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Sanlam Group - Sanlam Trading Update - June 2004
Release Date: 03/06/2004 08:29:28 Code(s): SLM
Sanlam Group - Sanlam Trading Update - June 2004
Sanlam Group
REGISTERED NAME: SANLAM LIMITED
(REGISTRATION NUMBER 1959/001562/06)
JSE SHARE CODE: SLM
NSX SHARE CODE: SLA
ISIN number: ZAE000028262
Sanlam Trading Update - June 2004
Operating results
The group`s actions over the last year have started to flow through to results,
with operating profit and earnings improving. Total new business inflows
continued to grow during the four months to April 2004, although this growth is
still substantially from lower margin non-Life business. The lack of growth in
the SA Life business flows remains a focus.
Earnings:
The Group achieved sound operating results in the first four months of the year,
improving on the corresponding period for 2003 and exceeding profit targets in
most of the major businesses.
To the end of April, net operating profit shows a material improvement on the
first four months in 2003. Initial cost saving benefits are reflected in an
improved contribution from Sanlam Life. Santam increased its relative
contribution to the Group results as short term insurance underwriting remained
at a cyclical high. Businesses in the investment cluster, as well as Sanlam
Financial Services in the UK, achieved sound earnings growth. The implementation
of the Sanlam Capital Markets business model is on track.
Headline earnings for the four months are materially higher than for the first
four months in 2003.
Business volumes:
The sustained increase in total new business flows during the four months to
April is encouraging. Overall, new business inflows for the period were up by
almost 50% on the same period in 2003. This growth is from a relatively low base
and the rate of growth is not expected to be maintained for the remainder of the
year. The major contribution to this growth came from investment fund inflows,
as well as real growth in net short-term insurance premiums and new Group Life
business.
Net new business inflow for the four months of some R5bn is a continued
improvement on the positive flows experienced in the second half of 2003 and
strong turnaround on the net outflows experienced during the comparative period
in 2003. The Life business experienced a significant reduction in outflows,
however it still recorded a net outflow.
The investment cluster businesses experienced a continued improvement in new
business volume flows. New wholesale third party fund inflows of some R3bn were
more than 60% up compared with the same period in 2003, while Sanlam Multi
manager and Sanlam Private Investments more than doubled their inflows. New
business volumes attracted by the UK investment consulting business exceeded
R2bn for the four month period.
Total new Individual Life business volumes for the four months are 4% down on
the same period in 2003. The continued volatility in equity and currency markets
during the period continued to negatively impact on client`s risk appetite for
contractual investment. Demand for single premium investment linked Life
business, in particular, including products that provide international currency
exposure, remained low. Business inflows in Employee Benefits (`EB`) are chunky
in nature and the timing of inflows has a major impact on the reported business
flows. New EB business for the four months to April is well ahead of that
achieved in the corresponding period in 2003, but, although encouraging
prospects are being pursued, it is unlikely that these will be concluded in time
to report growth in EB business in the half-year results. Margin improvement,
due largely to the realisation of cost savings, contributed to the embedded
value of new SA Life insurance business to date, which is well up from a
relatively low base in 2003. This rate of growth is not expected to continue and
may at the half-year reporting stage, due to lower levels of new business, not
be materially up on the R100m reported in 2003.
Strategic Focus
Sanlam continued to focus on the changing service and product needs of its
clients, rightsizing the group to weather ongoing economic volatility and
realising the opportunities open to the Group to deliver value to shareholders.
The revitalisation of the Group`s Employee Benefits business is an important
initiative in regaining lost ground in this important market. Capitalising on
our strategic partnerships with both ABSA and Ubuntu-Botho is also a major focus
and the implementation of the necessary structures and processes to gain maximum
value from both is progressing well. The scaling down of Gensec Bank will be
completed in early June 2004 with the return of its banking licence and the
change of its name to Sanlam Capital Markets. Sanlam Life assumed operational
control of the UK insurer, Merchant Investors Assurance (`MIA`), and initial
results of the MIA operations are in line with expectations. The restructured
actuarial and investment consulting business in the UK, Sanlam Financial
Services, achieved satisfactory results for the year to date
Shareholders are advised that the results referred to in this trading update
have not been reviewed by Sanlam`s auditors.
02 June 2004
