| Wed 4 Jun 2008, 14:00 | | SLM - Sanlam Limited - Operational update - June 2008 |
|
SLM
SLM
SLM - Sanlam Limited - Operational update - June 2008
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 - June 2008
As contemplated in our 2007 annual report market conditions have weakened
markedly thus far in 2008. Global equity and debt markets are under pressure,
with an unprecedented level of divergence in the performance of resources shares
versus the other South African equity sectors, while a number of deteriorating
economic factors have a negative effect on South African consumers` disposable
income.
In context of this challenging business environment, the Group achieved sound
trading results for the four months to 30 April 2008. Growth in total new
business volumes of some 9% represents a satisfying performance. This growth
should also be evaluated against the strong base of business flow experienced in
recent years. Core Earnings per share for the four months are marginally up on
2007 but Headline Earnings per share are down 16%, substantially due to lower
investment returns on shareholder funds. Normalised Headline Earnings per share,
which exclude certain IFRS related adjustments, are down 47% on 2007.
The Sanlam Board remains committed to capital optimisation in the Sanlam group
and continues to pursue the most efficient alternatives of utilising
discretionary capital, either through investing in value adding strategic
ventures or to reduce capital that is in excess of the Group`s ongoing business
requirement. As indicated in our 2007 financial results announcement we have
continued the buy back of Sanlam shares. For the year to date 62 million Sanlam
shares (2.7% of issued capital) have been acquired as treasury shares for a
consideration of R1 248 million. Of the Sanlam shares held as treasury shares,
63.5 million were cancelled, reducing Sanlam`s issued share capital to 2 240
million shares.
Salient features of the Group`s performance for the 4 months to April 2008 are:
New Business volumes:
- Overall new business volumes are up 9% on 2007, substantially due to some 30%
growth experienced in new Life insurance business:
- Sanlam Personal Finance (SPF) recorded a 43% increase in SA single life
premiums, in part due to a noticeable shift towards guaranteed-plan sales.
Notwithstanding recurring risk premium business that continues to perform well,
the impact of the challenging economic environment is evident in a 2% overall
reduction in new SA recurring premiums. Merchant Investors in the UK almost
doubled its new life business volumes;
- In Sanlam Developing Markets (SDM) new SA recurring premiums for the four
months are up 16%, with ongoing strong growth (28%) in non-SA business flows;
- Sanlam Employee Benefits (SEB) new business flows are however marginally
down on 2007;
- Overall, the average life new business margin for the four months (based on
the present value of new business premiums net of minorities) is marginally
lower than that achieved in the 2007 financial year.
- Gross Investment business inflows are in line with 2007 as an increase in
retail inflows is offset by lower institutional flows:
- SPF`s new investment business increased by some 30%, including good growth
in Namibian unit trust flows. The latter is however not sustainable due to the
expected impact of changes in the tax regime applicable to Namibian Unit Trusts;
- Gross investment flows in Sanlam Investments (SIM) are down 7%, mainly due
to lower multi-manager and wholesale collective investments business flows.
Retail collective investment business continued to reflect satisfactory new
business volumes. SIM`s assets under management amounted to R451 billion on 30
April 2008, marginally down on December 2007.
- Net fund inflows of R3,4 billion are the result of positive net flows in
both life insurance and investment business. As expected, life business
persistency levels deteriorated somewhat from the levels experienced in 2007.
Earnings:
- Net result from financial services (operating income) for the four months is
slightly lower than in 2007:
- SPF and SEB achieved solid performances to date;
- Santam reported satisfactory underwriting results for the period;
- SDM`s performance has been negatively impacted by new business strain
resulting from its stronger new business recurring premium sales, some cost
overruns and lower equity markets in Botswana;
- Volatile equity markets and a reduction in performance fees earned had a
negative impact on SIM`s results for the year to date while SCM`s performance is
also down on 2007 due to a substantial slowdown in deal flow, as well as a
general deterioration in the mark-to-market valuation of certain debt
instruments.
- MiWay, our new direct financial services business, was launched in March
2008 and is performing ahead of expectations. As expected though, this new
venture will only start to make a positive profit contribution once critical
mass in business volumes has been achieved.
- Core earnings per share are marginally up on 2007, as a small reduction in
both operating results and investment income (due to a smaller capital base) is
compensated for by a reduction in Sanlam`s weighted average number of shares in
issue.
- Normalised headline earnings per share are down 47% to date, substantially due
to lower investment returns as well as a lower capital base. Investment returns
were adversely impacted by both a lower overall stock market performance
relative to the same period in 2007 and an underweight exposure in shareholder
funds to the outperforming resources equity sector.
- Net of IFRS related adjustments, headline earnings are down 16%.
Outlook:
The challenging macro-economic conditions and volatile financial market
conditions are not expected to abate for the remainder of the year, and are
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. Relative market movements towards the end of June
and December 2008 may have a material impact on the level of Group earnings to
be reported for the interim and full 2008 financial year respectively.
The information in this operational update has not been reviewed or reported on
by Sanlam`s auditors. Sanlam`s interim results for the six months to 30 June
2008 are due to be released on 4 September 2008. Shareholders are advised that
this is not a trading statement as per section 3.4 of the JSE Listings
Requirements.
Bellville
4 June 2008
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 04/06/2008 14:00:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
