| Thu 3 Sep 2009, 8:00 | | SLM - Sanlam Limited - Reviewed interim results for the six months ended 30 |
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SLM
SLM
SLM - Sanlam Limited - Reviewed interim results for the six months ended 30
June 2009
Sanlam Limited
(Incorporated in the Republic of South Africa)
(Registration number 1959/001562/06)
JSE share code: SLM
NSX share code: SLA
ISIN: ZAE000070660
("Sanlam", "the Group" or "the Sanlam Group")
Reviewed interim results for the six months ended 30 June 2009
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Interim financial statements
Accounting policies and basis of presentation
External audit review
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
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Administration
Sanlam Group Interim Results June 2009
Key features
Earnings
- Net result from financial services per share decreased by 4%
- Core earnings per share down 2%
- Normalised headline earnings per share up 34%
Business volumes
- New business volumes up 1% to R51 billion
- Net value of new covered business down 3% to R243 million
- Net new covered business margin of 2,23%, up from 2,17%
- Net fund inflows of R7,7 billion, up 40%
Group Equity Value
- Group Equity Value per share of R21,72
- Annualised return on Group Equity Value per share of 5,2%
Capital management
- Discretionary capital of R2,8 billion at 30 June 2009
- Sanlam Life CAR cover of 2,5 times
SALIENT RESULTS
for the six months ended 30 June 2009
2009 2008 %
change
Sanlam Group
Earnings
Net result from financial services cents 60,4 62,6 -4%
per share
Core earnings per share(1) cents 87,5 89,7 -2%
Normalised headline earnings per cents 78,5 58,8 34%
share(2)
Diluted headline earnings per cents 82,6 94,5 -13%
share
Net result from financial services R million 1 234 1 334 -7%
Core earnings(1) R million 1 789 1 913 -6%
Normalised headline earnings(2) R million 1 605 1 254 28%
Headline earnings R million 1 664 1 955 -15%
Group administration cost ratio(3) % 26,8 28,0
Group operating margin(4) % 15,1 17,8
Business volumes
New business volumes R million 51 485 50 985 1%
Net fund flows R million 7 677 5 470 40%
Net new covered business
Value of new covered business R million 243 250 -3%
Covered business PVNBP(5) R million 10 906 11 501 -5%
New covered business margin(6) % 2,23 2,17
Group Equity Value
Group Equity Value(7) R million 44 490 45 238 -2%
Group Equity Value per share(7) cents 2 172 2 213 -2%
Annualised return on Group Equity % 5,2 (1,7)
Value per share(7),(8)
Adjusted annualised return on % 12,2 12,4
Group Equity Value per share(7)
Sanlam Life Insurance Limited
Shareholders` fund(7) R million 31 620 34 419
Capital Adequacy Requirements R million 8 200 8 075
(CAR)(7)
CAR covered by prudential times 2,5 2,7
capital(7)
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. Comparative figures are as at 31 December 2008.
8. 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
The Sanlam Group has shown pleasing resilience in challenging markets to
record a solid operational performance for the six months ended 30 June 2009.
The strategic diversification into different market segments and solution
offerings, as well as the effect of prudent practices and assumptions followed
in the past, shielded the Group from the most severe impact of the economic
downturn.
Business environment
The depressing financial and economic impact of the global financial market
crisis continued unabated during the first half of 2009, although there were
signs of some recovery in global equity markets towards the end of the
reporting period.
A lower demand for resources following the slowdown in the world`s largest
economies had a negative impact on the wealth creation and growth achieved in
the African commodity based economies in which the Group operates. The Group`s
key exposure remains to the performance of the South African economy, which,
as no exception, followed the developed world into a recession. This is
reflected in major pressure on consumers` disposable income, in addition to
the effects of the high interest rate and inflation conditions of the past two
years. The result has been contracting consumer spending, in particular in the
middle-income market. The interest rate cuts announced by the South African
Reserve Bank over the past few months should provide some relief to consumers,
but it is likely to take some time before this will be evident in increased
consumer demand.
The South African equity market recorded marginally positive returns for the
six months ended 30 June 2009 on the back of stronger international markets
and expectations that the worst of the financial market crisis may be over.
Overall market levels, however, remain significantly lower than the
comparative period in 2008 and continue to display high levels of volatility.
Performance review
In the context of the challenging environment, the Group achieved a pleasing
operational performance for the first six months of the 2009 financial year.
This has been aided by the diversified nature of the Group`s operations, in
respect of market segmentation, solutions offering and geographical presence,
which provided a platform for ongoing growth in new business volumes and a
sound level of profitability. The pressure on the middle-income retail market
in South Africa is however evident in declining new business volumes at Sanlam
Personal Finance and Sanlam Private Investments, but this was offset by strong
performances in the institutional and entry-level markets. Operating profit
also reflects a varied performance, with a solid contribution from the retail
life insurance and capital markets businesses, almost offsetting the negative
impact of the prevailing market conditions on the reported earnings of the
short-term insurance and investment management operations. Notwithstanding
the pressure on earnings, the core operations of all the major Group
businesses remain sound.
The primary performance target of the Group is to optimise shareholder value
through maximising the return on Group Equity Value (GEV). 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 annualised
return on GEV per share of 5% for the six months ended 30 June 2009 fell short
of this target, but still represents a strong performance given the relatively
weak investment markets and an increase of some 2% in long-term interest rates
(and commensurately risk discount rates applied) during the period. The
increase in risk discount rates in particular reduced the valuation and GEV
earnings of the life insurance and wealth management operations. On a
normalised basis, i.e. assuming a normalised investment market performance and
excluding any once-off items, the annualised return of 12,2% for the six
months exceeded the target of 11,3%.
Total new business volumes, excluding the volatile and low margin white label
business, grew by 3%, a particularly pleasing result in the current
environment. Retail business sales declined by 8%, with Sanlam Personal
Finance and Sanlam Private Investments reporting declines of 7% and 22%
respectively. This was to an extent offset by strong growth of 8% achieved by
Sanlam Developing Markets. Institutional business sales recorded a sterling
performance, increasing by 27% on 2008. Most of the institutional business
units contributed to this growth. The value of new covered business (after
minorities) decreased by 3% from R250 million in the first half of 2008 to
R243 million in 2009, reflecting the impact of lower new life business volumes
in the middle-income market. The profitability of new covered business has
been maintained through continued focus on cost management and the quality of
new business written, with overall margins increasing from 2,17% in 2008 to
2,23% in 2009.
Core earnings of R1 789 million are 6% lower than in 2008, the combined effect
of a 7% decrease in the net result from financial services and a 4% decline in
net investment income earned on the capital portfolio. The relatively lower
base of assets under management impacted on the growth in fee income and the
profitability of especially the investment management businesses. This was
further aggravated by a number of large commercial property claims at Santam
Limited (Santam). Core earnings per share decreased by only 2%, supported by
the effect of the share buy-back programme during 2008, which resulted in a 4%
reduction in the weighted average number of shares in issue compared to the
first half of 2008.
The investment return earned on the Group`s capital portfolio was marginally
positive during the first six months of 2009, with positive local equity
market return somewhat offset by a reduction in the valuation of interest-
bearing instruments and offshore investments. The investment return, however,
improved significantly compared to the negative performance in the first half
of 2008. Normalised headline earnings per share benefited from the turnaround
in investment return and increased by 34% on 2008. Diluted headline earnings
per share, which include the International Financial Reporting Standards
(IFRS) impact of Sanlam and Santam shares held by the policyholders` fund, are
13% down on 2008.
Delivering on strategy
The Group`s focused strategy continued to serve it well during the first six
months of 2009, which was characterised by the prolonged impact of the most
challenging environment faced by the Group in many years. The board of
directors of Sanlam (the Board) and management remain committed to the Group`s
key objective of maximising shareholder value. This is underpinned by the five
pillars of optimal capital utilisation, earnings growth, cost control and
efficiencies, diversification and transformation.
As indicated in the Group`s 2008 annual report, a more prudent approach is
required in the application of discretionary capital in the current financial
and economic environment. The focus has accordingly been on further optimising
the capital base of the Group, while only a few selected investments have been
made in existing operations and future growth markets. No share buy-backs
occurred during the first six months of 2009.
A major portion of the Group`s capital is utilised by the covered business
operations. Capital management and modelling within these operations receive
continuous attention to achieve an optimal capital level, taking cognisance of
the impact of changes in the capital management structure on expected return
on GEV. This process indicated that shareholder value can be further enhanced
by implementing a more conservative asset mix for the capital backing the
covered business operations, thereby reducing the level of required capital.
The Board approved as a target a 10% reduction in the capital portfolio`s
exposure to both equities and fixed-interest instruments and a consequential
20% increase in the cash exposure. This will result in less volatility in the
capital base and released some R900 million of capital to the Group`s
discretionary capital portfolio. The change in asset mix caused an increase in
the cost of capital and consequently a once-off R313 million reduction in the
value of in-force covered business (refer results commentary below). This
negative impact will be more than offset through a value enhancing application
of the additional discretionary capital.
A total of R375 million was utilised for corporate activity during the period.
The largest transactions concluded are as follows:
- Some R200 million was utilised to acquire minority shareholders` interest in
Channel Life, increasing the Group`s interest to just under 100%. This
acquisition will enable the Group to further enhance synergies between the
life businesses operating in the entry-level market segment in South Africa
and to more effectively manage the capital requirements of the growth achieved
in this market.
- MiWay required additional financing of R30 million to fund the start-up
losses of this business. A further R17 million has been utilised since the end
of June 2009 to acquire a proportionate share of the PSG Group`s interest in
MiWay. The remainder of PSG`s interest was acquired by existing shareholders.
- Sanlam UK has been further capitalised by R30 million, which includes an
increase in the Group`s interest in Principal from 86% to 89%.
- The Shriram Life Insurance acquisition agreement allowed for three
performance payments based on the achievement of new business growth and
expense targets. The third payment of R39 million became due during the six
months.
The release of R900 million of capital from covered business, investment
return and the application of capital for corporate activity contributed to a
net increase in the level of discretionary capital in the Group to R2,8
billion at the end of June 2009. The Board remains committed to the
utilisation of the discretionary capital in the most efficient manner, with a
preference for new value-enhancing initiatives. The buy-back of Sanlam shares
is not a priority but will be considered in periods of share price weakness.
Despite pressure from the economic downturn, the Group continues with
initiatives to enhance its growth platform. To this end, Sanlam Developing
Markets is expanding its distribution reach across all territories, with the
following important milestones reached during the six months:
- Advisor numbers in South Africa increased by 29% to 1 786, unprofitable
business has been discontinued and the integration of the back office and
administration functions of the South African businesses has been initiated;
- A new distribution channel has been launched by Shriram Life Insurance to
cover the northern Indian territories, augmenting the focus to date on the
south of India; and
- Bancassurance joint venture arrangements have been strengthened in Africa.
Sanlam Investments` international expansion is also progressing according to
plan. The establishment of the SMC wealth and investment management joint
ventures will provide Sanlam Investments with a strong entry point into the
fast growing Indian market. Sanlam International Investment Partners`
operational structure has been embedded and a number of international niche
acquisition opportunities are being evaluated.
Cost efficiency has been a strategic focus for the past five years, but
received even more intensified focus in light of the financial market crisis
and subsequent recessionary environment. The investment management operations
and Sanlam Personal Finance, which have been impacted most by lower assets
under management and new business volumes respectively, made a concerted
effort to reduce costs even further. Sanlam Investments reported a 9%
reduction in expenditure, excluding the impact of a release of excess
provisions. Sanlam Personal Finance initiated plans to reduce its cost base by
some R100 million. Containment of cost in all other business units is also
receiving appropriate attention, although not to the detriment of future
growth opportunities.
Efforts to increase the representation of previously disadvantaged individuals
at middle and senior management level is a priority for the Group`s
transformation. It remains a challenge given Sanlam`s traditional low staff
turnover, the freezing of vacancies in the current environment and a shortage
of individuals with the required specialised financial services expertise. We
will, however, continue to use all available opportunities to meet our targets
in the years to come.
Looking ahead
International sentiment has improved over the last few months, with many
analysts of the opinion that the world economy is at or past its lowest point
of the current recession. Risk aversion has also started to subside with a
renewed interest from international investors in developing markets. This
bodes well for the South African equity market, which has seen a major
improvement in performance since the end of June 2009. A continuation of
positive equity market returns will support improved profitability in the
Group`s investment management operations in particular and should be positive
for fund flows into equity-based solutions. Investment market volatility has,
however, not fully subsided and downside risk remains high.
The improved sentiment has also provided some support for commodity prices,
which should underpin an improvement in the real economy of many of the
African countries in which the Group operates. The negative trend in the South
African economy is expected to stabilise and show gradual recovery on the back
of higher commodity prices and improving consumer confidence and spending
power as the benefits of the recent interest rate cuts start to emerge over
the next few months. Any material impact of the improvement in economic
conditions is however only expected to reflect in the Group`s operating
results from 2010 onwards.
Challenging trading conditions are therefore expected to persist for the
remainder of the 2009 financial year, but we remain confident that our
businesses are well set to continue weathering the challenges. Relative market
movements during the second half of the year will impact on the level of
earnings growth to be reported for the full 2009 financial year.
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 six months ended 30 June 2009 are presented
based on and in compliance with International Financial Reporting Standards
(IFRS), 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 30 June 2009
June 2009 December 2008
R million Total Fair Value Total Fair Value
value of in value of in
of force of force
assets assets
Embedded value of 27 773 14 502 13 271 28 591 15 013 13 578
covered business
Sanlam Personal 18 939 8 032 10 907 19 574 8 275 11 299
Finance
Sanlam 3 040 1 215 1 825 2 796 1 032 1 764
Developing
Markets
Sanlam UK 685 238 447 680 234 446
Sanlam Employee 5 109 5 017 92 5 541 5 472 69
Benefits
Other group 13 637 13 637 - 13 560 13 560 -
operations
Retail cluster 2 223 2 223 - 2 287 2 287 -
Institutional 5 778 5 778 - 6 000 6 000 -
cluster
Short-term 5 636 5 636 - 5 273 5 273 -
insurance
Capital (1 137) (1 137) - (1 429) (1 429) -
diversification
Other capital and 1 432 1 432 - 2 416 2 416 -
net worth
adjustments
41 705 28 434 13 271 43 138 29 560 13 578
Discretionary 2 785 2 785 - 2 100 2 100 -
capital
Group Equity 44 490 31 219 13 271 45 238 31 660 13 578
Value
Issued shares for 2 048,2 2 044,2
value per share
(million)
Group Equity 2 172 2 213
Value per share
(cents)
Share price 1 728 1 700
(cents)
Discount -20% -23%
The GEV as at 30 June 2009 amounted to R44,5 billion, down 2% on the R45,2
billion at the end of 2008. On a per share basis GEV decreased by 2% from 2
213 cents to 2 172 cents at 30 June 2009, including the effect of the 98 cents
per share dividend paid during 2009. The Sanlam share price traded at a 20%
discount to GEV by close of trading on 30 June 2009.
As a financial services organisation, the Group has a major exposure to
financial markets in that the shareholder capital portfolio is invested in
financial instruments, a portion of the fee income base is linked to the level
of assets under management, while the valuation of the in force book of
covered business is impacted by changes in long-term interest rates and
investment return assumptions. In addition to the subdued investment market
performance in the first half of 2009, an increase of some 2% in long-term
interest rates required a commensurate increase in the risk-adjusted discount
rate used for the valuation of the Group`s covered and wealth management
businesses. Given these conditions, the annualised return on GEV (ROGEV) per
share of 5% for the first six months of 2009 is an overall satisfactory
performance. This is testimony to the defensive qualities of the Group`s
diversified portfolio of businesses. The return on the Group`s international
operations was negatively impacted by a stronger rand and the impact on the
Sanlam UK operations of the recession in the United Kingdom. This was,
however, compensated for by a satisfactory return achieved on the other Group
operations.
Return on Group Equity Value
for the six months ended 30 June 2009
June 2009 June 2008
Earnings Return* Earnings Return*
R million % R million %
Covered business 770 5,5 998 7,1
Sanlam Personal Finance 446 4,6 490 4,9
Sanlam Developing Markets 86 6,2 180 17,4
Sanlam UK 4 1,2 139 32,5
Sanlam Employee Benefits 234 8,6 189 7,3
Other operations 790 12,0 (1 692) -20,7
Sanlam Personal Finance 133 19,6 13 2,2
Sanlam Developing Markets 2 24,9 (7) -43,8
Sanlam UK (117) -25,7 25 8,5
Institutional cluster 241 8,1 (301) -8,1
Short-term insurance 531 21,2 (1 422) -39,6
Discretionary and other (475) 119
capital
Balance of portfolio (180) 240
Shares delivered to Sanlam - (26)
Demutualisation Trust
Shriram goodwill less (39) (43)
value of in-force acquired
Treasury shares and other (128) (130)
Change in net worth (128) 78
adjustments
Return on Group Equity 1 085 4,9 (575) -2,2
Value
Return on Group Equity 5,2 0,0
Value per share
* Annualised
Covered business achieved a return of 6% compared to 7% in the first half of
2008. This lower level of return is mainly attributable to an increase in the
cost associated with the capital required to back these operations. As
indicated above, the Board approved a more conservative asset mix for the
required capital, which reduced the overall capital to be held in respect of
covered business by R900 million. A consequence of the more conservative asset
mix is a reduction in the expected investment return to be earned on the
required capital in future. This increased the opportunity cost of holding the
capital, referred to as the cost of capital, by R313 million. Excluding this
once-off net increase in the cost of capital, the annualised return on covered
business amounted to 8%. The return on covered business includes positive
operating experience variances of R289 million, of which the majority relates
to underwriting experience that was better than the assumptions used in the
actuarial basis. The focus on quality of business written also contributed to
positive persistency experience, a particularly satisfactory result given the
overall negative market experience. This was offset by negative economic
assumption changes following the increase in risk discount rates.
The other Group operations yielded an overall annualised return of 12%,
compared to a negative return of 21% for the comparable period in 2008. Sanlam
Personal Finance and Santam delivered a marked improvement on their 2008
performances. This was however offset by negative earnings of R117 million
recorded by Sanlam UK. Most of Sanlam Personal Finance`s other operations had
a strong first six months of 2009, with future earnings prospects remaining
positive. This supported the valuations, despite the 2% increase in the risk
discount rate during the period. The return was also positively impacted by
the release of some R40 million of capital from Glacier. The investment in
Santam also performed well, with the Santam share price increasing by 7% after
allowing for the payment of its final dividend. The Sanlam UK businesses are
experiencing the aftermath of the financial market crisis more severely than
the South African based operations. The level of assets under management and
profitability of Principal and Buckles were in particular negatively impacted
by the United Kingdom (UK) economic and financial market conditions. Under
these conditions, a prudent approach was followed in valuing these businesses,
which required a further write-down of R77 million in their carrying values.
The stronger rand against the pound also aggravated the negative earnings. The
valuation of the businesses in the Institutional cluster remained on an
overall basis broadly in line with the end of 2008, with the GEV earnings for
the first six months to 30 June 2009 comprising mostly of the net operating
profit earned during the period.
The return on discretionary and other capital was impacted by the following:
- Negative investment return of R180 million on the balance of the capital
portfolio. This can mostly be ascribed to negative return on the offshore
exposure in the portfolio due to the strengthening of the rand exchange rate,
marked-to-market losses on the interest-bearing instruments held, in line with
the All Bond return, as well as negative investment return on the
discretionary capital invested in the Botswana equity markets;
- The write-off for GEV purposes of the R39 million goodwill recognised in
respect of the last remaining performance payment to Shriram in terms of the
acquisition agreement of Shriram Life Insurance in India;
- A negative change of R128 million in the net worth adjustments. This is
largely due to an increase in the allowance for corporate costs in line with
the expected inflationary increase in the annual corporate expenses; and
- A loss of R128 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 six months ended 30 June 2009
R million 2009 2008 %
change
Net result from financial services 1 234 1 334 -7%
Net investment income 555 579 -4%
Core Earnings 1 789 1 913 -6%
Project expenses (15) (40) 63%
Net equity-accounted headline earnings 10 (4) >100%
BEE transaction costs (3) (3) -
Net investment surpluses 23 (447) >100%
Secondary Tax on Companies (STC) (162) (99) -64%
Discontinued operations - (35) -
Amortisation of value of business acquired (37) (31) -19%
Normalised Headline Earnings 1 605 1 254 28%
Other non-headline earnings and impairments (58) (103) 44%
Normalised attributable earnings 1 547 1 151 34%
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 six months of R1 789 million are 6% down on 2008, the
combined effect of a 7% reduction in the net result from financial services
for the period and a 4% decline in net investment income. On a per share
basis, core earnings decreased by 2%, reflecting the impact of the 4%
reduction in the weighted average number of shares in issue due to the share
buy-backs during 2008.
The net result from financial services of R1 234 million for the first six
months of 2009 is 7% lower than in 2008. As indicated before, the following
items have an impact on this result:
- 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 investment management policies. Similarly, the
Group`s actuarial valuation basis for most insurance contracts does not allow
for the capitalisation of certain 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
reported by Sanlam Developing Markets), as well as in instances of a change in
business mix (as experienced by Sanlam Personal Finance) in the first half of
2009.
- The impact of MiWay only becoming operational during February 2008.
On a comparable basis the net result from financial services increased by 1%
on 2008, a very pleasing result in the current environment.
Net result from financial services
for the six months ended 30 June 2009
R million 2009 2008 %
change
Net result from financial services on 1 872 1 848 1%
comparable basis
Retail cluster 1 364 1 265 8%
Institutional cluster 415 423 -2%
Santam 118 188 -37%
Corporate and other (25) (28) 11%
MiWay (launched in February 2008) (36) (23) -57%
New business strain (602) (491) -23%
Net result from financial services 1 234 1 334 -7%
The table below provides an analysis of the net result from financial services
per individual business.
Net result from financial services
for the six months ended 30 June 2009
R million 2009 2008 %
Retail cluster 789 793 -1%
Sanlam Personal Finance 691 678 2%
Sanlam Developing Markets 85 78 9%
Sanlam UK 13 37 -65%
Institutional cluster 388 404 -4%
Sanlam Investments 264 287 -8%
Sanlam Employee Benefits 65 83 -22%
Sanlam Capital Markets 59 34 74%
Short-term insurance cluster 82 165 -50%
Santam 118 188 -37%
MiWay (36) (23) -57%
Corporate and other (25) (28) 11%
Net result from financial services 1 234 1 334 -7%
- Sanlam Personal Finance`s net result from financial services for the six
months of R691 million is 2% up on 2008. Before tax and minority interests,
the gross result from financial services is marginally down on 2008. Risk
underwriting profit increased by 28% to R248 million, underpinned by an
improved underwriting experience. The relatively lower level of assets under
management during the first half of 2009 reduced fund-based fee income, with a
commensurate negative impact on administration fee income. Containment of
costs, however, assisted in limiting the decline in overall administration
profit to 11%. Market related profit of R514 million is also 7% lower than
2008, largely attributable to lower interest earned on working capital and a
lower release of profit from the asset mismatch provision. The balance of the
asset mismatch provision was some R500 million lower at the end of 2008
compared to 2007, resulting in a relatively lower base from which profit is
released.
- The Sanlam Developing Markets net result from financial services of R85
million is 9% up on 2008 (up 13% before tax and minority shareholders`
interest).
- The South African operations more than doubled their contribution to
the gross result from financial services. Sanlam Sky Solutions
reported an increase in earnings, but the main contributor to the
growth was Channel Life, whose 2008 earnings were impacted by
expenses relating to the closure of its call centre.
- Botswana Life managed to increase its gross result from financial
services by 8%, with positive mortality experience on the annuity
book and a reduction in the credit default provision being partially
offset by the negative impacts of the weak equity markets and some
mismatch losses in the annuity portfolio.
- The rest of Africa operations reported lower earnings on an overall
basis. Most territories experienced lower new business volumes in
the current economic environment, which resulted in an under
recovery of fixed costs. Also contributing to the lower earnings are
additional bad debt provisions, a strengthening of persistency
bases, as well as lower credit life business following a general
reduction in lending activities of banks in the current environment.
- As indicated before, the retail market in the UK has been more severely
impacted by the financial crisis than South Africa. Despite some recent
improvement in sentiment and economic statistics, the first six months of 2009
has been characterised by continued economic uncertainty, rising unemployment,
poor consumer confidence and depressed financial and housing markets. This had
a particularly negative impact on the Punter Southall Group, Principal and
Buckles, whose results are directly affected by investment market performance
and business volumes. Both these indicators underperformed in the first half
of the 2009 financial year, impacting negatively on the earnings reported by
these operations. Merchant Investors provided some resilience and reported an
improved performance. The growth in rand-based earnings was further negatively
impacted by an average 9% strengthening of the rand against the British pound,
which contributed to an overall 65% decline in Sanlam UK`s net result from
financial services.
- The Institutional cluster operations were in particular affected by a lower
average level of assets under management, following the underperformance in
investment markets since June 2008.
- Sanlam Investments` net result from financial services of R264
million is down 8% on the comparable period in 2008 (down 12% to
R370 million before tax and minorities). Excluding the impact of a
release of over provisions of some R40 million (after tax), the net
result from financial services decreased by 22%, which is mainly
attributable to a decline in the average level of assets under
management in 2009 compared to the same period in 2008, as well as a
R14 million decrease in performance fees earned. A positive
development has been that both SIM Global and Octane have reached
the high water mark for a number of their portfolios and have
started earning performance fees again. Costs were also well managed
and are 9% lower than 2008, excluding the positive impact of the
release of provisions.
- Sanlam Employee Benefits` net result from financial services
decreased by 22% from R83 million in 2008 to R65 million for the
first half of 2009. Good growth in risk underwriting profit was more
than offset by an under recovery of fixed cost at Sanlam Structured
Solutions, following low new business volumes and a reduction in
interest earned on working capital.
- Sanlam Capital Markets made a welcome return to profitability and
recorded a gross result from financial services of R61 million
compared to a breakeven position in the first half of 2008. After
taxation, the net result from financial services increased by 74%
from R34 million in 2008 to R59 million. The equities division had a
very strong six months, driven by equity-backed finance
transactions. The debt division also recorded satisfactory results,
despite continued pressure from credit valuations. Deal flow at the
market activity division, however, remained subdued, which
contributed to an underperformance by this division. Capital
allocated to Sanlam Capital Markets was increased by R50 million
during the period, translating into a return of 26% on the R450
million capital base, a very satisfactory result in the prevailing
conditions.
- The underwriting results of the short-term insurance cluster were hard hit
by a number of large fire-related corporate claims, in line with a general
increase in these claims across the industry. This contributed to a 50%
decline in the cluster`s net result from financial services. Santam still
managed to achieve an underwriting margin of 1,5%, a satisfactory result
compared to the industry average. Income earned on Santam`s float was
significantly higher as a result of a higher level of float.
- Corporate administration expenses are 11% lower than 2008, the combined
effect of timing differences in the recognition of expenses and focussed cost
management.
Net investment income declined by 4%. This is mainly attributable to a lower
absolute level of capital following the utilisation of discretionary capital
for share buy-backs and corporate activity during 2008 and 2009.
Normalised headline earnings
Normalised headline earnings of R1 605 million are 28% higher than the
comparable period in 2008. The increase in normalised headline earnings is in
the main attributable to the following:
- A reduction of 6% in core earnings as discussed above.
- Investment markets performed relatively better in the first six months of
2009 than the comparable period in 2008 (refer discussion of business
environment above). The performance of the capital portfolio compared to
mandate also improved. This resulted in a turnaround of the negative
investment surpluses of R447 million recorded in 2008 to a net positive return
of R23 million in 2009.
- The 64% increase in the secondary tax on companies (STC) charge is mainly
attributable to the utilisation of available STC credits for the dividend paid
in May 2009. STC credits generated in the first half of 2009 are lower than in
2008 due to the utilisation of discretionary capital during 2008 and 2009 for
share buy-backs and other corporate activity (thereby reducing the absolute
level of capital on which investment income is earned), as well as a decrease
in the capital portfolio`s exposure to equities.
Business volumes
New business flows
New business volumes, excluding white label, increased by 3% on the first six
months of 2008.
New business volumes
for the six months ended 30 June 2009
R million 2009 2008 %
change
Sanlam Personal Finance 14 700 15 824 -7%
South Africa 10 214 11 559 -12%
Africa 4 486 4 265 5%
Sanlam Developing Markets 1 316 1 214 8%
South Africa 635 665 -5%
Africa 605 449 35%
Other international 76 100 -24%
Sanlam UK 955 807 18%
Institutional cluster 25 550 23 305 10%
Sanlam Investments 25 408 23 035 10%
Sanlam Employee Benefits 142 270 -47%
Santam 6 179 6 085 2%
New business excluding white label 48 700 47 235 3%
White label 2 785 3 750 -26%
Total new business 51 485 50 985 1%
Sanlam Personal Finance new business sales slowed down as the challenging
economic and business environment impacted on Topaz middle market sales in
particular. The Topaz market is more sensitive to the current economic
environment and investment market volatility. The combined life and non-life
sales are 7% lower than the comparable period in 2008.
- Total South African new business volumes decreased by 12% compared to 2008.
- Recurring premium life sales are 10% lower than the same period in
2008. The high interest rate and inflation environment of 2007 and
2008 continues to negatively impact disposable income, with a
commensurate negative impact on recurring premium savings and
retirement solutions. Recurring risk business is less sensitive to
these conditions and are 7% higher than 2008.
- Single premium life sales are down 13% on 2008. The market
conditions are now also impacting on Glacier`s volumes, which are 8%
lower than the comparable period in 2008. Part of the lower demand
can be attributed to clients` preference to reduce their personal
debt, but alternative investment classes, for example property, has
also become more attractive as an investment choice after decreasing
valuations over the past two years. Single premium sales of Topaz
life solutions decreased by 17% on 2008. Guaranteed plans performed
strongly in 2008, but demand slowed down in the first six months of
2009 as the recent interest rate cuts reduced the attractiveness of
guaranteed rates.
- Investment business is also struggling with lower demand for Glacier
investment solutions. The same drivers affecting Glacier life sales
are also impacting on the investment solution sales. This
contributed to a 10% reduction in new investment business volumes.
- The Namibian operations recorded a 5% increase in volumes, which is
attributable to demand for both life insurance solutions and unit trusts. The
same factors impacting on the South African operations are also affecting
Namibia.
Sanlam Developing Markets inflows are 8% higher than 2008. Excluding the
discontinued South African single premium business, new business volumes grew
by 17% - a commendable result.
- South African inflows are 5% lower than the comparable period in 2008, but
this includes the impact of discontinued single premium business. Single
premiums recorded comprise of continuations of existing business reaching
maturity date and are expected to decline over time as the in-force book winds
down. The core recurring premiums business is up 5% on 2008. Sanlam Sky
Solutions increased its new recurring premium sales by 8%, with a strong
underlying performance masked by an intentional decision to scale back on low
margin broker direct business. This decision has resulted in a marked
improvement in the quality and profitability (as measured by the value of new
business margin) of business written. Channel Life individual life sales
underperformed during the first six months of 2009, offsetting an otherwise
healthy growth contribution from Safrican and group benefits business.
- African inflows are 35% up on 2008, supported by a sterling performance from
Botswana, the largest African operation. Recurring premiums increased by 30%,
with single premiums exceeding 2008 by 37%. Both individual life and annuity
sales performed strongly in Botswana with bancassurance volumes also well up
on the comparable period in 2008. A weaker rand exchange rate also had a
positive impact on the rand-based growth recorded by Botswana Life. Apart from
Ghana, the other African operations are in general struggling to record growth
on the prior year, being affected by the economic downturn caused by low
commodity prices and the closure of mines.
- Shriram`s new business volumes of R76 million is 24% lower than 2008, in
part due to a marked switch from single to recurring business. The latter
increased by 57% on 2008. Single premiums are well down as the Indian market
did not escape the impact of the tougher economic environment. The outlook for
the rest of the year has improved, with the new distribution channel expected
to start contributing to new business volumes.
Sanlam UK started to experience a slowdown in new business volumes towards the
end of 2008 as the UK economy continued to deteriorate. This trend continued
into the first six months of 2009, with new life business volumes decreasing
by 44% on the first half of 2008. Principal contributed new business of R504
million for the six months. The combined life and investment new business
volumes are 18% up on 2008. New business volumes are only expected to improve
in 2010, as the UK economy emerges from its deepest recession in years.
The Institutional cluster recorded an overall 10% increase in new business
volumes. Retail business volumes are reflecting a similar result to Sanlam
Personal Finance, as the client bases are affected similarly by the pressure
on consumer spending power and risk aversion caused by market volatility. In
contrast, institutional business flows were particularly strong.
- Sanlam Investments new business volumes increased by 10% compared to 2008.
- The South African businesses performed strongly in the current
environment, exceeding the 2008 new business sales by 9%. The
biggest contributor is RSA segregated business, recording growth of
24%. Segregated business include an increase of R2,7 billion in the
mandate awarded by the Public Investment Corporation (PIC). The
pressure on the retail middle market is reflected in the new retail
business recorded by Sanlam Collective Investments, which is 10%
down on 2008. This was however offset by strong wholesale business
inflows, which contributed to an overall 16% increase in Sanlam
Collective Investments` new business sales compared to 2008. Sanlam
Private Investments is also experiencing the effect of the pressures
on the retail market, with its volumes decreasing by 22% on the high
base in 2008.
- New inflows in the Rest of Africa increased by 35%, with especially
segregated business performing exceptionally well.
- International (non-Africa) investment business flows are 23% lower
than the first six months of 2008. The volatile international
investment markets continued to impact on Octane and SIM Global,
with both businesses lagging the comparable period. Recent
outperformance of investment mandates, combined with a reduction in
investor risk aversion, should be positive for future net inflows
into these businesses.
- Sanlam Employee Benefits` new business volumes are 47% lower than the
comparable 2008 inflows, an overall disappointing result. This is largely
attributable to lower single premium volumes (65% lower than 2008), with new
recurring premiums decreasing by 7%. The competitiveness of Sanlam Employee
Benefits` pricing is being investigated as part of the process to regain
market share. The Group however continues to be driven by profitability and
not by pure market share.
Santam recorded a 2% increase in net premium inflows over the first six months
of 2009. Net written premiums of continued operations increased by 7%, a very
satisfactory result in the difficult industry conditions. The relatively low
level of growth is in part attributable to reinsurance reinstatement premiums
paid following the large corporate claims.
Net fund flows
The Group has been very successful in retaining funds under management and
achieved net inflows (excluding white label business) for the six months of
R8,2 billion, 12% up on the R7,3 billion in the corresponding period in 2008.
Excluding a low margin outflow at Sanlam Private Investments (refer below),
net fund inflows increased by 74% to R12,7 billion, a particularly
satisfactory result in the current environment. Total inflows increased by 2%
to R59,4 billion while outflows in respect of fund withdrawals and policy
benefits of R51,7 billion were down by 2%.
Net fund flows
for the six months ended 30 June 2009
R million 2009 2008
Sanlam Personal Finance 3 411 2 221
Life business 929 861
Investment business 2 482 1 360
Sanlam Developing Markets 610 673
Sanlam UK (111) 91
Institutional cluster 2 571 2 538
Sanlam Employee Benefits (499) (517)
Sanlam Investments 3 070 3 055
Santam 1 676 1 768
Net fund flows excluding white label 8 157 7 291
White label (480) (1 821)
Total net fund flows 7 677 5 470
The main contributors to the increase in net inflows are Sanlam Personal
Finance and Sanlam Investment Management.
- Net inflows of investment business at Sanlam Personal Finance were supported
by good retention of Namibian unit trusts. Despite lower life new business
volumes, Sanlam Personal Finance managed to increase its net inflow of life
business. This is the combined result of improved retention as well as lower
equity markets reducing the value of benefit payments. The persistency levels
of life business during the six months, measured in terms of the aggregate of
lapses, surrenders and paid-ups, deteriorated only marginally relative to that
of the first six months in 2008.
- Sanlam Investments` net inflows of R3,1 billion include a withdrawal of low
margin custody business of R4,5 billion at Sanlam Private Investments, which
will have a negligible impact on earnings. Excluding this flow, Sanlam
Investments increased its net inflows by R4,5 billion, of which R2,7 billion
is attributable to the new PIC mandate.
Value of new covered business
Despite an overall 7% decline in new life insurance business volumes, the
Group retained the profitability of new business. The total value of new life
business (VNB) of R276 million is 5% lower than that reported in 2008. Net of
minority interests VNB decreased by 3% to R243 million. The overall average
new life business margin (after minorities) increased from 2,17% to 2,23%.
Value of new covered business
for the six months ended 30 June 2009
R million 2009 2008 %
Value of new covered business 276 290 -5%
Sanlam Personal Finance 135 160 -16%
Sanlam Developing Markets 136 113 20%
Sanlam UK - 3 -100%
Sanlam Employee Benefits 5 14 -64%
Net of minorities 243 250 -3%
Present value of new business premiums 11 469 12 141 -6%
Sanlam Personal Finance 7 488 8 089 -7%
Sanlam Developing Markets 2 814 2 330 21%
Sanlam UK 463 836 -45%
Sanlam Employee Benefits 704 886 -21%
Net of minorities 10 906 11 501 -5%
New covered business margin 2,41% 2,39%
Sanlam Personal Finance 1,80% 1,98%
Sanlam Developing Markets 4,83% 4,85%
Sanlam UK - 0,36%
Sanlam Employee Benefits 0,71% 1,58%
Net of minorities 2,23% 2,17%
Sanlam Personal Finance`s VNB decreased by 16% to R135 million. This is
attributable to the lower new business volumes, partially compensated for by
the change in business mix towards risk underwriting and a strong focus on
containment of costs. The average VNB margin declined from 1,98% in 2008 to
1,80%, which still represents a satisfactory performance.
The Sanlam Developing Markets operations reported a commendable 20% increase
in gross VNB to R136 million, continuing its growth trend. The average VNB
margin decreased marginally from 4,85% to 4,83%. The South African operations`
margins improved, principally due to the intentional change in business mix
away from the low margin broker direct business. Botswana Life`s VNB margin
decreased slightly compared to the first six months of 2008, the result of a
strengthening of the persistency basis and a reduction in annuity margins
following a decline in interest rates. The VNB and margins of the other
African operations were negatively impacted by lower sales volumes and a
general strengthening of the persistency bases.
Both Sanlam UK and Sanlam Employee Benefits reported a significant reduction
in VNB in line with their new business performance.
Solvency
All of the life insurance businesses within the Group were sufficiently
capitalised at the end of June 2009. The total capital of Sanlam Life
Insurance Limited, the holding company of the Group`s major life insurance
subsidiaries, amounted to R31,6 billion on 30 June 2009. Its admissible
regulatory capital at the end of June 2009 amounted to R20,7 billion, which
covered its regulatory Capital Adequacy Requirements (CAR) 2,5 times, compared
to 2,7 times on 31 December 2008. No policyholder portfolio held a negative
bonus stabilisation reserve in excess of 7,5% of policyholder liabilities at
the end of June 2009.
Santam`s capital (shareholders` funds including bonds) constituted 42% of net
earned premiums on 30 June 2009, which is 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 2009:
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
No interim dividend has been declared. 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.
Roy Andersen Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Cape Town
2 September 2009
Sanlam Group
Interim financial statements for the six months ended 30 June 2009
Accounting policies and basis of presentation
The accounting policies adopted for purposes of the financial statements
comply with International Financial Reporting Standards (IFRS), specifically
IAS 34 on interim financial reporting, and with applicable legislation. The
condensed financial statements are presented in terms of IAS 34, with
additional disclosure where applicable, using accounting policies consistent
with those applied in the 2008 financial statements, apart from the changes
resulting from new and revised standards (refer below). 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 2008, apart from
changes in the economic assumptions.
The basis of preparation and presentation of the shareholders` information is
also consistent with that applied in the 2008 financial statements.
Application of new and revised IFRSs and interpretations
The following new or revised IFRSs and interpretations are applied in the
Group`s 2009 financial year:
- IAS 1 Revised Presentation of Financial Statements
- IAS 1 Amended Presentation of Financial Statements - Puttable Financial
Instruments and Obligations Arising on Liquidation
- IAS 32 Amended Financial Instruments: Presentation - Puttable Financial
Instruments and Obligations Arising on Liquidation
- IFRS 2 Amended Share-based Payment - Vesting Conditions and Cancellations
- May 2008 Improvements to IFRS
- Amendments to IFRIC 9 - Reassessment of Embedded Derivatives and IAS 39
Financial Instruments: Recognition and Measurement - Embedded Derivatives
- Amendment to IFRS 7 Financial Instruments: Disclosure - Improving
Disclosures about Financial Instruments
- AC 503: Amendment to AC 503 - Accounting for Black Economic Empowerment
(BEE) Transactions
The application of these standards and interpretations did not have a
significant impact on the Group`s reported results and cash flows for the six
months ended 30 June 2009 and the financial position at 30 June 2009. The
following presentational changes were introduced upon adoption of the revised
IAS 1:
- The Group income statement has been replaced with a Group statement of
comprehensive income, presenting all items of recognised income and expense in
one statement;
- The Group statement of changes in equity only includes details of
transactions with owners - non-owner changes in equity are presented in a
single line; and
- The Group balance sheet has been renamed to a Group statement of financial
position.
The following new or revised IFRSs and interpretations have effective dates
applicable to future financial years and have not been early adopted:
- IAS 27 Amended Consolidated and Separate Financial Statements (effective 1
July 2009)
- IAS 39 Amended Financial Instruments: Recognition and
Measurement - Eligible Hedged Items (effective 1 July 2009)
- IFRS 3 Revised Business Combinations (effective 1 July 2009)
- IFRS 5 Amended Non-current Assets Held for Sale and Discontinued
Operations (effective 1 July 2009)
- IFRIC 17 Distribution of Non-cash Assets to Owners (effective 1 July 2009)
- April 2009 Improvements to IFRS (mostly effective 1 January 2010)
- Amendments to IFRS 2: Group Cash-settled Share-based Payment Transactions
(effective 1 January 2010)
- AC 504: IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction in a South African Pension Fund Environment
(effective 1 April 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 cannot be quantified as
it will depend on the nature and structure of a specific business combination.
External audit review
The appointed external auditors, Ernst & Young Inc., reviewed the condensed
statement of financial position of the Sanlam Group as at 30 June 2009 and the
related condensed statements of comprehensive income, changes in equity and
cash flows for the six-month period then ended, and other explanatory notes.
The review was conducted in accordance with the International Standard on
Review Engagements 2410, Review of Interim Financial Information Performed by
the Independent Auditor of the Entity.
The external auditors have also conducted a limited assurance review of the
Sanlam Group Shareholders` Information for the six months ended 30 June 2009,
which comprises the report on group equity value, shareholders` fund at fair
value, shareholders` fund income statement and explanatory notes and report on
embedded value of covered business and related notes, in accordance with the
International Standard on Assurance Engagements 3000 Assurance Engagements
Other Than Audits or Reviews of Historical Financial Information.
Copies of the unqualified reports of Ernst & Young Inc. are available for
inspection at the registered office of the company.
Shareholders` information for the six months ended 30 June 2009
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 30 June 2009
June December
Reviewed Audited
2009 2008 2008
R R R
million million million
Embedded value of covered business 27 773 28 618 28 591
Sanlam Personal Finance 18 939 19 974 19 574
Adjusted net worth 8 032 8 300 8 275
Value of in-force 10 907 11 674 11 299
Sanlam Developing Markets 3 040 2 281 2 796
Adjusted net worth 1 215 925 1 032
Value of in-force 1 825 1 356 1 764
Sanlam UK 685 1 030 680
Adjusted net worth 238 510 234
Value of in-force 447 520 446
Sanlam Employee Benefits 5 109 5 333 5 541
Adjusted net worth 5 017 5 120 5 472
Value of in-force 92 213 69
Other Group operations 13 637 13 935 13 560
Retail cluster 2 223 2 451 2 287
Institutional cluster 5 778 6 249 6 000
Short-term insurance 5 636 5 235 5 273
Capital diversification (1 137) (1 057) (1 429)
Other capital and net worth 1 432 2 043 2 416
adjustments
41 705 43 539 43 138
Discretionary capital 2 785 3 000 2 100
Group equity value 44 490 46 539 45 238
Group equity value per share (cents) 2 172 2 254 2 213
Shareholders` fund at fair value
at 30 June 2009
June December
Reviewed Audited
2009 2008 2008
R million R million R million
Property and equipment 209 204 228
Owner-occupied properties 613 610 613
Goodwill 497 475 473
Value of business acquired 774 826 802
Other intangible assets 48 - -
Deferred acquisition costs 1 348 1 177 1 260
Investments 32 059 33 925 31 807
Sanlam businesses 13 637 13 935 13 560
Sanlam Investments 5 244 5 769 5 581
SIM Wholesale 3 603 3 778 3 903
International 1 314 1 682 1 358
Sanlam Collective Investments 327 309 320
Sanlam Personal Finance 1 425 1 125 1 423
Glacier 695 584 696
Sanlam Personal Loans 73 73 71
Multi-Data 172 172 190
Sanlam Trust 149 111 144
Sanlam Home Loans 120 61 133
Sanlam Healthcare Management 93 - 78
Other 123 124 111
Sanlam UK 776 1 305 847
Principal 253 584 299
Punter Southall Group 236 318 219
Other 287 403 329
Alfinanz 22 21 17
Coris Administration 24 46 54
Sanlam Capital Markets 510 434 365
Short-term insurance 5 636 5 235 5 273
Associated companies 225 336 234
Joint ventures 247 465 208
Safair Lease Finance - 254 -
Shriram Life Insurance and other 247 211 208
Other investments 17 950 19 189 17 805
Other equities and similar 8 472 11 346 9 036
securities
Public sector stocks and loans 550 1 171 1 411
Investment properties 491 360 491
Other interest-bearing and 8 437 6 312 6 867
preference share investments
Net term finance - - -
Term finance (4 790) (4 933) (5 101)
Assets held in respect of term 4 790 4 933 5 101
finance
Net deferred tax 279 - 352
Net working capital (1 165) (1 273) (451)
Minority shareholders` interest (748) (941) (947)
Shareholders` fund at fair value 33 914 35 003 34 137
Fair value per share (cents) 1 656 1 696 1 670
Shareholders` fund income statement
for the six months ended 30 June 2009
Six months Full year
Reviewed Audited
2009 2008 2008
R million R million R million
Result from financial services before 1 778 1 966 4 260
tax
Sanlam Personal Finance 892 895 1 975
Sanlam Developing Markets 142 126 218
Sanlam UK 13 46 68
Sanlam Employee Benefits 92 117 258
Short-term Insurance 244 403 1 161
Investment Management 370 421 825
Capital Markets 61 - (61)
Corporate and other (36) (42) (184)
Tax on financial services income (392) (397) (966)
Minority shareholders` interest (152) (235) (492)
Net result from financial services 1 234 1 334 2 802
Net investment income 555 579 1 068
Core earnings 1 789 1 913 3 870
Net project expenses (15) (40) (56)
BEE transaction costs (3) (3) (7)
Net equity-accounted headline earnings 10 (4) 16
Net investment surpluses 23 (447) (1 699)
Amortisation of value of business (37) (31) (77)
acquired
Net loss from discontinued operations - (35) (22)
Net Secondary Tax on Companies (162) (99) (59)
Normalised headline earnings 1 605 1 254 1 966
Other equity-accounted earnings - 32 33
Profit on disposal of subsidiaries and - - 3
associates
Impairments (58) (135) (244)
Normalised attributable earnings 1 547 1 151 1 758
Fund transfers 59 701 736
Attributable profit per Group statement 1 606 1 852 2 494
of comprehensive income
Notes to the Shareholders` Fund Information
for the six months ended 30 June 2009
2009 2008
Reviewed Reviewed
R million R million
1. New Business
Analysed per market:
Retail
Life business 5 696 6 485
Sanlam Personal Finance 5 061 5 820
Sanlam Developing Markets 635 665
Non-life business 13 317 15 358
Sanlam Personal Finance 5 153 5 739
Sanlam Private Investments 3 133 4 016
Sanlam Collective Investments 5 031 5 603
South African 19 013 21 843
Non-South African 6 122 5 621
Sanlam Personal Finance 4 486 4 265
Sanlam Developing Markets 681 549
Sanlam UK 955 807
Total Retail 25 135 27 464
Institutional
Group life business 552 477
Sanlam Employee Benefits 142 270
Investment Management 410 207
Non-life business 14 926 11 714
Segregated 7 920 6 379
Sanlam Multi-Manager 1 768 2 099
Sanlam Collective Investments 5 238 3 236
South African 15 478 12 191
Investment Management non-SA 1 908 1 495
Institutional 17 386 13 686
White label 2 785 3 750
Sanlam Collective Investments 2 785 3 750
Sanlam Developing Markets - -
Short-term insurance 6 179 6 085
Total new business 51 485 50 985
2. Net flow of funds
Analysed per market:
Retail
Life business 609 851
Sanlam Personal Finance 741 768
Sanlam Developing Markets (132) 83
Non-life business (557) 3 922
Sanlam Personal Finance 1 248 1 300
Sanlam Private Investments (2 571) 2 583
Sanlam Collective Investments 766 39
South African 52 4 773
Non-South African 2 053 834
Sanlam Personal Finance 1 422 153
Sanlam Developing Markets 742 590
Sanlam UK (111) 91
Total Retail 2 105 5 607
Institutional
Group life business (773) (1 218)
Sanlam Employee Benefits (499) (517)
Investment Management (274) (701)
Non-life business 4 738 1 552
Segregated 3 032 2 974
Sanlam Multi-Manager (210) (2 349)
Sanlam Collective Investments 1 916 927
South African 3 965 334
Investment Management non-SA 411 (418)
Total Institutional 4 376 (84)
White label (480) (1 821)
Sanlam Collective Investments (480) (1 821)
Sanlam Developing Markets - -
Short-term insurance 1 676 1 768
Total net flow of funds 7 677 5 470
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,
in management`s view, not a true representation of the earnings
attributable to the Group`s shareholders, specifically in instances
where the share prices and/or the number of shares held by the
policyholders` fund varies significantly. The Group therefore
calculates normalised diluted earnings per share to eliminate the
impact of investments in Sanlam shares and Group subsidiaries held
by the policyholders` fund.
Six months Full
Reviewed year
Audited
2009 2008 2008
cents cents cents
Normalised diluted earnings per
share:
Net result from financial services 60,4 62,6 133,8
Core earnings 87,5 89,7 184,8
Headline earnings 78,5 58,8 93,9
Profit attributable to shareholders` 75,7 54,0 84,0
fund
R R R
million million million
Analysis of normalised earnings
(refer shareholders` fund income
statement):
Net result from financial services 1 234 1 334 2 802
Core earnings 1 789 1 913 3 870
Headline earnings 1 605 1 254 1 966
Profit attributable to shareholders` 1 547 1 151 1 758
fund
million million million
Adjusted number of shares:
Weighted average number of shares for 2 015,1 2 068,1 2 043,5
diluted earnings per share (refer
below)
Add: Weighted average Sanlam shares 29,3 64,5 50,5
held by policyholders
Adjusted weighted average number of 2 044,4 2 132,6 2 094,0
shares for normalised diluted
earnings per share
Number of ordinary shares in issue at 2 190,1 2 303,6 2 303,6
beginning of period
Shares cancelled (30,1) (63,5) (113,5)
Number of ordinary shares in issue 2 160,0 2 240,1 2 190,1
Shares held by subsidiaries in (159,8) (218,5) (197,3)
shareholders` fund
Outstanding long-term incentive 37,6 43,2 45,5
scheme shares and options
Number of shares under option to be (10,5) (14,4) (12,7)
issued at fair value
Convertible deferred shares held by 20,9 13,9 18,6
Ubuntu-Botho
Adjusted number of shares for value 2 048,2 2 064,3 2 044,2
per share
4. Share repurchases
The Sanlam shareholders granted general authorities to the Group at
the 2008 and 2009 annual general meetings to repurchase Sanlam
shares in the market. The Group did not acquire any shares during
2009 in terms of the general authorities.
Embedded value of covered business
at 30 June 2009
June December
Reviewed Audited
2009 2008 2008
Note R R R
million million million
Sanlam Personal Finance 18 939 19 974 19 574
Adjusted net worth 8 032 8 300 8 275
Net value of in-force covered 10 907 11 674 11 299
business
Value of in-force covered 12 649 13 309 12 809
business
Cost of capital (1 613) (1 528) (1 378)
Minority shareholders` (129) (107) (132)
interest
Sanlam Developing Markets 3 040 2 281 2 796
Adjusted net worth 1 215 925 1 032
Net value of in-force covered 1 825 1 356 1 764
business
Value of in-force covered 2 428 1 956 2 432
business
Cost of capital (273) (280) (284)
Minority shareholders` (330) (320) (384)
interest
Sanlam UK 685 1 030 680
Adjusted net worth 238 510 234
Net value of in-force covered 447 520 446
business
Value of in-force covered 479 560 481
business
Cost of capital (32) (40) (35)
Minority shareholders` - - -
interest
Sanlam Employee Benefits 5 109 5 333 5 541
Adjusted net worth 5 017 5 120 5 472
Net value of in-force covered 92 213 69
business
Value of in-force covered 1 014 1 075 824
business
Cost of capital (922) (862) (755)
Minority shareholders` - - -
interest
Embedded value of covered 27 773 28 618 28 591
business
Adjusted net worth (1) 14 502 14 855 15 013
Net value of in-force covered 1 13 271 13 763 13 578
business
Embedded value of covered 27 773 28 618 28 591
business
1) Excludes subordinated debt funding of Sanlam Life.
Change in embedded value of covered business
for the six months ended 30 June 2009
June December
Reviewed Audited
2009 2008 2008
R million Note Total Value Adjus- Total Total
of in- ted net
force worth
Embedded value of covered 28 591 13 578 15 013 28 432 28 432
business at the beginning
of the year
Value of new business 2 243 845 (602) 250 612
Net earnings from 1 145 (224) 1 369 1 200 1 885
existing covered business
Expected return on value 839 839 - 886 1 838
of in-force business
Expected transfer of - (1 155) 1 155 - -
profit to adjusted net
worth
Operating experience 289 101 188 250 278
variances 3
Operating assumption 17 (9) 26 64 (231)
changes 4
Expected investment 546 - 546 588 1 180
return on adjusted net
worth
Embedded value earnings 1 934 621 1 313 2 038 3 677
from operations
Economic assumption (1 020) (1 013) (7) (705) 356
changes 5
Tax changes - change in - - - 196 215
corporate tax rates
Investment variances - 176 129 47 (234) (1 435)
value of in-force
Investment variances - (209) - (209) (368) (1 864)
investment return on
adjusted net worth
Exchange rate movements (96) (88) (8) 103 23
Net project expenses 6 (15) - (15) (32) (53)
Embedded value earnings 770 (351) 1 121 998 919
from covered business
Acquired value of in-force 228 44 184 - -
Change in utilisation of (292) - (292) (175) 197
capital diversification
Net transfers from (1 524) - (1 524) (637) (957)
covered business
Embedded value of covered 27 773 13 271 14 502 28 618 28 591
business at the end of the
period
Analysis of earnings from
covered business
Sanlam Personal Finance 446 (392) 838 490 453
Sanlam Developing Markets 86 17 69 180 659
Sanlam UK 4 1 3 139 (36)
Sanlam Employee Benefits 234 23 211 189 (157)
Embedded value earnings 770 (351) 1 121 998 919
from covered business
1) Comparative information for June 2008 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.
Value of new Business
for the six months ended 30 June 2009
Six months Full year
Reviewed Audited
R million Note 2009 2008 2008
Value of new business (at point of
sale):
Gross value of new business 321 332 787
Sanlam Personal Finance 154 178 419
Sanlam Developing Markets 156 128 343
Sanlam UK 1 6 6
Sanlam Employee Benefits 10 20 19
Cost of capital (45) (42) (89)
Sanlam Personal Finance (19) (18) (33)
Sanlam Developing Markets (20) (15) (41)
Sanlam UK (1) (3) (5)
Sanlam Employee Benefits (5) (6) (10)
Value of new business 276 290 698
Sanlam Personal Finance 135 160 386
Sanlam Developing Markets 136 113 302
Sanlam UK - 3 1
Sanlam Employee Benefits 5 14 9
Value of new business attributable
to:
Shareholders` fund 2 243 250 612
Sanlam Personal Finance 133 157 377
Sanlam Developing Markets 105 76 225
Sanlam UK - 3 1
Sanlam Employee Benefits 5 14 9
Minority shareholders` interest 33 40 86
Sanlam Personal Finance 2 3 9
Sanlam Developing Markets 31 37 77
Sanlam UK - - -
Sanlam Employee Benefits - - -
Value of new business 276 290 698
Geographical analysis:
South Africa 196 198 507
Africa 77 85 181
Other international 3 7 10
Value of new business 276 290 698
Analysis of new business
profitability:
Before minorities:
Present value of new business 11 469 12 141 26 033
premiums
Sanlam Personal Finance 7 488 8 089 17 371
Sanlam Developing Markets 2 814 2 330 5 332
Sanlam UK 463 836 1 484
Sanlam Employee Benefits 704 886 1 846
New business margin 2,41% 2,39% 2,68%
Sanlam Personal Finance 1,80% 1,98% 2,22%
Sanlam Developing Markets 4,83% 4,85% 5,66%
Sanlam UK 0,00% 0,36% 0,07%
Sanlam Employee Benefits 0,71% 1,58% 0,49%
After minorities:
Present value of new business 10 906 11 501 24 459
premiums
Sanlam Personal Finance 7 395 8 020 17 080
Sanlam Developing Markets 2 344 1 759 4 049
Sanlam UK 463 836 1 484
Sanlam Employee Benefits 704 886 1 846
New business margin 2,23% 2,17% 2,50%
Sanlam Personal Finance 1,80% 1,96% 2,21%
Sanlam Developing Markets 4,48% 4,32% 5,56%
Sanlam UK 0,00% 0,36% 0,07%
Sanlam Employee Benefits 0,71% 1,58% 0,49%
Notes to the embedded value of covered business
for the six months ended 30 June 2009
1. Value of in-force Gross Cost of Net Change
sensitivity analysis value of capital value of from
in-force in-force base
business business value
R R R %
million million million
Base value 16 053 (2 782) 13 271
- Risk discount rate 15 108 (3 382) 11 726 (12)
increase by 1%
2. Value of new business Gross Cost of Net Change
sensitivity analysis value of capital value of from
new new base
business business value
R R R %
million million million
Base value 280 (37) 243
- Risk discount rate 241 (43) 198 (19)
increase by 1%
Six months Full
Reviewed year
Audited
2009 2008 2008
R R R
million million million
3. Operating experience
variances
Risk experience 167 90 307
Investment guarantee 64 24 (117)
reserve
Working capital and other 58 136 88
Total operating experience 289 250 278
variances
4. Operating assumption
changes
Mortality and morbidity 34 (13) (196)
Persistency (6) (34) (31)
Modelling improvements and (11) 111 (4)
other
Total operating assumption 17 64 (231)
changes
5. Economic assumption
changes
Investment yields and risk (707) (710) 363
premiums
Long-term asset mix (313) 5 (7)
assumptions
Total economic assumption (1 020) (705) 356
changes
6. 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.
June December
Reviewed Audited
2009 2008 2008
% % %
7. Economic assumptions
Gross investment return, risk discount
rate and inflation
Sanlam Life:
Point used on the relevant yield 9 year 9 year 9 year
curve
Fixed-interest securities 9,2 10,7 7,3
Equities and offshore investments 12,7 14,2 10,8
Hedged equities 9,7 11,2 7,8
Property 10,2 11,7 8,3
Cash 8,2 9,7 6,3
Return on required capital 10,0 12,2 8,8
Inflation rate 6,2 7,7 4,3
Risk discount rate 11,7 13,2 9,8
Merchant Investors:
Point used on the relevant yield 15 year 15 year 15 year
curve
Fixed-interest securities 4,1 5,2 3,7
Equities and offshore investments 7,3 8,4 7,0
Hedged equities 7,3 8,4 7,0
Property 7,3 8,4 7,0
Cash 4,1 5,2 3,7
Return on required capital 4,1 5,2 3,7
Inflation rate 3,3 4,5 2,9
Risk discount rate 7,8 8,9 7,5
SDM Limited:
Point used on the relevant yield 6 year 6 year 6 year
curve
Fixed-interest securities 8,7 11,0 7,3
Equities and offshore investments 12,2 14,5 10,8
Hedged equities n/a n/a n/a
Property 9,7 12,0 8,3
Cash 7,7 10,0 6,3
Return on required capital 10,0 12,3 8,6
Inflation rate 5,7 8,0 4,3
Risk discount rate 11,2 13,5 9,8
Botswana Life Insurance:
Fixed-interest securities 10,5 10,5 10,5
Equities and offshore investments 14,0 14,0 14,0
Hedged equities n/a n/a n/a
Property 11,5 11,5 11,5
Cash 9,5 9,5 9,5
Return on required capital 10,6 10,6 10,6
Inflation rate 7,5 7,5 7,5
Risk discount rate 14,0 14,0 14,0
Asset mix for assets supporting the
required capital
Sanlam Life:
Equities 34 44 44
Hedged equities 13 13 13
Property 3 3 3
Fixed-interest securities 15 25 25
Cash 35 15 15
100 100 100
Merchant Investors:
Equities - - -
Hedged equities - - -
Property - - -
Fixed-interest securities - - -
Cash 100 100 100
100 100 100
SDM Limited:
Equities 50 50 50
Hedged equities - - -
Property - - -
Fixed-interest securities - - -
Cash 50 50 50
100 100 100
Botswana Life Insurance:
Equities 15 15 15
Hedged equities - - -
Property 10 10 10
Fixed-interest securities 25 25 25
Cash 50 50 50
100 100 100
Group financial statements
for the six months ended 30 June 2009
Contents
Group statement of financial position
Group statement of comprehensive income
Group statement of changes in equity
Group cash flow statement
Notes to the financial statements
Group statement of financial position
at 30 June 2009
June December
2009 2008
Reviewed Audited
R million R million
Assets
Property and equipment 376 382
Owner-occupied properties 651 652
Goodwill 2 668 2 623
Other intangible assets 50 -
Value of business acquired 1 205 1 309
Deferred acquisition costs 2 047 1 970
Long-term reinsurance assets 493 506
Investments 262 316 268 530
Properties 15 490 15 981
Equity-accounted investments 1 314 1 317
Equities and similar securities 119 926 120 284
Public sector stocks and loans 46 460 50 531
Debentures, insurance policies, preference 34 763 35 309
shares and other loans
Cash, deposits and similar securities 44 363 45 108
Deferred tax 572 712
Short-term insurance technical assets 2 665 2 250
Working capital assets 34 981 38 974
Trade and other receivables 26 396 28 908
Cash, deposits and similar securities 8 585 10 066
Total assets 308 024 317 908
Equity and Liabilities
Shareholders` fund 27 063 27 651
Minority shareholders` interest 2 370 2 596
Total equity 29 433 30 247
Long-term policy liabilities 225 111 229 268
Insurance contracts 116 101 120 879
Investment contracts 109 010 108 389
Term finance 6 471 6 763
Margin business 2 882 2 830
Other interest-bearing liabilities 3 589 3 933
External investors in consolidated funds 9 273 9 822
Cell owners` interest 475 447
Deferred tax 303 440
Short-term insurance technical provisions 8 700 8 229
Working capital liabilities 28 258 32 692
Trade and other payables 25 428 29 325
Provisions 1 541 1 453
Taxation 1 289 1 914
Total equity and liabilities 308 024 317 908
Group statement of comprehensive income
for the six months ended 30 June 2009
2009 2008
Reviewed Reviewed
R million R million
Net income 15 854 6 572
Financial services income 15 034 13 816
Reinsurance premiums paid (1 765) (1 624)
Reinsurance commission received 147 195
Investment income 8 863 8 250
Investment surpluses (6 519) (14 212)
Finance cost - margin business (114) (126)
Change in fair value of external investors 208 273
liability
Net insurance and investment contract benefits (7 513) 1 446
and claims
Long-term insurance and investment contract (3 219) 5 205
benefits
Short-term insurance claims (5 776) (5 107)
Reinsurance claims received 1 482 1 348
Expenses (5 383) (5 173)
Sales remuneration (2 127) (1 987)
Administration costs (3 256) (3 186)
Impairment of investments and goodwill (62) (135)
Amortisation of value of business acquired (37) (31)
Net operating result 2 859 2 679
Equity-accounted earnings (5) 63
Finance cost - other (164) (160)
Profit before tax 2 690 2 582
Taxation (853) (528)
Shareholders` fund (613) (419)
Policyholders` fund (240) (109)
Profit from continuing operations 1 837 2 054
Discontinued operations - (63)
Profit for the period 1 837 1 991
Other comprehensive income
Movement in foreign currency translation (383) 587
reserve
Comprehensive income for the period 1 454 2 578
Allocation of comprehensive income:
Profit for the period 1 837 1 991
Shareholders` fund 1 606 1 852
Minority shareholders` interest 231 139
Comprehensive income for the period 1 454 2 578
Shareholders` fund 1 303 2 313
Minority shareholders` interest 151 265
Earnings attributable to shareholders of the
company (cents):
Basic earnings per share 81,6 91,4
Diluted earnings per share 79,7 89,5
Earnings attributable to shareholders of the
company from continuing operations (cents):
Basic earnings per share 81,6 93,1
Diluted earnings per share 79,7 91,2
Group statement of changes in equity
for the six months ended 30 June 2009
2009 2008
Reviewed Reviewed
R million R million
Shareholders` fund:
Balance at beginning of the period 27 651 29 334
Comprehensive income 1 303 2 313
Profit for the period 1 606 1 852
Other comprehensive income: movement in
foreign currency translation reserve (303) 461
Net movement in treasury shares 633 (684)
Net realised investment surpluses on treasury
shares (146) (159)
Cost of net treasury shares
disposed/(acquired) (1) 779 (525)
Share-based payments 45 49
Dividends paid (2) (1 954) (1 907)
Shares cancelled (615) (1 439)
Balance at end of the period 27 063 27 666
Minority shareholders` interest:
Balance at beginning of the period 2 596 2 220
Comprehensive income 151 265
Profit for the period 231 139
Other comprehensive income: movement in
foreign currency translation reserve (80) 126
Net movement in treasury shares 9 69
Net realised investment surpluses on treasury
shares (13) 47
Cost of net treasury shares disposed (1) 22 22
Share-based payments 9 7
Dividends paid (279) (245)
Acquisitions, disposals and other movements in
minority interests (116) 168
Balance at end of the period 2 370 2 484
Shareholders` fund 27 651 29 334
Minority shareholders` interest 2 596 2 220
Total equity at beginning of the period 30 247 31 554
Shareholders` fund 27 063 27 666
Minority shareholders` interest 2 370 2 484
Total equity at end of the period 29 433 30 150
(1) Comprises movement in cost of shares held by subsidiaries and the share
incentive trust.
(2) Dividend of 98 cents per share paid during 2009 (2008: 93 cents per share)
in respect of the 2008 financial year.
Group cash flow statement
for the six months ended 30 June 2009
2009 2008
Reviewed Reviewed
R million R million
Net cash inflow from operating activities 357 5 746
Net cash (outflow)/inflow from investment (2 411) 4 679
activities
Net cash outflow from financing activities (147) (1 881)
Net (decrease)/increase in cash and cash
equivalents (2 201) 8 544
Cash, deposits and similar securities at
beginning of the period 55 145 51 309
Cash, deposits and similar securities at end
of the period 52 944 59 853
Non-current assets classified as held for - (915)
sale
Cash, deposits and similar securities at end
of the period - continuing operations 52 944 58 938
Cash inflow from discontinued operations - 103
Cash, deposits and similar securities at
beginning of the period - discontinued
operations - 812
Cash, deposits and similar securities at end
of the period - discontinued operations - 915
Notes to the financial statements for the six months ended 30 June 2009
2009 2008
Reviewed Reviewed
cents cents
1. Earnings per share
Basic earnings per share:
Headline earnings 84,6 96,5
Profit attributable to shareholders` fund 81,6 91,4
Diluted earnings per share:
Headline earnings 82,6 94,5
Profit attributable to shareholders` fund 79,7 89,5
R million R million
Analysis of earnings:
Profit attributable to shareholders 1 606 1 852
Less: Equity-accounted non-headline earnings - (32)
Plus: Impairment of investments and goodwill 58 135
Headline earnings 1 664 1 955
Headline earnings include re-measurements of investment properties, which are
largely attributable to policyholder funds.
million million
Number of shares:
Number of ordinary shares in issue at beginning of 2 190,1 2 303,6
period
Less: Weighted average number of shares cancelled (20,1) (31,8)
Less: Weighted average Sanlam shares held by (202,0) (245,6)
subsidiaries (including policyholders)
Weighted average number of shares for basic 1 968,0 2 026,2
earnings per share
Add: Weighted conversion of deferred shares 20,0 13,1
Add: Total number of shares and options 37,6 43,2
Less: Number of shares (under option) that would (10,5) (14,4)
have been issued at fair value
Weighted average number of shares for diluted 2 015,1 2 068,1
earnings per share
2. Segmental information
2009 2008
Reviewed Reviewed
R million R million
Segment financial services income (per 13 808 12 880
shareholders` fund information)
Sanlam Personal Finance 3 184 3 090
Sanlam Developing Markets 1 794 1 504
Sanlam UK 182 182
Sanlam Employee Benefits 1 056 1 006
Short-term Insurance 6 415 5 829
Sanlam Investments 928 1 097
Sanlam Capital Markets 162 97
Corporate, consolidation and other 87 75
IFRS adjustments 1 226 936
Total financial services income 15 034 13 816
Segment result (per shareholders` fund information
after tax and minorities) 1 547 1 151
Sanlam Personal Finance 855 (207)
Sanlam Developing Markets 46 46
Sanlam UK (41) 70
Sanlam Employee Benefits 194 122
Short-term Insurance 153 33
Sanlam Investments 262 249
Sanlam Capital Markets 59 34
Corporate, consolidation and other 19 804
Reverse minority shareholders` interest included 231 139
in segment result
Fund transfers 59 701
Total profit for the period 1 837 1 991
3. Pension and retirement fund fraud investigation
Shareholders are referred to the ongoing investigations by the Financial
Services Board (FSB) and the National Prosecuting Authorities into alleged
fraud within a number of pension and retirement funds. The events in question
took place in the mid to late 1990`s. Sanlam acted as administrator for three
of these funds at the time and has been supporting the authorities since
their investigation started in 2004.
Sanlam in 2006 made a payment in good faith to the funds, representing the
benefit, plus interest, that Sanlam indirectly received through the sale of a
company that previously formed part of the Sanlam group, which was the
controlling shareholder of the participating employers of three of the funds.
The curator of the funds subsequently issued civil claims against a number of
parties, including Sanlam, for the alleged losses suffered by the funds.
Sanlam and the curator of the funds are involved in litigation in respect of
the merits of his claims against Sanlam. Sanlam was not involved in
fraudulent or illegal activities relating to these cases.
We are confident that, inter alia through the involvement of the FSB, an
amicable resolution to this matter will be reached in due course.
4. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2008
annual report. The circumstances surrounding these contingent liabilities
remained materially unchanged.
5. 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 30 June 2009 as reflected in these financial statements.
Group secretary
Johan Bester
Registered office Transfer secretaries:
2 Strand Road, Bellville Computershare Investor Services
7530, South Africa (Proprietary) Limited
telephone +27 21 947-9111 (Registration number: 2004/003647/07)
Fax +27 21 947-3670 70 Marshall Street, Johannesburg 2001,
Postal address South Africa
PO Box 1, Sanlamhof 7532, PO Box 61051, Marshalltown 2107, South
South Africa Africa
Tel +27 (0)11 373-0000
Fax +27 (0)11 688-5200
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), SA Nkosi,
I Plenderleith(2), GE Rudman, RV Simelane, DK Smith, ZB Swanepoel,
PL Zim
(1) Executive
(2) British
Bellville
3 September 2009
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 03/09/2009 08:00:02 Produced by the JSE SENS Department.
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