Transcript Investor Presentation

investor presentation
2014 interim results
4 September 2014
Insurance
Financial Planning
Retirement
Investments
Wealth
agenda
Operating environment
Strategic overview
Financial review
Priorities and outlook
2014 interim results
agenda
operating environment
fundamentals remain weak
operating environment
Challenging operating conditions
Slow growth in global demand
Weak economic growth in SA
Industrial action, in particular platinum mines
SA consumer under pressure
SA economy
Growth
Interest rates
Equity markets
Currencies
Africa/India/Malaysia
2014 interim results
operating environment
sa economy
sub-2% growth outlook
Growth in real retail sales, GDP and PDI (%)
14
11
8
5
2
-1
-4
-7
Growth y-o-y in real retail sales
2014 interim results
Growth y-o-y in real GDP
Growth y-o-y in real PDI
operating environment
sa interest rates
higher LT rates had negative impact on RoGEV and VNB growth
SA 9-year bond yields and short-term interest rates
10.0%
Impact on growth:
Net VNB -4%
New business margin
-3%
9.0%
+70bps
8.0%
7.0%
6.0%
5.0%
4.0%
9-year
2014 interim results
Short term
Avg Short term
operating environment
sa equity and bond markets
Higher average AuM (average Alsi up 20%)
145
140
135
130
11,8%
125
120
115
110
2,3%
3,4%
105
100
-1,3%
95
All Share rebased
2014 interim results
All Bond rebased
Alsi avg
operating environment
average exchange rate
benefiting non-sa results
30%
Contribution to growth:
Net result from financial
services 5%
26.2%
25%
New business volumes 2%
21.2%
Net VNB 1%
20%
16.4%
15%
10%
7.6%
5.3%
5%
0.2%
0%
Europe
2014 interim results
United Kingdom
USA
Botswana
India
Rest of Africa
operating environment
rest of africa/india/malaysia
Botswana
Resilient economy and consumer base
Rest of Africa
GDP growth prospects exceed SA, despite slow growth in global
demand
Ghana economy struggling; devaluation of currency
India
Below-trend economic growth
Buoyant equity market
Positive environment post elections
Malaysia
Growth prospects remain in place
2014 interim results
operating environment
strategic delivery
value delivered
strategic focus remains unchanged
2014 interim results
Growth /
Operational
Efficiency
Capital
Efficiency
Returns
(ROGEV)
maximise shareholder return
Net Business Flows
Diversification
Operational Efficiency
Optimal Application
Strategic Investments
Return of Excess
strategic delivery
core strategic objectives
progress in all areas during 2014, particularly growth markets
Delivery of sustainable
growth
International
Creating a platform for
future growth
2014 interim results
Maximising return on Investment in existing business
Efficient and effective management
Sourcing new growth opportunities
Identification of core markets for growth & expansion
Effective capital management
South Africa
strategic delivery
top-line earnings growth
financial performance in 1H2014
Earnings per share
Net operating profit per share increased by 43%
Normalised headline earnings per share up 27%
Business volumes
New business volumes increased by 8% to R82bn (excl white label)
Net fund inflows of R19bn (excl white label), up 40%
Net life VNB up 7% to R626m
Net VNB margin of 2,68% – maintained on per product basis
Group Equity Value of 4 277 cents per share
Annualised RoGEV per share of 18% (15,3% adjusted)
2014 interim results
strategic delivery
operational efficiencies
profitable volume growth
Gross VNB grew by 9%; 13% on comparable economic basis
800
3.2%
700
2.7%
600
2.2%
500
1.7%
400
1.2%
300
0.7%
200
0.2%
100
0
-0.3%
1H06
1H07
South Africa
2014 interim results
1H08
Africa
1H09
1H10
Other International
1H11
1H12
1H13
1H14
Margins - rhs
strategic delivery
operational efficiencies
focus on quality
Persistency – SA middle-income market
Lapses, surrenders & fully paid-ups as % of in-force per half year
5%
4%
4.8%
4.2%
4.2%
3.9%4.0% 3.9%
3.9%
3.8%
3.8%
3.7%
3.6%
3.6%
3.4%
3.4%
3.0%2.9%2.9%
2.8%2.9%2.7%2.8%2.9% 2.9%
3%
2%
1%
0%
2003
H1
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
H2
2014 interim results
strategic delivery
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%
14.1%14.5%
15%
12.7%12.7%
10%
11.4%11.1% 11.1%
11.3%
10.4% 10.0%11.0%
5%
0%
2007
H1
2008
2009
2010
2011
2012
2013
2014
H2
2014 interim results
strategic delivery
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
2011
2014 interim results
2012
2013
1H14
Rolling 5 Yr
2011
2012
2013
1H14
strategic delivery
operational efficiencies
experience variances
Focus on quality, costs + prudence = consistent positive experience
1,200
5.0%
4.5%
1,021
1,000
4.0%
3.5%
800
3.0%
681
636
600
2.5%
555
477
468
400
277
241
288
2.0%
1.5%
278
1.0%
200
142
138
0.5%
0
0.0%
2003
2004
R'million
2014 interim results
2005
2006
2007
2008
2009
2010
2011
2012
2013
1H14
% of VIF (rhs)
strategic delivery
diversification
diversified earnings base
Group Equity Value
Admin, health & other
8%
Credit & banking
14%
Credit & banking
8%
Investment
management
14%
Short-term insurance*
17%
Net operating profit
Admin, health & other
3%
Investment
management
13%
Life business
53%
Short-term
insurance*
13%
Life business
57%
* General insurance
2014 interim results
strategic delivery
diversification
international positioning
RSA based
Rest of Africa
Botswana
Ghana
Kenya
Lesotho
Malawi
Mozambique
Namibia
Nigeria
Rwanda
South Sudan
Swaziland
Tanzania
The Gambia
Uganda
Zambia
2014 interim results
South-East Asia
India
Malaysia
Philippines
Developed markets
UK / Ireland
Switzerland
Australia
USA
Developed Markets
Emerging Markets - Direct presence
Emerging Markets - Indirect presence
strategic delivery
diversification
growth markets delivering value
Net VNB – 1H03 (R100m)
Namibia
2%
Net VNB – 1H14 (R626m)
Rest of Africa
8%
Other international
3%
Botswana
8%
Namibia
4%
SA Traditional
98%
SA Entry-level
22%
SA Traditional
55%
2014 interim results
strategic delivery
diversification
increasing contribution from growth markets
Contribution to group net operating profit
1H03 – R756 million
NamibiaOther international
1%1%
1H13 – R2 409 million
India/Malaysia
7%
Rest of Africa
2%
Botswana
4%
India/Malaysia
7%
Rest of Africa
1%
Botswana
5%
Other international
6%
SA Traditional
98%
Other international
6%
Namibia
5%
Namibia
5%
SA Entry-level
11%
1H14 – R3 461 million
SA Entry-level
11%
SA Traditional
65%
SA Traditional
65%
2014 interim results
strategic delivery
diversification
contribution from businesses outside of South Africa
Net operating profit
Net VNB
Group Equity Value
82%
76%
77%
76%
18%
20%
18%
6%
1H14
South Africa
2014 interim results
16%
14%
6%
1H13
81%
77%
1H14
Other emerging markets
7%
4%
3%
1H13
13%
1H14
6%
1H13
Developed markets
strategic delivery
capital efficiency
optimising capital base
Final SAM specifications expected towards end of the year
SAM QIS3 results indicate that sufficient capital is allocated to life
operations
R1,8 billion of investments in growth opportunities finalised during 1H14
Discretionary capital of R3,3 billion earmarked for investment in growth
opportunities
2014 interim results
strategic delivery
capital efficiency
discretionary capital
Balance 1 January 2014
Investments
SE Asia
Rwanda
Botswana
Rest of Africa
SEM/Santam co-investment
Developed markets
South Africa
Investment return & other
Balance 30 June 2014
2014 interim results
4 000
(1 761)
(1 258)
(255)
(95)
(81)
43
(25)
(90)
1 061
3 300
strategic delivery
sanlam group
financial review
changes in presentation / key assumptions
Accounting policies & basis of presentation
No change from 2013
Changes in RDR: (Sanlam Life 11,0%)
30 bps up from December 2013
70 bps up from June 2013
Negative impact on valuations and RoGEV
2014 interim results
financial review
salient features
Group Equity Value*
Annualised RoGEV per share
Annualised RoGEV per share (adjusted)
CAR cover (Sanlam Life)*
Net operating profit
Normalised Headline earnings
New business volumes +
Net fund flows +
New Life business EV (net)
New Life EV margin
cps
%
%
R mil
cps
R mil
cps
R mil
R mil
R mil
%
2014
2013

4 277
18,0
15,3
4,4
3 461
169,2
4 393
214,8
81 833
19 222
626
2,68
4 121
14,3
15,1
4,5
2 409
118,1
3 449
169,1
75 796
13 746
587
2,83
4%
44%
43%
27%
27%
8%
40%
7%
* Comparative information as at 31 December 2013
+ Excludes white label
2014 interim results
financial review
sanlam personal finance
R million
New business flows
Sanlam Sky
Individual Life
Glacier
Net flows
Sanlam Sky
Individual Life
Glacier
2014 interim results
2014
2013

23 662
474
5 821
17 367
19 239
503
5 368
13 368
23%
-6%
8%
30%
8 087
1 307
(859)
7 639
6 564
1 410
(701)
5 855
financial review
sanlam personal finance
2014
2013

Value of new life business
Sanlam Sky
Individual Life
Glacier
Comparable economic basis
437
135
228
74
467
450
146
240
64
450
-3%
-8%
-5%
16%
4%
New business margin
Sanlam Sky
Individual Life
Glacier
Comparable economic basis
2,73%
7,62%
2,59%
1,37%
2,89%
3,07%
7,46%
2,89%
1,45%
3,07%
R million
2014 interim results
financial review
sanlam personal finance
2014
2013

Gross operating profit
Sanlam Sky
Individual Life life and investments
Glacier
Personal loans
Other
2 439
518
1 571
171
148
31
1 941
360
1 267
122
157
35
26%
44%
24%
40%
-6%
-11%
Net operating profit
1 763
1 409
25%
Group Equity Value*
RoGEV (six months)
36 976
8,7%
35 666
6,8%
R million
* Comparative information as at 31 December 2013ite label
2014 interim results
financial review
sanlam emerging markets
2014
2013

New business flows
Namibia
Botswana
Rest of Africa
India/Malaysia
4 030
1 541
1 137
827
525
5 933
4 263
871
436
363
-32%
-64%
31%
90%
45%
Net fund flows
Namibia
Botswana
Rest of Africa
India/Malaysia
1 762
343
478
814
127
607
(419)
460
530
36
196
7,30%
136
6,52%
R million
Value of new life business
Margin
2014 interim results
44%
financial review
sanlam emerging markets
2014
2013

1 129
254
348
108
432
(13)
697
112
276
76
244
(11)
62%
127%
26%
42%
77%
-18%
Net operating profit
624
391
60%
Group equity value*
RoGEV (six months)
12 967
12,3%
10 189
22,0%
R million
Gross operating profit
Namibia
Botswana
Rest of Africa
India/Malaysia
Corporate
* Comparative information as at 31 December 2013
2014 interim results
financial review
sanlam investments
R million
2014
2013
Net investment business flows
Investment management SA
Wealth management
International
Capital management
4 871
3 883
(457)
1 346
99
2 959
(810)
2 457
1 312
-
New life business
Employee benefits
Sanlam UK
4 389
952
3 437
3 644
1 157
2 487
Net life business
1 491
1 235
64
1,16%
53
1,13%
Value of new life business
Margin
2014 interim results

20%
-18%
38%
21%
financial review
sanlam investments
2014
2013

Gross operating profit
Investment management
Employee benefits
Capital management
982
605
216
161
687
451
174
62
43%
34%
24%
160%
Net operating profit
727
523
39%
19 267
7 268
11 999
11,2%
17 971
6 901
11 070
9,2%
R million
Group Equity Value*
Covered business
Other
RoGEV (six months)
* Comparative information as at 31 December 2013
2014 interim results
financial review
santam
2014
2013

8 459
8 096
4%
Gross operating profit
Underwriting surplus
Working capital & other
871
626
245
296
101
195
194%
520%
26%
Net operating profit
353
128
176%
7,4%
1,3%
13 236
7,0%
12 644
2,9%
R million
Net earned premiums
Underwriting margin
Group Equity Value*
RoGEV (six months)
* Comparative information as at 31 December 2013
2014 interim results
financial review
business flows
R million
Gross
2014
2013
Net

2014
2013
by business
Personal Finance
Emerging Markets
Sanlam Investments
Santam
23 662
4 030
45 682
8 459
19 239
5 933
42 528
8 096
23%
-32%
7%
4%
8 087
1 762
6 362
3 011
6 564
607
4 194
2 381
by licence
Life insurance
Investment
Short-term
17 536
55 251
9 046
14 956
52 436
8 404
17%
5%
8%
6 137
9 979
3 106
5 159
6 160
2 427
Total
81 833
75 796
8%
19 222
13 746
* Excludes white label
2014 interim results
financial review
value of new covered business
R million
Value of New Business
2014
2013

Margin
2014
2013
Personal Finance
437
450
-3%
2,73%
3,07%
Emerging Markets
196
136
44%
7,30%
6,52%
Employee Benefits
42
30
40%
2,30%
1,45%
Sanlam UK
22
23
-4%
0,59%
0,87%
Total
697
639
9%
2,88%
2,98%
Net of minorities
626
587
7%
2,68%
2,83%
Comparable economic basis
650
587
11%
2,77%
2,83%
2014 interim results
financial review
net operating profit
2014
2013

1 763
1 409
25%
Emerging Markets
624
391
60%
Sanlam Investments
727
523
39%
Santam
353
128
176%
(6)
(42)
86%
3 461
2 409
44%
R million
Personal Finance
Corporate & other
Total
2014 interim results
financial review
income statement
2014
2013

Net operating profit
3 461
2 409
44%
Per share
169,2
118,1
43%
Net investment return
1 122
1 150
-2%
Other
(190)
(110)
-73%
Normalised headline earnings
4 393
3 449
27%
Per share
214,8
169,1
27%
54
25
Headline earnings
4 447
3 474
28%
Per share
220,2
171,4
28%
R million
Fund transfers
2014 interim results
financial review
group equity value
R million
Group operations
Personal Finance
Emerging Markets
Investments
Santam
Discretionary & Other
TOTAL
cps
Equity Value*
2014
2013
RoGEV+
Rm
%
82 446
36 976
12 967
19 267
13 236
76 470
35 666
10 189
17 971
12 644
7 282
3 107
1 258
2 031
886
9,5%
8,7%
12,3%
11,2%
7,0%
5 142
7 939
6
0,1%
87 588
84 409
7 288
8,6%
4 277
4 121
356
8,6%
Adjusted return
7,4%
Return target
5,9%
* Comparative information as at 31 December 2013
+ Return for six months
2014 interim results
financial review
group equity value earnings
R million
Actual
Adjusted
Net value of new business
Existing business
Expected return on VIF
Operating experience variance
Operating assumption changes
626
2 260
1 659
477
124
2 886
497
(3)
(200)
3 180
765
3 945
3 343
7 288
626
2 260
1 659
477
124
2 886
2 886
576
3 462
2 765
6 227
Inv variances in-force
Tax changes
Economic assumption changes
Return on net worth
EV earnings
Non-life
GEV earnings
2014 interim results
(497)
3
200
(294)
(189)
(483)
(578)
(1 061)
financial review
summary
Delivery on strategy:
Shareholder value
Cumulative RoGEV per share exceeds hurdle
Profitable growth
Strong growth in most markets and segments
Net VNB +11% on comparable basis
Net operating profit up 29% on comparable basis
Diversification
Increasing contribution from growth markets
Capital management
Investments in growth markets
2014 interim results
financial review
rogev versus target
Out perform cumulative growth target of long-bond rate + 400bps since
listing
1200
1000
800
600
400
200
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Target
2014 interim results
Cost of Capital (RFR + 300bps)
Actual
financial review
priorities for 2H14
sanlam personal finance
Focus on sales growth and maintain margins on same discount rate
Grow adviser force in all market segments
Product innovation, particularly recurring premiums
Improve Sanlam Sky broker channel performance
Increased focus on persistency
Continue focus on operational efficiency - manage costs
Focus on transformation and employer of choice
Meet regulatory obligations
2014 interim results
priorities for 2014
sanlam emerging markets
Focus remains on Africa, India and South-East Asia
Continue focus on top-line growth, efficiencies and capital optimisation in
current operations
Bed down new acquisitions in Rwanda and Malaysia
Unlock Shriram Capital synergies
Bed down IT implementations
Delivery on revenue diversification initiatives
Bolt-on transactions/deepening existing partnerships in Africa, India and
Malaysia
Strong deal-making focus to remain the leading player in Africa
Continuously refine organisational capacity to support growth
Governance, ethics and values
2014 interim results
priorities for 2014
sanlam investments
Maintain consistent upper quartile investment performance
Grow market share in higher margin areas
Institutional fund flows
Retail fund flows
Large mandates from promising EB pipeline
Provide appropriate, innovative and cost effective solutions to clients from
across SI value chain
Further leverage competitive active and passive management capabilities
Accelerate efforts to grow a market leading African Investments proposition
Continued focus on collaboration and efficiencies across businesses
2014 interim results
priorities for 2014
santam
Deliver on diversified growth
Market diversification (specialist business, Santam Re, investment in
SEM partners)
Continued growth at MiWay
Increased emphasis on quality of risk pool
Ongoing segmented premium rate increases
Underwriting actions to rectify unprofitable accounts
Drive efficiency through value chain
Focus on cost management and strategic sourcing to counter rand
weakness
Ongoing implementation of key strategic projects in Santam Commercial
and Personal
2014 interim results
priorities for 2014
outlook
outlook for 2014
Weak SA environment will continue to hamper new business growth
Some market volatility likely in second half of 2014
Focus on bedding down new acquisitions
Number of investment opportunities under consideration
Compliance to regulatory changes
2014 interim results
outlook
questions
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