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SANLAM LIMITED
GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 1999
YOUR FUTURE IN GOOD HANDS
BUSINESS BASE ESTABLISHED
LAUNCHING NEW INITIATIVES
EXPLORING OPPORTUNITIES
* 39% INCREASE IN OPERATING PROFIT
* 65% INCREASE IN HEADLINE EARNINGS
* 26% INCREASE IN HEADLINE EARNINGS PER SHARE
* 26% ATTRIBUTABLE RETURN ON EQUITY
* 24% RETURN ON EMBEDDED VALUE
* TURNAROUND OF SANLAM HEALTH ACHIEVED
SALIENT FEATURES
1999 1998
HEADLINE EARNINGS RMILLION 1 955 1 186
DILUTED HEADLINE EARNINGS PER SHARE CENTS 73,4 58,4
OPERATING PROFIT RMILLION 1 722 1 237
EMBEDDED VALUE OF NEW BUSINESS RMILLION 101 57
EMBEDDED VALUE PER SHARE CENTS 1 004 827
FUNDS RECEIVED FROM CLIENTS RMILLION 34 144 37 733
ASSETS UNDER MANAGEMENT AND
ADMINISTRATION RMILLION 215 924 176 792
INCOME STATEMENT
1999 1998
NOTE R MILLION R MILLION
FUNDS RECEIVED FROM CLIENTS 1 34 144 37 733
FINANCIAL SERVICES INCOME 10 988 11 016
SALES REMUNERATION 1 353 1 432
INCOME AFTER SALES REMUNERATION 9 635 9 584
UNDERWRITING POLICY BENEFITS 4 569 5 287
ADMINISTRATION COSTS 2 875 2 663
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS 2 191 1 634
EXCEPTIONAL ITEMS 469 397
OPERATING PROFIT AFTER EXCEPTIONAL ITEMS 2 1 722 1 237
INVESTMENT INCOME 1 186 893
HEADLINE EARNINGS BEFORE TAXATION 2 908 2 130
INCOME TAX ON HEADLINE EARNINGS (386) (427)
HEADLINE EARNINGS AFTER TAXATION 2 522 1 703
MINORITY SHAREHOLDERS' AND POLICYHOLDERS' INTEREST (567) (517)
HEADLINE EARNINGS 4 1 955 1 186
NET INVESTMENT SURPLUSES 1 414 (822)
ACCOUNTING POLICY CHANGE BY SUBSIDIARY 68 -
EARNINGS ATTRIBUTABLE TO SHAREHOLDERS 3 437 364
FULLY DILUTED HEADLINE EARNINGS PER SHARE (CENTS) 73,4 58,4
FULLY DILUTED ATTRIBUTABLE EARNINGS PER SHARE (CENTS) 129,0 17,9
DIVIDEND PER SHARE (CENTS) 25 -
WEIGHTED AVERAGE SHARES IN ISSUE 2 664 2 030
BALANCE SHEET
1999 1998
R MILLION R MILLION
ASSETS
NON-CURRENT ASSETS
FIXED ASSETS 328 322
INVESTMENTS 155 498 133 354
DEFERRED TAX 37 88
CURRENT ASSETS 19 705 15 597
TOTAL ASSETS 175 568 149 361
EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY 17 677 14 904
MINORITY INTEREST 2 387 1 846
NON-CURRENT LIABILITIES
POLICY LIABILITIES 134 319 114 176
TERM FINANCE 4 062 5 598
DEFERRED TAX 693 668
CURRENT LIABILITIES 16 430 12 169
TOTAL EQUITY AND LIABILITIES 175 568 149 361
ASSETS MANAGED AND ADMINISTERED ON BEHALF
OF CLIENTS (SEGREGATED FUNDS) 40 356 27 431
TOTAL ASSETS MANAGED AND ADMINISTERED 215 924 176 792
TANGIBLE NET ASSET VALUE PER SHARE (CENTS) 771 630
FINANCIAL RATIOS
% %
RETURNS
* HEADLINE RETURN ON EQUITY (1) 13 12
* ATTRIBUTABLE RETURN ON EQUITY (2) 23 4
* ADJUSTED RETURN ON EQUITY (3) 26 27
* 5-YEAR AVERAGE RETURN ON EQUITY (4) 23 22
* RETURN ON EMBEDDED VALUE (5) 24 -2(8)
GROUP ADMINISTRATION COST RATIO (6) 30 28
GROUP OPERATING MARGIN (7) 18 13
NOTES
(1) HEADLINE EARNINGS AS A PERCENTAGE OF SHAREHOLDERS' FUNDS AT THE BEGINNING
OF THE YEAR.
(2) ATTRIBUTABLE EARNINGS AS A PERCENTAGE OF SHAREHOLDERS' FUNDS AT THE
BEGINNING OF THE YEAR.
(3) ADJUSTED RETURN IS THE ATTRIBUTABLE RETURN AFTER ADJUSTING THE INTEREST OF
THE SHAREHOLDERS' FUND IN GENSEC AND SANTAM FROM NET ASSET VALUE TO MARKET
VALUE.
(4) 5-YEAR AVERAGE RETURN IS THE ADJUSTED RETURN USING THE AVERAGE INVESTMENT
RETURN OVER THE PAST 5 YEARS.
(5) GROWTH IN EMBEDDED VALUE (BEFORE DIVIDENDS PAID) AS A PERCENTAGE OF
EMBEDDED VALUE AT THE BEGINNING OF THE YEAR.
(6) ADMINISTRATION COSTS AS A PERCENTAGE OF INCOME EARNED BY SHAREHOLDERS NET
OF SALES REMUNERATION.
(7) OPERATING PROFIT AS A PERCENTAGE OF INCOME EARNED BY THE SHAREHOLDERS NET
OF SALES REMUNERATION.
(8) BASED ON THE PRO-FORMA EMBEDDED VALUE CALCULATED IN 1997 AND WHICH
REFLECTED THE DEMUTUALISATION AND RESTRUCTURING OF SANLAM AND THE SALE OF
SANLAM'S ASSET MANAGEMENT ACTIVITIES TO GENSEC IN 1998.
FINANCIAL RATIOS - ANALYSIS PER BUSINESS
1999 1998
% %
ADMIN COST RATIO - PERSONAL FINANCE 37 39
- EMPLOYEE BENEFITS 19 21
- HEALTH 19 27
- GENSEC 40 31
- SANTAM 15 13
OPERATING MARGIN - PERSONAL FINANCE 21 18
- EMPLOYEE BENEFITS 12 10
- HEALTH 1 -23
- GENSEC 60 69
- SANTAM 3 1
NOTES TO THE FINANCIAL STATEMENTS
1999 1998
R MILLION R MILLION
1. FUNDS RECEIVED FROM CLIENTS
INSURANCE BUSINESS
INDIVIDUAL LIFE INSURANCE 13 148 11 603
RECURRING PREMIUMS 8 344 8 496
SINGLE PREMIUMS * 4 804 3 107
EMPLOYEE BENEFITS 5 523 7 850
RECURRING PREMIUMS 3 029 2 740
SINGLE PREMIUMS 2 494 5 110
SHORT-TERM INSURANCE 3 303 4 093
INSURANCE BUSINESS 21 974 23 546
OTHER BUSINESS 12 170 14 187
* UNIT TRUSTS 8 154 8 266
* SEGREGATED FUNDS 2 310 4 498
* LINKED PRODUCTS * 1 706 1 423
TOTAL FUNDS RECEIVED FROM CLIENTS 34 144 37 733
NEW RECURRING PREMIUMS 1 446 1 532
* INCLUDED IN LONG-TERM INSURANCE SINGLE PREMIUMS IS R640 MILLION
(1998: R249 MILLION) IN RESPECT OF LINKED PRODUCT BUSINESS.
2. OPERATING PROFIT CONTRIBUTION
* PERSONAL FINANCE 783 608
* EMPLOYEE BENEFITS 168 115
* GENSEC 747 710
* HEALTH 11 (220)
* SANTAM 59 20
* CORPORATE INCOME 200 174
* CORPORATE COSTS (246) (170)
TOTAL OPERATING PROFIT 1 722 1 237
3. CORPORATE COSTS
CORPORATE MARKETING 62 48
SHAREHOLDER COSTS 52 -
CORPORATE FUNCTIONS 61 50
SHARED SERVICES AND OTHER 71 72
TOTAL CORPORATE COSTS 246 170
4. HEADLINE EARNINGS CONTRIBUTION
PERSONAL FINANCE 974 722
EMPLOYEE BENEFITS 399 288
GENSEC 367 295
HEALTH 34 (209)
SANTAM 68 73
CORPORATE 113 17
* COSTS (199) (112)
* INVESTMENT INCOME 172 16
* INCOME 140 113
TOTAL HEADLINE EARNINGS CONTRIBUTION 1 955 1 186
5. PAYMENTS TO CLIENTS
INSURANCE BENEFITS PAID
* POLICY BENEFITS 22 998 21 330
LONG-TERM INSURANCE
* INDIVIDUAL INSURANCE * 14 042 11 167
* GROUP BUSINESS 6 460 6 898
SHORT-TERM - MEDICAL AND GENERAL 2 496 3 265
OTHER PAYMENTS 10 761 8 757
* UNIT TRUST REPURCHASES 6 769 4 261
* MANAGED ASSETS WITHDRAWN 3 318 4 215
* LINKED PRODUCTS WITHDRAWN * 674 281
TOTAL PAYMENTS TO CLIENTS 33 759 30 087
RETIREMENT FUND TERMINATIONS 10 812 3 645
TOTAL PAYMENTS TO CLIENTS AND RETIREMENT FUND
TERMINATIONS 44 571 33 732.
* INCLUDED IN LONG-TERM INSURANCE POLICY BENEFITS IS R63 MILLION
(1998: R9 MILLION) IN RESPECT OF LINKED PRODUCT BUSINESS
6. ANALYSIS OF MOVEMENT IN CLIENTS
FUNDS (POLICY LIABILITIES AND
SEGREGATED FUNDS)
FUNDS RECEIVED FROM CLIENTS 34 144 37 733
INVESTMENT RETURN, TAX, EXPENSES AND
OTHER ADJUSTMENTS 43 495 (7 441)
NET INCOME BEFORE PAYMENTS TO CLIENTS 77 639 30 292
PAYMENTS TO CLIENTS 44 571 33 732
NET INCREASE IN CLIENTS FUNDS 33 068 (3 440)
EMBEDDED VALUE
1999 1998
COMPONENTS OF EMBEDDED VALUE R MILLION R MILLION
GROUP SHAREHOLDERS FUNDS PER BALANCE SHEET 17 677 14 904
REVALUATION OF SHAREHOLDERS' INTEREST
IN SANTAM AND GENSEC TO FAIR VALUE 2 786 1 827
ADJUSTED GROUP SHAREHOLDERS' FUND 20 463 16 731
NET VALUE OF IN-FORCE LIFE BUSINESS 6 193 5 221
* GROSS VALUE OF IN-FORCE BUSINESS 7 774 7 185
* COST OF HOLDING PRUDENTIAL RESERVES (1 581) (1 964)
SANLAM GROUP EMBEDDED VALUE 26 656 21 952
EMBEDDED VALUE EARNINGS
EMBEDDED VALUE FROM NEW LIFE BUSINESS 101 57
EARNINGS FROM EXISTING BUSINESS 1 056 1 488
* EXPECTED RETURN 1 219 967
* OPERATING EXPERIENCE VARIATIONS (101) 353
* OPERATING ASSUMPTIONS CHANGE (62) 168
EMBEDDED VALUE EARNINGS FROM OPERATIONS 1 157 1 545
INVESTMENT RETURN ON ADJUSTED NET WORTH 3 794 (1 649)
INVESTMENT VARIANCES 408 (821)
ECONOMIC ASSUMPTION CHANGES 521 (173)
TAX CHANGES (512) 599
TOTAL EMBEDDED VALUE EARNINGS 5 368 (499)
RETURN ON EMBEDDED VALUE 24% (2%)
VALUE OF NEW LIFE BUSINESS
BASED ON THE OLD TAX BASIS (1) 200 57
BASED ON THE NEW TAX BASIS (1) 101
(1) THE OLD TAX BASIS REFERS TO THE TAX BASIS THAT WAS APPLICABLE FOR
SANLAM UP TO 31 DECEMBER 1999. THE BASIS WAS AMENDED WITH EFFECT FROM 1
JANUARY 2000.
ANALYSIS PER BUSINESS - 1999 VALUE OF VALUE OF NEW
IN-FORCE LIFE BUSINESS
SANLAM PERSONAL FINANCE 5 857 86
SANLAM EMPLOYEE BENEFITS 720 64
CORPORATE COSTS (384) (49)
TOTAL SANLAM GROUP 6 193 101
PRINCIPAL ASSUMPTIONS % %
PRE-TAX INVESTMENT RETURNS
* EQUITIES 16,1 19,5
* PROPERTY 15,1 18,5
* FIXED-INTEREST SECURITIES 14,1 16,5
* CASH 12,1 15,0
INFLATION 7,6 10,0
RISK DISCOUNT RATE 16,1 19,0
GROUP FINANCIAL OVERVIEW
HEADLINE EARNINGS
WE ARE PLEASED TO REPORT THAT HEADLINE EARNINGS INCREASED BY 65% FROM R1 186
MILLION TO R1 955 MILLION AND DILUTED HEADLINE EARNINGS PER SHARE BY 26% FROM
58,4 CENTS TO 73,4 CENTS. THESE RESULTS CONFIRM THAT SANLAM IS REALISING ITS
POTENTIAL AND IS NOW FAVOURABLY PLACED TO BUILD ON THESE FOUNDATIONS, GENERATE
EXCELLENT RETURNS FOR SHAREHOLDERS AND LAUNCH NEW INITIATIVES.
FUNDS RECEIVED FROM CLIENTS
ALTHOUGH SINGLE PREMIUMS RECEIVED FROM LONG-TERM INDIVIDUAL INSURANCE BUSINESS
SHOWED GOOD GROWTH, THE TOTAL FUNDS RECEIVED FROM CLIENTS WAS 10% LOWER THAN IN
1998. THIS WAS LARGELY DUE TO LOWER INFLOWS AT SANLAM EMPLOYEE BENEFITS AND
LOWER SEGREGATED FUND INFLOWS AT GENSEC ASSET MANAGEMENT DUE TO INCREASED
COMPETITION FROM MULTI-MANAGER FUND ADMINISTRATORS AND THE COMPETITIVE
INVESTMENT ENVIRONMENT. THESE FACTORS ALSO CONTRIBUTED TO THE LARGE INCREASE IN
RETIREMENT FUND TERMINATIONS.
SHORT-TERM INSURANCE PREMIUMS WERE 19% LOWER THAN IN 1998 LARGELY BECAUSE
SANTAM9S PREMIUMS IN 1998 WERE FOR A 15 MONTH PERIOD DUE TO A CHANGE IN
YEAR-END. SANLAM HEALTH9S PREMIUMS REDUCED BY 16% DUE TO THE REDUCTION IN
MEMBERSHIP RESULTING FROM ADMINISTRATIVE PROBLEMS PRIOR TO 1999 WHICH HAVE NOW
BEEN RESOLVED.
PAYMENTS TO CLIENTS
PAYMENTS TO CLIENTS INCREASED BY 32% DUE PRIMARILY TO THE LARGE INCREASE IN
RETIREMENT FUND TERMINATIONS. UNIT TRUST REPURCHASES INCREASED BY 59% AS A
RESULT OF OUTFLOWS FROM CASH BASED UNIT TRUSTS.
ALTHOUGH THE PAYMENTS TO CLIENTS EXCEEDED THE FUNDS RECEIVED BY R10 427 MILLION
IN 1999, THE TOTAL CLIENT FUNDS MANAGED BY THE SANLAM GROUP INCREASED BY R33
068 MILLION AFTER TAKING THE INVESTMENT RETURN, TAX, EXPENSES AND OTHER
ADJUSTMENTS FOR 1999 INTO CONSIDERATION.
FINANCIAL SERVICES INCOME
FINANCIAL SERVICES INCOME WHICH CONSISTS OF FEES AND OTHER INCOME EARNED BY THE
SHAREHOLDERS FUND REMAINED CONSTANT OVER THE TWO YEARS DUE LARGELY TO THE
REDUCTION IN SHORT TERM INSURANCE PREMIUMS MENTIONED ABOVE.
OPERATING PROFIT
THE TURNAROUND OF SANLAM HEALTH FROM A R220 MILLION LOSS IN 1998 TO A PROFIT OF
R11 MILLION IN 1999 CONTRIBUTED SIGNIFICANTLY TO THE 39% GROWTH IN THE GROUP
OPERATING PROFIT AND CONFIRMS THAT SANLAM CAN OVERCOME DAUNTING CHALLENGES. THE
SOUND OPERATING PERFORMANCE ACHIEVED BY THE BUSINESSES ARE DISCUSSED BELOW.
CORPORATE COSTS INCREASED BY 45% LARGELY DUE TO SHAREHOLDER SERVICES COSTS
WHICH WERE INCURRED FOR THE FIRST TIME IN 1999 AS A RESULT OF THE LISTING IN
NOVEMBER 1998.
CORPORATE INCOME INCREASED BY 15% TO R200 MILLION IN 1999. THIS INCOME ARISES
FROM LEVERAGING ASSETS WHICH INVOLVE THE ISSUE OF PREFERENCE SHARES BY SANLAM
GROUP SUBSIDIARIES. THESE PROFITS WERE PREVIOUSLY INCLUDED IN SPF AND SEB9S
OPERATING PROFITS BUT ARE NOW DISCLOSED SEPARATELY AS THEY ARE MANAGED AS A
CORPORATE ACTIVITY.
ADMINSTRATION COSTS
GROUP ADMINISTRATION COSTS AMOUNTED TO R2 875 MILLION, WHICH IS 8% HIGHER THAN
1998. THE ADMINISTRATION COST TO INCOME RATIO ("ADMIN RATIO") WAS 30% IN 1999
COMPARED TO 28% IN 1998 DUE MAINLY TO THE 57% INCREASE IN ADMINISTRATION COSTS
AT GENSEC AS A RESULT OF GROWING BUSINESS ACTIVITIES AND THE 45% INCREASE IN
CORPORATE COSTS MENTIONED ABOVE. THE ADMIN COST RATIO FOR SEB, SPF AND HEALTH
IMPROVED OVER 1998.
THIS RATIO REFLECTS GROUP ADMINISTRATION EXPENSES AS A PERCENTAGE OF THE INCOME
AFTER SALES REMUNERATION. WE HAVE INTRODUCED THIS RATIO TO MEASURE AND MANAGE
THE COST-EFFICIENCY OF OUR OPERATIONS.
OPERATING MARGIN
THE GROUP OPERATING MARGIN WHICH MEASURES OUR PROFITABILITY AND REFLECTS THE
GROUP OPERATING PROFIT AS A PERCENTAGE OF INCOME AFTER SALES REMUNERATION
IMPROVED SATISFACTORILY TO 18% FROM 13% IN 1998.
EXCEPTIONAL ITEMS
EXCEPTIONAL ITEMS FOR THE GROUP AMOUNTED TO R469 MILLION (1998: R397 MILLION)
AND RELATES LARGELY TO SYSTEM DEVELOPMENT AND RESTRUCTURING COSTS.
INVESTMENT INCOME
INVESTMENT INCOME INCREASED BY 33% LARGELY ATTRIBUTABLE TO THE INCOME EARNED ON
THE CAPITAL RAISED IN NOVEMBER 1998 AND RELATIVELY HIGH INTEREST RATES.
INVESTMENT INCOME HAS BEEN REDUCED BY ONE-OFF COSTS IN RESPECT OF THE
MAINTENANCE OF THE HEAD OFFICE BUILDING AMOUNTING TO R33 MILLION AND A
PROVISION FOR GENERAL INVESTMENT RELATED RISKS AMOUNTING TO R53 MILLION.
INCOME TAX
THE EFFECTIVE TAX RATE ON HEADLINE EARNINGS WAS 13% COMPARED TO 20% IN 1998 DUE
TO THE REDUCTION IN THE CORPORATE TAX RATE FROM 35% TO 30% IN 1999 AND GENSEC9S
TAX PROVISION, WHICH AMOUNTED TO A NET CREDIT OF R41 MILLION OWING TO THE
REVERSAL OF A R100 MILLION OVER-PROVISION FOR TAX IN PRIOR YEARS IN RESPECT OF
AN OFF-SHORE SUBSIDIARY.
ATTRIBUTABLE EARNINGS
ATTRIBUTABLE EARNINGS INCREASED MORE THAN EIGHTFOLD TO R3 437 MILLION FROM R364
MILLION IN 1998 AND INCLUDES THE REALISED AND UNREALISED INVESTMENT SURPLUSES
AFTER TAX ON THE INVESTMENTS OF THE SHAREHOLDERS9 FUND. THIS SURPLUS AMOUNTED
TO R1 414 MILLION IN 1999 COMPARED TO A DEFICIT OF R822 MILLION IN 1998 AND
REFLECTS THE IMPROVED STOCK MARKET CONDITIONS IN 1999 AFTER THE MARKET CRASH IN
THE SECOND HALF OF 1998.
SANLAM PERSONAL FINANCE (SPF)
AS MENTIONED ABOVE, SINGLE PREMIUMS SHOWED GOOD GROWTH AFTER A DISAPPOINTING
START TO 1999 AND NEW RECURRING PREMIUM BUSINESS INCREASED IN THE LATTER HALF
OF 1999. TOTAL RECURRING PREMIUMS RECEIVED FOR THE YEAR WERE HOWEVER, 2% LESS
THAN IN 1998.
SPF9S POLICY LAPSE EXPERIENCE IMPROVED FURTHER DURING 1999, HOWEVER, POLICY
SURRENDERS INCREASED SUBSTANTIALLY DUE TO THE END OF THE DEMUTUALISATION SHARE
QUALIFICATION PERIOD AND ECONOMIC FACTORS.
THE SPF OPERATING PROFIT INCREASED BY 29% TO R783 MILLION RESULTING MAINLY FROM
A SUBSTANTIAL INCREASE IN RISK PROFITS TO R352 MILLION AND SOUND GROWTH IN
ADMINISTRATION PROFITS. HEADLINE EARNINGS AMOUNTED TO R974 MILLION, A 35%
IMPROVEMENT ON 1998 AND ATTRIBUTABLE EARNINGS WERE R2 275 MILLION WHICH
REPRESENTS A RETURN OF 28% ON ITS CAPITAL OF R8 247 MILLION.
EXCEPTIONAL EXPENDITURE INCLUDED THE COSTS ON NEW SYSTEMS AND PROJECTS WHICH
INCREASED BY MORE THAN 50% TO R206 MILLION. OTHER EXCEPTIONAL EXPENDITURE ALSO
AMOUNTED TO R206 MILLION AND RELATES TO THE RESTRUCTURING OF THE SALES FUNCTION
WHICH IS NOW COMPLETE.
SANLAM EMPLOYEE BENEFITS (SEB)
RECURRING PREMIUMS INCREASED BY 11% WHICH IS A WELCOME TURNAROUND AFTER A 9%
DECLINE IN THE PREVIOUS YEAR.
SEB ACHIEVED A 46% INCREASE IN ITS OPERATING PROFIT TO R168 MILLION,
NOTWITHSTANDING THE LOWER SINGLE PREMIUMS AND HIGH TERMINATIONS MENTIONED ABOVE
WHICH IS MAINLY LOW MARGIN BUSINESS. SYSTEMS DEVELOPMENT EXPENDITURE FOR THE
NEW FUND ADMINISTRATION SYSTEM AMOUNTED TO R20 MILLION IN 1999.
THE GROWTH IN OPERATING PROFIT IS MAINLY DUE TO THE 321% INCREASE IN THE
PROFITS FROM RISK BUSINESS TO R59 MILLION AND ADMINISTRATION PROFITS WHICH
INCREASED BY 53% TO R29 MILLION. PROFITS FROM INVESTMENT BUSINESS DECLINED
SLIGHTLY TO R103 MILLION.
HEADLINE EARNINGS INCREASED BY 39% TO R399 MILLION AND ATTRIBUTABLE EARNINGS TO
R1 249 MILLION WHICH REPRESENTS A RETURN OF 23% ON ITS CAPITAL OF R5 356
MILLION.
SANLAM HEALTH
AFTER THREE CONSECUTIVE YEARS OF SUFFERING HUGE LOSSES, THE BUSINESS WAS TURNED
AROUND SUCCESSFULLY. AN OPERATING PROFIT OF R11 MILLION WAS ACHIEVED FOR THE
YEAR (1998: R220 MILLION LOSS). EFFECTIVE ADMINISTRATION AND BENEFIT MANAGEMENT
RESULTED IN THE CLAIMS RATIO DECREASING FROM 101% IN 1998 TO 85% IN 1999. THE
SUCCESSFUL OUTSOURCING OF SANLAM HEALTH9S ADMINISTRATION FUNCTIONS AND
COST-EFFECTIVE RESTRUCTURING OF THE BUSINESS CONTRIBUTED TO THE TURNAROUND.
HEADLINE EARNINGS OF R34 MILLION (1998: R209 MILLION LOSS) WERE RECORDED AND
ATTRIBUTABLE EARNINGS AMOUNTED TO R146 MILLION (1998: R253 MILLION LOSS) WHICH
REPRESENT A 57% RETURN ON THE CAPITAL OF R256 MILLION.
GENSEC
GENSEC ACHIEVED EARNINGS AFTER TAX OF R788 MILLION, AN INCREASE OF 21% ON 1998.
HEADLINE EARNINGS PER SHARE INCREASED BY 15% FROM 271 TO 312 CENTS. THESE
RESULTS ARE CONSIDERED SATISFACTORY, ESPECIALLY GIVEN THE UNFAVOURABLE MARKET
CONDITIONS DURING THE YEAR FOR SMALL CAPITALISATION AND UNLISTED COMPANY
INVESTMENTS. ADMINISTRATION COSTS INCREASED BY 57% FROM R319 MILLION TO R500
MILLION DUE TO INCREASED SYSTEMS EXPENDITURE AND HUMAN RESOURCES COSTS AS A
RESULT OF GROWING BUSINESS ACTIVITIES.
THE RECURRING INCOME PORTION OF TOTAL INCOME INCREASED FROM 71% TO 78% DURING
1999. SHAREHOLDERS ARE REFERRED TO THE FULL SET OF GENSEC'S RESULTS WHICH WERE
PUBLISHED RECENTLY.
SANTAM
SANTAM9S UNDERWRITING SURPLUS INCREASED SIGNIFICANTLY FROM R19 MILLION TO R59
MILLION IN 1999 WHICH COMPARES FAVOURABLY WITH THE SHORT-TERM INDUSTRY
UNDERWRITING RESULTS. THESE RESULTS FOLLOWED SPECIFIC FOCUS ON THE MANAGEMENT
OF CLAIMS COSTS AND THE INTRODUCTION OF MEASURES TO ADDRESS WEAKER UNDERWRITING
RISKS.
INVESTMENT INCOME EARNED ON SANTAM9S INVESTMENTS AMOUNTED TO R215 MILLION WHICH
IS NEARLY THE SAME AS THAT EARNED IN 1998.
EARNINGS PER SHARE OF 293 CENTS WAS ACHIEVED WHICH IS 7% HIGHER THAN THE
COMPARABLE 275 CENTS IN 1998.
SANTAM ACQUIRED GUARDIAN NATIONAL INSURANCE COMPANY WITH EFFECT FROM 30
DECEMBER 1999. THE ACQUISITION IS STILL SUBJECT TO APPROVAL BY THE REGULATORY
AUTHORITIES AND THE GUARDIAN SHAREHOLDERS. IF APPROVED, THIS TRANSACTION WILL
ESTABLISH SANTAM AS A CLEAR MARKET LEADER IN THE SHORT TERM INSURANCE INDUSTRY.
SHAREHOLDERS ARE REFERRED TO THE FULL SET OF SANTAM9S RESULTS WHICH WERE
PUBLISHED RECENTLY.
EMBEDDED VALUE AND VALUE OF NEW BUSINESS
THE EMBEDDED VALUE OF THE SANLAM GROUP AMOUNTED TO R26 656 MILLION IN 1999 OR 1
004 CENTS PER SHARE. THE VALUE OF IN-FORCE INCREASED BY 19% TO R6 193 MILLION.
THE EMBEDDED VALUE OF NEW LIFE BUSINESS IMPROVED BY 77% FROM R57 MILLION TO
R101 MILLION IN 1999. THE 1999 VALUE OF NEW LIFE BUSINESS INCLUDES THE NEGATIVE
IMPACT OF THE AMENDMENTS TO THE TAX BASIS FOR LIFE INSURERS. THIS VALUE WOULD
HAVE BEEN R200 MILLION IF IT WAS DETERMINED ON THE OLD TAX BASIS. THE RETURN ON
EMBEDDED VALUE WAS 24%.
YEAR 2000 COMPLIANCE
THE EXTENSIVE PREPARATION AND TESTING OF THE COMPUTER AND ASSOCIATED BUSINESS
SYSTEMS WERE COMPLETED IN ACCORDANCE WITH OUR Y2K PROGRAMME. THE TRANSITION
INTO 2000 OCCURRED WITH NO MATERIAL Y2K RELATED PROBLEMS. WE WILL MONITOR ALL
SYSTEMS UNTIL THE END OF MARCH 2000 AND DO NOT ANTICIPATE ANY PROBLEMS. THE
ESTIMATED EXPENDITURE INCURRED ON THE Y2K PROJECT IS APPROXIMATELY R110 MILLION
AND CONSISTED LARGELY OF BUSINESS-AS-USUAL COSTS.
DIVIDENDS
DURING SEPTEMBER 1999, SANLAM DECLARED ITS MAIDEN DIVIDEND OF 10 CENTS PER
SHARE. ON 8 MARCH 2000 THE BOARD DECLARED A FINAL CASH DIVIDEND OF 15 CENTS PER
SHARE PAYABLE ON 24 MAY 2000 TO SHAREHOLDERS REGISTERED ON 28 APRIL 2000,
BRINGING THE TOTAL DIVIDEND FOR THE YEAR TO 25 CENTS PER SHARE. IN FUTURE,
DIVIDENDS WILL BE PAID ANNUALLY.
SANLAM FOCUS FOR 2000
INTERNATIONALISATION
THE GROUP UTILISES ITS CAPACITY PERMITTED BY EXCHANGE CONTROL REGULATIONS TO
INVEST OFF-SHORE ON BEHALF OF POLICYHOLDERS, CLIENTS AND SHAREHOLDERS ON AN
ON-GOING BASIS. HOWEVER, ADDITIONAL CAPACITY BECAME AVAILABLE DUE TO RECENT
AMENDMENTS TO THESE REGULATIONS ANNOUNCED IN THE BUDGET.
WE BELIEVE THAT IT IS NOW APPROPRIATE FOR OUR BUSINESSES TO EXPLORE
INTERNATIONAL OPPORTUNITIES. GENSEC ALREADY HAS AN INTERNATIONAL PRESENCE AND
IT WILL TAKE A FEW YEARS BEFORE OUR OTHER BUSINESSES WILL HAVE A MEANINGFUL
PRESENCE ABROAD. WE FIRMLY BELIEVE THAT OUR CORE COMPETENCIES ARE BETTER SUITED
TO THE EMERGING THAN THE DEVELOPED MARKETS AND THAT THERE ARE STILL SIGNIFICANT
OPPORTUNITIES IN THESE MARKETS.
INVESTMENT PERFORMANCE
THE INVESTMENT FOCUS FOR 2000 IS TO GROW GENSEC ASSET MANAGEMENT AS A LEADER IN
ITS INDUSTRY. ALTHOUGH IT ENJOYS SIGNIFICANT MARKET SHARE IN THE TRADITIONAL
MARKETS, GENSEC IS CURRENTLY UNDER-REPRESENTED IN THE MULTI-MANAGER AND PRIVATE
CLIENT SEGMENTS WHERE IT WILL BE SEEKING OPPORTUNITIES TO STRENGTHEN ITS
POSITION.
GENSEC HAS COMPLETED ITS NEW INVESTMENT PROCESS WHICH IS BASED ON THE PREMISE
THAT SPECIALISTS OUTPERFORM GENERALISTS. MULTI-DISCIPLINARY INVESTMENT TEAMS
NOW CUT ACROSS ALL INVESTMENT FUNCTIONS.
EMPLOYMENT EQUITY
WE ARE CREATING A WORKING ENVIRONMENT CONDUCIVE TO ATTRACTING, TRAINING AND
RETAINING SKILLED PEOPLE FROM ALL SECTORS OF THE COMMUNITY AND APPROACH
EMPLOYMENT EQUITY FROM A BUSINESS PERSPECTIVE. WE CONSIDER THIS AN OPPORTUNITY
TO BUILD A MORE COMPETITIVE BUSINESS.
BUILDING THE BRAND
STRENGTHENING THE POWER OF OUR BRAND IS ESSENTIAL TO MOBILISE OUR FULL
POTENTIAL, MOVE AWAY FROM PERCEPTIONS BASED ON HISTORIC STEREOTYPES AND TO
PROMOTE A UNITY OF PURPOSE IN ALL OUR INTERACTIONS WITH OUR STAFF, OTHER
STAKEHOLDERS AND ACTIVITIES THROUGHOUT THE SANLAM GROUP.
OUR BRAND IS ALREADY STRONG IN ALL SECTORS OF THE COMMUNITY. OUR COMMITMENT TO
SOUTH AFRICA, LEADERSHIP, INNOVATION AND OUR CULTURE OF EMPOWERMENT WILL BE
REFLECTED IN OUR ACTIONS TO BUILD THE BRAND. GOOD SERVICE AND PRODUCTS TO OUR
CLIENTS WILL SUPPORT THIS.
GROWTH
OUR FOCUS ON ORGANIC GROWTH FOR 2000 IS TO INCREASE OUR MARKET SHARE AND TO
REVERSE THE OUTFLOW OF FUNDS. RETURNS ON EQUITY AND EMBEDDED VALUE ARE KEY
PERFORMANCE MEASURES IN OUR INDUSTRY. WE HAVE SET OURSELVES TARGETS OF AT LEAST
10% REAL RETURN (ABOVE CORE INFLATION) IN RESPECT OF BOTH, AS WELL AS FOR
GROWTH IN HEADLINE EARNINGS. IN ADDITION WE AIM TO ACHIEVE EMBEDDED VALUE ON
ONE YEAR9S NEW BUSINESS IN EXCESS OF R200 MILLION BY NOT LATER THAN 2001.
WE HAVE SO FAR CONCENTRATED ON BUILDING A SOLID BASE IN EACH OF OUR BUSINESSES
BEFORE EMBARKING ON STRUCTURAL GROWTH. ENOUGH PROGRESS HAS BEEN MADE IN THIS
REGARD FOR US TO NOW LAUNCH NEW INITIATIVES IN OUR BUSINESS AND EXPLORE
OPPORTUNITIES FOR INVESTMENT. THIS WILL TAKE SOME TIME TO COME TO FRUITION AND
ALSO PRESENT FURTHER SCOPE FOR THE REDUCTION IN THE DISCOUNT TO EMBEDDED VALUE
TO REDUCE FURTHER. IN THIS REGARD CHARL LE ROUX, WHO MANAGED THE TURNAROUND OF
SANLAM HEALTH, HAS BEEN APPOINTED AS CHIEF EXECUTIVE: NEW BUSINESS DEVELOPMENT.
FOR AND ON BEHALF OF THE BOARD
MH DALING P DE V RADEMEYER
EXECUTIVE CHAIRMAN FINANCIAL DIRECTOR
8 MARCH 2000
CAPE TOWN
GROUP SECRETARY:
JP BESTER
REGISTERED OFFICE:
2 STRAND ROAD, BELLVILLE 7530.
TELEPHONE (021) 947-9111.
FAX: (021) 947-3670
POSTAL ADDRESS:
PO BOX 1, SANLAMHOF 7532
REGISTERED NAME:
SANLAM LIMITED
(REGISTRATION NUMBER 1959/001562/06)
TRANSFER SECRETARIES:
MERCANTILE REGISTRARS LIMITED
(REGISTRATION NUMBER 1987/003382/06)
10TH FLOOR, 11 DIAGONAL STREET, JOHANNESBURG 2001
PRIVATE BAG X105, MARSHALLTOWN 2107
HTTP://WWW.SANLAM.CO.ZA
SANLAMHOF, 8 MARCH 2000
ANNUAL RESULTS : SOUND EARNINGS GROWTH FOR SANLAM IN 1999
FINANCIAL HIGHLIGHTS
OPERATING PROFIT INCREASED BY 39%
HEADLINE EARNINGS INCREASED BY 65%, PER SHARE BY 26%
RETURN ON EQUITY OF 26%
RETURN ON EMBEDDED VALUE OF 24%
SANLAM REPORTED SOUND EARNINGS GROWTH WITH THE RELEASE OF ITS RESULTS FOR THE
YEAR ENDED 31 DECEMBER 1999 - ITS FIRST FULL-YEAR RESULTS AS A LISTED COMPANY.
THE TOTAL HEADLINE EARNINGS OF R1 955 MILLION FOR 1999 IS 65% UP ON EARNINGS
FOR 1998 WHILE HEADLINE EARNINGS PER SHARE AMOUNTED 73,4 CENTS - 26% HIGHER
THAN IN 1998. A 26% RETURN ON EQUITY WAS ACHIEVED AND SANLAM'S OPERATING PROFIT
INCREASED BY 39% TO R1 722 MILLION (1998: R1 237 MILLION).
RETURN ON EMBEDDED VALUE WAS 24%. EMBEDDED VALUE OF NEW BUSINESS AMOUNTED TO
R101 MILLION (R200 MILLION BEFORE CHANGES IN THE TAXATION BASIS OF LIFE
OFFICES). THIS COMPARES TO R57 MILLION FOR 1998, WHILE THE EMBEDDED VALUE PER
SHARE INCREASED FROM 827 CENTS IN 1998 TO 1 004 CENTS.
SANLAM HAD ASSETS UNDER MANAGEMENT AND ADMINISTRATION TO THE VALUE OF R216
BILLION (1998:R177 BILLION) AT THE END OF 1999.
SANLAM'S BOARD DECLARED A FINAL DIVIDEND OF 15 CENTS PER SHARE. IN SEPTEMBER
1999 A MAIDEN INTERIM DIVIDEND OF 10 CENTS WAS DECLARED, BRINGING THE TOTAL
DIVIDEND PER SHARE FOR 1999 TO 25 CENTS. SANLAM'S POLICY IS TO MAINTAIN A
DIVIDEND COVER OF BETWEEN TWO AND THREE TIMES OF HEADLINE EARNINGS AND AIMS TO
ACHIEVE STABLE REAL GROWTH IN DIVIDENDS. IN FUTURE DIVIDENDS WILL BE PAID
ANNUALLY AFTER THE RELEASE OF THE RESULTS.
ANNOUNCING THE RESULTS AT SANLAM'S HEAD OFFICE IN BELLVILLE TODAY, EXECUTIVE
CHAIRMAN MARINUS DALING SAID THAT IS EVIDENT THAT THE ENERGY RELEASED BY
SANLAM'S LISTING IN 1998 AND THE FOCUS ACHIEVED BY DECENTRALISING INTO FOUR
DISTINCT BUSINESSES, FLOWED THROUGH THE ORGANISATION IN 1999.
"OUR 1999 RESULTS SHOW THAT OUR BUSINESS BASE IS SUFFICIENTLY ESTABLISHED TO
START LAUNCHING NEW INITIATIVES AND EXPLORING OPPORTUNITIES FOR STRUCTURAL
GROWTH. THE PAST YEAR WAS EVENTFUL AND WE CAN REPORT PROGRESS ON THE ROAD TO
REALISING THE POTENTIAL OF THE GROUP TO BECOME THE BENCHMARK OF EXCELLENCE IN
FINANCIAL SERVICES IN THE MARKETS IN WHICH WE OPERATE.
"THE TURNAROUND OF SANLAM HEALTH AFTER THREE CONSECUTIVE YEARS OF HUGE LOSSES
(R220 MILLION IN 1998) TO POST A PROFIT OF R11 MILLION IS A TELLING EXAMPLE OF
OUR MANAGEMENT'S DELIVERY AND IT CONFIRMS THAT WE CAN OVERCOME DAUNTING
CHALLENGES," DALING SAID.
OTHER ACHIEVEMENTS HIGHLIGHTED BY DALING INCLUDE UNDERWRITING PROFITS IN THE
LIFE BUSINESS, UNIT TRUST INVESTMENT PERFORMANCES (IN PARTICULAR THE STANDARD
AND POOR/MICROPAL AND PLEXUS/RAGING BULL AWARDS TO SANLAM UNIT TRUSTS FOR THE
SECOND CONSECUTIVE YEAR AS THE BEST UNIT TRUST COMPANY MEASURED OVER WEIGHTED
ONE-, TWO-AND THREE-YEAR PERIODS AS WELL AS THEIR AWARDS FOR SPECIFIC FUNDS),
THE LAUNCHING OF A NEW IT PLATFORM, THE SUCCESSFUL IMPLEMENTATION OF CALL
CENTRES, AND THE COMPLETION OF SANLAM'S OUTSOURCING OF NON-CORE ACTIVITIES AND
SANTAM'S ACQUISITION OF GUARDIAN NATIONAL.
DALING ALSO REFERRED TO AREAS WHERE THE GROUP PERFORMED LESS SATISFACTORY AND
WHICH WILL RECEIVE SPECIFIC ATTENTION IN 2000.
ALTHOUGH THERE WAS AN IMPROVEMENT IN THE SECOND HALF, SANLAM HAVE ACHIEVED
LOWER THAN EXPECTED GROWTH IN SALES OVER THE YEAR. THE GROUP ALSO EXPERIENCED A
HIGHER THAN EXPECTED OUTFLOW OF FUNDS. IN TOTAL SANLAM PAID OUT MORE TO ITS
CLIENTS THAN WHAT IT RECEIVED FROM THEM AND THE GROUP INTENDS TO TURN THIS
UNSATISFACTORY SCENARIO AROUND. NOTWITHSTANDING SUBSTANTIAL PROGRESS IN
INVESTMENT PERFORMANCE, THE PERFORMANCE IN CERTAIN AREAS WAS NOT SATISFACTORY -
MAINLY AS A RESULT OF UNDER-PERFORMANCE IN PROPERTY AND DEVELOPMENT FUND
INVESTMENTS.
"IN ADDRESSING THESE ISSUES, OUR AIM FOR 2000 IS TO INCREASE OUR MARKET SHARE
AND SALES AND TO REVERSE THE OUTFLOW OF FUNDS. RETURNS ON EQUITY AND EMBEDDED
VALUE ARE KEY PERFORMANCE MEASURES IN OUR INDUSTRY. WE HAVE SET OURSELVES
TARGETS OF AT LEAST 10% REAL RETURN (ABOVE CORE INFLATION) IN RESPECT OF BOTH,
AS WELL AS FOR GROWTH IN HEADLINE EARNINGS. IN ADDITION WE STILL AIM TO
ACHIEVE EMBEDDED VALUE ON ONE YEAR'S NEW BUSINESS IN EXCESS OF R200 MILLION BY
NOT LATER THAN 2001 - DESPITE THE FACT THAT THE TAX BASIS HAS BEEN INCREASED
SIGNIFICANTLY. IF THE OLD BASIS STILL APPLIED THIS WOULD EQUATE TO A VALUE OF
R300 MILLION.
"WE HAVE CONCENTRATED OVER THE PAST TWO YEARS ON BUILDING A SOLID BASE IN EACH
OF OUR BUSINESSES BEFORE EMBARKING ON STRUCTURAL GROWTH. ENOUGH PROGRESS HAS
BEEN MADE IN THIS REGARD FOR US TO START GROWING OUR BUSINESS NOW AND TO SEEK
OPPORTUNITIES FOR INVESTMENT. THIS WILL TAKE SOME TIME TO COME TO FRUITION AND
ALSO PRESENT FURTHER SCOPE FOR THE DISCOUNT TO EMBEDDED VALUE TO REDUCE TO
LEVELS WHERE THE USE OF SANLAM PAPER TO FUND GROWTH WILL BE APPROPRIATE.
CHARL LE ROUX, WHO MANAGED THE TURNAROUND OF SANLAM HEALTH, HAS BEEN APPOINTED
AS CHIEF EXECUTIVE: NEW BUSINESS DEVELOPMENT AND WILL FOCUS PRIMARILY ON
STRUCTURAL GROWTH," DALING ANNOUNCED.
HE ADDED THAT IT WAS NOW APPROPRIATE FOR SANLAM'S BUSINESSES TO START LOOKING
FOR INTERNATIONAL OPPORTUNITIES. GENSEC ALREADY HAS AN INTERNATIONAL PRESENCE
BUT IT WILL TAKE A FEW YEARS BEFORE SANLAM'S OTHER BUSINESSES WILL HAVE A
MEANINGFUL PRESENCE ABROAD. SANLAM BELIEVES THAT ITS CORE COMPETENCIES ARE
BETTER SUITED TO THE EMERGING THAN THE DEVELOPED MARKETS AND THAT THERE ARE
STILL SIGNIFICANT OPPORTUNITIES IN THESE MARKETS.
SANLAM WILL IN 2000 ALSO FOCUS ON IMPROVING INVESTMENT PERFORMANCE BY GROWING
GENSEC ASSET MANAGEMENT AS A LEADER IN ITS INDUSTRY AND ON ACHIEVING MEANINGFUL
PROGRESS WITH ITS EMPLOYMENT EQUITY PROGRAMME.
- ENDS -
ISSUED BY FRANS VAN RENSBURG, SANLAM MEDIA RELATIONS (021) 947-4893/ CELL 083
626 8955
ENQUIRIES: FLIP RADEMEYER, FINANCIAL DIRECTOR : SANLAM (021) 947-6801
WALLY HARRIS, HEAD : FINANCIAL ACCOUNTS : SANLAM (021) 947-3253
JOINT NEWS RELEASE BY SANLAM AND ABSA
WEDNESDAY, 8 MARCH 2000
SANLAM MAINTAINS ITS SHAREHOLDING IN ABSA
SANLAM'S EXECUTIVE CHAIRMAN, MARINUS DALING, TODAY ANNOUNCED THAT SANLAM WOULD
MAINTAIN ITS 24% SHAREHOLDING IN ABSA. DALING FURTHER STATED THAT SANLAM WILL
REMAIN IN DISCUSSION WITH UNIVERSA, THE OTHER MAJOR SHAREHOLDER IN ABSA, ON
SHAREHOLDER ISSUES.
HE STATED THAT PROGRESS HAS BEEN MADE IN IDENTIFYING AND IMPLEMENTING AREAS OF
CO-OPERATION AND THE STRENGTHENING OF THE LONG-TERM RELATIONSHIP BETWEEN THE
TWO GROUPS. THIS FOLLOWS THE ANNOUNCEMENT BY BOTH SANLAM AND ABSA LAST YEAR
WHEN THEY DECIDED AGAINST A FULL MERGER.
THE CO-OPERATION PROCESS IS THEREFORE DRIVEN NOT AT A CORPORATE LEVEL, BUT BY
THE RESPECTIVE BUSINESSES OF THE GROUPS IN IDENTIFYING INITIATIVES AND
OPPORTUNITIES FOR THE FUTURE ESPECIALLY IN THE AREAS OF MASS MARKET INSURANCE,
ASSURANCE, FINANCIAL PLANNING MANAGEMENT AND ASSET MANAGEMENT.
THE GROUPS ARE PLEASED WITH SOME OF THE DEVELOPMENTS THAT HAVE ALREADY TAKEN
PLACE. IN THIS REGARD THE TWO INSURANCE COMPANIES IN THE ABSA GROUP HAVE
RECOGNISED THE SPECIALISED NATURE OF THE INVESTMENT SKILLS AVAILABLE IN GENSEC
AND HAVE DECIDED TO OUTSOURCE THE MANAGEMENT OF THEIR ASSETS TO GENSEC.
THE BASIS OF DEPARTURE FOR BOTH SANLAM AND ABSA IN THEIR CLOSER CO-OPERATION IS
THAT PRODUCTS, PROGRAMMES AND SERVICES MUST PROVIDE NEW BUSINESS AND PROFIT
OPPORTUNITIES FOR BOTH PARTIES.
- ENDS -
ENQUIRIES: ABSA
NICK CAIRNS, TEL. (011) 350-6170 / CELL 082 453 2070
SANLAM
FRANS VAN RENSBURG, TEL. (021) 947-4893 / CELL 083 626 8955
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