| Thu 5 Jun 2003, 14:52 | | Sage Group Limited - Corporate Update |
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Sage Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1970/010541/06)
Share code: SGG ISIN: ZAE000006623
("Sage Group")
CORPORATE UPDATE
Since the distribution of the annual reports of Sage Group and Sage Life Limited
("Sage Life") for the year ended 31 December 2002, there have been several
material developments, which, together with a trading update, are the subject of
this announcement.
Capital Raising
At the General Meeting of shareholders of Sage Group on Thursday, 29 May 2003
(investors are referred to the separate announcement on this subject on 30 May
2003), the necessary resolutions relating to the R350 million capital raising
exercise by Sage Group, were approved by shareholders. All the conditions
precedent in terms of the specific issue of new shares in Sage Group to a
consortium of investors represented by and including AVASA Holdings Limited (the
AVASA consortium), and in terms of the rights offer to Sage Group shareholders,
have been fulfilled. The specific issue for cash of 69 696 970 Sage Group shares
at a price of R1,65 per share will raise R115 million on or about 13 June 2003.
The renouncable rights offer in respect of 142 424 242 Sage Group shares at a
price of R1,65 per share in order to raise R235 million, is expected to be
concluded on or about 7 July 2003.
Equity Linked Notes ("ELN"s"):
Hedging of Currency Risk
In line with the Sage Group policy of hedging currency risk where appropriate,
transactions have been concluded to hedge the US$65 million ELN"s liability at
an average spot rate of R7,48 to the dollar.
Repurchase of ELN"s
ELN"s having a nominal value of approximately US$5 million have been repurchased
by Sage Group, for cancellation thereafter, to capitalise on the discount of
approximately 15% at which the ELN"s are currently priced in the market.
International Interests
As previously announced, Sage Group disposed of Sage Life (Bermuda) Limited to
Old Mutual Plc. The transfer of the business has been completed and
arrangements have been concluded for the ongoing servicing of policyholders of
the Bermuda branch of Sage Life, South Africa. .
Agreement in principle has been reached with Swiss Re Life and Health US ("Swiss
Re") for the acquisition by Swiss Re of the Group"s interest in Sage Life
Assurance of America Inc ("Sage Life USA") for a nominal consideration. Subject
to regulatory approval of this transaction, Swiss Re will consequently take full
control of Sage Life USA. Sage Life USA will continue to service existing
policyholders. Sage Group will continue with the winding-down of the ancillary
activities in the US and it is expected that all outstanding matters will be
resolved within the next few months as provided for within the financial
statements as at 31st December 2002.
Trading Update
New Business
The uncertainties surrounding the Group prior to the announcement of the 2002
financial results and other developments materially affected new business
results in the first five months of the current year. New business was also
impacted in line with the life assurance and investment industries by weak
domestic and global equity markets and generally uncertain and volatile economic
conditions.
Total new business for the first five months of the current year to 31 May 2003
(the latest available reporting date) showed a decline of 21,7% to R145,4
million compared to the same period in the previous year in terms of Annual
Premium Equivalent (annualised recurring premiums and 10% of single premiums).
Total new business in the Individual division declined by 30,6% while the
Employee Benefits division showed an increase of 17%.
Unit sales by Sage Unit Trusts for the period 1 January to 31 May 2003 reduced
slightly to R1 452,5 million (R1 644,4 million in the comparable period in the
previous year). Repurchases continue at high levels in line with the industry
trend, resulting in a net outflow of R143 million for the period.
The capital raising and other recent developments in the Group have been well
received internally and by intermediaries and clients. In the light of this it
has been decided to remove the penalty imposed on surrenders since December
2002.
Expense Management
Within the SA operations, expenses of management to the end of April 2003 have
been contained to a growth of 1,4% on a comparative basis over last year.
Further steps have been taken to rationalize certain activities and some
additional cost savings are expected. These may, however, be offset to some
extent by additional developmental expenses to be incurred in the restructuring
of local operations.
Policy Discontinuances
Discontinuances of policies through lapsing and surrenders within Sage Life
increased during the first 5 months of the year; the number of policies lapsed
increased by 6,4% and the number of policies surrendered by 23,2% compared to
the same period last year. In force annualised premiums, however, have
continued to increase, reaching R1 009 million at the end of May 2003 compared
to R972 million at May 2002.
Equity Market Movements
As with all life assurers and unit trust operations, fees based on asset values
have been materially impacted by the downturn in equity values over the first
quarter in spite of good relative performance. Shareholder funds in Sage Life,
however, have been partially protected due to the investments in ABSA Group
Limited and property, which have held their values relative to the market.
The Sage Group financial results for the interim reporting period (six months
ending 30 June 2003) will be affected by the decline in new business levels and
in particular by the impact of weak equity market performance on policyholder
and unitholder portfolios. On the other hand, the negative impact of the
international activities has been eliminated.
5 June 2003
Grant Thornton Kessel Feinstein Corporate Sponsors (Pty) Ltd
Sponsor
