Stemming the tide

"It was a tough 2003, although there were huge improvements in the last quarter, and the business environment is becoming positive for insurers now," says group CEO Johan Van Zyl.

• Headline earnings up 10.5% (JSE) or 2% LTRR); * Operating profit before tax up 11.9%;
• The net operating profit down 5.4%;
• Adjustment to fair value was (R501m) up from (R600m) up by 16.5%;
• CAR for Sanlam Life was up to 2.7x, from 1.7x;
• Embedded value up 11.1%;
• Gross written premiums up 16%;
• Net written premiums up 25%;
• Individual Life business dropped from 13.9 to 12.4;
• Employee benefits dropped from 18 to 13.4;

"We were particularly hard hit by the negative returns on offshore investments - harder than some of our competitors were.

"We are happy with the results and performed well. Our emphasis was on developing a platform for the future."

In essence the past year has seen lots of money spent on restructuring and cutting costs. The banking strategy has been resolved. Internationally they refocused to a niche operator, and there was a growth of 15.8% in core earnings.

The operating profit breakdowns make for interesting reading. There were big drops in the banking cluster, while the independent financial services cluster was down from R99m to a loss of R1m.

Shining lights were Santam, the investment cluster, while Sanlam Life was flat.

"The Sanlam Life new business was down, due mainly to a drop in the single premium business, sharply by 20.7%. This is also an industry issue," says Flip Rademeyer, chief financial officer.

"The fund flows in our investment cluster really bugged us. So it is particularly pleasing that we have this turnaround." He was referring to the turnaround and the net fund inflows of just under R5bn, from net outflows of just under R4bn."

The overall effect on operating profit was an increase of 12%, with Santam pulling the group back from the brink.

"Sustainability is the key," he says, "in terms of the investment cluster."

Turning to the Sanlam Capital Markets cluster, specifically Gensec Bank. Van Zyl said that Gensec was suffering badly, and the headcount was reduced from 300 to 146. "We took the full hit for the restructuring costs at Gensec Bank in the 2003 year."

On a group level they are actively looking for a chairman, and the Sanlam board met earlier this week and have agreed the process to be followed and the criteria for the person.

In terms of 2004 on the economic level, van Zyl says that the short-term rates will remain at same levels, although the equity markets will rise - slowly. The rand will be down moderately and there will be steady growth in disposable income.

"There are some positive signs already, and some short term money is going back into equities, while return on capital is a big focus for us in the year ahead."