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Cape Town – Sanlam remained upbeat despite recording an 18% drop in headline earnings in its six months to end-June, compared to the previous period in 2016.
While normalised headline earnings saw a 5% rise to R4.481bn, deferred tax assets of R1.275bn - in respect of certain assessed losses in the policyholder funds, after the introduction of a separate Risk Policy Fund for South African insurance companies during 2016 - saw headline earnings fall 18% to R4.565bn from R5.597bn.
Sanlam [JSE:SLM] was trading 2.06% lower at the end of trade on Wednesday at R68.54 a share.
“We are satisfied with the results for the first six months of the financial year and we believe that our focus on strategic execution continues to support our business performance and our delivery of value to all our stakeholders,” said Sanlam CEO Ian Kirk in a statement on Thursday.
“We expect the economic and operating environment to remain challenging for various reasons across our footprint for the remainder of the year. However, we are confident that our staff and management will continue to diligently execute on the strategic priorities we have identified and we believe this will sustain our performance going forward.”
Sanlam pointed to the strong growth in value of new life (covered) business written. The net value of new covered business increased by 11% (17% in constant currency) at a margin of 2.61%, which exceeds the comparable 2016 margin, it said.
“The group was particularly pleased with the double-digit annualised adjusted return on group equity value (RoGEV) of 16.2%. This exceeded the target of 13.2% for 2017 by a healthy margin. The group considers RoGEV as the most appropriate measure of long-term performance and value creation, given the diversified nature of Sanlam’s operations,” the firm said.
Net result from financial services increased by 1%, new business volumes declined by 4% to R110bn and net fund inflows of R19bn were brought in compared to R22bn in 2016.
It reported an increase of 1% in net result from financial services compared to the same period in 2016.
“The relatively low level of growth was largely attributable to the significantly stronger average rand exchange rate; higher new business strain at Sanlam Personal Finance following good growth in risk business; catastrophe claims experience at Santam; and one-off credit provisioning in Shriram Capital following demonetisation in India.
"This was partly offset by the contributions from structural growth. Excluding these, net result from financial services increased by a satisfactory 11%.”
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