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SLM
SLM
SLM - Sanlam Group - Audited results for the year ended 31 December 2009
SANLAM GROUP
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 1959/001562/06)
JSE SHARE CODE (PRIMARY LISTING): SLM
NSX SHARE CODE: SLA
ISIN: ZAE000070660
("Sanlam" or "the Group")
Audited results for the year ended 31 December 2009
Contents
Overview
Key features
Salient results
Executive review
Comments on the results
Group 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 Annual Results December 2009
Key features
Earnings
- Net result from financial services per share decreased by 1%
- Core earnings per share down 3%
- Normalised headline earnings per share up 133%
Business volumes
- New business volumes up 3% to R103 billion
- Value of new covered business down 1% to R689 million
- New covered business margin of 2,61%
- Net fund inflows of R15,5 billion, up 70%
Group Equity Value
- Group Equity Value per share up 12% to R24,73
- Return on Group Equity Value per share of 16,2%
Capital management
- Discretionary capital of R3,5 billion at 31 December 2009
- Sanlam Life CAR cover of 3,1 times
Salient results
For the year ended 31 December 2009
2009 2008 %
change
SANLAM GROUP
Earnings
Net result from financial services cents 132,2 133,8 -1%
per share
Core earnings per share (1) cents 179,7 184,8 -3%
Normalised headline earnings per cents 218,9 93,9 133%
share (2)
Diluted headline earnings per share cents 218,8 132,2 66%
Net result from financial services R million 2 714 2 802 -3%
Core earnings (1) R million 3 690 3 870 -5%
Normalised headline earnings (2) R million 4 494 1 966 129%
Headline earnings R million 4 438 2 702 64%
Group administration cost ratio (3) % 27,6 28,4
Group operating margin (4) % 16,9 18,4
Business volumes
New business volumes R million 102 928 100 136 3%
Net fund flows R million 15 499 9 122 70%
New covered business
Value of new covered business R million 689 698 -1%
Covered business PVNBP (5) R million 26 365 26 033 1%
New covered business margin (6) % 2,61 2,68
GROUP EQUITY VALUE
Group Equity Value R million 51 024 45 238 13%
Group Equity Value per share cents 2 473 2 213 12%
Return on Group Equity Value per % 16,2 (1,7)
share (7)
Adjusted return on Group Equity % 13,1 12,4
Value per share
Sanlam Life Insurance Limited
Shareholders` fund R million 37 036 34 419
Capital Adequacy Requirements (CAR) R million 7 675 8 075
CAR covered by prudential capital times 3,1 2,7
Notes
(1) Core earnings = net result from financial services and net investment income
(including dividends received from non-operating associates).
(2) Normalised headline earnings = core earnings, net investment surpluses,
secondary tax on companies and equity-accounted headline earnings less dividends
received from non-operating associates, but excluding fund transfers. Headline
earnings include fund transfers.
(3) Administration costs as a percentage of income after sales remuneration.
(4) Result from financial services as a percentage of income after sales
remuneration.
(5) PVNBP = present value of new business premiums and is equal to the present
value of new recurring premiums plus single premiums.
(6) New covered business margin = value of new covered business as a percentage
of PVNBP.
(7) Growth in Group Equity Value per share (with dividends paid, capital
movements and cost of treasury shares acquired/reversed) as a percentage of
Group Equity Value per share at the beginning of the period.
Executive review
The Sanlam Group delivered a solid and stable performance in 2009 - a year
heavily scarred by turmoil in world financial markets, the magnitude of which
claimed unprecedented victims late in 2008. The resilience of Sanlam`s business
model stood out clearly with our persistence commended by both shareholders and
analysts.
Business environment
The turmoil in the international financial markets had an ongoing impact on the
Sanlam business environment in 2009. Prudent policies and practices shielded the
Group from major financial losses, but could not prevent our 2009 new business
volumes and operating results being affected by the challenging economic
conditions experienced in all areas in which the Sanlam Group operates.
Investment markets have a material impact on the Group`s reported results.
Similar to international trends, the South African equity market experienced
huge volatility in 2009. After losing 14% in the first two months of 2009, the
FTSE JSE All Share Index recovered on the back of increasing local and
international demand to record an overall gain of 29% for the year compared to a
loss of 26% in 2008. This had a positive impact on portfolio returns achieved
for the year and in particular also on the investment return on shareholder
funds reported in headline earnings. However, the average FTSE JSE All Share
Index level for the year was still 15% lower than in 2008, which impacted
negatively on the Group`s asset-based revenue.
Long-term interest rates increased from the beginning of 2009, which is
reflected in the 1% negative All Bond return in 2009, compared to a return of
17% in 2008. Short-term interest rates decreased in line with the reduction in
the South African Reserve Bank`s repo rate, which had a negative impact on the
interest earned on working capital.
The rand strengthened against most of the currencies of the other countries in
which we operate. This had a negative impact on the translated rand results of
these entities. Against the British pound the rand strengthened by 11% from
R/GBP13,33 at the end of December 2008 to R/GBP11,89 at the end of 2009 and
against the Botswana pula from R/P1,26 to R/P1,13.
Performance review
In the context of the challenging environment, the Group achieved a pleasing
operational performance for the 2009 financial year.
The primary performance target of the Group 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 business and incorporates the result of all the major value drivers
in the business. A target has been set for the ROGEV per share to exceed the
Group`s cost of capital on a sustainable basis. The ROGEV per share of 16,2%
achieved in 2009 comfortably exceeded the target of 11,3%, in part owing to the
positive impact of the strong equity market. The adjusted ROGEV, i.e. assuming a
normalised investment market performance and excluding any once-off items, for
2009 amounted to 13,1%, also well ahead of target.
Total new business volumes for 2009 of R103 billion are 3% higher than in 2008.
After a relatively flat first half performance, new business volumes improved by
5% in the second half on those achieved in the comparable period in 2008. Net
inflows of R15,5 billion are well up on the R9,1 billion achieved in 2008, which
is testimony to the Group`s positive fund retention and persistency experience.
Value of new covered business of R689 million is down 1% at a marginally lower
average margin of 2,61%.
Core earnings of R3 690 million are 5% lower than in 2008, the combined effect
of a 3% decrease in the net result from financial services and a 9% decline in
net investment income earned on the capital portfolio. The relatively lower base
of assets under management impacted on the growth in fee income and the
profitability of especially the investment management businesses. This was
further aggravated by deterioration in the claims experience at Santam. Core
earnings per share decreased by a lower 3%, attributable to a 2% reduction in
the weighted average number of shares in issue.
The investment return earned on the Group`s capital portfolio improved
significantly compared to the negative performance in 2008, supported by the
strong investment market gains in particularly the second half of the 2009
financial year. Normalised headline earnings per share benefited from the
turnaround in investment returns and increased by 133% on 2008.
Delivering on strategy
Our strategy, which has proved to be resilient and sustainable, was fundamental
in distinguishing our performance from that of many of our peers in 2009. Our
strategy will therefore continue to centre around five pillars: optimal capital
utilisation, earnings growth, costs and efficiencies, diversification and
transformation.
We maintained our prudent approach to the application of discretionary capital
and focused on further optimising the capital base of the Group. Limited
investments were made in existing operations and future growth markets during
the period under review. As a result Sanlam now has discretionary capital of
R3,5 billion. While it was prudent to use this capital as a buffer during 2009,
we will be looking for profitable growth opportunities and other ways of
efficiently redistributing some of this capital in 2010.
Ongoing focus on reducing costs, while at the same time upping efficiencies,
significantly buffered our operations when the economy and financial markets
were placed under intense pressure by global events. Given the increased strain
on capital in 2009, we intensified our efforts. Sanlam Investments and Sanlam
Personal Finance, which have been impacted most by lower assets under management
and new business volumes, made a concerted effort to reduce costs even further.
Containment of costs in all other business units was also a priority, although
not to the detriment of future growth opportunities.
Diversification is key to ensuring sustainable future growth. The successful
diversification of our business since 2003 has helped us achieve a significant
rebalancing of our mix of new business, with an increasing contribution (83%)
channelled via our non-life operations. Our geographic diversification through
Sanlam Developing Markets once again paid off. The majority of operations within
this business cluster delivered reasonable new business results in 2009 despite
the tough economic conditions experienced by most of the markets in which these
businesses operate. In 2009 Sanlam Investments bedded down its joint venture
with SMC, India`s fourth largest securities broking house. Sanlam International
Investment Partners also formed an investment partnership with UK-based
investment manager, FOUR Capital Partners. In terms of the partnership, Sanlam
acquired an initial equity interest of 29,9% in the firm. The transaction is in
line with our strategy of acquiring stakes in specialist asset managers in
selected global markets.
Transformation remains one of the key pillars of Sanlam`s business strategy,
because only true qualitative change across all spheres of our business will
facilitate sustainable growth into the future.
Looking ahead
Dedicated focus on all five pillars of our strategy helped us to achieve
sustainable higher returns for the Group. But the biggest mistake we could make
now would be to rest on our laurels. We have proved to our shareholders, clients
and other stakeholders that we are a world-class operation. We are now in a good
position to accelerate our journey of transformation.
We would like to share the view of the optimists in their outlook for 2010, but
remain concerned that the worst is not necessarily behind us and that the South
African economy may still see further job losses this year. Inflation is likely
to stay under pressure largely as a result of Eskom`s tariff hikes, the oil
price and wage demands. In our view the true bottom may well still be ahead of
us, with a delayed recovery towards the end of this year.
How does this impact on our growth ambitions? While 2010 will not be an easy
year, we do believe that we are well placed to deliver another set of solid
results this year. We remain well positioned to achieve the sustainable growth
for which we have positioned the Group over the past seven years.
Forward-looking statements
In this report we make certain statements that are not historical facts and
relate to analyses and other information based on forecasts of future results
not yet determinable, relating, amongst others, to new business volumes,
investment returns (including exchange rate fluctuations) and actuarial
assumptions. These are forward-looking statements as defined in the United
States Private Securities Litigation Reform Act of 1995. Words such as
"believe", "anticipate", "intend", "seek", "will", "plan", "could", "may",
"endeavour" and "project" and similar expressions are intended to identify such
forward-looking statements, but are not the exclusive means of identifying such
statements. Forward-looking statements involve inherent risks and uncertainties
and, if one or more of these risks materialise, or should underlying assumptions
prove incorrect, actual results may be very different from those anticipated.
Forward-looking statements apply only as of the date on which they are made, and
Sanlam does not undertake any obligation to update or revise any of them,
whether as a result of new information, future events or otherwise.
Comments on the results
Introduction
The Sanlam Group results for the year ended 31 December 2009 are presented
below.
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 2009
December 2009 December 2008
R million Total Fair Value of Total Fair Value
value of in force value of of in
assets assets force
Embedded value 28 988 14 247 14 741 28 591 15 013 13 578
of covered
business
Sanlam 19 884 8 098 11 786 19 574 8 275 11 299
Personal
Finance
Sanlam 3 479 1 363 2 116 2 796 1 032 1 764
Developing
Markets
Sanlam UK 665 217 448 680 234 446
Sanlam 4 960 4 569 391 5 541 5 472 69
Employee
Benefits
Other group 17 227 17 227 - 13 560 13 560 -
operations
Retail 2 707 2 707 - 2 287 2 287 -
cluster
Institutional 7 371 7 371 - 6 000 6 000 -
cluster
Short-term 7 149 7 149 - 5 273 5 273 -
insurance
Capital (700) (700) - (1 429) (1 429) -
diversification
Other capital 2 009 2 009 - 2 416 2 416 -
and net worth
adjustments
47 254 32 783 14 741 43 138 29 560 13 578
Discretionary 3 500 3 500 - 2 100 2 100 -
capital
Group Equity 51 024 36 283 14 741 45 238 31 660 13 578
Value
Issued shares 2 063,1 2 044,2
for value per
share (million)
Group Equity 2 473 2 213
Value per share
(cents)
Share price 2 275 1 700
(cents)
Discount -8% -23%
The GEV as at 31 December 2009 amounted to R51 billion, up 13% on the R45,2
billion at the end of 2008. On a per share basis GEV increased by 12% from 2 213
cents to 2 473 cents at 31 December 2009. This increase is after payment of the
dividend of 98 cents per share during 2009. The Sanlam share price closed on
R22,75 on 31 December 2008, an 8% discount to the GEV on that date.
As a financial services organisation, the Group has a material exposure to the
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. After the
2008 return (-1,7%) that reflected the depressed financial markets at the time,
the Group`s performance recovered in 2009 in line with the stronger investment
markets. Sanlam achieved a ROGEV per share of 16,2% in 2009, well up on the
11,3% target set for the year.
Return on Group Equity Value
for the year ended 31 December 2009
2009 2008
Earnings Return Earnings Return
R million % R million %
Sanlam Personal Finance 3 003 14,3 744 3,5
Covered business 2 815 14,4 453 2,3
Other operations 188 13,2 291 24,4
Sanlam Developing 569 19,2 648 29,6
Markets
Covered business 467 16,7 659 30,5
Other operations 102 63,8 (11) -39,3
Sanlam UK (89) -5,8 (356) -23,4
Covered business (14) -2,1 (36) -3,9
Other operations (75) -8,9 (320) -53,3
Institutional cluster 2 607 22,6 (723) -5,8
Covered business 1 153 20,8 (157) -3,0
Sanlam Investments 1 381 24,7 (547) -8,2
Coris Administration (70) -129,6 16 42,1
Capital markets 143 31,8 (35) -8,8
Short-term insurance 2 133 40,5 (1 279) -20,1
Discretionary and other (774) (440)
capital
Balance of portfolio (334) 114
Shares delivered to - (46)
Sanlam
Demutualisation Trust
Intangible assets less (87) (43)
value of in-force
acquired
Treasury shares and (244) (269)
other
Change in net worth (109) (196)
adjustments
Return on Group Equity 7 449 16,5 (1 406) -2,7
Value
Return on Group Equity 16,2 -1,7
Value per share
Covered business yielded a return of 15,5% compared to 3,2% in 2008. An analysis
of this return is set out below:
Return on covered business
for the year ended 31 December 2009
R million 2009 2008
Net value of new business 607 612
Earnings from existing business 2 430 1 885
Expected return on value of in-force 1 714 1 838
Operating experience variances 636 278
Operating assumption changes 80 (231)
Expected investment return on adjusted net 1 091 1 180
worth
Embedded value earnings from operations 4 128 3 677
Economic assumption and tax changes (1 206) 571
Investment variances - value of in-force 1 149 (1 435)
Investment variances - adjusted net worth 515 (1 864)
Project expenses and other (165) (30)
Total embedded value earnings 4 421 919
Return on covered business 15,5% 3,2%
The increase in the return during 2009 is the combined effect of the following:
- Net value added by new business written of R607 million (2008: R612 million)
and earnings from the existing in-force book of R2,4 billion (R1,9 billion). The
increase in the latter was aided by positive experience variances of R636
million, essentially related to positive risk experience (R 363 million) and
interest earned on net working capital. Operating assumption changes were
overall positive, versus net negative adjustments required in 2008. The current
year includes some strengthening in the mortality and persistency bases;
- The increase in long-term interest rates and the change in long-term asset mix
assumptions resulted in negative changes in the economic assumptions base of
R1,2 billion, compared to positive changes of R356 million in 2008;
- The assets held in policyholder portfolios were positively impacted by the
improved market conditions, resulting in an increase in expected future fee
income, which supports an increase in the value of the book of in-force business
of R1,1 billion in 2009 compared to negative variances of R1,4 billion in 2008;
and
- Positive investment return on the capital supporting the life operations of
R1,6 billion compared to a negative return of R0,7 billion in 2008. The 2009
result comprises an expected investment return of R1,1 billion (2008: R1,2
billion) and positive investment variances of R0,5 billion (2008: negative R1,9
billion). This can mostly be ascribed to the improved investment market
performance in 2009.
The valuations of the other Group operations were strongly impacted by the
turnaround in market conditions and yielded a positive return of 28% for 2009
compared to a negative return of 12% in 2008. The Group`s investment in Santam
was the largest contributor to this performance, following a 37% increase in the
Santam share price during 2009. Compared to negative return of R1,3 billion in
2008 (20% negative return), the investment in Santam yielded a positive return
of R2,1 billion (42%) in 2009, a turnaround of R3,4 billion. Non-life operations
in the Institutional cluster achieved a return of 24%. This performance is
directly linked to the higher overall level of assets under management following
the stronger investment market performance during the year. The Group`s
businesses in the UK are experiencing the aftermath of the financial market
crisis more severely than the South African based operations, aggravated by the
strong rand exchange rate. This is reflected in the 9% negative return reported
for the Sanlam UK non-life operations.
The return on discretionary and other capital was impacted by the following:
- A negative change of R109 million in the net worth adjustments. This is
largely due to an increase in the allowance for corporate costs as corporate
resources are required at a Sanlam Developing Markets level to support this
growing cluster;
- A loss of R244 million recognised in respect of treasury shares. This loss is
substantially attributable to losses recognised on the delivery of share
incentive scheme shares to participants at the applicable strike prices, which
have previously been taken into account in the number of shares for value per
share purposes; and
- Negative investment returns of R334 million, of which a large portion is
attributable to foreign exchange losses on offshore cash holdings and the
notional transfer of investment return on the R1,4 billion capital
diversification allocated to covered business at the end of 2008.
Earnings
Summarised shareholders` fund income statement
for the year ended 31 December 2009
R million 2009 2008 % change
Net result from financial services 2 714 2 802 -3%
Net investment income 976 1 068 -9%
Core earnings 3 690 3 870 -5%
Project expenses (28) (56) 50%
Net equity-accounted headline earnings 41 16 156%
BEE transaction costs (7) (7) -
Net investment surpluses 1 032 (1 699) 161%
Secondary Tax on Companies (STC) (150) (59) -154%
Discontinued operations - (22)
Amortisation of value of business (84) (77) -9%
acquired
Normalised headline earnings 4 494 1 966 129%
Other non-headline earnings and (41) (208) 80%
impairments
Normalised attributable earnings 4 453 1 758 153%
Core earnings
Core earnings for the year of R3 690 million are 5% down on 2008, the combined
effect of a lower net result from financial services for the period and a 9%
decline in net investment income. On a per share basis, core earnings decreased
by 3%.
The net result from financial services of R2 714 million for the 2009 financial
year is 3% lower than in 2008.
Net result from financial services
for the year ended 31 December 2009
R million 2009 2008 % change
Retail cluster 1 703 1 757 -3%
Sanlam Personal Finance 1 498 1 555 -4%
Sanlam Developing Markets 172 144 19%
Sanlam UK 33 58 -43%
Institutional cluster 890 737 21%
Sanlam Investments 593 589 1%
Sanlam Employee Benefits 154 183 -16%
Sanlam Capital Markets 143 (35)
Short-term insurance cluster 242 439 -45%
Santam 313 494 -37%
MiWay (71) (55) -29%
Corporate and other (121) (131) 8%
Net result from financial 2 714 2 802 -3%
services
- Sanlam Personal Finance once again produced a solid set of results with a 3%
increase in its gross result from financial services for the year in spite of
the difficult business environment. Administration profit decreased by 5%
largely owing to increased new business strain. This was partly offset by cost-
saving initiatives. Risk profits increased by 8% largely owing to improved
underwriting experience. Market-related income, which contributes some 66% of
Sanlam Personal Finance`s profit, grew by only 2%. Lower interest rates caused a
reduction in interest earned on working capital. An increase in the effective
tax rate resulted in a reduction in the net operating result of 4% to R1 498
million.
- The Sanlam Developing Markets operations produced gross operating profit of
R376 million, that is 72% up on 2008. Botswana once again made a substantial
contribution to the results, in part due to the recovery in the Botswana equity
markets as well as positive mortality experience on the annuity book, a
reduction in the credit default provisions and a change in the accounting
treatment of Letshego, a micro finance business in Botswana. Botswana Life
Insurance obtained significant influence over Letshego following an increase in
our shareholding and directorships. Letshego accordingly became an associate of
the Group, with our portion of Letshego`s profit reported as equity-accounted
earnings through operating profit. All the other African operations reported
lower earnings as most territories experienced the impact of the current
economic environment. Also contributing to the lower earnings were lower credit
life profits following a general reduction in lending activities of banks and a
reduction in margins on credit life business. In South Africa the results of the
Sanlam Sky operations improved by some 50% on 2008, attributable to positive
expense basis changes resulting from cost control and an increase in the number
of in-force policies. Net of tax and minorities the Sanlam Developing Markets
operating profit is up 19%, with a higher effective tax rate impacting growth on
a net basis.
- The Sanlam UK results reflect the tough UK operating environment. Net
operating profit is down 43% on the comparable period in 2008. A strengthening
of the rand / sterling exchange rate aggravated these results.
- Sanlam Investments` net result from financial services of R593 million is 1%
up on the comparable period in 2008. The positive investment market performance
in the second half of the year supported fee income, with a marked improvement
in net operating profit since the June reporting period. Excluding the impact of
a release of over-provisions of some R70 million (after tax), net operating
profit decreased by 11%, which is in line with the decline in the average level
of assets under management in 2009 compared to 2008. Operating costs were well
managed and are 4% lower than 2008, excluding the release of over-provisions.
- Sanlam Employee Benefits posted a 16% decline in its net result from financial
services on 2008, the result of lower cash interest rates that contributed to a
decrease in the interest earned on working capital as well as a disappointing
increase in losses associated with the retirement fund administration business.
The migration of the funds onto the new administration platform has essentially
been completed and management attention will now shift to process optimisation
and an improvement in cost efficiencies.
- Sanlam Capital Markets` net result from financial services of R143 million is
a major improvement on the loss of R35 million reported in 2008. The equities
division had a very strong year, driven by equity-backed finance transactions.
The debt division also recorded satisfactory results, despite continued pressure
from credit valuations.
- Santam`s net result from financial services for the period is 37% lower than
2008. A deteriorating claims experience in respect of its personal lines motor
book and some large fire-related claims in the corporate division in the first
half of the year resulted in an increase in the overall claims experience and a
40% decline in the gross underwriting result. Lower cash interest rates also
contributed to a decrease in float income earned.
- MiWay recorded a R71 million net operating loss for the period. The difficult
economic environment in 2009 had a negative impact on their anticipated book
build towards break even. The latter part of the year, however, saw some
encouraging improvement in new business volumes while maintaining an acceptable
overall loss ratio.
Net investment income declined by 9%. This is mainly attributable to a reduction
in short-term interest rates as well as the relatively lower asset base
following the utilisation of some of the discretionary capital through the year.
Normalised headline earnings
Normalised headline earnings are 129% higher than the comparable period in 2008,
which is in the main attributable to improved investment returns.
Business volumes
New business flows
New business volumes, excluding white label, increased by 3% on 2008.
New business volumes for the year ended 31 December 2009
R million 2009 2008 % change
Sanlam Personal Finance 30 972 31 070 0%
South Africa 21 790 22 644 -4%
Africa 9 182 8 426 9%
Sanlam Developing Markets 2 702 2 594 4%
South Africa 1 363 1 449 -6%
Africa 1 198 968 24%
Other international 141 177 -20%
Sanlam UK 2 140 2 350 -9%
Institutional cluster 48 030 45 476 6%
Sanlam Investments 46 907 44 961 4%
Sanlam Employee Benefits 1 123 515 118%
Santam 12 896 12 165 6%
NEW BUSINESS EXCLUDING WHITE LABEL 96 740 93 655 3%
WHITE LABEL 6 188 6 481 -5%
TOTAL NEW BUSINESS 102 928 100 136 3%
Overall Sanlam Personal Finance new business sales remained in line with the
2008 level. The South African middle-income market in particular experienced the
full impact of the challenging economic environment. In these conditions Sanlam
Personal Finance did well to report much improved net inflows of R7 billion,
substantially due to the improved retention of investment business but also a
15% reduction in policy surrenders.
Sanlam Developing Markets achieved a 4% improvement in overall new business
flows. This is a commendable performance given the deliberate scaling down in
low-yielding single premium and non-profitable recurring premium business in
South Africa and lower single premium sales in India. Businesses in the Rest of
Africa continued to perform well, notwithstanding the extremely tough
environment in the resource-based economies. Annuity and individual life
business performed strongly in Botswana, contributing to a 37% increase on 2008.
Kenya and Ghana recorded growth in new business volumes of 30% and 23%
respectively.
The Sanlam UK total new business volumes for the year is 9% down at R2,1 billion
as its operations continue to be affected by the major slowdown in the UK
economy.
The Institutional cluster recorded a 6% improvement in new inflows and
substantial (100%) growth in net inflows to R3,3 billion. This reflects a
welcome increase in new investment mandates received as well as more than a
doubling in new group life business.
Santam recorded a 6% increase in net earned premiums, a strong performance in
challenging conditions where consumers and businesses were under pressure. The
growth in core business lines was above the industry average, reflecting an
increased market share in intermediated business.
Net fund flows
As also referred to above, the Group has been very successful in retaining funds
under management and achieved net inflows for the year of R15,5 billion, 70% up
on the R9,1 billion in the corresponding period in 2008.
Net fund flows for the year ended 31 December 2009
R million 2009 2008
Sanlam Personal Finance 7 048 3 876
Life business 2 248 1 170
Investment business 4 800 2 706
Sanlam Developing Markets 1 229 1 218
Sanlam UK (199) 89
Institutional cluster 3 301 1 650
Sanlam Employee Benefits (322) (1 994)
Sanlam Investments 3 623 3 644
Santam 3 796 3 734
Net fund flows excluding white label 15 175 10 567
White label 324 (1 445)
Total net fund flows 15 499 9 122
Value of new covered business
The total value of new life business (VNB) for 2009 of R689 million is 1% lower
than 2008, with new business margins also marginally lower, primarily owing to
the effect of the higher interest rates prevailing at year end, with a
commensurate impact on the risk discount rate (reducing VNB by R71 million) as
well as the decrease in Sanlam Personal Finance new business volumes. After
minorities, VNB of R607 million is also 1% down on 2008 at an average margin of
2,42%. Excluding the impact of the higher risk discount rate, net VNB of R674
million is 10% up on 2008 at an average margin of 2,62%.
Value of new covered business for the year ended 31 December 2009
R million 2009 2008 % change
Value of new covered business 689 698 -1%
Sanlam Personal Finance 320 386 -17%
Sanlam Developing Markets 290 302 -4%
Sanlam UK 14 1
Sanlam Employee Benefits 65 9 622%
Net of minorities 607 612 -1%
Present value of new business premiums 26 365 26 033 1%
Sanlam Personal Finance 16 573 17 371 -5%
Sanlam Developing Markets 5 711 5 332 7%
Sanlam UK 951 1 484 -36%
Sanlam Employee Benefits 3 130 1 846 70%
Net of minorities 25 102 24 459 3%
New covered business margin 2,61% 2,68%
Sanlam Personal Finance 1,93% 2,22%
Sanlam Developing Markets 5,08% 5,66%
Sanlam UK 1,47% 0,07%
Sanlam Employee Benefits 2,08% 0,49%
Net of minorities 2,42% 2,50%
Sanlam Personal Finance`s VNB for 2009 of R320 million is 17% lower than in
2008. The performance against 2008 is the combined effect of the higher interest
rates, which reduced the VNB by R61 million, and the lower new business volumes.
Cost-saving initiatives as well as the switch to higher margin risk business and
ad hoc premium increases dampened the impact of the lower volumes. The VNB
margin is similarly impacted by the increase in interest rates, with the overall
margin reducing from 2,22% in 2008 to 1,93% in 2009. Excluding the impact of the
change in economic basis, margins are in line with 2008.
Sanlam Developing Markets recorded VNB of R290 million for 2009, which is 4%
down on 2008 at an average margin of 5,08%, down from 5,66% in 2008. On a
similar economic basis as 2008, VNB increased by 6% to R320 million at a margin
of 5,48%. The performance against 2008 is largely the combined effect of a 13%
increase in the Botswana VNB with the strong new business performance being
offset by lower annuity business margins due to the decrease in long-term
interest rates, and lower business volumes and bancassurance margins earned in
the other Africa operations. Net of minorities, Sanlam Developing Markets` VNB
is 2% lower than in 2008.
Sanlam Employee Benefits` VNB increased from R9 million in 2008 to R65 million
in 2009. At the same time the average margin achieved of 2,08% is well up on the
0,49% of 2008. This substantial improvement follows the increase in business
volumes. R20 million of the 2009 VNB is attributable to a change in economic
basis, which also provided some support to the increase in the VNB margins.
The Sanlam UK operations reported an improved VNB contribution of R14 million
for 2009 at a margin of 1,47%. This performance is largely attributable to a
change in the mix of business to more profitable products.
Solvency
All of the life insurance businesses within the Group were sufficiently
capitalised at the end of December 2009. Sanlam Life Insurance Limited`s
admissible regulatory capital at the end of December 2009 covered its regulatory
Capital Adequacy Requirements (CAR) 3,1 times, compared to 2,7 times on 31
December 2008. No policyholder portfolio held a negative bonus stabilisation
reserve at the end of December 2009.
Santam`s capital (shareholders` funds plus subordinated debt) constituted 44% of
net earned premiums on 31 December 2009, which is at the higher end of the
target range of 35% to 45% set by Santam.
Dividend
Sustainable growth in dividend payments is an important consideration for the
Board in determining the dividend for the year. The Board uses cash operating
earnings as a guideline in setting the level of the dividend, subject to the
Group`s liquidity and solvency requirements. The operational performance of the
Group in the 2009 financial year enabled the Board to increase the dividend per
share by 6% to 104 cents.
Shareholders are advised that the cash dividend of 104 cents for the year ended
31 December 2009 is payable on Wednesday, 5 May 2010 to ordinary shareholders
recorded in the register of Sanlam at the close of business on Friday, 23 April
2010. The last date to trade to qualify for this dividend will be Friday, 16
April 2010, and Sanlam shares will trade ex-dividend from Monday, 19 April 2010.
Dividend payment by way of electronic bank transfers will be effected on
Wednesday, 5 May 2010. The mailing of cheque payments in respect of dividends
due to those shareholders who have not elected to receive electronic dividend
payments will commence on or as soon as practically possible after this date.
Share certificates may not be dematerialised or rematerialised between Monday,
19 April 2010 and Friday, 23 April 2010.
Annual general meeting
These financial results will be tabled at the annual general meeting.
Shareholders are invited to attend this meeting, to be held on Wednesday, 9 June
2010 at 14:00 at the Sanlam head office in Bellville.
Roy Andersen Johan van Zyl
Chairman Group Chief Executive
Sanlam Limited
Cape Town
10 March 2010
Sanlam Group
Financial statements for the year ended 31 December 2009
Accounting policies and basis of presentation
The accounting policies adopted for purposes of the financial statements
comply with International Financial Reporting Standards (IFRS), specifically
IAS 34 on interim financial reporting, and with applicable legislation. The
condensed financial statements are presented in terms of IAS 34, with additional
disclosure where applicable, using accounting policies consistent with those
applied in the 2008 financial statements, apart from the changes resulting from
new and revised standards (refer below). The policy liabilities and profit
entitlement rules are determined in accordance with prevailing legislation,
generally accepted actuarial practice and the stipulations contained in the
demutualisation proposal. There have been no material changes in the financial
soundness valuation basis since 31 December 2008, apart from changes in the
economic assumptions.
The basis of preparation and presentation of the shareholders` information
is also consistent with that applied in the 2008 financial statements.
Application of new and revised IFRSs and interpretations
The following new or revised IFRSs and interpretations are applied in the
Group`s 2009 financial year:
- IAS 1 Revised Presentation of Financial Statements
- IAS 1 Amended Presentation of Financial Statements - Puttable Financial
Instruments and Obligations Arising on Liquidation
- IAS 32 Amended Financial Instruments: Presentation - Puttable Financial
Instruments and Obligations Arising on Liquidation
- IFRS 2 Amended Share-based Payment - Vesting Conditions and Cancellations
- The May 2008 Improvements to IFRS
- Amendments to IFRIC 9 - Reassessment of Embedded Derivatives and IAS 39
Financial Instruments: Recognition and Measurement - Embedded Derivatives
- Amendment to IFRS 7 Financial Instruments: Disclosure - Improving Disclosures
about Financial Instruments
- AC 503: Amendment to AC 503 - Accounting for Black Economic Empowerment (BEE)
Transactions
The following presentational changes were introduced upon adoption of the
revised IAS 1:
- The Group income statement has been replaced with a Group statement of
comprehensive income, presenting all items of recognised income and expense in
one statement;
- The Group statement of changes in equity only includes details of transactions
with owners - non-owner changes in equity are presented in a single line; and
- The Group balance sheet has been renamed to a Group statement of financial
position.
The 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:
- IAS 27 Amended Consolidated and Separate Financial Statements (effective 1
July 2009)
- IAS 39 Amended Financial Instruments: Recognition and Measurement - Eligible
Hedged Items (effective 1 July 2009)
- IFRS 3 Revised Business Combinations (effective 1 July 2009)
- IFRS 5 Amended Non-current Assets Held for Sale and Discontinued Operations
(effective 1 July 2009)
- IFRIC 17 Distribution of Non-cash Assets to Owners (effective 1 July 2009)
- The April 2009 Improvements to IFRS (mostly effective 1 January 2010)
- Amendments to IFRS 2: Group Cash-settled Share-based Payment Transactions
(effective 1 January 2010)
- Amendment to IAS 32 - Classification of Rights Issues (effective 1 February
2010)
- IAS 24 revised - Related Party Disclosures (effective 1 January 2011)
- AC 504: IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction in a South African Pension Fund Environment
(effective 1 April 2009)
- IFRS 9 Financial Instruments (effective 1 January 2013)
- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
(effective 1 July 2010)
- Amendments to IFRIC 14 - Prepayments of a Minimum Funding Requirement
(effective 1 January 2011)
The application of these revised standards and interpretations in future
financial reporting periods is not expected to have a significant impact on the
Group`s reported results, financial position and cash flows, except for IFRS 3
Revised and IAS 27 Amended for which the impact cannot be quantified as it will
depend on the nature and structure of a specific business combination.
External audit
The Group financial statements have been extracted from the Group`s 2009 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 2009
Contents
Group Equity Value
Shareholders` fund at fair value
Shareholders` fund income statement
Notes to the shareholders` fund information
Embedded value of covered business
Group equity value at 31 December 2009
2009 2008
R million R million
Embedded value of covered business 28 988 28 591
Sanlam Personal Finance 19 884 19 574
Adjusted net worth 8 098 8 275
Value of in-force 11 786 11 299
Sanlam Developing Markets 3 479 2 796
Adjusted net worth 1 363 1 032
Value of in-force 2 116 1 764
Sanlam UK 665 680
Adjusted net worth 217 234
Value of in-force 448 446
Sanlam Employee Benefits 4 960 5 541
Adjusted net worth 4 569 5 472
Value of in-force 391 69
Other Group operations 17 227 13 560
Retail cluster 2 707 2 287
Institutional cluster 7 371 6 000
Short-term insurance 7 149 5 273
Capital diversification (700) (1 429)
Other capital and net worth adjustments 2 009 2 416
47 524 43 138
Discretionary capital 3 500 2 100
Group equity value 51 024 45 238
Group equity value per share (cents) 2 473 2 213
Shareholders` fund at fair value
at 31 December 2009
2009 2008
R million R million
Property and equipment 194 228
Owner-occupied properties 614 613
Goodwill 497 473
Value of business acquired 753 802
Other intangible assets 45 -
Deferred acquisition costs 1 390 1 260
Investments 36 489 31 807
Sanlam businesses 17 227 13 560
Sanlam Investments 6 778 5 581
SIM Wholesale 4 481 3 903
International 1 909 1 358
Sanlam Collective Investments 388 320
Sanlam Personal Finance 1 612 1 423
Glacier 762 696
Sanlam Personal Loans 133 71
Multi-Data 166 190
Sanlam Trust 160 144
Sanlam Home Loans 120 133
Sanlam Healthcare Management 130 78
Other 141 111
Sanlam UK 833 847
Principal 283 299
Punter Southall Group 259 219
Other 291 329
Sanlam Developing Markets other 262 17
operations
Coris Administration - 54
Sanlam Capital Markets 593 365
Short-term insurance 7 149 5 273
Associated companies 369 234
Joint ventures - Shriram Life Insurance 247 208
Other investments 18 646 17 805
Other equities and similar securities 7 657 9 036
Public sector stocks and loans 199 1 411
Investment properties 744 491
Other interest-bearing and preference 10 046 6 867
share investments
Net term finance - -
Term finance (5 397) (5 101)
Assets held in respect of term finance 5 397 5 101
Net deferred tax 61 352
Net working capital (344) (451)
Minority shareholders` interest (763) (947)
Shareholders` fund at fair value 38 936 34 137
Fair value per share (cents) 1 888 1 670
Shareholders` fund income statement
for the year ended 31 December 2009
2009 2008
R million R million
Result from financial services before 4 242 4 260
tax
Sanlam Personal Finance 2 031 1 975
Sanlam Developing Markets 376 218
Sanlam UK 35 68
Sanlam Employee Benefits 214 258
Short-term Insurance 746 1 161
Investment Management 833 825
Capital Markets 173 (61)
Corporate and other (166) (184)
Tax on financial services income (1 120) (966)
Minority shareholders` interest (408) (492)
Net result from financial services 2 714 2 802
Net investment income 976 1 068
Core earnings 3 690 3 870
Net project expenses (28) (56)
BEE transaction costs (7) (7)
Net equity-accounted headline earnings 41 16
Net investment surpluses 1 032 (1 699)
Amortisation of value of business (84) (77)
acquired
Net loss from discontinued operations - (22)
Net Secondary Tax on Companies (150) (59)
Normalised headline earnings 4 494 1 966
Other equity-accounted earnings - 33
Profit on disposal of subsidiaries and 35 3
associates
Impairments (76) (244)
Normalised attributable earnings 4 453 1 758
Fund transfers (56) 736
Attributable earnings per Group 4 397 2 494
statement of comprehensive income
Notes to the shareholders` fund information
for the year ended 31 December 2009
2009 2008
R million R million
1. NEW BUSINESS
Analysed per market:
Retail
Life business 12 395 12 862
Sanlam Personal Finance 11 032 11 413
Sanlam Developing Markets 1 363 1 449
Non-life business 29 586 29 105
Sanlam Personal Finance 10 758 11 231
Sanlam Private Investments 8 769 7 094
Sanlam Collective Investments 10 059 10 780
South African 41 981 41 967
Non-South African 12 661 11 921
Sanlam Personal Finance 9 182 8 426
Sanlam Developing Markets 1 339 1 145
Sanlam UK 2 140 2 350
Total Retail 54 642 53 888
Institutional
Group life business 1 907 1 500
Sanlam Employee Benefits 1 123 515
Investment Management 784 985
Non-life business 23 487 23 918
Segregated (1) 11 306 12 404
Sanlam Multi-Manager 3 666 4 040
Sanlam Collective Investments 8 515 7 474
South African 25 394 25 418
Investment Management non-SA (1) 3 808 2 184
Institutional 29 202 27 602
White label 6 188 6 481
Short-term insurance 12 896 12 165
Total new business 102 928 100 136
(1) Fund flows have been re-allocated
between Sanlam Investments International
and Wholesale business pursuant to the
restructuring of the Octane group.
2. NET FLOW OF FUNDS
Analysed per market:
Retail
Life business 1 658 795
Sanlam Personal Finance 1 844 794
Sanlam Developing Markets (186) 1
Non-life business 5 612 7 058
Sanlam Personal Finance 2 460 2 897
Sanlam Private Investments 992 3 215
Sanlam Collective Investments 2 160 946
South African 7 270 7 853
Non-South African 3 960 1 491
Sanlam Personal Finance 2 744 185
Sanlam Developing Markets 1 415 1 217
Sanlam UK (199) 89
Total Retail 11 230 9 344
Institutional
Group life business (1 090) (2 736)
Sanlam Employee Benefits (322) (1 994)
Investment Management (768) (742)
Non-life business 3 051 813
Segregated (1) 2 349 2 491
Sanlam Multi-Manager (1 487) (3 406)
Sanlam Collective Investments 2 189 1 728
South African 1 961 (1 923)
Investment Management non-SA (1) (1 812) (588)
Total Institutional 149 (2 511)
White label 324 (1 445)
Short-term insurance 3 796 3 734
Total net flow of funds 15 499 9 122
(1) Fund flows have been re-allocated between Sanlam Investments International
and Wholesale business pursuant to the restructuring of the Octane group.
3. Normalised diluted earnings per share
In terms of IFRS, the policyholders` fund`s investments in Sanlam shares and
Group subsidiaries are not reflected as equity investments in the Sanlam
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 diluted earnings per share to eliminate the impact of
investments in Sanlam shares and Group subsidiaries held by the policyholders`
fund.
2009 cents 2008 cents
Normalised diluted earnings per share:
Net result from financial services 132,2 133,8
Core earnings 179,7 184,8
Normalised headline earnings 218,9 93,9
Profit attributable to shareholders` 216,9 84,0
fund
R million R million
Analysis of normalised earnings (refer
shareholders` fund income statement):
Net result from financial services 2 714 2 802
Core earnings 3 690 3 870
Headline earnings 4 494 1 966
Profit attributable to shareholders` 4 453 1 758
fund
million million
Adjusted number of shares:
Weighted average number of shares for 2 028,1 2 043,5
diluted earnings per share (refer below)
Add: Weighted average Sanlam shares held 25,0 50,5
by policyholders
Adjusted weighted average number of 2 053,1 2 094,0
shares for normalised diluted earnings
per share
Number of ordinary shares in issue at 2 303,6 2 303,6
beginning of period
Shares cancelled (143,6) (113,5)
Number of ordinary shares in issue 2 160,0 2 190,1
Shares held by subsidiaries in (151,8) (197,3)
shareholders` fund
Outstanding long-term incentive scheme 37,1 45,5
shares and options
Number of shares under option to be (5,4) (12,7)
issued at fair value
Convertible deferred shares held by 23,2 18,6
Ubuntu-Botho
Adjusted number of shares for value per 2 063,1 2 044,2
share
4. Share repurchases
The Sanlam shareholders granted general authorities to the Group at the 2008 and
2009 annual general meetings to repurchase Sanlam shares in the market. The
Group did not acquire any shares during 2009 in terms of the general
authorities.
Embedded value of covered business at 31 December 2009
2009 2008
Note R million R million
Sanlam Personal Finance 19 884 19 574
Adjusted net worth 8 098 8 275
Net value of in-force covered 11 786 11 299
business
Value of in-force covered business 13 645 12 809
Cost of capital (1 694) (1 378)
Minority shareholders` interest (165) (132)
Sanlam Developing Markets 3 479 2 796
Adjusted net worth 1 363 1 032
Net value of in-force covered business 2 116 1 764
Value of in-force covered business 2 786 2 432
Cost of capital (307) (284)
Minority shareholders` interest (363) (384)
Sanlam UK 665 680
Adjusted net worth 217 234
Net value of in-force covered business 448 446
Value of in-force covered business 480 481
Cost of capital (32) (35)
Minority shareholders` interest - -
Sanlam Employee Benefits 4 960 5 541
Adjusted net worth 4 569 5 472
Net value of in-force covered business 391 69
Value of in-force covered business 1 300 824
Cost of capital (909) (755)
Minority shareholders` interest - -
Embedded value of covered business 28 988 28 591
Adjusted net worth 14 247 15 013
Net value of in-force covered business 1 14 741 13 578
Embedded value of covered business 28 988 28 591
CHANGE IN EMBEDDED VALUE OF COVERED BUSINESS FOR THE YEAR ENDED
31 DECEMBER 2009
2009 2008
R MILLION NOTE TOTAL VALUE OF ADJUSTED TOTAL
IN-FORCE NET WORTH
Embedded value of covered 28 591 13 578 15 013 28 432
business at the beginning
of the year
Value of new business 607 1 714 (1 107) 612
Net earnings from 2 430 (85) 2 515 1 885
existing
covered business
Expected return on 1 714 1 714 - 1 838
value
of in-force business
Expected transfer of - (2 064) 2 064 -
profit to adjusted
net
worth
Operating experience 3 636 182 454 278
variances
Operating assumption 4 80 83 (3) (231)
changes
Expected investment 1 091 - 1 091 1 180
return
on adjusted net worth
Embedded value earnings 4 128 1 629 2 499 3 677
from operations
Economic assumption 5 (1 206) (1 171) (35) 356
changes
Tax changes - - - 215
Investment variances - 1 149 805 344 (1 435)
value of in-force
Investment variances - 515 - 515 (1 864)
investment return on
adjusted net worth
Exchange rate movements (137) (137) - 23
Net project expenses 6 (28) - (28) (53)
Embedded value earnings 4 421 1 126 3 295 919
from covered business
Acquired value of in- 210 37 173 -
force
Transfers from other 17 - 17 -
Group
operations
Change in utilisation (729) - (729) 197
of
capital diversification
Net transfers from (3 522) - (3 522) (957)
covered
business
Embedded value of covered 28 988 14 741 14 247 28 591
business at the end of
the year
Analysis of earnings from
covered business
Sanlam Personal Finance 2 815 487 2 328 453
Sanlam Developing 467 315 152 659
Markets
Sanlam UK (14) 2 (16) (36)
Sanlam Employee 1 153 322 831 (157)
Benefits
Embedded value earnings 4 421 1 126 3 295 919
from covered business
VALUE OF NEW BUSINESS FOR THE YEAR ENDED 31 DECEMBER 2009
R MILLION NOTE 2009 2008
Value of new business (at point of
sale):
Gross value of new business 797 787
Sanlam Personal Finance 354 419
Sanlam Developing Markets 335 343
Sanlam UK 17 6
Sanlam Employee Benefits 91 19
Cost of capital (108) (89)
Sanlam Personal Finance (34) (33)
Sanlam Developing Markets (45) (41)
Sanlam UK (3) (5)
Sanlam Employee Benefits (26) (10)
Value of new business 689 698
Sanlam Personal Finance 320 386
Sanlam Developing Markets 290 302
Sanlam UK 14 1
Sanlam Employee Benefits 65 9
Value of new business attributable
to:
Shareholders` fund 2 607 612
Sanlam Personal Finance 308 377
Sanlam Developing Markets 220 225
Sanlam UK 14 1
Sanlam Employee Benefits 65 9
Minority shareholders` interest 82 86
Sanlam Personal Finance 12 9
Sanlam Developing Markets 70 77
Sanlam UK - -
Sanlam Employee Benefits - -
Value of new business 689 698
Geographical analysis:
South Africa 484 507
Africa 186 181
Other international 19 10
Value of new business 689 698
Analysis of new business
profitability:
Before minorities:
Present value of new business 26 365 26 033
premiums
Sanlam Personal Finance 16 573 17 371
Sanlam Developing Markets 5 711 5 332
Sanlam UK 951 1 484
Sanlam Employee Benefits 3 130 1 846
New business margin 2,61% 2,68%
Sanlam Personal Finance 1,93% 2,22%
Sanlam Developing Markets 5,08% 5,66%
Sanlam UK 1,47% 0,07%
Sanlam Employee Benefits 2,08% 0,49%
Analysis of new business
profitability:
After minorities:
Present value of new business 25 102 24 459
premiums
Sanlam Personal Finance 16 269 17 080
Sanlam Developing Markets 4 752 4 049
Sanlam UK 951 1 484
Sanlam Employee Benefits 3 130 1 846
New business margin 2,42% 2,50%
Sanlam Personal Finance 1,89% 2,21%
Sanlam Developing Markets 4,63% 5,56%
Sanlam UK 1,47% 0,07%
Sanlam Employee Benefits 2,08% 0,49%
NOTES TO THE EMBEDDED VALUE OF COVERED BUSINESS
FOR THE YEAR ENDED 31 DECEMBER 2009
Gross Cost of Net value Change
value of capital of in- from base
in-force force value
business business
1. VALUE OF IN-FORCE R million R million R million %
SENSITIVITY ANALYSIS
BASE VALUE 17 626 (2 885) 14 741
Interest rate and assets
- Risk discount rate increase 16 639 (3 486) 13 153 -11
by 1%
- Investment return and 18 073 (2 789) 15 284 4
inflation decrease by 1%,
coupled with a 1% decrease in
risk discount rates, and with
bonus rates changing
commensurately
- Equity and property values 16 897 (2 865) 14 032 -5
decrease by 10%, without a
corresponding change in
dividend and rental yields
- Expected return on equity 18 023 (2 631) 15 392 4
and property investments
increase by 1%, without a
corresponding change in
discount rates
Expenses and persistency
- Non-commission maintenance 18 124 (2 873) 15 251 3
expenses (excluding
investment expenses) decrease
by 10%
- Discontinuance rates 18 005 (2 967) 15 038 2
decrease by 10%
Insurance risk
- Mortality and morbidity 18 238 (2 878) 15 450 5
decrease by 5% for life
assurance business
- Mortality and morbidity 17 512 (2 882) 14 630 -1
decrease by 5% for life
annuity business
Gross Cost of Net value Change
value of capital of new from base
new business value
business
2. VALUE OF NEW BUSINESS R million R million R million %
SENSITIVITY ANALYSIS
Base value 704 (97) 607
Interest rate and assets
- Risk discount rate increase 620 (118) 502 -17
by 1%
- Investment return and 750 (99) 651 7
inflation decrease by 1%,
coupled with a 1% decrease in
risk discount rates, and with
bonus rates changing
commensurately
Expenses and persistency
- Non-commission maintenance 773 (97) 676 11
expenses (excluding
investment expenses) decrease
by 10%
- Acquisition expenses 771 (97) 674 11
(excluding commission and
commission related expenses)
decrease by 10%
- Discontinuance rates 796 (102) 694 14
decrease by 10%
Insurance risk
- Mortality and morbidity 832 (97) 735 21
decrease by 5% for life
assurance business
- Mortality and morbidity 694 (98) 596 -2
decrease by 5% for life
annuity business
2009 2008
R million R million
3. OPERATING EXPERIENCE
VARIANCES
Risk experience 363 307
Investment guarantee reserve 64 (117)
Working capital and other 209 88
Total operating experience 636 278
variances
4. OPERATING ASSUMPTION
CHANGES
Mortality and morbidity (124) (196)
Persistency (67) (31)
Modelling improvements and 271 (4)
other
Total operating assumption 80 (231)
changes
5. ECONOMIC ASSUMPTION
CHANGES
Investment yields and risk (866) 363
premiums
Long-term asset mix (340) (7)
assumptions
Total economic assumption (1 206) 356
changes
6. Net project expenses
Net project expenses relate to once-off expenditure on the Group`s distribution
platform that has not been allowed for in the embedded value assumptions.
2009 2008
% %
7. Economic assumptions
Gross investment return, risk discount rate
and
inflation
Sanlam Life:
Point used on the relevant yield curve 9 year 9 year
Fixed-interest securities 9,4 7,3
Equities and offshore investments 12,9 10,8
Hedged equities 9,9 7,8
Property 10,4 8,3
Cash 8,4 6,3
Return on required capital 10,3 8,8
Inflation rate 6,4 4,3
Risk discount rate 11,9 9,8
Merchant Investors:
Point used on the relevant yield curve 15 year 15 year
Fixed-interest securities 4,5 3,7
Equities and offshore investments 7,7 7,0
Hedged equities 7,7 7,0
Property 7,7 7,0
Cash 4,5 3,7
Return on required capital 4,5 3,7
Inflation rate 3,8 2,9
Risk discount rate 8,2 7,5
SDM Limited:
Point used on the relevant yield curve 6 year 6 year
Fixed-interest securities 8,6 7,3
Equities and offshore investments 12,1 10,8
Hedged equities n/a n/a
Property 9,6 8,3
Cash 7,6 6,3
Return on required capital 9,9 8,6
Inflation rate 5,6 4,3
Risk discount rate 11,1 9,8
Botswana Life Insurance:
Fixed-interest securities 10,0 10,5
Equities and offshore investments 13,5 14,0
Hedged equities n/a n/a
Property 11,0 11,5
Cash 9,0 9,5
Return on required capital 10,1 10,6
Inflation rate 7,0 7,5
Risk discount rate 13,5 14,0
Asset mix for assets supporting the
required capital
Sanlam Life:
Equities 34 44
Hedged equities 13 13
Property 3 3
Fixed-interest securities 15 25
Cash 35 15
100 100
Merchant Investors:
Equities - -
Hedged equities - -
Property - -
Fixed-interest securities - -
Cash 100 100
100 100
SDM Limited:
Equities 50 50
Hedged equities - -
Property - -
Fixed-interest securities - -
Cash 50 50
100 100
Botswana Life Insurance:
Equities 15 15
Hedged equities - -
Property 10 10
Fixed-interest securities 25 25
Cash 50 50
100 100
Group financial statements
for the year ended 31 December 2009
Contents
Group statement of financial position
Group statement of comprehensive income
Group statement of changes in equity
Group cash flow statement
Notes to the financial statements
Group statement of financial position
at 31 December 2009
2009 2008
R million R million
ASSETS
Property and equipment 375 382
Owner-occupied properties 652 652
Goodwill 2 810 2 623
Other intangible assets 45 -
Value of business acquired 1 210 1 309
Deferred acquisition costs 2 140 1 970
Long-term reinsurance assets 499 506
Investments 288 278 268 530
Properties 15 757 15 981
Equity-accounted investments 1 964 1 317
Equities and similar securities 141 570 120 284
Public sector stocks and loans 50 803 50 531
Debentures, insurance policies, 34 792 35 309
preference shares and other loans
Cash, deposits and similar securities 43 392 45 108
Deferred tax 515 712
Short-term insurance technical assets 2 064 2 250
Working capital assets 36 241 38 974
Trade and other receivables 24 261 28 908
Cash, deposits and similar securities 11 980 10 066
Total assets 334 829 317 908
EQUITY AND LIABILITIES
Shareholders` fund 30 044 27 651
Minority shareholders` interest 2 628 2 596
Total equity 32 672 30 247
Long-term policy liabilities 245 997 229 268
Insurance contracts 123 774 120 879
Investment contracts 122 223 108 389
Term finance 6 916 6 763
Margin business 3 341 2 830
Other interest-bearing liabilities 3 575 3 933
External investors in consolidated funds 10 534 9 822
Cell owners` interest 535 447
Deferred tax 763 440
Short-term insurance technical provisions 8 304 8 229
Working capital liabilities 29 108 32 692
Trade and other payables 25 842 29 325
Provisions 1 396 1 453
Taxation 1 870 1 914
Total equity and liabilities 334 829 317 908
Group statement of comprehensive income
for the year ended 31 December 2009
2009 2008
R million R million
Net income 60 671 19 700
Financial services income 30 968 28 578
Reinsurance premiums paid (2 848) (2 990)
Reinsurance commission received 258 401
Investment income 15 997 17 044
Investment surpluses 17 380 (24 672)
Finance cost - margin business (246) (244)
Change in fair value of external (838) 1 583
investors
liability
NET INSURANCE AND INVESTMENT CONTRACT (41 063) (4 352)
BENEFITS AND CLAIMS
Long-term insurance and investment (32 847) 3 062
contract
benefits
Short-term insurance claims (9 800) (9 189)
Reinsurance claims received 1 584 1 775
Expenses (11 576) (11 134)
Sales remuneration (4 438) (4 189)
Administration costs (7 138) (6 945)
Impairment of investments and goodwill (79) (247)
Amortisation of value of business (84) (77)
acquired
Net operating result 7 869 3 890
Equity-accounted earnings 104 34
Finance cost - other (363) (391)
Profit before tax 7 610 3 533
Taxation (2 529) (621)
Shareholders` fund (1 759) (428)
Policyholders` fund (770) (193)
Profit from continuing operations 5 081 2 912
Discontinued operations - 25
Profit for the period 5 081 2 937
Other comprehensive income
Movement in foreign currency (454) 154
translation
reserve
Comprehensive income for the period 4 627 3 091
Allocation of comprehensive income:
Profit for the period 5 081 2 937
Shareholders` fund 4 397 2 494
Minority shareholders` interest 684 443
Comprehensive income for the period 4 627 3 091
Shareholders` fund 4 088 2 554
Minority shareholders` interest 539 537
Earnings attributable to shareholders of
the company (cents):
Basic earnings per share 222,5 125,0
Diluted earnings per share 216,8 122,0
Earnings attributable to shareholders of
the company from continuing operations
(cents):
Basic earnings per share 222,5 126,1
Diluted earnings per share 216,8 123,1
Group statement of changes in equity
FOR THE YEAR ENDED 31 DECEMBER 2009
2009 2008
R million R million
Shareholders` fund:
Balance at beginning of the period 27 651 29 334
Comprehensive income 4 088 2 554
Profit for the period 4 397 2 494
Other comprehensive income: movement in (309) 60
foreign currency translation reserve
Net movement in treasury shares 735 17
Net realised investment surpluses on (274) (307)
treasury shares
Cost of net treasury shares disposed 1 009 324
(1)
Share-based payments 139 134
Dividends paid (2) (1 954) (1 907)
Shares cancelled (615) (2 481)
Balance at end of the period 30 044 27 651
Minority shareholders` interest:
Balance at beginning of the period 2 596 2 220
Comprehensive income 539 537
Profit for the period 684 443
Other comprehensive income: movement in (145) 94
foreign currency translation reserve
Net movement in treasury shares (14) (48)
Net realised investment surpluses on (23) (28)
treasury shares
Cost of net treasury shares 9 (20)
disposed/(acquired) (1)
Share-based payments 28 23
Dividends paid (419) (366)
Acquisitions, disposals and other (102) 230
movements in minority interests
Balance at end of the period 2 628 2 596
Shareholders` fund 27 651 29 334
Minority shareholders` interest 2 596 2 220
Total equity at beginning of the period 30 247 31 554
Shareholders` fund 30 044 27 651
Minority shareholders` interest 2 628 2 596
Total equity at end of the period 32 672 30 247
(1)Comprises movement in cost of shares held by subsidiaries and the share
incentive trust.
(2)Dividend of 98 cents per share paid during 2009 (2008: 93 cents per share) in
respect of the 2008 financial year.
Group cash flow statement
for the year ended 31 December 2009
2009 2008
R million R million
Net cash inflow from operating 3 993 6 810
activities
Net cash outflow from investment (4 288) (404)
activities
Net cash inflow/(outflow) from 519 (2 570)
financing activities
Net increase in cash and cash 224 3 836
equivalents
Cash, deposits and similar securities 55 145 51 309
at beginning of the year
Cash, deposits and similar securities 55 369 55 145
at end of the year - continuing
operations
Cash outflow from discontinued - (812)
operations
Cash, deposits and similar securities - 812
at beginning of the year - discontinued
operations
Cash, deposits and similar securities - -
at end of the year - discontinued
operations
Notes to the Financial Statements
For the year ended 31 December 2009
2009 2008
cents cents
1. Earnings per share
Basic earnings per share:
Headline earnings 224,6 135,4
Profit attributable to shareholders` fund 222,5 125,0
Diluted earnings per share:
Headline earnings 218,8 132,2
Profit attributable to shareholders` fund 216,8 122,0
R million R million
Analysis of earnings:
Profit attributable to shareholders 4 397 2 494
Less: Net profit on disposal of (25) (3)
subsidiaries
Less: Net profit on disposal of (10) -
associated companies
Less: Equity-accounted non-headline - (33)
earnings
Plus: Impairment of investments and 76 244
goodwill
Headline earnings 4 438 2 702
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 2 190,1 2 303,6
beginning of period
Less: Weighted average number of shares (25,1) (64,3)
cancelled
Less: Weighted average Sanlam shares held (189,2) (243,5)
by subsidiaries (including policyholders)
Adjusted weighted average number of 1 975,8 1 995,8
shares for basic earnings per share
Add: Weighted conversion of deferred 20,6 14,9
shares
Add: Total number of shares and options 37,1 45,5
Less: Number of shares (under option) (5,4) (12,7)
that would have been issued at fair value
Adjusted weighted average number of 2 028,1 2 043,5
shares for diluted earnings per share
2. Segmental information
2009 2008
R million R million
Segment financial services income (per 29 316 26 969
shareholders` fund information)
Sanlam Personal Finance 6 846 6 678
Sanlam Developing Markets 3 996 3 115
Sanlam UK 367 399
Sanlam Employee Benefits 2 190 2 059
Short-term Insurance 13 345 12 274
Sanlam Investments 2 106 2 259
Sanlam Capital Markets 409 107
Corporate, consolidation and other 87 78
IFRS adjustments 1 652 1 609
Total financial services income 30 968 28 578
Segment result (per shareholders` fund 4 453 1 758
information after tax and minorities)
Sanlam Personal Finance 2 960 80
Sanlam Developing Markets 162 53
Sanlam UK 59 (35)
Sanlam Employee Benefits 791 (85)
Short-term Insurance 550 358
Sanlam Investments 617 526
Sanlam Capital Markets 143 (35)
Corporate, consolidation and other (829) 896
Reverse minority shareholders` interest 684 443
included in segment result
Fund transfers (56) 736
Total profit for the year 5 081 2 937
3. Contingent liabilities
Shareholders are referred to the contingent liabilities disclosed in the 2009
interim and 2008 annual reports. The circumstances surrounding these contingent
liabilities remained materially unchanged.
4. Subsequent events
No material facts or circumstances have arisen between the dates of the balance
sheets and this report that affect the financial position of the Sanlam Group at
31 December 2009 as reflected in these financial statements.
GROUP SECRETARY
JOHAN BESTER
REGISTERED OFFICE
2 STRAND ROAD, BELLVILLE 7530, SOUTH AFRICA
tELEPHONE +27 21 947-9111
FAX +27 21 947-3670
POSTAL ADDRESS
PO BOX 1, SANLAMHOF, 7532,
SOUTH AFRICA
REGISTERED NAME: SANLAM LIMITED
(REGISTRATION NUMBER 1959/001562/06)
JSE SHARE CODE (PRIMARY LISTING): SLM
NSX SHARE CODE: SLA
ISIN NUMBER: 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: RC Andersen (Chairman), PT Motsepe (Deputy Chairman), J van Zyl (1)
(Group Chief Executive), MMM Bakane-Tuoane, AD Botha, AS du Plessis, FA du
Plessis, MV Moosa, JP Moller (1), YG Muthien (1), TI Mvusi (1),
SA Nkosi, I Plenderleith (2), GE Rudman, RV Simelane, DK Smith,
ZB Swanepoel, PL Zim
(1) Executive
(2) British
11 MARCH 2010
BELLVILLE
SPONSOR
DEUTSCHE SECURITIES (SA) (PROPRIETARY) LIMITED
Date: 11/03/2010 08:00:01 Produced by the JSE SENS Department.
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