Wrap Text
SLM - Sanlam Group - Interim results for the six months ended 30 June 2010
SANLAM GROUP
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
REGISTERED NAME: SANLAM LIMITED
(Registration number 1959/001562/06)
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
("Sanlam" or "the company")
Interim results for the six months ended 30 June 2010
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Interim financial statements
Accounting policies and basis of presentation
External audit review
Shareholders` information
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
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Administration
Sanlam Group Interim Results June 2010
Key features
Earnings
* Net result from financial services per share increased by 14%
* Core earnings per share up 2%
* Normalised headline earnings per share up 2%
Business volumes
* New business volumes down 3% to R50 billion
* New life business volumes increased by 13%
* Net value of new covered business up 16% to R283 million
* Net new covered business margin of 2,32%, up from 2,23%
* Net fund inflows of R6,6 billion
Group Equity Value
* Group Equity Value per share of R24,79
* Annualised return on Group Equity Value per share of 9,1%
Capital management
* Discretionary capital of R2,8 billion at 30 June 2010
* Sanlam Life CAR cover of 2,9 times
Salient results for the six months ended 30 June 2010
Sanlam Group 2010 2009 %
Earnings
Net result from financial
services per share cents 69,4 60,8 14%
Core earnings per share (1) cents 89,8 87,9 2%
Normalised headline earnings
per share (2) cents 80,5 78,9 2%
Diluted headline earnings per share cents 79,2 83,0 -5%
Net result from financial services R million 1 422 1 242 14%
Core earnings (1) R million 1 839 1 797 2%
Normalised headline earnings (2) R million 1 650 1 613 2%
Headline earnings R million 1 610 1 672 -4%
Group administration cost ratio (3) % 29,1 26,7
Group operating margin (4) % 17,9 15,1
Business volumes
New business volumes R million 49 781 51 485 -3%
Net fund flows R million 6 649 7 677 -13%
Net new covered business
Value of new covered business R million 283 243 16%
Covered business PVNBP (5) R million 12 220 10 906 12%
New covered business margin (6) % 2,32 2,23
GROUP EQUITY VALUE
Group Equity Value (7) R million 50 202 51 024 -2%
Group Equity Value per share (7) cents 2 479 2 473 0%
Annualised return on Group Equity
Value per share (7),(8) % 9,1 16,2
Adjusted annualised return on
Group Equity Value per share (7) % 13,2 13,1
Sanlam Life Insurance Limited
Shareholders` fund (7) R million 35 282 37 036
Capital Adequacy Requirements
(CAR) (7) R million 7 875 7 675
CAR covered by prudential capital (7) times 2,9 3,1
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 project expenses, 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 2009.
(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
In challenging business conditions during the six months ended 30 June 2010
the Group performed well, with all key performance indicators reflecting a
satisfactory result on a comparable basis. This again confirms the Group`s
track record of resilient results as our diversification strategy, combined
with prudent operational and financial practices, contributed towards its
defensive character in adverse trading conditions. The Group`s core operations
continue to provide a stable base, complemented by an increasing contribution
from investments in new growth initiatives.
Business environment
In the 2009 Sanlam Annual Report we expressed the view that the so-called
green shoots of recovery at the time were not expected to burst into vigorous
international growth and that especially Africa was likely to experience a
delayed recovery. The business environment experienced in the first six months
of 2010 confirmed that view. Amidst some signs of a global economic upturn,
the recovery remains fragile and has been mired by fears of the contagious
impact of sovereign debt problems experienced in the European Union. This is
evident in an increase in risk margins in Europe and a return to global equity
market volatility.
Key aspects of the economic and business environment during the six months and
the impact on the Group`s results are contextualised in the sections that
follow.
Equity markets
The South African equity market closely followed international trends,
recording negative growth during the first two months of the year, followed by
optimistic buoyancy during March and April, only to revert back into negative
territory in May and June. The FTSE/JSE All Share Index at the end of June
2010 closed 5% down on its 31 December 2009 level. The MSCI world index in
Rand lost 6% over the same period. The strong equity market performance in the
latter half of 2009, however, contributed to higher average market levels
during the first six months of 2010 compared to the same period in 2009.
These conditions had a major impact on the Group`s results:
* Net result from financial services: The higher average market levels
supported an increase in the average level of assets under management and
commensurately the asset-based fee income and profitability of the Group`s
asset management operations. The market volatility and associated uncertainty
and risk aversion, however, limited deal flow and profitability in the capital
management operations.
* Net investment return: The negative equity market returns during the first
six months of 2010, compared to the moderately positive returns in the
comparable period in 2009, depressed the return earned on the capital
portfolio, thereby limiting growth in headline earnings.
* Net fund flows: The strong equity market performance in the latter part of
2009 raised investor confidence and caused certain retail investors to switch
from money market funds back into equities. As a result, notwithstanding
ongoing growth in new funds attracted to the Glacier platform, the strong
allocation of funds from the platform to the Glacier wrap and money market
funds experienced during 2008 and 2009 reversed during the first six months of
2010, resulting in a net outflow from these solutions. Demand for Sanlam
Collective Investments` institutional funds (primarily dividend income fund)
also decreased from the high base in 2009. The demand for Sanlam UK`s
investment solutions benefited from some increase in UK investor confidence on
the back of improving equity markets.
Interest rates
Long-term interest rates remained largely unchanged from 2009 and had no
material impact on the reported results. In contrast, short-term interest
rates decreased sharply towards the end of June 2009, resulting in
significantly lower average short-term rates during the first six months of
2010 compared to the same period in 2009.
This had a material impact on the Group results compared to the first six
months of 2009:
* Net result from financial services: The Group`s operating earnings include
interest earned on working capital cash balances (`float`). The main drivers
behind this profit source are the level of cash balances and short-term
interest rates. The significant decrease in the latter had a major negative
impact on float income.
* Net investment return: The decrease in short-term interest rates also
reduced the return earned on the cash held in the capital portfolio.
* Net fund flows: The attractiveness of money market funds is directly linked
to short-term interest rates. The sharp decline in money market returns,
coupled with stronger equity markets, reduced demand for money market
solutions offered by Glacier and Sanlam Collective Investments (refer above).
Foreign currency exchange rates
The exchange rate of the Rand against the currencies to which the Group has
major exposure, is summarised in the table below (negative variances indicate
a strengthening of the Rand).
Foreign Europe United USA Botswana Kenya
Kingdom
currency/Rand Euro GBP US$ BWP KES
31/12/2008 12.85 13.33 9.24 1.26 0.13
30/06/2009 10.83 12.72 7.72 1.18 0.11
-15.7% -4.6% -16.5% -6.3% -15.4%
31/12/2009 10.56 11.89 7.36 1.13 0.10
30/06/2010 9.39 11.47 7.66 1.10 0.10
-11.1% -3.5% 4.1% -2.7% 0.0%
Average 1H09 12.19 13.64 9.13 1.24 0.12
Average 1H10 9.97 11.47 7.52 1.12 0.10
-18.2% -15.9% -17.6% -9.7% -16.7%
The Rand continued to strengthen during the first six months of 2010 against
currencies to which the Group has a major exposure. The stronger average
exchange rate of the South African currency impacted on the reported results:
* Net result from financial services: A negative effect on the rand-based
earnings recorded by the Group`s operations in the UK, Botswana and Kenya.
* Net investment return: A reduction in the investment return earned on the
capital portfolio`s foreign exposure in rand terms.
* Net fund flows and value of new covered business: A reduction in the Rand
value of the growth in new business volumes, value of new covered business and
net fund flows recorded by Sanlam UK and Sanlam Developing Markets.
Economic conditions
Consumer debt levels in South Africa remain high and continue to impact on the
level of discretionary expenditure. A decrease in mortgage lending rates
since 2008 provided some relief but was largely offset by major hikes in
electricity prices and other consumption expenditure. Discretionary savings in
the mass middle market therefore remain under pressure, with a very low demand
for recurring premium saving solutions. The demand for risk solutions,
however, are less affected by economic conditions and continued to grow.
As anticipated in the 2009 annual report, African resources-based economies
are experiencing a delayed impact of the global financial markets crisis as
the effect of reduced state revenue in particular took some time to filter
through to consumers. This is reflected in pressure on new business volumes
achieved in most of the African countries where the Group operates. A return
to global economic growth, although prolonged in the developed markets, should
provide some relief on the back of an increased demand for resources.
Improving investor confidence enabled Sanlam UK to stage a major improvement
in both new life and investment business.
Underwriting conditions
Santam experienced a favourable turnaround in underwriting results during the
first six months of 2010. The first half of 2009 was in particular marred by
large fire-related corporate claims, the absence of which in 2010 contributed
to a strong improvement in underwriting profits. Underwriting margins can,
however, not be expected to be maintained at the current level.
Employee Benefits` operating earnings and net fund flows deteriorated during
the six months to June 2010 due to a cyclical increase in risk claims. Sanlam
Personal Finance also reported some deterioration in risk underwriting
experience, but to a lesser extent.
Performance review
The Group achieved an overall satisfactory operational performance for the
first six months of the 2010 financial year.
The primary performance target of the Group is to optimise shareholder value
through maximising the return on Group Equity Value (GEV). A target has been
set for the growth in GEV to exceed the Group`s cost of capital on a
sustainable basis. Cost of capital is set at the government long bond yield
plus 3%. The target is to exceed this return by at least 1%. The annualised
return on GEV per share of 9,1% for the six months ended 30 June 2010 fell
short of this target, but still represents a strong performance given the
relatively weak investment markets. On a normalised basis, i.e. assuming a
normalised investment market performance and excluding any once-off items, the
annualised return of 13,2% for the six months is broadly in line with the
target of 13,4%.
Total new business volumes, excluding white label business, decreased by 3%,
the combined result of strong growth in new life business, offset by a decline
in new investment business from a high base in 2009. New life business volumes
increased by 13%, with strong contributions from the South African and UK
operations. The rest of Africa operations contributed satisfactory new
business volumes given the difficult economic environment and stronger rand
exchange rate. New investment business declined by 8% from the high base in
2009. Excluding the R2,7 billion increase in the Public Investment
Corporation`s mandate in the first half of 2009, new investment business
volumes are in line with 2009 on a comparable basis, a satisfactory result
given the impact of lower short-term interest rates on demand for money market
solutions. The low conversion rate of low margin money market outflows at
Glacier into Sanlam equity-based products is, however, disappointing.
Core earnings of R1 839 million are 2% up on 2009, the combined effect of a
14% increase in the net result from financial services, substantially offset
by a 25% decline in net investment income earned on the capital portfolio. An
excellent improvement in Santam`s contribution was offset by a decline in
operating earnings at Sanlam Capital Markets, Sanlam Employee Benefits and
Sanlam Investments. The latter is essentially attributable to a once-off
release of expense over provisions in 2009. Employee Benefits experienced an
increase in risk claims, while low business activity impacted on the Sanlam
Capital Markets results. Both Sanlam Personal Finance and Sanlam Developing
Markets experienced an increase in their effective income tax rate. On a
comparable basis the net result from financial services increased by 25%, a
particularly pleasing result in a difficult environment. Net investment income
decreased due to the significant decline in short-term interest rates and as a
result of lower capital levels following corporate activity since the end of
June 2009. Core earnings per share increased by 2%, but by a satisfactory 8%
if the above-mentioned once-off items are excluded. Share buy-backs during the
first half of 2010 had only a minor impact on the weighted average number of
shares in issue.
The investment return earned on the Group`s capital portfolio was marginally
positive during the six months due to weak investment markets. This
contributed to normalised headline earnings per share increasing by only 2% on
2009. Diluted headline earnings per share, which include the International
Financial Reporting Standards (IFRS) impact of Sanlam and Santam shares, and
investments in associated companies held by the policyholders` fund, are 5%
down on 2009.
Delivering on strategy
The Group`s well established strategy successfully supported the results
achieved for the first six months of 2010. The Board and management remain
committed to the Group`s key objective of maximising shareholder value. This
is underpinned by the five pillars of optimal capital utilisation, earnings
growth, cost control and efficiencies, diversification and transformation,
which are also reflected in five main priority areas for 2010 as identified in
the 2009 annual report. Good progress has been made on all of these:
* Grow the business through profitable volume growth, client service and cost
management
Amidst a difficult business environment the Group achieved net new fund
inflows of R6,6 billion. The value of new life business for the first six
months increased by 16%, at a higher average margin than for the comparable
period in 2009. At the same time the service culture of the Group received
market recognition in a number of areas. Among them Santam received all three
awards in the short-term insurance category issued by the IFA community.
Sanlam Personal Finance received the IFA awards for both Recurring and Single
premium investment product suppliers.
The Group`s asset managers continue to produce sound asset management results
and Sanlam Investments exceeded almost 100% of their mandates measured over a
one year period. Amongst a number of their recent market accolades, Kokkie
Kooyman of SIM Global was recognised as the best Financial fund manager in the
world.
* Expanding distribution reach
The development of multiple distribution capacity is a cornerstone of the
Group`s growth strategy and is being pursued by all businesses. MiWay, our
fledgling direct short-term insurance venture, remains on track to achieve
critical mass and break-even towards the end of the year. The direct
distribution of other financial services products will follow soon. Sanlam
Developing Markets concluded a joint venture agreement with the JD Group that
will see the distribution of their products through the JD infrastructure. In
the rest of Africa, Sanlam Uganda was formally launched in April 2010 while
formal agreements are being finalised in respect of our new Nigerian insurance
joint venture. In India, we are in particular pleased with the growth achieved
by Shriram General, our short-term insurance joint venture.
* Continued diversification into non-life operations
A number of new initiatives were concluded that added to the Group`s portfolio
of non-life businesses. Sanlam Health Management acquired Eternity Health
Administrators, which added the Chartered Accountants Medical Aid Fund as a
client. Its membership of some 30 000 increased our principal members under
administration to some 90 000 and elevated Sanlam Health Management to the
fourth largest fund administrator in South Africa. At the same time Sanlam
Developing Markets launched a venture aimed at establishing health management
businesses in Africa on the back of the Group`s existing African footprint. In
Botswana, Botswana Insurance Holdings Limited follows a similar
diversification strategy. During the reporting period it acquired an interest
in a general insurer, Legal Guard, to add to its interest in Letshego, an
important player in the African personal loans market. Sanlam Investments
continued with the implementation of its international investment partner
strategy through a number of selected smaller acquisitions.
* Unlocking of and the efficient utilisation of discretionary capital
Capital discipline remains a key commitment of the Group. R866 million of
discretionary capital has been utilised during the six months to buy back 36
million Sanlam shares. Some R62 million was used to acquire 0,6 million Santam
shares (increasing the effective Santam holding to 57%) while a number of new
business ventures consumed a further R200 million. These included additional
capital of just more than R85 million allocated to MiWay, to facilitate its
growth, and Channel Life, to align its solvency position with that of Sanlam
Sky. Given the adverse equity market performance no significant further excess
capital was identified for the period, leaving some R2,8 billion in
discretionary capital as at 30 June 2010.
* Attracting and retaining previously disadvantaged people.
The balanced transformation of our staff and intermediary profile to best
align it with the requirements necessary to optimally service our existing
client base while also reaching our target markets, remains on track. Our
accreditation and commitment to the Investors in People (IPP) standard
contributes to a positive culture of managing diversity. In terms of
Employment Equity our number of black advisers has increased to 71% as at June
2010, while the appointment of Yvonne Muthien and Temba Mvusi as Executive
Directors increased the number of black Sanlam Board members to 47%.
Looking ahead
`Optimism in the face of uncertainty` best describes the outlook for the
second half of the year. 2010 started with renewed investor confidence that
the worst of the financial markets crisis was over and that the world was
gearing up for accelerated growth. Whilst global economic growth is gradually
returning, uncertainty and risk aversion remains, aggravated by the emergence
of sovereign credit risk in Europe and regular economic data that confirms a
prolonged upturn at best.
We remain confident and optimistic that the Group will continue to deliver
sound operating results. The business environment is however expected to
remain challenging in the second half of the year, with only slow economic
recovery in most of the economies in which we operate. This is not expected to
result in any meaningful performance improvement in the second half of the
year compared to the first six months of 2010 or relative to the strong second
half of 2009. The second half performance in 2009 was in particular assisted
by the improvement in investment markets experienced during that period.
Relative market movements during the second half of 2010 will have a major
impact on the level of normalised headline earnings growth to be reported for
the full 2010 financial year.
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 results for the six months ended 30 June 2010 are presented
based on and in compliance with International Financial Reporting Standards
(IFRS), as applicable. The basis of presentation and accounting policies are
consistent with those applied in the 2009 annual report, apart from the
following:
* Segmental reporting: The Investment Management and Capital Markets segments
were restructured. Sanlam Private Equity, Sanlam Properties (excluding the
property management operations that were reallocated to the corporate
segment). And Sanlam Structured Solutions were reallocated from Sanlam
Investments and combined with Sanlam Capital Markets to form the new Capital
Management segment in line with the new management structures.
* Accounting policies: Sanlam Sky Solutions and Channel Life were integrated
into a single business unit after the acquisition of the minority shareholder
interest in Channel Life during 2009. As part of the integration, Channel
Life`s accounting policies for insurance contracts have been aligned with that
of the Sanlam Group by eliminating negative rand reserves held as part of its
insurance contract policy liabilities. Refer below for further information,
including the impact on earnings and the Group shareholders` fund.
Comparative information has been restated accordingly, apart from Group Equity
Value that has not been restated for the change in accounting policies based
on its immaterial impact on this performance measure.
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 based on longer term assumptions,
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 2010
June 2010 December 2009
R million Total Fair Value Total Fair Value
value of in- value of in-
of force of force
assets assets
Embedded value of
covered business 29 311 14 050 15 261 28 988 14 247 14 741
Sanlam Personal
Finance 20 120 8 078 12 042 19 884 8 098 11 786
Sanlam Developing
Markets 3 696 1 179 2 517 3 479 1 363 2 116
Sanlam UK 659 222 437 665 217 448
Sanlam Employee
Benefits 4 836 4 571 265 4 960 4 569 391
Other group operations 16 938 16 938 - 16 833 16 833 -
Retail cluster 2 944 2 944 - 2 707 2 707 -
Institutional
cluster 6 572 6 572 - 6 977 6 977 -
Short-term insurance 7 422 7 422 - 7 149 7 149 -
Capital
diversification (700) (700) - (700) (700) -
Other capital and net
worth adjustments 1 853 1 853 - 2 403 2 403 -
47 402 32 141 15 261 47 254 32 783 14 741
Discretionary capital 2 800 2 800 - 3 500 3 500 -
Group Equity Value 50 202 34 941 15 261 51 024 36 283 14 741
Issued shares for
value
per share (million) 2 025,3 2 063,1
Group Equity Value per
share (cents) 2 479 2 473
Share price (cents) 2 286 2 275
Discount -8% -8%
The GEV as at 30 June 2010 amounted to R50,2 billion, down 2% on the R51
billion at the end of 2009. On a per share basis GEV increased marginally from
2 473 cents to 2 479 cents at 30 June 2010, after allowing for the 104 cents
per share dividend paid during 2010. The Sanlam share price traded at an 8%
discount to GEV by close of trading on 30 June 2010, in line with the discount
at the end of 2009.
As a financial services organisation, the Group has a major exposure to
financial markets in that the shareholder capital portfolio is invested in
financial instruments and the valuation of the investment management
operations is driven by, amongst others, the level of assets under management.
The weak equity markets during the first half of 2010, depressed both the
investment return earned on the capital backing the covered business
operations and the growth in the Institutional cluster`s assets under
management. This had a negative impact on the growth in GEV per share since
December 2009. In the context of these conditions, the annualised return on
GEV (ROGEV) per share of 9,1% for the first six months of 2010 is an overall
satisfactory performance.
Return on Group Equity Value
for the six months ended 30 June 2010
June 2010 June 2009
Earnings Return* Earnings Return*
R million % R million %
Covered business 1 158 8,2 770 5,5
Sanlam Personal Finance 928 9,6 446 4,6
Sanlam Developing Markets 237 14,3 86 6,2
Sanlam UK 9 2,7 4 1,2
Sanlam Employee Benefits (16) -0,6 234 8,6
Other operations 947 11,6 790 12,0
Sanlam Personal Finance 284 38,3 133 19,6
Sanlam Developing Markets 81 71,4 2 24,9
Sanlam UK 55 13,6 (117) -25,7
Institutional cluster 125 3,6 241 8,1
Short-term insurance 402 11,6 531 21,2
Discretionary and other
capital 127 (475)
Balance of portfolio 366 (180)
Shriram goodwill less value
of in-force acquired - (39)
Treasury shares and other (127) (128)
Change in net worth
adjustments (112) (128)
Return on Group Equity Value 2 232 8,9 1 085 4,9
Return on Group Equity Value
per share 9,1 5,2
* Annualised
Covered business achieved an annualised return of 8,2% compared to 5,5% in the
first half of 2009. The return on covered business was positively impacted
relative to the first six months of 2009 by the following:
* Higher expected earnings from covered business (R1,1 billion in 2010
compared to R0,8 billion in 2009) based on the higher risk discount rate
applied to the calculation of the value of in-force business (VIF) at the end
of 2009 compared to 2008. The unwinding of VIF is commensurately higher in
2010 compared to 2009.
* Significantly lower economic assumption changes. Long-term interest rates,
and commensurately the risk discount rate assumption, increased by some 2%
during the first half of 2009, which decreased the valuation of VIF and
resulted in R1 billion negative economic assumption changes. Long-term
interest rates remained largely unchanged during 2010, which contributed to
R88 million positive economic assumption changes in 2010.
* The 16% growth in value of new business.
This was, however, to an extent offset by the following:
* An R844 million increase in negative investment variances on VIF and the
capital portfolio supporting these operations. This is attributable to
relatively weaker investment returns during the first half of 2010 compared to
the same period in 2009.
* A R207 million reduction in operating experience variances. Persistency
experience weakened at Employee Benefits and Sanlam Developing Markets, which
contributed to an overall R39 million negative persistency experience for the
Group in 2010 compared to marginally positive experience in the first half of
2009. Risk experience variances were negatively impacted (R29 million
reduction) by the high claims cycle in Employee Benefits and some
deterioration in Sanlam Personal Finance`s risk underwriting experience. The
higher effective tax rate at Sanlam Personal Finance and Sanlam Developing
Markets during the first half of 2010 contributed to a reduction in the
working capital and other experience variances.
* A R49 million decrease in operating assumption changes. Sanlam Personal
Finance strengthened its assumptions basis for lapses of risk business in
older age categories, being the main contributor to the decline in operating
assumption changes.
The other Group operations yielded an overall annualised return of 12%, on a
similar level than the comparable period in 2009. The retail clusters recorded
strong growth, which was partially offset by a lower contribution from the
Institutional cluster. Most of Sanlam Personal Finance`s non-life operations
are performing well, which is reflected in strong earnings growth and a
commensurate increase in the valuation of these operations. Sanlam Developing
Markets` non-life performance is driven by an increase in the listed value of
its interests in Letshego and Funeral Services Group. The ROGEV of the
Institutional cluster was impacted by an increase in the working capital
requirements of its operations to support the growing cluster. The strong new
business flows into Sanlam UK`s non-life platforms supported a turnaround in
the valuation and ROGEV earnings of these operations, in particular Nucleus.
The 2009 comparative earnings were also negatively impacted by a required
write-down in the valuation of Principal following the financial markets
crisis, which partly reversed in 2010.
The return on discretionary and other capital was positively impacted relative
to 2009 by the switch in the RSA portfolio`s asset mix from equities to cash
as well as improved equity market performance in 2010 applicable to the
portion of discretionary and other capital held in the Botswana operations.
Earnings
Summarised shareholders` fund income statement
for the six months ended 30 June 2010
R million 2010 2009 %
Net result from financial services 1 422 1 242 14%
Net investment income 417 555 -25%
Core earnings 1 839 1 797 2%
Project expenses (19) (15) -27%
Net equity-accounted headline earnings 60 10 500%
BEE transaction costs (3) (3) -
Net investment surpluses 22 23 -4%
Secondary tax on companies (209) (162) -29%
Amortisation of intangible assets (40) (37) -8%
Normalised headline earnings 1 650 1 613 2%
Other non-headline earnings and impairments 376 (58)
Normalised attributable earnings 2 026 1 555 30%
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 839 million are 2% up on 2009. The net
result from financial services increased by 14%, partially offset by a 25%
decline in net investment income. On a per share basis, core earnings
increased by 2%.
The net result from financial services is not directly comparable to the first
six months of 2009 due to the following:
* The 2009 results include a once-off release of expense over provisions at
Sanlam Investments of some R40 million after tax.
* The effective tax rate of Sanlam Personal Finance and Sanlam Developing
Markets increased in 2010. This is in essence due to the effect of the
utilisation of available tax losses in the past. These losses have been fully
utilised in 2009, resulting in a normalised tax expense in 2010.
* Letshego`s equity-accounted earnings are included in the 2010 results. The
Group obtained significant influence over Letshego in the second half of 2009,
with its earnings commensurately only equity-accounted with effect from 1 July
2009.
Excluding these non-recurring items, the net result from financial services
increased by 25% on a comparable basis, a particularly pleasing result.
The table below provides an analysis of the net result from financial services
per business. The discussions that follow are based on the comparable
earnings.
Net result from financial services
for the six months ended 30 June 2010
R million 2010 2009 %
Retail cluster 807 717 13%
Sanlam Personal Finance 712 641 11%
Sanlam Developing Markets 64 63 2%
Sanlam UK 31 13 138%
Institutional cluster 357 348 3%
Sanlam Investments 238 208 14%
Sanlam Employee Benefits 62 65 -5%
Capital Management 57 75 -24%
Short-term insurance cluster 266 82 224%
Santam 300 118 154%
MiWay (34) (36) 6%
Corporate and other (26) (25) -4%
Net result from financial services on
comparable basis 1 404 1 122 25%
Lower effective tax rate - 80
Letshego equity-accounting 18 -
Release of expense over provisions - 40
Net result from financial services 1 422 1 242 14%
* Sanlam Personal Finance`s net result from financial services for the six
months of R712 million is 11% up on 2009. Before tax and minority interests,
the gross result from financial services is 9% higher than in 2009. Market
related profit benefited from higher fund fees (based on the higher level of
assets under management), increased releases from the asset mismatch reserve
(based on the higher level of this reserve during the first half of 2010
compared to the same period in 2009 due largely to higher longer term interest
rates) and increased profits from Sanlam Personal Loans and Sanlam Home Loans
(sold after 30 June 2010) largely due to improved bad debt experience. Life
business profits were negatively impacted by worse risk underwriting
experience as well as increased new business strain emanating from the
increase in new life business volumes. Working capital profits were in line
with 2009, with the negative impact of lower short-term interest rates being
offset by a higher level of working capital cash.
* The Sanlam Developing Markets net result from financial services of R64
million is 2% up on 2009 (up 24% before tax and minority shareholders`
interest).
-The South African operations` gross contribution decreased by 23%,
primarily due to a strengthening of the persistency, premium collection and
claims experience basis at the end of 2009, with further strengthening in
2010.
- Botswana Life increased its pre-tax result from financial services by 59%.
Positive claims experience and a turnaround from annuity mismatch losses in
the first half of 2009 to profits in 2010 are the main contributors.
- The rest of the African operations reported earnings in line with 2009.
* Sanlam UK`s net result from financial services more than doubled from 2009,
notwithstanding the stronger rand exchange rate. Merchant Investors and Punter
Southall Group were the main contributors, but Principal and Buckles also
reported improved earnings.
* The Institutional cluster operations recorded a 3% increase in net result
from financial services, a 2% increase before tax and minorities.
- Sanlam Investments` net result from financial services of R238 million is
up 14% on the comparable period in 2009 (up 11% to R325 million before tax and
minorities). Fee income increased in line with higher assets under management,
supported by the higher average level of investment markets. Net performance
fees earned also recovered from a relatively low base in 2009, a particularly
satisfactory performance that reflects an outperformance of benchmarks across
a wide section of the business. The majority of businesses contributed to
performance fee income, but with a particularly strong contribution from
Sanlam Investment Management and SIM Global.
- Sanlam Employee Benefits` net result from financial services decreased by
5% from R65 million in 2009 to R62 million for the first half of 2010. This is
primarily attributable to worse claims experience emanating from the current
high claims cycle.
- The Capital Management business grouping includes the results of Sanlam
Capital Markets (the main contributor to the cluster`s results), Sanlam
Private Equity, Sanlam Properties and Sanlam Structured Solutions. The lack of
deal flow in particularly the market activity division of Sanlam Capital
Markets, contributed to a 24% decline in the net result from financial
services of this segment from R75 million to R57 million. Both Sanlam Private
Equity and Sanlam Properties recorded satisfactory growth. Sanlam Properties`
net result from financial services includes only property development profits
in 2010 after the disposal of the property management business to Vukile
effective 1 January 2010. A profit of R326 million was realised on the
disposal of the operations, which are reported outside of headline earnings.
* Santam reported excellent results for the first half of 2010, with its net
result from financial services increasing by 154%. Before tax and minorities,
the result from financial services is up 139% on 2009. Underwriting profit
increased more than fourfold following the improved claims experience.
Interest earned on working capital decreased by 6%, the combined result of
higher float balances, but lower short-term interest rates.
Net investment income declined by 25%. The main drivers of the decline were:
* A reduction in the size of the capital portfolio following corporate
activity during the second half of 2009 and the first six months of 2010. A
total of some R600 million was utilised for investments in Group operations
over this period. In addition, R866 million was utilised for share buy-backs
in 2010. This reduced net investment income by some R35 million.
* The reduction in short-term interest rates contributed to R60 million lower
return on the cash exposure of the capital backing Sanlam Life`s covered
business.
* Santam`s net investment income was similarly impacted by the lower short-
term interest rate environment.
Normalised headline earnings
Normalised headline earnings of R1 650 million are 2% higher than the
comparable period in 2009. The increase in normalised headline earnings is in
the main attributable to the following:
* An increase of 2% in core earnings as discussed above.
* Net investment surpluses in line with 2009.
* An increase in equity-accounted earnings, in part due to the inclusion of
earnings relating to the Vukile units received as consideration for the
disposal of the Sanlam Properties property management operations.
* The 29% increase in the secondary tax on companies (STC) charge due to a
higher level of dividends paid and a decrease in STC credits following the 10%
reduction in the equity exposure of the capital backing Sanlam Life`s covered
business at the end of June 2009 to release additional discretionary capital.
Business volumes
New business flows
New business volumes, excluding white label, decreased by 3% on the first six
months of 2009. Excluding the R2,7 billion new mandate awarded to Sanlam
Investment Management by the PIC in 2009 as well as rollovers of discontinued
single premium business in Sanlam Developing Markets, new business volumes
increased by 3% on a comparable basis.
New business volumes for the six months ended 30 June 2010
R million 2010 2009 % change
Sanlam Personal Finance 14 954 14 700 2%
South Africa 10 689 10 214 5%
Africa 4 265 4 486 -5%
Sanlam Developing Markets 1 087 1 051 3%
South Africa 423 370 14%
Africa 544 605 -10%
Other international 120 76 58%
Sanlam UK 1 499 955 57%
Institutional cluster 22 878 22 788 0%
Sanlam Investments 22 428 22 646 -1%
Sanlam Employee Benefits 450 142 217%
Santam 6 646 6 179 8%
NEW BUSINESS ON COMPARABLE BASIS 47 064 45 673 3%
PIC NEW BUSINESS - 2 762
SANLAM DEVELOPING MARKETS
DISCONTINUED BUSINESS 192 265 -28%
WHITE LABEL 2 525 2 785 -9%
TOTAL NEW BUSINESS 49 781 51 485 -3%
Sanlam Personal Finance new business sales increased by 2% on 2009. This low
level of growth is largely attributable to a slowdown in Namibian collective
investments sales from the high base in 2009 and a decrease in sales of
Glacier money market solutions following lower short-term interest rates and
the shift to equity-based solutions. Excluding these two product lines, new
business volumes increased by a strong 18%.
* South African recurring premium sales increased by a healthy 13%, driven by
strong growth in risk business (up 17%) and ad hoc premium increases (up 52%).
Savings and retirement business recurring premium sales were marginally lower
than 2009 in the context of the continued pressure on disposable income. South
African single premium sales increased by 4%.
* Excluding Glacier money market sales, single premiums increased by 19%.
Namibia new business volumes decreased by 5% on 2009, but excluding collective
investments, they recorded a 5% increase in new sales volumes.
Sanlam Developing Markets inflows are 3% higher than 2009, excluding the
discontinued single premium business.
* South African inflows are 14% higher than the comparable period in 2009,
with the Sanlam Sky field channel and Safrican recording strong growth.
* African inflows are 10% lower than 2009. This is in the main attributable to
the strengthening of the rand exchange rate and a reduction in Botswana Life
annuity sales, which are negatively impacted by lower interest rates. This was
partly offset by good credit life and group life volumes. The other African
operations recorded strong growth on 2009.
* Shriram`s new business volumes increased by 58% on 2009, driven by strong
sales from the existing channel and credit life sales.
Sanlam UK recorded an excellent 57% increase in new business sales,
notwithstanding the strengthening of the rand against the pound. Both life and
investment business contributed to the growth. The improvement in investment
markets and economic conditions since the middle of 2009, albeit still
challenging, flowed through to higher sales and advisor productivity.
The Institutional cluster new business volumes are in line with 2009. A 62%
decrease in institutional collective investment scheme business (primarily
dividend income funds) hides an otherwise strong performance by the cluster.
Money market solutions were negatively impacted by the sharp decrease in short-
term interest rates. This product line is however low margin business and
accordingly does not have a significant impact on profitability. Segregated
fund flows increased by 16%, with Sanlam Multi Manager and Sanlam Private
Investments recording exceptional growth of 95% and 20%.
Sanlam Employee Benefits more than doubled its contribution, with recurring
premiums increasing by 20% and single premium sales increasing fourfold.
Santam recorded an 8% increase in net premium inflows over the first six
months of 2010. Market prices remain soft especially in commercial business,
putting pressure on premium rates.
Net fund flows
The Group remained successful in retaining funds under management and achieved
net inflows (excluding white label business) for the six months of R6,4
billion. This compares to net inflows of R9,9 billion in 2009, excluding the
R2,7 billion new PIC mandate and a low margin outflow of R4,5 billion at
Sanlam Private Investments in 2009. Net life inflows (excluding Employee
Benefits) performed well and increased by 44% on 2009. This is the combined
effect of strong new business volumes and good retention of existing funds.
Net investment business fund flows decreased from R5,4 billion in 2009 to R3,1
billion in 2010.
Net fund flows for the six months ended 30 June 2010
R million 2010 2009
Sanlam Personal Finance 2 012 3 411
Life business 1 205 929
Investment business 807 2 482
Sanlam Developing Markets 1 025 610
Sanlam UK 378 (111)
Institutional cluster 689 2 571
Sanlam Employee Benefits (1 171) (499)
Sanlam Investments 1 860 3 070
Santam 2 315 1 676
Net fund flows excluding white label 6 419 8 157
White label 230 (480)
Total net fund flows 6 649 7 677
Both Sanlam Personal Finance and Sanlam Developing Markets achieved healthy
increases in net life business inflows. Sanlam Personal Finance`s net
investment flows, however, decreased by R1,7 billion compared to the first
half of 2009. This is primarily due to lower Namibia collective investment and
Glacier money market net inflows attributable to both lower new business
volumes and increased outflows. Sanlam Employee Benefits reported increased
net outflows due to the higher claims experience. Sanlam Investments net fund
flows were negatively impacted by the lower collective investments new
business volumes. The much improved claims experience at Santam supported a
strong increase in this business` contribution.
Value of new covered business
The value of new covered business written by the Group during the first six
months of 2010 is 16% up on the comparable period in 2009 (before and after
minorities). This growth is in line with the growth in new life business
volumes. Particularly satisfactory is the increase in new business margin from
2,41% in 2009 to 2,50% in 2010.
Value of new covered business for the six months ended 30 June 2010
R million 2010 2009 % change
Value of new covered business 320 276 16%
Sanlam Personal Finance 154 135 14%
Sanlam Developing Markets 146 136 7%
Sanlam UK 9 -
Sanlam Employee Benefits 11 5 120%
Net of minorities 283 243 16%
Present value of new business premiums 12 811 11 469 12%
Sanlam Personal Finance 8 306 7 488 11%
Sanlam Developing Markets 2 847 2 814 1%
Sanlam UK 577 463 25%
Sanlam Employee Benefits 1 081 704 54%
Net of minorities 12 220 10 906 12%
New covered business margin 2,50% 2,41%
Sanlam Personal Finance 1,85% 1,80%
Sanlam Developing Markets 5,13% 4,83%
Sanlam UK 1,56% -
Sanlam Employee Benefits 1,02% 0,71%
Net of minorities 2,32% 2,23%
Solvency
All of the life insurance businesses within the Group were sufficiently
capitalised at the end of June 2010. The total capital of Sanlam Life
Insurance Limited, the holding company of the Group`s major life insurance
subsidiaries, amounted to R35 billion on 30 June 2010. Its admissible
regulatory capital at the end of June 2010 amounted to R23 billion, which
covered its regulatory Capital Adequacy Requirements (CAR) 2,9 times, compared
to 3,1 times on 31 December 2009. No policyholder portfolio held a negative
bonus stabilisation reserve in excess of 7,5% of policyholder liabilities at
the end of June 2010.
Santam`s capital (shareholders` funds including bonds) constituted 44% of net
earned premiums on 30 June 2010, which is at the higher end of the target
range of 35% to 45% set by Santam.
FitchRatings has affirmed the following ratings of the Group in 2010 and
changed the outlook from negative to stable:
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: A+ (zaf)
Santam Limited:
* National Insurer Financial Strength: AA+ (zaf)
* National Long-term: AA (zaf)
* Subordinated debt: A+ (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.
Desmond Smith Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Cape Town
8 September 2010
Sanlam Group interim financial statements for the six months ended 30 June
2010
Accounting policies and basis of presentation
The accounting policies adopted for purposes of the financial statements
comply with International Financial Reporting Standards (IFRS), 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 2009 financial statements, apart from the changes
indicated below. 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 2009, apart from changes in the economic
assumptions and change in accounting policy for Channel Life`s insurance
contracts, as set out below.
The basis of preparation and presentation of the shareholders` information is
also consistent with that applied in the 2009 financial statements, apart from
the following change in segmental reporting:
* The Investment Management and Capital Markets segments were restructured.
Sanlam Private Equity, Sanlam Properties (excluding the property management
operations that were reallocated to the corporate segment) and Sanlam
Structured Solutions were reallocated from Sanlam Investments and combined
with Sanlam Capital Markets to form the new Capital Management segment.
Comparative information has been restated accordingly. The impact on the
applicable segments` results was immaterial.
Application of new and revised IFRSs and interpretations
The following new or revised IFRSs and interpretations are applied in the
Group`s 2010 financial year:
* IAS 27 Amended Consolidated and Separate Financial Statements
* IAS 39 Amended Financial Instruments: Recognition and Measurement - Eligible
Hedged Items
* IFRS 3 Revised Business Combinations
* IFRIC 17 Distribution of Non-cash Assets to Owners
* IFRIC 18 Transfers of Assets from Customers
* April 2009 Improvements to IFRS
* Amendments to IFRS 2: Group Cash-settled Share-based Payment Transactions
* AC 504: IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction in a South African Pension Fund Environment
The application of these standards and interpretations did not have a
significant impact on the Group`s reported results and cash flows for the six
months ended 30 June 2010 and the financial position at 30 June 2010.
The following new or revised IFRSs and interpretations have effective dates
applicable to future financial years and have not been early adopted:
* Amendment to IAS 32 - Classification of Rights Issues (effective 1 February
2010)
* IAS 24 revised - Related Party Disclosures (effective 1 January 2011)
* IFRS 9 Financial Instruments (effective 1 January 2013)
* IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
(effective 1 July 2010)
* Amendments to IFRIC 14 - Prepayments of a Minimum Funding Requirement
(effective 1 January 2011)
* May 2010 Improvements to IFRS (mostly effective 1 January 2011)
The application of these revised standards and interpretations in future
financial reporting periods is not expected to have a significant impact on
the Group`s reported results, financial position and cash flows.
Change in accounting policies
Sanlam Sky Solutions and Channel Life were integrated into a single business
unit after the acquisition of the minority shareholder interest in Channel
Life during 2009. As part of the integration, Channel Life`s accounting
policies for insurance contracts have been aligned with that of the Sanlam
Group by eliminating negative rand reserves held as part of its insurance
contract policy liabilities. The alignment of the accounting policies results
in a more consistent presentation of the Sanlam Group results.
External audit review
The appointed external auditors, Ernst & Young Inc, reviewed the condensed
statement of financial position of the Sanlam Group as at 30 June 2010 and the
related condensed statements of comprehensive income, changes in equity and
cash flows for the six-month period then ended, and other explanatory notes,
from which this information has been extracted. 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 Group Shareholders` Information for the six months ended 30 June 2010,
which comprises the report on group equity value, shareholders` fund at fair
value, shareholders` fund income statement and explanatory notes 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`, from which
this information has been extracted.
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 2010
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 2010
Restated Restated
June June December
Reviewed Reviewed Audited
2010 2009 2009
R million R million R million
Embedded value of covered business 29 311 27 773 28 988
Sanlam Personal Finance 20 120 18 939 19 884
Adjusted net worth 8 078 8 032 8 098
Value of in-force 12 042 10 907 11 786
Sanlam Developing Markets 3 696 3 040 3 479
Adjusted net worth 1 179 1 215 1 363
Value of in-force 2 517 1 825 2 116
Sanlam UK 659 685 665
Adjusted net worth 222 238 217
Value of in-force 437 447 448
Sanlam Employee Benefits 4 836 5 109 4 960
Adjusted net worth 4 571 5 017 4 569
Value of in-force 265 92 391
Other Group operations 16 938 13 637 16 833
Retail cluster 2 944 2 223 2 707
Institutional cluster 6 572 5 778 6 977
Short-term insurance 7 422 5 636 7 149
Capital diversification (700) (1 137) (700)
Other capital and net worth adjustments 1 853 1 432 2 403
47 402 41 705 47 524
Discretionary capital 2 800 2 785 3 500
Group equity value 50 202 44 490 51 024
Group equity value per share (cents) 2 479 2 172 2 473
Shareholders` fund at fair value
at 30 June 2010
Restated Restated
June June December
Reviewed Reviewed Audited
2010 2009 2009
R million R million R million
Property and equipment 237 209 194
Owner-occupied properties 503 613 614
Goodwill 500 497 497
Value of business acquired 737 774 753
Other intangible assets 44 48 45
Deferred acquisition costs 1 503 1 348 1 390
Investments 36 074 32 059 36 489
Sanlam businesses 16 938 13 637 16 833
Sanlam Investments 5 736 4 622 5 993
SIM Wholesale 3 515 2 981 3 696
International 1 787 1 314 1 909
Sanlam Collective Investments 434 327 388
Sanlam Personal Finance 1 680 1 425 1 612
Glacier 758 695 762
Sanlam Personal Loans 194 73 133
Multi-Data 143 172 166
Sanlam Trust 171 149 160
Sanlam Home Loans 115 120 120
Sanlam Healthcare Management 160 93 130
Other 139 123 141
Sanlam UK 901 776 833
Principal 294 253 283
Punter Southall Group 256 236 259
Other 351 287 291
Sanlam Developing Markets other
operations 363 22 262
Coris Administration - 24 -
Capital Management 836 1 132 984
Short-term insurance 7 422 5 636 7 149
Associated companies 874 225 369
Joint ventures - Shriram Life
Insurance 247 247 247
Other investments 18 015 17 950 19 040
Other equities and similar
securities 7 298 8 472 8 051
Public sector stocks and loans 77 550 199
Investment properties 780 491 744
Other interest-bearing and
preference share investments 9 860 8 437 10 046
Net term finance - - -
Term finance (5 272) (4 790) (5 397)
Assets held in respect of term
finance 5 272 4 790 5 397
Net deferred tax 139 279 61
Net working capital (1 385) (1 165) (344)
Minority shareholders` interest (676) (748) (763)
Shareholders` fund at fair value 37 676 33 914 38 936
Fair value per share (cents) 1 860 1 656 1 888
Shareholders` fund income statement
for the six months ended 30 June 2010
Restated Restated
Six months Six months Full year
Reviewed Reviewed Audited
2010 2009 2009
R million R million R million
Result from financial services
before tax 2 334 1 789 4 229
Sanlam Personal Finance 972 892 2 031
Sanlam Developing Markets 222 153 363
Sanlam UK 30 13 35
Sanlam Employee Benefits 91 92 214
Short-term Insurance 688 244 746
Investment Management 325 348 736
Sanlam Capital Management 61 83 270
Corporate and other (55) (36) (166)
Tax on financial services income (591) (395) (1 116)
Minority shareholders` interest (321) (152) (408)
Net result from financial
services 1 422 1 242 2 705
Net investment income 417 555 976
Core earnings 1 839 1 797 3 681
Net project expenses (19) (15) (28)
BEE transaction costs (3) (3) (7)
Net equity-accounted headline
earnings 60 10 41
Net investment surpluses 22 23 1 032
Amortisation of intangibles (40) (37) (84)
Net secondary tax on companies (209) (162) (150)
Normalised headline earnings 1 650 1 613 4 485
Profit on disposal of
operations 326 - 35
Impairments 50 (58) (76)
Normalised attributable earnings 2 026 1 555 4 444
Fund transfers (40) 59 (56)
Attributable profit per Group
statement of comprehensive
income 1 986 1 614 4 388
Notes to the shareholders` fund information
for the six months ended 30 June 2010
2010 2009
Reviewed REVIEWED
R million R MILLION
1. NEW BUSINESS
Analysed per market:
Retail
Life business 6 315 5 696
Sanlam Personal Finance 5 700 5 061
Sanlam Developing Markets 615 635
Non-life business 13 939 13 317
Sanlam Personal Finance 4 989 5 153
Sanlam Private Investments 3 769 3 133
Sanlam Collective Investments 5 181 5 031
South African 20 254 19 013
Non-South African 6 428 6 122
Sanlam Personal Finance 4 265 4 486
Sanlam Developing Markets 664 681
Sanlam UK 1 499 955
Total Retail 26 682 25 135
Institutional
Group life business 985 552
Sanlam Employee Benefits 450 142
Investment Management 535 410
Non-life business 11 461 14 926
Segregated 5 998 7 920
Sanlam Multi-Manager 3 453 1 768
Sanlam Collective Investments 2 010 5 238
South African 12 446 15 478
Investment Management non-SA 1 482 1 908
Institutional 13 928 17 386
White label 2 525 2 785
Sanlam Collective Investments 2 525 2 785
Sanlam Developing Markets - -
Short-term insurance 6 646 6 179
Total new business 49 781 51 485
2. NET FLOW OF FUNDS
Analysed per market:
Retail
Life business 1 450 609
Sanlam Personal Finance 1 115 741
Sanlam Developing Markets 335 (132)
Non-life business 3 743 (557)
Sanlam Personal Finance 541 1 248
Sanlam Private Investments 1 969 (2 571)
Sanlam Collective Investments 1 233 766
South African 5 193 52
Non-South African 1 424 2 053
Sanlam Personal Finance 356 1 422
Sanlam Developing Markets 690 742
Sanlam UK 378 (111)
Total Retail 6 617 2 105
Institutional
Group life business (1 571) (773)
Sanlam Employee Benefits (1 171) (499)
Investment Management (400) (274)
Non-life business 1 945 4 738
Segregated 2 015 3 032
Sanlam Multi-Manager 86 (210)
Sanlam Collective Investments (156) 1 916
South African 374 3 965
Investment Management non-SA (2 887) 411
Total Institutional (2 513) 4 376
White label 230 (480)
Sanlam Collective Investments 230 (480)
Sanlam Developing Markets - -
Short-term insurance 2 315 1 676
Total net flow of funds 6 649 7 677
3. Normalised diluted earnings per share
In terms of IFRS, the policyholders` fund`s investments in Sanlam shares,
Group subsidiaries and associated companies, 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 and associated companies). 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, in management`s view, 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, Group subsidiaries and associated companies held by the
policyholders` fund.
Restated Restated
Six months Six months Full year
Reviewed Reviewed Audited
2010 2009 2009
cents cents cents
Normalised diluted earnings per
share:
Net result from financial services 69,4 60,8 131,8
Core earnings 89,8 87,9 179,3
Headline earnings 80,5 78,9 218,5
Profit attributable to
shareholders` fund 98,9 76,1 216,5
R million R million R million
Analysis of normalised earnings
(refer shareholders` fund
income statement):
Net result from financial services 1 422 1 242 2 705
Core earnings 1 839 1 797 3 681
Headline earnings 1 650 1 613 4 485
Profit attributable to
shareholders` fund 2 026 1 555 4 444
million million million
Adjusted number of shares:
Weighted average number of shares
for diluted earnings
per share (refer below) 2 033,4 2 015,1 2 028,1
Add: Weighted average Sanlam shares
held by policyholders 15,6 29,3 25,0
Adjusted weighted average number
of shares for normalised diluted
earnings per share 2 049,0 2 044,4 2 053,1
Number of ordinary shares in issue
at beginning of period 2 160,0 2 190,1 2 190,1
Shares cancelled (60,0) (30,1) (30,1)
Number of ordinary shares in issue 2 100,0 2 160,0 2 160,0
Shares held by subsidiaries in
shareholders` fund (126,3) (159,8) (151,8)
Outstanding long-term incentive
scheme shares and options 28,3 37,6 37,1
Number of shares under option to be
issued at fair value (2,4) (10,5) (5,4)
Convertible deferred shares held
by Ubuntu-Botho 25,7 20.9 23,2
Adjusted number of shares for
value per share 2 025,3 2 048.2 2 063,1
Embedded value of covered business
at 30 June 2010
June June December
Reviewed Reviewed Audited
2010 2009 2009
Note R million R million R million
Sanlam Personal Finance 20 120 18 939 19 884
Adjusted net worth 8 078 8 032 8 098
Net value of in-force
covered business 12 042 10 907 11 786
Value of in-force covered
business 13 883 12 649 13 645
Cost of capital (1 659) (1 613) (1 694)
Minority shareholders`
interest (182) (129) (165)
Sanlam Developing Markets 3 696 3 040 3 479
Adjusted net worth 1 179 1 215 1 363
Net value of in-force
covered business 2 517 1 825 2 116
Value of in-force
covered business 3 130 2 428 2 786
Cost of capital (261) (273) (307)
Minority shareholders`
interest (352) (330) (363)
Sanlam UK 659 685 665
Adjusted net worth 222 238 217
Net value of in-force
covered business 437 447 448
Value of in-force
covered business 466 479 480
Cost of capital (29) (32) (32)
Minority shareholders`
interest - - -
Sanlam Employee Benefits 4 836 5 109 4 960
Adjusted net worth 4 571 5 017 4 569
Net value of in-force
covered business 265 92 391
Value of in-force
covered business 1 194 1 014 1 300
Cost of capital (929) (922) (909)
Minority shareholders`
interest - - -
Embedded value of covered
business 29 311 27 773 28 988
Adjusted net worth (1) 14 050 14 502 14 247
Net value of in-force covered
business 1 15 261 13 271 14 741
Embedded value of covered
business 29 311 27 773 28 988
(1) EXCLUDES SUBORDINATED DEBT FUNDING OF SANLAM LIFE.
CHANGE IN EMBEDDED VALUE OF COVERED BUSINESS
FOR THE SIX MONTHS ENDED 30 JUNE 2010
DECEM-
JUNE BER
REVIEWED AUDITED
2010 2010 2010 2009 2009
AD-
VALUE JUSTED
OF IN- NET
R MILLION NOTE TOTAL FORCE WORTH TOTAL TOTAL
EMBEDDED VALUE OF
COVERED BUSINESS AT
THE BEGINNING
of the period 28 988 14 741 14247 28 591 28 591
Change in accounting
policy 8 (49) 237 (286) - -
Embedded value of
covered business at
the beginning of the
period - restated 28 939 14 978 13 961 28 591 28 591
Value of new
business 2 283 913 (630) 243 607
Net earnings from
existing covered
business 1 138 (264) 1 402 1 145 2 430
Expected return on
value of in-force
business 1 088 1 088 - 839 1 714
Expected transfer
of
profit to adjusted
net worth - (1 255) 1 255 - -
Operating
experience
variances 3 82 (114) 196 289 636
Operating
assumption
changes 4 (32) 17 (49) 17 80
Expected investment
return on adjusted
net worth 568 - 568 546 1 091
Embedded value
earnings from
operations 1 989 649 1 340 1 934 4 128
Economic assumption
changes 5 88 87 1 (1 020) (1 206)
Investment variances
- value of in-force (436) (433) (3) 176 1 149
Investment variances
- investment return
on adjusted net
worth (441) - (441) (209) 515
Exchange rate
movements (24) (24) - (96) (137)
Net project expenses 6 (18) - (18) (15) (28)
Embedded value
earnings from
covered
business 1 158 279 879 770 4 421
Acquired value of
in-force 6 4 2 228 210
Transfer from other
Group operations - - - - 17
Change in
utilisation
of capital
diversification - - - (292) (729)
Net transfers from
covered business (792) - (792) (1 524) (3 522)
Embedded value of
covered business at
the end of the 29 311 15 261 14 050 27 773 28 988
period
Analysis of earnings
from covered business
Sanlam Personal 928 256 672 446 2 815
nance
Sanlam Developing 237 160 77 86 467
arkets
Sanlam UK 9 (11) 20 4 (14)
Sanlam Employee (16) (126) 110 234 1 153
Benefits
Embedded value
earnings from
covered business 1 158 279 879 770 4 421
VALUE OF NEW BUSINESS
FOR THE SIX MONTHS ENDED 30 JUNE 2010
FULL
SIX MONTHS YEAR
REVIEWED AUDITED
R MILLION NOTE 2010 2009 2009
VALUE OF NEW BUSINESS
(at point of sale):
Gross value of new business 366 321 797
Sanlam Personal Finance 172 154 354
Sanlam Developing Markets 160 156 335
Sanlam UK 11 1 17
Sanlam Employee Benefits 23 10 91
Cost of capital (46) (45) (108)
Sanlam Personal Finance (18) (19) (34)
Sanlam Developing Markets (14) (20) (45)
Sanlam UK (2) (1) (3)
Sanlam Employee Benefits (12) (5) (26)
Value of new business 320 276 689
Sanlam Personal Finance 154 135 320
Sanlam Developing Markets 146 136 290
Sanlam UK 9 - 14
Sanlam Employee Benefits 11 5 65
Value of new business
attributable to:
Shareholders` fund 2 283 243 607
Sanlam Personal Finance 147 133 308
Sanlam Developing Markets 116 105 220
Sanlam UK 9 - 14
Sanlam Employee Benefits 11 5 65
Minority shareholders` interest 37 33 82
Sanlam Personal Finance 7 2 12
Sanlam Developing Markets 30 31 70
Sanlam UK - - -
Sanlam Employee Benefits - - -
Value of new business 320 276 689
Geographical analysis:
South Africa 224 196 484
Africa 84 77 186
Other international 12 3 19
Value of new business 320 276 689
Analysis of new business
profitability:
Before minorities:
Present value of new business
premiums 12 811 11 469 26 365
Sanlam Personal Finance 8 306 7 488 16 573
Sanlam Developing Markets 2 847 2 814 5 711
Sanlam UK 577 463 951
Sanlam Employee Benefits 1 081 704 3 130
New business margin 2,50% 2,41% 2,61%
Sanlam Personal Finance 1,85% 1,80% 1,93%
Sanlam Developing Markets 5,13% 4,83% 5,08%
Sanlam UK 1,56% 0,00% 1,47%
Sanlam Employee Benefits 1,02% 0,71% 2,08%
VALUE OF NEW BUSINESS
FOR THE SIX MONTHS ENDED 30 JUNE 2010 (CONTINUED)
SIX MONTHS DECEMBER
REVIEWED AUDITED
R MILLION NOTE 2010 2009 2009
Analysis of new business
profitability (continued):
After minorities:
Present value of new business 12 220 10 906 25 102
premiums
Sanlam Personal Finance 8 179 7 395 16 269
Sanlam Developing Markets 2 383 2 344 4 752
Sanlam UK 577 463 951
Sanlam Employee Benefits 1 081 704 3 130
New business margin 2,32% 2,23% 2,42%
Sanlam Personal Finance 1,80% 1,80% 1,89%
Sanlam Developing Markets 4,87% 4,48% 4,63%
Sanlam UK 1,56% 0,00% 1,47%
Sanlam Employee Benefits 1,02% 0,71% 2,08%
NOTES TO THE EMBEDDED VALUE OF COVERED BUSINESS
FOR THE SIX MONTHS ENDED 30 JUNE 2010
1. VALUE OF IN-FORCE
SENSITIVITY ANALYSIS
Gross Net value
value of of Change
in-force Cost of in-force from base
business capital business value
R million R million R million %
BASE VALUE 18 084 (2 823) 15 261
* Risk discount rate
increase by 1% 17 101 (3 422) 13 679 (10)
Gross
value of Net value Change
new Cost of of new from base
2. Value of new business business capital business value
SENSITIVITY ANALYSIS R million R million R million %
Base value 325 (42) 283
* Risk discount rate
increase by 1% 271 (49) 222 (22)
Six months Full year
Reviewed Audited
2010 2009 2009
3. OPERATING EXPERIENCE VARIANCES R million R million R million
Risk experience 138 167 363
Investment guarantee reserve - 64 64
Working capital and other (56) 58 209
Total operating experience variances 82 289 636
4. OPERATING ASSUMPTION CHANGES
Mortality and morbidity 7 34 (124)
Persistency (148) (6) (67)
Modelling improvements and other 109 (11) 271
Total operating assumption changes (32) 17 80
5. ECONOMIC ASSUMPTION CHANGES
Investment yields and risk premiums 103 (707) (866)
Long-term asset mix assumptions (15) (313) (340)
Total economic assumption changes 88 (1 020) (1 206)
6. 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.
June December
Reviewed Audited
2010 2009 2009
% % %
7. Economic assumptions
Gross investment return, risk discount
rate and inflation
Sanlam Life:
Point used on the relevant yield curve 9 year 9 year 9 year
Fixed-interest securities 9,2 9,2 9,4
Equities and offshore investments 12,7 12,7 12,9
Hedged equities 9,7 9,7 9,9
Property 10,2 10,2 10,4
Cash 8,2 8,2 8,4
Return on required capital 10,0 10,0 10,3
Inflation rate 6,2 6,2 6,4
Risk discount rate 11,7 11,7 11,9
Merchant Investors:
Point used on the relevant yield curve 15 year 15 year 15 year
Fixed-interest securities 3,9 4,1 4,5
Equities and offshore investments 7,2 7,3 7,7
Hedged equities 7,2 7,3 7,7
Property 7,2 7,3 7,7
Cash 3,9 4,1 4,5
Return on required capital 3,9 4,1 4,5
Inflation rate 3,2 3,3 3,8
Risk discount rate 7,7 7,8 8,2
SDM Limited:
Point used on the relevant yield curve 6 year 6 year 6 year
Fixed-interest securities 8,4 8,7 8,6
Equities and offshore investments 11,9 12,2 12,1
Hedged equities n/a n/a n/a
Property 9,4 9,7 9,6
Cash 7,4 7,7 7,6
Return on required capital 9,7 10,0 9,9
Inflation rate 5,4 5,7 5,6
Risk discount rate 10,9 11,2 11,1
Botswana Life Insurance:
Fixed-interest securities 10,0 10,5 10,0
Equities and offshore investments 13,5 14,0 13,5
Hedged equities n/a n/a n/a
Property 11,0 11,5 11,0
Cash 9,0 9,5 9,0
Return on required capital 10,1 10,6 10,1
Inflation rate 7,0 7,5 7,0
Risk discount rate 13,5 14,0 13,5
Asset mix for assets supporting
the required capital
Sanlam Life:
Equities 34 34 34
Hedged equities 13 13 13
Property 3 3 3
Fixed-interest securities 15 15 15
Cash 35 35 35
100 100 100
Merchant Investors:
Equities - - -
Hedged equities - - -
Property - - -
Fixed-interest securities - - -
Cash 100 100 100
100 100 100
SDM Limited:
Equities 50 50 50
Hedged equities - - -
Property - - -
Fixed-interest securities - - -
Cash 50 50 50
100 100 100
Botswana Life Insurance:
Equities 15 15 15
Hedged equities - - -
Property 10 10 10
Fixed-interest securities 25 25 25
Cash 50 50 50
100 100 100
8. Change in accounting policies
Channel Life`s accounting policies for insurance contracts have been aligned
with the rest of the Sanlam Group. In terms of the amended accounting
policies, no negative rand reserves are recognised on an individual policy
level. Channel Life`s capital and economic bases have also been aligned with
that of SDM Limited. The impact of the aforementioned amendments was to reduce
embedded value by R49 million at 1 January 2010 as follows:
- A R286 million reduction in required capital with a commensurate R36 million
decrease in the cost of capital.
- The gross value of in force business increased by R201 million commensurate
with an increase in future taxable income following the elimination of the
negative rand reserves.
Comparative information has not been restated based on the immaterial impact
of the changes on the embedded value of covered business, embedded value
earnings and value of new business. The full impact is recognised as a change
to the opening embedded value of covered business on 1 January 2010.
Group financial statements
for the six months ended 30 June 2010
Contents
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2010
Restated
June December
2010 2009
Reviewed Audited
R million R million
Assets
Property and equipment 411 375
Owner-occupied properties 652 652
Goodwill 2 817 2 810
Other intangible assets 78 45
Value of business acquired 1 208 1 210
Deferred acquisition costs 2 189 2 140
Long-term reinsurance assets 499 499
Investments 288 732 288 278
Properties 15 137 15 757
Equity-accounted investments 3 250 1 964
Equities and similar securities 134 972 141 570
Public sector stocks and loans 54 787 49 905
Debentures, insurance policies, preference
shares and other loans 31 800 30 075
Cash, deposits and similar securities 48 786 49 007
Deferred tax 631 626
Short-term insurance technical assets 1 780 2 064
Working capital assets 33 706 36 230
Trade and other receivables 23 799 24 250
Cash, deposits and similar securities 9 907 11 980
Total assets 332 703 334 929
Equity and Liabilities
Shareholders` fund 28 590 29 796
Minority shareholders` interest 2 588 2 628
Total equity 31 178 32 424
Long-term policy liabilities 245 693 246 330
Insurance contracts 123 784 124 107
Investment contracts 121 909 122 223
Term finance 6 574 6 916
Margin business 3 538 3 341
Other interest-bearing liabilities 3 036 3 575
External investors in consolidated funds 10 241 10 534
Cell owners` interest 598 535
Deferred tax 683 763
Short-term insurance technical provisions 7 760 8 304
Working capital liabilities 29 976 29 123
Trade and other payables 27 046 25 842
Provisions 1 386 1 396
Taxation 1 544 1 885
Total equity and liabilities 332 703 334 929
Statement of comprehensive income
for the six months ended 30 June 2010
Restated
2010 2009
Reviewed Reviewed
R million R million
Net income 20 709 15 838
Financial services income 16 002 15 018
Reinsurance premiums paid (1 681) (1 765)
Reinsurance commission received 168 147
Investment income 7 679 8 863
Investment surpluses (1 153) (6 519)
Finance cost - margin business (95) (114)
Change in fair value of external investors
liability (211) 208
Net insurance and investment contract
benefits and claims (11 089) (7 513)
Long-term insurance and investment contract
benefits (7 001) (3 219)
Short-term insurance claims (4 719) (5 776)
Reinsurance claims received 631 1 482
Expenses (6 139) (5 356)
Sales remuneration (2 326) (2 100)
Administration costs (3 813) (3 256)
Impairment of investments and goodwill 49 (62)
Amortisation of intangibles (42) (37)
Net operating result 3 488 2 870
Equity-accounted earnings 235 (5)
Finance cost - other (138) (164)
Profit before tax 3 585 2 701
Taxation (1 210) (856)
Shareholders` fund (951) (616)
Policyholders` fund (259) (240)
Profit for the period 2 375 1 845
Other comprehensive income
Movement in foreign currency translation reserve (125) (383)
Comprehensive income for the period 2 250 1 462
Allocation of comprehensive income:
Profit for the period 2 375 1 845
Shareholders` fund 1 986 1 614
Minority shareholders` interest 389 231
Comprehensive income for the period 2 2 250 1 1 462
Shareholders` fund 1 894 1 311
Minority shareholders` interest 356 151
Earnings attributable to shareholders of
the company (cents):
Basic earnings per share 100,2 82,1
Diluted earnings per share 97,7 80,1
Statement of changes in equity
for the six months ended 30 June 2010
Restated
2010 2009
Reviewed Reviewed
R million R million
Shareholders` fund:
Balance at beginning of the period 29 796 27 412
Comprehensive income 1 894 1 311
Profit for the period 1 986 1 614
Other comprehensive income: movement in
foreign currency translation reserve (92) (303)
Net (acquisition)/disposal of treasury shares(1) (1 054) 18
Share-based payments 79 45
Deficit on change in subsidiary
Shareholding (29) -
Dividends paid (2) (2 096) (1 954)
Balance at end of the period 28 590 26 832
Minority shareholders` interest:
Balance at beginning of the period 2 628 2 596
Comprehensive income 356 151
Profit for the period 389 231
Other comprehensive income: movement in
foreign currency translation reserve (33) (80)
Net (acquisition)/disposal of treasury
shares(1) (57) 9
Share-based payments 12 9
Dividends paid (241) (279)
Acquisitions, disposals and other
movements in minority interests (110) (116)
Balance at end of the period 2 588 2 370
Shareholders` fund 29 796 27 412
Minority shareholders` interest 2 628 2 596
Total equity at beginning of the period 32 424 30 008
Shareholders` fund 28 590 26 832
Minority shareholders` interest 2 588 2 370
Total equity at end of the period 31 178 29 202
(1) Comprises movement in cost of shares held by subsidiaries and the share
incentive trust.
(2) Dividend of 104 cents per share paid during 2010 (2009: 98 cents per
share) in respect of the 2009 financial year.
Cash flow statement
for the six months ended 30 June 2010
2010 2009
Reviewed Reviewed
R million R million
Net cash inflow from operating activities 1 386 357
Net cash outflow from investment activities (2 385) (2 411)
Net cash outflow from financing activities (1 308) (147)
Net decrease in cash and cash equivalents (2 307) (2 201)
Cash, deposits and similar securities at
beginning of the period 60 984 55 145
Cash, deposits and similar securities at
end of the period 58 677 52 944
Notes to the financial statements
for the six months ended 30 June 2009
Restated
2010 2009
Reviewed Reviewed
cents cents
1. Earnings per share
Basic earnings per share:
Headline earnings 81,2 85,0
Profit attributable to shareholders` fund 100,2 82,1
Diluted earnings per share:
Headline earnings 79,2 83,0
Profit attributable to shareholders` fund 97,7 80,1
R million R million
Analysis of earnings:
Profit attributable to shareholders 1 986 1 614
Less: Net profit on disposal of operations (326) -
(Less)/plus: Impairment of investments
and goodwill (50) 58
Headline earnings 1 610 1 672
Headline earnings include re-measurements of investment properties,
which are largely attributable to policyholder funds.
million million
Number of shares:
Number of ordinary shares in issue at
beginning of period 2 160,0 2 190,1
Less: Weighted average number of shares
cancelled (40,0) (20,1)
Less: Weighted average Sanlam shares held
by subsidiaries (including policyholders) (137,2) (202,0)
Weighted average number of shares for
basic earnings per share 1 982,8 1 968,0
Add: Weighted conversion of deferred shares 24,7 20,0
Add: Total number of shares and options 28,3 37,6
Less: Number of shares (under option) that
would have been issued at fair value (2,4) (10,5)
Weighted average number of shares for
diluted earnings per share 2 033,4 2 015,1
2. Segmental information
2010 2009
Reviewed Reviewed
R million R million
Segment financial services income (per
shareholders` fund information) 15 214 13 792
Sanlam Personal Finance 3 465 3 184
Sanlam Developing Markets 2 062 1 778
Sanlam UK 182 182
Sanlam Employee Benefits 1 315 1 056
Short-term Insurance 6 871 6 415
Sanlam Investments 1 036 866
Sanlam Capital Management 201 224
Corporate, consolidation and other 82 87
IFRS adjustments 788 1 226
Total financial services income 16 002 15 018
Segment result (per shareholders` fund
information after tax and minorities) 2 026 1 555
Sanlam Personal Finance 996 855
Sanlam Developing Markets 74 54
Sanlam UK 54 (41)
Sanlam Employee Benefits 94 194
Short-term Insurance 302 153
Sanlam Investments 277 246
Sanlam Capital Management 401 75
Corporate, consolidation and other (172) 19
Reverse minority shareholders` interest
included in segment result 389 231
Fund transfers (40) 59
Total profit for the period 2 375 1 845
3. Change in accounting policies and reclassifications
Channel Life`s accounting policies for insurance contracts have been aligned
with that of the Sanlam Group by eliminating negative rand reserves held as
part of its insurance contract policy liabilities.
Comparative information has been restated for the change in accounting
policies and reclassifications due to re-assessment of Investments
classifications, as follows:
Six months ended
R million 30 June 2009 December 2009
Restated Reported Restated Reported
Shareholders fund at the
beginning of the period 27 412 27 651
Shareholders fund at the end
of the period 26 832 27 063 29 796 30 044
Retained earnings at the
beginning of the period 22 219 22 458
Retained earnings at the end
of the year 23 892 24 140
Public sector stocks
and loans 49 905 50 803
Debentures, insurance
policies, preference
shares and other loans 30 075 34 792
Cash, deposits and similar
securities 49 007 43 392
Deferred tax asset 626 515
Trade and other receivables 24 250 24 261
Insurance contract policy
liabilities 124 107 123 774
Taxation payable 1 885 1 870
Comprehensive income for
the period 1 462 1 454
The impact on individual line items in the Statement of Comprehensive
Income, basic earnings per share and diluted earnings per share, is
immaterial
4. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the
2009 annual report. In respect of the pension and retirement fund
investigation referred to in note 34.4 of the report, Sanlam and the curator
of the funds have reached a settlement agreement. Sanlam offered to make a
payment of R175 million to the funds involved. This amount has been paid
from existing provisions. In addition, the Sanlam Capital Markets` R7
billion guarantee was increased to R8,5 billion. The circumstances
surrounding the other contingent liabilities remain materially unchanged.
5. 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 Group at 30 June 2010 as reflected in these financial statements.
GROUP SECRETARY
JOHAN BESTER
REGISTERED OFFICE
2 STRAND ROAD, BELLVILLE 7530, SOUTH AFRICA
tELEPHONE +27 (0)21 947-9111
FAX +27 (0)21 947-3670
POSTAL ADDRESS
PO BOX 1, SANLAMHOF 7532, SOUTH AFRICA
REGISTERED NAME: SANLAM LIMITED
(REGISTRATION NUMBER 1959/001562/06)
JSE SHARE CODE: SLM
NSX SHARE CODE: SLA
ISIN: ZAE000070660
INCORPORATED IN SOUTH AFRICA
TRANSFER SECRETARIES:
COMPUTERSHARE INVESTOR SERVICES (PROPRIETARY) LIMITED
(REGISTRATION NUMBER 2004/003647/07)
70 MARSHALL STREET, JOHANNESBURG 2001,
SOUTH AFRICA
PO BOX 61051, MARSHALLTOWN 2107, SOUTH AFRICA
TEL +27 (0)11 373-0000
FAX +27 (0)11 688-5200
WWW.SANLAM.CO.ZA
Directors: DK Smith (Chairman), PT Motsepe (Deputy Chairman), J van Zyl (1)
(Group Chief Executive), MMM Bakane-Tuoane, AD Botha, AS du Plessis, FA du
Plessis, MV Moosa, JP Moller (1), YG Muthien (1), TI Mvusi (1), SA Nkosi, I
Plenderleith (2), GE Rudman, RV Simelane, ZB Swanepoel, PL Zim
(1) Executive
(2) British
Bellville
9 September 2010
SPONSOR
DEUTSCHE SECURITIES (SA) (PROPRIETARY) LIMITED
Date: 09/09/2010 08:00:01 Supplied by www.sharenet.co.za
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