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SANLAM LIMITED - SANLAM TRADING UPDATE - DECEMBER 2004 SANLAM LIMITED (REGISTRATION NUMBER 1959/001562/06) JSE SHARE CODE: SLM NSX SHARE CODE: SLA ISIN number: ZAE000028262 SANLAM TRADING UPDATE - DECEMBER 2004 Operating Results Earnings: The Group achieved sound operating results for the ten months to October, with core earnings per share to date up by some 20% on 2003. All major Group businesses delivered improved performances on the same period in 2003. Net operating profit to October 2004 shows a material improvement on 2003. The Sanlam Life results reflect the benefit of the recent cost saving exercise, as well as a favourable claims experience on risk business. Short-term insurance underwriting margins remain at a cyclical high, contributing to a substantial improvement in Santam`s performance for the period. The businesses in the Investment cluster, as well as Sanlam Financial Services in the UK and Sanlam Capital Markets, all achieved sound earnings growth. Lower prevailing interest rates contributed to a marginal reduction in investment income for the ten months. Strong growth in equity markets during 2004 to date contributed to an improvement in the funding levels of policyholder funds. Based on current market performance, we do not anticipate a need for financial support from shareholder funds in 2004 (2003: R290m). This will have a positive impact on headline earnings growth for the year. However, the strong growth in equity markets resulted in a negative valuation adjustment of some R90m (2003: R159m positive) in respect of hedging structures in Sanlam`s capital portfolio, which needs to be accounted for in Headline earnings in terms of AC133. This item introduced the potential for substantial volatility in Headline earnings and the equity market performance for the remainder of the year may have a major impact on the full year Headline earnings. Headline earnings per share for the 2004 financial year are expected to increase by between 20% and 30%, dependent on market conditions. Business volumes: All Sanlam Group businesses experienced improved business flows for the ten- month period. Overall, new business inflows to October were up by some 50% on 2003. The major contribution was from investment fund inflows, as well as from growth in excess of 10% in both new Life business and net short-term insurance premiums. Net new business inflows increased substantially for the period to R10bn, compared with only R2bn in 2003. All businesses within the Investment cluster attracted higher new business volume flows. New wholesale third party fund inflows doubled compared with the same period in 2003, while Sanlam Multi-manager and Sanlam Private Investments achieved even stronger growth. Funds under management in the Investment cluster increased by 12% to R225bn at the end of October 2004. The UK investment consulting business attracted some R4bn in new business for the period. New SA Individual Life business increased by some 7% on the first ten months of 2003. Satisfactory growth in single premium business is still being offset by lower new recurring premiums. Although SA Employee Benefit business volumes to date are well up on 2003, the performance for the full twelve month period is not expected to improve on the comparative period in 2003, due to strong inflows in the last quarter of 2003 that will not be repeated this year. New Life business inflows were also assisted by improved inflows in Namibia and a maiden contribution from the UK Life operations (Merchant Investors Assurance). Life cost savings had a positive impact on margins and the embedded value of new business to October 2004. Shareholders are advised that the results referred to in this trading update have not been reviewed or reported on by Sanlam`s auditors. Strategic Update At the Group`s interim results in September 2004, Sanlam indicated that following its restructuring, the Group was ready to leverage off the platforms created in each cluster to build profitable and diversified revenue streams and pursue growth opportunities. Cost-cutting and restructuring left operations in a favourable position to deliver against the challenges facing the industry and Sanlam in particular, including the group`s ability to counter the threat of a lower return and inflation environment. Sanlam has continued to focus on exploring new growth and revenue opportunities to substitute potentially lower future revenue streams due to changing market preferences, competitive product offerings and shrinking margins. A number of future revenue sources are already in place, including new ventures like Sanlam Home Loans and the joint venture with Citidel, and new acquisitions such as Merchant Investors Assurance. The process of developing new revenue sources by extending our service and product offering continues. Our focus also remains on extracting maximum value from the capital invested in Group businesses. Shareholders are referred to recent announcements on the possible acquisition by Barclays Plc of an interest in Absa and consequently the potential sale of a portion of Sanlam`s investment in Absa. Shareholders will be kept informed of any further progress in this regard. A successful transaction will have a positive impact on Sanlam`s ability to optimally structure the Group`s capital and to re deploy any surplus capital in the Group. Further detail on the strategy in this regard will be provided on the release of Sanlam`s year-end results. Bellville 2 December 2004 Sponsor JP Morgan Date: 02/12/2004 08:30:12 AM Produced by the JSE SENS Department
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