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SLM
SLM
SLA - Sanlam Limited - Sanlam Audited Results for the year ended 31 December
2011
SANLAM LIMITED
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 Audited Results for the year ended 31 December 2011
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Financial statements
Accounting policies and basis of presentation
External audit
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 Results December 2011
Key features
Earnings
* Net result from financial services per share increased by 15%
* Normalised headline earnings per share down 1%
Business volumes
* New business volumes up 9% to R115 billion
* Net value of new covered business up 44% to R958 million
* Net new covered business margin of 3,05%, up from 2,57%
* Net fund inflows of R25 billion, up 16%
Group Equity Value
* Group Equity Value per share of R31,46
* Return on Group Equity Value per share of 15,7%
Capital management
* Unallocated discretionary capital of R1,9 billion at 31 December 2011
* Sanlam Life Insurance Limited CAR cover of 3,7 times
Dividend of 130 cents per share, up 13%
Salient results
for the year ended 31 December 2011
2011 2010 %
SANLAM GROUP
Earnings
Net result from financial services per cents 186,1 161,5 15%
share
Normalised headline earnings per share cents 248,7 251,5 -1%
(1)
Diluted headline earnings per share cents 250,1 252,4 -1%
Net result from financial services R million 3 760 3 303 14%
Normalised headline earnings (1) R million 5 023 5 143 -2%
Headline earnings R million 5 015 5 122 -2%
Group administration cost ratio (2) % 30,1 29,6
Group operating margin (3) % 20,2 19,8
Business volumes
New business volumes R million 115 087 105 526 9%
Net fund inflows R million 25 480 22 026 16%
Net new covered business
Value of new covered business R million 958 666 44%
Covered business PVNBP (4) R million 31 449 25 891 21%
New covered business margin (5) % 3,05 2,57
GROUP EQUITY VALUE
Group Equity Value R million 63 521 57 361 11%
Group Equity Value per share cents 3 146 2 818 12%
Return on Group Equity Value per % 15,7 18,2
share(6)
Sanlam Life Insurance Limited
Shareholders` fund R million 45 172 40 521
Capital Adequacy Requirements (CAR) R million 7 350 7 375
CAR covered by prudential capital Times 3,7 3,4
Notes
(1) Normalised headline earnings = headline earnings, excluding fund transfers.
(2) Administration costs as a percentage 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) Growth in Group Equity Value per share (with dividends paid, capital
movements and cost of treasury shares acquired reversed) as a percentage of
Group Equity Value per share at the beginning of the year.
Executive review
Sustainable delivery summarises Sanlam`s performance in a year characterised by
uncertainty and global economic headwinds.
The period under review proved as challenging as we had anticipated in 2010. The
uncertainty that emanated from the eurozone during 2011 caused tremendous
volatility in financial markets around the world. While emerging market
countries, including South Africa, displayed remarkable resilience in the face
of the global crisis, they are not decoupled from the developed world and were
not spared from the fall-out of the extreme volatility filtering out of Europe
and the United States.
We performed well in areas of the business that we could control, resulting in a
pleasing growth in operational profits. Since investment markets are, however,
largely out of our control, we had to accept fairly flat investment performance
in 2011. We also maintained our focus on the quality of new business in line
with our objective to focus on profitable business instead of simply chasing
market share.
The following are some of our salient results:
* Net result from financial services per share up 15%
* New business volumes increased by 9% to R115 billion
* Net new covered business margin of 3,05% compared to 2,57% in 2010
* Return on Group Equity Value per share of 15,7%
* Dividend per share increased by 13% to 130 cents.
The Group achieved a satisfactory 14% growth in net operating profit. Sanlam
Personal Finance (SPF) performed exceptionally with excellent earnings growth of
18%, the result of sound contributions from all its South African retail market
segments and all its major businesses. Sanlam Emerging Markets (SEM) and Sanlam
Investments recorded 8% and 7% growth respectively, both clusters benefiting
from their diversified composition as strong performances from certain
individual businesses compensated for relatively weaker performances by other.
Businesses in the latter category are essentially either start-ups or growth
phase entities or businesses more directly and severely impacted by the adverse
economic conditions. Santam again made a material contribution to the Group`s
bottom line as favourable underwriting conditions continued during 2011. Some
reduction in margin in the second half of 2011 resulted in only a relatively
small increase in Santam`s operating profit for the year. The increase in the
Group`s effective interest in Santam during 2011, however, supported a 13%
increase in the Group`s share of Santam`s operating earnings.
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 lacklustre investment market performance during 2011 had a
marked negative impact on the RoGEV for the period. This was, however, offset by
growth in the underlying asset bases of most operations through strong net fund
inflows, which contributed to a RoGEV of 15,7% per share for 2011.
2011 strategic initiatives
In 2011 we continued to execute the Group`s five-pillar strategy and achieved
our overarching objective of keeping the business on a strategically sound
footing for the future. The five pillars that continue to make up our strategy
are optimal capital utilisation, earnings growth, costs and efficiencies,
diversification and transformation. By focusing resolutely on these five
pillars, we have achieved market-leading growth and have transformed Sanlam into
an efficient and profitable company with a healthy capital position.
* Optimal capital utilisation
One of our big focus areas for 2011 has been to pursue profitable growth
opportunities with the aim of efficiently utilising discretionary capital. Of
the discretionary capital, some R2 billion has been earmarked for the Shriram
Capital investment in India announced late last year. This investment is in line
with our strategy to diversify both geographically and into broader financial
services. Our target remains to close this transaction in the second quarter of
2012.
We used some R1,1 billion of discretionary capital for strategic acquisitions.
These include an increase in our Santam holding to an effective 60% and Sanlam
Private Investments` acquisition of leading United Kingdom (UK) stockbroking
firm, Merchant Securities Group plc, and Summit Trust, an international
independent trust services group headquartered in Geneva, Switzerland. Our
expanded global wealth management proposition will serve the established South
African client base and clients in the UK and Australia. SEM provided further
capital to a number of its fledgling businesses, expanded into Swaziland in 2011
where we established an asset management business, and started exploring
opportunities in Mozambique. We also continued the buy-back of Sanlam shares on
a selective basis. R979 million was utilised for this purpose.
In 2011, we bolstered our discretionary capital portfolio by some R1 billion
through the disposal of non-strategic investments, including the sale of a major
part of the Group`s holding in the Vukile Property Fund.
* Earnings Growth
Key to our strategy is to grow earnings in a responsible and sustainable manner.
We will therefore not push short-term profits at the expense of long-term
earnings growth. Strong growth in all of the key performance indicators during
2011 reflects the success of this approach.
* Cost and efficiencies
The strategic change in the Group`s management structure, effective 1 July 2011,
should ensure improved focus and co-ordination across businesses. These changes
include a targeted Emerging Markets business as well as the combination of SPF
and Sanlam Sky in a South African retail cluster. This should in time result in
reduced operating costs and greater efficiencies.
* Diversification
Our diversification strategy has resulted in a mix of business that has provided
us with the resilience required to withstand the extreme global turmoil over the
past four years. We have successfully achieved geographic, product, distribution
and market segment diversification in recent years, which has served us well. In
2003, for example, 74% of our net operating profit was derived from our life
business. In 2011 life business, while double in size compared to 2003,
contributed only 52% of net operating profit. So while our life business is
still important to the Sanlam Group, it forms part of a much more balanced
portfolio of businesses that is better equipped to withstand harsh conditions.
* Transformation
Transformation is one of the pillars of our business strategy, because only
through focused transformation will we ensure that this business remains viable.
While the internal transformation of Sanlam is a key priority, we are also
concerned with the transformation of the savings and investment landscape of
South Africa. South Africa`s low savings rate is of concern and we believe we
have an important role to play in helping more South Africans achieve financial
stability by providing access to appropriate products that offer value. We have
therefore done away with products that no longer offer value and are focused on
delivering innovative products through unconventional channels into the low-
income market.
Looking ahead
The strategic restructuring implemented in 2011 created a solid base from which
to achieve sustainable future growth for the Sanlam Group. We are facing many
challenges, including global economic uncertainty and a raft of regulatory
changes in all the regions we operate. However, we remain confident that our
conservative approach and experienced staff will enable us to continue
withstanding more turmoil while at the same time enable us to provide growth and
value on a sustainable basis.
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 year ended 31 December 2011 are presented based
on and in compliance with International Financial Reporting Standards (IFRS).
The basis of presentation and accounting policies are consistent with those
applied in the 2010 annual report and the 2011 interim report, apart from the
following changes, which were also indicated in the 2011 interim results
announcement:
* Segmental reporting: To ensure appropriate strategic focus across the Group,
the management structure was changed, effective 1 July, as follows:
- Operations in emerging markets outside of South Africa have been combined
into a Sanlam Emerging Markets cluster. This includes operations formerly
managed within the Sanlam Personal Finance, Sanlam Developing Markets, Short-
term Insurance and Investments clusters.
- The South African operations of the former Sanlam Developing Markets cluster
have been combined with that of Sanlam Personal Finance.
- Management responsibility for Sanlam UK has been transferred to the
Investments cluster.
- The Group now reports in five segments: Sanlam Personal Finance, Sanlam
Emerging Markets, Sanlam Investments, Santam and Corporate and Other.
Segmental information for 2010 has been restated accordingly.
* The replacement of STC in South Africa with a withholding tax basis, effective
1 April 2012, 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).
Group Equity Value (GEV)
GEV is the aggregate of the following components:
* The embedded value of covered business, being the life insurance businesses of
the Group, which comprises the required capital supporting these operations and
the net present value of their in-force books of business (VIF);
* The fair value of other Group operations based on longer term assumptions,
which includes the investment management, capital markets, credit, short-term
insurance and the non-covered wealth management operations of the Group; and
* The fair value of discretionary and other capital.
GEV provides an indication of the value of the Group`s operations, but without
placing any value on future new covered business to be written by the Group`s
life insurance businesses. Sustainable return on GEV is the primary performance
benchmark used by the Group in evaluating the success of its strategy to
maximise shareholder value.
Group Equity Value at 31 December 2011
2011 2010
R million Total Fair Value Total Fair Value
value of in- value of in-
of force of force
assets assets
Covered business 34 875 14 553 20 322 31 045 14 033 17 012
Sanlam Personal 26 687 8 622 18 065 23 663 8 513 15 150
Finance
Sanlam Emerging 2 320 1 012 1 308 1 777 735 1 042
Markets
Sanlam 5 868 4 919 949 5 605 4 785 820
Investments
Other group 22 012 22 012 - 19 413 19 413 -
operations
Sanlam Personal 2 189 2 189 - 1 949 1 949 -
Finance
Sanlam Emerging 1 167 1 167 - 1 000 1 000 -
Markets
Sanlam 9 041 9 041 - 8 078 8 078 -
Investments
Santam 9 615 9 615 - 8 386 8 386 -
Other capital and 2 734 2 734 - 2 903 2 903 -
net worth
adjustments
59 621 39 299 20 322 53 361 36 349 17 012
Discretionary 3 900 3 900 - 4 000 4 000 -
capital
Group Equity Value 63 521 43 199 20 322 57 361 40 349 17 012
Issued shares for 2 018,9 2 035,5
value per share
(million)
Group Equity Value 3 146 2 818
per share (cents)
Share price (cents) 2 885 2 792
Discount -8% -1%
The GEV per share increased by 11,6% from 2 818 cents at 31 December 2010 to 3
146 cents at 31 December 2011, after payment of a 115 cents per share dividend
in May 2011. The Sanlam share price traded at an 8% discount to GEV by close of
trading on 31 December 2011, with the discount widening 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 2011 had a marked negative impact on the RoGEV for the
period. This was, however, offset by growth in the underlying asset bases of
most operations through strong net fund inflows. After achieving a RoGEV per
share of 18,2% in 2010, the per share return of 15,7% in 2011 is a particularly
pleasing performance. This was positively impacted by the reversal of the STC
allowance in the value of in-force (VIF) of R1,2 billion (refer above). The
adjusted RoGEV per share for 2011, which excludes the STC reversal and assumes
long-term investment return assumptions, was 14,6%, well in excess of the return
target of 12,4%.
The lower RoGEV on a per share basis is in part the result of the further
vesting of the conversion right in respect of 13,3 million `A` Deferred shares
in terms of the value add arrangement with our BBBEE partner Ubuntu-Botho. In
aggregate, the conversion right in respect of 41,5 million of the issued 56,5
million `A` Deferred shares have vested to date.
Return on Group Equity Value for the year ended 31 December 2011
2011 2010
Earnings Return Earnings Return
R million % R million %
Covered business 6 273 20,2 5 057 17,5
Sanlam Personal Finance 5 146 21,7 4 108 18,9
Sanlam Emerging Markets 571 32,1 350 21,6
Sanlam Investments 556 9,9 599 10,6
Other operations 2 708 13,9 4 100 24,4
Sanlam Personal Finance 373 19,1 732 48,4
Sanlam Emerging Markets 27 2,7 127 15,6
Sanlam Investments 1 113 13,8 1 193 16,0
Santam 1 195 14,2 2 048 29,1
Discretionary and other capital 424 165
Portfolio investments and 575 342
other
Net corporate expenses (124) (112)
Share-based payment (4) (3)
transactions
Change in net worth (23) (62)
adjustments
Return on Group Equity Value 9 405 16,4 9 322 18,3
Return on Group Equity Value 15,7 18,2
per share
Covered business yielded a return of 20,2% compared to 17,5% in 2010. Excluding
the reversal of STC, investment variances and economic assumption changes, the
adjusted RoGEV of covered business amounted to 16,6%, a solid performance.
Strong VNB growth and continued positive operating experience variances
supported the results.
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. Santam and the majority of SEM`s non-life operations are
valued at their listed share prices. The Santam share price outperformed general
equity markets in South Africa, which supported the 14,2% return earned on this
investment. The SEM operations` relatively low return of 2,7% reflects the weak
equity market performance in Botswana.
Earnings
Summarised shareholders` fund income statement
for the year ended 31 December 2011
R million 2011 2010 %
Net result from financial services 3 760 3 303 14%
Net investment return 1 571 2 123 -26%
Net investment income 792 851 -7%
Net investment surpluses 715 1 131 -37%
Net equity-accounted earnings 64 141 -55%
Project expenses (25) (48) 48%
BEE transaction costs (7) (8) 13%
Secondary tax on companies (168) (135) -24%
Amortisation of intangible assets (108) (92) -17%
Normalised headline earnings 5 023 5 143 -2%
Other non-headline earnings and impairments 151 401
Normalised attributable earnings 5 174 5 544 -7%
Net result from financial services
The net result from financial services or net operating profit increased by a
pleasing 14%, with a strong contribution from SPF in particular.
Result from financial services
for the year ended 31 December 2011
Gross Net
R million 2011 2010 % 2011 2010 %
Sanlam Personal Finance 2 775 2 353 18% 1 990 1 680 18%
Sanlam Emerging Markets 656 591 11% 309 286 8%
Sanlam Investments 1 230 1 151 7% 945 882 7%
Investment Management 584 605 -3% 435 456 -5%
Employee Benefits 330 248 33% 242 179 35%
Capital Management 262 254 3% 210 201 4%
Sanlam UK 54 44 23% 58 46 26%
Santam 1 517 1 464 4% 640 567 13%
Corporate and other (171) (163) -5% (124) (112) -11%
Net result from financial 6 007 5 396 11% 3 760 3 303 14%
services
SPF`s net result from financial services increased by 18%, with a similar
increase on a gross basis. The entry-level market recorded gross operating
earnings of R296 million, 92% up on 2010. This is attributable to growth in the
size of the book over the last few years, augmented by good mortality experience
in 2011. The results were further enhanced as the level of new business strain
remained approximately in line with that of 2010 as a consequence of a slowdown
in new business volumes. The middle-income market gross profit increased by 11%,
attributable to higher risk profits from improved claims experience and an
increase in administration profit following higher average assets under
management, partly offset by lower interest earned on working capital as short-
term interest rates remained low. Sanlam Personal Loans increased its
contribution to gross operating profit by 43% following a 25% increase in the
average size of the loan book and improved bad debt experience. Glacier also
reported a 34% increase in gross profit, supported by an increase in fees earned
on the overall higher level of assets under management.
SEM achieved an 8% increase in its net result from financial services. On gross
basis operating earnings increased by 11%, despite some R45 million losses
incurred by newly established operations. The Namibian operations` gross
contribution decreased by 1% from the high base in 2010, which included annuity
mismatch profits that did not repeat in 2011 to the same extent. The Botswana
operations` operating earnings were flat on 2010 (up 2% in local currency), with
the increased stake in Letshego offsetting the negative impact of a reduced
holding in the Zambian investment management business and lower asset management
fees earned following a withdrawal of funds by the Botswana Public Officers
Pension Fund. The Rest of Africa results were negatively impacted by start-up
losses at new operations and the stronger average rand exchange rate; excluding
these the Rest of Africa businesses achieved satisfactory operating earnings of
some R100 million in 2011.
Sanlam Investments` result from financial services is 7% up on the prior year on
a gross and net basis, with Sanlam Employee Benefits (SEB) being the main
contributor. SEB`s earnings benefited from an improvement in claims experience
as well as a once-off release of data-related reserves. Sanlam Capital Markets
was impacted by a lack of deal flow during 2011 as market volatility drained
investor confidence and impacted on the competitiveness of hedging rates. The
Debt business, however, outperformed on the back of lower credit risk margins.
The Private Equity business` results were in turn negatively affected by
the non-recurrence of large fees earned in 2010 on the exit of investments.
Despite these conditions, Sanlam Capital Management managed to increase its
gross operating earnings by 3%, aided by a R45 million once-off profit
realised on a property financing transaction. The Investment Management
operations reported a 3% decrease in gross operating earnings, attributable
to a R31 million decline in performance fees earned and a R14 million decrease
in the investment return earned on seeding capital provided to some of the
cluster`s hedge fund portfolios. SIM Global is the main contributor to the
decline in performance fees, with volatility in its earnings expected given the
specialised nature of its investment funds. Excluding these items, gross
operating earnings increased by a satisfactory 14%, which is in excess of
the growth in average assets under management.
Santam`s favourable underwriting experience of 2010 continued into the 2011
financial year, resulting in a 4% increase in Santam`s gross result from
financial services (13% on a net basis). The strategic focus on claims
management is reflecting in a relatively low claims ratio, with an underwriting
margin of 7,7% in 2011, marginally down on the 7,8% average margin achieved in
2010 but down on the 8,6% margin achieved in the second half of 2010 and the
8,5% margin in the first half of 2011. Most risk classes contributed to the
results.
Normalised headline earnings
Normalised headline earnings of R5,02 billion are 2% lower than in 2010,
largely attributable to the 26% decrease in the net investment return earned on
the capital portfolio. The South African equity market delivered a marked weaker
performance in 2011 compared to 2010. This was partly offset by the positive
impact of the weaker rand (against developed market currencies) on the valuation
of the offshore exposure in the capital portfolio. The increase in the STC
expense for 2011 is the combined effect of lower STC credits earned during 2011
and a higher dividend paid in respect of the 2010 financial year.
Business volumes
New business flows
The Group achieved growth of 9% in new business volumes, a satisfactory
performance in the difficult operating environment of 2011. New life business
recorded exceptional growth of 25%, with investment and short-term insurance
business increasing by 5% and 8% respectively. The strategic focus on the
quality of new business written is reflected in good retention levels and a
continuance of strong net fund inflows.
Business volumes for the year ended 31 December 2011
R million New business Net flows
2011 2010 % 2011 2010 %
Sanlam Personal Finance 27 246 25 422 7% 5 898 5 660 4%
Sanlam Emerging Markets 10 995 10 660 3% 2 008 799 151%
Sanlam Investments 56 062 50 304 11% 11 444 10 141 13%
Santam 14 653 13 561 8% 5 249 4 868 8%
108 956 99 947 9% 24 599 21 468 15%
White label 6 131 5 579 10% 881 558 58%
Total 115 087 105 526 9% 25 480 22 026 16%
SPF new business sales increased by 7% on 2010, with single premium business
the main contributor to the growth. Excluding a once-off book transfer included
in the 2010 results, new business volumes increased by 12%.New business volumes
in the South African entry-level market decreased by 5%. Single premiums
continued to decline as roll-overs of the discontinued single premium business
in Sanlam Sky reduce over time while the book runs off. This trend was in
line with expectations. New recurring premium business were 3% up on 2010,
reflecting the impact of the strategic drive to improve new business quality.
The middle-income market segment recorded growth of 14% in new life business,
with good sales of new single premium savings products launched during the
year offsetting lacklustre demand for the traditional guaranteed solutions in
the current low interest rate environment. Recurring premium life business in
this segment grew by only 2%, in part impacted by a decision not to follow the
low premium rates offered by competitors in the underwriting market. The
Group`s focus remains on quality, rather than market share and unprofitable new
business growth. Glacier continued to perform well in the affluent market with
growth of 28% in life business sales. Demand for Glacier`s new international
offering and linked annuities remained strong. Investment business sales were,
however, 4% lower than in 2010, largely due to a R1 billion once-off book
transfer included in the 2010 results. Excluding this transfer, new investment
business increased by 6%.
SEM new business volumes increased by 3% on 2010, with strong growth in Rest
of Africa and India offset by a lower overall level of growth in the relatively
more mature Namibia and Botswana operations. New business volumes in Namibia
were 3% up on 2010. Life business sales decreased by 29% to R346 million from
a high base in 2010, which included once-off single premiums. Despite a very
competitive environment, collective investment scheme flows increased by 4%
to R7,8 billion. Botswana recorded flat new business volumes, supported by
strong single premium annuity and credit life sales. Recurring premium volumes
were, however, 19% down on 2010, with industrial action and increasing
competition eroding new business growth. The Rest of Africa operations
recorded new business volumes of R526 million, up 17% on 2010 despite an
average 10% stronger rand exchange rate against most countries. Zambia,
Tanzania and Malawi are the main contributors to the growth, with Nigeria also
recording a satisfactory maiden contribution of R21 million. Our Indian
operation adapted well to the new regulatory environment and achieved new
business growth of 9% on 2010, supported by single premium savings, credit
life and short-term insurance volumes.
Sanlam Investments` new business volumes were up 11% on 2010. South African
new investment business grew by 8%, with a continued strong performance of
retail collective investment scheme business partly offset by a decline in new
segregated and multi-manager mandates. Sanlam UK continued on its growth path
with new investment business increasing by 34% (partly assisted by business
flows from the newly acquired Border Asset Management operations). SIM Global
recorded growth of 59%, offsetting lower new business sales at Sanlam
International Investment Partners. Overall international investment business
volumes increased by 3% in a very challenging operating environment in the
developed markets. New life business volumes increased by 125% on 2010 to
R3,9 billion, with both SEB (up 228%) and Sanlam UK (up 43%) contributing
to the growth. The SEB performance benefited from a R1,2 billion annuity
mandate received in the second half of the year. The new life business aided
the cluster`s overall net fund inflows of R11,4 billion, offset by a weaker
performance from investment business.
Santam`s gross written premium increased by 12%, but higher reinsurance exposure
resulted in net earned premiums increasing by 8%, a satisfactory result in the
context of strong competition from the established direct insurers and banks.
MiWay continues to successfully build its direct distribution capacity,
increasing its net written premiums by some 70% in 2011.
Value of new covered business
The value of new life business (VNB) written during 2011 increased by 38% on
2010 to reach R1 051 million, breaching the R1 billion mark for the first time.
After minorities, VNB increased by 44% to R958 million. The replacement of STC
in South Africa with a withholding tax basis, results in an increase in the
future profitability of new business written and commensurately VNB. The change
in tax basis increased net VNB by R50 million for 2011. Excluding this, net
VNB increased by 36% at overall improved margins, testimony to the success
of the Group`s strategic focus on the quality of new business.
Value of new covered business for the year ended 31 December 2011
R million After STC basis Before STC basis
change change
2011 2010 % 2011 2010 %
Value of new covered 1 051 762 38% 1 001 762 31%
business
Sanlam Personal Finance 705 510 38% 668 510 31%
Sanlam Emerging Markets 223 221 1% 214 221 -3%
Sanlam Investments 123 31 297% 119 31 284%
Net of minorities 958 666 44% 908 666 36%
Present value of new 32 786 27 334 20% 32 786 27 334 20%
business premiums
Sanlam Personal Finance 23 423 20 372 15% 23 423 20 372 15%
Sanlam Emerging Markets 3 642 3 767 -3% 3 642 3 767 -3%
Sanlam Investments 5 721 3 195 79% 5 721 3 195 79%
Net of minorities 31 449 25 891 21% 31 449 25 891 21%
New covered business margin 3,21% 2,79% 3,05% 2,79%
Sanlam Personal Finance 3,01% 2,50% 2,85% 2,50%
Sanlam Emerging Markets 6,12% 5,87% 5,88% 5,87%
Sanlam Investments 2,15% 0,97% 2,08% 0,97%
Net of minorities 3,05% 2,57% 2,89% 2,57%
Solvency
All of the life insurance businesses within the Group were sufficiently
capitalised at the end of December 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 R27,5 billion covered its capital adequacy requirements (CAR) 3,7 times.
No policyholder portfolio had a negative bonus stabilisation reserve at the end
of December 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. Sustainable
growth in dividend payments is an important consideration for the Board in
determining the dividend for the year. The Board uses cash operating earnings
as a guideline in setting the level of the dividend, subject to the Group`s
liquidity and solvency requirements. Any cost relating to a dividend payment
is allowed for in setting the dividend for a particular year. The dividend
payable in 2012 is still subject to STC and allowance is accordingly made for
this cost in setting the dividend. The new dividend withholding tax regime
will apply in respect of future dividend declarations. The operational
performance of the Group in the 2011 financial year enabled the Board to
increase the dividend per share by 13% to 130 cents. This will maintain a
cash operating earnings cover of approximately 1,19 times.
Shareholders are advised that the final cash dividend of 130 cents for the year
ended 31 December 2011 is payable on Wednesday, 9 May 2012 to ordinary
shareholders recorded in the register of Sanlam at the close of business on
Thursday, 26 April 2012. The last date to trade to qualify for this dividend
will be Thursday, 19 April 2012, and Sanlam shares will trade ex-dividend from
Friday, 20 April 2012.
Dividend payment by way of electronic bank transfers will be effected on
Wednesday, 9 May 2012. The mailing of cheque payments in respect of dividends
due to those shareholders who have not elected to receive electronic dividend
payments will commence on or as soon as practically possible after this date.
Share certificates may not be dematerialised or rematerialised between Friday,
20 April 2012 and Thursday, 26 April 2012, both days inclusive.
Desmond Smith Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Bellville
7 March 2012
Sanlam Group
Financial statements for the year ended 31 December 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 annual results was
supervised by the financial director, Kobus Moller CA(SA).
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 1 July 2011)
* Amendment to IFRS 7 - Disclosures relating to offsetting of financial
assets and liabilities (effective 1 January 2013)
* Amendments to IAS 12 - Deferred tax: Recovery of underlying assets
(effective 1 January 2012)
* Amendment to IAS 32 - Clarification of the instances in which the set off
of financial assets and liabilities is allowed (effective 1 January 2014)
* 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 January 2013)
* IFRS 12 Disclosure of Interests in Other Entities (effective 1 January
2013)
* IFRS 13 Fair Value Measurement (effective 1 January 2013)
* IAS 19 Employee Benefits - Amendment regarding removal of corridor method
and other comprehensive income treatment (effective 1 January 2013)
* IAS27 Separate Financial Statements - Consequential amendments resulting
from consolidation project (effective 1 January 2013)
* IAS 28 Investments in Associates and Joint Ventures - 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.
External audit
The Group financial statements have been extracted from the Group`s 2011 audited
annual financial statements, which have been audited by Ernst & Young Inc. and
their unqualified audit opinion is available for inspection at the company`s
registered office. The Shareholders` information has also been subject to
external audit by Ernst & Young Inc. and the unqualified audit opinion is
available for inspection at the registered office of Sanlam Limited.
Shareholders` information for the year ended 31 December 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 31 December 2011
2011 2010
R million R million
Embedded value of covered business 34 875 31 045
Sanlam Personal Finance 26 687 23 663
Adjusted net worth 8 622 8 513
Value of in-force 18 065 15 150
Sanlam Emerging Markets 2 320 1 777
Adjusted net worth 1 012 735
Value of in-force 1 308 1 042
Sanlam Investments 5 868 5 605
Adjusted net worth 4 919 4 785
Value of in-force 949 820
Other Group operations 22 012 19 413
Sanlam Personal Finance 2 189 1 949
Sanlam Emerging Markets 1 167 1 000
Sanlam Investments 9 041 8 078
Santam 9 615 8 386
Other capital and net worth adjustments 2 734 2 903
59 621 53 361
Discretionary capital 3 900 4 000
Group equity value 63 521 57 361
Group equity value per share (cents) 3 146 2 818
Shareholders` fund at fair value
at 31 December 2011
2011 2010
R million R million
Property and equipment 332 222
Owner-occupied properties 416 493
Goodwill 478 497
Value of business acquired 694 716
Other intangible assets 29 39
Deferred acquisition costs 1 888 1 528
Non-current assets held for sale 512 -
Investments 42 434 39 405
Sanlam businesses 22 012 19 413
Sanlam Investments 9 041 8 078
Sanlam Investment Management
SIM Wholesale 4 247 4 201
International 2 034 1 508
Sanlam Collective Investments 583 512
Capital Management 851 931
Sanlam Employee Benefits: Infinit - 25
Sanlam UK
Principal 473 318
Punter Southall Group 307 227
Nucleus 229 140
Preference shares, interest-bearing
instruments and other 317 216
Sanlam Personal Finance 2 189 1 949
Glacier 1 169 965
Sanlam Personal Loans 494 365
Multi-Data 112 149
Sanlam Trust 168 185
Anglo African Finance 50 50
Sanlam Healthcare Management 196 235
Sanlam Emerging Markets other operations 1 167 1 000
Santam 9 615 8 386
Associated companies 786 1 168
Joint ventures - Shriram Life Insurance 267 257
Other investments 19 369 18 567
Other equities and similar securities 8 440 7 947
Public sector stocks and loans 13 17
Investment properties 489 993
Other interest-bearing and preference
share investments 10 427 9 610
Net term finance - -
Term finance (5 108) (5 577)
Assets held in respect of term finance 5 108 5 577
Net deferred tax 111 284
Net working capital (137) 520
Minority shareholders` interest (917) (668)
Shareholders` fund at fair value 45 840 43 036
Fair value per share (cents) 2 271 2 114
Shareholders` fund income statement
for the year ended 31 December 2011
2011 2010
R million R million
Result from financial services before tax 6 007 5 396
Sanlam Personal Finance 2 775 2 353
Sanlam Emerging Markets 656 591
Sanlam Investments 1 230 1 151
Santam 1 517 1 464
Corporate and other (171) (163)
Tax on financial services income (1 532) (1 387)
Minority shareholders` interest (715) (706)
Net result from financial services 3 760 3 303
Net investment return 1 571 2 123
Net investment income 792 851
Net investment surpluses 715 1 131
Net equity-accounted headline earnings 64 141
Net project expenses (25) (48)
BEE transaction costs (7) (8)
Amortisation of intangibles (108) (92)
Net secondary tax on companies (168) (135)
Normalised headline earnings 5 023 5 143
Profit on disposal of operations 186 404
Impairments (35) (3)
Normalised attributable earnings 5 174 5 544
Fund transfers (8) (21)
Attributable profit per Group statement of 5 166 5 523
comprehensive income
Notes to the shareholders` fund information
for the year ended 31 December 2011
2011 2010
R million R million
1. New business
Analysed per licence:
Life Insurance 21 455 17 151
Sanlam Personal Finance 15 338 13 074
Sanlam Emerging Markets 2 205 2 337
Sanlam Investments 3 912 1 740
Investment business and other 87 501 82 796
Sanlam Personal Finance 11 908 12 348
Sanlam Emerging Markets 8 790 8 323
Sanlam Investments 52 150 48 564
Santam 14 653 13 561
New business excluding white label 108 956 99 947
White label 6 131 5 579
Total new business 115 087 105 526
2011 2010
R million R million
2. Net flow of funds
Analysed per licence:
Life Insurance 6 685 2 784
Sanlam Personal Finance 4 143 2 424
Sanlam Emerging Markets 1 806 1 873
Sanlam Investments 736 (1 513)
Investment business and other 17 914 18 684
Sanlam Personal Finance 1 755 3 236
Sanlam Emerging Markets 202 (1 074)
Sanlam Investments 10 708 11 654
Santam 5 249 4 868
Net inflow excluding white label 24 599 21 468
White label 881 558
Total net flow of funds 25 480 22 026
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.
2011 2010
cents cents
Normalised diluted earnings per share:
Net result from financial services 186,1 161,5
Headline earnings 248,7 251,5
Profit attributable to shareholders` fund 256,2 271,1
R million R million
Analysis of normalised earnings (refer
shareholders` fund income statement):
Net result from financial services 3 760 3 303
Headline earnings 5 023 5 143
Profit attributable to shareholders` fund 5 174 5 544
million million
Adjusted number of shares:
Weighted average number of shares for 2 004,9 2 029,0
diluted earnings per share
Add: Weighted average Sanlam shares held by 15,0 16,3
policyholders
Adjusted weighted average number of shares 2 019,9 2 045,3
for normalised diluted earnings per share
Number of ordinary shares in issue at 2 100,0 2 160,0
beginning of year
Shares cancelled - (60,0)
Number of ordinary shares in issue 2 100,0 2 100,0
Shares held by subsidiaries in (158,1) (125,7)
shareholders` fund
Outstanding shares and share options in 36,5 34,9
respect of Sanlam Limited long-term
incentive scheme
Number of shares under option that would (1,0) (1,9)
have been issued at fair value
Convertible deferred shares held by Ubuntu- 41,5 28,2
Botho
Adjusted number of shares for value per 2 018,9 2 035,5
share
4. Share repurchases
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 36,1 million shares from 11 March
2011 to 11 November 2011 in terms of the general
authorities. The lowest and highest prices paid were
R26,57 and R28,61 per share respectively. The total
consideration paid of R979 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
410,8 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.
Before After
Cents repurchases repurchases
Basic earnings per share:
Profit attributable to shareholders` fund 264,8 266,9
Headline earnings 257,1 259,1
Diluted earnings per share:
Profit attributable to shareholders` fund 255,8 257,7
Headline earnings 248,4 250,1
Value per share:
Equity value 3 140 3 146
Net asset value 1 718 1 699
Tangible net asset value 1 382 1 357
Embedded value of covered business at 31 December 2011
2011 2010
Note R million R million
Sanlam Personal Finance 26 687 23 663
Adjusted net worth 8 622 8 513
Net value of in-force covered business 18 065 15 150
Value of in-force covered business 19 813 16 943
Cost of capital (1 721) (1 781)
Minority shareholders` interest (27) (12)
Sanlam Emerging Markets 2 320 1 777
Adjusted net worth 1 012 735
Net value of in-force covered business 1 308 1 042
Value of in-force covered business 2 181 1 805
Cost of capital (226) (181)
Minority shareholders` interest (647) (582)
Sanlam UK 791 638
Adjusted net worth 250 212
Net value of in-force covered business 541 426
Value of in-force covered business 575 455
Cost of capital (34) (29)
Minority shareholders` interest - -
Sanlam Employee Benefits 5 077 4 967
Adjusted net worth 4 669 4 573
Net value of in-force covered business 408 394
Value of in-force covered business 1 319 1 286
Cost of capital (911) (892)
Minority shareholders` interest - -
Embedded value of covered business 34 875 31 045
Adjusted net worth (1) 14 553 14 033
Net value of in-force covered business 1 20 322 17 012
Embedded value of covered business 34 875 31 045
(1) Excludes subordinated debt funding of Sanlam
Life.
Change in embedded value of covered business
for the year ended 31 December 2011
2011 2010
R million Note Total Net value Adjusted Total
of in- net worth
force
Embedded value of covered 31 045 17 012 14 033 28 988
business at the beginning of
the year as reported
Change in accounting 9 - - - (49)
policies
Embedded value of covered 31 045 17 012 14 033 28 939
business at the beginning of
the year - restated
Value of new business 2 958 2 178 (1 220) 666
Net earnings from existing
covered business 3 125 (376) 3 501 2 639
Expected return on value
of
in-force business 2 404 2 404 - 2 218
Expected transfer of
profit
to adjusted net worth - (2 891) 2 891 -
Operating experience 3 681 192 489 468
variances
Operating assumption 4 40 (81) 121 (47)
changes
Expected investment return on 1 062 - 1 062 1 151
adjusted net worth
Embedded value earnings from 5 145 1 802 3 343 4 456
operations
Economic assumption changes 5 132 142 (10) 430
Tax changes 6 1 244 1 241 3 -
Investment variances - value
of in-force (136) (188) 52 332
Investment variances -
investment
return on adjusted net worth (259) - (259) 4
Exchange rate movements 151 151 - (119)
Net project expenses 7 (4) - (4) (46)
Embedded value earnings from 6 273 3 148 3 125 5 057
covered business
Acquired value of in-force 235 137 98 6
Transfer from/(to) other
Group operations 34 25 9 -
Change in utilisation of
capital diversification - - - (700)
Net transfers from covered
business (2 712) - (2 712) (2 257)
Embedded value of covered 34 875 20 322 14 553 31 045
business at the end of year
Analysis of earnings from
covered business
Sanlam Personal Finance 5 146 2 915 2 231 4 108
Sanlam Emerging Markets 571 240 331 350
Sanlam UK 229 115 114 (7)
Sanlam Employee Benefits 327 (122) 449 606
Embedded value earnings from 6 273 3 148 3 125 5 057
covered business
VALUE OF NEW BUSINESS
for the year ended 31 December 2011
R million Note 2011* 2011** 2010
Value of new business (at point of
sale):
Gross value of new business 1 193 1 143 866
Sanlam Personal Finance 755 718 556
Sanlam Emerging Markets 248 239 245
Sanlam UK 11 11 14
Sanlam Employee Benefits 179 175 51
Cost of capital (142) (142) (104)
Sanlam Personal Finance (50) (50) (46)
Sanlam Emerging Markets (25) (25) (24)
Sanlam UK (3) (3) (3)
Sanlam Employee Benefits (64) (64) (31)
Value of new business 1 051 1 001 762
Sanlam Personal Finance 705 668 510
Sanlam Emerging Markets 223 214 221
Sanlam UK 8 8 11
Sanlam Employee Benefits 115 111 20
Value of new business
attributable to:
Shareholders` fund 2 958 908 666
Sanlam Personal Finance 701 664 507
Sanlam Emerging Markets 134 125 128
Sanlam UK 8 8 11
Sanlam Employee Benefits 115 111 20
Minority shareholders` interest 93 93 96
Sanlam Personal Finance 4 4 3
Sanlam Emerging Markets 89 89 93
Sanlam UK - - -
Sanlam Employee Benefits - - -
Value of new business 1 051 1 001 762
Geographical analysis:
South Africa 820 779 522
Africa 223 214 224
Other international 8 8 16
Value of new business 1 051 1 001 762
Analysis of new business profitability:
Before minorities:
Present value of new
business premiums 32 786 32 786 27 334
Sanlam Personal Finance 23 423 23 423 20 373
Sanlam Emerging Markets 3 642 3 642 3 766
Sanlam UK 1 374 1 374 996
Sanlam Employee Benefits 4 347 4 347 2 199
New business margin 3,21% 3,05% 2,79%
Sanlam Personal Finance 3,01% 2,85% 2,50%
Sanlam Emerging Markets 6,12% 5,88% 5,87%
Sanlam UK 0,58% 0,58% 1,10%
Sanlam Employee Benefits 2,65% 2,55% 0,91%
R million Note 2011* 2011** 2010
Analysis of new business profitability
(continued):
After minorities:
Present value of new
business premiums 31 449 31 449 25 891
Sanlam Personal Finance 23 353 23 353 20 287
Sanlam Emerging Markets 2 375 2 375 2 409
Sanlam UK 1 374 1 374 996
Sanlam Employee Benefits 4 347 4 347 2 199
New business margin 3,05% 2,89% 2,57%
Sanlam Personal Finance 3,00% 2,84% 2,50%
Sanlam Emerging Markets 5,64% 5,26% 5,31%
Sanlam UK 0,58% 0,58% 1,10%
Sanlam Employee Benefits 2,65% 2,55% 0,91%
* Excluding STC allowance
** Including STC allowance
Notes to the embedded value of covered business
for the year ended 31 December 2011
1. Value of in-force Gross value Cost Net value Change from
sensitivity analysis of in-force of of in-force base value
business capita business %
R million l R million
R
millio
n
Base value 23 145 (2 20 322
823)
* Risk discount rate
increase by 1% 21 862 (3 18 409 (9)
453)
2. Value of new business Gross value Cost Net value Change from
sensitivity analysis of new of of new base value
business capita business %
R million l R million
R
millio
n
Base value 1 093 (135) 958
* Risk discount rate
increase by 1% 967 (171) 796 (17)
2011 2010
R million R million
3. Operating experience variances
Risk experience 431 352
Working capital and other 250 116
Total operating experience variances 681 468
4. Operating assumption changes
Mortality and morbidity 13 (13)
Persistency (147) (89)
Modelling improvements and other 174 55
Total operating assumption changes 40 (47)
5. Economic assumption changes
Investment yields and other 130 448
Long-term asset mix assumptions 2 (18)
Total economic assumption changes 132 430
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.
8. Economic assumptions 2011 2010
Gross investment return, risk discount rate % %
and inflation
Sanlam Life:
Point used on the relevant yield curve 9 year 9 year
Fixed-interest securities 8,2 8,4
Equities and offshore investments 11,7 11,9
Hedged equities 8,7 8,9
Property 9,2 9,4
Cash 7,2 7,4
Return on required capital 9,1 9,3
Inflation rate (1) 5,2 5,4
Risk discount rate 10,7 10,9
Sanlam Investments and Pensions (2):
Point used on the relevant yield curve 15 year 15 year
Fixed-interest securities 2,5 4,0
Equities and offshore investments 5,7 7,2
Hedged equities n/a n/a
Property 5,7 7,2
Cash 2,5 4,0
Return on required capital 2,5 4,0
Inflation rate 2,7 3,5
Risk discount rate 6,2 7,7
SDM Limited:
Point used on the relevant yield curve 5 year 5 year
Fixed-interest securities 7,4 7,7
Equities and offshore investments 10,9 11,2
Hedged equities n/a n/a
Property 8,4 8,7
Cash 6,4 6,7
Return on required capital 8,7 9,0
Inflation rate 4,4 4,7
Risk discount rate 9,9 10,2
Botswana Life Insurance:
Fixed-interest securities 9,5 9,5
Equities and offshore investments 13,0 13,0
Hedged equities n/a n/a
Property 10,5 10,5
Cash 8,5 8,5
Return on required capital 9,6 9,6
Inflation rate 6,5 6,5
Risk discount rate 13,0 13,0
Asset mix for assets supporting the
required capital
Sanlam Life:
Equities 26 24
Offshore investments 10 10
Hedged equities 13 13
Property - 3
Fixed-interest securities 15 15
Cash 36 35
100 100
Sanlam Investments and Pensions:
Equities - -
Hedged equities - -
Property - -
Fixed-interest securities - -
Cash 100 100
100 100
SDM Limited
Equities 50 50
Hedged equities - -
Property - -
Fixed-interest securities - -
Cash 50 50
100 100
Botswana Life Insurance:
Equities 15 15
Hedged equities - -
Property 10 10
Fixed-interest securities 25 25
Cash 50 50
100 100
(1) Expense inflation of 7,2% (Dec 2010: 7,4%) assumed
for retail business administered on old platforms.
(2) Formerly Merchant Investors.
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
an individual policy level. Channel Life`s capital and
economic bases have also been aligned with that of SDM
Limited.
Comparative information has not been restated based on
the immaterial impact of the changes on the embedded
value of covered business, embedded value earnings and
value of new business. 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 year ended 31 December 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 31 December 2011
2011 2010
R million R million
Assets
Property and equipment 514 470
Owner-occupied properties 586 653
Goodwill 3 195 3 197
Other intangible assets 47 39
Value of business acquired 1 611 1 320
Deferred acquisition costs 2 427 2 270
Long-term reinsurance assets 674 588
Investments 329 150 310 091
Properties 15 310 17 362
Equity-accounted investments 2 938 3 626
Equities and similar securities 165 582 151 190
Public sector stocks and loans 58 831 57 347
Debentures, insurance policies, preference
shares and other loans 35 002 31 586
Cash, deposits and similar securities 51 487 48 980
Deferred tax 640 932
Non-current assets held for sale 1 390 -
Short-term insurance technical assets 1 831 1 560
Working capital assets 40 138 40 071
Trade and other receivables 25 761 27 883
Cash, deposits and similar securities 14 377 12 188
Total assets 382 203 361 191
Equity and liabilities
Shareholders` fund 33 822 31 778
Minority shareholders` interest 3 046 2 608
Total equity 36 868 34 386
Long-term policy liabilities 282 421 265 695
Insurance contracts 135 742 132 985
Investment contracts 146 679 132 710
Term finance 6 295 6 766
Margin business 2 414 3 115
Other interest-bearing liabilities 3 881 3 651
Derivative liabilities 212 -
External investors in consolidated funds 11 592 11 655
Cell owners` interest 603 577
Deferred tax 902 1 178
Short-term insurance technical provisions 8 682 7 945
Working capital liabilities 34 628 32 989
Trade and other payables 32 502 30 422
Provisions 423 617
Taxation 1 703 1 950
Total equity and liabilities 382 203 361 191
Statement of comprehensive income
for the year ended 31 December 2011
2011 2010
R million R million
Net income 54 278 67 285
Financial services income 36 663 33 737
Reinsurance premiums paid (3 661) (3 040)
Reinsurance commission received 392 307
Investment income 14 603 15 344
Investment surpluses 4 843 21 831
Finance cost - margin business (203) (216)
Change in fair value of external
investors liability 1 641 (678)
Net insurance and investment contract (31 437) (44 640)
benefits and claims
Long-term insurance contract benefits (15 322) (22 928)
Long-term investment contract benefits (7 199) (13 444)
Short-term insurance claims (10 766) (9 520)
Reinsurance claims received 1 850 1 252
Expenses (14 187) (13 290)
Sales remuneration (4 959) (4 870)
Administration costs (9 228) (8 420)
Impairments (36) -
Amortisation of intangibles (128) (103)
Net operating result 8 490 9 252
Equity-accounted earnings 421 329
Finance cost - other (336) (309)
Profit before tax 8 575 9 272
Taxation (2 510) (2 757)
Shareholders` fund (1 903) (1 911)
Policyholders` fund (607) (846)
Profit for the year 6 065 6 515
Other comprehensive income
Movement in foreign currency
translation reserve 541 (517)
Comprehensive income for the year 6 606 5 998
Statement of comprehensive income
for the year ended 31 December 2011 (continued)
2011 2010
R million R million
Allocation of comprehensive income:
Profit for the year 6 065 6 515
Shareholders` fund 5 166 5 523
Minority shareholders` interest 899 992
Comprehensive income for the year 6 606 5 998
Shareholders` fund 5 601 5 115
Minority shareholders` interest 1 005 883
Earnings attributable to shareholders of the
company (cents):
Basic earnings per share 266,9 280,4
Diluted earnings per share 257,7 272,2
Statement of changes in equity
for the year ended 31 December 2011
2011 2010
R million R million
Shareholders` fund:
Balance at beginning of the year 31 778 29 644
Comprehensive income 5 601 5 115
Profit for the year 5 166 5 523
Other comprehensive income: movement in
foreign currency translation reserve 435 (408)
Net acquisition of treasury shares (1) (1 144) (1 074)
Share-based payments 239 191
Dividends paid (2) (2 261) (2 096)
Change in ownership of subsidiaries (391) (2)
Balance at end of the year 33 822 31 778
Minority shareholders` interest:
Balance at beginning of the year 2 608 2 513
Comprehensive income 1 005 883
Profit for the year 899 992
Other comprehensive income: movement in
foreign currency translation reserve 106 (109)
Net acquisition of treasury shares(1) (22) (98)
Share-based payments 28 32
Dividends paid (2) (455) (629)
Change in ownership of subsidiaries (118) (93)
Balance at end of the year 3 046 2 608
Shareholders` fund 31 778 29 644
Minority shareholders` interest 2 608 2 513
Total equity at beginning of the year 34 386 32 157
Shareholders` fund 33 822 31 778
Minority shareholders` interest 3 046 2 608
Total equity at end of the year 36 868 34 386
(1) Includes movement in cost of shares held by
subsidiaries and the share incentive trust.
(2) Dividend of 115 cents per share declared during 2011
(2010: 104 cents per share) in respect of the 2010
financial year.
Cash flow statement
for the year ended 31 December 2011
2011 2010
R million R million
Net cash flow from operating activities 18 929 904
Net cash flow from investment activities (12 562) 313
Net cash flow from financing activities (1 674) (1 037)
Net increase in cash and cash equivalents 4 693 180
Cash, deposits and similar securities at 61 164 60 984
beginning of the year
Cash, deposits and similar securities at end 65 857 61 164
of the year
Notes to the financial statements
for the year ended 31 December 2011
2011 2010
cents cents
1. Earnings per share
Basic earnings per share:
Headline earnings 259,1 260,0
Profit attributable to shareholders` fund 266,9 280,4
Diluted earnings per share:
Headline earnings 250,1 252,4
Profit attributable to shareholders` fund 257,7 272,2
R million R million
Analysis of earnings:
Profit attributable to shareholders` fund 5 166 5 523
Less: Net profit on disposal of operations (186) (404)
Plus: Impairment of investments and 35 3
goodwill
Headline earnings 5 015 5 122
million million
Number of shares:
Number of ordinary shares in issue at
beginning of year 2 100,0 2 160,0
Less: Weighted number of shares cancelled - (50,0)
Less: Weighted Sanlam shares held by
subsidiaries (including (164,8) (140,0)
policyholders)
Adjusted weighted average number of shares
for basic earnings per share 1 935,2 1 970,0
Add: Weighted conversion of deferred 34,2 26,0
shares
Add: Total number of shares and options 36,5 34,9
Less: Number of shares (under option) that
would have been issued at fair value (1,0) (1,9)
Adjusted weighted average number of shares
for diluted earnings per share 2 004,9 2 029,0
2. Segmental information
2011 2010
R million R million
Segment financial services income (per
shareholders` fund information) 34 342 31 839
Sanlam Personal Finance 10 935 9 758
Sanlam Emerging Markets 2 279 2 401
Sanlam Investments 5 997 5 558
Santam 15 041 14 010
Corporate and other 90 112
IFRS adjustments 2 321 1 898
Total financial services income 36 663 33 737
Segment result (per shareholders` fund
information after tax and minorities) 5 174 5 544
Sanlam Personal Finance 2 911 3 248
Sanlam Emerging Markets 420 310
Sanlam Investments 1 041 1 633
Santam 801 914
Corporate and other 1 (561)
Reverse minority shareholders` interest
included in segment result 899 992
Fund transfers (8) (21)
Total profit for the year 6 065 6 515
3. Contingent liabilities
Shareholders are referred to the contingent liabilities
disclosed in the 2011 annual report. The circumstances
surrounding the contingent liabilities remain
materially unchanged.
4. 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 31 December 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 March 2012
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 08/03/2012 08:00:03 Produced by the JSE SENS Department.
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