Wrap Text
Summarised audited results for the year ended 31 December 2015
Sanlam Limited
Incorporated in the Republic of South Africa
(Registration number 1959/001562/06)
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
“Sanlam”, “Sanlam Group”, or “the Company”
Summarised audited results for the year ended 31 December 2015
Key features
Earnings
- Net result from financial services per share increased by 6%
- Normalised headline earnings per share up 6%
Business volumes
- New business volumes up 16% to R211 billion
- Net value of new covered business down 15% to R1,4 billion
- Net new covered business margin of 2,62%
- Net fund inflows of R19 billion
Group Equity Value
- Group Equity Value per share of 5 057 cents
- Return on Group Equity Value per share of 12,8%
Capital management
- Discretionary capital of R2,3 billion at 31 December 2015
- Sanlam Life Insurance Limited CAR cover of 5,8 times
Dividend
- Normal dividend of 245 cents per share up 9%
Salient results
for the year ended 31 December 2015
%
2015 2014 Change
Sanlam group
Earnings
Net result from financial services per share cents 355,2 336,2 6
Normalised headline earnings per share(1) cents 432,5 407,6 6
Diluted headline earnings per share cents 459,5 411,6 12
Net result from financial services R million 7 269 6 879 6
Normalised headline earnings(1) R million 8 851 8 340 6
Headline earnings R million 9 300 8 325 12
Business volumes
New business volumes R million 210 842 182 297 16
Net fund inflows R million 19 049 41 994 (55)
Net new covered business
Value of new covered business R million 1 360 1 592 (15)
Covered business PVNBP(2) R million 51 856 54 518 (5)
New covered business margin(3) % 2,62 2,92
Group Equity Value
Group Equity Value R million 103 506 95 936 8
Group Equity Value per share cents 5 057 4 684 8
Return on Group Equity Value per share(4) % 12,8 18,5
Sanlam Life Insurance Limited
Shareholders’ fund R million 77 970 68 156
Capital Adequacy Requirements (CAR) R million 8 250 8 325
CAR covered by prudential capital Times 5,8 4,5
(1) Normalised headline earnings = headline earnings, excluding fund transfers.
(2) PVNBP = present value of new business premiums and is equal to the present value of new
recurring premiums plus single premiums.
(3) New covered business margin = value of new covered business as a percentage of PVNBP.
(4) Growth in Group Equity Value per share (with dividends paid, capital movements and cost
of treasury shares acquired reversed) as a percentage of Group Equity Value per share
at the beginning of the year.
Executive review
2015 was one of the toughest years for business in and outside South Africa since the financial crisis in 2008.
However, our solid strategy and diversification across geographies, market segments and product solutions again provided the
resilience that enabled us to withstand these conditions and deliver a satisfactory performance.
The following are some of our salient features for the year:
- Return on Group Equity Value (RoGEV) per share of 12,8% (adjusted 14,8%)
- Net result from financial services per share increased by 6%
- New business volumes increased by 16% to R211 billion
- Net fund inflows of R19 billion
- Net value of new life business (VNB) down 15% to R1,4 billion
- Net VNB margin of 2,62%
The Group strategy was reviewed and approved by the Board of directors of Sanlam (Board) in December 2015. This
followed a six-month process driven by the Group Executive committee who identified refinements and shifts in some of
the underlying plans. In essence the strategy remains unchanged and focuses on two geographic approaches:
- In South Africa, the Group aims to retain and extend its leadership position in financial services.
- Outside South Africa, the Group aims to deepen and enhance its existing relationships and product ranges to become a
leading player in targeted territories through accelerated organic growth. This is augmented by continued focus on
identifying further opportunities for expansion to new businesses and territories.
2015 strategic initiatives
The five pillars of our strategy remain constant:
- Improving performance through top-line earnings growth by increasing market share in key segments and diversifying
the base (including diversification of geographical presence, products, market segments and distribution platforms).
- Optimising operational efficiencies.
- Enhancing capital utilisation on an ongoing basis, including the allocation of capital to business units in a manner
that will best achieve stated RoGEV targets.
- Prioritising diversification by enhancing the Group’s international positioning and growing the relative importance
and contribution of the international business to the Group, with a specific Pan-African focus.
- Commitment to the promotion of transformation and diversity within operations and broadly through the contribution
to socio-economic development in the countries and markets in which the Group operates, whether that be directly, or
via collaboration with business partners.
We continue to place a high premium on strategy execution. The specific pace of implementation of the strategy and the
quantification of performance measures are driven through the Group’s business plans and the budgets of the respective
clusters. This is influenced significantly by factors such as specific opportunities and the capabilities available
within each of the businesses.
We have made good progress in the implementation of the elements of the five-pillar strategy. Below is a brief
overview of our main achievements in 2015 against the strategic pillars.
Earnings growth
Earnings growth for Sanlam Personal Finance (SPF) and Santam remained strong despite operating in mature markets.
Sanlam Emerging Markets (SEM) and Sanlam Investments (SI) had more muted earnings growth, with SEM most significantly
affected by the provisioning in Shriram Equipment Finance in India and the business environment in Zambia. Low investor
confidence due to challenging macro-economic factors and major investment market volatility impaired the ability of the
investment businesses to show growth at the same levels as in the past few years.
Operating and cost efficiencies
Costs remain under control despite the need to invest in systems and capacity creation. At SPF, additional capacity
was created at Glacier and Sanlam Sky, whereas Sanlam Individual Life retained tight control on costs. SEM is making
progress with system transitions to standardise a platform among its partners. The cluster is starting to experience
efficiency benefits from centralised buying, IT support and standardised product roll-outs.
Following a period of extensive and careful planning, Sanlam Collective Investments’ administration and IT outsourcing
to Silica went live in October 2015. All client and funds data was successfully migrated and the process of supporting
all stakeholders continues as they adjust to the new system.
The ability to manage claims costs is critical at Santam, given the deterioration in the exchange rate and the
subsequent negative impact on prices of motor vehicle parts and paint costs. Santam’s suppliers form an integral part of the
claims management process, necessitating building a sustainable network that enables Santam to improve pricing and refine
its product offering, which ultimately attracts and retains policyholders.
Optimal capital utilisation
Group businesses are each allocated an optimal level of capital and are measured against appropriate return hurdles.
By using capital optimisation opportunities available within a Solvency Assessment and Management (SAM) regulatory
environment, the Group released an additional R2,5 billion in 2015 for investment in expansion opportunities.
SPF continued to focus on the capital efficiency of its product range and especially new products, ensuring that
product pricing compensates for the underlying capital requirements. The cluster is maintaining an optimal level of capital.
SEM continued balancing the need to achieve the hurdle rate with sensitivity towards the countries and stakeholder
expectations where the cluster operates. Excess capital is extracted via dividends as appropriate when taking these
considerations into account. Major new investments, subject to final regulatory approvals include a 30% interest in Saham
Finances and 23% additional interests in Shriram Life Insurance and Shriram General Insurance, with the Shriram insurance
transactions still being finalised.
The unwinding of Santam’s BBBEE scheme delivered a combined value of R1,1 billion to participants. The unwinding also
presented Santam with an opportunity to improve the efficiency of its capital structure by using a share buy back at
R190 per share to facilitate the unwinding. This reduced Santam’s capital base by R801 million.
Diversification
Prior to the Saham Finances transaction, the Group (through SEM) had nearly 40 operating life insurance, general
insurance and asset management businesses across 19 countries (through either a direct or an indirect presence) compared to
about 10 operating businesses five years ago. The Saham Finances transaction, which is one of the Group’s biggest
transactions yet, will provide access to new markets including Côte d’Ivoire, Gabon, Senegal and Cameroon in Francophone West
Africa, the Arabic-speaking North African country of Morocco and Lebanon in the Middle East, and Angola in Lusophone
Southern Africa. This will increase the number of operating businesses to more than 60.
Diversification opportunities within the Group were realised through the launch of MiWayLife to broaden SPF’s direct
offering. MiWayLife operates under the Sanlam Life licence, but is managed independently under its own brand. Santam’s
claims card is being rolled out in the Group and general insurance products have been launched in the Sanlam Life agency
network.
SPF identified geographic areas where it is under-represented and is developing further capacity in Limpopo and the
northern parts of the country. The cluster is also improving its penetration of the middle market in Gauteng.
Implemented Consulting, which formalises the investment implementation process through an investment committee
framework, was a key solution for SI to enable further growth and to assist with flows into the building blocks and solution
funds of the cluster.
Transformation
Ongoing transformation of the Group is driven from the centre and implemented at individual business unit level.
Accelerated transformation initiatives were identified within each cluster to ensure improvement in the demographics at
management levels.
SI is creating a strong pipeline of black leaders through its Alternative Investment Academy, which is aimed at
setting up graduates to ultimately being able to manage their own funds. Just over 80% of the recruited employees for 2014
and 2015 were black. 87% of SI’s employees under the age of 30 are black. They have excellent capability and potential to
develop into leaders of the business over the longer term.
Transformation at SEM takes consideration of the emphasis in many markets on citizen empowerment and localisation of
jobs. The cluster is focusing on training and development across the whole value chain of in-country employees and
increased regional support capacity to transfer skills.
The unwinding of Santam’s BBBEE scheme delivered on its objectives of empowerment and transformation, particularly
through the community trust. The trust created value through its support of education, arts, culture, skills development
and job creation - and will continue funding transformation initiatives on a projects basis.
Forward-looking statements
In this report we make certain statements that are not historical facts and relate to analyses and other information
based on forecasts of future results not yet determinable, relating, among others, to new business volumes, investment
returns (including exchange rate fluctuations) and actuarial assumptions. These statements may also relate to our future
prospects, developments and business strategies. These are forward-looking statements as defined in the United States
Private Securities Litigation Reform Act of 1995. Words such as “believe”, “anticipate”, “intend”, “seek”, “will”, “plan”,
“could”, “may”, “endeavour” and “project” and similar expressions are intended to identify such forward-looking
statements, but are not the exclusive means of identifying such statements. Forward-looking statements involve inherent risks
and uncertainties and, if one or more of these risks materialise, or should underlying assumptions prove incorrect, actual
results may be very different from those anticipated. Forward-looking statements apply only as of the date on which
they are made, and Sanlam does not undertake any obligation to update or revise any of them, whether as a result of new
information, future events or otherwise.
Comments on the results
- Introduction
The Sanlam Group International Financial Reporting Standards (IFRS) financial statements for the year ended 31
December 2015 are presented based on and in compliance with IFRS. The basis of presentation and accounting policies for the
IFRS financial statements and shareholders’ information are in all material respects consistent with those applied in the
2014 Annual Report.
- Group Equity Value
Group Equity Value (GEV) amounted to R103,5 billion or 5 057 cents per share on 31 December 2015, exceeding R100 billion for
the first time. Including the dividend of 225 cents per share paid during the year, a RoGEV per share of 12,8% was achieved
for 2015. This exceeds the 2015 target of 12,1% despite the challenges faced by the Group and a significant rise in long-term
interest rates in South Africa. Adjusted RoGEV per share, which excludes the impact of investment return earned in excess of
the long-term assumptions, interest rate changes and other one-off effects not under management control (such as tax changes),
amounted to 14,8% - well in excess of the target.
South African long-term interest rates increased by 200bp during 2015, with a corresponding 200bp rise in the risk
discount rate (RDR) used to value the Group’s South African businesses for GEV purposes. A discounted cash flow (DCF)
valuation basis is now used for essentially all of the Group’s operations, with the increase in RDR having a pronounced
negative effect on the end-2015 valuations and RoGEV for 2015. The diversification of the Group outside of South Africa
assisted in largely offsetting this negative impact, with the valuation and RoGEV of the Group’s international operations
benefiting from the sharp weakening in the rand exchange rate, particularly against developed market currencies and the
Indian rupee, and more stable long-term interest rates. Exchange rate gains contributed some 4% to RoGEV per share. The
strong investment market performance of 2014 also did not repeat in 2015, contributing to relatively lower RoGEV in the
2015 financial year compared to 2014. Adjusted RoGEV is a more comparable measure of the underlying operational
performance, which continues to reflect solid results.
Group Equity Value at 31 December 2015
GEV RoGEV
R million 2015 2014 Earnings %
Group operations 91 558 87 739 12 191 13,8
Sanlam Personal Finance 38 249 38 453 4 658 12,1
Sanlam Emerging Markets 18 047 14 571 4 369 29,9
Sanlam Investments 22 412 20 122 4 386 21,3
Santam 12 850 14 593 (1 222) (8,4)
Covered business 47 222 48 393 7 037 14,5
Value of in-force 32 114 31 207 5 338 17,1
Adjusted net worth 15 108 17 186 1 699 9,9
Other operations 44 336 39 346 5 154 12,9
Group operations 91 558 87 739 12 191 13,8
Discretionary capital and other 11 948 8 197 35 0,5
Group Equity Value 103 506 95 936 12 226 12,7
Per share (cents) 5 057 4 684 599 12,8
Group operations yielded an overall return of 13,8% in 2015, the combination of 14,5% return on covered business and
12,9% on other Group operations.
The Group’s covered business operations (comprising 46% of GEV) achieved a solid performance, exceeding the Group
hurdle rate by a healthy margin despite the adverse impact of higher interest rates. The mature South African covered
business operations exceeded the 12,1% hurdle rate by 0,6% with an overall return of 12,7% (17,4% on an adjusted basis),
augmented by a return of 20% from the non-South African businesses. The latter benefited from the release of relatively
higher discount rates applied in the valuation base of these businesses and the weakening in the rand exchange rate during
2015. The main items contributing to the return are:
- Value of new covered business (VNB): A 0,9% lower return from VNB in 2015 is largely attributable to the base effect
of the AECI policy written in 2014 and the negative change in economic basis in 2015.
- Positive operating experience variances persisted in 2015, with positive risk experience of some R800 million still
being the largest contributor. Particularly satisfactory is positive persistency experience of R170 million, a sound
performance in a low-growth economic environment with consumer disposable income under pressure. This is testimony to the
success of the Group’s strategic focus on client-centricity and efforts to improve the quality of the in-force book.
Positive working capital experience was largely offset by negative one-off expense experience due to a number of large
regulatory and other projects currently being implemented across the Group.
- Operating assumption changes contributed slightly less to the return in 2015. A major contributor in 2015 is
positive risk experience assumption changes of R810 million. The level of positive operating risk experience variances over a
number of years indicates some expected continuance in these trends and required the capitalisation of a portion thereof
in the value of in-force covered business (VIF) to align more closely to the SAM
requirements. This was partly offset by a strengthening in one-off expense assumptions given the level of regulatory
change currently being experienced in most operations, and a number of other modelling changes.
- The largest return variance compared to 2014 relates to economic assumption changes, turning from a positive return
contribution of 0,2% in 2014 to negative 3,3% in 2015. This is attributable to the rise in long-term interest rates in
South Africa, with the higher RDR only partly compensated for by an increase in the future investment return assumptions
on the underlying asset base.
- Investment variances contributed less to the overall RoGEV due to a weaker investment market performance in 2015
compared to 2014, partly offset by foreign exchange gains.
Capital allocated to covered business (adjusted net worth) declined from R17,2 billion at the end of 2014 to R15,1
billion at 31 December 2015, representing 32% of covered business compared to 36% at the end of 2014. The reduction is
largely due to the revised capital allocation approach applied to Sanlam Life’s covered business with effect from 2015
(refer Capital management below).
Other Group operations (comprising 43% of GEV) achieved a return of 12,9% (23,2% on an adjusted basis). The valuation
and return of the South African businesses were adversely impacted by the higher RDR, somewhat offset by good growth in
assets under management in a number of the asset management boutiques. Sanlam Investment Management, the traditional
retail and institutional asset manager in South Africa, experienced only a marginal increase in assets under management due
to large net outflows, particularly from the Public Investment Corporation (PIC).
The return on SI and SEM’s non-South African businesses was in general supported by the weakening in the rand exchange
rate. The Group’s investment in Santam is valued at its listed share price, which declined in 2015 commensurate with
other financial services stocks, resulting in a negative 8,4% RoGEV contribution from Santam.
The low return on discretionary and other capital is essentially the combined effect of the following:
- Net corporate expenses of R109 million recognised in net result from financial services.
- A relatively low level of return earned on the portfolio’s exposure to low yielding liquid assets.
- Hedging of the Saham Finances and Shriram life and general insurance transactions. The transactions were hedged
through the acquisition of foreign currency, which earns a very low rate of interest due to the US dollar denomination.
The application of hedge accounting principles in the GEV presentation furthermore eliminated the foreign currency gains,
essentially exposing the portfolio to some R5 billion of assets that earned close to zero return.
Earnings
Shareholders’ fund income statement for the year ended 31 December 2015
R million Change
2015 2014 %
Net result from financial services 7 269 6 879 6
Sanlam Personal Finance 3 831 3 476 10
Sanlam Emerging Markets 1 197 1 241 (4)
Sanlam Investments 1 417 1 468 (3)
Santam 933 801 16
Corporate and other (109) (107) (2)
Net investment return 1 946 1 794 8
Project costs and amortisation (321) (224) (43)
Equity participation costs (43) (109) 61
Normalised headline earnings 8 851 8 340 6
Per share (cents) 433 408 6
Net result from financial services (net operating profit) of R7,3 billion increased by 6% on 2014, with solid
performances by SPF and Santam more than compensating for lower earnings at SI and SEM. Santam achieved an exceptional
underwriting performance, with its underwriting margin of 9,6% exceeding the new longer term target range of between 4% and 8%.
As indicated in the introduction, the Group faced a challenging operating environment in 2015, which together with a
number of internal one-off items had a pronounced impact on growth in net result from financial services. These items were:
- In SI, performance fees declined by 21% from 2014. A significant portion of the performance fees earned by SI in
2014 related to funds managed on behalf of the Public Investment Corporation (PIC). The cumulative withdrawal by the PIC of
some R20 billion of funds under management in 2014 and 2015 as part of the restructuring of their portfolios, reduced
the base on which fees can be earned, with no performance fees accruing in 2015 on the PIC funds. A relatively lower
level of outperformance of benchmarks in 2015 compared to the 2014 financial year also resulted in lower performance fees
being earned on collective investment schemes.
The 2014 comparative earnings of SI’s International business included one-off profit of R58 million realised on the
disposal of Intrinsic in the United Kingdom (UK).
One-off expenditure increased SI’s administration costs by R83 million after tax in 2015, including the outsourcing of
Sanlam Collective Investments’ administration platform, further leveraging off the Group’s repositioned WealthsmithsTM
branding, restructuring of the UK private wealth business and costs associated with regulatory compliance in the UK.
Sanlam Employee Benefits (SEB) wrote one of the largest insurance policies in history in South Africa during 2014 when
it concluded an R8,3 billion pensions outsourcing agreement with the AECI retirement fund. This policy generated
effective net new business strain of R138 million in 2014, with a further R14 million being recognised in the 2015 earnings in
respect of the additional premium received during the year.
Capital Management experienced abnormal marked-to-market losses of R92 million in its debt and equity-structuring
units related to commodity market conditions, entity specific issues and political events in South Africa. Credit spreads on
Eurobonds issued by African governments and South African institutions widened significantly during the year. In the
case of African government bonds it is largely attributable to unfavourable investor sentiment towards emerging markets
following the severe slump in commodity prices that is likely to have an adverse impact on many governments’ ability to
service debt. Investors’ risk perception of South African institutional debt rose sharply during 2015 from a combination
of some company specific issues such as the regulatory penalty levied against MTN in Nigeria, and general negative
investor sentiment following the changes in Finance Ministers at the end of 2015. The widening of credit spreads culminated in
marked-to-market losses in Capital Management’s debt business that has exposure to these Eurobonds. In addition,
Capital Management also incurred marked-to-market losses on financing transactions backed by commodity stocks. The share
prices of commodity companies declined sharply during 2015 in line with the slump in commodity prices, which reduced the
underlying level of security within these instruments. This had a consequential negative impact on their fair values. In the
absence of defaults, these marked-to-market losses should reverse in future reporting periods.
- SEM experienced a difficult 2015, with its Indian, Malaysian and Zambian operations underperforming against 2014 and
the target for 2015.
The Shriram Capital results in India were affected by one-off items in both the 2014 and 2015 financial years, causing
a R154 million adverse change in net result from financial services. Shriram Transport Finance Company’s subsidiary
focused on equipment financing experienced abnormal levels of arrears in 2015. The subsidiary expanded its lending book in
anticipation of the newly elected government’s infrastructure projects. Delays in the roll-out of these projects placed
a large number of clients under financial pressure, with the outstanding loan book growing outside of normal parameters
during the year. This required a significant strengthening in the provision for bad debts. The position stabilised
recently with some projects being initiated. An improvement in recoveries and the arrears position is expected during 2016.
In addition, the 2014 comparative results for Shriram Capital included a R51 million one-off release of provisions
relating to Shriram General Insurance’s third party pool book, thereby increasing the comparative base.
The Zambian economy and currency are under severe pressure from low commodity prices, in particular copper that is its
main source of income and foreign currency inflows, unplanned elections and severe flooding during the year. Despite a
number of management actions, SEM’s Zambian operations could not escape the impact of the economic environment on
consumer disposable income, resulting in significantly lower operating earnings due to lower new business sales and negative
persistency experience.
Pacific & Orient, SEM’s general insurance business in Malaysia, appointed a new statutory actuary during 2015 in line
with Malaysian regulations. The new actuary required a strengthening of the reserving basis, which reduced the 2015 net
result from financial services by R30 million. This reserve can be released in future periods should actual experience
prove to be more favourable than that assumed in the current basis.
Excluding these items, net result from financial services grew by 11%, a solid performance against the overall
challenging backdrop.
SPF achieved solid growth for a largely mature business. Sanlam Individual Life remains the largest contributor to
SPF’s operating earnings with growth in its net result from financial services of 7% in 2015. Profit from investment
products grew by 27%, benefiting from strong guaranteed product sales over the last few years that increased the book size
of this line of business. Market-related investment products also contributed to the growth, supported by a 14% increase
in the average level of assets under management - partly attributable to the strong investment market performance of 2014.
The profit contribution of risk products declined by 8%, with a further improvement on the exceptionally favourable
mortality experience of 2014 difficult to achieve and due to an increase in new business strain in 2015 following the
strong growth in new risk business sales. Profit released from the asset mismatch reserve held in respect of non-participating
risk business declined by 14% in line with the lower level of this reserve during 2015. Mortality experience in the annuity
book normalised during 2015, which together with a lower level of asset mismatch profits contributed to a decline in earnings
from this line of business. This was offset by higher profit from other products, which include the legacy universal life book.
Sanlam Sky’s net result from financial services increased by 19%. Growth in the size of the in-force book, positive
investment variances and economic basis changes as well as improved persistency and premium variances supported the
earnings growth.
Glacier grew its profit contribution by 21% after tax. Fund-based fee income benefited from an increase in assets
under management due to strong net fund inflows and favourable investment market performance in prior years.
SEM grew its net result from financial services by a satisfactory 14% excluding the abnormal items highlighted before.
Namibia (up 10% net of tax and non-controlling interests; 16% on a gross basis) benefited from sound profit growth at
Santam Namibia and Capricorn Investment Holdings (CIH). Santam Namibia experienced a benign claims environment during
2015, similar to Santam’s South African experience. Bank Windhoek, CIH’s major investment, continued to deliver good
growth. Profit realised in 2014 in the closed fund life book from credit spread moves did not repeat in 2015, which together
with a shrinking book contributed to lower operating earnings from this business. The renegotiation of the Bank Windhoek
credit life profit share arrangement also had a negative impact on earnings growth in 2015. The variance between gross
and net growth is mostly attributable to relatively stronger growth in the businesses with non-controlling interests.
Botswana achieved good growth of 17% in its net result from financial services (22% before tax and non-controlling
interests). The life business’ results benefited from good annuity volumes and margins and an increase in the size of the
book following the strong new business performance over the last number of years. Letshego, which earns more than half of
its profit outside Botswana, experienced currency translation losses as well as a higher effective tax rate due to a
change in the various countries’ contribution to overall earnings. Its profit contribution was in line with 2014. The
general insurance business Legal Guard made a welcome recovery and turned around from a net loss in 2014 to a small net
profit in 2015. Botswana Insurance Fund Management (BIFM), the Botswana asset manager, was adversely impacted by the
withdrawal of R12,4 billion of assets under management by the Botswana Public Officers Pension Fund (BPOPF). Restructuring of
the business limited the negative profit impact to some R10 million.
The Rest of Africa operations, excluding Zambia, achieved growth in net result from financial services of 17%. Most
countries and lines of business delivered strong growth. The exception was general insurance where all businesses
experienced claims pressure, apart from the Ghanaian operations.
Net result from financial services in India rose 13% excluding structural changes and the abnormal items listed
before. The credit and general insurance businesses achieved satisfactory growth, while the life insurance business continued
to invest in expanding its distribution footprint.
In Malaysia, growth in general insurance business premiums came under pressure from a combination of lower sales of
two-wheelers and increased competition. Appropriate management action has been taken, which limited the impact on
profitability to some extent. The life business also did not perform in line with expectations due to losses in the medical
portfolio, contributing to a disappointing overall performance. A new Regional Executive for Malaysia has been appointed
towards the end of the year. His focus will be on improving the performance of the individual businesses, but also
extracting synergies from the combined operations.
SI achieved overall growth of 6% in its net result from financial services excluding abnormal items.
The relatively weaker investment market performance in 2015 impacted adversely on the Investment Management
businesses’ ability to grow assets under management, aggravated by:
- Continued net outflows from the South African life book and capital portfolio. The legacy life book managed by SI is
running off while SPF’s open architecture results in only a portion of its new business being managed by SI. Outflows
from the older life books are therefore not replaced by new inflows, resulting in consistent net outflows of assets under
management for SI. SI’s strategic focus remains on replacing the life outflows with third-party business and an increase
in the proportion of SPF open architecture business managed. A consequence of the Group’s strategic focus on capital
efficiency has been a reduction in the capital backing the South African life business, which is managed by SI. A further
R4 billion has been released during 2015, which will be redeployed for investment in strategic operations on which SI
does not earn any fee income.
- The R20 billion of funds under management withdrawn by the PIC over the last two years.
- The funds withdrawn from SEM by the BPOPF during 2015 included some R3 billion of funds managed by SI’s
International business.
Average assets under management of the South African investment manager, the largest contributor to the sub-clusters’
profit, increased by only 6% as a result. Growth of 8% in net result from financial services, excluding abnormal items,
represents a solid performance in this context.
SEB’s profit contribution grew marginally by 1% if the new business strain from the AECI policy is excluded. A
reduction in losses from the administration businesses and 32% growth at SEB investments were offset by a 7% decline in risk
profits following a normalisation in claims experience during 2015 from a particularly favourable experience in 2014.
Capital Management managed to achieve 11% growth in its net result from financial services, excluding marked-to-market
losses from widening credit spreads on Eurobonds and equity-backed financing structures.
Santam had an exceptional year, with its underwriting margin improving from an already high base of 8,7% in 2014 to
9,6% in 2015. The benign claims environment of 2014 persisted into 2015, which together with disciplined underwriting
action contributed to the 16% growth in Santam’s net result from financial services. Premium growth was less than planned
for 2015 in a competitive environment, commercial business in particular.
Normalised headline earnings of R8,9 billion are 6% up on 2014. This is the combined effect of the 6% increase in net
result from financial services, 8% growth in net investment return earned on the capital portfolio and a 43% increase in
amortisation of intangible assets. The latter is essentially due to intangible assets recognised in respect of the
acquisition of MCIS in Malaysia during 2014. Despite the relatively weaker investment market performance in 2015, net
investment surpluses earned on the capital portfolio increased by 16% due to a well-timed change in strategic asset allocation
(refer capital section below) and the international exposure in the portfolio. The change in strategic asset allocation
from unhedged to hedged equities was implemented before the decline in the South African equity market in December,
protecting the portfolio against these losses and locking in the gains made up to that stage. In addition, investment
return earned on the international exposure in the portfolio benefited from the sharp weakening of the rand exchange rate
against developed market currencies during 2015.
Business volumes
The Group achieved overall growth of 16% in new business volumes from a high base in 2014. Excluding the R8,3 billion
AECI premium recognised in 2014, new business increased by 21%, a particularly pleasing performance in a difficult
economic environment.
Life insurance new business volumes increased by 18% (excluding the AECI policy), investment business inflows by 24%
and general insurance earned premiums by 8%. All businesses contributed to the solid performance, apart from SI’s
International business.
Business volumes for the year ended 31 December 2015
New business Net inflows
Change 2015 2014 Change
R million 2015 2014 % %
Sanlam Personal Finance 63 825 52 566 21 22 895 19 580 17
Sanlam Emerging Markets 11 913 9 259 29 (7 346) 3 971 (>100)
Sanlam Investments 116 582 103 250 13 (3 512) 12 099 (>100)
Santam 18 522 17 222 8 7 012 6 344 11
Total 210 842 182 297 16 19 049 41 994 (55)
Covered business 39 976 42 290 (5) 12 081 18 430 (34)
Investment business 150 670 121 383 24 (523) 16 853 (>100)
General insurance 20 196 18 624 8 7 491 6 711 12
Total 210 842 182 297 16 19 049 41 994 (55)
SPF’s new business sales grew by 21%, a stellar performance for this mature business.
Sanlam Sky, operating largely in the South African entry-level market, achieved growth of 13%. Individual life
recurring premium new business increased by 12% and Group recurring premium sales by 21%. The tax free savings product
launched in March 2015 after changes in tax legislation proved much more popular than anticipated, with new savings business
volumes increasing by 50% on the comparable period in 2014. To some degree this came at the expense of the higher margin
risk business sales, which increased by only 4%. Some replacement sales are not unusual after the introduction of a new
product, but this was particularly pronounced at Sanlam Sky due to the non-availability of a competitive Sanlam savings
solution that intermediaries could sell in this market segment in prior years and industry-wide marketing of the new
product line that intensified client attention and demand. Sales trends started normalising towards the end of the year,
with the mix between risk and savings products moving to more appropriate levels. Group recurring premium sales were
supported by a large new scheme written during 2015 and the biennial renewal of the ZCC scheme, which more than offset the
impact of the cancellation of the Capitec credit life agreement in 2014.
New business volumes in the Individual Life segment, which is largely focused on the middle income segment in South
Africa, increased by 3%. Single premium sales increased by 3%, reflecting pressure on disposable income, the competitive
environment and a shift in sales to the Glacier platform. Annuity and guaranteed plan sales reflected good growth, offset
by lower sales from bank brokers as these channels increasingly focused on their own in-house products. New recurring
premium sales grew by 10% with all lines of business contributing to the growth. A strong recovery in the sales of risk
business was particularly satisfactory, with this line of business growing by 17% in the second half of 2015 (flat for
the six months to 30 June 2015) to reach overall growth of 9% for the full 2015 financial year. Similar to the entry-level
market, the mix of recurring premium savings products changed towards the new tax-free savings products, although in
this market segment the tax-free savings products was favoured above existing low margin endowments.
Glacier achieved another exemplary performance in 2015, growing its new business volumes by 27%. Demand for offshore
and wrap solutions were particularly strong, driven by a weaker rand and competitive investment performance offered by
the wrap solutions respectively.
The SEM operations grew their new business contribution by 29% - new life business increased by 32%, investment
business inflows by 29% and general insurance earned premiums by 19%. The growth in life and general insurance business was to
some extent supported by acquisitions during 2014 and 2015.
New business volumes in Namibia declined by 16%, the combined result of 36% growth in new life business and a 23%
decline in unit trust inflows in a competitive environment. The strong growth in life business is largely due to an increase
in per policy premium size in the affluent market.
The Botswana operations had another sterling year with new business volumes rising by 78%. Strong annuity sales
continue to be the main driver of new life business (up 41%), augmented by a more than doubling in new investment mandates at
the asset management operations.
A 35% increase in Rest of Africa new business volumes is attributable to a twofold increase in investment business
inflows and a 94% rise in general insurance business, the latter partly due to the base effect of new acquisitions. Life
business growth disappointed at 2%. The Zambian operations struggled in difficult economic conditions, recording a 37%
decline in new business sales. The Kenyan business made progress in rebuilding its agency force after the major impact of
the system implementation issues experienced in the first half of the year. As anticipated, a major improvement in sales
volumes will only reflect in 2016 as new agent productivity improves. New life business sales for the full year declined
by 19%, with some improvement evident in the second-half performance. Excluding Zambia and Kenya, Rest of Africa new
life business volumes increased by 30%, with all regions contributing to the strong growth.
New business growth in India persisted in line with the first-half 2015 trends. New life and general insurance
business sales increased by 60% and 24% respectively, benefiting from the investments made in growing the distribution
footprint.
As indicated before, lower two-wheeler sales and competitive pressures impacted negatively on Pacific & Orient in
Malaysia. This is evident in its earned premiums that declined by 22%. The base effect of the MCIS acquisition during 2014
supported a more than doubling in Malaysian new life business sales.
The AECI policy written by SEB in 2014 had a major negative impact on the 13% overall year-on-year growth in SI’s new business
volumes. Excluding the AECI policy, new business volumes increased by 23%. All business units achieved growth in excess of
20%, apart from International where an 18% decline in inflows is largely attributable to the disposal of Intrinsic during
2014. A 57% increase in new life business at SEB (excluding AECI) is particularly satisfactory. Recurring and single
premium new business grew by 60% and 57% respectively. Another highlight for the year was the success of the SI retail
unit in yielding new inflows. By partnering with intermediaries through the Implemented Consulting initiative, the unit
attracted new inflows of more than R8 billion during 2015. Also pleasing is the significant portion of the funds that
flowed to the SI investment core, supporting strong net inflows into Sanlam Collective Investments.
The bulk of Santam’s premiums are still written in the highly competitive South African market. Earned premiums grew
by 8%, reflecting the maturity of the South African market and the current low-growth economic environment. The severe
drought experienced in large parts of the country manifested in reduced planting and commensurately lower premiums written
in the agricultural business line. MiWay, Santam’s direct insurance business, continues to make inroads and grew its
premium base by 19%.
Net fund inflows of R19,1 billion in 2015 is an acceptable performance given the large withdrawals experienced from
the PIC and BPOPF and the economic and investment market headwinds faced in the 2015 financial year.
Value of new covered business for the year ended 31 December 2015
2015 economic basis 2014 economic basis
Change Change
R million 2015 2014 % 2015 2014 %
Value of new covered business 1 514 1 743 (13) 1 707 1 743 (2)
Sanlam Personal Finance 955 1 084 (12) 1 148 1 084 6
Sanlam Emerging Markets 448 431 4 467 431 8
Sanlam Investments 111 228 (51) 92 228 (60)
Net of non-controlling interest 1 360 1 592 (15) 1 545 1 592 (3)
Present value of new business premiums 54 362 56 394 (4) 55 555 56 394 (1)
Sanlam Personal Finance 38 572 34 798 11 39 712 34 798 14
Sanlam Emerging Markets 7 510 5 673 32 7 600 5 673 34
Sanlam Investments 8 280 15 923 (48) 8 243 15 923 (48)
Net of non-controlling interest 51 856 54 518 (5) 53 005 54 518 (3)
New covered business margin 2,80% 3,09% 3,07% 3,09%
Sanlam Personal Finance 2,48% 3,12% 2,89% 3,12%
Sanlam Emerging Markets 5,97% 7,60% 6,14% 7,60%
Sanlam Investments 1,34% 1,43% 1,12% 1,43%
Net of non-controlling interest 2,62% 2,92% 2,91% 2,92%
The discount rate used to determine VNB is directly linked to long-term interest rates. The 200bp rise in the South
African five and nine-year benchmark rates during 2015 resulted in a commensurate increase in the risk discount rate and a
significant negative impact on VNB growth and margins. This was aggravated by the high base in 2014 related to the AECI
policy. VNB at actual discount rates declined by 13% (6% excluding AECI). On a comparable basis (before economic
assumption changes) VNB decreased by 2% (increased by 6% excluding AECI).
SPF achieved overall growth of 6% on a comparable basis. The significant change in business mix in Sanlam Sky to the
lower margin tax free savings products contributed to a 9% decline in Sanlam Sky’s VNB and a reduction in new business
margins from 9,51% in 2014 to 7,44% in 2015. The normalisation in business mix towards the end of the year should support
VNB growth in 2016. The strong growth in recurring premium risk business in the Individual Life segment more than
compensated for the change in mix of savings business to tax-free savings products. VNB margins improved from 2,88% to 2,97%,
driving VNB growth of 9% in this mature segment. Glacier’s VNB growth was in line with its new business performance.
VNB growth and margins at SEM were negatively impacted by the significantly lower new business production in Kenya and
Zambia, the renegotiation of the Bank Windhoek credit life profit sharing arrangement and higher long-term interest
rates in Namibia. All of the other businesses achieved strong VNB growth largely in line with their new business
performance. On a consistent economic basis, overall VNB increased by 8% to R467 million. Excluding Kenya and Zambia, VNB grew by
24% and Rest of Africa’s contribution by 35%.
SI’s VNB declined by 60%, largely due to the base effect of the AECI transaction concluded in 2014 and a lower
contribution from the International business in line with its lower new business volumes.
VNB margins were in general maintained at a product level, apart from the Namibian credit life business.
- Capital management
Sanlam Life capital allocation approach
Under the current Financial Soundness Valuation (FSV) regime, participations or strategic investments held by a life
insurance company can be taken into account for purposes of the statutory capital available to cover its CAR. This creates
an opportunity in a diversified group to optimise its capital allocation by using trategic investments to cover a portion of
sthe capital required to meet its targeted CAR ratio, with the remainder being held in the form of a balanced portfolio
and/or subordinated debt. This is referred to as capital diversification. In the transition to SAM, the new solvency regime,
some uncertainty existed as to whether any capital diversification would also be allowed under the SAM regime.
The Group therefore followed a prudent capital allocation approach during the development phase of the SAM specifications,
essentially capitalising each life insurance business on a standalone basis without any allowance for diversification.
The SAM specifications have largely been finalised during 2015, with the outcome that participations will be allowed
to contribute to available capital (own funds) under SAM, both at a company (solo) and group level, with a corresponding
capital requirement (SCR). Prescribed valuation bases are applicable at a solo and group level.
The valuation and SCR bases for participations provide some stability to the entity’s SCR cover ratio and
potentially generate surplus own funds that can be redeployed.
The improved clarity on the final SAM specifications enabled the Group to extract further capital efficiencies during
2015. This was achieved through a combination of capital diversification and a more conservative asset allocation for
the balanced portfolio backing Sanlam Life’s covered business.
For Sanlam Life, the Group’s target under the FSV basis is to ensure that its CAR cover would be at least 1,5 times
over a 10-year period, within a 95% confidence level. At the end of 2014 this translated into IFRS-based required capital
of some R14,7 billion for Sanlam Life’s covered business. Consistent with the prudent approach then followed, this
capital requirement was fully covered by subordinated debt of R2 billion and a balanced portfolio of R12,7 billion, with no
allowance for the value attributed to investments in strategic businesses. This basis of capital allocation contributed
to Sanlam Life’s high CAR cover ratio under the FSV regime, as its investment in Santam alone contributes more than
R4 billion in available statutory capital.
The investment in Santam also provides a major diversification opportunity under SAM. The utilising of capital
diversification was accordingly introduced at the end of 2015, initially limited to R2,5 billion. The first R2,5 billion of
Sanlam Life’s IFRS-based capital requirement will therefore be covered by Santam shares, with the remainder covered by
subordinated debt and the balanced portfolio.
In conjunction with the use of the diversification benefit, the Group also reconsidered the strategic asset allocation
of the balanced portfolio to optimise RoGEV under SAM, given that the SAM regime is particularly punitive with regards
to equity holdings. The strategic asset allocation was significantly changed as follows, taking cognisance of the
utilisation of diversification benefits:
Asset allocation
31 December 31 December
2015 2014
Asset class % %
Balanced portfolio
Equities - 31
Offshore investments 8 12
Hedged equities 80 15
Cash 12 42
Total balanced portfolio 100 100
Subordinated debt
Fixed interest 100 100
Total subordinated debt 100 100
Sanlam Life’s IFRS-based required capital amounted to R14,5 billion at the end of 2015 based on the revised capital
allocation approach, covered as follows:
- R2,5 billion by Santam shares;
- R2 billion by the subordinated debt issued by Sanlam Life; and
- R10 billion by a balanced portfolio.
The revised capital allocation approach effectively released a total of R4 billion additional discretionary capital:
- R200 million emanated from the reduction in the overall required capital from R14,7 billion to R14,5 billion.
- Given a slightly lower overall capital requirement, the investment return of R1,3 billion earned on the balanced
portfolio during 2015 could be released to the discretionary capital portfolio.
- The reduction in the capital requirement funded by the balanced portfolio from R12,5 billion before the utilisation
of diversification benefits to R10 billion thereafter, released a further R2,5 billion.
As indicated in the Group’s interim results announcement, a SCR target cover range of between 1,7 times and 2,1 times
has been set for Sanlam Life’s covered business. The R14,5 billion of IFRS-based required capital translated into a SCR
cover at the upper end of the target range at 31 December 2015.
From a RoGEV perspective, the lower expected return from the more conservative asset allocation is compensated for by
the lower level of capital held in the balanced portfolio. The cost of capital charge in the embedded value of covered
business therefore remained largely unchanged.
Discretionary capital
The Group started the year with discretionary capital of R3,3 billion, which was earmarked for new growth and
expansion opportunities as well as to strengthen existing relationships. A net total of R6 billion was redeployed in the
year, which included the following:
- R4,2 billion (excluding Santam’s contribution) allocated to the acquisition of Saham Finances, which will
significantly expand the Group’s African footprint and general insurance diversification. The acquisition price is payable
in US dollars, which the Group hedged during 2015 by acquiring the foreign currency. In terms of the IFRS hedge accounting
specifications, the investment will be recognised in 2016 at the US dollar/R14,08 exchange rate at which the foreign
currency was acquired.
- The Group also indicated after the release of the interim results in September 2015 that it will acquire a 23%
additional stake in the Shiram life and general insurance businesses. A total of some R970 million has been earmarked for
this transaction, which has also been hedged during 2015 against exchange rate movements.
- R703 million was utilised for the acquisition of an effective 27% stake in Medscheme, which improves the Group’s
healthcare proposition for clients in addition to offering a number of potential synergies. The first of these has been
realised through the roll-out of the Reality loyalty scheme to medical aid members administered by Medscheme.
- Some R240 million was invested by SEM to enter the Mozambique and Zimbabwe markets and to increase its stakes in the
Nigerian and Tanzanian general insurance businesses.
- As indicated in the 2014 Sanlam Annual Report, the Group extended its relationship with its empowerment partner,
Ubuntu-Botho Investments (UB), for an additional 10 years with the aim, among others, to jointly explore mutually
beneficial transactions. The first transaction concluded in terms of this arrangement is the transformation of Indwe Brokers
Holdings (Indwe), a general insurance intermediary, into a black-owned company through the disposal by Santam of a 51%
shareholding in the business to African Rainbow Capital, a wholly owned subsidiary of UB. Sanlam also acquired a 25% stake
in Indwe for a total amount of R69 million. The transaction better positions Indwe in a highly competitive market, opens
up new opportunities for the business and enabled the Group to further execute on the transformation pillar of its strategy.
- R46 million was received from Santam as its contribution to recent general insurance investments made in Africa.
- SI utilised R36 million for investment in its US-based asset manager and for trail payments for the acquisition of
the Vukile property management agreement.
- SPF invested R57 million in a distribution business in the entry-level market in South Africa.
- SI established a seeding capital portfolio that will be utilised to grow some of their new products and portfolios
while building a track record. Discretionary capital of R200 million was utilised to bolster the portfolio.
- A special dividend of R226 million was received from MCIS in Malaysia as part of its capital optimisation
initiatives.
- R165 million was realised from the disposal of SEM’s direct stake in Nico Holdings in Malawi to Botswana Insurance
Holdings, SEM’s subsidiary in Botswana. Not only does this transaction enhance the potential to extract synergies between
the businesses, but it also effectively released illiquid excess capital held in the Botswana operations.
Investment return earned on the discretionary capital portfolio and the 2014 dividend cover in excess of cash
operating earnings added some R1 billion of discretionary capital. Together with the R4 billion of capital released from the
capital allocation changes in Sanlam Life, unallocated discretionary capital amounted to R2,3 billion at the end of
December 2015. We remain focused on utilising the available discretionary capital for value-accretive investment opportunities.
- Solvency
All of the life insurance businesses within the Group were sufficiently capitalised at the end of December 2015. The
total admissible regulatory capital (including identified discretionary capital) of Sanlam Life Insurance Limited, the
holding company of the Group’s major life insurance subsidiaries, of R47,8 billion, covered its CAR 5,8 times. No
policyholder portfolio had a negative bonus stabilisation reserve at the end of December 2015.
The Group appointed Standard & Poor’s (S&P) during 2015 to replace Fitch Ratings as the Group’s credit ratings agency
following the cancellation of Fitch Ratings’ registration as a ratings agency for regulatory purposes by the FSB. S&P
issued the following South Africa National Scale ratings at the beginning of 2016: Sanlam Limited: zaAA-; Sanlam Life
Insurance Limited: zaAAA, Subordinated debt: zaAA+. These ratings confirm the strength of the Group’s balance sheet and
operations.
- Dividend
The Group only declares an annual dividend due to the costs involved in distributing an interim dividend to our large
shareholder base. Sustainable growth in dividend payments is an important consideration for the Board in determining the
dividend for the year. The Board uses cash operating earnings as a guideline in setting the level of the normal
dividend, subject to the Group’s liquidity and solvency requirements. The operational performance of the Group in the 2015
financial year enabled the Board to increase the normal dividend per share by 9% to 245 cents. This will maintain a cash
operating earnings cover of approximately 1,1 times. The South African dividend withholding tax regime applies in respect
of this dividend. The dividend will in full be subject to the 15% withholding tax, where applicable, which will result in a
net final dividend, to those shareholders who are not exempt from paying dividend tax, of 208,25 cents per ordinary share.
The number of ordinary shares in issue in the company’s share capital at the date of the declaration is 2 003 141 288
(excluding treasury shares of 163 330 518). The company’s tax reference number is 9536/346/84/5.
Shareholders are advised that the final gross cash dividend of 245 cents for the year ended 31 December 2015 is payable on
Monday, 11 April 2016 by way of electronic bank transfers to ordinary shareholders recorded in the register of Sanlam at
close of business on Friday, 8 April 2016. The last date to trade to qualify for this dividend will be Friday,
1 April 2016, and Sanlam shares will trade ex-dividend from Monday, 4 April 2016.
Share certificates may not be dematerialised or rematerialised between Monday, 4 April 2016 and Friday, 8 April 2016,
both days included.
Sanlam Group
Summarised financial statements for the year ended 31 December 2015
- Accounting policies and basis of presentation
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for abridged reports, and the requirements of the Companies Act applicable to summary financial
statements. The Listings Requirements require abridged reports to be prepared in accordance with the framework concepts and
the measurement and recognition requirements of IFRS and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also,
as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies
applied in the preparation of the consolidated financial statements, from which the summary consolidated financial statements
were derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the
previous consolidated annual financial statements.
The policy liabilities and profit entitlement rules are determined in accordance with prevailing legislation,
generally accepted actuarial practice and the stipulations contained in the demutualisation proposal. There have been no
material changes in the financial soundness valuation basis since 31 December 2014, apart from changes in the economic
assumptions.
The basis of presentation and accounting policies for the IFRS financial statements and Shareholders’ information are
in all material respects consistent with those applied in the 2014 annual report.
The preparation of the Group’s audited annual results was supervised by the Financial Director, Kobus Möller CA(SA).
The following new or revised IFRS and interpretations 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 2018)
- IFRS 16 - Leases (effective 1 January 2019)
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 audit
This summarised report is extracted from audited information, but is not itself audited. The annual financial
statements were audited by Ernst & Young Inc., who expressed an unmodified opinion thereon. The audited annual financial
statements and the auditor’s report thereon are available for inspection at the company’s registered office. The shareholders’
information was audited by Ernst & Young Inc., who expressed an unmodified opinion thereon. The audited shareholders’
information and the auditor’s report thereon are available for inspection at the company’s registered office.
The directors take full responsibility for the preparation of the summarised report and that the financial information
has been correctly extracted from the underlying annual financial statements and shareholders’ information.
Summarised shareholders’ information
for the year ended 31 December 2015
Group Equity Value
at 31 December 2015
2015 2014
R million R million
Embedded value of covered business 47 222 48 393
Sanlam Personal Finance 34 526 35 444
Adjusted net worth 8 287 9 446
Value of in-force 26 239 25 998
Sanlam Emerging Markets 5 486 5 116
Adjusted net worth 2 323 2 324
Value of in-force 3 163 2 792
Sanlam Investments 7 210 7 833
Adjusted net worth 4 498 5 416
Value of in-force 2 712 2 417
Other Group operations 44 336 39 346
Sanlam Personal Finance 3 723 3 009
Sanlam Emerging Markets 12 561 9 455
Sanlam Investments 15 202 12 289
Santam 12 850 14 593
Other capital and net worth adjustments 9 648 4 897
101 206 92 636
Discretionary capital 2 300 3 300
Group equity value 103 506 95 936
Group equity value per share (cents) 5 057 4 684
Shareholders’ fund income statement
for the year ended 31 December 2015
2015 2014
R million R million
Result from financial services before tax 11 595 10 744
Sanlam Personal Finance 5 313 4 801
Sanlam Emerging Markets 2 248 2 213
Sanlam Investments 1 877 1 927
Santam 2 321 1 968
Corporate and other (164) (165)
Tax on financial services income (3 098) (2 849)
Non-controlling interest (1 228) (1 016)
Net result from financial services 7 269 6 879
Net investment return 1 946 1 794
Net investment income 968 931
Net investment surpluses 946 817
Net equity-accounted headline earnings 32 46
Net project expenses (15) (14)
Equity participation costs (43) (109)
Amortisation of intangibles (306) (210)
Normalised headline earnings 8 851 8 340
Profit on disposal of operations 200 387
Net equity-accounted non-headline earnings - 118
Impairments (109) (101)
Normalised attributable earnings 8 942 8 744
Fund transfers 449 (15)
Attributable profit per Group statement of comprehensive income 9 391 8 729
Notes to the shareholders’ fund information
for the year ended 31 December 2015
2015 2014
R million R million
1. New business
Analysed per licence:
Life Insurance 39 976 42 290
Sanlam Personal Finance 28 974 25 145
Sanlam Emerging Markets 4 338 3 286
Sanlam Investments 6 664 13 859
Investment business and other 170 866 140 007
Sanlam Personal Finance 34 851 27 421
Sanlam Emerging Markets 7 575 5 973
Sanlam Investments 109 918 89 391
Santam 18 522 17 222
Total new business 210 842 182 297
2. Net flow of funds
Analysed per licence:
Life Insurance 12 081 18 430
Sanlam Personal Finance 9 168 8 214
Sanlam Emerging Markets 3 174 2 214
Sanlam Investments (261) 8 002
Investment business and other 6 968 23 564
Sanlam Personal Finance 13 727 11 366
Sanlam Emerging Markets (10 520) 1 757
Sanlam Investments (3 251) 4 097
Santam 7 012 6 344
Total net flow of funds 19 049 41 994
3. Normalised earnings per share
In terms of IFRS, the policyholders’ fund’s investments in Sanlam shares and Group subsidiaries are not
reflected as equity investments in the Sanlam statement of financial position, but deducted in full from
equity on consolidation (in respect of Sanlam shares) or reflected at net asset value (in respect of
subsidiaries). The valuation of the related policy liabilities however includes the fair value of these
shares, resulting in a mismatch between policy liabilities and policyholder investments, with a consequential
impact on the Group’s earnings. The number of shares in issue must also be reduced with the treasury shares
held by the policyholders’ fund for the calculation of IFRS basic and diluted earnings per share. This is, in
management’s view, not a true representation of the earnings attributable to the Group’s shareholders,
specifically in instances where the share prices and/or the number of shares held by the policyholders’ fund
varies significantly. The Group therefore calculates normalised earnings per share to eliminate the impact of
investments in Sanlam shares and Group subsidiaries held by the policyholders’ fund.
cents 2015 2014
Normalised diluted earnings per share:
Net result from financial services 355,2 336,2
Headline earnings 432,5 407,6
Profit attributable to shareholders’ fund 437,0 427,3
R million 2015 2014
Analysis of normalised earnings (refer shareholders’
fund income statement):
Net result from financial services 7 269 6 879
Headline earnings 8 851 8 340
Profit attributable to shareholders’ fund 8 942 8 744
million 2015 2014
Adjusted number of shares:
Weighted average number of shares for diluted earnings per
share 2 024,0 2 022,8
Add: Weighted average Sanlam shares held by policyholders 22,3 23,4
Adjusted weighted average number of shares for normalised
diluted earnings per share 2 046,3 2 046,2
Number of ordinary shares in issue 2 166,5 2 166,5
Shares held by subsidiaries in shareholders’ fund (141,2) (142,1)
Outstanding shares and share options in respect of Sanlam
Limited long-term incentive scheme 21,3 23,9
Adjusted number of shares for value per share 2 046,6 2 048,3
Embedded value of covered business
at 31 December 2015
R million Note 2015 2014
Sanlam Personal Finance 34 526 35 444
Adjusted net worth 8 287 9 446
Net value of in-force covered business 26 239 25 998
Value of in-force covered business 28 139 27 872
Cost of capital (1 900) (1 874)
Sanlam Emerging Markets 5 486 5 116
Adjusted net worth 2 323 2 324
Net value of in-force covered business 3 163 2 792
Value of in-force covered business 5 317 4 618
Cost of capital (525) (384)
Non-controlling interest (1 629) (1 442)
Sanlam UK(1) 1 633 1 193
Adjusted net worth 778 391
Net value of in-force covered business 855 802
Value of in-force covered business 1 066 858
Cost of capital (211) (56)
Sanlam Employee Benefits(1) 5 577 6 640
Adjusted net worth 3 720 5 025
Net value of in-force covered business 1 857 1 615
Value of in-force covered business 2 804 2 520
Cost of capital (947) (905)
Embedded value of covered business 47 222 48 393
Adjusted net worth(2) 15 108 17 186
Net value of in-force covered business 1 32 114 31 207
Embedded value of covered business 47 222 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 year ended 31 December 2015
2015 2014
Net value Adjusted
R million Note Total of in-force net worth Total
Embedded value of covered business at the beginning of the year 48 393 31 207 17 186 43 475
Value of new business 2 1 360 3 164 (1 804) 1 592
Net earnings from existing covered business 5 328 (684) 6 012 4 881
Expected return on value of in-force business 3 759 3 759 - 3 368
Expected transfer of profit to adjusted net worth - (5 177) 5 177 -
Operating experience variances 3 1 081 276 805 991
Operating assumption changes 4 488 458 30 522
Expected investment return on adjusted net worth 1 256 - 1 256 1 179
Embedded value earnings from operations 7 944 2 480 5 464 7 652
Economic assumption changes 5 (1 608) (1 646) 38 86
Tax changes 7 6 1 (6)
Investment variances - value of in-force (74) (311) 237 557
Investment variances - investment return on adjusted net worth 443 - 443 118
Goodwill from business (69) (69) - (162)
Exchange rate movements 394 394 - (6)
Embedded value earnings from covered business 7 037 854 6 183 8 239
Acquired value of in-force 124 53 71 1 358
Transfer from/(to) other Group operations - - - (106)
Net transfers from covered business (8 332) - (8 332) (4 573)
Embedded value of covered business at the end of the year 47 222 32 114 15 108 48 393
Analysis of earnings from covered business
Sanlam Personal Finance 4 363 241 4 122 5 805
Sanlam Emerging Markets 1 403 318 1 085 932
Sanlam UK 277 53 224 147
Sanlam Employee Benefits 994 242 752 1 355
Embedded value earnings from covered business 7 037 854 6 183 8 239
Value of new business
for the year ended 31 December 2015
R million Note 2015 2014
Value of new business (at point of sale):
Gross value of new business 1 729 1 979
Sanlam Personal Finance 1 065 1 191
Sanlam Emerging Markets 499 466
Sanlam UK 28 33
Sanlam Employee Benefits 137 289
Cost of capital (215) (236)
Sanlam Personal Finance (110) (107)
Sanlam Emerging Markets (51) (35)
Sanlam UK (2) (3)
Sanlam Employee Benefits (52) (91)
Value of new business 1 514 1 743
Sanlam Personal Finance 955 1 084
Sanlam Emerging Markets 448 431
Sanlam UK 26 30
Sanlam Employee Benefits 85 198
Value of new business attributable to:
Shareholders’ fund 2 1 360 1 592
Sanlam Personal Finance 955 1 084
Sanlam Emerging Markets 294 280
Sanlam UK 26 30
Sanlam Employee Benefits 85 198
Non-controlling interest 154 151
Sanlam Personal Finance - -
Sanlam Emerging Markets 154 151
Sanlam UK - -
Sanlam Employee Benefits - -
Value of new business 1 514 1 743
Geographical analysis:
South Africa 1 040 1 282
Africa 400 409
Other international 74 52
Value of new business 1 514 1 743
R million 2015 2014
Analysis of new business profitability:
Before non-controlling interest:
Present value of new business premiums 54 362 56 394
Sanlam Personal Finance 38 572 34 798
Sanlam Emerging Markets 7 510 5 673
Sanlam UK 3 947 3 978
Sanlam Employee Benefits 4 333 11 945
New business margin 2,79% 3,09%
Sanlam Personal Finance 2,48% 3,12%
Sanlam Emerging Markets 5,97% 7,60%
Sanlam UK 0,66% 0,75%
Sanlam Employee Benefits 1,96% 1,66%
After non-controlling interest:
Present value of new business premiums 51 856 54 518
Sanlam Personal Finance 38 572 34 798
Sanlam Emerging Markets 5 004 3 797
Sanlam UK 3 947 3 978
Sanlam Employee Benefits 4 333 11 945
New business margin 2,62% 2,92%
Sanlam Personal Finance 2,48% 3,12%
Sanlam Emerging Markets 5,88% 7,37%
Sanlam UK 0,66% 0,75%
Sanlam Employee Benefits 1,96% 1,66%
Notes to the embedded value of covered business
for the year ended 31 December 2015
Net
Gross value of Change
value of in-force from base
in-force Cost of business value
R million business capital R million %
1. Value of in-force sensitivity analysis
Base value 35 506 (3 392) 32 114
Risk discount rate increase by 1% 33 675 (4 025) 29 650 (8)
Gross Net Change
value of value of from base
new Cost of new value
R million business capital business %
2. Value of new business sensitivity analysis
Base value 1 560 (200) 1 360
Risk discount rate increase by 1% 1 375 (242) 1 131 (17)
R million 2015 2014
3. Operating experience variances
Risk experience 816 842
Persistency 174 (64)
Maintenance expenses (16) 22
Working capital and other 107 191
Total operating experience variances 1 081 991
4. Operating assumption changes
Risk experience 810 167
Persistency (60) 88
Maintenance expenses (3) 32
Modelling improvements and other (259) 235
Total operating assumption changes 488 522
5. Economic assumption changes
Investment yields (1 603) 86
Long-term asset mix assumptions, inflation gap change and other (5) -
Total economic assumption changes (1 608) 86
R million 2015 2014
6. Reconciliation of growth from covered business
The embedded value earnings from covered business reconcile as
follows to the net result from financial services for the year:
Net results from financial services of covered business per
shareholders’ fund income statement 4 484 3 889
Sanlam Personal Finance 3 446 3 110
Sanlam Emerging Markets 603 477
Sanlam UK 74 68
Sanlam Employee Benefits 361 234
Investment return on adjusted net worth 1 699 1 297
Embedded value earnings from covered business: value of in-force 854 3 053
Embedded value earnings from covered business 7 037 8 239
% 2015 2014
7. Economic assumptions
Gross investment return, risk discount rate and inflation
Sanlam Life:
Point used on the relevant yield curve 9 year 9 year
Fixed-interest securities 10,1 8,1
Equities and offshore investments 13,6 11,6
Hedged equities 9,5 8,6
Property 11,1 9,1
Cash 9,1 7,1
Gross return on required capital(1) 9,8 9,3
Net return on required capital 8,4 7,6
Inflation rate(2) 8,1 6,1
Risk discount rate 12,6 10,6
Sanlam Investments and Pensions:
Point used on the relevant yield curve 15 year 15 year
Fixed-interest securities 2,4 2,2
Equities and offshore investments 5,6 5,4
Hedged equities n/a n/a
Property 5,6 5,4
Cash 2,4 2,2
Return on required capital 2,4 2,2
Inflation rate 3,2 2,9
Risk discount rate 6,1 5,9
% 2015 2014
7. Economic assumptions (continued)
SDM Limited:
Point used on the relevant yield curve 5 year 5 year
Fixed-interest securities 9,6 7,6
Equities and offshore investments 13,1 11,1
Hedged equities n/a n/a
Property 10,6 8,6
Cash 8,6 6,6
Return on required capital 10,9 8,9
Inflation rate 7,6 5,6
Risk discount rate 12,1 10,1
Botswana Life Insurance:
Fixed-interest securities 7,5 7,5
Equities and offshore investments 11,0 11,0
Hedged equities n/a n/a
Property 8,5 8,5
Cash 6,5 6,5
Return on required capital 8,8 8,8
Inflation rate 4,5 4,5
Risk discount rate 11,0 11,0
(1) 2014 return has been adjusted to exclude the assets matching the subordinated debt.
This is consistent with the 2015 disclosure and in line with how the asset mix was
modelled in the 2014 and 2015 valuations.
(2) Expense inflation of 10,1% (2014: 8,1%) assumed for retail business administered on
old platforms.
Illiquidity premiums
Investment returns on non-participating and inflation-linked annuities as well as guaranteed plans include
assumed illiquidity premiums due to matching assets being held to maturity.
Assumed illiquidity 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 capped at 80bps (2014: 50bps and 110bps) for guaranteed plans.
% 2015 2014
Asset mix for assets supporting required capital
Sanlam Life(1):
Equities - 31
Offshore investments 8 12
Hedged equities 80 15
Cash 12 42
100 100
Sanlam Investments and Pensions:
Cash 100 100
100 100
SDM Limited:
Equities 50 50
Cash 50 50
100 100
Botswana Life Insurance:
Equities 50 50
Cash 50 50
100 100
(1) Towards the end of 2015 the strategic asset allocation of the balanced portfolio for
Sanlam Life was revised including using the investment in Santam to back a portion of
Sanlam Life’s required capital.
Summarised Group IFRS financial statements
for the year ended 31 December 2015
Group statement of financial position
at 31 December 2015
R million 2015 2014
Assets
Equipment 892 723
Owner-occupied properties 1 329 1 096
Goodwill 3 895 3 974
Other intangible assets 487 439
Value of business acquired 1 943 2 045
Deferred acquisition costs 3 463 3 281
Long-term reinsurance assets 945 941
Investments 590 894 538 155
Properties 11 606 10 333
Equity-accounted investments 15 999 11 895
Equities and similar securities 189 214 183 040
Interest-bearing investments 165 261 161 778
Structured transactions 14 179 12 348
Investment funds 157 288 133 552
Cash, deposits and similar securities 37 347 25 209
Deferred tax 368 365
Assets of disposal groups classified as held for sale 540 1 893
Net defined benefit asset - 144
General insurance technical assets 4 251 3 964
Working capital assets 65 501 54 233
Trade and other receivables 45 360 37 974
Cash, deposits and similar securities 20 141 16 259
Total assets 674 508 611 253
Equity and liabilities
Shareholders’ fund 53 621 46 037
Non-controlling interest 6 571 5 198
Total equity 60 192 51 235
Long-term policy liabilities 480 910 443 672
Insurance contracts 183 972 186 626
Investment contracts 296 938 257 046
Term finance 5 637 5 775
Margin business 1 737 1 835
Other interest-bearing liabilities 3 900 3 940
Structured transactions liabilities 2 374 766
External investors in consolidated funds 53 641 49 625
Cell owners’ interest 980 925
Deferred tax 2 180 2 498
Liabilities of disposal groups classified as held for sale - 1 466
General insurance technical provisions 13 523 12 592
Working capital liabilities 55 071 42 699
Trade and other payables 52 751 40 529
Provisions 319 283
Taxation 2 001 1 887
Total equity and liabilities 674 508 611 253
Group statement of comprehensive income
for the year ended 31 December 2015
R million 2015 2014
Net income 85 293 92 060
Financial services income 53 754 49 683
Reinsurance premiums paid (6 831) (6 341)
Reinsurance commission received 1 275 1 125
Investment income 25 241 22 491
Investment surpluses 13 942 28 891
Finance cost - margin business (101) (105)
Change in fair value of external investors liability (1 987) (3 684)
Net insurance and investment contract benefits and claims (47 675) (58 626)
Long-term insurance contract benefits (15 247) (26 388)
Long-term investment contract benefits (21 736) (22 168)
General insurance claims (14 206) (14 404)
Reinsurance claims received 3 514 4 334
Expenses (23 024) (20 811)
Sales remuneration (7 269) (6 442)
Administration costs (15 755) (14 369)
Impairments (173) (140)
Amortisation of intangibles (382) (240)
Net operating result 14 039 12 243
Equity-accounted earnings 1 310 1 603
Finance cost - other (580) (517)
Profit before tax 14 769 13 329
Taxation (3 859) (3 534)
Shareholders’ fund (3 078) (3 007)
Policyholders’ fund (781) (527)
Profit for the year 10 910 9 795
Other comprehensive income
Movement in foreign currency translation reserve 3 390 569
Cash flow hedge reserve 509 -
Employee benefits re-measurement gain (11) 128
Comprehensive income for the year 14 798 10 492
Allocation of comprehensive income:
Profit for the year 10 910 9 795
Shareholders’ fund 9 391 8 729
Non-controlling interest 1 519 1 066
Comprehensive income for the year 14 798 10 492
Shareholders’ fund 12 863 9 393
Non-controlling interest 1 935 1 099
Earnings attributable to shareholders of the Company (cents):
Basic earnings per share 468,9 436,7
Diluted earnings per share 464,0 431,5
Group statement of changes in equity
for the year ended 31 December 2015
R million 2015 2014
Shareholders’ fund:
Balance at beginning of the year 46 037 40 965
Comprehensive income 12 863 9 393
Profit for the year 9 391 8 729
Other comprehensive income 3 472 664
Net acquisition of treasury shares(1) (1 146) (515)
Share-based payments 409 376
Dividends paid(2) (4 526) (4 009)
Acquisitions, disposals and other movements in interests (16) (173)
Balance at end of the year 53 621 46 037
Non-controlling interest:
Balance at beginning of the year 5 198 3 651
Comprehensive income 1 935 1 099
Profit for the year 1 519 1 066
Other comprehensive income: 416 33
Net (acquisition)/disposal of treasury shares(1) (16) (20)
Share-based payments 57 57
Dividends paid(2) (891) (636)
Acquisitions, disposals and other movements in interests 288 1 047
Balance at end of the year 6 571 5 198
Shareholders’ fund 46 037 40 965
Non-controlling interest 5 198 3 651
Total equity at beginning of the year 51 235 44 616
Shareholders’ fund 53 621 46 037
Non-controlling interest 6 571 5 198
Total equity at end of the year 60 192 51 235
(1) Includes movement in cost of shares held by subsidiaries and the share incentive trust.
(2) Normal dividend of 225 cents per share (2014: 200 cents per share) declared during 2015 in
respect of the 2014 financial year.
Group cash flow statement
for the year ended 31 December 2015
R million 2015 2014
Net cash flow from operating activities 32 593 35 944
Net cash flow from investment activities (15 911) (30 033)
Net cash flow from financing activities (1 477) (971)
Net increase in cash and cash equivalents 15 205 4 940
Net foreign exchange difference 707 -
Cash, deposits and similar securities at beginning of the year 41 431 36 491
Cash, deposits and similar securities at end of the year 57 343 41 431
Notes to the Group financial statements
for the year ended 31 December 2015
Cents 2015 2014
1. Earnings per share
Basic earnings per share:
Headline earnings 464,4 416,5
Profit attributable to shareholders’ fund 468,9 436,7
Diluted earnings per share:
Headline earnings 459,5 411,6
Profit attributable to shareholders’ fund 464,0 431,5
R million 2015 2014
Analysis of earnings:
Profit attributable to shareholders’ fund 9 391 8 729
Less: Net profit on disposal of operations (200) (387)
Less: Equity-accounted non-headline earnings - (118)
Plus: Impairment of investments and goodwill 109 101
Headline earnings 9 300 8 325
Million 2015 2014
Number of shares:
Number of ordinary shares in issue at beginning of year 2 166,5 2 100,0
Add: Shares reclassified during the year - 66,5
Less: Weighted Sanlam shares held by subsidiaries (including policyholders) (163,8) (167,6)
Adjusted weighted average number of shares for basic earnings per share 2 002,7 1 998,9
Add: Total number of shares in respect of Sanlam Limited long-term incentive
schemes 21,3 23,9
Adjusted weighted average number of shares for diluted earnings per share 2 024,0 2 022,8
R million 2015 2014
2. Reconciliation of segmental information
Segment financial services income (per shareholders’ fund information) 49 365 45 713
Sanlam Personal Finance 15 221 14 364
Sanlam Emerging Markets 6 078 5 236
Sanlam Investments 8 859 8 286
Santam 19 066 17 700
Corporate and other 141 127
IFRS adjustments 4 389 3 970
Total financial services income 53 754 49 683
Segment result (per shareholders’ fund information after tax and
non-controlling interest) 8 942 8 744
Sanlam Personal Finance 3 710 6 578
Sanlam Emerging Markets 1 445 1 504
Sanlam Investments 1 618 2 055
Santam 1 367 916
Corporate and other 802 (2 309)
Reverse non-controlling interest included in segment result 1 519 1 066
Fund transfers 449 (15)
Total profit for the year 10 910 9 795
3. Share repurchases
The Sanlam shareholders granted general authorities to the Group at the 2015 and 2014 annual general meetings
to repurchase Sanlam shares in the market. The Group acquired 142,000 shares at an average price of R46,85 in
terms of general authorities. The total consideration paid of R6,7 million was funded from existing cash resources.
All purchases were effected through the JSE trading system without any prior understanding or arrangement between
the Group and the other counterparties. Authority to repurchase 108,2 million shares, or 4,99% of Sanlam’s issued
share capital at the time, remain outstanding in terms of the general authority granted at the annual general
meeting held on 3 June 2015. The financial effect of the share repurchases during 2015 on the IFRS earnings and
net asset value per share is not material.
4. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosure in the 2015 Annual Report. The circumstances
surrounding the contingent liabilities remain materially unchanged.
5. Subsequent events
During November 2015 agreements were concluded whereby SEM and Santam will jointly acquire an effective 30%
interest in Saham Finances, the insurance arm of the Saham group. Saham Finances operates in 26 countries across
North, West and East Africa, and the Middle East. It is the largest insurer in Africa, excluding South Africa.
The acquisition consideration amounts to US$400 million, including transaction related costs and working capital
for the Group company that will hold the investment in Saham Finances. All the required regulatory approvals were
obtained after year-end and the transaction will be closed shortly.
No other material facts or circumstances have arisen between the date of the statement of financial position and
this report which materially affects the financial position of the Sanlam Limited Group at 31 December 2015 as
reflected in these financial statements.
6. Fair value disclosures
Determination of fair value and fair value hierarchy
Below follows required disclosure of fair value measurements, using a three-level fair value hierarchy that
reflects the significance of the inputs used in determining the measurements. It should be noted that these
disclosures only cover assets and liabilities measured at fair value.
Included in level 1 category are 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 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
31 December 2015
Properties - - 11 606 11 606
Equities and similar securities 186 222 2 562 430 189 214
Interest-bearing investments 72 478 91 049 490 164 017
Structured transactions 6 391 7 788 - 14 179
Investment funds 132 186 24 595 507 157 288
Trading account assets 5 549 24 243 - 29 792
Cash deposits and similar securities 25 769 11 573 - 37 342
Total assets at fair value 428 595 161 810 13 033 603 438
Investment contract liabilities - 293 760 3 178 296 938
Term finance 2 937 104 359 3 400
Valued at stock exchange prices 2 937 - - 2 937
Based on internal valuation - 104 359 463
Structured transactions liabilities - 2 374 - 2 374
Trading account liabilities 170 33 416 - 33 586
External investors in consolidated funds 53 437 204 - 53 641
Total liabilities at fair value 56 544 329 858 3 537 389 939
31 December 2014
Properties - - 10 333 10 333
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 assets at fair value 434 165 102 084 11 576 547 825
Investment contract liabilities - 254 494 2 552 257 046
Term finance 3 031 111 347 3 489
Valued at stock exchange prices 3 031 - - 3 031
Based on internal valuation - 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 liabilities at fair value 53 515 276 631 2 899 333 045
Reconciliation of movements in level 3 assets and liabilities measured at fair value
Equities Interest-
and similar bearing Structured Investment Total
R million Properties securities investments transactions funds assets
Assets
31 December 2015
Balance at 1 January 2015 10 333 395 396 - 452 11 576
Total gains/(loss) in statement of comprehensive income 42 23 41 - 60 166
Acquisitions 400 64 - - 2 466
Disposals (207) (70) (1) - (7) (285)
Foreign exchange movements 1 049 18 54 - - 1 121
Transfer from owner-occupied properties (11) - - - - (11)
Balance at 31 December 2015 11 606 430 490 - 507 13 033
31 December 2014
Balance at 1 January 2014 7 227 1 313 394 - 459 9 393
Total gain/(loss) in statement of comprehensive income 181 82 34 2 50 349
Acquisitions 1 022 130 13 - - 1 165
Disposals (301) (1 133) (51) (2) (57) (1 544)
Foreign exchange movements 138 3 6 - - 147
Transfer from owner-occupied property 111 - - - - 111
Transfers from level 1(1) 1 955 - - - - 1 955
Balance at 31 December 2014 10 333 395 396 - 452 11 576
(1) In the valuation performed on these investments, insignificant adjustments were made to the rates used to discount future cash flows.
The valuation methodology has been revisited and additional unobservable inputs are included, changing the classification.
Struc-
Invest- tured
ment trans-
contract Term actions Total
R million liabilities finance liabilities liabilities
Liabilities
31 December 2015
Balance at 1 January 2015 2 552 347 - 2 899
Total (gain)/loss in statement of comprehensive income 152 21 - 173
Acquisitions 73 - - 73
Disposals (193) (101) - (294)
Foreign exchange movements 594 92 - 686
Balance at 3 178 359 - 3 537
31 December 2015
31 December 2014
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) 1 984 - - 1 984
Balance at 2 552 347 - 2 899
31 December 2014
(1) The classification of investment contracts backing investment property has changed in line with the change in the
classification of the underlying investments. The policy of the Group is to effect transfers of financial instruments
between the fair value hierarchy levels at the beginning of the reporting period.
Reconciliation of movements in level 3 assets and liabilities measured at fair value
R million 2015 2014
Gains and losses (realised and unrealised) included in profit and loss
Total gains or losses included in profit or loss for the period (7) 114
Total unrealised gains or losses included in profit or loss for the period
for assets held at the end of the reporting period (47) 191
Transfers between categories
Cash,
Equities Interest- Struc- deposits
and bearing tured Invest- and
similar invest- trans- ment similar Total
securities ments actions funds securities assets
R million
2015
Assets
Transfer from level 1 to level 2 - 2 603 - - 1 331 3 934
Transfer from level 2 to level 1 - 313 142 469 153 1 077
2014
Transfer from level 1 to level 2 - 380 106 - 36 522
Transfer from level 2 to level 1 5 - - - - 5
Investments traded in a market that became inactive during the year have been transferred from level 1 to level 2.
Conversely, investments traded in a market that became active have been transferred from level 2 to level 1.
Valuation techniques used in determining the fair value of assets and liabilities
Significant
Applicable unobservable
Instrument to level Valuation basis Main assumptions input
Properties 3 Discounted cash flow model (DCF) Bond and interbank swap interest rate curve Capitalisation rate
Earnings multiple Cost of capital Discount rate
Consumer price index
Equities and similar securities 2 and Discounted cash flow model (DCF) Bond and interbank swap interest rate curve Cost of capital
3 Earnings multiple Cost of capital Earnings multiple
Consumer price index
Interest-bearing investments 2 and Discounted cash flow model (DCF) Bond and interbank swap interest rate curve Earnings multiple
(including insurance policies) 3 Earnings multiple Cost of capital
Quoted put/surrender price by issuer Consumer price index
Trading account assets and 2 DCF Forward rate n/a
liabilities Credit risk spread
Liquidity spread
Investment contract liabilities 2 and Current unit price of Bond and interbank swap interest rate curve Earnings multiple
and investment funds 3 underlying unitised asset, multiplied Cost of capital n/a
by the number of units held
DCF Consumer price index
Earnings multiple Bond interest rate curves
Term finance 2 and DCF Bond and forward rate Liquidity spread
3 Credit ratings of issuer
Liquidity spread
Agreement interest curves
Structured transactions assets 2 Option pricing models Bond and interbank swap interest rate curve n/a
and liabilities DCF Forward equity and currency rates
Volatility risk adjustments
External investors in consolidated 2 Current unit price of Based on underlying assets as discussed above n/a
funds underlying unitised asset, multiplied
by the number of units held
Cash, deposits and similar securities 2 Mark-to-market Bond and interbank swap interest rate curve n/a
Yield curve
Sensitivity of level 3 assets and liabilities measured at fair value to changes in key assumptions
Assets
Effect Effect
Effect of Effect of of a 1% of a 1%
a 10% a 10% increase decrease
increase decrease in base in base
in risk in risk capitali- capitali-
Carrying adjust- adjust- Carrying sation sation
amount ments ments amount(1) rate rate
R million
Properties
2015
Cash flow risk adjustments 11 606 (1 161) 1 161 - - -
Base rate - - - 8 371 (293) 314
Capitalisation - - - 8 371 (350) 427
2014
Cash flow risk adjustments 10 333 (1 033) 1 033 - - -
Base rate - - - 7 097 (264) (282)
Capitalisation - - - 7 097 (382) (466)
Effect Effect
Effect of Effect of of a 1% of a 1%
a 10% a 10% increase decrease
increase decrease in in
Carrying in in Carrying discount discount
amount(2) multiple multiple amount(3) rate rate
R million
Other investments
2015
Equities and similar securities 399 40 (40) 31 (6) 5
Interest-bearing investments 490 49 (49) - - -
Investment funds 507 51 (51) - - -
Total 1 396 140 (140) 31 (6) 5
2014
Equities and similar securities 323 32 (32) 72 (3) 3
Interest-bearing investments 396 40 (40) - - -
Investment funds 452 45 (45) - - -
Total 1 171 117 (117) 72 (3) 3
Liabilities
Effect Effect
Effect of Effect of of a 1% of a 1%
a 10% a 10% increase decrease
increase decrease in in
Carrying in in Carrying discount discount
amount(2) value value amount(3) rate rate
R million
2015
Investment contract liabilities 3 178 318 (318) - - -
Term finance 359 36 (36) - - -
Total liabilities 3 537 354 (354) - - -
2014
Investment contract liabilities 2 552 255 (255) - - -
Term finance 347 35 (35) - - -
Total liabilities 2 899 290 (290) - - -
(1) Investment properties comprise a majority of Sanlam Life properties valued using capitalisation and discount rates, with
sensitivities based on these two unobservable inputs.
(2) Represents mainly private equity investments valued on earnings multiple, with sensitivities based on the full valuation.
(3) Represents mainly instruments valued on a discounted cash flow basis, with sensitivities based on changes in the discount
rate.
7. Business combinations
There were no material business combinations during the year.
Administration
Registered name
Sanlam Limited
(Registration number 1959/001562/06)
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
Incorporated in South Africa
Group Company 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
www.sanlam.co.za
Transfer secretaries
Computershare Investor Services (Pty) Limited
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg 2001, South Africa
PO Box 61051, Marshalltown 2107
South Africa
Telephone +27 (0)11 370 5000
Fax +27 (0)11 688 5200
Directors
DK Smith (Chairman), PT Motsepe (Deputy Chairman), Ian Kirk(1) (Group Chief Executive), MM Bakane-Tuoane, CB Booth(2),
AD Botha, PR Bradshaw(2), JP Möller(1), MV Moosa, TI Mvusi(1), SA Nkosi, K Nondumo(3), P Rademeyer, Y Ramiah(1), RV
Simelane, CG Swanepoel, PL Zim
(1) Executive
(2) British
(3) Appointed 3 December 2015
Bellville
9 March 2016
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