Sanlam, South Africa’s largest insurer by value, said new business volumes increased by 9% compared to the start of last year and that operating conditions remained challenging during the first four months of 2016. The company revealed blamed investment market volatility coupled with concerns around global growth prospects as the reasons why economic growth in most markets that it operates remained below longer-term potential, particularly in South Africa where only modest growth is expected for 2016. The aforementioned conditions, according to the company, posed particular headwinds for the Group to grow new business volumes and fund- based fee income, aggravated in South Africa by concerns of a downgrade in the international sovereign rating to below investment grade. “Coupled with concerns around global growth prospects, these conditions posed particular headwinds for the Group to grow new business volumes and fund- based fee income, aggravated in South Africa by concerns of a downgrade in the international sovereign rating to below investment grade,” the company stated in the update which covers the four months to April 2016.
But despite the seemingly unfavorable conditions, the group described its performance during the reporting period as ‘solid’. Sanlam, started in 1918 and operates in Africa, Europe, the U.K., U.S., India and Malaysia. New business volumes reached R74 billion, up by 9% on the first four months of the 2015 financial year and its Personal Finance achieved growth of 11% in new business sales, the company said in a statement on Wednesday. “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,” noted Sanlam. The Group had excess capital of R2.3 billion available for redeployment at the end of December 2015, after allowing for the Saham Finances and Shriram Insurance transactions.
Including investment return earned on the portfolio and the excess dividend cover in respect of the 2016 dividend payment, Sanlam said, adding that discretionary capital amounted to R3.1 billion on 30 April 2016. “The available discretionary capital remains earmarked for transactions currently under consideration.”
Economic growth in most markets remains below longer-term potential, in particular in South Africa where only modest growth is expected for 2016. The first four months of 2016 also saw significant investment market volatility in South Africa and international markets. Says the company: “Sanlam Personal Finance achieved growth of 11% in new business sales, a particularly satisfactory performance given the challenging operating conditions in South Africa.” “The low growth in individual life business is largely attributable to increasing consumer pressure in this market segment and the realignment of the channels towards more profitable product lines. The Individual Life segment grew new business volumes by 3%.” The Rand exchange rate since the end of December 2015 is said to have contributed to negative returns from the offshore exposure in the portfolio. Furthermore: “Shareholders also need to be aware of the impact of the level of interest rates and financial market returns and volatility on the Group´s earnings 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 six months to 30 June 2016 as well as the full 2016 financial year. Relatively strong operating earnings and new business growth experienced subsequent to April 2015 also cause an increase in the comparable base.” “All of the Group operations remain well capitalised. Sanlam Life Insurance´s statutory capital covered its Capital Adequacy Requirements 5.3 times on 31 March 2016 after allowing for the dividend paid to Sanlam in April 2016,” the company assured. New Business volumes increased by 9%, reaching R74 billion
• Overall new business growth of 53% • Net fund inflows of R16 billion
• New recurring premiums increased by 16% • Glacier achieved overall growth of 13%
• Net value of new life business on a consistent economic basis increased by 7% • Normalised headline earnings per share down 13%
• Diluted headline earnings per share decreased by 15%