Edward West
12 March 2010
Johannesburg — LIFE assurance and wealth management group Sanlam lifted normalised headline earnings 133% to 218,9c per share in the year to December 31 after a stronger second half operationally and rising investment markets.
The group had a stable year operationally, but the tough economy affected new business volumes and operating results. New business volumes rose 3% to R102,9bn.
Net fund flows increased 70% to R15,5bn. The investment return on the capital portfolio improved significantly over the negative performance in 2008 due to rising markets. CEO Johan van Zyl said yesterday it was a tale of two halves for the group's retail cluster, with a general recovery in SA Retail and Group Life new business volumes and net cash flows in the second half of the year.
SA's middle-income market, where Sanlam derives most of its clients, had been hit hard by the financial crunch, but the value of lapses, surrenders and fully paid-up policies had declined in the latter half of the year, and persistency was "well in hand" overall.
Headline earnings climbed 64% to R4,44bn from R2,7bn a year earlier. Van Zyl said while he did not believe this year would be an easy one, with job losses perhaps still to bottom out, Sanlam was well positioned for another growth year.
Sanlam had discretionary capital of R3,5bn, and it was prudent to use the capital as a buffer during last year , but "we will be looking for profitable growth opportunities and other ways of efficiently redistributing some of this capital this year".
He said some analysts had proposed a special dividend with the R3,5bn, but this was not the most efficient use of the money, and share buy-backs at the right price would be considered if no other use was found. Of the R3,5bn, about R1bn was already earmarked for projects such as capital to grow some of the South African businesses, and build the African footprint. For instance, Sanlam hoped to be able to sell its first policy in Nigeria by the year-end.
"We are not rushing in to buy something big offshore," Van Zyl said. Part of the focus this year would be to steadily grow in other African countries and India for a scalable market share over three to five years, with a wider range of financial services such as health products in Africa and short-term insurance in Botswana.
Most operations in Sanlam Developing Markets delivered reasonable new business results last year, he said. Sanlam was concerned about the effects of inflation on the economy.
Diversification had been a key aspect in its strategy since 2003 and had resulted in a rebalancing of the mix of new business, with an increasing contribution - 83% - channelled via nonlife operations.
The group strategy would continue on five pillars: optimal capital utilisation, earnings growth, costs and efficiencies, diversification and transformation.
The dividend per share was lifted 6% to 104c.
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