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Overview for the week and 5-day outlook to Tuesday 29 May 2018

Overview for the week and 5-day outlook to Tuesday 29 May 2018

Visual: Accumulated precipitation outlook for the first week of June
Source: GrADS/COLA, George Mason University, http://www.wxmaps.org/outlooks.php

What Happened

The cooling effect of the South Atlantic high pressure cell was felt at the beginning of the week, followed by a gradual return to warmer temperatures, both night and day, as the high shifted to the eastern half of the sub-continent.

The colder Sunday and Monday nights manifested as far north as Otjiwarongo with the biggest impact in the Karas Region, and then a day later (Tuesday) in the Kalahari. By Wednesday conditions returned to an early-winter “normal” but nighttime temperatures generally remained above 10°C. The days were much warmer, hot even, around Mariental, the central northern areas, and the Kunene region.

At the beginning of the week, airflow over the interior was predominantly south with windy conditions above the escarpment. This lasted only a day and by Wednesday, the interior has settled while the wind direction veered to north-east. This change in wind direction brought in a layer of cloud from the north-east which originated in a weak low pressure system over Western Zambia. Scattered clouds continued to penetrate the interior from the Kavango during Wednesday and Thursday but the intrusion presented itself as a classic inversion layer, i.e. a high cloud base between 12,000 and 14,000 feet, and flat cloud tops thus little room for convection.

Except for isolated pockets in the Kavango and Bwabwata, none of the available satellite images portrayed anything remotely resembling a rain-bearing system.

The visual chosen for the week shows a precipitation outlook for the first week of June. Although these outlooks hardly every pan out the way they are projected 12 days earlier, there are however some very pointing clues regarding the general expectation for the winter.

As can be seen from the image, the outlook is based on a very normal Western Cape winter. This indicates that atmospheric conditions on a regional scale have normalised or are expected to continue moving closer to the 30-year mean. On a wider arena, this is corroborated by the Southern Oscillation Index of the Australian Bureau of Meteorology which have turned negative over the past three weeks, but is still regarded as “neutral.” This is a sign of a decaying La Nina in the western equatorial Pacific. Similarly, several ENSO trackers now show sea surface temperatures in the central and eastern Pacific to be reverting to mean, another sign that the La Nina is terminal.

It is still too early to tell how quickly the La Nina, once gone, will transition to warmer El Nino conditions but the general consensus among scientists is that conditions will remain neutral, at least until the end of the northern hemisphere summer, or even up to the end of the year.

If the short-term regional outlook for southern Africa assumes a normal winter stance, and if the leading American, Australian and European met institutions expect a return to neutral, the only safe view now, is that Namibia can expect a relatively normal winter and a normal early rain season later in the year.

If this indeed turns out to be the case, there will be several opportunities for the southern Namib and the Orange River Valley to receive some light rain during the next two months as a spill-over from the Western and southern Cape systems. This precipitation, however, is measured in ones and twos. It may also produce some snow in the Aus region, something which has not occurred for several years.

What’s Coming

Not much activity is expected over the long weekend. The current high pressure cell over the sub-continent stays in place during Friday and Saturday, ridging in over the Hardap and Karas Regions but it is not accompanied by a frontal system.

There is some low pressure intrusion along the coastal plain but the pressure differential is so slight, that if Oosweer is present, it will be mild. The northern Namib may experience windy conditions on Sunday.

It is only by next week Monday night that a change in conditions is expected. The South Atlantic high is then only some 200 km offshore Lüderitz and its impact will be felt on Tuesday and Wednesday. As the South Atlantic high moves onto the main land, its ridges again into Namibian airspace penetrating the territory from the south-east. The core however, remains offshore so while next week will present some cooler nights across most of the interior south of Etosha, the threat of frost is minimal.

About The Author

Sanlam 2018 Annual Results

7 March 2019

 

Sanlam’s 2018 annual results provides testimony to its resilience amid challenging operating conditions and negative investment markets

Sanlam today announced its operational results for the 12 months ended 31 December 2018. The Group made significant progress in strategic execution during 2018. This included the acquisition of the remaining 53% stake in SAHAM Finances, the largest transaction concluded in the Group’s 100-year history, and the approval by Sanlam shareholders of a package of Broad-based Black Economic Empowerment (B-BBEE) transactions that will position the Group well for accelerated growth in its South African home market.

Operational results for 2018 included 14% growth in the value of new life insurance business (VNB) on a consistent economic basis and more than R2 billion in positive experience variances, testimony to Sanlam’s resilience in difficult times.

The Group relies on its federal operating model and diversified profile in dealing with the challenging operating environment, negative investment markets and volatile currencies. Management continues to focus on growing existing operations and extracting value from recent corporate transactions to drive enhanced future growth.

The negative investment market returns and higher interest rates in a number of markets where the Group operates had a negative impact on growth in operating earnings and some other key performance indicators. This was aggravated by weak economic growth in South Africa and Namibia and internal currency devaluations in Angola, Nigeria and Zimbabwe.

Substantial growth in Santam’s operating earnings (net result from financial services) and satisfactory growth by Sanlam Emerging Markets (SEM) and Sanlam Corporate offset softer contributions from Sanlam Personal Finance (SPF) and Sanlam Investment Group (SIG).

Key features of the 2018 annual results include:

Net result from financial services increased by 4% compared to the same period in 2017;

Net value of new covered business up 8% to R2 billion (up 14% on a consistent economic basis);

Net fund inflows of R42 billion compared to R37 billion in 2017;

Adjusted Return on Group Equity Value per share of 19.4% exceeded the target of 13.0%; and

Dividend per share of 312 cents, up 8%.

Sanlam Group Chief Executive Officer, Mr Ian Kirk said: “We are satisfied with our performance in a challenging operating environment. We will continue to focus on managing operations prudently and diligently executing on our strategy to deliver sustainable value to all our stakeholders. The integration of SAHAM Finances is progressing well. In addition, Sanlam shareholders approved the package of B-BBEE transactions, including an equity raising, at the extraordinary general meeting held on 12 December 2018. Our plan to implement these transactions this year remains on track.”

Sanlam Personal Finance (SPF) net result from financial services declined by 5%, largely due to the impact of new growth initiatives and dampened market conditions. Excluding the new initiatives, SPF’s contribution was 1% down on 2017 due to the major impact that the weak equity market performance in South Africa had on fund-based fee income.

SPF’s new business sales increased by 4%, an overall satisfactory result under challenging conditions. Sanlam Sky’s new business increased by an exceptional 71%. Strong growth of 13% in the traditional individual life channel was augmented by the Capitec Bank credit life new business recognised in the first half of 2018, and strong demand for the new Capitec Bank funeral product. The Recurring premium and Strategic Business Development business units also achieved strong growth of 20%, supported by the acquisition of BrightRock in 2017. Glacier new business grew marginally by 1%. Primary sales onto the Linked Investment Service Provider (LISP) platform improved by 5%, an acceptable result given the pressure on investor confidence in the mass affluent market. This was however, offset by lower sales of wrap funds and traditional life products.

The strong growth in new business volumes at Sanlam Sky had a major positive effect on SPF’s VNB growth, which increased by 7% (14% on a comparable basis).

Sanlam Emerging Markets (SEM) grew its net result from financial services by 14%. Excluding the impact of corporate activity, earnings were marginally up on 2017 (up 8% excluding the increased new business strain).

New business volumes at SEM increased by 20%. Namibia performed well, increasing new business volumes by 22% despite weak economic conditions. Both life and investment new business grew strongly. Botswana underperformed with the main detractor from new business growth being the investment line of business, which declined by 24%. This line of business is historically more volatile in nature.

The new business growth in the Rest of Africa portfolio was 68% largely due to corporate activity relating to SAHAM Finances, with the East Africa portfolio underperforming.

The Indian insurance businesses continued to perform well, achieving double-digit growth in both life and general insurance in local currency. The Malaysian businesses are finding some traction after a period of underperformance, increasing their overall new business contribution by 3%. New business production is not yet meeting expectations, but the mix of business improved at both businesses.

SEM’s VNB declined by 3% (up 6% on a consistent economic basis and excluding corporate activity). The relatively low growth on a comparable basis is largely attributable to the new business underperformance in East Africa.

Sanlam Investment Group’s (SIG) overall net result from financial services declined by 6%, attributable to lower performance fees at the third party asset manager in South Africa, administration costs incurred for system upgrades in the wealth management business and lower earnings from equity-backed financing transactions at Sanlam Specialised Finance. The other businesses did well to grow earnings, despite the pressure on funds under management due to lower investment markets.

New business volumes declined by 13% mainly due to market volatility and low investor confidence in South Africa. Institutional new inflows remained weak for the full year, while retail inflows also slowed down significantly after a more positive start to the year. The international businesses, UK, attracted strong new inflows (up 57%).

Sanlam Corporate’s net result from financial services increased by 4%, with the muted growth caused by a continuation of high group risk claims experience. Mortality and disability claims experience weakened further in the second half of the year, which is likely to require more rerating of premiums in 2019. The administration units turned profitable in 2018, a major achievement. The healthcare businesses reported satisfactory double-digit growth in earnings, while the Absa Consultants and Actuaries business made a pleasing contribution of R39 million.

New business volumes in life insurance more than doubled, reflecting an exceptional performance. Single premiums grew by 109%, while recurring premiums increased by a particularly satisfactory 56%.

The good growth in recurring and single premium business, combined with modelling improvements, supported a 64% (71% on a comparable economic basis) increase in the cluster’s VNB contribution.

Following a year of major catastrophe events in 2017, Santam experienced a relatively benign claims environment in 2018. Combined with acceptable growth in net earned premiums, it contributed to a 37% increase in gross result from financial services (41% after tax and non-controlling interest). The conventional insurance book achieved an underwriting margin of 9% in 2018 (6% in 2017).

As at 31 December 2018, discretionary capital amounted to a negative R3.7 billion before allowance for the planned B-BBEE share issuance. A number of capital management actions during 2018 affected the balance of available discretionary capital, including the US$1 billion (R13 billion) SAHAM Finances transaction. Cash proceeds from the B-BBEE share issuance will restore the discretionary capital portfolio to between R1 billion and R1.5 billion depending on the final issue price within the R74 to R86 price range approved by shareholders.

Looking forward, the Group said economic growth in South Africa would likely remain weak in the short to medium term future, and would continue to impact efforts to accelerate organic growth. The outlook for economic growth in other regions where the Group operates is more promising. Recent acquisitions such as the SAHAM transaction should also support operational performance going forward.

“We remain focused on executing our strategy. We are confident that we have the calibre of management and staff to prudently navigate the anticipated challenges going forward,” Mr Kirk concluded.

Details of the results for the 12 months ended 31 December 2018 are available at www.sanlam.com.