8 June 2016
Despite these conditions impacting on performance in a number of areas, the Group’s diversification across geographies, market segments and product lines enabled it to deliver an overall solid performance for the four months ended 30 April 2016. 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.
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 Rand regained some ground against major currencies, but was still significantly weaker on an average basis during the first four months of 2016 compared to the same period in 2015
The salient features of the Group’s performance for the four months to 30 April 2016 are:
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 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. Utilisation since then has been limited to a number of small transactions. Including investment return earned on the portfolio and the excess dividend cover in respect of the 2016 dividend payment, discretionary capital amounted to R3.1 billion on 30 April 2016. The available discretionary capital remains earmarked for transactions currently under consideration.
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. 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.
The information in this operational update has not been reviewed and reported on by Sanlam's external auditors. Sanlam’s financial results for the six months ending 30 June 2016 are due to be released on 8 September 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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