Financial services and life assurance giant Sanlam said on Wednesday it has achieved sound operating results for the first four months of the year, with most of the major businesses improving on their 2004 performance and net operating profit up by more than 10% on the restated results for the same period last year.
“Sanlam Life’s lower cost base contributed to improved earnings for the period. All businesses in the Investment cluster performed well and contributed to a material improvement on the cluster’s results for the same period in 2004,” the group said in a trading update.
It added that stronger equity markets, increased assets under management and incentive fees earned had contributed to this performance.
“The revised business model of Sanlam Capital Markets is now well established and delivering according to expectations. In line with expectations, lower net insurance results had a negative impact on Santam’s relative contribution to the group results to date,” it stated.
Headline earnings per share, based on International Financial Reporting Standards, it added, were up about 20% on the first four months of 2004.
“In addition to the growth in operating results, equity market movement during the reporting period contributed to this improvement in earnings.”
Headline earnings for the 2005 financial year include both the realised and unrealised market value changes attributable to investments held in the shareholders’ funds and are reported net of transfers to or from policyholders’ funds to compensate the portfolios for market value changes in respect of Sanlam and Santam shares held in those portfolios.
The group said market movements may therefore have a material impact on headline earnings and that shareholders need to be aware of the potential volatility in reported earnings.
New business flows for the four months to April were 5% up on 2004. Positive investment inflows were offset by lower Life business inflows.
Sanlam said that the volatility in equity and currency markets, coupled with the spate of recent negative press reports on the insurance industry, had impacted client investment behaviour as private and collective investments had grown in popularity as substitutes for insurance-policy-based investments.
Individual Life single premiums for the four months were down 7% on 2004, substantially due to a fall in Life policy continuations, while new recurring premiums showed marginal growth.
“The strategic initiatives launched recently to address our reach and market share in key segments are expected to take longer in making a positive contribution than originally planned.
“New group business inflows for the four months are down on 2004, partly due to a structural change in the employee benefit investment environment, where multimanagers are making strong inroads into this market.
“This is also evidenced in a more than doubling in the new funds attracted by the Sanlam Multi Manager for the period.
“Overall, new investment inflows continued the upward trend of the recent past, greatly assisted by the strong growth in inflows to our Personal and Collective Investments businesses.”
The Public Investment Commission withdrew R6-billion of its funds under management from Sanlam Investment Management in March 2005 as part of the restructuring of its investment process and mandates.
Apart from this withdrawal, the group achieved positive net business inflows of R4-billion for the four months. The positive flows were essentially in respect of investment and short-term insurance activities.
Both the individual and group Life businesses experienced a small increase in net outflows for the period. — I-Net Bridge