Wrap Text
Audited Results for the year ended 31 December 2012
Sanlam Group
Incorporated in the Republic of South Africa
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
Registered name: Sanlam Limited
(Registration number 1959/001562/06)
Sanlam or the company
Sanlam Group Results December 2012
Audited Results for the year ended 31 December 2012
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Financial statements
Accounting policies and basis of presentation
External audit
Shareholders information
Group Equity Value
Shareholders fund income statement
Notes to the shareholders information
Embedded value of covered business
Group financial statements
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Administration
Key features
Earnings
Net result from financial services per share increased by 6%
Normalised headline earnings per share up 17%
Business volumes
New business volumes up 18% to R136 billion
Net value of new covered business up 23% to R1 176 million
Net new covered business margin of 3,22%, up from 3,05%
Net fund inflows of R23 billion
Group Equity Value
Group Equity Value per share of R37,07
Return on Group Equity Value per share of 22%
Capital management
Unallocated discretionary capital of R4,2 billion at 31 December 2012
Sanlam Life Insurance Limited CAR cover of 4,3 times
Dividend
Normal dividend of 165 cents per share, up 27%
Special dividend of 50 cents per share
SALIENT RESULTS
for the year ended 31 December 2012
SANLAM GROUP
Earnings 2012 2011 Delta
Net result from financial services per share(1) cents 198,9 187,1 6%
Normalised headline earnings per share(2) cents 292,1 248,7 17%
Diluted headline earnings per share cents 286,8 250,1 15%
Net result from financial services(1) R million 4 030 3 779 7%
Normalised headline earnings(2) R million 5 919 5 023 18%
Headline earnings R million 5 763 5 015 15%
Group administration cost ratio(3) % 30,6 29,9
Group operating margin(4) % 19,4 20,3
Business volumes
New business volumes R million 135 903 115 087 18%
Net fund inflows R million 22 989 25 480 (10%)
Net new covered business
Value of new covered business R million 1 176 958 23%
Covered business PVNBP(5) R million 36 528 31 449 16%
New covered business margin(6) % 3,22 3,05
Group Equity Value
Group Equity Value R million 75 352 63 521 19%
Group Equity Value per share cents 3 707 3 146 18%
Return on Group Equity Value per share(7) % 22,0 15,7
SANLAM LIFE INSURANCE LIMITED
Shareholders fund R million 55 466 45 172
Capital Adequacy Requirements (CAR) R million 7 125 7 350
CAR covered by prudential capital Times 4,3 3,7
Notes
(1)Comparative information has been restated as set out in the introduction to comments on the
results.
(2)Normalised headline earnings = headline earnings, excluding fund transfers.
(3)Administration costs as a percentage of income after sales remuneration.
(4)Result from financial services as a percentage of income after sales remuneration.
(5) PVNBP = present value of new business premiums and is equal to the present value of new
recurring premiums plus single premiums.
(6)New covered business margin = value of new covered business as a percentage of PVNBP.
(7) 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.
EXECUTIVE REVIEW
Sanlams 2012 financial result is another satisfactory addition to the Groups performance history
and further confirmation of our strategy to generate sustained growth in shareholder value. Sanlam
achieved another important milestone in 2012, with the value of new life business net of minorities
exceeding R1 billion for the first time, representing growth of 21% per annum since 2003;
emphasising again the turnaround from a company that was viewed as mature and ex-growth by
industry commentators at the time.
The 2012 results reflect a resilient performance in an overall challenging environment. Economic
growth remained marginal in most of the territories where the Group operates, impacting on consumers
disposable income. The South African general insurance industry also experienced one of its most
difficult underwriting environments in many years. This was partly offset by strong equity and bond
markets, which supported fees earned on assets under management.
The Return on Group Equity Value (RoGEV) per share for 2012 came in at 22%, exceeding the target
of 12,2% by a comfortable margin. The adjusted RoGEV per share, which excludes the impact of
investment markets and tax changes during the period, amounted to 15%, also well in excess of the
target.Our primary performance target is to optimise shareholder value through maximising the RoGEV per
share. Given the nature of the Groups diversified business we consider this measure of performance the
most appropriate since it incorporates the result of all the major value drivers in the business.
The net result from financial services grew by 6% on a per share basis. Other salient results are:
New business volumes increased by 18% to R136 billion
Net value of new covered business up 23%
Net VNB margin of 3,22% compared to 3,05% in 2011
Normal dividend per share increased by 27% to 165 cents
Special dividend per share of 50 cents
2012 strategic initiatives
Five strategic pillars underpin the Sanlam Group business model:
Improving performance through top-line earnings growth;
Achieve improved operating and cost efficiencies, including quality;
Improving capital efficiency on an ongoing basis;
Prioritising Sanlams international positioning through diversification; and
Embracing and accelerating transformation of the Group.
Earnings growth
The Sanlam Group delivered healthy earnings growth in 2012 despite the challenging operating
environment, which provided support for the Groups targeted diversification strategy.
Earnings growth was driven by solid contributions mainly from Sanlam Personal Finance (SPF)
and Sanlam Emerging Markets (SEM), somewhat offset by a deterioration in the Santam
underwriting results.
SPF achieved satisfactory organic growth of 6% in its entry-level market new business sales,
middle income new business volumes increased by 16% and the affluent market segment recorded
a 21% increase in new business. SEM delivered exceptional growth of 70% in its Rest of Africa
operations as a result of its successful partnerships in Africa.
A strong focus on the quality of new business was maintained by providing clients with affordable
and appropriate products for their specific needs and as a result persistency levels remain strong
across all market segments. The fact that entry-level market persistency levels did not deteriorate
from the 2011 levels was quite an achievement given the impact of the industrial action on this
segment.
Operating and cost efficiencies
The Sanlam for Sanlam cooperation programme, introduced at the end of 2010 to increase profits
through cooperation between businesses, is already making a significant contribution. The Blueprint
for Success initiative, launched late in 2012, is aimed at enhancing the Sanlam for Sanlam programme
by helping employees embrace the critical enabling factors that will help Sanlam achieve accelerated
growth.
In 2012 SPF also completed the implementation of new IT systems at a cost of some R400 million,
which will enable the cluster to improve efficiencies and design more innovative and competitive
products.
As part of our drive to remain relevant into the future we have to recognise that future
generations will engage differently with our products and services. It is imperative that our digital
strategy is implemented by the time South Africas digital generation is old enough to engage with our
offering. For this reason, we have intensified our focus on our digital strategy.
Sanlam Investments has also focused on improving margins through the effective use of technology
to improve efficiency and to reduce costs. In addition, the Sanlam Investments website has been
enhanced to facilitate a better client experience by providing more regular and easily accessible
information to clients.
Capital efficiency
Our liquidity position remained robust in 2012 and all of the Group operations remain well
capitalised. We started 2012 with a war chest of around R4 billion, which was bolstered by a strong
initiative in 2012 to drive surplus capital out of the various businesses and allocate this money to
growth initiatives. A total of R3,3 billion was redeployed during 2012.
The Sanlam Group held discretionary capital of R4,2 billion at the end of December 2012. We have
identified a number of opportunities that fit in with our strategic focus of bulking up in the
high-growth areas of Africa, India and South-East Asia, while we will also allocate some capital to
strengthen our distribution capabilities in South Africa. These initiatives will be pursued during
2013.
The Board fully supports the stated strategy not to hold excess capital that is unlikely to be
utilised within a reasonable period. It therefore approved the return to shareholders of the
approximately R1 billion added to discretionary capital in the second half of 2012 by way of a
special dividend of 50 cents per share.
Diversification
Our successful diversification strategy has enabled us to deliver consistent robust business
performance in recent years. Over the past 10 years Sanlam has evolved from a traditional insurer
to a diversified financial services provider with an extensive product offering catering for all
market segments. We have also successfully grown our local and international footprint with the aim
of further diversifying revenue streams.
Today we have a presence in 10 African countries, excluding South Africa, as well as India. In
2012 we also confirmed two acquisitions that will see us expanding our presence in India and
venturing into Malaysia in 2013. Furthermore we also have successful operations in the UK, Ireland,
Switzerland and Australia.
In 2013 we will focus on extracting more value from our existing partnerships in Africa. We will
also finalise our Malaysian acquisition and continue to identify other opportunities in South East
Asia, which we believe offers tremendous growth opportunities. In South Africa our focus will be on
growing our market share in the Gauteng market as well as in the entry-level market.
The Sanlam business is still predominantly intermediated and as part of our diversification
strategy we are looking at alternative methods of distribution, especially in the entry-level market.
Our joint ventures with affinity groups such as unions and church groups have proven successful
alternative distribution channels and we will continue to expand on this approach.
We have also made good progress with MiWay, a direct short-term insurance company owned by Santam.
Our future goal is to add traditional Sanlam products to the MiWay online platform.
Transformation
In order to remain a relevant player in a constantly changing environment we need to maintain the
agility to transform our business to meet new demands.
In the South African context transformation is traditionally seen as a companys willingness to
adapt the composition of its staff complement and its shareholding to more accurately reflect the
demographics of the country. We are committed to achieving this and as a result we have made good
progress. In 2011 we had set ourselves the target of increasing our black staff complement to 62%
by the end of 2012. Not only did we achieve this, but we also exceeded this target by a small
margin. At the end of 2012, 63% of our staff complement was black.
As far back as 1993, Sanlam concluded the countrys first major black economic empowerment
transaction with the sale of Metropolitan to a black-owned consortium. In 2004 the Ubuntu-Botho deal
resulted in a broad-based black empowerment consortium buying a 10% shareholding in Sanlam in what
was to become one of the most far-reaching black empowerment transactions to date. With the gazetting
of the Financial Sector Code late in 2012 we now have a clear roadmap on how to build on existing
achievements in black economic empowerment to the benefit of all stakeholders.
We also believe our willingness to transform must extend to other areas of our business. We have
therefore been transforming our offering to the entry-level market as well as our distribution model
for this segment to ensure more people have access to financial services.
As one of the biggest financial services groups in the country, the transformation of the savings
and investment landscape of South Africa is an additional priority and we continue working with the
Association for Savings and Investment South Africa (ASISA) as well as National Treasury and the
Financial Services Board (FSB) to achieve this.
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, among 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 year ended 31 December 2012 are presented based on and in
compliance with International Financial Reporting Standards (IFRS). The basis of presentation and
accounting policies for the IFRS financial statements and shareholders information are in all material
respects consistent with those applied in the 2011 annual report, apart from the following changes to the
shareholders information and segmental reporting:
Corporate expenses relating to the SEM cluster that was included in the overall Group
adjustment for holding company expenses has been reallocated to the SEM cluster. Comparative information
has been restated accordingly (already implemented in the 2012 interim results).
The establishment and growth of certain niche and specialised Group businesses are materially
linked to and dependent on the continued involvement of a few key specialist staff members. To retain
and appropriately incentivise these individuals, they are in exceptional cases granted
participation schemes through which they effectively share in the value created within these businesses.
The cost associated with the equity participation schemes is in substance similar to intangible assets
recognised in a business combination and commensurately not part of the Groups operational performance.
The change in fair value of the equity participation schemes is therefore excluded from the net
result from financial services and recognised as equity participation cost in the shareholders fund
income statement. Comparative information has been restated accordingly.
The Sanlam Investments cluster has been restructured, which affects the presentation of Group
Equity Value, the shareholders fund at fair value and the shareholders fund at net asset value.
Comparative information has been restated accordingly.
Group Equity Value
As at 31 December 2012 the total GEV amounted to R75,4 billion or 3 707 cents per share. Taking
into account the dividend of 130 cents per share paid in May 2012, this represents growth of 22,5%
and 22,0% respectively on the R63,5 billion and 3 146 cents per share in December 2011, both well above
the 2012 performance hurdle of 12,2%.
The Group has a significant exposure to investment markets, both in respect of the shareholder
capital portfolio that is invested in financial instruments, as well as a significant portion of the
fee income base that is linked to the level of assets under management. The strong investment market
performance during 2012 had a marked positive impact on the RoGEV for the period. Excluding the
favourable impact of investment returns in excess of the long-term expectations, lower long-term interest
rates and certain other once-off effects, an adjusted RoGEV of 15% is still in excess of the return
target.
Group Equity Value
at 31 December 2012
Group Equity Value RoGEV
R million 2012 2011 2012 %
Group operations 68 166 56 809 14 303 24,9
Sanlam Personal Finance 32 762 28 876 6 862 23,8
Sanlam Emerging Markets(1) 6 105 3 409 669 16,9
Sanlam Investments 16 424 14 909 2 539 16,9
Santam 12 875 9 615 4 233 44,0
Covered business 38 996 34 875 7 908 22,7
Value of in-force 24 050 20 322 6 433 31,7
Net worth 14 946 14 553 1 475 10,1
Other operations 29 170 21 934 6 395 28,2
68 166 56 809 14 303 24,9
Discretionary capital and other(1) 7 186 6 712 7 0,1
Group Equity Value 75 352 63 521 14 310 22,5
Per share (cents) 3 707 3 146 691 22,0
(1)Comparative information has been restated as set out in the introduction to comments
on the results.
Group operations of R68 billion yielded an overall return of 24,9% in 2012. The embedded value of
covered business (life operations) amounted to R39 billion, accounting for 52% of GEV in December
2012, marginally down from 55% in 2011. The capital allocated to the life operations increased
marginally to R15 billion. In aggregate, a balanced after tax investment return of 10,1% was earned
on the supporting capital portfolios in 2012. The in-force book of R24,1 billion yielded an exceptional
return of 31,7%. Strong VNB growth and continued positive operating experience variances, substantially
positive risk experience, supported this sound result. This was partly offset by negative tax
changes of R168 million emanating largely from an increase in the effective capital gains tax rate in
South Africa.
Other Group operations provided a return of 28,2%, assisted by a substantial contribution from the
Groups investment in Santam. The valuations of the other non-insurance operations were in general
positively impacted by a higher level of assets under management, somewhat 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 44% return earned on this investment.
The low return on discretionary and other capital is essentially the combined effect of the
investment return earned on surplus capital (substantially invested in low yielding liquid assets),
offset by corporate costs and the secondary tax on companies (STC) expense incurred in 2012. Refer
to the Capital and solvency section below for information on the movement in discretionary capital
during 2012.
Earnings
Normalised headline earnings of R5,9 billion or 292,1 cents per share are 17% higher than in 2011,
largely attributable to a 50% increase in the net investment return earned on the capital
portfolio, the result of the strong performance in the South African equity and bond markets in 2012
relative to a weak 2011. This was partly offset by an increase in the amortisation of intangible assets
acquired, the mark-to-market of equity participation rights of staff members in selected start-up Group
businesses (MiWay and certain SI international initiatives), as well as the final STC charge on the
dividend paid in May 2012. This charge will in 2013 be replaced by a dividend withholding tax and
will thus not be reflected in the Groups results.
Shareholders fund income statement
for the year ended 31 December 2012
R million 2012 2011 Delta
Net result from financial services 4 030 3 779 7%
Sanlam Personal Finance 2 351 1 990 18%
Sanlam Emerging Markets 428 309 39%
Sanlam Investments 975 945 3%
Corporate and other (129) (124) (4%)
3 625 3 120 16%
Santam(1) 405 659 (39%)
Net investment return 2 356 1 571 50%
Project costs and amortisation (178) (133) (34%)
Equity participation costs(1) (56) (26) (115%)
Secondary tax on companies (233) (168) (39%)
Normalised headline earnings 5 919 5 023 18%
Per share (cents) 292,1 248,7 17%
(1) Comparative information has been restated as set out in the introduction to comments on the
results.
Net operating profit (net result from financial services), of R4,0 billion, increased by 7%. A
strong performance by Sanlam Personal Finance (SPF) and Sanlam Emerging Markets (SEM) was offset by
marginal growth reported by Sanlam Investments (SI) and a significant deterioration in the underwriting
results experienced by Santam during 2012. Excluding the Santam results, net operating profit
increased by a satisfactory 16%.
SPFs gross result from financial services increased by 18%. The entry-level market recorded gross
operating earnings of R375 million, 27% up on 2011. Improved mortality and persistency experience
supported individual life profit. Safrican also benefited from lower claims experience. Middle-income
market profit increased by 17%, attributable to strong growth in risk profits, 33% growth in Sanlam
Personal Loans contribution and a lower impact from actuarial basis changes due to the
strengthening of the mortality basis in 2011 that was not repeated in 2012. Despite the negative
impact of system development expenditure, administration profit increased by 7%, supported by a
strong increase in fund fees from the higher average level of assets under management. Glacier
also reported satisfactory profit growth of 11%.
SEM recorded a 30% increase in its gross result from financial services. A more than doubling in
the Rest of Africa and India contributions was partly offset by lower growth in the more mature
Namibia and Botswana markets as expected. The increased holding in Letshego from the second half of
2011 supported the Botswana results. The Nigeria operations managed to break even within two years
of its launch, testimony to SEMs low cost expansion model in Africa.
Sanlam Investments (SI) contributed R1,3 billion to the Groups gross result from financial
services, 7% up on the prior year. The Capital Management business had another good year and recorded
growth of 18% on an already high base in 2011. The results include some once-off fees earned on large
financing deals concluded during the year. Sanlam Employee Benefits increased its contribution by 9%,
the combined effect of lower administration losses, strong earnings from Sanlam Structured Solutions
and lower risk profits. The Investment management operations were negatively impacted by the
following once-off items, which deflated operating earnings growth to 3%:
A R55 million reduction from the R78 million in performance fees earned by the South African
institutional asset manager in 2011. This is substantially due to Sanlam Investments value-based
investment philosophy that underperformed relative to the strong overall market performance in 2012.
The newly acquired Merchant Securities business recorded a loss of R35 million for the year,
largely attributable to once-off costs relating to the integration, restructuring and reorganisation
of the business.
Start-up losses of R27 million in newly established distribution channels.
Excluding the South African performance fees as well as the above once-off losses, Investment
management gross operating earnings increased by 24%, a very strong performance.
The South African general insurance industry experienced one of its most difficult underwriting
environments in many years. Fire and storm related events contributed to an increase in Santams
claims ratio from 64,2% in 2011 to 68,3% in 2012. The underwriting margin accordingly declined
from 8,0% in 2011 to 3,8% in 2012, and Santams net result from financial services by 39%.
Business volumes
The Group achieved overall growth of 13% in new business volumes (excluding white label), a solid
performance in the difficult operating environment of 2012. SPF and SEM recorded strong new business
growth with new life business, in particular, achieving growth of 19%. Investment and short-term
insurance business increased by 12% and 7% respectively. The strategic focus on the quality of new
business written is reflected in good retention levels and a continuance of strong net fund inflows.
Net fund inflows achieved of R25 billion is commendable given the loss of a number of investment
mandates during the year from clients restructuring their portfolios.
Business volumes for the year ended 31 December 2012
R million New business Net inflows
2012 2011 Delta 2012 2011 Delta
Sanlam Personal Finance 32 355 27 246 19% 8 974 5 898 52%
Sanlam Emerging Markets 12 952 10 995 18% 3 977 2 008 98%
Sanlam Investments 62 139 56 062 11% 7 103 11 444 (38%)
Santam 15 626 14 653 7% 4 946 5 249 (6%)
Total (excluding white label) 123 072 108 956 13% 25 000 24 599 2%
Covered business 25 436 21 455 19% 8 532 6 685 28%
Investment business 81 716 72 679 12% 11 460 12 630 (9%)
Short-term insurance 15 920 14 822 7% 5 008 5 284 (5%)
Total (excluding white label) 123 072 108 956 13% 25 000 24 599 2%
SPFs new business sales increased by 19%, with single premium business the main contributor to
the growth. An improvement in the entry-level market segment performance since the first half of
2012 was particularly satisfactory. Single premiums previously reported as part of the entry-level
market segment essentially comprised of roll-overs of discontinued single premium business in
Sanlam Sky.
As these relate more to middle-income clients, the business has been reclassified to the
middle-income market segment.
New business volumes in the South African entry-level market increased by 6%. Growth was impacted
by the closure of the Channel4Life distribution channel as well as the ZCC bi-annual premium
adjustment that occurred in 2011 and increased the comparative base. Excluding these two
distribution channels, new business sales grew by 12%. New individual life business increased by 13%
(15% excluding Channel4Life), offset by a 9% decline in new group life sales (2% increase excluding
the ZCC). The agency channel recorded strong growth in individual life business, but this was partly
offset by lower broker sales attributable to some instability in the broker channel. Safrican
experienced a difficult year after an exceptional 2011, also contributing to the lower group life
sales.
SEM recorded 18% growth in its new business sales, with exceptional growth in Rest of Africa.
Namibia achieved 13% growth in new business volumes, a good result from this more mature market.
The positive sales trend in the entry-level segment is continuing, with recent product launches
in the middle-income and affluent segments also performing well, albeit lower margin business.
Sales trends in Botswana remained largely unchanged from the first half of 2012, with individual
life recurring sales continuing to struggle (21% lower than in 2011), offset by a 29% increase in
single premiums (largely annuities).
The Rest of Africa operations had a good year and increased new business volumes by 70% on 2011.
All countries contributed to the growth.
Shriram General continued its strong growth trajectory and contributed to an overall 24% growth
in new Indian business. The life business continues to struggle in the tough regulatory environment
with overall new business volumes down 18% on 2011. This is attributable to much lower single
premium volumes, somewhat compensated for by 79% growth in recurring premium sales. Single premium
sales were negatively impacted by the attractive returns that are currently available on banking
products in India.
New business volumes for the SI cluster were up 11% on 2011 (excluding white label). The asset
management operations delivered solid growth of 11% in a very competitive environment, complemented
by a more than doubling in Sanlam UKs contribution, partly attributable to new acquisitions. The
international investment management operations had a tough year with investor risk aversion not
favouring the clusters niche operations. Sanlam Employee Benefits (SEB) won a large mandate in 2011
that did not repeat in 2012, contributing to an 18% decrease in its new business volumes. As
anticipated, SEBs VNB and margins declined commensurately from the high base in 2011 (refer below).
Net fund flows decreased by 38% from R11 billion in 2011 to R7 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 clusters net fund flows. The South African investment
management operations also lost a few mandates; this was however substantially due to portfolio
restructuring by clients and not related to investment performance. Retail net fund flows remained
strong.
Santam grew net earned premiums by 7%, above the industry average for the year.
Value of new covered business
The value of new life business (VNB) written during 2012 increased by 22% on 2011 to reach R1 278
million. After minorities, VNB increased by 23% to R1 176 million. Both SPF and SEM reported very
satisfactory VNB growth, with only the VNB of SI (essentially group business) being down from a
high 2011 base. The average margin achieved increased to 3,35%.
The reduction in long-term interest rates and consequently the risk discount rate applied, had a
marked effect on the reported VNB and contributed R117 million to the increase on 2011. At a
consistent 2011 discount rate VNB increased by 10% in 2012 and the average margin achieved was
somewhat lower at 3,12%, essentially due to the reduction in margin in the employee benefits business
from a high base in 2011, as expected. All businesses, apart from employee benefits and the Botswana
operations, achieved strong VNB growth on the 2011 economic basis as well.
Value of new covered business for the year ended 31 December 2012
R million 2012 economic basis 2011 economic basis
2012 2011 Delta 2012 2011 Delta
Value of new covered business 1 278 1 051 22% 1 161 1 051 10%
Sanlam Personal Finance 939 705 33% 829 705 18%
Sanlam Emerging Markets 267 223 20% 262 223 17%
Sanlam Investments 72 123 (41%) 70 123 (43%)
Net of minorities 1 176 958 23% 1 061 958 11%
Present value of new business premiums 38 129 32 786 16% 37 229 32 786 14%
Sanlam Personal Finance 27 332 23 423 17% 26 634 23 423 14%
Sanlam Emerging Markets 4 537 3 642 25% 4 471 3 642 23%
Sanlam Investments 6 260 5 721 9% 6 124 5 721 7%
Net of minorities 36 528 31 449 16% 35 657 31 449 13%
New covered business margin 3,35% 3,21% 3,12% 3,21%
Sanlam Personal Finance 3,44% 3,01% 3,11% 3,01%
Sanlam Emerging Markets 5,88% 6,12% 5,86% 6,12%
Sanlam Investments 1,15% 2,15% 1,14% 2,15%
Net of minorities 3,22% 3,05% 2,98% 3,05%
Capital and solvency
Optimal capital management remains a key strategic priority for the Group, with specific focus on
the following:
Optimising the capital allocated to Group operations, taking account of the applicable
regulatory requirements. Continuous attention is given to businesses and individual products attracting
suboptimal levels of capital and thus diluting RoGEV. Product design, pricing and new business targets
are therefore linked to capital required and the meeting of return hurdles. The Financial Services
Boards implementation of a third country equivalent of the European Solvency II regime in South
Africa (Solvency Assessment and Management (SAM)) is a major consideration. Sanlam is an active
participant in this process with our own SAM implementation project running according to plan. The FSB
conducted its second quantitative impact study in South Africa in 2012, which confirmed the Groups view
that the capital allocated to its life insurance operations is appropriate.
The mix of the Groups in-force life book is changing to less capital intensive products. This
resulted in a largely unchanged capital requirement for the life insurance operations at the end of
2012 and a release to discretionary capital of some R1,1 billion from the investment return earned
on the allocated capital. In addition, Santam paid a special dividend from its excess capital during
2012 that added R576 million to Sanlams discretionary capital.
Releasing capital from illiquid investments. Some R750 million was released during 2012 through
the disposal of illiquid investments, the majority of which comprised of properties.
Optimal utilisation of discretionary capital. The Groups preference remains to invest its
discretionary capital in value-adding growth opportunities, with specific focus on the identified growth
markets. Some R3,3 billion was utilised for this purpose in 2012:
- The acquisition of a 26% interest in Shriram Capital in India. The transaction that utilised some R2,1
billion was announced in the latter half of 2011 and concluded in September 2012.
- The acquisition of a 49% interest in Pacific & Orient (P&O), a short-term insurance operation in
Malaysia. Final closing of the transaction is still subject to P&O shareholder approval. Some R780 million
has been reserved for this transaction.
- The acquisition of the minority interests in Safrican and Satrix required an investment of R230 million.
- Approximately R100 million was used to expand the international operations of SI, essentially in respect
of bolt-on acquisitions and the capitalisation of start-up businesses.
- Some R95 million was utilised to capitalise SEMs operations in Nigeria and India and to increase its
holding in its Kenyan business.
- Expenditure on the acquisition of Sanlam shares was limited to only R26 million.
At the end of December 2011 the Group held discretionary capital of R3,9 billion. Taking into
account the movement set out above, as well as the investment income earned by the discretionary
capital portfolio and the cash operating profit retained in the 2011 dividend earnings cover, the
level of discretionary capital increased to R4,2 billion at the end of 2012. Progress made on
potential transactions, the level of capital and its optimal utilisation are continuously evaluated
given the suboptimal return earned on discretionary capital, which is largely invested in low yielding
liquid assets. A number of potential opportunities are currently being considered which, if successful,
should utilise some R3 billion of the available discretionary capital. The Groups capital management
philosophy dictates that any excess capital not likely to be applied within a reasonable timeframe must
be returned to shareholders.
The Board accordingly decided to distribute to shareholders the R1 billion added to discretionary capital
since June 2012 by way of a special dividend of 50 cents per share. This special dividend will be declared
and paid as part of the Groups normal dividend.
All of the life insurance businesses within the Group were sufficiently capitalised at the end of
December 2012. The total admissible regulatory capital (including identified discretionary capital) of
Sanlam Life Insurance Limited, the holding company of the Groups major life insurance subsidiaries,
of R31 billion covered its capital adequacy requirements (CAR) 4,3 times. No policyholder portfolio had
a negative bonus stabilisation reserve at the end of December 2012. Fitch Ratings has affirmed the credit
ratings of the Group early in 2013 and the outlook remained stable. These include
Sanlam Limited: National Long-term AA- (zaf); Sanlam Life Insurance Limited: National Insurer Financial
Strength: AA+ (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. Sustainable growth in dividend payments is an important consideration for
the Board in determining the dividend for the year. The Board uses cash operating earnings as a guideline
in setting the level of the normal dividend, subject to the Groups liquidity and solvency requirements.
The operational performance of the Group in the 2012 financial year, as well as the effect of abolishing STC,
enabled the Board to increase the normal dividend per share by 27% from 130 cents to 165 cents. This will
maintain a cash operating earnings cover of approximately 1,1 times. The Board fully supports the stated
strategy not to hold excess capital that is unlikely to be utilised within a reasonable period. It therefore
approved the return to shareholders of the approximately R1 billion added to discretionary capital in the second
half of 2012 by declaring a special dividend of 50 cents per share. Including the special dividend of 50 cents per
share,the total dividend, declared and payable to shareholders, amounts to 215 cents per share. The new
South African dividend withholding tax regime will apply in respect of the total dividend of 215 cents per share.
Shareholders will benefit from the remaining STC credits held by Sanlam in that 1,8 cents of the final dividend of
165 cents will still carry such credits. The final and special dividends will be subject to a 15% withholding tax,
which will result in a net final dividend, to those shareholders who are not exempt from paying dividend tax,
of 140.52 cents per ordinary share and a net special dividend of 42.5 cents per ordinary share. The number of
ordinary shares in issue in the companys share capital at the date of the declaration is
1,936,081,708 (excluding treasury shares of 163,918,292). The companys tax reference number is 9536/346/84/5.
Shareholders are advised that the total dividend of 215 cents per share for the year ended 31 December 2012 is payable
on Monday, 29 April 2013 to ordinary shareholders recorded in the register of Sanlam at the close of business on Friday,
26 April 2013. The last date to trade to qualify for this dividend will be Friday, 19 April 2013, and Sanlam shares will
trade ex-dividend from Monday, 22 April 2013.
Dividend payment by way of electronic bank transfers will be effected on Monday, 29 April 2013. Share certificates may
not be dematerialised or rematerialised between Monday, 22 April 2013 and Friday, 26 April 2013, both days inclusive.
Desmond Smith Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Bellville
6 March 2013
Sanlam Group
Financial statements for the year ended 31 December 2012
ACCOUNTING POLICIES AND BASIS OF PRESENTATION
The accounting policies adopted for purposes of the financial statements comply with International
Financial Reporting Standards (IFRS), specifically IAS 34 on interim financial reporting, 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. 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.
The basis of presentation and accounting policies for the IFRS financial statements and
shareholders information are in all material respects consistent with those applied in the 2011
annual report, apart from the changes to the shareholders information and segmental reporting
indicated above.
The preparation of the Groups audited annual results was supervised by the financial director,
Kobus Möller CA(SA).
The following new or revised IFRS and interpretations are applied in the Groups 2012 financial
year:
Amendments to IFRS 1 - Severe hyperinflation and removal of fixed dates for first-time adopters
(effective 1 July 2011)
Amendment to IFRS 7 - Disclosures - 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
Groups financial position, reported results and cash flows. The following new or revised IFRS
and interpretations have effective dates applicable to future financial years and have not been
early adopted:
Amendment to IFRS 7 - Disclosures relating to offsetting of financial assets and liabilities
(effective 1 January 2013)
Amendment to IAS 32 - Clarification of the instances in which the set off of financial assets
and liabilities is allowed (effective 1 January 2014)
Amendment to IAS 1 - Financial statement presentation (effective 1 July 2012)
Amendment to IFRS 10 - Investment entities exemption (effective 1 January 2014)
IFRS 9 Financial Instruments (effective 1 January 2015)
IFRS 10 Consolidated Financial Statements (effective1 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 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)
IAS 19 Employee benefits (revised) - removal of corridor approach and changes to concept of
expected return on plan assets (effective 1 January 2013)
May 2012 Improvements to IFRS (mostly 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 Groups reported results, financial position and cash
flows.
EXTERNAL AUDIT
The Group financial statements have been extracted from the Groups 2012 audited annual financial
statements, which have been audited by Ernst & Young Inc. and their unqualified audit opinion is
available for inspection at the companys registered office. The shareholders information has also
been subject to external audit by Ernst & Young Inc. and the unqualified audit opinion is available
for inspection at the registered office of Sanlam Limited.
Shareholders information for the year ended 31 December 2012
Contents
Group Equity Value
Shareholders fund income statement
Notes to the shareholders information
Embedded value of covered business
GROUP EQUITY VALUE
at 31 December 2012
2012 2011(1)
R million R million
Embedded value of covered business 38 996 34 875
Sanlam Personal Finance 30 144 26 687
Adjusted net worth 8 681 8 622
Value of in-force 21 463 18 065
Sanlam Emerging Markets 2 647 2 320
Adjusted net worth 1 145 1 012
Value of in-force 1 502 1 308
Sanlam Investments 6 205 5 868
Adjusted net worth 5 120 4 919
Value of in-force 1 085 949
Other Group operations 29 170 21 934
Sanlam Personal Finance 2 618 2 189
Sanlam Emerging Markets 3 458 1 089
Sanlam Investments 10 219 9 041
Santam 12 875 9 615
Other capital and net worth adjustments 2 986 2 812
71 152 59 621
Discretionary capital 4 200 3 900
Group equity value 75 352 63 521
Group equity value per share (cents) 3 707 3 146
(1)Restated as set out in the introduction to comments on the results.
SHAREHOLDERS FUND INCOME STATEMENT
for the year ended 31 December 2012
2012 2011(1)
R million R million
Result from financial services before tax 6 285 6 050
Sanlam Personal Finance 3 272 2 775
Sanlam Emerging Markets 850 656
Sanlam Investments 1 322 1 230
Santam 1 008 1 560
Corporate and other (167) (171)
Tax on financial services income (1 669) (1 544)
Minority shareholders interest (586) (727)
Net result from financial services 4 030 3 779
Net investment return 2 356 1 571
Net investment income 1 127 792
Net investment surpluses 1 171 715
Net equity-accounted headline earnings 58 64
Net project expenses (23) (25)
Equity participation costs (56) (26)
Amortisation of intangibles (155) (108)
Net secondary tax on companies (233) (168)
Normalised headline earnings 5 919 5 023
Profit on disposal of operations 66 186
Impairments (174) (35)
Normalised attributable earnings 5 811 5 174
Fund transfers (156) (8)
Attributable profit per Group statement
of comprehensive income 5 655 5 166
(1)Restated as set out in the introduction to comments on the results.
NOTES TO THE SHAREHOLDERS INFORMATION
for the year ended 31 December 2012
2012 2011
R million R million
1. NEW BUSINESS
Analysed per licence:
Life Insurance 25 436 21 455
Sanlam Personal Finance 18 351 15 338
Sanlam Emerging Markets 2 922 2 205
Sanlam Investments 4 163 3 912
Investment business and other 97 636 87 501
Sanlam Personal Finance 14 004 11 908
Sanlam Emerging Markets 10 030 8 790
Sanlam Investments 57 976 52 150
Santam 15 626 14 653
New business excluding white label 123 072 108 956
White label 12 831 6 131
Total new business 135 903 115 087
2. NET FLOW OF FUNDS
Analysed per licence:
Life Insurance 8 532 6 685
Sanlam Personal Finance 5 771 4 143
Sanlam Emerging Markets 2 200 1 806
Sanlam Investments 561 736
Investment business and other 16 468 17 914
Sanlam Personal Finance 3 203 1 755
Sanlam Emerging Markets 1 777 202
Sanlam Investments 6 542 10 708
Santam 4 946 5 249
Net inflow excluding white label 25 000 24 599
White label (2 011) 881
Total net flow of funds 22 989 25 480
3. NORMALISED EARNINGS PER SHARE
In terms of IFRS, the policyholders funds investments in Sanlam shares and Group subsidiaries
are not reflected as equity investments in the Sanlam statement of financial position, but
deducted in full from equity on consolidation (in respect of Sanlam shares) or reflected at net
asset value (in respect of subsidiaries). The valuation of the related policy liabilities however
includes the fair value of these shares, resulting in a mismatch between policy liabilities and
policyholder investments, with a consequential impact on the Groups earnings. The number of shares
in issue must also be reduced with the treasury shares held by the policyholders fund for the
calculation of IFRS basic and diluted earnings per share. This is, in managements view, not a true
representation of the earnings attributable to the Groups shareholders, specifically in instances
where the share prices and/or the number of shares held by the policyholders fund varies
significantly. The Group therefore calculates normalised earnings per share to eliminate the impact
of investments in Sanlam shares and Group subsidiaries held by the policyholders fund.
2012 2011
cents cents
Normalised diluted earnings per share:
Net result from financial services(1) 198,9 187,1
Headline earnings 292,1 248,7
Profit attributable to shareholders fund 286,8 256,2
R million R million
Analysis of normalised earnings
(refer shareholders fund income statement):
Net result from financial services(1) 4 030 3 779
Headline earnings 5 919 5 023
Profit attributable to shareholders fund 5 811 5 174
million million
Adjusted number of shares:
Weighted average number of shares for
diluted earnings per share 2 009,4 2 004,9
Add: Weighted average Sanlam shares held
by policyholders 16,9 15,0
Adjusted weighted average number of shares
for normalised diluted earnings per share 2 026,3 2 019,9
Number of ordinary shares in issue 2 100,0 2 100,0
Shares held by subsidiaries in shareholders
fund (150,9) (158,1)
Outstanding shares and share options in
respect of Sanlam Limited long-term incentive scheme 30,6 36,5
Number of shares under option that would have been
issued at fair value - (1,0)
Convertible deferred shares held by Ubuntu-Botho 53,0 41,5
Adjusted number of shares for value per share 2 032,7 2 018,9
(1)Restated as set out in the introduction to
comments on the results.
Embedded value of covered business
at 31 December 2012
Embedded value of covered business at 31 December 2012
2012 2011
Note R million R million
Sanlam Personal Finance 30 144 26 687
Adjusted net worth 8 681 8 622
Net value of in-force covered business 21 463 18 065
Value of in-force covered business 23 168 19 813
Cost of capital (1 705) (1 721)
Minority shareholders interest - (27)
Sanlam Emerging Markets 2 647 2 320
Adjusted net worth 1 145 1 012
Net value of in-force covered business 1 502 1 308
Value of in-force covered business 2 534 2 181
Cost of capital (273) (226)
Minority shareholders interest (759) (647)
Sanlam UK 904 791
Adjusted net worth 295 250
Net value of in-force covered business 609 541
Value of in-force covered business 664 575
Cost of capital (55) (34)
Minority shareholders interest - -
Sanlam Employee Benefits 5 301 5 077
Adjusted net worth 4 825 4 669
Net value of in-force covered business 476 408
Value of in-force covered business 1 374 1 319
Cost of capital (898) (911)
Minority shareholders interest - -
Embedded value of covered business 38 996 34 875
Adjusted net worth(1) 14 946 14 553
Net value of in-force covered business 1 24 050 20 322
Embedded value of covered business 38 996 34 875
(1)Excludes subordinated debt funding of Sanlam Life.
CHANGE IN Embedded value of covered business for the year ended 31 December 2012
2012 2011
R million Note Total Net Adjusted Total
value of net
in-force worth
Embedded value of covered business at
the beginning of the year 34 875 20 322 14 553 31 045
Value of new business 2 1 176 2 527 (1 351) 958
Net earnings from existing covered business 3 210 (788) 3 998 3 125
Expected return on value of 2 560 2 560 - 2 404
in-force business
Expected transfer of profit to adjusted
net worth - (3 134) 3 134 -
Operating experience variances 3 555 (334) 889 681
Operating assumption changes 4 95 120 (25) 40
Expected investment return on adjusted net worth 1 075 - 1 075 1 062
Embedded value earnings from operations 5 461 1 739 3 722 5 145
Economic assumption changes 5 874 969 (95) 132
Tax changes 6 (228) (168) (60) 1 244
Investment variances - value of in-force 1 344 1 159 185 (136)
Investment variances - investment return on
adjusted net worth 460 - 460 (259)
Exchange rate movements (3) (3) - 151
Net project expenses 7 - - - (4)
Embedded value earnings from covered business 7 908 3 696 4 212 6 273
Acquired value of in-force 47 32 15 235
Transfer from/(to) other Group operations - - - 34
Net transfers from covered business (3 834) - (3 834) (2 712)
Embedded value of covered business at the end of the year 38 996 24 050 14 946 34 875
Analysis of earnings from covered business
Sanlam Personal Finance 6 296 3 371 2 925 5 146
Sanlam Emerging Markets 628 189 439 571
Sanlam UK 162 68 94 229
Sanlam Employee Benefits 822 68 754 327
Embedded value earnings from covered business 7 908 3 696 4 212 6 273
Value of new business for the year ended 31 December 2012
R million Note 2012 2011
Value of new business (at point of sale):
Gross value of new business 1 443 1 193
Sanlam Personal Finance 1 003 755
Sanlam Emerging Markets 303 248
Sanlam UK 17 11
Sanlam Employee Benefits 120 179
Cost of capital (165) (142)
Sanlam Personal Finance (64) (50)
Sanlam Emerging Markets (36) (25)
Sanlam UK (3) (3)
Sanlam Employee Benefits (62) (64)
Value of new business 1 278 1 051
Sanlam Personal Finance 939 705
Sanlam Emerging Markets 267 223
Sanlam UK 14 8
Sanlam Employee Benefits 58 115
Value of new business attributable to:
Shareholders fund 2 1 176 958
Sanlam Personal Finance 939 701
Sanlam Emerging Markets 165 134
Sanlam UK 14 8
Sanlam Employee Benefits 58 115
Minority shareholders interest 102 93
Sanlam Personal Finance - 4
Sanlam Emerging Markets 102 89
Sanlam UK - -
Sanlam Employee Benefits - -
Value of new business 1 278 1 051
Geographical analysis:
South Africa 997 820
Africa 266 223
Other international 15 8
Value of new business 1 278 1 051
Analysis of new business profitability:
Before minorities:
Present value of new business premiums 38 129 32 786
Sanlam Personal Finance 27 332 23 423
Sanlam Emerging Markets 4 537 3 642
Sanlam UK 2 210 1 374
Sanlam Employee Benefits 4 050 4 347
New business margin 3,35% 3,21%
Sanlam Personal Finance 3,44% 3,01%
Sanlam Emerging Markets 5,88% 6,12%
Sanlam UK 0,63% 0,58%
Sanlam Employee Benefits 1,43% 2,65%
After minorities:
Present value of new business premiums 36 528 31 449
Sanlam Personal Finance 27 321 23 353
Sanlam Emerging Markets 2 947 2 375
Sanlam UK 2 210 1 374
Sanlam Employee Benefits 4 050 4 347
New business margin 3,22% 3,05%
Sanlam Personal Finance 3,44% 3,00%
Sanlam Emerging Markets 5,60% 5,64%
Sanlam UK 0,63% 0,58%
Sanlam Employee Benefits 1,43% 2,65%
Notes to the embedded value of covered businEss
for the year ended 31 December 2012
Gross value Net value of Change
of in-force Cost of in-force from base
business capital business value
R million R million R million %
1. Value of in-force sensitivity analysis
Base value 26 897 (2 847) 24 050
Risk discount rate increase by 1% 25 604 (3 546) 22 058 (8)
Gross value Net value Change
of new Cost of of new from base
business capital business value
R million R million R million %
2. Value of new business sensitivity analysis
Base value 1 329 (153) 1 176
Risk discount rate increase by 1% 1 170 (192) 978 (17)
2012 2011
R million R million
3. OPERATING EXPERIENCE VARIANCES
Risk experience 559 431
Persistency 26 187
Working capital and other (30) 63
Total operating experience variances 555 681
4. OPERATING ASSUMPTION CHANGES
Risk experience 66 13
Persistency 52 (147)
Modelling improvements and other (23) 174
Total operating assumption changes 95 40
5. ECONOMIC ASSUMPTION CHANGES
Investment yields and other 876 130
Long-term asset mix assumptions,
inflation gap change and other (2) 2
Total economic assumption changes 874 132
6. TAX CHANGES
Tax changes for 2012 are mostly due to the introduction of dividend withholding tax in South Africa and the change in the inclusion
rate for capital gains tax.
7. NET PROJECT EXPENSES
Net project expenses relate to once-off expenditure on the Groups distribution platform that has not been allowed for in the embedded
value assumptions. 2012 2011
R million R million
8. RECONCILIATION OF GROWTH FROM COVERED BUSINESS
The embedded value earnings from covered business
reconcile as follows to the net result from
financial services for the year:
Net results from financial services
of covered business per shareholders
fund income statement 2 737 2 317
Sanlam Personal Finance 2 064 1 791
Sanlam Emerging Markets 345 215
Sanlam UK 67 69
Sanlam Employee Benefits 261 242
Net project expenses and other - 5
Investment return on adjusted net worth 1 475 803
Embedded value earnings from covered business: value
of in-force 3 696 3 148
Embedded value earnings from covered business 7 908 6 273
9. ECONOMIC ASSUMPTIONS
Gross investment return, risk discount rate and inflation
SANLAM LIFE: % %
Point used on the relevant yield curve 9 year 9 year
Fixed-interest securities 6,8 8,2
Equities and offshore investments 10,3 11,7
Hedged equities 7,3 8,7
Property 7,8 9,2
Cash 5,8 7,2
Return on required capital 7,8 9,1
Inflation rate(1) 4,8 5,2
Risk discount rate 9,3 10,7
SANLAM Investments AND PENSIONS:
Point used on the relevant yield curve 15 year 15 year
Fixed-interest securities 2,3 2,5
Equities and offshore investments 5,5 5,7
Hedged equities n/a n/a
Property 5,5 5,7
Cash 2,3 2,5
Return on required capital 2,3 2,5
Inflation rate 2,5 2,7
Risk discount rate 6,0 6,2
SDM Limited:
Point used on the relevant yield curve 5 year 5 year
Fixed-interest securities 5,9 7,4
Equities and offshore investments 9,4 10,9
Hedged equities n/a n/a
Property 6,9 8,4
Cash 4,9 6,4
Return on required capital 7,2 8,7
Inflation rate 3,9 4,4
Risk discount rate 8,4 9,9
Botswana Life Insurance:
Fixed-interest securities 9,0 9,5
Equities and offshore investments 12,5 13,0
Hedged equities n/a n/a
Property 10,0 10,5
Cash 8,0 8,5
Return on required capital 9,1 9,6
Inflation rate 6,0 6,5
Risk discount rate 12,5 13,0
(1) Expense inflation of 6,8% (2011:7,2%) assumed for retail business administered on old platforms
Illiquidity premiums
Investment returns on non-participating annuities and guarantee 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 guarantee plans.
2012 2011
% %
Asset mix for assets supporting the
required capital
SANLAM LIFE:
Equities 26 26
Offshore investments 10 10
Hedged equities 13 13
Fixed-interest securities 15 15
Cash 36 36
100 100
SANLAM Investments AND PENSIONS:
Cash 100 100
100 100
SDM Limited:
Equities 50 50
Cash 50 50
100 100
Botswana Life Insurance:
Equities 15 15
Property 10 10
Fixed-interest securities 25 25
Cash 50 50
100 100
Group financial statements for the year ended 31 December 2012
Contents
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
STATEMENT OF FINANCIAL POSITION at 31 December 2012
2012 2011
R million R million
ASSETS
Property and equipment 449 514
Owner-occupied properties 665 586
Goodwill 3 457 3 195
Other intangible assets 63 47
Value of business acquired 1 599 1 611
Deferred acquisition costs 2 717 2 427
Long-term reinsurance assets 746 674
Investments 384 821 329 150
Properties 17 678 15 310
Equity-accounted investments 5 412 2 938
Equities and similar securities 202 952 165 582
Public sector stocks and loans 64 617 58 831
Debentures, insurance policies, preference
shares and other loans 37 726 35 002
Cash, deposits and similar securities 56 436 51 487
Deferred tax 450 640
Non-current assets held for sale 308 1 390
Short-term insurance technical assets 2 096 1 831
Working capital assets 46 193 40 138
Trade and other receivables 31 241 25 761
Cash, deposits and similar securities 14 952 14 377
Total assets 443 564 382 203
EQUITY AND LIABILITIES
Shareholders fund 36 919 33 822
Minority shareholders interest 2 970 3 046
Total equity 39 889 36 868
Long-term policy liabilities 328 584 282 421
Insurance contracts 148 427 135 742
Investment contracts 180 157 146 679
Term finance 5 463 6 295
Margin business 1 487 2 414
Other interest-bearing liabilities 3 976 3 881
Derivative liabilities 610 212
External investors in consolidated funds 19 596 11 592
Cell owners interest 688 603
Deferred tax 1 333 902
Short-term insurance technical provisions 9 877 8 682
Working capital liabilities 37 524 34 628
Trade and other payables 34 823 32 502
Provisions 396 423
Taxation 2 305 1 703
Total equity and liabilities 443 564 382 203
STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2012
2012 2011
R million R million
Net income 88 580 54 278
Financial services income 40 416 36 663
Reinsurance premiums paid (4 611) (3 661)
Reinsurance commission received 583 392
Investment income 17 749 14 603
Investment surpluses 37 091 4 843
Finance cost - margin business (185) (203)
Change in fair value of external investors
liability (2 463) 1 641
Net insurance and investment contract
benefits and claims (62 566) (31 437)
Long-term insurance contract benefits (27 977) (15 322)
Long-term investment contract benefits (24 690) (7 199)
Short-term insurance claims (12 185) (10 766)
Reinsurance claims received 2 286 1 850
Expenses (15 809) (14 187)
Sales remuneration (5 393) (4 959)
Administration costs (10 416) (9 228)
Impairments (206) (36)
Amortisation of intangibles (184) (128)
Net operating result 9 815 8 490
Equity-accounted earnings 584 421
Finance cost - other (315) (336)
Profit before tax 10 084 8 575
Taxation (3 650) (2 510)
Shareholders fund (2 468) (1 903)
Policyholders fund (1 182) (607)
Profit for the year 6 434 6 065
Other comprehensive income
Movement in foreign currency translation
reserve 128 541
Comprehensive income for the year 6 562 6 606
Allocation of comprehensive income:
Profit for the year 6 434 6 065
Shareholders fund 5 655 5 166
Minority shareholders interest 779 899
Comprehensive income for the year 6 562 6 606
Shareholders fund 5 760 5 601
Minority shareholders interest 802 1 005
Earnings attributable to shareholders of
the company (cents):
Basic earnings per share 293,3 266,9
Diluted earnings per share 281,4 257,7
STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2012
2012 2011
R million R million
Shareholders fund:
Balance at beginning of the year 33 822 31 778
Comprehensive income 5 760 5 601
Profit for the year 5 655 5 166
Other comprehensive income: movement in
foreign currency translation reserve 105 435
Net acquisition of treasury shares(1) (279) (1 144)
Share-based payments 235 239
Dividends paid(2) (2 556) (2 261)
Acquisitions, disposals and other movements
in interests (63) (391)
Balance at end of the year 36 919 33 822
Minority shareholders interest:
Balance at beginning of the year 3 046 2 608
Comprehensive income 802 1 005
Profit for the year 779 899
Other comprehensive income: movement in
foreign currency translation reserve 23 106
Net disposal/(acquisition) of treasury shares(1) 2 (22)
Share-based payments 22 28
Dividends paid(2) (851) (455)
Acquisitions, disposals and other movements
in interests (51) (118)
Balance at end of the year 2 970 3 046
Shareholders fund 33 822 31 778
Minority shareholders interest 3 046 2 608
Total equity at beginning of the year 36 868 34 386
Shareholders fund 36 919 33 822
Minority shareholders interest 2 970 3 046
Total equity at end of the year 39 889 36 868
(1)Includes movement in cost of shares held by subsidiaries and the share incentive trust.
(2)Dividend of 130 cents per share declared during 2012 (2011: 115 cents per share) in respect of
the 2011 financial year.
CASH FLOW STATEMENT for the year ended 31 December 2012
2012 2011
R million R million
Net cash flow from operating activities 11 002 18 929
Net cash flow from investment activities (4 134) (12 562)
Net cash flow from financing activities (1 337) (1 674)
Net increase in cash and cash equivalents 5 531 4 693
Cash, deposits and similar securities at beginning of the year 65 857 61 164
Cash, deposits and similar securities at end of the year 71 388 65 857
NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2012
2012 2011
cents cents
1. EARNINGS PER SHARE
Basic earnings per share:
Headline earnings 298,9 259,1
Profit attributable to shareholders fund 293,3 266,9
Diluted earnings per share:
Headline earnings 286,8 250,1
Profit attributable to shareholders fund 281,4 257,7
R million R million
Analysis of earnings:
Profit attributable to shareholders fund 5 655 5 166
Less: Net profit on disposal of operations (66) (186)
Plus: Impairment of investments and goodwill 174 35
Headline earnings 5 763 5 015
Number of shares: million million
Number of ordinary shares in issue at
beginning of year 2 100,0 2 100,0
Less: Weighted Sanlam shares held by
subsidiaries (including policyholders) (171,9) (164,8)
Adjusted weighted average number of shares
for basic earnings per share 1 928,1 1 935,2
Add: Weighted conversion of deferred shares 50,7 34,2
Add: Total number of shares and options 30,6 36,5
Less: Number of shares (under option) that
would have been issued at fair value - (1,0)
Adjusted weighted average number of shares
for diluted earnings per share 2 009,4 2 004,9
2. SEGMENTAL INFORMATION
2012 2011
R million R million
Segment financial services income
(per shareholders fund information) 37 247 34 342
Sanlam Personal Finance 11 647 10 935
Sanlam Emerging Markets 2 838 2 279
Sanlam Investments 6 623 5 997
Santam 16 041 15 041
Corporate and other 98 90
IFRS adjustments 3 169 2 321
Total financial services income 40 416 36 663
Segment result (per shareholders fund
information after tax and minorities) 5 811 5 174
Sanlam Personal Finance 5 420 2 911
Sanlam Emerging Markets 583 420
Sanlam Investments 1 368 1 041
Santam 613 801
Corporate and other (2 173) 1
Reverse minority shareholders interest
included in segment result 779 899
Fund transfers (156) (8)
Total profit for the year 6 434 6 065
3. SHARE REPURCHASES The Sanlam shareholders granted general authorities to the Group at the 2012 and 2011 annual general meetings to repurchase
Sanlam shares in the market. The Group acquired 807 571 shares at an average price of R31,76 in terms of the general
authorities. The total consideration paid of R26 million was funded from existing cash resources. All repurchases were effected
through the JSE trading system without any prior understanding or arrangement between the Group and the counter parties. Authority
to repurchase 419,2 million shares, or 19,96% of Sanlams issued share capital at the time, remain outstanding in terms of the
general authority granted at the annual general meeting held on 6 June 2012.
The financial effect of the share repurchases during 2012 on the IFRS earnings and net asset value per share is not material.
4. CONTINGENT LIABILITIES
Shareholders are referred to the contingent liabilities disclosed in the 2011 annual report. The circumstances surrounding the contingent
liabilities remain materially unchanged.
5. SUBSEQUENT EVENTS
No material facts or circumstances have arisen between the dates of the statement of financial position and this report that affect the
financial position of the Sanlam Group at 31 December 2012 as reflected in these financial statements. Subsequent to year-end, Sanlam
acquired a 3,7% direct interest in Shriram Transport Finance Company, part of the Shriram Capital Group, for some R1 billion.
Administration
Group Secretary Registered name: Sanlam Limited
Sana-Ullah Bray (Registration number 1959/001562/06)
(Tax reference number: 9536/346/84/5)
Registered office JSE share code (primary listing): SLM
2 Strand Road, Bellville 7530,South Africa NSX share code: SLA
Telephone +27 (0)21 947-9111 ISIN: ZAE000070660
Fax +27 (0)21 947-3670 Incorporated in South Africa
Postal address Transfer secretaries:
PO Box 1, Sanlamhof 7532,South Africa 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), TI Mvusi(1), SA
Nkosi, I Plenderleith(2), P Rademeyer, Y Ramiah(1), RV Simelane, CG Swanepoel, ZB Swanepoel, PL Zim
(1)Executive (2)British
Bellville
6 March 2013
Sponsor
Deutsche Securities (SA) (Pty) Limited
Date: 07/03/2013 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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