* Total new funds: up 54% * Net inflows: up 235% * Operating profit before tax: up 46% * Headline earnings (LTRR – long term rate of return) up 26% * Embedded value (cps) is up 19% at 1 346 cents per share
Its taken hard work, with cost cutting and efficiency improvements being the main focus areas says Johan van Zyl. The highlight is the operating profit that is up, with all businesses contributing to this, says Van Zyl, and for the first time the individual life business was also a positive contributor.
Sanlam aims to drive return on embedded value – its about profits and capital efficiency, its about strategic investments and how the balance sheet is used. There are many issues and not trying to have wooly targets, but targets linked to specific individuals, says Johan Van Zyl, group CEO.
Much has been said about excess capital and many numbers have been bandied about. Van Zyl says that the Absa transaction with Barclays is key, and the best way to do it. In terms of capital in hand they have R30bn, with R6.7bn in excess capital.
In terms of the individual businesses van Zyl says that the plan now is to grow the individual life business. They want to take the Absa relationship to another level – hoping to take a bigger slice of the Absa business.
They want to continue drive the costs down, but they need to simplify their processes. “It doesn’t having the best ideas – it’s about time to market and costs,” says Van Zyl, while service remains a key driver.
On the employee benefits side they want to grow single premiums business, while net outflows of funds needed to be stemmed. Volumes are not the main issue – it’s about profitability.
There have been huge structural changes in this sector, as confirmed by Liberty in their results yesterday. The shift is has been offset by the big inflows on the investment side. Van Zyl says that they gained hugely from this.
This has been driven by the more militant unions, and their affinity relationships. Sanlam also anticipated that this would happen and launched a multi-manager more than a year ago, which now has more than R10bn in assets under management.
The administration function needs to made sustainable and start working on a stand-alone basis.
They won’t take their eye of the contractual savings market says Van Zyl.
The biggest contribution to the inflows last year came from the investment side of the business – with an increase of 86%, with the life business contributing just 17%.
Individual life provided substantial cost savings, which Van Zyl says will be sustainable, going forward. The Absa brokers’ business flows were pleasing, while 60 advisors, some brokers and support staff have been appointed in Gauteng, to reinforce their entry into the area. Van Zyl is hoping to push that to 150 people in a competitive market, before the end of the year.
Currently they only have 5% of the market in Gauteng, while in other areas their market share is upwards of 20%.
Channel conflict has supposedly been addressed with the actuaries business repositioned and rebranded, while the new entry into the home loans business injected R750m in new business. me TherThere
A re-branding programme, valued at R35m, is currently underway and explains partially the 55% jump in corporate and other expenses that the group reported.
On the Absa : Barlclays deal, regulatory approval is still awaited on the sale. Nothing can happen until the regulator approves unconditionally the deal. “However, selling is not the only option,” says Van Zyl.
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