Operational Update December 2018

Transcription

1 Sanlam Limited (Incrprated in the Republic f Suth Africa) Registratin number 1959/001562/06 JSE share cde: SLM A2X share cde: SLM NSX share cde: SLA ISIN: ZAE ( Sanlam r the Grup ) Operatinal Update December 2018 The Grup made significant strategic prgress in the fur mnths since the end f June up t the end f Octber During this perid, we cncluded the largest transactin in Sanlam s histry by finalising the acquisitin f the remaining stake in Saham Finances. This transactin creates a unique ftprint and cmpetitive advantage fr Sanlam acrss the African cntinent t drive future grwth. It als simultaneusly affrded us the pprtunity t utilise the need t raise equity funding fr the acquisitin t prpse a package f Brad-based Black Ecnmic Empwerment (B-BBEE) transactins t Sanlam sharehlders. The prpsed B-BBEE transactins will psitin us well t gain market share in thse areas f the Suth African market where we d nt have a leading psitin and where enhanced empwerment credentials create a strategic advantage, including third party asset management, emplyee benefits, health and the entry-level market segment. These transactins remain subject t apprval by Sanlam s sharehlders. The Grup clusters cntinued t execute their peratinal strategies and delivered an verall resilient perfrmance fr the 10 mnths ended 31 Octber This is a pleasing result in the cntext f weak ecnmic cnditins in a number f ur territries, including Suth Africa ur largest market, and significant vlatility in glbal investment and currency markets. The Suth African equity market had a particularly weak mnth in Octber. Sanlam s 2018 centenary year reflects the cre cmpetencies f the Grup: being able t deliver sharehlder value under challenging cnditins while at the same time executing future grwth strategies. This is funded in ur diversified prfile as well as a federal management mdel that supprts dual fcus n peratinal and strategic delivery. The Saham Finances integratin is prgressing well. The Sanlam Emerging Markets (SEM) management structure is being aligned t a new line f business fcus t supprt the expanded cluster and t deliver n the strategic pprtunities identified as part f the acquisitin. Activities in pursuit f unlcking the synergies embedded in the business case have already cmmenced. Results The cnstant currency infrmatin included in this peratinal update has been presented t illustrate the impact f changes in currency exchange rates and is the respnsibility f the Grup s bard f directrs ( Bard ). It is presented fr illustrative purpses nly and because f its nature may nt fairly present the Grup s financial psitin, changes in equity, result f peratins r cash flws. All references t cnstant currency infrmatin are based n the translatin f freign currency results fr the 10 mnths t 31 Octber 2018 at the weighted average exchange rate fr the 10 mnths t 31 Octber 2017, which is als applied fr the translatin f cmparative infrmatin. The majr currencies cntributing t the exchange rate mvements are the British Pund, United States Dllar, Indian Rupee, Btswana Pula, Mrccan Dirham, Anglan Kwanza and the Nigerian Naira (negative mvements in the table belw indicate a strengthening in the rand exchange rate): 1 P a g e

2 Currency Average rand exchange rate 10 mnths t 31 Octber 2018 Average rand exchange rate 10 mnths t 31 Octber 2017 Change in average exchange rate British Pund % United States Dllar % Indian Rupee % Btswana Pula % Mrccan Dirham % Anglan Kwanza % Nigeria Naira % The cnstant currency infrmatin has nt been audited r reviewed by Sanlam s external auditr. The salient features f the Grup s perfrmance fr the 10 mnths t 31 Octber 2018 are: New business vlumes f R188 billin, up 3% n the first 10 mnths f the 2017 financial year with majr trends remaining in line with the first-half 2018 perfrmance. Sanlam Persnal Finance (SPF) achieved verall new business sales grwth f 7%. The recurring premium sub cluster cntinued t deliver strng grwth in excess f 20% (7% excluding the structural cntributin f the BrightRck acquisitin). Slid grwth in retirement annuities and tax free savings slutins in the savings business was partly ffset by a flat perfrmance frm individual life risk business (excluding BrightRck). Sanlam Sky grew its new business vlumes by sme 80%, supprted by the Capitec credit life business written in the first half f the year and strng demand fr the Capitec funeral prduct. Excluding Capitec and the impact f the biennial renewal f the Zinist Christian Church scheme that ccurred in 2017, Sanlam Sky sales increased by 10%. Individual life recurring premium business (excluding Capitec) increased by 14%. Safrican s perfrmance imprved since the end f June 2018, but with new business sales remaining lwer than the high cmparative base in Glacier increased its new business cntributin by 4% n the first 10 mnths f Grwth f 8% in primary LISP sales was suppressed by marginally lwer secndary sales int wrap funds and 1% grwth in traditinal life investment sales. The change in mix f business t less prfitable lines f business experienced in the first half f 2018 persisted. SEM recrded verall new business grwth f 14%, including the impact f structural activity (Saham Finances, Sanlam Investments East Africa and the Ghana dispsal) in In cnstant currency and excluding structural activity, new business vlumes increased by 17%. Despite the difficult ecnmic cnditins in Namibia, new business vlumes in this regin increased by mre than 20%, with strng cntributins frm bth life and investment business. The mre prfitable entry-level market segment, in particular, cntinued t perfrm well. A recvery in annuity market share in Btswana was ffset by lwer individual life risk and investment business sales frm a high base in 2017, cntributing t an verall decline f 20% in new business vlumes. This did nt impact n grwth in VNB, due t the change in mix t the mre prfitable annuity line f business. 2 P a g e

3 Rest f Africa new business vlumes increased by 46% (24% in cnstant currency and excluding structural activity). Mst regins and lines f business cntributed t the grwth in cnstant currency, apart frm Kenya, Malawi life business and Tanzania general insurance business. This is in line with the trends reprted in the Grup s interim results fr the six mnths ended 30 June Saham Finances new business prductin remained in line with expectatins. The Indian peratins delivered grwth f 5% (11% in cnstant currency) with slid grwth in bth the life and general insurance businesses in cnstant currency. The Malaysian life insurance business cntinued with its turnarund and achieved duble digit grwth in new business sales. The Malaysian general insurance business imprved its mix f business, but with verall new business sales still marginally lwer than the cmparable perid in Overall, Malaysian new business sales increased by 6% (dwn 1% in cnstant currency). New business vlumes at Sanlam Investments Grup (SIG) declined by 10%. The internatinal businesses did well and attracted 43% higher new mandates in This was ffset by lwer vlumes at the Suth African wealth and asset management businesses, reflecting the difficult perating envirnment. As reprted in the Grup s 2018 interim results annuncement, Sanlam Emplyee Benefits (SEB) attracted large new mandates subsequent t the end f June New life business vlumes mre than dubled as a result. Net value f new life business (VNB) increased by 7% (up 12% excluding structural activity and n a cnstant ecnmic and currency basis). VNB margins have been largely maintained n a per prduct basis. Duble digit grwth was achieved acrss mst regins n a cnstant ecnmic and currency basis, including Suth Africa where strng grwth at Sanlam Sky and SEB supprted the results. Detracting frm the verall perfrmance were Kenya and Malawi, where the underperfrmance in life new business had a majr negative impact n VNB. Overall net fund inflws f R36.2 billin were 5% higher than the R34.6 billin achieved in the cmparable 10-mnth perid in All clusters cntributed strng grwth, apart frm SIG that was impacted by an R8.5 billin withdrawal f lwer margin passive mandates managed n behalf f an institutinal client. Persistency experience trends remained in line with the first half f Net result frm financial services increased by 2% n the first 10 mnths f the 2017 financial year (3% in cnstant currency and excluding structural activity). Sanlam Persnal Finance s net result frm financial services declined by 5%. This is largely due t increased new business strain, the structural impact f the BrightRck acquisitin and a reduced impact frm mdelling and assumptins changes. Excluding these, Sanlam Persnal Finance achieved net perating prfit grwth f 5% n the first 10 mnths f 2017, an acceptable perfrmance in the cntext f the weak investment market perfrmance that impacted n fund-based fee incme. Sanlam Emerging Markets net result frm financial services increased by 4% (3% in cnstant currency and excluding structural activity). Saham Finances, Nigeria, Rwanda and Uganda delivered strng rganic grwth. Detracting frm the results were: higher new business strain in Namibia fllwing the strng grwth in entry-level market sales, weaker grup life claims experience in Namibia and Btswana, prir year tax crrectins at 3 P a g e

4 Letsheg and underperfrmances in Kenya, Zambia and the Tanzania general insurance business. Sanlam Investments cntributin t net result frm financial services decreased by 2%, attributable t lwer perfrmance fees and the negative impact f the weak equity market perfrmance n grwth in assets under management. Santam cntinued t benefit frm a benign claims envirnment, with its underwriting margin fr the first 10 mnths f 2018 slightly abve the upper end f its 4% t 8% target range. SEB experienced a weakening in mrtality and disability claims experience since the end f June, cntributing t a marginal decline in Sanlam Crprate s net result frm financial services. All ther lines f business achieved grwth. Nrmalised headline earnings declined by 10%, attributable t a 55% decline in net investment return. The JSE/FTSE Swix Index recrded a negative return f 16% in the first 10 mnths f 2018, cmpared t a psitive perfrmance f 15% in the cmparable perid in The equity hedges in the Sanlam capital prtflis prtected the Grup frm negative investment returns, in particular during Octber 2018 when the Suth African equity market experienced a significant decline. The JSE/FTSE Swix Index declined by 6% during the mnth. Diluted headline earnings per share, which include fund transfers recgnised in respect f Sanlam shares held in plicyhlder prtflis, declined by 10%. Capital The Grup s peratins remain well capitalised. The Sanlam Grup Slvency Capital Requirement (SCR) cver rati amunted t 2.4 times n 30 September 2018 (Sanlam Life Insurance Limited: 3 times). The Grup had excess capital f sme R10 billin available fr redeplyment at the end f June This has been fully utilised as partial payment fr the Saham Finances acquisitin referred t abve. The prceeds frm the prpsed B-BBEE transactins, which include an equity issuance, will be utilised t settle the shrt-term debt incurred as partial funding fr the Saham Finances transactin and t restre the discretinary capital prtfli t an apprpriate level. The prpsed B-BBEE transactins are subject t, amng thers, sharehlder apprval at an extrardinary general meeting scheduled fr 12 December Outlk We expect that the ecnmic and perating envirnment will remain subdued in ur largest markets fr the remainder f Investment market and currency vlatility are als expected t persist. We cmmensurately d nt fresee any significant imprvement in the peratinal trends experienced in the first 10 mnths f Average investment market levels, the relative strength f the Rand exchange rate and the level f lng-term interest rates are key factrs that may have an impact n the grwth in net result frm financial services, nrmalised headline earnings and Grup Equity Value t be reprted fr the full 2018 financial year. The infrmatin in this peratinal update has nt been reviewed and reprted n by Sanlam's external auditrs. Sanlam s annual financial results fr the year ending 31 December 2018 are 4 P a g e

5 due t be released n 7 March Sharehlders are advised that this is nt a trading statement as per paragraph 3.4(b) f the JSE Limited Listings Requirements. Cnference call A cnference call fr analysts, investrs and the media will take place at 17h00 (Suth African time) tday. Investrs and media wh wish t participate in the cnference call shuld register as indicated belw. Audi dial-in facility A tll free dial-in facility will be available. Please register at fr the call. Registered participants will receive their dial-in number upn registratin. Fr assistance, please cntact Sanlam Investr Relatins at Recrded playback will be available fr three days after the cnference call. Access Numbers fr Recrded Playback: Access cde fr recrded playback: Suth Africa Tll USA and Canada Tll-free UK Tll-free Other Cuntries Tll Fr further infrmatin n Sanlam, please visit ur website at Cape Twn 5 December 2018 Spnsr The Standard Bank f Suth Africa Limited 5 P a g e