Sanlam Limited · JSE:SLM
Sanlam — H1 2009 Earnings Presentation
30 slides from Sanlam's earnings presentation, 2009
Slide 1: Sanlam Investor Presentation 2009 Interim Results
SANLAM INTERIM RESULTS 2009 Results Presentation 1 SANLAM INVESTOR PRESENTATION 2009 Interim Results Agenda Key Observations in 1H09 Financial Review Review of Clusters Strategic Focus Outlook
Slide 2: Key Observations in 1H09
2 Results Presentation SANLAM INTERIM RESULTS 2009 KEY OBSERVATIONS IN 1H09 Headlines for 1H09 Stable Stable Stable Continued Highlights New Bus New Bus Profits Net Inflows Volumes Margins Volatile Bond Yields, Economic Pressure Macro Themes Equity Currency & Recession on PDI Markets Commodities Pre
Slide 3: Headlines for 1H09 – Highlights
SANLAM INTERIM RESULTS 2009 Results Presentation 3 Headlines for 1H09 – Highlights Satisfactory and resilient operational performance Highlights in light of challenging conditions What Sanlam Delivered in 1H09 Earnings per share: Core earnings -2% Normalised headline earnings +34% Business Volumes:
Slide 4: Headlines for 1H09 – Macro Themes: Weakening Economy
4 Results Presentation SANLAM INTERIM RESULTS 2009 Headlines for 1H09 – Macro Themes Tough economic and financial conditions Macro Themes adversely impacting operating environment Weakening Economy Retail customer under strain Growth in retail sales, real GDP and personal disposable income 20 15 10
Slide 5: Lower Relative Equity Levels; Bond Yields & Interest Rates
SANLAM INTERIM RESULTS 2009 Results Presentation 5 Lower Relative Equity Levels Impact on investment values Pressure on asset-based earnings Major SA indices (re-based = 100) 120 110 100 90 80 70 60 50 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Fini Swix Alsi Bond Yields & Intere
Slide 6: Stronger Rand; Declining Commodity Prices
6 Results Presentation SANLAM INTERIM RESULTS 2009 Stronger Rand Negative impact on the GEV and operating results reported in respect of Group’s international businesses Basket of currencies relative to SA Rand (re-based = 100) 130 120 110 100 90 80 70 60 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Ju
Slide 7: Headlines for 1H09 – Business Specific: New Business Growth
SANLAM INTERIM RESULTS 2009 Results Presentation 7 Headlines for 1H09 – Business Specific Retail customer under pressure (deteriorating persistency), Business but operational resilience supported by diversified nature Specific of business and prudent practices New Business Growth Pressure on Middle-
Slide 8: Persistency
8 Results Presentation SANLAM INTERIM RESULTS 2009 Persistency Marginal deterioration in SPF Lapses, Surrenders & Fully Paid-Ups (Rm) Jan Feb Mar Apr May Jun 1H09 - actual month-by-month 1H07 monthly average 1H08 monthly average Persistency Sustained Quality of New Business Sanlam’s share of total i
Slide 9: Persistency: Net Life Flows and Retention
SANLAM INTERIM RESULTS 2009 Results Presentation 9 Persistency Positive Net Life Flows Ongoing improvement in net life cash flows : Positive retail net life cash flows & lower institutional net outflows Net life cash flows (Rbn) 4 4% 3 3% 2 2% 1,2% 1 -0,1% 1% 0 0% -2,7% -2,0% -1,3% -1 -1% -2 -2% -3
Slide 10: Focus on Cost Efficiencies; Financial Review
10 Results Presentation SANLAM INTERIM RESULTS 2009 Focus on Cost Efficiencies Intensified focus on costs in light of financial market crises and recessionary environment Group administration ratio (%) 33,6% 31,4% 29,1% 28,4% 27,8% 27,1% 26,8% 2003 2004 2005 2006 2007 2008 1H09 SANLAM GROUP Financia
Slide 11: Changes in Key Assumptions; Salient features
SANLAM INTERIM RESULTS 2009 Results Presentation 11 Changes in Key Assumptions Change in asset mix (10% reduction in equity exposure) – Release R900m in excess capital – Increase CoC, R313m reduction in VIF RDR down from Jun-08 (impact on relative VNB & margins) – 150 bps (SPF) – 230 bps (Sky) RDR u
Slide 12: Key Financial Driver; Management Focus on ROGEV
12 Results Presentation SANLAM INTERIM RESULTS 2009 Key Financial Driver Growth in value per share Long term target : Cumulative Return on Group Equity Value to exceed cost of capital (RF + 300bp) by >100bp Annual target : Adjusted Return on Group Equity Value to exceed cost of capital (RF + 300bp)
Slide 13: Business Flows
SANLAM INTERIM RESULTS 2009 Results Presentation 13 Business Flows Net Flows Rand Million 1H09 1H08 ∆ 1H09 By business Personal Finance 14 700 15 824 (7%) 3 411 Developing Markets 1 316 1 214 8% 610 Sanlam UK 955 807 18% (111) Institutional Cluster 25 550 23 305 10% 2 571 Santam 6 179 6 085 2% 1 676
Slide 14: Value of New Covered Business; Investment Flows
14 Results Presentation SANLAM INTERIM RESULTS 2009 Value of New Covered Business Rand Million 1H09 1H08 ∆ Value of New Business 276 290 (5%) Personal Finance 135 160 (16%) Developing Markets 136 113 20% Sanlam UK - 3 (100%) Employee Benefits 5 14 (64%) Net of minorities 243 250 (3%) New Business Ma
Slide 15: Net Operating Profit
SANLAM INTERIM RESULTS 2009 Results Presentation 15 Net Operating Profit Rand Million 1H09 1H08 ∆ Retail cluster 789 793 (1%) Personal Finance 691 678 2% Developing Markets 85 78 9% Sanlam UK 13 37 (65%) Institutional cluster 388 404 (4%) Investment Management 264 287 (8%) Employee Benefits 65 83 (2
Slide 16: Income Statement; Group Equity Value
16 Results Presentation SANLAM INTERIM RESULTS 2009 Income Statement Rand Million 1H09 1H08 ∆ Net operating profit 1 234 1 334 (7%) Investment income 555 579 (4%) Core earnings 1 789 1 913 (6%) Cents per share 87,5 89,7 (2%) Net investment surpluses 23 (447) Net equity accounted headline earnings 10
Slide 17: Composition of Group Equity Value; Discretionary Capital
SANLAM INTERIM RESULTS 2009 Results Presentation 17 Composition of Group Equity Value R21,72 per share Discretionary Discretionary capital & Other Capital & Other 7% 7% SPF Short-term 46% Value of insurance in-force 13% 30% SCM 1% SEB 11% Other Group Operations SI 31% 12% SUK SDM FV of Covered 3% 7%
Slide 18: Return on Group Equity Value; Group Solvency
18 Results Presentation SANLAM INTERIM RESULTS 2009 Return on Group Equity Value Rand Million Jun 2009 Jun 2008 Covered business 770 5,5% 998 7,1% Personal Finance 446 4,6% 490 4,9% Developing Markets 86 6,2% 180 17,4% Sanlam UK 4 1,2% 139 32,5% Employee Benefits 234 8,6% 189 7,3% Other operations 7
Slide 19: Summary; Business Clusters Operational Review
SANLAM INTERIM RESULTS 2009 Results Presentation 19 Summary Strategic objectives are being achieved: Business volumes: – Satisfactory new business volumes (+3%), net cash inflows – Maintained value of new business & improved margins (+6bps) Profitability: Commendable operating profit result Operatio
Slide 20: A Portfolio of Diversified Assets; Retail Cluster
20 Results Presentation SANLAM INTERIM RESULTS 2009 A Portfolio of Diversified Assets Discretionary capital & Other 7% Short-term 13% SCM 1% SEB SPF 11% 46% SI 12% SUK SDM 3% 7% 1. Retail Cluster (SPF, SDM & SUK) SPF 46% SUK SDM 3% 7% Stability & Growth (Optimise Capital)
Slide 21: Sanlam Personal Finance; Sanlam Developing Markets
SANLAM INTERIM RESULTS 2009 Results Presentation 21 Sanlam Personal Finance (SPF) “Satisfactory performance in difficult business conditions” Overall Snapshot Profits marginally up 1H09 %∆ Admin costs contained Total sales down 7%, risk up 7% Net Operating Profit ▲ R691m +2% VNB 16% lower, margins 1
Slide 22: Sanlam UK; Institutional Cluster
22 Results Presentation SANLAM INTERIM RESULTS 2009 Sanlam UK “Performance impacted by challenging environment” Overall Snapshot Economic conditions impact 1H09 %∆ volumes and AUM Net Operating Profit ▼ R13m -65% MI – satisfactory performance in difficult environment New business flows ▲ R955m +18%
Slide 23: Sanlam Investments; Focus on Investment Performance
SANLAM INTERIM RESULTS 2009 Results Presentation 23 Sanlam Investments (SI) “Resilient performance, notwithstanding lower asset levels” Overall Snapshot Lower average asset levels feeding 1H09 %∆ into lower profits Net Operating Profit ▼ R264m -8% Businesses remain sound Improving investment perform
Slide 24: Sanlam Employee Benefits; Sanlam Capital Markets
24 Results Presentation SANLAM INTERIM RESULTS 2009 Sanlam Employee Benefits (SEB) “Steady progress in challenging conditions” Overall Snapshot Group Risk remains the SEB anchor 1H09 %∆ Lower market values impacted SSS’s Net Operating Profit ▼ R65m -22% fee income Admin migration on track (97% of Ne
Slide 25: Short-term Insurance (Santam)
SANLAM INTERIM RESULTS 2009 Results Presentation 25 3. Short-term Insurance (Santam) Growth (Optimise Capital) Short-term 13% Santam “Pressure on underwriting results” Overall Snapshot Slow premium growth in line with 1H09 %∆ industry Net Operating Profit* ▼ R118m -37% Underwriting margins under pre
Slide 26: Capital Optimisation; Discretionary Capital
26 Results Presentation SANLAM INTERIM RESULTS 2009 4. Capital Optimisation Utilise Discretionary capital & Other 7% Discretionary Capital Ongoing focus on efficient utilisation of capital in 2009 … Improve capital efficiency / optimisation: – Capital allocated to business units in a manner which wi
Slide 27: Strategic Focus for 2009 and Beyond
SANLAM INTERIM RESULTS 2009 Results Presentation 27 Summary of 1H09 performance Strategic diversification and the effect of prudent practices and assumptions shielded the Group in the severe economic downturn Life insurance businesses show their resilience: – Value of new business and margins broadl
Slide 28: Goal and Specific Focus Areas
28 Results Presentation SANLAM INTERIM RESULTS 2009 Goal Delivering sustainable growth South Africa: Fully optimise and expand our diversified financial services presence: Improve operational efficiency and performance Optimise the capital structure Pursue selective add-on or diversification opportu
Slide 29: Outlook
SANLAM INTERIM RESULTS 2009 Results Presentation 29 OUTLOOK Outlook for Remainder of 2009 Business Environment : Uncertainty and volatility in global financial markets likely to continue, although there are some early signs of recovery / stability Tough economic climate reflecting in consumer demand
Slide 30: Notes
30 Results Presentation SANLAM INTERIM RESULTS 2009 Notes