Wrap Text
SLM - Sanlam Limited - The Group achieved satisfactory results for the ten
months ended 31 October 2011
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 - December 2011
The Group achieved satisfactory results for the ten months ended 31 October
2011:
* New life insurance business volumes increased by 23%.
* Net value of new life business (before the impact of STC release)
is some 20% higher.
* Net fund inflows of R19 billion.
* Growth in net result from financial services of 10%.
* Normalised headline earnings are marginally down on 2010.
Business environment
Global market uncertainty, fuelled by renewed concerns on sovereign debt in
Europe and economic growth prospects in the major world economies,
continues to impact on the Group`s operating environment and is also
reflected in the results for the ten months to October.
* Despite some positive economic indicators in South Africa,
consumer debt levels and inflation in the middle market remain
high and impact on the level of discretionary retail expenditure.
* The South African equity market largely followed the volatility
of international markets, with the major indices only marginally
up for the year to date relative to an increase of some 10%
during the first ten months of 2010. This, as well as the low
interest rate environment, had a negative impact on relative
investment returns.
* Low interest rates also impact on interest earned on the Group
companies` working capital as well as the demand for guaranteed
and money market solutions.
* Investors remain cautious under these conditions, contributing to
a challenging environment for new business sales.
Results:
Salient features of the Group`s performance for the ten months to October
2011 are set out below. As anticipated, the relatively strong performance
experienced in the second half of 2010 results in a higher comparative base
for the 2011 full year. This is reflecting in a lower percentage growth in
earnings than that reported for the first half of 2011.
New Business volumes
* Overall new business volumes are up by 4% on the comparable
period in 2010, with particularly satisfactory growth in new life
insurance business.
* New life business volumes increased by 23% compared to the first
ten months of 2010.
- Sanlam Personal Finance recorded an 18% increase in new life
business sales, supported by particularly strong growth in
Glacier single premium business and a 14% increase in South
African middle-income market sales. Demand for the
traditional guaranteed solutions remain weak in the low
interest rate environment, but this has been offset by
strong demand for the new savings products launched during
the last year. Recurring premium new business volumes in the
South African entry-level market were in line with the 2010
performance, with the continued focus on writing quality new
business impacting on growth, but supporting an increase in
new business margins. Roll-overs of the discontinued single
premium business in Sanlam Sky continued to decline, as
expected.
- Sanlam Emerging Markets reported growth of 9% in its new
business volumes for the first ten months of 2011. The
strong average exchange rate of the Rand impacted negatively
on the growth reported by the various operations. The
Botswana operations recorded growth of 9% in Rand,
reflecting the more mature nature of this market as well as
the current difficult economic environment. Rest of Africa
new business volumes increased by some 30%.
- Sanlam UK continued its strong performance during 2011 and
increased its new life business volumes by more than 30%.
- Sanlam Employee Benefits more than doubled its contribution
to new business. This is attributable to a large annuity
business mandate received since the end of June 2011.
- Overall, the average life new business margin for the ten
months increased slightly from that achieved for the first
half of the 2011 financial year. This reflects the impact of
the focus on quality in the South African entry-level market
as well as the strong new business growth at Sanlam Employee
Benefits.
- Persistency in all markets remains within acceptable levels.
- Life net flows were more than double that of 2010.
* Gross investment business inflows are 2% lower than in 2010.
- Sanlam Personal Finance`s new investment business sales
decreased by 1%. This reflects the impact of the high
comparative base, attributable to a R1 billion once-off book
transfer to Glacier in 2010. Excluding this, new investment
business sales increased by 11%.
- Namibian new investment business declined by 9% on the first
ten months of 2010 in a very competitive environment. This
contributed to a similar reduction in new investment
business for the Emerging Markets cluster.
- Gross investment flows in the Institutional cluster
decreased by 2%. Strong growth in collective investment
scheme business was offset by lower segregated and multi-
manager new business volumes. Sanlam UK continued to report
strong growth.
- Net investment inflows of some R10,4 billion for the ten
months, versus R11,7 billion in 2010, are particularly
satisfactory in the current environment.
Earnings
* Net result from financial services for the ten months is up 10%
on 2010.
- Sanlam Personal Finance, Sanlam Employee Benefits and Santam
achieved solid performances.
- Growth reported by the rest of the Group operations reflects
the impact of the higher comparative base in the second half
of 2010, as expected, as well as the impact of costs
incurred on new initiatives and expansion.
* Normalised headline earnings are marginally down on 2010, with
the operating performance being offset by lower investment return
earned on the capital portfolio.
Capital
The Group remains well capitalised. As at the end of June 2011 the Group
reported discretionary capital of some R3,2 billion. Since then, more than
R700 million of additional capital was added to the discretionary capital
portfolio through the disposal of non-strategic investments, including the
sale of a major part of the Group`s holding in Vukile. R600 million of
discretionary capital was utilised in respect of strategic acquisitions,
including the acquisition of some 3 million Santam shares. The increased
holding in Santam to an effective 59.9% compensates for the dilution in the
Group`s short term insurance exposure following the sale to Santam of our
interest in MiWay. The remaining capital utilised is essentially in respect
of Sanlam Private Investments` acquisition of majority stakes in Merchant
Securities in the United Kingdom and Summit Trust in Switzerland.
Discretionary capital held within the Group thus remained broadly in line
with the June 2011 level, with some R2 billion being earmarked for the
Shriram Capital transaction announced in the Group`s interim results.
All of the Group operations remain well capitalised. Sanlam Life Insurance
Limited`s statutory capital covered its Capital Adequacy Requirements by
3.2 times on 30 September 2011.
Outlook
The risk of sovereign default in Europe will continue to weigh heavily on
sentiment and investment markets in general. The risk of a slowdown in
economic growth in the major global economies is also increasing. The
Group`s major exposure remains to the South African economy and investment
market, which is not shielded from international events. The operating
environment will commensurately remain challenging and is 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 the investment return component of the Group`s earnings and
Group Equity Value. Relative market movements may have a major impact on
the growth in Group earnings to be reported for the full 2011 financial
year. The strong market performance in the second half of the 2010
financial year, in particular, may not be repeated in 2011, which will
impact on the full year growth in earnings compared to the ten months ended
31 October 2011. Operationally, we will continue to execute on the Group`s
strategy and will remain focused on the quality of new business. Although
this may impact on the level of growth in new business volumes, it enhances
shareholder value creation. This is in line with the Group`s stated
objective of not striving to be the largest writer of new business, but
instead to focus on profitable business.
The information in this operational update has not been reviewed or
reported on by Sanlam`s auditors. Sanlam`s financial results for the year
ending 31 December 2011 are due to be released on 8 March 2012.
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
7 December 2011
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 07/12/2011 16:00:02 Supplied by www.sharenet.co.za
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