South African insurance company Sanlam on Thursday reported an 85% increase in headline earnings per share for the six months ended June 30, to 102,5 cents from 55,5 cents for the same period a year ago.
In line with past practice, no interim dividend was declared, as Sanlam declares an annual dividend at year-end.
Headline earnings rose by 94% to R2,681-billion from R1,384-billion a year earlier.
The group said total new business flows were up by 11% to R30-billion, while investment flows rose by 14% to R20,8-billion. The group experienced a net funds inflow of R495-million.
Sanlam said these results are the first to be presented based on International Financial Reporting Standards (IFRS).
The group said the strong equity markets experienced during the period largely contributed to growth.
The net result from financial services for the first six months of this year increased by 19% on 2004. As expected, Santam experienced some contraction in its underwriting results during the period and this detracted somewhat from an otherwise satisfactory financial performance across the group.
An improvement of 36% in net investment income contributed to an overall improvement in core earnings of 24% to R1,556-million.
New business volumes were 11% higher than in the first half of 2004, primarily due to an increase in retail and multimanager asset-management investment inflows.
Total investments under management increased by 29% to R375-billion during the period. New life-insurance business flows were down 3% on the comparable period in 2004 as the recent negative sentiment towards life insurers contributed to a deteriorating environment for contractual savings and life-insurance products in particular.
The embedded value of new life business for the period amounted to R114-million, which is 14% lower than in the corresponding period in 2004.
The annualised return on embedded value increased to 23,2% in the first half of 2005, “which is well in excess of our hurdle rate”, Sanlam said.
Looking forward, Sanlam said it will remain focused on delivering on four key strategic areas — achieving growth through a product and distribution capability that is aligned with its targeted markets and further improving operational efficiencies to ensure long-term profitability while improving the value proposition for clients.
There will also be a continued emphasis on capital optimisation and a focus on accelerating Sanlam’s brand positioning through transformation and marketing.
The buoyant equity markets had a significant impact on the strong headline earnings reported for the first six months of 2005, but Sanlam cautioned that this trend may not continue during the second half of the year, given the direct impact of equity markets on headline-earnings growth.
Second-half performance will also be impacted by the sale of the investment in Absa. A substantial component of the proceeds from the sale has been invested in liquid assets in anticipation of the share buy-back programme and the settlement of the African Life acquisition.
The benefits of the acquisition of African Life and the capital reduction will contribute to performance from 2006, Sanlam said. — I-Net Bridge