| Thu 5 Dec 2002, 10:48 | | Sanlam Limited - Third Quarter Trading Update |
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Sanlam Limited - Third Quarter Trading Update
Sanlam Limited
(Incorporated in the Republic of South Africa)
(Registration number 1959/001562/06)
(Share code: SLM ISIN: ZAE000028262)
("Sanlam")
THIRD QUARTER TRADING UPDATE
Introduction
WITH THE RELEASE OF ITS FIRST INTERIM TRADING STATEMENT IN JUNE THIS YEAR, THE
SANLAM BOARD ENVISAGED, IN THE INTEREST OF IMPROVED STAKEHOLDER DISCLOSURE,
ISSUING SUCH AN UPDATE TO THE INVESTMENT PUBLIC AFTER FUTURE ANNUAL GENERAL
MEETINGS. AT ITS MEETING ON 4 DECEMBER 2002, THE BOARD DECIDED TO ISSUE SUCH
COMMUNICATION BETWEEN FORMAL COMMUNICATION DATES.
SANLAM`S RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002 WILL BE ANNOUNCED ON
THURSDAY, 6 MARCH 2003 AND THE BOARD ISSUES THE FOLLOWING OVERVIEW ON ITS
EXPECTATIONS AND THE GROUP`S PERFORMANCE.
Business environment
THE DIFFICULT TRADING CONDITIONS EXPERIENCED IN THE FIRST HALF OF 2002 CONTINUED
THROUGHOUT THE THIRD QUARTER. RELATIVELY HIGH INTEREST RATES ARE ERODING
CLIENTS` DISPOSABLE INCOME, AND COUPLED WITH THE SUSTAINED VOLATILITY IN EQUITY
AND CURRENCY MARKETS, IMPACT NEGATIVELY ON GENERAL INVESTMENT AND INSURANCE
APPETITE. THIS IS EVIDENT IN OUR RETAIL MARKETS AND ALSO IN THE LIMITED LEVEL
OF DEAL FLOW EXPERIENCED IN GENSEC BANK`S BUSINESS AREAS.
Operating results
GROWTH IN NEW LIFE BUSINESS INFLOWS REMAINED FAIRLY FLAT, AS HIGHER RISK AND
GUARANTEED TYPE BUSINESS WERE OFFSET BY A REDUCTION IN INVESTMENT RELATED
BUSINESS. THE CONTAINMENT OF BENEFIT PAYMENTS AND A REDUCTION IN POLICY
SURRENDERS SHOULD RESULT IN A SECOND HALF IMPROVEMENT IN LIFE BUSINESS NET CASH
FLOWS. A WELCOME IMPROVEMENT IN SANLAM UNIT TRUST INVESTMENT PERFORMANCE IS
CONFIRMED BY AN INCREASE IN NEW UNIT TRUST INFLOWS. SOME SUCCESS IS ALSO BEING
ACHIEVED IN ATTRACTING NEW SEGREGATED FUND MANAGEMENT BUSINESS. HOWEVER, A
RELATIVELY HIGH LEVEL OF FUND WITHDRAWALS CONTINUED IN THE SECOND HALF OF 2002
AND WILL RESULT IN A DETERIORATION IN THE NET OUTFLOW IN FUNDS FOR THE YEAR.
In our announcement of the first half results we set a target to achieve real
growth in gross operating profit for the year, but stated that it would be
difficult to achieve given the prevailing business environment. The latter
statement has, unfortunately, been confirmed by the second half performance to
date. Given the current performance of our operations, only a modest operating
profit growth can be expected for the year. An improved second half performance
by Gensec is being substantially offset by increased expenditure, in particular
at our international operations while they are building capacity for future
growth, and an increase in underwriting claims. Fee income earned on assets
under management remained under pressure due to the cash outflow and market
value impact on the asset base. In the absence of any material adverse events
for the remainder of the year, and excluding the effect of the once off tax
reversal in 2001, headline earnings should be approximately in line with those
reported in 2001.
PROGRESS ON IMPLEMENTATION OF BANKING STRATEGY
Sanlam`s vision, namely to be the leader in wealth creation, is underpinned by
the three themes of superior client relationships, domestic and international
growth. We have indicated in the past that several options to add banking
products to our product offering were being evaluated and that we intended to
provide some clarity on the preferred route by the end of this year.
Sanlam`s strategic interest in ABSA provides a logical starting point for the
implementation of our banking strategy. One alternative in this regard, an
outright merger of the two entities, has been the subject of an in-depth
analysis over the past few months. After due consideration, the Sanlam Board
concluded that currently such a transaction is not viable nor in the best
interest of Sanlam shareholders.
The alternative of a formal co-operation model is now being pursued. This may
entail agreements on distribution, joint ventures and the rationalisation and
integration of overlapping businesses. It is our intention to maintain our
current shareholding in ABSA pending the outcome of the co-operation
deliberations.
Lead Sponsor: JPMorgan
Joint Sponsor: Gensec
5 December 2002
Date: 05/12/2002 07:00:03 AM Produced by the JSE SENS Department
