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Skip Navigation Linksoperational-update-jun-2013 Operational Update June 2013

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​​​​​​Operational Update for the 4 Months ended 30 April 2013

5 June 2013

Operational Update – June 2013

The Group delivered another solid overall performance in the first four months of 2013. The diversification strategy implemented over a number of years introduced some resilience that enabled the Group to absorb the impact of challenging operating conditions experienced by certain Group businesses as well as the relatively weak investment market performance in South Africa for the period. The operating results reported for the four months to April include a maiden contribution from the recent increase in the Group’s holding in Shriram Capital in India.

Results

The salient features of the Group’s performance for the 10 months to October 2013 are:

  • New business volumes of R128 billion (excluding white label), up 26% on 2012.
  • New business volumes of R49 billion (excluding white label), up 30% on 2012.
  • Personal Finance recorded a 28% increase in new business sales. Entry level new business in South Africa increased by 28%, supported by a more than doubling in group life business as well as good growth in agency channel individual life sales. Middle income volumes increased by some 18%, attributable to strong growth in single premium business, and affluent market sales by more than 30%.
  • Emerging Markets’ results were impacted by the volatility of single premium business, in particular Namibian investment business, which contributed to 12% lower new business volumes in 2013. New life recurring premium sales remained strong and increased by some 26%, supported by all operations.
  • The Investments cluster increased its new business volumes by 48%, with Wealth Management, Investment Services and International operations achieving strong growth. Net business flows of R3.6 billion (excluding white label) were significantly up on the R1.4 billion achieved in 2012, despite withdrawals of R4 billion by two institutional clients as part of the restructuring of their portfolios.
  • Net value of new life business increased by 27% (at marginally higher new business margins), reflecting the strong growth in new life insurance business but also the benefit of a lower risk discount rate in 2013.
  • Net fund inflows (excluding white label) of R9.4 billion were achieved compared to R7.6 billion in the comparable 4-month period in 2012.
  • Net result from financial services up 30%.
  • All business clusters apart from Santam reported strong earnings growth.
  • The increase in operating profit is in general supported by a relatively higher level of assets under management as well as a maiden contribution from the increased investment in the Shriram Group made in 2012. Excluding the latter, the net result from financial services increased by 22.
  • Santam experienced a continuing high level of claims frequency and severity in its traditional intermediated business. This was aggravated by flood related claims and an increase in commercial fire claims, as well as significant hail and drought claims in its agriculture business, causing a substantially lower insurance result relative to the same period in 2012.
  • Normalised headline earnings per share up 23%.
  • Normalised headline earnings in 2012 included a Secondary Tax on Companies (‘STC’) charge. STC is no longer applicable and without the 2012 STC charge the comparable increase in headline earnings for the four months is 11%. The investment return earned on the capital portfolio was negatively affected by the relatively weaker 2013 investment market performance in South Africa. This was partly offset by good returns from the international exposure in the portfolio, benefiting from both good underlying investment performance and a weakening in the rand exchange rate.

Capital

All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory capital covered its Capital Adequacy Requirements by 4.0 times on 31 March 2013, after allowing for its dividend payment to Sanlam Limited.

The Group had excess capital of some R4 billion available for redeployment at the end of December 2012, after allowing for the acquisition of a 49% interest in Pacific & Orient, a niche general insurance business in Malaysia, which transaction completed in April 2013. Utilisation in 2013 to date included the acquisition of an additional interest in Shriram Transport Finance Company (announced in February 2013) and the payment of a 50 cents per share special dividend. The disposal of the Group’s interest in the Punter Southall Group in the United Kingdom added to the discretionary capital portfolio. Net of these transactions and investment return, available discretionary capital amounts to some R3 billion. This remains earmarked for growth opportunities in mainly Africa and South-East Asia.

Outlook

We do not anticipate any material 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.

Shareholders 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 interim reporting period to 30 June 2013 as well as the full 2013 financial year.

The information in this operational update has not been reviewed and reported on by Sanlam's auditors. Sanlam’s financial results for the six months ending 30 June 2013 are due to be released on 5 September 2013. Shareholders are advised that this is not a trading statement as per section 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:

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 17:00.

Access numbers for participants dialing live from their country:

South Africa and other countries
Toll +27 (0)11 535 3600
Toll-free 0800 200 648

USA
Toll-free 1 866 652 5200

UK
Toll-free 0808 162 4061

Recorded playback will be available for three days after the conference

Access Numbers for Recorded Playback:

Access code for recorded playback: 24049#

South Africa and other countries
Toll +27 (0)11 305 2030

USA
Toll 1 412 317 0088

UK
Toll 0808 234 6771

Sponsor
Deutsche Securities (SA) (Proprietary) Limited

 

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