Sanlam Operational Update
The Group achieved sound overall results for the ten months to 31 October 2007, despite the volatility in global equity and debt markets. Growth in total new business volumes of approximately 25% reflects a continuance of the Group’s strong new business performance. As communicated before, the 2007 results need to be evaluated against an increasing comparative 2006 base. The rate of growth in Normalised Core Earnings per share and Normalised Headline Earnings per share for the ten months has accordingly moderated since the announcement of the Group’s 2007 interim results to 24% (June 2007: 28%) and 13% (June 2007: 18%) respectively. Shareholders need to be aware of the impact on Group earnings caused by volatility in the financial markets. Relative market movements towards the end of the 2007 financial year may have a major impact on the level of Group earnings to be reported for the full year.
The Sanlam Board remains committed to capital optimisation in the Sanlam group and continues to investigate and evaluate the most efficient alternatives of utilising discretionary capital, either to invest in value adding strategic ventures or to reduce capital that is in excess of the Group’s ongoing business requirement. Shareholders will be kept informed of progress in this regard. In the interim, we continue to buy back Sanlam shares in the market in periods of relative price weakness. Since the announcement of the Sanlam interim results in September 2007 approximately 64 million Sanlam shares have been acquired for a consideration of R1,46 billion, bringing the total for 2007 to approximately 126 million shares at a total consideration of R2,89 billion.
Salient features of the Group’s performance for the 10 months to October 2007 are:
New business volumes:
- Overall new business volumes have increased 25% on the comparative period in 2006.
- Life insurance volumes increased by 13%.
- Strong growth from Sanlam Personal Finance (SPF) – South African new recurring premiums are up 17% and single premiums are up 9%;
- Sanlam Developing Markets (SDM) is performing in line with expectations – new SA recurring premiums are up 13% with continued strong growth in non-SA business flows;
- Recovery in Sanlam Employee Benefits (SEB) - new business flows are at similar overall levels as in the 2006 comparative period;
- Overall, the life new business margin (based on the present value of new business premiums) has been maintained at the June 2007 level of approximately 2.3%.
- Gross investment business increased by 30%.
- SPF’s new investment business increased by more than 30%, supported by good growth in Namibian unit trust flows;
- Gross investment flows in Sanlam Investments (SIM) are up approximately 30%, supported by good wholesale, multi-manager and collective investments business flows. SIM’s assets under management amounted to R458 billion on 31 October 2007.
- Net fund inflows were in excess of R9 billion, largely due to strong investment business flows. Negative life business flows continued, in particular due to net outflows at SEB and an increase in SPF maturity benefits compared to the first ten months of 2006.
Earnings:
- Net result from financial services increased by 13%.
- SPF, SIM, SEB and Santam achieved solid performances;
- SDM’s performance has been impacted by new business strain and an expense overrun in Channel Life. The expense overrun is receiving management attention;
- Global debt and equity market volatility had some adverse impact on SCM’s performance, but its return hurdle rate is still being achieved.
- Core earnings are up 19% (24% increase in normalised core earnings per share).
- Normalised headline earnings per share are up 13%.
- A relatively more conservative asset mix for the capital portfolio resulted in a strong increase in investment income (interest and dividends) at the expense of potential capital appreciation;
- Share buy-backs during the first ten months of 2007 caused a 3% reduction in the adjusted weighted average number of shares in issue.
