| Thu 4 Dec 2003, 8:32 | | Trading Update and cautionary announcement |
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Sanlam Limited - Trading Update and cautionary announcement
Sanlam Limited
Incorporated in the Republic of South Africa
(Registration number 1959/001562/06)
Share code: SLM ISIN code: ZAE 000028262
"Sanlam" of "the company"
Thursday, 04 December 2003
Trading Update and cautionary announcement
Strategic direction
Sanlam has made good progress with the strategic initiatives embarked upon
during 2003, following a renewed focus on operational efficiency and delivery.
These initiatives are expected to contribute to improved results in 2004.
* Sanlam Life has taken major steps to improve cost effectiveness, distribution
and product innovation to ensure its continuing competitiveness. The resultant
savings will be evident from the 2004 financial year. The bulk of the associated
restructuring and severance cost will be accounted for in Sanlam Life"s 2003
results.
* The regulatory approval process of the acquisition of Merchant Investors
Assurance in the UK is progressing according to plan.
* The restructuring of Gensec Bank to enhance its performance is on target. All
continuing activities have now been defined and appropriately capitalised and
staffed. Those activities that will be closed or scaled down are subject to a
controlled build down process. The costs associated with this, including the
cost of retaining key staff during the transition process, will have a major
negative impact on the Bank"s results in 2003.
* The restructuring of Sanlam Financial Services (SFS), the Group"s
international advisory and asset management business, has been finalised. As
previously announced, Sanlam has, with effect from 1 July 2003, reduced its
holding in the advisory and related businesses (PSigma Group based in the UK) to
60%. Sanlam"s Investment cluster will regain a 100% holding in the asset and
multi manager components of SFS.
* A positive start has been made on the co-operation agreement with Absa. Areas
of co-operation in respect of product development and distribution have been
identified and are actively being pursued.
Operational results
As we projected, the business environment remained difficult this year,
particularly for the Life business. Relatively high short-term interest rates,
coupled with major volatility in local equity and currency markets, have had a
negative affect on equity-linked investments and new Life business inflows. It
is therefore encouraging that sound operating results are being achieved in
several areas across the Group.
Investment performance:
Sanlam Investment Management (SIM), the Group"s asset manager, has sustained a
strong investment performance relative to its benchmarks. SIM has over recent
months shown a steady recovery in its rating on both the domestic and global
Alexander Forbes Manager Watch. Of SIM"s Collective Investment Funds, 69% were
in the top half of their respective categories relative to their peers for the
year to date.
Business volumes:
Strong growth in new investment inflows at SIM and good short-term premium
growth at Santam contributed to satisfactory real growth in overall new business
inflows to the end of October. Life business inflows were however disappointing,
with Annual Premium Equivalent (APE) down 21% on 2002. New individual recurring
business (including inflation linked growth) remains in line with that achieved
in 2002 and single premium business reduced by almost 40%. This performance is
largely due to prevailing market conditions. Group business has not been as
severely affected, but is experiencing a similar trend.
Fund outflows are being contained below 2002 levels and, together with the
improvement in new business volumes, contributed to a R2,4 billion net fund
inflow to October. Life outflows are down on 2002, assisted by a 30% reduction
in the value of policies surrendered. This did not however compensate for the
lower Life inflows and resulted in negative net Life business flows.
Earnings:
Effective cost management and a strong performance from the Investment cluster
and Santam had a positive impact on the Group"s operating results to October.
The once off expenses associated with the restructuring at Sanlam Life, Gensec
Bank, as well as Sanlam Financial Services however caused an overall reduction
in net operating profit to date.
* Sanlam Life"s earnings contribution to date is in line with that of 2002.
Restructuring costs of R60 million and the lower level of new business volumes
have a negative impact on Sanlam Life"s earnings. This is, however, compensated
for by effective cost management and an improvement in underwriting results.
* Santam is maintaining its excellent operating performance.
A good operating performance in certain areas of Gensec Bank, is being offset by
the impact of lower deal flow and the once off costs associated with the
restructuring and building down of the Bank.
* Good overall earnings growth is being achieved by the investment cluster
despite the impact of depressed equity markets on the total level of assets
under management and the fee base of the operations. This is compensated for by
satisfactory performances by Innofin, Sanlam Property Asset Management and
Sanlam Collective Investments, as well as the contribution from the SFS
investment operations, which now form part of the Investment cluster.
* Costs associated with the restructuring of SFS / the PSigma Group offset their
earnings contribution to date.
A strong performance in investment income, including a much-improved
contribution from the investment in Absa, contributed to a material overall
increase in Headline earnings to date. Earnings calculated on a long-term rate
of return basis remain in line with that achieved in 2002, due to the impact of
a lower investment base and a reduction in the long-term rate of return used
(12% versus 13%).
Cautionary
As the financial information has not been reviewed or reported on by the
company"s auditors, shareholders are advised to exercise caution when dealing in
Sanlam"s shares until the release of the preliminary announcement of results for
the year ending 31 December 2003 which are expected to be published on or about
4 March 2004.
By order of the Board
Cape Town
3 December 2003
Sponsor: JPMorgan
Date: 04/12/2003 07:00:07 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
