Group
capital amounted to R6,1 billion at the end of 2007. A total amount of R1,6
billion was used to buy back 81,2 million Sanlam shares in the market. A
further R1,1 billion was applied towards corporate activity aimed at further
diversifying the Group`s solution offering and distribution reach. The
following are the largest transactions concluded:
- A total amount of R660 million was utilised to strengthen our business
presence in the United Kingdom. Sanlam UK acquired an 86% interest in
Principal Investment Holdings, a UK-based private client business, as well as
a 60% interest in Buckles Holdings, a financial advisory and ancillary
services company. These acquisitions, together with Merchant Investors,
Sanlam Multi-Manager International, Intrinsic and Nucleus form the new Sanlam
UK cluster.
- MiWay Finance, a direct financial services company, was launched in
February 2008. The Group has a direct 55% interest in MiWay, as well as an
indirect interest of 25% through Santam. Sanlam contributed R110 million to
the start-up capitalisation of the business.
- The success of the Group`s Shriram Life joint venture with the Shriram
group of India was extended during the year with the recent finalisation of
the Shriram General Insurance joint venture between the two entities to
further expand and diversify the Group`s financial services offering in this
market. Sanlam obtained a 26% interest in the new joint venture for a total
consideration of R115 million.
- Approximately R200 million of discretionary capital was invested to acquire
an additional 2,5 million Santam shares in the market, increasing the Group`s
effective interest in Santam to 57%.
The application of capital for the share buy-back programme and corporate
activity reduced the level of discretionary capital in the Group to R3
billion at the end of June 2008. The Board remains committed to the
utilisation of the remaining discretionary capital in the most efficient
manner. The preference is to invest in value-adding strategic initiatives.
Any potential transaction will however be evaluated against the Group`s
primary focus of creating shareholder value through maximising return on GEV.
The buy back of Sanlam shares continues to be an attractive option in periods
of share price weakness.
Sanlam Demutualisation Trust
In one of the largest empowerment and wealth creation transactions in South
African history, Sanlam listed on the JSE Limited and the Namibian Stock
Exchange in November 1998. As part of the demutualisation of Sanlam, free
Sanlam shares were distributed to more than 2 million Sanlam policyholders.
Shares allocated to policyholders that Sanlam could not trace at that stage,
were transferred to the Sanlam Demutualisation Trust ("the Trust"), managed
by an independent board of trustees. The Trust`s mandate was to find as many
of the beneficiaries of these shares as possible, to ensure that all
policyholders receive the benefit of their free shares.
Over the past ten years, the Trust has been extremely successful in finding
these beneficiaries. Shares due to just over 53 000 beneficiaries,
representing less than 3% of the number of policyholders to whom free shares
were originally allocated in 1998, still remain in the Trust. The number of
shares (about 22 million) represents only 1% of the free shares originally
allocated to policyholders. The Trust`s term ends on 22 October 2008, at
which stage it will be closed and any remaining shares in the Trust will
revert to Sanlam in terms of the demutualisation proposal approved by the
High Court of South Africa.
The Trust has been a party to the Sanlam / Ubuntu-Botho empowerment
transaction as approved by shareholders and concluded in 2004. As an integral
part of the transaction, Sanlam facilitated the sale of 52 million of the
shares (that would potentially revert to it) from the Trust to Ubuntu-Botho
at the ruling market price at the time of 765 cents per share, thus capping
the value of any shares that will finally revert to Sanlam at that price.
Sanlam at the same time introduced a mechanism that has ensured that the
value of the benefits accruing to beneficiaries of the Demutualisation Trust
remained unaffected. The Sanlam / Ubuntu-Botho transaction created a major
broad based black shareholder for Sanlam, which includes the Sanlam Ubuntu-
Botho Community Development Trust, targeting community upliftment and
development projects.
Looking ahead
The challenging macro-economic and volatile financial market conditions are
not expected to abate for the remainder of the year, and are likely to
continue to impact on growth in the Group`s key operational performance
indicators. Financial market volatility inevitably has a major impact on
Group earnings. Relative market movements for the remainder of 2008 may
therefore have an impact on the level of Group earnings to be reported for
the full 2008 financial year.
The Group, however is confident that it has the required resources and depth
in management and staff to successfully confront these challenges to continue
on its growth trajectory into the future.
Forward-looking statements
In this report we make certain statements that are not historical
facts and relate to analyses and other information based on
forecasts of future results not yet determinable, relating,
amongst others, to new business volumes, investment returns
(including exchange rate fluctuations) and actuarial assumptions.
These are forward-looking statements as defined in the United
States Private Securities Litigation Reform Act of 1995. Words
such as "believe", "anticipate", "intend", "seek", "will", "plan",
"could", "may", "endeavour" and "project" and similar expressions
are intended to identify such forward-looking statements, but are
not the exclusive means of identifying such statements. Forward-
looking statements involve inherent risks and uncertainties and,
if one or more of these risks materialise, or should underlying
assumptions prove incorrect, actual results may be very different
from those anticipated. Forward-looking statements apply only as
of the date on which they are made, and Sanlam does not undertake
any obligation to update or revise any of them, whether as a
result of new information, future events or otherwise.
Comments on the Results
Introduction
The Sanlam group interim results for the six months ended 30 June 2008 are
presented based on and in compliance with IFRS. The Group`s external
auditors, Ernst & Young Inc., have reviewed the financial statements.
Group Equity Value (GEV)
GEV is the aggregate of the following components:
- The embedded value of covered business, being the life insurance
businesses of the Group, which comprises the required capital
supporting these operations and the net present value of their in-
force books of business (VIF);
- The fair value of other Group operations, which includes the
investment management, capital markets, credit, short-term
insurance and the non-covered wealth management operations of the
Group; and
- The fair value of discretionary and other capital.
GEV provides an indication of the value of the Group`s operations,
but without placing any value on future new covered business to be
written by the Group`s life insurance businesses. Sustainable
return on GEV is the primary performance benchmark used by the
Group in evaluating the success of its strategy to maximise
shareholder value.
Group Equity Value
at 30 June 2008
30 June 2008
R million Total Fair Value
value of of in
assets force
Embedded value of covered business 28 618 14 855 13 763
Sanlam Personal Finance 19 974 8 300 11 674
Sanlam Developing Markets 2 281 925 1 356
Sanlam UK 1 030 510 520
Sanlam Employee Benefits 5 333 5 120 213
Other group operations 13 935 13 935 -
Retail cluster 2 820 2 820 -
Institutional cluster 6 105 6 105 -
Santam 5 010 5 010 -
Capital diversification (1 057) (1 057) -
Other capital 2 043 2 043 -
43 539 29 776 13 763
Discretionary capital 3 000 3 000 -
Group Equity Value 46 539 32 776 13 763
Issued shares for value per share 2 064,3
(million)
Group Equity Value per share (cents) 2 254
Share price (cents) 1 660
Discount (26%)
31 December 2007
R million Total Fair Value
value of of in
assets force
Embedded value of covered business 28 432 14 710 13 722
Sanlam Personal Finance 20 089 8 285 11 804
Sanlam Developing Markets 2 160 860 1 300
Sanlam UK 921 447 474
Sanlam Employee Benefits 5 262 5 118 144
Other group operations 15 451 15 451 -
Retail cluster 1 967 1 967 -
Institutional cluster 7 109 7 109 -
Santam 6 375 6 375 -
Diversification benefit (1 232) (1 232) -
Other capital 2 542 2 542 -
45 193 31 471 13 722
Discretionary capital 6 100 6 100 -
Group Equity Value 51 293 37 571 13 722
Issued shares for value per share 2 182,8
(million)
Group Equity Value per share (cents) 2 350
Share price (cents) 2 275
Discount (3%)
The GEV as at 30 June 2008 amounted to R46,5 billion. This is 9% lower than
the R51,3 billion at the end of December 2007. On a per share basis GEV
decreased by 4% from 2 350 cents to 2 254 cents at 30 June 2008. The decrease
in GEV per share is largely attributable to:
- The payment of the annual dividend of R2 billion (93 cents per share) in
May 2008.
- A reduction of R1,4 billion in the value of the Group`s investment in
Santam, due to a 24% fall in Santam`s share price during the period.
- A reduction in the valuation of the businesses in the Institutional
cluster, the result of an overall decrease in the cluster`s assets under
management since 31 December 2007. The valuation base for these operations is
directly linked to the level of assets under management.
Return on Group Equity Value
for the six months ended 30 June 2008
June 2008 June 2007
Earnings Return* Earnings Return*
R million % R million %
Sanlam Personal Finance 503 4,8 1 886 21,0
Covered business 490 4,9 1 785 21,0
Other operations 13 2,2 101 20,0
Sanlam Developing Markets 173 16,4 286 31,4
Covered business 180 17,4 253 27,6
Other operations (7) -43,8 33 -
Sanlam UK 161 20,2 213 32,2
Covered business 139 32,5 44 10,5
Other operations 22 6,0 169 69,0
Institutional cluster (109) -1,8 1 475 24,9
Covered business 189 7,3 352 10,7
Investment management & (332) -9,9 983 41,1
fund administration
Capital Markets 34 17,7 140 58,5
Santam (1 422) -39,6 1 393 55,6
Discretionary and other 119 (58)
capital
Balance of portfolio 240 444
Shares delivered to (26) (48)
Sanlam
Demutualisation Trust
Shriram goodwill less (43) (105)
value of in-force
acquired
Treasury shares and other (130) (203)
Change in net worth 78 (146)
adjustments
Return on Group Equity (575) -2,2 5 195 23,4
Value
Covered business 998 7,1 2 434 18,6
Sanlam Personal Finance 490 4,9 1 785 21,0
Sanlam Developing Markets 180 17,4 253 27,6
Sanlam UK 139 32,5 44 10,5
Institutional cluster 189 7,3 352 10,7
Other non-listed operations (270) -6,0 1 426 43,2
Sanlam Personal Finance 13 2,2 101 20,0
Sanlam Developing Markets (7) -43,8 33 -
Sanlam UK 22 6,0 169 69,0
Institutional cluster (298) -8,4 1 123 43,8
Santam (1 422) -39,6 1 393 55,6
Discretionary and other 119 (58)
capital
Return on Group Equity (575) -2,2 5 195 23,4
Value
Return on Group Equity 0,0 22,7
Value per share
* Annualised
The Group achieved a -2,2% (zero% per share) annualised return on GEV for the
first six months of 2008, significantly lower than the comparable 2007
performance. The main contributors to this result are the fall in the Santam
share price and the impact of lower equity markets on the valuation of the
Group`s asset management businesses.
The return on covered business is a combination of the investment return
earned on the capital supporting these operations and the earnings from the
book of in-force business (VIF). Overall, covered business recorded an
annualised return of 7,1% for the first six months of 2008, compared to a
return of 18,6% in the same period in 2007. This decrease is largely
attributable to changes in the investment and economic environment, which
resulted in the investment return earned on the capital supporting the
covered business of Sanlam Personal Finance and Sanlam Employee Benefits
declining from 6% (R838 million) in the first six months of 2007 to 0,7% (R94
million) in 2008. This can be ascribed to the volatility in investment
markets coupled with an overweight exposure in the applicable portfolios to
the underperforming financial and industrial sectors. The annualised return
on VIF decreased from 26,2% in 2007 to 11,7% in 2008, again substantially
linked to the weak investment returns. Negative investment variances amounted
to R108 million for the first six months of 2008 compared to favourable
investment variances of R247 million for the comparable period in 2007. The
increase in interest rates and inflation resulted in a change in the economic
assumptions used to calculate the value of in-force covered business. This
had a negative impact of R712 million on the earnings from covered business,
compared to negative economic assumptions changes of R118 million in 2007.
Changes in tax legislation contributed R187 million to the earnings from
covered business in 2008, compared to R285 million in 2007. The combined
effect of these external factors is a relative reduction in the earnings from
covered business of R1,8 billion in 2008 when compared to the first half of
2007. These negative return attributes were somewhat compensated for by a 12%
increase in the value of new covered business. Excluding the impact of the
above economic factors, the normalised annualised return on covered business
amounts to 20,6%, which reflects an improvement on 2007.
The Group`s other non-listed operations recorded an annualised return of -6%
in 2008, which is well down on the 43,2% earned in the first half of 2007.
This under performance is due, partly to lower returns from all of these
operations, but in particular to a significant reduction in the return from
the Institutional cluster businesses. Negative investment returns resulted in
a reduction in the assets under management of the Group`s investment
management businesses, which in turn impacted on the valuations of these
businesses with a commensurate negative impact on the GEV earnings.
The Santam share price derated during the period in line with other listed
financial services companies, decreasing from R104,00 at the end of December
2007 to R78,71 at 30 June 2008. Combined with dividends declared by Santam
during the first six months of 2008, the Group`s investment return on Santam
was negative R1,4 billion (-39.6% annualised), a R2,8 billion turnaround from
the earnings recorded in the comparable period in 2007.
Earnings
Summarised shareholders` fund income statement for the six months ended
30 June 2008
R million 2008 2007 Change
Net result from financial services 1 334 1 488 -10%
Net investment income 579 495 17%
CORE EARNINGS 1 913 1 983 -4%
Project expenses (40) (31) -29%
Net equity-accounted headline earnings (4) 104 -104%
BEE transaction costs (3) (4) 25%
Net investment surpluses (447) 1 200 -137%
Secondary Tax on Companies (STC) (99) (92) -8%
Discontinued operations (35) (11) -218%
Amortisation of value of business acquired (31) (23) -35%
NORMALISED HEADLINE EARNINGS 1 254 3 126 -60%
Disposal of associates and subsidiaries - 614
Other non-headline earnings and impairments (103) -
Normalised attributable earnings 1 151 3 740 -69%
Core earnings
Core earnings comprise the net result from financial services
(operating profit) and net investment income earned on the
shareholders` fund, but exclude abnormal and non-recurring items
as well as investment surpluses. Net investment income includes
dividends received from non-operating associated companies and
joint ventures, but excludes the equity-accounted retained
earnings.
Core earnings for the six months of R1 913 million are 4% down on 2007 (up 4%
on a per share basis). This is the net result of a 10% fall in the net result
from financial services, in part offset by a 17% increase in net investment
income. The latter was positively impacted by relatively higher average cash
interest rates during the first six months of 2008.
The net result from financial services of R1 334 million is R154 million
(10%) lower than in the comparative period in 2007. In evaluating this
performance, cognisance should be taken of the impact of a number of material
items:
- The initial losses incurred by MiWay whilst in its start-up phase. MiWay is
performing in line with expectations, with the initial start-up losses being
anticipated in its business plan.
- In terms of IFRS only variable costs incurred in writing new investment
policy contracts can be capitalised and expensed over the lifetime of the
contract in line with fees earned. All fixed acquisition costs must be
expensed at inception of the policy. Similarly, the Group`s actuarial
valuation basis for most insurance contracts does not allow for the
capitalisation of upfront acquisition costs, which commensurately results in
accounting losses at inception of these contracts. These losses, referred to
as new business strain, have a particularly pronounced impact on earnings in
strong new business growth scenarios, as achieved by the Group in the first
six months of 2008.
On a comparable basis the net result from financial services per share
increased by 7% (-1% in absolute terms), with a very strong growth from the
Retail cluster.
Net result from financial services for the six months ended
30 June 2008
R million 2008 2007 Change
Net result from financial services on 1 848 1 858 -1%
comparable basis
Retail cluster 1 280 1 113 15%
Institutional cluster 408 524 -22%
Santam 188 245 -23%
Corporate and other (28) (24) -17%
Direct Financial Services (MiWay launched (23) - -
in 2008)
New business strain (491) (370) -33%
Net result from financial services 1 334 1 488 -10%
The table below provides an analysis of the net result from financial
services per individual business.
Net result from financial services for the six months ended
30 June 2008
R million 2008 2007 Change
Retail cluster 808 754 7%
Sanlam Personal Finance 678 629 8%
Sanlam Developing Markets 78 80 -3%
Sanlam UK 52 45 16%
Institutional cluster 389 513 -24%
Sanlam Investments 272 373 -27%
Sanlam Employee Benefits 83 48 73%
Sanlam Capital Markets 34 92 -63%
Santam 188 245 -23%
Corporate and other (51) (24) -113%
Net result from financial services 1 334 1 488 -10%
- Sanlam Personal Finance`s net operating profit for the year to date is 8%
higher than in 2007. The higher interest rate environment supported market
related profit, while risk underwriting profit benefited from improved
underwriting experience. This was to an extent offset by lower growth in
administration profit due to new business strain following the strong growth
in new business volumes. Excluding the impact of new business strain, the
Sanlam Personal Finance earnings increased by 10%.
- The Sanlam Developing Markets net operating profit is 3% down on 2007. This
is mainly attributable to an increase in new business strain, the impact of
changes in economic assumptions on Channel Life and the poor investment
market performance in Botswana in the first half of 2008 compared to
particularly good investment performance in 2007. Strong growth in new life
business volumes in the first half of 2008 (refer below) resulted in an
increase of R67 million (after tax and minorities) in the new business strain
recognised at inception of the contracts compared to the same period in 2007.
A portion of the profit earned by the Botswana operations is linked to the
investment return earned on specific policyholder reserves. The weak
performance of the Botswana stock market in 2008 relative to 2007 resulted in
negative investment variances in 2008. This was to an extent offset by a
weakening of the rand exchange rate against the Botswana pula. Excluding the
impact of new business strain, Sanlam Developing Markets increased its
contribution to the Group net result from financial services by 34%, which is
a reflection of the major improvement in its performance on a normalised
basis.
- Sanlam UK recorded a 16% growth in its net operating profit, which is
largely attributable to a strong performance by Sanlam Multi-Manager
International, the first-time inclusion of the results of the newly acquired
Principal and Buckles businesses as well as the weakening in the exchange
rate.
- The Institutional cluster businesses had a challenging first six months of
2008 with net operating profit for the six months 24% lower than 2007. Sanlam
Investments recorded a 27% reduction in earnings. The volatile investment
markets had a major negative impact on these businesses` investment
performance, in particular Octane and SIM Global, which earned significantly
lower performance fees. Profit before tax and gross performance fees
increased by 8% on the comparable period in 2007, a satisfactory result in
the challenging environment. Administration costs increased by 19%, mainly
due to business expansion, with Simeka, Blue Ink and the transfer of
investment linked business from Sanlam Employee Benefits impacting on the
expense base subsequent to the first half of 2007. Sanlam Employee Benefits
performed well to post a 73% increase in its net profit. The performance can
mostly be ascribed to an increase in risk underwriting profit following
improved claims experience and the positive impact of higher interest rates
on market related profit. The 2007 result also included provisions to correct
historic errors on the administration platform. Sanlam Capital Markets was
adversely affected by the significant market turbulence in the first half of
2008, with reported results that are significantly lower than the comparable
period in 2007. The volatility in debt and equity markets, together with the
associated uncertainty experienced by market participants in these
conditions, resulted in a slowdown in deal flow during the first half of
2008. This, combined with the impact of widening credit spreads on the
valuation of credit positions, lead to a 63% reduction in its reported
earnings.
- Santam`s net operating earnings for the six months is 23% lower than 2007.
Santam`s earnings should however be evaluated against the high underwriting
margin of 8,7% achieved in 2007. For the first half of 2008 Santam reported
an underwriting margin of 5,8%, which represents a very satisfactory result
in the current short-term insurance market, in particular given a number of
large industrial related claims experienced in the corporate business unit.
Normalised headline earnings
Normalised headline earnings of R1 254 million are 60% lower than the first
six months of 2007. This is largely the result of a substantial reduction in
investment surpluses and equity-accounted earnings. The FTSE/JSE All Share
Index increased by 5% during the first half of 2008, but this was mainly
driven by an exceptionally strong resources sector, specifically BHP
Billiton, Anglo American and Sasol, which masked a substantial fall in value
in most other sectors. The Sanlam and Santam portfolios were underweight
these three shares which resulted in a material fall in relative returns. The
lower capital base following the continued buy-back of Sanlam shares in 2007
and 2008 also contributed to the lower earnings, but the 137% reduction in
reported investment surpluses was in essence due to the relatively weaker
investment performance for the six months. The sharp fall in equity-accounted
earnings is attributable to lower contributions from the Safair Lease Finance
joint venture and an investment linked to the market value of the Vukile
listed property fund as well as the impact of the disposal of the Group`s
interest in Peermont during 2007.
Discontinued operations relate to the results of Santam`s operations in
Europe that are in the process of being closed down and/or disposed of.
Earnings per share
On a per share basis core earnings are 4% up on 2007 and normalised headline
earnings are 57% down on the comparable 2007 period. Diluted headline
earnings per share decreased by 24%. The higher growth on a per share basis
is due to the lower weighted average number of shares in issue following the
share buy-backs.
Business volumes
New business flows
Total new business volumes increased by 2% from R49,8 billion in the first
six months of 2007 to R51 billion in the first half of 2008.
New business volumes for the six months ended 30 June 2008
R million 2008 2007 Change
Sanlam Personal Finance 15 824 11 928 33%
South Africa 11 559 8 864 30%
Africa 4 265 3 064 39%
Sanlam Developing Markets 1 214 1 050 16%
South Africa 665 681 -2%
Africa 449 316 42%
Other international 100 53 89%
Sanlam UK 807 566 43%
Institutional cluster 23 305 26 348 -12%
Sanlam Investments 23 035 26 072 -12%
Sanlam Employee Benefits 270 276 -2%
Santam 6 085 5 476 11%
WHITE LABEL 3 750 4 452 -16%
TOTAL NEW BUSINESS 50 985 49 820 2%
Sanlam Personal Finance continued its strong performance of 2007 and reported
a 33% increase in new business volumes. Life business increased by 32% with
growth of 33% in new investment business, an exemplary performance in the
current economic environment.
Total South African new business volumes increased by 30% compared to 2007.
- Recurring premium life sales are marginally down on the same period in
2007. The impact of increasing financial strain on the Topaz middle market
clients is evident in the reduction in the sales volumes of savings and
retirement solutions. Recurring risk solution sales are less exposed and new
business volumes grew by a satisfactory 20% over 2007. Advisor numbers that
lagged the previous year also had a negative impact on recurring business
sales, but this has been addressed through appropriate management action.
- Single premium life sales are up 37% on 2007 with a 69% increase in
Glacier`s life business the main contributor. Topaz life sales increased by
21%, with volatile equity market conditions and rising interest rates
increasing the demand for Topaz guaranteed solutions.
- Investment business reflects growth of 28% on 2007, supported by a more
than doubling in the growth of money market products. Sales of equity based
solutions are marginally down on 2007.
The Namibian operations recorded a 39% improvement in volumes, largely
attributable to continued out performance by collective investment flows that
are 41% up on 2007. Some of these inflows are however not expected to be
retained over the longer term.
Sanlam Developing Markets inflows are 16% higher than 2007.
- The core recurring premium business in South Africa performed well to
achieve a 29% increase in new business. This was however offset by a 23%
reduction in the sale of single premium business.
* Sanlam Sky Solutions (formerly African Life) volumes are well ahead of
2007, with both new recurring and single premium volumes up 65% on 2007. This
strong performance is the result of specific actions implemented to address
the trend of declining sales experienced in 2006 and the beginning of 2007.
In particular, agents remuneration and branches having been restructured
resulted in an increase in the number of agents and a reduction in agent
turnover.
* Channel Life`s new recurring premiums are slightly lower than the
comparative period in 2007 based on an under performance by the call centre,
which was closed at the end of May 2008. Single premium new business volumes
decreased by 50% on 2007 following the disposal of Alternative Channel during
the 2007 financial year, which contributed most of the single premium
business. As these flows were low margin business, the impact on
profitability is negligible with a positive effect on the overall
profitability of new business.
- Other African business inflows are 42% up on 2007, supported by strong
growth in all regions, and with both recurring and single premium volumes
increasing by 42%. The Kenyan business performed exceptionally well to
increase its total new business volumes by 67% despite the impact of
political violence at the start of the year.
- Shriram is continuing its strong sales performance with year-to-date sales
of R100 million, compared to R53 million in 2007. The total number of
accredited agents reached 17 500 at the end of June 2008, compared to 11 300
a year earlier.
Sanlam UK comprises Merchant Investors` new business volumes. The business
has been successful in expanding its distribution platform and reach with new
business volumes increasing by 43% on 2007.
New business volumes in the Institutional cluster are down 12% from a high
base in 2007.
- Sanlam Investments` new business volumes decreased by 12% compared to 2007,
largely attributable to a reduction in institutional inflows at Sanlam
Collective Investments and Sanlam Multi-Manager. The South African investment
businesses performed well when evaluated against the high base in 2007.
Segregated fund flows, excluding Sanlam Multi-Manager, recorded particularly
strong growth of 25% on 2007 with Sanlam Private Investments reporting growth
of 8% despite the large inflows experienced in 2007. Sanlam Collective
Investments wholesale flows decreased by 46% and its overall new business
flows by 24% as a result thereof. Sanlam Multi-Manager experienced a 43%
reduction in new business volumes. Both these trends were not unexpected
given the relatively strong inflows in 2007, coupled with the impact of the
current subdued economic outlook. The International businesses grew their
contribution to new business volumes by 16% compared to the first half of
2007. The hedge fund business, Blue Ink, is the main contributor to this
growth. Inflows at SIM Global are down 19%.
- Sanlam Employee Benefits inflows are marginally lower than the comparable
2007 inflows. Recurring premiums are 15% lower with single premiums
reflecting growth of 5%.
Santam recorded an 11% increase in net premium inflows over the first six
months of 2007, which is in line with expectations and above industry growth.
This is a satisfactory performance in the current business environment.
Net business flows
Total inflows increased by 3% on 2007 while outflows in respect of fund
withdrawals and policy benefits are down by 5%. This resulted in an overall
net inflow of funds amounting to R5,5 billion compared to a net inflow of
R1,3 billion in the corresponding period in 2007. Excluding the volatile
white label business, net business flows improved from R1,1 billion in the
first half of 2007 to R7,3 billion during 2008. Life business net flows
improved significantly from a R2,2 billion net outflow in 2007 to a net
inflow of R639 million in 2008, a combination of improved net flows in all of
the Group`s life businesses. Sanlam Investments also reported an improvement,
with net inflows of R3,1 billion in 2008 compared to net outflows of R2,5
billion in 2007. The main contributor to the improvement is South African
segregated business, which recorded net inflows of R3 billion compared to net
outflows of R4,5 billion in 2007. This was however somewhat offset by a
deterioration in Multi-Manager net flows.
Net business flows for the six months ended 30 June 2008
R million 2008 2007
Sanlam Personal Finance 2 221 2 627
Life business 861 (411)
Investment business 1 360 3 038
Sanlam Developing Markets 673 497
Sanlam UK 91 (187)
Institutional cluster 2 538 (3 627)
Sanlam Employee Benefits (517) (1 097)
Sanlam Investments 3 055 (2 530)
Santam 1 768 1 767
Net business flows before white label 7 291 1 077
White label (1 821) 173
Total net business flows 5 470 1 250
Value of new covered business (VNB)
Total VNB for the first six months of 2008 of R290 million reflects strong
growth of 12% (13% after minorities) with an improvement in new business
margins from 2,32% in 2007 to 2,39% in 2008 (2,11% and 2,17% respectively
after minorities), despite the negative impact of a 2,4% increase in the risk
discount rate following a similar rise in long-term interest rates. On a
comparable basis, before adjusting for the change in economic assumptions,
VNB and PVNBP increased by 28% and 11% respectively, with new business
margins improving from 2,32% to 2,67%. This is reflective of the strong
operational performance and the resilient results achieved in the current
economic environment. The table below presents the VNB results before and
after the change in economic assumptions.
Value of new covered business for the six months ended
30 June 2008
R million 2008 2007 Change
After economic assumption changes
Value of new covered business 290 260 12%
Sanlam Personal Finance 160 142 13%
Sanlam Developing Markets 113 88 28%
Sanlam UK 3 4 -25%
Sanlam Employee Benefits 14 26 -46%
Net of minorities 250 222 13%
Present value of new business premiums 12 141 11 214 8%
Sanlam Personal Finance 8 089 6 859 18%
Sanlam Developing Markets 2 330 2 010 16%
Sanlam UK 836 579 44%
Sanlam Employee Benefits 886 1 766 -50%
Net of minorities 11 501 10 535 9%
New covered business margin 2,39% 2,32%
Sanlam Personal Finance 1,98% 2,07%
Sanlam Developing Markets 4,85% 4,38%
Sanlam UK 0,36% 0,69%
Sanlam Employee Benefits 1,58% 1,47%
Net of minorities 2,17% 2,11%
Before economic assumption changes
Value of new covered business 334 260 28%
Sanlam Personal Finance 190 142 34%
Sanlam Developing Markets 133 88 51%
Sanlam UK 4 4 -
Sanlam Employee Benefits 6 26 -77%
Net of minorities 292 222 32%
Present value of new business premiums 12 503 11 214 11%
Sanlam Personal Finance 8 372 6 859 22%
Sanlam Developing Markets 2 423 2 010 21%
Sanlam UK 837 579 45%
Sanlam Employee Benefits 872 1 766 -51%
Net of minorities 11 848 10 535 12%
New covered business margin 2,67% 2,32%
Sanlam Personal Finance 2,27% 2,07%
Sanlam Developing Markets 5,49% 4,38%
Sanlam UK 0,48% 0,69%
Sanlam Employee Benefits 0,69% 1,47%
Net of minorities 2,46% 2,11%
Sanlam Personal Finance`s VNB for the first six
months of 2008 is 13% higher than 2007. The impact
of the higher risk discount rate masks a very
strong new life business performance during the
reporting period as the change in economic
assumptions reduced the year-to-date VNB by R30
million. VNB margins improved on a comparable basis
from 2,07% in 2007 to 2,27% in 2008.
Sanlam Developing Markets recorded VNB of R113
million in 2008, which is 28% up on 2007 despite a
R20 million negative impact from the change in
economic assumptions. This result reflects the
strong growth in new business volumes. VNB margins
increased from 4,38% in 2007 to 4,85% in 2008,
supported by an improved contribution by the
African operations, which were not affected to the
same extent by economic assumption changes as the
South African operations. On a comparable basis,
VNB margins increased from 4,38% in 2007 to 5,49%.
Sanlam Employee Benefits` lower new business
performance is also reflected in the 46% decrease
in VNB during 2008. The 50% decrease in PVNBP is
however mostly attributable to a decision by the
end of the 2007 financial year to include the
investment business as investment flows in Sanlam
Investments. Comparative VNB information has not
been restated for this change in classification.
Solvency
All of the life insurance businesses within the
Group were sufficiently capitalised at the end of
June 2008. The total capital of Sanlam Life
Insurance Limited, the holding company of the
Group`s major life insurance subsidiaries, amounted
to R33,6 billion on 30 June 2008. Its allocated
regulatory capital at the end of June 2008 amounted
to R22,5 billion, which covered its regulatory
Capital Adequacy Requirement (CAR) 2,8 times,
compared to 3,5 times on 31 December 2007. No
policyholder portfolios held negative bonus
stabilisation reserves below the statutory
reporting funding level of 92,5%.
Santam`s regulatory capital (shareholders` funds
including subordinated debt) constituted 40% of net
earned premiums on 30 June 2008 compared to 42% as
at 31 December 2007. The solvency level is within
the target range of 35% to 45% set by Santam.
FitchRatings has affirmed the following ratings of
the Group in 2008:
Sanlam Limited:
- National Long-term: AA-(zaf)
Sanlam Life Insurance Limited:
- National Insurer Financial Strength: AA+(zaf)
- National Long-term: AA(zaf)
- National Short-term: F1+(zaf)
- Subordinated debt: AA-(zaf)
Santam Limited:
- National Insurer Financial Strength: AA+(zaf)
- National Long-term: AA(zaf)
Dividend
No interim dividend has been declared. It is
Sanlam`s practice to pay only an annual dividend,
given the cost associated with the distribution of
a dividend to our large shareholder base.
Roy Andersen Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Cape Town
3 September 2008
INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED 30 JUNE 2008
Accounting Policies and Basis of Presentation
The accounting policies adopted for the purposes of
the financial statements comply with International
Financial Reporting Standards, specifically IAS 34
on interim financial reporting, and with applicable
legislation. The condensed financial statements are
presented in terms of IAS 34, with additional
disclosure where applicable, using accounting
policies consistent with those applied in the 2007
financial statements. The policy liabilities and
profit entitlement rules are determined in
accordance with prevailing legislation, generally
accepted actuarial practice and the stipulations
contained in the demutualisation proposal. There
have been no material changes in the financial
soundness valuation basis since 31 December 2007,
apart from changes in the economic assumptions. The
basis of presentation of the results is also
consistent with that applied in the 2007 financial
statements and shareholders` information, apart
from the following:
Segmental reporting
The Group announced the creation of a Sanlam UK
cluster during June 2008, which consolidates the
Group`s operations in the United Kingdom (UK). The
following businesses have been transferred from
other Group clusters to the Sanlam UK cluster:
- From Sanlam Personal Finance: Merchant Investors;
- From Sanlam Investments: Sanlam Multi-Manager
International; and
- From Independent Financial Services: Punter
Southall Group,
Intrinsic and Nucleus.
The newly acquired UK businesses, Principal and
Buckles, also form part of the Sanlam UK cluster.
Responsibility for the remaining businesses
formerly included in the Independent Financial
Services cluster has been transferred to the Group
Finance function. These operations are accordingly
not presented separately anymore but included in
the Corporate and Other cluster.
Comparative information in the Group`s segmental
reporting and shareholders` information has been
restated to reflect these changes in the Group`s
operational structure.
The results for MiWay, the Group`s direct financial
services business launched in February 2008, are
included in the Short-term Insurance cluster.
Group Equity Value (GEV)
Long-term incentives granted by the Group on Sanlam
shares are accounted for as dilutive instruments
with effect from the 2007 annual results. The GEV
is accordingly not adjusted for the fair value of
these outstanding shares, but the number of issued
shares used to calculate GEV per share is adjusted
for the dilutionary effect of these instruments. In
the June 2007 comparative information, which has
not been restated, the GEV was reduced with the
fair value of these shares, with no adjustment to
the number of shares in issue. The change in basis
does not have a material impact on the June 2007
GEV and Return on GEV on a per share basis.
The GEV disclosed for June 2007 accordingly equates
to the total group embedded value disclosed in the
2007 interim results report.
Change in embedded value assumptions and
methodology
The methodology and assumptions used to determine
the embedded value of covered business was adjusted
in the 2007 annual report with effect from December
2007 in preparation for the revised embedded value
guidance from the Actuarial Society of South Africa
that becomes effective for reporting periods ending
on or after 31 December 2008. These are intended to
be materially consistent with the CFO Forum`s
European Embedded Value (EEV) Principles. No
adjustment has been made to the June 2007 published
embedded value.
Application of new and revised standards
The following new or revised IFRSs and
interpretations are applied in the Group`s 2008
financial year:
- IFRIC 11 IFRS 2 Group and Treasury Share
Transactions
- IFRIC 13 Customer Loyalty Programmes
- IFRIC 14 IAS 19 The Limit on Defined Benefit
Asset, Minimum Funding Requirement and their
Interaction
The application of these interpretations did not
have a significant impact on the Group`s reported
results and cash flows for the six months ended 30
June 2008 and the financial position at 30 June
2008.
The following new or revised IFRSs and
interpretations have effective dates applicable to
the Group`s 2009 financial year and have not been
early adopted:
- IAS 1 Revised (effective 1 January 2009)
- IFRS 2 Amendments to IFRS 2 Share-based Payment -
Vesting Conditions and Cancellations (effective 1
January 2009)
- IFRS 3 Revised Business Combinations (effective 1
July 2009)
- IAS 27 Amended Consolidated and Separate
Financial Statements (effective 1 July 2009)
- IAS 23 Borrowing costs (effective 1 January 2009)
- IAS 32 Amendments to IAS 32 Financial
Instruments: Presentation and IAS 1 Presentation of
Financial Statements - Puttable Financial
Instruments and Obligations Arising on Liquidation
(effective 1 January 2009)
The application of these revised standards in
future financial reporting periods is not expected
to have a significant impact on the Group`s
reported results, financial position and cash
flows, except for IFRS 3 Revised and IAS 27 Amended
for which the impact can not be quantified as it
will depend on the nature and structure of a
specific business combination, combined with the
fact that the revised standards will mainly be
applied on a prospective basis.
External Audit Review
The appointed external auditors, Ernst & Young
Inc., reviewed the condensed balance sheet of the
Sanlam group as at 30 June 2008 and the related
condensed statements of income, changes in equity
and cash flows for the six-month period then ended,
and other explanatory notes. The review was
conducted in accordance with the International
Standard on Review Engagements 2410, Review of
Interim Financial Information Performed by the
Independent Auditor of the Entity.
The external auditors have also conducted a limited
assurance review of the Sanlam Limited
Shareholders` Information for the six months ended
30 June 2008, which comprises the Report on Group
Equity Value, Report on Shareholders` Fund
Financial Statements and Report on Embedded Value
of Covered Business and related notes, in
accordance with the International Standard on
Assurance Engagements 3000 Assurance Engagements
Other Than Audits or Reviews of Historical
Financial Information.
Copies of the unqualified reports of Ernst & Young
Inc. are available for inspection at the registered
office of the company.
Shareholders` information for the six months ended
30 June 2008
Contents
Group Equity Value
Shareholders` fund at fair value
Shareholders` fund income statement
Notes to the shareholders` fund information
Embedded value of covered business
GROUP EQUITY VALUE
at 30 June 2008
June December
Reviewed Audited
2008 2007 2007
R R R
million million million
Embedded value of covered business 28 618 28 286 28 432
Sanlam Personal Finance 19 974 19 397 20 089
Adjusted net worth 8 300 8 735 8 285
Value of in-force 11 674 10 662 11 804
Sanlam Developing Markets 2 281 2 049 2 160
Adjusted net worth 925 650 860
Value of in-force 1 356 1 399 1 300
Sanlam UK 1 030 904 921
Adjusted net worth 510 423 447
Value of in-force 520 481 474
Sanlam Employee Benefits 5 333 5 936 5 262
Adjusted net worth 5 120 5 415 5 118
Value of in-force 213 521 144
Other Group operations 13 935 15 037 15 451
Retail cluster 2 820 1 920 1 967
Institutional cluster 6 105 6 221 7 109
Santam 5 010 6 896 6 375
Capital diversification (1 057) (1 201) (1 232)
Other capital 2 043 704 2 542
43 539 42 826 45 193
Discretionary capital 3 000 5 800 6 100
Group Equity Value 46 539 48 626 51 293
Group Equity Value per share (cents) 2 254 2 188 2 350
SHAREHOLDERS` FUND AT FAIR VALUE
at 30 June 2008
June December
Reviewed Audited
2008 2007 2007
R million R million R million
Property and equipment 204 209 214
Owner-occupied properties 610 604 612
Goodwill 475 476 487
Value of business acquired 826 967 843
Deferred acquisition costs 1 177 857 1 079
Investments 33 925 39 636 38 453
Sanlam businesses 13 935 15 037 15 451
Sanlam Investments 5 625 5 681 6 530
SIM Wholesale 3 778 3 992 4 443
International 1 538 1 359 1 710
Sanlam Collective Investments 309 330 377
Sanlam Personal Finance 1 125 1 146 1 192
Glacier 584 569 593
Sanlam Personal Loans 73 114 104
Multi-Data 172 115 143
Sanlam Trust 111 96 104
Sanlam Home Loans 61 187 177
Other 124 65 71
Sanlam UK 1 449 739 747
Principal 584 - -
Punter Southall Group 318 298 297
Other 547 441 450
Alfinanz 21 35 28
Coris Administration 46 - 38
Sanlam Capital Markets 434 540 541
Santam 5 010 6 896 6 375
Other 225 - -
Associated companies 336 137 347
Joint ventures 465 484 378
Safair Lease Finance 254 271 209
Shriram and other 211 213 169
Other investments 19 189 23 978 22 277
Other equities and similar 11 346 11 719 11 112
securities
Public sector stocks and loans 1 171 1 803 2 697
Investment properties 360 310 245
Other interest-bearing and 6 312 10 146 8 223
preference share investments
Net term finance - - -
Term finance (4 933) (5 142) (5 068)
Assets held in respect of term 4 933 5 142 5 068
finance
Net deferred tax - (415) (95)
Net working capital (1 273) (2 670) (888)
Minority shareholders` interest (941) (927) (857)
Shareholders` fund at fair value 35 003 38 737 39 848
Fair value per share (cents) 1 696 1 743 1 826
SHAREHOLDERS` FUND INCOME STATEMENT
for the six months ended 30 June 2008
Six months Full year
Reviewed Audited
2008 2007 2007
R R million R million
million
Result from financial services 1 966 2 335 4 539
before tax
Sanlam Personal Finance 895 819 1 857
Sanlam Developing Markets 126 179 343
Sanlam UK 67 53 71
Sanlam Employee Benefits 117 67 173
Short-term Insurance 403 615 987
Investment Management 400 549 1 208
Capital Markets - 90 73
Corporate and other (42) (37) (173)
Tax on financial services income (397) (529) (997)
Minority shareholders` interest (235) (318) (513)
Net result from financial services 1 334 1 488 3 029
Net investment income 579 495 1 117
Core earnings 1 913 1 983 4 146
Net project expenses (40) (31) (85)
BEE transaction costs (3) (4) (5)
Net equity-accounted headline (4) 104 152
earnings
Net investment surpluses (447) 1 200 1 264
Amortisation of value of business (31) (23) (51)
acquired
Net loss from discontinued (35) (11) (91)
operations
Net Secondary Tax on Companies (99) (92) (131)
Normalised headline earnings 1 254 3 126 5 199
Other equity-accounted earnings 32 - -
Profit on disposal of subsidiaries - 614 668
and associates
Impairment of investments and (135) - (7)
goodwill
Normalised attributable earnings 1 151 3 740 5 860
Fund transfers 701 (381) (366)
Attributable earnings per Group 1 852 3 359 5 494
income statement
NOTES TO THE SHAREHOLDERS` FUND INFORMATION
for the six months ended 30 June 2008
2008 2007
R million R million
NEW BUSINESS
Analysed per market:
Retail
Life business 6 485 5 063
Sanlam Personal Finance 5 820 4 382
Sanlam Developing Markets 665 681
Non-life business 15 358 13 849
Sanlam Personal Finance 5 739 4 482
Sanlam Private Investments 4 016 3 730
Sanlam Collective Investments 5 603 5 637
South African 21 843 18 912
Non-South African 5 621 3 999
Sanlam Personal Finance 4 265 3 064
Sanlam Developing Markets 549 369
Sanlam UK 807 566
Total Retail 27 464 22 911
Institutional
Group life business 477 972
Sanlam Employee Benefits (1) 270 276
Investment Management (1) 207 696
Non-life business 11 714 14 806
Segregated 6 379 5 111
Sanlam Multi-Manager 2 099 3 672
Sanlam Collective Investments 3 236 6 023
South African 12 191 15 778
Investment Management Non-SA 1 495 1 203
Institutional 13 686 16 981
White label 3 750 4 452
Sanlam Collective Investments 3 750 3 998
Sanlam Developing Markets - 454
Short-term insurance 6 085 5 476
Total new business 50 985 49 820
(1) Comparative figures have been restated
for a reclassification of life licence
business from Sanlam Employee Benefits to
Investment Management.
2. NET FLOW OF FUNDS
Analysed per market:
Retail
Life business 851 (377)
Sanlam Personal Finance 768 (454)
Sanlam Developing Markets 83 77
Non-life business 3 922 4 867
Sanlam Personal Finance 1 300 1 732
Sanlam Private Investments 2 583 2 445
Sanlam Collective Investments 39 690
South African 4 773 4 490
Non-South African 834 1 582
Sanlam Personal Finance 153 1 349
Sanlam Developing Markets 590 420
Sanlam UK 91 (187)
Total Retail 5 607 6 072
Institutional
Group Life business (1 218) (2 174)
Sanlam Employee Benefits (1) (517) (1 097)
Investment Management (1) (701) (1 077)
Non-life business 1 552 (4 617)
Segregated 2 974 (4 522)
Sanlam Multi-Manager (2 349) 470
Sanlam Collective Investments 927 (565)
South African 334 (6 791)
Investment Management Non-SA (418) 29
Total Institutional (84) (6 762)
White label (1 821) 173
Sanlam Collective Investments (1 821) 60
Sanlam Developing Markets - 113
Short-term insurance 1 768 1 767
Total net flow of funds 5 470 1 250
(1) Comparative figures have been restated
for a reclassification of life licence
business from Sanlam Employee Benefits to
Investment Management.
3. NORMALISED DILUTED EARNINGS PER SHARE
In terms of IFRS, the policyholders` fund`s investments in Sanlam
shares and Group subsidiaries are not reflected as equity
investments in the Sanlam balance sheet, but deducted in full from
equity on consolidation (in respect of Sanlam shares) or reflected
at net asset value (in respect of subsidiaries). The valuation of
the related policy liabilities however includes the fair value of
these shares, resulting in a mismatch between policy liabilities and
policyholder investments, with a consequential impact on the Group`s
earnings. The number of shares in issue must also be reduced with
the treasury shares held by the policyholders` fund for the
calculation of IFRS basic and diluted earnings per share. This is
not a true representation of the earnings attributable to the
Group`s shareholders, specifically in instances where the share
prices and/or the number of shares held by the policyholders` fund
varies significantly. The Group therefore calculates normalised
diluted earnings per share to eliminate the impact of investments in
Sanlam shares and Group subsidiaries held by the policyholders`
fund.
Six months Full year
Reviewed Audited
2008 2007 2007
cents cents cents
Normalised diluted earnings per
share:
Net result from financial services 62,6 64,7 133,3
Core earnings 89,7 86,2 182,4
Headline earnings 58,8 135,9 228,7
Profit attributable to 54,0 162,5 257,8
shareholders` fund
R R million R million
million
Analysis of normalised earnings
(refer shareholders` fund income
statement):
Net result from financial services 1 334 1 488 3 029
Core earnings 1 913 1 983 4 146
Headline earnings 1 254 3 126 5 199
Profit attributable to 1 151 3 740 5 860
shareholders` fund
million million million
Adjusted number of shares:
Weighted average number of shares 2 068,1 2 209,8 2 189,3
for diluted earnings per share
(refer below)
Add: Weighted average Sanlam 64,5 90,8 83,9
shares held by policyholders
Adjusted weighted average number 2 132,6 2 300,6 2 273,2
of shares for normalised diluted
earnings per share
Number of ordinary shares in issue 2 303,6 2 303,6 2 303,6
at beginning of period
Shares cancelled (63,5) - -
Number of ordinary shares in issue 2 240,1 2 303,6 2 303,6
Shares held by subsidiaries in (218,5) (91,1) (168,9)
shareholders` fund
Outstanding long-term incentive 43,2 - 43,3
scheme shares and options
Number of shares under option to (14,4) - (7,3)
be issued at fair value
Convertible deferred shares held 13,9 9,7 12,1
by Ubuntu-Botho
Adjusted number of shares for 2 064,3 2 222,2 2 182,8
value per share
4. SHARE REPURCHASES
The Sanlam shareholders granted general authorities to the Group at
the 2007 and 2008 annual general meetings to repurchase Sanlam shares
in the market. The Group acquired 81,2 million shares from 6 March
2008 to 30 June 2008 in terms of the general authorities. The lowest
and highest prices paid were R16,51 and R21,49 per share
respectively. The total consideration paid of R1,6 billion was funded
from existing cash resources. All repurchases were effected through
the JSE trading system without any prior understanding or arrangement
between the Group and the counter-parties. Authority to repurchase
210,4 million shares, or 9,4% of Sanlam`s issued share capital at the
time, remain outstanding in terms of the general authority granted at
the annual general meeting held on 4 June 2008.
The financial effects of the share repurchases during 2008 on IFRS
earnings and net asset value per share are illustrated in the table
below:
Before After
repurchases repurchases
Basic earnings per share:
Profit attributable to cents 90,9 91,4
shareholders` fund
Headline earnings cents 95,9 96,5
Diluted earnings per share:
Profit attributable to cents 89,1 89,5
shareholders` fund
Headline earnings per share cents 94,0 94,5
Value per share:
Equity value cents 2 245 2 254
Net asset value cents 1 366 1 340
Tangible net asset value cents 1 085 1 048
EMBEDDED VALUE OF COVERED BUSINESS
at 30 June 2008
June December
Reviewed Audited
Note 2008 2007 2007
R million R million R million
Sanlam Personal Finance 19 974 19 397 20 089
Adjusted net worth 8 300 8 735 8 285
Net value of in-force 11 674 10 662 11 804
covered business
Value of in-force covered 13 309 12 327 13 452
business
Cost of capital (1 528) (1 582) (1 555)
Minority shareholders` (107) (83) (93)
interest
Sanlam Developing Markets 2 281 2 049 2 160
Adjusted net worth 925 650 860
Net value of in-force 1 356 1 399 1 300
covered business
Value of in-force covered 1 956 1 922 1 833
business
Cost of capital (280) (155) (268)
Minority shareholders` (320) (368) (265)
interest
Sanlam UK 1 030 904 921
Adjusted net worth 510 423 447
Net value of in-force 520 481 474
covered business
Value of in-force covered 560 513 506
business
Cost of capital (40) (32) (32)
Minority shareholders` - - -
interest
Sanlam Employee Benefits 5 333 5 936 5 262
Adjusted net worth 5 120 5 415 5 118
Net value of in-force 213 521 144
covered business
Value of in-force covered 1 075 951 961
business
Cost of capital (862) (430) (817)
Minority shareholders` - - -
interest
Embedded value of covered 28 618 28 286 28 432
business
Adjusted net worth 14 855 15 223 14 710
Net value of in-force 1 13 763 13 063 13 722
covered business
Embedded value of covered 28 618 28 286 28 432
business
CHANGE IN Embedded value of covered business
FOR THE SIX MONTHS ENDED 30 JUNE 2008
SIX MONTHS
REVIEWED
2008
R MILLION NOTE TOTAL VALUE OF IN- ADJUSTED NET
FORCE WORTH
Embedded value of covered 28 432 13 722 14 710
business at the beginning of
the year
Value of new business 290 825 (535)
Net earnings from existing 1 268 (106) 1 374
covered business
Expected return on value 919 919 -
of
in-force business
Expected transfer of - (1 134) 1 134
profit
to adjusted net worth
Operating experience 3 284 78 206
variances
Operating assumption 65 31 34
changes
Net project expenses 4 (32) - (32)
Embedded value earnings from 1 526 719 807
life operations
Economic assumption 5 (712) (688) (24)
changes
Tax changes 6 187 187 -
Investment variances (239) (238) (1)
Exchange rate movements 131 131 -
Change in minority (115) (70) (45)
shareholders` interest
EEV changes - - -
Growth from covered 778 41 737
business
Investment return on 220 - 220
adjusted net worth
Embedded value earnings from 998 41 957
covered business
Transfers to other Group - - -
operations
Net transfers to/from (812) - (812)
covered business
Embedded value of covered 28 618 13 763 14 855
business at the end of the
period
Analysis of earnings from
covered business
Sanlam Personal Finance 490 (130) 620
Sanlam Developing Markets 180 56 124
Sanlam UK 139 46 93
Sanlam Employee Benefits 189 69 120
Embedded value earnings from 998 41 957
covered business
SIX MONTHS FULL YEAR
REVIEWED AUDITED
2007 2007
R MILLION NOTE TOTAL TOTAL
Embedded value of covered 27 403 27 403
business at the beginning of
the year
Value of new business 2 260 565
Net earnings from existing 1 003 2 085
covered business
Expected return on value 768 1 493
of
in-force business
Expected transfer of - -
profit
to adjusted net worth
Operating experience 3 223 315
variances
Operating assumption 12 277
changes
Net project expenses 4 (31) (77)
Embedded value earnings from 1 232 2 573
life operations
Economic assumption 5 (118) (128)
changes
Tax changes 6 285 291
Investment variances 238 210
Exchange rate movements 9 (22)
Change in minority (133) (85)
shareholders` interest
EEV changes - 272
Growth from covered business 1 513 3 111
Investment return on 921 1 589
adjusted net worth
Embedded value earnings from 2 434 4 700
covered business
Transfers to other Group - (205)
operations
Net transfers to/from (1 551) (3 466)
covered business
Embedded value of covered 28 286 28 432
business at the end of the
year
Analysis of earnings from
covered business
Sanlam Personal Finance 1 785 3 953
Sanlam Developing Markets 253 351
Sanlam UK 44 63
Sanlam Employee Benefits 352 333
Embedded value earnings from 2 434 4 700
covered business
VALUE OF NEW BUSINESS (VNB)
FOR THE SIX MONTHS ENDED 30 JUNE 2008
value of new COVERED busIness
AS AT 30 JUNE 2008
SIX MONTHS FULL
REVIEWED YEAR
AUDITED
R MILLION NOTE 2008 2007 2007
Value of new business (at point of
sale):
Gross value of new business 332 278 657
Sanlam Personal Finance 178 147 363
Sanlam Developing Markets 128 95 233
Sanlam UK 6 7 13
Sanlam Employee Benefits 20 29 48
Cost of capital (42) (18) (90)
Sanlam Personal Finance (18) (5) (39)
Sanlam Developing Markets (15) (7) (30)
Sanlam UK (3) (3) (5)
Sanlam Employee Benefits (6) (3) (16)
Value of new business 290 260 567
Sanlam Personal Finance 160 142 324
Sanlam Developing Markets 113 88 203
Sanlam UK 3 4 8
Sanlam Employee Benefits 14 26 32
Value of new business attributable to:
Shareholders` fund 2 250 222 493
Sanlam Personal Finance 157 141 321
Sanlam Developing Markets 76 51 132
Sanlam UK 3 4 8
Sanlam Employee Benefits 14 26 32
Minority shareholders` interest 40 38 74
Sanlam Personal Finance 3 1 3
Sanlam Developing Markets 37 37 71
Sanlam UK - - -
Sanlam Employee Benefits - - -
Value of new business 290 260 567
Geographical analysis:
South Africa 198 202 426
Africa 85 52 125
Other international 7 6 16
Value of new business 290 260 567
Analysis of new business profitability:
Before minorities:
Present value of new business premiums 12 141 11 214 23 886
Sanlam Personal Finance 8 089 6 859 14 985
Sanlam Developing Markets 2 330 2 010 5 476
Sanlam UK 836 579 1 327
Sanlam Employee Benefits 886 1 766 2 098
New business margin 2,39% 2,32% 2,37%
Sanlam Personal Finance 1,98% 2,07% 2,16%
Sanlam Developing Markets 4,85% 4,38% 3,71%
Sanlam UK 0,36% 0,69% 0,60%
Sanlam Employee Benefits 1,58% 1,47% 1,53%
After minorities:
Present value of new business premiums 11 501 10 535 21 886
Sanlam Personal Finance 8 020 6 811 14 873
Sanlam Developing Markets 1 759 1 379 3 588
Sanlam UK 836 579 1 327
Sanlam Employee Benefits 886 1 766 2 098
New business margin 2,17% 2,11% 2,25%
Sanlam Personal Finance 1,96% 2,07% 2,16%
Sanlam Developing Markets 4,32% 3,70% 3,68%
Sanlam UK 0,36% 0,69% 0,60%
Sanlam Employee Benefits 1,58% 1,47% 1,53%
Notes to the embedded value of covered businEss
for the six months ended 30 June 2008
1. VALUE OF IN-FORCE Gross Cost of Net value Change
SENSITIVITY ANALYSIS value of capital of in- from
in-force R force base
business million business value
R million R million %
BASE VALUE 16 397 (2 634) 13 763
- Increase risk discount 15 428 (3 438) 11 990 -13%
rate by 1,0%
- Decrease risk discount 17 500 (1 922) 15 578 13%
rate by 1,0%
2. VALUE OF NEW BUSINESS Gross Cost of Net value Change
SENSITIVITY ANALYSIS value of capital of new from
new R business base
business million R million value
R million %
Base value 285 (35) 250
- Increase risk discount 246 (42) 204 -18%
rate by 1,0%
- Decrease risk discount 333 (28) 305 22%
rate by 1,0%
Six months Full year
Reviewed Audited
2008 2007 2007
R million R R million
million
3.OPERATING EXPERIENCE
VARIANCES
Risk experience 116 111 254
Group tabilized business 24 (14) (20)
outflows
Working capital and other 144 126 81
Total operating experience 284 223 315
variances
4.NET PROJECT EXPENSES
NET PROJECT EXPENSES RELATE
TO ONCE-OFF EXPENDITURE ON
THE GROUP`S DISTRIBUTION
PLATFORM THAT HAS NOT BEEN
ALLOWED FOR IN THE EMBEDDED
VALUE ASSUMPTIONS.
5.ECONOMIC ASSUMPTION
CHANGES
Investment yields and (715) (80) (95)
inflation gap
Long-term asset mix 3 (38) (33)
assumptions
Total economic assumption (712) (118) (128)
changes
6.TAX CHANGES
Change in corporate tax 187 - -
rate
Change in policyholders` - 135 141
fund tax rate
Reduction in STC rate from - 150 150
12,5% to 10,0%
Total tax changes 187 285 291
June December
Reviewed Audited
2008 2007 2007
% % %
7.ECONOMIC ASSUMPTIONS
Gross investment return, risk
discount rate and inflation
SANLAM LIFE:
Point used on the government bond 9 year 10 year 9 year
yield curve
Fixed-interest securities 10,7 8,4 8,3
Equities and offshore investments 14,2 10,4 11,8
Hedged equities 11,2 8,4 8,8
Property 11,7 9,4 9,3
Cash 9,7 6,4 7,3
Return on required capital 12,2 7,6 9,7
Inflation rate 7,7 4,9 5,3
Risk discount rate 13,2 10,9 10,8
MERCHANT INVESTORS:
Point used on the government bond 15 year 15 year 15 year
yield curve
Fixed-interest securities 5,2 5,3 4,6
Equities and offshore investments 8,4 7,8 7,8
Hedged equities 8,4 7,8 7,8
Property 8,4 7,8 7,8
Cash 5,2 5,3 4,6
Return on required capital 5,2 5,3 4,6
Inflation rate 4,5 3,9 3,7
Risk discount rate 8,9 9,0 8,3
SANLAM SKY SOLUTIONS:
Point used on the government bond 6 year 6 year 6 year
yield curve
Fixed-interest securities 11,0 8,7 8,6
Equities and offshore investments 14,5 10,7 12,1
Hedged equities n/a n/a n/a
Property 12,0 9,7 9,6
Cash 10,0 6,7 6,6
Return on required capital 12,3 8,7 9,4
Inflation rate 8,0 5,7 5,6
Risk discount rate 13,5 11,2 11,1
BOTSWANA LIFE INSURANCE:
Fixed-interest securities 10,5 10,5 10,5
Equities and offshore investments 14,0 12,5 14,0
Hedged equities n/a n/a n/a
Property 11,5 11,5 11,5
Cash 9,5 8,5 8,5
Return on required capital 10,6 11,1 9,5
Inflation rate 7,5 7,5 7,5
Risk discount rate 14,0 14,0 14,0
Asset mix for assets supporting the
required capital (1)
SANLAM LIFE:
Equities 44 - 44
Hedged equities 13 20 13
Property 3 - 3
Fixed-interest securities 25 50 25
Cash 15 30 15
100 100 100
MERCHANT INVESTORS:
Equities - - -
Hedged equities - - -
Property - - -
Fixed-interest securities - - -
Cash 100 100 100
100 100 100
SANLAM SKY SOLUTIONS:
Equities 50 50 50
Hedged equities - - -
Property - - -
Fixed-interest securities - - -
Cash 50 50 50
100 100 100
BOTSWANA LIFE INSURANCE:
Equities 15 68 69
Hedged equities - - -
Property 10 8 1
Fixed-interest securities 25 14 30
Cash 50 10 -
100 100 100
(1) From 31 December 2007 the cost of
capital is based on the higher of an
internally assessed required capital
and the statutory capital adequacy
requirement, previously based on the
statutory capital adequacy
requirement.
GROUP FINANCIAL STATEMENTS
for the six months ended 30 June 2008
Contents
Group balance sheet
Group income statement
Group statement of changes in equity
Group cash flow statement
Notes to the financial statements
GROUP BALANCE SHEET
at 30 June 2008
June December
Reviewed Audited
2008 2007 2007
R R R
million million million
ASSETS
Property and equipment 313 280 298
Owner-occupied properties 648 622 650
Goodwill 2 607 2 391 2 447
Value of business acquired 1 583 970 1 000
Deferred acquisition costs 1 834 1 536 1 693
Long-term reinsurance assets 474 416 487
Investments 279 140 297 002 290 101
Properties 14 622 15 640 15 648
Equity-accounted investments 1 632 1 264 1 759
Equities and similar securities 142 369 152 217 149 038
Public sector stocks and loans 41 621 49 339 49 887
Debentures, insurance policies, 30 751 30 767 34 091
preference shares and other loans
Cash, deposits and similar 48 145 47 775 39 678
securities
Deferred tax 430 333 475
Non-current assets held for sale 2 239 - 2 060
Short-term insurance technical assets 2 782 2 248 2 263
Working capital assets 44 542 46 446 38 791
Trade and other receivables 33 749 35 259 27 972
Cash, deposits and similar 10 793 11 187 10 819
securities
Total assets 336 592 352 244 340 265
Equity and liabilities
Shareholders` fund 27 666 28 936 29 334
Minority shareholders` interest 2 484 3 275 2 220
Total equity 30 150 32 211 31 554
Long-term policy liabilities 237 518 248 350 244 660
Insurance contracts 120 144 128 749 128 398
Investment contracts 117 374 119 601 116 262
Term finance 6 740 6 238 6 594
Margin business 2 968 2 764 2 687
Other interest-bearing liabilities 3 772 3 474 3 907
External investors in consolidated 11 680 12 767 12 278
funds
Cell owners` interest 422 383 336
Deferred tax 907 1 981 1 354
Non-current liabilities held for sale 1 781 - 1 606
Short-term insurance technical 8 404 8 235 7 719
provisions
Working capital liabilities 38 990 42 079 34 164
Trade and other payables 35 951 38 855 30 431
Provisions 1 039 1 106 973
Taxation 2 000 2 118 2 760
Total equity and liabilities 336 592 352 244 340 265
GROUP INCOME STATEMENT
for the six months ended 30 June 2008
Six months Full
Reviewed year
Audited
2008 2007 2007
R R R
million million million
Net income 6 572 31 115 52 504
Financial services income 13 816 12 588 26 715
Reinsurance premiums paid (1 624) (1 310) (2 685)
Reinsurance commission received 195 187 373
Investment income 8 250 7 587 14 740
Investment surpluses (14 212) 14 816 15 885
Finance cost - margin business (126) (120) (246)
Change in fair value of external 273 (2 633) (2 278)
investors liability
Net insurance and investment 1 446 (20 735) (33 414)
contract
benefits and claims
Long-term insurance and investment 5 205 (17 483) (26 413)
contract benefits
Short-term insurance claims (5 107) (3 886) (8 533)
Reinsurance claims received 1 348 634 1 532
Expenses (5 173) (4 596) (9 939)
Sales remuneration (1 987) (1 698) (3 554)
Administration costs (3 186) (2 898) (6 385)
Impairment of investments and (135) - (7)
goodwill
Amortisation of value of business (31) (23) (51)
acquired
Net operating result 2 679 5 761 9 093
Equity-accounted earnings 63 201 228
Finance cost - other (160) (117) (281)
Profit before tax 2 582 5 845 9 040
Taxation (528) (1 820) (2 493)
Shareholders` fund (419) (1 195) (1 678)
Policyholders` fund (109) (625) (815)
Profit from continued operations 2 054 4 025 6 547
Discontinued operations (63) (21) (168)
Profit for the year 1 991 4 004 6 379
Attributable to:
Shareholders` fund 1 852 3 359 5 494
Minority shareholders` interest 139 645 885
1 991 4 004 6 379
Earnings attributable to shareholders
of the company (cents):
Basic earnings per share 91.4 154.5 256.6
Diluted earnings per share 89.5 152.0 250.9
Earnings attributable to shareholders
of the company from continuing
operations (cents):
Basic earnings per share 93.1 155.0 260.8
Diluted earnings per share 91.2 152.5 255.1
GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2008
Six months December
Reviewed Audited
2008 2007 2007
R million R R
million million
Shareholders` fund:
Balance at beginning of the period 29 334 29 121 29 121
Total recognised income 2 313 3 354 5 395
Profit for the period 1 852 3 359 5 494
Movement in foreign currency 461 (5) (99)
translation reserve
Net movement in treasury shares (684) (1 862) (3 551)
Net realised investment surpluses (159) (203) (288)
on treasury shares
Cost of net treasury shares acquired (525) (1 659) (3 263)
(1)
Share-based payments 49 28 74
Dividends paid (2) (1 907) (1 705) (1 705)
Shares cancelled (1 439) - -
Balance at end of the period 27 666 28 936 29 334
Minority shareholders` interest:
Balance at beginning of the period 2 220 3 934 3 934
Total recognised income 265 640 858
Profit for the period 139 645 885
Movement in foreign currency 126 (5) (27)
translation reserve
Net movement in treasury shares 69 (541) (527)
Net realised investment surpluses 47 - 24
on treasury shares
Cost of net treasury shares 22 (541) (551)
disposed/(acquired) (1)
Share-based payments 7 4 10
Dividends paid (245) (255) (1 474)
Acquisitions, disposals and other 168 (507) (581)
movements in minority interests
Balance at end of the period 2 484 3 275 2 220
Shareholders` fund 29 334 29 121 29 121
Minority shareholders` interest 2 220 3 934 3 934
Total equity at beginning of the 31 554 33 055 33 055
period
Shareholders` fund 27 666 28 936 29 334
Minority shareholders` interest 2 484 3 275 2 220
Total equity at end of the period 30 150 32 211 31 554
(1) Comprises movement in cost of
shares held by subsidiaries and the
Share Incentive Trust.
(2) Dividend of 93 cents per share
paid during 2008 (2007: 77 cents per
share) in respect of the 2007
financial year.
GROUP CASH FLOW STATEMENT
for the six months ended 30 June 2008
Six months Full
Reviewed year
Audited
2008 2007 2007
R million R R
million million
Net cash inflow from operating 5 746 1 017 30
activities
Net cash inflow from investment 4 679 14 653 9 859
activities
Net cash outflow from financing (1 881) (1 355) (3 227)
activities
Net increase in cash and cash 8 544 14 315 6 662
equivalents
Cash, deposits and similar 51 309 44 647 44 647
securities at beginning of the
period
Cash, deposits and similar 59 853 58 962 51 309
securities at end of the period
Cash, deposits and similar (915) - (812)
securities classified as held for
sale
Cash, deposits and similar 58 938 58 962 50 497
securities at end of the period -
continuing operations
Cash inflow from discontinued 103 60 4
operations
Cash, deposits and similar 812 808 808
securities at beginning of the
period
Cash, deposits and similar 915 868 812
securities at end of the period -
discontinued operations
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 June 2008
Six months Full
Reviewed year
Audited
2008 2007 2007
cents cents cents
1. EARNINGS PER SHARE
Basic earnings per share:
Headline earnings 96.5 126.2 225.7
Profit attributable to shareholders` 91.4 154.5 256.6
fund
Diluted earnings per share:
Headline earnings 94.5 124.2 220.8
Profit attributable to 89.5 152.0 250.9
shareholders` fund
R million R million R million
Analysis of earnings:
Profit attributable to 1 852 3 359 5 494
shareholders
Less: Net profit on disposal of - (13) (44)
subsidiaries
Less: Net profit on disposal of - (601) (624)
associates
Less: Equity-accounted non (32) - -
Headline earnings
Plus: Impairment of investments 135 - 7
and goodwill
Headline earnings 1 955 2 745 4 833
million million million
Number of shares:
Number of ordinary shares in issue at 2 303.6 2 303.6 2 303.6
beginning of period
Less: Weighted average number of (31.8) - -
shares cancelled
Less: Weighted average Sanlam shares (245.6) (129.4) (162.4)
held by subsidiaries (including
policyholders)
Weighted average number of shares for 2 026.2 2 174.2 2 141.2
basic earnings per share
Add: Weighted conversion of deferred 13.1 8.7 12.1
shares
Add: Total number of shares and 43.2 42.7 43.3
options
Less: Number of shares (under (14.4) (15.8) (7.3)
option) that would have been issued
at fair value
Weighted average number of shares for 2 068.1 2 209.8 2 189.3
diluted earnings per share
2. RECONCILIATION OF SEGMENTAL INFORMATION
Six months Full
Reviewed year
Audited
2008 2007 2007
R R R
million million million
Segment financial services income 12 880 11 936 25 026
Sanlam Personal Finance 3 090 2 922 6 257
Sanlam Developing Markets 1 504 1 262 2 817
Sanlam UK 218 141 265
Sanlam Employee Benefits 1 006 908 1 796
Short-term Insurance 5 829 5 299 11 035
Investment Management 1 061 1 105 2 514
Sanlam Capital Markets 97 237 283
Corporate, consolidation and other 75 62 59
IFRS adjustments 936 652 1 689
Total financial services income 13 816 12 588 26 715
Segment result 1 151 3 740 5 860
Sanlam Personal Finance (1 788) 4 140 6 677
Sanlam Developing Markets 46 232 474
Sanlam UK 85 55 112
Sanlam Employee Benefits 122 418 775
Short-term Insurance 33 504 570
Investment Management 234 427 908
Sanlam Capital Markets 34 139 139
Corporate, consolidation and other 2 385 (2 175) (3 795)
Reverse minority shareholders` 139 645 885
interest included in segment result
Fund transfers 701 (381) (366)
Total profit for the period 1 991 4 004 6 379
3. CONTINGENT LIABILITIES
Shareholders are referred to the contingent liabilities disclosed
in the 2007 annual report. The circumstances surrounding these
contingent liabilities remained materially unchanged.
4. SUBSEQUENT EVENTS
No material facts or circumstances have arisen between the dates of
the balance sheet and this report that affect the financial
position of the Sanlam Limited group as reflected in these
financial statements.
GROUP SECRETARY TRANSFER SECRETARIES:
JOHAN BESTER COMPUTERSHARE INVESTOR SERVICES
(PROPRIETARY) LIMITED
REGISTERED OFFICE (REGISTRATION NUMBER
2 STRAND ROAD, BELLVILLE 7530, 2004/003647/07)
SOUTH AFRICA 70 MARSHALL STREET,
tELEPHONE +27 21 947-9111 JOHANNESBURG 2001, SOUTH AFRICA
FAX +27 21 947-3670 PO BOX 61051, MARSHALLTOWN 2107,
SOUTH AFRICA
TEL +27 83 900 3755
POSTAL ADDRESS Fax +27 11 688-5200
PO BOX 1, SANLAMHOF 7532,
SOUTH AFRICA
WWW.SANLAM.CO.ZA
Directors: RC Andersen (Chairman), PT Motsepe
(Deputy Chairman),
J van Zyl(1) (Group Chief Executive), MMM Bakane-
Tuoane, AD Botha,
AS du Plessis, FA du Plessis, WG James, MV Moosa,
JP M'ller(1),
RK Morathi(1), SA Nkosi, I Plenderleith(2), M
Ramos, GE Rudman,
RV Simelane, ZB Swanepoel, PL Zim
(1) Executive
(2) Non-South African
Bellville
4 September 2008
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 04/09/2008 08:00:06 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
