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Investment Case : 2014 Annual Results

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Investment Case : 2014 Annual Results investment case sustainable value creation Insurance Financial Planning Retirement Investments Wealth agenda Overview Strategic positioning Strategic delivery Financial performance – 2014 annual results Page 2 overview 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, 486 000 shareholders Market Cap of > R150bn JSE/ALSI40 stock with > 80% free-float Average daily trading stats 4 - 5 million shares per day >50% of shares trade p.a. Institutional shareholding of 87%, 35% offshore shareholding Page 3 operational structure Sanlam Group Group Office 100% 100% 100% 60% Sanlam100 Personal Sanlam100 Emerging Sanlam100 60% Santam %Finance %Markets Investments% SA Retail: life Emerging markets ex- SA & Developed General insurance in insurance, investment SA: life insurance, markets: investment SA & co-investor in & other financial general insurance, management, wealth SEM general insurance services investments, credit & management, businesses banking employee benefits Page 4 strategic positioning focus on growth markets strategy remains unchanged optimising returns Sustainable value creation for shareholders Maximising RoGEV Optimal Earnings Operational Diversifi- Transfor- capital growth efficiencies cation mation pillars utilisation Strategic Strategic TheSanlam Strategy People Responsible Environ- Sound Prosperous develop- products mental governance society ment and services footprint enablers Strategic Strategic Page 6 core strategic objectives progress in all areas during 2014, particularly growth markets Effective management capital Effective South Africa Maximising return on Investment in existing business Delivery of sustainable growth Efficient and effective management International Sourcing new growth opportunities Creating a platform for future growth Identification of core markets for growth & expansion Page 7 five strategic pillars underpinning the Sanlam Group business model Improving performance through earnings growth Increasing market share in key segments Improved operational efficiencies (including cost and quality) Improving returns through optimal capital utilisation Diversification of the base including geographical presence, products, market segments and distribution platforms Embracing and accelerating transformation of the Group Page 8 the growth opportunity growth markets in South Africa 50% 47% 45% 40% 36% 35% 30% 25% 25% 22% 22% 20% 17% % % of population 16% 15% 15% 10% 5% 0% 2006 2013 LSM 1-4 LSM 5 LSM 6-7 LSM 8-10 Page 9 the growth opportunity life insurance penetration in Africa 11.4% 5.4% % of GDP Global average: 3.7% 1.9% BRIC average: 1.9% 0.9% 1.1% 0.5% 0.4% 0.1% 0.2% 0.1% South Africa Namibia Botswana Malawi Kenya Ghana Zambia Tanzania Nigeria Uganda Source: Swiss Re and AXCO Page 10 strategic delivery consistency and prudence top-line earnings growth financial performance in 2014 Earnings per share Net operating profit per share increased by 26% Normalised headline earnings per share up 3% Business volumes New business volumes increased by 18% to R182bn Net fund inflows of R42bn, up 61% Net life VNB up 21% to R1.6bn Net VNB margin of 2.92% – maintained on per product basis Group Equity Value Group Equity Value of R46.84 per share RoGEV per share of 18.5% Page 12 operational efficiencies profitable volume growth Gross VNB grew by 20%; large SEB policy reduced overall margin 2 000 3.5% 1 800 3.0% 1 600 1 400 2.5% 1 200 2.0% 1 000 1.5% 800 600 1.0% 400 0.5% 200 0 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 South Africa Rest of Africa Other International Margins - rhs Page 13 operational efficiencies focus on quality Persistency – SA middle-income market Lapses, surrenders & fully paid-ups as % of in-force per half year 5 4.8 4.5 4.2 4.2 3.9 4.0 3.9 3.9 4 3.8 3.8 3.6 3.7 3.6 3.4 3.4 3.5 3.0 2.9 2.9 2.9 2.9 2.9 3 2.8 2.7 2.8 2.8 2.5 2 1.5 1 0.5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 H2 Page 14 operational efficiencies focus on quality Persistency – SA lower income market Number of NTUs, lapses and surrenders as % of in-force 30 27.6 25 20 17.5 16.8 15.2 14.5 15 14.1 12.7 12.7 11.4 11.1 11.1 11.0 11.3 10.4 10.0 10.7 10 5 0 2007 2008 2009 2010 2011 2012 2013 2014 H1 H2 Page 15 operational efficiencies experience variances Focus on quality, costs + prudence = consistent positive experience 1 200 5.0% 1 021 4.5% 991 1 000 4.0% 3.5% 800 681 3.0% 636 600 555 2.5% 468 2.0% 400 1.5% 277 288 278 241 1.0% 200 142 138 0.5% 0 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 R'million % of VIF (rhs) Page 16 investment performance focus on long-term performance track record Percentage of SIM’s AUM to exceed benchmark 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Rolling 3 Yr Rolling 5 Yr 2011 2012 2013 2014 2011 2012 2013 2014 Page 17 capital efficiency optimising capital base 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, India and SE Asia Page 18 capital efficiency capital redeployed since 2005 (R33bn) 35 000 30 000 25 000 20 000 15 000 Discretionary capital 10 000 South Africa Developed markets 5 000 Emerging markets Share buy back/special dividend - Capital released Capital deployed Page 19 capital efficiency composition of GEV transformed since 2005 120 000 100 000 80 000 60 000 Discretionary capital 40 000 Other capital Non-life operations 20 000 Value of in-force Life Required Capital - GEV 2005 GEV 2014 Page 20 diversification international positioning RSA based Rest of Africa Botswana Burundi Ghana Kenya South-East Asia Lesotho Malawi India Mozambique Malaysia Namibia Philippines Nigeria Rwanda Developed markets Tanzania UK / Ireland Developed Markets The Gambia Switzerland Uganda Australia Emerging Markets - Direct presence Zambia USA Emerging Markets - Indirect presence Page 21 diversification geographic profile Life insurance General insurance Country – direct stake Main brand Effective interest market share market share South Africa Sanlam/Santam 100%/60% 26% >22% Botswana Botswana Insurance Holdings 60% 76% 3% Namibia Sanlam Namibia 59% - 100% 17% 28% Zambia African Life Zambia 70% 33% 12% Tanzania African Life Tanzania 64% 53% 2% Kenya Pan Africa Life 56% 13% <1% Malawi NICO Holdings 25% 48% 38% Uganda Sanlam Uganda 100% 15% 2% Ghana Enterprise 40%/49% 23% 10% Nigeria FBN Life 35% 5% 1% Rwanda Soras Group 63% 35% 37% India Shriram Capital 20% - 26% 0.2% 2% Malaysia Pacific & Orient 49% - 3% Malaysia MCIS Insurance 51% 3% - Developed markets Various Various <1% - Page 22 diversification product mix COUNTRY LIFE INSURANCE GENERAL INSURANCE INVESTMENT MANAGEMENT CREDIT BANKING OTHER Botswana Botswana Life BIHL SURE Botswana Insurance Fund Management Letshego Bank Gaborone ● Burundi Socar SA Socar SA ● Ghana Enterprise Life Enterprise Insurance ● India Shriram Life Shriram General STFC, SCUF ● Kenya Pan Africa Life Gateway Insurance Pan Africa Asset Management Letshego ● Lesotho Letshego Malawi NICO Life NICO General Insurance NICO Asset Management NBS Bank ● Malaysia MCIS Insurance Pacific & Orient Mozambique NICO Vida Letshego Namibia Sanlam Life Santam Sanlam Investment Management Letshego Bank Windhoek ● Nigeria FBN Life Oasis Insurance Philippines Monarch Rwanda Soras VIE Soras AG Letshego Tanzania African Life Assurance NIKO Insurance Letshego The Gambia Enterprise Life Uganda Sanlam Life NIKO Insurance Letshego ● Zambia African Life Assurance NICO Insurance African Life Financial Services Letshego Cavmont ● Direct presence Indirect presence via associated company Holding Co., Properties, Employee Benefits, Funeral Page 23 diversification diversified base Group Equity Value Net operating profit Admin, health & other Admin, health & other 2% 11% Credit & banking 14% Credit & banking 9% Investment Investment management management 14% 13% Life business General insurance Life business General insurance 50% 14% 56% 17% Page 24 diversification growth markets delivering value Net VNB – 2003 (R232m) Net VNB – 2014 (R1 592m) Other international Rest of Africa 3% Namibia 7% 1% Botswana 6% Namibia 4% SA Entry-level SA Traditional 23% 99% SA Traditional 57% Page 25 diversification increasing contribution from growth markets Contribution to group net operating profit 2003 – R1 968 million 2013 – R5 429 million 2014 – R6 879 million Other international 7% Other international India/Malaysia India/Malaysia 6% 7% Rest of Africa Namibia Other international 7% 2% 1% 1% Rest of Africa 3% Botswana Botswana 5% 4% Namibia Namibia 6% 5% SA Entry-level 10% SA Entry-level SA Traditional 10% 98% SA Traditional 64% SA Traditional 64% Page 26 diversification contribution from businesses outside of South Africa Net operating profit Net VNB Group Equity Value 80% 80% 79% 77% 74% 74% 26% 26% 23% 21% 20% 20% 2013 2014 2013 2014 2013 2014 South Africa International Page 27 diversification competitive advantage Largest exposure to ex-SA emerging markets of South African insurers Diversified operations shield Group earnings from difficult operating environment in specific countries Expanding SA entry-level footprint Strengthening relationships in Africa Shriram Capital – unique business model in India Expansion into South-East Asia – synergies and organic growth Page 28 sanlam group financial performance – 2014
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