7 December 2011
Global market uncertainty, fuelled by renewed concerns on sovereign debt in Europe and economic growth prospects in the major world economies, continues to impact on the Group’s operating environment and is also reflected in the results for the ten months to October.
Salient features of the Group’s performance for the ten months to October 2011 are set out below. As anticipated, the relatively strong performance experienced in the second half of 2010 results in a higher comparative base for the 2011 full year. This is reflecting in a lower percentage growth in earnings than that reported for the first half of 2011.
The Group remains well capitalised. As at the end of June 2011 the Group reported discretionary capital of some R3,2 billion. Since then, more than R700 million of additional capital was added to the discretionary capital portfolio through the disposal of non-strategic investments, including the sale of a major part of the Group’s holding in Vukile. R600 million of discretionary capital was utilised in respect of strategic acquisitions, including the acquisition of some 3 million Santam shares. The increased holding in Santam to an effective 59.9% compensates for the dilution in the Group’s short term insurance exposure following the sale to Santam of our interest in MiWay. The remaining capital utilised is essentially in respect of Sanlam Private Investments’ acquisition of majority stakes in Merchant Securities in the United Kingdom and Summit Trust in Switzerland. Discretionary capital held within the Group thus remained broadly in line with the June 2011 level, with some R2 billion being earmarked for the Shriram Capital transaction announced in the Group’s interim results.
All of the Group operations remain well capitalised. Sanlam Life Insurance Limited’s statutory capital covered its Capital Adequacy Requirements by 3.2 times on 30 September 2011.
The risk of sovereign default in Europe will continue to weigh heavily on sentiment and investment markets in general. The risk of a slowdown in economic growth in the major global economies is also increasing. The Group’s major exposure remains to the South African economy and investment market, which is not shielded from international events. The operating environment will commensurately remain challenging and is likely to impact on growth in the Group’s key operational performance indicators. Shareholders need to be aware of the impact of financial market returns and volatility on the investment return component of the Group’s 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 2011 financial year. The strong market performance in the second half of the 2010 financial year, in particular, may not be repeated in 2011, which will impact on the full year growth in earnings compared to the ten months ended 31 October 2011. Operationally, we will continue to execute on the Group’s strategy and will remain focused on the quality of new business. Although this may impact on the level of growth in new business volumes, it enhances shareholder value creation. This is in line with the Group’s stated objective of not striving to be the largest writer of new business, but instead to focus on profitable business.
The information in this operational update has not been reviewed or reported on by Sanlam's auditors. Sanlam’s financial results for the year ending 31 December 2011 are due to be released on 8 March 2012. 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:
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