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Sanlam Reports Significant Strategic Progress

5 December 2018

Sanlam announced that it made significant strategic progress in the 10 months to 31 October 2018, while at the same time achieving a satisfactory operational performance. This demonstrates the Group’s ability to deliver shareholder value under challenging conditions while executing future growth strategies.

The cluster businesses continued to execute their operational strategies and delivered an overall resilient operational performance for the 10 months ended 31 October 2018. This was despite weak economic conditions in a number of territories where the Group operates, including South Africa, and significant volatility in global investment and currency markets.

The Group attributed its operational and strategic delivery to its diversified profile as well as a federal management model that supports dual focus on operational and strategic execution.

The salient features of the Group performance were:

  • New business volumes of R188 billion were up 3% on the first 10 months of the 2017 financial year with major trends remaining in line with the first-half 2018 performance.
  • Net result from financial services increased by 2% on the first 10 months of the 2017 financial year (3% in constant currency and excluding structural activity).
  • Normalised headline earnings declined by 10%, attributable to a 55% decline in net investment return. The JSE/FTSE Swix index recorded a negative return of 16% in the first 10 months of 2018, compared to a positive performance of 15% in the comparable period in 2017. The equity hedges in the Sanlam capital portfolios protected the Group from negative investment returns, in particular during October 2018 when the South African equity market experienced a significant decline. The JSE/FTSE Swix Index declined by 6% during the month.
  • Diluted headline earnings per share, which include fund transfers recognised in respect of Sanlam shares held in policyholder portfolios, declined by 10%.

Sanlam Group Chief Executive Officer, Mr Ian Kirk commented: “Our performance during our centenary year is pleasing. It reflects the diligence we have applied across our operations and focus to deliver shareholder value under challenging conditions, while executing growth strategies. This is testimony to the benefits of our strategy that we embarked on more than a decade ago. We will continue with our strategic execution to ensure we realise further success for the business going forward.”

New business volumes

Sanlam Personal Finance (SPF) achieved overall new business sales growth of 7%. Sanlam Sky continued to achieve strong growth. A flat performance from individual life risk business (excluding BrightRock) in the middle-income market partly offset solid growth in retirement annuities and tax-free savings solutions.

Sanlam Emerging Markets recorded overall new business growth of 14%, including the impact of structural activity (SAHAM Finances, Sanlam Investments East Africa and the Ghana disposal) in 2017. In constant currency and excluding structural activity, new business volumes increased by 17%. The integration of SAHAM is progressing well. Sanlam Emerging Markets’ (SEM) management structure has restructured to reflect the inclusion of SAHAM and to unlock the value embedded in the combined business.

New business volumes at Sanlam Investments Group (SIG) declined by 10%. The international businesses did well and attracted 43% higher new mandates in 2018. Lower volumes at the South African wealth and asset management businesses offset this accomplishment, reflecting the difficult operating environment.

As reported in the Group’s 2018 interim results announcement, Sanlam Employee Benefits (SEB) attracted large new mandates subsequent to the end of June 2018. New life business volumes of Sanlam Corporate more than doubled as a result.

Net value of new life business

Net value of new life business (VNB) increased by 7% (up 12% excluding structural activity and on a constant economic and currency basis). VNB margins were largely maintained on a per product basis. Double-digit growth was achieved across most regions on a constant economic and currency basis, including South Africa where strong growth at Sanlam Sky and SEB supported the results. Detracting from the overall performance were Kenya and Malawi, where the underperformance in life new business had a major negative impact on VNB.

Net result from financial services

Sanlam Personal Finance’s net result from financial services declined by 5%, largely due to increased new business strain, the structural impact of the BrightRock acquisition, and a reduced impact from modelling and assumptions changes.

Sanlam Emerging Markets’ net result from financial services increased by 4% (3% in constant currency and excluding structural activity). SAHAM Finances, Nigeria, Rwanda and Uganda delivered strong organic growth. Factors detracting from the results included higher new business strain in Namibia, and underperformances in Kenya, Zambia and the Tanzania general insurance business.

Sanlam Investments’ contribution to net result from financial services decreased by 2%, attributable to lower performance fees and the negative impact of the weak equity market performance on growth in assets under management.

SEB experienced a weakening in mortality and disability claims experience since the end of June, contributing to a marginal decline in Sanlam Corporate’s net result from financial services. All other lines of business achieved growth.

Santam continued to benefit from a benign claims environment, with its underwriting margin for the first 10 months of 2018 slightly above the upper end of its 4% to 8% target range.

“For the remainder of 2018 we expect that the economic and operating environment will remain subdued in the largest markets where we operate. We also expect investment market and currency volatility to persist. That said we remain confident that we will manage the challenges prudently and realize appropriate returns for the business and our shareholders,” Mr Kirk concluded.

Sanlam concluded the largest transaction in the Group’s history with the acquisition of the remaining stake in SAHAM Finances in October 2018. The deal creates a unique footprint and competitive advantage for Sanlam across Africa to drive future growth.

The SAHAM transaction also provided an opportunity to use the need to raise equity funding for the acquisition to propose a suite of Broad-based Black Economic Empowerment (B-BBEE) transactions to Sanlam shareholders. These transactions aim to enhance Sanlam’s positioning to gain market share in the areas of the South African market where the business does not have a leading position. The B-BBEE transactions are subject to shareholder approval.

Conference call

A conference call for analysts, investors and the media will take place at 17:00 (South African time) today. Investors and media who wish to participate in the conference call should register as indicated below.

Audio dial-in facility

A toll free dial-in facility will be available. Please register at http://www.diamondpass.net/1297033 for the call. Registered participants will receive their dial-in number upon registration. For assistance, please contact Sanlam Investor Relations at +2721 947 8455.

Recorded playback will be available for three days after the conference call.

Access Numbers for Recorded Playback

Access code for recorded playback: 19460

South AfricaToll010 500 4108
USA and CanadaToll-free1 412 317 0088
UKToll-free0 203 608 8021
Other CountriesToll+27 10 500 4108

For further information on Sanlam, please visit our website at www.sanlam.com

Enquiries

Allim Milazi, Sanlam Group Communications
+27 11 778-6316 or +27 82 889 5874 / allim.milazi@sanlam.co.za

Petra Steenkamp, Sanlam Group Communications
+27 21 947-2490 or +27 82 431 7956 / petra.steenkamp@sanlam.co.za

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