South African insurance company Sanlam on Thursday reported a 31% increase in headline earnings per share to 116,6 cents for the year ended December 31 2004, from 89,2 cents a year ago.
A dividend of 50 cents per share was declared, up 25% from the previous year.
The I-Net Bridge consensus forecast was for headline earnings per share of 120 cents and a dividend of 46 cents per share.
The group reported a 35% rise in headline earnings to R3,185-billion. Sanlam said there was a strong performance from all its businesses.
Adjusted headline earnings based on the long-term rate of return, a measure used by Sanlam as a more accurate reflection of its performance, came in at 151,6 cents per share, a 21% increase on the 124,9 cents recorded a year earlier.
Embedded value per share was reported at 1 346 cents, compared with 1 131 cents in 2003, while return on embedded value was 27,7%, up from 14% the previous year.
The new-business embedded value margin rose from 12,7% to 16,5%, while the embedded value of the group’s new life business increased by 40% to R324-million.
During the year, Sanlam said, it had delivered on tough targets, and the benefits of its wide-reaching initiatives had started to flow through to its financial performance more strongly. New-business fund inflows for group operations amounted to R59,9-billion, an improvement of 54% on 2003.
Net fund inflows of almost R16,6-billion were substantially higher than the R5-billion recorded in 2003.
Sanlam said it had met its goal of R250-million in annual cost savings in 2004, and the benefits of its major cost-cutting exercise in Sanlam Life were evident in the increase in its new-business embedded value margin.
Also key to the group’s performance was the marked improvement in investment performance from Sanlam Investment Management, it added.
Looking ahead, Sanlam said the recovery phase of its turnaround strategy is now mostly complete. The group will focus on further improving its distribution reach, redeploying its “lazy” capital and establishing the new Sanlam brand. It will also continue to work closely with banking group Absa to broaden its existing product offering, explore cross-selling opportunities and gain a greater share of Absa’s broker volumes.
Capital efficiency will be a major focus point for the group, it noted.
“We are committed to optimising Sanlam’s capital base to ensure sufficient financial strength and the efficient use of capital,” the group said. “Sanlam’s capital-utilisation strategy will primarily focus on investing in profitable structural growth opportunities that will support and complement the group’s strategy.
“Any excess capital will be returned to shareholders through the most efficient combination of capital distribution and share buy-backs. The monetisation of a portion of Sanlam’s stake in Absa will lower capital concentration risk and is essential to effectively execute the capital strategy. The Barclays transaction, if concluded, will accelerate the implementation of this strategy.”
Sanlam Life saw its shareholders’ funds rise to R26-billion from R19,74-billion in 2003, and funds held for capital adequacy requirements (CAR) totalled R6,55-billion, down from R7,18-billion. CAR covered by prudential capital, however, rose to 3,7 times from 2,6 times in 2003.
Turning to the company’s various operations, Sanlam said its exceptional growth in earnings overall was largely the result of strong growth in operating income from all of its major operations, with gross operating income improving by 46% on 2003 levels.
Its new-business volumes for the year saw individual life single premiums rising 20% to R7,26-billion from R6,1-billion the previous year. This was due largely to a R600-million maiden contribution from Merchant Investors Assurance and 26% growth in investment-linked life annuities sold by Innofin.
Sanlam’s individual life recurring premium business fell by 4% to R1,45-billion from R1,5-billion. Group business reported a 2% increase to R2,5-billion and life business as a whole recorded 12% growth to R11,2-billion from R10-billion in 2003.
Sanlam’s investment cluster (comprising Sanlam Investment Management, Sanlam Collective Investments, Sanlam Multi-Manager sand Sanlam Private Investments) posted strong growth of 84% in new business to R27,6-billion from R15,02-billion, and Innofin’s business rose by 19% to R6,1-billion.
Sanlam Financial Services in the United Kingdom saw new business inflows of R6-billion versus R1,5-billion in 2003, while its Namibia Unit Trust recorded strong inflows of R1,3-billion, up from R395-million previously.
Net funds inflow totalled more than R16-billion, a significant improvement on the R5-billion achieved in 2003. The bulk of the net flows came from investment flows, with strong net inflows achieved by Innofin and all of the major businesses in the investment cluster.
The net outflow of Sanlam individual life funds seen in recent years had been curbed, and a net inflow was recorded for the year. However, the continuing net loss of group life business remains a concern and is receiving high priority attention, Sanlam concluded. — I-Net Bridge