new investment case - sanlam · 2019. 4. 25. · investment management, wealth management, credit...

Investment CaseIncorporating FY15 results

Overview

Strategic positioning

Strategic delivery

Financial performance – 2015 annual results

Leading financial services group in Africa, with presence in India and SE Asia.

Established in 1918, listed in 1998 on the JSE & Namibian Stock Exchange

2 166 million issued shares, 476 000 shareholders

JSE/ALSI40 stock with > 80% free-float

Average daily trading stats4 - 5 million shares per day>50% of shares trade p.a.

Institutional shareholding of 87%, 37% offshore shareholding

Overview

Operational structure

100%

60%

SA Retail: life insurance,

investment & other financial

services

Sanlam Personal Finance

Emerging markets ex-SA: life insurance,

general insurance,

investments, credit & banking

Sanlam Emerging Markets

SA & Developed markets:

investment management,

wealth management,

credit & structuring

Sanlam Investments

General insurance in

SA & co-investor in

SEM general insurance

businesses

Santam

Sanlam Group

Group Office

100% 61%100%100%

SA & EM corporate: employee

benefits, health

Sanlam Corporate

100%

The Sanlam strategyMaximising shareholder value

Strategic focusOptimising value creation

Stra

tegi

c pi

llars

TransformationDiversification

Optimal capital utilisation

Operational efficienciesEarnings growth

Sustainable value creation for shareholders

Maximising RoGEV

A strategy focused on growthDriving geographic, segment and product diversification

India/SE AsiaLower income

segments have similar dynamics than SA ELM

and RoA

DevelopedNiche, solutions

for SA & RoAclients

South AfricaSolid base & cash flows

Rest of AfricaDemographics, low

insurance penetration, competitive

environment, Pan-Africa opportunity

Core regional focus areasDifferentiated approach per region

Large player in mature market with strong competition

Further diversifying distribution capability to drive growth: ELM footprint, Reality, health, digital, outcome based solutions, UB partnership, big data

Operational and capital efficiencies key in managing legacy book

South AfricaDelivering growth in mature market

Effective capital managem

ent


Large player in mature market with strong competition

Further diversifying distribution capability to drive growth: ELM footprint, Reality, health, digital, outcome based solutions, UB partnership, big data

Operational and capital efficiencies key in managing legacy book

South AfricaDelivering growth in

mature market

Focus on accelerated organic growth to obtain leadership position in all countries

Cross-border alliances and relationships; capitalise on expanded footprint from Saham Finances transaction

Geographic expansion in line with client and intermediary needs

Other Emerging Markets

Balance structural and organic growth






ent


Focus on accelerated organic growth to obtain leadership position in all countries

Cross-border alliances and relationships; capitalise on expanded footprint from Saham Finances transaction

Geographic expansion in line with client and intermediary needs



Products and services for SA and Rest of Africa client base

Sanlam UK consolidation; focus on efficiencies and distribution under new CEO

Wealth and investment management focus

Developed Markets

Niche approach


ent

The growth opportunityGrowth markets in South Africa

46%

23%

14%16%

22%

36%

18%

25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2006 2015

% o

f pop

ulat

ion

LSM 1-4 LSM 5 LSM 6-7 LSM 8-10

The growth opportunityInsurance penetration in Africa

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

World Africa SA Namibia Morocco Kenya Egypt Nigeria

Insurance penetration as % of GDP

Life Non-Life

Source: Barclays Research, Swiss Re

Strategic deliveryExceeding overall targets

Top-line earnings growth

Earnings per shareNet operating profit per share increased by 6% (11% excl one-offs)Normalised headline earnings per share up 6%

Business volumesNew business volumes increased by 16% to R211bnNet fund inflows of R19bnNet life VNB up 6% on comparable basis & excl large SEB policy in ‘14Net VNB margin of 2.91% on comparable basis

Group Equity ValueGroup Equity Value of R50.57 per shareRoGEV per share of 12.8%

Financial performance in 2015

DiversificationInternational positioning focused on emerging markets

India

Malaysia

Philippines

Ghana

The Gambia

KenyaUganda

RwandaBurundiTanzania

MalawiZambia

BotswanaNamibia

Swaziland

South Africa

Switzerland

United Kingdom

USA

Australia

Ireland

Mozambique

MoroccoAlgeria

Tunisia

MaliSenegal

GuineaBurkina Faso

Cote D’Ivoire

TogoBeninNigeria

CameroonGabon

Republic of the CongoAngola

Zimbabwe

MadagascarMauritius

Lesotho

Emerging Markets - Indirect presence

Emerging Markets - Direct presence

Developed Markets

Saham Finances presence

Sanlam and Saham Finances presence

DiversificationGeographic profile

Country – direct stake Effective interestLife/General insurance

Life insuranceMarket share/Position

General insurance Market share/Position

South Africa 100%/61% 25%/2 >22%/1Botswana 60%/60% 71%/1 3%/7Namibia 59%-100%/37% 31%/2 32%/1Zambia 70%/57% 35%/1 15%/2Tanzania 64%/50% 55%/1 2%/18Kenya 56%/32% 10%/4 1%/33Malawi 57%/57% 45%/1 36%/1Uganda 100%/82% 17%/2 3%/14Ghana 49%/40% 27%/2 10%/3Nigeria 35%/35% 5%/7 1%/32Rwanda 63%/63% 52%/1 29%/1India 20%/20% <1%/20 2%/15Malaysia 51%/49% 2%/13 2%/20Mozambique 56% <1%/5 -Zimbabwe 40%/40% 6%/4 12%/3Developed markets Various <1% -

* Excluding Saham Finances

DiversificationProduct mix

page 17* Excluding Saham Finances

SA Traditional58%SA Entry-level

18%

Namibia4%

Botswana9%

Rest of Africa7%

Other international4%

2015R1 360m

SA Traditional67%

SA Entry-level11%

Namibia5%

Botswana5%

Rest of Africa2%

Other international10%

Diversification – better balanced portfolioGeographic diversification

Net VNB Net operating profit

2015R7 269m

Life business46%

General insurance15%

Investment management

14%

Credit & structuring10%

Admin, health & other15%

2015R103 506m

Life business62%

General insurance14%

Investment management

12%

Credit & structuring11%

Admin, health & other1%

Diversification – better balanced portfolioLine of business diversification

Group Equity Value Net operating profit

2015R7 269m

Capital efficiency

Balance 1 January 2015 3 300 Net investments (6 285)

Saham Finances (4 224)Rest of Africa other (29)Shriram Insurance (969)Afrocentric (703)Other (360)

Investment return & excess cover 1 285 Capital released from portfolios 4 000Available for investment 2 300

Discretionary capital

Available for strategic initiatives

Optimising capital allocated to clusters - driving increased returns

Discretionary capital invested in growth markets as preference

Return to shareholders if not utilised in reasonable timeframe

Discretionary capital earmarked mainly for Africa

Optimising capital baseCapital efficiency

Capital efficiencyCapital redeployed since 2005 (R38bn)

-

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

Capital released Capital deployed


South Africa

Developed markets

Emerging markets

Share buy back/special dividend

Capital efficiencyComposition of GEV transformed since 2005

-

20 000

40 000

60 000

80 000

100 000

120 000

GEV 2005 GEV Dec 2015


Other capital

Non-life operations

Value of in-force

Life Required Capital

Sanlam GroupFinancial performance – 2015 annual results

External operating environmentEmerging market economies under pressure from global events

Robust economic growth in 2015Macro-economic adjustment required to address wide government budget and current account deficitsCurrency weakened in line with ZARStrong competitive environment across all segments

Namibia

Macro environment and structural constraints limiting capital investment and economic activity Modest growth in employment and disposable incomePolitical events contributed to investment market and currency volatilityPublic/private sector engagement and cooperation to drive economic and employment growth very necessary

South Africa


Commodity prices and tight financial conditions impacting on growth and currencies of a number of countriesSofter economic growth to persist in 2016 Low insurance penetration enables new business growth despite short-term challengesLonger term growth potential remains intact

Rest of Africa

Best sovereign rating in Africa due to sound management of government financesRobust economic growth, but need to diversify economy away from reliance on diamondsBIHL maintains strong competitive advantage

Botswana


Below-potential economic growth in 2015, but improvingDelays in roll out of infrastructure projects impacted on credit businesses – activity picked up towards end of 2015More stringent provisioning regulations implemented during 2016 will not affect IFRS-based resultsRobust long-term growth expectations

India

Relatively firm economic growth in 2015, some moderation expected in 2016Lower two-wheeler sales and competitive pressure impacting on general insurance growthUncertainty around effect of de-tariffing in 2016

Malaysia

Internal operating environment2015 results impacted by internal challenges and one-offs

Bad debt provisioning at STFC equipment financeOne-off item in Shriram Capital 2014 base System implementation challenges in KenyaActuarial reserving in Malaysia


Loss of PIC funds in 2014 and 2015 impacting on SI results SI admin costs elevated by projects, regulatory compliance and additional marketing spendOne-off items in 2014 base at SEB and SI International (UK)

Sanlam Investments

Salient features

2015 2014

Group Equity Value cps 5 057 4 684 8%RoGEV per share % 12,8 18,5CAR cover (Sanlam Life) 5,8 4,5Net operating profit R mil 7 269 6 879 6%

cps 355,2 336,2 6% Normalised Headline earnings R mil 8 851 8 340 6%

cps 432,5 407,6 6% New business volumes R mil 210 842 182 297 16% Net fund flows R mil 19 049 41 994 -55% New Life business EV (net) R mil 1 360 1 592 -15% New Life EV margin % 2,62 2,92

Business flows

Gross NetR million 2015 2014 2015 2014

by businessPersonal Finance 63 825 52 566 21% 22 895 19 580 Emerging Markets 11 913 9 259 29% (7 346) 3 971 Sanlam Investments 116 582 103 250 13% (3 512) 12 099 Santam 18 522 17 222 8% 7 012 6 344

by licenceLife insurance 39 976 42 290 -5% 12 081 18 430 Investment 150 670 121 383 24% (523) 16 853 General insurance 20 196 18 624 8% 7 491 6 711

Total 210 842 182 297 16% 19 049 41 994

Operational efficiencies

Persistency – SA middle-income market

Focus on quality supports net fund flows

4.8

3.9 3.9 3.6

3.4 3.8 3.9

3.0 2.9 2.9 2.8 2.9 2.9

4.2 4.0

3.8 3.7 3.6

4.2

3.4

2.9 2.8 2.7 2.9 2.8 2.8

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Lapses, surrenders & fully paid-ups as % of in-force per half year

H1 H2

Operational efficiencies

Persistency – SA lower income market

Focus on quality supports net fund flows

9.6 8.7

10.6 9.8

8.5

9.6 9.2

9.9

0

2

4

6

8

10

12

2012 2013 2014 2015

Lapses, surrenders & fully paid-ups as % of in-force per half year

H1 H2

Value of new covered business

Value of New Business MarginR million 2015 2014 2015 2014

Personal Finance 955 1 084 -12% 2,48% 3,12%

Emerging Markets 448 431 4% 5,97% 7,60%

Employee Benefits 85 198 -57% 1,96% 1,66%

Sanlam UK 26 30 -13% 0,66% 0,75%

Total 1 514 1 743 -13% 2,80% 3,09%

Net of minorities 1 360 1 592 -15% 2,62% 2,92%

Comparable economic basis 1 545 1 592 -3% 2,91% 2,92%

Value of new covered business

Large SEB policy in 2014, Kenya and Zambia also affecting growth

Significant impact from higher long-term interest rates

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015South Africa Rest of AfricaOther International Margins - rhs

Net operating profit

R million 2015 2014

Personal Finance 3 831 3 476 10%

Emerging Markets 1 197 1 241 -4%

Sanlam Investments 1 417 1 468 -3%

Santam 933 801 16%

Corporate & other (109) (107) -2%

Total 7 269 6 879 6%

Income statement

R million 2015 2014

Net operating profit 7 269 6 879 6% Per share 355,2 336,2 6%

Net investment return 1 946 1 794 8%

Other (364) (333) -9%

Normalised headline earnings 8 851 8 340 6% Per share 432,5 407,6 6%

Fund transfers 449 (15)

Headline earnings 9 300 8 325 12% Per share 459,5 411,6 12%

Group Equity Value

Equity Value RoGEVR million 2015 2014 Rm %

Group operations 91 558 87 739 12 191 13,8% Personal Finance 38 249 38 453 4 658 12,1% Emerging Markets 18 047 14 571 4 369 29,9% Investments 22 412 20 122 4 386 21,3% Santam 12 850 14 593 (1 222) -8,4% Discretionary & Other 11 948 8 197 35 0,5%TOTAL 103 506 95 936 12 226 12,7% cps 5 057 4 684 598 12,8% Adjusted return 14,8% Return target 12,1%

Group Equity Value earnings

R million 2015 2014

Net value of new business 1 360 1 592 -15%Existing business 5 328 4 881 9%Expected return on VIF 3 759 3 368 12%Operating experience variance 1 081 991 9%Operating assumption changes 488 522 -7%

6 688 6 473 3%Inv variances in-force 320 551 -42%Tax changes and goodwill (62) (168) 63%Economic assumption changes (1 608) 86 >-100%

5 338 6 942 -23%Return on net worth 1 699 1 297 31%EV earnings 7 037 8 239 -15%Non-life 5 189 7 344 -29%GEV earnings 12 226 15 583 -22%

Experience variancesPositive experience persisting

241

142 138

277 288 278

636

468

681

555

1 021 991

1 081

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0

200

400

600

800

1 000

1 200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R'million % of VIF (rhs)

Return on Group Equity ValueOut perform growth target of long-bond rate + 400bp

13.4 12.4 12.2 10.8 12.2 12.1 12.2

4.8 3.3

9.8

6.26.3

0.7

5.2

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 Avg

Target Out performance

Sanlam GroupCluster results 2015


R million 2015 2014

New business volumes 63 825 52 566 21% Sanlam Sky 1 279 1 127 13% Individual Life 12 829 12 443 3% Glacier 49 717 38 996 27%

Net flows 22 895 19 580Sanlam Sky 2 739 2 635Individual Life (3 005) (1 372)Glacier 23 161 18 317


R million 2015 2014

Value of new life business 955 1 084 -12% Sanlam Sky 241 361 -33% Individual Life 502 551 -9% Glacier 212 172 23%Comparable economic basis 1 148 1 084 6%

New business margin 2,48% 3,12%Sanlam Sky 5,86% 9,51%Individual Life 2,59% 2,88%Glacier 1,40% 1,45%Comparable economic basis 2,89% 3,12%


R million 2015 2014

Gross operating profit 5 313 4 801 11% Sanlam Sky 1 125 949 19% Individual Life life and investments 3 378 3 162 7% Glacier 426 339 26% Personal loans 346 308 12% Other 38 43 -12%

Net operating profit 3 831 3 476 10%

Group Equity Value 38 249 38 453 RoGEV 12,1% 17,9%

label


R million 2015 2014

New business volumes 11 913 9 259 29% Namibia 2 780 3 322 -16% Botswana 5 398 3 031 78% Rest of Africa 2 099 1 560 35% India/Malaysia 1 636 1 346 22% Net fund flows (7 346) 3 971Namibia 358 1 021Botswana (9 781) 1 129Rest of Africa 1 459 1 451India/Malaysia 618 370Value of new life business 448 431 4% Margin 5,97% 7,60%


R million 2015 2014

Gross operating profit 2 248 2 213 2% Namibia 618 534 16% Botswana 858 706 22%Rest of Africa 208 265 -22%India/Malaysia 572 749 -24%Corporate (8) (41) 80%

Net operating profit 1 197 1 241 -4%

Group equity value 18 047 14 571 RoGEV 29,9% 28,0%

Sanlam Investments

Sanlam Investments

R million 2015 2014

Net investment business flows (3 251) 4 097Investment management SA (753) 4 152Wealth management 3 569 (29)International (6 065) (246)Capital management (2) 220New life business 6 664 13 859 -52% Employee benefits 2 913 10 154 -71% Sanlam UK 3 751 3 705 1% Net life business (261) 8 002Value of new life business 111 228 -51% Margin 1,34% 1,43%

Sanlam Investments

R million 2015 2014

Gross operating profit 1 877 1 927 -3% Investment management 1 205 1 337 -10%Employee benefits 501 325 54% Capital management 171 265 -35%

Net operating profit 1 417 1 468 -3%

Group Equity Value 22 412 20 122 Covered business 7 210 7 833 Other 15 202 12 289 RoGEV 21,3% 20,4%

Sanlam Investments

Percentage of SIM’s benchmark-managed funds exceeding hurdle

Investment performance

2011

2012

2013

2014

2015

Rolling 3 year Rolling 5 year

100% 80% 60% 40% 20% 0% 20% 40% 60% 80% 100%

Santam

Santam

R million 2015 2014

Net earned premiums 18 522 17 222 8%

Gross operating profit 2 321 1 968 18% Underwriting surplus 1 777 1 489 19% Working capital & other 544 479 14%

Net operating profit 933 801 16%

Underwriting margin 9,6% 8,7%

Group Equity Value 12 850 14 593RoGEV -8,4% 19,1%

Ticker symbol: SLLDY

CUSIP: 80104Q208

Ratio: 1 ADR : 5 Ordinary Shares

Depositary bank: Deutsche Bank Trust Company Americas

Depositary bank contact: Stanley Jones

ADR broker helpline: +1 212 250 9100 (New York)+44 207 547 6500 (London)

e-mail: [email protected]

ADR website: www.adr.db.com

Depositary bank’s local custodian: Computershare South Africa

Sponsored level 1 ADRSanlam ADR programme

new investment case - sanlam · 2019. 4. 25. · investment management, wealth management, credit...

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