| Wed 9 Jun 2010, 13:55 | | SLM - Sanlam - Operational Update - June 2010 |
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SLM
SLM
SLM - Sanlam - Operational Update - June 2010
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 number: ZAE000070660
("Sanlam" or "the Group")
Operational Update - June 2010
The Group`s ongoing diversification into different market segments and
solution offerings is bearing fruit as overall satisfactory results were
achieved for the first four months of 2010. New life insurance business
volumes increased by 21% at sustained margins, overall net business inflows
amounted to R6,8 billion (with continued net life cash inflows) and core
earnings per share improved by 8%. These results were achieved amidst
ongoing challenging financial and economic conditions.
Challenging business environment remains
Amidst signs of a global economic upturn, the recovery remains fragile and
has been mired by fears of the contagious impact of sovereign debt problems
experienced in the European Union. This is reflected in a sharp increase in
risk margins in Europe and a return to significant international equity
market volatility.
The FTSE/JSE All Share Index gained 3,5% (excluding dividends) for the four
months to 30 April 2010, compared to a loss of 4% in the first four months of
the 2009 financial year, but has since lost some 5% to return to the levels
experienced in late 2009 . Although there are positive growth indicators in
the South African economy, pressure on consumers` disposable income and
discretionary spending remains. Deal flow and new business activity levels in
a number of our institutional businesses also remain low compared to the
relatively high base in 2009. As anticipated, the commodity based African
economies in which the Group operates are experiencing some lag effect of the
global economic crisis which is evident from a slowdown in the level of new
business. The reported results from most of our international businesses are
also negatively impacted by the relative strengthening of the South African
rand. A sharp reduction in short-term interest rates had a marked impact on
interest earned on Group companies` working capital as well as the investment
income on shareholder funds.
Highlights
In a difficult business environment total new business volumes were 6% lower
than for the first four months of the 2009 financial year. This is
substantially due to lower new institutional fund inflows, albeit a
satisfactory performance against the high base in 2009. Life insurance new
business volumes however performed exceptionally well to be 21% up on the
same period in 2009, a combination of strong growth in South Africa and a
welcome recovery in the United Kingdom, somewhat offset by a lower
contribution from the rest of Africa. The value of new life business for the
four months is 18% up on 2009. Gross investment flows are 11% down on 2009
but compensated for through a major improvement on a net basis. Overall net
inflows for the Group of R6,8 billion are substantially better than the R2,1
billion achieved in the first four months of 2009, supported by a continuing
trend of net life cash inflows. Core earnings per share to April 2010 are 8%
higher than for the comparable period in 2009. Normalised headline earnings
per share are up some 70%, substantially due to the positive return in equity
markets relative to a negative performance in the first four months of 2009.
Capital
As disclosed in the Group`s 2009 annual report, the Group remains well
capitalised with identified discretionary capital of some R3,5 billion as at
the end of December 2009. The optimal utilisation of capital is a priority in
the Group. In the current financial and economic environment prudence remains
an important consideration in the application of the Group`s discretionary
capital. As indicated before, our preferred utilisation of excess capital is
an investment in value adding growth opportunities. A number of strategic
ventures are currently being pursued. Some R100 million has been invested in
the year to date. At the same time we have recommenced the buy-back of Sanlam
shares. For the year to date - up to the end of May 2010 - we have utilised
R460 million to acquire 19,2 million Sanlam shares in a subsidiary at an
average price of some R24 per share. A total of 60 million Sanlam shares held
as treasury shares were cancelled and the listing of these shares terminated
during March 2010, reducing Sanlam`s issued share capital to 2 100 million
shares. All of the Group operations remain well capitalised. Sanlam Life
Insurance Limited`s statutory capital covered its Capital Adequacy
Requirements by 3,0 times on 31 March 2010, after allowing for the dividend
payable to Sanlam in respect of the 2009 financial year. The Group remains
well positioned to take advantage of growth opportunities.
Salient features of the Group`s performance for the four months to April 2010
are:
New Business volumes
- Overall new business volumes are down 6% on the comparable period in
2009, with a strong life insurance contribution being offset by lower
gross investment fund flows.
- New life business volumes increased by 21% compared to the first four
months of 2009.
- Sanlam Personal Finance recorded a 15% increase in new life
business sales, with both the Glacier and Topaz South African
business showing a strong improvement on their 2009 results. Growth
was achieved consistently in both new recurring and single premium
volumes, each showing an increase of some 15%. Risk underwriting
business remains resilient in the current environment and recorded
a 17% increase compared to the first four months of 2009.
- Sanlam Developing Markets reported growth of 10% in its new
business volumes for the first four months of 2010. A key feature
of this growth has been a 27% improvement in new business premiums
from the combined Sanlam Sky / Channel Life South African
operations. New business volumes reported by the African operations
are however 12% down on 2009. This deviation from a robust growth
track record is in part attributable to a stronger rand but also
due to a lower level of economic activity as the global economic
slowdown now also starts to impact on Africa. Shriram Life in India
continues to perform well.
- An improving economic environment in the United Kingdom contributed
to a 39% increase in Sanlam UK`s new life business volumes.
- Sanlam Employee Benefits recorded a threefold increase on 2009 in
new business sales for the four months, albeit from a relatively
low base. Single premium flows of R277 million are substantially up
on 2009 while new recurring premium business increased by 15%.
- Overall, the average life new business margin for the four months
has been retained at levels similar to that achieved for the first
four months of 2009, and broadly in line with the disclosed 1H09
margins.
- Persistency in all markets remains within acceptable levels.
- Life net flows remained positive.
- Gross investment business inflows are 11% lower than in 2009.
- The ongoing strain on discretionary retail savings is evident in a
3% reduction in Sanlam Personal Finance`s new investment business
in South Africa. This was, however, offset by strong unit trust
sales in Namibia, with an overall 2% increase in new business.
- Gross investment flows in Sanlam Investments were down by 17%, with
lower new inflows experienced in both the wholesale business as
well as in collective investments, albeit a satisfactory
performance against the high base of 2009. This was somewhat offset
by increased flows in Sanlam Private Investments and the
international businesses.
- Net investment inflows of some R4,5 billion (excluding white label)
for the four months, versus R260 million in 2009, are however
particularly satisfactory in the current environment. Sanlam
Investments` assets under management amounted to R457 billion on 30
April 2010, up from R441 billion at the end of December 2009.
Earnings
- Net result from financial services for the four months is up 12% on
2009, albeit from a relatively low base.
- Sanlam Personal Finance and Sanlam Developing Markets achieved
another solid performance.
- The Santam results showed a strong recovery from the negative
effect of some large commercial claims during the first few months
of 2009.
- An improvement in the average equity market levels had a positive
impact on Sanlam Investment`s results.
- Core earnings per share for the four months are 8% up on 2009, the
combined result of the increase in financial services income and
investment income that was negatively impacted by lower short-term
interest rates.
- Normalised headline earnings per share are up some 70%, primarily due to
the relative improvement in the equity market performance.
Outlook
Despite recent upbeat data releases on the global real economy, an important
conclusion from the European difficulties is that the balance of risks for
the global (and South African) economy is tilted to the downside for the
foreseeable future. The challenging and volatile financial and economic
environments are therefore expected to continue for the remainder of the year
and into 2011 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 returns and volatility on Group earnings and Group
Equity Value. Relative market movements may have a major impact on the growth
in Group earnings to be reported for the interim as well as the full 2010
financial year. The strong market performance in the second half of the 2009
financial year, in particular, may not be repeated in 2010, which will impact
on the full year growth in earnings compared to the four months ended 30
April 2010.
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 ended 30
June 2010 are due to be released on 9 September 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:
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 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 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
Bellville
9 June 2010
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 09/06/2010 13:55:01 Produced by the JSE SENS Department.
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