21 December 2017
The Sanlam Group has exposure to Steinhoff equity and debt instruments (“Steinhoff instruments”) in on-balance sheet policyholder and shareholder portfolios, as well as investment portfolios managed on behalf of third party clients.
Given recent developments around Steinhoff and the consequential decline in the traded values of Steinhoff instruments, the potential impact on the Group’s key financial results from exposure to Steinhoff instruments is provided in this announcement.
All information is indicative based on current mark-to-market (“MTM”) values and does not present actual or potential realised losses.
The information is based on the closing prices of Steinhoff instruments on Wednesday, 20 December 2017 relative to closing prices on Friday, 1 December 2017. We are actively managing the Group’s exposure and the potential impact outlined below may therefore not realise.
The Group’s exposure to Steinhoff instruments originated from normal course of business transactions, with many of the positions in place for a number of years. The Group’s exposure to debt and equity instruments issued by the Steinhoff Group is largely reflective of Steinhoff’s weighting in the local investment markets and Sanlam’s size as an institutional investor.
The Group has exposure to Steinhoff instruments in the following Sanlam products and portfolios:
The equity exposures were in general in line with or slightly above Steinhoff’s benchmark index weighting on 1 December 2017. The direct debt exposures were also in line with the Group’s risk management framework.
The best estimate potential impact on the Group’s 2017 and future earnings is not significant:
The potential impact on Sanlam clients’ investment returns will vary depending on each individual portfolio’s exposure to different asset classes. In a typical balanced portfolio, the Steinhoff exposure would have accounted for approximately 1.1% of the portfolio assets on 1 December 2017 and its share price movement up to Wednesday, 20 December 2017 would have an approximate 1% negative effect on the annual return of the portfolio. The negative impact on the return of a South African Swix Equity index fund would be approximately 2.1%.
The above potential financial effects on net asset value and earnings will only have a marginal effect on the Group’s solvency ratio without impacting our dividend payment capability.
The information in this announcement has not been reviewed and reported on by Sanlam's external auditors. Shareholders are advised that this is not a profit forecast as per paragraphs 8.35 to 8.44 of the JSE Limited Listings Requirements.