June 6, 2003
By Edward West
Cape Town - Sanlam expected to post a healthy increase in headline earnings for the first six months of this year compared with 2002, partly because of a much improved contribution from its investment in Absa, the life insurer said in a trading statement yesterday.
Sanlam's share price gained 2.9 percent to R7.10 yesterday, outstripping the life assurance sector, which fell 0.16 percent to 8172.77.
New business inflows to the end of April were about 20 percent more than last year. Gross operating profit for the interim period was expected to be marginally up on the first half of 2002.
There had been good short-term premium growth at short-term insurer Santam. But the lack of growth in new life business was disappointing.
Ton Vosloo, the chairman of Sanlam, said at the annual meeting this week the past year had been one of the most demanding in Sanlam's recent business history and renewed focus and repositioning was needed. Recent evidence pointed to a continuation of the slowdown in economic activity in South Africa and leading indicators had yet to point to an upturn in the global economy.
Recurring premium life business had grown well last year but single premium business had not
.
High interest rates were eroding some benefits of life products and guaranteed products. But Sanlam Life's earnings would benefit from cost management and certain other revenue sources.
Although there was some improvement in the investment inflows of Sanlam Investment Management, weak stock markets lowered assets under management, its fee base as well as the international asset management activities.
The international business was affected by slower-than-planned growth in new business and a firmer rand, while the depressed market impacted on private client and stock broking businesses.
Given the lower revenue base, a lower half-year profit contribution was expected from Sanlam Investment Management and the international operations.
Sanlam's Gensec was expected to report a better half-year operating performance. Some progress had been made on the structural changes to realign Sanlam, a strategy that would be implemented for the rest of the year.
Sanlam remained on target to improve on its 2002 new business and headline earnings performance, although this was linked to market conditions for the year.
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