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SLM - Sanlam Limited - Operational Update - June 2012
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: ZAE000070660
("Sanlam" or "the Group")
Operational Update - June 2012
The Group achieved pleasing results in a difficult operating environment for
the four months ended 30 April 2012, with the identified growth markets
delivering particularly satisfactory results:
* New life insurance business volumes increased by 28%.
* Net fund inflows of R8 billion.
* Growth in net result from financial services per share of 7%.
* Normalised headline earnings per share up 6% on 2011.
Business environment
As anticipated in our 2011 annual report global economic prospects for 2012
remain weak, as reflected in the instability in global investment markets
and, in particular, on-going weakness in developed economies. Even though
investment markets started the year on a positive note, recent renewed
concerns around Eurozone debt and political change in a number of key
European countries again fuelled increased volatility. These conditions
impacted negatively on the economies of the markets in which the Group
operates.
Results
Salient features of the Group`s performance for the four months to April 2012
are set out below. As anticipated, underwriting margins earned by Santam
Limited ("Santam"), the Group`s short-term insurance operation, pulled back
to its longer term target range. Sanlam Capital Management`s operating
earnings also declined from the high base in 2011. This had a marked impact
on the growth in earnings reported for the period.
New Business volumes
* Overall new business volumes are up by 6% on the comparable four-month
period in 2011.
* New life business volumes increased by 28%, in particular supported by
strong growth from the rest of Africa operations.
- Sanlam Personal Finance recorded a 19% increase in new life
business sales, supported by strong growth in single premium
business in the middle-income and affluent market segments.
Recurring premium new business volumes were in line with 2011, with
9% growth in new individual retail business being offset by a sharp
reduction in Sanlam Sky group scheme new business volumes.
- Sanlam Emerging Markets reported growth of 30% in its new life
business volumes, with a strong performance from all operations
apart from Botswana. The difficult economic environment in Botswana
continues, which had a severe impact on demand for individual life
business.
- The Sanlam Investments cluster achieved new life business growth in
excess of 50% after a relatively slow start for the same period in
2011, supported by positive results in both Sanlam Employee
Benefits and the UK operations.
- The present value of new life insurance business premiums increased
by a satisfactory 20%, while the average new life business margin
was marginally down on that reported for the 2011 financial year.
- Persistency in all markets remains within acceptable levels.
- Life insurance business achieved net fund inflows of R 3.7 billion,
up from R1.7 billion achieved for the same period in 2011.
* Net investment business flows of R2.5 billion were down on the R5.1
billion achieved in 2011. Sanlam Emerging Markets recorded net
investment business of more than R1 billion, largely attributable to
Namibian collective investment sales. Sanlam Investments achieved net
flows of R1.3 billion, despite a R2 billion single outflow of low margin
business from Sanlam Private Investments.
Earnings
* Net result from financial services for the four months is up 7% on 2011.
All operations achieved good growth, apart from Santam and Sanlam
Capital Management. Santam`s average underwriting margin reduced from
the historic high level achieved in 2010 and 2011 to be within the
longer term target range. Growth in Sanlam Capital Management`s
operating earnings was impacted by a lack of deal flow in the current
economic environment.
* Normalised headline earnings per share increased by 6%, despite a once-
off capital gains tax charge of some R100 million, being the impact on
the deferred tax liability of the higher effective capital gains tax
rate that will apply in South Africa from 2013. Investment return earned
on the capital portfolio benefited from relatively stronger equity
market performance in the first four months of 2012 compared to the same
period in 2011.
Capital
All of the Group operations remain well capitalised. Sanlam Life Insurance
Limited`s statutory capital covered its Capital Adequacy Requirements by 3.7
times on 31 March 2012.
As at the end of December 2011, the Group reported discretionary capital of
some R1,9 billion. An additional R1 billion was added since year-end through
the special dividend paid by Santam and the disposal of illiquid property
investments. No significant utilisation of discretionary capital occurred
since the end of December 2011. Discretionary capital held within the Group
thus amounts to some R3 billion, which will be redeployed in line with the
Group`s capital management strategy. Progress is being made with the
finalisation of the R2 billion Shriram Capital transaction announced in the
second half of 2011, with final regulatory approval being the major
outstanding item.
Outlook
As indicated above, our expectation of a slow global economic recovery
remains. The Group`s major exposure is still to the South African economy and
investment market, which are not shielded from international events. The
African economies in which the Group operates are also impacted by the demand
for resources created through economic growth in the developed world and
major emerging economies. Our operating environment is therefore expected to
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 six months ended 30 June
2012.
The information in this operational update has not been reviewed and reported
on by Sanlam`s auditors. Sanlam`s financial results for the six months ending
30 June 2012 are due to be released on 6 September 2012. Shareholders are
advised that this is not a trading statement as per section 3.4 of the JSE
Limited 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 Toll
other Toll-free +27 (0)11 535 3600
0800 200 648
USA Toll 1 412 858 4600
Toll-free 1 800 860 2442
UK Toll-free 0800 917 7042
ecorded 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
Toll 1 412 317 0088
USA
Toll 0808 234 6771
UK
For further information on Sanlam, please visit our website at
www.sanlam.co.za
Bellville
6 June 2012
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 06/06/2012 13:55:01 Supplied by www.sharenet.co.za
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