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Sanlam’s Investment Case – AR2010 Slide # 1 Sanlam’s Investment Case – AR2010 Slide # 1

Sanlam’s Investment Case – AR2010 Slide # 2

1. Clear strategy (firm commitment to deliver on promises)

2. Profitable growth opportunities

3. Diversification (reducing risk of overall portfolio)

4. Cost efficiency focus

5. Capital efficiencies

6. Prudence underpins quality and sustainability of base

7. Creation of shareholder value (share price performance)

8. Solid operational track-record (enhancing profitability and returns)


Maximise profitable growth

Maximise capital efficiencies

Returns

(ROGEV)

Growth /

Earnings

Operational Efficiencies

Diversification

Net Business Flows

Capital

Efficiency

Optimal Application

Strategic Investments

Return of Excess


Under penetrated lower income market in South Africa

Sanlam’s customer mix is best aligned with growth segments in

South Africa

SA attractive demographics represent an opportunity for insurers

Africa is an emerging insurance market and offers an attractive

growth story

Sanlam has the widest Pan-African presence and offers an excellent

platform for expansion

Growth in high net worth / mass affluent segments within SA

Resulting in profitable growth for Sanlam


8%

CAGR

10%

CAGR

8%

CAGR

9%

CAGR

5

A rising middle class Black population represents a sizable market for insurance products

Access to life insurance products by customer segments Access to life insurance products by population group

Source: AMPS 2010

Note: Affluent (R30k+), High income (R12k-R30k)n, Middle income (R6k-R12k), ELM (<R6k).

Source: AMPS 2010

Note: Data based on survey results of South African financial habits.

Note: Living Standard Measure (“LSM”) is a categorization ranging from 1 to 10 used extensively by marketers and advertisers as a means to segment the population. It is crude proxy for wealth, with the lower

LSM groups comprising the most impoverished end of the spectrum.

Personal incomes by population group (Rbn) Living standards improvement

Source: Unisa (Bureau of market research) Source: AMPS 2010


Sanlam Developing Markets, Sanlam‟s entry level proposition,

has experienced strong growth and profitability

Source: Credit Suisse research.

Customer breakdown by company

Source: Company filings and analyst presentation.

Note: Sanlam Personal Finance caters towards middle, affluent and self employed markets while

Sanlam Developing Markets caters entry-level markets in South Africa through Sanlam Sky and

Channel Life.

Sanlam individual life APE development in South Africa

06 – 10 Personal Finance CAGR : 7,0%

06 – 10 Developing Market CAGR: 14,4%

(ZAR in millions)

Source: Company filings and analyst presentation.

Note: Sanlam Personal Finance caters towards middle, affluent and self employed markets while

Sanlam Developing Markets caters entry-level markets in South Africa through Sanlam Sky

and Channel Life.

Sanlam FY10 PVNBP margins in South Africa by segment

Entry Level Group Mid-affluent Income


National

Population

(mm)

Population

growth

Working age

population (mm)

Median age

(years)

Literacy

rate

Urbanization

rate

GDP per

capita (US$)

Income per

capita (US$)

South Africa 48.8 0.8% 17.8 24.2 82.4% 60.7% 10 100 3 633

China 1 328.0 0.5% 807.3 37.6 90.9% 43.1% 6 140 1 804

India 1 148.0 1.6% 458.0 24.4 61.0% 29.5% 2 930 838

United States 304.1 0.9% 154.3 36.8 NA 81.7% 47 496 42 858

Indonesia 237.5 1.2% 112.0 27.5 61.0% 51.4% 3 820 1 774

Brazil 191.9 1.3% 93.7 27.6 88.6% 85.6% 10 320 6 285

Nigeria 146.3 2.1% 46.3 18.3 69.1% 50.6% 2 170 841

Russia 141.8 (0.4%) 75.8 37.6 99.4% 72.8% 15 940 7 863

Egypt 81.5 1.8% 24.7 23.4 91.0% 43.3% 5 440 1 920

United Kingdom 61.4 0.7% 31.2 39.2 99.0% 89.9% 35 760 41 341

Australia 21.0 1.2% 11.3 36.9 99.0% 88.7% 37 840 32 535

Source: Euromonitor (Data as of December 2008)

Demographics comparison

Source: EIU.

GDP per capita in South Africa (ZAR)

Source: EIU.

Income per capita in South Africa (ZAR)


Population in South Africa (in Millions) Ratio of working age to population above 60

Source: US Census Bureau.

Demand for savings and protection products is expected to increase as the number of working

people supporting an aging population decreases

2010 – 2020 CAGR

#1 (3.7%) China

(3.3%) Russia #2

(2.9%) Indonesia #3

(2.8%) Brazil #4

(2.7%) South Africa #5

2000A 2005A 2010E 2015E 2020E

South Africa India IndonesiaBrazil China Russia

2000 – 2010 CAGR

(2.0%) Brazil #1

(1.5%) China #2

(1.3%) India #3

(1.2%) Indonesia #4

(1.2%) South Africa #5

0.6% #6 Russia (1.9%) India #6

2.6

3.8

4.9 5.4 5.7

6.2

3.4

6.4

8.0 8.3 8.5 8.6

Source: US Census Bureau.a

45.1% 47.5%

49.1% 48.3% 48.3%


South Africa90.0%

Rest of

Africa10.0%

Life insurance penetration of

Sub-Saharan African countries (2009)

South Africa‟s contribution to

premium in Africa (2009)

Projected size of life insurance

market in Africa in 2010

Source: Swiss Re and AXCO. Note: Potential market size calculated assuming that those

countries above the targeted penetration rate will maintain its

current penetration rate.

Source: Swiss Re.

(US$ in billions)

2009A total premiums: US$ 34bn

2009A 2010E

32.6 32.6 35.5

37.9


06 – 10 Overall CAGR : 15,1%

06 – 10 Africa CAGR: 27,8%

(ZAR in millions)

Sanlam has achieved strong growth and profitability from its Sub-Saharan operations

Source: Company filings, analyst presentation.

South Africa includes SPF, Sky, Channel Life and Employee Benefits.

UK based on Sanlam UK.

Source: Company filings.

Note: Excluding South Africa.

06 – 10 Africa CAGR : 15,3%

06 – 10 Overall CAGR : 5,6%

(ZAR in millions)


* Note : excluding white Label


689 698

567

434

Number of markets present in Sub-Saharan Africa New business volumes*

1H10 PVNBP margins Value of new business

Sanlam’s Investment Case – AR2010 Slide # 11 Source: EIU, AXCO and Swiss Re.

Markets of potential interest Population and real GDP growth

Insurance penetration

Countries with

Sanlam operations

Tanzania

Namibia

Kenya Ghana Nigeria

Zambia

Malawi

Uganda

Botswana


EV Breakdown (FY2010) – R57,4bn Cross-sell opportunities

Source: Company filings. Source: Company presentation

EV : ZAR 50,2 billion

Source: Company presentation as of June 2009

Clients with a single provider (% untapped)

Traditional life assurance

Short-term insurance

Investment management

Other financial services


Amidst a difficult business environment, gross VNB grew by 11% yoy,

while average margins continued to rise

Slide # 13


Accelerated success towards providing a wide range of

client-centric solutions (reducing risk of portfolio)

2003 – R1 541m 2010 – R3 415m

Contribution to group net operating profit (Rm)


Intensified focus on costs in light of Sanlam’s expansionary mode

Group administration ratio (%)


Over R21bn of capital earmarked for redeployment since 2005

22.5

5.3

1.2

3.3 2.3

7.1

3.3


Continue to improve capital efficiency / optimisation :

Capital allocated to business units in a manner which will achieve

optimal ROGEV targets

Improve our understanding of implications of SAM (Solvency II)

framework

Pursue profitable growth opportunities, and value-adding strategic

initiatives, to efficiently redeploy discretionary capital

Pipeline of potential transactions (mainly India and Africa)

Consider capital redistribution options (prefer share buy-backs in

times of share price weakness)

Optimisation of capital remains a key priority for the Group


“De-risking” at Sanlam – shifting the „Efficient Frontier‟

Based on principles of optimal asset allocation

Obtaining similar returns, but at a lower level of risk

Long-term decision (not based on weaker equities)


Note : Returns based on 5-year averages - Special dividends (All-in returns for the SA Financial Index), Share

buy-back (Sanlam’s all-in returns), Return on new business (5 yr average IRR of new business strain)


SPF – Value of Lapses, Surrenders & Fully Paid-Ups (quarterly average - Rm)

R80m 2007 2008 2009 2010


Level of retention of maturing policies improved over 2009

Retention as percentage of maturities (SPF)

43,9% 45,9%


Sky - Number of NTUs, lapses and surrenders as % of in-force


Ongoing improvement in net life cash flows : Positive retail net life

cash flows & lower institutional net outflows

Net life cash flows (Rbn)

* Note : Annualised


VNB, positive experience variances and assumption changes has

generated R5.0bn of value (29% of VIF) over the past 5 years


17.6% pa

5.5% pa



1. Clear strategy (firm commitment to deliver on promises)

2. Profitable Growth opportunities

3. Diversification (reducing risk of overall portfolio)

4. Cost efficiency focus

5. Capital efficiencies

6. Prudence underpins quality and sustainability of base

7. Creation of shareholder value (share price performance)

8. Solid operational track-record (enhancing profitability and returns)

Sanlam’s Investment Case – AR2010 Slide # 28 Sanlam’s Investment Case – AR2010 Slide # 28

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