Johannesburg - Financial services and insurance group
Sanlam [JSE:SLM] on Wednesday reported that new life insurance business volumes increased by 21% at sustained margins in the first four months of 2010.
Overall net business inflows for the four month-period amounted to R6.8bn (with continued net life cash inflows) and core earnings per share improved by 8%.
The group said the satisfactory results were evidence that its ongoing diversification into different market segments and solution offerings were bearing fruit.
"These results were achieved amidst ongoing challenging financial and economic conditions," it pointed out.
"Amidst signs of a global economic upturn, the recovery remains fragile and has been mired by fears of the contagious impact of sovereign debt problems experienced in the European Union. This is reflected in a sharp increase in risk margins in Europe and a return to significant international equity market volatility.
"The FTSE/JSE All Share Index gained 3.5% (excluding dividends) for the four months to April 30 2010, compared to a loss of 4% in the first four months of the 2009 financial year, but has since lost some 5% to return to the levels experienced in late 2009," Sanlam stated.
Although there are positive growth indicators in the South African economy, pressure on consumers' disposable income and discretionary spending remains, it added.
"Deal flow and new business activity levels in a number of our institutional businesses also remain low compared to the relatively high base in 2009. As anticipated, the commodity based African economies in which the Group operates are experiencing some lag effect of the global economic crisis which is evident from a slowdown in the level of new business.
"The reported results from most of our international businesses are also negatively impacted by the relative strengthening of the South African rand. A sharp reduction in short-term interest rates had a marked impact on interest earned on Group companies' working capital as well as the investment income on shareholder funds," the group added.
But despite the difficult business environment total new business volumes were 6% lower than for the first four months of the 2009 financial year, it noted.
"This is substantially due to lower new institutional fund inflows, albeit a satisfactory performance against the high base in 2009. Life insurance new business volumes however performed exceptionally well to be 21% up on the same period in 2009, a combination of strong growth in South Africa and a welcome recovery in the United Kingdom, somewhat offset by a lower contribution from the rest of Africa. The value of new life business for the four months is 18% up on 2009.
"Gross investment flows are 11% down on 2009 but compensated for through a major improvement on a net basis. Overall net inflows for the Group of R6.8bn are substantially better than the R2.1bn achieved in the first four months of 2009, supported by a continuing
trend of net life cash inflows. Core earnings per share to April 2010 are 8% higher than for the comparable period in 2009.
"Normalised headline earnings per share are up some 70%, substantially due to the positive return in equity markets relative to a negative
performance in the first four months of 2009," Sanlam added.
- I-Net Bridge