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SLM
SLM
SLM - Sanlam Group - Sanlam Group Interim Results for the six months ended 30
June 2011
SANLAM GROUP
Incorporated in the Republic of South Africa
Registered name: Sanlam Limited
(Registration number 1959/001562/06)
"Sanlam" or "the Company"
JSE share code (primary listing): SLM
NSX share code: SLA
ISIN: ZAE000070660
Sanlam Group Interim Results for the six months ended 30 June 2011
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
Change in Group Equity Value
Return on 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 2011
Key features
Earnings
* Net result from financial services per share increased by 22%
* Normalised headline earnings per share up 35%
Business volumes
* New business volumes up 11% to R55 billion
* Net value of new covered business up 26% to R356 million
* Net new covered business margin of 2,52%, up from 2,32%
* Net fund inflows of R11 billion, up 72%
Group Equity Value
* Group Equity Value per share of R28,77
* Annualised return on Group Equity Value per share of 12,8%
* Adjusted annualised return on Group Equity Value per share of 12,6%
Capital management
* Discretionary capital of R3,2 billion at 30 June 2011
* Sanlam Life CAR cover of 3,2 times
Sanlam Investments: assets under management of R504 billion
Salient results
for the six months ended 30 June 2011
2011 2010 %
SANLAM GROUP
Earnings
Net result from financial services per
share cents 84,7 69,4 22%
Normalised headline earnings per
share (1) cents 108,6 80,5 35%
Diluted headline earnings per share cents 109,6 84,1 30%
Net result from financial services R million 1 716 1 422 21%
Normalised headline earnings (1) R million 2 202 1 650 33%
Headline earnings R million 2 205 1 710 29%
Group administration cost ratio (2) % 29,5 29,1
Group operating margin (3) % 19,8 17,9
Business volumes
New business volumes R million 55 062 49 781 11%
Net fund flows R million 11 418 6 649 72%
Net new covered business
Value of new covered business R million 356 283 26%
Covered business PVNBP (4) R million 14 112 12 220 15%
New covered business margin (5) % 2,52 2,32
GROUP EQUITY VALUE
Group Equity Value (6) R million 57 885 57 361 1%
Group Equity Value per share (6) cents 2 877 2 818 2%
Annualised return on Group Equity
Value per share (7) % 12,8 9,1
Adjusted annualised return on Group
Equity Value per share (8) % 12,6 13,2
Sanlam Life Insurance Limited
Shareholders` fund (6) R million 40 572 40 521
Capital Adequacy Requirements
(CAR) (6) R million 7 475 7 375
CAR covered by prudential capital (6) Times 3,2 3,4
Notes
(1) Normalised headline earnings = headline earnings, excluding fund
transfers.
(2) Administration costs as apercentage of income after sales remuneration.
(3) Result from financial services as a percentage of income after sales
remuneration.
(4) PVNBP = present value of new business premiums and is equal to the present
value of new recurring premiums plus single premiums.
(5) New covered business margin = value of new covered business as a
percentage of PVNBP.
(6) Comparative figures are as at 31 December 2010.
(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.
(8)Return on Group Equity Value per share, based on investment return
assumptions as at the beginning of the period.
Executive review
It is particularly pleasing to present another set of satisfactory results to
our stakeholders, delivering on our promise of sustained value creation.
The Group`s strategy, focussed on the five pillars of optimal capital
utilisation, earnings growth, costs and efficiencies, diversification and
transformation, has been in place for a number of years and remains relevant
in a continuously changing world. Our strategy provided a solid base to
perform in a challenging business environment over the last three years. The
first half of the 2011 financial year was no exception.
In the 2010 annual report we indicated that we did not expect the South
African economy to stage a large-scale recovery, but to reflect slow, yet
steady progress. We also expected volatility to remain in global investment
markets, as well as weakness in developed economies. These expectations
summarise actual conditions experienced in the first six months of 2011.
Despite overall positive economic growth in South Africa, the economy remains
fragile with many consumers still struggling with high debt levels despite
historic low lending rates. Increases in administered prices aggravate the
pressure on disposable income and are also expected to reflect in an increase
in inflation over the next year. The other African economies in which the
Group operates continue to exhibit a delayed recovery on the back of higher
resource prices. Operating conditions in Botswana were impacted by industrial
action in the public sector, of which the full adverse impact on business
results may still materialise. Against this backdrop, the Group delivered a
solid performance.
Our primary performance target is to optimise shareholder value through
maximising the return on Group Equity Value (ROGEV) per share. This measure of
performance is regarded as the most appropriate given the nature of the
Group`s diversified business and incorporates the result of all the major
value drivers in the business.
The ROGEV target for 2011 is 12,4%, based on the objective to exceed the
Group`s cost of capital by 100 basis points. Cost of capital is set at the
government (9-year) bond yield at the start of each financial year plus 300
basis points. Over a short-term measurement period the actual return achieved
can be distorted by volatile market movements. An `adjusted` ROGEV that aims
to exclude the impact of investment market volatility and other significant
items not under management`s control is therefore also reported. This is
calculated principally by assuming that for purposes of the investment return
earned on the supporting capital of covered business and the valuation of
other Group operations, the investment return assumptions used at the
beginning of the reporting period were actually achieved in that period.
The actual annualised ROGEV per share achieved for the first half of 2011 was
12,8%, impacted negatively by unfavourable equity market performance, but
partly offset by the release in the valuation base of the allowance for
Secondary Tax on Companies (`STC`). This follows the imminent replacement of
STC with a dividend withholding tax effective 1 April 2012. The adjusted
annualised ROGEV per share for the same period amounted to 12,6%, exceeding
the target. Sustainable value creation remains a key component of the Group`s
strategy. On a cumulative basis the Group has outperformed the ROGEV
performance target since being demutualised in 1998.
Other key performance indicators for the Group`s interim results are as
follows:
* Net result from financial services increased by 22% on 2010 to 84,7 cents
per share;
* New business volumes of R55 billion, up 11% on 2010;
* Value of new life business up 26% to R356 million; and
* Net fund inflows of R11 billion in 2011 compared to R7 billion in 2010.
Sanlam shareholders have been handsomely rewarded by the success of the
Group`s strategy over the past few years. Over the last five years, the Sanlam
share price (excluding dividends) significantly outperformed the major
JSE/FTSE indices.
Delivering on strategy
We made steady progress on the priorities for 2011 that were outlined in the
Group`s 2010 Integrated Annual Report. Some major initiatives are:
* Pursue profitable growth opportunities with the aim of efficiently
redistributing discretionary capital
Agreement has been reached with the Shriram Group, our partners in India, to
increase Sanlam`s exposure to the financial services activities of the Shriram
Group. These are held through a holding company, Shriram Capital, and include
commercial financing, retail financing, a distributor of wealth products and
stock broking businesses, as well as a 51% holding in each of the life and
general insurance joint ventures with Sanlam.The activities of all these
businesses are closely interrelated through cross selling, shared management
and services as well as a shared distribution force.A Sanlam investment in
Shriram Capital therefore better aligns the current and the future expansion
interests of Sanlam with that of our Indian partner, while it also provides
Sanlam access to the strong growth and profit generating capacity of the
financing entities. This investment is also in line with Sanlam`s strategy to
diversify both geographically and into broader financial services. In terms of
the agreement with Shriram, Sanlam will subscribe for an effective 26%
interest in Shriram Capital through a cash contribution of R1,9 billion, while
Sanlam`s 26% interest in both Shriram Life Insurance and Shriram General
Insurance will also be transferred to Shriram Capital. The existing management
and governance arrangements in the insurance ventures, as well as Sanlam`s
entitlement to acquire a further 23% in both ventures, will remain unchanged.
The transaction is still subject to regulatory and SARB approval.
We are also investigating a number of opportunities for expansion in Africa.
This includes potential consolidation in some markets, as well as expansion
into new countries, with Mozambique likely to be added in 2011. Other
initiatives are at various stages of development and further information will
be provided when appropriate. The potential for expansion into South East Asia
will also be considered during the remainder of the year.
* Expand our adviser and broker footprint
Both SPF and SDM are expanding their distribution footprint. After a
reduction in SDM`s South African sales force as part of its focus on writing
quality business, steady progress is being made to increase adviser numbers
again. Nucleus, our Independent Financial Adviser (IFA) controlled investment
platform in the United Kingdom (UK) continues to grow strongly. Net inflows of
R3,7 billion were achieved during the first half of 2011, increasing Nucleus`
funds under administration to R13 billion. The target is to further expand our
distribution reach during the remainder of the year.
* To ensure appropriate strategic focus across the Group, the management
structure was changed with effect from 1 July 2011 (reported results for the
first six months of 2011 are still based on the old structure):
- Emerging markets outside of South Africa have been identified as a strategic
future growth accelerator for the Group. To ensure appropriate management
attention on these markets, all of the operations in Africa (excluding South
Africa) and India have been combined into a Sanlam Emerging Markets cluster
under the leadership of Heinie Werth (former chief executive of Sanlam
Developing Markets). This includes operations formerly managed within the
Sanlam Personal Finance, Short-term Insurance and Institutional clusters,
thereby effectively transforming the Group`s product-based approach in
emerging markets into a holistic country-based approach. This will enable
structured and focussed development of the Group`s exposure in these markets
and contribute to leveraged growth opportunities.
- The South African consumer landscape is continuously transforming, with
particularly entry-level clients migrating to the middle-income market. In
line with the Group`s client centric strategy to provide clients with a
superior `Journey For Life` experience, it became appropriate to merge the
South African operations of Sanlam Developing Markets with that of Sanlam
Personal Finance under the leadership of Lize Lambrechts. This will ensure
improved client service and the opportunity for a seamless addition of Sanlam
solutions to clients` portfolios as their needs and level of disposable income
change. At the same time it will ensure better coordination in targeting the
full spectrum of the South African retail client market.
- The Group`s presence in the developed markets is primarily aimed at
providing South African retail and institutional clients with international
investment opportunities, while augmenting these niche operations with some
local distribution footprint to enhance efficiency and economies of scale. The
Sanlam UK operations are essentially investment management businesses and
directly linked to the Institutional clusters` operations in these markets.
The potential exists to extract further synergies from the Group`s different
UK operations. Management responsibility for Sanlam UK has accordingly been
transferred to the Institutional cluster under Johan van der Merwe to ensure
focussed management of the Group`s developed market exposure.
We are confident that the new management structure will contribute to enhanced
growth and value creation for all our stakeholders.
* Expand our customer base in South Africa through innovation in product
design and distribution mechanisms.
The restructuring of the South African retail business (as outlined above) is
an important step towards focussed management of changing client needs,
including the further development of innovative product solutions and
distribution channels. This will be a key focus for Sanlam Personal Finance.
Within the middle-income and affluent market segments, two new innovative
solutions were launched since the fourth quarter of 2010. The Cumulus single
premium savings solution was launched in 2011 to alleviate the impact of low
short-term interest rates on sales of the traditional guaranteed solutions.
Glacier also launched its international offering in October 2010. Both
products were well accepted in the market. The development of MiWay`s platform
for the direct distribution of life insurance solutions will add to the
Group`s distribution platforms.
Capital management
The Group held discretionary capital of R4 billion at the end of 2010. During
2011, R170 million was added to the pool from the disposal of Fundamo.
Utilisation of discretionary capital comprised of R944 million to acquire 34,8
million Sanlam shares in terms of the share buy-back programme, R71 million
for the acquisition of some 552 000 Santam shares, R31 million for the
establishment of our Nigerian life operations and R87 million for the
acquisition of Border Asset Management in the UK and other smaller
transactions. The net effect of these cash flows, allowance for illiquid
assets and investment return earned on the discretionary capital portfolio,
was to reduce the level of discretionary capital to R3,2 billion at 30 June
2011. Capital efficiency is a major strategic focus of the Group and any
discretionary capital that will not be used for corporate activity within a
reasonable timeframe will be returned to shareholders. The discretionary
capital at 30 June 2011 is substantially earmarked for corporate activity and
expansion of the Group`s footprint in Africa and India. Further share buy-
backs will also be considered in periods of share price weakness.
Looking ahead
Operating conditions are expected to remain difficult for the remainder of
2011. The economies of developed markets are likely to remain weak with
downside risk increasing significantly since the end of June. This elevates
the risk of a slowdown in demand for commodities, which will impact on growth
in the resource-based economies in which the Group operates. Volatility in
investment markets is commensurately also expected to remain, with global
markets sharply down since the end of June. The outlook for the remainder of
the 2011 financial year therefore remains cautious. Investment market
performance for the second half of the year will also impact on the level of
headline earnings growth to be reported for the full 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 statements may also relate to our future
prospects,developments and business strategies. These are forward-looking
statements as defined in the United States Private Securities Litigation
Reform Act of 1995. Words such as "believe", "anticipate", "intend", "seek",
"will", "plan", "could", "may", "endeavour" and "project" and similar
expressions are intended to identify such forward-looking statements, but are
not the exclusive means of identifying such statements. Forward-looking
statements involve inherent risks and uncertainties and, if one or more of
these risks materialise, or should underlying assumptions prove incorrect,
actual results may be very different from those anticipated. Forward-looking
statements apply only as of the date on which they are made, and Sanlam does
not undertake any obligation to update or revise any of them, whether as a
result of new information, future events or otherwise.
Comments on the results
Introduction
The Sanlam Group results for the six months ended 30 June 2011 are presented
based on and in compliance with International Financial Reporting Standards
(IFRS), as applicable. The basis of presentation and accounting policies are
consistent with those applied in the 2010 interim and annual report, apart
from the following:
* Further clarification has been obtained regarding the accounting treatment
of investments in associates since the release of the Group`s interim results
for 2010. IFRS contains an exemption to the equity-accounting of investments
in associates for those investments held in life insurance funds (i.e.
policyholders` funds). These investments can be recognised at fair value in
the statement of financial position. The Group`s general interpretation of
this exemption up to 30 June 2010 was that it only applied in instances where
all shares are held in the policyholders` fund.Where a portion of the
investment is held by the shareholders` fund, the full investment had to be
equity-accounted. The clarification referred to above, however, confirmed that
`split` accounting can be applied and that the policyholders` fund`s interest
can in all instances be recognised at fair value. This applies to the Group`s
interest in Vukile. The shareholders` fund`s investment is equity-accounted
whereas the interest held in the policyholders` fund is carried at fair value.
This split accounting now prevents the previous economic mismatch between
policy liabilities and policyholder assets. For the six months to 30 June
2010, a fund transfer of R100 million was recognised in respect of the Vukile
units held in the policyholders` fund as these holdings were also equity-
accounted. This fund transfer has been reversed in the comparative information
congruent to the change in clarification. A reallocation between equity-
accounted earnings and net investment return was also required in the IFRS
statement of comprehensive income. This change aligns the accounting policy
applied in the 2010 comparative period to that applied in the 2010 annual
report.
* The replacement of STC in South Africa with a withholding tax basis required
the elimination of STC as a future Sanlam cost in the valuation base. This
resulted in an increase in the future profitability of new life insurance
business written (VNB) as well as the in-force life insurance book (VIF).
Business environment
By their nature the Group`s operations are exposed to the volatility of
financial markets and economic conditions in general. The main features of the
business environment during the first six months of 2011 to take cognisance of
in evaluating the Group`s results are highlighted below.
Economic conditions
Economic growth in the main geographical regions in Africa and the United
Kingdom (UK) where the Group operates remained weak. Administered inflation
also continued to put pressure on disposable income of South African retail
clients.
Equity markets
The South African equity market delivered a lacklustre performance in the
first half of 2011, albeit a relative improvement on the first six months of
the 2010 financial year. The FTSE/JSE All Share and Swix Indices both closed
1% down on their 31 December 2010 levels. This compares to the respective 5,1%
and 3,5% declines in the first six months of 2010. The strong equity market
performance in the latter half of 2010, however, contributed to a 17% higher
average market level during the first six months of 2011, as compared to the
same period in 2010. This had a positive impact on the relative level of
assets under management in 2011 compared to 2010.
Interest rates
Long-term interest rates (9-year) increased by 30bps since 31 December 2010,
but are 50bps lower than 30 June 2010. Short-term interest rates declined
sharply in the latter half of 2010 and remained at these low levels during the
first six months of 2011. Compared to the first half of 2010, short-term
interest rates were on average 160bps (20%) lower in 2011.
Foreign currency exchange rates
The rand weakened against the major developed market currencies since December
2010, but continued to strengthen against the emerging market currencies to
which the Group has the largest exposure. However, the average rand exchange
rate for the first half of 2011 was stronger against all applicable currencies
compared to the first half of 2010, as reflected in the table below (negative
variances indicate a strengthening of the rand).
Foreign Europe United USA Botswana Kenya
Kingdom India
currency/ZAR EUR GBP US$ BWP INR KES
31/12/2009 10,56 11,89 7,36 1,13 0,16 0,10
30/06/2010 9,39 11,47 7,66 1,10 0,16 0,10
-11,1% -3,5% 4,1% -2,7% 0,0% 0,0%
31/12/2010 8,88 10,36 6,62 1,05 0,15 0,09
30/06/2011 9,83 10,88 6,79 1,04 0,15 0,08
10,7% 5,0% 2,6% -1,0% 0,0% -11,1%
Average:
first half 2010 9,97 11,47 7,52 1,12 0,16 0,10
Average
first half 2011 9,67 11,14 6,89 1,07 0,15 0,08
-3,0% -2,9% -8,4% -4,5% -6,3% -20,0%
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 2011
June 2011
R million Total Fair Value of
value of in-force
assets
Embedded value of covered business 33 045 14 225 18 820
Sanlam Personal Finance 22 854 8 207 14 647
Sanlam Developing Markets 4 507 1 274 3 233
Sanlam UK 637 177 460
Sanlam Employee Benefits 5 047 4 567 480
Other group operations 19 751 19 751 -
Retail cluster 3 817 3 817 -
Institutional cluster 7 323 7 323 -
Short-term insurance 8 611 8 611 -
Other capital and net worth adjustments 1 889 1 889 -
54 685 35 865 18 820
Discretionary capital 3 200 3 200 -
Group Equity Value 57 885 39 065 18 820
Issued shares for value per share
(million) 2 011,7
Group Equity Value per share (cents) 2 877
Share price (cents) 2 756
Discount -4%
Group Equity Value at 30 June 2011 (continued)
December 2010
R million Total Fair Value of
value of in-
assets force
Embedded value of covered business 31 045 14 033 17 012
Sanlam Personal Finance 21 488 8 144 13 344
Sanlam Developing Markets 3 952 1 104 2 848
Sanlam UK 638 212 426
Sanlam Employee Benefits 4 967 4 573 394
Other group operations 19 413 19 413 -
Retail cluster 3 359 3 359 -
Institutional cluster 7 525 7 525 -
Short-term insurance 8 529 8 529 -
Other capital and net worth adjustments 2 903 2 903 -
53 361 36 349 17 012
Discretionary capital 4 000 4 000 -
Group Equity Value 57 361 40 349 17 012
Issued shares for value per share
(million) 2 035,5
Group Equity Value per share (cents) 2 818
Share price (cents) 2 792
Discount -1%
The GEV per share increased by 2% from 2 818 cents at 31 December 2010 to 2
877 cents at 30 June 2011, after payment of a 115 cents per share dividend in
May 2011. The Sanlam share price traded at a 4% discount to GEV by close of
trading on 30 June 2011, with the discount widening somewhat since December
2010 in the volatile investment market conditions.
The Group operations have a significant exposure 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. The lacklustre investment
market performance during the first six months of 2011 had a marked negative
impact on the ROGEV for the period. After achieving a ROGEV per share of 9,1%
in 2010, an annualised ROGEV per share of 12,8% was recorded for the first
half of 2011. This was, however, impacted by the reversal of the STC allowance
in the value of in-force (VIF) of R1,2 billion (refer above). The adjusted
annualised ROGEV per share for the first half of 2011, which assumes long-term
investment return assumptions and excludes items not under management`s
control, was 12,6%, in excess of the return target.
Return on Group Equity Value for the six months ended 30 June 2011
June 2011 June 2010
Earnings Return Earnings Return
R million % R million %
Covered business 3 158 21,4 1 158 8,2
Sanlam Personal Finance 2 242 22,0 928 9,6
Sanlam Developing Markets 560 30,3 237 14,3
Sanlam UK 72 23,8 9 2,7
Sanlam Employee Benefits 284 11,8 (16) -0,6
Other operations 845 8,9 947 11,6
Sanlam Personal Finance 190 19,4 284 38,3
Sanlam Developing Markets 10 5,0 81 71,4
Sanlam UK 75 17,3 55 13,6
Institutional cluster 325 8,8 125 3,6
Short-term insurance 245 5,8 402 11,6
Discretionary and other capital (252) 127
Balance of portfolio 205 366
Treasury shares and other (224) (127)
Change in net worth adjustments (233) (112)
Return on Group Equity Value 3 751 13,5 2 232 8,9
Return on Group Equity Value
per share 12,8 9,1
Covered business yielded an annualised return of 21,4% compared to 8,2% in
2010. Excluding the reversal of STC, investment variances and economic
assumption changes, the ROGEV of covered business amounted to 15,5%, a solid
performance. Strong VNB growth and continued positive operating experience
variances supported the performance.
The valuations of the other Group operations were in general positively
impacted by a higher average level of assets under management, supporting
increased future profitability. The investment return earned on Santam and
SDM`s non-life operations, based on their listed share prices, reflects the
overall low market returns.
Earnings
Summarised shareholders` fund income statement
for the six months ended30 June 2011
R million 2011 2010 %
Net result from financial services 1 716 1 422 21%
Net investment return 766 499 54%
Net investment income 413 417 -1%
Net investment surpluses 299 22 >100%
Net equity-accounted earnings 54 60 -10%
Project expenses (21) (19) -11%
BEE transaction costs (2) (3) 33%
Secondary tax on companies (192) (209) 8%
Amortisation of intangible assets (65) (40) -63%
Normalised headline earnings 2 202 1 650 33%
Other non-headline earnings and impairments 69 376
Normalised attributable earnings 2 271 2 026 12%
Net result from financial services
The net result from financial services or net operating profit increased by a
satisfactory 21%, with particularly strong contributions from the retail and
short-term insurance businesses.
Net result from financial services
for the six months ended 30 June 2011
R million 2011 2010 %
Retail cluster 1 037 825 26%
Sanlam Personal Finance 820 712 15%
Sanlam Developing Markets 196 82 139%
Sanlam UK 21 31 -32%
Institutional cluster 412 357 15%
Sanlam Investments 212 239 -11%
Sanlam Employee Benefits 93 58 60%
Capital Management 107 60 78%
Short-term insurance cluster 319 266 20%
Corporate and other (52) (26) -100%
Net result from financial services 1 716 1 422 21%
The performance of the individual clusters is discussed in further detail
below.
Normalised headline earnings
Normalised headline earnings of R2,2 billion are 33% higher than in 2010,
largely attributable to the 21% increase in the net result from financial
services and a 54% increase in net investment return. A strong six-month
performance from international equity markets, combined with the weakening of
the rand against developed market currencies during the first half of 2011,
contributed to a marked relative improvement in the investment return earned
on the Group`s capital portfolio. Despite delivering a weak performance in the
first half of 2011, the South African investment market also performed better
relative to the first six months of 2010. This supported the increase in net
investment return. Normalised headline earnings exclude the IFRS accounting
impact of investments in Sanlam shares and Group subsidiaries held by the
policyholders` fund. Including the effect of fund transfers recognised in
terms of IFRS in respect of these shares, headline earnings increased by 29%.
Business volumes
New business flows
New business volumes for the Group increased by 11% to R55 billion (up 10% to
R52 billion excluding white label business), a solid performance in a
difficult operating environment. The growth is supported by an 18% increase in
new life business and a 27% increase in South African retail investment
business. Net fund inflows reflect an exemplary 72% growth.
Business volumes for the six months ended 30 June 2011
R million New business Net flows
2011 2010 % 2011 2010 %
Sanlam Personal Finance 15 960 14 954 7% 2 236 2 012 11%
Sanlam Developing Markets 1 603 1 279 25% 1 763 1 025 72%
Sanlam UK 2 289 1 499 53% 1 172 378 210
%
Institutional cluster 24 887 22 878 9% 3 316 689 381
%
Short-term insurance 7 112 6 646 7% 2 555 2 315 10%
51 851 47 256 10% 11 042 6 419 72%
WHITE LABEL 3 211 2 525 27% 376 230 63%
TOTAL 55 062 49 781 11% 11 418 6 649 72%
Value of new covered business
The value of new life business (VNB) written during the first six months of
2011 increased by 25% on 2010 to reach R401 million. After minorities, VNB
increased by 26% to R356 million. The replacement of Secondary Tax on
Companies (STC) in South Africa with a withholding tax basis, results in the
elimination of STC as a cost for Sanlam in the future. This increases the
future profitability of new business written and commensurately VNB. The
change in tax basis increased net VNB by R23 million for the first half of
2011.Excluding this, net VNB increased by a very pleasing 18% at overall
sustained margins.
Value of new covered business
for the six months ended 30 June 2011
Rmillion 2011 2010 %
After change in STC basis
Value of new covered business 401 320 25%
Sanlam Personal Finance 203 154 32%
Sanlam Developing Markets 173 146 18%
Sanlam UK 6 9 -33%
Sanlam Employee Benefits 19 11 73%
Net of minorities 356 283 26%
Present value of new business premiums 14 785 12 811 15%
Sanlam Personal Finance 9 264 8 306 12%
Sanlam Developing Markets 3 324 2 847 17%
Sanlam UK 695 577 20%
Sanlam Employee Benefits 1 502 1 081 39%
Net of minorities 14 112 12 220 15%
New covered business margin 2,71% 2,50%
Sanlam Personal Finance 2,19% 1,85%
Sanlam Developing Markets 5,20% 5,13%
Sanlam UK 0,86% 1,56%
Sanlam Employee Benefits 1,26% 1,02%
Net of minorities 2,52% 2,32%
Before change in STC basis
Value of new covered business 378 320 18%
Sanlam Personal Finance 192 154 25%
Sanlam Developing Markets 164 146 12%
Sanlam UK 6 9 -33%
Sanlam Employee Benefits 16 11 45%
Net of minorities 333 283 18%
Present value of new business premiums 14 785 12 811 15%
Sanlam Personal Finance 9 264 8 306 12%
Sanlam Developing Markets 3 324 2 847 17%
Sanlam UK 695 577 20%
Sanlam Employee Benefits 1 502 1 081 39%
Net of minorities 14 112 12 220 15%
New covered business margin 2,56% 2,50%
Sanlam Personal Finance 2,07% 1,85%
Sanlam Developing Markets 4,93% 5,13%
Sanlam UK 0,86% 1,56%
Sanlam Employee Benefits 1,07% 1,02%
Net of minorities 2,36% 2,32%
The performance of the individual clusters is discussed in further detail
below.
Cluster performance
Sanlam Personal Finance
Key performance indicators
for the six months ended 30 June 2011
R million 2011 2010 %
Group Equity Value
Group Equity Value 24 978 23 542 6,1%
Covered business 22 854 21 488 6,4%
Other operations 2 124 2 054 3,4%
Annualised return on Group Equity Value 21,7% 11,6%
Covered business 22,0% 9,6%
Other operations 19,4% 38,3%
Business volumes
New business volumes 15 960 14 954 7%
Life business 6 712 6 007 12%
Investment business 9 248 8 947 3%
South Africa 5 731 4 989 15%
Namibia 3 517 3 958 -11%
Net fund flows 2 236 2 012 11%
Life business 985 1 205 -18%
Investment business 1 251 807 55%
South Africa 894 541 65%
Namibia 357 266 34%
Value of new covered business
Value of new business 203 154 32%
Including STC allowance 192 154 25%
Reversal of STC allowance 11 -
Present value of new business premiums 9 264 8 306 12%
New business margin 2,19% 1,85%
Earnings
Gross result from financial services 1 146 972 18%
Middle market life and investments 852 741 15%
Glacier 83 71 17%
Sanlam Personal Loans 105 72 46%
Namibia 88 72 22%
Other operations 18 16 13%
Net result from financial services 820 712 15%
Administration cost ratio 37,0% 36,6%
Excluding growth initiatives 34,0% 34,8%
Operating margin 36,0% 33,9%
Sanlam Personal Finance (SPF) recorded overall strong results for the first
six months of 2011.
SPF reported annualised ROGEV of 21,7% for 2011, compared to 11,6% for the
comparable period in 2010. Both covered and other operations contributed to
the performance. The covered business results were supported by the reversal
of STC from the VIF. Adjusted ROGEV for SPF, which excludes tax changes,
investment variances and economic assumption changes, amounts to 15,4%. The
return on other operations were positively impacted by an increase in the
valuation of Glacier and Sanlam Personal Loans, attributable to an increase in
the level of assets under management and the size of the loan book
respectively.
New business volumes increased by 7%. South African new business volumes
increased by 14%, the combined effect of a 13% increase in new life business
and a 15% increase in investment business sales. The low interest rate
environment continues to place pressure on demand for guarantee plan and
guaranteed annuity single premium business. The Group`s diversified solution
offering and product innovation, however, proved effective in offsetting the
low sales volumes of these traditional products. SPF launched its new Cumulus
product in 2011, which is less sensitive to interest rates. Glacier also
launched new offshore solutions in the last quarter of 2010. Market reaction
to these new solutions is very positive. Glacier`s living annuity solution is
also popular in the current low interest rate environment as it offers
investment choice and does not lock clients into current interest rates. This
contributed to 14% growth in South African single premiums. South African
recurring premiums grew by 10%, supported by strong demand for investment
products. Competitive market pricing impacted on risk business sales. The
Group remains prudent in its approach towards new business growth that does
not yield acceptable return. Namibian sales declined by 11%, largely due to a
decrease in unit trust sales from a high base in 2010 in a very competitive
environment.
The value of new covered business increased by 25% before removal of the
allowance for STC, driven by the increase in new life business volumes,
effective cost management and good growth in high margin credit life business.
New business margins increased in 2011, driven by these same factors.
Overall net fund flows increased by 11%, supported by a 55% increase in net
investment business flows. Net life business flows decreased by 18% due to
lower single premium sales of guaranteed solutions and an increase in the
value of benefit payments following higher average market levels in the first
half of 2011 compared to 2010.
The gross result from financial services increased by 18%. The individual life
business recorded growth in operating profit of 15%, attributable to higher
risk profits from improved claims experience and an increase in administration
profit following higher average assets under management. Sanlam Personal Loans
increased its contribution to operating profit by a healthy 46% on the back of
an increase in its book size and improved bad debt experience. Glacier also
reported a satisfactory 17% increase in profit, due to higher management fees
earned on the overall higher level of assets under management.
Sanlam Developing Markets
Key performance indicators
for the six months ended 30 June 2011
R million 2011 2010 %
Group Equity Value
Group Equity Value 5 064 4 356 16,3%
Covered business 4 507 3 952 14,0%
Other operations 557 404 37,9%
Return on Group Equity Value 27,9% 18,0%
Covered business 30,3% 14,3%
Other operations 5,0% 71,4%
Business volumes
New business volumes 1 603 1 279 25%
South Africa 637 615 4%
Botswana 609 388 57%
Rest of Africa 235 156 51%
India 122 120 2%
Net fund flows 1 763 1 025 72%
South Africa 844 335 152%
Botswana 530 357 48%
Rest of Africa 264 190 39%
India 125 143 -13%
Value of new covered business
Value of new business 173 146 18%
Including STC allowance 164 146 12%
Reversal of STC allowance 9 -
Present value of new business premiums 3 324 2 847 17%
New business margin 5,20% 5,13%
Earnings
Gross result from financial services 360 222 62%
South Africa 179 42 326%
Rest of Africa 180 190 -5%
India 1 (10) >100%
Net result from financial services 196 82 139%
Administration cost ratio 32,2% 32,3%
Operating margin 20,2% 14,3%
Sanlam Developing Markets (SDM) had an overall
satisfactory first half despite some temporary
disruption in the South African distribution
channels (given various steps to improve the
quality and retention of new business written)
and a strong rand exchange rate impacting
negatively on the rand-based results of the
Rest of Africa operations.
SDM`s annualised ROGEV for the period was
negatively impacted by low return on its listed
non-life operations in Botswana, in line with
general equity market performance. This was
compensated for by a 30,3% return on covered
business, supported by strong VNB, operating
experience variances and operating assumption
changes. Excluding tax changes, investment
variances and economic assumption changes, SDM
achieved an exemplary adjusted ROGEV of 24,9%.
New business volumes increased by 25%, with
strong growth from Africa supporting the
overall result. South African new business grew
by 4%, supported by group business, with
individual life recurring premiums declining on
2010. Strategic focus on the quality of
business written had, as expected, a temporary
negative impact on business volumes. This has
been addressed with stability returning to the
distribution channels. The positive impact of
the focus on quality is reflected in an
improvement in persistency. Rest of Africa
sales were supported by strong single premium
and credit life sales and grew by 55%.
Following the regulatory changes in India
towards the end of last year, we experienced
significant pressure on new recurring premium
sales. This was, however, offset by strong
growth in single premiums.
The value of new life business written,
increased by 12% before the reversal of the STC
allowance. Margins, before the positive STC
reversal impact, decreased marginally on 2010
largely due to the decrease in individual life
recurring premiums in South Africa.
SDM achieved a 62% increase in its gross result
from financial services. The South African
contribution increased threefold, due to lower
new business strain (attributable to the change
in business mix from individual life recurring
premiums to group business), improvements in
persistency and claims experience, further
synergies being extracted from the combined
South African business and increased release of
margins from the in-force book given the growth
in size of the book over the last number of
years. The Rest of Africa operations recorded a
5% decline in gross operating profit, with non-
life operations recording particularly good
growth. This was, however, offset by start-up
losses at new operations and the negative
impact of the stronger average rand exchange
rate.
Institutional cluster
Key performance indicators
for the six months ended 30 June 2011
R million 2011 2010 %
Group Equity Value
Group Equity Value 12 370 12 492 -1%
Sanlam Investments 6 451 6 569 -2%
Sanlam Employee Benefits 5 084 4 992 2%
Sanlam Capital Management 835 931 -10%
Return on Group Equity Value 10,0% 1,8%
Sanlam Investments 6,4% 3,8%
Sanlam Employee Benefits 12,2% -0,7%
Sanlam Capital Management 24,3% 2,8%
Business volumes
Net fund flows
Investments 4 299 2 090 106%
South Africa retail 4 497 3 202 40%
South Africa institutional (209) 1 775 -112%
Non-South Africa 11 (2 887) 100%
Life business (607) (1 171) 48%
New life business volumes 618 450 37%
Recurring premiums 134 91 47%
Single premiums 484 359 35%
Value of new covered business
Value of new business 19 11 73%
Including STC allowance 16 11 45%
Reversal of STC allowance 3 -
Present value of new business 1 502 1 081 39%
premiums
New business margin 1,26% 1,02%
Earnings
Gross result from financial services 561 477 18%
Sanlam Investments 299 327 -9%
Sanlam Employee Benefits 129 86 50%
Sanlam Capital Management 133 64 108%
Net result from financial services 412 357 15%
Cluster administration cost ratio 44,2% 45,0%
The institutional cluster`s 10% annualised ROGEV
is the combined result of a very strong
performance by the Capital Management operations
and a relatively low return by Sanlam
Investments. The lacklustre investment market
performance during the first six months of 2011
resulted in marginal growth in Sanlam
Investments` assets under management since 31
December 2010, impacting directly on the
valuation, and hence return, of these
operations, which are valued based on assets
under management. The strong operating profit
performance of the Capital Management operations
reflects in the ROGEV achieved for the period.
Sanlam Employee Benefits` ROGEV continues to be
dampened by the relative size of required
capital held in respect of its covered business.
The Institutional cluster reported strong net
fund flows during the first half of the 2011
financial year. Operating profit growth was
supported by the Capital Management and Employee
Benefits businesses, with Sanlam Investments
recording a 9% decline in profitability.
New business volumes grew by 37% at Sanlam
Employee Benefits (SEB), with both recurring and
single premium business performing well. Sanlam
Umbrella Solutions achieved record sales and
increased its assets under management to some R6
billion. This contributed to a marked
improvement in SEB`s net fund flows, albeit
still negative. The value of new business and
new business margins also improved
commensurately. The retail investment businesses
had a strong six-month period, with Sanlam
Collective Investments recording exemplary net
inflows.
Gross result from financial services increased
by 18%. Sanlam Employee Benefits benefited from
a marked improvement in claims experience
compared to the same period in 2010. Good
progress is being made with the restructuring of
the administration business, despite still
contributing an operational loss. Sanlam Capital
Management recorded a 108% increase in operating
profit, with all business lines contributing to
the growth. The 2011 results includes profit
realised on a property financing transaction of
some R45 million, which will not recur. The
decline in Sanlam Investments` operating profit
is attributable to a reduction in performance
fees from R78 million in the first half of 2010
to R33 million in 2011 and a R20 million decline
in investment return earned on seeding capital
provided for some of the cluster`s hedge fund
portfolios. Excluding these, operating profit
increased by 16%, well in excess of the 11%
growth in average assets under management.
Performance fees were earned across the
business, with the overall decline attributable
to a lower contribution from SIM Global.
Volatility in performance fees earned by SIM
Global is expected given the specialist nature
of its investment portfolios.
Sanlam UK
Key performance indicators
for the six months ended 30 June 2011
R million 2011 2010 %
Group Equity Value
Group Equity Value 1 773 1 539 15,2%
Covered business 637 638 -0,2%
Other operations 1 136 901 26,1%
Return on Group Equity Value 20,0% 8,7%
Covered business 23,8% 2,7%
Other operations 17,3% 13,6%
Business volumes
New business volumes 2 289 1 499 53%
Life business 674 557 21%
Investments 1 615 942 72%
Net fund flows 1 172 378 210%
Life business 261 (26) >100%
Investments 911 404 125%
Value of new covered business
Value of new business 6 9 -33%
Present value of new business premiums 695 577 20%
New business margin 0,86% 1,56%
Earnings
Gross result from financial services 19 30 -37%
Net result from financial services 21 31 -32%
Sanlam UK continues to operate in a very
challenging economic environment. After some
relief in the second half of 2010, market
volatility returned, combined with uncertainty
relating to the impact of the European debt
crisis. Growth prospects for the UK economy have
also been revised downwards, with consumers
starting to feel the impact of austerity
measures. Consumer sentiment commensurately
turned cautious again, setting the stage for a
much more difficult first half of 2011.
Sanlam UK recorded an annualised ROGEV of 20,0%,
supported by a weakening in the rand exchange
rate and an increase in the base valuations of
the non-life operations, particularly Principal
and Nucleus, following a substantial increase in
assets under management. The increase in assets
under management was driven by positive
investment market performance as well as strong
net fund inflows.
Sanlam UK achieved strong growth in comparable
new business volumes of 53% despite the
challenging business environment, with both life
and investment business supporting the growth.
Sanlam UK continues to deliver on its niche
strategy, which reflects in the new business
growth.
The decrease in operating profit is largely
attributable to positive economic assumption
changes in the first half of 2010, which did not
recur in 2011. Costs associated with expanding
distribution capacity also impacted on the
results. Excluding these, Sanlam UK`s operating
profit is in line with growth in assets under
management.
Short-term insurance
Key performance indicators
for the six months ended 30 June 2011
R million 2011 2010 %
Group Equity Value
Group Equity Value 8 611 8 529 1,0%
Return on Group Equity Value 5,8% 11,6%
Business volumes
Net earned premiums 7 112 6 646 7%
Net fund flows 2 555 2 315 10%
Earnings
Gross result from financial services 793 688 15%
Net result from financial services 319 266 20%
Ratios
Claims 63,8% 65,2%
Administration costs 27,6% 27,9%
Combined 91,5% 93,0%
Underwriting 8,5% 7,0%
The favourable underwriting experience of 2010
continued into the first half of 2011. The
strategic focus on claims management is
reflected in the low claims ratio. Growth in net
earned premiums was below expectations, with
strong competition from the established direct
insurers and banks. With claims management
initiatives largely implemented, it affords
Santam the opportunity to shift focus to gaining
market share. Several initiatives are being
explored in the traditional intermediated
market. At the same time MiWay is continuing to
successfully build its direct distribution
capacity.
The ROGEV of the short-term insurance cluster
largely reflects the investment return earned on
the listed Santam shares, which under performed
in line with the South African equity market.
Solvency
All of the life insurance businesses within the
Group were sufficiently capitalised at the end
of June 2011. The total admissible regulatory
capital (including identified discretionary
capital) of Sanlam Life Insurance Limited, the
holding company of the Group`s major life
insurance subsidiaries, of R23,7 billion covered
its capital adequacy requirements (CAR) 3,2
times. No policyholder portfolio had a negative
bonus stabilisation reserve at the end of June
2011.
FitchRatings has affirmed the following ratings
of the Group in 2011 and the outlook remained
stable:
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: A+ (zaf)
Santam Limited:
* National Insurer Financial Strength: AA+ (zaf)
* National Long-term: AA (zaf)
* Subordinated debt: A+ (zaf)
Dividend
The Group only declares an annual dividend due
to the costs involved in distributing an interim
dividend to our large shareholder base.
Desmond Smith Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Bellville
7 September 2011
Sanlam Group
Interim financial statements
for the six months ended 30 June 2011
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, the AC 500 Standards as issued by the
Accounting Practices Board or its successor, 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 2010 financial
statements, apart from the changes indicated
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
2010, 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 2010 financial
statements.
The preparation of the Group`s reviewed
consolidated interim results was supervised by
the financial director, Kobus Moller CA(SA).
Application of new and revised IFRSs and
interpretations
The following new or revised IFRSs and
interpretations are applied in the Group`s 2011
financial year:
* Amendment to IAS 32 - Classification of Rights
Issues (effective 1 February 2010)
* IFRIC 19 - Extinguishing Financial Liabilities
with Equity Instruments (effective 1 July 2010)
* IAS 24 revised - Related Party Disclosures
(effective 1 January 2011)
* Amendments to IFRIC 14- Prepayments of a
Minimum Funding Requirement (effective 1 January
2011)
* May 2010 Improvements to IFRS (mostly
effective 1 January 2011)
The application of these standards and
interpretations did not have a significant
impact on the Group`s financial position,
reported results and cash flows.
The following new or revised IFRSs and
interpretations have effective dates applicable
to future financial years and have not been
early adopted:
* Amendments to IFRS 1 - Severe hyperinflation
and removal of fixed dates for first-time
adopters (effective 1 July 2011)
* Amendment to IFRS 7 - Disclosures - Transfers
of Financial Assets (effective date 1 July 2011)
* Amendments to IAS 12 - Deferred tax: Recovery
of underlying assets (effective 1 January 2012)
* IAS 1 Presentation of financial statements -
Amendment regarding presentation of other
comprehensive income (effective 1 July 2012)
* IFRS 9 Financial Instruments (effective 1
January 2013)
* IFRS 10 Consolidated Financial Statements
(effective 1 January 2013)
* IFRS 11 Joint Arrangements (effective 1
January2013)
* IFRS 12 Disclosure of Interests in Other
Entities (effective 1 January2013)
* IFRS 13 Fair Value Measurement (effective 1
January 2013)
* IAS 19Employee Benefits - Amendment regarding
removal of corridor method and other
comprehensive income treatment (effective 1
January 2013)
* IAS 27 Consolidated and Separate Financial
Statements - Consequential amendments resulting
from consolidation project (effective 1 January
2013)
* IAS 28 Investments in Associates -
Consequential amendments resulting from
consolidation project (effective 1 January 2013)
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.
Change in accounting policies
Further clarification has been obtained
regardingthe accounting treatment of investments
in associates since the release of the Group`s
interim results for 2010. IFRS contains an
exemption to the equity-accounting of
investments in associates for those investments
held in life insurance funds (i.e.
policyholders` funds). These investments can be
recognised at fair value in the statement of
financial position. The Group`s general
interpretation of this exemption up to 30 June
2010 was that it only applies in instances where
all shares are held in the policyholders`
fund.Where a portion of the investment is held
by the shareholders` fund, the full investment
had to be equity-accounted. The clarification
referred to above, however, confirmed that
`split` accounting can be applied and that the
policyholders` fund`s interest can in all
instances be recognised at fair value. This
applies to the Group`s interest in Vukile.The
shareholders` fund`s investment is equity-
accounted whereas the interest held in the
policyholders` fund is carried at fair value.
This split accounting prevents an economic
mismatch between policy liabilities and
policyholder assets. For the six months to 30
June 2010, a fund transfer was recognised in
respect of the Vukile units held in the
policyholders` fund as these holdings were also
equity-accounted. This fund transfer has been
reversed in the comparative information
congruent to the change in clarification. The
updated application was already applied in
respect of the 2010 year-end reporting.
External audit
The appointed external auditors, Ernst & Young
Inc., reviewed the condensed statement of
financial position of the Sanlam Group as at 30
June 2011 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, from which this
information has been extracted. 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 2011, 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, from which this
information has been extracted.
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 2011
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 2011
June December
Reviewed Audited
2011 2010 2010
R million R million R million
Embedded value of covered business 33 045 29 311 31 045
Sanlam Personal Finance 22 854 20 120 21 488
Adjusted net worth 8 207 8 078 8 144
Value of in-force 14 647 12 042 13 344
Sanlam Developing Markets 4 507 3 696 3 952
Adjusted net worth 1 274 1 179 1 104
Value of in-force 3 233 2 517 2 848
Sanlam UK 637 659 638
Adjusted net worth 177 222 212
Value of in-force 460 437 426
Sanlam Employee Benefits 5 047 4 836 4 967
Adjusted net worth 4 567 4 571 4 573
Value of in-force 480 265 394
Other Group operations 19 751 16 938 19 413
Retail cluster 3 817 2 944 3 359
Institutional cluster 7 323 6 572 7 525
Short-term insurance 8 611 7 422 8 529
Capital diversification - (700) -
Other capital and net worth 1 889 1 853 2 903
adjustments
54 685 47 402 53 361
Discretionary capital 3 200 2 800 4 000
Group equity value 57 885 50 202 57 361
Group equity value per share (cents) 2 877 2 479 2 818
Shareholders` fund at fair value
at 30 June 2011
December
Reviewed Audited
2011 2010
R million R million
Property and equipment 258 222
Owner-occupied properties 487 493
Goodwill 497 497
Value of business acquired 696 716
Other intangible assets 34 39
Deferred acquisition costs 1 551 1 528
Investments 39 638 39 405
Sanlam businesses 19 751 19 413
Sanlam Investments 6 451 6 569
SIM Wholesale 4 042 4 247
International 1 885 1 810
Sanlam Collective Investments 524 512
Sanlam Personal Finance 2 124 2 054
Glacier 1 061 965
Sanlam Personal Loans 406 365
Multi-Data 110 149
Sanlam Trust 143 185
Sanlam Home Loans - -
Sanlam Healthcare Management 250 235
Other 154 155
Sanlam UK 1 136 901
Principal 419 318
Punter Southall Group 260 227
Other 457 356
Sanlam Developing Markets other 557 404
operations
Coris Administration and Infinit 37 25
Capital Management 835 931
Short-term insurance 8 611 8 529
Associated companies 1 268 1 168
Joint ventures - Shriram Life Insurance 267 257
Other investments 18 352 18 567
Other equities and similar securities 8 474 7 947
Public sector stocks and loans 13 17
Investment properties 792 993
Other interest-bearing and preference
share
investments 9 073 9 610
Net term finance - -
Term finance (5 801) (5 577)
Assets held in respect of term finance 5 801 5 577
Net deferred tax 290 284
Net working capital (761) 520
Minority shareholders` interest (729) (668)
Shareholders` fund at fair value 41 961 43 036
Fair value per share (cents) 2 086 2 114
Shareholders` fund income statement
for the six months ended 30 June 2011
Restated
2011 2010
R million R million
Result from financial services before tax 2 804 2 334
Sanlam Personal Finance 1 146 972
Sanlam Developing Markets 360 222
Sanlam UK 19 30
Sanlam Employee Benefits 129 86
Short-term Insurance 793 688
Investment Management 299 327
Capital Management 133 64
Corporate and other (75) (55)
Tax on financial services income (720) (591)
Minority shareholders` interest (368) (321)
Net result from financial services 1 716 1 422
Net investment return 766 499
Net investment income 413 417
Net investment surpluses 299 22
Net equity-accounted headline earnings 54 60
Net project expenses (21) (19)
BEE transaction costs (2) (3)
Amortisation of intangibles (65) (40)
Net secondary tax on companies (192) (209)
Normalised headline earnings 2 202 1 650
Profit on disposal of operations 91 326
Impairments (22) 50
Normalised attributable earnings 2 271 2 026
Fund transfers 3 60
Attributable profit per Group statement of
comprehensive income 2 274 2 086
Notes to the shareholders` fund information
for the six months ended 30 June 2011
2011 2010
R million R MILLION
1. NEW BUSINESS
Analysed per market:
Retail
Life business 7 076 6 315
Sanlam Personal Finance 6 439 5 700
Sanlam Developing Markets 637 615
Non-life business 17 700 13 939
Sanlam Personal Finance 5 731 4 989
Sanlam Private Investments 3 778 3 769
Sanlam Collective Investments 8 191 5 181
South African 24 776 20 254
Non-South African 7 045 6 428
Sanlam Personal Finance 3 790 4 265
Sanlam Developing Markets 966 664
Sanlam UK 2 289 1 499
Total Retail 31 821 26 682
Institutional
Group Life business 968 985
Non-life business 9 830 11 461
Segregated 4 065 5 998
Sanlam Multi-Manager 2 130 3 453
Sanlam Collective Investments 3 635 2 010
South African 10 798 12 446
Investment Management non-SA 2 120 1 482
Total Institutional 12 918 13 928
White label 3 211 2 525
Short-term insurance 7 112 6 646
Total new business 55 062 49 781
2011 2010
R million R MILLION
2. NET FLOW OF FUNDS
Analysed per licence:
Life business 2 402 1 033
Sanlam Personal Finance 985 1 205
Sanlam Developing Markets 1 763 1 025
Sanlam UK 261 (26)
Sanlam Employee Benefits (607) (1 171)
Life licence business (389) (412)
Investment business 6 474 3 483
Sanlam Personal Finance 1 251 807
Sanlam Investments 4 312 2 272
Sanlam UK 911 404
Short-term insurance 2 555 2 315
11 042 6 419
White label 376 230
Total net flow of funds 11 418 6 649
3. Normalised earnings per share
In terms of IFRS, the policyholders` fund`s
investments in Sanlam shares and Group
subsidiaries are not reflected as equity
investments in the Sanlam statement of financial
position, but deducted in full from equity on
consolidation (in respect of Sanlam shares) or
reflected at net asset value (in respect of
subsidiaries). The valuation of the related
policy liabilities however includes the fair
value of these shares, resulting in a mismatch
between policy liabilities and policyholder
investments, with a consequential impact on the
Group`s earnings. The number of shares in issue
must also be reduced with the treasury shares
held by the policyholders` fund for the
calculation of IFRS basic and diluted earnings
per share. This is, in management`s view, not a
true representation of the earnings attributable
to the Group`s shareholders, specifically in
instances where the share prices and/or the
number of shares held by the policyholders` fund
varies significantly. The Group therefore
calculates normalised earnings per share to
eliminate the impact of investments in Sanlam
shares and Group subsidiaries held by the
policyholders` fund.
Six months reviewed
2011 2010
cents cents
Normalised earnings per share:
Net result from financial services 84,7 69,4
Headline earnings 108,6 80,5
Profit attributable to shareholders` fund 112,0 98,9
R million R million
Analysis of normalised earnings (refer
shareholders` fund income statement):
Net result from financial services 1 716 1 422
Headline earnings 2 202 1 650
Profit attributable to shareholders` fund 2 271 2 026
million million
Adjusted number of shares:
Weighted average number of shares for diluted
earnings per share (refer below) 2 011,0 2 033,4
Add: Weighted average Sanlam shares held by
policyholders 16,0 15,6
Adjusted weighted average number of shares for
normalised earnings per share 2 027,0 2 049,0
Number of ordinary shares in issue at
beginning of period 2 100,0 2 160,0
Shares cancelled - (60,0)
Number of ordinary shares in issue 2 100,0 2 100,0
Shares held by subsidiaries in shareholders` (157,9) (126,3)
fund
Outstanding long-term incentive scheme
shares and options 38,3 28,3
Number of shares under option to be issued
at fair value (1,2) (2,4)
Convertible deferred shares held by Ubuntu- 32,5 25,7
Botho
Adjusted number of shares for value per share 2 011,7 2 025,3
4. Share repurchases
The Sanlam shareholders granted general authorities to the
Group at the 2011 and 2010 annual general meetings to
repurchase Sanlam shares in the market. The Group
acquired 34,8 million shares from 22 February 2011 to 30
June 2011 in terms of the general authorities. The lowest
and highest prices paid were R26,57 and R27,85 per share
respectively. The total consideration paid of R944 million
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 412.1 million
shares, or 19,6% of Sanlam`s issued share capital at the
time, remain outstanding in terms of the general authority
granted at the annual general meeting held on 8 June 2011.
The financial effects of the share repurchases during 2011
on the IFRS earnings and net asset value per share are
illustrated in the table below. Tangible net asset value
excludes goodwill, value of business acquired, other
intangible assets and deferred acquisition cost included
in the shareholders` fund at net asset value.
Cents Before After
repurchases repurchases
Basic earnings per share:
Profit attributable to shareholders` fund 116,4 117,0
Headline earnings 112,9 113,5
Diluted earnings per share:
Profit attributable to shareholders` fund 112,5 113,1
Headline earnings 109,1 109,6
Value per share:
Equity value 2 875 2 877
Net asset value 1 551 1 531
Tangible net asset 1 242 1 216
Embedded value of covered business
at 30 June 2011
June June Decembe
r
Reviewed Reviewed Audited
2011 2010 2010
Note R million R million R
million
Sanlam Personal Finance 22 854 20 120 21 488
Adjusted net worth 8 207 8 078 8 144
Net value of in-force covered
business 14 647 12 042 13 344
Value of in-force covered
business 16 543 13 883 15 273
Cost of capital (1 650) (1 659) (1 695)
Minority shareholders`
interest (246) (182) (234)
Sanlam Developing Markets 4 507 3 696 3 952
Adjusted net worth 1 274 1 179 1 104
Net value of in-force covered
business 3 233 2 517 2 848
Value of in-force covered
business 3 874 3 130 3 475
Cost of capital (283) (261) (267)
Minority shareholders`
interest (358) (352) (360)
Sanlam UK 637 659 638
Adjusted net worth 177 222 212
Net value of in-force covered
business 460 437 426
Value of in-force covered
business 485 466 455
Cost of capital (25) (29) (29)
Minority shareholders`
interest - - -
Sanlam Employee Benefits 5 047 4836 4 967
Adjusted net worth 4 567 4571 4 573
Net value of in-force covered
business 480 265 394
Value of in-force covered
business 1 395 1 194 1 286
Cost of capital (915) (929) (892)
Minority shareholders`
interest - - -
Embedded value of covered 33 045 29 311 31 045
business
Adjusted net worth (1) 14 225 14 050 14 033
Net value of in-force covered
business 1 18 820 15 261 17 012
Embedded value of covered 33 045 29 311 31 045
business
(1) Excludes subordinated debt
funding of Sanlam Life.
CHANGE IN EMBEDDED VALUE OF COVERED
BUSINESS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
JUNE JUNE DECEMBER
REVIEWED REVIEWED AUDITED
2011 2010 2010
R MILLION NOTE TOTAL VALUE ADJUS- TOTAL TOTAL
OF IN- TED NET
FORCE WORTH
EMBEDDED VALUE OF COVERED
BUSINESS AT THE BEGINNING OF
the period as reported 31 045 17 012 14 033 28 988 28 988
Change in accounting 9 - - - (49) (49)
policies
Embedded value of covered
business at the beginning of
the period - restated 31 045 17 012 14 033 28 939 28 939
Value of new business 2 356 993 (637) 283 666
Net earnings from existing
covered business 1 450 (123) 1 573 1 138 2 639
Expected return on value
of in-force business 1 181 1 181 - 1 088 2 218
Expected transfer of
profit to adjusted net
worth - (1 443) 1 443 - -
Operating experience
variances 3 231 (1) 232 82 468
Operating assumption
changes 4 38 140 (102) (32) (47)
Expected investment return
on adjusted net worth 521 - 521 568 1 151
Embedded value earnings from
operations 2 327 870 1 457 1 989 4 456
Economic assumption changes 5 (215) (214) (1) 88 430
Tax changes 6 1 249 1 246 3 - -
Investment variances - value
of in-force (87) (138) 51 (436) 332
Investment variances -
investment return on
adjusted net worth (127) - (127) (441) 4
Exchange rate movements 19 19 - (24) (119)
Net project expenses 7 (8) - (8) (18) (46)
Embedded value earnings from
covered business 3 158 1 783 1 375 1 158 5 057
Acquired value of in-force 99 25 74 6 6
Change in utilisation of
capital diversification - - - - (700)
Net transfers from covered
business (1 257) - (1 257) (792) (2 257)
Embedded value of covered
business at the end of
the period 33 045 18 820 14 225 29 311 31 045
Analysis of earnings from
covered business
Sanlam Personal Finance 2 242 1 303 939 928 3 782
Sanlam Developing Markets 560 360 200 237 676
Sanlam UK 72 34 38 9 (7)
Sanlam Employee Benefits 284 86 198 (16) 606
Embedded value earnings from
covered business 3 158 1 783 1 375 1158 5 057
VALUE OF NEW BUSINESS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
SIX MONTHS FULL
YEAR
REVIEWED AUDITED
R MILLION NOTE 2011* 2011** 2010 2010
VALUE OF NEW BUSINESS
(at point of sale):
Gross value of new business 452 429 366 866
Sanlam Personal Finance 224 213 172 428
Sanlam Developing Markets 187 178 160 373
Sanlam UK 7 7 11 14
Sanlam Employee Benefits 34 31 23 51
Cost of capital (51) (51) (46) (104)
Sanlam Personal Finance (21) (21) (18) (42)
Sanlam Developing Markets (14) (14) (14) (28)
Sanlam UK (1) (1) (2) (3)
Sanlam Employee Benefits (15) (15) (12) (31)
Value of new business 401 378 320 762
Sanlam Personal Finance 203 192 154 386
Sanlam Developing Markets 173 164 146 345
Sanlam UK 6 6 9 11
Sanlam Employee Benefits 19 16 11 20
Value of new business
attributable to:
Shareholders` fund 2 356 333 283 666
Sanlam Personal Finance 195 184 147 367
Sanlam Developing Markets 136 127 116 268
Sanlam UK 6 6 9 11
Sanlam Employee Benefits 19 16 11 20
Minority shareholders`
interest 45 45 37 96
Sanlam Personal Finance 8 8 7 19
Sanlam Developing Markets 37 37 30 77
Sanlam UK - - - -
Sanlam Employee Benefits - - - -
Value of new business 401 378 320 762
Geographical analysis:
South Africa 298 275 224 522
Africa 95 95 84 224
Other international 8 8 12 16
Value of new business 401 378 320 762
Analysis of new business
profitability:
Before minorities:
Present value of new
business premiums 14 785 14 785 12 811 27 334
Sanlam Personal Finance 9 264 9 264 8 306 17 555
Sanlam Developing Markets 3 324 3 324 2 847 6 584
Sanlam UK 695 695 577 996
Sanlam Employee Benefits 1 502 1 502 1 081 2 199
New business margin 2,71% 2,56% 2,50% 2,79%
Sanlam Personal Finance 2,19% 2,07% 1,85% 2,20%
Sanlam Developing Markets 5,20% 4,93% 5,13% 5,24%
Sanlam UK 0,86% 0,86% 1,56% 1,10%
Sanlam Employee Benefits 1,26% 1,07% 1,02% 0,91%
After minorities:
Present value of new
business premiums 14 112 14 112 12 220 25 891
Sanlam Personal Finance 9 141 9 141 8 179 17 293
Sanlam Developing Markets 2 774 2 774 2 383 5 403
Sanlam UK 695 695 577 996
Sanlam Employee Benefits 1 502 1 502 1 081 2 199
New business margin 2,52% 2,36% 2,32% 2,57%
Sanlam Personal Finance 2,13% 2,01% 1,80% 2,12%
Sanlam Developing Markets 4,90% 4,58% 4,87% 4,96%
Sanlam UK 0,86% 0,86% 1,56% 1,10%
Sanlam Employee Benefits 1,26% 1,07% 1,02% 0,91%
* Excluding STC allowance
** Including STC allowance
NOTES TO THE EMBEDDED VALUE OF
COVERED BUSINESS
for the six months ended 30 June 2011
1. VALUE OF IN-FORCE Gross Cost of Net Change
SENSITIVITY ANALYSIS value of capital value from base
in-force R million of in- value
business force %
R million busines
s
R
million
BASE VALUE 21 640 (2 820) 18 820
* RISK DISCOUNT RATE
INCREASE
by 1% 20 457 (3 418) 17 039 (10)
2.VALUE OF NEW BUSINESS Gross Cost of Net Change
SENSITIVITY ANALYSIS value of capital value from base
new R million of new value
business busines %
R million s
R
million
Base value 398 (42) 356
* Risk discount rate
increase
by 1% 342 (52) 290 (19)
Six months Full year
Reviewed Audited
2011 2010 2010
R million R million R million
3. OPERATING EXPERIENCE VARIANCES
Risk experience 207 138 352
Working capital and other 24 (56) 116
Total operating experience variances 231 82 468
4. OPERATING ASSUMPTION CHANGES
Mortality and morbidity (131) 7 (13)
Persistency (29) (148) (89)
Modelling improvements and other 198 109 55
Total operating assumption changes 38 (32) (47)
5.ECONOMIC ASSUMPTION CHANGES
Investment yields and other (222) 103 448
Long-term asset mix assumptions 7 (15) (18)
Total economic assumption changes (215) 88 430
6.Tax changes
Tax changes are mostly due to the
removal of STC in the embedded value
calculations. STC will be replaced by
a new dividend withholding tax system
in South Africa effective from 1
April 2012.
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.
June December
Reviewed Audited
2011 2010 2010
% % %
8. Economic assumptions
Gross investment return, risk
discount rate and inflation
Sanlam Life:
Point used on the relevant
yield curve 9 year 9 year 9 year
Fixed-interest securities 8,7 9,2 8,4
Equities and offshore investments 12,2 12,7 11,9
Hedged equities 9,2 9,7 8,9
Property 9,7 10,2 9,4
Cash 7,7 8,2 7,4
Return on required capital 9,6 10,0 9,3
Inflation rate (1) 5,7 6,2 5,4
Risk discount rate 11,2 11,7 10,9
Sanlam Life and Pensions
UK Limited (2):
Point used on the relevant
yield curve 15 year 15 year 15 year
Fixed-interest securities 4,0 3,9 4,0
Equities and offshore investments 7,2 7,2 7,2
Hedged equities n/a 7,2 n/a
Property 7,2 7,2 7,2
Cash 4,0 3,9 4,0
Return on required capital 4,0 3,9 4,0
Inflation rate 3,5 3,2 3,5
Risk discount rate 7,7 7,7 7,7
SDM Limited:
Point used on the relevant
yield curve 5 year 6 year 5 year
Fixed-interest securities 8,1 8,4 7,7
Equities and offshore investments 11,6 11,9 11,2
Hedged equities n/a n/a n/a
Property 9,1 9,4 8,7
Cash 7,1 7,4 6,7
Return on required capital 9,4 9,7 9,0
Inflation rate 5,1 5,4 4,7
Risk discount rate 10,6 10,9 10,2
Botswana Life Insurance:
Fixed-interest securities 10,0 10,0 9,5
Equities and offshore investments 13,5 13,5 13,0
Hedged equities n/a n/a n/a
Property 11,0 11,0 10,5
Cash 9,0 9,0 8,5
Return on required capital 10,1 10,1 9,6
Inflation rate 7,0 7,0 6,5
Risk discount rate 13,5 13,5 13,0
(1) EXPENSE INFLATION OF 7,7% (DEC 2010: 7,4%)
ASSUMED FOR RETAIL BUSINESS ADMINISTERED ON OLD
PLATFORMS.
(2) Formerly Merchant Investors.
June December
Reviewed Audited
2011 2010 2010
% % %
8. Economic assumptions (continued)
Asset mix for assets supporting
the required capital
Sanlam Life:
Equities 34 34 34
Hedged equities 13 13 13
Property 3 3 3
Fixed-interest securities 15 15 15
Cash 35 35 35
100 100 100
Sanlam Life and Pensions UK Limited:
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
9. Change in accounting policies
During 2010, Channel Life`s accounting policies
for insurance contracts were aligned with the
rest of the Sanlam Group. In terms of the
amended accounting policies, no negative rand
reserves are recognised on a individual policy
level. Channel Life`s capital and economic bases
have also been aligned with that of SDM Limited.
The full impact is recognised as a change to the
opening embedded value of covered business on 1
January 2010.
Group financial statements
for the six months ended30 June 2011
Contents
Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Statement of financial position
at 30 June 2011
June December
Reviewed Audited
2011 2010
R million R million
ASSETS
Property and equipment 458 470
Owner-occupied properties 651 653
Goodwill 3 218 3 197
Other intangible assets 34 39
Value of business acquired 1 381 1 320
Deferred acquisition costs 2 330 2 270
Long-term reinsurance assets 614 588
Investments 316 579 310 091
Properties 15 672 17 362
Equity-accounted investments 3 914 3 626
Equities and similar securities 159 085 151 190
Public sector stocks and loans 57 923 57 347
Debentures, insurance policies, preference
shares and other loans 33 157 31 586
Cash, deposits and similar securities 46 828 48 980
Deferred tax 855 932
Short-term insurance technical assets 1 557 1 560
Working capital assets 39 402 40 071
Trade and other receivables 26 283 27 883
Cash, deposits and similar securities 13 119 12 188
Total assets 367 079 361 191
EQUITY AND LIABILITIES
Shareholders` fund 30 790 31 778
Minority shareholders` interest 2 821 2 608
Total equity 33 611 34 386
Long-term policy liabilities 271 039 265 695
Insurance contracts 132 106 132 985
Investment contracts 138 933 132 710
Term finance 6 986 6 766
Margin business 3 397 3 115
Other interest-bearing liabilities 3 589 3 651
External investors in consolidated funds 12 032 11 655
Cell owners` interest 595 577
Deferred tax 1 039 1 178
Short-term insurance technical provisions 8 084 7 945
Working capital liabilities 33 693 32 989
Trade and other payables 31 043 30 422
Provisions 664 617
Taxation 1 986 1 950
Total equity and liabilities 367 079 361 191
Statement of comprehensive income
for the six months ended 30 June 2011
Restated
Reviewed Reviewed
2011 2010
R million R million
Net income 24 862 20 809
Financial services income 17 505 16 002
Reinsurance premiums paid (1 707) (1 681)
Reinsurance commission received 214 168
Investment income 7 442 7 679
Investment surpluses 1 512 (1 053)
Finance cost - margin business (110) (95)
Change in fair value of external
investors` liability 6 (211)
Net insurance and investment contract
benefits and claims (13 930) (11 089)
Long-term insurance and investment
contract benefits (9 664) (7 001)
Short-term insurance claims (5 220) (4 719)
Reinsurance claims received 954 631
Expenses (6 821) (6 139)
Sales remuneration (2 485) (2 326)
Administration costs (4 336) (3 813)
Impairment of investments and goodwill (22) 49
Amortisation of intangibles (78) (42)
Net operating result 4 011 3 588
Equity-accounted earnings 221 235
Finance cost - other (179) (138)
Profit before tax 4 053 3 685
Taxation (1 303) (1 210)
Shareholders` fund (947) (951)
Policyholders` fund (356) (259)
Profit for the period 2 750 2 475
Other comprehensive income
Movement in foreign currency translation 101 (125)
reserve
Comprehensive income for the period 2 851 2 350
Allocation of comprehensive income:
Profit for the period 2 750 2 475
Shareholders` fund 2 274 2 086
Minority shareholders` interest 476 389
Comprehensive income for the period 2 851 2 350
Shareholders` fund 2 370 1 994
Minority shareholders` interest 481 356
Earnings attributable to shareholders
of the company (cents):
Basic earnings per share 117,0 105,2
Diluted earnings per share 113,1 102,6
Statement of changes in equity
for the six months ended 30 June 2011
Restated
Reviewed Reviewed
2011 2010
R million R million
Shareholders` fund:
Balance at beginning of the period 31 778 29 644
Comprehensive income 2 370 1 994
Profit for the period 2 274 2 086
Other comprehensive income: movement in
foreign
currency translation reserve 96 (92)
Net acquisition of treasury shares (1) (1 170) (1 054)
Share-based payments 87 79
Acquisitions, disposals and other movements
in interests (14) (29)
Dividends paid (2) (2 261) (2 096)
Balance at end of the period 30 790 28 538
Minority shareholders` interest:
Balance at beginning of the period 2 608 2 513
Comprehensive income 481 356
Profit for the period 476 389
Other comprehensive income: movement in
foreign
currency translation reserve 5 (33)
Net acquisition of treasury shares(1) (14) (57)
Share-based payments 9 12
Dividends paid (305) (241)
Acquisitions, disposals and other movements
in minority interests 42 (110)
Balance at end of the period 2 821 2 473
Shareholders` fund 31 778 29 644
Minority shareholders` interest 2 608 2 513
Total equity at beginning of the period 34 386 32 157
Shareholders` fund 30 790 28 538
Minority shareholders` interest 2 821 2 473
Total equity at end of the period 33 611 31 011
(1) Comprises movement in cost of shares held by
subsidiaries and the share incentive trust.
(2) Dividend of 115 cents per share paid during
2011 (2010: 104 cents per share) in respect of
the 2010 financial year.
Cash flow statement
for the six months ended 30 June 2011
Reviewed Reviewed
2011 2010
R million R million
Net cash flow from operating activities 5 532 1 386
Net cash flow from investment activities (5 802) (2 385)
Net cash flow from financing activities (948) (1 308)
Net decrease in cash and cash equivalents (1 218) (2 307)
Cash, deposits and similar securities at
beginning of the period 61 164 60 984
Cash, deposits and similar securities at
end of the period 59 946 58 677
Notes to the financial statements
for the six months ended 30 June 2011
Restated
Reviewed Reviewed
2011 2010
cents cents
1. Earnings per share
Basic earnings per share:
Headline earnings 113,5 86,2
Profit attributable to shareholders` fund 117,0 105,2
Diluted earnings per share:
Headline earnings 109,6 84,1
Profit attributable to shareholders` fund 113,1 102,6
R million R million
Analysis of earnings:
Profit attributable to shareholders 2 274 2 086
Less: Net profit on disposal of operations (91) (326)
Plus: Impairment of investments and goodwill 22 (50)
Headline earnings 2 205 1 710
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 period 2 100,0 2 160,0
Less: Weighted average number of shares - (40,0)
cancelled
Less: Weighted average Sanlam shares held
by
subsidiaries (including policyholders) (156,8) (137,2)
Weighted average number of shares for
basic earnings per share 1 943,2 1 982,8
Add: Weighted conversion of deferred shares 30,7 24,7
Add: Total number of shares and options 38,3 28,3
Less: Number of shares (under option) that
would have been issued at fair value (1,2) (2,4)
Weighted average number of shares for
diluted earnings per share 2 011,0 2 033,4
2. Segmental information
Reviewed Reviewed
2011 2010
R million R million
Segment financial services income
(per shareholders` fund information) 16 396 15 214
Sanlam Personal Finance 3 854 3 465
Sanlam Developing Markets 2 296 2 062
Sanlam UK 209 182
Sanlam Employee Benefits 1 433 1 354
Short-term Insurance 7 222 6 871
Sanlam Investments 1 024 994
Sanlam Capital Management 286 204
Corporate, consolidation and other 72 82
IFRS adjustments 1 109 788
Total financial services income 17 505 16 002
Segment result (per shareholders` fund
information after tax and minorities) 2 271 2 026
Sanlam Personal Finance 1 184 996
Sanlam Developing Markets 209 74
Sanlam UK 5 54
Sanlam Employee Benefits 216 89
Short-term Insurance 370 302
Sanlam Investments 185 279
Sanlam Capital Management 106 404
Corporate, consolidation and other (4) (172)
Reverse minority shareholders` interest
included in segment result 476 389
Fund transfers 3 60
Total profit for the period 2 750 2 475
3. Change in accounting policies and
reclassifications
Further clarification has been obtained
regarding the accounting treatment of
investments in associates since the release of
the Group`s interim results for 2010. IFRS
contains an exemption to the equity-accounting
of investments in associates for those
investments held in life insurance funds (i.e.
policyholders` funds). These investments can be
recognised at fair value in the statement of
financial position. The Group`s general
interpretation of this exemption up to 30 June
2010 was that it only applies in instances where
all shares are held in the policyholders` fund.
Where a portion of the investment is held by the
shareholders` fund, the full investment had to
be equity-accounted. The clarification referred
to above, however, confirmed that `split`
accounting can be applied and that the
policyholders` fund`s interest can in all
instances be recognised at fair value. This
applies to the Group`s interest in Vukile. The
shareholders` fund`s investment is equity-
accounted whereas the interest held in the
policyholders` fund is carried at fair value.
This split accounting prevents an economic
mismatch between policy liabilities and
policyholder assets. For the six months to 30
June 2010, a fund transfer was recognised in
respect of the Vukile units held in the
policyholders` fund as these holdings were also
equity-accounted. This fund transfer has been
reversed in the comparative information
congruent to the change in clarification. The
updated application was already applied in
respect of the 2010 year-end reporting.
As reported in the 2010 annual financial
statements, following recent queries from SARS
and pursuant to the complete restructuring of
Santam`s investment portfolio in 2007 and 2008,
an additional provision was raised for income
tax relating to the potential under provisioning
for taxation on the net realised gains on traded
investments during the said periods.
Comparative information has been restated for
the change in accounting policy and under
provision of taxation as:
Six months ended 30 June 2010
R million Restated Reported
Shareholders fund at the beginning of the 29 644 29 796
period
Shareholders fund at the end of the 28 538 28 590
period
Minority shareholders` interest at the 2 513 2 628
beginning of the period
Minority shareholders` interest at the 2 473 2 588
end of the period
Comprehensive income for the period 2 350 2 250
The impact on individual line items in the Statement of Comprehensive
Income, basic earnings per share and diluted earnings per share, is
immaterial.
4. Contingent liabilities
Shareholders are referred to the contingent
liabilities disclosed in the 2010 annual report.
The circumstances surrounding the other
contingent liabilities remain materially
unchanged.
5. Subsequent events
No material facts or circumstances have arisen
between the dates of the statement of financial
position and this report that affect the
financial position of the Sanlam Group at 30
June 2011 as reflected in these financial
statements.
Administration
GROUP SECRETARY
SANA-ULLAH BRAY
REGISTERED OFFICE
2 STRAND ROAD, BELLVILLE 7530, SOUTH AFRICA
tELEPHONE +27 (0)21 947-9111
FAX +27 (0)21 947-3670
POSTAL ADDRESS
PO BOX 1, SANLAMHOF 7532, SOUTH AFRICA
REGISTERED NAME: SANLAM LIMITED
(REGISTRATION NUMBER 1959/001562/06)
JSE SHARE CODE (PRIMARY LISTING): SLM
NSX SHARE CODE: SLA
ISIN: ZAE000070660
INCORPORATED IN SOUTH AFRICA
TRANSFER SECRETARIES:
COMPUTERSHARE INVESTOR SERVICES (PROPRIETARY)
LIMITED
(REGISTRATION NUMBER 2004/003647/07)
70 MARSHALL STREET, JOHANNESBURG 2001, SOUTH
AFRICA
PO BOX 61051, MARSHALLTOWN 2107, SOUTH AFRICA
TEL +27 (0)11 373-0000
Fax +27 (0)11 688-5200
WWW.SANLAM.CO.ZA
Directors: DK Smith (Chairman), PT Motsepe
(Deputy Chairman),
J van Zyl (1) (Group Chief Executive), MMM
Bakane-Tuoane, AD Botha,
P Buthelezi, FA du Plessis, MV Moosa, JP Moller
(1), YG Muthien (1),
TI Mvusi (1), SA Nkosi, I Plenderleith (2), P
Rademeyer, RV Simelane,
CG Swanepoel, ZB Swanepoel, PL Zim
(1) Executive
(2) British
BELLVILLE
8 SEPTEMBER 2011
SPONSOR
DEUTSCHE SECURITIES (SA) (PROPRIETARY) LIMITED
Date: 08/09/2011 08:00:09 Produced by the JSE SENS Department.
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