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Sanlam net operating profit jumps 11% to R4bn

Sep 08 2016 11:01
i stock, global markets

(iStock)

Company Data

Sanlam Limited [JSE:SLM]

Last traded 81
Change -1
% Change -1
Cumulative volume 1537056
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town- The Sanlam Group [JSE:SLM] has reported an increase of 11% in net operating profit to R4bn in its results for the six months to June 30 2016. Net operating profit increased by 11%, while normalised headline earnings per share were down 7%.

Headline earnings growth was negatively affected by lower investment returns on shareholder funds, due to a relatively weaker performance during the first six months of 2016 from local and some of the non-South African equity markets Sanlam is exposed to. This was aggravated by the sharp appreciation in the rand exchange rate, while the increase in the capital gains tax inclusion rate in South Africa also required a once-off adjustment.

Sanlam considers return on group equity value as its most appropriate measure of long-term performance and value creation, given its diversified operations. In the reported period it achieved a figure of 7.9%, exceeding its internal return target.

Return on group equity value per share for the six months was 7.9%, while net fund inflows were R22bn compared to R7bn in 2015.

The group reported double-digit growth in new business volumes (up by 15% to R115bn) and net result from financial services (net operating profit), in a persistently challenging operating environment.

Sanlam Personal Finance continued to achieve "particularly satisfactory growth for a largely mature business in a challenging South African business environment", said Sanlam. Its Individual Life unit grew its net operating profit by 8% in the first half of 2016, despite a marked increase in the number of mortality claims.

Glacier grew its net profit contribution by 20% with fund-based fee income benefiting from an increase in assets under management due to good net fund inflows, while Sanlam Sky increased its net operating profit by 7%, broadly in line with the growth in the size of the in-force book.

Sanlam Emerging Markets grew its net operating profit by 40%. Excluding Saham Finances, net operating profit rose by 24%, with strong contributions from India, Namibia and Botswana.

The Rest of Africa operations (excluding Saham Finances) recorded a 23% drop in net operating profit. A first-time contribution by Zimbabwe and good growth in Ghana, Nigeria and Tanzania were more than offset by a lower profit contribution from Zambia, Malawi and Rwanda and lower residential property sales in Kenya.

Sanlam Investments’ net result from financial services rose by 1% to R721m, affected by significant investment market volatility.

Santam experienced a normalisation in underwriting margins after an exceptional 2015 reporting period. The claims ratio increased from 63.7% in the first six months of 2015 to 64.8% in the first half of 2016, due to a number of large corporate claims in 2016 and an increase in drought-related agricultural claims.

The newly established Sanlam Corporate cluster made progress in developing and implementing its strategy and had unallocated discretionary capital of R3.1bn as at June 30.

“We expect the economic and operating environment to remain challenging for the remainder of 2016. However, we expect that our continued focus on strategy implementation will see us through,” said group CEO Ian Kirk.

Sanlam shares were trading at R64.68 just after 11:00.

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