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Interim Results for the six months ended 30 June 2012
SLM - Sanlam Group - Sanlam Group Interim Results for the six months ended 30 June 2012
SANLAM GROUP
Incorporated in South Africa
(Registration number 1959/001562/06)
"Sanlam" or "the Company"
JSE share code (primary listing): SLMNSX share code: SLA
ISIN: ZAE000070660
Sanlam Group Interim results for the six months ended 30 June 2012
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Interim financial statements
Accounting policies and basis of presentation
Shareholders information
External review report on shareholders information
Group Equity Value
Change in Group Equity Value
Return on Group Equity Value
Shareholders fund at fair value
Shareholders fund income statement
Notes to the shareholders fund information
Embedded value of covered business
Interim condensed consolidated financial statements
External review report on interim condensed consolidated financial statements
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the interim condensed consolidated financial statements
Administration
Sanlam Group Interim Results June 2012
Key features
Earnings
- Net result from financial services per share increased by 14%
- Normalised diluted headline earnings per share up 16%
Business volumes
- New business volumes up 11% to R61 billion
- Net value of new covered business up 38% to R491 million
- Net new covered business margin of 2,86%, up from 2,52%
- Net fund inflows of R10 billion
Group Equity Value
- Group Equity Value per share of R32,93
- Annualised return on Group Equity Value per share of 18,4%
Capital management
- Discretionary capital of R4 billion at 30 June 2012
- Sanlam Life Insurance Limited Capital Adequacy Requirements (CAR) cover of 3,7 times
Salient results for the six months ended 30 June 2012
Sanlam Group 2012 2011 %
EarningsNet result from financial services per share cents 96,2 84,7 14%
Normalised diluted headline earnings per share (1) cents 125,5 108,6 16%
Diluted headline earnings per share cents 120,1 109,6 10%
Net result from financial services R million 1 946 1 716 13%
Normalised headline earnings (1) R million 2 539 2 202 15%
Headline earnings R million 2 408 2 205 9%
Group administration cost ratio (2) % 30,4 29,5
Group operating margin (3) % 19,9 19,8
Business volumes New business volumes R million 60 977 55 062 11%
Net fund inflows R million 10 183 11 418 -11%
Net new covered business Value of new covered business R million 491 356 38%
Covered business PVNBP (4) R million 17 150 14 112 22%
New covered business margin (5) % 2,86 2,52
Group Equity Value
Group Equity Value (7) R million 66 820 63 521 5%
Group Equity Value per share (7) cents 3 293 3 146 5%
Annualised return on Group equity Value per share (6) % 18,4 12,8
Sanlam Life Insurance Limited 2012 2011
Shareholders' fund (7) R million 48 260 45 172
Capital Adequacy Requirements (CAR) (7) R million 7 250 7 350
CAR covered by prudential capital (7) times 3,7 3,7
Notes
(1) Normalised headline earnings = headline earnings, excluding fund transfers.
(2) Administration costs as a percentage of income after sales remuneration.
(3) Result from financial services as a percentage of income after sales remuneration.
(4) PVNBP = present value of new business premiums and is equal to the present value of new recurring premiums
plus single premiums.
(5) New covered business margin = value of new covered business as a percentage of PVNBP.
(6) 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 year.
(7) Comparative figures are as at 31 December 2011.
Executive review
Sustainable delivery has been a key theme of Sanlam's performance over a number
of years. We continued on this track record for the six months to 30 June 2012,
delivering another set of solid results.
As anticipated in our 2011 annual report global economic conditions remained weak
during the first half of 2012. A lasting resolution to the Eurozone debt crisis still
eludes political leaders, with austerity measures throughout the region adding to
lower consumer demand and economic contraction in a number of territories. The
US economy also continues to be weak with key indicators reflecting only marginal
growth. These conditions impact negatively on developed market demand for
resources and manufactured goods from emerging markets, slowing down economic expansion in
most of the emerging markets where the Group operates. Notwithstanding this, economic growth remained
positive in most of these territories, including that of South Africa, to which Sanlam has the largest
exposure. Of the larger African regions, the economy of Botswana has been hardest hit given its
reliance on diamond exports.
Global market volatility continued into 2012. The South African equity market closely
followed international events, reflecting similar levels of volatility, but ending the six
months on a positive note.
We remained focussed on executing on the five pillars of the Group's strategy,
namely optimal capital utilisation, earnings growth, costs and efficiencies,
diversification and transformation. This enabled us to achieve overall strong
operational results despite the challenging environment.
Some of our salient results:
- Net result from financial services per share up 14%
- New business volumes increased by 11% to R61 billion
- Net value of new covered business up 38%
Our primary performance target is to optimise shareholder value through maximising
the return on Group Equity Value (RoGEV) per share. This measure of performance
is regarded as the most appropriate given the nature of the Group's diversified
business and incorporates the result of all the major value drivers in the business.
The RoGEV target for 2012 is 12,2%, based on the objective to outperform the
Group's cost of capital by 100 basis points. Cost of capital is set at 300 basis points
above the 9-year RSA government bond yield at the start of each financial year. The
annualised RoGEV per share for the first six months of 2012 of 18,4% exceeded the
target by a comfortable margin. The annualised adjusted RoGEV per share, which
excludes the impact of investment markets and tax changes during the period,
amounted to 17,1%, also well in excess of the target.
The Group achieved a very pleasing 13% growth (14% on a per share basis) in its
net result from financial services (net operational result). Sanlam Emerging Markets
(SEM) and Sanlam Personal Finance (SPF) delivered strong growth of 56% and
19% respectively. Santam and Sanlam Investments' Capital Management business
reported lower operational earnings against a high base in 2011, which is in line with
expectations.
Sanlam remains well capitalised with identified discretionary capital of R4 billion at
30 June 2012.
Delivering on strategy
Specific priorities are set for each financial year as an integral part of executing on
the Group's five-pillar strategy. Good progress was made in achieving the priorities
for 2012, with some of the major initiatives listed below:
- Grow earnings by attracting new clients in new markets and by cross selling to
existing clients
Expanding our presence in emerging markets in Africa and Asia is a key focus
area for future growth. SEM was established during the second half of 2011 as a
separate cluster to focus exclusively on these markets. As part of the
restructuring, operations formerly managed within SPF, Sanlam Developing
Markets, Santam and Sanlam Investments were transferred to SEM. The
integration of these businesses within SEM was successfully completed during
the first half of 2012, without losing operational focus. SEM achieved exemplary
growth in the first half of 2012, increasing new business volumes by 40% and
net result from financial services by 56%, despite challenging economic
conditions.
The integration of all segments of the South African retail market within SPF was
also finalised during the first six months of 2012. The combined business is
making good progress in establishing the platforms required to seamlessly meet
changing client needs and expectations. Cross selling initiatives focussed on
providing clients with a full set of appropriate solutions, product innovation and
expanding the Sanlam Personal Loans (SPL) model into the lower end of the
market, contributing to strong growth in SPF's new business volumes and in
SPL's profitability.
Sanlam Investments acquired the 50% interest in Satrix Managers that it did not
own. The index tracking market is growing rapidly in South Africa and also
globally. Satrix is the leading manager of listed index tracking instruments in
South Africa and through this transaction Sanlam will have a larger stake in the
future growth of this market. Sanlam Investments also acquired a 50% interest
in JP Morgan's South African investment administration operations upon its exit
from this market segment.
- Strengthen distribution channels in South Africa
SPF successfully expanded its distribution reach. Advisers in the entry-level
market received specific attention and grew by 12% to 2 357 from the end of
December 2011 (up 20% since June 2011), while at the same time not losing
strategic focus on the quality of new business.
- Closing and bedding down the Shriram transaction
The transaction is in the final phases of regulatory approval. We are confident
that the final conclusion of the transaction is imminent. We look forward to
working with Shriram Capital's management in our expanded relationship to
jointly realise the synergies and growth prospects anticipated in the transaction.
- Explore further opportunities in Africa and South East Asia
Our immediate focus in Africa is strenghtening the Group's existing business
relationships rather than expanding into new countries. We are actively working
with our partners in these ventures to identify appropriate opportunities. In a
recent transaction SEM reached agreement to acquire a 10% interest in
Enterprise Group Limited, the 51% shareholder of Enterprise Life Assurance in
Ghana, in which SEM holds the remaining 49%. A sizable portion of the
discretionary capital is earmarked for similar investments in Africa. Attractive
opportunities to expand into other African countries will still be considered, when
available.
As indicated before, South East Asia has been identified as a potential growth
market for the Group. Any acquisition in this market is subject to finding a
suitable business partner and meeting the Group's hurdle rate for capital
investments. We are currently investigating a number of opportunities.
Looking ahead
The operating environment in the second half of the year is expected to remain
challenging with weak global economic growth and volatility in investment markets
also likely to continue. In addition, positive one-off items in this reporting period as
well as in the second half of 2011 are likely to impact on our ability to sustain the
current level of growth in operating profit for the full year. The financial services
industry across the globe is facing a fast changing regulatory landscape. South
Africa is no exception with many international developments finding their way into
local legislation. Although we are supportive of the objectives of the new regulations,
the fast pace and simultaneous implementation of the changes place severe
pressure on senior resources within the industry and the Sanlam Group. However,
we remain confident that we have the depth of skills and experience to meet these
challenges and to continue relentlessly in the execution of the Group's strategy in
pursuit of sustainable delivery.
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
statements may also relate to our future prospects, developments and business
strategies. 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 2012 are presented
based on and in compliance with International Financial Reporting Standards
(IFRS), specifically IAS 34 on Interim Financial Reporting. The accounting policies
and basis of preparation are consistent with those applied in the 2011 annual report,
apart from the following:
- Comparative segmental and shareholders' information for the six months ended
30 June 2011 has been restated in line with the revised Group management
structure, implemented in the second half of the 2011 financial year. This is
consistent with the 31 December 2011 reporting structure.
- Corporate expenses relating to the SEM cluster that was included in the overall
Group adjustment for holding company expenses is now allocated to the SEM
cluster. Comparative information for June 2011 and December 2011 has been
restated accordingly.
- The Sanlam Investments cluster has been restructured, which affects the
presentation of Group Equity Value and the Shareholders' fund at fair value.
Comparative information for June 2011 and December 2011 has been restated
accordingly.
Business environment
Economic conditions
General economic conditions remained challenging during the first half of 2012, as
highlighted above. The Group's largest exposure is to the economies of South
Africa, Namibia and Botswana. The South African and Namibian economies are
withstanding the global economic headwinds reasonably well and still reflect positive
growth. The Botswana economy has in contrast been hard hit by the low developed
market demand for resources, in particular diamonds that form the core of the
Botswana economy. The Botswana government in response announced another
year of no general salary increases in the public sector, placing further pressure on
consumer spending.
In South Africa, historic low interest rates and some growth in employment
supported real growth in disposable income. Consumer debt levels remain high,
with lending to the entry-level market segment growing at a particularly fast rate.
Credit providers are through increased lending competing for a larger share of the
increasing disposable income. Under these conditions we continued to focus on the
quality of new business to limit the risk of a disproportionate deterioration in future
persistency when interest rates start rising again.
Equity markets
The South African equity market reflected similar levels of volatility to global
investment markets, but ended the six months in positive territory, with the
FTSE/JSE All Share Index closing 5,4% up on its 31 December 2011 level,
compared to a decline of 0,8% in the comparable six months of 2011. Average
market levels were 4% higher in the first half of 2012 compared to the same period
in 2011, providing some support to fund-based fee income. The MSCI World index
delivered marginally lower returns in rand on a relative basis. The Group's overall
exposure to international equity markets remains relatively low.
Interest rates
Long-term interest rates decreased since 31 December 2011 and had a positive
impact on the valuation of new life business for the six months and the in-force life
book as at the end of June 2012. The South African All Bond Index provided a
return of 7,7% during 2012 (2,2% in the comparable period in 2011), while short-
term interest rates remained low. Lower short-term interest rates have a negative
impact on interest earned by companies in the Group on working capital as well as
the demand for traditional guaranteed and money market solutions offered by the
Group.
Foreign currency exchange rates
The rand exchange rate at 30 June 2012 closed at broadly similar levels than at the
end of 2011 for all major currencies to which the Group has exposure, apart from
Malawi where its central bank devalued their currency. This resulted in a 12%
strengthening of the rand against the Rest of Africa basket of currencies. The
weakening of the rand against developed market currencies during 2011 resulted in
a much weaker average exchange rate for the first half of 2012 compared to the
same period in 2011. A 12,3% strengthening in the GBP supported earnings
reported from operations in the United Kingdom (UK).
United Rest of
Foreign Europe Kingdom USA Botswana India Africa
currency/ZAR EUR GBP US$ BWP INR (weighted)
31/12/2011 10,48 12,55 8,07 1,11 0,15
30/06/2012 10,37 12,82 8,18 1,10 0,15
-1,0% 2,2% 1,4% -1,0% -1,4% -12,2%
Average first
half 2011 9,67 11,14 6,89 1,07 0,15
Average first
half 2012 10,29 12,51 7,93 1,09 0,15
6,4% 12,3% 15,1% 1,6% 1,1% 1,9%
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 2012
June 2012
Fair
value Value of
R million Total of assets in-force
Covered business 36 073 14 552 21 521
Sanlam Personal Finance 27 819 8 555 19 264
Sanlam Emerging Markets 2 345 1 020 1 325
Sanlam Investments 5 909 4 977 932
Other group operations 23 621 23 621
Sanlam Personal Finance 2 234 2 234
Sanlam Emerging Markets 1 098 1 098
Sanlam Investments 9 155 9 155
Santam 11 134 11 134
Other capital and net worth adjustments 3 126 3 126
62 820 41 299 21 521
Discretionary capital 4 000 4 000
Group Equity Value 66 820 45 299 21 521
Issued shares for value per share (million) 2 029,1
Group Equity Value per share (cents) 3 293
Share price (cents) 3 575
Premium 9%
December 2011 (restated)
Fair
value Value of
R million Total of assets in-force
Covered business 34 875 14 553 20 322
Sanlam Personal Finance 26 687 8 622 18 065
Sanlam Emerging Markets 2 320 1 012 1 308
Sanlam Investments 5 868 4 919 949
Other group operations 21 934 21 934
Sanlam Personal Finance 2 189 2 189
Sanlam Emerging Markets 1 089 1 089
Sanlam Investments 9 041 9 041
Santam 9 615 9 615
Other capital and net worth adjustments 2 812 2 812
59 621 39 299 20 322
Discretionary capital 3 900 3 900
Group Equity Value 63 521 43 199 20 322
Issued shares for value per share (million) 2 018,9
Group Equity Value per share (cents) 3 146
Share price (cents) 2 885
Discount 8%
The GEV per share increased by 4,7% from 3 146 cents at 31 December 2011 to 3 293 cents at
30 June 2012, after payment of a 130 cents per share dividend in May 2012. The Sanlam share
price traded at a 9% premium to GEV by close of trading on 30 June 2012.
After achieving a RoGEV per share of 6,2% in 2011, the per share return of 8,8% in
2012 is an overall satisfactory performance. This was supported by a very strong
performance of the Santam share price in the first half of 2012 and lower long term
interest rates (that impacted positively on the valuation of the in-force life business),
partly offset by negative tax changes and operating assumption changes in the
Sanlam UK operations. The adjusted RoGEV per share for the first half of 2012,
which excludes the tax changes and assumes long-term investment return
assumptions, was 8,2%, well in excess of the return target of 5,9% (the half year
equivalent of the 12,2% full year target).
The lower RoGEV on a per share basis is the result of the further vesting of the
conversion right in respect of 8,9 million 'A' Deferred shares in terms of the value
add arrangement with our BBBEE partner Ubuntu-Botho. In aggregate, the conversion right in
respect of 50,4 million of the issued 56,5 million 'A' Deferred shares have vested to date.
Return on Group Equity Value
for the six months ended 30 June 2012
June 2012 June 2011 (restated)
Earnings Return Earnings Return
R million % R million %
Covered business 2 941 8,4 3 158 10,2
Sanlam Personal Finance 2 430 9,1 2 650 11,2
Sanlam Emerging Markets 182 7,8 152 8,6
Sanlam Investments 329 5,6 356 6,4
Other operations 3 133 14,3 852 4,4
Sanlam Personal Finance 153 7,0 182 9,3
Sanlam Emerging Markets 33 3,0 70 7,9
Sanlam Investments 611 6,8 357 4,4
Santam 2 336 24,3 243 2,9
Discretionary and other capital (207) (259)
Portfolio investments and other 65 175
Net corporate expenses (59) (52)
Share based payment transactions (97) (142)
Change in net worth adjustments (116) (240)
Return on Group Equity Value 5 867 9,2 3 751 6,5
Return on Group Equity Value
per share 8,8 6,2
Annualised return on Group
Equity Value per share 18,4 12,8
Covered business yielded a return of 8,4% compared to 10,2% in the first half of
2011. The 2011 results were positively impacted by the reversal of secondary tax on
companies (STC) of R1,2 billion, compared to negative tax changes of R234 million
in 2012 following the announcement of a higher effective capital gains tax rate in
South Africa. The relatively stronger investment market performance in the first half
of 2012, combined with lower long term interest rates contributed R599 million of
positive investment variances and economic assumption changes in 2012. This
compares to negative investment variances and economic assumption changes of
R410 million in the first six months of 2011. Excluding tax changes, investment
variances and economic assumption changes, the adjusted RoGEV of covered
business amounted to 7,4% (7,5% in 2011), a solid performance on a comparable
basis. Strong VNB growth and continued positive operating experience variances
supported the results.
The valuations of the other Group operations were in general positively impacted by
a higher average level of assets under management and a lower discount rate,
offset by a higher allowance for cluster level corporate expenses in SEM and
Sanlam UK. Santam is valued at its listed share price. The Santam share price
substantially outperformed general equity markets in South Africa, which supported
the 24,3% return earned on this investment.
Earnings
Summarised shareholders' fund income statement
for the six months ended 30 June 2012
R million 2012 2011 %
Net result from financial services 1 946 1 716 13%
Net investment return 891 766 16%
Net investment income 555 413 34%
Net investment surpluses 312 299 4%
Net equity-accounted earnings 24 54 -56%
Project expenses (8) (21) 62%
BEE transaction costs (1) (2) 50%
Secondary tax on companies (229) (192) -19%
Amortisation of intangible assets (60) (65) 8%
Normalised headline earnings 2 539 2 202 15%
Other non-headline earnings and impairments (6) 69
Normalised attributable earnings 2 533 2 271 12%
Net result from financial services
The net result from financial services or net operating profit increased by 13%, a
particularly strong performance. All businesses contributed to the growth in net
result from financial services, apart from Santam and Sanlam Investments' Capital
Management operations, which as anticipated, declined from a high base in 2011.
The strong growth reported in interim operating earnings was in part enhanced by
once-off items in both the current and the comparative period in 2011. As a result,
the percentage growth achieved for the first six months is therefore not likely to be
sustained for the full financial year.
Net result from financial services
for the six months ended 30 June 2012
R million 2012 2011 %
Sanlam Personal Finance 1 077 904 19%
Sanlam Emerging Markets 183 117 56%
Sanlam Investments 471 430 10%
Investment Management 276 236 17%
Employee Benefits 136 93 46%
Capital Management 59 101 -42%
Santam 274 317 -14%
Corporate and other (59) (52) -13%
Net result from financial services 1 946 1 716 13%
The performance of the individual clusters is discussed in further detail below.
Normalised headline earnings
Normalised headline earnings of R2,5 billion are 15% higher than in 2011, largely
attributable to the following:
- The 13% increase in net result from financial services.
- A 16% increase in net investment return. Net investment income increased by
34% on 2011 due to higher dividend income received on the capital allocated to
the life operations as well as a higher average level of discretionary capital in the
first half of 2012 compared to the same period in 2011. Net investment
surpluses increased by 4%, supported by the relatively stronger South African
equity market performance in 2012, which was offset by a once-off capital gains
tax charge of some R100 million emanating from the increase in the effective
capital gains tax rate in South Africa with effect from 2013. The change in
effective tax rate required a rebasing of the deferred tax liability recognised in
terms of IFRS for unrealised mark-to-market differences on the investments held
by the Group.
- A 19% increase in secondary tax on companies (STC). STC was replaced with a
dividend withholding tax in South Africa during the first half of 2012. The
dividend paid by Sanlam in May 2012 was still subject to STC, with the higher
dividend commensurately contributing to an increase in the STC charge. In
addition, the deferred tax asset recognised in terms of IFRS for unused STC
credits also had to be written off with the change in tax legislation. This resulted
in an additional once-off STC charge during 2012. The Group will not incur STC
in respect of future dividend payments while limited STC credits will be available
to offset some of the first year's dividend withholding tax.
Business volumes
New business flows
The Group achieved satisfactory growth of 11% in new business volumes. New life
business recorded exceptional growth of 26%, with investment and short-term
insurance business increasing by 5% and 10% respectively. Retail business
delivered strong growth, somewhat offset by low growth in institutional investment
business in a very competitive environment. Net fund flows were impacted by a
R2,3 billion outflow of low margin business from a single client at Sanlam Private
Investments. Excluding this once-off outflow, net fund flows increased by 9%.
Business volumes
for the six months ended 30 June 2012
New business
R million 2012 2011 %
Sanlam Personal Finance 15 192 13 365 14%
Sanlam Emerging Markets 6 483 4 616 40%
Sanlam Investments 27 396 26 842 2%
Santam 7 703 7 028 10%
56 774 51 851 9%
White label 4 203 3 211 31%
Total 60 977 55 062 11%
Net flows
R million 2012 2011 %
Sanlam Personal Finance 3 615 2 859 26%
Sanlam Emerging Markets 2 296 1 237 86%
Sanlam Investments 1 027 4 405 -77%
Santam 2 614 2 541 3%
9 552 11 042 -13%
White label 631 376 68%
Total 10 183 11 418 -11%
Value of new covered business
The value of new life business (VNB) written during the first half of 2012 increased
by 33% on the comparable period in 2011 to R533 million, supported by the growth
in new life business as well as the decline in long term interest rates during the
period. Net of minorities, VNB increased by 38% to R491 million.
Value of new covered business
for the six months ended 30 June 2012
R million 2012 2011 %
Actual
Value of new covered business 533 401 33%
Sanlam Personal Finance 390 287 36%
Sanlam Emerging Markets 108 89 21%
Sanlam Investments 35 25 40%
Net of minorities 491 356 38%
Present value of new business premiums 17 930 14 785 21%
Sanlam Personal Finance 12 680 10 856 17%
Sanlam Emerging Markets 2 199 1 732 27%
Sanlam Investments 3 051 2 197 39%
Net of minorities 17 150 14 112 22%
New covered business margin 2,97% 2,71%
Sanlam Personal Finance 3,08% 2,64%
Sanlam Emerging Markets 4,91% 5,14%
Sanlam Investments 1,15% 1,14%
Net of minorities 2,86% 2,52%
Value of new covered business
for the six months ended 30 June 2012
R million 2012 2011 %
Before economic basis change *
Value of new covered business 509 401 27%
Sanlam Personal Finance 370 287 29%
Sanlam Emerging Markets 105 89 18%
Sanlam Investments 34 25 36%
Net of minorities 468 356 31%
Present value of new business premiums 17 691 14 785 20%
Sanlam Personal Finance 12 535 10 856 15%
Sanlam Emerging Markets 2 185 1 732 26%
Sanlam Investments 2 971 2 197 35%
Net of minorities 16 916 14 112 20%
New covered business margin 2,88% 2,71%
Sanlam Personal Finance 2,95% 2,64%
Sanlam Emerging Markets 4,81% 5,14%
Sanlam Investments 1,14% 1,14%
Net of minorities 2,77% 2,52%
* 2012 based on 31/12/2011 economic basis
The performance of the individual clusters is discussed in further detail below.
Cluster performance
Sanlam Personal Finance
Key performance indicators
for the six months ended 30 June 2012
R million 2012 2011 %
Group Equity Value
Group Equity Value * 30 053 28 876 4%
Covered business 27 819 26 687 4%
Other operations 2 234 2 189 2%
Return on Group Equity Value 8,9% 11,1%
Covered business 9,1% 11,2%
Other operations 7,0% 9,3%
Business volumes
New business volumes 15 192 13 365 14%
Life business 8 733 7 210 21%
Entry-level market 607 637 -5%
Recurring premiums 430 451 -5%
Single premiums 177 186 -5%
Middle-income market 4 287 3 442 25%
Recurring premiums 594 564 5%
Single premiums 3 693 2 878 28%
Affluent market 3 839 3 131 23%
Investment business 6 459 6 155 5%
Middle-income market 136 151 -10%
Affluent market 6 323 6 004 5%
Net fund flows 3 615 2 859 26%
Life business 2 913 1 926 51%
Entry-level market 886 844 5%
Middle-income market (144) (839) 83%
Affluent market 2 171 1 921 13%
Investment business 702 933 -25%
Value of new covered business
Value of new business 390 287 36%
Entry-level market 150 102 47%
Middle-income market 186 145 28%
Affluent market 54 40 35%
Present value of new business premiums 12 680 10 856 17%
Entry-level market 1 839 1 910 -4%
Middle-income market 7 002 5 815 20%
Affluent market 3 839 3 131 23%
New business margin 3,08% 2,64%
Entry-level market 8,16% 5,34%
Middle-income market 2,66% 2,49%
Affluent market 1,41% 1,28%
Earnings
Gross result from financial services 1 499 1 256 19%
Entry-level market 199 204 -2%
Middle-income market 1 209 968 25%
Affluent market 91 84 8%
Net result from financial services 1 077 904 19%
Administration cost ratio 35,5% 35,5%
Operating margin 33,0% 29,8%
* Comparative information as at 31 December 2011
SPF reported a very strong set of results for the first half of 2012, with lower Group
recurring premium new business in the entry-level market and marginal growth in
middle-income market new risk business the only areas performing below expectations.
SPF achieved a RoGEV of 8,9% for the first half of 2012, compared to 11,1% for the
comparable period in 2011. The covered business results were supported in 2011
by the reversal of STC from the VIF, with this once-off adjustment resulting in a high
comparative base in 2011. Strong growth in the value of new life business and
continued positive experience variances supported the 2012 results. The return on
other operations were positively impacted by an increase in the valuation of Sanlam
Glacier and Sanlam Personal Loans, attributable to an increase in the level of
assets under management and the size of the loan book respectively. This was
offset by a lower valuation of Sanlam Healthcare Management following the
termination of the Bestmed administration agreement.
New business sales increased by 14% on the first half of 2011, with single premium
business the main contributor to the growth.
New business volumes in the South African entry-level market decreased by 5%.
Single premiums continued to decline as roll-overs of the discontinued single
premium business in Sanlam Sky reduce over time while the book runs off. This
trend was in line with expectations. New individual life recurring premiums increased
by 22%, offset by a 47% decline in new group life recurring premium sales.
Individual life sales reflect the increase in the sales force as well as the improved
quality of business written (lower not taken up policies). All group life distribution
channels achieved lower new business sales in 2012, further impacted by the ZCC
bi-annual premium adjustment that occurred in 2011 and thus increasing the
comparative base. VNB benefited from the change in sales mix to the more
profitable individual life business, increasing by 47% with average VNB margins also
increasing from 5,34% in the first half of 2011 to 8,16% in 2012.
The middle-income market segment recorded growth of 25% in new life business,
driven by exemplary growth in new single premium sales. Demand for traditional
guaranteed solutions remains low in the current low interest rate environment. This
was compensated for by continued strong growth in single premium sales of new
solutions launched over the last two years. Recurring premium life business sales
were impacted by a continuance of competitive risk underwriting rates. VNB
increased by 28% on 2011, broadly in line with the growth in new business volumes.
VNB margins before economic basis changes were maintained at similar levels than
in 2011. Net fund outflows improved significantly on the back of the strong single
premium sales.
Sanlam Glacier continued to perform well in the affluent market with growth of 23%
in life business sales, with a similar increase in VNB. Demand for Sanlam Glacier's
new international offering and linked annuities remained strong.
Gross result from financial services increased by 19%. The entry-level market
recorded gross operating earnings of R199 million, 2% down on 2011 after once-off
costs associated with closing the Channel4Life distribution channel, as well as
increased new business strain from the strong growth in new individual life recurring
business. Excluding the Channel4Life closure costs, entry-level market operating
earnings increased by 9%. Middle-income market profit increased by 25%, mainly
attributable to an increase in administration profit following higher average assets
under management, 27% growth in Sanlam Personal Loans' contribution and a
lower impact from actuarial basis changes. The mortality basis was strengthened in
the first half of 2011, which did not recur in 2012. Sanlam Glacier also reported
satisfactory profit growth of 8%. Given the high base set in the second half of 2011
the overall percentage earnings growth achieved by SPF in the first half of 2012 is
not expected to be maintained for the full 2012 financial year.
Sanlam Emerging Markets
Key performance indicators
for the six months ended 30 June 2012
R million 2012 2011 %
Group Equity Value
Group Equity Value * 3 443 3 409 1%
Covered business 2 345 2 320 1%
Other operations 1 098 1 089 1%
Return on Group Equity Value 6,3% 8,3%
Covered business 7,8% 8,6%
Other operations 3,0% 7,9%
Business volumes
New business volumes 6 483 4 616 40%
Namibia 4 599 3 232 42%
Botswana 837 925 -10%
Rest of Africa+ 828 253 227%
India 219 206 6%
Net fund flows 2 296 1 237 86%
Namibia 648 222 192%
Botswana 649 595 9%
Rest of Africa 917 282 225%
India 82 138 -41%
Value of new covered business
Value of new business 108 89 21%
Namibia 24 16 50%
Botswana 39 58 -33%
Rest of Africa 46 12 283%
India (1) 3 -133%
Present value of new business premiums 2 199 1 732 27%
Namibia 502 319 57%
Botswana 832 858 -3%
Rest of Africa 739 398 86%
India 126 157 -20%
New business margin 4,91% 5,14%
Namibia 4,78% 5,02%
Botswana 4,69% 6,76%
Rest of Africa 6,22% 3,02%
India -0,79% 1,91%
Earnings
Gross result from financial services 381 272 40%
Namibia 97 92 5%
Botswana 247 217 14%
Rest of Africa 38 (29) 231%
India 7 8 -13%
Corporate (8) (16) 50%
Net result from financial services 183 117 56%
Administration cost ratio 34,6% 37,3%
Operating margin 37,2% 32,7%
* Comparative information as at 31 December 2011
+ Rest of Africa includes Malawi, Kenya, Tanzania, Zambia, Ghana, Uganda and Nigeria.
SEM reported solid overall results, despite a difficult operating environment in
especially Botswana. Due to the continued economic downturn in Botswana,
government has indicated in the 2012 budget speech that there will again not be
general salary increases in the public sector. This is putting consumer spending and
individual life savings under severe pressure in one of SEM's largest markets. Rest
of Africa is, however, performing strongly, reinforcing the value of the Group's
diversification strategy.
SEM's RoGEV for the period was negatively impacted by a low return on its
investment management operations in Botswana, where prudent valuation
assumptions were used following continued fee and cost pressures in a competitive
and challenging environment. In addition, the return of both covered and non-
covered business was reduced by an increased allowance for cluster level corporate
expenses. The anticipated growth in the SEM cluster required additional
investments in capacity on a cluster level.
New business volumes increased by a healthy 40% on the first half of 2011, with
exceptional growth in Namibia and Rest of Africa.
Namibia had a good start to the year, with both life and non-life business sales
increasing substantially. The growth is mostly attributable to strong single premium
inflows, which are more volatile in nature. The positive sales trend in the entry-level
segment in Namibia is continuing, with recent product launches in the middle-
income and affluent segments also performing well, albeit lower margin business.
VNB and net fund flows benefited from the good sales volumes and increased by
50% and 192% respectively.
Individual life sales in Botswana is struggling in the challenging operating
environment, with recurring premium life sales decreasing by 32% and new
investment business by 43%. Single premium life business weathered the
conditions surprisingly well and increased by 16%. VNB and VNB margins declined
as a result of the lower individual life sales. The business is placing particular focus
on cost control in the current environment, which limited the decline in VNB margins.
The Rest of Africa operations recorded new business volumes of R828 million, up
227% on the same period in 2011. All countries contributed to the growth, resulting
in very strong growth in VNB and a substantial expansion in VNB margins. Single
premium sales did particularly well, which are similar to Namibia more volatile in
nature.
Despite adapting well to the new regulatory environment, our Indian life business is
still struggling with overall new business volumes down 29% on 2011. This is
attributable to much lower single premium volumes, somewhat compensated for by
an encouraging doubling in recurring premium sales. Single premium sales were
negatively impacted by the attractive returns that are currently available on banking
products in India. Under these conditions we are taking proactive steps to address
the cost base in Shriram Life Insurance to improve VNB. Shriram General Insurance
is, however, doing very well and increased its net earned premiums by 57%.
SEM achieved a 40% increase in its gross result from financial services. The
Namibian operations' contribution increased by 5%, impacted by once-off expenses
incurred in the first half of 2012. The Botswana operations' operating earnings
increased by 14%, supported by the increased holding in Letshego from the second
half of 2011. The good growth in Rest of Africa over the last two years is also
reflecting in the region's operating earnings, which increased by R67 million
compared to the first half of 2011.
Sanlam Investments
Key performance indicators
for the six months ended 30 June 2012
R million 2012 2011 %
Group Equity Value
Group Equity Value * 15 064 14 909 1%
Covered business 5 909 5 868 1%
Other operations 9 155 9 041 1%
Return on Group Equity Value 6,3% 5,2%
Covered business 5,6% 6,4%
Other operations 6,8% 4,4%
Business volumes
Net fund flows 1 027 4 405 -77%
Investments 683 4 750 -86%
South Africa segregated (844) (1 337) 37%
South Africa collective investments 1 851 3 422 -46%
South Africa private investments (886) 1 526 -158%
Non-South Africa 562 1 139 -51%
Life business 344 (345) 200%
New life business volumes 1 933 1 292 50%
Recurring premiums 194 145 34%
Single premiums 1 739 1 147 52%
Value of new covered business
Value of new business 35 25 40%
Present value of new business premiums 3 051 2 197 39%
New business margin 1,15% 1,14%
Earnings
Gross result from financial services 631 560 13%
Investment management 369 307 20%
Employee Benefits 189 129 47%
Capital Management 73 124 -41%
Net result from financial services 471 430 10%
Administration cost ratio 48,4% 46,1%
Operating margin 20,4% 19,9%
* Comparative information as at 31 December 2011
Sanlam Investments achieved a RoGEV of 6,3%, the combined effect of a 5,6%
return on covered business and a 6,8% return on other operations. Low interest
rates in the UK depressed the investment return earned on the capital allocated to
the UK life operations. This contributed to a return on covered business of
marginally below the Group's hurdle rate. The Sanlam UK operations invested in
capacity at a cluster level to support the growth in the cluster as well as increased
regulatory requirements. This is reflected in a negative allowance of some R90
million for cluster level corporate expenses as part of the overall valuation of the UK
operations. This had a negative once-off impact on Sanlam Investment cluster's
RoGEV for the first six months of 2012.
The cluster achieved overall satisfactory operational results, impacted by some
large once-off items in both net fund flows and operating earnings.
New business volumes for the cluster were up 2% on 2011. South African new
investment business grew by 2%, with growth of 11% and 8% in private investments
and segregated mandates being offset by marginally lower collective investments
inflows from a high base in 2011. Non-South African investment business sales
declined by 18% in a very challenging global investment market, with investor risk
aversion exasperated by the market volatility. New life business volumes increased
by 50%, with both Sanlam Employee Benefits (SEB) and Sanlam UK contributing to
the growth. This supported a 40% increase in VNB at similar margins than in the
first half of 2011. Net fund flows decreased from R4,4 billion in the first half of 2011
to R1 billion in 2012. Sanlam Private Investments (SPI) experienced a R2,3 billion
once-off outflow of low margin business from a single client, which impacted
negatively on SPI and the cluster's net fund flows. Collective investments net inflows
remained strong, albeit lower than in 2011.
Gross result from financial services of R631 million is 13% up on the prior year with
SEB being a main contributor to the growth. The investment management
businesses increased their contribution by 20%, despite costs incurred in the wealth
management division on the integration of the newly acquired businesses. The
international business cluster achieved strong results, supported by the weaker
average exchange rate but also solid growth in local currency. SEB's earnings
benefited from an improvement in retirement fund administration losses and some
once-off income in Structured Solutions. As indicated in the 2011 results, the Capital
Management business earned once-off profit of R45 million on a property
transaction in the first half of 2011, which increased the comparative base.
Excluding this transaction, operating earnings in the business were 8% lower in the
first six months of 2012. This is attributable to lower revenue from the equities
division, where deal flow and structured transactions were hampered by volatile
markets and the low interest rate environment.
Santam
Key performance indicators
for the six months ended 30 June 2012
R million 2012 2011 %
Group Equity Value
Group Equity Value * 11 134 9 615 16%
Return on Group Equity Value 24,3% 2,9%
Business volumes
Net earned premiums 7 703 7 028 10%
Net fund flows 2 614 2 541 3%
Earnings
Gross result from financial services 672 791 -15%
Net result from financial services 274 317 -14%
Ratios
Claims 66,1% 63,9%
Administration costs 16,3% 14,6%
Combined 93,9% 91,5%
Underwriting 6,1% 8,5%
* Comparative information as at 31 December 2011
Santam achieved very satisfactory growth of 10% in net earned premiums in a
competitive short-term insurance market, with continued good growth from new
ventures at MiWay and Santam Re. Flooding related claims in the first half of 2012,
however, impacted negatively on the overall underwriting margin, which reduced
from 8,5% in 2011 to 6,1% in 2012, still being well within the target range. Santam's
result from financial services commensurately reduced by 15%.
The RoGEV of the short-term insurance cluster reflects the investment return
earned on the listed Santam shares, which performed ahead of the South African
equity market.
Capital management
Optimal capital allocation and management remains a key priority for the Group,
with specific focus on the following:
- Optimising the capital allocated to Group operations within the applicable
regulatory requirements. Continuous attention is given to products attracting
suboptimal levels of capital and thus reducing RoGEV. Product design, pricing
and new business targets are also based on capital requirements and meeting
return hurdle rates. An ongoing development is the Financial Services Board's
implementation of a third country equivalent of the European Solvency II regime
in South Africa (Solvency Assessment and Management (SAM)), with a planned
effective date of 1 January 2015. Sanlam is a participant in this process with our
own SAM implementation project running according to plan. Together with the
rest of the South African industry, we are busy completing the second
quantitative impact study. We are still of the opinion that the Group's life
insurance operations are sufficiently capitalised. The mix of the Group's in-force
life book is still changing to less capital intensive products, which resulted in a
largely unchanged capital requirement for the life insurance operations. The
investment return earned on the allocated capital during the six months could
therefore be released to discretionary capital.
- Releasing capital from illiquid investments. Some R750 million was released
during the first half of 2012 through the disposal of illiquid investments, the
majority of which comprised of investment properties in South Africa.
- Utilisation of discretionary capital. The Group's approach to the utilisation of
discretionary capital remains unchanged. The preference is to invest in value-
adding growth opportunities, with specific focus on the identified growth markets.
Any discretionary capital that is unlikely to be utilised within a reasonable
timeframe is returned to shareholders. Utilisation of discretionary capital during
the first half of 2012 comprised of:
o The Shriram Capital transaction announced in the latter half of 2011 is
expected to conclude imminently. The capital earmarked for the transaction
is included in other capital in the GEV statement.
o R22 million was used to buy back a limited number of Sanlam shares. This
had no material impact on the reported results.
o Some R85 million was utilised to capitalise SEM's operations in Kenya, Nigeria and India.
o R66 million was provided to the SPF operations, with R36 million utilised to
fund the growth in Sanlam Personal Loans' book and R30 million to acquire
the minority interest in Safrican.
o The Sanlam Investments cluster invested R94 million in its international operations.
The Group held discretionary capital of R3,9 billion at 31 December 2011. The
above corporate actions, together with investment return and other smaller
transactions, increased the level of discretionary capital marginally to R4 billion. A
number of potential opportunities are currently being considered that, if successful,
will utilise a substantial portion of the available discretionary capital. Progress on
these potential transactions will be evaluated at year-end and share buy-backs
and/or a special dividend will be considered if a substantial portion of the
discretionary capital is unlikely to be utilised during the course of 2013.
Solvency
All of the life insurance businesses within the Group were sufficiently capitalised at
the end of June 2012. The total admissible regulatory capital (including identified
discretionary capital) of Sanlam Life Insurance Limited, the holding company of the
Group's major life insurance subsidiaries, of R27,1 billion covered its capital
adequacy requirements (CAR) 3,7 times. No policyholder portfolio had a negative
bonus stabilisation reserve at the end of June 2012.
The Group's credit rating by FitchRatings remained unchanged:
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)
Dividend
The Group only declares an annual dividend due to the costs involved in distributing
an interim dividend to our large shareholder base.
Desmond Smith Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Bellville
5 September 2012
Sanlam Group
Interim financial statements
for the six months ended 30 June 2012
Accounting policies and basis of preparation
The preparation of the Group's reviewed interim financial statements was
supervised by the Financial Director, Kobus Möller CA(SA).
The accounting policies adopted for purposes of the interim condensed consolidated
financial statements comply with International Financial Reporting Standards
(IFRS), specifically IAS 34 on interim financial reporting, the AC 500 Standards as
issued by the Accounting Practices Board or its successor, 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 2011 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 2011, apart
from changes in the economic assumptions.
Application of new and revised IFRSs and interpretations
The following new or revised IFRSs and interpretations are applied in the Group's
2012 financial year:
- Amendment to IFRS 1 Severe hyperinflation and removal of fixed dates for
first-time adopters (effective 1 July 2011)
- Amendment to IFRS 7 Transfers of financial assets (effective 1 July 2011)
- Amendment to IAS 12 Deferred tax: Recovery of underlying assets (effective 1 January 2012)
The application of these standards and interpretations did not have a significant
impact on the Group's financial position, reported results and cash flows.
The following new or revised IFRSs and interpretations have effective dates
applicable to future financial years and have not been early adopted:
- IFRS 9 Financial Instruments (effective 1 January 2015)
- IFRS 10 Consolidated financial statements (effective 1 January 2013)
- IFRS 11 Joint Arrangements (effective 1 January 2013)
- IFRS 12 Disclosure of interests in other entities (effective 1 January 2013)
- IFRS 13 Fair Value measurement (effective 1 January 2013)
- IAS 1 Presentation of financial statements Amendment regarding presentation
of other comprehensive income (effective 1 July 2012)
- IAS 19 Employee benefits Amendment regarding removal of corridor
method and other comprehensive income treatment (effective 1 January 2013)
- IAS 27 Separate Financial Statements Consequential amendments resulting
from consolidation project (effective 1 January 2013)
- IAS 28 Investments in Associates and Joint Ventures Consequential
amendments resulting from consolidation project (effective 1 January 2013)
- Amendment to IAS 32 Clarification of the instances in which the
set off of financial assets and financial liabilities is allowed (effective 1 January 2014)
- Amendment to IFRS 7 Disclosures relating to offsetting of financial assets and
financial liabilities (effective 1 January 2013)
- 2012 Annual Improvements Project (effective 1 January 2013)
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.
The basis of preparation of the Shareholders' information is also consistent with that
applied in the 2011 annual report, apart from the following:
- Comparative segmental and Shareholders' information for the six months ended
30 June 2011 has been restated in line with the revised Group management
structure, implemented in the second half of the 2011 financial year. This is
consistent with the 31 December 2011 reporting structure.
- Corporate expenses relating to the SEM cluster that were included in the overall
Group adjustment for holding company expenses are now allocated to the SEM
cluster. Comparative information for June 2011 and December 2011 has been
restated accordingly.
- The Sanlam Investments cluster has been restructured, which affects the
presentation of Group Equity Value and the Shareholders' fund at fair value.
Comparative information for June 2011 and December 2011 has been restated
accordingly.
External audit review
The appointed external auditors, Ernst & Young Inc, reviewed the interim
condensed consolidated financial statements and the Shareholders' information of
the Group as at 30 June 2012. These reviews were conducted in accordance with
the International Standard on Review Engagements 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity". Copies of
the unqualified reports of Ernst & Young Inc are presented below.
Shareholder's information
for the six months ended 30 June 2011
Contents
External review report on shareholder's information
Group Equity Value
Change in Group Equity Value
Return on Group Equity Value
Shareholders fund at fair value
Shareholders fund income statement
Notes to the shareholders fund information
Embedded value of covered business
External review report
Report on review of Sanlam Limited interim shareholders' information
to the Directors of Sanlam Limited
Introduction
we have reviewed the accompanying interim Shareholders' information of Sanlam limited for the six months
ended 30 June 2012, comprising Group equity value; Change in Group equity value; Return on Group equity value;
Shareholders' fund at fair value; Shareholders' fund income statement; notes to the shareholders' fund information;
and embedded value of covered business, Change in embedded value of covered business, value of new Business and
notes to the embedded value of covered business; as set out below. management is responsible for the
preparation and presentation of this interim financial information in accordance with the basis of preparation set
out above. Our responsibility is to express a conclusion on this interim financial information based
on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" A review of interim financial information
consists of making inquiries, primarily of persons responsible for financial and accounting matters matters, and
applying analytical and other review procedures. A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim
Shareholders' information is not prepared, in all material respects, in accordance with the basis of preparation
set out on pages above.
Ernst & Young Inc
Director: Malcolm Rapson
Registered Auditor
Chartered accountant (SA)
Ernst & Young House
35 Lower Long Street
Cape Town
5 September 2012
Group Equity Value
at 30 June 2012
June Reviewed
2012
Fair value Value of
R million Note Total of assets in-force
Sanlam Personal Finance 30 053 10 789 19 264
Covered business (1) 27 819 8 555 19 264
Sanlam Glacier 1 206 1 206
Sanlam Personal Loans 620 620
Multi-Data 91 91
Sanlam Trust 180 180
Anglo African Finance 41 41
Sanlam Healthcare Management 96 96
Sanlam Emerging Markets 3 443 2 118 1 325
Covered business (1) 2 345 1 020 1 325
Sanlam Namibia Holdings 123 123
Shriram General Insurance 153 153
BIFM 253 253
Sanlam Emerging Markets other operations 569 569
Sanlam Investments 15 064 14 132 932
Covered business (1) 5 909 4 977 932
South African Investment Management
and Corporate 5 618 5 618
Sanlam UK operations 869 869
other International 2 668 2 668
Santam 11 134 11 134
Group operations 59 694 38 173 21 521
Discretionary capital 4 000 4 000
Balanced portfolio other 4 441 4 441
Group Equity Value before adjustments to
net worth 68 135 46 614 21 521
Net worth adjustments (1 315) (1 315)
Present value of holding company
expenses (1 315) (1 315)
Group Equity Value 66 820 45 299 21 521
Value per share (cents) 4 3 293 2 232 1 061
Analysis per type of business
Covered business (1) 36 073 14 552 21 521
Sanlam Personal Finance 27 819 8 555 19 264
Sanlam Emerging Markets 2 345 1 020 1 325
Sanlam Investments 5 909 4 977 932
Other Group operations 23 621 23 621
Discretionary and other capital 7 126 7 126
Group Equity Value 66 820 45 299 21 521
Group Equity Value (continued)
at 30 June 2012
June Reviewed (2)
2011
Fair value Value of
R million Note Total of assets in-force
Sanlam Personal Finance 27 365 10 608 16 757
Covered business (1) 25 346 8 589 16 757
Sanlam Glacier 1 061 1 061
Sanlam Personal Loans 406 406
Multi-Data 110 110
Sanlam Trust 143 143
Anglo African Finance 49 49
Sanlam Healthcare Management 250 250
Sanlam Emerging Markets 3 066 1 943 1 123
Covered business (1) 2 015 892 1 123
Sanlam Namibia Holdings 105 105
Shriram General Insurance 145 145
BIFM 302 302
Sanlam Emerging Markets other operations 499 499
Sanlam Investments 13 792 12 852 940
Covered business (1) 5 684 4 744 940
South African Investment Management
and Corporate 5 389 5 389
Sanlam UK operations 717 717
other International 2 002 2 002
Santam 8 466 8 466
Group operations 52 689 33 869 18 820
Discretionary capital 3 200 3 200
Balanced portfolio other 3 376 3 376
Group Equity Value before adjustments to
net worth 59 265 40 445 18 820
Net worth adjustments (1 380) (1 380)
Present value of holding company
expenses (1 380) (1 380)
Group Equity Value 57 885 39 065 18 820
Value per share (cents) 4 2 877 1 942 936
Analysis per type of business
Covered business (1) 33 045 14 225 18 820
Sanlam Personal Finance 25 346 8 589 16 757
Sanlam Emerging Markets 2 015 892 1 123
Sanlam Investments 5 684 4 744 940
Other Group operations 19 644 19 644
Discretionary and other capital 5 196 5 196
Group Equity Value 57 885 39 065 18 820
Group Equity Value (continued)
at 30 June 2012
December Audited(2)
2011
Fair value Value of
R million Note Total of assets in-force
Sanlam Personal Finance 28 876 10 811 18 065
Covered business (1) 26 687 8 622 18 065
Sanlam Glacier 1 169 1 169
Sanlam Personal Loans 494 494
Multi-Data 112 112
Sanlam Trust 168 168
Anglo African Finance 50 50
Sanlam Healthcare Management 196 196
Sanlam Emerging Markets 3 409 2 101 1 308
Covered business (1) 2 320 1 012 1 308
Sanlam Namibia Holdings 119 119
Shriram General Insurance 152 152
BIFM 294 294
Sanlam Emerging Markets other operations 524 524
Sanlam Investments 14 909 13 960 949
Covered business (1) 5 868 4 919 949
South African Investment Management
and Corporate 5 681 5 681
Sanlam UK operations 866 866
other International 2 494 2 494
Santam 9 615 9 615
Group operations 56 809 36 487 20 322
Discretionary capital 3 900 3 900
Balanced portfolio other 4 011 4 011
Group Equity Value before adjustments to
net worth 64 720 44 398 20 322
Net worth adjustments (1 199) (1 199)
Present value of holding company
expenses (1 199) (1 199)
Group Equity Value 63 521 43 199 20 322
Value per share (cents) 4 3 146 2 140 1 006
Analysis per type of business
Covered business (1) 34 875 14 553 20 322
Sanlam Personal Finance 26 687 8 622 18 065
Sanlam Emerging Markets 2 320 1 012 1 308
Sanlam Investments 5 868 4 919 949
Other Group operations 21 934 21 934
Discretionary and other capital 6 712 6 712
Group Equity Value 63 521 43 199 20 322
(1) Refer embedded value of covered business.
(2) Comparative information has been restated as referred to in the basis of preparation.
Change in Group Equity Value
for the six months ended 30 June 2012
Six months Full year
Reviewed (2) Audited (2)
R million 2012 2011 2011
Earnings from covered business (1) 2 941 3 158 6 273
Earnings from other Group operations 3 133 852 2 744
operations valued based on ratio of price to assets under
management 588 233 809
Assumption changes 44 (113)
Change in assets under management 355 171 231
Earnings for the year and changes in capital
requirements 165 12 377
Foreign currency translation differences and other 24 50 314
Operations valued based on discounted cash flows 106 262 603
Expected return 250 205 415
Operating experience variances and other 40 25 (19)
Assumption changes (203) (3) 72
Foreign currency translation differences 19 35 135
Operations valued at net asset value earnings for
the period 58 120 183
Listed operations investment return 2 381 237 1 149
Earnings from discretionary and other capital (207) (259) 388
Portfolio investments and other 65 175 575
Net corporate expenses (59) (52) (124)
Share-based payments transactions (97) (142) (4)
Change in net worth adjustments (116) (240) (59)
Group Equity Value earnings 5 867 3 751 9 405
Dividends paid (2 581) (2 279) (2 279)
Cost of treasury shares acquired 13 (948) (966)
Sanlam share buy back (22) (944) (979)
Share incentive scheme and other 35 (4) 13
Group Equity Value at beginning of the period 63 521 57 361 57 361
Group Equity Value at end of the period 66 820 57 885 63 521
Return on Group Equity Value
for the six months ended 30 June 2012
Six months Reviewed (2) Full year audited (2)
2012 2011 2011
Earnings Return Earnings Return Earnings Return
R million % R million % R million %
Sanlam Personal Finance 2 583 8,9 2 832 11,1 5 519 21,5
Covered business (1) 2 430 9,1 2 650 11,2 5 146 21,7
Other operations 153 7,0 182 9,3 373 19,1
Sanlam Emerging Markets 215 6,3 222 8,3 634 23,8
Covered business (1) 182 7,8 152 8,6 571 32,1
Other operations 33 3,0 70 7,9 63 7,1
Sanlam Investments 940 6,3 713 5,2 1 669 12,2
Covered business (1) 329 5,6 356 6,4 556 9,9
Other operations 611 6,8 357 4,4 1 113 13,8
Santam 2 336 24,3 243 2,9 1 195 14,2
Discretionary and other capital (207) (259) 388
Return on Group Equity Value 5 867 9,2 3 751 6,5 9 405 16,4
Return on Group Equity
Value per share 8,8 6,2 15,7
Annualised return on Group
Equity Value per share 18,4 12,8 15,7
Return on Group Equity Value (continued)
for the six months ended 30 June 2012
Six months Full year
Reviewed (2) Audited (2)
R million 2012 2011 2011
Reconciliation of return on Group Equity Value:
The return on Group Equity Value reconciles as follows to
normalised attributable earnings:
Normalised attributable earnings per shareholders' fund income
statement 2 533 2 271 5 174
Net foreign currency translation gains recognised in other
comprehensive income 15 111 435
Recognised directly in equity
Share based payment transactions (105) (152) (7)
Movement in book value of treasury shares (266) (239) (246)
Share based payments 161 87 239
Movements in subsidiary interests (2) (4) (277)
Recognised in Statement of Changes in equity (26) (29) (391)
Less: included in value of in-force 24 25 114
Movement in fair value adjustment shareholders' fund at
fair value 2 344 (59) 896
Movement in adjustments to net worth and other (93) (199) 36
Present value of holding company expenses and other (118) (226) (59)
Change in goodwill and value of business acquired
Adjustments less value of in-force acquired 25 27 95
Growth from covered business: value of in-force (1) 1 175 1 783 3 148
Return on Group equity value 5 867 3 751 9 405
(1)Refer embedded value of covered business.
(2)Comparative information has been restated as referred to in the basis of preparation.
Shareholders' fund at fair value
at 30 June 2012
June Reviewed
2012
Fair
value Net
Fair adjust- asset
R million Note value ment value
Covered business, discretionary and other capital 24 360 112 24 248
Property and equipment 282 282
Owner-occupied properties 547 547
Goodwill (2) 472 472
value of business acquired (2) 692 692
Other intangible assets 26 26
Deferred acquisition costs 2 132 2 132
Non-current assets held for sale
Investments 21 993 112 21 881
Equities and similar securities 7 955 112 7 843
Associated companies 847 847
Joint ventures Shriram life insurance 267 267
Public sector stocks and loans 105 105
Investment properties 57 57
Other interest-bearing and preference share
investments 12 762 12 762
Net term finance
Term finance (4 917) (4 917)
Assets held in respect of term finance 4 917 4 917
Net deferred tax (107) (107)
Net working capital (751) (751)
Minority shareholders' interest (926) (926)
Other Group operations 2 23 621 13 702 9 919
Sanlam Investments 9 155 5 747 3 408
South African Investment Management and
Corporate 5 618 4 388 1 230
Sanlam UK operations 869 132 737
Other international 2 668 1 227 1 441
Sanlam Personal Finance 2 234 1 402 832
Sanlam Glacier 1 206 920 286
Sanlam Personal Loans (3) 620 198 422
Multi-Data 91 84 7
Sanlam Trust 180 168 12
Anglo African Finance 41 28 13
Sanlam Healthcare Management 96 4 92
Sanlam Emerging Markets 1 098 (10) 1 108
Sanlam Namibia Holdings 123 97 26
Shriram General Insurance 153 153
BIFM 253 (59) 312
Sanlam Emerging Markets other operations 569 (48) 617
Santam 11 134 7 810 3 324
Goodwill held on Group level in respect of the above
businesses (1 247) 1 247
Shareholders' fund at fair value 47 981 13 814 34 167
Value per share (cents) 4 2 365 681 1 684
Shareholders' fund at fair value (continued)
at 30 June 2012
June Reviewed(4)
2011
Fair
value Net
Fair adjust- asset
R million Note value ment value
Covered business, discretionary and other capital 22 210 184 22 026
Property and equipment 258 258
Owner-occupied properties 487 487
Goodwill (2) 497 497
value of business acquired (2) 696 696
Other intangible assets 34 34
Deferred acquisition costs 1 551 1 551
Non-current assets held for sale
Investments 19 887 196 19 691
Equities and similar securities 8 474 112 8 362
Associated companies 1 268 84 1 184
Joint ventures Shriram life insurance 267 267
Public sector stocks and loans 13 13
Investment properties 792 792
Other interest-bearing and preference share
investments 9 073 9 073
Net term finance
Term finance (5 801) (5 801)
Assets held in respect of term finance 5 801 5 801
Net deferred tax 290 (12) 302
Net working capital (761) (761)
Minority shareholders' interest (729) (729)
Other Group operations 2 19 644 10 349 9 295
Sanlam Investments 8 108 5 059 3 049
South African Investment Management and
Corporate 5 389 3 813 1 576
Sanlam UK operations 717 71 646
Other international 2 002 1 175 827
Sanlam Personal Finance 2 019 1 326 693
Sanlam Glacier 1 061 798 263
Sanlam Personal Loans (3) 406 88 318
Multi-Data 110 101 9
Sanlam Trust 143 142 1
Anglo African Finance 49 31 18
Sanlam Healthcare Management 250 166 84
Sanlam Emerging Markets 1 051 167 884
Sanlam Namibia Holdings 105 93 12
Shriram General Insurance 145 145
BIFM 302 69 233
Sanlam Emerging Markets other operations 499 5 494
Santam 8 466 5 044 3 422
Goodwill held on Group level in respect of the above
businesses (1 247) 1 247
Shareholders' fund at fair value 41 854 10 533 31 321
Value per share (cents) 4 2 081 524 1 557
Shareholders' fund at fair value (continued)
at 30 June 2012
December Audited(4)
2011
Fair
value Net
Fair adjust- asset
R million Note value ment value
Covered business, discretionary and other capital 23 828 112 23 716
Property and equipment 332 332
Owner-occupied properties 416 416
Goodwill (2) 478 478
value of business acquired (2) 694 694
Other intangible assets 29 29
Deferred acquisition costs 1 888 1 888
Non-current assets held for sale 512 512
Investments 20 422 112 20 310
Equities and similar securities 8 440 112 8 328
Associated companies 786 786
Joint ventures Shriram life insurance 267 267
Public sector stocks and loans 13 13
Investment properties 489 489
Other interest-bearing and preference share
investments 10 427 10 427
Net term finance
Term finance (5 108) (5 108)
Assets held in respect of term finance 5 108 5 108
Net deferred tax 111 111
Net working capital (137) (137)
Minority shareholders' interest (917) (917)
Other Group operations 2 21 934 11 358 10 576
Sanlam Investments 9 041 5 453 3 588
South African Investment Management and
Corporate 5 681 4 058 1 623
Sanlam UK operations 866 166 700
Other international 2 494 1 229 1 265
Sanlam Personal Finance 2 189 1 407 782
Sanlam Glacier 1 169 865 304
Sanlam Personal Loans (3) 494 141 353
Multi-Data 112 98 14
Sanlam Trust 168 150 18
Anglo African Finance 50 39 11
Sanlam Healthcare Management 196 114 82
Sanlam Emerging Markets 1 089 2 1 087
Sanlam Namibia Holdings 119 88 31
Shriram General Insurance 152 152
BIFM 294 (35) 329
Sanlam Emerging Markets other operations 524 (51) 575
Santam 9 615 5 743 3 872
Goodwill held on Group level in respect of the above
businesses (1 247) 1 247
Shareholders' fund at fair value 45 762 11 470 34 292
Value per share (cents) 4 2 267 568 1 699
(1) Group businesses listed above are not consolidated, but reflected as investments at fair value.
(2) The value of business acquired and goodwill relate mainly to the consolidation of Sanlam Sky
Solutions, Channel life and Sanlam life and pensions and are excluded in the build-up of the Group
equity value, as the current value of in-force business for these life insurance companies are included
in the embedded value of covered business.
(3) The life insurance component of Sanlam personal loans' operations is included in the value of in-
force business and therefore excluded from the Sanlam personal loans fair value.
(4) Comparative information has been restated as referred to in the basis of preparation.
Shareholders' fund at fair value (continued)
at 30 June 2012
June Reviewed
2012
Fair value Value of
R million Total of assets in-force
Reconciliation to Group equity value
Group equity value before adjustments to net worth 68 135 46 614 21 521
add: Goodwill and value of business acquired replaced
by value of in-force 1 367 1 367
Sanlam life and pensions 356 356
Sanlam Developing Markets 771 771
Shriram life insurance (5) 210 210
Other 30 30
Less: value of in-force (21 521) (21 521)
Shareholders' fund at fair value 47 981 47 981
Shareholders' fund at fair value (continued)
at 30 June 2012
June Reviewed
2011
Fair value Value of
R million Total of assets in-force
Reconciliation to Group equity value
Group equity value before adjustments to net worth 59 265 40 445 18 820
add: Goodwill and value of business acquired replaced
by value of in-force 1 409 1 409
Sanlam life and pensions 356 356
Sanlam Developing Markets 825 825
Shriram life insurance (5) 210 210
Other 18 18
Less: value of in-force (18 820) (18 820)
Shareholders' fund at fair value 41 854 41 854
Shareholders' fund at fair value (continued)
at 30 June 2012
December Audited
2011
Fair value Value of
R million Total of assets in-force
Reconciliation to Group equity value
Group equity value before adjustments to net worth 64 720 44 398 20 322
add: Goodwill and value of business acquired replaced
by value of in-force 1 364 1 364
Sanlam life and pensions 356 356
Sanlam Developing Markets 780 780
Shriram life insurance (5) 210 210
Other 18 18
Less: value of in-force (20 322) (20 322)
Shareholders' fund at fair value 45 762 45 762
(5)the carrying value of Shriram life insurance includes goodwill of R210 million (2011: R210 million) that
is excluded in the build-up of the Group equity value, as the current value of in-force business for
Shriram life insurance is included in the embedded value of covered business.
Shareholders fund income statement
for the six months ended 30 June 2012
Sanlam Personal Sanlam Emerging Sanlam
Finance Markets Investments
R million 2012 2011 2012 2011 2012 2011
Financial services income 5 496 5 139 1 300 1 088 3 152 2 877
Sales remuneration (947) (930) (276) (256) (56) (43)
Income after sales remuneration 4 549 4 209 1 024 832 3 096 2 834
Underwriting policy benefits (1 435) (1 457) (289) (250) (967) (960)
Administration costs (1 615) (1 496) (354) (310) (1 498) (1 314)
Result from financial services before tax 1 499 1 256 381 272 631 560
Tax on result from financial services (416) (346) (67) (44) (154) (128)
Result from financial services after tax 1 083 910 314 228 477 432
Minority shareholders' interest (6) (6) (131) (111) (6) (2)
Net result from financial services 1 077 904 183 117 471 430
Net investment income 489 359 23 62 100 76
Dividends received Group companies 157 128
Other investment income 411 292 47 90 121 92
Tax on investment income (79) (61) (17) 8 (21) (16)
Minority shareholders' interest (7) (36)
Project expenses (1) (3) (7) (5) (4)
Amortisation of value of business aquired and
other intangibles (18) (18) (6) (7) (24) (20)
BEE transaction costs
Net equity-accounted headline earnings 1 3 (1)
Equity-accounted headline earnings 1 5 (1)
Minority shareholders' interest (2)
Net investment surpluses 1 032 123 47 (4) 57 30
Investment surpluses Group companies 836 (20)
Other investment surpluses 277 155 55 12 71 33
Tax on investment surpluses (81) (12) (4) 20 (14) (3)
Minority shareholders' interest (4) (36)
Secondary tax on companies after minorities (81) (106) (2) (1)
Normalised headline earnings 2 499 1 261 245 164 597 510
Loss on disposal of subsidiaries (6)
Net profit on disposal of associated companies
Profit on disposal of associated companies
Tax on profit on disposal of associated companies
Impairments (1) (6) (21)
Normalised attributable earnings 2 499 1 261 245 157 591 489
Fund transfers
Attributable earnings per Group statement of
comprehensive income 2 499 1 261 245 157 591 489
Ratios
Admin ratio (1) 35,5% 35,5% 34,6% 37,3% 48,4% 46,4%
Operating margin (2) 33,0% 29,8% 37,2% 32,7% 20,4% 19,8%
Diluted earnings per share
Adjusted weighted average number of
shares (million)
Net result from financial services (cents)
Shareholders fund income statement (continued)
for the six months ended 30 June 2012
Corporate and
Santam other(4) Total
R million 2012 2011 2012 2011 2012 2011
Financial services income 7 906 7 220 79 72 17 933 16 396
Sales remuneration (1 025) (1 037) (2 304) (2 266)
Income after sales remuneration 6 881 6 183 79 72 15 629 14 130
Underwriting policy benefits (5 089) (4 487) (7 780) (7 154)
Administration costs (1 120) (905) (158) (147) (4 745) (4 172)
Result from financial services before tax 672 791 (79) (75) 3 104 2 804
Tax on result from financial services (198) (225) 20 23 (815) (720)
Result from financial services after tax 474 566 (59) (52) 2 289 2 084
Minority shareholders' interest (200) (249) (343) (368)
Net result from financial services 274 317 (59) (52) 1 946 1 716
Net investment income 35 13 (92) (97) 555 413
Dividends received Group companies (157) (128)
Other investment income 57 18 39 30 675 522
Tax on investment income 4 6 26 1 (87) (62)
Minority shareholders' interest (26) (11) (33) (47)
Project expenses (9) (8) (21)
Amortisation of value of business aquired and
other intangibles (12) (20) (60) (65)
BEE transaction costs (1) (2) (1) (2)
Net equity-accounted headline earnings 23 26 26 24 54
Equity-accounted headline earnings 38 46 26 39 76
Minority shareholders' interest (15) (20) (15) (22)
Net investment surpluses 50 53 (874) 97 312 299
Investment surpluses Group companies (836) 20
Other investment surpluses 178 74 (40) 73 541 347
Tax on investment surpluses (93) 18 1 4 (191) 27
Minority shareholders' interest (35) (39) 1 (38) (75)
Secondary tax on companies after minorities (86) (19) (60) (66) (229) (192)
Normalised headline earnings 283 368 (1 085) (101) 2 539 2 202
Loss on disposal of subsidiaries (6)
Net profit on disposal of associated companies 97 97
Profit on disposal of associated companies 113 113
Tax on profit on disposal of associated companies (16) (16)
Impairments (6) (22)
Normalised attributable earnings 283 368 (1 085) (4) 2 533 2 271
Fund transfers (131) 3 (131) 3
Attributable earnings per Group statement of
comprehensive income 283 368 (1 216) (1) 2 402 2 274
Ratios
Admin ratio (1) 16,3% 14,6% 30,4% 29,5%
Operating margin (2) 9,8% 12,8% 19,9% 19,8%
Diluted earnings per share
Adjusted weighted average number of
shares (million) 2 023,2 2 027,0
Net result from financial services (cents) 96,2 84,7
(1) Administration costs as a percentage of income earned by the shareholders' fund less sales remuneration.
(2) Result from financial services before tax as a percentage of income earned by the shareholders' fund
less sales remuneration.
(3) Comparative information for all of the above clusters were restated as outlined in the basis of
preparation.
(4) Corporate and Other includes the consolidation entries in respect of the dividends received and the
investment surpluses on the Sanlam Limited shares held by Sanlam Life Insurance Limited.
Notes to the Shareholders' Fund information
for the six months ended 30 June 2012
1. Business volumes
1.1 Analysis of new business and total funds received
Analysed per business, reflecting the split between life and non-life business
Life
Insurance (1) Other (2) Total
R million 2012 2011 2012 2011 2012 2011
Sanlam Personal Finance 8 733 7 210 6 459 6 155 15 192 13 365
Entry-level 607 637 607 637
Recurring 430 451 430 451
Single 177 186 177 186
Middle-income 4 287 3 442 136 151 4 423 3 593
Recurring 594 564 24 42 618 606
Single 3 693 2 878 112 109 3 805 2 987
Affluent 3 839 3 131 6 323 6 004 10 162 9 135
Sanlam Emerging Markets 1 493 1 105 4 990 3 511 6 483 4 616
Namibia 284 139 4 315 3 093 4 599 3 232
Recurring 58 50 58 50
Single 226 89 4 315 3 093 4 541 3 182
Botswana 657 609 180 316 837 925
Recurring 69 102 21 90 102
Single 588 507 159 316 747 823
Rest of Africa 465 235 363 18 828 253
Recurring 166 96 166 96
Single 299 139 363 18 662 157
India 87 122 132 84 219 206
Recurring 42 20 132 84 174 104
Single 45 102 45 102
Sanlam Investments 1 933 1 292 25 463 25 550 27 396 26 842
South Africa 943 618 22 719 22 202 23 662 22 820
Employee benefits 943 618 943 618
Recurring 173 134 173 134
Single 770 484 770 484
Collective investment schemes 11 528 11 935 11 528 11 935
Private investments 4 210 3 778 4 210 3 778
Segregated funds 6 981 6 489 6 981 6 489
Sanlam Multi-Manager 1 574 1 532 1 574 1 532
Other 5 407 4 957 5 407 4 957
Non-South African 990 674 2 744 3 348 3 734 4 022
Sanlam UK 990 674 712 1 702 674
Recurring 21 11 21 11
Single 969 663 712 1 681 663
Sim Global 234 666 234 666
SIIP 506 1 066 506 1 066
other 1 292 1 616 1 292 1 616
Santam 7 703 7 028 7 703 7 028
New business excluding
white label 12 159 9 607 44 615 42 244 56 774 51 851
White label 4 203 3 211 4 203 3 211
Total new business 12 159 9 607 48 818 45 455 60 977 55 062
Recurring premiums on
existing funds:
Sanlam Personal Finance 6 617 6 279
Sanlam Emerging Markets 1 042 872
Sanlam Investments 2 583 1 988
Sanlam Employee Benefits 1 655 1 455
Sanlam UK 231 238
Sanlam Investment Management 697 295
Total funds received 71 219 64 201
(1) Life insurance business relates to business written under a life licence that is included in the calculation
of embedded value of covered business.
(2) Includes life licence, investment and short-term insurance business. life licence business relates to
investment products provided by means of a life insurance policy where there is very little or no
insurance risk. Life licence business is excluded from the calculation of embedded value of covered
business.
1.2 Analysis of paymentS to Clients
Life
Insurance (1) Other (2) Total
R million 2012 2011 2012 2011 2012 2011
Sanlam Personal Finance 12 323 11 488 5 870 5 297 18 193 16 785
Entry-level 1 240 1 246 1 240 1 246
Surrenders 158 153 158 153
Other 1 082 1 093 1 082 1 093
Middle-income 9 415 9 032 176 125 9 591 9 157
Surrenders 1 532 1 560 1 532 1 560
Other 7 883 7 472 176 125 8 059 7 597
Affluent 1 668 1 210 5 694 5 172 7 362 6 382
Sanlam Emerging Markets 1 360 1 156 3 870 3 095 5 230 4 251
Namibia 660 539 3 604 2 775 4 264 3 314
Surrenders 336 52 336 52
Other 324 487 3 604 2 775 3 928 3 262
Botswana 446 458 178 250 624 708
Surrenders 130 150 130 150
other 316 308 178 250 494 558
Rest of Africa 155 101 2 157 101
Surrenders 15 12 15 12
Other 140 89 2 142 89
India 99 58 86 70 185 128
Surrenders 75 58 75 58
Other 24 86 70 110 70
Sanlam Investments 3 475 3 330 25 477 21 095 28 952 24 425
South Africa 2 626 2 680 23 295 18 886 25 921 21 566
Sanlam Employee Benefits 2 626 2 680 2 626 2 680
Terminations 253 600 253 600
Other 2 373 2 080 2 373 2 080
Collective investment schemes 9 677 8 513 9 677 8 513
Private investments 5 096 2 252 5 096 2 252
Segregated funds 8 522 8 121 8 522 8 121
Multi-Manager 2 631 2 217 2 631 2 217
Other 5 891 5 904 5 891 5 904
Non-South African 849 650 2 182 2 209 3 031 2 859
Sanlam UK 849 650 849 650
Surrenders 654 498 654 498
Other 195 152 195 152
Sim Global 182 197 182 197
SIIP 1 266 1 306 1 266 1 306
Other 734 706 734 706
Santam 5 089 4 487 5 089 4 487
Payments to clients excluding
white label 17 158 15 974 40 306 33 974 57 464 49 948
White label 3 572 2 835 3 572 2 835
Total payments to clients 17 158 15 974 43 878 36 809 61 036 52 783
(1) Life insurance business relates to business written under a life licence that is included in the calculation
of embedded value of covered business.
(2) Includes life licence, investment and short-term insurance business. Life licence business relates to
investment products provided by means of a life insurance policy where there is very little or no
insurance risk. Life licence business is excluded from the calculation of embedded value of covered
business.
1.3 Analysis of net inflow/(outflow) of funds
Life
Insurance (1) Other(2) Total
R million 2012 2011 2012 2011 2012 2011
Sanlam Personal Finance 2 913 1 926 702 933 3 615 2 859
Entry-level 886 844 886 844
Middle-income (144) (839) 73 101 (71) (738)
Affluent 2 171 1 921 629 832 2 800 2 753
Sanlam Emerging Markets 1 176 821 1 120 416 2 296 1 237
Namibia (63) (96) 711 318 648 222
Botswana 647 529 2 66 649 595
Rest of Africa 556 264 361 18 917 282
India 36 124 46 14 82 138
Sanlam Investments 344 (345) 683 4 750 1 027 4 405
South Africa (28) (607) 121 3 611 93 3 004
Sanlam Employee Benefits (28) (607) (28) (607)
Collective investment schemes 1 851 3 422 1 851 3 422
Private investments (886) 1 526 (886) 1 526
Segregated funds
Sanlam Multi-Manager (604) (685) (604) (685)
Other (240) (652) (240) (652)
Non-South african 372 262 562 1 139 934 1 401
Sanlam UK 372 262 712 1 084 262
SIIP (760) (240) (760) (240)
Sim Global 52 469 52 469
Other 558 910 558 910
Santam 2 614 2 541 2 614 2 541
Net inflow excluding
white label 4 433 2 402 5 119 8 640 9 552 11 042
White label 631 376 631 376
Total net inflow 4 433 2 402 5 750 9 016 10 183 11 418
(1) Life insurance business relates to business written under a life licence that is included in the calculation
of embedded value of covered business.
(2) Includes life licence, investment and short-term insurance business. Life licence business relates to
investment products provided by means of a life insurance policy where there is very little or no
insurance risk. Life licence business is excluded from the calculation of embedded value of covered
business.
2. Cluster information
2.1 Sanlam Personal finance
Life Non-life
operations operations Total
R million 2012 2011 2012 2011 2012 2011
Analysis of attributable earnings
Gross result from financial
services 1 304 1 108 195 148 1 499 1 256
Entry-level market 199 204 199 204
Middle-income market
Life and investments 1 033 841 10 4 1 043 845
Administration 260 159 260 159
Risk underwriting:
Long-term insurance 342 281 342 281
Asset mismatch reserve 223 198 223 198
Working capital management 139 131 139 131
Other 69 72 10 4 79 76
Sanlam Glacier 37 31 54 53 91 84
Sanlam Personal Loans 35 32 98 73 133 105
Other operations 33 18 33 18
Tax on results from
financial sevices (364) (298) (52) (48) (416) (346)
Minority shareholders' interest (3) (3) (3) (3) (6) (6)
Net result from financial
Services 937 807 140 97 1 077 904
Net investment return 1 518 479 3 3 1 521 482
Net investment income 486 356 3 3 489 359
Net investment surpluses 1 032 123 1 032 123
Net other earnings (99) (125) (99) (125)
Amortisation of
intangibles and other (18) (19) (18) (19)
Secondary tax on companies (81) (106) (81) (106)
Normalised attributable earnings 2 356 1 161 143 100 2 499 1 261
Analysis of Group Equity Value (GEV)
GEV at
the Capital GEV at
beginning move- Dividend the end
R million of period Earnings ment paid of period
30 June 2012
Life insurance operations 26 687 2 430 41 (1 339) 27 819
Non-life operations 2 189 153 36 (144) 2 234
Sanlam Glacier 1 169 117 (80) 1 206
Sanlam Personal Loans 494 129 36 (39) 620
Other 526 (93) (25) 408
Group Equity Value 28 876 2 583 77 (1 483) 30 053
30 June 2011
Life insurance operations 23 663 2 650 (967) 25 346
Non-life operations 1 949 182 (112) 2 019
Sanlam Glacier 965 170 (74) 1 061
Sanlam Personal Loans 365 41 406
Other 619 (29) (38) 552
Group Equity Value 25 612 2 832 (1 079) 27 365
Life
Analysis of business volumes Insurance Investment Total
R million 2012 2011 2012 2011 2012 2011
Recurring premiums 1 024 1 015 24 42 1 048 1 057
Risk 626 654 626 654
investment 147 127 19 28 166 155
Retirement annuities 152 128 3 3 155 131
premium changes 99 106 2 11 101 117
Single premiums 7 709 6 195 6 435 6 113 14 144 12 308
discretionary savings 2 631 1 518 6 409 6 091 9 040 7 609
Retirement savings 346 311 9 9 355 320
Continuations 1 032 976 1 032 976
Contractual life business 3 548 3 265 3 548 3 265
other 152 125 17 13 169 138
Total new business 8 733 7 210 6 459 6 155 15 192 13 365
Death and disability benefits 1 930 1 747 1 930 1 747
Maturity benefits 5 979 5 591 5 979 5 591
Life and term annuities 2 651 2 281 2 651 2 281
Surrenders 1 690 1 713 1 690 1 713
Other 73 156 5 870 5 297 5 943 5 453
Total payments to clients 12 323 11 488 5 870 5 297 18 193 16 785
2.2 Sanlam Emerging Markets
R million R million
Analysis of attributable earnings 2012 2011
Net result from financial services 183 117
Life insurance 144 85
Short-term insurance (12)
Investment management 12 13
Credit and banking 42 27
Other (3) (8)
Net investment return 70 58
Net investment income 23 62
Net investment surpluses 47 (4)
Net other earnings (8) (18)
Amortisation of intangibles and impairments (6) (8)
Project expenses and other (2) (4)
Loss on disposal of operations (6)
Normalised attributable earnings 245 157
Analysis of net result from financial services
Life insurance operations 144 85
Namibia 59 50
Botswana 55 54
Rest of Africa 20 (20)
India 10 1
Non-life operations 39 32
Namibia 6 5
Botswana 44 30
Rest of Africa (2)
India (11) (1)
Net result from financial services 183 117
Analysis of Group Equity Value (GEV)
GEV at
the Capital GEV at
beginning move- Dividend the end
R million of period Earnings ment paid of period
30 June 2012
Life insurance operations 2 320 182 (5) (152) 2 345
Non-life operations 1 089 33 (24) 1 098
Botswana 830 12 (8) 834
Namibia 119 20 (16) 123
Other operations 140 1 141
Group Equity Value 3 409 215 (5) (176) 3 443
30 June 2011
Life insurance operations 1 777 152 99 (13) 2 015
Non-life operations 886 70 146 (51) 1 051
Botswana 706 49 146 (42) 859
Namibia 105 8 (8) 105
Other operations 75 13 (1) 87
Group equity value 2 663 222 245 (64) 3 066
Analysis of business volumes
Life
insurance Other Total
2012 R million R million R million
Recurring premiums 335 153 488
Risk 213 213
Investment and Short-term 111 153 264
Annuities 11 11
Recurring premiums 2011 268 84 352
Single premiums 1 158 4 837 5 995
Risk 423 423
Savings 710 4 837 5 547
Continuations 25 25
Single premiums 2011 837 3 427 4 264
Total new business 1 493 4 990 6 483
Recurring premiums on existing business 1 042 1 042
Risk 579 579
Investment 368 368
Annuities 95 95
Total funds received from clients 2 535 4 990 7 525
Total funds received from clients 2011 1 977 3 511 5 488
Death and disability benefits 309 309
Maturity benefits 204 204
Life and term annuities 197 197
Surrenders 556 556
Other 94 3 870 3 964
Total payments to clients 1 360 3 870 5 230
Total payments to clients 2011 1 156 3 095 4 251
2.3 Sanlam Investments
Analysis of attributable earnings
Asset Capital Wealth Investment
Management Management Management services
R million 2012 2011 2012 2011 2012 2011 2012 2011
Financial services income* 376 335 230 264 329 211 444 401
Sales remuneration
Income after sales remuneration 376 335 230 264 329 211 444 401
Underwriting policy benefits
Administration cost* (208) (193) (157) (140) (303) (176) (398) (356)
Result from financial services
before performance fees 168 142 73 124 26 35 46 45
Net performance fees 9 26 2 1 5 1
Result from financial services
before tax 177 168 73 124 28 36 51 46
Tax on result from financial
services (49) (47) (14) (23) (10) (11) (16) (13)
Minority shareholders'
interest (4) (2) 1 (1)
Net result from financial
services 124 119 59 101 19 25 34 33
Net investment return 1 (2) 4 3 1 (1)
Net investment income 1 4 3
Net investment surpluses (2) 1 (1)
Net other earnings 1 (1) (23) (21) (5) (1)
Normalised attributable
earnings 125 117 64 103 (3) 3 29 32
Administration cost ratio 55% 58% 68% 53% 92% 83% 90% 89%
Sanlam
Employee Corporate Intra-cluster
International Benefits services consolidation Total
R million 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Financial services income* 327 269 1 491 1 433 20 6 (105) (85) 3 112 2 834
Sales remuneration (32) (27) (24) (16) (56) (43)
Income after sales remuneration 295 242 1 467 1 417 20 6 (105) (85) 3 056 2 791
Underwriting policy benefits (967) (960) (967) (960)
Administration cost* (182) (159) (311) (328) (29) (35) 105 85 (1 483) (1 302)
Result from financial services
before performance fees 113 83 189 129 (9) (29) 606 529
Net performance fees 9 3 25 31
Result from financial services
before tax 122 86 189 129 (9) (29) 631 560
Tax on result from financial
services (14) (6) (53) (36) 2 8 (154) (128)
Minority shareholders'
interest (2) (6) (2)
Net result from financial
services 106 80 136 93 (7) (21) 471 430
Net investment return (46) (16) 175 124 22 (2) 157 106
Net investment income 5 4 89 69 1 100 76
Net investment surpluses (51) (20) 86 55 21 (2) 57 30
Net other earnings (9) (13) (1) (1) (10) (37) (47)
Normalised attributable
earnings 51 51 310 216 15 (33) 591 489
Administration cost ratio 62% 66% 21% 23% 145% 583% 49% 46%
* Excludes performance fees and related costs.
Analysis of Group Equity Value (GEV)
GEV at
the Capital GEV at
beginning move- Dividend the end
R million of period Earnings ment paid of period
30 June 2012
Sanlam Investments
Asset management and corporate 3 410 158 (133) 3 435
Capital Management 801 67 (177) 691
Wealth Management 1 272 77 (35) 1 314
Investment services 866 71 (62) 875
International operations 3 483 270 142 (278) 3 617
Life insurance operations 791 33 (47) 777
Non-life insurance operations 2 692 237 142 (231) 2 840
Sanlam Employee Benefits: Life
Insurance operations 5 077 296 (241) 5 132
Group equity value 14 909 939 142 (926) 15 064
30 June 2011
Sanlam investments
Asset management and corporate 3 360 (54) (107) 3 199
Capital Management 931 107 (203) 835
Wealth Management 899 43 87 (46) 983
Investment services 797 37 (43) 791
International operations 2 729 296 80 (168) 2 937
Life insurance operations 638 72 (73) 637
Non-life insurance operations 2 091 224 80 (95) 2 300
Sanlam Employee Benefits: Life
Insurance operations 4 967 284 (204) 5 047
Group equity value 13 683 713 167 (771) 13 792
June December
Income base 2012 2011
Asset Management 326 074 311 804
Capital Management private equity 3 414 3 532
Wealth Management 89 056 76 952
Investment services 128 317 122 178
International operations 59 367 54 977
Inter-cluster consolidation (54 497) (46 691)
Sanlam investments excluding life operations 551 731 522 752
Valuation methodology
The fair value of the unlisted Sanlam investments businesses has been determined by the application
of the following valuation methodologies:
Fair value
June December
2012 2011
valuation method R million R million
Ratio of price to assets under management 7 143 7 018
Asset Management 3 435 3 410
Capital Management 107 130
Wealth Management 1 119 1 064
Investment services 875 866
International operations 1 607 1 548
Discounted cash flows
International operations 850 853
Net asset value 1 162 1 170
Capital Management 584 671
Wealth Management 195 208
International operations 383 291
9 155 9 041
The main assumptions applied in the primary valuation for the unlisted businesses are presented below.
The sensitivity analysis is based on the following changes in assumptions:
Change in
assumption
June December
2012 2011
Ratio of price to assets under management (P/AuM) 0,1 0,1
Risk discount rate (RDR) 1,0 1,0
Perpetuity growth rate (PGR) 1,0 1,0
Weighted average Decrease in Increase in
R million assumption Base value assumption assumption
Ratio of price to assets under P/AuM = 1,12%
management (Dec 2011: 1,16%) 7 143 6 459 7 732
RDR = 17,9%
Discounted cash flows (Dec 2011: 17,4%) 850 881 821
PGR = 2,5 5%
(Dec 2011: 2,5 5%) 850 836 864
2.4 Santam
R million R million
2012 2011
Business volumes
net earned premiums 7 703 7 028
Net fund flows 2 614 2 541
Analysis of earnings
Gross result from financial services 672 791
Ratios
Admin cost ratio 16,3% 14,6%
Claims ratio 66,1% 63,9%
Underwriting margin 6,1% 8,5%
3. Normalised diluted earnings per share
Cents Cents
Normalised diluted earnings per share:
Net result from financial services 96,2 84,7
Normalised headline earnings 125,5 108,6
Profit attributable to shareholders' fund 125,2 112,0
R million R million
Analysis of normalised earnings (refer Shareholders' Fund income
statement):
Net result from financial services 1 946 1 716
Headline earnings 2 539 2 202
Profit attributable to shareholders' fund 2 533 2 271
Reconciliation of normalised headline earnings:
Headline earnings per note 1 2 408 2 205
Fund transfers 131 (3)
Normalised headline earnings 2 539 2 202
Million Million
Adjusted number of shares:
Weighted average number of shares for diluted earnings per share
(refer note 1) 2 005,3 2 011,0
Add: weighted average Sanlam shares held by policyholders 17,9 16,0
Adjusted weighted average number of shares for normalised diluted
earnings per share 2 023,2 2 027,0
4. Value per share
Fair value per share is calculated on the Group shareholders' fund at fair value of R47 981 million (2011:
R41 854 million), divided by 2 029,1 million (2011: 2 011,7 million) shares.
Net asset value per share is calculated on the Group shareholders' fund at net asset value of R34 167 million
(2011: R31 321 million), divided by 2 029,1 million (2011: 2 011,7 million) shares.
Equity value per share is calculated on the Group equity value of R66 820 million (2011: R57 885 million),
divided by 2 029,1 million (2011: 2 011,7 million) shares.
June
Reviewed
Million 2012 2011
Number of shares for value per share:
Number of ordinary shares in issue 2 100,0 2 100,0
Shares held by subsidiaries in shareholders' fund (154,5) (157,9)
Outstanding shares and share options in respect of Sanlam Limited
long-term incentive schemes 33,2 38,3
Number of shares under option that would have been issued at
fair value 0,0 (1,2)
Convertible deferred shares held by Ubuntu-Botho 50,4 32,5
Adjusted number of shares for value per share 2 029,1 2 011,7
Embedded value of covered business
at 30 June 2012
Embedded value of covered business
June December
Reviewed Audited
R million note 2012 2011 (2) 2011
Sanlam Personal Finance 27 819 25 346 26 687
Adjusted net worth 8 555 8 589 8 622
Net value of in-force covered business 19 264 16 757 18 065
Value of in-force covered business 21 001 18 526 19 813
Cost of capital (1 737) (1 755) (1 721)
Minority shareholders' interest (14) (27)
Sanlam Emerging Markets 2 345 2 015 2 320
Adjusted net worth 1 020 892 1 012
Net value of in-force covered business 1 325 1 123 1 308
Value of in-force covered business 2 240 1 890 2 181
Cost of capital (235) (177) (226)
Minority shareholders' interest (680) (590) (647)
Sanlam UK 777 637 791
Adjusted net worth 236 177 250
Net value of in-force covered business 541 460 541
Value of in-force covered business 592 485 575
Cost of capital (51) (25) (34)
Minority shareholders' interest
Sanlam Employee Benefits 5 132 5 047 5 077
Adjusted net worth 4 741 4 567 4 669
Net value of in-force covered business 391 480 408
Value of in-force covered business 1 320 1 395 1 319
Cost of capital (929) (915) (911)
Minority shareholders' interest
Embedded value of covered business 36 073 33 045 34 875
Adjusted net worth (1) 14 552 14 225 14 553
Net value of in-force covered business 1 21 521 18 820 20 322
Embedded value of covered business 36 073 33 045 34 875
(1) Excludes subordinated debt funding of Sanlam Life.
(2) Comparative information has been restated as referred to in the basis of preparation.
Embedded value of covered business (continued)
for the six months ended 30 June 2012
Change in embedded value of covered business
Six months Reviewed
2012
Value of Cost of Adjusted
R million Note Total in-force capital net worth
Embedded value of covered
business at the beginning
of the period 34 875 23 145 (2 823) 14 553
Value of new business 2 491 1 272 (68) (713)
Net earnings from existing
Covered business 1 557 (524) 101 1 980
Expected return on value of
In-force business 1 259 1 197 62
Expected transfer of profit to
Adjusted net worth (1 641) 1 641
Operating experience
Variances 3 230 (175) 405
Operating assumption
Changes 4 68 95 39 (66)
Expected investment return on
Adjusted net worth 528 528
Embedded value earnings from
operations 2 576 748 33 1 795
Economic assumption
Changes 5 375 401 41 (67)
Tax changes 6 (234) (83) (91) (60)
Investment variances value
of in-force 207 202 (39) 44
Investment variances
investment return on
adjusted net worth 54 54
Exchange rate movements (37) (41) 4
Net project expenses 7
Embedded value earnings from
Covered business 2 941 1 227 (52) 1 766
Acquired value of in-force 36 25 (1) 12
Transfers from/(to) other
Group operations
Transfers from covered business (1 779) (1 779)
Embedded value of covered business
at the end of the period 36 073 24 397 (2 876) 14 552
Analysis of earnings from covered business
Sanlam personal finance 2 430 1 188 (16) 1 258
Sanlam Emerging Markets 182 21 (1) 162
Sanlam UK 33 17 (17) 33
Sanlam Employee Benefits 296 1 (18) 313
Embedded value earnings from
covered business 2 941 1 227 (52) 1 766
Change in embedded value of covered business
(continued) Full year
Six months Reviewed Audited
2011 (1) 2011
Value of Cost of Adjusted
R million Note Total in-force capital net worth Total
Embedded value of covered
business at the beginning
of the period 31 045 19 840 (2 828) 14 033 31 045
Value of new business 2 356 1 035 (42) (637) 958
Net earnings from existing
Covered business 1 450 (181) 58 1 573 3 125
Expected return on value of
In-force business 1 181 1 116 65 2 404
Expected transfer of profit to
Adjusted net worth (1 443) 1 443
Operating experience
Variances 3 231 15 (16) 232 681
Operating assumption
Changes 4 38 131 9 (102) 40
Expected investment return on
Adjusted net worth 521 521 1 062
Embedded value earnings from
operations 2 327 854 16 1 457 5 145
Economic assumption
Changes 5 (215) (195) (19) (1) 132
Tax changes 6 1 249 1 244 2 3 1 244
Investment variances value
of in-force (87) (153) 15 51 (136)
Investment variances
investment return on
adjusted net worth (127) (127) (259)
Exchange rate movements 19 20 (1) 151
Net project expenses 7 (8) (8) (4)
Embedded value earnings from
Covered business 3 158 1 770 13 1 375 6 273
Acquired value of in-force 99 30 (5) 74 235
Transfers from/(to) other
Group operations 34
Transfers from covered business (1 257) (1 257) (2 712)
Embedded value of covered business
at the end of the period 33 045 21 640 (2 820) 14 225 34 875
Analysis of earnings from covered business
Sanlam personal finance 2 650 1 581 26 1 043 5 146
Sanlam Emerging Markets 152 50 6 96 571
Sanlam UK 72 30 4 38 229
Sanlam Employee Benefits 284 109 (23) 198 327
Embedded value earnings from
covered business 3 158 1 770 13 1 375 6 273
(1) Comparative information has been restated as referred to in the basis of preparation.
Embedded value of covered business (continued)
for the six months ended 30 June 2012
ValUe of new business
Six months Full year
Reviewed Audited
R million note 2012 2011 (1) 2011
Value of new business (at point of sale):
Gross value of new business 610 452 1 193
Sanlam Personal Finance 412 308 755
Sanlam Emerging Markets 126 103 248
Sanlam UK 10 7 11
Sanlam Employee Benefits 62 34 179
Cost of capital (77) (51) (142)
Sanlam Personal Finance (22) (21) (50)
Sanlam Emerging Markets (18) (14) (25)
Sanlam UK (2) (1) (3)
Sanlam Employee Benefits (35) (15) (64)
Value of new business 533 401 1 051
Sanlam Personal Finance 390 287 705
Sanlam Emerging Markets 108 89 223
Sanlam UK 8 6 8
Sanlam Employee Benefits 27 19 115
Value of new business attributable to:
Shareholders' fund 2 491 356 958
Sanlam Personal Finance 390 286 701
Sanlam Emerging Markets 66 45 134
Sanlam UK 8 6 8
Sanlam Employee Benefits 27 19 115
Minority shareholders' interest 42 45 93
Sanlam Personal Finance 1 4
Sanlam Emerging Markets 42 44 89
Sanlam UK
Sanlam Employee Benefits
Value of new business 533 401 1 051
Geographical analysis:
South africa 417 298 820
Africa 109 95 223
Other international 7 8 8
Value of new business 533 401 1 051
(1) Comparative information has been restated as referred to in the basis of preparation.
Six months Full year
Reviewed Audited
R million 2012 2011 (1) 2011
Analysis of new business profitability:
Before minorities:
Present value of new business premiums 17 930 14 785 32 786
Sanlam Personal Finance 12 680 10 856 23 423
Sanlam Emerging Markets 2 199 1 732 3 642
Sanlam UK 1 042 695 1 374
Sanlam Employee Benefits 2 009 1 502 4 347
New business margin 2,97% 2,71% 3,21%
Sanlam Personal Finance 3,08% 2,64% 3,01%
Sanlam Emerging Markets 4,91% 5,14% 6,12%
Sanlam UK 0,77% 0,86% 0,58%
Sanlam Employee Benefits 1,34% 1,26% 2,65%
After minorities:
Present value of new business premiums 17 150 14 112 31 449
Sanlam Personal Finance 12 669 10 823 23 353
Sanlam Emerging Markets 1 430 1 092 2 375
Sanlam UK 1 042 695 1 374
Sanlam Employee Benefits 2 009 1 502 4 347
New business margin 2,86% 2,52% 3,05%
Sanlam Personal Finance 3,08% 2,64% 3,00%
Sanlam Emerging Markets 4,62% 4,12% 5,64%
Sanlam UK 0,77% 0,86% 0,58%
Sanlam Employee Benefits 1,34% 1,26% 2,65%
NoteS to the embedded value of covered business
1. Value of in-force sensitivity analysis
Gross Net
value value Change
of of from
in-force Cost of in-force base
business capital business value
R million R million R million %
Base value 24 397 (2 876) 21 521
- Risk discount rate increase by 1% 22 995 (3 531) 19 464 (10)
2. Value of new business sensitivity analysis
Gross Net
value value Change
of of from
new Cost of new base
business capital business value
R million R million R million %
Base value 559 (68) 491
- Risk discount rate increase by 1% 485 (84) 401 (18)
Six months Full year
Reviewed Audited
R million 2012 2011 2011
3. operating experience variances
Risk experience 340 207 431
Working capital and other (110) 24 250
Total operating experience variances 230 231 681
4. Operating assumption changes
Mortality and morbidity (54) (131) 13
Persistency 29 (29) (147)
Modelling improvements and other 93 198 174
Total operating assumption changes 68 38 40
5. Economic assumption changes
Investment yields 312 (222) 130
Long-term asset mix assumptions, inflation gap
change and other 63 7 2
Total economic assumption changes 375 (215) 132
6. Tax changes
Tax changes for 2012 are mostly due to withholding dividend tax and the change to the inclusion
rate for capital gains tax.
7. 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.
8. Economic assumptions
June Reviewed December Audited
% 2012 2011 2011
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 7,6 8,7 8,2
Equities and offshore investments 11,1 12,2 11,7
Hedged equities 8,1 9,2 8,7
Property 8,6 9,7 9,2
Cash 6,6 7,7 7,2
Return on required capital 8,6 9,6 9,1
Inflation rate (1) 5,6 5,7 5,2
Risk discount rate 10,1 11,2 10,7
SDM Limited
Point used on the relevant yield curve 5 year 5 year 5 year
Fixed-interest securities 6,7 8,1 7,4
Equities and offshore investments 10,2 11,6 10,9
Hedged equities n/a n/a n/a
Property 7,7 9,1 8,4
Cash 5,7 7,1 6,4
Return on required capital 8,0 9,4 8,7
Inflation rate 4,7 5,1 4,4
Risk discount rate 9,2 10,6 9,9
Sanlam Life and Pensions UK Limited
Point used on the relevant yield curve 15 year 15 year 15 year
Fixed-interest securities 2,3 4,0 2,5
Equities and offshore investments 5,5 7,2 5,7
Hedged equities n/a n/a n/a
Property 5,5 7,2 5,7
Cash 2,3 4,0 2,5
Return on required capital 2,3 4,0 2,5
Inflation rate 2,3 3,5 2,7
Risk discount rate 6,0 7,7 6,2
Botswana Life Insurance
Fixed-interest securities 9,5 10,0 9,5
Equities and offshore investments 13,0 13,5 13,0
Hedged equities n/a n/a n/a
Property 10,5 11,0 10,5
Cash 8,5 9,0 8,5
Return on required capital 9,6 10,1 9,6
Inflation rate 6,5 7,0 6,5
Risk discount rate 13,0 13,5 13,0
(1) Expense inflation of 7,6% (Dec 2011: 7,2%) assumed for Retail business administered on old platforms.
Illiquidity premiums
Investment returns on non-participating annuities and guaranteed plans include assumed illiquidity
premiums due to matching assets being held to maturity.
Assumed illiquidity premiums generally amount to between 25bps and 50bps (2011: 25bps and 50bps)
for non-participating annuities and between 25bps and 110bps (2011: 25bps and 110bps) for guaranteed plans.
June December
Reviewed Audited
% 2012 2011 2011
Asset mix for assets supporting required capital
Sanlam life
Equities 26 24 26
Offshore investments 10 10 10
Hedged equities 13 13 13
Property 3
Fixed-interest securities 15 15 15
Cash 36 35 36
100 100 100
SDM Limited
Equities 50 50 50
Cash 50 50 50
100 100 100
Sanlam Life and Pensions UK Limited
Cash 100 100 100
100 100 100
Botswana Life Insurance
Equities 15 15 15
Property 10 10 10
Fixed-interest securities 25 25 25
Cash 50 50 50
100 100 100
Interim condensed consolidated financial statements
for the six months ended 30 June 2012
Contents
External review report
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
External review report
Report on review of interim condensed consolidated financial statements
To the directors of Sanlam limited
Introduction
We have reviewed the accompanying interim condensed consolidated statement of financial position of Sanlam Limited
as of 30 June 2012 and the related statements of comprehensive income, changes in equity and cash flow for the
sixmonth period then ended and other explanatory notes set out below. The Group's directors are
responsible for the preparation and presentation of these interim condensed consolidated financial statements in
accordance with International Financial Reporting Standard IAS 34 `Interim Financial Reporting' and the requirements
of the Companies Act of South Africa. Our responsibility is to express a conclusion on these interim condensed
consolidated financial statements based on our review.
Scope of review
We conducted our review in accordance with International Standard of Review Engagements 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information
consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed
consolidated financial statements of Sanlam Limited is not prepared, in all material respects, in accordance with
International Financial Reporting Standard IAS 34, "Interim Financial Reporting" and the requirements of the Companies Act
of South Africa.
Ernst & Young Inc
Director: Malcolm Rapson
Registered auditor
Chartered accountant (SA)
Ernst & Young House
35 Lower Long Street
Cape Town
5 September 2012
Statement of financial position
at 30 June 2012
June December
Reviewed Audited
R million 2012 2011
Assets
Property and equipment 488 514
Owner-occupied properties 586 586
Goodwill 3 182 3 195
Other intangible assets 42 47
Value of business acquired 1 599 1 611
Deferred acquisition costs 2 570 2 427
Long-term reinsurance assets 748 674
Investments 349 280 329 150
Properties 16 086 15 310
Equity-accounted investments 3 123 2 938
Equities and similar securities 175 833 165 582
Public sector stocks and loans 58 667 58 831
Debentures, insurance policies, preference shares
and other loans 37 446 35 002
Cash, deposits and similar securities 58 125 51 487
Deferred tax 439 640
Non-current assets held for sale 1 390
Short-term insurance technical assets 2 010 1 831
Working capital assets 44 664 40 138
Trade and other receivables 30 070 25 761
Cash, deposits and similar securities 14 594 14 377
Total assets 405 608 382 203
Equity and liabilities
Capital and reserves
Share capital and premium 22 22
Treasury shares (3 739) (3 780)
Other reserves 8 990 9 228
Retained earnings 28 130 28 352
Shareholders' fund 33 403 33 822
Minority shareholders' interest 2 700 3 046
Total equity 36 103 36 868
Long-term policy liabilities 298 610 282 421
Insurance contracts 139 298 135 742
Investment contracts 159 312 146 679
Term finance 6 356 6 295
Margin business 2 397 2 414
Other interest-bearing liabilities 3 959 3 881
Derivative liabilities 214 212
External investors in consolidated funds 14 871 11 592
Cell owners' interest 611 603
Deferred tax 902 902
Short-term insurance technical provisions 8 694 8 682
Working capital liabilities 39 247 34 628
Trade and other payables 36 648 32 502
Provisions 433 423
Taxation 2 166 1 703
Total equity and liabilities 405 608 382 203
Statement of comprehensive income
for the six months ended 30 June 2012
Reviewed Reviewed
R million Note 2012 2011
Net income 36 638 24 862
Financial services income 19 397 17 505
Reinsurance premiums paid (2 188) (1 707)
Reinsurance commission received 270 214
Investment income 9 171 7 442
Investment surpluses 10 780 1 512
Finance cost margin business (82) (110)
Change in fair value of external investors' liability (710) 6
Net insurance and investment contract benefits and claims (24 589) (13 930)
Long-term insurance and investment contract benefits (19 859) (9 664)
Short-term insurance claims (5 859) (5 220)
Reinsurance claims received 1 129 954
Expenses (7 542) (6 821)
Sales remuneration (2 589) (2 485)
administration costs (4 953) (4 336)
Impairments (6) (22)
Amortisation of intangibles (70) (78)
Net operating result 4 431 4 011
Equity-accounted earnings 271 221
Finance cost other (163) (179)
Profit before tax 4 539 4 053
Taxation (1 779) (1 303)
Shareholders' fund (1 298) (947)
Policyholders' fund (481) (356)
Profit for the period 2 760 2 750
Other comprehensive income
Movement in foreign currency translation reserve 2 101
Comprehensive income for the period 2 762 2 851
Allocation of comprehensive income
Profit for the period 2 760 2 750
Shareholders' fund 2 402 2 274
Minority shareholders' interest 358 476
Comprehensive income for the period 2 762 2 851
Shareholders' fund 2 417 2 370
Minority shareholders' interest 345 481
Earnings attributable to shareholders of the company
(cents):
Profit for the period
basic earnings per share 1 124,8 117,0
Diluted earnings per share 1 119,8 113,1
Statement of changeS in equity
for the six months ended 30 June 2012
Reviewed Reviewed
R million 2012 2011
Shareholders' fund:
Balance at beginning of the period 33 822 31 778
Comprehensive income 2 417 2 370
Profit for the period 2 402 2 274
Other comprehensive income: movement in foreign currency
translation reserve 15 96
Net acquisition of treasury shares (1) (413) (1 170)
Share-based payments 161 87
Acquisitions, disposals and other movements in interests (28) (14)
Dividends paid (2) (2 556) (2 261)
Balance at end of the period 33 403 30 790
Minority shareholders' interest
Balance at beginning of the period 3 046 2 608
Comprehensive income 345 481
Profit for the period 358 476
Other comprehensive income: movement in foreign currency
translation reserve (13) 5
Net acquisition of treasury shares (1) (14)
Share-based payments 15 9
Dividends paid (682) (305)
Acquisitions, disposals and other movements in interests (24) 42
Balance at end of the period 2 700 2 821
Shareholders' fund 33 822 31 778
Minority shareholders' interest 3 046 2 608
Total equity at beginning of the period 36 868 34 386
Shareholders' fund 33 403 30 790
Minority shareholders' interest 2 700 2 821
Total equity at end of the period 36 103 33 611
(1)Comprises movement in cost of shares held by subsidiaries and the share incentive trust.
(2)Dividend of 130 cents per share paid during 2012 (2011: 115 cents per share) in respect of the 2012
financial year.
Cash floW statement
for the six months ended 30 June 2012
Reviewed Reviewed
R million 2012 2011
Cash flow from operating activities 6 523 5 532
Cash flow from investment activities 796 (5 802)
Cash flow from financing activities (456) (948)
Net increase/(decrease) in cash and cash equivalents 6 863 (1 218)
Cash, deposits and similar securities at beginning
of the period 65 857 61 164
Cash, deposits and similar securities at end of the period 72 720 59 946
Notes to the Group financial statements
for the six months ended 30 June 2012
Reviewed Reviewed
2012 2011
1. Earnings per share
For basic earnings per share the weighted average number of ordinary shares is adjusted for the treasury shares held
by subsidiaries and policyholders. Basic earnings per share is calculated by dividing earnings by the adjusted weighted
average number of shares in issue.
For diluted earnings per share the weighted average number of ordinary shares is adjusted for the shares not yet issued
under the Sanlam Share Incentive Scheme, treasury shares held by subsidiaries and the conversion of deferred shares.
Diluted earnings per share is calculated by dividing earnings by the adjusted diluted weighted average number of shares in issue.
Refer to note 3 for normalised earnings per share, which is based on the economic earnings attributable to the shareholders'
fund, and should be used when evaluating the Group's economic performance.
cents cents
Basic earnings per share:
Headline earnings 125,1 113,5
Profit attributable to shareholders' fund 124,8 117,0
Diluted earnings per share:
Headline earnings 120,1 109,6
Profit attributable to shareholders' fund 119,8 113,1
R million R million
Analysis of earnings:
Profit attributable to shareholders' fund 2 402 2 274
Less: Net profit on disposal of operations (91)
Profit on disposal of subsidiaries (103)
Tax on profit on disposal of subsidiaries and businesses 17
Minority shareholders' interest (5)
Plus: Impairments 6 22
Headline earnings 2 408 2 205
million million
Number of shares:
Number of ordinary shares in issue at beginning of the period 2 100,0 2 100,0
Less: Weighted Sanlam shares held by subsidiaries (including
policyholders) (174,6) (156,8)
Adjusted weighted average number of shares for basic earnings
per share 1 925,4 1 943,2
Add: Weighted conversion of deferred shares 46,7 30,7
Add: Total number of shares and options 33,2 38,3
Less: Number of shares (under option) that would have been
issued at fair value (1,2)
Adjusted weighted average number of shares for diluted
earnings per share 2 005,3 2 011,0
Reviewed Reviewed
R million 2012 2011
2. Reconciliation of segmental information
Segment financial services income (per shareholders'
fund information) 17 933 16 396
Sanlam Personal Finance 5 496 5 139
Sanlam Emerging Markets 1 300 1 088
Sanlam Investments 3 152 2 877
Santam 7 906 7 220
Corporate, consolidation and other 79 72
IFRS adjustments 1 464 1 109
Total financial services income 19 397 17 505
Segment results (per shareholders' fund information after
tax and minorities) 2 533 2 271
Sanlam Personal Finance 2 499 1 261
Sanlam Emerging Markets 245 157
Sanlam Investments 591 489
Santam 283 368
Corporate, consolidation and other (1 085) (4)
Reverse minority shareholders' interest included in
segment result 358 476
Fund transfers (131) 3
Total profit for the period 2 760 2 750
Additional segmental information is provided in the Shareholders' information.
3. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2011 annual report. The circumstances surrounding
the other contingent liabilities remain materially unchanged, apart from the total utilisation of guarantees by SCM which
increased from R8.5 billion to a maximum of R11 billion at any one time.
4. Subsequent Events
As indicated in the overview of the results, the transaction in terms of which the Group will invest R2 billion in the
Shriram Capital Group is expected to conclude imminently. The cash component of the purchase consideration will be settled
from existing cash resources.
No other 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 2012 as reflected in these financial statements.
Administration
Group Secretary
Sana-ullah Bray
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 (primary listing): 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, P Buthelezi, FA du Plessis, MV Moosa, JP Möller (1), YG Muthien (1),
TI Mvusi (1), SA Nkosi, I Plenderleith (2), P de V Rademeyer, RV Simelane, CG Swanepoel, ZB Swanepoel, PL Zim(1)Executive
(2) British
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 06/09/2012 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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