Skip Ribbon Commands
Skip to main content

Skip Navigation Linksoperational-update-dec-2014 Operational Update December 2014

Skip Navigation LinksFinancial Results

​​​​​​Operational Update 10 Months to 31 October 2014

3 December 2014

The Group delivered a satisfactory operational performance for the 10 months ended 31 October 2014, despite a persistent challenging business environment.

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.

Results

The salient features of the Group’s performance for the 10 months to October 2014 are:

  • New business volumes of R150 billion (excluding white label), up 17% on the first 10 months of 2013.
    • Personal Finance recorded a 22% increase in new business sales. Sanlam Sky new business volumes increased by 5%, excluding the ZCC scheme (where premiums are renewed on a biennial basis) and large once-off schemes written in the third quarter of 2013, a solid performance after the disruption caused by industrial action in the platinum sector in the first half of the year. Middle income market volumes increased by 10%, with a continuance of strong growth in single premiums and recurring premium retirement annuity business, compensating for some reduction in new recurring risk premiums. Glacier sales increased by 27%.
    • Emerging Markets achieved new business growth of 30%, excluding the discontinued Capricorn Unit Trust business, which was sold as part of the CIH transaction in 2013. All regions contributed strong growth, apart from Botswana where a high comparative base for single premiums limited growth to 7%. Core recurring premium sales in Botswana, however, continue to perform well and increased by more than 30%.
    • The Investments cluster increased its new business volumes by 21%, supported by an R8 billion pension outsourcing policy written by Sanlam Employee Benefits. Excluding this business, new business sales increased by 9%. The International and SA Investment Management businesses recorded strong growth, with Wealth Management new mandates reducing from a high base in 2013. In addition to withdrawals of R2.9 billion from low margin share incentive scheme portfolios at Wealth Management, the Public Investment Corporation withdrew R10 billion from its funds managed by Sanlam Investment Management. Despite these withdrawals, net fund flows (excluding white label) increased from R89 million in the first 10 months of 2013 to R4.6 billion in the same period in 2014.
    • Value of new life business (VNB) increased by 22% on the comparable period in 2013. Excluding the R8 billion pension outsourcing policy referred to above, VNB increased by 11%. VNB margins were broadly in line with those reported for the first six months of 2014 and were maintained on an individual product basis.
    • Overall net fund inflows (excluding white label) of R27.5 billion were achieved compared to R18 billion in the comparable 10-month period in 2013.
    • Persistency levels deteriorated somewhat compared to 2013, as also reported in the first-half 2014 results.
  • Net result from financial services up 27% on the first 10 months of 2013.
    • All business clusters reported satisfactory underlying earnings growth.
    • The increase in operating profit is in general supported by a relatively higher level of assets under management as well as favourable claims experience in the life and general insurance businesses.
    • Santam’s underwriting performance improved significantly compared to the first 10 months of 2013. This was influenced by a turnaround in the crop insurance business during the period compared to the losses recorded in 2013, but with all of the other main businesses also experiencing an improved performance.
  • Normalised headline earnings per share up by some 3% compared to the first 10 months of 2013.
    • The strong growth in net result from financial services was largely offset by lower investment return earned on the capital portfolio, attributable to both the South African equity and international exposure in the portfolio.
  • Normalised headline earnings per share up by some 3% compared to the first 10 months of 2013.

Capital

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.

Outlook

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.

Conference call

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:

Audio dial-in facility

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.

Access numbers for participants dialing live from their country:

South Africa
Toll: 021 819 0900
Toll-free: 0800 200 648

USA and Canada
Toll-free: +1 855 481 5362

UK
Toll-free: 0808 162 4061

Other Countries
Toll: +27 11 535 3600, +27 10 201 6800

Recorded playback will be available for three days after the conference

Access Numbers for Recorded Playback:

Access code for recorded playback: 28681#

South Africa
Toll: 011 305 2030

USA and Canada
Toll-free: +1 855 481 5363

UK
Toll-free: 0 808 234 6771

Other Countries
Toll: +27 11 305 2030

Read full Media Release

 

Sanlam Life Insurance is a licensed financial service provider.
Copyright © Sanlam