Wrap Text
Interim results for the six months ended 30 June 2013
Sanlam Limited
(Registration number:1959/001562/06)
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
Incorporated in South Africa
Interim results for the six months ended 30 June 2013
Blueprint for Success
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Interim financial statements
Accounting policies and basis of preparation
Shareholders information
Report on review of Sanlam Limited interim 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 information
Embedded value of covered business
Interim condensed consolidated financial statements
Report on review of 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
Key features
- Earnings
Net result from financial services per share increased by 23%
Normalised diluted headline earnings per share up 35%
- Business volumes
New business volumes up 37% to R83 billion
Net value of new covered business up 20% to R587 million
Net new covered business margin of 2,83%
Net fund inflows of R13 billion
- Group Equity Value
Group Equity Value per share of R37,47
Annualised return on Group Equity Value per share of 14,3%
- Capital management
Discretionary capital of R3,2 billion at 30 June 2013
Sanlam Life Insurance Limited CAR cover of 3,9 times
Salient results
for the six months ended 30 June 2013
%
2013 2012 change
Sanlam Group
Earnings
Net result from financial services per share cents 118,1 96,2 23
Normalised diluted headline earnings per share(1) cents 169,1 125,5 35
Diluted headline earnings per share cents 171,4 120,1 43
Net result from financial services R million 2 409 1 946 24
Normalised headline earnings(1) R million 3 449 2 539 36
Headline earnings R million 3 474 2 408 44
Group administration cost ratio(2) % 29,3 30,4
Group operating margin(3) % 20,5 19,9
Business volumes
New business volumes R million 83 244 60 977 37
Net fund inflows R million 12 611 10 183 24
Net new covered business
Value of new covered business R million 587 491 20
Covered business PVNBP(4) R million 20 731 17 150 21
New covered business margin(5) % 2,83 2,86
Group Equity Value
Group Equity Value(6) R million 76 609 75 352
Group Equity Value per share(6) cents 3 747 3 707
Annualised return on Group Equity Value
per share(7) % 14,3 18,4
Sanlam Life Insurance Limited
Shareholders fund(6) R million 55 481 55 466
Capital Adequacy Requirements (CAR)(6) R million 7 250 7 125
CAR covered by prudential capital(6) times 3,9 4,3
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) Comparative figures are as at 31 December 2012.
(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
2013 marks the tenth anniversary of the introduction of the current Sanlam Group strategy. A strong commitment to this
strategy across the Group is evident in its steady and successful implementation over this period. Consistent delivery
has also become a key feature of the Groups financial performance and it is particularly satisfactory to report another
set of strong financial results for the six months ended 30 June 2013.
As anticipated, the challenging operating environment of 2012 persisted during the six months ended 30 June 2013.
Developed market economies failed to find noticeable traction to generate growth while growth in the Chinese economy also
experienced a slowdown. Demand for resources from Africa commensurately remained subdued. Investor appetite for emerging
markets diminished on concerns over the possible impact of a slowdown in emerging market growth, as well as uncertainty
around the unwinding of quantitative easing in the United States. As a consequence, equity and bond markets in most major
emerging countries underperformed relative to 2012, with currencies also depreciating sharply on the back of capital
outflows and risk aversion. The South African financial markets were no exception. Recent labour unrest in South Africa
and concerns around a potential unsecured credit bubble added to international investors cautious approach. The difficult
underwriting conditions in the South African general insurance industry also persisted. These challenges were partly
alleviated by a higher level of assets under management in the first half of 2013 relative to the same period in 2012,
following the strong investment market performance in the latter part of 2012, as well as underwriting experience in Sanlam
Personal Finance. Notwithstanding the challenging environment, the Groups diversification across business lines and
geographies provided significant resilience and enabled Sanlam to deliver overall satisfactory results for the period.
Optimising shareholder value, as measured by the Return on Group Equity Value (RoGEV) per share, is our primary
performance target. RoGEV per share of 6,9% (annualised 14,3%) for the first six months of 2013 exceeded the six-month target
of 5,3% (annualised 10,8%), despite the negative impact of higher long-term interest rates on the valuation of
businesses based on discounted cash flows. The adjusted RoGEV per share, which excludes the impact of investment markets during
the period, amounted to 7,3%, also well in excess of the target.
The net result from financial services grew by 23% on a per share basis. Other salient results are:
- New business volumes increased by 37% to R83 billion;
- Net value of new covered business up 20%; and
- Net VNB margin of 2,83%, in line with 2012.
2013 strategic initiatives
We identified the following priorities for the 2013 financial year:
- Focus on top-line sales growth as well as operating and cost efficiencies;
- Improving capital efficiency on an ongoing basis;
- Pursuit of international strategy in emerging markets;
- Continued focus on efficient and effective management of existing South African businesses; and
- Compliance with regulatory reform, in particular alignment with proposed TCF legislation.
Earnings growth
The Sanlam Group delivered strong growth in both new business volumes and operating earnings in the first half of
2013.
New business volumes increased by 37%, with Sanlam Investments (SI) delivering exemplary growth of 58%. Product
innovation had a positive impact on Sanlam Personal Finances (SPF) new business growth of 27%, with the Cumulus and Nimbus
product ranges continuing to attract strong demand. Sanlam Emerging Markets (SEM) recorded 20% growth in new life
recurring premiums. Large single premium business volumes achieved by SEM in the first half of 2012 did, however, not repeat to
the same extent in 2013. Single premium flows are more volatile in nature and the lower single premium sales do not
reflect any deterioration in the underlying operational performance.
Strong persistency levels were maintained across all market segments as the focus remained on client retention and on
writing only quality new business that provides clients with affordable and appropriate products for their specific
needs.
The net result from financial services increased by 24% (23% per share), with most businesses contributing to the
growth. This is the combined result of higher fee income earned on a higher asset base as well as a focus in all businesses
on delivering improved cost efficiencies. The Group administration cost ratio declined from 30,4% in the first half
of 2012 to 29,3% in 2013 as a result.
Capital efficiency
Capital efficiency is a key component of the Groups strategy to maximise RoGEV. This is achieved through the
allocation of capital to those areas that yield the highest risk adjusted return. Discretionary capital that is not required to
support the Group operations is managed at a central Group level, with investment in value-adding future growth opportunities the
preferred application.
The Sanlam Group held discretionary capital of R4,2 billion at the end of December 2012. Major changes during
the six months to 30 June 2013 include R1,1 billion utilised for the special dividend payment in April, R1,1 billion
utilised to acquire a direct stake of 4,1% in Shriram Transport Finance, and R412 million in discretionary capital
released through the disposal of non-core operations. Remaining discretionary capital of R3,2 billion at 30 June 2013 is
substantially earmarked for expansion in Africa, India and South-East Asia.
Pursuit of international strategy in emerging markets
Our presence in emerging markets outside of South Africa was bolstered by the successful execution of two major
investment transactions in India and Malaysia.
In India we increased our exposure to the credit operations of Shriram, our strategic partners in India, by the
investment of R1,1 billion in Shriram Transport Finance shares. This added to the R2,1 billion invested in Shriram Capital in
the latter half of 2012. These investments contributed R151 million to SEMs net result from financial services in the
first half of 2013, an annualised operating earnings yield of some 10%.
We also concluded the acquisition of a 49% stake in Pacific & Orient Insurance Co Berhad (P&O), a niche short-term
insurance business in Malaysia. The effective date of the transaction was 1 May 2013 and contributed R9 million to SEMs
net result from financial services.
We are confident of the growth prospects in both these regions and look forward to building our working relationship
with the P&O management team and further strengthening the excellent relationship established over a number of years with
the Shriram Group.
We are evaluating a number of other possible emerging market opportunities.
Efficient and effective management of South African businesses
The majority of the Groups earnings still comes from the more mature South African market. As is evident from the
strong growth reported by SPF over the last number of years, South Africa is by no means ex-growth and remains a key focus
area for the Group. Nevertheless, acquisitions of scale are not possible in this market given Sanlams large market
share. Organic growth will therefore be the driver of future earnings with a strong focus on product innovation, cost
efficiencies, cross selling and improved cooperation between the various business units. Sanlam is a formidable competitor in
the South African market and we still anticipate good growth from this region over the medium term, in particular the entry-level
market.
Regulatory changes
The regulatory environment in South Africa continues to change in line with similar international developments. The
Financial Services Boards (FSB) proposed Treating Customers Fairly (TCF) regime is important market conduct legislation
that will come into effect in 2014. Sanlam is supportive of the initiative as putting the needs of our clients first is
an integral part of our business philosophy and will benefit the industry in the longer term. We made good progress in
analysing the regulations and identifying the few minor areas where we need to fully align our approach with the new
requirements. These will be implemented over the next few months.
Looking ahead
The operating environment in the second half of the year is expected to remain difficult with weak economic growth in
the Groups core markets and investment market volatility likely to continue. These conditions, combined with a higher
comparative base in the second half of the year and some once-off items impacting the results for the first six months of
2013 (refer below), are likely to impact the Groups ability to maintain the strong growth achieved in the key performance
metrics. However, we remain confident that we have the strategy and depth of skills and experience to face these
challenges and to continue 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.
Any forward-looking statements in this announcement have not been reviewed and reported on by Sanlam's external auditor.
Introduction
The Sanlam Group results for the six months ended 30 June 2013 are presented based on and in compliance with
International Financial Reporting Standards (IFRS), specifically IAS 34 on Interim Financial Reporting. The basis of preparation
and accounting policies for the IFRS financial statements and Shareholders information are in all material respects
consistent with those applied in the 2012 annual report, apart from the following:
- The adoption of new IFRSs that became effective during the 2013 financial year, that impacted the
IFRS financial statements but did not have any effect on the presentation of the Shareholders information.
- The presentation within Group Equity Value (GEV) of non-life Group operations that are not valued at listed market
value was amended to align with the treatment of covered business. The fair value of these non-life operations
previously comprised their base valuation to which the year to date earnings were added. The year to date earnings essentially
constituted the dividend payment expected from the businesses in terms of the Groups dividend policy. This presentation
format is not consistent with covered business, where the operations are reflected at base valuation with year to date
earnings (potential dividend) included in Other capital within the GEV statement. With effect from 30 June 2013, non-life
Group operations are also reflected at base valuation, with year to date earnings included in Other capital. Comparative
information has not been restated as the change in presentation does not have an impact on the overall GEV, GEV
earnings and RoGEV.
Operating environment
Economic conditions
Economic conditions remained strained during the first half of 2013, with the low demand for resources impacting
economic growth in many of the countries where the Group operates.
The Groups largest exposure is to the economies of South Africa, Namibia, Botswana and India. The South African and
Namibian economies continued to deliver low growth, impacting negatively
on job creation and overall disposable income. The Botswana economy also remains impacted by low diamond prices, the
backbone of economic growth for the country, while growth in India slowed down from its previous high base.
Equity markets
The South African equity market underperformed relative to developed markets and the prior year performance as
investor risk aversion impacted most major emerging markets. The FTSE/JSE All Share Index closed 0,8% up on its
31 December 2012 level, with a total return of 2,3% for the six months to 30 June 2013. This compares to a return of 7% from
this index in the first six months of 2012. The MSCI World Index returned 26,9% in rand terms compared to 7,3% in 2012,
reflecting both good underlying market performance and a sharp depreciation in the relative value of the rand.
Interest rates
South African long-term interest rates increased markedly since the end of December 2012 as international investors
disinvested from emerging markets and inflationary risk increased due to the weakening of the rand. This had a negative
impact on the valuation of in-force covered business as well as other Group operations valued on a discounted cash flow
basis, with a commensurate impact on RoGEV for the period. The rise in long-term interest rates contributed to a negative
return in the All Bond Index of 1,3% for the first six months of 2013, compared to a positive return of 7,7% in 2012.
Foreign currency exchange rates
The rand weakened against most major currencies to which the Group has exposure. This had a positive impact on the
growth in new business volumes, value of new life business and earnings reported for the non-South African operations.
Foreign United Rest of
currency/ Europe Kingdom USA Botswana India Africa
ZAR EUR GBP USD BWP INR (weighted)
31/12/2012 11,18 13,79 8,48 1,11 0,16
30/6/2013 12,90 15,06 9,93 1,18 0,17
Weakening 15,4% 9,2% 17,1% 6,3% 7,1% 15,3%
Average first
half 2012 10,29 12,51 7,93 1,09 0,15
Average first
half 2013 12,10 14,15 9,19 1,14 0,17
Weakening 17,6% 13,1% 15,9% 4,8% 10,6% 4,7%
Group Equity Value
As at 30 June 2013 total GEV amounted to R76,6 billion or 3 747 cents per share. Growth of 7,3% and 6,9% respectively
on the R75,4 billion and 3 707 cents per share GEV in December 2012 was achieved, both well above the 2013 performance
hurdle for the six months of 5,3%.
The Group has a significant exposure to investment markets, both in 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 weak investment market performance during the first half of 2013 had a marked negative impact on
the RoGEV for the period. This was aggravated by the increase in long-term interest rates that reduced the valuation of
the in-force life book and other operations valued on a discounted cash flow basis. An adjusted RoGEV per share of 7,3%
that excludes the impact of investment returns that were below long-term expectations, the higher long-term interest
rates and certain other once-off effects, is also well in excess of the return target.
Group Equity Value at 30 June 2013
RoGEV %
Group Equity Value (six months)
R million 2013 2012* 2013 2012
Group operations 71 808 68 166 8,2 10,7
Sanlam Personal Finance 33 155 32 762 6,8 8,9
Sanlam Emerging Markets 9 356 6 105 22,0 6,3
Sanlam Investments 16 328 16 424 9,2 6,3
Santam 12 969 12 875 2,9 24,3
Covered business 39 927 38 996 7,8 8,4
Value of in-force 24 702 24 050 9,1 11,9
Net worth 15 225 14 946 5,7 3,6
Other operations 31 881 29 170 8,8 14,3
71 808 68 166 8,2 10,7
Discretionary capital and other 4 801 7 186 (2,5) (3,1)
Group Equity Value 76 609 75 352 7,3 9,2
Per share (cents) 3 747 3 707 6,9 8,8
* Comparative information as at 31 December 2012.
Group operations yielded an overall return of 8,2% in the first half of 2013, compared to 10,7% in the 2012 comparable
period. The return on covered business for the first six months of 2013 of 7,8% is characterised by strong growth in
VNB and a continuance of positive operating experience variances, with risk and persistency the main contributors.
Operating assumption changes of R289 million in 2013 also exceed the comparative periods R68 million. The new HIV/Aids tables
issued by the Actuarial Society of South Africa, which assume lower Aids-related mortality, were implemented in 2013 and
contributed R552 million in positive operating assumption changes for risk experience. This was partly offset by
additional provisions for project expenses relating to the changing regulatory environment in South Africa. The increase in
long-term interest rates resulted in negative economic assumptions changes of R888 million compared to positive economic
assumption changes of R375 million in 2012. Excluding these, covered business outperformed the 2012 comparative return.
Other Group operations provided a return of 8,8% compared to 14,3% in 2012. The lower return is mainly due to the
listed Santam share price delivering a return of only 2,9% in the first half of 2013 compared to 24,3% in 2012. All other
operations delivered good returns, with valuations generally supported by an increase in assets under management
and administration.
A 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 timing differences
in the recognition of the share-based payment expense relating to the Groups long-term incentive schemes,
which are weighted towards the first half of the year.
Earnings
Shareholders fund income statement
for the six months ended 30 June 2013
%
R million 2013 2012 change
Net result from financial services 2 409 1 946 24
Sanlam Personal Finance 1 409 1 077 31
Sanlam Emerging Markets 231 183 26
Sanlam Investments 523 471 11
Corporate and other (42) (59) 29
2 121 1 672 27
Sanlam Emerging Markets acquired earnings 160 -
Santam 128 274 (53)
Net investment return 1 150 891 29
Project costs and amortisation (101) (68) (49)
Equity participation costs (9) (1) >(100)
Secondary Tax on Companies - (229) 100
Normalised headline earnings 3 449 2 539 36
Per share (cents) 169,1 125,5 35
Net result from financial services (net operating profit) of R2,4 billion increased by 24% on the first half of 2012.
All clusters reported satisfactory growth, apart from Santam where the high claims experience of the second half of 2012
continued into the first six months of 2013. SEMs net operating profit more than doubled, assisted by a maiden
contribution from the investments in India and Malaysia during 2012 and 2013 (refer above). Excluding these impacts from Santam
and SEMs acquired earnings, net result from financial services increased by a satisfactory 27%. The individual cluster
results are discussed in more detail below.
Normalised headline earnings of R3,4 billion are 36% higher than in 2012, largely attributable to the following:
- The 24% increase in net result from financial services.
- A 29% increase in the net investment return earned on the capital portfolio. Investment income declined by 31%,
largely due to a lower level of discretionary capital following the utilisation of capital for acquisitions and the special
dividend, but net investment surpluses more than doubled on the first half of 2012. The relatively weaker equity and
bond market performance in South Africa in 2013 was offset by good returns on the international exposure in the portfolio
and once-off investment gains of some R215 million realised in 2013. The latter includes an increase in the valuation of
the Groups interest in Capricorn following the recent listing of Bank Windhoek in Namibia and a sizable recovery of a
previously impaired portfolio investment.
- The abolishment of Secondary Tax on Companies (STC) in South Africa during 2012. No STC expense is recognised in
the income statement with effect from the 2013 dividend compared to an expense of R229 million in 2012.
Business volumes
The Group achieved overall growth of 34% in new business volumes (excluding white label), a solid performance in the
difficult operating environment. SEM was the only business reporting lower new business sales, attributable to lower
single premiums in most regions. This was partly compensated for by strong new recurring premium sales in all SEM
operations. The strategic focus on the quality of new business written is reflected in good retention levels and a continuance
of strong net fund inflows. Overall net fund inflows achieved of R13,7 billion (excluding white label) is a commendable
performance. SIM received notice from the Public Investment Corporation of the imminent withdrawal of an investment mandate
of some R9,5 billion due to the restructuring of its portfolios. This outflow will put severe pressure on the Groups
ability to repeat the level of net inflows achieved in the second half of 2013. The individual business performance is
discussed in more detail below.
Business volumes for the six months ended 30 June 2013
New business Net inflows
% %
R million 2013 2012 change 2013 2012 change
Sanlam Personal Finance 19 239 15 192 27 6 564 3 615 82
Sanlam Emerging Markets 5 933 6 483 (8) 607 2 296 (74)
Sanlam Investments 42 528 27 396 55 4 194 1 027 308
Santam 8 096 7 703 5 2 381 2 614 (9)
Total (excluding white label) 75 796 56 774 34 13 746 9 552 44
Covered business 14 956 12 159 23 5 159 4 433 16
Investment business 52 436 36 759 43 6 160 2 459 151
Short-term insurance 8 404 7 856 7 2 427 2 660 (9)
Total (excluding white label) 75 796 56 774 34 13 746 9 552 44
Value of new covered business
The value of new life business (VNB) written during the first six months of 2013 increased
by 20% on 2012 gross and net of non-controlling interest. Margins were maintained at a level similar to 2012. The
individual business performance is discussed in more detail below.
Value of new covered business for the six months ended 30 June 2013
%
R million 2013 2012 change
Value of new covered business 639 533 20
Sanlam Personal Finance 450 390 15
Sanlam Emerging Markets 136 108 26
Sanlam Investments 53 35 51
Net of non-controlling interest 587 491 20
Present value of new business premiums 21 455 17 930 20
Sanlam Personal Finance 14 667 12 680 16
Sanlam Emerging Markets 2 085 2 199 (5)
Sanlam Investments 4 703 3 051 54
Net of non-controlling interest 20 731 17 150 21
New covered business margin 2,98% 2,97%
Sanlam Personal Finance 3,07% 3,08%
Sanlam Emerging Markets 6,52% 4,91%
Sanlam Investments 1,13% 1,15%
Net of non-controlling interest 2,83% 2,86%
Cluster performance
Sanlam Personal Finance
Key performance indicators
for the six months ended 30 June 2013
%
R million 2013 2012 change
Group Equity Value
Group Equity Value* 33 155 32 762 1
Covered business 30 524 30 144 1
Other operations 2 631 2 618 1
Return on Group Equity Value (6 months) 6,8% 8,9%
Covered business 6,2% 9,1%
Other operations 13,8% 7,0%
Business volumes
New business volumes 19 239 15 192 27
Life business 10 114 8 733 16
Entry-level market 503 430 17
Individual life 353 337 5
Group life 150 93 61
Middle-income market 5 200 4 464 16
Recurring premiums 628 594 6
Single premiums 4 572 3 870 18
Affluent market 4 411 3 839 15
Investment business 9 125 6 459 41
Middle-income market 168 136 24
Affluent market 8 957 6 323 42
Net fund flows 6 564 3 615 82
Life business 3 197 2 913 10
Entry-level market 1 410 867 63
Middle-income market (791) (125) >(100)
Affluent market 2 578 2 171 19
Investment business 3 367 702 380
Value of new covered business
Value of new business 450 390 15
Entry-level market 146 150 (3)
Middle-income market 240 186 29
Affluent market 64 54 19
Present value of new business premiums 14 667 12 680 16
Entry-level market 1 956 1 839 6
Middle-income market 8 300 7 002 19
Affluent market 4 411 3 839 15
New business margin 3,07% 3,08%
Entry-level market 7,46% 8,16%
Middle-income market 2,89% 2,66%
Affluent market 1,45% 1,41%
Earnings
Gross result from financial services 1 941 1 499 29
Entry-level market 360 199 81
Middle-income market 1 459 1 209 21
Affluent market 122 91 34
Net result from financial services 1 409 1 077 31
* Comparative information as at 31 December 2012
SPF achieved strong growth in all performance metrics for the six months to 30 June 2013. All market segments
contributed to the high level of growth, a particularly pleasing result.
SPF achieved a RoGEV of 6,8% for the six months to June 2013, compared to 8,9% for the comparable period in 2012.
Covered business return was negatively affected in 2013 by the increase in long-term rates that resulted in negative
economic assumption changes. A decline in rates had the opposite effect in the comparable 2012 return. Strong growth in the
value of new life business, continued positive experience variances and positive operating assumption changes, substantially
related to the introduction of the new HIV/Aids tables, supported the results in 2013. Investment return on the capital
portfolio also exceeded the expected return for the period, attributable to an outperformance of benchmarks by Sanlam
Investments and a good return achieved on the international exposure in the portfolio. The return on the non-life
operations were positively impacted by an increase in the valuation of Glacier and Sanlam Personal Loans, due to an increase
in the level of assets under management and the size of the loan book respectively.
New business volumes increased by 27% on the first half of 2012, with new life business up 16% and new investment
business sales increasing by 41%.
Sanlam SKY achieved growth of 17% in the entry-level market, the combined result of a 5% increase in individual life sales
and growth of 61% in group life business. The Sanlam SKY agency channel achieved 21% growth in individual life sales,
offset by a 25% decline in the broker channel. The increased compliance burden is resulting in many brokers leaving the
industry or converting to tied agents, contributing to the decline in brokers contribution. The impact on overall growth
should normalise over time as the structural change in distribution model to agents progresses. Compared to a slow start in
2012, group life business, specifically credit life sales and Safrican business, recorded good growth in the first six months
of 2013. The bi-annual ZCC premium renewal occurred in the first half of 2013, also supporting the growth in group life business.
VNB declined by 3%, partly attributable to an increase in the five-year long-term interest rate used to calculate VNB. On a
comparable basis, VNB grew by 9% at slightly reduced margins, with lower margin group life business contributing relatively more to
the overall margin in 2013.
Middle-income market sales increased by 17%, driven by 18% growth in single premiums. New recurring premium life
business increased by 6%, largely attributable to the newly launched Cumulus retirement annuity attracting strong new
business. New recurring premium risk business declined marginally on 2012, the combined result of competitive market rates and
a change in business mix from level to escalating premiums. VNB increased by 28% following the strong new business sales.
Glaciers non-life linked products remain popular in the affluent market, supporting the overall 32% growth in Glaciers
new business.
The strategic focus on writing quality new business continues to impact positively on retention, with all market
segments maintaining persistency levels. Net fund flows commensurately benefited and increased by 82%. The only segment
experiencing net outflows was the middle-income market, where the strong single premium sales of the past five years have
started to mature with a resulting increase in benefit payments.
Gross result from financial services increased by 29% (31% on a net of tax and non-controlling interest basis).
Entry-level market earnings were up 81%, primarily due to the growth in the in-force book over the last number of years,
positive mortality experience and the Channel4Life loss recognised in 2012 that reduced the comparative base. Middle-income
market profit grew by 20%, supported by positive mortality claims experience and higher fund-based fee income earned on
the higher average level of assets under management. Higher assets under management also impacted positively on Glaciers
fee income, which together with good cost control increased affluent market earnings by 34%.
Sanlam Emerging Markets
Key performance indicators
for the six months ended 30 June 2013
%
R million 2013 2012 change
Group Equity Value
Group Equity Value* 9 356 6 105 53
Covered business 2 982 2 647 13
Other operations 6 374 3 458 84
Return on Group Equity Value (6 months) 22,0% 6,3%
Covered business 21,6% 7,8%
Other operations 22,2% 3,0%
Business volumes
New business volumes 5 933 6 483 (8)
Namibia 4 263 4 599 (7)
Botswana 871 1 200 (27)
Rest of Africa 436 465 (6)
India/Malaysia 363 219 66
Net fund flows 607 2 296 (74)
Namibia (419) 648 (165)
Botswana 460 1 012 (55)
Rest of Africa 530 554 (4)
India/Malaysia 36 82 (56)
Value of new covered business
Value of new business 136 108 26
Namibia 44 24 83
Botswana 37 39 (5)
Rest of Africa 55 46 20
India - (1)
Present value of new business premiums 2 085 2 199 (5)
Namibia 444 502 (12)
Botswana 809 832 (3)
Rest of Africa 720 739 (3)
India 112 126 (11)
New business margin 6,52% 4,91%
Namibia 9,91% 4,78%
Botswana 4,57% 4,69%
Rest of Africa 7,64% 6,22%
India 0,00% (0,79)%
Earnings
Gross result from financial services 697 381 83
Namibia 112 97 15
Botswana 276 247 12
Rest of Africa 76 38 100
India/Malaysia 244 7 >100
Corporate (11) (8) (38)
Net result from financial services 391 183 114
* Comparative information as at 31 December 2012
The SEM results for the first half of 2013 include maiden contributions from the R3 billion additional investment in
Shriram in 2012 and 2013 as well as two months contribution from the P&O investment in Malaysia, effective 1 May 2013.
The weakening of the rand exchange rate also had a positive impact on the growth reported for 2013.
SEMs RoGEV for the period benefited from the weaker rand exchange rate. The return on covered business was also
supported by strong growth in VNB, positive experience variances as well as the abnormal value appreciation of the
Capricorn investment held within the Namibian capital portfolio (refer above). The investment in Shriram Capital is the
main contributor to the return on Other operations, with all valuations increasing in line with the growth in the
underlying businesses.
New business volumes declined by 8%, with new single premium sales 13% lower from a high base in 2012. Single premiums
are more volatile in nature, with anticipated lower new business volumes in some periods. The challenging economic
environment in Botswana continues to impact new business volumes, with lower single premium annuity business the main
contributor to the 32% decline in new single premium business in this market. Kenya received a large bulk annuity mandate in
2012 that did not repeat in 2013, resulting in a 22% decline in Rest of Africa single premiums. New recurring premium
life business increased by a healthy 20% and short-term insurance premiums doubled (50% increase excluding the newly
acquired P&O). The Botswana business has done well to grow recurring premium sales by 24%. The growth trajectory in Rest of
Africa also remains intact with new recurring premium sales increasing by 23%. VNB grew by 26% on 2012, with VNB margins
increasing from 4,91% in the first half of 2012 to 6,51% in 2013. The change in mix to more profitable recurring premium
business supported the higher overall margins. Botswana was the only region experiencing a decline in VNB and margins,
attributable to the lower annuity sales.
The lower single premium sales resulted in a marked decline in net fund flows across all regions.
SEM delivered exceptional growth of 83% in gross result from financial services (114% net of tax and non-controlling
interest). This includes the maiden contributions from India and Malaysia as referred to above. Excluding earnings from
structural growth, comparable gross earnings improved by 22%. The earnings growth reflects the increasing in-force book
across Africa as well as higher fee income in the asset management operations from a higher level of assets under
management. Excluding new acquisitions, operating earnings in India more than doubled off a relatively low base, with Shriram
General Insurance in particular achieving good profit growth.
Sanlam Investments
Key performance indicators
for the six months ended 30 June 2013
%
R million 2013 2012 change
Group Equity Value
Group Equity Value* 16 328 16 424 (1)
Covered business 6 421 6 205 3
Other operations 9 907 10 219 (3)
Return on Group Equity Value (6 months) 9,2% 6,3%
Covered business 9,5% 5,6%
Other operations 9,1% 6,8%
Business volumes
Net fund flows (excluding white label) 4 194 1 027 308
Investments 2 959 683 333
Asset management (2 828) 1 751 (262)
Wealth management 2 457 (328) 849
Investment services 2 018 (744) 371
International 1 312 4 >100
Life business 1 235 344 259
New life business volumes 3 644 1 933 89
Recurring premiums 178 194 (8)
Single premiums 3 466 1 739 99
Value of new covered business
Value of new business 53 35 51
Present value of new business premiums 4 703 3 051 54
New business margin 1,13% 1,15%
Earnings
Gross result from financial services 687 631 9
Investment management 451 369 22
Employee Benefits 174 189 (8)
Capital Management 62 73 (15)
Net result from financial services 523 471 11
* Comparative information as at 31 December 2012
SI delivered exemplary new business and net fund flow performances. The weaker rand exchange rate had a positive
impact on the results of the clusters international businesses but an allowance for the impairment of the Capital Management
units exposure to the First Strut bonds limited the increase in the clusters gross result from financial services to 9%.
SI achieved a RoGEV of 9,2% for the six months to June 2013, with both covered and other operations contributing to
the growth. The valuation of SIs operations benefited from an increase in the level of assets under management, following
a continuance of net fund inflows and net positive investment returns. Good growth in operating profit in the
investment management operations also contributed to the RoGEV.
New business volumes increased by 58% with all business units delivering growth in excess of 20%. The international
businesses more than doubled their new business sales, with Wealth management and Investment services achieving growth of
79% and 70% respectively, a particularly satisfactory achievement in a very competitive market.
The strong new business performance flowed through to the clusters net fund flows, which increased from R1 billion in
the first six months of 2012 to more than R4 billion in 2013 (excluding white label).
Asset management is the only business reporting worse net flows, declining from a net inflow of R1,8 billion in 2012
to a net outflow of R2,8 billion in the first half of 2013. This is due to two clients withdrawing R4,3 billion during the
period, essentially due to portfolio restructuring.
Gross result from financial services increased by 9%. The strong investment market performance in the second half of
2012 supported a higher level of assets under management in 2013 across all businesses in the cluster, resulting in a 22%
increase in earnings from the investment management businesses. Cost efficiency improvements also contributed to the
growth and remains a key focus area for the cluster. Sanlam Employee Benefits (SEB)s operating earnings declined by 8%,
attributable to once-off fee income in the first half of 2012 that increased the comparative base, as well as a 15%
decline in risk underwriting profit due to weaker claims experience. Operating profit in the Capital Management business
declined by 15%, attributable to a provision created against its exposure to First Strut, which went into liquidation,
partly offset by a partial recovery of a previously impaired investment. Excluding these two exceptional items, Capital
Management improved its operating earnings by 92%, with strong growth in both the equities and debt divisions.
Santam
Key performance indicators
for the six months ended 30 June 2013
%
R million 2013 2012 change
Group Equity Value
Group Equity Value* 12 969 12 875 1
Return on Group Equity Value (6 months) 2,9% 24,3%
Business volumes
Net earned premiums 8 096 7 703 5
Net fund flows 2 381 2 614 (9)
Earnings
Gross result from financial services 296 672 (56)
Net result from financial services 128 274 (53)
Ratios
Claims 70,6% 66,1%
Administration costs 17,2% 16,3%
Combined 98,8% 93,9%
Underwriting 1,3% 6,1%
* Comparative information as at 31 December 2012.
The RoGEV of the short-term insurance cluster reflects the investment return earned on the listed Santam shares, which
marginally outperformed the South African equity market.
The high claims experience in the South African short-term insurance industry continued into the first six months of
2013. The agricultural business, in particular, incurred significant losses from hail damage to summer crops and drought
in other parts of the country. At the same time the claims experience in the motor book was adversely affected by the
high replacement cost of imported vehicle parts following the sharp depreciation in the rand exchange rate. The
competitive environment in the mature South African market remains challenging. Gross written premiums increased by 9%; higher
reinsurance costs, however, limited the growth in net earned premiums to 5%.
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 based on the standard formula prescribed in this study. The standard formula is still
developing with a third quantitative impact study planned for submission to the FSB in April 2014. Until the FSB has
finalised the basis for determining the required capital for the Life Insurance operations, the Group will maintain its
prudent approach to capital management.
- Releasing capital from illiquid and non-core investments. R412 million was released during the first half of 2013
through the disposal of non-core operations in the United Kingdom and illiquid investments.
- 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. R1,1 billion was utilised in
2013 to acquire a direct interest of 4,1% in Shriram Transport Finance (refer Executive Review above). Discretionary
capital invested in cash yields suboptimal return and any amount that is not expected to be utilised for acquisitions in the
foreseeable future will be returned to shareholders. Excess investment return of some R1,1 billion earned during 2012
was returned to shareholders in 2013 through a special dividend of 50 cents per share.
At the end of December 2012 the Group held discretionary capital of R4,2 billion. Taking into account the movement set
out above, as well as the investment return earned by the discretionary capital portfolio and the cash operating profit
retained in the 2012 dividend earnings cover, the level of discretionary capital decreased to some R3,2 billion at the
end of June 2013. This amount is substantially earmarked for acquisitions in Africa, India and South-East Asia.
All of the life insurance businesses within the Group were sufficiently capitalised at the end of June 2013. 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 R28,5 billion covered its capital adequacy requirements
(CAR) 3,9 times. No policyholder portfolio had a negative bonus stabilisation reserve at the end of June 2013.
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
4 September 2013
Accounting policies and basis of preparation
The preparation of the Groups reviewed interim financial statements was supervised by the Financial Director, Kobus
Möller CA(SA).
The basis of presentation applied for purposes of the interim condensed consolidated financial statements is in accordance
with and contain the information required by International Financial Reporting Standards (IFRS), specifically IAS 34 on
interim financial reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act
of South Africa. The accounting policies are consistent with those applied in the 2012 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 2012, apart from changes in the
assumptions.
Application of new and revised IFRSs and interpretations
The following new or revised IFRSs and interpretations are applied in the Groups 2013 financial year:
- IFRS 10 Consolidated Financial Statements
- IFRS 11 Joint Arrangements
- IFRS 12 Disclosure of Interests in Other Entities
- IFRS 13 Fair Value Measurement
- IAS 19 Employee Benefits - Amendment regarding removal of corridor method and other comprehensive income treatment
- Amendment to IFRS 7 - Disclosures relating to offsetting of financial assets and liabilities
- Amendments to IAS 1 - Financial statement presentation
- IAS 27 Separate Financial Statements - Consequential amendments resulting from consolidation project
- IAS 28 Investments in Associates and Joint Ventures - Consequential amendments resulting from consolidation project
- May 2012 Improvements to IFRS
The retrospective application of IFRS 10 required restatement of the Groups previous IFRS financial statements. The
nature and the effect of this change are disclosed below.
The application of the remainder of the new standards and interpretations did not have a significant impact on the
Groups financial position, reported results and cash flows. Certain of these new standards will, however, require
additional disclosures in the annual financial statements. The additional fair value disclosures have, however, as required,
been presented as part of this interim financial statements.
IFRS 10 Consolidated financial statements
IFRS 10 establishes a single control model that applies to all entities including special purpose entities. IFRS 10
changes the definition of control such that an investor controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Previously, only holdings in investment funds of greater than 50% were consolidated. As a result of the adoption of
IFRS 10 the Group consolidated a number of additional funds, effectively leading to reclassifications of line items on the
Statement of Financial Position and the Statement of Comprehensive Income.
This change has been applied retrospectively, as required by the transitional arrangements of IFRS 10, and hence led
to reclassifications of the 2012 comparative information. The impact of these reclassifications on the Statement of
Financial Position as at 31 December 2012, the Statement of Comprehensive Income and the Cash Flow Statement for the six
months ended 30 June 2012 is disclosed in note 6.
These reclassifications in the current and prior period had no impact on the Groups total comprehensive income,
shareholders fund or net asset value.
Additional disclosures
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change
the requirements of when an entity is required to use fair value, but rather provides guidance on how to measure fair
value under IFRS when fair value is required or permitted.
The application of IFRS 13 did not materially impact the fair value measurements carried out by the Group.
IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in
other standards, including IFRS 7 Financial Instruments: Disclosures. Some of these disclosures are specifically required
for financial instruments by IAS 34, thereby affecting the interim condensed consolidated financial statements.
The Group provides these disclosures in note 5.
The following new or revised IFRSs and interpretations have effective dates applicable to future financial years and
have not been early adopted:
- Amendment to IAS 32 - Clarification of the instances in which the set off of financial assets and liabilities is
allowed (effective 1 January 2014)
- Amendment to IFRS 10 - Investment entities exemption (effective 1 January 2014)
- IFRS 9 Financial Instruments (effective 1 January 2015)
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.
The basis of preparation of the Shareholders information is also consistent with that applied in the 2012 annual
report, apart from the following:
- The presentation within Group Equity Value (GEV) of non-life Group operations that are not valued at listed market
value was amended to align with the treatment of covered business. The fair value of these non-life operations
previously comprised their base valuation to which the year to date earnings were added. The year to date earnings essentially
constituted the dividend payment expected from the businesses in terms of the Groups dividend policy. This presentation
format is not consistent with covered business, where the operations are reflected at base valuation with year to date
earnings (potential dividend) included in Other capital within the GEV statement. With effect from 30 June 2013, non-life
Group operations are also reflected at base valuation, with year to date earnings included in Other capital. This change
in presentation was also applied to the Shareholders Fund at fair value. Comparative information has not been restated
as the change in presentation does not have an impact on the overall GEV, GEV earnings and RoGEV.
EXTERNAL AUDIT REVIEW
The appointed auditors, Ernst & Young Inc, reviewed the interim condensed financial statements and Shareholders
information of the Group at 30 June 2013. These reviews were conducted in accordance with International Standard on Review
Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.
Copies of the unqualified audit reports of Ernst & Young Inc are presented.
SHAREHOLDERS INFORMATION
for the six months ended 30 June 2013
Contents
Report on review of Sanlam Limited interim 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
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
2013, 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. The directors are responsible for the preparation and presentation of this
interim financial information in accordance with the basis of accounting set out. 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, 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 accounting set out below.
Basis of accounting
Without modifying our opinion, we draw attention to the basis of accounting set out. The Sanlam Limited Interim Shareholders
Information are prepared to provide additional information in respect of the Group shareholders fund in a format that
corresponds with that used by management in evaluating the performance of the Group. As a result the Sanlam Limited Interim
Shareholders information may not be suitable for another purpose.
Ernst & Young Inc.
Director: Johanna Cornelia de Villiers
Registered Auditor
Chartered Accountant (SA)
Group Equity Value
at 30 June 2013
June reviewed June reviewed December audited
2013 2012 2012
Fair value Value of Fair value Value of Fair value Value of
R million Note Total of assets in-force Total of assets in-force Total of assets in-force
Sanlam Personal Finance 33 155 11 382 21 773 30 053 10 789 19 264 32 762 11 299 21 463
Covered business(1) 30 524 8 751 21 773 27 819 8 555 19 264 30 144 8 681 21 463
Glacier 1 368 1 368 - 1 206 1 206 - 1 338 1 338 -
Sanlam Personal Loans 822 822 - 620 620 - 816 816 -
Other operations 441 441 - 408 408 - 464 464 -
Sanlam Emerging Markets 9 356 7 708 1 648 3 443 2 118 1 325 6 105 4 603 1 502
Covered business(1) 2 982 1 334 1 648 2 345 1 020 1 325 2 647 1 145 1 502
Shriram Capital 4 190 4 190 - 153 153 - 2 398 2 398 -
Letshego 663 663 - 512 512 - 602 602 -
Pacific & Orient 872 872 - - - - - - -
Other operations 649 649 - 433 433 - 458 458 -
Sanlam Investments 16 328 15 047 1 281 15 064 14 132 932 16 424 15 339 1 085
Covered business(1) 6 421 5 140 1 281 5 909 4 977 932 6 205 5 120 1 085
Sanlam Employee Benefits 5 419 4 825 594 5 132 4 741 391 5 301 4 825 476
Sanlam UK 1 002 315 687 777 236 541 904 295 609
Investment Management 9 298 9 298 - 8 464 8 464 - 9 406 9 406 -
Capital Management 609 609 - 691 691 - 813 813 -
Santam 12 969 12 969 - 11 134 11 134 - 12 875 12 875 -
Group operations 71 808 47 106 24 702 59 694 38 173 21 521 68 166 44 116 24 050
Discretionary capital 3 188 3 188 - 4 000 4 000 - 4 200 4 200 -
Balanced portfolio - other 2 899 2 899 - 4 441 4 441 - 4 139 4 139 -
Group Equity Value before adjustments to net worth 77 895 53 193 24 702 68 135 46 614 21 521 76 505 52 455 24 050
Net worth adjustments - present value
of holding company expenses (1 286) (1 286) - (1 315) (1 315) - (1 153) (1 153) -
Group Equity Value 76 609 51 907 24 702 66 820 45 299 21 521 75 352 51 302 24 050
Value per share (cents) 4 3 747 2 539 1 208 3 293 2 232 1 061 3 707 2 524 1 183
Analysis per type of business
Covered business(1) 39 927 15 225 24 702 36 073 14 552 21 521 38 996 14 946 24 050
Sanlam Personal Finance 30 524 8 751 21 773 27 819 8 555 19 264 30 144 8 681 21 463
Sanlam Emerging Markets 2 982 1 334 1 648 2 345 1 020 1 325 2 647 1 145 1 502
Sanlam Investments 6 421 5 140 1 281 5 909 4 977 932 6 205 5 120 1 085
Other Group operations 31 881 31 881 - 23 621 23 621 - 29 170 29 170 -
Discretionary and other capital 4 801 4 801 - 7 126 7 126 - 7 186 7 186 -
Group Equity Value 76 609 51 907 24 702 66 820 45 299 21 521 75 352 51 302 24 050
(1) Refer embedded value of covered business on page 49.
(2) Refer to note 2.4 for a description of the impact of the change in presentation format of non-life Group
operations applied to June 2013 values.
Change in group equity value
for the six months ended 30 June 2013
Full year
Six months reviewed audited
R million 2013 2012 2012
Earnings from covered business(1) 3 038 2 941 7 908
Earnings from other Group operations 2 627 3 133 6 395
Operations valued based on ratio of price to assets under management 733 588 1 450
Assumption changes (142) 44 4
Change in assets under management 371 355 813
Earnings for the year and changes in capital requirements 142 165 497
Foreign currency translation differences and other 362 24 136
Operations valued based on discounted cash flows 1 307 106 628
Expected return 552 250 618
Operating experience variances and other 175 40 129
Assumption changes 173 (203) (226)
Foreign currency translation differences 407 19 107
Operations valued at net asset value - earnings for the year 215 58 84
Listed operations - investment return 372 2 381 4 233
Earnings from discretionary and other capital (160) (207) 7
Portfolio investments and other 128 65 149
Net corporate expenses (42) (59) (129)
Share-based payments transactions (113) (97) (59)
Change in net worth adjustments (133) (116) 46
Group Equity Value earnings 5 505 5 867 14 310
Dividends paid (4 309) (2 581) (2 581)
Cost of treasury shares sold/(acquired) 61 13 102
Sanlam share buy back - (22) (26)
Share incentive scheme and other 61 35 128
Group Equity Value at the beginning of the year 75 352 63 521 63 521
Group Equity Value at the end of the period 76 609 66 820 75 352
(1) Refer embedded value of covered business.
Return on group equity value
for the six months ended 30 June 2013
Six months reviewed Full year audited
2013 2012 2012
Earnings Return Earnings Return Earnings Return
R million % R million % R million %
Sanlam Personal Finance 2 241 6,8 2 583 8,9 6 862 23,8
Covered business(1) 1 879 6,2 2 430 9,1 6 296 23,6
Other operations 362 13,8 153 7,0 566 25,9
Sanlam Emerging Markets 1 548 22,0 215 6,3 669 16,9
Covered business(1) 572 21,6 182 7,8 628 27,1
Other operations 976 22,2 33 3,0 41 2,5
Sanlam Investments 1 504 9,2 940 6,3 2 539 16,9
Covered business(1) 587 9,5 329 5,6 984 16,8
Other operations 917 9,1 611 6,8 1 555 16,9
Santam 372 2,9 2 336 24,3 4 233 44,0
Discretionary and other capital (160) (207) 7
Return on Group Equity Value 5 505 7,3 5 867 9,2 14 310 22,5
Return on Group Equity Value per share 6,9 8,8 22,0
Annualised return on Group Equity Value
per share 14,3 18,4 22,0
(1) Refer embedded value of covered business.
Six months Full year
reviewed audited
R million 2013 2012 2012
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 3 483 2 533 5 811
Net foreign currency translation gains recognised in other
comprehensive income 571 15 105
Earnings recognised directly in equity
Share-based payment transactions (122) (105) (62)
Net cost of treasury shares delivered (265) (266) (297)
Share-based payments 143 161 235
Movements in subsidiary interests (36) (2) (63)
Recognised in Statement of Changes in Equity (36) (26) (63)
Less: Included in value of in-force - 24 -
Movement in fair value adjustment - shareholders fund at fair value 1 040 2 344 4 699
Movement in adjustments to net worth and other (39) (93) 124
Present value of holding company expenses and other (133) (118) 46
Movement in book value of treasury shares held by subsidiaries valued at
fair value 33 28 33
Change in goodwill and value of business acquired adjustments less value
of in-force acquired 61 (3) 45
Growth from covered business: value of in-force(1) 608 1 175 3 696
Return on Group Equity Value 5 505 5 867 14 310
(1) Refer embedded value of covered business.
Shareholders' fund at fair value
at 30 June 2013
June reviewed June reviewed December audited
2013 2012 2012
Fair Fair Fair
value Net value Net value Net
Fair adjust- asset Fair adjust- asset Fair adjust- asset
R million Notes value ment value value ment value value ment value
Covered business, discretionary and other capital 22 641 112 22 529 24 360 112 24 248 24 631 112 24 519
Property and equipment 288 - 288 282 - 282 271 - 271
Owner-occupied properties 570 - 570 547 - 547 569 - 569
Goodwill(2) 474 - 474 472 - 472 474 - 474
Value of business acquired(2) 637 - 637 692 - 692 643 - 643
Other intangible assets 28 - 28 26 - 26 28 - 28
Deferred acquisition costs 2 460 - 2 460 2 132 - 2 132 2 244 - 2 244
Investments 21 003 112 20 891 21 993 112 21 881 22 360 112 22 248
Equities and similar securities 8 685 112 8 573 7 955 112 7 843 9 210 112 9 098
Associated companies 1 361 - 1 361 847 - 847 1 182 - 1 182
Joint ventures - Shriram Life Insurance - - - 267 - 267 - - -
Public sector stocks and loans 333 - 333 105 - 105 225 - 225
Investment properties 48 - 48 57 - 57 106 - 106
Other interest-bearing and preference share investments 10 576 - 10 576 12 762 - 12 762 11 637 - 11 637
Net term finance - - - - - - - - -
Term finance (3 083) - (3 083) (4 917) - (4 917) (3 737) - (3 737)
Assets held in respect of term finance 3 083 - 3 083 4 917 - 4 917 3 737 - 3 737
Net deferred tax (375) - (375) (107) - (107) (256) - (256)
Net working capital (1 264) - (1 264) (751) - (751) (563) - (563)
Derivative liability (35) - (35) - - - (95) - (95)
Non-controlling interest (1 145) - (1 145) (926) - (926) (1 044) - (1 044)
Other Group operations 31 881 17 097 14 784 23 621 13 702 9 919 29 170 16 057 13 113
Sanlam Investments 2.3 9 907 6 724 3 183 9 155 5 747 3 408 10 219 6 333 3 886
Investment Management 9 298 6 697 2 601 8 464 5 660 2 804 9 406 6 253 3 153
Capital Management 609 27 582 691 87 604 813 80 733
Sanlam Personal Finance 2.1 2 631 1 858 773 2 234 1 402 832 2 618 1 668 950
Glacier 1 368 1 105 263 1 206 920 286 1 338 995 343
Sanlam Personal Loans(3) 822 397 425 620 198 422 816 349 467
Other operations 441 356 85 408 284 124 464 324 140
Sanlam Emerging Markets 2.2 6 374 361 6 013 1 098 (10) 1 108 3 458 (31) 3 489
Shriram Capital 4 190 463 3 727 153 - 153 2 398 93 2 305
Letshego 663 (10) 673 512 (52) 564 602 (4) 606
Pacific & Orient 872 (17) 889 - - - - - -
Other operations 649 (75) 724 433 42 391 458 (120) 578
Santam 12 969 9 401 3 568 11 134 7 810 3 324 12 875 9 334 3 541
Goodwill held on Group level in respect of the above
businesses - (1 247) 1 247 - (1 247) 1 247 - (1 247) 1 247
Shareholders fund at fair value 54 522 17 209 37 313 47 981 13 814 34 167 53 801 16 169 37 632
Value per share (cents) 4 2 667 842 1 825 2 365 681 1 684 2 646 795 1 851
Reconciliation to Group Equity Value
Group Equity Value before adjustments to net worth 77 895 53 193 24 702 68 135 46 614 21 521 76 505 52 455 24 050
Add: Goodwill and value of business acquired replaced by
value of in-force 1 329 1 329 - 1 367 1 367 - 1 346 1 346 -
Sanlam Life and Pensions 356 356 - 356 356 - 356 356 -
Sanlam Developing Markets 732 732 - 771 771 - 753 753 -
Shriram Life Insurance(4) 210 210 - 210 210 - 210 210 -
Other 31 31 - 30 30 - 27 27 -
Less: Value of in-force (24 702) - (24 702) (21 521) - (21 521) (24 050 - (24 050)
Shareholders fund at fair value 54 522 54 522 - 47 981 47 981 - 53 801 53 801 -
(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) The carrying value of Shriram Life Insurance includes goodwill of R210 million (2012: 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.
(5) Refer to note 2.4 for a description of the impact of the change in presentation format for non-life Group operations applied to June 2013 values.
Shareholders' fund income statement
for the six months ended 30 June 2013
Sanlam Personal Sanlam Emerging Sanlam
Finance Markets Investments
R million Note 2013 2012 2013 2012 2013 2012
Financial services income 6 240 5 496 1 754 1 300 3 493 3 152
Sales remuneration (1 027) (947) (313) (276) (77) (56)
Income after sales remuneration 5 213 4 549 1 441 1 024 3 416 3 096
Underwriting policy benefits (1 632) (1 435) (339) (289) (1 064) (967)
Administration costs (1 640) (1 615) (405) (354) (1 665) (1 498)
Result from financial services before tax 1 941 1 499 697 381 687 631
Tax on result from financial services (528) (416) (158) (67) (152) (154)
Result from financial services after tax 1 413 1 083 539 314 535 477
Non-controlling interest (4) (6) (148) (131) (12) (6)
NET RESULT FROM FINANCIAL SERVICES 1 409 1 077 391 183 523 471
Net investment income 482 489 75 23 84 100
Dividends received - Group companies 253 157 - - - -
Other investment income 298 411 124 47 110 121
Tax on investment income (69) (79) (24) (17) (26) (21)
Non-controlling interest - - (25) (7) - -
Project expenses - - (4) (3) - (5)
Amortisation of value of business acquired and other intangibles (18) (18) (6) (6) (59) (24)
Equity participation costs - - - - - -
Net equity-accounted headline earnings - - 2 1 - -
Net investment surpluses 471 1 032 150 47 175 57
Investment surpluses - Group companies 146 836 - - - -
Other investment surpluses 409 277 160 55 198 71
Tax on investment surpluses (84) (81) (1) (4) (21) (14)
Non-controlling interest - - (9) (4) (2) -
Net Secondary Tax on Companies - (81) - - - (2)
NORMALISED HEADLINE EARNINGS 2 344 2 499 608 245 723 597
Net profit on disposal of associated companies - - - - 42 -
Impairments - - - - (1) (6)
NORMALISED ATTRIBUTABLE EARNINGS 2 344 2 499 608 245 764 591
Fund transfers - - - - -
Attributable earnings per Group statement of comprehensive income 2 344 2 499 608 245 764 591
Ratios
Admin ratio(1) 31,5% 35,5% 28,1% 34,6% 48,7% 48,4%
Operating margin(2) 37,2% 33,0% 48,4% 37,2% 20,1% 20,4%
Normalised diluted earnings 3
per share
Adjusted weighted average number of shares (million)
Net result from financial services (cents) 69,1 53,2 19,2 9,0 25,6 23,3
Corporate and
Santam Other(3) Total
R million 2013 2012 2013 2012 2013 2012
Financial services income 8 291 7 906 96 79 19 874 17 933
Sales remuneration (1 027) (1 025) - - (2 444) (2 304)
Income after sales remuneration 7 264 6 881 96 79 17 430 15 629
Underwriting policy benefits (5 715) (5 089) - - (8 750) (7 780)
Administration costs (1 253) (1 120) (150) (158) (5 113) (4 745)
Result from financial services before tax 296 672 (54) (79) 3 567 3 104
Tax on result from financial services (69) (198) 12 20 (895) (815)
Result from financial services after tax 227 474 (42) (59) 2 672 2 289
Non-controlling interest (99) (200) - - (263) (343)
NET RESULT FROM FINANCIAL SERVICES 128 274 (42) (59) 2 409 1 946
Net investment income 21 35 (280) (92) 382 555
Dividends received - Group companies - - (253) (157) - -
Other investment income 33 57 (11) 39 554 675
Tax on investment income 6 4 (16) 26 (129) (87)
Non-controlling interest (18) (26) - - (43) (33)
Project expenses - - (2) - (6) (8)
Amortisation of value of business acquired and other intangibles (12) (12) - - (95) (60)
Equity participation costs (9) (1) - - (9) (1)
Net equity-accounted headline earnings 16 23 - - 18 24
Net investment surpluses 97 50 (143) (874) 750 312
Investment surpluses - Group companies - - (146) (836) - -
Other investment surpluses 204 178 3 (40) 974 541
Tax on investment surpluses (43) (93) - 1 (149) (191)
Non-controlling interest (64) (35) - 1 (75) (38)
Net Secondary Tax on Companies - (86) - (60) - (229)
NORMALISED HEADLINE EARNINGS 241 283 (467) (1 085) 3 449 2 539
Net profit on disposal of associated companies - - - - 42 -
Impairments (7) - - - (8) (6)
NORMALISED ATTRIBUTABLE EARNINGS 234 283 (467) (1 085) 3 483 2 533
Fund transfers - - 25 (131) 25 (131)
Attributable earnings per Group statement of comprehensive income 234 283 (442) (1 216) 3 508 2 402
Ratios
Admin ratio(1) 17,2% 16,3% 29,3% 30,4%
Operating margin(2) 4,1% 9,8% 20,5% 19,9%
Normalised diluted earnings
per share
Adjusted weighted average number of shares (million) 2 039,2 2 023,2
Net result from financial services (cents) 6,3 13,5 (2,1) (2,9) 118,1 96,2
(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) 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 2013
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 2013 2012 2013 2012 2013 2012
Sanlam Personal Finance 10 114 8 733 9 125 6 459 19 239 15 192
Entry-level(3) 503 430 - - 503 430
Middle-income 5 200 4 464 168 136 5 368 4 600
Recurring 628 594 25 24 653 618
Single(3) 4 572 3 870 143 112 4 715 3 982
Affluent 4 411 3 839 8 957 6 323 13 368 10 162
Sanlam Emerging Markets 1 198 1 493 4 735 4 990 5 933 6 483
Namibia 155 284 4 108 4 315 4 263 4 599
Recurring 73 58 - - 73 58
Single 82 226 4 108 4 315 4 190 4 541
Botswana 561 657 310 543 871 1 200
Recurring 87 69 25 21 112 90
Single(4) 474 588 285 522 759 1 110
Rest of Africa 402 465 34 - 436 465
Recurring 204 166 - - 204 166
Single(4) 198 299 34 - 232 299
India 80 87 204 132 284 219
Recurring 38 42 204 132 242 174
Single 42 45 - - 42 45
South-East Asia - - 79 - 79 -
Sanlam Investments 3 644 1 933 38 884 25 463 42 528 27 396
Employee benefits 1 157 943 - - 1 157 943
Recurring 143 173 - - 143 173
Single 1 014 770 - - 1 014 770
Investment Management 2 487 990 38 884 25 463 41 371 26 453
Asset Management - - 16 258 12 931 16 258 12 931
Wealth Management - - 9 874 5 502 9 874 5 502
Investment - - 9 455 5 578 9 455 5 578
Services
International 2 487 990 3 297 1 452 5 784 2 442
Recurring 35 21 - - 35 21
Single 2 452 969 3 297 1 452 5 749 2 421
Santam - - 8 096 7 703 8 096 7 703
New business excluding white label 14 956 12 159 60 840 44 615 75 796 56 774
White label - - 7 448 4 203 7 448 4 203
Total new business 14 956 12 159 68 288 48 818 83 244 60 977
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 2013 2012 2013 2012 2013 2012
Recurring premiums on existing funds:
Sanlam Personal Finance 7 073 6 617
Sanlam Emerging Markets 1 091 1 042
Sanlam 2 680 2 583
Investments
Sanlam Employee Benefits 1 656 1 655
Sanlam Investment Management 1 024 928
Asset Management 287 244
Investment Services 642 453
International 95 231
Total funds received 94 088 71 219
(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.
(3) Comparative information for entry-level market single premiums have been reclassified as middle-income market single premiums to align with December
2012 disclosures.
(4) Comparative information have been restated for Botswanas Zambian asset management operations (previously included in Rest of Africa) to align with
December 2012 disclosures.
1.2 Analysis of payments to clients
Life Insurance(1) Other(2) Total
R million 2013 2012 2013 2012 2013 2012
Sanlam Personal Finance 13 874 12 323 5 874 5 870 19 748 18 193
Entry-level(3) 828 1 082 - - 828 1 082
Middle-income 11 213 9 573 194 176 11 407 9 749
Surrenders(3) 1 751 1 690 - - 1 751 1 690
Other 9 462 7 883 194 176 9 656 8 059
Affluent 1 833 1 668 5 680 5 694 7 513 7 362
Sanlam Emerging Markets 1 562 1 360 4 855 3 870 6 417 5 230
Namibia 672 660 4 338 3 604 5 010 4 264
Surrenders 94 336 - - 94 336
Other 578 324 4 338 3 604 4 916 3 928
Botswana 546 446 267 178 813 624
Surrenders 147 130 - - 147 130
Other 399 316 267 178 666 494
Rest of Africa 230 155 - 2 230 157
Surrenders 29 15 - - 29 15
Other 201 140 - 2 201 142
India 114 99 199 86 313 185
Surrenders 90 75 - - 90 75
Other 24 24 199 86 223 110
South-East Asia - - 51 - 51 -
Sanlam Investments 4 160 3 475 36 854 25 477 41 014 28 952
Sanlam Employee Benefits 2 967 2 626 - - 2 967 2 626
Terminations 973 253 - - 973 253
Other 1 994 2 373 - - 1 994 2 373
Investment Management 1 193 849 36 854 25 477 38 047 26 326
Asset Management - - 19 373 11 424 19 373 11 424
Wealth Management - - 7 417 5 830 7 417 5 830
Investment Services - - 8 079 6 775 8 079 6 775
International 1 193 849 1 985 1 448 3 178 2 297
Santam - - 5 715 5 089 5 715 5 089
Payments to clients excluding white label 19 596 17 158 53 298 40 306 72 894 57 464
White label - - 8 583 3 572 8 583 3 572
Total payments to clients 19 596 17 158 61 881 43 878 81 477 61 036
(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.
(3) Comparative information for entry-level surrenders have been reclassified as middle-income surrenders to align with December 2012 disclosures.
1.3 Analysis of net inflow/(outflow) of funds
Life Insurance(1) Other(2) Total
R million 2013 2012 2013 2012 2013 2012
Sanlam Personal Finance 3 197 2 913 3 367 702 6 564 3 615
Entry-level(3) 1 410 867 - - 1 410 867
Middle-income(3) (791) (125) 90 73 (701) (52)
Affluent 2 578 2 171 3 277 629 5 855 2 800
Sanlam Emerging Markets 727 1 176 (120) 1 120 607 2 296
Namibia (189) (63) (230) 711 (419) 648
Botswana(4) 417 647 43 365 460 1 012
Rest of Africa(4) 496 556 34 (2) 530 554
India 3 36 5 46 8 82
South-East Asia - - 28 - 28 -
Sanlam Investments 1 235 344 2 959 683 4 194 1 027
Sanlam Employee Benefits (154) (28) - - (154) (28)
Investment Management 1 389 372 2 959 683 4 348 1 055
Asset Management - - (2 828) 1 751 (2 828) 1 751
Wealth Management - - 2 457 (328) 2 457 (328)
Investment Services - - 2 018 (744) 2 018 (744)
International 1 389 372 1 312 4 2 701 376
Santam - - 2 381 2 614 2 381 2 614
Net inflow excluding white label 5 159 4 433 8 587 5 119 13 746 9 552
White label - - (1 135) 631 (1 135) 631
Total net inflow 5 159 4 433 7 452 5 750 12 611 10 183
(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.
(3) Comparative information for entry-level market single premiums have been reclassified as middle-income market single premiums to align with December
2012 disclosures.
(4) Comparative information have been restated for Botswanas Zambian asset management operations (previously included in Rest of Africa) to align with
December 2012 disclosures.
2. CLUSTER INFORMATION
2.1 Sanlam Personal Finance
Life Non-life
operations operations Total
R million 2013 2012 2013 2012 2013 2012
Analysis of attributable earnings
Gross result from financial services 1 715 1 304 226 195 1 941 1 499
Entry-level market 360 199 - - 360 199
Middle-income market life and investments 1 251 1 033 16 10 1 267 1 043
Administration 338 260 - - 338 260
Risk underwriting - long-term insurance 414 342 - - 414 342
Asset-mismatch reserve 251 223 - - 251 223
Working capital management 143 139 - - 143 139
Other 105 69 16 10 121 79
Glacier 51 37 71 54 122 91
Sanlam Personal Loans 53 35 104 98 157 133
Other operations - - 35 33 35 33
Tax on result from financial services (465) (364) (63) (52) (528) (416)
Non-controlling interest - (3) (4) (3) (4) (6)
Net result from financial services 1 250 937 159 140 1 409 1 077
Net investment return 949 1 518 4 3 953 1 521
Net investment income 478 486 4 3 482 489
Net investment surpluses 471 1 032 - - 471 1 032
Net other earnings (18) (99) - - (18) (99)
Amortisation of intangibles (18) (18) - - (18) (18)
Secondary tax on companies - (81) - - - (81)
Normalised attributable earnings 2 181 2 356 163 143 2 344 2 499
2.1 Sanlam Personal Finance
Analysis of Group Equity Value (GEV)
GEV at the GEV at
beginning Capital the end
of the invest- Dividend of the
R million period Earnings ment paid period
30 June 2013
Life insurance operations 30 144 1 879 44 (1 543) 30 524
Non-life operations 2 618 362 (67) (282) 2 631
Glacier 1 338 184 - (154) 1 368
Sanlam Personal Loans 816 164 (86) (72) 822
Other 464 14 19 (56) 441
Group Equity Value 32 762 2 241 (23) (1 825) 33 155
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
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
2.2 Sanlam Emerging Markets
R million 2013 2012
Analysis of attributable earnings
Net result from financial services 391 183
Life insurance 180 144
Short-term insurance 5 (12)
Investment management 16 12
Credit and banking 179 42
Other 11 (3)
Net investment return 225 70
Net investment income 75 23
Net investment surpluses 150 47
Net other earnings (8) (8)
Amortisation of intangibles and impairments (6) (6)
Project expenses and other (2) (2)
Normalised attributable earnings 608 245
Analysis of net result from financial services
Life insurance operations 180 144
Namibia 64 59
Botswana 56 55
Rest of Africa 49 20
India 11 10
Non-life operations 211 39
Namibia 8 7
Botswana 52 44
Rest of Africa - -
India/Malaysia 160 (6)
Corporate (9) (6)
Net result from financial services 391 183
Analysis of Group Equity Value (GEV)
GEV at
the GEV at
beginning Capital the end
of the move- Dividend of the
R million period Earnings ment paid period
30 June 2013
Life insurance operations 2 647 572 - (237) 2 982
Non-life operations 3 458 976 2 009 (69) 6 374
Shriram Capital 2 398 710 1 104 (22) 4 190
Pacific & Orient - 55 817 - 872
Letshego 602 82 - (21) 663
Other operations 458 129 88 (26) 649
Group Equity Value 6 105 1 548 2 009 (306) 9 356
30 June 2012
Life insurance operations 2 320 182 (5) (152) 2 345
Non-life operations 1 089 33 - (24) 1 098
Shriram Capital 152 1 - - 153
Letshego 465 47 - - 512
Other operations 472 (15) - (24) 433
Group Equity Value 3 409 215 (5) (176) 3 443
2.2 Sanlam Emerging Markets
Analysis of business volumes
Life Insurance Other Total
R million 2013 2012 2013 2012 2013 2012
Recurring premiums 402 335 308 153 710 488
Risk 248 213 - - 248 213
Investment 154 111 - - 154 111
Short-term - - 308 153 308 153
Annuities - 11 - - - 11
Single premiums 796 1 158 4 427 4 837 5 223 5 995
Risk 369 423 - - 369 423
Savings 424 710 - - 424 710
Continuations 3 25 - - 3 25
Other - - 4 427 4 837 4 427 4 837
Total new business 1 198 1 493 4 735 4 990 5 933 6 483
Recurring premiums on existing business 1 091 1 042 - - 1 091 1 042
Risk 563 579 - - 563 579
Investment 428 368 - - 428 368
Annuities 100 95 - - 100 95
Total funds received from clients 2 289 2 535 4 735 4 990 7 024 7 525
Death and disability benefits 390 309 - - 390 309
Maturity benefits 502 204 - - 502 204
Life and term annuities 226 197 - - 226 197
Surrenders 360 556 - - 360 556
Other 84 94 4 855 3 870 4 939 3 964
Total payments to clients 1 562 1 360 4 855 3 870 6 417 5 230
2.3 Sanlam Investments
Analysis of attributable earnings
Investment Capital Sanlam Employee Intra-cluster
Management Management Benefits eliminations Total
R million 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
Financial services income* 1 621 1 408 214 230 1 600 1 491 (8) (17) 3 427 3 112
Sales remuneration (57) (32) - - (20) (24) - - (77) (56)
Income after sales remuneration 1 564 1 376 214 230 1 580 1 467 (8) (17) 3 350 3 056
Underwriting policy benefits - - - - (1 064) (967) - - (1 064) (967)
Administration cost* (1 144) (1 032) (152) (157) (342) (311) 8 17 (1 630) (1 483)
Results from financial services before
performance fees 420 344 62 73 174 189 - - 656 606
Net performance fees 31 25 - - - - - - 31 25
Results from financial services 451 369 62 73 174 189 - - 687 631
Tax on result from financial services (104) (87) 1 (14) (49) (53) - - (152) (154)
Non-controlling interest (12) (6) - - - - - - (12) (6)
Net result from financial services 335 276 63 59 125 136 - - 523 471
Net investment return 42 (22) 2 4 215 175 - - 259 157
Net investment income 10 7 2 4 72 89 - - 84 100
Net investment surpluses 32 (29) - - 143 86 - - 175 57
Net other earnings (18) (37) - 1 - (1) - - (18) (37)
Normalised attributable earnings 359 217 65 64 340 310 - - 764 591
* Financial service income and administration cost on page 32 includes performance fees and related administration costs respectively.
Net result from Assets under
financial services management Fee income Administration cost
June June June December June December June December
2013 2012 2013 2012 2013 2012 2013 2012
R million R million R million R million % % % %
Asset management
Investment management 307 248 618 500 593 582
Asset Management 135 132 354 031 356 605 0,25 0,23 0,15 0,14
Wealth Management 53 22 121 465 107 187 0,72 0,73 0,59 0,65
Investment Services 32 33 133 453 123 737 0,71 0,73 0,64 0,66
International 82 78 82 839 69 722 0,73 0,74 0,49 0,50
Support Services 5 (17) - -
Intra-cluster eliminations - - (73 288) (63 669)
Capital Management 63 59 2 793 2 863 1,26 1,11 0,81 0,72
Asset management operations 370 307 621 293 596 445
Covered business: 125 136 54 202 52 822
Sanlam Employee Benefits
Covered business: 28 28 28 689 24 385
Sanlam UK
Sanlam Investments total 523 471 704 184 673 652
2.3 Sanlam Investments
Asset mix of assets under management
Fixed Off- Pro-
R million Interest Equities shore perties Cash Total
June 2013
Asset Management 92 418 149 566 36 360 9 425 66 262 354 031
Wealth Management - 76 938 41 229 - 3 298 121 465
Investment Services 37 101 63 850 12 215 5 410 14 877 133 453
International - - 82 839 - - 82 839
Capital Management - 2 784 - - 9 2 793
Intra-cluster eliminations (73 288)
Assets under management - Sanlam Investments 129 519 293 138 172 643 14 835 84 446 621 293
December 2012
Asset Management 93 445 151 181 31 954 11 011 69 014 356 605
Wealth Management - 68 775 35 396 - 3 016 107 187
Investment Services 30 609 69 086 11 844 4 458 7 740 123 737
International - - 69 722 - - 69 722
Capital Management 513 2 341 - - 9 2 863
Intra-cluster eliminations (63 669)
Assets under management - Sanlam Investments 124 567 291 383 148 916 15 469 79 779 596 445
Sanlam Employee Benefits
2013 2012
Analysis of attributable earnings
Net result from financial services 125 136
Risk underwriting 61 73
Investment and other 67 70
Working capital management 15 14
Administration (18) (21)
Analysis of new business per product line
Recurring premiums 143 173
Guaranteed 31 71
Risk 112 102
Single premiums 1 014 770
Guaranteed 726 621
Annuity 56 149
Special structures 232 -
2.3 Sanlam Investments
Analysis of Group Equity Value (GEV)
GEV at GEV at
the the end
beginning Capital end of
of the move- Dividend the
R million period Earnings ment paid period
30 June 2013
Investment Management 10 310 969 (312) (667) 10 300
Asset Management 3 919 58 - (295) 3 682
Wealth Management 1 558 232 22 (87) 1 725
Investment Services 995 36 - (96) 935
International 3 838 643 (334) (189) 3 958
Covered business 904 133 - (35) 1 002
Other operations 2 934 510 (334) (154) 2 956
Sanlam Employee Benefits:
Covered business 5 301 454 - (336) 5 419
Capital Management 813 81 75 (360) 609
Group Equity Value 16 424 1 504 (237) (1 363) 16 328
30 June 2012
Investment Management 9 031 576 142 (508) 9 241
Asset Management 3 411 162 - (138) 3 435
Wealth Management 1 259 78 12 (35) 1 314
Investment Services 865 70 - (60) 875
International 3 496 266 130 (275) 3 617
Covered business 791 35 - (49) 777
Other operations 2 705 231 130 (226) 2 840
Sanlam Employee Benefits: Covered business 5 077 296 - (241) 5 132
Capital Management 801 67 - (177) 691
Group Equity Value 14 909 939 142 (926) 15 064
2.4 Valuation methodology
The fair value of unlisted businesses has been determined by the application of the following valuation methodologies:
Fair value
June December
R million 2013 2012
Valuation method
Ratio of price to assets under management 8 520 8 385
Sanlam Investments 8 074 7 917
Asset Management 3 423 3 640
Wealth Management 1 515 1 335
Investment Services 949 1 003
International 2 103 1 844
Capital Management 84 95
Sanlam Emerging Markets 446 468
Discounted cash flows 9 257 6 983
Sanlam Investments 1 168 1 409
Asset Management 217 222
Wealth Management 210 223
International 741 964
Sanlam Emerging Markets 5 458 2 956
Shriram Capital 4 190 2 398
Pacific & Orient 872 -
Other operations 396 558
Sanlam Personal Finance 2 631 2 618
Glacier 1 368 1 338
Sanlam Personal Loans 822 816
Other operations 441 464
Net asset value 1 135 927
Sanlam Investments 665 893
Asset Management 42 57
Investment Services (14) (8)
International 112 126
Capital Management 525 718
Sanlam Emerging Markets 470 34
18 912 16 295
As described in the accounting policies section the presentation format of non-life Group operations has been changed with
effect from June 2013 to base valuations, with year to date earnings reflected as Other capital on the GEV statement and Net
working capital on the Shareholders fund at fair value. Comparative information has not been restated as the change in
presentation does not have an impact on total GEV, GEV earnings and RoGEV.
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
% 2013 2012
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 Base Decrease in Increase in
R million average assumption value assumption assumption
Ratio of price to assets under P/AuM = 1,06%
management (Dec 2012: 1,06%) 8 520 7 715 9 325
Discounted cash RDR = 16,2%
flows (Dec 2012: 16,4%) 9 257 10 311 8 324
PGR = 2,5 - 5%
(Dec 2012: 2,5 - 5%) 9 257 8 686 9 929
3. NORMALISED DILUTED EARNINGS PER SHARE
June June
Cents 2013 2012
Normalised diluted earnings per share:
Net result from financial services 118,1 96,2
Normalised headline earnings 169,1 125,5
Profit attributable to shareholders fund 170,8 125,2
June June
R million 2013 2012
Analysis of normalised earnings (refer shareholders fund
income statement):
Net result from financial services 2 409 1 946
Headline earnings 3 449 2 539
Profit attributable to shareholders fund 3 483 2 533
Reconciliation of normalised headline earnings:
Headline earnings 3 474 2 408
Fund transfers (25) 131
Normalised headline earnings 3 449 2 539
June June
Million 2013 2012
Adjusted number of shares:
Weighted average number of shares for diluted earnings
per share 2 026,6 2 005,3
Add: Weighted average Sanlam shares held by policyholders 12,6 17,9
Adjusted weighted average number of shares for normalised diluted earnings per share 2 039,2 2 023,2
4. VALUE PER SHARE
Fair value per share is calculated on the Group shareholders fund at fair value of
R54 522 million (June 2012: R47 981 million), divided by 2 044,5 million (June 2012:
2 029,1 million) shares.
Net asset value per share is calculated on the Group shareholders fund at net
asset value of R37 313 million (June 2012: R34 167 million), divided by 2 044,5 million
(June 2012: 2 029,1 million) shares.
Equity value per share is calculated on the Group Equity Value of R76 609 million
(June 2012: R66 820 million), divided by 2 044,5 million (June 2012: 2 029,1 million)
shares.
June
Million 2013 2012
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 (148,7) (154,5)
Outstanding shares in respect of Sanlam Limited
long-term incentive schemes 32,1 33,2
Convertible deferred shares held by Ubuntu-Botho 61,1 50,4
Adjusted number of shares for value per share 2 044,5 2 029,1
Embedded value of covered business
as at 30 June 2013
June June December
Reviewed Reviewed Audited
R million Note 2013 2012 2012
Sanlam Personal Finance 30 524 27 819 30 144
Adjusted net worth 8 751 8 555 8 681
Net value of in-force covered business 21 773 19 264 21 463
Value of in-force covered business 23 544 21 001 23 168
Cost of capital (1 771) (1 737) (1 705)
Sanlam Emerging Markets 2 982 2 345 2 647
Adjusted net worth 1 334 1 020 1 145
Net value of in-force covered business 1 648 1 325 1 502
Value of in-force covered business 2 802 2 240 2 534
Cost of capital (297) (235) (273)
Non-controlling interest (857) (680) (759)
Sanlam UK(1) 1 002 777 904
Adjusted net worth 315 236 295
Net value of in-force covered business 687 541 609
Value of in-force covered business 742 592 664
Cost of capital (55) (51) (55)
Sanlam Employee Benefits(1) 5 419 5 132 5 301
Adjusted net worth 4 825 4 741 4 825
Net value of in-force covered business 594 391 476
Value of in-force covered business 1 568 1 320 1 374
Cost of capital (974) (929) (898)
Embedded value of covered business 39 927 36 073 38 996
Adjusted net worth(2) 15 225 14 552 14 946
Net value of in-force covered business 1 24 702 21 521 24 050
Embedded value of covered business 39 927 36 073 38 996
(1) Sanlam UK and Sanlam Employee Benefits are part of the Sanlam Investments cluster.
(2) Excludes subordinated debt funding of Sanlam Life.
Change in embedded value of covered business
for the six months ended 30 June 2013
Six months reviewed Six months reviewed
2013 2012
Adjusted Adjusted
Value of Cost of net Value of Cost of net
R million Notes Total in-force capital worth Total in-force capital worth
Embedded value of covered business at the
beginning of the period 38 996 26 897 (2 847) 14 946 34 875 23 145 (2 823) 14 553
Value of new business 2 587 1 499 (68) (844) 491 1 272 (68) (713)
Net earnings from existing covered business 2 029 (371) 9 2 391 1 557 (524) 101 1 980
Expected return on value of in-force business 1 269 1 192 77 - 1 259 1 197 62 -
Expected transfer of profit to adjusted net worth - (1 884) - 1 884 - (1 641) - 1 641
Operating experience variances 3 471 (4) (16) 491 230 (175) - 405
Operating assumption changes 4 289 325 (52) 16 68 95 39 (66)
Expected investment return on adjusted net worth 462 - - 462 528 - - 528
Embedded value earnings from operations 3 078 1 128 (59) 2 009 2 576 748 33 1 795
Economic assumption changes 5 (888) (850) (46) 8 375 401 41 (67)
Tax changes 3 3 - - (234) (83) (91) (60)
Investment variances - value of in-force 316 323 (35) 28 207 202 (39) 44
Investment variances - investment return on
adjusted net worth 385 - - 385 54 - - 54
Exchange rate movements 144 161 (17) - (37) (41) 4 -
Embedded value earnings from covered business 3 038 765 (157) 2 430 2 941 1 227 (52) 1 766
Acquired value of in-force - - - - 36 25 (1) 12
Transfers from/(to) other Group operations 44 44 - - - - - -
Transfers from covered business (2 151) - - (2 151) (1 779) - - (1 779)
Embedded value of covered business at the
end of the period 39 927 27 706 (3 004) 15 225 36 073 24 397 (2 876) 14 552
Analysis of earnings from covered business
Sanlam Personal Finance 1 879 332 (66) 1 613 2 430 1 188 (16) 1 258
Sanlam Emerging Markets 572 161 (15) 426 182 21 (1) 162
Sanlam UK 133 78 - 55 33 17 (17) 33
Sanlam Employee Benefits 454 194 (76) 336 296 1 (18) 313
Embedded value earnings from covered business 3 038 765 (157) 2 430 2 941 1 227 (52) 1 766
Full year
Audited
2012
R million Total
Embedded value of covered business at the beginning of the period 34 875
Value of new business 1 176
Net earnings from existing covered business 3 210
Expected return on value of in-force business 2 560
Expected transfer of profit to adjusted net worth -
Operating experience variances 555
Operating assumption changes 95
Expected investment return on adjusted net worth 1 075
Embedded value earnings from operations 5 461
Economic assumption changes 874
Tax changes (228)
Investment variances - value of in-force 1 344
Investment variances - investment return on adjusted net worth 460
Exchange rate movements (3)
Embedded value earnings from covered business 7 908
Acquired value of in-force 47
Transfers from/(to) other Group operations -
Transfers from covered business (3 834)
Embedded value of covered business at the end of the period 38 996
Analysis of earnings from covered business
Sanlam Personal Finance 6 296
Sanlam Emerging Markets 628
Sanlam UK 162
Sanlam Employee Benefits 822
Embedded value earnings from covered business 7 908
Value of new business
for the six months ended 30 June 2013
Full
Six months Six months year
Reviewed Reviewed Audited
R million Note 2013 2012 2012
Value of new business (at point of sale):
Gross value of new business 713 610 1 443
Sanlam Personal Finance 484 412 1 003
Sanlam Emerging Markets 152 126 303
Sanlam UK 25 10 17
Sanlam Employee Benefits 52 62 120
Cost of capital (74) (77) (165)
Sanlam Personal Finance (34) (22) (64)
Sanlam Emerging Markets (16) (18) (36)
Sanlam UK (2) (2) (3)
Sanlam Employee Benefits (22) (35) (62)
Value of new business 639 533 1 278
Sanlam Personal Finance 450 390 939
Sanlam Emerging Markets 136 108 267
Sanlam UK 23 8 14
Sanlam Employee Benefits 30 27 58
Value of new business attributable to:
Shareholders fund 2 587 491 1 176
Sanlam Personal Finance 450 390 939
Sanlam Emerging Markets 84 66 165
Sanlam UK 23 8 14
Sanlam Employee Benefits 30 27 58
Non-controlling interest 52 42 102
Sanlam Personal Finance - - -
Sanlam Emerging Markets 52 42 102
Sanlam UK - - -
Sanlam Employee Benefits - - -
Value of new business 639 533 1 278
Geographical analysis:
South Africa 480 417 997
Africa 136 109 266
Other international 23 7 15
Value of new business 639 533 1 278
Full
Six months Six months year
Reviewed Reviewed Audited
R million 2013 2012 2012
Analysis of new business profitability:
Before non-controlling interest
Present value of new business premiums 21 455 17 930 38 129
Sanlam Personal Finance 14 667 12 680 27 332
Sanlam Emerging Markets 2 085 2 199 4 537
Sanlam UK 2 636 1 042 2 210
Sanlam Employee Benefits 2 067 2 009 4 050
New business margin 2,98% 2,97% 3,35%
Sanlam Personal Finance 3,07% 3,08% 3,44%
Sanlam Emerging Markets 6,52% 4,91% 5,88%
Sanlam UK 0,87% 0,77% 0,63%
Sanlam Employee Benefits 1,45% 1,34% 1,43%
After non-controlling interest
Present value of new business premiums 20 731 17 150 36 528
Sanlam Personal Finance 14 667 12 669 27 321
Sanlam Emerging Markets 1 361 1 430 2 947
Sanlam UK 2 636 1 042 2 210
Sanlam Employee Benefits 2 067 2 009 4 050
New business margin 2,83% 2,86% 3,22%
Sanlam Personal Finance 3,07% 3,08% 3,44%
Sanlam Emerging Markets 6,17% 4,62% 5,60%
Sanlam UK 0,87% 0,77% 0,63%
Sanlam Employee Benefits 1,45% 1,34% 1,43%
Notes to the embedded value of covered business
for the six months ended 30 June 2013
Gross Change
value of Net value from
in-force Cost of of in-force base
business capital business value
R million R million R million %
1. Value of in-force sensitivity analysis
Base value at 30 June 2013 27 706 (3 004) 24 702
- Risk discount rate increase by 1% 26 318 (3 684) 22 634 (8)
Base value at 31 December 2012 26 897 (2 847) 24 050
- Risk discount rate increase by 1% 25 604 (3 546) 22 058 (8)
Gross Change
value of Net value from
new Cost of of new base
business capital business value
R million R million R million %
2. Value of new business sensitivity analysis
Base value 655 (68) 587
- Risk discount rate increase by 1% 566 (86) 480 (18)
Six months Six months Full year
Reviewed Reviewed Audited
R million 2013 2012 2012
3. Operating experience variances
Risk experience 325 340 559
Persistency 123 65 26
Working capital and other 23 (175) (30)
Total operating experience variances 471 230 555
4. Operating assumption changes
Risk experience 552 (54) 66
Persistency 45 29 52
Modelling improvements and other (308) 93 (23)
Total operating assumption changes 289 68 95
5. Economic assumption changes
Investment yields (923) 312 876
Long-term asset mix assumptions and other 35 63 (2)
Total economic assumption changes (888) 375 874
June June December
Reviewed Reviewed Audited
% 2013 2012 2012
6. Economic assumptions
Gross investment return, risk discount rate and inflation
Sanlam Life
Point used on the relevant yield curve 9 year 9 year 9 year
Fixed-interest securities 7,8 7,6 6,8
Equities and offshore investments 11,3 11,1 10,3
Hedged equities 8,3 8,1 7,3
Property 8,8 8,6 7,8
Cash 6,8 6,6 5,8
Return on required capital 8,8 8,6 7,8
Inflation rate(1) 5,8 5,6 4,8
Risk discount rate 10,3 10,1 9,3
(1) Expense inflation of 7,8% (December 2012: 6,8%) assumed
for retail business administered on old platforms.
SDM Limited
Point used on the relevant yield curve 5 year 5 year 5 year
Fixed-interest securities 7,2 6,7 5,9
Equities and offshore investments 10,7 10,2 9,4
Hedged equities n/a n/a n/a
Property 8,2 7,7 6,9
Cash 6,2 5,7 4,9
Return on required capital 8,5 8,0 7,2
Inflation rate 5,2 4,7 3,9
Risk discount rate 9,7 9,2 8,4
Sanlam Investments and Pensions
Point used on the relevant yield curve 15 year 15 year 15 year
Fixed-interest securities 3,0 2,3 2,3
Equities and offshore investments 6,2 5,5 5,5
Hedged equities n/a n/a n/a
Property 6,2 5,5 5,5
Cash 3,0 2,3 2,3
Return on required capital 3,0 2,3 2,3
Inflation rate 3,0 2,3 2,5
Risk discount rate 6,7 6,0 6,0
Botswana Life Insurance
Fixed-interest securities 9,0 9,5 9,0
Equities and offshore investments 12,5 13,0 12,5
Hedged equities n/a n/a n/a
Property 10,0 10,5 10,0
Cash 8,0 8,5 8,0
Return on required capital 9,1 9,6 9,1
Inflation rate 6,0 6,5 6,0
Risk discount rate 12,5 13,0 12,5
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
25 bps and 50 bps (2012: 25 bps and 50 bps) for non-participating annuities and between 25 bps and 110 bps
(2012: 25 bps and 110 bps) for guarantee plans.
Asset mix for assets supporting required capital
Sanlam Life
Equities 26 26 26
Offshore investments 10 10 10
Hedged equities 13 13 13
Fixed-interest securities 15 15 15
Cash 36 36 36
100 100 100
SDM Limited
Equities 50 50 50
Cash 50 50 50
100 100 100
Sanlam Investments and Pensions
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
Contents
Report on review of 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
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 2013 and the related statements of comprehensive income, changes in equity and cash flow for the six-month
period then ended, other explanatory notes and the basis of accounting set out above.
The Groups 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,
the SAICA Financial Reporting Guides as issued by the Accounting Practice Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council 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, the SAICA Financial Reporting Guides as
issued by the Accounting Practice Committee and Financial Pronouncements as issued by the Financial Reporting Standards
Council and the requirements of the Companies Act of South Africa.
Ernst & Young Inc.
Director: Johanna Cornelia de Villiers
Registered Auditor
Chartered Accountant (SA)
Ernst & Young House
35 Lower Long Street
Cape Town
4 September 2013
Statement of financial position
at 30 June 2013
Restated
June December
Reviewed Reviewed
R million 2013 2012
ASSETS
Property and equipment 471 449
Owner-occupied properties 684 665
Goodwill 3 559 3 457
Other intangible assets 72 63
Value of business acquired 1 588 1 599
Deferred acquisition costs 2 826 2 717
Long-term reinsurance assets 760 746
Investments 439 543 426 745
Properties 19 081 18 372
Equity-accounted investments 8 047 5 412
Equities and similar securities 221 102 206 203
Public sector stocks and loans 65 143 64 617
Debentures, insurance policies, preference shares and other loans 59 510 64 678
Cash, deposits and similar securities 66 660 67 463
Deferred tax 416 450
Non-current assets held for sale - 308
Short-term insurance technical assets 2 366 2 096
Working capital assets 52 486 50 958
Trade and other receivables 36 349 36 006
Cash, deposits and similar securities 16 137 14 952
Total assets 504 771 490 253
Equity and liabilities
Capital and reserves
Share capital and premium 22 22
Treasury shares (3 539) (3 632)
Other reserves 9 635 9 156
Retained earnings 30 364 31 373
Shareholders fund 36 482 36 919
Non-controlling interest 3 119 2 970
Total equity 39 601 39 889
Long-term policy liabilities 348 505 328 584
Insurance contracts 149 475 148 427
Investment contracts 199 030 180 157
Term finance 4 833 5 463
Margin business 905 1 487
Other interest-bearing liabilities 3 928 3 976
Derivative liabilities 11 192 16 507
External investors in consolidated funds 36 761 38 386
Cell owners interest 722 688
Deferred tax 1 264 1 333
Short-term insurance technical provisions 9 870 9 877
Working capital liabilities 52 023 49 526
Trade and other payables 48 788 46 825
Provisions 402 396
Taxation 2 833 2 305
Total equity and liabilities 504 771 490 253
Statement of comprehensive income
for the six months ended 30 June 2013
Restated
Reviewed Reviewed
R million Note 2013 2012
Net income 40 431 36 894
Financial services income 21 572 19 397
Reinsurance premiums paid (2 582) (2 188)
Reinsurance commission received 337 270
Investment income 9 660 9 846
Investment surpluses 13 025 11 088
Finance cost - margin business (19) (82)
Change in fair value of external investors liability (1 562) (1 437)
Net insurance and investment contract benefits (26 524) (24 589)
and claims
Long-term insurance and investment contract benefits (21 176) (19 859)
Short-term insurance claims (6 892) (5 859)
Reinsurance claims received 1 544 1 129
Expenses (8 634) (7 771)
Sales remuneration (2 774) (2 589)
Administration costs (5 860) (5 182)
Impairments (12) (6)
Amortisation of intangibles (114) (70)
Net operating result 5 147 4 458
Equity-accounted earnings 505 271
Finance cost - other (176) (181)
Profit before tax 5 476 4 548
Taxation (1 602) (1 788)
Shareholders fund (1 005) (1 298)
Policyholders fund (597) (490)
Profit for the period 3 874 2 760
Other comprehensive income
Movement in foreign currency translation reserve 713 2
Comprehensive income for the period 4 587 2 762
Allocation of comprehensive income
Profit for the period 3 874 2 760
Shareholders fund 3 508 2 402
Non-controlling interest 366 358
Comprehensive income for the period 4 587 2 762
Shareholders fund 4 079 2 417
Non-controlling interest 508 345
Earnings attributable to shareholders of the company (cents)
Profit for the period:
Basic earnings per share 1 181,1 124,8
Diluted earnings per share 1 173,1 119,8
Statement of changes in equity
for the six months ended 30 June 2013
Reviewed Reviewed
R million 2013 2012
Shareholders fund
Balance at the beginning of the period 36 919 33 822
Comprehensive income 4 079 2 417
Profit for the period 3 508 2 402
Other comprehensive income: movement in foreign
currency translation reserve 571 15
Net acquisition of treasury shares(1) (182) (413)
Share-based payments 143 161
Acquisitions, disposals and other movements in interests (194) (28)
Dividends paid(2) (4 283) (2 556)
Balance at the end of the period 36 482 33 403
Non-controlling interest
Balance at the beginning of the period 2 970 3 046
Comprehensive income 508 345
Profit for the period 366 358
Other comprehensive income: movement in foreign
currency translation reserve 142 (13)
Share-based payments 18 15
Dividends paid (325) (682)
Acquisitions, disposals and other movements in interests (52) (24)
Balance at the end of the period 3 119 2 700
Shareholders fund 36 919 33 822
Non-controlling interest 2 970 3 046
Total equity at the beginning of the period 39 889 36 868
Shareholders fund 36 482 33 403
Non-controlling interest 3 119 2 700
Total equity at the end of the period 39 601 36 103
(1) Comprises movement in cost of shares held by subsidiaries and the share incentive trust.
(2) Dividend of 215 cents per share paid during 2013 in respect of the 2012 financial year (2012: 130 cents
per share).
Cash flow statement
for the six months ended 30 June 2013
Restated
Reviewed Reviewed
R million 2013 2012
Net cash flow from operating activities 7 228 5 691
Net cash flow from investment activities (6 017) (154)
Net cash flow from financing activities (829) (456)
Net increase in cash and cash equivalents 382 5 081
Cash, deposits and similar securities at
the beginning of the period 82 415 74 250
Cash, deposits and similar securities at
the end of the period 82 797 79 331
Notes to the interim condensed consolidated financial statements
for the six months ended 30 June 2013
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 normalised earnings per share, which is based on the economic earnings attributable to the
shareholders fund, and in managements view should be used when evaluating the Groups economic performance.
Reviewed Reviewed
Cents 2013 2012
Basic earnings per share:
Headline earnings 179,4 125,1
Profit attributable to shareholders fund 181,1 124,8
Diluted earnings per share:
Headline earnings 171,4 120,1
Profit attributable to shareholders fund 173,1 119,8
R million
Analysis of earnings:
Profit attributable to shareholders fund 3 508 2 402
Less: Net profit on disposal of operations (42) -
Plus: Impairments 8 6
Impairments 12 6
Non-controlling interest (4) -
Headline earnings 3 474 2 408
Headline earnings includes remeasurements of
investment properties, which are largely attributable
to policyholders.
Million
Number of shares:
Number of ordinary shares in issue at the beginning
of the period 2 100,0 2 100,0
Less: Weighted Sanlam shares held by subsidiaries
(including policyholders) (163,2) (174,6)
Adjusted weighted average number of shares for
basic earnings per share 1 936,8 1 925,4
Add: Weighted conversion of deferred shares 57,7 46,7
Add: Total number of shares in respect of Sanlam Limited
long-term incentive schemes 32,1 33,2
Adjusted weighted average number of shares for incentive
schemes diluted earnings per share 2 026,6 2 005,3
2. RECONCILIATION OF SEGMENTAL INFORMATION
Reviewed Reviewed
R million 2013 2012
Segment financial services income
(per shareholders fund information) 19 874 17 933
Sanlam Personal Finance 6 240 5 496
Sanlam Emerging Markets 1 754 1 300
Sanlam Investments 3 493 3 152
Santam 8 291 7 906
Corporate, consolidation and other 96 79
IFRS adjustments 1 698 1 464
Total financial services income 21 572 19 397
Segment results (per shareholders fund information
after tax and non-controlling interest) 3 483 2 533
Sanlam Personal Finance 2 344 2 499
Sanlam Emerging Markets 608 245
Sanlam Investments 764 591
Santam 234 283
Corporate, consolidation and other (467) (1 085)
Non-controlling interest included in segment result 366 358
Fund transfers 25 (131)
Total profit for the period 3 874 2 760
Additional segmental information is provided in the Shareholders information
3. CONTINGENT LIABILITIES
Shareholders are referred to the contingent liabilities disclosed in the 2012 integrated report. The
circumstances surrounding the other contingent liabilities remain materially unchanged.
4. SUBSEQUENT EVENTS
No material facts or circumstances have arisen between the dates of the balance sheet and this report that
affect the financial position of the Sanlam Group at 30 June 2013 as reflected in these financial statements.
The SLI 1 listed bond issued by Sanlam Life Insurance Limited with a nominal value of R1,16 billion reached its
first call date on 15 August 2013. This bond was redeemed on 15 August, but replaced by the successful issuance
of a new bond to the same value.
5. FAIR VALUE DISCLOSURES
Determination of fair value and fair value hierarchy
Below follows required disclosure of fair value measurements, using a three-level fair value hierarchy that
reflects the significance of the inputs used in determining the measurements. It should be noted that these
disclosure only cover instruments measured at fair value.
Included in level 1 category are financial assets and liabilities that are measured by reference to unadjusted,
quoted prices in an active market for identical assets and liabilities. Quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those
prices represent actual and regularly occurring market transactions on an arms length basis.
Included in level 2 category are financial assets and liabilities measured using inputs other than quoted prices
included within level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly
(ie derived from prices). For example, instruments measured using a valuation technique based on assumptions that are
supported by prices from observable current market transactions are categorised as level 2.
Financial assets and liabilities measured using inputs that are not based on observable market data are categorised
as level 3.
R million Level 1 Level 2 Level 3 Total
30 June 2013 - Reviewed
Equities and similar securities 205 166 13 169 2 767 221 102
Public sector stocks and loans 60 502 4 641 - 65 143
Listed property companies and property
collective investments 9 301 1 643 - 10 944
Debentures, insurance policies, preference
shares and other loans 17 346 41 469 166 58 981
Trading account assets 1 784 17 312 - 19 096
Cash deposits and similar securities 28 294 38 336 2 66 632
Total financial assets 322 393 116 570 2 935 441 898
Investment contract liabilities 2 791 195 527 712 199 030
Term finance 3 536 76 118 3 730
Valued at stock exchange price 3 402 - - 3 402
Based on internal valuation 134 76 118 328
Derivative liabilities - 11 192 - 11 192
Trading account liabilities 1 965 19 580 - 21 545
Total financial liabilities 8 292 226 375 830 235 497
31 December 2012 - Restated Reviewed
Equities and similar securities 192 258 11 589 2 356 206 203
Public sector stocks and loans 55 579 9 038 - 64 617
Listed property companies and property
collective investments 7 367 884 - 8 251
Debentures, insurance policies, preference
shares and other loans 22 674 41 358 163 64 195
Trading account assets 2 729 16 817 - 19 546
Cash deposits and similar securities 28 354 38 942 2 67 298
Total financial assets 308 961 118 628 2 521 430 110
Investment contract liabilities 2 804 176 701 652 180 157
Term finance 3 281 77 97 3 455
Valued at stock exchange price 3 121 - - 3 121
Based on internal valuation 160 77 97 334
Derivative liabilities - 16 507 - 16 507
Trading account liabilities 2 701 18 649 - 21 350
Total financial liabilities 8 786 211 934 749 221 469
Reconciliation of movements in level 3 financial instruments measured at fair value
Deben-
tures,
insurance
policies,
Public pref- Cash,
Equities sector erence deposits
and stocks shares and Total
similar and and other similar financial
R million securities loans loans securities assets
30 June 2013 Reviewed
Financial assets
Balance at 1 January 2013 2 356 163 2 2 521
Total gains/(loss) in statement of
comprehensive income 282 4 286
Acquisitions 742 3 745
Disposals (623) (4) (627)
Foreign exchange movements 10 10
Balance at 30 June 2013 2 767 166 2 2 935
31 December 2012 Audited
Financial assets
Balance at 1 January 2012 3 349 1 625 3 975
Total gains/(loss) in statement of
comprehensive income (54) (216) (270)
Acquisitions 317 30 2 349
Disposals (798) (276) (1 074)
Foreign exchange movements 38 38
Transfers from level 1 and level 2 (496) (1) (497)
Not significant (net in/out) (1) (1)
Significant transfer out (496) (496)
Balance at 31 December 2012 2 356 163 2 2 521
Investment Total
contract Term financial
R million liabilities finance liabilities
30 June 2013 - Reviewed
Financial liabilities
Balance at 1 January 2013 652 97 749
Total (gain)/loss in statement of
comprehensive income 51 18 69
Foreign exchange movements 9 3 12
Balance at 30 June 2013 712 118 830
31 December 2012 - Audited
Financial liabilities
Balance at 1 January 2012 752 59 811
Total (gain)/loss in statement
of comprehensive income 126 34 160
Acquisitions 128 - 128
Disposals (354) - (354)
Foreign exchange movements - 4 4
Balance at 31 December 2012 652 97 749
Six
months Full year
Reviewed Audited
R million 2013 2012
Gains and losses (realised and unrealised)
included in profit and loss - level 3
Total gains or losses included in
profit or loss for the period 217 411
Total gains or losses included in
profit or loss for the
period for assets held at the end of
the reporting period 183 287
Transfers between categories
There were no transfers between categories during the six months ended 30 June 2013.
Full year - Audited
2012
Public
sector Cash,
stocks deposits Total
and and similar financial
R million loans securities assets
Transfer from level 1 to level 2 103 59 162
103 59 162
Valuation techniques used in determining the fair value of financial asset
and liabilities
Applicable Valuation Main
Instrument to level basis assumptions
Investment funds
included in:
- Equities 2 Quoted (exit) price n/a
- Properties 2 provided by fund
- Interest bearing 2 manager
Equities and similar 3 Discounted cash Bond and interbank swap
securities flow model (DCF) interest rate curve
Earnings multiple Cost of capital
Consumer price index
Debentures, insurance
policies, preference
shares and other loans
- Debentures, preference 2 & 3 DCF Bond and forward rate
shares and other loans Agreement interest curves
Liquidity spread
Credit ratings of issuer
- Insurance policies 2 Quoted put/ n/a
surrender price
by issuer
Trading account assets 2 DCF Forward rate
and liabilities Credit risk spread
Liquidity spread
Unlisted term deposits 2 DCF Bond and forward rate
Agreement interest curves
Liquidity spread
Credit ratings of issuer
Investment contract
liabilities
- Unit-linked policies 2 Current unit price n/a
of underlying
unitised financial
asset, multiplied
by the number
of units held
- Other 2 & 3 DCF Bond interest rate curves
Term finance 2 DCF Bond and forward rate
Agreement interest curves
Liquidity spread
Credit ratings of issuer
Derivative assets and 2 Option pricing Bond and interbank swap
liabilities models interest rate curve
DCF Forward equity and currency rates
Volatility factors
Sensitivity of level 3 financial instruments measured at fair value to changes in key assumptions
Effect of Effect of
Effect of a 1% a 1%
a 10% Effect of increase decrease
increase a 10% in in
Carrying(1) in decrease Carrying(2) discount discount
R million amount value in value amount rate rate
Six months - Reviewed 30 June 2013
Equities and similar securities 2 670 267 (267) 97 - -
Debentures, insurance policies,
preference shares and other loans - - - 166 2 (2)
Financial assets 2 670 267 (267) 263 2 (2)
Investment contract liabilities 712 71 (71) - - -
Term finance 118 12 (12) - - -
Financial liabilities 830 83 (83) - - -
Full year - Audited 31 December 2012
Equities and similar securities 2 212 221 (221) 144 1 (1)
Debentures, insurance policies,
preference shares and other loans - - - 163 2 (2)
Financial assets 2 212 221 (221) 307 3 (3)
Investment contract liabilities 652 65 (65) - - -
Term finance 97 10 (10) - - -
Financial liabilities 749 75 (75) - - -
(1) Represents mainly private equity investments valued on earnings multiple, with sensitivities based on
full valuation.
(2) Represents mainly private equity investments valued on a discounted cash flow basis, with sensitivities
based on changes in the discount rate.
6. RESTATEMENTS
Statement of financial position
31 December 2012
Reclassifi-
cation of
Previously investment
reported funds(1) Restated
R million Audited Reviewed Reviewed
Assets
Investments 314 792 41 924 356 716
Properties 17 678 694 18 372
Equities and similar securities 202 952 3 251 206 203
Debentures, insurance policies,
preference shares and other loans 37 726 26 952 64 678
Cash, deposits and similar securities 56 436 11 027 67 463
Working capital assets: Trade and
other receivables 31 241 4 765 36 006
346 033 46 689 392 722
Liabilities
External investors in consolidated funds 19 596 18 790 38 386
Derivative liabilities 610 15 897 16 507
Working capital liabilities: Trade and
other payables 34 823 12 002 46 825
55 029 46 689 101 718
Statement of comprehensive income
30 June 2012
Reclassifi-
cation of
Previously investment
reported funds(1) Restated
R million Reviewed Reviewed Reviewed
Net income 19 241 256 19 497
Investment income 9 171 675 9 846
Investment surpluses 10 780 308 11 088
Change in fair value of external
investors liability (710) (727) (1 437)
Expenses (5 597) (256) (5 853)
Administration costs (4 953) (229) (5 182)
Finance cost: other (163) (18) (181)
Taxation: policyholders fund (481) (9) (490)
(1) The application of IFRS 10 has led to certain investments in investment funds being reclassified between
investment categories and various income and expense items. Refer to the accounting policy section above for
a detailed explanation.
Administration
Group secretary
Sana-Ullah Bray
Sanlam Limited
Incorparated in South Africa
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
Sponsor
Deutsche Securities (SA) (Pty) Limited
Transfer secretaries
Computershare Investor Services (Pty) Limited
(Registration number: 2004/003647/07)
70 Marshall Street, Johannesburg 2001
South Africa
PO Box 61051, Marshalltown 2107
South Africa
Telephone +27 (0)11 373 0000
Fax +27 (0)11 688 5200
Internet address
http://www.sanlam.co.za
Board of directors
DK Smith (Chairman), PT Motsepe (Deputy Chairman), J van Zyl(1) (Group Chief Executive), MMM Bakane-Tuoane, AD Botha,
R Bradshaw(2)(4), A Duggal(3), MV Moosa, JP Möller(1), P Mthethwa, TI Mvusi(1), SA Nkosi, P Rademeyer, Y Ramiah(1),
RV Simelane, CG Swanepoel, ZB Swanepoel, PL Zim
I Plenderleith(2) retired on 4 September 2013
(1) Executive
(2) British citizen
(3) Indian citizen, appointed 15 January 2013
(4) Appointed 7 August 2013
Date: 05/09/2013 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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