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​​​​​​Operational Update for the 10 Months ended
31 October 2015

2 December 2015

The Sanlam Group achieved an overall solid performance for the 10 months ended 31 October 2015, despite continued impact from the headwinds faced by the Group in the first half of 2015.

Economic conditions in the markets where the Group operates remained challenging, with the commodity-based economies experiencing pressure on domestic economic growth as well as currency volatility. South Africa, the Group’s largest region, is no exception with a poor economic growth outlook for 2015 and a marked weakening of the Rand against developed market currencies since the end of June 2015.

The broader trends underlying the Group’s performance for the 10 months to 31 October 2015 are in line with those of the first half of 2015.
The large R8.3 billion policy written by Sanlam Employee Benefits in the third quarter of 2014 (“the SEB policy”) affects the comparability of new business volumes, value of new life business (VNB) and net result from financial services.


The salient features of the Group’s performance for the 10 months to 31 October 2015 are:

  • New business volumes of R175 billion, up 17% on the first 10 months of the 2014 financial year. Excluding the SEB policy, new business volumes increased by 24%.
    • Sanlam Personal Finance achieved growth of 22% in new business sales. Sanlam Sky new business volumes increased by 14%, comprising 13% growth in individual life recurring premiums and an 18% increase in group life recurring premiums. The 2015 new business sales benefited from the biennial premium renewal of the ZCC scheme as well as a large new voluntary scheme awarded to Sanlam Sky, which more than compensated for the termination of the Capitec credit life underwriting agreement towards the end of 2014. Excluding these items, new business volumes grew by 12% on a normalised basis, in line with the target for this business. The introduction of the tax free savings product in this market segment resulted in higher than expected replacement sales with a commensurate change in mix to the low margin savings product. The Individual Life segment grew new business volumes by 3%. Single premium sales growth remains moderate, in part due to a shift in sales to the Glacier platform. New recurring premiums increased by 8%, supported by good growth in risk, tax free savings and credit life business. Demand for Glacier’s offshore and wrap product solutions remains strong, contributing to 28% growth in Glacier’s new business contribution.
    • Sanlam Emerging Markets achieved overall new business growth of 42%. The Namibian operations experienced lower inflows of the more volatile unit trust business, which more than offset good growth in new life business. The Botswana operations more than doubled their new business contribution, supported by strong annuity and investment business volumes. All of the other regions (Rest of Africa, Malaysia and India) achieved growth in excess of 20%, despite some headwinds:
      • New business activity in Zambia remains depressed in the difficult operating environment with an improvement only expected during 2016.
      • The new business impact of the system implementation issues experienced by the Kenyan life business continues to reflect in the October year-to-date results.
      • Pacific & Orient, the Group’s general insurance business in Malaysia, is experiencing pressure on new business from a general decline in the sales of two-wheelers as well as increased competition. Appropriate management action has been implemented.
    • The Sanlam Investments cluster increased its new business volumes by 14% (26% excluding the SEB policy), with the South African Investment Management and Wealth Management businesses achieving particularly strong growth. Group recurring premium risk business in Sanlam Employee Benefits remains under pressure, similar to the first half of 2015. The International businesses also recorded a decline in new business inflows, partly attributable to the disposal of Intrinsic in 2014.
    • VNB on a consistent economic basis declined by 8% on the comparable period in 2014. Excluding the SEB policy, VNB increased by 1%. VNB margins have been maintained on a per product basis. Growth in Sanlam Personal Finance’s VNB was, however, depressed by the change in mix to the lower margin tax free savings product in both Sanlam Sky and Individual Life, as well as the strong growth in Sanlam Sky’s lower margin group life business. Sanlam Personal Finance’s overall VNB increased marginally as a result, with a decline reported at Sanlam Sky. Sanlam Emerging Markets’ VNB growth continues to be impacted by lower contributions from Namibia, Zambia and Kenya, due to the factors highlighted in the Group’s interim results. Sanlam Employee Benefits reported a markedly lower contribution due to the impact of the SEB policy included in the comparable base and a decline in the more profitable recurring premium risk business.
    • Overall net fund inflows of R11.5 billion were down from the R27,5 billion achieved in the comparable 10-month period in 2014, but represents a satisfactory performance given the large outflows experienced in 2015 from two institutional clients. The Public Investment Corporation withdrew R11.2 billion from Sanlam Investment Management while the Botswana Public Officers Pension Fund withdrew an overall R17.3 billion from Sanlam Emerging Markets and Sanlam Investments’ International business.
    • Persistency levels are generally in line with the 2015 first-half results.
  • Net result from financial services up 8% on the first 10 months of the 2014 financial year.
    • The same key factors that affected the Group’s 2015 first-half performance also reflect in the results for the 10 months to 31 October 2015.
      • Fund-based fee income benefited from a relatively higher level of assets under management.
      • Mortality experience in most of the major market segments remained in line with the first-half performance.
      • Sanlam Investments’ profitability reflects lower performance fees and increases in administration spend on projects and capacity building. An increase in emerging market credit spreads and marked-to-market losses on equity-backed financing structures in the current volatile equity market environment had a negative effect on Sanlam Capital Markets’ performance since the end of June 2015.
      • In Sanlam Emerging Markets, the Zambian and Indian businesses reported a decline in profits compared to the same period in 2014, with additional provisions being raised since the end of June 2015 in respect of the arrears position in the Shriram Transport Finance equipment finance book. Overall growth in operating earnings for the cluster remained broadly in line with the first-half performance.
    • Santam experienced a particularly favourable claims environment in the four months to 31 October 2015.
  • Normalised headline earnings per share up by 12% compared to the first 10 months of the 2014 financial year.
    • Investment return earned on the capital portfolio benefited from the major weakening in the Rand exchange rate since the end of June 2015, which supported the performance of the offshore exposure in the portfolio.
  • Diluted headline earnings per share, which includes fund transfers recognised in respect of Sanlam shares held in policyholder portfolios, increased by 16% compared to the first 10 months of the 2014 financial year.


All of the Group operations remain well capitalised. Sanlam Life Insurance’s statutory capital covered its Capital Adequacy Requirements 5 times on 30 September 2015.

The Group had excess capital of R4.6 billion available for redeployment at the end of June 2015. Utilisation since then has been limited to a number of small transactions. Including investment return earned on the portfolio and the release of some illiquid capital, discretionary capital amounted to R4.8 billion on 31 October 2015. As indicated before, a major portion of the available discretionary capital has been earmarked for transactions in the process of completion.

The Group followed a prudent approach in the allocation of capital to its operations in anticipation of the implementation of Solvency Assessment and Management (SAM) in South Africa. With increased certainty regarding the final outcome of the SAM regime, the Group is identifying opportunities to improve the efficiency of capital allocation. Being a diverse Group, one of the opportunities is to cover part of the life operations’ capital requirement with the investments held in other Group operations. This is referred to as internal capital diversification that creates some additional capacity for strategic investments. Combined with the existing discretionary capital pool, this will enable the Group to cover the funding requirements of all the recently announced transactions, including the proposed acquisition of an interest in the Saham Finances Group, from internal resources. An update on the Group’s capital position will be provided in the 2015 annual results announcement in March 2016.


We expect that the economic and operating environment will remain challenging for the remainder of 2015 with a resulting impact on the Group’s key operational performance indicators. 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 financial year ending 31 December 2015. Relatively strong operating earnings and new business growth experienced in the latter part of 2014 also cause an increase in the comparable base.

The 2015 financial year has been particularly challenging to date with a number of headwinds contributing to lower than expected performance in a number of key metrics. These are short-term pressures and we remain confident that the Group’s strategy is appropriate to deliver on our longer term growth targets.

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 2015 are due to be released on 10 March 2016. 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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