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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 other countries
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 countries
Toll +27 (0)11 305 2030

USA
Toll 1 412 317 0088

UK
Toll 0808 234 6771

Click here to read the press release.

Sponsor
Deutsche Securities (SA) (Proprietary) Limited

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