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Sanlam Limited - Financial Update Registered name: Sanlam Limited (Registration number 1959/001562/06) JSE share code: SLM NSX share code: SLA ISIN number: ZAE000028262 Sanlam Financial Update Operating results Earnings: The Group achieved sound operating results in the first four months of the year. Most of the major businesses improved on their 2004 performance. Net operating profit for the first four months is more than 10% higher than the restated results for the same period in 2004. Sanlam Life`s lower cost base contributed to improved earnings for the period. All businesses in the Investment cluster performed well and contributed to a material improvement on the cluster`s results for the same period in 2004. Stronger equity markets, increased assets under management and incentive fees earned contributed to this performance. The revised business model of Sanlam Capital Markets is now well established and delivering according to expectations. In line with expectations, lower net insurance results had a negative impact on Santam`s relative contribution to the Group results to date. Headline earnings per share, based on International Financial Reporting Standards (`IFRS`) as set out in the Financial Review in the 2004 Annual Report, are up some 20% on the first four months of 2004. In addition to the growth in operating results, equity market movement during the reporting period contributed to this improvement in earnings. Headline Earnings for the 2005 financial year include both the realised and unrealised market value changes attributable to investments held in the shareholders` funds and are reported net of transfers to or from policyholders` funds to compensate the portfolios for market value changes in respect of Sanlam and Santam shares held in those portfolios. The 2004 results have been restated accordingly. Market movements may therefore have a material impact on Headline Earnings and shareholders need to be aware of the potential volatility in reported earnings. Business volumes: New business flows for the four months to April are 5% up on 2004. Positive investment inflows were offset by lower Life business inflows. The volatility in equity and currency markets, coupled with the spate of recent negative press reports on the insurance industry, impacted client investment behaviour as private and collective investments grew in popularity as substitutes for insurance policy based investments. Individual Life single premiums for the four months are down 7% on 2004, substantially due to a fall in Life policy continuations, while new recurring premiums showed marginal growth. The strategic initiatives launched recently to address our reach and market share in key segments are expected to take longer in making a positive contribution than originally planned. New group business inflows for the four months are down on 2004, partly due to a structural change in the employee benefit investment environment where multi-managers are making strong inroads into this market. This is also evidenced in a more than doubling in the new funds attracted by the Sanlam Multi Manager for the period. Overall, new investment inflows continued the upward trend of the recent past, greatly assisted by the strong growth in inflows to our Personal and Collective Investments businesses. The Public Investment Commission withdrew R6bn of its funds under management from Sanlam Investment Management in March 2005 as part of the restructuring of its investment process and mandates. Apart from this withdrawal, the Group achieved positive net business inflows of R4bn for the four months. The positive flows were essentially in respect of investment and short term insurance activities. Both the individual and group Life businesses experienced a small increase in net outflows for the period. 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 The pensions fund adjudicator recently issued a number of rulings against various retirement annuity funds that could have potentially significant implications for the insurance industry as a whole. We strongly support actions to ensure that policyholders are treated fairly and have appointed a Sanlam internal ombudsman to oversee the protection of policyholder interests. In terms of the rulings against retirement annuity funds administered by Sanlam, we believe that they are not based on an accurate interpretation of all the relevant and applicable facts and we have therefore instituted the necessary legal process to appeal against them. Importantly, Sanlam is committed to providing a fair value offering to our policyholders and is continuously seeking ways to improve this. As part of this process, Sanlam is pro-actively addressing issues such as the cost base, product values, transparency and the flexibility offered to policyholders. To this end, Sanlam Life has already reduced its annual overheads by some R250 million in 2004. Shareholders and policyholders will be kept informed as we continue to make progress on these issues. Major progress has been made on Sanlam`s strategy to grow a more balanced business within a defined financial services framework. An important milestone has been the recent announcement of Barclays` offer for Absa. If successful, this transaction will remove the imbalance in Sanlam`s capital portfolio and release capital for alternative application in an optimal combination of structural growth opportunities and a reduction of capital. An announcement in this regard will follow as soon as there is certainty on the level of success of the Barclays offer, including the number of shares to be sold by Sanlam into the offer. Sanlam shareholders will vote on their support for the transaction on 9 June 2005. Sanlam recently announced its entry into the Indian insurance market in partnership with the local Shriram group. This is a unique opportunity for Sanlam to explore this potentially lucrative market with a fairly limited initial capital outlay. The partnership is in line with our strategy of developing selective international opportunities with the potential to diversify revenue and enhance profitability on a sustainable basis. Annual General Meeting At the Annual General Meeting of Sanlam Limited held in Bellville on Wednesday 1 June 2005, Sanlam shareholders approved all the resolutions proposed in the notice of the Annual General Meeting. Bellville 1 June 2005 Sponsor: JP Morgan Equities Limited Date: 01/06/2005 02:59:30 PM Produced by the JSE SENS Department
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