3 June 2015
As anticipated, the exceptionally favourable life and general insurance underwriting conditions in the 2014 financial year also set a high earnings base, with resulting lower growth prospects in 2015 than that achieved by the Group over the last few years.
Economic and employment growth in South Africa, our largest market, remains modest, which, coupled with labour instability and significant hikes in administered prices (electricity in particular), places pressure on the disposable income of the average South African consumer. Several of the rest of Africa economies where we operate are also experiencing headwinds. Low commodity prices, including oil, are impacting on the economic activity and currencies of a number of these countries. The anticipated acceleration of the Indian economic growth under the Modi administration is also lagging. Delays in the roll-out of infrastructure spending in particular are impacting not only on growth in our Indian credit businesses, but also the bad debt position of the Indian lending market in general.
The salient features of the Group’s performance for the four months to 30 April 2015 are:
All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory capital covered its Capital Adequacy Requirements by 4.7 times on 31 March 2015.
The Group had excess capital of R3.3 billion available for redeployment at the end of December 2014. Since then some R2 billion was either utilised for or committed to a number of specific transactions. The balance of the discretionary capital was augmented by a special dividend paid by MCIS Insurance, the disposal of some illiquid investments, the excess dividend cover relating to the 2014 financial year and investment return earned on the discretionary capital portfolio. This resulted in available discretionary capital of some R2 billion at the end of April 2015 that remains earmarked for growth opportunities.
We expect that the economic and operating environment will remain challenging for the remainder of 2015 with a resulting impact on the Group’s key operational performance indicators. Shareholders also need to be aware of the impact of the level of interest rates and financial market returns and volatility on the Group’s earnings and Group Equity Value. Relative movements in these elements may have a major impact on the growth in normalised headline earnings and Group Equity Value to be reported for the six months to 30 June 2015. Relatively strong operating earnings growth experienced in the second quarter of 2014 also causes an increase in the comparable base.
We have a solid strategy in place that served us well over more than 10 years and will continue to do so into the future. Despite the short-term pressure on operating earnings growth, we remain confident that we will deliver on our longer term growth targets.
The information in this operational update has not been reviewed and reported on by Sanlam's external auditors. Sanlam’s financial results for the six months ending 30 June 2015 are due to be released on 3 September 2015. Shareholders are advised that this is not a trading statement as per paragraph 3.4(b) of the JSE Limited Listings Requirements.
A conference call for analysts, investors and the media will take place at 17h00 (South African time) today. Investors and media who wish to participate in the conference call should dial the following numbers:
A toll free dial-in facility will be available. We kindly advice callers to dial in 5 - 10 minutes before the conference call starts at 17:00.
Recorded playback will be available for three days after the conference.
Access code for recorded playback: 35727
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