| Thu 5 Jun 2003, 8:57 | | Trading Update |
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Sanlam Limited -
SANLAM LIMITED
(Registration number 1959/001562/06)
JSE share code: SLM
ISIN number: ZAE000028262
Trading Update
Strategic direction
We recently announced a realignment of the Sanlam Group strategy, which is aimed
at operational focus and delivery. This included structural and leadership
changes necessary to facilitate that process.
To date, we have made progress in implementing the required changes, both from a
short-term perspective to counter the impact of the current business
environment, as well as longer-term initiatives to boost growth. The emphasis
for the remainder of the year will continue to be on implementation and delivery
of this strategy.
Santam Limited appointed Mr Steffen Gilbert as Chief Executive Officer with
effect from 14 July 2003. In that capacity he will also head up the Sanlam
Group"s short-term insurance cluster and will join the Sanlam Executive
Committee and the Sanlam Limited Board as Alternate Director.
Operational results
It is encouraging to report that, notwithstanding the difficult business
environment, the Group achieved satisfactory operating results in several areas
for the year to date.
Investment performance
The changes introduced at the Group"s asset manager, Sanlam Investment
Management (SIM), are starting to bear fruit. The Sanlam portfolios delivered a
good performance relative to most of their respective benchmarks. At the end of
April SIM moved to 4th position for a 12 month rolling performance on the
Alexander Forbes Domestic Large Manager Watch ranking. Year to date performance
is also pleasing, with the domestic and global funds both being ranked 5/10.
Business volumes
Overall new business inflows to the end of April are about 20% in excess of last
year, as SIM achieved strong growth in new segregated funds inflow and due to
good short-term premium growth at Santam. The containment of fund outflows,
coupled with the improvement in new business volumes, is impacting positively on
the Group"s net cash flow position.
However, the lack of growth in new Life business is disappointing. Although
recurring premium Life business continues to show growth on 2002, single premium
business, in particular, is being affected by the current market conditions. The
current relatively high level of short-term interest rates also erodes some of
the value proposition of Life products, such as term annuities and guaranteed
return products.
Earnings
Our published headline earnings represent net operating results and investment
income earned on the shareholder fund"s discretionary investment portfolio. A
healthy increase is expected in headline earnings for the first six months
compared to 2002, partly due to a much improved contribution from our investment
in Absa as their 2002 results were negatively impacted by losses incurred at
Unifer.
Notwithstanding difficult market conditions, gross operating profit for the
first six months of 2003 should be marginally up on that recorded in 2002:
Sanlam Life"s earnings are being affected by the depressed equity markets and
the lower level of new business volumes. This should, however, be substantially
offset by effective cost management and an improvement in certain other revenue
sources.
Santam is expected to maintain its good operating performance.
An improved operating performance is expected from Gensec Bank on the back of
good performances in many areas of the bank.
Although there have been improvements in SIM"s investment inflows, depressed
equity markets have a marked impact on the total level of assets under
management and the fee base of SIM locally, as well as the International asset
management activities. Given the lower revenue base, a lower half-year profit
contribution is expected from both.
The results from the International business are, in addition, affected by a
slower than planned rate of growth in new business and the stronger Rand
conversion rate, while the depressed market also impacts on their private client
and stock broking business.
Assuming a long term investment return (LTRR) on the shareholder fund"s
discretionary investment portfolio, a marginal increase is expected in the pro
forma LTRR headline earnings over the first six months of 2002.
Capital and funding levels
The capital level of Sanlam Life remains sufficiently strong to support all
regulatory and economic requirements.
Conclusion
We remain on target to improve on our 2002 performance in respect of both new
business flows and headline earnings, although our ability to achieve that is
obviously closely linked to the market conditions for the remainder of the year.
Positive signs of a potential reversal of the downward trend in the local equity
market, as well as expectations of an imminent lowering in interest rates, bode
well for an improvement in Sanlam"s business environment.
Note
At Sanlam"s AGM held on 4 June 2003, shareholders, inter alia, approved:
The re-appointment of directors E van As, VP Khanyile, DC Brink, PEI Swartz, J
van Zyl and T Vosloo to the Sanlam Limited Board.
An amendment to the resolution relating to the unissued ordinary shares in the
share capital of the company to be placed at the disposal and under the control
of the Board, subject to a maximum of 265 million shares.
JP Bester
Company Secretary
4 June 2003
Date: 05/06/2003 08:30:06 AM Supplied by www.sharenet.co.za
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