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Basis of Presentation and Accounting Policies

The Sanlam Group IFRS financial statements for the year ended 31 December 2018 are presented based on and in compliance with International Financial Reporting Standards (IFRS). The basis of presentation and accounting policies for the IFRS financial statements are in all material respects consistent with those applied in the 2017 Integrated Report and Annual Financial Statements, apart from the adoption of IFRS 9 – Financial Instruments and IFRS 15 – Revenue from Contracts with Customers.

Read more about the impact of the adoption of these new accounting standards in the Annual Financial Statements.

In addition to the IFRS Annual Financial Statements, Shareholders’ Information is presented in the Integrated Report. The basis of presentation and accounting policies for the Shareholders’ Information are in all material respects consistent with those applied in the 2017 Integrated Report, apart from the following:

  • The Sanlam Investment Group (SIG) cluster was restructured with effect from 1 January 2018. Following the creation of the Central Credit Manager (CCM) within Sanlam Capital Markets (SCM), it was decided to further enhance focus on the management of Sanlam assets within the SIG cluster, while at the same time creating a third party asset manager that can more effectively compete with leading independent asset managers. The Sanlam Asset Management division and the part of Sanlam Structured Solutions responsible for the Sanlam assets were accordingly combined with Sanlam Capital Markets (SCM) to form the new Sanlam Specialised Finance sub-cluster. Comparative Shareholders’ Information has been restated accordingly, apart from GEV that has not been restated for Sanlam Asset Management. The valuation of Sanlam Asset Management as a separate business was only finalised during 2018. Comparative GEV valuations are not available with the business accordingly transferred to SanFin with effect from 1 January 2018 for GEV purposes. As it is an intra cluster transfer, it does not have an impact on GEV or RoGEV for the overall SIG cluster. As part of the restructuring, operational responsibility for the Group’s term finance margin business was also transferred from the Group Office to Sanlam Specialised Finance. Comparative information was not restated for this change in operational responsibility based on materiality.
  • Non-annuity assets and business flows at Sanlam Private Wealth have been reclassified from Assets under Management to Assets under Administration in line with industry practice. Business flows relating to these assets are commensurately excluded from new business volumes and net fund flows. Comparative 2017 information for SIG and the Group has been restated as follows:
    • New business volumes decreased by R9 016 million
    • Net fund flows increased by R2 568 million
    • Reclassification of assets amounting to R98 446 million from assets under management to assets under administration.
  • Savings business written through the Sanlam Sky distribution channels are recognised within the SPF Savings business with effect from 2018. Comparative information has not been restated. The 2018 SPF Savings results include new business volumes of R118 million and VNB of negative R15 million relating to business formerly recognised in Sanlam Sky.

All growth percentages reflected in this review are relative to the 12 months ended 31 December 2017, unless otherwise indicated.

The 3% new shares issued through an accelerated book build in the first quarter (refer Capital management section) had a 2,3% dilutive effect on earnings per share metrics due to an increase in the weighted average number of shares in issue during the year. In addition, the acquisition of the remaining stake in Saham Finances, for which the capital was raised, only completed and started contributing to earnings from 1 October 2018.

Corporate activity during 2017 and 2018 impacts on the comparability of the Group’s results. The following were the largest transactions:

  • SPF acquired a 53% stake in BrightRock with effect from 1 September 2017. Shares acquired subsequent to the initial acquisition has increased Sanlam’s stake to 55,1% at 31 December 2018.
  • SPF started Indie as a new greenfields business in 2017, with initial losses recognised in earnings in both 2018 and 2017.
  • SEM sold its stake in the Enterprise Group in Ghana with an effective date of 1 July 2017.
  • Absa Consultants and Actuaries (renamed ACA Employee Benefits (ACA)) was acquired effective 1 April 2018.
  • Saham Finances is consolidated with effect from 1 October 2018; before this date, the Group’s investment in Saham Finances was recognised as an equity-accounted investment. The table below provides a summary of Sanlam’s participation in Saham Finances’ earnings, new business volumes, VNB and net fund flows based on the changes in shareholding:

The impact of corporate activity is highlighted in the remainder of this report where relevant.

The structural information included in this results announcement has been presented to illustrate the impact of changes in the group structure and is the responsibility of the Group’s board of directors (“Board”). It is presented for illustrative purposes only and because its nature may not fairly present the Group’s financial position, changes in equity, result of operations or cash flows.

Sanlam’s external auditor, Ernst & Young Inc., issued a limited assurance report in respect of the structural information in terms of section 8 of the JSE Listings Requirements. The limited assurance report is available for inspection at Sanlam Limited’s registered address.

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