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SLM
SLM
Sanlam - Trading update - December 2006
Registered name: Sanlam Limited
(Registration number 1959/001562/06)
JSE share code: SLM
NSX share code: SLA
ISIN number: ZAE000070660
Sanlam Trading update - December 2006
The strong operating results achieved for the first six months of the 2006
financial year continued during the four months ended 31 October 2006,
supported by the South African equity market reaching new heights during
the period.
Financial results
Business volumes:
The satisfactory level of new business reported for the first half of 2006
has been maintained up to the end of October. Total new business volumes
for the ten months to 31 October 2006 exceeded R65 billion, some 30% higher
than for the corresponding period in 2005. As anticipated, the rate of
growth has moderated somewhat since June 2006, reflecting the higher
comparative base towards the end of 2005. New life and investment business
flows (excluding white labelled business) remain strong and both exceeded
the comparative 2005 period by more than 30%. Life business flows include
the impact of the first time inclusion of the newly acquired African Life
and Channel Life businesses as well as a maiden contribution from Shriram
Life. White label business grew by more than 10%.
* Strong growth experienced in individual life new business for the ten
months was in part offset by a lack of growth in new group life business in
Sanlam Employee Benefits (SEB), a reflection of the difficult and changing
business environment being experienced by SEB. New Sanlam Personal Finance
(SPF) individual life business in South Africa performed well as both new
recurring premiums and single premiums were up by some 15% on 2005. SPF"s
non-RSA life business achieved similar growth. The Sanlam Developing
Markets businesses continue to perform in line with expectations.
* Sanlam Investment Management (SIM) achieved excellent overall new
business flows for the period, in particular due to its retail investment
businesses that continued on the exceptional performance of the first six
months of 2006, with Sanlam Private Investments (SPI) more than doubling
its inflows and Sanlam Collective Investments growing its inflows by more
than 50%. SPF"s new investment business inflows grew by some 30% on the
back of a strong sales performance by Glacier (formerly Innofin) and the
Namibian unit trust businesses.
* New business volumes of the Punter Southall Group (PSG) in the United
Kingdom are excluded from both the 2006 and 2005 results based on the
anticipated further reduction in the Group"s investment in PSG to a non-
strategic interest.
The overall profitability of new life business remains in line with the
results reported for the first six months of 2006.
A net positive funds flow of R12 billion was recorded for the ten months to
31 October. Investment business continued the trend of strong net inflows,
with SPI and SIM"s international business being the main contributors. A
positive individual life contribution was offset by continued negative
flows from group life business.
SIM"s multi-management capacity has been strengthened through the recent
acquisition of Coris Multi-Manager, which added R23 billion to its assets
under management. The Public Investment Corporation (PIC) gave notice of
its intention, pursuant to the restructuring of its investment process, to
withdraw some R22 billion of its funds under management with SIM. Due to
the relatively low fees earned on these assets and an adjusted fee
arrangement on the remaining assets managed for the PIC, this is not
expected to have a material impact on SIM"s operating results.
Earnings:
The disposal of the Sanlam shareholders" fund investment in Absa during
2005 and subsequent capital management actions resulted in changes in the
investment asset base that distort a year on year comparison of reported
earnings.
The overall satisfactory operating performance reported for the six months
to 30 June 2006 continued in the four months to 31 October. The net result
from financial services for the ten months to October improved by more than
10% on the comparable period in 2005. The underlying trends are broadly in
line with the six-month performance, with a sterling performance by SIM in
particular, being offset by the anticipated reduction in Santam"s
underwriting performance as well as a lower contribution by SEB. SPF"s
operating profit continues to be positively impacted by a positive risk
underwriting experience and favourable market related income. The
contributions from Sanlam Developing Markets and Sanlam Capital Markets
remain on target. The impact of the once-off special Absa dividend of R249
million received in June 2005, however, limited the growth in Core earnings
for the ten months to 4%. Core earnings per share are some 20% higher than
in 2005, illustrating the positive impact on earnings of the Sanlam shares
bought back to date.
Headline earnings per share for the ten months are marginally down on 2005.
Buoyant equity markets to date contributed to an improvement in investment
returns and an increase of more than 15% in earnings per share, before
accounting for IFRS related Fund Transfers. A substantial negative swing in
the latter, due to a combination of a stronger Sanlam share price at the
end of October 2006 and the once-off positive effect in 2005 of the sale of
the investment in Absa, however, offset the growth for the year to date.
Shareholders should note that Fund Transfers are not economical gains or
losses, but purely the result of an IFRS technical accounting requirement.
Shareholders need to be aware of the potential volatility in earnings
caused by market volatility. Headline earnings in particular are sensitive
to investment market performance. Market movements towards the end of the
2006 financial year may have a significant impact on the level of Headline
earnings growth to be reported for the 2006 full-year.
Delivering on Strategy
Sanlam continues to pursue its strategic goal of unlocking maximum
shareholder value through targeted growth and effective capital management.
The Group"s performance for the year to date is testimony to the advances
made in this regard.
* Periods of relative price weakness have been used by the Group to acquire
Sanlam shares in the open market. Approximately 97 million Sanlam shares
were acquired during the year to date for a total consideration of R1,5
billion (13,8 million for R236 million since 30 June 2006). A total of 456
million shares have been acquired for a consideration of approximately R6
billion since the beginning of the 2005 financial year.
* Long-term debt of R2 billion has been introduced as part of Sanlam Life
Insurance"s long-term capital, enabling the more efficient structuring of
its capital base.
* The newly established Sanlam Developing Markets (SDM) business spearheads
our efforts into a previously substantially untapped market segment for the
Group. SDM is performing in line with expectations and is making an
important contribution to the growth in the Group"s new business volumes
and earnings.
* SIM continues to build on its sound investment performance. In the Large
Manager Watch rankings for 12-month performance to October SIM achieved 2nd
and 4th position respectively in the domestic and global sections. Both the
Global Best Ideas Fund (GBI) and the Global Financial Fund (GF) achieved
first place in their respective categories in the Micropal ratings,
measured over 24 months to 30 September 2006. The GBI competes with more
than 600 funds across the world and the GF with more than 30.
* The improvement of operational efficiency is an ongoing target in the
Group. Sanlam entered into a Retirement Fund Administration joint venture
with Coris Capital that promises to deliver substantial cost savings and
operational benefits to the Group.
* The Group continues to pursue structural growth opportunities that will
support the Group strategy and enhance the Group"s return on embedded
value, as a preferred application of surplus capital.
The Sanlam Group results for the 2006 financial year will be released on 8
March 2007.
Shareholders are advised that this is not a trading statement as per
section 3.4 of the JSE Listings Requirements
Bellville
6 December 2006
Sponsor
J.P. Morgan Equities Limited
Date: 06/12/2006 04:29:42 PM Produced by the JSE SENS Department
