2 December 2009
Registered name: Sanlam Limited(Registration number 1959/001562/06)JSE share code: SLMNSX share code: SLAISIN number: ZAE000070660(‘Sanlam’ or ‘the Group’)
The demanding business environment experienced in the first six months of the year continued unabated during the four months ended 31 October 2009. Given these challenging conditions the Group continued to record satisfactory operating results. Particularly pleasing are the resilient new business volumes, sustained average new life business margins and the level of client retention, as is evident in strong net business flows and satisfactory persistency levels.
The economic conditions in our target markets remain depressed as the aftermath of the global financial crisis continues to impact on the business fortunes of developing economies in particular. Early signs of recovery in the developed economies are encouraging and bode well for a step up in the outlook for sustainable economic growth. This is however expected to take some time to manifest in any meaningful improvement in the developing world. The South African economy is expected to follow a similar recovery path with real upside only likely towards the middle of 2010.
International investment markets have recovered sharply since the end of June 2009 based on the expected turnaround in the global economy. Even though this is supported by early evidence of improved company earnings there is some doubt about the sustainability of the current market levels.
Total new business volumes (excluding low margin white label business) increased by 2% on the first ten months of the 2008 financial year. The rest of Africa life insurance businesses continued to perform well, while risk underwriting and institutional new business volumes continued to be the main drivers of the overall growth in South African new business sales. Pressure on the retail middle-income market in South Africa persisted, with the contractual savings in Sanlam Personal Finance and retail collective investments new business volumes being impacted in particular. Sanlam UK new business sales volumes remain depressed.
Core earnings per share for the ten months ended 31 October 2009 are 1% lower than the comparable period in 2008. The strong investment market performance for the year to date is in sharp contrast to the deterioration in equity markets experienced during the ten months to October 2008. This had a major positive impact on the relative net investment return earned on the capital portfolio, resulting in a five-fold increase in normalised headline earnings per share for the ten months.
The Group continued with its cautious capital management approach. The utilisation of discretionary capital since the end of June 2009 was limited to R190 million, essentially used in respect of the capitalisation of the Indian joint venture investment businesses with SMC, the acquisition of the PSG Group’s interest in MiWay and a further contribution to fund MiWay’s start-up losses. The share buy-back programme remained suspended. All of the Group operations remain well capitalised. Sanlam Life Insurance Limited’s statutory capital covered its Capital Adequacy Requirements by 2,8 times on 30 September 2009. Santam’s solvency remained within its target range of 35% to 45%.
Salient features of the Group’s performance for the ten months to October 2009 are:
The challenging economic environment 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 volatility on Group earnings and Group Equity Value.
The information in this operational update has not been reviewed or reported on by Sanlam's external auditors. Sanlam’s annual results for the year ended 31 December 2009 are expected to be released on 11 March 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:
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