Wrap Text
Interim Financial Statements for the six months ended 30 June 2017
SANLAM LIMITED
Incorporated in the Republic of South Africa JSE share code (primary listing): SLM
(Registration number 1959/001562/06) NSX share code: SLA
“Sanlam”, “Sanlam Group”, or “the Company” ISIN: ZAE000070660
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Interim financial statements
Accounting policies and basis of preparation
Shareholders' information
Independent auditors' review report on Sanlam Limited interim Shareholders' information
Group Equity Value
Change in Group Equity Value
Return on Group Equity Value
Shareholders' fund at fair value
Shareholders' fund at net asset value
Shareholders' fund income statement
Notes to the shareholders' fund information
Embedded value of covered business
Change in embedded value of covered business
Value of new business
Notes to the embedded value of covered business
Interim condensed consolidated financial statements
Independent auditors' review report on interim condensed consolidated financial statements
Group statement of financial position
Group statement of comprehensive income
Group statement of changes in equity
Group cash flow statement
Notes to the interim condensed consolidated financial statements
Administration
Key features
Earnings
- Net result from financial services increased by 1% (up 5% in constant currency)
Business volumes
- Net value of new covered business up 11% to R782 million (up 17% in constant currency)
- Net new covered business margin of 2.61% (2.44% in 2016)
- New business volumes declined by 4% to R110 billion (down 2% in constant currency)
- Net fund inflows of R19 billion compared to R22 billion in 2016
Group Equity Value
- Group Equity Value per share of R54.69
- Return on Group Equity Value per share of 6.1% for the six-month period
- Adjusted Return on Group Equity Value per share of 8.1%; exceeding target of 6.4%
Capital management
- Strategic investments of R4.8 billion finalised during 2017
- Unallocated discretionary capital up to R2 billion at 30 June 2017
- Sanlam Group SAM cover ratio of 2.1 times; Sanlam Life Insurance Limited SAM cover ratio of 3 times
- Sanlam Life Insurance Limited CAR cover ratio of 5.3 times
Salient results
for the six months ended 30 June 2017
%
2017 2016 change
Sanlam Group
Earnings
Net result from financial services per share cents 197,9 196,8 1%
Normalised headline earnings per share(1) cents 218,7 208,0 5%
Diluted headline earnings per share(2) cents 225,3 277,2 (19%)
Net result from financial services R million 4 056 4 028 1%
Normalised headline earnings(1) R million 4 481 4 256 5%
Headline earnings(2) R million 4 565 5 597 (18%)
Business volumes
New business volumes R million 110 257 115 353 (4%)
Net fund inflows R million 18 879 21 746 (13%)
Net new covered business
Value of new covered business R million 782 702 11%
Covered business PVNBP(3) R million 29 976 28 759 4%
New covered business margin(4) % 2,61 2,44
Sanlam Investments assets under management R million 868 892 835 130 4%
Group Equity Value
Group Equity Value(5) R million 112 100 110 717 1%
Group Equity Value per share(5) cents 5 469 5 407 1%
Return on Group Equity Value per share(6) % 6,1 7,9
Adjusted Return on Group Equity Value per share(7) % 8,1 9,3
Sanlam Life Insurance Limited
Shareholders' fund(5) R million 85 045 83 866
Capital Adequacy Requirement (CAR)(5) R million 8 100 8 150
CAR covered by prudential capital(5) Times 5,3 5,8
(1) Normalised headline earnings = headline earnings, excluding fund transfers.
(2) The divergent growth between normalised headline earnings and headline earnings is attributable to one-off deferred tax assets raised in the 2016 results in respect of
assessed losses in certain policyholder funds following the implementation of the new Risk Policy Fund for South African insurers, which increased the comparative base.
(3) PVNBP = present value of new business premiums and is equal to the present value of new recurring premiums plus single premiums.
(4) New covered business margin = value of new covered business as a percentage of PVNBP.
(5) Comparative figures are as at 31 December 2016.
(6) Growth in Group Equity Value per share (with dividends paid, capital movements and cost of treasury shares acquired reversed) as a percentage of Group Equity Value per
share at the beginning of the year.
(7) Adjusted Return on Group Equity Value = Return on Group Equity Value excluding investment market and currency volatility, as well as changes in interest rates and other
factors outside of management's control. Adjusted Return on Group Equity Value better reflects the underlying operational performance of the Group.
Executive review
The operating environment during the first half of 2017 proved even more demanding than anticipated, in particular in South Africa, our largest market. Growth in all key
performance indicators was also impacted by a significantly stronger average Rand exchange rate in the first half of 2017, increased new business strain at Sanlam Personal
Finance, catastrophe claims at Santam and the effect of the demonetisation initiative in India. Strategic execution remained a key focus under these difficult conditions,
enabling the Group to deliver resilient results for the first six months of the 2017 financial year. Particularly pleasing is the double-digit annualised Adjusted Return
on Group Equity Value (RoGEV) of 16.2% delivered to shareholders. This exceeded the target of 13.2% for 2017 by a healthy margin.
The global environment was in general supportive of emerging markets during the first six months of 2017. Global economic conditions improved in the latter half of 2016 and
remained relatively firm in the first half of 2017, with 3% projected growth in global GDP in 2017 and 2018. This is supported by encouraging growth momentum in Europe and
the United States (US), and a stabilisation in China's growth prospects. Political risk also eased in Europe after favourable election outcomes in The Netherlands and France,
with initial fears of rising support for Euro-sceptic parties not materialising. Commodity prices responded to expectations for rising demand, improving the terms of trade
of many emerging market countries. The exception was oil-dependent countries, which are still under pressure from structurally lower oil prices. International investor
sentiment and risk appetite rebounded, buoyed by the robust global economic outlook, some decline in geopolitical risk and indications that the major developed market
central banks will opt for moderated easing of their current loose monetary policy. A number of equity markets reached new highs as a result, with many emerging investment
markets benefiting from the renewed appetite for risk.
The South African operating environment was, however, not supportive of growth in the first half of 2017. A number of factors drove renewed optimism for accelerated economic
growth at the start of the year:
- An improvement in South Africa's terms of trade following the rise in commodity prices;
- Lower inflation, signifying higher real growth in household disposable income;
- The economic slowdown seemed to have bottomed;
- The interest rate cycle has probably peaked; and
- Improved prospects for agricultural production after good rainfall in large parts of the country.
Business and consumer confidence were, however, dealt severe blows by heightened political and economic policy uncertainty, which has risen sharply since the end of 2015.
The shock to business and consumer confidence that followed a cabinet reshuffle is evident in the collapse in manufacturers' investment spending plans as recorded by the
Bureau for Economic Research's latest surveys. This weighed heavily on private sector fixed-investment activity and constrained growth in employment. Consumer confidence
continued to wane in the uncertain environment, especially after the downgrade of South Africa's foreign currency sovereign rating to below investment grade by major
agencies, impacting consumer spending trends and savings activity. This considerably weakened the economic climate in South Africa and largely eliminated the benefits of
otherwise improving local and global conditions. The South African economy entered a technical recession in the first quarter of 2017 as a result, with only pedestrian
growth expected for the remainder of 2017 and 2018.
The impact of waning consumer confidence was already evident in 2016 when Glacier experienced a marked slowdown in single premium investment flows from the mass affluent
market. This trend continued into 2017, but also expanded to the high net worth segment. Both Glacier and Sanlam Private Wealth struggled to attract new single premium
business in the first half of 2017. The higher tax burden (increase in rate of highest tax bracket and higher dividend withholding tax) for clients in these businesses'
target markets further exacerbated the situation. A highlight, however, was continued strong growth in recurring premium risk business across all segments.
Santam faced a tough claims cycle in the first half of 2017. A number of large fire-related property claims during the period were aggravated by catastrophe claims in the
Western Cape in June 2017. A severe winter storm caused widespread wind and water damage in Cape Town. Strong winds from the same storm also drove runaway wildfires in the
Knysna and Plettenberg Bay areas that resulted in significant property damage. Despite these claims, Santam still managed to achieve an underwriting margin at the lower
end of its target range.
Commodity-based economies in the Rest of Africa are benefiting from better terms of trade and the firmer global growth outlook. Economic growth in these countries is
recovering slowly, augmenting robust growth in the East-African region that is less dependent on commodity exports. Oil-dependent countries, Nigeria and Angola in particular,
are however still adapting to lower oil prices and the need to diversify their economic bases away from oil is evident. Economic conditions in Namibia were under some
pressure in the first half of 2017. The Namibian government's finances and liquidity are under strain from twin deficits, which negatively impacted on liquidity and cost
of capital in the banking sector, as well as general economic activity. Overall though, the Rest of Africa region continued to expand at a much faster pace than South Africa,
providing a good base for accelerated growth at Sanlam's operations in this region. Namibia and Botswana remain the most competitive markets in the Rest of Africa region
given their more mature profile. The Botswana operations in particular faced aggressive pricing by competitors in the unsecured lending and life annuity lines of business,
which eroded some of our market share and margins.
Demonetisation in India during 2016 had a negative impact on the economy and credit businesses at the start of 2017. Consumers and corporates, however, adapted faster than
anticipated to the new environment, with the economy on track to continue delivering high growth in 2017 of some 7%. Shriram Capital similarly experienced a weak first
quarter in 2017, but has largely recovered by the second quarter of the year. We are optimistic that Shriram Capital will deliver improved results in the second half of 2017.
Malaysia's economic momentum has stabilised after a period of slower growth. Economic growth is accelerating, aided by a competitive Ringgit. A lack of progress in diversifying
our operations in Malaysia has, however, prevented our businesses from sharing in the growth.
The Group's primary indicator of shareholder value creation remains RoGEV. Given the nature of the Group's diversified business, we consider this measure of performance the
most appropriate since it incorporates the result of all the major value drivers in the business. The RoGEV per share for the six months to 30 June 2017 of 6.1% (annualised 11.7%)
was below the target of 6.4% (annualised 13.2%), largely due to the stronger Rand exchange rate. Adjusted RoGEV per share, which excludes investment market and currency volatility
as well as changes in interest rates and other factors outside of management's control, was well in excess of the target at 8.1% (annualised 16.2%). Annualised actual and adjusted
RoGEV excludes the annualisation of the revaluation of businesses held for sale and acquired goodwill written off for embedded value purposes.
Net result from financial services increased by 1%. The low level of growth is largely attributable to the stronger average Rand exchange rate, higher new business strain at Sanlam
Personal Finance following the good growth in risk business, the weak claims experience at Santam and one-off credit provisioning in Shriram Capital following demonetisation in India.
This was partly offset by the contributions from structural growth. Excluding these, net result from financial services increased by a satisfactory 11%.
New business volumes declined by 4%, an acceptable performance under difficult conditions. The Group did particularly well to achieve net fund inflows of R19 billion given the
significant pressure on single premium business. A highlight for the period is the strong growth in value of new life (covered) business written. The net value of the new covered
business (VNB) increased by 11% (17% in constant currency) at a margin of 2.61%, which exceeds the comparable 2016 margin.
Strategic initiatives
The Group's strategic intent of sustainable value creation for all key stakeholders remains firmly in place, underpinned by the Group's vision to:
- Lead in client-centric wealth creation, management and protection in South Africa.
- Be a leading Pan-African financial services group with a meaningful presence in India and South-East Asia.
- Play a niche role in wealth and investment management in specific developed markets.
The Group's vision and strategic intent is pursued through a strategy focussed on four pillars:
- Profitable top-line growth through a culture of client centricity
- Enhancing resilience and earnings growth through diversification (including geographical presence, products, market segments and distribution platforms)
- Extracting value through innovation and improved efficiencies (operating and cost efficiencies)
- Responsible capital allocation and management
Continuous transformation of the Group to remain relevant in a changing world is key. We define transformation broadly to include among others economic transformation to
reduce wealth inequality, transforming our staff to reflect the demographic profile of our client base and societies where we operate, transforming our distribution
channels and operations in line with technological and regulatory developments and most importantly, transforming everything we do in line with the changing needs and
preferences of our clients. Transformation therefore underpins the Group's strategy in its entirety as a key focus area under each of the strategic pillars.
We have highlighted before that Sanlam's strategy is not particularly unique. Our ability to consistently execute on the strategy in a sustainable manner has proved to be
a key differentiator. It has been a key driver of success in the past and forms the foundation for Sanlam's sustainability over the long term.
Good progress has been made on all four strategic pillars:
Profitable top-line growth through a culture of client centricity
The challenging conditions in South Africa, Namibia and Botswana provided significant headwinds to grow the Group's top-line in the first half of 2017. By remaining focused
on growing market share in the more profitable recurring premium space, in particular in market segments where we do not have a fair market share, enabled us to deliver the
sterling growth of 17% in VNB in constant currency, at higher overall margins. The strategic restructuring of Sanlam Personal Finance during 2016 into focussed business
units made a significant contribution to this growth.
Diligent focus on client centricity and the quality of new business written also enhances the resilience of the life insurance in-force book.
Enhancing resilience and earnings growth through diversification
The benefits of diversification was again evident in the Group's first-half 2017 performance. Despite pressure in a number of areas, the Group achieved an overall
satisfactory performance in all key performance indicators.
The Group's profile was significantly enhanced in the first half of 2017 by the acquisition of an additional 16.6% stake in Saham Finances. This not only increases the
Group's exposure to the higher-growth Rest of Africa region, but also enhances the line of business profile with a shift towards general insurance. The acquisition of a
majority stake in PineBridge Investments East Africa (renamed Sanlam Investments East Africa) provides for a better balanced and complementary business profile in
East Africa, which was skewed towards life insurance.
Good progress has also been made with the Central Credit Manager initiative launched during 2016, as further elaborated on in the results commentary below.
Extracting value through innovation and improved efficiencies
Cost efficiency is a key focus area across all of the Group's operations. This is especially prevalent during periods of low growth. In particular, lacklustre investment
market performance in South Africa since the end of 2015 and pressure on net fund inflows, are negatively affecting Sanlam Investments' fee income base. Various cost saving
initiatives were launched, with benefits already realised in the first half of 2017 across the cluster.
A number of initiatives at Group and cluster level are aimed at enhancing client offerings, agility and process efficiency through technological and product innovation.
These include:
- The acquisition of a majority stake in BrightRock (refer Capital Management section below) provides us with access to an innovative risk product platform that enables
seamless adaptation of product design and structure according to changing client needs. This is a unique offering that further enhances the attractiveness and agility of
the Sanlam product offering.
- We recently announced the acquisition of a 30% stake in the Purple Group's EasyEquities platform. EasyEquities is an award-winning fintech business, which has disrupted
the investments sector with its low barriers to opening an investment account through its low-cost platform. One of its primary objectives is to provide investment
solutions to all South Africans by removing barriers such as high cost and product complexity. This deal is one further step towards our efforts to make it easier for
investors to be able to save by facilitating easier access to investments.
- A Business Information project was launched at Group level to enhance client service offerings, underwriting capabilities and product development through advanced data
analytics using the latest developments in data management technology, and incorporating Big Data.
- The Sanlam Design Studio that focusses on the development of digital distribution channels and related product development as part of our omni-channel distribution approach.
The non-traditional and younger market segments are specific focus areas. The Sanlam Design Studio was awarded the '2017 South African New Product Innovation Leader in the
Insurance Industry on Digital Transformation' by Frost & Sullivan, a global growth consulting and research firm.
Responsible capital allocation and management
Discretionary capital of R1.9 billion was released during the first half of 2017 through the excess cash dividend cover in respect of the 2016 financial year as well as a
reduction in the capital allocation to Sanlam Capital Markets and Sanlam Personal Finance. The latter is largely attributable to more effective balance sheet management. We also
disposed of our stakes in the Enterprise Group in Ghana. Sanlam follows a partnership approach in emerging markets outside of South Africa, a key driver of value over the long term.
After the Saham Finances acquisitions, it became clear that we will not be able to meet the future regional aspirations of our partner in Ghana while also being a shareholder in
Saham Finances. Exiting the investment was the responsible option for our partners in Ghana and Sanlam shareholders, both being key stakeholders for the Group.
Opportunities to extract further capital are under investigation. This is approached in a responsible manner as the Group's long-term sustainability is dependent on having a
resilient balance sheet that can withstand adverse conditions. This is a safeguard to our clients, staff, suppliers and broader society, and has built stakeholder trust in Sanlam
over the almost 100 years of our existence. Conservatism is therefore inherent in the Sanlam culture and capital allocation methodology.
Responsible capital allocation also requires of us to invest where we can optimise value to our stakeholders. The deployment of capital during 2017 (refer Capital management
section below) was focused on areas with the highest growth and return on capital prospects. We also recently reached in principle agreement with ABSA to acquire ABSA
Consultants and Actuaries (ACA). ACA houses the entire employee benefits business of the ABSA Group.
Outlook
Growth prospects outside of South Africa remain more positive with the improvement in economic conditions likely to persist in the medium term across most regions where we
operate. Sanlam Emerging Markets is well placed to extract growth from this environment. In the short-term, though, growth in Rand terms in all key performance indicators
will be inhibited by the stronger average Rand exchange rate. The disposal of the Group's stakes in the Enterprise Group in Ghana will also impact on full-year growth for
2017 and 2018, in particular for the Rest of Africa region. Ghana's contribution to the Group's new business volumes, net VNB and net result from financial services in the
first half of 2017 were R130 million, R34 million and R28 million respectively.
In contrast, prospects for South Africa will remain muted for the remainder of 2017 and 2018. Political and economic policy uncertainty is not likely to dissipate before the
African National Congress' National Elective Conference in December. Until policy certainty returns, low business and investor confidence will prevail. We commensurately do
not expect an improvement in the performance of the South African businesses for the remainder of the year. The risk of further downgrades to South Africa's sovereign credit
ratings must be recognised, which will likely result in equity market, interest rate and currency volatility.
Shareholders need to be aware of the impact that the level of interest rates and financial market returns and volatility have on the Group's earnings and Group Equity Value.
Relative movements in these elements may have a major impact on the growth in normalised headline earnings, VNB and GEV to be reported for the 2017 financial year.
We will continue to diligently execute on the strategic priorities identified in the Group's 2016 Integrated Report.
Forward-looking statements
In this report we make certain statements that are not historical facts and relate to analyses and other information based on forecasts of future results not yet determinable,
relating, amongst others, to new business volumes, investment returns (including exchange rate fluctuations) and acturial 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 statments, but are not the exclusive means of identifying such statements. Forward-looking statements involve inherent risks and uncertainties and, if one or
more of these risks materialise, or should underlying assumptions prove incorrect, actual results may be very different from those anticipated. Forward-looking statements
apply only as of the date on which they are made, and Sanlam does not undertake any obligation to update or revise any of them, whether as a result of new information, future
events or otherwise. Any forward-looking information contained in this announcement has not been reviewed and reported on by Sanlam's external auditors.
Constant currency information
The constant currency information included in this interim results announcement has been presented to illustrate the impact of changes in currency exchange rates and is the
responsibility of the Group's board of directors. It is presented for illustrative purposes only and because of its nature may not fairly present the Group's financial
position, changes in equity, result of operations or cash flows. All references to constant currency information are based on the translation of foreign currency results for
the six months to 30 June 2017 at the weighted average exchange rate for the six months to 30 June 2016, which is also applied for the translation of comparative information.
The major currencies contributing to the exchange rate movements are the Botswana Pula, British Pound, Ghanaian Cedi, Indian Rupee, Kenyan Shilling, Malaysian Ringgit,
Moroccan Dirham, Nigerian Naira and the United States Dollar.
Comments on the results
Introduction
The Sanlam Group's International Financial Reporting Standards (IFRS) financial statements for the six months ended 30 June 2017 are presented based on and in compliance with
IFRS, specifically IAS34 on Interim Financial Reporting. The basis of presentation and accounting policies for the IFRS financial statements and Shareholders' information are
in all material respects consistent with those applied in the 2016 Integrated Report and Annual Financial Statements, apart from the treatment of the Central Credit Manager (CCM):
- The CCM was introduced as a new initiative within Sanlam Capital Markets in the latter part of 2016 to extract value from credit exposures. Based on materiality, the CCM
was included in other operations for GEV purposes in 2016. With effect from 1 January 2017, the CCM has been reallocated to covered business given its focus on managing
assets of the covered business operations. The credit risk component of capital allocated to Sanlam Personal Finance and Sanlam Employee Benefits was transferred to the
CCM together with the related cost of capital charge. No value of in-force (VIF) or VNB are recognised in respect of future margins expected to be earned by the CCM,
resulting in a negative VIF for the CCM equal to the cost of capital. All margins earned by the CCM are commensurately recognised as positive experience variances. The
CCM margins are net of a spread payment to Sanlam Personal Finance and Sanlam Employee Benefits, which is capitalised in the VIF of the latter businesses.
Comparative information has been restated for the recognition of deferred tax assets in respect of certain assessed losses in policyholder funds after the introduction of a
separate Risk Policy Fund for South African insurance companies in the first half of 2016. Similar deferred tax assets were recognised in the Group's 2016 full year results.
It resulted in a large one-off tax income in the 2016 comparable period, which contributed to a significant decline in headline earnings in 2017. For purposes of the
Shareholders' fund income statement and normalised headline earnings, the earnings impact was recognised as fund transfers, similar to the 2016 full year results.
Most of the Group businesses achieved a solid underlying performance in the first half of 2017 despite challenging economic and investment market conditions. Highlights and
lowlights for the six months include the following:
HIGHLIGHTS LOWLIGHTS
Adjusted RoGEV of 8.1% exceeded the target of 6.4% by a healthy margin Significantly lower single premium inflows at Glacier and Sanlam Private Wealth
Strong growth in new recurring premium risk business and VNB at Sanlam Personal Finance Increased claims experience at Santam
Strong overall new business growth at Sanlam Emerging Markets in constant currency Lower annuity new business volumes and VNB in Botswana
Improvement in Sanlam Investments institutional net inflows Adverse change in life insurance new business mix in Namibia, resulting in
lower VNB
Strong VNB and operational earnings performance by Sanlam Corporate Higher claims experience in Namibia
Finalisation of additional 16.6% stake in Saham Finances Under performance in Kenya and Malaysia
Good progress with capital and balance sheet management
Finalisation of BrightRock acquisition
Acquisition of 30% stake in EasyEquities and acquisition of ACA in H2 2017
Discretionary capital available for redeployment back to R2 billion following the sale
of our Ghana interests
Operating environment
Economic conditions
Economic conditions in South Africa during the first six months of the 2017 financial year were not conducive to growth, as elaborated on in the Executive Review.
Equity markets
The South African equity market delivered a relatively weaker performance with the FTSE/JSE Swix Index recording a total return of 3.3% for the six months to 30 June 2017,
compared to a return of 7.3% in the comparable six-month period in 2016. On average, the Swix was only 1.3% higher in the first half of 2017 compared to the same period in
2016. The MSCI World Index return in Rand of 6% was well in excess of the -3.9% return for the first half of 2016. Investment performance in a number of the Rest of Africa
markets where the Group operates were relatively stronger than the comparable 2016 period.
Interest rates
The South African 9- and 5-year interest rates declined by 10 and 40 basis points respectively since the end of 2016, but were broadly in line with the 30 June 2016 levels.
Movements in interest rates therefore did not have a major impact on VNB growth and RoGEV for the first six months of 2017. The South African All Bond Index returned 4% in
the first half of 2017 compared to a return of 11.2% for the same period in 2016, reflecting the more stable interest rate environment during 2017 compared to excessive
volatility in 2016.
Foreign currency exchange rates
The South African Rand strengthened sharply against most currencies during 2016, after a significant depreciation at the end of the 2015 financial year. Average exchange rates
during the first half of 2017 were commensurately stronger relative to the first six months of 2016. This had a major negative impact on the Rand-based performance of the
Group's non-South African operations. The exchange rate of the Rand against the currencies to which the Group has major exposure is summarised in the table below.
United Rest of
Kingdom USA Botswana India Morocco Malaysia Africa
Foreign currency/ZAR GBP USD BWP INR MAD MYR (weighted)
31/12/2016 16,92 13,68 1,30 0,20 1,36 3,05
30/06/2017 17,02 13,10 1,29 0,20 1,36 3,04
Weakening/(strengthening) 0,6% (4,2%) (0,5%) 0,2% 0,4% (0,2%) (6,0%)
Average first half 2016 22,05 15,40 1,40 0,23 1,57 3,77
Average first half 2017 16,59 13,20 1,28 0,20 1,34 3,02
Weakening/(strengthening) (24,8%) (14,3%) (8,6%) (12,4%) (14,8%) (20,0%) (20,0%)
Group Equity Value
GEV amounted to R112.1 billion or 5 469 cents per share on 30 June 2017. Including the dividend of 268 cents per share paid during the year, a RoGEV per share of 6.1% was
achieved for the first six months of 2017. This was below the 2017 six-month target of 6.4%. Adjusted RoGEV per share, which excludes the impact of investment market and
currency volatility, interest rate changes and other one-off effects not under management control (such as tax changes), was well in excess of the target.
The interest rate environment did not have a significant impact on the valuation of the Group's businesses and hence RoGEV in the first half of 2017, due to more stable
interest rates and largely offsetting movements in long-term interest rates in South Africa and the Rest of Africa region. In the comparable 2016-period, long-term interest
rates declined by more than 100bps in South Africa, which had a positive impact on the discounted cash flow-based valuations of the South African businesses. RoGEV of these
businesses was therefore in general higher in the first six months of 2016 than in 2017. RoGEV benefited from the following in the first half of 2017:
- Revaluation of the Group's operations in Ghana by some R870 million in line with the transaction price;
- Strong growth in VNB, which added 1.5% (annualised 3.1%) to the return on covered business; and
- Positive operating experience variances and assumption changes, which added R687 million to RoGEV. Positive experience variances of R595 million emanated broadly from risk
business, working capital management profit and credit spreads. Negative persistency experience of R114 million is an acceptable result in light of the pressure on
South African consumers. Assumption changes include a reduction in cost of capital following the decrease in capital allocated to the Sanlam Life covered business operations
(refer Capital Management section below). Similar assumption changes will result from the further planned releases of capital.
The following detracted from RoGEV in the first half of 2017:
- An overall strengthening in the Rand exchange rate, which contributed to unrealised currency translation losses of some R820 million relative to longer term expected exchange
rate movements;
- Lacklustre investment market performance, in particular in South Africa. Actual investment returns were lower than long-term assumptions, contributing to negative investment
variances of some R270 million in respect of covered business, while also depressing the valuations of the Group's asset management businesses;
- A disappointing performance at Pacific & Orient in Malaysia;
- Negative economic assumption changes in the Sanlam Finances valuation;
- The impact of the CCM initiative. Assets formerly managed by Sanlam Investment Management were transferred to the CCM during the period. No value has been placed on the future
margins to be earned by the CCM on these assets, while the asset management income was formerly valued in Sanlam Investment Management. This had a one-off negative impact
of R150 million on RoGEV in 2017; and
- A relatively low return from Santam shares, which were also impacted by the unfavourable investment market conditions. The investment in Santam is valued at its listed market
price for GEV purposes and reflects the share price performance during the period. This amounted to only 4.7% (annualised 9.6%) in the first six months of 2017, which was well
below the Group target.
Group Equity Value at 30 June 2017
GEV RoGEV - %*
June December June June
R million 2017 2016 2017 2016
Group operations 109 312 102 035 6,8 9,1
Sanlam Personal Finance 41 665 41 878 8,5 13,9
Sanlam Emerging Markets 28 171 22 097 6,6 1,5
Sanlam Investments 16 828 15 807 4,0 (0,1)
Santam 16 228 15 868 4,7 23,8
Sanlam Corporate 6 420 6 385 9,2 (0,3)
Covered business 53 524 51 246 9,5 8,8
Value of in-force 38 208 35 845 12,5 13,2
Adjusted net worth 15 316 15 401 2,6 (0,5)
Other operations 55 788 50 789 4,2 9,4
Group operations 109 312 102 035 6,8 9,1
Discretionary capital and other 2 788 8 682 (1,4) (3,8)
Group Equity Value 112 100 110 717 6,3 7,9
Per share (cents) 5 469 5 407 6,1 7,9
* 6-months return (not annualised)
Group operations yielded an overall return of 6.8% in the first half of 2017, the combination of 9.5% return on covered business and 4.2% on other Group operations.
Sanlam Personal Finance's RoGEV of 8.5% was well in excess of its target. Covered business yielded a return of 8.6% compared to 12.8% in the first half of 2016. This is a
commendable result despite a relatively low 3.0% return on the capital backing the covered business operations during the six months to June 2017. The comparable period
included a one-off benefit from tax changes. The strong VNB performance and positive experience variances were the main contributors to the excess return. The main components
of the positive experience variances were positive risk experience, working capital management profit and credit spreads earned from the CCM initiative. In addition, a
positive cost of capital assumption change was recognised in respect of the lower capital allocation to the Sanlam Life covered business (refer Capital Management section
below). The valuations of Glacier and Sanlam Personal Loans reflect solid operational results from these businesses, supporting a return of 8.2% from other operations in
the first half of 2017 compared to 27.1% in the comparable 2016 period.
Despite an overall solid operational performance by Sanlam Emerging Markets in the first half of 2017, the cluster did not achieve its RoGEV hurdle for the six-month period.
RoGEV for the first half of 2017 of 6.6% (2016: 1.5%) is the combined result of 18% (2016: -0.8%) return on covered business and a yield of 2.4% (2016: 2.3%) on other
operations. The below-target return is mostly attributable to a stronger Rand exchange rate and negative economic assumptions changes in the Rest of Africa region, which had
a major negative impact on the valuation of Saham Finances' life and non-life operations. Adjusted RoGEV of 10.8% was well in excess of the target. The return from covered
business includes positive contributions from the revaluation of the Ghana operations, VNB and experience variances.
The Sanlam Investments operations recorded a RoGEV of 4.0% in the first half of 2017 compared to -0.1% in the first six months of 2016. Covered business yielded 8.0%
(2016:-10.3%) and other operations 3.4% (2016: 1%). The return on covered business includes positive credit spread operating experience variances generated by the CCM.
The relatively low return from other operations were largely due to the impact of investment market conditions on the asset bases, fee income and hence valuations of the
South African asset management businesses, as well as the R150 million negative valuation methodology impact relating to the transfer of assets from Sanlam Investment
Management to the CCM. Excluding the latter, RoGEV for the cluster amounted to 4.9%.
As mentioned above, the RoGEV on Santam reflects the return on the listed Santam share.
Sanlam Corporate achieved a RoGEV of 9.2%, well in excess of its target (2016: -0.3%). The strong operational performance of the healthcare business supported a RoGEV of
25.1% for other operations (2016: 6%). This was augmented by a return of 6.6% from Sanlam Employee Benefits covered business, which includes positive operating experience
variances from risk experience, working capital management profit and credit spreads earned from the CCM activities.
The negative return on discretionary and other capital is essentially the combined effect of the following:
- A lower level of discretionary capital following payment of the Saham Finances and Shriram Life and General Insurance acquisitions during 2016.
- Hedging of the additional investment in Saham Finances during 2017. The transaction was hedged through the acquisition of foreign currency, which earned 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 movements,
essentially exposing the portfolio to assets that earned close to zero return.
Earnings
Shareholders' fund income statement for the six months ended 30 June 2017
%
R million 2017 2016 change
Net result from financial services 4 056 4 028 1%
Sanlam Personal Finance 2 133 2 088 2%
Sanlam Emerging Markets 771 788 (2%)
Sanlam Investments 573 580 (1%)
Santam 337 388 (13%)
Sanlam Corporate 244 186 31%
Group office and other (2) (2) -
Net investment return 586 377 55%
Project costs and amortisation (159) (145) (10%)
Equity participation costs (2) (4) 50%
Normalised headline earnings 4 481 4 256 5%
Per share (cents) 218,7 208,0 5%
Net result from financial services for the six months ended 30 June 2017
allowing for abnormal items
Sanlam Personal Finance 2 247 2 088 8%
Sanlam Emerging Markets 820 697 18%
Sanlam Investments 617 580 6%
Santam 456 388 18%
Sanlam Corporate 244 186 31%
Group office and other (2) (2) -
Net result from financial services excluding abnormal items 4 382 3 937 11%
Sanlam Personal Finance additional new business strain (114) -
Santam June catastrophe claims (102) -
Sanlam Emerging Markets structural growth 168 91
India demonetisation provisions (110) -
Foreign exchange impact (168) -
Net result from financial services 4 056 4 028 1%
Net result from financial services (net operating profit) of R4.1 billion increased by 1% on 2016. Solid operational growth at all clusters were impacted by the following:
- In terms of the Group's accounting policies, up front acquisition costs incurred in respect of insurance contracts are not capitalised but immediately expensed, resulting
in new business strain at initial recognition. New business strain incurred by Sanlam Personal Finance increased by R114 million after tax due to the strong growth in new
recurring premium risk business.
- Catastrophe claims incurred by Santam in June 2017 reduced its net underwriting profit by R102 million after reinsurance and reinstatement premiums.
- Demonetisation in India in the latter half of 2016 had a negative impact on the arrears position of the Shriram credit businesses, requiring an increase in provisioning in
terms of IFRS of some R110 million after tax and allowing for Sanlam Emerging Markets' effective shareholding. This impact appears temporary in nature, with improvements
in performance already evident. Depending on future arrears development, partial reversal of this provision is possible.
- The stronger average Rand exchange rate suppressed net result from financial services by R168 million in the first half of 2017.
- The acquisition of the initial 30% shareholding in Saham Finances at the end of February 2016 and an additional 16.6% stake at the beginning of May 2017 enhanced Sanlam
Emerging Markets' profit contribution relative to 2016. The acquisition of 23% direct stakes in Shriram Life and General Insurance in the latter half of 2016 similarly
supported growth in the first half of 2017 on a relative basis.
Excluding the above abnormal items, net result from financial services increased by a solid 11%, a commendable overall performance.
Sanlam Personal Finance achieved solid growth for a largely mature business in a challenging South African business environment.
Sanlam Individual Life grew its net result from financial services by 2% in the first half of 2017. Excluding the increase in new business strain, Individual Life net result
from financial services grew by a healthy 9%. Despite pressure on single premium new business, assets under management in the savings business increased by some 6%, supporting
fund-based fee income. This was augmented by additional margins earned from an increase in the size of the in-force books of risk and guarantee plan business (due to strong
new business growth in recent years) and a higher profit contribution from annuity business. The latter is largely attributable to the establishment of the CCM, which
enhanced the credit margins being extracted from the annuity portfolio. Sanlam Personal Loans' profit contribution was in line with 2016, with a conservative bad debt
reserving approach and an increase in administration costs offsetting the positive impact of a larger loan book.
Sanlam Sky's net result from financial services increased by 3%. An increase in margins released from the growing in-force book was largely offset by new business strain
recognised in respect of the strong growth in new business volumes. Excluding the latter, net result from financial services increased by 8%.
Glacier grew its net profit contribution by 8%. Growth in assets under management slowed down, attributable to lower net fund inflows and lacklustre South African investment
market performance since the end of 2015. Earnings growth was largely in line with the growth in assets under management.
Sanlam Emerging Market's net result from financial services declined by 2%. Excluding structural growth, the impact of a stronger Rand exchange rate and demonetisation-related
credit provisioning in India, net result from financial services grew by 18%.
Namibia had a difficult six months, resulting in a marginal 2% increase in its net result from financial services. Group life claims experience weakened in the life insurance
business, with disability claims increasing substantially. This is similar to the trend experienced in South Africa during 2016 and is partly attributable to the current
difficult economic environment in Namibia. Capricorn Investment Holdings (CIH) earnings were also under pressure from a decline in Bank Windhoek's net interest margin
following the liquidity constraints and increase in cost of capital in the Namibian banking industry. Growth in Namibia's gross result from financial services will be
negatively affected for the remainder of 2017 and 2018 by corporate transactions in Namibia, but with only a small effect on net result from financial services. CIH sold
14.5% of its stake in Bank Windhoek to the Namibian government pension fund during the six months. Cavmont Bank Zambia and Bank of Gabarone in Botswana were also sold to
Bank Windhoek. The disposals resulted in Bank Windhoek becoming an associate of CIH. Bank Windhoek will accordingly be accounted for as an associate within CIH in future
reporting periods as opposed to a consolidated subsidiary.
Botswana's net result from financial services declined by 23% (down 16% in constant currency). Life insurance profit was negatively affected by the decline in annuity new
business volumes as well as credit-related loss recognised in the annuity portfolio. The asset management business achieved good growth following strong net fund inflows in
2016 and 2017 year-to-date. Letshego also delivered a solid contribution in constant currency despite competitive pressures from local banks in Botswana.
The Rest of Africa operations (excluding Saham Finances) grew their contribution by 37% (doubling in constant currency) with most businesses achieving strong growth. Saham
Finances' contribution of R116 million increased by 27% on 2016 (up more than 50% in constant currency) and remains in line with expectations.
Net result from financial services in India declined by 5% due to the stronger Rand exchange rate and demonetisation-related credit provisioning, partly offset by structural
growth related to the acquisition of the 23% direct stakes in Shriram Life and Shriram General Insurance in the latter half of 2016. Excluding these, underlying organic
growth amounted to 30% in constant currency. All lines of business achieved good organic growth. Shriram Life Insurance continued to expand its new dedicated distribution
footprint, with initial losses from new branches suppressing the profit contribution to net result from financial services by some R20 million. The expanding footprint
contributed to strong growth in VNB.
In Malaysia, net result from financial services decreased by 17% (up 21% in constant currency), the aggregate of strong growth from MCIS and a disappointing decline in
Pacific & Orient's contribution. The MCIS performance was supported by a low base in 2016, which included a number of one-offs, and improved cost efficiencies. Net written
premiums declined at Pacific & Orient, attributable to a loss in market share in its traditional line of business. Diversification of the Pacific & Orient book remains a
challenge but is receiving dedicated attention.The general insurance industry in Malaysia is going through detariffing in July 2017. This creates an opportunity to price
more appropriately, but will be dependent on market participants' response.
Sanlam Investment's net result from financial services declined by 1% (up 6% in constant currency).
Investment management net result from financial services increased by 13% in constant currency. Fee income in the South African businesses was under pressure from relatively
flat equity markets (the average JSE/FTSE Swix Index increased by only 1%) and lower brokerage volumes as investor risk aversion remained high. This was partly alleviated
by strategic focus on cost efficiencies. The international businesses achieved strong growth from a low base in the first half of 2016, which included restructuring costs.
Sanlam Capital Markets' profitability declined by 11% net of tax. This is largely attributable to large one-off items in 2016. The comparable 2016 period included
marked-to-marked gains from credit and equity-participation stuctures following losses in respect of these instruments at the end of 2015 when credit spreads widened and the
share prices of counters underlying the equity participation structures declined. This increased the comparative base.
Santam had a difficult first six months in 2017 with a number of large corporate claims and catastrophe events highlighted in the Executive Review. Profitability of the
property line of business was severely affected, partly offset by good performance from the crop and motor lines.
Santam's overall underwriting margin declined from 6.4% in the first half of 2016 to 4% in 2017, a resilient performance in these circumstances, assisted by Santam's
diversified book. Higher float income and the structural impact of the Shriram General and Saham Finances acquisitions limited the decline in Santam's net result from
financial services to 13%.
Sanlam Corporate achieved exceptional growth of 31% in its net result from financial services.
Claims experience at Sanlam Employee benefits was still higher than long term expectations, but improved on the first half of 2016. Group risk profit increased by 55% as a
result, supporting overall growth of 26% in Sanlam Employee Benefits' net result from financial services.
Sanlam Healthcare Management (which predominantly includes the Group's stake in Medscheme) also achieved sterling growth of 49%, benefiting from new schemes and an increase
in the number of members under administration.
Normalised headline earnings of R4.5 billion are 5% up on the comparable 2016 period. This is the combined effect of the 1% increase in net result from financial services and
a 55% rise in net investment return earned on the capital portfolio. Net investment return were negatively affected in the first half of 2016 by:
- The sharp strengthening of the Rand from 31 December 2015 to 30 June 2016, which suppressed the Rand-based performance of the offshore exposure in the capital portfolio;
- Investment market under performance in a number of Sanlam Emerging Markets regions; and
- A R175 million one-off CGT expense incurred due to the increase in the effective CGT rate in South Africa.
More favourable investment market returns outside of South Africa supported net investment return in 2017. The redeployment of capital for investment in Saham Finances and
Shriram Life and Shriram General Insurance subsequent to the end of June 2016 reduced net investment income by some R100 million in 2017.
Headline earnings declined by 18% compared to the first six months of 2016. The divergent growth between normalised headline earnings and headline earnings is attributable
to the deferred tax assets raised in the 2016 comparative half-year results in respect of assessed losses in certain policyholder funds (refer Introduction above). This
increased the comparable base.
Business volumes
Overall new business volumes declined by 4%, largely attributable to lower single premium life and investment inflows in South Africa, Namibia and Botswana.
Life and investment new business volumes declined by 3% and 8% respectively, while general insurance earned premiums increased by 16%. In constant currency and
excluding structural growth, new business volumes declined by 3%.
Sanlam Personal Finance's new business sales declined by 7%, a resilient performance in an environment of weak investor confidence.
Sanlam Sky, operating largely in the South African entry-level market, achieved sterling growth of 15%. Individual life recurring premium new business increased by 5%, the
combination of 16% growth in risk business and a 48% decline in savings business as the business mix continued to improve. Group recurring premium sales increased by 48%,
benefiting from a large new scheme written by Safrican and the biennial renewal of the Zionist Christian Church scheme in 2017.
New business volumes in the Individual Life segment, which is largely focused on the middle-income market in South Africa, increased by 3%. Single premium sales increased
by 2% with good demand for guaranteed products in the uncertain environment. New recurring premium risk business grew by 14% and this was augmented by good demand for
retirement annuities, which increased by 9%. Endowments and ad hoc premium increases experienced lower demand in the first half of 2017.
Glacier new business volumes declined by a disappointing 10%. New life business volumes were in line with the first half of 2016, but investment business inflows declined by 16%.
This is largely attributable to low investor confidence.
The Sanlam Emerging Markets operations grew their new business contribution by 19% (6% excluding structural growth). In constant currency, new business increased by 32%
(17% excluding structural growth), a satisfactory overall performance. All regions and lines of business achieved strong growth, with the exception of:
- Namibian investment business, which declined by 9%. This more than offset 16% growth in new life business.
- Botswana life business, which declined by 11% in constant currency due to lower single premium annuity inflows. A decrease in the value of retirement funds available for
investment contributed to competitive market pricing and a loss in market share for the Group's life insurance business. Appropriate management actions are under
consideration by Sanlam Emerging Markets' regional and local management. New investment business inflows to the Botswana investment management operations increased by more
than 60%, supporting overall new business growth of 35% in constant currency.
- Tanzania and Zimbabwe, which had a slow start to the year.
- The Malaysian life and general insurance businesses, which disappointed with an overall 18% decline in new business sales in constant currency due to slow progress in
diversifying lines of business.
Sanlam Investments' new business volumes declined by 8% (5% down in constant currency).
The South African investment management business did well to attract new mandates broadly in line with the comparable period in 2016. Particularly satisfactory is an increase
in new institutional mandates, an area where the business has struggled to gain traction for a number of years. Retail inflows slowed down due to low investor confidence in
the retail market and increased competition for the cluster's Implemented Consulting offering. As highlighted in the Executive Review, the impact of low investor confidence
is now also experienced by Sanlam Private Wealth in the high net worth segment, with new inflows declining by 25%. Similar to Glacier, Sanlam Private Wealth is working on new
innovative product offerings to improve its share of profitable new business. The international operations' new inflows declined by 8% compared to the first six months of 2016
in constant currency. The United Kingdom management team's focus has returned to growth after the period of restructuring, with an improved performance expected over the next
18 months.
Despite a highly competitive South African market, Santam achieved sterling growth of 14% in gross written premiums, with double digit growth in all of the major lines of
business. Net earned premiums increased by a lower 9% mainly due to reinstatement premiums payable in respect of the catastrophe claims.
New business volumes at Sanlam Corporate declined by 5% due to a decrease in the more volatile single premium inflows. Gaining market share of the more profitable, but highly
competitive, recurring premium risk business has been a strategic focus area for Sanlam Corporate. The initiatives gained good traction and, together with some re-pricing,
contributed to sterling growth of more than 200% in this line of business.
Net fund inflows of R18.9 billion were achieved in the first half of 2017 despite significantly lower single premium inflows at Glacier and Sanlam Private Wealth. The increase
in Sanlam Investments' net inflows from R6.9 billion in the first half of 2016 to R9.2 billion in 2017 is a particularly pleasing result.
Business volumes for the six months ended 30 June 2017
New business Net inflows
% %
R million 2017 2016 change 2017 2016 change
Sanlam Personal Finance 28 614 30 806 (7%) 3 961 8 680 (54%)
Sanlam Emerging Markets 10 068 8 487 19% 1 859 2 562 (27%)
Sanlam Investments 58 983 64 218 (8%) 9 232 6 914 34%
Santam 10 551 9 700 9% 3 298 3 411 (3%)
Sanlam Corporate 2 041 2 142 (5%) 529 179 196%
Total 110 257 115 353 (4%) 18 879 21 746 (13%)
Covered business 21 267 21 853 (3%) 4 935 6 034 (18%)
Investment business 75 716 82 054 (8%) 9 694 11 680 (17%)
General insurance 13 274 11 446 16% 4 250 4 032 5%
Total 110 257 115 353 (4%) 18 879 21 746 (13%)
The discount rate used to determine VNB is directly linked to long-term interest rates. Long-term interest rates at 30 June 2017 were broadly in line with the 30 June 2016
levels, with no significant impact on VNB growth on a comparable basis. The 17% growth in VNB in constant currency (11% at actual average exchange rates) is an exceptional
performance and testimony to the Group's resilience in challenging conditions. By remaining focused on the profitability and quality of new business written, the Group's
life insurance operations managed to increase the overall VNB margin from 2.44% in the first six months of 2016 to 2.61% in the first half of 2017.
Sanlam Personal Finance achieved exceptional growth of 17% in VNB while also increasing its overall VNB margin from 2.49% in the first half of 2016 to 2.76% in 2017. The
strong growth in new recurring premium risk business across all market segments, augmented by good demand for single premium guaranteed business, contributed to a favourable
change in business mix towards the more profitable product ranges. Investment in capacity as part of the realignment of Sanlam Personal Finance during 2016 and increased
allowance for one-off project expenses in the unit costing resulted in some margin contraction in the individual life risk and savings businesses. This is expected to be
temporary in nature as the new structure will drive enhanced future new business growth.
Sanlam Emerging Markets net VNB declined by 6%, but was 17% up in constant currency (5% up in constant currency and excluding structural growth). Namibian net VNB declined
by 36% due to a change in business mix from individual lines of business to group life business. A decline in VNB in Botswana, Tanzania and Malaysia was in line with the
new life business production. All other regions achieved very strong VNB growth. VNB margins were broadly in line with the comparable 2016 period.
The growth in recurring premium risk business at Sanlam Corporate supported a more than 100% increase in the cluster's VNB contribution.
Sanlam UK was restructured into a more vertically integrated business during 2016. A consequence of the new structure is that most of the profit from new business written
on the life licence is earned in the non-life operations. VNB of Sanlam Investments commensurably reduced to close to zero, but does not represent the actual profit throughout
the value chain.
Value of new covered business
%
R million 2017 2016 change
Net value of new covered business 782 702 11%
Sanlam Personal Finance 585 499 17%
Sanlam Emerging Markets 171 181 (6%)
Sanlam Investments - 11 (100%)
Sanlam Corporate 26 11 136%
Gross of non-controlling interest 846 798 6%
Net present value of new business premiums 29 976 28 759 4%
Sanlam Personal Finance 21 164 20 038 6%
Sanlam Emerging Markets 3 566 3 712 (4%)
Sanlam Investments 1 456 2 209 (34%)
Sanlam Corporate 3 790 2 800 35%
Gross of non-controlling interest 31 230 30 735 2%
Net new covered business margin 2,61% 2,44%
Sanlam Personal Finance 2,76% 2,49%
Sanlam Emerging Markets 4,80% 4,88%
Sanlam Investments - 0,50%
Sanlam Corporate 0,69% 0,39%
Gross of non-controlling interest 2,71% 2,60%
Capital management
The Group started the year with unallocated discretionary capital of R550 million, after allowing for the BrightRock acquisition and a portion of the acquisition consideration
in respect of the additional 16.6% stake in Saham Finances.
Additional discretionary capital of R2.7 billion was released during the six months ended 30 June 2017:
- The disposal of the Group's stakes in the Enterprise Group in Ghana will yield net proceeds of some R1.6 billion.
- As communicated in the Group's 2016 annual results announcement, capital allocated to the covered business operations on the Sanlam Life balance sheet can be reduced by
R2 billion over time. Investment return earned on this capital base is also available for release. The first R500 million was released from the capital base at the end of
June 2017, together with the net investment return of R292 million earned during the six months then ended.
- The introduction of the Central Credit Manager enabled the transfer of credit exposures from the Sanlam Capital Markets balance sheet to Sanlam Life. This released R350 million
of the capital allocated to Sanlam Capital Markets.
The excess cash dividend cover relating to the 2016 financial year also added some R800 million.
Utilisation of discretionary capital during the first half of 2017 included the following transactions:
- Debt funding of up to US$140 million was considered as part of the funding model for the acquisition of the additional 16.6% stake in Saham Finances. The Enterprise Group
disposal eliminated the need for debt funding, with this portion of the acquisition consideration (R1.8 billion) also funded from discretionary capital.
- The acquisition of a controlling stake in PineBridge Investments East Africa (renamed to Sanlam Investments East Africa) and other smaller transactions utilised some
R260 million. The PineBridge acquisition provides the Group with a meaningful investment management capability in East Africa for future growth in this line of business.
The Enterprise Group disposal became effective on 25 August 2017, while the BrightRock acquisition was effective on 1 September 2017.
Allowing for the above transactions, including payment of the BrightRock acquisition, available discretionary capital increased to R2 billion at 30 June 2017. We remain focused
on utilising the available discretionary capital for value-accretive investment opportunities. The EasyEquities and ACA acquisitions referred to in the Executive Review will
utilise some of the available R2 billion discretionary capital.
Solvency
All of the life insurance businesses within the Group were sufficiently capitalised at the end of June 2017. The total admissible regulatory capital (including identified
discretionary capital) of Sanlam Life, the holding company of the Group's major life insurance subsidiaries, of R43 billion, covered its capital adequacy requirements (CAR)
5.3 times under the current solvency regime.
As indicated in previous results announcements, South Africa is implementing a new solvency regime (Solvency Assessment and Management - SAM) modelled on the European
Solvency II regime with an anticipated effective date of 1 July 2018. A Solvency Capital Requirement (SCR) target cover range under SAM of between 1.7 times and 2.1 times has
been set for Sanlam Life's covered business. The R9.5 billion of IFRS-based required capital allocated to these operations at the end of June 2017 translated into a SCR cover
at the upper end of this target range. The SCR cover ratio for the Sanlam Life entity as a whole at 3 times exceeded the covered business ratio at the end of June 2017 due to
the inclusion of discretionary and other capital held on the Sanlam Life balance sheet as well as investments in Santam and other Group operations that are not allocated to
Sanlam Life's covered business operations (i.e. not included in the R9.5 billion allocated capital referred to above). The Sanlam Group SCR cover ratio of 2.1 times remained
broadly in line with the 2.2 times cover at 31 December 2016. The Group will increasingly focus on the Group SCR cover as the main solvency measure.
Dividend
The Group only declares an annual dividend due to the costs involved in distributing an interim dividend to our large shareholder base.
Johan van Zyl Ian Kirk
Chairman Group Chief Executive
6 September 2017
Accounting policies and basis of preparation
The preparation of the Group's reviewed interim financial statements was supervised by the financial director, Heinie Werth CA(SA).
The basis of presentation applied for purposes of the interim condensed financial statements is in accordance with and contain the information required by International
Financial Reporting Standards (IFRS), specifically IAS 34 on interim financial reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee,
the Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa.
The policy liabilities and profit entitlement rules are determined in accordance with prevailing legislation, generally accepted actuarial practice and the stipulations
contained in the demutualisation proposal. There have been no material changes in the financial soundness valuation basis since 31 December 2016, apart from changes in the
economic assumptions.
The accounting policies and basis of preparation for the IFRS financial statements and shareholders' information are in all material respects consistent with those applied
in the 2016 annual report apart from the treatment of the Central Credit Manager (CCM).
- The CCM was introduced as a new initiative within Sanlam Capital Markets in the latter part of 2016 to extract value from credit exposures. With effect from 1 January 2017,
the CCM has been reallocated to covered business given its focus on managing assets of the covered business operations. The credit risk component of capital allocated to
Sanlam Personal Finance and Sanlam Employee Benefits was transferred to the CCM together with the related cost of capital charge. No value of in-force (VIF) or VNB is
recognised in respect of future margins expected to be earned by the CCM, resulting in a negative VIF for the CCM equal to the cost of capital. All margins earned by the
CCM are commensurately recognised as positive experience variances. The CCM margins are net of a spread payment to Sanlam Personal Finance and Sanlam Employee Benefits,
which is capitalised in the VIF of the latter businesses.
Comparative information has been restated for the following:
- Sanlam Employee Benefits and the Healthcare businesses in Sanlam Personal Finance were reallocated to the newly formed Sanlam Corporate cluster, in line with the restatements
made in the December 2016 annual financial statements.
- The recognition of deferred tax assets in respect of certain assessed losses in policyholder funds after the introduction of a separate Risk Policy Fund for South African
insurance companies during 2016. These deferred tax assets were recognised in the Group's 2016 full year results, but erroneously not in the June 2016 results. It resulted
in a large one-off tax income in the 2016 comparable period. For purposes of the Shareholders' fund income statement and normalised headline earnings, the earnings impact was
recognised as fund transfers, similar to the 2016 full year results.
None of the new or revised IFRSs or interpretations, including IFRS 15, that become effective in the current period had a material effect on the Group's interim results;
however, they will require certain additional disclosures in the annual financial statements.
The following new or revised IFRSs and interpretations, effective in future years and not early adopted, may have an impact on future results:
- Amendments to IFRS 2 - Share-based Payment: Classification and Measurement of Share-based Transactions (effective 1 January 2018)
- IFRS 9 - Financial Instruments (effective 1 January 2018)
- IFRS 16 - Leases (effective 1 January 2019)
- IFRIC 23 - Uncertainty over Income Tax Treatments (effective 1 January 2019)
- IFRS 17 - Insurance Contracts (effective 1 January 2021)
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. The Group is currently focusing on projects to determine the impact of IFRS 9 and IFRS 17. The key complexity of applying IFRS 9 is likely to be
on classification and measurement, but the outcome of this project is expected to be that no significant change to the overall statement of financial position will be required.
In addition, we are expecting adjustments in certain equity accounted investments that are primarily lending businesses as a result of the changes to the impairment requirements
of the standard. Comparative information will not be restated on adoption of IFRS 9 and the hedging guidance of IFRS 9 will not be adopted. The IFRS 17 project is currently
focused on performing a gap analysis at this early stage and the Group will provide an update in future reporting periods. No significant changes are expected as a result of the
adoption of IFRS 15 and IFRS 16.
External review
The appointed auditors, Ernst & Young Inc, reviewed the interim condensed financial statements and Shareholders' information of the Group at 30 June 2017. These reviews were
conducted in accordance with International Standards on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity".
Copies of the unqualified review reports of Ernst & Young Inc are presented below.
Contents
Shareholders' information
Independent auditors' review report on Sanlam Limited interim Shareholders' information
Group Equity Value
Change in Group Equity Value
Return on Group Equity Value
Shareholders' fund at fair value
Shareholders' fund at net asset value
Shareholders' fund income statement
Notes to the shareholders' fund information
Embedded value of covered business
Change in embedded value of covered business
Value of new business
Notes to the embedded value of covered business
Independent auditors' review report on Sanlam Limited interim Shareholders' information
To the directors of Sanlam Limited
Introduction
We have reviewed the accompanying interim Shareholders' Information of Sanlam Limited for the six months ended 30 June 2017, comprising Group Equity Value; Change in Group
Equity Value; Return on Group Equity Value; Shareholders' fund at fair value; Shareholders' fund at net asset value; Shareholders' fund income statement; Notes to the
shareholders' fund information; and Embedded Value of covered business, Change in Embedded Value of covered business, Value of New Business and Notes to the Embedded Value
of covered business; as set out below.
Directors' responsibility for interim financial information
The directors of Sanlam Limited are responsible for the preparation and presentation of this interim financial information in accordance with the basis of accounting set out
above, and for such internal control as the directors determine is necessary to enable the preparation of interim financial information that is free from material
misstatement, whether due to fraud or error.
Auditors' responsibility
Our responsibility is to express a conclusion on this interim financial information. We conducted our review in accordance with International Standard on Review Engagements
(ISRE) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". ISRE 2410 requires us to conclude whether anything has come to our
attention that causes us to believe that the interim financial statements are not prepared in all material respects in accordance with the basis of accounting set out above.
This standard also requires us to comply with relevant ethical requirements.
A review of interim financial information in accordance with ISRE 2410 is a limited assurance engagement. We perform procedures, primarily consisting of making inquiries of
management and others within the entity, as appropriate, and applying analytical procedures, and evaluate the evidence obtained.
The procedures performed in a review are substantially less than and differ in nature from those performed in an audit conducted in accordance with International Standards
on Auditing. Accordingly, we do not express an audit opinion on these financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim Shareholders' Information for the six months ended 30 June 2017
is not prepared, in all material respects, in accordance with the basis of accounting set out above.
Basis of accounting
Without modifying our conclusion, we draw attention to the Sanlam Limited Shareholders' Information, which describes the basis of accounting. The Sanlam Limited
Interim Shareholders' Information is prepared to provide additional information in respect of the Group shareholders' fund in a format that corresponds with that used by
management in evaluating the performance of the Group. As a result the Sanlam Limited Interim Shareholders' information may not be suitable for another purpose.
Ernst & Young Inc.
Director: Johanna Cornelia de Villiers
Registered Auditor
Chartered Accountant (SA)
No. 3 Dock Road
Waterway House
V&A Waterfront
Cape Town
6 September 2017
Group Equity Value
at 30 June 2017
June reviewed December audited
2017 2016
Fair value Value of Fair value Value of
R million Note Total of assets in-force Total of assets in-force
Sanlam Personal Finance 41 665 10 411 31 254 41 878 12 020 29 858
Covered business(1) 37 924 6 670 31 254 38 216 8 358 29 858
Glacier 2 301 2 301 - 2 192 2 192 -
Sanlam Personal Loans 990 990 - 999 999 -
Other operations 450 450 - 471 471 -
Sanlam Emerging Markets 28 171 23 453 4 718 22 097 18 584 3 513
Covered business(1) 7 946 3 228 4 718 6 370 2 857 3 513
Shriram Capital 8 668 8 668 - 7 963 7 963 -
Saham Finances 6 600 6 600 - 3 197 3 197 -
Letshego 1 102 1 102 - 1 190 1 190 -
Pacific & Orient 480 480 - 476 476 -
Capricorn Investment Holdings 991 991 - 1 077 1 077 -
Other operations 2 384 2 384 - 1 824 1 824 -
Sanlam Investments 16 828 16 592 236 15 807 15 136 671
Covered business(1) 2 316 2 080 236 1 137 466 671
Sanlam UK 1 184 508 676 1 137 466 671
Central Credit Manager 1 132 1 572 (440) - - -
Investment Management 14 262 14 262 - 14 070 14 070 -
Capital management 250 250 - 600 600 -
Santam 16 228 16 228 - 15 868 15 868 -
Sanlam Corporate 6 420 4 420 2 000 6 385 4 582 1 803
Covered business(1) 5 338 3 338 2 000 5 523 3 720 1 803
AfroCentric 990 990 - 775 775 -
Other operations 92 92 - 87 87 -
Group operations 109 312 71 104 38 208 102 035 66 190 35 845
Discretionary capital 2 000 2 000 - 550 550 -
Enterprise Group held for sale (1 598) (1 598) - - - -
Balanced portfolio - other 4 274 4 274 - 9 916 9 916 -
Group Equity Value before adjustments
to net worth 113 988 75 780 38 208 112 501 76 656 35 845
Net worth adjustments - present value
of holding company expenses 5 (1 888) (1 888) - (1 784) (1 784) -
Group Equity Value 112 100 73 892 38 208 110 717 74 872 35 845
Value per share (cents) 4 5 469 3 605 1 864 5 407 3 656 1 751
Analysis per type of business
Covered business (1) 53 524 15 316 38 208 51 246 15 401 35 845
Sanlam Personal Finance 37 924 6 670 31 254 38 216 8 358 29 858
Sanlam Emerging Markets 7 946 3 228 4 718 6 370 2 857 3 513
Sanlam Investments 2 316 2 080 236 1 137 466 671
Sanlam Corporate 5 338 3 338 2 000 5 523 3 720 1 803
Other Group operations 55 788 55 788 - 50 789 50 789 -
Discretionary and other capital 2 788 2 788 - 8 682 8 682 -
Group Equity Value 112 100 73 892 38 208 110 717 74 872 35 845
Change in Group Equity Value
for the six months ended 30 June 2017
Six months reviewed
R million 2017 2016
Earnings from covered business(1) 4 882 4 146
Earnings from other Group operations 2 168 4 393
Operations valued based on discounted cash flows 1 273 1 241
Expected return 2 480 2 229
Operating experience variances 218 (179)
Assumption changes (1 337) 330
Foreign currency translation differences (88) (1 139)
Operations valued at net asset value - earnings for the period 148 90
Listed operations - investment return 747 3 062
Earnings from discretionary and other capital (100) (363)
Portfolio investments and other (27) 44
Net corporate expenses (2) (2)
Share-based payment transactions 33 (138)
Change in net worth adjustments (104) (267)
Group Equity Value earnings 6 950 8 176
Dividends paid (5 437) (4 967)
Cost of treasury shares acquired
Share incentive scheme and other (130) (116)
Group Equity Value at beginning of the period 110 717 103 506
Group Equity Value at end of the period 112 100 106 599
(1) Refer embedded value of covered business below.
Return on Group Equity Value
for the six months ended 30 June 2017
Six months reviewed
2017 2016
Earnings Return Earnings Return
R million % R million %
Sanlam Personal Finance 3 535 8,5 5 224 13,9
Covered business(1) 3 234 8,6 4 427 12,8
Other operations(2) 301 8,2 797 27,1
Sanlam Emerging Markets 1 550 6,6 296 1,5
Covered business(1) 1 148 18,0 (43) (0,8)
Other operations 402 2,4 339 2,3
Sanlam Investments 655 4,0 (21) (0,1)
Covered business(1), (2) 153 8,0 (169) (10,3)
Other operations 502 3,4 148 1,0
Santam 747 4,7 3 062 23,8
Sanlam Corporate 563 9,2 (22) (0,3)
Covered business(1), (2) 347 6,6 (69) (1,2)
Other operations(2) 216 25,1 47 6,0
Discretionary and other capital (100) (363)
Return on Group Equity Value 6 950 6,3 8 176 7,9
Return on Group Equity Value per share 6,1 7,9
Annualised return on Group Equity Value per share 11,7 16,4
(1) Refer embedded value of covered business below.
(2) Comparative information has been restated for the reallocation of Sanlam Employee Benefits and the Healthcare businesses in Sanlam Personal Finance to the Sanlam Corporate cluster.
Six months reviewed
R million 2017 2016
Reconciliation of return on Group Equity Value:
The return on Group Equity Value reconciles as follows to
normalised attributable earnings:
Normalised attributable earnings per shareholders' fund
income statement 4 783 4 176
Net foreign currency translation gains recognised in other
comprehensive income (209) (1 460)
Earnings recognised directly in equity
Share-based payment transactions 19 (98)
Net cost of treasury shares delivered (162) (266)
Share-based payments 181 168
Other comprehensive income (36) (410)
Change in ownership of subsidiaries - (31)
Movement in fair value adjustment - shareholders' fund at
fair value 524 4 333
Movement in adjustments to net worth (71) (242)
Present value of holding company expenses (104) (267)
Change in goodwill and value of business acquired adjustments
less value of in-force acquired 33 25
Growth from covered business: value of in-force(1) 1 940 1 908
Return on Group Equity Value 6 950 8 176
(1) Refer embedded value of covered business below.
Shareholders' fund at fair value
at 30 June 2017
June reviewed December audited
2017 2016
Fair value Fair value
adjust- Net asset adjust- Net asset
R million Note Fair value ment(1) value Fair value ment(1) value
Covered business, discretionary and other capital 22 525 - 22 525 28 009 (36) 28 045
Property and equipment 388 - 388 416 - 416
Owner-occupied properties 648 - 648 652 - 652
Goodwill(2) 636 - 636 634 - 634
Value of business acquired(2) 936 - 936 986 - 986
Other intangible assets 264 - 264 273 - 273
Non-current assets held for sale 204 - 204 - - -
Deferred acquisition costs 2 660 - 2 660 2 648 - 2 648
Investments 19 988 - 19 988 23 600 (50) 23 650
Properties 600 - 600 511 - 511
Associated companies 3 953 - 3 953 3 299 - 3 299
Equities and similar securities 1 127 - 1 127 975 - 975
Other interest-bearing and preference
share investments 3 360 - 3 360 4 579 - 4 579
Structured transactions 343 - 343 573 - 573
Investment funds 9 492 - 9 492 9 038 - 9 038
Cash, deposits and similar securities 1 113 - 1 113 4 625 (50) 4 675
Net term finance - - - - - -
Term finance (3 882) - (3 882) (3 810) - (3 810)
Assets held in respect of term finance 3 882 - 3 882 3 810 - 3 810
Net deferred tax (600) - (600) (636) - (636)
Net working capital (278) - (278) 1 762 14 1 748
Structured transactions liability (29) - (29) (16) - (16)
Non-controlling interest (2 292) - (2 292) (2 310) - (2 310)
Other Group operations 55 788 25 407 30 381 50 789 24 919 25 870
Sanlam Investments 2.3 14 512 10 226 4 286 14 670 10 247 4 423
Investment Management 14 262 10 226 4 036 14 070 10 247 3 823
Capital Management 250 - 250 600 - 600
Sanlam Personal Finance 2.1 3 741 2 634 1 107 3 662 2 588 1 074
Glacier 2 301 1 894 407 2 192 1 788 404
Sanlam Personal Loans(3) 990 367 623 999 376 623
Other operations 450 373 77 471 424 47
Sanlam Emerging Markets 2.2 20 225 1 675 18 550 15 727 1 822 13 905
Shriram Capital 8 668 1 935 6 733 7 963 1 526 6 437
Saham Finances 6 600 (116) 6 716 3 197 321 2 876
Letshego 1 102 6 1 096 1 190 124 1 066
Pacific & Orient 480 - 480 476 - 476
Capricorn Investment Holdings 991 (44) 1 035 1 077 168 909
Other operations 2 384 (106) 2 490 1 824 (317) 2 141
Santam 16 228 11 772 4 456 15 868 11 332 4 536
Sanlam Corporate 2.5 1 082 297 785 862 127 735
AfroCentric 990 262 728 775 104 671
Other operations 92 35 57 87 23 64
Goodwill held on Group level in respect
of the above businesses - (1 197) 1 197 - (1 197) 1 197
Shareholders' fund at fair value 78 313 25 407 52 906 78 798 24 883 53 915
Value per share (cents) 4 3 820 1 239 2 581 3 848 1 215 2 633
Fair value Value of Fair value Value of
R million Total of assets in-force Total of assets in-force
Reconciliation to Group Equity Value
Group Equity Value 112 100 73 892 38 208 110 717 74 872 35 845
Add: Net worth adjustments 1 888 1 888 - 1 784 1 784 -
Add: Goodwill and value of business acquired
replaced by value of in-force 2 533 2 533 - 2 142 2 142 -
Sanlam Life and Pensions 356 356 - 356 356 -
Sanlam Developing Markets 556 556 - 573 573 -
Saham Finances(4) 878 878 - 460 460 -
MCIS Insurance 370 370 - 399 399 -
Shriram Life Insurance(5) 293 293 - 285 285 -
Other 80 80 - 69 69 -
Less: Value of in-force (38 208) - (38 208) (35 845) - (35 845)
Shareholders' fund at fair value 78 313 78 313 - 78 798 78 798 -
(1) Group businesses listed above are not consolidated, but reflected as investments at fair value.
(2) The value of business acquired and goodwill relate mainly to the consolidation of Sanlam Developing Markets, Channel Life, Sanlam Life and Pensions and MCIS Insurance
and are excluded in the build-up of the Group Equity Value, as the current value of in-force business for these life insurance companies are included in the embedded
value of covered business.
(3) The life insurance component of Sanlam Personal Loans' operations is included in the value of in-force business and therefore excluded from the Sanlam Personal Loans fair value.
(4) The carrying value of Saham Finances includes goodwill and value of business acquired of R878 million (2016: R460 million) that is excluded in the build-up of GEV, as the
current value of in-force business for Saham Finances is included in the embedded value of covered business.
(5) The carrying value of Shriram Life Insurance includes goodwill of R293 million (2016: R285 million) that is excluded in the build-up of the Group Equity Value, as the current
value of in-force business for Shriram Life Insurance is included in the embedded value of covered business.
Shareholders' fund at net asset value
at 30 June 2017
Sanlam Investment Capital Group Office Consolidation
Sanlam Life(1) Emerging Markets(2) Santam Management Management and Other(3) Entries(4) Total
R million 2017 2016(5) 2017 2016(5) 2017 2016(5) 2017 2016(5) 2017 2016(5) 2017 2016(5) 2017 2016(5) 2017 2016(5)
Property and equipment 274 303 145 146 333 321 61 61 10 9 - - - - 823 840
Owner-occupied properties 470 470 232 238 - 1 113 115 - - - - - - 815 824
Goodwill 244 244 298 178 772 774 1 203 1 203 - - - - 1 197 1 197 3 714 3 596
Other intangible assets 15 17 258 267 64 81 164 179 - - - - - - 501 544
Value of business acquired 481 500 712 547 - - 510 559 - - - - - - 1 703 1 606
Deferred acquisition costs 2 959 2 949 16 16 - - - - - - - - - - 2 975 2 965
Investments 24 862 29 117 27 943 22 722 17 000 11 987 1 971 1 927 - - 1 703 1 660 (10 634) (10 325) 62 845 57 088
Properties 143 143 827 821 - - - - - - - - - - 970 964
Associated companies 804 760 23 332 18 636 2 784 2 624 439 418 - - - - (2 803) (2 733) 24 556 19 705
Joint ventures 776 817 – – 67 65 - - - - - - - - 843 882
Equities and similar securities 8 290 8 118 672 536 1 902 1 404 251 222 - - 490 493 (7 807) (7 631) 3 798 3 142
Interest-bearing investments 3 705 5 134 1 469 1 060 8 487 5 892 112 109 - - 1 160 1 165 (24) 74 14 909 13 434
Structured transactions 525 812 16 5 1 262 714 - - - - - - - (35) 1 803 1 496
Investment funds 9 871 9 414 438 301 1 268 388 703 594 - - - - - - 12 280 10 697
Cash, deposits and similar securities 748 3 919 1 189 1 363 1 230 900 466 584 - - 53 2 - - 3 686 6 768
Net deferred tax (529) (600) (98) (64) (124) 25 28 60 99 73 (9) - (4) (4) (637) (510)
Deferred tax asset 253 175 198 185 102 144 76 73 99 73 - - - 3 728 653
Deferred tax liability (782) (775) (296) (249) (226) (119) (48) (13) - - (9) - (4) (7) (1 365) (1 163)
Disposal groups classified as held for sale – – 423 – - 8 - - - - - - - - 423 8
Net general insurance technical provisions – – (444) (399) (11 613) (9 136) - - - - - - - - (12 057) (9 535)
General insurance technical assets – – 168 124 6 353 4 898 - - - - - - - - 6 521 5 022
General insurance technical provisions – – (612) (523) (17 966) (14 034) - - - - - - - - (18 578) (14 557)
Net working capital assets/(liabilities) (1 060) 585 (229) 87 7 101 6 744 1 244 1 672 291 811 (285) (518) 414 100 7 476 9 481
Trade and other receivables 2 081 2 272 1 476 1 414 4 164 3 720 3 729 1 902 12 994 15 963 3 220 3 000 (3 046) (2 700) 24 618 25 571
Cash, deposits and similar securities 5 277 6 406 565 564 7 383 7 278 1 638 1 889 2 530 1 695 375 378 25 (104) 17 793 18 106
Trade and other payables (6 913) (6 694) (2 403) (2 011) (4 322) (4 065) (3 914) (1 859) (15 150) (16 793) (3 840) (3 856) 3 437 2 914 (33 105) (32 364)
Provisions (129) (131) – – (43) (41) (125) (123) - - (20) (20) (18) (17) (335) (332)
Taxation (1 376) (1 268) 133 120 (81) (148) (84) (137) (83) (54) (20) (20) 16 7 (1 495) (1 500)
Term finance (2 159) (2 159) (125) (115) (3 069) (2 054) (18) (239) - - (1 723) (1 651) - - (7 094) (6 218)
Structured transactions liabilities (29) (16) – – - - - - - - - - - - (29) (16)
Cell owners’ interest – – – – (2 989) (1 153) - - - - - - - - (2 989) (1 153)
Non-controlling interest – – (5 300) (5 238) (3 019) (3 062) (59) (54) - - - - 2 815 2 749 (5 563) (5 605)
Shareholders’ fund at net asset value 25 528 31 410 23 831 18 385 4 456 4 536 5 217 5 483 400 893 (314) (509) (6 212) (6 283) 52 906 53 915
Analysis of shareholders’ fund
Covered business 11 580 12 078 3 228 2 857 - - 508 466 - - - - - - 15 316 15 401
Other operations 1 892 1 809 18 550 13 905 4 456 4 536 4 036 3 823 250 600 - - 1 197 1 197 30 381 25 870
Discretionary and other capital 12 056 17 523 2 053 1 623 - - 673 1 194 150 293 (314) (509) (7 409) (7 480) 7 209 12 644
Shareholders’ fund at net asset value 25 528 31 410 23 831 18 385 4 456 4 536 5 217 5 483 400 893 (314) (509) (6 212) (6 283) 52 906 53 915
Consolidation reserve 1 225 1 253 – – - - - - - - - - (1 583) (1 778) (358) (525)
Shareholders’ fund per Group statement of financial position
below 26 753 32 663 23 831 18 385 4 456 4 536 5 217 5 483 400 893 (314) (509) (7 795) (8 061) 52 548 53 390
(1) Includes the operations of Sanlam Personal Finance, Central Credit Manager and Sanlam Corporate (which includes Sanlam Healthcare and Sanlam Employee Benefits) as well
as discretionary capital held by Sanlam Life. Equities and similar securities include an investment of R7 540 million (Dec 2016: R7 319 million) in Sanlam shares, which
is eliminated in the consolidation column.
(2) Includes discretionary capital held by Sanlam Emerging Markets.
(3) Group Office and Other includes the assets of Genbel Securities and Sanlam Limited Corporate on a consolidated basis.
(4) The investment in treasury shares is reversed within the consolidation column. Intercompany balances, other investments and term finance between companies within the Group
are also eliminated.
(5) Audited as at 31 December.
Shareholders' fund income statement
for the six months ended 30 June 2017 - reviewed
Sanlam Sanlam Sanlam Sanlam Group Office
Personal Finance(1) Emerging Markets Investments(1) Santam Corporate(1) and Other(2) Total
R million Note 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Financial services income 8 471 7 960 3 525 3 687 2 627 2 802 10 990 10 067 2 257 2 024 134 120 28 004 26 660
Sales remuneration (1 444) (1 324) (525) (603) (81) (117) (1 255) (1 217) (28) (28) - - (3 333) (3 289)
Income after sales remuneration 7 027 6 636 3 000 3 084 2 546 2 685 9 735 8 850 2 229 1 996 134 120 24 671 23 371
Underwriting policy benefits (1 816) (1 699) (749) (802) - - (7 252) (6 289) (1 309) (1 198) - - (11 126) (9 988)
Administration costs (2 233) (2 033) (828) (878) (1 803) (1 898) (1 622) (1 578) (577) (541) (153) (134) (7 216) (7 062)
Result from financial services before tax 2 978 2 904 1 423 1 404 743 787 861 983 343 257 (19) (14) 6 329 6 321
Tax on result from financial services (845) (814) (402) (391) (162) (194) (245) (274) (99) (71) 17 12 (1 736) (1 732)
Result from financial services after tax 2 133 2 090 1 021 1 013 581 593 616 709 244 186 (2) (2) 4 593 4 589
Non-controlling interest – (2) (250) (225) (8) (13) (279) (321) - - - - (537) (561)
Net result from financial services 2 133 2 088 771 788 573 580 337 388 244 186 (2) (2) 4 056 4 028
Net investment income 419 536 84 85 72 9 20 53 45 67 (337) (281) 303 469
Dividends received – Group companies 312 288 – – - - - - - - (312) (288) - -
Other investment income 145 328 175 202 77 5 37 112 53 81 (34) (6) 453 722
Tax on investment income (38) (80) (63) (92) (5) 4 (2) (22) (8) (14) 9 13 (107) (191)
Non-controlling interest – – (28) (25) - - (15) (37) - - - - (43) (62)
Project expenses – – (31) (3) (5) (6) - - - - - - (36) (9)
Amortisation of value of business acquired and other intangibles (20) (22) (19) (28) (78) (79) (5) (4) (1) (3) - - (123) (136)
Equity participation costs – – – – - - (2) (4) - - - - (2) (4)
Net equity-accounted headline earnings – – 5 3 11 (1) 16 13 (5) (11) - - 27 4
Equity-accounted headline earnings – – 12 7 11 (1) 28 21 (5) (11) - - 46 16
Tax on equity-accounted headline earnings – – (2) (1) - - (2) - - - - - (4) (1)
Non-controlling interest – – (5) (3) - - (10) (8) - - - - (15) (11)
Net investment surpluses 317 (93) 71 (25) 24 2 18 35 50 (47) (224) 32 256 (96)
Investment surpluses – Group companies 221 (20) – – - - - - - - (221) 20 - -
Other investment surpluses 129 68 153 (32) 30 1 55 143 65 16 (3) 12 429 208
Tax on investment surpluses (33) (141) (46) (4) (6) 1 (12) (85) (15) (63) - - (112) (292)
Non-controlling interest – – (36) 11 - - (25) (23) - - - - (61) (12)
Normalised headline earnings 2 849 2 509 881 820 597 505 384 481 333 192 (563) (251) 4 481 4 256
Net profit/(loss) on disposal of subsidiaries and associated companies – 15 5 19 - - 145 - - - - - 150 34
Profit/(loss) on disposal of subsidiaries and associated companies – 18 8 19 - - 180 - - - - - 188 37
Tax on profit/(loss) on disposal of subsidiaries and associated companies – (3) – – - - - - - - - - - (3)
Non-controlling interest – – (3) – - - (35) - - - - - (38) -
Impairments – – (14) (111) (1) - (6) - - - - - (21) (111)
Net equity accounted non-headline earnings – – 179 – - - - - (6) (3) - - 173 (3)
Normalised attributable earnings 2 849 2 524 1 051 728 596 505 523 481 327 189 (563) (251) 4 783 4 176
Fund transfers(3) (28) 1 275 – – - - - - - 112 66 84 1 341
Attributable earnings per Group statement of comprehensive income 2 821 3 799 1 051 728 596 505 523 481 327 189 (451) (185) 4 867 5 517
Ratios
Operating margin(1) 42,4% 43,8% 47,4% 45,5% 29,2% 29,2% 8,8% 11,1% 15,4% 12,9% (14,2%) (11,7%) 25,6% 27,0%
Diluted earnings per share 3
Adjusted weighted average number of shares (million) 2 049,2 2 046,3
Net result from financial services (cents) 104,1 102,0 37,6 38,5 28,0 28,4 16,4 18,9 11,9 9,1 (0,1) (0,1) 197,9 196,8
(1) Comparative information has been adjusted for the reallocation of business units from Sanlam Personal Finance and Sanlam Investments to the Sanlam Corporate cluster
as described in the basis of presentation.
(2) Group Office and Other includes the consolidation entries in respect of the dividends received and the investment surpluses on the Sanlam Limited shares held by
Sanlam Life Insurance Limited.
(3) Comparative information has been restated for the recognition of deferred tax assets in respect of certain assessed losses in the policyholder funds as described above.
Notes to the shareholders' fund information
for the six months ended 30 June 2017 - reviewed
1. Business volumes
1.1 Analysis of new business and total funds received
Analysed per business, reflecting the split between life insurance, general insurance and investment business
Life General Investment
insurance(1) insurance business(2) Total
R million 2017 2016 2017 2016 2017 2016 2017 2016
Sanlam Personal Finance 15 136 14 829 – – 13 478 15 977 28 614 30 806
Sanlam Sky 675 588 – – – – 675 588
Individual Life 6 063 5 870 – – 74 105 6 137 5 975
Glacier(3) 8 398 8 371 – – 13 404 15 872 21 802 24 243
Sanlam Emerging Markets 2 707 2 853 2 723 1 746 4 638 3 888 10 068 8 487
Namibia 710 612 – – 1 925 2 119 2 635 2 731
Recurring 75 92 – – – – 75 92
Single(3) 635 520 – - 1 925 2 119 2 560 2 639
Botswana 824 1 017 80 66 2 357 1 550 3 261 2 633
Recurring 168 167 80 66 – – 248 233
Single 656 850 – – 2 357 1 550 3 013 2 400
Rest of Africa (excluding Saham Finances) 655 773 405 328 356 219 1 416 1 320
Recurring 425 449 405 328 24 79 854 856
Single 230 324 – – 332 140 562 464
Saham Finances 33 13 1 347 802 – – 1 380 815
Recurring 33 13 1 347 802 – – 1 380 815
Single – – – – – – – –
India 342 206 751 352 – – 1 093 558
Recurring 231 120 751 352 – – 982 472
Single 111 86 – – – – 111 86
South-East Asia 143 232 140 198 – – 283 430
Recurring 122 203 140 198 – – 262 401
Single 21 29 – – – – 21 29
Sanlam Investments(4) 1 383 2 029 – – 57 600 62 189 58 983 64 218
Investment Management SA – – – – 45 807 46 572 45 807 46 572
Wealth Management(5) – – – – 5 944 7 960 5 944 7 960
International(5) 1 383 2 029 – – 5 849 7 657 7 232 9 686
Recurring 17 44 – – 4 8 21 52
Single 1 366 1 985 – – 5 845 7 649 7 211 9 634
Santam – – 10 551 9 700 – – 10 551 9 700
Sanlam Corporate(4) 2 041 2 142 – – – – 2 041 2 142
Recurring 294 121 – – – – 294 121
Single 1 747 2 021 – – – – 1 747 2 021
Total new business 21 267 21 853 13 274 11 446 75 716 82 054 110 257 115 353
Recurring premiums on existing funds:
Sanlam Personal Finance 8 448 7 899 - - 102 99 8 550 7 998
Sanlam Sky 2 424 2 143 - - - - 2 424 2 143
Individual Life 6 024 5 756 - - 102 99 6 126 5 855
Sanlam Emerging Markets 2 720 2 645 - - - - 2 720 2 645
Namibia 562 488 - - - - 562 488
Botswana 581 586 - - - - 581 586
Rest of Africa (excluding Saham Finances) 477 540 - - - - 477 540
Saham Finances 163 96 - - - - 163 96
India 280 100 - - - - 280 100
South-East Asia 657 835 - - - - 657 835
Sanlam Investments 179 205 - - 1 199 1 142 1 378 1 347
Investment Management SA - - - - 1 171 1 104 1 171 1 104
International 179 205 - - 28 38 207 243
Sanlam Corporate 2 786 2 579 - - - - 2 786 2 579
Total funds received 35 400 35 181 13 274 11 446 77 017 83 295 125 691 129 922
(1) Life insurance business relates to business written under a life licence that is included in the calculation of embedded value of covered business.
(2) Includes life licence and investment business. Life licence business relates to investment products provided by means of a life insurance policy where there is very little
or no insurance risk. Life licence business is excluded from the calculation of embedded value of covered business.
(3) Comparative information has been adjusted for the reallocation of Glacier Namibia single premiums from Sanlam Personal Finance to Sanlam Emerging Markets.
(4) Comparative information has been adjusted for the reallocation of Sanlam Employee Benefits from Sanlam Investments to Sanlam Corporate.
(5) Comparative information has been adjusted for the reallocation of business units between the International and Wealth Management sub-clusters.
1.2 Analysis of payments to clients
Life General Investment
insurance(1) insurance business(2) Total
R million 2017 2016 2017 2016 2017 2016 2017 2016
Sanlam Personal Finance 20 377 18 887 - - 12 826 11 237 33 203 30 124
Sanlam Sky 1 331 1 175 - - - - 1 331 1 175
Surrenders 232 214 - - - - 232 214
Other 1 099 961 - - - - 1 099 961
Individual Life 14 637 14 122 - - 300 284 14 937 14 406
Surrenders 1 294 2 081 - - - - 1 294 2 081
Other 13 343 12 041 - - 300 284 13 643 12 325
Glacier(3) 4 409 3 590 - - 12 526 10 953 16 935 14 543
Sanlam Emerging Markets 3 894 3 605 1 771 1 125 5 264 3 840 10 929 8 570
Namibia 1 389 742 - - 3 294 2 169 4 683 2 911
Surrenders 413 80 - - - - 413 80
Other(3) 976 662 - - 3 294 2 169 4 270 2 831
Botswana 840 1 034 35 31 1 570 1 555 2 445 2 620
Surrenders 190 216 - - - - 190 216
Other 650 818 35 31 1 570 1 555 2 255 2 404
Rest of Africa (excluding Saham Finances) 589 607 213 208 400 116 1 202 931
Surrenders 107 119 - - - - 107 119
Other 482 488 213 208 400 116 1 095 812
Saham Finances 132 76 678 442 - - 810 518
Surrenders - - - - - - - -
Other 132 76 678 442 - - 810 518
India 227 109 778 358 - - 1 005 467
Surrenders 98 65 - - - - 98 65
Other 129 44 778 358 - - 907 402
South-East Asia 717 1 037 67 86 - - 784 1 123
Surrenders 196 380 - - - - 196 380
Other 521 657 67 86 - - 588 743
Sanlam Investments(4) 1 896 2 113 - - 49 233 56 538 51 129 58 651
Investment Management 1 896 2 113 - - 49 233 56 506 51 129 58 619
Investment Management SA - - - - 35 890 39 146 35 890 39 146
Wealth Management(5) - - - - 8 408 6 692 8 408 6 692
International(5) 1 896 2 113 - - 4 935 10 668 6 831 12 781
Capital Management - - - - - 32 - 32
Santam - - 7 253 6 289 - - 7 253 6 289
Sanlam Corporate(4) 4 298 4 542 - - - - 4 298 4 542
Surrenders 972 932 - - - - 972 932
Other 3 326 3 610 - - - - 3 326 3 610
Total payments to clients 30 465 29 147 9 024 7 414 67 323 71 615 106 812 108 176
(1) Life insurance business relates to business written under a life licence that is included in the calculation of embedded value of covered business.
(2) Includes life licence and investment business. Life licence business relates to investment products provided by means of a life insurance policy where there is very little
or no insurance risk. Life licence business is excluded from the calculation of embedded value of covered business.
(3) Comparative information has been adjusted for the reallocation of Glacier Namibia single premium business from Sanlam Personal Finance to Sanlam Emerging Markets.
(4) Comparative information has been adjusted for the reallocation of Sanlam Employee Benefits from Sanlam Investments to Sanlam Corporate.
(5) Comparative information has been adjusted for the reallocation of business units between the International and Wealth Management sub-clusters.
1.3 Analysis of net inflow/(outflow) of funds
Life General Investment
insurance(1) insurance business(2) Total
R million 2017 2016 2017 2016 2017 2016 2017 2016
Sanlam Personal Finance 3 207 3 841 - - 754 4 839 3 961 8 680
Sanlam Sky 1 768 1 556 - - - - 1 768 1 556
Individual Life (2 550) (2 496) - - (124) (80) (2 674) (2 576)
Glacier(3) 3 989 4 781 - - 878 4 919 4 867 9 700
Sanlam Emerging Markets 1 533 1 893 952 621 (626) 48 1 859 2 562
Namibia(3) (117) 358 - - (1 369) (50) (1 486) 308
Botswana 565 569 45 35 787 (5) 1 397 599
Rest of Africa (excluding Saham Finances) 543 706 192 120 (44) 103 691 929
Saham Finances 64 33 669 360 - - 733 393
India 395 197 (27) (6) - - 368 191
South-East Asia 83 30 73 112 - - 156 142
Sanlam Investments(4) (334) 121 - - 9 566 6 793 9 232 6 914
Investment Management (334) 121 - - 9 566 6 825 9 232 6 946
Investment Management SA - - - - 11 088 8 530 11 088 8 530
Wealth Management(5) - - - - (2 464) 1 268 (2 464) 1 268
International(5) (334) 121 - - 942 (2 973) 608 (2 852)
Capital Management - - - - - (32) - (32)
Santam - - 3 298 3 411 - - 3 298 3 411
Sanlam Corporate(4) 529 179 - - - - 529 179
Total net inflow 4 935 6 034 4 250 4 032 9 694 11 680 18 879 21 746
(1) Life insurance business relates to business written under a life licence that is included in the calculation of embedded value of covered business.
(2) Includes life licence and investment business. Life licence business relates to investment products provided by means of a life insurance policy where there is very
little or no insurance risk. Life licence business is excluded from the calculation of embedded value of covered business.
(3) Comparative information has been adjusted for the reallocation of Glacier Namibia single premium business from Sanlam Personal Finance to Sanlam Emerging Markets.
(4) Comparative information has been adjusted for the reallocation of Sanlam Employee Benefits from Sanlam Investments to Sanlam Corporate.
(5) Comparative information has been adjusted for the reallocation of business units between the International and Wealth Management sub-clusters.
2. Cluster information
2.1 Sanlam Personal Finance
Analysis of Group Equity Value (GEV)
GEV Net GEV
at the capital at the
beginning invest- Dividend end of RoGEV
R million of period Earnings ment paid period (%)
30 June 2017 - reviewed
Covered business 38 216 3 234 (1 596) (1 930) 37 924 8,6
Non-life operations 3 662 301 - (222) 3 741 8,2
Glacier 2 192 240 - (131) 2 301 10,9
Sanlam Personal Loans 999 73 - (82) 990 7,3
Other operations 471 (12) - (9) 450 (2,5)
Group Equity Value 41 878 3 535 (1 596) (2 152) 41 665 8,5
31 December 2016 - audited
Covered business 34 526 7 402 (32) (3 680) 38 216 21,4
Non-life operations 2 946 1 101 (21) (364) 3 662 37,4
Glacier 1 605 772 - (185) 2 192 48,1
Sanlam Personal Loans 913 212 - (126) 999 23,2
Other operations 428 117 (21) (53) 471 27,3
Group Equity Value 37 472 8 503 (53) (4 044) 41 878 22,7
Business volumes
Life business Investment business Total
R million 2017 2016 2017 2016 2017 2016
New business volumes
Sanlam Sky 675 588 - - 675 588
Individual Life 471 450 - - 471 450
Group Life 204 138 - - 204 138
Individual Life 6 063 5 870 74 105 6 137 5 975
Recurring premiums 834 782 10 15 844 797
Single premiums 5 229 5 088 64 90 5 293 5 178
Glacier(1) 8 398 8 371 13 404 15 872 21 802 24 243
Total 15 136 14 829 13 478 15 977 28 614 30 806
Net fund flows
Sanlam Sky 1 768 1 556 - - 1 768 1 556
Individual Life (2 550) (2 496) (124) (80) (2 674) (2 576)
Glacier(1) 3 989 4 781 878 4 919 4 867 9 700
Total 3 207 3 841 754 4 839 3 961 8 680
Value of new covered business
Value of new Present value of new New business
business business premuims margin (%)
R million 2017 2016 2017 2016 2017 2016
Sanlam Sky 203 129 2 605 2 081 7,79 6,20
Individual Life 294 251 10 206 9 601 2,88 2,61
Glacier(1) 88 119 8 353 8 356 1,05 1,42
Total 585 499 21 164 20 038 2,76 2,49
(1) Comparative information has been adjusted for the reallocation of Glacier Namibia from Sanlam Personal Finance to Sanlam Emerging Markets.
Analysis of earnings
Life insurance Non-life operations Total
R million 2017 2016 2017 2016(2) 2017 2016
Gross result from financial services 2 694 2 608 284 296 2 978 2 904
Sanlam Sky 637 611 - - 637 611
Middle Income Segment: life and investments(1) 1 879 1 827 21 28 1 900 1 855
Glacier 117 109 151 140 268 249
Sanlam Personal Loans 61 61 114 113 175 174
Other operations - - (2) 15 (2) 15
Tax on result from financial services (764) (736) (81) (78) (845) (814)
Non-controlling interest - - - (2) - (2)
Net result from financial services 1 930 1 872 203 216 2 133 2 088
Net investment return 229 71 507 372 736 443
Operations 229 71 6 5 235 76
Sanlam Limited shares - - 533 268 533 268
Discretionary and other - - (32) 99 (32) 99
Net other earnings (20) (22) - 15 (20) (7)
Profit on disposal of subsidiaries and associated companies - - - 15 - 15
Amortisation of value of business acquired and other
intangibles (20) (22) - - (20) (22)
Normalised attributable earnings 2 139 1 921 710 603 2 849 2 524
(1) Includes an asset mismatch reserve release of R264 million (2016: R227 million).
(2) Comparative information has been adjusted for the reallocation of the Healthcare businesses to the Sanlam Corporate cluster.
Assets under management
June December
reviewed audited
2017 2016
R million
Sanlam Sky: Life insurance operations 5 484 5 372
Individual Life 229 987 228 580
Life insurance operations 227 932 226 299
Investment operations 2 055 2 281
Glacier 215 873 205 467
Life insurance operations 92 749 86 735
Investment operations 123 124 118 732
Total 451 344 439 419
Life insurance operations 326 165 318 406
Investment operations 125 179 121 013
451 344 439 419
Sanlam Personal Loans
Gross size of loan book (R million) 4 570 4 398
Interest margin 16,9% 16,9%
Bad debt ratio 5,3% 5,0%
Administration cost as % of net interest 32,7% 30,1%
2.2 Sanlam Emerging Markets
Analysis of Group Equity Value (GEV)
GEV GEV
at the Net at the
beginning capital Dividend end of RoGEV
R million of period Earnings investment paid period (%)
30 June 2017 - reviewed
Covered business 6 370 1 148 748 (320) 7 946 18,0
Non-life operations 15 727 402 4 497 (401) 20 225 2,4
Shriram Capital 7 963 714 - (9) 8 668 9,0
Saham Finances 3 197 (428) 3 909 (78) 6 600 (9,5)
Letshego 1 190 (79) - (9) 1 102 (6,6)
Pacific & Orient 476 3 - 1 480 0,6
Capricorn Investment Holdings 1 077 56 - (142) 991 5,2
Sanlam Emerging Markets
other operations 1 824 136 588 (164) 2 384 7,5
Group Equity Value 22 097 1 550 5 245 (721) 28 171 6,6
31 December 2016 - audited
Covered business 5 486 37 1 446 (599) 6 370 0,7
Non-life operations 12 561 (528) 4 574 (880) 15 727 (3,4)
Shriram Capital 7 594 143 308 (82) 7 963 1,9
Saham Finances - (214) 3 411 - 3 197 (7,5)
Letshego 1 106 17 120 (53) 1 190 1,4
Pacific & Orient 812 (260) - (76) 476 (32,0)
Capricorn Investment Holdings 877 219 - (19) 1 077 25,0
Sanlam Emerging Markets other operations 2 172 (433) 735 (650) 1 824 (19,3)
Group Equity Value 18 047 (491) 6 020 (1 479) 22 097 (2,3)
Business volumes
Present value of
New business Net fund Value of new new business New business
volumes flows business premiums margin (%)
R million 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Namibia(1) 2 635 2 731 (1 486) 308 44 71 1 025 1 651 4,29 4,30
Botswana 3 261 2 633 1 397 599 72 109 1 358 1 530 5,30 7,12
Rest of Africa (excluding Saham Finances) 1 416 1 320 691 929 69 54 1 152 1 200 5,99 4,50
Saham Finances 1 380 815 733 393 8 6 106 48 7,55 12,50
India 1 093 558 368 191 27 4 612 358 4,41 1,12
South-East Asia 283 430 156 142 15 33 567 901 2,65 3,66
Total 10 068 8 487 1 859 2 562 235 277 4 820 5 688 4,88 4,87
(1) Comparative information has been adjusted for the reallocation of Glacier Namibia from Sanlam Personal Finance to Sanlam Emerging Markets.
Analysis of earnings
R million 2017 2016
Net result from financial services 771 788
Life insurance 320 270
General insurance 160 157
Investment management 25 22
Credit and banking 292 354
Other (26) (15)
Net investment return 155 60
Net investment income 84 85
Net investment surpluses 71 (25)
Net other earnings 125 (120)
Project expenses (31) (3)
Amortisation of value of business acquired and other intangibles (19) (28)
Profit/(loss) on disposal of subsidiaries and associated
companies 5 19
Net equity-accounted headline earnings 5 3
Impairments (14) (111)
Net equity-accounted non-headline earnings 179 -
Normalised attributable earnings 1 051 728
Analysis of net result from financial services
Life insurance Non-life operations Total
R million 2017 2016 2017 2016 2017 2016
Namibia 73 79 80 71 153 150
Botswana 88 126 67 76 155 202
Rest of Africa (excluding Saham Finances) 110 73 (24) (10) 86 63
Saham Finances 24 13 92 78 116 91
South-East Asia 10 (10) 10 34 20 24
India 15 (11) 238 278 253 267
Corporate and other - - (12) (9) (12) (9)
Net result from financial services 320 270 451 518 771 788
Analysis of net investment return
Life insurance Non-life operations Total
R million 2017 2016 2017 2016 2017 2016
Namibia 24 9 6 8 30 17
Botswana (4) (27) - 8 (4) (19)
Rest of Africa (excluding Saham Finances) 35 5 2 (11) 37 (6)
Saham Finances 8 7 27 (14) 35 (7)
South-East Asia 10 16 3 4 13 20
India 14 7 19 38 33 45
Corporate and other 11 10 - - 11 10
Net investment return 98 27 57 33 155 60
Assets under management
R million June December
2017 2016
Life insurance operations 42 465 42 033
Investment operations 59 629 32 793
Namibia 18 487 19 679
Botswana 12 087 11 721
Rest of Africa 29 055 1 393
Assets under management 102 094 74 826
2.3 Sanlam Investments
Analysis of Group Equity Value (GEV)
GEV Net GEV
at the capital at the
beginning invest- Dividend end of RoGEV
R million of period Earnings ment paid period (%)
30 June 2017 - reviewed
Investment Management 15 207 384 130 (275) 15 446 2,5
Investment Management SA 7 071 (245) - (211) 6 615 (3,5)
Wealth Management 2 155 3 5 (8) 2 155 0,1
International 5 981 626 125 (56) 6 676 10,5
Covered business 1 137 47 - - 1 184 4,1
Other operations 4 844 579 125 (56) 5 492 12,0
Sanlam Capital Management 600 271 747 (236) 1 382 19,8
Covered business - 106 1 097 (71) 1 132 13,8
Other operations 600 165 (350) (165) 250 27,5
Group Equity Value 15 807 665 877 (511) 16 828 4,0
31 December 2016 - audited
Investment Management 16 235 (603) 326 (751) 15 207 (1,4)
Investment Management SA 6 287 1 030 296 (542) 7 071 16,4
Wealth Management 1 759 337 156 (97) 2 155 19,2
International 8 189 (1 970) (126) (112) 5 981 (24,1)
Covered business 1 633 (403) (82) (11) 1 137 (24,7)
Other operations 6 556 (1 567) (44) (101) 4 844 (23,9)
Sanlam Capital Management 600 281 - (281) 600 46,8
Group Equity Value 16 835 (322) 326 (1 032) 15 807 (1,9)
Business volumes
New business Net fund Value of new Present value of new New business
volumes flows business business premiums margin (%)
R million 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Investment Management 58 983 64 218 9 232 6 946 - 11 1 456 2 209 - 0,50
Investment Management SA 45 807 46 572 11 088 8 530 - - - - - -
Wealth Management(1) 5 944 7 960 (2 464) 1 268 - - - - - -
International(1) 7 232 9 686 608 (2 852) - 11 1 456 2 209 - 0,50
Sanlam Capital Management - - - (32) - - - - - -
Total 58 983 64 218 9 232 6 914 - 11 1 456 2 209 - 0,50
Analysis of earnings
Investment Capital
Management(2) Management(2) Total
R million 2017 2016 2017 2016 2017 2016
Financial services income(2) 2 224 2 366 359 402 2 583 2 768
Sales remuneration (81) (117) - - (81) (117)
Income after sales remuneration 2 143 2 249 359 402 2 502 2 651
Administration cost(2) (1 604) (1 695) (188) (196) (1 792) (1 891)
Results from financial services before performance fees 539 554 171 206 710 760
Net performance fees(2) 33 27 - - 33 27
Results from financial services 572 581 171 206 743 787
Tax on result from financial services (134) (148) (28) (46) (162) (194)
Non-controlling interest (8) (13) - - (8) (13)
Net result from financial services 430 420 143 160 573 580
Net investment return 65 11 31 - 96 11
Net investment income 57 9 15 - 72 9
Net investment surpluses 8 2 16 - 24 2
Net other earnings (73) (86) - - (73) (86)
Project expenses (5) (6) - - (5) (6)
Amortisation of intangible assets (78) (79) - - (78) (79)
Other 10 (1) - - 10 (1)
Normalised attributable earnings 422 345 174 160 596 505
(1) Comparative information has been adjusted for the reallocation of business units between the International and Wealth Management sub-clusters
and Sanlam Employee benefits to the Sanlam Corporate cluster.
(2) Financial services income and administration costs includes performance fees and the related administration costs.
Investment management
Analysis of net result from financial services
R million 2017 2016
Investment Management 391 382
Investment Management SA 199 234
Wealth Management 65 61
International 126 92
Support services 1 (5)
Capital Management 72 160
Asset management operations 463 542
Covered business:
Sanlam UK 39 38
Central Credit Manager 71 -
Sanlam Investments total 573 580
Assets under management
Assets under Fee Administration
management income cost
June December June December June December
2017 2016(1) 2017 2016(1) 2017 2016(1)
R million R million (%) (%) (%) (%)
Investment Management
Investment Management SA 666 717 672 154 0,30 0,31 0,23 0,22
Wealth Management 151 565 142 360 0,69 0,77 0,55 0,61
International 149 534 141 411 0,71 0,71 0,50 0,59
Intra-cluster eliminations (168 735) (163 622) - - - -
Asset management operations 799 081 792 303
Covered business:
Sanlam UK 44 533 42 827
Central Credit Manager 25 278 -
Sanlam Investments total 868 892 835 130
(1) Audited.
Asset mix of assets under management
Fixed
R million interest Equities Offshore Properties Cash Total
30 June 2017 - reviewed
Investment Management SA 133 375 320 760 69 323 19 494 123 765 666 717
Wealth Management - 118 835 29 487 - 3 243 151 565
International - - 149 534 - - 149 534
Intra-cluster consolidation (168 735)
Assets under management - Sanlam Investments 133 375 439 595 248 344 19 494 127 008 799 081
31 December 2016 - audited
Investment Management SA 160 501 308 452 67 703 19 865 115 633 672 154
Wealth Management - 108 791 29 464 - 4 105 142 360
International - - 141 411 - - 141 411
Intra-cluster consolidation (163 622)
Assets under management -
Sanlam Investments 160 501 417 243 238 578 19 865 119 738 792 303
Covered business (1)
Sanlam Investments Central Credit
and Pensions Manager
R million 2017 2016 2017 2016
Analysis of attributable earnings
Financial services income 166 186 190 -
Sales remuneration (57) (76) - -
Income after sales remuneration 109 110 190 -
Administration cost (70) (72) (91) -
Gross results from financial services 39 38 99 -
Tax on result from financial services - - (28) -
Net result from financial services 39 38 71 -
Net investment return - 2 31 -
Normalised attributable earnings 39 40 102 -
(1) Sanlam Investments and Pensions included in Investment Management and Central Credit Manager included in Capital Management above.
2.4 Santam
R million 2017 2016
Business volumes
Gross written premiums 13 795 12 134
Net earned premiums 10 551 9 700
Net fund flows 3 298 3 411
Earnings
Underwriting result 422 616
Net earned premiums 10 551 9 700
Sales remuneration (1 255) (1 217)
Claims incurred (7 252) (6 289)
Administration costs (1 622) (1 578)
Investment return on insurance funds 338 291
Net insurance result 760 907
Strategic investments 101 76
Saham Finances 62 55
SEM target shares 39 21
Gross result from financial services 861 983
Tax and non-controlling interest (524) (595)
Net result from financial services 337 388
Insurance activities
Gross written Underwriting
premiums result
R million 2017 2016 2017 2016
Motor 5 944 5 316 459 297
Property 4 188 3 772 (415) 18
Alternative risk 1 710 1 334 (6) 18
Engineering 645 579 114 81
Liability 566 489 93 172
Transportation 356 333 12 21
Crop 72 108 131 8
Other 314 203 34 1
Total 13 795 12 134 422 616
Ratios
Administration cost ratio(1) 15,4% 16,3%
Claims ratio(1) 68,7% 64,8%
Underwriting margin(1) 4,0% 6,4%
Investment return on insurance funds margin 3,2% 3,0%
(1) Ratios are calculated as a percentage of net earned premiums.
2.5 Sanlam Corporate
Analysis of Group Equity Value (GEV)
GEV at the GEV at the
beginning Net capital Dividend end of RoGEV
of period Earnings investment paid period (%)
R million
30 June 2017 - reviewed
Covered business 5 523 347 (355) (177) 5 338 6,6
Non-life operations 862 216 - 4 1 082 25,1
AfroCentric 775 210 - 5 990 27,1
Other operations 87 6 - (1) 92 6,9
Group Equity Value 6 385 563 (355) (173) 6 420 9,2
31 December 2016 - audited
Covered business 5 577 437 (64) (427) 5 523 7,8
Non-life operations 777 176 - (91) 862 22,7
AfroCentric 703 156 - (84) 775 22,2
Other operations 74 20 - (7) 87 27,0
Group Equity Value 6 354 613 (64) (518) 6 385 9,6
Business volumes
Sanlam Employee Benefits
R million 2017 2016
New business volumes 2 041 2 142
Recurring premiums 294 121
Guaranteed 152 75
Risk 142 46
Single premiums 1 747 2 021
Guaranteed 457 843
Risk 4 -
Retirement 1 041 1 012
Annuity 152 106
Special structures 93 60
Net fund flows 529 179
Value of new business 26 11
Present value of new business 3 790 2 800
New business margin 0,69% 0,39%
Analysis of earnings
Sanlam Employee Sanlam Healthcare
Benefits and other Total
R million 2017 2016 2017 2016 2017 2016
Financial services income 2 091 1 905 166 119 2 257 2 024
Sales remuneration (28) (28) - - (28) (28)
Income after sales remuneration 2 063 1 877 166 119 2 229 1 996
Underwriting policy benefits (1 309) (1 198) - - (1 309) (1 198)
Administration cost (510) (483) (67) (58) (577) (541)
Result from financial services 244 196 99 61 343 257
Tax on result from financial services (67) (55) (32) (16) (99) (71)
Non-controlling interest - - - - - -
Net result from financial services 177 141 67 45 244 186
Risk underwriting 56 36 - - 56 36
Investments 99 95 - - 99 95
Administration and other 22 10 67 45 89 55
Net investment return 95 20 - - 95 20
Net investment income 45 67 - - 45 67
Net investment surpluses 50 (47) - - 50 (47)
Net other earnings - - (12) (17) (12) (17)
Normalised attributable earnings 272 161 55 28 327 189
2.6 Valuation methodology
The fair value of the unlisted Sanlam businesses has been determined by the application of the following valuation methodologies:
Fair value
June December
2017 2016
Reviewed Audited
R million
Valuation method
Discounted cash flows 37 385 32 559
Sanlam Investments 13 349 13 240
Investment Management SA 6 036 6 514
Wealth Management 2 005 2 066
International 5 308 4 660
Sanlam Emerging Markets 19 213 14 795
Shriram Capital(1) 8 668 7 963
Saham Finances 6 600 3 197
Letshego(1) 1 102 1 190
Pacific & Orient 480 476
Capricorn Investment Holdings(1) 991 1 077
Other operations 1 372 892
Sanlam Personal Finance 3 741 3 662
Glacier 2 301 2 192
Sanlam Personal Loans 990 999
Other operations 450 471
Sanlam Corporate 1 082 862
AfroCentric 990 775
Other operations 92 87
Net asset value 2 175 2 362
Sanlam Investments 1 163 1 430
Investment Management SA 579 557
Wealth Management 150 89
International 184 184
Capital Management 250 600
Sanlam Emerging Markets 1 012 932
39 560 34 921
(1) Includes the listed businesses at directors' valuation of R6 717 million (2016: R6 189 million) for Shriram Capital, R1 102 million (2016: R1 190 million) for Letshego
and R991 million (2016: R1 077 million) for Capricorn Investment Holdings. The listed values of these operations are R7 258 million (2016: R5 923 million), R995 million
(2016: R1 008 million) and R1 135 million (2016: R1 159 million) respectively.
The main assumptions applied in the primary valuation for the unlisted businesses are presented below. The sensitivity analysis is based on the following changes in assumptions:
Change in
assumption
June
2017
Risk discount rate (RDR) 1,0
Perpetuity growth rate (PGR) 1,0
Decrease in Increase in
R million Weighted average assumption Base value assumption assumption
Discounted cash flows RDR = 14,8% (2016: 14,5%) 37 385 43 046 33 054
Perpetuity growth rate PGR = 2 - 5% (2016: 2 - 5%) 37 385 35 054 40 495
3. Normalised diluted earnings per share
June reviewed
Cents 2017 2016
Normalised diluted earnings per share:
Net result from financial services 197,9 196,8
Headline earnings 218,7 208,0
Profit attributable to shareholders' fund 233,4 204,1
R million
Analysis of normalised earnings (refer shareholders' fund
income statement above):
Net result from financial services 4 056 4 028
Headline earnings 4 481 4 256
Profit attributable to shareholders' fund 4 783 4 176
Reconciliation of normalised headline earnings:
Headline earnings 4 565 5 597
Less: Fund transfers (84) (1 341)
Normalised headline earnings 4 481 4 256
Million
Adjusted number of shares:
Weighted average number of shares for diluted earnings per
share 2 026,0 2 018,8
Add: Weighted average Sanlam shares held by policyholders 23,2 27,5
Adjusted weighted average number of shares for normalised
diluted earnings per share 2 049,2 2 046,3
4. Value per share
June December
2017 2016
R million Reviewed Audited
Fair value per share is calculated on the Group shareholders'
fund at fair value of R78 313 million (2016: R78 798 million),
divided by 2 049.9 million (December 2016:
2 047.5 million) shares.
Net asset value per share is calculated on the Group
shareholders' fund at net asset value of R52 906 million
(2016: R53 915 million), divided by 2 049.9 million
(2016: 2 047.5 million) shares.
Equity value per share is calculated on the Group Equity Value
of R112 100 million (2016: R110 717 million), divided by
2 049.9 million (2016: 2 047.5 million) shares.
Number of shares for value per share
Number of ordinary shares in issue 2 166,5 2 166,5
Shares held by subsidiaries in shareholders' fund (137,7) (138,9)
Outstanding shares in respect of Sanlam Limited long-term
incentive schemes 21,1 19,9
Adjusted number of shares for value per share 2 049,9 2 047,5
5. Present value of holding company expenses
The present value of holding company expenses has been calculated by applying a multiple of 8.8 (2016: 8.9) to the after tax recurring corporate expenses.
6. Share repurchases
Sanlam shareholders granted general authorities to the Group at the 2017 and 2016 annual general meetings to repurchase Sanlam shares in the market. The Group did not acquire
any shares in 2017.
Embedded value of covered business
at 30 June 2017
June December
2017 2016
R million Note Reviewed Audited
Sanlam Personal Finance 37 924 38 216
Adjusted net worth(1) 6 670 8 358
Net value of in-force covered business 31 254 29 858
Value of in-force covered business 32 799 31 823
Cost of capital(1) (1 545) (1 965)
Sanlam Emerging Markets 7 946 6 370
Adjusted net worth 3 228 2 857
Net value of in-force covered business 4 718 3 513
Value of in-force covered business 7 000 5 712
Cost of capital (621) (562)
Non-controlling interest (1 661) (1 637)
Sanlam Investments 2 316 1 137
Sanlam UK 1 184 1 137
Adjusted net worth 508 466
Net value of in-force covered business 676 671
Value of in-force covered business 833 828
Cost of capital (157) (157)
Central Credit Manager 1 132 -
Adjusted net worth(1) 1 572 -
Net value of in-force covered business (440) -
Value of in-force covered business - -
Cost of capital(1) (440) -
Sanlam Corporate(2) 5 338 5 523
Adjusted net worth(1) 3 338 3 720
Net value of in-force covered business 2 000 1 803
Value of in-force covered business 2 917 2 857
Cost of capital(1) (917) (1 054)
Embedded value of covered business 53 524 51 246
Adjusted net worth(3) 15 316 15 401
Net value of in-force covered business 1 38 208 35 845
Embedded value of covered business 53 524 51 246
(1) The Central Credit Manager was established during 2016 with a mandate to manage credit-related instruments on behalf of the Group's covered business operations. The credit
risk capital (and related cost of capital) in respect of the investments managed by the Central Credit Manager were transferred from Sanlam Personal Finance and Sanlam
Employee Benefits to the Central Credit Manager effective 1 January 2017 as follows:
- From Sanlam Personal Finance: R710 million of capital (R199 million of cost of capital);
- From Sanlam Employee Benefits: R367 million of capital (R108 million of cost of capital).
(2) Sanlam Employee Benefits is part of the Sanlam Corporate cluster.
(3) Excludes subordinated debt funding of Sanlam Life.
Change in embedded value of covered business
for the six months ended 30 June 2017
Six months reviewed
2017 2016
Adjusted Adjusted
Value of Cost of net Value of Cost of net
R million Note Total in-force capital worth Total in-force capital worth
Embedded value of covered business at the beginning of the year 51 246 39 379 (3 534) 15 401 47 222 35 506 (3 392) 15 108
Value of new business 2 782 2 016 (105) (1 129) 702 1 815 (107) (1 006)
Net earnings from existing covered business 3 002 (891) 166 3 727 2 339 (982) 63 3 258
Expected return on value of in-force business 2 315 2 221 94 - 2 197 2 112 85 -
Expected transfer of profit to adjusted net worth - (3 142) - 3 142 - (3 007) - 3 007
Operating experience variances 3 595 (1) 104 492 75 (150) (8) 233
Operating assumption changes 4 92 31 (32) 93 67 63 (14) 18
Expected investment return on adjusted net worth 556 - - 556 604 - - 604
Embedded value earnings from operations 4 340 1 125 61 3 154 3 645 833 (44) 2 856
Economic assumption changes 5 150 149 4 (3) 764 753 25 (14)
Tax changes - - - - 488 724 (107) (129)
Investment variances - value of in-force (120) (65) 3 (58) 190 192 (55) 53
Investment variances - investment return on adjusted net worth (151) - - (151) (528) - - (528)
Goodwill from business (43) (43) - - (172) (172) - -
Revaluation of business held for sale 6 745 745 - - - - - -
Exchange rate movements (39) (42) 3 - (241) (278) 37 -
Embedded value earnings from covered business 4 882 1 869 71 2 942 4 146 2 052 (144) 2 238
Acquired value of in-force 690 423 - 267 853 541 - 312
Transfers from/(to) other Group operations - - - - 49 49 - -
Transfers from covered business (3 294) - - (3 294) (2 304) - - (2 304)
Embedded value of covered business at the end of the period 53 524 41 671 (3 463) 15 316 49 966 38 148 (3 536) 15 354
Analysis of earnings from covered business
Sanlam Personal Finance 3 234 976 99 2 159 4 427 2 495 (11) 1 943
Sanlam Emerging Markets 1 148 828 (46) 366 (43) (186) (60) 203
Sanlam Investments 153 5 4 144 (169) (125) 25 (69)
Sanlam UK 47 5 - 42 (169) (125) 25 (69)
Central Credit Manager 106 - 4 102 - - - -
Sanlam Corporate 347 60 14 273 (69) (132) (98) 161
Embedded value earnings from covered business 4 882 1 869 71 2 942 4 146 2 052 (144) 2 238
Value of new business
for the six months ended 30 June 2017
Six months reviewed
R million 2017 2016
Value of new business (at point of sale):
Gross value of new business 957 917
Sanlam Personal Finance 643 557
Sanlam Emerging Markets 256 312
Sanlam Investments 4 12
Sanlam Corporate 54 36
Cost of capital (111) (119)
Sanlam Personal Finance (58) (58)
Sanlam Emerging Markets (21) (35)
Sanlam Investments (4) (1)
Sanlam Corporate (28) (25)
Value of new business 846 798
Sanlam Personal Finance 585 499
Sanlam Emerging Markets 235 277
Sanlam Investments - 11
Sanlam Corporate 26 11
Value of new business attributable to:
Shareholders' fund 782 702
Sanlam Personal Finance 585 499
Sanlam Emerging Markets 171 181
Sanlam Investments - 11
Sanlam Corporate 26 11
Non-controlling interest 64 96
Sanlam Personal Finance - -
Sanlam Emerging Markets 64 96
Sanlam Investments - -
Sanlam Corporate - -
Value of new business 846 798
Geographical analysis:
South Africa 611 510
Africa 193 239
Other international 42 49
Value of new business 846 798
Analysis of new business profitability:
Before non-controlling interest:
Present value of new business premiums 31 230 30 735
Sanlam Personal Finance 21 164 20 038
Sanlam Emerging Markets 4 820 5 688
Sanlam Investments 1 456 2 209
Sanlam Corporate 3 790 2 800
New business margin 2,71% 2,60%
Sanlam Personal Finance 2,76% 2,49%
Sanlam Emerging Markets 4,88% 4,87%
Sanlam Investments - 0,50%
Sanlam Corporate 0,69% 0,39%
After non-controlling interest:
Present value of new business premiums 29 976 28 759
Sanlam Personal Finance 21 164 20 038
Sanlam Emerging Markets 3 566 3 712
Sanlam Investments 1 456 2 209
Sanlam Corporate 3 790 2 800
New business margin 2,61% 2,44%
Sanlam Personal Finance 2,76% 2,49%
Sanlam Emerging Markets 4,80% 4,88%
Sanlam Investments - 0,50%
Sanlam Corporate 0,69% 0,39%
Notes to the embedded value of covered business
for the six months ended 30 June 2017 - reviewed
1. Value of in-force sensitivity analysis
Gross
value of Net value Change
in-force Cost of in-force from base
business of capital business value
R million R million R million (%)
Base value at 30 June 2017 41 671 (3 463) 38 208
- Risk discount rate increase by 1% 39 450 (4 138) 35 312 (8)
Base value at 31 December 2016 39 379 (3 534) 35 845
- Risk discount rate increase by 1% 37 204 (4 094) 33 110 (8)
2. Value of new business sensitivity analysis
Base value at 30 June 2017 887 (105) 782
- Risk discount rate increase by 1% 766 (119) 647 (17)
Base value at 30 June 2016 809 (107) 702
- Risk discount rate increase by 1% 702 (124) 578 (18)
3. Operating experience variances
Value of Cost of Adjusted
R million Total in-force capital net worth
Six months-Reviewed
2017
Risk experience 261 71 (6) 196
Persistency (114) (78) 13 (49)
Maintenance expenses 1 2 2 (3)
Working capital 191 2 - 189
Credit spread 170 - - 170
Other 86 2 95 (11)
Total operating experience variances 595 (1) 104 492
2016
Risk experience 80 (20) (3) 103
Persistency (99) (56) 2 (45)
Maintenance expenses (57) (1) - (56)
Working capital and other 151 (73) (7) 231
Total operating experience variances 75 (150) (8) 233
4. Operating assumption changes
Value of Cost of Adjusted
R million Total in-force capital net worth
Six months - Reviewed
2017
Risk experience 71 50 2 19
Persistency - 7 (3) (4)
Maintenance expenses 7 (13) - 20
Modelling improvements and other 14 (13) (31) 58
Total operating assumption changes 92 31 (32) 93
2016
Risk experience 50 3 - 47
Persistency (50) (16) - (34)
Maintenance expenses 80 59 (2) 23
Modelling improvements and other (13) 17 (12) (18)
Total operating assumption changes 67 63 (14) 18
5. Economic assumption changes
Value of Cost of Adjusted
R million Total in-force capital net worth
Six months - Reviewed
2017
Investment yields 149 148 4 (3)
Long-term asset mix assumptions and other 1 1 - -
Total economic assumption changes 150 149 4 (3)
2016
Investment yields 759 748 25 (14)
Long-term asset mix assumptions and other 5 5 - -
Total economic assumption changes 764 753 25 (14)
6. Revaluation of business held for sale
Sanlam Emerging Markets entered into agreements for the disposal of its 49% stake in Enterprise Life Assurance Company in Ghana during the second quarter of 2017. The
revaluation of the disposal value amounted to R745 million.
7. Economic assumptions
June December
Reviewed Audited
% 2017 2016 2016
Gross investment return, risk discount rate and inflation
Sanlam Life
Point used on the relevant yield curve 9 year 9 year 9 year
Fixed-interest securities 9,1 9,0 9,2
Equities and offshore investments 12,6 12,5 12,7
Hedged equities 8,5 8,4 8,6
Property 10,1 10,0 10,2
Cash 8,1 8,0 8,2
Inflation rate(1) 7,1 7,0 7,2
Risk discount rate 11,6 11,5 11,7
(1) Expense inflation of 11.1% (Dec 2016: 11.2%) assumed for retail business administered on old platforms.
Sanlam Developing Markets
Point used on the relevant yield curve 5 year 5 year 5 year
Fixed-interest securities 8,2 8,5 8,6
Equities and offshore investments 11,7 12,0 12,1
Hedged equities 7,2 n/a 7,6
Property 9,2 9,5 9,6
Cash 7,2 7,5 7,6
Inflation rate 6,2 6,5 6,6
Risk discount rate 10,7 11,0 11,1
Sanlam Investments and Pensions
Point used on the relevant yield curve 15 year 15 year 15 year
Fixed-interest securities 1,7 1,5 1,7
Equities and offshore investments 4,9 4,8 4,9
Hedged equities n/a n/a n/a
Property 4,9 4,8 4,9
Cash 1,7 1,5 1,7
Inflation rate 3,3 2,9 3,4
Risk discount rate 5,4 5,3 5,4
Botswana Life Insurance
Fixed-interest securities 7,0 7,0 7,0
Equities and offshore investments 10,5 10,5 10,5
Hedged equities n/a n/a n/a
Property 8,0 8,0 8,0
Cash 6,0 6,0 6,0
Inflation rate 4,0 4,0 4,0
Risk discount rate 10,5 10,5 10,5
Illiquidity premiums
Investment returns on non-participating and inflation-linked annuities, as well as guarantee plans include assumed illiquidity premiums due to matching assets being held
to maturity.
Assumed illiquidity premiums generally amount to between 25bps and 60bps (Dec 2016: 25bps and 60bps) for non-participating annuities, between 25bps and 75bps
(Dec 2016: 25bps to 75bps) for inflation-linked annuities and capped at 120bps reflecting both illiquidity premium and credit risk premium (Dec 2016: 120bps) for guarantee plans.
Asset mix for assets supporting required capital
Fixed-
interest Hedged
% R million securities Equities Offshore equities Property Cash Total
June 2017 - reviewed
Required capital
South Africa 11 570 - 3 7 77 - 13 100
Namibia 493 6 36 - - - 58 100
Botswana 343 - - - - 50 50 100
Ghana 48 35 40 - - 20 5 100
Kenya 76 35 40 - - 15 10 100
Other Africa 787 66 5 - - 5 24 100
India 185 30 66 - - - 4 100
South-East Asia 231 72 19 - - - 9 100
Other International 435 - - - - - 100 100
Total required capital 14 168
Free surplus 1 148
Adjusted net worth 15 316
Fixed-
interest Hedged
% R million securities Equities Offshore equities Property Cash Total
December 2016 -
audited
Required capital
South Africa 12 069 - 3 7 78 - 12 100
Namibia 490 6 36 - - - 58 100
Botswana 337 - - - - 50 50 100
Ghana 47 35 40 - - 20 5 100
Kenya 76 35 40 - - 15 10 100
Other Africa 563 82 - - - - 18 100
India 171 36 63 - - - 1 100
South-East Asia 188 76 17 - - - 7 100
Other International 438 - - - - - 100 100
Total required capital 14 379
Free surplus 1 022
Adjusted net worth 15 401
June December
% Reviewed Audited
2017 2016 2016
Return on required capital
Sanlam Life
Gross return on required capital 8,8 8,7 8,9
Net return on required capital 7,1 7,0 7,2
Sanlam Developing Markets
Gross return on required capital 8,1 9,8 8,5
Net return on required capital 6,7 7,6 7,1
Sanlam Investments and Pensions
Gross return on required capital 1,7 1,5 1,7
Net return on required capital 1,4 1,2 1,4
Botswana Life Insurance
Gross return on required capital 6,9 6,9 6,9
Net return on required capital 5,2 5,2 5,2
Sanlam Life Namibia
Gross return on required capital 10,0 9,9 10,1
Net return on required capital 8,8 8,7 8,9
Sanlam Namibia Holdings
Gross return on required capital 8,7 8,7 8,9
Net return on required capital 7,6 7,6 7,8
Contents
Interim condensed consolidated financial statements
Independent auditors' review report on interim condensed consolidated financial statements
Group statement of financial position
Group statement of comprehensive income
Group statement of changes in equity
Group cash flow statement
Notes to the interim condensed consolidated financial statements
Independent auditors' review report on interim condensed consolidated financial statements
To the shareholders of Sanlam Limited
Introduction
We have reviewed the condensed consolidated financial statements of Sanlam Limited, contained in the accompanying interim report, which comprise the condensed consolidated
statement of financial position as at 30 June 2017 and condensed consolidated statements of comprehensive income, changes in equity and cash flow for the six-month period then
ended and selected explanatory notes.
Directors' responsibility for the interim financial statements
The directors of Sanlam Limited are responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with
International Financial Reporting Standard IAS 34 - "Interim Financial Reporting", the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committee
and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa, and for such internal
control as the directors determine is necessary to enable the preparation of interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' responsibility
Our responsibility is to express a conclusion on these interim condensed consolidated financial statements. We conducted our review in accordance with International Standard
of Review Engagements (ISRE) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". ISRE 2410 requires us to conclude whether
anything has come to our attention that causes us to believe that the interim financial statements are not prepared in all material respects in accordance with the applicable
financial reporting framework. This standard also requires us to comply with relevant ethical requirements.
A review of interim financial information in accordance with ISRE 2410 is a limited assurance engagement. We perform procedures, primarily consisting of making inquiries of
management and others within the entity, as appropriate, and applying analytical procedures, and evaluate the evidence obtained.
The procedures performed in a review is substantially less than and differ in nature from those performed in an audit conducted in accordance with International Standards on
Auditing. Accordingly, we do not express an audit opinion on these financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements of Sanlam Limited
for the six-month period ended 30 June 2017 is not prepared, in all material respects, in accordance with International Financial Reporting Standard IAS 34, "Interim Financial
Reporting", the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Pronouncements as issued by the Financial Reporting
Standards Council and the requirements of the Companies Act of South Africa.
Ernst & Young Inc.
Director: Johanna Cornelia de Villiers
Registered Auditor
Chartered Accountant (SA)
No.3 Dock Road
Waterway House
V&A Waterfront
Cape Town
6 September 2017
Group statement of financial position
at 30 June 2017
Reviewed Audited
June December
R million 2017 2016
ASSETS
Equipment 876 881
Owner-occupied properties 1 151 1 171
Goodwill 3 714 3 596
Value of business acquired 1 703 1 606
Other intangible assets 530 575
Deferred acquisition costs 3 608 3 597
Long-term reinsurance assets 1 014 958
Investments 615 353 592 945
Properties 11 693 10 664
Equity-accounted investments 26 379 21 560
Equities and similar securities 182 186 176 944
Interest-bearing investments 174 607 170 584
Structured transactions 13 281 13 756
Investment funds 170 890 161 050
Cash, deposits and similar securities 36 317 38 387
Deferred tax 1 926 1 880
Assets of disposal groups classified as held for sale 423 663
General insurance technical assets 6 521 5 022
Working capital assets 52 776 59 665
Trade and other receivables 34 168 40 904
Cash, deposits and similar securities 18 608 18 761
Total assets 689 595 672 559
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 22 22
Treasury shares (3 913) (3 790)
Other reserves 9 964 9 903
Retained earnings 46 475 47 255
Shareholders' fund 52 548 53 390
Non-controlling interests 5 658 5 696
Total equity 58 206 59 086
Long-term policy liabilities 497 168 483 748
Insurance contracts 176 078 177 675
Investment contracts 321 090 306 073
Term finance 7 312 6 466
Margin business 1 724 1 652
Other interest-bearing liabilities 5 588 4 814
Structured transactions liabilities 1 366 1 298
External investors in consolidated funds 58 096 55 486
Cell owners' interest 2 989 1 153
Deferred tax 2 153 2 069
General insurance technical provisions 18 578 14 557
Working capital liabilities 43 727 48 696
Trade and other payables 41 583 46 636
Provisions 335 332
Taxation 1 809 1 728
Total equity and liabilities 689 595 672 559
Group statement of comprehensive income
for the six months ended 30 June 2017
Reviewed Reviewed
R million Note 2017 2016
Net income 47 289 49 796
Financial services income 30 465 28 514
Reinsurance premiums paid (4 380) (3 828)
Reinsurance commission received 742 657
Investment income 14 921 14 494
Investment surpluses 8 281 11 940
Finance cost - margin business (54) (54)
Change in fair value of external investors' liability (2 686) (1 927)
Net insurance and investment contract benefits and claims (28 084) (31 237)
Long-term insurance and investment contract benefits (21 390) (25 403)
General insurance claims (10 901) (8 658)
Reinsurance claims received 4 207 2 824
Expenses (12 485) (12 088)
Sales remuneration (4 073) (3 937)
Administration costs (8 412) (8 151)
Impairments (27) (147)
Amortisation of intangibles (146) (153)
Net operating result 6 547 6 171
Equity-accounted earnings 1 296 985
Finance cost - other (501) (311)
Profit before tax 7 342 6 845
Taxation (1 962) (858)
Shareholders' fund(1) (1 439) (518)
Policyholders' fund (523) (340)
Profit for the period 5 380 5 987
Other comprehensive income: to be recycled through profit or
loss in subsequent periods
Movement in foreign currency translation reserve (306) (1 591)
Other comprehensive income of equity-accounted investments 4 (34)
Movement in cash flow hedge (40) (428)
Comprehensive income for the period 5 038 3 934
Allocation of comprehensive income: 5 380 5 987
Profit for the period
Shareholders' fund 4 867 5 517
Non-controlling interests 513 470
Comprehensive income for the period 5 038 3 934
Shareholders' fund 4 622 3 647
Non-controlling interests 416 287
Earnings attributable to shareholders of the Company (cents):
Profit for the period
Basic earnings per share 1 242,8 276,0
Diluted earnings per share 1 240,2 273,3
(1) As described in the basis of preparation, comparative information has been restated for the recognition of deferred tax assets of R1 275 million in respect of certain
assessed losses in the policyholder funds after the introduction of a separate Risk Policy Fund for South African insurance companies during 2016.
Group statement of changes in equity
for the six months ended 30 June 2017
Reviewed Reviewed
R million 2017 2016
Shareholders' fund
Balance at beginning of the period 53 390 53 621
Comprehensive income 4 622 3 647
Profit for the period(1) 4 867 5 517
Other comprehensive income (245) (1 870)
Net acquisition of treasury shares(2) (245) (566)
Share-based payments 181 168
Acquisitions, disposals and other movements in interests - (28)
Dividends paid(3) (5 400) (4 916)
Balance at end of the period 52 548 51 926
Non-controlling interests
Balance at beginning of the period 5 696 6 571
Comprehensive income 416 287
Profit for the period 513 470
Other comprehensive income (97) (183)
Net acquisition of treasury shares(2) (27) (40)
Share-based payments 16 19
Acquisitions, disposals and other movements in interests 46 (34)
Dividends paid (489) (635)
Balance at end of the period 5 658 6 168
Shareholders' fund 53 390 53 621
Non-controlling interests 5 696 6 571
Total equity at beginning of the period 59 086 60 192
Shareholders' fund 52 548 51 926
Non-controlling interests 5 658 6 168
Total equity at end of the period 58 206 58 094
(1) As described in the basis of preparation, comparative information has been restated for the recognition of deferred tax assets of R1 275 million in respect of certain
assessed losses in the policyholder funds after the introduction of a separate Risk Policy Fund for South African insurance companies during 2016.
(2) Comprises movement in cost of shares held by subsidiaries, the share incentive trust and other consolidated funds.
(3) Dividend of 268 cents per share declared and paid during 2017 in respect of the 2016 financial year (2016: 245 cents).
Group cash flow statement
for the six months ended 30 June 2017
Restated
Reviewed Reviewed
R million 2017 2016
Cash flow from operating activities 10 333 (3 231)
Cash flow from investment activities (13 444) (2 704)
Cash flow from financing activities 548 25
Net increase in cash and cash equivalents (2 563) (5 910)
Net foreign exchange difference (5) 58
Cash, deposits and similar securities at beginning of the
period 52 621 54 046
Cash, deposits and similar securities at end of the period 50 053 48 194
Restatement of the Group cash flow statement
Cash, deposits and similar securities disclosed in the statement of financial position include financial instruments of varying durations in line with the definition of the
Solvency Assessment and Management regime being implemented in South Africa and the operational management of liquidity by the Group. During 2016, the Group reassessed the
application of IAS 7 to liquid instruments held to match certain five-year guaranteed investment contracts issued to policyholders by a subsidiary. The application of IAS 7
to these instruments was amended, resulting in a reallocation of R25 million between the movement in cash, deposits and similar securities and cash flows from investment
activities for 2016.
2016
Policyholder
Previously activities
R million reported adjustments Restated
Cash flow from operating activities (3 231) - (3 231)
Cash flow from investment activities (2 679) (25) (2 704)
Cash flow from financing activities 25 - 25
Net increase in cash and cash equivalents (5 885) (25) (5 910)
Net foreign exchange difference 58 - 58
Cash, deposits and similar securities at beginning of the
period 57 343 (3 297) 54 046
Cash, deposits and similar securities at end of the period 51 516 (3 322) 48 194
Notes to the interim condensed consolidated financial statements
for the six months ended 30 June 2017
1. Earnings per share
For basic earnings per share the weighted average number of ordinary shares is adjusted for the treasury shares held by subsidiaries, consolidated investment funds and
policyholders. Basic earnings per share is calculated by dividing earnings by the adjusted weighted average number of shares in issue.
For diluted earnings per share the weighted average number of ordinary shares is adjusted for the shares not yet issued under the Sanlam Share Incentive Scheme and treasury
shares held by subsidiaries, consolidated investment funds and policyholders. Diluted earnings per share is calculated by dividing earnings by the adjusted diluted weighted
average number of shares in issue.
Refer above for normalised earnings per share, which is based on the economic earnings attributable to the shareholders' fund, and should also be used when evaluating
the Group's economic performance.
Previously
Restated Reported
Reviewed Reviewed Reviewed
Cents 2017 2016 2016
Basic earnings per share(1):
Headline earnings 227,7 280,0 216,2
Profit attributable to shareholders' fund 242,8 276,0 212,2
Diluted earnings per share(1):
Headline earnings 225,3 277,2 214,1
Profit attributable to shareholders' fund 240,2 273,3 210,1
R million
Analysis of earnings(1):
Profit attributable to shareholders' fund 4 867 5 517 4 242
Less: Net loss/(profit) on disposal of operations (150) (34) (34)
Loss/(profit) on disposal of subsidiaries and
associated companies (188) (37) (37)
Tax on loss/(profit) on disposal of subsidiaries and
associated companies - 3 3
Non-controlling interests 38 - -
Less: Equity-accounted non-headline earnings (173) 3 3
Plus: Impairments 21 111 111
Gross impairments 27 147 147
Tax on impairments (1) (12) (12)
Non-controlling interests (5) (24) (24)
Headline earnings 4 565 5 597 4 322
Million
Number of shares:
Number of ordinary shares in issue at beginning of the
period 2 166,5 2 166,5
Less: Weighted Sanlam shares held by subsidiaries and
consolidated investment funds (including policyholders) (161,6) (167,7)
Adjusted weighted average number of shares for basic
earnings per share 2 004,9 1 998,8
Add: Number of shares in respect of Sanlam Limited
long-term incentive schemes 21,1 20,0
Adjusted weighted average number of shares for diluted
earnings per share 2 026,0 2 018,8
(1) As described in the basis of preparation, comparative information has been adjusted for the recognition of a deferred tax asset relating to the introduction of a
separate Risk Policy Fund (RPF) for South African insurance companies during 2016.
2. Reconciliation of segmental information(1)
Reviewed Reviewed
R million 2017 2016
Segment financial services income (per shareholders' fund
income statement) 28 004 26 660
Sanlam Personal Finance(2) 8 471 7 960
Sanlam Emerging Markets 3 525 3 687
Sanlam Investments(2) 2 627 2 802
Santam 10 990 10 067
Sanlam Corporate(2) 2 257 2 024
Group Office and other 134 120
IFRS adjustments 2 461 1 854
Total financial services income 30 465 28 514
Segment results (per shareholders' fund income statement
after tax and non-controlling interest) 4 783 4 176
Sanlam Personal Finance(2) 2 849 2 524
Sanlam Emerging Markets 1 051 728
Sanlam Investments(2) 596 505
Santam 523 481
Sanlam Corporate(2) 327 189
Group Office and other (563) (251)
Non-controlling interests included in segment result 513 470
Fund transfers 84 1 341
Total profit for the period 5 380 5 987
(1) Additional segmental information is provided in the Shareholders' information.
(2) Comparative information has been adjusted for the reallocation of business units from Sanlam Personal Finance and Sanlam Investments to the Sanlam Corporate cluster.
3. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2016 annual report. The circumstances surrounding the contingent liabilities remain materially unchanged.
4. Subsequent events
All conditions precedent to the disposal of the Group's stakes in the Enterprise Group and the acquisition of a 53% stake in BrightRock Holdings were fulfilled during
August 2017 and September 2017, respectively. Due to the timing of the BrightRock Holdings transaction, the acquisition accounting will be finalised in the second half
of 2017. No further material facts or circumstances have arisen between the dates of the statement of financial position and this report that affect the financial position
of the Sanlam Group at 30 June 2017 as reflected in these financial statements.
5. Fair value disclosures
Determination of fair value and fair value hierarchy
Below follows required disclosure of fair value measurements, using a three-level fair value hierarchy that reflects the significance of the inputs used in determining
the measurements. It should be noted that these 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
30 June 2017 - reviewed
Equities and similar securities 179 589 2 211 386 182 186
Interest-bearing investments 45 622 127 923 34 173 579
Structured transactions 6 688 6 593 - 13 281
Investment funds 151 776 18 675 439 170 890
Trading account assets 5 318 10 643 - 15 961
Cash, deposits and similar securities 22 597 13 720 - 36 317
Investment in joint ventures and associates - - 436 436
Total assets at fair value 411 590 179 765 1 295 592 650
Investment contract liabilities - 319 118 1 972 321 090
Term finance - 5 311 - 5 311
Structured transactions liabilities - 1 366 - 1 366
Trading account liabilities 2 283 14 615 - 16 898
External investors in consolidated funds 57 512 - 584 58 096
Total liabilities at fair value 59 795 340 410 2 556 402 761
31 December 2016 - audited
Equities and similar securities 174 452 2 072 420 176 944
Interest-bearing investments 48 621 120 570 392 169 583
Structured transactions 6 502 7 254 - 13 756
Investment funds 143 374 17 209 467 161 050
Trading account assets 3 661 19 288 - 22 949
Cash, deposits and similar securities 22 792 15 595 - 38 387
Investment in joint ventures - - 423 423
Total assets at fair value 399 402 181 988 1 702 583 092
Investment contract liabilities - 303 761 2 312 306 073
Term finance - 4 300 201 4 501
Structured transactions liabilities - 1 298 - 1 298
Trading account liabilities 1 828 21 170 - 22 998
External investors in consolidated funds 54 389 493 604 55 486
Total liabilities at fair value 56 217 331 022 3 117 390 356
Reconciliation of movements in level 3 assets and liabilities measured at fair value
Equities Interest Investment
and similar bearing Investment in joint Total
R million securities investments funds ventures assets
Assets
30 June 2017 - reviewed
Balance at 1 January 2017 420 392 467 423 1 702
Total gain/(loss) in statement
of comprehensive income (31) (1) (28) 13 (47)
Acquisitions - 4 - - 4
Foreign exchange movements (3) (4) - - (7)
Settlements - (357) - - (357)
Balance at 30 June 2017 386 34 439 436 1 295
31 December 2016 - audited
Balance at 1 January 2016 430 490 507 - 1 427
Total gain/(loss) in statement
of comprehensive income 36 (114) (33) - (111)
Acquisitions 54 50 - 423 527
Disposals (83) - (7) - (90)
Foreign exchange movements (17) (34) - - (51)
Balance at 31 December 2016 420 392 467 423 1 702
External
investors
Investment in consoli-
contract Term dated Total
R million liabilities finance funds liabilites
Liabilities
30 June 2017 - reviewed
Balance at 1 January 2017 2 312 201 604 3 117
Total gain in statement of comprehensive income 45 - (16) 29
Acquisitions 27 - - 27
Disposals (59) - - (59)
Settlements (357) (201) - (558)
Foreign exchange movements 4 - (4) -
Balance at 30 June 2017 1 972 - 584 2 556
31 December 2016 - audited
Balance at 1 January 2016 3 178 359 - 3 537
Total gain/(loss) in statement of comprehensive income (84) - (67) (151)
Acquisitions 201 - - 201
Disposals (335) - - (335)
Settlements - (134) - (134)
Foreign exchange movements (648) (24) - (672)
Transfers in(1) - - 671 671
Balance at 31 December 2016 2 312 201 604 3 117
(1) The market for the shares to which the external investors in consolidated funds relate became inactive in 2016.
Six months Full year
Gains and losses on level 3 instruments Reviewed Audited
(realised and unrealised) included in profit and loss 2017 2016
Total gains or losses included in profit or loss for
the period (76) 597
Total unrealised gains or losses included in profit or
loss for the period for assets held at the end of the
reporting period (24) 515
Transfers between categories
Interest- Cash,
Equities bearing Structured Invest- deposits
and similar invest- trans- ment and similar Total
R million securities ments(1) actions funds securities assets
Financial assets
Six months
Reviewed - 2017
Transfer from level 1 to level 2 - 259 - - - 259
Transfer from level 2 to level 1 - 3 - - - 3
Full year
Audited - 2016
Transfer from level 1 to level 2 - 15 521 162 - 350 16 033
Transfer from level 2 to level 1 - 10 - 6 - 16
External
investors in
consoli-
dated Term Total
R million funds(2) finance(1) liabilities
Liabilities
Six months
Reviewed - 2017
Transfer from level 2 to level 1 357 - 357
Full year
Audited - 2016
Transfer from level 1 to level 2 - 3 145 3 145
(1) During the year ended December 2016 management have re-evaluated their determination of what constitutes an active market to a more conservative approach. As a result,
certain bonds are now considered to be classified as level 2 valuations. During the 6 months ended June 2017, instruments that were note actively traded in the market
have been transferred from level 1 to level 2. Conversely, instruments that have become actively traded in the market have been transferred from level 2 to level 1.
(2) External investors in consolidated funds transfers relate to investment funds that listed during the 6 months ended June 2017. As a result, those funds are now classified
as level 1.
Valuation techniques used in determining the fair value of financial assets and liabilities
Applicable Significant
Instrument to level Valuation basis Main assumptions unobservable input
Equities and similar 2 and 3 Discounted cash flow model Bond and interbank Cost of Capital
securities (DCF), Earnings multiple swap interest rate Earnings multiple
curve, Cost of Capital,
Consumer price index
Interest-bearing 2 and 3 DCF, Earnings multiple, Quoted Bond and interbank Earnings multiple
investments (including put/surrender price by issuer swap interest rate Discount Rate
insurance policies) curve, Cost of Capital,
Consumer price index
Structured transactions 2 Option pricing models Bond and interbank n/a
assets and liabilities DCF swap interest rate
curve, Forward equity
and currency rates,
Volatility risk
adjustments
Investment contract 2 and 3 Current unit price of underlying Bond and interbank Earnings multiple
liabilities and unitised asset, multiplied by the swap interest rate
investment funds number of units held curve, Cost of Capital,
Earnings multiple Consumer price
DCF index, Bond interest
rate curve
Trading account assets 2 DCF Forward rate n/a
and liabilities Credit risk spread
Liquidity spread
Cash, deposits and 2 Mark to market Bond and interbank n/a
similar securities Yield curve swap interest rate
curve
Investment in joint 3 DCF Bond and interbank Cost of Capital
ventures swap interest rate
curve, Cost of Capital,
Consumer price index
Term finance 2 and 3 DCF Bond and forward rate Liquidity spread
Credit ratings of issuer
Liquidity spread
Agreement interest
curves
External investors in 2 and 3 Current unit price of unitised net Bond and interbank Capitalisation Rate
consolidated funds asset value, multiplied by the swap interest rate Discount Rate
number of units held curve, Cost of Capital,
Consumer price index
Sensitivity of level 3 assets and liabilities measured at fair value to changes in key assumptions
Effect of Effect of
Effect of Effect of a 1% a 1%
a 10% a 10% increase decrease
Carrying increase decrease Carrying in discount in discount
R million amount in multiple in multiple amount(1) rate rate
Six months - reviewed
30 June 2017
Other investments
Equities and similar securities(2) 386 39 (39) - - -
Interest-bearing investments - - - 34 (1) 1
Investment funds(2) 439 44 (44) - - -
Investment in joint ventures - - - 436 (37) 41
Total assets 825 83 (83) 470 (38) 42
Liabilities
Investment contract liabilities 1 972 197 (197) - - -
External investors in consolidated funds 584 58 (58) - - -
Total liabilities 2 556 255 (255) - - -
Full year - audited
31 December 2016
Other investments
Equities and similar securities(2) 420 42 (42) - - -
Interest-bearing investments 361 36 (36) 31 (1) 1
Investment funds(2) 467 47 (47) - - -
Investment in joint ventures - - - 423 (29) 32
Total assets 1 248 125 (125) 454 (30) 33
Liabilities
Investment contract liabilities(2) 2 312 231 (231) - - -
Term finance 201 20 (20) - - -
External investors in consolidated funds 604 60 (60) - - -
Total liabilities 3 117 311 (311) - - -
(1) Represents mainly instruments valued on a discounted cash flow basis, with sensitivities based on changes in the discount rate.
(2) Represents mainly private equity investments valued on earnings multiple, with sensitivities based on the full valuation.
6. Business combinations
During 2017, the Group acquired subsidiaries for a total consideration of R448 million, resulting in a net cash inflow of R640 million.
7. Acquisition of associated companies
During May 2017, the Sanlam Group concluded the acquisition of an additional interest of 16.6% in Saham Finances for a total consideration of
$351 million (R4.8 billion). The cash flow hedge reserve of R32 million was released against the carrying value of the investment.
Administration
Registered name
Sanlam Limited
(Registration number: 1959/001562/06)
(Tax reference number: 9536/346/84/5)
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
Incorporated in South Africa
Transfer secretaries
Computershare Investor Services (Pty) Limited
(Registration number 2004/003647/07)
Rosebank Towers,15 Biermann Avenue, Rosebank 2196,
South Africa
PO Box 61051, Marshalltown 2107, South Africa
Telephone +27 (0)11 370 5000
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
http://www.sanlam.co.za
Directors
J van Zyl (Chairman)(1), PT Motsepe (Deputy Chairman), IM Kirk(2) (Group Chief Executive), MM Bakane-Tuoane, CB Booth(5), AD Botha, P Hanratty(3), (4), MV Moosa, TI Mvusi(2),
SA Nkosi (Lead independent director), K Nonduma, P de V Rademeyer, Y Ramiah(2), RV Simelane, CG Swanepoel, HC Werth(2), PL Zim
(1) Chairman since 8 June 2017
(2) Executive
(3) British
(4) Appointed 3 April 2017
(5) Resigned 8 March 2017
Date: 07/09/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
