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6 December 2017
The operating environment remained challenging, in particular in South Africa, Namibia, Botswana, Angola and Nigeria. A stronger average Rand exchange rate during the first 10 months of 2017 compared to the same period in 2016 also had a negative impact on the translated Rand results of the non-South African operations. These conditions were consistent with the first-half 2017 experience and as a result, the underlying new business performance trends were largely in line with those reported for the six months ended 30 June 2017.
Despite persistent political and policy uncertainty in South Africa, the local equity market rallied since the end of June 2017 on the back of dual listed and blue chip stocks, supporting assets under management and fund-based fee income in the second half of the year. Due to the lag effect on average assets under management, the higher market levels did not have a significant impact on the October 2017 year-to-date results.
The constant currency information included in this operational update has been presented to illustrate the impact of changes in currency exchange rates and is the responsibility of the Group’s board of directors. It is presented for illustrative purposes only and because of its nature may not fairly present the company’s financial position, changes in equity, result of operations or cash flows. All references to constant currency information are based on the translation of foreign currency results for the 10 months to 31 October 2017 at the weighted average exchange rate for the 10 months to 31 October 2016, which is also applied for the translation of comparative information. The major currencies contributing to the exchange rate movements are the British Pound, Indian Rupee, Botswana Pula, Moroccan Dirham and the Nigerian Naira (negative movements in the table below indicate a strengthening in the Rand exchange rate):
The constant currency information has not been reviewed and reported on by Sanlam’s external auditors.
All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory capital covered its CAR under the current solvency regime 5.6 times on 30 September 2017. Under the new SAM regime being implemented in South Africa, Sanlam Life Insurance’s Solvency Capital Requirement cover ratio amounted to 2.8 times on 30 September 2017, while the Sanlam Group cover ratio was 2.1 times.
Capital deployment since the end of June 2017 was limited to the acquisition of Lion Assurance Company, a general insurer in Uganda, and the Group following its rights in terms of the Afrocentric rights issue for a combined outlay of some R100 million. Available discretionary capital at 31 October 2017 was therefore largely unchanged from the 30 June 2017 position. A combined total of some R400 million will be utilised for the Absa Consultants and Actuaries and EasyEquities transactions.
We expect that the economic and operating environment will remain challenging for the remainder of 2017 with a resulting impact on the Group’s key operational performance indicators. Persistent investor risk aversion, average investment market levels, the relative strength of the Rand exchange rate and the level of long-term interest rates are key factors that may have an impact on the growth in net result from financial services, normalised headline earnings and Group Equity Value to be reported for the full 2017 financial year. The outcome of the African National Congress’ national elective conference in December 2017 can potentially result in currency, investment market and interest rate volatility. The Group is, however, well-positioned to weather these headwinds and to continue delivering value for our shareholders and other stakeholders.
The information in this operational update has not been reviewed and reported on by Sanlam's external auditors. Sanlam’s annual financial results for the year ending 31 December 2017 are due to be released on 8 March 2018. Shareholders are advised that this is not a trading statement as per paragraph 3.4(b) of the JSE Limited Listings Requirements.