Wrap Text
Summarised audited results for the year ended 31 December 2013
Sanlam Group
Incorporated in the Republic of South Africa
Registered name: Sanlam Limited
(Registration number 1959/001562/06)
“Sanlam” or “the company”
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
Summarised audited results
for the year ended 31 December 2013
CONTENTS
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Summarised Financial statements
Accounting policies and basis of presentation
External audit
Summarised Shareholders’ information
Group Equity Value
Shareholders’ fund income statement
Notes to the shareholders’ information
Embedded value of covered business
Summarised Group IFRS financial statements
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Administration
KEY FEATURES
- Earnings
Net result from financial services per share increased by 34%
Normalised headline earnings per share up 35%
- Business volumes
New business volumes up 36% to R185 billion
Net value of new covered business up 12% to R1 320 million
Net new covered business margin of 3,06%
Net fund inflows of R32 billion
- Group Equity Value
Group Equity Value per share of R41,21
Return on Group Equity Value per share of 17%
- Capital management
Discretionary capital of R4 billion at 31 December 2013
Sanlam Life Insurance Limited CAR cover of 4,5 times
- Dividend
Normal dividend of 200 cents per share, up 21%
Salient results
for the year ended 31 December 2013
%
2013 2012 Change
Sanlam Group
Earnings
Net result from financial services per share cents 266,0 198,9 34
Normalised headline earnings per share(1) Cents 395,0 292,1 35
Diluted headline earnings per share cents 397,8 286,8 39
Net result from financial services R million 5 429 4 030 35
Normalised headline earnings(1) R million 8 060 5 919 36
Headline earnings R million 8 062 5 763 40
Group administration cost ratio(2) % 29,4 30,6
Group operating margin(3) % 22,2 19,4
Business volumes
New business volumes R million 184 855 135 903 36
Net fund inflows R million 31 848 22 989 39
Net new covered business
Value of new covered business R million 1 320 1 176 12
Covered business PVNBP(4) R million 43 197 36 528 18
New covered business margin(5) % 3,06 3,22
Group Equity Value
Group Equity Value R million 84 409 75 352 12
Group Equity Value per share cents 4 121 3 707 11
Return on Group Equity Value per share(6) % 17,0 22,0
Sanlam Life Insurance Limited
Shareholders’ fund R million 60 542 55 466
Capital Adequacy Requirements (CAR) R million 7 550 7 125
CAR covered by prudential capital times 4,5 4,3
(1) Normalised headline earnings = headline earnings, excluding fund transfers.
(2) Administration costs as a percentage of income after sales remuneration.
(3) Result from financial services as a percentage of income after sales remuneration.
(4) PVNBP = present value of new business premiums and is equal to the present value of
new recurring premiums plus single premiums.
(5) New covered business margin = value of new covered business as a percentage of PVNBP.
(6) Growth in Group Equity Value per share (with dividends paid, capital movements and
cost of treasury shares acquired reversed) as a percentage of Group Equity Value per
share at the beginning of the year.
Executive review
The Sanlam Group in 2013 once again delivered the solid operational performance that stakeholders
have come to expect from us. These excellent results were achieved despite a challenging local and
global operating environment.
In 2013 we experienced a difficult environment mainly due to low short-term interest rates, which
had a negative effect on several of our businesses, combined with tough economic conditions that
severely restricted the disposable income of the South African consumer. A volatile currency and
severe regulatory pressures and uncertainty also impacted on our businesses.
The strength of the Sanlam brand together with a well-diversified business, an increased
distribution footprint and a strong focus on client service helped us weather this environment and
our total new business volumes grew by more than 35%.
Our primary performance target for measuring shareholder value creation is Return on Group Equity
Value (RoGEV). Given the nature of the Group’s diversified business, we consider this measure of
performance the most appropriate since it incorporates the result of all the major value drivers
in the business. The RoGEV per share for 2013 of 17% exceeded the target of 10,8% by a healthy
margin.
Net operating profit (net result from financial services) grew by 35%. All businesses contributed
to this growth, with the exception of Santam. The short-term insurer was hit hard by the high
claims experience caused by a succession of costly natural disasters and a volatile currency that
resulted in excessive vehicle repair costs.
The following are some of our other salient results:
- New business volumes (excluding white label) increased by 26% to R155 billion
- Net value of new covered business up 23% on a comparable economic basis
- Net VNB margin of 3,29% compared to 3,22% in 2012 on a comparable economic basis
- Normal dividend per share increased by 21% to 200 cents
2013 strategic initiatives
The following five strategic pillars continue to underpin the Sanlam Group business model:
- Improving performance through top-line growth
- Increasing market share in key segments
- Diversifying the base (including geographical presence, products, market segments and
distribution platforms)
- Improved operating and cost efficiencies, including quality
- Prioritising Sanlam’s international positioning through diversification
- Improving capital efficiency on an ongoing basis
- Embracing and accelerating transformation of the Group
Below is a brief overview of our achievements for 2013 against our five strategic pillars.
Earnings growth
The Group achieved exceptional operating earnings growth of 35% for 2013, surpassing our own
expectations.
Earnings growth was driven by two main components. Organic growth contributed 71% of the growth
and was achieved by extracting more value from existing businesses, improving efficiencies and
reducing costs. Acquisitions made with surplus capital contributed 29% of earnings growth. We
had particular success with this approach in India, Malaysia and Namibia.
Operating and cost efficiencies
Maintaining capital and cost efficiency remains a big driver across our businesses. We therefore
launched two long-term initiatives in recent years aimed at fostering efficiency within the Group.
The Sanlam for Sanlam programme, which has been in place for three years, encourages effective
collaboration between clusters with the goal of achieving greater growth and profitability.
The Blueprint for Success initiative, launched in September 2012, is aimed at enhancing the Sanlam
for Sanlam programme by helping employees embrace the critical enabling factors that will help
Sanlam achieve accelerated growth.
We are satisfied that these two initiatives are achieving the desired results for the Group.
Diversification
Our successful diversification strategy has changed the profile of the Sanlam Group from a
traditional insurer 10 years ago to a well-diversified financial services provider with a direct
footprint on four continents and is able to offer extensive solutions across all market segments
in South Africa.
In 2013 we pushed this strategy even harder with the aim of further diversifying revenue streams.
We concluded five acquisitions in 2013 as part of a net capital investment of some R2,5 billion.
As a result, we now have a direct footprint in 11 African countries, as well as Europe, Australia,
India and Malaysia.
During the year we bedded down our 2012 acquisition of a 49% stake in Malaysian general insurer
P&O, which became effective in 2013 and aggressively continued expanding our short-term
insurance interests. We bought 49% of NICO General Insurance Company’s businesses in Malawi,
Zambia and Uganda. FBN Life in Nigeria, in which we have a 35% stake, received a capital
contribution of R58 million to enable them to expand into general insurance. In Namibia we
increased our shareholding in Capricorn Investment Holdings. We expect steady year on year
growth from this investment.
R1,3 billion was also invested to increase our effective holding in Shriram Transport Finance
Company in India.
In the Investments cluster, the dual strategy applied by Wealth Management of offshore
acquisitions combined with greenfield investing in South Africa paid off handsomely, resulting in
strong new client growth as well as a greater share of wallet from existing clients.
Sanlam Personal Finance delivered a superior performance, in part through the introduction of a
more diversified product range designed around client needs. We are particularly impressed by the
new single premium business attracted in 2013. Sanlam Personal Loans continued to perform well,
while our Sanlam Sky business produced excellent results with profits doubling on 2012.
Capital efficiency
Our strong focus on the effective utilisation of capital was maintained during 2013. The Group
started the year with discretionary capital of R4,2 billion. The special dividend of 50 cents per
share paid in April 2013 utilised R1,1 billion of capital in addition to the net R1,7 billion applied
in respect of acquisitions. Investment return earned on the discretionary capital portfolio and
excess capital released from Group businesses added some R2,6 billion, leaving us with unallocated
discretionary capital of R4 billion at the end of December 2013. We remain focused on utilising the
available discretionary capital by finding value-accretive investment opportunities.
Transformation
Transformation in the South African context refers to a company’s willingness to adapt the
composition of its staff complement and its shareholding to more accurately reflect the demographics
of the country. We initially demonstrated Sanlam’s commitment to transforming into a truly South
African business 10 years ago when we announced the Ubuntu-Botho Investments (Ubuntu-Botho) black
economic empowerment (BEE) transaction.
In what has been described as one of the most far-reaching black empowerment transactions to date
Ubuntu-Botho, a broad-based black empowerment consortium led by businessman Patrice Motsepe,
acquired an 8% shareholding in Sanlam. At the end of December 2013 the 10-year debt had been settled
and 66,5 million of the deferred shares issued to Ubuntu-Botho qualified for reclassification into
ordinary shares in terms of a value-add formula linked to new Sanlam business flows. This resulted
in a total unencumbered holding of 292,5 million Sanlam shares. The total value created was about
R15 billion, which is attributable to the shareholders of Ubuntu-Botho.
Underprivileged South Africans will also benefit from the transaction through the Sanlam
Ubuntu-Botho Community Development Trust, which will advance and support community upliftment and
development projects, BEE initiatives and corporate social investment programmes now that the loans
of Ubuntu-Botho have been repaid.
Sanlam is proud of the success of this transaction, which has enabled us to secure significant
long-term growth opportunities and effect true broad-based empowerment by involving a
representative spectrum of South African community groups in Sanlam’s future.
Forward-looking statements
In this report we make certain statements that are not historical facts and relate to analyses
and other information based on forecasts of future results not yet determinable, relating, amongst
others, to new business volumes, investment returns (including exchange rate fluctuations) and
actuarial assumptions. These statements may also relate to our future prospects, developments and
business strategies. These are forward-looking statements as defined in the United States Private
Securities Litigation Reform Act of 1995. Words such as “believe”, “anticipate”, “intend”, “seek”,
“will”, “plan”, “could”, “may”, “endeavour” and “project” and similar expressions are intended to
identify such forward-looking statements, but are not the exclusive means of identifying such
statements. Forward-looking statements involve inherent risks and uncertainties and, if one or more
of these risks materialise, or should underlying assumptions prove incorrect, actual results may be
very different from those anticipated. Forward-looking statements apply only as of the date on which
they are made, and Sanlam does not undertake any obligation to update or revise any of them, whether
as a result of new information, future events or otherwise.
Comments on the results
Introduction
The Sanlam Group IFRS financial statements for the year ended 31 December 2013 are presented based
on and in compliance with International Financial Reporting Standards (IFRS). The basis of
presentation and accounting policies for the IFRS financial statements and shareholders’ information
are in all material respects consistent with those applied in the 2012 annual report, apart from the
following:
The adoption of new IFRS that became effective during the 2013 financial year, which impacted on
the IFRS financial statements but did not have any effect on the presentation of the shareholders’
information.
The investment categories disclosed in the Group Statement of Financial Position and in the
Shareholders’ fund balance sheet at net asset value were aligned with those required for regulatory
purposes in the future, to ensure consistency across the reporting formats.
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 Group’s dividend policy. To be consistent with the
disclosure of covered business, these operations are, with effect from 2013, reflected at their base
valuation in the GEV statement, with year-to-date earnings (potential dividend) included as part of
other capital.
Comparative information has not been restated as the change in presentation does not have an impact
on the overall GEV earnings and RoGEV.
Group Equity Value
GEV amounted to R84,4 billion or 4 121 cents per share on 31 December 2013. Including the
dividends of 215 cents per share paid during the year, a RoGEV of 17,7% (17% per share) was achieved
for 2013, well in excess of the 2013 performance hurdle of 10,8%. The lower RoGEV on a per share
basis is largely due to a further 13,5 million deferred shares held by our broad-based black economic
empowerment partner, Ubuntu-Botho, qualifying for reclassification to ordinary shares in terms of the
value-add arrangement. The 10-year period of the agreement ended on 31 December 2013, with a final
total of 66,5 million deferred shares qualifying for reclassification. No further dilution will
therefore occur in respect of the arrangement from 2014 onwards.
The strong equity market performance during 2013 had a marked positive impact on the RoGEV for the
period, partly offset by the rise in long-term interest rates as well as a relative
underperformance of the Santam share price after its outperformance in prior years. Excluding the
favourable impact of investment returns in excess of the long-term expectations, higher long-term
interest rates and certain other once-off effects, an adjusted RoGEV of 11,3% (10,6% per share) is
still in excess of the return target (slightly lower on a per share basis). Excluding the effect
of Santam’s share price performance, adjusted RoGEV of 15,6% (14,6% per share) is well in excess
of the target.
Group Equity Value at 31 December 2013
GEV RoGEV
R million 2013 2012 %
Group operations 76 470 68 166 13 367 19,3
Sanlam Personal Finance 35 666 32 762 6 721 20,5
Sanlam Emerging Markets 10 189 6 105 2 246 29,8
Sanlam Investments 17 971 16 424 4 204 25,9
Santam 12 644 12 875 196 1,5
Covered business 43 475 38 996 9 128 23,4
Value of in-force 27 675 24 050 6 946 28,9
Adjusted net worth 15 800 14 946 2 182 14,6
Other operations 32 995 29 170 4 239 13,3
Group operations 76 470 68 166 13 367 19,3
Discretionary capital and other 7 939 7 186 (20) (0,3)
Group Equity Value 84 409 75 352 13 347 17,7
Per share (cents) 4 121 3 707 629 17,0
Group operations yielded an overall return of 19,3% in 2013. The embedded value of covered
business (life operations) amounted to R43 billion, 52% of GEV in December 2013. The capital
allocated to the life operations increased marginally to R15,8 billion. Strong earnings from
the equity and foreign exposure in the supporting capital portfolios contributed to an aggregate
after tax investment return of 14,6%. The in-force book of R27,7 billion yielded an exceptional
return of 28,9%. Strong growth in VNB, continued positive operating experience variances, as well
as investment variances of R2,4 billion emanating from investment market performance in excess of
long-term assumptions, contributed to the sound result. This was partly offset by negative economic
assumption changes of R1,1 billion due to the higher risk discount rate applied at the end of
December 2013.
Other Group operations provided a return of 13,3%, the net result of a 1,5% return on the Group’s
investment in Santam and return in excess of 20% on the other non-insurance operations. The Santam
share price experienced a correction during 2013, significantly underperforming the general equity
market, following major outperformance in prior years. The valuations of the other non-insurance
operations were in general positively impacted by a higher level of assets under management and a
weaker rand, somewhat offset by a higher risk discount rate applied to those operations valued on
a discounted cash flow basis.
The low return on discretionary and other capital is essentially the combined effect of the
investment return earned on surplus capital (substantially invested in low yielding liquid assets),
offset by corporate costs.
Earnings
Shareholders’ fund income statement for the year ended 31 December 2013
R million 2013 2012 % Change
Net result from financial services 5 429 4 030 35
Sanlam Personal Finance 2 920 2 351 24
Sanlam Emerging Markets 1 011 428 136
Sanlam Investments 1 301 975 33
Santam 333 405 (18)
Corporate and other (136) (129) (5)
Net investment return 3 019 2 356 28
Project costs and amortisation (237) (178) (33)
Equity participation costs (151) (56) (170)
Secondary tax on companies - (233) 100
Normalised headline earnings 8 060 5 919 36
Per share (cents) 395,0 292,1 35
Net result from financial services (net operating profit) of R5,4 billion increased by 35% on
2012, aided by maiden contributions of R410 million from new acquisitions in Sanlam Emerging
Markets (SEM). All clusters achieved strong growth with the exception of Santam, where underwriting
results were negatively impacted by adverse weather conditions and rand weakness. Excluding the
earnings contribution from SEM structural growth, net result from financial services grew by 25%,
a particularly satisfactory result. A higher level of assets under management across most asset
management businesses, a growing life in-force book and the weaker rand exchange rate supported
the earnings growth. In addition, Sanlam Investments earned substantially higher performance fees.
Normalised headline earnings of R8 billion are 36% up on 2012. This is the combined effect of the
following:
The 35% growth in net result from financial services.
A 28% increase in the net investment return earned on the Group’s capital portfolio. Net
investment income (dividends, interest and rental income) declined by 24%, largely due to a lower
average level of discretionary capital in 2013 following the utilisation of capital for acquisitions
and the Sanlam special dividend. Net realised and unrealised investment surpluses increased by 80%,
supported by good returns on the international exposure in the portfolio and once-off investment gains
of some R200 million realised in 2013. The latter includes an increase in the valuation of the Group’s
interest in Capricorn Investment Holdings (CIH) in Namibia following the listing of its main investment,
Bank Windhoek, in the first half of the year (before CIH became an associated company on 1 July
2013) and a sizable recovery of a previously impaired portfolio investment.
The abolishment of secondary tax on companies (STC) in 2012, resulting in no expense being
incurred in 2013.
A 33% rise in project and amortisation costs, attributable to due diligence and related
transaction costs incurred in respect of corporate activity in SEM as well as the weaker rand exchange
rate that increased the amortisation charges of the Investment cluster’s international businesses.
The equity participation expense recognised in terms of IFRS for incentive schemes linked to the
value of certain of the Group’s non-life operations that increased in line with the higher valuations
of these businesses.
Business volumes
The Group achieved overall growth of 26% in new business volumes (excluding white label business),
reaching R150 billion for the first time. All businesses contributed to the solid performance,
apart from Sanlam Employee Benefits (SEB) that achieved limited growth in new flows in a very
competitive market and SEM’s Namibian business that recorded a decline in low margin unit trust inflows,
largely attributable to the disposal of Capricorn Unit Trust as part of the CIH transaction (refer
below). Life insurance new business volumes increased by 25%, augmented by 29% and 10% growth in new
investment and short-term insurance business, respectively. The ongoing strategic focus on the quality
of new business written is reflected in good retention levels and strong net fund inflows. Net fund
inflows of R26,1 billion compared to R25 billion in 2012 is commendable, in particular given the loss
of three large mandates at Sanlam Investments during the year from clients that restructured their
portfolios. Excluding these, net fund inflows of R40,3 billion were achieved, a very satisfactory
result in a challenging environment.
Business volumes for the year ended 31 December 2013
New Business Net Inflows
% %
R million 2013 2012 Change 2013 2012 Change
Sanlam Personal Finance 42 507 32 355 31 14 993 8 974 67
Sanlam Emerging Markets 9 749 12 952 (25) 1 794 3 977 (55)
Sanlam Investments 85 970 62 139 38 4 184 7 103 (41)
Santam 16 750 15 626 7 5 142 4 946 4
Total (excluding white label) 154 976 123 072 26 26 113 25 000 4
Covered business 31 687 25 436 25 10 561 8 532 24
Investment business 105 697 81 670 29 10 238 11 431 (10)
Short-term insurance 17 592 15 966 10 5 314 5 037 5
Total (excluding white label) 154 976 123 072 26 26 113 25 000 4
The value of new life business (VNB) written increased by 13%. On a comparable basis (before
economic assumption changes) VNB increased by 24% from R1 278 million in 2012 to R1 584 million in 2013
and after non-controlling interest by 23% to R1 449 million. All clusters achieved strong growth,
with the overall new business margin expanding from 3,35% in 2012 to 3,46% in 2013, measured on a
comparable basis. The strong growth in new business volumes, good cost control and a continued focus on
the quality of new business written had a positive impact on both VNB and new business margins.
The increase in long-term interest rates and consequently the risk discount rate used to determine
VNB, had a marked negative impact on VNB after economic assumption changes, particularly on Sanlam
Personal Finance’s (SPF) and Sanlam Sky business, where the increase in discount rate is to a much
lesser extent offset by a commensurate increase in the expected investment return to be earned on
investments backing policy liabilities.
Value of new covered business for the year ended 31 December 2013
2013 Economic basis 2012 Economic basis
% %
R million 2013 2012 Change 2013 2012 Change
Value of new covered business 1 450 1 278 13 1 584 1 278 24
Sanlam Personal Finance 986 939 5 1 113 939 19
Sanlam Emerging Markets 364 267 36 374 267 40
Sanlam Investments 100 72 39 97 72 35
Net of non-controlling interest 1 320 1 176 12 1 449 1 176 23
Present value of new business premiums 44 902 38 129 18 45 731 38 129 20
Sanlam Personal Finance 30 789 27 332 13 31 627 27 332 16
Sanlam Emerging Markets 4 877 4 537 7 4 886 4 537 8
Sanlam Investments 9 236 6 260 48 9 218 6 260 47
Net of non-controlling interest 43 197 36 528 18 44 022 36 528 21
New covered business margin 3,23% 3,35% 3,46% 3,35%
Sanlam Personal Finance 3,20% 3,44% 3,52% 3,44%
Sanlam Emerging Markets 7,46% 5,88% 7,65% 5,88%
Sanlam Investments 1,08% 1,15% 1,05% 1,15%
Net of non-controlling interest 3,06% 3,22% 3,29% 3,22%
Capital and solvency
Optimal capital management remains a 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 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 Board’s (FSB) implementation
of a third country equivalent of the European Solvency II regime in South Africa (Solvency Assessment
and Management (SAM)) is ongoing, with the third and last quantitative impact study (QIS3) to be
completed in 2014. The QIS3 results will inform the final set of regulations to be issued by the FSB
and should give more clarity on the impact that the new regime will have on Sanlam’s capital
requirements.
The mix of the Group’s in-force life book is continuously changing to less capital-intensive products.
This, coupled with the growth in new life business, resulted in only a slightly higher capital
requirement for the life insurance operations at the end of 2013 and a release to discretionary
capital of some R1,5 billion from the investment return earned on the allocated capital.
Disposal of non-core operations. The Group’s stake in the Punter Southall Group in the United
Kingdom was sold during the year, yielding net proceeds of some R360 million.
Optimal utilisation of discretionary capital. The Group’s preference remains to invest its
discretionary capital in value-adding growth opportunities, with specific focus on the identified
growth markets. Some R1,7 billion was utilised for this purpose in 2013, including the following:
The acquisition of a 5% direct interest in Shriram Transport Finance Company (STFC) in India. In
addition to being a good growth investment on a standalone basis, the transaction better aligned
Sanlam’s interests with those of Shriram Capital, our strategic partner in India. Combined with the
indirect interest in STFC through our 26% stake in Shriram Capital, the Group now has an effective
interest of 12% in STFC. The transaction utilised R1,3 billion of discretionary capital.
Some R490 million was deployed in line with the Group’s stated objective of increasing our
exposure to existing operations in Africa. A net amount of R208 million was used to increase the
Group’s interest in CIH in Namibia to more than 20%, effective 1 July 2013. CIH is the holding company
of Bank Windhoek and our strategic bancassurance partner in Namibia. CIH commensurately became a
strategic associated company on 1 July 2013, with Sanlam’s share of the CIH earnings being equity
accounted as operational earnings from the effective date. FBN Life, our Nigerian life insurance
business with strategic partner First Bank of Nigeria, expanded into short-term insurance through
the acquisition of a majority stake in a Nigerian general insurance company. The Group’s share of
the acquisition price amounts to some R58 million. In addition, R130 million was utilised to increase
our exposure to the operations of Nico Holdings (Malawi) and R95 million to acquire an additional
3% stake in Botswana Insurance Holdings.
The arrangement with Santam in respect of short-term insurance business conducted outside of South
Africa was formalised at the end of 2013. Through a transaction concluded at an SEM level, Santam
acquired a 35% economic interest in SEM’s short-term insurance holdings in Africa, India and
Malaysia. SEM in turn acquired Santam’s stake in Nico Holdings and a 65% economic interest in Santam’s
holding in Santam Namibia. After the transaction, Santam has an effective 35% economic interest in all
of the short-term insurance holdings of the Group outside South Africa, with SEM retaining an
effective 65% economic interest. SEM assumed overall management responsibility for the operations,
with Santam continuing as the short-term insurance technical partner. Santam paid a net amount of
R181 million to Sanlam in terms of the agreement.
A number of smaller transactions utilised a total amount of some R100 million, the most
significant being the renewal of the exclusive bancassurance arrangement with Standard Chartered Bank
in Africa for a minimum of five years after the expiration of the current agreement.
At the end of December 2012 the Group held discretionary capital of R4,2 billion. Taking into
account the movements set out above, the special Sanlam dividend of R1,1 billion paid in April 2013
as well as the investment return earned by the discretionary capital portfolio and the cash operating
profit retained in the 2012 dividend earnings cover, discretionary capital amounted to R4 billion at
the end of 2013.
Transactions likely to be finalised soon will utilise a large portion of the discretionary
capital. In addition, a number of potential opportunities are currently being considered which, if
successful, will utilise most of the remaining available discretionary capital within a reasonable
timeframe. No special dividend has therefore been considered.
All of the life insurance businesses within the Group were sufficiently capitalised at the end of
December 2013. The total admissible regulatory capital (including identified discretionary capital)
of Sanlam Life Insurance Limited, the holding company of the Group’s major life insurance
subsidiaries, of R33,6 billion, covered its capital adequacy requirements (CAR) 4,5 times. No
policyholder portfolio had a negative bonus stabilisation reserve at the end of December 2013.
FitchRatings has affirmed the credit ratings of the Group in 2014 and the outlook remained stable.
These include Sanlam Limited: National Long-term AA- (zaf); Sanlam Life Insurance Limited: National
Insurer Financial Strength: AA+ (zaf), Subordinated debt: A+ (zaf).
Dividend
The Group declares an annual dividend only due to the costs involved in distributing an interim
dividend to our large shareholder base. Sustainable growth in dividend payments is an important
consideration for the Board in determining the dividend for the year. The Board uses cash operating
earnings as a guideline in setting the level of the normal dividend, subject to the Group’s liquidity
and solvency requirements. The operational performance of the Group in the 2013 financial year enabled
the Board to increase the normal dividend per share by 21% to 200 cents. This will maintain a cash
operating earnings cover of approximately 1,2 times. The South African dividend withholding tax regime
applies in respect of this dividend. No STC credits will be utilised. The dividend will be subject to a
15% withholding tax, which will result in a net final dividend, to those shareholders who are not exempt
from paying dividend tax, of 170 cents per ordinary share. The number of ordinary shares in issue in the
Company’s share capital at the date of the declaration is 1 931 144 256 (excluding treasury shares of 168 855 744).
The Company’s tax reference number is 9536/346/84/5.
Shareholders are advised that the final cash dividend of 200 cents for the year ended 31 December
2013 is payable on Monday, 14 April 2014 to ordinary shareholders recorded in the register of Sanlam
at the close of business on Friday, 11 April 2014. The last date to trade to qualify for this
dividend will be Friday, 4 April 2014, and Sanlam shares will trade ex-dividend from Monday, 7 April
2014.
Dividend payment by way of electronic bank transfers will be effected on Monday, 14 April 2014.
Share certificates may not be dematerialised or rematerialised between Monday, 7 April 2014 and
Friday, 11 April 2014, both days inclusive.
Desmond Smith Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Bellville
5 March 2014
Sanlam Group
Financial statements
for the year ended 31 December 2013
ACCOUNTING POLICIES AND BASIS OF PRESENTATION
The summary consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for abridged reports, and the requirements of the Companies
Act applicable to summary financial statements. The Listings Requirements require abridged reports
to be prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council and to also, as a minimum, contain the information required by
IAS 34 - Interim Financial Reporting. The accounting policies applied in the preparation of the
consolidated financial statements, from which the summary consolidated financial statements were
derived, are in terms of International Financial Reporting Standards and are consistent with the
accounting policies applied in the preparation of the previous consolidated annual financial statements.
The policy liabilities and profit entitlement rules are determined in accordance with prevailing
legislation, generally accepted actuarial practice and the stipulations contained in the demutualisation
proposal. There have been no material changes in the financial soundness valuation basis since
31 December 2012, apart from changes in the economic assumptions.
The basis of presentation and accounting policies for the IFRS financial statements and
shareholders’ information are in all material respects consistent with those applied in the 2012
annual report, apart from the changes indicated below.
The preparation of the Group’s audited annual results was supervised by the Financial Director,
Kobus Möller CA(SA).
The following new or revised IFRS and interpretations are applied in the Group’s 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 Group’s previous IFRS
financial statements. The application of the remainder of the new standards and interpretations
did not have a significant impact on the Group’s financial position, reported results and cash
flows. Certain of these new standards, however, required additional disclosures in the financial
statements.
The following new or revised IFRS 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 2018)
The application of these revised standards and interpretations in future financial reporting
periods is not expected to have a significant impact on the Group’s reported results, financial
position and cash flows.
All investments have been reclassified to new revised investment categories. These new categories
align IFRS investment classifications with the required SAM classifications. All comparative
information has been reclassified accordingly.
These reclassifications in the current and prior period had no impact on the Group’s total
comprehensive income, shareholders’ fund or net asset value.
EXTERNAL AUDIT
This summarised report is extracted from audited information, but is not itself audited. The
annual financial statements were audited by Ernst & Young Inc., who expressed an unmodified opinion
thereon. The audited annual financial statements and the auditors’ report thereon are available for
inspection at the Company’s registered office.
The shareholders’ information was audited by Ernst & Young Inc., who expressed an unmodified
opinion thereon. The audited shareholders’ information and the auditors’ report thereon are
available for inspection at the Company’s registered office.
The directors take full responsibility for the preparation of the abridged report and the
financial information has been correctly extracted from the underlying annual financial statements
and shareholders’ information.
Shareholders’ information
for the year ended 31 December 2013
Contents
Group Equity Value
Shareholders’ fund income statement
Notes to the shareholders’ information
Embedded value of covered business
GROUP EQUITY VALUE
at 31 December 2013
R million 2013 2012
Embedded value of covered business 43 475 38 996
Sanlam Personal Finance 33 033 30 144
Adjusted net worth 9 041 8 681
Value of in-force 23 992 21 463
Sanlam Emerging Markets 3 541 2 647
Adjusted net worth 1 533 1 145
Value of in-force 2 008 1 502
Sanlam Investments 6 901 6 205
Adjusted net worth 5 226 5 120
Value of in-force 1 675 1 085
Other Group operations 32 995 29 170
Sanlam Personal Finance 2 633 2 618
Sanlam Emerging Markets 6 648 3 458
Sanlam Investments 11 070 10 219
Santam 12 644 12 875
Other capital and net worth adjustments 3 939 2 986
80 409 71 152
Discretionary capital 4 000 4 200
Group Equity Value 84 409 75 352
Group Equity Value per share (cents) 4 121 3 707
SHAREHOLDERS’ FUND INCOME STATEMENT
for the year ended 31 December 2013
R million 2013 2012
Result from financial services
before tax 8 179 6 285
Sanlam Personal Finance 4 055 3 272
Sanlam Emerging Markets 1 736 850
Sanlam Investments 1 718 1 322
Santam 835 1 008
Corporate and other (165) (167)
Tax on financial services income (2 100) (1 669)
Non-controlling interest (650) (586)
Net result from financial services 5 429 4 030
Net investment return 3 019 2 356
Net investment income 852 1 127
Net investment surpluses 2 110 1 171
Net equity-accounted headline
earnings 57 58
Net project expenses (31) (23)
Equity participation costs (151) (56)
Amortisation of intangibles (206) (155)
Net secondary tax on companies - (233)
Normalised headline earnings 8 060 5 919
Profit on disposal of operations 90 66
Impairments (21) (174)
Normalised attributable earnings 8 129 5 811
Fund transfers 2 (156)
Attributable profit per Group
statement of comprehensive income 8 131 5 655
NOTES TO THE SHAREHOLDERS’ INFORMATION
for the year ended 31 December 2013
R million 2013 2012
1. New business
Analysed per licence:
Life Insurance 31 687 25 436
Sanlam Personal Finance 21 498 18 351
Sanlam Emerging Markets 2 862 2 922
Sanlam Investments 7 327 4 163
Investment business and other 123 289 97 636
Sanlam Personal Finance 21 009 14 004
Sanlam Emerging Markets 6 887 10 030
Sanlam Investments 78 643 57 976
Santam 16 750 15 626
New business excluding white label 154 976 123 072
White label 29 879 12 831
Total new business 184 855 135 903
2. Net flow of funds
Analysed per licence:
Life Insurance 10 561 8 532
Sanlam Personal Finance 6 538 5 771
Sanlam Emerging Markets 1 541 2 200
Sanlam Investments 2 482 561
Investment business and other 15 552 16 468
Sanlam Personal Finance 8 455 3 203
Sanlam Emerging Markets 253 1 777
Sanlam Investments 1 702 6 542
Santam 5 142 4 946
Net inflow excluding white label 26 113 25 000
White label 5 735 (2 011)
Total net flow of funds 31 848 22 989
3. Normalised earnings per share
In terms of IFRS, the policyholders’ fund’s investments in Sanlam shares and Group
subsidiaries are not reflected as equity investments in the Sanlam statement of
financial position, but deducted in full from equity on consolidation (in respect of
Sanlam shares) or reflected at net asset value (in respect of subsidiaries). The
valuation of the related policy liabilities however includes the fair value of these
shares, resulting in a mismatch between policy liabilities and policyholder investments,
with a consequential impact on the Group’s earnings. The number of shares in issue must
also be reduced with the treasury shares held by the policyholders’ fund for the
calculation of IFRS basic and diluted earnings per share. This is, in management’s view,
not a true representation of the earnings attributable to the Group’s shareholders,
specifically in instances where the share prices and/or the number of shares held by the
policyholders’ fund varies significantly. The Group therefore calculates normalised
earnings per share to eliminate the impact of investments in Sanlam shares and Group
subsidiaries held by the policyholders’ fund.
Cents 2013 2012
Normalised diluted earnings per share
Net result from financial
services 266,0 198,9
Headline earnings 395,0 292,1
Profit attributable to
shareholders’ fund 398,4 286,8
R million 2013 2012
Analysis of normalised earnings
(refer shareholders’ fund income statement)
Net result from financial services 5 429 4 030
Headline earnings 8 060 5 919
Profit attributable to
shareholders’ fund 8 129 5 811
R Million 2013 2012
Adjusted number of shares
Weighted average number of shares
for diluted earnings per share 2 026,7 2 009,4
Add: Weighted average Sanlam
shares held by policyholders 13,9 16,9
Adjusted weighted average number
of shares for normalised diluted
earnings per share 2 040,6 2 026,3
Number of ordinary shares in issue 2 100,0 2 100,0
Shares held by subsidiaries in
shareholders’ fund (146,6) (150,9)
Outstanding shares and share
options in respect of Sanlam
Limited long-term incentive
scheme 28,6 30,6
Convertible deferred shares
held by Ubuntu-Botho 66,5 53,0
Adjusted number of shares
for value per share 2 048,5 2 032,7
Embedded value of covered business
at 31 December 2013
R million Note 2013 2012
Sanlam Personal Finance 33 033 30 144
Adjusted net worth 9 041 8 681
Net value of in-force covered
business 23 992 21 463
Value of in-force covered business 25 834 23 168
Cost of capital (1 842) (1 705)
Non-controlling interest - -
Sanlam Emerging Markets 3 541 2 647
Adjusted net worth 1 533 1 145
Net value of in-force covered business 2 008 1 502
Value of in-force covered business 3 313 2 534
Cost of capital (350) (273)
Non-controlling interest (955) (759)
Sanlam UK 1 194 904
Adjusted net worth 401 295
Net value of in-force covered business 793 609
Value of in-force covered business 845 664
Cost of capital (52) (55)
Non-controlling interest - -
Sanlam Employee Benefits 5 707 5 301
Adjusted net worth 4 825 4 825
Net value of in-force covered business 882 476
Value of in-force covered business 1 792 1 374
Cost of capital (910) (898)
Non-controlling interest - -
Embedded value of covered business 43 475 38 996
Adjusted net worth(1) 15 800 14 946
Net value of in-force covered business 1 27 675 24 050
Embedded value of covered business 43 475 38 996
(1) Excludes subordinated debt funding of Sanlam Life.
Change in Embedded value of covered business
for the year ended 31 December 2013
R million Note Total Net value Adjusted Total
of in-force net worth
Embedded value of covered business at the beginning
of the year 38 996 24 050 14 946 34 875
Value of new business 2 1 320 2 826 (1 506) 1 176
Net earnings from existing covered business 3 991 (439) 4 430 3 210
Expected return on value of in-force business 2 585 2 585 - 2 560
Expected transfer of profit to adjusted net worth - (3 693) 3 693 -
Operating experience variances 3 1 021 175 846 555
Operating assumption changes 4 385 494 (109) 95
Expected investment return on adjusted net worth 935 - 935 1 075
Embedded value earnings from operations 6 246 2 387 3 859 5 461
Economic assumption changes 5 (1 077) (1 094) 17 874
Tax changes 88 67 21 (228)
Investment variances - value of in-force 2 387 1 919 468 1 344
Investment variances - investment return on adjusted
net worth 1 247 - 1 247 460
Exchange rate movements 237 237 - (3)
Net project expenses 6 - - - -
Embedded value earnings from covered business 9 128 3 516 5 612 7 908
Acquired value of in-force 79 65 14 47
Transfer from/(to) other Group operations 44 44 - -
Net transfers from covered business (4 772) - (4 772) (3 834)
Embedded value of covered business at the end of
the year 43 475 27 675 15 800 38 996
Analysis of earnings from covered business
Sanlam Personal Finance 6 205 2 485 3 720 6 296
Sanlam Emerging Markets 1 251 441 810 628
Sanlam UK 326 184 142 162
Sanlam Employee Benefits 1 346 406 940 822
Embedded value earnings from covered business 9 128 3 516 5 612 7 908
Value of new business
for the year ended 31 December 2013
R million Note 2013 2012
Value of new business (at point of sale):
Gross value of new business 1 654 1 443
Sanlam Personal Finance 1 090 1 003
Sanlam Emerging Markets 407 303
Sanlam UK 43 17
Sanlam Employee Benefits 114 120
Cost of capital (204) (165)
Sanlam Personal Finance (104) (64)
Sanlam Emerging Markets (43) (36)
Sanlam UK (4) (3)
Sanlam Employee Benefits (53) (62)
Value of new business 1 450 1 278
Sanlam Personal Finance 986 939
Sanlam Emerging Markets 364 267
Sanlam UK 39 14
Sanlam Employee Benefits 61 58
Value of new business attributable to:
Shareholders’ fund 2 1 320 1 176
Sanlam Personal Finance 986 939
Sanlam Emerging Markets 234 165
Sanlam UK 39 14
Sanlam Employee Benefits 61 58
Non-controlling interest 130 102
Sanlam Personal Finance - -
Sanlam Emerging Markets 130 102
Sanlam UK - -
Sanlam Employee Benefits - -
Value of new business 1 450 1 278
Geographical analysis
South Africa 1 047 997
Africa 361 266
Other international 42 15
Value of new business 1 450 1 278
Analysis of new business profitability
Before non-controlling interest:
Present value of new business premiums 44 902 38 129
Sanlam Personal Finance 30 789 27 332
Sanlam Emerging Markets 4 877 4 537
Sanlam UK 5 554 2 210
Sanlam Employee Benefits 3 682 4 050
New business margin 3,23% 3,35%
Sanlam Personal Finance 3,20% 3,44%
Sanlam Emerging Markets 7,46% 5,88%
Sanlam UK 0,70% 0,63%
Sanlam Employee Benefits 1,66% 1,43%
After non-controlling interest:
Present value of new business premiums 43 197 36 528
Sanlam Personal Finance 30 789 27 321
Sanlam Emerging Markets 3 172 2 947
Sanlam UK 5 554 2 210
Sanlam Employee Benefits 3 682 4 050
New business margin 3,06% 3,22%
Sanlam Personal Finance 3,20% 3,44%
Sanlam Emerging Markets 7,38% 5,60%
Sanlam UK 0,70% 0,63%
Sanlam Employee Benefits 1,66% 1,43%
Notes to the embedded value of covered business
for the year ended 31 December 2013
Gross value Net value Change
of in-force Cost of of in-force from base
business capital business value
R million R million R million %
1. Value of in-force
sensitivity analysis
Base value 30 720 (3 045) 27 675
Risk discount rate
increase by 1% 28 907 (3 717) 25 190 (9)
2. Value of new business
sensitivity analysis
Base value 1 506 (186) 1 320
Risk discount rate
increase by 1% 1 302 (222) 1 080 (18)
R million 2013 2012
3. Operating experience
variances
Risk experience 645 559
Persistency 211 26
Working capital and other 165 (30)
Total operating experience
variances 1 021 555
4. Operating assumption
changes
Risk experience 655 66
Persistency 13 52
Modelling improvements
and other (283) (23)
Total operating assumption
changes 385 95
5. Economic assumption changes
Investment yields and other (1 137) 876
Long-term asset mix
assumptions, inflation gap
change and other 60 (2)
Total economic assumption
changes (1 077) 874
6. Net project expenses
Net project expenses relate to once-off expenditure on the Group’s distribution platform
that has not been allowed for in the embedded value assumptions.
7. Reconciliation of growth from covered business
The embedded value earnings from covered business reconcile as follows to the net result
from financial services for the year:
Net results from financial
services of covered business
per shareholders’ fund income
statement 3 430 2 737
Sanlam Personal Finance 2 607 2 064
Sanlam Emerging Markets 484 345
Sanlam UK 62 67
Sanlam Employee Benefits 277 261
Investment return on
adjusted net worth 2 182 1 475
Embedded value earnings
from covered business:
value of in-force 3 516 3 696
Embedded value earnings
from covered business 9 128 7 908
% 2013 2012
8. Economic assumptions
Gross investment return, risk discount rate and inflation
Sanlam Life
Point used on the relevant
yield curve 9 year 9 year
Fixed-interest securities 8,2 6,8
Equities and offshore
investments 11,7 10,3
Hedged equities 8,7 7,3
Property 9,2 7,8
Cash 7,2 5,8
Return on required capital 9,2 7,8
Inflation rate(1) 6,2 4,8
Risk discount rate 10,7 9,3
Sanlam Investments and Pensions
Point used on the relevant
yield curve 15 year 15 year
Fixed-interest securities 3,5 2,3
Equities and offshore
investments 6,7 5,5
Hedged equities n/a n/a
Property 6,7 5,5
Cash 3,5 2,3
Return on required capital 3,5 2,3
Inflation rate 3,4 2,5
Risk discount rate 7,2 6,0
SDM Limited
Point used on the relevant
yield curve 5 year 5 year
Fixed-interest securities 7,4 5,9
Equities and offshore
investments 10,9 9,4
Hedged equities n/a n/a
Property 8,4 6,9
Cash 6,4 4,9
Return on required capital 8,7 7,2
Inflation rate 5,4 3,9
Risk discount rate 9,9 8,4
Botswana Life Insurance
Fixed-interest securities 8,0 9,0
Equities and offshore
investments 11,5 12,5
Hedged equities n/a n/a
Property 9,0 10,0
Cash 7,0 8,0
Return on required capital 8,1 9,1
Inflation rate 5,0 6,0
Risk discount rate 11,5 12,5
(1) Expense inflation of 8,2% (2012: 6,8%) assumed for retail business administered
on old platforms.
% 2013 2012
Illiquidity premiums
Investment returns on non-participating annuities and guarantee plans include assumed
illiquidity premiums due to matching assets being held to maturity. Assumed illiquidity
premiums generally amount to between 25bps and 50bps (2012: 25bps and 50bps) for
non-participating annuities and between 25bps and 110bps (2012: 25bps and 110bps) for
guarantee plans.
Asset mix for assets supporting the required capital
Sanlam Life
Equities 26 26
Offshore investments 10 10
Hedged equities 13 13
Fixed-interest
securities 15 15
Cash 36 36
100 100
Sanlam Investments
and Pensions
Cash 100 100
100 100
SDM Limited
Equities 50 50
Cash 50 50
100 100
Botswana Life Insurance:
Equities 15 15
Property 10 10
Fixed-interest securities 25 25
Cash 50 50
100 100
Summarised Group IFRS financial statements for the year ended 31 December 2013
Contents
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
STATEMENT OF FINANCIAL POSITION
at 31 December 2013
R million 2013 2012(1)
Assets
Equipment 586 449
Owner-occupied properties 672 665
Goodwill 3 796 3 457
Other intangible assets 111 63
Value of business acquired 1 586 1 599
Deferred acquisition costs 2 976 2 717
Long-term reinsurance assets 796 746
Investments 477 550 401 556
Properties 9 182 10 027
Equity-accounted investments 9 780 5 412
Equities and similar securities 166 122 135 506
Interest-bearing investments 131 417 124 212
Structured transactions 11 906 14 831
Investment funds 131 029 97 622
Cash, deposits and similar securities 18 114 13 946
Deferred tax 361 450
Non-current assets held for sale 415 308
Short-term insurance technical assets 2 716 2 096
Working capital assets 69 739 76 847
Trade and other receivables 51 339 60 288
Cash, deposits and similar securities 18 400 16 559
Total assets 561 304 490 953
Equity and liabilities
Shareholders’ fund 40 965 36 556
Non-controlling interest 3 651 2 970
Total equity 44 616 39 526
Long-term policy liabilities 382 309 328 584
Insurance contracts 158 575 148 427
Investment contracts 223 734 180 157
Term finance 6 129 5 463
Margin business 2 038 1 487
Other interest-bearing liabilities 4 091 3 976
Derivative liabilities 1 387 610
External investors in consolidated funds 55 710 38 702
Cell owners’ interest 814 688
Deferred tax 2 142 1 333
Short-term insurance technical provisions 11 032 9 877
Working capital liabilities 57 165 66 170
Trade and other payables 54 799 63 469
Provisions 285 396
Taxation 2 081 2 305
Total equity and liabilities 561 304 490 953
(1) Restated for adoption of new IFRS 10 and alignment of investment categories
between financial and regulatory reporting (refer above).
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2013
R million 2013 2012(1)
Net income 102 000 89 337
Financial services income 45 104 40 414
Reinsurance premiums paid (4 963) (4 611)
Reinsurance commission received 675 583
Investment income 19 688 19 522
Investment surpluses 47 350 38 303
Finance cost - margin business (69) (185)
Change in fair value of external
investors liability (5 785) (4 689)
Net insurance and investment contract
benefits and claims (71 376) (62 566)
Long-term insurance contract benefits (26 480) (27 977)
Long-term investment contract benefits (34 106) (24 690)
Short-term insurance claims (13 861) (12 185)
Reinsurance claims received 3 071 2 286
Expenses (18 418) (16 408)
Sales remuneration (5 825) (5 393)
Administration costs (12 593) (11 015)
Impairments (34) (206)
Amortisation of intangibles (263) (184)
Net operating result 11 909 9 973
Equity-accounted earnings 1 224 584
Finance cost - other (516) (453)
Profit before tax 12 617 10 104
Taxation (3 483) (3 670)
Shareholders’ fund (2 422) (2 468)
Policyholders’ fund (1 061) (1 202)
Profit for the year 9 134 6 434
Other comprehensive income
Movement in foreign currency
translation reserve 1 123 128
Employee benefits re-measurement gain 3 -
Comprehensive income for the year 10 260 6 562
Allocation of comprehensive income
Profit for the year 9 134 6 434
Shareholders’ fund 8 131 5 655
Non-controlling interest 1 003 779
Comprehensive income for the year 10 260 6 562
Shareholders’ fund 9 030 5 760
Non-controlling interest 1 230 802
Earnings attributable to shareholders
of the company (cents)
Basic earnings per share 419,8 293,3
Diluted earnings per share 401,2 281,4
(1) Restated for adoption of new IFRS (refer above).
STAtEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2013
R million 2013 2012(1)
Shareholders’ fund
Balance at beginning of the year Previously reported 36 556 33 822
Change in accounting policy - (363)
Balance at beginning of the year - restated 36 556 33 459
Comprehensive income 9 030 5 760
Profit for the year 8 131 5 655
Other comprehensive income 899 105
Net acquisition of treasury shares(1) (319) (279)
Share-based payments 329 235
Dividends paid(2) (4 283) (2 556)
Acquisitions, disposals and other
movements in interests (348) (63)
Balance at end of the year 40 965 36 556
Non-controlling interest
Balance at beginning of the year 2 970 3 046
Comprehensive income 1 230 802
Profit for the year 1 003 779
Other comprehensive income: 227 23
Net disposal/(acquisition) of
treasury shares(1) 11 2
Share-based payments 46 22
Dividends paid(2) (518) (851)
Acquisitions, disposals and other
movements in interests (88) (51)
Balance at end of the year 3 651 2 970
Shareholders’ fund 36 556 33 459
Non-controlling interest 2 970 3 046
Total equity at beginning of the year 39 526 36 505
Shareholders’ fund 40 965 36 556
Non-controlling interest 3 651 2 970
Total equity at end of the year 44 616 39 526
(1) Includes movement in cost of shares held by subsidiaries and the share incentive trust.
(2) Normal dividend of 165 cents per share (2012: 130 cents per share) and a special
dividend of 50 cents per share declared during 2013 in respect of the 2012 financial year.
CASH FLOW STATEMENT
for the year ended 31 December 2013
R million 2013 2012(1)
Net cash flow from operating
activities 10 372 8 818
Net cash flow from investment
activities (4 529) (6 611)
Net cash flow from financing
activities 143 (1 337)
Net increase in cash and cash
equivalents 5 986 870
Cash, deposits and similar
securities at beginning of
the year 30 505 29 635
Cash, deposits and similar
securities at end of the year 36 491 30 505
(1) Restated for adoption of new IFRS (refer above).
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2013
Cents 2013 2012
1. Earnings per share
Basic earnings per share
Headline earnings 416,2 298,9
Profit attributable to shareholders’ fund 419,8 293,3
Diluted earnings per share
Headline earnings 397,8 286,8
Profit attributable to shareholders’ fund 401,2 281,4
R million 2013 2012
Analysis of earnings
Profit attributable to shareholders’ fund 8 131 5 655
Less: Net profit on disposal of operations (90) (66)
Plus: Impairment of investments and goodwill 21 174
Headline earnings 8 062 5 763
Number of shares
Number of ordinary shares in issue at
beginning of year 2 100,0 2 100,0
Less: Weighted Sanlam shares held by
subsidiaries (including policyholders) (162,9) (171,9)
Adjusted weighted average number of
shares for basic earnings per share 1 937,1 1 928,1
Add: Weighted conversion of deferred
shares 61,0 50,7
Add: Total number of shares in respect
of Sanlam Limited long-term incentive schemes 28,6 30,6
Adjusted weighted average number of shares
for diluted earnings per share 2 026,7 2 009,4
2. Reconciliation of Segmental information
Segment financial services income
(per shareholders’ fund information) 42 104 37 247
Sanlam Personal Finance 13 249 11 647
Sanlam Emerging Markets 4 045 2 838
Sanlam Investments 7 574 6 623
Santam 17 124 16 041
Corporate and other 112 98
IFRS adjustments 3 000 3 167
Total financial services income 45 104 40 414
Segment result (per shareholders’
fund information after tax and
non-controlling interest) 8 129 5 811
Sanlam Personal Finance 5 536 5 420
Sanlam Emerging Markets 1 302 583
Sanlam Investments 1 854 1 368
Santam 692 613
Corporate and other (1 255) (2 173)
Reverse Non-controlling interest
included in segment result 1 003 779
Fund transfers 2 (156)
Total profit for the year 9 134 6 434
3. Share repurchases
The Sanlam shareholders granted general authorities to the Group at the 2013 and 2012
annual general meetings to repurchase Sanlam shares in the market. No share repurchases
were done in respect of these authorities.
4. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2012 annual
report. The circumstances surrounding the contingent liabilities remain materially
unchanged.
5. Subsequent events
No material facts or circumstances have arisen between the dates of the statement of
financial position and this report that affect the financial position of the Sanlam
Group at 31 December 2013 as reflected in these financial statements.
6. Bond redemption and issue
The SL1 listed bond issued by Sanlam Life Insurance Limited with a nominal value of
R1,16 billion reached its first full 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.
7. 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 disclosures 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 arm’s-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 (i.e. as prices) or indirectly (i.e. 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
Recurring fair value measurements
31 December 2013
Properties - 1 955 7 227 9 182
Equities and similar securities 162 861 1 948 1 313 166 122
Interest-bearing investments 100 900 29 723 394 131 017
Structured transactions 3 161 8 745 - 11 906
Investment funds 115 828 14 742 459 131 029
Trading account assets 3 021 33 605 - 36 626
Cash deposits and similar securities 13 614 4 494 - 18 108
Total assets at fair value 399 385 95 212 9 393 503 990
Investment contract liabilities - 222 967 767 223 734
Term finance 3 047 209 259 3 515
Margin business 3 047 - - 3 047
Other interest-bearing liabilities - 209 259 468
Derivative liabilities - 1 184 203 1 387
Trading account liabilities 2 265 30 355 - 32 620
External investors in consolidated funds 54 540 1 170 - 55 710
Total liabilities at fair value 59 852 255 885 1 229 316 966
31 December 2012 - restated
Equities and similar securities 132 164 1 461 1 881 135 506
Interest-bearing investments 87 836 35 782 163 123 781
Structured transactions 1 278 13 431 122 14 831
Investment funds 85 087 12 182 353 97 622
Trading account assets 2 728 40 884 - 43 612
Cash deposits and similar securities 8 985 4 954 2 13 941
Total assets at fair value 318 078 108 694 2 521 429 293
Investment contract liabilities - 179 505 652 180 157
Term finance 3 281 77 97 3 455
Margin business 3 121 - - 3 121
Other interest-bearing liabilities 160 77 97 334
Derivative liabilities - 610 - 610
Trading account liabilities 2 701 35 010 - 37 711
External investors in consolidated funds 37 543 1 159 - 38 702
Total liabilities at fair value 43 525 216 361 749 260 635
Reconciliation of movements in level 3 financial instruments measured at fair value
R million Properties Equities Interest- Struc- Cash,
and bearing tured Invest- deposits Total
similar invest- trans- ment and similar financial
securities ments actions funds securities assets
Financial assets
31 December 2013
Balance at 1 January 2013 - 1 881 163 122 353 2 2 521
Adjusted due to IFRS 13 8 419 - - - - - 8 419
Total gains/(loss) in the statement
of comprehensive income 440 1 191 92 6 6 - 1 735
Acquisitions/issues 501 222 160 - 56 - 939
Disposals (2 227) (1 985) (34) (128) (11) (2) (4 387)
Foreign exchange movements 112 4 26 - - - 142
Settlements - - (13) - - - (13)
Not significant (net in/out) (18) - - - 55 - 37
Balance at 31 December 2013 7 227 1 313 394 - 459 - 9 393
31 December 2012
Balance at 1 January 2012 2 601 626 89 659 - 3 975
Total gains/(loss) in the statement
of comprehensive income (99) (216) 11 34 - (270)
Acquisitions 202 30 103 12 2 349
Disposals (365) (276) (81) (352) - (1 074)
Foreign exchange movements 38 - - - - 38
Transfers from level 1 and level 2 (496) (1) - - - (497)
Significant - transfer in - (1) - - - (1)
Significant - transfer out (496) - - - - (496)
Balance at 31 December 2012 1 881 163 122 353 2 2 521
Reconciliation of movements in level 3 financial instruments measured at fair value
R million Invest-
ment Deri- Total
contract Term vative financial
liabilities finance liabilities liabilities
31 December 2013
Financial liabilities
Balance at 1 January 2013 652 97 - 749
Total (gain)/loss in the statement
of comprehensive income 113 172 197 482
Acquisitions 151 - 6 157
Issues 160 - - 160
Disposals (337) - - (337)
Settlements - (11) - (11)
Foreign exchange movements 28 1 - 29
Balance at 31 December 2013 767 259 203 1 229
31 December 2012
Balance at 1 January 2012 752 59 - 811
Total (gain)/loss in the 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
R million 2013 2012
Gains and losses (realised and
unrealised) included in profit or loss
Total gains or losses included in profit
or loss for the period 1 253 411
Total unrealised gains or losses included
in profit or loss for the period for assets
held at the end of the reporting period 1 007 287
Transfers between categories
R million Cash,
Interest- deposits Total
Structured bearing and similar financial
transactions investments securities assets
2013
Financial assets
Transfer from level 1 to level 2 2 - 25 27
Transfer from level 2 to level 1 - - - -
2012
Transfer from level 1 to level 2 - 103 59 162
Transfer from level 2 to level 1 - - - -
Valuation techniques used in determining the fair value of financial instruments
Significant
Applicable unobservable
Instrument to level Valuation basis Main assumptions input
Properties 2 and 3 Discounted cash flow model (DCF), Earnings multiple Bond and interbank swap interest rate curve Capitalisation rate
(DCF), Earnings multiple Cost of capital Discount rate
Consumer price index
Equities and similar securities 2 and 3 Discounted cash flow model (DCF), Earnings multiple Bond and interbank swap interest rate curve Earnings multiple
(DCF), Earnings multiple Cost of capital Cost of capital
Consumer price index
Interest-bearing investments 2 and 3 Discounted cash flow model (DCF), Earnings multiple Bond and interbank swap interest rate curve Earnings multiple
(Including insurance polices) (DCF), Earnings multiple, Quoted put/ surrender price Cost of capital
by issuer Consumer price index
Structured transactions and investment funds 2 Quoted (exit) price provided by fund manager n/a n/a
Trading account assets and liabilities 2 DCF Forward rate n/a
Credit risk spread
Liquidity spread
Investment contract liabilities: 2 Current unit price of underlying unitised financial n/a n/a
asset, multiplied by the number of units held
DCF Bond interest rate curves n/a
Term finance 2 and 3 DCF Bond and forward rate Liquidity spread
Credit ratings of issuer
Liquidity spread
Agreement interest curves
Derivative assets and liabilities 2 and 3 Option pricing models Bond and interbank swap interest rate curve Risk adjustments
DCF Forward equity and currency rates
Volatility risk adjustments
Sensitivity of level 3 financial instruments measured at fair value to changes in key assumptions
Financial assets
R million Effect Effect
Effect of Effect of of a 1% of a 1%
a 10% a 10% increase decrease
increase decrease in base/ in base/
Carrying in risk in risk Carrying capitalisation capitalisation
amount(1) adjustments adjustments amount(2) rate rate
Properties
2013
Cash flow risk adjustments 7 227 (723) 723 - - -
Base rate - - - 7 227 (255) 272
Capitalisation - - - 7 227 (354) 432
R million Effect of Effect of Effect Effect
a 10% a 10% of a 1% of a 1%
increase decrease increase decrease
Carrying in in Carrying in base/ in base/
amount(1) multiple multiple amount(2) rate rate
Other investments
2013
Equities and similar securities 755 76 (76) 558 (6) 6
Interest-bearing investments 345 35 (35) 49 (12) 14
Investment funds 459 46 (46) - - -
Total 1 559 157 (157) 607 (18) 20
2012
Equities and similar securities 1 737 174 (174) 144 (1) 1
Interest-bearing investments - - - 163 (2) 2
Structured transactions 122 12 (12) - - -
Investment funds 353 35 (35) - - -
Cash, deposits and similar securities 2 - - - - -
Total 2 214 221 (221) 307 (3) 3
Sensitivity of level 3 financial instruments measured at fair value to changes in key assumptions
Financial liabilities
R million Effect of Effect of Effect Effect
a 10% a 10% of a 1% of a 1%
Carrying increase decrease Carrying increase in decrease in
amount(1) in value in value amount (2) discount rate discount rate
2013
Investment contract liabilities 494 49 (49) 273 (8) 8
Term finance 259 26 (26) - - -
Derivative liabilities - - - 203 (37) 14
Financial liabilities 753 75 (75) 476 (45) 22
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 the full valuation.
(2) Represents mainly instruments valued on a discounted cash flow basis, with sensitivities based on changes in the discount rate.
8. Restatements
The application of IFRS 10 and the alignment of the investment classes to SAM asset classes has led to certain investments in
investment funds being reclassified between investment categories and various income and expense items.
Statement of financial position as at 31 December 2012
R million SAM
investment
Previously category IFRS 10
reported alignment adoption Restated
Assets
Investments 379 409 - 16 735 396 144
Properties 17 678 (7 651) - 10 027
Equities and similar securities 202 952 (75 749) 8 303 135 506
Interest-bearing investments 102 343 10 574 11 295 124 212
Structured transactions - 14 571 260 14 831
Investment funds - 101 686 (4 064) 97 622
Cash, deposits and similar securities 56 436 (43 431) 941 13 946
Other assets 17 962 - - 17 962
Working capital assets 46 193 - 30 654 76 847
Trade and other receivables 31 241 - 29 047 60 288
Cash, deposits and similar securities 14 952 - 1 607 16 559
Total assets 443 564 - 47 389 490 953
Equity and liabilities
Capital and reserves
Other shareholders’ equity 37 632 - - 37 632
Consolidation reserve (713) - (363) (1 076)
Shareholders’ fund 36 919 - (363) 36 556
Non-controlling interest 2 970 - - 2 970
Total equity 39 889 - (363) 39 526
External investors in consolidated funds 19 596 - 19 106 38 702
Other liabilities 349 256 - - 349 256
Working capital liabilities 34 823 - 28 646 63 469
Trade and other payables 34 823 - 28 646 63 469
Total equity and liabilities 443 564 - 47 389 490 953
Statement of comprehensive income
R million Previously IFRS 10
reported adoption Restated
Net income
Financial services income 40 416 (2) 40 414
Investment income 17 749 1 773 19 522
Investment surpluses 37 091 1 212 38 303
Change in fair value of external
investors’ liability (2 463) (2 226) (4 689)
Expenses
Administration costs (10 416) (599) (11 015)
Finance cost - other (315) (138) (453)
Taxation
Policyholders’ fund (1 182) (20) (1 202)
CASH FLOW STATEMENT for the year ended 31 December 2012
R million Previously IFRS 10 Restated
reported adoption
Net cash flow from 7 924 (2 528) 5 396
operating activities
Net cash flow from (1 984) (2 477) (4 461)
investment activities
Net increase in cash
and cash equivalents
Cash, deposits and similar 65 857 (36 222) 29 635
securities at beginning of the year
Administration
Group secretary
Sana-Ullah Bray
Registered name
Sanlam Limited
(Registration number 1959/001562/06)
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
Incorporated in South Africa
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
Internet address
www.sanlam.co.za
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
Tel +27 (0)11 373 0000
Fax +27 (0)11 688 5200
Directors
DK Smith (Chairman), PT Motsepe (Deputy Chairman), J van Zyl(1) (Group Chief Executive),
MMM Bakane-Tuoane, AD Botha, PR Bradshaw(2), A Duggal(3), MV Moosa, JP Möller(1), MP Mthethwa,
TI Mvusi(1), SA Nkosi, P Rademeyer, Y Ramiah(1), RV Simelane, CG Swanepoel, ZB Swanepoel,
PL Zim
(1) Executive
(2) British
(3) American national and resident of India
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