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SANLAM LIMITED - Operational Update June 2013

Release Date: 05/06/2013 13:45
Code(s): SLM     PDF:  
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Operational Update – June 2013

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 2013

The Group delivered another solid overall performance in the first four months of 2013.
The diversification strategy implemented over a number of years introduced some
resilience that enabled the Group to absorb the impact of challenging operating
conditions experienced by certain Group businesses as well as the relatively weak
investment market performance in South Africa for the period. The operating results
reported for the four months to April include a maiden contribution from the recent
increase in the Group’s holding in Shriram Capital in India.

Results

The salient features of the Group’s performance for the four months to April 2013 are:

-       New business volumes of R49 billion (excluding white label), up 30% on 2012.

    o    Personal Finance recorded a 28% increase in new business sales. Entry level
         new business in South Africa increased by 28%, supported by a more than
         doubling in group life business as well as good growth in agency channel
         individual life sales. Middle income volumes increased by some 18%, attributable
         to strong growth in single premium business, and affluent market sales by more
         than 30%.
    o    Emerging Markets’ results were impacted by the volatility of single premium
         business, in particular Namibian investment business, which contributed to 12%
         lower new business volumes in 2013. New life recurring premium sales remained
         strong and increased by some 26%, supported by all operations.
    o    The Investments cluster increased its new business volumes by 48%, with
         Wealth Management, Investment Services and International operations
         achieving strong growth. Net business flows of R3.6 billion (excluding white
         label) were significantly up on the R1.4 billion achieved in 2012, despite
         withdrawals of R4 billion by two institutional clients as part of the restructuring of
         their portfolios.
    o    Net value of new life business increased by 27% (at marginally higher new
         business margins), reflecting the strong growth in new life insurance business
         but also the benefit of a lower risk discount rate in 2013.
    o    Net fund inflows (excluding white label) of R9.4 billion were achieved compared
         to R7.6 billion in the comparable 4-month period in 2012.

-   Net result from financial services up 30%.

    o All business clusters apart from Santam reported strong earnings growth.
    o The increase in operating profit is in general supported by a relatively higher
      level of assets under management as well as a maiden contribution from the
      increased investment in the Shriram Group made in 2012. Excluding the latter,
      the net result from financial services increased by 22%.
    o Santam experienced a continuing high level of claims frequency and severity in
      its traditional intermediated business. This was aggravated by flood related
      claims and an increase in commercial fire claims, as well as significant hail and
      drought claims in its agriculture business, causing a substantially lower
      insurance result relative to the same period in 2012.

-   Normalised headline earnings per share up 23%.

    o   Normalised headline earnings in 2012 included a Secondary Tax on Companies
        (‘STC’) charge. STC is no longer applicable and without the 2012 STC charge
        the comparable increase in headline earnings for the four months is 11%. The
        investment return earned on the capital portfolio was negatively affected by the
        relatively weaker 2013 investment market performance in South Africa. This was
        partly offset by good returns from the international exposure in the portfolio,
        benefiting from both good underlying investment performance and a weakening
        in the rand exchange rate.

Capital

All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory
capital covered its Capital Adequacy Requirements by 4.0 times on 31 March 2013,
after allowing for its dividend payment to Sanlam Limited.

The Group had excess capital of some R4 billion available for redeployment at the end
of December 2012, after allowing for the acquisition of a 49% interest in Pacific &
Orient, a niche general insurance business in Malaysia, which transaction completed in
April 2013. Utilisation in 2013 to date included the acquisition of an additional interest in
Shriram Transport Finance Company (announced in February 2013) and the payment
of a 50 cents per share special dividend. The disposal of the Group’s interest in the
Punter Southall Group in the United Kingdom added to the discretionary capital
portfolio. Net of these transactions and investment return, available discretionary capital
amounts to some R3 billion. This remains earmarked for growth opportunities in mainly
Africa and South-East Asia.

Outlook

We do not anticipate any material improvement in the economic environment for the
remainder of the year. General operating conditions are therefore expected to remain
challenging with a resulting impact on the Group’s key operational performance
indicators.

Shareholders need to be aware of the impact of the level of interest rates and financial
market returns and volatility on the Group’s earnings and Group Equity Value. Relative
movements in these elements may have a major impact on the growth in normalised
headline earnings and Group Equity Value to be reported for the interim reporting
period to 30 June 2013 as well as the full 2013 financial year.

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 2013
are due to be released on 5 September 2013. 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:

                            Toll      +27 (0)11 535 3600
South Africa and other
                            Toll-free 0800 200 648
USA                         Toll-free 1 866 652 5200
UK                          Toll-free 0808 162 4061

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

Cape Town
5 June 2013

Sponsor
Deutsche Securities (SA) Proprietary Limited

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