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UBS GLOBAL INSURANCE CONFERENCE

Growth Prospects in Emerging Markets

Sanlam (CEO – Johan van Zyl) : June 2009

Agenda

• Group Overview

• Sanlam in the Context of the SA Market

• Strategy and Growth opportunities

o Tapping into Existing Client base (Mass Affluent Market)

o Exploring New Growth Markets (Lower-income Market)

o Exploring New Distribution Channels

o Writing Profitable New Business

• Strategy & Outlook

GROUP OVERVIEW

Our 91-year History

The Extent of our Business

• Total assets under management = R409 billion (£31bn)

• Total new business received = R100 billion (£7.5bn)

• Operating profit before tax = R4.3 billion (£323m)

• Market Capitilisation = ~ R37 billion (£2.8bn)

• Personnel = 9,000

Core Purpose & Vision

The Leader in Wealth Creation

Sanlam‟s core objective is the achievement of a

sustainable, superior rating to deliver the

highest value to shareholders over the long-term

Transforming Sanlam from a mutual insurer into

a world-class diversified Financial Services Group providing

a wide range of client-centric solutions in retail and institutional

markets in both South Africa and other targeted countries

Sanlam Operational Structure

Retail Cluster Institutional

Cluster

Short-term

Insurance

Cluster

Net operating result:

R 1,757m

New bus volumes:

R36,014m

Net operating result:

R 737m

New bus volumes:

R51,957m

Net operating result:

R 439m

New bus volumes:

R12,165m

Net operating result:

(R 131) mill

Corporate &

Other

Sanlam

Limited

Solution‟s Offering in Retail & Institutional Sectors

Retail

• Investments

• Savings

• Risk products

• Home Loans

• Trusts and Estate planning

• Private Client Portfolios

• Stock-broking

• Short-term insurance

• General Loans

• Health Administration

Institutional

• Pension Fund Administration

• Group Risk provision

• Group Investments and Annuities

• Asset Management – Single and Multi-

Manager

• Private Equity

• Niche debt and equity financial

engineering solutions

• Short-term insurance

• Hedge Funds (International)

Current Geographical Footprint

Current

“LIFE” IN SA

Striking Parallels between Developed Market Economies

High Penetration Rate in SA

Italy

Oceania

North America

Brazil

Venezuela

GermanyLatin Am. &

Caribbean

Europe

Mexico

UK

South Africa

France

South Korea

Japan

PR ChinaAfrica

Asia World

0

2

4

6

8

10

12

14

16

1000 10000 100000

Source: Swiss Re, Sigma No. 3/2008

Life P

enetr

ation (

%G

DP

)

GDP per Capita (log scale)

Market share of SA retail single new

business premiums

Highly Concentrated Market in SA

Remainder

10%

Sanlam

15%

Old Mutual

23%

Liberty

23%

Metropolitan

7%

Momentum

13%

Discovery

9%

Market share of SA retail recurring

new business premiums

Remainder

20%

Discovery

0%

Momentum

11%

Metropolitan

6%

Liberty

24%

Old Mutual

17%

Sanlam

22%

Summary of SA Life Market (Mass Affluent)

• The high premium-to-GDP ratio has often been used to suggest that

SA has high penetration levels and is a mature market

• A large proportion of premium income is transfer business between

life insurers instead of new savings, or transfer from other financial

services firms

• Sizeable portion of SA “life insurance” is management of existing

assets and drawdown / annuity products

• The ratio of retirement assets to GDP is running at around 80%

which is comparable with developed countries where private sector

pension plans or private pensions play a key role

STRATEGY & GROWTH OPPORTUNITIES

A Sanlam Case Study

Finding Growth in a Mature Market

Global Drivers of Change

From a global perspective, the following are among the key trends

impacting life insurers...

• Many developed-insurance markets have become saturated

• Customers are falling into very distinct behavioural segments

• Multi-distribution is on the rise as networks specialise and evolve

• Bancassurance: A successful network, however its enviable position

could still be shaken by market forces

• Searching for future growth, with a spotlight on developing markets

• Regulatory pressures, driven by increased consumerism

• Transformation (SA trend only)

Rationalisation and Drivers of Change at Sanlam

• Growth based on revenue and profit enhancement:

o Client centricity (focusing on a broader range of solutions)

o Changing consumer needs (increased consumerism)

o Cross-pollination opportunities

o Need for entering new growth markets

o Focus on multi-distribution initiatives

• Improving overall efficiencies:

o Diversifying the total service portfolio to reduce risk

o Cost focus

o Capital efficiency focus

• Transformation and People

Diagrammatic Representation of Strategy

• Maximising Returns for Shareholders

• Focus on Client-Centric Solutions

Returns

(ROGEV)

Growth /

Earnings

Operational Efficiencies

Diversification

Net Business Flows

Capital

Efficiency

Optimal Application

Strategic Investments

Return of Excess

Focus on Profitable Growth

Key drivers in maximising Sanlam‟s operational performance and

delivering sustainable, profitable growth:

• Management focus – New business growth, net flows, cost

management

Returns

ROGEV

Growth /

Earnings

Operational Efficiencies

Diversification

Net Business Flows

NEW GROWTH OPPORTUNITIES

i) Tapping into Existing Client Base

(Mass Affluent Market)

Consumerism & Increasing Share of Wallet

Client

Centricity

Integrated services & a shift from product towards

needs-orientated perspective

Listening to What our Clients Want

Changing Consumer Demands Example of Flows Moving Off-Balance Sheet

0.44

0.63

0.870.79 0.74 0.75

1.01

1.65

1.871.79

2.11

1.77

0

100

200

300

400

500

6001

99

7

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

*

Rb

n

0.0

0.4

0.8

1.2

1.6

2.0

2.4

tim

es

Mutual Funds Life insurance - Premiums received Mutual Funds vs Life (%)

Development of SA savings industry: Total new business flows

Source: SARB *Note: Life sales on an annualised basis for 9-months ended Sept-08

Sanlam Adapting to Changing Demands Building Capacity to Exploit New Trends

139 11 11

1419 1818

27

43

51

66

83 824.48

2.91

1.47

4.04

4.55 4.674.48

0

10

20

30

40

50

60

70

80

90

100

2002 2003 2004 2005 2006 2007 2008

Rb

n

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

tim

es

Life Non-life Ratio of non-life to life

Grow alternative revenue sources: Sanlam Group New business flows

CAGR 2002-2008 (+22%)

Retail

Clients Medical

Car &

house

hold

cover

Wills &

trusts

Home

loan

Financial

Education

Savings

& Invest-

ment

Short-

term

Education

provision

Medium

term

credit

Retire-

ment

Banking/

Trans-

actional

Risk

cover

Wealth Management

Life-

style

Personal

Cover

Divestment from Absa,

allows Sanlam to

operate directly in

these banking-related

markets

Institutional

Clients

Specialist:

International

Capital

Markets

Employee

Benefits

SPE

SIM

Blue

Ink

SSS

Sanlam

Proper-

ties

Simeka

SAMI

SEB

Risk

SIM

EM

incl Nam

SUS

SMMI Cpt &

Ldn

Coris

SCI

Octane

SPI

SIM

Global

SCM

Specialist: SA

Traditional IM:

International

Traditional IM:

SA

Cross Pollination Opportunities Creating the Ability to Cross-sell within the Group

Traditional

life assurance

Investment

management

Other financial

services

Short-term

insurance

Cross Pollination Opportunities (continued…)

Untapped Opportunities within the Group

77%

55%52%

45%

37%

30%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

SPF (Life only) SCI Santam Wills Glacier SHL

mil

lio

n

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

No. of total clients - lhs % of clients with only 1 product (ie untapped potential) - rhs

Cross-sell Potential at SPF: Clients with a single provider (% untapped)

SPF‟s life clients have the largest

untapped potential of 1.3m clients

NEW GROWTH OPPORTUNITIES

ii) Tapping into New Markets

(Lower-income Markets)

SA, Rest of Africa & India

a) Growth Opportunities in South Africa

Entry-level Market (ELM) and Black Diamonds

Entry-level Market in SA

ELM

87%

Affluent

1%Middle-

income

12%

Entry level market (ELM)

• Current size of ELM: 18-20 m people

• Only 20-30% of ELM have an insurance-related product

Growth Potential – Size of RSA ELM

Too poor

4,9m

No regular

income

5,4m

No need

0,4m

Potential

2,1m

Has funeral/

burial insurance

5,2m (30%)

Does not have

12,8m (70%)

Has Access

2,5m

No Access

10,3m Total Market

18m

Black Diamonds in SA

Black emerging middle-class: Black Diamond

• 3m Black Diamonds at 3Q08 (+15%)

• Spending power increased to R250bn in 2008 (40% of SA)

• Accounts for 67% of total black spending power

• Black Diamond spending power now equals that of total White

spending

Source: UCT Unilever Institute

RSA Strategic focus going forward

• Improved regional penetration in South Africa

• Building our multi-channel distribution strategy

• Value for money client offerings

• Leverage more off the Sanlam brand

• Operational efficiencies to be improved (NTU, lapse rates, costs)

• Ongoing improvement in client service (e.g. Ombud complaints)

• Addressing government‟s social reform initiatives

b) Growth Opportunities in the Rest of Africa

Strong Growth for at least the next 3-5 years

Growth Potential – Presence in Rest of Africa

Key Start Population Policies

SA (ELM) 1982 45 m 933,000

Botswana 1995 2 m 250,000

Kenya 2000 37 m 100,000

Ghana 2000 23 m 95,000

Zambia 2002 12 m 30,000

Tanzania 2005 39 m 8,000

Rest of Africa – Prospects / Opportunities

• Why should we be in rest of Africa?

o Low insurance penetration (3%) and less competition

o Diversification of our business

o Strong economic growth (but slowdown recently)

o Higher margins available

o Does not consume excessive time (small support team)

• Individually small, but collectively meaningful

Rest of Africa – Key Challenges

• Competition for wallet from micro lenders

• Impact of economic crises (commodity driven economies) –

persistency

• Insurance skill shortages – management, technical, operational

• Premium collection capabilities – many countries cash driven

• Evolution of legislation and regulations

• Increase in competition – more appetite for Africa

• But opportunity to help to shape the industries

Rest of Africa – Key Focus Areas

• More focus on bancassurance & credit providers

• Expansion of distribution channels

• Group life business and credit life

• Overall product diversification

• Focus on operational efficiencies

o Distribution capabilities

o Quality of business (lapses, NTU‟s)

o Cost efficiencies

• Improved support out of South Africa

• Further expansion into Africa (eg Nigeria)

c) Growth Opportunities in India

Meaningful Contribution to Growth in >+5 years

Contribution to emerging market life real premium growth,

1998 – 2007

Source: National Insurance Authorities, Swiss Re Economic research & Consulting

Growth Potential – India Example: The Advantages of India – Insurance linkages

The country is looking at an annual

GDP growth of 7-8% (medium term)

Insurance penetration of 4.4%

following entry of foreign players

High expected growth in personal

income and aspirations

Need for strong financial planning

Markets in most developed countries

have saturated

This makes the Indian market more

attractive for global insurance majors

Huge opportunity to tap semi-urban

and rural markets

There exists a strong urban and rural divide with regard to savings

Over 1 Billion Indians – Strong economic growth

Majority of the population does not

have adequate financial protection

Market penetration in developed

markets: avg 5.2 policies per client

Low penetration levels in India: 1.3

policies (life and non-life) per client

Successful Tie-up with Shriram

• 26% Holding in Shriram (with the right to go to 49%), giving Sanlam

access to 19,000 registered agents + 10m client base

• After 1st three years of operations – growth in new business levels

on par with competitors, but lowest cost producer (30% cost to APE)

• Only 2 private foreign start-ups have been cash positive from an

earnings perspective (Shriram is one of them)

• Partnership moved into short-term insurance market, as well as a

recent tie-up with SMC on the wealth management side

• „NEW Channel‟ recently launched in North, East and West of India

o By 2011, we will have 5000 field officers, and 500 business

managers

o Target to double existing business volumes within 5 years

Why we are Positive in Terms of Growth?

• Good growth prospects available in South Africa – relative low

market share and scope for improved regional penetration

• Rest of Africa – collective high margins, scope for growth /

increased penetration

• India – country with vast opportunities (but increasing competition)

• Selective structural opportunities :

o In RSA – on distribution front

o New countries to be added over time

• BUT – We need to monitor / manage the following :

o The “basics” in every business (retention, costs, distribution)

o Changing legislative environment

NEW GROWTH OPPORTUNITIES

iii) New Distribution Channels

Exploring Non-traditional Channels

Multi-Distribution Initiatives

• Insurers are being forced to multi-distribute to retain market access,

and increase wallet share

• Highly specialised matrix of distribution initiatives, with each network

addressing a specific segment of the market, for a specific need

• Customers intend to use different networks into the future, internet

will continue gaining market share

• Half of customers who use the internet to gather information for their

purchase decisions ultimately buy insurance via the internet

Multi-Distribution Initiatives (continued…)

The Internet is Growing the Fastest

Networks in Mature Markets : Mapping of 3-year Change in

Market Share vs. Relative Strength of Top 3 Purchase Influencers (%)

Source : Capgemini analysis, 2007

(Another winner, only held

back due to their relative

weakness of brand)

(Sanlam, Santam and PSG

recently launched MiWay –

Direct & Internet Solution

Provider)

Multi-Distribution Initiatives (continued…)

Highly specialised distribution networks

Distribution Networks in Mature Markets Mapping of Product Specialty

vs. Strength of Professional Advice (%)

Source : Capgemini analysis, 2007

Another winner, only held

back due to their relative

weakness of brand

Brokers remain critical in distribution process – especially iro

advice driven sales of complex life/savings solutions

Major Trend in SA Distribution Environment Shift towards Higher Average Recurring Premiums

• Unit costs of sale too high: FAIS, FICA and new commission

dispensation likely to push advisors up-market

• Since 2005, average recurring premium file-sizes grew by 11%pa in

SFA and 14%pa in broker channel (inflation 6%)

Cumulative growth in gross average recurring premiun size vs

inflation (indexed)

90

100

110

120

130

140

150

160

170

180

190

200

210

2000 2001 2002 2003 2004 2005 2006 2007 2008

Ave CPIX SFA (incl wealth) Broker

Cumulative growth in average recurring premium size vs inflation (indexed)

SA Distribution Environment Current and Proposed Distribution Space

Experimental / New

Opportunities

[SanlamConnect]

% o

f busin

ess →

Exis

ting m

odel

% o

f busin

ess →

NS

SS

Lower Income Middle Income Higher Income

Existing distribution

models

NSSS

NEW GROWTH OPPORTUNITIES

iv) Writing Profitable New Business

Focus on Costs

Focus on Cost Efficiencies

• Increased competition and historically lower inflation levels –

stringent focus on costs

33.6%

31.4%

29.1%

27.1%27.8%

28.4%

42.1%

38.4% 38.1%36.8%

35.6% 35.3%

25%

30%

35%

40%

45%

50%

2003 2004 2005 2006 2007 2008

Group admin cost ratio SPF admin cost ratio

Group administration ratio (%)

Securing Sustainable Profitable Growth Growth in Value of New Business

• Sanlam‟s value of new business is becoming a more meaningful

contributor to Return on EV

3.3%3.6%

4.0%

4.5%

0

100

200

300

400

500

600

700

2005 2006 2007 2008

-0.75%

0.00%

0.75%

1.50%

2.25%

3.00%

3.75%

4.50%

5.25%

SPF SDM Other (SUK & SEB) % of net VIF (rhs)

Split of Sanlam‟s value of new business (VNB) per cluster (Rm)

Securing Sustainable Profitable Growth New business margins

• Sanlam‟s new business margins now exceed its listed large-cap

peer group

Source: Company Financials

Gross Sanlam new business margins vs sector (PV NBP basis)

2.8%

2.3%2.4% 2.5%

1.8%

2.1%

2.4%

2.7%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2005 2006 2007 2008

Industry (ex-Sanlam) Sanlam

Securing Sustainable Profitable Growth Earnings growth

• Sanlam has created a sound platform from which to grow profitably

Group net operating profit (Rm)

Other

financial

services

Life

0

500

1 000

1 500

2 000

2 500

3 000

3 500

2003* 2004 2005 2006 2007 2008

SPF SDM SEB SUK SIM SCM SNT IFS

5 year CAGR of 20% pa (per share basis)

* Note : Comparative number not restated for Group restructuring

51%

5%

6%2%

20%

1%

15%

SPF SDM SEB SUK SIM SCM SNT

Diversification of Solutions Profile Supported Higher Profitability

70%0%0%0%

12%

4%

14%

2003

2008

Pre-tax

operating

profits R2,933m R1,541m

• Sanlam‟s profits have increasingly diversified and almost

doubled over the past 5 years

Insights into Strategy

Strategic Focus for 2009 and Beyond

Goals set for 2009 Delivering sustainable growth

No fundamental shift to existing strategy…

However, we need to lift the performance bar and further strengthen our long-term strategic position

• South Africa:

o Improved efficiency and performance

o Continued selective diversification

o Transformation

• International:

o Position ourselves to have a leading position in the financial sector in selected emerging markets

o Pursue a differentiated / niche strategy, in order to have a specialist position in financial services in developed markets

Particular focus areas for 2009

No major changes, but adjustments in the short term to account for

economic realities:

Focused on de-risking balance sheet:

• Group‟s exposure to credit is being closely monitored

• Continue with capital management program

• Conservative approach to growth opportunities

Internal focus:

• Strong focus on maintaining and growing distribution footprint

• Strong focus on cost management

Outlook

Business Environment :

• Uncertainty and volatility in global financial markets

• Tough economic climate

• Regulatory change

Challenges:

• Lower asset base

• Persistency

• Cost control

Group‟s portfolio is adequately diversified to spread the risks &

creates a sound platform from which to grow

Thank you

Questions?