| Wed 8 Dec 2010, 15:00 | | SLM - Sanlam Limited - Operational Update - December 2010 |
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SLM
SLM
SLM - Sanlam Limited - Operational Update - December 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: ZAE000070660
("Sanlam" or "the Group")
Operational Update - December 2010
The Group achieved overall satisfactory results for the ten months ended 31
October 2010, despite a continuance of challenging operating conditions, most
evident in pressure on disposable income of the middle market. Strong net fund
inflows and sustained new business margins are particularly satisfactory.
Business environment
The challenging business conditions persisted since June 2010. The outlook
remains for a fragile and delayed global recovery, with renewed sovereign risk
in Europe. A second round of quantitative easing by the Federal Reserve in the
United States should aid economic recovery.
The South African equity market followed international trends and recorded a
strong 4 months since June 2010. The FTSE/JSE All Share Index at the end of
October 2010 closed 10% up on its 31 December 2009 level. This compares to a 23%
increase during the first 10 months of 2009. Positive growth indicators in the
South African economy, combined with a low interest rate environment, should
provide some relief for consumers` disposable income and discretionary spending.
Above-inflation increases in the cost of living, particularly electricity prices
and healthcare costs, however, continue to put pressure on the middle market.
The commodity-based African economies in which the Group operates are gradually
benefiting from higher resource prices, with early signs of increased
operational activity emerging. The reported results from the Group`s
international businesses are however negatively impacted by the relative
strength of the South African rand. Prevailing low short-term interest rates
continue to have a marked impact on interest earned on group companies` working
capital as well as the investment income on shareholder funds.
Highlights
In the context of the difficult business environment satisfactory growth of 4%
in new business volumes was achieved. Gross investment flows are 4% up while
life insurance new business volumes increased by 5% on the comparable period in
2009. Growth in recurring premiums remains strong, being partially offset by
marginal growth in South African retail single premiums. The value of new life
business for the ten months is some 7% up on the first ten months of 2009 before
allowing for the positive impact of lower long-term interest rates. On a similar
basis, margins were maintained at approximately the levels reported in the
group`s interim results. Overall net inflows for the group of R17,2 billion
(excluding white label business) are substantially better than the R13,5 billion
achieved in the first ten months of 2009, supported by strong net investment
flows as well as continued net life cash inflows. This is a particularly
satisfactory result. Core earnings per share for the ten months to October 2010
are 9% higher than for the comparable period in 2009. Normalised headline
earnings per share for the same period are marginally up on the comparable ten
months of 2009, with the relatively weaker investment market performance in 2010
offsetting the growth in core earnings.
Capital
As disclosed in the Group`s interim results report, the Group remains well
capitalised with identified discretionary capital of some R2,8 billion as at the
end of June 2010. The optimal utilisation of capital is a priority in the Group,
and is receiving significant management attention in the current lower short-
term interest rate environment. 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. No significant
utilisation of discretionary capital occurred since the end of June 2010. All of
the Group operations remain well capitalised. Sanlam Life Insurance Limited`s
statutory capital covered its Capital Adequacy Requirements by 3,2 times on 30
September 2010.
Sanlam and Santam have reached agreement to consolidate the Group`s interest in
MiWay, the new direct insurance venture, as a wholly owned Santam subsidiary.
This decision will enable the Sanlam Group to improve the coordination of its
short-term insurance coverage across all consumer market segments. Santam will
reimburse Sanlam`s investment to date in the venture of R240 million, while a
basis has been agreed in terms of which Sanlam will share in any increase in the
valuation of MiWay up to December 2013. Sanlam will also retain access to the
MiWay structures to distribute other financial services products. The
transaction is still subject to regulatory approval.
Salient features of the Group`s performance for the ten months to October 2010
are:
New Business volumes
* Overall new business volumes (excluding white label business) are up 4% on
the comparable period in 2009.
* New life business volumes increased by 5% compared to the first ten months
of 2009.
* Sanlam Personal Finance recorded a marginal increase in new life
business sales, with satisfactory growth of 15% in new recurring
premiums being offset by flat single premium volumes. The low interest
rate environment erodes demand for single premium annuity and
guarantee plan solutions. Risk underwriting business remains resilient
in the current conditions and recorded a 15% increase compared to the
first ten months of 2009.
* Sanlam Developing Markets reported growth of 14% in its new business
volumes for the first ten months of 2010. Excluding discontinued
single premium business in South Africa, new business sales were 17%
up on 2009. All geographical regions contributed to the growth,
despite the strengthening of the rand.
* Improving economic conditions in the United Kingdom contributed to a
10% increase in Sanlam UK`s new life business volumes, after allowing
for a 14% strengthening in the average exchange rate of the rand
against pound sterling.
* Sanlam Employee Benefits recorded a 70% increase on 2009 in new
business sales for the ten months. This is driven by single premium
sales. This level of growth is not expected to be maintained for the
full financial year.
* Overall, the average life new business margin for the ten months has
been retained at levels similar to that achieved for the first six
months of 2010.
* Persistency in all markets remains within acceptable levels, with the
core operations reflecting improvements.
* Life net flows remained positive.
* Gross investment business inflows are 4% higher than the first ten months
of 2009.
* Despite ongoing strain on discretionary retail savings, Sanlam
Personal Finance recorded a 5% increase in new investment business in
South Africa. This was, however, offset by lower unit trust sales in
Namibia against a high base in 2009.
* Gross investment flows in Sanlam Investments were up by 3%. Sanlam
Multi Manager and the international businesses achieved strong new
business volumes, offset by lower money market collective investment
and private investment inflows.
* Net investment inflows of some R12 billion (excluding white label) for
the ten months, versus R8,8 billion in 2009, are particularly
satisfactory in the current business climate. Sanlam Investments`
assets under management amounted to R482 billion on 31 October 2010,
up from R441 billion at the end of December 2009.
Earnings
* Net result from financial services for the ten months is up 15% on 2009.
* Sanlam Personal Finance and Sanlam Developing Markets achieved a solid
performance.
* The Santam results continue to reflect positive underwriting
experience.
* Core earnings per share for the ten months are 9% up on 2009, the combined
result of the increase in the net result from financial services and lower
net investment income, which continues to be impacted by a lower capital
base and the low short-term interest rate environment.
* Normalised headline earnings per share are up marginally as the equity
markets performed weaker relative to the first ten months of 2009.
Outlook
The challenging and volatile financial and economic conditions are expected to
continue 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 effect 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 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 affect the full year growth
in earnings compared to the ten months ended 31 October 2010.
The information in this operational update has not been reviewed or reported on
by Sanlam`s auditors. Sanlam`s results for the year ended 31 December 2010 are
due to be released on 10 March 2011. 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 - Johannesburg Toll +27 (0)11 535 3600
(Telkom) Toll-free 0800 200 648
South Africa - Johannesburg Toll 011 581 2002
(Neotel)
South Africa - Cape Town Toll 021 819 0900
(Neotel)
South Africa - Durban (Neotel) Toll 031 812 7600
South Africa Toll-free 0 800 200 648
USA Toll 1 412 858 4600
Toll-free 1 800 860 2442
UK Toll-free 0 800 917 7042
Other countries Toll +27 (0)11 535 3600
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 and Canada Toll 1 412 317 0088
Other Countries Toll +27 (0)11 305 2030
UK Toll-Free 0 808 234 6771
For further information on Sanlam, please visit our website at www.sanlam.co.za
Bellville
8 December 2010
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 08/12/2010 15:00:01 Produced by the JSE SENS Department.
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