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7 December 2016
Key trends remained broadly in line with those highlighted in the Group’s interim results for the six months to 30 June 2016, but with some improvement in risk business claims experience at Sanlam Personal Finance and Sanlam Employee Benefits. Recent acquisitions, including Saham Finances and investments in Zimbabwe, continue to contribute to operational growth in 2016.
The challenging operating conditions experienced in the first six months of 2016 persisted for the 10 months to 31 October 2016 as anticipated. Economic growth in most markets where the Group operates remains below longer-term potential, with robust growth in India the exception. Investment and currency markets remain volatile, reacting to global and country specific developments. Average market levels during the first 10 months of 2016 were in general lower than the comparable period in 2015, depressing growth in assets under management and commensurately fee income at Sanlam Personal Finance and the investment management businesses. The Rand regained some ground against major currencies, but was still weaker on an average basis during the first 10 months of 2016 compared to the same period in 2015.
New business volumes of R195 billion, up 11% on the first 10 months of the 2015 financial year.
Net result from financial services up 10% on the first 10 months of the 2015 financial year.
Normalised headline earnings per share down 8% compared to the first 10 months of the 2015 financial year.
Diluted headline earnings per share, which include fund transfers recognised in respect of Sanlam shares held in policyholder portfolios, decreased by 9% compared to the first 10 months of the 2015 financial year.
All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory capital covered its Capital Adequacy Requirements 5.5 times on 30 September 2016.
The Group had excess capital of R3.1 billion available for redeployment at the end of June 2016, after allowing for the Shriram Insurance transactions that concluded in October 2016. Utilisation since then has been limited to a number of small transactions. Including investment return earned on the portfolio and the special dividend declared by Santam, discretionary capital amounted to R3.6 billion on 31 October 2016. The available discretionary capital remains earmarked for transactions currently under consideration.
Good progress has been made with capital modelling under the Solvency Assessment and Management (SAM) regime to be introduced in South Africa during 2017. The Group will remain well capitalised under the SAM regime. Further information on the Group’s optimal capital levels will be provided as part of the Group’s 2016 annual results announcement in March 2017.
We expect that the economic and operating environment will remain challenging for the remainder of 2016 with a resulting impact on the Group’s key operational performance indicators. A number of factors are likely to impact on the Group’s ability to maintain the 10-month growth rate in net result from financial services for the full 2016 financial year, including average investment market levels, the strengthening in the Rand exchange rate and the high comparable 2015 base for performance fees at Sanlam Investments. Shareholders also need to be aware of the impact of movements in the Rand exchange rate, the level of interest rates and financial market returns and volatility on the Group’s investment return and Group Equity Value. Relative movements in these elements may have a major impact on the growth in normalised headline earnings and Group Equity Value to be reported for the full 2016 financial year.
The information in this operational update has not been reviewed and reported on by Sanlam's external auditors. Sanlam’s financial results for the year ending 31 December 2016 are due to be released on 9 March 2017. Shareholders are advised that this is not a trading statement as per paragraph 3.4(b) of the JSE Limited Listings Requirements.
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