| Wed 8 Jun 2011, 13:00 | | SLM - Sanlam Limited - Challenging business environment remains |
|
SLM
SLM
SLM - Sanlam Limited - Challenging business environment remains
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 2011
The Group achieved overall satisfactory results for the first four months of
2011. New life insurance business volumes increased by 12% at sustained
margins, overall net business inflows amounted to R8,6 billion (with improved
net life cash inflows) and the underlying net result from financial services
increased by some 15%. These results were achieved amidst ongoing
challenging financial and economic conditions.
Challenging business environment remains
The Group`s 2010 annual report indicated that we did not expect the South
African economy to stage a large-scale recovery in 2011, but rather to
experience slow, yet steady progress. This has been the theme for the first
four months of 2011. Relatively high salary increases and a low interest rate
environment enabled consumers to reduce some of their debt. Consumer debt
levels in South Africa however remain high and together with sharp cost of
living increases continue to impact on the level of discretionary
expenditure. This is reflected in new retail business volumes for the period,
although some improvement has been experienced in discretionary savings in
the mass middle market. The low interest rate environment also continues to
impact negatively on demand for guaranteed and money market solutions and has
a marked impact on interest earned on Group companies` working capital.
Higher resource prices provide support for the African resources-based
economies, although some territories are still experiencing recessionary
conditions.
The reported results of our international businesses were negatively impacted
by the strong average South African rand exchange rate when compared to the
first four months of 2010.
Global investment market uncertainty continued during the first four months
of 2011, exacerbated by political unrest in North Africa and the Middle East
and the natural disaster in Japan. Sovereign risk in the Euro zone also
flared up again. This contributed to daily market volatility in international
as well as the South African equity markets during the period.
Highlights
- Total new business volumes were 11% up on the first four months of the
2010 financial year. This was the combined effect of a satisfactory
increase in both new investment as well as new life insurance business
flows.
- Overall net inflows for the Group of R8,6 billion are a 27% improvement
on the R6,8 billion achieved in the first four months of 2010, supported
by a continuing positive trend in net life cash inflows.
- The underlying net result from financial services to April 2011 is some
15% higher than in the comparable period in 2010.
Capital
As disclosed in the Group`s 2010 annual report, the Group remains well
capitalised with identified discretionary capital of some R4 billion as at
the end of December 2010. The optimal utilisation of capital is a priority in
the Group. 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.
This includes discussions with our Indian partners on a possible additional
investment in the financial services businesses of the Shriram Group. Further
detail on this and other potential ventures will be disclosed in due course.
Some R730 million of the discretionary capital has been utilised during the
year to date, essentially in respect of the buy-back of Sanlam shares. For
the year to date - up to the end of May 2011 - we have acquired 26.9 million
Sanlam shares at an average price of R27.18 per share. 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 31 March
2011, after allowing for the dividend payable to Sanlam in respect of the
2010 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 2011
are:
New Business volumes
- Overall new business volumes are up by 11% on the comparable period in
2010, with satisfactory growth in both life insurance and investment
fund flows.
- New life business volumes increased by 12% compared to the first four
months of 2010.
- Sanlam Personal Finance recorded an 8% increase in new life
business sales, supported by particularly strong growth in Glacier
single premium business and a 12% increase in South African
recurring premium life business. This was partly offset by
continued weak demand for single premium guaranteed solutions.
- Sanlam Developing Markets reported growth of 35% in its new
business volumes for the first four months of 2011. South African
recurring premium new business was in line with 2010, affected by a
focus on writing quality new business. A reduction in roll-overs of
the discontinued single premium business also impacted on the
cluster`s new business growth in South Africa. The African
operations continue on their growth path and most recorded
increases in new business sales in excess of 50%, driven by strong
single premium volumes in most operations and continued good
annuity sales in Botswana.
- The strong equity market performance in the United Kingdom during
2010 continues to support improved investor confidence and demand
for the Group`s solutions. Sanlam UK`s new life business volumes
increased by 32%.
- Sanlam Employee Benefits recorded a 25% increase in new recurring
premium business, a particularly satisfactory result in a very
competitive market. Volatility in single premium business
continues, driven partly by the Group`s focus on only writing
quality business that meets internal return hurdle rates. This
contributed to a 27% decrease in new single premium business and an
overall 19% reduction in new business.
- Overall, the average life new business margin for the four months
has been maintained at a level similar to that achieved for the
first four months of 2010, and broadly in line with the disclosed
1H10 average margin.
- Persistency in all markets remains within acceptable levels.
- Life net inflows improved threefold on those of 2010.
- Gross investment business inflows were 10% higher than in 2010.
- Glacier achieved strong growth in sales of new single premium
investment solutions, supporting a 17% increase in Sanlam Personal
Finance`s new South African investment business. This was however
offset by a 26% reduction in Namibian sales volumes as unit trust
sales decreased in a very competitive environment and from a high
base in 2010.
- Gross investment flows in Sanlam Investments were up by 12%, with
strong contributions from Sanlam Collective Investments, Sanlam
Private Investments and the non-South African operations. This was
partly offset by lower volumes of Multi-Manager and South African
segregated inflows.
- Sanlam UK`s new investment business inflows almost doubled on the
2010 comparable base.
- Net investment inflows of some R4,9 billion (excluding white label)
for the four months, versus R4,5 billion in 2010, are particularly
satisfactory in the current environment. SIM`s assets under
management amounted to R503 billion on 30 April 2011, up from R491
billion at the end of December 2010.
Earnings
- The underlying net result from financial services for the four months is
up some 15% on 2010.
- Sanlam Personal Finance, Sanlam Developing Markets, Sanlam Employee
Benefits and Sanlam Investments Capital Management all achieved a
solid performance.
- The favourable Santam underwriting experience continued for the
first four months of 2011.
- Once off items and an increase in new venture expenditure offset
the positive effect of the higher average equity market levels on
the Sanlam Investments results.
- Similarly, normalised headline earnings are also up on the comparable
period in 2010 due to the strong operating performance as well as an
increase in investment returns on the shareholder funds.
Outlook
Global economic growth is expected to remain sluggish for the rest of the
2011 financial year. The subdued global economic conditions are likely to
also reflect in the economies within which the Group operates and to impact
on growth in the Group`s key operational performance indicators for the
remainder of the year.
The operating earnings growth reported for the four months to April 2011 to
some extent reflect a relatively slow start in the comparable period in 2010.
The acceleration in earnings growth achieved during the latter part of 2010,
in many instances on the back of stronger equity markets, an increase in fund-
based earnings and strong underwriting results, will not necessarily be
repeated in 2011. Shareholders also 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
interim as well as the full 2011 financial year compared to the four months
ended 30 April 2011.
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 2011 are due to be released on 8 September 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 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
8 June 2011
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 08/06/2011 13:00:06 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.
