Capital
All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory capital covered its Capital Adequacy Requirements 5.5 times on 30 September 2016.
The Group had excess capital of R3.1 billion available for redeployment at the end of June 2016, after allowing for the Shriram Insurance transactions that concluded in October 2016. Utilisation since then has been limited to a number of small transactions. Including investment return earned on the portfolio and the special dividend declared by Santam, discretionary capital amounted to R3.6 billion on 31 October 2016. The available discretionary capital remains earmarked for transactions currently under consideration.
Good progress has been made with capital modelling under the Solvency Assessment and Management (SAM) regime to be introduced in South Africa during 2017. The Group will remain well capitalised under the SAM regime. Further information on the Group’s optimal capital levels will be provided as part of the Group’s 2016 annual results announcement in March 2017.
Outlook
We expect that the economic and operating environment will remain challenging for the remainder of 2016 with a resulting impact on the Group’s key operational performance indicators. A number of factors are likely to impact on the Group’s ability to maintain the 10-month growth rate in net result from financial services for the full 2016 financial year, including average investment market levels, the strengthening in the Rand exchange rate and the high comparable 2015 base for performance fees at Sanlam Investments. Shareholders also need to be aware of the impact of movements in the Rand exchange rate, the level of interest rates and financial market returns and volatility on the Group’s investment return 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 2016 financial year.
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 2016 are due to be released on 9 March 2017. Shareholders are advised that this is not a trading statement as per paragraph 3.4(b) of the JSE Limited Listings Requirements.
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