| Thu 8 Dec 2005, 8:00 | | Sanlam Trading Update - December 2005 |
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Sanlam Trading Update - December 2005
REGISTERED NAME: SANLAM LIMITED
(REGISTRATION NUMBER 1959/001562/06)
JSE share code: SLM
NSX share code: SLA
ISIN number: ZAE000070660
Sanlam Trading Update - December 2005
Delivering on Strategy
Substantial progress has been made during the second half of 2005 in regard to
the implementation of Sanlam"s strategy on capital efficiency, business
diversification and growth initiatives.
Capital management:
The share buy back program was approved by shareholders on 23 September 2005 and
has been successfully completed in November 2005. In total, 330 million Sanlam
shares (12% of the issued share capital) have been repurchased at an average
price of R12.17 per share, for a final consideration of R4 billion. This
includes the mandatory pro rata share buy back of 250 million shares at R12 per
share, the special offer to small shareholders as well as 76 million shares that
were acquired via open market transactions at an average price of R12.65 per
share.
The management of Sanlam"s capital requirements and the optimal utilisation of
capital in the Group is an ongoing process. An update on the potential for
future capital rationalisation will be provided with the 2005 annual results. In
the interim, we will continue to repurchase Sanlam shares on a selective basis
to take advantage of price weakness.
Strategic acquisitions:
All suspensive conditions for the acquisition of African Life have been
fulfilled. The court"s sanctioning of the section 311 scheme and regulatory
approval was obtained on 30 November 2005. However, the Momentum group has yet
to secure the necessary regulatory approvals for their acquisition of African
Life Health ("ALH"). African Life shareholders will therefore receive a payment
of R22.05 per share on 12 December with any additional payment in respect of the
ALH disposal to Momentum or any other third party only being payable once the
disposal of ALH has become unconditional. The latter does not impact the
conclusion of the acquisition and African Life will now formally
become a wholly-owned subsidiary of Sanlam.
African Life will form the core of Sanlam"s entry-level market focus. Heinie
Werth from Sanlam has been appopinted to implement African Life"s integration
into the Sanlam fold.
Operating results
Earnings:
The satisfactory operating result achieved in the first half of 2005 has
continued and the net result from financial services for the ten months to
October is 15% up on the restated results achieved for the same period in 2004.
Sanlam Life continues to perform well, assisted by positive risk underwriting
results, as well as an increase in net interest and other market related income.
Stronger equity markets, increased assets under management and incentive fees
earned, contributed to a material improvement on the same period in 2004 from
both the local and international operations within the Investment cluster.
Sanlam Capital Markets continues to deliver a satisfactory performance. In line
with expectations, these positive results are somewhat offset by a lower profit
contribution from Santam, due to a normalisation of underwriting margins.
Headline earnings per share for the ten months, based on International Financial
Reporting Standards (`IFRS"), are 80% up on the restated results of 2004. Equity
market movement during the reporting period contributed substantially to this
earnings improvement. Headline Earnings includes both the realised and
unrealised market value changes attributable to investments held in the
shareholders" funds and are reported net of fund transfers to compensate the
policyholder portfolios for market value changes in respect of Sanlam and Santam
shares held in those portfolios. Market movements may therefore have a material
impact on Headline Earnings and shareholders need to take into account the
potential volatility in reported earnings.
Business volumes:
Overall growth in new business flows to October is ahead of the 11% growth
achieved for the first six months, in particular on the back of increased non-
life business flows.
After a slow start in the first quarter of 2005, total Life new business flows
recovered somewhat and to October are marginally up on the same period in 2004.
New individual recurring premiums continue to show growth but Single premium
Life business is still marginally behind 2004. The level of new Group Life
Business inflows is in line with 2004.
New investment related inflows are up some 30% as collective investments, direct
or multi-managed investments and Innofin"s linked products continue to show
strong growth, partly at the expense of insurance policy based investments. This
is also evident in the more than 10% overall growth in total retail inflows for
the period, notwithstanding the lack of growth in the Life business.
The Group achieved positive net business inflows of almost R10bn for the ten
months, essentially in respect of investment and short term insurance
activities, with the SFS business in the United Kingdom recording net inflows of
some R6bn. Both Individual and Group Life businesses experienced a deterioration
in net outflows for the period, which is in part due to an improvement in policy
benefit payments following the substantial increase in the JSE listed market
value of both policy assets and liabilities.
Pension Funds Adjudicator:
Since reporting our interim results, the Pension Funds Adjudicator has issued a
number of unfavourable rulings in regards to life insurance policies. These
rulings could have significant implications for Sanlam and the life insurance
industry as a whole. It is essential that the life industry"s legal and
regulatory framework and the value proposition of life products be reconfirmed.
Sanlam is committed to working with other industry players and government
towards finding an equitable outcome to the current impasse. Due to the
uncertainty of any cost relating to Sanlam that may result from this process, to
date, no specific provision has been made in Sanlam"s financial results.
Shareholders and policyholders will be kept informed on progress on this matter.
Shareholders are advised that the results referred to in this trading update
have not been reviewed or reported on by Sanlam"s auditors.
Bellville
7 December 2005
Sponsor: J.P.Morgan Equities Limited
Date: 08/12/2005 08:00:07 AM Produced by the JSE SENS Department
