Interim Results 2019 Investor Presentation · INVESTOR PRESENTATION 2019 Interim Results 5...

aSANLAM 2019 INTERIM RESULTS

Interim Results 2019

Investor Presentation

Notes

1SANLAM 2019 INTERIM RESULTS

Insurance | Financial Planning | Retirement | Investments | Wealth

INVESTOR PRESENTATION2019 Interim Results

5 September 2019

Notes

2 SANLAM 2019 INTERIM RESULTS

Page | 2

Strategic Review

Operating environment in 1H19

Financial review

Strategic priorities and governance

Outlook

Notes


STRATEGIC REVIEWGeared for enhanced growth

Notes


Page | 4

A strategy that stood the test of timeGood progress on all pillars in 1H19

Our strategic intentOur strategic intent is to create sustainable value for all stakeholders.

Our vision in Africa, India and Malaysia

To be a leading Pan-African financial services group with a meaningful presence in India &

Malaysia

Our vision indeveloped markets

To play a niche role in wealth-and investment management in

specific developed markets

Our vision inSouth Africa

To lead in client-centric wealth creation, management and

protection

TransformationContinuous transformation is central to Sanlam’s ability to adapt to a

changing world and underpins all of the strategic pillars.

Enhancing resilience and earnings growth through diversification

Profitable top-line growth through a culture of client-centricity

Extracting value through innovation and improved efficiencies

Responsible capital allocation and management

Our strategic pillars

Notes


Page | 5

Sustainable shareholder value creationDifficult operating environment impacted on valuations and returns in 1H19

Dual focus on future grow

th and dividend flows

0200400600800

10001200140016001800

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

1H19

Consistent outperformance of RoGEV target

Target Actual

0

50

100

150

200

250

300

350

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Stable dividend growth

Dividend Cash earnings

Target: SA 9yr risk free + 4% Target: 2% - 4% real growth

10yr CAGR 12.3%10yr CAGR 15.1%

Quality of earnings and strong cash flow generation sets us apart

Notes


Page | 6

Our strategic scorecardUnique diversification and demonstrated ability to execute despite major headwinds

Delivering shareholder value under challenging conditions

Capitec Bank funeral product reached

1 million sales since launch

Capital position and

BEE credentials

strengthened through share

issuance

Continued positive

experience variances

Strong growth across most key metrics

SA investor confidence

under severe pressure

Higher corporate

credit provisioning

in SA

Weak SA economic

environment - hampered

by uncertainty

Notes


Page | 7

An unmatched pan-African footprint in placeFocus is now on delivering the business case over the medium term

India

Malaysia

PhilippinesGhana Kenya

UgandaRwandaBurundiTanzania

MalawiZambia

BotswanaNamibia

SwazilandSouth Africa

Switzerland

United Kingdom

USA

Australia

Ireland

Mozambique

MoroccoAlgeria

Tunisia

Mali

Senegal

GuineaBurkina Faso

Cote D’IvoireTogo

BeninNigeria

CameroonGabon

Republic of the CongoAngola

ZimbabweMadagascar

Mauritius

Lesotho

Saudi ArabiaLebanon

Niger

Luxembourg

France

Developed Markets

Emerging Markets - Direct presence

Emerging Markets - Indirect presence

Future Expansion

Ethiopia

Egypt

Notes


Operating environment in 1H19

Challenging economic conditions in South Africa and Namibia

Notes


Page | 9

Our business environment in 1H19

Globaltrade wars

Investmentmarket

volatility

Exchange ratevolatility

Competition

Other African regionsApart from Namibia, economic conditions in other emerging markets more conducive to growthRisk-based capital introduced in a number of markets – provides consolidation opportunitiesExposure to commodities and agriculture causes volatility

GlobalEscalating trade war between US and ChinaRisks to Chinese economic growth and impact on commodity pricesUncertainties around BrexitVolatility persisting

South AfricaPedestrian economic growth and high unemployment; requires structural reformsRisk of sovereign credit rating downgrade increasingNeed to restore confidencePublic/private partnerships key to deliver favourable environment

India & MalaysiaLiquidity constraints in India in latter part of 2018Share prices of credit businesses under pressure despite good operational performanceFavourable economic growth prospects

Notes


FINANCIAL REVIEWResilience through diversification

Notes


Page | 11

Our economic and underwriting environment in 1H19

Exchange RatesOverall OP: +3%

ROGEV: -1%

Interest RatesRoGEV: +1%

VNB: +5%

Investment returnEV investment

variances: R572mPressure on fee

income

GI underwritingSantam under-writing margin:

5,3%Saham under-writing margin:

3,2%

8,4%

15,3%

6,0%

11,8%

8,2%10,3%

1,0%

UnitedKingdom

USA Botswana Morocco India Malaysia Rest ofAfrica

Average Rand exchange rates

10,5

11,0

11,5

12,0

12,5

13,0

13,5

14,0

44

46

48

50

52

54

56

58

60

Dec-17 Jun-18 Dec-18 Jun-19

Thou

sand

s

Thou

sand

s

JSE Indices

All Share Swix Avg Swix

7,0%

7,5%

8,0%

8,5%

9,0%

9,5%

10,0%

10,5%

Dec-17 Jun-18 Dec-18 Jun-19

SA bond yields & short-term interest rates

9 year Avg ST

- 200

-

200

400

600

800

1 000

Motor Property Engineering Liability Accident &health

Other Total

Santam underwriting result (Rm)

2018 2019

Notes


Page | 12

Key Performance Indicators

EarningsNet result from financial services increased by 13%Net operational earnings up 15%

Business volumesNet value of new covered business up 19% to R942 million (+15% on consistent economic basis)Net new covered business margin of 2.79% (2.46% in 2018)New business volumes increased by 4% to R111 billionNet fund inflows of R23 billion compared to R19 billion in 2018

Group Equity ValueGroup Equity Value of R63.70 per shareAnnualised RoGEV per share of 10.5%; adjusted 8.9% compared to hurdle of 13,5%

Notes


FINANCIAL REVIEWSanlam Personal Finance

Notes


Page | 14

R million 2019 2018

New business volumes 28 153 31 022 -9% Sanlam Sky 1 228 1 194 3%

Individual life recurring 575 507 13%Capitec Bank funeral 467 19Capitec Bank credit life - 566Other channels 186 102 82%

Recurring premium & SBD 1 722 1 666 3% Glacier 25 203 28 162 -11%

Life 12 468 14 175 -12%Non-life 12 735 13 987 -9%

Net flows 3 622 6 777Sanlam Sky 2 014 1 886Recurring premium & SBD (560) (1 261)Glacier 2 168 6 152

Sanlam Personal Finance

Notes


Page | 15


R million 2019 2018 CEB*

Net value of new life business 723 622 16% 11%Sanlam Sky 329 244 35% 25%Recurring premium & SBD 216 160 35% 28%Glacier 178 218 -18% -18%

Net new business margin 3,14% 2,70% 0,44%Sanlam Sky 8,29% 8,00% 0,29%Recurring premium & SBD 3,27% 2,72% 0,55%Glacier 1,43% 1,54% -0,11%

* Consistent economic basis

Notes


Page | 16


R million 2019 2018

Net operating profit 2 290 2 096 9% Sanlam Sky 545 487 12% Recurring premium sub cluster 964 1 060 -9% Glacier 586 442 33% SBD & Other 195 107 82%

Excl SPL one-off adjustment 125 107 17%

Group Equity Value* 45 610 43 185 RoGEV (6 months) 11,5% 5,5%* Comparative information as at 31 December 2018

Notes


FINANCIAL REVIEWSanlam Emerging Markets

Notes


Page | 18

Sanlam Emerging Markets

R million 2019 2018

New business volumes 15 474 11 407 36%Sanlam Pan Africa 13 706 9 968 38%Namibia 2 885 3 286 -12% Botswana 3 585 2 682 34% Other African operations 7 236 4 000 81% Saham Finances 5 924 2 421 145%Other 1 312 1 579 -17%

Other emerging markets 1 768 1 439 23%Net fund flows 5 491 3 201Sanlam Pan Africa 4 474 2 594Namibia 159 (602)Botswana 743 807Other African operations 3 572 2 389

Other emerging markets 1 017 607

Notes


Page | 19


R million 2019 2018

Net value of new life business 176 150 17%Sanlam Pan Africa 135 100 35%Namibia 46 33 39% Botswana 50 48 4% Other African Operations 39 19 105% Saham Finances 22 15 47%Other 17 4 325%

Other emerging markets 41 50 -18%

Net new business margin 3,43% 4,28%Sanlam Pan Africa 3,59% 3,94%Namibia 4,24% 4,82%Botswana 5,48% 6,13%Other African operations 2,21% 1,78%

Other emerging markets 2,99% 5,18%

Notes


Page | 20


R million 2019 2018

Net operating profit 1 363 911 50% Sanlam Pan Africa 778 569 37%Namibia 149 148 -Botswana 162 149 9%Other African operations 467 272 72%Saham Finances 382 234 63%Other 85 38 124%

Other emerging markets 568 336 69%India 570 328 74%Malaysia (2) 8 -125%

Corporate 17 6 183%

Group equity value* 44 309 44 659RoGEV (6 months) -0,4% 8,8%* Comparative information as at 31 December 2018

Notes


FINANCIAL REVIEWSanlam Investment Group

Notes


Page | 22

Sanlam Investment Group

R million 2019 2018

Net investment business flows 10 425 5 422 92%

Investment management SA 9 543 3 882

Wealth management (171) 1 673

International 1 053 (133)

New life business 1 668 1 722 -3%

Net life business (398) (37)

Notes


Page | 23


R million 2019 2018

Net operating profit 559 523 7% Investment management SA 197 122 61%Wealth management 68 64 6% International 117 138 -15%Specialised finance (Sanfin) 177 199 -11%

Group Equity Value* 19 636 18 703 Covered business 2 989 2 797 Other 16 647 15 906RoGEV (6 months) 5,5% 5,3%* Comparative information as at 31 December 2018

Notes


FINANCIAL REVIEWSantam

Notes


Page | 25

Santam

R million 2019 2018

Net earned premiums 11 773 11 122 6% Gross operating profit 1 248 1 381 -10% Underwriting surplus 620 941 -34%

Working capital income 285 263 8%

SEM participations & other 343 177 94%

Net operating profit 501 573 -13%Underwriting margin - conventional 5,3% 8,4%

Group Equity Value* 20 343 20 102RoGEV (6 months) 3,4% 9,2%* Comparative information as at 31 December 2018

Notes


FINANCIAL REVIEWSanlam Corporate

Notes


Page | 27

Sanlam Corporate

R million 2019 2018

New business volumes 3 357 2 542 32%Recurring risk premiums 109 175 -38%

Investment & retirement – life 2 161 1 680 29%

Investment – non-life 1 087 687 58%

Net fund flows (389) (353)Value of new life business 43 19 126%New business margin 1,11% 0,51%

Notes


Page | 28

Sanlam Corporate

R million 2019 2018

Net operating profit 254 308 -18% Employee Benefits (incl ACA) 201 236 -15%

Healthcare 63 78 -19%

Integrated solutions and corporate (10) (6) -67%

Group Equity Value* 5 963 6 009 RoGEV (6 months) 8,2% 6,9%* Comparative information as at 31 December 2018

Notes


FINANCIAL REVIEWSanlam Group

Notes


Page | 30

Business flows

Gross NetR million 2019 2018 2019 2018

by businessPersonal Finance 28 153 31 022 -9% 3 622 6 777 -47%Emerging Markets 15 474 11 407 36% 5 491 3 201 72%Investment Group 52 583 51 128 3% 10 027 5 385 86%Santam 11 773 11 122 6% 4 155 4 203 -1%Sanlam Corporate 3 357 2 542 32% (389) (353) -10%by licenceLife insurance 23 633 23 192 2% 5 888 6 167 -5%General insurance 18 531 14 852 25% 6 704 5 697 18%Investment 69 176 69 177 - 10 314 7 349 40%Total 111 340 107 221 4% 22 906 19 213 19%

Notes


Page | 31

Net value of new covered business

Net value of New Business MarginR million 2019 2018 CEB* 2019 2018 CEB*

Personal Finance 723 622 16% 11% 3,14% 2,70% 3.01%

Emerging Markets 176 150 17% 15% 3,43% 4,28% 3,40%

Sanlam Corporate 43 19 126% 132% 1,11% 0,51% 1,14%

Total 942 791 19% 15% 2,79% 2,46% 2,70%

* Consistent economic basis

Notes


Page | 32

Net value of new covered businessValue of new business (Rm) vs new business margins (%)

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

0

100

200

300

400

500

600

700

800

900

1000

1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 1H18 1H19

South Africa Rest of Africa Other International Margins - rhs

Notes


Page | 33

Net result from financial services

R million 2019 2018

Personal Finance 2 290 2 096 9%

Emerging Markets 1 363 911 50%

Investment Group 559 523 7%

Santam 501 573 -13%

Sanlam Corporate 254 308 -18%

Corporate & other 1 (18) >100%

Total 4 968 4 393 13%

Notes


Page | 34

Income statement

R million 2019 2018

Net result from financial services 4 968 4 393 13% Per share (cents) 226,9 211,0 8%

Net investment return 875 678 29% Net project expenses (42) (47) 11%Net operational earnings 5 801 5 024 15% Amortisation of intangible assets (383) (119)IFRS 2 charge (one-off) (1 686) -Other (293) 145IFRS attributable earnings 3 439 5 050 -32%

Notes


Page | 35

Group Equity Value

Equity Value* RoGEVR million 2019 2018 Rm %

Group operations 135 861 132 658 6 996 5,3% Personal Finance 45 610 43 185 4 971 11,5% Emerging Markets 44 309 44 659 (185) -0,4% Investment Group 19 636 18 703 1 044 5,5% Santam 20 343 20 102 692 3,4%Sanlam Corporate 5 963 6 009 474 8,2%Discretionary & Other 5 833 1 394 (11) -1,0%TOTAL 141 694 134 052 6 985 5,2% cps - annualised 6 370 6 341 10,5% Adjusted RoGEV cps - annualised 8,9%Return target 13,5% * Comparative information as at 31 December 2018

Notes


Page | 36

Group Equity Value earnings

1 Investment variances, currency movements, goodwill write-off & other2 Investment variances, economic assumption changes, currency movements & other

4 705

6 0066 985

942

2 582

663

42 476

1 312

11 414290

275

,0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

VNB Expectedreturn on VIF

Experiencevariances

Assumptionchanges

Expectedinv return,currency& other

AdjustedLife earnings

Otheroperations

Other capital AdjustedRoGEV

Economicassump

changes -Life

Other -Life(1)

Other - Non-life(2)

RoGEV

Notes


Page | 37

Experience variancesRisk, working capital, credit spreads major contributors

636468

681555

1021

991

1081

1 558

1078

663

1036

0

500

1000

1500

2000

2500

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H190,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

5,0%

5,5%

R m

illio

n

% o

f VIF

983

247 207

-56 -56

197 254

192 102

498

156

1H18 1H19-200

0

200

400

600

800

1000

1200

R m

illio

n

Risk experience Persistency Working capital

Credit spreads Other% of VIF

Notes


Page | 38

Return on Group Equity ValueGrowth target of long-bond rate +400bp

12,114,1 13,2 13,0 13,5 13,2

0,7

-2,3

1,7

-1,4 -3,0

-0,9

- 4

- 2

0

2

4

6

8

10

12

14

16

2015 2016 2017 2018 1H19 Avg

Target Out/(under) performance

12,114,1 13,2 13,0 13,5 13,2

2,7

3,72,6

6,4

-4,6

2,2

- 6- 4

- 2 0

2 4

6 8

10

12 14

16 18

20

2015 2016 2017 2018 1H19 Avg

Target Out/(under) performance

Actual RoGEV Adjusted RoGEV

Notes


Page | 39

Geographic diversification

Net VNB Net Operating Profit Group Equity Value

81%70%

62%

15%

14%23%

4%11% 9%4% 5%

Other internationalIndia/MalaysiaOther African operationsSouth Africa

R5bn1H19

R942m1H19 R141.7bn

1H19

Notes


Page | 40

Line of business diversification

Group Equity Value Net Operating Profit

42% 54%

31% 20%

12% 8%

9% 12%

6% 7%

Admin, health & otherCredit & structuringInvestment managementGeneral insuranceLife business

R141.7bn1H19

R5bn1H19

Notes


FINANCIAL REVIEWCapital management

Notes


Page | 42

Discretionary capital

Notes


Page | 43

Solvency positionSolvency cover exceeding upper end of target range

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Sanlam Life31/12/2018

Sanlam Life30/06/2019

Sanlam Life covered31/12/2018

Sanlam Life covered30/06/2019

Sanlam Group31/12/2018

Sanlam Group30/06/2019

SAM solvency cover

Own funds SCR

264%

Target: 170% – 210%

244%

221% 214%

215%205%

Notes


STRATEGIC PRIORITIES AND GOVERNANCE

Notes


Page | 45

Sanlam Group

Establising new and expanding current strategic partnerships

Capital optimisation across the Group, with specific focus on SEM

Enhanced efficiencies through balance sheet management – SEM now the priority

Advanced analytics/digital transformation

People development

Notes


Page | 46


Deepen strategic partnerships with Capitec, MTN and others

Increasing market share in the middle income and affluent segments through product innovation and leveraging the portfolio, including MiWayLife, Sanlam Indie and BrightRock

Increasing sales and productivity through an improved worksite offering in the entry-level market – African Rainbow Life

Offering best-in-class client value for savings products

Continue to build multi-channel, digitally-enabled distribution footprint across all segments

Further enhancing the full suite of integrated offerings at Glacier in cooperation with SIG

Harness digital and advanced analytics to improve client experience while achieving further operational efficiencies and productivity improvements, including AI and robotic process automation

Notes


Page | 47


Sanlam Pan Africa: Continue with shift in focus to accelerated organic growth through superior execution and enhanced strategic alliances, timetable 1 – integration complete, timetable 2 –business case delivery

Ongoing focus on risk management, operational controls, compliance and ethics

Improve life distribution, with specific focus on ex-Saham territories

Increased visibility of Sanlam brand as partnership brand for markets and our employees

Joint focus with Santam on reinsurance and specialist business opportunity, in addition to in-country retail and commercial lines focus

Increase collaboration on human resource development and high performance culture across the cluster – best people in the right jobs with the right support

Continue to explore industry consolidation, increased shareholding and strategic partnerships where it makes sense

Notes


Page | 48


Complementary footprint and businesses; delivering on the synergiesGrowing Saham life insurance operationsGrowing other SEM general insurance businessesExpanding Saham’s offering in assistance and health insurance pan AfricaOptimising reinsurance and specialist lines

Create platform to realise our vision of being a leading pan-African financial services businessThe “go-to” insurer for multinationals iro their own and employees’ needs The preferred partner to brokers, banks and other distribution entities operating across AfricaThe preferred network partner to international insurers with no African footprintHaving the leading life and general insurance businesses on the ground, in each key country across the continent

Notes


Page | 49


Maintain consistent superior investment performance

Leveraging capabilities across businesses to provide holistic solutions for retail and institutional clients, including closer cooperation with Sanlam Personal Finance and Ubuntu-Botho

Seizing the passive and alternatives opportunities

Strengthening the turn-around of Sanlam UK, positioning the business for future growth and enhancing offerings for our African client base

Dealing with fee income pressures through targeted cost reduction initiatives

Continued focus on transformation and people development

Driving retail flows through outcome-based fund management

Using business intelligence capability to apply data analytics in pursuit of product innovation, to enhance client and intermediary experience, and to support operational efficiencies

Notes


Page | 50

Santam

Focus on profitable growth; new 5-year plan

Pan-African strategy in partnership with Sanlam and Saham Finances

Implement “future fit” Santam Group strategy, digital transformation

Work with industry on wider economic transformation of the value chain

Further progress our partnerships to reduce risk and improve resilience

Notes


Page | 51

Sanlam Corporate

Continue group risk profitability recovery

Grow market positioning in Employee Benefits and Healthcare

Enhancing the customer experience through digitization and improved service

Continue building diversified distribution channels and leveraging partnerships

Integrate ACA administration and consulting into the Employee Benefits business

Capitalise on retailisation opportunities and default regulations

Enhance strategic alignment with Afrocentric

Notes


Page | 52

Board appointments to enhance independence and diversity

Ongoing governance

New board members appointed in 2019

Independent non-executive director: Elias Masilela

Independent non-executive director: Andrew Birrell

Independent non-executive director: Kobus Möller

Executive director: Jeanett Modise

New chair to be appointed at 2020 AGM

Governance arrangements around broad-based trusts well under way

Trusts established (professional black women, rural and urban poor black women’s groups, black business associates and broad-based groups, black youth and black youth groups, employees of the Sanlam Group)

Selection committees and framework finalised

Notes


OUTLOOK

Notes


Page | 54

Outlook for remainder of 2019

Economic and operating environment will remain challenging in SA and Namibia

Improved investor confidence dependent on:

Concrete plans to resolve governance and finances of SOE’s

Policy certainty/implementation of structural reforms to boost economy

Prevention of further corporate governance failures in private sector

More positive outlook for pan-Africa, India and Malaysia

Need to deliver on Saham Finances acquisition and package of B-BBEE transactions that have fundamentally changed Sanlam’s competitive positioning

Sanlam has unique opportunity for accelerated future growth Pan Africa

Notes


Notes


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