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SLM - Sanlam - Operational Update - June 2010

Release Date: 09/06/2010 13:55
Code(s): SLM
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SLM - Sanlam - Operational Update - June 2010 Registered name: Sanlam Limited (Incorporated in the Republic of South Africa) Registration number 1959/001562/06 JSE share code: SLM NSX share code: SLA ISIN number: ZAE000070660 ("Sanlam" or "the Group") Operational Update - June 2010 The Group`s ongoing diversification into different market segments and solution offerings is bearing fruit as overall satisfactory results were achieved for the first four months of 2010. New life insurance business volumes increased by 21% at sustained margins, overall net business inflows amounted to R6,8 billion (with continued net life cash inflows) and core earnings per share improved by 8%. These results were achieved amidst ongoing challenging financial and economic conditions. Challenging business environment remains Amidst signs of a global economic upturn, the recovery remains fragile and has been mired by fears of the contagious impact of sovereign debt problems experienced in the European Union. This is reflected in a sharp increase in risk margins in Europe and a return to significant international equity market volatility. The FTSE/JSE All Share Index gained 3,5% (excluding dividends) for the four months to 30 April 2010, compared to a loss of 4% in the first four months of the 2009 financial year, but has since lost some 5% to return to the levels experienced in late 2009 . Although there are positive growth indicators in the South African economy, pressure on consumers` disposable income and discretionary spending remains. Deal flow and new business activity levels in a number of our institutional businesses also remain low compared to the relatively high base in 2009. As anticipated, the commodity based African economies in which the Group operates are experiencing some lag effect of the global economic crisis which is evident from a slowdown in the level of new business. The reported results from most of our international businesses are also negatively impacted by the relative strengthening of the South African rand. A sharp reduction in short-term interest rates had a marked impact on interest earned on Group companies` working capital as well as the investment income on shareholder funds. Highlights In a difficult business environment total new business volumes were 6% lower than for the first four months of the 2009 financial year. This is substantially due to lower new institutional fund inflows, albeit a satisfactory performance against the high base in 2009. Life insurance new business volumes however performed exceptionally well to be 21% up on the same period in 2009, a combination of strong growth in South Africa and a welcome recovery in the United Kingdom, somewhat offset by a lower contribution from the rest of Africa. The value of new life business for the four months is 18% up on 2009. Gross investment flows are 11% down on 2009 but compensated for through a major improvement on a net basis. Overall net inflows for the Group of R6,8 billion are substantially better than the R2,1 billion achieved in the first four months of 2009, supported by a continuing trend of net life cash inflows. Core earnings per share to April 2010 are 8% higher than for the comparable period in 2009. Normalised headline earnings per share are up some 70%, substantially due to the positive return in equity markets relative to a negative performance in the first four months of 2009. Capital As disclosed in the Group`s 2009 annual report, the Group remains well capitalised with identified discretionary capital of some R3,5 billion as at the end of December 2009. The optimal utilisation of capital is a priority in the Group. In the current financial and economic environment prudence remains an important consideration in the application of the Group`s discretionary capital. As indicated before, our preferred utilisation of excess capital is an investment in value adding growth opportunities. A number of strategic ventures are currently being pursued. Some R100 million has been invested in the year to date. At the same time we have recommenced the buy-back of Sanlam shares. For the year to date - up to the end of May 2010 - we have utilised R460 million to acquire 19,2 million Sanlam shares in a subsidiary at an average price of some R24 per share. A total of 60 million Sanlam shares held as treasury shares were cancelled and the listing of these shares terminated during March 2010, reducing Sanlam`s issued share capital to 2 100 million shares. All of the Group operations remain well capitalised. Sanlam Life Insurance Limited`s statutory capital covered its Capital Adequacy Requirements by 3,0 times on 31 March 2010, after allowing for the dividend payable to Sanlam in respect of the 2009 financial year. The Group remains well positioned to take advantage of growth opportunities. Salient features of the Group`s performance for the four months to April 2010 are: New Business volumes - Overall new business volumes are down 6% on the comparable period in 2009, with a strong life insurance contribution being offset by lower gross investment fund flows. - New life business volumes increased by 21% compared to the first four months of 2009. - Sanlam Personal Finance recorded a 15% increase in new life business sales, with both the Glacier and Topaz South African business showing a strong improvement on their 2009 results. Growth was achieved consistently in both new recurring and single premium volumes, each showing an increase of some 15%. Risk underwriting business remains resilient in the current environment and recorded a 17% increase compared to the first four months of 2009. - Sanlam Developing Markets reported growth of 10% in its new business volumes for the first four months of 2010. A key feature of this growth has been a 27% improvement in new business premiums from the combined Sanlam Sky / Channel Life South African operations. New business volumes reported by the African operations are however 12% down on 2009. This deviation from a robust growth track record is in part attributable to a stronger rand but also due to a lower level of economic activity as the global economic slowdown now also starts to impact on Africa. Shriram Life in India continues to perform well. - An improving economic environment in the United Kingdom contributed to a 39% increase in Sanlam UK`s new life business volumes. - Sanlam Employee Benefits recorded a threefold increase on 2009 in new business sales for the four months, albeit from a relatively low base. Single premium flows of R277 million are substantially up on 2009 while new recurring premium business increased by 15%. - Overall, the average life new business margin for the four months has been retained at levels similar to that achieved for the first four months of 2009, and broadly in line with the disclosed 1H09 margins. - Persistency in all markets remains within acceptable levels. - Life net flows remained positive. - Gross investment business inflows are 11% lower than in 2009. - The ongoing strain on discretionary retail savings is evident in a 3% reduction in Sanlam Personal Finance`s new investment business in South Africa. This was, however, offset by strong unit trust sales in Namibia, with an overall 2% increase in new business. - Gross investment flows in Sanlam Investments were down by 17%, with lower new inflows experienced in both the wholesale business as well as in collective investments, albeit a satisfactory performance against the high base of 2009. This was somewhat offset by increased flows in Sanlam Private Investments and the international businesses. - Net investment inflows of some R4,5 billion (excluding white label) for the four months, versus R260 million in 2009, are however particularly satisfactory in the current environment. Sanlam Investments` assets under management amounted to R457 billion on 30 April 2010, up from R441 billion at the end of December 2009. Earnings - Net result from financial services for the four months is up 12% on 2009, albeit from a relatively low base. - Sanlam Personal Finance and Sanlam Developing Markets achieved another solid performance. - The Santam results showed a strong recovery from the negative effect of some large commercial claims during the first few months of 2009. - An improvement in the average equity market levels had a positive impact on Sanlam Investment`s results. - Core earnings per share for the four months are 8% up on 2009, the combined result of the increase in financial services income and investment income that was negatively impacted by lower short-term interest rates. - Normalised headline earnings per share are up some 70%, primarily due to the relative improvement in the equity market performance. Outlook Despite recent upbeat data releases on the global real economy, an important conclusion from the European difficulties is that the balance of risks for the global (and South African) economy is tilted to the downside for the foreseeable future. The challenging and volatile financial and economic environments are therefore expected to continue for the remainder of the year and into 2011 and are likely to impact on growth in the Group`s key operational performance indicators. Shareholders need to be aware of the impact of financial market returns and volatility on Group earnings and Group Equity Value. Relative market movements may have a major impact on the growth in Group earnings to be reported for the interim as well as the full 2010 financial year. The strong market performance in the second half of the 2009 financial year, in particular, may not be repeated in 2010, which will impact on the full year growth in earnings compared to the four months ended 30 April 2010. The information in this operational update has not been reviewed or reported on by Sanlam`s auditors. Sanlam`s interim results for the six months ended 30 June 2010 are due to be released on 9 September 2010. Shareholders are advised that this is not a trading statement as per section 3.4 of the JSE Listings Requirements. A conference call for analysts, investors and the media will take place at 17h00 (South African time) today. Investors and media who wish to participate in the conference call should dial the following numbers: Audio dial-in facility A toll free dial-in facility will be available. We kindly advise callers to dial in 5 - 10 minutes before the conference call starts at 17:00. Access numbers for participants dialing live from their country: South Africa and other Toll +27 (0)11 535 3600 Toll-free 0800 200 648
USA Toll 1 412 858 4600 Toll-free 1 800 860 2442 UK Toll-free 0800 917 7042 Recorded playback will be available for three days after the conference. Access Numbers for Recorded Playback: Access code for recorded playback: 2560# South Africa and other Toll +27 (0)11 305 2030 USA Toll 1 412 317 0088 UK Toll 0808 234 6771 For further information on Sanlam, please visit our website at www.sanlam.co.za Bellville 9 June 2010 Sponsor Deutsche Securities (SA) (Proprietary) Limited Date: 09/06/2010 13:55:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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