Sanlam Limited Looking forward to increased visibility

Research evidence excerpt

Sanlam Limited Looking forward to increased visibility

Sanlam Limited UBS Research

UBS Research THESIS MAP a guide to our thinking and what´s where in this report

Pivotal Questions Can Sanlam grow operating earnings by 10%-12% p.a. in the medium term?

Yes. Based on our modelling, we believe Sanlam can organically grow its operating earnings by c12%

p.a. (high proportion of market-related earnings) on a sustainable basis, while continued bolt-on

acquisitions over the medium term can add a further c1% p.a. to this growth rate.

Can Sanlam sustain positive variances on the covered GEV in the medium term?

We believe so. We expect Sanlam to continue to report positive variances, particularly for mortality, in

the medium term. Furthermore, with an improving economic outlook, and management actions, we

expect persistency variances to improve into the near term.

UBS VIEW We rate Sanlam Buy. Sanlam has demonstrated a capital-efficient culture within the group in recent

years, releasing significant previously trapped capital and repaying that to shareholders through

buybacks and special dividends. Its embedded value also exhibits the most conservative assumptions

in the sector, through the generation of consistent strong positive experience variances. As a result,

its embedded value has remained more robust than peers during times of consumer pressure.

Further, Sanlam has the widest and most profitable footprint across fast-growing businesses on the

African continent and other emerging markets (India and Asia Pacific).

EVIDENCE By breaking down Sanlam's operating earnings between what we believe to be market-related and

non-market-related, and applying normalised return assumptions to these market-related earnings,

we conclude Sanlam can generate 10-12% p.a. organic growth.