Wrap Text
Interim results for the six months ended 30 June 2014
Sanlam Limited
(Registration number 1959/001562/06)
(Tax reference number: 9536/346/84/5)
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 2014
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Interim financial statements
Accounting policies and basis of preparation
Shareholders’ information
Independent auditors’ review report on 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
Interim condensed consolidated financial statements
Independent auditors’ review report on interim condensed consolidated financial statements
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the interim condensed consolidated
financial statements
Administration
KEY FEATURES
Earnings
- Net result from financial services per share increased by 43%
- Normalised headline earnings per share up 27%
Business volumes
- New business volumes up 7% to R89 billion
- Net value of new covered business up 7% to R626 million
- Net new covered business margin of 2,68%
- Net fund inflows of R22 billion
Group equity value
- Group Equity Value per share of R42,77
- Annualised Return on Group Equity Value per share of 18%
Capital management
- Discretionary capital of R3,3 billion at 30 June 2014
- Sanlam Life Insurance Limited CAR cover of 4,4 times
SALIENT RESULTS
for the six months ended 30 June 2014
%
2014 2013 Change
Sanlam Group
Earnings
Net result from financial services per share cents 169,2 118,1 43
Normalised headline earnings per share(1) cents 214,8 169,1 27
Diluted headline earnings per share cents 220,2 171,4 28
Net result from financial services R million 3 461 2 409 44
Normalised headline earnings(1) R million 4 393 3 449 27
Headline earnings R million 4 447 3 474 28
Group administration cost ratio(2) % 29,2 29,3
Group operating margin(3) % 27,5 20,5
Business volumes
New business volumes R million 88 774 83 244 7
Net fund inflows R million 21 708 12 611 72
Net new covered business
Value of new covered business R million 626 587 7
Covered business PVNBP(4) R million 23 335 20 731 13
New covered business margin(5) % 2,68 2,83
Group Equity Value
Group Equity Value(7) R million 87 588 84 409 4
Group Equity Value per share(7) cents 4 277 4 121 4
Annualised Return on Group Equity Value per share(6) (7) % 18,0 17,0
Sanlam Life Insurance Limited
Shareholders’ fund(7) R million 62 763 60 542
Capital Adequacy Requirements (CAR)(7) R million 7 775 7 550
CAR covered by prudential capital(7) times 4,4 4,5
Notes
(1) Normalised headline earnings = headline earnings, excluding fund transfers.
(2) Administration costs as a percentage of income after sales remuneration.
(3) Result from financial services as a percentage of income after sales remuneration.
(4) PVNBP = present value of new business premiums and is equal to the present value of new recurring premiums plus
single premiums.
(5) New covered business margin = value of new covered business as a percentage of PVNBP.
(6) Growth in Group Equity Value per share (with dividends paid, capital movements and cost of treasury shares
acquired reversed) as a percentage of Group Equity Value per share at the beginning of the year.
(7) Comparative figures are as at 31 December 2013.
EXECUTIVE REVIEW
The Sanlam Group delivered a commendable performance in the first half of 2014, with all clusters achieving strong
growth in operating earnings.
The Group’s largest exposure remains to the South African market, where a supportive investment market performance
countered the effect of a strained local economy. Despite an initial emerging markets sell-off, the South African equity
market remained buoyant and followed global markets higher to reach new record levels during the six-month period.
Fee-based earnings in Sanlam Investments and Sanlam Personal Finance benefited from the higher average level of assets under
management with particularly robust growth in investment management and administration profits. This was augmented by
favourable underwriting conditions in both the life and short-term insurance operations.
The weak economic environment in South Africa persisted during the first half of 2014, aggravated by prolonged periods
of industrial action. The economic growth outlook for 2014 has been reduced to below 2%, limiting any potential
improvement in employment in the short term. Consumers’ disposable income also remained under pressure from a combination of
high exposure to debt and inflationary strain. These conditions proved exceptionally challenging for writing new recurring
premium business. It also necessitated a further strengthening of the Group’s risk criteria for unsecured lending, with
a deliberate slowdown in the growth of the Sanlam Personal Loans book.
Our identified growth markets in Africa, India and South-East Asia made a strong contribution to the Group’s results
for the period, notwithstanding slower economic growth also being experienced in a number of those areas. The strategy of
diversification across geographies, market segments and product offering once again enabled the Group to deliver
overall solid growth and value creation to our stakeholders.
Our primary strategic objective is to optimise value creation for shareholders as measured by 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 annualised RoGEV per share
for the six months to 30 June 2014 of 18% exceeded the target of 12,2% by a healthy margin. Normalised RoGEV per share
(annualised), which excludes the investment market performance in excess of long-term assumptions, as well as changes in
interest rates and other factors outside of management’s control, amounted to 15,3%, also in excess of the target.
Net operating profit (net result from financial services) grew by 44% (43% on a per share basis). All businesses
achieved growth in excess of 20%, with Santam’s contribution more than doubling. After two years of costly natural disasters,
Santam’s claims experience improved significantly in the first half of 2014 enabling it to achieve an underwriting
margin of 7,4% compared to 1,3% in the first six months of 2013. While the 44% earnings growth achieved reflects an
excellent operational performance across the Group for the six months it has been somewhat boosted by a few once-off items in
both the 2014 and the comparable 2013 reporting periods, the timing effect of the accounting for new acquisitions during
2013 and the weak first half 2013 performance by Santam. Excluding the once-off items and the base effect of new
acquisitions, as well as adjusting the Santam first half 2013 underwriting margin to be in line with the second half of 2013,
the comparable increase in operating profit is some 29%. It should therefore not be expected that the first half growth
percentage will be sustained for the remainder of 2014.
The following are some of our other salient results:
- New business volumes (excluding white label) increased by 8% to R82 billion (13% excluding the Namibian unit trust
business disposed of in 2013).
- Net value of new covered business up 11% on a comparable economic basis.
- Net VNB margin of 2,77% compared to 2,83% in 2013 on a comparable economic basis.
2014 strategic initiatives
The Group’s strategic positioning remains focused on five pillars:
- 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; and
- Embracing and accelerating transformation of the Group.
In executing on the strategy since 2003, changes in the Group, our client base, other stakeholders and the operating
environment required ongoing focus on each of the different pillars. Below is a brief overview of our progress on the
specific priorities identified for 2014.
Top-line and earnings growth
New business volumes, excluding white label, grew by 8% despite the challenging market conditions for recurring
premium business in South Africa. Excluding the impact of the disposal of Capricorn Unit Trust in 2013, comparable growth of
13% was achieved. The main areas of focus in 2014 to drive new business growth over the longer term are:
- Our commitment to putting the needs of our clients first. Our client service and new product development models are
focused on providing our clients with appropriate and affordable solutions based on their particular needs, and supporting
these through superior service delivery over their lifetime with us. During 2014 we continued to improve our client
service models and refine our product solutions.
- Building the Sanlam brand. Sanlam has built a strong and trusted brand in the South African market over the almost 100 years
of our existence. A refreshed and repositioned Sanlam brand was successfully launched in June 2014 to enhance its
appeal to our client base and to better reflect the change in the Group profile from predominantly a life insurer a few
years ago to a broad financial services group.
- Increasing our distribution footprint in key market segments. We are growing the size of our agency force at a steady
rate and entered new markets in Africa and Malaysia (refer Capital efficiency and diversification section below).
The Group achieved operating earnings growth of 44% in the first half of 2014. Organic growth of 40% was augmented by
an earnings contribution of R130 million (2013: R33 million) from recent acquisitions. A number of new acquisitions were
concluded in 2014 that will contribute to future earnings growth, as further elaborated on below.
Operating and cost efficiencies
Maintaining operating and cost efficiencies remains a key focus area across our businesses. We continue to leverage
off the Sanlam for Sanlam and Blueprint for Success initiatives to further improve collaboration and maximise synergies
available in the Group.
Capital efficiency and diversification
The Group started the year with discretionary capital of R4 billion, which was earmarked for new growth and expansion
opportunities, as well as to strengthen existing relationships. A total of R1,8 billion was redeployed in the six months
ended 30 June 2014, which included the following:
- Some R1,3 billion was utilised to acquire a 51% shareholding in MCIS Insurance, a life insurance business in Malaysia.
This transaction adds to the Group’s short-term insurance presence in Malaysia, which was established through the
acquisition in May 2013 of a 49% stake in Pacific & Orient (P&O). The acquisition follows our partnership approach in
emerging markets outside of South Africa and we look forward to building a mutually beneficial working relationship with
our new partners. The combined exposure in Malaysia creates a solid platform for future growth through internal synergies,
as well as organic growth in this high-potential market.
- We expanded our footprint in Rest of Africa to include Rwanda through the acquisition of a 63% shareholding in the
Soras Group for R255 million. The Soras Group is the largest long-term and short-term insurance company in Rwanda. Rwanda
has one of the fastest-growing economies in Africa, which together with low levels of insurance penetration, creates
substantial scope for future growth.
- R56 million was invested to acquire a 22% stake in the United Kingdom (UK)-based micro-insurance provider,
MicroEnsure. We see micro-insurance, which includes the buying of insurance products through mobile phones at low premiums,
as a substantial opportunity for growth across all our markets. MicroEnsure has a strong footprint in emerging markets that
overlaps with that of Sanlam Emerging Markets (SEM) in Africa, India and South-East Asia.
- Some R130 million was invested to increase the Group’s exposure to existing operations in Botswana, Tanzania and the
UK.
- The remainder of the R1,8 billion capital utilisation was applied to bolster the capital position of some of the
Group’s South African operations.
The application of discretionary capital further enhances the Group’s geographic diversification and exposure to
identified growth markets.
Investment return earned on the discretionary capital portfolio, excess capital released from Group businesses and the
2013 dividend cover in excess of cash operating earnings added some R1,1 billion of surplus capital, leaving
unallocated discretionary capital of R3,3 billion at the end of June 2014. We remain focused on utilising the available
discretionary capital by finding value-accretive investment opportunities.
The Group’s effective interest in Shriram Capital in India diluted to 23% during the first half of the year after a
share issuance by Shriram Capital to a new strategic investor. The Group subsequently (in August 2014) subscribed for new
shares in Shriram Capital for some R730 million to increase our effective stake to 26%, the level before the dilution.
This investment was funded by a reduction in the Group’s direct interest in the listed Shriram Transport Finance Company
in India during June 2014 from 5% to 3%.
Compliance to new regulatory requirements
The primary focus in 2014 is the Financial Services Board’s introduction of a third-country equivalent of the European
Solvency II regime (Solvency Assessment and Management or SAM) in South Africa, as well as Treating Customers Fairly
(TCF) regulations. We completed a third quantitative impact study during the first half of 2014 as part of the SAM
implementation, which indicated that adequate capital is allocated to the Group’s life insurance operations. A TCF culture
has been at the heart of Sanlam for many years. Compliance to TCF is therefore mainly a function of reviewing current
practices to confirm compliance and implementing the systems required to adhere to the evidencing and reporting requirements
under TCF. Good progress has been made in this regard, which included compulsory TCF training for all affected staff
members.
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 auditors.
COMMENTS ON THE RESULTS
Introduction
The Sanlam Group IFRS financial statements for the six months ended 30 June 2014 are presented based on and in compliance
with International Financial Reporting Standards (IFRS), specifically IAS 34 - Interim Financial Reporting. 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 2013 Integrated Report, apart from the presentation of the Sanlam Investments (SI)
cluster’s segmental results.
SI restructured its South African investment management operations in 2014 to better align with its client-centric
model. The former Asset Management and Investment Services businesses were combined into an Asset Management SA business
with three sub-units: client-facing Retail and Institutional units responsible for distribution and client service and an
Investment Core that houses the investment management capabilities. Comparative segmental information has been restated
to combine the former Asset Management and Investment Services information into the new Asset Management SA business.
The Group acquired controlling interests in MCIS Insurance and the Soras Group close to the end of the 30 June 2014
reporting period. Both these businesses were allocated to other Group operations for GEV purposes at 30 June 2014,
although they contain covered (life) business and non-life operations. In addition, the excess consideration paid over the fair
value of assets and liabilities acquired from MCIS was recognised as a Value of Business Acquired intangible asset. The
allocation between covered business and other Group operations, as well as the separate recognition of intangible assets
acquired, will be finalised during the second half of the year for 2014 year-end reporting purposes as allowed for in terms of
IFRS.
The presentation of business volumes as part of the Shareholders’ information disclosure will be amended for the 2014
annual results. New business volumes, payments to clients and net fund flows are currently presented for all types of
business. This disclosure is not the most appropriate format for asset management operations due to the volatility of
investment-related fund flows and the fact that net fund flows is the main driver of value and future profitability for an
asset management business. With effect from the 2014 annual results, only net fund flow information will be presented for
investment business. The current disclosure format will be maintained for long- and short-term insurance business. This
will ensure appropriate focus on the key value drivers in the various businesses.
- Operating environment
Economic conditions
The economic conditions in South Africa remained strained during the first half of 2014, as highlighted in the
Executive Review. Economic conditions elsewhere in Africa were in general more supportive as also reflected in the higher
levels of growth achieved in these markets. The Indian economy continued to grow below its long-term potential, with Shriram
Capital taking a cautious approach to growth in its credit businesses under these conditions. We remain optimistic about
the future growth potential in India, especially given positive statements from the newly elected government to support
economic growth. Growth prospects for the Malaysian economy also remain intact.
Equity markets
The South African equity market delivered a strong performance with the FTSE/JSE All Share Index recording a total
return of 11,8% for the six months to 30 June 2014, compared to a return of 2,3% in the comparable six-month period in
2013. This supported investment return earned on the Group’s capital portfolio, as well as asset-based fee income. The MSCI
World Index in rand terms underperformed in 2014 relative to the first half of 2013, growing by 7,9% compared to 26,9%
in 2013. The international exposure in the capital portfolio commensurately underperformed in 2014 relative to the first
six months of 2013. On a weighted basis, however, the portfolio earned higher returns in 2014.
Interest rates
South African long-term interest rates continued to rise in the first half of 2014. The benchmark nine-year government
bond yield used to value the majority of the Group’s business increased by 0,3% since the end of December 2013 and was
0,7% higher than 30 June 2013. This had a negative impact on RoGEV, as well as the growth in the value of new life
business (VNB). The South African All Bond Index returned 3,4% in the first half of 2014 compared to a negative return of
1,3% in 2013.
Foreign currency exchange rates
Some stability returned to the rand exchange rate after its sharp depreciation against most currencies in 2013. Growth
in foreign earnings, new business volumes and VNB benefited from a weaker average rand exchange rate for the six months
ended 30 June 2014 compared to the same period in 2013.
Rest
United of Africa
Foreign currency/ Europe Kingdom USA Botswana India (weighted)
ZAR EUR GBP USD BWP INR
31/12/2013 14,51 17,42 10,53 1,21 0,17
30/6/2014 14,56 18,18 10,64 1,22 0,18
Weakening/(strengthening) 0,3% 4,4% 1,0% 0,4% 4,0% (8,6%)
Average first half 2013 12,10 14,15 9,19 1,14 0,17
Average first half 2014 14,66 17,85 10,70 1,23 0,18
Weakening 21,2% 26,2% 16,4% 7,6% 5,3% 0,2%
Group Equity Value
GEV amounted to R87,6 billion or 4 277 cents per share on 30 June 2014. Including the dividend of 200 cents per share
paid during the year, a RoGEV per share of 8,6% (annualised 18%) was achieved for the first half of 2014, well in excess
of the 2014 performance hurdle of 5,9% (annualised 12,2%). Investment market performance in the first six months of
2014 exceeded the long-term assumptions used for Group GEV purposes at 31 December 2013. This had a positive impact on the
valuation of the in-force life insurance book, as well as the Group’s asset management operations, contributing to the
strong RoGEV performance for the first half of 2014. Augmenting the performance were R626 million of new life insurance
business written during the six months, as well as a continuance of positive operating experience variances. This was
partly offset by the rise in long-term interest rates during the six months to 30 June 2014, which resulted in an increase
in the discount rate used to value the in-force life insurance business, as well as some of the other Group operations.
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 per share of 7,4% (annualised 15,3%) is still well in
excess of the return target.
- Group Equity Value at 30 June 2014
GEV RoGEV
June December
R million 2014 2013 %Change*
Group operations 82 446 76 470 7 282 9,5
Sanlam Personal Finance 36 976 35 666 3 107 8,7
Sanlam Emerging Markets 12 967 10 189 1 258 12,3
Sanlam Investments 19 267 17 971 2 031 11,2
Santam 13 236 12 644 886 7,0
Covered business 44 903 43 475 3 945 9,1
Value of in-force 28 925 27 675 3 180 11,5
Adjusted net worth 15 978 15 800 765 4,8
Other operations 37 543 32 995 3 337 10,1
Group operations 82 446 76 470 7 282 9,5
Discretionary capital and other 5 142 7 939 6 0,1
Group Equity Value 87 588 84 409 7 288 8,6
Per share (cents) 4 277 4 121 356 8,6
* Return for the six months, non-annualised.
Group operations yielded an overall return of 9,5% in the first half of 2014 (annualised 19,9%). The embedded value of
covered business (life operations) amounted to R44,9 billion, 51% of GEV at 30 June 2014. The capital allocated to the
life operations increased marginally to R16 billion. The strong equity market performance over the period contributed to
R189 million of positive investment variances and an after-tax return of 4,8% on the capital portfolios supporting the
life operations. The in-force book of R28,9 billion yielded a return of 11,5% (annualised 24,3%). Good growth in VNB,
continued positive operating experience variances, as well as investment variances of some R500 million emanating from the
investment market performance in excess of long-term assumptions, contributed to the sound result. This was partly
offset by negative economic assumption changes of R200 million due to the higher risk discount rate applied at the end of
June 2014.
Other Group operations provided a return of 10,1% (annualised 21,2%). The valuations of the non-insurance operations
were in general positively impacted by a higher level of assets under management, 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 and timing
differences in respect of the recognition of long-term incentive scheme costs at the interim reporting stage.
Earnings
Shareholders’ fund income statement for the six months ended 30 June 2014
%
R million 2014 2013 Change
Net result from financial services 3 461 2 409 44
Sanlam Personal Finance 1 763 1 409 25
Sanlam Emerging Markets 624 391 60
Sanlam Investments 727 523 39
Santam 353 128 176
Corporate and other (6) (42) 86
Net investment return 1 122 1 150 (2)
Project costs and amortisation (123) (101) (22)
Equity participation costs (67) (9) (>100)
Normalised headline earnings 4 393 3 449 27
Per share (cents) 214,8 169,1 27
Net result from financial services (net operating profit) of R3,5 billion increased by 44% on 2013, including
structural growth of R130 million in SEM. Organic growth of 40% is particularly pleasing, with all clusters achieving good
results. A higher level of assets under management across most asset management and administration businesses, a growing life
in-force book, the weaker average rand exchange rate and favourable claims experience in the life and short-term
insurance operations supported the earnings growth. The 2013 comparable period also included once-off losses relating to the
impairment of the Group’s exposure to First Strut, with similar losses not repeating in 2014. The individual cluster
results are discussed in more detail below.
Normalised headline earnings of R4,4 billion are 27% up on 2013. This is the combined effect of the 44% increase in
net result from financial services, partly offset by a 2% decline in net investment return. Investment surpluses in the
first half of 2013 included once-off investment gains of some R215 million from an increase in the valuation of the
Group’s interest in Capricorn Investment Holdings following the listing of Bank Windhoek and a sizable recovery of a
previously impaired portfolio investment. Excluding these, net investment return earned on the capital portfolio increased by
19%, which is in line with the relatively stronger investment market performance in the first half of 2014.
- Business volumes
The Group achieved overall growth of 8% in new business volumes (excluding white label business), including the
Capricorn Unit Trust (CUT) business that was sold on 1 July 2013. Excluding CUT, new business volumes grew by 13%. Life
insurance new business volumes increased by 17%, augmented by 12% (excluding CUT) and 8% growth in new investment and
short-term insurance business respectively. All businesses contributed to the solid performance, apart from Sanlam Sky and
Sanlam Employee Benefits (SEB). Sanlam Sky was impacted by lower Group risk business in 2014 as well as the industrial action
in the platinum sector, which persisted for most of the first half of 2014. Rustenburg in the heart of the platinum
belt is Sanlam Sky’s largest branch, which experienced a very poor first half. SEB achieved growth of 8% in new recurring
premium sales, but this was offset by a 21% decline in the more volatile single premium business. The 32% decline in
SEM’s new business volumes is entirely attributable to the CUT sale in 2013. Excluding CUT, SEM achieved overall growth of
50%. A 90% increase in the Rest of Africa contribution was particularly satisfactory. Single premium sales continue to
drive growth in South African life business, with lacklustre new recurring premium sales reflecting the weak economy and
pressure on consumers’ disposable income. 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 R19,2 billion compared to R13,7 billion in
2013 is commendable, in particular given the highly competitive market in South Africa.
Business volumes for the six months ended 30 June 2014
New business Net inflows
% %
R million 2014 2013 Change 2014 2013 Change
Sanlam Personal Finance 23 662 19 239 23 8 087 6 564 23
Sanlam Emerging Markets 4 030 5 933 (32) 1 762 607 190
Sanlam Investments 45 682 42 528 7 6 362 4 194 52
Santam 8 459 8 096 4 3 011 2 381 26
Total (excluding white label) 81 833 75 796 8 19 222 13 746 40
Covered business 17 536 14 956 17 6 137 5 159 19
Investment business 55 251 52 436 5 9 979 6 160 62
Short-term insurance 9 046 8 404 8 3 106 2 427 28
Total (excluding white label) 81 833 75 796 8 19 222 13 746 40
The discount rate used to determine the value of new life business written (VNB) is directly linked to long-term
interest rates. The rise in the long-term benchmark rates during 2014 resulted in a commensurate increase in the Group’s risk
discount rate with a negative effect on the growth in VNB. VNB at actual discount rates increased by 9% (7% net of
non-controlling interest). On a comparable basis (before economic assumption changes) VNB increased by 13% (11% net of
non-controlling interest). Sanlam Personal Finance (SPF) achieved disappointing growth of only 4% on a comparable basis. This
is attributable to the decline in Sanlam Sky new business, as well as a change in mix to lower margin single premium
savings products. VNB margins were, however, maintained at an individual product level, a satisfactory achievement in a
very competitive market. SEM achieved strong VNB growth of 45% on a comparable basis, in line with its new business
performance. The decline in single premiums at SEB limited SI’s VNB growth to 9%. The overall VNB margin declined slightly
since 2013 largely due to the change in business mix at SPF.
Value of new covered business for the six months ended 30 June 2014
2014 economic basis 2013 economic basis
% %
R million 2014 2013 Change 2014 2013 Change
Value of new covered business 697 639 9 722 639 13
Sanlam Personal Finance 437 450 (3) 467 450 4
Sanlam Emerging Markets 196 136 44 197 136 45
Sanlam Investments 64 53 21 58 53 9
Net of non-controlling interest 626 587 7 650 587 11
Present value of new business premiums 24 202 21 455 13 24 349 21 455 13
Sanlam Personal Finance 15 990 14 667 9 16 164 14 667 10
Sanlam Emerging Markets 2 684 2 085 29 2 669 2 085 28
Sanlam Investments 5 528 4 703 18 5 516 4 703 17
Net of non-controlling interest 23 335 20 731 13 23 488 20 731 13
New covered business margin 2,88% 2,98% 2,97% 2,98%
Sanlam Personal Finance 2,73% 3,07% 2,89% 3,07%
Sanlam Emerging Markets 7,30% 6,52% 7,38% 6,52%
Sanlam Investments 1,16% 1,13% 1,05% 1,13%
Net of non-controlling interest 2,68% 2,83% 2,77% 2,83%
- Cluster performance
Sanlam Personal Finance
Key performance indicators for the six months ended 30 June 2014
R million 2014 2013 % Change
Group Equity Value
Group Equity Value * 36 976 35 666 4
Covered business 34 103 33 033 3
Other operations 2 873 2 633 9
Return on Group Equity Value (six months) 8,7% 6,8%
Covered business 8,7% 6,2%
Other operations 9,0% 13,8%
Business volumes
New business volumes 23 662 19 239 23
Life business 11 552 10 114 14
Sanlam Sky 474 503 (6)
Individual life 373 353 6
Group life 101 150 (33)
Individual Life 5 672 5 200 9
Recurring premiums 645 628 3
Single premiums 5 027 4 572 10
Glacier 5 406 4 411 23
Investment business 12 110 9 125 33
Individual Life 149 168 (11)
Glacier 11 961 8 957 34
Net fund flows 8 087 6 564 23
Life business 3 538 3 197 11
Sanlam Sky 1 307 1 410 (7)
Individual Life (820) (791) (4)
Glacier 3 051 2 578 18
Investment business 4 549 3 367 35
Value of new covered business (gross)
Value of new business 437 450 (3)
Sanlam Sky 135 146 (8)
Individual Life 228 240 (5)
Glacier 74 64 16
Present value of new business premiums 15 990 14 667 9
Sanlam Sky 1 772 1 956 (9)
Individual Life 8 812 8 300 6
Glacier 5 406 4 411 23
New business margin 2,73% 3,07%
Sanlam Sky 7,62% 7,46%
Individual Life 2,59% 2,89%
Glacier 1,37% 1,45%
Earnings
Gross result from financial services 2 439 1 941 26
Sanlam Sky 518 360 44
Individual Life 1 750 1 459 20
Glacier 171 122 40
Net result from financial services 1 763 1 409 25
* Comparative information as at 31 December 2013.
SPF had a good start to the 2014 financial year, with the only exception being recurring premium new business where a
number of factors contributed to disappointing growth.
SPF achieved a RoGEV of 8,7% for the six months to June 2014, compared to 6,8% for the comparable period in 2013. The
improved return on covered business relative to 2013 is largely attributable to lower negative economic assumption
changes in the first half of 2014, partly offset by lower positive operating assumption changes. Long-term interest rates
increased by 0,3% in 2014 compared to a 1% increase during the first six months of 2013, resulting in negative economic
assumption changes of R264 million in the first of half of 2014 compared to R869 million in 2013. Operating assumption
changes of some R270 million were recognised in the first six months of 2013 due to the introduction of new HIV/Aids tables.
This did not repeat in 2014, contributing to a decline in operating assumption changes to some R40 million in the first
half of 2014. The return on the non-life operations were positively impacted by an increase in the valuation of Glacier
due to an increase in the level of assets under management and profitability.
New business volumes increased by 23% on the first half of 2013, with new life business up 14% and new investment
business sales increasing by 33%.
Sanlam Sky experienced a 6% decline in new business sales. Individual recurring premium business grew by 6% overall,
with agency channels up 9% and broker and other channels down 5%. The prolonged industrial action at platinum mines
impacted negatively on sales of the Rustenburg area, with other areas performing well. Excluding the platinum belt,
individual recurring premium new business grew 10%. Group recurring premium business declined by 33% after a slower start to the
year with less large schemes written than in the first half of 2013. The biennial ZCC renewal also occurred in 2013,
further increasing the comparative base. The lower new business volumes resulted in only a marginal increase of 2% in VNB
on a comparable economic basis (8% decline at actual rates). The average VNB margin benefited from the change in mix
towards the more profitable individual life business, and increased from 7,46% in 2013 to 7,62%.
Individual Life sales (predominantly middle-income market) were 8% higher in the first six months of 2014 compared to
the same period in 2013. Single premiums increased by 9% with demand for the traditional guaranteed and annuity products
improving in the higher interest rate environment. Recurring premium new business increased by 1%. Retirement annuities
attracted good demand, but this was offset by lower endowment and risk products sales in the challenging economic
environment. Credit life new business also declined due to the deliberate curtailment of unsecured lending in Sanlam Personal
Loans. VNB was negatively impacted by the new business performance, in particular the decline in the more profitable
risk and credit life business, and increased only marginally against 2013 on a comparable economic basis. VNB margins as a
result declined marginally.
Glacier achieved very strong growth of 30% in the affluent market segment where personal wealth continued to expand,
supported by the strong investment market performance that increased the value of retirement benefits invested with
Glacier. Inflows into Glacier’s money market funds also improved as investor uncertainty over equity market levels increased.
The strategic focus on writing quality new business continues to impact positively on retention and the protection of
the in-force book. Despite a difficult economic environment and the severe impact of industrial action on Sanlam Sky,
overall persistency experience essentially remained in line with assumptions. Net fund flows commensurately benefited and
increased by 23%. The only segment experiencing net outflows was the Individual Life market, where higher maturity
values result in an increase in benefit payments.
Gross result from financial services increased by 26% (25% on a net of tax and non-controlling interest basis). Sanlam
Sky’s gross earnings were up 44%, primarily due to higher profits released from the increasing in-force book, good
mortality experience and flat new business strain from the lower new business volumes. Individual Life profit grew by 20%,
supported by good mortality claims experience and fund-based fee income earned on the higher average level of assets
under management. Higher assets under management is also the main driver of Glacier’s 40% earnings growth.
Sanlam Emerging Markets
Key performance indicators for the six months ended 30 June 2014
R million 2014 2013 % Change
Group Equity Value
Group Equity Value* 12 967 10 189 27
Covered business 3 532 3 541 -
Other operations 9 435 6 648 42
Return on Group Equity Value (six months) 12,3% 22,0%
Covered business 10,3% 21,6%
Other operations 13,5% 22,2%
Business volumes
New business volumes 4 030 5 933 (32)
Namibia 1 541 4 263 (64)
Botswana 1 137 871 31
Rest of Africa 827 436 90
India 331 284 17
South-East Asia 194 79 146
Net fund flows 1 762 607 190
Namibia 343 (419) 182
Botswana 478 460 4
Rest of Africa 814 530 54
India 53 8 563
South-East Asia 74 28 164
Value of new covered business (gross)
Value of new business 196 136 44
Namibia 45 44 2
Botswana 81 37 119
Rest of Africa 68 55 24
India 2 - -
Present value of new business premiums 2 684 2 085 29
Namibia 432 444 (3)
Botswana 1 092 809 35
Rest of Africa 1 046 720 45
India 114 112 2
New business margin 7,30% 6,52%
Namibia 10,42% 9,91%
Botswana 7,42% 4,57%
Rest of Africa 6,50% 7,64%
India 1,75% 0,00%
Earnings
Gross result from financial services 1 129 697 62
Namibia 254 112 127
Botswana 348 276 26
Rest of Africa 108 76 42
India 389 231 68
South-East Asia 43 13 231
Corporate (13) (11) (18)
Net result from financial services 624 391 60
* Comparative information as at 31 December 2013.
The SEM results for the first half of 2014 include the impact of corporate transactions concluded during the course of
2013. These transactions contributed to the 2014 interim results for the full six months, but only proportionally to
the 2013 first half results. The majority of the impact emanates from the direct stake acquired in Shriram Transport
Finance Company (contributing from April 2013), the P&O investment in Malaysia (contributing from May 2013) and the Capricorn
Investment Holdings (CIH) acquisition in Namibia (contributing from July 2013). The weaker average rand exchange rate
against the Indian rupee and Botswana pula also had a positive impact on the growth reported for 2014.
SEM achieved a RoGEV of 12,3%, well in excess of its target. The return for the period is lower than the comparable
period in 2013 for both covered and other operations. This is largely due to the significant weakening of the rand
exchange rate in the first six months of 2013 that did not repeat in 2014, with a consequential lower exchange rate impact
included in the 2014 earnings.
New business volumes declined by 32%, impacted by the disposal of CUT as part of the CIH transaction. Excluding the
discontinued operations in Namibia, new business volumes increased by 50%. All regions contributed to the growth, with
strong recurring and single premium sales in most regions. Namibian new business volumes increased by 52% (excluding CUT),
supported by strong unit trust sales. The Botswana operations received a once-off annuity tranche from government
retirees, contributing to a 31% rise in Botswana new business volumes. Rest of Africa continued on its growth path, assisted
by a sharp increase in non-life new business from R34 million in 2013 to R215 million in 2014 due to the first-time
inclusion of Oasis in Nigeria and the increased stakes in the Nico General Insurance businesses. The 146% increase in
Malaysia’s new business contribution is due to the base effect of including P&O from May 2013. VNB benefited from the strong
growth in new life business, in particular the high margin annuity business in Botswana. VNB grew by 44% on 2013, with VNB
margins increasing from 6,52% in the first six months of 2013 to 7,30% in 2014. The marginal increase in Namibian VNB
reflects the low growth in new life business in this region.
The strong new business performance is also evident in a more than doubling in net fund flows.
SEM delivered growth of 62% in gross result from financial services (60% net of tax and non-controlling interest). The
2014 earnings include a R72 million once-off release of a provision held in respect of the third-party pool business
that was transferred to Shriram General Insurance after the change in regulations governing this business. Excluding this
once-off item, as well as earnings from structural growth, comparable gross earnings increased by 26%. All regions
contributed to the growth, reflecting 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.
Sanlam Investments
Key performance indicators for the six months ended 30 June 2014
R million 2014 2013 % Change
Group Equity Value
Group Equity Value* 19 267 17 971 7
Covered business 7 268 6 901 5
Other operations 11 999 11 070 8
Return on Group Equity Value (six months) 11,2% 9,2%
Covered business 10,3% 9,5%
Other operations 11,8% 9,1%
Business volumes
Net fund flows (excluding white label) 6 362 4 194 52
Investments 4 871 2 959 65
Asset management SA 3 883 (810) 579
Wealth management (457) 2 457 (119)
International 1 346 1 312 3
Capital management 99 -
Life business 1 491 1 235 21
New life business volumes 4 389 3 644 20
Recurring premiums 222 178 25
Single premiums 4 167 3 466 20
Value of new covered business (gross)
Value of new business 64 53 21
Present value of new business premiums 5 528 4 703 18
New business margin 1,16% 1,13%
Earnings
Gross result from financial services 982 687 43
Investment management 605 451 34
Employee Benefits 216 174 24
Capital Management 161 62 160
Net result from financial services 727 523 39
* Comparative information as at 31 December 2013.
SI delivered a robust overall performance, supported by an increase in assets under management and the weaker average
rand exchange rate.
SI achieved a RoGEV of 11,2% for the six months to June 2014, with both covered and other operations contributing to
the growth. The valuation of SI’s 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 7% with all business units contributing to the growth apart from Wealth Management
and SEB. The International businesses were the main contributors, with the 10% growth at the SA Asset Manager a
particularly satisfactory achievement in a very competitive market.
The new business performance flowed through to the cluster’s net fund flows, which increased from R4,2 billion in the
first six months of 2013 to R6,4 billion in 2014. The SA Asset Management operations turned around its net outflow of
R810 million in the first half of 2013 to a net inflow of R3,9 billion in 2014. The Wealth Management business reported a
net outflow of R457 million after losing very low margin share incentive scheme portfolios of R1,5 billion during the
first six months of 2014.
Gross result from financial services increased by 43%. A higher level of assets under management, augmented by
performance fees earned on third-party mandates and higher scriplending fees, contributed to a 34% increase in earnings from
the Investment Management businesses. SEB’s operating earnings improved by 24% on the first half of 2013, largely
attributable to good risk claims experience. Gross operating profit in the Capital Management business increased by 160% from a
low base in 2013. The 2013 earnings included once-off items relating to the First Strut impairment and recoveries of
previously impaired investments. Excluding these exceptional items, Capital Management grew its operating earnings by 21%,
benefiting from exit fees earned by the Private Equity business unit.
Santam
Key performance indicators for the six months ended 30 June 2014
R million 2014 2013 % Change
Group Equity Value
Group Equity Value* 13 236 12 644 5
Return on Group Equity Value (six months) 7,0% 2,9%
Business volumes
Net earned premiums 8 459 8 096 4
Net fund flows 3 011 2 381 26
Earnings
Gross result from financial services 871 296 194
Net result from financial services 353 128 176
Ratios
Claims 64,4% 70,6%
Administration cost 18,9% 17,2%
Underwriting 7,4% 1,3%
* Comparative information as at 31 December 2013.
The RoGEV of the short-term insurance cluster reflects the investment return earned on the listed Santam shares.
Claims experience in 2014 improved considerably compared to the first half of 2013. The agricultural business, in
particular, incurred significant losses from hail damage to summer crops and drought in other parts of the country in 2013.
This did not recur in 2014 with widespread rainfall and an absence of hail storms. The underwriting profit of the
agricultural business turned around from a loss of R112 million in 2013 to a profit of R187 million in the first six months of
2014, which together with a resilient performance from the Specialist businesses, contributed to a significant increase
in the overall underwriting margin and operating profit.
Gross written premium increased by 10% excluding cell captive business and 7% including cell captive business. This is
a good performance in a highly competitive and mature South African market. After allowing for an additional quota
share reinsurance treaty to support Santam’s international business following the sovereign rating downgrade of South
Africa, net earned premiums increased by 4%.
Solvency
All of the life insurance businesses within the Group were sufficiently capitalised at the end of June 2014. 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 R34,1 billion, covered its capital adequacy requirements
(CAR) 4,4 times. No policyholder portfolio had a negative bonus stabilisation reserve at the end of June 2014.
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 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
Cape Town
3 September 2014
Sanlam Group
Interim financial statements
for the six months ended 30 June 2014
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The preparation of the Group’s reviewed interim financial statements was supervised by the financial director, Kobus
Möller CA(SA).
The basis of presentation applied for purposes of the interim condensed 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, the Financial
Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of
South Africa.
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 2013, apart from changes in the economic
assumptions.
The accounting policies and basis of preparation for the IFRS financial statements and shareholders’ information are
in all material respects consistent with those applied in the 2013 integrated report, except for the adoption of new IFRS
standards and interpretations effective as of 1 January 2014 and changes to the shareholders’ information as indicated
below.
- Sanlam Investments restructured its South African investment management operations in 2014 to better align with its
client-centric model. The former Asset Management and Investment Services businesses were combined into an Asset
Management SA business with three sub-units: client-facing Retail and Institutional units responsible for distribution and
client service and an Investment Core that houses the investment management capabilities. Comparative segmental information
has been restated to combine the former Asset Management and Investment Services information into the new Asset Management
SA business.
The following new or revised IFRSs and interpretations that became effective in the current year and are applicable to
the Group’s 2014 financial year were adopted:
- Amendment to IAS 32 - Clarification of the instances in which the set off of financial assets and liabilities is
allowed.
The application of these revised standards did not have a significant impact on the Group’s financial position,
reported results and cash flows.
The following new or revised IFRSs and interpretations that are applicable to the Group have effective dates
applicable to future financial years and have not been early adopted:
- IFRS 9 - Financial Instruments (effective 1 January 2018)
- IFRS 15 - Revenue from Contracts with Customers (effective 1 January 2017)
The impact of the application of these revised standards and interpretations in future financial reporting periods on
the Group’s reported results, financial position and cash flows are still being assessed.
External review
The appointed auditors, Ernst & Young Inc, reviewed the interim condensed financial statements and shareholders’
information of the Group at 30 June 2014. These reviews were conducted in accordance with International Standards on Review
Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. Copies of
the unqualified review reports of Ernst & Young Inc are presented below.
SHAREHOLDERS’ INFORMATION
Contents
Independent auditors’ review report on 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
INDEPENDENT AUDITORS’ REVIEW REPORT ON 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
2014, comprising Group Equity Value; Change in Group Equity Value; Return on Group Equity Value; Shareholders’ fund at
fair value; Shareholders’ fund income statement; Notes to the shareholders’ fund information; and Embedded Value of
covered business; Change in Embedded Value of covered business; Value of New Business and Notes to the Embedded Value of
covered business; as set out below.
Directors’ responsibility for interim financial information
The directors of Sanlam Limited are responsible for the preparation and presentation of this interim financial
information in accordance with the basis of accounting set out above, and for such internal control as the directors
determine is necessary to enable the preparation of interim financial information that is free from material misstatement,
whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express a conclusion on this interim financial information. 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". ISRE 2410 requires us to conclude whether anything has come to our attention that
causes us to believe that the interim financial statements are not prepared in all material respects in accordance with the
basis of accounting set out above. This standard also requires us to comply with relevant ethical requirements.
A review of interim financial information in accordance with ISRE 2410 is a limited assurance engagement. We perform
procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and
applying analytical procedures, and evaluate the evidence obtained.
The procedures performed in a review are substantially less than and differ in nature from those performed in an audit
conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on
these financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim
Shareholders’ Information for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with
the basis of accounting set out above.
Basis of accounting
Without modifying our conclusion, we draw attention to above, of the Sanlam Limited Shareholders’ Information, which
describes the basis of accounting. The Sanlam Limited Interim Shareholders’ Information is 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)
Ernst & Young House
35 Lower Long Street
Cape Town
3 September 2014
GROUP EQUITY VALUE
at 30 June 2014
June Reviewed December Audited
2014 2013
Fair value Value of Fair value Value of
R million Note Total of assets in-force Total of assets in-force
Sanlam Personal Finance 36 976 12 115 24 861 35 666 11 674 23 992
Covered business(1) 34 103 9 242 24 861 33 033 9 041 23 992
Glacier 1 508 1 508 - 1 336 1 336 -
Sanlam Personal Loans 825 825 - 836 836 -
Other operations 540 540 - 461 461 -
Sanlam Emerging Markets 12 967 10 851 2 116 10 189 8 181 2 008
Covered business(1) 3 532 1 416 2 116 3 541 1 533 2 008
Shriram Capital 4 148 4 148 - 4 219 4 219 -
MCIS Malaysia 1 258 1 258 - - - -
Letshego 802 802 - 698 698 -
Pacific & Orient 684 684 - 622 622 -
Capricorn Investment Holdings 712 712 - 682 682 -
Other operations 1 831 1 831 - 427 427 -
Sanlam Investments 19 267 17 319 1 948 17 971 16 296 1 675
Covered business(1) 7 268 5 320 1 948 6 901 5 226 1 675
Sanlam Employee Benefits 6 018 4 925 1 093 5 707 4 825 882
Sanlam UK 1 250 395 855 1 194 401 793
Investment Management 11 314 11 314 - 10 454 10 454 -
Capital Management 685 685 - 616 616 -
Santam 13 236 13 236 - 12 644 12 644 -
Group operations 82 446 53 521 28 925 76 470 48 795 27 675
Discretionary capital 3 300 3 300 - 4 000 4 000 -
Balanced portfolio - other 3 265 3 265 - 5 317 5 317 -
Group Equity Value before adjustments to net worth 89 011 60 086 28 925 85 787 58 112 27 675
Net worth adjustments - present value of holding
company expenses (1 423) (1 423) - (1 378) (1 378) -
Group Equity Value 87 588 58 663 28 925 84 409 56 734 27 675
Value per share (cents) 4 4 277 2 865 1 412 4 121 2 770 1 351
Analysis per type of business
Covered business(1) 44 903 15 978 28 925 43 475 15 800 27 675
Sanlam Personal Finance 34 103 9 242 24 861 33 033 9 041 23 992
Sanlam Emerging Markets 3 532 1 416 2 116 3 541 1 533 2 008
Sanlam Investments 7 268 5 320 1 948 6 901 5 226 1 675
Other Group operations 37 543 37 543 - 32 995 32 995 -
Discretionary and other capital 5 142 5 142 - 7 939 7 939 -
Group Equity Value 87 588 58 663 28 925 84 409 56 734 27 675
(1) Refer embedded value of covered business below.
CHANGE IN GROUP EQUITY VALUE
for the six months ended 30 June 2014
Six months reviewed
R million 2014 2013
Earnings from covered business(1) 3 945 3 038
Earnings from other Group operations 3 337 2 627
Operations valued based on ratio of price to assets under management 1 160 733
Assumption changes 89 (142)
Change in assets under management 466 371
Earnings for the period and changes in capital requirements 436 142
Foreign currency translation differences and other 169 362
Operations valued based on discounted cash flows 1 057 1 307
Expected return 918 552
Operating experience variances (54) 175
Assumption changes and other (30) 173
Foreign currency translation differences 223 407
Operations valued at net asset value - earnings for the period 234 215
Listed operations - investment return 886 372
Earnings from discretionary and other capital 6 (160)
Portfolio investments and other 157 128
Net corporate expenses (6) (42)
Share-based payments transactions (100) (113)
Change in net worth adjustments (45) (133)
Group Equity Value earnings 7 288 5 505
Dividends paid (4 044) (4 309)
Cost of treasury shares (acquired)/sold (65) 61
Group Equity Value at beginning of the period 84 409 75 352
Group Equity Value at end of the period 87 588 76 609
(1) Refer embedded value of covered business below.
RETURN ON GROUP EQUITY VALUE
for the six months ended 30 June 2014
Six months reviewed
2014 2013
Earnings Return Earnings Return
R million % R million %
Sanlam Personal Finance 3 107 8,7 2 241 6,8
Covered business(1) 2 870 8,7 1 879 6,2
Other operations 237 9,0 362 13,8
Sanlam Emerging Markets 1 258 12,3 1 548 22,0
Covered business(1) 363 10,3 572 21,6
Other operations 895 13,5 976 22,2
Sanlam Investments 2 031 11,2 1 504 9,2
Covered business(1) 712 10,3 587 9,5
Other operations 1 319 11,8 917 9,1
Santam 886 7,0 372 2,9
Discretionary and other capital 6 (160)
Return on Group Equity Value 7 288 8,6 5 505 7,3
Return on Group Equity Value per share 8,6 6,9
Annualised return on Group Equity Value per share 18,0 14,3
(1) Refer embedded value of covered business below.
Six months reviewed
R million 2014 2013
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 below 4 485 3 483
Other comprehensive income 229 571
Earnings recognised directly in equity
Share-based payment transactions (96) (122)
Net cost of treasury shares delivered (262) (265)
Share based payments 166 143
Change in ownership of subsidiaries 63 (36)
Movement in fair value adjustment - shareholders’ fund at
fair value 1 389 1 040
Movement in adjustments to net worth 7 (39)
Present value of holding company expenses (45) (133)
Change in goodwill and value of business acquired adjustments
less value of in-force acquired 52 94
Growth from covered business: value of in-force(1) 1 211 608
Return on Group Equity Value 7 288 5 505
(1) Refer embedded value of covered business below.
SHAREHOLDERS’ FUND AT FAIR VALUE
at 30 June 2014
June Reviewed December Audited
2014 2013
Fair Fair
value Net value Net
Fair adjust- asset Fair adjust- asset
R million Note value ment value value ment value
Covered business, discretionary and other capital 23 806 112 23 694 26 393 112 26 281
Equipment 376 - 376 356 - 356
Owner-occupied properties 568 - 568 564 - 564
Goodwill(2) 473 - 473 474 - 474
Value of business acquired(2) 588 - 588 607 - 607
Other intangible assets 148 - 148 86 - 86
Deferred acquisition costs 2 293 - 2 293 2 615 - 2 615
Investments 22 317 112 22 205 22 928 112 22 816
Properties 187 - 187 120 - 120
Associated companies 1 450 - 1 450 1 461 - 1 461
Equities and similar securities 4 891 112 4 779 4 808 112 4 696
Other interest-bearing and preference share
investments 7 689 - 7 689 8 106 - 8 106
Structured transactions 911 - 911 872 - 872
Investment funds 4 340 - 4 340 4 351 - 4 351
Cash, deposits and similar securities 2 849 - 2 849 3 210 - 3 210
Net term finance - - - - - -
Term finance (3 952) - (3 952) (4 194) - (4 194)
Assets held in respect of term finance 3 952 - 3 952 4 194 - 4 194
Net deferred tax (990) - (990) (805) - (805)
Net working capital (449) - (449) 1 090 - 1 090
Derivative liability (174) - (174) (147) - (147)
Non-controlling interest (1 344) - (1 344) (1 375) - (1 375)
Other Group operations 37 543 18 126 19 417 32 995 16 737 16 258
Sanlam Personal Finance 2.1 2 873 1 945 928 2 633 1 853 780
Glacier 1 508 1 211 297 1 336 1 050 286
Sanlam Personal Loans(3) 825 283 542 836 425 411
Other operations 540 451 89 461 378 83
Sanlam Emerging Markets 2.2 9 435 (140) 9 575 6 648 (237) 6 885
Shriram Capital 4 148 207 3 941 4 219 159 4 060
MCIS Malaysia 1 258 - 1 258 - - -
Letshego 802 (21) 823 698 (17) 715
Pacific & Orient 684 32 652 622 (25) 647
Capricorn Investment Holdings 712 (23) 735 682 (16) 698
Other operations 1 831 (335) 2 166 427 (338) 765
Sanlam Investments 2.3 11 999 8 505 3 494 11 070 7 665 3 405
Investment Management 11 314 8 489 2 825 10 454 7 617 2 837
Capital Management 685 16 669 616 48 568
Santam 13 236 9 063 4 173 12 644 8 703 3 941
Goodwill held on Group level in respect of the
above businesses - (1 247) 1 247 - (1 247) 1 247
Shareholders’ fund at fair value 61 349 18 238 43 111 59 388 16 849 42 539
Value per share (cents) 4 2 996 891 2 105 2 900 823 2 077
(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 Developing
Markets, Channel Life and Sanlam Investments 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.
SHAREHOLDERS’ FUND AT FAIR VALUE continued
at 30 June 2014
June Reviewed December Audited
2014 2013
Fair Fair
value Value value Value
R million of of of of
Reconciliation to Group Equity Value Total assets in-force Total assets in-force
Group Equity Value 87 588 58 663 28 925 84 409 56 734 27 675
Add: Net worth adjustments 1 423 1 423 - 1 378 1 378 -
Add: Goodwill and value of business acquired replaced
by value of in-force 1 263 1 263 - 1 276 1 276 -
Sanlam Life and Pensions 356 356 - 356 356 -
Sanlam Developing Markets 672 672 - 685 685 -
Shriram Life Insurance(4) 210 210 - 210 210 -
Other 25 25 - 25 25 -
Less: Value of in-force (28 925) - (28 925) (27 675) - (27 675)
Shareholders’ fund at fair value 61 349 61 349 - 59 388 59 388 -
(4) The carrying value of Shriram Life Insurance includes goodwill of R210 million (2013: R210 million) that is
excluded in the build-up of the Group Equity Value, as the current value of in-force business for Shriram
Life Insurance is included in the embedded value of covered business.
SHAREHOLDERS’ FUND INCOME STATEMENT
for the six months ended 30 June 2014 - reviewed
Sanlam Personal Sanlam Emerging
Finance Markets Sanlam Investments Santam
R million Note 2014 2013 2014 2013 2014 2013 2014 2013
Financial services income 6 985 6 240 2 437 1 754 3 923 3 493 8 704 8 291
Sales remuneration (1 071) (1 027) (361) (313) (127) (77) (910) (1 027)
Income after sales remuneration 5 914 5 213 2 076 1 441 3 796 3 416 7 794 7 264
Underwriting policy benefits (1 695) (1 632) (494) (339) (900) (1 064) (5 448) (5 715)
Administration costs (1 780) (1 640) (453) (405) (1 914) (1 665) (1 475) (1 253)
Result from financial services before tax 2 439 1 941 1 129 697 982 687 871 296
Tax on result from financial services (674) (528) (328) (158) (238) (152) (247) (69)
Result from financial services after tax 1 765 1 413 801 539 744 535 624 227
Non-controlling interest (2) (4) (177) (148) (17) (12) (271) (99)
Net result from financial services 1 763 1 409 624 391 727 523 353 128
Net investment income 501 482 61 75 92 84 40 21
Dividends received - Group companies 235 253 - - - - - -
Other investment income 351 298 108 124 118 110 72 33
Tax on investment income (85) (69) (30) (24) (26) (26) (3) 6
Non-controlling interest - - (17) (25) - - (29) (18)
Project expenses - - (4) (4) - - - -
Amortisation of value of business acquired and
other intangibles (20) (18) (7) (6) (86) (59) (6) (12)
Equity participation costs - - - - (59) - (8) (9)
Net equity-accounted headline earnings - - 10 2 - - 10 16
Equity-accounted headline earnings - - 24 4 - - 17 26
Tax on equity-accounted headline earnings - - (1) (1) - - - -
Non-controlling interest - - (13) (1) - - (7) (10)
Net investment surpluses 1 312 471 13 150 165 175 124 97
Investment surpluses - Group companies 997 146 - - - - - -
Other investment surpluses 406 409 17 160 215 198 245 204
Tax on investment surpluses (91) (84) 1 (1) (50) (21) (36) (43)
Non-controlling interest - - (5) (9) - (2) (85) (64)
Normalised headline earnings 3 556 2 344 697 608 839 723 513 241
Net profit on disposal of subsidiaries and
associated companies - - 92 - 19 42 - -
Profit on disposal of subsidiaries and associated
companies - - 124 - 19 42 - -
Tax on profit on disposal of subsidiaries and
associated companies - - (32) - - - - -
Impairments - - (10) - (9) (1) - (7)
Normalised attributable earnings 3 556 2 344 779 608 849 764 513 234
Fund transfers - - - - - - - -
Attributable earnings per Group statement of
comprehensive income 3 556 2 344 779 608 849 764 513 234
Ratios
Admin ratio(1) 30,1% 31,5% 21,8% 28,1% 50,4% 48,7% 18,9% 17,2%
Operating margin(2) 41,2% 37,2% 54,4% 48,4% 25,9% 20,1% 11,2% 4,1%
Diluted earnings per share 3
Adjusted weighted average number of shares (million)
Net result from financial services (cents) 86,2 69,1 30,5 19,2 35,5 25,6 17,3 6,3
(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.
SHAREHOLDERS’ FUND INCOME STATEMENT
for the six months ended 30 June 2014 - reviewed continued
Corporate and other(3) Total
R million 2014 2013 2014 2013
Financial services income 103 96 22 152 19 874
Sales remuneration - - (2 469) (2 444)
Income after sales remuneration 103 96 19 683 17 430
Underwriting policy benefits - - (8 537) (8 750)
Administration costs (116) (150) (5 738) (5 113)
Result from financial services before tax (13) (54) 5 408 3 567
Tax on result from financial services 7 12 (1 480) (895)
Result from financial services after tax (6) (42) 3 928 2 672
Non-controlling interest - - (467) (263)
Net result from financial services (6) (42) 3 461 2 409
Net investment income (206) (280) 488 382
Dividends received - Group companies (235) (253) - -
Other investment income 26 (11) 675 554
Tax on investment income 3 (16) (141) (129)
Non-controlling interest - - (46) (43)
Project expenses - (2) (4) (6)
Amortisation of value of business acquired and
other intangibles - - (119) (95)
Equity participation costs - - (67) (9)
Net equity-accounted headline earnings - - 20 18
Equity-accounted headline earnings - - 41 30
Tax on equity-accounted headline earnings - - (1) (1)
Non-controlling interest - - (20) (11)
Net investment surpluses (1 000) (143) 614 750
Investment surpluses - Group companies (997) (146) - -
Other investment surpluses (3) 3 880 974
Tax on investment surpluses - - (176) (149)
Non-controlling interest - - (90) (75)
Normalised headline earnings (1 212) (467) 4 393 3 449
Net profit on disposal of subsidiaries and
associated companies - - 111 42
Profit on disposal of subsidiaries and associated
companies - - 143 42
Tax on profit on disposal of subsidiaries and
associated companies - - (32) -
Impairments - - (19) (8)
Normalised attributable earnings (1 212) (467) 4 485 3 483
Fund transfers 54 25 54 25
Attributable earnings per Group statement of
comprehensive income (1 158) (442) 4 539 3 508
Ratios
Admin ratio(1) 29,2% 29,3%
Operating margin(2) 27,5% 20,5%
Diluted earnings per share
Adjusted weighted average number of shares (million) 2 045,6 2 039,2
Net result from financial services (cents) (0,3) (2,1) 169,2 118,1
(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 2014 - reviewed
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 2014 2013 2014 2013 2014 2013
Sanlam Personal Finance 11 552 10 114 12 110 9 125 23 662 19 239
Sanlam Sky 474 503 - - 474 503
Individual Life 5 672 5 200 149 168 5 821 5 368
Recurring 645 628 17 25 662 653
Single 5 027 4 572 132 143 5 159 4 715
Glacier 5 406 4 411 11 961 8 957 17 367 13 368
Sanlam Emerging Markets 1 595 1 198 2 435 4 735 4 030 5 933
Namibia 162 155 1 379 4 108 1 541 4 263
Recurring 66 73 - - 66 73
Single 96 82 1 379 4 108 1 475 4 190
Botswana 745 561 392 310 1 137 871
Recurring 126 87 31 25 157 112
Single 619 474 361 285 980 759
Rest of Africa 612 402 215 34 827 436
Recurring 317 204 107 - 424 204
Single 295 198 108 34 403 232
India 76 80 255 204 331 284
Recurring 36 38 255 204 291 242
Single 40 42 - - 40 42
South-East Asia - - 194 79 194 79
Sanlam Investments 4 389 3 644 41 293 38 884 45 682 42 528
Sanlam Employee Benefits 952 1 157 - - 952 1 157
Recurring 154 143 - - 154 143
Single 798 1 014 - - 798 1 014
Investment Management 3 437 2 487 41 194 38 884 44 631 41 371
Investment Management SA(3) - - 28 344 25 713 28 344 25 713
Wealth Management - - 7 594 9 874 7 594 9 874
International 3 437 2 487 5 256 3 297 8 693 5 784
Recurring 68 35 - - 68 35
Single 3 369 2 452 5 256 3 297 8 625 5 749
Capital Management - - 99 - 99 -
Santam - - 8 459 8 096 8 459 8 096
New business excluding white label 17 536 14 956 64 297 60 840 81 833 75 796
White label - - 6 941 7 448 6 941 7 448
Total new business 17 536 14 956 71 238 68 288 88 774 83 244
Recurring premiums on existing funds:
Sanlam Personal Finance 7 553 7 073
Sanlam Emerging Markets 1 230 1 091
Sanlam Investments 2 823 2 680
Sanlam Employee Benefits 1 654 1 656
Sanlam Investments 1 169 1 024
Investment Management SA 1 043 929
International 126 95
Total funds received 100 380 94 088
(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) The former Assets Management and Investment Services businesses were combined into an Investment Management SA business.
1.2 Analysis of payments to clients
Life insurance(1) Other(2) Total
R million 2014 2013 2014 2013 2014 2013
Sanlam Personal Finance 15 461 13 874 7 667 5 874 23 128 19 748
Sanlam Sky 1 238 828 - - 1 238 828
Individual Life 11 868 11 213 294 194 12 162 11 407
Surrenders 1 876 1 751 - - 1 876 1 751
Other 9 992 9 462 294 194 10 286 9 656
Glacier 2 355 1 833 7 373 5 680 9 728 7 513
Sanlam Emerging Markets 1 717 1 562 1 781 4 855 3 498 6 417
Namibia 587 672 975 4 338 1 562 5 010
Surrenders 204 94 - - 204 94
Other 383 578 975 4 338 1 358 4 916
Botswana 710 546 383 267 1 093 813
Surrenders 192 147 - - 192 147
Other 518 399 383 267 901 666
Rest of Africa 345 230 54 - 399 230
Surrenders 62 29 - - 62 29
Other 283 201 54 - 337 201
India 75 114 249 199 324 313
Surrenders 52 90 - - 52 90
Other 23 24 249 199 272 223
South-East Asia - - 120 51 120 51
Sanlam Investments 4 678 4 160 37 465 36 854 42 143 41 014
Sanlam Employee Benefits 2 967 2 967 - - 2 967 2 967
Terminations 668 973 - - 668 973
Other 2 299 1 994 - - 2 299 1 994
Investment Management 1 711 1 193 37 465 36 854 39 176 38 047
Investment Management SA(3) - - 25 504 27 452 25 504 27 452
Wealth Management - - 8 051 7 417 8 051 7 417
International 1 711 1 193 3 910 1 985 5 621 3 178
Santam - - 5 448 5 715 5 448 5 715
Payments to clients excluding white label 21 856 19 596 52 361 53 298 74 217 72 894
White label - - 4 455 8 583 4 455 8 583
Total payments to clients 21 856 19 596 56 816 61 881 78 672 81 477
(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) The former Assets Management and Investment Services businesses were combined into an Investment Management SA business.
1.3 Analysis of net inflow/(outflow) of funds
Life insurance(1) Other(2) Total
R million 2014 2013 2014 2013 2014 2013
Sanlam Personal Finance 3 538 3 197 4 549 3 367 8 087 6 564
Sanlam Sky 1 307 1 410 - - 1 307 1 410
Individual Life (820) (791) (39) 90 (859) (701)
Glacier 3 051 2 578 4 588 3 277 7 639 5 855
Sanlam Emerging Markets 1 108 727 654 (120) 1 762 607
Namibia (61) (189) 404 (230) 343 (419)
Botswana 469 417 9 43 478 460
Rest of Africa 653 496 161 34 814 530
India 47 3 6 5 53 8
South-East Asia - - 74 28 74 28
Sanlam Investments 1 491 1 235 4 871 2 959 6 362 4 194
Sanlam Employee Benefits (361) (154) - - (361) (154)
Investment Management 1 852 1 389 4 772 2 959 6 624 4 348
Investment Management SA(3) - - 3 883 (810) 3 883 (810)
Wealth Management - - (457) 2 457 (457) 2 457
International 1 852 1 389 1 346 1 312 3 198 2 701
Capital Management - - 99 - 99 -
Santam - - 3 011 2 381 3 011 2 381
Net inflow excluding white label 6 137 5 159 13 085 8 587 19 222 13 746
White label - - 2 486 (1 135) 2 486 (1 135)
Total net inflow 6 137 5 159 15 571 7 452 21 708 12 611
(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) The former Assets Management and Investment Services businesses were combined into an Investment Management SA business.
2. Cluster information - reviewed
2.1 Sanlam Personal Finance
Life Non-life
operations operations Total
R million 2014 2013 2014 2013 2014 2013
Analysis of attributable earnings
Gross result from financial services 2 187 1 715 252 226 2 439 1 941
Sanlam Sky 518 360 - - 518 360
Individual Life 1 542 1 251 29 16 1 571 1 267
Administration 491 338 - - 491 338
Risk underwriting - long-term insurance 465 414 - - 465 414
Asset-mismatch reserve 276 251 - - 276 251
Working capital management 146 143 - - 146 143
Other 164 105 29 16 193 121
Glacier 74 51 97 71 171 122
Sanlam Personal Loans 53 53 95 104 148 157
Other operations - - 31 35 31 35
Tax on result from financial services (615) (465) (59) (63) (674) (528)
Non-controlling interest - - (2) (4) (2) (4)
Net result from financial services 1 572 1 250 191 159 1 763 1 409
Net investment return* 430 363 1 383 590 1 813 953
Amortisation of intangibles (20) (18) - - (20) (18)
Normalised attributable earnings 1 982 1 595 1 574 749 3 556 2 344
* Comparative information has been adjusted to reallocate the return on discretionary capital from life to non-life
operations, in line with the 2013 full year disclosures.
Analysis of Group Equity Value (GEV)
GEV at the Capital GEV at
beginning move- the end
R million of period Earnings ment Dividend of period
30 June 2014 - reviewed
Covered business 33 033 2 870 - (1 800) 34 103
Non-life operations 2 633 237 97 (94) 2 873
Glacier 1 336 220 26 (74) 1 508
Sanlam Personal Loans 836 (73) 71 (9) 825
Other 461 90 - (11) 540
Group Equity Value 35 666 3 107 97 (1 894) 36 976
31 December 2013 - audited
Covered business 30 144 6 205 44 (3 360) 33 033
Non-life operations 2 618 516 (81) (420) 2 633
Glacier 1 338 205 - (207) 1 336
Sanlam Personal Loans 816 251 (100) (131) 836
Other 464 60 19 (82) 461
Group Equity Value 32 762 6 721 (37) (3 780) 35 666
2.2 Sanlam Emerging Markets
R million 2014 2013
Analysis of attributable earnings
Net result from financial services 624 391
Life insurance 217 180
Short-term insurance 100 5
Investment management 23 16
Credit and banking 270 179
Other 14 11
Net investment return 74 225
Net investment income 61 75
Net investment surpluses 13 150
Net other earnings 81 (8)
Amortisation of intangibles and impairments (17) (6)
Profit on disposal of associated companies 92 -
Other 6 (2)
Normalised attributable earnings 779 608
Analysis of net result from financial services
Life insurance operations 217 180
Namibia 110 64
Botswana 93 56
Rest of Africa 5 49
India 9 11
Non-life operations 407 211
Namibia 53 8
Botswana 66 52
Rest of Africa 16 -
India 250 160
South-East Asia 22 (9)
Net result from financial services 624 391
Analysis of Group Equity Value (GEV)
GEV at the Capital GEV at
beginning move- the end
R million of period Earnings ment Dividend of period
30 June 2014 - reviewed
Covered business 3 541 363 39 (411) 3 532
Non-life operations 6 648 895 1 934 (42) 9 435
Shriram Capital 4 219 599 (659) (11) 4 148
MCIS Malaysia - - 1 258 - 1 258
Letshego 698 74 31 (1) 802
Pacific & Orient 622 91 - (29) 684
Capricorn Investment Holdings 682 15 - 15 712
Sanlam Emerging Markets other operations 427 116 1 304 (16) 1 831
Group Equity Value 10 189 1 258 1 973 (453) 12 967
31 December 2013 - audited
Covered business 2 647 1 251 79 (436) 3 541
Non-life operations 3 458 995 2 346 (151) 6 648
Shriram Capital 2 398 686 1 157 (22) 4 219
Letshego 602 114 34 (52) 698
Pacific & Orient - 126 529 (33) 622
Capricorn Investment Holdings - 32 676 (26) 682
Sanlam Emerging Markets other operations 458 37 (50) (18) 427
Group Equity Value 6 105 2 246 2 425 (587) 10 189
Analysis of business volumes - reviewed
Life insurance Other Total
R million 2014 2013 2014 2013 2014 2013
Recurring premiums 545 402 587 308 1 132 710
Risk 289 248 - - 289 248
Investment 253 154 - - 253 154
Short term - - 587 308 587 308
Annuities 3 - - - 3 -
Single premiums 1 050 796 1 848 4 427 2 898 5 223
Risk 437 369 - - 437 369
Savings 583 424 - - 583 424
Continuations 30 3 - - 30 3
Other - - 1 848 4 427 1 848 4 427
Total new business 1 595 1 198 2 435 4 735 4 030 5 933
Recurring premiums on existing business 1 230 1 091 - - 1 230 1 091
Risk 690 563 - - 690 563
Investment 423 428 - - 423 428
Annuities 117 100 - - 117 100
Total funds received from clients 2 825 2 289 2 435 4 735 5 260 7 024
Death and disability benefits 523 390 - - 523 390
Maturity benefits 309 502 - - 309 502
Life and term annuities 299 226 - - 299 226
Surrenders 510 360 - - 510 360
Other 76 84 1 781 4 855 1 857 4 939
Total payments to clients 1 717 1 562 1 781 4 855 3 498 6 417
2.3 Sanlam Investments
Analysis of attributable earnings
Sanlam
Investment Capital Employee Intra-cluster
Management Management Benefits eliminations Total
R million 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
Financial services income* 1 956 1 621 322 214 1 516 1 600 (8) (8) 3 786 3 427
Sales remuneration (101) (57) - - (26) (20) - - (127) (77)
Income after sales remuneration 1 855 1 564 322 214 1 490 1 580 (8) (8) 3 659 3 350
Underwriting policy benefits - - - - (900) (1 064) - - (900) (1 064)
Administration costs* (1 321) (1 144) (189) (152) (374) (342) 8 8 (1 876) (1 630)
Result from financial services before
performance fees 534 420 133 62 216 174 - - 883 656
Net performance fees 71 31 28 - - - - - 99 31
Result from financial services 605 451 161 62 216 174 - - 982 687
Tax on result from financial services (148) (104) (30) 1 (60) (49) - - (238) (152)
Non-controlling interest (17) (12) - - - - - - (17) (12)
Net result from financial services 440 335 131 63 156 125 - - 727 523
Net investment return 11 42 - 2 246 215 - - 257 259
Net investment income 22 10 - 2 70 72 - - 92 84
Net investment surpluses (11) 32 - - 176 143 - - 165 175
Net other earnings (135) (18) - - - - - - (135) (18)
Normalised attributable earnings 316 359 131 65 402 340 - - 849 764
* Financial services income above includes performance fees and related administration costs.
Net Result
from financial Assets under Administration
services management Fee Income cost
June June June December* June December* June December*
2014 2013 2014 2013 2014 2013 2014 2013
R million R million R million R million R million % R million %
Asset management
Investment management 422 307 718 421 674 031
Investment Management SA(1) 235 167 538 555 512 044 0,31 0,31 0,20 0,22
Wealth Management 74 53 157 645 136 929 0,72 0,76 0,58 0,61
International 112 82 128 053 124 744 0,67 0,62 0,46 0,41
Support Services 1 5 - -
Intra-cluster eliminations - - (105 832) (99 686)
Capital Management 131 63 2 818 3 024 1,75 0,84 0,69 0,83
Asset management operations 553 370 721 239 677 055
Covered business: Sanlam Employee Benefits 156 125 63 440 59 139
Covered business: Sanlam UK 18 28 38 426 35 550
Sanlam Investments total 727 523 823 105 771 744
(1) The former Asset Management and Investment Services businesses were combined into an Investment Management SA business.
* Audited
Asset mix of assets under management
R million Fixed interest Equities Offshore Properties Cash Total
June 2014 - reviewed
Investment Management SA 125 218 244 079 56 613 17 912 94 733 538 555
Wealth Management - 97 298 56 623 - 3 724 157 645
International - - 128 053 - - 128 053
Capital Management - 2 808 - - 10 2 818
Intra-cluster eliminations (105 832)
Assets under management - Sanlam Investments 125 218 344 185 241 289 17 912 98 467 721 239
December 2013 - audited
Investment Management SA(1) 121 014 228 258 52 943 17 777 92 052 512 044
Wealth Management - 89 548 44 407 - 2 974 136 929
International - - 124 744 - - 124 744
Capital Management - 3 014 - - 10 3 024
Intra-cluster eliminations (99 686)
Assets under management - Sanlam Investments 121 014 320 820 222 094 17 777 95 036 677 055
(1) The former Asset Management and Investment Services businesses were combined into an Investment Management SA business.
Analysis of covered business
Sanlam Employee Benefits
June
Reviewed
R million 2014 2013
Analysis of attributable earnings
Net result from financial services 156 125
Risk underwriting 92 61
Investment and other 65 67
Working capital management 19 15
Administration (20) (18)
Net investment return 246 215
Net investment income 70 72
Net investment surpluses 176 143
Normalised attributable earnings 402 340
Analysis of premiums
Recurring premiums 154 143
Guaranteed 28 31
Risk 126 112
Single premiums 798 1 014
Guaranteed 621 726
Annuity 106 56
Special structures 71 232
Sanlam Investments and Pensions
(included in Investment Management above)
Analysis of attributable earnings
Financial services income 169 136
Sales remuneration (59) (40)
Income after sales remuneration 110 96
Administration costs (92) (68)
Result from financial services before tax 18 28
Tax on result from financial services - -
Result from financial services after tax 18 28
Net investment return 1 1
Normalised attributable earnings 19 29
Analysis of Group Equity Value (GEV)
GEV at the Capital GEV at
beginning move- the end
R million of period Earnings ment Dividend of period
30 June 2014 - reviewed
Investment Management 11 648 1 297 35 (416) 12 564
Investment Management SA 4 974 19 - (212) 4 781
Wealth Management 2 105 435 - (54) 2 486
International 4 569 843 35 (150) 5 297
Covered business 1 194 98 - (42) 1 250
Other operations 3 375 745 35 (108) 4 047
Sanlam Employee Benefits 5 707 614 - (303) 6 018
Capital Management 616 120 75 (126) 685
Group Equity Value 17 971 2 031 110 (845) 19 267
31 December 2013 - audited
Investment Management 10 310 2 628 (288) (1 002) 11 648
Investment Management SA* 4 914 628 - (568) 4 974
Wealth Management 1 558 670 22 (145) 2 105
International 3 838 1 330 (310) (289) 4 569
Covered business 904 326 - (36) 1 194
Other operations 2 934 1 004 (310) (253) 3 375
Sanlam Employee Benefits 5 301 1 346 - (940) 5 707
Capital Management 813 230 75 (502) 616
Group Equity Value 16 424 4 204 (213) (2 444) 17 971
* The former Asset Management and Investment Services businesses were combined into an
Investment Management SA business.
2.4 Valuation methodology
The fair value of the unlisted Sanlam businesses has been determined by the application
of the following valuation methodologies:
Fair value
June December
2014 2013
R million Reviewed Audited
Valuation method
Ratio of price to assets under management 10 285 9 490
Sanlam Investments 9 777 9 040
Investment Management SA 4 583 4 759
Wealth Management 2 205 1 839
International 2 904 2 351
Capital Management 85 91
Sanlam Emerging Markets 508 450
Discounted cash flows 12 302 10 250
Sanlam Investments 1 524 1 419
Investment Management SA 221 236
Wealth Management 281 266
International 1 022 917
Sanlam Emerging Markets 7 905 6 198
Shriram Capital(1) 4 148 4 219
MCIS Malaysia 1 258 -
Letshego(1) 802 698
Pacific & Orient 684 622
Capricorn Investment Holdings(1) 712 682
Other operations 301 (23)
Sanlam Personal Finance 2 873 2 633
Glacier 1 508 1 336
Sanlam Personal Loans 825 836
Other operations 540 461
Net asset value 1 720 611
Sanlam Investments 698 611
Investment Management SA (23) (21)
International 121 107
Capital Management 600 525
Sanlam Emerging Markets 1 022 -
24 307 20 351
(1) Includes the listed businesses at directors’ valuation of R3 530 million (2013: R4 054 million)
for Shriram Capital, R813 million (2013: R698 million) for Letshego and R712 million
(2013: R682 million) for Capricorn Investment Holdings. The listed values of these operations are
R4 653 million (2013: R4 073 million), R813 million (2013: R803 million) and R765 million
(2013: R694 million) respectively.
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
2014 2013
% Reviewed Audited
Ratio of price to assets under management (P/AuM) 0,1 0,1
Risk discount rate (RDR) 1,0 1,0
Perpetuity growth rate (PGR) 1,0 1,0
Weighted average Base Decrease in Increase in
R million assumption value assumption assumption
Ratio of price to assets under management P/AuM = 1,05% 10 285 9 301 11 269
(Dec 2013: 1,04%)
Discounted cash flows RDR = 15,5% 12 302 13 680 11 162
(Dec 2013: 16,6%)
PGR = 2,5 - 5% 12 302 11 829 12 879
(Dec 2013: 2,5 - 5%)
3. Normalised diluted earnings per share
June June
2014 2013
Cents Reviewed Reviewed
Normalised diluted earnings per share:
Net result from financial services 169,2 118,1
Normalised headline earnings 214,8 169,1
Profit attributable to shareholders’ fund 219,3 170,8
June June
2014 2013
R million Reviewed Reviewed
Analysis of normalised earnings (refer shareholders’
fund income statement above):
Net result from financial services 3 461 2 409
Headline earnings 4 393 3 449
Profit attributable to shareholders’ fund 4 485 3 483
Reconciliation of normalised headline earnings:
Headline earnings per note 1 below 4 447 3 474
Fund transfers (54) (25)
Normalised headline earnings 4 393 3 449
June June
2014 2013
Million Reviewed Reviewed
Adjusted number of shares:
Weighted average number of shares for diluted earnings per share
(refer note 1 below) 2 019,1 2 026,6
Add: Weighted average Sanlam shares held by policyholders 26,5 12,6
Adjusted weighted average number of shares for normalised diluted earnings per share 2 045,6 2 039,2
4. Value per share
Fair value per share is calculated on the Group shareholders’ fund at fair value of R61 349 million
(December 2013: R59 388 million), divided by 2 048,0 million (December 2013: 2 048,5 million) shares.
Net asset value per share is calculated on the Group shareholders’ fund at net asset value of R43 111 million
(December 2013: R42 539 million), divided by 2 048,0 million (December 2013: 2 048,5 million) shares.
Equity value per share is calculated on the Group Equity Value of R87 588 million (December 2013: R84 409 million),
divided by 2 048,0 million (December 2013: 2 048,5 million) shares.
June December
2014 2013
Million Reviewed Audited
Number of shares for value per share:
Number of ordinary shares in issue 2 166,5 2 100,0
Shares held by subsidiaries in shareholders’ fund (143,4) (146,6)
Outstanding shares in respect of Sanlam Limited long-term incentive schemes 24,9 28,6
Convertible deferred shares held by Ubuntu-Botho - 66,5
Adjusted number of shares for value per share 2 048,0 2 048,5
EMBEDDED VALUE OF COVERED BUSINESS
at 30 June 2014
June December
2014 2013
R million Note Reviewed Audited
Sanlam Personal Finance 34 103 33 033
Adjusted net worth 9 242 9 041
Net value of in-force covered business 24 861 23 992
Value of in-force covered business 26 737 25 834
Cost of capital (1 876) (1 842)
Sanlam Emerging Markets 3 532 3 541
Adjusted net worth 1 416 1 533
Net value of in-force covered business 2 116 2 008
Value of in-force covered business 3 446 3 313
Cost of capital (338) (350)
Non-controlling interest (992) (955)
Sanlam UK(1) 1 250 1 194
Adjusted net worth 395 401
Net value of in-force covered business 855 793
Value of in-force covered business 910 845
Cost of capital (55) (52)
Sanlam Employee Benefits(1) 6 018 5 707
Adjusted net worth 4 925 4 825
Net value of in-force covered business 1 093 882
Value of in-force covered business 2 003 1 792
Cost of capital (910) (910)
Embedded value of covered business 44 903 43 475
Adjusted net worth(2) 15 978 15 800
Net value of in-force covered business 1 28 925 27 675
Embedded value of covered business 44 903 43 475
(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 2014
Six months reviewed Six months reviewed
2014 2013
Adjusted Adjusted
Value of Cost of net Value of Cost of net
R million Note Total in-force capital worth Total in-force capital worth
Embedded value of covered business
at the beginning of period 43 475 30 720 (3 045) 15 800 38 996 26 897 (2 847) 14 946
Value of new business 2 626 1 574 (74) (874) 587 1 499 (68) (844)
Net earnings from existing covered business 2 260 (546) 61 2 745 2 029 (371) 9 2 391
Expected return on value of in-force business 1 659 1 577 82 - 1 269 1 192 77 -
Expected transfer of profit to adjusted net worth - (2 381) - 2 381 - (1 884) - 1 884
Operating experience variances 3 477 6 (31) 502 471 (4) (16) 491
Operating assumption changes 4 124 252 10 (138) 289 325 (52) 16
Expected investment return on adjusted net worth 576 - - 576 462 - - 462
Embedded value earnings from operations 3 462 1 028 (13) 2 447 3 078 1 128 (59) 2 009
Economic assumption changes 5 (200) (215) 8 7 (888) (850) (46) 8
Tax changes (3) (2) - (1) 3 3 - -
Investment variances - value of in-force 527 462 (27) 92 316 323 (35) 28
Investment variances - investment return on adjusted net worth 189 - - 189 385 - - 385
Exchange rate movements (30) (29) (1) - 144 161 (17) -
Embedded value earnings from covered business 3 945 1 244 (33) 2 734 3 038 765 (157) 2 430
Acquired value of in-force 43 43 (4) 4 - - - -
Transfers from/(to) other Group operations - - - - 44 44 - -
Transfers from covered business (2 560) - - (2 560) (2 151) - - (2 151)
Embedded value of covered business at the end of period 44 903 32 007 (3 082) 15 978 39 927 27 706 (3 004) 15 225
Analysis of earnings from covered business
Sanlam Personal Finance 2 870 903 (34) 2 001 1 879 332 (66) 1 613
Sanlam Emerging Markets 363 65 4 294 572 161 (15) 426
Sanlam UK 98 65 (3) 36 133 78 - 55
Sanlam Employee Benefits 614 211 - 403 454 194 (76) 336
Embedded value earnings from covered business 3 945 1 244 (33) 2 734 3 038 765 (157) 2 430
VALUE OF NEW BUSINESS
for the six months ended 30 June 2014
Six Six
months months
2014 2013
R million Note Reviewed Reviewed
Value of new business (at point of sale):
Gross value of new business 779 713
Sanlam Personal Finance 479 484
Sanlam Emerging Markets 213 152
Sanlam UK 24 25
Sanlam Employee Benefits 63 52
Cost of capital (82) (74)
Sanlam Personal Finance (42) (34)
Sanlam Emerging Markets (17) (16)
Sanlam UK (2) (2)
Sanlam Employee Benefits (21) (22)
Value of new business 697 639
Sanlam Personal Finance 437 450
Sanlam Emerging Markets 196 136
Sanlam UK 22 23
Sanlam Employee Benefits 42 30
Value of new business attributable to:
Shareholders’ fund 2 626 587
Sanlam Personal Finance 437 450
Sanlam Emerging Markets 125 84
Sanlam UK 22 23
Sanlam Employee Benefits 42 30
Non-controlling interest 71 52
Sanlam Personal Finance - -
Sanlam Emerging Markets 71 52
Sanlam UK - -
Sanlam Employee Benefits - -
Value of new business 697 639
Geographical analysis:
South Africa 479 480
Africa 195 136
Other international 23 23
Value of new business 697 639
Six Six
months months
2014 2013
R million Reviewed Reviewed
Analysis of new business profitability:
Before non-controlling interest:
Present value of new business premiums 24 202 21 455
Sanlam Personal Finance 15 990 14 667
Sanlam Emerging Markets 2 684 2 085
Sanlam UK 3 703 2 636
Sanlam Employee Benefits 1 825 2 067
New business margin 2,88% 2,98%
Sanlam Personal Finance 2,73% 3,07%
Sanlam Emerging Markets 7,30% 6,52%
Sanlam UK 0,59% 0,87%
Sanlam Employee Benefits 2,30% 1,45%
After non-controlling interest:
Present value of new business premiums 23 335 20 731
Sanlam Personal Finance 15 990 14 667
Sanlam Emerging Markets 1 817 1 361
Sanlam UK 3 703 2 636
Sanlam Employee Benefits 1 825 2 067
New business margin 2,68% 2,83%
Sanlam Personal Finance 2,73% 3,07%
Sanlam Emerging Markets 6,88% 6,17%
Sanlam UK 0,59% 0,87%
Sanlam Employee Benefits 2,30% 1,45%
NOTES TO THE EMBEDDED VALUE OF COVERED BUSINESS
for the six months ended 30 June 2014 - reviewed
Gross Net Change
value of value of from
in-force Cost 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 2014 32 007 (3 082) 28 925
Risk discount rate increase by 1% 30 290 (3 765) 26 525 (8)
Base value at 31 December 2013 30 720 (3 045) 27 675
Risk discount rate increase by 1% 28 907 (3 717) 25 190 (9)
Gross Net Change
value of value of from
new Cost of new base
business capital business value
R million R million R million %
2. Value of new business
sensitivity analysis
Base value 700 (74) 626
Risk discount rate increase by 1% 609 (93) 516 (18)
Six Six
months months
2014 2013
R million Reviewed Reviewed
3. Operating experience variances
Risk experience 405 325
Persistency (24) 123
Maintenance expenses 22 29
Working capital and other 74 (6)
Total operating experience variances 477 471
4. Operating assumption changes
Risk experience 94 552
Persistency 73 45
Maintenance expenses 65 18
Modelling improvements and other (108) (326)
Total operating assumption changes 124 289
5. Economic assumption changes
Investment yields (229) (923)
Long-term asset mix assumptions and other 29 35
Total economic assumption changes (200) (888)
June June December
2014 2013 2013
% Reviewed Reviewed Audited
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 8,5 7,8 8,2
Equities and offshore investments 12,0 11,3 11,7
Hedged equities 9,0 8,3 8,7
Property 9,5 8,8 9,2
Cash 7,5 6,8 7,2
Return on required capital 9,5 8,8 9,2
Inflation rate(1) 6,5 5,8 6,2
Risk discount rate 11,0 10,3 10,7
(1)Expense inflation of 8.5% (Dec 2013: 8.2%) 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 7,8 7,2 7,4
Equities and offshore investments 11,3 10,7 10,9
Hedged equities n/a n/a n/a
Property 8,8 8,2 8,4
Cash 6,8 6,2 6,4
Return on required capital 9,1 8,5 8,7
Inflation rate 5,8 5,2 5,4
Risk discount rate 10,3 9,7 9,9
Sanlam Investments and Pensions
Point used on the relevant yield curve 15 year 15 year 15 year
Fixed-interest securities 3,2 3,0 3,5
Equities and offshore investments 6,4 6,2 6,7
Hedged equities n/a n/a n/a
Property 6,4 6,2 6,7
Cash 3,2 3,0 3,5
Return on required capital 3,2 3,0 3,5
Inflation rate 3,3 3,0 3,4
Risk discount rate 6,9 6,7 7,2
Botswana Life Insurance
Fixed-interest securities 8,0 9,0 8,0
Equities and offshore investments 11,5 12,5 11,5
Hedged equities n/a n/a n/a
Property 9,0 10,0 9,0
Cash 7,0 8,0 7,0
Return on required capital 8,1 9,1 8,1
Inflation rate 5,0 6,0 5,0
Risk discount rate 11,5 12,5 11,5
Illiquidity premiums
Investment returns on non-participating annuities and
guaranteed plans include assumed illiquidity premiums
due to matching assets being held to maturity.
Assumed illiquidity premiums generally amount to
between 25bps and 55bps (2013: 25bps and 50bps) for
non-participating annuities and between 25bps and 110bps
(2013: 25bps and 110bps) for guaranteed 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 40 15 15
Property - 10 10
Fixed-interest securities - 25 25
Cash 60 50 50
100 100 100
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 June 2014
Contents
Independent auditors’ review report on interim condensed consolidated financial statements
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the interim condensed consolidated financial statements
INDEPENDENT AUDITORS’ REVIEW REPORT ON INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
To the directors of Sanlam Limited
Introduction
We have reviewed the condensed consolidated financial statements of Sanlam Limited, contained in the accompanying
interim report, which comprise the condensed consolidated statement of financial position as at 30 June 2014 and condensed
consolidated statements of comprehensive income, changes in equity and cash flow for the six-month period then ended and
selected explanatory notes set out below and the basis of accounting set out above.
Directors’ responsibility for the interim financial statements
The directors of Sanlam Limited 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 Practices Committee, the Financial
Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa,
and for such internal control as the directors determine is necessary to enable the preparation of interim financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express a conclusion on these interim condensed consolidated financial statements. We
conducted our review in accordance with International Standard of Review Engagements (ISRE) 2410, “Review of Interim Financial
Information Performed by the Independent Auditor of the Entity.” ISRE 2410 requires us to conclude whether anything has
come to our attention that causes us to believe that the interim financial statements are not prepared in all material
respects in accordance with the applicable financial reporting framework. This standard also requires us to comply with
relevant ethical requirements.
A review of interim financial information in accordance with ISRE 2410 is a limited assurance engagement. We perform
procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and
applying analytical procedures, and evaluate the evidence obtained.
The procedures performed in a review is substantially less than and differ in nature from those performed in an audit
conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on
these financial statements.
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 for the six-month period ended 30 June 2014 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 Practices Committee, the 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
3 September 2014
STATEMENT OF FINANCIAL POSITION
at 30 June 2014
Reviewed Audited
June December
R million 2014 2013
Assets
Equipment 684 586
Owner-occupied properties 994 672
Goodwill 3 845 3 796
Other intangible assets 207 111
Value of business acquired 1 859 1 586
Deferred acquisition costs 3 066 2 976
Long-term reinsurance assets 868 796
Investments 509 505 477 550
Properties 10 296 9 182
Equity-accounted investments 10 045 9 780
Equities and similar securities 179 384 166 122
Interest-bearing investments 149 720 131 417
Structured transactions 12 127 11 906
Investment funds 122 555 131 029
Cash, deposits and similar securities 25 378 18 114
Deferred tax 366 361
Non-current assets held for sale 428 415
Short-term insurance technical assets 3 383 2 716
Working capital assets 51 852 69 739
Trade and other receivables 37 360 51 339
Cash, deposits and similar securities 14 492 18 400
Total assets 577 057 561 304
Equity and liabilities
Capital and reserves
Share capital and premium 22 22
Treasury shares (3 633) (3 581)
Other reserves 9 217 9 250
Retained earnings 35 800 35 274
Shareholders’ fund 41 406 40 965
Non-controlling interest 4 732 3 651
Total equity 46 138 44 616
Long-term policy liabilities 420 240 382 309
Insurance contracts 176 186 158 575
Investment contracts 244 054 223 734
Term finance 5 910 6 129
Margin business 1 832 2 038
Other interest-bearing liabilities 4 078 4 091
Derivative liabilities 1 177 1 387
External investors in consolidated funds 44 533 55 710
Cell owners’ interest 850 814
Deferred tax 2 516 2 142
Short-term insurance technical provisions 12 190 11 032
Working capital liabilities 43 503 57 165
Trade and other payables 40 750 54 799
Provisions 290 285
Taxation 2 463 2 081
Total equity and liabilities 577 057 561 304
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2014
Reviewed Reviewed
R million Note 2014 2013
Net income 50 160 40 431
Financial services income 24 025 21 572
Reinsurance premiums paid (3 048) (2 582)
Reinsurance commission received 521 337
Investment income 10 995 9 660
Investment surpluses 20 507 13 025
Finance cost - margin business (51) (19)
Change in fair value of external investors’ liability (2 789) (1 562)
Net insurance and investment contract benefits
and claims (33 349) (26 524)
Long-term insurance and investment contract benefits (28 308) (21 176)
Short-term insurance claims (6 739) (6 892)
Reinsurance claims received 1 698 1 544
Expenses (9 750) (8 634)
Sales remuneration (2 988) (2 774)
Administration costs (6 762) (5 860)
Impairments (25) (12)
Amortisation of intangibles (131) (114)
Net operating result 6 905 5 147
Equity-accounted earnings 665 505
Finance cost - other (243) (176)
Profit before tax 7 327 5 476
Taxation (2 249) (1 602)
Shareholders’ fund (1 565) (1 005)
Policyholders’ fund (684) (597)
Profit for the period 5 078 3 874
Other comprehensive income: to be recycled through
profit or loss in subsequent periods
Movement in foreign currency translation reserve 234 713
Comprehensive income for the period 5 312 4 587
Allocation of comprehensive income:
Profit for the period 5 078 3 874
Shareholders’ fund 4 539 3 508
Non-controlling interest 539 366
Comprehensive income for the period 5 312 4 587
Shareholders’ fund 4 768 4 079
Non-controlling interest 544 508
Earnings attributable to shareholders of the company (cents):
Profit for the period
Basic earnings per share 1 227,6 181,1
Diluted earnings per share 1 224,8 173,1
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2014
Reviewed Reviewed
R million 2014 2013
Shareholders’ fund
Balance at the beginning of period 40 965 36 556(3)
Comprehensive income 4 768 4 079
Profit for the period 4 539 3 508
Other comprehensive income 229 571
Net acquisition of treasury shares(1) (494) (182)
Share-based payments 166 143
Acquisitions, disposals and other movements in interests 10 (194)
Dividends paid(2) (4 009) (4 283)
Balance at the end of period 41 406 36 119
Non-controlling interest
Balance at the beginning of period 3 651 2 970
Comprehensive income 544 508
Profit for the period 539 366
Other comprehensive income 5 142
Net acquisition of treasury shares(1) (15) -
Share-based payments 18 18
Acquisitions, disposals and other movements in interests 891 (52)
Dividends paid (357) (325)
Balance at the end of period 4 732 3 119
Shareholders’ fund 40 965 36 556
Non-controlling interest 3 651 2 970
Total equity at the beginning of period 44 616 39 526
Shareholders’ fund 41 406 36 119
Non-controlling interest 4 732 3 119
Total equity at the end of period 46 138 39 238
(1) Comprises movement in cost of shares held by subsidiaries and the share incentive trust.
(2) Dividend of 200 cents per share paid during 2014 in respect of the 2013 financial year
(2013: normal dividend of 165 cents and special dividend of 50 cents per share).
(3) Restated in 2013 annual financial statements for the application of IFRS 10 and its
impact on policyholder investments in Sanlam Limited.
CASH FLOW STATEMENT
for the six months ended 30 June 2014
Reviewed Reviewed
R million 2014 2013(1)
Cash flow from operating activities 8 334 8 790
Cash flow from investment activities (4 226) (2 993)
Cash flow from financing activities (779) (829)
Net increase in cash and cash equivalents 3 329 4 968
Cash, deposits and similar securities at the beginning of period 36 491 30 505
Cash, deposits and similar securities at the end of period 39 820 35 473
(1) For the 2013 year-end, all investments have been reclassified to new revised investment categories. These new
categories align IFRS investment classifications with the required SAM classifications. June 2013 comparative cash flow
information has been reclassified accordingly, with the effect of changing the cash inflow from operating activities from
R7 228 million to R8 790 million and the cash outflow from investment activities from R6 017 million to R2 993 million.
Similarly, the opening cash, deposits and similar securities at the beginning of the period changed from R82 415 million
to R30 505 million. Consequently, the closing cash, deposits and similar securities at the end of the period changed
from R82 797 million to R35 473 million.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 June 2014
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 and treasury shares held by subsidiaries and policyholders. Diluted
earnings per share is calculated by dividing earnings by the adjusted diluted weighted average number of shares in issue.
Refer above for normalised earnings per share, which is based on the economic earnings attributable to the shareholders’
fund, and in management’s view should also be used when evaluating the Group’s economic performance.
Reviewed Reviewed
Cents 2014 2013
Basic earnings per share:
Headline earnings 223,0 179,4
Profit attributable to shareholders’ fund 227,6 181,1
Diluted earnings per share:
Headline earnings 220,2 171,4
Profit attributable to shareholders’ fund 224,8 173,1
R million
Analysis of earnings:
Profit attributable to shareholders’ fund 4 539 3 508
Less: Net profit on disposal of operations (111) (42)
Profit on disposal of subsidiaries and associated companies (143) (42)
Tax on profit on disposal of subsidiaries and associated companies 32 -
Plus: Impairments 19 8
Gross impairments 25 12
Non-controlling interest (6) (4)
Headline earnings 4 447 3 474
Million
Number of shares:
Number of ordinary shares in issue at beginning of the period 2 100,0 2 100,0
Add: Reclassification of deferred shares 66,5 -
Less: Weighted Sanlam shares held by subsidiaries
(including policyholders) (172,3) (163,2)
Adjusted weighted average number of shares for basic
earnings per share 1 994,2 1 936,8
Add: Weighted conversion of deferred shares - 57,7
Add: Total number of shares held in staff incentive schemes 24,9 32,1
Adjusted weighted average number of shares for diluted
earnings per share 2 019,1 2 026,6
R million
2. Reconciliation of segmental information
Segment financial services income (per shareholders’
fund income statement) 22 152 19 874
Sanlam Personal Finance 6 985 6 240
Sanlam Emerging Markets 2 437 1 754
Sanlam Investments 3 923 3 493
Santam 8 704 8 291
Corporate, consolidation and other 103 96
IFRS adjustments 1 873 1 698
Total financial services income 24 025 21 572
Segment results (per shareholders’ fund income statement after
tax and non-controlling interest) 4 485 3 483
Sanlam Personal Finance 3 556 2 344
Sanlam Emerging Markets 779 608
Sanlam Investments 849 764
Santam 513 234
Corporate, consolidation and other (1 212) (467)
Non-controlling interest included in segment result 539 366
Fund transfers 54 25
Total profit for the period 5 078 3 874
Additional segmental information is provided in the shareholders’ information (refer above).
3. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2013 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 statement of financial position and this report
that affect the financial position of the Sanlam Group at 30 June 2014 as reflected in these financial
statements. During August 2014, the Group subscribed for new shares in Shriram Capital for some
R730 million (refer above).
5. Fair value disclosures
Determination of fair value and fair value hierachy
Below follows required disclosure of fair value measurements, using a three-level fair value hierachy
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.
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
30 June 2014 - reviewed
Equities and similar securities 177 142 1 809 433 179 384
Interest-bearing investments 108 498 38 972 546 148 016
Structured transactions 3 955 8 172 - 12 127
Investment funds 105 851 16 257 447 122 555
Trading account assets 4 195 17 892 - 22 087
Cash, deposits and similar securities 17 267 6 745 - 24 012
Total financial assets 416 908 89 847 1 426 508 181
Investment contract liabilities - 243 278 776 244 054
Term finance 3 010 199 319 3 528
Margin business 3 010 - - 3 010
Other interest-bearing liabilities - 199 319 518
Derivative liabilities - 1 177 - 1 177
Trading account liabilities 1 065 21 721 - 22 786
External investors in consolidated funds 44 533 - - 44 533
Total financial liabilities 48 608 266 375 1 095 316 078
31 December 2013 - audited
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 financial assets 399 385 93 257 2 166 494 808
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 financial liabilities 59 852 255 885 1 229 316 966
Reconciliation of movements in level 3 financial instruments measured at fair value
Interest- Cash, deposits Total
Equities and bearing Structured Investment and similar financial
R million similar securities investments transactions funds securities assets
30 June 2014 - reviewed
Financial assets
Balance at 1 January 2014 1 313 394 - 459 - 2 166
Total gain/(loss) in statement of comprehensive income 146 32 - 45 - 223
Acquisitions/issues 414 4 - - - 418
Disposals (1 426) (85) - - - (1 511)
Foreign exchange movements - 1 - - - 1
Transfers from level 1 and level 2
Not significant (net in/out) (14) 200 - (57) - 129
Balance at 30 June 2014 433 546 - 447 - 1 426
31 December 2013 - audited
Financial assets
Balance at 1 January 2013 1 881 163 122 353 2 2 521
Total gain/(loss) in statement of comprehensive income 1 191 92 6 6 - 1 295
Acquisitions/issues 222 160 - 56 - 438
Disposals (1 985) (34) (128) (11) (2) (2 160)
Foreign exchange movements 4 26 - - - 30
Settlements - (13) - - - (13)
Transfers from level 1 and level 2
Not significant (net in/out) - - - 55 - 55
Balance at 31 December 2013 1 313 394 - 459 - 2 166
Invest-
ment Total
contract Term Derivative financial
R million liabilities finance liabilities liabilities
30 June 2014 - reviewed
Financial liabilities
Balance at 1 January 2014 767 259 203 1 229
Total (gain)/loss in statement of
comprehensive income 38 60 94 192
Acquisitions 119 - - 119
Disposals (149) - (297) (446)
Foreign exchange movements 1 - - 1
Balance at 30 June 2014 776 319 - 1 095
31 December 2013 - audited
Financial liabilities
Balance at 1 January 2013 652 97 - 749
Total (gain)/loss in statement of 113 172 197 482
comprehensive income
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
six Full
months year
Reviewed Audited
R million 2014 2013
Gains and losses (realised and unrealised) included
in profit and loss - level 3 instruments
Gains and losses included in profit or loss for the period 31 1 253
Gains and losses included in profit or loss for the period for
assets held at the end of the reporting period 6 1 007
Transfers between categories
Cash,
Interest- deposits Total
Structured bearing and similar financial
transactions investments securities assets
R million
Financial assets
Six months reviewed - 2014
Transfer from level 1 to level 2 - 686 - 686
Full year audited - 2013
Transfer from level 1 to level 2 2 - 25 27
Valuation techniques with relatively less market observable inputs are being used in the current period.
Valuation techniques used in determining the fair value of financial instruments
Significant
Applicable Valuation Valuation unobservable
Instrument to level basis assumptions input
Equities and similar 2 & 3 Discounted cash Bond and interbank Cost of Capital
securities flow model (DCF), swap interest rate Earnings multiple
Earnings multiple curve, Cost of Capital,
Consumer price index
Interest-bearing 2 & 3 DCF, Earnings Bond and interbank swap Earnings multiple
investments multiple, Quoted interest rate curve,
(including put/surrender price Cost of Capital, Consumer
insurance policies) by issuer price index
Structured 2 Quoted (exit) price n/a n/a
transactions and provided by fund
investment funds manager
Trading account 2 DCF Forward rate n/a
assets and Credit risk spread
liabilities Liquidity spread
Investment contract 2 & 3 Current unit price Bond and interbank swap Earnings multiple
liabilities of underlying unitised interest rate curve,
financial asset, Cost of Capital, Consumer
multiplied by the price index
number of units held
DCF Bond interest rate curves n/a
Term finance 2 & 3 DCF Bond & Forward rate Liquidity spread
Credit ratings of issuer
Liquidity spread
Agreement interest curves
Derivative assets 2 & 3 Option pricing models Bond and interbank swap Risk adjustments
and liabilities DCF interest rate curve
Forward equity and currency
rates
Volatility risk adjustments
Sensitivity of level 3 financial instruments measured at fair value to changes in key assumptions
Effect of Effect of
Effect of Effect of a 1% a 1%
a 10% a 10% increase decrease
increase decrease in in
carrying in in carrying discount discount
amount(1) multiple multiple amount(2) rate rate
R million
Six months - reviewed
30 June 2014
Equities and similar securities 394 39 (39) 39 (3) 3
Interest-bearing investments 471 47 (47) 75 (19) 22
Investment funds 447 45 (45) - - -
Financial assets 1 312 131 (131) 114 (22) 25
Investment contract liabilities 614 61 (61) 162 (16) 16
Term finance 319 32 (32) - - -
Financial liabilities 933 93 (93) 162 (16) 16
Full year - audited
31 December 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) - - -
Financial assets 1 559 157 (157) 607 (18) 20
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
(1) Represents mainly private equity investments valued on earnings multiple, with sensitivities based on the full
valuation.
(2) Represents mainly investments valued on a discounted cash flow basis, with sensitivities based on changes in the
discount rate.
6. Business combinations
Material acquisitions of the Group consolidated in the 2014 financial year
Material business combinations
During May 2014 the Group acquired a 51% interest in MCIS Insurance Berhad, a life and general insurance provider
in Malaysia, and obtained control of the entity. The acquisition is in line with Sanlam’s strategy to pursue value
accretive growth opportunities into the South-East Asia region. The acquisition accounting in respect of the MCIS
transaction will be finalised in the second half of the year due to the timing of the transaction being close to the
30 June 2014 reporting period. The excess amount paid over the fair value of the already identified net assets is
expected to be predominately value of business acquired, and therefore has been recognised as such for the interim
reporting period and could change when the acquisition accounting is finalised. Non-controlling interest is
measured at the proportional share of the acquiree’s identifiable net assets.
Other
There were no other material business combinations during the six month period.
Reviewed
R million 2014
Details of the acquisition are as follows:
Cash consideration 1 258
Fair value of net assets acquired (1 741)
Non-controlling interest 853
Value of business acquired 370
Details of the assets acquired and liabilities assumed are as follows:
Equipment 23
Owner-occupied properties 319
Other intangible assets 41
Long-term reinsurance assets 9
Investment properties 174
Equities and similar securities 1 093
Interest-bearing investments 11 564
Investment funds 416
Cash, deposits and similar securities 1 433
Short-term technical assets 510
Trade and other receivables 563
Long-term policy liabilities (12 384)
Deferred tax liability (99)
Short-term insurance technical provisions (1 335)
Trade and other payables (584)
Taxation (2)
Total identifiable net assets 1 741
Net profits from 1 January 2014 to the effective date of the transaction would not have been material. The short
period since the effective date of the transaction did not allow for the alignment of the reporting of Financial
Services Income to the Sanlam Group accounting policy, and as such disclosure of the impact on revenues from
1 January 2014 to the effective date of the transaction is impracticable.
ADMINISTRATION
Group Secretary
Sana-Ullah Bray
Registered office
2 Strand Road, Bellville 7530, South Africa
Telephone +27 (0)21 947-9111
Fax +27 (0)21 947-3670
Postal address
PO Box 1, Sanlamhof 7532, South Africa
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
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
Cape Town
4 September 2014
Sponsor
Deutsche Securities (SA) Proprietary Limited
www.sanlam.co.za
Date: 04/09/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
