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SANLAM LIMITED
SANLAM YOUR FUTURE IN GOOD HANDS
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2000
32% GROWTH IN FUNDS RECEIVED FROM CLIENTS
NET OUTFLOW OF FUNDS REVERSED
SPF OPERATING PROFIT GROWTH OF 35%
HEADLINE EARNINGS PER SHARE GROWTH OF 18%
FOURFOLD GROWTH IN EMBEDDED VALUE OF NEW BUSINESS TO R82 MILLION
SALIENT FEATURES
6 MONTHS FULL YEAR
UNAUDITED AUDITED
2000 1999 1999
HEADLINE EARNINGS R MILLION 1 190 1 012 1 955
DILUTED HEADLINE
EARNINGS PER SHARE CENTS 45,1 38,1 73,4
GROUP OPERATING
PROFIT R MILLION 819 1 036 1 722
EMBEDDED VALUE
OF NEW BUSINESS R MILLION 82 19 101(1)
EMBEDDED VALUE
PER SHARE CENTS 980 990 1 004(1)
FUNDS RECEIVED
FROM CLIENTS R MILLION 21 868 16 513 35 768
NET INFLOW/
(OUTFLOW) OF FUNDS R MILLION 45 (3 427) (10 427)
ASSETS UNDER
MANAGEMENT R MILLION 214 800 200 775 215 924
(1) UNAUDITED.
INCOME STATEMENT
6 MONTHS FULL YEAR
UNAUDITED AUDITED
2000 1999 1999
NOTE R MILLION R MILLION R MILLION
FUNDS RECEIVED FROM
CLIENTS 1 21 868 16 513 35 768
OPERATING PROFIT AFTER
EXCEPTIONAL ITEMS 4/5 819 1 036 1 722
INVESTMENT INCOME 638 675 1 186
HEADLINE EARNINGS BEFORE
TAXATION 1 457 1 711 2 908
INCOME TAX ON HEADLINE
EARNINGS (87) (398) (386)
HEADLINE EARNINGS
AFTER TAXATION 1 370 1 313 2 522
MINORITIES (180) (301) (567)
HEADLINE EARNINGS 6 1 190 1 012 1 955
NET INVESTMENT SURPLUSES (575) 1 260(1) 1 482(1)
EARNINGS ATTRIBUTABLE
TO SHAREHOLDERS 615 2 272 3 437
FULLY DILUTED HEADLINE
EARNINGS PER SHARE (CENTS) 45,1 38,1 73,4
FULLY DILUTED ATTRIBUTABLE
EARNINGS PER SHARE (CENTS) 23,3 85,6 129,0
DIVIDEND PER SHARE (CENTS) - 10(2) 25
PRO FORMA INCOME STATEMENT - LONG TERM RATE OF RETURN BASIS (LTRR)
6 MONTH S FULL YEAR
UNAUDITED AUDITED
2000 1999 1999
NOTE R MILLION R MILLION R MILLION
OPERATING PROFIT AFTER
EXCEPTIONAL ITEMS 4/5 819 1 036 1 722
LTRR INVESTMENT RETURN 1 092 985 1 905
HEADLINE EARNINGS BEFORE
TAXATION 1 911 2 021 3 627
INCOME TAX ON HEADLINE EARNINGS (97) (396) (395)
HEADLINE EARNINGS AFTER TAXATION 1 814 1 625 3 232
MINORITIES (205) (316) (599)
HEADLINE EARNINGS 1 609 1 309 2 633
SHORT-TERM INVESTMENT
FLUCTUATIONS AFTER TAX AND
MINORITIES (994) 963(1) 804(1)
EARNINGS ATTRIBUTABLE TO
SHAREHOLDERS 615 2 272 3 437
FULLY DILUTED HEADLINE
EARNINGS PER SHARE (CENTS) 60,9 49,3 98,8
WEIGHTED AVERAGE SHARES
IN ISSUE (MILLION) 2 641 2 655 2 664
(1) INCLUDES R68 MILLION IN
RESPECT OF ACCOUNTING
POLICY CHANGE BY SUBSIDIARY.
(2) SPECIAL INTERIM DIVIDEND.
BALANCE SHEET
6 MONTHS FULL YEAR
UNAUDITED AUDITED
2000 1999 1999
R MILLION R MILLION R MILLION
ASSETS
NON-CURRENT ASSETS
FIXED ASSETS 320 327 328
GOODWILL 34 - -
INVESTMENTS 150 987 147 298 155 498
DEFERRED TAX 224 4 37
CURRENT ASSETS 20 856 17 850 19 705
TOTAL ASSETS 172 421 165 479 175 568
EQUITY AND LIABILITIES
SHAREHOLDERS'
FUNDS 18 292 16 910 17 677
MINORITY INTEREST 2 569 2 289 2 387
NON-CURRENT
LIABILITIES
POLICY
LIABILITIES 128 940 126 225 134 319
TERM FINANCE 4 153 5 412 4 062
DEFERRED TAX 406 827 693
CURRENT
LIABILITIES 18 061 13 816 16 430
TOTAL EQUITY
AND LIABILITIES 172 421 165 479 175 568
SEGREGATED FUNDS 42 379 35 296 40 356
TOTAL ASSETS
UNDER MANAGEMENT
AND ADMINISTERED 214 800 200 775 215 924
TANGIBLE NET
ASSET VALUE
PER SHARE (CENTS) 750 774 771
TOTAL ISSUED
SHARES (MILLION) 2 633 2 655 2 655
NOTES
6 MONTHS FULL YEAR
UNAUDITED AUDITED
2000 1999 1999
R MILLION R MILLION R MILLION
1. FUNDS RECEIVED FROM CLIENTS
SANLAM PERSONAL FINANCE 11 896 10 405 21 906
- INDIVIDUAL INSURANCE 7 004 6 470 13 980
- RECURRING PREMIUMS 3 825 3 892 8 310
- SINGLE PREMIUMS 2 159 1 710 4 046
- CONTINUATIONS 1 020 868 1 624
- UNIT TRUST INFLOWS 4 892 3 935 7 926
LINKED PRODUCTS 1 284 1 218 2 346
SANLAM EMPLOYEE BENEFITS 2 337 2 179 5 299
- RECURRING PREMIUMS 1 498 1 337 2 850
- SINGLE PREMIUMS 839 842 2 449
SHORT-TERM INSURANCE
- SANTAM 1 709 1 301 2 603
- SANLAM HEALTH 330 324 700
GENSEC SEGREGATED FUNDS 3 933 849 2 310
SANLAM NAMIBIA LIMITED 379 237 604
TOTAL FUNDS RECEIVED FROM
CLIENTS 21 868 16 513 35 768
2. TOTAL LIFE INSURANCE PREMIUMS
(INCLUDED IN NOTE 1)
INDIVIDUAL INSURANCE 7 491 6 878 14 772
- RECURRING PREMIUMS 3 847 3 904 8 344
- SINGLE PREMIUMS AND
CONTINUATIONS 3 644 2 974 6 428
EMPLOYEE BENEFITS 2 444 2 264 5 523
- RECURRING PREMIUMS 1 589 1 405 3 029
- SINGLE PREMIUMS 855 859 2 494
TOTAL LIFE INSURANCE PREMIUMS 9 935 9 142 20 295
3. NEW RECURRING INSURANCE PREMIUMS
- INDIVIDUAL INSURANCE
- INDEXED GROWTH 239 250 527
- INDIVIDUAL INSURANCE
- OTHER 384 331 749
- EMPLOYEE BENEFITS 95 62 139
TOTAL NEW RECURRING INSURANCE
PREMIUMS 718 643 1 415
4. OPERATING PROFIT
FINANCIAL SERVICES INCOME 5 790 5 475 10 988
SALES REMUNERATION 727 637 1 353
INCOME AFTER SALES REMUNERATION 5 063 4 838 9 635
UNDERWRITING POLICY BENEFITS 2 621 2 284 4 569
ADMINISTRATION COSTS 1 505 1 352 2 875
OPERATING PROFIT BEFORE
EXCEPTIONAL ITEMS 937 1 202 2 191
EXCEPTIONAL ITEMS 118 166 469
OPERATING PROFIT AFTER
EXCEPTIONAL ITEMS 819 1 036 1 722
5. OPERATING PROFIT CONTRIBUTION
- PERSONAL FINANCE 496 368 781
- EMPLOYEE BENEFITS 106 89 168
- GENSEC 272 589 747
- HEALTH 7 5 11
- NEW BUSINESS DEVELOPMENT - (5) 2
- SANTAM (13) 19 59
- CORPORATE INCOME 46 75 200
- CORPORATE COSTS (95) (104) (246)
GROUP OPERATING PROFIT 819 1 036 1 722
6. HEADLINE EARNINGS CONTRIBUTION
- PERSONAL FINANCE 723 477 972
- EMPLOYEE BENEFITS 275 207 399
- GENSEC 130 202 367
- HEALTH 20 12 34
- NEW BUSINESS DEVELOPMENT - (4) 2
- SANTAM 25 30 68
- NET CORPORATE INCOME * 17 88 113
GROUP HEADLINE CONTRIBUTION 1 190 1 012 1 955
* INCLUDES INVESTMENT INCOME EARNED ON THE "WAR-CHEST" ARISING FROM THE CAPITAL
RAISED
TOWARDS THE END OF 1998.
7. CORPORATE COSTS
CORPORATE MARKETING 23 21 62
SHAREHOLDER COSTS 14 21 52
CORPORATE SUPPORT SERVICES 22 20 41
SHARED SERVICES AND OTHER 36 42 91
TOTAL CORPORATE COSTS 95 104 246
8. PAYMENTS TO CLIENTS
SANLAM PERSONAL FINANCE 12 163 10 957 22 258
- INDIVIDUAL INSURANCE 7 226 7 567 15 560
- SURRENDERS 1 613 1 601 3 427
- CONTINUATIONS 1 020 868 1 624
- DEATH, MATURITY,
DISABILITY AND
ANNUITY BENEFITS 4 593 5 098 10 509
- UNIT TRUSTS OUTFLOWS 4 937 3 390 6 698
LINKED PRODUCTS 504 322 737
SANLAM EMPLOYEE BENEFITS 5 753 6 941 16 841
- FUND TERMINATIONS 2 938 3 703 10 717
- DEATH, RETIREMENT,
PENSION, DISABILITY
AND WITHDRAWAL BENEFITS 2 815 3 238 6 124
SHORT-TERM INSURANCE
- SANTAM 1 289 931 1 823
- SANLAM HEALTH 321 307 673
GENSEC SEGREGATED FUNDS 1 409 348 3 318
SANLAM NAMIBIA LIMITED 384 134 545
TOTAL PAYMENTS TO CLIENTS 21 823 19 940 46 195
NOTES (CONTINUED)
6 MONTHS FULL YEAR
UNAUDITED AUDITED
2000 1999 1999
R MILLION R MILLION R MILLION
9. CAPITAL ADEQUACY
REQUIREMENTS (CAR)
- CAR FOR LIFE BUSINESS
(R MILLION) 7 175 6 700 5 925
- TIMES CAR COVERED BY
SANLAM LIFE INSURANCE
LIMITED SHAREHOLDERS
FUND 2,2 2,4 2,7
EMBEDDED VALUE
6 MONTHS FULL YEAR
UNAUDITED AUDITED
2000 1999 1999
R MILLION R MILLION R MILLION
EMBEDDED VALUE
SANLAM GROUP SHAREHOLDERS' NET ASSETS
(PER BALANCE SHEET) 18 292 16 910 17 677
REVALUATION OF SHAREHOLDERS' INTEREST
IN SANTAM AND GENSEC TO FAIR VALUE 1 447 3 629 2 786
SANLAM GROUP SHAREHOLDERS ADJUSTED NET
ASSETS 19 739 20 539 20 463
NET VALUE OF EXISTING LIFE INSURANCE
BUSINESS 6 070 5 753(1) 6 193
- VALUE OF EXISTING LIFE INSURANCE
BUSINESS 7 655 7 597 7 774
- COST OF HOLDING PRUDENTIAL RESERVES (1 585) (1 844) (1 581)
SANLAM GROUP EMBEDDED VALUE 25 809 26 292 26 656
EMBEDDED VALUE EARNINGS
EMBEDDED VALUE FROM NEW LIFE INSURANCE
BUSINESS 82 19(2) 101
- VALUE OF NEW LIFE BUSINESS 97 43 132
- COST OF HOLDING PRUDENTIAL
RESERVES (15) (24) (31)
EARNINGS FROM EXISTING LIFE INSURANCE
BUSINESS 657 445 1 056
- EXPECTED RETURN 574 600 1 219
- OPERATING EXPERIENCE VARIATIONS 75 (80) (101)
- OPERATING ASSUMPTION CHANGES 8 (75) (62)
EMBEDDED VALUE EARNINGS FROM LIFE
OPERATIONS 739 464 1 157
ECONOMIC AND OTHER (INCLUDING ASSET MIX)
ASSUMPTION CHANGES (66) - 521
TAX CHANGES (23) - (512)
INVESTMENT VARIANCES (292) 313 408
GROWTH FROM LIFE INSURANCE BUSINESS 358 777 1 574
INVESTMENT RETURN ON SHAREHOLDERS
ADJUSTED NET ASSETS (1 205) 3 829 3 794
TOTAL EMBEDDED VALUE EARNINGS (847) 4 606 5 368
EMBEDDED VALUE OF NEW LIFE BUSINESS
AS % OF APE (3) 8,8% 2,4% 5,7%
(1) THIS VALUE ON A COMPARABLE BASIS, ALLOWING FOR THE CURRENT TAX RULES, WOULD
HAVE BEEN APPROXIMATELY R5 174 MILLION.
(2) ON THE CURRENT TAX BASIS THIS WOULD HAVE BEEN A NEGATIVE EMBEDDED VALUE OF
NEW BUSINESS OF R11 MILLION.
(3) ANNUAL PREMIUM EQUIVALENT (APE) IS EQUIVALENT TO NEW RECURRING PREMIUMS
(EXCLUDING INDEXED GROWTH PREMIUMS) PLUS 10% SINGLE PREMIUMS.
PRINCIPAL ASSUMPTIONS % % %
PRE-TAX INVESTMENT RETURNS
- EQUITIES 16,7 18,5 16,1
- PROPERTY 15,7 17,0 15,1
- FIXED-INTEREST SECURITIES 14,7 15,5 14,1
- CASH 12,7 14,0 12,1
INFLATION 8,2 9,0 7,6
RISK DISCOUNT RATE 16,7 18,0 16,1
FINANCIAL RATIOS
6 MONTHS FULL YEAR
UNAUDITED AUDITED
2000 1999 1999
% % %
RETURNS (1)
- HEADLINE RETURN ON EQUITY (2) 13,9 14,0 13,1
- FIVE-YEAR AVERAGE RETURN ON EQUITY (3) 15,0 28,0 23,3
- RETURN ON EMBEDDED VALUE (4) -6,4 46,4 24,4
EMBEDDED VALUE GROWTH FROM LIFE
INSURANCE BUSINESS (5) 11,6 32,0 30,1
GROUP ADMINISTRATION COST RATIO (6) 29,7 28,1 29,8
GROUP OPERATING MARGIN (7) 16,2 21,4 17,9
FINANCIAL RATIOS - ANALYSIS PER BUSINESS
- ADMIN COST RATIO - PERSONAL FINANCE 36,6 37,6 36,3
- EMPLOYEE BENEFITS 19,7 18,2 19,4
- HEALTH 16,1 21,5 19,3
- GENSEC 49,8 25,2 40,1
- SANTAM 15,0 14,1 15,0
- OPERATING MARGIN - PERSONAL FINANCE 27,5 21,0 21,3
- EMPLOYEE BENEFITS 14,2 13,2 12,1
- HEALTH 1,8 1,2 1,3
- GENSEC 50,2 74,8 59,9
- SANTAM -0,9 1,7 2,7
(1) RETURNS FOR THE SIX MONTHS HAVE BEEN ANNUALISED.
(2) HEADLINE EARNINGS AS A PERCENTAGE OF SHAREHOLDERS' FUNDS AT THE BEGINNING
OF THE YEAR.
(3) FIVE-YEAR AVERAGE RETURN IS THE ATTRIBUTABLE EARNINGS BUT USING THE
AVERAGE INVESTMENT RETURN (AFTER ADJUSTING THE INTEREST OF THE SHAREHOLDERS'
FUNDS IN GENSEC AND SANTAM FROM NET ASSET VALUE TO MARKET VALUE) OVER THE PAST
FIVE YEARS, AS A PERCENTAGE OF SHAREHOLDERS' FUND AT THE BEGINNING OF THE YEAR.
(4) GROWTH IN EMBEDDED VALUE (BEFORE DIVIDENDS PAID) AS A PERCENTAGE OF
EMBEDDED VALUE AT THE BEGINNING OF THE YEAR.
(5) EMBEDDED VALUE GROWTH FROM LIFE INSURANCE BUSINESS AS A PERCENTAGE OF THE
NET VALUE OF EXISTING LIFE INSURANCE BUSINESS AT THE BEGINNING OF THE YEAR.
(6) ADMINISTRATION COSTS AS PERCENTAGE OF INCOME EARNED BY SHAREHOLDERS NET
OF SALES REMUNERATION.
(7) OPERATING PROFIT AS A PERCENTAGE OF INCOME EARNED BY THE SHAREHOLDERS
AFTER SALES REMUNERATION.
GROUP OVERVIEW
OUR STRATEGIC FOCUS FOR 2000 IS TO GROW OUR BUSINESS AND WE ARE PLEASED THAT
OUR INTERIM RESULTS FOR JUNE 2000, WITH SOME EXCEPTIONS, INDICATE THAT WE ARE
SUCCEEDING IN THIS OBJECTIVE. GROUP HEADLINE EARNINGS GREW BY 18%. GROUP
EMBEDDED VALUE OF NEW LIFE INSURANCE BUSINESS GREW SUBSTANTIALLY FROM R19
MILLION IN 1999 (A NEGATIVE VALUE OF R11 MILLION ON A COMPARABLE TAX BASIS) TO
A R82 MILLION PROFIT, ALTHOUGH IT IS NOT YET AT THE TARGET LEVEL. SANLAM
PERSONAL FINANCE (SPF) ACHIEVED EXCELLENT GROWTH IN OPERATING PROFIT OF 35% AND
THIS BUSINESS CONTRIBUTED 61% TO SANLAM'S HEADLINE EARNINGS FOR THE SIX MONTHS.
GROSS FUNDS RECEIVED FROM CLIENTS GREW BY 32% WHICH INCLUDES SIGNIFICANT GROWTH
IN GENSEC'S SEGREGATED FUND INFLOWS FROM R849 MILLION TO R3 933 MILLION AND A
26% GROWTH IN SPF'S INDIVIDUAL LIFE SINGLE PREMIUMS. THE NET INFLOW OF FUNDS
(AFTER DEDUCTING BENEFITS PAID TO CLIENTS) IMPROVED SUBSTANTIALLY FROM A NET
OUTFLOW OF R3 427 MILLION IN 1999 TO A NET INFLOW OF R45 MILLION IN THE FIRST
SIX MONTHS OF 2000.
SANLAM EMPLOYEE BENEFIT'S (SEB) OPERATING PROFIT INCREASED BY 19% TO R106
MILLION FOR THE SIX MONTHS WHILST ACHIEVING 12% GROWTH IN RECURRING PREMIUMS
AND REDUCING FUND TERMINATIONS TO R2,9 BILLION COMPARED TO R3,7 BILLION IN THE
FIRST HALF OF 1999.
THESE SATISFACTORY RESULTS WERE TEMPERED BY THE 36% REDUCTION IN GENSEC'S
CONTRIBUTION TO HEADLINE EARNINGS AS THEIR RESULTS, PARTICULARLY THEIR EQUITY
TRADING ACTIVITIES AND PRIVATE EQUITY AND SMALL CAPITALISATION INVESTMENTS,
WERE SEVERELY IMPACTED BY THE DIFFICULT INVESTMENT MARKET CONDITIONS IN THE
FIRST HALF OF 2000. GENSEC ANNOUNCED AT THE END OF MAY 2000 THAT ITS PORTFOLIO
OF CORPORATE ASSETS HAS BEEN RESTRUCTURED TO EFFECTIVELY CLOSE DOWN ITS EQUITY
TRADING ACTIVITIES. SANTAM'S UNDERWRITING RESULTS WERE AFFECTED BY
ENVIRONMENTAL FACTORS. LOWER INTEREST RATES, TOGETHER WITH OUR EQUITY ACCOUNTED
SHARE OF ABSA'S FLAT EARNINGS, RESULTED IN A 6% REDUCTION IN INVESTMENT INCOME
EARNED ON THE INVESTMENTS OF THE SHAREHOLDERS FUND. THE ABOVE DECLINES WERE
OFFSET BY THE REVERSAL OF AN OVERPROVISION OF DEFERRED TAX OF R181 MILLION.
THIS PROVISION FOR DEFERRED TAX WAS RAISED IN PRIOR YEARS ON THE FINANCIAL
SOUNDNESS VALUATION BASIS ON THE PREVIOUS TAX DISPENSATION FOR LONG TERM
INSURERS. THE TAX DISPENSATION WAS AMENDED WITH EFFECT FROM 1 JANUARY 2000 TO
BRING THE ACTUAL TAX CHARGE MORE IN LINE WITH THE ACCOUNTING PROVISION. THIS
REVERSAL REPRESENTS APPROXIMATELY HALF OF THE EXPECTED FULL YEAR REVERSAL FOR
2000. AT 30 JUNE 2000 THE REMAINING DEFERRED TAX LIABILITY, AFTER THE REVERSAL
OF THE R181 MILLION IN THE FIRST HALF OF 2000, AMOUNTED TO R406 MILLION.
GROUP FINANCIAL SERVICES INCOME INCREASED BY ONLY 6% DUE MAINLY TO A 31%
REDUCTION IN GENSEC'S INCOME AND LOWER INCOME EARNED ON WORKING CAPITAL AS A
RESULT OF LOWER INTEREST RATES.
THE GROUP ADMINISTRATION COST RATIO DETERIORATED FROM 28,1% IN 1999 TO 29,7%
BUT IMPROVEMENTS WERE RECORDED BY SPF AND HEALTH WHILST THE RATIOS OF GENSEC
AND SEB INCREASED. CORPORATE COSTS DECREASED BY 9% TO R95 MILLION.
EXCEPTIONAL ITEMS, WHICH CONSIST LARGELY OF SYSTEM DEVELOPMENT EXPENDITURE, WAS
29% DOWN ON THE 1999 LEVELS MAINLY DUE TO SPF'S LOWER LEVEL OF SYSTEM
DEVELOPMENT EXPENDITURE AND NON-RECURRING RESTRUCTURING EXPENSES INCURRED IN
1999.
ATTRIBUTABLE EARNINGS, WHICH INCLUDE THE REALISED AND UNREALISED INVESTMENT
SURPLUSES ON THE INVESTMENTS OF THE SHAREHOLDERS FUND, REDUCED TO R615 MILLION
FROM R2 272 MILLION IN 1999 AND REFLECTS THE STOCK MARKET DECLINE DURING THE
FIRST HALF OF 2000 COMPARED TO THE STRONG GROWTH IN THESE MARKETS DURING THE
FIRST HALF OF 1999.
THE ANNUALISED HEADLINE RETURN ON EQUITY FOR THE FIRST HALF OF 2000 OF 13,9% IS
SIMILAR TO THE 14,0% ACHIEVED IN 1999 WHILE THE ANNUALISED FIVE YEAR AVERAGE
RETURN ON EQUITY WAS 15,0% COMPARED TO 28,0% IN 1999.
SEGMENTAL BUSINESS RESULTS
SANLAM PERSONAL FINANCE (SPF)
SPF ACHIEVED SIGNIFICANT OPERATING PROFIT GROWTH OF 35% TO R496 MILLION IN THE
FIRST HALF OF 2000 WHICH IS WELL IN EXCESS OF THEIR GROWTH TARGET. RISK PROFITS
ROSE BY 44% TO R181 MILLION AS THE FAVOURABLE CLAIMS EXPERIENCE OF THE LATTER
PART OF 1999 CONTINUED IN 2000. MARKET RELATED INCOME (WHICH INCLUDES INCOME
ATTRIBUTABLE TO THE NON-PARTICIPATING PORTFOLIOS AND INCOME EARNED ON WORKING
CAPITAL) GREW BY 20% TO R273 MILLION. FOLLOWING THE IMPROVEMENT IN ITS ASSET
COMPOSITION IN 1999, THE INCREASE IN EARNINGS FROM THE NON-PARTICIPATING LIFE
ANNUITY PORTFOLIO MORE THAN COMPENSATED FOR THE NEGATIVE IMPACT THAT THE
SUBSTANTIALLY LOWER INTEREST RATES HAD ON INTEREST EARNED ON WORKING CAPITAL.
THE ADMINISTRATION SURPLUS OF R137 MILLION WAS 9% LOWER THAN 1999 DUE IN PART
TO A MORE CONSERVATIVE REVENUE RECOGNITION POLICY APPLIED FOR THE NEW STRATUS
RANGE OF PRODUCTS. ADMINISTRATION EXPENDITURE WAS WELL CONTAINED AND REMAINED
AT THE SAME LEVEL AS 1999. COST BENEFITS REALISED AS A RESULT OF THE REDUCTION
IN STAFF NUMBERS AND THE CLOSURE OF OFFICES DURING 1998 AND 1999 FULLY
COMPENSATED FOR VOLUME BASED COST INCREASES AND INFLATIONARY INCREASES. THE
ADMINISTRATION COST RATIO IMPROVED TO 36,6% FROM 37,6% IN THE FIRST HALF OF
1999.
SPF'S INVESTMENT IN IT PROJECTS, WHICH IS WRITTEN OFF IMMEDIATELY, AMOUNTED TO
R85 MILLION FOR THE FIRST SIX MONTHS AND IS 9% LOWER THAN 1999. THIS
EXPENDITURE IS SUBSTANTIALLY FOCUSSED ON THE NEW LIFE ADMINISTRATION SYSTEM,
THE ELECTRONIC SALES AID (S.NET) AND THE CLIENT DATABASE WHICH WILL IMPROVE
PRODUCT DEVELOPMENT CAPABILITIES AND CLIENT SERVICE. THE INVESTMENT IN THESE
PROJECTS WILL BE LESS THAN THE 1999 LEVELS.
TOTAL FUNDS RECEIVED FROM CLIENTS GREW BY 14% TO R11 896 MILLION SUBSTANTIALLY
ON THE BACK OF A 26% RISE IN SINGLE PREMIUMS AND A 24% GROWTH IN FUNDS
ATTRACTED BY SANLAM UNIT TRUST. COMPETITIVE CONTINUATION OPTIONS AVAILABLE TO
POLICYHOLDERS ON MATURITY OF THEIR POLICIES CONTRIBUTED TO AN 18% GROWTH IN
FUNDS REINVESTED WITH SANLAM, ENABLING THE RETENTION OF 40% OF MATURING
INVESTMENTS. TOTAL RECURRING PREMIUMS REMAINED ON A SIMILAR LEVEL AS IN 1999,
AS NEW BUSINESS PREMIUM GROWTH WAS OFFSET BY THE NET EROSION OF PREMIUMS CAUSED
BY BENEFIT PAYMENTS ON POLICY MATURITIES, SURRENDERS AND LAPSES. HOWEVER AS
MENTIONED ABOVE, A LARGE PORTION OF THE BENEFIT PAYMENTS WERE RETAINED BY
SANLAM BY MEANS OF SINGLE PREMIUM CONTINUATIONS. POLICY SURRENDERS WHICH HAD
ESCALATED ABNORMALLY IN THE PAST TWO YEARS STARTED TO LEVEL OUT AND ARE NOW 10%
LOWER THAN FOR THE SIX MONTHS TO DECEMBER 1999. NEW RECURRING PREMIUMS GREW BY
7% ON 1999 AFTER A TRADITIONALLY SLOW START EARLY IN THE YEAR. FIRST-YEAR
POLICY LAPSE RATES IMPROVED TO 15,2% COMPARED TO 15,8% IN 1999 DUE TO AN
IMPROVEMENT IN THE QUALITY OF BUSINESS WRITTEN RESULTING FROM A MORE STRINGENT
SCREENING PROCESS.
SPF REMAINS WELL ON TRACK TO EXCEED ITS TARGET OF 10% REAL GROWTH IN OPERATING
PROFIT FOR 2000. CURRENT INDICATIONS ARE THAT SUBJECT TO FAVOURABLE MARKET
CONDITIONS, THE SECOND HALF PERFORMANCE SHOULD AT LEAST EQUAL THAT OF THE FIRST
SIX MONTHS. NEW BUSINESS VOLUMES SHOWED STRONG GROWTH AFTER A TRADITIONALLY
SLOW START FOR THE YEAR AND ARE ON TARGET TO EXCEED 1999 LEVELS IN REAL TERMS.
A MAJOR TRANSACTION CONCLUDED AFTER CLOSURE OF THE FIRST SIX MONTH PERIOD WILL
CONTRIBUTE TO A HEALTHY INCREASE IN NEW RECURRING PREMIUMS FOR THE YEAR.
SANLAM EMPLOYEE BENEFITS (SEB)
SEB ACHIEVED A 19% GROWTH IN OPERATING PROFIT TO R106 MILLION COMPARED TO R89
MILLION IN 1999 MAINLY DUE TO GOOD GROWTH IN PROFITS ON RISK BUSINESS. THIS WAS
ACCOMPANIED BY GROWTH IN THE OPERATING MARGIN RATIO FROM 13,2% TO 14,2%. SEB'S
ADMINISTRATION COST RATIO DETERIORATED FROM 18,2% IN THE FIRST HALF OF 1999
COMPARED TO 19,7% IN 2000. THIS IS MAINLY DUE TO INCREASED SALES AND MARKETING
EXPENDITURE WHERE BENEFITS ARE EXPECTED TO MATERIALISE IN THE NEAR FUTURE.
DURING THE PERIOD UNDER REVIEW, RECURRING PREMIUMS GREW 12% TO R1 498 MILLION.
SINGLE PREMIUMS HOWEVER REMAINED ON LEVELS SIMILAR TO THOSE ACHIEVED DURING
1999. THE SIGNIFICANTLY LOWER LEVELS OF FUND TERMINATIONS OF R2 938 MILLION
COMPARED TO R3 703 MILLION IN 1999 ARE NOTABLE AND THIS TREND IS EXPECTED TO
CONTINUE FOR THE REMAINDER OF THE YEAR. IN ADDITION LOWER BENEFIT PAYMENTS OF
R2 815 MILLION ALSO REFLECT AN IMPROVED CLAIMS EXPERIENCE DURING THE PERIOD
UNDER REVIEW, CAUSING SEB'S TOTAL BENEFITS PAID TO BE 17% LOWER THAN 1999'S R6
941 MILLION.
MARKET CONDITIONS OVER THE PAST SIX MONTHS REMAINED COMPETITIVE WITH A WIDE
RANGE OF PRODUCTS BEING MADE AVAILABLE BY AN INCREASING NUMBER OF PARTICIPANTS
SERVING THE CHANGES IN MEMBER EXPECTATIONS AS THEY ASSUME GREATER
RESPONSIBILITY FOR THEIR OWN RETIREMENT FUND PROVISIONS. SEB RESPONDED TO THESE
DEMANDS BY FOCUSING ON INCREASED SPECIALISED SERVICES FOR KEY DECISION-MAKERS
WITH AN INCREASING FOCUS ON INDIVIDUAL MEMBERS.
THE PERIOD UNDER REVIEW ALSO SAW THE FIRST SUCCESSFUL MIGRATION OF FUNDS TO ITS
NEW RETIREMENT FUND ADMINISTRATION PLATFORM, WIZ@RD, WHICH WILL ENHANCE
SERVICES TO INDIVIDUAL MEMBERS AND BE MORE FLEXIBLE TO NEW DEMANDS. VARIOUS
SURVEYS ALSO CONFIRMED SEB'S LEADERSHIP IN FUND ADMINISTRATION SERVICES,
COMPETITIVE PRICING FOR RISK PRODUCTS AND BEST BONUS DECLARATIONS ON ITS
MONTHLY FULLY VESTING GUARANTEED PRODUCTS.
FORECASTS FOR THE REST OF THE YEAR REMAIN POSITIVE AND GROWTH ON 1999 IS
EXPECTED. FOCUS IS ALSO BEING PLACED ON BRINGING NEW PRODUCTS TO THE MARKET
DURING THE REMAINDER OF THE YEAR.
GENSEC
ALTHOUGH THE FINANCIAL PERFORMANCE OF GENSEC'S ASSET MANAGEMENT, INVESTMENT
BANKING, EQUITY UNDERWRITING AND PROPERTY SERVICES WERE PLEASING FOR THE FIRST
SIX MONTHS OF 2000, THE WEAK FINANCIAL MARKETS DURING THIS PERIOD HAD A
SEVERELY NEGATIVE IMPACT ON THE PERFORMANCE OF THEIR EQUITY TRADING ACTIVITIES,
PRIVATE EQUITY INVESTMENTS AND SMALL CAPITALISATION INVESTMENTS WHICH RESULTED
IN A 40% REDUCTION IN THEIR TOTAL EARNINGS FROM R438 MILLION IN 1999 TO R261
MILLION.
AS A RESULT, GENSEC'S CONTRIBUTION TO SANLAM'S HEADLINE EARNINGS REDUCED BY 36%
FROM R202 MILLION IN 1999 TO R130 MILLION. THE SANLAM GROUP'S INTEREST IN
GENSEC AT 30 JUNE 2000 WAS 65,0% OF WHICH 49,9% WAS HELD BY THE SHAREHOLDERS
FUND.
PROVIDED THAT EQUITY MARKETS DO NOT MOVE DOWN SHARPLY, GENSEC'S EARNINGS FOR
THE SECOND HALF OF 2000 ARE EXPECTED TO BE BETTER THAN THAT EARNED DURING THE
FIRST HALF BUT EARNINGS FOR THE FULL YEAR TO 31 DECEMBER 2000 ARE EXPECTED TO
BE LOWER THAN THE EARNINGS FOR THE YEAR ENDED 31 DECEMBER 1999. SHAREHOLDERS
ARE REFERRED TO GENSEC'S RESULTS WHICH WERE PUBLISHED RECENTLY.
SANLAM HEALTH
PREMIUM INCOME FOR THE FIRST SIX MONTHS IN 2000 REMAINED FAIRLY STABLE AT R330
MILLION (R324 MILLION IN 1999) AND AN OPERATING PROFIT OF R7 MILLION WAS
ACHIEVED COMPARED TO R5 MILLION IN 1999.
SANLAM HEALTH CONTINUED ITS EXTERNAL FOCUS WITH THE SUCCESSFUL COMPLETION OF
THE RESTRUCTURING OF ITS MARKETING DIVISION AND THE STRENGTHENING OF ITS
PRESENCE IN GAUTENG WITH THE ESTABLISHMENT OF ITS MAIN MARKETING DIVISION IN
JOHANNESBURG. GIVEN SANLAM HEALTH'S MEMBERSHIP LOSS OVER THE PAST FEW YEARS,
THE GREATEST CHALLENGE REMAINS THE GROWTH OF NEW BUSINESS. NOTWITHSTANDING THE
SUCCESSFUL TURNAROUND OF THEIR BUSINESS IN 1999, THE REALISTIC EXPECTATION IS
THAT SATISFACTORY GROWTH IN NEW BUSINESS WILL ONLY BE ACHIEVED AFTER 2000.
SANLAM HEALTH IS FOCUSSING ON INFLUENCING DECISION-MAKERS IN MEDICAL FUNDS AND
SCHEMES TO SECURE NEW BUSINESS FOR 2001 AS THESE DECISIONS ARE TAKEN ON AN
ANNUAL BASIS. THIS IS A KEY SUCCESS AREA FOR 2000.
NEW BUSINESS DEVELOPMENT
NEW BUSINESS DEVELOPMENT WAS ESTABLISHED AT THE END OF 1999 TO EXPLORE
OPPORTUNITIES FOR INVESTMENT AND TO LAUNCH NEW INITIATIVES FOR STRUCTURAL
GROWTH IN THE SANLAM GROUP.
THEIR FIRST INITIATIVE, ANNOUNCED DURING MARCH 2000, WAS AN AGREEMENT WITH
MACQUARIE BANK, A LEADING AUSTRALIAN FINANCIAL SERVICES GROUP, TO JOINTLY
ESTABLISH A FINANCIAL SERVICES BUSINESS FOR THE HIGH NET WORTH SOUTH AFRICAN
MARKET. THIS WILL ENCOMPASS A TECHNOLOGY DRIVEN RANGE OF INNOVATIVE FINANCIAL
SOLUTIONS AND PRODUCTS AND IS EXPECTED TO LAUNCH THE FIRST PRODUCT WITHIN THE
NEXT SIX MONTHS. GOOD PROGRESS IS BEING MADE ON THIS DEVELOPMENT PROJECT.
THE ACTIVITIES OF SANLAM PERSONAL PORTFOLIOS (SP2), THE EXISTING LINKED PRODUCT
PROVIDER IN THE SANLAM GROUP, HAS BEEN INCLUDED WITH NEW BUSINESS DEVELOPMENT.
DESPITE VOLATILE MARKET CONDITIONS, INFLOWS TO SP2 INCREASED BY 5% TO R1 284
MILLION COMPARED TO 1999 AND OUR MARKET SHARE IN RESPECT OF ASSETS UNDER
MANAGEMENT IS SHOWING CONTINUOUS GROWTH.
AT THIS STAGE NEW BUSINESS DEVELOPMENT'S CONTRIBUTION TO GROUP PROFITS ARE
MARGINAL.
SANTAM
THE RESULTS FOR SANTAM INCLUDE THE MERGED ACTIVITIES OF GUARDIAN NATIONAL WITH
EFFECT FROM 1 MAY 2000. THE PERIOD UNDER REVIEW WAS CHARACTERISED BY EXTREMELY
DIFFICULT UNDERWRITING CONDITIONS BUT STRICT UNDERWRITING MEASURES LED TO A
CONSIDERABLE TURNAROUND IN THE GUARDIAN PORTFOLIO AND ALTHOUGH UNFAVOURABLE
WEATHER CONDITIONS LED TO ABNORMALLY HIGH CLAIM LEVELS, PRUDENT REINSURANCE
ARRANGEMENTS ENABLED SANTAM TO LIMIT ITS GROUP UNDERWRITING LOSS TO R13 MILLION
COMPARED TO A PROFIT OF R19 MILLION LAST YEAR. AFTER INVESTMENT INCOME AND TAX,
SANTAM'S EARNINGS OF R73 MILLION WAS 23% LOWER THAN THE R95 MILLION ACHIEVED
LAST YEAR AND THEIR CONTRIBUTION TO THE SANLAM HEADLINE EARNINGS DECREASED BY
17% FROM R30 MILLION TO R25 MILLION.
ALTHOUGH UNDERWRITING CONDITIONS ARE EXPECTED TO STABILISE IN THE NEXT SIX
MONTHS, THE SEVERE WEATHER-RELATED LOSSES OF THE FIRST QUARTER WILL PLACE A
STRAIN ON THE FULL YEAR'S EARNINGS. IT IS THUS EXPECTED THAT SANTAM'S EARNINGS
PER SHARE WILL BE DOWN FOR THE FULL YEAR, BUT NOT TO THE SAME EXTENT
EXPERIENCED FOR THE FIRST SIX MONTHS. SHAREHOLDERS ARE REFERRED TO SANTAM'S
RESULTS WHICH WERE PUBLISHED RECENTLY.
HEADLINE EARNINGS BASED ON THE LONG-TERM RATE OF RETURN
HEADLINE EARNINGS DETERMINED ON A LONG-TERM RATE OF RETURN (LTRR) AND BASED ON
THE STATEMENT OF RECOMMENDED PRACTICE (SORP) IN THE UNITED KINGDOM HAVE BEEN
INCLUDED IN THIS ANNOUNCEMENT. THESE EARNINGS INCLUDE AN EXPECTED LONG-TERM
INVESTMENT RETURN OF 13% ON THE INVESTMENTS OF THE SHAREHOLDERS FUND.
SHORT-TERM FLUCTUATIONS IN THE INVESTMENT RETURNS, WHICH REPRESENT THE
DIFFERENCE BETWEEN THE ACTUAL RETURN AND THE LONG-TERM INVESTMENT RETURN, ARE
INCLUDED IN ATTRIBUTABLE EARNINGS.
PRO FORMA HEADLINE EARNINGS PER SHARE ON THE LTRR BASIS AMOUNTED TO 60,9 CENTS
FOR THE FIRST SIX MONTHS WHICH IS 24% HIGHER THAN THE 49,3 CENTS IN RESPECT OF
THE FIRST HALF OF 1999.
EMBEDDED VALUE AND VALUE OF NEW BUSINESS
THE EMBEDDED VALUE OF NEW BUSINESS HAS SHOWED GOOD GROWTH FROM R19 MILLION IN
1999 (A NEGATIVE VALUE OF R11 MILLION BASED ON THE CURRENT TAX BASIS) TO A
POSITIVE R82 MILLION FOR THE FIRST HALF OF 2000. THIS GROWTH HAS BEEN DRIVEN BY
SPF WHERE THE NEW BUSINESS EMBEDDED VALUE INCREASED FROM A COMPARABLE R1
MILLION TO R63 MILLION AND SEB FROM A COMPARABLE R15 MILLION TO R38 MILLION
WHILE THE TOTAL NEW BUSINESS EMBEDDED VALUE WAS REDUCED BY CORPORATE COSTS
WHICH DECREASED TO R19 MILLION FROM A COMPARABLE R27 MILLION. INCREASED NEW
BUSINESS PREMIUMS AND AN OVERALL IMPROVEMENT IN MARGINS CONTRIBUTED TO THIS
GROWTH.
THE EMBEDDED VALUE EARNINGS FROM OPERATIONS GREW BY 59% FROM R464 MILLION IN
1999 TO R739 MILLION. HOWEVER, THE TOTAL EMBEDDED VALUE EARNINGS, WHICH
INCLUDES THE INVESTMENT RETURN ON THE ADJUSTED SHAREHOLDERS FUND, AMOUNTED TO A
DEFICIT OF R847 MILLION COMPARED TO A SURPLUS OF R4 606 MILLION FOR THE FIRST
SIX MONTHS OF 1999. THIS INVESTMENT RETURN INCLUDES REALISED AND UNREALISED
INVESTMENT SURPLUSES WHICH WERE NEGATIVELY INFLUENCED BY STOCK MARKET
CONDITIONS MENTIONED EARLIER IN THIS ANNOUNCEMENT AND IN PARTICULAR THE SHARE
PRICE OF GENSEC.
THE SENSITIVITY OF THE EMBEDDED VALUES TO THE BASE RISK DISCOUNT RATE OF 16,7%
HAS BEEN DETERMINED. IF THE RISK DISCOUNT RATE IS REDUCED BY 1,5% TO 15,2%, THE
NET VALUE OF EXISTING LIFE INSURANCE BUSINESS WOULD INCREASE BY 18% AND THE NET
VALUE OF NEW LIFE INSURANCE BUSINESS WOULD INCREASE BY 29%. IF THE RISK
DISCOUNT RATE IS INCREASED BY 1,5% TO 18,2% THEN THE NET VALUE OF EXISTING LIFE
INSURANCE BUSINESS WOULD DECLINE BY 15% AND THE NET VALUE OF NEW LIFE INSURANCE
WOULD DECLINE BY 24%.
DIVIDENDS
IN ACCORDANCE WITH SANLAM'S POLICY OF ANNUAL DISTRIBUTION, NO INTERIM DIVIDEND
HAS BEEN DECLARED.
SHARES IN ISSUE
IN TERMS OF THE DEMUTUALISATION PROPOSAL OF 1998, A NUMBER OF SHARES WERE HELD
BY THE SANLAM DEMUTUALISATION TRUST TO ENABLE ADJUSTMENTS TO BE MADE IN THE
EVENT OF ERRORS IN THE ALLOCATION OF FREE SHARES. THE PERIOD WITHIN WHICH
ADJUSTMENTS COULD BE MADE EXPIRED ON 22 OCTOBER 1999. THE REMAINING 22,2
MILLION SHARES HELD FOR THIS PURPOSE WERE RETURNED TO SANLAM LIMITED AND ARE
CURRENTLY HELD AS TREASURY STOCK BY ITS WHOLLY-OWNED SUBSIDIARY, BELDIV
INVESTMENTS (PTY) LIMITED. THESE INTER-GROUP HOLDINGS ARE ELIMINATED ON
CONSOLIDATION OF THE SANLAM GROUP RESULTS.
CAUTIONARY ANNOUNCEMENTS
IN VARIOUS JOINT ANNOUNCEMENTS SINCE 23 JUNE 2000, SANLAM LIMITED, NEW AFRICA
INVESTMENT LIMITED (NAIL) AND METROPOLITAN ANNOUNCED THAT NAIL AND SANLAM ARE
ENGAGED IN DISCUSSIONS IN RESPECT OF THE CREATION OF A NEW TRULY SOUTH AFRICAN
FINANCIAL SERVICES GROUP. THE NEW GROUP WOULD COMBINE, BY WAY OF A MERGER, THE
FINANCIAL SERVICES OF METROPOLITAN (IN WHICH NAIL IS THE CONTROLLING
SHAREHOLDER) AND SANLAM.
IN A JOINT CAUTIONARY ANNOUNCEMENT BY SANLAM AND GENSEC ON 18 AUGUST 2000 IT
WAS ANNOUNCED, THAT SUBJECT TO THE FULFILMENT OF CERTAIN PRECONDITIONS, SANLAM
IS CONSIDERING THE PURCHASE OF ALL THE SHARES IN GENSEC IT DOES NOT ALREADY
OWN, INCLUDING THOSE SHARES THAT ARE HELD ON BEHALF OF ITS POLICYHOLDERS, FOR A
CASH CONSIDERATION OF R37 PER SHARE. THIS OFFER WILL BE SUBJECT TO REGULATORY
APPROVALS.
PROSPECTS AND FOCUS FOR 2000
PROGRESS HAS BEEN MADE IN ALL THE FOCUS AREAS OUTLINED IN OUR 1999 ANNUAL
REPORT AND WE WILL CONTINUE OUR EFFORTS ON THESE MATTERS DURING THE REMAINDER
OF THE YEAR.
THESE INTERIM RESULTS SHOW SOUND PROGRESS IN OUR AIM TO GROW OUR BUSINESS AND
ARE CONFIDENT, GIVEN FAVOURABLE MARKET CONDITIONS FOR THE REMAINDER OF THE
YEAR, THAT OUR TARGETS OF 10% REAL GROWTH WILL BE ACHIEVED.
DIRECTORATE
THE SANLAM BOARD ANNOUNCED THAT IT EXPECTED THAT EXECUTIVE CHAIRMAN MARINUS
DALING WILL RESUME HIS DUTIES ON 2 OCTOBER 2000. MR DALING IS CURRENTLY
RECUPERATING AFTER A MALIGNANT TUMOUR WAS REMOVED FROM HIS ABDOMEN ON 29
AUGUST. HE WILL SOON START WITH CHEMOTHERAPY TREATMENT.
THE BOARD ALSO ANNOUNCED THAT THE FUNCTIONS OF CHAIRMAN AND EXECUTIVE OFFICER
WOULD BE SEPARATED IN FUTURE. THIS WILL HAPPEN WHEN A MANAGING DIRECTOR IS
APPOINTED. CANDIDATES FOR THIS POSITION WILL BE SOUGHT BOTH INTERNALLY AND
EXTERNALLY.
SANLAM'S EXECUTIVE DIRECTOR, GEORGE RUDMAN, IS CURRENTLY ACTING CHIEF EXECUTIVE
AND WILL CONTINUE IN THAT POSITION FOR AS LONG AS AND WHEN MR DALING IS NOT
AVAILABLE. HE WILL ALSO ASSIST MR DALING IN HIS EXECUTIVE TASKS.
FOR AND ON BEHALF OF THE BOARD
T VOSLOO P DE V RADEMEYER
ACTING CHAIRMAN FINANCIAL DIRECTOR
13 SEPTEMBER 2000
CAPE TOWN
WWW.SANLAM.CO.ZA
GROUP SECRETARY:
J P 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
SOLID INTERIM RESULTS FROM SANLAM
HIGHLIGHTS OF INTERIM RESULTS FOR SIX MONTHS TO 30 JUNE 2000
32% GROWTH IN FUNDS RECEIVED FROM CLIENTS
NET OUTFLOW OF FUNDS REVERSED
SANLAM PERSONAL FINANCES'S OPERATING PROFIT GROWS BY 35%
HEADLINE EARNINGS PER SHARE GROWS BY 18%
FOURFOLD GROWTH IN EMBEDDED VALUE OF NEW BUSINESS TO R82 MILLION
SANLAM'S INTERIM RESULTS FOR JUNE 2000 SHOW THAT THE GROUP IS SUCCEEDING WITH
ITS STRATEGIC OBJECTIVES OF GROWING ITS BUSINESS, UNDERTAKING NEW INITIATIVES
AND EXPLORING OPPORTUNITIES.
FINANCIAL DIRECTOR FLIP RADEMEYER SAID THAT GOOD PROGRESS HAD BEEN MADE IN ALL
THESE FOCUS AREAS.
"OVERALL, OUR BUSINESSES PERFORMED WELL IN THE FIRST SIX MONTHS. SANLAM
PERSONAL FINANCE (SPF), WHICH CONTRIBUTED 61% TO SANLAM'S HEADLINE EARNINGS,
POSTED A STERLING OPERATING PROFIT GROWTH OF 35%, SANLAM EMPLOYEE BENEFITS
(SEB) MANAGED TO REDUCE FUND TERMINATIONS TO R2,9 BILLION COMPARED TO R3,7
BILLION IN 1999, SANLAM HEALTH SHOWED AN OPERATING PROFIT OF R7 MILLION
COMPARED TO R5 MILLION IN 1999 AND CORPORATE COSTS WERE REDUCED BY 9%.
"GROSS FUNDS RECEIVED FROM CLIENTS GREW BY 32% TO R21 868 MILLION WHICH
INCLUDES SIGNIFICANT GROWTH IN GENSEC'S SEGREGATED FUND INFLOWS FROM R849
MILLION TO R3 933 MILLION AND 26% GROWTH IN SINGLE PREMIUMS AT SPF. THE NET
INFLOW OF FUNDS (I.E. AFTER DEDUCTING BENEFIT PAYMENTS TO CLIENTS) IMPROVED
SUBSTANTIALLY - FROM A NET OUTFLOW OF R3 427 MILLION IN 1999 TO A NET INFLOW OF
R45 MILLION IN THE SIX MONTHS UNDER REVIEW.
"THE EMBEDDED VALUE OF NEW BUSINESS INCREASED FOURFOLD TO R82 MILLION WHICH IS
ENCOURAGING.
"GIVEN FAVOURABLE MARKET CONDITIONS FOR THE REMAINDER OF THE YEAR, THESE
ACHIEVEMENTS, TOGETHER WITH THE GROWTH OF HEADLINE EARNINGS BY 18% PLACE US
WELL ON TRACK TO ACHIEVE OUR TARGET OF 10% REAL GROWTH FOR THE YEAR", HE SAID.
NEW BUSINESS DEVELOPMENT WAS ESTABLISHED AT THE END OF 1999 TO EXPLORE
OPPORTUNITIES FOR INVESTMENT AND TO LAUNCH NEW INITIATIVES FOR STRUCTURAL
GROWTH IN THE SANLAM GROUP. AT THIS STAGE ITS CONTRIBUTION TO PROFITS ARE
MARGINAL BUT RADEMEYER SAYS IT IS PROGRESSING WELL WITH ITS EARLIER ANNOUNCED
JOINT PROJECT WITH MACQUARIE BANK OF AUSTRALIA IN DEVELOPING A TECHNOLOGY
DRIVEN RANGE OF INNOVATIVE FINANCIAL SOLUTIONS AND PRODUCTS FOR THE HIGH NET
WORTH SOUTH AFRICAN MARKET.
SANLAM'S LINKED PRODUCT PROVIDER, SANLAM PERSONAL PORTFOLIOS, IS NOW PART OF
NEW BUSINESS DEVELOPMENT.
RADEMEYER ADDED THAT THESE SATISFACTORY RESULTS WERE TEMPERED BY THE 36%
REDUCTION IN GENSEC'S CONTRIBUTION TO HEADLINE EARNINGS DUE TO THE IMPACT WHICH
THE DIFFICULT INVESTMENT MARKET CONDITIONS IN THE FIRST HALF OF 2000 HAD ON
PARTICULARLY THEIR EQUITY TRADING ACTIVITIES AND PRIVATE EQUITY AND SMALL
CAPITALISATION INVESTMENTS. SANTAM'S UNDERWRITING RESULTS WERE NEGATIVELY
AFFECTED BY ENVIRONMENTAL FACTORS, IN PARTICULAR THE FLOODS EARLIER THIS YEAR.
LOWER INTEREST RATES AND SANLAM'S EQUITY ACCOUNTED SHARE OF ABSA'S FLAT
EARNINGS RESULTED IN A 6% REDUCTION IN INVESTMENT INCOME EARNED ON THE
INVESTMENTS OF THE SHAREHOLDERS' FUNDS.
THESE DECLINES WERE OFFSET BY THE REVERSAL OF AN OVERPROVISION OF R181 MILLION
FOR DEFERRED TAX RAISED IN PRIOR YEARS. THIS REVERSAL REPRESENTS APPROXIMATELY
HALF OF THE EXPECTED FULL YEAR REVERSAL FOR 2000.
IN ACCORDANCE WITH SANLAM'S POLICY OF ANNUAL DISTRIBUTION, NO INTERIM DIVIDEND
HAS BEEN DECLARED.
IN ITS CONTINUING ENDEAVOURS TO ENHANCE FINANCIAL REPORTING, PRO FORMA HEADLINE
EARNINGS PER SHARE DETERMINED ON A LONG-TERM RATE OF RETURN AND BASED ON THE
STATEMENT OF RECOMMENDED PRACTICE IN THE UNITED KINGDOM, HAVE BEEN INCLUDED IN
SANLAM'S ANNOUNCEMENT. ON THIS BASIS HEADLINE EARNINGS PER SHARE AMOUNTED TO
60,9 CENTS FOR THE SIX MONTHS TO 30 JUNE. THIS IS 24% HIGHER THAN THE
COMPARABLE 49,3 CENTS FOR 1999.
ASSETS UNDER MANAGEMENT AND ADMINISTRATION INCREASED BY 7% TO R215 BILLION
COMPARED TO R201 BILLION IN JUNE 1999.
THE OPERATING PROFIT OF SEB INCREASED BY 19% TO R106 MILLION FOR THE SIX MONTHS
WHILST ACHIEVING 12% GROWTH IN RECURRING PREMIUMS.
GROUP FINANCIAL SERVICES INCOME INCREASED BY ONLY 6% DUE MAINLY TO A REDUCTION
OF 31% IN GENSEC'S INCOME AND LOWER INCOME EARNED ON WORKING CAPITAL AS A
RESULT OF LOWER INTEREST RATES.
DESPITE IMPROVEMENTS AT SPF AND SANLAM HEALTH THE GROUP ADMINISTRATION RATIO
DETERIORATED FROM 28,1% IN 1999 TO 29,7% DUE TO INCREASED RATIOS AT GENSEC AND
SEB.
EXCEPTIONAL ITEMS, CONSISTING MAINLY OF SYSTEM DEVELOPMENT EXPENDITURE WAS 29%
LOWER THAN LEVELS IN 1999 LARGELY DUE TO SPF'S LOWER LEVEL OF INVESTMENT IN
SYSTEM DEVELOPMENT AND NON-RECURRING RESTRUCTURING EXPENSES INCURRED IN 1999.
ATTRIBUTABLE EARNINGS (INCLUDING REALISED AND UNREALISED INVESTMENT SURPLUSES
ON SHAREHOLDERS' FUNDS) DROPPED FROM R2 272 MILLION IN 1999 TO R615 MILLION.
ACCORDING TO RADEMEYER THIS REFLECTED THE STOCK MARKET DECLINE DURING THE FIRST
HALF OF 2000 COMPARED TO STRONG GROWTH IN THESE MARKETS DURING THE FIRST HALF
OF 1999.
THE ANNUALISED HEADLINE RETURN ON EQUITY OF 13,9% IS SIMILAR TO THE 14%
ACHIEVED IN 1999 WHILE THE ANNUALISED FIVE YEAR AVERAGE RETURN ON EQUITY WAS
15,0% COMPARED TO 28% IN 1999, THE DECLINE IS ALSO ATTRIBUTABLE TO THE
DECREASED INVESTMENT RETURNS FOLLOWING THE STOCK MARKET DECLINE.
THE CAPITAL ADEQUACY REQUIREMENTS OF SANLAM LIFE INSURANCE LIMITED WERE COVERED
2,2 TIMES BY ITS SHAREHOLDERS' FUNDS (30 JUNE 1999: 2,4 TIMES).
SANLAM REFERRED SHAREHOLDERS TO CAUTIONARY ANNOUNCEMENTS REGARDING DISCUSSIONS
ON A POSSIBLE MERGER OF THE FINANCIAL SERVICES OF METROPOLITAN (IN WHICH NAIL
IS THE CONTROLLING SHAREHOLDER) AND SANLAM AND ALSO THE POSSIBILITY OF SANLAM
ACQUIRING ALL THE SHARES IN GENSEC IT DOES NOT ALREADY OWN. THESE DEVELOPMENTS
MAY IMPACT ON REPORTED EARNINGS FOR THE YEAR.
ENDS
ENQUIRIES: FLIP RADEMEYER (021) 947-6801
WALLY HARRIS, HEAD : FINANCIAL ACCOUNTS (021) 947-3253
GROUP FINANCIAL STATEMENTS BY FAX ON REQUEST.
RELEASED BY FRANS VAN RENSBURG, SANLAM MEDIA RELATIONS (021) 947-4893 OR 082
805 9245
NOTE TO EDITORS:
SEE SEPARATE RELEASE ON THE POSITION OF SANLAM'S EXECUTIVE CHAIRMAN, MARINUS
DALING.
ANY VIEWS EXPRESSED IN THIS MESSAGE ARE THOSE OF THE INDIVIDUAL SENDER, EXCEPT
WHERE THE SENDER SPECIFICALLY STATES THEM TO BE THOSE OF SANLAM, TO WHOM NO
LIABILITY SHALL ATTACH WHATSOEVER.
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