3 June 2009
Despite a slight recent recovery in global equity markets, the financial and economic impact of the global financial market crisis continued unabated during the first four months of 2009, as evidenced by negative earnings reports being the order of the day. The slowdown in the world’s largest economies has resulted in lower demand for resources, and hence negatively impacting on the growth of the commodity based economies in which the Group operates. The South African economy is no exception and a general slowdown in economic growth and pressure on consumers’ disposable income is evident in consumer spending statistics. The interest rate cuts announced by the South African Reserve Bank over the last few months should provide some relief to consumers, but it is likely to take some time before this will be evident in increased consumer demand.
Total new business volumes (excluding low margin white label business) increased by 2% compared to the first four months of the 2008 financial year. The pressure on consumer spending is most evident in the retail middle-income market, with Sanlam Personal Finance, Sanlam Private Investments and our businesses in the United Kingdom experiencing a slowdown in respect of savings and investment-related business volumes. Risk underwriting and institutional new business volumes are proving to be more resilient and recorded a satisfactory performance in the current environment. Core earnings per share for the four months to 30 April 2009 are 6% lower than the comparable period in 2008. Normalised headline earnings per share are down 23%, reflecting a continuation of the negative investment market performance in 2009. The FTSE/JSE All Share Index lost 4% of its value (excluding dividends) for the four months to 30 April 2009, compared to an increase of 6% in the first four months of the 2008 financial year.
As indicated in the Group’s 2008 annual report, a more cautious approach is being followed in the application of the Group’s discretionary capital in the current financial and economic environment. In line with this, the share buy-back programme was suspended during 2008. Significant utilisation of discretionary capital for corporate activity during 2009 was limited to the acquisition of the minority interests in Channel Life for some R200 million. A total of 30 million Sanlam shares held as treasury shares were cancelled during March 2009, reducing Sanlam’s issued share capital to 2 160 million shares. All of the Group’s operations remain well capitalised. Sanlam Life Insurance Limited’s statutory capital covered its Capital Adequacy Requirements by 2,4 times as at 31 March 2009, after allowing for the dividend payable to Sanlam Limited in respect of the 2008 financial year. The Group remains well positioned to take advantage of growth opportunities.
Salient features of the Group’s performance for the four months to 30 April 2009 are:
The challenging financial and economic environments are expected to continue for the remainder of the year and into 2010, and are likely to impact on growth in the Group’s key operational performance indicators. Shareholders need to be aware of the impact of financial market volatility on Group earnings and Group Equity Value. Relative market movements may have a major impact on the growth in Group earnings to be reported for the full 2009 financial year. The information in this operational update has not been reviewed or reported on by Sanlam's auditors. Sanlam’s interim results for the six months ended 30 June 2009 are due to be released on 3 September 2009. Shareholders are advised that this is not a trading statement as per section 3.4 of the JSE 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: 2560#