Wrap Text
SANLAM LIMITED
GROUP INCOME STATEMENT
2000 1999
FOR THE YEAR ENDED 31 DECEMBER 2000 NOTE R MILLION R MILLION %
FUNDS RECEIVED FROM CLIENTS 2 46 926 35 768 31
OPERATING PROFIT BEFORE TAX 3 & 4 1 924 1 722 12
TAX ON OPERATING PROFIT 225 204 -10
OPERATING PROFIT FROM ORDINARY
ACTIVITIES AFTER TAX 1 699 1 518 12
MINORITY INTEREST 357 451 21
NET OPERATING PROFIT 1 342 1 067 26
INVESTMENT RETURN 1 348 2 936 -54
TAX ON INVESTMENT RETURN (225) (245) 8
MINORITY INTEREST (36) (190) 81
NET LONG TERM RATE OF RETURN
ADJUSTMENT 8 1 049 (847) 224
NET INVESTMENT RETURN
BASED ON THE LONG TERM RATE OF RETURN 2 136 1 654 29
HEADLINE EARNINGS
BASED ON THE LONG TERM RATE OF RETURN 3 478 2 721 28
SHORT TERM INVESTMENT FLUCTUATIONS (1 049) 847 -224
OTHER NET INVESTMENT SURPLUSES
AND ADJUSTMENTS (220) (131) -68
ATTRIBUTABLE EARNINGS 2 209 3 437 -36
DILUTED EARNINGS PER SHARE: CENTS CENTS
- NET OPERATING PROFIT FROM ORDINARY ACTIVITIES 50,5 40,1 26
- HEADLINE EARNINGS BASED ON THE
LONG TERM RATE OF RETURN 130,9 102,1 28
- HEADLINE EARNINGS AS PREVIOUSLY DISCLOSED 90,6 73,4 23
- ATTRIBUTABLE EARNINGS PER SHARE 83,1 129,0 -36
DIVIDEND PER SHARE 30,0 25,0 20
GROUP BALANCE SHEET
2000 1999
AT 31 DECEMBER 2000 R MILLION R MILLION
ASSETS
NON-CURRENT ASSETS
FIXED ASSETS 256 328
GOODWILL 1 711 -
INVESTMENTS 150 452 151 635
DEFERRED TAX 115 37
INVESTMENTS HELD FOR RESALE 1 213 1 460
CURRENT ASSETS 24 318 22 108
TOTAL ASSETS 178 065 175 568
EQUITY AND LIABILITIES
SHAREHOLDERS' FUNDS 18 222 17 677
MINORITY INTEREST 1 215 2 387
NON-CURRENT LIABILITIES
POLICY LIABILITIES 133 952 134 319
TERM FINANCE 4 698 4 062
DEFERRED TAX 284 693
CURRENT LIABILITIES 19 694 16 430
TOTAL EQUITY AND LIABILITIES 178 065 175 568
SEGREGATED FUNDS NOT INCLUDED IN
THE ABOVE BALANCE SHEET 45 572 40 356
TOTAL ASSETS UNDER MANAGEMENT
AND ADMINISTRATION 223 637 215 924
TANGIBLE NET ASSET VALUE PER SHARE (CENTS) 779 771
CASH FLOW STATEMENT
2000 1999
FOR THE YEAR ENDED 31 DECEMBER 2000 R MILLION R MILLION
NET CASH FLOW FROM OPERATING ACTIVITIES 4 954 23 040
CASH FLOW FROM INVESTMENT ACTIVITIES (1 328) (21 888)
CASH FLOW FROM FINANCING ACTIVITIES 628 (1 536)
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 4 254 (384)
CASH, DEPOSITS AND SIMILAR SECURITIES
AT BEGINNING OF YEAR 4 870 5 254
CASH, DEPOSITS AND SIMILAR SECURITIES
AT END OF YEAR 9 124 4 870
FINANCIAL RATIOS
2000 1999
FOR THE YEAR ENDED 31 DECEMBER 2000 % %
RETURNS
- OPERATING PROFIT BEFORE TAX (1) 8,2 7,7
- OPERATING PROFIT AFTER TAX (1) 7,2 6,4
- HEADLINE EARNINGS BASED ON THE
LONG TERM RATE OF RETURN (1) 18,7 16,3
- RETURN ON EMBEDDED VALUE (2) 5,1 24,4
- ANNUALISED RETURN ON THE SANLAM
SHARE PRICE SINCE LISTING 27,0 41,0
GROUP ADMINISTRATION COST RATIO (3) 29,7 29,8
GROUP OPERATING MARGIN (3) 17,4 17,9
NOTES
(1) CALCULATED AS A PERCENTAGE OF THE AVERAGE MONTHLY SHAREHOLDERS' FUND FOR
THE YEAR.
(2) GROWTH IN EMBEDDED VALUE (BEFORE DIVIDENDS PAID) AS A PERCENTAGE OF THE
EMBEDDED VALUE AT THE BEGINNING OF THE YEAR.
(3) CALCULATED AS A PERCENTAGE OF INCOME EARNED BY THE SHAREHOLDERS LESS SALES
REMUNERATION.
NOTES
2000 1999
R MILLION R MILLION %
1. NEW BUSINESS
LONG-TERM INSURANCE BUSINESS
INDIVIDUAL BUSINESS 9 795 7 704 27
RECURRING PREMIUMS - INDEXED GROWTH 525 527 0
RECURRING PREMIUMS - OTHER 1 149 749 53
SINGLE PREMIUMS
(INCLUDING CONTINUATIONS) 8 121 6 428 26
EMPLOYEE BENEFITS 4 399 2 633 67
- RECURRING PREMIUMS 219 139 58
- SINGLE PREMIUMS 4 180 2 494 68
TOTAL LONG-TERM INSURANCE BUSINESS 14 194 10 337 37
OTHER BUSINESS 23 506 15 473 52
- UNIT TRUSTS 9 342 8 154 15
- SEGREGATED FUNDS 7 973 2 310 245
- LINKED PRODUCTS 1 687 1 706 -1
- SHORT-TERM INSURANCE 4 504 3 303 36
TOTAL NEW BUSINESS 37 700 25 810 46
2.1 FUNDS RECEIVED FROM CLIENTS
SANLAM PERSONAL FINANCE 24 704 21 906 13
INDIVIDUAL INSURANCE 15 630 13 980 12
RECURRING PREMIUMS 8 401 8 310 1
SINGLE PREMIUMS 4 989 4 046 23
CONTINUATIONS 2 240 1 624 38
UNIT TRUST INFLOWS 9 074 7 926 14
LINKED PRODUCTS 2 449 2 346 4
SANLAM EMPLOYEE BENEFITS 6 658 5 299 26
RECURRING PREMIUMS 2 883 2 850 1
SINGLE PREMIUMS 4 146 2 449 69
7 029 5 299 33
TRANSFER TO SEGREGATED FUNDS (371) - -
SANTAM 3 836 2 603 47
SANLAM HEALTH 668 700 -5
GENSEC SEGREGATED FUNDS 8 149 2 534 222
SANLAM NAMIBIA LIMITED 462 380 22
TOTAL FUNDS RECEIVED FROM CLIENTS 46 926 35 768 31
2.2 PAYMENTS TO CLIENTS
SANLAM PERSONAL FINANCE 24 521 22 258 -10
INDIVIDUAL INSURANCE 15 952 15 560 -3
SURRENDERS 3 672 3 444 -7
OTHER POLICY BENEFITS 12 280 12 116 -1
UNIT TRUST OUTFLOWS 8 569 6 698 -28
LINKED PRODUCTS 1 133 737 -54
SANLAM EMPLOYEE BENEFITS 12 006 16 841 29
FUND TERMINATION 7 271 11 060 34
OTHER POLICY BENEFITS 5 765 6 311 9
13 036 17 371 25
TRANSFER TO SEGREGATED FUNDS (1 030) (530) 94
SANTAM 2 763 1 823 -52
SANLAM HEALTH 640 673 5
GENSEC SEGREGATED FUNDS 4 848 3 318 -46
SANLAM NAMIBIA LIMITED 238 545 56
TOTAL PAYMENTS TO CLIENTS 46 149 46 195 0
2.3 NET FLOW OF FUNDS 777 (10 427) 107
NOTES
CONTINUED 2000 1999
R MILLION R MILLION %
3. SEGMENTAL ANALYSIS OF OPERATING PROFIT
SANLAM PERSONAL FINANCE 1 044 781 34
SANLAM EMPLOYEE BENEFITS 202 168 20
GENSEC 683 747 -9
SANLAM HEALTH 15 11 36
NEW BUSINESS DEVELOPMENT (23) 2 -
SANTAM 100 59 69
NET CORPORATE INCOME 93 197 -53
CORPORATE COSTS (190) (243) 22
TOTAL OPERATING PROFIT 1 924 1 722 12
4. OPERATING PROFIT
FINANCIAL SERVICES INCOME 12 566 10 988 14
SALES REMUNERATION 1 505 1 353 -11
INCOME AFTER SALES REMUNERATION 11 061 9 635 15
UNDERWRITING POLICY BENEFITS 5 480 4 569 -20
ADMINISTRATION COSTS 3 289 2 875 -14
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS 2 292 2 191 5
EXCEPTIONAL ITEMS 368 469 -22
OPERATING PROFIT AFTER EXCEPTIONAL ITEMS 1 924 1 722 12
5. CORPORATE EXPENSES
CORPORATE MARKETING 45 62 27
SHAREHOLDER COSTS 28 52 46
CORPORATE FUNCTIONS 84 75 -12
SHARED SERVICES AND OTHER 33 54 39
TOTAL CORPORATE COSTS 190 243 22
6. INCOME TAX
INCOME TAX BEFORE ONE-OFFS 804 611
OPERATING PROFIT 455 347
INVESTMENT INCOME 349 264
TAX ONE-OFFS (354) (162)
OPERATING PROFIT (230) (143)
INVESTMENTS INCOME (124) (19)
TOTAL INCOME TAX 450 449
7. GROSS LONG TERM INVESTMENT RETURN
INVESTMENT INCOME 950 922
ABSA EQUITY ACCOUNTED EARNINGS 423 327
INVESTMENT SURPLUSES (25) 1 687
ACTUAL INVESTMENT RETURN 1 348 2 936
GROSS LONG TERM INVESTMENT RETURN
ADJUSTMENT (NOTE 8) 1 255 (816)
GROSS LONG TERM INVESTMENT RETURN 2 603 2 120
8. NET LONG TERM RATE OF RETURN ADJUSTMENT
GROSS LONG TERM INVESTMENT RETURN
ADJUSTMENT 1 255 (816)
TAX (23) (21)
MINORITY SHAREHOLDERS' INTEREST (183) (10)
NET LONG TERM RATE OF RETURN ADJUSTMENT 1 049 (847)
9. CAPITAL ADEQUACY REQUIREMENTS (CAR)
CAR FOR LIFE BUSINESS (R MILLION) 6 996 5 925
TIMES CAR COVERED BY SANLAM LIFE INSURANCE
LIMITED SHAREHOLDERS' FUND 2,4 2,7
EMBEDDED VALUE
2000 1999
FOR THE YEAR ENDED 31 DECEMBER 2000 R MILLION R MILLION
EMBEDDED VALUE
SANLAM GROUP SHAREHOLDERS' NET ASSETS
(PER BALANCE SHEET) 18 222 17 677
REVALUATION OF SHAREHOLDERS' INTEREST IN
SANTAM AND GENSEC TO FAIR VALUE(1) 2 290 2 786
SANLAM GROUP SHAREHOLDERS'
ADJUSTED NET ASSETS 20 512 20 463
NET VALUE OF IN-FORCE LIFE
INSURANCE BUSINESS 6 726 6 193
VALUE OF IN-FORCE LIFE INSURANCE BUSINESS 7 900 7 774
COST OF HOLDING PRUDENTIAL RESERVES (1 174) (1 581)
SANLAM GROUP EMBEDDED VALUE 27 238 26 656
EMBEDDED VALUE EARNINGS
EMBEDDED VALUE FROM NEW LIFE
INSURANCE BUSINESS 209 101
VALUE OF NEW LIFE BUSINESS 245 132
COST OF HOLDING PRUDENTIAL RESERVES (36) (31)
EARNINGS FROM IN-FORCE LIFE INSURANCE
BUSINESS 1 330 1 056
EXPECTED RETURN 1 173 1 219
OPERATING EXPERIENCE VARIATIONS 137 (101)
OPERATING ASSUMPTION CHANGES 20 (62)
EMBEDDED VALUE EARNINGS FROM LIFE OPERATIONS 1 539 1 157
ECONOMIC AND OTHER (INCLUDING ASSET MIX)
ASSUMPTION CHANGES 289 521
TAX CHANGES (22) (512)
INVESTMENT VARIANCES (304) 408
GROWTH FROM LIFE INSURANCE BUSINESS 1 502 1 574
INVESTMENT RETURN ON SHAREHOLDERS'
ADJUSTED NET ASSETS (130) 3 794
TOTAL EMBEDDED VALUE EARNINGS 1 372 5 368
APE FOR EMBEDDED VALUE PURPOSES (2) 2 618 1 757
EMBEDDED VALUE OF NEW LIFE BUSINESS
AS A PERCENTAGE OF APE 8,0% 5,7%
GROWTH FROM LIFE INSURANCE BUSINESS
AS A PERCENTAGE OF BEGINNING VALUE OF IN-FORCE 24% 30%
PRINCIPAL ASSUMPTIONS % %
PRE TAX INVESTMENT RETURNS
- FIXED INTEREST SECURITIES 13,1 14,1
- EQUITIES AND OFFSHORE INVESTMENTS 15,1 16,1
- HEDGED EQUITIES 12,1 13,1
- PROPERTY 14,1 15,1
- CASH 11,1 12,1
INFLATION 6,6 7,6
RISK DISCOUNT RATE 15,6 16,1
INVESTMENT RETURN ON ASSETS SUPPORTING
PRUDENTIAL RESERVES 14,1 14,5
ASSUMED LONG TERM ASSET MIX FOR FUNDS
SUPPORTING PRUDENTIAL RESERVES
- FIXED INTEREST SECURITIES 10 33
- EQUITIES 54(3) 32
- HEDGED EQUITIES 18 17
- PROPERTY 16 10
- CASH 2 8
100 100
(1) A FAIR VALUE OF R32.48 PER SHARE WAS PLACED ON GENSEC AT 31 DECEMBER 2000
BASED ON ITS CONSTITUENT BUSINESSES AND ASSETS. THIS VALUE IS DETERMINED TAKING
COGNISANCE OF CURRENT MARKET VALUES AND DOES NOT PLACE A VALUE ON THE LONGER
TERM STRATEGIC VALUE AS WAS REQUIRED FOR THE ACQUISITION OF THE GENSEC
MINORITIES.
(2) APE IS EQUIVALENT TO NEW RECURRING PREMIUMS PLUS 10% SINGLE PREMIUMS.
(3) THE LONG TERM ASSET MIX FOR PRUDENTIAL RESERVES LARGELY REFLECTS THE ACTUAL
CHANGE IN ASSET MIX WHICH OCCURED SIMULTANEOUSLY WITH THE ACQUISITION OF THE
GENSEC MINORITIES.
OVERVIEW OF FINANCIAL RESULTS
WE ARE PLEASED TO REPORT THAT SANLAM ACHIEVED MOST OF ITS FINANCIAL GROWTH
TARGETS SET A YEAR AGO AS REFLECTED IN THE HIGHLIGHTS AND SALIENT FEATURES AND
DISCUSSED FURTHER BELOW.
NEW BUSINESS
TOTAL NEW BUSINESS GREW SIGNIFICANTLY BY 46%. LIFE INSURANCE NEW BUSINESS GREW
BY 37% TO R14 194 MILLION AND CONTRIBUTED TOWARDS THE HEALTHY GROWTH IN THE
EMBEDDED VALUE OF NEW BUSINESS. NEW BUSINESS FROM NON-LIFE ACTIVITIES SUCH AS
UNIT TRUSTS, SEGREGATED FUNDS AND SHORT TERM ACTIVITIES GREW AT AN EVEN GREATER
RATE OF 52% TO R23 506 MILLION LARGELY DUE TO THE INCREASE IN SEGREGATED FUNDS
FROM R2 310 MILLION IN 1999 TO R7 973 MILLION IN 2000. THIS WAS AS A RESULT OF
INNOVATIVE PRODUCT OFFERINGS AND THE RE-ENGINEERING OF OUR INVESTMENT PROCESS
TO WORLD CLASS STANDARDS.
NET INFLOW OF FUNDS
A PRIMARY TARGET WAS TO TURN THE NET OUTFLOW OF FUNDS OF R10 427 MILLION IN
1999 AROUND AND WE ARE PLEASED TO REPORT THAT WE HAVE SUCCEEDED AND ACHIEVED A
NET INFLOW OF R777 MILLION IN 2000 - A TURNAROUND OF R11 204 MILLION. WE ARE
NOT YET SATISFIED WITH THE LEVEL OF NET INFLOWS BUT ARE CONFIDENT THAT THE
TURNAROUND HAS ESTABLISHED A BASIS FOR CONTINUING IMPROVEMENT AND AIM TO REPORT
IMPROVEMENT IN 2001. MOST BUSINESSES CONTRIBUTED TO THIS TURNAROUND BUT SANLAM
EMPLOYEE BENEFITS (SEB) AND SANLAM INVESTMENT MANAGEMENT (PREVIOUSLY GENSEC
ASSET MANAGEMENT) SHOWED MAJOR IMPROVEMENTS. THE SIGNIFICANT GROWTH IN NEW
BUSINESS MENTIONED ABOVE AND A SPECIFIC FOCUS ON RETAINING THE FUNDS OF
EXISTING CLIENTS THROUGH SERVICE EXCELLENCE AND CONTINUATION OPTIONS
CONTRIBUTED TO THIS TURNAROUND.
OPERATING PROFIT BEFORE TAX
SANLAM PERSONAL FINANCE (SPF) EXPERIENCED A GOOD YEAR AND GREW ITS OPERATING
PROFIT BY 34% TO R1 044 MILLION. RISK PROFITS AND MARKET RELATED INCOME SHOWED
15% AND 23% GROWTH RESPECTIVELY FROM CONTINUED FAVOURABLE UNDERWRITING RESULTS
AND AN IMPROVEMENT IN THE PERFORMANCE OF THE ANNUITY PORTFOLIO. SPF'S
EXCEPTIONAL COSTS (INCLUDING SYSTEM AND PROJECT COSTS) REDUCED BY 36% AS
RESTRUCTURING COSTS IN 1999 WERE NOT REPEATED AT THE SAME LEVELS IN 2000.
SEB ALSO POSTED A VERY SATISFACTORY 20% GROWTH IN ITS PROFITS TO R202 MILLION
ALSO LARGELY ATTRIBUTABLE TO GOOD RISK PROFITS. GROUP CORPORATE EXPENSES WERE
REDUCED BY 22% TO R190 MILLION.
THESE RESULTS WERE TEMPERED BY GENSEC'S PROFITS OF R683 MILLION FOR 2000 WHICH
WERE 9% LOWER THAN IN 1999. THIS IS IN LINE WITH EXPECTATIONS PUBLISHED AT THE
INTERIM STAGE AS THEIR RESULTS IN THE FIRST HALF OF 2000 WERE SUBSTANTIALLY
LOWER THAN THE CORRESPONDING PERIOD IN 1999. THE SECOND SIX MONTHS HOWEVER,
SHOWED SIGNIFICANT IMPROVEMENT WITH PROFITS OF R411 MILLION WHICH IS 51% HIGHER
THAN THE FIRST HALF.
CORPORATE INCOME, WHICH CONSISTS LARGELY OF PROFITS EARNED ON LEVERAGING ASSETS
USING STRUCTURED FINANCE ARRANGEMENTS REDUCED BY 53% FROM R197 MILLION IN 1999
TO R93 MILLION IN 2000. THIS DECREASE IS LARGELY ATTRIBUTABLE TO INCREASED
COMPETITION FROM SIMILAR PRODUCTS AND PRESSURE ON MARGINS DUE TO THE LOWER
LEVEL OF INTEREST RATES IN 2000.
THESE VARYING SUCCESSES RESULTED IN THE GROUP OPERATING PROFIT INCREASING BY
12% TO R1 924 MILLION.
ADMINISTRATION COSTS - EXCLUDING SANTAM'S COSTS, WHICH WERE DISTORTED BY THE
INCLUSION OF GUARDIAN'S FIGURES AS A RESULT OF ITS ACQUISITION BY SANTAM IN
APRIL 2000 - INCREASED BY 8% (14% INCLUDING SANTAM) LARGELY DUE TO A 26%
INCREASE IN GENSEC'S COSTS RESULTING FROM BUILDING ITS INTERNATIONAL
CAPABILITIES AND CONTINUED GROWTH IN GENSEC BANK. THE GROUP ADMINISTRATION
RATIO REMAINED CONSTANT AT 29,7%.
EXCEPTIONAL COSTS DECREASED BY 22% TO R368 MILLION AND INCLUDE RESTRUCTURING
COSTS OF R33 MILLION AT GENSEC FOLLOWING THE ACQUISITION OF THE GENSEC
MINORITIES AND R79 MILLION AT SPF IN RESPECT OF A FURTHER PHASE OF THE
RESTRUCTURING OF ITS SALES FUNCTION. EXPENDITURE ON NEW SYSTEMS AND PROJECTS
AIMED AT IMPROVING CLIENT SERVICE, PRODUCT DEVELOPMENT AND ADMINISTRATION
CAPABILITIES AMOUNTED TO R231 MILLION.
THE GROUP OPERATING MARGIN DECLINED TO 17,4% FROM 17,9% IN 1999 LARGELY DUE TO
GENSEC'S MARGIN WHICH DECREASED TO 49,2% FROM 59,9% IN 1999, BUT SPF AND SEB
REGISTERED IMPROVEMENTS COMPARED TO 1999.
GROSS LONG TERM INVESTMENT RETURN
THE GROSS LONG TERM INVESTMENT RETURN GREW BY 23% FROM R2 120 MILLION TO R2 603
MILLION IN 2000. AS DISCUSSED BELOW, A LONG TERM INVESTMENT RETURN OF 13% WAS
ASSUMED FOR BOTH YEARS. THE AVERAGE MONTHLY FAIR VALUE OF THE ASSET BASE ON
WHICH THE LONG TERM RETURN IS CALCULATED, WAS ON AVERAGE 8% HIGHER IN 2000
COMPARED WITH 1999 AND CONTRIBUTED TO THIS GROWTH IN INVESTMENT RETURN.
ABSA'S EQUITY ACCOUNTED EARNINGS BEFORE TAX (BASED ON THEIR EARNINGS FOR THE
TWELVE MONTHS ENDED 30 SEPTEMBER 2000) INCREASED BY
29% FROM R327 MILLION TO R423 MILLION LARGELY DUE TO ITS IMPROVED INTERIM
RESULTS FOR 30 SEPTEMBER 2000 AND AN INCREASE IN THE SHAREHOLDERS' FUND
INTEREST IN ABSA FROM 13,8% TO 14,8%. INVESTMENT RETURN WAS ALSO IMPACTED BY
THE CREATION OF AN INVESTMENT PROVISION OF R53 MILLION IN 1999 AND ITS
SUBSEQUENT REVERSAL IN 2000 AS IT WAS NO LONGER REQUIRED. (THE LASTMENTIONED
ITEMS ARE NOT SUBJECT TO THE LONG TERM RETURN BASIS.)
INCOME TAX
THE TAX CHARGE FOR 2000 INCLUDES A DEFERRED TAX REVERSAL OF R354 MILLION IN
RESPECT OF OUR LIFE BUSINESS. THE PROVISION WAS RAISED IN PRIOR YEARS ON THE
FINANCIAL SOUNDNESS VALUATION BASIS IN TERMS OF THE PREVIOUS TAX DISPENSATION
FOR LONG TERM INSURERS. THIS DISPENSATION WAS AMENDED WITH EFFECT FROM 1
JANUARY 2000 TO BRING THE ACTUAL TAX CHARGE MORE IN LINE WITH THE ACCOUNTING
PROVISION. THE 1999 TAX CHARGE ALSO INCLUDES OTHER ONE-OFF CREDITS OF R162
MILLION (R110 MILLION AFTER MINORITIES). AT 31 DECEMBER 2000 THE BALANCE OF THE
DEFERRED TAX LIABILITY AMOUNTED TO R284 MILLION, THE APPLICATION OF WHICH WILL
BE CONSIDERED WHEN OUTSTANDING ASSESSMENTS HAVE BEEN RECEIVED.
SANTAM
SANLAM HOLDS A 59% INTEREST IN SANTAM, OF WHICH 36% IS HELD BY THE SANLAM
SHAREHOLDERS' FUND. SANTAM ACQUIRED 100% OF THE SHAREHOLDING IN GUARDIAN
NATIONAL INSURANCE COMPANY LIMITED IN APRIL 2000 AND IS NOW SOUTH AFRICA'S
LEADING SHORT TERM INSURER.
SANTAM'S UNDERWRITING PROFITS INCREASED SIGNIFICANTLY BY 69% TO R100 MILLION
AND THEIR TOTAL CONTRIBUTION TO THE SANLAM GROUP HEADLINE EARNINGS ON THE LONG
TERM RATE OF RETURN BASIS USED BY SANLAM, AMOUNTED TO R139 MILLION COMPARED
WITH R107 MILLION IN 1999. THEIR EARNINGS FOR 2000 INCLUDED NON-RECURRING
INTEGRATION BENEFITS OF R37 MILLION.
THE FAVOURABLE SANTAM RESULTS ACHIEVED IN 2000, SUPPORTED BY A BALANCED
INSURANCE PORTFOLIO AFTER THE SUCCESSFUL MERGER WITH GUARDIAN, HAVE CREATED A
SOLID PLATFORM FOR FUTURE GROWTH. SHAREHOLDERS ARE REFERRED TO THE FULL SET OF
SANTAM'S RESULTS WHICH WERE PUBLISHED RECENTLY.
HEADLINE EARNINGS BASED ON THE LONG TERM RATE OF RETURN
THE BOARD HAS DECIDED TO USE THE LONG TERM RATE OF RETURN (LTRR) FOR THE
DETERMINATION OF HEADLINE EARNINGS AS IT IS OF THE VIEW THAT THERE ARE
SIGNIFICANT BENEFITS IN THIS PRACTICE. THE APPLICATION OF THE LTRR BASIS HAS
BECOME STANDARD PRACTICE IN THE UNITED KINGDOM. USING A LONG TERM RATE OF 13%,
OUR LTRR HEADLINE EARNINGS FOR 2000 INCREASED BY 28% TO R3 478 MILLION (130,9
CENTS PER SHARE) COMPARED WITH R2 721 MILLION IN 1999 (102,1 CENTS PER SHARE).
IF WE CALCULATE THE EARNINGS PER SHARE PRIOR TO TAKING ACCOUNT OF THE TAX
ONE-OFFS MENTIONED ABOVE, OUR LTRR HEADLINE EARNINGS AMOUNT TO 117,6 CENTS,
WHICH REFLECTS GROWTH OF 20% ON 1999. WE HAVE CLEARLY SUCCEEDED IN EXCEEDING
OUR TARGET OF 10% REAL GROWTH IN 2000.
HEADLINE EARNINGS ON THE PREVIOUS BASIS INCREASED BY 23% TO R2 406 MILLION
(90,6 CENTS PER SHARE) COMPARED WITH R1 955 MILLION (73,4 CENTS PER SHARE) IN
1999.
EMBEDDED VALUE
THE EMBEDDED VALUE OF NEW BUSINESS MORE THAN DOUBLED TO R209 MILLION IN 2000
COMPARED TO R101 MILLION IN 1999. IN OUR 1999 ANNUAL REPORT WE
SET THE TARGET TO ACHIEVE AN EMBEDDED VALUE OF NEW BUSINESS IN EXCESS OF R200
MILLION BY NO LATER THAN 2001. WE ARE PLEASED THAT THIS HAS BEEN ACHIEVED ONE
YEAR EARLIER.
THIS IMPROVEMENT WAS ACHIEVED LARGELY AS A RESULT OF INCREASED NEW BUSINESS
VOLUMES (EMBEDDED VALUE OF NEW BUSINESS ANNUAL PREMIUM EQUIVALENT (APE)
INCREASED BY 49% ON 1999) AND INCREASED MARGINS (NEW BUSINESS EMBEDDED VALUE AS
A PERCENTAGE OF APE WAS 8,0% COMPARED WITH 5,7% IN 1999). OUR TARGET FOR 2001
IS TO CONTINUE THIS GOOD GROWTH PATTERN.
THE EMBEDDED VALUE INCREASED BY ONLY 2% TO R27 238 MILLION LARGELY BECAUSE OF
THE POOR INVESTMENT RETURN EARNED ON THE SHAREHOLDERS' NET ASSETS DUE TO THE
DIFFICULT STOCK MARKET CONDITIONS IN 2000 COMPARED TO 1999. HOWEVER, THE VALUE
OF EXISTING LIFE INSURANCE BUSINESS (VALUE OF IN-FORCE) GREW BY A SATISFACTORY
24% DURING THE YEAR.
DIVIDENDS
THE BOARD HAS DECLARED A DIVIDEND OF 30 CENTS PER SHARE PAYABLE ON 16 MAY 2001
TO SHAREHOLDERS REGISTERED ON 20 APRIL 2001. THIS REPRESENTS A 20% INCREASE ON
THE 25 CENTS DECLARED IN 1999, OF WHICH 10 CENTS WAS PAID AS A SPECIAL INTERIM
DIVIDEND IN OCTOBER 1999.
STRATEGIC FOCUS FOR 2001
GROWTH
SANLAM HAS SET ITSELF A GROWTH TARGET OF 10% IN REAL TERMS WHICH WILL PRIMARILY
BE MEASURED BY GROWTH IN HEADLINE EARNINGS. THIS REQUIRES SIMILAR GROWTH IN
OPERATING PROFIT AND TOP-LINE GROWTH.
ORGANIC GROWTH
TO ACHIEVE OUR OBJECTIVES WE INTEND ENSURING THAT OUR PRODUCT OFFERING AND
CLIENT SERVICE CONTINUE TO IMPROVE. A CONCERTED EFFORT IS BEING MADE TO ACHIEVE
GREATER PENETRATION OF THE EMERGING BLACK SALARIED MARKET. FURTHER PENETRATION
OF THE HIGHER END OF THE MARKET WILL BE PURSUED THROUGH INNOFIN, OUR JOINT
VENTURE WITH MACQUARIE BANK OF AUSTRALIA, AS WELL AS THE CONVENTIONAL SPF
CHANNELS AND SANLAM INVESTMENT MANAGEMENT'S (SIM) (PREVIOUSLY GENSEC ASSET
MANAGEMENT) PRIVATE CLIENTS.
THE DEVELOPMENT OF SYNERGIES BETWEEN THE VARIOUS BUSINESSES WILL BE PURSUED.
GENSEC BANK'S ABILITIES IN STRUCTURING PRODUCTS AND SPF'S DISTRIBUTION
CAPABILITIES HAVE ALREADY ACHIEVED CONSIDERABLE SUCCESS.
THE INCREASING IMPORTANCE OF INDIVIDUAL CHOICE IN THE MARKETS SERVICED BY
SANLAM EMPLOYEE BENEFITS OFFERS SIGNIFICANT OPPORTUNITIES. THE PEOPLE AND
TECHNOLOGICAL CAPABILITIES DEVELOPED WITHIN SEB POSITION US WELL TO EXPLOIT
THESE OPPORTUNITIES AND WE ARE TARGETING THIS MARKET AS A SOURCE OF GROWTH IN
FUTURE.
THE RE-ENGINEERING OF SIM'S INVESTMENT PROCESS TO WORLD CLASS STANDARDS HAS
BEEN COMPLETED AND IS WELL ON ITS WAY TO FULL IMPLEMENTATION. THE GOAL IS TO
ACHIEVE CONSISTENT POSITIVE LONG TERM INVESTMENT RETURNS, WHICH WILL CONTRIBUTE
TO OUR OBJECTIVE OF GROWING OUR FLOW OF FUNDS AND IMPROVING PROFITABILITY.
STRUCTURAL GROWTH
INNOFIN EXPECTS TO LAUNCH ITS FIRST PRODUCT AIMED AT THE HIGH NET WORTH MARKET
IN THE FIRST HALF OF 2001 AND WITH SP2, OUR LINKED PRODUCT PROVIDER, WILL GROW
ITS PARTICIPATION IN THIS FAST DEVELOPING MARKET. SIM COMPLETED THE ACQUISITION
OF PUNTER SOUTHALL IN THE UNITED KINGDOM, WHICH WILL EXTEND AND IMPROVE ITS
CAPABILITY THERE. THE EXPANSION OF ITS PRIVATE CLIENT BUSINESS THROUGH THE
PURCHASE OF THE ABN AMRO'S SOUTH AFRICAN PRIVATE CLIENT BUSINESS WILL IMPROVE
ITS OFFERING IN SOUTH AFRICA AND SHOULD CONTRIBUTE TO GROWTH IN 2001.
CAPITAL EFFICIENCY
THE ACQUISITION OF THE GENSEC MINORITIES WILL ENABLE US TO IMPROVE CAPITAL
EFFICIENCY. WE ARE REVISITING OUR CAPITAL MODEL, WHICH WILL INCREASE THE FOCUS
ON OPERATIONAL AND INVESTMENT EFFICIENCY WITHIN THE GROUP WHILST ALLOCATING THE
RESPONSIBILITY FOR RETURNS TO ITS LINE AUTHORITY.
IMPROVING RETURNS OBVIOUSLY STARTS WITH OPERATIONAL PERFORMANCE AND IMPROVING
MARGINS, BUT ULTIMATELY, SHOULD A BUSINESS, OR A PART OF THE BUSINESS, NOT BE
ABLE TO DELIVER SUSTAINABLE RETURNS, WE WILL SELL IT OR CLOSE IT DOWN. GREATER
CAPITAL EFFICIENCY REQUIRES MEASURING RETURNS AS WELL AS REVISITING CAPITAL
ALLOCATION TO THE BUSINESSES AND CONSIDERATION OF THE RESTRUCTURING OF THE
ASSETS BACKING THE CAPITAL.
REPOSITIONING
SANLAM IS INTENT ON FURTHER STRENGTHENING ITS POSITION AS A TRULY SOUTH AFRICAN
GROUP IN ITS FULL SENSE WHICH WILL REQUIRE A MEASURE OF REPOSITIONING. ALTHOUGH
WE HAVE MADE GOOD PROGRESS WITH OUR EMPLOYMENT EQUITY PROGRAMME, THIS IS NOT
NEARLY SATISFACTORY ENOUGH AND WILL REQUIRE A CONCERTED EFFORT ACROSS THE
SPECTRUM OF THE GROUP. MENTORING AND DEVELOPING OF EMPOWERMENT APPOINTMENTS
WILL BE A PRIORITY.
EMPLOYER OF CHOICE
THE FINANCIAL SERVICES INDUSTRY IS PARTICULARLY DEPENDENT ON ITS PEOPLE AND OUR
FUTURE ACHIEVEMENTS WILL BE INEXTRICABLY LINKED TO THE FURTHER DEVELOPMENT AND
RETENTION OF EMPLOYEES AND TO ATTRACT PEOPLE OF THE HIGHEST CALIBRE. SUCCESS IN
THIS AREA WILL BE MEASURED BY WHETHER SANLAM WILL BE RECOGNISED AS THE EMPLOYER
OF CHOICE.
THIS WILL DEPEND ON WHETHER WE CREATE A CULTURE AND WORKING ENVIRONMENT THAT
WILL PROVIDE CHALLENGING OPPORTUNITIES FOR ALL EMPLOYEES. IT CLEARLY ALSO
REQUIRES COMPENSATION COMMENSURATE WITH PERFORMANCE AND AN ALIGNMENT OF
EMPLOYEES' OBJECTIVES WITH THOSE OF OUR SHAREHOLDERS.
INTERNATIONALISATION
THE DRIVE FOR INTERNATIONALISATION WILL COME FROM OUR BUSINESSES IN LINE WITH
OUR DECENTRALISED MANAGEMENT PHILOSOPHY. THE SUCCESSES ACHIEVED IN LOCAL
OPERATIONS INDICATE THAT OUR BUSINESSES ARE READY TO PURSUE INTERNATIONAL
INITIATIVES.
THE INFORMATION TECHNOLOGY, ADMINISTRATIVE CAPABILITIES AND OPERATIONAL
EFFICIENCIES OF SANLAM'S TRADITIONAL BUSINESS ARE OF A FIRST WORLD STANDARD AND
COULD BE EXPLOITED OUTSIDE SOUTH AFRICA. BOTH SIM AND GENSEC BANK WILL CONTINUE
TO FOCUS PRIMARILY ON THE DEVELOPED MARKETS TO SATISFY THEIR INTERNATIONAL
ASPIRATIONS. WE WILL APPROACH THESE INITIATIVES WITH THE PRIMARY REQUIREMENT OF
ACHIEVING A RETURN ON EQUITY COMMENSURATE WITH THE RISK.
PROSPECTS
SANLAM HAS SET ITSELF A TARGET OF 10% REAL GROWTH AND IS CONFIDENT OF MEETING
THIS TARGET IN RESPECT OF ITS NET OPERATING PROFIT.
DIRECTORATE
THE BOARD ANNOUNCED THE APPOINTMENT OF MESSRS TS GCABASHE AND BP VUNDLA AND
PROFESSORS AF PEROLD AND J VAN ZYL TO THE BOARD OF SANLAM.
APPRECIATION
PROFESSORS KATE JOWELL AND FLIP SMIT AND MR MURRAY GRINDROD RETIRED AS
DIRECTORS IN MARCH 2001 AND THE BOARD EXPRESSES ITS APPRECIATION FOR THEIR
SERVICE OVER A NUMBER OF YEARS.
A SPECIAL WORD OF APPRECIATION GOES TO EXECUTIVE DIRECTOR GEORGE RUDMAN WHO
WILL RETIRE AFTER 37 YEARS OF COMMENDABLE SERVICE AND ACHIEVEMENTS. GEORGE
DID US PARTICULARLY PROUD IN HIS LEADERSHIP ROLE IN THE DEMUTUALISATION OF
SANLAM.
IN CONCLUSION, TO ALL THE STAFF OF SANLAM, A SINCERE THANK YOU FOR YOUR
CONTINUED EFFORTS TO ACHIEVE OUR GROUP'S OBJECTIVES.
FOR AND ON BEHALF OF THE BOARD
MH DALING P DE V RADEMEYER
EXECUTIVE CHAIRMAN FINANCIAL DIRECTOR
7 MARCH 2000
CAPE TOWN
Sharenet Sites 
