Wrap Text
Reviewed Interim Results for the six months ended 30 June 2015
Sanlam Limited
(Registration number 1959/001562/06)
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
Incorporated in South Africa
www.sanlam.com
Interim results for the six months ended 30 June 2015
Key features
Earnings
Net result from financial services per share increased by 5%
Normalised headline earnings per share up 4%
Business volumes
New business volumes up 22% to R100 billion
Net value of new covered business up 5% to R655 million
Net new covered business margin of 2,66% (2,68% in 2014)
Net fund inflows of R7 billion
Group Equity Value
Group Equity Value per share of R47,53
Annualised return on Group Equity Value per share of 13%
Capital management
Unallocated discretionary capital of R2,5 billion at 30 June 2015
Sanlam Life Insurance Limited CAR cover of 4,8 times
Salient results
for the six months ended 30 June 2015
2015 2014 % Change
Sanlam Group
Earnings
Net result from financial services per share cents 177,0 169,2 5
Normalised headline earnings per share(1) cents 224,2 214,8 4
Diluted headline earnings per share cents 233,1 220,2 6
Net result from financial services R million 3 622 3 461 5
Normalised headline earnings(1) R million 4 588 4 393 4
Headline earnings R million 4 726 4 447 6
Group administration cost ratio(2) % 30,0 29,2
Group operating margin(3) % 27,2 27,5
Business volumes
New business volumes R million 99 879 81 833 22
Net fund inflows R million 6 769 19 222 (65)
Net new covered business
Value of new covered business R million 655 626 5
Covered business PVNBP(4) R million 24 633 23 335 6
New covered business margin(5) % 2,66 2,68
Group Equity Value
Group Equity Value(7) R million 97 263 95 936 1
Group Equity Value per share(7) cents 4 753 4 684 1
Annualised return on Group Equity Value per share(6)(7) % 13,0 18,5
Sanlam Life Insurance Limited
Shareholders’ fund(7) R million 72 665 68 156
Capital Adequacy Requirements (CAR)(7) R million 8 500 8 325
CAR covered by prudential capital(7) Times 4,8 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 2014.
Executive review
Following the exceptional results achieved by the Group in its 2014 financial year, some headwinds contributed to a
more subdued overall performance in the first half of 2015. The strong investment market performance over a number
of years as well as favourable claims experience in most life and general insurance businesses in the recent past set
a high comparable base for growth in 2015. Notwithstanding, overall new business production proved particularly
resilient with growth of 22%. Net result from financial services, however, increased by a more modest 5% as under
performance in a few areas concealed an otherwise sound result.
*A challenging business environment persisted in South Africa, the region with the largest contribution to the
Group’s results. The South African economy continues to struggle with a modest growth outlook of below 2% for 2015.
Disposable income remains under pressure from a combination of high exposure to debt and inflationary strain, in
particular large hikes in electricity prices. The competitive environment also remains challenging in all lines of
business.
These conditions are not supportive of growth in new business, with the middle income market segment bearing the
brunt of the economic pressures. Individual Life new business volumes in the middle income market increased only
marginally as a result. Strong growth in the entry-level and mass affluent markets, however, more than compensated
for this with overall strong growth in South African new business sales. A strong investment market performance in
2014 increased average assets under management and fund based fee income in 2015, but to a lesser extent than for
the first half of 2014.
*Contrary to prior years, a number of our Rest of Africa markets are simultaneously facing some headwinds, including
some of the larger contributors to Sanlam Emerging Markets’ results. Low commodity prices, especially oil, are
impacting on economic growth in several markets, with many African currencies that are experiencing significant
volatility (Ghana, Zambia and Nigeria in particular). Ghana is also struggling with high levels of inflation and
interest rates. The competitive environment is showing some change with an increase in competition where
international players entered the markets (Ghana, Kenya and Nigeria).
Low levels of insurance penetration and the Group’s diversified portfolio in the Rest of Africa region compensated
somewhat for these conditions, with overall sound growth being achieved for the six months to 30 June 2015, albeit
at a lower level than our longer-term targets.
*The Indian economy continues to grow, although below its long-term potential. A renewed optimism for improved growth
prospects emerged after the recent elections but any significant improvement will take some time to crystallise. The
benefits of this are only expected to reflect in the results of our Indian operations over the medium term. This
realisation is also evident in the Indian equity market that pulled back after its post-election run. Delays in the
roll out of infrastructure development are impacting negatively on the bad debt experience in the banking and lending
sectors, with Shriram Capital’s equipment finance business being particularly hard hit, resulting in significant bad
debt write-offs recognised in respect of this business in the Group’s 2015 interim results.
*Growth prospects for the Malaysian economy remain intact, despite some pressure from low oil prices.
Our primary strategic objective of optimising value creation for shareholders, as measured by Return on Group Equity
Value (RoGEV), remains solidly in place. Given the nature of the Group’s diversified business, we consider this measure
of performance the most appropriate since it incorporates the results of all the major value drivers in the business.
The annualised RoGEV per share for the six months to 30 June 2015 of 13% exceeded the target of 12,1%.
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 15,8%, also in excess of the target.
Net operating profit (net result from financial services) grew by 5%. Sanlam Personal Finance and Santam achieved
solid growth of 11% and 17% respectively. Sanlam Investments and Sanlam Emerging Markets reported lower earnings than
the comparable 2014 period. Lower performance fees and higher administration costs relating to outsourcing projects and
capacity building were the main contributors to Sanlam Investments’ earnings decline, with the remainder of the cluster
achieving satisfactory growth. The bad debt experience in Shriram Capital and a particularly challenging environment in
Zambia and Kenya, depressed an otherwise good performance from Sanlam Emerging Markets.
The net value of new covered business (VNB) increased by 5% at a margin of 2,66%. This is broadly in line with the 2.68%
margin achieved in the first half of 2014.
Strategic initiatives
The Sanlam board of directors (Board) reconfirmed the Group’s strategic positioning at its recent Board summit. The
strategy 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 of business written
*Prioritising Sanlam’s international positioning through diversification
*Improving capital efficiency on an ongoing basis
*Embracing and accelerating transformation of the Group.
Since introducing the strategy in 2003, different pillars have received emphasis from time to time as the Group
evolved, the economic and operating environment changed and client needs and preferences developed. In line with this
approach, specific attention will be given to the following strategic pillars in the remainder of 2015 and into 2016:
*After a number of years of stellar investment market performance a period of muted investment return is expected in
South Africa. Given the impact that this will have on the Group’s asset-based fee income in Sanlam Investments and
Sanlam Personal Finance, these businesses will place increased attention on operating and cost efficiencies, while
not losing focus on growing new business volumes profitably. Further diversification of these businesses remains a
priority.
*The Sanlam Emerging Markets cluster is currently invested in more than 50 companies across Rest of Africa, India and
Malaysia after making a number of acquisitions over the last few years. Increased emphasis will now be placed on
organic growth and extracting maximum value from its current investments and relationships, while continuing to explore
new investment opportunities.
*The South African life and general insurance businesses are making good progress in complying with the new solvency
regime (Solvency Assessment and Management - a South African Solvency II-based regime) currently being implemented by
the South African regulator with an effective date planned for early in 2016. Following compliance, the next phase for
the Group is to evaluate the structure and strategic asset allocation of the capital supporting the South African
insurance operations within the new regulatory environment to continue optimising RoGEV.
Outlook
We expect that the economic and operating environment will remain challenging for the remainder of 2015 with a
resulting impact on the Group’s key operational performance indicators. Shareholders also need to be aware of the
impact of the level of interest rates and financial market returns and volatility on the Group’s earnings and Group
Equity Value. Relative movements in these elements may have a major impact on the growth in normalised headline
earnings and Group Equity Value to be reported for the 2015 financial year. Relatively strong operating earnings
growth experienced in the second half of 2014 also causes an increase in the comparable base.
Despite the short-term pressure on operating earnings growth, we remain confident that we will deliver on our
longer-term growth targets.
Forward-looking statements
In this report we make certain statements that are not historical facts and relate to analyses and other information
based on forecasts of future results not yet determinable, relating, among others, to new business volumes, investment
returns (including exchange rate fluctuations) and actuarial assumptions. These statements may also relate to our
future prospects, developments and business strategies. These are forward-looking statements as defined in the United
States Private Securities Litigation Reform Act of 1995. Words such as “believe”, “anticipate”, “intend”, “seek”, “will”,
“plan”, “could”, “may”, “endeavour” and “project” and similar expressions are intended to identify such forward-looking
statements, but are not the exclusive means of identifying such statements. Forward-looking statements involve inherent
risks and uncertainties and, if one or more of these risks materialise, or should underlying assumptions prove incorrect,
actual results may be very different from those anticipated. Forward-looking statements apply only as of the date on
which they are made, and Sanlam does not undertake any obligation to update or revise any of them, whether as a result
of new information, future events or otherwise. Any forward-looking information contained in this announcement has not
been reviewed and reported on by Sanlam's external auditors.
Comments on the results
Introduction
The Sanlam Group International Financial Reporting Standards (IFRS) financial statements for the six months ended
30 June 2015 are presented based on and in compliance with IFRS, specifically IAS 34 on 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 2014 Annual Report.
Most of the Group’s businesses achieved a sound underlying performance in the first half of 2015, but this was marred
by the following that had a significant impact on the Group’s overall performance:
*Sanlam Investments’ operating earnings were negatively affected by a decline in performance fees as well as an
increase in administration expenditure relating to outsourcing projects and increased client service capacity.
*An additional adjustment premium received by Sanlam Employee Benefits in respect of the 2014 AECI policy generated
new business strain of R27 million for the period.
*The Group’s Kenyan business went live with a new policy administration system towards the end of 2014. Initial
system instability had an impact on both client service levels as well as the business’ ability to accurately
determine agent remuneration. The resulting instability in the distribution channel had a significantly negative
impact on new business sales, VNB and the operating profit of the life insurance company. The system and relationships
with the adviser force have been stabilised and an improvement in new business performance is expected over the
coming months.
*Zambia experienced a particularly difficult business environment, including unplanned elections after the passing of
its president, severe flooding and currency volatility. New business sales, VNB and profitability were severely impacted
as a result.
*Shriram Transport Finance Company’s subsidiary focused on equipment financing experienced abnormal levels of bad debt.
The subsidiary expanded its lending book in anticipation of the newly elected government’s infrastructure projects.
Delays in the roll out of these projects are placing a large number of clients under financial pressure, with the
outstanding loan book growing outside of normal parameters. This required a significant strengthening in the provision
for bad debts. In addition, the 2014 comparative results included a R72 million once-off release of provisions relating
to Shriram General Insurance’s third-party pool book, thereby increasing the comparative base.
Operating environment
Economic conditions
Economic conditions in the first six months of the 2015 financial year were not conducive to growth in a number of
countries where the Group operates, as expanded on in the executive review. Despite these conditions, we were able to
deliver a generally sound operational performance, however, with certain areas under performing in the current
environment. The medium to long-term growth potential of all regions remains intact.
Equity markets
The South African equity market delivered a relatively weaker performance with the FTSE/JSE All Share Index recording
a total return of 6,7% for the six months to 30 June 2015, compared to a return of 11,8% in the comparable six-month
period in 2014. Investment return earned on the Group’s capital portfolio was commensurately lower, with a similar
impact on headline earnings. The MSCI World Index return in rand of 7,8% was in line with the first half of 2014.
Interest rates
South African long-term interest rates rose by some 40 basis points since the end of 2014, but were broadly in line
with the 30 June 2014 levels. RoGEV for the first six months of 2015 was negatively impacted by the rise in rates since
the end of 2014. Growth in VNB was only marginally affected given the stability in rates compared to the 30 June 2014
comparable base for this metric. The South African All Bond Index returned 1,6% in the first half of 2015 compared to
a return of 3,4% for the same period in 2014.
Foreign currency exchange rates
The South African rand weakened against most developed market currencies over the 18 months to 30 June 2015, with a
number of other African currencies also experiencing exchange rate weakness. A combination of weak commodity prices
and current account and budget deficits were the main drivers of the volatility. The exchange rate of the rand against
the currencies to which the Group has major exposure is summarised in the table below.
Foreign currency/ United Rest of
ZAR Europe Kingdom USA Botswana India Africa
EUR GBP USD BWP INR (weighted)
31/12/2014 14,01 18,05 11,57 1,23 0,18
30/06/2015 13,55 19,08 12,15 1,25 0,19
Weakening/(strengthening) (3,3%) 5,7% 5,0% 1,5% 5,7% (5,4%)
Average first half 2014 14,66 17,85 10,70 1,23 0,18
Average first half 2015 13,29 18,14 11,91 1,24 0,19
Weakening/(strengthening) (9,4%) 1,6% 11,3% 0,9% 7,6% (5,9%)
Group Equity Value
Group Equity Value (GEV) amounted to R97,3 billion or 4 753 cents per share on 30 June 2015. Including the dividend
of 225 cents per share paid during the six months, a RoGEV per share of 6,3% (annualised 13%) was achieved for the first
half of 2015, exceeding the 2015 performance hurdle of 5,9% (annualised 12,1%). Excluding the 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 7,6% (annualised 15,8%) is also in excess of the return target.
The Group’s life operations (covered business) achieved a RoGEV of 6,9% for the first six months of 2015, with the
non-life businesses (other Group operations) delivering a return of 7,2%. This compares to returns of 9,1% and 10,1%
respectively for covered business and other Group operations in the comparable 2014 period. The relatively weaker return
on covered business in 2015 is largely attributable to the following:
*The more benign investment market performance in the first half of 2015 contributed to a R395 million decrease in
investment variances on the in-force life book, as well as a R95 million decline in investment variances on the
capital portfolio backing the covered business operations.
*The moderating mortality claims experience in a number of businesses contributed to a R69 million decline in the
positive operating experience variances generated by the in-force life book. Positive persistency experience of
R88 million for the first half of 2015 is a particularly satisfactory result in a challenging operating environment
across many Group businesses.
*Operating assumption changes contributed R96 million less to the earnings from covered business, primarily due to
various model refinements and improvements.
The decline in return from other Group operations relative to the first half of 2014 is largely due to lower
investment return earned on the listed Santam shareholding (7% in the first half of 2014 compared to only 2,5% in the
first six months of 2015) and a significantly lower return contribution from Sanlam Emerging Markets’ investment in
Shriram Capital. The losses incurred in Shriram Transport Finance’s equipment finance subsidiary had a negative effect
on the 30 June 2015 valuations, as well as an increase in the effective dividend withholding tax rate. The 2014
comparative period also included a once-off valuation uplift following the introduction of the Piramal Group as a new
equity investor in Shriram Capital, which further impacted returns on a relative basis.
All clusters exceeded their return hurdles for the period, apart from Sanlam Emerging Markets. The operational
challenges in Zambia and Kenya, weaker Rest of Africa currencies and low return earned on the Shriram Capital
investment depressed the Cluster’s return in the first half of 2015.
Group Equity Value at 30 June 2015
GEV RoGEV
R million June December %*
2015 2014
Group operations 90 932 87 739 6 165 7,0
Sanlam Personal Finance 39 312 38 453 3 129 8,1
Sanlam Emerging Markets 14 859 14 571 702 4,8
Sanlam Investments 22 135 20 122 1 975 9,8
Santam 14 626 14 593 359 2,5
Covered business 49 006 48 393 3 319 6,9
Value of in-force 31 628 31 207 2 629 8,4
Adjusted net worth 17 378 17 186 690 4,0
Other operations 41 926 39 346 2 846 7,2
Group operations 90 932 87 739 6 165 7,0
Discretionary capital and other 6 331 8 197 (263) (3,2)
Group Equity Value 97 263 95 936 5 902 6,2
Per share (cents) 4 753 4 684 294 6,3
* Return for the six months, non-annualised.
The negative 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 2015
R million 2015 2014 % Change
Net result from financial services 3 622 3 461 5
Sanlam Personal Finance 1 955 1 763 11
Sanlam Emerging Markets 562 624 (10)
Sanlam Investments 712 727 (2)
Santam 413 353 17
Corporate and other (20) (6) (>100)
Net investment return 1 148 1 122 2
Project costs and amortisation (143) (123) (16)
Equity participation costs (39) (67) 42
Normalised headline earnings 4 588 4 393 4
Per share (cents) 224,2 214,8 4
Net result from financial services (net operating profit) of R3,6 billion increased by 5% on 2014. A higher
level of assets under management across most asset management and administration businesses supported
fund-based fee income. After exceptionally favourable mortality experience in 2014, the level of claims
normalised to some extent across most businesses, resulting in an overall marginal decline in life
underwriting profit. This was aggravated by the abnormal items highlighted in the introductory paragraph
above. Excluding the abnormal items, net result from financial services increased by 11%, a commendable
performance against a high comparative base. The individual cluster results are discussed in more detail
below.
Normalised headline earnings of R4,6 billion are 4% up on 2014. This is the combined effect of the 5% increase
in net result from financial services and marginally higher investment return earned on the Group’s capital
portfolio. Investment surpluses declined by more than 20% following the weaker equity market performance in
the first half of 2015 compared to the same period in 2014. This was partly offset by higher investment income
earned in most businesses and the first-time inclusion of MCIS Malaysia’s results.
Business volumes
The Group achieved overall growth of 22% in new business volumes. Life insurance new business volumes
increased by 6%, augmented by 29% and 9% growth in new investment and general insurance business
respectively. All clusters contributed to the solid performance, despite some pressure experienced in the
following segments:
*The South African middle income market continues to feel the pressure of high levels of inflation and
debt as evident in only a marginal increase in new business sales in this segment.
*The group risk market in South Africa continues to be highly competitive with all market participants
pricing keenly to retain business. Many schemes are accordingly not changing service providers, resulting
in an overall decline in new business for the industry. Sanlam Employee Benefits is no exception,
experiencing a marked decline in new recurring premium risk business.
*In Sanlam Emerging Markets, the Kenyan and Zambian businesses’ results reflect the particular issues
experienced by these businesses, as highlighted above.
*Sanlam Investments’ International business recorded a marked decline in new business volumes, attributable
to the disposal of Intrinsic during 2014.
Sanlam Sky’s improved performance in the South African entry-level market is particularly pleasing.
As indicated in the Group’s 2014 Annual Report, the Botswana Public Officers Pension Fund (BPOPF) withdrew
R11,5 billion from the Group’s Botswana asset manager. This withdrawal also coincided with a simultaneous
withdrawal by the BPOPF of some R3 billion from Sanlam Investments’ International asset management business.
Excluding these flows, net fund inflows increased by some 10% on the comparable 2014 period.
Business volumes for the six months ended 30 June 2015
R million New business Net inflows
2015 2014 % Change 2015 2014 % Change
Sanlam Personal Finance 29 162 23 662 23 10 188 8 087 26
Sanlam Emerging Markets 5 395 4 030 34 (8 981) 1 762 (>100)
Sanlam Investments 56 234 45 682 23 2 260 6 362 (64)
Santam 9 088 8 459 7 3 302 3 011 10
Total 99 879 81 833 22 6 769 19 222 (65)
Covered business 18 620 17 536 6 5 822 6 137 (5)
Investment business 71 359 55 251 29 (2 549) 9 926 (>100)
General insurance 9 900 9 046 9 3 496 3 159 11
Total 99 879 81 833 22 6 769 19 222 (65)
Following similar withdrawals in the past, the Public Investment Corporation gave notice during July 2015 for the
further withdrawal of R10 billion of its assets managed by Sanlam Investments as part of the restructuring of its
investment portfolio. This outflow will be recognised in the second half of the year.
The VNB written in the six months to 30 June 2015 increased by 5% on the same period in 2014. Sanlam Personal
Finance and Sanlam Emerging Markets achieved good growth despite the challenges faced in certain segments. This
was, however, partly offset by disappointing results from Sanlam Employee Benefits and Sanlam UK. The decline in
group risk business at Sanlam Employee Benefits contributed to a 62% decline in its contribution to VNB. Similarly,
the decline in new life business volumes at Sanlam UK led to a 55% decline in its VNB contribution. The overall
VNB margin declined slightly from 2014, largely due to a change in business mix in most businesses.
Value of new covered business for the six months ended 30 June 2015
R million 2015 economic basis 2014 economic basis
2015 2014 % Change 2015 2014 % Change
Value of new covered business 730 697 5 736 697 6
Sanlam Personal Finance 482 437 10 486 437 11
Sanlam Emerging Markets 222 196 13 225 196 15
Sanlam Investments 26 64 (59) 25 64 (61)
Net of non-controlling interest 655 626 5 660 626 5
Present value of new business premiums 25 866 24 202 7 25 886 24 202 7
Sanlam Personal Finance 18 263 15 990 14 18 279 15 990 14
Sanlam Emerging Markets 3 599 2 684 34 3 606 2 684 34
Sanlam Investments 4 004 5 528 (28) 4 001 5 528 (28)
Net of non-controlling interest 24 633 23 335 6 24 649 23 335 6
New covered business margin 2,82% 2,88% 2,84% 2,88%
Sanlam Personal Finance 2,64% 2,73% 2,66% 2,73%
Sanlam Emerging Markets 6,17% 7,30% 6,24% 7,30%
Sanlam Investments 0,65% 1,16% 0,62% 1,16%
Net of non-controlling interest 2,66% 2,68% 2,68% 2,68%
Cluster performance
Sanlam Personal Finance
Key performance indicators for the six months ended 30 June 2015
R million 2015 2014 % Change
Group Equity Value
Group Equity Value* 39 312 38 453 2
Covered business 36 181 35 444 2
Other operations 3 131 3 009 4
Return on Group Equity Value (six months) 8,1% 8,7%
Covered business 8,0% 8,7%
Other operations 10,2% 9,0%
Business volumes
New business volumes 29 162 23 662 23
Life business 13 546 11 552 17
Sanlam Sky 546 474 15
Individual life 443 373 19
Group life 103 101 2
Individual Life 5 893 5 672 4
Recurring premiums 696 645 8
Single premiums 5 197 5 027 3
Glacier 7 107 5 406 31
Investment business 15 616 12 110 29
Individual Life 155 149 4
Glacier 15 461 11 961 29
Net fund flows 10 188 8 087 26
Life business 4 350 3 538 23
Sanlam Sky 1 373 1 307 5
Individual Life (1 503) (820) (83)
Glacier 4 480 3 051 47
Investment business 5 838 4 549 28
Value of new covered business (Gross)
Value of new business 482 437 10
Sanlam Sky 149 135 10
Individual Life 234 228 3
Glacier 99 74 34
Present value of new business premiums 18 263 15 990 14
Sanlam Sky 1 942 1 772 10
Individual Life 9 222 8 812 5
Glacier 7 099 5 406 31
New business margin 2,64% 2,73%
Sanlam Sky 7,67% 7,62%
Individual Life 2,54% 2,59%
Glacier 1,39% 1,37%
Earnings
Gross result from financial services 2 718 2 439 11
Sanlam Sky 569 518 10
Individual Life 1 940 1 750 11
Glacier 209 171 22
Net result from financial services 1 955 1 763 11
* Comparative information as at 31 December 2014.
Sanlam Personal Finance had a solid start to the 2015 financial year, achieving a strong new business
performance and delivering growth in net result from financial services in line with its longer-term
targets despite a high comparative base in 2014.
Sanlam Personal Finance achieved a RoGEV of 8,1% for the six months to June 2015, compared to 8,7% for
the comparable period in 2014. The slight decline in return on covered business relative to 2014 is
largely attributable to lower positive mortality experience, a decline in investment variances following
the more benign investment market performance in 2015 and an increase in negative economic assumption
changes, with long-term interest rates increasing relatively more in the first half of 2015 than the
first six months of 2014. The return on non-life operations was supported by an increase in the valuation
of Glacier following good growth in its level of assets under management and hence future profitability.
New business volumes increased by 23% on the first half of 2014. The general trends emerging in the second
half of 2014 continued into 2015 with strong growth in the entry-level and mass affluent market segments,
but with the middle income market continuing to struggle as disposable income in this segment remains
under pressure.
Sanlam Sky grew its new business sales by 15%, the combined effect of 19% growth in individual life
recurring premiums and 2% growth in group life business. The agency channel achieved growth of more than
20% in individual life business, while brokers experienced growth of 4% after a few years of declines. Risk
business sales continued to show good growth, supported by particularly strong sales of the newly launched
savings products. The individual life growth should also be seen against the context of a weak first half in
2014 following the prolonged industrial action at platinum mines. Group life business sales in 2015 includes
the biennial Zion Christian Church (ZCC) renewal that occurred in May this year, partly offsetting the effect
of the loss of the Capitec credit life business in the second half of 2014. Excluding both the Capitec and
ZCC policies, group life business increased by more than 20%. This includes a large new scheme awarded to
Sanlam Sky. VNB increased by 10% (13% on a comparable economic basis) at a margin broadly in line with the
first half of 2014. The average margin is expected to decline over time as the lower margin savings products
start to contribute more meaningfully to the average business mix.
Individual Life sales (predominantly middle income market) were 4% higher in the first six months of 2015
compared to the same period in 2014. Single premiums increased by only 3%, reflecting the strain in this market.
Recurring premium sales increased by a satisfactory 8%, supported by endowments, ad hoc premium increases and
Sanlam Personal Loans credit life business. Risk business volumes were flat on 2014, reversing the declining
trend of the last few reporting periods. VNB grew by 3%, in line with the new life business growth. A relentless
focus on cost efficiencies enabled the business to maintain margins at broadly similar levels than the 2014
comparable period.
Glacier achieved very strong growth of 30% in the mass affluent market, to some extent still reflecting the
impact of the investment market performance over the last few years on the value of retirement funds becoming
available for investment. The offshore and wrap solutions attracted strong demand.
Net fund flows increased by 26%, supported by the new business performance as well as overall persistency
experience that remained intact despite some deterioration in certain areas. The only segment experiencing net
outflows was the Individual Life market from a combination of higher maturity values and low growth in single
premium new business.
Result from financial services increased by 11% gross and net of tax and minorities. Sanlam Sky’s gross earnings
were up 10%, the combination of higher profits released from the increasing in-force book being partly offset by
some normalisation in mortality claims experience and lower investment variances. Individual Life profit grew by
11%. Savings products achieved good growth based on a higher level of assets under management, augmented by higher
working capital income that benefited from an increase in average short-term interest rates. Profit from risk
products declined marginally as claims experience in this segment also started normalising after exceptional
experience over the last two years. Administration costs remain well under control. Higher assets under management
due to strong recent equity markets and good sales momentum is the main driver of Glacier’s earnings growth.
Sanlam Emerging Markets
Key performance indicators for the six months ended 30 June 2015
R million 2015 2014 % Change
Group Equity Value
Group Equity Value* 14 859 14 571 2
Covered business 4 984 5 116 (3)
Other operations 9 875 9 455 4
Return on Group Equity Value (six months) 4,8% 12,3%
Covered business 5,7% 10,3%
Other operations 4,3% 13,5%
Business volumes
New business volumes 5 395 4 030 34
Namibia 1 286 1 541 (17)
Botswana 2 449 1 137 115
Rest of Africa 885 827 7
India 391 331 18
South-East Asia 384 194 98
Net fund flows (8 981) 1 762 (>100)
Namibia (41) 343 (>100)
Botswana (9 983) 478 (>100)
Rest of Africa 799 814 (2)
India 120 53 126
South-East Asia 124 74 68
Value of new covered business (Gross)
Value of new business 222 196 13
Namibia 39 45 (13)
Botswana 94 81 16
Rest of Africa 59 68 (13)
India 4 2 100
South-East Asia 26 -
Present value of new business premiums 3 599 2 684 34
Namibia 439 432 2
Botswana 1 428 1 092 31
Rest of Africa 897 1 046 (14)
India 206 114 81
South-East Asia 629 -
New business margin 6,17% 7,30%
Namibia 8,88% 10,42%
Botswana 6,58% 7,42%
Rest of Africa 6,58% 6,50%
India 1,94% 1,75%
South-East Asia 4,13% -
Earnings
Gross result from financial services 1 117 1 129 (1)
Namibia 257 254 1
Botswana 411 348 18
Rest of Africa 123 108 14
India 252 389 (35)
South-East Asia 75 43 74
Corporate (1) (13) 92
Net result from financial services 562 624 (10)
* Comparative information as at 31 December 2014.
As highlighted in the introductory paragraph, a number of Sanlam Emerging Markets businesses experienced a
particularly challenging business environment during the first six months of 2015. The affected businesses
include the larger contributors to Sanlam Emerging Markets’ results, having a major impact on most performance
metrics. Most of the events are once-off in nature and we expect the business to return to its longer-term
growth trends during 2016.
SEM achieved a disappointing RoGEV of 4,8%, well down on its 2014 comparable performance and below its target
return. Both covered business and other Group operations under performed due to the operational issues
experienced, currency volatility and an increase in the effective withholding tax percentage allowed for in
the valuation of the Indian operations.
New business volumes increased by 34%, supported by an exceptional performance of the Botswana operations
and the first-time contribution of acquisitions finalised after 30 June 2014. These include MCIS in Malaysia,
Enterprise Insurance in Ghana and the Soras Group in Rwanda.
Namibian new business volumes declined by 17%. The more volatile unit trust and investment management
business declined by 18%, with new life insurance business marginally down on the first half of 2014 in a
competitive market.
The Botswana operations experienced an exceptional first half of 2015 and more than doubled its new business
volumes. Both life and investment business grew strongly, the former benefiting from good annuity sales. Given
the volatile nature of especially investment business, we do not expect this level of growth to continue for
the full year.
Rest of Africa achieved new business growth of only 7%, attributable to some 30% decline in both the Kenya
and Zambia contributions. The challenges faced by these businesses (refer introduction above) had a severe
impact on their new business performance. With stability returning, we expect a much improved performance
from these operations. Excluding Kenya and Zambia, new business volumes in Rest of Africa increased by some
60%, the combination of structural growth and strong organic growth in all businesses.
The Indian operations recorded an 18% increase in new business sales. The expansion of the life business’
footprint is evident in growth of some 60%. General insurance business grew by 5%, in line with the
slowdown in growth of the credit businesses’ loan books.
The almost doubling of the South-East Asia contribution is largely attributable to the first-time inclusion of
MCIS in Malaysia.
Growth in VNB of only 13% is due to a marked decline in Kenya’s and Zambia’s contributions in line with their
poor new business performance. In addition, the credit life profit sharing arrangement with Bank Windhoek was
revised during the first half of 2015, causing a decline in Namibia’s VNB and margins. This was partly offset
by the first-time inclusion of MCIS. Excluding these businesses, organic growth of more than 20% was achieved
by the cluster.
The R11,5 billion withdrawal of funds by the Botswana Public Officers Pension Fund resulted in a net outflow
of funds of R9 billion. Restructuring of the Botswana asset manager after the large outflow enabled us to
limit the impact on gross result from financial services to less than R12 million.
Gross result from financial services declined by 1% compared to the first half of 2014. This is largely
attributable to lower contributions from Shriram and the Zambian business. Excluding the abnormal bad debt
experience in Shriram Equipment Finance, the R72 million once-off release of provisions in Shriram General
Insurance in 2014 as well as the Zambia operating earnings, gross result from financial services increased
by 12%. All of the remaining regions reported good growth, apart from Namibia where some R35 million of
annuity mismatch profits in the first half of 2014 did not repeat in 2015. South-East Asia made a strong
earnings contribution due to the first time inclusion of MCIS. A once-off strengthening in the Pacific &
Orient IBNR reserve has been offset by the release of a corporate contingency reserve.
Sanlam Investments
Key performance indicators for the six months ended 30 June 2015
R million 2015 2014 % Change
Group Equity Value
Group Equity Value* 22 135 20 122 10
Covered business 7 841 7 833 -
Other operations 14 294 12 289 16
Return on Group Equity Value (six months) 9,8% 11,2%
Covered business 2,6% 10,3%
Other operations 14,4% 11,8%
Business volumes
Net fund flows 2 260 6 362 (64)
Investments 2 585 4 871 (47)
Investment Management SA 4 203 3 883 8
Wealth Management 2 446 (457) 635
International (4 061) 1 346 (402)
Capital Management (3) 99 (103)
Life business (325) 1 491 (122)
New life business volumes 2 988 4 389 (32)
Recurring premiums 102 222 (54)
Single premiums 2 886 4 167 (31)
Value of new covered business (Gross)
Value of new business 26 64 (59)
Present value of new business premiums 4 004 5 528 (28)
New business margin 0,65% 1,16%
Earnings
Gross result from financial services 933 982 (5)
Investment Management 592 612 (3)
Employee Benefits 206 216 (5)
Capital Management 135 154 (12)
Net result from financial services 712 727 (2)
* Comparative information as at 31 December 2014.
Sanlam Investments’ operational performance was impacted by a number of items, as discussed in more detail
below. Excluding these, net fund flows were on par with the first half of 2014 and gross result from
financial services increased by 9%. This is a sound performance in the difficult operating environment.
Sanlam Investments achieved a RoGEV of 9,8% for the six months to June 2015, with a good return on other
Group operations offsetting a poor performance from covered business. The valuation of Sanlam Investments’
operations benefited from an increase in the level of assets under management, following a continuance of
net fund inflows in a number of core businesses and net positive investment returns. Both Sanlam Employee
Benefits and Sanlam UK’s covered business under performed, achieving growth of only 3% and 0,6%
respectively. Significant declines in VNB written in the first half of 2015 were aggravated by negative
operating assumption changes emanating from improved modelling.
New business volumes increased by 23% with all business units contributing to the growth apart from
International. The decline in the International business’ contribution is due to the disposal of Intrinsic
in the second half of 2014. Both Wealth Management and Investment Management SA are performing well in
attracting retail funds onto their platforms. In the case of Wealth Management most of the flows were into
the more profitable discretionary mandates. Investment Management SA also received a large new mandate from
one of South Africa’s major multi-manager platforms, a particularly pleasing development. Sanlam Employee
Benefits received an additional premium of some R230 million in respect of the large AECI policy written in
2014, accounting for the majority of the growth in this business. The market for risk business is
extremely competitive with most participants lowering rates to retain business. Recurring premium new
business at Sanlam Employee Benefits declined by more than half as a result, with a similar impact on VNB
and VNB margins.
The new business performance flowed through to Wealth Management and Asset Management SA’s net fund flows,
which almost doubled in aggregate. The International business experienced a net outflow of funds of
R4 billion compared to a net inflow of R3,2 billion in the first six months of 2014. The decline is largely
attributable to the impact of the disposal of Intrinsic as well as a R3 billion withdrawal linked to the
Botswana Public Officers Pension Fund’s withdrawal of funds from Sanlam Emerging Markets (refer above).
Sanlam Investments’ International business managed the offshore component of the funds, which were
simultaneously withdrawn.
Gross result from financial services declined by 5%, but increased by 9% on a normalised basis.
A higher level of assets under management supported fee income in the investment businesses. This was,
however, more than neutralised by lower performance fees and an increase in administration costs relating
to collective investment scheme administration outsourcing, marketing and building additional capacity in
the client-facing distribution businesses. The benefits of these initiatives will only reflect in future
results. Excluding these items, investment management gross result from financial services increased
by 12%.
The additional premium received by Sanlam Employee Benefits in respect of the AECI policy generated new
business strain of R27 million for the six months to 30 June 2015, resulting in a 5% decline in its gross
result from financial services. Excluding this, operating earnings grew by 8%, a satisfactory result
given some normalisation of mortality claims experience in 2015.
Capital Management achieved gross result from financial services in line with the longer-term
expectations for this business, albeit 12% lower than the high base in 2014 due to significantly lower
performance fees earned by Sanlam Private Equity.
Santam
Key performance indicators for the six months ended 30 June 2015
R million 2015 2014 % Change
Group Equity Value
Group Equity Value* 14 626 14 593 -
Return on Group Equity Value (six months) 2,5% 7,0%
Business volumes
Net earned premiums 9 088 8 459 7
Net fund flows 3 302 3 011 10
Earnings
Gross result from financial services 1 055 871 21
Net result from financial services 413 353 17
Ratios
Claims 63,7% 64,4%
Administration costs 18,2% 18,9%
Underwriting 8,9% 7,4%
* Comparative information as at 31 December 2014.
The RoGEV of Santam reflects the investment return earned on the listed Santam shares.
Gross written premium increased by 8% excluding cell captive business and 7% including cell captive
business, a solid performance in a highly competitive and mature South African market. Competition is
especially rife in the niche classes. MiWay continues to perform well with premium growth of 17%.
After some catastrophe events in the first quarter of 2015, claims experience improved considerably in
the second quarter across most insurance lines, resulting in a decline in Santam’s claims ratio from
64,4% in the first half of 2014 to 63,7% in 2015. This translated into an underwriting margin of 8,9%
for the first six months of 2015, well in excess of Santam’s target range and even surpassing an already
excellent result in 2014. The current favourable claims environment is not expected to continue for the
remainder of the year, with weather-related catastrophe events a particular risk in the fourth quarter.
Capital management
The Group started the year with discretionary capital of R3,3 billion, earmarked for new growth and
expansion opportunities as well as to strengthen existing relationships. Capital utilisation during
the six months to 30 June 2015 was limited to a net amount of R285 million, with only small
transactions concluded during the period:
*Some R70 million was invested by Sanlam Emerging Markets to enter the Mozambique market and to
increase its stakes in the Nigerian and Tanzanian general insurance businesses.
*R46 million was received from Santam as its contribution to recent general insurance investments
made in Africa.
*R169 million was invested in a seeding capital portfolio at Sanlam Investments, aimed at growing
its international asset management operations. An additional R32 million was utilised by Sanlam
Investments for investment in its US-based asset manager and for a trail payment for the acquisition
of the Vukile property management agreement.
*Sanlam Personal Finance invested R57 million in a distribution business in the entry-level market
in South Africa.
Investment return earned on the discretionary capital portfolio, excess capital released from Group
businesses, the realisation of some illiquid investments and the 2014 dividend cover in excess of cash
operating earnings added some R1,6 billion of surplus capital. Some R2 billion has been earmarked for
transactions in an advanced stage of completion, including the acquisition of a 27% interest in ACT
(a medical aid administration and risk management company based in South Africa) and an additional 23%
in the Shriram insurance businesses. This leaves unallocated discretionary capital of some R2,5 billion
at the end of June 2015, which remains earmarked for investment in value-accretive investment
opportunities.
Solvency
All of the life insurance businesses within the Group were sufficiently capitalised at the end of June
2015. The total admissible regulatory capital (including identified discretionary capital) of Sanlam
Life Insurance Limited (Sanlam Life), the holding company of the Group’s major life insurance
subsidiaries, of R41 billion, covered its CAR 4,8 times. Excluding the identified discretionary capital,
investments in strategic Group subsidiaries and associated companies (participations) and cash
accumulated in respect of the 2016 Group dividend payment, the R13 billion of capital allocated to Sanlam
Life’s life insurance operations covered its CAR 1,7 times. No policyholder portfolio had a negative
bonus stabilisation reserve at the end of June 2015.
The South African insurance businesses are progressing well to reach compliance with the new Solvency
Assessment and Management (SAM) requirements that are expected to be effective in the first half of 2016.
The Group is at the same time preparing a revised solvency risk appetite based on the new regime. We
currently aim for a solvency cover ratio of between 1,7 and 2,1 times the Solvency Capital Requirement
(SCR) under SAM for the life insurance operations of Sanlam Life, i.e. excluding any identified
discretionary capital, participations and cash accumulated in Sanlam Life in respect of the Group
dividend payments. The range might change over time as the views from market participants, investors and
rating agencies mature. Sanlam Life’s life insurance operations are well capitalised under the SAM
regime (taking into account the current R13 billion IFRS based capital allocation to these operations)
with the cover ratio being at the upper end of the indicated target range. Santam is also progressing
with its own compliance programme and will communicate its target range to the market at an appropriate
time.
FitchRatings has affirmed the credit ratings of the Group in 2015 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 Ian Kirk
Chairman Group Chief Executive
Sanlam Limited
Cape Town
2 September 2015
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 contains 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 2014, 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 2014 annual report.
There were no new or revised IFRSs and interpretations that became effective in the current year.
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 2015. 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
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 2015, 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 (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
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 2015 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 the basis of accounting above. 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
2 September 2015
Group Equity Value
at 30 June 2015
June reviewed December audited
2015 2014
R million Note Fair value Value of Fair value Value of
Total of assets in-force Total of assets in-force
Sanlam Personal Finance 39 312 12 629 26 683 38 453 12 455 25 998
Covered business(1) 36 181 9 498 26 683 35 444 9 446 25 998
Glacier 1 747 1 747 - 1 542 1 542 -
Sanlam Personal Loans 900 900 - 907 907 -
Other operations 484 484 - 560 560 -
Sanlam Emerging Markets 14 859 12 106 2 753 14 571 11 779 2 792
Covered business(1) 4 984 2 231 2 753 5 116 2 324 2 792
Shriram Capital 5 714 5 714 - 5 595 5 595 -
Letshego 931 931 - 923 923 -
Pacific & Orient 742 742 - 704 704 -
Capricorn Investment Holdings 825 825 - 845 845 -
Other operations 1 663 1 663 - 1 388 1 388 -
Sanlam Investments 22 135 19 943 2 192 20 122 17 705 2 417
Covered business(1) 7 841 5 649 2 192 7 833 5 416 2 417
Sanlam Employee Benefits 6 479 5 025 1 454 6 640 5 025 1 615
Sanlam UK 1 362 624 738 1 193 391 802
Investment Management 13 589 13 589 - 11 604 11 604 -
Capital Management 705 705 - 685 685 -
Santam 14 626 14 626 - 14 593 14 593 -
Group operations 90 932 59 304 31 628 87 739 56 532 31 207
Discretionary capital 4 600 4 600 - 3 300 3 300 -
Balanced portfolio - other 3 329 3 329 - 6 453 6 453 -
Group Equity Value before
adjustments to net worth 98 861 67 233 31 628 97 492 66 285 31 207
Net worth adjustments - present value of holding
company expenses (1 598) (1 598) - (1 556) (1 556) -
Group Equity Value 97 263 65 635 31 628 95 936 64 729 31 207
Value per share (cents) 4 4 753 3 208 1 545 4 684 3 160 1 524
Analysis per type of business
Covered business(1) 49 006 17 378 31 628 48 393 17 186 31 207
Sanlam Personal Finance 36 181 9 498 26 683 35 444 9 446 25 998
Sanlam Emerging Markets 4 984 2 231 2 753 5 116 2 324 2 792
Sanlam Investments 7 841 5 649 2 192 7 833 5 416 2 417
Other Group operations 41 926 41 926 - 39 346 39 346 -
Discretionary and other capital 6 331 6 331 - 8 197 8 197 -
Group Equity Value 97 263 65 635 31 628 95 936 64 729 31 207
(1) Refer embedded value of covered business below.
Change in Group Equity Value
for the six months ended 30 June 2015
Six months reviewed
R million 2015 2014
Earnings from covered business(1) 3 319 3 945
Earnings from other Group operations 2 846 3 337
Operations valued based on ratio of price to assets under management(2) - 1 160
Assumption changes - 89
Change in assets under management - 466
Earnings for the period and changes in capital requirements - 436
Foreign currency translation differences and other - 169
Operations valued based on discounted cash flows 2 342 1 057
Expected return 1 758 918
Operating experience variances (97) (54)
Assumption changes and other 86 (30)
Foreign currency translation differences 595 223
Operations valued at net asset value - earnings for the period 145 234
Listed operations - investment return 359 886
Earnings from discretionary and other capital (263) 6
Portfolio investments and other 41 157
Net corporate expenses (20) (6)
Share-based payments transactions (242) (100)
Change in net worth adjustments (42) (45)
Group Equity Value earnings 5 902 7 288
Dividends paid (4 556) (4 044)
Cost of treasury shares acquired
Share incentive scheme and other (19) (65)
Group Equity Value at beginning of the period 95 936 84 409
Group Equity Value at end of the period 97 263 87 588
(1) Refer embedded value of covered business below.
(2) Businesses previously valued on a ratio of price to assets under management basis were changed to a
discounted cash flow basis to ensure a consistent valuation basis across all unlisted Group operating
businesses.
Return on Group Equity Value
for the six months ended 30 June 2015
Six months reviewed
2015 2014
Earnings Return Earnings Return
R million % R million %
Sanlam Personal Finance 3 129 8,1 3 107 8,7
Covered business(1) 2 822 8,0 2 870 8,7
Other operations 307 10,2 237 9,0
Sanlam Emerging Markets 702 4,8 1 258 12,3
Covered business(1) 290 5,7 363 10,3
Other operations 412 4,3 895 13,5
Sanlam Investments 1 975 9,8 2 031 11,2
Covered business(1) 207 2,6 712 10,3
Other operations 1 768 14,4 1 319 11,8
Santam 359 2,5 886 7,0
Discretionary and other capital (263) 6
Return on Group Equity Value 5 902 6,2 7 288 8,6
Return on Group Equity Value per share 6,3 8,6
Annualised return on Group Equity Value per share 13,0 18,0
(1) Refer embedded value of covered business below.
Six months reviewed
R million 2015 2014
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 4 565 4 485
Net foreign currency translation gains recognised
in other comprehensive income 393 229
Earnings recognised directly in equity
Share-based payment transactions (213) (96)
Net cost of treasury shares delivered (418) (262)
Share-based payments 205 166
Change in ownership of subsidiaries (301) 63
Movement in fair value adjustment - shareholders’
fund at fair value 1 066 1 389
Movement in adjustments to net worth (17) 7
Present value of holding company expenses (42) (45)
Change in goodwill and value of business acquired
adjustments less value of in-force acquired 25 52
Growth from covered business: value of in-force(1) 409 1 211
Return on Group Equity Value 5 902 7 288
(1) Refer embedded value of covered business below.
Shareholders’ fund at fair value
at 30 June 2015
June reviewed December audited
2015 2014
Fair Fair
value Net value Net
Fair adjust- asset Fair adjust- asset
R million Notes value ment value value ment value
Covered business, discretionary and
other capital 27 074 - 27 074 28 691 112 28 579
Equipment 369 - 369 360 - 360
Owner-occupied properties 481 - 481 470 - 470
Goodwill(2) 644 - 644 648 - 648
Value of business acquired(2) 1 218 - 1 218 1 214 - 1 214
Other intangible assets 163 - 163 153 - 153
Deferred acquisition costs 2 518 - 2 518 2 457 - 2 457
Investments 25 640 - 25 640 25 365 112 25 253
Properties 455 - 455 338 - 338
Associated companies 1 600 - 1 600 1 540 - 1 540
Equities and similar securities 4 785 - 4 785 5 157 112 5 045
Other interest-bearing and preference
share investments 10 589 - 10 589 9 792 - 9 792
Structured transactions 749 - 749 737 - 737
Investment funds 3 767 - 3 767 4 883 - 4 883
Cash, deposits and similar securities 3 695 - 3 695 2 918 - 2 918
Net term finance - - - - - -
Term finance (3 579) - (3 579) (3 875) - (3 875)
Assets held in respect of term finance 3 579 - 3 579 3 875 - 3 875
Net deferred tax (982) - (982) (1 145) - (1 145)
Net defined benefit asset - - - 144 - 144
Net working capital (413) - (413) 1 563 - 1 563
Structured transactions liability (27) - (27) (2) - (2)
Non-controlling interests (2 537) - (2 537) (2 536) - (2 536)
Other Group operations 41 926 21 176 20 750 39 346 19 998 19 348
Sanlam Personal Finance 2.1 3 131 2 168 963 3 009 2 092 917
Glacier 1 747 1 428 319 1 542 1 235 307
Sanlam Personal Loans(3) 900 322 578 907 365 542
Other operations 484 418 66 560 492 68
Sanlam Emerging Markets 2.2 9 875 202 9 673 9 455 415 9 040
Shriram Capital 5 714 102 5 612 5 595 516 5 079
Letshego 931 4 927 923 70 853
Pacific & Orient 742 117 625 704 71 633
Capricorn Investment Holdings 825 50 775 845 84 761
Other operations 1 663 (71) 1 734 1 388 (326) 1 714
Sanlam Investments 2.3 14 294 9 796 4 498 12 289 8 588 3 701
Investment Management 13 589 9 769 3 820 11 604 8 536 3 068
Capital Management 705 27 678 685 52 633
Santam 14 626 10 257 4 369 14 593 10 150 4 443
Goodwill held on Group level in respect
of the above businesses - (1 247) 1 247 - (1 247) 1 247
Shareholders’ fund at fair value 69 000 21 176 47 824 68 037 20 110 47 927
Value per share (cents) 4 3 372 1 035 2 337 3 322 982 2 340
(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, Sanlam
Investments and Pensions and MCIS Insurance, and are excluded in the build-up of 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.
June reviewed December audited
2015 2014
R million Fair Fair
value of Value of value of Value of
Total assets in-force Total assets in-force
Reconciliation to Group Equity Value
Group Equity Value 97 263 65 635 31 628 95 936 64 729 31 207
Add: Net worth adjustments 1 598 1 598 - 1 556 1 556 -
Add: Goodwill and value of business
acquired replaced by value of in-force 1 767 1 767 - 1 752 1 752 -
Sanlam Life and Pensions 356 356 - 356 356 -
Sanlam Developing Markets 630 630 - 646 646 -
MCIS Insurance 475 475 - 506 506 -
Shriram Life Insurance(4) 210 210 - 210 210 -
Other 96 96 - 34 34 -
Less: Value of in-force (31 628) - (31 628) (31 207) - (31 207)
Shareholders’ fund at fair value 69 000 69 000 - 68 037 68 037 -
(4)The carrying value of Shriram Life Insurance includes goodwill of R210 million (2014: 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 2015 - reviewed
Sanlam Personal Sanlam Emerging Sanlam
Finance Markets Investments
R million Note 2015 2014 2015 2014 2015 2014
Financial services income 7 500 6 985 2 926 2 437 4 214 3 923
Sales remuneration (1 165) (1 071) (523) (361) (123) (127)
Income after sales remuneration 6 335 5 914 2 403 2 076 4 091 3 796
Underwriting policy benefits (1 727) (1 695) (582) (494) (1 033) (900)
Administration costs (1 890) (1 780) (704) (453) (2 125) (1 914)
Result from financial services before tax 2 718 2 439 1 117 1 129 933 982
Tax on result from financial services (758) (674) (323) (328) (203) (238)
Result from financial services after tax 1 960 1 765 794 801 730 744
Non-controlling interests (5) (2) (232) (177) (18) (17)
Net result from financial services 1 955 1 763 562 624 712 727
Net investment income 561 501 80 61 99 92
Dividends received - Group companies 263 235 - - - -
Other investment income 386 351 160 108 125 118
Tax on investment income (88) (85) (45) (30) (26) (26)
Non-controlling interests - - (35) (17) - -
Project expenses - - (7) (4) - -
Amortisation of value of business acquired
and other intangibles (24) (20) (21) (7) (82) (86)
Equity participation costs - - - - - (59)
Net equity-accounted headline earnings - - 4 10 5 -
Equity-accounted headline earnings - - 8 24 5 -
Tax on equity-accounted headline earnings - - (1) (1) - -
Non-controlling interests - - (3) (13) - -
Net investment surpluses (291) 1 312 90 13 111 165
Investment surpluses - Group companies (429) 997 - - - -
Other investment surpluses 157 406 211 17 123 215
Tax on investment surpluses (19) (91) 20 1 (12) (50)
Non-controlling interests - - (141) (5) - -
Normalised headline earnings 2 201 3 556 708 697 845 839
Net profit on disposal of subsidiaries
and associated companies - - (1) 92 - 19
Profit on disposal of subsidiaries and
associated companies - - (2) 124 - 19
Tax on profit on disposal of subsidiaries
and associated companies - - - (32) - -
Non-controlling interest - - 1 - - -
Impairments - - - (10) (1) (9)
Normalised attributable earnings 2 201 3 556 707 779 844 849
Fund transfers - - - - - -
Attributable earnings per Group statement
of comprehensive income 2 201 3 556 707 779 844 849
Ratios
Admin ratio(1) 29,8% 30,1% 29,3% 21,8% 51,9% 50,4%
Operating margin(2) 42,9% 41,2% 46,5% 54,4% 22,8% 25,9%
Diluted earnings per share 3
Adjusted weighted average number of
shares (million)
Net result from financial services (cents) 95,5 86,2 27,5 30,5 34,8 35,5
(1) Administration costs as a percentage of income earned by the shareholders’ fund less sales remuneration.
(2) Result from financial services before tax as a percentage of income earned by the shareholders’ fund less sales remuneration.
(3) Corporate and Other includes the consolidation entries in respect of the dividends received and the investment surpluses on
the Sanlam Limited shares held by Sanlam Life Insurance Limited.
Shareholders’ fund income statement (continued)
for the six months ended 30 June 2015 - reviewed
Corporate
Santam and Other(3) Total
R million Note 2015 2014 2015 2014 2015 2014
Financial services income 9 335 8 704 112 103 24 087 22 152
Sales remuneration (971) (910) - - (2 782) (2 469)
Income after sales remuneration 8 364 7 794 112 103 21 305 19 683
Underwriting policy benefits (5 786) (5 448) - - (9 128) (8 537)
Administration costs (1 523) (1 475) (147) (116) (6 389) (5 738)
Result from financial services before tax 1 055 871 (35) (13) 5 788 5 408
Tax on result from financial services (306) (247) 15 7 (1 575) (1 480)
Result from financial services after tax 749 624 (20) (6) 4 213 3 928
Non-controlling interests (336) (271) - - (591) (467)
Net result from financial services 413 353 (20) (6) 3 622 3 461
Net investment income 63 40 (187) (206) 616 488
Dividends received - Group companies - - (263) (235) - -
Other investment income 124 72 19 26 814 675
Tax on investment income (16) (3) 57 3 (118) (141)
Non-controlling interests (45) (29) - - (80) (46)
Project expenses - - - - (7) (4)
Amortisation of value of business acquired
and other intangibles (9) (6) - - (136) (119)
Equity participation costs (39) (8) - - (39) (67)
Net equity-accounted headline earnings 36 10 - - 45 20
Equity-accounted headline earnings 60 17 - - 73 41
Tax on equity-accounted headline earnings - - - - (1) (1)
Non-controlling interests (24) (7) - - (27) (20)
Net investment surpluses 149 124 428 (1 000) 487 614
Investment surpluses - Group companies - - 429 (997) - -
Other investment surpluses 315 245 (1) (3) 805 880
Tax on investment surpluses (67) (36) - - (78) (176)
Non-controlling interests (99) (85) - - (240) (90)
Normalised headline earnings 613 513 221 (1 212) 4 588 4 393
Net profit on disposal of subsidiaries
and associated companies - - - - (1) 111
Profit on disposal of subsidiaries and
associated companies - - - - (2) 143
Tax on profit on disposal of subsidiaries
and associated companies - - - - - (32)
Non-controlling interest - - - - 1 -
Impairments (21) - - - (22) (19)
Normalised attributable earnings 592 513 221 (1 212) 4 565 4 485
Fund transfers - - 138 54 138 54
Attributable earnings per Group statement
of comprehensive income 592 513 359 (1 158) 4 703 4 539
Ratios
Admin ratio(1) 18,2% 18,9% 30,0% 29,2%
Operating margin(2) 12,6% 11,2% 27,2% 27,5%
Diluted earnings per share 3
Adjusted weighted average number of
shares (million) 2 046,4 2 045,6
Net result from financial services (cents) 20,2 17,3 (1,0) (0,3) 177,0 169,2
(1) Administration costs as a percentage of income earned by the shareholders’ fund less sales remuneration.
(2) Result from financial services before tax as a percentage of income earned by the shareholders’ fund less sales remuneration.
(3) Corporate and Other includes the consolidation entries in respect of the dividends received and the investment surpluses on
the Sanlam Limited shares held by Sanlam Life Insurance Limited.
Notes to the shareholders’ fund information
for the six months ended 30 June 2015 - 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) General insurance Investment business(2) Total
R million 2015 2014 2015 2014 2015 2014 2015 2014
Sanlam Personal Finance 13 546 11 552 - - 15 616 12 110 29 162 23 662
Sanlam Sky 546 474 - - - - 546 474
Individual Life 5 893 5 672 - - 155 149 6 048 5 821
Recurring 696 645 - - 13 17 709 662
Single 5 197 5 027 - - 142 132 5 339 5 159
Glacier 7 107 5 406 - - 15 461 11 961 22 568 17 367
Sanlam Emerging Markets 2 086 1 595 812 587 2 497 1 848 5 395 4 030
Namibia 161 162 - - 1 125 1 379 1 286 1 541
Recurring 71 66 - - - - 71 66
Single 90 96 - - 1 125 1 379 1 215 1 475
Botswana 1 101 745 28 31 1 320 361 2 449 1 137
Recurring 135 126 28 31 - - 163 157
Single 966 619 - - 1 320 361 2 286 980
Rest of Africa 554 612 279 107 52 108 885 827
Recurring 335 317 279 107 - - 614 424
Single 219 295 - - 52 108 271 403
India 122 76 269 255 - - 391 331
Recurring 74 36 269 255 - - 343 291
Single 48 40 - - - - 48 40
South-East Asia 148 - 236 194 - - 384 194
Recurring 102 - 236 194 - - 338 194
Single 46 - - - - - 46 -
Sanlam Investments 2 988 4 389 - - 53 246 41 293 56 234 45 682
Employee benefits 1 182 952 - - - - 1 182 952
Recurring 76 154 - - - - 76 154
Single 1 106 798 - - - - 1 106 798
Investment Management 1 806 3 437 - - 53 246 41 194 55 052 44 631
Investment Management SA - - - - 39 909 28 344 39 909 28 344
Wealth Management - - - - 9 419 7 594 9 419 7 594
International 1 806 3 437 - - 3 918 5 256 5 724 8 693
Recurring 26 68 - - 10 - 36 68
Single 1 780 3 369 - - 3 908 5 256 5 688 8 625
Capital Management - - - - - 99 - 99
Santam - - 9 088 8 459 - - 9 088 8 459
Total new business 18 620 17 536 9 900 9 046 71 359 55 251 99 879 81 833
Recurring premiums on existing funds:
Sanlam Personal Finance 7 853 7 553
Sanlam Sky 2 153 2 071
Individual Life 5 700 5 482
Sanlam Emerging Markets 2 317 1 230
Namibia 465 364
Botswana 494 434
Rest of Africa 517 386
India 72 46
South-East Asia 769 -
Sanlam Investments 3 802 2 823
Sanlam Employee Benefits 2 116 1 654
Sanlam Investments 1 686 1 169
Investment Management SA 1 476 1 043
International 210 126
Total funds received 113 851 93 439
(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 and investment business. Life licence business relates to investment products provided by means of a
life insurance policy where there is very little or no insurance risk. Life licence business is excluded from the
calculation of embedded value of covered business.
1.2 Analysis of payments to clients
Life insurance(1) General insurance Investment business(2) Total
R million 2015 2014 2015 2014 2015 2014 2015 2014
Sanlam Personal Finance 16 936 15 461 - - 9 891 7 667 26 827 23 128
Sanlam Sky 1 326 1 238 - - - - 1 326 1 238
Surrenders 193 190 - - - - 193 190
Other 1 133 1 048 - - - - 1 133 1 048
Individual Life 12 983 11 868 - - 278 294 13 261 12 162
Surrenders 2 070 1 876 - - - - 2 070 1 876
Other 10 913 9 992 - - 278 294 11 191 10 286
Glacier 2 627 2 355 - - 9 613 7 373 12 240 9 728
Sanlam Emerging Markets 2 606 1 717 618 439 13 469 1 342 16 693 3 498
Namibia 480 587 - - 1 312 975 1 792 1 562
Surrenders 63 204 - - - - 63 204
Other 417 383 - - 1 312 975 1 729 1 358
Botswana 766 710 10 16 12 150 367 12 926 1 093
Surrenders 213 192 - - - - 213 192
Other 553 518 10 16 12 150 367 12 713 901
Rest of Africa 453 345 143 54 7 - 603 399
Surrenders 84 62 - - - - 84 62
Other 369 283 143 54 7 - 519 337
India 85 75 258 249 - - 343 324
Surrenders 49 52 - - - - 49 52
Other 36 23 258 249 - - 294 272
South-East Asia 822 - 207 120 - - 1 029 120
Surrenders 198 - - - - - 198 -
Other 624 - 207 120 - - 831 120
Sanlam Investments 5 610 4 678 - - 52 166 37 465 57 776 42 143
Sanlam Employee Benefits 3 699 2 967 - - - - 3 699 2 967
Terminations 850 668 - - - - 850 668
Other 2 849 2 299 - - - - 2 849 2 299
Investment Management 1 911 1 711 - - 52 163 37 465 54 074 39 176
Investment Management SA - - - - 37 182 25 504 37 182 25 504
Wealth Management - - - - 6 973 8 051 6 973 8 051
International 1 911 1 711 - - 8 008 3 910 9 919 5 621
Capital Management - - - - 3 - 3 -
Santam - - 5 786 5 448 - - 5 786 5 448
Total payments to clients 25 152 21 856 6 404 5 887 75 526 46 474 107 082 74 217
(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 and investment business. Life licence business relates to investment products provided by means of
a life insurance policy where there is very little or no insurance risk. Life licence business is excluded from the
calculation of embedded value of covered business.
1.3 Analysis of net inflow/(outflow) of funds
Life insurance(1) General insurance Investment business(2) Total
R million 2015 2014 2015 2014 2015 2014 2015 2014
Sanlam Personal Finance 4 350 3 538 - - 5 838 4 549 10 188 8 087
Sanlam Sky 1 373 1 307 - - - - 1 373 1 307
Individual Life (1 503) (820) - - (10) (39) (1 513) (859)
Glacier 4 480 3 051 - - 5 848 4 588 10 328 7 639
Sanlam Emerging Markets 1 797 1 108 194 148 (10 972) 506 (8 981) 1 762
Namibia 146 (61) - - (187) 404 (41) 343
Botswana 829 469 18 15 (10 830) (6) (9 983) 478
Rest of Africa 618 653 136 53 45 108 799 814
India 109 47 11 6 - - 120 53
South-East Asia 95 - 29 74 - - 124 74
Sanlam Investments (325) 1 491 - - 2 585 4 871 2 260 6 362
Sanlam Employee Benefits (401) (361) - - - - (401) (361)
Investment Management 76 1 852 - - 2 588 4 772 2 664 6 624
Investment Management SA - - - - 4 203 3 883 4 203 3 883
Wealth Management - - - - 2 446 (457) 2 446 (457)
International 76 1 852 - - (4 061) 1 346 (3 985) 3 198
Capital Management - - - - (3) 99 (3) 99
Santam - - 3 302 3 011 - - 3 302 3 011
Total net inflows/(outflows) 5 822 6 137 3 496 3 159 (2 549) 9 926 6 769 19 222
(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 and investment businesses. Life licence business relates to investment products provided by means of
a life insurance policy where there is very little or no insurance risk. Life licence business is excluded from the
calculation of embedded value of covered business.
2. Cluster information
2.1 Sanlam Personal Finance
Non-life
Life operations operations Total
R million 2015 2014 2015 2014 2015 2014
Analysis of attributable earnings
Gross result from financial services 2 445 2 187 273 252 2 718 2 439
Entry-level market 569 518 - - 569 518
Middle-income market life and investment 1 723 1 542 10 29 1 733 1 571
Glacier 91 74 118 97 209 171
Sanlam Personal Loans 62 53 114 95 176 148
Other operations - - 31 31 31 31
Tax on result from financial services (687) (615) (71) (59) (758) (674)
Non-controlling interests - - (5) (2) (5) (2)
Net result from financial services 1 758 1 572 197 191 1 955 1 763
Net investment return 377 430 (107) 1 383 270 1 813
Net other earnings (24) (20) - - (24) (20)
Normalised attributable earnings 2 111 1 982 90 1 574 2 201 3 556
Analysis of Group Equity Value (GEV)
GEV GEV
at the at the
beginning Net capital Dividend end of
R million of period Earnings investment paid period
30 June 2015 - reviewed
Covered business 35 444 2 822 (325) (1 760) 36 181
Non-life operations 3 009 307 - (185) 3 131
Glacier 1 542 309 - (104) 1 747
Sanlam Personal Loans 907 39 - (46) 900
Other 560 (41) - (35) 484
Group Equity Value 38 453 3 129 (325) (1 945) 39 312
31 December 2014 - audited
Covered business 33 033 5 805 (284) (3 110) 35 444
Non-life operations 2 633 567 97 (288) 3 009
Glacier 1 336 312 26 (132) 1 542
Sanlam Personal Loans 836 84 71 (84) 907
Other 461 171 - (72) 560
Group Equity Value 35 666 6 372 (187) (3 398) 38 453
2.2 Sanlam Emerging Markets
R million 2015 2014
Analysis of attributable earnings
Net result from financial services 562 624
Life insurance 263 217
General insurance 73 100
Investment management 21 23
Credit and banking 204 270
Other 1 14
Net investment return 170 74
Net investment income 80 61
Net investment surpluses 90 13
Net other earnings (25) 81
Normalised attributable earnings 707 779
Analysis of net result from financial services
Life insurance 263 217
Namibia 59 110
Botswana 107 93
Rest of Africa 70 5
India 8 9
South-East Asia 19 -
Non-life operations 299 407
Namibia 57 53
Botswana 63 66
Rest of Africa 11 16
India 146 250
South-East Asia 22 22
Net result from financial services 562 624
2.2 Sanlam Emerging Markets (continued)
Analysis of Group Equity Value (GEV)
R million GEV GEV
at the at the
beginning Net capital Dividend end of
of period Earnings investment paid period
30 June 2015 - reviewed
Covered business 5 116 290 (159) (263) 4 984
Non-life operations 9 455 412 89 (81) 9 875
Shriram Capital 5 595 124 (11) 6 5 714
Letshego 923 24 - (16) 931
Pacific & Orient 704 52 - (14) 742
Capricorn Investment Holdings 845 (15) - (5) 825
Sanlam Emerging Markets other operations 1 388 227 100 (52) 1 663
Group Equity Value 14 571 702 (70) (344) 14 859
31 December 2014 - audited
Covered business 3 541 932 1 120 (477) 5 116
Non-life operations 6 648 1 978 1 074 (245) 9 455
Shriram Capital 4 219 1 344 71 (39) 5 595
Letshego 698 297 35 (107) 923
Pacific & Orient 622 155 - (73) 704
Capricorn Investment Holdings 682 169 - (6) 845
Sanlam Emerging Markets other operations 427 13 968 (20) 1 388
Group Equity Value 10 189 2 910 2 194 (722) 14 571
2.3 Sanlam Investments
Analysis of attributable earnings
Investment Capital Sanlam
Management Management Employee Benefits
R million 2015 2014* 2015 2014* 2015 2014
Financial services income** 2 174 1 975 300 303 1 695 1 516
Sales remuneration (96) (101) - - (27) (26)
Income after sales remuneration 2 078 1 874 300 303 1 668 1 490
Underwriting policy benefits - - - - (1 033) (900)
Administration cost** (1 508) (1 333) (174) (177) (429) (374)
Result from financial services
before performance fees 570 541 126 126 206 216
Net performance fees 22 71 9 28 - -
Result from financial services 592 612 135 154 206 216
Tax on result from financial services (136) (148) (9) (30) (58) (60)
Non-controlling interests (18) (17) - - - -
Net result from financial services 438 447 126 124 148 156
Net investment return (2) 11 - - 212 246
Net investment income 7 22 - - 92 70
Net investment surpluses (9) (11) - - 120 176
Net other earnings (78) (135) - - - -
Normalised attributable earnings 358 323 126 124 360 402
* Comparative information has been adjusted for the reallocation of the Sanlam Africa Funds from Capital Management
to Investment Management.
** Financial services income and administration costs above include performance fees and related
administration costs.
Analysis of attributable earnings (continued)
Intra-cluster
eliminations Total
R million 2015 2014 2015 2014
Financial services income** (15) (8) 4 154 3 786
Sales remuneration - - (123) (127)
Income after sales remuneration (15) (8) 4 031 3 659
Underwriting policy benefits - - (1 033) (900)
Administration cost** 15 8 (2 096) (1 876)
Result from financial services
before performance fees - - 902 883
Net performance fees - - 31 99
Result from financial services - - 933 982
Tax on result from financial services - - (203) (238)
Non-controlling interests - - (18) (17)
Net result from financial services - - 712 727
Net investment return - - 210 257
Net investment income - - 99 92
Net investment surpluses - - 111 165
Net other earnings - - (78) (135)
Normalised attributable earnings - - 844 849
* Comparative information has been adjusted for the reallocation of the Sanlam Africa Funds from Capital Management
to Investment Management.
** Financial services income and administration costs above include performance fees and related
administration costs.
Investment Management
Analysis of net result from financial services
R million 2015 2014
Investment management 402 422
Investment Management SA 223 235
Wealth Management 84 74
International 100 112
Support Services (5) 1
Capital Management 126 131
Asset management operations 528 553
Covered business: Sanlam Employee Benefits 148 156
Covered business: Sanlam UK 36 18
Sanlam Investments total 712 727
Asset management
Assets under New business Fee Administration
management volumes income costs
June December* June December* June December* June December*
2015 2014 2015 2014 2015 2014 2015 2014
R million R million R million R million % % % %
Investment management 781 329 758 132 53 246 89 171
Investment Management SA 627 650 604 309 39 909 63 314 0,31 0,30 0,21 0,21
Wealth Management 170 406 163 091 9 419 14 716 0,72 0,72 0,57 0,58
International 130 130 131 863 3 918 11 141 0,71 0,71 0,52 0,53
Intra-cluster eliminations (146 857) (141 131)
Capital Management 2 848 3 372 - 220 0,81 0,75 0,81 0,71
Asset management operations 784 177 761 504 53 246 89 391
Covered business:
Sanlam Employee Benefits 76 009 74 115 1 182 10 154
Sanlam UK 43 360 39 787 1 806 3 705
Sanlam Investments total 903 546 875 406 56 234 103 250
* Audited
Asset mix of assets under management
Fixed
R million interest Equities Offshore Properties Cash Total
June 2015 - reviewed
Investment Management SA 139 968 291 528 64 082 17 151 114 921 627 650
Wealth Management - 106 971 59 854 - 3 581 170 406
International - - 130 130 - - 130 130
Capital Management - 2 838 - - 10 2 848
Intra-cluster eliminations (146 857)
Assets under management - Sanlam Investments 139 968 401 337 254 066 17 151 118 512 784 177
December 2014 - audited
Investment Management SA 143 188 271 801 61 997 17 790 109 533 604 309
Wealth Management - 101 512 58 091 - 3 488 163 091
International - - 131 863 - - 131 863
Capital Management - 2 829 533 - 10 3 372
Intra-cluster eliminations (141 131)
Assets under management - Sanlam Investments 143 188 376 142 252 484 17 790 113 031 761 504
Analysis of covered business
Sanlam Employee Benefits
June
Reviewed
R million 2015 2014
Analysis of attributable earnings
Net result from financial services 148 156
Risk underwriting 83 92
Investment and other 58 65
Working capital management 21 19
Administration (14) (20)
Net investment return 212 246
Net investment income 92 70
Net investment surpluses 120 176
Normalised attributable earnings 360 402
Analysis of premiums
Recurring premiums 76 154
Guaranteed 18 28
Risk 58 126
Single premiums 1 106 798
Guaranteed 521 621
Risk 65 -
Retirement 36 -
Annuity 349 106
Special structures 135 71
Sanlam Investments and Pensions
(included in Investment Management above)
June
Reviewed
R million 2015 2014
Analysis of attributable earnings
Financial services income 132 169
Sales remuneration (57) (59)
Income after sales remuneration 75 110
Administration costs (39) (92)
Gross result from financial services 36 18
Tax on result from financial services - -
Net result from financial services 36 18
Net investment return - 1
Normalised attributable earnings 36 19
2.3 Sanlam Investments (continued)
Analysis of Group Equity Value (GEV)
GEV GEV
at the at the
beginning Net capital Dividend end of
R million of period Earnings investment paid period
30 June 2015 - reviewed
Investment Management 12 797 1 641 1 069 (556) 14 951
Investment Management SA 4 823 991 602 (191) 6 225
Wealth Management 2 522 261 36 (86) 2 733
International 5 452 389 431 (279) 5 993
Covered business 1 193 7 198 (36) 1 362
Other operations 4 259 382 233 (243) 4 631
Sanlam Employee Benefits 6 640 200 (212) (149) 6 479
Capital Management 685 134 - (114) 705
Group Equity Value 20 122 1 975 857 (819) 22 135
31 December 2014 - audited
Investment Management 11 648 2 075 (154) (772) 12 797
Investment Management SA 4 974 58 167 (376) 4 823
Wealth Management 2 105 528 - (111) 2 522
International 4 569 1 489 (321) (285) 5 452
Covered business 1 194 147 (80) (68) 1 193
Other operations 3 375 1 342 (241) (217) 4 259
Sanlam Employee Benefits 5 707 1 355 (188) (234) 6 640
Capital Management 616 241 75 (247) 685
Group Equity Value 17 971 3 671 (267) (1 253) 20 122
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
R million June December
2015 2014
Reviewed Audited
Valuation method
Ratio of price to assets under management(1) - 10 802
Sanlam Investments - 10 334
Investment Management SA - 4 610
Wealth Management - 2 360
International - 3 279
Capital Management - 85
Sanlam Emerging Markets - 468
Discounted cash flows 25 313 12 433
Sanlam Investments 12 962 1 175
Investment Management SA 5 711 238
Wealth Management 2 733 162
International 4 413 775
Capital Management 105 -
Sanlam Emerging Markets 9 220 8 249
Shriram Capital(2) 5 714 5 595
Letshego(2) 931 923
Pacific & Orient 742 704
Capricorn Investment Holdings(2) 825 845
Other operations 1 008 182
Sanlam Personal Finance 3 131 3 009
Glacier 1 747 1 542
Sanlam Personal Loans 900 907
Other operations 484 560
Net asset value 1 987 1 518
Sanlam Investments 1 332 780
Investment Management SA 514 (25)
International 218 205
Capital Management 600 600
Sanlam Emerging Markets 655 738
27 300 24 753
(1) Businesses previously valued on a ratio of price to assets under management basis were changed
to a discounted cash flow basis to ensure a consistent valuation basis across all unlisted Group
operating businesses.
(2) Includes the listed businesses at directors’ valuation of R4 792 million (2014: R4 669 million)
for Shriram Capital, R931 million (2014: R923 million) for Letshego and R825 million (2014:
R845 million) for Capricorn Investment Holdings. The listed value of these operations are
R5 618 million (2014: R6 552 million), R1 224 million (2014: R997 million) and R1 094 million
(2014: R949 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
2015
% Reviewed
Risk discount rate (RDR) 1,0
Perpetuity growth rate (PGR) 1,0
Decrease in Increase in
R million Weighted average assumption Base value assumption assumption
Discounted cash flows RDR = 17,3% (Dec 2014: 16,6%) 25 313 28 703 22 569
Perpetuity growth rate PGR = 2,5 - 5% (Dec 2014: 2,5 - 5%) 25 313 23 984 26 888
3. Normalised diluted earnings per share
June June
2015 2014
Cents Reviewed Reviewed
Normalised diluted earnings per share:
Net result from financial services 177,0 169,2
Normalised headline earnings 224,2 214,8
Profit attributable to shareholders’ fund 223,1 219,3
June June
2015 2014
R million Reviewed Reviewed
Analysis of normalised earnings
(refer shareholders’ fund income statement above):
Net result from financial services 3 622 3 461
Headline earnings 4 588 4 393
Profit attributable to shareholders’ fund 4 565 4 485
Reconciliation of normalised headline earnings:
Headline earnings per note 1 below 4 726 4 447
Fund transfers (138) (54)
Normalised headline earnings 4 588 4 393
June June
2015 2014
Million Reviewed Reviewed
Adjusted number of shares:
Weighted average number of shares for diluted earnings per share
(refer note 1 below) 2 027,1 2 019,1
Add: Weighted average Sanlam shares held by policyholders 19,3 26,5
Adjusted weighted average number of shares for normalised diluted
earnings per share 2 046,4 2 045,6
4. Value per share
Fair value per share is calculated on the Group shareholders’ fund at fair value of R69 000 million
(December 2014: R68 037 million), divided by 2 046,3 million (December 2014: 2 048,3 million) shares.
Net asset value per share is calculated on the Group shareholders’ fund at net asset value of R47 824
million (December 2014: R47 927 million), divided by 2 046,3 million (December 2014: 2 048,3 million)
shares.
Equity value per share is calculated on the Group Equity Value of R97 263 million (December 2014:
R95 936 million), divided by 2 046,3 million (December 2014: 2 048,3 million) shares.
June December
2015 2014
Million Reviewed Audited
Number of shares for value per share:
Number of ordinary shares in issue 2 166,5 2 166,5
Shares held by subsidiaries in shareholders’ fund (141,9) (142,1)
Outstanding shares in respect of Sanlam Limited
long-term incentive schemes 21,7 23,9
Adjusted number of shares for value per share 2 046,3 2 048,3
Embedded value of covered business
at 30 June 2015
Note June December
Reviewed Audited
R million 2015 2014
Sanlam Personal Finance 36 181 35 444
Adjusted net worth 9 498 9 446
Net value of in-force covered business 26 683 25 998
Value of in-force covered business 28 527 27 872
Cost of capital (1 844) (1 874)
Sanlam Emerging Markets 4 984 5 116
Adjusted net worth 2 231 2 324
Net value of in-force covered business 2 753 2 792
Value of in-force covered business 4 617 4 618
Cost of capital (446) (384)
Non-controlling interest (1 418) (1 442)
Sanlam UK(1) 1 362 1 193
Adjusted net worth 624 391
Net value of in-force covered business 738 802
Value of in-force covered business 904 858
Cost of capital (166) (56)
Sanlam Employee Benefits(1) 6 479 6 640
Adjusted net worth 5 025 5 025
Net value of in-force covered business 1 454 1 615
Value of in-force covered business 2 362 2 520
Cost of capital (908) (905)
Embedded value of covered business 49 006 48 393
Adjusted net worth(2) 17 378 17 186
Net value of in-force covered business 1 31 628 31 207
Embedded value of covered business 49 006 48 393
(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 2015
Six months reviewed
2015
Value of Cost of Adjusted
R million Notes Total in-force capital net worth
Embedded value of covered business at the
beginning of the year 48 393 34 299 (3 092) 17 186
Value of new business 2 655 1 654 (79) (920)
Net earnings from existing covered business 2 256 (836) 16 3 076
Expected return on value of in-force business 1 820 1 727 93 -
Expected transfer of profit to adjusted
net worth - (2 639) - 2 639
Operating experience variances 3 408 20 (19) 407
Operating assumption changes 4 28 56 (58) 30
Expected investment return on adjusted net worth 608 - - 608
Embedded value earnings from operations 3 519 818 (63) 2 764
Economic assumption changes 5 (397) (374) (19) (4)
Tax changes - - - -
Investment variances - value of in-force 132 107 (31) 56
Investment variances - investment return on
adjusted net worth 94 - - 94
Goodwill from business (14) (14) - -
Exchange rate movements (15) (7) (8) -
Embedded value earnings from covered business 3 319 530 (121) 2 910
Acquired value of in-force 18 12 - 6
Transfers from covered business (2 724) - - (2 724)
Embedded value of covered business at the end
of the period 49 006 34 841 (3 213) 17 378
Analysis of earnings from covered business
Sanlam Personal Finance 2 822 655 30 2 137
Sanlam Emerging Markets 290 (13) (38) 341
Sanlam UK 7 46 (110) 71
Sanlam Employee Benefits 200 (158) (3) 361
Embedded value earnings from covered business 3 319 530 (121) 2 910
Change in embedded value of covered business (continued)
for the six months ended 30 June 2015
Six months reviewed
2014
Value of Cost of Adjusted
R million Notes Total in-force capital net worth
Embedded value of covered business at the
beginning of the year 43 475 30 720 (3 045) 15 800
Value of new business 2 626 1 574 (74) (874)
Net earnings from existing covered business 2 260 (546) 61 2 745
Expected return on value of in-force business 1 659 1 577 82 -
Expected transfer of profit to adjusted
net worth - (2 381) - 2 381
Operating experience variances 3 477 6 (31) 502
Operating assumption changes 4 124 252 10 (138)
Expected investment return on adjusted net worth 576 - - 576
Embedded value earnings from operations 3 462 1 028 (13) 2 447
Economic assumption changes 5 (200) (215) 8 7
Tax changes (3) (2) - (1)
Investment variances - value of in-force 527 462 (27) 92
Investment variances - investment return on
adjusted net worth 189 - - 189
Goodwill from business - - - -
Exchange rate movements (30) (29) (1) -
Embedded value earnings from covered business 3 945 1 244 (33) 2 734
Acquired value of in-force 43 43 (4) 4
Transfers from covered business (2 560) - - (2 560)
Embedded value of covered business at the end
of the period 44 903 32 007 (3 082) 15 978
Analysis of earnings from covered business
Sanlam Personal Finance 2 870 903 (34) 2 001
Sanlam Emerging Markets 363 65 4 294
Sanlam UK 98 65 (3) 36
Sanlam Employee Benefits 614 211 - 403
Embedded value earnings from covered business 3 945 1 244 (33) 2 734
Value of new business
for the six months ended 30 June 2015
Six months reviewed
R million Note 2015 2014
Value of new business (at point of sale):
Gross value of new business 817 779
Sanlam Personal Finance 530 479
Sanlam Emerging Markets 244 213
Sanlam UK 11 24
Sanlam Employee Benefits 32 63
Cost of capital (87) (82)
Sanlam Personal Finance (48) (42)
Sanlam Emerging Markets (22) (17)
Sanlam UK (1) (2)
Sanlam Employee Benefits (16) (21)
Value of new business 730 697
Sanlam Personal Finance 482 437
Sanlam Emerging Markets 222 196
Sanlam UK 10 22
Sanlam Employee Benefits 16 42
Value of new business attributable to:
Shareholders’ fund 2 655 626
Sanlam Personal Finance 482 437
Sanlam Emerging Markets 147 125
Sanlam UK 10 22
Sanlam Employee Benefits 16 42
Non-controlling interest 75 71
Sanlam Personal Finance - -
Sanlam Emerging Markets 75 71
Sanlam UK - -
Sanlam Employee Benefits - -
Value of new business 730 697
Geographical analysis:
South Africa 498 479
Africa 192 195
Other international 40 23
Value of new business 730 697
Analysis of new business profitability:
Before non-controlling interest:
Present value of new business premiums 25 866 24 202
Sanlam Personal Finance 18 263 15 990
Sanlam Emerging Markets 3 599 2 684
Sanlam UK 1 890 3 703
Sanlam Employee Benefits 2 114 1 825
New business margin 2,82% 2,88%
Sanlam Personal Finance 2,64% 2,73%
Sanlam Emerging Markets 6,17% 7,30%
Sanlam UK 0,53% 0,59%
Sanlam Employee Benefits 0,76% 2,30%
After non-controlling interest:
Present value of new business premiums 24 633 23 335
Sanlam Personal Finance 18 263 15 990
Sanlam Emerging Markets 2 366 1 817
Sanlam UK 1 890 3 703
Sanlam Employee Benefits 2 114 1 825
New business margin 2,66% 2,68%
Sanlam Personal Finance 2,64% 2,73%
Sanlam Emerging Markets 6,21% 6,88%
Sanlam UK 0,53% 0,59%
Sanlam Employee Benefits 0,76% 2,30%
Notes to the embedded value of covered business
for the six months ended 30 June 2015
Gross Net
value of value of Change
in-force Cost of in-force from base
business capital business value
R million R million R million %
1.Value of in-force sensitivity analysis
Base value at 30 June 2015 34 841 (3 213) 31 628
• Risk discount rate increase by 1% 33 027 (3 950) 29 077 (8)
Base value at 31 December 2014 34 299 (3 092) 31 207
• Risk discount rate increase by 1% 32 429 (3 792) 28 637 (8)
Gross Net
value value Change
of new Cost of of new from base
business capital business value
R million R million R million %
2.Value of new business sensitivity analysis
Base value at 30 June 2015 734 (79) 655
• Risk discount rate increase by 1% 643 (103) 540 (18)
Value of Cost of Adjusted
R million Total in-force capital net worth
3.Operating experience variances
Six months reviewed 2015
Risk experience 377 85 - 292
Persistency 88 85 (18) 21
Maintenance expenses (5) (2) (1) (2)
Working capital and other (52) (148) - 96
Total operating experience variances 408 20 (19) 407
Six months reviewed 2014
Risk experience 405 29 (2) 378
Persistency (24) 34 (34) (24)
Maintenance expenses 22 (1) (1) 24
Working capital and other 74 (56) 6 124
Total operating experience variances 477 6 (31) 502
Value of Cost of Adjusted
R million Total in-force capital net worth
4.Operating assumption changes
Six months reviewed 2015
Risk experience (28) (30) 1 1
Persistency 2 4 - (2)
Maintenance expenses (55) (55) (2) 2
Modelling improvements and other 109 137 (57) 29
Total operating assumption changes 28 56 (58) 30
Six months reviewed 2014
Risk experience 94 53 1 40
Persistency 73 94 (9) (12)
Maintenance expenses 65 69 (2) (2)
Modelling improvements and other (108) 36 20 (164)
Total operating assumption changes 124 252 10 (138)
5.Economic assumption changes
Six months reviewed 2015
Investment yields (395) (372) (19) (4)
Long-term asset mix assumptions and other (2) (2) - -
Total economic assumption changes (397) (374) (19) (4)
Six months reviewed 2014
Investment yields (229) (217) (19) 7
Long-term asset mix assumptions and other 29 2 27 -
Total economic assumption changes (200) (215) 8 7
June December
Reviewed Audited
% 2015 2014 2014
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 8,5 8,1
Equities and offshore investments 12,0 12,0 11,6
Hedged equities 9,0 9,0 8,6
Property 9,5 9,5 9,1
Cash 7,5 7,5 7,1
Return on required capital 9,5 9,5 9,1
Inflation rate(1) 6,5 6,5 6,1
Risk discount rate 11,0 11,0 10,6
(1) Expense inflation of 8,5% (Dec 2014: 8,1%) 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 8,0 7,8 7,6
Equities and offshore investments 11,5 11,3 11,1
Hedged equities n/a n/a n/a
Property 9,0 8,8 8,6
Cash 7,0 6,8 6,6
Return on required capital 9,3 9,1 8,9
Inflation rate 6,0 5,8 5,6
Risk discount rate 10,5 10,3 10,1
Sanlam Investments and Pensions
Point used on the relevant yield curve 15 year 15 year 15 year
Fixed-interest securities 2,5 3,2 2,2
Equities and offshore investments 5,7 6,4 5,4
Hedged equities n/a n/a n/a
Property 5,7 6,4 5,4
Cash 2,5 3,2 2,2
Return on required capital 2,5 3,2 2,2
Inflation rate 3,3 3,3 2,9
Risk discount rate 6,2 6,9 5,9
Botswana Life Insurance
Fixed-interest securities 7,5 8,0 7,5
Equities and offshore investments 11,0 11,5 11,0
Hedged equities n/a n/a n/a
Property 8,5 9,0 8,5
Cash 6,5 7,0 6,5
Return on required capital 8,8 8,1 8,8
Inflation rate 4,5 5,0 4,5
Risk discount rate 11,0 11,5 11,0
June December
Reviewed Audited
% 2015 2014 2014
Liquidity premiums
Investment returns on non-participating and inflation-linked annuities, as well as guaranteed plans include
assumed liquidity premiums due to matching assets being held to maturity.
Assumed liquidity premiums generally amount to between 25bps and 55bps (2014: 25bps and 55bps) for
non-participating annuities, between 25bps and 75bps (2014: 25bps to 75bps) for inflation-linked
annuities and between 80bps and 140bps (2014: 50bps 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 50 40 50
Cash 50 60 50
100 100 100
Interim condensed consolidated financial statements
for the six months ended 30 June 2015
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 shareholders 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 2015 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 2015 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
2 September 2015
Statement of financial position
at 30 June 2015
Reviewed Audited
June December
R million 2015 2014
ASSETS
Equipment 752 723
Owner-occupied properties 1 087 1 096
Goodwill 4 063 3 974
Other intangible assets 491 439
Value of business acquired 1 966 2 045
Deferred acquisition costs 3 354 3 281
Long-term reinsurance assets 967 941
Investments 555 782 538 155
Properties 10 827 10 333
Equity-accounted investments 12 336 11 895
Equities and similar securities 185 789 183 040
Interest-bearing investments 164 548 161 778
Structured transactions 12 239 12 348
Investment funds 142 404 133 552
Cash, deposits and similar securities 27 639 25 209
Deferred tax 358 365
Assets of disposal groups classified
as held for sale 677 1 893
General insurance technical assets 4 205 3 964
Net defined benefit asset - 144
Working capital assets 62 515 54 233
Trade and other receivables 47 002 37 974
Cash, deposits and similar securities 15 513 16 259
Total assets 636 217 611 253
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 22 22
Treasury shares (3 573) (3 584)
Other reserves 9 981 9 423
Retained earnings 39 691 40 176
Shareholders’ fund 46 121 46 037
Non-controlling interests 5 656 5 198
Total equity 51 777 51 235
Long-term policy liabilities 460 175 443 672
Insurance contracts 187 293 186 626
Investment contracts 272 882 257 046
Term finance 5 308 5 775
Margin business 1 572 1 835
Other interest-bearing liabilities 3 736 3 940
Structured transaction liabilities 934 766
External investors in consolidated funds 49 063 49 625
Cell owners’ interest 947 925
Deferred tax 2 374 2 498
Liabilities of disposal groups classified
as held for sale - 1 466
General insurance technical provisions 12 651 12 592
Working capital liabilities 52 988 42 699
Trade and other payables 50 730 40 529
Provisions 284 283
Taxation 1 974 1 887
Total equity and liabilities 636 217 611 253
Statement of comprehensive income
for the six months ended 30 June 2015
R million Note Reviewed Reviewed
2015 2014
Net income 46 424 50 160
Financial services income 26 259 24 025
Reinsurance premiums paid (3 386) (3 048)
Reinsurance commission received 608 521
Investment income 12 933 10 995
Investment surpluses 12 173 20 507
Finance cost - margin business (52) (51)
Change in fair value of external investors’ liability (2 111) (2 789)
Net insurance and investment contract benefits and claims (28 231) (33 349)
Long-term insurance and investment contract benefits (22 862) (28 308)
Short-term insurance claims (7 353) (6 739)
Reinsurance claims received 1 984 1 698
Expenses (10 877) (9 750)
Sales remuneration (3 388) (2 988)
Administration costs (7 489) (6 762)
Impairments (36) (25)
Amortisation of intangibles (166) (131)
Net operating result 7 114 6 905
Equity-accounted earnings 642 665
Finance cost - other (260) (243)
Profit before tax 7 496 7 327
Taxation (1 999) (2 249)
Shareholders’ fund (1 502) (1 565)
Policyholders’ fund (497) (684)
Profit for the period 5 497 5 078
Other comprehensive income: to be recycled through profit or loss in subsequent periods
Movement in foreign currency translation reserve 386 234
Comprehensive income for the period 5 883 5 312
Allocation of comprehensive income:
Profit for the period 5 497 5 078
Shareholders’ fund 4 703 4 539
Non-controlling interests 794 539
Comprehensive income for the period 5 883 5 312
Shareholders’ fund 5 096 4 768
Non-controlling interests 787 544
Earnings attributable to shareholders of the company (cents):
Profit for the period
Basic earnings per share 1 234,5 227,6
Diluted earnings per share 1 232,0 224,8
Statement of changes in equity
for the six months ended 30 June 2015
R million Reviewed Reviewed
2015 2014
Shareholders’ fund
Balance at beginning of the period 46 037 40 965
Comprehensive income 5 096 4 768
Profit for the period 4 703 4 539
Other comprehensive income 393 229
Net acquisition of treasury shares(1) (447) (494)
Share-based payments 205 166
Acquisitions, disposals and other movements in interests (244) 10
Dividends paid(2) (4 526) (4 009)
Balance at end of the period 46 121 41 406
Non-controlling interests
Balance at beginning of the period 5 198 3 651
Comprehensive income 787 544
Profit for the period 794 539
Other comprehensive income (7) 5
Net acquisition of treasury shares(1) (6) (15)
Share-based payments 41 18
Acquisitions, disposals and other movements in interests 293 891
Dividends paid (657) (357)
Balance at end of the period 5 656 4 732
Shareholders’ fund 46 037 40 965
Non-controlling interests 5 198 3 651
Total equity at beginning of the period 51 235 44 616
Shareholders’ fund 46 121 41 406
Non-controlling interests 5 656 4 732
Total equity at end of the period 51 777 46 138
(1) Comprises movement in cost of shares held by subsidiaries, the share incentive trust and
other consolidated funds.
(2) Dividend of 225 cents per share paid during 2015 in respect of the 2014 financial year
(2014: 200 cents).
Cash flow statement
for the six months ended 30 June 2015
Reviewed Reviewed
R million 2015 2014
Cash flow from operating activities 5 628 8 334
Cash flow from investment activities (3 127) (4 226)
Cash flow from financing activities (909) (779)
Net increase in cash and cash equivalents 1 592 3 329
Cash, deposits and similar securities at beginning of the period 41 431 36 491
Cash, deposits and similar securities at end of the period 43 023 39 820
Notes to the interim condensed consolidated financial statements
for the six months ended 30 June 2015
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 to 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 from a shareholder’s perspective.
Reviewed Reviewed
Cents 2015 2014
Basic earnings per share:
Headline earnings 235,7 223,0
Profit attributable to shareholders’ fund 234,5 227,6
Diluted earnings per share:
Headline earnings 233,1 220,2
Profit attributable to shareholders’ fund 232,0 224,8
R million
Analysis of earnings:
Profit attributable to shareholders’ fund 4 703 4 539
Less: Net loss/(profit) on disposal of operations 1 (111)
Loss/(profit) on disposal of subsidiaries
and associated companies 2 (143)
Tax on loss/(profit) on disposal of subsidiaries
and associated companies - 32
Non-controlling interests (1) -
Plus: Impairments 22 19
Gross impairments 36 25
Non-controlling interests (14) (6)
Headline earnings 4 726 4 447
Million
Number of shares:
Number of ordinary shares in issue at beginning of
the period 2 166,5 2 100,0
Add: Reclassification of deferred shares - 66,5
Less: Weighted Sanlam shares held by subsidiaries
(including policyholders) (161,1) (172,3)
Adjusted weighted average number of shares for basic
earnings per share 2 005,4 1 994,2
Add: Total number of shares to be issued by staff
incentive schemes 21,7 24,9
Adjusted weighted average number of shares for diluted
earnings per share 2 027,1 2 019,1
R million Reviewed Reviewed
2015 2014
2. Reconciliation of segmental information
Segment financial services income
(per shareholders’ fund income statement) 24 087 22 152
Sanlam Personal Finance 7 500 6 985
Sanlam Emerging Markets 2 926 2 437
Sanlam Investments 4 214 3 923
Santam 9 335 8 704
Corporate, consolidation and other 112 103
IFRS adjustments 2 172 1 873
Total financial services income 26 259 24 025
Segment results (per shareholders’ fund
income statement after tax and
non-controlling interest) 4 565 4 485
Sanlam Personal Finance 2 201 3 556
Sanlam Emerging Markets 707 779
Sanlam Investments 844 849
Santam 592 513
Corporate, consolidation and other 221 (1 212)
Non-controlling interests included in
segment result 794 539
Fund transfers 138 54
Total profit for the period 5 497 5 078
Additional segmental information is provided in the shareholders’
information (refer to above).
3. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2014 annual report. The
circumstances surrounding the 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 2015
as reflected in these financial statements.
5. Fair value disclosures
Determination of fair value and fair value hierarchy
Below follows required disclosure of fair value measurements, using a three-level fair value
hierarchy that reflects the significance of the inputs used in determining the measurements. It
should be noted that these disclosure only cover instruments measured at fair value.
Included in level 1 category are financial assets and liabilities that are measured by reference
to unadjusted, quoted prices in an active market for identical assets and liabilities.
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.
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 2015 - reviewed
Equities and similar securities 182 916 2 431 442 185 789
Interest-bearing investments 106 181 56 373 370 162 924
Structured transactions 5 696 6 543 - 12 239
Investment funds 121 207 20 705 492 142 404
Trading account assets 8 083 17 075 - 25 158
Cash deposits and similar securities 16 034 11 602 - 27 636
Total financial assets 440 117 114 729 1 304 556 150
Investment contract liabilities - 270 251 2 631 272 882
Term finance 3 001 103 262 3 366
Margin business 3 001 - - 3 001
Other interest-bearing liabilities - 103 262 365
Structured transactions liabilities - 934 - 934
Trading account liabilities 969 23 035 - 24 004
External investors in consolidated funds 48 879 184 - 49 063
Total financial liabilities 52 849 294 507 2 893 350 249
31 December 2014 - audited
Equities and similar securities 180 185 2 460 395 183 040
Interest-bearing investments 107 061 53 063 396 160 520
Structured transactions 4 653 7 695 - 12 348
Investment funds 114 691 18 409 452 133 552
Trading account assets 7 522 15 304 - 22 826
Cash deposits and similar securities 20 053 5 153 - 25 206
Total financial assets 434 165 102 084 1 243 537 492
Investment contract liabilities - 254 494 2 552 257 046
Term finance 3 031 111 347 3 489
Margin business 3 031 - - 3 031
Other interest-bearing liabilities - 111 347 458
Structured transactions liabilities - 766 - 766
Trading account liabilities 1 008 21 111 - 22 119
External investors in consolidated funds 49 476 149 - 49 625
Total financial liabilities 53 515 276 631 2 899 333 045
Reconciliation of movements in level 3 financial instruments measured at fair value
Cash,
Equities Interest- deposits Total
similar bearing Structured Investment and similar financial
R million securities investments transactions funds securities assets
30 June 2015 - reviewed
Financial assets
Balance at 1 January 2015 395 396 - 452 - 1 243
Total gain/(loss) in statement
of comprehensive income 214 (22) - 40 - 232
Acquisitions/issues 103 - - - - 103
Disposals (258) - - - - (258)
Foreign exchange movements (1) 3 - - - 2
Transfers to level 1 and level 2 (11) (7) - - - (18)
Balance at 30 June 2015 442 370 - 492 - 1 304
31 December 2014 - audited
Financial assets
Balance at 1 January 2014 1 313 394 - 459 - 2 166
Total gain/(loss) in statement
of comprehensive income 82 34 2 50 - 168
Acquisitions 130 13 - - - 143
Disposals (1 133) (51) (2) (57) - (1 243)
Foreign exchange movements 3 6 - - - 9
Balance at 31 December 2014 395 396 - 452 - 1 243
Reconciliation of movements in level 3 financial instruments measured at fair value (continued)
R million Structured
Investment trans- Total
contract Term actions financial
R million liabilities finance liabilities liabilities
30 June 2015 - reviewed
Financial liabilities
Balance at 1 January 2015 2 552 347 - 2 899
Total (gain)/loss in statement
of comprehensive income 7 - - 7
Acquisitions 97 - - 97
Disposals (143) - - (143)
Settlements - (100) - (100)
Foreign exchange movements 118 15 - 133
Balance at 30 June 2015 2 631 262 - 2 893
31 December 2014 - audited
Financial liabilities
Balance at 1 January 2014 767 259 203 1 229
Total (gain)/loss in statement
of comprehensive income 82 59 94 235
Acquisitions 195 - - 195
Disposals (505) - (297) (802)
Foreign exchange movements 29 29 - 58
Transfers from level 1 and level 2 1 984 - - 1 984
Balance at 31 December 2014 2 552 347 - 2 899
5.Fair value disclosures (continued)
Six Full
months year
reviewed audited
2015 2014
Gains and losses (realised and unrealised)
included in profit and loss - level 3 instruments
Gains or losses included in profit or loss
for the period 225 (67)
Gains or losses included in profit or loss for the
period for assets held at the end of the reporting period 242 191
Cash,
Equities Interest- deposits Total
similar bearing Structured and similar financial
R million securities investments transactions securities assets
Transfers between categories
Financial assets
Six months reviewed - 2015
Transfer from level 1 to level 2(1) - 2 627 - - 2 627
Transfer from level 2 to level 1 - - - - -
Full year audited - 2014
Transfer from level 1 to level 2 - 380 106 36 522
Transfer from level 2 to level 1 5 - - - 5
(1) Listed bonds not traded within an active market have been transferred from level 1 to level 2.
Valuation techniques used in determining the fair value of financial instruments
Significant
Applicable Valuation Main unobservable
Instrument Equities to level basis assumptions input
and similar 2 and 3 Discounted cash Bond and interbank Cost of capital
securities flow model (DCF), swap interest rate curve,
earnings multiple cost of capital, consumer Earnings
price index multiple
Interest-bearing 2 and 3 DCF, earnings multiple, Bond and interbank swap Earnings
investments quoted put/surrender interest rate curve, cost of multiple
(including price by issuer capital, consumer price index
insurance policies)
Trading account 2 DCF Forward rate n/a
assets and Credit risk spread
liabilities Liquidity spread
Investment contract 2 and 3 Current unit price of Bond and interbank swap Earnings
liabilities and underlying unitised interest rate curve, cost of multiple
investment funds financial asset, multiplied capital, consumer price index
by the number of units held, bond interest rate curve
DCF, earnings multiple n/a
Term finance 2 and 3 DCF Bond and forward rate Liquidity
Credit ratings of issuer spread
Liquidity spread
Agreement interest curves
Structured 2 Option pricing models Bond and interbank swap n/a
transactions assets DCF interest rate curve, forward
and liabilities equity and currency rates
Volatility risk adjustments
External investors 2 Current unit price of n/a n/a
in consolidated underlying unitised financial
funds asset, multiplied by the number
of units held
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
Carrying increase decrease Carrying in discount in discount
R million amount(1) in multiple in multiple amount(2) rate rate
Six months - reviewed
30 June 2015
Equities and similar securities 378 38 (38) 64 3 (3)
Interest-bearing investments 370 37 (37) - - -
Investment funds 492 49 (49) - - -
Financial assets 1 240 124 (124) 64 3 (3)
Investment contract liabilities 2 631 263 (263) - - -
Term finance 262 26 (26) - - -
Financial liabilities 2 893 289 (289) - - -
Full year - audited
31 December 2014
Equities and similar securities 323 32 (32) 72 (3) 3
Interest-bearing investments 396 40 (40) - - -
Investment funds 452 45 (45) - - -
Financial assets 1 171 117 (117) 72 (3) 3
Investment contract liabilities 2 552 255 (255) - - -
Term finance 347 35 (35) - - -
Financial liabilities 2 899 290 (290) - - -
(1) Represents mainly private equity investments valued on earnings multiple, with sensitivities based on the full
valuation.
(2) Represents mainly private equity investments valued on a discounted cash flow basis, with sensitivities based
on changes in the discount rate.
6. Business combinations
There were no material business combinations during 2015.
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
Sponsor
Deutsche Securities (SA) Proprietary Limited
Internet address
http://www.sanlam.com
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), IM Kirk(1) (Group Chief Executive),
MMM Bakane-Tuoane, CB Booth(2), AD Botha, PR Bradshaw(2), MV Moosa, JP Möller(1), TI Mvusi(1),
SA Nkosi, P Rademeyer, Y Ramiah(1), RV Simelane, CG Swanepoel, ZB Swanepoel, PL Zim
(1) Executive
(2) British
Changes to the board
Resignation of Ms Philisiwe Mthethwa with effect from 13 February 2015.
Mr Arun Duggal retired with effect from 3 June 2015.
Dr Johan van Zyl stepped down as Group Chief Executive and retired from the Board with effect
from 30 June 2015.
Mr Ian Kirk appointed as Group Chief Executive with effect from 1 July 2015.
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