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Results

The salient features of the Group’s performance for the four months to 30 April 2016 are:

  • New business volumes of R74 billion, up 9% on the first four months of the 2015 financial year.
    • Sanlam Personal Finance achieved growth of 11% in new business sales, a particularly satisfactory performance given the challenging operating conditions in South Africa. Sanlam Sky new business volumes increased by 5%, comprising only a marginal increase in individual life recurring premiums and strong growth in group life recurring premiums. The low growth in individual life business is largely attributable to increasing consumer pressure in this market segment and the realignment of the channels towards more profitable product lines. The Individual Life segment grew new business volumes by 3%. Single premium sales growth remains moderate, in line with the 2015 experience. New recurring premiums increased by 16%, supported by strong growth in risk business. Glacier achieved overall growth of 13% as demand for its offshore and wrap product solutions remains strong.
    • Sanlam Emerging Markets achieved overall new business growth of 53%, supported by a weaker average Rand exchange rate and the impact of corporate activity during 2015. Excluding these, new business volumes increased by some 40%. All major businesses contributed strong growth, apart from Zambia, that continues to struggle in a difficult environment, and Ghana and Malawi that had a slow start to the year. New life business volumes increased by 42%, augmented by 65% and 50% growth in investment and general insurance business respectively.
    • The Sanlam Investments cluster increased its new business volumes by 5%, with Sanlam Employee Benefits and the International businesses achieving particularly good growth. Group recurring premium risk business in Sanlam Employee Benefits remains under pressure while the South African Investment Management and Wealth Management business units achieved only marginal growth on the 2015 comparative base.
    • Net value of new life business (“VNB”) on a consistent economic basis increased by 7% on the comparable period in 2015 (in line with 2015 based on actual 30 April 2016 economic basis). VNB margins have been largely maintained on a per product basis. Growth in Sanlam Personal Finance’s VNB was, however, depressed by the inclusion of the lower margin tax free savings product in the Sanlam Sky business mix (the product was introduced after April 2015 and therefore not included in the comparative base). Sanlam Personal Finance’s overall VNB increased marginally as a result, with a decline at Sanlam Sky offsetting good growth at Individual Life and Glacier. Sanlam Emerging Markets’ net VNB grew by 23% on a comparable economic basis with VNB trends generally in line with new business performance. Sanlam Employee Benefits reported a markedly lower contribution due to a decline in the more profitable Group Risk business.
    • Overall net fund inflows of R16 billion were up from the R3 billion achieved in the comparable 4-month period in 2015, with most businesses contributing to the higher net inflows. The comparable 2015 period included the Botswana Public Officers Pension Fund withdrawal from Sanlam Emerging Markets and Sanlam Investments.
    • Persistency levels are generally in line with the 2015 results.
  • Net result from financial services up 7% on the first four months of the 2015 financial year.
    • All businesses contributed satisfactory growth, apart from Sanlam Investments where fund-based fee income was impacted by lower average market levels.
    • The Saham Finances acquisition concluded on 29 February 2016 and contributed to the Group’s earnings with effect from 1 March 2016.
  • Normalised headline earnings per share down 13% compared to the first four months of the 2015 financial year.
    • Subdued investment returns earned on the capital portfolio relative to the first four months of 2015 were further negatively impacted by the strengthening in the Rand exchange rate since the end of December 2015, which contributed to negative returns from the offshore exposure in the portfolio.
  • Diluted headline earnings per share, which includes fund transfers recognised in respect of Sanlam shares held in policyholder portfolios, decreased by 15% compared to the first four months of the 2015 financial year.

Capital

All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory capital covered its Capital Adequacy Requirements 5.3 times on 31 March 2016 after allowing for the dividend paid to Sanlam in April 2016.

The Group had excess capital of R2.3 billion available for redeployment at the end of December 2015, after allowing for the Saham Finances and Shriram Insurance transactions. Utilisation since then has been limited to a number of small transactions. Including investment return earned on the portfolio and the excess dividend cover in respect of the 2016 dividend payment, discretionary capital amounted to R3.1 billion on 30 April 2016. The available discretionary capital remains earmarked for transactions currently under consideration.

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. Shareholders also 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 six months to 30 June 2016 as well as the full 2016 financial year. Relatively strong operating earnings and new business growth experienced subsequent to April 2015 also cause an increase in the comparable base.

The information in this operational update has not been reviewed and reported on by Sanlam's external auditors. Sanlam’s financial results for the six months ending 30 June 2016 are due to be released on 8 September 2016. 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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