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SLM
SLM
SLM - Sanlam - Audited results for the year ended 31 December 2008 and
dividend declaration
SANLAM LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
Registration number (1959/001562/06)
ISIN number: ZAE000070660
JSE SHARE CODE: SLM
NSX SHARE CODE: SLA
("SANLAM") OR (THE "GROUP")
Audited results for the year ended 31 December 2008
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Annual financial statements
Accounting policies and basis of presentation
Shareholders` information
Group Equity Value
Shareholders` fund at fair value
Shareholders` fund income statement
Notes to the shareholders` fund information
Embedded value of covered business
Group financial statements
Group balance sheet
Group income statement
Group statement of changes in equity
Group cash flow statement
Notes to the financial statements
Administration
Sanlam Group Results December 2008
Key features
Earnings
- Net result from financial services per share in line with 2007
- Core earnings per share up 1%
- Normalised headline earnings per share decreased by 59%
- Diluted headline earnings per share decreased by 40%
- Dividend per share up 5% to 98 cents per share
Business volumes
- Total new business volumes down 2% to R100 billion
- Value of new covered business up 23% to R698 million
- New covered business margin of 2,68%, up from 2,37%
- Net fund inflows of R9,1 billion
Group Equity Value
- Group Equity Value per share of R22,13
- Return on Group Equity Value per share of -1,7%
Capital management
- 117 million shares bought back during 2008 for R2,2 billion
- Discretionary capital of R2,1 billion at 31 December 2008
- Sanlam Life CAR cover of 2,7 times
Salient results
for the year ended 31 December 2008
2008 2007 %
change
SANLAM LIMITED GROUP
Earnings:
Net result from financial services per cents 133,8 133,3 0%
share
Core earnings per share (1) cents 184,8 182,4 1%
Normalised headline earnings per share cents 93,9 228,7 -59%
(2)
Diluted headline earnings per share cents 132,2 220,8 -40%
Net result from financial services R`m 2 802 3 029 -7%
Core earnings (1) R`m 3 870 4 146 -7%
Normalised headline earnings (2) R`m 1 966 5 199 -62%
Headline earnings R`m 2 702 4 833 -44%
Group administration cost ratio (3) % 28,4 27,8
Group operating margin (4) % 18,4 20,8
Gross business volumes:
New business volumes R`m 100 136 102 004 -2%
Net fund flows R`m 9 122 11 363
New covered business
Value of new covered business R`m 698 567 23%
Covered business PVNBP (5) R`m 26 033 23 886 9%
New covered business margin (6) % 2,68 2,37
GROUP EQUITY VALUE:
Group Equity Value R`m 45 238 51 293 -12%
Group Equity Value per share cents 2 213 2 350 -6%
Return on Group Equity Value per share % -1,7 18,8
(7)
SANLAM LIFE INSURANCE LIMITED
Shareholders` fund R`m 34 419 37 933
Capital Adequacy Requirement (CAR) R`m 8 075 7 525
CAR covered by prudential capital times 2,7 3,5
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. New covered business margin = value of new covered business as a percentage
of 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
Business environment
The turmoil in international financial markets that started to emerge in the
second half of 2007, intensified during 2008. A worldwide confidence crisis
caused by major capital write-offs in the financial services sector culminated
in a general melt-down in international investment markets, impacting on the
operating environment in both South Africa and the other countries in which
Sanlam and its subsidiaries (the "Group") operates. The South African economy
with its open currency and investment markets has not been shielded from the
international events.
Global equity and debt markets remained under pressure during the year. As for
most international markets, the South African equity market fell well short of
the performance achieved in 2007. The FTSE/JSE All Share Index lost 26%
(excluding dividends) during 2008 versus a gain of 16% in the comparable
period in 2007. These conditions set the stage for a difficult trading
environment.
Performance review
In the context of this challenging business environment, the Group achieved
solid operating results for the 2008 financial year. The diversified nature of
the Group`s operations provided some resilience in the turbulent market
conditions, with the short-term insurance and life businesses recording strong
operational performances that largely offset some deterioration in the
operating results of the investments and capital markets operations. The lower
performance level of the latter operations reflects the impact of the
prevailing market volatility but should also be measured against the
extraordinary impact that the strong investment markets of the past few
financial years had on their operating profit and business flows. The results
of the life insurance operations are reported after the upfront cost
associated with the strong growth in new business volumes, which masks the
positive result flowing from the in-force book of business. Notwithstanding
the pressure on earnings, the core operations of all the major Group
businesses remained sound.
The primary performance target of the Group is to optimise shareholder value
through maximising the return on Group Equity Value (GEV). The Group embarked
on a strategy of transformation into a diversified financial services
organisation five years ago, with a clear focus on maximising return for our
shareholders and other stakeholders. A target has been set for the growth in
GEV to exceed the Group`s cost of capital on a sustainable basis. Cost of
capital is set at the government long bond yield plus 3%. The target is to
exceed this return by at least 1%. The negative return per share of 1,7%
achieved in 2008 fell short of the target of some 12% due to the adverse
impact of the investment markets. On a normalised basis, i.e. assuming a
normalised investment market performance and excluding any once-off items, the
return of 12,4% met the target. Over a running five-year period the total
return on Group Equity Value (ROGEV) comfortably exceeded the growth target.
Delivering on strategy
Despite the challenges facing the Group in the current business environment,
the Sanlam Board ("the Board") and management remain committed to the Group`s
key objective of maximising shareholder value. The Group has a sound platform
and strategic base from which to continue to grow. The focus during 2008
remained on optimal capital utilisation, earnings growth, costs and
efficiencies, diversification and transformation.
Last year`s difficult economic conditions, particularly the substantial drop
in equity markets, put a damper on earnings, particularly in respect of
investment returns. The Group was, however, still able to gain market share on
a profitable basis by attracting substantial new business, particularly in the
retail area. In spite of substantially increased new business strain caused by
the growth in new business, core earnings per share increased by 1% from 2007,
bearing testimony to our excellent operational results in tough conditions.
Reducing costs while at the same time upping efficiency has been a strategic
focus for the past five years. However, given the intensified pressure on
capital last year, we took a decision to increase our efforts. Steps taken
include cost-cutting initiatives such as freezing non-essential staff
positions, especially in the more mature parts of our business. As was to be
expected, our United Kingdom based businesses felt the global events
significantly harder than what we did in South Africa. As a result a strong
focus was placed on containment of costs and achieving greater efficiency by
identifying and exploiting synergies and partnerships across our business
interests in the United Kingdom.
Capital management is an ongoing theme in the Group. Discretionary Group
capital amounted to R6,1 billion at the end of 2007. A total amount of R2,2
billion was used to buy back 117 million Sanlam shares in the market. Some
R1,1 billion was applied towards corporate activity aimed at further
diversifying the Group`s solution offering and distribution reach. The
following are the largest transactions concluded:
- A total amount of R561 million was utilised to strengthen our business
presence in the United Kingdom. Sanlam UK acquired an 86% interest in
Principal Investment Holdings ("Principal"), a UK-based private client
business, as well as a 60% interest in Buckles Holdings ("Buckles"), a
financial advisory and ancillary services company. These acquisitions,
together with Merchant Investors, Intrinsic, Nucleus and our interest in the
Punter Southall Group form the new Sanlam UK cluster.
- MiWay Finance, a direct financial services company, was launched in
February 2008. The Group has a direct 55% interest in MiWay, as well as an
indirect interest of 25% through Santam. Sanlam contributed R110 million to
the start-up capitalisation of the business.
- The success of the Group`s Shriram Life joint venture with the Shriram
group of India was extended during the year with the formation of Shriram
General Insurance, a joint venture between Sanlam and the Shriram Group to
further expand and diversify the Group`s financial services offering in this
market. Sanlam obtained a 26% interest in the new joint venture for a total
consideration of R115 million.
- Approximately R200 million of discretionary capital was invested to acquire
an additional 2,5 million Santam shares in the market, increasing the Group`s
effective interest in Santam to 57%.
- The Group disposed of its interest in the Safair Lease Finance ("SLF")
joint venture with the Imperial Group towards the end of 2008 for a
consideration of R434 million.
- It was announced in February 2009 that the Group will acquire the PSG
Group`s 34,6% interest in Channel Life (including loan accounts) for an amount
of R197 million, subject to regulatory approval. This will increase the
Group`s interest in Channel Life to 97,6%.
The application of capital for the share buy-back programme, corporate
activity, negative investment market performance and some allowance for
illiquid investments reduced the level of discretionary capital in the Group
to R2,1 billion at the end of 2008. The Board remains committed to the
utilisation of the remaining discretionary capital in the most efficient
manner. The preference is to utilise such capital on new initiatives that will
further the Group`s strategic goals. Unemployed capital is value dilutive and
will in time be returned to shareholders. The buy back of Sanlam shares
continues to be an attractive option in periods of share price weakness.
In 2008 a major focus area included achieving employment equity and training
targets. We can proudly announce that for the first time, more than 50% of our
employees were black last year. However, achieving targets at middle and
senior management level remains challenging and in 2009 we will be
investigating creative ways of speeding up progress. We also welcomed the
first black Executive Director to the Board in May 2008. Raisibe Morathi,
Chief Executive of Sanlam Group Services, was previously an independent non-
executive director on the Board.
Sanlam Demutualisation Trust
In one of the largest empowerment and wealth creation transactions in South
African history, Sanlam Limited listed on the JSE Limited and the Namibian
Stock Exchange in November 1998. As part of the demutualisation of Sanlam,
free Sanlam shares were distributed to more than 2 million Sanlam
policyholders. Shares allocated to policyholders that Sanlam could not trace
at that stage, were transferred to the Sanlam Demutualisation Trust ("Trust"),
managed by an independent board of trustees. The Trust`s mandate was to find
as many of the beneficiaries of these shares as possible, to ensure that all
policyholders receive the benefit of their free shares.
The Trust`s term ended on 22 October 2008. Over the ten years, the Trust has
been extremely successful in finding these beneficiaries. Shares due to just
over 48 600 beneficiaries, representing less than 2,5% of the number of
policyholders to whom free shares were originally allocated in 1998, remained
unclaimed in the Trust. The number of shares (about 19 million) represents
only 1% of the free shares originally allocated to policyholders.
Looking ahead
Recessionary conditions in most of the major international economies are
likely to have a negative impact on South African trade, with an expected
lower demand for commodities and reduced economic growth for the foreseeable
future. These conditions will have an unavoidable impact on the Group`s
operations, in particular on the investment management and capital markets
operations that are more exposed to the market volatility and negative
sentiment, but also on the life insurance businesses that are reliant on the
level of consumer confidence and disposable income in its target client base.
Some slowdown in new business flows can therefore be expected.
This sets the stage for a challenging 2009 and although we are confident that
our businesses are robust enough to weather these challenges, it will impact
on our ability to repeat our 2008 operational performance.
Forward-looking statements
In this report we make certain statements that are not historical facts and
relate to analyses and other information based on forecasts of future results
not yet determinable, relating, amongst others, to new business volumes,
investment returns (including exchange rate fluctuations) and actuarial
assumptions. These are forward-looking statements as defined in the United
States Private Securities Litigation Reform Act of 1995. Words such as
"believe", "anticipate", "intend", "seek", "will", "plan", "could", "may",
"endeavour" and "project" and similar expressions are intended to identify
such forward-looking statements, but are not the exclusive means of
identifying such statements. Forward-looking statements involve inherent risks
and uncertainties and, if one or more of these risks materialise, or should
underlying assumptions prove incorrect, actual results may be very different
from those anticipated. Forward-looking statements apply only as of the date
on which they are made, and Sanlam does not undertake any obligation to update
or revise any of them, whether as a result of new information, future events
or otherwise.
Comments on the results
Introduction
The Sanlam Group results for the year ended 31 December 2008 are presented
based on and in compliance with International Financial Reporting Standards
(IFRS), IAS34 Interim Financial Reporting, Schedule 4 of the Companies Act of
South Africa and the Listings Requirement of the JSE Limited, as applicable.
Group Equity Value (GEV)
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 required capital supporting these operations
and the net present value of their in-force books of business (VIF);
- The fair value of other Group operations based on longer term assumptions,
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 an indication of the value of the Group`s operations, but without
placing any value on future new covered business to be written by the Group`s
life insurance businesses. Sustainable return on GEV is the primary
performance benchmark used by the Group in evaluating the success of its
strategy to maximise shareholder value.
Group Equity Value
at 31 December 2008
2008 2007
R million Total Fair value Value of
of assets in force Total Fair Value of
value in force
of assets
Embedded
value of
covered
business 28 591 15 013 13 578 28 432 14 710 13 722
Sanlam
Personal
Finance 19 574 8 275 11 299 20 089 8 285 11 804
Sanlam
Developing
Markets 2 796 1 032 1 764 2 160 860 1 300
Sanlam UK 680 234 446 921 447 474
Sanlam
Employee
Benefits 5 541 5 472 69 5 262 5 118 144
Other
Group
Operations 13 560 13 560 - 15 451 15 451 -
Retail
Cluster 2 287 2 287 - 1 820 1 820 -
Institutional
Cluster 6 000 6 000 - 7 256 7 256 -
Short-term
Insurance 5 273 5 273 - 6 375 6 375 -
Capital
Diversify-
Cation (1 429) (1 429) - (1 232) (1 232) -
Other capital 2 416 2 416 - 2 542 2 542 -
43 138 29 560 13 578 45 193 31 471 13 722
Discretionary
Capital 2 100 2 100 - 6 100 6 100 -
Group Equity
Value 45 238 31 660 13 578 51 293 37 571 13 722
Issued shares 2 044,2 2 182,8
for value per
share
(million)
Group Equity 2 213 2 350
Value per
share (cents)
Share price 1 700 2 275
(cents)
Discount -23% -3%
The GEV as at 31 December 2008 amounted to R45,2 billion, down 12% on the
R51,3 billion at the end of 2007. On a per share basis GEV decreased by 6%
from 2 350 cents to 2 213 cents at 31 December 2008, after allowing for the 93
cents per share dividend paid during 2008. The Sanlam share price traded at a
23% discount to GEV as at the close of trading on 31 December 2008.
As a financial services organisation, the Group is to a large extent exposed
to investment markets, both in respect of the shareholder capital portfolio
that is invested in financial instruments, as well as a significant portion of
the fee income base that is linked to the level of assets under management.
Therefore, viewed against the major downturn in investment markets, Sanlam did
well to achieve a negative return on GEV (ROGEV) per share of only 1,7% for
2008, significantly better than the overall equity market. This is testimony
to the defensive qualities of the Group`s diversified portfolio of businesses.
The investment management operations were severely impacted by these
conditions, but this was offset by a resilient performance by the life
operations. Although the return for 2008 is below the Group`s long-term
target, the cumulative ROGEV per share since demutualisation is only slightly
lower than target.
Return on Group Equity Value
for the year ended 31 December 2008
2008 2007
Earnings Return Earnings Return
R million % R million %
Covered business 919 3,2 4 700 17,2
Sanlam Personal Finance 453 2,3 3 953 22,2
Sanlam Developing Markets 659 30,5 351 18,0
Sanlam UK (36) -3,9 63 7,3
Sanlam Employee Benefits (157) -3,0 333 4,9
Other operations (1 885) -12,2 4 428 33,7
Sanlam Personal Finance 291 24,4 169 16,0
Sanlam Developing Markets (11) -39,3 26 -
Sanlam UK (320) -53,3 149 33,9
Institutional cluster (566) -8,0 1 722 29,4
Short-term insurance (1 279) -20,1 2 362 42,0
Discretionary and other (440) (209)
capital
Balance of portfolio 114 365
Shares delivered to (46) (71)
Sanlam Demutualisation
Trust
Shriram goodwill less (43) (108)
value of in-force acquired
Treasury shares and other (269) (286)
Change in net worth (196) (109)
adjustments
Return on Group Equity (1 406) -2,7 8 919 19,1
Value
Return on Group Equity -1,7 18,8
Value per share
Covered business yielded a return of 3% compared to 17% in 2007. This lower
level of return is attributable to the negative investment market performance
during 2008, which decreased the return earned on the supporting capital from
positive earnings of R1,6 billion in 2007 to a loss of R0,7 billion in 2008,
and also resulting in negative investment variances of R1,4 billion on the
value of in force business in 2008. Sanlam Personal Finance, Sanlam UK and
Sanlam Employee Benefits` return on covered business were depressed by these
items compared to the returns in 2007, with Sanlam Employee Benefits in
particular being negatively impacted by the return on adjusted net worth,
given its disproportionate size relative to its value of in-force. A very
strong new business performance, combined with lower equity exposure in its
supporting capital base, contributed to a sterling 31% return on covered
business for Sanlam Developing Markets.
The other Group operations were more severely impacted by the market
conditions and yielded a negative return of 12% for 2008 compared to positive
earnings of 34% in 2007. The Group`s investment in Santam was the largest
contributor to this under performance. Compared to positive earnings of R2,4
billion in 2007 (42% return), the investment in Santam yielded a negative
return of R1,3 billion (20% negative return) in 2008, a turnaround of R3,6
billion. The decline in the Santam share price was however in line with the
general market performance. Operations in the Institutional cluster achieved a
negative return of 8%. As mentioned above, this performance is directly linked
to the lower overall level of assets under management following the negative
investment market performance during the year. The Group`s businesses in the
UK are experiencing the aftermath of the financial markets crisis more
severely than the South African based operations, with the UK economy
officially in recession. These economic conditions, combined with lower assets
under management, is expected to have a negative impact on the business flows
and profitability and consequently also the valuation, of these operations.
This is reflected in the more than 50% negative return reported for the Sanlam
UK non-life operations. The newly acquired Principal private client business
is the main contributor to this under performance. Since the acquisition of
Principal in the first half of the year, the UK equity markets recorded record
losses with a commensurate reduction in Principal`s assets under management.
This, combined with a more than 20% strengthening of the Rand against the
British Pound since acquisition, required a write down of approximately R180
million in the Principal carrying value.
The return on discretionary and other capital was impacted by the following:
- The write-off for GEV purposes of the R43 million goodwill recognised in
respect of a performance payment to Shriram in terms of the acquisition
agreement of Shriram Life in India;
- Some R125 million profit realised on the disposal of the Group`s interest
in the SLF joint venture;
- A negative change of R196 million in the net worth adjustments. This is
largely due to an increase in the allowance for corporate costs following a
change in the calculation methodology. Up to the 2007 financial year, the
Group allowed for the interest earned on the cash held in respect of the
annual dividend between year-end and the dividend payment date. With effect
from the 2008 financial year, it is assumed that the dividend is paid at the
beginning of each reporting period, resulting in an increase in the net
corporate expenses assumed in the calculation of GEV;
- A loss of R46 million incurred on the delivery of Sanlam shares to the
Trust. As part of the Ubuntu-Botho (UB) empowerment transaction, the Trust
sold 52 million Sanlam shares to UB in exchange for UB preference shares. This
was based on expectations at the time of the number of shares that the Trust
will deliver to its beneficiaries. As part of the transaction, Sanlam
undertook to deliver Sanlam shares to the Trust in instances of shortfalls, in
exchange for an equivalent number of UB preference shares. The Trust delivered
more shares than expected and started to experience shortfalls in its stock of
Sanlam shares, which required of the Group to transfer Sanlam shares to it
during the year. The fair value of the UB shares received in exchange was
less than the fair value of the Sanlam shares delivered, resulting in a loss
of R46 million, which can be seen as part of the financing costs of the UB
transaction; and
- A loss of R269 million recognised in respect of treasury shares. This loss
is substantially attributable to losses recognised on the delivery of share
incentive scheme shares to participants at the applicable strike prices.
Earnings
Summarised shareholders` fund income statement
for the year ended 31 December 2008
R million 2008 2007 % change
Net result from financial services 2 802 3 029 -7%
Net investment income 1 068 1 117 -4%
Core earnings 3 870 4 146 -7%
Project expenses (56) (85) 34%
Net equity-accounted headline earnings 16 152 -89%
BEE transaction costs (7) (5) -40%
Net investment surpluses (1 699) 1 264 -234%
Secondary Tax on Companies (STC) (59) (131) 55%
Discontinued operations (22) (91) 76%
Amortisation of value of business (77) (51) -51%
acquired
Normalised headline earnings 1 966 5 199 -62%
Disposal of associates and 3 668
subsidiaries
Other non-headline earnings and (211) (7)
impairments
Normalised attributable earnings 1 758 5 860 -70%
Core earnings
Core earnings comprise the net result from financial services
(operating profit) 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.
Core earnings for the year of R3 870 million are 7% down on 2007, the combined
effect of a 7% reduction in the net result from financial services for the
year and a 4% decline in net investment income over the same period. On a per
share basis, core earnings increased by 1%, reflecting the impact of the 8%
reduction in the weighted average number of shares in issue due to the share
buy-backs during 2008 and 2007.
The net result from financial services of R2 802 million for the 2008
financial year is 7% lower than in 2007. In evaluating this performance,
cognisance should be taken of the impact of a number of material items:
- In terms of IFRS, only variable costs incurred in writing new investment
management policy contracts can be capitalised and expensed over the lifetime
of the contract in line with fees earned. All fixed acquisition costs must be
expensed at inception of the policy. Similarly, the Group`s actuarial
valuation basis for most insurance contracts does not allow for the
capitalisation of upfront acquisition costs, which commensurately results in
accounting losses at inception of these contracts. These losses, referred to
as new business strain, have a particularly pronounced impact on earnings in
strong new business growth scenarios, as achieved by the Group in the 2008
financial year.
- The initial losses incurred by MiWay whilst in its start-up phase. MiWay is
performing in line with expectations, with the initial start-up losses being
anticipated in its business plan.
On a comparable basis the net result from financial services is in line with
2007, a very pleasing result in the current environment.
Net result from financial services
for the year ended 31 December 2008
R million 2008 2007 % change
Net result from financial services
on comparable basis 3 922 3 905 0%
Retail cluster 2 785 2 542 10%
Institutional cluster 774 1 110 -30%
Santam 494 372 33%
Corporate and other (131) (119) -10%
Direct Financial
Services (MiWay launched in 2008) (55) - -
New business strain (1 065) (876) -22%
Net result from financial services 2 802 3 029 -7%
The table below provides an analysis of the net result from financial services
per individual business.
Net result from financial services
for the year ended 31 December 2008
R million 2008 2007 % change
Retail cluster 1 757 1 690 4%
Sanlam Personal Finance 1 555 1 418 10%
Sanlam Developing Markets 144 227 -37%
Sanlam UK 58 45 29%
Institutional cluster 737 1 086 -32%
Sanlam Investments 589 869 -32%
Sanlam Employee Benefits 183 123 49%
Sanlam Capital Markets (35) 94 -137%
Santam 494 372 33%
MiWay (55) - -
Corporate and other (131) (119) -10%
Net result from financial
Services 2 802 3 029 -7%
- Sanlam Personal Finance`s gross result from financial services for the year
of R1 975 million is 6% up on 2007. Market related income which contributes
some two thirds of SPF`s profit grew by 12%, largely due to higher interest
earned on working capital. The higher interest rates during the year also
contributed to a higher level of asset mismatch reserve held during the year
in respect of non-participating business and therefore the consequential
increased level of profit released from the reserve in terms of the profit
entitlement policy. Risk profits - some 22% of profit - declined by 1% largely
due to some deterioration in claims experience, in particular in respect of
mortality claims. The average underwriting margin decreased from 17,3% to
16,3%. Administration profit decreased by 9% largely due to an increase of 17%
in new business strain on the increased new business volumes. The increase in
administration costs was contained at 5% notwithstanding inflationary
pressures and new business units (e.g. Sanlam Health Management) established
during the period. The profit contribution from non-life operations amounted
to R85m, marginally up from that in 2007 despite pressure on the profitability
of Sanlam Home Loans and Sanlam Personal Loans. This is substantially due to
some deterioration in the level of arrears as well as a deliberate scaling
back in new loans granted (down 38% and 9% respectively). Net of taxation and
minorities the results increased by 10% to R1 555 million.
- The Sanlam Developing Markets gross result from financial services of R218
million is 36% down on 2007. Notwithstanding some fall in profitability in
Botswana, due to the negative impact of the fall in equity markets, a strong
performance by all the other African operations led to an overall 18% increase
in profit from the Rest of Africa. The South African operations however
reported a substantial fall in profit. Two main factors contributed to this
lower profit level; a major negative mortality experience in a Channel Life
product and increased new business strain. Corrective action has been taken to
curtail the negative claims experience at Channel. New business costs expensed
in 2008 increased by 31% to R335m after tax and minorities. The deferred
benefit is reflected in the value of the in-force book and will have a
positive impact on future profitability. After allowing for taxation and
minority interest the SDM net operating results are down 37% to R144m. The
taxation charge in both years benefited from some reversal of an overprovision
in prior years.
- Sanlam UK reported gross operating profit of R68 million, a 39% improvement
on their 2007 results. The 2008 results, however, include a maiden
contribution from Principal and Buckles. Excluding these new acquisitions,
earnings growth is 16%. A weaker average exchange rate contributed to this
growth but Merchant Investors and the PS Group both achieved satisfactory
trading results in a difficult UK business environment. Profit net of tax and
minorities increased by 29% to R58 million.
- The Institutional cluster operations were in particular affected by the
financial turmoil in 2008 and reported a 31% fall in operating earnings for
the year.
- Sanlam Investments` gross operating results of R825 million are down 33% on
2007. This turnaround is substantially due to the volatile investment markets
which had a major negative impact on these businesses` investment performance.
This resulted in significantly lower performance fees being earned, down from
R526 million in 2007 to R107 million in 2008. Other factors contributing to
the performance include an initial diluting impact of expenditure on new
ventures and acquisitions. Administration costs increased by 8%, mainly due to
once-off restructuring costs of R47 million and costs associated with business
expansion, with Simeka, Blue Ink, Atom Funds Management, the growth of the
Emerging Markets business and the transfer of investment linked business from
Sanlam Employee Benefits impacting on the expense base. The effect of these
items has been somewhat offset by a reduction in performance bonuses. Profit
net of minorities and tax amounted to R589 million, down 32% on 2007. 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. The wholesale asset manager contributed only a third of
net profit in 2008, with the non-South African businesses contributing 29%.
- Sanlam Employee Benefits continued its recent turnaround in profitability
and posted gross profit of R258 million, a 49% improvement on 2007. The Group
Risk business` profit contribution increased by 33% due to an 8% increase in
total recurring premiums and an improvement in underwriting experience. The
migration of the policy administration business to Coris Capital and progress
towards an initial breakeven target remains on track. The loss for the year
attributable to this business of R32m is well down on the R74 million recorded
in 2007. Adverse market conditions required a R69 million charge to the income
statement in respect of an increase in the minimum investment guarantee
reserve held for employee benefit products, resulting in a 23% fall in the
contribution from the Structured Solutions unit. Profit net of tax and
minorities amounted to R183 million, 49% up on 2007.
- Capital Markets recorded its first loss of R61 million since its formation.
This is the result of the volatility in debt and equity markets, the impact of
widening credit spreads on the valuation of credit positions and a slowdown in
deal flow associated with the uncertainty experienced by market participants
in these conditions. Under the prevailing circumstances this business
performed well to contain its downside risk. After allowing for the effect of
tax, the loss for the period amounted to R35 million.
- Santam`s gross operating results for the year of R1 288 million are 30%
higher than in 2007, the combined effect of a 12% increase in underwriting
results and a 69% increase in income earned on working capital. The latter
benefited from a higher working capital level, higher average interest rates
as well as a positive contribution from some bond exposure in the backing
portfolio during the year. The claims ratio of 68% was in line with 2007 while
the average underwriting margin of 6,4% is marginally up on the 6,2% reported
in 2007. Taking into account a marginal increase during the year to 57% in
Sanlam`s effective holding, Santam`s contribution to the Group`s after tax
results increased by 33% to R494 million. These results exclude the earnings
from discontinued operations in Europe, which is recognised separately in the
income statement. These operations reported a net loss of R22 million
(Sanlam`s effective interest) for the year compared to a loss of R91 million
in 2007.
- An initial pre-tax loss of R127 million incurred by MiWay is within its
original business plan. MiWay made substantial inroads into the direct
insurance market since inception in the first quarter of 2008 and already had
some 26 000 short-term insurance policyholders by the end of December 2008.
The initial focus has been on short-term insurance. Diversification to also
include other financial services will follow in due course. Continuing strong
growth in new business volumes should keep MiWay on target to break even on a
monthly basis towards the end of 2009, which will be a remarkable achievement
for this fledgling operation.
- Corporate administration expenses were well maintained within inflationary
limits.
Normalised headline earnings
Normalised headline earnings of R1 966 million are 62% lower than the
comparative period in 2007. The reduction in normalised headline earnings is
in the main attributable to the following:
- A reduction of 7% in core earnings as discussed above.
- Project expenditure of R56 million (net of taxation and minorities) spent
on Sanlam Personal Finance`s SanlamConnect distribution channel and the MiWay
direct distributional channel (up to its launch in February 2008) during their
set-up phases. No further project cost is envisaged in respect of these
projects. Ongoing costs incurred on the process refinements will be accounted
for as operational expenditure.
- Equity-accounted earnings from non-operating investments decreased
substantially in 2008. This is due to the disposal of the Group`s interest in
Peermont Global during 2007 as well as a reduction in earnings from the SLF
joint venture and investments held by Sanlam Developing Markets, Sanlam
Investments, Sanlam Personal Finance and Santam. The Group disposed of its
interest in SLF effective from the end of 2008.
- Investment surpluses amounting to R1 264 million (after tax and minorities)
in 2007 turned around to aggregate negative investment returns of R1 699
million (after tax and minorities) in the 2008 financial year. This is the
effect of the substantial deterioration in global equity markets during 2008.
The FTSE/JSE All Share Index return in 2008 was -26% relative to a positive
return of 16% in 2007.
- The 55% fall in the secondary tax on companies (STC) charge is mainly
attributable to the increased availability of STC credits generated to offset
the charge in respect of the dividend paid in 2008.
- Discontinued operations relate to Santam`s operations in Europe that have
been unwound and disposed of. 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 decreased by 2% from R102 billion in 2007 to R100
billion for the 2008 financial year.
New business volumes
for the year ended 31 December 2008
R million 2008 2007 % change
Sanlam Personal Finance 31 070 26 516 17%
South Africa 22 644 19 137 18%
Africa 8 426 7 379 14%
Sanlam Developing Markets 2 594 3 615 -28%
South Africa 1 449 2 767 -48%
Africa 968 722 34%
Other international 177 126 40%
Sanlam UK 2 350 1 293 82%
Institutional cluster 45 476 50 177 -9%
Sanlam Investments 44 961 49 299 -9%
Sanlam Employee Benefits 515 878 -41%
Santam 12 165 11 407 7%
WHITE LABEL 6 481 8 996 -28%
TOTAL NEW BUSINESS 100 136 102 004 -2%
Sanlam Personal Finance`s total new business volumes increased by 17%.
Recurring premium business (including both life and non-life) increased by 3%
compared to 2007 with single premium business achieving growth of 18%. These
results are commendable in the very tough economic environment.
- South African new business volumes increased by 18%, with good support
experienced for both investment and life solutions.
- New recurring premium life sales were in line with that of 2007. The impact
of the high inflation and interest rate environment on clients` disposable
income is evident in a fall in the sale of contractual savings products. This
was however offset by an ongoing strong demand for risk solutions that led to
a 16% growth in new business sales of these solutions.
- Total single premium life sales are up 24% on 2007, a very satisfactory
performance but somewhat down on the 37% growth reported for the first six
months of 2008. Growth in the Glacier life insurance solution range
accelerated during the year to achieve an increase of 46% in inflows.
Guaranteed plan and contractual preservation fund solutions were popular in
the volatile market conditions, while equity linked savings solutions reflect
lower sales volumes in 2008.
- Investment business increased by 16% in 2008 as Glacier continued its
strong growth in new business flows, confirming the successful diversification
of the business into the investment space. The new Topaz linked investment
solution also made a solid contribution to overall investment business
volumes. The growth was supported by a strong demand for money market
solutions with less demand for equity-linked solutions due to the market
volatility and uncertainty.
- The Namibian operations experienced another good year and increased its new
business volumes by 14%.
Sanlam Developing Markets delivered sterling results with a 33% increase in
new life insurance business, excluding the discontinued, relatively low margin
single premium business. Only continuations of existing single premium
business are reflected in the 2008 single premium new business volumes.
- South African total new recurring premium business inflows increased by 31%
to R765 million, the combined result of 43% growth in Sanlam Sky (previously
African Life SA) and a 14% increase in Channel Life sales. Sanlam Sky`s
results were supported by an increase in manpower and average premium size as
well as a recovery from the negative impact of administrative problems
experienced in 2007. The operational problems experienced by the Channel Life
call centre led to its closure in the first half of 2008. Notwithstanding the
loss of these volumes, Channel Life managed to record strong new recurring
business volumes.
- The other African operations continued on their strong growth trajectory
with an increase of 34% in new business volumes. Botswana Life remains the
main contributor to African flows and increased its recurring premiums by 32%
to R183 million, and single premiums by 18% to R475 million. Recurring premium
business was supported by the launch of new solutions in late 2007,
improvements in validation and the strengthening of broker relationships. The
single premium growth from the annuity product is particularly satisfactory
and local assets have been acquired to back this portfolio. The other African
operations also had a very good year and reported R310 million (up 72%) of new
business volumes, with all operations growing in excess of 30% and Zambia and
Tanzania more than doubling their sales volumes.
- Shriram Life, our 26% held life operation in India, is continuing its
strong sales performance, albeit at a somewhat slower pace, with 2008 full
year sales of R177 million, up 40% on 2007. India is not escaping the global
economic downturn, which is reflected in a lower demand for single premium
savings products. Optimising the productivity of Shriram`s substantial agency
force remains a challenge receiving ongoing focus. At the same time an
investment is being made in additional complimentary distribution capacity.
The Sanlam UK unit was established in 2008 to consolidate the Group`s UK
operations. Its total new business volumes for the year amounted to R2,3
billion. This comprises R1,4 billion in new life insurance business from
Merchant Investors (up 10% on 2007), and a first time contribution of R0,9
billion of new investment inflows in Principal, the newly acquired private
client investment business. Both these operations were affected by the major
slowdown in the UK economy.
Institutional new business flows are down 9% compared to the 2007 financial
year.
- New life insurance business of R2,2 billion is down 19% on 2007. This
performance should be evaluated against a background of severe market turmoil
as well as a deliberate strategy to hold back on growth in certain areas
during the restructuring of the Employee Benefits business. New recurring
premiums increased by 13% on 2007 but this has been more than offset by lower
single premium business flows.
- New investment inflows are down 9% to R43,3 billion. South African
wholesale segregated inflows performed well and increased by 18% to R11,8
billion. The South African multi manager unit, as well as the private client
and collective investment businesses, however, all recorded lower new inflows
in 2008 - these businesses attracted large volumes of business in 2007 that
was not expected to continue. The market conditions weighed heavily on the non-
SA operations, which halved their 2008 new inflows to R2,1 billion.
Net fund flows
Net inflows (excluding white label business) for the year amounted to R10,6
billion, 11% up on the R9,6 billion in the corresponding period in 2007. Total
inflows increased by 1% to R109,5 billion while outflows in respect of fund
withdrawals and policy benefits of R99 billion were up by only 0,6%.
Net fund flows
for the year ended 31 December 2008
R million 2008 2007
Sanlam Personal Finance 3 876 3 693
Life business 1 170 (1 182)
Investment business 2 706 4 875
Sanlam Developing Markets 1 218 2 266
Sanlam UK 89 (172)
Institutional cluster 1 650 390
Sanlam Employee Benefits (1 994) (3 594)
Sanlam Investments 3 644 3 984
Santam 3 734 3 379
Net business flows
before white label 10 567 9 556
White label (1 445) 1 807
Total net fund flows 9 122 11 363
Value of new covered business (VNB)
The Group`s life insurance operations reported exceptional new business value
for 2008. The total value of new life business (VNB) of R698 million is 23%
higher than that reported in 2007. Net of minority interests VNB improved by
24% to R612 million. The overall average new life business margin increased
from 2,37% to 2,68%. This improved performance is the combined effect of cost
efficiencies, higher new business volumes and beneficial product mix. At the
same time lower long-term interest rates resulted in a reduction in the
discount rate applied. The latter contributed R49 million to the increase in
total VNB.
Value of new covered business
for the year ended 31 December 2008
R million 2008 2007 % change
Value of new covered business 698 567 23%
Sanlam Personal Finance 386 324 19%
Sanlam Developing Markets 302 203 49%
Sanlam UK 1 8 -88%
Sanlam Employee Benefits 9 32 -72%
Net of minorities 612 493 24%
Present value of new business
Premiums 26 033 23 886 9%
Sanlam Personal Finance 17 371 14 985 16%
Sanlam Developing Markets 5 332 5 476 -3%
Sanlam UK 1 484 1 327 12%
Sanlam Employee Benefits 1 846 2 098 -12%
Net of minorities 24 459 21 886 12%
New covered business margin 2,68% 2,37%
Sanlam Personal Finance 2,22% 2,16%
Sanlam Developing Markets 5,66% 3,71%
Sanlam UK 0,07% 0,60%
Sanlam Employee Benefits 0,49% 1,53%
Net of minorities 2,50% 2,25%
Sanlam Personal Finance`s VNB increased by 19% to R386 million. This result
was positively impacted by the good sales recorded for the year as well as the
change in economic assumptions, with the average VNB margin increasing from
2,16% in 2007 to 2,22%.
The Sanlam Developing Markets operations contributed to an exceptional 49%
increase in gross VNB to R302 million following the 53% growth achieved in
2007. The average VNB margin improved from 3,71% to 5,66%. This improvement
can be ascribed to the strong new business growth achieved as well as the
decision to discontinue the sale of low margin single premium business. Sanlam
Sky increased its VNB by 87% while Ghana, Zambia and Tanzania more than
doubled their contribution during 2008 on the back of the strong new business
growth. Channel Life`s VNB was however negatively impacted by deteriorating
mortality experience and a consequential strengthening of the mortality basis.
The Botswana operations are continuing to do well, with VNB increasing by 22%
and margins broadly in line with 2007.
The Sanlam UK operations reported nominal VNB for 2008 as increased
expenditure on the Merchant Investors distribution infrastructure offset the
benefit of increased business volumes.
Sanlam Employee Benefits similarly reported a major reduction in VNB in 2008.
This is essentially due to the lower level of new life business in 2008.
Solvency
All of the life insurance businesses within the Group were sufficiently
capitalised at the end of the 2008 financial year. The total capital of
Sanlam Life Insurance Limited, the holding company of the Group`s major life
insurance subsidiaries, amounted to R34,4 billion on 31 December 2008. Its
admissible regulatory capital at the end of December 2008 amounted to R21,4
billion, which covered its regulatory Capital Adequacy Requirement (CAR) 2,7
times, compared to 3,5 times on 31 December 2007. No policyholder portfolio
held a negative bonus stabilisation reserve in excess of 7,5% of policyholder
liabilities at the end of 2008.
Following Santam`s capital reduction in 2007 its regulatory capital
(shareholders` funds including bonds) constituted 47% of net earned premiums
on 31 December 2007. The adverse market conditions in 2008 resulted in a
marginal reduction in the solvency level to 44% on 31 December 2008. This
reduced solvency level is still at the higher end of the target range of 35%
to 45% set by Santam.
FitchRatings has affirmed the following ratings of the Group in 2008:
Sanlam Limited:
- National Long-term: AA-(zaf)
Sanlam Life Insurance Limited:
- National Insurer Financial Strength: AA+(zaf)
- National Long-term: AA(zaf)
- National Short-term: F1+(zaf)
- Subordinated debt: AA-(zaf)
Santam Limited:
- National Insurer Financial Strength: AA+(zaf)
- National Long-term: AA(zaf)
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
Board in determining the dividend for the year. The 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 operational performance of
the Group in the 2008 financial year enabled the Board to increase the
dividend per share by 5% to 98 cents. Taking into account the reduction in the
number of shares in issue following the share buy-backs during the year, this
will keep the total rand value of the dividend distribution in line with that
of 2007, maintaining a cash operating earnings cover of approximately 1,1
times.
The cash dividend for the year ended 31 December 2008 will be paid to
shareholders in the register on Friday, 24 April 2009. The last date to trade
to qualify for this dividend will be Friday, 17 April 2009, and Sanlam shares
will trade ex-dividend from Monday, 20 April 2009. Dividend payment by way of
electronic bank transfers will be effected on Wednesday, 6 May 2009. 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 this date. Share certificates may not
be dematerialised or rematerialised between Monday, 20 April 2009 and Friday,
24 April 2009. In the event that the South African National Elections are
confirmed for Wednesday, 22 April 2009, a public holiday may be declared and
the dividend timetable stated above would be impacted. In this event, the last
day to trade to qualify for this dividend will be Thursday, 16 April 2009 with
the corresponding ex dividend date being changed to Friday, 17 April 2009. The
record and payment dates would remain as stated above.
Annual general meeting
These financial results will be tabled at the annual general meeting.
Shareholders are invited to attend this meeting, to be held on Wednesday, 3
June 2009 at 14:00 at the Sanlam head office in Bellville.
Roy Andersen Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Cape Town
4 March 2009
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008
Accounting policies and basis of presentation
The accounting policies adopted for the purposes of the financial statements
comply with International Financial Reporting Standards, IAS34 Interim
Financial Reporting, Schedule 4 of the Companies Act of South Africa, the
Listings Requirement of the JSE Limited and with applicable legislation. 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
2007, apart from changes in the economic assumptions.
The basis of presentation of the results is also consistent with that applied
in the 2007 financial statements and shareholders` information, apart from the
following:
Segmental reporting
The Group announced the creation of a Sanlam UK cluster during June 2008,
which consolidates the Group`s operations in the United Kingdom (UK). The
following businesses have been transferred from other Group clusters to the
Sanlam UK cluster:
- From Sanlam Personal Finance: Merchant Investors;
- From Independent Financial Services: Punter Southall Group, Intrinsic and
Nucleus.
The newly acquired UK businesses, Principal and Buckles, also form part of the
Sanlam UK cluster.
Responsibility for the remaining businesses formerly included in the
Independent Financial Services cluster has been transferred to the Group
Finance function. These operations are accordingly not presented separately
anymore but included in the Corporate and Other cluster.
Comparative information in the Group`s segmental reporting and shareholders`
information has been restated to reflect these changes in the Group`s
operational structure.
The results for MiWay, the Group`s direct financial services business launched
in February 2008, are included in the Short-term Insurance cluster.
Application of new and revised standards
The following new or revised IFRSs and interpretations are applied in the
Group`s 2008 financial year:
- 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
- IAS 39 Amended Financial Instruments: Recognition and Measurement -
Reclassification of financial assets
- IFRS 7 Amended Financial Instruments: Disclosure - Reclassification of
financial assets
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 2008 and the financial position at 31 December 2008. The
Group has not applied the reclassification option from fair value to amortised
cost measurement allowed in terms of the recently amended IAS 39 to any of its
financial instruments.
The following new or revised IFRSs and interpretations have effective dates
applicable to future financial years and have not been early adopted:
- IAS 1 Revised Presentation of Financial Statements (effective 1 January
2009)
- IAS 1 Amended Presentation of Financial Statements - Puttable Financial
Instruments and Obligations Arising on Liquidation (effective 1 January 2009)
- IAS 27 Amended Consolidated and Separate Financial Statements (effective 1
July 2009)
- IAS 32 Amended Financial Instruments: Presentation - Puttable Financial
Instruments and Obligations Arising on Liquidation (effective 1 January 2009)
- IAS 39 Amended Financial Instruments: Recognition and Measurement -
Eligible Hedged Items (effective 1 July 2009)
- IFRS 2 Amended Share-based Payment - Vesting Conditions and Cancellations
(effective 1 January 2009)
- IFRS 3 Revised Business Combinations (effective 1 July 2009)
- May 2008 Improvements to IFRS (mostly effective 1 January 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 be applied
on a prospective basis.
External audit
The Group financial statements have been extracted from the Group`s 2008
annual financial statements, which have been audited by Ernst & Young Inc. and
their unqualified audit opinion is available for inspection at the company`s
registered office. The Shareholders` information has also been subject to
external audit by Ernst & Young Inc..
Shareholders` information
for the year ended 31 December 2008
Contents
Group Equity Value
Shareholders` fund at fair value
Shareholders` fund income statement
Notes to the shareholders` fund information
Embedded value of covered business
Group Equity Value
at 31 December 2008
2008 2007
R million R million
Embedded value of covered business 28 591 28 432
Sanlam Personal Finance 19 574 20 089
Adjusted net worth 8 275 8 285
Value of in-force 11 299 11 804
Sanlam Developing Markets 2 796 2 160
Adjusted net worth 1 032 860
Value of in-force 1 764 1 300
Sanlam UK 680 921
Adjusted net worth 234 447
Value of in-force 446 474
Sanlam Employee Benefits 5 541 5 262
Adjusted net worth 5 472 5 118
Value of in-force 69 144
Other Group operations 13 560 15 451
Retail cluster 2 287 1 820
Institutional cluster 6 000 7 256
Short-term insurance 5 273 6 375
Capital diversification (1 429) (1 232)
Other capital 2 416 2 542
43 138 45 193
Discretionary capital 2 100 6 100
Group equity value 45 238 51 293
Group equity value per share (cents) 2 213 2 350
Shareholders` Fund at Fair Value
at 31 December 2008
2008 2007
R million R million
Property and equipment 228 214
Owner-occupied properties 613 612
Goodwill 473 487
Value of business acquired 802 843
Deferred acquisition costs 1 260 1 079
Investments 31 807 38 474
Sanlam businesses 13 560 15 451
Sanlam Investments 5 581 6 677
SIM Wholesale 3 903 4 443
International 1 358 1 857
Sanlam Collective Investments 320 377
Sanlam Personal Finance 1 423 1 192
Glacier 696 593
Sanlam Personal Loans 71 104
Multi-Data 190 143
Sanlam Trust 144 104
Sanlam Home Loans 133 177
Sanlam Healthcare Management 78 -
Other 111 71
Sanlam UK 847 600
Principal 299 -
Punter Southall Group 219 297
Other 329 303
Alfinanz 17 28
Coris Administration 54 38
Sanlam Capital Markets 365 541
Short-term insurance 5 273 6 375
Associated companies 234 347
Joint ventures 208 378
Safair Lease Finance - 209
Shriram and other 208 169
Other investments 17 805 22 298
Other equities and similar securities 9 036 11 112
Public sector stocks and loans 1 411 2 697
Investment properties 491 245
Other interest-bearing and preference 6 867 8 244
share investments
Net term finance - -
Term finance (5 101) (5 068)
Assets held in respect of term finance 5 101 5 068
Net deferred tax 352 (95)
Net working capital (451) (909)
Minority shareholders` interest (947) (857)
Shareholders` fund at fair value 34 137 39 848
Fair value per share (cents) 1 670 1 826
Shareholders` Fund Income Statement
for the year ended 31 December 2008
2008 2007
R million R million
Result from financial services
before tax 4 260 4 539
Sanlam Personal Finance 1 975 1 857
Sanlam Developing Markets 218 343
Sanlam UK 68 49
Sanlam Employee Benefits 258 173
Short-term Insurance 1 161 987
Investment Management 825 1 230
Capital Markets (61) 73
Corporate and other (184) (173)
Tax on financial services income (966) (997)
Minority shareholders` interest (492) (513)
Net result from financial services 2 802 3 029
Net investment income 1 068 1 117
Core earnings 3 870 4 146
Net project expenses (56) (85)
BEE transaction costs (7) (5)
Net equity-accounted headline
Earnings 16 152
Net investment surpluses (1 699) 1 264
Amortisation of value of business
Acquired (77) (51)
Net loss from discontinued operations (22) (91)
Net Secondary Tax on Companies (59) (131)
Normalised headline earnings 1 966 5 199
Other equity-accounted earnings 33 -
Profit on disposal of subsidiaries
and associates 3 668
Impairments (244) (7)
Normalised attributable earnings 1 758 5 860
Fund transfers 736 (366)
Attributable earnings per Group
income statement 2 494 5 494
NOTES TO THE SHAREHOLDERS` FUND INFORMATION
for the year ended 31 December 2008
2008 2007
R million R million
1. NEW BUSINESS
Analysed per market:
Retail
Life business 12 862 12 195
Sanlam Personal Finance 11 413 9 428
Sanlam Developing Markets 1 449 2 767
Non-life business 29 105 29 601
Sanlam Personal Finance 11 231 9 709
Sanlam Private Investments 7 094 8 300
Sanlam Collective Investments 10 780 11 592
South African 41 967 41 796
Non-South African 11 921 9 520
Sanlam Personal Finance 8 426 7 379
Sanlam Developing Markets 1 145 848
Sanlam UK 2 350 1 293
Total Retail 53 888 51 316
Institutional
Group life business 1 500 2 388
Sanlam Employee Benefits (1) 515 878
Investment Management (1) 985 1 510
Non-life business 23 324 23 490
Segregated 11 810 10 012
Sanlam Multi-Manager 4 040 5 238
Sanlam Collective Investments 7 474 8 240
South African 24 824 25 878
Investment Management non-SA 2 778 4 407
Institutional 27 602 30 285
White label 6 481 8 996
Sanlam Collective Investments 6 481 7 794
Sanlam Developing Markets - 1 202
Short-term insurance 12 165 11 407
Total new business 100 136 102 004
(1) Comparative figures have been restated for a reclassification of life
licence business from Sanlam Employee Benefits to Investment Management and
Botswana Insurance Fund Management business from life insurance to life
licence.
2.Net Flow of Funds
Analysed per market:
Retail
Life business 795 162
Sanlam Personal Finance 794 (1 210)
Sanlam Developing Markets 1 1 372
Non-life business 7 058 9 569
Sanlam Personal Finance 2 897 3 762
Sanlam Private Investments 3 215 3 762
Sanlam Collective Investments 946 2 045
South African 7 853 9 731
Non-South African 1 491 1 863
Sanlam Personal Finance 185 1 141
Sanlam Developing Markets 1 217 894
Sanlam UK 89 (172)
Total Retail 9 344 11 594
Institutional
Group Life business (2 736) (4 745)
Sanlam Employee Benefits (1) (1 994) (3 594)
Investment Management (1) (742) (1 151)
Non-life business 985 (1 907)
Segregated 2 663 (1 753)
Sanlam Multi-Manager (3 406) 75
Sanlam Collective
Investments 1 728 (229)
South African (1 751) (6 652)
Investment Management non-SA (760) 1 235
Total Institutional (2 511) (5 417)
White label (1 445) 1 807
Sanlam Collective Investments (1 445) 1 255
Sanlam Developing Markets - 552
Short-term insurance 3 734 3 379
Total net flow of funds 9 122 11 363
(1)Comparative figures have been restated for a reclassification of life
licence business from Sanlam Employee Benefits to Investment Management and
Botswana Insurance Fund Management business from life insurance to life
licence.
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.
2008 2007
Cents cents
Normalised diluted earnings per share:
Net result from financial services 133,8 133,3
Core earnings 184,8 182,4
Headline earnings 93,9 228,7
Profit attributable to shareholders` fund 84,0 257,8
R million R million
Analysis of normalised earnings
(refer shareholders` fund income statement):
Net result from financial services 2 802 3 029
Core earnings 3 870 4 146
Headline earnings 1 966 5 199
Profit attributable to shareholders` fund 1 758 5 860
Million million
Adjusted number of shares:
Weighted average number of shares
for diluted earnings
per share (refer below) 2 043,5 2 189,3
Add: Weighted average Sanlam shares
held by policyholders 50,5 83,9
Adjusted weighted average number
of shares for normalised diluted
earnings per share 2 094,0 2 273,2
Number of ordinary shares in issue
at beginning of period 2 303,6 2 303,6
Shares cancelled (113,5) -
Number of ordinary shares in issue 2 190,1 2 303,6
Shares held by subsidiaries
in shareholders` fund (197,3) (168,9)
Outstanding long-term incentive
scheme shares and options 45,5 43,3
Number of shares under option to
be issued at fair value (12,7) (7,3)
Convertible deferred shares
held by Ubuntu-Botho 18,6 12,1
Adjusted number of shares for
value per share 2 044,2 2 182,8
4. Share repurchases
The Sanlam shareholders granted general authorities to the Group at the 2007
and 2008 annual general meetings to repurchase Sanlam shares in the market.
The Group acquired 117,2 million shares from 6 March 2008 to 31 December 2008
in terms of the general authorities. The lowest and highest prices paid were
R15,33 and R21,49 per share respectively. The total consideration paid of R2,2
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 174,5
million shares, or 7,8% 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 4 June 2008.
The financial effects of the share repurchases during 2008 on IFRS earnings
and net asset value per share are illustrated in the table below. Tangible net
asset value excludes goodwill, value of business acquired and deferred
acquisition cost included in the shareholders` fund at net asset value.
Before repurchases After repurchases
Basic earnings per share:
Profit attributable to
shareholders` fund cents 125,8 125,0
Headline earnings cents 135,9 135,4
Diluted earnings per share:
Profit attributable to
shareholders` fund cents 123,0 122,0
Headline earnings
per share cents 132,8 132,2
Value per share:
Equity value cents 2 201 2 213
Net asset value cents 1 388 1 353
Tangible net asset value cents 1 143 1 094
Embedded Value of covered business
at 31 December 2008
2008 2007
Note R million R million
Sanlam Personal Finance 19 574 20 089
Adjusted net worth 8 275 8 285
Net value of in-force covered 11 299 11 804
business
Value of in-force covered 12 809 13 452
business
Cost of capital (1 378) (1 555)
Minority shareholders` interest (132) (93)
Sanlam Developing Markets 2 796 2 160
Adjusted net worth 1 032 860
Net value of in-force covered 1 764 1 300
business
Value of in-force covered 2 432 1 833
business
Cost of capital (284) (268)
Minority shareholders` interest (384) (265)
Sanlam UK 680 921
Adjusted net worth 234 447
Net value of in-force covered 446 474
business
Value of in-force covered 481 506
business
Cost of capital (35) (32)
Minority shareholders` interest - -
Sanlam Employee Benefits 5 541 5 262
Adjusted net worth 5 472 5 118
Net value of in-force covered 69 144
business
Value of in-force covered 824 961
business
Cost of capital (755) (817)
Minority shareholders` interest - -
Embedded value of covered business 28 591 28 432
Adjusted net worth 15 013 14 710
Net value of in-force
covered business 1 13 578 13 722
Embedded value of covered business 28 591 28 432
CHANGE IN EMBEDDED VALUE OF COVERED BUSINESS
FOR THE YEAR ENDED 31 DECEMBER 2008
2008 2007
R MILLION NOTE TOTAL VALUE ADJUS- TOTAL
OF IN- TED
FORCE NET
WORTH
Embedded value of covered 28 432 13 722 14 710 27
business at the beginning 403
of the year
Value of new business (2) 2 612 1 677 (1 489
065)
Net earnings from existing 1 885 (693) 2 578 1 996
covered business
Expected return on value 1 838 1 838 - 1 442
of in-force business
Expected transfer of - (2 195) 2 195 -
profit to adjusted net
worth
Operating experience 3 278 (92) 370 288
variances
Operating assumption 4 (231) (244) 13 266
changes
Expected investment return 1 180 - 1 180 1 048
on adjusted net worth
Embedded value earnings 3 677 984 2 693 3 533
from operations
Economic assumption 5 356 402 (46) (109)
changes
Tax changes 6 215 216 (1) 291
Investment variances - (1 435) (1 769) 334 271
value of in-force
Investment variances - (1 864) - (1 541
investment return on 864)
adjusted net worth
Exchange rate movements 23 23 - (22)
Net project expenses 7 (53) - (53) (77)
EEV changes - - - 272
Embedded value earnings 919 (144) 1 063 4 700
from covered business
Transfers to other Group - - - (205)
operations (3)
Change in utilisation of 197 - 197 (300)
capital diversification
Net transfers from covered (957) - (957) (3
business 166)
Embedded value of covered 28 591 13 578 15 013 28
business at the end of the 432
year
Analysis of earnings from
covered business
Sanlam Personal Finance 453 (505) 958 3 953
Sanlam Developing Markets 659 464 195 351
Sanlam UK (36) (28) (8) 63
Sanlam Employee Benefits (157) (75) (82) 333
Embedded value earnings 919 (144) 1 063 4 700
from covered business
(1) Comparative information has been restated to allocate the
change in minority shareholders` interest to the individual line
items. All line items are accordingly presented net of minority
shareholders` interest.
(2) The 2007 comparative value of new business is before the impact
of the adoption of EEV methodology at 31 December 2007. Value of
new business disclosed below is after the EEV changes to ensure
consistent comparison with the 2008 results.
(3) Reallocation of Botswana Insurance Fund Management from covered
business to other Group operations.
VALUE OF NEW BUSINESS
FOR THE YEAR ENDED 31 DECEMBER 2008
R MILLION NOTE 2008 2007
Value of new business (at point of sale):
Gross value of new business 787 657
Sanlam Personal Finance 419 363
Sanlam Developing Markets 343 233
Sanlam UK 6 13
Sanlam Employee Benefits 19 48
Cost of capital (89) (90)
Sanlam Personal Finance (33) (39)
Sanlam Developing Markets (41) (30)
Sanlam UK (5) (5)
Sanlam Employee Benefits (10) (16)
Value of new business 698 567
Sanlam Personal Finance 386 324
Sanlam Developing Markets 302 203
Sanlam UK 1 8
Sanlam Employee Benefits 9 32
Value of new business attributable to:
Shareholders` fund 2 612 493
Sanlam Personal Finance 377 321
Sanlam Developing Markets 225 132
Sanlam UK 1 8
Sanlam Employee Benefits 9 32
Minority shareholders` interest 86 74
Sanlam Personal Finance 9 3
Sanlam Developing Markets 77 71
Sanlam UK - -
Sanlam Employee Benefits - -
Value of new business 698 567
Geographical analysis:
South Africa 507 426
Africa 181 125
Other international 10 16
Value of new business 698 567
Analysis of new business profitability:
Before minorities:
Present value of new business premiums 26 033 23 886
Sanlam Personal Finance 17 371 14 985
Sanlam Developing Markets 5 332 5 476
Sanlam UK 1 484 1 327
Sanlam Employee Benefits 1 846 2 098
New business margin 2,68% 2,37%
Sanlam Personal Finance 2,22% 2,16%
Sanlam Developing Markets 5,66% 3,71%
Sanlam UK 0,07% 0,60%
Sanlam Employee Benefits 0,49% 1,53%
R MILLION NOTE 2008 2007
After minorities:
Present value of new business premiums 24 459 21 886
Sanlam Personal Finance 17 080 14 873
Sanlam Developing Markets 4 049 3 588
Sanlam UK 1 484 1 327
Sanlam Employee Benefits 1 846 2 098
New business margin 2,50% 2,25%
Sanlam Personal Finance 2,21% 2,16%
Sanlam Developing Markets 5,56% 3,68%
Sanlam UK 0,07% 0,60%
Sanlam Employee Benefits 0,49% 1,53%
NOTES TO THE EMBEDDED VALUE OF COVERED BUSINESS
for the year ended 31 December 2008
1.VALUE OF IN-FORCE Gross Cost Net Change
SENSITIVITY ANALYSIS value of of value of from
in-force capital in-force base
business R business value
R million R
million million %
BASE VALUE 15 939 (2 361) 13 578
Interest rate and assets
- Risk discount rate 14 907 (3 067) 11 840 -13
increase by 1%
- Investment return and 16 338 (2 296) 14 042 3
inflation decrease by 1%,
coupled with a 1% decrease
in risk discount rates, and
with bonus rates changing
commensurately
- Equity and property 15 079 (2 318) 12 761 -6
values decrease by 10%,
without a corresponding
change in dividend and
rental yields
- Expected return on equity 16 488 (1 895) 14 593 7
and property investments
increase by 1%, without a
corresponding change in
discount rates
Expenses and persistency
- Non-commission 16 424 (2 359) 14 065 4
maintenance expenses
(excluding investment
expenses) decrease by 10%
- Discontinuance rates 16 251 (2 427) 13 824 2
decrease by 10%
Insurance risk
- Mortality and morbidity 16 543 (2 358) 14 185 4
decrease by 5% for life
assurance business
- Mortality and morbidity 15 817 (2 353) 13 464 -1
decrease by 5% for life
annuity business
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 685 (73) 612
Interest rate and assets
- Risk discount rate 586 (88) 498 -19
increase by 1%
- Investment return and 726 (74) 652 7
inflation decrease by 1%,
coupled with a 1% decrease
in risk discount rates, and
with bonus rates changing
commensurately
Expenses and persistency
- Non-commission 731 (73) 658 8
maintenance expenses
(excluding investment
expenses) decrease by 10%
- Acquisition expenses 744 (71) 673 10
(excluding commission and
commission related
expenses) decrease by 10%
- Discontinuance rates 765 (77) 688 12
decrease by 10%
Insurance risk
- Mortality and morbidity 772 (73) 699 14
decrease by 5% for life
assurance business
- Mortality and morbidity 658 (73) 585 -4
decrease by 5% for life
annuity business
2008 2007
R million R million
3. OPERATING EXPERIENCE VARIANCES
Risk experience 307 215
Investment guarantee reserve shortfall (117) -
Working capital and other 88 73
Total operating experience variances 278 288
4. OPERATING ASSUMPTION CHANGES
Mortality and morbidity (196) 98
Persistency (31) (18)
Modelling improvements and other (4) 186
Total operating assumption changes (231) 266
5. ECONOMIC ASSUMPTION CHANGES
Investment yields and risk premium 363 (86)
Long-term asset mix assumptions (7) (23)
Total economic assumption changes 356 (109)
6. TAX CHANGES
Change in corporate tax rate 215 -
Change in policyholders` fund tax rate - 141
Reduction in STC rate from 12,5% to 10,0% - 150
Total tax changes 215 291
7. NET PROJECT EXPENSES
NET PROJECT EXPENSES RELATE TO ONCE-OFF
EXPENDITURE ON THE GROUP`S DISTRIBUTION
PLATFORM THAT HAS NOT BEEN ALLOWED FOR IN
THE EMBEDDED VALUE ASSUMPTIONS.
2008 2007
% %
8. Economic assumptions
Gross investment return, risk discount rate
and inflation
SANLAM LIFE:
Point used on the relevant yield curve 9 year 9 year
Fixed-interest securities 7,3 8,3
Equities and offshore investments 10,8 11,8
Hedged equities 7,8 8,8
Property 8,3 9,3
Cash 6,3 7,3
Return on required capital 8,8 9,7
Inflation rate 4,3 5,3
Risk discount rate 9,8 10,8
MERCHANT INVESTORS:
Point used on the relevant yield curve 15 year 15 year
Fixed-interest securities 3,7 4,6
Equities and offshore investments 7,0 7,8
Hedged equities 7,0 7,8
Property 7,0 7,8
Cash 3,7 4,6
Return on required capital 3,7 4,6
Inflation rate 2,9 3,7
Risk discount rate 7,5 8,3
SDM LIMITED:
Point used on the relevant yield curve 6 year 6 year
Fixed-interest securities 7,3 8,6
Equities and offshore investments 10,8 12,1
Hedged equities n/a n/a
Property 8,3 9,6
Cash 6,3 6,6
Return on required capital 8,6 9,4
Inflation rate 4,3 5,6
Risk discount rate 9,8 11,1
BOTSWANA LIFE INSURANCE:
Point used on the relevant yield curve n/a n/a
Fixed-interest securities 10,5 10,5
Equities and offshore investments 14,0 14,0
Hedged equities n/a n/a
Property 11,5 11,5
Cash 9,5 8,5
Return on required capital 10,6 9,5
Inflation rate 7,5 7,5
Risk discount rate 14,0 14,0
2008 2007
% %
Asset mix for assets supporting the
required capital
SANLAM LIFE:
Equities 44 44
Hedged equities 13 13
Property 3 3
Fixed-interest securities 25 25
Cash 15 15
100 100
MERCHANT INVESTORS:
Equities - -
Hedged equities - -
Property - -
Fixed-interest securities - -
Cash 100 100
100 100
SDM LIMITED:
Equities 50 50
Hedged equities - -
Property - -
Fixed-interest securities - -
Cash 50 50
100 100
BOTSWANA LIFE INSURANCE:
Equities 15 69
Hedged equities - -
Property 10 1
Fixed-interest securities 25 30
Cash 50 -
100 100
Group financial statements
for the year ended 31 December 2008
Contents
Group balance sheet
Group income statement
Group statement of changes in equity
Group cash flow statement
Notes to the financial statements
Group Balance Sheet
at 31 December 2008
2008 2007
R million R million
ASSETS
Property and equipment 382 298
Owner-occupied properties 652 650
Goodwill 2 623 2 447
Value of business acquired 1 309 1 000
Deferred acquisition costs 1 970 1 693
Long-term reinsurance assets 506 487
Investments 268 530 290 101
Properties 15 981 15 648
Equity-accounted investments 1 317 1 759
Equities and similar securities 120 284 149 038
Public sector stocks and loans 50 531 49 887
Debentures, insurance policies, preference 35 309 34 091
shares and other loans
Cash, deposits and similar securities 45 108 39 678
Deferred tax 712 475
Non-current assets held for sale - 2 060
Short-term insurance technical assets 2 250 2 263
Working capital assets 38 974 41 357
Trade and other receivables 28 908 30 538
Cash, deposits and similar securities 10 066 10 819
Total assets 317 908 342 831
Equity and liabilities
Shareholders` fund 27 651 29 334
Minority shareholders` interest 2 596 2 220
Total equity 30 247 31 554
Long-term policy liabilities 229 268 244 660
Insurance contracts 120 879 128 398
Investment contracts 108 389 116 262
Term finance 6 763 6 594
Margin business 2 830 2 687
Other interest-bearing liabilities 3 933 3 907
External investors in consolidated funds 9 822 12 278
Cell owners` interest 447 336
Deferred tax 440 1 354
Non-current liabilities held for sale - 1 606
Short-term insurance technical provisions 8 229 7 719
Working capital liabilities 32 692 36 730
Trade and other payables 29 325 32 997
Provisions 1 453 973
Taxation 1 914 2 760
Total equity and liabilities 317 908 342 831
2007 comparative Trade and other payables and Trade and other receivables have
been increased by R2,6 billion for inappropriate set-off in the prior period.
Group Income Statement
for the year ended 31 December 2008
2008 2007
R million R million
Net income 19 700 52 504
Financial services income 28 578 26 715
Reinsurance premiums paid (2 990) (2 685)
Reinsurance commission received 401 373
Investment income 17 044 14 740
Investment surpluses (24 672) 15 885
Finance cost - margin business (244) (246)
Change in fair value of external investors 1 583 (2 278)
liability
NET INSURANCE AND INVESTMENT CONTRACT (4 352) (33 414)
BENEFITS AND CLAIMS
Long-term insurance and investment contract 3 062 (26 413)
benefits
Short-term insurance claims (9 189) (8 533)
Reinsurance claims received 1 775 1 532
Expenses (11 134) (9 939)
Sales remuneration (4 189) (3 554)
Administration costs (6 945) (6 385)
Impairment of investments and goodwill (247) (7)
Amortisation of value of business acquired (77) (51)
Net operating result 3 890 9 093
Equity-accounted earnings 34 228
Finance cost - other (391) (281)
Profit before tax 3 533 9 040
Taxation (621) (2 493)
Shareholders` fund (428) (1 678)
Policyholders` fund (193) (815)
Profit from continued operations 2 912 6 547
Discontinued operations 25 (168)
Profit for the year 2 937 6 379
Attributable to:
Shareholders` fund 2 494 5 494
Minority shareholders` interest 443 885
2 937 6 379
Earnings attributable to shareholders of the
company (cents):
Basic earnings per share 125,0 256,6
Diluted earnings per share 122,0 250,9
Earnings attributable to shareholders of the
company from continuing operations (cents):
Basic earnings per share 126,1 260,8
Diluted earnings per share 123,1 255,1
Group Statement of changes in equity
for the year ended 31 December 2008
2008 2007
R million R million
Shareholders` fund:
Balance at beginning of the period 29 334 29 121
Total recognised income 2 554 5 395
Profit for the period 2 494 5 494
Movement in foreign currency translation 60 (99)
reserve
Net movement in treasury shares 17 (3 551)
Net realised investment surpluses on (307) (288)
treasury shares
Cost of net treasury shares acquired (1) 324 (3 263)
Share-based payments 134 74
Dividends paid (2) (1 907) (1 705)
Shares cancelled (2 481) -
Balance at end of the period 27 651 29 334
Minority shareholders` interest:
Balance at beginning of the period 2 220 3 934
Total recognised income 537 858
Profit for the period 443 885
Movement in foreign currency translation 94 (27)
reserve
Net movement in treasury shares (48) (527)
Net realised investment surpluses on (28) 24
treasury shares
Cost of net treasury shares (20) (551)
disposed/(acquired) (1)
Share-based payments 23 10
Dividends paid (366) (1 474)
Acquisitions, disposals and other movements 230 (581)
in minority interests
Balance at end of the period 2 596 2 220
Shareholders` fund 29 334 29 121
Minority shareholders` interest 2 220 3 934
Total equity at beginning of the period 31 554 33 055
Shareholders` fund 27 651 29 334
Minority shareholders` interest 2 596 2 220
Total equity at end of the period 30 247 31 554
(1) Comprises movement in cost of shares held by subsidiaries and the share
incentive trust.
(2) Dividend of 93 cents per share paid during 2008 (2007: 77 cents per share)
in respect of the 2007 financial year.
Group Cash Flow Statement
for the year ended 31 December 2008
2008 2007
R million R million
Net cash inflow from operating activities 6 810 30
Net cash (outflow)/inflow from investment (404) 9 859
activities
Net cash outflow from financing activities (2 570) (3 227)
Net increase in cash and cash equivalents 3 836 6 662
Cash, deposits and similar securities at 51 309 44 647
beginning of the period
Cash, deposits and similar securities at end 55 145 51 309
of the period
Cash, deposits and similar securities - (812)
classified as held for sale
Cash, deposits and similar securities at end 55 145 50 497
of the period - continuing operations
Cash inflow from discontinued operations (812) 4
Cash, deposits and similar securities at 812 808
beginning of the period
Cash, deposits and similar securities at end - 812
of the period - discontinued operations
Notes to the financial statements
for the year ended 31 December 2008
2008 2007
cents cents
1. Earnings per share
Basic earnings per share:
Headline earnings 135,4 225,7
Profit attributable to shareholders` fund 125,0 256,6
Diluted earnings per share:
Headline earnings 132,2 220,8
Profit attributable to shareholders` fund 122,0 250,9
R million R million
Analysis of earnings:
Profit attributable to shareholders 2 494 5 494
Less: Net profit on disposal of subsidiaries (3) (44)
Less: Net profit on disposal of associates - (624)
Less: Equity-accounted non-headline earnings (33) -
Plus: Impairment of investments and goodwill 244 7
Headline earnings 2 702 4 833
million million
Number of shares:
Number of ordinary shares in issue at beginning of 2 303,6 2 303,6
period
Less: Weighted average number of shares cancelled (64,3) -
Less: Weighted average Sanlam shares held by (243,5) (162,4)
subsidiaries (including policyholders)
Weighted average number of shares for basic earnings 1 995,8 2 141,2
per share
Add: Weighted conversion of deferred shares 14,9 12,1
Add: Total number of shares and options 45,5 43,3
Less: Number of shares (under option) that would (12,7) (7,3)
have been issued at fair value
Weighted average number of shares for diluted 2 043,5 2 189,3
earnings per share
2. Segmental information
2008 2007
R million R million
Segment financial services income 26 969 25 026
Sanlam Personal Finance 6 678 6 257
Sanlam Developing Markets 3 115 2 817
Sanlam UK 399 217
Sanlam Employee Benefits 2 059 1 796
Short-term Insurance 12 274 11 035
Sanlam Investments 2 259 2 562
Sanlam Capital Markets 107 283
Corporate, consolidation and other 78 59
IFRS adjustments 1 609 1 689
Total financial services income 28 578 26 715
Segment result 1 758 5 860
Sanlam Personal Finance 80 2 795
Sanlam Developing Markets 53 474
Sanlam UK (35) 96
Sanlam Employee Benefits (85) 775
Short-term Insurance 358 570
Sanlam Investments 526 922
Sanlam Capital Markets (35) 139
Corporate, consolidation and other 896 89
Reverse minority shareholders` interest included in 443 885
segment result
Fund transfers 736 (366)
Total profit for the period 2 937 6 379
Segment assets 74 582 83 506
Sanlam Life 33 938 36 468
Sanlam Developing Markets 4 887 5 397
Sanlam UK 1 692 1 368
Short-term insurance 16 736 17 300
Sanlam Investments 3 217 3 252
Sanlam Capital Markets 22 104 25 932
Corporate, consolidation and other (7 992) (6 211)
IFRS adjustments (539) (1 843)
Policyholders` fund 243 865 261 168
Total assets 317 908 342 831
3. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2007
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 that affect the financial position of the Sanlam Group at
31 December 2008 as reflected in these financial statements.
GROUP SECRETARY TRANSFER SECRETARIES:
JOHAN BESTER COMPUTERSHARE INVESTOR SERVICES
(PROPRIETARY) LIMITED
REGISTERED OFFICE (REGISTRATION NUMBER 2004/003647/07)
2 STRAND ROAD, BELLVILLE 70 MARSHALL STREET, JOHANNESBURG 2001,
7530, SOUTH AFRICA SOUTH AFRICA
tELEPHONE +27 21 947-9111 PO BOX 61051, MARSHALLTOWN 2107,
FAX +27 21 947-3670 SOUTH AFRICA
TEL +27 83 900 3755
Fax +27 11 688-5200
POSTAL ADDRESS
PO BOX 1, SANLAMHOF 7532,
SOUTH AFRICA
WWW.SANLAM.CO.ZA
Directors: RC Andersen (Chairman), PT Motsepe (Deputy Chairman),
J van Zyl (1) (Group Chief Executive), MMM Bakane-Tuoane,
AD Botha, AS du Plessis, FA du Plessis, MV Moosa, JP Moller (1), RK Morathi
(1), SA Nkosi, I Plenderleith (2), GE Rudman,
RV Simelane, ZB Swanepoel, PL Zim
(1) Executive
(2) British
Bellville
5 March 2009
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 05/03/2009 08:00:37 Produced by the JSE SENS Department.
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