Johan van Zyl, CEO of Sanlam Limited, South Africa’s second-largest financial services group, says the outlook for the country’s insurance industry in 2004 is a positive one, and he is expecting an improvement in performance from Sanlam going forward.
Presenting the group’s final results for the year ending December 31 2003 on Thursday, Van Zyl also said Sanlam is happy with its current 59,2% stake in short-term insurer Santam, which had performed exceptionally well for the group over the year. Although the company had no plans to increase its holding, it was an option always considered by the group as a way to increase shareholder value, he noted, as was a share buy-back.
Van Zyl was upbeat about Sanlam’s 2004 prospects, expressing his confidence that the group had created a solid platform for growth across all of its operations, following a disappointing 2003 dented by large restructuring costs within its core Life business, its international operations and subsidiary Gensec Bank. This, combined with positive macroeconomic conditions, should lead to good growth going forward, he said.
“The outlook for 2004 is positive,” he told investors at the presentation in Cape Town. “We are quite bullish — we have a very favourable environment going forward and have already seen some positive signs as people are putting their money market funds back into equities and long-term insurance products. Lots of money is now ready to move bank into insurance products.”
He said he was “cautiously optimistic” about new business volumes in 2004, as the group had already experienced a turnaround in investment inflows in its Employee Benefits business in December, which had carried on through January and February. Funds were also going into unit trusts and high net worth individuals were showing more interest via its Innofin business.
“Over time, we expect that as advisers and brokers regain confidence in equities, more money will go into the life assurance business as well,” he noted.
At the same time, financial director Flip Rademeyer said the group had completed what restructuring it had wanted to undertake, and did not foresee incurring further costs in that regard in 2004.
“We’ve taken it on the chin in 2003 and hopefully there will be no more costs in the future,” he observed.
The Life business had “substantially met” its savings target of R250-million, leaving it more competitive, the CEO revealed. At the same time, the restructuring of Gensec Bank into Sanlam Capital Markets (SCM) had been completed, resulting in the loss of about 150 jobs and the freeing up of an estimated R1,1-billion in capital over time.
SCM’s fixed cost base had been reduced from R370-million to R146-million, and capital employed was now at R400-million.
“It was a very difficult year for Gensec with a huge restructuring effort that led to extremely low profitability,” Van Zyl commented. “But SCM is operational now and we believe we have created a platform from which to grow — it is a business that is sustainable and I believe can add value to the group.”
As part of Sanlam’s ongoing board review, which saw three new appointments in December, the group would add three nominees from its black empowerment partner Ubuntu-Botho (led by mining entrepreneur Patrice Motsepe) on March 25, and planned to name a new chairperson to replace Ton Vosloo in June. The board had already agreed on a structured process for finding the new chairperson, concluded Van Zyl. — I-Net Bridge