3 December 2014
The broader trends are in line with the first-half 2014 performance, with higher average market levels and sound underwriting experience largely offsetting the impact of a weak South African economy and pressure on consumers’ disposable income. Overall investment market returns during the first 10 months of 2014 were significantly weaker than the comparable period in 2013, dampening growth in headline earnings per share. As anticipated and highlighted in the Group’s interim results announcement in September 2014, the growth in net result from financial services is moderating towards the end of 2014. This is due to once-off items in the first half of 2014, the base effect of new acquisitions and an increasing 2013 base, in part due to the weak first-half 2013 underwriting results at Santam. New business volumes benefited from a large pension outsourcing policy awarded to Sanlam Employee Benefits during the third quarter of 2014, a particularly satisfactory achievement.
The salient features of the Group’s performance for the 10 months to October 2014 are:
All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory capital covered its Capital Adequacy Requirements by 4.6 times on 30 September 2014.
The Group had excess capital of R3.3 billion available for redeployment at the end of June 2014. Since then a net total of R111 million was utilised, including R237 million for the acquisition of a 40% stake in Enterprise Insurance Company, a general insurance business in Ghana, and capital released from the disposal of the Group’s interest in Intrinsic in the UK. Net of these transactions and investment return earned on the discretionary capital portfolio, the available discretionary capital amounts to some R3.2 billion. This remains earmarked for growth opportunities.
We do not anticipate an improvement in the economic environment for the remainder of the year. General operating conditions are therefore expected to remain challenging with a resulting impact on the Group’s key operational performance indicators. Investment market volatility is likely to persist. The increasing 2013 comparative base highlighted above is expected to continue impacting on the sustainability of the level of operating earnings growth for the remainder of the 2014 financial year.
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 full year to 31 December 2014.
The information in this operational update has not been reviewed and reported on by Sanlam's external auditors. Sanlam’s financial results for the year ending 31 December 2014 are due to be released on 5 March 2015. Shareholders are advised that this is not a trading statement as per paragraph 3.4 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 advise callers to dial in 5 - 10 minutes before the conference call starts at 17h00.
South AfricaToll: 021 819 0900Toll-free: 0800 200 648
USA and CanadaToll-free: +1 855 481 5362
UKToll-free: 0808 162 4061
Other CountriesToll: +27 11 535 3600, +27 10 201 6800
Recorded playback will be available for three days after the conference
Access code for recorded playback: 28681#
South AfricaToll: 011 305 2030
USA and CanadaToll-free: +1 855 481 5363
UKToll-free: 0 808 234 6771
Other CountriesToll: +27 11 305 2030