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SLM
SLM
SLM - Sanlam Limited - Audited Results For The Year Ended 31 December 2007
and dividend declaration
SANLAM LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 1959/001562/06)
JSE SHARE CODE: SLM
NSX share code: SLA
ISIN number: ZAE000070660
("Sanlam" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 AND DIVIDEND DECLARATION
Key features
Earnings
- Net result from financial services up 16%
- Core earnings per share up 27%
- Normalised headline earnings per share decreased by 19%
Business volumes
- Total new business volumes up 26% to R102 billion
- Net fund inflows of R11,4 billion
Group Equity Value
- Group Equity Value per share of R23,50
- Return on Group Equity Value per share of 18,8%
- Value of new life insurance business up 31% to R567 million
- Life new business margin of 2,37%
Capital management
- 5,5% of issued shares bought back during 2007 for R2,9 billion
- Discretionary capital of R6,1 billion at 31 December 2007
Dividend
- Dividend increased by 21% to 93 cents per share
SALIENT RESULTS
for the year ended 31 December 2007
2007 2006 %
Change
SANLAM GROUP
Earnings:
Net result from financial R million 3 029 2 605 16%
services
Core earnings (1) R million 4 146 3 365 23%
Normalised headline earnings R million 5 199 6 633 (22)%
(2)
Headline earnings R million 4 833 6 838 (29)%
Net result from financial cents 133,3 110,8 20%
services per share
Core earnings per share (1) cents 182,4 143,1 27%
Normalised headline earnings cents 228,7 282,0 (19)%
per share (2)
Diluted headline earnings per cents 220,8 304,9 (28)%
share
Group administration cost % 27,8 27,1
ratio (3)
Group operating margin (4) % 20,8 21,1
Gross business volumes:
New business volumes R million 102 004 80 648 26%
Net fund flows R million 11 363 (7 451)
Value of new life insurance
business
Value of new life insurance R million 567 434 31%
business
Life insurance PVNBP (5) R million 23 886 20 308 18%
Life new business margin % 2,37 2,14
(6)
VALUE OF NEW NON-LIFE LINKED R million 69 64 8%
AND LOAN BUSINESS
GROUP EQUITY VALUE:
Group Equity Value R million 51 293 46 811 10%
Group Equity Value per share cents 2 350 2 047 15%
Return on Group Equity Value % 18,8 31,0
per share (7)
SANLAM LIFE INSURANCE LIMITED
Shareholders` fund R million 37 933 34 197
Capital Adequacy Requirements R million 7 525 5 800
(CAR)
CAR covered by prudential times 3,5 4,4
capital
Notes
(1) Core earnings = net result from financial services and net investment
income (including dividends received from non-operating associates).
(2) Normalised headline earnings = core earnings, net investment surpluses,
secondary tax on companies and equity-accounted headline earnings less
dividends received from non-operating associates, but excluding fund
transfers. Headline earnings include fund transfers.
(3) Administration costs as a percentage of income after sales remuneration.
(4) Result from financial services as a percentage of income after sales
remuneration.
(5) PVNBP = present value of new business premiums and is equal to the
present value of new recurring premiums plus single-premiums.
(6) Life new business margin = value of new business as a percentage of life
insurance PVNBP.
(7) 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 period.
Executive review
Overview
We are pleased to be reporting on a financial year that saw the Group achieve
significant growth for its shareholders.
Shareholders were rewarded with a return of 29% for the year ended 31
December 2007, which exceeded the performance of the JSE All Share Index by a
margin of 10%. This return consists of a R4,45 increase in the Sanlam share
price for the year and a 77 cents dividend per share.
Last year`s performance was not an isolated event - the Sanlam share price
also outperformed its peer group as measured by the South African Life
Assurance Index over the five year period ended 31 December 2007 by an
average of 7% per annum.
This bears testimony to the Group`s ability to adapt and perform in an
environment where uncertainty prevails and challenges are the norm.
Sanlam remains on a growth trajectory. Supported by a loyal and sizeable
existing policyholder and investor base, diversification into other financial
services opportunities continues to gain momentum. The goal is to achieve a
world-class South African financial services group that delivers wealth
creation and protection for clients both in South Africa and beyond our
borders across a variety of different financial services solutions.
Therefore, each Sanlam share not only comes with the credentials of solid
past performance, but also with a commitment from the Sanlam board and
management to keep on delivering long-term value and growth.
Sanlam is well positioned to continue to maximise shareholder value. During
2007 the Group delivered improved performances in both new business margin
and efficiency terms and enhanced its non-traditional distribution channels
significantly within a very competitive operating environment. The effective
management of the Group`s capital base remains a key component of our
strategy to maximise shareholder value.
Performance review
The Group delivered a solid performance in 2007. A cause for celebration is
the fact that we reached two important milestones during the 2007 financial
year: new business volumes exceeded R100 billion for the first time and core
earnings passed the R4 billion mark.
In 2007 we changed over from Embedded Value to Group Equity Value (GEV) as
the preferred term for reporting on the aggregate value of the Group
operations. Reporting on GEV is considered a more meaningful method of
disclosing information for the combined Group given the transformation of
Sanlam into a diversified financial services organisation. At the end of
2007, the GEV per share amounted to R23,50 compared to R20,47 at the end of
the previous financial year. A return on GEV per share of 18,8% was achieved
during the year, again well in excess of the Group`s target.
There has also been an improvement in consumer confidence in the life
insurance industry since hitting an all-time low around three years ago. A
strong contributor to last year`s new business flows was our life business -
life sales grew by 25%. Combined with 32% growth in new investment business,
the Group`s total new business volumes increased by 26% to reach R102 billion
in 2007. The value of new life business of R567 million is 31% up on the
comparable 2006 period with an increase in the average margin from 2,14% in
2006 to 2,37% in 2007.
Core earnings for the year amounted to R4 146 million, up by 23% on 2006.
When analysing the sources of this earnings growth, it becomes apparent that
our strong diversification focus in recent years is continuing to pay off. An
increase of 16% in the net result from financial services contributed towards
the earnings growth, together with an increase in net investment income of
47%. All the major businesses performed satisfactorily within the context of
a challenging business environment and volatile debt and equity markets in
the latter part for 2007. In addition, we have managed to contain costs
within inflationary limits, with a marginal increase of 0,7% in the group
administration cost ratio over 2006 substantially due to new ventures and an
increase in capacity.
A relatively lower investment market performance in 2007, compared to the
exceptional returns in 2006, largely contributed to a 22% decline in
normalised headline earnings. Diluted headline earnings per share, including
the IFRS impact of Sanlam shares held by the policyholders` funds, are 28%
lower than in 2006.
Delivering on strategy
Our strategy continues to centre around five pillars: capital efficiency,
earnings, costs and efficiencies, transformation and diversification.
However, two of these pillars attracted additional focus last year for
strategic reasons, namely transformation with regard to people and
diversification. Only five years ago more than three quarters of all inflows
were generated by our life insurance business. Last year only about a quarter
of our inflows came from the life side - a direct result of our successful
diversification strategy.
Over the past two years most of our growth has emanated from new efforts such
as:
- Focusing on the Gauteng market where we were under-represented.
- Venturing into the South African entry-level market with African Life,
Channel Life and Safrican.
- Our diversification into Africa where we now have some 1 500
intermediaries selling our solutions.
- Expansion into India where some 16 400 people represent us, and the UK
market where we have more than 500 people on the ground.
- Focusing on the institutional market where Sanlam Investment Managers and
Sanlam Capital Market have grown their income base substantially by
leveraging off the life platform.
We are also proud to boast the fastest growing private client business in the
country. Sanlam Private Investments now boasts assets under management of
more than R50 billion. Six years ago this operation was making a loss - in
2007 it generated pre-tax profits of more than R80 million.
One of the significant new initiatives launched last year is SanlamConnect, a
revolutionary new distribution model that will help position Sanlam as a
leader in our rapidly changing financial services industry. We also
introduced Sanlam Liquid, our transactional banking initiative, with the aim
of increasing the choice of solutions available to our clients as part of our
client retention strategy. And towards the end of 2007, we became the first
big South African financial services company to launch more affordable and
flexible life and disability cover for people living with HIV, known as the
Sanlam LifePower range.
Maximising Return on Group Equity Value through improved capital efficiency
and earnings growth remains a central target of our strategy since this is
the most relevant measure of value creation. In this regard, the Group has
set a target of outperforming the 10-year bond yield plus 3% to 4% on a
sustainable basis. This has been achieved in 2007, with a total return on GEV
of 19,1%. All of the businesses contributed to the growth, with a particular
strong performance from the investment in Santam.
In our ongoing focus on capital efficiency we succeeded in freeing up a
further R3 billion of capital last year. This has increased the current level
of our discretionary capital to just more than R6 billion. This we will
invest in new projects that will spearhead the growth of this business well
into the future or return it to shareholders. Much of our focus this year
will be on pursuing and bedding down these initiatives.
R2,9 billion was utilised to buy back Sanlam shares in 2007. The aggregate
amount of capital returned through share buy-backs since the start of 2005
now amounts to R9 billion (588,8 million shares or 21,3% of Sanlam`s issued
share capital as at the beginning of 2005). Recent market weakness, in
particular in respect of the Sanlam share price, created a further
opportunity to add value through the buy back of Sanlam shares. The Sanlam
Board is of the opinion that share buy-backs remain the most efficient way of
returning capital to shareholders under these conditions and has therefore
committed to a continuance of the Sanlam buy back programme.
Looking ahead
A number of significant challenges started to emerge onto the South African
investment horizon towards the end of last year and at the beginning of 2008.
Together with the intense volatility that started to plague international
financial markets, the threat of continuing rising interest rates, increasing
inflation, and Eskom`s power supply dilemma have started impacting on
investor confidence as measured by the Sanlam Investment Management (SIM)
Investor Confidence Index. Adding to the negative sentiment is the continued
weakness in the US housing market and the potential of a US and European
slowdown.
It is unlikely that Sanlam as a Group would not be impacted by the current
challenges in the investment environment. But we are confident that our
strong focus on diversification will make a difference and assist performance
in what will be a challenging year.
Comments on the results
Introduction
The Sanlam group financial statements for the year ended 31 December 2007 are
presented based on and in compliance with IFRS. The Group`s external
auditors, Ernst & Young Inc., have audited the financial statements.
Continuing impact of IFRS
IFRS have been developed as general-purpose accounting standards to be
applied across all industries without exemption for any unique industry or
country-specific circumstances. While we support the objective of IFRS to
achieve consistency in financial reporting, we are concerned that the
indiscriminate application of IFRS does not necessarily present the economic
substance of transactions or the reality and performance of the reporting
entity, to the potential detriment of the users of the financial statements.
The accounting treatment of investments in Sanlam shares and Group
subsidiaries held by the policyholders` fund is an example where IFRS have a
material disclosure but not a true economic impact on the Group`s results.
In terms of IFRS, the investments of the policyholders` fund in Sanlam shares
and Group subsidiaries are not reflected as equity investments at fair value
in the Sanlam balance sheet but deducted in full from equity on consolidation
(in respect of Sanlam shares) or reflected at net asset value (in respect of
subsidiaries). The valuation of the related policy liabilities however
includes the fair value of these shares, resulting in a mismatch between
policy liabilities and policyholder investments, with a consequential impact
on the Group`s earnings through a transfer between policyholders` and
shareholders` funds. For the calculation of basic and diluted earnings per
share in terms of IFRS, the number of shares in issue is reduced by the
Sanlam shares held by the policyholders` fund. This is not a true
representation of the earnings attributable to the Group`s shareholders. This
is specifically evident in instances where the share prices and/or the number
of shares held by the policyholders` fund varies significantly, which results
in losses being recognised in the IFRS earnings as the Sanlam share price
increases and profits when the Sanlam share price decreases. These are not
true economic profits and losses. The Group therefore decided to also
disclose normalised diluted earnings per share from the 2007 financial year
that eliminate this IFRS impact.
As the granting of shares to the beneficiaries of Santam`s Black Economic
Empowerment transaction is still in the implementation phase, no charge has
been recognised in the income statement in terms of IFRS 2 during 2007.
Sanlam has followed Santam`s disclosure of discontinued operations in terms
of IFRS 5. Discontinued operations are excluded from Core Earnings.
Group Equity Value
Embedded Value terminology is traditionally associated with Life Insurance
businesses. The ongoing transformation of the Sanlam group into a diversified
financial services organisation, which includes a growing non-life component,
caused our past practice to refer to the combined Group operations in terms
of embedded value terminology and methodology to become increasingly
inappropriate. Consistent with our objective to continuously improve the
quality and relevance of our financial communication we will, with effect
from the 2007 financial year, refer to the aggregate value of the group
business as Group Equity Value (GEV). This change in terminology and
presentation does not impact on the previously published group embedded
value.
GEV is the aggregate of the following components:
- The embedded value of covered business, being the life insurance
businesses of the Group, which comprises the capital supporting these
operations and the net value of their in-force books of business;
- The fair value of other Group operations, which includes the investment
management, capital markets, credit, short-term insurance and the non-covered
wealth management operations of the Group; and
- The fair value of discretionary and other capital.
GEV provides a meaningful basis of reporting the underlying value of the
Group`s different operations and the related performance drivers, while
changes in GEV more accurately reflects the performance of the Group than
results presented under IFRS. This basis also allows more explicitly for the
impact of uncertainty in future investment returns and is consistent with the
Group`s operational management structure.
The embedded value methodology is still being applied to the Group`s covered
life insurance business as defined. The methodology and assumptions used to
determine the embedded value of covered business have however been adjusted
from 2007 in preparation for the revised embedded value guidance from the
Actuarial Society of South Africa that becomes effective for reporting
periods ending on or after 31 December 2008. These are intended to be
materially consistent with the CFO Forum`s European Embedded Value (EEV)
Principles. The change added R272 million to the GEV as at 31 December 2007.
No adjustment has been made to the 2006 published embedded value.
The GEV as at 31 December 2007 amounted to R51,3 billion, up 9,6% on the
R46,8 billion at the end of 2006. On a per share basis GEV increased by 14,8%
from 2 047 cents to 2 350 cents at 31 December 2007. The Sanlam share price
traded at a 3,2% discount to GEV at close of trading on 31 December 2007.
The GEV at 31 December 2007 is analysed in the following table:
GROUP EQUITY VALUE
2007
Total Fair value Value of
R million of assets in-force
R million R million
Embedded value of covered 28 432 14 710 13 722
business
Sanlam Personal Finance 21 010 8 732 12 278
Sanlam Developing Markets 2 160 860 1 300
Sanlam Employee Benefits 5 262 5 118 144
Other Group operations 15 557 15 557
Retail cluster 1 220 1 220
Institutional cluster 7 256 7 256
Santam 6 375 6 375
Independent Financial Services 706 706
Diversification benefit (1 232) (1 232)
Other capital 2 436 2 436
45 193 31 471 13 722
Discretionary capital 6 100 6 100
Group Equity Value 51 293 37 571 13 722
Issued shares for value per 2 182,8
share
GEV per share (cents) 2 350
Share price (cents) 2 275
Premium/(discount) (3)%
GROUP EQUITY VALUE
2006
Total Fair value Value of
R million of assets in-force
R million R million
Embedded value of covered 27 403 15 140 12 263
business
Sanlam Personal Finance 18 702 8 325 10 377
Sanlam Developing Markets 1 953 650 1 303
Sanlam Employee Benefits 6 748 6 165 583
Other Group operations 13 210 13 210
Retail cluster 1 058 1 058
Institutional cluster 5 899 5 899
Santam 5 628 5 628
Independent Financial Services 625 625
Diversification benefit (1 532) (1 532)
Other capital 1 530 1 530
40 611 28 348 12 263
Discretionary capital 6 200 6 200
Group Equity Value 46 811 34 548 12 263
Issued shares for value per 2 286,7
share
GEV per share (cents) 2 047
Share price (cents) 1 830
Premium/(discount) (11)%
GEV at 31 December 2007 includes discretionary capital of R6,1 billion. By
utilising the net asset value of other Group operations to partially cover
the required capital of the Group`s life operations, a diversification
benefit of R1,2 billion was achieved at 31 December 2007. This contributes to
the optimal use of the Group`s capital base.
The return on GEV of 19,1% (18,8% per share) is again well in excess of the
Group`s long-term return target of the 10-year bond yield plus 3% to 4%. The
Group has outperformed this target on a cumulative basis since Sanlam`s
demutualisation in 1998.
RETURN ON GROUP EQUITY VALUE
for the year ended 31 December 2007
2007 2006
Earnings Return Earnings Return
R million % R million %
Sanlam Personal Finance 4 185 21,2 4 772 25,4
Covered business 4 016 21,5 4 469 24,6
Other operations 169 16,0 303 45,4
Sanlam Developing Markets 377 19,3 559 36,3
Covered business 351 18,0 559 36,3
Other operations 26 - - -
Institutional cluster 2 055 16,2 4 049 36,9
Covered business 333 4,9 1 196 16,6
Investment Management 1 581 28,9 2 712 84,0
and Fund Administration
Sanlam Capital markets 141 35,3 141 35,3
Short-term insurance 2 362 42,0 1 043 22,0
Independent Financial 169 27,0 161 31,9
Services
Discretionary and other (229) 1 128
capital
Balanced portfolio 345 980
Shares delivered to (71) -
Sanlam Demutualisation
Trust
Shriram goodwill less (108) -
VIF acquired
Treasury shares and (286) 32
other
Change in net worth (109) 116
adjustments
Return on Group Equity 8 919 19,1 11 712 30,7
Value
Sanlam Personal Finance achieved a return of more than 21% on its operations
with covered business accounting for the bulk of the growth. Similarly the
covered business of Sanlam Developing Markets substantially contributed
towards its 19,3% return for the year.
Operations in the Institutional cluster achieved a return of 16,2%. This is
the combined result of 28,9% growth in the Investment management and fund
administration business, a 35,3% return recorded by Sanlam Capital Markets,
somewhat offset by a disappointing 4,9% return in Sanlam Employee Benefits.
Sanlam Employee Benefits` return includes a negative impact of R380 million
following the adoption of the EEV principles referred to above. Excluding
this impact, Sanlam Employee Benefits` return amounts to 10,6%. Sanlam
Capital Markets` return includes once-off profit realised on the disposal of
an associated company and subsidiary. Excluding these items, Sanlam Capital
Markets` return was slightly below its 25% target. While the required capital
of Sanlam Employee Benefits remains disproportionate to its value of in-
force, its return will be sub-optimal. The return in 2007 was also adversely
affected by the R380 million impact of the change to EEV. Excluding this
impact, Sanlam Employee Benefits` return amounts to 10,6%. An ongoing Group
focus is the restructuring of Sanlam Employee Benefits` solutions to improve
its capital efficiency.
Exceptional growth in the Santam share price plus dividends of R26,28 per
share paid during the year (including a special dividend of R22,00)
contributed to a return of 42% on the Group`s investment in Santam.
The return on discretionary and other capital was negatively impacted by a
number of low yielding assets in the portfolio. This includes international
cash as well as the Group`s interest in the Safair Lease Finance joint
venture, which required a R62 million negative valuation adjustment. Other
items impacting on the return include:
- A shortfall of R71 million on the delivery of Sanlam shares to the Sanlam
Demutualisation Trust in terms of an arrangement put in place as part of the
Ubuntu-Botho (UB) empowerment transaction in 2004, being the difference
between the fair value of the Sanlam shares delivered and the fair value of
the equivalent number of UB preference shares received from the Trust in
return;
- The write-off, for GEV purposes, of the goodwill paid on the acquisition
of Shriram Life in India of R108 million;
- A shortfall of R288 million on the delivery of Sanlam shares to the share
incentive scheme participants at the applicable strike prices; and
- A negative change of R109 million in the net worth adjustments,
essentially due to some reallocation of expenses formerly recognised in the
calculation of the value of covered business.
Earnings
Summarised shareholders` fund income statement
for the year ended 31 December 2007
2007 2006 % Change
R million R million
Net result from financial services 3 029 2 605 16%
Net investment income 1 117 760 47%
CORE EARNINGS 4 146 3 365 23%
Project expenses (85) - -
Equity-accounted headline earnings 152 164 -7%
Broad-based employee share plan (5) (19) 74%
Net investment surpluses 1 264 3 215 -61%
Secondary Tax on Companies (STC) (131) (84) -56%
Discontinued operations (91) 37 -346%
Amortisation of value of business (51) (45) -13%
acquired
NORMALISED HEADLINE EARNINGS 5 199 6 633 -22%
Disposal of associates and 668 132
subsidiaries
Other non-headline earnings - 5
Impairment of investments and (7) (30)
goodwill
Normalised attributable earnings 5 860 6 740 -13%
Core earnings
Core earnings for the year of R4 146 million are 23% up on 2006. Core
earnings comprise the net result from financial services and net investment
income earned on the shareholders` fund, but exclude abnormal and non-
recurring items as well as investment surpluses. Net investment income
includes dividends received from non-operating associated companies and joint
ventures, but excludes the equity-accounted retained earnings. On a per share
basis, core earnings increased by 27%, reflecting the impact of the 3,4%
reduction in the weighted average number of shares in issue from the share
buy-backs during the year.
The gross result from financial services of R4 539 million is 11% higher than
the comparative period in 2006. Net of taxation and minority interests, the
result from financial services is 16% higher than 2006. The relatively higher
growth on a net basis is mainly due to a lower effective tax rate in Sanlam
Developing Markets and Sanlam Capital Markets.
Result from financial services
for the year ended 31 December 2007
2007 2006 % Change
R million R million
Sanlam Personal Finance 1 889 1 697 11%
Sanlam Developing Markets 343 421 -19%
Institutional cluster 1 476 1 298 14%
Sanlam Investments 1 230 1 077 14%
Sanlam Employee Benefits 173 70 147%
Sanlam Capital Markets 73 151 -52%
Santam 987 878 12%
Independent Financial Services 7 20 -65%
Corporate expenses (163) (216) 25%
Gross result from financial services 4 539 4 098 11%
Taxation (997) (989) -1%
Minority shareholders` interest (513) (504) -2%
Net result from financial services 3 029 2 605 16%
- Sanlam Personal Finance achieved another set of satisfactory results with
its result from financial services for the year 11% up on 2006. Higher market-
related income was to an extent offset by lower administration profits due to
new business strain. The profit contribution from non-life operations
decreased slightly in 2007, primarily due to new business strain from the
strong business volumes recorded by the Topaz linked business, which was
launched in the latter part of 2006. The increase in individual life
maintenance unit costs was well contained at 5%.
- The Sanlam Developing Markets` result from financial services is 19% down
on 2006 and was in general affected by new business strain from the strong
new business performance. New business strain is a normal element of a high-
growth strategy and will positively impact on future profitability, as
reflected in the growth in Value of New Life Business. In addition, African
Life SA was negatively impacted by the relatively lower investment returns in
2007. Channel Life`s contribution of R11 million is 70% lower than the R37
million in 2006, in part due to negative persistency experience and expense
overruns in the call centre. Profit from the Botswana operation was also
lower than 2006 following lower relative investment performance and an
increase in staff numbers as part of an investment in additional capacity.
Sanlam Developing Markets` after-tax results benefited from a release of an
excess tax provision.
- The Institutional cluster recorded another strong performance in 2007,
increasing its result from financial services by 14% against the high
comparative base in 2006.
* Sanlam Employee Benefits posted a 147% improvement on 2006, representing a
major turnaround in profitability. These results include the full cost
associated with the ongoing migration of the retirement fund administration
to Coris Capital. Independent Financial Services carried some of these costs
in 2006. Comparative information has not been restated. The outperformance
against 2006 can largely be ascribed to a 38% improvement in risk
underwriting profits following good claims experience, as well as profit
realised on an improvement in the matching profile of the annuity book.
* Sanlam Investments` result from financial services is 14% up on 2006. This
performance reflects the positive gearing effect of its higher assets base,
assisted by the recent positive market performance and performance fees
earned by the Cluster, which increased by 48% from R356 million in 2006 to
R526 million in 2007. The inclusion of new acquisitions also contributed to
the improvement, including Coris Multi-Manager acquired during 2006, and
Simeka acquired in 2007. Sanlam Private Equity and Sanlam Private Investments
both recorded exceptional results.
Major progress has been made over the past few years in transforming the
business from a wholesale asset manager into a diversified boutique of
investment-related businesses. International business contributed 35% of
profit during 2007 and performance fees represented 17% of revenue.
* Sanlam Capital Markets` result from financial services is 52% down on 2006
and 33% down on an after tax basis. The increased volatility in debt and
equity markets, including a general widening of credit spreads following the
US subprime crisis, had a severe impact on capital market activities in the
second half of 2007. Despite these challenges, Sanlam Capital Markets
reported a marginal profit in the second half of the year and still succeeded
in recording a return of 23,5% on its R400 million allocated capital for the
year, slightly below the long-term target of 25%.
- Santam`s results for the year were negatively affected by major local and
international claims towards the end of the year. The international
businesses due for closure and/or sale are classified as discontinued
operations and reported a net loss of R168 million (R91 million after
minorities) compared to a profit of R70 million (R37 million after
minorities) in 2006. These results are recognised separately in the income
statement. The results from continuing operations of R987 million are 12%
higher than in 2006. A claims experience of 68% was in line with 2006, while
an underwriting margin achieved of 6,2% is also broadly in line with the 6,5%
reported in 2006.
- Independent Financial Services results are 65% lower than 2006, due to a
combination of lower profit contributions from and a reduction in the Group`s
interest in certain business.
- The reduction in corporate costs versus 2006 is mainly due to the first-
time inclusion in corporate costs of the interest earned on the cash held for
the Sanlam Limited dividend payment in May 2007. Corporate administration
expenses were well contained within inflationary limits.
Net investment income for the 2007 financial year is 47% higher than the
comparative period in 2006, due to relatively higher cash interest rates and
the more conservative investment asset mix that was adopted for the balanced
portfolio during 2006. This resulted in a higher exposure to interest-bearing
investments (lower exposure to equities) in 2007 compared to 2006 with a
higher investment income return. This was partially offset by reduced income
on the cash used for the share buy-backs during the year.
Normalised headline earnings
Normalised headline earnings of R5 199 million are 22% lower than the
comparative period in 2006. Normalised headline earnings exclude the IFRS
accounting impact of investments in Sanlam shares and Group subsidiaries held
by the policyholders` fund (refer `Earnings` section above). Including the
effect of fund transfers recognised in terms of IFRS in respect of these
shares, headline earnings decreased by 29%.
Normalised headline earnings per share decreased by 19% with the lower
reduction on a per share basis attributable to the reduction in the weighted
average number of shares in issue following the share buy-backs during the
year.
- Headline earnings include R85 million spent on Sanlam Personal Finance`s
SanlamConnect distribution channel (launched in December 2007) and the MiWay
direct distributional channel (launched in February 2008) during the set-up
phases. Some ongoing project costs still need to be incurred in respect of
further development phases on these projects, which will be recognised in the
2008 income statement. These projects are aligned with Sanlam`s strategy to
diversify and expand the Group`s distribution reach.
- Investment surpluses amounted to R1 264 million (after tax and minorities)
in 2007 compared to R3 215 million (after tax and minorities) in the 2006
financial year. The 61% decrease in net investment surpluses is primarily due
to much lower relative equity returns during 2007. The JSE All Share Index
return in 2007 was less than half than that of 2006. The more conservative
asset mix implemented for the balanced portfolio, as well as portfolio
investments utilised for the share buy-back, also contributed to the lower
return.
- The 56% increase in secondary tax on companies (STC) is mainly
attributable to the increased dividend paid in 2007, the deferred tax impact
of the change in the STC rate from 12,5% to 10% and lower dividend income
earned on the balanced portfolio due to the more conservative asset mix, and
thus less STC credits generated.
- Discontinued operations relate to Santam`s operations in Europe that will
be closed down and/or disposed of in due course. The profit or loss earned
from discontinued operations must be recognised separately in the income
statement in terms of IFRS.
Business volumes
New business flows
Total new business volumes increased by 26% from R81 billion in 2006 to R102
billion in the 2007 financial year. All of the Group businesses contributed
to the performance.
New business volumes
for the year ended 31 December 2007
2007 2006 %
R million R million Change
Sanlam Personal Finance 27 809 21 826 27%
South Africa 19 137 15 645 22%
Africa 7 379 5 424 36%
Other international 1 293 757 71%
Sanlam Developing Markets 3 615 2 003 80%
South Africa 2 767 1 366 103%
Africa 722 593 22%
Other international 126 44 186%
Institutional cluster 50 177 38 678 30%
Sanlam Investments 47 843 36 498 31%
Sanlam Employee Benefits 2 334 2 180 7%
Santam 11 407 10 203 12%
WHITE LABEL 8 996 7 938 13%
TOTAL NEW BUSINESS 102 004 80 648 26%
Sanlam Personal Finance`s new business volumes increased by an exemplary 27%.
Recurring premium business (including both life and non-life) is up 24% with
single premium business reflecting growth of 28% on 2006.
- South African new business volumes increased by 22%, with good support
experienced for both life and investments solutions. These results have been
achieved despite the negative impact of increasing interest rates on
consumers` disposable income. The introduction of more flexible, tailored and
transparent solutions assisted in improving the recent negative sentiment
towards the insurance industry.
* Strong new recurring premium life sales were recorded, being 15% up on the
same period in 2006. This is somewhat down on the 21% growth reported for the
first six months of 2007, but reflects the impact of the higher comparative
base towards the end of 2006. Competitive solutions and good advisor and
broker support contributed to the growth in recurring premiums.
* Total single premium life sales are up 14% on 2006, an improved
performance compared to the 9% growth reported for the first six months of
2007. Growth in the Glacier life insurance solution range accelerated during
the year to achieve an increase of 28% in inflows. Despite volatility in
equity markets during 2007, overall returns were still attractive and
supported the sales of single-premium business.
* Sanlam Personal Finance`s investment business increased by 31% in 2007,
confirming the successful diversification of the business into investment
products. Glacier continued its strong growth in investment business, which
increased by 26% compared to 2006. The new Topaz linked investment solution
recorded exceptional growth to make a solid contribution to overall
investment business volumes.
- The Namibian operations experienced another good year and increased their
new business volumes by 36%. The majority of the growth stems from investment
business, which grew by 37% compared to 2006. The popularity of unit trust
solutions continued, with new business volumes increasing by 51% from R3,8
billion in 2006 to R5,8 billion in 2007.
- Merchant Investors` increased focus on new business initiatives and on
further extending its distribution capacity contributed to excellent growth
of 71% in new business volumes for the year to in excess of R1 billion.
Sanlam Developing Markets again exceeded expectations and delivered sterling
results with an 80% increase in new life insurance business. Excluding the
relatively low margin single premium business in Channel Life and African
Life SA, new business volumes are 30% up on 2006.
- South African total new business inflows more than doubled in 2007 to R2,8
billion, aided by two large single-premiums amounting to some R1,1 billion.
New recurring premiums increased by 27% to R584 million, the combined result
of 28% growth in African Life SA`s recurring business and a 26% increase in
Channel Life sales. African Life SA`s results were supported by improvements
in manpower and average premium size as well as a substantial reduction in
the not taken up (NTU) rate of traditional channels in 2007. A relatively
high NTU rate in the direct channel is, however, still receiving management
attention. The Channel Life call centre experienced operational problems
during the year, which are being addressed. Notwithstanding these problems,
Channel Life recorded strong new recurring business volumes.
- The African operations` new business volumes increased by 22%. Botswana
Life remains the main contributor to African flows and increased its
recurring premiums by 35% to R139 million, and single premiums by 15% to R404
million. Recurring premium business was supported by the launch of new
solutions, improvements in validation and the strengthening of broker
relationships. Double-digit single-premium growth is particularly
satisfactory in the face of strong competition from the Botswana Government
annuity product. The Kenyan operations had a very good year and reported an
increase of 68% in its new business volumes to reach R103 million for 2007.
- Shriram Life, our 26% held life operation in India, is continuing its
strong sales performance with 2007 full-year sales of R126 million up 186% on
the R44 million for 2006. Accredited agents increased from 9 400 at the end
of 2006 to more than 16 000. Agent productivity is still lower than target
but this was offset by a higher average premium size.
Institutional new business flows increased by 30% compared to the 2006
financial year.
- Sanlam Employee Benefits` flows are 7% up on 2006 in a very competitive
market for risk and investment solutions. Sanlam Employee Benefits`
performance has shown a significant turnaround from the reported 28%
reduction in sales volumes in the first half of 2007. The improvement is the
combined effect of a major recovery in single-premium volumes, partially
offset by a slowdown in recurring- premium growth against the higher
comparative base towards the end of 2006.
- Sanlam Investments` inflows increased by 31% to R47,8 billion, of which
R4,4 billion was accounted for by the non-South African businesses. Wholesale
segregated inflows and Sanlam Multi-Manager inflows more than doubled in
2007. As expected, after an exceptional 2006, new business inflows in Octane
and Sanlam Private Investments moderated by 55% and 19% respectively. All
other investment management businesses experienced satisfactory improvement
in new fund flows.
Santam recorded a 12% overall increase in net earned premiums, a satisfactory
result in a highly competitive environment. Santam has made a strategic
decision to discontinue its international operations in Europe. Excluding
premiums attributable to the discontinued operations, net earned premiums
increased by 11% from R9,6 billion in 2006 to R10,7 billion in 2007.
Net business flows
Total inflows increased by 24% to R116,9 billion, while outflows in respect
of fund withdrawals and policy benefits were up by only 4% to R105,5 billion.
Net inflows amounted to R11,4 billion, somewhat down on the net inflow of
R14,1 billion in the corresponding period in 2006 (before the PIC withdrawal
of R21,6 billion).
Net business flows
for the year ended 31 December 2007
2007 2006
R million R million
Sanlam Personal Finance 3 521 3 678
Sanlam Developing Markets 2 266 1 669
Institutional cluster 390 (17 664)
Sanlam Employee Benefits (4 111) (2 835)
Sanlam Investments 4 501 (14 829)
Santam 3 379 3 166
White label 1 807 1 700
Total net business flows 11 363 (7 451)
Sanlam Personal Finance`s net flows of R3,5 billion are marginally down on
the R3,7 billion recorded in 2006. RSA life business recorded net outflows of
R1,2 billion compared to a net inflow of R103 million in 2006. This is the
result of higher maturity claims, which can be ascribed to the relatively
bigger block of business sold five years ago as well as higher maturity
values due to the current higher market levels. Policy surrenders are
marginally down on 2007. Net investment inflows improved from R3,9 billion in
2006 to R4,9 billion for the 2007 financial year, offsetting the reduction in
net life business flows.
Sanlam Developing Markets is continuing to perform well and recorded net
inflows (excluding white label) for the 2007 year of R2,3 billion compared to
R1,7 billion in 2006. The high level of single-premiums written by Channel
Life was the main contributor to the increase in South African net fund
flows. Alternative Channel, that contributed most of the single-premium
volumes, was sold at the end of 2007. A similar level of single-premium
business is therefore not expected in the future. All non-South African
operations contributed to an increase in non-South African net flows.
Institutional cluster net flows increased from a net outflow of R17,7 billion
in 2006 to a net inflow of R390 million in 2007. Net inflows are somewhat
down on 2006 excluding the PIC fund withdrawal of R21,6 billion. Sanlam
Investments recorded net inflows of R4,5 billion in 2007 compared to R6,7
billion in 2006 (excluding PIC) . This shortfall is substantially due to a
few large mandates that were lost during the first half of 2007 as a result
of changes in client investment strategy and the impact of the closure of the
Sanlam Dividend Income Fund. Non-South African net inflows declined from R2,8
billion in 2006 to R1,2 billion for the 2007 financial year, mainly due to a
decline in Octane inflows from a relatively high base. Sanlam Employee
Benefits recorded net outflows
of R4,1 billion compared to R2,8 billion in 2006. The increased level of net
outflows is in part attributable to a deliberate effort to reduce its capital
and margin inefficient business.
White label net inflows of R1,8 billion was marginally higher than 2006, the
combined effect of a decline in Collective Investments net inflows and a
significant increase in Sanlam Developing Markets` contribution. White label
flows are volatile in nature and variances can be expected between reporting
periods.
Value of new business (VNB)
Total life VNB for 2007 of R567 million reflects exceptional growth of 31% on
the back of similar new business volume performance. Net of minority
interests, VNB improved by 30% to R493 million. The overall new life business
margin increased from 2,14% to 2,37%.
VALUE OF NEW BUSINESS
2007 2006 %
R million R million Change
Covered business
Value of new life business 567 434 30,6%
Sanlam Personal Finance 332 261 27,2%
Sanlam Developing Markets 203 134 51,5%
Sanlam Employee Benefits 32 39 (17,9)%
Net of minorities 493 379 30,1%
Present value of new business 23 886 20 308 17,6%
premiums
Sanlam Personal Finance 16 312 13 735 18,8%
Sanlam Developing Markets 5 476 3 107 76,2%
Sanlam Employee Benefits 2 098 3 466 (39,5)%
Net of minorities 21 886 19 426 12,7%
Life new business margin 2,37% 2,14%
Sanlam Personal Finance 2,04% 1,90%
Sanlam Developing Markets 3,71% 4,31%
Sanlam Employee Benefits 1,53% 1,13%
Net of minorities 2,25% 1,95%
The Sanlam Personal Finance VNB was positively impacted by the good sales
achieved for the year, with the VNB margin also increasing from 1,90% in 2006
to 2,04%. Sanlam Personal Finance also calculates the VNB of its non-life
business and reported an 8% increase in the value of non-life linked and loan
business from R64 million in 2006 to R69 million in 2007.
All of the operations in Sanlam Developing Markets contributed to an
exceptional 51% growth in gross VNB to R203 million. African Life SA and
Kenya more than doubled their contribution during 2007, the latter supported
by strong bancassurance sales. African Life SA`s performance was positively
impacted by good volume growth, an improved mix of business and persistency
gains (refer above for decline in NTU rates in the traditional distribution
channels). Channel Life`s VNB declined by 19% to R30 million and was
negatively impacted by deteriorating persistency and an expense overrun in
the call centre. The Botswana operations are continuing to do well, with both
VNB of R93 million and margins positively impacted by strong bancassurance
sales, good margins on a newly launched risk underwriting solution and
persistency gains. The decline in the overall VNB margin from 4,31% in 2006
to 3,71% in 2007 is largely attributable to single-premium contracts written
at relatively low margins. Excluding these contracts, VNB margins are
slightly higher than 2006.
As part of the restructuring of Sanlam Employee Benefits, the market-related
investment business written by Sanlam Employee Benefits has been reclassified
as life licence business with effect from 2007, to be consistent with the
treatment of similar business written by Sanlam Investment Management under
life licence. It has commensurately also been excluded from the embedded
value of covered business and VNB. Comparative information has not been
restated for the change in classification. This resulted in a significant 39%
decline in the present value of new business premiums included in the VNB
calculations. The VNB is however down by only 3%, given the lower margins
earned on the reclassified investment business. Overall profitability
improved from 1,13% in 2006 to 1,53% in 2007.
Solvency
All of the life insurance businesses within the Group were sufficiently
capitalised at the end of the 2007 financial year. The total capital of
Sanlam Life Insurance Limited, the holding company of the Group`s major life
insurance subsidiaries, amounted to R37,9 billion on 31 December 2007. Its
allocated regulatory capital at the end of December 2007 amounted to R26,3
billion, which covered its regulatory Capital Adequacy Requirement (CAR) 3,5
times, compared to 4,4 times on 31 December 2006. No policyholder portfolios
held negative bonus stabilisation reserves at the end of 2007.
In terms of its capital efficiency strategy, Santam reduced its capital by
way of the buy-back of Santam shares worth R713 million as well as a special
dividend of R2,5 billion paid in December 2007. As a result, Santam`s
regulatory capital (shareholders` funds including subordinated debt)
constituted 42% of net earned premiums on 31 December 2007 compared to 62% as
at 31 December 2006. The reduced solvency level is well within the target
range set by Santam.
Discretionary capital that is surplus to the Group`s immediate operational
requirements is separately identified and centrally managed. Net of capital
set aside for the final dividend in respect of 2007, share incentive scheme
commitments and an allowance for some illiquid investments, discretionary
capital amounted to R6,1 billion on 31 December 2007, a reduction of R100
million on the R6,2 billion level reported in 2006. The Group`s approach
towards the application of discretionary capital remains unchanged. The
overall objective of the Group is to maximise return on GEV and value to
shareholders. This requires that the Group cannot retain unproductive capital
indefinitely. The priority remains to find investment opportunities that
complement Group strategy and will enhance shareholder value. Any
discretionary capital not to be utilised for suitable acquisitions or
ventures will be returned to shareholders in the most efficient form.
Dividend
It is Sanlam`s practice to pay only an annual dividend, given the cost
associated with the distribution of a dividend to our large shareholder base.
Sustainable growth in dividend payments is an important consideration for the
Sanlam board in determining the dividend for the year. The Sanlam board uses
cash operating earnings as a guideline in setting the level of the dividend,
subject to the Group`s liquidity and solvency requirements. The strong
operational performance of the Group in the 2007 financial year enabled the
Sanlam board to increase the dividend distribution by 13%, maintaining a cash
operating earnings cover of approximately 1,2 times. Taking cognisance of the
reduction in the number of issued Sanlam shares following the share buy-backs
during the year, the dividend per share increased by 21% to 93 cents.
The cash dividend for the year ended 31 December 2007 will be paid to
shareholders recorded in the register on Friday, 25 April 2008. The last day
to trade to qualify for this dividend will be Friday, 18 April 2008, and
Sanlam shares will trade ex-dividend from Monday, 21 April 2008. Dividend
payment by way of electronic bank transfers will be effected on Wednesday, 7
May 2008. The mailing of cheque payments in respect of dividends due to those
shareholders who have not elected to receive electronic dividend payments
will commence on or as soon as practically possible after that date. Share
certificates may not be dematerialised or rematerialised between Monday, 21
April 2008 and Friday, 25 April 2008.
Annual General Meeting
These results will be tabled at the annual general meeting. Shareholders are
invited to attend this meeting, to be held on Wednesday, 4 June 2008 at 14:00
at the Sanlam head office in Bellville.
Roy Andersen Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Cape Town
Audited Financial Statements for the year ended 31 December 2007
Accounting Policies and Basis of Presentation
The accounting policies adopted for purposes of the Sanlam group annual
financial statements are consistent with those applied in the Group`s 2006
annual financial statements.
The basis of presentation of the results is also consistent with that applied
in the 2006 financial statements, apart from the following:
Group Equity Value
Embedded Value terminology is traditionally associated with Life Insurance
businesses. The ongoing transformation of the Sanlam group into a diversified
financial services organisation, which includes a growing non-life component,
resulted in the adoption of the GEV reporting basis. Refer above for
additional information.
Change in embedded value assumptions and methodology
The methodology and assumptions used to determine the embedded value of
covered business have been adjusted from 2007 in preparation for the revised
embedded value guidance from the Actuarial Society of South Africa that
becomes effective for reporting periods ending on or after 31 December 2008.
These are intended to be materially consistent with the CFO Forum`s European
Embedded Value (EEV) Principles. No adjustment has been made to the 2006
published embedded value.
Shareholders` fund balance sheet and income statement
The presentation of the shareholders` fund balance sheet and income statement
has been amended, both of which are presented for information purposes only.
We have indicated to shareholders in previous financial reports that we
believe that the IFRS accounting treatment of the policyholders` fund`s
investments in Sanlam shares and Group subsidiaries, and in particular the
associated mismatch reserve in the balance sheet and the fund transfers in
the income statement, results in a misrepresentation of the Group`s
operational performance. As part of the Group`s approach to continuous
improvement in financial reporting, it was decided to amend the presentation
of the shareholders` fund information to exclude the impact of these holdings
on both the income statement and balance sheet. This will not replace the
IFRS based results but will provide shareholders with a more accurate
alternative presentation of the Group`s underlying economic performance.
- The shareholders` fund income statement has been adjusted to exclude the
fund transfers. Comparative information has also been restated to exclude
fund transfers of R205 million for the year ended 31 December 2006. As a
result we also disclose normalised earnings and normalised diluted earnings
per share with effect from the 2007 interim results, which eliminate the
impact of the IFRS accounting treatment and more accurately present earnings
attributable to shareholders. For purposes of the earnings per share
calculation, the number of shares in issue is also restated to exclude the
deemed `treasury` shares held by the policyholders` fund.
- The shareholders` fund balance sheet has been adjusted to exclude the
consolidation reserve that represents the mismatch between policy liabilities
and policyholder assets resulting from the IFRS treatment. Comparative
information has been restated, which increased the shareholders` fund net
asset value by R1 859 million on 31 December 2006.
Application of new and revised standards
The following new or revised IFRSs and interpretations are applied in the
Group`s 2007 financial year:
- IFRS 7 Financial Instruments - Disclosures
- Amendment to IAS 1: Presentation of Financial Statements - Capital
Disclosures
- IFRIC 8 Scope of IFRS 2
- IFRIC 9 Reassessment of Embedded Derivatives
- IFRIC 10 Interim Financial Reporting and Impairment
- AC503 Accounting for Black Economic Empowerment (BEE) Transactions
- IFRS 8 Operating Segments (effective 1 January 2009)
The Group early adopted IFRS 8 Operating Segments in the 2007 financial year.
The application of these standards and interpretations did not have a
significant impact on the Group`s reported results and cash flows for the
year ended 31 December 2007 and the financial position at 31 December 2007.
The following new or revised IFRSs and interpretations have effective dates
applicable to the Group`s 2008 financial year (unless otherwise indicated)
and have not been early adopted:
- IAS 1 Revised (effective 1 January 2009)
- IFRIC 11 IFRS 2 Group and Treasury Share Transactions
- IFRIC 13 Customer Loyalty Programmes
- IFRIC 14 IAS19 The Limit on Defined Benefit Asset, Minimum Funding
Requirement and their Interaction
- IFRS 3 Revised (effective 1 July 2009)
- IAS 27 Amended (effective 1 July 2009)
The application of these revised standards and interpretations in future
financial reporting periods is not expected to have a significant impact on
the Group`s reported results, financial position and cash flows, except for
IFRS 3 Revised and IAS 27 Amended for which the impact can not be quantified
as it will depend on the nature and structure of a specific business
combination, combined with the fact that the revised standards will mainly be
applied on a prospective basis.
GROUP EQUITY VALUE
at 31 December 2007
2007 2006
R million R million
Embedded value of covered business 28 432 27 403
Sanlam Personal Finance 21 010 18 702
Required capital 8 732 8 325
Value of in-force 12 278 10 377
Sanlam Developing Markets 2 160 1 953
Required capital 860 650
Value of in-force 1 300 1 303
Sanlam Employee Benefits 5 262 6 748
Required capital 5 118 6 165
Value of in-force 144 583
Other Group operations 15 557 13 210
Retail cluster 1 220 1 058
Institutional cluster 7 256 5 899
Santam 6 375 5 628
Independent Financial Services 706 625
Diversification benefit (1 232) (1 532)
Other capital 2 436 1 530
45 193 40 611
Discretionary capital 6 100 6 200
Group equity value 51 293 46 811
Group equity value per share (cents) 2 350 2 047
SHAREHOLDERS` FUND AT FAIR VALUE
at 31 December 2007
2007 2006
R million R million
Property and equipment 214 195
Owner-occupied properties 612 514
Goodwill 487 477
Value of business acquired 843 977
Deferred acquisition costs 1 079 917
Investments 38 453 36 386
Sanlam businesses 15 557 13 210
Sanlam Investments 6 677 5 358
SIM Wholesale 4 443 3 729
International 1 857 1 336
Sanlam Collective Investments 377 293
Sanlam Personal Finance 1 192 1 058
Glacier 593 527
Sanlam Personal Loans 104 94
Multi-Data 143 110
Sanlam Trust 104 95
Sanlam Home Loans 177 168
Other 71 64
Independent Financial Services 706 625
Punter Southall Group 297 209
Other 409 416
Alfinanz 28 -
Coris Administration 38 -
Sanlam Capital Markets 541 541
Santam 6 375 5 628
Associated companies 301 2 806
Peermont - 1 062
Other 301 1 744
Joint ventures 378 387
Safair Lease Finance 209 271
Shriram and other 169 116
Other investments 22 217 19 983
Other equities and similar securities 11 112 10 232
Public sector stocks and loans 2 697 2 368
Investment properties 245 793
Other interest-bearing and preference 8 163 6 590
share investments
Net term finance - -
Term finance (5 068) (5 322)
Assets held in respect of margin business 5 068 5 322
Net deferred tax (95) (215)
Net working capital (888) (942)
Minority shareholders` interest (857) (818)
Shareholders` fund at fair value 39 848 37 491
Fair value per share (cents) 1 826 1 640
SHAREHOLDERS` FUND AT NET ASSET VALUE
at 31 December 2007
2007 2006
R million R million
Assets
Goodwill 2 447 2 163
Value of business acquired 1 000 977
Investments 36 877 36 423
Working capital and other assets 40 616 45 982
Total assets 80 940 85 545
Equity and liabilities
Shareholders` fund 31 177 30 980
Share capital and premium 955 955
Treasury shares (3 959) (377)
Other reserves 9 782 9 812
Retained earnings 24 399 20 590
Minority shareholders` interest 2 270 4 050
Term finance, working capital and other 47 493 50 515
liabilities
Total equity and liabilities 80 940 85 545
Net asset value per share (cents) 1 428 1 355
Reconciliation to Group balance sheet
Shareholders` fund at net asset value above 31 177 30 980
Consolidation reserve (1 843) (1 859)
Shareholders` fund per Group balance sheet 29 334 29 121
SHAREHOLDERS` FUND INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006
R million R million
Result from financial services before tax 4 539 4 098
Life insurance 2 405 2 188
Short-term Insurance 987 878
Investment Management 1 230 1 077
Capital Markets 73 151
Independent Financial Services 7 20
Corporate and other (163) (216)
Tax on financial services income (997) (989)
Minority shareholders` interest (513) (504)
Net result from financial services 3 029 2 605
Net investment income 1 117 760
Core earnings 4 146 3 365
Net project expenses (85) -
Net broad-based employee share plan (5) (19)
Net equity-accounted headline earnings 152 164
Net investment surpluses 1 264 3 215
Amortisation of value of business (51) (45)
acquired
Discontinued operations (91) 37
Net Secondary Tax on Companies (131) (84)
Normalised headline earnings 5 199 6 633
Other equity-accounted earnings - 5
Profit on disposal of subsidiaries and 668 132
associates
Impairment of investments and goodwill (7) (30)
Normalised attributable earnings 5 860 6 740
Fund transfers (366) 205
Attributable earnings per Group income 5 494 6 945
statement
NOTES TO THE SHAREHOLDERS` FUND INFORMATION
for the year ended 31 December 2007
2007 2006
R million R million
NEW BUSINESS AND TOTAL FUNDS RECEIVED FROM
CLIENTS
Analysed per market:
Retail (1)
Life business 12 195 9 597
Sanlam Personal Finance 9 428 8 231
Sanlam Developing Markets 2 767 1 366
Non-life business 29 601 24 377
Sanlam Personal Finance 9 709 7 414
Sanlam Private Investments 8 300 10 257
Sanlam Collective Investments 11 592 6 706
South African 41 796 33 974
Non-South African 9 520 6 818
Sanlam Developing Markets 848 637
Sanlam Personal Finance - Merchant 1 293 757
Investors
Sanlam Personal Finance - Namibia 7 379 5 424
Total Retail 51 316 40 792
Institutional (1)
Group Life business 2 388 2 392
Sanlam Employee Benefits 2 334 2 180
Investment Management 54 212
Non-life business 23 490 14 901
Segregated 10 012 5 402
Sanlam Multi-Manager 5 238 2 131
Sanlam Collective Investments 8 240 7 368
South African 25 878 17 293
Investment Management non-SA 4 407 4 422
Institutional 30 285 21 715
White label 8 996 7 938
Sanlam Collective Investments 7 794 7 647
Sanlam Developing Markets 1 202 291
Short-term insurance 11 407 10 203
Total new business 102 004 80 648
(1) Comparative figures have been restated for a reclassification
of collective investment funds between retail and institutional
business.
2. NET FLOW OF FUNDS
Analysed per market:
Retail (1)
Life business 162 1 114
Sanlam Personal Finance (1 210) 103
Sanlam Developing Markets 1 372 1 011
Non-life business 9 569 6 479
Sanlam Personal Finance 3 762 2 314
Sanlam Private Investments 3 762 4 920
Sanlam Collective Investments 2 045 (755)
South African 9 731 7 593
Non-South African 1 863 1 919
Sanlam Developing Markets 894 658
Sanlam Personal Finance - Namibia 1 141 1 651
Sanlam Personal Finance - Merchant (172) (390)
Investors
Total Retail 11 594 9 512
Institutional (1)
Group Life business (4 745) (3 384)
Sanlam Employee Benefits (4 111) (2 835)
Investment Management (634) (549)
Non-life business (1 907) (21 229)
Segregated (1 753) (23 105)
Sanlam Multi-Manager 75 200
Sanlam Collective Investments (229) 1 676
South African (6 652) (24 613)
Investment Management non-SA 1 235 2 784
Total Institutional (5 417) (21 829)
White label 1 807 1 700
Sanlam Collective Investments 1 255 3 675
Sanlam Developing Markets 552 (1 975)
Short-term insurance 3 379 3 166
Total net flow of funds 11 363 (7 451)
(1) Comparative figures have been restated for a reclassification
of collective investment funds between retail and institutional
business.
3. NORMALISED DILUTED EARNINGS PER SHARE
In terms of IFRS, the policyholders` fund`s investments in Sanlam shares and
Group subsidiaries are not reflected as equity investments in the Sanlam
balance sheet, but deducted in full from equity on consolidation (in respect
of Sanlam shares) or reflected at net asset value (in respect of
subsidiaries). The valuation of the related policy liabilities however
includes the fair value of these shares, resulting in a mismatch between
policy liabilities and policyholder investments, with a consequential impact
on the Group`s earnings. The number of shares in issue must also be reduced
with the treasury shares held by the policyholders` fund for the calculation
of IFRS basic and diluted earnings per share. This is not a true
representation of the earnings attributable to the Group`s shareholders,
specifically in instances where the share prices and/or the number of shares
held by the policyholders` fund varies significantly. The Group therefore
calculates normalised diluted earnings per share to eliminate the impact of
investments in Sanlam shares and Group subsidiaries held by the
policyholders` fund.
2007 2006
Cents Cents
Normalised diluted earning per share:
Net result from financial services 133,3 110,8
Core earnings 182,4 143,1
Headline earnings 228,7 282,0
Profit attributable to shareholders` fund 257,8 286,6
R million R million
Analysis of normalised earnings (refer
shareholders` fund income statement):
Net result from financial services 3 029 2 605
Core earnings 4 146 3 365
Headline earnings 5 199 6 633
Profit attributable to shareholders` fund 5 860 6 740
million million
Adjusted number of shares:
Weighted average number of shares for 2 189,3 2 243,1
diluted earnings per share (refer below)
Add: Weighted average Sanlam shares held by 83,9 108,9
policyholders
Adjusted weighted average number of shares 2 273,2 2 352,0
for normalised diluted earnings per share
Number of ordinary shares in issue at 2 303,6 2 408,6
beginning of period
Shares cancelled - (105,0)
Number of ordinary shares in issue 2 303,6 2 303,6
Shares held by subsidiaries in (168,9) (24,1)
shareholders` fund
Outstanding long-term incentive scheme 43,3 -
shares and options
Number of shares under option to be issued (7,3) -
at fair value
Convertible deferred shares held by Ubuntu- 12,1 7,2
Botho
Adjusted number of shares for value per 2 182,8 2 286,7
share
4. SHARE REPURCHASES
The Sanlam shareholders granted general authorities to the Group at the 2006
and 2007 annual general meetings to repurchase Sanlam shares in the market.
The Group acquired 126,3 million shares from 3 April 2007 to 31 December 2007
in terms of the general authorities. The lowest and highest prices paid were
R20,69 and R23,79 per share respectively. The total consideration paid of
R2,9 billion was funded from existing cash resources. All repurchases were
effected through the JSE trading system without any prior understanding or
arrangement between the Group and the counter-parties. Authority to
repurchase 137,1 million shares, or 6% of Sanlam`s issued share capital at
the time, remain outstanding in terms of the general authority granted at the
annual general meeting held on 6 June 2007.
The financial effects of the share repurchases during 2007 on IFRS earnings
and net asset value per share are illustrated in the table below:
Before After
repurchases repurchases
Basic earnings per share:
Profit attributable to cents
shareholders` fund 244,4 256,6
Headline earnings cents 215,4 225,7
Diluted earnings per share:
Profit attributable to cents
shareholders` fund 248,4 251,0
Headline earnings per share cents 218,8 220,8
Value per share:
Equity value cents 2 350 2 350
Net asset value cents 1 399 1 344
Tangible net asset value cents 1 177 1 108
EMBEDDED VALUE OF COVERED BUSINESS
at 31 December 2007
Note 2007 2006
R million R million
Sanlam Personal Finance 21 010 18 702
Adjusted net worth 8 732 8 325
Net value of in-force covered 12 278 10 377
business
Value of in-force covered 13 958 12 010
business
Cost of capital(1) (1 587) (1 582)
Minority shareholders` interest (93) (51)
Sanlam Developing Markets 2 160 1 953
Adjusted net worth 860 650
Net value of in-force covered 1 300 1 303
business
Value of in-force covered 1 833 1 762
business
Cost of capital(1) (268) (142)
Minority shareholders` interest (265) (317)
Sanlam Employee Benefits 5 262 6 748
Adjusted net worth 5 118 6 165
Net value of in-force covered 144 583
business
Value of in-force covered 961 974
business
Cost of capital(1) (817) (391)
Minority shareholders` interest - -
Embedded value of covered business 28 432 27 403
Adjusted net worth 14 710 15 140
Net value of in-force covered 1 13 722 12 263
business
Embedded value of covered business 28 432 27 403
(1) From 31 December 2007 the cost of capital is based on the higher of an
internally assessed required capital and the statutory Capital Adequacy
Requirement, previously based on the statutory Capital Adequacy Requirement.
CHANGE IN Embedded value of covered business
FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006
R MILLION NOTE TOTAL VALUE OF ADJUS-TED TOTAL
IN-FORCE NET WORTH
Embedded value of covered 27 403 12 263 15 140 26 880
business at the beginning
of the year
Value of new business(1) 2 565 1 494 (929) 434
Net earnings from 2 085 (384) 2 469 1 717
existing covered business
Expected return on 1 493 1 493 - 1 256
value of in-force business
Expected transfer of - (2 096) 2 096 -
profit to adjusted net
worth
Operating experience 3 315 (30) 345 277
variances
Operating assumption 277 249 28 184
changes
Net project expenses 4 (77) - (77) -
Embedded value earnings 2 573 1 110 1 463 2 151
from life operations
Economic assumption 5 (128) (136) 8 (5)
changes
Tax changes 6 291 289 2 47
Investment variances 210 123 87 1 015
Exchange rate movements (22) (22) - 119
Change in minority (85) (85) - (76)
shareholders` interest
EEV changes 8 272 272 - -
Growth from covered 7 3 111 1 551 1 560 3 251
business
Investment return on 1 589 - 1 589 2 973
adjusted net worth
Embedded value earnings 4 700 1 551 3 149 6 224
from covered business
Acquired value of in- - 9 (9) -
force
Transfers to other Group (205) (101) (104) -
operations
Net transfers to/from (3 466) - (3 466) (5 701)
covered business
Embedded value of 28 432 13 722 14 710 27 403
covered business at the end
of the year
(1) Value of new business in the above table is calculated on the closing
assumptions before EEV changes.
Analysis of earnings from
covered business
Sanlam Personal Finance 4 016 1 924 2 092 4 469
Sanlam Developing Markets 351 72 279 559
Sanlam Employee Benefits 333 (445) 778 1 196
Embedded value earnings from 4 700 1 551 3 149 6 224
covered business
value of new business (VNB)
FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006
R MILLION NOTE AFTER BEFORE PUBLISHED
EEV EEV
CHANGES CHANGES
Value of new business (at point
of sale):
Gross value of new business 657 618 472
Sanlam Personal Finance 376 343 276
Sanlam Developing Markets 233 229 149
Sanlam Employee Benefits 48 46 47
Cost of capital (90) (53) (38)
Sanlam Personal Finance (44) (21) (15)
Sanlam Developing Markets (30) (24) (15)
Sanlam Employee Benefits (16) (8) (8)
Value of new business 567 565 434
Sanlam Personal Finance 332 322 261
Sanlam Developing Markets 203 205 134
Sanlam Employee Benefits 32 38 39
Value of new business attributable
to:
Shareholders` fund 2 493 489 379
Sanlam Personal Finance 329 318 259
Sanlam Developing Markets 132 133 81
Sanlam Employee Benefits 32 38 39
Minority shareholders` interest 74 76 55
Sanlam Personal Finance 3 4 2
Sanlam Developing Markets 71 72 53
Sanlam Employee Benefits - - -
Value of new business 567 565 434
Geographical analysis:
South Africa 426 420 346
Africa 125 130 84
Other international 16 15 4
Value of new business 567 565 434
Analysis of new business
profitability:
Before minorities:
Present value of new business 23 886 23 886 20 308
premiums
Sanlam Personal Finance 16 312 16 312 13 735
Sanlam Developing Markets 5 476 5 476 3 107
Sanlam Employee Benefits 2 098 2 098 3 466
New business margin 2,37% 2,37% 2,14%
Sanlam Personal Finance 2,04% 1,97% 1,90%
Sanlam Developing Markets 3,71% 3,74% 4,31%
Sanlam Employee Benefits 1,53% 1,81% 1,13%
After minorities:
Present value of new business 21 886 21 886 19 426
premiums
Sanlam Personal Finance 16 200 16 200 13 663
Sanlam Developing Markets 3 588 3 588 2 297
Sanlam Employee Benefits 2 098 2 098 3 466
New business margin 2,25% 2,23% 1,95%
Sanlam Personal Finance 2,03% 1,96% 1,90%
Sanlam Developing Markets 3,68% 3,71% 3,53%
Sanlam Employee Benefits 1,53% 1,81% 1,13%
Notes to the embedded value of covered businEss
for the year ended 31 December 2007
1. VALUE OF IN-FORCE Gross Cost of Net Change
SENSITIVITY ANALYSIS value of capital value of from
in-force R in-force base
business million business value
R R %
million million
BASE VALUE 16 362 (2 640) 13 722
Increase risk discount 15 341 (3 461) 11 880 (13)
rate by 1,0%
Decrease risk discount 17 489 (1 857) 15 632 14
rate by 1,0%
Investment return (and 16 626 (2 577) 14 049 2
inflation) decrease by
1,0%, coupled with a 1,0%
decrease in risk discount
rates, and with bonus rates
changing commensurately
Investment return (and 15 781 (3 322) 12 459 (9)
inflation) decrease by 1,0%
and with bonus rates
changing commensurately
Non-commission 15 867 (2 619) 13 248 (3)
maintenance expenses
(excluding investment
expenses) increase by 10%
Discontinuance rates 15 980 (2 547) 13 433 (2)
increase by 10%
Mortality and morbidity 15 405 (2 615) 12 790 (7)
increase by 10% for
assurances, coupled with a
10% decrease in mortality
for annuities
Equity assets fall by 10% 15 671 (2 536) 13 135 (4)
2. VALUE OF NEW BUSINESS Gross Cost of Net Change
SENSITIVITY ANALYSIS value of capital value of from
new R new base
business million business value
R R %
million million
Base value (after EEV 579 (86) 493
changes)
Increase risk discount 477 (89) 388 (21)
rate by 1,0%
Decrease risk discount 675 (62) 613 24
rate by 1,0%
Investment return (and 588 (67) 521 6
inflation) decrease by
1,0%, coupled with a 1,0%
decrease in risk discount
rates, and with bonus rates
changing commensurately
Investment return (and 499 (84) 415 (16)
inflation) decrease by 1,0%
and with bonus rates
changing commensurately
Non-commission 523 (75) 448 (9)
maintenance expenses
(excluding investment
expenses) increase by 10%
Discontinuance rates 522 (71) 451 (9)
increase by 10%
Mortality and morbidity 440 (75) 365 (26)
increase by 10% for
assurances, coupled with a
10% decrease in mortality
for annuities
3. OPERATING EXPERIENCE VARIANCES 2007 2006
R million R million
Risk experience 254 280
Group stabilised business outflows (20) (108)
Working capital and other 81 105
Total operating experience variances 315 277
4. DEVELOPMENT EXPENSES
Development expenses relate to once-off expenditure on the Group`s
distribution platform that has not been allowed for in the
embedded value assumptions.
5. ECONOMIC ASSUMPTION CHANGES 2007 2006
R million R million
Investment yields and inflation gap (95) (51)
Long-term asset mix assumptions (33) 46
Total economic assumption changes (128) (5)
6. TAX CHANGES 2007 2006
R million R million
Changes in policyholders` fund tax rate 141 117
Reduction in STC rate from 12,5% to 150 -
10,0%
STC modelling changes and other - (70)
Total tax changes 291 47
7. RECONCILIATION OF GROWTH FROM COVERED 2007 2006
BUSINESS R million R million
The profit from covered business
reconciles as follows to net result from
financial services for the year :
Net result from financial services of 1 731 1 465
covered business
Differences between profits recognized (2) 139
under IFRS and the embedded value
methodology
Investment return included in IFRS (6) 8
equity-accounted earnings
Other 4 131
Less net project expenses (77) -
Less STC projected on dividends from (92) (6)
covered business profits for the year
Growth from covered business: value of 1 551 1 653
in-force
Growth from covered business 3 111 3 251
8. ECONOMIC ASSUMPTIONS - BEFORE EEV 2007 2006
CHANGES % %
Gross investment return, risk discount
rate and inflation
SANLAM LIFE:
Fixed-interest securities 8,3 7,9
Equities and offshore investments 10,3 9,9
Hedged equities 8,3 7,9
Property 9,3 8,9
Cash 6,3 5,9
Return on required capital 8,7 7,1
Inflation rate 5,3 4,4
Risk discount rate 10,8 10,4
MERCHANT INVESTORS:
Fixed-interest securities 4,6 4,6
Equities and offshore investments 7,8 7,1
Hedged equities 7,8 7,1
Property 7,8 7,1
Cash 4,6 4,6
Return on required capital 4,6 4,6
Inflation rate 3,7 3,5
Risk discount rate 8,3 8,3
AFRICAN LIFE:
Fixed-interest securities 8,6 8,0
Equities and offshore investments 10,6 10,0
Hedged equities n/a n/a
Property 9,6 9,0
Cash 6,6 6,0
Return on required capital 8,6 8,0
Inflation rate 5,6 5,0
Risk discount rate 11,1 10,5
BOTSWANA LIFE INSURANCE:
Fixed-interest securities 10,5 11,0
Equities and offshore investments 12,5 13,0
Hedged equities n/a 13,0
Property 11,5 12,0
Cash 8,5 9,0
Return on required capital 9,2 11,8
Inflation rate 7,5 8,0
Risk discount rate 14,0 14,5
Asset mix for assets supporting the
statutory capital
SANLAM LIFE:
Equities - -
Hedged equities 20 20
Property - -
Fixed-interest securities 50 50
Cash 30 30
100 100
MERCHANT INVESTORS:
Equities - -
Hedged equities -
Property - -
Fixed-interest securities - -
Cash 100 100
100 100
AFRICAN LIFE:
Equities 50 50
Hedged equities - -
Property - -
Fixed-interest securities - -
Cash 50 50
100 100
BOTSWANA LIFE INSURANCE:
Equities 70 75
Hedged equities - -
Property 5 1
Fixed-interest securities 20 24
Cash 5 -
100 100
9. ECONOMIC ASSUMPTIONS - AFTER EEV CHANGES
% Sanlam Merchant Botswana
Life Investors African Life
2007 2007 Life Insurance
2007 2007
Gross investment
return, risk discount
rate and inflation
Fixed-interest 8,3 4,6 8,6 10,5
securities
Equities and offshore 11,8 7,8 12,1 14,0
investments
Hedged equities 8,8 7,8 n/a n/a
Property 9,3 7,8 9,6 11,5
Cash 7,3 4,6 6,6 8,5
Return on required 9,7 4,6 9,4 9,5
capital
Inflation rate 5,3 3,7 5,6 7,5
Risk discount rate 10,8 8,3 11,1 14,0
Asset mix for assets
supporting the required
capital
Equities 44 - 50 69
Hedged equities 13 - - -
Property 3 - - 1
Fixed-interest 25 - - 30
securities
Cash 15 100 50 -
100 100 100 100
GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2007
GROUP BALANCE SHEET
at 31 December 2007
2007 2006
R million R million
ASSETS
Property and equipment 298 259
Owner-occupied properties 650 530
Goodwill 2 447 2 163
Value of business acquired 1 000 977
Deferred acquisition costs 1 693 1 397
Long-term reinsurance assets 487 427
Investments 290 101 280 627
Properties 15 648 14 602
Equity-accounted investments 1 759 3 417
Equities and similar securities 149 038 141 456
Public sector stocks and loans 49 887 53 921
Debentures, insurance policies, 34 091 31 743
preference shares and other loans
Cash, deposits and similar securities 39 678 35 488
Deferred tax 475 549
Non-current assets held for sale 2 060 -
Short-term insurance technical assets 2 263 2 288
Working capital assets 38 791 46 265
Trade and other receivables 27 972 37 103
Cash, deposits and similar securities 10 819 9 162
Total assets 340 265 335 482
Equity and liabilities
Shareholders` fund 29 334 29 121
Minority shareholders` interest 2 220 3 934
Total equity 31 554 33 055
Long-term policy liabilities 244 660 237 864
Insurance contracts 128 398 125 517
Investment contracts 116 262 112 347
Term finance 6 594 5 760
Margin business 2 687 2 779
Other interest-bearing liabilities 3 907 2 981
External investors in consolidated funds 12 278 8 010
Cell owners` interest 336 329
Deferred tax 1 354 1 929
Non-current liabilities held for sale 1 606 -
Short-term insurance technical provisions 7 719 7 752
Working capital liabilities 34 164 40 783
Trade and other payables 30 431 37 801
Provisions 973 996
Taxation 2 760 1 986
Total equity and liabilities 340 265 335 482
GROUP INCOME STATEMENT
for the year ended 31 December
2007 2006
R million R million
Net income 52 504 69 317
Financial services income 26 715 23 609
Reinsurance premiums paid (2 685) (2 400)
Reinsurance commission received 373 383
Investment income 14 740 11 959
Investment surpluses 15 885 37 903
Finance cost - margin business (246) (223)
Change in fair value of external (2 278) (1 914)
investors liability
NET INSURANCE AND INVESTMENT CONTRACT (33 414) (49 655)
BENEFITS AND CLAIMS
Long-term insurance and investment (26 413) (43 272)
contract benefits
Short-term insurance claims (8 533) (7 616)
Reinsurance claims received 1 532 1 233
Expenses (9 939) (8 821)
Sales remuneration (3 554) (3 236)
Administration costs (6 385) (5 585)
Impairment of investments and goodwill (7) (30)
Amortisation of value of business acquired (51) (45)
Net operating result 9 093 10 766
Equity-accounted earnings 228 423
Finance cost - other (281) (114)
Profit before tax 9 040 11 075
Taxation (2 493) (3 049)
Shareholders` fund (1 678) (1 873)
Policyholders` fund (815) (1 176)
Profit from continued operations 6 547 8 026
Discontinued operations (168) 70
Profit for the year 6 379 8 096
Attributable to:
Shareholders` fund 5 494 6 945
Minority shareholders` interest 885 1 151
6 379 8 096
Earnings attributable to shareholders of
the company (cents):
Basic earnings per share 256,6 315,2
Diluted earnings per share 250,9 309,6
Earnings attributable to shareholders of
the company from continuing operations
(cents):
Basic earnings per share 260,8 313,6
Diluted earnings per share 255,1 308,0
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2007
2007 2006
R million R million
Shareholders` fund:
Balance at beginning of year 29 121 25 020
Total recognised income 5 395 7 263
Profit for the year 5 494 6 945
Movement in foreign currency translation (99) 318
reserve
Net realised investment surpluses on (288) (188)
treasury shares
Cost of treasury shares (acquired)/sold (3 263) 63
(1)
Share-based payments 74 74
Dividends paid (2) (1 705) (1 467)
Shares cancelled - (1 644)
Balance at end of year 29 334 29 121
Minority shareholders` interest:
Balance at beginning of year 3 934 3 443
Total recognised income 858 1 257
Profit for the year 885 1 151
Movement in foreign currency translation (27) 106
reserve
Net realised investment surpluses on 24 -
treasury shares
Cost of treasury shares acquired (551) -
Share-based payments 10 9
Dividends paid (1 474) (668)
Acquisitions, disposals and other (581) (107)
movements in minority interests
Balance at end of year 2 220 3 934
Shareholders` fund 29 121 25 020
Minority shareholders` interest 3 934 3 443
Total equity at beginning of year 33 055 28 463
Shareholders` fund 29 334 29 121
Minority shareholders` interest 2 220 3 934
Total equity at end of year 31 554 33 055
1. Comprises movement in cost of shares held by subsidiaries and the share
incentive trust.
2. Dividend of 77 cents per share paid during 2007 (2006: 65 cents per
share) in respect of the 2006 financial year.
GROUP CASH FLOW STATEMENT
for the year ended 31 December 2007
2007 2006
R million R million
Net cash inflow/(outflow) from operating 30 (5 436)
activities
Net cash inflow/(outflow) from investment 9 859 11 704
activities
Net cash (outflow)/inflow from financing (3 227) 971
activities
Net increase in cash and cash equivalents 6 662 7 239
Cash, deposits and similar securities at 44 647 37 408
beginning of year
Cash, deposits and similar securities at 51 309 44 647
end of year
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2007
1. EARNINGS PER SHARE 2007 2006
cents cents
Basic earnings per share:
Headline earnings 225,7 310,4
Profit attributable to shareholders` fund 256,6 315,2
Diluted earnings per share:
Headline earnings 220,8 304,9
Profit attributable to shareholders` fund 251,0 309,6
R million R million
Analysis of earnings:
Profit attributable to shareholders 5 494 6 945
Less: Net profit on disposal of (44) (122)
subsidiaries
Less: Net profit on disposal of associates (624) (10)
Less: Equity-accounted non-headline - (5)
earnings
Plus: Impairment of investments and 7 30
goodwill
Headline earnings 4 833 6 838
million million
Number of shares:
Number of ordinary shares in issue at 2 303,6 2 408,6
beginning of period
Less: Weighted average number of shares - (43,8)
cancelled
Less: Weighted average Sanlam shares held (162,3) (161,7)
by subsidiaries (including policyholders)
Weighted average number of shares for 2 141,3 2 203,1
basic earnings per share
Add: Weighted conversion of deferred 12,1 6,8
shares
Add: Total number of shares and options 43,3 63,1
Less: Number of shares (under option) (7,3) (29,9)
that would have been issued at fair value
Weighted average number of shares for 2 189,4 2 243,1
diluted earnings per share
2. SEGMENTAL INFORMATION
2007 2006
R million R million
Segment revenue 25 026 22 333
Sanlam Personal Finance 6 457 5 829
Sanlam Developing Markets 2 817 2 466
Sanlam Employee Benefits 1 796 1 744
Short-term Insurance 11 035 9 902
Investment Management 2 562 1 996
Sanlam Capital Markets 283 370
Independent Financial Services 14 28
Corporate and other 62 (2)
IFRS adjustments 1 689 1 276
Total segment revenue 26 715 23 609
Segment result 8 444 9 957
Sanlam Personal Finance 7 426 7 142
Sanlam Developing Markets 805 854
Sanlam Employee Benefits 966 1 458
Short-term Insurance 1 622 2 462
Investment Management 1 309 1 186
Sanlam Capital Markets 122 151
Independent Financial Services 39 110
Corporate and other (3 845) (3 406)
IFRS adjustments (346) 59
Policyholder activities 774 1 129
Total segment result 8 872 11 145
3. CONTINGENT LIABILITIES
Shareholders are referred to the contingent liabilities disclosed
in the 2006 annual report. The circumstances surrounding these
contingent liabilities remained materially unchanged.
4. SUBSEQUENT EVENTS
No material facts or circumstances have arisen between the dates of
the balance sheet and this report which affect the financial
position of the Sanlam Limited group as reflected in these
financial statements.
GROUP SECRETARY
JOHAN BESTER
REGISTERED OFFICE
2 STRAND ROAD, BELLVILLE 7530, SOUTH AFRICA
TELEPHONE +27 21 947-9111
FAX +27 21 947-3670
POSTAL ADDRESS
PO BOX 1, SANLAMHOF 7532, SOUTH AFRICA
TRANSFER SECRETARIES:
COMPUTERSHARE INVESTOR SERVICES (PROPRIETARY) LIMITED
(REGISTRATION NUMBER 2004/003647/07)
70 MARSHALL STREET, JOHANNESBURG 2001,
SOUTH AFRICA
PO BOX 61051, MARSHALLTOWN 2107, SOUTH AFRICA
TEL +27 83 900 3755
Fax +27 11 688 5200
WWW.SANLAM.CO.ZA
Directors: RC Andersen (Chairman), PT Motsepe (Deputy Chairman),
J van Zyl (Group Chief Executive), MMM Bakane-Tuoane, AD Botha,
AS du Plessis, FA du Plessis, WG James, MV Moosa, JP Moller, RK Morathi, SA
Nkosi, I Plenderleith, M Ramos, GE Rudman, RV Simelane, ZB Swanepoel, PL Zim
6 March 2008
Belville
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 06/03/2008 07:59:46 Produced by the JSE SENS Department.
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